UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington,D.C. 20549 ________________________________________________ FORM 20-F  ̈
     REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934ORx
     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014OR ̈
     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934OR ̈
     SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  Commission File Number 1-14626 ________________________________________________ COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO (Exact Name of Registrant as Specified in its Charter) BRAZILIAN DISTRIBUTION COMPANY (Translation of Registrant’s name into English) THE FEDERATIVE REPUBLIC OF BRAZIL(Jurisdiction of incorporation or organization) ________________________________________________ Christophe Hidalgo, Chief Financial Officer Phone:  +55 11 3886-0421 Fax:  +55 11 3884-2677 gpa.ri@gpabr.com Avenida Brigadeiro Luiz Antonio, 3,142 01402-901 São Paulo, SP, Brazil (Address of principal executive offices) ________________________________________________ Securities registered or to be registered pursuant to Section 12(b) of the Act. Title of each class
     Name of each exchange on which registeredPreferred Shares, without par value*
     New York Stock Exchange**American Depositary Shares (as evidenced by American Depositary Receipts), each representing one Preferred Share
     New York Stock Exchange
.
 ____________________ *The Preferred Shares are non-voting, except under limited circumstances. **Not for trading purposes, but only in connection with the listing on the New York Stock Exchange of American Depositary Shares representing those Preferred Shares. Securities registered or to be registered pursuant to Section 12(g) of the Act: None Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None


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Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the period covered by the annual report: 99,679,851 Common Shares, no par value per share 165,625,332 Preferred Shares, no par value per share Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act. xYes ̈No If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.  ̈YesxNo Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. xYes ̈No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  ̈YesxNo Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non‐accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one): Large Accelerated FilerxAccelerated Filer ̈Non-accelerated Filer ̈ Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP ̈
     International Financial Reporting Standards as issued by the International Accounting Standards Boardx
     Other ̈
 If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: Item 17 ̈Item 18 ̈ If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ̈YesxNo


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PART I
     2ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
     2ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE
     2ITEM 3.KEY INFORMATION
     23A.Selected Financial Data
     23B.Capitalization and Indebtedness
     63C.Reasons for the Offer and Use of Proceeds
     63D.Risk Factors
     6ITEM 4.INFORMATION ON THE COMPANY
     134A.History and Development of the Company
     134B.Business Overview
     174C.Organizational Structure
     324D.Property, Plants and Equipment
     32ITEM 4E.UNRESOLVED STAFF COMMENTS
     33ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS
     335A.Operating Results
     335B.Liquidity and Capital Resources
     335C.Research and Development, Patents and Licenses, Etc.
     525D.Trend Information
     525E.Off-balance sheet arrangements
     525F.Tabular disclosure of contractual obligations
     52ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
     536A.Directors and Senior Management
     536B.Compensation
     576C.Board Practices
     616D.Employees
     666E.Share Ownership
     66ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
     667A.Major Shareholders
     667B.Related Party Transactions
     687C.Interests of Experts and Counsel
     73ITEM 8.FINANCIAL INFORMATION
     738A.Consolidated Statements and Other Financial Information
     738B.Significant Changes
     77ITEM 9.THE OFFER AND LISTING
     779A.Offer and Listing Details
     779B.Plan of Distribution
     799C.Markets
     799D.Selling Shareholders
     819E.Dilution
     819F.Expenses of the Issue
     81ITEM 10.ADDITIONAL INFORMATION
     8110A.Share Capital
     8110B.Memorandum and Articles of Association
     8210C.Material Contracts
     9110D.Exchange Controls
     9110E.Taxation
     9310F.Dividends and Paying Agents
     9910G.Statement by Experts
     10010H.Documents on Display
     10010I.Subsidiary Information
     100ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     100ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
     10312A.American Depositary Shares
     103i


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|PART II                                                                              | 104
|------------------------------------------------------------------------------------ | ---
|ITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              | 104
|ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 105
|ITEM 15.CONTROLS AND PROCEDURES                                                      | 105
|ITEM 16.[RESERVED]                                                                   | 105
|16A.Audit Committee Financial Expert                                                 | 105
|16B.Code of Ethics                                                                   | 106
|16C.Principal Accountant Fees and Services                                           | 106
|16D.Exemptions from the Listing Standards for Audit Committees                       | 106
|16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers           | 107
|16F.Change in Registrant’s Certifying Accountant                                     | 107
|16G.Corporate Governance                                                             | 107
|16H.Mine Safety Disclosure                                                           | 109
|PART III                                                                             | 109
|ITEM 17.FINANCIAL STATEMENTS                                                         | 109
|ITEM 18.FINANCIAL STATEMENTS                                                         | 109
|ITEM 19.EXHIBITS                                                                     | 109

ii


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INTRODUCTION All references in this annual report to (i) “CBD,” “we,” “us,” “our” and “Company” are references to Companhia Brasileira de Distribuição and its consolidated subsidiaries, unless the context requires otherwise, (ii) “Nova HoldCo” are to Nova Pontocom Comércio Eletrônico S.A. and its subsidiaries prior to the e-commerce reorganization as described herein, (iii) “Cnova” are to Cnova N.V., which owns, directly or indirectly, or has the right to use substantially all of the assets that were used, or held for use, in the e-commerce business of the Casino Guichard-Perrachon Group, or the Casino Group and its affiliates entities in France, Latin America (including Brazil) and Asia, (iv) “Cnova Brazil” are to Cnova Comércio Eletrônico S.A., a wholly-owned subsidiary of Cnova, owning the Brazilian e-commerce businesses of CBD and Via Varejo S.A., or Via Varejo, following the completion of the e-commerce reorganization described herein, (v) the “Brazilian government” are references to the federal government of the Federative Republic of Brazil, or Brazil, and (vi) “preferred shares” and “common shares” are references to our authorized and outstanding shares of non-voting preferred stock, designated asações preferenciais, and common stock, designated asações ordinárias, respectively, in each case without par value.  All references to “ADSs” are to American depositary shares, each representing one preferred share, without par value.  The ADSs are evidenced by American Depositary Receipts, or “ADRs,” issued by The Bank of New York Mellon. All references herein to the “real,” “reais” or “R$” are to Brazilianreal, the official currency of Brazil.  All references to “US$,” “dollars” or “U.S. dollars” are to United States dollars. We have prepared our consolidated financial statements included in this annual report in conformity with accounting practices adopted by the International Financial Reporting Standards, or IFRS, issued by the International Accounting Standards Board, or IASB, inreais. We have translated some of therealamounts contained in this annual report into U.S. dollars.  The rate used to translate the amounts in respect of the year ended December 31, 2014 was R$2.656 to US$1.00, which was the commercial rate for the purchase of U.S. dollars in effect as of December 31, 2014, as reported by the Central Bank of Brazil, or the Central Bank.  The U.S. dollar equivalent information presented in this annual report is provided solely for the convenience of investors and should not be construed as implying that therealamounts represent, or could have been or could be converted into, U.S. dollars at that rate or at any other rate.  See “Item 3A. Selected Financial Data—Exchange Rates” for more detailed information regarding the translation ofreaisinto U.S. dollars. FORWARD-LOOKING STATEMENTS This annual report includes forward-looking statements, principally in “Item 3D.  Risk Factors,” “Item 4B.  Business Overview” and “Item 5.  Operating and Financial Review and Prospects.”  We have based these forward‐looking statements largely on our current expectations and projections about future events and financial trends affecting our business.  These forward-looking statements are subject to risks, uncertainties and assumptions including, among other things: ·global economic conditions and their impact on consumer spending patterns, particularly in Brazil and France; ·our ability to sustain or improve our performance; ·competition in the Brazilian and French retail industry in the sectors in which we operate; ·government regulation and tax matters; ·adverse legal or regulatory disputes or proceedings; ·credit and other risks of lending and investment activities; ·ability to expand our operations outside of our existing markets; and ·other risk factors as set forth under “Item 3D.  Risk Factors.” 1


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The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar words are intended to identify forward-looking statements.  We undertake no obligation to update publicly or revise any forward-looking statements because of new information, future events or otherwise.  In light of these risks and uncertainties, the forward-looking information, events and circumstances discussed in this annual report might not occur.  Our actual results and performance could differ substantially from those anticipated in our forward-looking statements. PART I ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS Not applicable. ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE Not applicable. ITEM 3.KEY INFORMATION 3A.Selected Financial Data We present in this section summary financial and operating data derived from our audited consolidated financial statements as of December 31, 2013 and 2014 and for the years ended December 31, 2012, 2013 and 2014 included in this annual report and prepared in accordance with IFRS.  The consolidated balance sheet data as of December 31, 2010, 2011 and 2012 and consolidated statement of income data for the years ended December 31, 2010 and 2011 have been derived from our audited consolidated financial statements which are not included in this annual report. The following tables present certain of our summary historical consolidated financial and operating data for each of the periods indicated.  Solely for the convenience of the reader,realamounts as of and for the year ended December 31, 2014 have been translated into U.S. dollars at the commercial selling rate at closing for the purchase of U.S. dollars, as reported by the Central Bank, as of December 31, 2014, of R$2.656 to US$1.00 (subject to rounding adjustments).  As of and for the Year Ended December 31,2010(1)

   2011

   2012(2)

   2013(2)

   2014

   2014(reclassified)

   (reclassified)(millions of R$, except as indicated)

   (millions ofUS$, exceptas indicated)Statement of income dataNet operating revenue

   32,092

   46,594

   51,016

   57,854

   65,525

   24,671Cost of sales

   (24,241)

   (33,935)

   (37,210)

   (42,750)

   (48,580)

   (18,291)Gross profit

   7,851

   12,659

   13,806

   15,104

   16,945

   6,380Selling, general and administrative expenses

   (5,817)

   (9,620)

   (10,164)

   (10,742)

   (11,787)

   (4,438)Depreciation and amortization

   (446)

   (678)

   (751)

   (787)

   (821)

   (309)Other operating expenses, net

   (128)

   (259)

   (33)

   (673)

   (441)

   (166)Operating expenses, net

   (6,391)

   (10,557)

   (10,948)

   (12,202)

   (13,049)

   (4,913)Profit from operations before financial income (expenses) and share of profit of associates..

   1,460

   2,102

   2,858

   2,902

   3,896

   1,467Financial income

   332

   593

   593

   643

   688

   259Financial expenses

   (1,155)

   (1,926)

   (1,786)

   (1,836)

   (2,195)

   (826)Financial expenses, net

   (823)

   (1,333)

   (1,193)

   (1,193)

   (1,508)

   (567)Share of profit of associates

   35

   35

   11

   47

   108

   41Profit before income tax and social contribution.

   671

   805

   1,676

   1,756

   2,496

   940Income tax and social contribution

   (85)

   (85)

   (520)

   (360)

   (736)

   (277)Net income for the year

   586

   719

   1,156

   1,396

   1,760

   663Attributed to controlling shareholders

   619

   718

   1,051

   1,052

   1,270

   479Attributed to noncontrolling shareholders

   (33)

   1

   105

   344

   490

   186Other comprehensive income for the year, net of income tax

   —

   —

   —

   —

   4

   2Total comprehensive income for the year

   586

   719

   1,156

   1,396

   1,764

   664Attributed to controlling shareholders

   619

   718

   1,051

   1,052

   1,271

   479Attributed to noncontrolling shareholders

   (33)

   1

   105

   344

   493

   186Basic earnings per share (weighted average for the year) (in R$)Preferred

   2.50

   2.87

   4.15

   4.13

   4.97

   1.87Common

   2.27

   2.61

   3.78

   3.75

   4.51

   1.70Diluted earnings per share (weighted average for the year) (in R$)Preferred

   2.48

   2.85

   4.12

   4.11

   4.95

   1.86Common

   2.27

   2.61

   3.78

   3.75

   4.51

   1.70Basic earnings per ADS (in R$)

   2.50

   2.87

   4.15

   4.12

   4.97

   1.87Diluted earnings per ADS (in R$)

   2.48

   2.85

   4.12

   4.11

   4.95

   1.86Weighted average number of shares outstanding (in thousands)Preferred

   156,873

   159,775

   162,417

   164,773

   165,603

   165,603Common

   99,680

   99,680

   99,680

   99,680

   99,680

   99,680Total

   256,553

   259,455

   262,097

   264,453

   265,283

   265,283Dividends declared (in R$)Preferred

   0.69

   0.68

   0.65

   0.98

   0.98

   0.37Common

   0.63

   0.62

   0.59

   0.89

   0.89

   0.34Dividends declared (in R$)(3)

   0.69

   0.68

   0.65

   0.98

   0.98

   0.37Balance sheet dataCash and cash equivalents

   3,818

   4,970

   7,086

   8,367

   11,149

   4,198Property and equipment

   6,794

   7,358

   8,114

   9,053

   9,699

   3,652Total assets (4)

   29,772

   33,443

   34,832

   38,007

   45,500

   17,131Current borrowings and financing

   2,915

   4,918

   4,211

   5,172

   6,594

   2,483Noncurrent borrowings and financing

   5,592

   6,241

   6,281

   4,323

   3,134

   1,180Shareholders’ equity

   9,501

   10,094

   11,068

   12,712

   14,482

   5,453Share capital(5)

   5,580

   6,129

   6,710

   6,764

   6,792

   2,557Other financial InformationNet cash provided by (used in):Operating activities

   361

   1,128

   5,299

   4,892

   5,016

   1,889Investing activities

   (1,399)

   (1,356)

   (1,306)

   (1,963)

   (1,650)

   (621)Financing activities

   2,514

   1,380

   (1,877)

   (1,648)

   (636)

   (239)Capital expenditures

   (1,522)

   (1,723)

   (1,426)

   (2,127)

   (1,963)

   (738)
  ________________________________ (1)   Includes the results of operations of Nova Casa Bahia S.A., or Nova Casa Bahia, which operates under the brand nameCasas Bahiaas from November 1, 2010. (2)   In 2014, we began to record revenues and costs associated with rentals of commercial spaces as “sales revenue of goods and/or services” and “cost of goods sold and/or services”, respectively, as a result of the increased participation of this activity in theMultivarejosegment, better displaying this activity in the Company's financial statements. Our management believes it is best to proceed with the current classification as to allow comparability and a final classification of revenues and costs.  Previously, we had recorded such net revenues and costs as selling expenses recovery.  In order to make our financial statements for the years ended December 31, 2013 and 2012 comparable to our financial statements for the year ended December 31, 2014, we reclassified our revenues and costs associated with rentals of commercial spaces for the years ended December 31, 2013 and 2012 in line with this new accounting policy.  For further information on the reclassification, see note 2 to our audited consolidated financial statements included elsewhere in this annual report.  We have not reclassified our financial statements for the years ended December 31, 2011 and 2010 to account for these changes in accounting policybecause we cannot provide this information without unreasonable effort and expense and the changes are not considered material for these periods. (3)   Each preferred share received a dividend 10% higher than the dividend paid to each common share.  See “Item 8A. Consolidated Statements and Other Financial Information—Dividend Policy and Dividends.” (4)   For our financial statements as of and for the years ended December 31, 2012 and 2011, we reclassified balances of receivables related to bonuses that were granted by suppliers under commercial agreements – See Note 2 to December 31, 2014 financial statements.  Pursuant to the terms of these agreements, we were allowed to offset receivables due to us by the suppliers with the outstanding balance to be paid by us to the suppliers.  This reclassification aimed at presenting these receivables consistently with their realization.  We have not retrospectivelyrevised our consolidated balance sheet data as of December 31, 2010 due to practical difficulties in obtaining the remaining information for the reclassification of this date and the fact that the difference would not be considered material. (5)   On February 12, 2015, our board of directors approved a capital increase in connection with our new stock option plan.  See “Item 6B. Compensation—Employee Stock Option Plans.”  The capital increase will be in the amount of R$1 million and our subscribed capital after the increase will total R$6,793 million.






2

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As of and for the Year Ended December 31,2010

   2011

   2012

   2013

   2014

   2014Operating Data

   (R$, except as indicated)

   (US$, except as indicated)Employees at period end(1)

   144,914

   149,070

   151,037

   156,451

   159,829Total square meters of selling area at period end

   2,811,103

   2,855,851

   2520,373

   2657,403

   2,771,460Number of stores at period end:Pão de Açúcar

   149

   159

   163

   168

   181Extra Hiper(2)

   110

   132

   138

   138

   137Minimercado Extra and Minuto Pão de Açúcar

   68

   72

   107

   164

   256Extra Supermercado(4)

   231

   204

   207

   213

   207Assaí

   57

   59

   61

   75

   84Pontofrio

   506

   401

   397

   397

   374Casas Bahia

   526

   544

   568

   602

   663Cnova

   —

   —

   —

   —

   —Total number of stores at period end

   1,647

   1,571

   1,641

   1,757

   1,902Net operating revenue per employee(1):Pão de Açúcar

   287,016

   288,256

   243,825

   324,689

   346,472

   130,449Extra Hiper(2)

   431,185

   457,355

   442,813

   458,663

   496,126

   186,794Minimercado Extra and Minuto Pão de Açúcar(3)

   N/A

   270,466

   195,418

   218,461

   179,230

   67,481Extra Supermercado(4)

   316,028

   256,486

   338,644

   370,867

   396,860

   149,420Assaí

   418,860

   486,356

   545,787

   548,808

   610,144

   229,723Pontofrio

   466,002

   365,954

   542,007

   580,086

   590,149

   222,195Casas Bahia(5)

   N/A

   464,689

   474,760

   525,507

   547,875

   206,278Cnova(6)

   —

   —

   —

   —

   —

   —CBD average net operating revenue per employee

   383,818

   369,937

   397,608

   432,440

   452,408

   170,334Net operating revenue by store format:Pão de Açúcar

   4,287

   4,740

   5,252

   5,761

   6,327

   2,382Extra Hiper(2)

   11,658

   12,364

   13,504

   14,463

   14,490

   5,456Minimercado Extra and Minuto Pão de Açúcar(3)

   N/A

   182

   241

   451

   638

   240Extra Supermercado(4)

   4,597

   4,390

   4,381

   4,863

   4,959

   1,867Assaí

   2,943

   3,902

   4,639

   6,273

   8,326

   3,135Pontofrio

   4,455

   4,524

   4,872

   5,341

   5,222

   1,966Casas Bahia(5)

   2,448

   13,304

   14,566

   16,405

   17,390

   6,547Cnova(6)

   1,704

   3,189

   3,409

   4,297

   8,172

   2,163Real Estate Projects(7)

   –

   –

   152

   –

   –

   –Total net operating revenue

   32,092

   46,594

   51,016

   57,854

   65,524

   24,671Average monthly net operating revenue per square meter(8):Pão de Açúcar

   1,835

   1,945

   2,042

   2,213

   2,362

   889Extra Hiper(2)

   1,219

   1,280

   1,311

   1,353

   1,341

   504Minimercado Extra and Minuto Pão de Açúcar(3)

   N/A

   1,027

   1,149

   1,118

   1,143

   430Extra Supermercado(4)

   1,188

   1,331

   1,484

   1,618

   1,624

   611Assaí

   1,790

   1,778

   2,036

   2,257

   2,367

   891Pontofrio

   1,033

   1,498

   1,578

   1,723

   1,765

   664Casas Bahia(5)

   N/A

   1,480

   1,573

   1,708

   1,737

   653Cnova(6)

   —

   —

   —

   —

   —

   —CBD average monthly net operating revenue per square meter

   1,287

   1,565

   1,547

   1,640

   1,957

   736Average ticket amount:Pão de Açúcar

   33

   36

   40

   45

   50

   19Extra Hiper(2)

   53

   64

   59

   64

   70

   26Minimercado Extra and Minuto Pão de Açúcar(3)

   N/A

   12

   13

   15

   15

   6Extra Supermercado(4)

   24

   25

   27

   30

   33

   12Assaí

   85

   89

   104

   116

   134

   51Pontofrio

   564

   451

   433

   486

   517

   195Casas Bahia(5)

   361

   372

   392

   451

   489

   184Cnova(6)

   538

   486

   428

   420

   419

   158CBD average ticket amount

   54

   73

   79

   88

   97

   37Average number of tickets per month (Brazilianreais– R$):Pão de Açúcar

   10,765,303

   10,882,640

   10,862,968

   10,770,189

   10,502,201Extra Hiper(2)

   18,237,819

   18,025,561

   18,966,815

   18,811,073

   17,273,270Minimercado Extra and Minuto Pão de Açúcar(3)

   N/A

   1,355,022

   1,563,405

   2,575,492

   3,463,884Extra Supermercado(4)

   16,026,255

   14,588,413

   13,693,582

   13,461,964

   12,595,001Assaí

   2,885,286

   3,671,405

   3,732,878

   4,527,849

   5,164,456Pontofrio

   658,275

   835,446

   938,511

   915,119

   841,098Casas Bahia(5)

   564,626

   2,978,613

   3,100,208

   3,028,962

   2,962,453Cnova(6)

   263,747

   547,328

   663,300

   852,992

   1,142,718CBD average number of tickets per month

   49,401,310

   52,884,427

   53,521,666

   54,943,639

   53,909,401


___________________________

(1)   Based on the average of the full-time equivalent number of employees, which is the product of the number of all retail employees (full- and part-time employees) and the ratio of the average monthly hours of all retail employees to the average monthly hours of full-time employees.

(2)   In 2010, includes the results of operations ofExtra Hiperstores andMinimercado Extrastores.  Includes revenues associated with rentals of commercial spaces in 2012, 2013 and 2014. Revenues of gas stations, drugstores, food delivery and  in-store pick-up are included in the respective banner.

(3)   In 2010, the results of operations ofMinimercado Extraare included inExtra Hiperbanner.

(4)   In 2010, includes the results of operations ofSendasandCompreBemstores.  During 2010 and 2011, we converted theSendasandCompreBemstores intoExtra Supermercadostores.

(5)   In 2010, includes the results of operations ofCasas Bahiastores as from November 1, 2010.

(6)   Includes all e-commerce assets of the Company, which, following the reorganization described in “Item 4B. Business Overview—Our Company—E-commerce Operating Segment,” includes our e-commerce operations in France, Latin America (including Brazil) and Asia.  We began consolidating Cnova’s e-commerce operations in France, Latin America (excluding Brazil, which we already consolidated) and Asia on July 31, 2014. For further information, see “Item 4B. Business Overview—Operations—E-commerce Operating Segment.”

(7)   In 2012, R$152 million net operating revenue (R$153 million gross operating revenue) was recognized from real estate projects through a barter transaction. The barter transaction revenue is the net result of the book value of the assets swapped. For further information on the barter transactions, see note 11(c) to our audited consolidated financial statements included elsewhere in this annual report.

(8)   Calculated using the average of square meters of selling area on the last day of each month in the period.

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Exchange Rates Brazil’s foreign exchange system allows the purchase and sale of currency and the international transfer ofreaisby any person or legal entity, regardless of amount, subject to certain regulatory procedures. The Brazilian currency has during the last years experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies.  Between mid-2003 and 2008 therealappreciated significantly against the U.S. dollar and in August 2008 reached R$1.559 per US$1.00.  Primarily as a result of the crisis in the global financial markets, therealdepreciated 31.9% against the U.S. dollar and reached R$2.337 per US$1.00, at year end 2008.  In 2009 and 2010, therealappreciated against the U.S. dollar and reached R$1.666 per US$1.00 at year end 2010.  During 2011, 2012 and 2013 therealdepreciated against the U.S. dollar and reached at year end 2013 R$2.343per US$1.00.  During 2014 therealdepreciated against the U.S. dollar and on December 31, 2014 the exchange rate was R$2.656 per US$1.00. The Central Bank has intervened occasionally to combat instability in foreign exchange rates.  We cannot predict whether the Central Bank or the Brazilian government will continue to allow therealto float freely or will intervene in the exchange rate market through a currency band system or otherwise. The following tables present the selling rate, expressed inreaisto the U.S. dollar (R$/US$), for the periods indicated: Exchange Rate of Brazilian Currency per US$1.00Year

   Low

   High

   Average(1)

   Year-End2010

   1.655

   1.881

   1.759

   1.6662011

   1.535

   1.902

   1.675

   1.8762012

   1.702

   2.112

   1.955

   2.0442013

   1.953

   2.446

   2.161

   2.3432014

   2.197

   2.740

   2.355

   2.656Exchange Rate of Brazilian Currency per US$1.00Month

   Low

   High

   Average(1)

   Period-EndOctober 2014

   2.391

   2.534

   2.448

   2.444November 2014

   2.484

   2.614

   2.548

   2.560December 2014

   2.561

   2.740

   2.639

   2.656January 2015

   2.575

   2.711

   2.634

   2.662February 2015

   2.689

   2.881

   2.816

   2.878March 2015

   2.866

   3.268

   3.139

   3.208April 2015 (through 23, 2015)

   3.008

   3.156

   3.076

   3.008


____________

Source: Central Bank

(1)   Represents the average of the exchange rates of each trading date using the exchange rates from the first and last day of the month.

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3B.Capitalization and Indebtedness Not applicable. 3C.Reasons for the Offer and Use of Proceeds Not applicable. 3D.Risk Factors An investment in the ADSs or our preferred shares involves a high degree of risk.  You should carefully consider the risks described below before making an investment decision.  Our business, financial condition and results of operations could be materially and adversely affected by any of these risks.  The trading price of the ADSs and our preferred shares could decline due to any of these risks or other factors, and you may lose all or part of your investment.  The risks described below are those that we currently believe may materially affect us. Risks Relating to Brazil and other Markets in Which We Operate The Brazilian government has historically exercised, and continues to exercise, significant influence over the Brazilian economy.  Brazilian political and economic conditions may adversely affect us and the trading price of the ADSs and our preferred shares. The Brazilian government’s economic policies may have important effects on Brazilian companies, including us, and on market conditions and prices of Brazilian securities.  Our financial condition and results of operations may be adversely affected by the following factors and the Brazilian government’s response to these factors: ·interest rates; ·monetary policy; ·exchange rate and currency fluctuations; ·inflation; ·liquidity of the domestic capital and lending markets; ·tax and regulatory policies; and ·other political, social and economic developments in or affecting Brazil.


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Uncertainty over whether the Brazilian government will implement changes in policy or regulation affecting these or other factors creates instability in the Brazilian economy, increasing the volatility of the Brazilian securities markets, which may have an adverse effect on us.  Recent economic and political instability has led to legislative or regulatory changes that resulted in increased economic uncertainty, a negative perception of the Brazilian economy and outlook and heightened volatility in the Brazilian securities markets, which may adversely affect us and our securities. Political crisis in Brazil in the past has affected the development of the Brazilian economy and the trust of foreign investors, as well as the public in general.  Recent popular unrest in Brazil has led to large demonstrations, which serves as an example of the population’s growing dissatisfaction with corruption and certain political measures. Brazilian government efforts to combat inflation may hinder the growth of the Brazilian economy and could harm us and the trading price of the ADSs and our preferred shares. Brazil has in the past experienced extremely high rates of inflation and has therefore followed monetary policies that have resulted in one of the highest realinterest rates in the world.  Between 2005 and 2014, the base interest rate (Sistema Especial de Liquidação e de Custódia), or SELIC rate, in Brazil varied between 19.75% per annum and 7.25% per annum.  Inflation and the Brazilian government’s measures to fight it, principally through the Central Bank, have had and may have significant effects on the Brazilian economy and our business.  Tight monetary policies with high interest rates may restrict Brazil’s growth and the availability of credit.  Conversely, more lenient government and Central Bank policies and interest rate decreases may trigger increases in inflation, which could negatively affect our business.  We may not be able to adjust the prices we charge our customers to offset the effects of inflation on our cost structure.  Furthermore, interest rate decreases may affect our ability to maintain interest margins we charge on installment sales, especially in connection with our home appliance segment, which could have a negative effect on our financial income.  Brazilian government measures to combat inflation that result in an increase in interest rates may have an adverse effect on us as our indebtedness is indexed to the interbank deposit certificate (Certificados de Depósito Interbancário), or CDI, rate.  Inflationary pressures may also hinder our ability to access foreign financial markets or lead to government policies to combat inflation that could harm us or adversely affect the trading price of the ADSs and our preferred shares. Exchange rate instability may have a material adverse effect on the Brazilian economy and us. The Brazilian currency fluctuates in relation to the U.S. dollar and other foreign currencies.  The Brazilian government has in the past utilized different exchange rate regimes, including sudden devaluations, periodic mini‐devaluations (during which the frequency of adjustments has ranged from daily to monthly), exchange controls, dual exchange rate markets and a floating exchange rate system.  Since 1999, Brazil has adopted a floating exchange rate system with interventions by the Central Bank in buying or selling foreign currency.  From time to time there have been significant fluctuations in the exchange rate between therealand the U.S. dollar and other currencies.  For example, therealappreciated 11.8%, 8.7% and 17.2% against the U.S. dollar in 2005, 2006 and 2007, respectively.  In 2008, as a result of the worsening global economic crisis, therealdepreciated 32% against the U.S. dollar, closing at R$2.337 to US$1.00 on December 31, 2008.  For the years ended December 31, 2009 and 2010, therealappreciated 25.5% and 4.2%, respectively, against the U.S. dollar, closing at R$1.741 and R$1.666 to US$1.00 on December 31, 2009 and 2010, respectively.  For the years ended December 31, 2011, 2012, 2013 and 2014 therealdepreciated 12.6%, 8.9%, 14.6% and 13.4%, respectively,against the U.S. dollar, closing at R$1.876,R$2.044, R$2.343 and R$2.656to US$1.00, respectively.  Therealmay substantially depreciate or appreciate against the U.S. dollar in the future.  Exchange rate instability may have a material adverse effect on us.  Depreciation of therealagainst the U.S. dollar could create inflationary pressures in Brazil and cause increases in interest rates, which could negatively affect the growth of the Brazilian economy as a whole and result in a material adverse effect on us.  Depreciation would also reduce the U.S. dollar value of distributions and dividends and the U.S. dollar equivalent of the trading price of the ADSs and our preferred shares.


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Developments and the perception of risk in other countries, especially in the United States, the European Union and in emerging market countries, may adversely affect our business and the market price of Brazilian securities, including the ADSs and our preferred shares. The market price of securities of Brazilian issuers is affected by economic and market conditions in other countries, including the United States and emerging market countries.  Although economic conditions in those countries may differ significantly from economic conditions in Brazil, investors’ reactions to developments in other countries may have an adverse effect on the market price of securities of Brazilian issuers.  Crises in the United States, the European Union or emerging market countries may diminish investor interest in securities of Brazilian issuers, including ours.  This could adversely affect the market price of our preferred shares and the ADSs, and could also make it more difficult for us to access the capital markets and finance our operations in the future on acceptable terms or at all. Asubstantialpart of the population in emerging markets relies on cash payments, which may impact our ability to grow our e-commerce business in those markets. In emerging markets, including certain Latin American countries, African countries and certain Asian countries, a substantial part of the population relies on cash payments, rather than credit and debit card payments or electronic banking. Since our e-commerce business is dependent on customers' use of electronic payment methods, a reliance of cash in any of the markets in which we operate could impact our ability to grow our business in such market. Although we expect that over time the prevalence of cash payments will decline as a greater percentage of the population in emerging markets adopts credit and debit card payments and electronic banking, this may not happen quickly or at all. Risks Relating to our Industries and Us We face significant competition, which may adversely affect our market share and net income. We operate mainly in the food retail and home appliances sectors.  The food retail sector in Brazil, including the cash and carry (atacado de auto serviço) segment and the home appliances sector, are highly competitive in Brazil.  We face intense competition from small retailers, especially from those that operate in the informal segment of the Brazilian economy.  In addition, in our markets, and particularly in the São Paulo and Rio de Janeiro city areas, we compete in the food retail sector with a number of large multinational retail food and general merchandise and cash and carry chains, as well as local supermarkets and independent grocery stores.  In the home appliances sector, we also compete with large multinational chains and large or specialized Brazilian companies.  Acquisitions or consolidations within the industry may also increase competition and adversely affect our market share and net income. In the e-commerce segment we compete with other large well established players that, similar to us, offer a wide range of products, as well as with specialized retailers that focus on one or a few products.  Because barriers to entry are much lower than in traditional retail, competition in the e-commerce market in Brazil and France is even more intense and if we are unable to respond to changes in these markets our market share and net income may be adversely affected. Our business depends on strong brands. We may not be able to maintain and enhance our brands, or we may receive unfavorable customer complaints or negative publicity, which could adversely affect our brands. We believe that ourPão de Açúcar,Minuto Pão de Açúcar,Cdiscount,Extra,Extra Supermercado,Minimercado Extra,Casas Bahia,Pontofrio, andAssaíbrands contribute significantly to the success of our business. We also believe that maintaining and enhancing those brands is critical to maintaining and expanding our base of customers, vendors and marketplace sellers.Maintaining and enhancing our brands will also depend largely on our ability to continue to create the best customer experience, based on our competitive pricing, our large assortment of products, the range and convenience of the delivery options we offer and providing a user-friendly buying experience, including having dedicated customer service teams available, and our ability to provide a reliable, trustworthy and profitable market to our vendors and marketplace sellers.


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Customer complaints or negative publicity about our sites, product offerings, services, delivery times, customer data handling and security practices or customer support could harm our reputation and diminish consumer use of our sites, and consumer, vendor and marketplace seller confidence in us. A diminution in the strength of our brands and reputation could have a material adverse effect on our business, financial condition and operating results. We may not be successful in integrating and capturing synergies from acquired companies. As part of our growth strategy, we regularly analyze acquisition opportunities.  Acquisitions involve risks and challenges, such as those related to the integration of operations, personnel, products and customer base of the acquired companies with ours, generation of expected return on the investment and exposure to liabilities of the acquired companies.  The integration of acquired businesses with our business and our capturing of synergies from acquired companies may require more resources and time than initially expected.  In addition, we may be required to obtain approval from Brazilian anti-trust authorities for certain acquisitions.  The Brazilian anti-trust authorities may grant the approval subject to restrictive measures, such as sale of part of the assets, or may not grant it in a timely manner. If we are not able to successfully integrate acquired businesses with ours or to capture synergies as planned, we may be materially and adversely affected. We are subject to environmental laws and regulations. We are subject to a number of different national, state and municipal laws and regulations relating to the preservation and protection of the environment, especially in relation to our gas stations.  Among other obligations, these laws and regulations establish environmental licensing requirements and standards for the release of effluents, gaseous emissions, management of solid waste and protected areas.  We incur expenses for the prevention, control, reduction or elimination of releases into the air, ground and water at our gas stations, as well as in the disposal and handling of wastes at our stores and distribution centers.  Any failure to comply with those laws and regulations may subject us to administrative and criminal sanctions, in addition to the obligation to remediate or indemnify others for the damages caused.  We cannot ensure that these laws and regulations will not become stricter.  In this case, we may be required to increase, perhaps significantly, our capital expenditures and costs to comply with these environmental laws and regulations.  Unforeseen environmental investments may reduce available funds for other investments and could materially and adversely affect us and the trading price of the ADSs and our preferred shares. We may not be able to renew or maintain our stores’ lease agreements on acceptable terms, or at all. Most of our stores are leased.  The strategic location of our stores is key to the development of our business strategy and, as a result, we may be adversely affected in case a significant number of our lease agreements is terminated and we fail to renew these lease agreements on acceptable terms, or at all.  In addition, as per applicable law, landlords may increase rent periodically, usually every three years.  A significant increase in the rent of our leased properties may adversely affect us. We face risks related to our distribution centers. Approximately 80% of our products are distributed through our 61 distribution centers and depots located in the southern, southeastern, mid-western and northeastern regions of Brazil.  If operations at one of these centers are adversely affected by factors beyond our control, such as fire, natural disasters, power shortages, failures in the systems, among others, and in the event that no other distribution center is able to meet the demand of the region affected, the distribution of products to the stores supplied by the affected distribution center will be impaired, which may adversely affect us.  Our growth strategy includes the opening of new stores which may require the opening of new or the expansion of our existing distribution centers to supply and meet the demand of the additional stores.  Our operations may be negatively affected if we are not able to open new distribution centers or expand our existing distribution centers in order to meet the supply needs of these new stores. In our e-commerce segment, fulfillment is essential to our ability to provide a high level of service to our customers. If we do not optimize and operate our distribution centers successfully and efficiently, it could result in excess or insufficient fulfillment capacity, an increase in costs or impairment charges and a reduction in our gross


profit margin, excluding shipping cost, or harm our business in other ways. If we do not have sufficient fulfillment capacity or experience a problem fulfilling orders in a timely manner, such as due to a failure of mechanized equipment at our distribution centers, or if certain products are out of stock, our customers may experience delays in receiving their purchases, which could harm our reputation and our relationship with our customers. 9


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We are exposed to risks related to customer financing and loans. We have a financial partnership with ItaÃo Unibanco Holding S.A., or ItaÃo Unibanco, through which we have established Financeira ItaÃo CBD S.A. CrÃ©dito, Financiamento e Investimento, or FIC, which exclusively offers credit cards, financial services and insurance at our stores.  In addition, installment sales are widely used in the Brazilian home appliance market.  FIC is subject to the risks normally associated with providing these types of financing, including risk of default on the payment of principal and interest and any mismatch of cost and maturity of our funding in relation to cost and maturity of financing to its customers, which could have a material adverse effect on us. Financial institutions in Brazil, including FIC, are subject to changing regulation by the Central Bank. FIC is a financial institution regulated by the Central Bank and is therefore subject to significant regulation.  The regulatory structure of the Brazilian financial system is continuously changing.  Brazilian government rules and intervention may adversely affect our operations and profitability more than those of a retailer without financial operations.  Existing laws and regulations may be amended, and their application or interpretation may also change, and new laws and regulations may be adopted.  FIC and, therefore, we, may be adversely affected by changes in regulations, including those related to: Â·minimum capital requirements; Â·requirements for investment in fixed capital; Â·credit limits and other credit restrictions; Â·accounting requirements; and Â·intervention, liquidation and/or temporary special management systems. The retail segment is sensitive to decreases in consumer purchasing power and unfavorable economic cycles. Historically, the retail segment has experienced periods of economic slowdown that led to declines in consumer expenditures.  The success of operations in the home appliances retail sector depends on various factors related to consumer expenditures and consumersâ€TM income, including general business conditions, interest rates, inflation, consumer credit availability, taxation, consumer confidence in future economic conditions, employment and salary levels.  Reductions in credit availability and more stringent credit policies by us and credit card companies may negatively affect our sales, especially in the home appliance segment.  Unfavorable economic conditions in Brazil, or unfavorable economic conditions worldwide reflected in the Brazilian economy, may significantly reduce consumer expenditure and available income, particularly in the lower income classes, who have relatively less credit access than higher income classes, more limited debt refinancing conditions and more susceptibility to increases in the unemployment rate.  These conditions may cause a material adverse effect on us. Because the Brazilian retail industry is perceived as essentially growth-oriented, we are dependent on the growth rate of Brazilâ€TMs urban population and its different income levels.  Any decrease or slowdown in growth may adversely affect our sales and our results of operation. Unauthorized disclosure of customer data through breach of our computer systems or otherwise could cause a material adverse effect on us. One of the main e-commerce issues is the safe transmission of confidential information of our customers on our servers and the safe data storage on systems that are connected to our servers.  We depend on the efficient and uninterrupted operation of numerous systems, including our computer systems and software, as well as the data centers through which we collect, maintain, transmit and store data about our customers, vendors, marketplace sellers and others, including payment information and personally identifiable information, as well as other


confidential and proprietary information. Because our technology systems are highly complex, they are subject to failure. 10


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Our cybersecurity measures may not detect or prevent all attempts to compromise our systems. Breaches of our cybersecurity measures could result in unauthorized access to our systems, misappropriation of information or data, deletion or modification of client information, or a denial-of-service or other interruption to our business operations, which could result in a shutdown of our sites for a short or extended period and have an adverse and material effect on our business. As techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against us or our third-party service providers, we may be unable to anticipate or implement adequate measures to protect against these attacks. We have in the past been, and are likely again in the future to be, subject to these types of attacks, although to date no such attack has resulted in any breach of our systems, material damages or remediation costs. If we are unable to avert these attacks and security breaches, we could be subject to significant legal and financial liability, our reputation would be harmed and we could sustain substantial revenue loss from lost sales and customer dissatisfaction. We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks. Cyber-attacks may target us, our sellers, buyers or other participants, or the communication infrastructure on which we depend. In addition, security breaches can also occur as a result of non-technical issues, including intentional or inadvertent breaches by our employees or by persons with whom we have commercial relationships. Any compromise or breach of our security measures, or those of our third-party service providers, could result in us violating applicable privacy, data security and other laws, and cause significant legal and financial exposure, adverse publicity and a loss of confidence in our security measures, which could have an adverse and material effect on our business, financial condition and operating results. We depend on the transportation system and infrastructure to deliver our products to our stores. Products destined for all of our stores are distributed through our distribution centers located in 17 Brazilian states and the Federal District.  The transportation system and infrastructure in Brazil are underdeveloped and need significant investment to work efficiently and to meet our business needs.  In our e-commerce segment, our reputation and ability to retain, acquire and serve our customers are dependent upon the reliable uninterrupted performance of our sites and the underlying infrastructure of the Internet, including fixed-line and mobile communications networks operated by third parties over which we have no control. Any significant interruptions or reduction in the use of transportation infrastructure or in their operations in the cities where our distribution centers are located, as a result of natural disasters, fire, accidents, systemic failures or other unexpected causes, may delay or affect our ability to distribute products to our stores and may decrease our sales, which may have a material adverse effect on us. Furthermore, any damage to, or failure of, our third-party communication networks or data centers, whether due to system failures, computer viruses, physical or electronic break-ins or other unexpected events or disruptions, could cause system interruption, delays and loss of critical data, prevent us from providing our services on a timely basis or limit or prevent access to our sites and cause partial or complete shutdowns of our sites, which could have a material adverse effect on our business, financial condition and operating results. We may not be able to adapt to changing consumer habits. We compete with other retailers based on price, product mix, store location and layout and services.  Consumer habits are constantly changing and we may not be able to anticipate and quickly respond to these changes. If we are unable to adapt our store format mix or layout, identify locations and open stores in preferred areas, quickly adjust our product mix or prices under each of our banners and segments or otherwise adjust to changing consumer preferences, such as shopping on mobile devices, our business and results of operation could be materially adversely affected. 11


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Our controlling shareholder has the ability to direct our business and affairs. Our controlling shareholder, the Casino Guichard-Perrachon Group, or the Casino Group, through our holding company, Wilkes ParticipaÃ§Ãμes S.A., or the Holding Company, has the power to, among other things, appoint the majority of the members to our board of directors, who, in turn, appoint our executive officers; determine the outcome of any action requiring shareholder approval, including the timing and payment of any future dividends, provided that we observe the minimum mandatory dividend established by Law No. 6,404, dated December 15, 1976, as amended, or Brazilian corporate law; determine corporate reorganizations, acquisitions, dispositions and the transfer of our control to third parties; enter into new partnerships; and deliberate on financings and similar transactions.  Our controlling shareholder may prevail over our other shareholders or holders of ADSs.  For a description of our ownership structure, see â€œItem 7A. Major Shareholders.â€ Severe drought conditions could have a material adverse effect on our overall business. Approximately 70% of Brazilâ€TMs installed electric generation capacity is currently dependent upon hydroelectric generation facilities. A severe drought in certain regions of Brazil has reduced hydrogenation in the affected regions. In response, the Brazilian government has considered instituting a rationing program; however, no such program has yet been instituted. If the amount of water available to energy producers becomes increasingly scarce due to drought affecting or diversion for other uses, the Brazilian government could institute a rationing program and the cost of energy, which represented approximately 1.0% of our total cost of goods sold in 2014, may increase.  Such conditions could have a material adverse effect on our sales and margins. Risks Relating to the Preferred Shares and ADSs If you exchange the ADSs for preferred shares, as a result of Brazilian regulations you may risk losing the ability to remit foreign currency abroad. As an ADS holder, you benefit from the electronic certificate of foreign capital registration obtained by the Banco ItaÃo Corretora de Valores S.A., or the Custodian, for our preferred shares underlying the ADSs in Brazil, which permits the Custodian to convert dividends and other distributions with respect to the preferred shares into non-Brazilian currency and remit the proceeds abroad.  If you surrender your ADSs and withdraw preferred shares, you will be entitled to continue to rely on the Custodianâ€TMs electronic certificate of foreign capital registration for only five business days from the date of withdrawal.  Thereafter, upon the disposition of or distributions relating to the preferred shares, you will not be able to remit abroad non-Brazilian currency unless you obtain your own electronic certificate of foreign capital registration or you qualify under Brazilian foreign investment regulations that entitle some foreign investors to buy and sell shares on Brazilian stock exchanges without obtaining separate electronic certificates of foreign capital registration.  If you do not qualify under the foreign investment regulations you will generally be subject to less favorable tax treatment of dividends and distributions on, and the proceeds from any sale of, our preferred shares. If you attempt to obtain your own electronic certificate of foreign capital registration, you may incur expenses or suffer delays in the application process, which could delay your ability to receive dividends or distributions relating to our preferred shares or the return of your capital in a timely manner.  The depositaryâ€TMs electronic certificate of foreign capital registration may also be adversely affected by future legislative changes.  See â€œItem 10D. Exchange Controls.â€ You might be unable to exercise preemptive rights with respect to the preferred shares underlying the ADSs. You will not be able to exercise the preemptive rights relating to the preferred shares underlying your ADSs unless a registration statement under the United States Securities Act of 1933, or the Securities Act, is effective with respect to those rights, or an exemption from the registration requirements of the Securities Act is available.  We are not obligated to file a registration statement or to take any action to make preemptive rights available to holders of ADSs.  Unless we file a registration statement or an exemption from registration applies, you may receive only the net proceeds from the sale of your preemptive rights by the depositary or, if the preemptive rights cannot be sold, they will lapse and you will not receive any value for them.  In addition, we may issue a substantial number of preferred shares as consideration for future acquisitions and we may choose not to extend preemptive rights to holders of ADSs. 12


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The relative volatility and illiquidity of the Brazilian securities markets may substantially limit your ability to sell the preferred shares underlying the ADSs at the price and time you desire. Investing in securities that trade in emerging markets, such as Brazil, often involves greater risk than investing in securities of issuers in more developed markets, and these investments are generally considered to be more speculative in nature.  The Brazilian securities market is substantially smaller, less liquid, more concentrated and can be more volatile than more developed securities markets.  The top 10 stocks in terms of trading volume accounted for approximately 39%, 39% and 46% of all shares traded on the São Paulo stock exchange (BM&FBovespa S.A. – Bolsa de Valores,Mercadorias e Futuros), or BM&FBOVESPA, in 2012, 2013 and 2014, respectively.  Accordingly, although you are entitled to withdraw the preferred shares underlying the ADSs from the depositary at any time, your ability to sell the preferred shares underlying the ADSs at a price and time at which you wish to do so may be substantially limited. Holders of the ADSs and our preferred shares may not receive any dividends. According to our by-laws, we must pay our shareholders at least 25% of our annual net income as dividends, as determined and adjusted under Brazilian corporate law.  This adjusted income may be used to absorb losses or otherwise appropriated as allowed under the Brazilian corporate law and may not be available to be paid as dividends.  We may not pay dividends to our shareholders in any particular fiscal year if our board of directors determines that such distributions would be inadvisable in view of our financial condition. ITEM 4.INFORMATION ON THE COMPANY 4A.History and Development of the Company We were incorporated in Brazil under Brazilian law on November 10, 1981 as Companhia Brasileira de Distribuição.  Our principal executive offices are located at Avenida Brigadeiro Luis Antonio, 3,142, São Paulo, SP, Brazil (telephone: +55-11-3886-0421).  Our agent for service of process in the United States is CT Corporation, 1633 Broadway, New York, New York, 10019. We have been a pioneer in the Brazilian retail food industry, opening our first store, a pastry shop, in 1948 in the city of São Paulo under the namePão de Açúcar.  We established one of the first supermarket chains in Brazil, opening our first supermarket in 1959, and opened the first hypermarket in Brazil in 1971. Brazilian economic reforms implemented in 1994, including the introduction of therealas the Brazilian currency and the drastic reduction of inflation rates, resulted in an unprecedented growth in local consumer markets.  This increase in available income and the resulting increase in consumer confidence broadened our potential customer base and provided us with growth opportunities. We responded to these changes by strengthening our capital structure, increasing our logistics and technology investments and implementing an expansion strategy focused on the different consumer preferences of the Brazilian population.  To support our expansion strategy, consisting of acquisitions and organic growth, we defined the format of our stores to tailor them to the expectations, consumption patterns and purchasing power of the different income levels in Brazil.  Our stores have operated under different banners targeted at the various income segments of the Brazilian population.  For further information on our banners, see “Item 4B. Business Overview—Our Company” and “—Operations.” In order to implement that strategy and to increase our market share, between 1981 and 2003 we acquired important supermarket chains such asCoopercitrus,Lourenção,Barateiro,Peralta,ABC Supermercados,Sé Supermercados,Sendasand small chains, such asSão Luiz,NagumoandRosado. These chains were later and gradually converted into our current banners. In 2004, we entered into a financial partnership called FIC with Itaú Unibanco.  FIC exclusively offers credit cards, financial services and insurance at our stores.  For further information on FIC, see “Item 4B. Business Overview—FIC and Investcred.”


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In 2007, we acquired a 60% ownership interest in theAssaíchain.  This acquisition enabled us to enter the cash and carry segment in the State of São Paulo.  In 2008, we started cash and carry operations in the State of Rio de Janeiro throughXantocarpa, a company that assumed the operation of three Sendas stores, which were converted intoAssaístores.  In July 2009, we purchased the remaining 40% interest inAssaíand became owners of 100% of the chain. In July 2009, we purchased a 70.2% ownership interest in Globex (which later changed its corporate name to Via Varejo), a company which operates in the home appliances sector under the brand namePontofrio.  In this annual report, the term “home appliances” refers to sale of durable goods, i.e., electronics, furniture and other items for the home.  In a tender offer triggered by the acquisition, our Company increased its ownership interest in Globex to 98.8%. In 2010, we consolidated our leading position in the retail segment in Brazil and we believe we became the largest home appliance retailer in the country as a result of our association with the partners (represented by the Klein Family) of Casa Bahia Comercial Ltda., or Casa Bahia Comercial, a Brazilian home appliances retailer which operates under the brand nameCasas Bahia, or the Casas Bahia association.  Pursuant to the association agreement, by means of a corporate reorganization, we and the partners of Casa Bahia Comercial merged our respective businesses in the home appliances and e-commerce segments under Via Varejo.  As a result we then owned 52.4% of Via Varejo. In April 2013, we and Via Varejo entered into a term of undertaking (Termo de Compromisso de Desempenho), or the Term of Undertaking, with the Brazilian antitrust authority (Conselho Administrativo de Defesa Econômica), or CADE, for the approval of the Casas Bahia association. Our main undertaking under the Term of Undertaking was to divest 74 stores, distributed across 54 cities and seven states, representing approximately 3% of Via Varejo’s consolidated gross sales in 2013.  As of December 31, 2014, we had divested 40 stores and still had 34 remaining stores located in the states of São Paulo, Rio de Janeiro, Goiás, Minas Gerais and Mato Grosso, which still await the compliance with the precedent condition of the agreement to divest.  As a result of not selling these remaining stores, we paid a total fine of R$12 million. On October 17, 2013, we, Via Varejo and Nova HoldCo entered into a stock purchase agreement pursuant to which we acquired 6.2% of Nova HoldCo’s capital stock from Via Varejo for R$80.0 million and 1.95% of Nova HoldCo’s capital stock from minority shareholders for R$25 million.  As a result, Nova HoldCo became our direct subsidiary of which we hold 52.06% of the capital stock, Via Varejo holds 43.9% and the remaining 4.04% is held by minority shareholders.  This transaction had no impact on our consolidation of Nova HoldCo’s results of operations and financial condition on our financial statements, since we previously held, through Via Varejo, the indirect control of Nova HoldCo. In addition, Via Varejo and Nova HoldCo entered into (i) an operational agreement that establishes the terms and conditions of their relationship, synergies and complementary operations.  Pursuant to this operational agreement, Via Varejo and Nova HoldCo will, among other things, share logistics and marketing costs for their mutual benefit, as well as an electronic catalog of products from which they will negotiate in good faith purchases between them; and (ii) a shareholders’ agreement that establishes the corporate governance framework and other property rights for Nova HoldCo. On December 27, 2013, our subsidiary, Via Varejo, concluded its public offering in Brazil with selling efforts to qualified institutional buyers in the United States and to institutions and other investors who were not U.S. persons elsewhere.  The offering raised approximately R$3 billion in proceeds.  The public offering was structured as a secondary public offering of Units, each Unit consisting of one common share and two preferred shares of Via Varejo. We sold a total of 38.9 million Units for approximately R$897 million, which reduced our shareholding in Via Varejo to 62.25% of the common shares and 43.35% of the total capital stock.  No gain was recorded as a result of this transaction.  The Klein Family sold more than 23.64% of shares of Via Varejo’s capital stock.  As of the date of this annual report, the Klein Family owns 27.31% of Via Varejo’s total capital stock. Via Varejo has 29.3% of its total stock capital in the free float.


