Jeronimo Martins — Annual Report 2011

Mar 30, 2012

Message from the Chairman	3
Message from the Chief Executive Officer	7
I. The Group Jerónimo Martins
1. Profile and Structure 2. Strategic Positioning Awards and Recognition Obtained by Jerónimo Martins	13 22 24
II. Consolidated Management Report - Creating Value and Growth
1. Key Facts of the Year 2. 2011 Environment 3. Group's Performance 4. Business Areas Performance 5. Outlook for 2012 6. Events After Balance Sheet Date 7. Results Appropriation Proposal 8. Consolidated Management Report Annex	29 31 37 55 77 84 85 86
III. Consolidated Financial Statements
1. Consolidated Financial Statements 2. Statement of Board of Directors 3. Auditor's Report 4. Report and Opinion of the Audit Committee	90 138 139 141
IV. Corporate Governance
Introduction Chapter 0 – Statement of Compliance Chapter 1 – General Shareholders' Meeting Chapter 2 – Management and Supervisory Bodies of the Company Chapter 3 – Information and Auditing	146 147 151 155 193
V. Corporate Responsibility in Value Creation
1. Our Approach 2. 2011 Highlights 3. Promoting Good Health through Diet 4. Respecting the Environment 5. Sourcing Responsibly 6. Supporting Surrounding Communities 7. Being a Benchmark Employer 8. Commitments for 2012-2014	207 211 213 221 236 241 245 252
VI. Individual Annual Report
1. Management Report 2. Individual Financial Statements 3. Auditor's Report 4. Report and Opinion of the Audit Committee	255 262 301 303

Message from the Chairman

Dear Shareholders,

In my message to you in the 1995 Annual Report, I mentioned the start of the Group's internationalisation as being "a natural evolution" and then justified the choice of Poland at that time due to the potential that, in our eyes, that country clearly presented. Right from the start, I pledged that we were entering the Polish Food Distribution market with the objective of becoming its leader.

16 years have passed and, at the end of 2011, in Coface's ranking, Jerónimo Martins Dystrybucja, the owner of the Biedronka chain, was already the largest Polish company in the food industry, the fourth largest of the non-financial companies in terms of turnover and the seventh in the TOP 500 in Central and Eastern Europe.

Also, in the Global Powers of Retailing 2012 general ranking, by consultancy firm Deloitte together with Stores magazine, Jerónimo Martins appears in 81st place among the 250 largest retail companies in the world, four positions ahead of last year. Whilst in the specific ranking of the 50 retailers with the highest growth in the last five years, the Group holds the 21st position, an improvement of six places compared to the classification obtained the previous year. According to the study, whilst the average annual sales growth of the 50 worldwide retailers was 14.6%, at Jerónimo Martins this indicator reached 19%.

These positions reflect the really significant gain in Biedronka's dimension over the last few years, notably as it now leads Food Retail in Poland, with practically double the sales of the second largest retailer. Leadership in the food distribution market in Portugal, where the retail and Cash & Carry formats operated by the Group have been reinforcing their market shares, also made a positive contribution towards reaching a new dimension.

Last year, Biedronka reasserted itself as the main growth and profitability driver of the entire Group, whose consolidated EBITDA was more than 720 million euros, with net profits attributable to Jerónimo Martins of 340 million euros, up 21% on 2010.

In a year in which the Portuguese market's reference index – PSI-20 - devalued 27.6%, which was one of the worst results in the developed world markets, our shares rose 12.2% in value and, for the second year running, we were once again the company with the best performance.

Those who have been following our Group's activity for some time now, know very well that our path has not always been an easy one. That we have had our share of failure and forced learning. But they also know that it is not in our nature to give up and that we tackle our difficulties, encouraged by a strong sense of determination to create value.

I am of the opinion that the responsibility of the leaders, at various levels within an organisation, is above all to anticipate changes and prevent future needs. For this to become a reality, it is absolutely essential to have the capacity to interpret the environment, decode the signs and incorporate them into decision-making.

I believe that Jerónimo Martins Group's success in Poland must be essentially understood in the light of our ability, above all, to see in a Poland of 1994, just a few years after the fall of the Berlin wall, a democratic country, eager to evolve, open to private initiative, with an educated, proud people with a will to win. I also believe we had the merit of understanding that we should develop a format from scratch that would fit the Polish people's purchasing power, dietary and consumption habits and also their lifestyle. We did this and kept firmly to our growth-oriented strategy and the results appeared.

Jerónimo Martins Group's huge cash generating capacity now enables us to take another step forward in the internationalisation process, without this implying any increase in debt in the consolidated balance sheet. Under any circumstances, but especially within the macro-economic environment that we are experiencing in Europe, this strong financial solidity with historically low levels of indebtedness is a great source of comfort.

The decision to enter Colombia as the Group's third operating country, appears once again as a natural evolution of the strategy that was defined many years ago and that we have endeavoured to implement coherently and scrupulously. Like a new cycle on a sustained growth path that has transformed Jerónimo Martins' scale, especially over the last decade.

The management's maturity, the accumulated experience and know-how, the excellence in carrying out the defined policies and the financial solidity, enable us to feel prepared for another leap in dimension. Nevertheless, we are aware that in order to continue winning, we have to change. The nature of becoming a multinational Group – with the specific aspect of joining operations in such varied and distant locations – requires us to make an organisational effort to adapt and improve. Basically, an exercise that ensures we have even more discipline and focus, a less complex structure, more systematised processes and a new way of working.

Above all, having another country in our portfolio is a huge challenge in terms of human resources, of management development, of preparing our managers for internationalisation. Now, more than ever, it is essential that we are able to attract the best, retain the most capable, develop those with the highest potential. This largely depends on our ability not only to continue growing but to continue to be leaders in the markets where we operate.

Therefore, in 2011, we set up a working group with the specific mission of studying a series of matters which have a significant impact on people management. I expect this Group to look outwards, capture the signs of a rapidly changing world and understand the expectations of the new generations. And at the end of its work in 2012, to present a series of proposals that cover both new forms of remuneration and competency development and also a reflection on retirement age.

Distribution is a complex and very demanding business, highly dependent on having competent and motivated people, who are result-orientated and inspired to make a difference. This is true at various levels within a company and must be a matter of deep reflexion for the leaders.

I have always believed that the people are in fact Jerónimo Martins' most valuable asset and am of the opinion that it is essential to find ways of continuously improving their conditions and contributing towards increasing their quality of life.

I consider that the role of a leader is to lead a business, as far as possible, on the path to profitable and sustainable growth, whilst respecting the people and caring for their development.

In Jerónimo Martins' country of origin, the Portuguese people are feeling pressure on their household budgets that is difficult to bear. The drastic impoverishment of the country is inevitable. We know about this because of the social emergency that we discovered among our store employees and those at the distribution centres in Portugal, following an initiative that we launched in June which involved listening to them. This led us to create an extraordinary Fund which has already supported over a thousand people and which we describe in this Report, in the chapter on Corporate Responsibility. In Poland we also reinforced our internal Social Responsibility initiatives.

In the middle of a European crisis that is not only financial, social and economic, but one of leadership, the people are the worst victims. Of unemployment, austerity, disbelief in the future. And it is from the people, especially the younger ones who are promoting civil society movements of indignation all around the world, that we are

now receiving strong signs of change, which must be listened to carefully and taken to heart.

I have every hope that, from these times of deep uncertainty and suffering, new European leaders may emerge with a strong sense of Statesmanship who are driven by the founding values of the idea of a united Europe: freedom, solidarity and security.

I have every hope of finally starting to see the effects of the reinforcement of the role of the European Parliament and the national parliaments foreseen in the Lisbon Treaty.

I have every hope that the Europe we so much desire, which is more efficient and plays a greater role in world affairs, may start to happen.

I sincerely hope that the sacrifices imposed on the people of various European countries, including the Portuguese, due to the austerity measures, will not be in vain and lead our old continent back to the path of growth and prosperity.

Alexandre Soares dos Santos

Chairman

Message from the Chief Executive Officer

2011 is a year that will definitely be part of the Jerónimo Martins Group's history as the year in which we reached a new dimension – that of 10 billion euros in turnover – and in which we took the strategic and structuring decision for the future of the Group, which was choosing Colombia to build our new growth pillar.

It is true that Jerónimo Martins mainly owes its remarkable consolidated performance to Biedronka, which is why expanding this chain and reinforcing its leadership in the Polish market continue to be the investment plan's main priority and also the Group's main point of focus.

In fact, in 2011, Biedronka accounted for around 70% of Jerónimo Martins' total investment (449 million euros). The priority was clearly the store-openings plan, without discarding store-remodelling and logistics maintenance work.

In a year in which the Food Retail market in Poland grew 2.8% against 2010, Biedronka increased its sales by 20.4% (approximately 24.2% in zloty) to 5.8 billion euros. This chain's 13.4% like-for-like sales growth strongly boosted the Group's likefor-like sales, at 7.8%.

In 2011, both the number of store visits and the average ticket spending continued to increase, which were helped by a more dynamic assortment management and a reinforcement of the Perishables, which also serve as an effective traffic driver. A new layout, which places Perishables at the store entrance, was tested and considering the good results obtained, this will be applied to the entire chain in 2012.

After having invested mostly in communication of the perception of its price leadership to the consumers in the last few years, in 2011, Biedronka felt that the time had come to strengthen its emotional relationship with the Polish people. So at the end of the year, the conceptual rebranding and communications repositioning exercise was concluded for Biedronka, and a more affectionate tone of voice to the brand and a happier image in the stores, namely by greater use of colour and images, will be integrally introduced. The first feedback received from the consumers regarding the change in the first few stores has been most encouraging, and we hope that the positive effects will mostly be revealed (with the roll-out process) throughout 2012.

Our strategic focus can be seen in the profitable growth and Biedronka's remarkable contribution towards the consolidated operating performance can also be seen in the EBITDA. In fact, the EBITDA generated by Biedronka, which at 458 million euros and a YOY growth of 26.2%, represented 63.5% of the consolidated EBITDA in 2011.

Biedronka's strength as the main growth and profitability driver of Jerónimo Martins Group is thus reaffirmed, the Group's main economic activity today being undoubtedly in Poland.

In line with its plan, Biedronka continued to reinforce its presence in the large Polish cities, a fourth of the new openings in the year taking place in these locations.

Very strict compliance with Biedronka's expansion plan, its significant gain in scale and its strong price leadership have enabled it to have a sharp rise in the ranking, prepared by Coface, of the largest non-financial companies in Central and Eastern Europe and also in Poland. In fact, in 2011, Jerónimo Martins Dystrybucja was in seventh place in the TOP 500 companies with the highest turnover in Central and Eastern Europe and fourth place in the ranking of the largest companies operating in Poland and was considered the largest among those listed in the food industry. It is important to note that in 2006, when this ranking was first published, the Company occupied the 69th place.

In 2011, taking advantage of the wide knowledge it has of the market and the Polish consumers' lifestyle and consumption habits, Jerónimo Martins launched a new business concept, which is still at an experimental stage. By the end of the year, seven stores had been opened under the Hebe brand, with a strong presence of emphasis on the cosmetics categories, and the first performance results are now being analysed in order to take a decision.

Reflecting Biedronka's strong cost-led strategy and its strict discipline and efficiency in carrying it out, the EBITDA margin rose from 7.6% in 2010 to 7.9% in 2011, making a very positive contribution towards the consolidated EBITDA margin, which was 7.3% of sales.

The main businesses in Portugal also made a positive contribution towards the Group's profitability, despite the severe social-economic crisis the country is undergoing and

the very negative impact on households' available income from the austerity measures arising from compliance with the Memorandum signed with the troika.

In a declining market, Pingo Doce's sales grew 4.2% compared to 2010, thereby reinforcing its market share. In an extremely adverse climate, the ability to interpret the environment and adapt the commercial strategy to the Portuguese people's new consumption habits, resulting from the severe economic contraction, contributed considerably towards this performance.

I believe that the efforts made by Pingo Doce in maintaining its competitiveness and price stability and the agility of its response to the impoverishment of the country, namely by launching the most varied "family baskets" at really attractive prices, were determining factors for the resilience demonstrated by the Company. The attractiveness of Pingo Doce's value proposition was confirmed by the increase in the number of store visits, even though there was a reduction in the average ticket. In like-for-like terms, the Company posted a 0.8% growth in a year in which Pingo Doce ended with seven additional stores.

In 2011, Pingo Doce continued to invest in innovation, both with regard to its Private Brand and to the projects it has been developing with producers in Portugal, namely for meat and fruit.

Notwithstanding the strong pressure from the macro-economic environment that was felt throughout the year, Pingo Doce managed to increase its EBITDA by 3.4%, with an EBITDA margin of 6.7% of sales (6.8% in 2010).

Recheio had another good year, reasserting itself as the most robust business partner of the traditional retailers and operators in the HoReCa channel, two segments which had sharp falls in sales in 2011. This Company's sales grew 4.9%, and like for like increased 2.4%, which demonstrates Recheio's highly aggressive commercial strategy, its well-managed assortment and its strong relationship with its customers. In 2011, a new food service platform was inaugurated and Recheio's commercial partnership with some of its traditional retail customers was strengthened, as they were integrated into an innovate collaborative programme for growth, entitled "Amanhecer", which is described in this Report.

In Manufacturing, sales for the year dropped by 3.2% and the reduction in EBITDA margin from 14.4% in 2010 to 12.5% in 2011 is a reflection of the effort made to maintain competitiveness and increase market shares in the portfolio's strategic areas and categories.

Despite the recession, 2011 was a year in which the Group invested over 100 million euros in Portugal, clearly demonstrating the protection of its businesses and its commitment to its country of origin, where it has around 30 thousand of its employees.

2011 was also the year in which the Jerónimo Martins Group strengthened its strong financial soundness by reducing net debt by 350 million euros to a gearing ratio of 16.0%, which will allow us to face the development of our business portfolio with confidence.

Finally, and complying with the strategic objective of ensuring the Group's long-term growth, we decided to choose Colombia as a new market. Apart from the size being in line with the requirements we had defined and announced, Colombia is a democratic country with a political and economic framework that favours the development of private initiatives.

In 2011, 11 years after the violence and a crisis in the banking system leading Colombia to be classified as "junk", the country recovered its investment grade rating by Standard & Poor's and Moody's. This evaluation is the recognition of the accelerated economic growth and the success of the Government's efforts to reduce the threat related to insecurity, giving Colombia a rating in line with that of Brazil and Peru, for example, with a stable outlook.

I really believe in Colombia's potential and that this new stage in Jerónimo Martins' internationalisation process will be a future source of creating sustainable value for the Group.

We closed the year having created over 5,200 new jobs in Distribution, an area where we increased the minimum wage in all the Companies, in Portugal and in Poland, continuing to reinforce the respective gap compared to the national minimum wage in the countries where we operate.

At the end of 2011, Jerónimo Martins was in third place in the PSI-20 in terms of market capitalisation (eight billion euros) and the majority of the 26 analysts who follow our shares recommended buying them.

For myself and my team, this represents a vote of confidence and we shall do everything to continue to deserve it.

My final words go to the over 66 thousand employees of the Group, who with their will, their performance and their loyalty made 2011 another memorable year for the Jerónimo Martins Group. They really are the main inspiration and strength behind the solid results that I am proud to present in this Report.

Pedro Soares dos Santos

Chief Executive Officer

I – The Group Jerónimo Martins

1. Profile and Structure	13
1.1. Identity and Responsibilities	13
1.1.1. Asset Portfolio	13
1.2. Operating and Financial Indicators	15
1.3. Corporate Bodies and Structure	17
1.3.1. Statutory Bodies	17
1.3.2. Business Structure	19
1.3.3. Management Structure	20
2. Strategic Positioning	22
2.1. Mission	22
2.2. Strategic Vision	22
2.3. Operational Profile	23

1. Profile and Structure

1.1. Identity and Responsibilities

1.1.1. Asset Portfolio

Jerónimo Martins is a Food Distribution Group with market leadership positions in Poland and Portugal, which in 2011 posted sales of 9.8 billion euros (58.8% in Poland and 41.2% in Portugal), an EBITDA of 722 million euros (63.5% in Poland and 36.5% in Portugal), with a total of 66,270 employees (56.1% in Poland and 43.9% in Portugal) and which at the end of the year occupied the third position in market capitalisation on the NYSE Euronext Lisbon, to the value of eight billion euros.

The Group holds a portfolio of businesses focused on the food area, and which combines the growth of Biedronka in Poland with the strength of the market positions of its Retail and Wholesale operations in Portugal and the maturity and profitability of the industrial assets from its partnership with Unilever, also in Portugal.

In Poland, Biedronka, a chain of food stores whose positioning combines the quality of its assortment and store environment with the practice of everyday low prices, is the Retail Food sales leader through a presence which is reflected in 1,873 stores spread across the entire Polish territory. At the end of 2011, the Company reached 5.8 billion euros of sales, recording over 926 million customer tickets. Also in Poland, in May 2011, the Group launched a new test project in the drugstore sector under the Hebe banner which has seven stores. This new business concept is based on the offer of high quality services at very competitive prices. This service quality is based on the combination of a pleasant store environment with the best reference brand products, as well specialised advice in various areas.

In Poland, the Group also operates a pharmacy network under the Apteka Na Zdrowie banner which at the end of 2011 had 36 pharmacies.

In Portugal, the Group holds a leading position in Food Distribution, having reached a combined turnover of 3.8 billion euros in 2011. It operates with the Pingo Doce banner (356 supermarkets in Mainland Portugal and 13 on the Island of Madeira) and the Recheio banner (36 cash & carries and three Food Service platforms in Mainland Portugal and one cash & carry and one Food Service platform in Madeira Island). The Group is the market leader in supermarkets and Cash & Carries, both in sales area and turnover. Moreover, Jerónimo Martins has been investing in the development of new projects in Portugal that are complementary to the Food Retail business, through its Refeições No Sítio do Costume Restaurants and Take Away within Pingo Doce, as well as its network of petrol stations, its Bem-Estar stores and through the banners New Code (adults' and children's' clothing), Electric Co (electrical appliances), GET (books, music, electronics and telecommunications), and Spot (shoes and accessories).

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, operating under the Company Unilever Jerónimo Martins. This Company

maintains its leadership position in the margarines, iced tea, ice creams and washing detergents markets, among others.

Also within the area of Manufacturing, the partnership with Unilever is extended to Gallo Worldwide, operating in the Olive Oil and Vegetable Oil business. This Company is present in five continents, in a total of 47 countries, with leadership positions in Portugal, Brazil, Angola and Venezuela, through the Gallo brand.

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 of food products (some of which are market leaders in fast-moving consumer food), Food Service through Caterplus and selective cosmetics and fast-moving cosmetics,

Hussel, a Specialised Retail chain selling chocolates and confectionary, with 25 stores at the end of 2011;

through the partnership with the Puig group;

Jerónimo Martins Restauração e Serviços, which is focused on developing projects in the Restaurant service sector, which at the end of 2011 included the Jeronymo chain of kiosks and coffee-shops, with 24 points of sale; the Olá chain of ice-cream parlours, with 40 stores, five of which are franchised out; the Chili's restaurant in Lisbon, a franchising of the Brinker group and one Oliva restaurant, a concept that was launched in 2010.

Annual Report 11 The Jerónimo Martins Group Profile and Structure

5,350 6,894 7,317 8,691 9,838 6.3% 6.7% 6.9% 7.2% 7.3% 4.0% 4.4% 4.6% 5.0% 5.2% 0% 6% 12% 0 5,000 10,000 2007 2008 2009 2010 2011 Sales & Services EBITDA Margin * EBIT Margin * €' 000,000 EBITDA & EBIT Margin

* Reclassified values - see details in Note 1

1.2 Operating and Financial Indicators

Annual Report 11 The Jerónimo Martins Group Profile and Structure

* In 2010, some adjustments weremade in stores area measurements and it was not possible to reflect that in previous years.

*Note 1 – EBITDA margin was reclassified for the years prior to 2011, due to the restatement in the 1st semester of 2011, of financial expenses with payments to suppliers in Biedronka to Total Margin. This restatement is reflected on this Report whenever applicable.

1.3. Statutory Bodies and Structure

1.3.1. Statutory Bodies

Election date: 9 April 2010

Composition of the Board of Directors elected for the term 2010-2013

Chairman of the Board of Directors Elísio Alexandre Soares dos Santos

• 77 years old
• Chairman of the Evaluation and Nominations Committee since April 2010
• Chairman of the Group since 1996

Chief Executive Officer

Pedro Manuel de Castro Soares dos Santos

• 52 years old
• Chief Executive Officer of the Group since April 2010
• Member of the Board of Directors since 1995

Luís Maria Viana Palha da Silva

• 56 years old
• Chairman of the Committee on Corporate Responsibility since April 2010
• Member of the Evaluation and Nominations Committee since April 2010
• Member of the Board of Directors since 2001

José Manuel da Silveira e Castro Soares dos Santos

• 49 years old
• Member of the Committee on Corporate Responsibility since April 2010
• Member of the Evaluation and Nominations Committee since April 2010
• Member of the Board of Directors since 2004

Artur Eduardo Brochado dos Santos Silva

• 70 years old
• Member of the Evaluation and Nominations Committee since April 2010
• Member of the Board of Directors since 2004
• Member of the Audit Committee since April 2011

Hans Eggerstedt

• 73 years old
• Chairman of the Audit Committee since 2007
• Member of the Board of Directors since 2001

Marcel Lucien Corstjens

• 61 years old
• Member of the Board of Directors since 2009

Profile and Structure

Nicolaas Pronk

• 50 years old
• Member of the Board of Directors since 2007

António Pedro Carvalho Viana-Baptista

• 54 years old
• Member of the Audit Committee since April 2010
• Member of the Committee on Corporate Responsibility since April 2010
• Member of the 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 rd floor, 1050-217 Lisbon Represented by:

Abdul Nasser Abdul Sattar, R.O.C. Substitute:

José Manuel Henriques Bernardo

Company Secretary

Henrique Manuel da Silveira e Castro Soares dos Santos Substitute: Carlos Miguel Martins Ferreira

• Chairman of the General Shareholders' Meeting João Vieira de Castro
• Secretary of the General Shareholders' Meeting Tiago Ferreira de Lemos

1.3.2 Business Structure

1.3.3. Management Structure

Leading the management structure of Jerónimo Martins, SGPS, S.A. is the Board of Directors, comprised of its Chairman and eight Directors, one of whom is the Chief Executive Officer.

Supporting the Chief Executive Officer in the daily management of the Company is a Managing Committee, which in 2011 was made up of five Managers representing the areas of Strategy and Finance – Nuno Abrantes; Operations – Pedro Silva (also Country Manager for Poland); Human Resources – Marta Maia; Communication and Corporate Responsibility – Sara Miranda and Legal Affairs – Carlos Martins Ferreira.

The structure of Jerónimo Martins, SGPS, S.A., the Group's Holding, also includes the Functional Divisions, which provide support and advice to the Board of Directors, the Managing Committee, the Audit Committee, the Financial Matters Committee, the Committee on Corporate Responsibility and Evaluations and Nominations Committee, as well as to the other Group Companies.

The Functional Divisions are organised by specific areas, namely: Internal Auditing, Legal Affairs, Communication and Corporate Responsibility, Consolidation and Accountancy, Strategy and Planning, International Expansion, Tax, Financial Operations and Risk Management, Food Quality and Safety, Human Resources, Investor Relations, Safety, Information Security and Information Systems. The activities of these Functional Divisions are described in the chapter of this report on Corporate Governance.

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.

The following operational Companies are also part of the Food Distribution segment: Biedronka in Poland, Pingo Doce and Recheio in Mainland Portugal and Lidosol and J.G. Camacho on the Island of Madeira. Each Company's business management is run by the respective Managing Committee, chaired by a Managing Director and comprised of the Managers of the main functional areas: Operations, Commercial, Human Resources, Financial and Logistics.

In each of the Companies in the Food Distribution segment, the Operations Division is organized by regions. As an example, at Pingo Doce and Biedronka – the Group's largest Companies – the Marketing, Operational Control, Human Resources, Health and Safety at Work, Maintenance and Technical Issues functions are part of each Regional Operations Division. 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 and the consumer.

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 managers nominated by the partners Jerónimo Martins SGPS, S.A. and Unilever. Reporting to this entity is a Managing Committee which is made up of the Business Units' Food, Personal Care 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 Production Units), Financial, Legal, Communications and Information Technology.

Equally, the management structure of Gallo Worldwide, Lda. has its own management board, comprised of members nominated from the partners Jerónimo Martins SGPS, S.A. and Unilever. Reporting to this entity is a Managing Committee, which is comprised of the following Functional and Business Divisions: Financial, Customer Service and Information Technology, 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 Caterplus, Jerónimo Martins Restauração e Serviços and Hussel.

The various Companies guarantee all the operational and management side of the business, whilst Jerónimo Martins Distribuição de Produtos de Consumo provides its sister companies with Financial, Information Technologies, Human Resources and Logistics services.

2. Strategic Positioning

2.1. Mission

Jerónimo Martins is a Portugal-based international Group operating in Food Distribution and Food Manufacturing, with a view to satisfying the needs and expectations of its stakeholders and 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.

The Jerónimo Martins Group adopts continuous and sustainable value creation and growth as key pillars to its mission, within the framework of its Corporate Responsibility policy.

The Corporate Responsibility policy is based on 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 as well as respecting the preservation of the environment and natural resources.

2.2. Strategic Vision

Creating Value and Growth

The Group's strategic guidelines for creating value are based on four aspects:

• 1. Continuous strengthening of the balance sheet solidity;
• 1. Risk management in preserving asset value;
• 1. Maximisation of the scale effect and synergies;
• 1. Promoting innovation and a pioneering spirit as factors for developing competitive advantages.

These four aspects aim to achieve the following strategic objectives:

• To reach 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 the sales and profitability of its business units.

In pursuing these objectives, the Group's Companies carry out their activity using the following guidelines:

• Strengthening their price competitiveness and value proposition;
• Improving their operational efficiency;
• Incorporating cutting edge technology;
• Identifying opportunities for profitable growth.

2.3. Operational Profile

Our operational positioning reflects a clear value food retail approach, where the focus on value and mass market strategy define our presence in the market.

The Group offers food solutions in a convenient, close manner to all consumers, at competitive and stable prices, which requires maximum cost-effective structures. All our value propositions are marked by strong differentiation in three fundamental aspects: i. variety and quality of fresh food products; ii. strong brands and iii. store environment quality.

The success of our formats is leveraged upon market leadership. Leadership in a mass-market approach is linked to a relevant size, essential for creating the dynamics of economies of scale which enables us to be cost leaders and to the offer the best prices. It is also leadership that enables us to create awareness and trust, which are essential to building a relationship with our consumers.

Awards and Recognition Obtained by Jerónimo Martins

Awards and Recognition Obtained by Jerónimo Martins

Corporate

• "Best Investor Relations Officer" prize (Cláudia Falcão), awarded at the 24th "Investor Relations & Governance Awards", of the consultancy firm Deloitte, in partnership with the daily newspaper Diário Económico;
• "Best Overall Investor Relations Strategy", awarded at the 24th Investor Relations & Governance Awards;
• "Best Stock Market Performance", awarded at the 24th Investor Relations & Governance Awards;
• "Best Companies for Leadership Portugal 2011" (4th place), awarded at the 2 nd national awards organised by Hay Group, in partnership with Jornal de Negócios.

Distribution Poland

Biedronka

• Considered one of "The Most Valuable Polish Brands" (1st position in the food sector and 5th overall) in the ranking of the daily newspaper Rzeczpospolita;
• Considered one of the 100 best Polish employers, ranked 71st, in a research by Universum Professional Survey 2011;
• Ranked 7th among the biggest companies from the Central and Eastern Europe in the TOP 500 CEE ranking organised by Coface;
• "Best CSR practices in the health promotion and prevention field", award from the 1st International Forum of Health Promotion and Prevention;
• "Service Quality", award from the 4th edition of a study of three million consumers, by www.jakoscobslugi.pl;
• Ranked first among Retail chains and 10th among the companies in general in the "500 Largest Business in Central and Eastern Europe" ranking organised by Deloitte and the daily newspaper Rzeczpospolita;
• The "Milky Start" project was highligted in the eight edition of "Corporate Social Responsibility Report" published by the weekly magazine Gazeta Finansowa;
• Pedro Soares dos Santos, the Chairman of the Board of Jerónimo Martins Dystrybucja, was awarded "Business Faces" prizes in two categories – "Ethics" and "Innovation" in a ranking organised by the economic daily newspaper Dziennik Gazeta Prawna and TVN CNBC business TV channel;
• "Trusted Brand" award in the "Store/Shopping Centre" category, of the 11th European Trusted Brand ranking;
• Considered the 4th largest company (in terms of turnover) in the ranking of the weekly newspaper Polityka;

• "Golden Otis", awarded by consumers and other players of the pharmaceutical market, for the projects developed by Biedronka in the health area (free screenings for employees of this banner);

• Considered the 4th largest company (in terms of turnover and profit) in the ranking of the daily newspaper Rzeczpospolita;

• "Retailer of the Year", award in the Discount stores category, awarded by suppliers of the FMCG sector;
• Biedronka's CSR actions targeted to employees as well as its participation in the "Partnership for Health" were highlighted in the "Responsible business in Poland 2010. Good practices" report, published by the Responsible Business Forum.

Distribution Portugal

Pingo Doce

• "Master of Food Distribution", award at the 20th "Masters of Distribution Awards", attributed annually by the specialised magazine Distribuição Hoje;
• "Best Perishables", award in the Food Retail category, attributed by the specialised magazine Hipersuper;
• "Best Marketing", award in the Food Retail category, attributed by the specialised magazine Hipersuper.

Recheio

"Master of Wholesale Distribution", award at the 20th "Masters of Distribution Awards", attributed annually by the specialised magazine Distribuição Hoje.

Manufacturing and Services

Gallo Worldwide

• Bronze Medal, awarded to the Grande Escolha Olive Oil at the China International Olive Oil Competition;
• Honourable Mention, awarded to the Novo Olive Oil and Colheita ao Luar Olive Oil at the China International Olive Oil Competition;
• Silver Medal, awarded to the Grande Escolha Olive Oil at the Mário Solinas Quality Awards, annually organised by the International Olive Council (IOC);
• Silver Medal, awarded to the Novo Olive Oil 2010-2011 at the Los Angeles International Extra Virgin Olive Oil Competition;
• Bronze Medal, awarded to the Aromatizado Orégãos Olive Oil 2010-2011 at the Los Angeles International Extra Virgin Olive Oil Competition;
• Gold Medal, awarded to the Novo 2010-2011 and Grande Escolha Olive Oils at the Olivinus International Competition;
• 2 nd and 3rd Frutado Verde Intenso Prizes, awarded to the Novo and Grande Escolha olive oils at the Domingo Faustino Sarmiento Awards, held in Argentina;
• Two Stars, awarded the Grande Escolha and Novo olive oils by the International Taste & Quality Institute, in Brussels;
• 1 st Frutado Maduro Prize, awarded Grande Escolha Olive Oil by OVIBEJA;

• 3 rd Frutado Verde Prize, awarded Novo Olive Oil by OVIBEJA;

• Two Stars, awarded to the Novo and Grande Escolha olive oils by the Great Taste Awards, in the United Kingdom;

• Colheita ao Luar Olive Oil considered one of the 50 best olive oils, of the agricultural season by Der Feinschecker International, in Germany.

Unilever Jerónimo Martins

• Eficácia (Effectiveness), award given to the Dove Men Plus Care range by the Portuguese Advertisers' Association;
• Best DPH Manufacturer award (Detergents and Hygiene Products), attributed by the magazine Hipersuper;
• Master of Distribution, award given to the Knorr Natura stock cubes, in the Sauces and Condiments category, by the magazine Distribuição Hoje;
• Master of Distribution, award given to the Carte D'or Castanha ice cream, in the Desserts category, by the magazine Distribuição Hoje;
• "Product of the Year", award given to Vasenol Creme Gordo Hidratante, in the Moisturising creams category;
• "Product of the Year", award given to Dove Men + Care, in the Male Deodorant category;
• "Product of the Year", award given to Knorr Natura, in the Stock cubes category.

Jerónimo Martins Distribuição de Produtos de Consumo

• "Flavour of the Year 2011", awarded to the G.B. Sauces of the Guloso brand, by a panel of Portuguese consumers, in the Sauces category;
• The Kellog's and Heinz brands occupied 34th and 49th position respectively in a ranking of the 100 most valuable brands annually drawn up by Interbrand;
• Kellog's was considered the brand with the most spontaneous brand awareness in the Cereals category, in the second edition of the "Marcas que Marcam" guide published by QSP Marketing consultants in partnership with the daily newspaper Diário Económico and the Yellow Street company.

II. Consolidated Management Report - - Creating Value and Growth

	1. Key Facts of the Year	29
	2. 2011 Environment	31
	2.1. International Macroeconomic Environment	31
	2.2. Sector and Market Environment	32
	2.2.1. Key Facts in the Food Distribution Sector 2.2.2. Poland 2.2.3. Portugal	32 33 34
	3. Group Performance	37
	3.1. Main Projects of 2011 3.1.1. Strengthening of the Leadership Positions in Poland and Portugal 3.1.2. Investment Programme 3.1.3. Ensuring Long-term Growth – Choosing a New Market 3.2. Consolidated Activity in 2011 3.2.1. Consolidated Sales 3.2.2. Consolidated Operating Results	37 37 39 41 43 43 47
	3.2.3. Balance Sheet and Return on Invested Capital 3.2.4. Debt Breakdown 3.2.5. Jerónimo Martins in the Stock Market	50 51 52
	4. Business Areas Performance	55
	4.1. Distribution Poland	55
	4.1.1. Biedronka 4.1.2. Apteka Na Zdrowie 4.1.3. Hebe 4.2. Distribution Portugal	55 58 59 60
	4.2.1. Food Retail - Pingo Doce 4.2.2. Food Retail - Madeira 4.2.3. Cash & Carry - Recheio	60 63 66
4.3.	Manufacturing, Distribution and Restaurants & Services	69
	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) and Hussel	69 69 71 73 73 75
	5. Outlook for 2012	77
	5.1. International Macroeconomic Environment 5.2. International Sector Trends 5.3. Outlook for Poland 5.4. Outlook for Portugal 5.5. Outlook for Jerónimo Martins Group Businesses	77 77 78 80 81
	6. Events After Balance Sheet Date	84
	7. Results Appropriation Proposal	85
	8. Consolidated Management Report Annex	86

1. Key Facts of the Year

First Quarter

• Opening of 19 Biedronka stores and remodelling of a further nine
• Remodelling of two Pingo Doce stores
• Remodelling of one Recheio store (Torres Vedras)
• Opening of the first Amanhecer project store
• Opening of a new area of Sabores ao Kg restaurant, in the Fórum Madeira shopping centre
• Acquisition of the 51% shareholding not previously held in Caterplus
• Launch of the Exports Division at JMDPC
• Launch of Jeronymo coffee-shops new image
• Launch of the new "O Meu Olá" concept

Second Quarter

• Opening of 44 Biedronka stores and remodelling of a further 15
• Launch of a new business concept in Poland, in the drugstore sector, based on cosmetics, beauty and personal care products, with the opening of the first Hebe store
• Opening of four Pingo Doce stores
• Conversion of the Sintra hypermarket into the new Pingo Doce concept
• Launch of the Sabe Bem magazine (available in Pingo Doce stores)
• Opening of a Recheio Food-service Platform in Tavira (Algarve)
• Opening of the first franchised Recheio store in the Azores

Third Quarter

• Opening of 54 Biedronka stores and remodelling of a further 30
• Opening of two Hebe stores
• Opening of three Pingo Doce stores and remodelling of a further four
• Launch of the "Cabazes Pingo Doce" campaign
• JMDPC starts representing SunLover brand

Fourth Quarter

• Opening of 122 Biedronka stores and remodelling of a further 45
• Opening of four Hebe stores
• Opening of two Pingo Doce stores
• Conversion of the Odivelas hypermarket into the new Pingo Doce concept
• Remodelling of a Recheio store (Regedor)
• Decision to enter Colombia as the new market

2. 2011 Environment

2.1. International Macroeconomic Environment

The International Monetary Fund's (IMF) projections that were available at the end of 2011 show a world economic growth of 3.8% against 5.2% registered in 2010. Although a slowdown in world economic growth had been forecast, arising from the budgetary consolidation process and the accumulation of excessive production, economic retraction was greater than estimated, aggravated further by a lack of consumer confidence.

The slow growth of the main world economies is caused on one hand by accumulated macroeconomic imbalances in the period prior to the current crisis, which need to be corrected, and on the other hand by consequences inherent to the crisis itself, namely the still weak real estate market in the United States, the deterioration of public finances in the United States, Japan and some European Union countries, and the crisis and uncertainty in the sovereign debt markets and the financial system.

Throughout 2011, markets became sceptical regarding the actual capacity of several countries to stabilize their public debt, which was not only a concern regarding the European peripheral countries but also in relation to Japan and the United States. These concerns caused the interest on Government bonds to shoot up and the banking system's financing difficulties increased. The risk asset market fell sharply throughout the year, once investors decided to channel their investments into assets with more controlled risk.

In 2011, the North American economy grew 1.8%, after a growth of 3.1% in 2010. The persistence of high macroeconomic imbalances (public and foreign deficit and public debt), the weakness of the real estate market, the necessary reforms in the job market and the restrictive credit terms are the factors that have been causing a weak growth in private domestic demand, which is also influenced by the needs of households to continue adjusting their financial situation, asking for loans in lower scale.

The economy in the Euro Zone grew 1.6% in 2011, compared to 1.9% in 2010. The ongoing budgetary consolidation process in various Euro Zone countries had a very strong influence on domestic demand. Following Greece and Ireland's request for financial aid in 2010, in April 2011, Portugal was also forced to turn to foreign assistance.

During Summer 2011, the sovereign debt crisis took on new proportions and at the European summit of 1st July, it was decided that the European Financial Stability Fund's (EFSF) current activity would be extended in order to be able to buy bonds from countries in greater difficulties in the secondary market, as well as being able to offer credit lines to those countries and help them in the process of bank re-capitalisation.

The sustainability of the debt re-payment by the aided countries was reinforced, by extending maturities and lowering interest rates. The measures were insufficient for the most part of the countries that were in difficulties. In Greece, the financial situation became worse, culminating in a second bailout of 159 billion euros in July. The Spanish and Italian Governments were forced to take a series of budgetary consolidation measures as a result of the progressive difficulties in obtaining financing

in the markets and that translated into rising interest rates from July onwards. However, these may hamper economic growth and development.

It should be noted that there continued to be restrictions in terms of obtaining bank credit and the level of unemployment has not yet shown any sign of recovery.

In December, S&P ended up giving ratings with a negative outlook to 15 of the 17 member states of the Euro Zone, including the six countries with the highest grading. At the end of 2011, some measures were taken to stop the crisis from spreading, namely an initiative co-ordinated by six central world banks to boost the overall financial system, the anticipation of the European Stability Mechanism coming into force in July 2012 (with a capacity of 500 billion euros) and the increase in funds of 200 billion euros from the IMF.

The emerging and developing economies have managed to be immune to these developments, either by increasing domestic demand or through their monetary policies, which enabled them to grow at 6.2% in 2011, in line with forecast.

Apart from food, one of the main causes of the increase in the price of commodities was oil, which reached it highest value in April 2011. This evolution was exacerbated by the high demand for commodities in some emerging economies such as China and India, where economic growth has been very strong.

2.2. Sector and Market Environment

2.2.1. Key Facts in the Food Distribution Sector

The slowdown in the growth of the world economy in 2011 impacted in the Food sector, which also contracted, despite being recognized as one of the most resilient of the economy.

There was a decline in consumer confidence and consequently a reduction in consumption, whose determining factors were the effects of the budgetary and fiscal consolidation measures that were adopted in various countries, an increase in unemployment and a reduction in available income and uncertainty about the stability of the financial system.

One of the major characteristics of this sector is the constant adaptation to the needs of the consumer and so retailers were obliged to once again adapt to new market conditions.

The reduction in household consumption during the year, together with the increase in inflation and commodity prices, put additional pressure on most retailers, the majority of whom felt a reduction in their profit margins.

With regard to store formats, the year was characterised by a greater trend towards opening proximity and convenience stores, to the detriment of hypermarkets.

There continued to be a trend toward reducing and optimising the assortments and a strong investment in the Private Brand, focusing on quality and price. Apart from meeting the objective of satisfying consumer needs, this concern for adapting the offer

also enables improved levels of profitability to be achieved, as it provides a reduction in operating costs and an increase in stock management efficiency.

Within the Food Retail sector, the consolidation trend remained strong during the year, with several Mergers and Acquisitions (M&A) operations occurring in Europe.

2.2.2. Poland

Macroeconomic Environment

In the three-year period 2009-2011, the growth in GDP in Poland was one of the highest in the member-states of the European Union (EU). In 2011, the Polish economy performed very positively, with an increase in GDP of 4.3%, clearly above the average for the EU countries.

In terms of public debt, Poland maintained controlled levels at around 53.7% of GDP, despite the devaluation of the Polish currency - the zloty (PLN). The budget deficit fell to 5.6% of GDP compared to 7.8% in 2010, mainly due to the substantial savings made by the Government. The unemployment rate also remained stable, at above 12% throughout 2011.

In the first half of 2011, the zloty remained stable with an average monthly exchange rate slightly below 4 PLN/EUR. However, it devalued strongly during the second half and ended the year quoting at 4.4580 PLN/EUR, presenting an annual devaluation of 11.5%.

Inflation in the Polish economy reached 4.3% in 2011, with a contribution of 5.4% from the food and non-alcoholic beverage categories. To combat escalating prices, the Polish Central Bank increased its reference interest rate from 3.5% (unchanged since June 2009) four times, to 4.5% in June and remaining at this rate until the end of the year.

Modern Food Retail

In 2011, sales in Polish Food Retail recovered after the slowdown during 2009-2010. However, the 3.7% growth was driven mainly by inflation. The discount and convenience store segments achieved higher levels of growth.

The Discount segment continued to grow sharply, reaching over 33 billion PLN in sales (a growth of 22% compared to 2010). This segment already represents 13.4% of the retail sales in Poland, compared to 11.4% in 2010. Proximity, low prices and Private Brands are the factors that best serve the needs of the Polish consumers and are the main reasons for the success of this segment.

The Private Brand concept entered a new stage of development, with new chains and new segments investing in this differentiation factor, including premium mini-markets, small retailers, convenience stores and franchised chains. The growth of the Private Brand sales' weight on overall sales, which stood at 17% in 2010, reached around 21% in 2011.

The Polish market continued to consolidate during the year. The main operation was the acquisition of Tradis by Eurocash to the value of approximately 1.1 billion PLN, placing the group in second place in Food Distribution, after the Jerónimo Martins Group. Private equity funds played a very important role in the market consolidation, with Mid Europa Partners acquiring a stake in Zabka and making an offer for the retail division of Emperia.

2.2.3. Portugal

Macroeconomic Environment

According to the Bank of Portugal, there was a contraction in GDP of 1.6% in 2011, following the growth of 1.4% in 2010. This reflects the slowdown in domestic demand and the general fall in investments, partially offset by an increase in exports, which have helped to soften the extent of the GDP decline.

The economic situation in Portugal in 2011 was conditioned by various factors, especially: i. the world economic contraction; ii. the European sovereign debt crisis; iii. the Economic and Financial Adjustment Programme (EFAP), linked to the request for external financial aid; and iv. the deleveraging of the private sector, with more restrictive access to bank loans.

With regard to domestic demand, which fell by 5.2%, private consumption may have contracted 3.6%, more than GDP, following the increase of 1.4% in 2010, notably the 1.9% reduction in the consumption of current goods and services, which represent 90% of total private consumption, and investments may have decreased more than 10%. Sales of durable goods probably fell by close to 20%, following an increase of around 11% in 2010. Public consumption decreased, in real terms, by 3.2% (+1.5% in 2010).

The evolution of the private component reflected the limitations arising from household weak solvency, among other factors, imposed not only by the restrictive conditions for obtaining loans, but also the increased taxation (such as the income tax surcharge, which implied a 50% retention of the Christmas Bonus) and the prospects of the continued adverse conditions in the job market. Within this context, also noteworthy is the historically low levels of confidence among Portuguese consumers.

The unemployment rate in the year 2011 increased to a new historic high of 12.7%.

In 2011, there was a 3.7% inflation rate. Among various factors that contributed to the increase in inflation were the increase in VAT from 21% to 23%, the rise in transport prices and the increase in indirect taxation on electricity and natural gas. This last measure, in conjunction with the significant increase in oil prices, caused the energy component of the consumer price index to increase by around 13%.

The Government's latest projections indicate a public deficit of around 4% of GDP in 2011, lower than the 5.9% foreseen in the EFAP and considerably lower than 2010 (9.8%). For the first time, in 2011 public debt surpassed 100% of GDP, reaching 101.7% against 93.3% in 2010.

Modern Food Retail

In summary last year was noted for the programme of financial aid to Portugal, which imposed a wide range of restrictive measures with a direct impact on households' available income. There was also a general increase in prices, especially in the nonfood areas (notably energy and transport, among others) and a high rate of unemployment, as mentioned before. Therefore, 2011 was a particularly difficult year for most Portuguese families and consumers, whose level of income declined.

According to data from the Portuguese National Statistics Institute (INE), the macroeconomic climate in 2011 had a negative impact on consumer confidence, whose indicator in December had the lowest figure ever. According to Eurostat, the economic sentiment indicator in Portugal is also currently one of the lowest in Europe.

All the above-mentioned aspects contributed towards a considerable reduction in consumption in 2011 and were clearly the cause of various changes in consumer habits. Current consumer behaviour trends, some already noted in 2010, include the following:

• i) Increase in shopping frequency and reduction of the average amount spent at each visit;
• ii) More home consumption, with consumers choosing increasingly to make more meals at home, limiting their visits to restaurants;
• iii) Shifting of choice of brands, with consumers choosing products with a lower price, showing increasing preference for Private Brands;
• iv) Greater price awareness with more price comparison and importance given to this at the point of purchase.

Taking into account the factors mentioned above, in 2011 there was a decrease in the retail sales compared to 2010. This decrease was more significant in non-food items (-9.8%), although this year it also spread to food retail (-1.1%).

Modern Food Retail followed the general trends mentioned above. In 2011, there was a negative sales trend in all formats, except for Hypermarkets which benefited from the change in the law in October 2010 that enabled this format to open on Sundays.

With regard to the sector's organic expansion, as was the case in 2010, there was a limited opening of approximately 50 new stores, mainly in the proximity formats.

Wholesale Market

As a consequence of the recessive economic environment, 2011 was marked by a significant decrease in the turnover of the wholesalers, estimated at over 5%. There was also the loss of a major player, whose entire operation closed down. This negative trend is the result of the declines in the two main segments in this sector: Traditional Retail and HoReCa.

According to Nielsen's data (Nielsen Scan Trends), there was a fall of 8.7% in sales within the Traditional Retail sector, compared to 2010, continuing the declining weight of this sector in the overall fast-moving consumer goods sales that has been occurring for some years. The weight of Traditional Retail is now only 9.2%, versus 10.1% in 2010.

The HoReCa channel contracted throughout the year. According to INE (Portuguese National Statistics Institute), service sales fell 4.0% in November when compared with the previous 12 months in the segment for hotels and restaurants.

Sources:

IMF World Economic Outlook; European Commission, Eurostat; Reuters; Bank of Portugal Economic Bulletins; Portuguese Ministry of Finance; 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 Performance

3.1. Main Projects of 2011

2011 was another year of strong performance for all the Group's business areas. All the established strategies and objectives were implemented and achieved by the management teams, with the appropriate monitoring of the Board of Directors, who discharged their supervisory activity of management activities without any constraints.

Jerónimo Martins began 2011 defining three fundamental strategic objectives for the sustainability of its growth strategy:

• i) Strengthening of the leadership positions in Poland and Portugal;
• ii) Investment Programme;
• iii) Ensuring long-term growth choosing a new market.

3.1.1. Strengthening of the leadership positions in Poland and Portugal

For its Food Distribution formats and the Manufacturing categories, the Group remained clearly focused on strengthening its market leadership. This strategic direction led to the Group's main business areas achieving growth in sales above their respective sectors, ending 2011 with strengthened market shares.

The strategies followed by the Companies in pursuit of this objective were founded on the strategic pillars defined and strengthened over recent years for each banner, and recognised and valued by consumers as differentiating factors.

The Food Retail market¹ in Poland grew by 2.8% compared to 2010. Biedronka posted sales growth in Poland of 24.2% (in zloty), reaching 23.8 billion zloty.

The Company remained the recognised price leader in the Polish market throughout the year, as well as maintaining the dynamism with which it continuously addresses its value proposition, and which requires a careful review every year of the basic food needs of Polish consumers, in order to identify necessary adjustments to the assortment and development opportunities for the average basket.

Biedronka, besides undertaking the normal review of the assortment, which leads to the replacement of some products by others of the same category better suited to the current needs, strengthened the categories already identified as strategic to the sustainable development of its average basket.

In this regard, the importance of Perishables is to be noted in the medium and long-term positioning of Biedronka in the Polish market, which led the Company to take another step towards its differentiation by testing a new store layout which, while maintaining the assortment, gives greater visibility and generates sales growth in categories that are important daily traffic generators. The positive result achieved in the test phase led to the decision to apply the new layout to the entire network of Biedronka stores, to be implemented during 2012.

¹ GUS - Retail Sales of goods by type of enterprise activity (current prices) (Food, Beverages and Tobacco).

The Food Retail market in Portugal reflected the consequences of the reduction in the incomes of households, who have adjusted their buying habits since the beginning of the year, increasing the frequency of visits to stores to the detriment of the value of each purchase, while also displaying greater sensitivity to the price factor.

Hence, the Food Retail market² decreased by 1.1% in 2011. This development was to a certain extent anticipated by Pingo Doce, which kept its strategic focus on increasing market share through a value proposition undergoing constant improvement. The Company's sales grew 4.2%, leading to an increase in market share.

In Pingo Doce, the quality of the assortment, the store environment and the commitment to consistently low prices were the main instruments used to maintain the preference that the brand has achieved from consumers in a very unfavourable economic environment for the income of Portuguese households.

The Company kept its focus throughout the year on innovation as a common approach to all its strategic pillars – Perishables, Private Brand, Communication and Take Away.

The acknowledged level of quality of Perishables was highlighted by innovative projects involving the national production of meat, fish and vegetables, with appropriate publicity in television campaigns. The Private Brand has been strengthened with the development of these projects that supplemented the assortment and, above all, contributed to strengthening the Pingo Doce brand.

