Jeronimo Martins — Interim / Quarterly Report 2011

Aug 24, 2011

Consolidated 1st Half Report 2011

INDEX

I – Consolidated Management Report
Message from the CEO	3
1. Introduction	3
2. Sales Analysis	3
3. Results Analysis	4
4. Balance Sheet	6
5. Outlook	7
II – Consolidated Management Report Appendix
1. Sales Evolution	8
2. Stores Network	8
3. EBITDA Margin Breakdown	9
4. Working Capital	9
5. Net Debt	9
6. Definitions	10
7. Information Regarding Individual Financial Statements	10
III – Other Informations	11
IV – Statement of the Board of Directors	15
V – Consolidated Financial Statements
1. Financial Statements	17
2. Notes to the Consolidated Financial Statements	21
3. Auditor's Report	37

I. CONSOLIDATED MANAGEMENT REPORT

Message from the CEO – Pedro Soares dos Santos

"The excellent performance in the first half confirms our best expectations regarding the growth of Biedronka in Poland. Also our formats in Portugal, despite a difficult macroeconomic environment, proved to be highly resilient, and delivered sales and EBITDA growth, positively contributing to the Group's performance.

The performance registered in the first semester reinforces our view that Biedronka will keep driving the strong growth of the Group in 2011, and contributing to the strengthening of our cash flow generation and balance sheet.

We will continue to explore new ways to grow while maintaining under control the risk profile of our Group."

1. Introduction

Jerónimo Martins' net profit increased 41.4%, a particularly remarkable evolution when considering the unstable economic situation seen in Europe and in the World.

Consolidated sales, in 1ST Half 2011 (H1 11), grew 17.5% to Euro4,752 mn and EBITDA increased by 24.4% to Euro311 mn, reaching 6.5% of sales (6.2% in H1 10).

The Group's net debt was reduced by Euro248 mn compared to the same period of the previous year. Gearing decreased to 39.5% (71.1% in H1 10).

2. Sales Analysis

NET SALES AND SERVICES
(Million Euro)	H1 11		Δ % H1 10			Q2 11		Q2 10		Δ %
		% total		% total	Pln	Euro		% total		% total	Pln	Euro
Biedronka	2,845	59.9% 2,221			54.9% 26.6%	28.1%	1,508	60.1% 1,133			54.3% 31.4%	33.1%
Retail Mainland	1,480	31.1% 1,401		34.6%		5.6%	769	30.6%	731	35.0%		5.3%
Recheio	354	7.4%	336	8.3%		5.2%	191	7.6%	179	8.6%		6.5%
Madeira	74	1.6%	62	1.5%		20.3%	40	1.6%	32	1.5%		24.4%
Manufacturing	115	2.4%	117	2.9%		‐2.3%	64	2.5%	64	3.1%		‐0.4%
Mkt. Repr. and Rest. Serv.	41	0.9%	42	1.1%		‐4.2%	22	0.9%	23	1.1%		‐3.8%
Consolidation Adjustments	‐156	‐3.3%	‐136	‐3.4%		14.3%	‐84	‐3.3%	‐74	‐3.5%		13.8%
Total JM	4,751			100.0% 4,043 100.0%		17.5%		2,510 100.0% 2,088 100.0%				20.2%
p.m. Retail Mainland (store sales)	1,346		1,291			4.3%	698		671			4.0%

Consolidated sales reached Euro4,751.5 mn, +17.5% than in the first six months of the previous year, as a result of the Like for Like (LFL) performance of +9.0% of the Group's sales and of the +7.9% contribution from the new stores.

LFL Growth (H1 11/H1 10)

Towards this growth in the Group's top line, Biedronka made an essential contribution with a sales growth of 26.6% (in local currency in H1 11), as a result of the strong LFL (+16.0% in H1 11) and of the increase of 14.3% in sales area compared to H1 10. This LFL sales performance was helped by an increase of c.6% in the average basket together with a growth of c.10% in the number of visits.

Apart from the Company's competitiveness, the significant growth in Biedronka's LFL sales in 2nd Quarter (Q2) (+20.0%) was also the result of a more favourable comparison with Q1 10 (calendar effect of Easter's, Smolensk accident and bad weather at the beginning of Summer 2010) together with a slight acceleration in food inflation which, for the basket, reached 4.6% in Q2 11 (+4.4% in H1 11).

At Pingo Doce, sales grew 4.3% in H1 11. The trading down trend continued in the market and in the case of Pingo Doce there was also an increase in the penetration of private brand in the total sales. These effects mitigated the visibility of volumes growth and took LFL sales in value to reach +0.9% in H1 11 (-0.4% excluding the sale of fuel). It should be mentioned that, on a comparative basis, the number of visits continued to progress positively (+2.5% in H1 11).

At Recheio, sales grew 5.2% to Euro353.6 mn as a result of the LFL growth and of 2 new stores compared to the same period of the previous year.

Recheio's strong competitive position continued to enable the Company to post a healthy LFL growth which reached +2.0% in the first half (+3.3% in Q2) driven by the increase in the number of clients (c.+2%); a remarkable performance when taking into consideration the negative evolution recorded in the HoReCa and Traditional Retail markets.

In Madeira, sales in H1 11 recorded a strong growth of 20.3%, influenced by the closure of two of the Company's stores in February 2010, due to a storm, which were only re-opened in June 2010.

In Manufacturing, the Q2 sales performance (-0.4%), which is an improvement on the trend seen in Q1, reflected the positive impact of Easter and the stabilization of stocks in the wholesale market, which affected sales in Q1 of this year. It is worth mentioning the strong olive oil sales driven by stronger exports and also the ice-cream category, which began the Summer season in a positive way.

In the area of Marketing, Representations and Restaurant Services, sales decreased by 4.2%, reflecting the impact of the economic environment on some of the categories.

3. Results Analysis

CONSOLIDATED RESULTS

(Million Euro)	H1 11			H1 10 (*)	Δ		Q2 11		Q2 10 (*)	Δ
Consolidated Sales	4,752		4,043		17.5%	2,510		2,088		20.2%
Total Margin	1,065	22.4%	923	22.8%	15.4%	564	22.5%	483	23.1%	16.7%
Operating Costs		‐754 ‐15.9%		‐673 ‐16.6%	12.0%		‐392 ‐15.6%		‐344 ‐16.5%	13.8%
EBITDA	311	6.5%	250	6.2%	24.4%	172	6.8%	139	6.6%	23.9%
Depreciation	‐104	‐2.2%	‐92	‐2.3%	12.9%	‐52	‐2.1%	‐47	‐2.2%	12.1%
EBIT	207	4.4%	158	3.9%	31.1%	120	4.8%	92	4.4%	29.8%
Net Financial Results	‐15	‐0.3%	‐22		‐0.5% ‐29.0%	‐7	‐0.3%	‐12		‐0.6% ‐37.1%
Non Recurrent Items	‐6	‐0.1%	‐1	0.0%	n.a.	‐1	0.0%	0	0.0%	n.a.
EBT	185	3.9%	135	3.3%	37.6%	111	4.4%	81	3.9%	37.7%
Taxes	‐39	‐0.8%	‐29	‐0.7%	35.9%	‐24	‐0.9%	‐18	‐0.9%	28.1%
Net Profit	146	3.1%	106	2.6%	38.1%	87	3.5%	62	3.0%	40.6%
Non Controlling Interest	‐2	0.0%	‐4		‐0.1% ‐47.0%	0	0.0%	‐3		‐0.1% ‐96.8%
Net Profit attr. to JM	144	3.0%	102	2.5%	41.4%	87	3.5%	59	2.8%	47.0%
EPS (€)	0.23		0.16		41.4%	0.14		0.09		47.0%
Cash Flow per share (€)	0.42		0.33		27.9%	0.23		0.18		25.5%

(*) Restated - see Chapter V, note 2

Operating Profit

Consolidated EBITDA posted a 24.4% growth, reaching 6.5% of sales (6.2% in the same period of the previous year).

