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MODELO CONTINENTE GROUP

ANNUAL FINANCIAL STATEMENTS - 2004CONSOLIDATEDINDIVIDUAL

MODELO CONTINENTE, S.G.P.S., S.A.

Sociedade Gestora de Participações Sociais

SEDE: R. João Mendonça, 529 - 4464-501 SENHORA DA HORA

Matriculada na Conservatória Registo Comercial do Porto sob nº 38045

NIPC 501 532 927 - Capital Social 1.100.000.000 Euro

" sociedade com o capital aberto ao investimento do público "

MODELO CONTINENTE GROUP

CONSOLIDATED

FINANCIAL STATEMENTS

2004







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Management Report Modelo Continente, S.G.P.S., S.A.

To the Shareholders,

In accordance with Portuguese Law and the company’s articles of association, we hereby present

the Consolidated Report and Accounts of Modelo Continente, S.G.P.S., SA for the year 2004.

Economic background

The year 2004 was a turning point in the trend of world economic growth, being particularly positive

in the USA and the main Asian economies. Although the Euro zone showed the worst performance

among the more advanced economies, growth was still positive.

Portugal’s economy grew in 2004 by around 1.3% but continued at a level less than the average of

the European community. Internal demand grew significantly, confirming the trend begun in the

middle of 2002. Greater consumer confidence and the maintenance of exceptionally low interest

rates appear to have created conditions for a recovery in growth of private consumption of around

2% which was more visible in consumer durables. Investment also grew at about the same rate and

although growth did not occur in the construction segment, overall the trend of falls in investment

that have occurred over the last few years was reversed.

Exports grew by 7% in volume, due to the accelerated growth of Portugal’s main trading partners.

However, imports grew at a faster rate so that net external demand for Portuguese goods was

negative.

Average annual inflation in the year fell to 2.4% compared to 3.3% in 2003. The fall was due mainly

to a slow down in industrial equipment and food prices, offset to some extent by the significant

increase in the international price of oil as from mid April.

The profile of growth in Portugal in 2004 showed some worrying signs in that it was driven by

consumption and was not based on growth of productive investment and increasing exports in

major international markets.

At the structural level, 2004 was marked by fresh difficulties in controlling public expenditure and

adhering to the growth and stability pact. At the end of the year and against a background of

political instability in the country, indices of consumer and business confidence once again fell,

indicating the fragility of the economic upturn.

In Brazil, the economy grew at a rate of almost 5% compared to almost zero growth in 2003. This

was based on a strong increase in external demand that leveraged growth in other sectors of the

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economy. In particular, private consumption grew in volume by around 4% driven by a fall in

unemployment and a real increase in average earnings.

The most worrying sign during the year was the inflation rate which ended the year at 7.6% due to

the increase in oil prices and the still significant impact of prices of goods and services included in

the inflation index by the government. Although the rate was below the high levels recorded in

previous years, it exceeded the goal set by the government and the IMF. To combat this trend, the

monetary authorities raised market base interest rates so that the SELIC at the end of January

2005 reached the extremely high rate of 18.25%.

However the country appears to have public finances under control due to strong export growth that

resulted in a trade surplus. Exports have benefited from improved world economic growth on the

one hand and on the other from greater competitiveness in international markets resulting from

successive depreciations of the Brazilian Real. At present, exports are the key factor in sustaining

growth.

With a more favourable economic background and having achieved the commitments the country

made to international financial institutions, the country risk factor fell, and foreign direct investment

grew by 60% to an overall total of 16 thousand million US dollars.

For 2005, sustained growth in GDP is forecasted which together with falls in the inflation and

interest rates, should further improve the Brazilian economy.

Market background

In Portugal, the modern food retail market showed little growth in 2004, only slightly above 3%. This

trend was due mainly to an increase of 43,000 m2 in sales area. Although this increase is less than

in previous years due to the freeze on new licences for commercial properties, it still represents an

increase of 3% over the period.

Against a background of weak demand and continued strong supply, competition in the market

increased sharply with a generalised increase in promotional activity, low priced products and

branding based on the pricing variable. For example, this explains why the Price Index for food and

non alcoholic drink products was around 1%, thus strongly contributing towards the slowdown in the

Portuguese inflation rate.

These factors also impacted the non food retail market. However, the pioneering work of

Portuguese brands and the growing presence of international operators have meant greater

development in this market, particularly in those segments popular with the Portuguese public.

In Brazil, turnover of the operators that are part of ABRAS, the national retailers’ association, grew

by around 9%. This is the biggest growth in the sector for the last four years, and has been driven

by the country’s good economic performance. Due to two major merger and acquisitions operations

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during 2004, there was a further move towards concentration of the country’s retail structure, which

still remains however at a lower level than in more developed countries.

The market also saw an increase of around 125,000 m2 in new sales area following a significant

period of low investment activity. This was particularly strong in the latter part of the year, and

confirms greater confidence in the strength of the underlying economic situation of the country.

Nonetheless, 55,000 m2 of sales area were also shut down, as part of efforts to rationalise existing

stores.

Strategic background

Throughout 2004, Modelo Continente continued to follow the strategic direction of the last few

years, namely the focus on growth, and investment in constantly reconfiguring the value proposal

for its format portfolio.

In term of growth, Modelo Continente efforts were aimed at strengthening the food retail business in

Portugal and Brazil, and at developing non food retail in a complementary fashion.

However while in Brazil efforts at expansion had to contend with economic instability, in Portugal

expansion has been heavily impacted by the political and bureaucratic problem of the freeze on

new commercial licences for modern distribution retail stores.

This freeze slowed down investment and job creation of the main operators in the sector, especially

in Modelo Continente’s food retail formats. The new commercial licensing laws that have now finally

come into effect put an end to this situation.

Nonetheless given the decentralised nature of the law that is based on decision making at a

regional level, Modelo Continente considers it essential that central government does not shirk its

responsibility for its application and follow up. If this happens, the process will become fragmented,

discretionary and above all, lack transparency. It should not copy the worse features of the previous

law by in particular showing a lack of even handedness in the attribution of new licences.

This situation artificially damages those projects that systematically gain greater recognition from

consumers and local communities, as has been the case of Modelo Continente. However, the

company’s value offer has enabled it to continue as the leading operator in the Portuguese food

retail market with a market share of around 30%, 1.6 times higher than its nearest competitor.

In the face of innumerable obstacles to the expansion of modern distribution retail in Portugal, the

company decided in good time to focus its effort on the growth on non food retail segments. Thus it

developed synergistically a wide portfolio of new brands that cover segments running from sports

goods to construction materials. This business area quickly assumed importance in Portugal,

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taking advantage of a customer traffic base that had already been created, the company’s business

experience and of course the growing sophistication of consumer habits.

With their market presence established and their positioning strategy fine tuned, all of the brand

names in the portfolio have become profitable and a benchmark reference for the Portuguese

consumer in their specific segments. Modelo Continente’s journey in this area will certainly not stop

with the existing formats. The company is preparing new growth options, for example the brand

Zippy Kidstore that is currently in a phase of market testing.

In Brazil, after a phase of strong growth based on organic expansion, and mergers and

acquisitions, Modelo Continente came up against a period of heavy political and economic

instability. The company immediately braked its expansion plan and focused in particular on

rationalising and standardising its store portfolio.

As soon as the economic situation shows sustainable improvement, Modelo Continente will

continue to expand, especially to states in the south of the country, with the goal of strengthening

the clear leadership position that it enjoys in the region.

Throughout the year, the company also remained focused on optimising its value proposal and

strengthening operational service levels to customers, seen as essential preconditions to maintain

rates of growth and sustainable profitability. In this area, the company’s efforts both in Portugal and

Brazil were centred mainly on fine-tuning the business support structure.

Important upgrades were implemented in the company’s computer architecture in order to allow

information systems to be standardised and give more power to develop technically and

commercially innovative solutions.

In the logistics area, improvements were implemented to the warehouse operation models through

more robust technical solutions in terms of work organisation, and more centralised operations.

These improvements immediately yielded very significant gains in productivity.

More visibly for the customer, the year was marked by the introduction of a range of low priced

items and own brand products. Leveraging the important experience of the company in the design,

production and sale of a range of products of this kind, Modelo Continente developed and promoted

throughout 2004 a wide range of own brand products both in Portugal and Brazil.

These were particularly important in the food area since by offering a balanced price/quality

relationship with a big emphasis on the price variable, this enabled the most basic hypermarket

supply segment to be strengthened, and in a number of instances to achieve leadership in their

respective markets.

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Also in the area of changes in the product range, the year confirmed the defined strategy of greater

segment supply clarification in non food retail, a typical example being the life styles presentation in

the textile business in Portugal.

Efforts were made during the year to forge partnerships with different entities with the goal of

complementing and strengthening the offer to customers. There are many examples among which

should be highlighted.

• The “Producers’ Club” involving cooperation with farmers and food producers to produce

and sell around 130,000 tons of local products in Portugal and Brazil.

• The partnership between Modelo Continente and Galp to give Modelo Continente

customers discounts on the purchase of fuel, thus making access easier to a range of

products that make up an important part of the monthly expenses of Portuguese families.

• The partnership with a bank in Brazil that resulted in specific store credit cards for BIG,

Nacional, Mercadorama and Maxi Atacado stores being available for customers and the

convenience cards Super Compra and Super Bonus, strengthening even further the link

with the final customer.

In Brazil especially, Modelo Continente made efforts to build awareness among customers of the

company and its brands by taking various actions that had a strong impact on local communities.

Business activity

Consolidated gross sales of Modelo Continente for the year 2004 totalled 4,159 million Euro, an

increase of 4% over the same period of 2003, and were favourably impacted by significant growth

of turnover in Brazil that increased by 16% in local currency. In Euro, this growth was 11%,

impacted by a 5% depreciation of the Real to the Euro during the year. This trend basically reflects

the performance of stores on a like for like basis, given that the company’s expansion programme

continued to be impacted by the legal framework in Portugal and the slow economic recovery in

Brazil.

• Gross sales of Modelo Continente in Portugal totalled 2,957 million Euro in 2004, an

increase of 2% compared to 2003. Growth picked up as the year progressed due to the

investment made by the company in a more aggressive commercial posture.

• In Brazil, gross sales totalled 4,367 million Brazilian Real, an increase of 16% compared to

2003. This performance has been the result of actions taken to consolidate operational

activity, to extensively refurbish stores and to improve knowledge about local customers in

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each regional market. In the last quarter of the year alone, turnover grew by 23% over

2003.

This performance is clearly above the market average and its main competitors, strengthening the

company’s key business indicators and leading to increased market share. However due to the

depreciation of the Real to the Euro, the contribution of Brazilian operations to consolidated gross

sales was 1,202 million Euro, an increase of 11% compared to 2003.

Consolidated operational cash-flow for the year was 284 million Euro, equal to 7.9% on net sales

and at a level similar to that of 2003.

• In Portugal, the contribution of operations to consolidated operating cash flow was 242

million Euro, equal to 9.3% on net sales, a fall of 4% compared to 2003, once again

reflecting the company’s more aggressive commercial policy.

• In Brazil, Modelo Continente’s business has seen a steady increase in profitability with the

contribution to consolidated operational cash flow in 2004 reaching 41 million Euro or 4.2%

of net sales. This is equal to an increase of 14% or 5 million Euro compared to 2003, and

of 0.2 percentage points in the EBITDA margin.

Expansion Programme

During the year 2004, the company opened 22 new stores, equal to 22,000 m2 of sales area. In

Portugal, a new Modelo store was opened in Gulpilhares, in the Porto metropolitan area as well as

12 stores in non food retail. This format included a pilot store - Zippy - for a new concept in the

children’s apparel segment.

In Brazil, expansion led to an increase of 14,000 m2 of sales area, corresponding mainly to the

opening of 2 BIG hypermarkets in the states of Santa Catarina and Rio Grande do Sul.

In general, the company’s efforts in this area focused mainly on preparing an expansion plan for the

next 24 months searching for new sites for stores and preparing material for different projects.

Those projects with opening dates in the near future were closely followed by the teams involved,

particularly for the Continente hypermarkets at Antas and Loures in Portugal with opening planned

in the first and second halves of 2005 respectively. Also included is the BIG hypermarket at

Protássio Alves in the Brazilian state of Rio Grande do Sul.

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Financial Analysis

Consolidated net sales of Modelo Continente totalled 3,578 million Euro for the year, an increase of

3% that was negatively impacted by a 5% depreciation of the Real to the Euro during the year, as

noted above.

Consolidated operational cash-flow was 284 million Euro, equal to 7.9% on net sales and at a level

similar to that of 2003.

Profits on ordinary activities totalled 128 million Euro, an increase of 23%, resulting from a fall in

financial charges. This fall was due to a sustained reduction in debt, a fall in the company’s cost of

debt and a capital gain from the sale of financial investments.

Consolidated net profits after minority interests were 114 million Euro, an increase of 53% over

2003. This improvement reflects a small profit from operations in Brazil compared to the losses of

last year.

In 2004, investment in fixed assets at Modelo Continente was around 100 million Euro. This total

must be put in the context of the difficult legal framework in Portugal for commercial premises which

for practical purposes was still in force, as well as high interest rates that continue in Brazil.

In view of the high level of cash flow generated, net bank debt has steadily fallen and stood at 506

million Euro at the end of 2004. This corresponds to a Net Debt/EBITDA ratio of 1.8 x, reflecting a

solid financial structure that allows Modelo Continente to face future growth challenges with

confidence.

Outlook

The year 2005 will mark the beginning of a new era for modern retail distribution in Portugal. With

the new law concerning commercial property licensing coming into effect, a four year freeze on the

issue of licences for new commercial premises comes to an end. A period of strong growth in the

number of stores operating in the country is now expected. Given that the market is already close to

maturity, this means a significant increase in competitive pressures, which has already been

apparent over the last few years.

Against this background, Modelo Continente reaffirms its strategic goal of consolidating its market

position and maximizing value to the final customer. To that end, in 2005 it will develop a series of

expansion projects that will make its strategic growth plan viable and involve a provisional

investment forecast of 200 million Euro in Portugal alone.

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The expansion programme will be accompanied by an important number of operational

development projects that will enable the company to remain sharply focused on the consumer,

optimise its internal business processes and strengthen links with its suppliers. This plan will enable

the company to move forward in a sustainable fashion to reach high levels of operating profitability.

In Brazil, over the coming months, the development of the business will be focused on maintaining

growth especially in the southern states of the country and on fine tuning business processes and

the value proposal offered to customers.

In general terms and bearing in mind the points highlighted above, the company’s outlook for the

coming year is positive. This opinion is based on:

• recent progress that the company’s portfolio of brands have made in Portugal as a result of

the promotional activity undertaken;

• the full programme of investment in Portugal including in particular two Continente units

and an important number of Modelo mini-hypermarkets and non food retail stores;

• the improvement in the economic background and the increase in the competitiveness of

the Brazilian operation that allow the company to face the specific challenges of this market

with confidence.

In view of the demanding expansion programme defined for 2005 that will involve an investment of

about 250 million Euro in Portugal and Brazil, and given the company’s wish to maintain the solid

capital structure of the company, the Board of Directors of Modelo Continente, SGPS, SA propose

that no dividend for the year 2004 is distributed.

Transition to International Financial Reporting Standard (IAS/IFRS)

In accordance with the terms of Regulation 1606/2002 of the European Parliament and Council, the

company has already completed an analysis of the changes to accounting policies that it will have

to implement to comply with IAS/IFRS. Both the staff involved and the computer systems are ready

to respond to the new information requirements both for individual companies and for consolidation

purposes.

Throughout this process, the Board of Directors of Modelo Continente has been actively involved in

the definition of accounting policies to be adopted and has closely supervised progress made. The

process was also accompanied by Deloitte e Associados, SROC, SA, the company’s auditors.

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We believe that, judging from the results already achieved, the most critical steps in the process

have already been completed such that Modelo Continente is now ready to apply the required

policies.

As far as the disclosure information is concerned, Modelo Continente will observe paragraph 20 of

the Recommendations and Additional Guidelines for the Transition to International Financial

Reporting Standards of the CESR (European Stock Exchange Regulatory Committee).

The first information using the full IAS/IFRS will be disclosed for the intermediary financial

statements up to 31 March 2005 together with those up to 31 March 2004 converted to IAS/IFRS,

including the relevant reconciliations with the information previously presented using Portuguese

accounting standards (POC) as suggested in the recommendations of the CESR.

The opening balance sheet as at 1 January 2004 as well as the impact of applying IAS/IFRS for the

first time as of this date, will be disclosed in April at a date prior to the intermediate financial

statements as at 31 March 2005 being made available, with the objective of allowing a more

complete understanding of the impact of the new standards.

Vote of thanks

We thank all our customers, suppliers, financial institutions and shareholders for their support and

their preference during the year.

We also thank the external auditors and statutory auditors for all their co-operation throughout the

year.

And finally, a special word of thanks to all of Modelo Continente’s employees for the enthusiasm,

dedication and competence that they demonstrated once again in 2004.

Matosinhos, 28 February 2005

The Board of Directors

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Report on Corporate Governance Modelo Continente, SGPS, SA

31 December 2004

This document gives a brief description of the Corporate Governance practices of Modelo

Continente SGPS, SA, and was prepared to comply with Regulation 7/2001 of 20 December 2001

of the CMVM (Portuguese Stock Exchange Commission) together with those changes made in

Regulation 11/2003 of 19 November 2003.

Given that this is an appendix to the Board of Directors’ Report, it should be read together with and

as a complement to that document. Certain aspects in this appendix are cross referenced to the

main body of the report as it was felt that it was more appropriate to deal with them in the main

body of the report to avoid repetition.

0 – Statement of compliance The adoption of the recommendations of the CMVM on corporate governance is explicit in this

report and in each of the chapters into which it is divided.

1 – Information Disclosure

1.1 Decision making process

The Board of Directors of Modelo Continente, SGPS, SA is made up of seven members. The

members of the Board of Directors have collective duties of co-ordination and management of

various functional departments.

Board of Directors

• Belmiro Mendes de Azevedo (Chairman)

• Nuno Manuel Moniz Trigoso Jordão (CEO)

• Ângelo Gabriel Ribeirinho dos Santos Paupério (CFO)

• Fernando Sérgio Maia Rebelo

• Manuel José Ferreira Fontoura

• Luís Filipe Campos Dias de Castro Reis

• José Manuel Alves Elias da Costa

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The Board of Directors had 4 executive directors as at 31 December 2004 (Nuno Manuel Moniz

Trigoso Jordão, Ângelo Gabriel Ribeirinho dos Santos Paupério, Fernando Sérgio Maia Rebelo and

Manuel José Ferreira Fontoura), with the remaining directors being non-executive.

As at 31 December 2004, the Board of Directors was assisted by 3 advisors.

Advisors to the Board of Directors

• José Fernando Oliveira de Almeida Côrte-Real

• Luís Miguel Vieira de Sá da Mota Freitas

• Luís António Vicente Dias

The company is currently organized as follows:

Conselho de Administração

Portugal

• Operations

• Commercial

• Logistics

• Procurement

• Store development

• Marketing

• Human Resources

• Information systems

• Finance

• Management Planning and Control

• Audit and Risk Management

• Legal

• Environment

Direcções funcionais

Adjuntos do Conselho de Administração

Brasil

• Operations

• Commercial

• Logistics

• Procurement

• Store development

• Marketing

• Human Resources

• Information systems• Finance

• Management Planning and Control

• Audit and Risk Management

• Legal

• Environment

Board of Directors

Portugal

•

•

•

• Procurement

•

• Marketing

•

•

•

•

•

•

•

Functional Departments

Advisors to the Board

Brazil

•

•

•

• Procurement

•

• Marketing

•

•

•

•

•

•

•

The company also has a Remuneration Committee described in paragraph 1.8 below.