The Communication vector reflected initiatives that the Company implemented in 2011, with evident benefits concerning the growing consumer preference for Pingo Doce.

The two main segments of the Cash & Carry format – Traditional Retail and HoReCa – recorded falls in sales of 8.7% (against to 2010) and 4.0% sales (cumulative to November) respectively, as a result of the economic downturn that pressurises small retail operators and also leads to the shift in consumption from outside the house into the home.

Recheio, aware of the difficulties that the year could bring for each segment, established the increase in the number of customers of its business base as a priority, as a means of mitigating the reduction in business activity that was expected to hit the sector.

The Company remained very competitive in terms of price, reinforcing the already clear competitive advantage held by its assortment where the range and quality of the categories of Perishables stand out. The development of the Amanhecer project, with an assortment of specific Private Brands, which strengthen the value propositions aimed at the Traditional Retail channel, is also noticeable.

Recheio's sales grew 4.9% compared with 2010, well above the market average, which confirms the Company's position as the strongest partner among traditional retailers and HoReCa players.

2 INE - Index of Turnover in Retail Trade - Retail Sales of Food, Beverages and Tobacco.

3.1.2. Investment Programme

The commitment to growth and value creation gives the investment area a crucial role in the Jerónimo Martins Group's strategy.

This strategic focus on growth, combined with the excellence of the formats the Group operates, has allowed it to more than double the number of stores over the past five years, thus ensuring sustainable leadership in the Food Distribution market in Poland and Portugal.

The investment programme is aligned with the top strategic priority of the Jerónimo Martins Group to galvanise the potential identified for Biedronka in the Polish market by maximising the Company's growth, both by increasing like-for-like sales and opening stores.

		New Stores		Refurbished 1		Closed Stores
	2011	2010	2011	2010	2011	2010
Biedronka	239	197	9 9	116	1 5	1 4
Pingo Doce 2	9	7	8	2 7	2	1
Recheio 3	1	3	2	2	0	0
Other Businesses 4	4 3	2 8	2	1 6	1 6	7

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

2 Including Pingo Doce stores in Madeira.

3 Including Recheio store in Madeira.

4 Including the stores Apteka Na Zdrowie, Hebe, New Code, Spot, ElectricCo, Bem Estar, Refeições no Sítio do Costume, Petrol Stations, Jeronymo, Olá, Hussel, Chilli's and Oliva.

In 2011, most of the 448.6 million euros invested by the Group were allocated to the inauguration of a total of 249 new Food Distribution stores, most of them (239) under the Biedronka banner, which ended the year with a total of 1,873 stores.

In Portugal, despite the limitations naturally imposed by the macroeconomic situation and the clear downward trend in the opening of new Food Retail spaces, remained the determination to guarantee the leadership position. Hence, Pingo Doce opened nine stores in 2011, mostly in urban and developing areas, while closing two other stores.

Recheio strengthened its position with one more store (Tavira platform), thereby strengthening its presence in key locations for HoReCa.

The investment in developing new business areas resulted in the opening of 43 new establishments in areas such as Restaurants, Clothing, Petrol Stations and Health. Of note in this regard is the launch of a new business in Poland in the drugstore area, comprising the opening of seven Hebe stores, still in the test phase.

The store opening plan accounted for most of the year's investment, totalling 448.6 million euros, 312.5 million (69.7%) of which was invested in the Polish operations.

More than half of Group's investment was allocated to new stores. Investments in maintenance and refurbishment of the store network and the logistics infrastructure was also a priority focus, with 185.5 million euros invested in those areas.

The investment in the refurbishment of stores is essential to maintaining the high standard of store environment established by each banner as an integral part of the value proposition. It reflects a concern to ensure that the stores are maintained in optimum operating condition, with spaces that guarantee total consumer satisfaction, while also permitting the adaptation of stores to new market trends.

						(million euros)
		2011			2010
Business Area	Expansion1	Others2	Total	Expansion1	Others2	Total
Biedronka	227	85	312	151	120	271
Stores	182	71	253	120	101	221
Logistics and Head Office	45	14	59	30	19	50
Pingo Doce	33	73	106	36	80	116
Stores	33	71	104	35	78	113
Logistics and Head Office	0	3	3	0	2	3
Recheio	2	11	13	14	15	29
Madeira	0	1	1	0	12	12
Food Distribution Portugal	35	86	121	49	108	157
Total Food Distribution	262	171	433	200	228	428
Manufacturing & Others	1	14	16	1	5	6
Total JM	263	186	449	201	233	434
% do EBITDA	36.5%	25.7%	62.2%	30.9%	35.7%	66.5%
1 New Stores and New Distribution Centres.
2

These investments are essential to promote customer loyalty and win new customers, thereby ensuring sustainable growth in like-for-like sales.

2 Refurbishing, Maintenance and Others.

Biedronka undertook a total of 99 store refurbishments in line with investment maturity, which normally requires a store to be refurbished every seven years.

Pingo Doce refurbished two hypermarkets in Greater Lisbon (Sintra and Odivelas), with the aim of standardising the banner among the various formats. Six Pingo Doce

stores were refurbished and five more underwent a layout refurbishment, in order to give greater focus to Perishables, one of the pillars of the banner's differentiation.

Recheio refurbished two stores in order to maintain the high level of quality and service of its operations at all establishments throughout its network.

The focus on growth and value creation entails a meticulous and comprehensive analysis of investments to be made.

In 2012, the focus on organic growth will continue, while also analysing other growth opportunities that may arise in the markets where the Group Jerónimo Martins operates.

In terms of investments, Biedronka will continue to occupy the first place in the Group's priorities and will receive the lion's share of the total investment.

3.1.3. Ensuring Long-Term Growth - Choosing a New Market

The Group, aware of Biedronka's significant potential as an engine of the Group's growth in the short and medium-term, must be alert to new growth opportunities, particularly those that will allow it to maintain attractive growth rates when Biedronka approaches maximum potential in the Polish market.

With, i. the implementation of the strategy in the Polish market under control, as Biedronka has given successive proof in recent years of its ability to open new stores, while maintaining good sales performances and profitability; ii. the growing strength of the Group's balance sheet, with cash flow from operations significantly decreasing the level of debt; iii. a management team of great seniority and prepared for new challenges, and; iv. knowing that the construction of a profitable operation requires time, it became clear that the time had come to start building the future.

After nearly two years of detailed study of markets that might provide an investment opportunity for the Group, the decision was taken to choose Colombia as a new market where the Group will commence operations.

The choice meets all the initially established criteria of the Group, regarding, i. the political and economic organisation of the country; ii. market size; iii. economic growth and; iv. the opportunities in the Food Retail sector.

Colombia is a constitutional state with a long history of democracy, fully functioning institutions and a market open to private investment, thus meeting the minimum criteria considered essential to undertake a more in-depth study of the country and the market.

The country has around 46 million inhabitants, with a young population and a high birth rate, which in itself constitutes a market with the necessary scale to establish an operation whose success is leveraged on the benefits of scale, similar to the situation in the Group's other Food Distribution businesses.

The Colombian economy has grown sustainably in the last decade, and in 2011 the country received an investment grade rating from Standard & Poor's and Moody's.

Lastly, the Food Retail sector, dominated by small Traditional Retail operators, offers interesting opportunities for strengthening supply to the Colombian consumer. The Jerónimo Martins Group's believes that its experience can find interesting opportunities in Colombia to establish a differentiated value proposition.

The management team responsible for launching the new Company established itself in the country at the end of 2011, to prepare for the Group's entry in this market.

This is a project that is forecast to be highly focused on the needs of local consumers. It will begin in a disciplined manner and we aim to turn it into a reference in the Colombian market.

The decision to invest in a third country is of enormous strategic relevance on account of what it represents for the Group's future growth and, as publicly stated several times throughout the year, is also reflected in the need to adopt a new type of organisation which will facilitate co-ordination between the various geographic regions, thereby ensuring the efficient and consistent management of a larger and more complex business portfolio.

Thus, throughout the year, in keeping with the concern for aligning the organisational structure with its strategy, the Jerónimo Martins Group prepared and carried out a reorganisation of the Group's businesses, with the objective of i. simplifying and clarifying the holdings structure, isolating different business groups, reducing the normal complexity that arises from companies operating different businesses (Distribution and Manufacturing) and/or in different countries (Portugal, Poland and Colombia); ii. protecting the Group's growth strategy, optimising the sources of financing and ensuring access to financial liquidity by establishing a sub-holding for each business area based in a financial market of great maturity, liquidity, international credibility and transparent and stable law-making, such as the Netherlands and iii. minimising the corporate levels between the Group's holding and the various business areas, thereby enabling free cash flow to circulate more efficiently and increasing the relation between the earnings generated and the dividends paid to Jerónimo Martins' shareholders.

As a result of this re-organisation, three different business areas were made autonomous and, simultaneously, another was created, with these units being structured under four sub-holding companies: Warta BV, which aggregates the businesses in Poland; Tagus BV, which brings together the shareholdings in Distribution in Portugal; Monterroio BV, which encompasses the manufacturing and service areas in Portugal, and finally, New World BV, which is in charge of the shareholdings for the business to be developed in Colombia.

This new organisation is considered to be simpler and has the advantage of more clearly reflecting the outlined strategy and the international dimension of the Jerónimo Martins Group, whilst driving specialisation in each business area and optimising synergies.

3.2. Consolidated Activity in 2011

3.2.1 Consolidated Sales

The sales growth recorded in 2011 allowed Jerónimo Martins to strengthen its leadership position in the markets where it operates.

Consolidated Net Sales

(million euros)	2011		2010		% 		LFL
		% total		% total	Zloty	Euro
Sales & Services
Biedronka	5,787	58.8%	4,807	55.3%	24.2%	20.4%	13.4%
Retail Mainland	3,155	32.1%	2,995	34.5%	n.a.	5.3%	0.8%
Recheio	756	7.7%	721	8.3%	n.a.	4.9%	2.4%
Madeira	162	1.6%	142	1.6%	n.a.	14.4%	7.6%
Manufacturing	228	2.3%	236	2.7%	n.a.	-3.2%	-3.2%
Mkt, Repr. and Rest. Services	89	0.9%	90	1.0%	n.a.	-1.1%	-3.6%
Consolidated Adjustments	-339	-3.5%	-300	-3.4%	n.a.	13.2%	n.a.
Total JM	9,838	100.0%	8,691	100.0%	n.a.	13.2%	7.8%
p.m. Retail Portugal (store sales)	2,865		2,749			4.2%

Consolidated sales grew 13.2% to 9.8 billion euros. Excluding the negative exchange rate effect, the Group's sales reached 10.0 billion euros, representing a 15.3% growth.

Consolidated Sales (million euros)

Contribution to Consolidated Sales Growth (million euros)

The sales performance for the year reflects the Group's strong like-for-like growth (+7.8%), with the excellent contribution from Biedronka (+13.4%) and the good performance of the businesses in Portugal. The implementation of the expansion plan added over 10.7% to the Group's sales area, totalling over 232 stores.

In Poland, Biedronka's sales grew 20.4% (+24.2% in zloty) to 5.8 billion euros. The like-for-like growth of 13.4% and the implementation of the Company's ambitious expansion plan contributed to this performance.

Biedronka - Net Sales (million euros)

Biedronka's implementation capacity is noteworthy, specifically in relation to the store network expansion plan, with the opening of 239 new locations and an increased market presence in the large cities (accounting for 25% of store openings in 2011). The Company ended the year with a total of 1,873 stores.

In Portugal, Pingo Doce and Recheio proved the competitiveness of their value propositions and posted sales growths above their respective sectors, thereby increasing their market shares. By maintaining a remarkable capacity to respond to changing food consumption habits and concentrating efforts on differentiation through the quality of their Perishables and Private Brands, the two Portuguese banners continued to earn the growing preference of their customers.

Pingo Doce continued to show signs of remarkable resilience in a negative macroeconomic climate, recording 4.2% growth of sales, which was driven by seven stores and a like-for-like growth of 0.8%. The Company's like-for-like sales reflected an increase in the number of visits, which was offset to a certain extent by the reduction of the average ticket, greatly influenced by the decrease in consumer purchasing power.

In 2011, the sales of Recheio grew by 4.9%. This result is due to the 2.4% increase in like-for-like sales and a new food service platform commencing operations. It should be mentioned that in the two segments in which the Company operates – Traditional Retail and HoReCa – it continues to record sales growth, despite the fact that those segments developed negatively in the marketplace.

Recheio Number of Stores

In Madeira, sales for the year grew 14.4% as a result of the 7.6% growth in like-forlike sales, and benefited also from the re-opening of the company's two main stores in June 2010, following their total refurbishment. The Company is now the market leader in this region.

In Manufacturing, the heavily competitive environment in a negative market climate led the year's sales to decline by 3.2%. The Company's sales performance in the majority of categories, driven by the promotional efforts undertaken in the last quarter of the year, are worth highlighting. Sales were higher than the market, leading to an increase in market share in key portfolio areas.

Sales in the Marketing, Representations and Restaurant Services area fell by 1.1%, reflecting the impact of the economic environment on some of the categories.

3.2.2. Consolidated Operating Results

(million euros)	2011		2010	11/10
		%		%	%
Net Sales & Services	9,838		8,691		13.2%
Gross Margin	2,244	22.8%	2,014	23.2%	11.4%
Operating Costs	-1,523	-15.5%	-1,390	-16.0%	9.6%
EBITDA	722	7.3%	624	7.2%	15.6%
Depreciation	-209	-2.1%	-191	-2.2%	9.7%
EBIT *	512	5.2%	434	5.0%	18.2%

Consolidated Operating Result

* 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 commitment to profitable growth in 2011 resulted in a 15.6% increase in EBITDA (+17.9% excluding the impact of the devaluation of the zloty), reaching 721.6 million euros, to give a sales margin of 7.3% (7.2% in 2010).

Consolidated EBITDA (million euros)

This strong operating performance was largely driven by Biedronka, which recorded EBITDA growth of 26.2% (+30.6% in zloty), reaching 458.4 million euros. The Polish company was responsible for 63.5% of the EBITDA generated by the Group.

Contribution to Consolidated EBITDA Growth (million euros)

The ability to promote the growing quality of the value proposition presented to the consumer; keeping the price leadership of the market, with sales growth in the same set of stores; as well as the implementation of an ambitious expansion plan that increased the sales area of Biedronka last year by 16.6%, are all the more relevant when an increase in EBITDA margin from 7.6% in 2010 to 7.9% in 2011 is recorded.

This positive development of Biedronka's margin reflects the Company's disciplined performance and its leadership in terms of costs, which allow it to have a sustainable price leadership, thus allowing the efficiency gains obtained from a growing scale of operations to be clearly demonstrated through an improved EBITDA margin.

EBITDA grew 3.4% at Pingo Doce, and the respective margin was 6.7% of sales (6.8% in 2010). It should be noted that in this Company the sales volume increased, above the growth of sales in terms of value, and Pingo Doce, even so, was able to dilute this impact on the development of costs by efficiency drives at all levels of the organisation. The increase in the petrol station business area, with its increased weight in the Company's sales and lower margin, also had a natural dilution effect.

Recheio's strong competitive position enabled the Company to post a growth of 8.2% of generated EBITDA, whose margin grew from 6.2% in 2010 to 6.4% in 2011, driven by the good sales performance.

In the Manufacturing area there was a reduction of the EBITDA margin in the year, as a result of the Company's efforts to maintain its competitiveness in a scenario of rising prices of the raw materials.

The Group's financial expenses were 30.0 million euros, a reduction of 24.1%, which reflected the significant reduction of consolidated debt.

Net profit attributable to Jerónimo Martins grew 21.1% to 340.3 million euros.

(million euros)	2011		2010		11/10
		%		%	%
EBIT*	512	5.2%	434	5.0%	18.2%
Net Financial Results **	-30	-0.3%	-40	-0.5%	-24.1%
Non Recurrent Items ***	-14	-0.1%	-15	-0.2%	-9.2%
EBT	469	4.8%	379	4.4%	23.7%
Taxes	-111	-1.1%	-79	-0.9%	40.6%
Net Profit	357	3.6%	300	3.4%	19.2%
Non Controlling Interest	-17	-0.2%	-19	-0.2%	-8.9%
Net Profit attr. to JM	340	3.5%	281	3.2%	21.1%
EPS (euro)	0.54		0.45		21.1%
Cash Flow per share (euro)	0.96		0.82		17.8%

Consolidated Net Results

* The EBIT shown in the "Consolidated Net Results" table does not include non-recurrent operational items which appear itemised in the "Statement by Functions" under Exceptional Operating Profit/Loss and are included in the Operating Result shown therein.

** The Financial Results presented in the table "Consolidated Net Results" include the Profits in Associated Companies as reported in the "Statement by Functions".

*** Non Recurrent Items presented in the table "Consolidated Net Results" include the Exceptional Operating Results and Gains/Losses on Other Investments as reported in the "Statement by Functions".

3.2.3. Balance Sheet and Return on Invested Capital

The Group's invested capital was less than the value of the end of 2010, impacted by the devaluation of the zloty in the conversion to euros of the capital invested in Poland.

Balance Sheet

(million euros)	2011	2010
Net Goodwill	721	747
Net Fixed Assets	2,411	2,309
Net Working Capital	-1,542	-1,425
Others	61	78
Invested Capital	1,650	1,709
Total Borrowings	702	782
Leasings	38	72
Accrued Interest & Hedging	15	25
Marketable Sec. & Bank Deposits	-527	-301
Net Debt	228	578
Non Controlling Interests	301	287
Share Capital	629	629
Retained Earnings	492	216
Shareholders Funds	1,422	1,132
Gearing	16.0%	51.0%

Net Fixed Assets, in addition to the depreciation for the year, reflect the investments made during the year and reached 448.6 million euros, 69.7% of which was in Biedronka. They also reflect the approximately 11% devaluation of the PLN/EUR exchange rate between the end of 2010 and the end of 2011.

Working capital remained a key source of financing for the Group, particularly Biedronka, where the growth of operations generates such funds.

Pre-Tax ROIC

The development of Pre-Tax ROIC reflects an investment strategy that is highly focused on Poland, where the growth of sales from the same set of stores and the careful implementation of an ambitious expansion plan with growing benefits of scale led to the Group's Pre-Tax ROIC reaching 26.4% in 2011.

The key driver of the growth of profitability was the capital turnover, which rose from 4.4 in 2010 to 5.1 in 2011. The increase in Biedronka's EBIT margin also contributed to this performance.

3.2.4. Debt Breakdown

The reduction of the consolidated net debt of 577.5 million euros to 227.7 million euros reflects the ability to generate cash flow from the operations that financed the Group's expansion plan and reduced the consolidated debt by 349.8 million euros, bringing the gearing to 16.0%.

Debt Breakdown

(million euros)	2011	2010
Long Term Debt	368	595
as % of Total Borrowings	52.5%	76.1%
Average Maturity (years)	1.9	2.4
Bond Loans	205	340
Private Placement	81	81
Fair value adjustment	-1	-1
Commercial Paper	50	50
Other LT Debt	34	126
Short Term Debt	334	187
as % of Total Borrowings	47.5%	23.9%
Total Borrowings	702	782
Average Maturity (years)	1.8	2.0
Leasings	38	72
Accrued Interest & Hedging	15	25
Marketable Securities & Bank Deposits	-527	-301
Net Debt	228	578
% Debt in Euros (Financial Debt + Leasings)	92.0%	88.1%
% Debt in Zlotys (Financial Debt + Leasings)	8.0%	11.9%

Over 80% of the Group's total borrowings is represented by bond and commercial paper issues. Due to the strong cash flow generation, the Group has chosen to reduce loans that mature.

3.2.5. Jerónimo Martins in the Stock Market

The main Portuguese stock index (PSI-20) declined by of 27.6% in 2011, making it the second worst performing stock index in Europe. Although it appreciated 2% in the first three months of 2011, that trend reversed and became more pronounced, especially in the second half of the year, as a result of the economic situation in Europe and the worsening of the sovereign debt crisis.

In 2011, the Group's share price increased 12.2% compared to the previous year, making it the best performer of the PSI-20. With regard to market capitalisation, Jerónimo Martins ended the year in third place on the PSI-20 index (at a market capitalisation of 8.0 billion euros), which accounts for 17% of the total value of the Index. The appreciation of Jerónimo Martins shares was the strongest in 2011 of the companies considered as a reference - Ahold, BIM, Carrefour, Casino, Colruyt, Delhaize, Dia, Magnit, Metro, Sainsbury, Tesco, Walmart and X5 - which recorded an average drop of 15.6%.

Jerónimo Martins shares registered, in net terms, an average daily trading volume of 990.5 thousand shares during the year, around 15.4% down on 2010.

See the Corporate Governance chapter in this report for a more detailed analysis of the performance of the share (page 194).

In 2011, five investment houses began coverage of Jerónimo Martins (Erste Group, N+1 Equities, MainFirst Bank AG, Renaissance Capital and Wood & Co.) and another five ceased reporting on the security (Caixa BI, Banco Carregosa, Liberum Capital, Nomura and Redburn), mainly because the analysts who monitored Jerónimo Martins shares left. Thus, at the end of 2011, 26 analysts monitored Jerónimo Martins like the previous year. However, it should be noted that only 22 actually had an up-to-date recommendation at the end of 2010.

Number of Recommendations

Underperform/Reduce Hold/Neutral Buy/Accumulate/Add

At the end of the year, 14 of the 26 analysts had a "Buy" recommendation on the share, while three recommended "Reduce" the exposure to it.

In August 2011, Thomson Reuters conducted a Shareholder Identification study. The holders of 92.8% of the shares issued by Jerónimo Martins and 77.1% of the floated capital (26.0% of total capital) were identified. This study concluded that:

• The shareholder base of Jerónimo Martins is well distributed over the key geographical regions;
• Shareholders based in Europe hold 19.6% of the capital of Jerónimo Martins, with France (6.1%) and the UK (8.2%) the most representative markets;
• Shareholders based in the USA hold 5.8% of the capital of Jerónimo Martins;
• Portuguese shareholders account less than 1% of all shares issued;
• During the period under analysis, only 50.9% of all transactions with Jerónimo Martins shares were carried out using primary platforms; the rest were traded on alternative platforms.

Annual Report 11 Consolidated Management Report - Creating Value and Growth Group Performance

2007 2011 2008 2010 2009 BALANCE SHEET
Fixed Assets
Net Goodwill 721 747 737 734	416
110 117 99 93 Net Intangibles Assets	80
Net Tangible Assets 2,301 2,193 2,003 1,875	1,671
Financial Investments 59 72 73 60	61
Working Capital $-1,542$ $-1,425$ $-1,201$ $-1,065$	$-863$
83 69 69 63 Long Term Assets	63
Income Tax Provision $-33$ $-22$ 0 $-4$	$-1$
Deferred Taxes $-47$ $-30$ $-20$ 8	18
Invested Capital 1,650 1,709 1,758 1,777	1,443
Net Debt 228 578 692 846	579
702 782 796 946 Total Borrowings	713
38 72 85 102 Leasings 15 25 31 22	79 52
Accrued Interest Marketable Securities and Bank Deposits $-527$ $-301$ $-220$ $-224$	$-264$
Shareholders Loans
Non Controlling Interests 301 287 288 281	287
1,121 845 778 650 Equity	577
INCOME STATEMENT
Net Sales & Services 9,838 8,691 7,317 6,894	5,350
EBITDA 722 624 505 459	340
7.3% 7.2% 6.9% 6.7% EBITDA margin	6.3%
Depreciation $-209$ $-191$ $-168$ $-158$	$-127$
512 EBIT 434 337 302	213
5.2% 5.0% 4.6% 4.4% EBIT margin	4.0%
Financial Results $-30$ $-48$ $-72$ $-40$	$-47$
Non Recurrent Items * $-14$ $-15$ $-10$ -8	22
EBT 469 379 279 222	188
$-111$ $-46$ Taxes $-79$ -56	$-37$
357 300 223 176 Net Income	151
$-19$ $-23$ $-13$ Non Controlling Interests $-17$	$-20$
Net Income attributable to JM 340 281 200 163	131
Cash Flow 607 515 434 345	266
MARKET RATIOS
Total Shares 629,293,220 629,293,220 629,293,220 629,293,220 629,293,220
Own Shares 859,000 859,000 859,000 859,000	859,000
EPS (EUR) 0.54 0.45 0.32 0.26	0.21
Cash Flow per share (EUR) 0.96 0.82 0.69 0.55	0.42
Share Price at the Lisbon Stock Exchange
14.34 12.58 7.05 6.40 High (EUR)	5.59
Low (EUR) 10.64 6.33 3.07 3.22 Average (closing) (EUR) 12.33 8.63 4.97 4.92	3.43 4.37
Closing at year end (EUR) 12.79 11.40 6.99 3.97	5.40
Market Capitalisation (31Dec) (EUR 000.000) 8,049 7,174 4,396 2,498	3,398

Jerónimo Martins Financial Performance 2007-2011

* 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.

4. Business Areas Performance

4.1. Distribution Poland

4.1.1. Biedronka

Message from the Managing Director

2011 was another year of dynamic growth for Biedronka in the Polish market, as the Company achieved its goals for expansion, two-digit like-for-like growth and increased efficiency levels.

Biedronka maintained its strategy of offering an assortment of carefully selected high quality products at low prices every day, with focus on high quality customer service and locations providing proximity. Simultaneously, Biedronka continues to work on the adaptation of its services and assortment of products, in order to adjust its strategy to new consumption trends and the growing purchasing power of Polish consumers. Consumer satisfaction is reflected in the growth of the number of visitors to stores and of the average ticket value, as borne out by the reported operating profit.

The expected slowdown in the growth of private consumption as well as increased price sensitivity among Polish consumers, will be relevant factors to be taken into account next year.

While Biedronka was recognised as the 4th largest Polish company in 2011, the strengthened reputation will support the Company's focus on growth of like-for-like sales, expansion and the management development, allowing the sales growth, profits and store number goals to be achieved.

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.

2011 Performance

The 13.4% growth of like-for-like sales was supported by the growing preference of Polish consumers for the banner. The Company, leading the lowest prices of the market, continues to benefit from consumers' high sensitivity to the price factor and also the clear preference for proximity formats, which is even more important in a year of rising travel costs due to the increase in fuel prices.

Although the cost structure may have been affected by the significant increase in fuel prices and also some raw

HIGHLIGHTS

Sales: 5,787 million euros Sales Growth: +20.4% LFL Growth: +13.4% EBITDA: 458 million euros EBITDA Margin: 7.9% EBITDA Growth: +26.2%

materials, such as flour and sugar, the gains achieved in terms of scale and the consequent dilution of costs have offset those increases. The Company's EBITDA margin in 2011 reached 7.9%, 30 b.p. higher than the previous year.

An adjustment to the assortment, quality and service provided are necessary due to the improved purchasing power of Polish consumers and the change to consumption habits. 2011 was another year in which Biedronka focused on improving its image and perception among consumers and other key stakeholders.

Perishables remained a focus of the Company since they are a category with an everincreasing share of the "standard basket" of the Polish consumer, as the result of changing eating habits.

Exclusive Brand products – another of the Company's strategic pillars – are recognised by consumers as being of quality, and the focus on maintaining the price competitiveness of these items is essential. Private Brand accounted for 54.5% of sales in 2011 (56.5% in 2010).

One of the most important changes was in the Wines category, with the significant extension of the assortment. Exclusive wines were introduced and thematic fairs devoted to several wine producing regions were held. Biedronka also organised various "Meetings with Wines of the World" events, which were free wine tasting events that attracted the media, key stakeholders and opinion makers.

The strategy in the Non-Food Products category, which held a 6.7% share of the Company's sales in 2011, was to proceed with the two weeks in&out campaigns (short timeframe), as a means of attracting consumers and increasing the average ticket.

In order to increase the visibility of the Fruits and Vegetables categories, a new store layout was tested in the last quarter of 2011. It is expected to remodel all stores to the same layout in 2012.

The strong commitment to the Biedronka expansion plan resulted in the opening of 239 stores, equivalent to a net increase of 224 stores, since 15 were closed during 2011. About 25% of new stores were opened in large cities and about 76% are leased stores. Thus, the Company had a total of 1,873 stores at the end of 2011.

The banner's expansion plan was also a growth driver for creating more jobs throughout the year. In order to motivate the employees, who are so essential for the business's growth, and to promote their performance, the Company has an attractive salary policy, as well as other benefits, such as programmes for supporting the more underprivileged employees and for promoting health, as well as initiatives aimed at employees' children.

Biedronka continued to support the surrounding communities, mostly by donating food, and launched three new references within the scope of the "Milk Start" project, aimed at school-age children. Along with this launch, there was an awareness campaign dedicated to having a balanced diet, which reached over 90 thousand children.

In terms of communication strategy, 2011 was the year in which the banner became the official sponsor of the Polish national football team for the 2012 European Football Championship, which will give it greater visibility and brand awareness, to provide an

expected impact on the Company's positive performance not only in 2011 but also 2012.

Outlook for 2012

The slowdown of private consumption growth and increasing price sensitivity among Polish consumers will be factors to take into account in 2012. On the other hand, inflation may be higher than expected if the devaluation of the zloty continues, similarly to the previous year.

The expansion plan sets out the opening of about 250 stores in 2012, as well as the inauguration of two distribution centres, one of which is a replacement for one that has been closed. Biedronka's operations are now going to be organised into 10 regions of Poland.

Investment in layout changes will also be made, which will be undertaken in all Company stores in 2012. This change will entail the phased closure of every store for two to three days, which is expected to be offset by the increase of like-for-like subsequent to the stores' remodelling. It is expected that this project contributes positively to increasing the consumers' awareness in relation to the quality and service vectors at the lowest price in the market. A revision and improvement to the packaging of the Company's Exclusive Brands products will also be undertaken, with the same aim.

A new campaign will be launched across all the traditionally used media (in-store communication, television, billboards) as well as broadcast on radio for the first time, in 2012. Another important aspect of the communication strategy will be the official sponsorship of the Polish national team at the 2012 European Football Championship, which will be used by the Company to enhance its image.

4.1.2. Apteka Na Zdrowie

With the objective of developing a retail pharmacy business in Poland, in 2011 a further 12 units were inaugurated in this market, closing the year with a total of 36 stores within the country.

All the pharmacies are located next to Biedronka stores, although in separate and independent facilities, in accordance with the legal scheme applicable to this sector in force in Poland.

In December 2011, the partnership with the ANF (Portuguese National Pharmacy Association) came to an end, which resulted in Group Jerónimo Martins acquiring the ANF's 50% shareholding.

In 2012, we aim to develop this business unit, by boosting the existing locations and generating synergies with the Hebe drugstore business.

Annual Report 11 Consolidated Management Report - Creating Value and Growth Business Areas Performance

4.1.3. Hebe

In May 2011, Group Jerónimo Martins inaugurated its first drugstore.

This store focuses on the daily needs of the female consumer, with an assortment favouring the Cosmetics, Perfumery and Personal Care categories. This innovative space also provides a range of services for make-up and body care, namely for nail treatment.

This new concept is built on the combination of high levels of service and advice, linked with the offer of a wide assortment of reference brand products at very competitive prices, within an attractive store environment.

The year ended with a total of seven Hebe stores operating in Poland. The future development of this project will be defined based on the results achieved.

4.2. Distribution Portugal

4.2.1. Food Retail – Pingo Doce

Message from the Managing Director

Pingo Doce set the clear objective for 2011 to achieve like-for-like growth of its market share in the food area, without jeopardising the profitability of the Company and retaining its strategic positioning. Therefore, we streamlined, and we were innovative and bold from the start of the year.

We innovated in communication, efficiently conveying our price positioning through very competitive baskets and the launch of the Take Away "Sunday Menu", at equally competitive prices.

We invested in the launch of Pingo Doce espresso capsules in the Private Brand strategic area, an innovation that had a significant impact on strengthening our relationship with consumers.

Notable in the Perishables field was the investment made in Pingo Doce pork, a project to establish a brand in a market where there is traditionally no differentiation. It is a different product, of higher quality and at a good price.

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.

2011 Performance

Pingo Doce began 2011 expecting a difficult macroeconomic environment, with an expected reduction in consumer purchasing power and private consumption, likely to be exacerbated by the expected rise in the price of various raw materials, with a relevant impact on both the food assortment and the cost structure.

The Company maintained confidence in the Pingo Doce banner to weather the challenges imposed by the economic environment, with its growing market share since 2006. It established as the strategic priority of

HIGHLIGHTS

Store Sales: 2,865 million euros Sales Growth: +4.2% LFL Growth: +0.8% EBITDA: 193 million euros EBITDA Margin: 6.7% EBITDA Growth: +3.4%

2011 to maintain the growth of market share while protecting the profitability of the Company.

The focus on the stabilisation of store sales prices in a scenario of increasing raw materials prices and cost inflation, set internal challenges regarding supply chain efficiency.

Accordingly, a process to increase efficiency was implemented, primarily impacting on Operations, Marketing and Communication.

Consumers showed signs right at the start of 2011 of a growing preference for Private Brand products and products of lower unit values, in an attempt to limit spending, generating a consequent reduction in the average ticket and more frequent store visits.

Like-for-like sales performance in 2011 (+0.8%) reflected the referred trading down impact and also the effect of the opening of hypermarkets on Sunday afternoon, which mostly benefited competitors since this format only accounts for 10% of sales of Pingo Doce. Nonetheless, the growth in Company turnover indicates the Company's competitive strength and reflects the success in achieving the major strategic objective of increasing market share.

It should be noted that Pingo Doce registered, from a perspective of sustainable growth of market share: i. an increase in the number of peripheral customers, which represent a potential increase for the growth of the Company's sales, and ii. retaining the core customers, for whom Pingo Doce is their main store.

Pingo Doce's stance in 2011 was of innovation and leadership, which was reflected in all the strategic pillars: Communication, Perishables, Private Brands, Take Away.

In terms of Communication, 2011 began with an innovative campaign in which Pingo Doce was the first retail operator to take a position on the VAT increase from 21% to 23%, not transferring that rise to the prices charged by the Company.

The "Compare and Prove" campaign was launched at the beginning of the 2nd half of the year, with the aim of strengthening the image of everyday low price (EDLP).

This campaign was developed based on different family baskets, which reinforced the concepts of proximity and immediate savings at the time of purchase. This strategy was followed by the Company in response to the changes and challenges that arose during the year, by virtue of the austerity measures and the reduction of the purchasing power of Portuguese households.

Various projects concerning Perishables were implemented and consolidated during 2011, aimed at enhancing the quality and involvement of national production.

In this regard, the Pingo Doce pork project for differentiation and quality, which began in late 2010, was strengthened. This product has already achieved a 40% share in its category, surpassing initial expectations and demonstrating its heavy approval among consumers.

Similarly, the national veal project was strengthened, which currently has more than 700 domestic producers producing for Pingo Doce.

The Company has also developed a national lamb differentiation project, giving a product of higher quality that meets the preferences of Portuguese consumers.

In the category of Fresh Fish, relations with national fishing fleets were strengthened through an agreement that covers 63 boats and safeguards supply stability through guaranteed purchase of the product. New sourcing markets were sought for some species, especially octopus, with the focus placed on buying at source and developing

relationships with new suppliers in order to prevent any disruptions in supply from the usual suppliers.

The Pingo Doce Private Brand strategy benefited from the perception and confidence that consumers have shown in relation to product quality and the competitive prices of the banner, with the share of total sales increasing from 38.6% to 41.4%.

The Pingo Doce coffee machine launched in 2010 was heavily approved by consumers, guaranteeing their loyalty throughout 2011 and contributing to the quality image of the brand.

Other examples of Private Brand innovation include the Pura Vida products and yoghurts for babies made from follow-on milk and with no added sugar.

The Take Away category recorded strong growth, based on the production of cheaper food solutions, with special focus on the "Sunday Menu". This supply is only possible due to the competitive advantage generated by Pingo Doce's centralised kitchens. The Odivelas kitchen, which opened at the end of 2011, will raise the capacity for innovation in this category and ensure greater and more effective supply to the Refeições no Sítio do Costume restaurants.

The efficiency drive also included the review of some logistics processes, which included some storage facilities changing to a six-day week (instead of a five-day week). This change not only ensured better logistics management, with the elimination of peaks, but, and above all, improved service to the stores, thereby permitting the reduction of stocks and out-of-stock situations. This will be one of the projects undergoing consolidation in 2012.

The increase in transport costs was one of the main challenges in 2011, especially the price of diesel. The implementation of a cost reduction policy was required in order to minimise this impact on the Company's cost structure.

In relation to Pingo Doce store numbers, nine new stores were opened in 2011, mainly located in urban zones and/or zones under development. Two stores were closed. Nine new petrol stations were also opened, a project that will be continued in 2012.

On a social level, in 2011, Jerónimo Martins Group created a Social Emergency Fund, with the objective of providing support to employees in need. On this topic, see also Chapter V – Being a Benchmark Employer, of this Report.

Outlook for 2012

The main objective of Pingo Doce will be the growth of like-for-like market share, with a great deal of attention to cost management, maintaining a stable EBITDA margin. Similarly, the focus on price competiveness and the consolidation of the investment in family baskets will continue.

The Company will continue to invest, but in a more selective manner given the present climate. Pingo Doce will proceed with its revamping plan in order to improve the quality and service supplied by the Company.

4.2.2. Food Retail - Madeira

Message from the Managing Director

2011 was a year of reward for the whole Group in Madeira, with remarkable growths in sales and operational improvements at all levels, recovering strongly from the effects of the flooding in 2010. As a result of all the work carried out, both Pingo Doce and Recheio arrive at the end of this year as market leaders in Madeira.

Mission

To offer an assortment that fits the daily needs of our customers, with the most competitive price, the best perishables and the best quality Private Brand, with a constantly high level of efficiency.

2011 Performance

The Group's two banners operating in Madeira recorded a 14.4% growth in sales, reaching 162.3 million euros, posting a 7.6% like-for-like growth.

In 2011, the main challenge that the operation in Madeira faced was the decrease in consumer purchasing power, as a consequence of the weaker performance of the main economic sectors in the archipelago. Although the Tourism sector had a good performance in 2011, mostly due to the comparison with the weak performance in 2010, both the Building

HIGHLIGHTS

Sales: 162 million euros Sales Growth: +14.4% LFL Growth: +7.6% EBITDA: 8 million euros EBITDA Margin: 4.7%

sector (where there were various bankruptcies and redundancies), and the Civil Service (with salary reductions) contributed towards the reduction in available income. In addition to these factors, there was also an increase in emigration.

Throughout the year, as the macro-economic climate got worse, Pingo Doce reviewed its assortment and reduced the number of SKUs (Stock Keeping Unit - individual identification of each article in stock) which enabled the company to better adapt to the difficulties of the consumers. The decision to not increase prices due to the change in VAT rates also improved the business's competitiveness in the Autonomous Region of Madeira, with positive effects on sales and on Pingo Doce's image.

This business area began 2011 with the objective of continuing to increase its market share and during the year became market leader and a benchmark operator in the Bakery and Pastry categories, improving its offer and its Restaurant Service.

Apart from the good performance in the above-mentioned key categories, Pingo Doce's sales growth in Madeira also reflected the positive impact of the re-building of the Company's two main stores (Anadia and Dolce Vita), which were closed for four months in 2010 due to the storm that hit the island. These stores re-opened with a renewed image that is more attractive to the consumer and with a layout better

adapted to his needs and to the Company's strategy, where the Perishables and Restaurant area are highlighted.

With regard to the Bakery and Pastry categories, various changes were implemented which resulted in an improvement of the consumer's perception and in a growth in sales, in this case by around 20%. Apart from having implemented an over-thecounter service, a review of the entire assortment was made and bread production was generally implemented using fresh dough in the majority of stores.

Focusing on improving the Restaurant Service also meant increasing the offer and changing the menus to better fit the needs of the consumer, namely by introducing vegetarian dishes or creating recipes more appropriate for tourists in some stores where the location justified this. These changes led to an increase in around 30% of sales in this category, helped by the re-opening of two restaurants that had closed in 2010 due to the storm.

As a result of the strategies that were implemented, there has been a significant increase in market share, with Pingo Doce leading Food Retail in Madeira Island for the first time since it began operating in that region.

The banner presented an excellent sales performance, with a growth of 16.3%, reaching 124.6 million euros. The like-for-like growth posted by Pingo Doce in Madeira was 7.3%.

For Recheio in Madeira, the objective set for 2011 was to increase its penetration of Perishables in HoReCa, where preference for local specialised operators still prevails. For this purpose a senior Perishables manager was nominated, in order to ensure that the store corresponds to the level of these customers' demands.

Special emphasis was also given to the wholesale distribution service level, with the introduction of a night picking shift (collection of products in the warehouse for later delivery to the customer), which caused an increase in sales of around 30% in this channel. It should also be noted that the Recheio product codes were harmonised between Madeira and the Mainland.

In 2011, this business area's sales growth was 8.5%, reaching 37.7 million euros.

As far as logistics are concerned, the target for the retail operation in Madeira was to increase the store service level. So the warehouse operation was restructured, with changes to the layout and the introduction of another working shift, which resulted in a reduction in stock of approximately two days of sales and in service levels close to 95%.

In 2011, the Pingo Doce Private Brand showed a significant growth (3 p.p.), representing around 40% of the Company's sales for the year. For Recheio, the main project was the increase in the Amanhecer Private Brand assortment and the investment in giving greater visibility and highlighting these products within the store. The opening of the first Amanhecer store in December in Funchal should also be mentioned.

Concerning investments in 2011, these were made in replacing obsolete equipment and in the refurbishments needed to continuously improve the service provided to consumers, especially focusing on the Bakery/Pastry and Restaurant areas.

Outlook for 2012

In 2012, Pingo Doce in Madeira will focus on increasing its market share and in reducing its operating expenses, taking into account the expected further decrease in consumer purchasing power due to the various foreseen austerity measures, especially the increase in taxes (VAT, income tax, tax on oil and energy products and the end of the insularity subsidies), but also due to an increase in unemployment.

Recheio will continue with its investment in Perishables that began in 2011, especially in the Fruit and Vegetables category. The main objective is to strengthen the Company's position in HoReCa, where this segment is still dominated by local market players. There will be a focus on increasing the business's profitability, especially in the wholesale distribution service, following the investments that were made to improve it.

4.2.3. Cash & Carry - Recheio

Message from the Managing Director

2011 was a year of milestones for Recheio. The Company consolidated its market leadership, further distancing itself from its competitors and surpassing the 100,000 active customers mark. It strengthened differentiation in the Perishables category, remaining a reference mark in HoReCa channel and it increased competitiveness, to support its customers in a difficult economic environment. The Amanhecer project marked a turning point in the Traditional Food Retail segment. The year was also one of preparation for the future, based on a thorough analysis of the market and the development of projects that guarantee the long-term sustainability of the business.

Mission

To meet all the needs of the Traditional Retail customers and the HoReCa channel. To give the Recheio customers value for money and, therefore, to believe in long-term relationships, offering each segment the value best suited to its needs. Recheio's employees, with their motivation, competence and dedication, are the best building blocks for such relationships, whether with customers, or with suppliers. Everyone focusing on the customer and the Company's efficiency is the best way of guaranteeing profitability and a return on the Shareholders' investment.

2011 Performance

2011 was a year of challenges for Recheio. Performance in 2011 was in line with the goals initially established. The fall in consumer confidence and reduced purchasing power as well as decreased consumption were factors adequately planned for. The Company's main goals were, given the constraints of the economic climate, acquiring new customers and also retaining existing customers.

Sales of Recheio grew 4.9% in 2011. The Wholesale sector in 2011 was marked by the closure of several operators. Recheio, on the other hand, benefited from the strength of its commercial proposal, founded on the fact of belonging to the Jerónimo Martins Group.

HIGHLIGHTS

Sales: 756 million euros Sales Growth: +4.9% LFL Growth: +2.4% EBITDA: 48 million euros EBITDA Margin: 6.4% EBITDA Growth: +8.2%

Recheio continued to focus on Perishables and its Private Brands as strategic vectors of its value proposition, and it has made significant investment in training its teams with clear targets for improving customer service levels.

The best performing categories were Private Brands and Perishables (especially meat and fish), attesting to the success of the work carried out. These two pillars remain a priority for the Company. Private Brands accounted for 21.3% of overall sales in 2011, an increase of 4.2 p.p. from 2010. One of the factors contributing to this performance was the release of 80 new Amanhecer product references. Sales of products of the Amanhecer brand recorded strong growth, exceeding 20 million euros last year.

The worst performing categories as a result of the macroeconomic environment were those of non-essential goods, in particular alcoholic beverages. The Vegetables category was also negatively affected due to the E.coli bacteria outbreak in Europe, which began in May.

In terms of customer numbers, Recheio grew 4.7%, to over 100,000. Traditional Retail moved closer to the HoReCa in terms of sales, and these two segments currently have practically the same share of the Company's sales.

The sales of Recheio in the HoReCa grew 1.4% in 2011. The recessionary macroeconomic climate increased customer turnover in this channel, as a result of more openings and closures of restaurants and cafes. Nonetheless, the year still proved to be positive despite this factor, with the Company's customer base growing 4.0%.

Traditional Retail sales of Recheio grew by 5.1%, and the respective customer base increased by 4.5%.

The Amanhecer project, which is designed to boost this sales channel, was launched in 2011. This project enables customers of this segment to collaborate in technical terms with Recheio in redefining their business model, making it more competitive by access to the knowledge that the Company has of the market. This project permits the creation of business sustainability in a distribution channel that Recheio believes to represent a clear market opportunity and the possibility to revive and enhance traditional commerce and commerce of proximity. After the initial test phase, the pace of openings accelerated with one store opened per week in the last quarter of the year. 2011 ended with a total of 17 Amanhecer stores, including one store in Madeira.

The Company's EBITDA margin increased 20 b.p. to 6.4% of sales, despite the growth of energy and logistics costs, this latter exacerbated by the significant increase in volumes transported.

In terms of investment, 2011 was marked by the slowdown of the amounts invested compared to previous years. This restraint measure represents, on the one hand, an anticipation of the slowdown of economic activity in Portugal, and on the other hand, the fact that Recheio has made significant investment in recent years in new stores and renovations. It is expected that these investments reach levels of maturity that may allow sales and profitability to increase in a consistent manner.

The investment plan primarily focused on opening a food-service platform in the Algarve region, with the aim of increasing the service to HoReCa. The first franchising project also began in 2011, with the opening of a store in partnership with the Marques group in June, in São Miguel, Azores.

Outlook for 2012

Recheio will continue to focus on its mission: to be the main business partner of its customers of the HoReCa and Traditional Retail channels, through a better value proposition than its competitors. This value proposition is based on the supply of food products and quality services at very competitive prices, as well as the daily construction of a lasting relationship of trust with its customers.

Recheio will remain focused in 2012 on increasing market share and strengthening its leadership of the Cash & Carry market. The celebration of the Company's 40th anniversary will be associated with a strong advertising campaign that is expected to have a positive impact on sales.

Recheio will carry out a detailed analysis of the food service market, with the aim of increasing focus on the segment and seeking to further adjust the assortment and services to the specific needs of this type of customer.

Around 20 new stores are expected to be opened under the Amanhecer project. The Amanhecer brand will continue to grow in terms of the number of references, aiming to increase its penetration among retail customers and to become the most important brand of the traditional Food Retail Segment.

4.3. Manufacturing, Distribution and Restaurants & Services

4.3.1. Manufacturing

4.3.1.1. Unilever Jerónimo Martins

Message from the Managing Director

2011 was a year of continuous challenges but the main objective of gaining market share was attained without significantly affecting the Company's profitability. Unilever Jerónimo Martins is now better positioned to face the challenges that 2012 will bring us.

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.

2011 Performance

Unilever Jerónimo Martins set as its main objective for 2011, the increase in its market share whilst maintaining its profitability.

In joint terms, in the In Home market, at the end of 2011 the Company's market share was around 35.8%, according to Nielsen, which reflects an increase of 20 b.p. compared to 2010, whilst in the Out-of-Home market, its market share was around

81.2%, reflecting a gain of around 140 b.p.. It should be highlighted that these gains in market share occurred in almost 70% of the categories in which Unilever Jerónimo Martins operates.

An objective was set that the gain in market share should be transversal and cover the majority of the 19 categories in which the Company operates. Hence, the main projects carried out in 2011 to reach the desired result were the following:

• Strong investment by Planta and Becel buttery taste, in launching and consolidating their position, so crucial for increasing the sales recorded in the category, with increases in market share in margarines and spreads;
• Re-organisation of the network of ice cream dealers, with increased focus and service quality;
• Strong promotional investment at Olá, namely in giving the brand visibility, but also in launching MAX, a range of ice-creams for children, and in continuing to consolidate the Ben & Jerry's range both for In Home and Out-of-Home;

HIGHLIGHTS

Sales: 179 million euros Sales Growth: -4.8%

• Promotional investment in the washing machine detergent market, where of note are the two "door-to-door" initiatives involving two million homes, under the theme "Skip helps you to save. Work it out", which resulted in a substantial increase in market share;
• Continued introduction of cutting-edge innovations, such as Rexona deodorant with the motion senses system or the Knorr Sabores no Forno oven seasoning range;
• Introduction of very simple but relevant propositions within the social and economic context, such as extending the Olá Original range to the cone segment or repositioning Vasenol and clarifying its different price levels.

Although the market share objective was achieved, the Company's sales still reflected the impact of a recessive consumption environment. Hence, Unilever Jerónimo Martins's posted a fall of 4.8% in 2011 compared to the previous year, part of this decrease being explained by the unfavourable climate conditions during Summer (July and August), which had a significant effect on the Ice Cream and Ice Tea categories.

With regard to profitability, the Company's EBITDA margin evolution was largely a reflexion of: i. a fall in market share that was greater than expected, namely in the Out-of-Home market; ii. an increase in commodity prices, namely products such as oils and oil derivatives, which were widely absorbed by the Company, in order to maintain competitiveness in an aggressive competitive environment and one of slack demand; and iii. a strong increase in promotional activity, mainly in the second half of the year.

Outlook for 2012

The main objective for 2012 is to consolidate the gains in market share obtained in 2011.

Thus, the Company will continue to strongly invest in communicating its brands and presenting innovative propositions that fit the consumers' current lifestyle. A review of the current cost structure is foreseen, making it more appropriate and competitive in an environment which is expected to be extremely highly competitive.

