Modelo Continente, S.G.P.S., S.A. - CMVMweb3.cmvm.pt/sdi2004/emitentes/docs/fsd5851.pdf · As a...

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Modelo Continente, S.G.P.S., S.A. Directors’ Report

To the Shareholders, In compliance with relevant legislation and the company’s articles of association, we hereby present the Directors’ Report and Accounts for the consolidated activity of Modelo Continente, SGPS, SA for 2002.

Background to the company’s business

• Economic situation

The beginning of the new century will certainly not be remembered for world economic growth, the strength of the financial markets or business confidence. The repercussions of the implosion of the “new economy”, the financial scandals, as well as the tragic events of 11 September and the resulting war in Afghanistan in 2002, have led business and confidence indices to reach their lowest historic levels ever.

In addition, the increased risk of a new military conflict in the Middle East has led to a further fall in confidence, increased instability in the financial markets and a significant increase in the price of oil, impacting the main driving forces of the world economy, which in 2002 grew less than even the most conservative forecasts.

This negative situation was reflected in business activity in Portugal, adversely affecting external demand, as well as consumer confidence and the business environment in the country. The economic environment was also affected by relocation of several manufacturing plants to more competitive cost areas in the world, as well as the government’s efforts to reduce public expenditure and increase tax receipts. This resulted in an immediate increase in unemployment, which, at a rate of 6.2% in December, was the highest in the last 5 years showing a very negative trend especially in the last quarter of the year.

This situation resulted in a modest increase in real terms of 0.5% in GDP due to a slowing down of all the major economic indicators, in particular a sharp fall in investment. The latter is even more damaging since it hinders the process of Portugal’s convergence to reach the economic levels of other European Union countries, which is dependent on a major improvement in education levels and the growth of fixed capital.

In a world environment of instability, the emerging economies, especially those of Latin America, were also severally affected.

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In Brazil particularly, the year was marked by expectations concerning the results of the presidential elections and uncertainties regarding the direction of the new government which affected the already low level of confidence of consumers and investors.

This situation once again affected the Real, which in the last 3 years has lost more than 60% of its value compared to the Euro. The Central Bank of Brazil was forced to successively increase interest rates, which currently exceed 26%. These measures can be justified by the government as a means of attracting funds to finance the Current Account deficit (in an international market marked by shortages of liquidity) and to keep inflation within levels agreed with the IMF.

This major increase in interest rates has obviously had an adverse affect on available income and business activity, which have also been impacted by the high levels of taxation. Despite these difficult conditions, Brazilian GDP had real growth of 1.5% in 2002, benefiting from strong external demand due to exchange rate devaluation, which improved the country’s competitiveness.

However, devaluation of the currency has meant increased inflationary pressure through the cost of imported goods. The rate of inflation in 2002 was 13%, equal to an increase of 5 p.p. compared to 2001.

The first signs in 2003 would indicate an improvement in confidence of the Brazilian consumer and the feeling that the Government is determined to confront the main weaknesses in the economy and implement the long awaited structural reforms, which are vital for the sustained development of the country.

• Market Conditions

The stagnant economy and major uncertainty have clearly impacted retail activity, since they have affected consumer disposable income and expectations regarding trends in the medium term. In such a situation, and after a period of aggressive internationalization and portfolio diversification, the principal operators in the sector have concentrated their efforts on consolidating and rationalizing their operations.

Portugal also felt the effects of lower growth in consumption, the retail trade operators being limited further by the freeze on new licenses granted to open commercial units of significant size.

In spite of this limitation, installed capacity of the modern retail market increased by approximately 65,000 m2, reflecting growth of around 7% since the beginning of the year. On the other hand, demand, measured by total consolidated sales of the main modern retail operators, only grew at a rate close to inflation, a clear sign of the increased competition that the Portuguese market has seen over recent years.

Against a background of instability, the rate of expansion of installed capacity of the Brazilian market, was significantly lower than in previous years, the majority of operators concentrating their efforts on rationalizing

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their stores – resulting in the closing down of more than 100,000 m2. The overall net change in the market was only slightly over 50,000 m2, which is symptomatic of the difficulties that the sector is undergoing as a result of the economic situation, in particular, the high interest rates referred to earlier.

As in the two prior years and according to first estimates for 2002, the ten largest Brazilian retail operators lost ground in terms of the total sales of the Brazilian Supermarket Association, meaning that the market is resistant to moving towards the degree of concentration seen in more developed countries.

Main Strategic Guidelines Lower consumer expectations and increased market volatility have slowed growth, both organic and by acquisition of the principal world retailers. This situation has re-focused the main concerns of retailers, to enhancing the value proposal to customers and rationalising critical business processes. In Portugal, besides the weakness of the Portuguese economy throughout 2002, the administrative restrictions imposed on modern retail trade and therefore to Modelo Continente had a negative impact on the growth of the retail distribution. Despite its many promises, in 2002 the government did not revise the licensing law for commercial units of significant size, which, in its current text recommends freezing authorizations for licenses to install food-based establishments. For this reason the company concentrated on expansion in the non food-based sector while consolidating its marketing presence and fine tuning its strategic position. As a result all of the Group’s formats are a reference for the Portuguese consumer in their own sector. Also in the e-commerce area, the results have been very encouraging, showing growth rates above the market average and placing Modelo Continente in a leadership position in online commerce among operators in Portugal. Modelo Continente has closely followed major domestic market trends, in order to find new development opportunities. Thus, at the end of 2002, a partnership was established with Sonae Turismo, through acquisition of a 50% shareholding in Roteiro - Prestação de Serviços de Turismo, S.A.. As a result, Modelo Continente, SGPS, SA will increase its portfolio of stores by a total of 32 new units, that in 2002 had turnover of 29 million Euro. In this way Modelo Continente enters a new business with strong synergies in terms of value offered to the final customers and with the capacity to stimulate traffic among the company’s businesses.

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The limited opportunities for growth of food formats allowed Modelo Continente to focus, throughout the year, on improving value proposal to customers, and rationalising and increasing the efficiency of its business processes. At the beginning of the year the company successfully introduced the Euro, bringing to an end a period of significant development of information systems and employee training. In addition, Modelo Continente continues to invest in new management support systems, based on the most advanced technology, which will improve and strengthen efficiency. Also the company in Portugal extended and modernised its logistic infrastructure to increase internal productivity and the standard of services provided to stores. However, the main strategic priority of Modelo Continente continued to be its focus on the customer. Customers loyalty and satisfaction were the slogans used to launch a wide-ranging project across the whole company. It has already led to the implementation of concrete plans and actions strengthening the commitment to quality and service. In Brazil the year 2002 was one of caution in managing its investment plan due to the instability of the Brazilian economy, which led to slower growth in the opening of new stores. This instability was reflected in a sharp devaluation of the Real and an increase in interest rates resulting in reduced demand. Despite this negative backdrop, Brazil continues to be a valid option growth and the outlook is favourable for developing a structured retail operation building from the regional markets in the Southern states of the country, where Modelo Continente is the clear market leader. Therefore, the current expansion slowdown has not lessened efforts to modernise and rationalise the business. Special note should be made of investments made in refurbishing stores and the introduction of new non food format units. The encouraging results by the Big Electroelectrónico units have led to the launch of the Hello brand name specialising in apparel sales. Once again, Modelo Continente has given priority to taking advantage of synergies from traffic generated by the food-based stores and to strengthening the value proposal to the customer. After a period of rapid growth through acquisitions, the year 2002 ended another phase to consolidate and standardise the organisational model. Despite the big differences between the Portuguese and Brazilian markets, internal development projects in Brazil were also guided by three key objectives: the focus of the company on customers, maximising their satisfaction and loyalty; acting to rationalise and improve critical business processes; and the training and qualification of human resources. In the context of training, a special mention should be made of the Varejo School.

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In 2001 Modelo Continente strengthened its capital structure by significantly extending bank debt maturity dates. In 2002 this work continued through a sustained reduction of debt and the increase of its share capital by 100 million Euro to face the challenges and conditions of the markets in which it operates. Operations Review Consolidated

The particularly difficult market conditions which, in the case of Portugal were further affected by the freeze on new licences granted to install units of significant size and, in the case of Brazil, by the climate of major political instability, were inevitably reflected in Modelo Continente’s operations throughout 2002. The sharp devaluation of the Brazilian Real of around 21% further added to these difficulties. Thus, the consolidated turnover of Modelo Continente, S.G.P.S., S.A. in 2002 amounted to 4,069 million Euro, equal to a decrease of 6% compared to 2001, due essentially to the devaluation of the Real to the Euro during the year. On a constant exchange rate basis, the company’s turnover increased by over 2%. Modelo Continente’s consolidated cash flow in 2002 totalled to 296 million Euro, equal to 8.4% of net sales. This was a decrease of 37 million Euro over 2001 and reflects the smaller contribution from Brazilian operations.

At the end of the year, after an increase of around 25,000 m2 in sales area equal to 25 new stores, and efforts to refurbish and rationalise a significant number of stores in Brazil, Modelo Continente ended the year with 343 stores and a sales area in excess of 860,000 m2. The company therefore has a balanced and varied portfolio at different stages of maturity and operational efficiency, employing a dedicated work force of 36,000 employees. Portugal Gross sales in Portugal totalled 2,798 million Euro, equal to an increase of 5% over 2001. This was the result of an increase of 6% in sales of the company’s formats and was impacted by the exclusion of Expedis, a micro-logistics company, from consolidation in 2002, as a result of its sale to the GCT Group.

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Consolidated operating cash flow in Portugal amounted to 242 million Euro, equal to 9.8% of net sales, a notable increase of 0.3 p.p. compared to 2001. Food formats Gross turnover of food-based formats totalled 2,306 million Euro, equal to an increase of 3% over 2001, after exclusion of Expedis. The Continente, Modelo and Modelo Bonjour group of stores had an increase of 4% in turnover, confirming once again their success with consumers and strengthening their leadership position in the Portuguese market. The food-based formats had consolidated operating cash flow of 202 million Euro, increasing their respective operating profitability by around 0.2 p.p. in relation to the preceding year, to a ratio of 9.9% of net sales. This very positive performance has resulted from successive increases in productivity and operating efficiency, to which all the investments the company has made over the last few years have contributed. Non food formats Non food-based formats had consolidated gross sales of 492 million Euro, equal to an increase of 17% over 2001, in a period once again marked by the expansion of these stores in Portugal, stimulated by their increasing acceptance by target consumers. As a result of this very positive performance, consolidated operating cash flow of these stores amounted to 40 million Euro. This corresponds to an increase of 26%, and increased the ratio over net sales by around 0.8 p.p. to 9.6%. Brazil In a market marked by major political instability and high interest rates, the company’s turnover in Brazil in 2002 amounted to approximately 3.4 thousand million Reais, a level similar to 2001. As a result of depreciation of the Real of around 21% during the year, the contribution of the Brazilian market to the consolidated gross sales of the company was 1,271 million Euro, 23% lower than in 2001. After the completion of a merger process of 7 companies and a fast organic expansion over the last 3 years, 2002 was one of a temporary halt to the company’s expansion programme. This allowed extra effort to be made to modernise and rationalise stores. Efforts were also made to improve the commercial business processes and logistics operations.

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Devaluation of the Real in relation to the Euro, together with very aggressive competition felt especially in the São Paulo market, as well as the significant changes implemented and the lower rate of expansion, impacted the operating cash flow contribution of this operation that totalled 54 million Euro. This equals 5.0% of net sales and is a decrease of 2.7 p.p. compared to 2001. Recent actions implemented to improve the operation, which do not have an immediate impact, have the potential of improving the company’s future results in the Brazilian market. Financial review Operations Consolidated net sales of Modelo Continente amounted to 3,537 million Euro, equal to a decrease of 6% and was strongly affected, as explained earlier, by depreciation of the Real during the period. Consolidated operating profit for the year totalled 185 million Euro, equal to 5.2% of net sales, and is 43 million Euro less than in 2001. Profits from Ordinary Activities were 107 million Euro, equal to 3.0% of net sales, after net financial charges of 78 million Euro, which represent 2.2% of net sales. Net consolidated profit of Modelo Continente for 2002 amounted to 97 million Euro. Net consolidated profit, after minority interests, exceeded 100 million Euro. Although this is a fall of 30 million Euro compared to 2001, this level of profit is considered to be very positive considering the adverse external situation and fall in the contribution of the Brazilian operation due to the exchange rate depreciation. As in 2001, goodwill was written off to reserves. If this write off had not taken place, fixed assets and shareholders’ funds as at 31 December 2002 would have been higher by 763 million Euro and depreciation for the year by 48 million Euro. During the same period, investment in fixed assets in Modelo Continente totalled approximately 120 million Euro, which is significantly less than in recent years. This reduction results from decisions made concerning the company’s expansion plan that were influenced by weak consumer demand, as well as the serious barriers to expansion of the modern retail distribution sector in Portugal, and the climate of instability and the high interest rates in Brazil.

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As a result of the significant cash generated, there was a sustained fall in debt levels and at the end of the year, net debt amounted to 690 million Euro, which includes the cash received from the capital increase made at the end of the year. Capital structure Modelo Continente continues to have a high cash generation capacity, which is reflected in the reduction of the net debt level in recent years, despite investment in excess of 880 million Euro by the company over the last 3 years. However, depreciation of the Brazilian Real in 2002 had a significant impact on the level of the company’s equity, which reached a level close to the minimum desirable to face the challenges and constraints of the markets in which the company operates. This resulted in the Board of Directors deciding to increase the capital of Modelo Continente, S.G.P.S., S.A.. Accordingly, under the terms of the authorisation given at the Shareholders’ Extraordinary General Meeting held on 13 November 2000 and formalised by public deed on 27 December 2000, the Board of Directors decided on 29 October 2002 to increase the company’s share capital from 1,000,000,000 Euro to 1,100,000,000 Euro, to be paid up in cash. Thus, 100,000,000 new ordinary bearer shares of 1 Euro each were issued. The new shares were subscribed indirectly by a banking syndicate in 2002, and were subsequently offered to the shareholders in 2003. Despite the positive signs in the first months of 2003, from the trend of some economic indicators and the more positive outlook of the Brazilian population as to the future, the Board of Directors believes that there is still a possible risk of continued depreciation of the Real, which will have a direct impact on Modelo Continente’s equity. Consequently, as in 2001, the Board of Directors propose that there should not be any dividend distribution until a more comfortable level of equity is reached. In a year in which the level of investment has been reduced and is lower than the cash flow generated, the company’s financial position has been strengthened through reduction in the average debt level and the capital increase at the end of the year. This has enabled the company to end the year with a net debt of approximately 690 million Euro, resulting in a strong Debt/EBITDA ratio of 2.3.

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Outlook

Modelo Continente has adequate financial strength to enable it to continue implementing its defined strategic development plan, with the ultimate objective of consolidating its leadership position in the Portuguese and Southern Brazil markets.

Notwithstanding this, it must recognise that the plans for expansion of food-based formats will probably not be resumed in full in 2003. The signs of recovery of the world economy are still too tenuous, especially those of the Brazilian economy.

On the other hand, definition of the legal framework applicable to licensing new significant size commercial units in Portugal is overdue. Therefore, despite the portfolio of projects for new stores already authorised and that are not yet in operation, this lack of definition will adversely affect the medium term growth strategies of the main retail operators in the Portuguese market.

The situation in Brazil would indicate that preparations should be made internally to resume the expansion plan as soon as the economic conditions are appropriate.

Despite this, the company expects to open around 15,000 m2 in 2003, basically through using the licences it has already obtained, mostly in non food-based formats in Portugal.

Modelo Continente will continue to strengthen its focus on the customer and invest strongly in actions relating to quality and service levels.

This strategy of focus on the customer is based fundamentally on constant training and qualification of the company’s staff. Modelo Continente will invest continually in this area improving staff motivation and the existing good employee relations, which are reflected in the results of broad ranging attitude surveys carried out internally.

Acknowledgements

We thank all our customers, suppliers, financial institutions and shareholders for their support and preference. To Statutory and other auditors, our acknowledgement for their co-operation given throughout the year. Finally a special word of acknowledgement to all Modelo Continentes’s employees for their enthusiasm, dedication and competence.

Matosinhos, 28 February 2003 The Board of Directors

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Modelo Continente, SGPS, SA Appendix to the Directors’ Report Management of the Companies Section I – Disclosure of Information 1- Organisation chart relating to the division of responsibilities

The Board of Directors of Modelo Continente, S.G.P.S., S.A. is made up of seven members. The members of the Board have responsibility for coordinating and managing the sovereign functions (functional boards), functioning on a collective basis.

