1 | P a g e At Sonae we… Are green at the core At Sonae the environment comes first. In 2010, our environmental values were recognized for their outstanding excellence. Sonae Maia Business Centre was awarded the LEED Gold Award and the project Equipa Worten Equipa was also recognized for its contribution to a better environment. Give back to the community At Sonae we take our responsibilities seriously. This is who we are. Due to our teams devoted efforts to a number of social causes we were rewarded with several reputed awards such as the Companies Citizenship Award and the Eficácia Gold and Silver awards in Social Responsibility. Know that tomorrow’s leadership starts today We promote creativity and innovation across the whole organisation, because we believe innovation is a strong determinant of future success. Sonaecom and Sonae’s efforts in the field of innovation were rewarded with the InAVation and Retail Technology Awards Europe. Our image was also awarded the Reddot Design Award. Transform risk into opportunities We continuously monitor our exposure to risk so that we can find new opportunities to expand our businesses. As part of our efforts towards risk management, Sonae SR was awarded the 2010 European Risk Management Award in Strategic Risk. Do not compromise on Quality We devote ourselves to offering the best products and services at a fair price and our efforts have been continuously rewarded with recognition from our customers. We are proud to hold a substantial number of Superbrand and Brand of Trust awards. Make sure that people come first At Sonae, we do not compromise when it comes to the safety of our people and in 2010 we were the proud recipient of the 2010 Safety and Health at Work European Good Practice Award. Our promotion of leadership and entrepreneurship was awarded the Junior Achievement Award. 2 | P a g e Main 2010 achievements Business . Continued to gain market share from Over To reinforce our position as market our competitors 1,000 stores leader and strengthen our presence in . Maximized cash-flows from our visited by international markets. investments . Reinforced internationalization 3,9 million . Maximized efficiency across all weekly retail customers and business segments over 51 new retail stores in international markets Finance . Provided our investors with +9% To promote sustainable economic continued and sustainable growth of EBITDA growth, growth that takes into consideration our . Strengthened our efforts towards corporate responsibility values. efficiency +4% . Promoted both short and long term of turnover growth and growth in respect of our corporate responsibility values 168 million euros . Promoted strategic investment of net income equity holders Our team . Promoted job opportunities 43,268 people To reinforce the excellence of our team . Rewarded excellent performance over by providing each one with career . Promoted a culture of continuous opportunities and with a solid culture of learning and innovation 1.5 million personal and professional development. Developed a diversified portfolio of hours of training and skills . Allowed our team to share our 41 million euros involvement with our community in performance based . Health and safety were always a compensation priority Community . Reinforcement of our support to 10 million euros To make a positive difference in our social causes in donations and community by strengthening our . Development of projects to provide involvement and promoting social help to our community 3,082 causes as a corporate priority. Strong involvement in cultural stitutions supported activities and institutions . Development of projects to improve life styles, such as Hiper-Saudável Environment . 68 million euros invested in Sonae Almost To promote sustainable growth and a Maia Business Centre, one of the 5% 5,000 tons better environment by reducing our of buildings in the world with the of electric equipment, over environmental footprint and by working LEED Gold certification and the first together with the community. building in the Iberian Peninsula 3 million . First company to adopt a strict policy batteries and towards sustainable fishing . Strengthened our support to 8 million initiatives that promote a better corks collected environment . Promoted the involvement of our community with projects that reward their participation 3 | P a g e The world of Sonae EFANOR 53% SONAE 50% 100% 54,5454%% 100% 100% Sonae 100% SonaeSR Sonaecom SonaeRP SonaeMC Sierra Investment Non-Food Telecom, Retail Real Food Retail Shopping Management Retail SSI&Media Estate Centres 51% SONAE INDÚSTRIA Table of contents 56% Main 2010 achievements 3 SONAE CAPITAL The world of Sonae 4 Chairman’s Letter 5 CEO letter 6 Performance overview 8 Corporate responsibility 18 Governance structure 38 Group overview 46 Glossary and main awards 73 Acknowledgements 77 4 | P a g e Chairman’s Letter Dear Investors, 2010 was an extraordinary year for Sonae. Despite the economic downturn in Portugal, the strength of its activities coupled with a strong disciplined