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1.2 Risk control

Risk management is one of the component parts of the company culture, is present in all

management processes and is a responsibility of all management and employees. The objective of

risk management at Modelo Continente is to create value by managing and controlling uncertainties

and threats that can affect the company on a going concern basis and prevent it from taking

advantage of business opportunities.

Risk management is integrated into the entire planning process as a structured and disciplined

approach that aligns strategy, processes, people, technologies and knowledge with the goal of

identifying, evaluating and managing the uncertainties and threats that the company face in the

pursuit of its business objectives and value creation.

As part of strategic planning, the risks of the existing business portfolio as well as new businesses

and relevant projects, are identified and evaluated, while strategies to manage those risks are also

defined.

At the operational level, business risks and planned actions to manage those risks, are identified

and evaluated, and are included and monitored in business unit and functional unit plans.

For risks that cross business unit boundaries, such as large scale organizational changes,

contingency and business recovery plans, structural risk management programmes are developed

with the involvement of those responsible for the units and functions involved.

As far as tangible asset and people safety risks are concerned (technical-operational risks), audits

are carried out at the main units, and preventive and corrective actions for the identified risks are

implemented. The financial cover of insurable risks is reassessed on a regular basis.

Financial risk management is carried out and monitored as part of the company’s financial

departments activity, whose work is coordinated by the Board of Directors.

The risk management process is supported by a uniform and systematic methodology that includes

the following:

- Identifying systematically the risks that affect the organization (common language); defining

and grouping risks (dictionary and matrix of risks);

- Evaluating and attributing the level of criticality and priority of risks as a function of their

impact on the objectives of the business and the probability of the risks occurring;

- Identifying the causes of the most important risks;

- Evaluating strategic risk management options;

- Developing a risk management action plan and integrating it into the management and

planning procedures of the units and functions of the company;

- Monitoring and reporting on progress made to implement the action plans.

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Risk Management is the responsibility of all managers and staff of the company at all levels of the

organization, and is supported in the most direct way by the Audit and Risk Management, and

Management Planning and Control Departments, in both Portugal and Brazil, reporting directly to

the Board of Directors.

• The Audit and Risk Management function‘s mission is to help companies reach their

objectives via a systematic and structural approach to developing and evaluating the

effectiveness of management and control of business processes and information

systems risks. The Risk Management function promotes, co-ordinates, facilitates and

supports the development of risk management processes. The Internal Audit function

identifies and evaluates the effectiveness and efficiency of management and control of

business processes and information systems risks, as well as risks arising from non

compliance with legislation, contracts and company policies and procedures. The

Internal Audit annual plan includes critical business process audits, compliance audits,

financial audits and information systems audits.

• Financial and accounting information reliability and integrity risks are also evaluated

and reported upon by the External Audit function.

• The Management Planning and Control function promotes and supports the integration

of risk management into the management and planning control process of companies.

1.3 Share Price Performance

Modelo Continente, SGPS, SA’s shares are quoted on the Euronext Lisbon stock exchange. The

key technical information concerning the shares is as follows:

Company name: Modelo Continente, SGPS, SA

Share capital: 1,100,000,000 Euros

Nominal value of shares: 1€

Number of shares: 1,100,000,000

Stock exchange: Euronext Lisbon

ISIN/Euronext Code: PTMOC0AE0007

Reuters: MDCT.IN1

Bloomberg: MCON PL

Central Code: MOCAE

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The share price at the beginning of the year was 1.45€ per share and was 1.46€ per share at the

end of 2004. During the year, the maximum price was 1.64€ per share which occurred in early

March. The lowest price was recorded on 17 August at 1.35€ per share.

Comparing the share price at the end of 2003 and 2004, these was an increase of 3% with the

average share price for the year being 1.45€ per share.

The share performance throughout 2004 is shown in the graph below and also that of the main

Portuguese stock exchange index, the PSI 20.

Graph.1 – Trend of the Modelo Continente share price and the PSI20 during 2004

The trend of the key stock market indicators for the company during the last three years was as

follows:

80

85

90

95

100

105

110

115

120

Psi20

MOCAE

(Bas

e =

100)

(02.January) (31.December)

1,45€/share

1,46€/share

80

85

90

95

100

105

110

115

120

Psi20

MOCAE

(Bas

e =

100)

(02.January) (31.December)

1,45€/share

1,46€/share

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Table 1 – Trend of the key stock market indicators for Modelo Continente

2002* 2003 2004 Base data

Share capital (€) 1,100,000,000 1,100,000,000 1,100,000,000

Number of shares 1,100,000,000 1,100,000,000 1,100,000,000

Nominal share value (€) 1.0 1.0 1.0

Net profit (€) 100,089,749 74,664,172 114,415,880

Net profit per share (€) 0.099 0.068 0.104

Dividend per share (€) 0 0 0

Share price (€)

Beginning of year 1.71 1.59 1.45

Maximum 1.92 1.64 1.64

Minimum 1.60 1.14 1.35

Average 1.76 1.39 1.45

End of year 1.61 1.42 1.46 Transactions (number per day)

Maximum 199,603,711 1,360,775 2,824,880

Minimum 0 0 0

Average 1,141,660 23,705 35,290 Transactions (value per day, €)

Maximum 369,266,590 1,703,600 3,818,745

Minimum 0 0 0

Average 2,112,728 32,749 51,166

Share capitalization

End of year (€) 1,771,000,000 1,562,000,000 1,606,000,000

Change - -12% 3%

* By public deed dated 16 December 2002, the company increased its share capital from 1,000,000,000 Euro to 1,100,000,000 Euro, an increase of 100,000,000 Euro paid for in cash by indirect subscription, through the issue of 100,000,000 new ordinary bearer shares.

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In order to assist in analyzing adequately the trend of the share price in 2004, the most relevant

events and press releases of the company were as follows:

• Press Release concerning the consolidated financial statements

for 2003 9 March

• Press Release concerning the consolidated financial statements for the 3

months to 30 March 29 April

• Publication of the prospectus for the issue of 10,000,000 bonds

of the Modelo Continente/2004 – 1st bond issue on the Euronext

Lisbon second market June

• Change of name of statutory auditor 26 July

• Press Release concerning the consolidated financial

statements for the six months to 30 June 8 September

• Press Release concerning the consolidated financial

Statements for the nine months to 30 September 28 October

• Information concerning qualified shareholdings 17 November

• Change in the Board of Directors 17 November

• Information concerning qualified shareholdings 14 December

• Information concerning qualified shareholdings 21 December

1.4 Dividend distribution

Modelo Continente, SGPS, SA did not distribute any dividends for the years 2002, 2003 and 2004.

1.5 Share Plans and Stock Option Plans

There are no share plans or stock option plans.

1.6 Related Party Transactions

The company did not have business dealings with any member of the Board of Directors. The only

transactions with the Statutory Auditor were those related to his official duties and his fees were

paid as described in paragraph 1.9 below.

Transactions with group companies or those controlled by Modelo Continente were made at arms

length, were part of the normal business activity of the company, and as such do not need further

disclosure.

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1.7 Investor Relations

The representative of Modelo Continente, SGPS, SA for Capital Market Relations is Ângelo Gabriel

Ribeirinho dos Santos Paupério.

Modelo Continente, SGPS, SA has committed to inform the capital markets expeditiously of all

relevant facts about the company, thus ensuring equal treatment to all parties involved and equal

access to information by investors.

To that end, Modelo Continente, SGPS, SA uses the normal channels of communication but has

put special emphasis on using new information technologies. Here, the main highlight is the

company website (www.ModeloContinente.pt) that acts as a focal point for a wide range of

questions put by investors and the general public, as well as being a repository of historical

information about the company, in particular financial statements, earnings announcements and the

most important corporate presentations.

As part of the above commitment, Modelo Continente, SGPS, SA set up its Investor Relations

Office that is technically well equipped and has a dedicated team, acting as a focal point for the

Portuguese and international investment community.

Its main function is to rapidly respond to all questions put to it, but also to prepare institutional

documents and presentations.

The office can be contacted at:

Rua João Mendonça, 529 – 6ºDto

4464-501 Senhora da Hora (Matosinhos – Portugal)

Telephone: 351.22.9561958

Fax: 351.22.9561318

Email: [email protected]

In recent years, the Office has helped a wide range of parties involved with the capital markets, in

particular small private investors and the university community, as well as the main financial

analysis teams in the Portuguese and international retail sector.

1.8 Remuneration Committee

The Shareholders’ General Meeting appoints a Remuneration Committee with the same term of

office as the statutory bodies. Its mission, in accordance with paragraph 2 of Article twenty-five of

the company’s articles of association, is to approve the remuneration of members of the Board of

Directors.

In Modelo Continente, SGPS, SA, the current Remuneration Committee is made up of Sonae

SGPS, SA represented by Professor José Manuel Trindade Neves Adelino and Bruno Walter

Lehmann, who are not members of the Board of Directors.

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1.9 Auditor’s Fees

The company’s auditors are Deloitte, who, in 2004, billed the company and its affiliated and

associated companies a total of 529,000 thousand euro (of which 240,000 thousand euro were

billed to foreign companies). Of the total, 76.4% were statutory audit fees, 16.1% tax consultancy

fees and 7.5% other services fees.

Tax consultancy services and other services are provided by different specialists than those who

are involved in audit, thus contributing to the independence of the auditor.

2 - Shareholder representation and voting rights

The articles of association of the company only allow participation in the Shareholders’ General

Meeting to shareholders who can provide proof of their title as shareholders and who, at least eight

days before the date of the meeting, have those shares: either registered in their names in the

company’s share register; or deposited with a financial institution duly authorized in accordance

with the law; or entered in an electronic shareholding account at the stock market register.

The deposit with a financial intermediary and those entered in an electronic shareholding account at

the stock market register, have to be confirmed in writing by the respective intermediary, and this

letter must be received by the company at least eight days before the General Meeting is held.

Shareholders can only attend the General Meeting if they inform the Chairman of the Board of the

Shareholders’ Meeting of their intention to do so, in writing, at least three days before the General

Meeting is held, unless they have confirmed the deposit with a financial intermediary or the

electronic shareholding account at the stock market register.

One vote corresponds to each group of one thousand shares, and each shareholder has as many

votes as results from dividing the total number of shares he/she owns by one thousand, rounded

down to the nearest whole number, without limit.

Shareholders who are private individuals can be represented at Shareholders’ General Meetings by

their spouse or direct family, a director or other shareholder, by sending a letter to the Chairman of

the Board of the Shareholders’ Meeting, stating the name and address of the representative and

the date of the meeting.

Corporate entities will be represented by a person nominated by them by written letter whose

authenticity will be verified by the Chairman of the Board of the Shareholders’ General Meeting.

For as long as the company is listed on the Stock Exchange, shareholders can vote by

correspondence but only in relation to changes to the articles of association and election of

statutory bodies.

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Correspondence votes will only be taken into account when received at the company’s

headquarters by registered mail addressed to the Chairman of the Board of the Shareholders’

General Meeting, and received at least three days before the meeting, subject to proof of title of the

related shares.

The voting declaration should be signed by the holder of the shares or by his legal representative

and, in the case of a private individual should be accompanied by an authenticated copy of his

identity card, and in the case of a corporate entity, the signature should be authenticated by a

notary public testifying to his/her status and powers.

Written voting papers shall only be considered valid when they clearly set out in an unambiguous

manner:

a) The agenda item or items to which they refer;

b) The specific proposal to which they relate with an indication of the respective proposer or

proposers;

c) The precise and unconditional voting intention on each proposal, as well as whether this is

maintained, if the proposal is altered by its proposer.

Nonetheless, a shareholder is permitted to include in a written voting paper, in relation to an

identified proposal, the intention to vote against all alternative proposals, in relation to the same

item on the agenda, without further specification.

It is assumed that shareholders have abstained from any proposals that are not specifically

included in their written voting papers.

Nonetheless, a shareholder may make a vote on a specific proposal conditional on the approval or

rejection of another proposal within the same item on the agenda at the General Meeting.

It is the responsibility of the Chairman of the Board of the Shareholders’ General Meeting, or the

person substituting him, to verify correspondence voting declarations, eliminating any votes relating

to declarations that are not accepted.

The individual company and consolidated financial statements and other documents required by

law, as well as the proposals made by the Board of Directors for approval by the General meeting,

will be available for consultation by shareholders at the head office as from fifteen days prior to the

date of the Shareholders’ Annual General Meeting.

The General Meeting may pass resolutions at the first meeting as long as shareholders

representing over fifty percent of the share capital of the company are present or represented,

unless the law demands a different quorum.

The right to vote electronically is not contemplated in the company’s articles of association.

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3 - Company Rules

3.1 Codes of conduct and Internal Regulations

Modelo Continente, SGPS, SA values and principles are widely spread and deeply rooted in the

company’s culture. The key aspects are a business culture (leadership, openness to change,

loyalty and rigour, transparency), responsibility towards employees (equal treatment, professional

development, safety), social responsibility (social and environmental awareness, openness to

society, trust and ethics) and political independence. As a publicly listed company it is particularly

aware of its duties of diligence and confidentiality in its dealings with third parties, protecting its

position in situations of conflict of interest. In this area, no written code of conduct for management

bodies or other internal regulation relating to this subject exists.

3.2 Risk Management

In its day to day and strategic management, the company actively practices policies of risk

management and internal audit in all aspects of its business operations. These activities are

considered by the company to be fundamental towards supporting and controlling the business,

and have been the subject of growing attention by Modelo Continente, SGPS, SA. Two separate

functions in Portugal and Brazil reporting directly to the board of Directors carry out these activities.

During 2004, the Audit and Risk Management Department continued to work on a broad range of

subjects among which we highlight:

Process and compliance audits

• Compliance audits of critical business variables including purchases, sales, write offs, returns

and inventories.

• Audits of most relevant company processes including customer suggestions and complaints,

calculations of working capital needs and permanent inventories.

Information system audits

• Audits of Backup and Recovery procedures

• Audits of critical business data bases

• Audit of SAP control applications

• Intrusion and security tests

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Risk management

• Risk analysis of logistic warehouses with execution tests to security systems

• Set up of a data base to monitor the trend of risks to stores

• Daily execution of food safety audits in stores, warehouses and production centers A highlight

was preparing and reporting on the main conclusions of the audit at a company level and

developing guidelines for corrective actions

At the same time the Audit and Risk Management Department closely followed all change

processes that were of significant impact to Modelo Continente, and checked their feasibility and

conformance with benchmark processes in the sector.

3.3 Limits to exercising voting rights or to the transfer of shares, shareholders’ agreements

and special shareholders’ rights

Over and above the number of shares (1,000) that correspond to a vote and the representation

rules mentioned in paragraph above, there are no other limitations on voting rights, nor are there

any restrictions on transferring shares. The company has not taken any measures that would hinder

the success of a tender offer for the purchase of shares.

4 - Management Bodies

4.1 Description

The Board of Directors is made up of seven executive members who have collective duties of co-

ordination and management of various functional departments. The mandate of this Board of

Directors is four years and ends in 2005. The directors were elected from a single list. No

alternative list was presented by any shareholder.

Board of Directors

• Belmiro Mendes de Azevedo (Chairman)

• Nuno Manuel Moniz Trigoso Jordão (CEO)

• Ângelo Gabriel Ribeirinho dos Santos Paupério (CFO)

• Fernando Sérgio Maia Rebelo

• Manuel José Ferreira Fontoura

• Luís Filipe Campos Dias de Castro Reis

• José Manuel Alves Elias da Costa

Independent member as defined by Regulation nr. 11/2003 of the CMVM

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During 2004 the Board met 9 times. The respective minutes are recorded in the minute book.

As at 31 December 2004, the Board of Directors of Modelo Continente, SGPS, SA was made up of

4 executive directors (Nuno Manuel Moniz Trigoso Jordão, Ângelo Gabriel Ribeirinho dos Santos

Paupério, Fernando Sérgio Maia Rebelo e Manuel José Ferreira Fontoura), and three advisors

(José Fernando Oliveira de Almeida Côrte-Real, Luis Miguel Vieira de Sá da Mota Freitas and Luís

António Vicente Dias).

As part of the business decision making process, the members of the Board of Directors have the

following duties:

• Nuno Manuel Moniz Trigoso Jordão – has responsibility for overall co-ordination, in line with

the duties of a traditional CEO, for both Portugal and Brazil;

• Ângelo Gabriel Ribeirinho dos Santos Paupério – has responsibility for overall coordination in

line with the duties of a CFO, for both Portugal and Brazil;

• Fernando Sérgio Maia Rebelo – has executive responsibility for the operations of Modelo

Continente, SGPS, SA in Brazil;

• Manuel José Ferreira Fontoura – has operational responsibility for stores and the logistic

chain of Modelo Continente, SGPS, SA in Portugal.

In addition, there is no Executive Committee or any other Committee with management authority.

No internal control committees were set up to evaluate corporate governance, since this evaluation

is carried out in meetings of the Board of Directors.

No list of incompatibilities was defined nor the maximum number of cumulative duties of directors in

the management bodies of other companies. This was because directors of the company generally

exercise management duties in companies belonging to Modelo Continente.

4.2 Remunerations

In 2004, members of the Board of Directors remunerated by the company or by affiliated or

associated companies were paid in total 2,659,465 euro, of which 1,510,142 euro was a

performance bonus.

The performance bonus is indexed to a group of financial indicators that best align the interests of

Directors with those of the company and its shareholders. Half of this bonus is deferred and will

only be paid in 2007, and may increase or decrease depending on share price performance.

The Chairman of the Board of Directors had a total remuneration of 50,000 Euro that did not include

any performance related bonus.

14/25

The CEO of the company had a total remuneration of 885,760 euro, including a performance bonus

of 563,760 euro.

The average remuneration of the remaining members of the Board of the Directors was 574,568

euro that includes a performance bonus of 315,461. The remaining non executive members of the

Board of Directors did not receive any remuneration.

The Board of Directors believes that the information given above concerning remunerations is

sufficient and that to give details for each director, as recommended by the CMVM, goes beyond

the general principles governing the duty to inform and is of marginal usefulness to shareholders’

interests.

4.3 Offices Held in other Companies

The members of the Board of Directors also held office in the following companies:

Belmiro Mendes de Azevedo

• Sonae – SGPS, S.A.

• Sonae Capital, SGPS, S.A.

• Spred – S.A.

• Sonae Indústria – SGPS, S.A.

• Imocapital – Sociedade Gestora de Participações Sociais, S.A.

• Sonae Imobiliária SGPS, S.A.

• Sonae.Com, SGPS, S.A.

• Efanor Investimentos, SGPS, S.A.

• Setimanale – SGPS, S.A.

• Praça Foz – Sociedade Imobiliária, S.A.

• Casa.Agrícola de Ambrães, S.A.

• Tableros de Fibras, S.A.

Nuno Manuel Moniz Trigoso Jordão

• Andar – Sociedade Imobiliária, S.A.

• Aqualuz – Turismo e Lazer, Lda

• Aquapraia – Investimentos Turísticos, S.A.

• Aquapraia – Investimentos Turísticos, SGPS, S.A.

• Atlantic Ferries – Tráfego Local, Fluvial e Marítimo, S.A.

• Bertimóvel – Sociedade Imobiliária S.A.

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• Best Offer – Prestação de Informações pela Internet, S.A.

• Bikini – Portal de Mulheres, S.A.

• Bloco Q – Sociedade Imobiliária, S.A.

• Bloco W – Sociedade Imobiliária, S.A.

• Cacetinho – Comércio Retalhista e Exploração de Centros Comerciais, S.A.

• Campimeios – Sociedade Imobiliária, S.A.

• Carnes do Continente – Indústria e Distribuição de Carnes, S.A.

• Casa da Ribeira – Hotelaria e Turismo, S.A.

• Centro Residencial da Maia – Urbanismo, S.A.

• Country Club da Maia - Imobiliária, S.A.

• Chão Verde – Sociedade de Gestão Imobiliária, S.A.

• Cesse - Informática, Lda.

• CHT – Casino Hotel de Tróia, S.A.

• Citorres – Sociedade Imobiliária, S.A.