The Board of Directors • Belmiro Mendes de Azevedo (President) • Nuno Manuel Moniz Trigoso Jordão (CEO) • Ângelo Gabriel Ribeirinho dos Santos Paupério (CFO) • José Manuel Baeta Tomás • Fernando Sérgio Maia Rebelo • Manuel José Ferreira Fontoura • Luis Filipe Campos Dias de Castro Reis The Board of Directors has 4 executive directors (Nuno Manuel Moniz Trigoso Jordão, Ângelo Gabriel Ribeirinho dos Santos Paupério, Fernando Sérgio Maia Rebelo and Manuel José Ferreira Fontoura), being assisted by 3 associate directors. Associate Members of the Board of Directors • José Fernando Oliveira de Almeida Côrte-Real • Luis Miguel Vieira de Sá da Mota Freitas • Luis António Vicente Dias In the business decision-making process, the members of the Board of Directors have the following responsibilities:

• Nuno Manuel Moniz Trigoso Jordão - has responsibility for overall co-ordination, similar to that of a traditional CEO, with responsibility extended to Portugal and Brazil;

• Ângelo Gabriel Ribeirinho dos Santos Paupério – has responsibility for overall co-ordination similar to that of a traditional CFO, with responsibility extended to Portugal and Brazil;

• Fernando Sérgio Maia Rebelo – has executive responsibility for the Modelo Continente, SGPS, SA operation in Brazil;

• Manuel José Ferreira Fontoura - responsible for the store operations and management of the logistics chain of Modelo Continente, S.G.P.S., S.A. in Portugal.

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2. Evolution of the share prices Modelo Continente, SGPS, SA shares are quoted in the Euronext Lisbon Stock Exchange. Throughout 2002, the depressed global economy, marked by great volatility and mistrust in the financial markets, had the direct effect of keeping the international share prices at extremely low levels. This scenario also impacted Portugal, having naturally affected the evolution of the price of the Company’s shares. As shown in figure 1, the price of the Company’s shares at the beginning of the year was 1.75 € per share and at the end of the year was 1.61 € per share. The price of the Company’s shares in the last stock exchange session of 2002 fell 8% compared to the first session of the year, the average price for the year being 1.76 € per share.

Picture 1. Evolution of the Company’s daily share prices and liquidity

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An exceptional factor that occurred in 2002 was the General Public Purchase Offer launched by Sonae, SGPS, SA over shares representing 29.52% of the capital and voting rights of Modelo Continente, SGPS, SA, at the price of 1.85 € per share in the beginning of February. This operation was carried out in the first week of May, Sonae, SGPS, SA having acquired shares representing 3.79% of the company’s share capital. In order to assist in the analysis of the evolution of the Company’s share prices, the most significant facts that occurred during the year are described in the following paragraphs. • 8 February 2002 Preliminary announcement of the launching of the General Public Purchase Offer by Sonae, SGPS, SA over 295,180,264 shares of Modelo Continente, SGPS, SA, quoted in the Lisbon Euronext stock exchange, representing 29.52% of its capital and voting rights, at the price of 1.85 € per share. • 12 March 2002 Informed the results for the year 2001. • 28 March 2002. Announcement of the launching of the General Public Purchase Offer by Sonae, SGPS, SA over 295,180,264 shares of Modelo Continente, SGPS, SA, quoted in the Lisbon Euronext stock exchange, representing 29.52% of its capital and voting rights, at the price of 1.85 € per share.

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• 29 April 2002 Informed the results for the first quarter of 2002. • 6 May 2002 Realisation of a special session of the stock exchange to ascertain the results of the public purchase offer over shares of Modelo Continente, SGPS, S.A., Sonae, SGPS, SA having acquired 37,893,510 shares representing 3.79% of the share capital. • 16 Setember 2002 Informed the results for the second quarter of 2002. • 29 October 2002 Informed the results for the third quarter of 2002. • 16 December 2002 The Company increased its share capital from 1,000,000,000 Euros to 1,100,000,000 by public deed dated 16 December 2002, through the issuance, by indirect subscription, of 100,000,000 new ordinary non-materialized bearer shares, payable in cash. The shares were offered to the shareholders in the period from 6 to 17 January 2003 and listed on the stock exchange on 20 February 2003. As shown in Picture 2, Modelo Continente, SGPS, SA’s shares evolved over the period in accordance with the negative situation of the national market, evolution of the Company’s shares having exceeded the Portuguese market as a whole, as measured by the PSI20 index.

Picture 2. Evolution of the Company’s share price vs Index PSI20

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Basis 100 = 4 January 2002 3. Dividend policy adopted by the Company Evolution of Modelo Continente, SGPS, SA’s gross dividend per share over the 5 years from 1997 to 2001 has been as follows:

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Year Nominal value of the shares

Gross dividend per share

1997 1000$ 120$ 1998 1000$ 85$00 / 49$37 / 47$27* 1999 4.99 Euro 0.22 Euro 2000 1 Euro 0.035 Euro 2001 1 Euro 0 Euro

* Because of the capital increase in 1998, the Company paid a gross dividend of 85$00 per share on the shares existing before the capital increase and 49$37 per share on the 25.2 million shares resulting from the capital increase and paid up in cash and 47$27 per share on the shares issued through incorporation of reserves.

4. Principal characteristics of the stock and stock option plans The Company’s articles of association do not contain restrictions as to the acquisition of its shares. The Company and the Remuneration Committee have the practice of granting annual performance bonuses, which can include a deferred payment component, the calculation of which can include, among other variables, variation in the price of the company’s shares. 5. Data regarding the disclosure of information

Modelo Continente, SGPS, SA has the procedure of informing the stock market immediately and effectively of all significant facts involving it, thus ensuring equal treatment of the market agents and avoiding inequalities regarding access, by investors, to information. Modelo Continente, SGPS, SA uses the normal means of communication for this purpose, especially the new information technologies. In this respect the Company has an institutional site (www.ModeloContinente.pt,), which serves as a means to centralise information relating to questions raised by investors and the public in general, as well as a repository for historical information on the Company, notably reports and financial statements, communications of results and the most significant corporate presentations.

6. Investor support office

Under its commitments to interact permanently with the market agents, Modelo Continente, SGPS, SA has created an Investor Relations department with specific technical means and a dedicated team, which centralises contacts with the national and international investor community. In line with recommendations of the Stock Exchange Commission (CMVM), a specific office was structured to attend private investors. Information is provided directly to the investor by Modelo Continente, SGPS, SA’s representative for relations with the market: Ângelo Gabriel Ribeirinho dos Santos Paupério.

Section II – Exercise of the right to vote and representation of shareholders The Shareholders General Meeting is made up only of shareholders with the right to vote, owners of shares or subscription securities that substitute them, which up to eight days preceding the date of the meeting have either: had their name recorded in the Company’s records; made the deposit at an authorised financial intermediary in accordance with the law; or had inscribed them in non-materialized security accounts.

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The deposit at an authorised intermediary or inscription in non-materialized security accounts must be proved by letter issued by the institution, received by the Company at least eight days before the date of the meeting. Shareholders can only be present at the Meeting if they inform their intention to do so in writing to the president of the Shareholders General Meeting up to three days preceding the date of the meeting, unless they have proved the deposit at a financial intermediary or the inscription in non-materialized security accounts. Each group of one thousand shares corresponds to one vote, the shareholders having the number of votes, without limit, corresponding to the full number resulting from the division of the number of shares owned by one thousand. Shareholders that are individuals can be represented at Shareholders’ General Meetings by their spouses, ascendants or descendents, administrator or another shareholder by means of a letter addressed to the President of the Shareholders’ General Meeting, indicating the name and address of their representative and the date of the Meeting. Legal entities are represented by the person designated for that purpose, through a letter, the authenticity of which is decided by the President of the Shareholders’ General Meeting. While the Company is considered as “a Company with capital open to investment by the public”, its shareholders can vote by correspondence on matters relating exclusively to changes in the articles of association and election of the governing bodies. Votes by correspondence will only be considered if received at the Company’s head office, by registered letter with reception notice, addressed to the President of the Shareholders’ General Meeting, at least three days prior to the date the meeting, without excluding the requirement to prove the quality of the shareholders. The declarations of vote must be signed by the owner of the shares or his/her legal representative and the shareholder, if an individual, must attach to the declaration, an authenticated photocopy of his/her identity card, if a legal entity, the signature must be recognised by a notary as having powers for the act.

Declarations of vote will only be considered where they expressly and unequivocally contain the following:

a) indication of the point or points of order to which they relate;

b) a concrete proposal as to their purpose, with an indication of the proponent or proponents; c) a precise and unconditional indication of how the vote for each proposal should be cast, as well as if this is maintained in the event that the proposal is altered by the proponent. Notwithstanding this, a shareholder can send a declaration of vote relating to a specified proposal, declaring that he/she votes against the remaining proposals relating to the same point of order, without other specifications. It is understood that the shareholders that send declarations of vote by correspondence abstain from voting on proposals that are not included in the declarations. Notwithstanding this, a shareholder can subject the way the vote is cast on a specified proposal, to the approval or rejection of another proposal under the same point of order. The President of the Shareholders’ General Meeting, or his/her substitute, is responsible for verifying the conformity of the declarations of vote by correspondence, the votes not accepted being considered as not cast. The non consolidated and consolidated financial statements and the other documents established by law, as well as the proposals to be submitted by the Board of Directors must be at the disposal of the shareholders at the head office of the Company, fifteen days before the date of the meeting.

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The annual accounts of the company’s activities will also be at the disposal of the shareholders in the internet site www.ModeloContinente.pt as from the same date.

The Shareholders’ General Meeting can make decisions at the first call, provided that shareholders or shareholders’ representatives representing more than fifty percent of the share capital are present, except where legislation requires a different quorum. The Company’s articles of association do not provide for voting by electronic means. Section III – Corporate Regulations 1. The Company’s object is the management of investments in other companies, as an indirect form of exercising business activities. The Company can purchase or sell participations in domestic or foreign companies with similar or different objects to those of Modelo Continente,SGPS,S.A, in companies subject to special laws, in companies with unlimited liability, as well as become associated with other legal entities, notably to form new companies, consortiums of companies, European financial consortiums, consortiums and participating associations. The principles and values of the company are duly determined and rooted in the culture of its employees, namely diligence and the duty of confidentiality in relations with third parties, safeguarding the company’s position in situations of conflict.

2. In its strategic and current management, the Company actively adopts internal audit and risk management policies in the management of risks in its various businesses. These activities are understood to be fundamental pillars in support and control of its business and have been subject to increased monitoring in Modelo Continente, SGPS, SA’s operations, by two separate organic units in Portugal and Brazil, reporting directly to the Board of Directors. Their activities in 2002 were focused principally on the following: • Audit of procedures and compliance The Audit of Procedures and Compliance area kept focused on the assessment of operating and transaction risks on basic business processes. This area focused on systematic monitoring of the key areas of activity, compliance audits having been carried out, resulting in the identification of measures to improve and implement new controls. • Audit of systems In 2002 the Audit of Systems area performed intensive work in the area of protecting information and respective systems architecture as regards confidentiality, integrity and availability of the information. The most significant actions realised in 2002, included the performance of tests of external intrusion in the electronic commerce sites, review of the security mechanisms of the internal networks and definition of disaster and recovery scenarios relating to the critical business processes, as well as the realisation of tests of the integrity of the data relating to implementation of new computer applications. • Risk Management The Risk Management Area focused mainly on the assessment of the principal risks inherent to the processes of change and critical assets of the Company. The main work performed in this area was in the logistics operation, with the structuring of an organisation to manage specific crises. As a result of the work performed the principal risks identified were diagnosed and measures to be adopted to eliminate or minimize them were indicated.

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3. The articles of association do not contain restrictions regarding voting rights, nor do they confer special voting rights to shareholders, and the company is not aware of any parasocial agreements in this area. Section IV – Corporate Bodies 1. Modelo Continente, SGPS, SA’s Board of Directors is made up of seven members, who are responsible for co-ordinating the management of the sovereign functions (functional boards), and functions on a collective basis.

Modelo Continente, SGPS, SA’s Board of Directors has 4 executive directors [Nuno Manuel Moniz Trigoso Jordão (CEO), Ângelo Gabriel Ribeirinho dos Santos Paupério (CFO), Fernando Sérgio Maia Rebelo and Manuel José Ferreira Fontoura] who are assisted by 3 associate directors [José Fernando Oliveira de Almeida Corte-Real, Luis Miguel Vieira de Sá da Mota Freitas and Luís António Vicente Dias].

The directors exercise their functions in their own name. The members of the Board of Directors have also governing/management functions in the following companies. • Belmiro Mendes de Azevedo

Efanor Investimentos, SGPS, S.A. Imocapital-Sociedade Gestora de Participações Sociais, S.A. Praça Foz-Sociedade Imobiliária, S.A. Setimanale – SGPS, S.A. Sonae, SGPS, S.A. Sonae Capital, SGPS, S.A. Sonae.Com, SGPS, S.A. Sonae Imobiliária, SGPS, S.A. Sonae Indústria – SGPS, S.A. Spred – SGPS, 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. Aquapraia II – Gestão e Serviços, S.A. Atlantic Ferries-Tráfego Local, Fluvial e Marítimo, S.A. Bertimóvel – Sociedade Imobiliária, 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. Bloco Y – Sociedade Imobiliária, S.A. Cacetinho – Comércio Retalhista e Exploração de Centros Comerciais, S.A. Campimeios-Sociedade Imobiliária, S.A. Carnes do Continente-Industria e Distribuição de Carnes,S.A. Casa da Ribeira – Hotelaria e Turismo, S.A.

8

Centro Residencial da Maia – Urbanismo, S.A. Chão Verde – Sociedade de Gestão Imobiliária, S.A. CHT- Casino Hotel de Troia, S.A. Citorres – Sociedade Imobiliária, S.A. Consolimar-Urbanizadora Internacional, S.A. Contibomba-Comércio e Distribuição de Combustiveis,S.A. Contifin, SGPS, Lda Contimobe – Imobiliária do Castelo de Paiva, S.A. Country Club da Maia – Urbanismo, S.A. Difusão – Sociedade Imobiliária, S.A. Distrifin-Comercio y Prestacion de Servicios, S.A. Empreendimentos Imobiliários da Quinta da Azenha, S.A. Equador – Agência de Viagens e Turismo, S.A. Estevão Neves – Hipermercados da Madeira, S.A. Fozimo - Sociedade Imobiliária, S.A. Fozmassimo – Comércio e Industria de Produtos Alimentares, S.A. Gaiaproject – Empreendimentos Imobiliários, S.A. Gestholding – SGPS, S.A. Global S – Hipermercado, Lda. 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. Imoconti – Sociedade Imobiliária, S.A. Imoestrutura – Sociedade Imobiliária, S.A. Imoferro – Sociedade Imobiliária, S.A. Imohora – Imobiliária, S.A. Imohotel – Empreendimentos Turisticos Imobiliários, S.A. Imomuro – Sociedade Imobiliária, S.A. Imopeninsula-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. Insulatroia – Sociedade Imobiliária, S.A. Inventory – Acessórios de Casa, 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. Max Mat Espanã – Distribucion de Materiales de Construccion,S.A. MaxOffice – 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.

9

Modelo Continente – Operações de Retalho,SGPS, S.A. Modelo Continente Hipermercados, 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. Palmares-Companhia de Empreendimentos Turísticos da Lagos, S.A. Palmares-Investimentos e Urbanizações, S.A. Partnergiro-Empreendimentos Turísticos, Lda. Praedium – Desenvolvimento Imobiliário, S.A. Praedium II – Imobiliária, S.A. Praedium III – Serviços Imobiliários, S.A. Predicomercial – Promoção Imobiliária, S.A. Prédios Privados – Imobiliária, S.A. Predisedas- Predial das Sedas, S.A. Promosedas – Promoções Imobiliárias, S.A. Roteiro – Prestação de Serviços de Turismo, S.A. S.I.I. – Soberana – Investimentos Imobiliários, S.A. Sempre à Mão – Sociedade Imobiliária, S.A. Sesagest – Projectos e Gestão Imobiliária, S.A. Socijofra - Sociedade Imobiliária, S.A. Sociloures - Sociedade Imobiliária, S.A. Solinca – Lazer, SGPS, S.A. Solinca II – Gestão e Serviços Hoteleiros, S.A. Solinca III – Desporto e Saúde, S.A. Solinca- Investimentos Turísticos, S.A. Soltróia – Sociedade Imobiliária de Urbanização e Turismo de Troia, S.A. Sonae Capital, SGPS, S.A. 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 Consultadoria, 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. Torre São Rafael – Imobiliária, S.A.. Troiaverde – Exploração Hoteleira e Imobiliária, S.A. Tulipamar - Exploração Hoteleira e Imobiliária, S.A. Urbisedas – Imobiliária das Sedas, S.A. Venda Aluga – Sociedade Imobiliária, S.A. World Trade Center Porto, S.A. Worten - Equipamentos para o Lar, S.A.

