II Consolidated Management Report Appendix 9. III - Statement of Conformity 12

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2 1st Half 2008 INDEX I- Mangement Report 1. Introduction 4 2. Sales 5 3. Operating Results 6 4. Balance Sheet 7 5. Outlook 7 6. Information Regarding Individual Financial Statements 7 II Consolidated Management Report Appendix 9 III - Statement of Conformity 12 IV Consolidated Financial Statements 1. Financial Statements Notes to the Consolidated Financial Statements Auditor s Report 34

3 I CONSOLIDATED MANAGEMENT REPORT 1st Half 2008

4 1st Half 2008 Consolidated Management Report I CONSOLIDATED MANAGEMENT REPORT 1. Introduction Consolidated net sales increased by 31.1% in the 1 st Half 2008 (H1 08) to Euro 3,171.7 million. The net profit attributable to Jerónimo Martins rose by 55.5% to Euro 64.9 million. The main contributors to this strong performance were Biedronka and Pingo Doce whose sales performance again overcame the sector. Biedronka, in the first semester, posted a 52.0% sales growth in euro, thanks to a 24.3% increase in Like For Like (LFL) sales along with +16.3% new space. In Portugal, Pingo Doce maintained its strong performance in the second quarter of the year, with +13.6% LFL sales increase, in the semester, and total net sales growing by 30.3%. Consolidated EBITDA reached Euro million, a 40.4% increase on the same period last year, representing a margin of 6.3% of consolidated sales (5.9% in the 1 st Half H1 07). This remarkable performance is the result of a very positive evolution of the main business areas of the Group where we have to highlight the performance of: i) Biedronka, which posted an outstanding 89.7% EBITDA growth (to Euro million). The combination of price leadership in the market along with benefits of scale associated to growth (LFL and organic) brought outstanding operational leverage in the company. ii) Retail in Portugal, which also posted a solid performance. Despite the start of the integration of the Plus network, EBITDA grew 15.4% to Euro 54.0 million. Consolidated financial expenses reached Euro 44.2 million in H1 08, reflecting i) the investment program of the Group already including Plus acquisition in Portugal, ii) the increase in the average cost of debt (from 4.3% in H1 07 to 5.4% in H1 08) and iii) the cost related with interest rate hedging operations incurred mainly in the 1 st Quarter 2008 (Q1 08). Non recurrent results in the amount of Euro -1.1 million include among other items, capital gains on the sale of part of the Lipton ready-to-drink tea business, the sale of some real estate in Portugal and provisions related to a plan on incentives for senior employees. Also included in this amount are costs related to the integration of Plus network in Portugal. Capex in H1 08 reached Euro million, of which 67% was invested in Portugal, and 33% in Poland. It reflects the investments made in the recent acquisition and integration of the 77 Plus stores in Portugal along with the execution of expansion plan of the Group (6 new supermarkets in Portugal and 52 new Biedronka stores) along with. Consolidated net debt reached Euro million and gearing reached 88.3%. 4

5 1st Half 2008 Consolidated Management Report 2. Sales The consolidated sales performance reflected the positive contribution of all the Group s business areas. Biedronka posted an outstanding 52.0% sales growth, in Euro, to 1,618.8 million, as a result of 128 new stores compared to H1 07 (+16.3% new space) and a remarkable 24.3% increase in LFL sales. In Portugal, Pingo Doce kept its strong performance of recent quarters, with +13.6% LFL sales increase in H1 08 and total net sales growing by 30.3% to Euro million. Pingo Doce started, at the beginning of May, with the integration of the former Plus stores network. As of today, the stores have gone through the first phase of the integration this is, a basic conversion of the store (banner and assortment) without substantial reforms. Results of this integration are encouraging, with sales uplifts in line with internal expectations. In the semester, former Plus stores contributed with Euro 25.5 million (corresponding to 50 days of sales). In Feira Nova, hypermarkets were the most affected by the performance of the non food area. Compact stores, helped by the sales of fuel, posted in the semester a 4.5% LFL growth, slightly above inflation. Net sales for the company reached Euro million, a 7.5% increase vs. H1 07. Feira Nova initiated the conversion of its compact stores into the Pingo Doce network. First converted store started operations in April with positive signs. In the second half of the year we expect 3 more stores to be converted. Recheio continued its steady growth with a 4.6% LFL evolution supported by a 6.5% sales growth to HoReCa channel. In Manufacturing, total sales grew by 1.1% versus the same period last year. Despite the possible impact that price increases may have had on the volumes of some categories, the company will defend market shares in its key categories. 5

6 1st Half 2008 Consolidated Management Report 3. Operating Results Consolidated EBITDA in H1 08 increased by 40.4% to Euro million, representing 6.3% of consolidated sales. This strong performance is the result of very positive behaviour from all different business areas and can be explained by several main factors: - Biedronka reported an outstanding 89.7% increase in EBITDA (+72.0% in local currency) to 6.9% of sales. Several factors explain this remarkable performance, amongst which, we would like to outline i) strong top line growth; ii) subsequent effect on sourcing of the sales increase and iii) cost dilution due to LFL growth. This strong EBITDA performance was achieved maintaining a clear and undisputed price leadership in the Polish market. - In Retail in Portugal, EBITDA margin evolution from 5.4% in H1 07 to 5.1% in H1 08 reflects mainly the impact of Plus integration (c.20b.p. of margin dilution in JMR). Operational leverage, particularly in Pingo Doce, is allowing the company to accommodate the increase in several lines of the operating cost structure, namely energy and transport. - In Recheio, sales EBITDA increased by 6.9%, reaching Euro 17.0 million, a margin of 5.6% of sales. - In Manufacturing, the company proceeded with the adjustments to its pricing policies that are allowing a margin recovery compared to that of the 2 nd Half 2007 (12.2%). EBITDA margin in this business area reached 14.9% in H1 08 vs 16.0% in H1 07. It should be taken into consideration that the disposal of part of the Lipton ready-to-drink tea business at the beginning of 2008 (that originated a Euro 17.1 million gain in non recurrent items) represents a decline of not less than 50b.p. in the EBITDA margin of the company. 6