• Contibomba – Comércio e Distribuição de Combustiveis, S.A.

• Contifin, SGPS, Lda.

• Contimobe – Imobiliária do Castelo de Paiva, S.A.

• Difusão – Sociedade Imobiliária, S.A.

• Distrifin Comercio y Prestacion de Servicios, S.A.

• Efanor - Design e Serviços, S.A.

• Efanor - Indústria de Fios, S.A.

• Empreendimentos Imobiliários da Quinta da Azenha, S.A.

• Estevão Neves – Hipermercados da Madeira, S.A.

• Fonetária - Empreendimentos Imobiliários S.A.

• Fozimo - Sociedade Imobiliária, S.A.

• Fozmassimo – Sociedade Imobiliária, S.A.

• Gestholding – SGPS, S.A.

• Global S – Hipermercado, Lda.

• Golf Time - Golfe e Investimentos Turísticos, S.A.

• Grano Salis – Investimentos Turísticos, Jogo e Lazer, S.A.

• IGI – Investimento Imobiliário, S.A.

• Igimo – Sociedade Imobiliária, S.A.

• Iginha- Sociedade Imobiliária, S.A.

• Imoareia – Investimentos Turísticos, SGPS, S.A.

• Imoclub – Serviços Imobiliários, S.A.

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• Imoconti – Sociedade Imobiliária, S.A.

• Imoestrutura – Sociedade Imobiliária, S.A.

• Imoferro – Sociedade Imobiliária, S.A.

• Imohotel – Empreendimentos Turísticos Imobiliários, S.A.

• Imomuro – Sociedade Imobiliária, S.A.

• Imopenínsula – Sociedade Imobiliária, S.A.

• Imoponte – Sociedade Imobiliária, S.A.

• Imoresort – Sociedade Imobiliária, S.A.

• Imoresultado – Sociedade Imobiliária, S.A.

• Imosedas – Imobiliária e Serviços, S.A.

• Imosistema – Sociedade Imobiliária, S.A.

• Infofield – Informática, S.A.

• Informeios – Projectos e Representações, S.A.

• Insulatróia – Sociedade Imobiliária, S.A.

• Inventory – Acessórios de Casa, S.A.

• Marimo – Exploração Hoteleira e Imobiliária, S.A.

• Marinamagic - Exploração de Centros Lúdicos e Maritimos, Lda

• Marmagno – Exploração Hoteleira e Imobiliária, S.A.

• Martimope – Sociedade Imobiliária, S.A.

• Marvero – Exploração Hoteleira e Imobiliária, S.A.

• Max Office – Artigos e Serviços para Escritório, S.A.

• Modalfa - Comércio e Serviços, S.A.

• Modelo – Distribuição de Materiais de Construção, S.A.

• Modelo - Sociedade Gestora de Participações Sociais, S.A.

• Modelo Continente – Operações de Retalho, SGPS, S.A.

• Modelo Continente Hipermercados, S.A.

• Modelo Continente, SGPS, S.A.

• Modelo Hiper Imobiliária, S.A.

• Modelo Investimentos Brasil, S.A.

• Modelo.Com – Vendas por Correspondência, S.A

• Modis – Distribuição Centralizada, S.A.

• Modis International Trade, S.A.

• Modis, SGPS, Lda.

• O.K. Bazar – Comércio Geral, S.A.

• Partnergiro – Empreendimentos Turísticos, Lda.

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• Praedium II – Imobiliária, S.A.

• Praedium III – Serviços Imobiliários, S.A.

• Praedium, SGPS, S.A.

• Predicomercial – Promoção Imobiliária, S.A.

• Prédios Privados – Imobiliária, S.A.

• Predisedas – Predial das Sedas, S.A.

• Promosedas – Promoções Imobiliárias, S.A.


• S.I.I. – Soberana – Investimentos Imobiliários, S.A.

• Sempre à Mão – Sociedade Imobiliária, S.A.

• Sempre a Postos – Produtos Alimentares e Utilidades, Lda.

• Sesagest – Projectos e Gestão Imobiliária, S.A.

• Sociedade Construções do Chile, S.A.

• Socijofra - Sociedade Imobiliária, S.A.

• Sociloures - Sociedade Imobiliária, S.A.

• Solinca – Lazer, SGPS, S.A.

• Solinca III – Desporto e Saúde, S.A.

• Solinca- Investimentos Turísticos, S.A.

• Soltróia – Sociedade Imobiliária de Urbanização e Turismo de Tróia, S.A.

• Sonae Capital, SGPS, SA

• Sonae Distribuição Brasil, S.A.

• Sonae Retalho Espanã – Servicios Generales, S.A.

• Sonae Retalho Especializado, SGPS, S.A.

• Sonae Turismo – Gestão e Serviços, S.A.

• Sonae Turismo - SGPS, S.A.

• Sonae, SGPS, S.A.

• Sondis Imobiliária, S.A.

• Sontária – Empreendimentos Imobiliários, S.A.

• SportZone – Comércio de Artigos de Desporto, S.A.

• SRE – Projectos e Consultoria, S.A.

• Star – Viagens e Turismo, S.A.

• Todos os Dias – Comércio Retalhista e Exploração de Centros Comerciais, S.A.

• Torralta – Club Internacional de Férias, S.A.

• Torre São Gabriel – Imobiliária, S.A.

• Troiaverde – Exploração Hoteleira e Imobiliária, S.A.

18/25

• Tulipamar - Exploração Hoteleira e Imobiliária, S.A.

• Urbisedas – Imobiliária das Sedas, S.A.

• Vastgoed One - Promoção Imobiliária, S.A.

• Vastgoed Sun - Promoção Imobiliária, S.A.

• Venda Aluga – Sociedade Imobiliária, S.A.

• World Trade Center Porto, S.A.

• Worten - Equipamentos para o Lar, S.A.

Ângelo Gabriel Ribeirinho dos Santos Paupério

• Andar – Sociedade Imobiliária, S.A.

• Aqualuz – Turismo e Lazer, Lda.

• Aquapraia – Investimentos Turísticos, S.A.

• Aquapraia – Investimentos Turísticos, SGPS, S.A.

• Atlantic Ferries – Tráfego Local, Fluvial e Marítimo, S.A.

• BA – Fábrica de Vidros Barbosa & Almeida, S.A.

• Bar- Bar- Idade Glass – Serviços de Gestão e Investimento, S.A.

• Best Offer – Prestação de Informações pela Internet, S.A.

• Bikini - Portal de Mulheres, S.A.

• Bloco Q – Sociedade Imobiliária, S.A.

• Bloco W – Sociedade Imobiliária, S.A.


• Campimeios - Sociedade Imobiliária, S.A.


• Carplus – Comércio de Automóveis, S.A.

• Casa da Ribeira – Hotelaria e Turismo, S.A.

• Centro Residencial da Maia – Urbanismo, S.A.

• Change, SGPS, S.A.


• Choice Car – Comércio Automóveis, S.A.

• Choice Car, SGPS, S.A.

• CHT- Casino Hotel de Tróia, S.A.


• Contibomba – Comércio e Distribuição de Combustíveis, S.A.



19/25

• Country Club da Maia – Imobiliária, S.A.


• Distrifin Comercio y Prestación de Servicios, S.A.

• Efanor - Design e Serviços, S.A.

• Efanor - Indústria de Fios, S.A.

• Elmo, SGPS, S.A.

• Empreendimentos Imobiliários Quinta da Azenha, S.A.

• Estevão Neves - Hipermercados da Madeira, S.A.

• Finlog – Aluguer e Comércio de Automóveis, S.A.


• Fozmassimo – Comércio e Indústria de Produtos Alimentares, S.A.

• Gestholding – SGPS, S.A.


• Golf Time - Golfe e Investimentos Turísticos, S.A.

• Grano Salis - Investimentos Turísticos, Jogos e Lazer, S.A.

• Guérin Rent - a - Car (Dois), Lda



• Iginha – Sociedade Imobiliária, S.A.

• Imoareia – Investimentos Turísticos, SGPS, S.A.

• Imocapital – Sociedade Gestora de Participações Sociais, S.A.

• Imoclub – Serviços Imobiliários, S.A.



• Imoferro – Sociedade Imobiliária, S.A.

• Imohotel – Empreendimentos Turísticos Imobiliários, S.A.


• Imopenínsula – Sociedade Imobiliária, S.A.


• Imoresort – Sociedade Imobiliária, S.A.


• Imosedas – Imobiliária e Serviços, S.A.

• Imosistema – Sociedade Imobiliária, S.A.


• Informeios – Projectos e Representações, S.A.

20/25

• Inparvi – SGPS, S.A.

• Insulatróia – Sociedade Imobiliária, S.A.

• Integrum – Serviços Partilhados, S.A.


• Luso – Assistência – Gestão de Acidentes, S.A.

• Marimo – Exploração Hoteleira e Imobiliária, S.A.

• Marinamagic – Exploração de Centros Lúdicos e Maritimos, Lda.

• Marmagno – Exploração Hoteleira e Imobiliária, S.A.

• Martimope – Sociedade Imobiliária, S.A.

• Marvero – Exploração Hoteleira e Imobiliária, S.A.


• MDS – Corrector de Seguros, S.A.









• Modelo.Com – Vendas por Correspondência, S.A

• Modis - Distribuição Centralizada, S.A.



• Norscut – Concessionária de Auto-Estradas, S.A.


• Partnergiro – Empreendimentos Turísticos, Lda.

• Praedium II – Imobiliária, S.A.

• Praedium III – Serviços Imobiliários, S.A.

• Praedium, SGPS, S.A.


• Prédios Privados – Imobiliária, S.A.

• Predisedas – Predial das Sedas, S.A.

• Promosedas – Promoções Imobiliárias, S.A.

• Publimeios, SGPS, S.A.

21/25

• S.I.I. – Soberana – Investimentos Imobiliários, S.A.

• SC – Insurance and Risk, SGPS, S.A.

• SC – Sociedade de Consultadoria, S.A.

• Selfrio, Engenharia do Frio, S.A.

• Selfrio, SGPS, S.A.



• Sistavac – Sistemas de Aquecimento, Ventilação e Ar Condicionado, S.A.

• SKK – Central de Distribuição para Refrigeração e Climatização, S.A.

• SMP – Serviços de Manutenção e Planeamento, S.A.

• Sociedade Construções do Chile, S.A.



• Sodesa – Comercialização de Energia, S.A.

• Soflorin, BV

• Solinca – Lazer, SGPS, S.A.

• Solinca III – Desporto e Saúde, S.A.

• Solinca- Investimentos Turísticos, S.A.

• Soltróia – Sociedade Imobiliária de Urbanização e Turismo de Tróia, S.A.

• Sonae 3P – Panels, Pul and Paper, SGPS, S.A.

• Sonae Capital, SGPS, S.A.


• Sonae Imobiliária, SGPS, S.A.

• Sonae Investments, BV



• Sonae Turismo, SGPS, S.A.

• Sonae, SGPS, S.A.

• Sonaegest – Sociedade Gestora de Fundos de Investimento, S.A.


• Sondis, BV


• Sontur, BV

• Sonvecap BV

• Sopair, S.A.

22/25

• SportZone – Comércio de Artigos de Desporto, S.A.


• Star - Viagens e Turismo, S.A.

• Todos os Dias - Comércio Retalhista e Exploração de Centros Comerciais, S.A.

• TP - Sociedade Térmica Portuguesa, S.A.

• Torralta - Club Internacional de Férias, S.A.

• Torre S. Gabriel – Imobiliária, S.A.

• Troiaverde – Exploração Hoteleira e Imobiliária, S.A.

• Tulipamar - Exploração Hoteleira e Imobiliária, S.A.

• Urbisedas – Imobiliária das Sedas, S.A.

• Vastgoed One – Promoção Imobiliária, S.A.

• Vastgoed Sun – Promoção Imobiliária, S.A.

• Venda Aluga – Sociedade Imobiliária, S.A.

• World Trade Center Porto, S.A.


Fernando Sérgio Maia Rebelo



• Frienginneering International, Ltda.







• Distrifin - Comercio y Prestacion de Servicios, S.A.


• Fozmassimo – Comércio e Indústria de Produtos Alimentares, S.A.




• Iginha - Sociedade Imobiliária, S.A.



23/25




• Imosistema - Sociedade Imobiliária, S.A.


• Informeios - Projectos e Representações, S.A.











• Modelo.Com – Vendas por Correspondência, S.A.




• O.K. Bazar - Comércio Geral, S.A.











• Sonvecap, B.V.

• Sport Zone – Comércio de Artigos de Desporto, S.A.



24/25

Manuel José Ferreira Fontoura



• Contibomba – Comércio e Distribuição de Combustíveis, S.A.

• Efanor – Indústria de Fios, S.A.

• Estevão Neves – Hipermercados da Madeira, S.A.

• Fozmassimo – Sociedade Imobiliária, S.A.

• IGI - Investimento Imobiliário, S.A.


• Insco – Insular de Hipermercados, S.A.

• Max Office – Artigos e Serviços Para Escritório, S.A.






• Modelo.Com – Vendas Por Correspondência, S.A.




• Sport Zone – Comércio de Artigos de Desporto, S.A.


• Todos os Dias – Comércio Retalhista e Exploração de Centros Comerciais, S.A.

• Worten - Equipamentos Para o Lar, S.A.

• Casa da Quinta de Vale d’Arados, Turismo Rural, Lda.

• Sempre a Postos – Produtos Alimentares e Utilidades, Lda.

Luís Filipe Campos Dias de Castro Reis

• Clixgest – Internet e conteúdos, S.A.

• Enabler – Informática, S.A.

• Exit Travel – Agência de viagens e turismo online, S.A.

• Jaua – SGPS, S.A.

• KPNQwest Portugal – Telecomunicações,S.A.

• Miauger – Organização e gestão de leilões electrónicos, S.A.

25/25


• Noriema, SGPS, S.A.

• Novis Telecom, S.A.

• Optimus – Telecomunicações, S.A.

• Público – Comunicação social, S.A.

• Sonaecom, SGPS, S.A.

• Sonae.com – Sistemas de Informação, SGPS, S.A.

• Sonae Matrix Multimédia, SGPS, S.A.

• Sonae Telecom, SGPS, S.A.

• We do consulting – Sistemas de informação, S.A.

José Manuel Alves Elias da Costa

• Santander Totta, SGPS, S.A.

• Banco Santander Totta, S.A.

• Banco Santander de Negócios Portugal, S.A.

• Santander – Gestão de Activos, SGPS, S.A.

• Santander Gestão de Activos – Sociedade Gestora de Fundos de Invest. Mobiliário, S.A.



Modelo Continente, Sociedade Gestora de Participações Sociais, S.A.

Consolidated Balance sheet as of 31 December 2004(Translation of a report originally issued in Portuguese - Note 51)

Amounts stated in Euro04.12.31 03.12.31

Assets Gross Depreciation and Net Netassets Provisions assets assets

FIXED ASSETS: Intangible assets: Installation expenses............................................................ 44,129,781 36,999,595 7,130,186 12,847,318 Research and development costs........................................ 55,590,490 46,483,031 9,107,459 17,076,826 Industrial property and other rights....................................... 11,166,830 4,767,964 6,398,866 7,176,064 Premiums paid for property occupation rights...................... 11,105,685 8,915,558 2,190,127 3,327,209 Intangible assets in progress................................................ 1,099,734 1,099,734 2,500,122

123,092,520 97,166,148 25,926,372 42,927,539 Tangible assets: Land and natural resources.................................................. 185,699,644 185,699,644 173,843,852 Buildings and other constructions........................................ 668,309,879 101,645,588 566,664,291 581,897,190 Machinery and equipment.................................................... 553,023,653 252,819,928 300,203,725 288,909,822 Transport equipment............................................................. 17,727,797 14,486,395 3,241,402 3,430,041 Tools and utensils................................................................. 4,459,858 3,229,677 1,230,181 1,023,657 Office equipment.................................................................. 177,802,775 79,130,923 98,671,852 84,865,397 Reusable containers............................................................. 251,533 251,533 Other tangible assets............................................................ 1,983,836 1,967,189 16,647 1,567,891 Tangible assets in progress.................................................. 37,689,321 37,689,321 35,066,991 Advances on account of tangible assets.............................. 27,621,817 27,621,817 16,495,110

1,674,570,113 453,531,233 1,221,038,880 1,187,099,951 Investments: Investments in associated companies.................................. 15,984,472 15,984,472 16,374,530 Loans to associated companies........................................... 50,000 Investments in other companies........................................... 748,197 748,197 748,197 Securities and other investments......................................... 16,728,167 16,728,167 16,766,572 Advances on account of investments................................... 7,760,486 7,760,486 1,513,114

41,221,322 41,221,322 35,452,413CURRENT ASSETS: Inventories : Merchandise......................................................................... 397,854,239 10,336,473 387,517,766 385,923,777

397,854,239 10,336,473 387,517,766 385,923,777 Medium and long term receivables: State and public entities....................................................... 5,175,261 5,175,261 7,166,995 Other debtors........................................................................ 39,353,116 39,353,116 41,659,110

44,528,377 44,528,377 48,826,105 Short term receivables: Clients - Current accounts.................................................... 22,810,170 1,424,880 21,385,290 16,331,295 Clients - Doubtful accounts................................................... 9,999,114 9,997,445 1,669 10,703 Associated companies......................................................... 13,041 Advances to suppliers........................................................... 827,623 827,623 225,719 Advances to suppliers of fixed assets................................... 9,408 9,408 State and public entities....................................................... 33,417,113 33,417,113 18,374,662 Other debtors........................................................................ 129,357,944 8,112,430 121,245,514 51,119,713

196,421,372 19,534,755 176,886,617 86,075,133 Marketable securities: Other marketable securities.................................................. 136,079,991 Other treasury applications................................................... 12,375,000 12,375,000

12,375,000 12,375,000 136,079,991 Bank deposits and cash: Bank deposits....................................................................... 245,689,059 245,689,059 180,082,333 Cash in hand......................................................................... 1,943,338 1,943,338 2,180,234

247,632,397 247,632,397 182,262,567ACCRUALS AND DEFERRALS: Accrued income.................................................................... 48,858,205 48,858,205 60,385,794 Deferred costs...................................................................... 16,907,741 16,907,741 17,159,443

65,765,946 65,765,946 77,545,237Total depreciation 550,697,381

Total provisions 29,871,228Total assets 2,803,461,286 580,568,609 2,222,892,677 2,182,192,713



Consolidated Balance sheet as of 31 December 2004(Translation of a report originally issued in Portuguese - Note 51)

Amounts stated in Euro

Shareholders' Equity, Minority Interests and Liabilities 04.12.31 03.12.31

SHAREHOLDERS' EQUITY Share capital............................................................................................................ 1,100,000,000 1,100,000,000 Revaluation reserves............................................................................................... 44,243,339 44,243,339

Reserves:

Legal reserves....................................................................................................... 86,000,000 86,000,000 Other reserves....................................................................................................... -906,858,216 -973,722,250

323,385,123 256,521,089 Consolidated net profit for the year 114,415,880 74,664,172

Total shareholders' equity 437,801,003 331,185,261

Minority interests 18,860,054 30,592,482

LIABILITIES

Provisions for risks and charges: Other provisions for risks and charges.................................................................. 17,703,303 6,775,476

17,703,303 6,775,476

Medium and long term liabilities: Bonds: Non convertible...................................................................................................... 182,000,000 82,000,000 Bank loans............................................................................................................... 297,175,551 379,052,108 Participant and participated companies.................................................................. 14,325,652 14,325,652 Other loans.............................................................................................................. 129,999,755 129,999,755 Suppliers of fixed assets - current accounts............................................................ 14,200,723 9,925,960 Other creditors......................................................................................................... 27,107,998 27,968,466