14

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As a consequence of the reduction of its participation in Via Varejoâ€TMs capital stock, the Klein Family no longer has certain rights under the shareholdersâ€TM agreement entered into by and among us, the Klein Family and Via Varejo, among which are Mr. Michael Kleinâ€TMs appointment to the position of chairman of the board of directors of Via Varejo and the right to consent with respect to Via Varejoâ€TMs vote at shareholdersâ€TM meetings of its subsidiary Nova HoldCo or by members of the board of directors of Nova HoldCo regarding certain matters.  In addition, the Klein Family has the right to appoint only two members of the board of directors of Via Varejo. On July 11, 2014, we, the Casino Group, Via Varejo, Nova HoldCo and Cnova Brazil entered into a Framework and IPO Agreement, or the Cnova Framework and IPO Agreement.  Subsequently, Cnova, Almacenes Ã‰xito S.A., or Ã‰xito, CDiscount Group S.A.S., or Cdiscount, GermÃ¡n Quiroga and another founder ofNova HoldCoalso became parties to the Cnova Framework and IPO Agreement, whichprovided for the reorganization of the e-commerce business of the Casino Group and its affiliates in France, Latin America (including Brazil) and Asia under the common ownership and/or control of Cnova.  The reorganization was effected in accordance with the Cnova Framework and IPO Agreement through the steps described below. On or shortly prior to July 24, 2014 (except for clause (v) below, which was completed on November 17, 2014): (i)the Casino Group effected a contribution in kind of all issued and outstanding shares it held in Cdiscount, the holding company through which the Casino Group conducted its e-commerce business in France, Colombia and Asia to Cnova, as a result of which Cnova now owns the majority (approximately 99.8%) of the shares of Cdiscount and as a result controls the Cdiscount business in France and abroad; (ii)Nova HoldCo effected a contribution in kind of substantially all of its assets and liabilities to a wholly-owned Brazilian subsidiary, Cnova Brazil, as a result of which Cnova Brazil owns our and Via Varejoâ€TMs Brazilian e-commerce businesses; (iii)Nova HoldCo reorganized the ownership structure of Cnova Brazil, such that, prior to the completion of step (iv), 100% of the share capital of Cnova Brazil was held by Marneylectro B.V. (a Dutch holding company), or DutchCo, which is in turn a wholly-owned subsidiary of Marneylectro S.Ã .r.l. (a Luxembourg holding company), or LuxCo, which is in turn a wholly-owned subsidiary of Nova HoldCo; (iv)Following the completion of the preceding steps, DutchCo contributed all of the issued and outstanding shares in Cnova Brazil to Cnova, as a result of which Cnova owns our and Via Varejoâ€TMs Brazilian e-commerce businesses; (v)the Casino Group transferred 30% of its indirect interest in C-Distribution Asia Pte. Ltd, or C-Asia, which controls the Casino Groupâ€TMs e-commerce subsidiaries operating in Thailand and Vietnam to a subsidiary of Cdiscount, resulting in Cnova acquiring indirectly 60% of the equity interests in C-Asia; and (vi)Cnova obtained control over the e-commerce business of the Casino Group in Colombia, operated through Cdiscount Colombia S.A., or Cdiscount Colombia.  In connection with this step, Ã‰xito contributed 21% of its equity interest in Cdiscount Colombia to Cnova in consideration for 0.16% of Cnovaâ€TMs share capital. Following the reorganization, Cnova owns, directly or indirectly, or has the right to use substantially all of the assets that were used, or held for use, in the e-commerce business of the Casino Group and its affiliated entities in France, Latin America (including Brazil) and Asia. On November 25, 2014, our subsidiary, Cnova, concluded its initial public offering of ordinary shares on the Nasdaq Global Select Market and raised approximately US$204.1 million in gross proceeds.  On January 23, 2015, Cnova also listed its ordinary shares on the Euronext Paris. On December 30, 2014, Nova Holdco transferred 5,838,233 shares in the capital of LuxCo to us and 4,902,270 shares in the capital of LuxCo to Via Varejo in connection with a restructuring of an intercompany debt owed by


Nova Holdco. As a result of those transfers, CBD, Via Varejo and Nova Holdco directly hold approximately 2.65%, 2.22% and 95.13%, respectively, of the issued and outstanding shares in the capital of LuxCo and CBD, Via Varejo and certain minority shareholders indirectly hold approximately 26.1%, 21.9% and 1.80%, respectively, of the issued and outstanding shares in the capital of Cnova. 15


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In 2014 it was approved by the Board of Directors, as recommended by the Corporate Governance Committee, a policy for Related Party Transactions. Under such policy it was determined that the Audit Committee is required to assess whether the guidance contemplated in said policy was observed in certain transactions of this nature to be brought to the Board of Directors for approval. In several Audit Committee meetings such transactions among related parties were analyzed to ensure the policy had been complied with. Capital Expenditures and Investment Plan As part of our capital expenditures and investment plan, we have invested approximately R$5,515 millionin our operations in the three years ended December 31, 2014.  Our capital expenditure and investment plan for 2015 contemplates capital expenditures and investments for 2015 in the total amount of approximately R$2 billion relating to (i) the opening of new stores, purchase of real estate and conversion of stores, (ii) the renovation of existing stores, and (iii) improvements to information technology, logistic and other infrastructureâ€‘related capital expenditures and investments.  The Company has historically financed its capital expenditures and investments mainly with cash flow generated from its operations and, to a lesser extent, funded by third parties.  The Company plans to continue financing its capital expenditures and investments principally with cash flow from its operations. Our investments in the last three years have included: Opening of new stores and purchases of real estateâ€“ In the food retail sector, we seek real estate properties to open new stores under one of our banners in regions or local supermarket chain acquisition opportunities that suit one of our formats.  We have opened 444 new stores from 2012 through 2014, including those in the food retail sector and those in the home appliances retail sector.  The total cost of opening these new stores and the purchase of real estate from 2012 through 2014 was R$1,654million. Acquisition of retail chains and companiesâ€“ We have paid an aggregate of R$376millionfrom 2012 through 2014 for the acquisition of equity interests in other companies, including Sendas, AssaÃ­, and, more recently, IndÃostria de MÃ3veis Bartira Ltda., or Bartira, a furniture maker that sells exclusively to Casas Bahia. Renovation of existing stores â€“We usually remodel a number of ourstores every year.  Through our renovation program we modernized refrigeration equipment in our stores, create a more modern, customer-friendly and efficient environment, and outfit our stores with advanced information technology systems.  The total cost of renovating stores from 2012 through 2014 was R$1,740 million. Improvements to information technologyâ€“ We view technology as an important tool for efficiency and security in the flow of information among stores, distribution centers, suppliers and corporate headquarters.  We have made significant investments in information technology in an aggregate amount of R$1,118millionfrom 2012 through 2014.  For more information on our information technology, see â€œItem 4B. Business Overviewâ€”Technology.â€ Expansion of distribution facilitiesâ€“ Since 2009, we have opened distribution centers in the cities of SÃ£o Paulo, BrasÃ­lia, Fortaleza, Rio de Janeiro, Recife, Salvador and Curitiba.  The increase and improvement in storage space enables us to further centralize purchasing for our stores and, together with improvements to our information technology, improve the overall efficiency of our inventory flow.  We have invested an aggregate of R$627 millionon our distribution facilities from 2012 through 2014. 16


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The following table provides a summary description of our principal capital expenditures for the three years ended December 31, 2014: Year Ended December 31,2012

   2013

   2014(in millions of R$)Opening of new stores

   286

   521

   513Purchases of real estate

   97

   199

   38Acquisition of retail chains and companies

   33

   276

   67Renovation of existing stores

   564

   612

   565Information technology

   338

   371

   410Distribution centers

   109

   148

   370Total

   1,426

   2,127

   1,963
  4B.Business Overview The Brazilian Retail Industry The Brazilian retail food industry represented approximately 5.3% of Brazil’s gross domestic product, or GDP, in 2014.  According to the Brazilian Supermarket Association (Associação Brasileira de Supermercados), or ABRAS, the food retail industry in Brazil had gross revenues of approximately R$295 billion in 2014, representing a 8.3% nominal increase compared with 2013. The Brazilian retail food industry is highly fragmented.  Despite consolidation within the industry, according to ABRAS, the five largest supermarket chains represented approximately 52.2% of the retail food industry in 2014, as compared to 46.6% in 2013.  Our consolidated gross sales represented 24.7% of the gross sales of the entire retail food industry in 2014, also according to ABRAS. The cash and carry segment was created in order to serve customers within a market niche that was neither reached by self-service retail nor by direct wholesale. According to the Brazilian Association of Wholesalers and Distributors of Industrial Products(Associação Brasileira da Atacadistas e Distribuidores de Produtos Industrializados)the cash and carry sector in Brazil had gross revenues of approximately R$212 billion in 2014, representing a nominal increase of 7.3% over the previous year. According to data published in February 2015 by the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística), or IBGE, the volume of sales in the food retail sector increased by 1.3% in 2014 compared to 2013.  This data mainly reflects the increase in the Brazilian population’s purchasing power, mostly driven by the rise in the salaries and number of people employed. According to the IBGE, the volume of sales in furniture and house appliances sector in Brazil increased by 7.2% in 2014 relation to the previous year.  This performance occurred due to the maintenance of the employment and income growth and credit availability. According to the IBGE, the total population of Brazil was approximately 203 million in 2014, a 17.6% growth since 2001.  Given that more than 84% of the population lives in urban areas (where most of our operations are located) and the urban population has been increasing at a greater rate than the population as a whole, our business is particularly well positioned to benefit from Brazil’s urban growth and economies of scale related to urban growth. According to an IBGE estimate for 2014, the city of São Paulo has a population of approximately 11.9 million and the city of Rio de Janeiro has a population of approximately 6.5 million.  These are the two largest cities in Brazil.  The State of São Paulo has a total population in excess of 44.0 million, representing 21.7% of the Brazilian population and is our largest consumer market.  The State of Rio de Janeiro is our second largest consumer market, with approximately 336 stores. According to IBGE, gross income in Brazil increased approximately 4.4% in 2014 compared to 2013.  During the same period, private consumption increased 0.9%, and Brazil’s GDP also increased 0.1%.  Among the reasons for the growth are the 2.7% increase in average real income and the 7.2% increase in household credit as a percentage of GDP. According to the Getúlio Vargas Foundation (Fundação Getúlio Vargas), or FGV, the Gini index, a measure of income inequality, in Brazil has decreased for the 12th consecutive year, in January 2012 reaching the lowest level


since the 1960’s (0.5190).  During the past 10 years, income for the poorest 50% in Brazil increased 68%, while it increased only 10% for the richest 10%.


17

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The Brazilian retail industry is perceived as essentially growth-oriented, because retail margins are substantially more constrained compared to other industries.  We are therefore intrinsically dependent on the growth rate of Brazil’s urban population and its different income levels.  While living expenses in Brazil are lower than those in North America, Western Europe and Japan, Brazilian household income levels are also substantially lower. The following table sets forth the different income class levels of Brazilian households, according to the Consumption Potential Index (Índice de Potencial de Consumo), or IPC, Maps 2013. Class Level

   

   Average Monthly Income (in R$)A1

   

   24,770A2

   

   13,261B1

   

   11,110B2

   

   4,335C1

   

   2,321C2

   

   1,470D

   

   1,070E

   

   732
  According to a study by IPC Maps 2013, classes A1 and A2 households will account for only 4.6% of the urban population and classes B1 and B2 households will account for 33.4% of the urban population.  Classes C1, C2, D and E will collectively represent 62.0% of all urban households.  In recent years, the number of class C, D and E households has increased in terms of total urban households and their average purchasing power has increased. We expect that increased consumption by the lower income class levels will occur over time as a result of gradual salary increases and a steadily growing population.  The Brazilian monthly minimum wage increased 8.8% from R$724.00 in January 2014 to R$788.00 in January 2015.  Our management believes based on internal data for the years immediately following the introduction of therealin 1994, that even small purchasing power increments generally result in significant increases in consumption in absolute terms, as well as increased expenditures in premium-priced food products and other non-food items, including home appliances and consumer electronics. Our Company We are the largest retailer in Brazil, with a market share of approximately 24.7% in 2014, according to ABRAS.  As of December 31, 2014, our total gross sales, including the food and non-food categories, totaled R$73 billion. On the same date, we operated 1,902 stores, 83 gas stations and 158 drugstores in 20 Brazilian states and the Federal District, in addition to a logistics infrastructure supported by 61 distribution centers and depots located in 17 Brazilian states and the Federal District. We classify our various business segments into four operating segments as follows (see note 34 to our audited consolidated financial statements included elsewhere in this annual report): ·Food retail segment, which consists of sales of food and non-food products to individual consumers at (i) supermarkets through the bannersPão de AçúcarandExtra Supermercado,(ii) hypermarkets through the bannerExtra Hiperand (iii) neighborhood stores through the bannersMinimercado ExtraandMinuto Pão de Açúcar.The food retail segment also includes the revenues related to rentals of commercial spaces. Food products include non-perishable food products, beverages, fruit, vegetables, meat, bread, cold cuts, dairy products, cleaning products, disposable products, and personal care products.  In some cases, these goods are sold in the form of private label products at our food retail stores.  We also sell non-food products, which include clothing items, baby items, shoes and accessories, household articles, books, magazines, CDs and DVDs, stationery, handcraft, toys, sports and camping gear, furniture, mattresses, pet products, gardening and also electronics products, such as personal computers, software, computer accessories, and sound and image systems.  Some of the products listed above are also offered in the form of our private label products.  We also sell our products in the food retail segment through our websites www.paodeacucar.com.br and www.extra.com.br.


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In addition, we include in the food retail segment the non-food products we sell at our drugstores, such as medications and cosmetics, and the non-food products we sell and the services we provide at our gas stations. ·Cash and carry segment, which consists of sales of food and some non-food products to resellers, intermediate consumers and retail customers through theAssaíbanner. ·Home appliances segment, which consists of sales of durable goods (i.e., electronics, home appliances, furniture and other items for the home) and the provision of products and services, such as specialized and convenient sales and after-sales service throughCasas BahiaandPontofriostores and “mobile stores,” a new format focused on selling mobile phones, tablets, accessories, services and post-paid plans of Brazil’s leading mobile carriers. ·E-commerce segment, which consists of Cnova operations through Cdiscount websites in France and Brazil, and operations in Colombia, Thailand, Vietnam, Ivory Coast, Ecuador, Belgium, Senegal and Cameroon (launched in 2014) and in Panama (launched in 2015), and operations in Brazil under the sites Extra.com.br, Pontofrio.com.br and Casasbahia.com.br. Cnova also operates specialty sites both in France and Brazil, including Comptoirsante.com, Moncornerdeco.com, Monshowroom.com, Barateiro.com.br and PartiuViagens.com.br, as well as B2B solutions, such as eHub, an e-commerce platform solution for third parties. In the food retail, home appliance and e-commerce segments we also provide extended warranties to our customers upon the sale of home appliances at our stores. Segment Revenue and Income Distribution The table below shows the breakdown of our consolidated gross and net operating revenue by operating segment.  Results of the operating segments are presented in conformity with IFRS, the measure used by management in evaluating the performance of and strategy for the four segments listed below. Year Ended December 31, 2014Operating segment

   Gross Operating Revenue

   from the Segment

   Percentage of

   Total Gross Operating Revenue

   Net Operating Revenue

   from the Segment

   Percentage of

   Total Net Operating Revenue(in millions of R$)

   

   (in millions of R$)Food retail

   28,677

   39.4%

   26,415

   40.3%Cash and carry

   8,983

   12.3%

   8,326

   12.7%Home appliances

   25,753

   35.4%

   22,674

   34.6%E-commerce

   9,461

   13.0%

   8,175

   12.5%Eliminations (1)

   (70)

   (0.1)%

   (65)

   (0.1)%Total

   72,804

   100.0%

   65,525

   100.0%
 ____________ (1)        Eliminations consist of intercompany balances.  Apart from revenues generated by the e-commerce segment, all of our operating revenue is generated in Brazil.  In the e-commerce segment, Brazil is our largest market.  The table below shows the percentage breakdown of Cnova’s net operating revenue by geographic region for the period from July 31, 2014 to December 31, 2014. Geographic region

   Percentage of

   Total Net Operating RevenueBrazil

   70.3%Other countries

   29.7%Total

   100.0%


19

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The table below shows the breakdown of our consolidated net profit by operating segment.  Results of the operating segments are presented in conformity with IFRS, the measure used by management in evaluating the performance of and strategy for the four segments listed below. Year Ended December 31, 2014Operating segment

   Net Income (Loss)

   from the Segment(in millions of R$)

   Percentage of

   Total Net IncomeFood retail

   752

   42.7%Cash and carry

   120

   6.8%Home appliances

   969

   55.1%E-commerce

   (81)

   (4.6)%Total

   1,760

   100.0%
  For more information about our net operating revenues and net income by operating segment, see “Item 5A. Operating Results—Results of Operations for 2014, 2013 and 2012.” Number of Stores The following table sets forth the total number of stores at the end of the periods indicated per store format: Pão de Açúcar

   Extra Hiper

   Extra Super(1)

   Mini-mercado Extra

   Minuto Pão de Açúcar

   Assaí

   Pontofrio(2)

   Casas Bahia

   Total(3)As of December 31, 2011

   160

   132

   204

   72

   

   59

   401

   544

   1,572During 2012

   

   

   

   

   ­Opened

   4

   6

   3

   39

   –

   3

   8

   25

   88Closed

   (1)

   –

   –

   (4)

   –

   (1)

   (12)

   (1)

   (19)Converted (from)/to

   –

   –

   –

   –

   –

   –

   –

   –

   –Acquired

   –

   –

   –

   –

   –

   –

   –

   –

   –As of December 31, 2012(3)

   163

   138

   207

   107

   –

   61

   397

   568

   1,641During 2013Opened

   5

   –

   6

   57

   –

   14

   5

   36

   125Closed

   –

   –

   –

   –

   –

   –

   (5)

   (2)

   (11)Converted (from)/to

   –

   –

   –

   –

   –

   –

   –

   –

   -Acquired

   –

   –

   –

   –

   –

   –

   –

   –

   -As of December 31, 2013

   168

   138

   213

   164

   –

   75

   397

   602

   1,757During 2014Opened

   8

   3

   3

   83

   14

   9

   27

   61

   208Closed

   (3)

   (1)

   (1)

   (8)

   –

   –

   (44)

   (6)

   (63)Converted (from)/to

   8

   (3)

   (8)

   1

   2

   –

   (6)

   6

   –Acquired

   –

   –

   –

   –

   –

   –

   –

   –

   –As of December 31, 2014

   181

   137

   207

   240

   16

   84

   374

   663

   1,902
 ____________ (1)   During 2010 and 2011, we converted theSendasandCompreBemstores into other formats. (2)   During 2010, we converted theExtra EletrointoPontofriostores. (3)   Excludes 83 gas stations and 158 drugstores. Geographic Distribution of Stores The Company operates mainly in the Southeast region of Brazil, which consists of the states of São Paulo, Rio de Janeiro, Minas Gerais and Espírito Santo. The Southeast region accounted for 80.4% of the Company’s consolidated net revenue for the year ended December 31, 2014, while the other Brazilian regions (North, Northeast, Center West and South regions) in the aggregate accounted for the remaining consolidated net operating revenue for the year ended December 31, 2014. In addition, none of these regions represents individually more than 8.9% of the consolidated net operating revenue.


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The following table sets forth the number of our stores by region as of December 31, 2014: City of São Paulo

   State of São Paulo

   (excluding the City of

   São Paulo)(1)

   State of Rio de Janeiro

   South and SoutheastRegions(excluding the

   States of São Paulo

   and Rio de Janeiro)(2)

   North and Northeast Regions(3)

   Middle-West Region(4)Pão de Açúcar

   67

   48

   22

   5

   23

   16Extra Hiper

   29

   42

   24

   7

   20

   15Extra Supermercado

   63

   88

   44

   —

   12

   —Minimercado ExtraandMinuto Pão de Açúcar

   177

   79

   —

   —

   —

   —Assaí

   21

   26

   11

   2

   16

   8Pontofrio

   46

   89

   88

   124

   —

   27Casas Bahia

   92

   191

   102

   121

   90

   67Total (5)

   495

   563

   291

   259

   161

   133
 ____________ (1)   Consists of stores in 128 cities, including Campinas, Ribeirão Preto and Santos. (2)   This area comprises the states of Espírito Santo, Minas Gerais, Paraná, Rio Grande do Sul and Santa Catarina. (3)   This area comprises the states of Alagoas, Bahia, Ceará, Paraíba, Pernambuco, Piauí, Rio Grande do Norte, Sergipe and Tocantins. (4)   This area comprises the states of Goiás, Mato Grosso, Mato Grosso do Sul and the Federal District. (5)   Excludes 83 gas stations and 158 drugstores. Operations The following table sets forth the number of stores, the total selling area, the average selling area per store, total number of employees and the net operating revenue as a percentage of our total net operating revenue for each of our store formats as of December 31, 2014: Store Format

   Number of Stores

   Total Selling Area

   Average Selling Area Per Store

   Total Number of Employees (1)

   Percentage of Our Net Operating Revenue(in square meters)

   (in square meters)Pão de Açúcar

   Supermarket

   181

   232,572

   1,285

   18,262

   9.7%Extra Hiper

   Hypermarket

   137

   811,612

   5,924

   29,207

   21.9%Minimercado ExtraandMinuto Pão de Açúcar

   Proximity Store

   256

   62,280

   243

   3,561

   1.0%Extra Supermercado

   Supermarket

   207

   236,947

   1,145

   12,495

   7.6%Assaí

   Cash and Carry

   84

   316,513

   3,768

   13,647

   12.7%Pontofrio

   Home Appliance Store

   374

   243,718

   652

   8,848

   8.0%Casas Bahia

   Home Appliance Store

   663

   867,818

   1,309

   31,741

   26.5%Cnova(2)

   E-commerce

   N/A

   N/A

   N/A

   N/A

   12.5%Head office and distribution center

   N/A

   N/A

   N/A

   N/A

   42,067

   N/ATotal(3)

   N/A

   1,902

   2,771,460

   1,457

   159,828

   100%
 ____________ (1)   Based on the average of the full-time equivalent number of employees, which is the product of the number of all retail employees (full- and part-time) and the ratio of the average monthly hours of all retail employees to the average monthly hours of full-time employees. (2)   Cnova’s employees are included in head office and distribution center. (3)   Excludes 83 gas stations and158 drugstores. For a detailed description of net operating revenue for each of our store formats, see “Item 5A. Operating Results.”


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Food Retail Operating Segment Pão de AçúcarStores Pão de Açúcaroperates supermarkets, which are predominantly located in large urban areas (with over one-third located in the greater São Paulo metropolitan area).  We believe that the locations of ourPão de Açúcarstores are a competitive advantage since available sites in these urban areas are scarce.  ThePão de Açúcarstores target the Brazilian class A and class B household consumers.  The stores are characterized by a pleasant shopping environment, a broad mix of quality products, innovative service offerings and high level of customer service.  Many of these stores feature specialty areas such as perishables, baked goods, wine, ready-to-eat dishes, meat, cheese and seafood departments.  Many stores have shopping advisors that assist customers with inquiries about their particular needs, prices, special discounts and brand information. As of December 31, 2014, we had 181Pão de Açúcarstores.  ThePão de Açúcarstores have an average of 1,285 square meters of selling space.  Food products represented 95.7% of gross sales revenue attributable toPão de Açúcarin 2014 and non-food products represented 4.3%. ThePão de Açúcarbanner recorded gross sales of R$6,665 million in 2014, representing an increase of 7.0% relative to 2013.  This increase was mainly a result of our expansion (eight new stores were opened and another eight were converted fromExtraSupermercadostores) as well as growth in certain categories, such as beverages and perishables, particularly meat and poultry and seafood. Extra HiperStores We introduced the hypermarket format in Brazil with the opening of our first 7,000 square meter store in 1971.  TheExtra Hiperstores offer the widest assortment of products of any of our store formats and had an average selling area of 5,924 square meters as of December 31, 2014.  TheExtra Hiperstores target the Brazilian classes B, C, D and E classes.  As of December 31, 2014, we had 137Extra Hiperstores.  The sale of food products and non-food products represented 68.7% and 31.3% ofExtra Hiper’s gross sales in 2014, respectively. Gross sales of theExtra Hiperbanner in 2014 reached R$14,279 million, an 0.8% decrease compared to 2013, mainly due to decrease in sales of durable goods, which influenced store traffic. Three newExtra Hiperstores were opened in 2014. Extra SupermercadoStores As of December 31, 2014, we operated 207Extra Supermercadostores.  OurExtra Supermercadobanner is characterized by supermarkets focused on the middle-class customer, with an average sales area of 1,145 square meters and a complete mix of food products and general merchandise.  OurExtra Supermercadostores offer quality products, where families can stock up their pantries rapidly and economically and also acquire a wide range of household items in an easily accessible and pleasant environment with exemplary customer service.  The sale of food products and non-food products represented 95.5% and 4.5%, respectively, ofExtra Supermercado’s gross sales in 2014. Gross sales of theExtra Supermercadoformat in 2014 reached R$5,062 million, a 1.5% increase compared to 2013. This increase was mainly due to the opening of three new stores in 2014. In line with the market in general and emerging consumer habits, theExtrabrand (HipermercadosandSupermercados) works to ensure offers and opportunities that provide its target audience with a great shopping experience.  For example in 2014, theExtrabrand strengthened its position by focusing on competitiveness and the assortment of products and services offered. As a result, the business is investing in offers and opportunities to retain their customers and ensure growth.  Due to higher promotional dynamics implemented than compared to the previous year, prices lagged behind inflation during the period.


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Proximity Stores(Minimercado ExtraandMinuto PÃ£o de AÃ§Ãocar) In 2011, we began to re-brand the proximity stores banner toMinimercado Extra, emphasizing the neighborhood concept of these stores.  Through this process, the model was improved with some changes to the products and services mix, including a larger offer of customized services on perishable goods such as bakery products, sliced cheese/meat and butchery products. These changes were a response to consumer demand for healthier food, comfort and convenience. In 2014, we opened the firstMinuto PÃ£o de AÃ§Ãocar, another proximity store banner, which offers a differentiated assortment of products and services to meet the needs of high income customers, whileMinimercado Extrais focused on middle-class public. As of December 31, 2014, theMinimercado ExtraandMinuto PÃ£o de AÃ§Ãocarstores had an average of 243 square meters of selling space.  The sale of food products and non-food products represented 97.7% and 2.3%, respectively, of proximity stores gross sales in 2014. Gross sales of the proximity stores in 2014 reached R$677 million, an 41.9% increase compared to 2013, mainly due to the opening of 97 new stores in 2014 (83Minimercado Extraand 14Minuto PÃ£o de AÃ§Ãocar), bringing the total of proximity stores to 256 units as of December 31, 2014.  We expect to continue growing this banner in the years. Other Businesses Other businesses include gas stations, drugstores, food delivery and revenues related to rentals of commercial spaces.  Gross sales from other businesses increased by 6.1%, from R$1,879 million in 2013 to R$1,993 million in 2014, and are included in the Food Retail Business. Gas Stations As of December 31, 2014, we operated 83 gas stations.  The vast majority of our gas stations are located within the parking area of certain of our stores, mainly inExtra Hiperstores.  The location of our gas stations allows our customers to both shop and refuel their cars while they are on our premises.  Our strategy for gas stations is based on competitive prices and the reliability and quality of fuel, which is assured by the brand. Drugstores As of December 31, 2014, we operated 158 drugstores in 17 states and in the Federal District.  Our strategy, in relation to our drugstores, is to provide greater convenience to our customers by providing additional products, mainly in ourExtra Hiperstores.  We opened four new drugstores in 2014. Food Delivery and In-Store Pick-Up We have consolidated our leadership in food e-commerce through our food delivery platforms, includingPÃ£o de AÃ§ÃocarDelivery, or PA Delivery, launched in 1995, andExtraDelivery, launched in 2012, through which our customers can order their products online and receive them at home (within 24 hours for â€œconventionalâ€ delivery and four hours for â€œexpressâ€ delivery). In January 2013 we launched our â€œIn-Store Pick-Upâ€ service, a new purchasing option through which our customers are able to order online and choose the best time to pick up their food order in selectPÃ£o de AÃ§Ãocarstores.  In November 2013, we launched our â€œIn-Store Pick-Upâ€ service in ourExtrastores. As of December 31, 2014, we operated four â€œconventionalâ€ PA Delivery units (two located in the greater SÃ£o Paulo region and one in each of Rio de Janeiro and Brasilia) and six â€œexpressâ€ PA Delivery units (all located in the greater SÃ£o Paulo region).  As of December 31, 2014, our â€œClick & Collectâ€ service was available in sevenPÃ£o de AÃ§Ãocarstores (all located in the greater SÃ£o Paulo region). 23


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As of December 31, 2014, we operated twoExtraDelivery units (one located in each of SÃ£o Paulo and Rio de Janeiro).  As of December 31, 2014, our â€œClick & Collectâ€ service was available in twoExtrastores (all located in the greater SÃ£o Paulo region). GPA Malls In 2014, GPA Malls added 37,000 square meters of gross leasable area, or GLA, and, as of December 31, 2014, GPA Malls had a total GLA of 325,000 square meters. Cash and Carry Operating Segment AssaÃ­Stores AssaÃ­has been operating in the cash and carry segment for 40 years.  In 2014, we expanded our cash and carry business and invested in organic growth by opening nine newAssaÃ­stores in five Brazilian states, totaling 84 stores as of December 31, 2014, strengthening theAssaÃ­bannerâ€TMs national footprint.  We expect to continue growing this operating segment.  In 2014, theAssaÃ­banner had gross sales of R$8,983 million, an increase of 31.8% compared to 2013. Beginning in 2012,AssaÃ­launched a new format for its stores, which operate as mini distribution centers and do not rely on a logistics infrastructure, as deliveries are made directly by the supplier. These standard stores are characterized by wider aisles and high ceilings, which facilitate the loading and increase up to six times the capacity of storage of goods. In addition, other characteristic features of these standard stores include a larger assortment of goods and improved ambiance, including covered parking, air conditioning and natural lighting. This set of initiatives resulted in a more convenient experience for our customers, which, consequently, increased our customer flow and loyalty.AssaÃ­â€TMs customers include individual consumers and corporations, such as prepared food retailers (such as restaurants, pizzerias and snack bars), conventional retailers (such as grocery stores and neighborhood supermarkets) and end users (such as schools, small businesses, churches and hospitals). Home Appliances Operating Segment PontofrioStores OurPontofriostores specialize in sales of home appliances, such as consumer electronics.  As of December 31, 2014, we operated 374Pontofriostores as a result of our acquisition of Globex (currently Via Varejo) in July of 2009.  In 2014,Pontofriostores had gross sales of R$5,906 million, a 3.9% decrease compared to 2013. Our Pontofrio stores target middle- and higher-income customers, and our strategy is to open more stores in shopping malls focused on the high income customers (A and B income classes).  We offer these customers customized expert advice on our products, as well as a range of value-added services, during and after sales, such as extended warranties. Casas BahiaStores OurCasas Bahiastores specialize in furniture and home appliances.  As of December 31, 2014, we operated 663 stores as a result of the Casas Bahia association.  In 2014,Casas Bahiastoresâ€TM gross sales totaled R$19,777 million, an increase of 5.1% compared to 2013. OurCasas Bahiastores target middle- and lower-income customers (B and C income classes), who are attracted by flexible payment alternatives, including installment plans.Casas Bahiastores are generally larger thanPontofriostores.  OurCasas Bahiastores also offer a range of value-added services, during and after sales, such as extended warranties. In December 2014, Via Varejolaunched the â€œmobile store,â€ a new format focused on selling mobile phones, tablets, accessories, services and post-paid plans of Brazilâ€TMs leading mobile carriers. Twenty points of sales were opened, of which 10 dedicated stores (stand-alone) and 10 built inside existing stores (store-in-store) under the


PontofrioandCasas Bahiabanners. Via Varejoalso lauched a project of complete renewal of the furniture category, with improvements in design, store displays and offering of customized furniture at accessible prices inCasas Bahiabanner and will be rolled out toPontofrioin 2015. 24


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In 2014, we opened 88 new home appliance stores, of which 27 werePontofriostores and 61 wereCasas Bahiastores. E-commerce Operating Segment In line with our strategy to expand our share of the sales of home appliances through e-commerce, in 2010 we consolidated our e-commerce operations by creating a new company called Nova HoldCo.  This segment consisted of remote sales of a broad product mix through the websitesExtra.com.br,PontoFrio.com.brandCasasBahia.com.br. In addition, in 2013, we began to offer a marketplace e-commerce solution through ourExtra.com.brwebsite, through which we provide our customers with the possibility of purchasing products from a large number of partners through a single online purchase experience.  We also seek to offer other e-commerce related services throughE-hub, our e-commerce solution, which we sell to specialized retailers, and B2B solutions.In 2012, we launchedBarateiro.com, a website originally dedicated to selling phased-out products and products with minor flaws.  In 2013, we broadenedBarateiro.comâ€TMs assortment in order to include phased-out products under a hard discount model. Our e-commerce network offers our customers a range of shipping and delivery options, including ourâ€œClick & Collectâ€option, whereby customers can select a nearby location to pick up products they purchase on our sites.  We have a network of more than 17,500â€œClick & Collectâ€locations in France for small and light products. Of those pick-up locations, over 2,200 are stores that are owned, operated or franchised by the Casino Group. In addition, we have a network of almost 600â€œClick & Collectâ€locations in France for heavy or large products, of which approximately 400 are part of the Casino Group, to which we have exclusive access. The network of more than 18,000â€œClick & Collectâ€locations allows our customers in France to choose a convenient pick-up location for delivery of their purchased products.  We launched our â€œClick & Collectâ€ program in Brazil in 2013 and by the end of 2014, itwas available in 100 stores. As described above in â€œItem 4A. History and Development of the Companyâ€, on July 11, 2014, we, the Casino Group, Via Varejo, Nova HoldCo and Cnova Brazil entered into the Cnova Framework and IPO Agreement.  Subsequently, Cnova, Ã‰xito, Cdiscount, GermÃ¡n Quiroga and another founder ofNova HoldCoalso became parties to the Cnova Framework and IPO Agreement, whichprovided for the reorganization of the e-commerce business of the Casino Group and its affiliates in France, Latin America (including Brazil) and Asia under the common ownership and/or control of Cnova.   As a result of this reorganization, Cnova owns, directly or indirectly, or has the right to use substantially all of the assets that were used, or held for use, in the e-commerce business of the Casino Group and its affiliated entities in France, Latin America (including Brazil), Africa and Asia.  Consequently, we have consolidated the results of Cnovaâ€TMs non-Brazilian subsidiaries since July 31, 2014. On November 25, 2014, Cnova concluded its initial public offering on the Nasdaq Global Select Market and raised approximately US$204 million in gross proceeds. In 2014, the e-commerce segmentâ€TMs net operating revenue totaled R$8,175 million, of which sales in Brazil and France accounted for 53.8% and 45.9%, respectively.  Cnova has a market share of slightly less than 20% of the Brazilian e-commerce market, as measured by e-Bit, and is the second largest e-commerce company in Brazil.  Additionally, Cnova is a leading e-commerce company in France, with 23% to 35% market share as of December 31, 2014, in a number of our product categories, based on revenues. Cnova is one of the largest global e-commerce companies and, among non-travel pure player e-commerce companies, is the sixth largest by sales and the eighth largest by unique monthly visitors. 25


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Seasonality We have historically experienced seasonality in our results of operations, principally due to traditionally stronger sales in the fourth quarter holiday season and â€œBlack Fridayâ€ promotions, which are relatively new in Brazil and helped to boost fourth quarter sales of mainly non-food categories.  Average sales revenues during the fourth quarter are typically 30% above average sales revenues during the other quarters. We also experience strong seasonality in our results for the months of March or April as a result of the Easter holiday where we offer specialized products for the occasion as well as in FIFA World Cup years where some of our products show an increase in sales. Seasonality relating to the availability of some of our products (such as fruits and vegetables) does not affect our results due to the large and diverse selection of products we offer our customers. Our Products Our products in the food retail sector are mostly ready-for-sale products that we purchase and resell to our endâ€‘user consumers.  Only a portion of our products are produced at our stores, which are based on formulations prepared by our technical team for development of perishables.  In certain circumstances, we have entered into partnerships with suppliers who deliver semi-finished products that are finished at our stores. The products manufactured and/or handled at our stores are: (i) fruits and vegetables, cut or packaged at our stores; (ii) meat (beef, pork, chicken and fish) as well as cold cuts and cheeses, which are cut, weighed and packaged at our stores; (iii) ready-to-eat meals sold at our deli counters; and (iv) bread, cakes and sweets made at the bakeries located within our stores. We do not manufacture the products sold under our own exclusive brands.  These products are manufactured by suppliers who are carefully selected by us, after we have thoroughly evaluated the quality of their service and their capacity to meet our demand.  The development of products carrying our private label is guided by a detailed process aimed at standardizing our products and ensuring the productsâ€TM manufacturing and launch within the commercial and strategic targets of our brands and compliance with our quality standards, involving various areas of our Company. In the home appliances retail sector all our products are ready-for-sale products that we purchase and resell to our end-user consumers.  We generally do not sell products in the home appliances segment under our own brands, but we offer value-added services, such as extended warranties. Suppliers The purchasing of food products for all of our banners,excludingAssaÃ­,is centralized and we purchase substantially on the spot or on a short-term basis from a large number of unaffiliated suppliers.  As a result, we are not dependent on any single supplier. The purchasing of electronic products forPontofrio,Casas Bahia, Extra-Hypermarketand for our Brazilian e-commerce operating segment is made by Via Varejo purchase from a small number of suppliers, mostly Brazilian.  We do not depend on any single supplier in our home appliance and e-commerce segments.  In 2014, our largest supplier in the home appliance and e-commerce segments, excluding Cdiscount, represented 17.7% and 21.9% of our respective sales and the ten largest suppliers in these segments represented 59.6% and 65.0% of our respective sales. Bartira represented 5.4% of our sales in the home appliance segment. Distribution and Logistics In order to efficiently distribute perishable food products, grocery items and general merchandise, we operate 61 distribution centers and depots strategically located in 17 Brazilian states and the Federal District with a total storage capacity of approximately 1.85 million square meters.  The locations of our distribution centers enable us to make frequent shipments to stores, which reduces the need of in-store inventory space, and limits non-productive


store inventories.In our e-commerce segment, we utilize 23 distribution centers (with a total storage space of more than 615,000 square meters), of which 12 are located in France (with a total of approximately 264,000 square meters), seven in Brazil (with a total of approximately 347,000 square meters), and one in each of Colombia, Thailand, Ecuador and Vietnam. 26


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Our distribution centers are significantly supported by pd@net, a business-to-business technology platform, which links our computer automated ordering system to our distribution centers and suppliers in order to automatically replenish our inventory. In 2014, we continued focusing on capturing synergies in our logistics network, by acting in three main areas: (1) transforming our logistics network so that it can service all of our businesses, optimizing space and existing processes; (2) improving our logistics network by taking into consideration the structure and environment; and (3) promoting operational efficiencies.  Furthermore, we remain committed to exploring synergy opportunities that result in a better experience for the customer and improve our existing processes. In addition, in keeping with our multichannel strategy, in 2014 we expanded our “Click & Collect” service to an additional 100Extrastores, providing kiosks where customers can collect the products they purchased on ourExtrawebsite.  We expect to expand our “Click & Collect” service to a greater number of stores and brands in the coming years. In line with our strategy to expand our proximity store models (Minimercado ExtraandMinuto Pão de Açúcar), in 2014 we launched our first distribution center dedicated exclusively to these types of stores and to our food delivery services.  We invested R$38 million to build this 56,000 square meter distributing center, containing 46,000 thousand square meters of floor area.  With this new distribution center, we expect to improve operational efficiency, with gains across our supply chain, from the receipt of the supplier’s goods, through storage, picking, shipping and the flow of internal processes in each store. In 2004, we initiated the Top Log program to certify our suppliers who employ the best policies and practices in logistics and supply ascertained during the year.  In 2014, 55 suppliers participated in the Top Log Program, and were evaluated with respect to their service level, suitability to the client and integration.  This program has led to several efficiency gains and better interaction between our logistics and that of our suppliers. In our e-commerce segment, we began, for a fee, offering fulfillment services to our marketplace sellers in France during the first quarter of 2014. If a marketplace seller chooses to use our fulfillment services, the seller delivers their products to one of our warehouses, and we handle the fulfillment of any orders placed in our marketplace for such products. We have plans to offer similar fulfillment services to our marketplace sellers in Brazil. In addition, we offer fulfillment services to our eHub customers. Our logistics and distribution processes are organized in accordance with the products and services sold under our banners.  Accordingly, our distribution processes are guided by the procedures described below. Stores, Supermarkets and Hypermarkets As of December 31, 2014, the logistic process to supply our stores, supermarkets, hypermarkets and our cash and carry operation, excluding drugstores and gas stations, included 27 distribution centers located in the states of São Paulo, Rio de Janeiro, Ceará, Pernambuco, Bahia, Paraná and the Federal District, corresponding to a 589,988 square meter area including both our own and outsourced distribution centers.  Our distribution process is performed by an outsourced fleet.  As of December 31, 2014, our centralization rate (the percentage of revenue from the products supplied at our stores that comes directly from our distribution centers) was 87% excluding our cash and carry operation.  Including our cash and carry operation, our centralization rate was 80%. Orders made for our non-centralized products are made directly by the stores and delivered by the suppliers following the supply model known as “Direct Delivery.”  As of December 31, 2014, 13% of our stores sales, excluding our cash and carry operation, corresponded to “Direct Delivery” products, especially ornamental plants, cigarettes, ice creams, yogurts and magazines.  Including our cash and carry operation, 20% of our stores’ sales corresponded to “Direct Delivery” products. 27


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Electronic Products and Home Appliances â€“Casas BahiaandPontofrioStores The logistics process associated with ourCasas BahiaandPontofriostores involves an analysis of forecast sales, which we use to submit orders to our suppliers.  Once these orders are issued, the delivery of products is managed by Via Varejoâ€TMs supply chain area, which analyzes inventory levels, sales estimates by store and other variables, and schedules the delivery of the requested products with our suppliers.  The products are delivered and distributed among Via Varejoâ€TMs distribution centers, which as of December 31, 2014 totaled 26 distribution centers located in 17 Brazilian states (SÃ£o Paulo, Rio de Janeiro, Minas Gerais, ParanÃ¡, Bahia, EspÃ­rito Santo, GoiÃ¡s, Mato Grosso, Mato Grosso do Sul, Santa Catarina, CearÃ¡, Rio Grande do Sul, Pernambuco, Alagoas, Rio Grande do Norte, Sergipe, Tocantins and the Federal District), corresponding to an 909,550 square meter area. Food Delivery Our PA Delivery andExtraDelivery units currently share the same inventories with the retail stores where these units are strategically located in order to optimize logistics and attend to a greater delivery area.  By the end of 2015, we expect to have a dedicated â€œpick-up centerâ€ in City of SÃ£o Paulo, which will replace the current distribution operation of our â€œconventionalâ€ delivery units located in the greater SÃ£o Paulo region. Cnova Our non-food productsâ€TM e-commerce network offers our customers a range of shipping and delivery options, including ourâ€œClick & Collectâ€option, whereby customers can select a nearby location to pick up products they purchase on our sites. We have access to large retail networks to serve as exclusive pick-up locations, giving us a distinct competitive advantage. We are also focused on providing reliable and efficient fulfillment services, for which we use multiple warehouses.  As of December 31, 2014, we had 12 warehouses in France, six in Brazil and one in each of Colombia, Thailand, Ecuador and Vietnam).  We have put in place tracking systems that provide our customers with updates on the status of their order at different steps in the fulfillment process. In addition, we invested in automation and custom design of some of our warehouse space to more efficiently process orders, which has also led to significant cost savings. Providing efficient and reliable fulfillment services and fast and convenient delivery options are key parts of our business model. Drugstores Our drugstores are supplied with medications and other products, such as cosmetics.  The logistics system varies between centralized deliveries through our warehouses and decentralized deliveries.  We have supply agreements with the main pharmaceutical distributors in the country, as well as regional distributors across Brazil. Gas Stations Our gas stations are supplied by exclusive suppliers.  In 2014, we used four suppliers.  Supply orders are made individually by each station, and fuel is requested through purchase orders or pre-agreed daily supplies, pursuant to the service agreements entered into by each gas station.  Fuel transportation is carried out exclusively by our suppliers while unloading operations are closely followed by our employees for safety and quality control reasons.  The process for compressed natural gas (gÃ¡s natural veicular), or GNV, is different.  GNV is delivered by regional suppliers directly to the gas stations, through dealers and using pipelines connected to the entrance boxes located at the gas stations and holding fuel meters installed and controlled by the dealers themselves.  This equipment regularly measures the GNV volumes supplied.  GNV is sold through dispensers attached to these entrance boxes, using specific pipelines. Marketing Our marketing policy is aimed at attracting and retaining our customers.  To this end, we conduct integrated marketing campaigns that are specific to each store banner in which we operate and are structured and directed at the target market for each store banner.  Our marketing teams are media experts dedicated to developing quality marketing campaigns to emphasize our strengths in terms of selection, service and competitive prices.  We recognize marketing campaign expenses on sales expenses as they are incurred. 28


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In 2014, we continued our marketing efforts through a series of actions designed to attract more customers.  These actions included a number of promotions, for example a Black Friday sale and scheduled clearance sales calledDetona Preço(detonate prices) as well as partnerships with suppliers in joint campaigns to promote specific products. In 2012, 2013 and 2014, we spent approximately R$1,006 million, R$912 million and R$1,045 million, respectively, on advertising (approximately 2.0%, 1.6% and 1.6%, respectively, of total net operating revenue in each year) accounted for as sales expenses.  Also, 17.7%, 20.4% and 19.9% of our total marketing expenditures in 2012, 2013 and 2014, respectively, we spent on radio, newspaper and magazine advertising.  Television advertisements accounted for 56.1%, 56.6% and 55.8% of advertising expenses in 2012, 2013 and 2014, respectively.  We spent 26.2%, 22.8% and 24.3% on other promotional activities in 2012, 2013 and 2014, respectively. FIC and Investcred Before our acquisition of Via Varejo, Via Varejo had entered into an association with Unibanco – União de Bancos Brasileiros S.A. (currently, Itaú Unibanco), named Banco Investcred Unibanco S.A., or Investcred.  In December 2009, we amended our partnership with Itaú Unibanco to include Investcred in the partnership and to extend the FIC’s term for an additional five years. Itaú Unibanco paid us R$600 million, of which R$550 million was related to Itaú Unibanco’s breach of the exclusivity clause, which allowed it to obtain the right to enter into similar partnerships with other retailers and R$50 million was related to the extension of term through August 28, 2029. FIC operates service kiosks in our stores that have exclusive rights to offer credit cards, financial services and insurance, except for extended warranties.  FIC has been operating for more than ten years and as of December 31, 2014 had a portfolio of 3.9 million credit card accounts from customers (including the customer base of Investcred).  Each of our Company and Itaú Unibanco holds 50% of FIC’s capital stock.  The retail segment holds 36% of FIC through CBD, and the home appliance segment holds 14% through Via Varejo. Itaú Unibanco is responsible for the financial and operational policies of FIC, appointing the majority of its officers. In 2014, the customer base returned to growth with the significant increase in the sale of new accounts bringing a higher volume of billing. FIC had a profit of R$222 million, an increase of 148% in the year-over-year comparison. This increase was mainly due to the improvement in our credit analysis and lower default rates by our customers, non-operating expenses related to the decrease in the volume of lawsuits against us and the number of defaults for fraudulent reasons. We maintain our strategy to increase FIC card’s share of sales and to make it the best payment option in our stores and e-commerce operations, with exclusive benefits and advantages for card holders. We also continue to maintain our focus in credit management and fraud. The table below sets forth the breakdown of FIC’s customers in 2012, 2013 and 2014: Total number of clients (in thousands)

   2012

   2013

   2014Credit cards

   4,067

   3,770

   3,916
  Credit Sales In 2014, 58.4% of our net operating revenue was represented by credit sales, principally in the form of credit card sales, installment sales and food vouchers, as described below: Credit card sales.  All of our store formats and our e-commerce operations accept payment for purchases with main credit cards, such as MasterCard, Visa, Diners Club, American Express and co-branded credit cards issued by FIC.  Sales to customers using credit cards accounted for 47.9%, 47.4% and 48.4% of our consolidated net operating revenue in 2012, 2013 and 2014, respectively.  Of this total, sales through our FIC co-branded credit cards accounted for 4.4% of our net operating revenue in 2014.  An allowance for doubtful accounts is not required as credit risks are assumed by credit card companies or issuing banks.


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Installment credit card sales.  OurExtrahypermarkets andPontofrioandCasas Bahiastores offer attractive consumer financing conditions to our customers to purchase home appliances on an installment basis through our co-branded and private label credit cards, as well as third-party credit cards.  Sales to customers using credit cards on an installment basis accounted for 60%, 59% and 59% of our total credit card sales (mentioned above) in 2012, 2013 and 2014, respectively.  An allowance for doubtful accounts is not required as credit risks for all installments are assumed by credit card companies or issuing banks. Installment sales(â€œCrediÃ¡rioâ€).  OurCasas BahiaandPontofriostores offer access to credit through payment books (â€œcarnÃasâ€) to our customers to finance their purchases.  Sales to customers using payment slips accounted for 5.0% of our consolidated net operating revenue in 2014.  Installment sales are widely used in the Brazilian home appliance market. We usually sell the receivables in connection with these installments to meet working capital needs of the home appliance segment.  The cost of sales of receivables is considered as a financial expense. Food vouchers.  We accept as payment in our food stores vouchers issued by third-party agents to participating companies who provide them to their employees as a fringe benefit.  Food vouchers accounted for 4.3%, 4.6% and 4.9% of our consolidated net operating revenue in 2012, 2013 and 2014, respectively.  We record allowance for doubtful accounts based on average historical losses complemented by our estimates of probable future losses. Technology We invested R$338 million, R$371 million and R$410 million in information technology in 2012, 2013 and 2014, respectively.  We are identifying opportunities and mapping the efficiency gains by integrating our various operating segments, with a focus on governance and the customer. In 2014, we started the joint negotiation of agreements with key IT suppliers and the centralization of our data center. In the coming years, we expect to optimize in the integration of the companies by harmonizing systems/processes, unifying strategic services and projects and focusing on innovations to improve customer service and productivity. Intellectual Property We consider our brands to be one of our most valuable assets and we have worked extensively to define the characteristics of each of our banners (Extra,Extra Supermercado,Minimercado Extra, PÃ£o de AÃ§Ãocar,Minuto PÃ£o de AÃ§Ãocar,Pontofrio,Casas BahiaandAssaÃ­) with respect to the expectations, consumption patterns and purchasing power of the different income levels in Brazil.  We believe that Brazilian consumers associate each of our banners with a specific combination of products, services and price levels. In Brazil, to acquire a brand it is necessary to officially register it with the National Industrial Property Institute(Instituto Nacional de Propriedade Industrial), or INPI.  This registration gives the owner the exclusive right to use the trademark throughout Brazil for a renewable period of time. As of December 31, 2014, our most important trademarks (PÃ£o de AÃ§Ãocar, Extra, Conviva, QualitÃ¡, Taeq, Pontofrio, Casas Bahia, AssaÃ­, and Barateiro, among others) were duly registered with INPI and we had approximately 3,244 trademarks registered or in the process of being registered in Brazil.  We did not have any registered patents as of December 31, 2014. Our business relies on intellectual property that includes the content of our sites, our registered domain names and our registered and unregistered trademarks.We believe that the PÃ£o de AÃ§Ãocar, Extra, Casas Bahia, Ponto Frio and other domain names we use in our e-commerce business, as well as our Bartira, Finlandek, Atmosfera, Continental Edison and Oceanic private labels, are valuable assets and essential to the identity of our business. We further believe that our technology infrastructure is an important asset of our e-commerce business. We own the following domain names, among others: www.extra.com.br, www.gpabr.com, www.paodeacucar.com.br, www.deliveryextra.com.br, www.assai.com.br, www.pontofrio.com, www.casasbahia.com.br, www.barateiro.com.br, www.partiuviagens.com.br, www.cnova.com, www.cdiscount.com.br and www.cdiscount.com .  Note that these domain names are for informative purposes only and the information contained in these websites is not incorporated by reference in this annual report. 30


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Competition Brazilâ€TMs leading retail food companies are controlled by companies headquartered abroad.  Foreign presence in the Brazilian retail food industry started with the French retail food chain,Carrefour.  In the past decade, the U.S. chainWalmarthas also entered the Brazilian market, mostly through the acquisition of domestic retail food chains, increasing competition in the industry.  Thus, the Brazilian retail food industry is highly competitive.  Nonetheless, supermarket penetration levels in Brazil, in terms of the number of supermarkets in proportion to the countryâ€TMs population and area, is estimated to be lower than the levels recorded in the United States, several Western European countries and some other South American countries. Recently, leading retail food companies, including our Company, have pursued the following strategies: Â·acquire smaller chains; Â·migrate large stores to smaller formats, such as neighborhood banners; and Â·increase share of hypermarkets in sales of clothing, general goods, electronic products, furniture and construction materials as well as in other categories of non-food products. Our competitors vary depending on the regional location of the stores.  Our principal competitors in food retail in the state of SÃ£o Paulo areCarrefour, Futurama,Mambo, Pastorinho, SondaandWalmart.  In BrasÃ­lia, our principal competitors areBig Box, Carrefour, Super CeiandSuper Maia.In the State of Rio de Janeiro, our principal competitors areGuanabara, Mundial, PrezunicandZona Sulsupermarkets.  In the states of ParaÃ­ba, Pernambuco, CearÃ¡ and PiauÃ­, our principal competitors are the local supermarkets, in addition toBompreÃ§oandGBarbosa. The principal competitor ofExtrahypermarket isCarrefour, which operates stores in the southeastern and southern regions of Brazil, andWalmart, which operates through various banners in the southeastern, northeastern and southern regions of Brazil. AssaÃ­chain competes withAtacadÃ£o, a cash and carry chain purchased byCarrefourin 2007,RoldÃ£o, Tenda, MakroandMaxxi. In our other regional markets, we compete not only with the organized food retail sector, but also with various small and medium-sized chains, family companies and food retail businesses. In the home appliances market, the principal competitors of ourCasas BahiaandPontofriostores areMagazine Luiza, Pernambucanas, Ricardo Eletro, Lojas InsinuanteandFast Shop, as well as hypermarkets such asCarrefourandWalmart. In relation to our food products e-commerce, our PA Delivery and Extra Delivery units are market leaders and do not face competition at the national level; however there are relevant competitors in local markets, such asZona Sul, in the city of Rio de Janeiro, andSonda, in the city of SÃ£o Paulo. In non-food products e-commerce, we compete with both e-commerce businesses, including direct sales e-commerce platforms and marketplaces, and traditional retailers, including with their storefronts and e-commerce platforms. Our competitors vary per country and product category. In France, our main competitors include Amazon, FNAC, LDLC and RDC, in particular with respect to small consumer electronics, such as mobile phones, cameras and computers and, in the case of Amazon and FNAC, also with respect to leisure products, such as books, music and DVDs. We also compete in France with MDG, with respect to home appliances, Darty and Boulanger, with respect to home appliances and consumer electronics, and La Redoute and Conforama, in the home furnishings products category. In Brazil, our main competitors are B2W, the market leader, which owns Americanas.com, Walmart, Magazine Luiza, Fastshop and Ricardo Eletro, on the full range of our products. Regulatory Matters We are subject to a wide range of governmental regulation and supervision generally applicable to companies engaged in business in Brazil, including federal, state and municipal regulation, such as labor laws, public health and


environmental laws.  In order to open and operate our stores, we need a business permit and site approval and an inspection certificate from the local fire department, as well as health and safety permits.  Our stores are subject to inspection by city authorities.Our French operations must comply with various French and European laws and regulations, particularly those relating to consumer protection, online communication and website hosting services, Internet advertising and data privacy and protection.We believe that we are in compliance in all material respects with all applicable statutory and administrative regulations with respect to our business.  In addition, we have internal policies that in some instances go beyond what is required by law, particularly with respect to environmental and sustainability requirements and social and community matters. 31


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Our business is primarily affected by a set of consumer protection rules regulating matters such as advertising, labeling and consumer credit.  We believe we are in compliance in all material respects with these consumer protection regulations. Our e-commerce business in is subject to laws and regulations related to the Internet, e-commerce, m-commerce, consumer protection, data privacy, data protection and information technology.  However, laws and regulations in these areasare not fully settled and are currently undergoing rapid development. While this makes it difficult at present to fully ascertain to what extent new developments in the law will affect our business, there has been a trend toward increased consumer and data privacy protection. In addition, it is possible that general business regulations and laws, or those specifically governing the Internet, e-commerce or m-commerce, may be interpreted and applied in a manner that may place restrictions on the conduct of our business. Environmental and Social Matters Consistent with the policies of the Casino Group, we are committed to sustainability at various levels of our organizational structure.  In 2014, we created the Corporate Sustainability and Responsibility, or CSR, department which applies to all of our operating segments and reports directly to our Personnel Vice-President.  In 2014, the CSR committee (a subcommittee of our Board of Directors) held six meetings and other subcommittees were created to complement the CSR committee and support its agenda.  In addition, in 2014, we: Â·completed of a company-wide online employee engagement survey with a record 83% response rate which measured a 4% increase in our overall employee satisfaction rate, from 55% in 2013 to 59% in 2014; Â·implemented an action plan to increase the integration and inclusion of people with disabilities across our operating segments; Â·launched the first executive womenâ€TMs forum, with the aim to define and implement actions to encourage gender equality in leadership positions across the Company; Â·launched a retention and appreciation program for female store managers at Via Varejo; Â·implemented several energy efficiency projects, including new lighting, air conditioning and refrigeration solutions, under the â€œGreen Yellow Brazilâ€ initiative in three pilotExtrahypermarkets.  We expect that approximately 100 sites will participate in the â€œGreen Yellow Brazilâ€ initiative in 2015; Â·increased by 86%, compared with 2013, in the number ofMultivarejostores with integrated waste management systems as a result of the Brazilian governmentâ€TMs National Policy of Solid Waste and expanded Via Varejoâ€TMs recycling program to more than 200 stores, including all of Via Varejoâ€TMs stores in the State of SÃ£o Paulo.  By the end of 2014, 147Multivarejostores had integrated waste management systems and 266 recycling stations were available inExtra,PÃ£o de AÃ§ÃocarandAssaÃ­stores; Â·participated in the Casino Groupâ€TMs food donation program, in which 820 stores under theAssaÃ­,ExtraandPÃ£o de AÃ§Ãocarbanners donated 145 tons of non-perishable food items to partner institutions with the help of more than 1,000 employees; and Â·improved our â€œqualityâ€ programs, such Quality from the Source (Qualidade desde a Origem) and our Evolutionary Quality Program (Programa Evolutive de Qualidade).  We accompanied, controlled and supported the perishables and private label products and suppliers to verify quality, health and safety and


general compliance with our “quality” programs.  We increased sales of our organic products, through the Taeq brand, by 28% as compared with 2013. 32


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4C.Organizational Structure We conduct our operations through CBD.  We invest in subsidiaries primarily to acquire the share capital of other retail chains from third parties.  In most cases, the retail operations are transferred to retail stores under existing banners or the stores acquired begin operating under our banners.  We conduct our food retail segment operations under thePão de Açúcar,Minuto Pão de Açúcar,Extra Hiper,Minimercado Extra,Extra Supermercadobanners and for cash and carry retail segment operations, under theAssaíbrand.  We conduct our home appliances retail segment operations through ourPontofrioandCasas Bahiabrands.  In addition, we conduct our e-commerce operations through Cnova.  The chart below sets forth a summary of our organizational structure based on total capital stock:  For further information on our subsidiaries, see note 3(b) to our audited consolidated financial statements included elsewhere in this annual report. 4D.Property, Plants and Equipment We own 131 stores, 13 distribution centers (warehouses) and a portion of the real estate property where our headquarters are located.  The remaining 1,771 stores and 47 distribution centers we operate in Brazil and the remaining portion of the real estate property where our headquarters are located are leased.  Leases are usually for a term of five to 25 years, and provide for monthly rent payments based on a percentage of sales above an agreed minimum value.  We have 91 leases expiring by the end of 2015.  Based on our prior experience and Brazilian law and leasing practices, we do not anticipate any material change in the general terms of our leases or any material difficulty in renewing them.  As of December 31, 2014, we leased 15 properties from members of the Diniz Family and 62 stores from Fundo de Investimento Imobiliário Península, which is owned by the Diniz Family.  In addition, as of December 31, 2014, we had lease agreements with the Klein Family regarding 314 properties, among distribution centers, stores and administrative buildings.  Our management believes that our leases follow market standards.  See “Item 7B. Related Party Transactions—Lease Agreements with the Klein Family” and note 12 to our audited consolidated financial statements included in this annual report.