7 1st Half 2008 Consolidated Management Report 4. Balance Sheet 5. Outlook Management maintains a positive view on the evolution of sales and earnings for the full year, with stable to slightly positive margin evolution. In Retail in Portugal, we expect to continue with a very solid performance although the integration of Plus could have short term impact on margins. Therefore, a very solid LFL sales evolution for the year is expected, along with c.10 new supermarkets and the pursuit of the Plus network integration. Having already integrated IT systems, logistics, banner and adapted the assortment, the company is analysing the plan for an in-depth renovation of the network. Company foresees the total renovation of c.10 stores before the end of In Poland, Biedronka will remain focused in sales growth and price leadership as its two main priorities. For the year, strong double digit LFL sales growth (c.20%) and the opening of a minimum of 100 stores (50 more new stores to be open in the 2 nd Half 2008) are expected. Once received the approval of Anti-Trust Authorities for the acquisition of the Plus network, the company will start its integration that is expected to be completed before the year end. The similarity between the business models of Biedronka and Plus allows to predict a relatively simple process of integration, without significant effects in the strong growth of the company s EBITDA. 6. Information Regarding Individual Financial Statements In accordance with section b) of paragraph 3 of article 246 of the Commercial Companies Code, the 1 st Half individual financial statements of Jerónimo Martins SGPS, S.A. will not be disclosed as they do not include significant information. Lisbon, 30 th July, 2008 The Board of Directors 7

8 1st Half 2008 II CONSOLIDATED MANAGEMENT REPORT APPENDIX

9 1st Half 2008 Consolidated Management Report Appendix II APPENDIX 9

10 1st Half 2008 Consolidated Management Report Appendix INFORMATION CONCERNING STAKES HELD IN THE COMPANY BY MEMBERS OF THE BOARD OF DIRECTORS AND STATUTORY AUDITOR AS AT JUNE 30th, 2008 (As provided in article 447 of the Portuguese Commercial Companies Code and under the terms of sub-paragraph b), paragraph 1 of article 7 of the Portuguese Securities Market Commission - CMVM - Regulation nº 24/2000) BOARD OF DIRECTORS Members of the Board of Directors Held on Increases during the year Decreases during the year Held on Shares Bonds Shares Bonds Shares Bonds Shares Bonds Elísio Alexandre Soares dos Santos 1 100,355-10, ,355 - José Manuel da Silveira e Castro Soares dos Santos Luís Maria Viana Palha da Silva Pedro Manuel de Castro Soares dos Santos 198, ,305 - António Mendo Castel-Branco Borges Artur Eduardo Brochado dos Santos Silva 7,680-7,680 - Hans Eggerstedt 2 19,700-19,700 - Nicolaas Pronk Rui Manuel de Medeiros d`espiney Patrício 2 1 the 10,000 shares were bought on 29/05/2008, at a price of 4.63 euros each 2 also members of the Audit Committee. STATUTORY AUDITOR As at June 30th, 2008, the Statutory Auditor PricewaterhouseCoopers & Associados, SROC, Lda., did not hold any shares and bonds of Jerónimo Martins, SGPS, S.A. and had not made any transactions with Jerónimo Martins, SGPS, S.A. securities. 10

11 1st Half 2008 Consolidated Management Report Appendix LIST OF SHAREHOLDERS WITH QUALIFYING STAKES AS AT JUNE 30th, 2008 (Under the terms of articles 447 and 448 of the Portuguese Commercial Companies Code and for the purposes of section e), paragraph 1 of article 6 of the Portuguese Securities Market Commission CMVM - Regulation nº 11/2000 and in the terms of the Portuguese Securities Code) Shareholder Nº of shares held % Capital % of Voting Rights 1 Sociedade Francisco Manuel dos Santos, SGPS, S.A. Directly 351,769, % % Asteck, S.A. 2 Directly 62,929, % % Ameriprise Financial Inc 3 Through Threadneedle Asset Management Limited 25,569, % 4.069% Through Threadneedle International Limited 5,429, % 0.864% Artio Global Management LLC 4 Total Attributable 30,998, % 4.933% Directly 13,838, % 2.202% 1 % Voting rights = No. Shares Held / (Total No. JM shares Own shares) 2 Under the terms articles 16 and 20 of the Portuguese Securities Code (CVM), the stakes held by Asteck, S.A. must be attributed to Heerema Holding Company Inc., which has a 100% holding in that company. 3 Under the terms of articles 16 and 20 of the Portuguese Securities Code (CVM), we hereby inform that the companies Threadneedle Asset Management Limited and Threadneedle International Limited are held by the company Threadneedle Asset Management Holdings Limited. We also inform that the company Ameriprise Financial Inc. holds the company Threadneedle Asset Management Holdings Limited. 4 This number of shares indicated refers to 6th December, 2006, date of the last communication made by this company to Jerónimo Martins, SGPS, S.A. Until 15th June, 2008, this company was designated Julius Baer Investment Management LLC. 11