664,809,679 643,271,941 Short term liabilities: Bonds: Non convertible...................................................................................................... 15,789,420 Bank loans............................................................................................................... 157,278,460 312,017,712 Suppliers - current accounts.................................................................................... 594,691,588 581,013,681 Suppliers - invoices pending.................................................................................... 133,125,876 64,237,284 Participant and participated companies.................................................................. 766,340 860,121 Other shareholders.................................................................................................. 158 225 Suppliers of fixed assets - current accounts............................................................ 27,131,437 22,869,233 State and public entities.......................................................................................... 38,878,687 39,849,148 Other creditors......................................................................................................... 7,145,535 9,720,650

959,018,081 1,046,357,474

Accruals and deferrals: Accrued expenses................................................................................................... 119,852,355 117,999,527 Deferred income...................................................................................................... 4,848,202 6,010,552

124,700,557 124,010,079

Total liabilities 1,766,231,620 1,820,414,970

Total shareholders' equity, minority interests and liabilities 2,222,892,677 2,182,192,713



Consolidated Statement of Profit and Loss for the year ended 31 December 2004(Translation of statements originally issued in Portuguese - Note 51)


04.12.31 03.12.31

EXPENSES

Cost of goods sold and materials consumed: Merchandise.............................................................................................................2,800,220,829 2,800,220,829 2,769,411,584 2,769,411,584

External supplies and services ...................................................................................... 364,143,699 335,912,473

Personnel Costs:

Wages and salaries.................................................................................................. 269,662,892 251,425,475 Social charges:......................................................................................................... Other...................................................................................................................... 85,200,820 354,863,712 80,295,479 331,720,954

Depreciation and amortisation of fixed assets .......................................................... 96,134,174 105,673,039 Provisions................................................................................................................... 8,601,039 104,735,213 9,444,225 115,117,264 Taxes.......................................................................................................................... 12,773,791 8,114,299 Other operating costs................................................................................................. 3,147,022 15,920,813 3,650,092 11,764,391

(A) 3,639,884,266 3,563,926,666

Interest and similar expenses: Relating to associated companies........................................................................... 108,115 376,519 Other......................................................................................................................... 98,913,994 99,022,109 115,049,655 115,426,174

(C) 3,738,906,375 3,679,352,840 Loss on associated companies.................................................................................. 2,199,825 769,780 Extraordinary expenses.............................................................................................. 37,787,901 30,798,413

(E) 3,778,894,101 3,710,921,033

Income tax for the year Current tax.................................................................................................................. 15,157,255 18,359,169 Deferred tax................................................................................................................ 1,590,430 16,747,685 -1,043,207 17,315,962

(G) 3,795,641,786 3,728,236,995Minority interests.............................................................................................................. 1,593,334 -472,232Consolidated net profit for the year................................................................................. 114,415,880 74,664,172

3,911,651,000 3,802,428,935INCOME

Sales: Merchandise.............................................................................................................3,577,610,129 3,470,229,030Services rendered .......................................................................................................... 22,565,663 3,600,175,792 19,687,252 3,489,916,282

Own work capitalised...................................................................................................... 1,796,222 765,539Supplementary income ................................................................................................... 212,944,444 244,083,997Operating subsidies........................................................................................................ 12,279 36,420Other operating income................................................................................................... 3,899,501 218,652,446 1,820,519 246,706,475

(B) 3,818,828,238 3,736,622,757Gain on equity investments: Relating to other companies.................................................................................... 105,141 392,531

Income from marketable securities and other financial applications: Other......................................................................................................................... 4,930,169 11,654,464

Other interest and similar income: Relating to associated companies........................................................................... 619,555 1,711,641 Other ....................................................................................................................... 42,032,296 47,687,161 32,937,623 46,696,259 (D) 3,866,515,399 3,783,319,016Gain on associated companies....................................................................................... 730,699 1,959,267Extraordinary income....................................................................................................... 44,404,902 17,150,652 (F) 3,911,651,000 3,802,428,935

Summary:

Operating results: (B) - (A) = 178,943,972 172,696,091 Net financial results: [(D) - (B)] - [(C) - (A)] = -51,334,948 -68,729,915 Current results: (D) - (C) = 127,609,024 103,966,176 Profit before income tax: (F) - (E) = 132,756,899 91,507,902 Consolidated net profit for the year with minority interests: (F) - (G) = 116,009,214 74,191,940



Consolidated Statement of Profit and Loss by Functions for the year ended 31 December 2004(Translation of statements originally issued in Portuguese - Note 51)

Amounts stated in Euro04.12.31 03.12.31

Sales and services rendered.................................................................. 3,600,175,792 3,489,916,282

Cost of goods sold and services rendered.............................................. -2,893,683,674 -2,866,380,981

Gross margin....................................................................................... 706,492,118 623,535,301

Other operating income......................................................................... 221,866,979 249,148,367

Distribution charges............................................................................... -602,624,048 -586,110,858

Administrative charges.......................................................................... -131,517,860 -101,093,657

Other operating charges........................................................................ -38,563,464 -30,090,510

Operating results................................................................................. 155,653,725 155,388,643

Net financial charges............................................................................. -30,927,710 -51,815,001

Gain/(loss) on investments in subsidiaries and associated companies... -1,469,126 4,747,603

Gain/(loss) on other investments........................................................... 106,055 392,534

Exceptional items.................................................................................. 9,393,955 -17,205,877

Current results..................................................................................... 132,756,899 91,507,902

Income tax on current results................................................................. -16,747,685 -17,315,962

Current results after income tax............................................................. 116,009,214 74,191,940

Minority interests................................................................................... 1,593,334 -472,232

Extraordinary items................................................................................

Tax on extraordinary items....................................................................

Consolidated net profit for the year................................................... 114,415,880 74,664,172 Earnings per share.............................................................................. 0.104 0.068



Consolidated Statement of Cash Flows for the year ended 31 December 2004(Translation of a statement originally issued in Portuguese - Note 51)


OPERATING ACTIVITIES:

Receipts from customers 3,557,929,358 3,489,390,452Payments to suppliers 2,857,396,095 2,776,263,594Payments to personnel 348,801,757 329,982,942

Cash flow generated by operations 351,731,506 383,143,916

Payments/receipts of income tax 35,252,686 -2,566,631Other receipts/payments relating to operating activities -8,603,916 388,356

Cash flow generated before extraordinary items 307,874,904 386,098,903

Receipts relating to extraordinary items 4,701,410 8,535,502Payments relating to extraordinary items 15,841,291 25,581,804

Cash flow from operating activities [1] 296,735,023 369,052,601

INVESTING ACTIVITIES:

Receipts relating to:

Investments 320,000 25,036,868Tangible assets 6,090,062 18,588,730Intangible assets 1,432,095 1,351,806Governmental grants 652,127Interest and similar income 53,702,003 51,132,929Dividends 105,141 392,531Loans granted 1,123,388,000 112,158,000Others 826,032 1,186,515,460 208,660,864

Payments relating to:

Investments 18,630,158 86,146,142Tangible assets 144,452,342 120,847,494Intangible assets 3,714,651 22,623,203Loans granted 1,123,388,000 110,294,000Others 1,290,185,151 165,842 340,076,681

Cash flow from investing activities [2] -103,669,691 -131,415,817

FINANCING ACTIVITIES:

Receipts relating to:

Capital increases, supplementary capital contributions and share premium 12,100,000Loans obtained 644,193,448 457,818,868Other 644,193,448 139 469,919,007

Payments relating to:

Loans obtained 801,438,456 586,922,664Interest and similar costs 97,253,457 119,498,494Dividends 67 1,187,144Others 898,691,980 8,515 707,616,817

Cash flow from financing activities [3] -254,498,532 -237,697,810

Variation of cash and its equivalents [4]=[1]+[2]+[3] -61,433,200 -61,026

Effect of exchange rate differences -493,477 -603,534

Cash and its equivalents at the beginning of the year 316,649,042 316,106,534

Cash and its equivalents at the end of the year 255,709,319 316,649,042


04.12.31 03.12.31


Notes to the Consolidated Statement of Cash Flows for the year ended 31 December 2004

(Translation of Notes originally issued in Portugal - Note 51)

1- Acquisition or sale of affiliated companies and other company activities

Paragraphs a) and b)Amounts stated in Euro

AFFILIATED COMPANIES AND OTHER COMPANY ACTIVITIES TOTAL AMOUNT TOTAL AMOUNTPRICE PAID PRICE RECEIVED

Equador-Agencia de Viagens e Turismo, S.A. 545,000 545,000Estevão Neves-Hipermercados da Madeira, Lda 15,600,973 15,600,973

c) Cash and its equivalents in affiliated companies or in business activities acquired or sold:

Amounts stated in EuroCash and Cash and

AFFILIATED COMPANIES its equivalents its equivalentsacquired sold

Efanor-Indústria de Fios, S.A. 4,045Inventory-Acessórios de Casa, S.A. 1,605Sempre à Mão-Sociedade Imobiliária, S.A. 1,408

d) Other assets and liabilities acquired (sold):Amounts stated in Euro

Efanor Inventory Sempre àIndust. Fios Mão

Imobilizado 90,073 Dívidas a receber 22,681 31,736 3,035 Dívidas a pagar 6,436 6,378 51,125

2- Description of components of cash and its equivalents:Amounts stated in Euro

2004 2003

Cash 1,943,338 2,180,234Bank deposits 245,689,059 180,082,333Cash equivalents 8,076,922 134,386,475

Cash and its equivalents 255,709,319 316,649,042

Demand deposits (bank overdrafts) 4,298,078 1,693,516

Banks and cash in the balance sheet 260,007,397 318,342,558

3- Information regarding non monetary financial activities

a) Bank credits granted and not drawnNot applicable.

b) Purchase of a company through the issuance of sharesNot applicable.

c) Conversion of debt into capitalNot applicable.

4- Division of cash flow by business segmentsNot applicable.


ACQUISITIONS SALES

CAPTIONSAcquired

1

MODELO CONTINENTE, SOCIEDADE GESTORA DE PARTICIPAÇÕES SOCIAIS, S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2004 (Translation of notes originally issued in Portuguese – Note 51) INTRODUCTION The following notes are numbered in accordance with the Official Chart of Accounts (“Plano Oficial de Contabilidade”) for consolidated financial statements. The numbers not included relate to notes that are either not applicable to the Company or not significant to the accompanying financial statements. 0. VALUATION CRITERIA AND ACCOUNTING POLICIES ADOPTED The accompanying consolidated financial statements have been prepared on a going concern, accruals and historical cost basis and using the following valuation criteria and accounting policies: (a) Historical cost The consolidated financial statements were prepared in terms of the historical cost convention, except for tangible fixed assets that include successive legal revaluations based on inflation indices. (b) Consolidation basis The companies mentioned in Note 1 have been consolidated using the full consolidation method in accordance with Decree-law 238/91 of 2 July. Significant intercompany balances and transactions were eliminated in this process. Additionally, whenever necessary, the accounting principles of the subsidiaries were adjusted for consolidation purposes to those of the Modelo Continente Group. Investments in associated companies are recorded in accordance with the equity method (Note 3). (c) Investments Companies in which the Group has participating interests of more than 20% but less than 50% and over which it exercises significant influence are considered as associated companies and recorded in the financial statements in accordance with the equity method (Note 3). The portion of net profit / loss of associated companies attributable to the Group is included in the statement of profit and loss. Investments in subsidiaries not recorded in accordance with the equity method, under the provisions of Paragraph 13.6.2, Appendix 1 of Decree-Law 238/91 (not significant) and in other companies are stated at cost (Note 4). Permanent losses in the estimated realizable value of investments and loans, where applicable, are provided for in the caption provisions for investments. (d) Marketable securities Marketable securities and other treasury applications are stated at the lower of cost, which includes the additional purchase costs, or market value. (e) Intangible fixed assets Intangible fixed assets are stated at cost, which includes the additional purchase costs. Amortisation is provided on a straight-line monthly basis over a five-year period (f) Tangible fixed assets Tangible fixed assets are stated at cost, including additional purchase costs, plus the successive revaluations in accordance with inflation indices (Note 41). Tangible fixed assets include costs incurred with the construction of access infrastructures to the stores, which are later given to the city councils. Depreciation is provided on a straight-line monthly basis over the estimated useful life for each type of asset. The main annual depreciation rates are as follows: % Buildings and other constructions 2 Machinery and equipment 10 Transport equipment 20 Office equipment 10 Other fixed assets 20

2

(g) Premiums paid for property occupation rights and goodwill Premiums paid for property occupation rights represent the excess of the amount paid or to be paid over the value attributable to the net assets acquired and are being amortised on a straight-line monthly basis over a five-year period. Goodwill, calculated as of the date of acquisition of investments in group and associated companies, represents the excess of the amount paid over the value attributable to the net assets acquired and is reflected as a reduction to the shareholders’ equity caption “Other reserves”. (h) Capitalization of financial expenses Financial expenses directly related or imputable (in accordance with the average financing interest rate for the year) to tangible assets, that take a substantial period of time to get ready for its intended use, incurred up to the moment the assets become operational, are capitalized and amortized at the rates referred to in the paragraph f) above. (i) Installation expenses and research and development costs Research and development costs incurred on specific projects are capitalized where there is reasonable expectation of their commercial success, provided that the expected future income is greater than the development costs incurred or expected to be incurred and the respective costs of production, distribution and administration. Such capitalized costs are amortized over a five-year period. When expenditure incurred before the inauguration of each new outlet is greater than the related income, it is included under the caption “Installation expenses” and amortized over a five-year period. (j) Inventories Inventories held by the group are stated at acquisition cost, deducted from quantity discounts received or to be received from suppliers, which is lower than their market value. Inventories are valued at the last purchase’s price. Attending to the rotation level of inventories at the stores this method is not materially different from FIFO or average cost. (k) Assets and liabilities denominated in foreign currency Assets and liabilities denominated in foreign currency are translated to Euro at the exchange rates ruling at each period end. Gains and losses arising from differences between the exchange rates in force on the dates of the transactions and those in force on the dates of collection, payment or the balance sheet date are recorded as financial income and expenses in the statement of profit and loss for the year. The financial statements of subsidiaries and associated companies stated in foreign currencies were translated to Euro using the following exchange rates: - Historical: shareholders’ equity, except for net result for the year; - Balance sheet date: all assets and liabilities; - Average for the period: statement of profit and loss for the year; Differences arising from the translation to Euro of financial statements of subsidiary and associated companies expressed in foreign currencies are reflected in the shareholders’ equity caption “Other reserves”. The exchange rates used to translate the accounts of the foreign subsidiaries to Euro are listed in Note 24. (l) Minority interests The portion of shareholders’ equity of consolidated subsidiaries attributable to participations held by third parties outside the Group is reflected under the caption “Minority interests”. Minority interests in the net result of consolidated subsidiaries are deducted from the consolidated result in the statement of profit and loss under the caption “Minority interests”. (m) Income tax Income tax for the year is calculated based on the taxable profit of the Company according to the applicable tax rules and, where significant, includes deferred taxation. Where significant, deferred taxes are computed based on the liability method, and corresponds to timing differences between the amounts of assets and liabilities for accounting and for tax purposes. Deferred tax assets and liabilities are computed and valued annually using the tax rates enacted or substantively enacted to be in force when the timing differences revert. Deferred tax assets resulting from tax losses carried forward are recorded only where there is reasonable expectation of sufficient future taxable profits to use them.

3

(n) Provisions Provisions are recorded at the amounts necessary to cover estimated losses. (o) Financial leasing and long-term rental Tangible fixed assets acquired under financial lease contracts and the corresponding liabilities are recorded in accordance with the financial method. Under this method the cost of the fixed assets, accumulated depreciation and the corresponding liability, computed in accordance with the contracted financial plan, are reflected in the balance sheet. In addition, interest included in the lease instalments and depreciation of the fixed assets, calculated as explained in paragraph f) above, are recognized in the statement of profit and loss for the year to which they refer. Long-term rental instalments relating to assets acquired under operational leasing are recognized as costs of the year in which they are billed by the lessor. (p) Accruals basis The Group companies record their income and expenses on an accruals basis. Under this basis, income and expenses are recognized in the period to which they relate, independently of when the amounts are received or paid. Differences between the amounts received and paid and the corresponding income and expenses are recorded in “Accruals and deferrals” accounts (Note 50.2). I - INFORMATION RELATING TO THE COMPANIES INCLUDED IN THE CONSOLIDATION AND OTHERS 1. COMPANIES INCLUDED IN THE CONSOLIDATION

HEAD OFFICE

% PARTICIPA

TION HELD

REASONS FOR

INCLUSION

3) Best Offer – Prestação de Informações pela Internet, S.A. Maia 100,00% a) Bikini, Portal de Mulheres, S.A. Maia 100,00% a) Cacetinho – Comércio Retalhista e Expl. Centros Comerciais, S.A. Matosinhos 100,00% a) 2) Cess Informática, Ltda São Leopoldo (Brazil) 100,00% a) 3) Carnes do Continente – Industria e Distribuição Carnes, S.A. Santarém 100,00% a) 4) Chão Verde - Sociedade de Gestão Imobiliária, S.A. Maia 100,00% a) 4) Citorres - Sociedade Imobiliária, S.A. Maia 100,00% a) Contifin - S.G.P.S., Lda Matosinhos 89,90% a) 3) Contibomba-Comércio e Distribuição de Combustíveis, S.A. Matosinhos 100,00% a) 4) Contimobe - Imobiliária de Castelo de Paiva, S.A. Castelo de Paiva 100,00% a) 4) Difusão - Sociedade Imobiliária, S.A. Maia 100,00% a) Efanor – Design e Serviços, S.A. Matosinhos 100,00% a) 1) 3) Efanor - Industria de Fios, S.A. Matosinhos 100,00% a) Estevão Neves - Hipermercados da Madeira, S.A. Madeira 100,00% a) 3) Fozimo - Sociedade Imobiliária, S.A. Maia 100,00% a) 4) Fozmassimo – Comércio e Indústria de Produtos Alimentares, S.A. Matosinhos 100,00% a) Global S Hipermercado, Lda. Matosinhos 100,00% a) 4) IGI – Investimento Imobiliário, S.A. Porto 100,00% a) 3) Igimo – Sociedade Imobiliária, S.A. Maia 100,00% a) 4) Iginha – Sociedade Imobiliária, S.A. Matosinhos 100,00% a) 3) Imoconti – Sociedade Imobiliària, S.A. Matosinhos 100,00% a) 4) Imoestrutura – Sociedade Imobiliária, S.A. Maia 100,00% a) 3) Imomuro – Sociedade Imobiliária, S.A. Matosinhos 100,00% a) 4) Imoponte – Sociedade Imobiliária, S.A. Maia 100,00% a) 3) Imoresultado – Sociedade Imobiliária, S.A. Maia 100,00% a) 4) Imosistema – Sociedade Imobiliária, S.A. Maia 100,00% a) 4) Informeios-Projectos e Representações, S.A. Lisboa 100,00% a) 3) Infofield – Informática, S.A. Maia 100,00% a) 1) Inventory - Acessórios de Casa, S.A. Maia 100,00% a) 3) Maxoffice – Artigos e Serviços para Escritório, S.A. Maia 100,00% a) Modelo - Distribuição de Materiais de Construção, S.A. Maia 50,00% a) Modis International Trade, S.A. Madrid (Spain) 100,00% a) 3) Modalfa – Comércio e Serviços, S.A. Maia 100,00% a) 3) Modelo.Com -Vendas por Correspondência, S.A. Maia 100,00% a) 4) Modelo – Sociedade Gestora de Participações Sociais, S.A. Maia 100,00% a) 3) Modelo Continente Hipermercados, S.A. Matosinhos 100,00% a) 3) Modelo Continente, S.G.P.S., S.A. Matosinhos PARENT PARENT 3) Modelo Continente – Operações de Retalho, S.G.P.S., S.A. Matosinhos 100,00% a) 3) Modelo Hiper Imobiliária, S.A. Maia 100,00% a) Modelo Investimentos Brasil, S.A. São Paulo (Brazil) 100,00% a) Modis - Distribuição Centralizada, S.A. Matosinhos 100,00% a) Modis, S.G.P.S., Lda Matosinhos 100,00% a) 3) Ok Bazar - Comércio Geral, S.A. Ermesinde 100,00% a) 4) Predicomercial – Promoção Imobiliária, S.A. Maia 100,00% a) 1) 3) Sempre à Mão - Sociedade Imobiliária, S.A. Matosinhos 100,00% a) 3) Sesagest – Projectos e Gestão Imobiliária, S.A. Porto 100,00% a) 3) Sociloures – Sociedade Imobiliária, S.A. Matosinhos 100,00% a) 4) Socijofra – Sociedade Imobiliária, S.A. Gondomar 100,00% a) Soflorin, B.V. Amsterdam (The Netherlands) 100,00% a) Sonae Distribuição Brasil, S.A. Porto Alegre (Brazil) 96,56% a) Sonae Retalho España – Servicios Generales, S.A. Madrid (Spain) 100,00% a) Sondis, B.V. Amsterdam (The Netherlands) 100,00% a) 4) Sondis Imobiliária, S.A. Maia 100,00% a) Sontária - Empreendimentos Imobiliários, S.A. Maia 100,00% a)