4.3.1.2. Gallo Worldwide

Message from the Managing Director

During 2011, the Company forged ahead on the path for extending its geographic presence, adding five new countries to its destination markets. At the same time, we re-launched the brand to prepare it for the future, which enabled us to give it a single worldwide image that had not been the case since 1989, the year of the Unilever Jerónimo Martins joint-venture acquisition. This re-launch was supported by a manufacturing investment which increased efficiency and made it possible to identify a greater number of non-conformities, raising the level of its product's quality and consistency.

Mission

The Company's mission is 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.

2011 Performance

Gallo Worldwide started 2011 with the ambitious objective of consolidating the sales growth that began the previous year, aware of the challenge it faced due to the limitations of the Portuguese market and the demanding comparison that 2010 represented.

HIGHLIGHTS Sales: 50 million euros Sales Growth: +2.6%

This sales growth objective was achieved with an

increase of 2.6%, even when faced with the downturn in the domestic market, which was more than compensated by the strategic investment that the Company has been making in foreign markets.

Within this context, the strong growth achieved for the year under review comes from the accelerated pace of the Brazilian market, the strong volume growth in Venezuela and, to a lesser extent, the expansion into other regions.

In 2011, the investment related to the entry into new markets and the first stage of growth was consolidated. This initial investment is essential for sustained sales growth in the mid and long term.

In Brazil, the appreciation of the real against the euro, and a certain exchange rate stability in conjunction with the increase in available income, led this market to a growth of over 25%. Consequently, there was increased competitor aggressiveness, which, linked to our partner being less focused (due to a major acquisition), made us fall back in market position.

With regard to our market expansion, of note is the entry into Russia which, despite having only taken place in the second half of the year, rapidly achieved very positive results.

In Portugal, the year was marked by greater price aggressiveness, leading the biggest competitor to systematically fix prices below those of the distribution brands.

Despite olive oil being the product with the greatest weight in the Company's sales, it is important to mention the growing relevance of the other two products, olives and vinegar, which have an increasing penetration internationally. It should be noted that in Brazil, the olive business began around 18 months ago, envisaging an interesting growth potential of this product in this market. With regard to vinegar, Gallo is the second biggest brand in Portugal and introduced the product in Brazil in 2011, with a positive outlook for 2012.

For the year under review, an important investment was made in the image of the Gallo brand. All branded olive oils now have to be packed in dark glass, protecting the quality of the product and the image was made uniform across all the markets where Gallo Worldwide operates. This change in packaging was the basis for a strong advertising campaign and the major innovation of the year, as it involved significant changes to the manufacturing process.

Outlook for 2012

Despite envisaging a general economic slowdown in the markets where it operates, Gallo Worldwide's main objective for 2012 is to continue increasing its sales and increasing its market share in the countries where it is present. In Portugal, a retraction is forecast, although a residual growth is expected in the olive oil market and possibly a higher growth than the distribution brands.

Hence, the objective for 2012 in Portugal will be to defend Gallo Worldwide's market position, increasing its profitability, whilst being aware of the limitations imposed by the decline in consumer purchasing power. We shall therefore endeavour to capitalise on the image of a high quality product at a fair price.

In Brazil, apart from the favourable macroeconomic climate, where the market itself is expected to grow, Gallo Worldwide also expects to increase its market share. In China, a market where the penetration of Gallo products is still in its infancy, strong growth is expected, equally benefiting from the economic growth expected for the country.

With regard to the price of the raw material, 2011 was a second consecutive year of price stability. This stability is historic and is expected to be maintained in 2012, as the world crop will be more abundant and no increase in demand from the main olive oil consumer countries (Spain and Italy) is expected. The greatest risk regarding costs is in the packaging materials, as glass production will be affected by the increase in the price of electricity and gas, with PET production also being affected by the evolution of the price of oil.

4.3.2. Marketing, Representations and Restaurant Services

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

Message from the Managing Director

The consolidation of our brands' business and our entry into the export market with Take Portugal to the World allowed JMDPC to close the year with a similar level of sales to the previous one.

Our exports, penetration of new distribution channels and the introduction of new represented brands will most certainly be the pillars of our growth in upcoming years.

Mission

To be the key partner in the construction and development of brands for the Portuguese market with a solid, diversified portfolio of leading brands represented and a service of excellence throughout the whole supply chain.

2011 Performance

Food Division

CoRo, Lindt, Jerónimos and Canderel were the represented brands that showed the best performance in 2011 and made a positive contribution in a year that was particularly difficult in Portugal.

The consolidation of sales of Arla Foods and Leche Pascual, along with the shrimp business, which was particularly important once again in 2011, enabled JMDPC to sustain its performance during the year.

HIGHLIGHTS

Sales: 69 million euros Sales Growth: -1.1%

Cosmetics Division

2011 was especially hard for the Cosmetics Division because of the difficulty in obtaining credit experienced by its customer companies. As a result, the Company decided to restructure the division to prepare for the challenges it would have to face in 2012.

Export Division

JMDPC started up an export project entitled "Take Portugal to the World" in 2011. Its aim was to serve as a vehicle for Portuguese companies wishing to export their products. Some of our represented brands, such as Guloso, Mandarin and Jerónimos, joined the project and JMDPC is now their exclusive export agent. The Company also

decided to include other product categories in the project, such as Wines, Cheese and Sausages. By the end of this first year, exports to three continents totalled around two million euros. These were thus JMDPC's first steps in what will be one of the pillars of its future development.

Caterplus

2011 was a year of major changes at Caterplus. The acquisition of the former shareholder's 51% holding and the Company's strategic repositioning enabled it to end the year with close to two-figure growth.

Outlook for 2012

The expected slowdown in consumption in Portugal, plus our customer companies' difficulties in obtaining loans mean that the outlook for 2012 is highly uncertain. A strong commitment to exports and the launch of new represented brands in Portugal will be JMDPC's focus in the construction of sustained growth.

4.3.2.2. Jerónimo Martins Restauração e Serviços (JMRS) and Hussel

Message from the Managing Director

In 2011, Jerónimo Martins Restauração e Serviços consolidated the foundations of its growth and reintroduced the Jeronymo concept with a new image and the Olá image with a completely new concept, "O Meu Olá". Market performance had a negative impact last year, namely in view of the fall in traffic in the shopping centres. Despite this difficult climate, and even considering the rise in VAT from 13% to 23% in 2012, JMRS is confident of this business's good performance during this year.

Mission

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

2011 Performance

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

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

The year closed with 86 of its own stores for different concepts and further five franchised stores.

HIGHLIGHTS

Sales: 21 million euros Sales Growth: -0.9%

Jeronymo

The dynamism of this banner in 2011 was reflected in the launch of the new image at four coffee shops and the rethinking of its portfolio of products in street stores with the introduction of a series of successful innovations for its target customers. It is worth noting the 1% like-for-like growth in street stores, which is remarkable considering the crisis in the sector.

Jeronymo ended the year with eight kiosks and 16 coffee shops. Three kiosks were closed and two coffee shops were opened during the year.

Olá

Olá is the chain with the largest number of stores in this segment. The Company introduced the new concept "O Meu Olá" at four of its units in order to maintain and strengthen its current leadership. This new store concept, which includes a new design, enables customers to personalise Olá range products, such as Magnum, Cornetto and Solero.

A store was also opened in Sintra in 2011 for the same reason. The banner currently has 35 of its own and five franchised stores, to a total of 40 units.

Oliva

Oliva is a Mediterranean-inspired restaurant that is famous for its variety of predefined recipes prepared with fresh ingredients quickly and in a modern, unique environment in front of the customer.

This concept showed slower growth than originally expected during the year and until it is undeniable accepted by Portuguese consumers, the pilot store in Lisbon will remain the only one.

Chili's

Chili's operates a casual dining restaurant in Lisbon in association with Brinker International.

The concept was consolidated with its target customers in 2011 and sales were within the goals set for the brand.

Hussel

In 2011, 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 fell 2.8% against 2010 as a result of the reduction in Portuguese consumers' purchasing power, which impacted most directly on non-essential goods.

Two shops were closed and another two were opened. The Company ended the year operating a total of 25 stores.

Outlook for 2012

We can expect a difficult year, exacerbated by the increase in VAT in the catering sector. JMRS will work towards adjusting its range to the needs of consumers with lower purchasing power and taking measures to reduce food cost in order to be more competitive. Hussel will maintain its stake in quality and innovation.

5. Outlook for 2012

5.1. International Macroeconomic Environment

The high degree of uncertainty regarding world economic growth in 2012, with the World Bank downgrading to 2.5% its initial forecast of 3.6% growth, could pose additional challenges at a time when the scope for economic policy manoeuvring in the most advanced economies (U.S.A., Japan and European Union) is relatively small, both in terms of fiscal policy and monetary policy.

The stagnation trend expected in the most developed economies will continue to be offset by strong growth in emerging and developing countries, especially by means of the contribution from Asian countries (China and India), Latin America and Russia.

Regarding the climate of uncertainty existing in the international environment, risks have been identified that could restrict economic growth in the major economies.

The main risks to economic growth in the European Union are: i. the absence of a real agreement on a common economic and budgetary policy; ii. the possibility that some peripheral countries may default, with a contagion effect on other economies; iii. the strong budgetary consolidation policy of the Euro Area, which will greatly restrict growth; and iv. inflationary pressures that may arise, impacting on the purchasing power of European households. Growth for the Euro Area in 2012 is estimated at 1.1%, when it was 1.6% last year.

The forecasts for emerging and developing economies are more positive, but they also may be exposed to risks related to lower global demand for raw materials. According to IMF projections, the scenario of lower demand may cut the estimated growth for these economies by three percentage points, estimated at 5.4% for 2012, compared to 6.2% in 2011.

The financing conditions of the banking sector in international markets, in this climate of the sovereign debt crisis, have significantly worsened since the start of 2010. The banking system environment was particularly adverse in 2011 and it led to a balancesheet adjustment in most banks. It is expected, given the prospects of economic growth slowdown and instability in financial markets that the restrictive conditions for accessing bank credit remain or even worsen in 2012.

It is forecast that the benchmark interest rates of the central banks of world's major economies remain historically low. In relation to the European Central Bank, most analysts expect a further decrease in the benchmark interest rate during the first half of this year.

In the second half of 2011, raw material prices stagnated as a result of the deterioration of world growth forecasts. The most recent market expectations point to a certain stability which is forecast for 2012 for raw material prices.

5.2. International Sector Trends

2011 ended in a climate of uncertainty regarding the evolution of demand and consumption in most developed economies.

This climate has a direct impact on the evolution of the Food Retail sector. It is expected that on the one hand, operators focus on their expansion efforts in emerging economies, where growth prospects are more attractive, and on the other hand, they establish multi-channel strategies in order to safeguard and increase their market shares in developed economies.

It is expected that the major international operators will continue moving into markets such as Asia, Africa and South America in 2012, as a way of ensuring their sustained growth and improving operational performance.

The multi-channel strategy will require that retailers have a clear understanding of consumer behaviour, and the way consumers approach, choose and move around the different channels to make their purchases.

Physical stores will remain the preferred place of purchase despite this constant technological innovation, which has been primarily responsible for the emergence of these new channels and consequent changes in consumer behaviour. However, the tendency will be for these channels to gradually become one more place to make purchases. This change will mean that retailers will have to make a great effort to innovate and ensure the adequacy of the formats and channels they currently operate, in order to accompany the changes in consumption patterns.

5.3. Outlook for Poland

Economic Perspectives

The Polish economy should continue in 2012 the positive trend it has followed in recent years, although the GDP growth estimates indicate more modest growth, between 2.5% and 3.0%.

Private consumption will continue to account for a substantial part of this growth, whilst investment will also make a positive contribution. Unemployment shall remain above 12% and the economic growth rate shall be slightly slower than in the 2010-2011 two-year period.

The Government estimates that the public debt will reduce its weight from 53.7% of GDP in 2011 to 52.4% in 2012. On the other hand, the budget deficit should fall from 5.6% of GDP in 2011 to less than 3.0% in 2012, according to the latest Government estimates. This will primarily result from a number of savings measures taken last year and which will continue to have a positive impact in 2012.

In terms of Monetary Policy, the Polish central bank signals the possible increase of the benchmark interest rate in the second half of the year, as a reflection of the country's economic conditions (relatively high inflation and GDP growth at the referred values).

Financial instability in Europe makes it difficult to make any predictions on the performance of the Polish currency in 2012.

Modern Food Retail Market in Poland

As a result of the macroeconomic environment, the Food Retail market shall continue to grow at a pace above 4% in 2012.

The improvement of consumers' living standards, especially in urban areas, brings a change in consumption habits. With less time available for shopping and preparing meals, proximity, ease and speed of purchases and a larger range of ready meals are increasingly the determining factors for defining consumers' preferences.

It is expected that sales dynamism will raise the share of Private Brands to 23%. The share of Private Brands is two times lower in Poland than some Western European countries, so there still is large growth potential.

It is expected that the consolidation trend in the Food Retail market will remain in 2012, particularly in the more fragmented segments, with the major players strengthening their positions.

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.

5.4. Outlook for Portugal

Economic perspectives

The latest projections of Banco de Portugal (Portuguese central bank) estimate a 3.1% contraction of the Portuguese economy in 2012, after shrinking 1.6% in 2011, in a context where the pursuit of the adjustment of macroeconomic imbalances, especially budgetary imbalances, will remain as an important limiting factor to the development of domestic demand, which should be offset, to some extent, by growth in exports and a reduction of imports.

The budgetary consolidation process will affect the net disposable income of households. This consolidation process includes measures such as i. the elimination of public servants' Christmas and holiday allowances; ii. the reduction of the higher wages and pensions; iii. higher taxes on households (income tax, VAT and municipal real estate taxes); and iv. the reduction and elimination of tax benefits.

On the contrary, it is expected that the European Central Bank interest rate will again fall, which will lead to a decline in the amount of housing mortgage repayments.

Private consumption should drop 6% in 2012, following a 3.6% decline in 2011. This reflects the impact of the budgetary consolidation measures as well as the uncertainty regarding additional measures that may reveal necessary.

The reduction in gross fixed capital formation is projected to be 12.8%, which is slightly higher than the 11.2% decline recorded in 2011. This projection is based on the expected negative evolution of demand and income and the investment decisions of businesses and households. The restrictive conditions for accessing bank financing and a significant reduction in public investment are also expected to be maintained.

In the labour market, the contraction of economic activity should lead, according to the forecast in the State Budget for 2012, to an unemployment rate of 13.4% in 2012, following 12.5% recorded in 2011. This reflects the contraction of employment in the private sector and the public sector, although more pronounced in the latter.

The Harmonised Consumer Price Index (HCPI) is forecast to grow 3.2% in 2012, following a 3.6% growth in 2011 according to the Bank of Portugal's Winter Bulletin, released in 2011.

The relative stability of the inflation rate in 2012 is due to the combination of an acceleration of prices of the non-energy component and a sharp slowdown of the energy component. This evolution reflects, on the one hand, the dissipation of the impact of the increase of the standard VAT rate at the start of 2011 and, on the other, the slowdown of non-energy goods import prices. The energy component reflects two opposing effects: on the one hand, the increase in indirect taxes on electricity and natural gas, since October 2011, and on the other the fall in the price of oil, after the significant rise of last year.

The slowdown in domestic demand, with a reduction of private and public spending, shall occur simultaneously with the increase of exports in the context of the deleveraging of the private sector, allowing a better financing structuring, with savings rates more aligned with the level of expected return for the Portuguese economy.

Modern Food Retail Market in Portugal

2011 was a particularly difficult year for Portuguese households, which felt a negative impact on their income.

A climate of recession and consequent increase in unemployment levels is once again forecast for 2012, going beyond the levels of 2011. The adoption of restrictive measures in the 2012 State Budget will cause a further generalised decrease in disposable income. Therefore, an even more significant deterioration of the living standards of the Portuguese is expected in 2012.

In this context, an even more significant decline in private consumption is expected for this year and the trends identified in 2011 are expected to worsen, such as the increase in purchase frequency (lower value of each purchase), increased demand for less expensive products, with a preference for Private Brands, and extra attention given to price, in addition to a natural transfer of consumption from out-of-home to in home.

Food Retail will be directly affected by the current economic climate. It will generally be restricted to the range of Private Brand products and encompass a greater focus on price. It is also expected that the pace of expansion will maintain the trend of the last two years, with the fall in the number of store openings during 2012.

Wholesale Food Market in Portugal

As mentioned above, consumers' economic conditions are expected to worsen in 2012, with the consequent increase of consumption at home, at the expense of consumption outside the home.

Thus, it is estimated that, in terms of demand, the HoReCa turnover will fall again. However, despite the expected increase in the share of consumption at home, Traditional Retail will not benefit from this increase. It is expected that this segment will continue to lose share, driven by the competitive dynamism of Modern Food Retail. It is expected a significant number of closer of hospitality and restaurants units as well as the continuous slowdown and the number of points of sales in the Traditional Retail segment.

Given these perspectives, it is expected that, on the supply side, Cash & Carry operators have another year of strong competitive pressure, struggling to maintain their share of a market that will continue to shrink.

5.5. Outlook for the Jerónimo Martins Group Businesses

In view of the current international and domestic macroeconomic climate, which is marked by a clear trend for the shrinkage of the world economy, particularly the Portuguese economy, with expected consequences on consumption and employment, and the countless uncertainties hanging over the European economy, the Jerónimo Martins Group will continue to maintain a prudent financial stance that favours the soundness of the balance sheet and the strong profitability of its assets.

The Group, notwithstanding the referred constraints, believes that it is well prepared to meet the challenges expected for 2012, and it is confident that the business it operates will again demonstrate that they are prepared to counteract the adversities of the economic environment, as has been the case in recent years.

Food Retail Business in Poland: Biedronka

In Poland, the growth of the leadership position will continue to be a priority. Thus, the pace of the opening of Biedronka stores recorded in recent years will progressively increase, in order to pass 2,100 stores in 2012.

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 price leadership, the products quality and the customer service 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 growth and also the continuous improvement of operational efficiency and profitability.

Food Retail Business in Portugal: Pingo Doce

Pingo Doce started 2012 prepared for the expected worsening of the economic climate and standard of living of households. The changes in consumption habits recorded in 2011, as mentioned above, will intensify in 2012. Thus, two key factors will stand apart: Price and Proximity.

Accordingly, Pingo Doce, through its unique reputation and positioning in the market, which is based on the excellence of the Private Brand at competitive prices, the differentiation of the Perishables, the clear positioning with low and stable prices, and a balance between assortment and store environment, has the ability to remain as the reference establishment for consumers.

The Company will continue to stand out in 2012 through its quality Private Brand and an innovative range of products tailored to the needs of consumers. As was the case in 2011, Pingo Doce will continue to develop a working partnership with suppliers of Perishables and Private Brand and it will keep its focus on price, through a policy of efficiency that allows the resulting gains to be transferred to the consumer.

Wholesale Food Market in Portugal: Recheio

2012 will be a year of consolidation of Recheio's market position. In the HoReCa, the Company will increase its focus of the Food Service market through greater adaptation of the assortment and enhancing the range of services in response to the specific needs of this type of customers. The focus on the growth of Perishables and the Gourmês and Masterchef Private Labels will remain as a factor of differentiation.

In relation to the Amanhecer project, 20 new stores are expected to open during the year. The Amanhecer brand will continue to grow in number of references and thus increase its penetration among retail customers. The brand will continue to support

this market segment through communication-related initiatives in the online and offline media and at Traditional Retail points of sale.

Development of New Businesses

Following the announcement in the past to seek new forms of growth and value creation for the Group, 2012 will mark the entrance in Colombia, which it is hoped will become, in the near future, one of the drivers of growth for Jerónimo Martins.

The test in Poland of the new business in the drugstores area will continue. A decision on the future expansion plan of this new business should be taken during 2012.

The Group will remain, like the two above-mentioned examples, focused on identifying other forms of growth with strong potential for value creation, channelling its attention primarily to geographical diversification of the Distribution area, as well as growth opportunities in other areas of the food world and strategic investments that may improve the operational efficiency of the current portfolio.

Manufacturing and Services in Portugal

The main objective of Unilever Jerónimo Martins for 2012 will be to consolidate the gains in market share achieved in 2011, continuing to heavily invest in brand communication and the provision of innovative proposals, tailored to the reality of consumers.

The priority of Gallo Worldwide in 2012, like in 2011, will be to continue growing in the international markets where it operates, especially Brazil, as well as find new markets as a means of growing and developing the business.

For Jerónimo Martins Distribuição de Produtos de Consumo (JMDPC), 2012 will be a year of strong focus on the export channel as a driver of additional growth for the Company. In parallel, the improved profitability and sustainability of the current portfolio of represented brands also comprises an important project.

For Jerónimo Martins Restauração e Serviços (JMRS), 2012 will be a year when the major objective of the restaurant business is to improve the profitability of the different formats operated by the Company.

6. Events After the Balance Sheet Date

At the conclusion of this Report there were no relevant events to highlight that are not disclosed in the Financial Statements.

7. Results Appropriation Proposal

In the financial year 2011, Jerónimo Martins, SGPS, S.A. declared consolidated profits of 340,267,623 euros and a profit in individual accounts of 581,468,551.10 euros.

In accordance with the policy of dividend distribution described in the Corporate Governance chapter (page 198), the Board of Directors proposes to Shareholders that the net profits be applied in the following manner:

• Legal Reserve ...........................29,073,427.56 euros
• Free Reserves .........................379,575,713.04 euros
• Dividends ...............................172,819,410.50 euros

This proposal represents a gross dividend payment of 0.275 euros per share, excluding own shares in the portfolio.

Lisbon, 6 March 2012

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, 2011

(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 31.12.10 Increases during the year Decreases during the year							Held on 31.12.11
	Shares	Bonds	Shares	Bonds	Shares	Bonds	Shares	Bonds
Elísio Alexandre Soares dos Santos 1	137,633	-	3,976	-	-	-	141,609	-
Pedro Manuel de Castro Soares dos Santos 2	198,305	-	18,000	-	-	-	216,305	-
José Manuel da Silveira e Castro Soares dos Santos	-	-	-	-	-	-	-	-
Luís Maria Viana Palha da Silva	-	-	-	-	-	-	-	-
António Pedro Viana-Baptista	-	-	-	-	-	-	-	-
Artur Eduardo Brochado dos Santos Silva	7,680	-	-	-	-	-	7,680	-
Marcel Lucien Corstjens -	-	-	-	-	-	-	-	-
Hans Eggerstedt	19,700	-	-	-	-	-	19,700	-
Nicolaas Pronk	-	-	-	-	-	-	-	-

¹ The 3,976 shares were bought on: 2,363 on 20/06/2011, at an average price of 12.70 euros each and the 1,613 shares were bought on 05/08/2011, at an average price of 12.40 euros each.

²The 18,000 shares were bought on 18/03/2011, at an average price of 11.05 euros each.

STATUTORY AUDITOR

As at 31 December, 2011, 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, 2011.

Date	Nature	Code ISIN	Volume	Price	Local
09-08-2011	Buy	PTJMT0AE0001	20,000	11.534	Euronext Portugal
11-08-2011	Buy	PTJMT0AE0001	5,000	12.150	Euronext Portugal
12-09-2011	Buy	PTJMT0AE0001	30,000	12.110	Euronext Portugal
13-09-2011	Buy	PTJMT0AE0001	15,000	11.920	Euronext Portugal
14-09-2011	Buy	PTJMT0AE0001	20,000	11.940	Euronext Portugal
22-09-2011	Buy	PTJMT0AE0001	10,000	11.985	Euronext Portugal
23-09-2011	Buy	PTJMT0AE0001	27,741	11.403	Euronext Portugal
26-09-2011	Buy	PTJMT0AE0001	4,500	11.430	Euronext Portugal
30-09-2011	Buy	PTJMT0AE0001	1,000	11.745	Euronext Portugal
03-10-2011	Buy	PTJMT0AE0001	2,000	11.340	Euronext Portugal
04-10-2011	Buy	PTJMT0AE0001	2,000	10.839	Euronext Portugal
04-10-2011	Buy	PTJMT0AE0001	2,000	10.710	Euronext Portugal
26-10-2011	Buy	PTJMT0AE0001	2,000	11.960	Euronext Portugal
Total			141,241

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

E. Alexandre Soares dos Santos

Date Nature		Code ISIN	Volume	Price	Local
	20-06-2011	Buy	PTJMT0AE0001	2,363	12.700	Euronext Portugal
	05-08-2011	Buy	PTJMT0AE0001	1,613	12.400	Euronext Portugal
	Total			3,976

Pedro Soares dos Santos

Date	Nature	Code ISIN	Volume	Price	Local
18-03-2011	Buy	PTJMT0AE0001	6,648	11.040	Euronext Portugal
18-03-2011	Buy	PTJMT0AE0001	1,000	11.045	Euronext Portugal
18-03-2011	Buy	PTJMT0AE0001	10,352	11.050	Euronext Portugal
Total			18,000

Annual Report 11 Consolidated Management Report - Creating Value and Growth Consolidated Management Report Annex

Date	Nature	Code ISIN	Volume	Price	Local
07-11-2011	Sale	PTJMT0AE0001	8,437	12.930	Euronext Portugal
07-11-2011	Sale	PTJMT0AE0001	422	12.935	Euronext Portugal
07-11-2011	Sale	PTJMT0AE0001	13,783	12.950	Euronext Portugal
07-11-2011	Sale	PTJMT0AE0001	6,316	12.955	Euronext Portugal
07-11-2011	Sale	PTJMT0AE0001	5,573	12.960	Euronext Portugal
07-11-2011	Sale	PTJMT0AE0001	3,218	12.965	Euronext Portugal
07-11-2011	Sale	PTJMT0AE0001	11,317	12.970	Euronext Portugal
07-11-2011	Sale	PTJMT0AE0001	19,661	12.975	Euronext Portugal
07-11-2011	Sale	PTJMT0AE0001	18,361	12.980	Euronext Portugal
07-11-2011	Sale	PTJMT0AE0001	25,829	12.985	Euronext Portugal
07-11-2011	Sale	PTJMT0AE0001	66,333	12.990	Euronext Portugal
07-11-2011	Sale	PTJMT0AE0001	22,600	12.995	Euronext Portugal
07-11-2011	Sale	PTJMT0AE0001	111,380	13.000	Euronext Portugal
07-11-2011	Sale	PTJMT0AE0001	13,096	13.005	Euronext Portugal
07-11-2011	Sale	PTJMT0AE0001	10,413	13.010	Euronext Portugal
07-11-2011	Sale	PTJMT0AE0001	15,679	13.015	Euronext Portugal
07-11-2011	Sale	PTJMT0AE0001	13,578	13.020	Euronext Portugal
07-11-2011	Sale	PTJMT0AE0001	2,600	13.025	Euronext Portugal
07-11-2011	Sale	PTJMT0AE0001	9,336	13.030	Euronext Portugal
07-11-2011	Sale	PTJMT0AE0001	32,376	13.035	Euronext Portugal
07-11-2011	Sale	PTJMT0AE0001	1,696	13.045	Euronext Portugal
Total			412,004

Eduardo Cid Correia

List of Shareholders with Qualifying Holdings as at 31 December, 2011

(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.
Through Sociedade Francisco Manuel dos Santos, B.V.	353,260,814	56.136%	56.213%
Heerema Holding Company Inc.
Through Asteck, S.A.	62,929,500	10.000%	10.014%
Carmignac Gestion 2
Directly	17,254,270	2.679%	2.683%
BNP Paribas
Through Investment Funds Managed by BNP Paribas	14,043,102	2.232%	2.235%

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

² This number of shares indicated refers to 30th June, 2011, 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 2011 AND 2010

					Euro thousand
	Notes	December 2011	December 2010 (*)	th Quarter 4 2011	th Quarter 4 2010 (*)
Sales and services rendered	3	9,838,241		2,518,474	2,357,967
Cost of sales		(8,068,961)	8,691,115	(2,061,822)	(1,929,589)
Supplementary income and costs	5	474,784	(7,056,900) 379,614	126,049	121,780
Gross profit		2,244,064	2,013,829	582,701	550,158
Distribution costs	6	(1,541,413)	(1,400,933)	(393,251)	(368,929)
Administrative costs	6	(190,352)	(179,395)	(47,532)	(48,107)
Exceptional operating profits/losses	11.1	(12,228)	(9,967)	(7,545)	(8,597)
Operating profit		500,071	423,534	134,373	124,525
Net financial costs	8	(30,538)	(40,210)	(6,824)	(9,225)
Gains in associated companies	16	493	646	222	325
Losses in other investments	11.2	(1,487)	(5,142)	13	(4,993)
Profit before taxes		468,539	378,828	127,784	110,632
Income tax	10	(111,183)	(79,056)	(40,230)	(20,704)
Profit before non-controlling interests		357,356	299,772	87,554	89,928
Attributable to:
Non-controlling interests		17,088	18,757	2,962	2,799
Jerónimo Martins Shareholders		340,268	281,015	84,592	87,129
Basic and diluted earnings per share - euros	24	0.5415	0.4472	0.1346	0.1386

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

(*) Restated – see note 2

CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2011 AND 2010

			Euro thousand
	Notes	2011	2010
Assets
Tangible assets	12	2,300,501	2,192,824
Investment properties	14	52,128	52,047
Intangible assets	13	830,620	863,368
Investments in associated Companies	16	1,052	1,213
Available-for-sale financial assets	17	6,157	7,015
Trade debtors and deferred costs	20	85,407	71,716
Derivative financial instruments	15	10	46
Deferred tax assets	19.1	57,957	67,360
Total non-current assets		3,333,832	3,255,589
Inventories	18	388,262	368,711
Taxes receivable	19.3	33,834	48,947
Trade debtors, accrued income and deferred costs	20	195,200	181,848
Cash and cash equivalents	21	530,155	303,927
Total current assets		1,147,451	903,433
Total assets		4,481,283	4,159,022
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	(1,162)	63,433
Retained earnings		476,338	135,988
		1,120,861	845,106
Non-controlling interests		300,824	286,706
Total Shareholders' equity		1,421,685	1,131,812
Borrowings	25	385,553	634,182
Derivative financial instruments	15	8,785	16,649
Employee benefits	26	33,954	30,839
Deferred profits- state grants		910	935
Provisions for risks and contingencies	27	49,597	22,907
Deferred tax liabilities	19.1	105,155	96,928
Total non-current liabilities		583,954	802,440
Trade creditors, accrued costs and deferred income	28	2,006,336	1,895,411
Derivative financial instruments	15	4,038	7,763
Borrowings	25	354,672	219,217
Taxes payable	19.3	110,543	102,308
Deferred profits- state grants		55	71
Total current liabilities		2,475,644	2,224,770
Total Shareholders' equity and liabilities		4,481,283	4,159,022

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 2011	December 2010	th Quarter 4 2011	th Quarter 4 2010
Currency translation differences	(82,734)	15,414	(14,284)	339
Fair value of cash flow hedging	2,441	(2,604)	183	3,113
Revaluation of fixed assets	10,031	(4,133)	10,031	(4,133)
Fair value of hedging instruments on foreign operations	7,997	(2,464)	1,240	992
Fair value of available-for-sale financial assets	(858)	(513)	(120)	(111)
Gains and losses directly recognised in equity	(63,123)	5,700	(2,950)	200
Net profit	357,356	299,772	87,554	89,928
Total gains and losses recognised	294,233	305,472	84,604	90,128
Attributable to:
Non-controlling interests	18,394	15,382	3,380	1,264
Jerónimo Martins Shareholders	275,839	290,090	81,224	88,864

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

Shareholders' equity attributable to Shareholders of Jerónimo Martins, SGPS, S.A. Notes Share Capital Share Premium Own Shares Fair value and other reserves Retained Earnings Total Noncontrolling interests Shareholders' Equity Balance Sheet at 1st January 2010 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 (1,577) (1,577) (2,556) (4,133) - Disposals of revaluated fixed assets (826) 826 - - 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 assets 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 (221,837) (221,837) (16,312) (238,149) Dividends as result of corporate restructuring (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 Equity changes in 2011 Currency translation differences in 2011 23.1 (82,734) (82,734) (82,734) Revaluation of fixed assets: 23.1 - From 2011 9,618 9,618 413 10,031 - Land transfer to investment property (166) 166 - - Fair value of cash flow hedging 23.1 1,548 1,548 893 2,441 Fair value of hedging instruments on foreign operations 23.1 7,997 7,997 7,997 Fair value of available-for-sale financial assets 23.1 (858) (858) (858) Gains/losses directly recognised in equity (64,595) 166 (64,429) 1,306 (63,123) Net profit in 2011 340,268 340,268 17,088 357,356 Total gains and losses recognised during the year (64,595) 340,434 275,839 18,394 294,233 Dividends 23.4 (4,019) (4,019) Non-controlling interests 4 (84) (84) (257) (341) Balance Sheet at 31st December 2011 629,293 22,452 (6,060) (1,162) 476,338 1,120,861 300,824 1,421,685

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

Euro thousand

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEARS ENDED 31 DECEMBER 2011 AND 2010

			Euro thousand
	Notes	2011	2010(*)
Operating Activities
Cash received from Customers		11,006,389	9,733,271
Cash paid to Suppliers and Employees		(10,172,136)	(8,953,472)
Cash generated from operations	22	834,253	779,799
Interest paid		(25,661)	(46,625)
Income taxes paid		(64,699)	(46,468)
Cash Flow from operating activities		743,893	686,706
Investment activities
Disposals of tangible assets		10,330	48,773
Disposals of intangible assets		7,436	-
Disposals of available-for-sale financial assets and investment
property		-	11,630
Interest received		8,775	4,207
Dividends received		681	618
Acquisition of group and associated companies	4	(7,409)	-
Acquisition of tangible assets		(366,271)	(369,807)
Acquisition of available-for-sale financial assets and investment
property Acquisition of intangible assets		(19) (19,277)	(5) (25,720)
Cash flow from investment activities		(365,754)	(330,304)
Financing activities
Received from other loans		107,614	78,027
Loans paid		(224,643)	(119,422)
Dividends paid	23.4	(4,019)	(238,149)
Dividends paid as result of corporate restructuring		-	(1,205)
Cash Flow from financing activities		(121,048)	(280,749)
Net changes in cash and cash equivalents		257,091	75,653
Cash and cash equivalents changes
Cash and cash equivalents at the beginning of the year		303,927	223,501
Net changes in cash and cash equivalents		257,091	75,653
Effect of disposal/acquisition of subsidiaries	4	888	-
Effect of currency translation differences		(31,751)	4,773
Cash and cash equivalents at the end of the year	21	530,155	303,927

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

(*) Restated – see note 2

CONSOLIDATED CASH FLOW STATEMENT FOR THE INTERIM PERIOD

				Euro thousand
	December 2011	December 2010	th Quarter 4 2011	th Quarter 4 2010
Cash Flow from operating activities	743,893	686,706	241,014	175,043
Cash Flow from investment activities	(365,754)	(330,304)	(123,401)	(51,806)
Cash Flow from financing activities	(121,048)	(280,749)	(18,885)	(95,012)
, Cash and cash equivalents changes	257,091	75,653	98,728	28,225

	Index to the Notes to the Consolidated Financial Statements	Page
1	Activity 95
2	Accounting policies 95
3	Segments reporting109
4	Businesses acquisitions/disposals and changes to the consolidation scope 111
5	Supplementary income and costs 112
6	Distribution and administrative costs 112
7	Staff costs112
8	Net financial costs 113
9	Financial instruments113
10	Income tax recognised in the income statement114
11	Exceptional operating profits/losses and losses in other investments 114
12	Tangible Assets115
13	Intangible Assets 117
14	Investment Property118
15	Derivative financial instruments 119
16	Investments in associated companies 120
17	Available-for-sale financial assets 120
18	Inventories120
19	Taxes 121
20	Trade debtors, accrued income and deferred costs 122
21	Cash and cash equivalents 123
22	Cash generated from operations 123
23	Capital and reserves124
24	Earnings per share 125
25	Borrowings125
26	Employee benefits127
27	Provisions and adjustments to the net realisable value129
28	Trade creditors, accrued costs and deferred income130
29	Guarantees 130
30	Operational lease 130
31	Capital commitments131
32	Contingencies 131
33	Related parties133
34	Group companies 134
35	Interests in joint ventures and associates136
36	Additional information requested by law137
37	Events after the balance sheet date137

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 2011, employs 66,270 people (61,061 at 31 st December 2010).

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 NYSE Euronext Lisbon (ex-Lisbon and Porto Stock Exchange) since 1989.

The share capital comprises of 629,293,220 ordinary shares (2010: 629,293,220 shares), and all shares have a nominal value of one euro.

The Board of Directors approved these consolidated financial statements on 6 th March 2012.

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, as at 31 December 2011.

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 assets held for trading and available-for-sale financial assets , 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 2011 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 2011. None of the standards detailed below have a material impact on consolidated financial statements of JMH:

• i) 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. Its application is mandatory for accounting periods beginning after 30 June 2010;
• ii) 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. Its application is mandatory for accounting periods beginning after 31 December 2010;
• iii) 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. Its application is mandatory for accounting periods beginning after 31 December 2010;
• iv) 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. Its application is mandatory for accounting periods beginning after 30 June 2010.

Also in 2011 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:

• i) The Regulation no. 149/2011, which adopted some improvements to IFRS 1, IFRS 3, IFRS 7, IAS 1, IAS 27, IAS 34 and IFRIC 13, which were issued by the IASB in May 2010. Its implementation is mandatory for financial years beginning on or after January 1, 2011;
• ii) The Regulation no. 1205/2011, which adopted amendments to IFRS 7 Financial Instruments: Disclosures, these amendments that were issued by the IASB in October 2010, clarifies the disclosure requirements in a transfer of financial assets. Its application is mandatory for financial years beginning on or after July 1, 2011.

In addition, the IASB issued between 2009 and 2011, 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 2015;
• ii) 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;
• iii) In December 2010, IASB issued an amendment to IAS 12 Income Taxes, that provides a practical solution when 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;
• iv) In May 2011, IASB issued IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 – Disclosures of interests in Other Entities. These standards are effective for annual periods beginning on or after 1 January 2013:
• a. IFRS 10 partially replaces IAS 27 Consolidated and Separate Financial Statements and SIC 12 Consolidation – Special Purpose Entities. The statndard provides a single consolidation model that identifies control as the basis for consolidation for all types of entities;
• b. IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC 13 Jointly Controlled Entities Non-monetary Contributions by Venturers. The standard establishes principles for the financial reporting by parties to a joint arrangement;
• c. IFRS 12 combines, enhances and replaces the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities;
• d. As a consequence of these new IFRSs, the IASB also issued amendments and retitled IAS 27 Separate Financial Statements and IAS 28 – Investments in Associates and Joint Ventures.
• v) In May 2011, the IASB issued IFRS 13 Fair Value Measurement, which defines a framework for measuring fair value and requires disclosures about fair value measurements. This standard are effective for annual periods beginning on or after 1 January 2013;
• vi) In June 2011, the IASB issued amendments to IAS 19 Employee Benefits The amendments will improve the recognition and disclosure requirements for defined benefit plans. These amendments are effective for annual periods beginning on or after 1 January 2013;
• vii) In June 2011, the IASB issued amendments to IAS 1 Financial Statements Presentation. These amendments improves presentation of components of other comprehensive income. These amendments are effective for annual periods beginning on or after 1 July 2012;
• viii) In October 2011, the IFRIC issued IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine. This interpretation is effective for annual periods beginning on or after 1 January 2013;
• ix) In December 2011, the IASB issued amendments to IFRS 7 Financial Instruments: Disclosures, which includes new disclosures requirements related with offsetting of financial assets and financial liabilities. These amendments are effective for annual periods beginning on or after 1 January 2013;
• x) In December 2011, the IASB issued amendments to IAS 32 Financial Instruments: Presentation, to clarify the application requirements of the offsetting of financial assets and financial liabilities. These amendments are effective for annual periods beginning on or after 1 January 2014.

The most relevant impacts of its application are related with changes in consolidation method of joint ventures as well as minor changes in the presentation requirements of financial information. Their application will not result in changes to the Group"s Equity.

Changes in Basis for Preparation (Reclassifications)

Over the past years, with the development of the Polish market"s operations, the Management has privileged the establishment of long-term relationships with its suppliers, namely through the negotiation of prices, volumes, packages and payment terms.

In this sense it has agreed with the majority of its suppliers, to extend payment terms, bearing, in compensation, financial expenses, thereby obtaining greater flexibility in the management of its working capital.

Respecting their accounting nature, these financial expenses had been classified in the net financial costs line. However, this value has been gaining relevance with the growth of Biedronka"s operations and the management sees this flow as part of its cash flow generation and dependent on the evolution of its activity, as such, and the Group decided, in 2011, to classify this amount as Supplementary costs which impact the total margin.

In order to have comparable financial information, we have restated the financial statements of the previous year, as shown below:

		December 2010		4
	Published	Reclassification	Restated	Published	Reclassification	Restated
Sales and services rendered	8,691,115	-	8,691,115	2,357,967	-	2,357,967
Cost of sales	(7,056,900)	-	(7,056,900)	(1,929,589)	-	(1,929,589)
Supplementary income and costs	407,921	(28,307)	379,614	129,331	(7,551)	121,780
Gross profit	2,042,136	(28,307)	2,013,829	557,709	(7,551)	550,158
Distribution costs	(1,400,933)	-	(1,400,933)	(368,929)	-	(368,929)
Administrative costs	(179,395)	-	(179,395)	(48,107)	-	(48,107)
Exceptional operating profits/losses	(9,967)	-	(9,967)	(8,597)	-	(8,597)
Operating profit	451,841	(28,307)	423,534	132,076	(7,551)	124,525
Net financial costs	(68,517)	28,307	(40,210)	(16,776)	7,551	(9,225)
Gains/Losses in associated companies	646	-	646	325	-	325
Gains/Losses in other investments	(5,142)	-	(5,142)	(4,993)	-	(4,993)
Profit before taxes	378,828	-	378,828	110,632	-	110,632

2.2. Basis of consolidation

Reference dates

The consolidated financial statements include, as of 31 December 2011, 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 taken on at the date of the acquisition. Costs attributable to the acquisition are recognised in profit and loss as incurred.

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 the fair value of assets, liabilities and contingent liabilities of acquired 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:

Euro foreign exchange reference rates (x foreign exchange units per 1 Euro)	Rate on 31 December 2011	Average rate for the year
Polish Zloty (PLN)	4.4580	4.1200
US Dollar (USD)	1.2987	-
Swiss Franc (CHF)	1.2156	-
Colombian Peso (COP)	2,508.2300	-

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 profit and loss.

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 cash flow 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, amongst 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.

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 reduce 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. Any ineffectiveness of the hedging operations is 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

Tangible 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), within an appropriate frequency to ensure that accounting value is close to its market value.

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 at 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 interest rate on the lessor"s financing debt.

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

The estimated useful life of assets are reviewed and adjusted when necessary, at the balance sheet date. Residual values are not taken in consideration, since it is the Groups intention to use the assets until the end of their economic life.

2.7 Intangible assets

Intangible assets are stated at acquisition cost net of accumulated amortisation and impairment losses (note 2.13).

Costs associated 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 asset 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.

Costs associated with developing or maintaining computer software are recognised as an expense as incurred, except 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 is expected to generate future economic benefits and is expected 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. Goodwill and the intangible assets with indefinite useful life are tested for impairment at the balance sheet date, and whenever there is an indication that the carrying amount will not be recoverable.

Amortisations

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.

Amortisation of the 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	5-6.66

The estimated useful life of assets are reviewed and adjusted when necessary, at the balance sheet date.

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 an asset. Financial assets are initially recognised by their fair value plus directly attributable transaction costs, except for financial 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 assets held for trading and derivative financial instruments, loans and receivables and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired.

Financial assets 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 financial 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 assets

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 assets and recognised in the accounts as non-current assets.

These financial assets 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, impairment losses are registered 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.

Fair value changes 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 Properties

Investment property, are land and buildings that are registered at fair value, determined by specialised independent entities, with appropriate recognised professional qualifications and experience in valuing 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% 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 assets are measured at their fair value and any difference to their carrying amount is recognised in revaluation reserves.

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 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

Cash and cash equivalents 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 indicators exists, the assets recoverable amount is estimated.

For Goodwill and other intangible assets with indefinite useful life, the recoverable amount is estimated annually at the balance sheet date.

The recoverable amount of assets with indicators of potential impairment loss are determined annually. 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 487,423 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 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 receivables corresponds to the present value of estimated future cash inflows, using as discount rate the actual interest rate implicit in the original operation.

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 assets

In the case of financial assets 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 assets 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 are no longer considered as overdue and are considered as new credits.

2.14 Share Capital

Share capital corresponds to the nominal value of the ordinary shares issued.

Share premium is recognised when the issued share price exceeds its nominal value. Costs incurred with the issuance of new shares are recognised directly in this heading, 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 those 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 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 of liabilities assumed is made using the immediate rents method, taking into account that the plans includes only retired employees. The discount rate is the interest rate on medium and long-term risk-free bonds, for the period of the estimated maturity of the liabilities. 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 programme of seniority awards existing in the Group comprises a component of defined contribution and a defined benefit.

The defined contribution component consists of a life insurance and a contribution to a supplementary retirement plan, to the employees covered by this programme, starting from a specific number of years of service. These benefits are awarded only when employees reach the age defined in the programme and the costs related to this component are recognized in the year to which they relate.

The component of defined benefit consists 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 specialised independent entity.

The cost of current services, interest as well as actuarial gains or losses is recognised as costs 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 announced publicly.

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 estimated future operating losses or estimated profits from the disposal of assets.

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.

In the Retail segment, sales are recognised when delivered directly to the client in store, against cash collected. The costs to be incurred related to returns of products with lack of quality, are estimated at the date of the sale based on historical data.

In the Manufacturing segment, sales are recognised when the ownership of the products are transferred to the clients, being the payments generally in credit. The sales are deducted of any commercial discounts negotiated with the clients.

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 commercial discounts obtained in 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.

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.

Exceptional Operating profits/losses

The exceptional operating profits (non-recurrent) that by its nature or by its materiality, distort the financial performance of the Group as well as their comparability, are presented in a separate line of the Consolidated Income Statement by Function. These results are excluded from the operational performance indicators adopted by Management.

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 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 derecognised 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, with no impacts being recognised in profit and loss.

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.

However, if the cash flow assumptions were reduced by 10%, compared with that estimates, or if the discount rate was higher by 100 bps, according to current projections of the business areas, the Goodwill would be still recoverable and there would be no risk of impairment.

Fair value of financial instruments

The fair value of financial instruments not quoted on an active market is determined based on valuation methods and financial theories. The use of valuation methodologies requires using assumptions, with some assumptions requiring the use of 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. 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 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.

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 plan assets and other factors that may impact the costs and responsibilities of the pension plan.

If the discount rates used were lower in 50 bps, the liabilities of the Group related to benefits granted to employees would be higher by EUR 1,474 thousands, if instead the rates used were higher in 50 bps, its impact would be a reduction of EUR 1,379 thousand.

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 in 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

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.

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

These financial instruments include mainly short-term financial assets and for that reason their accounting value at the reporting date is considered approximately their fair value.

Available for sale financial assets

Listed financial instruments are recognised in the balance sheet at their fair value. The other available for sale financial assets are stated at cost, reduced by 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.

Creditors and accruals

These financial instruments include mainly short-term financial liabilities and for that reason their accounting value at the 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, 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.

2011	Total	Level 1	Level 2	Level 3
Assets measured at fair value
Trading Financial Assets
Trading Derivatives	-	-	-	-
Derivatives used for hedging	10	-	10	-
Available-for-sale financial assets				-
Equity Investments	277	277	-	-
Total Assets	287	277	10	-
Liabilities measured at fair value
Trading Financial Liabilities
Trading Derivatives	324	-	324	-
Derivatives used for hedging	12,499	-	12,499	-
Total Liabilities	12,823	-	12,823	-

2010	Total	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 assets	Other financial liabilities	Total assets and financial liabilities
2011
ASSETS
Cash and cash equivalents	-	-	530,155	-	-	530,155
Available-for-sale financial assets	-	-	-	6,157	-	6,157
Debtors, accruals	-	-	182,316	-	-	182,316
Derivative financial instruments	-	10	-	-	-	10
TOTAL FINANCIAL ASSETS	-	10	712,471	6,157	-	718,638
LIABILITIES
Borrowings	-	-	-	-	740,225	740,225
Derivative financial instruments	324	12,499	-	-	-	12,823
Creditors, accruals	-	-	-	-	1,927,235	1,927,235
TOTAL FINANCIAL LIABILITIES	324	12,499	-	-	2,667,460	2,680,283
2010
ASSETS
Cash and cash equivalents	-	-	303,927	-	-	303,927
Available-for-sale financial assets	-	-	-	7,015	-	7,015
Debtors, accruals	-	-	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	-	-	-	-	1,815,953	1,815,953
TOTAL FINANCIAL LIABILITIES	448	23,964	-	-	2,669,352	2,693,764

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 perspective. In accordance with this, the segments are defined as Portugal Retail, Poland Retail, Portugal Cash & Carry and Portugal Manufacturing. Apart from these, there are also other businesses, but due to their low 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.

Portugal Retail Portugal Cash & Carry Poland Retail Portugal Manufacturing Others, eliminations and adjustments Total JM Consolidated 2011 2010 2011 2010 2011 2010 (*) 2011 2010 2011 2010 2011 2010 (*) Net Sales and Services 3,155,255 2,995,109 756,074 720,508 5,786,510 4,807,166 228,409 236,045 (88,007) (67,713) 9,838,241 8,691,115 Inter-segments 283,413 239,266 1,327 1,419 572 1,267 36,437 40,944 (321,510) (282,377) 239 519 External Customers 2,871,842 2,755,843 754,747 719,089 5,785,938 4,805,899 191,972 195,101 233,503 214,664 9,838,002 8,690,596 Operational Cash-Flow (EBITDA) 192,840 186,519 48,046 44,389 458,417 363,314 28,467 34,086 (6,215) (4,031) 721,555 624,277 Depreciations and Amortisations (94,459) (88,521) (10,922) (9,180) (95,008) (84,880) (3,185) (3,085) (5,682) (5,109) (209,256) (190,775) Operational Result (EBIT) 98,381 97,998 37,123 35,209 363,409 278,434 25,282 31,001 (11,896) (9,141) 512,299 433,501 Financial Results - - - - - - - - - - (31,532) (44,706) Net Result Attributable to JM - - - - - - - - - - 340,268 281,015 TOTAL ASSETS 1,840,693 1,871,330 312,854 301,821 1,864,433 1,660,500 194,233 199,361 269,070 126,010 4,481,283 4,159,022 TOTAL LIABILITIES 1,233,706 1,292,800 248,156 256,080 1,215,220 1,147,527 113,932 122,514 248,584 208,289 3,059,598 3,027,210 Investments in Fixed Assets 106,464 115,822 12,983 27,283 312,476 270,719 3,761 4,049 2,644 16,315 438,328 434,188 Reinforcement of provisions and adjustments to the net realisable value (30,551) (5,921) (2,459) (1,044) (800) (3,407) (1,513) (403) (4,516) (1,160) (39,939) (11,935) Reversal of provisions and

Detailed Information by Business Segments at December 2011 and 2010

(*) Restated – see note 2

adjustments to the net realisable

Reconciliation between EBIT and Operational Result

	December 2011	December 2010
EBIT	512,299	433,501
Non-recurrent results	(12,228)	(9,967)
Operational Result	500,071	423,534

value 352 114 2,515 406 834 188 775 343 528 380 5,004 1,431

Information by Geographical Segments at December 2011 and 2010

	Net Sales and Services
	2011	2010
Portugal	4,033,661	3,877,144
Poland	5,804,580	4,813,971
Total	9,838,241	8,691,115

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.