Note: Group and Biedronka EBITDA margin reclassified - detail in Chapter V - note 2

In Poland, in H1 11, EBITDA grew 42.2% to Euro207.9 mn. The evolution of Biedronka's margin, which reached 7.3% of sales (6.6% in H1 11), maintained the Q1 11 trend, supported by the increasing benefits of scale recorded throughout the previous year and which, in the first two quarters of this year, had a more favourable comparison, but also by the strong LFL posted in Q2 11.

In Pingo Doce, EBITDA was up by 4.6%, the respective margin remaining at 5.4% of sales. Two aspects should be mentioned when analysing Pingo Doce's margin, the stability of which, compared to the previous year, reflects an increase in the Company's productivity as i) the growth in costs remained in line with the evolution of sales in value, although the volumes sold by Pingo Doce increased by 6% and ii) the increase in fuel sales in H1 11 had the effect of diluting the EBITDA margin.

Recheio's strong competitive position enabled the Company to post a growth of 8.3% of the EBITDA generated which margin went from 5.7% in H1 10 to 5.8% in H1 11, driven by the good sales performance.

In Manufacturing, there was a reduction in margin in H1 11, following the Company's decision of maintaining its competitiveness in a situation of rising costs of several raw materials which affected some important products.

Net Result

The Group's financial expenses reached Euro15.4 mn (submitted to reclassification as detailed in Chapter V, note 2), a reduction of 29.0% which reflected the significant decrease in consolidated debt and the maintenance of the average cost of debt.

Net profit attributable to Jerónimo Martins grew 41.4%, reaching Euro143.8 mn (+43.2% when excluding non-recurring items).

4. Balance Sheet

(Million Euro)	H1 11	2010	H1 10
Net Goodwill	746	747	733
Net Fixed Assets	2,319	2,309	2,179
Net Working Capital	‐1,350	‐1,425	‐1,204
Others	68	78	101
Invested Capital	1,782	1,709	1,809
Financial Debt	688	782	848
Leasings	54	72	82
Accrued interest	17	25	13
Marketable sec. & Bank deposits	‐254	‐301	‐191
Net Debt	504	578	752
Non Controlling Interests	289	287	276
Share Capital	629	629	629
Reserves and Retained Earnings	360	216	152
Shareholders Funds	1,278	1,132	1,057
Gearing	39.5%	51.0%	71.1%

Consolidated net debt was Euro504.3 mn, a reduction of Euro247.8 mn compared to H1 10, and gearing reduced to 39.5% (71.1% in H1 10).

With regard to the Group's investment programme, the first six months of the year represented a total of Euro127.2 mn.

CAPEX
(Million Euro)	H1 11	Weight
Distribution Poland	87	68.4%
Distribution Portugal	38	29.5%
Manufacturing& Others	3	2.1%
Total CAPEX	127	100.0%

The expansion of the store network in Poland remained a main priority and Biedronka carried out 63 openings together with 24 refurbishments, the Company's investment plan having reached c.70% of total Group's Capex.

Pingo Doce carried out 4 openings, 2 closures and also advanced with 3 refurbishments during the first half.

In June this year, Recheio opened a food service platform in the Algarve, thereby reinforcing its commercial proposition in a part of the country that is essential for the HoReCa market, and in the same month, in the Azores, a franchised store was opened under the Recheio banner.

5. Outlook

It is expected that 2011 will be another year of solid growth for the Group. This growth will be driven by the leadership of Biedronka along with the scale benefits showed at the EBITDA margin.

Although, Biedronka LFL and EBITDA will keep strong in the second half of the year, it should be noted that the performance of the Company faces a more demanding comparison against the prior year.

For 2011 Biedronka is forecasting an increase, in net terms, of its store network by around 200 locations, absorbing approximately 75% of the Group's total investments planned for the year, which is estimated at c.Euro450 mn.

In Portugal, the Group believes that Pingo Doce and Recheio will record growth in volumes despite the structural changes in consumer patterns, which are showing a trend of a reduction in the average purchase. Gains in productivity should soften this trend and the EBITDA margin is expected to remain stable.

In 2011, we expect that the Group's sales will continue their double-digit growth and that EBITDA will grow above sales. The trend for strengthening the Group's gearing should be maintained.

Lisbon, 26th July, 2011

The Board of Directors

II. CONSOLIDATED MANAGEMENT REPORT APPENDIX

1. Sales Evolution

		Total SalesGrowth			LFL SalesGrowth
	Q1 11	Q2 11	H1 11	Q1 11	Q2 11	H1 11
Biedronka
Euro	22.8%	33.1%	28.1%
PLN	21.7%	31.4%	26.6%	11.7%	20.0%	16.0%
Retail Portugal	4.6%	4.0%	4.3%	* 1.8%	* 0.1%	0.9% *
Supermarkets	5.6%	4.1%	4.8%	1.7%	‐0.2%	0.7%
Hypermarkets	‐4.2%	3.5%	‐0.2%	3.2%	2.9%	3.0%
Recheio	3.7%	6.4%	5.2%	0.4%	3.3%	2.0%
Madeira	15.9%	24.4%	20.3%	3.7%	5.3%	4.5%
Manufacturing	‐4.6%	‐0.4%	‐2.3%	‐4.6%	‐0.4%	‐2.3%
Mkt. Repr. and Rest. Serv.	‐4.8%	‐3.8%	‐4.2%	‐7.9%	‐7.3%	‐7.6%
			* Ex‐petrol LFL	0.1%	‐0.9%	‐0.4%

2. Stores Network

NUMBEROF STORES
Number of Stores			Openings	Closings		Network
	2010	Q1 11	Q2 11	H1 11	H1 11	H1 10
Biedronka	1,649	19	44	5	1,707	1,527
Retail Portugal	349	0	4	2	351	345
Supermarkets	340	0	4	2	342	336
Hypermarkets	9	0	0	0	9	9
Recheio	38	0	1	0	39	37
Madeira	15	0	0	0	15	15

SALES AREA (sqm)

SalesArea (sqm)	2010		Openings	Closings *	Network
		Q1 11	Q2 11	H1 11	H1 11	H1 10
Biedronka	938,218	11,989	29,017	1,604	977,620	855,400
Retail Portugal	437,317	0	4,488	3,512	438,293	433,113
Supermarkets	359,036	0	4,488	999	362,525	354,832
Hypermarkets	78,281	0	0	2,513	75,768	78,281
Recheio	123,532	0	2,000	‐22	125,554	118,901
Madeira	14,253	0	0	0	14,253	14,253

* including changes ofsales area due to remodellings

3. EBITDA Margin Breakdown

	H1 11	% total	H1 10 (*)	% total
Biedronka	7.3%	66.8%	6.6%	58.5%
Retail Mainland (store sales)	5.4%	23.4%	5.4%	27.8%
Recheio	5.8%	6.6%	5.7%	7.6%
Madeira	3.1%	0.7%	3.7%	0.9%
Manufaturing	12.0%	4.4%	14.8%	7.0%
Mkt, Repr. and Rest. Services	0.3%	0.0%	0.1%	0.0%
JM Consolidated	6.5%	100%	6.2%	100%

(*) Restated - see Chapter V, note 2

4. Working Capital

(Million Euro)	H1 11	2010	H1 10
Inventories	419	369	346
in days ofsales	16	15	15
Customers	102	73	98
in days ofsales	4	3	4
Suppliers	‐1,539	‐1,527	‐1,329
in days ofsales	‐59	‐64	‐59
Working Capital Trade	‐1,018	‐1,086	‐885
in days ofsales	‐39	‐46	‐40
Others	‐332	‐339	‐319
Total Working Capital	‐1,350	‐1,425	‐1,204
in days ofsales	‐51	‐60	‐54

5. Net Debt

(Million Euro)	H1 11
Long Term Debt	517
as % of Financial Debt	75.2%
Maturity	1.8
Bond Loans	340
Private Placement	81
Fair Value Adjustment	‐7
Commercial Paper	0
Other Debt	104
Short Term Debt	171
as % of Financial Debt	24.8%
Financial Debt	688
Maturity	1.6
Leasings	54
Accrued Interest & Hedging	17
Marketable Securities & Bank Deposits	‐254
Net Debt	504
% Debt in Euros (Financial Debt + Leasings)	88.3%
% Debt in Zlotys (Financial Debt + Leasings)	11.7%

6. Definitions

Like For Like (LFL) sales: sales made by stores that operated under the same conditions in the two periods. Excludes stores opened or closed in one of the two periods. Sales of stores that underwent profound remodelling are excluded for the remodelling period (store closure);

Cash Flow per share: (Net Profit + Depreciation – Deferred tax – Non-recurrent items) / Number of Shares;

Gearing: Net Debt / Shareholder Funds;

EBITDA Retail Margin in Portugal - Reclassification of Fees to Shareholders: Retail Portugal's EBITDA margin was subject to reclassification, having excluded from the EBITDA, the costs with services from Shareholders. This allows a more accurate analysis of business area performance aligning the information provided to the market with that used internally for assessing the business area's performance. The part of these costs not eliminated in the consolidation process is now included in the Group's Holdings and continue to affect the consolidated EBITDA.

