Jeronimo Martins — Interim / Quarterly Report 2013

Nov 29, 2013

Unaudited

INDEX

I – Consolidated Management Report

Message from the CEO	3
1. Sales Analysis	3
2. Results Analysis	4
3. Balance Sheet	5
4. Outlook for 2013	6

II – Consolidated Management Report Appendix

1. Sales Growth	7
2. Stores Network	7
3. EBITDA Margin Breakdown	7
4. Financial Costs Breakdown	7
5. Working Capital Adjustment	7
6. Definitions	8
7. Information Regarding Individual Financial Statements	8

III – Consolidated Financial Statements

1. Consolidated Financial Statements	10
2. Notes to the Consolidated Financial Statements	14

I. CONSOLIDATED MANAGEMENT REPORT

Message from the CEO – Pedro Soares dos Santos

'In these first nine months, the Group's Companies reinforced their leadership positions in the markets where we operate, even if the trading environment has become tougher and more challenging.

In a context of economic slowdown and increased competitive intensity in Poland, Biedronka's strategic priority remains to grow sales profitably and sustainably. In the third quarter the Company has further strengthened its price offer with promotions on top of its everyday low price position. Market share continued to increase and the expansion plan remains firmly on track.

I am very confident that our businesses are healthy and well positioned to succeed in these challenging environments. For the year we will once more deliver sales growth ahead of the market and increase earnings.'

1. Sales Analysis

(Million Euro)		9M 13		9M 12 *	D %		Q3 13			Q3 12 *	D %
		% total		% total	Pln	Euro		% total		% total	Pln	Euro
Biedronka				5,642 64.9% 4,867 62.4% 15.9% 15.9%						1,950 63.8% 1,734 62.2% 15.5% 12.5%
Pingo Doce (store sales)		2,353 27.1% 2,266 29.1%				3.8%		837 27.4%		804 28.8%		4.1%
Recheio	609	7.0%	601	7.7%		1.3%	234	7.6%	226	8.1%		3.6%
Mkt. Repr. and Rest. Serv.	5 7	0.7%	6 2	0.8%		-8.2%	2 0	0.7%	2 2	0.8%		-8.3%
Others & Cons. Adjustments	3 8	0.4%	4	0.1%		n.a.	1 6	0.5%	3	0.1%		n.a.
Total JM	8,699	100% 7,800		100%		11.5%	3,056	100% 2,788		100%		9.6%

* Restated – see note 2 Chapter III

In the first nine months of the year, consolidated sales grew strongly, reaching €8,699 million (+11.5%), with a like-for-like (LFL) growth of 3.8% in an environment of increased competitiveness.

In Poland, the food retail market increased 2.9% in the nine months, with a growth of 4.7% in third quarter including food inflation of 2.5% in third quarter and 2.1% in the nine months.

Since the end of the second quarter the food retail market has become much more competitive with a high level of promotions throughout the quarter. For the consumer, in a weaker economic environment, price and convenience remain the key factors to choose where to shop, with "attractive promotions" now becoming more relevant to consumers.

Biedronka decided to complement its Everyday Low Price position with strong promotions in order to further reinforce its price leadership.

Biedronka's strategic focus on sustainable and profitable growth remains unchanged and the Company is well positioned to continue to outperform in the market, based on its scale, price leadership, proximity and quality.

In the third quarter total sales of the Company increased by 15.5% in local currency (+12.5% in Euro), and by 15.9% in the nine months. In the third quarter Biedronka achieved a LFL growth of 4.0%, with basket inflation slowing to 0.8% mainly due to the investment in promotions. Both basket and number of visits contributed to this LFL performance, with the number of visits increasing by 2.8%. In the period, Biedronka's market share has increased.

Expansion remains a priority for us in Poland and Biedronka has opened 128 new stores in the 9 months, and remains on track to open 290 new stores by the end of the year. In September, another important step in support of our growth strategy was taken with the inauguration of two new distribution centres, and Biedronka now operates through 12 logistics regions in the country.

In Portugal the environment remains tough although there are some signs of stabilization in the food retail market. Food retail sales in the country increased by 1.9% in third quarter, +1.0% in the nine months, with food inflation of around 2.4% in both periods.

Pingo Doce has maintained the strong and effective promotional activity initiated last year. The Company achieved a very strong LFL sales growth of 5.0% (excluding fuel) in the quarter, with total sales increasing 4.1%. In the nine months LFL growth was 3.6% (excluding fuel) and total sales grew by 3.8% with Pingo Doce increasing its market share.

Recheio's sales increased by 3.6%, with a LFL sales growth of 2.1% in the third quarter. Both Traditional Retail and HoReCa markets are still declining but Recheio has outperformed in both segments and gained market share.

A brief update on our two start-up businesses. In Colombia Ara opened 14 stores between July and September and ended the quarter with 28 stores. We are very enthusiastic about the market's potential and the Colombian consumers' response to our propositions. In Poland, Hebe added 9 new stores to its network during the quarter ending the period with a total of 86 stores including pharmacies.

Our start-up businesses are developing well and performing in line with our expectations.

(Million Euro)		9M 13	9M 12	*	D	Q3 13		Q3 12	*	D
Net Sales and Services	8,699		7,800		11.5%	3,056		2,788		9.6%
Total Margin	1,862	21.4%	1,710	21.9%	8.9%	655	21.4%	617	22.1%	6.2%
Operating Costs		-1,289 -14.8% -1,179 -15.1%			9.3%		-432 -14.1%		-399 -14.3%	8.0%
EBITDA	573	6.6%	532	6.8%	7.8%	224	7.3%	217	7.8%	2.8%
Depreciation	-185	-2.1%	-166	-2.1%	11.4%	-63	-2.1%	-55	-2.0%	13.3%
EBIT	388	4.5%	366	4.7%	6.1%	161	5.3%	162	5.8%	-0.7%
Financial Results	-30	-0.3%	-21	-0.3%	43.1%	-10	-0.3%	-8	-0.3%	22.2%
Profit in Associated Companies	1 4	0.2%	1 3	0.2%	3.0%	8	0.3%	6	0.2%	26.9%
Non-Recurrent Items	0	0.0%	-13	-0.2%	n.a.	-1	0.0%	0	0.0%	n.a.
EBT	372	4.3%	345	4.4%	7.7%	158	5.2%	161	5.8%	-1.4%
Taxes	-78	-0.9%	-70	-0.9%	11.4%	-34	-1.1%	-32	-1.2%	4.3%
Net Profit	294	3.4%	275	3.5%	6.8%	125	4.1%	129	4.6%	-2.9%
Non Controlling Interests	-13	-0.2%	-4	0.0%	n.a.	-10	-0.3%	-9	-0.3%	9.2%
Net Profit attributable to JM	281	3.2%	272	3.5%	3.3%	115	3.8%	120	4.3%	-3.8%
EPS (€)	0.45		0.43		3.3%	0.18		0.19		-3.8%