10

• 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. Barmins – Serviço e Gestão Imobiliária, S.A. Bertimóvel – Sociedade Imobiliária, 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. Cacetinho – Comércio Retalhista e Exploração de Centros Comerciais, S.A. Campimeios – Sociedade Imobiliária, S.A. Carnes do Continente-Industria e Distribuição de Carnes,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. Chão Verde – Sociedade de Gestão Imobiliária, S.A. Choice Car – Comércio de Automóveis, S.A. Choice Car, SGPS, S.A. CHT- Casino Hotel de Troia, S.A. Citorres – Sociedade Imobiliária, S.A. Consolimar-Urbanizadora Internacional, S.A. Contibomba-Comércio e Distribuição de Combustiveis,S.A. Contifin, SGPS, Lda Contimobe – Imobiliária do Castelo de Paiva, S.A. Country Club da Maia – Urbanismo, S.A. Difusão – Sociedade Imobiliária, S.A. Distrifin-Comercio y Prestacion de Servicios, S.A. Empreendimentos Imobiliários da Quinta da Azenha, S.A. Finlog – Aluguer e Comércio de Automóveis, S.A. Fozimo - Sociedade Imobiliária, S.A. Fozmassimo – Comércio e Industria de Produtos Alimentares, S.A. Gaiaproject – Empreendimentos Imobiliários, S.A. Gestholding – SGPS, S.A. Global S – Hipermercado, Lda. Guérrin – Rent-a-Car (Dois), Lda IGI – Investimento Imobiliário, S.A. Igimo – Sociedade Imobiliária, S.A. Iginha- Sociedade Imobiliária, S.A. Imoareia – Investimentos Turísticos, SGPS, S.A. Imocapital-Sociedade Gestora de Participações Sociais, S.A. Imoclub – Serviços Imobiliários, S.A. Imoconti – Sociedade Imobiliária, S.A. Imoestrutura – Sociedade Imobiliária, S.A. Imoferro – Sociedade Imobiliária, S.A. Imohora – Imobiliária, S.A. Imohotel – Empreendimentos Turisticos Imobiliários, S.A.

11

Imomuro – Sociedade Imobiliária, S.A. Imopeninsula - 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. Insulatroia - Sociedade Imobiliária, S.A. Integrum – Serviços Partilhados, S.A. Inventory – Acessórios de Casa, 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. Max Mat Espanã – Distribucion de Materiales de Construccion,S.A. MaxOffice – 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 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. Palmares-Companhia de Empreendimentos Turísticos da Lagos, S.A. Palmares-Investimentos e Urbanizações, S.A. Partnergiro-Empreendimentos Turísticos, Lda. Praedium – Desenvolvimento Imobiliário, S.A. Praedium II – Imobiliária, S.A. Praedium III – Serviços Imobiliários, S.A. Predicomercial – Promoção Imobiliária, S.A. Prédios Privados – Imobiliária, S.A. Predisedas- Predial das Sedas, S.A. Promosedas – Promoções Imobiliárias, S.A. Publimeios, SGPS, S.A. S.I.I. – Soberana – Investimentos Imobiliários, S.A. SC – Sociedade de Consultadoria, S.A. Selfrio – Engenharia do Frio, S.A. Selfrio, SGPS, S.A. Sempre à Mão – Sociedade Imobiliária, S.A. Sesagest – Projectos e Gestão Imobiliária, 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.

12

Sociedade de Construções do Chile, Lda. Socijofra - Sociedade Imobiliária, S.A. Sociloures - Sociedade Imobiliária, S.A. Soflorin, BV Solinca – Catering e Eventos, S.A. Solinca – Lazer, SGPS, S.A. Solinca II – Gestão e Serviços Hoteleiros, S.A. Solinca III – Desporto e Saúde, S.A. Solinca- Investimentos Turísticos, S.A. Soltróia – Sociedade Imobiliária de Urbanização e Turismo de Troia, S.A. Solução – Apoio à Gestão, S.A. Sonae 3 P, S.A. Sonae Capital, SGPS, S.A. Sonae Distribuição Brasil, S.A. Sonae Imobiliária, SGPS, S.A. Sonae Indústria, SGPS, S.A. Sonae Investments, BV Sonae Retalho Espanã – Servicios Generales,S.A. Sonae Retalho Especializado, SGPS, S.A. Sonae Turismo, SGPS, S.A. Sonae, SGPS, S.A. Sonaegest – Sociedade de Fundos de Investimento, S.A. Sonaudit – Gestão e Consultadoria Financeira, S.A. Sondis Imobiliária, S.A. Sondis, B.V. Sontária – Empreendimentos Imobiliários, S.A. Sontur, BV Sonvecap B.V. Sopair, S.A. SPEL – Serviços Auto, S.A. SportZone – Comércio de Artigos de Desporto, S.A. Spred, SGPS, S.A. SRE – Projectos e Consultadoria, S.A. Todos os Dias- Comércio Retalhista e Exploração de Centros Comerciais, S.A. Torre São Gabriel – Imobiliária, S.A. Torre São Rafael – Imobiliária, S.A.. Troiaverde – Exploração Hoteleira e Imobiliária, S.A. Tulipamar - Exploração Hoteleira e Imobiliária, S.A. Urbisedas – Imobiliária das Sedas, S.A. Venda Aluga – Sociedade Imobiliária, S.A. World Trade Center Porto, S.A. Worten - Equipamentos para o Lar, S.A.

• José Manuel Baeta Tomás

Friengineering International, Lda Modelo Investimentos Brasil, S.A. Sonae Distribuição Brasil, S.A. Sonae Investimentos América Latina, Lda

• Fernando Sérgio Maia Rebelo

Bertimóvel – Sociedade Imobiliária, S.A. Cacetinho – Comércio Retalhista e Exploração de Centros Comerciais, S.A.

13

Chão Verde – Sociedade de Gestão Imobiliária, S.A. Citorres – Sociedade Imobiliária, 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. Fozimo - Sociedade Imobiliária, S.A. Fozmassimo – Comércio e Industria de Produtos Alimentares, S.A. Global S – Hipermercado, Lda. IGI – Investimento Imobiliário, S.A. Igimo – Sociedade Imobiliária, S.A. Iginha- Sociedade Imobiliária, S.A. Imoconti – Sociedade Imobiliária, S.A. Imoestrutura – Sociedade Imobiliária, S.A. Imomuro – Sociedade Imobiliária, S.A. Imoponte – Sociedade Imobiliária, S.A. Imoresultado – Sociedade Imobiliária, S.A. Imosistema - Sociedade Imobiliária, S.A. Infofield – Informática, S.A. Informeios-Projectos e Representações, S.A. Inventory – Acessórios de Casa, S.A. Max Mat Espanã – Distribucion de Materiales de Construccion,S.A. MaxOffice – 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 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. Predicomercial – Promoção Imobiliária, S.A. Sempre à Mão – Sociedade Imobiliária, S.A. Sesagest – Projectos e Gestão Imobiliária, S.A. Socijofra - Sociedade Imobiliária, S.A. Sociloures - Sociedade Imobiliária, S.A. Sonae Distribuição Brasil, S.A. Sonae Retalho Espanã – Servicios Generales,S.A. Sonae Retalho Especializado, SGPS, S.A. Sondis Imobiliária, S.A. Sontária – Empreendimentos Imobiliários, S.A. Sonvecap B.V. SportZone – Comércio de Artigos de Desporto, S.A. SRE – Projectos e Consultadoria, S.A. Tafibrás – Participações, S.A. Worten - Equipamentos para o Lar, S.A.

• Manuel José Ferreira Fontoura

14

Cacetinho – Comércio Retalhista e Exploração de Centros Comerciais, S.A. Carnes do Continente-Indústria e Distribuição de Carnes, S.A. Contibomba-Comércio e Distribuição de Combustíveis, S.A. Estevão Neves – Hipermercados da Madeira, S.A. Fozmassimo – Comércio e Industria de Produtos Alimentares, S.A. IGI – Investimento Imobiliário, S.A. Infofield – Informática, S.A. Insco – Insular de Hipermercados, S.A. MaxOffice – Artigos e Serviços para Escritório, S.A. Modalfa - Comércio e Serviços, S.A. Modelo - Sociedade Gestora de Participações Sociais, S.A. Modelo Continente – Operações de Retalho,SGPS, S.A.. Modelo Continente Hipermercados, S.A. Modelo.Com – Vendas por Correspondência, S.A. Modelo Hiper Imobiliária, S.A. Modis - Distribuição Centralizada, S.A. Modis International Trade, S.A. O.K. Bazar- Comércio Geral, S.A. Sempre a Postos – Produtos Alimentares e Utilidades, Lda. SportZone – Comércio de Artigos de Desporto, S.A. SRE- Projectos e Consultoria, S.A. Todos os Dias-Comércio Retalhista e Exploração de Centros Comerciais, S.A. Worten - Equipamentos para o Lar, S.A.

• 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. Funonline – Actividades Lúdicas, S.A. Mauger-S.A. Move On, SGPS, S.A. Myplace – Conteúdos Imobiliários na Internet, S.A. Net Mall, SGPS, S.A. Novis Telecom, S.A. Optimus – Telecomunicações, S.A. Portais Verticais. Com, SGPS, S.A. Público – Comunicação Social, S.A. Público.pt-Serviços Digitais Multimedia, S.A. Sonae.Com – 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. Wedo do Brasil, Lda. XS- Comunicação, Informação e Lazer, S.A.

2. There is no Executive Committee with management powers. 3. In 2002 the Modelo Continente, SGPS, SA’s Board of Directors met 8 times. 4. There is no internal control committee. 5. The Company and the Remuneration Committee have the practice of attributing annual performance bonuses, which can include a deferred payment component, the calculation of

15

which includes, among other variables, the result and variations in the price of the Company’s shares. 6. Remuneration of the members of the corporate bodies is determined by the Remuneration Committee elected in Shareholders’ General Meetings, and is currently made up of Sonae, SGPS, S.A. represented by José Manuel Trindade Neves Adelino and Bruno Walter Lehmann. In 2002 the members of the Board of Directors received remuneration totalling 1,615,330 Euro. This amount corresponds entirely to executive members of the Board of Directors of Modelo Continente, SGPS, SA, of which 1,042,750 Euro correspond to fixed remuneration and the balance to variable remuneration. Matosinhos, 28 February 2003

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

Consolidated Balance sheet as of 31 December 2002(Translation of a report originally issued in Portuguese - Note 51)

Amounts stated in Euro31.12.02 31.12.01

Assets Gross Depreciation and Net Netassets Provisions assets assets

FIXED ASSETS: Intangible assets: Installation expenses............................................................ 137.266.957 79.573.892 57.693.065 103.763.000 Research and development costs......................................... 53.334.793 27.922.142 25.412.651 31.864.898 Industrial property and other rights....................................... 5.189.877 1.567.516 3.622.361 2.460.832 Premiums paid for property occupation rights....................... 10.915.602 6.527.252 4.388.350 4.913.117 Intangible assets in progress................................................ 3.290.962 3.290.962 10.175.421

209.998.191 115.590.802 94.407.389 153.177.268 Tangible assets: Land and natural resources.................................................. 159.605.692 159.605.692 176.748.900 Buildings and other constructions......................................... 623.465.887 73.191.435 550.274.452 586.181.153 Machinery and equipment..................................................... 448.177.520 177.280.728 270.896.792 347.679.644 Transport equipment............................................................. 16.160.931 12.667.015 3.493.916 5.275.883 Tools and utensils................................................................. 3.225.700 2.529.044 696.656 581.205 Office equipament................................................................. 129.425.654 50.825.324 78.600.330 75.676.917 Reusable containers............................................................. 251.840 251.840 5.312 Other tangible assets............................................................ 3.735.521 2.100.377 1.635.144 13.220.649 Tangible assets in progress.................................................. 41.674.608 41.674.608 53.417.098 Advances on account of tangible assets............................... 14.226.803 14.226.803 17.670.377

1.439.950.156 318.845.763 1.121.104.393 1.276.457.138 Investments: Investments in associated companies.................................. 9.911.727 9.911.727 8.020.065 Loans to associated companies............................................ 17.559.935 17.559.935 16.883.655 Investments in other companies........................................... 748.197 748.197 748.197 Securities and other investments.......................................... 302.368 302.368 21.826.946 Advances on account of investments.................................... 598.558 598.558

29.120.785 29.120.785 47.478.863CURRENT ASSETS: Inventories : Merchandise......................................................................... 358.994.453 358.994.453 400.489.888

358.994.453 358.994.453 400.489.888 Medium and long term receivables: State and public entities........................................................ 15.333.365 15.333.365 33.339.751 Other debtors........................................................................ 36.932.428 36.932.428 62.273.766

52.265.793 52.265.793 95.613.517 Short term receivables: Clients - Current accounts.................................................... 21.216.002 777.341 20.438.661 30.273.653 Clients - Notes receivable..................................................... 3.695 Clients - Doubtful accounts................................................... 8.685.234 8.678.577 6.657 45.675 Associated companies.......................................................... 3.058.002 3.058.002 1.653.927 Advances to suppliers........................................................... 245.527 245.527 391.370 Advances to suppliers of fixed assets................................... 14.856 14.856 106.600 State and public entities........................................................ 35.956.305 35.956.305 64.372.211 Other debtors........................................................................ 63.192.319 8.309.739 54.882.580 85.100.731

132.368.245 17.765.657 114.602.588 181.947.862 Marketable securities: Other marketable securities.................................................. 131.420.178 131.420.178 28.680.358 Other treasury applications................................................... 9.487.833 9.487.833

140.908.011 140.908.011 28.680.358 Bank deposits and cash: Bank deposits....................................................................... 173.784.463 173.784.463 109.475.803 Cash in hand......................................................................... 1.803.644 1.803.644 12.439.969

175.588.107 175.588.107 121.915.772ACCRUALS AND DEFERRALS: Accrued income.................................................................... 73.363.846 73.363.846 34.694.244 Deferred costs....................................................................... 15.837.061 15.837.061 13.098.460

89.200.907 89.200.907 47.792.704Total depreciation 434.436.565

Total provisions 17.765.657Total assets 2.628.394.648 452.202.222 2.176.192.426 2.353.553.370

The Board of Directors


Consolidated Balance sheet as of 31 December 2002(Translation of a report originally issued in Portuguese - Note 51)

Amounts stated in Euro

Shareholders' Equity, Minority Interests and Liabilities 31.12.02 31.12.01

SHAREHOLDERS' EQUITY Share capital............................................................................................................ 1.100.000.000 1.000.000.000 Consolidation differences........................................................................................ 524.162 Revaluation reserves............................................................................................... 44.243.339 44.243.339

Reserves:

Legal reserves....................................................................................................... 86.000.000 81.300.000 Other reserves....................................................................................................... -962.078.141 -907.658.390

268.165.198 218.409.111

Consolidated net profit for the year 100.089.749 129.579.850

Total shareholders' equity 368.254.947 347.988.961

Minority interests 34.830.963 61.939.232

LIABILITIES

Provisions for risks and charges: Other provisions for risks and charges.................................................................. 1.503.142 1.959.521

1.503.142 1.959.521

Medium and long term liabilities: Bonds: Non convertible...................................................................................................... 15.789.420 58.713.560 Bank loans............................................................................................................... 634.338.384 393.172.187 Associated companies............................................................................................. 117.296 Other loans.............................................................................................................. 99.999.755 121.199.755 Suppliers of fixed assets - current accounts............................................................ 9.941.002 11.337.773 State and public entities........................................................................................... 1.901.454 3.449.398 Other creditors......................................................................................................... 26.427.902 44.607.598

788.397.917 632.597.567 Short term liabilities: Bonds: Non convertible...................................................................................................... 33.713.561 33.713.561 Bank loans............................................................................................................... 219.401.019 333.014.412 Suppliers - current accounts.................................................................................... 514.388.255 592.967.576 Suppliers - invoices pending.................................................................................... 36.976.432 40.939.707 Participant and participated companies................................................................... 1.695.797 35.003.569 Other shareholders.................................................................................................. 281 381 Suppliers of fixed assets - current accounts............................................................ 25.756.646 107.175.438 State and public entities........................................................................................... 35.203.075 49.318.443 Other creditors......................................................................................................... 4.900.603 15.177.390

872.035.669 1.207.310.477

Accruals and deferrals: Accrued expenses................................................................................................... 106.632.702 99.937.514 Deferred income...................................................................................................... 4.537.086 1.820.098

111.169.788 101.757.612

Total liabilities 1.773.106.516 1.943.625.177

Total shareholders' equity, minority interests and liabilities 2.176.192.426 2.353.553.370



Consolidated Statement of Profit and Loss for the year ended 31 December 2002(Translation of statements originally issued in Portuguese - Note 51)


31.12.02 31.12.01

EXPENSES

Cost of goods sold and materials consumed: Merchandise.............................................................................................................. 2.822.831.419 2.822.831.419 3.024.285.104 3.024.285.104