12 Statement of Conformity Dear Shareholders, 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, 30 th July, 2008 Elísio Alexandre Soares dos Santos (President of the Board of Directors) Luís Maria Viana Palha da Silva (President of the Executive Committee in charge of financial matters) Pedro Manuel de Castro Soares dos Santos (Member of the Executive Committee Responsible for Food Distribution Operations) José Manuel da Silveira e Castro Soares dos Santos (Member of the Executive Committee - Responsible for Manufacturing Operations and Representation and Marketing Services) António Mendo Castel-Branco Borges (Non-Executive Member) Hans Eggerstedt (Non-Executive Member) Rui de Medeiros d Espiney Patrício (Non-Executive Member) Artur Eduardo Brochado dos Santos Silva (Non-Executive Member) Nicolaas Pronk (Non-Executive Member) 12

13 IV. CONSOLIDATED FINANCIAL STATEMENTS 1st Half 2008

14 JERÓNIMO MARTINS, SGPS, S.A. CONSOLIDATED INCOME STATEMENT BY FUNCTIONS FOR JUNE 2008 AND 2007 Euro thousand Notes Sales and services rendered 3 3,171,689 2,419,936 Cost of sales (2,570,002) (1,950,195) Supplementary income and costs 5 116,624 83,887 Gross profit 718, ,628 Distribution costs 6 (515,566) (405,696) Administrative costs 6 (77,313) (65,488) Exceptional operating profits/losses (547) Operating profit 125,558 81,897 Net financial costs 7 (44,170) (22,908) Profit in associated companies Gains/Losses in other investments 10.2 (1,192) 1,319 Profit before taxes 80,210 60,330 Income taxes 9 (18,672) (15,072) Profit before minority interests 61,538 45,258 Attributable to: Minority interests (3,314) 3,540 Jerónimo Martins Shareholders 64,852 41,718 Basic and diluted earnings per share- Euros To be read with the attached notes to the consolidated financial statements. 14

15 JERÓNIMO MARTINS, SGPS, S.A. CONSOLIDATED BALANCE SHEET AT 30 JUNE 2008 AND DECEMBER 2007 Euro thousand Notes Assets Tangible assets 11 1,782,077 1,670,506 Investment properties 13 41,745 49,600 Intangible assets , ,293 Investments in associated Companies Available-for-sale financial investments 16 8,600 10,289 Trade debtors and deferred costs 19 66,596 65,667 Derivative financial instruments 14 1, Deferred tax assets ,378 73,322 Total non-current assets 2,632,593 2,366,962 Inventories , ,571 Taxes receivable ,696 28,657 Trade debtors, accrued income and deferred costs , ,626 Derivative financial instruments Cash and cash equivalents , ,639 Total current assets 820, ,101 Total assets 3,453,284 3,127,063 Shareholders equity and liabilities Share capital 629, ,293 Share premium 22,452 22,452 Own shares (6,060) (6,060) Fair value and other reserves ,122 92,814 Retained earnings (153,260) (161,620) 595, ,879 Minority interests 270, ,326 Total Shareholders equity 866, ,205 Borrowings , ,441 Derivative financial instruments 14 57,210 50,832 Employee benefits 25 31,247 18,685 Deferred profits- state grants 997 1,056 Provisions for risks and contingencies 26 17,250 15,433 Deferred tax liabilities ,599 55,697 Total non-current liabilities 914, ,144 Trade creditors, accrued costs and deferred income 27 1,418,594 1,289,562 Derivative financial instruments Borrowings , ,715 Taxes payable ,270 39,262 Deferred profits- state grants Total current liabilities 1,672,394 1,445,714 Total Shareholders equity and liabilities 3,453,284 3,127,063 To be read with the attached notes to the consolidated financial statements. 15

16 JERÓNIMO MARTINS, SGPS, S.A. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY Euro thousand Notes Shareholders equity attributable to Shareholders of Jerónimo Martins, SGPS, S.A. Share Capital Share Premium Own Shares Fair value and other reserves Retained Earnings Total Minority Interests Shareholders Equity Balance Sheet at 31 December ,293 22,452 (6,060) 84,420 (238,215) 491, , ,281 Equity changes in 2007 Currency translation differences in the 1st half of ,166 2,166 2,166 Revaluation of fixed assets: - Business acquisitions and restructuring (636) Fair value of cash flow hedging (90) (90) - (90) Fair value of available-for-sale financial investments 12,028 12,028 12,028 Gains/losses directly recognised in equity , ,104-14,104 Net profit in 1st half of ,718 41,718 3,540 45,258 Total gains/losses recognised during the year ,468 42,354 55,822 3,540 59,362 Dividends (55,302) (55,302) (11,810) (67,112) Balance Sheet at 30 June ,293 22,452 (6,060) 97,888 (251,163) 492, , ,531 Balance Sheet at 31 December ,293 22,452 (6,060) 92,814 (161,620) 576, , ,205 Equity changes in 2008 Currency translation differences in the 1st half of ,805 21,805 21,805 Revaluation of fixed assets: - Disposals 22.1 (3,838) 3, Fair value of cash flow hedging 22.1 (155) (155) (155) Fair value of hedging instruments on foreign operations 22.1 (6,287) (6,287) (6,287) Fair value of available-for-sale financial investments 22.1 (1,217) (1,217) (1,217) Gains/losses directly recognised in equity 10,308 3,838 14,146 14,146 Net profit in 1st half of ,852 64,852 (3,314) 61,538 Total gains/losses recognised during the year 10,308 68,690 78,998 (3,314) 75,684 Dividends 22.2 (60,330) (60,330) (13,251) (73,581) Balance Sheet at 30 June ,293 22,452 (6,060) 103,122 (153,260) 595, , ,308 To be read with the attached notes to the consolidated financial statements. 16