2. Results Analysis

* Restated – see note 2 Chapter III

Operating Profit

In the nine months the Group EBITDA grew by €41million (+7.8%) to €573 million and the EBITDA margin was 6.6%. The EBITDA of the established businesses grew 11.4%, in line with sales. The start-up losses related to the new businesses impacted the Group's EBITDA margin by 20bps in the period.

Biedronka´s EBITDA increased 13.3% to €451 million in the nine months with a margin of 8.0%, 20 bps down on the previous year due to higher investments in price since July and the set-up costs related to the two new logistics regions opened in September.

The Distribution companies in Portugal delivered an EBITDA of €168 million in the nine months, corresponding to a 30 bps increase in margin versus the same period of 2012, mainly driven by the strong sales performance and the cost rationalization programme of Pingo Doce.

Financial Result

Financial costs for the Group were €30 million, the increase on the same period last year mainly due to the higher net debt after the extraordinary dividend paid at the end of 2012.

Net Result

Net Profit attributable to Jerónimo Martins grew by 3.3% to €281 million in the 9 months, with the established businesses net earnings growing by 11.8%.

(Million Euro)	9M 13	2012*	9M 12*
Net Goodwill	643	655	652
Net Fixed Assets	2,840	2,711	2,637
Total Working Capital **	-1,669	-1,615	-1,612
Others **	76	72	114
Invested Capital	1,891	1,823	1,791
Total Borrowings	741	660	695
Leasings	8	18	22
Accrued Interest	17	15	15
Marketable Sec. & Bank Deposits	-458	-372	-516
Net Debt	308	321	217
Non-Controlling Interests	300	290	301
Share Capital	629	629	629
Reserves and Retained Earnings	653	582	644
Shareholders Funds	1,582	1,502	1,574
Gearing	19.5%	21.4%	13.8%

3. Balance Sheet

* Restated – see note 2 Chapter III

** Restated – see note 5 Chapter II

Net Consolidated Debt decreased to €308 million as a result of the strong cash flow, and Gearing was 19.5% at the end of September 2013.

Investment Programme

In the first nine months of the year, the Group Capex reached €376 million, of which €291 million were invested in Biedronka.

Cash Flow

(Million Euro)	9M 13	9M 12*
EBITDA	573	532
Net Interest	-13	-7
Income Tax	-78	-82
Funds From Operations	483	444
Capex Payment	-368	-343
Working Capital Movement	89	68
Others	-1	-10
Free Cash Flow	203	158

* Restated – see note 2 Chapter III

The Cash Flow from Operations increased by 28% to €203 million, benefiting from the solid EBITDA growth and the working capital improvement in the third quarter.

4. Outlook for 2013

In Poland and Portugal we remain committed to long-term profitable growth through strong leadership positions.

In Biedronka the reinforcement of the commercial strategy together with the continued focus on fresh and perishables will support robust LFL growth versus the market, in addition to the strong growth coming from the execution of the expansion plan.

Pingo Doce will continue to focus on market share and efficiency gains in order to gradually improve profitability.

For the full year we expect the consolidated sales to grow double-digit (in constant currency). The Group´s EBITDA will increase slightly below sales (EBITDA margin around 20-30bps below 2012) due to higher price investment in Poland and to the impact of the investments in the start-up businesses. The EBITDA and Net Earnings for the established businesses are expected to grow strongly in the year.

Biedronka will fully execute its expansion plan for the year with 290 stores opened in 2013. In Portugal a new distribution centre will be completed by the end of the year, in line with our expectations. In Colombia, Ara will end the year with 35-40 stores.

Capex for 2013 is planned to be between €600 million and €650 million, of which 70% is expected to be invested in Biedronka and around €50m in Colombia.

Lisbon, 29 th October 2013

The Board of Directors

II. CONSOLIDATED MANAGEMENT REPORT APPENDIX

1. Sales Growth

			Total Sales Growth			LFL Sales Growth
	Q1 13	Q2 13	H1 13	Q3 13	9M 13	Q1 13	Q2 13	H1 13	Q3 13	9M 13
Biedronka
Euro	22.1%	13.9%	17.9%	12.5%	15.9%
PLN	20.1%	12.4%	16.1%	15.5%	15.9%	8.8%*	2.0%*	5.3%*	4.0%*	4.8%*
Pingo Doce	5.3%	2.3%	3.7%	4.1%	3.8%	2.9%**	1.2%**	2.0%**	4.0%**	2.7%**
Recheio	-2.1%	1.8%	0.0%	3.6%	1.3%	-2.8%	1.0%	-0.8%	2.1%	0.3%

* Excluding days of closure for store layout conversion

** Ex-petrol LFL 3.7% 2.2% 2.9% 5.0% 3.6%

2. Stores Network

Number of Stores	2012		Openings		Closings	Network
		Q1 13	Q2 13	Q3 13	9M 13	9M 13	9M 12
Biedronka	2,125	22	40	66	8	2,245	2,006
Pingo Doce	372	1	0	1	0	374	372
Recheio	41	0	0	0	0	41	41