External supplies and services 333.504.921 335.430.249

Personnel Costs:

Wages and salaries.................................................................................................. 247.990.773 250.373.066 Social charges: Other................................................................................................................... 79.637.271 327.628.044 79.907.052 330.280.118

Depreciation and amortisation of fixed assets ............................................................. 106.497.637 99.339.782 Provisions..................................................................................................................... 4.441.333 110.938.970 5.501.854 104.841.636 Taxes............................................................................................................................ 8.384.227 10.226.101 Other operating costs.................................................................................................... 9.303.027 17.687.254 5.379.670 15.605.771

(A) 3.612.590.608 3.810.442.878

Interest and similar expenses: Relating to associated companies......................................................................... 529.142 952.188 Other...................................................................................................................... 127.917.519 128.446.661 113.621.589 114.573.777

(C) 3.741.037.269 . 3.925.016.655 Extraordinary expenses................................................................................................ 42.704.374 18.308.805

(E) 3.783.741.643 3.943.325.460

Income tax for the year: Current tax............................................................................................................. 12.765.654 39.850.909 Deferred tax........................................................................................................... -30.760.213 -17.994.559

(G) 3.765.747.084 3.983.176.369 Minority interests........................................................................................................... -3.340.606 1.908.690 Consolidated net profit for the year............................................................................... 100.089.749 129.579.850

3.862.496.227 4.114.664.909INCOME

Sales: Merchandise........................................................................................................... 3.537.133.264 3.771.268.028 Services rendered ................................................................................................. 19.316.466 3.556.449.730 19.593.951 3.790.861.979

Own work capitalised.................................................................................................... 1.389.851 5.143.174 Supplementary income ................................................................................................ 238.279.529 240.913.852 Operating subsidies...................................................................................................... 78.472 114.680 Other operating income................................................................................................. 1.113.246 240.861.098 1.698.363 242.726.895

(B) 3.797.310.828 4.038.732.048 Gain on equity investments: Relating to associated companies......................................................................... 925.781 Relating to other companies.................................................................................. 1.447.458 566.834

Income from marketable securities and other financial applications: Other...................................................................................................................... 9.422.948 3.062.174

Other interest and similar income: Relating to associated companies......................................................................... 1.146.213 1.015.836 Other .................................................................................................................... 38.920.506 50.937.125 39.867.438 45.438.063 (D) 3.848.247.953 4.084.170.111 Gain on associated companies..................................................................................... 1.078.764 Extraordinary income.................................................................................................... 13.169.510 30.494.798 (F) 3.862.496.227 4.114.664.909

Summary:

Operating results: (B) - (A) = 184.720.220 228.289.170 Net financial results: [(D) - (B)] - [(C) - (A)] = -77.509.536 -69.135.714 Current results: (D) - (C) = 107.210.684 159.153.456 Profit before income tax and minority interests: (F) - (E) = 78.754.584 171.339.449 Consolidated net profit for the year with minority interests: (F) - (G) = 96.749.143 131.488.540



Consolidated Statement of Profit and Loss by Functions for the year ended 31 December 2002(Translation of statements originally issued in Portuguese - Note 51)

Amounts stated in Euro31.12.02 31.12.01

Sales and services rendered........................................................................ 3.556.449.730 3.790.861.979

Cost of goods sold and services rendered.................................................... -2.909.408.540 -3.106.742.693

Gross margin.............................................................................................. 647.041.190 684.119.286 Other operating income................................................................................ 246.184.996 255.555.723

Distribution charges...................................................................................... -589.533.964 -589.795.265

Administrative charges................................................................................. -100.085.376 -100.428.037

Other operating charges............................................................................... -34.928.715 -34.006.986

Operating results....................................................................................... 168.678.131 215.444.721 Net financial charges.................................................................................... -63.068.547 -57.784.018

Gain/(loss) relating to related undertakings.................................................. 588.493 1.280.007

Gain/(loss) on other investments.................................................................. 1.447.496 480.342

Exceptional items......................................................................................... -28.890.989 11.918.397

Current results........................................................................................... 78.754.584 171.339.449 Income tax on current results....................................................................... 17.994.559 -39.850.909

Current results after income tax................................................................... 96.749.143 131.488.540

Minority interests.......................................................................................... -3.340.606 1.908.690

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

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

Consolidated net profit for the year.......................................................... 100.089.749 129.579.850 Earnings per share..................................................................................... 0,099 0,130



Consolidated Statement of Cash Flows for the year ended 31 December 2002(Translation of a statement originally issued in Portuguese - Note 51)


OPERATING ACTIVITIES:

Receipts from customers 3.548.054.812Payments to suppliers 3.024.698.513Payments to personnel 322.924.754

Cash flow generated by operations 200.431.545

Payments/receipts of income tax 14.069.090Other receipts/payments relating to operating activities 47.953.765

Cash flow generated before extraordinary items 234.316.220

Receipts relating to extraordinary items 6.088.152Payments relating to extraordinary items 31.197.395

Cash flow from operating activities [1] 209.206.977

INVESTING ACTIVITIES:

Receipts relating to:

Investments 24.207.009Tangible assets 7.334.961Intangible assets 1.014.259Interest and similar income 39.349.794Dividends 1.447.458Loans granted 4.143.000Others 7.995.092 85.491.573

Payments relating to:

Investments 123.577.284Tangible assets 95.580.293Intangible assets 30.830.767Loans granted 5.665.189 255.653.533

Cash flow from investing activities [2] -170.161.960

FINANCING ACTIVITIES:

Receipts relating to:

Capital increases, suplementary capital contributions and share premiums 100.000.000Loans obtained 1.156.214.716Other 14.262 1.256.228.978

Payments relating to:

Loans obtained 990.228.161Interest and similar costs 125.725.075Dividends 1.464.841 1.117.418.077

Cash flow from financing activities [3] 138.810.901

Variation of cash and its equivalents [4]=[1]+[2]+[3] 177.855.918

Effect of foreign exchange rates 10.383.252

Cash and its equivalents at the beginning of the year 148.633.868

Cash and its equivalents at the end of the year 316.106.534



Notes to the Consolidated Statement of Cash Flows for the year ended 31 December 2002

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

Sonae Distribuição Brasil, S.A. 35.060.249 35.060.249Bikini Portal de Mulheres, S.A. 170.000Carnes do Continente-Ind. e Distribuição de Carnes, S.A. 50.000 50.000Contibomba-Comércio e Distribuição de Combustíveis, S.A. 50.000 50.000Efanor Design e Serviços, S.A. 320.000Efanor Indústria de Fios, S.A. 25.000Global S - Hipermercados, Lda 4.345Inventory- Acessórios de Casa, S.A. 50.000Roteiro-Prestação de Serviços de Turismo, S.A. 2.650.000 2.650.000Sonae Retalho Especializado, SGPS, S.A. 650.000Todos os Dias-Com. Retalh. Expl. Centros Comerciais, S.A. 50.000 50.000Expedis-Logistica Integrada, S.A. 2.926.454 2.629.454

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

Amounts stated in EuroCash and Cash and

AFFILIATED COMPANIES its equivalents its equivalentsacquired disposed

Best Offer.Prestação de Informações pela Internet, S.A. 3.496Global S Hipermercado, Lda 15.586Sre-Projectos e Consultadoria, S.A. 4.492

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

Acquired Acquired Acquired Disposed

Best Offer Global S SRE-Consult. Expedis

Fixed Assets 687.208 100.072 26.940 177.934 Inventories 0 0 0 1.025.516 Accounts Receivable 658.942 204.649 823.563 9.023.846 Accounts Payable 85.471 113.703 105.904 8.385.667

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

2002 2001

Cash 1.803.644 12.439.969Bank deposits 173.784.463 109.475.803Cash equivalents 140.518.427 26.718.096

Cash and its equivalents 316.106.534 148.633.868

Demand deposits (bank overdrafts) 389.584 1.962.262

Banks and cash in the balance sheet 316.496.118 150.596.130

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 line of businessNot applicable.


ACQUISITIONS DISPOSALS

CAPTIONS

1

MODELO CONTINENTE, SOCIEDADE GESTORA DE PARTICIPAÇÕES SOCIAIS, S.A. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 DECEMBER 2002 (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 Investments in subsidiaries excluded from the consolidation in accordance with Article 4 Item 1 of Decree-Law 238/91 and in other companies are stated at cost. 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. The portion of net profit / loss of associated companies attributable to the Group is included in the statement of profit and loss. 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 lowest of aquisition 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.

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(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 (g) Premiums paid for property occupation rights and consolidation differences 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. Consolidation differendes, 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 relating directly to specific tangible assets, 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 are stated at average cost, which is lower than their market value. (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.

3

The financial statements of subsidiary 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 correspond 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 expected 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. (n) Provisions Provisions are recorded at the amounts necessary to cover estimated losses. (o) Finance leasing and long-term rental Tangible fixed assets acquired under finance 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 these conditions are recognized as costs of the period in which they are billed by the lessor. (p) Accruals basis The Group companies record 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).

4

I - INFORMATION RELATING TO THE COMPANIES INCLUDED IN THE CONSOLIDATION AND OTHERS 1. COMPANIES INCLUDED IN THE CONSOLIDATION COMPANY HEAD OFFICE %

PARTICIPATION HELD

REASONS FOR INCLUSION

1) Best Offer – Prestação de Informações pela Internet, S.A. Maia 100.00% a) Cacetinho – Comércio Retalhista e Expl. Centros Comerciais, S.A. Matosinhos 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) 4) Contimobe - Imobiliária de Castelo de Paiva, S.A. Castelo de Paiva 100.00% a) 5) Continente Investimentos Brasil, S.A. Porto Alegre (Brazil) 100.00% a) 4) Difusão - Sociedade Imobiliária, S.A. Maia 100.00% a) Estevão Neves - Hipermercados da Madeira, S.A. Madeira 51.00% a) 6) Expedis – Logística Integrada, S.A. Matosinhos 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) 2) 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) Imosistema – Sociedade Imobiliária, S.A. Maia 100.00% a) 3) Infofield – Informática, S.A. Maia 100.00% a) 3) Maxoffice – Artigos e Serviços para Escritório, S.A. Maia 100.00% a) Modis International Trade, S.A. Madrid (Spain) 100.00% a) 3) Modalfa – Comércio e Serviços, S.A. Maia 100.00% a) 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) Ok Bazar-Comércio Geral, S.A. Ermesinde 100.00% a) 4) Predicomercial – Promoção Imobiliária, S.A. Maia 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) Sonae Distribuição Brasil, S.A. Porto Alegre (Brazil) 89.90% a) Sonae Retalho España – Servicios Generales, S.A. Madrid (Spain) 100.00% a) Sondis, B.V. Amsterdam

(Netherlands) 100.00% a)

4) Sondis Imobiliária, S.A. Maia 100.00% a) Sonvecap, B.V. Amsterdam

(Netherlands) 100.00% a)

3) Sport Zone – Comércio de Artigos de Desporto, S.A. Matosinhos 100.00% a) Sport Zone España - Comercio de Artículos de Deporte, S.A. Madrid (Spain) 100.00% a) 1) SRE - Projectos e Consultadoria, S.A. Maia 100.00% a) 3) Worten – Equipamentos para o Lar, S.A. Matosinhos 100.00% a)

5

a) Paragraph a), Item 1, Art. 1 of Decree-Law 238/91. 1) Subsidiary included in the consolidation because it has become material; 2) Subsidiary acquired on 9 January 2002; 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. 5) Company merged into Modelo Investimentos Brasil, Ltd. on 31 December 2002. 6) Company sold on 31 January 2002. 2. COMPANIES EXCLUDED FROM THE CONSOLIDATION COMPANY HEAD OFFICE %

PARTICIPATION HELD

REASONS FOR EXCLUSION

1) Bertimóvel - Sociedade Imobiliária, S.A. Matosinhos 100.00% a) 5) Bikini, Portal de Mulheres, S.A. Maia 100.00% a) 3) Carnes do Continente-Ind. e Distrib. de Carnes, S.A. Santarém 100.00% a) 7) Contibomba-Comércio e Distribuição de Combustíveis, S.A. Matosinhos 100.00% a) 5) Efanor-Design e Serviços, S.A. Matosinhos 100.00% a) 6) Efanor-Industria de Fios, S.A. Matosinhos 100.00% a) 2) Imoponte - Sociedade Imobiliária, S.A. Maia 100.00% a) 1) Imoresultado - Sociedade Imobiliária, S.A. Maia 100.00% a) Informeios-Projectos e Representações, S.A. Lisbon 100.00% a) 6) Inventory-Acessórios de Casa, S.A. Maia 100.00% a) 1) Sempre à Mão - Sociedade Imobiliária, S.A. Matosinhos 100.00% a) 5) Sonae Retalho Especializado, S.G.P.S., S.A. Maia 100.00% a) 4) Todos os Dias-Com. Retalh.e Expl. Centros Comerciais,

S.A. Matosinhos 100.00% a)

a) Item 1, Art. 4 of Decree-Law 238/91 (Not significant) 1) Companies included in the “Special Regime for Taxation of Groups of Companies” of Modelo Continente, SGPS, S.A. 2) Companies included in the “Special Regime for Taxation of Groups of Companies” of Modelo, SGPS, S.A. 3) Company founded on 2 August 2002. 4) Company founded on 9 July 2002. 5) Companies acquired on 31 December 2002. 6) Companies acquired on 16 December 2002. 7) Company founded on 21 June 2002. 3. ASSOCIATED COMPANIES STATED BY THE EQUITY METHOD COMPANY HEAD OFFICE %

PARTICIPATION HELD

Modelo - Distribuição de Materiais de Construção, S.A. Maia 50.00% Crediuniverso - Serviços de Marketing, S.A. Maia 50.00% Maxmat España - Distribucion de Materiales de Construccion, S.A. Madrid (Spain) 50.00% Sonaegest – Sociedade Gestora de Fundos de Investimentos, S.A. Maia 40.00% 4. ASSOCIATED COMPANIES NOT STATED BY THE EQUITY METHOD COMPANY HEAD

OFFICE % PARTICIPATION HELD

REASONS FOR EXCLUSION

Sempre a Postos - Produtos Alimentares e Utilidades, S.A. Lisbon 25.00% a) Roteiro-Prestação de Serviços de Turismo, S.A. Lisbon 50.00% a) b) a) Paragraph 13.6.2, Appendix 1 of Decree-Law 238/91. (Not significant) b) Company acquired on 18 December 2002

6

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. EMPLOYEE INFORMATION The average number of personnel working for the companies included in the consolidation in 2002 was as follows: By market: By categories:

Portugal 16,858 Directors and managers 3,073Brazil 19,072 Specialized staff 776

Administrative staff 3,210Operational 28,871

Total 35,930 Total 35,930

7

III - INFORMATION ON CONSOLIDATION PROCEDURES ADOPTED 10. CONSOLIDATION DIFFERENCES a) Description As explained in Note 0.g), as from 1 January 2001 ha been recorded in the caption “Other reserves”. The changes in the balance of goodwill in 2002 were as follows:

Amounts stated in Euro2002 2001 Variation

Positive 975.823.854 943.257.496 32.566.358Negative 524.162 524.162

The changes in goodwill during the year 2002 were as follows:

Acquisitions: Amounts in EuroSonae Distribuição Brasil , S.A. 31.216.795Global S Hipermercado, Lda 317.191

Disposals:Expedis-Logística Integrada, S.A. -506.569

Companies included in the consolidation for the first time:Best Offer – Prestação de Informações pela Internet, S.A. 354.121SRE-Projectos e Consultadoria,S.A. 1.184.820

32.566.358 In 2002 the Company recorded goodwill of 33,072,942 Euro 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 in the liability caption “Minority interests”. 11. EXCEPTIONS TO CONSISTENCY OF ACCOUNTING PRINCIPLES 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 763,103,118 Euro, and the caption Depreciation and amortization for the year would increase by 48,252,488 Euro.

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14. COMPARABILITY OF THE FINANCIAL STATEMENTS In 2002 the following companies were included/excluded from the consolidation:

Included a) Global S Hipermercado, Lda

b) Best Offer – Prestação de Informações pela Internet, S.A. b) SRE-Projectos e Consultadoria, S.A. Excluded c) Expedis-Logística Integrada, S.A.

a) Subsidiary acquired on 9 January 2002; b) Subsidiary which became material in 2002; c) Subsidiary sold on 31 January 2002;

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 cost). IV - INFORMATION REGARDING COMMITMENTS 22. GUARANTEES GRANTED At 31 December 2002, the companies included in the consolidation had commitments for guarantees granted as follows:

amounts in EuroGuarantees granted to: Tax entities a) 42,230,308 City Councils 8,805,036 Other entities 2,423,773

Securities deposited relating to: Tax entities b) 22,916,519 City Councils 1,224,439 Other entities 87,565

a) Includes guarantees of 19,930,595 Euro relating to appeals against additional corporate income tax assessments, as well as guarantees of 21,592,706 Euro relating to VAT processes.

b) Includes securities of 13,398,737 Euro deposited, relating to appeals against additional corporate income tax assessments, as well as securities of 9,438,501 Euro 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.