7. Information Regarding Individual Financial Statements

In accordance with section b) of paragraph 3 of article 246 of the Portuguese Securities Code, the 1st Half individual financial statements of Jerónimo Martins SGPS, S.A. will not be disclosed as they do not include significant information.

III. OTHER INFORMATIONS

INFORMATION CONCERNING STAKES HELD IN THE COMPANY BY MEMBERS OF THE BOARD OF DIRECTORS AND STATUTORY AUDITOR AS AT JUNE 30th, 2011

(As provided in article 447 of the Portuguese Commercial Companies Code and under the terms of subparagraph 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		year	Decreases during the	Held on 30.06.11
	Shares	Bonds	Shares	Bonds	Shares	Bonds	Shares	Bonds
Elísio Alexandre Soares dos Santos1	137,633	-	2,363	-	-	-	139,996	-
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 2,363 shares were acquired on 20th of June of 2011, with an average unit price of EUR 12,70.

2 The 18,000 shares were acquired on 18th of March of 2011, with an average unit price of EUR 11,05.

Note: Dr. Artur Stefan Kirsten on 17th of February of 2011, presented his resignation as a Non Executive Board Member and as a Member of the Audit Committee, for which he was appointed at the Annual General Meeting of April 9, 2010.

STATUTORY AUDITOR

As at June 30th, 2011, the Statutory Auditor PricewaterhouseCoopers & Associados, SROC, Lda., did not held any shares and bonds of Jerónimo Martins, SGPS, S.A. and had not made any transactions with Jerónimo Martins, SGPS, S.A. securities.

LIST OF TRANSACTIONS MADE BY PERSONS DISCHARGING MANAGERIAL RESPONSABILITIES AND PEOPLE CLOSELY CONNECTED WITH THEM

Under the terms of paragraph 7 of Article 14 of CMVM Regulation 5 / 2008, Jerónimo Martins, SGPS, S.A. informs about all the transactions made by persons discharging managerial responsibilities in the first six months of 2011.

E. Alexandre Soares dos Santos

Date	Nature	Code ISIN	Volume	Price	Local
20-06-2011	Acquisition	PTJMT0AE0001	2,363	12.700	Euronext Portugal
TOTAL			2,363

Pedro Manuel de Castro Soares dos Santos

Date	Nature	Code ISIN	Volume	Price	Local
18-03-2011	Acquisition	PTJMT0AE0001	717	11.050	Euronext Portugal
18-03-2011	Acquisition	PTJMT0AE0001	467	11.050	Euronext Portugal
18-03-2011	Acquisition	PTJMT0AE0001	321	11.050	Euronext Portugal
18-03-2011	Acquisition	PTJMT0AE0001	212	11.050	Euronext Portugal
18-03-2011	Acquisition	PTJMT0AE0001	500	11.045	Euronext Portugal
18-03-2011	Acquisition	PTJMT0AE0001	162	11.050	Euronext Portugal
18-03-2011	Acquisition	PTJMT0AE0001	2,240	11.050	Euronext Portugal
18-03-2011	Acquisition	PTJMT0AE0001	5,000	11.040	Euronext Portugal
18-03-2011	Acquisition	PTJMT0AE0001	489	11.050	Euronext Portugal
18-03-2011	Acquisition	PTJMT0AE0001	253	11.050	Euronext Portugal
18-03-2011	Acquisition	PTJMT0AE0001	1,500	11.050	Euronext Portugal
18-03-2011	Acquisition	PTJMT0AE0001	3,110	11.050	Euronext Portugal
18-03-2011	Acquisition	PTJMT0AE0001	500	11.045	Euronext Portugal
18-03-2011	Acquisition	PTJMT0AE0001	1,648	11.040	Euronext Portugal
18-03-2011	Acquisition	PTJMT0AE0001	881	11.050	Euronext Portugal
TOTAL			18,000

LIST OF SHAREHOLDERS WITH QUALIFYING STAKES AS AT JUNE 30th, 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	N.º of shares held	% Capital	% of Voting Rights1
Sociedade Francisco Manuel dos Santos, SGPS, S.A.
Directly	353,119,573	56.114%	56.190%
Heerema Holding Company Inc.
Through Asteck, S.A.	62,929,500	10.000%	10.014%
Carmignac Gestion
Directly	16,859,313	2.679%	2.683%
BNP Paribas
Through Investment Funds Managed by BNP Paribas	14,402,950	2.289%	2.292%

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

TRANSACTIONS WITH OWN SHARES DURING THE 1ST HALF OF 2011

(Under the terms of section d), paragraph 5 of article 66 and paragraph 2 of article 448 of the Portuguese Commercial Companies Code)

During the 1st Half of 2011 there were no acquisitions or disposal of own shares, so at June 30, 2011, there were 859,000 own shares in the portfolio.

IV. STATEMENT OF THE BOARD OF DIRECTORS

Statement of the Board of Directors

Within the terms of paragraph c) n.º1 of article 246 of Portuguese Securities Code, we hereby inform you that to the best of our knowledge:

• i) the information contained in the interim management report is a faithful statement of the evolution of the businesses, of the performance and of the position of Jerónimo Martins, SGPS, S.A. and the companies included within the consolidation perimeter, and contains a description of the main risks and uncertainties which they face; and
• ii) the information contained in the consolidated financial statements, as well as their annexes, was produced in compliance with the applicable accounting standards and gives a true and fair view of the assets and liabilities, the financial situation and the results of Jerónimo Martins, SGPS, S.A. and the companies included in the consolidation perimeter.

Lisbon, 26th July, 2011

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

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

Luís Maria Viana Palha da Silva

(Member of the Board of Directors, Chairman of the Financial Matters Committee and of the Corporate Responsibility Committee and Member of the Evaluation and Nomination Committee)

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

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

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

Marcel Lucien Corstjens (Member of the Board of Directors)

Nicolaas Pronk (Member of the Board of Directors)

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

V. CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT BY FUNCTIONS FOR JUNE 2011 AND 2010

				Euro thousand
	Notes	1st Half 2011	1st Half 2010 (*)	2nd Quarter 2011	2nd Quarter 2010 (*)
Sales and services rendered	3	4,751,504	4,043,290	2,509,936	2,088,160
Cost of sales		(3,910,577)	(3,279,104)	(2,065,327)	(1,691,042)
Supplementary income and costs	5	223,968	158,896	119,386	86,115
Gross profit		1,064,895	923,082	563,995	483,233
Distribution costs	6	(763,692)	(676,868)	(394,390)	(347,655)
Administrative costs	6	(94,461)	(88,503)	(50,025)	(43,458)
Exceptional operating profits/losses	10.1	(4,654)	(1,308)	425	209
Operating profit		202,088	156,403	120,005	92,329
Net financial costs	7	(15,544)	(21,859)	(7,450)	(11,768)
Gains/Losses in associated companies	15	97	115	91	72
Gains/Losses in other investments	10.2	(1,500)	(149)	(1,500)	65
Profit before taxes		185,141	134,510	111,146	80,698
Income taxes	9	(39,221)	(28,859)	(23,648)	(18,457)
Profit before non-controlling interests		145,920	105,651	87,498	62,241
Attributable to:
Non-controlling interests		2,073	3,908	91	2,789
Jerónimo Martins Shareholders		143,847	101,743	87,407	59,452
Basic and diluted earnings per share- Euros	23	0.2289	0.1619	0.1391	0.0946

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

(*) Restated – see note 2

JERÓNIMO MARTINS, SGPS, S.A.