Sales Area (sqm)	2012		Openings		Closings/ Remodellings	Network
		Q1 13	Q2 13	Q3 13	9M 13	9M 13	9M 12
Biedronka	1,301,006	15,463	26,009	47,885	-2,252	1,392,615	1,207,345
Pingo Doce	452,588	1,183	0	1,000	-404	455,175	452,837
Recheio	129,295	0	0	0	0	129,295	128,670

3. EBITDA Margin Breakdown

(% of sales)	9M 13	% total	9M 12	% total
Biedronka	8.0%	79%	8.2%	75%
Distribution Portugal	5.7%	29%	5.4%	29%
Others & Cons. Adjustments	n.a.	-8%	n.a.	-4%
JM Consolidated	6.6%	100.0%	6.8%	100.0%

4. Financial Costs Breakdown

(Million Euro)	9M 13	9M 12
Net Interest	-23	-18
Exchange Differences	-2	1
Others	-5	-5
Financial Results	-30	-21

5. Working Capital Adjustment

An adjustment was made in Working Capital eliminating the value of long-term assets that are not allocated to the operating units. In the Balance Sheet, these values are included in the line 'Others', keeping unchanged the Invested Capital value. The calculation of profitability ratios and the Operational Invested Capital (OIC) also reflects this adjustment.

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.

7. Information Regarding Individual Financial Statements

In accordance with number 3 of article 10 of the Regulation number 5/2008 of the Portuguese Securities Market Commission (CMVM), the Quarter Individual Financial Statements of Jerónimo Martins SGPS, S.A. will not be disclosed as they do not include significant information.

First Nine Months'13

III. CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT BY FUNCTIONS

FOR SEPTEMBER 2013 AND 2012

					Euro thousand
	Notes	9 Months 2013	9 Months 2012(*)	rd Quarter 3 2013	rd Quarter 3 2012(*)
Sales and services rendered	3	8,699,287	7,799,801	3,056,243	2,788,399
Cost of sales	4	(6,837,419)	(6,089,406)	(2,400,991)	(2,171,431)
Gross profit		1,861,868	1,710,395	655,252	616,968
Distribution costs	5	(1,320,779)	(1,210,134)	(446,257)	(410,806)
Administrative costs	5	(152,597)	(134,235)	(48,150)	(44,141)
Exceptional operating profits/losses	8.1	(73)	(12,929)	(951)	148
Operating profit		388,419	353,097	159,894	162,169
Net financial costs	6	(29,992)	(20,954)	(9,507)	(7,780)
Gains in joint-ventures and associates	11	13,701	13,296	8,046	6,341
Gains/Losses in other investments	8.2	25	-	-	-
Profit before taxes		372,153	345,439	158,433	160,730
Income taxes	7	(78,166)	(70,143)	(33,520)	(32,145)
Profit before non-controlling interests		293,987	275,296	124,913	128,585
Attributable to:
Non-controlling interests		13,468	3,756	9,741	8,922
Jerónimo Martins Shareholders		280,519	271,540	115,172	119,663
Basic and diluted earnings per share-euros	15	0.4464	0.4321	0.1833	0.1904

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

CONSOLIDATED BALANCE SHEET AT 30 SEPTEMBER 2013, 31 DECEMBER 2012 AND 1 JANUARY 2012

				Euro thousand
	Notes	30 September 2013	31 December 2012 (*)	1 January 2012 (*)
Assets
Tangible assets	9	2,690,243	2,571,705	2,276,309
Investment properties	9	49,163	49,336	52,128
Intangible assets	9	792,876	794,407	736,808
Investments in joint-ventures and associates	11	80,683	77,300	81,577
Available-for-sale financial assets	12	1,065	1,022	6,134
Trade debtors and deferred costs		95,424	96,351	85,393
Derivative financial instruments	10	-	-	10
Deferred tax assets		46,147	52,133	56,384
Total non-current assets		3,755,601	3,642,254	3,294,743
Inventories		493,086	474,056	370,210
Taxes receivable		67,117	47,652	27,784
Trade debtors, accrued income and deferred costs		266,517	232,677	151,589
Derivative financial instruments	10	54	-	-
Cash and cash equivalents	13	461,444	375,072	527,247
Total current assets		1,288,218	1,129,457	1,076,830
Total assets		5,043,819	4,771,711	4,371,573
Shareholders' equity and liabilities
Share capital		629,293	629,293	629,293
Share premium		22,452	22,452	22,452
Own shares		(6,060)	(6,060)	(6,060)
Fair value and other reserves	14.1	27,650	52,125	(1,162)
Retained earnings		608,852	513,721	476,338
		1,282,187	1,211,531	1,120,861
Non-controlling interests		300,168	290,395	300,824
Total Shareholders' equity		1,582,355	1,501,926	1,421,685
Borrowings	16	401,386	570,781	385,452
Derivative financial instruments	10	2,317	10,977	8,785
Employee benefits		35,143	33,961	32,932
Deferred profits- state grants		867	885	910
Provisions for risks and contingencies	17	63,428	62,950	47,529
Deferred tax liabilities		122,379	118,285	104,528
Total non-current liabilities		625,520	797,839	580,136
Trade creditors, accrued costs and deferred income		2,346,716	2,232,472	1,932,835
Derivative financial instruments	10	10,644	4,958	4,038
Borrowings	16	347,620	107,406	328,320
Taxes payable		130,939	127,085	104,534
Deferred profits- state grants		25	25	25
Total current liabilities		2,835,944	2,471,946	2,369,752
Total Shareholders' equity and liabilities		5,043,819	4,771,711	4,371,573

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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

			Euro thousand, net of income taxes
	9 Months 2013	9 Months 2012(*)	rd Quarter 3 2013	rd Quarter 3 2012(*)
Net profit	293,987	275,296	124,913	128,585
Other comprehensive income:
Items that will not be reclassified to profit or loss
Revaluation of fixed assets	636	-	-	-
Gain (loss) on joint-ventures and associates		-	-	-
	636	-	-
Items that may be reclassified to profit or loss
Currency translation differences	(25,591)	60,165	18,203	23,208
Fair value of cash flow hedging	2,377	817	657	60
Fair value of hedging instruments on foreign operations	(1,656)	(6,863)	(273)	(449)
Fair value of available-for-sale financial assets	43	(146)	-	(69)
	(24,827)	53,973	18,587	22,750
Other comprehensive income	(24,191)	53,973	18,587	22,750
Total comprehensive income for the year	269,796	329,269	143,500	151,335
Attributable to:
Non-controlling interests	13,752	4,346	9,961	9,165
Jerónimo Martins Shareholders	256,044	324,923	133,539	142,170
Total comprehensive income for the year	269,796	329,269	143,500	151,335