17 JERÓNIMO MARTINS, SGPS, S.A. CONSOLIDATED CASH FLOW STATEMENT FOR JUNE 2008 AND 2007 Euro thousand Notes Operating Activities Cash received from Customers 3,529,564 2,690,771 Cash paid to Suppliers and Employees (3,268,723) (2,556,304) Cash generated from operations , ,467 Interest paid (58,534) (25,755) Income taxes paid (16,336) (10,348) Cash Flow from operating activities 185,971 98,364 Investment activities Disposals of tangible assets 46,987 3,583 Interest received 4,337 2,151 Dividends received Acquisition of group and associated companies (151,890) (2,500) Acquisition of tangible assets (203,939) (186,812) Disposals of available-for-sale financial investments and investment property 5,708 3,580 Acquisition of available-for-sale financial investments and investment property (541) (48) Acquisition of intangible assets (11,820) (10,067) Cash flow from investment activities (310,978) (189,485) Financing activities Received from loans 226,264 68,298 Reimbursement of loans (66,990) (4,000) Dividends paid 22.2 (73,581) (67,112) Cash Flow from financing activities 85,693 (2,814) Net changes in cash and cash equivalents (39,314) (93,935) Cash and cash equivalents changes Cash and cash equivalents at the beginning of 1 st Half 268, ,764 Net changes in cash and cash equivalents (39,314) (93,935) Effect of acquisition of subsidiaries 4 12,120 1,051 Effect of currency translation differences 13, Cash and cash equivalents at the end of 1 st Half ,495 83,643 To be read with the attached notes to the consolidated financial statements. 17

18 Notes to the Consolidated Financial Statements 30 June 2008 and 2007 Index to the Notes to the Consolidated Financial Statements Page 1 Activity Accounting policies Segments reporting Businesses Acquisitions and changes to the consolidation scope Supplementary income and costs Distribution and administrative costs Net financial costs Financial instruments Income tax recognised in the income statement Exceptional operating profits/losses and gains/losses in other investments Tangible Assets Intangible Assets Investment Property Derivative financial instruments Investments in associated companies Available-for-sale financial investments Inventories Taxes Trade debtors, accrued income and deferred costs Cash and cash equivalents Cash generated from operations Capital and reserves Earnings per share Borrowings Employee benefits Provisions and adjustments to the net realisable value Trade creditors, accrued costs and deferred income Contingencies Related parties

19 Notes to the Consolidated Financial Statements 30 June 2008 and 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 Lisbon Share Capital: 629,293,220 euros Registered at the Commercial Registry Office of Lisbon and Tax Number: JMH has been listed on Euronext Lisbon (ex-lisbon and Porto Stock Exchange) since The Board of Directors approved these consolidated financial statements on 30th July Accounting policies The JMH consolidated financial statements were prepared in accordance with the interim reporting standard (IAS 34), 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 of JMH were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and in accordance 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 annual report are omitted because no changes occurred or they are not materially relevant for the understanding of the interim financial statements. All amounts are shown in thousand euros (EUR thousand) unless otherwise stated 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 2008 Average rate for the 1 st Half Polish Zloty (PLN) US Dollar (USD) Segments reporting Information by segments is reported relative to the Group s geographical and business segments. The results, assets and liabilities of each segment correspond to those directly attributable to them as well as those that may reasonably be attributed to them. The results, assets and liabilities not directly attributable to segments and included in the not allocated column refer essentially to financial operations, also including consolidation adjustments. 19

20 Notes to the Consolidated Financial Statements 30 June 2008 and 2007 Detailed Information by Segment at June 2008 and 2007 DISTRIBUTION MANUFACTURING NOT AND SERVICES Portugal Poland Portugal ALLOCATED TOTAL Revenues from external customers Sales 1,417,917 1,219,711 1,611,573 1,058, , , ,161,468 2,411,226 Services rendered 3,018 2,588 7,082 6, ,221 8,710 1,420,935 1,222,299 1,618,655 1,064, , , ,171,689 2,419,936 Inter-segments revenues ,236 26,518 (29,506) (26,837) - - TOTAL REVENUES 1,421,074 1,222,496 1,618,786 1,064, , ,298 (28,808) (26,602) 3,171,689 2,419,936 SEGMENT RESULTS 28,312 28,891 80,223 35,927 31,341 18,200 (14,318) (1,121) 125,558 81,897 Net financial costs (44,170) (22,908) Profit in associated Companies Gains/Losses in other investments (1,192) 1,319 PROFIT BEFORE TAXES 80,210 60,330 Income taxes (18,672) (15,072) Minority interest 3,314 (3,540) NET PROFIT 64,852 41,718 TOTAL ASSETS 2,135,053 1,782,100 1,045, , , ,625 (66,601) (72,999) 3,453,284 2,729,739 TOTAL LIABILITIES 1,530,448 1,215, , , , , ,632 66,417 2,586,976 1,970,208 Cash flow from operating activities 185,971 98,364 Cash flow from investment activities (310,978) (189,485) Cash flow from financing activities 85,693 (2,814) Investment in tangible and intangible assets 73, , ,615 86,410 2,240 1, , ,813 Amortisation and depreciation 40,072 34,253 31,111 22,782 2,683 2, ,930 59,573 4 Businesses Acquisitions and changes to the consolidation scope On May 1 st, 2008, Pingo Doce Distribuição Alimentar, S.A. bought Plus Discount Supermercados, Lda., owner of retail stores in Portugal, after receiving, in April 29th 2008, clearance from the Portuguese anti-trust Authority. The effects of these operations on the Financial Statements were as follows: Fixed assets 30,599 Inventories 9,841 Taxes receivable 7,278 Debtors and Accruals and Deferrals 1,666 Cash and cash equivalents 12,120 Total Assets 61,504 Bank Loans 5,713 Provisions for risks and contingencies 400 Taxes payable 1,720 Creditors and Accruals and Deferrals 34,653 Total Liabilities 42,486 Goodwill 132,872 Invested amount 151,890 Debt increase 5,713 Cash acquired (12,120) Net invested amount 145,483 During the 1 st half of 2008 the companies Idole Utilidades, Equipamentos e Investimentos Imobiliários, Lda. and Dantas & Vale, S.A. were wound up. 20