Notes to the Consolidated Financial Statements 31 December 2011 and 2010

		Portugal Retail	Cash & Carry	Portugal	Poland Retail		Manufacturing	Portugal	adjustments	Others, eliminations and	Consolidated	Total JM
	2011	2010	2011	2010	2011	2010	2011	2010	2011	2010	2011	2010
Cash and cash equivalents	89,303	143,765	12,665	9,438	232,171	103,704	2,908	1,073	193,108	45,947	530,155	303,927
Available-for-sale financial assets	5,131	5,131	671	671	-	-	22	22	333	1,191	6,157	7,015
Debtors, accruals and deferrals	74,684	64,770	29,239	22,986	67,695	54,264	47,368	55,205	(36,670)	(26,416)	182,316	170,809
Derivative financial instruments	-	-	-	-	10	46	-	-	-	-	10	46
TOTAL	169,118	213,666	42,575	33,095	299,876	158,014	50,298	56,300	156,771	20,722	718,638	481,797

4 Businesses acquisitions/disposals and changes to the consolidation scope

In 2011, following the plan to simplify the operations of its business areas, the Group made the following ownership restructuring operations:

In March 2011, 51% of the share capital of the company Caterplus – Comercialização e Distribuição de Produtos de Consumo, Lda., were acquired by the company Jerónimo Martins – Distribuição de Produtos de Consumo, Lda., which now owns 100% of the share capital of that company. The difference between the price paid and the value of the non-controlling interests acquired, were recognized directly in equity as the Group already had control over the acquired Company.

In December 2011, the companies Hermes - Sociedade de Investimentos Mobiliários e Imobiliários, Lda. and PSQ - Sociedade de Investimentos Mobiliários e Imobiliários, Lda., were wound up.

As described in the consolidated management report, the Group implemented a corporate reorganization, three different business areas were made autonomous and, simultaneously, another was created with a total of units being structured under four sub-holding companies: Warta B.V., in which the businesses in Poland are concentrated; Tagus B.V., managing the holdings in the Portuguese Distribution area; Monterroio B.V., in which the manufacturing and services areas of Portugal are concentrated. A fourth sub-holding company was also established, New World B.V., structuring a fourth business area and managing the shareholdings relative to the activity to be developed in Colombia. As a result of this reorganisation, several changes in the Ownership structure were done, without changing the consolidation scope of the Group.

In December 2011, Warta B.V. acquired 50% of the share capital of Bliska Sp. Zo.o., from the partner in this joint venture. The Group now holds 100% of its share capital and as a result of this change in control, the assets and liabilities of Bliska were fully consolidated as at 31 December 2011.

The effects of these operations on the Consolidated Financial Statements were as follows:

Tangible assets	1,207
Intangible assets	493
Deferred tax assets	487
Inventories	669
Taxes receivables	3
Trade debtors, accruals and deferrals	436
Cash and cash equivalents	888
Total assets	4,183
Bank Loans	3,954
Deferred tax liabilities	75
Trade creditors, accruals and deferrals	1,646
Taxes payable	142
Total liabilities	5,817
Goodwill	8,702
Invested amount	7,068
Debt increase	3,954
Cash acquired	(888)
Net invested amount	10,134

5 Supplementary income and costs

	2011	2010 (*)
Supplementary gains	493,379	393,623
Cash discount received	43,210	41,185
Cash discount paid	(3,083)	(3,144)
Electronic payment commissions	(17,776)	(16,689)
Other supplementary costs	(39,977)	(34,919)
Provisions for debtors suppliers	(969)	(442)
	474,784	379,614

(*) Restated

Supplementary gains relate to profits obtained by the Group through the distribution of goods, namely, rental of spaces, anniversary 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, as well as financial expenses incurred by Poland Retail (see note 2 - changes in Basis for preparation).

6 Distribution and administrative costs

	2011	2010
Supplies and services	369,784	337,420
Advertising costs	66,443	71,154
Rents	203,933	182,930
Staff costs	748,946	678,887
Depreciation and profit/loss with fixed assets	208,314	190,217
Transportation costs	130,190	113,657
Other operational profit/loss	4,155	6,063
	1,731,765	1,580,328

7 Staff costs

	2011	2010
Wages and salaries	598,717	545,927
Social Security	113,827	102,897
Employee benefits (note 26)	5,749	5,586
Other staff costs	47,345	37,673
	765,638	692,083

Other staff costs include, labour accident insurance, social responsibility costs, training costs and indemnities. Of total staff costs, EUR 25,603 thousand relates to staff costs of joint-venture companies consolidated by the proportional method, the total amount of which was EUR 56,896 thousand.

The difference in staff costs stated in note 6 of EUR 16,692 thousand relates to the production activities that were attributable to the cost of the goods sold in the amount of EUR 10,886 thousand (EUR 11,203 thousand in 2010) and to exceptional losses in the amount of EUR 5,806 thousand (EUR 1,993 thousand in 2010).

The average number of Group employees during the year was 63,215 (2010: 57,066). Of the total number of employees, 960 are employed by joint-venture companies consolidated by the proportional method.

The number of employees at the end of the year was 66,270 (2010: 61,061). Of the total number of employees, 852 are employed by joint-venture companies consolidated by the proportional method.

8 Net financial costs

	2011	2010 (*)
Interest expense	(32,534)	(37,676)
Interest received	8,673	4,395
Dividends	27	67
Net foreign exchange	(1,730)	(706)
Other financial costs and gains	(4,965)	(6,144)
Fair value of financial assets held for trade:
Derivative instruments	(9)	(146)
	(30,538)	(40,210)

(*) Restated

Interest expense includes the interest on loans measured at amortised cost and interest on derivatives of fair-value hedge and cash flow hedge (note 15).

As explained in note 2, financial expenses related to the extension of payment terms from suppliers in the retail segment of Poland were restated to Supplementary costs.

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:

	2011	2010
Derivatives held for trading
Currency swaps	-	(130)
Interest rates swaps	(9)	(16)
	(9)	(146)
Income tax recognised in the income statement	2	39
Non-controlling interests	3	52
Value recognised in profit/loss	(4)	(55)

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 7,971 thousand (net of deferred tax).

The change to the fair value of derivative instruments designated as fair value hedging (note 15), in the amount of positive EUR 7,339 thousand (2010: EUR 8,747 thousand), includes the settlement of the derivative designated as hedging the 84 million USD loan, with fair value of EUR 6,776 thousand on 31th December 2010 and, the change in fair value, in the amount of EUR 563 thousand, of the derivative designated as hedging the 96 million USD loan, which was offset by a variation in the fair value of the loan. See note 25.2.

10 Income tax recognised in the income statement

10.1 Income tax

	2011	2010
Current income tax
Current tax of the year	(83,881)	(69,803)
Adjustment to prior year estimation	(652)	147
	(84,533)	(69,656)
Deferred tax (note 19.1)
Temporary differences created or reversed in the year	(18,673)	(13,139)
Change to the recoverable amount of tax losses and temporary differences from previous years	3,591	3,739
	(15,082)	(9,400)
Other gains/losses related to taxes
Impact of changes in estimates for tax litigations	(11,568)	-
	(11,568)	-
Total income tax	(111,183)	(79,056)

Due to recent developments relating to tax litigations as describe in note 32, the Group has reviewed the provisions relating to these outstanding tax cases. The net effect from expected gains and potential losses is shown under "other gains/ losses related to taxes" in the table above.

10.2 Reconciliation of effective tax rate

		2011		2010
Profit before tax		468,539		378,828
Income tax using the Portuguese corporation tax rate	26.5%	(124,163)	26.5%	(100,389)
Fiscal effect due to:
Different tax rates in foreign jurisdictions	6.4%	29,806	6.0%	22,817
Non-taxable or non-recoverable results	(3.6%)	(16,650)	(0.3%)	(1,191)
Non-deductible expenses and fiscal benefits	0.2%	860	(0.4%)	(1,370)
Adjustment to prior year estimation	(0.1%)	(652)	0.0%	147
Change to the recoverable amount of tax losses and
temporary differences of prior years	0.8%	3,591	1.0%	3,739
Results subject to special taxation	(0.8%)	(3,975)	(0.7%)	(2,809)
Income tax	23.7%	(111,183)	20.9%	(79,056)

11 Exceptional operating profits/losses and losses in other investments

11.1 Exceptional operating profits/losses

	2011	2010
Losses with businesses disposals	-	(1,114)
Compensation related to termination of lease agreements	(4,907)
Costs related with restructuring plans	(8,448)	-
Losses related to natural disaster in Madeira	-	(1,341)
Impairment of assets	(1,713)	(6,607)
Reimbursement of notary fees resulting from court decision	1,473	1,379
Impact of actuarial assumptions changes	479	(1,939)
Others	888	(345)
	(12,228)	(9,967)

11.2 Losses in other investments
	2011	2010
Changes in fair value of investment properties	(1,487)	(4,993)
Losses with the disposal of available-for-sale financial assets	-	(149)
	(1,487)	(5,142)

12 Tangible Assets

12.1 Changes occurred during the year

2011	Land and natural	Buildings and other	Plants, machinery	Transport equipment and	Work in progress and	Total
Cost	resources	constructions	and tools	others	advances
Opening balance	431,992	1,679,699	1,037,952	185,283	135,735	3,470,661
Foreign exchange differences	(13,086)	(84,994)	(30,070)	(8,775)	(18,001)	(154,926)
Increases	17,835	137,760	97,438	7,655	158,364	419,052
Revaluation	12,103	-	-	-	-	12,103
Disposals	(1,342)	(6,944)	(11,849)	(3,653)	(3,143)	(26,931)
Transfers and write off"s	5,271	52,102	(6,232)	327	(68,209)	(16,741)
Business acquisition and restructuring	-	1,016	324	413	48	1,801
Transfers to/from investment properties	(786)	(1,624)	-	-	-	(2,410)
Closing balance	451,987	1,777,015	1,087,563	181,250	204,794	3,702,609
Depreciation and impairment losses
Opening balance	-	476,737	656,319	144,781	-	1,277,837
Foreign exchange differences	-	(23,932)	(14,774)	(6,699)	-	(45,405)
Increases	-	91,274	91,043	17,274	-	199,591
Disposals	-	(2,703)	(11,245)	(3,472)	-	(17,420)
Transfers and write off"s	-	798	(10,305)	(4,446)	-	(13,953)
Business acquisition and restructuring	-	249	100	243	-	592
Transfers to/from investment properties	-	(847)	-	-	-	(847)
Impairment losses	-	1,500	213	-	-	1,713
Closing balance	-	543,076	711,351	147,681	-	1,402,108
Net value
As at 1 January 2011	431,992	1,202,962	381,633	40,502	135,735	2,192,824
As at 31 December 2011	451,987	1,233,939	376,212	33,569	204,794	2,300,501

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

The impairment losses are related with the 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 relating 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:

	2011	2010
Land and natural resources
Tangible assets	34	34
	34	34
Buildings and other constructions
Tangible assets	35,222	34,995
Accumulated depreciation	(14,399)	(10,996)
	20,823	23,999
Plants and machinery
Tangible assets	139,313	139,697
Accumulated depreciation	(74,859)	(58,962)
	64,454	80,735
IT and office equipment and tools and utensils
Tangible assets	20,338	20,502
Accumulated depreciation	(18,581)	(17,632)
	1,757	2,870
Transport equipment
Tangible assets	32,022	38,360
Accumulated depreciation	(26,025)	(25,504)
	5,997	12,856
Total assets under financial leases	93,065	120,494

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 2011, 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 an increase in the value of the land of Euros 12,103 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	105,706	140,882	138,842	3,062
Poland	154,798	162,409	158,642	9,041
Total	260,504	303,291	297,484	12,103

Revaluation values under tangible fixed assets total EUR 163,787 thousand (EUR 154,796 thousand in 2010), reflected in the shareholders" equity as follows:

	2011	2010
Revaluation of land	163,787	154,796
Deferred taxes	(32,717)	(31,262)
Non-controlling interests	(40,671)	(40,418)
Net revaluation (Note 23.1)	90,399	83,116

If the cost model had been applied to the land assets that are valued at EUR 451,987 thousand (EUR 431,992 thousand in 2010), as mentioned in note 12.1, their net book value would be EUR 288,200 thousand (EUR 277,196 thousand in 2010).

13 Intangible Assets

13.1 Changes occurring during the year

2011	Goodwill	R&D expenses	Software, ind. property and other rights	Key money	Work in progress	Total
Cost
Opening balance	746,811	26,711	56,288	84,700	15,056	929,566
Foreign exchange differences	(34,950)	(2,387)	(4,593)	(5,967)	(1,082)	(48,979)
Increases	-	1,411	4,836	8,682	4,347	19,276
Disposals	-	-	(29)	-	(7,422)	(7,451)
Transfers and write off"s	-	427	2,429	157	(2,888)	125
Business acquisition and restructuring	8,702	-	52	709	1	9,464
Closing balance	720,563	26,162	58,983	88,281	8,012	902,001
Depreciation and impairment losses
Opening balance	-	23,840	5,074	37,284	-	66,198
Foreign exchange differences	-	(2,252)	(167)	(1,857)	-	(4,276)
Increases	-	1,182	1,455	7,133	-	9,770
Disposals	-	-	(15)	-	-	(15)
Transfers and write off"s	-	(345)	(215)	(35)	-	(595)
Business acquisition and restructuring	-	-	81	218	-	299
Closing balance	-	22,425	6,213	42,743	-	71,381
Net value
As at 1 January 2011	746,811	2,871	51,214	47,416	15,056	863,368
As at 31 December 2011	720,563	3,737	52,770	45,538	8,012	830,620

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

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 is subject to impairment tests annually, using the same assumptions applied in Goodwill (note 13.4).

13.2 Guarantees

No intangible assets have been pledged as security for the fulfilment of bank or other obligations.

13.3 Intangible assets in progress

The implementation of projects for processes simplification, usage 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 below:

Business Areas	2011	2010
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 Pharmacies	8,702
Poland Retail	287,640	322,590
	720,563	746,811

The additions in this heading include:

• Acquisition of 50% the company Bliska Sp. Z o.o., as mentioned in note 4, whose Goodwill value was PLN 38,796 thousand;
• As a consequence of the currency translation adjustment of assets in the Group"s business in Poland, the Goodwill value related to this business, totalling PLN 1,282,278 thousand, was updated by negative EUR 34,950 thousand.

In 2011 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 determined by past performance and the expectation of 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 8% and 9.4% for Portugal and 10.1% for Poland, and a perpetual growth rate between 0% and 1% for the various businesses.

14 Investment Property

	2011	2010
Opening balance	52,047	63,283
Increases due to acquisitions	19	5
Transfers	1,613	(1,950)
Changes in fair value	(1,551)	(9,227)
Disposals	-	(64)
Closing balance	52,128	52,047

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, but whose market value is expected to increase.

Non-current assets are all the investment properties that are not expected to be sold within a period of less than 12 months.

15 Derivative financial instruments

				2011					2010
	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	-	-	-	324	10 millions EUR	-	-	-	448
Fair value hedging derivatives
USD loan hedging	96 millions USD	-	-	-		680 180 millions USD	-	-	6,776	1,243
Cash flow hedging derivatives
Interest rate swap (EUR)	441.2 millions EUR	-	-	4,038	7,629	524,1 millions EUR	-	-	987	14,783
Interest rate swap (PLN)	189 milions PLN	-	10	-		152 229,5 milions PLN	-	46	-	175
Total derivatives held for trading		-	-	-	324		-	-	-	448
Total hedging derivatives		-	10	4,038	8,461		-	46	7,763	16,201
Total assets/liabilities derivatives		-	10	4,038	8,785		-	46	7,763	16,649

In December 2011, the values shown include interest receivable or payable related to these financial instruments that are due. The net payable amount is EUR 1,093 thousand.

Derivatives held for trading

Interest rate swap

At 31 December 2011, the Group had derivatives financial instruments held for trading with a notional of EUR 10,000 thousand (2010: EUR 10,000 thousand). The fair value of these instruments at 31 December 2011 was negative EUR 324 thousand (2010: negative EUR 448 thousand).

Fair value hedge

Currency swap

The Group hedges its exposure to the fair value of its loans in the total amount of USD 180,000 thousand, through two cross currency swaps that have the same characteristics as the debt that was issued (one branch for 7 years and other for 10 years). 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. One of the cross currency swaps, in the amount of USD 84,000 thousand, referring to the 7 years branch, was due in June 2011, and at 31 December 2011, there remained only the cross currency swap for ten years in the amount of USD 96,000 thousand. The fair value of the cross currency swap at 31 December 2011 was negative EUR 680 thousand (December 2010: negative EUR 8,019 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 2011, the total loans with derivative hedge instruments were EUR 519,777 thousand (2010: EUR 638,107 thousand) and PLN 210,000 thousand (2010: PLN 255,000 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 value of EUR 439,970 thousand (2010: EUR 524,075 thousand), and the fair value of these instruments at 31 December 2011 was negative EUR 11,667 thousand (2010: negative EUR 15,770 thousand).

On the other hand, the interest rate swaps in Zlotys have a notional value of PLN 189,000 thousand (2010: PLN 229,500 thousand), and its fair value at 31 December 2011 was negative EUR 142 thousand (2010: negative m EUR 129 thousand).

Hedging of investments in foreign entities

Currency Forwards

The Group hedges the economic risk of its exposure to the exchange rate of Zloty. To do so, the Group entered currency forwards, with maturities in September and December 2011, with a notional value of PLN 375,000 thousand. The changes in the derivative fair value were recognised in equity currency translation reserve.

16 Investments in associated companies

The associated companies are listed in note 34, and changes in these investments was as follows:

	2011	2010
Investments
Opening balance	1,213	1,118
Equity method	(161)	95
Closing balance	1,052	1,213
Fair value adjustments
Opening balance	-	-
Closing balance	-	-
Net value as at 1 January	1,213	1,118
Net value as at 31 December	1,052	1,213

From the application of equity method a gain of EUR 493 thousand was recognised (2010: EUR 646 thousand), which was deducted from the dividends received in 2011 in the amount of EUR 654 thousand.

17 Available-for-sale financial assets

Non-Current
	2011	2010
BCP shares	3,705	3,705
Advances on account of financial assets	4,988	4,988
Others	893	893
	9,586	9,586
Fair value adjustment – BCP shares (note 27)	(3,429)	(2,571)
	6,157	7,015

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, 2011 (2010: 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 assets measured at cost are set out in the table below:

	2011	2010
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 these investments, and not being able to determine the fair value based on comparable transactions, the Group did not measure these instruments based on expected discounted cash flows since they cannot be reasonably estimated.

18 Inventories

	2011	2010
Raw and subsidiary materials and consumables	7,581	5,365
Goods and work in progress	1,010	750
Finished and semi-finished goods	387	319
Goods available for sale	394,019	377,956
	402,997	384,390
Fair value adjustment (note 27)	(14,735)	(15,679)
Net inventories	388,262	368,711

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

	2011	2010
Opening balance	(29,568)	(19,871)
Currency translation difference (note 23.1)	(39)	(1,257)
Revaluation and reserves (note 23.1)	(2,921)	960
Business acquisition and restructuring	412	-
Result of the year (note 10.1)	(15,082)	(9,400)
Closing balance	(47,198)	(29,568)

Deferred taxes are presented in the balance sheet as follows:

	2011	2010
Deferred tax assets	57,957	67,360
Deferred tax liabilities	(105,155)	(96,928)
	(47,198)	(29,568)

Movement in deferred taxes during the year

	Opening balance	Impact on results	Revaluation and reserves	Currency translation differences	Business acquisition and restructuring	Closing balance
Deferred tax liabilities
Revaluation of assets	32,250	233	2,072	(509)	-	34,046
Deferred income for tax purposes	11,779	7,939	-	(1,501)	76	18,293
Differences on accounting policies in other countries	12,924	139	-	(1,411)	-	11,652
Other temporary differences	39,975	1,189	-	-	-	41,164
	96,928	9,500	2,072	(3,421)	76	105,155
Deferred tax assets
Excess over legal provisions	20,212	1,291	-	(1,474)	38	20,067
Revaluation of assets	2,216	835	-	-	-	3,051
Employee benefits	4,374	634	-	-	-	5,008
Derivative instruments	3,795	(33)	(849)	(25)	-	2,888
Recoverable losses	6,825	(6,191)	-	(192)	442	884
Other deferred costs for tax purposes	22,279	(2,152)	-	(1,436)	-	18,691
Differences on accounting policies in other countries	3,094	(115)	-	(327)	8	2,660
Other temporary differences	4,565	149	-	(6)	-	4,708
	67,360	(5,582)	(849)	(3,460)	488	57,957
Net change in deferred tax	(29,568)	(15,082)	(2,921)	(39)	412	(47,198)

Deferred tax assets arising from recoverable losses are as follows:

	2011	2010
Jerónimo Martins Dystrybucja, S.A.	-	3,842
Poland pharmacies	884	574
Others	-	2,409
	884	6,825

The Group recognised these deferred tax assets on tax losses based on projections for the respective businesses that show that taxable 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 taxable profits are expected to guarantee the recovery of deferred tax assets. Total unrecognised tax assets amount to EUR 8,912 thousand (2010: EUR 12,941 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., Beleggingsmaatschappij Tand BV and Jerónimo Martins - Restauração e Serviços, S.A..

19.3 Receivable and payable taxes

	2011	2010
Taxes receivable
Income tax receivable	22,302	28,778
VAT receivable	10,585	19,136
Others	947	1,033
	33,834	48,947
Taxes payable
Income tax payable	55,784	50,428
VAT payable	24,079	21,601
Income tax withheld	6,778	6,218
Social Security	20,606	19,664
Other taxes	3,296	4,397
	110,543	102,308

20 Trade debtors, accrued income and deferred costs

	2011	2010
Non-current
Other debtors	80,460	66,066
Deferred costs	4,947	5,650
	85,407	71,716
Current
Commercial customers	80,296	74,250
Suppliers	15,565	12,191
Staff	2,059	1,981
Other debtors	38,706	35,055
Accrued income	45,690	47,331
Deferred costs	12,884	11,040
	195,200	181,848

Non-current debtors" includes EUR 80,426 thousand relating 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 include basically supplementary gains contracted with suppliers, in the amount of EUR 41,833 thousand.

The deferred costs include EUR 9,183 thousand of pre-paid rents, EUR 2,379 thousand of bond issue expenses and pre-paid interest, EUR 1,980 thousand of insurance costs and EUR 4,289 thousand of other costs attributable to future years and paid in 2011, or, if not yet paid, were already charged by the entities.

The current debtor"s excluding accrued income and deferred costs, are stated at their recoverable values. The Group constitutes provisions for impairment losses whenever there are signs of uncollectible amounts (note 27).

Other debtors includes an amount of EUR 14,273 thousand (2010: EUR 13,690 thousand), of guarantees to landlords of stores.

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

	2011	2010
Debtors balances not considered impaired
Less than 3 months past due	21,775	19,135
More than 3 months past due	17,032	19,592
	38,807	38,727
Debtors balances considered impaired
Less than 3 months past due	5,865	666
More than 3 months past due	15,740	20,268
	21,605	20,934

Of the debtors balances not consider impaired, EUR 18,645 thousand (2010: EUR 17,509 thousand) are covered by credit guarantees and credit insurance.

21 Cash and cash equivalents

	2011	2010
Bank deposits	340,517	131,609
Short-term investments	186,597	169,445
Cash and cash equivalents	3,041	2,873
	530,155	303,927

The short-term investments include short-term bank deposits and other negotiable funds for which provisions were booked to reduce them to their realizable value (note 27).

22 Cash generated from operations

	2011	2010(*)
Net results	340,268	281,015
Adjustments for:
Non-controlling interests	17,088	18,757
Income tax	111,183	79,056
Depreciations and amortisations	209,256	190,775
Provisions and other operational gains and losses	1,842	7,666
Net financial costs	30,538	40,210
Profit in associated companies	(493)	(646)
Profit/ Losses on other investments	1,487	5,142
Profit/ Losses on tangible and intangible assets	6,091	17,550
	717,260	639,525
Changes in working capital:
Inventories	(39,534)	(33,288)
Debtors, accruals and deferrals	(6,139)	7,949
Creditors, accruals and deferrals	162,666	165,613
	834,253	779,799

(*) Restated

23 Capital and reserves

23.1 Fair value and other reserves

	Land revaluation reserves	Cash-flow hedging reserve	Available for-sale financial assets	Currency translation reserve	Total
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 1st January 2011	83,116	(6,781)	(455)	(12,447)	63,433
Land transferred to investment property: - Gross value - Deferred tax - Non-controlling interests	(434) 108 160				(434) 108 160
Revaluation: - Gross value - Deferred tax - Non-controlling interests	12,103 (2,072) (413)				12,103 (2,072) (413)
Fair value adjustment of financial instruments: - Gross value - Deferred tax - Income tax - Non-controlling interests		3,290 (849) (893)		10,871 (2,874)	14,161 (849) (2,874) (893)
Fair value adjustment of available-for-sale financial instruments: - Gross value			(858)		(858)
Currency translation differences: - In the year - Deferred tax	(2,678) 509	144 (25)		(80,161) (523)	(82,695) (39)
Balance as at 31st December 2011	90,399	(5,114)	(1,313)	(85,134)	(1,162)

It should be noted that the values mentioned in fair value and other reserves refer to application of the fair value of fixed assets, and they cannot be distributed in the individual accounts of the companies that originated them.

The individual annual report of Jerónimo Martins, SGPS, S.A. duly state all conditions related to the use of reserves to be distributed comprised in company equity, therefore we recommend to read 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 (2010: 629,293,220).

The holders of ordinary shares have the right to receive 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 shold 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 2011, the Group held 859,000 own shares (2010: 859,000). As defined by law the own shares are not entitled to dividends.

23.4 Dividends

Dividends distributed in 2011 in the amount of EUR 4,019 thousand, were paid to non-controlling interests in the Group companies.

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 340,268 thousand (2010: EUR 281,015 thousand) divided by the weighted average of outstanding ordinary shares, numbering 628,434,220 (2010 adjusted: 628,434,220).

	2011	2010
Ordinary shares issued at the beginning of the year	629,293,220	629,293,220
Own shares at the beginning of the year	859,000	859,000
Shares issued during the year	-	-
Weighted average number of ordinary shares	628,434,220	628,434,220
	2011	2010
Diluted net results of the year attributable to shareholders that own ordinary shares	340,268	281,015
Diluted weighted average ordinary shares	628,434,220	628,434,220
Basic and diluted earnings per share - euros	0.5415	0.4472

25 Borrowings

Throughout the year, Jerónimo Martins, SGPS, and JMR, Gestão de Empresas de Retalho, SGPS, S.A. have renegotiated the terms (maturities, pricing and value) of some commercial paper programmes.

In Poland some credit lines in a total amount of PLN 1,000 million were contracted with a maturity of 2 years, and at a variable interest rate.

JMH issued a new bond loan for EUR 100,000 thousand maturing in 3 years. The interest rate is variable.

25.1 Current and non-current loans

	2011	2010
Non-current loans
Bank loans	83,647	175,746
Bond loans	284,798	419,228
Financial lease liabilities	17,108	39,208
	385,553	634,182
Current loans
Bank overdrafts	8,085	7,671
Bank loans	90,468	80,536
Bond loans	235,000	98,643
Financial lease liabilities	21,119	32,367
	354,672	219,217

25.2 Loan terms and maturities

2011	Average rate	Total	Less than 1 year	Between 1 and 5 years	More than 5 years
Bank loans
Commercial Paper in EUR	3.77%	75,750	25,750	50,000	-
Loans in EUR	6.13%	51,259	51,259	-	-
Loans in PLN	5.34%	47,106	13,459	33,647	-
Bond Loans
Loans	4.16%	520,537	235,000	285,537	-
Fair value adjustment	-	(739)	-	(739)	-
Bank overdrafts	5.80%	8,085	8,085	-	-
Financial lease liabilities	3.19%	38,227	21,119	17,102	6
		740,225	354,672	385,547	6

2010	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	-
		853,399	219,217	634,090	92

The amount of negative EUR 739 thousand (2010: negative EUR 8,136 thousand), adjusted to the total of bond loans, refers to the fair value adjustment of the bond loan for USD 96 million, for which the Group contracted a hedging instrument, presented in note 15.

25.3 Bond loans

	2011	2010
Non-convertible bonds	520,537	526,007

The bond loans in course at the end of 2011 were as follows:

• In June 2004, JMR placed a fixed-rate Private Placement on the US market in the amount of USD 180,000 thousand. These "Notes" issued by JMR are equivalent to Bond Loans according to Portuguese law. The total amount was divided between a 7-year issue of USD 84,000 thousand and a 10-year issue of USD 96,000 thousand. Immediately after contracting these amounts, a EUR/USD Cross Currency Swap was performed. In June 2011, was reimbursed by JMR the Bond Loan (Private Placement) placed on the US market, in the amount of USD 84,000 thousand. On the same date matured the EUR/USD Cross Currency Swap;
• In September 2007, two bond loans were issued by JMH for EUR 35,000 thousand each, with four and five-year maturity periods, variable interest rates, and indexed to the 6-month Euribor. In September 2011, JMH reimbursed the bond loan of EUR 35,000 thousand;
• In December 2007, JMR issued a new bond loan for EUR 200,000 thousand, maturing in five years. The interest rate is variable, and is indexed to the 6-month Euribor;
• In April 2009 JMR issued a new bond loan for EUR 105,000 thousand, maturing in five years, and payment of 50% at the end of the 4th year. The interest rate is variable and is indexed to the 6-month Euribor;
• In September 2011, JMH issued a new bond loan for EUR 100,000 thousand, maturing in 3 years, The interest rate is variable and is indexed to the 6-month Euribor.

The redemption dates of the bond loans are as follows:

Total	520,537
2014	233,037
2013	52,500
2012	235,000

25.4 Financial lease liabilities

	2011	2010
Payments in less than 1 year	21,844	33,968
Payments between 1 and 5 years	18,237	40,545
Payments in more than 5 years	30	95
	40,111	74,608
Payment of future interest	(1,884)	(3,033)
Present value of liabilities	38,227	71,575

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:

	2011	2010
Non-current loans (note 25.1)	385,553	634,182
Current loans (note 25.1)	354,672	219,217
Derivative financial instruments (note 15)	12,813	24,366
Interest on accruals and deferrals	1,791	821
Bank deposits (note 21)	(340,517)	(131,609)
Short-term investments (note 21)	(186,597)	(169,445)
	227,715	577,532

26 Employee benefits

Amounts of employee benefits in the balance sheet:

	2011	2010
Retirement benefits - defined benefit plan paid for by the Group	19,827	17,570
Retirement benefits - defined benefit plan with a fund managed by a third party	132	253
Seniority awards	13,995	13,016
Total	33,954	30,839

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

	2011	2010
Retirement benefits - defined contribution plan	988	881
Retirement benefits - defined benefit plan paid for by the Group	3,252	2,356
Retirement benefits - defined benefit plan with a fund managed by a third party	(121)	68
Seniority awards	1,630	2,281
Total	5,749	5,586

A brief description of the plans and their impact 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 granting of benefits, while simultaneously creating an incentive for the employees to participate in their own pension scheme.

Movements in the year:

	2011	2010
Liabilities (not covered) as at 1 January	-	-
Costs of the year	988	881
Contributions of the year	(988)	(881)
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 2011, the liabilities total EUR 19,827 thousand, and are included in employee benefits.

Movement in the year:

2011	2010
17,570	16,192
	841
	1,515
	(978)
19,827	17,570
	2,516 768 (32) (995)

Actuarial assumptions used:

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

The mortality assumptions used corresponds to the most common adopted in Portugal, and was set based on actuarial advice in accordance with published statistics and experience in each geography.

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:

	2011	2010
Present value of funded obligations	1,426	1,671
Fair value of plan assets	1,294	1,418
Liability in balance sheet - employee benefits	132	253

Changes in fair value of plan assets:

	2011	2010
Plan assets on 1 January	1,418	1,495
Expected return on plan assets	72	57
Actuarial gains/(losses)	(42)	22
Contributions paid	(154)	(156)
Plan assets on 31 December	1,294	1,418

The amounts recognised in income statement, are as follows:

	2011	2010
Interest costs	72	88
Expected return on plan assets	(72)	(57)
Actuarial losses recognised	(121)	37
Total costs recognised	(121)	68

Actuarial assumptions used:

Mortality table	TV 88/90	TV 88/90
Discount rate	4.90%	4.50%
Expected return on plan assets	4.90%	4.70%
Pension growth rate	2.50%	2.50%

26.3 Other long-term benefits granted to employees

The Group currently has an incentive programme based on the award of seniority, for employees in Portugal.

This programme 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 liability was EUR 13,996 thousand, which is accounted for as liabilities in employee benefits.

Movement in the year:

	2011	2010
Balance on 1 January	13,016	11,362
Current service cost	1,986	1,830
Actuarial (gains)/losses	(355)	451
Paid contributions	(651)	(627)
Balance on 31 December	13,996	13,016

Actuarial assumptions used:

Mortality table	TV – 88/90	TV – 88/90
Discount rate	4.90%	4.50%
Salaries growth rate	2.50%	2.50%

26.4 Defined benefit obligation granted to employees

	2011	2010	2009	2008
Present value of defined benefit obligation	35,248	32,257	29,233	29,739
Fair value of plan assets	1,294	1,418	1,495	1,544
(Surplus)/deficit of defined benefit plans	33,954	30,839	27,738	28,195

Plan assets includes the following:

Total	1,294	100%	1,418	100%
Cash	15	1%	13	1%
Bonds	1,071	83%	1,138	80%
Equity shares	208	16%	267	19%
	2011		2010

27 Provisions and adjustments to the net realisable value

2011	Opening balance	Set up reinforced	Unused and reversed	Foreign exchange difference	Used	Business acquisition and restructuring	Closing balance
Doubtful debtors (note 20)	21,825	3,796	(1,282)	(374)	(1,033)	-	22,932
Inventories (note 18)	15,679	1,683	(1,666)	(980)	-	19	14,735
Available-for-sale fin. investments (note 17)	2,571	858	-	-	-	-	3,429
Short term investments (note 21)	57	-	-	-	-	-	57
Total fair value adjustments to net realisable value	40,132	6,337	(2,948)	(1,354)	(1,033)	19	41,153
Other risks and contingencies	22,907	33,502	(2,056)	(692)	(4,064)	-	49,597
Total of provisions	22,907	33,502	(2,056)	(692)	(4,064)	-	49,597

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

The provisions for other risks and contingencies consists of provisions for possible compensation to be paid by the Group regarding guarantees provided in business sales agreements contracted over the last few years, provisions for restructuring plans and provisions for litigation processes where there is no prospect of resolution in less than one year.

28 Trade creditors, accrued costs and deferred income

	2011	2010
Other commercial creditors	1,615,771	1,544,503
Other non-commercial creditors	179,878	142,502
Accrued costs	207,514	204,755
Deferred income	3,173	3,651
	2,006,336	1,895,411

The accrued costs include basically salaries and wages to be paid to the employees, in the amount of EUR 75,930 thousand, interest payable in the amount of EUR 17,383 thousand and supplementary costs with the distribution and promotion of goods in the amount of EUR 37,074 thousand. The remaining EUR 77,127 thousand relates to sundry costs (utilities, insurance, consultants, rents, among others), for 2011, which had not been invoiced by the respective entities prior to the end of the year.

Deferred income comprises basically supplementary gains in the amount of EUR 2,374 thousand, which are deferred until the respective goods are sold.

29 Guarantees

The bank guarantees are as follows:

	2011	2010
Guarantees provided to suppliers	1,785	3,860
Guarantees for D.G.C.I. (Portuguese tax authorities)	106,896	108,959
Other State guarantees	3,715	6,441
Other guarantees provided	14,317	12,152
Total of Guarantees	126,713	131,412

30 Operational lease

The Group has liabilities relating to medium and long-term contracts which have penalty clauses if broken.

The total of future payments associated with such contracts, are as follows:

	2011	2010
Payments in less than 1 year	192,710	168,982
Payments between 1 and 5 years	661,549	570,415
Payments in more than 5 years	778,035	710,098
	1,632,294	1,449,495

These amounts are in respect of stores and warehouses rent contracts, with initial term between 5 and 20 years, with an option to renegotiate after that period. The payments are updated annually, reflecting inflation and/or market valuation.

As mentioned all these contracts are breakable with the payment of penalties. The liabilities relating to these penalties were, at the end of 2011, of EUR 146,322 thousand.

The operational lease contracts recognised as costs amounting to EUR 203,845 thousand (2010: EUR 182,794 thousand), are analysed as follows:

	2011	2010
Buildings	181,952	164,190
Plants & machinery	7,996	7,707
Transport equipment	10,701	8,846
IT equipment	1,104	1,225
Others	2,092	826
	203,845	182,794

The difference to the rents stated in note 6 are costs with occasional renting in the amount of EUR 814 thousand (2010: EUR 763 thousand) and rents costs that were attributable to the cost of goods sold in the amount of negative EUR 726 thousand (2010: negative EUR 627 thousand).

31 Capital commitments

Capital expenditure contracted for at the balance sheet date amounted EUR 96,187 thousand and refers essentially to work in progress and the preliminary agreement for the acquisition of land, buildings and equipment.

32 Contingencies

Under non-current debtors (note 20), an amount of EUR 79,540 thousand relates to tax liquidations claimed by the Tax Administration.

The Board of Directors, supported by its tax and legal advisers, believes the company has acted entirely within the law and maintains the claims filed against such settlements, without waiving its legitimate right to appeal against them and expect 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.

During January 2012, one of the judicial proceedings was held to be well-grounded by the Court of Appeal (TCAS), which ruled the cancelation of the referred liquidations and the payment of compensatory interests and of a compensation for the guarantees granted within the proceedings. The Group recognised the amount of compensatory interest due on this credit.

There are several disputes arising out of the ordinary course of the Group"s businesses, and the material issues mentioned below are also pending resolution. With respect to these issues the Board of Directors, supported by the opinion of its tax and legal advisors, assesses the outcome of each proceedings and for those where the Board estimates that a future cash outflow may occur a provision has been made in the respective amount:

• 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 court ruled in favour of the defendants, denying the plaintiff"s claim. Meanwhile the plaintiff appealed to the Court of Appeal, which is still pending. The Board of Directors maintains its belief that the amount requested will probably not be granted;
• 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;
• 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 the company 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 an additional assessment of Value Added Tax (VAT). 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, this being 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 an additional VAT assessment, as 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 additional VAT 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. The Portuguese Tax Authorities have now issued additional assessments, amounting to EUR 20,888 thousand. Recheio appealed by different means, namely through a Special Administrative Action against the Order of authorization for initializing the tax inspection under the anti-avoidance clause. The said Special Administrative Action was not ruled in favour of Recheio by the Tax and Administrative Court, therefore Recheio appealed to the Central Administrative Court, which once again ruled in favour of the tax authorities, and consequently, stated that the order to make the inspection was valid. Nevertheless, Recheio still considers that the restatement of dividends for fiscal purposes has no validity, and maintains its judicial claim against the assessments, since the Central Administrative Court's decision has no relation to the facts discussed on that judicial claim;
• 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 valid arguments to request these payments;
• h) The Portuguese Tax Authorities assessed Feira Nova Hipermercados, S.A. (merged into Pingo Doce 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 relate 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 valid arguments to request these payments. In consequence, Feira Nova was notified by the Lisbon Tax Court that the judicial claim filed against the Portuguese tax authorities assessment, regarding Value Added Tax (VAT), for the tax year 2002, amounting to approximately, EURO 1,2 million, was ruled in favour of the company. Since the tax authorities have not appealed, the Court decision is final;
• 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 valid grounds to request this payment;
• j) The Portuguese Tax Authorities have informed Jerónimo Martins, SGPS, S.A., to 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 as opposed 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 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 challenged it;
• l) The Tax Authorities assessed JMR Gestão de Empresas de Retalho, 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"s 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. The judicial claims presented were ruled in favour of the Portuguese tax authorities, JMR"s Management, supported by its lawyers and tax advisors" opinion, still believe that those decisions are not valid nor have any legal grounds and has challenged and opposed the ruling;
• 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 valid 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 valid grounds, and it will be challenged;
• o) The Tax Authorities assessed JMR Gestão de Empresas de Retalho, SGPS, S.A. and Jerónimo Martins, SGPS, S.A for the amounts of EUR 507 thousand and EUR 480 thousand, respectively, both for the year 2008. The assessments concern swap payments, treated as interest in that year, which the tax authorities consider that should have been subject to withholding tax. Both JMR and Jerónimo Martins, supported by its tax consultants, have challenged these assessments, believing that the tax authorities have no valid grounds to request the payment of such amounts;
• p) The Portuguese Tax Authorities carried out some corrections to the CIT amount from companies included in the perimeter of the Tax group headed by Recheio, SGPS, S.A. (Recheio), which led to additional assessment, concerning 2008, amounting to EUR 3,200 thousand. Recheio"s Management supported by their lawyers and tax consultants have challenged these assessments, assuming that the Tax Authorities have no valid grounds to request this payment;
• q) The Portuguese Tax Authorities have informed Jerónimo Martins, SGPS, S.A., that they do not accept losses on capital gains associated with a liquidation of one Company and the sale of another, amounting to EUR 24,660 thousand, which generated a correction on the company"s tax losses, regarding year 2007. 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 challenge it;
• r) At the beginning of September Nestlé initiated judicial proceedings against Unilever Jerónimo Martins, Lda., claiming a compensation of 2,1 million euros for alleged similarity and confusion in the packaging of competing products. The defendant as filed its statement of defense. Meanwhile the parties have reached agreement to terminate the judicial proceedings, that has now to be confirmed by the court.

This lawsuit followed the injunction proceedings filed by Nestlé, which was ruled in its favour by the court and confirmed by the Court of Appeal. Pursuant to the decision of the Court of Appeal, the plaintiff commenced the enforcement proceedings of the injunction decreed against Unilever Jerónimo Martins, Lda., which was also settled by agreement and awaits the respective judicial confirmation;

s) Tengelmann KG filed arbitration proceedings against Jerónimo Martins, SGPS, S.A. before the German Institute of Arbitration, in Cologne. The plaintiff argues that Jerónimo Martins, SGPS, S.A. is liable for the non-payment of rents and contractual penalties, plus accrued interests, by Dystrybucja Integrator Sp. Z o.o. (previously Plus Discount Sp. z o.o. – Plus Poland), in the amount of EUR 2,716 thousand, under the guarantee granted by Jerónimo Martins, SGPS, S.A. in the SPA (Sale and Purchase Agreement) regarding Plus Discount Sp. z o.o.. Jerónimo Martins, SGPS, S.A. considers the allegations ungrounded. The arbitral proceedings are awaiting the constitution of the Tribunal, which will determine the deadline for the statement of defence.

33 Related parties

33.1 Balances and transactions with related parties

56.13% 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 2011, neither were there any amounts payable or receivable between them on December 31st, 2011.

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

	Sales and services rendered		supplied	Stocks Purchased and services
	2011	2010	2011	2010
Joint Ventures	434	990	79,766	89,788
Associated companies	-	43	1,122	1,742

	Trade debtors, accrued income and deferred costs		income and deferred costs	Trade creditors, accrued
	31/12/2011	31/12/2010	31/12/2011	31/12/2010
Joint Ventures	372	734	6,642	8,565
Associated companies	-	2	505	757

		Sales and services rendered	supplied	Stocks Purchased and services
	2011	2010	2011	2010
Joint Ventures	239	519	43,871	49,384
Associated companies	-	43	1,122	1,742
	Trade debtors, accrued income and deferred costs		Trade creditors, accrued income and deferred costs
	31/12/2011	31/12/2010	31/12/2011	31/12/2010
Joint Ventures	205	388	3,653	4,710
Associated companies	-	2	505	757

Balances and transactions with related parties not eliminated on consolidation, 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, as a result of trade agreements, are settled in cash, and are subject to the same payment terms as those applicable to other agreements contracted 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:

	2011	2010
Salaries and other short-term employee benefits	21,725	23,018
Termination benefits	1,419	308
Post-employment benefits	796	656
Other benefits	253	246
Total	24,193	24,228

The Board of Directors of the company contains 9 members and the average number of Senior Managers of the Group was 94 (2010: 93).

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

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 and 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 are organised according to the consolidation method used.

a) Full consolidation method

Company	Business area	Head office	% Owned
Jerónimo Martins, SGPS, S.A.	Business portfolio management	Lisbon
Jerónimo Martins – Serviços, S.A.	Human resources top management	Lisbon	100.00
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, SGPS, Lda.1	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	100.00
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
Monterroio – Industry & Services Investments B.V.	Business portfolio management and financial services	Amsterdam (Holland)	100.00
Tagus - Retail & Services Investments B.V.	Business portfolio management and financial services	Amsterdam (Holland)	100.00
Warta - Retail & Services Investments B.V.	Business portfolio management and financial services	Amsterdam (Holland)	100.00
New World Investments B.V.	Business portfolio management and financial services	Amsterdam (Holland)	100.00
Jerónimo Martins Colômbia S.A.S.	Production, trading and distribution of consumer goods	Bogota (Colombia)	100.00
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
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.	Business portfolio management and financial services	Rotterdam (Holland)	100.00
Jerónimo Martins Dystrybucja, S.A.	Retail and wholesale of food and consumer goods	Kostrzyn (Poland)	100.00
Optimum Mark Sp. Z o.o.	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
Bliska Sp. Z o.o.	Retail sale of pharmaceutical, orthopaedic and health products	Warsaw (Poland)	100.00

¹ Previously assigned as Servicompra – Consultores de Aprovisionamento, Lda.. Amendment made on December 2011.

b) Proportional consolidation method

Company	Business area	Head Office	% Owned
Unilever Jerónimo Martins, Lda.	Wholesale of other food products	Lisbon	45.00
Indústrias Lever Portuguesa, S.A.	Detergent manufacturing	Lisbon	45.00
Olá – Produção de Gelados e Outros Produtos Alimentares, S.A.	Manufacturing of ice-cream and sorbet	Lisbon	45.00
Fima – Produtos Alimentares, S.A.	Production of margarines and similar products	Lisbon	45.00
Victor Guedes – Indústria e Comércio, S.A.	Production of olive oil	Lisbon	45.00
Gallo Worldwide, Lda.	Wholesale of olive oil and similar products	Lisbon	45.00

c) Equity method

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

d) During the year 2011:

As result of the ownership restructuring implemented by the Group, as described in the Consolidated Management Report, the following companies were incorporated: Warta – Retail & Services Investments B.V., Tagus – Retail & Services Investments B.V., Monterroio – Industry & Services Investments B.V. and New World Investments B.V.. These new companies became the sub-holdings of the Group for the different geographies and business segments in which the Group operates.

In 2011, 51% of the share capital of the company Caterplus – Comercialização e Distribuição de Produtos de Consumo, Lda., was acquired by the company Jerónimo Martins – Distribuição de Produtos de Consumo, Lda., which now owns 100% of the share capital of that company.;

In December 2011, the companies Hermes - Sociedade de Investimentos Mobiliários e Imobiliários, Lda. and PSQ - Sociedade de Investimentos Mobiliários e Imobiliários, Lda., were wound up.

In December 2011, Warta – Retail & Services Investments, B.V. acquired 50% of the share capital of Bliska Sp. Zo.o., from the partner in this joint venture, the Group now holds 100% of its share capital. As result of this change in control, the full consolidation method was applied as at 31 December 2011.

In December 2011, the company Jerónimo Martins Colombia, S.A.S. was incorporated for the development of the operations that the Group intends to implement in the Colombian market.

35 Interests in joint ventures and associates

The Group owns (directly and indirectly) interests in the following joint ventures:

• 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;
• 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 owns directly interests in the following associated company:

● A shareholding of 27.545% in Perfumes e Cosméticos Puig Portugal – Distribuidora, S.A. its business area is the retail sale of perfumes and cosmetic products.

The financial statements of the above-mentioned joint ventures are as follows:

	2011	2010
Non-current assets	615,472	620,286
Current assets	165,597	178,887
Non-current liabilities	(421,924)	(428,279)
Current liabilities	(244,698)	(264,950)
Net assets	114,447	105,944
Income and gains	703,702	717,619
Costs and losses	(676,393)	(675,957)
Net result	27,309	41,662

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.

	2011	2010
Non-current assets	119,918	122,313
Current assets	70,788	76,306
Non-current liabilities	(3,818)	(6,682)
Current liabilities	(109,623)	(119,001)
Net assets	77,265	72,936
Income and gains	97,928	106,603
Costs and losses	(81,415)	(84,559)
Net result	16,513	22,044

The financial statements of the associates which are integrated into the consolidated statements by the equity method, include the following amounts related to assets, liabilities and earnings:

	2011	2010
Non-current assets	381	122
Current assets	10,407	14,986
Non-current liabilities	(628)	(3,467)
Current liabilities	(6,705)	(7,603)
Net assets	3,455	4,038
Income and gains	18,502	20,950
Costs and losses	(16,768)	(18,634)
Net result	1,734	2,316

In applying the equity method there were no issues in harmonizing the accounting policies of the associates.

36 Additional information required 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 that 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 2011, was 804,689 euros, of which 706,936 euros correspond to legal accounts audit services, while the remaining 97,753 euros, relate to the access to a tax database, technical consulting within the project for the transfer of processes to a Shared Service Centre, the market research study on remuneration policy in Poland, as well as the analysis of potential effects on applying IFRS on the statutory accounts of the Polish Companies of the Group;
• 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

At the conclusion of this Report there were no relevant events to highlight that are not disclosed in the Financial Statements.