(*) Restated – see note 2

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 2011 (*)		629,293	22,452	(6,060)	(1,162)	476,338	1,120,861	300,824	1,421,685
Equity changes in 2012 (*)
Currency translation differences in the 9 Months of 2012	14.1				60,165		60,165		60,165
Fair value of cash flow hedging	14.1				227		227	590	817
Fair value of hedging instruments on foreign operations	14.1				(6,863)		(6,863)		(6,863)
Fair value of available-for-sale financial assets	14.1				(146)		(146)		(146)
Other comprehensive income					53,383	-	53,383	590	53,973
Net profit in the 9 Months of 2012						271,540	271,540	3,756	275,296
Total comprehensive income for the year					53,383	271,540	324,923	4,346	329,269
Dividends						(172,819)	(172,819)	(4,212)	(177,031)
Balance sheet at 30 September 2012 (*)		629,293	22,452	(6,060)	52,221	575,059	1,272,965	300,958	1,573,923
Balance sheet at 31 December 2012 (*)		629,293	22,452	(6,060)	52,125	513,721	1,211,531	290,395	1,501,926
Equity changes in 2013
Currency translation differences in the 9 Months of 2013	14.1				(25,591)		(25,591)		(25,591)
Revaluation of fixed assets:	14.1
- From 2013					636		636		636
Fair value of cash flow hedging	14.1				2,093		2,093	284	2,377
Fair value of hedging instruments on foreign operations	14.1				(1,656)		(1,656)		(1,656)
Fair value of available-for-sale financial assets	14.1				43		43		43
Other comprehensive income					(24,475)	-	(24,475)	284	(24,191)
Net profit in the 9 Months of 2013						280,519	280,519	13,468	293,987
Total comprehensive income for the year					(24,475)	280,519	256,044	13,752	269,796
Dividends	14.2					(185,388)	(185,388)	(3,979)	(189,367)
Balance sheet at 30 September 2013		629,293	22,452	(6,060)	27,650	608,852	1,282,187	300,168	1,582,355

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

CONSOLIDATED CASH FLOW STATEMENT FOR SEPTEMBER 2013 AND 2012

			Euro thousand
	Notes	9 Months 2013	9 Months 2012(*)
Operating activities
Cash generated from operations		661,223	589,279
Interest paid		(24,774)	(26,433)
Income taxes paid		(77,938)	(81,729)
Cash flow from operating activities		558,511	481,117
Cash flow from investment activities		(355,764)	(322,721)
Cash flow from financing activities		(109,971)	(180,172)
Net changes in cash and cash equivalents		92,776	(21,776)
Cash and cash equivalents changes
Cash and cash equivalents at the beginning of the year		375,072	527,247
Net changes in cash and cash equivalents		92,776	(21,776)
Effect of currency translation differences		(6,404)	14,011
rd Quarter Cash and cash equivalents at the end of 3	13	461,444	519,482

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
	9 Months 2013	9 Months 2012(*)	rd Quarter 3 2013	rd Quarter 3 2012(*)
Cash Flow from operating activities Cash Flow from investment activities Cash Flow from financing activities	558,511 (355,764) (109,971)	481,117 (322,721) (180,172)	294,450 (133,323) (120,013)	217,345 (120,165) (33,310)
Cash and cash equivalents changes	92,776	(21,776)	41,114	63,870

1	Activity 15
2	Accounting policies 15
3	Segments reporting18
4	Costs of sales 19
5	Distribution and administrative costs 19
6	Net financial costs 19
7	Income tax recognised in the income statement20
8	Exceptional operating profits/losses and gains/losses in other investments 20
9	Fixed assets and investment property 20
10	Derivative financial instruments 21
11	Investments in joint-ventures and associates21
12	Available-for-sale financial investments21
13	Cash and cash equivalents 21
14	Capital and reserves 22
15	Basic and diluted earnings per share22
16	Borrowings 23
17	Provisions and adjustments to the net realisable value23
18	Contingencies 24
19	Related parties25

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

Head Office: Largo Monterroio Mascarenhas, n.º1 – 9.º andar - 1099-081 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 Oporto Stock Exchange) since 1989.

The Board of Directors approved these consolidated financial statements on 29 th October 2013.

2 Accounting policies

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

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) as adopted by the European Union.

The consolidated financial statements were prepared in accordance with the same standards and accounting policies adopted by the Group in the preparation of the annual financial statements, including 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 2012 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 the Corporate Governance chapter of the 2012 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 nine months of 2013, there were no material changes in addition to the notes in this annex that could significantly change the assessment of the risks that the group is exposed to.

In relation to 2012, the European Union issued the following Regulations:

• i) Regulation no. 183/2013, which adopted some improvements to IFRS 1 First-time Adoption of International Financial Reporting Standards. The changes relate to the form of classification of loans received from governments. Their application is mandatory for financial years beginning on or after January 1, 2013;
• ii) Regulation no. 301/2013, which adopted some improvements to standards IFRS 1, IAS 1, IAS 16, IAS 32 and IAS 34. Their application is mandatory for financial years beginning on or after January 1, 2013;
• iii) Regulation no. 313/2013, which adopted some improvements to standards IFRS 10, IFRS 11 and IFRS 12, regarding Transition Guidance, providing transition relief. This improvement shall be applied at the latest, as from the commencement date of its first financial year starting on or after January 1, 2014.

The Group has adopted the above improvements during the year 2013, with no material impact on the Group's financial statements.