33

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The following table sets forth the number and total selling area of our owned and leased retail stores by store format, the number and total storage area of our owned and leased warehouses and the total office area of our headquarters that we own and lease as of December 31, 2014:  Owned

   Leased

   Total (1)Number

   Area

   (in square meters)

   Number

   Area

   (in square meters)

   Number

   Area

   (in square meters)Pão de Açúcar

   41

   54,409

   140

   176,826

   181

   231,235Extra Hiper

   43

   246,360

   94

   554,690

   137

   801,050Extra Supermercado

   30

   40,476

   177

   196,577

   207

   237,053Minimercado Extra

   2

   529

   254

   61,364

   256

   61,893Assaí

   5

   25,922

   79

   288,081

   84

   314,003Pontofrio

   10

   9,827

   370

   237,425

   380

   247,252Casas Bahia

   —

   —

   657

   864,285

   657

   864,285Total Stores

   131

   377,523

   1,771

   2,379,248

   1,902

   2,756,771Warehouses (2)

   13

   112,726

   64

   2,004,312

   77

   2,117,038Headquarters

   4

   30,058

   27

   71,982

   31

   102,041Total

   148

   520,307

   1,862

   4,455,542

   2,010

   4,975,850
 ___________ (1) Excludes 83 gas stations and 158 drugstores. (2)Includes 14 commercial warehouses of Via Varejo.  Of the 23 warehouses that support our e-commerce segment (more than 615,000 square meters of storage area), all of which are leased or operated by third parties, 12 are located in France (approximately 264,000 square meters of storage area), seven are located in Brazil (approximately 347,000 square meters of storage are) and four are located in other countries (approximately 6,500 square meters of storage area). For further information on Capital Expenditures, see “Item 4A.  History and Development of the Company—Capital Expenditures and Investment Plan.” ITEM 4E. UNRESOLVED STAFF COMMENTS None. ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS You should read this discussion in conjunction with our consolidated financial statements prepared in accordance with IFRS and the related notes and the other financial information included elsewhere in this annual report. 5A.Operating Results Brazilian Economic Environment and Factors Affecting Our Results of Operations Since most of our operations are in Brazil, our results of operations are affected by macroeconomic conditions in Brazil, including inflation rate, interest rate, Brazilian GDP, employment rates, wage levels, consumer confidence and credit availability. For the period from 2012 through 2014, Brazilian GDP increased by an average of 1.1% annually (0.9% in 2012, 2.37% in 2013 and 0.1% in 2014).  Inflation, as measured by the broad consumer price index (índice nacional de preços ao consumidor amplo), or IPCA, was 5.8%, 5.9% and 6.4% in 2012, 2013 and 2014, respectively.  From January 2012 through December 2014, the real depreciated 41.6% against the U.S. dollar.  Unemployment rate decreased from 5.5% in January 2012 to 4.3% in December 2014.  International reserves decreased from US$358.8 billion to US$363.6 billion from 2013 to 2014. In 2008, Brazil received investment grade long-term debt ratings from Standard & Poor’s and Fitch and, in September 2009, from Moody’s.  The upgraded long-term debt ratings reflected a favorable medium-term economic environment for Brazil due to the maturity of its financial institutions and the political structure of the country, as well as advances in fiscal policy and control over public debt.  In the following months, the Brazilian government promoted a series of measures to stimulate consumption, including reducing interest rates, expanding credit through federal public banks and cutting taxes on durable goods, such as vehicles and refrigerators.  In April 2011, Fitch


upgraded Brazil’s rating on Brazil’s local and foreign currency debt to BBB from BBB-, and its country ceiling to BBB+ from BBB.


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In the second half of 2008, global economic conditions worsened significantly, in light of the global financial crisis.  The immediate effects on the Brazilian economy included reduced growth and depreciation of thereal, which decreased 31.6% between August and October 2008 (from R$1.57/US$1.00 on August 4, 2008 to R$2.29/US$1.00 on October 10, 2008).  The crisis also adversely affected the Brazilian capital markets, as reflected by a decrease in the Ibovespa index of 49.0% between May 19, 2008 and December 30, 2008. After these initial effects, the Brazilian economy resumed its prior growth trend, with rising income levels, stable employment rates and controlled inflation.  The increase in GDP in 2010 was 7.5%.  In 2011, GDP growth totaled 2.7%, below initial estimates, mainly due to the debt crisis in the Eurozone.  In 2011, 2012 and 2013, Brazil’s GDP was 2.3%, 0.9% and 2.3%, respectively.  In 2014, Brazil’s GDP growth slowed to 0.1%.  Additionally, Standard & Poor’s lowered Brazil’s credit rating in March 2014 for the first time in more than a decade to the lowest level of investment grade (yet notably maintaining investment grade status), citing slower growth as well as deteriorating fiscal accounts. According to IBGE, the average real income of Brazil’s workforce in 2014 was estimated at R$1,983.80, the highest since 2004, with a 4.1% growth over 2013.  Between 2004 and 2014, the purchasing power related to the average real income of Brazil’s workforce increased 40.7% (in 2004 the figure was R$1,409.84 (February 2015reais)), while unemployment fell from 9.6% in December 2004 to 4.3% in December 2014.  The accumulated inflation rate as measured by the IPCA was 6.4% in December 2014, at the top of the targeted range.  The Committee on Monetary Policy (Comitê de Política Monetária), or COPOM, increased the SELIC rate from 7.25% at the end of 2012 to 9.50% at the end of 2013 and to 11.75% at the end of 2014.  On January 22, 2015, the COPOM raised the rate again to 12.25%. The following table sets forth data on real GDP growth, inflation and interest rates, and the U.S. dollar exchange rate for the indicated periods: December 312012

   2013

   2014GDP Growth(1)

   1.8%

   2.7%

   0.1%Inflation (IGP-M) (%)(2)

   7.8%

   5.5%

   3.7%Inflation (IPCA) (%)(3)

   5.8%

   5.9%

   6.4%CDI (%)(4)

   8.4%

   8.1%

   10.8%TJLP (%)(5)

   5.5%

   5.0%

   5.0%SELIC rate (%)(6)

   7.3%

   9.5%

   11.8%Appreciation (depreciation) ofrealbefore USD (%)

   (8.9)%

   (14.6%)

   (13.4)%Exchange rate (closing) R$ per USD 1.00(7)

   2.044

   2.343

   2.656Average exchange rate R$ per USD 1.00(8)

   1.955

   2.161

   2.355
 ____________ (1)   Source:  IBGE. (2)   The General Market Price Index (Índice Geral de Preços-Mercado), or IGP-M, is measured by FGV. (3)   Inflation (IPCA) is a broad consumer price index measured by IBGE. (4)   The CDI is the accumulated rate of the interbank deposits in Brazil during each year. (5)   The official long-term interest rate (taxa de juros de longo prazo), or TJLP, is required by Brazil’s National Development Bank (Banco Nacional de Desenvolvimento Econômico e Social), or BNDES, for long-term financing (end of the period data). (6)   Annual average interest rate.  Source:  Central Bank. (7)   Exchange rate (for sale) of the last day of the period.  Source:  Central Bank. (8)   Average of exchange rates (for sale) of the period.  Source:  Central Bank. Financial Presentation and Accounting Policies Presentation of Financial Statements The preparation of our consolidated financial statements, under IFRS as issued by IASB, requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period.  However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.


35

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Critical Accounting Policies We discuss below key assumptions and judgments concerning the future, and other key sources of uncertain estimates at the reporting date that have a significant risk of causing a material impact to the carrying amounts of assets and liabilities within the next financial year.  They are: Lease commitments â€“ Company as lessee We have entered into certain commercial property leases as part of our operations.  Lease agreements are classified as operating leases when there is no transfer of risk and benefits incidental to ownership of the leased item. Estimated impairment of goodwill and intangibles We test annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 4 to our financial statements and international accounting standard, or IAS, 36 Impairment of Assets.  Other intangible assets, the useful lives of which are indefinite, such as brands and commercial rights were submitted to impairment tests according to the same calculation criteria used for goodwill. As of December 31, 2014, the Company calculated the recoverable amount of goodwill arising from past acquisitions, which balance ceased to be amortized as of January 1, 2008, for the purpose of evaluating if there were changes in the assetsâ€TM value resulting from events or changes in economic, operating and technological conditions that might indicate impairment. For impairment testing purposes, the goodwill arising from business combinations and licenses with indefinite useful lives were allocated to our four operating segments, which consists of our retail, home appliances, cash and carry and e-commerce operating segments. The recoverable amount allocated to each segment was defined by means of a calculation based on the value in use, which was itself based on cash flow projections arising from financial budgets approved by senior management for the next three years.  The discount rate before taxes applied to cash flow projections was 11.4% as of December 31, 2014 (10.8% as of December 31, 2013), and cash flows exceeding three years are extrapolated by using a sales growth rate of 6.7% as of December 31, 2014 (6.5% as of December 31, 2013).  As a result of this analysis, there no impairment loss was identified. For brands, the value was subject to impairment testing through the income approach â€“ Relief from Royalty, which consists of determining the value of an asset by measuring the present value of future benefits.  Given the indefinite useful life of the brand, we consider a perpetual growth of 6.7% in the preparation of the discounted cash flow.  The royalty rates ranged from 0.4% to 0.9%, depending on which brand was used. Commercial rights refer to amounts paid to former owners of commercial locations, and amounts calculated as the fair value of these rights in the business combinations of Casa Bahia and Pontofrio.  To test for impairment of these assets, we allocated the amounts of identifiable commercial rights by stores and we test them together with the fixed assets as described in note 6.2 to our financial statements. Income taxes Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income.  Given the nature and complexity of our business, differences arising between the actual results and the assumptions made, or future changes to those assumptions, could require future adjustments to tax income and expense already recorded.  We establish provisions, based on reasonable estimates, for consequences of audits by the tax authorities of the respective jurisdictions in which we operate.  The amount of the provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by


the taxable entity and the responsible tax authority.  Differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective companyâ€TMs jurisdiction. 36


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Deferred income and social contribution taxes assets are recognized for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized.  Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax-planning strategies. We have tax loss carry forwards amounting to a tax benefit of R$354 million as of December 31, 2014 (R$794 million as of December 31, 2013).  These losses do not expire and relate to subsidiaries that have tax-planning opportunities available to support these balances, however, the use of tax loss carry forwards is limited by law to 30% of taxable income in a single fiscal-year. Fair value of derivatives and other financial instruments Where the fair value of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from active markets, they are determined using valuation techniques including the discounted cash-flow model.  The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values.  The judgments include considerations of inputs such as liquidity risk, credit risk and volatility.  Changes in assumptions regarding these factors could affect the reported fair value of financial instruments. The fair value of financial instruments that are actively traded on organized markets is determined based on the market quotes, on the balance sheet dates, without any deduction for transaction costs.  For financial instruments that are not actively traded, the fair value is based on valuation techniques defined by us and compatible with usual market practices.  These techniques include the use of recent market transactions between independent parties, benchmarks to the fair value of similar financial instruments, analysis of discounted cash flows and other valuation models. Share-based payments We measure the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted.  Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant.  This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the share option, volatility and dividend yield and making assumptions about them.  We disclose the assumptions and models used for estimating fair value for share-based payment transactions in note 26.6 to our financial statements included in this annual report. Revenue from sales of goods Revenues are recognized at the fair value of the consideration received or receivable for the sale of goods and services.  Revenues from the sale of products are recognized when their value can be measured reliably, all risks and benefits inherent to the product are transferred to the buyer, the Company no longer has the control or responsibility over the goods sold and the economic benefits generated to the Company are probable.  Revenues are not recognized if their realization is uncertain. Returns and cancellations are recognized when incurred. When a sale is recorded, the assumptions are based in the volumes of sales and historic of returns in each reporting segment. Revenue is recorded net of returns and cancellations. In 2014, we began to record revenues and costs associated with rentals of commercial spaces as â€œsales revenue of goods and/or servicesâ€ and â€œcost of goods sold and/or servicesâ€, respectively, as a result of the increased participation of this activity in the Multivarejo segment, better displaying this activity in the Company's financial statements. Our management believes it is best to proceed with the current classification as to allow comparability and a final classification of revenues and costs.  Previously, we had recorded such net revenues and costs as selling expenses recovery.  In order to make our financial statements for the years ended December 31, 2013 and 2012


comparable to our financial statements for the year ended December 31, 2014, we reclassified our revenues and costs associated with rentals of commercial spaces for the years ended December 31, 2013 and 2012 in line with this new accounting policy.  For further information on the reclassification, see note 2 to our audited consolidated financial statements included elsewhere in this annual report. 37


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Revenue from services Service revenue mainly derives from services provided in stores, such as photo printing, financial intermediation and extended warranty.  Service revenue is recognized when services are rendered.  Deferred revenue is recorded as certain targets are met, as set forth in the respective agreement. Revenue from financial services Customer financing is essential for conducting the business of the Company.  Financial revenue obtained from customer financing is recorded as net operating revenue, based on the agreement executed with the respective customer.  Revenue or expense for all trade receivable related to installment sales measured at amortized cost are recorded using the effective interest rate, which discounts the estimated future cash receipts of the expected life of the financial instrument. Inventories Inventories are carried at the lower of cost or net realizable value.  The cost of inventories purchased is recorded at average cost, including warehouse and handling costs to the extent these costs are necessary, and offset by rebates received from suppliers, so that inventories are available for sale in the Companyâ€TMs stores. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs necessary to make the sale. Inventories are also reduced by an allowance for losses and breakage, which are periodically reviewed and evaluated as to its adequacy.  The E-Commerce Reorganization and Business Combinations On July 11, 2014, we, the Casino Group, Via Varejo, Nova HoldCo and Cnova Brazil entered into the Cnova Framework and IPO Agreement.  Subsequently, Cnova, Ã‰xito, Cdiscount, GermÃ¡n Quiroga and another founder ofNova HoldCoalso became parties to the Cnova Framework and IPO Agreement, whichprovided for the reorganization of the e-commerce business of the Casino Group and its affiliates in France, Latin America (including Brazil) and Asia under the common ownership and/or control of Cnova.  The reorganization was effected in accordance with the Cnova Framework and IPO Agreement through the steps described below. On or shortly prior to July 24, 2014 (except for clause (v) below, which was completed on November 17, 2014): (i)the Casino Group effected a contribution in kind of all issued and outstanding shares it held in Cdiscount, the holding company through which the Casino Group conducted its e-commerce business in France, Colombia and Asia to Cnova, as a result of which Cnova now owns the majority (approximately 98%) of the shares of Cdiscount and as a result controls the Cdiscount business in France and abroad; (ii)Nova HoldCo effected a contribution in kind of substantially all of its assets and liabilities to a wholly-owned Brazilian subsidiary, Cnova Brazil, as a result of which Cnova Brazil owns our and Via Varejoâ€TMs Brazilian e-commerce businesses; 38


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(iii)Nova HoldCo reorganized the ownership structure of Cnova Brazil, such that, prior to the completion of step (iv), 100% of the share capital of Cnova Brazil was held by DutchCo, which is in turn a wholly-owned subsidiary of LuxCo, which is in turn a wholly-owned subsidiary of Nova HoldCo ; (iv)Following the completion of the preceding steps, DutchCo contributed all of the issued and outstanding shares in Cnova Brazil to Cnova, as a result of which Cnova owns our and Via Varejoâ€TMs Brazilian e-commerce businesses; (v)the Casino Group transferred 30% of its indirect interest in C-Asia, which controls the Casino Groupâ€TMs e-commerce subsidiaries operating in Thailand and Vietnam to a subsidiary of Cdiscount, resulting in Cnova acquiring indirectly 60% of the equity interests in C-Asia; and (vi)Cnova obtained control over the e-commerce business of the Casino Group in Colombia, operated through Cdiscount Colombia.  In connection with this step, Ã‰xito S.A. contributed 21% of its equity interest in Cdiscount Colombia to Cnova in consideration for 0.16% of Cnovaâ€TMs share capital. Following the reorganization, Cnova owns, directly or indirectly, or has the right to use substantially all of the assets that were used, or held for use, in the e-commerce business of the Casino Group and its affiliates entities in France, Latin America (including Brazil), Africa and Asia.  We began consolidating the results of Cnovaâ€TMs non-Brazilian business on July 31, 2014. Acquisition of Bartira Until October 31, 2013, Via Varejo and Casa Bahia Comercial were shareholders of Bartira, a furniture manufacturer that sells exclusively to Casas Bahia.  Via Varejo held a 25% equity interest in Bartira and Casa Bahia Comercial held the remaining 75% equity interest in Bartira.  Since the Casa Bahia association commenced in November 2010, we held a call option to purchase the remaining 75% equity interest, which could be exercised between three and six years from the date of the commencement of the Casa Bahia association. In 2013, we calculated the fair value of this option using the Black-Scholes model, using a volatility of 28% and a risk-free rate of 5.8% per annum, which resulted in a fair value calculation of approximately R$314 million (approximately R$307 million on December 31, 2012) on the date the option was exercised (October 31, 2013).  Until the exercise date, this option was recorded as a financial instrument in our consolidated financial statements. On October 31, 2013, our shareholders approved at an extraordinary shareholdersâ€TM meeting the exercise of the option to purchase the remaining interest in Bartira and an exercise notice was delivered to Casa Bahia Comercial on November 1, 2013.  On the same date, the price paid for exercise of the option was R$212.3 million and Bartiraâ€TMs equity interest was transferred on December 2, 2013.  After the exercise of the option, Bartira became a wholly-owned subsidiary of Via Varejo. From the date the exercise notice was delivered to Casa Bahia Comercial, Via Varejo held substantive rights over Bartira and November 1, 2013 was defined as the business combination date.  Prior to the business combination, Via Varejo held a 25% equity interest in Bartira.  The fair value of the previously-held equity interest was measured at fair value on the acquisition date, as defined in IFRS 3(R).  The fair value of the previously-held equity interest was measured through the discounted cash flow method and was equivalent to R$176 million.  The fair value of the re-measurement of the equity interest previously held, compared to the book value of the investment, resulted in a gain of R$71 million presented in 2013 and recorded in â€œOther operating expenses and income.â€ Therefore, we determine the consideration transferred in connection with the Bartira business combination by (1) the exercise price of the call option in the amount of R$212 million, (2) the fair value of the call options previously held by the Company prior to exercising the option in the amount of R$314 million and (3) the re-measurement at fair value of the equity interest previously held in the amount of R$176 million. The amounts included as an â€œintangibleâ€ in connection with the Bartira business combination refer to: 39


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(i)“Bartira” brand, a well-known brand in Brazil that is not going to be discontinued, in the amount of R$46 million, measured based on the royalties-relief method considering market compensation for the brand if it had not been acquired by us; and (ii)lease agreement between Klein Family and Via Varejo, with respect to Bartira’s industrial plant, at lower than market prices, in the amount of R$36 million, based on the income approach method considering comparable market transactions; Goodwill relating to the Bartira business combination consists almost entirely of the expected economies of scale and cost synergies with the retail operations of our home appliance segment, in particular Via Varejo.  Bartira manufactures furniture exclusively for Via Varejo.  Therefore, the acquisition of control of Bartira was strategic to ensure continued supply of furniture from an important manufacturer. In addition, the Bartira business combination allowed Via Varejo (1) to vertically integrate its furniture retail operation, (2) to benefit from Bartira’s low-cost structure given its scale as one of the largest plants in Latin America in terms of production volume and (3) maintain operational efficiencies and synergies (including logistics, sales and administrative costs) developed previously since the commencement of the Casa Bahia association.  These combined effects of these factors allow us to have larger margins in Bartira products sold at our Via Varejo stores. Replacing Bartira as a supplier would be difficult in the local market and could negatively affect the furniture line of products that are sold by Via Varejo. Subsequent measurement – final allocation of the purchase price The acquisition of Bartira’s control was accounted for under the acquisition method, in accordance with IFRS 3(R). In compliance with this standard, in 2014 the Company concluded collecting the data and assessing the fair value of the net assets acquired on November 1, 2013, adjusting R$23 million, and, consequently increased the goodwill on acquisition. The adjustments mainly refer to effects on measuring income tax and inventories on the acquisition date. Set forth below are the fair values of identifiable assets and liabilities acquired from Bartira on November 1, 2013 (acquisition date) and as adjusted in November 1, 2014: November 1,2013

   

   2014(millions of R$)AssetsCash and cash equivalents

   

   1

   

   1Inventories

   

   51

   

   46Deferred tax income

   

   4

   

   —Others

   

   40

   

   38Property and equipment

   

   139

   

   139Intangible

   

   82

   

   82Acquired assets

   

   317

   

   306LiabilitiesLoans and financing

   

   (19)

   

   (19)Materials and services

   

   (62)

   

   (62)Contingencies

   

   (119)

   

   (118)Deferred tax income

   

   —

   

   (12)Others

   

   (18)

   

   (20)Assumed liabilities

   

   (218)

   

   (231)Net identifiable assets

   

   99

   

   75Acquisition price

   

   212

   

   212Call option fair value

   

   314

   

   314Previous interest fair value

   

   176

   

   176Goodwill

   

   603

   

   627
  For further information, see note 14 to our audited consolidated financial statements included elsewhere in this annual report.


40

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Overview In 2014, we continued to face a challenging macroeconomic environment marked by low GDP growth in Brazil and rising interest rates, mainly as a mechanism to control inflation. Despite this adverse scenario, we were able to adjust our strategy to market conditions and deliver strong results accompanied by market share gains in all business segments. Building on our existing multi-format, multi-channel and multi-region strategy and supported by the synergies with the Casino Group, we maintained a solid growth pace and improved our results of operations.  We continued to implement a series of initiatives focused on integration, capturing synergies and innovative solutions to make the buying experience increasingly more practical, convenient and attractive for our customers. In 2014 we accelerated the growth of our multi-channel platform by expanding our â€œClick & Collectâ€ service, a practical solution for retailers and customers, which is available at 100 stores.  We also invested in organic growth by opening 212 new stores, 84 more than the previous year.  We also improved our operational efficiencies, gaining better control of our working capital and optimizing our capital expenditures, as a result of which we were able to reduce our capital expenditures relating to the opening of new stores.  This expansion had a significant impact onMultivarejo, which encompasses our food-retail segment and includes the Minimercado Extra and Minuto PÃ£o de AÃ§Ãocar stores.  We launched Minuto PÃ£o de AÃ§Ãocar stores in May 2014 and its intended target is the â€œABâ€ income segment. We continued to focus on implementing a new pricing strategy in the food retail segment, especially with theExtrabanner.  This strategy focuses on increasing competitiveness by reducing prices while improving efficiency and reducing expenses.  Promotional activities are also intensified by enhancing our media coverage and area of influence of our stores.  As a result, we had a significant increase in customer traffic at our stores and gained market share.  Our competitive pricing strategy aims to obtain efficiency gains, especially by streamlining operating and corporate expenses. Among our different businesses,AssaÃ­â€TMs performance was one of the highlights of 2014.  We accelerated its organic growth by opening 9 new stores in 2014, reaching a total of 84 stores in 13 Brazilian states, which strengthened theAssaÃ­bannerâ€TMs national footprint. As part of our strategy to increase traffic in our stores to boost sales, we continued to invest in the leasing of commercial spaces. GPA Malls added 37,000 square meters of gross leasable area, or GLA, and, as of December 31, 2014, we had a total GLA of 325,000 square meters. During 2014, Via Varejo increased sales and adopted a set of measures focused on capturing efficiency gains. Throughout the year, we focused on expanding Via Varejo by opening 88 new stores and launching pioneering initiatives, such as 20 new â€œmobile storesâ€ under the Casas Bahia and Pontofrio brands and expanding in the furniture segment by opening units focused on selling customized furniture. In the e-commerce segment, together with the Casino Group and Via Varejo, we introduced Cnova, which concluded its initial public offering of ordinary shares on the Nasdaq Global Select Market and raised approximately US$204 million in gross proceeds in November 2014.  On January 23, 2015, Cnova also listed its ordinary shares on the Euronext Paris. Results of Operations for 2014, 2013 and 2012 We measure the results of our operating segments in conformity with IFRS using, among other measures, each segmentâ€TMs operating results.  References to â€œsame-storeâ€ sales is determined by the sales made in stores open for at least 12 consecutive months and that did not close or remain closed for a period of seven or more consecutive days. At times, we revise the measurement of each segmentâ€TMs operating results.  When revisions are made, the operating results for each segment affected by the revisions are restated for all periods presented to maintain comparability.  In 2014, we began to record revenues and costs associated with rentals of commercial spaces as â€œsales revenue of goods and/or servicesâ€ and â€œcost of goods sold and/or servicesâ€, respectively, as a result of the


increased participation of this activity in theMultivarejosegment, better displaying this activity in the Company's financial statements. Our management believes it is best to proceed with the current classification as to allow comparability and a final classification of revenues and costs.  Previously, we had recorded such net revenues and costs as selling expenses recovery.  In order to make our financial statements for the years ended December 31, 2013 and 2012 comparable to our financial statements for the year ended December 31, 2014, we reclassified our revenues and costs associated with rentals of commercial spaces for the years ended December 31, 2013 and 2012 in line with this new accounting policy.  For further information on the reclassification, see note 2 to our audited consolidated financial statements included elsewhere in this annual report. 41


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Information for our segments is included in the following tables: Segments

   Year Ended December 31, 2014Statement of income data

   Food Retail

   Cash and Carry

   Home Appliances

   E-commerce

   Elimination(1)

   Total(in millions of R$)Net operating revenue

   26,415

   8,326

   22,674

   8,175

   (65)

   65,525Gross profit

   7,549

   1,208

   7,355

   845

   (12)

   16,945Depreciation and amortization

   (552)

   (78)

   (139)

   (52)

   -

   (821)Profit from operations before financial income (expenses) and share of profit of associates

   1,478

   233

   2,091

   94

   -

   3,896Financial expenses

   (887)

   (71)

   (1,035)

   (249)

   47

   (2,195)Financial income

   335

   20

   356

   23

   (47)

   687Financial expenses, net

   (552)

   (51)

   (679)

   (226)

   -

   (1,508)Share of profit of associates

   79

   -

   32

   (3)

   -

   108Profit (loss) before income tax and social contribution

   1,005

   182

   1,444

   (135)

   -

   2,496Income tax and social contribution

   (253)

   (62)

   (475)

   54

   -

   (736)Net income (loss) for the year

   752

   120

   969

   (81)

   -

   1,760
 ____________ (1)   Accounts for inter-company transactions. Segments

   Year Ended December 31, 2013(1)Statement of income data

   Food Retail

   Cash and Carry

   Home Appliances

   E-commerce

   Elimination(2)

   Total(in millions of R$)Net operating revenue

   25,538

   6,273

   21,746

   4,297

   -

   57,854Gross profit

   7,107

   914

   6,690

   393

   -

   15,104Depreciation and amortization

   (594)

   (56)

   (130)

   (7)

   -

   (787)Profit from operations before financial income (expenses) and share of profit of associates

   999

   193

   1,612

   98

   -

   2,902Financial expenses

   (852)

   (46)

   (815)

   (155)

   32

   (1,836)Financial income

   375

   23

   264

   13

   (32)

   643Financial expenses, net

   (477)

   (23)

   (551)

   (142)

   -

   (1,193)Share of profit of associates

   33

   -

   14

   -

   -

   47Profit (loss) before income tax and social contribution

   555

   170

   1,075

   (44)

   -

   1,756Income tax and social contribution

   (14)

   (58)

   (304)

   16

   -

   (360)Net income (loss) for the year

   541

   112

   771

   (28)

   -

   1,396
 ____________ (1)   In 2014, we began to record revenues and costs associated with rentals of commercial spaces as “sales revenue of goods and/or services” and “cost of goods sold and/or services”, respectively, as a result of the increased participation of this activity in theMultivarejosegment, better displaying this activity in the Company's financial statements. Our management believes it is best to proceed with the current classification as to allow comparability and a final classification of revenues and costs.  Previously, we had recorded such net revenues and costs as selling expenses recovery.  In order to make our financial statements for the years ended December 31, 2013 and 2012 comparable to our financial statements for the year ended December 31, 2014, we reclassified our revenues and costs associated with rentals of commercial spaces for the years ended December 31, 2013 and 2012 in line with this new accounting policy.  For further information on the reclassification, see note 2 to our audited consolidated financial statements included elsewhere in this annual report. (2)   Accounts for inter-company transactions.


42

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Segments

   Year Ended December 31, 2012(1)Statement of income data

   Food Retail

   Cash and Carry

   Home Appliances

   E-commerce

   Elimination(2)

   Total(in millions of R$)Net operating revenue

   23,530

   4,639

   19,438

   3,409

   -

   51,016Gross profit

   6,790

   (675)

   5,858

   483

   -

   13,806Depreciation and amortization

   (552)

   (44)

   (153)

   (2)

   -

   (751)Profit from operations before financial income (expenses) and share of profit of associates

   1,498

   145

   1,107

   108

   -

   2,858Financial expenses

   (872)

   (90)

   (745)

   (113)

   34

   (1,786)Financial income

   422

   24

   171

   10

   (34)

   593Financial expenses, net

   (450)

   (66)

   (574)

   (103)

   -

   (1,193)Share of profit of associates

   11

   -

   -

   -

   -

   11Profit before income tax and social contribution

   1,059

   79

   533

   5

   -

   1,676Income tax and social contribution

   (287)

   (18)

   (213)

   (2)

   -

   (520)Net income (loss) for the year

   772

   61

   320

   3

   -

   1,156
 ____________ (1)   In 2014, we began to record revenues and costs associated with rentals of commercial spaces as “sales revenue of goods and/or services” and “cost of goods sold and/or services”, respectively, as a result of the increased participation of this activity in theMultivarejosegment, better displaying this activity in the Company's financial statements. Our management believes it is best to proceed with the current classification as to allow comparability and a final classification of revenues and costs.  Previously, we had recorded such net revenues and costs as selling expenses recovery.  In order to make our financial statements for the years ended December 31, 2013 and 2012 comparable to our financial statements for the year ended December 31, 2014, we reclassified our revenues and costs associated with rentals of commercial spaces for the years ended December 31, 2013 and 2012 in line with this new accounting policy.  For further information on the reclassification, see note 2 to our audited consolidated financial statements included elsewhere in this annual report. (2)   Accounts for inter-company transactions. The following table presents the consolidated results of operations in accordance with IFRS, as included in our financial statements. Results of Operation

   Year Ended December 31,2014

   %

   2013(1)

   %

   2012(1)

   %(reclassified)

   

   (reclassified)(in millions of R$, unless otherwise noted)Net operating revenue

   65,525

   100.0

   57,854

   100.0

   51,016

   100.0Cost of sales

   (48,580)

   (74.1)

   (42,750)

   (73.9)

   (37,210)

   (72.9)Gross profit

   16,945

   25.9

   15,104

   26.1

   13,806

   27.1Selling, general and administrativeexpenses

   (11,787)

   (18.0)

   (10,742)

   (18.6)

   (10,164)

   (19.9)Depreciation and Amortization

   (821)

   (1.3)

   (787)

   (1.4)

   (751)

   (1.5)Other operating expenses, net

   (441)

   (0.7)

   (673)

   (1.2)

   (33)

   (0.1)Profit from operations before financial income (expenses) and share of profit of associates

   3,896

   5..9

   2,902

   5.0

   2,858

   5.6Financial income

   688

   1.0

   643

   1.1

   593

   1.2Financial expenses

   (2,195)

   (3.3)

   (1,836)

   (3.2)

   (1,786)

   (3.5)Financial expenses, net

   (1,508)

   (2.3)

   (1,193)

   (2.1)

   (1,193)

   (2.4)Share of profit of associates

   108

   0.2

   47

   0.1

   11

   —Profit before income tax and social contribution

   2,496

   3.8

   1,756

   3.0

   1,676

   3.3Income tax and social contribution

   (736)

   (1.1)

   (360)

   (0.6)

   (520)

   (1.0)Net income for the year

   1,760

   2.7

   1,396

   2.4

   1,156

   2.3Attributed to controlling shareholders

   1,270

   1.9

   1,052

   1.8

   1,051

   2.1Attributed to noncontrolling shareholders

   490

   0.7

   344

   0.6

   105

   0.2
 ____________ (1)In 2014, we began to record revenues and costs associated with rentals of commercial spaces as “sales revenue of goods and/or services” and “cost of goods sold and/or services”, respectively, as a result of the increased participation of this activity in theMultivarejosegment, better displaying this activity in the Company's financial statements. Our management believes it is best to proceed with the current classification as to allow comparability and a final classification of revenues and costs.  Previously, we had recorded such net revenues and


costs as selling expenses recovery.  In order to make our financial statements for the years ended December 31, 2013 and 2012 comparable to our financial statements for the year ended December 31, 2014, we reclassified our revenues and costs associated with rentals of commercial spaces for the years ended December 31, 2013 and 2012 in line with this new accounting policy.  For further information on the reclassification, see note 2 to our audited consolidated financial statements included elsewhere in this annual report.


43

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Year Ended December 31, 2014 Compares to Year Ended December 31, 2013 The discussion below is based on our reclassified consolidated statement of income for the year ended December 31, 2013 to be consistent with the accounting standards that we used to prepare our consolidated statement of income for the year ended December 31, 2014.  For further information on the reclassification, see note 2 to our financial statements included elsewhere in this annual report. Consolidated Net operating revenue.Net operating revenue increased by 13.3%, or R$7,671 million, from R$57,854 million in 2013 to R$65,525 million in 2014, mainly due to: (i) an increase of  R$3,413 million in sales of stores opened for at least one year, or same-store sales, of which (a) R$1,113 million were related to food retail and cash and carry segments, representing an increase of 3.5%, primarily as a result of our mix of products and the increase in IPCA from 5.9% to 6.4% in 2014, (b) R$652 million were related to the home appliances segment, representing an increase of 4.2%, and (c) R$1,207 related to net operating revenue recorded by our Brazilian subsidiary, Cnova Brazil; (ii) an increase of R$638 million in financial services and services rendered, primarily related to services provided by Via Varejo; (iii) R$2,428 million related to net operating revenue recorded by Cdiscount beginning July 31, 2014; and (iv) the remaining difference relates to net operating revenue in the amount of R$3,417 recorded by the 212 new stores that opened in 2014.  In 2014, we closed 68 stores, including those stores requested by CADE in connection with the Casas Bahia association.  For more information about the Casas Bahia association, see “Item 4A. History and Development of the Company.” Gross profit.Gross profit increased by 12.2%, or R$1,841 million, from R$15,104 million in 2013 to R$16,945 million in 2014.  In the same period, our gross margin slightly decreased to 25.9% of net operating revenue in 2014 from 26.1% in 2013.  This variation of 0.2 p.p. is in line with our strategy to reduce prices, and is mainly due to: (i) increased participation e-commerce and cash and carry in total sales, 5.0 p.p. and 1.9 p.p., respectively. Selling, general and administrative expenses.  Selling, general and administrative expenses increased by 9.7%, or R$1,045 million, from R$10,742 million in 2013 to R$11,787 million in 2014.  This increase was mainly due to: (i) a R$498 million increase in personnel expenses across all businesses, primarily related to annual salary increases ; and (ii) R$169 million related to the consolidation of Cdiscount; Depreciation and amortization. Depreciation and amortization increased by 4.3%, or R$34 million, from R$787 million in 2013 to R$821 million in 2014, mainly due to the depreciation of acquired assets in connection with the opening and renewal of stores. Other operating expenses, net. Other operating expenses, net, decreased by R$232 million, from R$673 million in 2013 to R$441 million in 2014.  This decrease was mainly due to: (i) a reduction of R$241 million in provisions for legal claims from R$392 million in 2013 to R$151 million in 2014; and (ii) a decrease in the expenses related to the Casas Bahia association in the amount of R$46 million.  This increase was partially offset by: (i) increase of R$39 million in expenses relating to Cnova’s initial public offering; and (ii) a net increase of R$16 million in other expenses. Financial expenses, net. Financial expenses, net,increased by 26.3%, or R$314 million, from R$1,193 million in 2013 to R$1,508 million in 2014.  This increase was mainly due to: (i) a 24.0%, or R$215 million, increase in our interest expense over sales of receivables as a result of (a) an increase in sales volumes and (b) an increase in the average CDI rate, from 8.0% in 2013 to 10.8% in 2014; (ii) a 14.5%, or R$87 million, increase in our cost of debt; and (iii) a 56.3%, or R$58 million, increase in interest over our risk provisions and other liabilities.  This increase was partially offset by a change from a net debt position of R$1.1 billion in 2013 to a net cash position of R$1.4 billion in 2014 and a 11.2%, or R$42 million, increase in interest on cash and cash equivalents.


44

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Share of profit of associates. Share of profit of associatesincreased by 129.8%, or R$60 million, from R$47 million in 2013 to R$108 million in 2014, mainly due to an increase in the net results of FIC as a result of improvements in credit analysis and lower default rates by customers. Profit before income tax and social contribution. Profit before income tax and social contribution increased by 42.2%, or R$741.1 million, from R$1,756 million in 2013 to R$2,496 million in 2014, due to the increase in net operating revenue and reduction in other operating expenses, as partially offset by the increase in selling, general and administrative expenses. Income tax and social contribution. Income tax and social contribution increased by 104.5%, or R$376 million, from R$360 million in 2013 to R$736 million in 2014, affecting the effective rate from 20.5% in 2013 to 29.5% in 2014.  This variation was mainly due to: (i) a R$223 million increase directly related to the increase in profit in 2014; and (ii) a R$126 million increase related to a tax credit taken in 2013 that decreased our effective rate for that year,  but which did not repeat in 2014. Net income for the year. Net income for the year increased by 26.0%, or R$364 million, from R$1,396 million in 2013 to R$1,760 million in 2014, mainly due to the increase in net operating revenue, especially in the e-commerce and cash and carry segments, and higher gross margins recorded at Via Varejo. Segment Information We present the results of our operating segments in the same manner management evaluates the performance of and strategy for the four segments listed below.  For further information on the segments, see note 34 to our audited consolidated financial statements included elsewhere in this annual report. Food Retail Segment As of December 31, 2014, the food retail segment was comprised of the bannersPÃ£o de AÃ§ÃocarandExtra(includingMinimercado Extra, Minuto PÃ£o de AÃ§Ãocar, Extra SupermercadoandExtra Hiper). Net operating revenue.  Net operating revenue increased by 3.4%, or R$877 million, from R$25,538 million in 2013 to R$26,415 million in 2014, mainly due to: (i) an increase in same-store sales, which resulted from inflation and our increased competitiveness and reduction of prices; and (ii) an increase in sales from 97 net new stores. Gross profit.  Gross profit increased by 6.2%, or R$442 million, from R$7,107 million in 2013 to R$7,549  million in 2014.  In the same period, our gross margin increased from 27.8% in 2013 to 28.6% in 2014.  This 0.8 p.p. variation was due a more favorable mix of products sold, whereby we sold more food products, which have higher margins, than non-food products. Depreciationand amortization.  Depreciation and amortization decreased by 7.0%, or R$42 million, from R$594 million in 2013 to R$552 million in 2014, mainly due to the termination of the amortization term of intangibles related to prior acquisitions.  This decrease was offset by an increase of R$61 million related to the termination of the amortization of Bartira. Profit from operations before financial income (expenses) and share of profit of associates.Profit from operations before financial income (expenses) and share of profit of associates increased by 47.9%, or R$478 million, from R$999 million in 2013 to R$1,478 million in 2014, mainly due to the higher net operating revenue and higher gross margins. Financial expenses, net. Financial expenses, net, increased by 15.7%, or R$74 million, from R$477 million in 2013 to R$550 million in 2014, mainly due to: (i) R$20 million, increase in interest over net debt; (ii) a R$13 million, increase in interest expenses on sale of receivables; and (iii) R$40 million, increase in interest on contingencies and other financial expenses. 45


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Profit before income tax and social contribution.Profit before income tax and social contributionincreased by 81.1%, or R$450 million, from R$555 million in 2013 to R$1,005 million in 2014, mainly due to the increase in our operating profit, as a result of our more favorable mix of products sold and the decrease in other operating expenses. Cash and Carry Segment As of December 31, 2014, theAssaÃ­banner represented our cash and carry segment. Net operating revenue. Net operating revenue increased by 32.7%, or R$2,053 million, from R$6,273 million in 2013 to R$8,326 million in 2014, mainly due to: an increase in sales from new stores and, to a lesser extent, an increase in same-store sales, which resulted from (a) our increased competitiveness and (b) the effectiveness of our recently-opened stores.  In 2014, we opened nine new stores and expanded our activities in this segment to six new Brazilian states. Gross profit.  Gross profit increased by 32.2%, or R$294 million, from R$914 million in 2013 to R$1,208 million in 2014, in line with our increase in net operating revenue.  In the same period, our gross margin remained stable at 14.5% in 2013 and 2014. Depreciationand amortization. Depreciation and amortization increased by 39.3%, or R$22 million, from R$56 million in 2013 to R$78 million in 2014, mainly due to property, plant and equipment acquired during 2014 and the opening of nine new stores. Profit from operations before financial income (expenses) and share of profit of associates.Profit from operations before financial income (expenses) and share of profit of associates increased by 20.1%, or R$39 million, from R$193 million in 2013 to R$233 million in 2014.  This increase was partially offset by a R$37 million increase in other operating expenses resulting from certain tax contingencies. Financial expenses, net. Financial expenses, net, increased by 121.7%, or R$28 million, from R$23 million in 2013 to R$51 million in 2014.  This increase was mainly due to: (i) R$24 million, increase in interest over net debt; and (ii) R$5 million, increase in expenses over receivables sold.  This increase was partially offset by R$3 million, decrease in other financial expenses, net. Profit before income tax and social contribution. Profit before income tax and social contributionincreased by R$12 million, from R$170 million in 2013 to R$182 million in 2014,mainly due to an increase in our operating profit and partially offset by an increase in our financial expenses, net. Home Appliance Segment As of December 31, 2014, our home appliance segment was comprised of the bannersPontofrioandCasas Bahia. Net operating revenue.Net operating revenue increased by 4.3%, or R$928 million, from R$21,746 million in 2013 to R$22,674 million in 2014, mainly due to: (i) a R$652 million increase in same-store sales; (ii) a R$207 million increase in financed sales; and (iii) an increase in sales from 39 net new stores. Gross profit. Gross profit increased by 9.9% or R$665 million, from R$6,690 million in 2013 to R$7,355 million in 2014, in line with the increase in our net operating revenue.  In the same period, our gross margin increased from 30.8% in 2013 to 32.4% in 2014. This 1.6 p.p. variation was due to: (i) the increase in our net operating revenue; (ii) ICMS tax credits effects higher than the amount recorded in 2013; and (iii) gains relating to better functioning logistics. Depreciationand amortization. Depreciation and amortization increased by 6.9%, or R$9 million, from R$130 million in 2013 to R$139 million in 2014, mainly due to the depreciation of assets we acquired in 2014. Profit from operations before financial income (expenses) and share of profit of associates.Profit from operations before financial income (expenses) and share of profit of associates increased by 29.7%, or R$479


million, from R$1,612 million in 2013 to R$2,091 million in 2014, mainly due to: (i) the increase in our gross margin and net operating revenue; (ii) a decrease in expenses as a percentage of net operating revenue, from 22.7% in 2013 to 22.4% in 2014, primarily related to the decrease in back office personnel expenses and optimization of marketing and information technology expenses in line with our strategy to increase cost efficiency and capture additional synergies from our acquisitions. 46


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Financial expenses, net. Financial expenses, net,increased by 23.2%, or R$128 million, from R$551 million in 2013 to R$679 million in 2014, mainly due to:  (i) R$94million, increase in our financial expenses mainly resulting from an increase in the average CDI rate, from 8.0% in 2013 to 10.8% in 2014; (ii) an increase of R$62 million in expenses over receivables sold; (iii) higher gain interest over cash about R$44 million; and (iv) an increase of R$16 million in other financial expenses, net. Profit before income tax and social contribution. Profit before income tax and social contributionincreased by 34.3% or R$369 million, from R$1,075 million in 2013 to R$1,444 million in 2014, mainly due to our improved operational efficiencies and the decrease in our expenses. E-commerce Segment As of December 31, 2014, our e-commercesegmentconsisted of our e-commerce operations through the websites Extra.com.br,PontoFrio.com.br, CasasBahia.com.br,Barateiro.com.br, PartiuViagens.com.br, Cdiscount.com (mainly on France),wholesale activities (B2B), and E-Hub. Net operating revenue. Net operating revenue increased by 90.2%, or R$3,878 million, from R$4,297 million in 2013 to R$8,175 million in 2014, mainly due to: (i) our gain in market share resulting from our increased competitiveness; (ii) a broader range of products offered on our websites, which enhanced the market perception of our products and services; (iii) the development of our online market place sales platform; and (iv) R$2,428 million related to net operating revenue recorded by Cdiscount beginning July 31. 2014. Gross profit. Gross profit increased by 115.0%, or R$452 million, from R$393 million in 2013 to R$845 million in 2014, mainly due to the consolidation of Cdiscount and  the increase of our net operating revenue.  In the same period, our gross margin increased from 9.1% in 2013 to 10.3% in 2014.  This 1.2 p.p. variation was in line with our strategy to capture intercompany synergies, mainly in Via Varejo. Depreciationand amortization. Depreciation and amortization increased by 642.9%, or R$45 million, from R$7 million in 2013 to R$52 million in 2014, mainly due to: (i) the consolidation of Cdiscount; and (ii) acquisitions of property, plant and equipment during 2014. Profit from operations before financial income (expenses) and share of profit of associates.Profit from operations before financial income (expenses) and share of profit of associates decreased by 4.1%, or R$4 million, from R$98 million in 2013 to R$94 million in 2014, mainly due to the increase in our depreciation and amortization. Financial expenses, net. Financial expenses, net,increased by 59.2%, or R$84 million, from R$142 million in 2013 to R$226 million in 2014, mainly due to the increase in our interest expense over sales of receivables as a result an increase in the average CDI rate, from 8.0% in 2013 to 10.8% in 2014. Loss before income tax and social contribution. Loss before income tax and social contribution increased by 206.8%, or R$91 million, from a loss of R$44 million in 2013 to a loss of R$135 million in 2014, mainly due to the increase in our financial expenses. Year Ended December 31, 2013 Compared to Year Ended December 31, 2012 The discussion below is based on our reclassified consolidated statement of income for the year ended December 31, 2012 to be consistent with the accounting standards that we used to prepare our consolidated statement of income for the year ended December 31, 2013.  For further information on the reclassification, see note 2 to our audited consolidated financial statements included elsewhere in this annual report. 47


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Consolidated Net operating revenue.Net operating revenue increased by 13.4%, or R$6,838 million, from R$51,016 million in 2012 to R$57,854 million in 2013, mainly due to: (i) an increase of  R$5,005 million in sales of stores opened for at least one year, or same-store sales, of which R$2,244 million were related to food retail and cash and carry segments, representing an increase of 3.6%, primarily as a result of our strategy in 2013 to reduce price to enhance our competitiveness, and R$1,873 million were related to the home appliances segment, representing an increase of 8.8%; and (ii) an increase of R$1,801 million, or 5.3%, in sales from 128 new stores opened.  In 2013, we closed 11 stores.  This increase was partially offset by barter transactions (which are transactions without the exchange of money) involving land owned by us and unit apartments, which occurred in 2012, in the amount of R$152 million, and were not recurrent in 2013. Gross profit.Gross profit increased by 9.4%, or R$1,298 million, from R$13,806 million in 2012 to R$15,104 million in 2013.  In the same period, our gross margin decreased to 26.1% of net operating revenue in 2013 from 27.0% in 2012.  This variation of 1.1 p.p. is in line with our strategy to reduce prices and is mainly due to: (i) a 1.1 p.p. decrease in the margin of food retail; and (ii) a 4.8 p.p. decrease in the margin of e-commerce. Selling, general and administrative expenses.  Selling, general and administrative expenses increased by 5.7%, or R$579 million, from R$10,164 million in 2012 to R$10,742 million in 2013.  This increase was mainly due to: (i) a R$450 million increase in personnel expenses in the food retail and cash and carry segments due to annual salary adjustments; and (ii) a R$149 million increase in rent and other operation expenses, which were related to the increase in sales.  This increase was partially offset by a R$48 million reduction in marketing expenses, especially in the food retail segment.  As a percentage of net operating revenue, these expenses decreased from 19.9% to 18.6% in the year-over-year comparison, which is in line with our strategy to reduce expenses and improve operational efficiency. Depreciationand amortization. Depreciation and amortization increased by 4.8%, or R$36 million, from R$751 million in 2012 to R$787 million in 2013, mainly due to the depreciation of acquired assets in connection with the opening and renewal of stores. Other operating expenses, net. Other operating expenses, net, increased R$640 million, from R$33 million in 2012 to R$673 million in 2013.  This increase was mainly due to: (i) additional provisions of R$392 million related to labor liabilities for which we reassessed the risk of loss and increased the amount previously recorded and tax liabilities for which we reassessed the risk of loss due to developments in the legal proceedings; (ii) costs of R$105 million associated with severance costs incurred in optimization of our personnel structure, mainly among our executives; (iii) additional expense of R$61 million related to the write-off of fixed assets in the ordinary course of business and a provision for fines that may be applied by CADE resulting from the Term of Undertaking; and (iv) payment of contractual obligations related to the Casas Bahia association in the amount of R$147 million.  This increase in other operating expenses was partially offset by other net positive effects in the amount of R$31.6 million mainly related to the reevaluation of our equity interest in Bartira.  For more information on the Term of Undertaking, see â€œItem 4A. History and Development of the Company.â€ Financial expenses, net. Financial expenses, net,remained stable at R$1,193 million in 2012 and 2013.  This was mainly due to the 0.5%, or R$103 million, increase in the interest expense over sales of receivables as a result of the increase in volume sold. This increase was partially offset by: (i) a 10%, or R$40 million, decrease in our financial debt in the year-over-year comparison; (ii) an 18%, or R$18 million, increase in financial income resulting from (a) an increase in cash generated from our operations and (b) financial instruments that benefited from the increase in the average CDI rate; and (iii) a R$32 million increase in other financial income in 2013. Share of profit of associates. Share of profit of associates increased by 327.3%, or R$36 million, from R$11 million in 2012 to R$47 million in 2013, mainly due to an increase in the net results of FIC as a result of improvements in credit analysis and lower default rates by customers. Profit before income tax and social contribution.Profit before income tax and social contributionincreased by 4.8%, or R$80 million, from R$1,676 million in 2012 to R$1,756 million in 2013, mainly due to: (i) the increase in our net operating revenue; and (ii) the decrease in our selling, general and administrative expenses.  This increase was partially offset by the increase in other operating expenses. 48


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Income tax and social contribution.Income tax and social contribution decreased by 30.8%, or R$160 million, from R$520 million in 2012 to R$360 million in 2013, affecting the effective rate from 31.0% in 2012 to 20.4% in 2013.  This variation was mainly due to: (i) the reversal of a deferred income tax liability in the amount of R$104 million, which we recorded in connection with the business combination of Nova Casa Bahia in 2010, and reversed to our income statement due to the exercise of the call option to purchase the remaining 75% equity interest in Bartira; and (ii) the R$71 million increase in the evaluation of our equity interest in Bartira, which resulted in a non-taxable income. Net income for the year. Net income for the year increased by 20.8%, or R$240 million, from R$1,156 million in 2012 to R$1,396.million in 2013, mainly due to the increase in net operating revenue, especially in the food retail and home appliance segments.  This increase was partially offset by an increase in other operating expenses. Segment Information We present the results of our operating segments in the same manner management evaluates the performance of and strategy for the four segments listed below.  For further information on the segments, see note 35 to our audited consolidated financial statements included elsewhere in this annual report. Food Retail Segment As of December 31, 2013, the food retail segment was comprised of the bannersPÃ£o de AÃ§ÃocarandExtra(includingMinimercado Extra, Extra SupermercadoandExtra Hiper). Net operating revenue. Net operating revenue increased by 8.5%, or R$2,008 million, from R$23,530 million in 2012 to R$25,538 million in 2013, mainly due to: (i) an increase in same-store sales, which resulted from our increased competitiveness and reduction of prices; and (ii) an increase in sales from 73 new stores, including 59Minimercado Extrastore.  In 2013, we closed four stores.  This increase was partially offset by barter transactions (which are transactions without the exchange of money) involving land owned by us and unit apartments, which occurred in 2012 in the amount of R$152 million and were not recurrent in 2013. Gross profit. Gross profit increased by 5.4%, or R$317 million, from R$6,790 million in 2012 to R$7,107 million in 2013.  In the same period, our margin over net operating revenue decreased from 28.8% in 2012 to 27.7% in 2013 in line with our strategy to reduce prices.  This 1.0 p.p. variation was due to an increase in net operating revenue, which was partially offset by an increase in other operating expenses. Depreciationand amortization. Depreciation and amortization increased by 7.6%, or R$41 million, from R$552 million in 2012 to R$594 million in 2013, mainly due to property, plant and equipment acquired during 2013 and 2012. Profit from operations before financial income (expenses) and share of profit of associates.Profit from operations before financial income (expenses) and share of profit of associates decreased by 33.3%, or R$488 million, from R$1,487 million in 2012 to R$999 million in 2013, mainly due to the increase in other operating expenses, primarily as a result of additional provisions of R$392 million related to labor liabilities for which we reassessed the risk of loss and increased the amount previously provisioned and tax liabilities for which we reassessed the risk of loss due to developments in the legal proceedings. Financial expenses, net. Financial expenses, net, increased by 6.0%, or R$29 million, from R$450 million in 2012 to R$477 million in 2013, mainly due to: (i) a R$68 million decrease in our revenue from cash investments due to the reduction in our average cash balance of approximately 23.0%; (ii) an R$18 million decrease in the cost of our financial debt; and (iii) a R$21 million increase in interest over other financial assets and liabilities. Profit before income tax and social contribution.Profit before income tax and social contribution decreased by 47.6%, or R$507 million, from R$1,059 million in 2012 to R$555 million in 2013, mainly due to the decrease in our operating profit, as a result of our strategy to reduce prices and become more competitive in the short term.  This decrease was partially offset by the R$392 million increase in other operating expenses, as described above under this segmentâ€TMs operating profit. 49


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Cash and Carry Segment As of December 31, 2013, theAssaÃ­banner represented our cash and carry segment. Net operating revenue. Net operating revenue increased by 35.2%, or R$1,634 million, from R$4,639 million in 2012 to R$6,273 million in 2013, mainly due to: (i) an increase in sales from new stores; and (ii) an increase in same-store sales, which resulted from our increased competitiveness and reduction of prices.  In 2013, we opened 14 new stores and expanded our activities in this segment to an additional five Brazilian states. Gross profit. Gross profit increased by 35.5%, or R$239 million, from R$675 million in 2012 to R$914 million in 2013, in line with our increase in net operating revenue.  Our gross profit over net operating revenue grew slightly, from 14.5% in 2012 to 14.6% in 2013. Depreciationand amortization. Depreciation and amortization increased by 27.2%, or R$12 million, from R$44 million in 2012 to R$56 million in 2013, mainly due to property, plant and equipment acquired during 2013 and the opening of 14 new stores. Profit from operations before financial income (expenses) and share of profit of associates.Profit from operations before financial income (expenses) and share of profit of associates increased by 33.1%, or R$48 million, from R$145 million in 2012 to R$193 million in 2013, in line with our increase in net operating revenue.  Our operating profit over net operating revenue remained stable at 3.1% in 2012 and 2013. Financial expenses, net. Financial expenses, net,decreased by 65.2%, or R$43 million, from R$66 million in 2012 to R$23 million in 2013.  This decrease was mainly due to: (i) a non-recurring transfer of R$20 million of principal amount of debt to the cash and carry segment in 2012; and (ii) payment of an intercompany loan, which resulted in a R$14 million decrease in interest expenses in 2013. Profit before income tax and social contribution.Profit before income tax and social contribution increased by R$91 million, from R$79 million in 2012 to R$170 million in 2013, mainly due to an increase in our operating profit and decrease in our financial expenses, net. Home Appliance Segment As of December 31, 2013, our home appliance segment was comprised of the bannersPontofrioandCasas Bahia. Net operating revenue. Net operating revenue increased by 11.9%, or R$2,308 million, from R$19,438 million in 2012 to R$21,746 million in 2013, mainly due to: (i) a 9.0%, or R$1,873 million, increase in same-store sales; and (ii) a R$435 million increase in sales from 34 net new stores. Gross profit. Gross profit increased by 15.1% or R$832 million, from R$5,858 million in 2012 to R$6,690 million in 2013, in line with our increase in net operating revenue.  Gross margin increased from 30.1% in 2012 to 30.8% in 2013, in line with our strategy to increase cost-efficiency and capture additional synergies from the Casas Bahia association.  This 0.7 p.p. increase was mainly due to: (i) our increase in sales; and (ii) the decrease in our cost of sales resulting from (a) our new strategy to use distribution centers that are closer to our delivery points and (b) the restructuring of teams in charge of assembling furniture. Depreciationand amortization. Depreciation and amortization decreased by 14.9%, or R$23 million, from R$153 million in 2012 to R$130 million in 2013, due to the sale of certain assets, mainly trucks. Profit from operations before financial income (expenses) and share of profit of associates.Profit from operations before financial income (expenses) and share of profit of associates increased by 45.6%, or R$505 million, from R$1,107 million in 2012 to R$1,612 million in 2013, mainly due to: (i) the increase in our gross margin and net operating revenue; (ii) a decrease in expenses as a percentage of net operating revenue, from 23.8% in 2012 to 22.7% in 2013, primarily related to the decrease in back office personnel expenses and optimization of


marketing and information technology expenses in line with our strategy to increase cost efficiency and capture additional synergies from our acquisitions. 50