9

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: Real ( rate at the end of the period ) 0.26937 Balance sheetReal ( average rate ) 0.37828 Statement of profit and loss

VI - INFORMATION REGARDING CERTAIN CAPTIONS 25. INSTALLATION EXPENSES AND RESEARCH AND DEVELOPMENT COSTS The more significant increases in the captions “Installation expenses” and “Research and development costs” in 2002 were as follows:

amounts in Euro

Company ProjectSonae Distribuição Brasil, S.A. Expenses with the opening and remodelling of stores 7,997,397

27. MOVEMENT IN FIXED ASSETS The movement in fixed assets and the respective amortization, depreciation and provision accounts in 2002 was as follows:

Gross Assets Amounts in EuroOpening Increase Decrease Transfers and Closing

Captions Balance (a) Disposals (b) BalanceIntangible assets:Installation expenses 177,514,117 10,290,361 32,527 -50,504,994 137,266,957Research and development costs 50,424,214 335,156 165,125 2,740,548 53,334,793Industrial property and other rights 3,236,760 282,613 97,997 1,768,501 5,189,877Premiums paid for property occupation rights 10,238,919 741,766 65,083 10,915,602

c) f) Intangible assets in progress 10,175,421 18,272,129 10,911 -25,145,677 3,290,962251,589,431 29,922,025 371,643 -71,141,622 209,998,191

Tangible assets:Land and natural resources 176,748,900 2,915,129 227,137 -19,831,200 159,605,692Buildings and other constructions 650,487,862 1,537,234 74,237 -28,484,972 623,465,887M achinery and equipment 527,237,236 18,376,268 6,905,844 -90,530,140 448,177,520Transport equipment 19,475,104 831,788 1,239,901 -2,906,060 16,160,931Tools and utensils 2,883,134 129,455 39,606 252,717 3,225,700

f) Office equipment 129,020,411 3,838,816 2,087,501 -1,346,072 129,425,654Reusable containers 251,840 251,840Other tangible assets 15,277,047 719 203,588 -11,338,657 3,735,521

c) Tangible assets in progress 53,417,098 58,888,213 694,738 -69,935,965 41,674,608d) Advances on account of tangible assets 17,670,377 2,342,329 -5,785,903 14,226,803

1,592,469,009 88,859,951 11,472,552 -229,906,252 1,439,950,156Investm ents:Investments in associated companies 8,020,065 4,474,863 -2,583,201 9,911,727

e) Loans to associated companies 16,883,655 575,032 290,835 392,083 17,559,935Investments in other companies 748,197 748,197

Securities and other investments 21,826,946 45,377 -21,479,201 302,368Advances on account of investments 598,558 598,558

47,478,863 5,648,453 336,212 -23,670,319 29,120,785

a) Includes 1,838,739 Euro relating to subsidiaries included in the consolidation for the first time; b) Includes -291,217,435 Euro relating to exchange rate adjustments of the opening balances of foreign

subsidiaries;

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c) The most significant amounts included in the caption “Fixed assets in progress” correspond to the following projects:

amouts inEuro

Remodelling and expansion of Continente, Modelo, Modalfa, Worten and Sport Zone stores 12.441.633Santarém Meat Warehouse 1.169.162Development of Loureshopping 2.240.483Information tecnology projects 1.799.963Projects concerning new stores in Portugal 17.143.182

34.794.423

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

amounts in Euro

Continente and Modelo Stores Project 9,557,915Loureshopping Project 4,355,856

13,913,771

e) The caption “Loans to associated companies” at 31 December 2002 includes essentially shareholders’ loans to Modelo Distribuição de Materiais de Construção, S.A. and Crediuniverso-Serviço de Marketing, S.A.

f) In 2002 several computer applications relating to the Company’s operations, which were being capitalized in the caption “Intangible Assets – work in progress”, were concluded. Therefore, the Board of Directors decided to transfer these costs to the caption “Tangible Assets – Office Equipment” since they are mainly costs of software and hardware.

Depreciation amounts in EuroOpening Increase Adjustments Closing

Captions balance (a) (b) (c) balanceIntangible assets:Installation expenses 73.751.117 20.887.308 -15.064.533 79.573.892Research and development costs 18.559.316 9.543.922 -181.096 27.922.142Industrial property and other rights 775.928 852.754 -61.166 1.567.516Premiums paid for property occupation rights 5.325.802 1.206.875 -5.425 6.527.252

98.412.163 32.490.859 -15.312.220 115.590.802Tangible assets:Buildings and other constructions 64.306.709 13.446.595 -4.561.869 73.191.435Machinery and equipment 179.557.592 37.822.997 -40.099.861 177.280.728Transport equipment 14.199.221 1.565.119 -3.097.325 12.667.015Tools and utensils 2.301.929 264.612 -37.497 2.529.044Office equipment 53.343.494 10.136.668 -12.654.838 50.825.324Reusable containers 246.528 5.262 50 251.840Other tangible assets 2.056.398 166.947 -122.968 2.100.377

316.011.871 63.408.200 -60.574.308 318.845.763

a) Includes 1,767,127 Euro relating to subsidiaries included in the consolidation for the first time; b) Includes -12,365,705 Euro relating to exchange rate differences resulting from different exchange rates

used for translating the balance sheet and statement of profit and loss accounts of foreign subsidiaries; c) Includes -66,810,011 Euro relating to exchange rate adjustments of the opening balances of foreign

subsidiaries. 28. FINANCIAL COSTS CAPITALIZED DURING THE YEAR In 2002 the Company capitalized financial costs of 1,817,813 Euro incurred on loans obtained to finance fixed assets during their construction period.

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36. SALES AND SERVICES RENDERED BY ACTIVITY AND GEOGRAPHICAL MARKET Consolidated net sales and services rendered in 2002, by activity and geographical market, were as follows:

a) By activity: amounts in EuroHyper and Supermarkets 3,104,019,853Specialised retail 415,969,271Other 36,460,606Total 3,556,449,730

b) By m arket:Portugal 2,474,261,816Brazil 1,082,187,914Total 3,556,449,730

38. DEFERRED TAXATION Deferred tax assets and liabilities at 31 December 2002 and 2001 were made up as follows, by the timing differences that gave rise to them:

amounts in Euro

2002 2001 2002 2001Revaluation of depreciable tangible fixed assets 3.559.438 2.530.113Reinvestment of capital gains 5.108.554 668.513Tax losses carried forward 39.104.911 18.094.678

Non tax deductible provisions and depreciation -16.989 338.733Harmonisation adjustments 20.243.193 15.789.848Other 344.087

39.104.911 18.094.678 29.238.283 19.327.207

Deferred Tax LiabilitiesDeferred Tax Assets

The changes in deferred taxes during 2002 and 2001 were as follows:

Amounts in Euro

2002 2001 2002 2001Opening balance 18.094.678 19.284.040 19.327.207 15.197.624Impact on profit and loss account:

Depreciation of extraordinary revaluations of depreciable tangible fixed assets -68.011Depreciation for the year of capital gains reinvested -104.564 -417.722Tax losses carried forward 35.233.060 938.211Harmonisation adjustments 4.678.428 4.323.906Other -33.006 256.519

35.233.060 938.211 4.472.847 4.162.703Impact on reserves:

Reinvestment of capital gains 4.586.387Revaluation of depreciable tangible fixed assets 1.293.555Exchange rate variation -16.363.478 -1.705.427 -441.713Tax losses carried forward 2.280.123 -561.619Other -139.472 139.473 -33.120

-14.222.827 -2.127.573 5.438.229 -33.120Closing balance 39.104.911 18.094.678 29.238.283 19.327.207

Deferred Tax LiabilitiesDeferred Tax Assets

Prior to Portuguese Accounting Directive 28 coming into force, the Company recorded deferred tax assets and liabilities in accordance with International Accounting Standards, and so significant adjustments were not required when the Directive came into force.

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In accordance with current tax legislation, the income tax rate decreased from 35.2% in previous years to 33% in 2002. Consequently, the Company adjusted its deferred tax assets and liabilities according to the new rate, and recorded the effect of the decrease in rate in the statement of profit and loss caption “Income tax for the year”. 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 2001, and was recorded in the caption “Other reserves” (Note 0.k). 39. REMUNERATION OF THE MEMBERS OF THE STATUTORY BOARDS OF THE PARENT

COMPANY amounts in Euro

Board of Directors 1,615,330 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(a) (a)(b) (a)

Tangible assets:Land and natural resources 148.062.260 11.543.432 159.605.692Buildings and other constructions 521.974.287 28.300.165 550.274.452Machinery and equipment 270.451.780 445.012 270.896.792Tools and utensils 694.537 2.119 696.656Office equipment 78.556.493 43.837 78.600.330Other tangible assets 1.631.791 3.353 1.635.144

1.021.371.148 40.337.918 1.061.709.066 (a) Net of depreciation; (b) Includes all the revaluations. 44. CONSOLIDATED NET FINANCIAL RESULTS

amounts in EuroExpenses 2002 2001Interest expense 79,666,244 67,593,355Foreign currency exchange losses 2,404,690 2,870,158Financial discounts allowed 18,447 54,789

a) Other financial expenses 46,357,280 44,055,475128,446,661 114,573,777

Net financial result -77,509,536 -69,135,71450,937,125 45,438,063

Income 2002 2001Interest income 16,152,091 11,232,563Gain on equity investments 1,447,458 1,492,615Foreign currency exchange gains 1,591,141 2,083,080Financial discounts received 23,217,457 27,412,557Other financial income 8,528,978 3,217,248

50,937,125 45,438,063

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.

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45. CONSOLIDATED NET EXTRAORDINARY RESULTS

amounts in EuroExpenses 2002 2001Donations 1.139.578 1.406.361Uncollectible debts 4.997.248 5.285.605Inventory losses 5.108 738Loss on fixed assets 6.116.525 3.066.112Fines and penalties 951.764 789.286Increase in depreciation and provisions 21.539Prior year adjustments 1.584.150 2.491.618Other extraordinary expenses 27.888.462 5.269.085

42.704.374 18.308.805Net extraordinary results -29.534.864 12.185.993

13.169.510 30.494.798

Income 2002 2001Tax recovery 65.054Debt recovery 5.547 3.818Gain on fixed assets 1.462.629 3.836.707Benefits of contractual penalties 776 7.323Decrease in depreciation and provisions 2.915.929 3.198.932Prior year adjustments 1.731.210 1.289.022Other extraordinary income 7.053.419 22.093.942

13.169.510 30.494.798 46. MOVEMENT IN PROVISIONS During 2002 the changes in provisions were as follows:

amounts in EuroCaptions Opening Increase Decrease Closing

Balance (a) (b) BalanceProvisions for doubtful debts 18.979.581 2.436.011 3.649.935 17.765.657Provisions for risks and charges 1.959.521 1.432.948 1.889.327 1.503.142

20.939.102 3.868.959 5.539.262 19.268.799 a) Includes -593,913 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; b) Includes -1,026,420 Euro relating to exchange rate adjustments of the opening balances of foreign

subsidiaries, and -323,158 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.

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47. ASSETS USED UNDER FINANCE LEASE

amounts in EuroCost Accumulated Net

Captions Depreciation ValueTangible assets:Land and natural resources 3.835.605 3.835.605Buildings and other constructions 8.789.228 443.411 8.345.817Office Equipment 3.336.774 522.202 2.814.572

15.961.607 965.613 14.995.994

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

amounts in Euro

Short term 1.074.502Medium and long term 9.941.002

11.015.504

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:

PORTUGAL BRAZIL TOTALSales and services rendered 2,474,261,816 1,082,187,914 3,556,449,730Depreciation and amortisation of fixed assets 63,229,594 43,268,043 106,497,637Provisions 2,371,669 2,069,664 4,441,333Operating Results 176,262,684 8,457,536 184,720,220Gain and loss on associated companies 1,078,764 1,078,764Operating Cash-flow (EBITDA) 241,863,947 53,795,243 295,659,190

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

amounts in EuroPORTUGAL BRASIL TOTAL

Fixed assets 968.882.290 275.750.277 1.244.632.567Inventories 244.475.241 114.519.212 358.994.453Other assets 537.579.711 34.985.695 572.565.406Total Assets 1.750.937.242 425.255.184 2.176.192.426

Accounts Payable 1.461.652.673 198.780.913 1.660.433.586Other Liabilities 99.781.701 12.891.229 112.672.930Total Liabilities 1.561.434.374 211.672.142 1.773.106.516

Investment in tangible and intangible fixed assets 90.826.339 27.955.636 118.781.975Financial investments - equity method 4.757.043 4.757.043

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2) ACCRUALS AND DEFERRALS a) Accrued Income At 31 December 2002 this caption was made up as follows:

amounts in EuroDiscounts receivable from suppliers 16.468.412Deferred tax assets (note 38) 39.104.911Accrued interest 13.161.843Royalties for use of brands 2.083.730Recovery of notary expenses 2.097.673Other income 447.277

73.363.846 b) Deferred costs At 31 December 2002 this caption was made up as follows:

amounts in EuroRent 3,628,619Store opening costs 866,715Store remodelling costs 1,438,250Prepaid interest 5,418,982Professional services 2,555,094Market studies 544,337Insurance 471,861Other 913,203

15,837,061 c) Accrued Expenses At 31 December 2002 this caption was made up as follows:

amounts in EuroHoliday pay, holiday bonus and other remuneration 39,265,696Deferred tax liabilities (note 38) 29,238,283Local government tax 6,667,738Accrued insurance premiums 610,167Accrued interest 11,472,975Professional services 11,781,701Rent 2,606,151Publicity 611,849Other expenses 4,378,142

106,632,702

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3) OTHER DEBTORS – SHORT TERM As of 31 December 2002 this caption was made up as follows:

amounts in EuroSuppliers - current accounts - debit balances 17.060.026Credit sales to third parties a) 18.707.140Sales of fixed assets c) 6.883.834VAT recoverable on property 753.464Special Regime for the Settlement of Debts to the Tax Authorities and Social Security (Decree-Law 248-A b)) 14.576.053Other 5.211.802

63.192.319

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 2003;

b) 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;

c) This caption includes 6,574,943 Euro receivable in 2003 relating to the sale of investments. 4) OTHER DEBTORS / CREDITORS – MEDIUM AND LONG TERM At 31 December 2002 this caption was made up as follows:

amounts in EuroDebit balances:

Judicial deposits in Brazil 26.607.824Social Integration Program ("PIS-Programa de Integração Social") 5.125.813Other 5.198.791

36.932.428Credit balances:

Judicial deposits in Brazil 22.560.904Tax on the circulation of merchandise and services ("ICMS-Imposto s/ Circulação de Mercadorias e Serviços") 2.931.619Other 935.379

26.427.902 The asset caption “Judicial deposits in Brazil” corresponds basically to an increase in the tax rate of a subsidiary in Brazil, which is being contested, and for which there is a legal deposit reflected under the liability caption. 5) TAX SAVINGS Tax savings of 23,852,612 Euro, resulting from the taxation of groups of companies under the Special Regime for Taxation of Groups of Companies, were recognized in the caption “Income tax for the year – current tax”.

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6) BONDS Bonds comprise:

Short term

Medium and long term

Modelo Continente / 95 33,713,561 Modelo Continente / 99 - 15,789,420 33,713,561 15,789,420

MODELO CONTINENTE / 95 BONDS

14,970,000,000 bonds - Nominal value: 0.01 Euro Maximum term: eight years. Annual interest rate:

1st coupon- LISBOR 6 month rate plus 0.25, rounded up to the 1/16 of a percentage point, totalling 10.25% for the half year ended April 1996;

2nd to 10th coupons - arithmetic average of the last 5 LISBOR 6 month rates plus 0.25, rounded up to the 1/16 of a percentage point;

11th to 16th coupons - arithmetic average of the last 5 LISBOR 6 month rates plus 0.35, rounded up to the 1/16 of a percentage point;

Interest Payment: half yearly in arrears on 30 October and 30 April of each year.

Redemption: at par, in 2 equal instalments, by reduction of the nominal value on the maturity dates of the 14th and 16th coupons, on 30 October 2002 and 30 October 2003, respectively. On 31 October 2002 the Company redeemed 6,742,075 bonds in the amount of 33,713,560 Euro.