In addition, the IASB and the IFRIC issued in 2013, the following amendments and interpretation that have not yet been endorsed by the European Union:

• i) In May 2013, IFRIC issued new Interpretation 21 Levies. The interpretation provides guidance on the accounting for levies in the financial statements of the entity that is paying the levy. Their application is mandatory for financial years beginning on or after January 1, 2014;
• ii) In May 2013, IASB issued amendments to IAS 36 Impairment of Assets. The changes relate to clarification on recoverable amount disclosures for impaired Non-Financial assets. Their application is mandatory for financial years beginning on or after January 1, 2014;
• iii) In June 2013, IASB issued amendments to IAS 39 Financial Instruments: Recognition and Measurement. The changes relate to provide relief from discontinuing hedge accounting when novation to a central counterparty of a derivative designated as a hedging instrument meets certain criteria. Their application is mandatory for financial years beginning on or after January 1, 2014.

The application of these amendments and interpretation will not have a significant impact on the Group's Financial Statements.

In the new standard IFRS 11 'Joint arrangements', joint ventures are accounted for using the equity method, in accordance with IAS 28. The existing policy choice of proportional consolidation for jointly controlled entities has been eliminated. As consequence, the Group decided to adopt this standard and consolidate its interest in Unilever Jerónimo Martins and Gallo Worldwide using the equity method from 1 January, 2013 forward, despite its adoption being only mandatory from 1 January 2014 forward.

The Group also adopted the fully amended IAS 19 Employee benefits, which improves recognition and disclosure requirements for defined benefit plans (DBP), eliminates the option for the corridor method and provides better information about the characteristics of DBP and the risks that entities are exposed on those plans.

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

CONSOLIDATED BALANCE SHEET

	1 January 2012
	Published	Adoption of accounting standards	Restated
Assets
Tangible assets	2,300,501	(24,192)	2,276,309
Investment properties	52,128	-	52,128
Intangible assets	830,620	(93,812)	736,808
Investments in joint-ventures and associates	1,052	80,525	81,577
Other non-current assets	149,531	(1,610)	147,921
Total non-current assets	3,333,832	(39,089)	3,294,743
Inventories	388,262	(18,052)	370,210
Other current assets	229,034	(49,661)	179,373
Cash and cash equivalents	530,155	(2,908)	527,247
Total current assets	1,147,451	(70,621)	1,076,830
Total assets	4,481,283	(109,710)	4,371,573
Shareholders' equity and liabilities
Attributable to Jerónimo Martins Shareholders	1,120,861	-	1,120,861
Non-controlling interests	300,824	-	300,824
Total shareholders' equity	1,421,685	-	1,421,685
Borrowings	385,553	(101)	385,452
Other non-current liabilities	198,401	(3,717)	194,684
Total non-current liabilities	583,954	(3,818)	580,136
Borrowings	354,672	(26,352)	328,320
Other current liabilities	2,120,972	(79,540)	2,041,432
Total current liabilities	2,475,644	(105,892)	2,369,752
Total shareholders' equity and liabilities	4,481,283	(109,710)	4,371,573

	31 December 2012
	Published	Adoption of accounting standards	Restated
Assets
Tangible assets	2,600,230	(28,525)	2,571,705
Investment properties	49,336	-	49,336
Intangible assets	888,217	(93,810)	794,407
Investments in joint-ventures and associates	1,049	76,251	77,300
Other non-current assets	150,950	(1,444)	149,506
Total non-current assets	3,689,782	(47,528)	3,642,254
Inventories	495,661	(21,605)	474,056
Other current assets	331,378	(51,049)	280,329
Cash and cash equivalents	376,152	(1,080)	375,072
Total current assets	1,203,191	(73,734)	1,129,457
Total assets	4,892,973	(121,262)	4,771,711
Shareholders' equity and liabilities
Attributable to Jerónimo Martins Shareholders	1,211,531	-	1,211,531
Non-controlling interests	290,395	-	290,395
Total shareholders' equity	1,501,926	-	1,501,926
Borrowings	570,825	(44)	570,781
Other non-current liabilities	230,387	(3,329)	227,058
Total non-current liabilities	801,212	(3,373)	797,839
Borrowings	146,246	(38,840)	107,406
Other current liabilities	2,443,589	(79,049)	2,364,540
Total current liabilities	2,589,835	(117,889)	2,471,946
Total shareholders' equity and liabilities	4,892,973	(121,262)	4,771,711

CONSOLIDATED INCOME STATEMENT BY FUNCTIONS

	30 September 2012
	Published	Adoption of accounting standards	Restated
Sales and services rendered	7,953,799	(153,998)	7,799,801
Cost of sales	(6,177,479)	88,073	(6,089,406)
Gross profit	1,776,320	(65,925)	1,710,395
Distribution costs	(1,234,110)	23,976	(1,210,134)
Administrative costs	(156,069)	21,834	(134,235)
Exceptional operating profits/losses	(14,095)	1,166	(12,929)
Operating profit	372,046	(18,949)	353,097
Net financial costs	(22,016)	1,062	(20,954)
Profit in joint-ventures and associates	146	13,150	13,296
Profit before taxes	350,176	(4,737)	345,439
Income taxes	(74,880)	4,737	(70,143)
Profit before non-controlling interests	275,296	-	275,296
Attributable to: Non-controlling interests Jerónimo Martins Shareholders	3,756 271,540	- -	3,756 271,540

	rd Quarter 2012 3
	Published	Adoption of accounting standards	Restated
Sales and services rendered	2,845,688	(57,289)	2,788,399
Cost of sales	(2,204,898)	33,467	(2,171,431)
Gross profit	640,790	(23,822)	616,968
Distribution costs	(417,559)	6,753	(410,806)
Administrative costs	(51,608)	7,467	(44,141)
Exceptional operating profits/losses	(275)	423	148
Operating profit	171,348	(9,179)	162,169
Net financial costs	(8,180)	400	(7,780)
Profit in joint-ventures and associates	116	6,225	6,341
Profit before taxes	163,284	(2,554)	160,730
Income taxes	(34,699)	2,554	(32,145)
Profit before non-controlling interests	128,585	-	128,585
Attributable to:
Non-controlling interests	8,922	-	8,922
Jerónimo Martins Shareholders	119,663	-	119,663