Lisbon, 6 th March 2012

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, 6 March 2012

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)

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

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

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

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)

Marcel Lucien Corstjens (Member of the Board of Directors)

Nicolaas Pronk (Member of the Board of Directors)

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, 2011, (which shows total assets of Euros 4,481,283 thousand and a total of shareholder's equity of Euros 1,421,685 thousand, including a total of non-controlling interests of Euros 300,824 thousand and a net profit of Euros 340,268 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. 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

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, 2011, 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 6, 2012

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 31 December 2011, 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 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 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 Managing Committee, the Ethics Committee, the Internal Control Committee, and the Financial Matters Committee, 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.

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 c) of paragraph 1 of article 245.º of the Portuguese Securities Code, 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 6 th, 2012

Hans Eggerstedt (Chairman of the Audit Committee)

António Pedro Viana-Baptista (Member)

Artur Eduardo Brochado dos Santos Silva (Member)

IV – Corporate Governance

Introduction	146
Chapter 0 – Statement of Compliance	147
Chapter 1 – General Shareholders' Meeting	151
1.1. Presiding Members of the General Shareholders' Meeting 1.2. Participation in the General 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 General Shareholders' Meetings 1.7. Intervention by the General Shareholders' Meeting regarding the Company's Remuneration Policy and the proposal on the Share Allocation or Stock Options Plans 1.8. Intervention by the General Shareholders' Meeting in the Approval of the Main Features of	151 151 152 152 152 153 153 153
the Retirement Benefits Scheme 1.9. Defensive Measures	153
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	153
1.11. Agreements between the Company and Officers and Members of the Board of Directors	154
Chapter 2 – Management and Supervisory Bodies of the Company	155
Section 1 – General Matters	155
2.1. Identification and Composition of the Corporate Bodies 2.2. Identification of the Specialised Committees Formed with Responsibility in Company Management or Supervision	155 155
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 2.5. Risk Management and Internal Control Systems 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 2.5.2. Main Risks 2.6. Code of Conduct and Internal Regulations	156 156 157 157 162 163 163 163 163 164 164 165 173
Section 2 – The Board of Directors	173
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	173 174 174 174 175 175 175
Directors and of the Supervisory Board

2.11. Number of Meetings of the Management and Supervisory Bodies, and Other Committees 2.12. Minutes of the Executive Committee and Information for the Members of the Corporate	176
Bodies	176
2.13. Description and Identification of the Management Body	176
2.14. Rules of the Selection Process of Candidates for Non-Executive Directors	177
2.15. Inclusion in the Annual Management Report of the Description of the Activities Performed by Non-Executive Members	178
2.16. Professional Qualifications of the Members of the Board of Directors	178
2.17. Positions that the Members of the Board of Directors Hold in Other Companies	179
Section 3 – Remuneration	182
2.18. Remuneration Policy of the Board of Directors and of the Supervisory Board	182
2.19. Remuneration of the Members of the Board of Directors and of the Supervisory Board	183
2.20. Communications Policy for Alleged Irregularities Occurring within the Company (Whistleblower Procedure)	186
Section 4 – Specialised Committees	186
2.21. Composition of Specialised Committees and Number of Meetings during Financial Year	186
2.21.1. Chief Executive Officer and Executive Board	186
2.21.2. Audit Committee	188
2.21.3. Financial Matters Committee	189
2.21.4. Committee on Corporate Responsibility	190
2.21.5. Evaluation and Nominations Committee	190
2.21.6. Ethics Committee	190
2.21.7. Internal Control Committee	191
2.21.8. Remuneration Committee	192
Chapter 3 – Information and Auditing	193
3.1. The Company's Capital Structure	193
3.2. Shareholder Structure	193
3.3. Restrictions Regarding Transferability of Shares, Shareholder Agreements and Rules Applicable to Amendment of the Company's Articles of Association	193
3.4. System for Employees' Participation in the Company's Capital	194
3.5. Share Price Performance	194
3.6. Performance of Jerónimo Martins Shares	195
3.7. Publication of Market Results	198
3.8. Dividend Distribution Policy	198
3.9. Stock Options Plan	199
3.10. Business between the Company and the Members of the Board, Holdings and Companies in a Parent-Subsidiary or Group Relationship and Owners of Qualifying Holdings	199
3.10.1. Business with Members of the Board and Companies in a Parent-Subsidiary or Group Relationship	199
3.10.2. Business with Owners of Qualifying Holdings	199
3.11. Investor Relations Office	200
3.11.1. Communication Policy of Jerónimo Martins for the Capital Markets	200
3.11.2. Activities of the Investor Relations Office	200
3.12. Yearly Remuneration Paid to the External Auditor	203
3.13. Activity and Rotation Period of the External Auditor	204

Introduction

In 2007, following the revision of the Portuguese Commercial Companies Code occured in 2006 and in what the Company considered a coherent evolution of its previous model of governance – the monist model - Jerónimo Martins adopted the socalled "Anglo-Saxon" model, with the following corporate bodies: the General Shareholders' Meeting, the Board of Directors, the Audit Committee, the Chartered Accountant and the Company"s Secretary.

This model of governance, completed through the internal organisation structure chosen by each Board of Directors, has enabled the Company to more efficientelly solve its organisation needs while respecting governance best practices.

With the entry into force in 2010 of CMVM Regulation no. 1/2010 on 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), Jerónimo Martins sought, always bearing in mind the interests of shareholders and of the market, to adjust its practices in order to continue to adopt the best standards of the market, particularly in relation to rigour and transparency.

Consequently, the Board of Directors has adopted an internal organisation strucutre characterised by the delegation of the day-to-day management of corporate business to a Chief Executive Officer (CEO) and by the setting up of specialised committees intended to monitor and supervise certain areas.

In view of its commitment to the Shareholders and other stakeholders, the Company"s Board continues paying particular attention to matters related to Corporate Governance and considers the Group's policy to be consistent with the best market practices and the operation of its governance model to be 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 complies in its essence 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.
I.2.2	1.2.
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			X
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		0.3.2.
II.1.5.3		0.3.3.
II.1.5.4	1.7.; 1.8.; 2.19.; 3.9.
II.1.5.6	1.6.
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			X
II.3.3			X
II.4.1 II.4.2	2.4.; 3.11.2.		X
II.4.3	2.4.
II.4.4 II.4.5	2.21.2. 2.21.2.
II.4.6 II.5.1	2.21.2.; 2.21.6. 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		0.3.4.; 3.12.
IV.1	3.10.
IV.1.2	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. In a first mandate characterized by the said 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. With respect to paragraph (ii) of recommendation II.1.5.1. it is important to explain that the matter concerning the remuneration of Directors, including the setting of maximum limits for all the components of the remuneration, depends exclusively on the Remuneration Committee, which is a committee appointed by the General Shareholder"s Meeting and independent of the Board of Directors. Thus, the full compliance with the referred recommendation is within the exclusive competence of the Remuneration Committee. The latter decided not to follow the recommendation, since it understands that the manner in which the remuneration of Executive Directors is structured ensures full alignment of their interests with those of the Company in the long term.

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 the Shareholders.

0.3.2. With respect to paragraph (i) of recommendation II.1.5.2. it is hereby clarified that the statement on the remuneration policy of the management and supervisory bodies of the Company, including its optional contents, depends exclusively on the Remuneration Committee, which is a corporate body originated from the General Shareholder"s Meeting and independent of the Board of Directors. Thus, the full compliance with the referred recommendation is within the exclusive competence of the Remuneration Committee. The latter decided not to follow the recommendation, since it deems unnecessary the recourse and indentification of benchmark to determine the remuneration. Nevertheless, the Committee considers that the remuneration policies of the Company are aligned with the best practices of the similar companies within the PSI-20.

0.3.3. 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 General 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 entrusted these types of functions to the General 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 General Shareholders" Meeting.

0.3.4. As regards recommendation III.1.5. it is important to explain that in 2011 the Audit Committee established the rules concerning the provision of consultancy services by the external auditor. These rules determine: i. the possibility of contracting those services, if the auditor"s independence is assured; and ii. the obligation to obtain prior approval of the Committee, from the moment the global amount of fees related to these type of services in that year surpasses 10% of the global amount of fees concerning audit services. The Audit Committee considers that the provision of non-audit services up to the said amount of 10% is not capable of compromising auditor"s independence. Furthermore, the Committee considers this solution as the most appropriate to the Group"s geographical multilocalization and to the specific needs of its subsidiaries set up in other jurisdictions.

Chapter 1 General Shareholders' Meeting

1.1. Presiding Members of the General Shareholders' Meeting

The Board of the General Shareholder's Meeting is chaired by João Vieira de Castro, the secretary being Tiago Ferreira de Lemos.

The current members of the Board of the General Shareholders' Meeting were elected on 9 April 2010 for the current term, which terminates in 2012.

The Chairman of the Board of the General Shareholder's Meeting received an annual payment of 5,000 Euros. For the meeting held in 2011, the members had all the 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 General Shareholders' Meeting

Following the entry into force of Decree-Law No. 49/2010 of 19 May, which amended the rules regarding the participation of the shareholders in the general shareholder"s meeting, including those related to the blocking of shares, the Articles of Association of the Company were also amended in the 2011 General Shareholder"s Meeting.

Despite this amendment was only in force to subsequent general shareholder"s meetings, the 2011 General Shareholder"s Meeting fully complied with the legislation on this subject, which coincides with that currently prescribed on Article Twenty-Three of the Company"s Articles of Association.

Thus, shareholders complying with the following conditions could attend and vote at the meeting:

• i) On the Record Date, corresponding to 00:00 am (GMT) of the fifth trading day prior to the General Shareholder"s Meeting, they held shares of the Company entitling them to at least one vote;
• ii) By the end of the day prior to the day of the Record Date, they had stated in writing, to the Chairman of the General Shareholder"s Meeting and to the respective financial intermediary, their intention to participate in the meeting;
• iii)By the end of the day of the Record Date, the respective financial intermediary has sent to the Chairman of the General Shareholder"s Meeting information on the number of shares registered under that Shareholder's name on the Record Date.

Despite the rules of the Articles of Associtation regarding the blocking of the shares, adopted under the previous legislation, were still in force by the date the General Shareholder"s Meeting was held, the Company has also followed in this respect the provisions of the new legislation, which do not require such blocking.

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.

1.3. 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 General 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 General 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 General 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 General Shareholders' Meetings. Thus, Shareholders must state their intent to exercise their right to vote electronically to the Chairman of the Board of the General Shareholders' Meeting, at the Company's Head Office or using the Jerónimo Martins website, at 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 website, at www.jeronimomartins.pt, besides the information identified in section 3.11. hereinafter, extracts of minutes of meetings of the General Shareholders' Meeting within five days of their completion, and a record of the attendance lists, agendas and the resolutions passed by the General Shareholders' Meeting in the previous three years.

1.6. Remuneration Committee Representative Attending General Shareholders' Meetings

At the General Shareholders' Meeting held in 2011, Mr. Arlindo do Amaral was present as the representative of the Remuneration Committee.

1.7. Intervention by the General 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 General Shareholders' Meeting. This statement outlines the main characteristics of that policy – which is better explained in section 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 General Shareholders' Meeting in the Approval of the Main Features of the Retirement Benefits Scheme

The 2005 Annual General 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 Case of Change in Control of the Company

Since it leads a group that includes various partnerships with international groups, the Company understands that certain provisions of joint venture contracts entered into

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 are 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 Elísio Alexandre Soares dos Santos (Chairman), António Pedro de Carvalho Viana Baptista, Artur Eduardo Brochado dos Santos Silva, Hans Eggerstedt, José Manuel da Silveira e Castro Soares dos Santos, Luís Maria Viana Palha da Silva, Marcel Lucien Corstjens, Nicolaas Pronk and Pedro Manuel de Castro Soares dos Santos.

The Audit Committee comprises Hans Eggerstedt, who chairs it, António Pedro de Carvalho Viana Baptista and Artur Eduardo Brochado dos Santos Silva.

The position of Company Secretary is held by Henrique Soares dos Santos, and that of alternate by Carlos Martins Ferreira.

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

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

In addition to the Audit Committee, which is the supervisory body of the Company, the structure of the Board of Directors includes the Chief Executive Officer and specialised committees intended to monitor and supervise certain areas. Until the end of 2011, this strucutre comprised the Financial Matters Committee (FMC) (which ceased its functions on Decemebr 31, 2011), the Committee on Corporate Responsibility (CCR) and the Evaluation and Nominations Committee (ENC).

In order to assist the Chief Executive Director in carrying out his role, the Board of Directors appointed the Managing Committee, an 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 Organisational 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 the business activity of the latter. The Board of Directors and its Chairmany 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, inherently to the duties performed on that Committee, the monitoring of investor relations (this special duty ceased on December 31, 2011) and to the Director 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:

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 2011, this Division focused on monitoring the evolution of the corporate rules and recommendations in the Group"s various reorganization operations and on supporting the Board of Directors and other functional divisions in the project of internationalisation of the Group to a new geography.

It also had an important role regarding the prevention of legal disputes, through legal counselling and internal training.

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.

Corporate Responsibility and Communication – In 2011, focus was placed on integrating the coordination of the area of Corporate Responsibility in the Communication Division, which resulted in redesignating the latter as the Corporate Responsibility and Communication Division. This Division reports directly to the CEO. The area of Corporate Communication is responsible for coordinating the strategic management of the brand and the corporate reputation among the different key nonfinancial audiences. It operates as an agent fostering inter-departmental integration with the aim of ensuring the consistency of internal and external communications and alignment with the values and objectives of the Group. It manages the digital communication channels and coordinates event organisation and management. It is the quintessential point of interaction with journalists, providing support to the various Companies and Functional Divisions on media relations, event communication and organisation. It produces publications and contents internally and externally-oriented in various formats and media. The area of Corporate Responsibility aims to ensure that the business units' balanced growth in sales and profitability incorporates social and environmental concerns throughout the value chain. Its objective is to promote social and economic well-being in the regions where the Group carries out its business.

Within the scope of Corporate Responsibility, 2011 saw the start of strategic alignment with the Food Quality and Safety Divisions, Environmental Divisions and Commercial Divisions of the Group's Companies. A Policy for Supporting the Surrounding Communities was drawn up and a Policy for Sustainable Procurement was implemented. Within Communications, the internal magazine "A Nossa Gente" (Our People) was restructured, resulting in re-styling it to a new format with new graphics, as well as a change in its frequency and a new distribution process. A new, monthly, internal means of communication was launched "Carta Aberta" (Open Letter), which aims to bring the Group's decision centres closer to all the employees in Portugal. The

new institutional website at www.jeronimomartins.pt was restructured and launched, presenting more information, more functions and improved browsing.

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.

Last year was marked by an update of the tools used to support financial consolidation and reporting, as well as by the strict cooperation with the other Group divisions in the work for entering a new geographic region.

Its activity was also focused on supervising the financial reporting of the different Group companies to ensure its conformity with the accounting standards adopted by Jerónimo Martins, on supporting the Companies in the accounting assessment of all non-recurrent transactions, as well as in the Group's restructuring and expansion activities.

Strategy and Planning – Co-ordinates and supports the process of creating and maintaining Jeronimo Martins"s Strategic Plans and 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.

2011 was dedicated to optimising the reporting process, through which this Division ensured that a series of reports were issued that quickly became essential tools for identifying and anticipating changes in trends in the different businesses and made it possible to monitor even more closely the Group's business areas. Within this area, also of note was the permanent monitoring of the macroeconomic indicators in the regions where Jerónimo Martins operates, which were constantly volatile in 2011, enabling us to act proactively, thereby anticipating any contingencies.

Last year, with regard to assessing any new business opportunities and new geographic markets, a series of markets were analysed and various models developed to assess potential business opportunities.

International Expansion – Created in 2011, it is responsible for identifying and assessing any growth opportunities for the Jerónimo Martins Group in new geographical areas, using for this purpose the guidelines laid down by the Board of Directors. The analytical process, which covers political, economic and social issues and those relating to the market, culminates in writing investment recommendations, which include the strategies for entering and obtaining growth in the selected new markets, as well as the business model to be adopted.

Hierarchically, this Functional Division reports to the Chief Executive Officer.

In 2011, after analysing opportunities in various geographic regions, an investment in Colombia was recommended, which was approved by the Board of Directors in October. This Functional Division then took on the management of the project,

outlining and supporting the implementation of the investment plan, which involved coordinating the different functional areas and involving key personnel from the various Group companies, both in Portugal and Poland.

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.

In 2011, within its scope of activity the Fiscal Affairs Division carried out the following: i. provided support to the Group's various internationalisation and restructuring operations; ii. carried out special work in order to standardise the policies adopted (or to be adopted) by the different Group Companies; and iii. followed up the preparation of various applications for tax benefits within the scope of "SIFIDE" (System of Tax Incentives in Corporate R&D).

Finally, during 2011 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 first 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. It also performs treasury planning with the aim 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 Distribution Companies in Portugal are completely centralised, while the areas of Distribution in Poland, Industry and Services 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 during the year in question and a new debt was issued, with the main objective of increasing the maturity of the overall debt and ensuring that credit lines are available should they become necessary.

Food Quality and Safety– 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 in this field. This responsibility extends to the various geographic regions where Jerónimo Martins operates and where there must be common harmonisation and consistency of the methods and procedures used, thereby ensuring the same overall activity across the Group.

The main activities carried out in 2011 were focused on effectively harmonising processes, methodologies, policies and practices in Portugal and Poland, with the objective of having a common modus operandi and establishing a single culture within the two countries in terms of food quality and safety and the development of new products. Equally, a common nutritional policy was defined for the two regions, which will enable us to have an overall action plan in the future regarding product launches and reformulations and for defining the assortment. We also continued to develop the new IT system for quality management.

This Division also carried out the following during the year: i. it successfully finalised the certification process of the central kitchens in accordance with the Codex Alimentarius, within the scope of "Preparing and Cooking Food"; ii. reviewed and adjusted the internal training process, using more modern technologies and updating content; iii. actively participated in the logistics redesign project in Portugal; and iv. continued with its research on agriculture together with the Group's partners, namely suppliers and universities, in order to find the right tools and products to help the Company to improve the quality of its offer to the consumers.

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.

The activities that this Functional Division carried out can be found in detail in Section 7 - Being a Benchmark Employer, of Chapter V - Corporate Responsibility - Creating Value, of the Annual Report of which this Corporate Governance Report is a part.

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 CMVM.

The activities carried out by this Functional Division can be found in detail in section 3.11. hereinafter.

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 Security – This division is responsible for implementing and maintaining an information security management system which ensures the confidentiality, integrity and availability of information that is critical for the business and assures system recovery in the event of any disruption to the operations.

The core objective of this Functional Division is to protect the Group's information from a wide range of threats in order to guarantee business continuity, minimising the

risk and maximising the automation of security processes. The Information Security Officers (ISO) in each country ensure compliance with the Information Security Policy, in which the rules for applying, using and maintaining Jerónimo Martins information assets are defined.

In 2011, technical solutions were implemented for protecting confidential information and detecting any vulnerabilities in the critical IT systems. A Corporate Information Security Manual was also drawn up, which contemplates the standards and processes in line with the Information Security Policy approved in both countries.

Information Technology – 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.

2011 was marked by the following: i. definition of the strategy and management models for the IT systems in the new geographical region; ii. development of common projects for Portugal and Poland, with a view to streamlining contracts between the main suppliers of technology and creating corporate-level applications, mainly for Human Resources; and iii. various programmes for technical convergence.

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 & Carry) and Madeira (supermarkets and Cash & Carry). In Poland there are two Operational Areas: Biedronka (food stores), and another one that includes "Apteka Na Zdrowie" (pharmacies) and Hebe (drugstores).

In the manufacturing segment Jeronimo Martins 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 de Produtos de Consumo, which represents in Portugal major

international brands of widely consumed food products and premium cosmetic 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, 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 Corporate Governance Report is part.

2.4. Audit Committee Annual Report and Opinion

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 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 with 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

Risk evaluation seeks mainly to distinguish what is irrelevant from what is material and requires active management, therefore involving the assessment 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 controls focus both on the probability of occurrence of a certain event and on the extent of its consequences.

The Risk Management Process (RMP) is cyclical in nature, considering: i. risk identification and evaluation; ii. definition of management strategies; iii. implementation of control processes; and iv. process monitoring.

The RMP of the Group complies with standards of the Federation of European Risk Management Associations (FERMA), which are seen as a model of best practices.

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

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

In this manner, a systematised, interconnected perspective of the risks inherent to 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;
• Operating Risks;
• Financial 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 operating risks category also includes uncertainty regarding the relevance and quality of the information used for decision-making.

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 conformance audits were performed, as well as financial audits and information technology audits whose associated risks presented a higher probability of occurrence and/or potential impact on operations. This approach helps make the internal auditing process more efficient and contributes to increasing the awareness of those responsible for the prompt implementation of scheduled recommendations.

The results of these consultations 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.

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, 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.

2.5.2. Main Risks

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 adequate 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 Management Committees meetings and discussed during various internal forums throughout the year.

Operating 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.

Food Safety Risks

The following areas are the responsibility of the Quality and Food Safety Department of the different Companies: i. prevention, through selection, assessment, and followup audits on suppliers; ii. monitoring, by following the product throughout the whole logistics circuit, to analyse compliance with best practice and certification requirements; and iii. training, by carrying out periodic simulations and awareness initiatives.

Environment Risks

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 establishments 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.

Physical Security and People Risks

The Security Department is responsible for ensuring that conditions exist to guarantee the physical security 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.

In the Food Distribution area in Portugal, coordinating the management of Hygiene and Safety 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.

Information Systems Risks

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 Department and 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.

Regulation Risks

Compliance with legislation is 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 manages outside counseling.

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 manages their tax proceedings.

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.

The activity in this area is carried out by the Financial Operations Department, under the supervision of the Managing Committee. 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 2011, a depreciation of the zloty against the euro of around 10% would have a negative impact on the net investment of 61 million euros. The Company's vulnerability to this risk increased during 2011 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 2009.

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 #2	\$96,000,000.00	23-06-2014

It should be noted that during the year of 2011 it was paid a debt issued in USD, in the amount of \$84,000,000. This reduction in the outstanding US dollar debt reduced the Group"s portfolio of swaps, which is now composed of only one swap that exactly replicates the terms of the financing.

Financing	Amount	Counter-amount	Maturity
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 2010 to 2011.

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. Notwithstanding when the cash flow of one commercial transaction exceeds €1,000,000 the Group policy is to cover 100% of its value.

Management of the Operational Companies' exchange rate risk is centralized in the Financial Operations Department of the Group's Holding Company. 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 in and off the balance sheet at 31 December 2011 was as follows:

					(€"000)
				Colombian
As at December 31st, 2011	Euro	Zloty	Dollar	Peso	Total
Assets
Cash and cash equivalents	285,826	244,249		80	530,155
Available-for-sale financial investments	6,157	-		-	6,157
Debtors and deferred costs	114,093	68,223		-	182,316
Derivative financial instruments	-	10	-	-	10
Total financial assets	406,076	312,482	-	80	718,638
Liabilities
Borrowings	603,352	57,075	79,798	-	740,225
Derivative financial instruments	11,991	152	680	-	12,823
Creditors and accrued costs	889,972	1,037,180	59	24	1,927,235
Total financial liabilities	1,505,315	1,094,407	80,537	24	2,680,283
Net financial position in the balance sheet	(1,099,239)	(781,925)	(80,537)	56	(1,961,645)
As at December 31st, 2010
Total financial assets	324,327	157,470	-	-	481,797
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)

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 2011, a negative 10% variation in the trading price of BCP shares would have a negative effect of 27,700 euros. At 31 December 2010, a similar variation would have a negative effect of 113,000 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. Currently, according to the Board of Directors decision, 100% of all new Debt should be either issued at, or swapped into, fixed rate.

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 2011, 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 1.1 million euros (compared to 2.8 million euros at the end of 2010). Incorporating the effect of interest rate derivatives, the net impact would be a positive 1.7 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 to Manufacturing and Services businesses, since the other businesses operate based on sales paid with cash or 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 2011 and 2010:

			(€"000)
		2011	2010
Rating Company	Rating	Balance	Balance
Standard & Poor"s	[AA- : AA]	81,413	21,776
Standard & Poor"s	[A- : A+]	254,721	196,175
Standard & Poor"s	[BBB- : BBB+]	2,416	43,731
Standard & Poor"s	[BB : BB+]	80,893	-
Standard & Poor"s	B	4	-
Moody"s	[A- : A+]	60,352	-
Fitch"s	[A- : A+]	47,289	29,384
	Not available	9	10,017
	Total	527,097	301,083

The ratings shown correspond to the notations given by Standard & 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
	2011	2010
	Balance	Balance
New customer balances (less than six months)	5,216	3,536
Balances of customers without a history of non-payment	73,456	64,221
Balances of customers with a history of non-payment	15,522	19,605
Balances of other debtors with the provision of guarantees	1,348	432
Balances of other debtors without the provision of guarantees	61,723	55,140
	157,265	142,934

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
		2011		2010
	No.	Balance	No.	Balance
Customers with a balance above 1,000,000 euros	19	35,753	19	34,219
Customers with a balance between 250,000 and 1,000,000 euros	55	15,884	63	16,593
Customers with a balance below 250,000 euros	8,145	41,818	7,711	37,541
Other Debtors with a balance above 250,000 euros	34	31,353	129	30,564
Other Debtors with a balance below 250,000 euros	1,925	32,457	2,332	24,017
	10,178	157,265	10,254	142,934

The maximum exposure to credit risk as at 31 December 2011 and 2010 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 credit spreads increase, which result from external 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 that 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
2011	Less than 1 year	1 to 5 years	> 5 years
Borrowings
Financial Leasing	21,844	18,237	30
Loans	361,418	398,898	-
Derivative Financial Instruments	6,887	5,082	-
Creditors	1,795,649	-	-
Operational Lease Liabilities	192,710	661,549	778,035
2010
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

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 Board of Directors established a gearing ratio below 70% as a target for 2011, consistent with an investment grade rating.

The gearing ratios at 31 December 2011 and 2010 were as follows:

		(€"000)
	2011	2010
Capital Invested	1,649,500	1,709,343
Net Debt	227,715	577,532
Shareholder´s Funds	1,421,685	1,131,812
Gearing	16.0%	51.0%

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 in effect Regulations for the Board of Directors, the Managing Committee, the Audit Committee, the MFC (until December 31, 2011, day on which this committee ceased its functions), the CCR, the ENC, the Ethics Committee and the ICC, which regulate the responsibilities and functioning of the mentioned bodies. There is also the 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 nine 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 three Independent Directors out of a total of nine Directors.

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 should also be mentioned that it is the responsibility of the Chairman of the Board of Directors and of the other 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 E. 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 of the Company. The Chairman is also Chairman of the ENC, 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 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 General 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 and functions described in the sections below - namely 2.21.3., 2.21.4. and 2.21.5. –, were focused, until December 31, 2011, on the following subjects:

• Financial Matters Committee (which ceased its functions on December 31, 2011) – 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 cannot 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 General 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 General 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 provision regarding the appointment and replacement of Members of the Audit Committee, being applicable only what is set forth in law.

2.11. Number of Meetings of the Management and Supervisory Bodies, and Other Committees

During 2011, the Board of Directors met five times; the Managing Committee met 13 times; and the Audit Committee held four meetings. Likewise, the FMC met six times, the CCR four times, and the ENC one time. The Ethics Committee met six times, and the ICC held 11 meetings. The respective minutes were prepared for all 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 activities 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 Managing Committee, the ad-hoc body chaired by the Chief Executive Officer. These minutes contain the matters discussed and decisions taken in the meetings, and they are sent, via the CEO"s Chief of Staff, to the Chairman of the Board of Directors and the Company Secretary.

Moreover, at each Board of Directors meeting the Chief Executive Officer reports on Company activity since the last meeting and provides any further clarification that the Non-Executive Directors may require. All information requested by the Non-Executive Directors in 2011 was provided in full and in a timely manner by the Chief Executive Officer.

2.13. Description and Identification of the Management Body

The Board of Directors has nine members, one of whom is the Chief Executive Officer - Pedro Soares dos Santos, and the remaining eight members are: E. Alexandre Soares dos Santos (Chairman of the Board of Directors), António Viana Baptista, Artur Santos Silva, Hans Eggerstedt, José Soares dos Santos, Luís Palha da Silva, Marcel Corstjens and Nicolaas Pronk.

Of the Non-Executive Directors - E. Alexandre Soares dos Santos, Marcel Corstjens, Nicolaas Pronk, Hans Eggerstedt, António Viana Baptista and Artur Santos Silva – 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).

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, Artur Santos Silva, Marcel Corstjens and António Viana Baptista qualify as Independent Directors. 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, except that provided for in sub-paragraph b). 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, 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 General 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 General 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 General Shareholders' Meeting, who guarantees its legality. The selection of candidates for Non-Executive Directors is, therefore, a process that depends entirely on 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, E. 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 in 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 Colworth 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.

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

Annual Report 11 Corporate Governance Managing and Supervisory Bodies of the Company

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 holds a Degree in Economics from Universidade Católica Portuguesa (1980), 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. Since 2011, he is CEO of Crédit Suisse AG for Spain and Portugal. He is in his first term of office as a Non-Executive Director of the Company.

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:

E. Alexandre Soares dos Santos

Chairman of the Board of Curators of Fundação Francisco Manuel dos Santos Member of the Supervisory Board of Jeronimo Martins Dystrybucja, S.A.* Director of Sindcom – Sociedade de Investimento na Indústria e Comércio, SGPS, S.A. Director of Sociedade Francisco Manuel dos Santos, SGPS, S.A. Director of Sociedade Francisco Manuel dos Santos, B.V. Director of Sindcom – Sociedade Imobiliária, S.A. Director of Quinta da Parreira – Exploração Agrícola, S.A.

Pedro Soares dos Santos

Director of Jerónimo Martins Serviços, S.A.* Director of Jeronimo Martins Dystrybucja, S.A.* Director of Jeronimo Martins Colombia, SAS* 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. Director of Quinta da Parreira – Exploração Agrícola, S.A. Manager of Friedman – Sociedade de Investimentos Mobiliários e Imobiliários, Lda.* Manager of Servicompra, SGPS, 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 Sociedade Francisco Manuel dos Santos, B.V. Director of SFMS – Imobiliária, S.A. Director of Fundação Francisco Manuel dos Santos. Member of the Supervisory Board of Jeronimo Martins Dystrybucja, S.A.* Manager of Unilever Jerónimo Martins, Lda.*

Manager of Gallo Worldwide, Lda.* Manager of Jerónimo Martins – Distribuição de Produtos de Consumo, Lda.* Manager of Transportadora Central do Infante, Lda.

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. * Member of the Supervisory Board of Jeronimo Martins Dystrybucja, S.A.* Manager of Unilever Jerónimo Martins, Lda.* Manager of Gallo Worldwide, Lda.*

Hans Eggerstedt

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 Dystrybucja, S.A.*

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 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 Celloteck Holding Inc.

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 Power Ultrasonics, S.A.

Marcel Corstjens

Does not hold any post in other companies.

António Viana Baptista

CEO of Crédit Suisse AG for Spain and Portugal Member of the Board of Directors of Semapa, SGPS, S.A. Member of the Board of Directors of RIM - Research in Motion

Section 3 Remuneration

2.18. Remuneration Policy of the Board of Directors and of the Supervisory Board

Considering the changes introduced in April 2010 to the organizational structure of the Board of Directors, the Remuneration Committee adjusted the remuneration policy of the corporate bodies in 2011.

With respect to the remuneration of Directors with executive duties, the Remuneration Committee, maintained the existence of two components, one fixed and other variable, which together guarantee a more competitive remuneration in the market and also serve as a motivating element for high individual and collective performance, allowing ambitious targets of accelerated growth and the appropriate remuneration of Shareholders to be established and achieved.

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 results, shareholder value creation (EVA), the evolution of Company's share price, the work carried out during the preceding financial year, the degree of achievement of the projects included in the Group's Strategic Scorecard, as well as the criteria applied in the attribution of variable remuneration to the remaining managers.

The variable remuneration is thus dependent on predetermined criteria, to be fixed at the beginning of each year by the Chairman of the Board of Directors, that take into account the real growth of the Company, the wealth created for shareholders and long-term sustainability.

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 remuneration of the members of the Audit Committee as well as the remuneration of Directors with non executive duties will continue to comprise a fixed component only.

Having established the Financial Matters Committee, the Committee on Corporate Responsibility, and the Evaluation and Nominations Committee, which demand additional availability from the respective member Directors, the Remuneration Committee considers appropriate to attribute meeting fees to the Directors with non executive duties who are members of those Committees.

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 General 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 2011.

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 may 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 2011 totalled 3,841,813.08 euros (2,531,218.08 euros relative to the fixed component and 1,310,595.00 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 2011 Pedro Soares dos Santos earned a total of 995.460.00 euros (592,200.00 euros in relation to the fixed component and 403,260.00 euros in relation to the variable component), the variable component referring to the duties performed in 2010, in the capacity of member of the Executive Committee (until April) and of CEO. This total includes the contributions made in the financial year, in the amount of 148,260.00 euros, to the Retirement Pension Plan below mentioned.

Luís Palha da Silva earned a total of 1,177,745.84 euros in 2011 (472,040.84 euros in relation to the fixed component and 705,705.00 euros in relation to the variable

component), the variable component referring to the duties performed in the capacity of Chairman of the Executive Committee (until April 2010), to those performed within the special duty allocated to him by the Board of Directors (until December 31, 2011) and to the overall performance of the Director while carrying out executives duties in the Company. Also included in this total are the contributions made in the financial year, amounting to 175,175.04 euros, to the Retirement Pension Plan mentioned below.

José Soares dos Santos earned a total of 672,100.04 euros in 201 (470,470.04 euros in relation to the fixed component and 201,630.00 euros in relation to the variable component), the variable component referring to the duties performed in 2010, in the capacity of member of the Executive Committee (until April) and within the special duty allocated to him by the Board of Directors. The contruibutions in the financial year to the Retirement Pension Plan mentioned below in the amount of 100,100.04 euros, are included in the above total.

The members of the Audit Committee earned a total remuneration of 218,500.00 euros, all as fixed remuneration.

Individually, the current members of the Audit Committee earned the following remuneration: Hans Eggerstedt received 76,750.00 euros, António Viana Baptista received 72,750.00 euros, and Artur Santos Silva received 61,500.00 euros.

Stefan Kirsten, member of the Audit Committee and member of the Board of Directors until February 2011, received a remuneration of 7,500.00 euros.

The remaining members of the Board of Directors received the following, individually and as fixed remuneration: Nicolaas Pronk received 31,500.00 euros, and Marcel Corstjens received 57,500.00 euros.

The Chairman of the Board of Directors received 689,007.20 euros, as fixed 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.

Annual Report 11 Corporate Governance Managing and Supervisory Bodies of the Company

The Remuneration Committee has held that the manner in which the remuneration of the Executive Directors is structured ensures full alignment of their interests with the positive performance of the Company in the long term without the need to stipulate any period of deferral for the variable component or to determine the tresholds for the fixed and variable components of remuneration. Moreover, it should be noted that during 2011 the Remuneration Committee studied the possiblity of deferral of the variable component of remuneration, without reaching a conclusion on the subject. The Committee still considers the current remuneration structure as adequate. 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 General Shareholders' Meeting in 2005, a Retirement Pension Plan was approved. It is a Defined Contribution Pension Plan in which the amount of the contribution is fixed in advance – the percentage of the monthly contribution to the Fund is, currently, 17.5% – and in which the value of the benefits varies depending on earnings received. The Remuneration Committee defines the contribution rate of the Company and the initial contribution.

Plan participants, as defined in the respective regulation, include the Executive Directors of the Company. Those who opt for the current Pension Plan will forego eligibility for the Alternative Pension Plan, by way of expressly and irrevocably waiving it.

The retirement date is defined as either the actual day or the first day of the month following that in which the Participant reaches 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 acknowledged as such by the Portuguese Social Security Authorities.

Pensionable salary is the gross monthly base salary multiplied by 14 and divided by 12. At the end of each calendar year, a variable amount made up of all the amounts received as variable remuneration is added to this monthly fixed amount. 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 General 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 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

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 a Managing Committee, 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, during 2011, had 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, if they are included in the plans;
• After consulting the Chairman of the Board of Directors, designate the people to be proposed to the General Shareholders' Meetings of the companies in which it holds, in whole or in 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 organisation 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 daily 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, Pedro Soares dos Santos, who is the chair, Pedro Pereira da Silva, Marta Lopes Maia, Nuno Abrantes, Sara Miranda and Carlos Martins Ferreira. Since January 1, 2012, this commmittee also comprises Alan Johnson, appointed Chief Financial Officer of the Group from that same date. 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.

In 2011, the Managing Committee met 13 times, drawing up minutes of the meetings, which were sent to the Chairman of the Board of Directors and to the Company Secretary.

2.21.2. Audit Committee

The Audit Committee, which has three Non-Executive Directors as members - Hans Eggerstedt (Chairman), António Viana Baptista and Artur Santos Silva (elected in substitution of Stefan Kirsten at the General Shareholder"s Meeting held on March 30, 2011), the last two being independent according to legal criteria – paid particular attention in 2011 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, 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 General 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 General 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 ICC, 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 should be noted that, in accordance with the respective Regulation, the external auditor was chosen by the Audit Committee, under proposal of the then Executive Committee, which submitted to that body the results of the tender that it conducted in 2009 and that involved 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.

In this respect, it should also be noted that the Company did not promote the rotation of the external auditor, but 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.

Furthermore, as regards the performance of the duties of this commitee, it sould be mentioned that, by verifying and evaluating the activities of the external auditor in each accounting year, the Audit Commitee ensures that the Company provides the Auditor with the best conditions to perform its services, and that information is presented in a timely manner with quality and transparency. This committee has also discussed the remuneration proposal of the external auditor and fixed the respective parameters.

2.21.3. Financial Matters Committee

According to its Regulations, FMC (which ceased its functions on December 31, 2011) 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. At the above mentioned date this committee comprised Luís Palha da Silva (Chairman), José Soares dos Santos and Nicolaas Pronk.

During 2011 and pursuant to its Regulation, the mission of FMC was 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 FMC was further responsible for monitoring and supervising the financial policies adopted by the Group.

In 2011, the FMC met six 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 CCR is composed of three members of the Board of Directors, appointed by the Board. The members of this Committee are Luís Palha da Silva (Chairman), José Soares dos Santos and António Viana Baptista, who is independent according to applicable legal criteria.

In carrying out its mission, the CCR 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 of 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 2011, the CCR met four times, drawing up minutes of the meetings that were distributed to the other members of the Board of Directors.

2.21.5. Evaluation and Nominations Committee

The ENC is composed of the Chairman of the Board of Directors, E. Alexandre Soares dos Santos, who is also Chairman of the Committee, and three members of the Board of Directors - Luís Palha da Silva, José Soares dos Santos and Artur Santos Silva, who are all appointed by the Board of Directors.

The mission of the ENC, as a support body of the Board of Directors, is to collaborate with the latter, by assessing and submitting to it proposals for strategic guidance in the area of policies of evaluation and nominations, as well as to 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, as well as the follow up of the processes for identifying potential and the validity of candidates for senior positions.

In 2011, the ENC met one time, drawing up minutes of the meeting, which was 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 composed of Sara Miranda (Chief Communications and

Corporate Responsibility Officer), who chairs it, Inês Carvalho (Human Resources Manager of Recheio), Carlos Martins Ferreira (Chief Legal Officer of the Group) Marian Jaskowiak (Management Development Manager of Jeronimo Martins Dystrybucja SA) and 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.

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 CCR 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 CCR 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 CCR, which has responsabilities in the fields of corporate governance, social responsibility, environment and ethics, including those related to the internal codes of ethics and of conduct.

The Ethics Committee in 2011 examined various issues submitted to it by the CCR, by the Group's employees and by third parties. During the year the Committee focused on developing a benchmark analisys, which was presented to the CCR, on the scope of action and best prectices of ethics committees and also on codes of conduct with the aim to prepare an eventual revision of the Codes of Conduct (the internal and that of the suppliers) in force.

In 2011, the Ethics Committee met seven times, drawing up minutes of the meetings, copies of which were sent to the CCR. The minutes were made available to other members of the Board of Directors for consultation.

2.21.7. Internal Control Committee

The ICC, 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 ICC must obtain regular information on the legal and fiscal contingencies that affect the Companies of the Group.

The ICC meets monthly and is composed of a Chairman (David Duarte) and three members (José Gomes Miguel, Catarina Oliveira and Henrique Santos). None of the members is an Executive Director of the Company.

In 2011, 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 Remuneration Committee is composed of three members, elected by the General Shareholders' Meeting. This committee comprises Arlindo do Amaral (Chairman), José Queirós Lopes Raimundo and Soledade Carvalho Duarte.

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 2011, the Remuneration Committee met two times, and the respective minutes were prepared.

Last year, this Committee submitted a statement to the Annual General Shareholders' Meeting on the remuneration policy of the Company's Board of Directors and Supervisory board.

During 2011, 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 2011, there was no movement whatsoever of own shares.

56.1% 10.0% 2.7% 2.2% 29.0% Soc. Francisco Manuel dos Santos, B.V. Asteck, S.A. Carmignac Gestion, S.A. BNP Paribas Investment Partners, Ltd. Co. Floating and Own Shares

3.2. Shareholder Structure

Source: Shareholder communications.

___________

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 2011, included in the Annex to the Consolidated Management Report of Annual Report. Sociedade Francisco Manuel dos Santos, B.V., Asteck, S.A., and Carmignac Gestion, S.A. and BNP Paribas Investment Partners Ltd. Co. are qualified shareholders.

Special rights are not attributed to Shareholders in the By-Laws.

3.3. Restrictions Regarding Transferability of Shares, Shareholders 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. Pursuant to the communication regarding the qualifying holding received by the Company on January 2, 2012, the Board of Directors become aware of a shareholders" agreement between Sociedade Francisco Manuel dos Santos, B.V. and Sociedade Francisco Manuel dos Santos, SGPS, S.A. concerning the exercise of voting rights. The Board, however, does not know of any restrictions concerning the transfer of securities or voting rights.

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 sovereign debt crisis in the Euro Zone was the dominant topic in 2011, with investors assigning considerable unpredictability regarding its potential effects on the global economy.

The reference index in the Portuguese market – PSI-20 – devalued by 27.6% in 2011, although it was harder hit during the summer months, with one of the worst results in the developed world markets. Most of the European stock markets had very negative results, whilst the North American market was one of the most resilient, with a rise of 5.5% (Dow Jones Industrial).

The rejection of the fourth and last version of the Programme for Stability and Growth, in March 2011, the resignation of the prime-minister at that time, the request for external aid, the successive European summits, but above all, the countless rating cuts, which affected the Portuguese Republic and some of the main listed Portuguese companies, created a scenario dominated by a devaluation trend.

The successive decreases in the risk classification of Portugal and Portuguese companies, which heightened the country's difficulty in obtaining financing, mainly penalized the banking sector. The banks, which had the sharpest falls, with share prices hitting historic lows. Among the 20 listed on the PSI-20, 17 declined and Jerónimo Martins, which increased 12.2% in value, for the second year running, was the best performing company. In 2011, 13 of the 20 companies listed on the Portuguese index lost more than a fifth of their value and six lost half of their respective market capitalisation.

The inversion of investor sentiment was the result of the severe economic slowdown that occurred as from the second quarter, mainly justified by the worsening of the sovereign debt crisis, the incapacity of European leaders to overcome this situation, the sharp rise in the price of commodities and the rise in interest rates. Of note also is the Portuguese State's request for financial aid from the Troika (European Commission, Central European Bank and International Monetary Fund), agreed on 6 April and signed on 2 May, which foresees a loan of 78 billion euros.

On average, Europe lost around 16% of the value of its listed companies' shares. The sectors with the best performances and consequently the most defensive, were those of everyday consumption (+8.0%), healthcare (+7.6%) and telecommunications (+0.5%). Commodities had the worst performance (-18.6%) and manufacturing (-10.8%). It can be seen that the companies with the greatest market capitalisation were those with the best relative performance (-5.8%).

The analysts made a downward review of their estimates for profit growths in 2011 and 2012 due to the signs of global slowdown, but the sharpest fall in share prices brought indexes such as the Euro Stoxx and the S&P 500 to trade at historic low PER levels (risk measure deduced from the relationship between price and profits per share), which may bring some comfort to the stock markets for 2012.

3.6. Performance of Jerónimo Martins Shares

Listed Stock Exchange	Euronext Lisbon
IPO (year)	November 1989
Share Capital (€)	629,293,220
Nominal Value	1.00 €
Number of shares issued	629,293,220

Shares Description

Euronext
Description	Type	ISIN Codes	Symbol
Jerónimo Martins- SGPS	Shares	PTJMT0AE0001	JMT
Other Codes
Reuters RIC			JMT.LS
Reuters REDD			40419
Bloomberg			JMAR PL
Sedol			B1Y1SQ7
WKN			878605

Jerónimo Martins' shares are traded freely within the terms of the applicable general scheme, without any statutory restriction to their transferability.

The shares in question are part of several indexes (around 35), namely the PSI-20, the Euronext 100, the Iberian Index, among others and are negotiated on around 30 different platforms, mostly in the main European markets.

As mentioned, Jerónimo Martins with a year-on-year increase in value of 12.2% had the best performance on the Portuguese index (PSI-20) in 2011, after also having the highest increase in value in 2010 (63.2%).

In 2011, Jerónimo Martins was one of the Portuguese companies with the highest market capitalisation and closed the year with a relative weight of 17.0% in the PSI-20 - the reference index of the NYSE Lisbon Euronext. The Group ended 2011 in third place in the PSI-20 index (a market capitalisation of 8.0 billion euros), in contrast with the fourth place it occupied at the end of 2010 (a market capitalisation

of 7.2 billion euros) and a weight of 12.0% within the index. Jerónimo Martins is one of the five Portuguese companies on the Euronext 100 index, with a weight of 0.6%.

Jerónimo Martins' shares were among the most traded on the NYSE Euronext Lisbon, with around 254.6 million shares, meaning a daily average of 990.5 thousand shares (around 15.4% lower than in 2010), at an average price of 12.33 euros. In terms of turnover, these shares represented the equivalent of 11.9% (3.1 billion euros) of the overall volume of shares traded on the PSI-20 index in 2011 (26.1 billion euros).

Despite a certain amount of volatility, in the first four months of the year, Jerónimo Martins shares remained stable, with a market price at the beginning of May close to that at the end of 2010 (11.40 euros). The highest increase in the share price occurred between May and the end of July, with a historic high of 14.34 euros on 26 July, which represents a year-on-year increase in value of +25.7%. During August and September the Jerónimo Martins share had a sharp devaluation, cancelling out the gains previously accumulated and on 5 October it had the same price as at the end of 2010 (11.40 euros). During the fourth quarter there was a positive trend, despite some volatility which was typical of the markets and reflected the economic climate. Jerónimo Martins share closed 2011 with a year-on-year increase in value of 12.2%.

At the end of the year, 33.9% of Jerónimo Martins's shares were freely traded on the market (excluding the qualifying shareholders Sociedade Francisco Manuel dos Santos, B.V. and Asteck, S.A.), the highest percentage belonging to institutional investors. The portfolio of shareholders includes investors from various countries and Jerónimo Martins' visibility in the international market was proven by the fact that the vast majority of the institutional portfolio was distributed outside the country of origin. American, British and French institutional investors occupy a leading position, representing a significant percentage of the total investors. The Portuguese institutional investors represent around 0.4% of the free float.

Annual Report 11 Corporate Governance Information and Auditing

	2011	2010	2009	2008	2007
Share Capital (€)	629,293,220	629,293,220	629,293,220	629,293,220	629,293,220
Number of shares issued	629,293,220	629,293,220	629,293,220	629,293,220	629,293,220
Own Shares	859,000	859,000	859,000	859,000	859,000
Floating and Own Shares	29.0%	31.2%	33.9%	31.5%	28.9%
EPS (€)	0.54	0.45	0.32	0.26	0.21
Cash Flow per share (€)	0.96	0.82	0.69	0.55	0.42
Dividend per share (€) *	0.21	0.14	0.11	0.10	0.44
Stock Market Performance
High (€)	14.34	12.58	7.05	6.40	5.59
Low (€)	10.64	6.33	3.07	3.22	3.43
Average (Closing) (€)	12.33	8.63	4.97	4.92	4.37
Closing (End of year) (€)	12.79	11.40	6.99	3.97	5.40
Market Capitalisation (31/12) (million euros)	8,049	7,174	4,396	2,498	3,398
Transactions
Volume (1.000 shares)	254,571	300,343	347,603	468,826	275,512
Annual Growth
PSI-20	-27.6%	-10.3%	33.5%	-51.3%	16.3%
Jerónimo Martins	12.2%	63.2%	75.9%	-26.5%	58.8%

Volume JM PSI-20

*2008 dividend per share, related to 2007, reflecting the stock split of May 2007.

No shares or other securities were issued. The shares are not divided into different categories, therefore dividend payments were not affected.

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 investors and analysts informed as to the development of Jerónimo Martins" operational and financial activities.

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

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

11 January Preliminary Sales 2010 18 February FY 2010 Results 4 May 1 st Quarter 2011 Results 27 July 1 st Half 2011 Results 27 October 3 rd Quarter 2011 Results

The following table shows the performance of Jerónimo Martins' shares, taking into account the announcement of results and material information during 2011.

	Price Variations JM
Events	Date	Price	5 days before	1 day after	5 days after
Preliminary Sales 2010	11 January	11.40	5.2%	3.3%	1.0%
FY 2010 Results	18 February	11.59	0.0%	-0.8%	-0.7%
st Quarter 2011 Results 1	4 May	11.81	-6.7%	3.9%	6.3%
st Half 2011 Results 1	27 July	13.54	0.8%	3.3%	-0.6%
rd Quarter 2011 Results 3	27 October	12.66	-0.7%	0.0%	-4.3%

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 2008 fiscal year, the gross dividend paid to Shareholders was 0.11 euros per share and as regards 2009 it was 0.143 euros per share, in accordance with the abovementioned policy.

With respect to 2010 financial year, also according to the abovementioned policy, the gross dividend distributed to the Shareholders in the end of 2010 was 0.21 euros per share.

In view of the net results of 2011 financial year and the established policy, at the General Shareholders' Meeting the Board of Directors will propose the distribution of a gross dividend of 0.275 euros per share, excluding the 859,000 owned shares in the portfolio.

This proposal represents an increase of 31.0% over the dividend paid in the previous year, corresponding to a dividend yield of 2.2% on the average share price in 2011, which was 12.33 euros.