CONSOLIDATED BALANCE SHEET AT 30 JUNE 2011 AND DECEMBER 2010

			Euro thousand
	Notes	2011	2010
Assets
Tangible assets	11	2,203,973	2,192,824
Investment properties	13	50,588	52,047
Intangible assets	12	860,130	863,368
Investments in associated Companies	15	656	1,213
Available-for-sale financial investments	16	6,715	7,015
Trade debtors and deferred costs	19	67,065	71,716
Derivative financial instruments	14	113	46
Deferred tax assets	18.1	60,159	67,360
Total non-current assets		3,249,399	3,255,589
Inventories	17	418,518	368,711
Taxes receivable	18.2	19,767	48,947
Trade debtors, accrued income and deferred costs	19	225,573	181,848
Derivative financial instruments	14	601	-
Cash and cash equivalents	20	257,419	303,927
Total current assets		921,878	903,433
Total assets		4,171,277	4,159,022
Shareholders' equity and liabilities
Share capital		629,293	629,293
Share premium		22,452	22,452
Own shares		(6,060)	(6,060)
Fair value and other reserves	22.1	63,783	63,433
Retained earnings		279,751	135,988
		989,219	845,106
Non-controlling interests		288,758	286,706
Total Shareholders' equity		1,277,977	1,131,812
Borrowings	24	544,155	634,182
Derivative financial instruments	14	15,993	16,649
Employee benefits		30,929	30,839
Deferred profits- state grants		922	935
Provisions for risks and contingencies	25	22,177	22,907
Deferred tax liabilities	18.1	97,295	96,928
Total non-current liabilities		711,471	802,440
Trade creditors, accrued costs and deferred income	26	1,893,679	1,895,411
Derivative financial instruments	14	229	7,763
Borrowings	24	197,264	219,217
Taxes payable	18.2	90,599	102,308
Deferred profits- state grants		58	71
Total current liabilities		2,181,829	2,224,770

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

CONSOLIDATED STATEMENT OF GAINS AND LOSSES RECOGNISED IN EQUITY

Euro thousand

	1st Half 2011	1st Half 2010	2nd Quarter 2011	2nd Quarter 2010
Currency translation differences	(3,316)	(3,852)	2,214	(33,540)
Fair value of cash flow hedging	5,315	(7,218)	(898)	(1,425)
Fair value of hedging instruments on foreign operations	435	475	435	7,033
Fair value of available-for-sale financial investments	(300)	(439)	(288)	(398)
Gains/losses directly recognised in equity	2,134	(11,034)	1,463	(28,330)
Net profit	145,920	105,651	87,498	62,241
Total gains/losses recognised	148,054	94,617	88,961	33,911
Attributable to:
Non-controlling interests	3,857	1,585	(212)	2,161
Jerónimo Martins Shareholders	144,197	93,032	89,173	31,750

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

Euro thousand

Shareholders' equity attributable to Shareholders of Jerónimo Martins, SGPS, S.A.
	Notes	Share Capital	Share Premium	Own Shares	Fair value and other reserves	Retained Earnings	Total	Non controlling Interests	Shareholders' Equity
Balance Sheet at 31 December 2009		629,293	22,452	(6,060)	55,184	77,189	778,058	287,636	1,065,694
Equity changes in 2010
Currency translation differences in the 1st Half of 2010	22.1				(3,852)		(3,852)		(3,852)
Fair value of cash flow hedging	22.1				(4,895)		(4,895)	(2,323)	(7,218)
Fair value of hedging instruments on foreign operations	22.1				475		475		475
Fair value of available-for-sale financial investments	22.1				(439)		(439)		(439)
Gains/losses directly recognised in equity		-	-	-	(8,711)	-	(8,711)	(2,323)	(11,034)
Net profit in 1st Half of 2010						101,743	101,743	3,908	105,651
Total gains/losses recognised during the year		-	-	-	(8,711)	101,743	93,032	1,585	94,617
Dividends						(89,866)	(89,866)	(13,258)	(103,124)
Balance Sheet at 30 June 2010		629,293	22,452	(6,060)	46,473	89,066	781,224	275,963	1,057,187
Balance Sheet at 31 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 the 1st Half of 2011	22.1				(3,316)		(3,316)		(3,316)
Fair value of cash flow hedging	22.1				3,531		3,531	1,784	5,315
Fair value of hedging instruments on foreign operations	22.1				435		435		435
Fair value of available-for-sale financial investments	22.1				(300)		(300)		(300)
Gains/losses directly recognised in equity		-	-	-	350		350	1,784	2,134
Net profit in 1st Half of 2011						143,847	143,847	2,073	145,920
Total gains/losses recognised during the year		-	-	-	350	143,847	144,197	3,857	148,054
Dividends	22.2							(1,548)	(1,548)
Non-controlling interests acquisition	4					(84)	(84)	(257)	(341)
Balance Sheet at 30 June 2011		629,293	22,452	(6,060)	63,783	279,751	989,219	288,758	1,277,977

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

CONSOLIDATED CASH FLOW STATEMENT FOR JUNE 2011 AND 2010

			Euro thousand
	Notes	2011	2010 (*)
Operating Activities
Cash received from Customers		5,288,409	4,502,804
Cash paid to Suppliers and Employees		(5,010,477)	(4,247,874)
Cash generated from operations	21	277,932	254,930
Interest paid		(18,358)	(24,521)
Income taxes paid		(29,815)	(14,433)
Cash Flow from operating activities		229,759	215,976
Investment activities
Disposals of tangible assets		1,557	3,185
Disposals of intangible assets		7,242	-
Interest received		3,873	1,466
Dividends received		672	56
Acquisition of group and associated companies	4	(341)	-
Acquisition of tangible assets		(163,955)	(165,092)
Disposals of available-for-sale financial investments and		-	7,880
investment property
Acquisition of available-for-sale financial investments and investment property		-	(5)
Acquisition of intangible assets		(9,548)	(15,710)
Cash flow from investment activities		(160,500)	(168,220)
Financing activities
Received from loans		46,003	64,635
Reimbursement of loans		(159,152)	(39,825)
Dividends paid	22.2	(1,548)	(103,124)
Cash Flow from financing activities		(114,697)	(78,314)
Net changes in cash and cash equivalents		(45,438)	(30,558)
Cash and cash equivalents changes
Cash and cash equivalents at the beginning of 1st Half		303,927	223,501
Net changes in cash and cash equivalents		(45,438)	(30,558)
Effect of currency translation differences		(1,070)	1,478
Cash and cash equivalents at the end of 1st Half	20	257,419	194,421

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

	1st Half	1st Half	2nd Quarter	2nd Quarter
	2011	2010	2011	2010
Cash Flow from operating activities	229,759	215,976	174,920	163,365
Cash Flow from investment activities	(160,500)	(168,220)	(75,227)	(87,980)
Cash Flow from financing activities	(114,697)	(78,314)	(106,861)	(87,171)
Cash and cash equivalents changes	(45,438)	(30,558)	(7,168)	(11,786)

	Index to the Notes to the Consolidated Financial Statements	Page
1	Activity 22
2	Accounting policies 22
3	Segments reporting 23
4	Businesses acquisitions and changes to the consolidation scope 24
5	Supplementary income and costs 24
6	Distribution and administrative costs 25
7	Net financial costs 25
8	Financial instruments25
9	Income tax recognised in the income statement26
10	Exceptional operating profits/losses and gains/losses in other investments26
11	Tangible Assets27
12	Intangible Assets 27
13	Investment Property28
14	Derivative financial instruments 29
15	Investments in associated companies 30
16	Available-for-sale financial investments 30
17	Inventories30
18	Taxes 30
19	Trade debtors, accrued income and deferred costs 31
20	Cash and cash equivalents 32
21	Cash generated from operations 32
22	Capital and reserves 32
23	Earnings per share 33
24	Borrowings 33
25	Provisions and adjustments to the net realisable value34
26	Trade creditors, accrued costs and deferred income34
27	Contingencies 35
28	Related parties 35

1 Activity

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

Jerónimo Martins Group is essentially devoted to the production, distribution and sale of food and other fast moving consumer goods products. The Group operates in Portugal and Poland.