21 Notes to the Consolidated Financial Statements 30 June 2008 and Supplementary income and costs June 2008 June 2007 Supplementary gains 110,301 77,263 Cash discount received 16,631 16,151 Cash discount paid (1,519) (1,776) Electronic payment commissions (6,091) (5,296) Other supplementary costs (2,734) (2,574) Provisions for debtors suppliers ,624 83,887 Supplementary gains concern to profits obtained by the Group through the distribution of goods, namely, rental of spaces, participation in birthday events, rental of shelf s, etc. Supplementary costs concern to the same nature of supplementary gains mentioned, paid by subsidiaries operating in the manufacturing and services segments. 6 Distribution and administrative costs June 2008 June 2007 Supplies and services 127, ,325 Advertising costs 32,801 29,078 Rents 58,796 46,138 Staff costs 256, ,025 Depreciations, amortisations and assets profit/loss 72,841 58,695 Transportation costs 43,904 32,619 Other operational profit/loss 557 (696) 592, ,184 7 Net financial costs June 2008 June 2007 Interest expense (34,642) (25,512) Interest received 4,245 1,196 Dividends 5 19 Net foreign exchange 307 (108) Investment property: Changes to fair value (note 13) (9) (13) Other financial costs and gains (1,799) 250 Changes to fair value in derivative financial instruments (note 8) (12,277) 1,260 (44,170) (22,908) 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). Other financial costs and gains include costs with debt issued by the Group. The other financial costs and gains heading includes an amount of EUR 130 thousand (2007: EUR 130 thousand) regarding transfers from reserves for covering cash-flow. 21

22 Notes to the Consolidated Financial Statements 30 June 2008 and Financial instruments Fair value of derivative financial instruments The impact in income statement, is as follows: June 2008 June 2007 Derivatives held for trading Currency swaps (6,824) 1,987 Interest rates swaps (7,357) (727) Credit default swap 1,904 - (12,277) 1,260 Income tax recognised in the income statement 3,254 (334) Minority interests 635 (453) Ammount recognised in profit/loss (8,388) 473 The value recognised in reserves referred to hedging of investment in Poland is negative EUR 6,287 thousand, (net of tax). Changes to the fair value of derivative instruments designated as fair value hedging (note 14) for the amount of EUR 9,866 thousand (2007: EUR 6,634 thousand) was offset by a symmetrical variation in value for the loan of USD 180 million (note 24.2). 9 Income tax recognised in the income statement 9.1 Income taxes June 2008 June 2007 Current income tax Current tax of the year (20,882) (10,464) Adjustment to prior year estimation (2,160) 24 (23,042) (10,440) Deferred tax (note 18.1) Temporary differences created and reversed 4,236 (1,340) Change to the recoverable amount of tax losses and temporary differences from previous years 134 (3,292) 4,370 (4,632) Total income taxes (18,672) (15,072) 9.2 Reconciliation of effective tax rate June 2008 June 2007 Profit before tax 80,210 60,330 Income tax using the Portuguese corporation tax rate 26,5% (21,256) 26.5% (15,987) Fiscal effect due to: Different tax rates in foreign jurisdictions 8.8% 7, % 5,585 Non taxable or non recoverable results (1.0%) (837) (1.5%) (896) Non-deductible expenses and fiscal benefits (0.1%) (107) 0.6% 365 Adjustment to prior year estimation (2.7%) (2,160) 0.0% 24 Change to the recoverable amount of tax losses and temporary differences of prior years 0.2% 134 (5.5%) (3,292) Results subject to special taxation (1.8%) (1,474) (1.4%) (871) Income tax 23.3% (18,672) 25.0% (15,072) 22

23 Notes to the Consolidated Financial Statements 30 June 2008 and Exceptional operating profits/losses and gains/losses in other investments 10.1 Exceptional operating profits/losses June 2008 June 2007 Gains/Losses with businesses disposals 17,047 (1,000) Losses with organizational restructuring program (15,415) - Real state disposal 10,242 - Introduction of a plan on incentives for senior employees (11,639) - Others (109) (547) 10.2 Gains/Losses in other investments June 2008 June 2007 Gains on disposals of available-for-sale financial investments Dividends received from available-for-sale financial investments Changes in the fair value of available-for-sale financial investments (1,014) - Losses with the disposal of available-for-sale financial investments (178) - (1,192) 1, Tangible Assets 11.1 Changes occurred during the year Cost 2008 Land and natural resources Buildings and other constructions Plants, machinery and tools Transport equipment and others Work in progress and advances Total Opening balance 399,400 1,170, , , ,382 2,587,087 Foreign exchange differences 2,450 28,584 10,285 5,219 4,993 51,531 Increases 1,937 25,109 39,277 15,949 93, ,060 Disposals (22,944) (36,921) (6,789) (3,555) (1,189) (71,398) Transfers and write off s 9,121 68,484 3,861 1,011 (87,083) (4,606) Business acquisitions - 17,459 14,774 11, ,197 Transfers to investment properties (84) (84) Closing balance 389,964 1,273, , , ,178 2,782,787 Depreciation and impairment losses Opening balance - 305, , , ,581 Foreign exchange differences - 9,106 5,367 3,294-17,767 Increases - 29,579 32,925 8,109-70,613 Disposals - (5,277) (6,717) (3,443) - (15,437) Transfers and write off s - (1,110) (1,456) (679) - (3,245) Business acquisitions - 1,982 5,028 6,588-13,598 Impairment Closing balance - 340, , ,531-1,000,710 Net value As at 1 January , , ,741 42, ,382 1,670,506 As at 30 June , , ,904 58, ,178 1,782,077 During the 1st half of 2008, impairment losses were registered in the amount of EUR 833 thousand, regarding equipments Guarantees No tangible assets have been pledged as security for the fulfilment of bank or other obligations Revaluation No changes ocurred in the market value of land allocated to the operating activity. 23