Early redemption: Call-Option – The bonds can be fully or partly redeemed by initiative of the issuer by reduction of their nominal value, on the maturity dates of the following coupons, and payment of the respective premiums:

6th coupon 0.025%; 7th coupon 0.0175%; 8th coupon 0.01%, 9th coupon 0.01%; 10th to 15th coupons 0.005%;

Early redemption: Put-Option – During the year 2000 bonds in the amount of 82,272,879 Euro were redeemed at par by exercise of the put-option clause by the bondholders, upon the maturity of the 10th coupon (the only coupon in which the bondholders can exercise this put-option). MODELO CONTINENTE / 99 BONDS 5,000,000 bonds – Nominal Value: 5 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 0.375%. Interest Payment: half yearly in arrears, on 30 June and 31 December of each year.

Redemption: at par, in one payment on 30 June 2004, the maturity date of the loan. Early redemption is not possible, either by initiative of the issuer or the bondholders.

At 31 December 2002 the Company held 1,874,355 own Modelo Continente/99 bonds, which are reflected at cost as a debit balance in the liability caption “Bonds” (9,210,580 Euro).

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

a) A bank loan of 200,000,000 Euro obtained from a syndicate of banks, repayable in 2004, bearing interest payable half yearly at normal market rates;

b) A bank loan of 400,000,000 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;

c) 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;

d) Bank loans of 112,627,182 Reais (30,338,384 Euro) net of exchange hedging operations, obtained in Brazil, repayable up to 2005, bearing interest payable monthly at normal market rates. The subsidiary Sonae Distribuição Brasil has entered into a hedging operation of 200,000,000 Reais (approximately 53,900,000 Euro at the year-end exchange rate). At 31 December 2002 this financial instrument was valued at 138,603,165 Reais (approximately 37,300,000 Euro). The Board of Directors considers that this amount hedges the bank loan of the subsidiary, being their intention to realise the gain on this operation at the time the loan is repaid, and so has decided to reflect these amounts at their net value in the caption “Bank Loans – medium and long term”.

The loans referred to in paragraphs a) and b) and their respective conditions, are subordinate to compliance with certain financial ratios relating to the consolidated financial statements of the Group. 8) STATE AND OTHER ENTITIES (ASSETS) a) Short term This caption includes 6,750,988 Euro corresponding to VAT charged on acquisitions of real estate. This amount can be recovered in the short term should the Company choose to renounce its exemption and this is granted. 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. 9) TAX CONTINGENCIES The subsidiaries have tax contingencies in the amount of approximately 15,387,479 Euro. These contingencies are safeguarded by counter-guarantees over third parties through the mortgage of assets. 10) OTHER MARKETABLE SECURITIES At 31 December 2002 this caption included units in real estate funds in the amount of 131,420,178 Euro. Additionally, in 2002, the real estate fund Fundo de Investimento Imobiliário Imosonae II, announced the distribution of income amounting to approximately 8,300,000 Euro, payable in January 2003, which is reflected in caption “Accrued Income – Accrued interest” (note 50.2.a).

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11) TAXES The Company and its subsidiaries have outstanding tax commitments to reinvest amounts resulting from the sale of investments up to 31 December 2000. The Boards of Directors of the Company and its subsidiaries intend to follow the policy adopted in preceding years of complying with the requirements for reinvestment in accordance with current tax legislation, through the acquisition of other investments, and so the gains on the sale of investments in previous years (including those relating to transactions with group companies and eliminated in consolidation process) were not included in the computation of income tax for the years 2000, 2001 and 2002. 12) OTHER MEDIUM AND LONG TERM LOANS At 31 December 2002 this caption corresponded to a loan obtained from an external entity, which bears interest at normal market rates and is repayable in 2005. For account presentation purposes, the Company has reflected, in the accompanying balance sheet, the liability of 121,199,755 Euro net of the associated no-risk application of 21,200,000 Euro which matures on the same date as the loan. 13) BANK LOANS – SHORT TERM At 31 December 2002 this caption was made up as follows:

amounts in EuroCommercial paper 126,500,000"Hot-Money",overdrafts ans other operations 60,788,435Loans obtained in Brazil 32,112,584

219,401,019

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.

LEGAL CERTIFICATION OF ACCOUNTS 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 Legal Certification of Accounts 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 2002, that reflects a total of 2,176,192,426 Euro and shareholders’ equity of 368,254,947 Euro, including net profit of 100,089,749 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; (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, assets and shareholders' equity as of 31 December 2002 would increase by 763,103,118 Euro and consolidated net profit for the year then ended would decrease by 48,252,488 Euro, corresponding to amortisation of goodwill for the year ended 31 December 2002.

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 2002 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.

Emphasis

7. As explained in Note 50.11 of the accompanying notes, the parent company and subsidiaries sold investments in prior years and recorded capital gains thereon in their non consolidated financial statements (of which the most significant amounts occurred in the year 2000) which, as regards the amounts relating to sales to other group companies, were eliminated in the consolidation process. In accordance with the policy adopted in preceding years, the Boards of Directors of the parent company and subsidiaries intend to comply with the tax requirements for reinvestment in accordance with current legislation, through the acquisition of other investments.

Porto, 28 February 2003 MAGALHÃES, NEVES E ASSOCIADOS - SROC 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)

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 2002, which are the responsibility of Company’s Board of Directors. We accompanied the evolution of the operations of the Company and its principal subsidiary and affiliated companies, the 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 subsidiary and affiliated companies, all the information and explanations required. In performing our work, we examined the consolidated Balance sheet as of 31 December 2002, 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 and on this date issued the Legal Certification of Accounts and Audit Report, which in paragraph 5 contains a qualification and in paragraph 7 contains an emphasis paragraph. Additionally, we examined the consolidated Directors’ Report for 2002, prepared by the Company’s Board of Directors. Considering the above, in our opinion, except for the effects of the matter referred to in paragraph 5 and considering the matter mentioned in paragraph 7 of the Legal Certification of Accounts and Audit Report, the consolidated financial statements referred to above and the consolidated Directors’ Report, are in accordance with the accounting, legal and articles of association requirements and so can be approved by the Shareholders’ General Meeting. We wish to thank the Board of Directors and personnel of Modelo Continente, as well as the statutory boards and personnel of the group and associated companies for the assistance provided to us. Porto, 28 February 2003 __________________________________________ MAGALHÃES, NEVES E ASSOCIADOS - SROC Represented by Jorge Manuel Araújo de Beja Neves

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

Page 1 of 4

Modelo Continente, SGPS, SA Directors’ Report

To the Shareholders,

In compliance with legislation and the company’s articles of association, we hereby present the Directors’ Report and Accounts of Modelo Continente, SGPS, SA for 2002. We would point out that the information on consolidated business activity is presented in a separate report.

Background to the company’s business

• Economic situation

The beginning of the new century will certainly not be remembered for world economic growth, the strength of the financial markets or business confidence. The repercussions of the implosion of the “new economy”, the financial scandals, as well as the tragic events of 11 September and the resulting war in Afghanistan in 2002, have led business and confidence indices to reach their lowest historic levels ever.

In addition, the increased risk of a new military conflict in the Middle East has led to a further fall in confidence, increased instability in the financial markets and a significant increase in the price of oil, impacting the main driving forces of the world economy, which in 2002 grew less than even the most conservative forecasts.

This negative situation was reflected in business activity in Portugal, adversely affecting external demand, as well as consumer confidence and the business environment in the country. The economic environment was also affected by relocation of several manufacturing plants to more competitive cost areas in the world, as well as the government’s efforts to reduce public expenditure and increase tax receipts. This resulted in an immediate increase in unemployment, which, at a rate of 6.2% in December, was the highest in the last 5 years showing a very negative trend especially in the last quarter of the year.

This situation resulted in a modest increase in real terms of 0.5% in GDP due to a slowing down of all the major economic indicators, in particular a sharp fall in investment. The latter is even more damaging since it hinders the process of Portugal’s convergence to reach the economic levels of other European Union countries, which is dependent on a major improvement in education levels and the growth of fixed capital.

In a world environment of instability, the emerging economies, especially those of Latin America, were also severally affected.


Page 2 of 4

In Brazil particularly, the year was marked by expectations concerning the results of the presidential elections and uncertainties regarding the direction of the new government which affected the already low level of confidence of consumers and investors.

This situation once again affected the Real, which in the last 3 years has lost more than 60% of its value compared to the Euro. The Central Bank of Brazil was forced to successively increase interest rates, which currently exceed 26%. These measures can be justified by the government as a means of attracting funds to finance the Current Account deficit (in an international market marked by shortages of liquidity) and to keep inflation within levels agreed with the IMF.

This major increase in interest rates has obviously had an adverse affect on available income and business activity, which have also been impacted by the high levels of taxation. Despite these difficult conditions, Brazilian GDP had real growth of 1.5% in 2002, benefiting from strong external demand due to exchange rate devaluation, which improved the country’s competitiveness.

However, devaluation of the currency has meant increased inflationary pressure through the cost of imported goods. The rate of inflation in 2002 was 13%, equal to an increase of 5 p.p. compared to 2001.

The first signs in 2003 would indicate an improvement in confidence of the Brazilian consumer and the feeling that the Government is determined to confront the main weaknesses in the economy and implement the long awaited structural reforms, which are vital for the sustained development of the country.

• Market Conditions

The stagnant economy and major uncertainty have clearly impacted retail activity, since they have affected consumer disposable income and expectations regarding trends in the medium term. In such a situation, and after a period of aggressive internationalisation and portfolio diversification, the principal operators in the sector have concentrated their efforts on consolidating and rationalising their operations.

Portugal also felt the effects of lower growth in consumption, the retail trade operators being limited further by the freeze on new licences granted to open commercial units of significant size.

In spite of this limitation, installed capacity of the modern retail market increased by approximately 65,000 m2, reflecting growth of around 7% since the beginning of the year. On the other hand, demand, measured by total consolidated sales of the main modern retail operators, only grew at a rate close to inflation, a clear sign of the increased competition that the Portuguese market has seen over recent years.

Against a background of instability, the rate of expansion of installed capacity of the Brazilian market, was significantly lower than in previous years, the majority of operators concentrating their efforts on rationalising their stores – resulting in the closing down of more than 100,000 m2. The overall net change in the market was only slightly over 50,000 m2, which is symptomatic of the difficulties that the sector is undergoing as a result of the economic situation, in particular the high interest rates referred to earlier.


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As in the two prior years and according to first estimates for 2002, the ten largest Brazilian retail operators lost ground in terms of the total sales of the Brazilian Supermarket Association, meaning that the market is resistant to moving towards the degree of concentration seen in more developed countries.

Operating Review

• Operations of subsidiaries

The particularly difficult market situation which, in the case of Portugal was further affected by the freeze on new licences granted to open units of significant size and, in the case of Brazil, by the climate of great political instability, also impacted the operations of the Modelo Continente, SGPS, SA group of companies. Throughout the year these companies focused particularly on improving the value proposal offered to customers, as well as on rationalising critical business processes.

• Operations of the company

Throughout 2002 Modelo Continente, SGPS, SA coordinated the management of its subsidiaries, following up on the economic and financial performance of the operating and other companies that make up its portfolio.

The most significant step during the period under review was the company’s capital increase to 1,100 million Euro, paid up in cash. This involved the issue of 100,000,000 new ordinary bearer shares with a nominal value of 1 Euro each. The new shares were indirectly subscribed by a banking syndicate in 2002 and subsequently offered to shareholders.

In this way the company continued to keep a solid and balanced capital structure and limited the accounting impact on equity as a result of the sharp depreciation of the Brazilian Real, thus placing it at a level considered desirable to meet the challenges of future growth opportunities.

The following other actions of Modelo Continente, SGPS, SA are also worthy of mention:

• Sale of the company’s entire shareholding in Expedis – Logística Integrada, SA, as part of a contract with the GCT Group.

• Increase of the shareholding in Sonae Distribuição Brasil, SA through purchase of 17,898,258 shares, from Ita Mercantil, Lda., equal to 1.754% of the share capital.

• Sale of 32% of the capital of Modelo, SGPS, SA, and 66.57% of the capital of Modelo Investimentos Brasil, Lda to the company Sondis B.V


Page 4 of 4

Financial review of the company

• Operations

The company had a turnover of 15.7 million Euro for the year, a change of 3.4% compared to 2001. Operating profit totalled 10.3 million Euro, while Profit from Ordinary Activities was 47.1 million Euro which includes net financial income of 36.8 million Euro, of which 6.0 million Euro correspond to dividends received from subsidiaries. The company had a net loss of 243.4 million Euro for the year.

• Other

The company did not distribute any dividend during the year.

In 2002 the 13th and 14th coupons of the Modelo Continente/95 bonds, totalling 2,633,871 Euro and the 6th and 7th coupons of the Modelo Continente/99 bonds, totalling 590,684 Euro, matured. In October partial repayment of the 1995 bonds, in the amount of 35,041,032 Euro was made, no new bonds having been issued.

Outlook

In 2003, the company will follow the same path as in 2002, thus continuing the 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.

Proposed appropriation of the results

The Board of Directors proposes transferring the net loss of 243,355,842.22 Euro for the year to Retained Earnings.

We thank our Customers, Employees, Suppliers and other Entities for all their help and support during the year.

Matosinhos, 10 February 2003 The Board of Directors


NOTE RELATING TO ARTICLE 447 OF THE COMMERCIAL COMPANY CODE ("CÓDIGO DAS SOCIEDADES COMERCIAIS")

Held at 31.12.2002

Date Quantity Average value - Euro Quantity Average value - Euro Quantity

THE BOARD OF DIRECTORS

Belmiro Mendes de Azevedo Efanor Investimentos, SGPS, SA (1) 49.999.997 Imparfin, SGPS, SA (2) 112.500 Sonae, SGPS, SA 14.901 Sonae.com, SGPS, SA Capital increase 23.07.02 15.107 2,25 75.537

Nuno Manuel Moniz Trigoso Jordão Sonae.com, SGPS, SA 59.800

Ângelo Gabriel Ribeirinho dos Santos Paupério Sonae, SGPS, SA 4.564 Sonae.com, SGPS, SA 59.800 Modelo Continente, SGPS, SA - Bonds Sale 08.01.02 1.995.191 0,0099 0

José Manuel Baeta Tomás Sonae.com, SGPS, SA 29.900

Fernando Sérgio Maia Rebelo Sonae.com, SGPS, SA 29.900

Manuel José Ferreira Fontoura Sonae, SGPS, SA Investment 10.01.02 50.000 0,88 73.340 Sonae.com, SGPS, SA Capital increase 23.07.02 50 2,25 30.150

Luís Filipe Campos Dias de Castro Reis Sonae.com, SGPS, SA 29.900

THE BOARD OF THE SHAREHOLDERS' GENERAL MEETING

António Manuel Ramos de Oliveira Sonae, SGPS, SA 11.370 Modelo Continente, SGPS, SA Purchase 02.12.02 94 1,65 4.100 Sonae, SGPS, SA - Bonds 25.937 Modelo Continente, SGPS, SA - Bonds 20

Notes:(1) Efanor Investimentos, SGPS, SA Sonae, SGPS, SA 948.101.424 Pareuro, BV (3) 20.000(2) Imparfin, SGPS, SA Sonae, SGPS, SA 5.193.798(3) Pareuro, BV Sonae, SGPS, SA 108.820.695

SECURITIES HELD BY THE MEMBERS OF CORPORATE BOARDS AND RESPECTIVE TRANSACTIONS DURING 2002

Acquisitions Disposals


NOTE RELATING TO ARTICLE 448 OF THE COMMERCIAL COMPANY CODE ("CÓDIGO DAS SOCIEDADES COMERCIAIS")

Number of shares at 31.12.02

Efanor Investimentos, SGPS, SA Sonae, SGPS, SA 948.101.424 Pareuro, BV 20.000

Pareuro, BV Sonae, SGPS, SA 108.820.695

Sonae, SGPS, SA Modelo Continente, SGPS, SA 555.145.768

Carrefour, SA Modelo Continente, SGPS, SA 213.640.580

Number of bonds at 31.12.02

Carrefour, SA Modelo Continente, SGPS, SA 1.068.202

Note:(1) The Company increased its share capital from 1,000,000,000 Euro to 1,100,000,000 Euro in accordancewith a Public deed signed on 16 December 2002 in the First Specialised Notary Public's Office of Oporto.The increase of 100,000,000 Euro was paid up in cash through indirect subsciption, and 100,000,000 new non-materialised ordinary bearer shares were issued. The shares taken up were offered to the shareholders that intended to exercise their preferential rights in the period from 6 to 17 January 2003.