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Financial expenses, net. Financial expenses, net,decreased by 4.1%, or R$24 million, from R$574 million in 2012 to R$551 million in 2013, mainly due to a R$89 million increase in financial income resulting from an increase in our cash position as of December 31, 2013 as compared to our cash position as of December 31, 2012. This increase in financial income was partially offset by a R$56 million increase in the cost of sales of receivables, as a result of the increase in volume sold. Profit before income tax and social contribution.Profit before income tax and social contribution increased by 101.7% or R$543 million, from R$533 million in 2012 to R$1,075 million in 2013, mainly due to our improved operational efficiencies and the decrease in our financial expenses. E-commerce Segment As of December 31, 2013, our e-commercesegmentconsisted of our e-commerce operations through the websites Extra.com.br,PontoFrio.com.br, CasasBahia.com.br,Barateiro.com.br, PartiuViagens.com.br;wholesale activities (B2B), and E-Hub. Net operating revenue. Net operating revenue increased by 26.1%, or R$888 million, from R$3,409 million in 2012 to R$4,297 million in 2013, mainly due to (i) our gain in market share resulting from our increased competitiveness; (ii) a broader range of products offered on our websites, which enhanced the market perception of our products and services; and (iii) the development of our online market place sales platform. Gross profit. Gross profit decreased by 18.7%, or R$90 million, from R$483 million in 2012 to R$393 million in 2013, due to reduction of prices and increasing competition in this segment.  In the same period, our margin over net operating revenue decreased from 14.2% in 2012 to 9.1% in 2013. This 5.1% p.p. variation was in line with our strategy to reduce prices. Depreciationand amortization. Depreciation and amortization increased by 250.0%, or R$5 million, from R$2 million in 2012 to R$7 million in 2013, due to property, plant and equipment acquired during 2013. Profit from operations before financial income (expenses) and share of profit of associates.Profit from operations before financial income (expenses) and share of profit of associates decreased by 9.3%, or R$10 million, from R$108 million in 2012 to R$98 million in 2013, mainly due to the decrease in our gross margin. Financial expenses, net. Financial expenses, net,increased by 37.9%, or R$38 million, from R$103 million in 2012 to R$142 million in 2013, mainly due to an increase in the volume of receivables sold. Profit (loss) before income tax and social contribution. We had a profit before income tax and social contribution of R$5 million in 2012 compared to a loss of R$44 million in 2013, mainly due to our gain in market share resulting from increased competitiveness and reduction of prices.  We have funded our operations and capital expenditures mainly from our operating cash flow and sale of receivables entered into with financial institutions (banks and credit card merchant acquirers).  Additionally, we have issued debentures in the local markets and obtained loans from banks and from BNDES. **5B. Liquidity and Capital Resources** In 2014, we continued selling our receivables to banks and credit card merchant acquirers without right of recourse or any obligation related therewith.  For more information on the sale of receivables, see note 8.1 to our audited consolidated financial statements included elsewhere in this annual report. As of December 31, 2014, we had R$11,149 million in cash and cash equivalents.  We have a policy of maintaining cash and cash equivalents to meet short-term liquidity needs.  Historically, a relevant portion of our


cash is generated during the fourth quarter of the year, and our cash level decreases between the second and third quarter of each year. 51


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Our main cash needs include: ·the servicing of our indebtedness; ·capital expenditures, including the construction and remodeling of new stores and investments in our infrastructure; ·acquisitions of other supermarket chains; and ·distribution of dividends. Our primary sources of liquidity have historically been cash flow from our operating activities. Net cash from operating activities was R$5,016 million in 2014, R$4.892 million in 2013 and R$5,299 million in 2012.  In 2014, these cash flows were primarily used for investments in the capital expenditures program, totaling R$1,963 million.  Our working capital need, or the gap between suppliers and inventories, improved by 19.2 days in 2014, as compared to 2013, due to optimizations in all of our business segments. Our total cash position as of December 31, 2014, increased by 33.2%, or R$2,782 million, from R$8,367 million in 2013 to R$11,149 million in 2014. Our outstanding debt as of December 31, 2014, increased by 2.5%, or R$233 million, from R$9,495 million in 2013 to R$9,728 million in 2014, consisting of: ·R$9,029 million inreal-denominated loans, and ·R$699 million in U.S. dollar-denominated debt, swapped toreal-denominated loans. Our debt interest expense was R$687 millionin 2014 and R$600 million in 2013. We have adopted a treasury policy to manage financial exchange risk, principally by entering into swaps inreaisfor 100% of our U.S. dollar-denominated liabilities, which represent less than 10% of our total debt.  We engage in cross-currency interest rate swaps under which we enter into an agreement typically with the same counter-party that provides the original U.S. dollar-denominated financing.  A separate financial instrument is signed at the time the loan agreement is consummated, pursuant to which we are then effectively liable for amounts inreaisand interest at a percentage of the CDI rate.  The reference amounts and maturity periods of these swaps generally correspond to the original U.S. dollar-denominated loan.  This policy protects us against losses resulting from currency devaluations. We have two lines of credit outstanding with BNDES, which are denominated inreaisand subject to TJLP, indexation plus an annual spread.  In addition, we have credit lines outstanding with other financial institutions that are associated with BNDES by means of the Equipment and Machinery Financing (Financiamento de Máquinas e Equipamentos), or Finame, platform, which are used in the ordinary course of business for purchase of machinery and equipment financing.  Amortizations are in monthly installments after a grace period.  BNDES has historically been an important source of financing for new stores and the acquisition of supermarket chains as well as machinery and equipment.  For further information on our lines of credit with BNDES and BNDES/Finame, see note 18 to our audited consolidated financial statements included elsewhere in this annual report. Under the lines of credit with BNDES, we are prohibited from offering assets as collateral in loans entered into with third parties without the prior consent of BNDES.  We also have to comply with the maintenance of covenants measured in accordance with the relevant BNDES agreements: capitalization ratio (shareholders’ equity/total assets) equal to or in excess of 0.30 and current ratio (EBITDA-to-net debt) equal to or in excess of 0.35.  As of the date of this annual report, we are in compliance with these financial covenants. 52


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We issued a number of non-convertible debentures in recent years, as follows: CBD On December, 2011, the shareholders approved the tenth issuance and public offering of debentures in Brazil.  We received proceeds equivalent to R$800 million, for 80,000 non-convertible debentures issued as the first series of the tenth issuance.  The debentures accrue interest at 108.5% of the average CDI rate, payable annually.  Principal will be paid on the maturity date on June 29, 2015. On May, 2012, the shareholders approved the eleventh issuance and public offering of debentures in Brazil.  We received proceeds equivalent to R$1,200 million, for 120,000 non-convertible debentures issued as the first series of the eleventh issuance.  The debentures accrue interest at the average CDI rate plus a spread of 1% per year, which will be payable semi-annually.  Principal will be paid on the maturity date on November 2, 2015. On September, 2014, the shareholders approved the twelfth issuance and public offering of debentures in Brazil.  We received proceeds equivalent to R$900 million, for 900,000 non-convertible debentures issued as the first series of the twelfth issuance.  The debentures accrue interest at 107.0% of the average CDI rate, payable annually.  Principal will be paid on the maturity date on December 9, 2019. Via Varejo On January, 2012, the shareholders approved the third issuance and public offering of debentures in Brazil.  We received proceeds equivalent to R$400 million for 40,000 non-convertible debentures issued as the first series of the third issuance.  The debentures remuneration is CDI + 1% per year, which will be payable semi-annually and principal on the maturity date on July 30, 2015. Consolidated As of December 31, 2014, we had 1,140,000 non-convertible debentures outstanding, totaling R$3,568 million.  We are subject to certain covenants, such as net debt (debt less cash and cash equivalents and trade receivables) not greater than equity and consolidated net debt-to-EBITDA ratio lower than or equal to 3.25. As of December 31, 2014, we complied with these ratios. For further information on our non-convertible debentures, see note 18.4 to our audited consolidated financial statements included elsewhere in this annual report. Capital expenditures In 2014, our capital expenditures totaled R$1,963 million.  These investment projects were financed with our operating cash flow and by third parties.  Our capital expenditures were R$2,126 million in 2013.  For specific use of our capital expenditures in 2014, see “Item 4A. History and Development of the Company—Capital Expenditure and Investment Plan.” We believe that existing resources and operating income will be sufficient for our capital expenditure and investment plan and meet our liquidity requirements.  However, our capital expenditure and investment plan is subject to a number of contingencies, many of which are beyond our control, including the continued growth and stability of the Brazilian economy.  We cannot assure you that we will successfully complete all of or any portion of our capital expenditure and investment plan.  In addition, we may participate in acquisitions not budgeted in the capital expenditure and investment plan, and we may modify these plans. 5C.Research and Development, Patents and Licenses, Etc. We do not have any significant research and development activities. 5D.Trend Information 53


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We believe that Brazilian consumers are very concerned with rising inflation rates, saving to repay debts, cutting leisure-related spending and reducing the number of trips they make to the supermarket.  To continue buying products they tried and enjoyed during times of growth, consumers seek out stores with low prices and promotions.   If they are unable to find them, they change brands. At the end of 2014, we surveyed the behavior of Brazilians in 48 million urban households.  According to our study, 13% of Brazilians are saving to repay overdue debts, and 64% say they have reduced leisure activities outside of the home to save money.  Our survey also corroborates other third-party studies that found that the Brazilian middle class has cut back on spending and the classes with greater income (A and B income classes) are driving consumption. There was a 4.7% decrease in the number of trips to points of sale in 2014 compared to 2013, while average spending per visit increased by 5.6%.  We believe this is a result of better planning by consumers. According to a survey conducted by Nielsen, more than half of Brazilian consumers have low spending levels and focus on purchasing basic household products only.   According to Nielsen, in 2014, sales in Brazil of 137 categories of beverages, foods, toiletries and cosmetic products, among others, increased by 3.7% by volume and 4.9% by inflation-adjusted revenue compared to 2013.  In 2013, sales in Brazil of the same categories of products decreased by 0.3% by volume and increased by 3.5% by inflation-adjusted revenue compared to 2012.  Data released by the IBGE revealed a more concerning trend for Brazilian consumer retailers.   According to the IGBE, sales volumes of restricted retail products, excluding vehicles and construction materials, increased by only 2.2% in 2014, as compared to 2013, representing the lowest sales growth percentage in the past 10 years. In 2014, consumers’ focus on finding the best prices drove them to cash and carry and away from supermarkets – a trend that has been building over recent years.  According to Nielsen, a total of 47 cash and carry stores opened in Brazil in 2014, and 1.4 million households moved to purchase from this channel during that time.   Cash and carry was not the only segment that grew in 2014.  Brazilians also began shopping at up to four different stores for their grocery needs. In an attempt to save money on household purchases, consumers first search for stores that offer their preferred brands at a price deemed fair, seeking sales and discounts on these brands.  It is only after this attempt fails that consumers change brands, moving to a less expensive product. According to Nielsen, 2015 will be just as challenging, if not more so, than 2014 for the food retail industry. Consumers will continue to be concerned with inflation, reeling in their spending.  Despite these challenges, we believe we have the necessary tools to continue to increase sales during this time.  In 2015, we intend to maintain our strategy to increase competitiveness and consolidate synergies.  We also intend to invest in the opening of new stores, remodeling and renovating stores and acquiring land in strategic locations.  In addition, we intend to invest in infrastructure related to information technology and distribution.  We also believe we are well positioned to achieve our growth targets in 2015.  While we will prioritize organic growth through the existing stores and through the opening of new stores, we will also remain alert to any opportunities for strategic acquisitions that will result in operational synergies, leverage returns on invested capital and create value for our shareholders. 5E.Off-balance sheet arrangements We do not maintain any off-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, except for off-balance sheet arrangements related to operational leases disclosed in note 25 to our financial statements. As of December 31, 2014, Company revised the information disclosed in note 25, in order to disclose only the Non-Cancellable lease obligation, as required by the IFRS. The supplementary Cancellable lease obligation information was removed, since it is not a requirement  54


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5F.Tabular disclosure of contractual obligations The following table summarizes significant contractual obligations and commitments as of December 31, 2014: Payment Due by PeriodContractual Obligations (1)

   Total

   Less than one year

   One to three years

   Three to five years

   After five years(in millions ofreais)Long-term debt:Principal

   5,693

   3,747

   1,888

   34

   25Accrued interest as of 12/31/14

   205

   142

   63

   0

   –Projected interest (2)

   704

   237

   355

   91

   21Total long-term debt

   6,602

   4,126

   2,306

   125

   46Debentures:Principal

   3,496

   2,600

   448

   448

   –Accrued interest as of 12/31/14

   72

   72

   –

   –

   –Projected interest (2)

   711

   292

   359

   60

   –Total debentures

   4,279

   2,964

   807

   508

   –Taxes, other than on income

   1,484

   867

   219

   140

   258Financial Leasing

   263

   34

   103

   31

   96Operating lease (3)

   136

   18

   28

   41

   49Total contractual obligations

   12,764

   8,009

   3,463

   844

   449
 ____________ (1)   For additional information, see notes 18, 19, 21 and 24 to our audited consolidated financial statements included elsewhere in this annual report. (2)   Future interest includes estimated interest to be incurred from December 31, 2013 through the respective contractual maturity dates, based on outstanding principal amounts at December 31, 2013 and projected market interest rates (especially the Brazilian CDI rate) for our variable rate debt obligations, net of the impacts of derivative instruments classified as fair value hedges and swap transactions. (3)   Only the non-cancellable obligations in the lease agreements. ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 6A.Directors and Senior Management Board of Directors The following table sets forth the name and the year of election of each of our board members as of the date of this report.  A brief biographical description of each of our board members follows the table: Name

   Position

   Since

   Date of BirthJean-Charles Henri Naouri

   Chairman

   2005

   March 8, 1949Arnaud Strasser

   Vice-Chairman

   2012

   July 6, 1969Antoine Marie Remi Lazars Giscard D’Estaing

   Director

   2009

   January 5, 1961Yves Desjacques

   Director

   2014

   December 23, 1967Roberto Oliveira de Lima

   Director (Independent)

   2012

   April 1, 1951Luiz Augusto de Castro Neves

   Director (Independent)

   2012

   October 29, 1943Eleazar de Carvalho Filho

   Director (Independent)

   2012

   July 26, 1957Maria Helena dos Santos Fernandes de Santana

   Director (Independent)

   2013

   June 23, 1959Luiz Aranha Corrêa do Lago

   Director (Independent)

   2014

   November 27, 1950
  Mr. Jean-Charles Henri Naourihas been a member of our board of directors since 2005.  Mr. Naouri is also the chairman and chief executive officer of the Casino Group, president of its ultimate parent company, Euris S.A.S., and chairman of the board of directors of Cnova.  He also holds the following positions: chairman of the board of directors of Rallye S.A., member of the board of directors ofF. Marc de Lacharrière FIMALAC S.A., vice-chairman of the Casino Group Corporate Foundation and chairman of the Euris Foundation.  In June 2013, Mr. Naouri was appointed by France’s Ministry of Foreign Affairs to be a special representative for economic relations with Brazil. In the past five years, he has served as chairman and chief executive officer (until 2013) and member of the supervisory board (until 2013) of Monoprix S.A., chief executive officer of Rallye S.A. (until 2013), chairman of Finatis S.A. (until 2010), and member of the board of directors and audit committee of Natixis S.A. (until 2010).


From 1982 to 1986, Mr. Naouri served as chief of staff for the Minister of Social Affairs and National Solidarity of France and the Minister of Economy, Finance and Budget of France. Mr. Naouri isInspecteur des Finances(Finance Inspector) for the French government.Mr. Naouri holds degrees fromEcole Normale SupÃ©rieureandEcole Nationale dâ€TMAdministrationand a Ph.D. in mathematics and has studied at Harvard University.


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Mr. Arnaud Strasserhas been the vice-chairman of our board of directors since 2012 and a member of our board of directors since 2010.  He has also been a member of the board of directors of Cnova since 2014,Ã‰xito since 2010 and Via Varejo since 2012 (where he has served as vice-chairman since 2013).  Until 2014, Mr. Strasser also served as a member of the board of directors of the Big C Supercenter plc.  Hehas worked for the Casino Group since 2007, where he currently serves as corporate development and equity interests officer.  Until 2009, he was advisor to the chairman for international development of the Casino Group.  Mr. Strasser also worked in the Cabinet of the Prime Minister of France in 2005, as mission head, and in the Cabinet of Renaud Dutreil, French Minister of Companies and Trade, from 2005 to 2007, as special advisor.Mr. Strasser holds a bachelorâ€TMs degree fromÃ‰cole Nationale dâ€TMAdministrationand masterâ€TMs degrees fromHautes Ã‰tudes CommercialesandInstitut dâ€TMÃ‰tudes Politiques de Paris. Mr. Antoine Marie Remi Lazars Giscard Dâ€TMEstainghas been a member of our board of directors since 2009.  Mr. Dâ€TMEstaing is the financial director of the Casino Group.  Previously, he was a partner at Bain & Company and financial, strategy and information technology director of the Danone Group.  Mr. Dâ€TMEstaing holds degrees in business administration fromHautes Ã‰tudes CommercialesandÃ‰cole Nationale dâ€TMAdministration. Mr. Yves Desjacqueshas been a member of our board of directors since 2014. He also serves as a member of the board of directors of Ã‰xito and Mercialys S.A., a French real estate affiliate of the Casino Group.  Mr. Desjacques has been executive vice-president of human resources of the Casino Group since 2007.  From 2001 to 2007, he served as vice-president of human resources and member of the executive committee of VÃ©dior France.  From 1994 to 2001, Mr. Desjacques held several positions at Generali Assurances, including human resources manager from 1994 to 1997, vice-president of human resources from 1997 to 2001 and vice-president of human resources for shared corporate functions from 1998 to 2001.  From 1992 to 1994, he was human resources officer at Commercial Union Assurances.  Since 2007, Mr. Desjacques has been chairman of the French Equal Opportunity in Education Association.  He holds a master's degree in international human resources management from the University of Paris II, where he specialized in labor law, corporate relations and human resources. Mr. Roberto Oliveira de Limahas been an independent member of our board of directors since 2012.  He  is also a member of the board of directors of Telefonica Brasil S.A. and has held several executive positions at Grupo Vivo, such as chief executive officer of Tele Sudeste Celular ParticipaÃ§Ãμes S.A., Tele Leste Celular ParticipaÃ§Ãμes S.A. and Celular CRT ParticipaÃ§Ãμes S.A. until February 2006, chief executive officer Telemig Celular ParticipaÃ§Ãμes S.A. until November 2009, executive officer of Telemig Celular ParticipaÃ§Ãμes S.A., Avista ParticipaÃ§Ãμes Ltda., Tagilo ParticipaÃ§Ãμes Ltda., Sudestecel ParticipaÃ§Ãμes Ltda. and Vivo Brasil ComunicaÃ§Ãμes Ltda. until November 2009. Mr. Oliveira de Lima serves as a member of the board of directors of Edenred S.Ã .r.l., which is headquartered in Paris, France.  Previously, he served as chairman of the board of directors of Grupo Credicard from 1999 to 2005 and chief executive officer of Banco Credicard S.A. from 2002 to 2005.  He also held executive positions at Accor Brasil S.A., Rhodia Rhone Poulec S.A. and Saint Global S.A. Mr. Oliveira de Lima holds a masterâ€TMs degree in business administration fromFundaÃ§Ã£o GetÃolio Vargasin Brazil and a master degreeâ€TMs in finance and strategic planning fromInstitute Superieur des Affairesin France. Mr. Luiz Augusto de Castro Neveshas been an independent member of our board of directors since 2012.  Previously, he was a career diplomat.  He joined the Brazilian foreign service in March 1967 and served as Brazilian ambassador to Japan, Mongolia and the Democratic Peopleâ€TMs Republic of Korea from 2008 to 2010, China from 2004 to 2008 and Paraguay from 2000 to 2004.  Mr. Castro Neves also served as chairman of Itaipu Binacional and Interim Minister of State and Head of the Secretariat of Strategic Affairs of the Presidency of Brazil.  He is a founding partner of CN Estudo e Projetos Ltda. and president of the Brazilian Center of Foreign Affairs (Centro Brasileiro de RelaÃ§Ãμes Internacionais) and teaches economics at the Brazilian Ministry of Foreign Affairsâ€TM (MinistÃ©rio das RelaÃ§Ãμes Exteriores)Instituto Rio-Brancoand foreign economic relations atUniversidade de BrasÃ­lia.  Mr. Castro Neves holds bachelorâ€TMs degrees in economics from theUniversidade Federal do Rio de Janeiroand diplomacy from the Brazilian Ministry of Foreign Affairsâ€TM (MinistÃ©rio das RelaÃ§Ãμes Exteriores)Instituto Rio-Brancoand a masterâ€TMs degree in economics from University of London. 56


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Mr. Eleazar de Carvalho Filhohas been an independent member of our board of directors since 2012.  He has also been a member of the board of directors of Cnova since October 2014.  Mr. Carvalho Filho is a founding partner ofVirtus BR Partners, an independent advisory company, and Iposeira Capital and currently serves on the board of directors of FMC Technologies, Inc. andBrookfield Renewable Energy Partners.Previously, hewas the chief executive officer of Unibanco Banco de Investimentos and president and managing director of BNDES and Banco UBS – Brasil.Mr. Carvalho Filho served as the non-executive chairman of the board of directors BHP Billiton Brazil and as a member of the board of directors of Petrobras, Centrais Elétricas Brasileiras, Vale,Tele Norte Leste Participações, Alpargatas, Rossi Residencial, Varig, Santista Têxtil and Telemig.He is also the president of the board of trustees of the Brazilian Symphony Orchestra. Mr. de Carvalho Filho holds a bachelor’s degree in economics from New York University and a master’s degree in international relations from the Johns Hopkins University. Mrs. Maria Helena S. F. Santanahas been an independent member of our board of directors since 2013. She is also independent director and coordinator of the audit committee of Totvs S.A., a member of the audit committee of Itau Unibanco Holding S.A. and a trustee of the IFRS Foundation. She is a former independent non-executive director of CPFL Energia S.A. Mrs. Santana previously served as chair of the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários), or CVM, from July 2007 to July 2012 and as commissioner of the CVM from July 2006 to July 2007.  Ms. Santana worked for the BM&FBOVESPA from 1994 to 2006, acting as head of Listings and Issuer Relations from 2000 to 2006, being responsible for the supervision of listed companies and for attracting new companies to the stock exchange.  She was involved in the creation of the New Market (Novo Mercado) listing segment of the BM&FBOVESPA and charged with its implementation.  Mrs. Santana was vice-chair of the Brazilian Institute of Corporate Governance (Instituto Brasileiro de Governança Corporativa), or IBGC, from 2004 to 2006 and chair of the Executive Committee of the International Organization of Securities Commissions (IOSCO) from 2011 to 2012. Mrs. Santana holds a degree in economics fromUniversidade de São Paulo. Mr. Luiz Aranha Corrêa do Lagohas been an independent member of our board of directors since 2014.  He has been a professor of economics atPontifícia Universidade Católica from Rio de Janeirosince 1979, having served as associate professor from 1979 to 1995 and full professor since 1995.  Previously, Mr. Lago served as planning and economic consultant and officer for Grupo Lorentzen, a member of the board of directors of Lorentzen Empreendimentos S.A. from 1985 to 2006, economic consultant of the Investment Bank Association (Associação Nacional Dos Bancos De Investimento), or ANBID, stock market officer of the Central Bank from 1987 to 1988, technical director of Primus Corretora de Valores e Câmbios S.A. from 1986 to 1987, chief of the Center for Monetary Studies and International Economics from 1981 to 1986 and economist of the Brazilian Institute of Economy from 1978 to 1986.  Mr. Lago served as a member of board of directors of Aracruz Celulose S.A. from 1988 to 2008, Veracel S.A. from 2006 to 2008, Arapar S.A. from 1988 to 2009 and Companhia de Navegação Norsul from 1988 to 2010.  Mr. Lago holds a degree in economics fromUniversidade Federal do Rio de Janeiro, a master’s degree in economics from Duke University and a master’s degree and Ph.D. in economics from Harvard University. Executive Officers The following table sets forth the name, position and the year of election of each of our executive officers.  A brief biographical description of each of our executive officers follows the table: Name

   Position

   First Year Elected

   Date of BirthRonaldo Iabrudi dos Santos Pereira

   Chief Executive Officer

   2014

   May 14, 1955Christophe Jose Hidalgo

   Chief Financial Officer

   2012

   October 25, 1967Antonio Salvador

   Personnel Vice-President

   2013

   June 13, 1967Peter Estermann

   Vice-President of Strategic Development and Infrastructure

   2014

   July 28, 1957Belmiro de Figueiredo Gomes

   Cash and Carry Officer

   2012

   August 11, 1971Roberto Bruce Harley

   Real Estate Officer

   2015

   June 5, 1973Daniela Sabbag

   Investor Relations Officer

   2013

   April 10, 1975
  Mr. Ronaldo Iabrudihas been our chief executive officer since 2014. He has also been a member of the board of directors of Cnova, chairman of the board of directors of Via Varejo and member of the executive committee of the Casino Group since 2014.  Previously, Mr. Iabrudi was chief executive officer of Magnesita from 2007 to 2011, chief executive officer of the Telemar Group from 1999 to 2006, chief executive officer of Ferrovia Centro-


AtlÃ¢ntica from 1997 to 1999 and chief financial and administrative officer and head of human resources of the Gerdau Group from 1984 to 1997.  Mr. Iabrudi also served as chairman of the board of directors of Lupatech, Cemar, Contax, Telemar Operadora and Porto de Angra and a member of the board of directors of EstacioParticipaÃ§Ãμes, Magnesita, the Telemar Group (currently Oi S.A.), RM Engenharia and Ispamar. Mr. Iabrudi holds a bachelorâ€TMs degree in psychology fromPontifÃ­cia Universidade CatÃ3lica de Minas Gerais, a masterâ€TMs degree in organizational development fromUniversitÃ© Paris I PanthÃ©on-Sorbonneand a masterâ€TMs degree in adult education and change management fromUniversitÃ© Paris IX Dauphine.


57

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Mr. Christophe JosÃ© Hidalgohas been our chief financial officer and corporate services officer since 2012.  He joined the Casino Group in 2000, where he has held several positions in finance and controllership, including chief financial officer of Ã‰xito from 2010 to 2012.  From 1996 to 2000, Mr. Hidalgo was chief financial officer of Castorama.  Mr. Hidalgo holds a bachelorâ€TMs degree in law and a masterâ€TMs degree in finance and accounting fromUniversitÃ© de Bordeaux. Mr. Antonio Salvadorhas been our personnel vice-president officer since 2013.  Previously, he served as vice-president of human resources for Hewlett-Packard in Brazil from 2010 to 2013, human resources executive director at PricewaterhouseCoopers Brazil from 2007 to 2010, associate partner at IBM Global Business Services from 2003 to 2007, executive director at Promon Tecnologia from 2001 to 2003, senior manager at PricewaterhouseCoopers Brazil from 1997 to 2001 and corporate university manager at Brahma from 1994 to 1997.  In 2011 and 2012, Mr. Salvador received the â€œHR Professional of the Yearâ€ award for the technology industry from Voce S.A.  Mr. Salvador holds a bachelorâ€TMs degree in social communication fromUniversidade Gama Filhoand an executive MBA fromFundaÃ§Ã£o CÃ¢ndido Mendes.  He has also completed programs in business administration atFundaÃ§Ã£o Getulio Vargas, INSEAD and Harvard Business School. Mr. Peter Estermannhas been our vice president of strategic development and infrastructure since 2014. Previously, he held the following executive positions: vice-president and chief operating officer of TENCO Shopping Centers from 2013 to 2014; executive officer of global operations of Magnesita Refractarios S.A. from 2012 to 2013; chief executive officer at LWB Refractories â€“ Germany, subsidiary of Magnesita Refractarios S.A. for operations in Europe, from 2008 to 2011; executive director of operations at Medial SaÃode, one of the largest health insurance companies in Brazil, from 2006 to 2007, during its initial public offering in theNovo Mercadosegment of the BM&FBOVESPA, in which actively participated, executive director of organizational development and president for the North and Northeast regions of Telemar Norte Leste S.A. from 2001 to 2005; executive director of operations and vice-president at Satipel Minas Industrial Ltda. from 1999 to 2001; chairman of the board of directors and general director of Tecflor Ind. S.A. from 1997 to 1998; general director of the forestry division of Aracruz Celulose SA from 1996 to 1997; chief operating officer of the Petropar Group from 2006 to 2007; chief operating officer of Destilaria BrasilÃ¢ndia S.A. from 1987 to 1988; and general manager of AgropecuÃ¡ria Mogno S.A. from 1981 to 1986.  Mr. Estermann also served as a member of the board of directors of Tecflor Industrial S.A. from 1997 to 1998, Planalto Transportes Ltda. from 2007 to 2008 and Odontosystem Ltda. in 2008; as chairman of the board of directors of Sinterco S.A. from 2008 to 2013; and as member and chairman of the board of directors of Reframec Services S.A. in 2013. Mr. Estermann holds a bachelorâ€TMs degree in agricultural engineering fromUniversidade Federal de Minas Gerais â€“ Lavrasand a graduate degree from Harvard Business School. Mr. Belmiro de Figueiredo Gomeshas been our real estate cash and carry officer since 2012.  Mr. Gomes joined  the Company in 2010, having also held the position of commercial director.  Previously, he worked in several areas of the AtacadÃ£o chain for 22 years.  In 2007, he coordinated the sale process of the AtacadÃ£o chain to the Carrefour Group, subsequently serving as an executive director responsible for the commercial, logistics, marketing and business strategy areas. Mr. Robert Bruce Harleyhas been our real estate officer since 2015. Previously, he was an executive officer, including chief executive officer, of JHSF ParticipaÃ§Ãμes S.A.â€TMs shopping mall business unit from 2008 to 2014 and partner and chief executive officer of BGNE Restaurante e ComÃ©rcios de Alimentos S.A. from 2006 to 2008. Mr. Harley has also had work experience in project management and expansion at Super Shopping Osasco and McDonaldâ€TMs ComÃ©rcio de Alimentos Ltda.  He holds a degree in business administration from the University of Chicago. Ms. Daniela Sabbaghas been our investor relations officer since 2013, having joined our finance team 13 years ago.  Ms. Sabbag was our investor relations non-executive officer from 2006 to 2010 and strategic planning,


mergers and acquisitions and new business officer from 2010 to 2013.  Previously, Ms. Sabbag worked at Deutsche Bank and the Jeronimo Martins Group.  She holds a degree in business administration fromFundação Getulio Vargasand has completed post-graduate studies in capital markets at theUniversidade de São Pauloand an MBA program atFundação Getulio Vargas. 58


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6B.Compensation For the year ended December 31, 2014, the aggregate compensation paid in cash to the directors, executive officers and members of the committees of CBD is expected to be R$89 million.  Non-cash benefits in 2014 included reimbursements of medical expenses to our executive officers and the use of our cars during working hours.  There are no outstanding loans granted by us to our executive officers or members of our board of directors.  Under CVM rules, listed companies are required to publicly disclose the lowest, highest and average compensation paid to executive officers and board members.  However, our Company, together with other listed companies, has not disclosed this information, based on an injunction obtained by IBEF-RJ on March 2, 2010, that, according to our legal department, supersedes the CVM requirement. In July 2007, the Company established a supplementary private pension plan of defined contribution to its employees and retained the financial institution, Brasilprev Seguros e Previdência S.A., for management purposes.  When establishing the plan, the Company provides monthly contributions on behalf of its employees on account of services rendered to the Company.  Contributions made by the Company in the year ended December 31, 2014, amounted to R$3 million and employees’ contributions amounted to R$7 million with 921 participants. We have established a profit sharing plan for our management, including our executive officers.  The plan and its rules have been approved by our board of directors.  The plan does not apply to our board of directors.  Under the terms of the plan, each member of our management (including our executive officers) who is beneficiary of the plan is assigned annually a base amount for computation of payments under the profit sharing plan.  The final amount of the profit sharing payment to an individual is based on the consolidated results of the Company, the results of the business segment or the department, as the case may be, to which the individual belongs and the individual’s performance.  This individual amount is determined by multiplying the base amount by an index applicable to all participants.  This index depends on our operating performance. Compensation of the Board of Directors, Executive Officers and Fiscal Council of CBD for 2013, 2014 and 2015 The table below indicates the compensation for members of the board of directors and members of the committees of the company, executive officers and fiscal council for 2013: Board of directorsand members of the

   committees of the board of directors(1)

   Executive officers

   Fiscal council

   Total(In R$, when applicable)Number of members

   13.75

   8.00

   3.00

   24.75Fixed annual compensation

   6,568,660

   15,899,617

   504,000

   22,972,277Benefits

   -

   2,715,698

   -

   2,715,698Variable compensationProfit sharing

   -

   18,383,676

   -

   18,383,676Participation in meetings

   -

   -

   -

   -Others (invitees’ compensation)

   -

   -

   -

   -Post-employment benefit

   -

   -

   -

   -Benefits on ceasing to exercise the position

   -

   -

   -

   -Share-based compensation

   -

   11,373,000

   -

   11,373,000Total compensation

   6,568,660

   48,371,991

   504,000

   55,444,651
 ____________ (1) The number of members in the Board of executive officers informed in the table above corresponds to the annual average number of executive officers ascertained on a monthly basis. The table below indicates the compensation for members of the board of directors and members of the committees of the company, executive officers and fiscal council for 2014:


59

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Board of directorsand members of the

   committees of the board of directors

   Executive officers(1)

   Fiscal council

   Total(In R$, when applicable)Number of members

   9

   7.08

   3

   19.08Fixed annual compensation

   4,149,322

   52,019,172

   168,000

   56,336,494Benefits

   -

   4,022,234

   -

   4,022,234Variable compensationProfit sharing

   -

   20,759,354

   -

   20,759,354Participation in meetings

   -

   -

   -

   -Others (invitees’ compensation)

   -

   -

   -

   -Post-employment benefit

   -

   -

   -

   -Benefits on ceasing to exercise the position

   -

   -

   -

   -Share-based compensation 1

   -

   6,000,000

   -

   6,000,000Total compensation

   4,149,322

   82,800,760

   168,000

   87,118,082
 ____________ (1) The number of members in the Board of executive officers informed in the table above corresponds to the annual average number of executive officers ascertained on a monthly basis. The table below indicates the expected compensation for members of the board of directors and members of the committees of the board of directors, executive officers and fiscal council for 2015: Board of directorsand members of the

   committees of the board of directors

   Executive officers

   Fiscal council

   Total(In R$, when applicable)Number of members

   9

   8

   5

   22Fixed annual compensation

   4,311,865

   30,664,532

   535,000

   35,511,397Benefits

   -

   4,154,614

   -

   4,154,614Variable compensationProfit sharing

   -

   23,951,847

   -

   23,951,847Participation in meetings

   -

   -

   -

   -Others (invitees’ compensation)

   -

   -

   -

   -Post-employment benefit

   -

   -

   -

   -Benefits on ceasing to exercise the position

   -

   -

   -

   -Share-based compensation

   -

   5,270,780

   

   5,270,780Total compensation

   4,311,865

   64,041,773

   535,000

   68,888,638
  Variable Compensation 2013, 2014 and 2015 With the exception of the compensation based on the hours actually worked, the members of our board of directors and our fiscal council receive no variable compensation in the exercise of their functions.  Below we present the variable compensation of our executive officers paid in 2013 and 2014 and expected to be paid in 2015.  2013

   Executive officers(In R$, when applicable)Number of members

   8Profit sharingMinimum expected amount

   0Maximum expected amount

   40,080,802Expected amount – goals achieved

   18,383,676Amount actually recognized

   18,383,676
  2014

   Executive officers(In R$, when applicable)Number of members

   7.08Profit sharingMinimum expected amount

   0Maximum expected amount

   43,594,645Expected amount – goals achieved

   21,797,322Amount actually recognized

   20,759,354
  2015 (Expected)

   Executive officers(In R$, when applicable)Number of members

   8Profit sharingMinimum expected amount

   0Maximum expected amount

   R$ 47,903,694Expected amount – goals achieved

   R$ 23,951,847


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Employee Stock Option Plans At an extraordinary general meeting held on May 9, 2014, our shareholders voted to: (1) discontinue the stock option plan previously approved by our shareholders on December 20, 2006, or our Former Stock Option Plan, subject to the stock options that had already been granted pursuant to the Former Stock Option Plan remaining in force under the same terms and conditions; (2) approve the creation of a new stock option plan, or our New Stock Option Plan; and (3) create a compensation plan for employees based on stock options, or our Compensation Plan. We refer to the Former Stock Option Plan, the New Stock Option Plan and the Compensation Plan collectively as our â€œStock Option Plans.â€  Our Stock Option Plans grant options to purchase our preferred shares only, and members of our board of directors are not eligible to participate. General Terms and Conditions Former Stock Option Plan Our Former Stock Option Plan is administered by the stock option plan management committee of our board of directors.  Each grant cycle under our Former Stock Option Plan is designated with a serial number beginning with the letter â€œA.â€  Having been discontinued in May 2014, no additional stock options will be granted under our Former Stock Option Plan.  As of December 31, 2014, the only outstanding series of stock options under our Former Stock Option Plan were Series A5, A6 and A7.  The maximum deadline for exercising Series A5, A6 and A7 stock options under our Former Stock Option Plan is May 31, 2015, March 31, 2016 and March 31, 2017, respectively. New Stock Option Plan Our New Stock Option Plan is administered by the human resources and compensation committee of our board of directors, which will define the planâ€TMs eligibility criteria and select recipients based on their functions, responsibilities and performance.  Each grant cycle under our New Stock Option Plan will designated with a serial number beginning with the letter â€œC.â€  As of December 31, 2014, the only outstanding series of stock options under our New Stock Option Plan was Series C1. The Companyâ€TMs employees and executives are eligible to participate in our New Stock Option Plan.  Employees and executive managers of our subsidiaries who are considered â€œkey executivesâ€ may also participate subject to the approval of the human resources and compensation committee.  Our employeesâ€TM participation in our New Stock Option Plan is independent of other forms of compensation, such as wages and benefits. Compensation Plan Our Compensation Plan is also administered by the human resources and compensation committee of our board of directors, which will define the planâ€TMs eligibility criteria and select recipients based on their functions, responsibilities and performance.  Each grant cycle under our Compensation Plan will designated with a serial


number beginning with the letter â€œB.â€  As of December 31, 2014, the only outstanding series of stock options under our Compensation Plan was Series B1. 61


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The Companyâ€TMs employees and executives are eligible to participate in our New Stock Option Plan.  Employees and executive managers of our subsidiaries who are considered â€œkey executivesâ€ may also participate subject to the approval of the human resources and compensation committee.  Our employeesâ€TM participation in our New Stock Option Plan is independent of other forms of compensation, such as wages and benefits. Main Objectives of the Stock Option Plans The aim of our Stock Option Plans is to (i) attract and retain highly qualified executive officers and professionals; (ii) enable our managers and employees to participate in our capital and in the equity increases arising from the results these managers and employees have contributed; and (iii) to align the interests of our managers and employees with those of our shareholders, encouraging these professionals to better perform while ensuring continuity in the management of our Company and our subsidiaries. Maximum Number of Shares and Options Each stock option granted under the Stock Option Plans corresponds one preferred share of the Company.  There is no maximum aggregate number of options that may be granted under our Former Stock Option Plan, provided that the total number of shares granted from the exercise of the options does not exceed 15,500,000 preferred shares overall and 2% of our total capital stock per series. The total aggregate number of options that may be granted under our each of our New Stock Option Plan and our Compensation Plan must exceed 2% of the total number of preferred shares issued by the Company, subject to adjustments resulting from stock splits, reverse stock splits and bonuses. When stock options are exercised, we issue the beneficiaries new shares, with the right to use our treasury shares. Exercise Price With respect to options granted under our Former Stock Option Plan, the exercise price per preferred share of â€œSilverâ€ options will correspond to the average closing price of our preferred shares over the last 20 BM&FBOVESPA trading sessions prior to the date on which the stock option plan disbursement committee decides to grant the option.  After this average price has been determined, a discount of 20% will be applied.  For â€œGoldâ€ options, the exercise price per preferred share will correspond to R$0.01. The exercise price per preferred share granted under the Compensation Plan will correspond to R$0.01. For each series of options granted under the New Stock Option Plan, the exercise price of each stock option will correspond to 80% of the average of the closing price of the preferred shares issued by the Company in the prior 20 sessions of the BM&FBOVESPA prior to the date of the meeting of the human resources and compensation committee in which such options are granted. Vesting In general, the stock options granted under the Stock Option Plans will vest as from the 36th month following the granting of the stock options. The options granted under the Stock Option Plans may be exercised in whole or in part. Restrictions on Transferring Shares The stock option plan management committee and the human resources and compensation committee, as the case may be, may establish restrictions on the transfer of the shares resulting from the exercise of the stock options. 62


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Outstanding Stock Options Below are the outstanding options for the members of our senior management, as of December 31, 2014. Number of members benefiting from the granting of stock options:

   3In relation to options not yet exercisable:

   Series A5– Gold

   Series A5– Silver

   Series A6– Gold

   Series A6– Silver

   Series A7– Gold

   Series A7– Silver

   SeriesB1

   SeriesC1Quantity (in thousand)

   2,562

   2,563

   10,990

   10,994

   12,961

   12,969

   23,752

   23,750Grant date

   May 31, 2011

   May 31, 2011

   March 15, 2012

   March 15, 2012

   March 15, 2013

   March 15, 2013

   May 30, 2014

   May 30, 2014Vesting date

   May 31, 2014

   May 31, 2014

   March 31, 2015

   March 31, 2015

   March 31, 2016

   March 31, 2016

   June 1,

   2017

   June 1,

   2017Maximum deadline for exercising the options

   May 31, 2015

   May 31, 2015

   March 31, 2016

   March 31, 2016

   March 31, 2017

   March 31, 2017

   November 30, 2017

   November 30, 2017Weighted average exercise price (in R$, per share)

   0.01

   54.69

   0.01

   64.13

   0.01

   80.00

   0.01

   83.22Grant date fair value of the options (in R$, per share)

   59.75

   25.27

   79.78

   37.94

   105.17

   46.11

   101.83

   44.36In relation to exercisable options:Quantity

   N/A

   N/A

   N/A

   N/A

   N/A

   N/A

   N/A

   N/AMaximum deadline for exercising the options

   N/A

   N/A

   N/A

   N/A

   N/A

   N/A

   N/A

   N/AWeighted average exercise price (in R$, per share)

   N/A

   N/A

   N/A

   N/A

   N/A

   N/A

   N/A

   N/AGrant date fair value of the options (in R$, per share)

   N/A

   N/A

   N/A

   N/A

   N/A

   N/A

   N/A

   N/A
  Stock Options Exercised and Shares Delivered The members of our senior management did not exercise any stock options in 2014. We recognized share-based payments of R$37 million, R$43 million and R$45 million in our consolidated financial statement in 2014, 2013 and 2012, respectively.  These amounts included the amounts related to the acceleration of the vesting of certain stock options. Insurance We have an insurance policy withXL Seguros Brasil S.A, effective fromDecember 23,2014 throughDecember 23,2015, covering all our managers against damages attributed to them in the exercise of their functions.  Coverage is limited to US$50 million, for losses and damages arising from one and the same damaging act involving the capital markets, with deductibles of US$200,000 in connection with SEC-related proceedings and US$50,000 in connection with CVM-related proceedings.  This policy has no deductible for losses and damages arising from one and the same damaging act of a different nature.  This policy is automatically extended to the management of our new subsidiaries, with liability limited to 30% of the total assets of the new subsidiary. 6C.Board Practices According to our by-laws, our board of directors consists of at least three and up to 12 members.  The directors meet ordinarily six times a year, and extraordinarily whenever required.  The members of our board of directors are appointed at general shareholders’ meetings for a term of office of two years.  The board’s responsibilities include leading the corporate governance process, electing our executive officers and members of our committees and supervising our management.  Our board of directors consists of nine members elected by our shareholders, consisting of 4 representatives of the Casino Group and 5 independent directors, whose terms of office expire in 2016.  We are managed by our board of directors and by our board of executive officers.  None of our directors and officers is party to an employment agreement providing for benefits upon termination of employment.


63

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Our board of executive officers is composed of at least two and up to 14 members.  The general responsibilities of our executive officers are determined pursuant to our by-laws and their specific duties and titles are established by our board of directors.  As of April 24, 2015, our board of executive officers was composed of eight members. The responsibilities of our executive officers include adopting plans related to our management and operations, reporting to shareholders each fiscal year on the status of our business activities, presenting the year-end balance sheets and other legally required financial statements and submitting investment programs and budgets to our board of directors. Our executive officers are elected by our board of directors for two-year terms, although any executive officer may be removed by our board of directors before the expiration of his or her term.  On April 24, 2014, our directors elected our current executive officers.  The current term of all executive officers expires on April 24, 2016. Committees of the Board of Directors As of the date of this annual report, we have the following four special committees:  (i) human resources and compensation committee; (ii) financial committee; (iii) sustainable development committee; and (iv) corporate governance committee.  The responsibilities of our committees are established by their respective internal regulations, which were approved by our board of directors.  The members of each committee are appointed by our board of directors and the board of directors also designates the chairman of each special committee.  The committees may include one member who is not a member of our board of directors.  Each special committee is composed of three and up to five members for a term of office of two years, reelection being permitted.  In addition to these committees, the board of directors may create other committees with special roles. Human Resources and Compensation Committee The human resources and compensation committee holds meetings at least once every two months and has the following duties:  (i) to provide guidelines for the selection of our chief executive officer; (ii) to examine candidates for election to our board of directors; (iii) to examine candidates for appointment to our board of executive officers; (iv) to review and discuss management compensation and stock option plans for our officers (with respect to the New Stock Option Plan and the Compensation Plan); (v) to propose criteria for the assessment of the performance of our managers, using comparable Brazilian corporations as benchmark; (vi) to review the recruitment and hiring methods adopted by us and our controlled companies, using comparable Brazilian corporations as benchmark; (vii) to define the compensation and incentive policies for our managers; and (viii) to identify individuals within our Company and our controlled companies who could be our future leaders and follow up the development of their career.  Our human resources and compensation committee is composed of Arnaud Strasser, Yves Desjacques and Roberto Oliveira de Lima. Financial Committee The financial committee holds meetings at least once every two months and has the following duties:  (i) to review the financial/economic viability of our investment plans and programs; (ii) to review and recommend actions for the negotiation of any merger and acquisition or of any similar transaction involving us or any of our controlled companies; (iii) to follow up any such transaction and negotiation referred to in item (ii); (iv) to review our cash flow, indebtedness policy and capital structure; (v) to monitor the implementation and accomplishment of our annual investment plan; (vi) to monitor the average cost of our capital structure and to make suggestions for modifications whenever deemed necessary; and (vii) to review and recommend opportunities related to financing transactions that may improve our capital structure.  Our financial committee is currently composed of Eleazar de Carvalho Filho, Antoine Giscard Dâ€TMEstaing and Arnaud Strasser. Sustainable Development Committee The sustainable development committee holds meetings at least once every three months and has the following duties: (i) to increase the value of our business by expanding our sustainable development and environmental matters; (ii) to establish sustainable practices, based on economic, environmental and social elements in order to promote sustainable development and disseminate these practices throughout all of our strategic activities and relationships; (iii) to evaluate and approve projects, proposals and institutional campaigns related to environmental


or social issues, including the allocation of resources; (iv) to evaluate investment opportunities and projects from a sustainable perspective; and (v) to approve the social and sustainable development reports.  Our sustainability committee is composed of Luiz Augusto Castro Neves, Roberto Oliveira de Lima and Helio Mattar. 64


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Corporate Governance Committee The corporate governance committee holds meetings at least once every three months and has the following duties:  (i) to promote monitoring and ensure the adoption of the best practices of corporate governance and to coordinate the process for implementing and maintaining such practices at the Company, as well the effectiveness of corporate governance processes, suggesting changes, updates and improvements, as necessary; (ii) to review from time to time and to recommend necessary changes to the corporate governance policies and practices adopted by the Company; (iii) to ensure the good operation of the board of directors, the executive management, and the support committees of the Company and the relationship between themselves and the shareholders of the Company, and accordingly, to review from time to time and make recommendations to the board of directors about its operations and authorities, as well as regarding the executive management and the support committees of the Company; (iv) to prepare or review from time to time, as the case may be, the Companyâ€TMs by-laws, and the codes and policies of the company, and the internal regulations of the support committees of the Company, as well as any other document related to the corporate governance of the Company as well as to criticize, make recommendations of modifications and suggestions that it deems necessary to the board of directors, in order to maintain such documents updated according to the highest corporate governance practices, always observing the singular characteristics of the Company; (v) to keep the board of directors informed and updated on rules, regulations and recommendations in force and adopted on the market, including regarding rules that are created and impact the Companyâ€TMs corporate and capital markets activities; (vi) to follow-up on the implementation in respect to of all the requirements stated forth in the Brazilian corporate and capital markets law, and of the stock market inspection agencies the Company is subject to; (vii) to draft, submit and review the related party transaction policy of the Company to the board of directors, as well as any other policies necessary for the adoption, by the Company, of the best practices of management and corporate governance; (viii) to issue an opinion, at the board of directorsâ€TM or executive managementâ€TM request, regarding situations where there might be a conflict of interests scenario in the Companyâ€TMs activities; and (ix) to provide an opinion on any matters submitted by the board of directors, as well as on those matters our corporate governance committee determines to be relevant.  Our corporate governance committee is composed of Maria Helena Santana, Arnaud Strasser, Luiz Augusto Castro Neves and Roberto Oliveira de Lima. Audit Committee, Stock Option Plan Management Committee and Fiscal Council In addition to the four special committees, we also have an audit committee, a stock option plan management committee and, if installed, a fiscal council.  We set forth below a description of our audit committee, stock option plan management committee and fiscal council. Audit Committee Brazilian publicly-held companies may pursuant to CVM Rule 308, as amended by the CVM Rule 509, adopt a statutory audit committee (comitÃa de auditoria estatutÃ¡rio).  According to CVM Rule 308, the statutory audit committee is an advisory body of the board of directors and must have at least three members who shall be appointed by the board of directors, including at least one member who is also a member of the board of directors and not a member of management.  A majority of the members must be independent according to the independence requirements of the CVM. On April 16, 2014, our shareholders approved the establishment of a statutory audit committee, which has the following duties: (a) to recommend the appointment or replacement of external independent auditors to our board of directors; (b) to analyze our management reports and financial statements and make recommendations to the board of directors; (c) to review our annual and quarterly financial statements; (d) to evaluate the effectiveness and adequacy of the structure of our internal controls and our internal and independent audit processes and present recommendations for improvement thereof; (e) to give opinions, at the board of directorsâ€TM request, on management proposals regarding changes in capital structure, issuance of debentures, guarantees, capital budgets, dividend distribution, corporate transformation, merger or spin-off; (f) to analyze and monitor risk exposure; (g) to evaluate the implementation of recommendations made by internal and independent audits and to make recommendations to the board of directors related to disagreements between internal audit and independent audit and/or management; (h)


to participate in meetings with the committees of the board and with the board of directors to discuss policies, practices and procedures; (i) to prepare a summarized annual report to be presented with the financial statements; and (j) to give opinions, at the board of directors’ request, on matters referred by the board of directors as well as on other relevant matters. 65


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Our statutory audit committee is composed of at least three and up to five members, of whom at least two must be from outside the Company and independent and one must be a member of our board of directors and not an executive officer of the Company.  Members of our statutory audit committee are appointed by our board of directors for a two-year term and must meet certain requirements set forth by our by-laws and the CVM rules. Our statutory audit committee is not equivalent to or comparable with a U.S. audit committee.  Pursuant to Exchange Act Rule 10A-3(c)(3), which provides for an exemption under the rules of the U.S. Securities and Exchange Commission, or SEC, regarding the audit committees of listed companies, a foreign private issuer is not required to have an audit committee equivalent to or comparable with a U.S. audit committee, if the foreign private issuer has a body established and selected pursuant to home country legal or listing provisions expressly requiring or permitting such a body and if the body meets the requirements that (i) it be separate from the full board, (ii) its members not be elected by management, (iii) no executive officer be a member of the body, and (iv) home country legal or listing provisions set forth standards for the independence of the members of the body.  In addition, in order to qualify for the exemption, the body must, to the extent permitted by home country law: ·be responsible for the appointment, retention, compensation and oversight of the external independent auditors (including the resolution of disagreements between management and the external auditors regarding financial reporting); ·be responsible for establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, and procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters; ·have the authority to engage independent counsel and other advisors as it determines necessary to carry out its duties; and ·receive appropriate funding from the company for payment of compensation to the external auditors, for any advisors and ordinary administrative expenses. Our statutory audit committee is also responsible for, among other things, reviewing certain proposed related party transactions to ensure these transactions comply with our related party transactions policy. As a foreign private issuer, we chose to rely on this exemption under Exchange Act Rule 10A-3(c)(3) and we believe that our statutory audit committee complies with the aforementioned exemption requirements. Because Brazilian corporate law does not permit the board of directors to delegate responsibility for the appointment, retention and compensation of the external independent auditors and does not provide the board with the authority to resolve disagreements between management and the external auditors regarding financial reporting, our statutory audit committee cannot fulfill these functions.  Therefore, our statutory audit committee may only make recommendations to the board of directors with respect to these matters. On April 24, 2014, the following members were appointed by our board of directors to our statutory audit committee: Name

   Position

   First Year Elected

   Date of BirthEleazar de Carvalho Filho

   Member

   2014

   July 26, 1957Luiz Nelson Guedes de Carvalho

   Member

   2014

   November 18, 1945Pedro Oliva Marcilio de Sousa

   Member

   2014

   March 1, 1973


66

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Mr. Eleazar de Carvalho Filhohas been a member of the board of directors since 2012 and a member of our audit committee since 2014.  For more information about Mr. Carvalho Filho, see â€œâ€”Board of Directorsâ€”Mr. Eleazar de Carvalho Filho.â€ Mr. Luiz Nelson Guedes de Carvalhohas been a member of our audit committee since 2014.  He is a professor at the School of Economics and Management (Faculdade de Economia, AdministraÃ§Ã£o e Contabilidade), or FEA, of theUniversidade de SÃ£o Paulo.  He is a member and international relations vice-coordinator of the Brazilian Accounting Pronouncements Committee (ComitÃa de Pronunciamentos ContÃ¡beis), or CPC, a deputy representative of the CPC in the Emerging Economies Group of IASB, a member of the International Integrated Reporting Committee (ComitÃa Internacional para RelatÃ3rios Integrados) and an independent member of the banking auto-regulation board of the Brazilian Federation of Banks (FederaÃ§Ã£o Brasileira de Bancos), or FEBRABAN.  In addition, he is a member of the editorial Board for the Accounting and Finance Scientific Magazine (FIPECAFI, FEA); chairman of the committee on Capacity Building in the area of International Financial Reporting of the Intergovernmental Group of Experts in International Standards of Accounting and Reporting, part of the UNCTAD, United Nations; member of the board of directors and accounting and finance specialist of BM&FBOVESPA; member of the board of directors Sustainable Amazon Committee (FundaÃ§Ã£o AmazÃ ́nia SustentÃ¡vel) and the sustainability committee of BM&FBOVESPA (a self listed public corporation in Brazil) and coordinator of its audit committee; and a member of the Brazilian Accounting Academy (Academia Brasileira De CiÃancias ContÃ¡beis), or Abracicon.  Previously, Mr. Carvalho was president â€œat largeâ€ of the International Association for Accounting Education and Research; also was a member of the Financial Crisis Advisory Group set out by the US FASB and the IASB; the first independent president of the Standards Advisory Council (Conselho Consultivo de Normas) of IASB; a member of the Consultative and Advisory Group of the International Federation of Accountants (FederaÃ§Ã£o Internacional de Contadores); a vice-director of the Interamerican Accounting Association; a member of the board of directors of Banco Nossa Caixa S.A., or Banco Nossa Caixa, Caixa EconÃ ́mica Federal, Banco Bilbao Vizcaya Argentaria Brasil â€“ BBVA, Banco de CrÃ©dito Real de Minas Gerais, Grupo ORSA, Companhia MÃ1⁄4ller de Bebidas, Vicunha TÃaxtil S.A., or Vicunha TÃaxtil, and Banco Fibra S.A., or Banco Fibra; a member of the audit committees of Banco Nossa Caixa and Vicunha TÃaxtil; and a member of the internal control committee of Banco Fibra. Mr. Carvalho was also the president of the International Institute of Financial Executives (AssociaÃ§Ã£o Internacional dos Institutos de Executivos de FinanÃ§as) for Central and South America and director of the Central Bank and the CVM (the Brazilian Securities and Exchange Commission).  Mr. Carvalho holds bachelorâ€TMs degrees in economics from FEA and accounting fromFaculdades SÃ£o Judas Tadeuand masterâ€TMs and doctorate degrees in accounting and comptrolling from FEA. Mr. Pedro Oliva Marcilio de Sousahas been a member of our audit committee since 2014.  Mr. Souza is currently a partner at the private equity and asset management firm BR Partners GestÃ£o de Recursos Ltda., a member of the audit committee of BM&FBOVESPA and a member of the fiscal council of Hypermarcas S.A. Previously, he was a director of mergers and acquisitions at Banco Standard de Investimentos S.A., vice-president of the investment bank division of Goldman Sachs do Brasil Banco MÃoltiplo S.A., commissional of the CVM and a partner at Machado, Meyer, Sendacz e Opice Advogados.  Mr. Souza holds a law degree from theUniversidade Federal da Bahia. On April 19, 2015, in view of a press article of a nationwide Brazilian magazine regarding alleged payments by Grupo Pão de Açúcar, in 2010, to a Brazilian law firm, which were allegedly connected to a company controlled by a Brazilian politician at that time, our board of directors has requested our audit committee to (1) initiate an internal investigation and (2) report its findings to the board of directors at which point we will inform the market and, if necessary, any relevant authority. Stock Option Plan Management Committee Our stock option plan management committee has the following duties with respect to our Former Stock Option Plan:  (i) to deliberate matters relating to granting, prices, dates and the amount granted in each plan; (ii) to decide when, if at all, each stock option plan will be granted; (iii) to take into account all the necessary measures in order to appropriately manage the stock option plan, including the interpretation of the general guidelines; (iv) to guide the Company on when to issue new shares or when to use the shares held in treasury; (v) to select, among the eligible personnel, who will take part in the stock option plan according to the attributions, responsibilities and/or their performance based on the goals established by the â€œGoldâ€ option plan; (vi) to establish the appropriate guidelines for each stock option for each beneficiary, approving the stock option plan agreements, especially regarding the amount of shares and the conditions to exercise each stock option plan; (vii) to establish, for each beneficiary, the alternatives, terms and conditions for each exercise, the share acquisition price and payment; (viii) to extend, generally or in specific cases, the termination date for each stock option plan; (ix) to determine the increase or decrease of the stock option plan lots that were already granted, maintaining its terms and conditions, especially regarding the acquisition rights of its exercise; and (x) to modify unilaterally the terms and conditions of the option


granted freely as well as adapting them to amendments in Brazilian corporate law.  Our stock option plan management committee is composed of Arnaud Strasser, Roberto Oliveira de Lima and Yves Desjacques. 67


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Fiscal Council According to Brazilian corporate law, the adoption of a fiscal council is voluntary and it may be on a permanent or temporary basis.  On October 18, 2012, our shareholders approved an amendment to our by-laws to grant temporary status to our fiscal council.  Under Brazilian corporate law, the fiscal council is an independent body from management and the board of directors, elected by shareholders annually to supervise the activities of management and independent auditors.  The responsibilities of the fiscal council are established by the Brazilian corporate law and encompass the oversight of management’s compliance with the laws and by-laws, the issuance of a report included in the annual and quarterly reports and certain matters submitted for shareholders’ approval and calling of shareholders’ meetings and the reporting of specific adverse matters arising at those meetings. Under Brazilian corporate law, the fiscal council may not contain members who are members of the board of directors or management, or who are our employees or employees of a controlled company or of a company of the group, or a spouse or relative of any member of our management.  In addition, Brazilian corporate law requires that fiscal council members receive a compensation at least 10% of the average amount paid to each executive officer, not including profit sharing and other benefits.  Brazilian corporate law requires a fiscal council to be composed of a minimum of three and a maximum of five members and their respective alternates. Our fiscal council, if installed, will be composed of at least three and up to five members who are elected at the annual shareholders’ meeting, with terms lasting until the next annual shareholders’ meeting following their election.  Under Brazilian corporate law, minority shareholders have the right to elect separately one member of the fiscal council.  In any event, however, our controlling shareholder has the right to elect the majority of the members of the fiscal council. Our fiscal council exercised the role of our audit committee under Exchange Act Rule 10A-3(c)(3) until April 16, 2014.  As of the date of this annual report, a fiscal council has not been installed for 2015. 6D.Employees As of December 31, 2014, we had 159,829 employees (calculated on a full-time employee equivalent basis).  Virtually all of our employees are covered by union agreements.  The agreements are renegotiated annually as part of industry-wide negotiations between a management group representing the major participants in the retail food industry, including our management, and unions representing employees in the retail food industry.  We believe we compensate our employees on a competitive basis, and we have developed incentive programs to motivate our employees and reduce employee turnover.  Our management believes that our relations with our employees and their unions are good. The following table sets forth the number of our employees as of December 31, 2010, 2011, 2012, 2013 and 2014: As of December 31(1)2010

   2011

   2012

   2013

   2014Operational

   131,534

   135,867

   137,349

   150,056

   152,632Administrative

   13,380

   13,203

   13,688

   6,395

   7,197Total

   144,914

   149,070

   151,037

   156,451

   159,829
 ____________ (1)   Based on the average of the full-time equivalent number of employees, which is the product of the number of all retail employees (full- and part-time) and the ratio of the average monthly hours of all retail employees to the average monthly hours of all full-time employees. 6E.Share Ownership As of December 31, 2014, members of our board of officers directly owned an aggregate amount of 17,440 preferred shares while the members of our board of directors directly held an aggregate amount of 3 preferred shares.  None of the members of our board of directors and our board of officers, on an individual basis and as a group, own directly any of our common stock.  For further information on direct and indirect share ownership of our board


members, see “Item 7A. Major Shareholders.” As of March 31, 2015, our management and some of our employees also owned options to purchase an aggregate amount of 1,105 thousands of preferred shares at per-share weighted average purchase price of R$38.28.  None of the members of our management and our employees holds any options to purchase our common shares.  See “Item 6B. Compensation” for a description of the stock option plans available to the Company’s and our subsidiaries’ senior management and employees.