24 Notes to the Consolidated Financial Statements 30 June 2008 and Intangible Assets 12.1 Changes occurring during the year Cost 2008 Goodwill R&D expenses Software, ind. property and other rights Key money Work in progress Opening balance 416,290 30,312 33,767 62,222 5, ,989 Foreign exchange differences 10,113 1,645 1,135 2, ,328 Increases ,195 1,504 9,102 11,821 Transfers and write off s - (1,901) 5,677 1,776 (5,147) 405 Business acquisitions 132, ,890 Closing balance 559,275 30,076 41,792 67,556 9, ,433 Depreciation and impairment losses Opening balance - 25,751 2,419 23,526-51,696 Foreign exchange differences - 1, ,944 Increases ,179-3,315 Transfers and write off s - (361) (124) Business acquisitions Closing balance - 27,570 3,262 26,017-56,849 Net value As at 1 January ,290 4,561 31,348 38,696 5, ,293 As at 30 June ,275 2,506 38,530 41,539 9, ,584 The Group identified as intangible assets of indefinite useful life, besides goodwill, the trademarks Pingo Doce and Feira Nova, for which there is no time limit for how long they will continue to create economic benefits to the Group. Their net value is EUR 13,717 thousand, which are not being depreciated and are subject to impairment tests annually Guarantees No intangible assets have been pledged as security for the fulfilment of bank or other obligations Intangible assets in progress The implementation of projects for processes simplification, business acquisition expenses and key money are considered in intangible assets work in progress. Total 12.4 Impairment tests for Goodwill Goodwill is allocated to the Groups business areas as presented bellow: Business Areas June 2008 December 2007 Retail Portugal 234, ,610 Cash & Carry Portugal 72,433 72,433 Madeira 8,509 8,509 Manufacturing 93,809 93,809 Poland 150, ,929 The additions in this heading include: 559, ,290 acquisition of the company Plus Discount Supermercados, Lda., as mentioned in note 4, whose Goodwill value was EUR 132,872 thousand; as a consequence of the currency translation adjustment of assets in the Group s business in Poland, the Goodwill value related to this business, totalling PLN 502,818 thousand, increased by EUR 10,113 thousand. 24

25 Notes to the Consolidated Financial Statements 30 June 2008 and Investment Property June 2008 Opening balance 49,600 Transfers from tangible assets 84 Changes to fair value (9) Disposals (7,930) Closing balance 41,745 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 a period below 12 months. 14 Derivative financial instruments Notional June 2008 December 2007 Assets Liabilities Notional Assets Liabilities Non Non Non Non Current Current Current Current Current Current Current Current Derivatives held for trading Interest rate swap 40 millions EUR ,442 Currency swap Credit default swap 40 millions EUR - 1, millions EUR 200 millions PLN 100 millions EUR , , Fair value hedging derivatives USD loan hedging 180 millions USD , millions USD ,143 Cash flow hedging derivatives Interest rate swap 10 millions EUR millions EUR Foreign operation investments hedging derivatives Currency swap 400 millions PLN , millions PLN ,350 Total derivatives held for trading 133 1,074-1, ,339 Total hedging derivatives , ,493 Total assets/liabilities derivatives 179 1,074-57, ,832 In June 2008 the values shown include interest receivable or payable related with these financial instruments that are due. The net payable amount is EUR 138 thousand. Derivatives held for trading Interest rate swap The Group enters into interest rate swaps with the intention of make an economic hedge of the interest rate risk on its future interest payments on the loans. In 30 June 2008, the total amount of loans was EUR 421,007 thousand (December 2007: EUR 461,007 thousand), and the Group had derivatives financial instruments with a notional of EUR 40,000 thousand (December 2007: EUR 120,000 thousand). Currency swap The Group makes an economic hedge of the exchange rate risk of its exposure in zloty. The most significant derivative financial instruments were three interest rate swaps entered in 2006 with a notional of 305 million zloty. In 2007, two of them were cancelled. During the 1st half of 2008, the remaining swap with the notional of 200 million zlotys was equally cancelled. 25