Head Office: Rua Tierno Galvan, Torre 3, 9º, J- 1099-008 Lisbon

Share Capital: 629,293,220 euros

Registered at the Commercial Registry Office of Lisbon and Tax Number: 500 100 144

JMH has been listed on Euronext Lisbon (ex-Lisbon and Porto Stock Exchange) since 1989.

The Board of Directors approved these consolidated financial statements on 26th July 2011.

2 Accounting policies

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

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

The JMH consolidated financial statements were prepared in accordance with the interim financial reporting standard (IAS 34), and all other International Financial Reporting Standards (IFRS) issued by International Accounting Standards Board (IASB) and with the interpretations of the International Financial Reporting Interpretations Committee (IFRIC).

The consolidated financial statements were prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union, and with the same standards and accounting policies adopted by the Group on the elaboration of the annual financial statements, including mainly an explanation of the events and relevant changes for the understanding of variations in the financial position and Group performance since the last annual report. Thus, some of the notes from the 2010 annual report are omitted because no changes occurred or they are not materially relevant for the understanding of the interim financial statements.

As mentioned in Corporate Governance chapter of 2010 Annual Report, the Company, as a result of its normal activity, is exposed to several risks which are monitored and mitigated throughout the year. During the first half of 2011, there were no material changes in addition to the notes discriminated in this annex, that could significantly change the assessment of the risks that the group is exposed to.

In relation to 2010, the European Union issued 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. Its implementation is mandatory for financial years beginning on January 1, 2011, having no material impact on the Group's Financial Statements.

In May 2011 the IASB issued IFRS 10 – Consolidated Financial Statements IFRS 11 – Joint Arrangements, IFRS 12 – Disclosures of Interests in Other Entities, IFRS 13 - Fair Value Measurement, in June 2011 were issued amendments to IAS 1 - Presentation of Financial Statements and IAS 19 - Employee Benefits.

All these standards are still waiting to be endorsed by the European Union, and its mandatory implementation should occur for annual periods beginning on January 1st, 2013.

The most relevant impacts of its implementation regard, changes in consolidation method for joint ventures as well as changes in the presentation 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 observed in 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 have been, until now, 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, the Group decided to classify this amount as Supplementary costs which contribute to the total margin.

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

		1st Half 2010			2nd Quarter 2010
	Published	Reclassification	Restated	Published	Reclassification	Restated
Sales and services rendered	4,043,290	-	4,043,290	2,088,160	-	2,088,160
Cost of sales	(3,279,104)	-	(3,279,104)	(1,691,042)	-	(1,691,042)
Supplementary income and costs	172,659	(13,763)	158,896	92,911	(6,796)	86,115
Gross profit	936,845	(13,763)	923,082	490,029	(6,796)	483,233
Distribution costs	(676,868)	-	(676,868)	(347,655)		(347,655)
Administrative costs	(88,503)	-	(88,503)	(43,458)		(43,458)
Exceptional operating profits/losses	(1,308)	-	(1,308)	209		209
Operating profit	170,166	(13,763)	156,403	99,125	(6,796)	92,329
Net financial costs	(35,622)	13,763	(21,859)	(18,564)	6,796	(11,768)
Gains/Losses in associated companies	115	-	115	72	-	72
Gains/Losses in other investments	(149)	-	(149)	65	-	65
Profit before taxes	134,510	-	134,510	80,698	-	80,698

2.1. Transactions in foreign currencies

Transactions in foreign currencies are translated into Euros at the exchange rate prevailing on the transaction date.

On the balance sheet date, monetary assets and liabilities expressed in foreign currencies are translated at the exchange rate prevailing on that date and exchange differences arising from this conversion are recognised in the income statement. When qualifying as hedges on investments in foreign subsidiaries the exchange differences are deferred in equity.

The main exchange rates applied on the balance sheet date are those listed below:

	Rate on 30 June 2011	Average rate for the 1st Half
Polish Zloty (PLN)	€ 0.2506	€ 0.2529
US Dollar (USD)	€ 0.6888	-

3 Segments reporting

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

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

Business segments:

• Portugal Retail: comprises the business units 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.

Detailed Information by Business Segments at June 2011 and 2010

		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	1,479,516	1,400,926	353,571	336,144	2,844,523	2,220,941	114,613	117,308	(40,719)		(32,029) 4,751,504	4,043,290
Inter-segments	130,512	107,353	652	659	305	271	17,342	21,034	(148,592)	(129,061)	219	256
External Customers	1,349,004	1,293,573	352,919	335,485	2,844,218	2,220,670	97,271	96,274	107,873		97,032 4,751,285	4,043,034
Operational Cash-Flow (EBITDA)	72,742	69,550	20,576	19,005	207,850	146,218	13,782	17,417	(3,945)	(2,157)	311,005	250,033
Depreciations and Amortisations	(46,396)	(42,905)	(5,509)	(4,389)	(47,923)	(41,046)	(1,603)	(1,591)	(2,832)	(2,391)	(104,263)	(92,322)
Operational Result (EBIT)	26,346	26,645	15,067	14,616	159,927	105,172	12,179	15,826	(6,777)	(4,548)	206,742	157,711
Financial Results											(16,947)	(21,893)
Net Result Attributable to JM											143,847	101,743
TOTAL ASSETS (1)	1,765,505	1,871,330	316,010	301,821	1,753,826	1,660,500	233,189	199,361	102,747		126,010 4,171,277	4,159,022
TOTAL LIABILITIES (1)	1,181,753	1,292,800	264,429	256,080	1,133,642	1,147,527	157,963	122,514	155,513		208,289 2,893,300	3,027,210
Investments in Fixed Assets	33,726	44,964	3,136	9,106	86,944	122,369	1,889	1,332	1,577	8,045	127,272	185,816

(1) The Comparative report is 31th December of 2010

(*) Restated – see note 2

Reconciliation between EBIT and Operational Result

	June 2011	June 2010 (*)
EBIT	206,742	157,711
Non recurrent results	(4,654)	(1,308)
Operational Result	202,088	156,403
(*) Restated – see note 2

Information by Geographical Segments at June 2011 and 2010

		Net Sales and Services
	2011	2010
Portugal	1,902,675	1,819,273
Poland	2,848,829	2,224,017
Total	4,751,504	4,043,290

4 Businesses acquisitions and changes to the consolidation scope

On March 15th 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 had already control over the acquired company.

5 Supplementary income and costs

	June 2011	June 2010 (*)
Supplementary gains	233,580	166,473
Cash discount received	19,959	18,949
Cash discount paid	(1,557)	(1,693)
Electronic payment commissions	(8,241)	(7,707)
Other supplementary costs	(19,526)	(16,598)
Provisions for debtors suppliers	(247)	(528)
	223,968	158,896

(*) Restated – see note 2

Supplementary gains concern to profits obtained by the Group through the distribution of goods, namely, rental of spaces, participation in birthday events, rental of shelf's, etc. Supplementary costs concern to the same nature of supplementary gains mentioned, paid by subsidiaries operating in the manufacturing and services segments, as well as financial expenses incurred by Poland Retail (see note 2 - changes in Basis for preparation).