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ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 7A.Major Shareholders The following table sets forth information relating to the beneficial ownership of our capital stock as of December 31, 2014 by each person known by us to beneficially own 5% or more of our common shares and our directors and officers as a group.  We have also included in the table the number of preferred shared held by each such person and by our directors and officers as a group. Shareholder

   Common Shares

   Preferred Shares

   Total SharesNumber

   %

   Number

   %

   Number

   %Wilkes Participações S.A (1)

   65,400,000

   65.61

   -

   -

   65,400,000

   24.65Sudaco Participações S.A. (1)

   28,619,178

   28.71

   -

   -

   28,619,178

   10.79Segisor S.A. (1)

   -

   -

   13,460

   0.01

   13,460

   0.01Casino Guichard Perrachon S.A. (1)

   5,600,052

   5.62

   -

   -

   5,600,052

   2.11King LLC (1)

   -

   -

   852,000

   0.51

   852,000

   0.32Pincher LLC (1)

   -

   -

   115,235

   0.07

   115,235

   0.04Cofidol SAS (1)

   -

   -

   8,907,123

   5.38

   8,907,123

   3.36Jean-Charles Naouri

   -

   -

   1

   0.00

   1

   0.00Directors and Officers (2)

   -

   -

   17,640

   0.01

   17,640

   0.01Treasury shares

   -

   -

   232,586

   0.14

   232,586

   0.09Others

   60,621

   0.06

   155,465,409

   93.88

   155,526,231

   58.63Total

   99,679,851

   100.00

   165,603,454

   100.00

   265,283,506

   100.00
 ____________ (1)   Wilkes Participações S.A., Sudaco Participações Ltda., Segisor S.A., Casino Guichard Perrachon S.A., King LLC, Pincher LLC and Cofidol SAS are part of the Casino Group. (2)   Refer to the amount of our shares that directors and officers own directly. As of the date of this annual report, the Casino Group is the beneficial owner of 41.3% of the total capital stock of CBD.  On March 31, 2015, 60,256,474 of our preferred shares were held in the form of ADSs, representing 33.0% of the total of our preferred shares.  None of our common shares are held in the form of ADSs. On September 6, 2013, our controlling shareholder, the Casino Group, and the Diniz Family, represented by Mr. Abilio dos Santos Diniz, entered into an agreement pursuant to which they agreed to settle any and all of their disputes, proceedings or claims related to CBD or the Holding Company.  The parties also agreed not to take any action or sue the other party based on contractual rights or understandings between the parties entered into prior to the date of the agreement. The agreement set forth, among other things: (i) the exchange of 19,375,000 preferred shares of CBD held by the Casino Group for 19,375,000 common shares of the Holding Company held by the Diniz Family, subject to the approval of CADE with respect to 11,229,075 shares; (ii) the termination of the agreements entered into by and between the Casino Group and the Diniz Family, such as the shareholders’ agreements of the Holding Company and CBD as well as the conditional put option agreement; (iii) the resignation by Mr. Abilio dos Santos Diniz from the positions that he held as chairman of the board of directors of CBD, member of the Human Resources and Compensation Committee of CBD and member of the board of directors of the Holding Company as well as resignation by the two members appointed by the Diniz Family to the board of directors and special committees of CBD. The Casino Group, jointly with its holding company Rallye S.A., has increased its direct and indirect ownership of our company from 35.4% as of January 1, 2011 to 41.27% as of March 31, 2015 as a result of (i) a series of market transactions, (ii) the receipt of newly issued shares of our company in connection with the amortization of goodwill, (iii) the acquisition of 19,375,000 shares of the Holding Company held by the Diniz Family as a result of the exercise of the a purchase option and (iv) the aforementioned agreement entered into with the Diniz Family on September 6, 2013.


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The Diniz Family sold its remaining interest in the Company  in October 2014 as a result of (i) a series of market transactions between December 2012 and October 2014, (ii) the sale of 19,375,000 shares of the Holding Company to the Casino Group as a result of the exercise by the Casino Group of the a purchase option and (iii) the aforementioned agreement entered into with the Casino Group on September 6, 2013. Holding Company Goodwill Contribution of Deferred Tax Benefits On May 3, 2005, the Casino Group and the Diniz Family formed Vieri Empreendimentos e ParticipaÃ§Ãμes S.A., or Vieri, which became our parent company. The control of Vieri was shared by the Casino Group and the Diniz Family.  The group was reorganized and restructured in 2006, resulting in our current ownership structure.  Under the terms of the corporate reorganization, the resulting tax benefit reverts 80% to the benefit of the controlling shareholder that originated the goodwill upon the issuance of new shares and the remaining 20% reverts to the benefit of all shareholders without issuing new shares.  The realization of this benefit does not cause any negative effects to our profitability or the flow of dividends to our minority shareholders. The offsetting entry to the initial recognition of the tax benefit balance is recognized directly in shareholdersâ€TM equity as a capital reserve (goodwill special reserve), as it represents a realizable asset contribution by the shareholders.  Also under the terms of the corporate reorganization, the effective tax benefit realized in each fiscal year will subsequently be capitalized in the proportion described above, and non-controlling shareholders are entitled to preemptive rights to acquire a number of shares to be issued by us proportional to their interest in our capital at the time. On March 31, 2011, our shareholders approved a capital increase in the amount of R$106 million by capitalizing the goodwill special reserve.  Out of this total, R$21 million was capitalized without the issuing new shares, to the benefit of all shareholders, and R$85 million was capitalized to the benefit of our Holding Company, pursuant to article 7 of CVM Rule 319/99, through the issuance of 1,354 thousand new preferred shares. On April 27, 2012, our shareholders approved a capital increase in the amount of R$201 million, by capitalizing the goodwill special reserve.  Out of this amount, R$40 million were capitalized without issuing new shares, to the benefit of all shareholders, and R$161 million was capitalized to the benefit of our Holding Company. On April 17, 2013, our shareholders approved a capital increase in the amount of R$38 million, by capitalizing the goodwill special reserve.  Out of this amount, R$8 million were capitalized without issuing new shares, to the benefit of all shareholders, and R$30 million was capitalized to the benefit of our Holding Company. As of the date of this annual report the goodwill special reserve has been fully capitalized. 7B.Related Party Transactions From time to time we have entered into transactions with the Casino Group and other related parties for the provision of certain services.  The following discussion summarizes certain of the significant agreements and arrangements among us and related parties.  For further details regarding our related party transactions, see note 12 to our audited consolidated financial statements included elsewhere in this annual report. Our statutory audit committee is also responsible for, among other things, reviewing certain proposed related party transactions to ensure these transactions comply with our related party transactions policy. Lease Agreements with the Klein Family Casa Bahia Comercial and Via Varejo entered into operating lease agreements for Casa Bahia Comercial properties where some of the stores, distribution centers and buildings of Nova Casa Bahia are located. In addition, as of December 31, 2014, we had lease agreements with the Klein Family regarding 312 properties, among distribution centers, stores and administrative buildings.  The rental will be annually adjusted by inflation based on the positive variation of IPCA/IBGE. 70


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Furniture Supply Agreement with Bartira Within the scope of the Casas Bahia association, on October 1, 2010, a furniture supply agreement was entered into between Via Varejo and Nova Casa Bahia, on the one hand, and Bartira, a furniture manufacturer company that was controlled by Casa Bahia Comercial, on the other hand, to exclusively supply furniture to Nova Casa Bahia.  The agreement had a six-year term. On November 9, 2010, an agreement was entered into between Nova Casa Bahia and Casa Bahia Comercial, pursuant to which a purchase option of 75% of Bartiraâ€TMs capital stock was granted to Nova Casa Bahia, exercisable for a 30-day term as of November 9, 2013.  In January 2013, Nova Casa Bahia was merged into Via Varejo and Via Varejo became the legal successor of Nova Casa Bahiaâ€TMs obligations and rights set forth in these agreements. In November 2013, Via Varejo exercised the purchase option and Bartira became a wholly-owned subsidiary of Via Varejo.  As a result, we do not consider Bartira a related party.  See â€œItem 5Aâ€”Operating Resultsâ€”Business Combinationsâ€”Acquisition of Bartira.â€ E-Commerce Reorganization Related Agreements On July 11, 2014, we, the Casino Group, Via Varejo, Nova HoldCo and Cnova Brazil entered into the Cnova Framework and IPO Agreement.  Subsequently, Cnova, Ã‰xito, Cdiscount, GermÃ¡n Quiroga and another founder ofNova HoldCoalso became parties to the Cnova Framework and IPO Agreement, whichprovided for the reorganization of the e-commerce business of the Casino Group and its affiliates in France, Latin America (including Brazil) and Asia under the common ownership and/or control of Cnova. In addition to the Cnova Framework and IPO Agreement, Cnova entered into other agreements with the Casino Group related to: (1) the contribution of shares of certain e-commerce companies to Cnova; (2) the issuance of special voting shares by Cnova to the Special Voting Depository; and (3) registration rights provided to the Casino Group and other shareholders of Cnova.  Cnova also entered into shareholdersâ€TM agreements with Ã‰xito with respect to put and call arrangements related to the acquisition of Cdiscount Colombia andCLatAm S.A., or Cdiscount LatAm. Agreements with Companies of the Casino Group Technical Assistance Agreement In July 2005, we entered into a technical assistance service agreement with the Casino Group.  Pursuant to the agreement, the Casino Group provides us with technical assistance in the areas of human resources, trademarks, marketing and communication, global campaigns and administrative assistance, among others.  In exchange, we pay to the Casino Group a fixed annual fee inreaiscorresponding to US$2 million.  The agreement was terminated on August 1, 2014. Cost Sharing Agreement On August 1, 2014, we entered into a cost sharing agreement with the Casino Group, pursuant to which we agreed to reimburse the Casino Group for expenses incurred by its employees in connection with services provided to us.  For the year ended December 31, 2014, we paid the Casino Group R$18 million under this cost sharing agreement. Cnovaâ€TMs IPO In addition, we reimbursed the Casino Group R$3 million in connection with costs related to Cnovaâ€TMs initial public offering. Bic C Agency Agreement On October 2014, CBD, Cnova Brasil, Groupe Casino and Espace Big C Dongnai (these two herein mentioned


as the Agent) entered into negotiations in order to sign an Agency Agreement, as the parties wanted to provide CBD and Cnova with the expertise in international sourcing, supply and purchasing management of the Agent. This AgencyAgreementdefines the conditions under which the Agent acts in the name and on behalf of CBD and Cnova Brasil as an international sourcing body, placing its orders towards suppliers according to the product specifications. The Agent receives a fee for all purchases performed under the Agreement, and during the year of 2014 the Agent received as commission the total amount of R$1 million. 71


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Cdiscount Easydis Agreement On January 24, 2013, Cdiscount entered into a logistics service agreement with Easydis SAS, or Easydis, which is an affiliate of the Casino Group. Under the terms of the agreement, Easydis manages and operates the fulfillment center located in AndrÃ©zieux, France. Easydis handles receipt of inventory at the center, inspection of products from Cdiscount's suppliers, storage of products, preparation of customer orders, management and conservation of inventory and shipping. The parties subsequently amended the agreement on March 27, 2015 to provide for reviews of the pricing terms based on prevailing market rates. The term of the agreement is six years, from June 1, 2014, until June 1, 2020. It is automatically renewable for successive six-year periods. Cdiscount CCV Agreement On July 16, 2013, Cdiscount entered into a logistics service agreement with CCV SNC, or CCV, a member of the Casino Group as amended by two agreements, each dated May 16, 2014. Under the terms of the agreement, CCV provides logistics services to Cdiscount, including delivery in metropolitan France (excluding Corsica and related islands) to our customers of products purchased on our sites. CCV also provides CCV stores as â€œClick & Collectâ€ locations for customers purchasing heavy or large products on our sites. The agreement terminates on January 1, 2023, and is automatically renewable for successive 10-year periods unless terminated by either party with written notice sent two years prior to the expiration of the initial period. Cdiscount EMC Commercial Partnership Agreement On May 14, 2014, EMC Distribution S.A.S., or EMC, the central purchasing entity for the Casino Group, and Cdiscount entered into a commercial partnership agreement. Under this agreement, both parties undertake to implement buying synergies to increase the volume of everyday consumer goods ordered from certain suppliers. Each party also agrees to act on behalf of the other to negotiate the terms and conditions of certain frameworks agreements with suppliers. This agreement is effective until June 1, 2024, and is automatically renewable for another five-year period unless terminated with an 18-month prior notice. EMC Distribution Supply Agreement On May 19, 2014, Cdiscount and EMC entered into a supply agreement, whereby EMC sells to Cdiscount imported Casino Group private label products and imported products from other suppliers. Cdiscount has no purchase volume obligation under the agreement. Neither party is entitled to assign its rights and advantages under the agreement without the prior written consent of the other party. The agreement terminates on June 1, 2024, and is automatically renewable for successive 10-year periods unless terminated by either party with written notice sent 18 months prior to expiration of the initial period. DCF Commercial Partnership Agreements On May 19, 2014, Cdiscount and DCF entered into two supply agreements, whereby DCF sells to Cdiscount Casino Group private label products and products from other suppliers and Cdiscount sells to DCF Cdiscount private label products and products from other suppliers. The agreements were subsequently amended on March 27, 2015. Neither party has a purchase volume obligation under the agreements. The agreements terminate on June 1,


2024, and are automatically renewable for successive 10-year periods unless terminated by either party with written notice sent two years prior to the expiration of the initial period. 72


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Cdiscount Banque Casino Cooperation Agreement On December 30, 2011, Cdiscount and Banque Casino, a French credit institution of which the Casino Group and CrÃ©dit Mutuel S.A. each own 50.0% of the share capital, entered into a cooperation agreement. The agreement provides for the development, distribution and promotion in French metropolitan areas, exclusively for Cdiscountâ€TMs customers, via Cdiscountâ€TMs sites or other channels of marketing and distribution used by Cdiscount, certain financial products and services offered by Banque Casino. Cdiscount and Banque Casino amended the agreement on December 20, 2012, and June 28, 2013, to entrust Banque Casino with the distribution and the management of the financial services relating to the payment-in-installments option offered on Cdiscountâ€TMs sites, whereby customers are subject to the general terms and conditions of Banque Casino. Cdiscount Profit and Loss Sharing Agreement On June 13, 2012, Cdiscount, Banque Casino and C2C-Cartes et CrÃ©dits Ã  la Consommation S.A., or Cartes et CrÃ©dits, created an unincorporated joint venture in order to gather the resources required for their partnership and to share the profit and losses of the common activity regarding Cdiscount customers. On the basis of their contribution, the allocation of the interests in the joint venture is 55% for Banque Casino, 40% for Cdiscount and 5% for Cartes et CrÃ©dits. The profits and the losses of the joint venture are shared by the stakeholders, it being specified that specific rights in such sharing are allocated among the stakeholders. The manager of the joint venture is Banque Casino. The duration of the joint venture is 99 years from January 1, 2012. The joint venture shall be dissolved in case of the termination of the cooperation agreement dated December 30, 2011, described above, or at the request of a stakeholder, with six monthsâ€TM prior notice, if the participation of Cartes et CrÃ©dits and/or its affiliates in the share capital of Banque Casino falls below 34%. Cdiscount Polca Holding Cash Pooling Agreement On July 1, 2014, Cnova entered into a Current Account Agreement with Polca Holding S.A., or Polca Holding, a member of the Casino Group and the centralizing entity of a cash pool implemented among certain members of the Casino Group. On July 21, 2014, Cdiscount acceded to the Current Account Agreement with Polca Holding. Certain of Cnovaâ€TMs other European subsidiaries, including Cdiscount and CDiscount International B.V., will also accede to the Current Account Agreement with Polca Holding. The purpose of the current account agreement is to improve the management of the partiesâ€TM working capital through: (i) obtaining cash advances from Polca Holding to Cnova and its European subsidiaries and (ii) making Cnova and its European subsidiariesâ€TM cash surplus available to Polca Holding. The parties have acknowledged that the cash flows under the agreement is driven by a common economic, social or financial interest in accordance with the global policy developed for the whole Casino Group and will take into account the interest of each party. The current accounts are designed to record the cash flows between the parties on a daily basis, with all recorded claims netted off on a continuous basis, resulting in a single account balance. Interest accrues on a daily basis (but does not compound). Interest is calculated on a monthly basis at a rate equal to the monthly average of the EONIA per annum plus a margin of 0.50% if the cash balance is in favor of Polca Holding and a margin of 0.25% if the cash balance is in favor of Cnova and its European subsidiaries. Accrued interest is due and payable on the last date of each calendar month. The term of the agreement is indefinite. Each party is entitled to terminate the agreement at any time subject to ten daysâ€TM prior written notice. Each agreement immediately terminates if the Casino Group no longer controls, directly or indirectly, Polca Holding or Cnova or its European subsidiaries, as the case may be, or in case of bankruptcy of a party. Loan to Management of Nova Pontocom 73


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In November 2010, within the context of the restructuring of e-commerce business, we provided loans to certain statutory members of Nova Pontocom’s management, which mature on January 8, 2018. As of December 31, 2014, the aggregate amount outstanding of the loans was R$34million. Members of Nova Pontocom's management who received these loans no longer hold management positions at Cnova Brazil. 7C.Interests of Experts and Counsel Not applicable. ITEM 8.FINANCIAL INFORMATION 8A.Consolidated Statements and Other Financial Information The information included in Item 18 of this annual report is referred to and incorporated by reference into this Item 8A. Legal Proceedings We are party to administrative proceedings and lawsuits that are incidental to the normal course of our business.  These include general civil, tax and labor litigation and administrative proceedings.  We believe that our provisions for legal proceedings are sufficient to meet probable and reasonably estimated losses in the event of unfavorable court decisions to us and to ensure that the outcomes of these legal proceedings have no material effect on our financial condition or results of operations.  We cannot estimate the amount of all potential costs that we may incur or penalties that may be imposed on us other than those amounts for which we have made provisions.  For further information on our legal proceedings, see note 23 to our audited consolidated financial statements included elsewhere in this annual report. Based on the advice of our external legal counsel, we have identified and made provisions for the following probable losses that may result from legal proceedings to which we are a party: 2012

   2013

   2014(in millions of R$)COFINS(1) and PIS(2) tax claims

   87

   272

   79Other tax claims

   365

   403

   510Labor claims

   191

   297

   524Civil and other claims

   131

   175

   231Total accrued liabilities for legal proceedings

   774

   1,147

   1,344
 ____________________ (1)   Social security contribution (Contribuição para o Financiamento da Seguridade Social), or COFINS. (2)    Social integration (Programa de Integração Social), or PIS. Tax-related claims Tax-related claims are indexed to the SELIC rate, which in annual terms, was 7.29% on December 31, 2012, 9.90% on December 31, 2013 and 11.65% on December 31, 2014 and are also subject, in certain cases, to fines.  We have made provisions for interest charges and fines, when applicable. In addition, tax claims are subject to monthly indexing, which involves adjusting the amount of provisions for litigation in accordance with the indexing rates used by each tax jurisdiction.  The indexing is required by law for all tax amounts, including the provision for judicial deposits. COFINS and PIS taxes We pay PIS and COFINS taxes, at the rates of 1.65% and 7.6% on gross sales revenue, respectively.  We adopt the non-cumulative system whereby these tax liabilities can be offset by credits we accrue from taxes previously paid on products we purchase and other expenses.  As a result of our application of the non-cumulative system, we and our subsidiaries have requested the right to exclude state value added tax (Imposto Sobre Circulação de Mercadorias e Serviços), or ICMS, from the calculation basis of these two contributions.


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Since the noncumulative regime to calculate PIS and COFINS has been used, the Company has challenged the right to deduct ICMS from the base of these two contributions. The provision recognized as of December 31, 2014 totals R$72 (R$92 as of December 31, 2013). The reduction is due to the change in the likelihood of losses (from â€œprobableâ€ to â€œpossibleâ€) related to offsetting of PIS/COFINS tax debts against Federal VAT â€“ Inputs (IPI) credits subject to a zero tax rate or tax-exempt â€“ acquired from third parties (transferred based on a final and unappealable decision). Taxes and other We have other tax claims that were deemed probable losses by our legal counsel: (i) tax assessment notices related to purchase, industrialization and sale of soybean and byproducts exports (PIS, COFINS and federal income tax (Imposto de Renda da Pessoa JurÃ­dica), or IRPJ); (ii) disagreement on the non-application of Accident Prevention Factor (Fator AcidentÃ¡rio de PrevenÃ§Ã£o), or FAP, in 2011; (iii) disagreement on the State Government Fund Against Poverty (Fundo de Combate Ã  Pobreza), enacted by the State of Rio de Janeiro government; (iv) discussions related to tax losses carry forward; (v) purchases from suppliers considered disqualified before the registration of the relevant State Financing Secretary; (vi) error in application rate, (vii) ancillary obligations by state tax authorities; and (viii) other less relevant issues.  The amount we provisioned as of December 31, 2014 was R$108 million (R$100.1 million as of December 31, 2013). The Supreme Court ("STF") on October 16, 2014, decided that the taxpayers whose trade products included in the â€œbasic consumer products basketâ€ have no right to fully use the ICMS credits. The Company, with the aid of its legal advisors, evaluated and recorded a provision for this matter amounting to R$147 as of December 31, 2014, due to the fact that the likelihood of loss related this claim is considered â€œprobableâ€. The amounts accrued represent the best managementÂ ́s estimation of the probable losses. We discussed in court the eligibility to not pay the contributions provided for by Supplementary Law 110/01, referring to the Government Severance Indemnity Fund for Employees (Fundo de Garantia do Tempo  de ServiÃ§o), or FGTS, costs.  The accrued amount as of December 31, 2014 was R$48 million (R$39 million as of December 31, 2013). Provisions for tax contingent liabilities were recorded by our subsidiary Via Varejo at the time of the business combination.  As of December 31, 2014, the amount recorded was R$87 million in tax contingent liabilities (R$165 million as of December 31, 2013). For further information on our tax-related claims, see note 23 to our audited consolidated financial statements included elsewhere in this annual report. Labor claims We are party to numerous lawsuits involving disputes with our employees, primarily arising from layoffs in the ordinary course of business.  As of December 31, 2014, we recorded a provision of R$521 million (R$298 million as of December 31, 2013) referring to lawsuits which risk of loss was considered probable.  Management, assisted by legal counsel, evaluates these claims recording provision for losses when reasonably estimable, taking into account previous experience in relation to the amounts claimed.  Labor claims are indexed to the benchmark interest rate (taxa referencial), or TR of 0.86% accrued as of December 31, 2014 (0.19% as of December 31, 2013) plus 1% monthly interest rates. Civil and other claims We are defendants in civil lawsuits.  Among these lawsuits, we highlight the following: Â·We file and respond to various lawsuits requesting the review of lease amounts.  In these lawsuits, the judge determines a provisional lease amount, which is then paid by the stores until the final lease amount is defined.  The Company recognizes a provision for the difference between the original amount paid by the stores and the amounts pleaded by the adverse party (owner of the property) in the lawsuit, when internal and external legal advisors agree on the likelihood of a change to the lease paid by the entity.  As of


December 31, 2014, the provision for these lawsuits was R$55 million (R$43 million as of December 31, 2013) to which there are no judicial deposits. 75


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·Via Varejo is party to lawsuits involving consumer relations rights (civil claims and assessments from the Consumer Protection and Defense Foundation (Fundação de Proteção e Defesa do Consumidor) or the PROCON Foundation) and a few lawsuits involving contracts terminated with suppliers in the amount of R$86 million at December 31, 2014, as compared to R$69 million in December 31, 2013. As of December 31, 2014, including the lawsuits mentioned above, we had provisioned for civil actions in the amount of R$231 million, as compared to R$175 million as of December 31, 2013. Other contingent liabilities for which there are no provisions As of December 31, 2014, we were a party to certain legal proceedings for which the probability of loss was deemed possible and, therefore, we have not recorded provisions for these proceedings.  See note 23.4 to our audited consolidated financial statements included elsewhere in this annual report for detailed information on these proceedings. We are a party to several tax-related legal proceedings with various governmental agencies related to social security taxes (Instituto Nacional de Seguridade Social), or INSS, IRPJ, withholding tax (Imposto de Renda Retido na Fonte), or IRRF, social contribution on net profits (ContribuiÃ§Ã£o Social Sobre o Lucro LÃ­quido), or CSLL, COFINS, PIS, contribution tax on financial transactions, (ContribuiÃ§Ã£o ProvisÃ3ria sobre MovimentaÃ§Ã£o ou TransmissÃ£o de Valores e de CrÃ©ditos e Direitos de Natureza Financeira), or CPMF, ICMS, municipal service tax (Imposto Sobre ServiÃ§os), or ISS, municipal property tax (Imposto Predial e Territorial Urbano), or IPTU, and property transfer tax (Imposto sobre transferÃancia de bens imÃ3veis), or ITBI.As of December 31, 2014, the aggregate amount of the possible loss regarding these tax-related legal proceedings was R$8,552 million, as compared to R$7,630 million in 2013. Other tax contingent liabilities recorded refer to administrative proceedings related to the offset of PIS contribution, under the protection of Decrees 2445/88 and 2449/88, generated in view of credits deriving from legal proceedings and the offset of tax debts with contribution credits levied on coffee exports. Other Legal Proceedings We are party to certain administrative proceedings and lawsuits related to civil, consumer protection matters and labor claims.  As of December 31, 2014, the aggregate amount of the possible loss regarding these proceedings was R$505 million, as compared to R$697 million in 2013. Federal Tax Installment Payment Program(Programa de Recuperação Fiscal), or REFIS On May 27, 2009, the Brazilian government enacted Law No. 11,941/09, which amends the federal tax laws related to tax debt payments by installments by allowing certain judicial deposits to be deducted and paid in installments. Previously, we maintained provisions for judicial proceedings related to certain social security contributions and income taxes.  During the third quarter of 2009, our management and legal counsel, adhering to the federal tax installment payment program introduced by Law No. 11,941/09, decided to include tax and social security liabilities from proceedings, in particular those related to the COFINS tax rate, which at the time totaled approximately R$987.0 million, and other applicable tax liabilities in the federal tax installment payment program.  The balance of the consolidated installments on December 31, 2014 was R$680 million, as compared to R$1,198 million in 2013. Law 12.996/2014 amended by Provisional measure - MP 651, introduced interest reduction benefits and penalties for anticipated payments of litigations and taxes in installments on federal debts. The Company understands is reasonable to enroll the Amnesty program to pay part of its debts, utilizing also part of the deferred income tax over tax losses carryforward to offset it. There was a reduction of the provision for risks in the amount of R$296. 76


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Also, the law 12.996/14, allowed taxpayers to use tax loss carryforward to settle 70% of the remaining debt balance. Therefore, management settled certain debts in the amount of R$366, (R$256 - using tax loss carryforward, R$97 paid in cash and with interest reduction). Dividend Policy and Dividends General Pursuant to Brazilian corporate law, Brazilian corporations are required to hold an annual shareholders’ meeting in the first four months of each fiscal year at which time the allocation of the results of operations in any year and the distribution of an annual dividend are approved.  Under Brazilian corporate law, shareholders of a Brazilian corporation have the right to receive, as a mandatory dividend for each fiscal year, a part of the corporation’s net profits as established under its by-laws or, if not provided under such by-laws, an amount equal to 50% of the company’s adjusted net profits pursuant to Brazilian corporate law.  Currently, Brazilian corporate law generally requires that each Brazilian corporation distribute as a mandatory dividend an aggregate amount equal to at least 25% of the adjusted net profits and adjusted according to Brazilian corporate law.  Pursuant to Brazilian corporate law, in addition to the mandatory dividend, the board of directors may recommend to the shareholders payment of interim dividends and payment of dividends from other legally available funds.  Also pursuant to Brazilian corporate law, a Brazilian company is allowed to suspend the distribution of the mandatory dividends in any year in which its management report to its shareholders’ general meeting that the distribution would be incompatible with its financial condition. For the fiscal year ended 2014, we have not changed the dividend distribution period.  Pursuant to our dividend policy created by our board of directors on August 3, 2009, we anticipate our dividend distribution on a quarterly basis.  For further information see “Item 10B. Memorandum and Articles of Association—Allocation of Net Profits and Distribution of Dividends—Distribution of Dividends.”  According to Brazilian corporate law and our by-laws, we must pay declared dividends within 60 days after the approval. Dividend Policy and History of Dividend Payments The following table sets forth the distributions paid to holders of our common shares and preferred shares since 2010: Period

   Description

   First payment date

   R$ per preferred share

   R$ per common share

   Total amount in dividends on shareholders’ equity shares(in R$ millions)2011

   Dividends

   May 27, 2011

   0.09

   0.0818181

   232011

   Dividends

   August 10, 2011

   0.09

   0.0818181

   232011

   Dividends

   November 28, 2011

   0.09

   0.0818181

   232011

   Dividends

   June 26, 2012

   0.372950601

   0.410245661

   1032012

   Dividends

   June 20, 2012

   0.11

   0.10

   282012

   Dividends

   August 13, 2012

   0.11

   0.10

   282012

   Dividends

   November 23, 2012

   0.11

   0.10

   282012

   Dividends

   June 14, 2013

   0.653088073

   0.593716430

   1662013

   Dividends

   May 16, 2013

   0.13

   0.118182

   332013

   Dividends

   August 13, 2013

   0.13

   0.118182

   332013

   Dividends

   November 7, 2013

   0.13

   0.118182

   332013

   Dividends

   June 13, 2014

   0.5889348796

   0.5353953451

   1512014

   Dividends

   May 15, 2014

   0.14

   0.127270

   362014

   Dividends

   August 13, 2014

   0.14

   0.127270

   362014

   Dividends

   November 21, 2014

   0.14

   0.127270

   362014

   Dividends

   To be determined(1)

   0.76(2)

   0.69(2)

   194(2)
 ________________ (1)   To be paid within 60 days following approval of such dividends by our general shareholders’ meeting to be held on April 24, 2015. (2)   Based on management  proposal  approved at our general shareholders’ meeting held on April 24, 2015. Shareholders who are not residents of Brazil must generally register with the Central Bank to have dividends and/or interest on shareholders’ equity, sales proceeds or other amounts with respect to their shares eligible to be remitted in foreign currency outside of Brazil.  See “Item 10D. Exchange Controls.”  The preferred shares


underlying the ADSs are held in Brazil by the Custodian, as agent for the depositary, the registered owner on the records of the Custodian for the preferred shares underlying the ADSs.The current custodian is Banco Itaú Corretora de Valores S.A.


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Payments of cash dividends and distributions, if any, will be made in Brazilian currency to the Custodian on behalf of the depositary, which will then convert the payments in Brazilian currency into U.S. dollars and thereafter will cause the U.S. dollars to be delivered to the depositary for distribution to holders of ADSs as described above.  In the event that the Custodian is unable to convert immediately the Brazilian currency received as dividends and/or interest on shareholders’ equity into U.S. dollars, the amount of U.S. dollars payable to holders of ADSs may be adversely affected by devaluations of the Brazilian currency that occur before the distributions are converted and remitted.  See “Item 3A. Selected Financial Data—Exchange Rates.”  Dividends and interest on shareholders’ equity in respect of the preferred shares paid to shareholders, including holders of ADSs, are subject to the tax treatment outlined in “Item 10E.  Taxation—Brazilian Tax Considerations.” 8B.Significant Changes None. ITEM 9.THE OFFER AND LISTING 9A.Offer and Listing Details Our preferred shares are traded on the BM&FBOVESPA under the trading symbol PCAR4.  Our preferred shares in the form of ADSs also trade on the New York Stock Exchange, or NYSE, under the trading symbol “CBD.” We also have ADSs listed on the Luxembourg Stock Exchange. Our ADSs commenced trading on the NYSE in May 1997.  As of December 31, 2014, the ADSs represented 33.3% of our preferred shares.  Each ADS represents one preferred share, without par value.  The ADSs are evidenced by ADRs issued by The Bank of New York Mellon. The following table sets forth, for the period indicated, the reported high and low sales prices for the preferred shares on the BM&FBOVESPA: High

   Low

   High

   Low

   R$ Average Daily Trading VolumeCalendar Period

   R$

   US$(1)2010:

   71.18

   54.40

   42.84

   30.14

   51,106,8412011:

   73.25

   56.00

   46.92

   29.88

   52,809,6892012:

   98.19

   66.00

   48.05

   32.30

   42,719,4712013:1st quarter

   107.89

   88.67

   53.37

   43.86

   107,384,4792nd quarter

   114.70

   93.03

   51.40

   41.69

   93,416,1993rd quarter

   105.11

   92.80

   47.41

   41.86

   64,457,3394th quarter

   111.10

   100.30

   47.03

   42.46

   68,738,6792014:1st quarter

   103.65

   92.30

   45.80

   40.79

   63,361,2292nd quarter

   109.09

   99.95

   49.53

   45.38

   91,883,0223rd quarter

   115.00

   102.39

   46.92

   41.77

   98,098,1374th quarter

   112.00

   95.80

   42.17

   36.07

   86,561,961
 ____________ (1)   Converted into U.S. dollars at the U.S. dollar-Brazilianrealexchange rate in effect at the end of each period presented.  See “Item 3A. Selected Financial Data—Exchange Rates.”


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Preferred share prices for the most recent six months are as follows: High

   Low

   High

   Low

   R$ Average Daily Trading VolumeCalendar Period

   R$

   US$(1)October 2014 ...........................................

   112.00

   95.80

   45.82

   39.19

   122,270,056November 2014 .......................................

   108.50

   103.08

   42.38

   40.26

   72,199,715December 2014 ........................................

   105.46

   96.50

   39.70

   36.33

   59,141,787January 2015 ............................................

   97.78

   88.47

   36.73

   33.23

   59,334,273February 2015 ..........................................

   97.15

   89.40

   33.75

   31.06

   82,706,232March 2015 ..............................................

   98.90

   94.10

   30.83

   29.33

   108,117,208April 2015 (through April 23)...................

   102.00

   96.50

   33.91

   32.08

   125,786,055
 ____________ (1)   Converted into U.S. dollars at the U.S. dollar-Brazilianrealexchange rate in effect at the end of each period presented.  See “Item 3A.  Selected Financial Data—Exchange Rates.” On April 23, 2014, the closing sale price for the preferred shares on the BM&FBOVESPA was R$97.50 per preferred share, equivalent to US$33.91 per ADS translated at the exchange rate of R$3.008 per US$1.00, the commercial selling rate on that date.  On the same date, the closing sale price for our ADSs on the NYSE was US$32.73. The following table sets forth, for the periods indicated, the reported high and low sales prices for our ADSs listed on the NYSE: High

   Low

   High

   Low

   US$ Average Daily Trading VolumeCalendar Period

   US$ ADSs

   R$ ADSs(1)2010:

   42.26

   29.15

   70.21

   52.60

   25,490,1832011:

   48.00

   30.68

   87.88

   57.08

   29,838,6922012:

   49.67

   36.03

   101.50

   73.63

   20,025,9792013:1st quarter

   55.33

   43.99

   111.86

   88.93

   29,044,3612nd quarter

   56.83

   42.11

   114.89

   85.13

   25,785,7483rd quarter

   48.03

   38.98

   97.10

   78.81

   28,904,8654th quarter

   50.93

   43.67

   102.97

   88.29

   23,083,8922014:1st quarter

   43.76

   38.06

   99.03

   86.13

   20,995,3062nd quarter

   49.00

   43.96

   107.92

   96.82

   26,918,4143rd quarter

   51.23

   43.61

   125.56

   106.89

   29,330,4654th quarter

   46.08

   35.35

   122.40

   93.90

   22,458,595
 ____________ (1)   Converted into Brazilian reaisat the U.S. dollar-Brazilianrealexchange rate in effect at the end of each period presented.  See “Item 3A. Selected Financial Data—Exchange Rates.” Share prices for the most recent six months are as follows: High

   Low

   High

   Low

   US$ Average Daily Trading VolumeCalendar Period

   US$ ADSs

   R$ ADSs(1)October 2014

   46.08

   38.44

   112.63

   93.96

   31,544,571November 2014

   43.31

   39.77

   110.88

   101.82

   18,849,926December 2014

   40.85

   35.35

   108.51

   93.90

   16,076,198January 2015

   37.32

   32.81

   99.36

   87.35

   19,992,006February 2015

   34.05

   31.53

   98.00

   90.75

   21,249,555March 2015

   33.86

   28.75

   108.62

   92.23

   19,675,575April 2015 (through April 23)

   32.78

   30.43

   98.60

   91.53

   19,852,973
 ____________ (1)   Converted into Brazilianreaisat the U.S. dollar-Brazilianrealexchange rate in effect at the end of each period presented.  See “Item 3A. Selected Financial Data—Exchange Rates.” In addition, our common shares are traded on the BM&FBOVESPA under the trading symbol PCAR3, although they are not actively traded.  See “Item 7A. Major Shareholders” for more information on ownership of our common shares.


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9B.Plan of Distribution Not applicable. 9C.Markets Trading on the BM&FBOVESPA BM&FBOVESPA is a Brazilian publicly held company formed in 2008 through the integration between the SÃ£o Paulo Stock Exchange (Bolsa de Valores de SÃ£o Paulo) and the Brazilian Mercantile and Futures Exchange (Bolsa de Mercadorias & Futuros). BM&FBOVESPA is one of the largest exchanges in the world in market capitalization, the second in the Americas and the leader in Latin America. Trading on the exchange is conducted by authorized members. Trading sessions take place every business day, from 10:00 a.m. to 5:00 p.m. or from 11:00 a.m. to 6:00p.m. during daylight savings time in Brazil, on an electronic trading system. Trading is also conducted between 6:00 p.m. and 7:30 p.m., or between 7:00 p.m. and 8:30p.m. during daylight savings time in Brazil, in an after market trading session. To better control the excess of volatility in market conditions, BM&FBOVESPA has adopted a “circuit breaker” pursuant to which trading sessions may be suspended for a period of 30 minutes or one hour whenever the stock exchange broad based index falls below the limits of 10% and 15%, respectively, compared to the close of trading of the previous trading day. In the event the stock exchange index falls below the limit of 20% in comparison to the previous trading day, BM&FBOVESPA may determine the suspension of the trading session for a certain period to be defined at its sole discretion. The exchange has also adopted single stocks trading halts to deal with certain high volatility situations. Trading on the BM&FBOVESPA by non-residents of Brazil is subject to certain limitations under Brazilian foreign investment and tax legislation. Regulation of the Brazilian Securities Markets The Brazilian securities market is regulated and supervised by the CVM, the Brazilian Securities and Exchange Commission (which has general authority over the stock exchanges and  securities markets), as provided for by the Brazilian Securities Exchange Act and Brazilian Corporate Law. The CMN, National Monetary Council, is responsible for supervising the CVM’s activities, granting licenses to brokerage firms to govern their incorporation and operation, and regulating foreign investment and exchange transactions, as provided for by the Brazilian Securities Exchange Act and Law No. 4,595 of December 31, 1964, as amended. These laws and regulations provide for, among other things, disclosure requirements to issuers of securities listed on stock exchanges, criminal sanctions for insider trading and price manipulation, protection of minority shareholders, the procedures for licensing and supervising brokerage firms and the governance of Brazilian stock exchanges. Under Brazilian corporate law, a company is either public (companhia aberta) such as we are, or private (companhia fechada).  All public companies are registered with the CVM, and are subject to periodic reporting requirements and disclosure of material facts.  A company registered with the CVM may have its securities traded either on the BM&FBOVESPA or on the Brazilian overâ€‘theâ€‘counter market.  The shares of a company listed on the BM&FBOVESPA may also be traded privately, subject to certain limitations.  To be listed on the BM&FBOVESPA, a company must apply for registration with the CVM and with the BM&FBOVESPA.  Trading of securities of a public company on the BM&FBOVESPA may be suspended at the request of such company in anticipation of a material announcement.  Trading may also be suspended on the initiative of the BM&FBOVESPA or the CVM, based on or due to, among other reasons, a belief that a company has provided inadequate information regarding a material event or has provided inadequate responses to inquiries made by the CVM or the BM&FBOVESPA. The Brazilian Securities Law, Brazilian corporate law and the laws and regulations issued by the CVM, the CMN, and the Central Bank provide for, among other matters, disclosure requirements applicable to issuers of traded securities, restrictions on insider trading and price manipulation, protection of minority shareholders, licensing procedures, supervision of brokerage firms, and governance of the Brazilian stock exchanges. 80


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Corporate Governance Practices In 2000, the BM&FBOVESPA introduced three special listing segments, known as Level 1 (NÃ­vel 1) and 2 (NÃ­vel 2) of differentiated Corporate Governance Practices and New Market, aiming at fostering a secondary market for securities issued by Brazilian companies with securities listed on the BM&FBOVESPA, by prompting such companies to follow good practices of corporate governance.  The listing segments were designed for the trading of shares issued by companies voluntarily undertaking to abide by corporate governance practices and disclosure requirements in addition to those already imposed by applicable Brazilian law.  These rules generally increase shareholdersâ€TM rights and enhance the quality of information provided to shareholders. To be listed on the Level 1 segment, in addition to the obligations imposed by current Brazilian law, a company must agree to (a) ensure that shares of the issuer representing at least 25% of its total capital are effectively available for trading (at least 25% must be free float), (b) adopt offering procedures that favor widespread ownership of shares whenever making a public offering, (c) comply with minimum quarterly disclosure standards including the disclosure of consolidated financial statements and independent audit revision opinion, (d) follow stricter disclosure policies with respect to transactions made by controlling shareholders, directors and officers involving securities issued by the respective company, (e) submit any existing shareholdersâ€TM agreements and stock option plans to the BM&FBOVESPA and (f) disclose to shareholders an annual corporate events calendar. On May 10, 2011 the differentiated Corporate Governance Practices and New Market rules were amended.  The new provisions include, among others, new pecuniary sanctions for companies that do not comply with rules.  In addition to that, according to the amended rules, a companyâ€TMs chief executive officer or major executive officer cannot hold the position of chairman of the board of directors. Board members shall be elected for continuous terms extending for a maximum of two (2) years, with reelection permitted. We have been listed as a Level 1 listed company since March 31, 2003.  As a result, we must comply with the corporate governance standards and Level 1 listing requirements described in the previous paragraphs in addition to other obligations imposed by applicable Brazilian law. Disclosure Requirements According to Brazilian corporate law and CVM regulation, a public company must submit to the CVM and BM&FBOVESPA certain periodic information, including financial statements accompanied by the management discussion and analysis report and independent audit report, quarterly information, management discussion and analysis and independent audit reports.  This legislation also requires us to file with the CVM and the BM&FBOVESPA our shareholdersâ€TM agreements, notices of shareholdersâ€TM meetings and copies of the related minutes and communications regarding material acts or facts. The CVM rules also provide for requirements regarding the disclosure and use of information related to material acts or facts, including the disclosure of information in the trading and acquisition of securities issued by publicly held companies. Such requirements include provisions that: ·establish the concept of a material act or fact that gives rise to reporting requirements.  Material acts or facts include decisions made by the controlling shareholders, resolutions of the general meeting of shareholders or of management of the company, or any other political, administrative, technical, financial or economic acts or facts related to the companyâ€TMs business (whether occurring within the company or otherwise somehow related thereto) that may influence the price of its publicly traded securities, or the decision of investors to trade or maintain such securities or to exercise any of such securitiesâ€TM underlying rights; ·specify examples of acts or facts that are considered to be material, which include, among others, the execution of agreements providing for the transfer of control of a public company, the entry or withdrawal of shareholders that maintain any managing, financial, technological or administrative function with or contribution to the company, and any corporate restructuring undertaken among related companies; 81


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·oblige the public company to disclose material acts or facts to the CVM, to the BM&FBOVESPA and through the publication of such acts in the newspapers usually utilized by such company; ·require the acquirer of a controlling stake in a public company to publish a material fact, including its intentions as to whether or not to de-list the corporationâ€TMs shares, within one year; ·require management, members of the fiscal council, if active, or of any technical or advising body of a public company to disclose to the company, to the CVM and to the BM&FBOVESPA the number, type and form of trading of securities issued by the company, its subsidiaries and controlling public companies that are held by them or by persons closely related to them, and any changes in their respective ownership positions; ·require that, if any direct or indirect controlling shareholder or any shareholder electing members of the board of directors of a public company increases or decreases participation in such company by more than 5.0%, such person or entity must disclose information regarding such acquisition or disposition; and ·forbid trading on the basis of insider information. Under the terms of CVM Instruction No. 358, dated January 3, 2002, as amended, we may, under exceptional circumstances, submit a request for confidential treatment to the CVM concerning a material act or fact when our controlling shareholders or managers consider that their disclosure will risk the companyâ€TMs legitimate interest. 9D.Selling Shareholders Not applicable. 9E.Dilution Not applicable. 9F.Expenses of the Issue Not applicable. ITEM 10.ADDITIONAL INFORMATION 10A.Share Capital As of December 31, 2014, our capital stock consisted of a total of 265,283,308 non-par shares, of which 99,679,851 were common shares and 165,603,457 were preferred shares.  As of the same date, our Company held 232,586 preferred shares in treasury.  In 2014, we increased our capital stock by 830,423 preferred shares in connection with our New Stock Option Plan. As of March 31, 2015, our capital stock consisted of a total of 265,315,100 non-par shares, of which 99,679,851 were common shares and 165,635,249 were preferred shares.  As of the same date, 232,586 preferred shares were held in treasury and no common shares were held in treasury. In the last three years we have not issued any other class of shares. 10B.Memorandum and Articles of Association Below is a brief summary of certain significant provisions of our by-laws and Brazilian corporate law.  This description does not purport to be complete and is qualified by reference to our by-laws (an English translation of which has been filed with the SEC) and to the Brazilian corporate law. 82


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Corporation Objects and Purposes We are a publicly held corporation with principal place of business and jurisdiction in the city of SÃ£o Paulo, Brazil, governed by Brazilian laws (including Brazilian corporate law), CVM and SEC regulations and our by-laws. Our main business purpose is to sell manufactured, semi-manufactured and natural products of both Brazilian and foreign origin, of any and all kinds and description, nature or quality, provided that they are not forbidden by law.  Furthermore, we may also engage in a wide range of activities set forth in article 2 of our by-laws. Preferred Shares and Common Shares Pursuant to Brazilian corporate law and our by-laws, each common share entitles the holder thereof to one vote at our shareholdersâ€TM meetings.  Holders of common shares are not entitled to any preference relating to our dividends or other distributions or any preference upon our liquidation, provided that they may convert their common shares into preferred shares at any time.  See â€œConversion of Common Shares into Preferred Shares.â€ Pursuant to Brazilian corporate law, each preferred share is non-voting, except under limited circumstances, and is entitled to: Â·priority in the receipt of fixed or minimum dividend; Â·priority in the reimbursement of capital, with or without premium; or Â·cumulative preferences and advantages established in items (i) and (ii) above. Furthermore, the preferred shares will only be admitted for trading on the BM&FBOVESPA if they are entitled to at least one of the following preferences: Â·right to participate in the distribution of the mandatory dividend of at least 25% of our adjusted net profits, pursuant to the following criteria (See â€œâ€”Allocation of Net Profits and Distribution of Dividendsâ€”Allocation of Net Profitsâ€”Mandatory Dividendsâ€ for a description of calculation of our adjusted net profits):  (i) priority in the receipt of dividends corresponding to at least 3% of the sharesâ€TM book value; and (ii) right to participate in the profit distribution together with the common shares under equal conditions, after the common shares have received dividends as set forth in item (i) above; or Â·right to receive dividends in an amount per share of at least 10% higher than the amount per share paid to holders of common shares. In addition, pursuant to Brazilian corporate law and our by-laws, the preferred shares will acquire the right to vote in the event that the minimum non-cumulative annual preferred dividend is not paid for a period of three consecutive years and such voting right will cease upon the payment of such minimum non-cumulative annual preferred dividend. Under Brazilian corporate law, amendments reducing the rights of preferred shares entitle the holders of those shares to withdrawal rights.  See â€œâ€”Withdrawal Rightsâ€ for a description of withdrawal rights. Allocation of Net Profits and Distribution of Dividends Allocation of Net Profits Brazilian corporate law defines the â€œnet profitâ€ as the results of the relevant fiscal year, reduced by accumulated losses of prior fiscal years, provisions for income tax and social contribution for such fiscal year, and amounts allocated to employeesâ€TM and managementâ€TMs participation in the results in such fiscal year.  The allocation of our net profits is proposed by our management and is subject to approval by our shareholders at a general shareholdersâ€TM meeting.  The discretion of our management and our shareholders to determine the allocation of our net profits, however, is limited by certain rules that determine whether such net profits should be distributed as dividends or allocated to certain profit reserves or carried forward to future fiscal years, as follows: 83


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Mandatory dividends.  Our shareholders are generally entitled to receive mandatory dividends each year, in an amount equivalent to 25% of our adjusted net profits.  Adjusted net profits are net profits following the addition or subtraction of: Â·amounts allocated to the formation of a legal reserve account; Â·amounts allocated to the formation of a contingency reserve account and the return of any amounts in any contingency reserve accounts deposited in previous years; Â·amounts allocated to the formation of a tax incentives reserve account; Â·amounts allocated to the statutory reserve, if any; Â·amounts allocated to the unrealized profit reserve; Â·amounts allocated to the retained profit reserve; and Â·reversions of the amounts allocated to the unrealized profit reserve, when realized and not absorbed by losses. The payment of our mandatory dividends may be limited to the profits actually realized in the fiscal year, if the portion of the profits not realized is allocated to the unrealized income reserve account (as described below). For the fiscal year ended 2009, we created a new dividend policy during the board of directors meeting held on August 3, 2009, pursuant to which we anticipate our dividend distribution on a quarterly basis; we have not made further alterations to the dividend distribution period. Legal reserve account.  We are required to maintain a legal reserve to which we must allocate 5% of our net profits for each fiscal year until the amount of the reserve equals 20% of our paid-in capital.  The allocation of a portion of the net profits to the legal reserve account is mandatory and it must be submitted for approval to the shareholders voting at the general shareholdersâ€TM meeting and may only be transferred to our capital account or used to offset accumulated losses, if any.  We are not required to make any allocations to our legal reserve for any fiscal year in which such reserve, when added to our capital reserves, exceeds 30% of our capital stock.  The legal reserve account is not available for the payment of dividends. Expansion Reserve.  Currently, our by-laws provide for an expansion reserve (Reserva de ExpansÃ£o) which will be made of up to 100% of the remainder adjusted net profits after the establishment of the legal, contingency and unrealized income reserves.  The total amount of this reserve may not exceed the amount corresponding to our share capital.  Our shareholders may amend our by-laws in order to establish other discretionary reserves.  The allocation of our net profits to discretionary reserve accounts may not be made if it prevents the distribution of our mandatory dividends. Contingency reserve account.  A portion of our net profits may also be allocated to a contingency reserve for an anticipated loss that is deemed probable in future years.  Any amount so allocated in a prior year must either be reversed in the fiscal year for which the loss was anticipated if the loss does not occur or be charged off if the anticipated loss occurs. Tax incentives reserve account.  According to Brazilian corporate law, our shareholdersâ€TM meeting, upon a justified proposal of our board of directors or board of executive officers or according the rules of the benefit granted, may decide to allocate a percentage of our net profits resulting from government donations or subventions for investment purposes. Retention of our net profits.  According to Brazilian corporate law, the shareholders can decide to retain a portion of the net profit provided that such portion has been contemplated in the capital budget previously approved by the shareholders. Unrealized income reserve account.  The portion of the mandatory dividends that exceeds the net profits actually realized in that year may be allocated to the unrealized income reserve account.  Unrealized income is income resulting from investments measured by equity method and/or the profits of earnings of any transaction, the financial satisfaction of which takes place in the subsequent fiscal year. 84