4

Sonvecap, B.V. Amsterdam (The Netherlands) 100,00% a) 3) Sport Zone – Comércio de Artigos de Desporto, S.A. Matosinhos 100,00% a) Distrifin - Comercio y Prestacion de Servicios, S.A. Madrid (Spain) 100,00% a) 3) SRE - Projectos e Consultadoria, S.A. Maia 100,00% a) 3) Todos os Dias – Comércio Ret. E Explor.Centros Comerciais, S.A. Matosinhos 100,00% a) 3) Worten – Equipamentos para o Lar, S.A. Matosinhos 100,00% a)

a) Paragraph a), Item 1, Art. 1 of Decree-Law 238/91; 1) Subsidiary included in the consolidation because it has become significant; 2) Subsidiary acquired on 3 February 2004; 3) Companies included in the “Special Regime for Taxation of Groups of Companies” of Modelo Continente, SGPS, S.A.; 4) Companies included in the “Special Regime for Taxation of Groups of Companies” of Modelo, SGPS, S.A.. 3. ASSOCIATED COMPANIES STATED BY THE EQUITY METHOD COMPANY HEAD OFFICE % PARTICIPATION HELD Star –Viagens e Turismo, S.A. Lisbon a) 50,00% Sonae Retalho Especializado, S.G.P.S., S.A. Maia 49,90% Sonaegest – Sociedade Gestora de Fundos de Investimentos, S.A. Maia 40,00% a) Accordingly with public writing signed on 30 April 2004, which produces retroactive effects since 1 January 2004, the associate companies Roteiro – Prestação de Serviços de Turismo, S.A. and Star - Viagens e Turismo, S.A. were merged into Equador - Agência de Viagens e Turismo, S.A., which changed its social denomination to Star - Viagens e Turismo, S.A. 4. ASSOCIATED COMPANIES NOT STATED BY THE EQUITY METHOD COMPANY

HEAD OFFICE

% PARTICIPATIO

N HELD

REASONS FOR

EXCLUSION Sempre a Postos - Produtos Alimentares e Utilidades, S.A. Lisbon 25,00% a) a) Paragraph 13.6.2, Appendix 1 of Decree-Law 238/91. (Not significant) 6. OTHER EQUITY INVESTMENTS COMPANY HEAD OFFICE % PARTICIPATION HELD Dispar - Distribuição de Participações, S.G.P.S., S.A. Lisbon 7,14% Insco - Insular de Hipermercados, S.A. Ponta Delgada 10,00% 7. PERSONNEL The average number of personnel of the companies included in the consolidation during the financial year 2004 was as follows: By market: By categories:

Portugal 17,810 Directors and managers 3,488Brazil 20,471 Specialized staff 894

Administrative staff 2,783Operational 31,116

Total 38,281 Total 38,281

5

III - INFORMATION ON CONSOLIDATION PROCEDURES 10. GOODWILL a) Description As explained in Note 0.g), as from 1 January 2001 Goodwill has been recorded in the caption “Other reserves”. The changes in the balance of goodwill in 2004 were as follows:

Amounts stated in Euro2004 2003 Variation

Positive 1.053.952.198 1.038.715.654 15.236.544Negative 524.162 524.162

The changes in goodwill occured in the year 2004 were as follows:

Acquisitions: Amounts in euroEstevão Neves - Hipermercados da M adeira, S.A. 9.775.158Sonae Distribuição Brasil, S.A. 5.639.482Others -183.055

Companies included in the consolidation for the first time:Efanor - Indústria de Fios, S.A. 4.959

15.236.544In 2004 the Company recorded goodwill changes as a decrease of the caption “Other reserves”. b) Calculation method: See Note 0 (g). As in previous years, only the portion of goodwill of each subsidiary attributable to the Group is considered as goodwill. The portion attributable to the minority interests is reflected as a decrease of the liability caption “Minority interests”. 11. PORTUGUESE ACCOUNTING PRINCIPLES NOT APPLIED The accounting procedure used as from 1 January 2001 to record goodwill (Note 0 g), is not in accordance with generally accepted accounting principles in Portugal, which require that goodwill be recorded in the Intangible fixed assets caption “Goodwill”, and amortized on a straight-line basis over the estimated period of recovery of the corresponding investments. Had the Company followed the accounting policy defined in the Official Chart of Accounts, shareholders’ equity and net intangible fixed assets would increase by 739,260,734 Euro, and the caption Depreciation and amortization for the year would increase by 52,567,053 Euro. 14. COMPARABILITY OF THE FINANCIAL STATEMENTS In 2004 the following companies were included from the consolidation:

Included a) Efanor – Indústria de Fios, S.A a) Inventory - Acessórios de Casa, S.A. a) Sempre à Mão - Sociedade Imobiliária, S.A. b) Cess Informática, Ltda

a) Subsidiary which became significant in 2004; b) Subsidiary acquired on 3 February 2004;

18. BASIS FOR RECORDING INVESTMENTS IN ASSOCIATED COMPANIES The Group companies included in the consolidation recorded their investments in associated companies in accordance with paragraph a), item 5.4.3.1. of schedule II of the Official Chart of Accounts (at acquisition cost).

6

IV - INFORMATION REGARDING COMMITMENTS 22. GUARANTEES GRANTED At 31 December 2004, the companies included in the consolidation had commitments for guarantees granted as follows:

amounts in EuroGuarantees granted to: Tax entities a) 36.080.134 City Councils 7.782.492 Other entities 4.638.101

Securities deposited relating to: Tax entities b) 16.248.938 City Councils 1.224.439 Other entities 74.559

a) Includes guarantees of 19,274,151 Euro relating to appeals against additional corporate income tax assessments, as well as guarantees of 16,095,113 Euro relating to VAT processes.

b) Includes securities of 6,731,156 Euro deposited, relating to appeals against additional corporate income tax assessments, as well as securities of 9,438,501Euro deposited relating to reimbursement of VAT.

No provision has been recorded for the contingent liabilities that could arise from these processes, as the Board of Directors believes that they will be resolved without loss to the Company. V - INFORMATION REGARDING ACCOUNTING POLICIES 23. VALUATION CRITERIA See Note 0. 24. EXCHANGE RATES USED FOR TRANSLATION TO EURO The exchange rates used to translate the accounts of foreign subsidiaries to Euro were the following: Real ( rate at the end of the period ) 0,27665 Balance sheetReal ( average rate ) 0,27526 Statement of profit and loss

7

VI - INFORMATION REGARDING CERTAIN CAPTIONS 27. MOVEMENT IN FIXED ASSETS The movement in fixed assets and the respective amortization, depreciation and provision accounts in 2004 was as follows:

Gross Assets Amounts in EuroChanges in

Captions Opening Increase Decrease Consolidation Transfers and ClosingBalance Perimeter Disposals (a) Balance

Intangible assets:Installation expenses 70,578,634 18,125 2,577,869 450,561 -24,339,670 44,129,781Research and development costs 54,892,018 610,841 87,631 55,590,490Industrial property and other rights 10,145,138 228,881 80,620 712,191 11,166,830Premiums paid for property occupation rights 11,105,685 11,105,685

c) Intangible assets in progress 2,500,122 3,997,676 23,880 -5,374,184 1,099,734149,221,597 4,244,682 2,601,749 1,142,022 -28,914,032 123,092,520

Tangible assets:Land and natural resources 173,843,852 11,315,830 9,392,338 22,692 9,909,608 185,699,644Buildings and other constructions 671,368,451 6,457,160 30,624,163 68,076 21,040,355 668,309,879M achinery and equipment 506,071,522 25,151,095 10,917,633 32,718,669 553,023,653Transport equipment 17,322,833 724,366 913,117 593,715 17,727,797Tools and utensils 3,814,800 46,121 77,287 676,224 4,459,858Office equipment 147,958,561 12,215,783 1,830,052 218,477 19,240,006 177,802,775Reusable containers 251,533 251,533Other tangible assets 3,758,736 17,896 -1,757,004 1,983,836

c) Tangible assets in progress 35,066,991 76,612,559 363,840 -73,626,389 37,689,321d) Advances on account of tangible assets 16,495,110 18,358,311 -7,231,604 27,621,817

1,575,952,389 150,881,225 54,136,326 309,245 1,563,580 1,674,570,113Investments:Investments in associated companies 16,374,530 -390,058 15,984,472Loans to associated companies 50,000 -50,000Investments in other companies 748,197 748,197

b) Securities and other investments 16,766,572 -38,405 16,728,167Advances on account of investments 1,513,114 6,247,372 7,760,486

35,452,413 6,247,372 -478,463 41,221,322 a) Includes 4,713,060 Euro relating to exchange rate adjustments on the amounts of foreign subsidiaries; b) The most significant amounts correspond to supplementary capital constituted by affiliated companies in associated companies; c) The most significant amounts included in the captions “Tangible and intangible assets in progress” correspond to the following

projects: Amounts in

Euro

Remodelling and expansion of stores in P ortugal 9,140,346Remodelling and expansion of stores in Brazil 1,657,069P roject s concerning new stores in P ortugal 25,485,205

36,282,620

d) The most significant amounts under the caption “Advances on account of tangible assets” refer to the following projects:

Continente and Modelo Stores Project 27,472,905

The most significant amounts of transfers and disposals under the caption “Investments” refer to companies that were included in the consolidation process (Note 14).

8

Amortization and depreciation Amounts in EuroChanges in

Captions Opening Increase Consolidation Adjustments Closingbalance Perimeter (a) balance

Intangible assets:Installation expenses 57,731,316 5,935,654 449,937 -27,117,312 36,999,595Research and development costs 37,815,192 8,230,949 610,841 -173,951 46,483,031Industrial property and other rights 2,969,074 1,717,523 80,620 747 4,767,964Premiums paid for property occupation rights 7,778,476 1,137,082 8,915,558

106,294,058 17,021,208 1,141,398 -27,290,516 97,166,148Tangible assets:Buildings and other constructions 89,471,261 15,551,230 714 -3,377,617 101,645,588M achinery and equipment 217,161,700 44,781,692 -9,123,464 252,819,928Transport equipment 13,892,792 1,317,109 -723,506 14,486,395Tools and utensils 2,791,143 506,292 -67,758 3,229,677Office equipment 63,093,164 16,931,911 218,477 -1,112,629 79,130,923Reusable containers 251,533 251,533Other tangible assets 2,190,845 24,732 -248,388 1,967,189

388,852,438 79,112,966 219,191 -14,653,362 453,531,233 a) Includes 1,379,202 Euro relating to exchange rate adjustments on the amounts of foreign subsidiaries; 36. SALES AND SERVICES RENDERED BY ACTIVITY AND GEOGRAPHICAL MARKET Consolidated net sales and services rendered in 2004, by activity and geographical market, were as follows:

a) By activity: amounts in EuroHyper and Supermarkets 3,024,442,524Specialised retail 567,699,484Other 8,033,784Total 3,600,175,792

b) By market:Portugal 2,620,806,332Brazil 979,369,460Total 3,600,175,792

38. DEFERRED TAXES Deferred tax assets and liabilities at 31 December 2004 and 2003 by the timing differences that gave rise to them, were made up as follows:

amounts in Euro

2004 2003 2004 2003Revaluation of depreciable tangible fixed assets 3,119,094 3,014,147Reinvestment of capital gains 3,808,597 3,884,157Tax losses carried forward 39,447,159 40,074,645Non tax deductible provisions and depreciation 2,826,739 1,292,500Standardisation of criteria 970,645 33,630,912 30,144,247Other 238,342

43,244,543 41,367,145 40,558,603 37,280,893

Deferred Tax LiabilitiesDeferred Tax Assets

9

The changes in deferred taxes during 2004 and 2003 were as follows: amounts in Euro

2004 2003 2004 2003Opening balance 41.367.145 39.104.911 37.280.983 29.238.283Impact on profit and loss account:

Amortization of extraordinary revaluations of depreciable tangible fixed assets -101.909 -111.691Amortization for the year of capital gains reinvested -75.559 -104.989Non tax deductable provisions 1.534.240 1.292.500Tax losses carried forward -1.135.342 1.110.354Harmonization adjustments -18.188 2.357.498 3.479.101Income tax rate variation -937.660 -2.392.201Other 64.968 -143.922 -448.234

445.678 1.465.194 2.036.108 421.986Impact on reserves:

Reinvestment of capital gainsRevaluation of depreciable tangible fixed assets 206.856 20.978Exchange rate variation 442.796 412.344 2.799 6.971Standardisation of criteria 42.933 8.030.356Tax losses carried forwardIncome tax rate variation -473.240Other 988.924 384.696 988.924 35.649

1.431.720 797.040 1.241.512 7.620.714Closing balance 43.244.543 41.367.145 40.558.603 37.280.983

Deferred Tax LiabilitiesDeferred Tax Assets

The impact on reserves of the change in exchange rates corresponds to the effect of the devaluation of the Brazilian Real in relation to 31 December 2003, and was recorded in the caption “Other reserves” (Note 0.k). As of 31 December 2004, the tax deductible losses in Group Companies that were not recorded as a deferred tax asset amounted to 181,380,000 Euro. 39. REMUNERATION OF THE MEMBERS OF THE STATUTORY BOARDS OF THE PARENT COMPANY The members of the Board of Directors of Modelo Continente, SGPS, S.A. received a global amount of 2,104,021 Euro in 2004, including 954,699 performance-based premmium. 41. LEGISLATION REGARDING THE REVALUATION OF TANGIBLE FIXED ASSETS The companies included in the consolidation revalued their tangible fixed assets in prior years in accordance with the following legislation: Decree-Laws 118B/86 of 27 May, 111/88 of 2 April, 49/91 of 25 January, 264/92 of 24 November and 31/98 of 11 February. Additionally, in 1998 the tangible fixed assets of the companies in Brazil were revalued based on inflation indices. 42. REAVALUATIONS

The overall effect of the revaluation of tangible fixed assets is as follows:

amounts in euroHistorical Revalued

Captions Cost Revaluation amounts in euro(a) (a)(b) (a)

Tangible assets:Land and natural resources 174,414,884 11,284,760 185,699,644Buildings and other constructions 539,970,752 26,693,539 566,664,291Machinery and equipment 300,141,688 62,037 300,203,725Tools and utensils 1,228,097 2,084 1,230,181Office equipment 98,667,800 4,052 98,671,852Other tangible assets 15,489 1,158 16,647

1,114,438,710 38,047,630 1,152,486,340

(a) Net of depreciation; (b) Includes all the revaluations.

10

44. CONSOLIDATED NET FINANCIAL RESULTS amounts in Euro

Expenses 2004 2003Interest expense 43,193,999 66,571,756Foreign currency exchange losses 2,810,606 2,912,208Financial discounts allowed 1,192 3,509

a) Other financial expenses 53,016,312 45,938,70199,022,109 115,426,174

Net financial result -51,334,948 -68,729,91547,687,161 46,696,259

Income 2004 2003Interest income 9,293,532 17,490,801Gain on equity investments 105,141 392,531Foreign currency exchange gains 1,722,015 2,211,546Financial discounts received 23,128,031 22,785,246Gain on disposal of short term investments 9,561,069Other financial income 3,877,373 3,816,135

47,687,161 46,696,259 a) The caption “Other financial expenses” includes basically: (i) charges for the use of automatic teller machines; (ii) expenses with

credit sales and (iii) taxes relating to financial flows in Brazil. 45. CONSOLIDATED NET EXTRAORDINARY ITEMS

amounts in EuroExpenses 2004 2003Donations 5,206,365 471,177Uncollectible debts 3,049,503 3,912,899Loss on inventories 85,424 107,299Loss on fixed assets 7,793,800 14,932,766Fines and penalties 726,117 1,042,939Increase in depreciation and provisions 8,305,988 2,024,260Prior year adjustments 6,519,863 1,387,276Other extraordinary expenses 6,100,841 6,919,797

37,787,901 30,798,413Net extraordinary items 6,617,001 -13,647,761

44,404,902 17,150,652

Income 2004 2003Tax recovery 211,425 250,839Debt recovery 4,501 4,136Gain on inventories 145,060 34,404Gain on fixed assets 5,240,237 4,122,948Contractual penalties received 37,671 632,160Decrease in depreciation and provisions 3,301,914 4,917,621Prior year adjustments 927,860 1,976,511

a) Other extraordinary income 34,536,234 5,212,03344,404,902 17,150,652

a) This caption includes an amount of 29,560,365 Euro related to recovered taxes in Brazil (mainly, Tax on the Circulation of Merchandise and Services – “ICMS-Imposto sobre a Circulação de Mercadoria e Serviços”).