Shareholders Number of shares % Voting rights

Sonae, SGPS, SA 555.145.768 50,47%Imputable voting rights in accordance with art. 20 line e) of the Stock Exch. Com. 199.500.000 18,14%

Total imputable 754.645.768 68,60%

Carrefour, SA 213.640.580 19,42% Continente Hypermarchés 10.106.940 0,92%


Banco Santander Central Hispano, SA Foggia, SGPS, SA 108.108.100 9,83% Banco Santander Central Hispano, SA 56.877.900 5,17% Banco Santander de Negócios de Portugal, SA (1) 19.950.000 1,81%


Banco ABN AMRO Bank, N.V. (1) 80.050.000 7,28%Total imputable 80.050.000 7,28%

Note:(1) The Company increased its share capital from 1,000,000,000 Euro to 1,100,000,000 Euro in accordancewith a Public deed signed on 16 December 2002 in the First Specialised Notary Public's Office of Oporto.The increase of 100,000,000 Euro was paid up in cash through indirect subscription, and 100,000,000 new non-materialised ordinary bearer shares were issued. The shares taken up were offered to the shareholders that intended to exercise their preferential rights in the period from 6 to 17 January 2003.

QUALIFIED PARTICIPATIONS

Pursuant to paragraph e), article 6 of the Stock Exchange Commission ("Comissão do Mercado de Valores Mobiliários")Regulation 11/2000, with the alterations introduced by Regulation 24/2000, we indicate the shareholders with qualifiedparticipations at 31 December 2002:

euro

31/12/2002 31/12/2001

Assets Gross Depreciation Net NetAssets and provisions Assets Assets

Fixed assets: Intangible assets: Installation expenses...................................................................... 12.071.730 10.981.271 1.090.459 2.385.042 Research and development costs.................................................. 33.000 917 32.083 Industrial property and other rights................................................. 7.277 7.277 1.819

12.112.007 10.989.465 1.122.542 2.386.861 Tangible assets: Transport equipment...................................................................... 19.062 19.062 1.191 Office equipment............................................................................ 9.833 4.084 5.749 7.354 Other tangible assets..................................................................... 679 645 34 162

29.574 23.791 5.783 8.707 Investments: Investments in group companies.................................................... 1.107.832.267 1.107.832.267 1.874.167.567 Loans to group companies............................................................. 432.976.528 432.976.528 556.134.973 Securities and other investments................................................... 5.472.787 5.472.787 3.054.787

1.546.281.582 1.546.281.582 2.433.357.327Current assets: Short term receivables: Clients - Current accounts.............................................................. 92.252 92.252 104.700 Group companies........................................................................... 972.349.884 972.349.884 684.131.414 State and public entities................................................................. 3.218.126 3.218.126 16.483.300 Other debtors................................................................................. 9.265.195 9.265.195 118.825.772

984.925.457 984.925.457 819.545.186 Marketable securities: Other marketable securities........................................................... 131.420.178 131.420.178 28.680.358

131.420.178 131.420.178 28.680.358 Bank deposits and cash: Bank deposits................................................................................ 115.510.030 115.510.030 35.196.203 Cash in hand.................................................................................. 47 47 3.865

115.510.077 115.510.077 35.200.068 Accruals and deferrals: Accrued income............................................................................. 16.423.136 16.423.136 4.779.393 Deferred costs................................................................................ 1.109.621 1.109.621 650.211

17.532.757 17.532.757 5.429.604Total depreciation 11.013.256

Total provisionsTotal assets 2.807.811.632 11.013.256 2.796.798.376 3.324.608.111

The Accountant,


Balance sheet as of 31 December 2002

The Board of Directors,

(Translation of a report originally issued in Portuguese - Note 49)

euro

Shareholders' Equity and Liabilities 31/12/2002 31/12/2001

Shareholders' Equity Share capital.................................................................................................. 1.100.000.000 1.000.000.000 Reserves: Legal reserve............................................................................................... 86.000.000 81.300.000 Other reserves............................................................................................. 1.282.309.324 1.195.548.747

Subtotal.............................................................. 2.468.309.324 2.276.848.747

Net profit/(loss) for the year............................................................................ -243.355.842 91.460.577

Total shareholders' equity 2.224.953.482 2.368.309.324

Liabilities: Medium and long term liabilities: Bonds: Non convertible............................................................................................ 15.789.420 58.713.560 Bank loans..................................................................................................... 4.000.000

19.789.420 58.713.560 Short term liabilities: Bonds: Non convertible............................................................................................ 33.713.560 33.713.561 Bank loans..................................................................................................... 107.055.921 108.705.562 Suppliers - Current accounts......................................................................... 31.525 25.736 Group companies........................................................................................... 396.902.165 670.390.980 Other shareholders........................................................................................ 281 381 Suppliers of fixed assets - Current accounts.................................................. 68.248.197 State and public entities................................................................................. 5.630.570 2.786.862 Other creditors............................................................................................... 189.970 3.312.515

543.523.992 887.183.794 Accruals and deferrals: Accrued expenses.......................................................................................... 8.531.482 10.401.433

8.531.482 10.401.433

Total liabilities 571.844.894 956.298.787

Total shareholders' equity and liabilities 2.796.798.376 3.324.608.111

The Accountant, The Board of Directors,


Balance sheet as of 31 December 2002(Translation of a report originally issued in Portuguese - Note 49)

euro

Expenses

External supplies and services...................................................................... 2.245.798 1.662.116

Personnel costs:

Wages and salaries:................................................................................... 1.567.339 1.498.086

Social charges:

Other......................................................................................................... 87.230 1.654.569 73.548 1.571.634

Depreciation and amortisation of fixed assets.............................................. 1.299.908 1.299.908 2.021.997 2.021.997

Taxes............................................................................................................ 267.460 267.460 417.062 417.062

(A) 5.467.735 5.672.809

Interest and similar expenses:

Relating to group companies...................................................................... 16.300.542 1.950.934

Other........................................................................................................... 15.348.649 31.649.191 30.451.284 32.402.218

(C) 37.116.926 38.075.027

Extraordinary expenses................................................................................. 317.901.985 55.052.324

(E) 355.018.911 93.127.351

Income tax:

Current tax.................................................................................................. 3.319 2.800

Deferred tax................................................................................................ -19.759.710 -19.756.391 2.800

(G) 335.262.520 93.130.151

Net profit/(loss) for the year........................................................................... -243.355.842 91.460.577

91.906.678 184.590.728

Income

Services rendered......................................................................................... 15.732.837 15.732.837 15.214.587 15.214.587

Supplementary income................................................................................. 4.082 4.082 879 879

(B) 15.736.919 15.215.466

Gain on equity investments........................................................................... 5.929.617 70.771.907

Gain on marketable securities and other financial applications:

Other........................................................................................................... 8.584.852 2.082.113

Other interest and similar income:

Relating to group companies...................................................................... 48.430.596 70.427.338

Other........................................................................................................... 5.517.997 68.463.062 4.595.629 147.876.987

(D) 84.199.981 163.092.453

Extraordinary income.................................................................................... 7.706.697 21.498.275

(F) 91.906.678 184.590.728

Summary: Operating results: (B) - (A) = 10.269.184 9.542.657

Net financial results: [(D) - (B)] - [(C) - (A)] = 36.813.871 115.474.769

Current results: (D) - (C) = 47.083.055 125.017.426

Profit/(loss) before income tax: (F) - (E) = -263.112.233 91.463.377 Net profit/(loss) for the year: (F) - (G) = -243.355.842 91.460.577


Statement of profit and loss by nature for the year ended 31 December 2002


31/12/2002 31/12/2001


Statement of profit and loss by functions for the year ended 31 December 2002(Translation of report originally issued in Portuguese - Note 49)

euro

31/12/2002 31/12/2001

Sales and services rendered 15.732.837 15.214.587Cost of goods sold and services rendered -2.834.565 -2.668.987

Gross margin 12.898.272 12.545.600

Other operating income 4.082 881Administrative charges -2.365.789 -2.586.761Other operating charges -854 -808

Operating results 10.535.711 9.958.912

Net financial results 30.617.727 44.286.607Gain/(loss) relating to undertakings -309.406.543 19.601.880Exceptional items 5.140.872 17.615.978

Current results -263.112.233 91.463.377

Income tax on current results 19.756.391 -2.800

Current profit/(loss) after income tax -243.355.842 91.460.577

Net profit/(loss) for the year -243.355.842 91.460.577

Earnings per share -0,22 0,09


Year ended


Statement of cash flows for the year ended 31 December 2002

(Translation of report originally issued in Portuguese - Note 49)

euro

Year ended31/12/2002 31/12/2001

OPERATING ACTIVITIES Receipts from customers 15.074.464 13.103.562Payments to suppliers 778.162 617.200Payments to personnel 1.704.151 1.380.131 Cash flow generated by operations 12.592.151 11.106.231Payments/receipts of income tax -20.362.224 2.501.786Other receipts/payments relating to operating activities -8.425.475 -6.678.682 Cash flow generated before extraordinary items 24.528.900 1.925.763Receipts relating to extraordinary items 3.501.685 2.300Payments relating to extraordinary items 352.389 255.322 Cash flow from operating activities [1] 27.678.196 1.672.741

INVESTING ACTIVITIES:Receipts relating to:Investments 423.841.334 1.456.841.178Tangible assets 50Interest and similar income 55.727.474 74.182.553Dividends received 5.929.617 70.771.907Loans granted 2.850.044.626 1.883.067.654

3.335.543.101 3.484.863.292Payments relating to:Investments 253.488.359 1.299.458.175Tangible assets 5.383Intangible assets 33.000 2.569.960Loans granted 2.679.498.112 2.457.347.716

2.933.019.471 3.759.381.234 Cash flow from investing activities [2] 402.523.630 -274.517.942

FINANCING ACTIVITIES:Receipts relating to:Loans obtained 2.155.046.479 1.842.637.789Cap. inc., supp. cap. cont. and share premiums 100.000.000

2.255.046.479 1.842.637.789Payments relating to:Loans obtained 2.472.393.337 1.456.238.586Interest and similar costs 29.844.547 34.415.020Dividends 101 35.000.277

2.502.237.985 1.525.653.883 Cash flow from financing activities [3] -247.191.506 316.983.906Variation of cash and its equivalents [4]=[1]+[2]+[3] 183.010.320 44.138.703Cash and its equivalents at the beginning of the year 63.872.864 19.734.161Cash and its equivalents at the end of the year 246.883.184 63.872.864


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

Notes to the Statement of Cash Flows for the year ended 31 December 2002

0- The Notes to statement of cash flows not included, are not applicable.

1- Acquisition or disposals of equity investments on affiliated companies and other business activitiesParagraphs a) and b)

Acquisitions euroSubsidiaries Acquisitions

Total price Amount paid Contibomba - Comércio e Distribuição de Combustíveis, S.A. 50.000 50.000

Sonae Distribuição Brasil, S.A. 10.550 10.550Todos os Dias - Comércio Ret. e Expl. de Centros Comerciais, S.A. 50.000 50.000

Total 110.550 110.550

Disposals euroSubsidiaries Sales

Total price Amount received Expedis - Logística Integrada, S.A. 599.933.667 599.636.459Modelo Investimentos Brasil, S.A. 388.444.818Modelo, S.G.P.S., S.A. 59.738.417

Total 1.048.116.902 599.636.459

2- Description of components of cash and its equivalents:euro

2002 2001

Cash 47 3.865Bank deposits 115.510.030 35.196.203Marketable securities 131.420.178 28.680.358Cash equivalents -47.071 -7.562

Cash and its equivalents 246.883.184 63.872.864Other cash equivalents 47.071 7.562Banks and cash in the balance sheet 246.930.255 63.880.426


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NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2002

(Translation of notes originally issued in Portuguese – Note 49) INTRODUCTION Modelo Continente, SGPS, S.A. is a Portuguese corporation with shares listed on the Lisbon Stock Exchange. 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 “Plano Oficial de Contabilidade”. 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 required 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. 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.


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e) Marketable securities

Marketable securities and other treasury applications are recorded at the lower of 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 expected 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 has outstanding tax commitments to reinvest amounts resulting from the sale of investments in prior years. The Company’s Board of Directors intends to follow the policy adopted in preceding years, of complying with the requirements to reinvest in accordance with current tax legislation, through the acquisition of other investments, and so the gains on the sale of investments in previous years (of which the most significant amounts relate to the year 2000) were not included in the calculation of estimated income tax.

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. Additionally, the Company recorded, in the statement of profit and loss caption “Deferred Tax”, the amount of 19,759,710 Euro corresponding to deferred tax relating to tax losses for the year, which are compensated with taxable profits of the companies covered by 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 2002, 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 259,000,000 Euro, the Company not having recorded the corresponding deferred tax asset .

8. INSTALLATION EXPENSES The increase in the caption “Research and development costs” corresponds to expenses incurred with the new

organizational and services rendering models.


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10. MOVEMENT IN FIXED ASSETS In 2002 the movement in fixed assets and in the related amortisation, depreciation and provision accounts was as

follows:

Gross AssetsOpening Closing

Captions Balance Revaluation Increase Decrease Others Balance

2001.12.31 2002.12.31

Intangible Assets:Installation expenses 12,072,177 -447 12,071,730

Research and development costs 33,000 33,000

Industrial property and other rights 7,277 7,277

12,079,454 33,000 -447 12,112,007

Tangible Assets:

Transport equipment 19,062 19,062

Office equipment 13,030 3,197 9,833

Other tangible assets 679 679

32,771 3,197 29,574

Investments:Investments in group companies 1,874,167,567 110,550 738,139,212 -28,306,638 1,107,832,267

Loans to group companies 556,134,973 179,730,285 302,888,730 432,976,528

Securities and other investments 3,054,787 2,418,000 5,472,787

2,433,357,327 182,258,835 1,041,027,942 -28,306,638 1,546,281,582

euro

The decrease of 738,139,212 Euro in the caption “Investments in group companies” corresponds to the sale of the 100% participation in Expédis - Logística Integrada, SA, the 32% participation in Modelo, SGPS, SA and the 66.57% participation in “ Modelo Investimentos Brasil, SA”.

The amount of -28,306,638 Euro in the “Others” column for the caption “Investments in group companies”

corresponds to the transfer out of 145,183,870 shares of “Continente Investimentos Brasil, SA” and the transfer in of 124,034,808 shares of “Modelo Investimentos Brasil, SA”, as a result of the merger of “Continente Investimentos Brasil, SA” into “Modelo Investimentos Brasil, SA”.

The increase of 2,418,000 Euro in the caption “Securities and other investments” corresponds to supplementary

capital contributions made to “Sonae Retalho España, Servicios Generales, SA”.

DepreciationOpening Closing

Captions Balance Revaluation Increase Decrease Others Balance

2001.12.31 2002.12.31

Intangible Assets:Installation expenses 9,687,135 1,294,248 -112 10,981,271

Research and development costs 917 917

Industrial property and other rights 5,458 1,819 7,277

9,692,593 1,296,984 -112 10,989,465

Tangible Assets:

Transport equipment 17,871 1,191 19,062

Office equipment 5,676 1,605 3,197 4,084

Other tangible assets 517 128 645

24,064 2,924 3,197 23,791

euro


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16. GROUP AND ASSOCIATED COMPANIES At 31 December 2002 the Company had investments in the following group and associated companies:

euro

Company HeadOffice

% Shareholders’

Direct Equity Net Profit/LossParticipation

Bertimóvel - Sociedade Imobiliária, SA a) Matosinhos 100% 39,765 -8,157

Contibomba - Comércio e Distribuição de Combustíveis, SA Matosinhos 100% -28,331 -78,331

Contimobe - Imobiliária Castelo Paiva, SA Castelo Paiva 8.07% 133,697,841 13,920,524

Crediuniverso - Serviço de Marketing, SA Porto 50% 2,062,268 401,983

Fozimo - Sociedade Imobiliária, SA a) Maia 100% 378,489 -46,092

Igimo - Sociedade Imobiliária, SA a) Maia 100% 135,158 54,614

Iginha - Sociedade Imobiliária, SA Matosinhos 10% 466,862 431,253

Imoconti - Sociedade Imobiliária, SA a) Matosinhos 100% 161,326 101,326

Imomuro - Sociedade Imobiliária, SA a) Matosinhos 100% -114,538 -167,870

Imoresultado - Sociedade Imobiliária, SA a) Maia 100% 323,663 17,610

Infofield - Informática, SA a) Maia 10% 1,283,217 358,735

Modelo.Com - Vendas por Correspondência, SA Maia 100% -163,101 -2,381,339

Modelo Continente Hipermercados, SA a) Matosinhos 46.2% 49,785,187 6,986,896

Modelo Continente - Operações de Retalho, SGPS, SA a) Matosinhos 100% 984,583,336 23,727,840

Modelo Investimentos Brasil, SA São Paulo - Brazil 10.25% 401,577,415 -42,682,813

Modelo, SGPS, SA Maia 0.15% 95,567,628 -8,922,121

Modis, SGPS, Ldª. Matosinhos 60% 12,396,895 313,474

Ok Bazar - Comércio Geral, SA Matosinhos 100% 3,276,568 563,475

Predicomercial - Promoção Imobiliária, SA Maia 10% 7,970,403 464,671

Sempre à Mão - Sociedade Imobiliária, SA a) Matosinhos 100% 45,967 -1,361

Sempre a Postos - Prod. Aliment. e Utilidades, Lda Lisbon 25%

Sesagest - Projectos e Gestão Imobiliária, SA a) Matosinhos 100% 5,464,737 2,848,175

Sociloures - Sociedade Imobiliária, SA a) Matosinhos 100% 25,447 -6,179

Sonae Distribuição Brasil, SA São Paulo - Brazil 0.001% 378,817,191 -47,141,131

Sondis, B.V. Amesterdam 100% 92,989,282 -6,548,465

Sonvecap, B.V. Amesterdam 100% 2,871,600 272,989

Sportzone - Comércio de Artigos de Desporto, SA a) Matosinhos 10% 5,446,635 1,898,325

SRE - Projectos de Consultadoria, SA a) Maia 100% 1,150,572 1,104,522

Todos os Dias-Comércio Ret. e Expl. de Centros Comerciais, S.A. Matosinhos 100% 48,511 -1,489

Sonae Retalho España, SA Spain 100% 2,281,397 2,250,379

Worten - Equipamentos para o Lar, SA a) Matosinhos 10% 9,124,104 4,380,550

2002.12.31

a) Companies included in the Special Regime for Taxing Groups of Companies; 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. Additionally, the Company prepares consolidated financial statements.