6 Distribution and administrative costs

	June 2011	June 2010
Supplies and services	177,851	157,128
Advertising costs	35,740	37,014
Rents	101,457	89,248
Staff costs	373,175	332,095
Depreciations, amortisations and assets profit/loss	103,280	91,855
Transportation costs	63,543	53,124
Other operational profit/loss	3,107	4,907
	858,153	765,371

7 Net financial costs

	June 2011	June 2010 (*)
Interest expense	(16,640)	(19,038)
Interest received	3,628	1,462
Dividends	19	56
Net foreign exchange	(71)	(737)
Investment property:
Changes to fair value (note 13)	(9)	(9)
Other financial costs and gains	(2,470)	(3,449)
Fair value of financial investments held for trade
Derivative instruments (note 8)	(1)	(144)
	(15,544)	(21,859)

(*) Restated – see note 2

The interest expense heading includes the interests regarding loans measured at amortized cost, as well as interests on fair value and cash flow hedging instruments (note 14).

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.

8 Financial instruments

Fair value of derivative financial instruments

The impact in income statement, is as follows:

	June 2011	June 2010
Derivatives held for trading
Currency swaps	-	(130)
Interest rates swaps	(1)	(14)
	(1)	(144)
Income tax recognised in the income statement	-	38
Non-controlling interests	1	52
Amount recognised in profit/loss	-	(54)

The value recognised in reserves referred to hedging of investment in Poland is EUR 434 thousand (net of tax). Changes to the fair value of derivative instruments designated as fair value hedging (note 14) for the amount of positive EUR 631 thousand (2010: positive EUR 24,796 thousand) was offset by a symmetrical variation in value for the loan of USD 96 million (note 24.2).

9 Income tax recognised in the income statement

9.1 Income taxes

	June 2011	June 2010
Current income tax
Current tax of the year	(33,902)	(23,348)
Adjustment to prior year estimation	424	17
	(33,478)	(23,331)
Deferred tax (note 18.1)
Temporary differences created and reversed	(5,743)	(6,899)
Change to the recoverable amount of tax losses and temporary differences from previous years	-	1,371
	(5,743)	(5,528)
Total income taxes	(39,221)	(28,859)

9.2 Reconciliation of effective tax rate

		June 2011		June 2010
Profit before tax		185,141		134,510
Income tax using the Portuguese corporation tax rate	26.5%	(49,062) 26.5%		(35,645)
Fiscal effect due to:
Different tax rates in foreign jurisdictions	7.1%	13,095	6.7%	9,025
Non taxable or non recoverable results	(0.3%)	(646)	(0.6%)	(751)
Non-deductible expenses and fiscal benefits	(0.3%)	(612)	(1.1%)	(1,517)
Adjustment to prior year estimation	0.2%	424	0.0%	19
Change to the recoverable amount of tax losses and
temporary differences of prior years	0.0%	-	1.0%	1,371
Results subject to special taxation (including State surcharge)	(1.3%)	(2,420)	(1.0%)	(1,361)
Income tax	21.2%	(39,221) 21.5%		(28,859)

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

10.1 Exceptional operating profits/losses

	June 2011	June 2010
Losses with businesses disposals	-	(1,235)
Losses related to natural disaster in Madeira	-	(1,000)
Indemnities related to termination of lease agreement	(4,907)	-
Impact of actuarial assumptions changes	723	-
Reimbursement of notary fees resulting from court decision	119	1,350
Impairment of assets	(496)	(402)
Others	(93)	(21)
	(4,654)	(1,308)

10.2 Gains/Losses in other investments

	June 2011	June 2010
Impairment of investment properties	(1,500)	-
Losses with the disposal of available-for-sale financial investments	-	(149)
	(1,500)	(149)

11 Tangible Assets

11.1 Changes occurred during the year

	Land and natural resources	Buildings and other constructi ons	Plants, machinery and tools	Transport equipment and others	Work in progress and advances	Total
Cost
Opening balance		431,992 1,679,699	1,037,952	185,283	135,735	3,470,661
Foreign exchange differences	(460)	(3,200)	(1,118)	(320)	(268)	(5,366)
Increases	3,945	38,364	35,539	3,957	35,920	117,725
Disposals	(5)	(77)	(4,499)	(2,056)	(1,302)	(7,939)
Transfers and write off's	2,615	34,696	(2,112)	1,963	(49,679)	(12,517)
Closing balance		438,087 1,749,482	1,065,762	188,827	120,406	3,562,564
Depreciation and impairment losses
Opening balance	-	476,737	656,319	144,781	-	1,277,837
Foreign exchange differences	-	(901)	(593)	(257)	-	(1,751)
Increases	-	45,402	45,146	8,903	-	99,451
Disposals	-	(30)	(4,353)	(2,044)	-	(6,427)
Transfers and write off's	-	(5,713)	(4,697)	(604)	-	(11,014)
Impairment losses	-	308	187	-	-	495
Closing balance	-	515,803	692,009	150,779	-	1,358,591
Net value
As at 1 January 2011		431,992 1,202,962	381,633	40,502	135,735	2,192,824
As at 30 June 2011		438,087 1,233,679	373,753	38,048	120,406	2,203,973

11.2 Guarantees

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

11.3 Revaluation

No changes occurred in the market value of land allocated to the operating activity.

12 Intangible Assets

12.1 Changes occurring during the year

	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	(1,237)	(81)	(161)	(227)	(24)	(1,730)
Increases	-	153	284	4,009	5,101	9,547
Disposals	-	-	(29)	-	(7,228)	(7,257)
Transfers and write off's	-	390	1,465	379	(1,877)	357
Closing balance	745,574	27,173	57,847	88,861	11,028	930,483
Depreciation and impairment losses
Opening balance	-	23,840	5,074	37,284	-	66,198
Foreign exchange differences	-	(81)	(7)	(75)	-	(163)
Increases	-	515	705	3,559	-	4,779
Disposals	-	-	(15)	-	-	(15)
Transfers and write off's	-	(345)	(101)	-	-	(446)
Closing balance	-	23,929	5,656	40,768	-	70,353
Net value
As at 1 January 2011	746,811	2,871	51,214	47,416	15,056	863,368
As at 30 June 2011	745,574	3,244	52,191	48,093	11,028	860,130

The Group identified as intangible assets of indefinite useful life, besides Goodwill, the trademark Pingo Doce, whose net value is EUR 9,228 thousand, for which there is no time limit for how long they will continue to create economic benefits to the Group. This intangible asset is not amortised and are subject to impairment tests annually, using the same assumptions applied in Goodwill (note 12.4).

12.2 Guarantees

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

12.3 Intangible assets in progress

The implementation of projects for processes simplification, usufruct rights of assets not yet operational and key money are considered in intangible assets work in progress.

12.4 Goodwill

Goodwill is allocated to the Groups' business areas as presented bellow:

Business Areas	June 2011	December 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 Retail	321,353	322,590
	745,574	746,811

As a consequence of the currency translation adjustment of assets in the Group's business in Poland, the Goodwill related to this business, totalling PLN 1,282,278 thousand, was decreased by EUR 1,237 thousand.

13 Investment Property

	June 2011
Opening balance	52,047
Transfers	50
Changes to fair value	(9)
Impairment Losses	(1,500)
Closing balance	50,588

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.

This category also includes recently acquired land, whose use has still not been determined, being, therefore, considered has investment expecting for a market value increase.

As non-current assets are all the investment properties that are not expectable to be sold within the next 12 months.

During the first semester, as a result of evaluations conducted by independent entities, impairment losses were recognized in the amount of EUR 1,500.

14 Derivative financial instruments

				June 2011					December 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	-	-	-	383	10 millions EUR	-	-	-	448
Fair value hedging derivatives
USD loan hedging	96 millions USD	-	-	-		7,388 180 millions USD	-	-	6,776	1,243
Cash flow hedging derivatives
Interest rate swap (EUR)	468.7 millions EUR	-	-	218	8,188	524.1 millions EUR	-	-	987	14,783
Interest rate swap (PLN)	229.5 millions PLN	-	113	-		34 229.5 milions PLN	-	46	-	175
Foreign operation investments hedging derivatives
Currency Forwards (PLN)	375 millions PLN	601	-	11	-		-	-	-	-
Total derivatives held for trading		-	-	-	383		-	-	-	448
Total hedging derivatives		601	113	229	15,610		-	46	7,763	16,201
Total assets/liabilities derivatives		601	113	229	15,993		-	46	7,763	16,649

In June 2011 the values shown include interest receivable or payable related with these financial instruments that are due. The net payable amount is EUR 1,323 thousand.