CONSOLIDATED CASH FLOW STATEMENT

	30 September 2012
	Published	Adoption of accounting standards	Restated
Cash flow from operating activities	487,321	(6,204)	481,117
Cash flow from investment activities	(340,250)	17,529	(322,721)
Cash flow from financing activities	(169,648)	(10,524)	(180,172)
Net changes in cash and cash equivalents	(22,577)	801	(21,776)

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:

Euro foreign exchange reference rates (foreign exchange units per 1 Euro)	Rate on 30 September 2013	Average rate for the 9 Months 2013
Polish Zloty (PLN)	4.2288	4.2019
US Dollar (USD)	1.3524	-
Swiss Franc (CHF)	1.2225	-
Colombian Peso (COP)	2,585.7300	2,476.4100

3 Segments reporting

Management monitors the performance of the business based on a geographical and business nature. Due to the fact that the business units in the distribution area in Portugal share a set of competences, the Group analyses, on a quarterly basis, its segments in an aggregate performance perspective. In addition, the Group also analyses separately the distribution business unit in Poland. Apart from these, there are also other businesses, but due to their low materiality they are not reported separately.

Business segments:

• Portugal Distribution: comprises the business unit of JMR (Pingo Doce supermarkets), and the wholesale business unit Recheio;
• Poland Distribution: the business unit using the brand Biedronka;
• Others, eliminations and adjustments: includes i) the business units with low materiality (Marketing Services and Representations, Restaurants, Pharmacies and Drugstores in Poland and retail business in Colombia), 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 exceptional operating profits/losses.

Detailed information by segment at September 2013 and 2012

	Portugal Distribution		Poland Distribution		Others, eliminations and adjustments		Total JM Consolidated
	2013	2012	2013	2012	2013	2012(*)	2013	2012 (*)
Net sales and services				2,965,890 2,870,622 5,642,431 4,866,993	90,966			62,186 8,699,287 7,799,801
Inter-segments	192	238	1,094	642	(1,286)	(880)	-	-
External customers	2,965,698	2,870,384	5,641,337	4,866,351	92,252	63,066		8,699,287 7,799,801
Operational cash-flow (EBITDA)	167,782	155,501	451,100		397,977 (45,667)	(21,672)	573,215	531,806
Depreciations and amortisations	(82,061)	(84,550)	(97,956)	(79,205)	(4,706)	(2,025)	(184,723)	(165,780)
Operational result (EBIT)	85,721	70,951	353,144		318,772 (50,373)	(23,697)	388,492	366,026
Financial results							(16,266)	(7,658)
Net result attributable to JM							280,519	271,540
Total assets (1)				2,315,662 2,248,157 2,414,087 2,363,014 314,070				160,540 5,043,819 4,771,711
Total liabilities (1)				1,625,943 1,577,916 1,711,938 1,589,349 123,583			102,520 3,461,464 3,269,785
Investments in fixed assets	45,796	34,692	291,451	285,336	39,148	4,351	376,395	324,379

(1) The comparable amounts of total assets and liabilities are reported to 31 December 2012

Reconciliation between EBIT and the operational result of the income statement by functions

	September 2013	September 2012
EBIT	388,492	366,026
Exceptional operating profits/losses	(73)	(12,929)
Operational result	388,419	353,097

4 Costs of sales

	September 2013	September 2012
Net cost of products sold	6,821,250	6,076,440
Net cash discount and interest paid to suppliers	904	(3,286)
Electronic payment commissions	10,059	12,186
Other supplementary costs	5,206	4,066
	6,837,419	6,089,406

5 Distribution and administrative costs

	September 2013	September 2012
Supplies and services	306,182	277,219
Advertising costs	36,052	39,540
Rents	198,944	172,538
Staff costs	637,469	589,127
Depreciations and profit/loss with fixed assets	184,316	165,900
Transportation costs	106,036	100,402
Other operational profit/loss	4,377	(357)
	1,473,376	1,344,369

6 Net financial costs

	September 2013	September 2012
Interest expense	(25,074)	(24,090)
Interest received	1,900	6,347
Dividends	23	19
Net foreign exchange	(1,618)	1,478
Other financial costs and gains	(5,206)	(4,690)
Fair value of financial investments held for trade:
Derivative instruments	(17)	(18)
	(29,992)	(20,954)

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 10).

Other financial costs and gains include costs with debt issued by the Group.

7 Income tax recognised in the income statement

	September 2013	September 2012
Current income tax
Current tax of the year	(69,426)	(59,922)
Adjustment to prior year estimation	731	(1,434)
	(68,695)	(61,356)
Deferred tax
Temporary differences created and reversed	(10,607)	(9,775)
Change to the recoverable amount of tax losses and temporary differences from previous years	703	597
	(9,904)	(9,178)
Other gains/losses related to taxes
Impact of changes in estimates for tax litigations	433	391
	433	391
Total income taxes	(78,166)	(70,143)

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

8.1 Exceptional operating profits/losses

	September 2013	September 2012
One-off costs Pingo Doce	-	(10,350)
Legal processes	1,054	-
Costs of organizational restructuring programme	(3,010)	(688)
Impairment of assets	(25)	(470)
Write-off Electric Co	-	(1,552)
Others	1,908	131
	(73)	(12,929)

8.2 Gains/losses in other investments

	September 2013	September 2012
Gains in sale of investment properties	25	-
	25	-

9 Fixed assets and investment property

	Tangible assets	Investment property	Intangible assets	Total
Net value at 31 December 2012	2,571,705	49,336	794,407	3,415,448
Foreign exchange differences	(51,588)	-	(16,167)	(67,755)
Revaluations	636	-	-	636
Increases	351,660	-	24,735	376,395
Disposals and write-offs	(7,455)	(125)	(13)	(7,593)
Transfers	36	-	(64)	(28)
Depreciation and impairment losses	(174,751)	-	(10,022)	(184,773)
Fair value changes	-	(48)	-	(48)
Net value at 30 September 2013	2,690,243	49,163	792,876	3,532,282

The total amount of revaluations carried out in the first nine months of 2013 were EUR 636 thousand.