17. MARKETABLE SECURITIES

At 31 December 2002 this caption was made up as follows:

euro Description Quantity Nominal value Book value Fundo de Investimento Imobiliário–Imosonae II 1,390,925 69,379,339 91,700,178 Fundo Efisa 750,000 37,410,000 39,720,000 131,420,178


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27. BONDS AND OTHER SECURITIES ISSUED BY THE COMPANY

As of 31 December 2002 this caption was made up as follows:

S h o r t te rm M e d iu m a n d lo n g te rm B o n d s E u ro E u ro

M o d e lo C o n t in e n te /9 5 3 3 ,7 1 3 ,5 6 0

M o d e lo C o n t in e n te /9 9 1 5 ,7 8 9 ,4 2 0 3 3 ,7 1 3 ,5 6 0 1 5 ,7 8 9 ,4 2 0

MODELO CONTINENTE / 95 BONDS 14,970,000,000 bonds - Nominal value: 0.01 Euro Maximum term: eight years. Annual interest rate:

1st coupon- LISBOR 6 month rate plus 0.25, rounded up to the 1/16 of a percentage point, totalling 10.25% for the half year ended April 1996;

2nd to 10th coupons - arithmetic average of the last 5 LISBOR 6 month rates plus 0.25, rounded up to the 1/16 of a percentage point;

11th to 16th coupons - arithmetic average of the last 5 LISBOR 6 month rates plus 0.35, rounded up to the 1/16 of a percentage point;

Interest Payment: half yearly in arrears on 30 October and 30 April of each year.

Redemption: at par, in 2 equal instalments, by reduction of the nominal value on the maturity dates of the 14th and 16th coupons, on 30 October 2002 and 30 October 2003, respectively.

On 31 October 2002 the Company redeemed 6,742,075 bonds in the amount of 33,713,560 Euro.

Early redemption: Call-Option – The bonds can be fully or partly redeemed by initiative of the issuer by reduction of their nominal value, on the maturity dates of the following coupons, and payment of the respective premiums:

6th coupon 0.025%; 7th coupon 0.0175%; 8th coupon 0.01%, 9th coupon 0.01%; 10th to 15th coupons 0.005%;

Early redemption: Put-Option – During the year 2000 bonds in the amount of 82,272,879 Euro were redeemed at par by exercise of the put-option clause, by the bondholders, upon the maturity of the 10th coupon (the only coupon in which the bondholders can exercise this put-option).

MODELO CONTINENTE / 99 BONDS 5,000,000 bonds– Nominal Value: 5 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, plus a spread of 0.375%. Interest Payment: half yearly in arrears, on 30 June and 31 December of each year. Redemption: at par, in one payment on 30 June 2004, the maturity date of the loan. Early redemption is not possible, either by initiative of the issuer or the bondholders.

At 31 December 2002 the Company held 1,874,355 own Modelo Continente/99 bonds, which are reflected in the liabilities caption “Bonds – non convertible” at cost (9,210,580 Euro).

31. FINANCIAL COMMITMENTS NOT INCLUDED IN THE BALANCE SHEET

At 31 December 2002 the financial commitments not included in the balance sheet were as follows:

Long term rental instalments not yet due (principal) –196,411 Euro.


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32. GUARANTEES GRANTED At 31 December 2002 the Company had responsibilities for guarantees granted as follows:

In favour of: euro

Guarantes

Matosinhos Tax department 5,218,039

Cascais Tax department 129,049

Amadora Tax department 1,995

Tax administration 13,482,125

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. 34. MOVEMENT IN PROVISIONS

Provisions at 31 December 2002 and their movement in the year then ended were as follows:

euro Captions Opening Increase Decrease Closing

Balance Balance Provisions for doubtful accounts Clients 865,728 865,728 - Other debtors 544,189 544,189 -

1,409,917 1,409,917 - 35. MOVEMENT IN CAPITAL

In 2002 the Company increased share capital from 1,000,000,000 Euro to 1,100,000,000 Euro through the issuance of 100,000,000 new ordinary bearer shares, with nominal value of 1 Euro, indirectly and payable in cash by a group of financial institutions, which have assumed the commitment to offer them to the Company’s shareholders that exercise their preferential share subscription rights in the proportion of the shares held.

36. SHARE CAPITAL At 31 December 2002 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 2002 the following entities held more than 20% of the share capital:

Entity % Sonae, S.G.P.S., S.A. 56.89 Carrefour, S.A. 22.37

These percentages include shares acquired in January 2003 as result of the capital increase made through indirect subscription and offered to the shareholders at that date, as explained in note 35.


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40. MOVEMENT IN EQUITY CAPTIONS The movement in the equity captions in 2002 was as follows:

euro

Captions Opening Closing

Balance Increase Decrease Balance

Share capital 1,000,000,000 100,000,000 1,100,000,000

Reserves:

Legal reserve 81,300,000 4,700,000 86,000,000

Other reserves 1,195,548,747 86,760,577 1,282,309,324

Net profit/(loss) 91,460,577 334,816,419 -243,355,842

2,368,309,324 191,460,577 334,816,419 2,224,953,482

As decided at the Shareholders’ General Meeting held on 29 May 2002, net profit for the year 2001 was appropriated as follows:

euro

Legal reserves 4,700,000

Other reserves 86,760,577

91,460,577 43. REMUNERATION OF THE MEMBERS OF THE CORPORATE BOARDS The remuneration of the members of the Company’s Corporate Boards during 2002 was as follows:

euro Board of Directors 1,615,330

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

euro

Expenses 2002.12.31 2001.12.31

Interest expenses 29,464,692 25,373,477

Foreign currency exchange losses 1,639,184 6,569,953

Other financial expenses 545,315 458,788

Net financial results 36,813,871 115,474,769

68,463,062 147,876,987

Income 2002.12.31 2001.12.31

Interest income 62,533,386 77,103,654

Gains on equity investments 5,929,617 70,771,907

Foreign currency exchange gains 59 743

Other financial income 683

68,463,062 147,876,987 The amount reflected in the caption “Foreign currency exchange losses” corresponds fundamentally to the result

of term operations hedging exchange risk.


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46. NET EXTRAORDINARY ITEMS

euro

Expenses 2002.12.31 2001.12.31

Uncollectible debts 64 14,324

Losses on fixed assets 317,549,334 54,782,678

Fines and penalties 469

Prior year adjustments 20,170 7,427

Other extraordinary expenses 332,417 247,426

Net extraordinary results -310,195,288 -33,554,049

7,706,697 21,498,275

Income 2002.12.31 2001.12.31

Recovery of income tax 56,035

Gains on fixed assets 2,213,336 3,612,650

Reduction in amortisation and provisions 64 15,098

Prior year adjustments 43,148 2,287

Other extraordinary income 5,450,149 17,812,205

7,706,697 21,498,275 The amount of 317,549,334 Euro reflected in the caption “Losses on fixed assets” corresponds to losses on the sale of investments to group companies (Note 10). The amount of 2,213,336 Euro reflected in the caption “Gains on fixed assets” corresponds to gains on the sale of investments in transactions with third parties (Note 10).

The caption “Other extraordinary income” corresponds essentially to fees paid by the Company in previous years

as a result of share capital increases and changes in the Company’s Articles of Association, which have been legally claimed by the Company and received from the Portuguese State in accordance with a decision of the Tax Court in favour of the Company.

47. INFORMATION REQUIRED BY LAW Art 5, item 4 of Decree-Law 318/94 During 2002 shareholders’ loan contracts were entered into with the following companies:

Sonae Distribuição Brasil, S.A.Sociloures - Sociedade Imobiliária, S.A.Imoresultado – Sociedade Imobiliária, S.A.Imoconti – Sociedade Imobiliária, S.A.Sesagest - Projectos e Gestão Imobiliária, S.A.Modelo Continente Hipermercados, S.A.Sonae Retalho España, S.A.Fozimo – Sociedade Imobiliária, S.A.Imomuro - Sociedade Imobiliária, S.A.Sondis, B.V.Predicomercial - Promoção Imobiliária, S.A.Sportzone - Comércio de Artigos de Desporto, S.A.Sempre à Mão - Sociedade Imobiliária, S.A.


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During 2002 short-term treasury loan contracts were entered into with the following companies:

SRE - Projectos de Consultoria, S.A.Fozimo – Sociedade Imobiliária, S.A.Igimo – Sociedade Imobiliária, S.A.Sportzone - Comércio de Artigos de Desporto, S.A.Modelo.Com - Vendas por Correspondência, S.A.Infofield – Informática, S.A.Imoconti – Sociedade Imobiliária, S.A.O.K. Bazar - Comércio Geral, S.A.Sonvecap, B.V.Bertimóvel - Sociedade Imobiliária, S.A.Sempre à Mão - Sociedade Imobiliária, S.A.Contibomba - Comércio e Distribuição Combustíveis, S.A.Modis - Distribuição Centralizada, S.A.Modelo Continente - Operações de Retalho, SGPS, S.A.Global S - Hipermercados, LdaSesagest - Projectos e Gestão Imobiliária, S.A.Modelo Hiper Imobiliária, S.A.Max Office - Artigos e Serviços para Escritórios, S.A.Imomuro - Sociedade Imobiliária, S.A.Fozmassimo - Comércio e Industria de Produtos Alimentares, S.A.Best Offer - Prestação de Informação pela Internet, S.A.

At 31 December 2002 the receivable balances were as follows: Loans granted

euro

COMPANIES Closing

Balance

Bertimóvel-Sociedade Imobiliária, S.A. 1,870,000

Contibomba-Comércio e Distribuição Combustíveis, S.A. 65,000

Crediuniverso–Serviço de Marketing, S.A. 1,414,106

Fozimo–Sociedade Imobiliária, S.A. 2,697,000

Igimo–Sociedade Imobiliária, S.A. 860,000

Imoconti–Sociedade Imobiliária, S.A. 20,355,000

Imomuro-Sociedade Imobiliária, S.A. 5,337,000

Imoresultado–Sociedade Imobiliária, S.A. 432,192

Modis-Distribuição Centralizada, S.A. 18,192,000

Modelo.Com -Vendas por Correspondência, S.A. 5,973,498

Modelo Continente Hipermercados, S.A. 428,908,000

O.K. Bazar - Comércio Geral, S.A. 10,220,000

Predicomercial-Promoção Imobiliária, S.A. 11,075,000

Sempre à Mão-Sociedade Imobiliária, S.A. 21,000

Sesagest-Projectos e Gestão Imobiliária, S.A. 92,977,000

Sociloures-Sociedade Imobiliária, S.A. 8,538,000

Sondis, B.V. 83,771,854

Sonae Distribuição Brasil, S.A. 120,011,876

Sonae Retalho Espanha, S.A. 685,002

Sportzone-Comércio de Artigos de Desporto, S.A. 15,483,000

Worten-Equipamentos para o Lar, S.A. 79,421,000

908,307,528


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The current asset caption “Group companies” includes: (i) 448,183,235 Euro relating to accounts receivable from the sale of investments in 2002 (note 10); (ii) 12,677,901 Euro corresponding to interest on the loans granted; (iii) 17,790,382 Euro corresponding to income tax for the year of the companies taxed in accordance with the Special Regime for Taxing Groups of Companies and (iv) 18,367,366 Euro corresponding to accounts receivable from Group companies for services rendered.

At 31 December 2002 the payable balances were as follows:

Loans obtained: euro

COMPANIES Closing

Balance

Modelo, S.G.P.S., S.A. 395,622,000 SRE - Projectos de Consultoria, S.A. 1,079,000

396,701,000 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, in accordance with authorisation to be granted by the Finance Minister. Because of the changes in the companies included in the tax consolidation, renewal of the permission has been

requested and is expected to be granted.

b) Bank Loans

This caption includes essentially 76,500,000 Euro corresponding to commercial paper issued and 30,508,850 Euro corresponding to very short-term “Hot-Money” funding operations. The medium and long-term caption includes a financing operation for five years.

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.

This caption also includes 6,570,000 Euro relating to the amount receivable in 2003 from the sale of investments in 2002.

d) Accruals and Deferrals

The caption “Accrued Income” includes mainly 6,038,683 Euro corresponding to accrued interest income and

8,392,841 Euro relating to accrued income on marketable securities, receivable in January 2003.

The caption “Accrued costs” refers mainly to accrued interest expense. 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.


CORPORATE BOARDS

BOARD OF DIRECTORS Belmiro Mendes de Azevedo - Chairman Nuno Manuel Moniz Trigoso Jordão Ângelo Gabriel Ribeirinho dos Santos Paupério José Manuel Baeta Tomás Fernando Sérgio Maia Rebelo Manuel José Ferreira Fontoura Luis Filipe Campos Dias de Castro Reis STATUTORY AUDITOR Magalhães, Neves e Associados, SROC, represented by Jorge Manuel Araújo de Beja Neves - Statutory Auditor ALTERNATE STATUTORY AUDITOR António Dias e Associados, SROC, represented by António Marques Dias - Statutory Auditor BOARD OF THE SHAREHOLDERS’ GENERAL MEETING Carlos Manuel Teixeira Osório de Castro - President Alice de Assunção Castanho Amado – Vice - President António Manuel Ramos de Oliveira - Secretary SALARY COMMITTEE Sonae, S.G.P.S., S.A. represented by José Manuel Trindade Neves Adelino Bruno Walter Lehmann COMPANY SECRETARY Alice de Assunção Castanho Amado - Secretary Júlia Maria Moreira da Silva Santos - Alternate Secretary

LEGAL CERTIFICATION OF ACCOUNTS 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 Legal Certification of Accounts 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 2002, which comprise the Balance Sheet as of 31 December 2002, that reflects a total of 2,796,798,376 Euro and shareholders’ equity of 2,224,953,482 Euro, including a net loss of 243,355,842 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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Qualification

5. As mentioned in the notes to the financial statements, the investments in group and associated companies are stated at cost, and not in accordance with the equity method as required by Portuguese Accounting Directive 9. The Company will prepare and present separate consolidated financial statements as of 31 December 2002. Although Note 16 to the financial statements contains financial information on the group and associated companies, at the date of this report the effect on the accompanying financial statements of recording the investments in group and associated companies based on the equity method has not been quantified.

Opinion

6. In our opinion, except for the effect of the matter referred to in paragraph 5 above, the financial statements referred in paragraph 1 above, present fairly, in all material respects, the financial position of Modelo Continente, S.G.P.S., S.A. as of 31 December 2002 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

7. As explained in Note 6, in prior years the Company recorded capital gains on the sale of investments (of which the more significant amounts occurred in the year 2000), essentially to other group companies. In accordance with the policy adopted in preceding years, the Company’s Board of Directors intends to comply with the requirements for reinvestment in accordance with the applicable tax legislation, through the acquisition of other investments.

Porto, 10 February 2003 MAGALHÃES, NEVES E ASSOCIADOS - SROC 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)

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 2002, which are the responsibility of the Company’s Board of Directors. We accompanied the evolution of the operations of the Company, the 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 2002, 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 and on this date issued the Legal Certification of Accounts and Audit Report, which contains a qualification in its paragraph 5 and an emphasis in its paragraph 7. Additionally, we reviewed the Directors’ Report prepared by the Board of Directors for the year 2002, and the proposals included therein. Considering the above, in our opinion, except for the effect of the matter referred to in paragraph 5 and considering the matter referred to in paragraph 7 of the Legal Certification of Accounts and Audit Report, the financial statements referred to above and the Directors’ Report, including the proposals included therein, are in accordance with the accounting, legal and articles of association 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 2003 ___________________________________________ MAGALHÃES, NEVES E ASSOCIADOS - SROC Represented by Jorge Manuel Araújo de Beja Neves

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