3.9. Stock Options Plan

The Company does not have any plan in force to attribute shares or options to acquire shares. Although it is possible that the adoption of a plan of this type may be studied, the Board of Directors believes that it has found solutions 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, Companies in a Parent-Subsidiary or Group Relationship and Owners of Qualifying Holdings

3.10.1. Business with Members of the Board and Companies in a Parent-Subsidiary or Group Relationship

During 2011, 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.

3.10.2. Business with Owners of Qualifying Holdings

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.

In this regard it should be noted that, in terms of procedure, the responsibilities of the CCR, pursuant to its regulations, are to prepare and monitor the decision-making of the corporate bodies and relevant committees on matters subject to prior opinion that give rise to conflicts of interest between the Company and members of its corporate bodies and the shareholders, particularly those owning a qualifying holding. The CCR is particularly empowered to comment on materially relevant business between the Company and owners of a qualifying holding.

During 2011, pursuant to a proposal presented by the CCR after consulting with the Audit Committee, the Board of Directors approved the relevance criteria, which determine the intervention of the supervisory body of the Company to assess and give advice on deals to be concluded between the Company and shareholders with a qualifying holding.

Thus, deals between, on the one hand, the Company or companies within Jerónimo Martins Group and, on the other hand, shareholders with a qualifying holding or entities with which the same are linked, shall be subject to the assessment and prior opinion of the Audit Committee, whenever one of the following criteria is fulfilled:

• a) Having an amount equal to or higher than 3 (three) million Euros, 1% of the purchases of Jerónimo Martins" Group, or 20% of the sales of the respective shareholder;
• b) Despite having an amount lower than the one resulting from the criteria mentioned in the previous paragraph, the addition of that amount to the amount of the previous deals concluded with the same shareholder with a qualifying holding, during the same fiscal year, equals or exceeds 5 (five) million Euros;
• c) Regardless of the amount, they may cause a material impact on the Company"s name concerning its independency in the relationships with shareholders with qualifying holdings.

3.11. Investor Relations Office

3.11.1. Communication Policy of Jerónimo Martins for the Capital Markets

Jerónimo Martins' policy for communicating to the capital markets aims to ensure a regular flow of relevant information, which respects the principles of symmetry and simultaneity and creates a faithful image of the Company's business performance and strategy for investors, shareholders, analysts and the general public.

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 financial 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 2011, 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 General Shareholders' Meetings;
• Investor Day.

Within the scope of information sent to the market, the following communications were published during the year:

Privileged Information
December 15, 2011	Financial Calendar Plan for 2012
November 2, 2011	Investor's Day Presentation
October 27, 2011	Release - First Nine Months 2011 Results
September 26, 2011	Release - Bond Issue
July 27, 2011	st Half 2011 Results Release - 1
June 8, 2011	Conference Presentation
May 4, 2011	st Quarter 2011 Results Release - 1
March 30, 2011	Shareholders Meeting deliberation
February 18, 2011	Release - FY 2010 Results
January 11, 2011	Release - Preliminary Sales 2010
Financial Information
November 23, 2011	First Nine Months 2011 Report
August 23, 2011	First Half 2011 Report

August 23, 2011	First Half 2011 Report
May 26, 2011	First Quarter 2011 Report
March 30, 2011	Approval of Annual Report 2010 in the General Shareholders Meeting

Corporate Governance
March 30, 2011	Corporate Governance Report - 2010
Notice of Meetings
March 11, 2011	Item 10 of the agenda of the General Shareholders Meeting 2011
March 11, 2011	Item 4 of the agenda of the General Shareholders Meeting 2011
March 11, 2011	Amendment to the Notice of the General Shareholders Meeting
March 3, 2011	Proposals - Items 5, 6, 7, 8 and 9 of the agenda of the General Shareholders Meeting
March 3, 2011	Annual Report 2010 to be approved in General Shareholders Meeting - Items 1, 2, 3 and 4 of the agenda
March 3, 2011	Notice General Shareholders Meeting 2011
Qualifying Holdings and Shareholders Agreements
March 2, 2011	Qualified Participation - BNP Paribas Investment Partners
January 6, 2011	Reduction on Qualified Participation - Barclays Capital plc
Management Transactions
November 10, 2011	Amendment to the Management Transaction
November 9, 2011	Management Transaction
October 28, 2011	Management Transaction
October 7, 2011	Management Transaction
September 29, 2011	Management Transaction
September 26, 2011	Management Transaction
September 16, 2011	Management Transaction
September 13, 2011	Management Transaction
August 12, 2011	Management Transaction
August 10, 2011	Management Transaction
June 30, 2011	Management Transaction
March 21, 2011	Management Transaction
Board Members and Function
March 30, 2011	Nomination Audit Committee
February 24, 2011	Non-Executive Board Member and Member of Audit Committee Resignation
February 18, 2011	Nomination of the Substitute Secretary
January 10, 2011	Resignation of the Substitute Secretary

Annual Summary of Information Disclosed

March 22, 2011 Annual Summary of Information Disclosed on 2010

The Office may be contacted through the Market Relations Representative and the Investor Relations Office Manager, Cláudia Falcão - and via the e-mail address:investor.relations@jeronimo-martins.pt.

In order to make information easily accessible to all interested parties the communications issued regularly by the Office are available in full on 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;
• 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, General Shareholders' Meetings, the disclosure of annual, half-yearly and quarterly results;
• Information regarding the General Shareholders' Meeting;
• Information about Corporate Governance;
• Code of Conduct of Jerónimo Martins;
• Company Articles of Association;
• Current Internal Regulations;
• Minutes of the General 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 General 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, 1600-404, Lisboa Telephone: +351 21 752 61 05 Fax: +351 21 752 61 65 E-mail: investor.relations@jeronimo-martins.pt

Finally, it is also the responsibility of the Office to produce the Annual Report, which is recognized as an essential document for communicating with financial markets. The Office strives to publish therein transparent and comprehensive information regarding the various business areas of Jerónimo Martins, seeking to transmit the reality of the different activities throughout the year.

3.12. Yearly Remuneration Paid to the External Auditor

In 2011, the total remuneration paid to the External Auditor and other individuals or companies" belonging to the same network was 804,689.00 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 and audit services: 88%;
• Other services (not legal accounts audits or external audits): 12%.

From the non-audit services requested by Group"s companies to the External Auditor and/or to entities belonging to the same network, totalling 97,753.00 euros, reference is made to those related to the access to a tax database, technical consulting within the project for the transfer of processes to a Shared Service Centre, the market research study on remuneration policy in Poland, as well as the analysis of potencial effects on applying IFRS on the statutory accounts of the Polish Companies of the Group.

All these services were necessary for the regular activity of the companies of the Group and after due analysis of the situation the External Auditor and/or the entities belonging to its network were considered as those which could better perform the said services. 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 independence of the External Auditor during the performance of its role.

In this respect it should also be noted that in 2011 the Audit Committee regulated the commissioning of non-audit services to the External Auditor, as mentioned above in section 0.3.4. of chapter 0 of this corporate governance report, allowing them to be commissioned as long as the independence of the External Auditor was assured and imposing their prior approval as of the moment the global amount of the respective fees in the year surpassed 10% of the global fees of the audit services.

3.13. Activity and Rotation Period of the External Auditor

During 2011 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

1. Our Approach	207
2. 2011 Highlights	211
3. Promoting Good Health through Diet	213
3.1. Introduction	213
3.2. Quality and Diversity	213
3.2.1. Launches 3.2.2. Reformulations	213
3.2.3. Promoting Healthier Choices	214 215
3.2.4. Other Highlights	217
3.2.5. Partnerships	217
3.3. Food Safety	218
3.3.1. Certification	218
3.3.2. Audits	218
3.3.3. Laboratory Analyses of Products	220
3.3.4. Training in Food Quality and Safety	220
	221
4. Respecting the Environment
4.1. Introduction	221
4.2. Biodiversity	222
4.3. Climate Changes	222
4.3.1. Carbon Footprint	222
4.3.2. Rationalisation of Energy and Water Consumption 4.3.3. Reduction of Environmental Impacts of Logistics Processes	224
4.3.4. Management of Refrigeration Gases	227 228
4.3.5. Rationalisation of Paper Consumption	229
4.4. Waste Management	229
4.4.1. Characterisation of Waste	230
4.4.2. Waste Recovery	231
4.4.3. Ecodesign Project	232
4.5. Other Action	232
4.6. Raising Employee and Customer Awareness	233
4.7. Partnerships and Support	234
5. Sourcing Responsibly	236
5.1. Introduction	236
5.2. Commitment: National or Local Origin	236
5.3. Commitment: Human and Workers' Rights	238
5.4. Promotion of More Sustainable Production Practices	239
5.5. Supplier Audits	240
5.6. Supplier Training	240
6. Supporting Surrounding Communities	241
6.1. Introduction	241
6.2. Greater Professionalization	241
6.3. Direct Aid	241
6.4. In-house Volunteering and Other Campaigns	243
6.5. Indirect Support	243
6.6. Other Support	244

7. Being a Benchmark Employer	245
7.1. Introduction	245
7.2. Human and Labor Rights	245
7.2.1. Commitment	245
7.2.2. How We Disclose	245
7.2.3. How We Guarantee that they are Respected	246
7.3. From attraction to Retention	246
7.3.1. Trainee and Intern Programme	246
7.3.2. "Move Within" Programme	247
7.3.3. Appraisal and Remuneration	247
7.3.4. Training	247
7.4. Health and Safety in the Workplace	248
7.5. Occupational Health	249
7.6. Internal Social Responsibility	249
7.6.1. Health and Well-being	250
7.6.2. Education	250
7.6.3. Social Welfare	250
8. Commitments for 2012-2014	252

1. Our Approach

Corporate Responsibility - Value Creation and Sustainability

The Jerónimo Martins Group seeks to manage the relationship between economic prosperity, social development and environmental protection in a balanced manner and develops its actions according to a triple bottom line: Profit, People and Planet.

We believe that more than two centuries of our history, and values such as humanity, merit, entrepreneurship and citizenship, which guide what we do, clearly demonstrate the responsible way in which we undertake our business and the medium- and longterm vision that we include in decisions made along the entire value chain.

As leaders in Food Distribution in the countries in which we operate, we want to ensure balanced growth in sales and profitability in our business units, while incorporating social and environmental concerns in our business management. We are aware that our size gives us a substantial ability to influence practices and processes and that our activity has important impacts on communities and on the environment. We therefore wish to foster socioeconomic wellbeing in the regions in which we operate.

Our medium and long-term approach to Corporate Responsibility includes, for example, encouraging good farming practices and imposing high standards of quality and food safety in production, the thousands of jobs that we create every year or the different environmental initiatives that we foster. In this area, we can highlight recycling and waste recovery projects, reduction of greenhouse gas emissions, raising customers' awareness of environmental issues and our programmes for the rational use of water and energy.

Stakeholders

In our activity, we are in touch with a variety of audiences: customers and consumers, suppliers and other business partners, shareholders and investors, supervisory authorities and public bodies, the media, associations and Non-Governmental Organisations and, of course, thousands of our employees. It is this contact, very often on a daily basis, that builds the relationships of trust that sustain balanced growth, innovation and the development of our business, especially in more demanding circumstances.

An Organisation's relations with different stakeholders in its activity are decisive to its long-term success and competitiveness. We are aware that companies' reputation and survival are not only determined by pure market principles but also by the social acceptance that these are able to achieve in the permanent scrutiny of their activity in a wide variety of forums, such as the media, social networks, market surveys and reputation rankings and indexes.

The Jerónimo Martins Group's constant work of creating and sharing value takes place throughout a network of relations and at different points of daily contact with our strategic audiences (key stakeholders).

In order to guarantee that the entire Organisation is in line with the principles of Corporate Responsibility in our activity, the guidelines governing our actions are set out in some documents, which are available in full on our corporate website:

• Code of Conduct;
• Nutritional Policy;
• Sustainable Sourcing Policy;
• Policy of Support for Surrounding Communities.

The Jerónimo Martins Group has two independent committees to ensure the fulfilment, dissemination and reinforcement of these principles: its Committee on Corporate Responsibility and Ethics Committee.

The Committee on Corporate Responsibility collaborates with the Board of Directors in issues of strategic orientation in this area. It permanently monitors and supervises matters concerning:

• Corporate Governance, Social Responsibility, the Environment and Ethics;
• The sustainability of the Group's businesses;
• In-house Codes of Ethics and Conduct;
• Systems for assessing and solving conflicts of interest, especially regarding relations between the Company and its shareholders or other stakeholders.

The Ethics Committee's mission is to monitor the dissemination of and compliance with the Code of Conduct in all of the Group's Companies.

There are also other interlocutors and communication channels for the different audiences with which we relate, such as the Investor Relations Office, Corporate Communication Department, the Customer Ombudsman and, in Portugal and Poland, the Customer Support Service and Human Resource Departments, among others.

Priorities: The Five Pillars of Corporate Responsibility

Corporate Responsibility in the Jerónimo Martins Group is based on five comprehensive pillars that are incorporated into our Companies' culture and in the guiding processes.

I - Promoting Good Health Through Diet

The promotion of good health through diet is embodied in two strategies applying to all the countries and sectors in which we operate: i. foster the quality and diversity of the food products that we develop and/or sell and ii. promote food safety.

II - Respecting the Environment

Our aim is to help to effectively link supply and demand in order to foster more sustainable production and consumption practices. In this area, the Group and its Companies have undertaken a number of initiatives in three priority areas: climate change, biodiversity and waste management.

III - Sourcing Responsibly

The Group endeavours to incorporate ethical and environmental concerns in its supply chains. It develops lasting business relationships, seeks to ensure that its prices are fair and stimulates national production in the countries in which it operates.

IV - Supporting Surrounding Communities

By tradition and out of a sense of mission, the Jerónimo Martins Group is deeply involved with the communities in which it is present. Directly or through its companies, it aids causes and organisations that provide assistance to the society's most vulnerable groups, such as children, young people and the elderly.

V - Being a Benchmark Employer

By creating employment, we aim to motivate the markets in which we operate. At the same time, we promote balanced wages policies and a positive, stimulating work environment in a firm commitment to our employees.

Annual Report 11 Corporate Responsibility in Value Creation Our Approach

2. 2011 Highlights

Promoting Good Health through Food

• Focus on products for people with specific dietary requirements. In Portugal, 32 products from the Pura Vida range of Pingo Doce's Private Brand were launched. In Poland, 21 new Private Brand products were launched, aiming to reinforce the offering with more nutritionally healthy propositions. In Manufacturing, the Becel range was extended with products which help to reduce cholesterol levels;
• Focus on natural and low-processed ingredients. Launch of the new Knorr Sopas Frescas (Fresh Soups) range and the new Knorr Natura stock cubes. Reformulation of various drinks and desserts in Poland;
• Nutritional reformulation of Private Brand products, aiming to reduce the levels of sugar, salt and fat and/or increase the level of fibre. In Portugal, more than six tonnes of sugar, 26 tonnes of salt, and 15 tonnes of fat were removed from our products and nearly 15 tonnes of fibre were added. In Poland, 14 tonnes of fat and a total of 471 tonnes of sugar were removed;
• HACCP certification of the industrial kitchens in Portugal.

Protecting the Environment

• Definition of a strategy and action plan to protect Biodiversity;
• Launch of the "Water and Energy Consumption Management Teams" project in the Distribution companies in Portugal:

Total savings in 2011:

• Electricity: 5,638,091 kWh (1.8% reduction against 2010)
• Water: 10,169 m³(1.3% reduction against 2010)
• Increase in the number of recycling points available in the Pingo Doce stores of about 77%, totalling around 309 bins in 2011.

Sourcing Responsibly

Maintenance of the policy of giving preference, under the same circumstances and whenever possible, to acquiring products from local suppliers, in Portugal and in Poland.

Supporting Surrounding Communities

Systematization of a Policy for Supporting Surrounding Communities, by identifying the main lines of action and preferential target groups: fighting hunger, malnutrition and social exclusion with an impact on underprivileged children and young people as well as the elderly.

Total support given in 2011: 6.8 million euros.

Being a Benchmark Employer

• Job creation in 2011: more than 5,200 new jobs;
• Throughout the Social Emergency Fund, rose in September 2011, for Group employees in Portugal was given support to over 1,200 families, through 2,200 aid measures. Among the requests submitted by employees, 56% of them were for food support, 36% for healthcare, 36% for financial guidance and 20% for legal counsel.

3. Promoting Good Health through Diet

3.1. Introduction

The Jerónimo Martins Group endeavours to play an educational and constructive role in helping consumers to make decisions that have a positive impact on their health by developing and promoting a range of safe, healthy, nutritious and accessible food products.

Our strategic development priorities in this context are as follows:

• Committing to the quality and innovativeness of our Private Brands;
• Promoting food safety;
• Offering a trustworthy service;
• Providing full nutrition information on the products we sell.

Promoting good health through diet involves two guiding lines of action common to all the countries and sectors in which we operate: i. promoting the quality and diversity of food products; and ii. promoting food safety.

3.2. Quality and Diversity

Our companies' range of products include solutions that are in line with growing trends: following healthier lifestyles, increasing demand for convenience foods with a balanced dietary profile and products that satisfy special dietary needs.

3.2.1. Launches

Thirty-two new products in the Pura Vida range of Pingo Doce's private brand were launched in 2011 (below initially forecast, considering demanding standards commitment with our customers). This range is designed to satisfy Portuguese consumers' increasingly specific dietary needs and to contribute to a more balanced diet. Among other recently launched products, the Pura Vida range was extended with three types of breakfast cereals, seven alternative vegetarian meals, six types of infusions, soya drinks and yoghurts and two ice cream products with pea protein.

Pingo Doce has always taken particular care with children's food and has sought to contribute over the medium and long term to a balance between diet and more active lifestyles. In 2011, it developed an innovative food product called O Teu Primeiro Pingo Doce (Your First Pingo Doce), a yoghurt-type dairy product for babies over six months old with no added sugars and enriched with iron and vitamins.

In Poland, in order to contribute to a more varied range and a healthy diet among consumers, Biedronka launched 21 Private Brand products in this segment. They include wholemeal Just Fit Plus cereals with added fibre from the P. psyllium plant, which has cardiovascular health properties, 4Fit soft drinks containing fruit sugar and sweeteners and Miami children's liquid yoghurts enriched with calcium and vitamin D.

As part of the Milk Start project, three cereal snacks were launched in 2011. They are enriched with vitamins and minerals (satisfying up to 25% of school-age children's daily needs) selected by specialists from Instytut Matki i Dziecka (Mother and Child

Institute) in 2011. These snacks constitute a balanced meal and can be eaten midmorning or mid-afternoon. Their launch was accompanied by an awareness-raising campaign devoted to a balanced diet. It was held with partner organisations in 2,448 Polish primary schools and reached 91,475 children.

Our range of organic products in the Perishables area was extended in Portugal. We also introduced a range of healthier pastries with no added sugar, which currently has two references: a plain and a chocolate-flavoured cake.

Pingo Doce also invested in convenience meat products. In 2011, 15 easy-to-cook references were introduced, including 10 poultry-based products (chicken and turkey), which are lighter, healthier alternatives, some of which are particularly suitable for cooking with little added fat.

In the Manufacturing sector, in 2011 Unilever Jerónimo Martins launched a range of Sopas Frescas Knorr fresh soups made with 100% natural ingredients as well as easy and quick to prepare. Knorr also extended its range of Natura stocks with a new variety, a fish stock, made from a selection of the highest quality fish. Knorr also enlarged its range of Sabores no Forno oven seasonings, which make it possible to cook dishes with no added fat and include a high percentage of spices and herbs.

There were also new products in the range of Lipton Pyramid teas, especially two varieties of green tea (orange and tangerine and lemon balm, lemon and mint) and one white tea, known for its antioxidant properties.

Two Becel brand products were launched: Becel Pro-Activ com Sabor a Manteiga (Becel Pro-Activ Buttery Taste), a vegetarian spread that contains plant sterols to help reduce cholesterol, and Becel Cozinha Líquida (Becel Liquid Margarine), an omega 3 and 6 rich-cooking margarine with 30% less fat than olive oil.

Olá launched four low-calorie ice cream products: three references of MAX ice creams for children and Solero ice creams.

3.2.2. Reformulations

There were 34 Private Brand product reformulations in Distribution in Portugal in 2011. They are part of a plan aimed at improving nutritional quality by reducing sugar, salt and fat content and/or increasing fibre content.

As a result, more than six tonnes of sugar, about 26 tonnes of salt and 15 tonnes of fat were removed from our products and nearly 15 tonnes of fibre were added.

The most relevant examples of these reformulations were: Pingo Doce tomato pulp from which about 66% of salt was removed, Pingo Doce waffles from which 55% of saturated fats were removed as a consequence of replacing palm oil with sunflower oil (altogether 1,3 tonne of saturated fats was withdrawn from the market resulting from this reformulation) and some breakfast cereals, such as: Fruta&Fibra (Fruit&Fibre) or Wheat Bran, to which fibre was added and in which sugar content was reduced.

In Poland, reformulations focused on eliminating unnecessary and superfluous ingredients, replacing artificial ingredients by natural ones and reducing fat content. All together, 58 products were reformulated in 2011 resulting in the withdrawal from

the market of up to 471 tonnes of sugar and 14 tonnes of fat and the addition of seven tonnes of fruit.

As an example of these reformulations, natural fruit juices were added to fruit jellies and puddings (six products) and cocoa, vanilla and natural cream to other-flavoured puddings in the Twój Deser (Your Dessert) range. Artificial flavourings were replaced with natural ones in the Dekada and Polaris soft drink ranges. The fruit content in the Fruvita dairy drinks was increased from 0.3% to 3%, in the 4Fit drinks range and in the Melly pineapple nectar the sugar content was reduced. Furthermore, around 25% fats were removed from the Bom Creme dairy desserts.

Knorr, a brand of the Unilever portfolio, reformulated its range of dried soups. New recipes were developed without flavour enhancers or artificial colourings and with a 10% lower salt content. Knorr's portfolio of sauce and stock mixes was also reformulated in order to reduce superfluous additives.

3.2.3. Promoting Healthier Choices

Distribution – Portugal

Pingo Doce continued its focus on nutrition information and placed complete nutrition tables on the packaging of its Private Brand products indicating values per 100g and per portion. It also placed nutrition symbols on the front of the packaging. Specific symbols were created for the Pura Vida range giving information on its health benefits. The health benefits are also highlighted on the front of the packaging of reformulated products.

In Perishables, we have continued our efforts to include nutrition information on the labels of fresh products. Meat products already include this information. We now also indicate it on Bakery and Pastry products made by our suppliers. Today, 23% of these products, such as some varieties of rustic loaf, Rio Maior bread or corn bread and some ten pastry products, already display it and we plan to extend it to all products in these categories.

There are also the themed leaflets produced for the Sabores Mediterrânicos (Mediterranean Flavours) programme, which promotes the advantages of the Mediterranean diet, made available free of charge to Pingo Doce customers. The bimonthly "Sabe Bem" magazine was also launched in 2011. It is on sale at Pingo Doce stores at a highly accessible price and includes Mediterranean diet recipes.

The magazines "A Nossa Gente" (a corporate publication for all Group employees in Portugal), "Notícias Recheio" and "Amanhecer" (for Recheio and Amanhecer customers), also published articles on the subject. They included, for example, dietary information and tips on how to prepare balanced school snacks and low-cost, healthy food.

Distribution – Poland

The area of healthy, balanced diets is usually covered in the weekly magazine "Kropka TV", which is distributed exclusively in Biedronka stores. Its articles promote good eating habits.

Biedronka weekly in-store leaflets have a page devoted to healthy eating habits using the know-how of specialists at the Polish Food and Nutrition Institute. Recommendations from dietary specialists were also published in 37 of the 52 weekly leaflets.

In July 2011, a special leaflet on more balanced, low-fat, high-fibre meals made with fresh ingredients such as fruit, vegetables and fish was published and distributed free of charge to Biedronka customers. Labels identifying these types of product also made Polish consumers' choice easier at the stores.

Manufacturing – Portugal

The Knorr brand continued to sponsor a children's play fostering a healthy diet at primary schools. Altogether, it was performed before more than 20,000 pupils.

Becel also sponsored the first series of the television programme Peso Pesado [The Biggest Loser] in Portugal, which enjoyed the collaboration of the Unilever Jerónimo Martins nutritionist and the Executive Chef of Unilever Food Solutions, in order to foster a healthier, more balanced diet.

Pursuing its stake in the internationalization of the brand, Gallo Worldwide stepped up its advertising of the health benefits of olive oil by attaching a stamp from Sociedade Brasileira de Cardiologia on products of the brand sold in Brazil, for example.

100% Programme

The Unilever Food Solutions 100% Programme was introduced at the beginning of 2011 to promote healthy eating at schools. It has already helped ensure that more than 28,000 healthier meals were served at 87 schools in the programme.

The programme aims to improve food at schools by making the canteens more attractive and the meals healthier for the students and helping schools to plan their menus by training canteen cooks to use ingredients more healthily and with minimum waste. The recipes are available online (www.programa100porcento.com), so that parents can prepare them at home.

The 100% Programme achieved the following results in 2011: 375 cooks trained by chefs, 28,216 100% healthy meals served, 55,506 students reached and 259 schools enrolled, 87 of which have received training.

The programme enjoys the support of the Ministry of Education, the scientific support of the Ministry of Health (Platform against Obesity) and a partnership with Associação de Cozinheiros Profissionais de Portugal (Association of Professional Chefs of Portugal).

3.2.4. Other Highlights

In 2011, ISO 9001:2008 certification of the Pingo Doce and Recheio quality management system was renewed as a part of developing Private Brands and postlaunch product and supplier monitoring (on this renewal, see also "Food Safety").

The average response time to customer complaints about the quality of Perishables purchased at our stores in Portugal stood at 27 days, down 16% from 2010. Regarding Private Brands products, the average time of response in 2011 was of 19.6 days, having had increased, against the previous year, about 10%. This situation was a consequence of the increase of complaints that implied laboratory tests conducted by external entities.

In Poland, the approach to analysing this indicator was harmonized in July 2011, resulting in 22 days of the average response time, during the second semester.

3.2.5. Partnerships

The Jerónimo Martins Group cooperated with different organisations and took part in a number of initiatives in the areas of health and nutrition in order to foster healthy eating habits. Here are some of the partnerships formed in 2011.

Distribution - Portugal

• Associação Portuguesa de Celíacos (Portuguese Celiac Sufferers Association), which shared a list of gluten-free Pingo Doce brand products and supported Pura Vida products;
• Fundação Portuguesa de Cardiologia (Portuguese Cardiology Foundation), which recommended cold meat products with the "Healthy Choice" symbol.

Distribution - Poland

Polski Instytut Żywności i Żywienia (Polish Food and Nutrition Institute), which shared its know-how with Biedronka.

Manufacturing - Portugal

• Partnership between Instituto Becel (Becel Institute) and Fundação Portuguesa de Cardiologia (Portuguese Cardiology Foundation) to publish a brochure entitled Alimentação Saudável - Amiga do Coração (Healthy Food Is Heart Friendly);
• Collaboration by Instituto Becel (Becel Institute) with Fundação Portuguesa de Cardiologia (Portuguese Cardiology Foundation) in the Month of the Heart, World Heart Day, World Coronary Day and World Food Day;
• Collaboration by Instituto Becel (Becel Institute) with Premivalor Consulting in a study entitled "Observatory of Diseases of Modern Civilisation (high blood pressure, diabetes, high cholesterol and obesity)".

3.3. Food Safety

Food safety is one of our priorities. The Group therefore invests in the certification and monitoring of its products, facilities and processes as well as training in best work practices in this area.

3.3.1. Certification

Monitoring of certification that was renewed in 2010:

• HACCP Codex Alimentarius certification of Recheio stores and food service platforms, geographically extended to four new stores, to a total of 31;
• HACCP Codex Alimentarius certification of Recheio store in Madeira;
• ISO 14001:2004 and Codex Alimentarius certification of our integrated environment management system and HACCP at JMR (Distribution Centres).

Certification Renewed in 2011

• Biedronka: ISO 22000:2005 certification (storage and distribution processes, introduction of Private Brand);
• Pingo Doce and Recheio: ISO 9001:2008 certification for the development of Private Brands and post-launch product and supplier monitoring;
• FIMA: ISO 9001 and ISO 14001 in the production of margarines, spreads and edible fats for domestic and manufacturing purposes and production of stocks; BRC in the production of stocks;
• OLÁ: ISO 9001, ISO 14001 and OHSAS 18001 in the production of ice creams;
• Gallo Worldwide: ISO 9001, ISO 14001, McDonald's SQMS.

New Certification

HACCP Codex Alimentarius certification of the Pingo Doce central kitchens in Gaia, Aveiro, Peniche and Odivelas I for the preparation and cooking of food.

3.3.2. Audits

The Group's companies are permanently monitored by quality control specialists to ensure the implementation of procedures and the suitability of facilities and equipment.

Distribution - Portugal

Stores and Distribution Centres	Pingo Doce		Recheio		JMR(*)
	2011	2010	2011	2010	2011	2010
Internal audits	1,780	1,753	103	110	10	9
External audits	2	1	2	1	1	1
Follow-up audits	639	790	152	244	155	108

*JMR – Distribution Centres

The following levels of performance were found in the internal audits:

HACCP Performance	2011	2010	Δ2011/2010
Pingo Doce	87%	87%	0%
Recheio	74%	74%	0%
Distribution Centres	75%	91%	-18%

Note: HACCP implementation at Pingo Doce is assessed on the basis of its own criteria. As Recheio has HACCP certification, its assessment is based on different criteria.

The results shown above are influenced by a change of methodology used in internal audits that occurred in 2011. Due to their HACCP certification, the assessment criteria for Recheio and JMR are stricter, which explains why their performance indicators are lower than Pingo Doce.

In 2011, monitoring of best good hygiene and work practices also continued, as usually, at Recheio and Distribution Centres there were conducted, in total, more than 89 thousand of analyses of work surfaces, perishable handlers and the proper perishables handled in stores.

Distribution - Poland

Stores and Distribution Centres			Stores			DCs
		2011		2010		2011	2010
Internal audits		2,653		2,421		18	22
External audits			-	-		11	12
HACCP Performance	2011			2010			Δ2011/2010

Stores 79% 76% +4% Distribution Centres 88% 84% +5%

Manufacturing - Portugal

In 2011, 201 audits were conducted in the Unilever Jerónimo Martins supply chain, covering business partners and points of sale. Assessments are made in accordance

with Unilever requirements, such as best practices in the ice cream distribution chain and consumer-relevant quality standards, and on the basis of legal requirements.

3.3.3. Laboratory Analyses of Products

24,167 lab analyses were conducted to monitor best hygiene and work practices.

Distribution (Portugal and Poland)

Analytical Control (compliance rate)	2011	2010	Δ2011/2010
Pingo Doce	93.4%	95.3%	-2.0%
Recheio	96.8%	96.7%	0.1%
Biedronka	94.7%	93.6%	+1.2%

3.3.4. Training in Food Quality and Safety

In 2011, the syllabuses of food hygiene and safety (FHS) training and the training scheme were revised in order to adapt them better to the needs and reality of the business.

In Poland, training actions were intensified substantially in 2011, having resulted in an increase of trainees of about 42.5% (5,070 trainees and 1,445 training hours in total).

4. Respecting the Environment

4.1. Introduction

Respect for the environment is a concern in the growth of the Jerónimo Martins Group's businesses, as it wishes to help to effectively link supply and demand in order to foster more sustainable production and consumption practices.

The Group and its Companies have undertaken a number of environmental management initiatives in three priority areas:

• Climate change;
• Biodiversity;
• Waste management.

In order to continuously improve the environmental performance of its Companies' activities, products and services, the environmental management systems of the Group's Distribution and Manufacturing companies, which are based on ISO 14001 principles and requirements, updated applicable environmental legislation, conducted environmental audits and diagnoses of business units and monitored environmental aspects.

Main Environmental Impacts

In 2011, the Group worked on reducing environmental impacts in Distribution in Portugal and Poland arising from: i. water consumption, ii. energy consumption used to preserve foodstuffs, lighting, HVAC and to operate equipment, iii. production of organic solid waste and paper, cardboard and plastic packaging and iv. atmospheric emissions and consumption of fossil fuels for transporting goods and for Group vehicles.

Environmental audits

In 2011, 229 in-house environmental audits were conducted at stores and distribution centres in Portugal to guarantee their compliance with legal requirements and the Jerónimo Martins Group's environmental management procedures.

The Manufacturing Companies carry out an annual assessment and review of the most relevant environmental aspects under the Environmental Management Systems implemented to meet ISO 14001:2004 requirements.

Facilities with ISO 14001 certification

Three of the eight distribution centres in Portugal (Azambuja, Vila do Conde and Guardeiras) maintained ISO 14001:2004 certification for their Environmental Management System. The Manufacturing Companies' four plants also kept their ISO 14001:2004 environmental certification.

4.2. Biodiversity

As we are aware of the importance of biodiversity for the sustainability of the communities in which we operate, we performed an assessment of the main threats and opportunities for improvement of our activities. We also evaluated our suppliers using, in both cases, the World Research Institute (WRI) Ecosystem Services Review (ESR). An assessment of the risks to ecosystems associated with the different services made it possible to identify priority actions and define a strategy for protecting biodiversity and draft a plan of activities.

These projects cover different aspects that are essential in the progressive inclusion of biodiversity in the Group's management systems and practices:

• Information management;
• Training;
• Partnerships with suppliers;
• Research and development.

4.3. Climate Changes

Our Companies are committed to responsible, proactive behaviour when taking action to help reduce energy consumption and minimise greenhouse gas emissions, examples of which are measures to rationalise energy consumption.

4.3.1. Carbon Footprint

The Jerónimo Martins Group's carbon footprint in 2011 was estimated at 1,006,339 tonnes of carbon dioxide equivalents, which was 30% more than 2010. This is explained by an increase in the number of retail outlets and by the growing focus on the offer of Perishables, especially in Poland.

Carbon footprint	2011
Overall figure (scope 1 & 2) – t CO2 eq.	1,006,339
Specific figure (scope 1 & 2) – t CO2 eq./'000 €	0.102

Annual Report 11 Corporate Responsibility in Value Creation Respecting the Environment

Carbon footprint – Indicators	2011 (t CO2 eq.)	2010 (t CO2 eq.)
Overall carbon footprint (scope 1 e 2)  Distribution, Portugal  Distribution, Poland Manufacturing  Carbon footprint (scope 1 - direct impacts)  Leakage of refrigeration gases  Fuel consumption  Light vehicle fleet  Reduction of carbon emissions due to use of renewable energies	464,362 524,084 17,893 141,702 41,397 16,129 -95	387,681 370,776 16,803 222,312 36,825 14,937 -90
Carbon footprint (scope 2 - indirect impacts)  Electricity consumption  Heating	795,917 11,556	502,933 *
Carbon footprint (scope 3 - other indirect impacts)  Transport of goods to stores (Distribution)  Disposal of waste in landfills  Air travel by employees  Leakage of refrigeration gases (equipment managed by Olá's customers) CO2 emissions avoided by backhauling project 	127,132 54,070 1,439 876 -4,457	125,273 43,340 *1,052 -4,336

Notes: The carbon footprint of the different activities at Jerónimo Martins is calculated using the three levels of the WBCSD Greenhouse Gas Protocol method: direct and indirect impacts and impacts of third parties in the service of the Jerónimo Martins Group.

The figures given took account of emission factors defined by the IPCC – Intergovernmental Panel on Climate Change (fuel, refrigeration gases and waste), International Energy Agency (electricity) and European Environmental Agency (air travel). We have not included emissions resulting from activities held by JMRS (they are estimated to represent less than 1% of total emissions) or those from heating provided by external bodies in the case of the stores in Poland (it was not possible to obtain this information from suppliers).

It was not possible to calculate the 2010 figures identified with ´*´ and the figure identified with ´**' was rectified comparing to the 2010 Annual Report.

4.3.2. Rationalisation of Energy and Water Consumption

As part of our commitment to combat climate change and further rationalise energy consumption, management of water consumption is of maximum importance. Action is therefore constantly taken to minimise waste and increase efficiency of water use.

Energy and Water Consumption Management Teams

At Distribution Companies in Portugal, one of the main actions taken in 2011 was the start of the Energy and Water Consumption Management Teams project aiming to rationalise energy and water consumption.

Environment and Occupational Safety Representatives at each store were appointed and trained in order to raise the teams' awareness, monitor environmental performance and identify opportunities for improving operations.

This project achieved a 5,638,091 kWh like-for-like reduction in energy and 10,169 m³ in water consumption, i.e. 1.8% and 1.3%, respectively. The target was a 2% reduction in both cases.

Other Measures for Reducing Energy Consumption - Distribution

Technology	No. Units
Store exterior LED lighting	42
Exterior lighting controlled by photocells or astronomical clocks	10
LED lighting in cold display cabinets	42
Store interior LED lighting	143
Centralised consumption management system	382
Frozen food cabinets with speed compressors and automatic defrosting	37
Doors of self-service display counters (except frozen foods)	1,927
Speed variator controlling ventilator motors in evaporative condensers	1,803
Recovery units for heating sanitary water using heat from the refrigeration system	307

Renewable Energy - Distribution

Technology	No. Stores	Energy saved per month	CO2 saving per year
Solar collectors for water heating	5	8,240 kWh	43.5 t
Lighting powered by photovoltaic panels	1	5,000 kWh	30 t
Tubular solar light transporting system	3	3,740 kWh	21.5 t

Measures to Reduce Energy Consumption - Manufacturing

Unit	Measure	Expected energy saving per year
Fima	Replacement of steam by hot water (in oil heating) Service of steam traps and steam flow meter	1,550,000 kWh
Fima	Change in lighting Installation of frequency inverters in evaporative condensers Installation of new air compressor	300,000 kWh
Olá	Installation of soft starters in refrigeration network compressors Replacement of insulation in a freezing tunnel	252,000 kWh
ULJM	Replacement of copying and printing equipment Progressive introduction of LED lighting	4,000 kWh

Other Water Consumption Reduction Measures

• Fima: alteration in the ammonia evaporative condenser purge system, reduction in waste by dealing with leaks, installation of a utensil washing machine with an expected reduction in consumption of around 9,000 m³ of water a year.
• Olá: start of installation of flow meters to measure consumption per production line in order to improve monitoring and establish targets per team, general audit of water management by outside specialists to determine an overall balance of water flows and areas for improvement.
• Lever: introduction of a new washing powder formula leading to a reduction of around 40% in water consumption during production against the previous formula.
• Pingo Doce: installation of a vacuum drain system at a store to eliminate water consumption.
• Azambuja Distribution Centre: installation of automatic water-level detection mechanisms in the reusable crate washing line resulting in a monthly saving of over 2,000 m³ of water.

Energy consumption (total)

Total consumption	2011
Energy consumption
 Overall consumption - GJ	5,952,011
 Specific consumption - GJ/'000 €	0.605
Energy consumption per business unit
 Distribution, Portugal - GJ	2,560,357
 Distribution, Poland - GJ	3,043,739
Manufacturing – GJ 	291,968
 Other business units - GJ	55,947

Energy consumption in business units

Distribution	2011	2010	Δ2011/2010
Portugal – Retail
Electricity (kWh/m2 )	877.2	899.9	-2.5%
Fuel (GJ*)	23,843	26,176	-8.9%
Portugal – Cash & Carry
Electricity (kWh/ m2 )	362.4	349.4	+3.7%
Fuel (GJ*)	4,300	4,354	-1.2%
Portugal - Distribution Centres Electricity (kWh/PBU'000*)	116.6	113.6	+2.6%
Fuel (GJ**)	384	843	-54.4%
Portugal - Industrial kitchens and fresh dough factory Electricity (kWh/PBU'000*)	231,6	-	-
Fuel (GJ*)	341	-	-
Poland - Retail Electricity (kWh/ m2 )	593.7	474.9	+25.0%
Fuel (GJ*)	485,661	380,181	+27.7%
Poland - Distribution centres Electricity (kWh/PBU'000*)	54.5	40.9	+33.3%

* GJ = gigajoule (energy measurement unit).

** Purchasing buying unit.

The positive variation in electricity consumption in some business units, especially in Poland, is explained by investments made in the Perishables area, which involved new equipment and cooling areas needed for storing and preserving these products.

Manufacturing	2011	2010	Δ2011/2010
Overall electricity consumption (MWh)	24,088	25,413	-5.2%
Overall fuel consumption (GJ*)	53,907	55,711	-3.2%
Overall steam consumption (GJ*)	134,197	139,898	-4.1%
Consumption of energy per unit of product produced (GJ*/t)	2.03	1.98	+2.5%

*GJ = gigajoule (energy measurement unit)

Water consumption (total)

Total consumption	2011
Water consumption  Overall figure - m3  Specific figure - m3/'000 €	2,612,679 0.266
Water consumption per business unit  Distribution, Portugal - m3  Distribution, Poland - m3	1,712,018 559,710
 Manufacturing - m3  Other business units estimated - m3	303,541 37,410

Water consumption in business units

Distribution	2011	2010	Δ2011/2010
Portugal - Retail (m3 /m2 )	2.94	2.98	-1.3%
Portugal – Cash & Carry (m3 /m2 )	0.74	0.75	-1.3%
Portugal - Distribution Centres (m3 /PBU'000*)	0.72	0.82	-12.2%
Portugal - Industrial kitchens and fresh dough factory (m3 / t)	8.54	-	-
Poland – Retail (m3 /m2 )	0.49	0.65	-24.6%
Poland - Distribution Centres (m3 /PBU'000*)	0.07	0.07	0%

(*) PBU – Purchasing buying units in thousands.

Manufacturing	2011	2010	Δ2011/2010
Overall water consumption (thousand m3 )	303.5	326.3	-7,0%
Water consumption per unit of product produced (m3 / t)	2.24	2.25	-0.4%

Generally, the indicators referring to water and energy consumption had a positive performance and they reveal an effective rationalisation of consumption when compared to 2010. The only exception was noticed regarding energy consumption in Poland which can be explained by the investments in the cooling equipment and areas.

4.3.3. Reduction of Environmental Impacts of Logistics Processes

It is the Group Companies' goal to progressively reduce the environmental impacts of logistics processes along the value chains of its activities by minimising consumption of natural and energy resources and reducing waste generation. The following action was particularly important in 2011:

Emissions in Distribution

• The speed limit of about 80% of the distribution fleet working exclusively for JMR was reduced to 80 kph in Portugal. This measure is expected to reduce consumption by up to one litre per 100 kilometres;
• Also in Portugal, a pilot project was set up to use two DAF hybrid vehicles in urban areas;
• The backhauling operation in Portugal was stepped up and the service was provided to 60 regular suppliers, representing 211,158 pallets collected. This measure, making the most of the fleet, is estimated to have resulted in a saving of 4,496,155 km for suppliers and a 4,343 tonnes reduction in CO² emissions;
• The backhauling operation in Poland represented 38,085 pallets collected resulting in a saving of 114,536 km and 114 tonnes reduction in CO² emissions.
• In Poland, 100 Euro 3 engine trucks were replaced by trucks with Euro 5 engines, thereby reducing CO² emissions by 56.5 tonnes a year;
• Also in Poland, new solutions were tested in the use of more efficient trailers: one using CO² as cooling fluid and the other with a capacity to carry 36 pallets instead of 33.

Emissions in Manufacturing

• The logistics chain at Unilever Jerónimo Martins was optimised with the consolidation of direct loads from factory to customer, thereby reducing transport and accordingly, CO² emissions;
• Unilever Jerónimo Martins continued to optimise its vehicle fleet's efficiency, as 107 vehicles were replaced by new units with 12% lower CO² emissions (around 50 tonnes of CO² fewer per year than the others). A 100% electric Renault Kangoo ZE was purchased for courier services, thereby avoiding direct emissions of over three tonnes a year.

Waste

In Portugal, reusable plastic boxes are used for meat, dairy products, fish, baked goods and fruit and vegetables. In Poland, reusable packages are used whenever logistic and operational conditions allow:

Percentage of reusable boxes vs. total number of boxes transported	2011	2010	Δ2011/2010
Portugal	13.0%	10.4%	+2.6 p.p

4.3.4. Management of Refrigeration Gases

Management of refrigeration gases is based on the premise of minimising the release of pollutants. The action taken by the Group's Companies therefore included minimising leaks, investing in cleaner technologies and cooperating with providers of refrigeration and HVAC services.

The only substance subject to regulation at the different companies is R22 gas, which has been systematically replaced by other substances with a lower environmental impact:

	Number of establishments
	Portugal - Distribution	Poland - Distribution	Portugal - Manufacturing	Total
Refrigeration system with R22	15	1	1	17
Air-conditioning systems with R22	71	6	3	80

4.3.5. Rationalisation of Paper Consumption

Office paper consumption is substantial in the Group and a number of projects have been undertaken to reduce it, resulting in considerable benefits for the sustainability of forest resources:

• In Logistics in Portugal, front and back printing and the dematerialisation of processes made it possible to save 5.2 million sheets of paper;
• Electronic management of orders, invoices and delivery notes in Distribution in Portugal covered 89% of suppliers last year, which corresponded to 91% of turnover (in 2011 there was an estimated saving of 2.4 million sheets of paper);
• In Poland, 34% of suppliers issue electronic invoices, which accounts for 68% of documents (in 2011 there was an estimated saving of 1.2 million sheets of paper).

4.4. Waste Management

The Group is committed to prevention, minimisation and recovery of waste generated not only in its own activity but also in the support it provides to consumers in these tasks. Raising employee and public awareness of correct waste separation practices and seeking new recovery solutions constitute basic practices at our Companies.

Waste recovery rate

	2011
Distribution Portugal	53.9%
Distribution Poland	75.6%
Manufacturing	90.5%

4.4.1. Characterisation of Waste

Distribution - Poland

Distribution - Portugal

4.4.2 Waste Recovery

The following were the most important projects in 2011:

• Pingo Doce continued to increase the number of recycling bins in its stores and set an example for customers in waste recovery. At year end, 320 establishments had recycling points, accounting for 85% of all Pingo Doce stores. A total of 308 containers for recycling cooking oil, 309 for batteries, 309 for small domestic appliances, 46 for fluorescent light bulbs and 46 for ink cartridges were installed;
• In partnership with Ecopilhas, Pingo Doce conducted a Life Energy campaign for customers, resulting in the collection of 16 tonnes of used batteries;
• Biedronka began collecting PET (polyethylene terephthalate) bottles at stores in the town of Proszkowice;
• At Olá, all gardening (and other green areas) waste was sent for recovery in order to reduce the amount of waste sent to landfills).

Waste Dropped off by Customers in Recycling Bins at Stores

Distribution – Portugal

Waste (in tonnes)	2011	2010	Δ2011/2010
Batteries	45.40	33.26	+36%
Used electrical and electronic equipment	135.48	150.49	-10%
Used cooking oil	183.54	*129.80	+41%
Ink cartridges	2.28	2.66	-14%

*Value has been rectified (comparing to 2010 Annual Report)

Distribution - Poland

Waste (in tonnes)	2011	2010	Δ2011/2010
Batteries	16.82	15.50	+9%
Used electrical and electronic equipment	413.34	135.00	+206%

4.4.3. Ecodesign Project

Aware of the importance of having a new perspective of our products, we formed partnerships with our suppliers to improve the eco-efficiency of packaging using ecodesign strategies. The aim of this approach is:

• To reduce the environmental impact of the packaging of items sold by our stores (especially their Private Brands);
• To reduce the costs of packaging materials and components and of packaging waste management;
• To optimise the movement, transport and display of goods.

The Companies in our Distribution sector in Portugal have been taking action in this area since the end of 2009. For example, they have developed a Packaging Ecodesign Manual and conducted demonstrations for nine private brand suppliers.

Results

Environmental Benefits	No.	Unit
Savings in packaging materials	1,794	t materials / year
Transport avoided	22,731	t CO2 eq / year

4.5. Other Actions

Promotion of Environmental Performance in Construction and Remodelling of Distribution Units

All construction and remodelling plans for distribution units in Portugal are subject to environmental criteria in order to minimise the environmental impacts of building and using facilities. In 2011:

• Environmental specifications were developed for new stores and remodelling setting out construction and equipment measures to improve stores' environmental performance, contribute to greater savings and facilitate operations during their lives. These measures are divided into six environmental issues: water consumption, energy consumption, waste, wastewater, atmospheric emissions and noise;
• A technical environmental work-site management standard was developed with a view to ongoing improvement of environmental performance for those involved in building works (construction and remodelling of stores and other buildings and facilities). The standard defines responsibilities and systematises the main applicable legislation and best practice essential to safeguarding the environment;
• Building and remodelling at Biedronka abide by environmental requirements set out in technical standards;
• Biedronka currently has six eco-stores.

Biedronka eco-store

Up to 2011, 10 standard measures were set out for new Biedronka stores in order to reduce water and energy consumption. They include: suspended ceilings, heat recovery from cooling systems, automatic taps and other eco-friendly solutions. Three new eco-stores, in addition to all these technologies, they also have, among others, cardboard compactors.

Garden areas – 952 establishments with gardens (152 Pingo Doce stores; 19 Recheio stores; 756 Biedronka stores; 25 others)

4.6. Raising Employee and Customer Awareness

In 2011, the Group placed a higher stake in the environmental training and awareness of its employees in order to change attitudes and behaviour and ensure appropriate management of natural resources, emissions and waste. The following were the most important achievements in this area:

• Introduction of in-house signage on rationalisation of water and energy consumption;
• Training on in-house environmental management practices for Distribution Companies employees in Portugal, to a total of 188 hours. There was given training to service providers at ULJM aiming to improve their awareness on best environmental practices, as well as to plants' employees (total of 54 training actions).
• Articles on the carbon footprint and rationalisation of water and energy consumption for the in-house magazines "A Nossa Gente", which is distributed to all employees in Portugal, and "Bom dia TPM" distributed in Lever, Olá and Fima plants;
• Raising awareness of the need for best environmental practice for Biedronka office employees, including information in an operations manual.