As a consequence of the currency translation adjustment of the assets in the Group's businesses in Poland:

• the Goodwill related to Polish business (Biedronka), totalling PLN 1,282,278 thousand, was updated negatively by EUR 11,522 thousand;

• the Goodwill related to Polish pharmacies business (Bliska), totalling PLN 38,796 thousand, was updated negatively by EUR 349 thousand.

10 Derivative financial instruments

				September 2013				December 2012
	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	-	-	132	-	10 millions EUR	-	-	-	197
Currency forwards (PLN)	6.7 millions EUR	-	-	17	-
Fair value hedging derivatives
USD loan hedging	96 millions USD	-	-	6,259	-	96 millions USD	-	-	-	2,931
Cash flow hedging derivatives
Interest rate swap (EUR)	462.9 millions EUR	-	-	3,909	2,317	315 millions EUR	-	-	526	7,849
Interest rate swap (PLN)		-	-	-	-	135 millions PLN	-	-	332	-
Foreign operation investments hedging derivatives
Currency forwards (PLN)	280 millions PLN	54	-	327	-	918 millions PLN	-	-	4,100	-
Total derivatives held for trading		-	-	149	-		-	-	-	197
Total hedging derivatives		54	-	10,495	2,317		-	-	4,958	10,780
Total assets/liabilities derivatives		54	-	10,644	2,317		-	-	4,958	10,977

At 30 September 2013 the values shown include interest receivable or payable related with these financial instruments that are due. The net payable amount is EUR 2,591 thousand.

11 Investments in joint-ventures and associates

During the first nine months of 2013, the movement under this heading was as follows:

Balance at 31 December 2012	77,300
Equity method:
Net result	13,701
Dividends and other income received	(10,318)
Balance at 30 September 2013	80,683

12 Available-for-sale financial investments

Regarding the financial assets available-for-sale, the reduction of EUR 43 thousand relates to changes in the fair value of listed equity holdings, at the reporting date of these financial statements.

13 Cash and cash equivalents

	September 2013	December 2012
Bank deposits	225,097	250,523
Short-term investments	232,934	121,107
Cash and cash equivalents	3,413	3,442
	461,444	375,072

The short-term investments include short-term bank deposits and other negotiable funds for which provisions were booked to reduce these to their realisable value (note 17).

14 Capital and reserves

14.1 Fair value and other reserves

	Land revaluation reserves	Cash-flow hedging	Available for-sale financial assets	Ajust. in joint- -ventures and associates	Currency translation reserve	Total
Balance as at 1 January 2013	85,197	(4,097)	(1,437)	4,248	(31,786)	52,125
Revaluation: - Gross value	636					636
Fair value adjustment of financial investments: - Gross value - Deferred/current tax - Non-controlling interests		3,202 (825) (284)			(1,656)	1,546 (825) (284)
Fair value adjustment of available-for-sale financial investments: - Gross value			43			43
Currency translation differences: - In the year - Deferred tax	(1,101) 209	12 (2)			(25,150) 441	(26,239) 648
Balance as at 30 September 2013	84,941	(1,994)	(1,394)	4,248	(58,151)	27,650

	Land revaluation reserves	Cash-flow hedging	Available for-sale financial assets	Ajust. in joint- -ventures and associates	Currency translation reserve	Total
Balance as at 1 January 2012	86,255	(5,114)	(1,313)	4,144	(85,134)	(1,162)
Fair value adjustment of financial investments: - Gross value - Deferred/current tax - Non-controlling interests Fair value adjustment of available-for-sale financial investments:		1,061 (244) (590)			(6,863)	(5,802) (244) (590)
- Gross value			(146)			(146)
Currency translation differences: - In the year - Deferred tax	2,682 (510)	(62) 12			58,999 (956)	61,619 (1,454)
Balance as at 30 September 2012	88,427	(4,937)	(1,459)	4,144	(33,954)	52,221

14.2 Dividends

Dividends distributed in 2013 amounted to EUR 189,367 thousand. EUR 185,388 thousand was paid to JMH Shareholders, and EUR 3,979 thousand was paid to non-controlling interests in the Group companies.

15 Basic and diluted earnings per share

	September 2013 September 2012
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
Diluted net result attributable to ordinary shares	280,519	271,540
Basic and diluted earnings per share – euros	0.4464	0.4321

16 Borrowings

In August 2013, JMR-Gestão de Empresas de Retalho, SGPS, S.A. exercised the early redemption call on the Mutual Contract in the total amount of EUR 35,000 thousand, which was due to mature in August 2015.

Jerónimo Martins Colombia renewed the short term credit line, held with BBVA Colombia, increasing the limit up to COP 51,107,000 thousand and extended the maturity until September 2014.

An amount of PLN 150,000 thousand related to the loan issued by Jerónimo Martins Polska, S.A. in 2008 with initial amount of m PLN 300,000 thousand for a period of 5 years was repaid.

16.1 Current and non-current loans

	September 2013 December 2012
Non-current loans
Bank loans	149,573	85,000
Bond loans	250,000	480,029
Financial lease liabilities	1,813	5,752
	401,386	570,781
Current loans
Bank overdrafts	113,566	2,774
Bank loans	1,933	39,987
Bond loans	225,858	52,500
Financial lease liabilities	6,263	12,145
	347,620	107,406

16.2 Financial debt

The Group entered several foreign exchange rate risk and interest risk hedging operations, as well as short-term investments. The net consolidated financial debt at the balance sheet date is as follows:

	September 2013	December 2012
Non-current loans (note 16.1)	401,386	570,781
Current loans (note 16.1)	347,620	107,406
Derivative financial instruments (note 10)	12,907	15,935
Interest on accruals and deferrals	4,452	(1,177)
Bank deposits (note 13)	(225,097)	(250,523)
Short-term investments (note 13)	(232,934)	(121,107)
	308,334	321,315