46. MOVEMENT IN PROVISIONS During 2004 the changes in provisions were as follows:

amounts in EuroCaptions Opening Increase Decrease Closing

Balance (a) BalanceProvisions for doubtful accounts 18,001,892 2,979,834 1,446,971 19,534,755Provisions for risks and charges 6,775,476 12,782,770 1,854,943 17,703,303Provisions for inventories 4,700,000 5,636,473 10,336,473

29,477,368 21,399,077 3,301,914 47,574,531 a) Includes 128,687 Euro relating to exchange rate differences resulting from different exchange rates used for translating the balance

sheets and statements of profit and loss of foreign subsidiaries; subsidiaries included in consolidation for the first time in the amount of 375,264 Euro and provisions for financial investments-equity method in the amount of 3,766,647 Euro;

11

47. ASSETS USED UNDER FINANCE LEASE

amounts in Euro

Cost Accumulated NetCaptions DepreciationTangible assets:Land and natural resources 5,269,770 5,269,770Buildings and other constructions 10,304,604 949,173 9,355,431Computer hardware 10,905,664 2,232,980 8,672,684

26,480,038 3,182,153 23,297,885

The liability under these contracts is reflected in the caption "Suppliers of fixed assets" and is payable as follows:

amounts in Euro

Short term 1,748,644Medium and long term 13,094,122

14,842,766 VII - OTHER INFORMATION 50. OTHER SIGNIFICANT INFORMATION REQUIRED FOR AN UNDERSTANDING OF THE CONSOLIDATED

FINANCIAL POSITION AND CONSOLIDATED RESULTS 1) SEGMENT INFORMATION The contributions of the main segments to the consolidated Profit and Loss Account are as follows:

amounts in EuroPORTUGAL BRAZIL TOTAL

Sales and services rendered 2,620,806,332 979,369,460 3,600,175,792Depreciation and amortisation of fixed assets 75,628,445 20,505,729 96,134,174Provisions 7,999,141 601,898 8,601,039Operating Results 158,781,796 20,162,176 178,943,972Gain and loss on associated companies -1,469,126 -1,469,126Operating Cash-flow (EBITDA) 242,409,382 41,269,803 283,679,185

The contributions of the main segments to the consolidated Balance Sheet are as follows:

amounts in EuroPORTUGAL BRAZIL TOTAL

Fixed assets 1,025,320,447 262,866,127 1,288,186,574Inventories 285,395,226 102,122,540 387,517,766Other assets 366,280,641 180,907,696 547,188,337Total Assets 1,676,996,314 545,896,363 2,222,892,677

Accounts Payable 1,338,994,872 284,832,888 1,623,827,760Other Liabilities 110,360,668 32,043,192 142,403,860Total Liabilities 1,449,355,540 316,876,080 1,766,231,620

Investment in tangible and intangible fixed assets 110,979,322 44,146,585 155,125,907Financial investments - equity method 15,211,160 15,211,160Provisions for financial investments - equity method 3,766,647 3,766,647

12

2) ACCRUALS AND DEFERRALS a) Accrued Income At 31 December 2004 this caption was made up as follows:

amounts in EuroDiscounts receivable from suppliers 1,302,920Deferred tax assets (note 38) 43,244,543Accrued interest 3,582,420Other income 728,322

48,858,205 b) Deferred costs At 31 December 2004 this caption was made up as follows:

amounts in EuroRent 5,809,392Store opening costs 429,115Personnel costs 1,242,861Prepaid interest 6,567,212Professional services 1,162,742Insurance 129,920Other 1,566,499

16,907,741 c) Accrued Expenses At 31 December 2004 this caption was made up as follows:

amounts in EuroHoliday pay, holiday bonus and other remuneration 48,490,375Deferred tax liabilities (note 38) 40,558,603Local government tax 5,112,227Accrued interest 5,674,824Professional services 3,349,244Rent 3,118,895Energy 2,185,631Publicity 7,906,089Other expenses 3,456,467

119,852,355

d) Deferred income At 31 December 2004 this caption was made up of amounts received from financial institutions concerning derivatives. 3) OTHER DEBTORS – SHORT TERM As of 31 December 2004 this caption was made up as follows:

amounts in EuroSuppliers - current accounts - debit balances 25,621,107

a) Credit sales to third parties 50,301,888b) Sale of fixed assets 34,669,009

c)Special Regime for the Settlement of Debts to the Tax Authorities and Social Security (Decree-Law 248-A b)) 14,576,053Other 4,189,887

129,357,944

a) Corresponds to credit sales, basically in Brazil, by the use of predated cheques, as well as accounts receivable relating to sales paid for by credit cards, which were received from the financial institutions in the first days of January 2005;

b) This caption is related to the sale of fixed assets in the last months of 2004;

c) The caption “Other debtors” includes 14,576,053 Euro relating to taxes paid subject to appeal, the outcome of which the Board of Directors believes will be favourable to the Company;

13

4) OTHER DEBTORS / CREDITORS – MEDIUM AND LONG TERM At 31 December 2004 this caption was made up as follows:

Valores em euroDebit balances:

Judicial deposits 29,543,621Recoverable asssets - mortgage 6,834,885Outros 2,974,610

39,353,116Credit balances:

a) Judicial deposits 26,865,801

Tax on the circulation of merchandise and services ("ICMS-Imposto s/ Circulação de Mercadorias e Serviços") 111,855Other 130,342

27,107,998

a) The liability caption “Judicial deposits” corresponds basically to the estimated amounts to fulfil the judicial obligations of the Brazilian subsidiary which are considered enough to face uncertain losses on lawsuits, for which legal deposits exist (recorded under the caption “Other debtors – medium and long term”).

5) BONDS Bonds comprise:

Medium and long term

Modelo Continente / 2003 82,000,000 Modelo Continente / 2004 100,000,000 182,000,000

MODELO CONTINENTE / 99 BONDS

In June 2004 the Company reimbursed these bonds in the amount of 15,628,225 Euro.

MODELO CONTINENTE / 2003 BONDS 1,640,000 bonds – Nominal Value: 50 Euro

Maximum term: eight years. Annual interest rate: the interest rate, which is variable, is indexed to the EURIBOR 6 month rate on the second working day

preceding the interest period, with a spread of 0.75% p.a.. Interest Payment: half yearly in arrears, on 15 April and 15 October of each year.

Redemption: at par, in one payment on 15 October 2011, the maturity date of the loan. Early redemption is not possible, either by initiative of the issuer or the bondholders. MODELO CONTINENTE / 2004 BONDS 10,000,000 bonds – Nominal Value: 10 euro.

Maximum term: five years. Annual interest rate: the interest rate, which is variable, is indexed to the EURIBOR 6 month rate on the second working day

preceding the interest period, with a spread of 1.15% p.a.. Interest Payment: half yearly in arrears, on 18 March and 18 September of each year.

Redemption: at par, in one payment on 18 March 2009, the maturity date of the loan. Early redemption is not possible, either by initiative of the issuer or the bondholders.

14

6) BANK LOANS – MEDIUM AND LONG TERM These include:

a) A bank loan of 340,000,000 Euro obtained from a syndicate of banks, repayable up to 2006, bearing interest payable half yearly at normal market rates, of which 200,000,000 Euro corresponds to a “Revolving facility”. The “Revolving facility” is considered as a medium and long-term liability as the Board of Directors intends to continue using this credit facility for a period no shorter than a year. As of 31 December 2004, 270,000,000 Euro are considered as medium and long-term liabilities and 70,000,000 Euro as short-term liabilities.

b) A bank loan of 4,000,000 Euro obtained from a financial institution, repayable up to 2007, bearing interest payable half yearly at normal market rates. As of 31 December 2004, 2,800,000 Euro are considered as medium and long-term liabilities and the remaining as short-term liabilities;

c) A bank loan of 88,109,708 Reais (24,375,551 Euro), repayable up to 2009, bearing interest payable monthly at normal market rates, including of financial hedging operations to cover exchange risk.

The loan referred to in paragraph a) and their respective conditions are subordinated to the compliance with certain financial ratios relating to the consolidated financial statements of the Group. 7) STATE AND OTHER ENTITIES (ASSETS) a) Short term This caption includes 26,154,742 Euro corresponding to VAT. b) Medium and long term This caption corresponds to Tax on circulation of merchandise and services (“ICMS-Imposto s/ circulação de mercadorias e serviços”) recoverable from the Brazilian tax authorities, in accordance with legal claims by the Brazilian subsidiary. 8) TAX CONTINGENCIES The affiliated company Sonae Distribuição Brasil has tax contingencies amounting to, approximately, 20,000,000 Euro. Based on tax expert lawyers and favourable Lower Court sentences, the Board of Directors decided not to record a provision as in its opinion, no liabilities will result from it to the Company. 9) OTHER MEDIUM AND LONG TERM LOANS At 31 December 2004 this caption corresponded to a loan obtained from an external entity, which bears interest at normal market rates and is repayable in 2007. For account presentation purposes, the Company has reflected, in the accompanying balance sheet, the liability of 157,499,755 Euro net of the associated no-risk application of 27,500,000 Euro which matures on the same date as the loan. 10) BANK LOANS – SHORT TERM At 31 December 2004 this caption was made up as follows:

amounts in Euroa) Long term loans instalments to be reimbursed in less than one year 70,000,000

Overdrafts ans other operations 5,498,077Loans obtained in Brazil 81,780,383

157,278,460

a) Bank loan obtained from a syndicate of banks, bearing interest payable half yearly at normal market rates. This loan and its conditions are subordinated to the compliance with certain financial ratios relating to the consolidated financial statements of the Group.

11) PARTICIPANT AND PARTICIPATED COMPANIES - MEDIUM AND LONG TERM At 31 December 2004 this caption corresponded to a minority Shareholders loan granted to a subsidiary, bearing interest and with no defined reimbursement schedule. 12) SHARES PUT OPTION The company conceded to minority shareholders, put options over shares, which, according to contracts, represent a maximum of 52,4 million US dollars liability (approximately 38,5 million Euro).

15

51. EXPLANATION ADDED FOR TRANSLATION These financial statements are a translation of financial statements originally issued in Portuguese in accordance with generally accepted accounting principles in Portugal and the format and disclosures required by the Portuguese Official Chart of Accounts (“Plano Oficial de Contabilidade - POC”) some of which may not conform to or be required by generally accepted accounting principles in other countries. In the event of discrepancies, the Portuguese language version prevails.

STATUTORY AUDITOR’S REPORT AND AUDIT REPORT

CONSOLIDATED FINANCIAL STATEMENTS

(Translation of a report originally issued in Portuguese – Note 51)

Introduction

1. Pursuant to the applicable legislation, we hereby present our Statutory Auditor’s Report and Audit Report on the consolidated financial information contained in the Directors’ Report and the accompanying consolidated financial statements of Modelo Continente, S.G.P.S., S.A., which comprise the consolidated Balance Sheet as of 31 December 2004, that reflects a total of 2,222,892,677 Euro and shareholders’ equity of 437,801,003 Euro, including net profit of 114,415,880 Euro, the consolidated Statements of Profit and Loss by nature and by functions and the consolidated Statement of Cash Flows for the year then ended and the corresponding notes.

Responsibilities

2. The Company’s Board of Directors is responsible for: (i) the preparation of consolidated financial statements that present a true and fair view of the financial position of the companies included in the consolidation, the consolidated results of their operations and their consolidated cash flows; (ii) the preparation of historical financial information in accordance with generally accepted accounting principles and that is complete, true, up-to-date, clear, objective and licit, as required by the Securities Market Code; (iii) adopting adequate accounting policies and criteria and the maintenance of appropriate systems of internal control; and (iv) informing any significant facts that have influenced the operations, financial position or results of operations of the companies included in the consolidation.

3. Our responsibility is to examine the financial information contained in the documents of account referred to above, including the verification that, in all material respects, the information is complete, true, up-to-date, clear, objective and licit, as required by the Securities Market Code, and to issue a professional and independent report based on our examination.

Scope

4. Our examination was performed in accordance with the Technical Review/Audit Standards issued by the Portuguese Institute of Statutory Auditors, which require that the examination be planned and performed with the objective of obtaining reasonable assurance about whether the consolidated financial statements are free of material misstatement. Our examination included verifying, on a test basis, evidence supporting the amounts and disclosures in the financial statements and assessing the significant estimates, based on the judgement and criteria defined by the Company’s Board of Directors, used in their preparation. Our examination also included verification of the consolidation procedures used and application of the equity method, as well as verifying that the financial statements of the companies included in the consolidation have been appropriately examined, assessing the adequacy of the accounting principles used, their uniform application and their disclosure, taking into consideration the circumstances, verifying the applicability of the going concern concept, assessing the adequacy of the overall presentation of the consolidated financial statements, and verifying that, in all material respects, the information is complete, true, up-to-date, clear, objective and licit. Our examination also included verifying that the consolidated financial information included in the Directors’ Report is consistent with the other consolidated documents of account. We believe that our examination provides a reasonable basis for expressing our opinion.

- 2 -

Qualification

5. Up to 31 December 2000 the Group recorded goodwill arising on the acquisition of investments in group and associated companies under the caption Intangible Assets, and amortised it over the estimated period to recover the investments. In the beginning of 2001 the Group decided to change this accounting policy and adopted the different policy of recording goodwill directly in the caption Other Reserves, including the net book value of goodwill as of 31 December 2000. The accounting policy adopted as from 31 December 2000 is not in accordance with generally accepted accounting principles in Portugal. Had the Group maintained the accounting policy and amortisation periods used up to 31 December 2000 and without considering the adjustments, if any, on the transition to International Financial Reporting Standards, assets and shareholders' equity as of 31 December 2004 would increase by 739,260,734 Euro and consolidated net profit for the year then ended would decrease by 52,567,053 Euro, corresponding to amortisation of goodwill for the year ended 31 December 2004.

Opinion

6. In our opinion, except for the effect of the matter referred to in paragraph 5 above, the consolidated financial statements referred in paragraph 1 above, present fairly, in all material respects, the consolidated financial position of Modelo Continente, S.G.P.S., S.A. as of 31 December 2004 and the consolidated results of its operations and its consolidated cash flows for the year then ended, in conformity with generally accepted accounting principles in Portugal, and the financial information contained therein is, in terms of the definitions included in the Technical Review/Audit Standards referred to in paragraph 4 above, complete, true, up-to-date, clear, objective and licit.

Porto, 28 February 2005 DELOITTE & ASSOCIADOS, SROC S.A. Represented by Jorge Manuel Araújo de Beja Neves

REPORT AND OPINION OF THE STATUTORY AUDITOR

CONSOLIDATED FINANCIAL STATEMENTS

(Translation of a report originally issued in Portuguese – Note 51)

To the Shareholders of Modelo Continente, S.G.P.S., S.A. In compliance with the applicable legislation and our mandate we hereby submit our Report and Opinion which covers our work and the consolidated documents of account of Modelo Continente, S.G.P.S., S.A. for the year ended 31 December 2004, which are the responsibility of Company’s Board of Directors. We accompanied with the periodicity and scope considered adequate by us, the evolution of the operations of the Company and its principal subsidiaries and affiliated companies, the timely writing up of their accounting records and their compliance with the requirements of current legislation and their articles of association, having obtained from the Boards of Directors and personnel of Modelo Continente, S.G.P.S., S.A. and its principal subsidiaries and affiliated companies, all the information and explanations required. In performing our work, we examined the consolidated Balance sheet as of 31 December 2004, the consolidated Statements of profit and loss by nature and by functions and the consolidated Statement of cash flows for the year then ended and the accompanying notes. Additionally, we examined the consolidated Directors’ Report for 2004, prepared by the Company’s Board of Directors. As consequence of our legal examination we have issued the Statutory Auditor’s Report and Audit Report, which in paragraph 5 contains a qualification. Considering the above, in our opinion, except for the effects of the matter referred to in paragraph 5 of the Statutory Auditor’s Report and Audit Report, the consolidated financial statements referred to above and the consolidated Directors’ Report, are in accordance with the accounting, legal and statutory requirements and so can be approved by the Shareholders’ General Meeting. We wish to thank the Board of Directors and personnel of Modelo Continente, S.G.P.S., S.A., as well as the statutory boards and personnel of the group and associated companies for the assistance provided to us. Porto, 28 February 2005 DELOITTE & ASSOCIADOS, SROC S.A. Represented by Jorge Manuel Araújo de Beja Neves


ANNUAL REPORT AND ACCOUNTS

2004







1 / 4

Modelo Continente, SGPS, SA

Board of Directors’ Report

To the Shareholders,

In compliance with relevant legislation and the company’s articles of association, we hereby present

the Directors’ Report and Consolidated Financial Statements of Modelo Continente, SGPS, SA for the

year 2004. We would point out that information concerning consolidated business activity is

presented in a separate report.

Economic background

The year 2004 was a turning point in the trend of world economic growth, being particularly positive in

the USA and the main Asian economies. Although the Euro zone showed the worst performance among

the more advanced economies, growth was still positive.

Portugal’s economy grew in 2004 by around 1.3% but continued at a level less than the average of the

European community. Internal demand grew significantly, confirming the trend begun in the middle of

2002. Greater consumer confidence and the maintenance of exceptionally low interest rates appear to

have created conditions for a recovery in growth of private consumption of around 2% which was more

visible in consumer durables. Investment also grew at about the same rate and although growth did not

occur in the construction segment, overall the trend of falls in investment that have occurred over the

last few years was reversed.

Exports grew by 7% in volume, due to the accelerated growth of Portugal’s main trading partners.

However, imports grew at a faster rate so that net external demand for Portuguese goods was negative.

Average annual inflation in the year fell to 2.4% compared to 3.3% in 2003. The fall was due mainly to

a slow down in industrial equipment and food prices, offset to some extent by the significant increase in

the international price of oil as from mid April.

2 / 4

The profile of growth in Portugal in 2004 showed some worrying signs in that it was driven by

consumption and was not based on growth of productive investment and increasing exports in major

international markets.

At the structural level, 2004 was marked by fresh difficulties in controlling public expenditure and

adhering to the growth and stability pact. At the end of the year and against a background of political

instability in the country, indices of consumer and business confidence once again fell, indicating the

fragility of the economic upturn.

In Brazil, the economy grew at a rate of almost 5% compared to almost zero growth in 2003. This was

based on a strong increase in external demand that leveraged growth in other sectors of the economy.

In particular, private consumption grew in volume by around 4% driven by a fall in unemployment and a

real increase in average earnings.

The most worrying sign during the year was the inflation rate which ended the year at 7.6% due to the

increase in oil prices and the still significant impact of prices of goods and services included in the

inflation index by the government. Although the rate was below the high levels recorded in previous

years, it exceeded the goal set by the government and the IMF. To combat this trend, the monetary

authorities raised market base interest rates so that the SELIC at the end of January 2005 reached the

extremely high rate of 18.25%.

However the country appears to have public finances under control due to strong export growth that

resulted in a trade surplus. Exports have benefited from improved world economic growth on the one

hand and on the other from greater competitiveness in international markets resulting from successive

depreciations of the Brazilian Real. At present, exports are the key factor in sustaining growth.

With a more favourable economic background and having achieved the commitments the country made

to international financial institutions, the country risk factor fell, and foreign direct investment grew by

60% to an overall total of 16 thousand million US dollars.

For 2005, sustained growth in GDP is forecasted which together with falls in the inflation and interest

rates, should further improve the Brazilian economy.

3 / 4

Business activity

Throughout 2004, Modelo Continente, SGPS, SA co-ordinated the management of its subsidiaries,

following up on the economic and financial performance of the operating and other companies that

make up its portfolio.

As part of its activity and of the main business developments during the year, the main highlights were

the share capital increases of Sonae Distribuição Brasil, SA that took place in January (of 101,732,209

Euro) and December (of 26,735,014 Euro), totalling 128,467,223 Euro, entirely subscribed by Modelo

Continente, SGPS, SA. After these increases, the company’s share capital was 1,613,672,653 Brazilian

Real, with 96.56% of the share capital of the company held directly or indirectly by Modelo Continente.

Financial analysis

• Dividends

In accordance with the decision of the Shareholders’ General Meeting that took place on 30 March

2004, Modelo Continente, SGPS, SA did not distribute any dividends for the year 2003. During 2004,

the company received dividends totalling 20,665,733 Euro from its affiliated companies.

• Remuneration of main lines of credit

At the beginning of 2004, the company made a new bond issue (Modelo Continente/2004) for a five

year period. 10,000,000 bonds with a nominal value of 10 Euro each were issued on 18 March. The

first coupon of the bond issue Modelo Continente/2004 matured in September, and interest was paid

totalling 1,635,044 Euro.

In 2004, the 10th coupon of the bond issue Modelo Continente/99 totalling 192,783 Euro also

matured, as well as the 1st and 2cnd coupons of the bond issue Modelo Continente/2003 amounting to

1,213,402 Euro and 1,164,632 Euro respectively.

At the end of June, the bond issue Modelo Continente/99 was repaid, amounting to 15,628,225 Euro.

• Financial Results

The turnover of the company for the year 2004 was 20,603 million Euro, an increase of 15.6%

compared to 2003. Operating profits were 20.3 million Euro, while Profits on Ordinary Activities were

4 / 4

73.9 million Euros after net financial charges of 53.6 million Euro. Net profits for the year were 83.4

million Euro.

Outlook

In 2005, the company will follow a similar path to that of 2004, continuing to follow its strategy of

value creation. In this way, Modelo Continente, SGPS, SA through its subsidiaries will remain focused

on strengthening service levels and consolidating basic business competencies, seeking to drive

growth and profitability levels and so boosting the capability of the company to create value.

Profit Appropriation Proposal

The Board of Directors propose that the net profit for the year 2004 of 83,437,125.92 Euro, be

appropriated as follows:

Legal reserves 4,200,000.00

Retained earnings 79,237,125.92

Total 83,437,125.92

It is also proposed that Free Reserves totalling 96,781,422.08 Euro are used to cover accumulated

losses from prior years in retained earnings.

We thank our Customers, Employees, Suppliers, Banks and other entities for all their help and support

during the year.



Modelo Continente, S.G.P.S., S.A.