Being aware that Companies must play an active role in public awareness of sustainable development, in 2011 we undertook a number of environmental initiatives aimed at customers and consumers. The most important were:

• Several articles in "Notícias Recheio" magazine for environmental awareness and training of Recheio customers on the HoReCa channel;
• Several articles in "Sabe Bem" magazine for environmental awareness and training of Pingo Doce customers;
• Permanent environmental signage and information at 316 Pingo Doce stores;
• Pingo Doce sells reusable plastic bags at a symbolic price of €0.02. In five years, Pingo Doce achieved the following results: 47% reduction in consumption of bags (by weight), reduction of 7,667 tonnes of bags disposed of in landfills, reduction of 15,265 tonnes of CO² emissions representing a decrease of 11,926 tonnes of diesel and natural gas. At the same time, Pingo Doce also has trolleys and large reusable bags on sale;
• Launch of the New Green Bag developed by the Portuguese Association of Distribution Companies (APED – Associação Portuguesa das Empresas da Distribuição);
• Pingo Doce participated in the Ecopilhas Life Energy campaign. It was launched on World Environment Day and consisted of the distribution of mini battery

recycling bins to customers at check-outs in its stores, in order to encourage them to drop off batteries in the stores' recycling bins;

• Support for the national Simulate Less Waste project organised by the Portuguese Environment Agency, which consisted of placing an interactive simulator in retail establishments associating waste generation and consumption practices;
• Promotion of public discussions through participation in the seminars "Sustainable consumption: the response of modern distribution", organised by APED, and "Distribution and production hand-in-hand to the consumer", organised by the Jerónimo Martins Group for its fruit and vegetable suppliers;
• "We take care of ECO-practices" campaign on 14 and 15 October, continuing the 2010 campaign, which made it possible to collect more than 40 tonnes of waste glass at 15 Biedronka stores. The more than 25,000 customers who handed in at least five glass packagings received a symbolic gift of a plant (heather);
• Publication of a series of articles on environmental protection entitled "The green side of Biedronka" in Kropka TV magazine;
• Launch of a campaign at Biedronka stores on the correct disposal of used batteries;
• An environmental publicity and awareness campaign on "Biedronka Good Life" was conducted at its stores. The campaign was also published in newspapers and magazines.
• Use by Gallo Worldwide of its packaging label to raise consumer awareness of the need to place cooking oil in used oil bins;
• Continuation in the 2010-2011 school year of collaboration of Unilever Jerónimo Martins with the European Blue Flag Association (EBFA, member of the 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 aim of the Eco-Schools programme is to promote environmental education at schools. Last year, it awarded green flags to 1,209 schools for their environmental performance. Within the Ecobeaches project were made available for holiday makes 142 recycling bins on 33;
• Unilever Jerónimo Martins joined Earth Hour, a symbolic global initiative of the World Wildlife Fund for Nature between 8:30 and 9:30 p.m. on 26 March, when it switched off all exterior lighting at its head office and production units.

4.7. Partnerships and Support

The Distribution Companies in Portugal participated in the following initiatives in order to support the restoration of natural habitats and protect biodiversity:

• Pingo Doce continued to sponsor the Lisbon Oceanarium by contributing 100 thousand euros a year;
• As part of Pingo Doce's partnership with Liga para a Protecção da Natureza (Nature Protection League), the company sponsored the ECOs-Locais project, which is designed to encourage local environmental volunteering. The project made possible initiatives by 21 teams (around 200 participants) in 2011;

• As part of the ECOs-Locais project, Pingo Doce also sponsored four specific drives to restore four natural areas in Portugal. Group employees and their families participated. Five kilometres of the bank of the River Tagus were cleaned, weeds were removed from two wooded areas (to a total of 15,000 m² ) and around 4,500 kilos of waste were collected and sent for recycling, when possible;

• As part of the International Year of the Forest, Pingo Doce organised a national forest clearing drive on 4th of June, which involved more than 5,000 young people. The Company's support consisted of making its stores available for advertising and promoting the drive, donating material for clearing the forests and supplying light meals, hats and t-shirts for the volunteers in a donation totalling 50 thousand euros;

• The Distribution Companies in Portugal also conducted a study on "Benchmarking of water and energy consumption at retail units and wholesale establishments", in partnership with Instituto Superior de Gestão at Lisbon Technical University in order to foster a culture of eco-innovation.

5. Sourcing Responsibly

5.1. Introduction

The Jerónimo Martins Group considers its suppliers to be business partners and service providers that are essential to the construction of the value proposals of its brands and that incorporate social, ethical and environmental concerns into its supply chains.

In this context, the Group's business activity is governed by a Sustainable Sourcing Policy, which was approved in 2010 and is available at www.jeronimomartins.pt. This policy abides by principles of food quality and safety, fair prices, a preference for healthy foods, social wellbeing and sustainability.

In this area, our Perishables suppliers in Portugal not only sign a commercial agreement but also a Supplier Code of Conduct (also available at www.jeronimomartins.pt) that materialises the principles of the policy.

Furthermore, we buy directly from the producer whenever possible and have monitoring teams in the field to offer producers guidance on how to optimise their products in accordance with our definitions.

5.2. Commitment: National or Local Origin

The Group's Distribution Companies, preferably and on an equal footing, choose local or national suppliers in order to minimise the carbon footprint of the products they sell and boost the socioeconomic wellbeing of the locations in which they operate.

The Group also makes it easier for consumers to choose national products and labels them "The best of Portugal is here" at Pingo Doce stores. Several campaigns promoting national production were held at Pingo Doce and Biedronka in 2011.

More than 80% of the products that the Group sells at its stores in Portugal are purchased from Portuguese suppliers. In Poland, more than 90% of its foodstuffs are bought from Polish suppliers. Milk, dairy products and baked goods account for 100%.

Perishables in Portugal:

Fresh Fruit and Vegetables

The Jerónimo Martins Group chooses to buy, preferably, fresh fruit and vegetables from domestic suppliers. Exceptionally, the Group resorts to imports in the following cases: i. for reasons of seasonality, in the cases of products which have a countercyclical production such is the case with the supply of oranges and apples during the Summer; ii. when there is no production at a national level or the quantity produced within the country is insufficient to supply our stores; iii. when the quality of domestic products do not allow to fulfil the quality commitment that the Groups maintains with both customers and consumers.

Taking these factors into account, it is noteworthy the fact only around 30% of fresh fruit sold in Portugal was improved. Thus, 93% of chestnuts purchased by the Group in Portugal were grown in the country, as well as 92% of tangerines. It is also worth of note that about 90% of cherries, 85% of oranges, 84% of pears, nearly 65% of apples and 60% of kiwis bought by the Group were grown in Portugal.

The Group also helped Portuguese apple producers to organise their production with a procurement plan in which it undertook to purchase pre-defined quantities during the year. This enabled us to offer our customers more than 16 thousand additional tonnes against 2010. The Portuguese-grown apple varieties include Golden, Starking, Royal Gala, Granny Smith, Reinette, Bravo-de-Esmolfe and Fuji.

Over 99% of the fresh vegetables sold by the Group in Portugal in 2011 were purchased from Portuguese producers as were 95% of the pre-packaged products, consisting of cut, ready-washed vegetables for soups and salads, and 83% of potatoes, onions and garlic.

Some vegetable are of 100% Portuguese origin, such as leeks, watercress, cabbage greens, turnip greens, turnips, and mushrooms. Nearly all carrots and lettuce purchased by the Group in Portugal were grown locally, as well as a vast majority of cabbage, pumpkin, spinach and fresh herbs (parsley, coriander, mint and basil).

We have special projects in the vegetable category, such as the production of Kennebec potatoes in partnership with a supplier from Agroaguiar in Vila Pouca de

Aguiar, Trás-os-Montes. These potatoes are grown on small holdings, as they used to be in the 1960s and 70s, when thousands of tonnes were produced all over the country. Because of its importance, the Kennebec potato was classified as a product with a Protected Geographical Indication (PGI), but almost disappeared because of the social desertification in the area where it was produced, due to emigration. Thanks to this project, the land in Trás-os-Montes goes once again through planting processes that follow the Portuguese integrity and entrepreneurship.

Meat and Fish

In Portugal, more than 82% of the meat sold came from livestock raised and slaughtered in the country. All together, the Jerónimo Martins Group works with more than 300 Portuguese meat suppliers representing thousands of small producers.

As part of this policy, the Group is promoting the organisation of Portuguese lamb producers and there are currently 70 suppliers who guarantee sales and payment of their production at a fixed price all year round (above the annual average market price). In addition to these advantages, these producers have logistics and ease of transport at their disposal.

Furthermore, Recheio and Pingo Doce contribute to the protection of Portuguese breeds by selling certified beef, such as Mertolenga, Barrosã and Alentejana.

Portuguese production of fresh and frozen fish is not enough to meet demand. Nonetheless, the Group works directly with more than 60 Portuguese vessels, thereby supporting traditional fishery. In 2011, around 45% of the fish bought by the Group therefore came from Portuguese suppliers. All black scabbard fish and about 95% of sardines, some kinds of hake and tuna were purchased from Portuguese suppliers.

Where Manufacturing is concerned, 80% of the raw materials used by Gallo Worldwide are bought from Portuguese suppliers. Its business relations are based on lasting partnerships, such as those with SAOV in Ribatejo, Olival Fonte dos Frades and Olivais do Sul in Alentejo and Cooperativa Valpaços in Trás-os-Montes.

5.3. Commitment: Human and Workers' Rights

According to our Sustainable Sourcing Policy, we only use suppliers who expressly commit to practices and activities that fully comply with national and international laws and agreements. We are committed to severing business relations with suppliers if we ever learn that they or their suppliers violate human, children's or workers' rights or if they do not incorporate ethical and environmental concerns in their actions and are not prepared to draw up a plan to remedy the situation.

In the supplier code of conduct, suppliers undertake to respect the social and labour laws and laws on occupational health, hygiene and safety in the countries in which they operate.

At Unilever Jerónimo Martins and Gallo Worldwide too, all suppliers assume full acceptance of the principles of the Suppliers Code (available at www.unilever.pt). The pre-audit questionnaire for company suppliers includes questions on occupational health and safety and the code of business principles.

5.4. Promotion of More Sustainable Production Practices

We uphold that our present and future quality of life depends on careful management of available resources. We believe that it is possible to maximise the Companies' potential to transform environmental challenges into economic opportunities and ensure good quality of life for the future. Therefore, together with our suppliers, we endeavour to include in our supply chains environmental criteria that help reduce impacts in production processes with a view to sustainable production.

We believe that business should be conducted on a win-win basis. This is why the contracts that the Jerónimo Martins Group signs with suppliers in Portugal, especially for Perishables, are for one year at a fixed price that has been studied and agreed upon with the supplier, with guaranteed payment.

Our priority in Poland also is to build strong relationships and help our suppliers to plan their investments and technological capabilities. This enables them to be better prepared to compete in the market.

We also give preference to suppliers' standardised deliveries on pallets. The Group takes care of any division and redistribution of the goods, which helps reduce the supplier's costs substantially.

Where certification is concerned, fruit and vegetable suppliers in Poland have Global Good Agricultural Practice (G.A.P.) certification, which includes environmental aspects, meat suppliers have British Retail Consortium (BRC) certification and other suppliers have ISO or HACCP certification.

In Portugal, suppliers that are not covered by our audit system must have food safety certification recognised by the Global Food Safety Initiative, such as BRC, IFS, Global G.A.P, Codex Alimentarius or ISO 22000:2005. In addition, Pingo Doce brand tinned tuna bears a dolphin-safe label and 22 Pingo Doce hygiene products have Sustainable Forestry Initiative certification.

In the audit system developed and implemented by the Quality and Food Safety Department, assessment of suppliers covers a series of legal environmental requirements with count for 5% of the audit's score. These requirements include criteria associated with water, effluent, waste, atmospheric emissions, noise and management and handling of hazardous substances.

Under the Unilever Sustainable Living Plan, all palm oil will be purchased from certified sustainable sources by 2015 and all paper and cardboard packaging by 2020. As of 2011, all Lipton Yellow Label tea sold in Portugal comes from plantations certified by the Rainforest Alliance while Ben & Jerry's ice creams continue to introduce products with the Fairtrade stamp. Their commitment is that all their ice creams will bear the fair trade stamp by the end of 2012.

Gallo Worldwide encourages its partners to use excellent production practices, such as in sustainable farming, selection of olive varieties and optimal harvest times to maximise the quality-cost ratio.

5.5. Supplier Audits

Quality and Safety

Perishables and Private Brand suppliers undergo regular quality and compliance audits, which are mandatory for those operating in Portugal. The assessment and approval of these suppliers may take one of two forms: documental or on-site audit.

Each supplier is reassessed at predefined intervals based on their score: Basic (12 months), High (18 months) or Excellent (24 months).

Audits of Perishables Suppliers in Portugal	2011	2010	Δ2011/2010
Evaluation Audits	270	297	-9%
Follow-up Audits	285	206	+38%
Audits of Perishables Suppliers in Poland	2011	2010	Δ2011/2010
Evaluation Audits	37	38	-3%
Follow-up Audits	198	145	+37%

Environment

The Companies in the Distribution sector recognise that it is essential to have the cooperation of their suppliers in order to minimise environmental impact. Therefore, 35 audits of service providers were conducted in the areas of maintenance and waste in 2011. A total of 6% were recognised as having an Excellent while 17% as having a High environmental performance.

5.6. Supplier Training

In Portugal, a workshop was held for small producers supplying cold meats and dairy products who had a score of Basic in 2011 in order to instil knowledge on HACCP, best good practices and legal aspects.

6. Supporting Surrounding Communities

6.1. Introduction

The Jerónimo Martins Group is aware that, over the long term, a business's sustainability is indissociable from the broad sense of responsibility with which it is run and its active contribution to the wellbeing of the surrounding communities in the areas in which it operates.

In 2011 the Executive Committee approved the Jerónimo Martins Group's Policy of Support for Surrounding Communities (available at www.jeronimomartins.pt). Under this policy, support is provided to projects and works that promote and identify with the values of humanity, merit, entrepreneurship and citizenship by fighting hunger and malnutrition, cycles of poverty and social exclusion in the two main groups that Jerónimo Martins considers to be society's most vulnerable: the elderly and disadvantaged children and young people.

The support provided usually takes the form of donations of shopping vouchers to buy food and personal and domestic hygiene products at the Group's stores. It may also involve direct and indirect support to initiatives that promote educational work with children and young people at risk: i. preventing early school drop out and factors leading to social exclusion and ii. encouraging entrepreneurship.

6.2. Greater Professionalization

All activities supported are properly monitored and their impact is assessed so that we can guarantee at all times that resources go where they are most needed and where they can make the greatest difference to the largest number of people.

In 2011, the Jerónimo Martins Group joined the London Benchmarking Group, a network of companies that use the structured LBG model to assess the short- and medium-term impacts and consequences of their investments in surrounding communities.

Periodical visits are made to closely monitor the institutions supported by the Group at institutional level and on an ongoing basis. They are aimed, on one hand, at helping the institutions manage their work and, on the other, at assessing the conditions and general wellbeing they offer their beneficiaries.

6.3. Direct Aid

The direct aid given in 2011 to surrounding communities by the Jerónimo Martins Group totalled 6.8 million euros.

During the year the Group provided aid at corporate level to several organisations to a total of 471 thousands euros, 27% more than in 2010. Of this amount, 293 thousands euros, or 65%, were for social patronage, mainly for children and young people.

Institutional Support by Type:

Irmãzinhas dos Pobres (Sisters of the Poor)

The mission of the Irmãzinhas dos Pobres Congregation is to provide shelter to poor elderly people, offering them all the basic care, safety, affection and the quality of life they deserve The congregation runs two residential homes, one in Lisbon and the other in Porto, where around 170 elderly people live. They count on donations from private individuals or companies and public collection campaigns to cover their running expenses. The sisters at the Lisbon home serve around 400 meals a day to the 100 or so elderly people who live there. The Group has been assisting this home by donating shopping vouchers to buy foodstuffs and personal and domestic hygiene products at Group stores since September 2011.

In 2011, at central level, Pingo Doce supported surrounding communities with donations in cash and in kind to the amount of 206 thousands euros, with special focus on the 75 thousand euros donated to Associação de Apoio a Investigação e Formação em Gastrenterologia e Hepatologia (Association for Support to Research and Training in Gastroenterology and Hepatology), which studies, among others, liver diseases. In addition to this aid, donations in kind were made directly by stores and Distribution Centres to their surrounding communities and they summed up, within the period between May and December 2011 (prior to this period they hadn't been accounted for in this way), to a value of 4.7 million euros.

On Madeira, the supports conceded, mostly in foodstuffs, reached in 2011 about 230 thousands euros. Recheio provided aid to surrounding communities in the form of donations of cash and foodstuffs to the amount of 137 thousands euros.

Biedronka provided aid, mostly in kind (98%), totalling around 628 thousands euros (2.7 million zlotys) in 2011. Caritas Polska (Polish Caritas) has been the main partner of this brand for several years now. Both collaborate in the celebration of events such as the Day of the Child, World Day of the Sick and St Nicholas's Day. The company's support not only takes the form of donations of food products but also assistance in sponsorship of the institution's events, including advertising.

Hope for the Euro

On 24 and 25 September 2011, a tournament was held in Poland for 400 institutionalised children from 25 permanent homes not only in Poland but also Slovakia, France, Ukraine and Russia. "The Hope for the Euro" tournament was sponsored by Biedronka, which is also one of the official sponsors of Euro 2012.

Unilever Jerónimo Martins aided around 20 private charities in 2011, contributing with products of a total value of 272 thousands euros The Portuguese Food Bank was the main beneficiary.

JMDPC provided aid, in 2011, to surrounding communities with in-kind donations to the amount of more than 111 thousands euros.

6.4. In-house Volunteering and Other Campaigns

As in previous years, last year the Jerónimo Martins Group's employees participated in a volunteer campaign organised by the Junior Achievement Association. The programme's aim was to encourage entrepreneurship in children and young people.

In December, a toy collection campaign was organised, at headquarters, aiming at offering to 58 children living in the Cova da Moura neighbourhood in Lisbon the Christmas gifts they have asked for (to Santa). At the 2011 Christmas Dinner for Jerónimo Martins Group managers in Portugal there was also a fundraising drive for the Irmãzinhas dos Pobres (Sisters of the Poor). The amount raised of nearly five thousands euros was matched by the Group raising the total donation to nearly 10 thousands euros. Thanks to this donatations, the Congregation was able to purchase industrial kitchen equipment and special mattresses for the bedridden.

6.5. Indirect Support

Pingo Doce encouraged and participated in several collection campaigns for food and other goods with a view to supporting surrounding communities.

More than 1,500 tonnes of food were collected at Pingo Doce stores by the institution's volunteers during the Food Bank campaign and a total of 347,930 vouchers were sold, to the amount of 117 thousands euros. The fundraising campaign for Associação de Cegos e Amblíopes de Portugal (ACAPO – Portuguese Association of the Blind and Poorly Sighted) resulted in proceeds of nearly 19 thousands euros. More than 250 thousand candles were sold at Pingo Doce stores during the "10 milliom stars – a gesture for peace" campaign resulting in proceeds of over 117 thousands euros for Cáritas Portuguesa. In the Energy of Life drive, Pingo Doce and Ecopilhas collected

more than 16 tonnes of used batteries, which made possible a donation of 10 thousand litres of milk to 19 private charities.

In the course of three campaigns in 2011, Biedronka managed to collect 600 tonnes of food in collaboration with the Polish Food Bank Federation. It also held drives in partnership with Caritas Polska, which were able to collect around 160 tonnes of food.

Biedronka's "Milk Start"

In Poland, three snack references for school-age children were launched in 2011, within the scope of the "Milk Start" project. These snacks constitute a nutritionally-balanced meal and can be eaten as something extra mid-morning or at tea-time.

The "Milk Start" project was developed in response to the problem of malnutrition among Polish children. The products within this range are sold at a price that is very accessible to the Polish consumer, without any profit for Biedronka.

You can find out more about this project in Sub-chapter 3. "Promoting Good Health through Diet".

For the sixth year running, Unilever Jerónimo Martins was joint organiser with TNT Express of Walk the World in Portugal in aid of the World Food Programme. Thanks to this and other initiatives ("Pole POSition") more than two thousands euros were donated to Cáritas Portuguesa.

6.6. Other Support

Also at Unilever Jerónimo Martins, the Vasenol Skin Fund programme took place for the third year running. The programme was set up in 2009 to raise public awareness of the importance of the skin and the health risks associated with it. The campaign once again counted on a partnership with Associação Portuguesa da Psoríase (PSO Portugal) and the collaboration of Sociedade Portuguesa de Ciências Cosmetológicas (SPCC).

7. Being a Benchmark Employer

7.1. Introduction

Group Jerónimo Martins aims to be a driver of the job markets where it carries out its businesses and a promoter of social and economic well-being, through performance appraisals and fair remuneration.

In 2011, and even despite the recession felt in Portugal, the Group as a whole created 5,202 new jobs, which represented a growth of 8.5% compared to the previous year. Poland was the real growth driver, essentially due to Biedronka chain's ambitious expansion.

Description of our team:

• There are 66,270 of us;
• 76% are women;
• 39% of management positions are held by women;
• 19% are under 25, 43% between 25 and 34 years of age; 26% between 35 and 44; 10% between 45 and 54, 2% 55 or over;
• 81% are hired on a full-time basis;
• 62% are permanent staff.

7.2. Human and Labor Rights

7.2.1. Commitment

The Group ensures respect for the right to equal opportunities, both with regard to recruitment processes and to professional development, prohibiting any direct or indirect discriminatory practices, or disrespect for personal dignity. At the same time, there is a concern for the personal and professional development of the employees at various levels within the Organization, based on merit. Everyone is ensured an objective and transparent appraisal process, as well as an appropriate remuneration. We also seek to encourage a culture of parental protection, which goes beyond compliance with the law on this, throughout initiatives such as two nurseries in Portugal or holiday camps for employees' children in Portugal and in Poland, as well as for protecting disabled workers or those with reduced working capacity.

7.2.2. How We Disclose

This commitment is covered by the Code of Conduct, available at www.jeronimomartins.pt, which all the employees are informed of when they join the Group, whatever their position, both in Portugal and in Poland.

In Poland, a Policy against Moral Assault and a Policy against Discrimination are also in force, which strengthen and establish the Group's commitment to ensure nondiscriminatory practices or those that may be offensive to employee dignity. These policies, which cover any employee with a work contract, aim to combat any abuses, defining the action to take whenever cases of this kind are detected.

7.2.3. How We Guarantee That They are Respected

The Jerónimo Martins Group provides all its employees, in Portugal and in Poland, with an Employee Assistance Service (called "Among Us" in Portugal) which receives contacts by telephone, e-mail or letter. This service is an open communications channel for receiving any complaints related to Human Rights, requests for clarification of a work nature or requests for social support, ensuring appropriate investigation and resolution of all situations. This service ensures confidentiality, credibility and availability to the employees.

Employee Assistance Service
No. of contacts/No. of % of procedures concluded procedures started
Portugal	2,655	99%
Poland	1,486	97%

In addition, in Poland, regular meetings are held with the unions and with an "Employee Forum", a self-regulating collective body, set up to defend the interests of the employees.

7.3. From Attraction to Retention

Talent attraction is one of Group's main ways of strengthening its position in the countries where it is present. We favour the internal mobility of our employees between the different operational departments and the different companies. However, we also use external recruitment in order to satisfy the strategic needs of our businesses.

7.3.1. Trainee and Intern Programme

With a view to guaranteeing the future sustainability of the businesses, every year, in Portugal and in Poland, we promote the Management Trainees Programme, which aims to recruit new graduates with bachelor's or master's degrees. In 2011, 51 trainees were accepted.

In 2011, in Portugal, 466 curricular and professional internships also took place.

In Poland, of note is the Summer internship programme called "Fruitful Holidays", which in 2011 had 48 young participants, as well as the "Experts League" programme, which aims to recruit new graduates and students in their last years of technical courses (e.g. IT) and train them to be the best experts in their subject.

7.3.2. "Move Within" Programme

In Portugal, in 2011, the Group launched an Internal Recruitment Programme which enables employees to play an active and determining part in designing their own professional path.

Under the slogan "Move Within", this programme is supported by an employee continuous development policy, whose objective is to provide new professional challenges and value those who contribute towards the Group's growth on a daily basis.

Throughout the year, 15 internal recruitment processes were disclosed, to which 123 employees applied. In all, and within the scope of this programme, 11 employees took up new roles within the Organization.

7.3.3. Appraisal and Remuneration

Through the appraisal systems and attractive and competitive remuneration practices, we intend to create and maintain dynamic and motivated teams leading to excellent performance.

Statistics:

• Number of promotions in 2011: 9,067;
• Increase in minimum salary compared to 2010: between 1.67% and 5.24%, depending on the Company (excluding Manufacturing).

7.3.4. Training

The training and development of our employees are two critical factors for the Jerónimo Martins Group.

2011	Training Indicators
Total no. of sessions	21,378
Total no. of training hours*	1,466,017

* Total nº of training hours = no. of training hours x no. of employees in training

Training the Unemployed

During the year, in Portugal seven training sessions took place covering 97 unemployed, of which 49 were then hired by the Group. These training sessions are comprised of short units which are part of the National Qualifications Catalogue (NQC) and have a duration of around two months.

32 unemployed also joined other training programmes, outside the scope of the NQC, in specific areas of our business (namely training for Butcher's and Bakery and Pastry staff), of which 29 were then hired.

7.4. Health and Safety in the Workplace

In 2011, the Group continued to invest in the area of Health and Safety in the Workplace (HSW), which it considers to be essential for its businesses.

Distribution - Portugal

In Distribution in Portugal, activities in this area focused on creating and developing eight competency centres, in subjects such as store safety, communications, training and information, IT application for managing personal protective equipment and developing an e-learning platform.

With regard to the "Safe Store" project, specifications were drawn up with a group of HSW requirements to be implemented during the store building and remodelling stage. At the same time, and in order to complement this document, a manual of safety signs was written. For building and remodelling at Recheio, "HSW Management during Works" technical information was developed.

In the area of training, investment was made in creating new courses and modules, as well as revising and adjusting existing training content. In 2011, a total of 23,049 hours of training in HSW were given to 6,240 employees.

At the same time, the HSW area at Distribution in Portugal carried out other activities in order to achieve improvements in the security of its processes and safety of its professionals, of which the following actions are highlighted:

• 441 audits were carried out;
• The risk assessment of the stores and logistics warehouses was updated.

Restaurants and Services

In the area of Restaurants and Services, in 2011 the following activities are highlighted:

• A study was carried out of the quality of the air inside the head office building, as well as measurements of the lighting in the same location;
• 22 HSW audits were carried out;
• The Manual for Self-Protection Measures for the stores, as well as the Safety Manual for the employees were drawn up;
• A total of 92 hours training in HSW were given.

Manufacturing

Unilever Jerónimo Martins consolidated its audits, in accordance with the plan for 2011, with an increase of 34% in the number of audits carried out (total of 411), as well as in the amount of topics and areas covered.

It should be noted that for the year under review, 2,069 training and awareness hours were given on the subject of safety.

At Unilever Jerónimo Martins' head offices an External Automatic Defibrillation Programme was also implemented and five machines were installed, thereby creating the conditions for improved aid to victims of cardiac arrest.

At the Fima, Olá and Lever plants, there was a strong investment in training in firstaid and fire-fighting.

With regard to Gallo Worldwide, the following initiatives are of note:

• The Automatic Defibrillation Programme was implemented, which was licensed by INEM (National Medical Emergency Institute), after which the company then had 12 first-aiders trained in Basic Life Support and Defibrillation;
• Change in uniforms, machine safety and installation of a new lift platform for access, reducing the risk of falling during certain operations to be eliminated.

Distribution - Poland

In 2011, the Health and Safety in the Workplace Management System certification process by Det Norske Veritas (DNV) was concluded, Jeronimo Martins Dystrybucja being the first company in the sector to be certified in accordance with standards PN-N-18001:2004 and OHSAS 18001:2007. Following this certification, 685 internal audits were also carried out in the central and regional offices, Distribution Centres and Biedronka stores.

Co-operation also began with Polska Rada Resuscytacji (Polish Resuscitation Council). The first joint project carried out was to write a first-aid manual.

	Frequency Figures	Severity Figures
2010	25.46	0.53
2011	23.23	0.46

Health and Safety in the Workplace indicators (Group)

Note: The Frequency Figures = number of accidents with sick leave / n.º of total work hours x 10⁶ ; the Severity Figures = the number of lost working days, as a consequence of accidents / n.º of total work hours x 10 ³ .

7.5. Occupational Health

In 2011, 35 health offices were built or remodelled, in a total of 175 offices within the whole of the Jerónimo Martins Group. This investment, together with the changes to the management structure of this service, was reflected in the number of medical exams carried out within the scope of Occupational Health - 46,085 exams, which represents a YOY increase of 6%.

7.6. Internal Social Responsibility

As far as Social Responsibility aimed at employees is concerned with the objective of improving the quality of their lives and those of their families (in Portugal this area of activity is called "Jerónimo Martins For Us"), the main strategic areas of activity remained the same: Health and Well-Being, Education and Social Welfare.

7.6.1. Health and Well-being

In Portugal, in the area of Health and Well-Being, there were programmes for Gymnastics at Work and Gymnastics for Posture Correction, Curative Medicine and Psychology consultations.

In Poland, through the programme "Let's take care of our health", free screening is given which all employees may receive at the premises of the various partners of this programme. Women can have screening for the detection of breast cancer and cervical cancer and men can have screening for cardiovascular diseases. In 2011, 3,219 women and 429 men participated. 1,347 people also benefited from the free 'flu vaccination programme (seasonal 'flu).

With a view to promoting an active lifestyle, in Poland football and volleyball tournaments also took place, with the participation of 300 men and 250 women.

7.6.2. Education

In Portugal, we continued with the Learn and Develop programme, through which 491 employees were able to obtain the equivalence of 6th, 9th and 12th grade schooling.

With regard to measures aimed at the families of employees, 14 Holiday Camps took place for a total of 917 children. We also offered school text books to 40 large families with low incomes and provided discount on school materials to around 6,500 families. Apart from that, advantageous conditions were created for buying school text books, which benefited 1,122 families. We also offered a school kit to the children of all employees who went to primary school (1st Year) for the first time in 2011, covering a total of 903 children.

In Poland, 500 children participated in the Holiday Camps and on International Children's Day, we offered gifts to 2,250 children of employees. We also offered a school kit to the children of all employees who went to primary school for the first time, a total of 2,166 children.

7.6.3. Social Welfare

Within the scope of Social Support, in Portugal we created the Social Emergency Fund, whose objective is to support employees in situations of extreme necessity.

In Poland, we continued with the programme "You can count on Biedronka", a fund for supporting employees in need, through cash donations. In 2011, we helped around 4,675 Biedronka employees. We also supported 97 families of employees with disabled children or those with chronic illness.

In Portugal, the Group also continued to provide life insurance to all employees with five or more years' seniority, and for the first time, offered baby kits to all employees who experienced maternity/paternity, with a total of 350 gifts.

In Poland, around 1,800 baby kits and also nearly 71 thousands Christmas kits were offered to Biedronka employees and their children.

Social Emergency Fund

The Social Emergency Fund (SEF) was created in order to support Group employees in great need, by providing support for food, health, education, legal matters and financial advice and training.

Amounts applied and how they were divided

In six months - as from September 2011 - the Group invested around 400 thousand euros in the SEF, supporting over 1,200 families through 2,200 measures.

The requests of support submitted by our employees within this initiative broke down into the following areas: food support (56%), health (36%), financial advice (36%) and legal advice (20%).

8. Commitments for 2012-2014

Promoting Good Health through Diet

• Develop policies that cover all the Group Companies:
• Packaging Manual;
• Quality and Food Safety Manual.
• Further improve the nutritional profile of the Private Brand products in Portugal and Poland:
• Provide more balanced products, with less salt, less fat (especially saturated fat), less sugar and higher fibre content;
• Ensure food solutions for consumer groups with special needs (diabetics, vegetarians, celiacs, lactose intolerants, and others);
• Repackage 800 SKU's in Poland, placing greater focus on the nutritional information on packaging;
• In the Meal Solutions area in Portugal, adjust the doses to those for healthy eating (focusing on the children target group); develop and implement nutritional information;
• Reduce the level of sugar and fat in Pastry products in Portugal;
• Develop and implement nutritional information in the Bakery, in Portugal.

Respecting the Environment

• Reduce the carbon footprint by 5% (LFL per EUR 1,000 of sales).
• Reduce water and electricity consumption in Portugal by 2% per year (LFL per m² of sales area);
• Increase the amount of customer waste collected in Portugal (used cooking oil, used small appliances and light bulbs, batteries and printer toners) by at least 15% by 2014;
• Increase the rate of recovery of waste in Portugal by at least 5 p.p. by 2014;
• In Poland, test and implement the Building Research Establishment Environmental Assessment Method (BREEAM) certification in Biedronka's ecostores.

Sourcing Responsibly

• Guarantee the continued procurement in all banners of at least 80% of food products from domestic suppliers;
• Introduce products with sustainability certification (UTZ certification, Fairtrade, MSC or otherwise) for at least:
• Private Brand two products;
• Perishables four products.

Supporting Surrounding Communities

In 2012 - 2014 we will consolidate the assessment of impacts and strengthen our social intervention.

• Keep focused on:

• The careful selection of the fields of social investment, according to our policy;

• Monitoring our investments and assessing impact in accordance with the LBG model (London Benchmarking Group);

• Increase the number of Pingo Doce stores in Portugal that support charities (2011: 75% of stores; goal to end of 2014: 95%);
• Increase the involvement in projects of a social nature in Poland, e.g. through the initiatives undertaken in partnership with Caritas Polska aimed at children;
• Expand the programme to combat child malnutrition in Poland, under the Partnerstwo dla Zdrowia project (Partnership for Health).

Being a Benchmark Employer

We will remain focused on internal social responsibility in the period 2012-2014. We will engage in more extensive dialogue with our employees, especially those of operations, with the aim of improving our understanding of their real situations and, thereby, increase our positive impact on their lives and consequently their motivation and loyalty.

Annual Report 11

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 2011

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, Information Technologies and International Expansion. The turnover from these services, as well as management services for negotiation on behalf of the Group Companies, reached 20.1 million euros.

1. The Group's operational performance in Poland

In Poland, Biedronka's sales grew 20.4% (+24.2% in zloty) to 5.8 billion euros. The like-for-like growth of 13.4% and the implementation of the Company's ambitious expansion plan contributed to this performance.

Biedronka's implementation capacity is noteworthy, specifically in relation to the store network expansion plan, with the opening of 239 new locations and an increased market presence in the large cities (accounting for 25% of store openings in 2011). The Company ended the year with a total of 1,873 stores.

Biedronka recorded EBITDA growth of 26.2% (+30.6% in zloty), reaching 458.4 million euros. The ability to promote the growing quality of the value proposition presented to the consumer; keeping the price leadership of the market, with sales growth in the same set of stores; as well as the implementation of an ambitious expansion plan that increased the sales area of Biedronka last year by 16.6%, are all the more relevant when an increase in EBITDA margin from 7.6% in 2010 to 7.9% in 2011 is recorded.

This positive development of Biedronka's margin reflects the Company's disciplined performance and its leadership in terms of costs, which allow it to have a sustainable price leadership, thus allowing the efficiency gains obtained from a growing scale of operations to be clearly demonstrated through an improved EBITDA margin.

2. The Group's operational performance in Portugal

Pingo Doce

Pingo Doce continued to show signs of remarkable resilience in a negative macroeconomic climate, recording 4.2% growth of sales, reaching 2.9 billion euros, which was driven by seven stores and a likefor-like growth of 0.8%. The Company's like-for-like sales reflected an increase in the number of visits, which was offset to a certain extent by the reduction of the average ticket, greatly influenced by the decrease in consumer purchasing power.

EBITDA grew 3.4% at Pingo Doce, and the respective margin was 6.7% of sales (6.8% in 2010). It should be noted that in this Company the sales volume increased, above the growth of sales in terms of value, and Pingo Doce, even so, was able to dilute this impact on the development of costs by means of endeavour and efficiency drives at all levels of the organisation. The increase in the petrol station business area, with its increased weight in the Company's sales and lower margin, also had a natural dilution effect.

Recheio

In 2011, the sales of Recheio recorded 4.9% growth, reaching 756.1 million euros. This result is due to the 2.4% increase in like-for-like sales and a new food service platform commencing operations. It should be mentioned that in the two segments in which the Company operates – Traditional Retail and HoReCa – it continues to record sales growth, despite the fact that those segments developed negatively in the marketplace.

Recheio's strong competitive position enabled the Company to post a growth of 8.2% of generated EBITDA, the margin of which grew from 6.2% in 2010 to 6.4% in 2011, driven by the good sales performance.

Madeira

The Group's two banners operating in Madeira recorded a 14.4% growth in sales, reaching 162.3 million euros, posting a 7.6% like-for-like growth, which benefited from the re-opening of the company's two main stores in June 2010, following their total refurbishment. The Company is now the market leader in this region.

Pingo Doce presented an excellent sales performance, with a growth of 16.3%, reaching 124.6 million euros. The like-for-like growth posted by the company in Madeira was 7.3%.

In 2011, Recheio's sales growth was 8.5%, reaching 37.7 million euros.

Manufacturing

In Manufacturing, the strong competitive environment in a negative market climate led the year's sales to decline by 3.2%, reaching 228.4 million euros. The Company's sales performance in the majority of categories, driven by the promotional efforts undertaken in the last quarter of the year, are worth highlighting. Sales were higher than the market, leading to an increase in market share in key portfolio areas.

In the Manufacturing area there was a reduction of the EBITDA margin in the year, as a result of the Company's efforts to maintain its competitiveness in a scenario of rising prices of the raw materials.

Marketing, Representations and Restaurant Services

Sales in the Marketing, Representations and Restaurant Services area fell by 1.1%, reaching 89.1 million euros, reflecting the impact of the economic environment on some of the categories.

3. Perspectives for 2012

To Biedronka, the slowdown of private consumption growth and increasing price sensitivity among Polish consumers will be factors to take into account in 2012. On the other hand, inflation may be higher than expected if the devaluation of the zloty continues in 2012.

The expansion plan sets out the opening of about 250 stores in 2012, as well as the inauguration of two distribution centres, one of which is a replacement for one that has been closed. Biedronka's operations are now going to be organised into 10 regions in Poland.

Investment in layout changes will also be made, which will be undertaken in all Company stores in 2012. This change will entail the phased closure of every store for two to three days, which is expected to be offset by the increase of like-for-like subsequent to the stores' remodelling. It is expected that this project contributes positively to increasing the consumers' awareness in relation to the quality and service at the lowest price in the market. A revision and improvement to the packaging of the Company's Exclusive Brands products will also be undertaken, with the same aim.

The main objective of Pingo Doce will be the growth of like-for-like market share, with a great deal of attention to cost management, with the objective of maintaining a stable EBITDA margin. Similarly, the focus on price competiveness and the consolidation of the investment in Family Baskets will continue.

The Company will continue to invest, but in a more selective manner given the present climate. Even so, Pingo Doce plans to open about five stores and renovate others, in order to improve the quality and service supplied by the Company.

Recheio will continue to focus on its mission: to be the main business partner of its customers of the HoReCa and Traditional Retail channels, through a better value proposition than its competitors. This value proposition is based on the supply of food products and quality services at very competitive prices, as well as the daily construction of a lasting relationship of trust with its customers.

In 2012, Pingo Doce in Madeira will focus on increasing its market share and in reducing its operating expenses, taking into account the expected further decrease in consumer purchasing power due to the various foreseen austerity measures, especially the increase in taxes (VAT, income tax, tax on oil and energy products and the end of the subsidies), but also due to an increase in unemployment.

Recheio in Madeira will continue with its investment in Perishables that began in 2011, especially in the Fruit and Vegetables category. The main objective is to strengthen the Company's position in the HoReCa channel, where this segment is still dominated by local market players. There will be a focus on increasing the business's profitability, especially in the wholesale distribution service, following the investments that were made to improve it.

For 2012, the main objective in Manufacturing area is to consolidate the gains in market share obtained in 2011, and to improve profitability.

In JMDPC the expected slowdown in consumption in Portugal, plus our customers difficulties in obtaining loans mean that the outlook for 2012 is highly uncertain. A strong commitment to exports and the launch of new represented brands in Portugal will the focus to achieve sustained growth.

The Group's business activities are analysed in further detail in the Consolidated Management Report that accompanies the 2011 Consolidated Financial Statements.

4. Company's performance as a Holding of investments

JMH, as the Holding and manager of company holdings, presented in 2011 negative operating results of 0.2 million euros, which represents a decrease of 5.6 million euros compared with 2010. This decrease is due mainly to the higher operating costs regarding international expansion and the increase in the exceptional operating losses regarding restructuring plans and provisions for risks and contingencies.

The financial debt was reduced by 109.0 million euros to 22.0 million euros (131.0 million euros in 2010). This decrease was due mainly to the disposal of one subsidiary in the amount of 119.5 million euros.

The net financial costs in 2011 were affected by gains in derivative instruments and exchange differences in intercompany loans, in the net amount of 10.4 million euros. Not considering these effects, the net financial costs were in 2011 at the same level than 2010.

Thus, throughout the year, in keeping with the concern for aligning the organisational structure with its strategy, the Jerónimo Martins Group prepared and carried out a reorganisation of the Group's businesses, with the objective of i. simplifying and clarifying the holdings structure, isolating different business groups, reducing the normal complexity that arises from companies operating different businesses (Distribution and Manufacturing) and/or in different countries (Portugal, Poland and Colombia); ii. protecting the Group's growth strategy, optimising the sources of financing and ensuring access to financial liquidity by establishing a sub-holding for each business area based in a financial market of great maturity, liquidity, internationally credibility and transparent and stable law-making, such as the Netherlands and iii. minimising the corporate levels between the Group's holding and the various business areas, thereby enabling free cash flow to circulate more efficiently and increasing the relation between the earnings generated and the dividends paid to Jerónimo Martins' shareholders.

As a result of this re-organisation, three different business areas were made autonomous and, simultaneously, another was created with a total of units being structured under four sub-holding companies: Warta B.V., which aggregates the businesses in Poland; Tagus B.V., which brings together the shareholdings in Distribution in Portugal; Monterroio B.V., which encompasses the manufacturing and service areas in Portugal, and finally, New World B.V., which is in charge of the shareholdings for the business to be developed in Colombia.

In implementing this reorganization, Jerónimo Martins created the companies described above, having contributed to their capital with investments previously held in each of the restructured business areas. Under current tax legislation only the holdings of more than 50% were contributed, with tax neutrality, at historical cost, while the remaining shares were contributed at market values, which led to the recognition of gains amounting to 304.6 million.

5. Risk Management

The Company, and in particular, its Board of Directors, dedicates a great deal of attention to the risks affecting the businesses. 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. The Group's Risk Management Policy, which aims to stimulate and reinforce the type of behaviour necessary for that success, provides the necessary guidance to the Management of the Group to manage risks and opportunities.

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 these risks is focused on the unpredictable nature of the financial markets and aims to minimize its adverse effects on the Company's financial performance. To achieve this, certain types of exposure are managed using derivative financial instruments.

Activity in this area is managed by the Financial Operations Department, under the supervision of the Executive Committee. This Department is responsible for identifying, assessing and hedging financial risks, in line with the policies and guidelines defined by the Board in April 2009.

a) Market Risk

Foreign Exchange Risk

In 2011 JMH hedged the economic risk of its exposure to the exchange rate of Zloty. To do so, JMH entered into currency forwards with a notional value of 375 million Zlotys, with maturities in September and December 2011. On 31 December 2011, JMH did not hold any derivative currency hedging instrument.

Price Risk

As a result of its investment in Banco Comercial Português (BCP), Jerónimo Martins is exposed to equity price risk. At 31 December 2011, a negative 10% variation in the trading price of BCP shares would have a negative effect of 27.7 thousand euros in Other Reserves (negative 113.5 thousand euros at 31 December 2010).

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 continuously. 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 managed centrally. 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 deposits, short-term investments and derivative financial instruments with positive fair value, as at 31 December 2011 and 2010:

Annual Report 11 Management Report

			(€'000)
		2011	2010
Rating Company	Rating	Balance	Balance
Standard & Poor's	[AA- : AA]	43,013	20
Standard & Poor's	[A- : A+]	69,313	42,268
Moody's	[A- : A+]	60,338	-
Standard & Poor's	[BBB- : BBB+]	51	7
Standard & Poor's	[BB : BB+]	2,523	-
	Not Available	9	4
	Total	175,247	42,299

The ratings shown correspond to those given by Standard and Poor's. When not available, the company uses Moody's notations. The maximum exposure to credit risk, at 31 December 2011 and 2010 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 mitigate the impact of credit spreads increase 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 financial plans which are reviewed at least twice a year.

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

			(€'000)
Exposure to liquidity risk
2011	Less than 1 year	1 to 5 years	More than 5 years
Borrowings
Loans	52,747	163,695	-
Derivative Financial Instruments	1,164	1,035	-
Creditors	1,311	-	-
Operational Lease Liabilities	370	362	-
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	-

6. Information on environmental matters

There are no environmental matters likely to affect the company's financial performance or its future development.

7. Results Appropriation Proposal

In the financial year of 2011, Jerónimo Martins, SGPS, S.A. declared consolidated profits of EUR 340,267,623 euros and a profit in the individual accounts of 581,468,551.10 euros.

In accordance with the dividend distribution policy and included in the Corporate Governance chapter (page 198), the Board of Directors proposes to the Shareholders that the net profits be applied in the following manner:

• Legal Reserve ...........................29,073,427.56 euros
• Free Reserves .........................379,575,713.04 euros
• Dividends ...............................172,819,410.50 euros

This proposal represents a gross dividend payment of 0.275 euros per share, excluding own shares in the portfolio.

8. Statements for legal purposes

Under the Law, the Board of Directors is required to provide the following information:

• a) In addition to the facts referred above, and those that, in greater detail, are given in the Report that accompanies the Group's Consolidated Financial Statements for 2011, no other situation has come to the Board of Director's knowledge after the end of the year which warrants a special mention;
• b) Under the terms of Article 21 of Decree-Law nº 411/91, from 17 October, there are no debts of arrears of payments of Social Security costs;
• 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 2011 was the same as on 31 December 2010: 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, 6 th March 2012

The Board of Directors

INCOME STATEMENT BY FUNCTIONS

FOR THE YEARS ENDED 31 DECEMBER 2011 AND 2010

	Euro thousand
	Notes	2011	2010
Services rendered		20,143	19,638
Cost of the services rendered		(10,789)	(9,705)
Gross profit		9,354	9,933
Other operating revenues		195	203
Administrative costs		(3,057)	(2,632)
Other operating costs		(2,953)	(1,143)
Exceptional operating profits/losses	10	(3,742)	(1,010)
Operating profit		(203)	5,351
Net financial costs	5	4,980	(5,372)
Gains/Losses in subsidiaries and associated companies	8	582,471	89,113
Gains/Losses in other investments	9	205	97
Profit/loss before taxes		587,453	89,189
Income taxes	7	(5,984)	171
Net profit/loss		581,469	89,360
Basic and diluted earnings per share – euros	22	0.925	0.142

To be read with the attached notes to the Individual Financial Statements

BALANCE SHEET AT 31 DECEMBER 2011 AND 2010

Euro thousand Notes 2011 2010 Assets Tangible assets 11 394 315 Intangible assets 12 - 10 Investment properties 13 2,470 2,470 Investments in subsidiaries 14.1 667,958 217,962 Investments in joint-ventures 14.2 - 6,663 Loans to subsidiaries 15.1 699,641 413,581 Loans to joint-ventures 15.2 - 188,727 Available-for-sale financial assets 16 277 1,135 Deferred tax assets 17 5,590 6,772 Total non-current assets 1,376,330 837,635 Taxes receivable 17 193 159 Loans to subsidiaries 15.1 63,050 113,273 Trade debtors, accrued income and deferred costs 18 6,998 12,670 Cash and cash equivalents 19 175,256 42,308 Total current assets 245,497 168,410 Total assets 1,621,827 1,006,045 Shareholders' equity and liabilities Share capital 21.1 629,293 629,293 Share premium 21.1 22,452 22,452 Own shares 21.2 (6,060) (6,060) Other reserves 21.3 (2,870) (2,365) Retained earnings 21.4 751,892 170,423 Total shareholders' equity 1,394,707 813,743 Borrowings 23 150,000 85,000 Derivative financial instruments 28 1,774 2,431 Employee benefits 29 16,492 13,868 Provisions for risks and contingencies 26 5,658 - Deferred tax liabilities 17 957 243 Total non-current liabilities 174,881 101,542 Trade creditors, accrued costs and deferred income 27 5,767 3,640 Borrowings 23 45,000 85,040 Derivative financial instruments 28 500 517 Taxes payable 17 972 1,563 Total current liabilities 52,239 90,760 Total Shareholders' equity and liabilities 1,621,827 1,006,045

To be read with the attached notes to the Individual Financial Statements

263

STATEMENT OF GAINS AND LOSSES RECOGNISED IN EQUITY

		Euro thousand
	2011	2010
Fair value of cash flow hedging	353	(422)
Fair value of available-for-sale financial assets	(858)	(513)
Gains/losses directly recognised in equity	(505)	(935)
Net profit	581,469	89,360
Total gains/losses recognised	580,964	88,425

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

	Notes	Share Capital	Share Premium	Own shares	Other reserves	Retained earnings	Shareholders' equity
Balance sheet at 1st January 2010		629,293	22,452	(6,060)	(1,430)	302,900	947,155
Fair value of available-for-sale financial assets	16				(513)		(513)
Fair value of cash flow hedgings - Gross amount - Deferred tax	28				(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						(221,837)	(221,837)
Balance sheet at 31st December 2010		629,293	22,452	(6,060)	(2,365)	170,423	813,743
Fair value of available-for-sale financial assets	16				(858)		(858)
Fair value of cash flow hedgings - Gross amount - Deferred tax	28 17.1				480 (127)		480 (127)
Gains/losses directly recognised in equity		-	-	-	(505)	-	(505)
Net profit in 2011						581,469	581,469
Total gains/losses recognised during the year Dividend payment		-	-	-	(505)	581,469 -	580,964 -
Balance sheet at 31st December 2011		629,293	22,452	(6,060)	(2,870)	751,892	1,394,707

To be read with the attached notes to the Individual Financial Statements

Euro thousand

CASH FLOW STATEMENT

FOR THE YEARS ENDED 31 DECEMBER 2011 AND 2010

			Euro thousand
	Notes	2011	2010
Operating Activities
Cash received from customers and other debtors		33,063	18,284
Cash paid to suppliers and employees		(21,095)	(15,510)
Cash generated from operations	20	11,968	2,774
Interest and other similar costs paid	5	(7,027)	(5,120)
Income taxes paid		(993)	(306)
Cash Flow from operating activities		3,948	(2,652)
Investment activities
Disposals of tangible assets
Disposals of investments in subsidiaries	14	-	25
Repayment of loans and capital contributions from subsidiaries	15	119,500	1,254
Interest received	8	340,466	187,868
Dividends received	8	13,800	11,226
Acquisition and capital increase of subsidiaries	14	6,388	66,204
Acquisition and capital increase of joint-ventures		(72)	-
Loans and capital contributions given to subsidiaries	15	-	(314)
Acquisition of tangible assets	11	(388,005) (132)	(31,378) (41)
Cash flow from investment activities		91,945	234,844
Financing activities
Received from loans	23	100,000	50,034
Interest and similar income received	5	12,095	305
Repayment of loans	23	(75,040)	(20,000)
Dividends paid		-	(221,837)
Cash Flow from financing activities		37,055	(191,498)
Net changes in cash and cash equivalents		132,948	40,694
Cash and cash equivalents changes
Cash and cash equivalents at the beginning of the year		42,308	1,614
Net changes in cash and cash equivalents		132,948	40,694
Cash and cash equivalents at the end of the year	19	175,256	42,308

To be read with the attached notes to the Individual Financial Statements

Index to the Notes to the Individual Financial Statements	Page
1. Activity 267
2. Accounting policies 267
3. Corporate reorganization 278
4. Operating costs 279
5. Net financial costs 280
6. Operating leases 280
7. Income tax recognised in the income statement 281
8. Gains/Losses in subsidiaries and associated companies 281
9. Gains/Losses in other investments 282
10. Exceptional operating profits/losses 282
11. Tangible assets 282
12. Intangible assets 283
13. Investment property 284
14. Investments in subsidiaries and joint ventures 284
15. Loans 285
16. Available-for-sale financial assets 285
17. Taxes 286
18. Trade debtors, accrued income and deferred costs 287
19. Cash and cash equivalents 287
20. Cash generated from operations 287
21. Capital and reserves 287
22. Earnings per share 288
23. Borrowings 289
24. Financial debt 290
25. Financial risks 290
26. Provisions and adjustments to the net realisable value 290
27. Trade creditors, accrued costs and deferred income 291
28. Derivative financial instruments 291
29. Employee benefits 292
30. Guarantees 294
31. Contingencies 294
32. Subsidiaries, joint-ventures and available-for-sale investments 295
33. Group Companies and Joint-Ventures– Direct and indirect stakes 296
34. Related parties 297
35. Interests in joint ventures 300
36. Information on environmental matters 300
37. Additional information requested by law 300
38. Events after the balance sheet date 300

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 71 people (64 in 2010).