26 Notes to the Consolidated Financial Statements 30 June 2008 and 2007 Credit default swap The Group entered into this derivative with the intention of minimizing the impact of the credit spreads increase resulting from exogenous effects to JMH. Following the renegotiation of debt started during the 1 st half 2008, the notional was reduced from EUR 100,000 thousand to EUR 40,000 thousand. Hedging fair value The Group hedges its exposure to the fair value of its loans in the total amount of USD 180 million, arising from interest rate risk and exchange rate risk, through two cross currency swaps that have the same characteristics as the debt that was issued. The objective of this hedge is to transform the fixed rate into a variable rate, and to hedge exposure to the US dollar, thus reflecting changes to the fair value of the debt that was issued. The credit risk is not hedged. The fair value of the two cross currency swaps at 30 June 2008 was negative EUR 35,035 thousand (December 2007: negative EUR 25,143 thousand). Cash flow hedge The Group partially hedges future interest payments on the loans, using for that interest rate swaps, in which pays fixed interest rate and receives variable interest rate, with a notional of EUR 10,000 thousand (December 2007: EUR 10,000 thousand). This is an hedging of interest rate risk associated with variable-rate interest payments arising from recognised financial liabilities. The hedged risk is indexed to the variable rate associated with the loans. The objective of the hedge is to convert the loans with variable interest rate into fixed interest rate. The credit risk is not hedged. The fair value of the interest rate swaps at 30 June 2008 was EUR 46 thousand (December 2007: EUR 127 thousand). In August 2006, one of the hedges was discontinued and it is still recognised in equity an amount of EUR 163 thousand (December 2007: EUR 293 thousand), which is being recycled to the profit and loss, having been recognised in the 1st half of 2008 results in the amount of EUR 130 thousand (2007: EUR 130 thousand). Hedging of investments in foreign entities The Group hedges part of its exposure to the variation of the zloty due to its net investment in Poland through an exchange rate swap for PLN 400,000 thousand (December 2007: PLN 400,000 thousand). This instrument qualifies for hedge accounting. The fair value of the derivative at 30 June 2008 was negative EUR 20,733 thousand (December 2007: negative EUR 12,350 thousand). The changes in the fair value of the derivative was recognised in the currency translation reserve in equity. 15 Investments in associated companies During the 1 st half of 2008, the movement under this heading was as follows: June 2008 Investments Opening balance 700 Equity method (161) Closing balance 539 Fair value adjustments Opening balance - Transfers - Closing balance - Net value as at 1 January 700 Net value as at 30 June Available-for-sale financial investments Non-Currents June 2008 December 2007 BCP shares 3,705 4,380 Advances on account of financial investments 4,988 4,988 Others ,614 10,289 Fair value adjustments (note 26) BCP shares (1,014) - 8,600 10,289 26

27 Notes to the Consolidated Financial Statements 30 June 2008 and 2007 The listed available-for-sale financial assets were recognized at fair value at the date of the financial statements. Thus, an impairment loss was registered on results reflecting the change on its fair value. The financial assets available-for-sale include non-listed capital instruments whose fair value cannot be reliably measured and so as such are recognised at cost to the value of EUR 5,909 thousand at 30 June 2008 (December 2007: EUR 5,909 thousand). At the date of preparing the financial statements, the Group does not intend to dispose of any of its investments. The main financial investments measured at cost are set out in the table below: June 2008 December 2007 Investment in Uniarme Investment in Mercado Abastecedor do Porto Investment in AMS Other investments There are no market prices available for the mentioned investments, and not being able to determine the fair value based on comparable transactions, the Group did not measured this instruments based on expected discounted cash flows since they can not be reasonably estimated. 17 Inventories June 2008 December 2007 Raw and subsidiary materials and consumables 6,737 4,368 Goods and work in progress 1, Finished and semi-finished goods 1, Goods 358, , , ,926 Fair value adjustment (note 26) (13,475) (11,355) Net inventories 354, ,571 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 2008 Opening balance 17,625 Currency translation difference (note 22.1) 3,728 Revaluation and reserves (note 22.1) 56 Result of the year (note 9.1) 4,370 Closing balance 25,779 Deferred taxes are presented in balance sheet as follows: June 2008 December 2007 Deferred tax assets 80,378 73,322 Deferred tax liabilities (54,599) (55,697) 25,779 17,625 27

28 Notes to the Consolidated Financial Statements 30 June 2008 and 2007 Movement in deferred taxes during the year Deferred tax liabilities Opening balance Impact on results Impact on equity Currency translation differences Closing balance Revaluation of assets 36,695 (3,665) ,030 Deferred income for tax purposes 1,811 (782) - 1,155 2,184 Differences on accounting policies in other countries 12, ,090 Other temporary differences 4, ,295 55,697 (3,187) - 2,089 54,599 Deferred tax assets Excess over legal provisions 10,901 1, ,934 Revaluation of assets 1, ,078 Employee benefits 4,388 3, ,632 Costs with foreign exchange risk hedging operations 6,141 (3,000) 56 2,266 5,463 Recoverable losses 11, ,679 Profit in inventories Fair value adjustments on inventories 2, ,693 Other deferred costs for tax purposes 31,015 (1,169) - 2,195 32,041 Differences on accounting policies in other countries 1, ,260 Other temporary differences 4,170 (95) - - 4,075 73,322 1, ,817 80,378 Net change in deferred tax 17,625 4, ,728 25, Receivable and payable taxes Taxes receivable June 2008 December 2007 Income tax receivable 5,092 6,954 VAT receivable 16,410 19,770 Others 1,194 1,933 22,696 28,657 Taxes payable Income tax payable 11,541 8,289 VAT payable 12,652 12,012 Income tax withheld 5,144 3,567 Social security 15,205 9,166 Other taxes 6,728 6,228 51,270 39, Trade debtors, accrued income and deferred costs Non-current June 2008 December 2007 Other debtors 61,376 60,427 Deferred costs 5,220 5,240 Current 66,596 65,667 Commercial customers 95,320 75,264 Associated companies 15 9 Suppliers 12,063 11,584 Staff 1,352 1,157 Other debtors 55,623 35,951 Accrued income 11,952 20,262 Deferred costs 12,990 9, , ,626 Non-current debtors balance of EUR 60,267 thousand is related to additional tax liquidation. 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 7,515 thousand. 28