17 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	18,689	2,387	(326)	(116)	(450)	20,184
Inventories	11,588	4,015	(1,036)	(217)	-	14,350
Financial investments (note 13)	3,552	(43)	-	-	-	3,509
Short terms investments	57	-	-	-	-	57
Total fair value adjustments	33,886	6,359	(1,362)	(333)	(450)	38,100
Employee benefits	33,961	2,492	-	-	(1,310)	35,143
Provisions for risks and contingencies	62,950	3,847	(2,644)	(89)	(636)	63,428
Total of provisions	96,911	6,339	(2,644)	(89)	(1,946)	98,571

18 Contingencies

Following the contingencies mentioned in the 2012 Annual Report, changes occurred as follows:

• a) 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. The plaintiff appealed to the Court of Appeal, which confirmed the ruling of the court. Subsequently the plaintiff filed an appeal to the Supreme Court of Justice, which decided that the Court of Appeal should look into the case again. The Court of Appeal re-analysed the case and decided again in favour of the defendants. The plaintiff filed a new appeal to the Supreme Court of Justice, which decided entirely in favour of JM Group companies. The parties await the Supreme Court of Justice's decision to become final;
• 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. The court has decided that Pingo Doce should indemnify the plaintiff in an amount slightly below the claimed amount (EUR 2,300 thousand), from which should be deducted the amounts meanwhile received by Proherre from the new tenants. The amount due has to be determined in new judicial proceedings. Each litigant has filed its appeal to the Court of Appeal. Meanwhile, Pingo Doce offered a voluntary mortgage over an immovable property belonging to Imoretalho in order to assure that it will pay the amount due at the end of the process. Proherre opposed to the mortgage. The court accepted such opposition and rejected said mortgage. Pingo Doce filed an appeal regarding the decision of the Court not to accept the mortgage and offered a bank guarantee of the same amount;
• d) The Portuguese Tax Authorities claim from Recheio, SGPS, S.A. (Recheio SGPS) 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. The Board of Directors, 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. Meanwhile, the Lisbon Tax Court ruled in favour of Recheio, regarding years 1998/2001, amounting to EUR 1,753 thousand, consequently, the amount in dispute is now of EUR 750 thousand, for part of 2001 and for 2002, which reinforces the Board of Directors judgment that they are entirely right on this matter;
• 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 SGPS), which led to additional assessments concerning 2002 to 2010, amounting to EUR 51,662 thousand. The Board of Directors supported by their lawyers and tax consultants have challenged these assessments, believing that the Tax Authorities have no grounds to request this payment. In the meantime, the Lisbon Tax Court has ruled partially in favour of JMR regarding 2002 and 2005 assessments. The Board of Directors maintains the strong belief in its arguments, all cases follow their court proceedings;
• m) The Portuguese Tax Authorities assessed Feira Nova, Pingo Doce and Recheio the amounts of EUR 1,305 thousand, EUR 1,700 thousand and EUR 518 thousand respectively. These additional assessments were issued because the Tax Authorities argue that some goods were sold at a lower VAT rate, and solely for Feira Nova they do not agree with the VAT treatment of the discount sales coupons. These assessments relate to the years of 2005 to 2010. The Board of Directors, supported by their tax consultants, have challenged these assessments, believing that the Tax Authorities have no valid arguments to request these payments;
• 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, which led to additional assessments concerning the years of 2008 to 2010, amounting to EUR 8,460 thousand. The Board of Directors supported by their lawyers and tax consultants have challenged these assessments, believing that the Tax Authorities have no valid grounds to request this payment. Following these same grounds the Lisbon Tax Court has ruled in favor of Recheio concerning 2008, which has been appealed by the Tax Authorities;
• r) At the beginning of September 2011, Nestlé initiated judicial proceedings against Unilever Jerónimo Martins, Lda., claiming a compensation of EUR 2,100 thousand for alleged similarity and confusion in the packaging of competing products. The defendant filed its statement of defence. Meanwhile the parties reached an agreement to terminate the judicial proceedings, which was 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, which has been confirmed by the court in April 2013;

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 regarding Plus Discount Sp. z o.o.. Jerónimo Martins, SGPS, S.A. considered the allegations ungrounded and presented its statement of defense in the arbitral proceedings. Tengelmann KG presented its response and expanded the amount claimed to EUR 5.640 thousand, plus accrued interest from June 1, 2012. Jerónimo Martins presented a rejoinder. Meanwhile, court hearings have taken place and the post hearing briefs by the parties have been presented. On 8 April 2013, the parties reached an agreement regarding the resolution of their respective disputes. The settlement foresees, amongst other things, the payment of EUR 7,000 thousand by Jerónimo Martins Polska, SA, as well as the anticipated extension of the duration of the leases in Poland and the renegotiation of some clauses thereof. The settlement agreement was confirmed by an award of the Arbitral Tribunal, which put an end to the litigation;

At the end of 2012, DST, SGPS, S.A. initiated judicial proceedings against Pingo Doce – Distribuição Alimentar, S.A., claiming that Pingo Doce breached a promissory share purchase agreement, dated 2000, regarding a company that owns real estate in Barcelos. The plaintiff, promissory seller, claims to be entitled to keep part of the purchase price paid by the defendant, promissory buyer, in the amount of EUR 5,000 thousand, as indemnity. Pingo Doce presented a counterclaim, alleging that the contract was no longer in force and asking for the reimbursement of the amount paid, plus interest accrued in a total amount of EUR 6,062 thousand. Hearings took place on 22 and 23 October 2013, and will continue on 12 December 2013.

19 Related parties

Sociedade Francisco Manuel dos Santos owns 56.14% of the Group. No transactions occurred between this Company and any company of the Group in the first nine months of 2013, neither were there any amounts payable or receivable between them on September 30th, 2013.

	Sales and services rendered		Stocks purchased and services supplied
	September 2013	September 2012	September 2013	September 2012
Joint-ventures and associated companies	16	305	63,522	62,551
	deferred costs	Trade debtors, accrued income and	Trade creditors, accrued income and deferred costs
	September 2013	December 2012	September 2013	December 2012
Joint-ventures and associated companies	148	433	19,592	6,099

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

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

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

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

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

Lisbon, 29 th October, 2013

The Certified Accountant The Board of Directors