SECURITIES HELD BY THE MEMBERS OF CORPORATE BOARDS AND RESPECTIVE TRANSACTIONS DURING 2004

SHARES DateHeld at

31.12.2004Quantity Average Value € Quantity Average Value € Quantity

THE BOARD OF DIRECTORS

Belmiro Mendes de Azevedo Efanor Investimentos, SGPS, SA (1) 49,999,997 Imparfin, SGPS, SA (3) 150,000 Sonae, SGPS, SA 14,901

Ângelo Gabriel Ribeirinho dos Santos Paupério Sonae, SGPS, SA 4,564

Manuel José Ferreira Fontoura Sonae, SGPS, SA 73,340

Notes:(1) Efanor Investimentos, SGPS, SA Sonae, SGPS, SA 949,983,715 Pareuro, BV (2) 20,000(2) Pareuro, BV Sonae, SGPS, SA 108,820,695(3) Imparfin, SGPS, SA Sonae, SGPS, SA 4,105,273

Acquisitions Disposals

NOTE RELATING TO ARTICLE 447 OF THE COMMERCIAL COMPANY CODE ("CÓDIGO DAS SOCIEDADES COMERCIAIS")


SHAREHOLDERSNumber of shares at 31.12.2004

Sonae, SGPS, SA (1) 748,616,399

Banco Santander Totta, SGPS, SA 235,156,700

Carrefour, SA (3) 0

Notes:(1) Efanor Investimentos, SGPS, SA Sonae, SGPS, SA 949,983,715 Pareuro, BV (2) 20,000(2) Pareuro, BV Sonae, SGPS, SA 108,820,695(3) Undertaking sold on November 2004

("CÓDIGO DAS SOCIEDADES COMERCIAIS")NOTE RELATING TO ARTICLE 448 OF THE COMMERCIAL COMPANY CODE


Pursuant to paragraph e), article 8 of the Stock Exchange Commission ("Comissão do Mercado de Valores Mobiliários")Regulation 04/2004, we indicate the shareholders with qualified participations at 31 December 2004:

Shareholders Number of shares % Voting rights

Sonae, SGPS, SA 748,616,399 68.06%Imputable voting rights in accordance with art. 20 line e) of the Stock Exch. Com. (1) 330,000,000 30.00%

Total imputable 1,078,616,399 98.06%

Banco Santander Totta, SA 235,156,700 21.38%Banco Santander Central Hispano, SA 56,877,900 5.17%Santander - Fundo de Pensões CPP 19,140,000 1.74%Santander - Fundo de Pensões BTA 14,960,000 1.36%Santander - Fundo de Pensões Santander 3,865,400 0.35%

Total imputable 330,000,000 30.00%

Notes:(1) Imputable rights resulting from financial agreements with Santander Totta Group

QUALIFIED PARTICIPATIONS

euro

2004-12-31 2003-12-31

Assets Gross Depreciation Net NetAssets and provisions Assets Assets

Fixed assets: Intangible assets: Installation expenses...................................................................... 2,894,557 2,894,557 147,109 Research and development costs................................................. 33,000 22,917 10,083 21,083 Industrial property and other rights................................................ 1,408,879 707,766 701,113 1,166,667

4,336,436 3,625,240 711,196 1,334,859 Tangible assets: Transport equipment...................................................................... 19,062 19,062 Office equipment............................................................................ 14,633 9,094 5,539 8,345 Other tangible assets..................................................................... 679 679

34,374 28,835 5,539 8,345 Investments: Investments in group companies................................................... 1,336,335,643 1,336,335,643 1,208,051,475 Loans to group companies............................................................. 855,553,194 855,553,194 528,439,312 Securities and other investments.................................................. 3,583,000 3,583,000 5,472,787

2,195,471,837 2,195,471,837 1,741,963,574Current assets: Short term receivables: Clients - Current accounts............................................................. 431,749 431,749 135,924 Group companies........................................................................... 824,565,886 824,565,886 913,666,198 State and public entities................................................................. 4,555,517 4,555,517 1,358,688 Other debtors................................................................................. 3,555,250 3,555,250 2,946,518

833,108,402 833,108,402 918,107,328 Marketable securities: Other marketable securities........................................................... 136,079,991

136,079,991 Bank deposits and cash: Bank deposits................................................................................. 45,271,844 45,271,844 112,607,432 Cash in hand..................................................................................

45,271,844 45,271,844 112,607,432 Accruals and deferrals: Accrued income............................................................................. 4,192,045 4,192,045 11,097,458 Deferred costs................................................................................ 4,658,337 4,658,337 4,168,888

8,850,382 8,850,382 15,266,346Total depreciation 3,654,075

Total provisionsTotal assets 3,087,073,275 3,654,075 3,083,419,200 2,925,367,875

The Accountant,


Balance sheet as of 31 December 2004

The Board of Directors,

(Translation of a report originally issued in Portuguese - Note 49)

euro

Shareholders' Equity and Liabilities 2004-12-31 2003-12-31

Shareholders' Equity Share capital........................................................................................................... 1,100,000,000 1,100,000,000 Reserves: Legal reserve........................................................................................................ 86,000,000 86,000,000 Other reserves...................................................................................................... 1,282,309,324 1,282,309,324

Retained Earnings.................................................................................................. -176,018,548 -243,355,842 Subtotal....................................................................... 2,292,290,776 2,224,953,482

Net profit for the year.............................................................................................. 83,437,126 67,337,294

Total shareholders' equity 2,375,727,902 2,292,290,776

Liabilities: Medium and long term liabilities: Bonds: Non convertible.................................................................................................... 182,000,000 82,000,000 Bank loans.............................................................................................................. 2,800,000 4,000,000

184,800,000 86,000,000 Short term liabilities: Bonds: Non convertible.................................................................................................... 15,789,420 Bank loans.............................................................................................................. 1,230,489 59,259 Suppliers - Current accounts................................................................................ 18,825 20,894 Group companies................................................................................................... 511,360,350 519,029,841 Other shareholders................................................................................................. 158 225 Suppliers of fixed assets - Current accounts......................................................... 183,055 State and public entities......................................................................................... 5,847,240 4,804,115 Other creditors........................................................................................................ 12,822 1,133

518,469,884 539,887,942 Accruals and deferrals: Accrued expenses.................................................................................................. 4,421,414 7,189,157

4,421,414 7,189,157

Total liabilities 707,691,298 633,077,099

Total shareholders' equity and liabilities 3,083,419,200 2,925,367,875

The Accountant, The Board of Directors,


Balance sheet as of 31 December 2004

(Translation of a report originally issued in Portuguese - Note 49)

euro

Expenses

External supplies and services....................................................................... 1,162,425 2,758,096 Personnel costs: Wages and salaries:.................................................................................... 3,300,317 1,486,527 Social charges: Other............................................................................................................ 80,909 3,381,226 435,421 1,921,948

Depreciation and amortisation of fixed assets................................................ 628,070 628,070 1,189,922 1,189,922 Taxes............................................................................................................. 914,776 914,776 360,834 360,834 (A) 6,086,497 6,230,800 Interest and similar expenses: Relating to group companies........................................................................ 11,945,110 15,467,116 Other............................................................................................................ 13,127,437 25,072,547 12,054,261 27,521,377 (C) 31,159,044 33,752,177 Extraordinary expenses.................................................................................. 1,827,346 2,457,235 (E) 32,986,390 36,209,412 Income tax: Current tax................................................................................................... 2,869 2,494 Deferred tax................................................................................................. -10,142,592 -10,139,723 -16,276,932 -16,274,438 (G) 22,846,667 19,934,974 Net profit for the year..................................................................................... 83,437,126 67,337,294

106,283,793 87,272,268

Income

Services rendered.......................................................................................... 20,603,424 20,603,424 17,824,070 17,824,070

Supplementary income.................................................................................. 5,792,866 5,792,866 116 116 (B) 26,396,290 17,824,186 Gain on equity investments............................................................................ 20,665,733 6,352,140 Gain on marketable securities and other financial applications: Other............................................................................................................ 7,280,282 Other interest and similar income: Relating to group companies........................................................................ 44,789,014 48,322,768 Other............................................................................................................ 13,171,584 78,626,331 4,115,215 66,070,405 (D) 105,022,621 83,894,591 Extraordinary income..................................................................................... 1,261,172 3,377,677 (F) 106,283,793 87,272,268Summary: Operating results: (B) - (A) = 20,309,793 11,593,386 Net financial results: [(D) - (B)] - [(C) - (A)] = 53,553,784 38,549,028 Current results: (D) - (C) = 73,863,577 50,142,414 Profit before income tax: (F) - (E) = 73,297,403 51,062,856 Net profit for the year: (F) - (G) = 83,437,126 67,337,294


Statement of profit and loss by nature for the year ended 31 December 2004


2004-12-31 2003-12-31

(Translation of a report originally issued in Portugal - Note 49)

euro

2004-12-31 2003-12-31

Sales and services rendered 20,603,424 17,824,070Cost of goods sold and services rendered -3,381,228 -3,171,952

Gross margin 17,222,196 14,652,118

Other operating income 5,792,867 116Administrative expenses -1,790,495 -2,698,014Other operating expenses -783,592 -14,958

Operating results 20,440,976 11,939,262

Net financial results 32,756,867 31,851,012Gain on investments 20,665,733 5,113,513Exceptional items -566,173 2,159,069

Current results 73,297,403 51,062,856

Income tax on current results 10,139,723 16,274,438

Current profit after income tax 83,437,126 67,337,294

Net profit for the year 83,437,126 67,337,294

Earnings per share 0.08 0.06


Year ended

Statement of profit and loss by functions for the year ended 31 December 2004

(Translation of report originally issued in Portuguese - Note 49)



Statement of cash flows for the year ended 31 December 2004

(Translation of report originally issued in Portuguese - Note 49)

euro

Year ended2004-12-31 2003-12-31

OPERATING ACTIVITIES Collections from customers 17,134,311 15,518,625Payments to suppliers -739,579 -1,163,056Payments to personnel -1,957,913 -2,009,105 Cash flow generated by operations 14,436,819 12,346,464Payments/receipts of income tax 12,401,549 20,631,356Other receipts/payments relating to operating activities -246,703 4,290,710 Cash flow generated before extraordinary items 26,591,665 37,268,530Receipts relating to extraordinary items 74,621 3,447,212Payments relating to extraordinary items -11,274 Cash flow from operating activities [1] 26,666,286 40,704,468

INVESTING ACTIVITIES:Receipts relating to:Investments 33,946,230 134,260,681Tangible assetsInterest and similar income 61,239,976 54,870,053Dividends received 20,665,733 6,352,140Loans granted 2,720,406,097 4,016,569,400

2,836,258,036 4,212,052,274Payments relating to:Investments -487,637,548 -330,701,035Tangible assets -4,800Intangible assets -1,602 -1,400,000Loans granted -2,630,315,097 -3,946,724,400

-3,117,954,247 -4,278,830,235 Cash flow from investing activities [2] -281,696,211 -66,777,961

FINANCING ACTIVITIES:Receipts relating to:Loans obtained 1,425,682,900 2,117,771,994Share capital increases and share premium

1,425,682,900 2,117,771,994Payments relating to:Loans obtained -1,348,842,125 -2,057,328,404Interest and similar costs -25,197,592 -32,625,061Dividends -67 -56

-1,374,039,784 -2,089,953,521 Cash flow from financing activities [3] 51,643,116 27,818,473Variation of cash and its equivalents [4]=[1]+[2]+[3] -203,386,809 1,744,980Cash and its equivalents at the beginning of the year 248,628,164 246,883,184Cash and its equivalents at the end of the year 45,241,355 248,628,164


0- The Notes to statement of cash flows not included, are not applicable.

1- Acquisition or sales of equity investments on affiliated companies and other business activitiesParagraphs a) and b)

Non-compulsory capital in flows euro

Subsidiaries Total amount Amount paid Contibomba - Comércio e Distribuição de Combustíveis, S.A. 160,000 160,000Infofield - Informática, S.A. 33,000 33,000Modelo.Com - Vendas por Correspondência, S.A. 280,000 280,000Todos os Dias-Comércio Ret. e Expl. de Centros Comerciais, S.A. 630,000 630,000

Total 1,103,000 1,103,000

Supplementary capital reimbursement euroFiliais Total amount Amount receivedModis - SGPS, Lda 2,992,787 2,992,787

Total 2,992,787 2,992,787

2- Description of components of cash and its equivalents:euro

2004 2003

CashBank deposits 45,271,844 112,607,432Marketable securities 136,079,991Cash equivalents -30,489 -59,259

Cash and its equivalents 45,241,355 248,628,164Other cash equivalents 30,489 59,259Banks and cash in the balance sheet 45,271,844 248,687,423


Notes to the Statement of Cash Flows for the year ended 31 December 2004


- 1 -

NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2004

(Translation of notes originally issued in Portuguese – Note 49) INTRODUCTION Modelo Continente, SGPS, S.A. is a Portuguese corporation with shares listed on the Euronext Lisbon. Its head office is in Matosinhos and its principal activity is the management of investments (Note 16). The following notes are numbered in accordance with the Official Chart of Accounts. The numbers not included relate to notes that are either not applicable to the Company or not significant to the accompanying financial statements. 1. PORTUGUESE ACCOUNTING PRINCIPLES NOT APPLIED The equity method established in Portuguese Accounting Directive 9/92 was not applied in the financial

statements as the Company has prepared separate consolidated financial statements and it was considered that if that method had been applied to the non consolidated financial statements they would still not reflect a true and fair view of the net assets and operations of the Company and its subsidiaries. In addition, application of the equity method is not permitted under international accounting standards, when the Company presents consolidated financial statements.

3. VALUATION CRITERIA AND ACCOUNTING POLICIES ADOPTED The financial statements, which are based on the Company’s accounting records, were prepared on a going

concern, accruals and historical cost basis, applying the following valuation criteria and accounting policies:

a) Intangible fixed assets

Intangible fixed assets are stated at cost and amortised on a straight-line basis over a period of three years.

b) Tangible fixed assets Tangible fixed assets are stated at cost including additional purchase costs.

Depreciation of cost is provided on a straight-line monthly basis over the estimated period of useful life of each type of asset.

c) Investments Investments are recorded at cost, by lot. Loans to group companies and other loans are stated at their

nominal value. The FIFO method by lots is used in the valuation of investments sold.


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d) Debts to and from third parties Operations in foreign currency are recorded at the exchange rate as of the date considered for the operation.

Assets and liabilities expressed in foreign currencies, for which there is no exchange rate agreement, are adjusted to the exchange rate in effect on the balance sheet date. Exchange gains and losses arising from differences between the exchange rates in force on the dates of the transactions and on the date of the balance sheet are recorded as income and expenses for the year. Liabilities for which there is a fixed exchange rate agreement are recorded at the fixed exchange rate, and the exchange differences are recorded as income and expenses over the estimated period of the operation.

e) Marketable securities

Marketable securities and other treasury applications are recorded at the lower of acquisition cost, including additional purchasing expenses but excluding possible accrued income corresponding to the time elapsed, or market value.

f) Recognition of expenses and income

The Company records income and expenses on an accruals basis. Under this basis income and expenses are recognised in the period to which they relate, independently of when the amounts are received or paid. Differences between the amounts received and paid and the corresponding income and expenses are recorded in “Accruals and deferrals” accounts.

g) Income tax

Income tax for the year is calculated based on the taxable profit of the Company according to tax legislation in force and, where significant, includes deferred taxation.

Where significant, deferred taxes are calculated based on the liability method and refer to timing differences between the recognition of income and expenses for accounting and for tax purposes.

Deferred tax assets and liabilities are computed and valued annually using the tax rates enacted or substantively enacted to be in force when the timing differences revert.

Deferred tax assets resulting from tax losses carried forward are recorded only where there is reasonable expectation of sufficient future taxable profits to use them.

6. TAXES

The Company is taxed in accordance with the Special Regime for Taxing Groups of Companies (dominant company). Each company included in this regime records income tax for the year in its individual accounts in the caption “Group companies”. Where a subsidiary contributes with a tax loss, it reflects, in its individual accounts, the amount of tax corresponding to the loss to be compensated by the profits of the other companies covered by in this regime.

According to current tax legislation, tax losses can be carried forward for a period of six years after their occurrence, for deduction from taxable profits generated in that period. At 31 December 2004, the tax losses carried forward of the group of companies taxed in accordance with Special Regime for Taxing Groups of Companies, in which the Company is the dominant entity, amounted to approximately 91,445,000 Euro, the Company not having recorded the corresponding deferred tax asset.


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10. MOVEMENT IN FIXED ASSETS In 2004 the movement in fixed assets and in the related amortisation, depreciation and provision captions was as

follows:

Gross Assets

Opening Transfers Closing

Captions Balance Increase Decrease and Balance

2003.12.31 Disposals 2004.12.31

Intangible Assets:

Intallation expenses 12.071.730 -9.177.173 2.894.557

Research and development costs 33.000 33.000

Industrial Property and other rights 1.407.277 1.602 1.408.879

13.512.007 1.602 -9.177.173 4.336.436

Tangible Assets:

Transport Equipment 19.062 19.062

Office Equipment 14.633 14.633

Other Tangible Assets 679 679

34.374 34.374

Investments:

Investments in group companies 1.208.051.475 128.284.168 1.336.335.643

Loans to group companies 528.439.312 486.534.547 30.953.442 -128.467.223 855.553.194

Securities and other investments 5.472.787 1.103.000 2.992.787 3.583.000

1.741.963.574 487.637.547 33.946.229 -183.055 2.195.471.837

euro

The amount of 128,467,223 Euro in the caption “Loans to group companies” was transferred to the caption “Investments in group companies” as it corresponds to a capital increase in the company “Sonae Distribuição Brasil, S.A.”, totally realized by those loans.

An amount of 1,103,000 Euro in the caption “Securities and other investments” relates to capital non-compulsory

in flows on subsidiary companies.

The decrease of 2,992,787 Euro registered in the caption “Securities and other investments” relates to the repayment from a subsidiary of a supplementary capital.