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The unrealized income reserve account, when realized, must be used first to offset accumulated losses, if any, and the remaining portion must be used for the payment of mandatory dividends. The balance of the profits reserve accounts, except for the contingency reserve account and unrealized income reserve account, may not exceed our share capital.  If this occurs, a shareholdersâ€TM meeting must resolve if the excess will be applied to pay in the subscribed and unpaid capital, to increase and pay in the subscribed share capital or to distribute dividends. Distribution of Dividends Under Brazilian corporate law and our by-laws, we may pay dividends only from: Â·our â€œnet profitsâ€ earned in a given fiscal year, which is our result of the relevant fiscal year, reduced by:  accumulated losses from prior fiscal years; provisions for income tax and social contribution for such fiscal year; and amounts allocated to employeesâ€TM and managersâ€TM participation in the results in such fiscal year pursuant to our Profit Sharing Program (participaÃ§Ãμes dos empregados nos resultados).  Furthermore, our by-laws allow us to implement a profit sharing plan for employees and managers and a stock option plan.  The amount to be paid in connection with both plans is set forth by our board of directors and must not exceed an amount equal to 15% of our net profits.  Under Brazilian corporate law, this profit sharing may only be paid to managers with respect to a fiscal year in which the mandatory dividend has been declared to the shareholders; Â·our net profits accrued in previous fiscal years or in any six-month and/or quarterly interim period of a fiscal year; or Â·our profit reserves set aside in previous fiscal years or in the first six months of a fiscal year.  In this case, â€œprofit reservesâ€ means any discretionary reserve account, contingency reserve account, amounts allocated to our capital expenditure budget approved by our shareholdersâ€TM resolution or unrealized income reserve account, not including the legal reserve account. Under our by-laws, the preferred shares are entitled to:  (i) priority in receiving a minimum non-cumulative annual preferred dividend equal to R$0.08 per preferred share, (ii) priority in reimbursement of capital, without premium, in case of liquidation, (iii) participation on equal terms with common shares in the distribution of bonus shares resulting from capitalization of reserves of retained earnings and (iv) receipt of the mandatory dividend that is 10% higher than the dividend of each common share, including, for purposes of this calculation, in the sum of the total dividend amount paid to the preferred shares, the amount paid as a minimum non-cumulative annual preferred dividend equal to R$0.08 per share. Consequently, under our by-laws, to the extent funds are available, dividends and/or interest on shareholdersâ€TM equity are paid in the following order:  (i) a minimum non-cumulative annual preferred dividend in respect of the preferred shares in the amount of R$0.08 per preferred share; and (ii) after common shares are assured a dividend equal to the minimum non-cumulative annual preferred dividend equal to R$0.08 per share, each preferred share receives a dividend that is 10% higher than the dividend of each common share, including, for purposes of this calculation, the amount paid as a minimum non-cumulative annual preferred dividend equal to R$0.08 per preferred share, subject to any determination by our board of directors that such distribution would be incompatible in view of our financial condition.  We are authorized, but not required, to distribute a higher amount of dividends. Dividends are generally to be declared at general shareholdersâ€TM meetings in accordance with the recommendation of the board of directors.  Our board of directors may declare interim dividends to be deducted from the accrued profits recorded in our annual or semiannual financial statements.  In addition, our board of directors may pay dividends from the net income based on our unaudited quarterly financial statements.  The interim dividends may be declared and debited to the profit reserve amount registered at the most recent annual or semiannual statement.  These semiannual or quarterly interim dividends may not exceed the amounts accounted for in our capital reserve accounts.  Any payment of interim dividends may be set off against the amount of mandatory dividends relating to the net profits earned in the year the interim dividends were paid. 85


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Distributions of interest on our shareholdersâ€TM equity may constitute an alternative form of payment to shareholders.  These payments may qualify as part of the mandatory dividend at their net value.  Please see â€œItem 10E. Taxationâ€”Brazilian Tax Considerations.â€ Under Brazilian corporate law, dividends must be available to the shareholders within 60 days after the date the dividends were declared to the holder of record on the declaration date.  The amount is subject to monetary restatement, in accordance with recommendation of our board of directors and Brazilian corporate law. A shareholder has a three-year period following the dividend payment date to claim a dividend in respect of its shares.  After the expiration of that period, we are no longer liable for the payment of such dividend. Our calculation of â€œnet profitsâ€ and allocations to reserves for any fiscal year are determined on the basis of financial statements. Under Brazilian corporate law, however, we are allowed to suspend the distribution of the mandatory dividends in any year in which our management report to our shareholdersâ€TM general meeting that the distribution would be incompatible with our financial condition.  Such suspension is subject to review by the fiscal council, if it is in place.  In addition, in case of public companies, like us, our management must file a justification for such suspension with the Brazilian Securities Commission within five days from the date of the relevant general shareholdersâ€TM meeting.  In case the mandatory dividend is not paid, the unpaid amount shall be attributed to a special reserve account and, if not absorbed by subsequent losses, those funds shall be paid out as dividends as soon as the financial condition of the company permits. Conversion of Common Shares into Preferred Shares Our by-laws do not provide for the conversion of preferred shares into common shares.  In accordance with our by-laws, our shareholders may at any time convert our common shares into preferred shares, provided that such common shares are fully paid and that the total of preferred shares issued does not exceed the limit of two-thirds of all outstanding shares.  The requests for conversion must be submitted in writing to our board of executive officers and subsequently ratified at the next board of directors meeting. Interest on Shareholdersâ€TM Equity We are allowed to pay interest on shareholdersâ€TM equity as an alternative form of payment to shareholders, which payment may be treated as a deductible expense for income tax and social contribution purposes.  Payments of interest on shareholdersâ€TM equity may be made at the discretion of our board of directors, subject to the approval of our shareholders in the shareholdersâ€TM meeting.  The amount paid to shareholders as interest on shareholdersâ€TM equity, net of any withholding tax, may be included as part of the mandatory distribution.  This interest is limited to the daily pro rata variation of the TJLP, as determined by the Central Bank from time to time, and cannot exceed, for tax purposes, the greater of (i) 50% of net income (after deduction of social contribution on profits and before taking such distribution and any deduction for corporate income tax) for the year in respect of which the payment is made; or (ii) 50% of the sum of retained profits and profit reserves in the beginning of the period with respect to which the payment is made. Distribution of interest on shareholdersâ€TM equity may also be accounted for as our tax deductible expense, and any payment of interest on preferred shares to shareholders, whether Brazilian residents or not, including holders of ADSs, is subject to Brazilian withholding tax at the rate of 15% or at the rate of 25% in case the beneficiary is resident and domiciled in a â€œtax haven,â€ a country or location that does not impose income tax or where the maximum income tax rate is lower than 20% or where the local legislation imposes restrictions on disclosing the shareholding composition or the ownership of the investment.  See â€œItem 10E. Taxationâ€”Brazilian Tax Considerationsâ€”Distribution of Interest on Shareholdersâ€TM Equity.â€  To the extent we distribute interest on shareholdersâ€TM equity in any year, which distribution is not accounted for as part of the mandatory distribution, a Brazilian withholding tax would apply and we would not be required to make a gross-up. 86


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Board of Directors According to Brazilian corporate law, our officers and directors are prohibited from voting on, or acting in, matters in which their interests conflict with ours. Our by-laws provide that the shareholders are responsible for determining the global remuneration of the members of our management bodies.  There are no specific provisions regarding the directorsâ€TM power to vote on their compensation in the absence of an independent quorum. With respect to the borrowing powers of the board of directors, the board of directors has the power to authorize the borrowing of funds.  Other financing arrangements, including bank loans, may be entered into by us upon the joint signatures of (i) one executive officer, acting jointly with the chief executive officer or other executive officer indicated by the board of directors, (ii) one officer and one attorney-in-fact, or (iii) two attorneys-in-fact. There is no requirement under Brazilian corporate law or our by-laws that directors retire upon reaching a certain age.  In addition, our by-laws do not provide for the re-election of directors at staggered intervals. For a discussion of our board of directors, see â€œItem 6A. Directors and Senior Managementâ€”Board of Directorsâ€ and â€œItem 6C. Board Practices.â€ Voting Rights Each common share entitles the holder thereof to one vote at our shareholdersâ€TM meetings.  Preferred shares do not entitle the holder to vote. Brazilian corporate law provides that non-voting or restricted voting shares (such as our preferred shares) entitled to fixed or minimum dividends acquire unrestricted voting rights if the company has failed for three consecutive fiscal years (or for any shorter period set forth in a companyâ€TMs by-laws) to pay any fixed or minimum dividend to which such shares are entitled, and such voting rights exist until the payment thereof is made.  Our by-laws do not set forth any shorter period. In any circumstance in which holders of preferred shares are entitled to vote, each preferred share will entitle the holder thereof to one vote. Any change in the preferences or advantages of the preferred shares, or the creation of a class of shares having priority or preference over the existing preferred shares, would require, in addition to the affirmative vote of shareholders holding the majority of our common shares in a shareholdersâ€TM meeting, the prior approval or the ratification by holders of a majority of the concerned outstanding preferred shares, voting as a class at a special meeting of holders of preferred shares.  This meeting would be called by notice published at least three times in theDiÃ¡rio Oficial do Estado de SÃ£o Paulo, as well as in a newspaper of wide circulation in SÃ£o Paulo, at least 15 days prior to the meeting, but would not generally require any other form of notice.We have designated newspapers such asFolha de SÃ£o Paulo, Valor EconÃ ́mico, Estado de S. PauloorBrasil EconÃ ́micofor this purpose.In addition to these newspapers, we also have to publish the notice on the website of CVM or BM&FBOVESPA and our website. According to Brazilian corporate law, (i) shareholders that jointly hold preferred shares that represent at least 10% of the total capital stock, and (ii) holders of common shares that are not controlling shareholders and represent, at least 15% of the total voting stock, will have the right to elect one member of the board of directors and an alternate.  In case non-controlling shareholders do not achieve the aforementioned percentage, they may combine their participation and, if they jointly hold at least 10% of the total capital, they may elect a member of the board of directors and an alternate director.  Only shareholders that prove they have been holding the shares for at least three continuous months may exercise such rights. 87


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Shareholdersâ€TM Meetings Under Brazilian corporate law, at an annual general meeting of shareholders, or an extraordinary general meeting, convened and held in accordance with such law and our by-laws, the shareholders are empowered to decide all matters relating to our business purposes. In accordance with Brazilian corporate law, shareholders voting at our general meeting have the power, among others, to: Â·amend our by-laws; Â·delist from CVM (to become a private company); Â·approve the issuance of convertible debentures and secured debentures; Â·elect or dismiss members of the board of directors and of the fiscal council, at any time; Â·receive the managementâ€TMs accounts and approval of our financial statements, including the allocation of net profits; Â·suspend the rights of a shareholder who has violated Brazilian corporate law or our by-laws; Â·approve the valuation of assets offered by a shareholder in consideration for the subscription of shares of our capital stock; Â·approve the transformation of the corporate form or a merger with or into another company, spin-off, consolidation or split; and Â·authorize the management to petition for bankruptcy, to declare our company insolvent and to request procedures involving protection from creditors similar in nature to reorganization under the U.S. Bankruptcy Code. In addition, our by-laws also establish that a general meeting of our shareholders will have the following duties: Â·approval of our dissolution or liquidation and the appointment and dismissal of the respective liquidator and review of the accounts and reports; Â·appointment and removal of the chairman and the vice-chairman of our board of directors; Â·establishment of the global annual compensation of the members of any management body of the Company including fringe benefits; Â·approval of or amendment to our annual investment-plan; Â·approval of any issuance of  common or preferred shares up to the limit of our authorized capital (400,000,000 shares), above and any bonuses, debentures convertible into its shares or with secured guarantee or securities or other rights or interests which are convertible or exchangeable into or exercisable for its shares, or any other options, warrants, rights, contracts or commitments of any character pursuant to which the Company is or may be bound to issue, transfer, sell, repurchase or otherwise acquire any shares and the terms and conditions of subscription and payment; and Â·approval of any delisting from trading on any stock exchange or filings for new listings. According to Brazilian corporate law, neither a companyâ€TMs by-laws nor actions taken at a shareholdersâ€TM meeting may deprive a shareholder of certain specific rights, such as: Â·the right to participate in the distribution of profits; Â·the right to participate equally and ratably in any remaining residual assets in the event of liquidation of the company; Â·the right to preemptive rights in the event of subscription of shares, convertible debentures or subscription warrants, except in some specific circumstances under the Brazilian law described under â€œâ€”Preemptive Rights on Increase in Preferred Share Capital;â€ 88


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Â·the right to withdraw from the company in the cases specified under Brazilian corporate law, see â€œâ€”Withdrawal Rights;â€ and Â·the right to supervise, pursuant to Brazilian corporate law, the management of the company. Quorum Generally, Brazilian corporate law provides that a quorum at a shareholdersâ€TM meeting consists of shareholders representing at least 25% of a companyâ€TMs issued and outstanding voting capital on the first call and, if that quorum is not reached, any percentage on the second call.  If the shareholders are called to amend our by-laws, a quorum at a shareholdersâ€TM meeting consists of shareholders representing at least two-thirds of our issued and outstanding voting capital on the first call and any percentage on the second call. As a general rule, the affirmative vote of shareholders representing at least the majority of our issued and outstanding common shares present in person or represented by proxy at a shareholdersâ€TM meeting is required to ratify any proposed action, and abstentions are not taken into account.  However, the affirmative vote of shareholders representing more than one-half of our issued and outstanding voting capital is required to: Â·modify a preference, privilege or condition of redemption or amortization conferred on one or more classes of preferred shares, or create a new class with greater privileges than the existing classes of preferred shares; Â·reduce the percentage of mandatory dividends; Â·change our corporate purpose; Â·merge us into or with another company; Â·spin off a portion of our assets or liabilities; Â·approve our participation in a group of companies (as defined in Brazilian corporate law); Â·apply for cancellation of any voluntary liquidation; Â·merge all our shares into another Brazilian company, so that we become a wholly-owned subsidiary of such company; and Â·approve our dissolution. Notice of our shareholdersâ€TM meetings Notice of our shareholdersâ€TM meetings must be published at least three times in the DiÃ¡rio Oficial do Estado de SÃ£o Paulo, and the newspapersFolha de SÃ£o Paulo, Valor EconÃ ́mico, Estado de S. PauloorBrasil EconÃ ́mico.  The first notice must be published no later than 15 days before the date of the meeting on the first call, and no later than eight days before the date of the meeting on the second call.  However, in certain circumstances, the CVM may require that the first notice be published 30 days in advance of the meeting. Conditions of admission Shareholders attending a shareholdersâ€TM meeting must produce proof of their status as shareholders and proof that they hold the shares they intend to vote.  A shareholder may be represented at a shareholdersâ€TM meeting by a proxy appointed less than a year before, which must be a shareholder, a corporation officer, a lawyer or a financial institution.  Investment funds must be represented by their manager. Preemptive Rights on Increase in Preferred Share Capital Under Brazilian corporate law, each shareholder has a general preemptive right to subscribe for shares in any capital increase, in proportion to its shareholding, except in the event of the grant and exercise of any option to acquire shares of our capital stock under our stock option program.  A shareholder has a general preemptive right to subscribe for debentures convertible into our shares and subscription warrants that we may issue.  A minimum


period of 30 days following the publication of the notice of a capital increase must be respected to exercise such right, except if otherwise determined by the by-laws or the shareholder meeting, and the right is negotiable. 89


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According to Brazilian corporate law, capital increases that do not change the proportion between the existing classes and types of shares entitle the shareholders to exercise their preemptive rights solely with respect to shares of equal class and type as the shares they already hold.  However, if an issuance of shares changes the existing proportion of classes and types of shares, then (i) the shareholders may exercise their preemptive rights with respect to shares of equal class and type as the shares they already hold and, (ii) if necessary to maintain such shareholdersâ€TM ownership proportional with regard to the total capital stock, they may subscribe for other classes or types of shares. Our board of directors is authorized to eliminate preemptive rights with respect to the issuance of shares, debentures convertible into shares and subscription warrants, provided that the distribution of such shares is effected (i) through a stock exchange or in a public offering or (ii) through an exchange of shares in a public offering, the purpose of which is to acquire control of another company. In the event of a capital increase, that maintains or increases the proportion of capital represented by preferred shares, holders of ADSs, may, under certain circumstances described above, exercise preemptive rights to subscribe newly issued preferred shares.  In the event of a capital increase which would reduce the proportion of capital represented by preferred shares, holders of ADSs, may under certain circumstances described above, have preemptive rights to subscribe for preferred shares, in proportion to their shareholdings and for common shares only to the extent necessary to prevent dilution of their interest in us.  For risks associated with preemptive rights, see â€œItem 3D. Risk Factorsâ€”Risks Relating to the Preferred Shares and ADSsâ€”You might be unable to exercise preemptive rights with respect to the preferred shares underlying the ADSs.â€ Withdrawal Rights Neither the common shares nor the preferred shares are redeemable.  Any of our shareholders who dissent from certain actions taken by our shareholders in a shareholdersâ€TM meeting have the right to withdraw from our company and to receive the value of their shares.  According to Brazilian corporate law, the withdrawal rights of a dissenting shareholder may be exercised in the event that our shareholders representing at least one-half of our issued and outstanding voting capital authorizes: i.the creation of preferred shares or the disproportional increase of an existing class of preferred shares relative to the other classes of shares, unless such action is provided for or authorized by our by-laws; ii.the modification of a preference, privilege or condition of redemption or amortization conferred on one or more classes of preferred shares, or the creation of a new class with greater privileges than the existing classes of preferred shares; iii.a reduction in the mandatory distribution of dividends; iv.a change in our corporate purposes; v.the transfer of all of our shares to another company in order to make us a wholly-owned subsidiary of such company or vice versa; vi.our merger into or with another company, including if we are merged into one of our controlling companies, or are consolidated with another company; vii.our participation in a group of companies as defined under Brazilian corporate law and subject to the conditions set forth therein; viii.a spin-off of our company if it entails a change in the corporate purpose, a reduction in mandatory dividends or the participation in a centralized group of companies; or ix.the transformation of us into another type of company. Dissenting shareholders also have a right of withdrawal in the event that the entity resulting from (a) a transfer of all of our shares to another company in order to make us a wholly-owned subsidiary of such company or vice versa, (b) a spin-off or, (c) a merger or a consolidation of a Brazilian publicly listed company, fails to become a


Brazilian publicly listed company within 120 days of the general shareholdersâ€TM meeting in which such decision was taken. 90


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The right to withdraw lapses 30 days after publication of the minutes of the relevant shareholdersâ€TM meeting.  In items (i) and (ii) above, the resolution will be effective only upon the prior approval or confirmation within one year by the preferred shareholders, which must be made at a special meeting, in which case the 30-day term is counted from the date the minutes of the special meeting are published.  In any event, we are entitled to reconsider any action giving rise to withdrawal rights within ten days following the expiration of the 30-day term mentioned above, if the withdrawal of shares of dissenting shareholders would jeopardize our financial stability. In addition, the rights of withdrawal in items (iv), (v), (vii) and (viii), above, may not be exercised by holders of shares if such shares have (a) liquidity, when such shares are part of the BM&FBOVESPA Index, or part of any other stock exchange index in Brazil or in the world, as defined by the CVM, and (b) dispersion, when the controlling shareholder or other companies under the same control has less than 50% of the shares or class of shares. Our preferred shares may be withdrawn at their book value, determined on the basis of the last balance sheet approved by the shareholders.  If the shareholdersâ€TM meeting giving rise to withdrawal rights occurs more than sixty days after the date of the last approved balance sheet, a shareholder may demand that its shares be valued on the basis of a special balance sheet that is of a date within sixty days of such shareholdersâ€TM meeting.  In this case, we must immediately pay 80% of the book value of the shares according to the most recent balance sheet approved by our shareholders, and the balance must be paid within 120 days after the date of the resolution of the relevant shareholdersâ€TM meeting. Form and Transfer of Shares Our shares are in book-entry form, and the transfer of such shares is made by the registrar in our books, by debiting the share account of the transferor and crediting the share account of the transferee.  We maintain book entry form services with the Custodian, which performs all the services of safekeeping and transfer of our shares and related services. Transfer of shares by a foreign investor is made in the same way and is requested by the investorâ€TMs local agent on the investorâ€TMs behalf.  If the original investment is registered with the Central Bank pursuant to Resolution 2,689 of CMN, the foreign investor should also seek amendment through its local agent, if necessary, of the electronic registration to reflect the new ownership. BM&FBOVESPA operates a clearing house through CBLC.  CBLC is also responsible for settlement and custody of the shares.  The payment of dividends, bonuses and other corporate events is managed by â€œCentral DepositÃ¡riaâ€ a branch of BM&FBOVESPA. Other Dispositions In addition to the provisions already described in this annual report, Brazilian corporate law and current regulations set forth, among others: i.upon a sale of control, the acquirer is required to launch a tender offer to purchase all minority voting shares at a price equal to at least 80% of the control price; ii.if provided for in the by-laws, disputes among our shareholders will be subject to arbitration; our by-laws currently do not provide for arbitration; iii.upon the occurrence of a tender offer aiming at delisting our company or through which our controlling shareholders acquire more than one-third of the float shares, the purchase price will be equal to the fair value of the shares taking into account the total number of outstanding shares; iv.members of our board of directors elected by the non-controlling shareholders will have the right to veto the choice of the independent accountant of the controlling shareholders; and v.the chairman of any shareholdersâ€TM or board of directorsâ€TM meeting will disregard any vote that is rendered against provisions of any shareholdersâ€TM agreement if that shareholdersâ€TM agreement has been duly filed with us.  91


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10C.Material Contracts Casas Bahia Below we summarize the shareholdersâ€TM agreement entered into among CBD, the Klein Family and Via Varejo. The summary is qualified by reference to the agreements that are filed as exhibits to this annual report. Pursuant to the shareholdersâ€TM agreement CBD will have the right to elect the majority of members of Via Varejoâ€TMs board of directors and the partners (represented by the Klein Family) of Casa Bahia Comercial will have the right to elect a certain number of members corresponding to their ownership interest in Via Varejoâ€TMs capital stock if Casa Bahia Comercial holds, at least, 25% of shares bound to the shareholdersâ€TM agreement.  The partners of Casa Bahia Comercial shall appoint, at least, two members of Via Varejoâ€TMs board of directors if they hold, at least, 20% of the shares bound to the shareholdersâ€TM agreement. On October 17, 2013, CBD, Via Varejo and Nova HoldCo entered into a stock purchase agreement pursuant to which CBD acquired 6.2% of Nova HoldCoâ€TMs capital stock from Via Varejo for R$80.0 million and 1.96% of Nova HoldCoâ€TMs capital stock from minority shareholders for R$25 million.  As a result, Nova HoldCo became a subsidiary of CBD of which CBD holds 52.06% of its capital stock, Via Varejo holds 43.9% and the remaining 4.04% is held by minority shareholders.  This transaction had no impact on our consolidation of Nova HoldCoâ€TMs results of operations and financial condition on our financial statements, since we previously held, through Via Varejo, the indirect control of Nova HoldCo. On December 27, 2013, our subsidiary Via Varejo concluded its public offering in Brazil with selling efforts to qualified institutional buyers in the United States and to institutions and other investors who were not U.S. persons elsewhere, the offering raised approximately R$3 billion in proceeds.  The public offering was structured as a secondary public offering of Units, each Unit consisting of one common share and two preferred shares of Via Varejo. We sold a total of 38.9 million Units for approximately R$896.8 million, which reduced our shareholding in Via Varejo to 62.25% of the common shares and 43.35% of the total capital stock.  The Klein Family sold more than 23.64% of shares of Via Varejoâ€TMs capital stock.  As of the date of this annual report, the Klein Family owns 27.31% of Via Varejoâ€TMs total capital stock. As a consequence of the reduction of its participation in Via Varejoâ€TMs capital stock, the Klein Family no longer has certain rights under the shareholdersâ€TM agreement entered into by and among us, the Klein Family and Via Varejo, among which are Mr. Michael Kleinâ€TMs appointment to the position of chairman of the board of directors of Via Varejo and the right to consent with respect to Via Varejoâ€TMs vote at shareholdersâ€TM meetings of its subsidiary Nova HoldCo or by members of the board of directors of Nova HoldCo regarding certain matters.  In addition, the Klein Family has the right to appoint only two members of the board of directors of Via Varejo. 10D.Exchange Controls The ownership of preferred or common shares by individuals or legal entities domiciled outside Brazil is subject to certain conditions established under Brazilian Law. The right to convert dividend payments and proceeds from the sale of common shares or preferred shares into foreign currency and to remit those amounts outside Brazil is subject to exchange control restrictions and foreign investment legislation which generally requires, among other things, obtaining an electronic registration with the Central Bank. Resolution No. 1,927 of the CMN, which is the restated and amended Annex V to Resolution No. 1,289 of the CMN, or the Annex V Regulations, provides for the issuance of depositary receipts in foreign markets in respect of shares of Brazilian issuers.  We filed an application to have the ADSs approved under the Annex V Regulations by the Central Bank and the CVM, and we received final approval before the offering of the preferred shares underlying the ADSs in May 1997. 92


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An electronic registration, which replaced the amended certificate of registration, was issued in the name of the depositary with respect to the ADSs and is maintained by the custodian on behalf of the depositary. This electronic registration was carried on through the Central Bankâ€TMs system (Sistema do Banco Central), or SISBACEN, a database of information provided by financial institutions to the Central Bank.  Pursuant to the electronic registration, the custodian is able to convert dividends and other distributions with respect to the preferred shares represented by the ADSs into foreign currency and remit the proceeds outside Brazil.  In the event that a holder of ADSs exchanges those ADSs for preferred shares, that holder will be entitled to continue to rely on the depositaryâ€TMs electronic registration for only five business days after that exchange, following which that holder must seek to obtain its own electronic registration.  Thereafter, unless the preferred shares are held pursuant to Resolution No. 2,689 of the CMN, dated as of January 26, 2000, as amended, a holder of preferred shares who applies for and obtains a new electronic registration may not be able to obtain and remit abroad U.S. dollars or other foreign currencies upon disposal of the preferred shares, or distributions with respect thereto, and generally will be subject to a less favorable tax treatment on the proceeds arising from any sale of the preferred shares.  In addition, if the foreign investor is domiciled in a Low or Nil Taxation Jurisdiction (as defined under â€œItem 10E. Taxationâ€”Brazilian Tax Considerationsâ€â€), the investor will also be subject to a less favorable tax treatment, even if its registry before the Central Bank is in accordance with the provisions of Resolution No. 2,689.  See â€œItem 10E. Taxationâ€”Brazilian Tax Considerations.â€ Under Resolution No. 2,689, foreign investors may invest in almost all financial assets and engage in almost all transactions available in the Brazilian financial and capital markets, provided that the requirements described below are fulfilled.  In accordance with Resolution 2,689, the definition of foreign investor includes individuals, legal entities, mutual funds and other collective investment entities domiciled or headquartered outside Brazil. Pursuant to Resolution No. 2,689, foreign investors must fulfill the following requirements before engaging in financial transactions: i.appoint at least one representative in Brazil with powers to perform actions relating to the foreign investment; ii.appoint an authorized custodian in Brazil for the investments, which must be a financial institution duly authorized by the Central Bank and the CVM; iii.complete the appropriate foreign investor registration form; iv.register as a foreign investor with the CVM; and v.register the foreign investment with the Central Bank. Securities and other financial assets held by foreign investors pursuant to Resolution No. 2,689 must be registered or maintained in deposit accounts or under the custody of an entity duly licensed by the Central Bank or the CVM.  In addition, securities trading is restricted to transactions carried out on stock exchanges or through organized over-the-counter markets licensed by the CVM, except for subscription, bonification, conversion of debentures into shares, securities indexes, purchase and sale of investment funds quotas and, if permitted by the CVM, going private transactions, canceling or suspension of trading.  Moreover, the offshore transfer or assignment of the securities or other financial assets held by foreign investors pursuant to Resolution No. 2,689 are prohibited, except for transfers resulting from a corporate reorganization, or occurring upon the death of an investor by operation of law or will. Investors under Resolution No. 2,689 who are not resident in a tax haven jurisdiction (i.e., a country that does not impose income tax or where the maximum income tax rate is lower than 20%) are entitled to favorable tax treatment.  See â€œItem 10E. Taxationâ€”Brazilian Tax Considerations.â€ 10E.Taxation This summary contains a description of the principal Brazilian and U.S. federal income tax consequences of the purchase, ownership and disposal of preferred shares or ADSs, but it does not purport to be a comprehensive


description of all the tax considerations that may be relevant to these matters based upon the particular circumstances of a holder. 93


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This summary is based upon tax laws of Brazil and the federal income tax laws of the United States in effect as of the date hereof, which laws are subject to change (possibly with retroactive effect) and differing interpretations.  This summary is also based upon the representations of the depositary and on the assumption that each obligation in the Amended and Restated Deposit Agreement, dated as of May 28, 1997, among us, the depositary and the owners from time to time of ADRs, and any related documents, will be performed in accordance with its terms. Although there is presently no income tax treaty between Brazil and the United States, the tax authorities of the two countries have had discussions that may culminate in such a treaty.  No assurance can be given, however, as to whether or when a treaty will enter into force or how such a treaty would affect a U.S. holder of preferred shares or ADSs. Brazilian Tax Considerations The following discussion summarizes the principal Brazilian tax consequences of the acquisition, ownership and disposal of preferred shares or ADSs by a holder that is not domiciled in Brazil for purposes of Brazilian taxation (a â€œNon-Brazilian Holderâ€).  It is based on Brazilian law as currently in effect, which is subject to change, possibly with retroactive effect, and to differing interpretations.  Any change in such law may change the consequences described below.  Each Non-Brazilian Holder should consult his or her own tax adviser concerning the Brazilian tax consequences of an investment in preferred shares or ADSs. Taxation of Dividends Dividends based on profits generated after January 1, 1996, including dividends paid in kind, payable by us to the depositary in respect of preferred shares underlying ADS or to a Non-Brazilian Holder in respect of preferred shares, are exempt from withholding income tax. Beginning in 2008, the Brazilian accounting rules were significantly modified in order to align them with IRFS. After the issuance of such new rules, a transitory tax regime (regime tributÃ¡rio de transiÃ§Ã£o), or RTT, was created mainly to ensure neutrality of the new accounting rules in connection with the calculation and payment of corporate taxes on income. Thus, according to the RTT, Brazilian companies had, only for purposes of calculation of their taxable profit, to use the accounting rules and criteria that existed until December 2007. As a result of the application of the RTT, the accounting profit of a Brazilian company might be significantly higher (or lower) than its taxable profit. Although this specific matter has not been expressly regulated by law, the Brazilian tax authorities issued a normative instruction stating that the amount of dividends paid in excess of the profit of a company determined as per the accounting rules and criteria that existed until December 2007 should be subject to taxation. Law 12,973 from May 13, 2014, modified the treatment applicable to foreign source income derived by Brazilian-owned foreign subsidiaries and associated companies. As of January 1, 2015, foreign source income earned by Brazilian-owned foreign subsidiaries is taxable in Brazil in a year-end basis irrespective of the distribution of such income in the form of dividends or capital gains. Foreign source income earned by Brazilian-owned foreign associated companies is only taxable in Brazil upon distribution. A foreign tax credit related to the income tax paid in the country of residence of the foreign subsidiary or associated company is nevertheless granted to the Brazilian parent company provided certain requirements are fulfilled. As from January 1, 2015, therefore, foreign source income earned by our foreign subsidiaries and associated companies will be subject to Brazilian income taxation pursuant to the recently-introduced rules brought forth by Law 12,973/14 and applicable regulations. Distribution of Interest on Shareholdersâ€TM Equity In accordance with the Law No. 9,249, dated December 26, 1995, as amended, Brazilian corporations may make payments to shareholders characterized as distributions of interest on shareholderâ€TMs equity as an alternative to making dividend distributions.  Such interest is calculated by reference to the TJLP (long term interest rate) as determined by the Central Bank from time to time and cannot exceed the greater of: 94


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i.50% of the net income (before taking the distribution and any deductions for calculating income taxes into account), as measured in accordance with generally accepted accounting principles in Brazil for the period in respect of which the payment is made; or ii.50% of retained earnings for the year preceding the year in which the payment is made, as measured in accordance with generally accepted accounting principles in Brazil. Payments of interest on shareholderâ€TMs equity to a Non-Brazilian Holder may be deducted for purposes of calculating Brazilian corporate income tax and social contribution on net profits as far as the limits described above are observed.  Such payments are subject to withholding income tax at the rate of 15%, or 25% if the Non-Brazilian Holder is domiciled in a country or location that does not impose income tax or where the maximum income tax rate is lower than 20% (â€œLow or Nil Taxation Jurisdictionâ€).  These payments may be included, at their net value, as part of any mandatory dividend.  To the extent that such payments are accounted for as part of the mandatory dividend, under current Brazilian law, we are obliged to distribute to shareholders an additional amount sufficient to ensure that the net amount received by the shareholders, after payment by us of applicable Brazilian withholding income tax, plus the amount of declared dividends, is at least equal to the mandatory dividend.  The distribution of interest on shareholdersâ€TM equity is proposed by our board of directors and subject to subsequent declaration by the shareholders at the general meeting. Taxation of Gains According to Law No. 10,833 of December 29, 2003, capital gains realized on the disposal of assets located in Brazil by a Non-Brazilian Holder, whether to other non-Brazilian resident or to a Brazilian resident are subject to taxation in Brazil.  In this sense, on the disposal of the preferred shares, as they are assets located in Brazil, the Non-Brazilian Holder will be subject to income tax on the gains assessed, following the rules described below, regardless of whether the disposal is conducted in Brazil or abroad and with a Brazilian resident or not. Regarding the ADSs, although the matter is not free from doubt, arguably the gains realized by a Non-Brazilian Holder on the disposal of ADSs to another non-Brazilian resident are not taxed in Brazil, based on the argument that ADSs would not constitute assets located in Brazil for purposes of Law No. 10,833/03.  However, we cannot assure you of how Brazilian courts would interpret the definition of assets located in Brazil in connection with the taxation of gains realized by a Non-Brazilian Holder on the disposal of ADSs to another non-Brazilian resident.  As a result, gains on a disposal of ADSs by a Non-Brazilian Holder to a Brazilian resident, or even to a non-Brazilian resident in the event that Brazilian courts determine that ADSs would constitute assets located in Brazil, may be subject to income tax in Brazil according to the rules described below. Although there is no clear regulatory guidance, the withdrawal of ADSs in exchange for preferred shares should not be subject to Brazilian income tax, since as described above, ADSs would not constitute assets located in Brazil for purposes of Law No. 10,833/03.  With reference to the deposit of preferred shares in exchange for ADSs, the difference between the acquisition cost of the preferred shares and the market price of the preferred shares may be subject to Brazilian income tax at the rate of 15% or 25%, in case of a resident in a Low or Nil Taxation Jurisdiction.  In some circumstances, there may be arguments to claim that this taxation is not applicable in the case of a Non-Brazilian Holder that is a 2,689 Holder (as defined below) and is not a resident in a Low or Nil Taxation Jurisdiction. Under Brazilian law, income tax rules on such gains can vary, depending on the domicile of the Non-Brazilian Holder, the type of registration of the investment by the Non-Brazilian holder before the Central Bank and how the disposal is carried out, as described below. Capital gains assessed by a Non-Brazilian Holder on a disposal of preferred shares carried out on the Brazilian stock exchange (which includes the transactions carried out on the organized over-the-counter market) are: i.exempt from income tax when assessed by a Non-Brazilian Holder that (1) has registered its investment in Brazil with the Central Bank under the rules of Resolution No. 2,689, of January 26, 2000, (â€œ2,689 Holderâ€) and (2) is not a resident in a Low or Nil Taxation Jurisdiction; or ii.subject to income tax at a rate of 15% in any other case, including a case of gains assessed by a Non-Brazilian Holder that is not a 2,689 Holder, or is a resident in a Low or Nil Taxation Jurisdiction. 95


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In these cases, a withholding income tax of 0.005% of the sale value will be applicable and can be later offset with the eventual income tax due on the capital gain. Any other gains assessed on a disposal of the preferred shares that is not carried out on a Brazilian stock exchange are subject to income tax at the rate of 15%, except for a resident in a Low or Nil Taxation Jurisdiction or yet where the local legislation imposes restrictions on the disclosure of the shareholding composition, of the ownership of the investment or of the identity of the effective beneficiary of the income attributed to non-residents, which, in this case, is subject to income tax at the rate of 25%.  If these gains are related to transactions conducted on the Brazilian non-organized over-the-counter market with intermediation, the withholding income tax of 0.005% shall also be applicable and can be offset against the eventual income tax due on the capital gain. In the case of a redemption of preferred shares or ADSs or a capital reduction by a Brazilian corporation, such as our company, the positive difference between the amount received by a Non-Brazilian Holder and the acquisition cost of the preferred shares or ADSs redeemed is treated as capital gain derived from the sale or exchange of shares not carried out on a Brazilian stock exchange market and is therefore subject to income tax at the rate of 15%, or 25%, as the case may be. As a general rule, the gains realized as a result of a disposal of preferred shares or ADSs is the positive difference between the amount realized on the sale or exchange of the shares and their acquisition cost. There is no assurance that the current preferential treatment for a Non-Brazilian Holder of ADSs and 2,689 Holder of preferred shares will continue or that it will not be changed in the future. Any exercise of preemptive rights relating to the preferred shares or ADSs will not be subject to Brazilian income tax.  Any gain on the sale or assignment of preemptive rights relating to the preferred shares or ADSs by a Non-Brazilian Holder will be subject to Brazilian taxation at the same rate applicable to the sale or disposal of preferred shares. Discussion on Low or Nil Taxation Jurisdictions In certain circumstances, the Brazilian tax legislation imposes higher taxation on transactions that are carried out with entities located in jurisdictions considered to maintain favorable tax regimes (the above mentioned Low or Nil Taxation Jurisdiction). On June 24, 2008, Law No. 11,727 enlarged the scope of Low or Nil Taxation Jurisdiction (by adding the fourth paragraph to article 24 of Law No. 9,430/96 and introduced a new concept of â€œPrivileged Tax Regime.â€  According to the enacted article 24-A of Law No. 9,430/96 it is considered as such the tax regime that (i) does not tax income or taxes it at a maximum rate lower than 20%; or (ii) grants tax benefits to non-resident entities or individuals (a) without the requirement to carry out a substantial economic activity in the country or dependency or (b) contingent to the non-exercise of a substantial economic activity in the country or dependency; or (iii) does not tax or taxes the income generated abroad at a maximum rate lower than 20%; or (iv) does not provide access to information related to shareholding composition, ownership of assets and rights or economic transactions carried out. The recent enactment of the Normative Ruling no. 1,037/10, which sets forth the updated list of countries or jurisdictions deemed by Brazilian tax authorities to provide favorable taxation and privileged tax regimes, made evident the acknowledgement by tax authorities that tax legislation does not provide for a singular concept of â€œtax haven.â€  Rather, there are cases of Low or Nil Taxation Jurisdiction and there are cases of Privileged Tax Regime, which must be analyzed separately.  The provisions of Law No. 11,727/08 that refer to the â€œPrivileged Tax Regimeâ€ came into effect on January 1, 2009. In principle, the best interpretation of Law No. 11,727/08 lead us to conclude that the new concept of â€œprivileged tax regimeâ€ should be solely applied for purposes of transfer pricing rules in export and import transactions (Law No. 9,430/96) and thin capitalization rules (Law No. 12,249/10). Thus, to income and gains realized by foreign investors that invest in the Brazilian financial and capital markets (2,689 Holder), the relevant concept is the one that makes reference to â€œcountries that tax income at a rate lower


than 20%,â€ as provided under Law No. 9,959/00 (i.e. only Low or Nil Taxation Jurisdiction) and the countries listed in the article one of the Normative Ruling No. 1,037/10. 96


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Other Brazilian Taxes There are no Brazilian federal inheritance, gift or succession taxes applicable to the ownership, transfer or disposal of preferred shares or ADSs by a Non-Brazilian Holder. Gift and inheritance taxes, however, may be levied by some states on gifts made or inheritances bestowed by the Non-Brazilian Holder to individuals or entities resident or domiciled within such states in Brazil.  There is no Brazilian stamp, issue, registration or similar taxes or duties payable by a Non-Brazilian Holder of preferred shares or ADSs. Taxation of Foreign Exchange Transactions (â€œIOF/Exchangeâ€) Pursuant to Decree No. 6,306/07, the conversion into foreign currency or the conversion into Brazilian currency of the proceeds received or remitted by a Brazilian entity from a foreign investment in the Brazilian securities market, including those in connection with the investment by a Non-Brazilian Holder in the preferred shares and ADSs may be subject to the Tax on Foreign Exchange Transactions, or IOF/Exchange.  Currently applicable rate for almost all foreign currency exchange transactions is 0.38%.  However, foreign currency exchange transactions carried out for the inflow of funds in Brazil for investment in the Brazilian financial and capital market made by a foreign investor (including a Nonâ€‘Brazilian Holder, as applicable) are subject to IOF/Exchange at 0% rate. The IOF/Exchange rate will be also 0% for the outflow of resources from Brazil related to these type of investments, including payments of dividends and interest on shareholdersâ€TM equity and the repatriation of funds invested in the Brazilian market. Furthermore, the IOF/Exchange is currently levied at a 0% rate on the withdrawal of ADSs into shares. In any case, the Brazilian Government is permitted to increase at any time the rate to a maximum of 25%, but only in relation to future transactions. Tax on Bonds and Securities Transactions (â€œIOF/Bondsâ€) Pursuant to Decree 6,306/07, the Tax on Bonds and Securities Transactions (â€œIOF/Bondsâ€) may be imposed on any transactions involving bonds and securities even if the transactions are performed on a Brazilian stock exchange.  The rate of this tax for transactions involving preferred shares is currently 0% but the Brazilian government may increase such rate up to 1.5% per day, but only with respect to future transactions.  Currently, the issuance of depositary receipts traded outside of Brazil which underlying shares are issued by a Brazilian company and listed on a Brazilian stock exchange are also subject to IOF/Bonds at 0% rate.  Any increase in the rate would not apply retroactively. U.S. Federal Income Tax Considerations The following discussion summarizes the principal U.S. federal income tax considerations relating to the acquisition, ownership and disposition of preferred shares or ADSs by a U.S. holder (as defined below) holding such preferred shares or ADSs as capital assets for U.S. federal income tax purposes (generally, property held for investment).  This summary is based upon the Internal Revenue Code of 1986, as amended (the â€œCodeâ€), Treasury regulations, administrative pronouncements of the U.S. Internal Revenue Service (the â€œIRSâ€) and judicial decisions, all as in effect on the date hereof, and all of which are subject to change (possibly with retroactive effect) and to differing interpretations.  This summary does not describe any implications under state, local or non-U.S. tax law, or any aspect of U.S. federal tax law (such as the estate tax, gift tax or the Medicare tax on net investment income) other than U.S. federal income taxation. This summary does not purport to address all the material U.S. federal income tax consequences that may be relevant to the holders of the preferred shares or ADSs, and does not take into account the specific circumstances of any particular investors, some of which (such as tax-exempt entities, banks or other financial institutions, insurance companies, dealers in securities or currencies, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, regulated investment companies, real estate investment trusts, investors liable for the alternative minimum tax, partnerships and other pass-through entities, U.S. expatriates, investors that own or are treated as owning 10% or more of our voting stock, investors that hold the preferred shares or ADSs as part of a straddle, hedge, conversion or constructive sale transaction or other integrated transaction and persons whose functional currency is not the U.S. dollar) may be subject to special tax rules. 97


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As used below, a â€œU.S. holderâ€ is a beneficial owner of preferred shares or ADSs that is, for U.S. federal income tax purposes: i.an individual citizen or resident of the United States; ii.a corporation (or an entity taxable as a corporation) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia; iii.an estate, the income of which is subject to U.S. federal income tax regardless of its source; or iv.a trust if (A) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust or (B) the trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person. If a partnership or other entity taxable as a partnership holds preferred shares or ADSs, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership.  Partners of partnerships holding preferred shares or ADSs should consult their tax advisors. In general, for U.S. federal income tax purposes, holders of American Depositary Receipts evidencing ADSs will be treated as the beneficial owners of the preferred shares represented by those ADSs. Taxation of Distributions In general, distributions with respect to the preferred shares or ADSs (which likely include distributions of interest on shareholdersâ€TM equity, as described above under â€œâ€”Brazilian Tax Considerationsâ€”Distribution of Interest on Shareholdersâ€TM Equityâ€) will, to the extent made from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles, constitute dividends for U.S. federal income tax purposes.  If a distribution exceeds the amount of our current and accumulated earnings and profits, as so determined under U.S. federal income tax principles, the excess will be treated first as a non-taxable return of capital to the extent of the U.S. holderâ€TMs tax basis in the preferred shares or ADSs, and thereafter as capital gain.  We do not intend to maintain calculations of our earnings and profits under U.S. federal income tax principles and, unless and until such calculations are made, U.S. holders should assume all distributions are made out of earnings and profits and constitute dividend income.  As used below, the term â€œdividendâ€ means a distribution that constitutes a dividend for U.S. federal income tax purposes. The gross amount of any dividends (including amounts withheld in respect of Brazilian taxes) paid with respect to the preferred shares or ADSs generally will be subject to U.S. federal income taxation as ordinary income and will not be eligible for the dividends received deduction allowed to corporations.  Dividends paid in Brazilian currency will be included in the gross income of a U.S. holder in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date the dividends are actually or constructively received by the U.S. holder, or in the case of dividends received in respect of ADSs, on the date the dividends are actually or constructively received by the depositary or its agent, whether or not converted into U.S. dollars.  A U.S. holder will have a tax basis in any distributed Brazilian currency equal to its U.S. dollar amount on the date of receipt by the U.S. holder or disposition, as the case may be, and any gain or loss recognized upon a subsequent disposition of such Brazilian currency generally will be foreign currency gain or loss that is treated as U.S. source ordinary income or loss.  If dividends paid in Brazilian currency are converted into U.S. dollars on the day they are received by the U.S. holder, the depositary or its agent, as the case may be, U.S. holders generally should not be required to recognize foreign currency gain or loss in respect of the dividend income.  U.S. holders should consult their own tax advisors regarding the treatment of any foreign currency gain or loss if any Brazilian currency received by the U.S. holder or the depositary or its agent is not converted into U.S. dollars on the date of receipt. Under current law, the U.S. dollar amount of dividends received by an individual with respect to the ADSs will be subject to taxation at a maximum rate of 20% if the dividends represent â€œqualified dividend income.â€  Dividends paid on the ADSs will be treated as qualified dividend income if (i) the ADSs are readily tradable on an established securities market in the United States, (ii) the U.S. holder meets the holding period requirement for the ADSs (generally more than 60 days during the 121-day period that begins 60 days before the ex-dividend date, and (iii) we were not in the year prior to the year in which the dividend was paid, and are not in the year in which the dividend is paid, a passive foreign investment company (â€œPFICâ€).  The ADSs are listed on the New York Stock Exchange, and


should qualify as readily tradable on an established securities market in the United States so long as they are so listed.  However, no assurances can be given that the ADSs will be or remain readily tradable.  Based on our audited financial statements as well as relevant market and shareholder data, we believe that we were not treated as a PFIC for U.S. federal income tax purposes with respect to our 2014 taxable year.  In addition, based on our audited financial statements and current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market and shareholder data, we do not anticipate becoming a PFIC for our 2015 taxable year.  Because these determinations are based on the nature of our income and assets from time to time, and involve the application of complex tax rules, no assurances can be provided that we will not be considered a PFIC for the current (or any past or future) tax year. 98


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Based on existing guidance, it is not entirely clear whether dividends received with respect to the preferred shares (to the extent not represented by ADSs) will be treated as qualified dividend income, because the preferred shares are not themselves listed on a U.S. exchange.  In addition, the U.S. Treasury Department has announced its intention to promulgate rules pursuant to which holders of ADSs or preferred stock and intermediaries through whom such securities are held will be permitted to rely on certifications from issuers to establish that dividends are treated as qualified dividends.  Because such procedures have not yet been issued, we are not certain that we will be able to comply with them.  U.S. Holders of ADSs and preferred shares should consult their own tax advisors regarding the availability of the reduced dividend tax rate in the light of their own particular circumstances. Dividends paid by us generally will constitute foreign source â€œpassive categoryâ€ income and will be subject to various other limitations for U.S. foreign tax credit purposes.  Subject to generally applicable limitations under U.S. federal income tax law, Brazilian income tax imposed or withheld on such dividends, if any, will be treated as a foreign income tax eligible for credit against a U.S. holderâ€TMs U.S. federal income tax liability (or at a U.S. holderâ€TMs election if it does not elect to claim a foreign tax credit for any foreign income taxes paid during the taxable year, all foreign income taxes paid may instead be deducted in computing such U.S. holderâ€TMs taxable income).  In general, special rules will apply to the calculation of foreign tax credits in respect of dividend income that is subject to preferential rates of U.S. federal income tax. U.S. holders should be aware that the IRS has expressed concern that parties to whom ADSs are released may be taking actions that are inconsistent with the claiming of foreign tax credits by U.S. holders of ADSs.  Accordingly, the discussion above regarding the creditability of Brazilian income tax on dividends could be affected by future actions that may be taken by the IRS.  The rules with respect to the U.S. foreign tax credit are complex, and U.S. holders of preferred shares or ADSs are urged to consult their own tax advisors regarding the availability of the foreign tax credit under their particular circumstances. Taxation of Capital Gains Deposits and withdrawals of preferred shares by U.S. holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes. In general, gain or loss, if any, realized by a U.S. holder upon a sale, exchange or other taxable disposition of preferred shares or ADSs will be subject to U.S. federal income taxation as capital gain or loss in an amount equal to the difference between the amount realized on the sale, exchange or other taxable disposition and such U.S. holderâ€TMs adjusted tax basis in the preferred shares or ADSs.  Such capital gain or loss will be long-term capital gain or loss if at the time of sale, exchange or other taxable disposition the preferred shares or ADSs have been held for more than one year.  Under current U.S. federal income tax law, net long-term capital gain of certain U.S. holders (including individuals) is eligible for taxation at preferential rates.  The deductibility of capital losses is subject to certain limitations under the Code. Gain, if any, realized by a U.S. holder on the sale, exchange or other taxable disposition of preferred shares or ADSs generally will be treated as U.S. source gain for U.S. foreign tax credit purposes.  Consequently, if a Brazilian income tax is imposed on the sale or disposition of preferred shares, a U.S. holder that does not receive sufficient foreign source income from other sources may not be able to derive effective U.S. foreign tax credit benefits in respect of such Brazilian income tax.  Alternatively, a U.S. holder may take a deduction for all foreign income taxes paid during the taxable year if it does not elect to claim a foreign tax credit for any foreign taxes paid or accrued during the taxable year.  U.S. holders should consult their own tax advisors regarding the application of the foreign tax credit rules to their investment in, and disposition of, preferred shares or ADSs. 99


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Passive Foreign Investment Company Rules Based upon our current and projected income, assets and activities, we do not expect the preferred shares or ADSs to be considered shares of a PFIC for our current fiscal year or for future fiscal years.  However, because the determination of whether the preferred shares or ADSs constitute shares of a PFIC will be based upon the composition of our income, assets and the nature of our business, as well as the income, assets and business of entities in which we hold at least a 25% interest, from time to time, and because there are uncertainties in the application of the relevant rules, there can be no assurance that the preferred shares or ADSs will not be considered shares of a PFIC for any fiscal year.  If the preferred shares or ADSs were shares of a PFIC for any fiscal year, U.S. holders (including certain indirect U.S. holders) may be subject to adverse tax consequences, including the possible imposition of an interest charge on gains or â€œexcess distributionsâ€ allocable to prior years in the U.S. holderâ€TMs holding period during which we were determined to be a PFIC.  If we are deemed to be a PFIC for a taxable year, dividends on our preferred shares or ADSs would not be â€œqualified dividend incomeâ€ eligible for preferential rates of U.S. federal income taxation. A U.S. Holder who owns preferred shares or ADSs during any taxable year that we are a PFIC in excess of certainde minimusamounts and fails to qualify for certain other exemptions would be required to file IRS Form 8621. In addition, under certain circumstances, the temporary regulations also require a â€œUnited States personâ€ (as such term is defined in the Code) that owns an interest in a PFIC as an indirect shareholder through one or more United States persons to file Form 8621 for any taxable year during which such indirect shareholder is treated as receiving an excess distribution in connection with the ownership or disposition of such interest, or reports income pursuant to a mark-to-market election. U.S. holders should consult their own tax advisors regarding the application of the PFIC rules to the preferred shares or ADSs. U.S. Information Reporting and Backup Withholding A U.S. holder of preferred shares or ADSs may, under certain circumstances, be subject to information reporting and backup withholding with respect to certain payments to such U.S. holder, such as dividends paid by our company or the proceeds of a sale, exchange or other taxable disposition of preferred shares or ADSs, unless such U.S. holder (i) is an exempt recipient and demonstrates this fact when so required, or (ii) in the case of backup withholding, provides a correct taxpayer identification number, certifies that it is a U.S. person and that it is not subject to backup withholding, and otherwise complies with applicable requirements of the backup withholding rules.  Backup withholding is not an additional tax.  Any amount withheld under these rules will be creditable against a U.S. holderâ€TMs U.S. federal income tax liability, provided the requisite information is timely furnished to the IRS. â€œSpecified Foreign Financial Assetâ€ Reporting Owners of â€œspecified foreign financial assetsâ€ with an aggregate value in excess of U.S.$50,000 (and in some circumstances, a higher threshold), may be required to file an information report with respect to such assets with their U.S. federal income tax returns.  â€œSpecified foreign financial assetsâ€ generally include any financial accounts maintained by foreign financial institutions as well as any of the following, but only if they are not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-U.S. persons, (ii) financial instruments and contracts held for investment that have non-U.S. issuers or counterparties and (iii) interests in foreign entities. Prospective purchasers should consult their own tax advisors regarding the application of the U.S. federal income tax laws to their particular situations as well as any additional tax consequences resulting from purchasing, holding or disposing of preferred shares or ADSs, including the applicability and effect of the tax laws of any state, local or foreign jurisdiction, including estate, gift, and inheritance laws. 10F.Dividends and Paying Agents Not applicable. 10G.Statement by Experts Not applicable.  100


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10H.Documents on Display We are subject to the information requirements of the Securities Exchange Act of 1934, as amended, pursuant to which we file reports and other information with the SEC.  Reports and other information filed by us with the SEC may be inspected and copied at the public reference facilities maintained by the SEC at Room 1580, 100 F Street N.E., Washington, D.C. 20549, and at the Commissionâ€TMs Regional Offices at 233 Broadway, New York, New York 10279 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661-2511.  Copies of such material can also be obtained at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street N.E., Washington, D.C. 20549.  You may also inspect these reports and other information at the offices of the New York Stock Exchange Inc., 120 Broad Street, New York, New York 10005, on which our ADSs are listed. We also file financial statements and other periodic reports with the CVM, including theFormulÃ¡rio de ReferÃancia,which is an annual report that is prepared and filed in accordance with CVM Instruction No. 480/09 and can be accessed through www.cvm.gov.br.  Information from that website is not incorporated by reference into this document. Copies of our annual reports on Form 20-F and documents referred to in this annual report and our by-laws will be available for inspection upon request at our headquarters at: Avenida Brigadeiro Luiz AntÃ ́nio, no. 3,142, SÃ£o Paulo, SÃ£o Paulo, Brazil. 10I.Subsidiary Information Not required. ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk We are exposed to market risks from changes in foreign currency and interest rates.  Market risk is the potential loss arising from adverse changes in market rates, such as foreign currency exchange rates and interest rates.  See note 20 to our audited consolidated financial statements included elsewhere in this annual report for additional information regarding derivative financial instruments and our foreign exchange and interest rate risk. Starting in 1999, we have adopted a treasury policy designed to manage financial market risk, principally by swapping a substantial part of our U.S. dollar-denominated liabilities to obligations denominated inreais.  We engage in cross-currency interest rate swaps under which we enter into an agreement typically with the same counter-party which provides the original U.S. dollar-denominated financing.  A separate financial instrument is signed at the time the loan agreement is consummated, under which we effectively are then liable for amounts inreaisand interest at a percentage of the CDI rate.  Amounts are normally consummated with the same financial institutions and for the same maturity periods.  See â€œItem 5B. Liquidity and Capital Resources.â€ We use derivative financial instruments, usually cross-currency interest rate swaps, to mitigate risk caused by fluctuating currency and interest rates.  We enter into cross-currency interest rate swaps to protect foreign currency exposure.  Decisions regarding swap contracts are made on a case-by-case basis, taking into consideration the amount and duration of the exposure, market volatility, and economic trends.  Our realized and unrealized gains and losses on these contracts are included within â€œfinancial incomeâ€ and â€œfinancial expense,â€ respectively. We use interest rate swap agreements to manage interest costs and risks associated with changing rates.  The differential to be paid or received is accrued as interest rates change and is recognized in interest expense over the life of the agreements. We have a policy of entering into contracts only with parties that have high credit ratings.  The counter-parties to these contracts are major financial institutions.  We do not anticipate a credit loss from counter-party non-performance. 101


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Interest Rate Risk We are exposed to interest rate volatility with regard to our cash and cash equivalents, fixed and floating rate debt.  For cash and cash equivalents, we generally swap the fixed interest rate for a floating rate, the CDI rate.  The interest rate in our cash and cash equivalents denominated inreaisis based on the CDI rate, the benchmark interest rate set by the interbank market on a daily basis. We are exposed to interest rate volatility with regard to future issuances of fixed rate debt, foreign currency fluctuations and existing issuances of fixed rate debt, foreign currency fluctuations and existing issuances of variable rate debt.  We manage our debt portfolio in response to changes in interest rates and foreign currency rates by periodically retiring, redeeming and repurchasing debt, and using derivative financial instruments.  Among other facilities, we also use bank loans to meet our financing requirements, originally denominated in U.S. dollars and swapped to obligations inreaisaccruing interest based on the CDI rate. The table below provides information about our significant interest rate-sensitive instruments.  For variable interest rate debt, the rate presented is the weighted average rate calculated as of December 31, 2014.  See note 19 to our audited consolidated financial statements included elsewhere in this annual report. As of December 31, 2014Expected Maturity Date2015

   2016

   2017

   2018

   2019

   There-after

   Total

   Borrowing Cost

   Fair Value

   Annual Average Interest Rate(in millions of R$)Assets:Cash and banks inreais

   1,388

   -

   -

   -

   -

   -

   1,388

   -

   1,388Cash equivalents denominated inreais

   9,761

   -

   -

   -

   -

   -

   9,761

   -

   9,761

   101.03% of CDITotal cash and cash equivalents

   11,149

   -

   -

   -

   -

   -

   11,149

   -

   11,149Liabilities:Loans and financingFloating rate, denominated in US dollars (*)

   60

   338

   302

   -

   -

   -

   699

   -

   699

   (103.64% of CDI)+ (1.83% per year)Floating rate, denominated inreais

   3,726

   256

   789

   162

   11

   18.4

   4,963

   (6.0)

   4,957

   (105.30% of CDI) + (CDI + 0.71% per year) + (TR + 9.80% per year) + (11.58% per year)Floating rate, denominated inreais

   103

   96

   7

   7

   7

   21.6

   241

   -

   304

   (TJLP + 3.55% per year) or (3.21% per year)Floating rate, denominated inreais

   34

   36

   37

   30

   31

   95.5

   263

   -

   263

   (99.52% of CDI) or (IGPDI + 6% per year)Total loans and financing

   3,923

   726

   1,135

   199

   49

   135.5

   6,166

   (6)

   6,223Debentures floating rate, denominated inreais

   2,672

   -

   -

   -

   900

   -

   3,572

   (4)

   3,568

   (107.69% of CDI) or (CDI + 0.97%)Total liabilities

   6,595

   726

   1,135

   199

   949

   136

   9,738

   (10)

   9,791
 ____________ (*)   Originally US dollar-denominated and swapped to CDI.