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 66,270 people (61,061 in 2010).

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 6 th March 2012.

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), as at 31 December 2011.

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 assets 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 2011 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 were already endorsed by the European Union and mandatory for 2011. None of the standards detailed below have a material impact on individual financial statements of JMH:

• i) 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. Its application is mandatory for accounting periods beginning after 30 June 2010;
• ii) 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. Its application is mandatory for accounting periods beginning after 31 December 2010;
• iii) 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. Its application is mandatory for accounting periods beginning after 31 December 2010;
• iv) 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. Its application is mandatory for accounting periods beginning after 30 June 2010.

Also in 2011 the European Commission adopted several changes to International Accounting Standards issued by the IASB and Interpretations issued by the IFRIC, which based on the assessment made by JMH, do not have a significant impact on the Financial Statements:

• i) The Regulation no. 149/2011, which adopted some improvements to IFRS 1, IFRS 3, IFRS 7, IAS 1, IAS 27, IAS 34 and IFRIC 13, which were issued by the IASB in May 2010. Its implementation is mandatory for financial years beginning on or after January 1, 2011;
• ii) The Regulation no. 1205/2011, which adopted amendments to IFRS 7 Financial Instruments: Disclosures, these amendments that were issued by the IASB in October 2010, clarifies the disclosure requirements in a transfer of financial assets. Its application is mandatory for financial years beginning on or after July 1, 2011.

In addition, the IASB issued between 2009 and 2011, 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 2015;
• ii) 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;
• iii) In December 2010, IAS issued an amendment to IAS 12 Income Taxes, that provides a practical solution when 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;
• iv) In May 2011, IASB issued IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 – Disclosures of interests in Other Entities. These standards are effective for annual periods beginning on or after 1 January 2013;
• a. IFRS 10 partially replaces IAS 27 Consolidated and Separate Financial Statements and SIC 12 – Consolidation – Special Purpose Entities. The statndard provides a single consolidation model that identifies control as the basis for consolidation for all types of entities;
• b. IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC 13 Jointly Controlled Entities – Non-monetary Contributions by Venturers. The standard establishes principles for the financial reporting by parties to a joint arrangement;
• c. IFRS 12 combines, enhances and replaces the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities;
• d. As a consequence of these new IFRSs, the IASB also issued amendments and retitled IAS 27 – Separate Financial Statements and IAS 28 – Investments in Associates and Joint Ventures.
• v) In May 2011, the IASB issued IFRS 13 Fair Value Measurement, which defines a framework for measuring fair value and requires disclosures about fair value measurements. This standard is effective for annual periods beginning on or after 1 January 2013;
• vi) In June 2011, the IASB issued amendments to IAS 19 Employee Benefits The amendments will improve the recognition and disclosure requirements for defined benefit plans. These amendments are effective for annual periods beginning on or after 1 January 2013;
• vii) In June 2011, the IASB issued amendments to IAS 1 Financial Statements Presentation. These amendments improve presentation of components of other comprehensive income. These amendments are effective for annual periods beginning on or after 1 July 2012;
• viii) In October 2011, the IFRIC issued IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine. This interpretation is effective for annual periods beginning on or after 1 January 2013;
• ix) In December 2011, the IASB issued amendments to IFRS 7 Financial Instruments: Disclosures, which includes new disclosures requirements related with offsetting of financial assets and financial liabilities. These amendments are effective for annual periods beginning on or after 1 January 2013;
• x) In December 2011, the IASB issued amendments to IAS 32 Financial Instruments: Presentation, to clarify the application requirements of the offsetting of financial assets and financial liabilities. These amendments are effective for annual periods beginning on or after 1 January 2014.

The application of these standards does not result in any impact on financial information and will not result in changes to JMH's Equity.

2.2 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.

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 profit and loss.

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), at 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 in the results of the period, except in relation to cash flow hedge derivatives. Recognition of changes in the fair value of hedge instruments depends on the nature of the hedged risk and the type of hedge used.

2.4 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 around 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 takes into account economic contributions ahead of anything else. The implications of adding any new instrument to a portfolio of derivatives are also taken into account, namely, the 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 with the underlying exposure are carried at the interest rate of the hedging instruments.

When a hedge instrument expires or is sold, or when the hedge ceases to meet the criteria required for hedge accounting, the changes in the fair value of the derivative, that are accumulated in reserves, are recognised in the results when the hedged operation also affects the results.

2.5 Tangible assets

Tangible assets are recognised at acquisition cost 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 in 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 at the lower of fair value of leased assets or present value of outstanding lease payments.

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

Rental payments are split into a financial charge and a reduction of liability. Financial charges are recognised as costs over the lease period, so as to produce a constant periodic interest rate on the lessor's financing debt.

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

The estimated useful life of assets are reviewed and adjusted when necessary, at the balance sheet date. Residual values are not taken in consideration, since it is JMH's intention to use the assets until the end of their economic life.

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 an intangible asset 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.

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.

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.

Amortisation of the intangible assets is calculated by the straight-line method, on a duodecimal basis on acquisition cost.

The most important annual depreciation rates are as follows (in percentage):

	%
Development expenditure	20-33.33

The estimated useful life of assets are reviewed and adjusted when necessary, at the Balance Sheet date.

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 the JMH balance sheet on their trade or contracting date, which is the date on which JMH commits to acquiring an asset. Financial assets are initially recognised by their fair value plus directly attributable transaction costs, except for financial 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's 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 assets held for trading, loans and receivables and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired.

Financial assets 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 financial 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 on 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 assets

The available-for-sale financial assets are non derivative financial assets that: (i) JMH intends to maintain for an indetermined 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 assets and recognised in the accounts as non-current assets.

These financial assets are marked to market, i.e., they are stated at the respective market price value as at the Balance Sheet date. When there is medium term expectation of significant decrease of the value below the listed value, impairment losses are registered to reflect permanent losses.

If the investments are unlisted, JMH uses, whenever possible, valuation techniques to determine 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. Where none of these valuation techniques is feasible, they are measured at cost. When so justified, provisions for impairment losses are recognised.

Fair value changes 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 as gains in other investments, when the right to receive the payment is established.

2.9 Investment Property

Investment property, are land and buildings that are 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 for 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 are considered.

Changes to fair value of investment property are recognised in the income statement, in Gains/Losses in other investments, in accordance with IAS 40, since it is related with the expected return of a financial investment in assets owned for appreciation.

Whenever, as a result of changes in their expected use, tangible assets are transferred to investment property, the assets are measured at their fair value and any difference to its carrying amount is recognised in revaluation reserves.

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 relating to 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 impairment losses.

2.11 Cash and cash equivalents

Cash and cash equivalents 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 indicators exist, the assets recoverable amount is estimated.

The recoverable amount of assets with indicators of potential impairment loss is determined annualy. 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 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 do not generate independent cash flow is determined together with the cash-generating unit to which these assets belong.

Reversal of impairment losses

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, which would have been determined for the asset if no impairment loss was recognised.

2.12.2 Impairment of financial assets

At each reporting date JMH analyses if there is objective evidence that a financial asset or group of financial assets is impaired.

The recoverable amount of receivables corresponds to the present value of estimated future cash inflows, using as discount rate the actual interest rate implicit in the original operation.

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 assets

In the case of financial assets classified as available for sale, a prolonged or significant decline in the fair value of the assets below its cost is considered to be an indicator that the assets are impaired. If that indicator exists, 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 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.

An impairment loss 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 are no longer considered as overdue and are considered as new credits.

2.13 Share capital

Share capital corresponds to the nominal value of the ordinary shares issued.

Share premium is recognised when the issued share price exceeds its nominal value. Costs incurred with the issuance of new shares are recognised directly in this heading, 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

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.

2.16 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 those 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 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 of liabilities assumed is made using the immediate rents method, taking into account that the plans include retired employees. The discount rate is the interest rate on medium and long-term risk-free bonds, for the period of the estimated maturity of the liabilities. 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 programme of seniority awards existing in JMH comprises a component of defined contribution and a defined benefit.

The defined contribution component consists of a life insurance and a contribution to a supplementary retirement plan, to the employees covered by this programme, starting from a specific number of years of service. These benefits are awarded only when employees reach the seniority defined in the programme, and the costs related to this component are recognized in the year to which they relate.

The component of defined benefit consists 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 specialised independent entity.

The costs of current services, interest as well as actuarial gains or losses are recognised as costs 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 announced publicly.

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 estimated future operating losses or estimated profits from the disposal of assets.

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 at 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

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.

Exceptional Operating profits/losses

The exceptional operating profits/losses (non recurrent) that by its nature or by its materiality, distort the financial performance of JMH, as well as their comparability, are presented in a separate line of the Income Statement by Function. These results are excluded from the operational performance indicators adopted by Management.

2.21 Income tax

Income tax includes current and deferred taxes. Income tax is recognised in the income statement except when relating to gains or losses directly recognised in equity, in which case it is stated directly in equity.

Tax on current income is calculated in accordance with tax criteria prevailing as of the balance sheet date.

Deferred tax is calculated in accordance with the balance sheet liability method on temporary differences between the 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 derecognised 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.

Fair value of financial instruments

The fair value of financial instruments not quoted on an active market is determined based on valuation methods and financial theories. The use of valuation methodologies requires using assumptions, with some assumptions requiring the use of 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 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 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.

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 liabilities of the pension plan. Changes to these assumptions may have a significant impact on the values determined. If the discount rate changes in 50 basis points, total liabilities would be EUR thousand 723 higher or EUR thousand 676 lower.

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 in 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 include 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

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 assets

Listed financial assets are recognised in the Balance Sheet at their fair value.

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.

Creditors and accruals

These financial instruments include mainly short-term financial liabilities and for that reason their accounting value at the 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, 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.

	2011	Level 1		Level 2	Level 3
Assets measured at fair value
Available-for-sale financial assets
Equity Investments	277		277
Liabilities measured at fair value
Derivatives used for hedging	2,274			2,274
	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

2.25 Financial instruments by category

	Derivatives defined as hedging instruments	Borrowings and accounts receivable	Available for-sale financial assets	Other financial liabilities	Total assets and financial liabilities
2011
ASSETS
Cash and cash equivalents	-	175,256	-	-	175,256
Available-for-sale financial assets	-	-	277	-	277
Loans to subsidiaries	-	762,691	-	-	762,691
Debtors and accrued income	-	6,886	-	-	6,886
TOTAL ASSETS	-	944,833	277	-	945,110
LIABILITIES
Borrowings	-	-	-	195,000	195,000
Derivative financial instruments	2,274	-	-	-	2,274
Creditors and accrued costs	-	-	-	2,957	2,957
TOTAL LIABILITIES	2,274	-	-	197,957	200,231
2010
ASSETS
Cash and cash equivalents	-	42,308	-	-	42,308
Available-for-sale financial assets	-	-	1,135	-	1,135
Loans to subsidiaries	-	715,581	-	-	715,581
Debtors and accrued income	-	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 and accrued costs	-	-	-	1,416	1,416
TOTAL LIABILITIES	2,948	-	-	171,456	174,404

3. Corporate reorganization

As described in the management report, during the year 2011 Jerónimo Martins implemented a corporate reorganization, with the creation of four sub-holdings, which allowed simplifying and structuring their holdings according to the strategy for future development of their businesses, and ensuring access to liquidity in financial markets with greater maturity, liquidity and international credibility. In this sense, the following companies were created:

• Warta – Retail & Services Investments B.V.

• Tagus Retail & services Investments B.V.

• Monterroio Industry & Services Investments B.V.
• New World Investments B.V.

Consequently, the investments and medium and long term loans of the following companies were contributed to the capital of the above companies:

JMR – Gestão de Empresas de Retalho, SGPS, S.A. Recheio, SGPS, S.A. Jerónimo Martins – Distribuição de Produtos de Consumo, Lda. Unilever Jerónimo Martins, Lda. Gallo Worldwide, Lda. Bliska Sp. Z.o.o. Servicompra, SGPS, Lda. Hermes – Sociedade de Investimentos Mobiliários e Imobiliários, Lda.

The impact of the above transactions in the financial statements is summarized below:

	Amount
Balance Sheet
Investments in subsidiaries	311,260
Investments in joint-ventures	(6,663)
Loans to subsidiaries	189,574
Loans to joint-ventures	(189,574)
	304,597
Income Statement
Gains/Losses in subsidiaries and associated companies	304,597

4. 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 policies.

4.1 Operational costs by nature

JMH operational costs by nature, excluding the exceptional operating costs detailed in note 10, are as follows:

	2011	2010
Supplies and services	9,026	5,128
Rents	864	735
Staff costs	7,589	7,756
Depreciations and profit/loss with tangible and intangible assets	100	116
Other operational profit/loss	(975)	(458)
	16,604	13,277

4.2 Staff costs

	2011	2010
Wages and salaries	5,154	5,865
Social security	626	502
Employee benefits (see note 29)	3,782	2,171
Other staff costs	758	334
	10,320	8,872

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 2011 was 71 (2010 was 64). The company's average number of employees during the year was 69 (62 in 2010).

In 2011, the difference between the total staff costs stated in note 4.1, and the total amount of note 4.2, in the amount of EUR thousand 2,731, referes to exceptional operating costs associated with the change in the actuarial assumptions (EUR thousand 5) and exceptional operating costs related with restructuring plans (EUR thousand 2,726). In 2010, the same difference in total staff costs, in the amount of EUR thousand 1,116 referes to exceptional operating costs associated with the change in the actuarial assumptions.

5. Net financial costs

	2011	2010
Interest expense	(5,855)	(4,499)
Interest received	1,248	257
Fair value of held for trade financial assets
- Derivative instruments (see note 28)	10,845	-
Net foreign exchange	(429)	84
Other financial costs and gains	(829)	(1,214)
Net financial costs	4,980	(5,372)

Interest expense includes the interest related with loans measured at amortised cost as well as, interest on cash flow hedge derivatives (note 28).

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 held for trade financial assets are referred in note 28.

5.1 Fair value of financial instruments that do not qualify as hedge accounting recognised in the income statement

	2011	2010
Held for Trade derivatives
Currency forwards	10,845	-
	10,845	-

6. Operating leases

The costs recognised in the income statement as operating leases are as follows:

	2011	2010
Buildings – Third parties	161	170
Buildings - Group	202	204
Vehicles – Third parties	415	330
IT equipment – Third parties	37	21
	815	725

Apart from the costs above, there were occasional rentals throughout the year which amounted EUR 49 thousand (2010: EUR 10 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:

	2011	2010
Payments in less that 1 year	370	296
Payments between 1 and 5 years	362	300
Payment in more that 5 years	-	-
Total future payments	732	596

All the contracts may be cancelled upon the payment of a penalty clause. At the end of 2011, the liabilities arising from penalty clauses were EUR 89 thousand (2010: EUR 82 thousand).

7. Income tax recognised in the income statement

7.1 Income tax

	2011	2010
Current tax
Current tax of the year	(1,041)	(541)
Adjustment to prior year estimation	-	-
	(1,041)	(541)
Deferred tax
Temporary differences originated or reversed in the year	(5,435)	(3,002)
Change to the recoverable amount of tax losses and temporary differences from previous years	3,666	3,714
	(1,769)	712
Other losses related to taxes
Impact of changes in estimates for tax litigations	(3,174)	-
	(3,174)	-
Total income tax	(5,984)	171

Due to recent developments relating to tax litigations as describe in note 31, JMH has reviewed the provisions relating to these outstanding tax cases. The effect from expected potential losses is disclosed as other losses related to taxes.

7.2 Reconciliation of effective tax rate

	2011	2010
Profit/loss before taxes	587,453	89,189
Income tax using the Portuguese corporation tax rate – 26.5%	(155,675)	(23,635)
Non taxable or non recoverable results	146,962	20,663
Non-deductible expenses	(262)	(228)
Change to the recoverable amount of tax losses and temporary differences from previous years	3,666	3,714
Adjustment to prior year estimation	-	-
Results subject to special taxation	(675)	(343)
Income tax for the year	(5,984)	171
Effective tax rate	1.02%	(0.19%)

8. Gains/Losses in subsidiaries and associated companies

	2011	2010
Dividends received	6,388	66,167
Interest from loans to subsidiaries and associated companies	13,322	11,258
Disposal of subsidiaries and associated companies	119,445	1,229
Adjustments of acquisition cost of shares in subsidiaries (note 26)	138,719	10,459
Corporate reorganization (see note 3)	304,597	-
	582,471	89,113

9. Gains/Losses in other investments

	2011	2010
Banco Comercial Português (BCP) dividends	-	37
Sale of rights over BCP shares	25	-
Rents from investment properties	180	60
	205	97

10. Exceptional operating profits/losses

	2011	2010
Reimbursement of notary fees resulting from court decision	1,473	106
Impact of actuarial assumptions changes	(5)	(1,116)
Costs related with restructuring plans	(2,726)	-
Provisions for risks and contingencies (note 26)	(2,484)	-
	(3,742)	(1,010)

11. Tangible assets

11.1 Changes occurred during the year

Gross assets

	01/01/2011 Opening balance	Increases	Disposals	Transfers and write-offs	31/12/2011 Closing balance
Buildings and other constructions	248	92		- -	340
Transport equipment	79	-		- -	79
Tools and utensils	2	-		- -	2
Office equipment	1,879	77		- -	1,956
Other tangible assets	389	-		- -	389
	2,597	169		- -	2,766

Accumulated depreciation and impairment

	01/01/2011 Opening	Increases	Disposals	Transfers and	31/12/2011 Closing
	balance			write-offs	balance
Buildings and other constructions	146	30		- -	176
Transport equipment	57	6		- -	63
Tools and utensils	2	-		- -	2
Office equipment	1,751	54		- -	1,805
Other tangible assets	326	-		- -	326
	2,282	90		- -	2,372
Net book amount	315				394

11.2 Changes occurred in the previous 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

11.3 Equipment under financial lease

At the end of 2011 and 2010, there was no equipment under financial lease.

11.4 Guarantees

No assets have been pledged as security for the fulfilment of bank or other obligations.

12. Intangible assets

Intangible assets are made up of research and development expenses and include expenses incurred with the implementation of the SAP information system.

12.1 Changes occurred during the year

Net book amount	10				-
	299	10		- -	309
Research and development expenses	299	10		- -	309
	01/01/2011 Opening Balance	Increases	Disposals	Transfers and write-offs	31/12/2011 Closing Balance
Accumulated depreciation and impairment
	309	-		- -	309
Research and development expenses	309	-		- -	309
	01/01/2011 Opening Balance	Increases	Disposals	Transfers and write-offs	31/12/2011 Closing Balance
Gross Assets

12.2 Changes occurred in the previous year

Gross Assets

Net book amount	29				10
	280	19		- -	299
Research and development expenses	280	19		- -	299
	01/01/2010 Opening Balance	Increases	Disposals	Transfers and write-offs	31/12/2010 Closing Balance
Accumulated depreciation and impairment
	309	-		- -	309
Research and development expenses	309	-		- -	309
	01/01/2010 Opening Balance	Increases	Disposals	Transfers and write-offs	31/12/2010 Closing Balance

13. Investment property

JMH owns a property, which was partially rented to a Group company generating profits in the amount of EUR 180 thousand (2010: EUR 60 thousand). This property is valuated at its market value, according to an independent valuation, and is recorded at EUR 2,470 thousand (2010: EUR 2,470 thousand).

In 2011, JMH incurred in expenses regarding this property in the amount of EUR 5 thousand (2010: EUR 21 thousand), recognised in results in other operating costs.

14. Investments in subsidiaries and joint ventures

14.1 Investments in subsidiaries

	2011	2010
Net value at 1 January	217,962	207,528
Increases	72	-
Decreases	(55)	(25)
Increases/Decreases in provisions for impairment loss (see note 26)	138,719	10,459
Corporate reorganization (see note 3)	311,260	-
Net value at 31 December	667,958	217,962

In 2011, JMH sold its 11% share holding in the capital of PSQ – Sociedade de Investimentos Mobiliários e Imobiliários, Lda. to a Group company, in the amount of EUR 119,500 thousand.

14.2 Investments in joint ventures

	2011	2010
Net value at 1 January	6,663	6,349
Increases	-	314
Decreases	-	-
Corporate reorganization (see note 3)	(6,663)	-
Net value at 31 December	-	6,663

15. Loans

15.1 Loans to subsidiaries

Non-current loans	2011	2010
Net value at 1 January	413,581	598,036
Increases	373,797	10
Decreases	(277,311)	(184.465)
Corporate reorganization (see note 3)	189,574	-
Net value at 31 December	699,641	413,581

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	2011	2010
Net value at 1 January	113,273	85,308
Increases	12,932	31,368
Decreases	(63,155)	(3,403)
Net value at 31 December	63,050	113,273

Current loans are liable to interest rates at normal market levels.

15.2 Loans to joint ventures

Non-current loans	2011	2010
Net value at 1 January	188,727	188,643
Increases	1,276	-
Decreases	-	-
Foreign currency loans translation differences	(429)	84
Corporate reorganization (see note 3)	(189,574)	-
Net value at 31 December	-	188,727

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).

16. Available-for-sale financial assets

	2011	2010
BCP shares	3,705	3,705
Fair value adjustment	(3,428)	(2,570)
	277	1,135

As of 31 December 2011, all BCP shares in the company's portfolio (2,035 million shares) were marked to market – price as of 31 December 2011 of Euro 0.136 – Euronext Lisbon. The changes in the fair value of these assets of a negative EUR 858 thousand were recognised directly in equity (2010: negative EUR 513 thousand).

17. Taxes

17.1 Deferred tax assets and liabilities

Deferred taxes are presented in the Balance Sheet as follows:

	2011	2010
Deferred tax assets	5,590	6,772
Deferred tax liabilities	(957)	(243)
	4,633	6,529

Movement in deferred taxes during the year:

	01/01/2011	Impact on results	Impact on equity	31/12/2011
Deferred tax liabilities
Revaluation of assets	(243)	5	-	(238)
Other temporary differences	-	(719)	-	(719)
	(243)	(714)	-	(957)
Deferred tax assets
Employee benefits	3,675	695	-	4,370
Recoverable losses	2,408	(2,408)	-	-
Fair value in derivative financial instruments	689	-	(127)	562
Excess over legal provisions	-	658	-	658
	6,772	(1,055)	(127)	5,590
Net change in deferred tax	6,529	(1,769)	(127)	4,633

17.2 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 taxable profits are expected to guarantee the recovery of deferred tax assets.

Unrecognised deferred taxes on tax losses are as follow:

	2011	2010
Tax losses	7,047	21,692
Tax rate	25%	25%
Deferred tax assets (Unrecognised)	1,762	5,423

17.3 Taxes receivable and payable

Taxes receivable	2011	2010
Income tax receivable	192	158
VAT receivable	1	1
	193	159
Taxes payable
VAT payable	399	1,235
Income tax payable	177	170
Income tax withheld	322	98
Social security	69	55
Municipal real estate tax	5	5
	972	1,563

18. Trade debtors, accrued income and deferred costs

	2011	2010
Subsidiaries and associated companies	840	8,345
Receivables from suppliers	14	38
Staff	8	5
Other debtors	159	31
Accrued income	4,643	3,874
Deferred costs	1,334	377
	6,998	12,670

Amounts recognised in subsidiaries and associated companies concern mainly to invoices issued to group companies relating to various services provided.

Accrued income respects namely to EUR 4,092 thousand regarding the rendering of technical and administrative services to subsidiaries and EUR 528 thousand of interest receivable.

Deferred costs includes EUR 847 thousand of prepaid expenses with bonds, bank loans and commercial paper, EUR 375 thousand of commercial paper anticipated interests, and EUR 112 thousand of other costs relating to future periods, paid in 2011 or when not paid, already charged by the competent entities.

19. Cash and cash equivalents

	2011	2010
Bank deposits	23,547	59
Short-term investments	151,700	42,240
Cash and cash equivalents	9	9
	175,256	42,308

20. Cash generated from operations

	2011	2010
Net results	581,469	89,360
Adjustments for:
Income tax	5,984	(171)
Depreciation	100	117
Net financial costs	(4,980)	5,372
Gains/Losses in subsidiaries and associated companies	(582,471)	(89,113)
Gains/Losses in other investments	(205)	(97)
Profit / losses on tangible assets disposals	-	(1)
	(103)	5,473
Changes in working capital:
Trade debtors, accrued income and deferred costs	6,304	(5,933)
Trade creditors, accrued costs and deferred income	659	2,104
Provisions and employee benefits	5,108	1,136
	11,968	2,774

21. Capital and reserves

21.1 Share capital and share premium account

The authorised share capital is represented by 629,293,220 ordinary shares (2010: 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.

During the year 2011, no changes occurred in the amount of EUR 22,452 thousand showed in share premium.

21.2 Own shares

Own shares reflect the cost of shares held by the company in portfolio. As of 31 December 2011, the company held 859,000 own shares (2010: 859,000).

21.3 Other reserves

	Cash Flow Hedging	Available-for- -sale financial instruments	Total
Balance as at 1 January 2010	(1,489)	59	(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 1 January 2011	(1,911)	(454)	(2,365)
Fair value of cash flow hedging instruments:
- Gross value	480	-	480
- Deferred tax	(127)	-	(127)
Fair value adjustment of available-for-sale financial instruments	-	(858)	(858)
Balance as at 31 December 2011	(1,558)	(1,312)	(2,870)

These reserves are not able to be distributed to the Shareholders.

21.4 Retained earnings

At 31st December 2011, the total amount of retained earnings was EUR 751,892 thousand, resulting from profit generated in the financial year, and previous years.

Of this amount, EUR 241,515 thousand are not able to be distributed, as provided in articles 32, 218, 295, 296 and 324 of the Legal Code for Commercial Companies.

21.5 Dividends

In accordance with the dividend distribution policy and described in the section regarding the Dividend Distribution Policy included in the Corporate Governance chapter (page 198), which is an integral part of the consolidated annual report, the Board of Directors proposes to the shareholders the distribution of the amount 172,819,410.50 euros, which corresponds to a dividend per share of EUR 0.275 (excluding own shares in the portfolio).

22. Earnings per share

22.1 Basic and diluted earnings per share

Basic and diluted earnings per share are calculated based on the net profit of EUR 581,469 thousand (2010: EUR 89,360 thousand) divided by the weighted average of outstanding ordinary shares, numbering 628,434,220 (2010: 628,434,220). The diluted earnings per share are equal to basic earnings per share as there are no dilution events.

	2011	2010
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
		89,360
Basic and diluted earnings per share – euros	0.925	0.142
Net results of the year attributable to ordinary shares (equal to diluted)	581,469

23. 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 28.

23.1 Current and non-current loans

	2011	2010
Non-current loans
Bank loans – Commercial Paper	50,000	50,000
Non-convertible Bond loans	100,000	35,000
	150,000	85,000
Current loans
Bank loans – Commercial Paper	10,000	50,000
Non-convertible Bond loans	35,000	35,000
Bank overdrafts	-	40
	45,000	85,040

23.2 Loan terms and maturities

	Average rate	2011	Payable in less than 1 year	Payable between 1 and 5 years
Bank loans – Commercial Paper	3.97%	60,000	10,000	50,000
Non-convertible Bond loan JM2011 e JM2012	3.44%	35,000	35,000	-
Non-convertible Bond loans JM2014	4.23%	100,000	-	100,000
		195,000	45,000	150,000
	Average rate	2010	Payable in less than 1 year	Payable between 1 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 increase to EUR 41,750 thousand (2010: EUR 43,000 thousand).

23.3 Bond loans

	2011	2010
Non-convertible Bond loan: JM2011 and JM2012	35,000	70,000
Non-convertible Bond loans JM2014	100,000	-
	135,000	70,000

Non-convertible bonds

In September 2007, a bond loan in the amount of EUR 70,000, with variable interest rate was issued, with maturity of EUR 35,000 thousand in 2011 and EUR 35,000 thousand in 2012.

In September 2011, a bond loan in the amount of EUR 100,000, with variable interest rate was issued, with maturity in 2014.

23.4 Bank loans: Commercial paper

There are several bank loans in the form of a commercial paper programme, in the amount of EUR 240,000 thousand, with variable interest rate. In the end of 2011, of the total amount subscribed, only EUR 60,000 thousand were in use, with the following maturity:

Maturity	Amount
2012	10,000
2014	50,000

24. Financial debt

	2011	2010
Non-current loans	150,000	85,000
Current loans	45,000	85,040
Derivative financial instruments	2,274	2,948
Accruals and deferrals (financial headings only)	(76)	278
Bank deposits	(23,547)	(59)
Short-term investments	(151,700)	(42,240)
	21,951	130,967

25. 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.

26. Provisions and adjustments to the net realisable value

2011	Opening balance	Provisions set up	Provisions used	Closing balance
Investments in subsidiaries	259,745	-	(138,719)	121,026
Available-for-sale financial assets	2,570	858	-	3,428
Total adjustments to the net realisable value	262,315	858	(138,719)	124,454
Other risks and contingencies	-	5,658	-	5,658
Total provisions	-	5,658	-	5,658

Total adjustments to the net realisable value	272,261	513	(10,459)	262,315
Available-for-sale financial assets	2,057	513	-	2,570
Investments in subsidiaries	270,204	-	(10,459)	259,745
2010	Opening balance	Provisions set up	Provisions used	Closing balance

The adjustment set up in 2011 on Investments in subsidiaries, in the amount of EUR 138,719 thousand, corresponds to the increase in fair value of subsidiaries for which it had been recognized impairment losses in previous years (2010: EUR 10,459 thousand increase in the fair value). The adjustment for available-for-sale financial assets corresponds to upgrade to fair value, as described in note 16.

The heading other risks and contingencies consists of provisions for possible compensation to be paid by JMH regarding guarantees provided in business sales agreements celebrated over the last few years and provisions for litigation processes where there are no prospects for resolution in less than one year.

27. Trade creditors, accrued costs and deferred income

	2011	2010
Payables to subsidiaries	279	188
Other trade creditors	632	344
Other non-trade creditors	400	3
Accrued costs	4,441	3,090
Deferred income	15	15
	5,767	3,640

Accrued costs includes salaries and wages payable in the amount of EUR 2,795 thousand, and interest's payable in the amount of EUR 1,361 thousand. The remaining EUR 285 thousand relate to various costs (utilities, insurance, consultants, rents, among others), relating for 2011 and not invoiced by the respective entities prior to the end of the year.

28. Derivative financial instruments

		2011					2010
	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	76 million EUR	-	-	500	1,774	103 million EUR	-	-	517	2,431
Total assets/liabilities hedge derivatives		-	-	500	1,774		-	-	517	2,431
Total assets/liabilities derivatives		-	-	500	1,774		-	-	517	2,431

In 2011, the values shown include interest receivable or payable related with these financial instruments that are due. The net payable amount is EUR 154 thousand (2010: EUR 348 thousand receivable).

Derivatives held for trading

In 2011 JMH hedged the economic risk of its exposure to the Zloty exchange rate. To do so, JMH entered into currency forwards with a notional of PLN 375,000 thousand, with maturities in the September and December 2011. This operation originated a profit of EUR 10,845 thousand, registered in the profit and loss accounts in net financial costs.

Cash flow hedge

JMH enters into interest rate swaps to hedge interest rate risk, regarding future interest payments on the loans. At 31 December 2011, the bank and bond loans with derivative hedge instruments were EUR 85,000 thousand (2010: 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 76,250 thousand (2010: EUR 102,500 thousand), and the fair value of these instruments at 31 December 2011 was negative EUR 2,274 thousand (2010: negative EUR 2,948 thousand). The changes in fair value of these instruments were recognised in other reserves in the amount of positive EUR 480 thousand (2010: negative EUR 574 thousand).

28.1 Impacts on Financial Statements

	2011	2010
Fair value of the financial instruments at 1st January	(2,948)	(2,406)
(Receipts) / Payments made	(9,138)	2,166
Fair value of financial instruments held for trade (P&L)
- Exchange rate derivative	10,845	-
Fair value of financial instruments that qualify as hedge accounting (Reserves)	480	(574)
Interest expense from financial instruments that qualify as hedge accounting (P&L)	(1,513)	(2,134)
Fair value of the financial instruments at 31st December	(2,274)	(2,948)

29. Employee benefits

Amounts of employee benefits in the balance sheet:

	2011	2010
Retirement benefits - defined benefit plan paid for by the group	16,198	13,710
Seniority awards	294	158
Total	16,492	13,868

Amounts reflected in the income statement – staff costs (note 4.2):

	2011	2010
Retirement benefits – defined contribution plan	476	381
Retirement benefits - defined benefit plan paid for by the group	3,164	1,770
Seniority awards	142	20
Total	3,782	2,171

29.1 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 plan controls the costs of the company of the related benefits, while simultaneously creating an incentive for the employees to participate in their own pension scheme.

Movement in the year:

	2011	2010
Liabilities at 1 January	-	-
Staff costs on the year	476	381
Contributions of the year	(476)	(381)
Liabilities at 31 December	-	-

29.2 Defined benefit plans for former employees managed by the Group

Independent actuaries evaluate this plan every six months. According to the actuarial calculation reported on 31 December 2011 the liability is EUR 16,198 thousand, provisioned entirely in liabilities in the employee benefits heading.

Movement in the year:

	2011	2010
Balance at 1 January	13,710	12,584
Past services costs	2,516	-
Interest costs	602	674
Actuarial (gains)/ losses	46	1,096
Retirement pensions paid	(676)	(644)
Balance at 31 December	16,198	13,710

Actuarial assumptions used:

	2011	2010
Mortality table	TV 88/90	TV 88/90
Discount rate	4.5%	4.5%
Pensions growth rate	2.5%	2.5%

The mortality assumptions used corresponds to the most common adopted in Portugal, and was set based on actuarial advice in accordance with published statistics and experience in each geography.

29.3 Other long-term benefits granted to employees

The Company has adopted an incentive programme based on the granting of awards according to seniority.

The programme consists in granting 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 2011, the liabilities amount to EUR 294 thousand, and are provisioned entirely, in liabilities, in the employee benefits heading.

Movement in the year:

	2011	2010
Balance at 1 January	158	148
Current service costs	22	22
Actuarial (gains)/ losses	120	(2)
Bonus paid	(6)	(10)
Balance at 31 December	294	158

Actuarial assumptions used:

	2011	2010
Mortality table	TV 88/90	TV 88/90
Discount rate	4.9%	4.5%
Salaries growth rate	2.5%	3.0%

30. Guarantees

The bank guarantees are as follows:

	2011	2010
Guarantees for D.G.C.I. (Portuguese tax authority)	1,949	1,335
Other guarantees provided	1,584	1,483
	3,533	2,818

31. Contingencies

There are several disputes arising out of the ordinary course of the JMH's businesses. The material issues pending resolution are detailed below. With respect to these issues the Board of Directors, supported by the opinion of its tax and legal advisors, assesses the outcome of each proceedings, and for those where the Board estimates that a future cash outflow may occur, a provision in taken (note 26):

• The Portuguese tax authorities have informed Jerónimo Martins, SGPS, S.A., to 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 treated as interest income and subject to Corporate Income Tax (CIT) as opposed to dividends received that are exempt from tax. 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 challenge it;
• 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 challenged the decision;
• The Portuguese tax authorities have claimed from Jerónimo Martins, SGPS, S.A the amount of EUR 480 thousand, regarding the year 2008. The assessment concerns swap payments, treated as interest in that year, which the tax authorities consider should have been subject to withholding tax. Jerónimo Martins, supported by its tax consultants, have challenged this assessment, believing that the tax authorities have no grounds to request the payment of such amounts;
• The Portuguese tax authorities have informed Jerónimo Martins, SGPS, S.A., that they do not accept losses on capital gains, amounting to EUR 24,660 thousand, calculated in the year 2007 with the liquidation of a company and the sale of another, which generated a correction on the company's tax losses. 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 challenge it;
• Tengelmann KG filed arbitration proceedings against Jerónimo Martins, SGPS, S.A. before the German Institute of Arbitration, in Cologne. The plaintiff argues that Jerónimo Martins, SGPS, S.A. is liable for the non-payment of rents and contractual penalties, plus accrued interests, by Dystrybucja Integrator Sp. Z o.o. (previously Plus Discount Sp. z o.o. – Plus Poland), in the amount of EUR 2,716 thousand, under the guarantee granted by Jerónimo Martins, SGPS, S.A. in the SPA (Sale and Purchase Agreement) regarding Plus Discount Sp. z o.o.. Jerónimo Martins, SGPS, S.A. considers the allegations ungrounded. The arbitral proceedings are awaiting the constitution of the Tribunal, which will determine the deadline for the statement of defence.

32. Subsidiaries, joint-ventures and available-for-sale investments

The direct investments owned by JMH, at 31 December 2011, are as follows:

Companies	Notes	Head Office	% Owned	Stake held directly	Total assets	Shareholder's Equity	Net profit /loss
INVESTMENTS IN SUBSIDIARIES
Desimo – Desenvolvimento e Gestão Imobiliária, Lda.	a)	Lisbon	100.00%	50	555	511	437
Jerónimo Martins Serviços, S.A.	a)	Lisbon	100.00%	50	3,822	253	37
Imocash – Imobiliário de Distribuição, S.A.	a)	Lisbon	1.00%	30	70,625	12,730	1,142
Larantigo – Sociedade de Construções, S.A.	a)	Lisbon	0.20%	1	1,260	1,259	0,07
Eva – Soc. de Investimentos Mobiliários e Imobiliários, Lda	a)	Funchal	5.60%	28	72,249	72,249	737
Friedman – Soc. de Investim. Mobiliários e Imobiliários, Lda	a)	Funchal	100.00%	5	25	25	(5)
Warta – Retail & Services Investments B.V.	a)	Amsterdam	100.00%	18	398,544	398,517	82,606
Tagus – Retail & Services Investments B.V.	a)	Amsterdam	100.00%	18	673,667	673,652	(126,287)
Monterroio – Retail & Services Investments B.V.	a) b)	Amsterdam	100.00%	18	372,326	185,957	1
New World Investments B.V.	a)	Amsterdam	100.00%	18	98	89	(9)
AVAILABLE-FOR-SALE FINANCIAL ASSETS
BCP - Banco Comercial Português, S.A.	b)	Oporto	0.03%	2,036	93,544,549	4,436,843	(786,151)

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.

33. Group Companies and Joint-Ventures– Direct and indirect stakes

Table below describes the companies directly and indirectly held by Jerónimo Martins, SGPS, SA, as of 31 December 2011:

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
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
Bliska Sp. Z.o.o.	Warszawa (Poland)	100.00
Belegginsmaatschappij Tand B.V.	Amsterdam (Holand)	100.00
Warta – Retail & Services Investments B.V.	Amsterdam (Holand)	100.00
Tagus – Retail & Services Investments B.V.	Amsterdam (Holand)	100.00
Monterroio – Retail & Services Investments B.V.	Amsterdam (Holand)	100.00
New World Investments B.V.	Amsterdam (Holand)	100.00
Jerónimo Martins Colombia S.A.S.	Bogota (Colombia)	100.00
Jerónimo Martins – Distribuição de Produtos de Consumo, Lda.	Lisbon	100.00
Caterplus – Comercialização e Distribuição Produtos de Consumo, Lda.	Lisbon	100.00
Hussel Ibéria – Chocolates e Confeitaria, S.A.	Lisbon	51.00
Jerónimo Martins – Restauração e Serviços, S.A.	Lisbon	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, SGPS, Lda.1	Lisbon	100.00

Joint-ventures

Companies	Head Office	% Owned
Unilever Jerónimo Martins, Lda.	Lisbon	45.00
Fima – Produtos Alimentares, S.A.	Lisbon	45.00

¹ Previously assigned as Servicompra – Consultores de Aprovisionamento, Lda.. Amendment made on December 2011.

Notes to the individual financial statements 31 December 2011 and 2010

Companies	Head Office	% Owned
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

Associates

Companies	Head Office	% Owned
Perfumes e Cosméticos PUIG Portugal – Distribuidora, S.A.	Lisbon	27.55

34. Related parties

Note: transactions with related parties are always carried out at market prices.

34.1 Transactions with related parties (shareholders)

JMH is owned 56.136% by Sociedade Francisco Manuel dos Santos, there were no direct transactions between this Company and any other Group company in 2011.

34.2 Transactions with other related parties

34.2.1 Technical and administrative services provided

As the Group's holding company, JMH co-ordinates and provides 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, Information Technologies and International Expansion. JMH is remunerated for these services, as well as management services for negotiation on behalf of the Group Companies.

Income from technical and administrative services provided to subsidiaries during 2011 was EUR 16,343 thousand (2010: EUR 15,239 thousand).

34.2.2 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 2011 an amount of EUR 3,395 thousand (2010: EUR 3,951 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 2011 an amount of EUR 405 thousand (2010: EUR 448 thousand).

34.2.3 Lease of property

JMH develops its activity in premises rented to a subsidiary, which represented costs of EUR 202 thousand (2010: EUR 204 thousand).

As referred in note 12, JMH owns a property which is partially rented to a Group company, and generated profits in 2011, in the amount of EUR 180 thousand (2010: EUR 60 thousand).

34.2.4 Supplementary income

JMH charges annually a joint-venture company relating to a sales commission. In 2011, this amounted EUR 146 thousand (2010: EUR 131 thousand).

34.2.5 Loans to subsidiaries and joint ventures (current and non-current loans)

JMH granted loans to joint ventures and subsidiaries, which generated interest in the amount of EUR 13,322 thousand (2010: EUR 11,258 thousand).

Companies	2011	2010
Joint-ventures	3,866	3,128
Subsidiaries	9,556	8,130
Total	13,322	11,258

34.2.6 Costs relating to staff

As a group, JMH takes advantage of the synergies existing between various companies and frequently transfers staff from one company to another, according to the needs of the various businesses. In 2011, total costs incurred with personnel from other companies amounted to EUR 4,787 thousand (2010: EUR 2,595 thousand).

34.2.7 Group companies disposals

In 2011, JMH sold its 11% shareholding in PSQ – Sociedade de Investimentos Mobiliários e Imobiliários, Lda. for the amount of EUR 119,500 thousand, to Belegginsmaatschappij Tand B.V., which also belongs to the Jerónimo Martins Group. This transaction was made at market values and generated a profit in the amount of EUR 119,445 thousand.

34.2.8 Corporate reorganization

As mentioned in the management report and in note 3, the group restructuring involved the contribution of some investments at market value, which generated capital gains of EUR 304,597. According to current tax legislation, the stakes of more than 50% were contributed, with tax neutrality, at historical cost.

34.2.9 Open balances as of 31 December 2011

Companies	Current Loans	Non-current Loans	Accounts receivable	Income	Accrued Deferred Income	Accounts Accrued Payable	costs
Group companies
Comespa - Gestão de Espaços Comerciais, S.A.	-	-	-	3	-	-	-
Cunha & Branco – Distribuição Alimentar, S.A.	-	-	-	1	-	-	-
Escola de Formação Jerónimo Martins, S.A.	-	-	15	-	-	13	16
Friedman - Soc. Inv. Mobiliários e Imobiliários, Lda.	-	10	-	-	-	-	-
Hussel Ibéria – Chocolates e Confeitaria, S.A.	-	-	-	3	-	-	-
Imocash – Imobiliário de Distribuição, S.A.	-	-	-	4	-	-	-
Imoretalho – Gestão de Imóveis, S.A.	-	-	-	19	-	20	-
João Gomes Camacho, S.A.	-	-	1	16	-	-	-
Jerónimo Martins Colombia, S.A.S.	-	-	2	-	-	-	-
Jerónimo Martins – Dist. Prod. Consumo, Lda.	10,745	-	30	65	-	-	-
Jerónimo Martins Dystrybucja S.A.	-	-	-	1,705	-	-	-
Jerónimo Martins Serviços, S.A.	-	500	138	-	-	-	1,621
JMR – Gestão Empresas Retalho, SGPS, S.A.	-	-	-	388	-	-	-
JMR - Prestação de Serviços para a Distribuição, S.A.	-	-	47	25	-	128	4
Lidinvest - Gestão de Imóveis, S.A.	-	-	-	1	-	-	-
Lidosol II – Distrib. Produtos Alimentares, S.A.	-	-	6	58	-	-	-
Monterroio - Industry & Services Investments B.V.	-	248,048	-	313	-	-	-
New World Investments B.V.	-	80	-	-	-	-	-
Pingo Doce – Distribuição Alimentar, S.A.	-	-	88	1,461	-	18	-
Recheio - Cash & Carry, S.A.	-	-	3	248	15	100	-
Recheio, SGPS, S.A.	52,305	-	209	95	-	-	-
Servicompra, SGPS, Lda.	-	-	1	-	-	-	-
Tagus - Retail & Services Investments B.V.	-	136,285	-	-	-	-	-
Warta - Retail & Services Investments B.V.	-	314,718	8	-	-	-	-
Subtotal	63,050	699,641	548	4,405	15	279	1,641
Joint-ventures
Unilever Jerónimo Martins, Lda.	-	-	292	-	-	-	-
Subtotal	-	-	292	-	-	-	-
TOTAL	63,050	699,641	840	4,405	15	279	1,641

34.3 Remuneration paid to directors

	2011	2010
Salaries and cash awards	3,418	3,497
Retirement benefits	424	335
	3,842	3,832

The Board of Directors of the company contains 9 members.

The remuneration of the Members of the Board of Directors and of the Supervisory Board is stated in the Consolidated Annual Report, under the Corporate Governance section.

The retirement benefits granted to the Directors correspond to post-employment benefits and are part of the defined contribution plan described in note 29.

As the cash awards to Executive Directors were due solely to the good performance of the Group's activity in Poland, the cash awards payment were charged to Jerónimo Martins Dystrybucja S.A.

No other remuneration was paid to the Directors by any other Group company.

35. Interests in joint ventures

The company owns (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,

36. Information on environmental matters

As referred in the management report, there are no environmental matters likely to affect the company's financial performance and situation, and the company is unaware of any contingent liability or obligation concerning environmental matters. As a result, the company did not recognise any relevant costs or investment of environmental nature in its financial statements.

37. Additional information requested by law

In accordance with article 66-A of the Portuguese Commercial Companies Code, we hereby inform of the following:

• a) In addition to all operations described in the notes above, as well as in the Management's Report, there are no other operations considered relevant which are not already contained either in the balance sheet or its annex;
• b) The total remuneration paid in 2011, to the External Auditor and Chartered Accountant, was 98,776 euros, of which 92,790 euros correspond to legal accounting audit services, while the remaining 5,986 euros, relate to access to a tax legislation database;
• c) Note 34 of the notes to the financial statements include all the related parties' disclosures, in accordance with the International Accounting Standards.

38. Events after the balance sheet date

At the conclusion of this Report there were no relevant events to highlight that are not disclosed in the Financial Statements.

Lisbon, 6 th March 2012

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, 2011, (which shows total assets of Euros 1,621,827 thousand and a total of shareholder's equity of Euros 1,394,707 thousand, including a net profit of Euros 581,469 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

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 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, 2011, 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 6, 2012

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 31 December 2011, 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 Managing Committee, the Company Secretary and the Statutory Auditor, having received their total cooperation.

The suitability and effectiveness of the internal control and risk management systems were verified, with the co-operation and work of the Internal Control Committee, the Internal Audit Department and the External Auditor.

This Committee was given access to all the corporate documentation that it considered relevant, namely the minutes of the meetings of the Managing Committee, the Ethics Committee, the Internal Control Committee, and the Financial Matters Committee, 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 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.

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 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.

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 Individual Financial Information, we are of the opinion that:

• i) The Management Report should be approved;
• ii) The Financial Statements should be approved; and
• iii) The Board of Directors' results appropriation proposal should be approved.

Statement of Responsibility

In accordance with sub-paragraph c) of paragraph 1 of article 245.º of the Portuguese Securities Code, the members of the Audit Committee, identified below, declare that to the best of their knowledge:

i) The information contained in the Management Report, the Annual Accounts, the Auditors' Report and all other accounting documentation required by law or regulation, was produced in compliance with the applicable accounting standards and gives a true and fair view of the assets and liabilities, the financial position and the results of Jerónimo Martins, SGPS, S.A.;

ii) The Management Report is a faithful statement of the evolution of the businesses, of the performance and position of the issuer, and contains a description of the main risks and uncertainties which they face.

Lisbon, March 6 th, 2012

Hans Eggerstedt (Chairman of the Audit Committee)

António Pedro Viana-Baptista (Member)

Artur Eduardo Brochado dos Santos Silva (Member)