Derivatives held for trading

Interest rate swap

At 30 June 2011, the Group had derivatives financial instruments held for trading with a notional of EUR 10,000 thousand (December 2010: EUR 10,000 thousand). The fair value of these instruments at 30 June 2011 was negative EUR 383 thousand (December 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 30 June 2011, 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 30 June 2011 was negative EUR 7,388 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 30 June 2011, the total loans with derivative hedge instruments were EUR 564,317 thousand (December 2010: EUR 638,107 thousand) and PLN 255,000 thousand (December 2010: 255,000).

The Group set a portion of future interest payments on loans, through entering into interest rate swaps. The hedged risk is indexed to the variable rate associated with the loans. The purpose of the hedge is to convert the loans with variable interest rate into fixed interest rate. The credit risk is not hedged. The Group had interest rate swaps in Euro and Zlotys.

Interest rate swaps in Euro have a notional EUR 468,710 thousand (December 2010: EUR 524,075 thousand), and the fair value of these instruments at 30 June 2011 was negative EUR 8,406 thousand (December 2010: negative EUR 15,770 thousand).

On the other hand, the interest rate swaps in Zlotys have a notional PLN 229,500 thousand (December 2010: PLN 229,500 thousand), and its fair value at 30 June 2011 was positive EUR 79 thousand (December 2010: negative 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 maturity in September 2011, involving a notional of PLN 375,000 thousand. The fair value of these derivatives at 30 June 2011 was positive EUR 590 thousand. The changes in the derivative fair value were recognised in equity currency translation reserve.

15 Investments in associated companies

During the 1st half of 2011, the movement under this heading was as follows:

	June 2011
Opening balance	1,213
Equity method	(557)
Closing balance	656

From the application of equity method a gain of EUR 97 thousand was recognised, which was deducted of the dividends received in 2011 in the amount of EUR 654 thousand.

16 Available-for-sale financial investments

Regarding the financial assets available-for-sale, the reduction of EUR 300 thousand respects to changes in the fair value of listed equity holdings, at the reporting date of these financial statements.

17 Inventories

	June 2011	December 2010
Raw and subsidiary materials and consumables	7,322	5,365
Goods and work in progress	1,090	750
Finished and semi-finished goods	1,226	319
Goods	423,277	377,956
	432,915	384,390
Fair value adjustment (note 25)	(14,397)	(15,679)
Net inventories	418,518	368,711

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

18 Taxes

18.1 Deferred tax assets and liabilities

Change in deferred tax accounts

	June 2011
Opening balance	(29,568)
Currency translation difference (note 22.1)	10
Revaluation and reserves (note 22.1)	(1,835)
Result of the year (note 9.1)	(5,743)
Closing balance	(37,136)

Deferred taxes are presented in balance sheet as follows:

	June 2011	December 2010
Deferred tax assets	60,159	67,360
Deferred tax liabilities	(97,295)	(96,928)
	(37,136)	(29,568)

Movement in deferred taxes during the year

	Opening balance	Impact on results	Impact on equity	Currency translation differences	Closing balance
Deferred tax liabilities
Revaluation of assets	32,250	(5)	-	(18)	32,227
Deferred income for tax purposes	11,779	(343)	-	(42)	11,394
Differences on accounting policies in other countries	12,924	87	-	(50)	12,961
Deferred taxation of results	36,910	-	-	(142)	36,768
Other temporary differences	3,065	706	16	158	3,945
	96,928	445	16	(94)	97,295
Deferred tax assets
Excess over legal provisions	17,054	237	-	(43)	17,248
Revaluation of assets	2,216	-	-	-	2,216
Employee benefits	4,374	(110)	-	-	4,264
Costs with foreign exchange risk hedging operations	3,795	(17)	(1,819)	2	1,961
Recoverable losses	6,825	(4,012)	-	18	2,831
Profit in inventories	410	51	-	-	461
Fair value adjustments on inventories	3,158	(320)	-	(5)	2,833
Other deferred costs for tax purposes	22,279	(1,107)	-	(43)	21,129
Differences on accounting policies in other countries	3,094	72	-	(13)	3,153
Other temporary differences	4,155	(92)	-	-	4,063
	67,360	(5,298)	(1,819)	(84)	60,159
Net change in deferred tax	(29,568)	(5,743)	(1,835)	10	(37,136)

18.2 Receivable and payable taxes

	June 2011	December 2010
Taxes receivable
Income tax receivable	14,354	28,778
VAT receivable	4,462	19,136
Others	951	1,033
	19,767	48,947
Taxes payable
Income tax payable	31,548	50,428
VAT payable	26,757	21,601
Income tax withheld	6,705	6,218
Social security	21,634	19,664
Other taxes	3,955	4,397
	90,599	102,308

19 Trade debtors, accrued income and deferred costs

	June 2011	December 2010
Non-current
Other debtors	62,045	66,066
Deferred costs	5,020	5,650
	67,065	71,716
Current
Commercial customers	104,930	74,250
Suppliers	27,619	12,191
Staff	1,960	1,981
Other debtors	38,375	35,055
Accrued income	37,986	47,331
Deferred costs	14,703	11,040
	225,573	181,848

Non-current debtors balance of EUR 62,015 thousand is related to additional tax liquidation, as well as advances on account of tax. The Group has already contested the amount paid and made a legal claim for reimbursement.

Accrued income essentially respects to the recognition of supplementary gains contracted with suppliers, in the amount of EUR 34,850 thousand.

The debtor's amount is registered by the recoverable value, i.e., the Group constitutes provisions for impairment losses whenever there are signs of uncollectable amounts (note 25).

20 Cash and cash equivalents

	June 2011	December 2010
Bank deposits	203,534	131,609
Short-term investments	50,897	169,445
Cash and cash equivalents	2,988	2,873
	257,419	303,927

The short-term investments include short-term bank deposits and other negotiable funds for which provisions were booked to reduce it to the realizable value (note 25).

21 Cash generated from operations

	June 2011	June 2010
Net results	143,847	101,743
Adjustments for:
Non-controlling interests	2,073	3,908
Income tax	39,221	28,859
Depreciations and amortisations	104,263	92,322
Provisions and other operational gains and losses	(1,611)	455
Net financial costs	15,544	21,859
Profit in associated companies	(97)	(115)
Profit/ Losses on other investments	1,500	149
Profit/ Losses on tangible and intangible assets	2,261	8,731
	307,001	257,911
Changes in working capital:
Inventories	(49,331)	(16,538)
Trade debtors, accrued income and deferred costs	(30,476)	(21,908)
Trade creditors, accrued costs and deferred income	50,738	35,465
	277,932	254,930

22 Capital and reserves

22.1 Fair value and other reserves

	Land and buildings	Cash-flow Hedging reserve	Available-for sale financial investments	Currency translation reserve	Total
Balance as at 1 January 2011	83,116	(6,781)	(455)	(12,447)	63,433
Fair value adjustment of financial investments: - Gross value - Deferred/current tax	- -	7,146 (1,831)	- -	591 (156)	7,737 (1,987)
- Non-controlling interests	-	(1,784)	-	-	(1,784)
Fair value adjustment of available-for-sale financial investments: - Gross value	-	-	(300)	-	(300)
Currency translation differences:
- In the year - Deferred tax	(95) 18	18 (4)	- -	(3,419) 166	(3,496) 180
Balance as at 30 June 2011	83,039	(3,236)	(755)	(15,265)	63,783

Notes to the Consolidated Financial Statements 30 June 2011 and 2010

	Land and buildings	Cash-flow Hedging reserve	Available for-sale financial investments	Currency translation reserve	Total
Balance as at 1 January 2010	84,931	(4,985)	58	(24,820)	55,184
Fair value adjustment of financial investments: - Gross value - Deferred/current tax - Non-controlling interests	- - -	(9,780) 2,562 2,323	- - -	692 (217)	(9,088) 2,345 2,323
Fair value adjustment of available-for-sale financial investments: - Gross value	-	-	(439)	-	(439)
Currency translation differences: - In the year - Deferred tax	(228) 43	5 (1)	- -	(3,468) (203)	(3,691) (161)
Balance as at 30 June 2010	84,746	(9,876)	(381)	(28,016)	46,473

22.2 Dividends

Dividends distributed in 2011 in the amount of EUR 1,548 thousand, were paid to non-controlling interests in the Group companies.