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The following table presents historical data for interest rates relevant to our financial instrument in the last three years: As of December 31,2012

   2013

   2014CDI (1)

   8.4%

   8.1%

   10.8%TJLP (2)

   5.5%

   5.0%

   5.0%
 ____________ (1)   Annualized rate at the end of each period. (2)   Reference rate at the end of each period. We have not experienced, and we do not expect to experience, difficulty in obtaining financing or refinancing existing debt.  See “Item 5B. Liquidity and Capital Resources” for a discussion of our credit agreements. Exchange Rate Risk We are exposed to fluctuations in foreign currency cash flows related to certain short-term and long-term debt payments.  We are principally exposed to fluctuations of the exchange rate with the U.S. dollar.  Additionally, certain lines of credit agreements entered into with BNDES are subject to indexation based on a basket of foreign currencies to reflect BNDES’s funding portfolio. Since December 31, 2010 and through December 31, 2014, therealdepreciated by 59.4% against the U.S. dollar, and as of December 31, 2014, the commercial market rate for purchasing U.S. dollars was R$2.656 to US$1.00.  In the first quarter of 2015, therealdepreciated 20.8% against the U.S. dollar, and as of March 31, 2015, the commercial market rate for purchasing U.S. dollars was R$3.208 to US$1.00. Our foreign currency exposure gives rise to market risks associated with exchange rate movements against the U.S. dollar.  Foreign currency-denominated liabilities as of December 31, 2014 included debt denominated mainly in U.S. dollars.  Our net foreign currency exposure (U.S. dollar-denominated debt less our cross-currency interest rate swaps in our U.S. dollar-denominated debt) was R$26 million as of December 31, 2014 compared to R$61 million as of December 31, 2013.  Our net foreign currency exposure is represented by the debt due to import financing.  Our cross-currency interest rate swaps partially protect our exposure arising from our U.S. dollar-denominated debt. The table below provides information on our debt outstanding as of December 31, 2014. Expected Maturity Date2015

   2016

   2017

   2018

   2019

   Thereafter

   Total

   Fair Value(in millions of R$)Loans and financingUS dollars (*)

   60

   338

   302

   -

   -

   -

   700

   700Reais

   3,862

   388

   833

   199

   48

   135.5

   5,466

   5,523Total loans and financing

   3,922

   726

   1,135

   199

   48

   135.5

   6,165

   6,223DebenturesReais

   2,672

   -

   -

   -

   900

   -

   3,572

   3,568Total Debentures

   2,672

   -

   -

   -

   900

   -

   3,572

   3,568
 ____________ (*)   Originally US dollar-denominated and swapped to CDI. Our utilization of derivative financial instruments is substantially limited to the use of cross-currency interest rate swap contracts to mitigate foreign currency risks.  Foreign currency swap contracts allow us to swap fixed rate U.S. dollar-denominated short-term and long-term debt for Brazilianreal-denominated floating rate debt, based on the CDI rate variation.  See note 19to our audited consolidated financial statements included elsewhere in this annual report.  As of December 31, 2014, the originally U.S. dollar-denominated debt of R$699 million and R$205 million as of December 31, 2013, which were covered by floating rate swaps inreais, based on the CDI rate, has been treated on a combined basis as if these loans had been originally denominated inreaisand accrued CDI.  In addition, the swap agreements do not provide for collateral.


103

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The table below provides information about our cross-currency interest rate swaps: Expected Maturity Date2015

   2016

   2017

   2018

   2019

   There– after

   Total

   Fair Value of (Assets) Liabilities

   Average Paying Rate inreais

   Average Receiving RateCross currency and interest rate swap contracts notional amount

   55

   359

   334

   -

   -

   -

   748

   725

   103.64% over CDI

   U.S. dollar + 1.83% per yearU.S. dollars toreais

   55

   359

   334

   -

   -

   -

   748

   725

   103.64% over CDI

   U.S. dollar + 1.83% per year
  ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 12A.American Depositary Shares In the United States, our preferred shares trade in the form of ADS.  The ADSs commenced trading on the NYSE on May 29, 1997. We do not treat ADR holders as our shareholders and ADR holders have no shareholder rights.  Brazilian law governs shareholder rights.  The depositary is the holder of the preferred shares underlying the ADSs.  Holders of ADRs have ADR holder rights. Fees and Expenses The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them.  The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees.  The depositary may collect its annual fee for depositary services by deductions from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them.  The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid. Persons depositing or withdrawing shares must pay:

   For:US$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)

   ·Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property

   ·Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminatesUS$.02 (or less) per ADS

   ·Any cash distribution to ADS registered HoldersA fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs

   ·Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS registered holdersRegistration or transfer fees

   ·Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw sharesExpenses of the depositary

   ·Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement)

   ·Converting foreign currency to U.S. dollarsTaxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes

   ·As necessaryAny charges incurred by the depositary or its agents for servicing the deposited securities

   ·As necessary
  Fees Incurred Since January 1, 2014 From January 1, 2014 until December 31, 2014, the Company received from the depositary US$1.6 million for continuing annual stock exchange listing fees, standard out-of-pocket maintenance costs for the ADRs (consisting of reimbursement of the expenses of postage and envelopes for mailing annual and interim financial reports, printing and distributing dividend checks, electronic filing of U.S. Federal tax information, mailing required tax forms,


stationery, postage, facsimile, and telephone calls), any applicable performance indicators relating to the ADR facility, underwriting fees and legal fees.


104

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Fees to be Paid in the Future The Bank of New York Mellon, as depositary, has agreed to reimburse the Company for expenses they incur that are related to establishment and maintenance expenses of the ADS program.  The depositary has agreed to reimburse the Company for its continuing annual stock exchange listing fees.  The depositary has also agreed to pay the standard out-of-pocket maintenance costs for the ADRs, which consist of the expenses of postage and envelopes for mailing annual and interim financial reports, printing and distributing dividend checks, electronic filing of U.S. Federal tax information, mailing required tax forms, stationery, postage, facsimile, and telephone calls.  It has also agreed to reimburse the Company annually for certain investor relationship programs or special investor relations promotional activities.  In certain instances, the depositary has agreed to provide additional payments to the Company based on any applicable performance indicators relating to the ADR facility.  There are limits on the amount of expenses for which the depositary will reimburse the Company, but the amount of reimbursement available to the Company is not necessarily tied to the amount of fees the depositary collects from investors. PART II ITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES No matters to report. ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS None. ITEM 15.CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures.  The Companyâ€TMs disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in reports that it files or submits, under the Securities Exchange Act of 1934, was recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to provide reasonable assurance that information required to be disclosed by us in such reports is accumulated and communicated to the Companyâ€TMs management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.  The Companyâ€TMs chief executive officer and chief financial officer, with the participation and assistance of other members of management, have evaluated the effectiveness, as of December 31, 2014, of the Companyâ€TMs â€œdisclosure controls and procedures,â€ as that term is defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934, as amended, or the Exchange Act.  Based upon that evaluation, our chief executive officer and our chief financial officer concluded that the disclosure controls and procedures as of December 31, 2014, are effective at the reasonable assurance level. Managementâ€TMs Report on Internal Control over Financial Reporting.  Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934.  Our internal control over financial reporting is designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and of financial statements for external purposes in accordance with generally accepted accounting principles.  Our internal control over financial reporting did not undergo significant changes in its design or operation during the year. All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2014.  In making this assessment, management used the criteria set forth by theCommittee of Sponsoring


Organizations of the Treadway Commission (COSO) in Internal Control (1992) Integrated Framework.  Based on this assessment, management believes that, as of December 31, 2014, our internal control over financial reporting is effective based on those criteria.  Our conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Cdiscount Group S.A.S. and its subsidiaries, which are included in our 2014 audited consolidated financial statements as from July 31, 2014, the date from which these entities were consolidated.  For our management’s report on internal control over financial reporting, see page F-1 of this annual report. 105


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The effectiveness of internal controls over financial reporting as of December 31, 2014 has been audited by Deloitte Touche Tohmatsu Auditores Independentes, the independent registered public accounting firm who also audited our consolidated financial statements, as stated in their report appearing on page F-2 of this annual report. Management is aware of and closely oversees closely the Action Plans to enhance controls and procedures relating to issues highlighted by our audit committee in the recommendations contained in its report for for the fiscal year ended December 31, 2014. Pursuant to CVM regulation, our audit committee issued a report on February 12, 2015, which is included in our consolidated financial statements that we filed locally with the CVM and on our website.  We have attached this audit committee report to our consolidated financial statements included in this annual report.  ITEM 16.[RESERVED] 16A.Audit Committee Financial Expert Our board of directors has determined that Luiz Nelson Guedes de Carvalho, a member of our audit committee, is an audit committee financial expert, as defined by current SEC rules and meets the independence requirements of the SEC and the NYSE listing standards.  For a discussion of the role of our audit committee, see “Item 6C. Board Practices—Audit Committee, Stock Option Plan Management Committee and Fiscal Council—Audit Committee.” 16B.Code of Ethics In 2000, our board of directors adopted a code of ethics for our directors, officers and employees, including our chief executive officer and chief financial officer, which was amended by our board of directors on November 3, 2011.  This Code of Moral Conduct of the Company complies with item 5.8 of the New Listing Regulation for Corporate Governance Level 1 issued by BM&FBOVESPA and is available at our website www.gpa-ri.com.br and at www.cvm.gov.br.  We intend to make publicly available on this website any amendments to our code of ethics.  Information from that website is not incorporated by reference into this document. 16C.Principal Accountant Fees and Services Deloitte Touche Tohmatsu Auditores Independentes acted as our independent registered public accounting firm for the fiscal years ended December 31, 2012, 2013 and 2014.  The chart below sets forth the total amount billed to us by our independent accountants for services performed in 2012, 2013 and 2014, including out-of-pocket expenses, and a breakdown of these amounts by category of service: 2012(1)

   2013(1)

   2014(2)(in millions of R$)Audit Fees

   7.8

   10.7

   20.8Audit–Related Fees

   0.5

   -

   -Tax Fees

   -

   -

   -All Other Fees

   -

   -

   -Total

   8.3

   10.7

   20.8
 ____________ (1)   Includes Ernst &Young fees for work performed for Via Varejo, including periodic audits and audits in connection with the public offering of Via Varejo in Brazil. (2)   Includes Ernst &Young fees for work performed for Cnova initial public offering.


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Audit Fees Audit fees are fees billed for the audit of our annual financial statements and for the reviews of our quarterly financial statements in connection with statutory and regulatory filings or engagements. Audit-Related Fees Audit-related fees were comprised of assurance and related services that are related to the performance of the audit or review of our financial statements, including due diligence related to mergers and acquisitions, audit in connection with acquisitions, internal control reviews, attest services that are not required by statute or regulation, consultations concerning financial accounting and reporting standards and tax compliance review. Pre-Approval Policies and Procedures Our audit committee has the responsibility of approving all audit, audit-related, tax and other services provided by our independent accountants.  Any services provided by our independent accountants that are not specifically included within the scope of the audit must be pre-approved by our audit committee prior to any engagement.  Our audit committee is permitted to approve certain audit and tax services, pursuant to ade minimisexception. In the beginning of 2014 and in 2013, 2012 and 2011, these functions were performed by our fiscal council, which was then instated.  None of the fees paid to our independent accountants were approved pursuant to thede minimisexception. 16D.Exemptions from the Listing Standards for Audit Committees Under the listed company audit committee rules of the NYSE and the SEC, effective July 31, 2005, we are required to comply with Exchange Act Rule 10A-3, which mandates that we either establish an audit committee composed of members of the board of directors that meets specified requirements or rely on an exemption under Exchange Act Rule 10A-3(c)(3), which is the case with our statutory audit committee.  In our assessment, in light of the composition of our statutory audit committee, our reliance on the exemption does not materially adversely affect the ability of our statutory audit committee to act independently and to satisfy the other requirements of Exchange Act Rule 10A-3.  For a further discussion of our statutory audit committee and the audit committee exemption, see â€œItem 6C. Board Practicesâ€”Audit Committee, Stock Option Plan Management Committee and Fiscal Councilâ€”Audit Committee.â€ 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. 16F.Change in Registrantâ€TMs Certifying Accountant Not applicable. 16G.Corporate Governance Significant Differences between our Corporate Governance Practices and NYSE Corporate Governance Standards We are subject to the NYSE corporate governance listing standards.  As a foreign private issuer, the standards applicable to us are considerably different than the standards applied to U.S. listed companies.  Under the NYSE rules, we must disclose any significant differences between our corporate governance practices and those followed by U.S. companies under NYSE listing standards.  As a Brazilian company listed on BM&FBOVESPA, we are required to comply with the corporate governance standards set forth in Brazilian corporate law, and the rules of CVM.  The following is a summary of those differences. 107


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Independence of Directors and Independence Tests The NYSE rules require that a majority of the board must consist of independent directors.  Independence is defined by various criteria, including the absence of a material relationship between the director and the listed company.  Brazilian law does not have a similar requirement.  Under Brazilian law, neither our board of directors nor our management is required to test the independence of directors before their election to the board.  However, both Brazilian corporate law and the CVM have established rules that require directors to meet certain qualification requirements and that address the compensation and duties and responsibilities of, as well as the restrictions applicable to, a companyâ€TMs executive officers and directors. While our directors meet the qualification requirements of Brazilian corporate law and the CVM, we do not believe that a majority of our directors would be considered independent under the NYSE test for director independence.  Brazilian corporate law requires that our directors be elected by our shareholders at a general shareholdersâ€TM meeting.  Currently our board of directors consists of nine members elected by our shareholders, consisting of four representatives of the Casino Group and five external directors. Executive Sessions NYSE rules require that the non-management directors must meet at regularly scheduled executive sessions without management present.  Brazilian corporate law does not have a similar provision.  According to Brazilian corporate law, up to one-third of the members of the board of directors can be elected from management.  There is no requirement that non-management directors meet regularly without management.  As a result, the non-management directors on our board do not typically meet in executive session. Our board of directors consists of nine members elected by our shareholders, all of whom are non-management directors. Nominating/Corporate Governance Committee NYSE rules require that listed companies have a nominating/corporate governance committee composed entirely of independent directors and governed by a written charter addressing the committeeâ€TMs required purpose and detailing its required responsibilities, which include, among other things, identifying and selecting qualified board member nominees and developing a set of corporate governance principles applicable to the company. Although we are not required under applicable Brazilian law, we have created a Corporate Governance Committee and a Human Resources and Compensation Committee to improve our corporate governance practices. Both committees are responsible for examining candidates and providing guidelines for the appointment of members of our board, special committees and executive officers.  For further information on our Human Resources and Compensation Committee, see â€œItem 6C. Board Practicesâ€”Committees of the Board of Directorsâ€”Human Resources and Compensation Committee.â€ People Management Policies Committee NYSE rules require that listed companies have a compensation committee composed entirely of independent directors and governed by a written charter addressing the committeeâ€TMs required purpose and detailing its required responsibilities, which include, among other things, reviewing corporate goals relevant to the chief executive officerâ€TMs compensation, evaluating the chief executive officerâ€TMs performance, approving the chief executive officerâ€TMs compensation levels and recommending to the board non-chief executive officer compensation, incentive compensation and equity-based plans. We are not required under applicable Brazilian law to have a compensation committee.  Under Brazilian corporate law, the total amount available for compensation of our directors and executive officers and for profit sharing payments to our executive officers is established by our shareholders at the annual general meeting.  The board of directors is then responsible for determining the individual compensation and profit-sharing of each executive officer, as well as the compensation of our board and committee members.  In making such determinations, the board reviews the performance of the executive officers, including the performance of our chief executive officer, who typically excuses himself from discussions regarding his performance and compensation. 108


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We do, however, have a Human Resources and Compensation Committee, which, among other assignments, reviews management compensation.  For further information on our Human Resources and Compensation Committee, see â€œItem 6C. Board Practicesâ€”Committees of the Board of Directorsâ€”Human Resources and Compensation Committee.â€ Audit Committee and Audit Committee Additional Requirements NYSE rules require that listed companies have an audit committee that (i) is composed of a minimum of three independent directors who are all financially literate, (ii) meets the SEC rules regarding audit committees for listed companies, (iii) has at least one member who has accounting or financial management expertise and (iv) is governed by a written charter addressing the committeeâ€TMs required purpose and detailing its required responsibilities.  However, as a foreign private issuer, we need only to comply with the requirement that the audit committee meet the SEC rules regarding audit committees for listed companies to the extent compatible with Brazilian corporate law. As a foreign private issuer, we chose to rely on an exemption under Exchange Act Rule 10A-3(c)(3).  For a further discussion of our statutory audit committee and the audit committee exemption, see â€œItem 6C.  Board Practicesâ€”Audit Committee, Stock Option Plan Management Committee and Fiscal Councilâ€”Audit Committee.â€ Shareholder Approval of Equity Compensation Plans NYSE rules require that shareholders be given the opportunity to vote on all equity compensation plans and material revisions thereto, with limited exceptions.  Under Brazilian corporate law, shareholders must approve all stock option plans.  In addition, any issuance of new shares that exceeds our authorized share capital is subject to shareholder approval. Our board of directors is responsible for voting on the issuance of new equity in connection with our existing stock option plans, provided that the limit of our authorized capital is respected.  However, any issuance of new shares that exceeds such authorized capital is subject to shareholder approval. Corporate Governance Guidelines Under NYSE listing standards, a listed U.S. company must adopt and disclose corporate governance guidelines that cover certain minimum specified subjects.  We have adopted and observed corporate governance guidelines in accordance with Brazilian legislation, including a disclosure policy which requires, among other things, the disclosure of our corporate governance guidelines, material facts and annual Financial Reports.  In addition, we have adopted and observed a policy on business conduct and ethics. Code of Business Conduct and Ethics NYSE rules require that listed companies adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers.  Applicable Brazilian law does not have a similar requirement. Although we were not required to adopt a code of ethics, we implemented a code of ethics in 2000, as amended in 2011, to regulate our employeeâ€TMs conduct with us and our customers, suppliers, competitors and the public at large.  In order to comply with the requirements of the Sarbanes-Oxley Act and NYSE rules, we implemented rules applicable to our managersâ€TM conduct in connection with the registration and control of financial and accounting information and their access to privileged and non-public information and data in 2005.  For more information about our code of ethics, see â€œItem 16B. Code of Ethics.â€ Internal Audit Function NYSE rules require that listed companies maintain an internal audit function to provide management and the fiscal council or the audit committee, as the case may be, with ongoing assessments of the companyâ€TMs risk management processes and system of internal control.  Our internal audit department and our internal control department are responsible for our compliance with the requirements of Section 404 of the U.S. Sarbanes Oxley Act


of 2002 regarding internal control over financial reporting.  The internal audit department reports to our audit committee as well as to our chief financial officer. Our audit committee and chief executive officer, in turn, report to our board of directors. 109


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Sarbanes Oxley Act of 2002 We maintain controls and procedures designed to ensure that we are able to collect the information we are required to disclose in the reports we file with the SEC, and to process, summarize and disclose this information within the time periods specified in the rules of the SEC.  We have filed the relevant officer certifications under Section 404 of the U.S. Sarbanes Oxley Act of 2002 regarding internal controls over financial reporting as Exhibits 12.1 and 12.2 to this annual report. 16H.Mine Safety Disclosure Not applicable. PART III ITEM 17.FINANCIAL STATEMENTS We have responded to Item 18 in lieu of responding to this item. ITEM 18.FINANCIAL STATEMENTS The consolidated financial statements, together with the Reports of Independent Registered Public Accounting Firms, are filed as part of this annual report. ITEM 19.EXHIBITS Exhibit Number

   Description1.1

   English translation of ourEstatuto Social(by-laws), as amended.(1)2.(a)

   Form of Amended Deposit Agreement, among us, The Bank of New York Mellon, as depositary, and each Owner and Beneficial Owner from time to time of ADRs issued thereunder, including the form of American Depositary Receipt.(2)4.(b)(1)

   Technical Assistance Agreement dated as of July 8, 2005 by and between us and Casino Guichard Perrachon.(3)4.(b)(2)

   Real Estate Structure Agreement dated as of October 3, 2005 by and between us, Zabaleta Participações, and Rio Plate Empreendimentos e Participações Ltda.(4)4.(b)(3)

   First Amendment to the Real Estate Structure Agreement dated as of December 30, 2005 by and between us, Zabaleta Participações, and Rio Plate Empreendimentos e Participações Ltda.(4)4.(b)(4)

   Shareholders’ Agreement dated as of July 1, 2010 among Companhia Brasileira de Distribuição, Samuel Klein, Michael Klein, Eva Lea Klein, Via Varejo S.A. as intervening party, Casa Bahia Comercial Ltda. and Wilkes Participações S.A.(5)4.(b)(5)

   Cost Sharing Agreement, dated August 1, 2014, by and among Casino Guichard Perrachon S.A., Sudaco Participações Limitada and Companhia Brasileira de Distribuição.*4.(b)(6)

   First Amendment to the Cost Sharing Agreement, dated October 30, 2014, by and among Casino Guichard Perrachon S.A., Sudaco Participações Limitada, Companhia Brasileira de Distribuição and Euris.*4.(b)(7)

   English translation of the Logistics Service Agreement, dated January 24, 2013, between Easydis S.A.S. and Cdiscount S.A.(6)4.(b)(8)

   English translation of the First Amendment, dated May 16, 2014, to the Logistics Service Agreement, dated January 24, 2013, between Easydis S.A.S. and Cdiscount S.A.(6)4.(b)(9)

   English translation of the Second Amendment, dated May 16, 2014, to the Logistics Service Agreement, dated January 24, 2013, between Easydis S.A.S. and Cdiscount S.A.(6)4.(b)(10)

   English translation of the Third Amendment, dated March 27, 2015, to the Logistics Service Agreement, dated January 24, 2013, between Easydis S.A.S. and Cdiscount S.A.(7)4.(b)(11)

   English translation of the Cooperation Agreement, dated December 30, 2011, between Banque du Groupe Casino S.A. and Cdiscount S.A.(6)4.(b)(12)

   English translation of the First Amendment, dated December 20, 2012, to the Cooperation Agreement, dated December 30, 2011, between Banque du Groupe Casino S.A. and Cdiscount S.A.(6)4.(b)(13)

   English translation of the Second Amendment, dated June 28, 2013, to the Cooperation Agreement, dated December 30, 2011, between Banque du Groupe Casino S.A. and Cdiscount S.A.(6)4.(b)(14)

   English translation of the Joint Venture Agreement, dated June 13, 2012, among Banque du Groupe Casino S.A., C2C-Cartes et Crédits à la Consommation S.A. and Cdiscount S.A.(6)4.(b)(15)

   Cash Pooling Agreement, dated July 1, 2014, between Polca Holding S.A. and Cnova N.V.(8)4.(b)(16)

   English translation of the Commercial Partnership Agreement, dated May 14, 2014, between Cdiscount S.A. and E.M.C. Distribution S.A.S.(6)4.(b)(17)

   English translation of Logistics Service Agreement, dated July 16, 2013, between CCV, S.N.C. and Cdiscount S.A.(6)4.(b)(18)

   English translation of the First Amendment, dated May 16, 2014, to the Logistics Service Agreement, dated July 16, 2013, between CCV, S.N.C. and Cdiscount S.A.(9)4.(b)(19)

   English translation of the Second Amendment, dated May 16, 2014, to the Logistics Service Agreement, dated July 16, 2013, between CCV, S.N.C. and Cdiscount S.A.(9)4.(b)(20)

   English translation of the Commercial Partnership Agreement, dated May 19, 2014, between Cdiscount S.A. and Distribution Casino France S.A.S.(6)4.(b)(21)

   English translation of the Commercial Partnership Agreement, dated May 19, 2014, between Cdiscount S.A. and Distribution Casino France S.A.S.(9)4.(b)(22)

   Framework and IPO Agreement, dated July 11, 2014, among Casino, Guichard-Perrachon S.A., Companhia Brasileira de Distribuição, Via Varejo S.A., Nova Pontocom Comércio Eletrônico S.A., Bruxelas Empreendimentos e Participações S.A. and Cnova N.V.(9)6.1

   See note 31 to our financial statements for information explaining how earnings per share information was calculated.8.1

   List of Subsidiaries. See note 3 to our financial statements for information regarding our subsidiaries.12.1

   Section 302 Certification of the Chief Executive Officer.*12.2

   Section 302 Certification of the Administrative Financial Officer.*13.1

   Section 906 Certification of the Chief Executive Officer.*13.2

   Section 906 Certification of the Administrative Financial Officer.*(1)

   Incorporated herein by reference to our annual report on Form 20-F filed on April 30, 2014.(2)

   Incorporated herein by reference to our registration statement on Form F-6 (No. 333-145679).(3)

   Incorporated herein by reference to our 6-K filed on August 1, 2005.(4)

   Incorporated herein by reference to our annual report on Form 20-F filed on June 27, 2006.(5)

   Incorporated herein by reference to our annual report on Form 20-F filed on July 1, 2011.(6)

   Incorporated herein by reference to Cnova N.V.’s registration statement on Form F-1 (File No. 333-196521) filed on June 4, 2014.(7)

   Incorporated herein by reference to Cnova N.V.’s annual report on Form 20-F filed on March 31, 2015.(8)

   Incorporated herein by reference to Cnova N.V.’s registration statement on Form F-1 (File No. 333-196521) filed on August 7, 2014.(9)

   Incorporated herein by reference to Cnova N.V.’s registration statement on Form F-1 (File No. 333-196521) filed on July 14, 2014.*

   Filed herewith.


110

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SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and has duly caused and authorized the undersigned to sign this Annual Report on its behalf. COMPANHIA BRASILEIRA DE DISTRIBUIÇÃO By:/s/ Ronaldo Iabrudi Name:  Ronaldo Iabrudi Title:  Chief Executive Officer By:/s/ Christophe Hidalgo Name:  Christophe Hidalgo Title:  Chief Financial Officer Dated:  April 29, 2015 111


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Companhia Brasileira de Distribuiçãoand subsidiaries

Consolidated Financial Statements As of December 31,2014 and 2013 and for the Years Ended December 31, 
2014, 2013 and 2012 andReport of Independent 
Registered Public Accounting Firm

Deloitte Touche Tohmatsu Auditores Independentes


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Companhia Brasileira de Distribuição  Consolidated Financial Statements As of December 31, 2014 and 2014 and for the Years ended December 31, 2014, 2013 and 2012   Table of contentsManagement’s Report on Internal Control over Financial Reporting
     F-1Report of Independent Registered Public Accounting Firm
     F-2Full Report of the Audit Committee – 2014
     F-4Consolidated financial statementsConsolidated Statements of Income and Comprehensive Income
     F-10Consolidated Balance Sheets
     F-12Consolidated Statements of Changes in Shareholders’ Equity
     F-14Consolidated Statements of Cash Flows
     F-15Notes to the Consolidated Financial Statements
     F-17


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Management ́s Report on Internal Control over Financial Reporting The management of Companhia Brasileira de Distribuição is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.  The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  Our conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Cdiscount Group S.A.S. and its subsidiaries, which was acquired on July 1, 2014, and whose financial statements constitute 3.7%, 0.9% and 6.6% of net operating revenue, net income for the year and total assets, respectively, of the consolidated financial statements amounts as of and for the year ended December 31, 2014.  Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2013 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission  (COSO) in Internal Control (1992) Integrated Framework. Management's assessment included documenting, evaluating and testing of the design and operating effectiveness of its internal control over financial reporting. Based on that assessment, management believes that, as of December 31, 2013, the Company’s internal control over financial reporting is effective based on those criteria.  The effectiveness of internal controls over financial reporting as of December 31, 2013 has been audited by Deloitte Touche Tohmatsu Auditores Independentes, the independent registered public accounting firm who also audited the Company’s consolidated financial statements. Deloitte’s attestation report on the Company’s internal controls over financial reporting is included herein.
  /s/ Ronaldo Iabrudi dos Santos Pereira Ronaldo Iabrudi dos Santos Pereira Chief Executive Officer

   /s/ Christophe José Hidalgo

   Christophe José Hidalgo

   Chief Financial Officer
  Date: April 29, 2015


F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Companhia Brasileira de Distribuição and Subsidiaries São Paulo - SP, Brazil We have audited the accompanying consolidated balance sheets of Companhia Brasileira de Distribuição and subsidiaries (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of income and comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2014. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated financial position of Companhia Brasileira de Distribuição and subsidiaries as of December 31, 2014 and 2013 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2014, in conformity with International Financial Reporting Standards - IFRS, issued by the International Accounting Standards Board - IASB. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2014, based on criteria established in the Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission - COSO, and our report datedApril 29, 2015expressed an unqualified opinion on the Company’s internal control over financial reporting. /S/ DELOITTE TOUCHE TOHMATSU DELOITTE TOUCHE TOHMATSU Auditores Independentes São Paulo, Brazil April 29, 2015


F-2

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Companhia Brasileira de Distribuição and Subsidiaries São Paulo - SP, Brazil We have audited the internal control over financial reporting of Companhia Brasileira de Distribuição and subsidiaries (the “Company”) as of December 31, 2014, based on criteria established in the Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission - COSO. As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Cdiscount Group S.A.S. and its subsidiaries (“Cdiscount”), which was acquired on July 1, 2014, and whose financial statements constitute 3.7%, 0.9% and 6.6% of net operating revenue, net income for the year and total assets, respectively, of the consolidated financial statements amounts as of and for the year ended December 31, 2014. Accordingly, our audit did not include the internal control over financial reporting at Cdiscount. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.We believe that our audit provides a reasonable basis for our opinion. A Company’s internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the Company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A Company’s internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on criteria established in the Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission - COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2014 of the Company, and our report datedApril 29, 2015expressed an unqualified opinion on those consolidated financial statements. /S/ DELOITTE TOUCHE TOHMATSU DELOITTE TOUCHE TOHMATSU Auditores Independentes São Paulo, Brazil April 29, 2015


F-3

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FULL REPORT OF THE AUDIT COMMITTEE – 2014 Introductory remarks  The Audit Committee of Companhia Brasileira de Distribuição (“Company”) is defined in the bylaws as an advisory body directly linked to the Board of Directors, with its creation deliberated in that Board’s meeting of 27 September, 2012 and formally included in the bylaws as approved by the Extraordinary Shareholders’ Meeting of 18 October, 2012.  The Audit Committee members, appointed in the Board of Directors’ Meeting of 16 October, 2013, started effectively to operate in calendar 2014, with its first meeting having taken place in 07 February, 2014. Until then, the Company had a Fiscal Council (as defined in the Brazilian Company law) and that operated until the closing of the financial statements for calendar 2013,  having not being reappointed after that. The current Committee is composed of a Board member and two more, all independent, appointed for a two-year term and with the possibility of reappointment. They are appointed by Board members, taking into consideration Brazilian legal and regulatory requirements and also best international practices.  Duties and responsibilities Company’s Management Management is responsible for defining and implementing processes and procedures aiming to collect data for preparation of the financial statements, observing the requirements of the Brazilian Company law, the accounting practices generally accepted in Brazil besides those issued by the International Accounting Standards Board (IASB), the rulings issued by the Brazilian Securities and Exchange Commission (“Comissão de Valores Mobiliários”) and, as the Company is also listed in the New York Stock Exchange, the requirements by the U.S.Securities and Exchange Commission (SEC) and those of the U. S. Sarbanes-Oxley Act must also be observed and complied with under Management supervision.  Management is also responsible for internal control processes, policies and procedures to ensure safeguard of assets, timely recognition of liabilities and elimination, or reduction to acceptable levels, of risk factors.  In October 2013 the Directory of Risks was created, with the mission to identify and monitor, at the Business Units level, the main risks that may challenge the strategies of the Company in pursuing its business objectives, structuring the process for management of those risks and for mitigating their impact in the operations.  Additionally, such Directory assists management in developing standards, policies, procedures and redesign of processes, besides the control activities to ensure risk mitigation.  Starting in 2014 it was also assigned to this Directory the duty to coordinate and monitor the internal control tests aiming to comply with the requirements of the U.S. Sarbanes-Oxley Act (S-Ox).  Internal Audit Internal Audit is charged with the duty to assess the quality of the Company’s internal control systems and compliance with policies and procedures set out by Management, including those related to the main accounting records that result in the preparation of financial statements. It performs its task in an ample and independent way, observing, mainly, the coverage of áreas and activities that present the most sensitive risks to operations and to the strategies. There was in the end of 2014 a replacement of the Director of Internal Audit, and the new Director, just recruited, started working in 19 January, 2015.


F-4

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Independent Auditors Independent auditors, under the responsibility of Deloitte Touche Tohmatsu since the financial statements of 31 December, 2013, is responsible forexamining such financials aiming at issuing a report with their opinion about compliance with the applicable standards. As a result of their work, independent auditors also issue a recommendation report about accounting procedures and internal controls, besides other reports it is also engaged to prepare like those of the quarterly reviews. It is also Deloitte’s responsibility to audit the internal controls as required by U. S. Sarbanes-Oxley Act (S-Ox).  Audit Committee As determined by paragraph 3 of Article 20 of the Company ́s bylaws and by Article 13 of the Internal Ruling of the Audit Committee (available at www.gpabr.com, under “RI”, in “Bylaws, Code of Moral Conduct, Policies and Rulings”) among the main duties of this body are to ensure that quality and integrity of financial statements and Management Report are achieved, as well as compliance with legal and regulatory requirements, performance, Independence and quality of the work of independent and of internal auditors, quality and effectiveness of internal control systems, assessment and monitoring of risks, be informed and analyze related party transactions and preparation of an annual report to be presented together with the financial statements.  The Audit Committee bases its judgements and forms its opinions taking into account information from Management, presentations about information systems, financial statements and internal controls, as well as results of the work of the Director of Risks, Director of Accounting, Director of the Legal Department (Counsel) and of the Internal and the Independent Auditors.  Activities of the Audit Committee in 2014  The Audit Committee met regularly in 16 occasions, in which 80 individual meetings were carried out with senior Management,Internal and Independent Auditors and other members of the Management team of the Company. The Coordinator of the Audit Committee is invited as a permanent observer of the meetings of the Fiscal Council (as defined in the Brazilian Company Law) of Via Varejo S.A., aiming at being currently informed of relevant issues of the financial statements and/or of internal controls that deserve to be taken into consideration when financial data from that investee affect the equity method of accounting and consolidation at the Parent Company CBD. The Coordinator of the Audit Committee meets periodically with the Director of Internal Audit of Group CASINO based in France. The Chairwoman of the Corporate Governance Committe of the Company is a permanent invitee to the Audit Committee meetings, attending them whenever possible. The Audit Committee reported periodically the main subjects under its scope to the Board of Directors in their regular meetings.  Meetings with Management  The Audit Committee met with Management and respective teams to discuss, in this first year of activities, the structures and operations of the areas, their work processes, eventual deficiencies already identified in their controls, mitigating mechanisms in place and improvement plans. Among the subjects that most called attention of the Committee are: Contingencies and Provisions –The criteria for classifying the chances of success in administrative and legal cases were analyzed and discussed with Legal Counsel and senior Management in charge of Accounting, Tax, Risks and with the Independent Auditors, with the objective to inform decisions about the accounting recognition of amounts involved, mainly in relation to civil and legal claims.  As regards the monitoring of related balances by Legal Counsel, it was requested an analysis of amounts deposited as guarantees of the cases having in mind the large number of employees of the Company and, in consequence, the also large number of labor claims open against the Company.


F-5

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The Committee was informed about an Action Plan already under way aiming to adopt more effective and modern systems and processes to monitor legal claims against the Company, under supervision of the Head of Legal Counsel and his team. Related Party Transactions– In 2014 it was approved by the Board of Directors, as recommended by the Corporate Governance Committee, a policy for Related Party Transactions. Under such policy it was determined that the Audit Committee is required to assess whether the guidance contemplated in said policy was observed in certain transactions of this nature to be brought to the Board of Directors for approval. In several Audit Committee meetings such transactions among related parties were analyzed to ensure the policy had been complied with. Information Technology and Security– the Audit Committee prioritized the monitoring of progress of the processes and controls involving information technology issues as well as related long and medium term action plans aiming at improvements in Information Security. Highlighting this last subject, it is worth mentioning that an Information Security Committee was formed, reporting to senior Management; its members are the heads of IT, Risks and Legal Counsel, who meet on a monthly basis to deal with the matters of greater risk and monitor the action plans for improvement and mitigation. Matters discussed in this information security committee are reported on a quarterly basis to the Audit Committee. In meetings with the head of Information Technology and Security and his team the improvements in processes with IT support were discussed with the objective of optimizing and improving the availability and control of information in the areas of Human Resources, Internal Audit, Accounting and Taxes; updates on this front are also reported quarterly to the Audit Committee. With this objective in mind, improvements in specific systems are beind developed for each of these áreas, with their respective peculiarities, supported by the IT department. Human Resources– With senior Management of HR it was discussed the Action Plan already under way that intends to implement a new management and control system of personnel of the entire GPA group, to achieve a better control of all aspects related to history of employment and related documentation of each and all employees, in such a way that such system improves the processes of managing personnel and assists the Legal Counsel in obtaining better documentation support to discuss labor claims and consequently to improve chances of success in courts. Accounting– With the head of Accounting Department and his team the Audit Committee analyzed and discussed, before issuance, the quarterly results and those for the financial year ended 31 December, 2014, as well as information in the Notes to those financial statements, always with support of the independent auditors. It is under development a Project to implement a system to consolidate all financial and accounting information of the GPA group, with the objective to enhance the quality and control of the consolidation of such information.  It were also discussed aspects related to manual journal entries, searching to analyze and discuss the controls in force in the quality of the adjusting entries and/or of manual intervention in inherited non-integrated systems up to now. In relation to this subject, levels of review and approvals were adopted based on materiality and nature, as well as suggestions and opportunities to reduce manual intervention in the accounting process routines by means of systems improvements. To monitor this work it was requested the assistance of the independent auditors to test and validate the manual journal entries.


F-6

---



Inventory controls and taxes on purchases, transfers and sales– The Audit Committee was informed about an Action Plan that intends to optimize the management of inventories involving Distribution Centers, Transfers to and Controls at stores, as well as timing and amounts of taxes applicable in each of these steps. The Plan contemplates to achieve significant improvements in issues related to inventory shrinkage and risk of inexistence of products at sales areas in stores, checking of quantities shipped at Distribution Centers and quantities arrived at stores, scheduled physical count of inventories and logistic procedures related to such inventories.  Real Estate management (“GPA Malls”)– the Audit Committee was informed by the Director of Risks of studies in the area of “Malls” aiming to achieve more effectiveness in management and reduction of compliance risks in real estate activities.  Internal and Risks Controls  During 2014 the Audit Committee accompanied and made recommendations about internal controls encompassing:  - Policies and codes of the Company, like the Insurance Policy, Policy for appointing independent auditors and their internal control letter; - Intensive monitoring, together with the Corporate Governance Committee, of progressive compliance with Brazilian Anti-brybery Act (“Anti Corruption Act number 12.846”), attempting to analyze and discuss all procedures to be set in place and related controls; - Procedures to fully comply with the requirements of U.S. Sarbanes-Oxley Act;  - The Audit Committee was periodically informed of communication received by the Company from regulatory agencies and governamental entities in what concerns matters within the scope of the Audit Committee.  Independent Auditors  Among the work performed by the independent auditors it should be mentioned that the Audit Committee accompanied and discussed the results of their reports on the financial statements before disclosure to users, contemplating the recomendations and suggestions made by the external auditors. Another work of the auditors supervised by the Audit Committee was Management of Fraud Risks, where an extensive mapping was carried out in all areas of the Company by interviews with key personnel to identify potential risks and design preventive or mitigation procedures. Internal Audit The Audit Committee had an intensive and constant interaction with the Internal Auditors, and among the subjects discussed it is worth mentioning: - Monthly report of claims and wrongdoing reports (“whistleblowing”) received through the internal communication channel, that come in to the Internal Audit area in a confidential way - without identification of the whistleblower. The flows to investigate the claims and the steps taken when they proved valid, as well as the financial impact of each confimed claim, were discussed.  - Revision of the corporate standards and procedures of the Company’s internal audit department. - Accompanying the studies and beginning of implementation of an IT-based system for Continuous Auditing of several areas of the Company, like sales, information from electronic checkout points, inventory controls, tax information, accounts receivable and accounts payable, among other. This project was named Continuous Auditing and based in the initial analyses the Audit Committee agreed that large benefits shall stem from improvement in controls and time saving in processing the audited information.


F-7

---



The Audit Committee approved the 2015 work plan developed by the former Internal Audit Director, and such plan is being implemented. The Audit Committee also approved a revision of the Company’s Internal Audit ruling; subsequent updates of it must be submitted to approval of the Audit Committee.  Recommendations of the Audit Committee The Audit Committee recommends to Senior Management (Executive Directors): - That they rigorously monitor and follow the consolidation, scheduled for 2015, of the Compliance area of the Group, with the formation of an expert team under the responsibility of the Director of Risks, that shall be responsible to assist management in monitoring compliance with legislation, rules, policies, codes and commitments applicable to the Company, ensuring a process for building capacity in all business areas to adhere to the related requirements.  - That they make sure all necessary resources are made available to a complete implementation of the following Action Plans under way and room is open in the ordinary Executive Directors’ meetings for them to be informed of progress and of eventual new obstacles identified, making efforts for shortening scheduled completion dates:   ·In the Legal Counsel Department, aiming to adopt more effective and modern systems and processes to monitor all legal cases involving the Company; ·In the Information Technology Department, aiming at improvements in processes supported by this area for the purpose of optimizing availability and control of information in the areas of Human Resources, Internal Audit, Accounting and Taxes. ·In the area of Human Resources, aiming at implementing a new system to manage and control all personnel information of the entire GPA group. ·In the area of Accounting, aiming at implementing a new system to consolidate all financial information and accounting data of all companies of the GPA Group. ·Still in the Accounting area, constant high level monitoring of the subject “manual journal entries”, aiming at ensuring that the mitigating controls are effective while systemic solutions – naturally more complex and costly, are not defined and adopted, with emphasis in recommending that such systemic solutions be persistently searched for. ·In the area of Inventory Controls and related taxes on purchases, transfers and sales, aiming at optimizing the permanent accuracy of physical and accounting control of inventories and of computation of applicable taxes in inventory movements. ·In the area of “Malls”, the conclusion and implementation of strategies aiming to achieve greater effectiveness in managing real estate assets.


F-8

---



Conclusion  The Audit Committee is of the opinion that the matters highlighted under “Recommendations” above for which Action Plans are stil under way were supported by satisfactory mitigation procedures to minimize the Internal Control risks that might impact the Financial Statements as of 31 December, 2014.  The Audit Committee is of the opinion that all relevant facts that came to its attention from the work described in this Report are adequately disclosed in the Management Report and in the audited Financial Statements as of 31 December 2014 and recommends their approval by the Board of Directors.  São Paulo, February 12, 2015   L. Nelson Carvalho – Coordinator of the Audit Committee and Accounting, Auditing and Financial Expert   Eleazar de Carvalho Filho, Board Member and equally Financial Expert   Pedro Oliva Marcílio de Sousa


F-9

---



Companhia Brasileira de Distribuição  Consolidated Statements of Income and Comprehensive Income Years Ended December 31, 2014, 2013 and 2012 (In millions of Brazilian reais, except earnings per share)  Notes

   

   2014

   

   2013

   (Reclassified)

   

   2012

   (Reclassified)Net operating revenue

   27

   

   65,525

   

   57,854

   

   51,016Cost of sales

   28

   

   (48,580)

   

   (42,750)

   

   (37,210)Gross profit

   

   

   16,945

   

   15,104

   

   13,806Operating income (expenses)Selling expenses

   28

   

   (10,303)

   

   (9,257)

   

   (8,410)General and administrative expenses

   28

   

   (1,484)

   

   (1,485)

   

   (1,754)Depreciation and amortization

   

   

   (821)

   

   (787)

   

   (751)Other operating expenses, net

   29

   

   (441)

   

   (673)

   

   (33)(13,049)

   

   (12,202)

   

   (10,948)Profit from operations before financial income (expenses) and share of profit of associates

   

   

   3,896

   

   2,902

   

   2,858Financial income (expenses), net

   30

   

   (1,508)

   

   (1,193)

   

   (1,193)Share of profit of associates

   13

   

   108

   

   47

   

   11Profit before income tax and social contribution

   

   

   2,496

   

   1,756

   

   1,676Income tax and social contribution

   21

   

   (736)

   

   (360)

   

   (520)Net income for the year

   

   

   1,760

   

   1,396

   

   1,156Other comprehensive income, net of income tax-Items that may be reclassified subsequently to statement of income:Defined benefit pension plan – actuarial gain or loss

   

   

   (2)

   

   -

   

   --Items that will not be reclassified to stament of income:

   

   

   

   

   

   

   -Foreign currency translation adjustment

   

   

   6

   

   -

   

   -Other comprehensive income for the year, net of income tax

   

   

   4

   

   -

   

   -Total comprehensive income for the year

   

   

   1,764

   

   1,396

   

   1,156Net income for the year attributed to:Controlling shareholders

   

   

   1,270

   

   1,052

   

   1,051Noncontrolling shareholders

   

   

   490

   

   344

   

   1051,760

   

   1,396

   

   1,156Total comprehensive income for the year attributed to:Controlling shareholders

   

   

   1,271

   

   1,052

   

   1,051Noncontrolling shareholders

   

   

   493

   

   344

   

   1051,764

   

   1,396

   

   1,156


F-10

---



Companhia Brasileira de Distribuição  Consolidated Statements of Income and Comprehensive Income Years Ended December 31, 2014, 2013 and 2012 (In millions of Brazilian reais, except earnings per share)    Earnings per share (weighted average for the year R$)

   31BasicCommon

   

   

   4.51

   

   3.75

   

   3.78Preferred

   

   

   4.97

   

   4.13

   

   4.15DilutedCommon

   

   

   4.51

   

   3.75

   

   3.78Preferred

   

   

   4.95

   

   4.11

   

   4.12
 The accompanying notes are an integral part of these consolidated financial statements.


F-11

---



Companhia Brasileira de Distribuição  Consolidated Balance Sheets December 31, 2014 and 2013 (In millions of Brazilian reais)  Assets

   Notes

   

   2014

   

   2013CurrentCash and cash equivalents

   7

   

   11,149

   

   8,367Marketable securities

   

   

   -

   

   24Trade receivables, net

   8

   

   3,210

   

   2,516Other receivables

   9

   

   295

   

   227Inventories, net

   10

   

   8,405

   

   6,382Recoverable taxes

   11

   

   808

   

   908Other assets

   

   

   266

   

   185Total current assets

   

   

   24,133

   

   18,609NoncurrentTrade receivables, net

   8

   

   105

   

   115Other receivables

   9

   

   636

   

   630Inventories, net

   10

   

   172

   

   172Recoverable taxes

   11

   

   2,136

   

   1,429Deferred income tax and social contribution

   21

   

   491

   

   951Related parties

   12

   

   313

   

   172Restricted deposits for legal proceedings

   23

   

   857

   

   815Other assets

   

   

   37

   

   50Investments in associates

   13

   

   401

   

   310Investment properties

   

   

   25

   

   -Property and equipment, net

   15

   

   9,699

   

   9,053Intangible assets, net

   16

   

   6,495

   

   5,701Total noncurrent assets

   

   

   21,367

   

   19,398Total assets

   

   

   45,500

   

   38,007
  The accompanying notes are an integral part of theseconsolidatedfinancial statements.


F-12

---



Companhia Brasileira de Distribuição  Consolidated Balance
Sheets December 31, 2014 and
2013 (In millions of Brazilian
reais)  Liabilities
    Notes
    
    2014
    
    2013CurrentTrade payables,
      net
    17
    
    13,322
    
    8,547Borrowings and
      financing
    18
    
    6,594
    
    5,172Payroll and
      related taxes
    
    
    864
    
    796Taxes and
      contributions payable and taxes payable in installments
    20
    
    867
    
    969Related
      parties
    12
    
    261
    
    33Dividends
      payable
    26.8
    
    321
    
    152Acquisition of
      noncontrolling interests
    22
    
    73
    
    69Financing of
      property
    
    
    98
    
    36Operational
      lease payable
    
    
    115
    
    112Deferred
      revenue
    25
    
    214
    
    115Pass through
      liabilities
    
    
    429
    
    226Other
      payables
    
    
    690
    
    783Total current liabilities
    
    
    23,848
    
    17,010NoncurrentBorrowings and
      financing
    18
    
    3,134
    
    4,323Deferred income
      tax and social contribution
    21
    
    1,133
    
    1,061Taxes payable in
      installments
    20
    
    617
    
    1,073Provisions for
      risks
    23
    
    1,344
    
    1,147Acquisition of
      noncontrolling interests
    22
    
    57
    
    108Deferred
      revenue
    25
    
    834
    
    456Other
      payables
    
    
    51
    
    117Total noncurrent liabilities
    
    
    7,170
    
    8,285Shareholders’ equityShare
      capital
    26
    
    6,792
    
    6,764Capital
      reserves
    26
    
    282
    
    233Earnings
      reserves
    26
    
    3,505
    
    2,486Accumulated
      other comprehensive income
    
    
    1
    
    -10,580
    
    9,483Noncontrolling interests
    
    
    3,902
    
    3,229Total equity
    
    
    14,482
    
    12,712Total liabilities and equity
    
    
    45,500
    
    38,007
  The accompanying notes are an integral part of these
consolidated financial statements.


F-13

---



Companhia Brasileira de
Distribuição  Consolidated Statements of Changes
inShareholders’ Equity Years Ended December 31, 2014, 2013
and 2012 (In millions of Brazilian
reais) Capital reserves
    
    
    
    
    
    Earnings reservesDescription
    
    Sharecapital
    
    Specialgoodwill
    
    Other reserves
    
    Stock options
    
    Legal
    
    Expansion
    
    Treasury shares
    
    Earnings
      retention
    
    Retaining
      earnings
    
    Accumulated other
      comprehensive income
    
    Controlling
      shareholders’
    
    Non-controlling
      interests
    
    TotalBalance at December 31, 2011
    
    6,130
    
    239
    
    7
    
    138
    
    249
    
    784
    
    (7)
    
    87
    
    -
    
    -
    
    7,627
    
    2,470
    
    10,097Capital increasesCapitalization of
      reserve
    
    559
    
    (201)
    
    -
    
    -
    
    -
    
    (323)
    
    -
    
    (35)
    
    -
    
    -
    
    -
    
    -
    
    -Stock options
      exercised
    
    21
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    21
    
    -
    
    21Net income for the year
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    1,051
    
    -
    
    1,051
    
    105
    
    1,156Share-based expenses
    
    -
    
    -
    
    -
    
    45
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    45
    
    -
    
    45Appropriation of income to legal reserve
    
    -
    
    -
    
    -
    
    -
    
    53
    
    674
    
    -
    
    -
    
    (727)
    
    -
    
    -
    
    -
    
    -Dividends
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    (250)
    
    -
    
    (250)
    
    (2)
    
    (252)Gain (loss) in equity interest
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    2
    
    -
    
    -
    
    2
    
    1
    
    3Transfer to earnings reserve
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    74
    
    (74)
    
    -
    
    -
    
    -
    
    -Balance at December 31, 2012
    
    6,710
    
    38
    
    7
    
    183
    
    302
    
    1,135
    
    (7)
    
    128
    
    -
    
    -
    
    8,496
    
    2,574
    
    11,070Capital increasesCapitalization of
      reserve (note 26.3)
    
    38
    
    (38)
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -Stock options
      exercised
    
    16
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    16
    
    -
    
    16Transfer to expansion reserve (note 26.5)
    
    -
    
    -
    
    -
    
    -
    
    -
    
    674
    
    -
    
    (674)
    
    -
    
    -
    
    -
    
    -
    
    -Share-based expenses (note 26.6)
    
    -
    
    -
    
    -
    
    43
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    43
    
    -
    
    43Net income for the year
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    1,052
    
    -
    
    1,052
    
    344
    
    1,396Appropriation of income to legal reserve (note 26.5)
    
    -
    
    -
    
    -
    
    -
    
    52
    
    -
    
    -
    
    -
    
    (52)
    
    -
    
    -
    
    -
    
    -Dividends (note
      26.8)
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    (250)
    
    -
    
    (250)
    
    (186)
    
    (436)Transfer to earnings reserve
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    750
    
    (750)
    
    -
    
    -
    
    -
    
    -Transactions with non-controlling interest (note
      26.9)
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    126
    
    -
    
    -
    
    126
    
    497
    
    623Balance at December 31, 2013
    
    6,764
    
    -
    
    7
    
    226
    
    354
    
    1,809
    
    (7)
    
    330
    
    -
    
    -
    
    9,483
    
    3,229
    
    12,712Capital increase (note 26.1)
    
    28
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    28
    
    -
    
    28Share-based expenses (note 26.6)
    
    -
    
    -
    
    -
    
    37
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    37
    
    -
    
    37Share-based expenses - subsidiaries
    
    -
    
    -
    
    -
    
    12
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    12
    
    17
    
    29Net income for the year
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    1,270
    
    -
    
    1,270
    
    490
    
    1,760Other comprehensive income:Foreign currency
      translation
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    2
    
    2
    
    4
    
    6Defined benefit pension plan - actuarial
      losses
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    (1)
    
    (1)
    
    (1)
    
    (2)Comprehensive income for the year
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    1,270
    
    1
    
    1,271
    
    493
    
    1,764Appropriation of income to legal reserve (note 26.5)
    
    -
    
    -
    
    -
    
    -
    
    63
    
    -
    
    -
    
    -
    
    (63)
    
    -
    
    -
    
    -
    
    -Dividends (note 26.8)
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    (302)
    
    -
    
    (302)
    
    (126)
    
    (428)Transfer to earnings reserve
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    905
    
    (905)
    
    -
    
    -
    
    -
    
    -Transactions with non-controlling interest (note
      26.9)
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    (28)
    
    -
    
    -
    
    (28)
    
    24
    
    (4)Cnova N.V initial public offering transaction (note
      1.4 ii)
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    132
    
    -
    
    -
    
    132
    
    279
    
    411Corporate restructuring on subsidiaries (note 1.4
      iv)
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    -
    
    (53)
    
    -
    
    -
    
    (53)
    
    (14)
    
    (67)Balance at December 31, 2014
    
    6,792
    
    -
    
    7
    
    275
    
    417
    
    1,809
    
    (7)
    
    1,960
    
    -
    
    1
    
    10,580
    
    3,902
    
    14,482
 The accompanying notes are an integral part of these
consolidated financial statements.