management has enabled the company to increase profitability. Sonae remains a leading retailing group in Portugal, better characterized as envisioning an international footprint and aiming at innovation both at the product and business model levels. In 2010, we have taken major steps in this direction. New business models have been reengineered, adopting a more adequate institutional financing and governance framework to increase efficiency and profitability in the core business of retailing. Sonae embraces a broad perspective on value, one that goes far beyond the narrow concept of value to shareholders. Value creation is understood as the ability to meet the expectations of the overall community, internal and external. And as such, we framed our activities on the principles of sustainable generation of economic value and social and environmental responsibility. Paying close attention to our stakeholders, adapting to their changing needs, and adjusting products and services to new trends in industry is of paramount importance to deliver value. We are totally committed to improving efficiency and to achieve high levels of operational and financial profitability. It is essential, however, that this takes place whilst remaining strongly committed to our corporate social goals, such as making Sonae a better place to work, being a valued partner to our suppliers, remaining the most preferred retailer to our customers, and achieving a high level of recognition in the community with respect to social and environmental challenges. I am very proud of all the successful efforts we have devoted to help and improve the life style of our people and our community during such difficult times. Never before has corporate responsibility had such a high priority as it has today. Sonae’s culture and values leave a remarkably positive impact on society. After a year of a freeze on dividend growth, we are now preparing to our general shareholders’ assembly a small increase in dividend distribution, reflecting our growing confidence in our ability to weather economic slowdown, the improvement in profitability, our ability to reduce debt and the very significant improvement in financial ratios. Sonae was able to achieve consolidated sales of 5.9 billion euros, a growth rate of 4%. The company continues to post high direct profitability figures and total earnings per share rose by 79% to 0.0898 euros1, allowing a return on equity of 14%. Regarding the future, it is important to mention that Sonae is a very different company than it was a few years ago. This repositioning enabled the company to post a positive performance during the downturn and we believe it will benefit the company for the future. Despite the environment that remains very challenging in some of our major markets, we have managed at simultaneously improve share and profitability in those markets and lay the basis for geographical expansion in other markets or businesses. Sonae is a growing business with strong financial discipline and we believe our talented management will enable the business to make further good progress in the future. Belmiro de Azevedo Chairman Sonae 1 Does not include shares included in the cash settled equity swap signed. 5 | P a g e CEO letter The objectives we have set ourselves are difficult in any economic environment. We want to grow fast and in new international markets, we want high return on equity and rapid improvement of financial ratios not just through increased profitability, but also through debt reduction in absolute terms. Above all, we want to do this by providing better prices and service to our customers. In 2010, we stepped up international growth very significantly in Sonae SR and in Sonae Sierra in Brazil; we grew our retail business at 7%; we achieved ROE of 14% despite a negative contribution of 2pp from indirect income; we reduced net debt by 228 million euros. We achieved this whilst increasing our charitable contributions to community to 10.4 million euros (+12%) supporting 3,082 institutions, creating 3,454 new jobs and increasing corporate taxes paid. We also invested significantly in future growth by investing heavily in strengthening our core competencies, increasing training and preparing growth in new geographies. In Sonae SR, the weight of international operations is growing at fast pace - ~20% for the full year. Spain was the main focus of our expansion where we opened 46 company operated stores, more than doubling the total number of the end of 2009. We also signed several franchise and joint-venture agreements and opened the first 5 franchised Zippy stores in Saudi Arabia. Sonae Sierra2 continues to increase its international presence with particular emphasis on Brazil. In Europe, we have kept development at a very prudent level and have concentrated our development expansion efforts on Germany and Italy. In development and management services, we have successfully kicked off the provision of services to third parties with new contracts in Morocco, Spain, Italy, Romania, Portugal and Colombia.