Amortization and depreciation

Opening Transfers Closing

Captions Balance Increase Decrease and Balance

2003.12.31 Disposals 2004.12.31

Intangible Assets:

Intallation expenses 11.924.621 147.109 -9.177.173 2.894.557

Research and development costs 11.917 11.000 22.917

Industrial Property and other rights 240.610 467.156 707.766

12.177.148 625.265 -9.177.173 3.625.240

Tangible Assets:

Transport Equipment 19.062 19.062

Office Equipment 6.289 2.805 9.094

Other Tangible Assets 679 679

26.030 2.805 28.835

euro


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16. GROUP AND ASSOCIATED COMPANIES At 31 December 2004 the Company had investments in the following group and associated companies:

euro

Company Head Office % Sharehoder's Net/Profit Loss

Direct Equity

Participation

Contibomba - Comércio e Distribuição de Combustíveis, S.A. a) Matosinhos 100% 61.924 25.574

Contimobe - Imobiliária Castelo Paiva, S.A. Castelo Paiva 8,07% 163.803.910 16.837.104

Fozimo - Sociedade Imobiliária, S.A. a) Maia 100% 381.443 31.202

Igimo - Sociedade Imobiliária, S.A. a) Maia 100% 157.513 34.111

Iginha - Sociedade Imobiliária, S.A. Matosinhos 10% 1.505.413 1.038.550

Imoconti - Sociedade Imobiliária, S.A. a) Matosinhos 100% 581.926 332.155

Imomuro - Sociedade Imobiliária, S.A. a) Matosinhos 100% 273.092 111.570

Imoresultado - Sociedade Imobiliária, S.A. a) Maia 100% 327.125 7.530

Infofield - Informática, S.A. a) Maia 10% 1.183.784 -70.739

Modelo Continente - Operações de Retalho, SGPS, S.A. a) Matosinhos 100% 1.027.772.129 22.697.996

Modelo Continente Hipermercados, S.A. a) Matosinhos 46,2% 46.036.372 1.681.130

Modelo Investimentos Brasil, S.A. São Paulo - Brazil 10,97% 274.396.278 -16.434.569

Modelo, SGPS, S.A. Maia 0,15% 84.397.176 909.619

Modelo-Com - Vendas por Correspondência, S.A. a) Maia 100% 1.332.359 -974.059

Modis, SGPS, Ldª. Matosinhos 60% 1.315.466 75.268

Ok Bazar - Comércio Geral, S.A. a) Matosinhos 100% 3.697.340 738.873

Predicomercial - Promoção Imobiliária, S.A. Maia 10% 8.988.834 948.548

Sempre à Mão - Sociedade Imobiliária, S.A. a) Matosinhos 100% 39.255 -3.911

Sempre a Postos - Produtos Alimentares e Utilidades, Lda b) Lisboa 25% 1.043.089 254.749

Sesagest - Projectos e Gestão Imobiliária, S.A. a) Matosinhos 100% 46.149.332 5.312.251

Sociloures - Sociedade Imobiliária, S.A. a) Matosinhos 100% 9.593.503 -122.020

Soflorin, B.V. Amesterdam 100% 59.237.747 1.120.642

Sonae Distribuição Brasil, S.A. Porto Alegre - Brazil 34,32% 385.195.186 -12.524.877

Sonae Retalho España, S.A. Espanha 100% 2.398.487 34.586

Sondis, B.V. Amesterdam 100% 47.315.929 -10.211.103

Sonvecap, B.V. Amesterdam 100% 3.832.281 11.964

Sportzone - Comércio de Artigos de Desporto, S.A. a) Matosinhos 10% 7.869.101 2.330.805

SRE - Projectos de Consultadoria, S.A. a) Maia 100% 472.484 411.870

Todos os Dias-Comércio Ret. e Expl. de Centros Comerciais, S.A. a) Matosinhos 100% 114.761 -403.598

Worten - Equipamentos para o Lar, S.A. a) Matosinhos 10% 11.922.420 4.770.112

2004-12-31

a) Companies included in the Special Regime for Taxing Groups of Companies; b) Values accordingly with last financial year ending at 31 December 2003;

The financial statements of the companies above are included, together with the Company’s financial statements,

in the consolidated financial statements of Sonae, S.G.P.S.,S.A., with head office in Lugar do Espido, Via Norte, Maia. Likewise, the Company prepares consolidated financial statements.


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27. BONDS AND OTHER SECURITIES ISSUED BY THE COMPANY

As of 31 December 2004 this caption was made up as follows:

Bonds

Medium and long term Euro

Modelo Continente/03 82.000.000

Modelo Continente/04 100.000.000

182.000.000 MODELO CONTINENTE / 99 - BONDS In June 2004 the Company reimbursed these bonds in the amount of 15,628,225 Euro. MODELO CONTINENTE / 2003 - BONDS 1,640,000 bonds – Nominal Value: 50 Euro

Maximum term: eight years. Annual interest rate: the interest rate, which is variable, is indexed to the EURIBOR 6 month rate on the second

working day preceding the interest period, with a spread of 0.75% p.a. Interest Payment: halfyearly in arrears, on 15 April and 15 October of each year.

Redemption: at par, in one payment on 15 October 2011, the maturity date of the loan. Early redemption is not possible, either by initiative of the issuer or the bondholders.

MODELO CONTINENTE / 2004 - BONDS 10,000,000 – Nominal Value: 10 Euro

Maximum term: five years. Annual interest rate: the interest rate, which is variable, is indexed to the EURIBOR 6 month rate on the second

working day preceding the interest period, with a spread of 1.15% p.a. Interest Payment: halfyearly in arrears, on 18 March and 18 September of each year.

Redemption: at par, in one payment on 18 March 2009, the maturity date of the loan. Early redemption is not possible, either by initiative of the issuer or the bondholders.

29. ACCOUNTS PAYABLE OVER 5 YEARS At 31 December 2004 there are bonds issued with reimbursement over five years in the amount of 82,000,000

Euro (Note 27). 31. FINANCIAL COMMITMENTS NOT INCLUDED IN THE BALANCE SHEET

At 31 December 2004 the financial commitments not included in the balance sheet were as follows:

Operational leases instalments not yet due (principal) – 108,988 Euro.


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32. GUARANTEES GRANTED At 31 December 2004 the Company had responsibilities for guarantees granted as follows:

In favour of: euro

Guarantees:

Matosinhos Tax department 1.432. 049

Cascais Tax department 123. 606

Amadora Tax department 1. 995

Tax department 15.919. 316

Securities:

Cascais Tax department 79. 280 No provision has been recorded for the processes for which guarantees have been given, as the Board of

Directors expects them to be resolved with no liability to the Company. 36. SHARE CAPITAL At 31 December 2004 share capital consisted of 1,100,000,000 non-materialised ordinary bearer shares

of 1 Euro each. 37. CORPORATE ENTITIES HOLDING 20% OR MORE OF THE SHARE CAPITAL At 31 December 2004 the following entities held more than 20% of the share capital:

Entity % Sonae, S.G.P.S., S.A. 68,06 Banco Santander Totta, S.A. 21,38

40. MOVEMENT IN EQUITY CAPTIONS The movement in the equity captions in 2004 was as follows:

euro

Captions Opening Closing

Balance Increase Decrease Transfers Balance

Share Capital 1.100.000.000 1.100.000.000

Reserves:

Legal reserve: 86.000.000 86.000.000

Other reserves: 1.282.309.324 1.282.309.324

Retained earnings -243.355.842 67.337.294 -176.018.548

Net Profit/Loss 67.337.294 83.437.126 -67.337.294 83.437.126

2.292.290.776 83.437.126 2.375.727.902

As decided at the Shareholders’ General Meeting held on 30 March 2004, net profit for the year 2003 was transferred to Retained Earnings.


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43. REMUNERATION OF THE MEMBERS OF THE CORPORATE BOARDS The remuneration of the members of the Company’s Corporate Boards during 2004 was as follows:

Euro Board of Directors 1.876.563

44. SERVICES RENDERED

Services rendered correspond to amounts invoiced for services rendered to companies of the Modelo Continente,

SGPS, SA Group in Portugal. 45. NET FINANCIAL RESULTS At 31 December 2004 the net financial results were as follows:

euro

Expenses 2004-12-31 2003-12-31

Interest expense 23.288.290 26.869.084

Foreign currency exchange losses 32

Other financial expenses 1.784.225 652.293

Net financial results 53.553.784 38.549.028

78.626.331 66.070.405

Income 2004-12-31 2003-12-31

Interest income 48.399.456 59.718.265

Gains on equity investments 20.665.733 6.352.140

Foreign currency exchange gains 63

Gain on disposal of short term investments 9.561.069

Other financial income 10

78.626.331 66.070.405

The amount of 9,561,069 Euro accounted in “Gain on disposal of short term investments” results from the selling of Marketable Securities.


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46. NET EXTRAORDINARY ITEMS At 31 December 2004 the net extraordinary results were as follows:

euro

Expenses 2004-12-31 2003-12-31

Losses on fixed assets 2.445.961

Fines and penalties 9.976

Prior year adjustments 1.298

Other extraordinary expenses 1.827.346

Net extraordinary items -566.174 920.442

1.261.172 3.377.677

euro

Income 2004-12-31 2003-12-31

Gain on fixed assets 1.207.334

Prior year adjustments 4.536 3.024

Other extraordinary income 1.256.636 2.167.319

1.261.172 3.377.677

The amount of 1,827,346 Euro reflected in caption “Other extraordinary expenses” corresponds to a 2003 excess estimate of the deferred tax asset.

The amount of 1,256,636 Euro accounted in caption “Other extraordinary income” 1,186,552 Euro corresponds to

a 2003 excess of tax estimate. 47. INFORMATION REQUIRED BY LAW Art 5, item 4 of Decree-Law 318/94 During 2004 shareholders’ loan contracts were entered into with the following companies: Contibomba – Comércio e Distribuição de Combustível, S.A. Imoconti – Sociedade Imobiliária, S.A. Imomuro – Sociedade Imobiliária, S.A. Imoresultado – Sociedade Imobiliária, S.A. Modelo Continente - Operações de Retalho, S.G.P.S., S.A. Modelo Continente Hipermercados, S.A. Modelo.Com – Vendas por Correspondência, S.A. OK Bazar - Comércio Geral, S.A. Predicomercial – Promoção Imobiliária, S.A. Sesagest – Projectos e Gestão Imobiliária, S.A. Sociloures – Sociedade Imobiliária, S.A. Soflorin, B.V. Sonae Distribuição Brasil, S.A. Sondis, B.V. Sport-Zone – Comércio e Artigos de Desporto, S.A. Worten – Equipamentos para o Lar, S.A.


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During 2004 short-term treasury loan contracts were entered into with the following companies: Bikini – Portal de Mulheres, S.A. Carnes do Continente – Indústria e Distribuição de Carnes, S.A. Efanor - Design e Serviços, S.A. Efanor - Indústria de Fios, S.A. Fozimo – Sociedade Imobiliária, S.A. Iginha – Sociedade Imobiliária, S.A. Imoconti – Sociedade Imobiliária, S.A. Imomuro – Sociedade Imobiliária, S.A. Imoresultado – Sociedade Imobiliária, S.A. Infofield – Informática, S.A. Inventory – Acessórios de Casa, S.A. Max-Office – Artigos e Serviços para Escritório, S.A. Modelo Continente Hipermercados, S.A. Modelo Hiper - Imobiliária, S.A. Modelo.Com – Vendas por Correspondência, S.A. Modis – Distribuição Centralizada, S.A. Modis, S.G.P.S., Lda OK Bazar - Comércio Geral, S.A. Sempre à Mão – Sociedade Imobiliária, S.A. Sesagest – Projectos e Gestão Imobiliária, S.A. Sociloures – Sociedade Imobiliária, S.A. Sonae, S.G.P.S., S.A. Sport-Zone – Comércio e Artigos de Desporto, S.A. Worten – Equipamentos para o Lar, S.A. Todos os Dias – Comércio Retalhista e Exploração de Centros Comerciais, S.A.


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At 31 December 2004 the receivable balances were as follows: Loans granted

euros

COMPANIES Closing

Balance

Contibomba - Comércio e Distribuição de Combustíveis, S.A. 247.000

Fozimo – Sociedade Imobiliária, S.A. 2.362.000

Igimo – Sociedade Imobiliária, S.A. 750.000

Imoconti – Sociedade Imobiliária, S.A. 20.605.000

Imomuro - Sociedade Imobiliária, S.A. 4.123.000

Imoresultado – Sociedade Imobiliária, S.A. 368.000

Modelo.Com - Vendas por Correspondência, S.A. 1.742.998

Modelo Continente - Operações de Retalho, SGPS, SA 30.767.000

Modelo Continente Hipermercados, S.A. 533.849.597

Ok Bazar - Comércio Geral, SA 14.667.000

Predicomercial - Promoção Imobiliária, S.A. 10.372.677

Sempre à Mão - Sociedade Imobiliária, SA 52.000

Sesagest - Projectos e Gestão Imobiliária, S.A. 49.613.000

Sociloures - Sociedade Imobiliária, S.A. 9.543.000

Sondis, B.V. 310.091.591

Soflorin, B.V. 37.591.330

Sonae Retalho España, S.A. 511.002

Sportzone - Comércio de Artigos de Desporto, S.A. 11.942.000

Todos os Dias - Comércio Ret. e Expl. de Centros Comerciais, S.A. 1.552.000

Worten - Equipamentos para o Lar, S A. 130.198.000

1.170.948.195

The current asset caption “Group companies” includes: (i) 448,183,235 Euro relating to accounts receivable from the sale of investments in 2002; (ii) 24,453,847 Euro corresponding to interest not yet paid; (iii) the amount of 12,731,377 Euro corresponding to income tax of the companies taxed in accordance with the Special Regime for Taxing Groups of Companies; (iv) the amount of 23,802,426 Euro relative to accounts receivable from Group companies for services rendered.

At 31 December 2004 the payable balances were as follows:

Loans obtained – short term:

euro

COMPANIES Closing

Balance

Modelo, S.G.P.S., S.A. -504.088.000

Modis, SGPS, Ldª. -1.278.000

Modelo Hiper - Imobiliária, S.A. -2.515.000

SRE - Projectos de Consultoria, S.A. -455.000

-508.336.000 The short term liabilities caption “Group Companies” includes an amount of 3,024,350 Euro corresponding to

income tax for the year of the companies taxed in accordance with the Special Regime for Taxing Groups of Companies to be received from the dominant company.


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48. OTHER INFORMATION

a) Special Regime for Taxing Groups of Companies Following the procedures adopted in the previous year, consolidated financial statements are prepared for group

corporate income tax purposes, covering the directly owned subsidiaries marked a) in Note 16.

b) Bank Loans

The short term caption includes a financing operation with redemption on 2005. The medium and long-term caption includes a financing operation with redemption on 2006 and 2007.

c) Other Debtors

The caption “Other Debtors” includes approximately 2,650,000 Euro relating to taxes claimed against tax authorities. The Board of Directors believes that the claims will be decided in favour of the Company.

d) Accruals and Deferrals

The caption “Accrued Income” corresponds mainly to periodification of receivable interests.

The caption “Accrued Expense” corresponds mainly to periodification of payable interests and remunerations.

The caption “Deferred Expense” corresponds to the periodifications of “Modelo Continente/03” and “Modelo Continente/04” bond commissions. These are going to be accounted for on a straight-line basis during the bond’s useful life.

49. NOTE ADDED FOR TRANSLATION

The accompanying financial statements are a translation of financial statements originally issued in Portuguese in accordance with generally accepted accounting principles in Portugal and the disclosures required by the Portuguese Chart of Accounts, some of which may not conform with or be required by generally accepted accounting principles in other countries. In the event of discrepancies the Portuguese language version prevails. The Accountant, The Board of Directors


CORPORATE BOARDS BOARD OF DIRECTORS Engº. Belmiro Mendes de Azevedo (President) Dr. Nuno Manuel Moniz Trigoso Jordão Engº. Ângelo Gabriel Ribeirinho dos Santos Paupério Dr. Fernando Sérgio Maia Rebelo Engº. Manuel José Ferreira Fontoura Dr. José Manuel Alves Elias da Costa Dr. Luis Filipe Campos Dias de Castro Reis ALTERNATE STATUTORY AUDITOR IN FUNCTIONS Deloitte & Associados, SROC, SA, represented by Dr. Jorge Manuel Araújo de Beja Neves – Statutory Auditor BOARD OF THE SHAREHOLDERS’ GENERAL MEETING Dr. Carlos Manuel Teixeira Osório de Castro - President Drª. Alice de Assunção Castanho Amado - Vice-President Dr. António Manuel Ramos de Oliveira - Secretary SALARY COMMITEE Sonae, SGPS, SA, represented by Prof. Dr. José Manuel Trindade Neves Adelino Engº. Bruno Walter Lehmann COMPANY SECRETARY Drª. Alice da Assunção Castanho Amado - Secretary Drª. Júlia Maria Moreira da Silva Santos – Alternate Secretary

STATUTORY AUDITOR’S REPORT AND AUDIT REPORT

NON CONSOLIDATED FINANCIAL STATEMENTS

(Translation of a report originally issued in Portuguese – Note 49) Introduction 1. Pursuant to the applicable legislation, we hereby present our Statutory Auditor’s Report and

Audit Report on the financial information contained in the Directors’ Report and the accompanying financial statements of Modelo Continente, S.G.P.S., S.A. for the year ended 31 December 2004, which comprise the Balance Sheet as of 31 December 2004, that reflects a total of 3,083,419,200 Euro and shareholders’ equity of 2,375,727,902 Euro, including a net profit of 83,437,126 Euro, the Statements of Profit and Loss by nature and by functions and the Statement of Cash Flows for the year then ended and the corresponding notes.

Responsibilities 2. The Company’s Board of Directors is responsible for: (i) the preparation of financial statements

that present a true and fair view of the financial position of the Company, the results of its operations and its cash flows; (ii) the preparation of historical financial information in accordance with generally accepted accounting principles and that is complete, true, up-to-date, clear, objective and licit, as required by the Securities Market Code; (iii) adopting adequate accounting policies and criteria and the maintenance of an appropriate system of internal control; (iv) informing any significant facts that have influenced its operations, financial position or results of operations.

3. Our responsibility is to examine the financial information contained in the documents of account

referred to above, including the verification that, in all material respects, the information is complete, true, up-to-date, clear, objective and licit, as required by the Securities Market Code, and issue a professional and independent report based on our examination.

Scope 4. Our examination was performed in accordance with the Technical Review/Audit Standards

issued by the Portuguese Institute of Statutory Auditors, which require that the examination be planned and performed with the objective of obtaining reasonable assurance about whether the financial statements are free of material misstatement. Our examination included verifying, on a test basis, evidence supporting the amounts and disclosures in the financial statements and assessing the significant estimates, based on the judgment and criteria defined by the Company’s Board of Directors, used in their preparation. Our examination also included assessing the adequacy of the accounting principles used and their disclosure, taking into consideration the circumstances, verifying the applicability of the going concern concept, assessing the adequacy of the overall presentation of the financial statements, and verifying that, in all material respects, the information is complete, true, up-to-date, clear, objective and licit. Our examination also included verifying that the financial information included in the Directors’ Report is consistent with the other documents of account. We believe that our examination provides a reasonable basis for expressing our opinion.

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Opinion 5. In our opinion, the financial statements referred in paragraph 1 above, present fairly, for the

purposes explained on paragraph 6 below, in all material respects, the financial position of Modelo Continente, S.G.P.S., S.A. as of 31 December 2004 and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles in Portugal, and the information contained therein is, in terms of the definitions included in the Technical Review/Audit Standards referred to in paragraph 4 above, complete, true, up-to-date, clear, objective and licit.

Emphasis 6. The financial statements mentioned in paragraph 1 above relate to the non-consolidated activity of

the Company and were prepared for approval and publishing in compliance with applicable legislation. As mentioned in note 3.c) investments in subsidiaries and associated companies are stated at the lower of cost or realisable value being this calculated based on financial forecasts. The Company will prepare and present, in compliance with applicable legislation, consolidated financial statements as of 31 December 2004 that better reflect the financial position and results of the operations of the Company and its subsidiaries and associated companies.

Porto, 10 February 2005 DELOITTE & ASSOCIADOS, SROC, S.A. Represented by Jorge Manuel Araújo de Beja Neves

REPORT AND OPINION OF THE STATUTORY AUDITOR

NON CONSOLIDATED FINANCIAL STATEMENTS

(Translation of a report originally issued in Portuguese – Note 49) To the Shareholders of Modelo Continente, S.G.P.S., S.A. In compliance with the applicable legislation and our mandate we hereby submit our Report and Opinion which covers our work and the non consolidated documents of account of Modelo Continente, S.G.P.S., S.A. (“the Company”) for the year ended 31 December 2004, which are the responsibility of the Company’s Board of Directors. We accompanied with the periodicy and scope considered adequate by us, the evolution of the operations of the Company, the timely writing up of its accounting records and its compliance with the requirements of the law and of its articles of association, having obtained from the Board of Directors and personnel of the Company all the information and explanations required. In performing our work, we examined the Balance Sheet as of 31 December 2004, the Statements of Profit and Loss by nature and by functions and the Statement of Cash Flows for the year then ended and the corresponding notes. Additionally, we examined the Directors’ Report for the year 2004 and the proposal for appropriation of the net profit for the year. As a consequence of our legal examination we have issued the Statutory Auditor’s Report and Audit Report, which contains an emphasis in its paragraph 6. In our opinion and considering the matter referred to in paragraph 6 of the Statutory Auditor’s Report and Audit Report, the financial statements referred to above and the Directors’ Report, including the proposal included therein, are in accordance with the accounting, legal and statutory requirements and so can be approved by the Shareholders’ General Meeting. We wish to thank the Board of Directors and personnel of the Company for the assistance provided to us. Porto, 10 February 2005 DELOITTE & ASSOCIADOS, SROC S.A. Represented by Jorge Manuel Araújo de Beja Neves

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