29 Notes to the Consolidated Financial Statements 30 June 2008 and 2007 The debtor s amount is registered by the recoverable value, i.e., the Group constitutes provisions for impairment losses whenever there are signs of uncollectible amounts (note 26). 20 Cash and cash equivalents June 2008 December 2007 Bank deposits 248, ,507 Short-term investments 2,727 50,830 Cash and cash equivalents 3,434 4, , ,639 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 26). 21 Cash generated from operations June 2008 June 2007 Net results 64,852 41,718 Adjustments for: Minority interests (3,314) 3,540 Taxes 18,672 15,072 Depreciations 73,930 59,573 Provisions 16,845 2,548 Net financial costs 44,170 23,012 Profit in associated companies (14) - Profit/ Losses on financial investment disposals 1,192 (1,319) Profit/ Losses on tangible assets disposals (9,511) 1, , ,149 Changes in working capital: Inventories (58,853) (32,140) Trade debtors, accrued income and deferred costs (19,219) (15,980) Trade creditors, accrued costs and deferred income 132,091 37, , , Capital and reserves 22.1 Fair value and other reserves Land and buildings Cash-flow Hedging reserve Available-forsale financial investments Currency translation reserve Balance as at 1 January , ,217 14,892 92,814 Total Disposal of revaluated assets: - Gross value (10,102) (10,102) - Deferred tax 2,577 2,577 - Minority interests 3,687 3,687 Fair value adjustment of financial investments: - Gross value (211) (8,554) (8,765) - Deferred tax 56 2,267 2,323 Fair value adjustment of available-for-sale financial investments: - Gross value (1,217) (1,217) Currency translation differences: - In the year 20,344 20,344 - Deferred tax 1,461 1,461 Balance as at 30 June , , ,122 29

30 Notes to the Consolidated Financial Statements 30 June 2008 and Dividends Dividends distributed in 2008 in the amount of EUR 73,581 thousand, were paid to Jerónimo Martins, SGPS, S.A. shareholders an amount of EUR 60,330 thousand and to minority interest in the Group companies an amount of EUR 13,251 thousand. 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 64,852 thousand (2007: profit of EUR 41,718 thousand) and on weighted average outstanding ordinary shares, numbering 628,434,220 (2007: 628,434,220) Weighted average ordinary shares June 2008 June 2007 Ordinary shares issued at the beginning of the year 629,293, ,293,220 Own shares at the beginning of the year 859, ,000 Shares issued during the year - - Weighted average number of ordinary shares 628,434, ,434, Net results attributable to ordinary shareholders June 2008 June 2007 Weighted average ordinary shares 628,434, ,434,220 Net profit of the year attributable to ordinary shareholders 64,852 41,718 Basic and diluted earnings per share Euros Borrowings During the 1st Half 2008, Jerónimo Martins, SGPS, SA negotiated a new Commercial paper program in the maximum amount of EUR 10,000 thousands, or its counter value in PLN, maturing in July In April 2008, the call option of the bond loan in the amount of EUR 40,000 thousands issued by Jerónimo Martins was exercised. The final maturity of this loan was in October During the 1st Half, the terms of some of the existing commercial paper programs were renegotiated, as in terms of the amounts as well as in price conditions. In several Group companies, financial leases were contracted in the total amount of EUR 18,600 thousands, for a period of 48 months. In JMR Group four new commercial paper programs were negotiated in the total amount of EUR 110,000 thousands Current and non-current loans Non-current loans June 2008 December 2007 Bank loans 302, ,586 Bond loans 386, ,894 Financial lease liabilities 65,099 54,961 Current loans 753, ,441 Bank overdrafts 15,558 17,068 Bank loans 107,750 75,154 Other loans - 28 Bond loans 50,000 - Financial lease liabilities 29,142 24, , ,715 30

31 Notes to the Consolidated Financial Statements 30 June 2008 and Loan terms and maturities Average rate Total Less than 1 year Between 1 and 5 years More than 5 years Bank loans Comercial Paper in EUR 4.80% 234,150 69, ,000 - Loans in EUR 5.22% 84,105 5,505 78,600 - Loans in PLN 6.16% 91,647 33,095 58,552 - Bond Loans Loans 5.50% 471,007 50, ,470 80,537 Fair value adjustment (34,979) - (16,592) (18,387) Bank overdrafts 5.24% 15,558 15, Financial lease liabilities 4.99% 94,241 29,142 63,477 1, , , ,507 63,772 The amount of negative EUR 34,979 thousand, adjusted to the total of bond loans, refers to the updating of the bond loan for USD 180 million, for which the Group contracted a hedging instrument, presented in note 14, with a symmetrical value 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 2008 December 2007 Non-current loans (note 24.1) 753, ,441 Current loans (note 24.1) 202, ,715 Derivative financial instruments (note 14) 55,957 49,747 Interest on accruals and deferrals 4,518 1,700 Bank deposits (note 20) (248,334) (213,507) Short-term investments (note 20) (2,727) (50,830) 765, , Employee benefits The Group has adopted an incentive program based on the attribution of bonus to senior employees, wich applies to the employees in Portugal who are not under the incentive plan of Unilever-JM Group. The program consists in the attribution of bonus to senior employees when they reach 5, 10, 15 and 25 years of service. In order to meet the responsibilities, the Group has recognized, during the 1 st half, the amount of EUR 12,393 thousand, of which EUR 11,639 thousand regarding past services costs were recognized under exceptional operating losses (note 10.1). The 2008 responsabilities are being recognized on operating results. 26 Provisions and adjustments to the net realisable value 2008 Opening balance Provisions set up Provisions used Foreign exchange difference Business acquisition Closing balance Doubtful debtors (note 19) 25, (1,396) ,729 Inventories (note 17) 11,355 5,759 (4,606) ,474 Financial Investments (note 16) - 1, ,014 Short terms investments Total fair value adjustments 36,904 7,660 (6,002) ,274 Employee benefits (note 25) 18,685 13,008 (446) ,247 Other risks and contingencies 15,433 2,748 (1,443) ,250 Total of provisions 34,118 15,756 (1,889) ,497 31