23 Earnings per share

23.1 Basic and diluted earnings per share

Basic net results per share are calculated based on the net profit of EUR 143,847 thousand (2010: profit of EUR 101,743 thousand) and on weighted average outstanding ordinary shares, numbering 628,434,220 (2010: 628,434,220).

23.2 Weighted average ordinary shares

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

23.3 Diluted net results attributable to ordinary shares

	June 2011	June 2010
Weighted average ordinary shares	628,434,220	628,434,220
Diluted net results of the year attributable to ordinary shares	143,847	101,743
Basic and diluted earnings per share – Euros	0.2289	0.1619

24 Borrowings

In June 2011 the seven years issue of the Bond Loan in the amount of USD 84,000 thousand placed by JMR – Gestão de Empresas de Retalho, SGPS, S.A., on the US market (Private Placement), was reimbursed.

24.1 Current and non-current loans

	June 2011	December 2010
Non-current loans
Bank loans	104,020	175,746
Bond loans	413,109	419,228
Financial lease liabilities	27,026	39,208
	544,155	634,182
Current loans
Bank overdrafts	9,729	7,671
Bank loans	125,858	80,536
Bond loans	35,000	98,643
Financial lease liabilities	26,677	32,367
	197,264	219,217

24.2 Loan terms and maturities

	Average rate	Total	Less than 1 year	Between 1 and 5 years	More than 5 years
Bank loans
Commercial Paper in EUR	2.09%	95,750	95,750	-	-
Loans in EUR	5.06%	69,496	18,104	51,392	-
Loans in PLN	5.04%	64,632	12,004	52,628	-
Bond Loans
Loans	4.15%	455,537	35,000	420,537	-
Fair value adjustment		(7,428)	-	(7,428)
Bank overdrafts	2.89%	9,729	9,729	-	-
Financial lease liabilities	1.78%	53,703	26,677	27,026	-
		741,419	197,264	544,155	-

The amount of negative EUR 7,428 thousand, adjusted to the total of bond loans, refers to the updating of the bond loan for USD 96,000 thousand, for which the Group contracted a hedging instrument, presented in note 14, with a symmetrical value.

24.3 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 30 June is as follows:

	June 2011	December 2010
Non-current loans (note 24.1)	544,155	634,182
Current loans (note 24.1)	197,264	219,217
Derivative financial instruments (note 14)	15,508	24,366
Interest on accruals and deferrals	1,771	821
Bank deposits (note 20)	(203,534)	(131,609)
Short-term investments (note 20)	(50,897)	(169,445)
	504,267	577,532

25 Provisions and adjustments to the net realisable value

	Opening balance	Set up and reinforced	Unused and reversed	Foreign exchange difference	Used	Closing balance
Doubtful debtors (note 19)	21,825	1,145	(335)	(13)	(567)	22,055
Inventories (note 17)	15,679	448	(1,706)	(24)	-	14,397
Available-for-sale fin. investments (note 16)	2,571	300	-	-	-	2,871
Short term investments	57	-	-	-	-	57
Total fair value adjustments to net realisable value	40,132	1,893	(2,041)	(37)	(567)	39,380
Employee benefits	30,839	1,638	(741)	-	(807)	30,929
Other risks and contingencies	22,907	269	(800)	(24)	(175)	22,177
Total of provisions	53,746	1,907	(1,541)	(24)	(982)	53,106

26 Trade creditors, accrued costs and deferred income

	June 2011	December 2010
Other commercial creditors	1,569,545	1,544,503
Other non-commercial creditors	100,938	142,502
Accrued costs	219,383	204,755
Deferred income	3,813	3,651
	1,893,679	1,895,411

27 Contingencies

• Under non-current debtors (note 19), an amount of EUR 60,799 thousand relates to tax liquidations claimed by the Tax Administration.

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

In this context, the Group immediately demanded total reimbursement of the amounts paid, as well as indemnity interest at the legal rate for the period between the payment date and its effective restitution date.

According to the principle of prudence, the Group has not recognised the amount of indemnity interest over this credit.

The judicial claims presented concerning Corporate Income Tax (CIT), of the tax year 1993 and amounting to, approximately, EURO 14,700 thousand were ruled in favour of the Portuguese tax authorities.

The Board of Directors still believing that those decisions are not valid nor have any legal grounds, supported by its lawyers and tax advisors' opinion, has used every legal means at its disposal to continue challenging them and to oppose to any consequences that they may cause. Moreover, no changes will be introduced to its financial statements.

Following the contingencies mentioned in the 2010 Annual Report, changes occurred on the headings as follows:

• 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 respect to the years of 2002, 2003 and 2004. Feira Nova and Pingo Doce's Management, supported by their lawyers and tax consultants, have challenged these assessments, believing that the Tax Authorities have no arguments to request these payments. 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, an amounting to, approximately, EURO 1,2 million, was ruled in favour of the company. Since the tax authorities did not react against it, this Court decision is final.
• l) The Tax Authorities assessed JMR, SGPS, S.A. for the amount of EUR 16,078 thousand due to the fact that JMR should restate the dividends received, in 2003 and 2004, from its subsidiary in the Madeira Free Zone, considering them as interest for tax purposes. According to the Portuguese Tax Authorities the said income should be subject to Corporate Income Tax in opposition to the dividends received that are exempt. JMR'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, therefore JMR's Management, supported by its lawyers and tax advisors' opinion, still believing that those decisions are not valid nor have any legal grounds will use every legal means at its disposal to continue challenging them and to oppose to any consequences that they may cause. Moreover, no changes will be introduced to its financial statements.
• o) The Fiscal Authorities claimed from Unilever Bestfoods Portugal Produtos Alimentares, S.A., the amount of EUR 4,343 thousand for non-acceptance of withholding tax exemption carried out by the company, regarding the payment of dividends in 2002. The Management of the company, supported by its lawyers and fiscal consultants, has contested these charges, believing that the Fiscal Authorities are not justified in requesting this payment. By decision dated on March 24th 2011 the court has decided in favour of the Company. This decision has become final, and this matter is definitively closed.

28 Related parties

56.11% of the Group is owned by the Sociedade Francisco Manuel dos Santos, and no transactions occurred between this Company and any other company of the Group in the first half of 2011, neither were there any amounts payable or receivable between them on June 30th, 2011.

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

		Sales and services rendered		Stocks purchased and services supplied
	June 2011	June 2010	June 2011	June 2010
Joint-Ventures	423	489	38,011	46,376
Associated companies	-	41	355	429

	Accounts payable		Accounts receivable
	June 2011	December 2010	June 2011	December 2010
Joint-Ventures	502	734	16,937	8,565
Associated companies	-	2	347	757

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

		Sales and services rendered	Stocks purchased and services supplied
	June 2011	June 2010	June 2011	June 2010
Joint-Ventures	219	256	20,906	25,507
Associated companies	-	41	355	429

	Accounts payable		Accounts receivable
	June 2011	December 2010	June 2011	December 2010
Joint-Ventures	260	388	9,314	4,710
Associated companies	-	2	347	757

All the transactions with the jointly controlled companies (joint ventures) and associate companies were made under normal market conditions, i.e., the transaction value corresponds to prices that would be applicable between non related parties.

Outstanding balances between Group companies and related parties, being a result of a trade agreement, are settled in cash, and are subject to the same payment terms as those applicable to other agreements celebrated between Group companies and their suppliers.

The amounts receivable are not covered by insurance and no guarantees are given or received, as the Group holds a relevant influence over these companies.

There are no provisions for doubtful debts and no costs were recognised during the year related with bad debts or doubtful debts with these related parties.

Lisbon, 26th July, 2011

The Certified Accountant The Board of directors