F-14

---



Companhia Brasileira de Distribuição  Consolidated Statements of Cash Flows Years Ended December 31, 2014, 2013 and 2012 (In millions of Brazilian reais)  2014
    
    2013
    
    2012Cash flows from operating activitiesNet income for
      the year
    
    1,760
    
    1,396
    
    1,156Adjustments to reconcile net
      income to net cash provided by operations:Deferred income
      tax and social contribution (note 21.3)
    
    222
    
    89
    
    193Loss (gain) on
      disposal of property and equipment
    
    58
    
    45
    
    (12)Depreciation and
      amortization (note 15 and 16)
    
    931
    
    865
    
    834Interest and
      inflation adjustments
    
    1,118
    
    1,000
    
    1,099Adjustment to
      present value on trade accounts receivable
    
    -
    
    (10)
    
    (14)Barter revenue
    
    -
    
    -
    
    (158)Share of profit
      of associates (note 13)
    
    (108)
    
    (47)
    
    (11)Provision for
      risks
    
    309
    
    249
    
    83Share-based
      expenses
    
    47
    
    43
    
    45Estimated losses
      in doubtful accounts (note 8)
    
    518
    
    451
    
    341Estimated losses
      on inventories obsolescence, and breakage (nota 10)
    
    35
    
    (2)
    
    (23)Deferred
      revenue
    
    (32)
    
    (43)
    
    54Gain on fair
      value measurement of investments
    
    -
    
    (100)
    
    -Gain on disposal
      of a subsidiary
    
    (16)
    
    -
    
    -Provision for disposals and
      losses of fixed assets
    
    -
    
    -
    
    11Other operating
      expenses
    
    150
    
    324
    
    (23)4,992
    
    4,260
    
    3.575Changes in assets and liabilitiesTrade
      receivables
    
    (922)
    
    (333)
    
    2,174Inventories
    
    (1,503)
    
    (582)
    
    (192)Recoverable
      taxes
    
    (476)
    
    (284)
    
    (575)Other
      assets
    
    (69)
    
    -
    
    -Related
      parties
    
    (253)
    
    (34)
    
    25Restricted
      deposits from legal proceedings
    
    (20)
    
    (186)
    
    (179)Trade
      payables
    
    3,556
    
    2,270
    
    261Payroll, related
      taxes and taxes payable
    
    72
    
    59
    
    (29)Taxes and
      contributions payable
    
    (432)
    
    (128)
    
    130Financial
      instruments
    
    -
    
    -
    
    (50)Deferred
      revenue
    
    492
    
    -
    
    -Other
      liabilities
    
    (445)
    
    (126)
    
    159Marketable
      securities
    
    24
    
    (24)
    
    -Net cash provided by operating
    activities
    
    5,016
    
    4,892
    
    5,299


F-15

---



Companhia Brasileira de Distribuição  Consolidated Statements of Cash Flows –
Continued Years Ended December 31, 2014, 2013 and 2012 (In millions of Brazilian reais)  2014
    
    2013
    
    2012Cash flow provided by (used in) investing
      activitiesPurchase of
      property and equipment (note 15)
    
    (1,379)
    
    (1,656)
    
    (1,309)Increase in
      intangible assets (note 16)
    
    (518)
    
    (194)
    
    (84)Proceeds from the sale of property and
      equipment
    
    59
    
    97
    
    87Net cash from business combination and
      corporate reorganization
    
    168
    
    -
    
    -Proceeds from sale of subsidiary (note
      13.1 vii)
    
    20
    
    -
    
    -Acquisition of
      subsidiary
    
    -
    
    (212)
    
    -Net cash used in investing activities
    
    (1,650)
    
    (1,963)
    
    (1,306)Cash flow provided by (used in) financing
      activitiesCapital
      increase
    
    28
    
    16
    
    21Proceeds from
      borrowings and financing (note 18.2)
    
    6,780
    
    5,278
    
    7,211Repayments of
      borrowings and financing (note 18.2)
    
    (7,519)
    
    (7,239)
    
    (8,890)Dividends
      paid
    
    (258)
    
    (453)
    
    (186)Transactions
      with non-controlling shareholders
    
    (8)
    
    -
    
    -Sale of
      noncontrolling interest - secondary offering of shares of
      subsidiary
    
    -
    
    814
    
    -Acquisition of
      subsidiary in installments
    
    (67)
    
    (64)
    
    (33)Proceeds from offering of shares of
      subsidiary, net of transaction costs
    
    408
    
    -
    
    -Net cash used in financing activities
    
    (636)
    
    (1,648)
    
    (1,877)Increase in cash and cash equivalents
    
    2,730
    
    1,281
    
    2,116Cash and cash equivalents at beginning
      of year
    
    8,367
    
    7,086
    
    4,970Exchange rate changes in
      cash and cash equivalents
    
    52
    
    -
    
    -Cash and cash
      equivalents at end of year
    
    11,149
    
    8,367
    
    7,086Increase in cash and cash equivalents
    
    2,730
    
    1,281
    
    2,116
   The accompanying notes are an
integral part of these consolidated financial statements.  The main non-cash
transactions are disclosed in the notes1.6,1.4.(i), 1.4 (ii), 1.4 (v),
15.3, 16.6, 20, 21, 23, 26.9 and 29.


F-16

---



Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 1.Corporate information Companhia Brasileira de
Distribuição (“CBD”), directly or through its subsidiaries (“Company”), engages
in the retail of food, clothing, home appliances, electronics and other items
through its chain of hypermarkets, supermarkets, specialized stores and
department stores, principally under the trade names "Pão de Açúcar”, “Minuto
Pão de Açúcar”, "Extra Hiper", “Extra Super”, “Minimercado Extra”, “Assaí”,
“Ponto Frio” and “Casas Bahia", in addition to the e-commerce platforms
“CasasBahia.com,” “Extra.com”, “Ponto Frio.com”, “Barateiro.com”,
“Partiuviagens.com” and “Cdiscount.com” and the neighborhood shopping center
flag “Conviva”. Its headquarters are located in the city of São Paulo, São Paulo
State, Brazil. CBD’s shares are listed on São
Paulo Stock Exchange (“BM&FBovespa”) Level 1 of Corporate Governance under
the ticker symbol “PCAR4” and on New York Stock Exchange (ADR level III) under
the ticker symbol “CBD”. CBD is controlled by Wilkes
Participações S.A. ("Wilkes"), which, in turn, is controlled by Casino Guichard
Perrachon (“Casino”). 1.1.Casino
arbitration In 2011, Casino filed two
arbitration proceedings with the International Court of Arbitration of the
International Chamber of Commerce against Mr. Abílio dos Santos Diniz and
his related parties. On September 6, 2013, Casino and Mr. Abilio dos Santos
Diniz, jointly with their related parties, filed a petition for closing all
arbitration procedures and signed a Transaction and Waiver of Rights Agreement. It was also agreed to terminate
all litigations between parties and not to take any actions or file any lawsuits
based on the rights referred to in the agreements previously entered into
between the parties or on understandings between the parties prior to September
6, 2013.   1.2.Arbitration request by Morzan In June 2012, CBD was notified by
the International Chamber of Commerce (ICC) of a request for starting
arbitration proceedings (“Proceedings”) by Morzan Empreendimentos e
Participações Ltda, (“Morzan”), the former holding of Globex Utilidades S.A.,
currently Via Varejo S.A. (“Via Varejo”). The Proceedings are associated
with Share Purchase Agreement signed between subsidiary Mandala Empreendimentos
e Participações S.A. and Morzan on June 8, 2009 for the acquisition of
86,962,965 registered common shares with no par value, which then represented
70.2421% of Via Varejo’s total voting capital. The arbitration terms are subject
to confidentiality requirements. Through the reporting date, the
developments of the Proceedings did not have any impacts on GPA financial
statements.


F-17

---



Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 1.Corporate information –Continued 1.3.Performance Commitment Agreement CBD, its subsidiary Via Varejo and
Casa Bahia Comercial Ltda. (“CB”), collectively “Committed Parties” and the
Administrative Council for Economic Defense ("CADE") executed a Performance
Commitment Agreement ("PCA") to approve the Association Agreement signed between
CBD and CB on December 4, 2009 and amended on July 1, 2010. Under the PCA, Via
Varejo was required to sell 74 stores, located in 54 cities, distributed in six
Brazilian states and the Federal District. As required by the PCA, from
October 2013 to January 2014, Via Varejo sold 42 stores, which was
 approved by CADE in September and October 2014. The Company still awaits
for certain precedent conditions in the sales and purchase agreements to be met,
since this may influence the final selling price of these stores and the actual
transfer of stores to buyers. The accounting effects related to the sale of the
stores will be recognized when such precedent conditions are met. No losses are
expected other than those already recognized in the financial statements. Regarding the remaining 32 stores
not sold, as required by the PCA, between May and June 2014, their activities
were closed down and a fine of R$12 was paid. CBD understands that the
obligations under the PCA were fulfilled and it is waiting for the formal
approval from CADE.  1.4.Corporate
restructuring (i)Acquisition of interest in Nova Pontocom On October 17, 2013, Via Varejo
sold 6.20% of Nova Pontocom’s capital stock to CBD by the amount of R$80, in
cash. On the same date, CBD acquired
1.95% interest in Nova Pontocom, which was held by noncontrolling shareholders,
for the amount of R$25, of which R$7 was offset against balances due by these
noncontrolling shareholders to CBD and R$18 was paid in cash. Once the
transaction was completed, CBD was the holder of a 47.21% direct interest plus a
23.88% indirect interest in Nova Pontocom. The abovementioned transactions
were classified as “capital transaction” and their effects were recorded
directly in equity attributable to controlling shareholders’, in the total
amount of R$73 and in noncontrolling interests in the amount of R$24 (see note
26.9). In addition to those transactions,
on that same date, a new Nova Pontocom Shareholders Agreement was signed,
whereby new corporate governance practices were established. (ii)E-commerce
segment corporate restructuring On June 4, 2014, the Boards of
Directors of the CBD and Via Varejo approved the association of the e-commerce
businesses developed by the companies through Nova Pontocom with the e-commerce
business developed by the controlling shareholder Casino through Cdiscount S.A.
and its subsidiaries and associates (“CDiscount”).


F-18

---



Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 1.Corporate information –Continued 1.4.Corporate
restructuring (ii)E-commerce
segment corporate restructuring  Special Committees implemented by
the Boards to evaluate the transactions, delivered a favorable recommendation of
implementation of the operation considering the following elements: (a) the
commercial interests of the companies in the e-commerce activities will be
preserved; and (b) the potential for value generation for the companies and
their shareholders through the integration of the e-Commerce activities
currently developed by Nova Potocom and CDiscount into a new entity named Cnova
N.V. (“Cnova”) organized under the Netherlands laws.  The exchange of net assets between
Nova Potocom and CDiscount was based on the fair value of these
entities.  In July 24, 2014, the corporate
restructuring was completed at Cnova level in the Netherlands, resulting in
subsidiary Nova Pontocom giving 46.5% of the operational net assets, in exchange
for 53.5% of interest in CDiscount.  The operational entities with
important operations that the Company started consolidating as a result of this
transaction are:  ·Cdiscount
S.A.S.; ·Financiere
MSR; ·E-trend; ·Cdiscount
Colombia; ·Cdiscount
Thailand; ·Cdiscount
Afrique; ·Cdiscount
Voyages.  The exchange of shares remained
recorded at historical cost, since this transaction is out of the scope of IFRS
3 (R) “Business Combinations”, by involving entities under common control. The
date of the first consolidation of these entities, whose control was acquired by
the Company, was July 31, 2014.  The impact in the shareholders’
equity attributable to controlling shareholders as a result of the transaction
is broke down as follow: 07.31.2014Investment granted by the
      Company (represented by 46.5% of Nova Pontocom)
    (23)Investment received by the
      Company (represented by 53.5% of Cdiscount)
    16Net
    effect
    (7)


F-19

---



Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 1.Corporate information –Continued 1.4.Corporate
restructuring (ii)E-commerce
segment corporate restructuring The main assets and liabilities
initially consolidated on July 31, 2014 were the following: CdiscountAssets
    
    07.31.2014Current assetsCash and cash
      equivalents
    
    204Trade
      receivables
    
    272Recoverable
      taxes
    
    92Inventories
    
    510Other current
      assets
    
    16Total current
    
    1,094NoncurrentTaxes
      payable
    
    41Other noncurrent
      assets
    
    5Investments in
      associates
    
    9Property and
      equipment
    
    30Intangible
      assets
    
    447Total noncurrent
    
    532Total assets
    
    1,626Liabilities
    
    07.31.2014Current
      liabilitiesTrade
      payables
    
    1,097Taxes and
      contributions payable
    
    78Related
      parties
    
    312Other
      payables
    
    78Total current liabilities
    
    1,565Noncurrent liabilitiesPension
      plan
    
    5Provisions
    
    9Other
      payables
    
    8Total noncurrent
    liabilities
    
    22Equity
    
    30Transactions with noncontrolling
      interests
    
    9Total equity
    
    39Total liabilities and
    equity
    
    1,626
 The effects of this transaction in
the shareholders’ equity is detailed in note 26.9. Additional information on the
transaction terms, such as preservation of the existing rights, additional
conditions and management decisions were disclosed in a material fact to the
market on July 24, 2014.


F-20

---



Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
  1.Corporate information –Continued 1.4.Corporate
restructuring (iii)Initial
public offering of Cnova In November and December 2014
Cnova, based in Netherlands, has concluded the initial public offering and
additional offer. The proceeds received (net of transaction costs) of a result
of this transaction were recorded in equity, since this is a transaction with
non-controlling shareholders  and the Company kept the control over Cnova.
The net impact in the shareholders’ equity as a result of this transaction was
R$411, recognizing R$132 in the shareholders equity attributed to controlling
shareholders and R$279 of non-controlling interest. Despite the Company has
indirect and direct interest of 35.73% in Cnova N.V, the control of this
subsidiary is exercised through Nova Pontocom that has 49.96% of interest and
more than 50% of Cnova voting rights. (iv)Corporate
restructuring and debt of Nova Pontocom  On December 2014, Nova Pontocom, a
holding that had 100% of the entity Marneylectro S.A.R.L., indirect controlling
entity of Cnova, paid part of its debt against CBD and Via Varejo delivering
shares of the investee Marneylectro S.A.R.L., based on its market value. As this
transaction was performed between entities under common control, all the related
effects were recorded directly in shareholders’ equity (R$53 in the shareholders
equity attributed to controlling shareholders and R$14 in noncontrolling
interests). (v)Corporate
restructuring of C-Asia On November 17, 2014, Casino
transferred 30% of its indirect interest in C-Distribution Asia Pte. Ltd
("C-Asia"), which controls the subsidiaries of Cnova operating in Thailand and
Vietnam, for an amount of R$52. This transaction resulted in the fact that the
Cnova, acquired indirect control over C-Asia. As this transaction was conducted
between entities under common control, it was recorded at historical costs. The
difference between the carrying amount of the net assets acquired and the
consideration was recorded in the shareholders’ equity attributable to
controlling interest (R$15) and non-controlling interest (R$21), as detailed in
note 26.9. Cash and cash equivalents at
acquisition accounted for R$18. 1.5Public
offering of shares – Via Varejo At December 27, 2013, the
subsidiary Via Varejo concluded its  Secondary Public Offering of Share
Certificates or Units (each Unit is comprised of one common share and two
preferred shares). Considering the overallotment, a total amount of one hundred,
twenty-three million, six hundred, ninety-six thousand, nine hundred,
eighty-four (123,697) Units were offered, totaling R$2,845. CBD sold a total amount of
thirty-eight million, nine hundred, ninety-one thousand, four hundred, forty-one
(38,991,441) Units for R$897, so that its interest in Via Varejo decreased to
62.25% of common shares and 43.35% of total capital. The proceeds received, net
of transaction costs, were recorded in equity, as this is a transaction with
non-controlling shareholders and the Company kept the control over Via Varejo.
The effect of income tax on capital gain and transaction costs was alsorecorded in the equity.
The equity effect deriving from this transaction was R$199 and is detailed in
note 26.9.


F-21

---



Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 1.Corporate information –Continued 1.5Public offering of
shares – Via Varejo -- continued Also pursuant to Clauses 4.1.3 and
10.1.4.2 of the Shareholders’ Agreement, the following cumulative conditions
were observed: (i) Casas Bahia Group “CB Group” (represented by Messrs. Samuel
Klein, Michael Klein and Mrs. Eva Lea Klein, and other entities) sold more than
23.64% of their shares representing Via Varejo’s capital stock; and (ii) Via
Varejo’s total free float reached a level higher than 20% of total capital. As
of the reporting date, CB Group holds 27.31% of shares representing Via Varejo’s
capital and its free float reached 29.34% of total. Accordingly, CB Group lost some
rights, such as: (i) Mr. Michael Klein is no longer the Chairman of Via Varejo’s
Board of Directors; (ii) CB Group’s agreement, in previous meeting, with Via
Varejo’s vote at the shareholders’ meetings of its subsidiary Nova Pontocom or
by members of Nova Pontocom’s Board of Directors, appointed by Via Varejo, in
relation to certain matters; (iii) the Migration Right; (iv) GPA’s call option;
and (v) CB Group’s call option. In addition, pursuant to Clause 4.1.2 of the
Shareholders’ Agreement, as its interest decreased, CB Group now appoints only
two members for Via Varejo’s Board of Directors. Transaction costs, totaling R$89,
net of income tax, were fully paid by Via Varejo, pursuant to the terms of the
Shareholders Agreement, and recorded directly in shareholders’
equity.


F-22

---



Companhia Brasileira de Distribuição  Notes to the Consolidated Financial Statements December 31, 2014, 2013 and 2012 (In millions of Brazilian reais, except when otherwise stated)
 2.Basis of preparation The consolidated financial statements have been prepared in accordance withthe International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”). The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments measured at their fair value. The consolidated financial statements are prepared in millions of Brazilian Reais (“R$”), which is also the functional currency of CBD. The consolidated financial statements for the year ended December 31, 2014 were approved by the Board of Directors at April 29, 2015. The Company has reclassified certain amounts in the consolidated statements of income for the years ended December 31, 2013 and 2012, presented for comparison purposes, to conform them to the reporting criteria adopted in the current period. The following reclassifications were made: Balances at 2013

   Published balance

   GPA Malls –

   cost

   GPA Malls – revenue

   Reclassified balanceNet operating revenue

   57,731

   -

   123

   57,854Cost of sales

   (42,704)

   (46)

   -

   (42,750)Gross profit

   15,027

   (46)

   123

   15,104Operating income (expenses)

   (12,078)

   46

   (123)

   (12,155)Selling expenses

   (9,180)

   46

   (123)

   (9,257)
  Balances at 2012

   Published balance

   GPA Malls –

   cost

   GPA Malls –Revenue

   Reclassified balanceNet operating revenue

   50,924

   -

   92

   51,016Cost of sales

   (37,168)

   (42)

   -

   (37,210)Gross profit

   13,757

   (42)

   92

   13,807Operating income (expenses)

   (10,887)

   42

   (92)

   (10,937)Selling Costs

   (8,360)

   42

   (92)

   (8,410)
  The reclassification abovementioned refers to revenues and related costs of rentals of malls, which were previously recorded net as part of selling expenses and have been reclassified to “net operating revenue” and “cost of sales”. Such reclassification is due to the increase of malls activities in the Multivarejo segment and considering expected increase in future operation of  malls ("Conviva" trade name), resulting in better presentation of this activity in the financial statements.


F-23

---



Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 3.Basis for consolidation 3.1.Interest
in subsidiaries and associated companies: Direct and
      indirect
      equity interests
      - %Companies
    2014
    
    2013SubsidiariesNovasoc Comercial Ltda. (“Novasoc”)
    10
    
    10Sé Supermercados Ltda. (“Sé”)
    100
    
    100Sendas Distribuidora S.A.
      (“Sendas”)
    100
    
    100Bellamar Empreend. e Participações
      Ltda.
    100
    
    100GPA
      Malls & & Properties Gestão de Ativos e Serviços Imobiliários
      Ltda.(“GPA Malls”)
    100
    
    100PA Publicidade Ltda. (“PA Publicidade”)
      (**)
    -
    
    100Vancouver Empreend. e Participações
      Ltda.(**)
    -
    
    100CBD Holland B.V.
    100
    
    100CBD Panamá Trading Corp.
    100
    
    100Barcelona Comércio Varejista e
      Atacadista S.A. (“Barcelona”)
    100
    
    100Xantocarpa Participações Ltda.
      (“Xantocarpa”)
    100
    
    100Vedra Empreend. e Participações S.A.
      (**)
    -
    
    100Monte Tardeli Empreendimentos e
      Participações S.A. (**)
    -
    
    100GPA 2 Empreend. e Participações
      Ltda.
    100
    
    100GPA 4 Empreend. e Participações S.A.
      (**)
    -
    
    100GPA 5 Empreend. e Participações S.A.
      (**)
    -
    
    100GPA 6 Empreend. e Participações Ltda.
      (GPA Logística e Transporte Ltda.)
    100
    
    100ECQD Participações Ltda. (**)
    -
    
    100API SPE Planej. e Desenv. de Empreed.Imobiliários Ltda. (**)
    -
    
    100Posto Ciara Ltda.
    100
    
    100Auto Posto Império Ltda.
    100
    
    100Auto Posto Duque Salim Maluf
      Ltda.
    100
    
    100Auto Posto GPA Santo André
      Ltda.
    100
    
    100Auto Posto Duque Lapa
Ltda.
    100
    
    100Duque Conveniências Ltda. (**)
    -
    
    100Nova Pontocom Comércio Eletrônico
      S.A(“Nova Pontocom”) (*) (***))
    71,4
    
    71.4CNova Comércio Eletrônico S/A (former
      Bruxellas Empreend. e Participações S.A.)(***)
    35.7
    
    100Cnova N.V (***)
    35.7
    
    -E-Hub Consult. Particip. e Com. S.A.
      (***)
    71.4
    
    71.4CDiscount Group S.A.S. (***)
    35.7
    
    -CDiscount Colombia S.A. (***)
    18.2
    
    -C Distribution Asia Pte. Ltd (***)
    21.4
    
    -C Distribution (Thaïland) Ltd (***)
    15
    
    -C-Discount Vietnam Co Ltd (***)
    17.1
    
    -Marneylectro B.V (***)
    71.6
    
    -Marneylectro S.A.R.L (***)
    71.6
    
    -Via Varejo S.A.(“Via
    Varejo”)
    43.4
    
    43.4Nova Extra Eletro Comercial Ltda.(Átino Comunicação Ltda) (**)
    -
    
    43.4Sabara S.A.(**)
    -
    
    43.4Indústria de Móveis Bartira Ltda.(“Bartira”)
    43.4
    
    43.4Ponto Frio Adm e Importação de Bens
      Ltda.(**)
    -
    
    43.4PontoCred Negócio de Varejo
      Ltda.
    43.4
    
    43.4Globex Adm e Serviços Ltda.(“GAS”)
    43.4
    
    43.4Rio Expresso Com. Atacad. de
      Eletrodoméstico Ltda.(**)
    -
    
    43.4Lake Niassa Empreend. e Participações
      Ltda.
    43.4
    
    43.4Globex Adm. Consórcio Ltda.
    43.4
    
    43.4Nova Experiência PontoCom
    S.A.
    71.4
    
    71.4Casas Bahia Contact Center Ltda.(“CBCC”) (****)
    -
    
    43.4
 (*) Except for treasury shares. (**) The change in equity interest refers to subsidiaries
incorporated in 2014 without any effect in the consolidated financial
statements. (***) The change in equity interest refers to e-commerce
corporate restructuring mentioned in the note 1.4. (****) This subsidiary was sold and the realted gain
recorded in other operating expenses, net note 29 (e).


F-24

---



Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 3.Basis for
consolidation–Continued 3.1.Interest
in subsidiaries and associated companies – Continued Companies
    2014
    
    213AssociatesFinanceira Itaú CBD S.A. Crédito,
      Financiamento e Investimento (“FIC”)
    41.9
    
    41.9Banco Investcred Unibanco S.A.
      (“BINV”)
    21.7
    
    21.7FIC Promotora de Vendas
    Ltda.
    41.9
    
    41.9Financière MSR S.A.S.U (*)
    35.7
    
    -E-Trend S.A.S. (*)
    35.7
    
    -CDiscount International B.V. (*)
    35.7
    
    -C-Discount Afrique S.A.S.U (*)
    35.7
    
    -
 (*) The change in equity interest
refers to Cnova N.V associate companies. See note 1 (1.4). 3.2.Subsidiaries In the consolidated financial
statements, the Company consolidates all its subsidiaries and maintain
noncontrolling interests in a separate line in shareholders’ equity. The consolidated financial
statements include the financial information of all subsidiaries over which the
Company has direct or indirect control. The determination of which subsidiaries
are controlled by the Company and the consolidation process is based on the
principles and concepts established by IFRS 10. The subsidiaries’ financial
statements are prepared as of the same reporting date and in accordance with the
same accounting policies. All intragroup balances, including income and
expenses, unrealized gains and losses and dividends resulting from intragroup
transactions are eliminated. Gains or losses from changes in
equity interests in subsidiaries that do not result in loss of control are
directly recorded in shareholders’ equity. Losses are attributable to
noncontrolling interests, even if this results in a deficit balance. The main direct or indirect
subsidiaries included in the consolidation is as follows: (i)Novasoc CBD has a 10% interest in Novasoc
and controls 99.98% of its voting rights, under the Shareholders’ Agreement.
Novasoc’s articles of association does not require its profit to be necessarily
proportional to the interest held by the shareholders.


F-25

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 3.Basis for
consolidation–Continued 3.2.Subsidiaries - continued (ii)Via
Varejo Via Varejo S.A., directly or
through its subsidiaries (“Via Varejo”), operates in the consumer electronics,
home appliance, mobile phones and furniture retail segments through “Casas
Bahia” and “Ponto Frio” banners. CBD holds 43.35% of Via Varejo’s
total stock and 62.3% of its voting shares, controlling this
subsidiary. (iii)Sé Supermercados and
Sendas CBD holds, directly or indirectly,
100% of Sendas’ the capital of these subsidiaries, which operate in the retail
segment, mainly in the State of Rio de Janeiro and São Paulo. (iv)Barcelona and
Xantocarpa CBD holds direct or indirectly,
100% of these subsidiaries, which operate in the cash and carry
segment. (v)GPA
Malls GPA Malls is responsible to manage
and operate the GPA’s real estate activities, which includes management of strip
malls and exploration of our properties. (vi)Nova
Pontocom Nova Pontocom is the holding of
the e-commerce companies, selling to end customers through websites:
www.extra.com.br, www.pontofrio.com.br, www.casasbahia.com.br,
www.barateiro.com.br, www.partiuviagens.com.br and www.cdiscount.com.Group
During 2014, the Company performed certain corporate restructurings involving
the e-commerce segment subsidiaries, which are detailed in note
 (1.4).


F-26

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 3.     Basis
for consolidation –Continued 3.3.Associates
– BINV and FIC The accounting method used by the
Company to measure and record the effects from its associates, which represent
entities in which the Company has significant influence but does not have the
control over their activities, is in accordance with the requirements of IAS 28,
as follows: ·Initial recognition of
the investment is at cost or fair value, depending on the case, and its profit
(loss) is accounted for under the equity method. ·Changes recognized
directly in the shareholders’ equity of an associate are recorded directly
 in the statement of changes in shareholders’ equity. ·Any unrealized gains or
losses resulting from transactions between the Company and its associates are
proportionately eliminated. ·The associates’
financial statements are prepared as of the same reporting date as that of CBD
and, when necessary, adjustments are made to conform to the Company’s accounting
policies. The Company’s investments in the
associates FIC and BINV, entities engaged in financing sales directly to
customers, result from an association with Banco Itaú Unibanco S.A. (“Itaú
Unibanco”).  The Company has significant
influence in FIC’s operating decisions through the Board of Directors of this
associate. FIC’s summarized
consolidated financial statements are as follows: FIC - Consolidated2014
    2013Current assets
    3,815
    3,522Noncurrent assets
    35
    32Total assets
    3,850
    3,554Current liabilities
    2,963
    2,827Noncurrent liabilities
    15
    23Shareholders’ equity
    872
    704Total liabilities and equity
    3,850
    3,554Income
      statement:
    2014
    2013Revenues
    1,025
    895Operating income
    397
    158Net income for the year
    220
    88
  For the purposes of measurement of
the investment in this associate, the special goodwill reserve recorded by FIC
should be deducted from its shareholders’ equity, since it is Itaú Unibanco’s
(controlling shareholder) exclusive right.


F-27

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 4.Significant accounting
policies 4.1.Financial
instruments Financial assets are initially
recognized at fair value when the GCompany assumes contractual rights to receive
cash or other financial assets under contracts in which they are a party.
Financial assets are derecognized when the rights to receive cash from the
financial asset expire or had their risks and rewards substantially transferred
to third parties. Assets and liabilities continue to be recognized when rights
and/or obligations are retained in the transfer by the company.  Financial liabilities are
recognized when the GCompany assumes contractual obligations to deliver cash or
other financial assets to another entity or to exchange financial assets or
financial liabilities with another entity under conditions that are potentially
unfavorable to the Company. Financial liabilities are initially recognized at
fair value and are derecognized when they are settled, extinguished or
expired.  Financial instruments measured at
amortized cost are subsequently measured at the effective interest rate (“EIR”).
Interest income and expenses, inflation adjustments and exchange rate changes
are recognized when incurred in the statement of income.  The Company evaluates monthly the
estimates of loss due to financial assets, which were not received. An estimate
of loss is recognized when there is objective evidence that the Company were not
able to receive all amounts falling due on their due dates. For the calculation,
the Company considers the history of losses, historical statistical data, aging
list of receivables and an assessment of the likelihood of additional impairment
of the portfolio, taking into account macroeconomic and market factors. When the
collection of receivable is unlikely, their carrying amount and the respective
estimate of loss are recognized in the statement of income. Subsequent
recoveries are recognized, when incurred, in line item Selling expenses in the
income statement for the year.  Note 19 provides additional
information on financial instruments and details on how they are
measured.   (i)Financial assets  Initial recognition and
measurement  The financial assets held by the
Company within the scope of (IAS 39) are classified according to the purpose for
which they were acquired or contracted, into the following categories: (i)
financial assets measured at fair value through profit or loss (“FVTPL”); (ii)
loans and receivables, and (iii) investments held to maturity. The Company
determines the classification of their financial assets upon initial
recognition.  Financial assets classified as at
FVTPL are measured at fair value and the related transaction costs are
recognized in the statement of income immediately on initial recognition. Loans
and receivables are accounted for at amortized cost and the related transaction
costs are included in the determination of effective interest rate.  Purchases or sales of financial
assets that require assets to be delivered within a time frame established by
regulations or market conventions (negotiations under usual conditions) are
recognized on the trade date, that is, on the date that the Company commits to
purchase or sell the asset.  The financial assets of the
Company include cash and cash equivalents, marketable securities, trade
receivables, related parties receivables and derivative financial instruments.


F-28

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 4.Significant accounting policies –Continued 4.1.Financial
instruments – Continued Subsequent
measurement  ·Financial assets measured at fair value through profit or
loss:
assets acquired to be realized in the short term, which are measured at fair
value as of each balance sheet date. Interest rates, inflation adjustments,
exchange rate changes, and any changes on fair value measurements are recognized
in the statement of income for the year as finance income or finance expenses,
when incurred. ·Loans
and receivables: non-derivative financial assets with fixed or
determinable payments, which are not quoted in an active market. After the
initial recognition, they are measured at amortized cost using the effective
interest method. Interest income, inflation adjustments and exchange rate
changes, as applicable, are recognized in the statement of income as finance
income or finance expenses, when incurred; and  Derecognition of
financial assets  A financial asset (or, as
applicable, part of a financial asset or part of a Company of similar financial
assets) is derecognized when: ·The rights
to the cash flows from the asset expire; or ·The
Company transfers the financial assets and substantially all the risks and
rewards of ownership of the assets to another party..  Company If the neither transfers
nor retains substantially all the risks and rewards of ownership and continues
to control the transferred assets, the Company recognizes its retained interest
in the asset and an associated liability for amounts it may have to pay. If the
Company retains substantially all the risks and rewards of ownership of a
transferred financial asset, the Company continues to recognize the financial
asset and also recognizes a colletarized borrowing for the proceeds
received.  Impairment of financial
assets  At the end of the reporting
periods, the Company evaluates if there is an indication of impairment of a
financial asset or Company of financial assets. The impairment of a financial
asset or Company of financial assets is only considered when there is an
objective evidence resulting from one or more events that have occurred after
the asset’s initial recognition (“loss event”), and if said event affects the
estimated future cash flows of the financial asset or Company of financial
assets that can be reliably estimated.  The evidence of impairment may
include indications that debtors (or Company of debtors) are going through
relevant financial constraints, moratorium or default in the amortization of
interest or principal; likelihood that they will file for bankruptcy or another
type of financial reorganization; and when this data indicates a measurable
decrease in future cash flows, such as changes in late payment interest or
economic conditions related to default.


F-29

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 4.Significant accounting policies –Continued 4.1.Financial
instruments – Continued (i)Financial assets– Continued  Impairment of financial
assets  Impairment is measured as the
difference between the carrying amount of an asset and the present value of the
estimated future cash flows (excluding future credit losses that have not been
incurred) discounted by the original effective interest rate of the financial
asset. The carrying amount of the assets decreases through the use of a
provision and the impairment loss is recognized in the statement of income.
Interest revenue is recorded in the financial statements as part of finance
income, except the account receivable.Company  If, in a subsequent period, the
impairment amount decreases and the reduction can be objectively associated to
an event that has occurred after the recognition of the provision (such as an
improvement in a debtor’s credit rating), the reversal of the previously
recognized impairment loss is recognized in the statement of income. If a
write-off is recovered subsequently, this recovery is also recognized in the
statement of income.  (ii)Financial liabilities  The financial liabilities under
the scope of IAS 39 are classified as borrowings, financing or derivative
financial instruments designated as hedge instruments in an effective hedge
relationship, as applicable. The Company defines the classification of its
financial liabilities at the initial recognition.  All financial liabilities are
initially recognized at fair value and, in the case of borrowings and financing,
net of the related attributable transaction costs.  The Company’ financial liabilities
include trade payables, borrowings and financing, debentures, finance of
property, related parties payables, acquisition of noncontrolling interests and
derivatives financial instruments.  Subsequent
measurement  After initial recognition,
interest-bearing borrowings and financing are subsequently measured at amortized
cost using the effective interest rate method.


F-30

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
  4.Significant accounting policies –Continued 4.1.Financial
instruments – Continued (ii)Financial liabilities– Continued   Derecognition of
financial liabilities  A financial liability is
derecognized when the underlying obligation is settled, cancelled or
expired.  When an existing financial
liability is replaced by another one from the same lender, under substantially
different terms, or the terms of an existing liability are substantially
modified, this replacement or modification is treated as a derecognition of the
original liability and the recognition of a new liability, and the difference in
the respective carrying amounts is recognized in the statement of
income.  Offsetting financial
instruments  Financial assets and financial
liabilities are offset and stated net in the balance sheet only if there is a
currently enforceable legal right to offset the recognized amounts and there is
an intention of settling them on a net basis or realizing the assets and
settling the liabilities simultaneously. 4.2.Foreign
currencies Foreign-currency transactions are
initially recognized at fair value of the corresponding currencies on the date
the transaction is qualified for recognition.  Monetary assets and monetary
liabilities denominated in foreign currencies are translated into Brazilian
reais according to the market price at the end of the reporting periods.
Differences arising on payment or translation of monetary items are recognized
as finance income or finance expenses. 4.3.Hedge accounting The Company uses derivative
financial instruments such as interest rate and exchange rate swaps. These
derivative financial instruments are initially recognized at fair value on the
date on which a derivative contract is entered into and are subsequently
re-measured at fair value at the end of each reporting period. Derivatives are
accounted for as financial assets when their fair value is positive and as
financial liabilities when their fair value is negative. Any gains or losses on
changes in the fair value of derivatives are directly recorded in the statement
of income.  At the inception of a hedge
relationship, the Company formally designates and documents the hedge
relationship to which it intends to apply the hedge accounting and its objective
and risk management strategy for contracting the hedging instrument. The
documentation includes identification of the hedging instrument, the hedged item
or transaction, the nature of the risk being hedged and how the Company will
assess the effectiveness of the changes in the hedging instrument’s fair value
in offsetting the exposure to changes in the fair value of the hedged item or
cash flow attributable to the hedged risk. These hedges are expected to be
highly effective in offsetting changes in the fair value and are assessed on an
ongoing basis to determine if they actually have been highly effective
throughout the periods for which they were designated.


F-31

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 4.Significant accounting policies –Continued 4.3.Hedge
accounting – Continued For accounting purposes, these
instruments are classified as fair value hedge when hedging the exposure to
changes in the fair value of a recognized asset or liability.  The following are recognized as
fair value hedges, in accordance with the procedures below:  ·The change in the fair
value of a derivative financial instrument classified as interest rate hedging
is recognized as finance income (expenses). The change in the fair value of the
hedged item is recorded as a part of the carrying amount of the hedged item and
is recognized in the statement of income;  ·For fair value hedges
relating to items accounted for at amortized cost, the adjustment to the
carrying amount is amortized in profit or loss over the remaining term to
maturity. The amortization of the effective interest rate may begin as soon as
an adjustment exists and shall begin no later than when the hedged item ceases
to be adjusted for changes in its fair value attributable to the hedged risk;  ·If the hedge item is
derecognized, the unamortized fair value is immediately recognized in the
statement of income; and  ·To calculate the fair
value, debts and swaps are measured through rates disclosed in the financial
market and projected up to their maturity date. The discount rate used in the
calculation by the interpolation method for borrowings loans denominated in
foreign currency is arrived at through DDI curves, clean coupon and DI x
exchange rates, indices disclosed by the BM&FBovespa (the Brazilian
Securities, Commodities and Futures Exchange), whereas for loans denominated in
reais, the Company uses the DI curve, an index published by the CETIP and
calculated through the exponential interpolation method. 4.4.Cash and
cash equivalents Cash and cash
equivalents consist of cash, bank accounts and highly liquid short-term
investments that are readily convertible into a known cash amount, and are
subject to an insignificant risk of change in value, with intention and
possibility to be redeemed in the short term, up to 90 days. 4.5.Trade
receivables Trade receivables are stated and
maintained in the balance sheets at sales amount less an allowance for doubtful
accounts, which is recorded based on historical losses and a risk analysis of
the entire customer portfolio and the respective likelihood of
collection.  Trade receivables refer to
non-derivative financial assets with fixed payments or which may be calculated,
without quotation in an active market. After the initial measurement, these
financial assets are subsequently measured at amortized cost according to the
effective interest rate, less impairment. The amortized cost is calculated
taking into account eventual discounts or premiums over the acquisition and
tariffs or costs comprising the effective interest rate. The effective interest
rate amortization is included in finance income (expenses), net in the statement
of income. Impairment expenses are recognized in the statement of income in
selling expenses.  At the end of each reporting
period, the Company assess if the financial assets or Company of financial
assets are impaired.


F-32

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 4.Significant accounting policies –Continued 4.5.Trade
receivables - Continued Impairment of receivables are
based on historical losses recorded over the last 24 months, in addition to an
assessment of economic events, such as unemployment rates, consumer trends and
past due receivables in the portfolio.  Receivables are considered
uncollectable and are written off from trade receivables when payments remain
outstanding for more than 180 days. 4.6.Inventories Inventories are
accounted for at cost or net realizable value, whichever is lower. Inventories
purchased are recorded at average cost, including warehouse and handling costs,
to the extent these costs are necessary to make inventories available for sale
in the stores, less bonuses received from suppliers.  Net realizable value is the
selling price in the ordinary course of business, less the estimated costs
necessary to make the sale.  Inventories are reduced by an
allowance for losses and breakage, which is periodically reviewed and evaluated
for adequacy. 4.7.Supplier
Bonuses Bonuses received from suppliers
are measured and recognized based on contracts and agreements signed, and
recorded in the statement of income when the corresponding inventories are sold.
They include purchase volume agreements (rebates), logistics services and
specific negotiations to recompose margin or marketing agreements, among others,
and are deducted from payables to the respective suppliers, when the Company is
contractually entitled to settle trade payables net of amounts receivable by way
of bonus. 4.8.Present
value adjustment of assets and liabilities Current monetary
assets and monetary liabilities, when relevant, and long-term assets and
liabilities are adjusted to their present value. The present value adjustment is
calculated taking into account contractual cash flows and the respective
explicit or implied interest rates.  Implicit interest
rates associated with said assets and liabilities are adjusted for appropriate
recognition considering the effective interest method.  Trade receivables
related to installment sales are recorded at net present value and the
corresponding interest income is recorded as part of net operating
revenue.  Other balance sheet
accounts on which the present value adjustment is necessary are recorded in
finance income (expenses). 4.9.Impairment
of non-financial assets Impairment testing is required for
the Company to accurately present the net realizable value of an asset. This
amount may be realized directly or indirectly, respectively, through the sale of
the asset or the cash generated by the use of the asset in the Company
activities.  The Company tests the recorded
amounts of its property, equipment and intangible assets for impairment annually
or whenever there is an internal or external evidence that assets may be
impaired.


F-33

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 4.Significant accounting policies –Continued 4.9.Impairment
of non-financial assets - Continued An asset’s recoverable amount is
defined as the asset’s fair value or the value in use of its cash-generating
unit (CGU), whichever is higher, unless the asset does not generate cash inflows
that are largely independent of those from other assets or groups of
assets.  If the carrying amount of an asset
or CGU exceeds its recoverable amount, the asset is considered impaired and an
allowance for impairment is recorded to adjust its carrying amount to its
recoverable amount. In assessing the recoverable amount, the estimated future
cash flows are discounted to present value using a pre-tax discount rate that
represents the Company’s weighted average cost of capital (“WACC”), reflecting
current market assessments of the time value of money and the risks specific to
the asset.  Impairment losses are recognized
in the statement of income in expense categories consistent with the function of
the respective impaired asset. Previously recognized impairment losses are only
reversed in case of change in the assumptions used to determine the asset’s
recoverable amount at its initial or most recent recognition, except for
goodwill, which cannot be reversed in future periods. 4.10.Property, plant
and equipment Property and equipment is stated
at cost, net of accumulated depreciation and/or impairment losses, if any. This
cost includes the acquisition cost of equipment and financing costs for
long-term construction projects, if the recognition criteria are met. When
significant components of property and equipment are replaced, they are
recognized as individual assets with specific useful lives and depreciation.
Likewise, when a major replacement is performed, its cost is recognized at the
carrying amount of the equipment as a replacement, if the recognition criteria
are met. All other repair and maintenance costs are recognized in the statement
of income as incurred.  Asset category
    Average annual
      depreciation rateBuildings
    2.50%Improvements
    4.41%IT processing
      equipment
    20.93%Software
    11.81%Facilities
    7.88%Furniture and
      fixtures
    10.21%Vehicles
    21.52%Machinery and
      equipment
    9.17%Decoration
    20.00%
  Property and equipment items and
any significant components are written off when sold or when no future economic
benefits are expected from its use or sale. Any eventual gains or losses arising
from the write-off of the assets are included in the statement of
income.  The residual value, the useful
life of assets and the depreciation methods are reviewed at the end of each
financial year-end and adjusted prospectively, if applicable. The Company
reviewed the useful lives of fixed and intangible assets in fiscal year 2014
with no significant changes.


F-34

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 4.Significant accounting policies –Continued 4.11.Capitalization of
interest Interest on loans directly
attributable to the acquisition, construction or production of an asset that
requires a substantial period of time to be prepared for its intended use or
sale (qualifying asset) are capitalized as part of the cost of the respective
assets during its construction phase. From the date that the asset is placed
into operation, capitalized costs are depreciated over the estimated useful life
of the asset. 4.12.Investments
properties Investment properties (in our case
represented by land and buildings rented to third parties) are measured at
historical cost, including transaction costs. After the initial recognition,
they are stated at cost, net of accumulated depreciation and or impairment loss,
if is applicable  Investment properties are written
off when they are sold or when they are no longer used and no future economic
benefit is expected from the sale. An investment property is also transferred
when there is an intention to sell it and, in this case, it is classified as a
non-current asset available for sale. The difference between the net amount
obtained from the sale and the carrying amount of the asset is recognized in the
statement of income for the period in which the asset is written off. 4.13.Intangible
assets Intangible assets acquired
separately are measured at cost at initial recognition, less amortization and
eventual impairment losses. Internally generated intangible assets, excluding
capitalized software development costs, are reflected in the statement of
income, in which they were incurred, since they do not achieve the requirements
for capitalization,  Intangible assets consist mainly
of software acquired from third parties, software developed for internal use,
commercial rights (stores’ rights of use), customer lists, advantageous lease
agreements, advantageous furniture supply agreements and brands.  Intangible assets with definite
useful lives are amortized by the straight-line method. The amortization period
and method are reviewed, at least, at the end of each year. Changes in the
expected useful life or the expected pattern of consumption of future economic
benefits embodied in the asset are accounted for by changing the amortization
period or method, as appropriate, and are treated as changes in accounting
assumptions.  Software development costs
recognized as assets are amortized over their 10-year definite useful
lives.  Intangible assets with indefinite
useful lives are not amortized, but tested for recovery at the end of each year
or whenever there are indications that their carrying value may be impaired
either individually or at the level of the cash-generating unit. The assessment
is reviewed annually to determine whether the indefinite life assumption remains
valid. Otherwise, the useful life is changed prospectively from indefinite to
definite.  Where applicable, gains or losses
arising from the derecognition of an intangible asset are measured as the
difference between the net proceeds from the sale of the asset and its carrying
amount. Any gain or loss being recognized in the statement of income in the year
when the asset is derecognized.


F-35

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 4.Significant accounting policies -Continued 4.14.Classification of
assets and liabilities as current and noncurrent Assets (except for deferred income
tax and social contribution) that are expected to be realized in or are intended
for sale or consumption within twelve months as of the end of the reporting
periods are classified as current assets. Liabilities (except for deferred
income tax and social contribution) that are expected to be settled within
twelve months as of the end of the reporting periods are classified as current,
All other assets and liabilities (including deferred tax assets and liabilities)
are classified as “noncurrent”.  The deferred tax assets and
liabilities are classified as “noncurrent”, net by legal entity, according to
the related accounting standard.  4.15.Leases Leases are classified as finance
leases whenever the terms of the lease transfer substantially all the risk and
rewards of ownership to the lessee. All other leases are classified as operating
leases.  The Company rents equipments and
commercial space, including stores and distribution centers, through cancelable
and non-cancelable lease agreements. The agreements length vary from five to
twenty-five years.  Group as
lessees  Finance lease agreements, which
transfer to the Company substantially all the risks and benefits incidental to
ownership of the leased item, are capitalized at the commencement of the lease
at the fair value of the leased property or at the present value of the minimum
lease payments, whichever is lower. Lease payments are allocated between finance
charges and reduction of lease liabilities to achieve a constant interest rate
in the remaining balance of liabilities. Finance charges are recognized as an
expense in the year.  Leased assets are depreciated over
their useful lives. However, if there is no reasonable certainty that the
Company will obtain ownership by the end of the lease term, the asset is
depreciated over its estimated useful life or the lease term, whichever is
shorter. The leasehold improvements and rebuilding follow the same
rule.  Lease agreements are classified as
operating leases when there is no transfer of risk and benefits incidental to
ownership of the leased item.  The installment payments of leases
(excluding service costs, such as insurance and maintenance) classified as
operating lease agreements are recognized as expenses, on straight-line basis,
during the lease term.  Contingent rentals are recognized
as expenses in the years they are incurred.  Group as
lessors  Lease agreements where the Company
does not transfer substantially all the risks and benefits incidental to
ownership of the asset are classified as operating leases. Initial direct costs
incurred in negotiating an operating lease are added to the carrying amount of
the leased asset and recognized over the agreement term on the same basis as
rental income.  Contingent rentals are recognized
as revenue in the years in which they are earned.


F-36

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 4.Significant accounting policies –
Continued 4.16.Provisions Provisions are recognized when the
Company has present obligation (legal or not formalized) as a result of a past
event, it is probable that an outflow of resources will be required to settle
the obligation and the obligation can be reliably estimated. Where the Company
expect a provision to be fully or partially reimbursed, for example under an
insurance contract, the reimbursement is recognized as a separate asset but only
when the reimbursement is virtually certain. The expense relating to the
eventual provision is recognized in the statement of income, net of any
reimbursement. In cases of attorney’s fees in favorable court decisions, the
Company’ policy is to make a provision when fees are incurred (i.e., upon final
judgment on lawsuits) and the involved amounts related to lawsuits in progress
are disclosed in note 23. 4.17.Dividend
distribution Dividend distribution to the
Company’s shareholders is recognized as a liability at the year-end, based on
the minimum mandatory dividends established by the Bylaws. Exceeding amounts are
only recorded at the date on which said additional dividends are approved by the
Company’s shareholders.  4.18.Deferred
revenue The Company defers revenue related
to amounts received from its business partners for the exclusivity
intermediation services of additional or extended warranties, recognized in the
statement of income as the evidences of the service to rendered to business
partners are obtained. 4.19.Equity Common and preferred
shares are classified as equity.  When the Company purchases its own
shares (treasury shares), the amount paid, including any directly attributable
incremental costs, is deducted from equity,and are recorded as treasury
shares until the shares are cancelled or reissued to the market. When these
shares are subsequently reissued, any amounts received, net of any directly
attributable incremental transaction costs, is included in equity. No gain or
loss is recognized on the purchase, sale, issue or cancellation of the Company’s
own equity instruments.


F-37

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 4.Significant accounting policies –
Continued 4.20.Share-based
payment Employees (including
senior executives) receive compensation in the form of share-based payment
awards, whereby employees render services in exchange for equity instruments
(“equity-settled transactions”).  Equity-settled
transactions  Equity-settled share-based
payments are measured at the fair value of the equity instruments at the grant
date. Details regarding the determination of the fair value of equity-settled
share-based trnsactions are set out in note 26.6  The cost of equity-settled
transactions is recognized as an expense in the year, together with a
corresponding increase in equity, over the period in which the performance
and/or service conditions are met. Cumulative expenses recognized for equity
instruments at each reporting date until the vesting date reflect the extent to
which the vesting period has expired and the Company’s best estimate of the
number of equity instruments that will ultimately vest.  Each year’s expenses
or income represents the change in the cumulative expenses recognized at the
beginning and the end of that year. No expense is recognized for services that
will not complete the vesting period, except for equity-settled transactions
where vesting is conditional upon a market or non-vesting condition, which are
treated as vested irrespective of whether or not the market or non-vesting
condition is met, provided that all other performance and/or service conditions
are met.  Where an equity instrument is
modified, the minimum expense recognized is the expense that would have been
incurred if the terms had not been modified, an additional expense is recognized
for any modification that increases the total fair value of the share-based
payment transaction or is otherwise beneficial to the employee, as measured at
the date of modification.  When an equity instrument is
cancelled, it is treated as fully vested on the date of cancellation, and any
expense not yet recognized related to the award are immediately recognized in
the statement of income. This includes any award whose non-vesting conditions
within the control of either the Company or the employee are not met. However,
if the cancelled plan is replaced by another plan and designated as a
replacement grant on the date that it is granted, the cancelled grant and the
new grant is treated as if they were a modification of the original grant, as
described in the previous paragraph. All cancellations of equity-settled
transactions are treated equally.  The dilutive effect of outstanding
options is reflected as an additional share dilution in the calculation of
diluted earnings per share (see note 31). 4.21.Earnings per
share Basic earnings per
share is calculated based on the weighted average number of outstanding shares
of each category during the year, including treasury shares.  Diluted earnings per share is
calculated as follows:  ·numerator: profit for the year adjusted by
dilutive effects from stock options granted by subsidiaries; and ·denominator: the number of shares of each
category adjusted to include potential shares corresponding to dilutive
instruments (stock options), less the number of shares that could be bought back
at market, if applicable. Equity instruments that will or
may be settled in Company’ shares are only included in the calculation when said
settlement has a dilutive impact on earnings per share.


F-38

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 4.Significant accounting policies –Continued 4.22.Income (expenses)
recognition Revenue is recognized
to the extent that it is probable that the economic benefits will flow to the
Company, and it can be reliably measured. Revenue is measured at the fair value
of the consideration received, and recorded net of  discounts, rebates, and
related sales taxes and duties.  The Company assesses its revenue
arrangements against specific criteria in order to determine if it is acting as
principal or agent. The Company have concluded that it is acting as a principal
in all of its revenue arrangements, except for those referring to extended
warranties and insurance policy brokerage, among others. Specifically in these
cases, the Company operate as agents, and revenue is recognized on a net basis
and others, which reflects the commission received from third parties. The
following specific recognition criteria must also be met before revenue is
recognized:  (i)Revenue  a)Sale
of goods  Revenue from the sale
of goods are recognized at their fair value and, when all the risks and benefits
inherent to said good are transferred to the buyer, the Company ceases to
control or have responsibility for the goods sold and the economic benefits
generated to the Company are probable. No revenue is recognized if its
realization is uncertain.  b)Rendering of services  Due to the Company’ actions as
agents for extended warranty contracts, financial protection insurance, personal
accident insurance, sales agents in technical assistance and mobile phone
recharge, revenues earned are presented net of related costs and recognized as
part of net operating revenue when probable that the economic benefits will flow
to the Company and their values can be measured reliably.   c)Financial services revenues  As the activity of customer
financing is an important part of the Company’ business, financial services
revenues regarding trade receivables related to installment sales measured at
amortized cost, are recorded as part of net operating revenue, using the
effective interest rate, which discounts exactly the estimated future cash
receipts through the expected life of the financial instrumentGroup.


F-39

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 4.Significant accounting policies –
Continued 4.22.Income (expenses)
recognition – Continued (i) Revenue -Continued  d)Interest income  For all financial
instruments measured at amortized cost, except the customer financing interest,
interest income is recorded using the effective interest rate, which is the rate
that discounts the estimated future cash payments or receipts through the
expected life of the financial instrument or a shorter period, where
appropriate, to the net carrying amount of the financial asset or liability,
Interest income is included in the financial result in the statement of income.  e)Barter
revenue  Revenues are recognized: (i) at
fair value of the consideration received in the barter transaction, in the date
that the transaction was concluded, (ii) upon delivery of the units sold by GPA
Malls. The related cost of the units sold comprises the fair value of the barter
transaction initially recognized.  f)Returns and cancellations  Estimated returns and
cancellations are recognized when sales revenue is incurred. These estimates are
based on sales volumes and historical returns and cancellations data for each
business segment. Revenue is recorded net of sales returns and
cancellations.  (ii)Cost of
sales  The cost of goods sold comprises
the cost of purchases net of discounts and bonuses received from vendors,
changes in inventories, depreciation and logistics costs.  Rebates received from suppliers
are measured based on contracts and agreements signed with them.  The cost of sales includes the
cost of logistics operations managed or outsourced by the Company’, comprising
warehousing, handling and freight costs incurred until the goods are available
for sale. Transport costs are included in the acquisition costs.  (iii)Selling
expenses  Selling expenses comprise all
store expenses, such as salaries, marketing, occupancy, maintenance, expenses
with credit card companies, in addition to advertising campaigns for each
segment in which the Company operates. The main media used by the Company are
radio, television, newspapers and magazines. These expenses are recognized in
the statement of income when incurred, net of amounts received from suppliers in
cooperation agreements..  (iv)General
and administrative expenses  General and administrative
expenses correspond to overhead and the cost of corporate units, including the
purchasing and procurement, IT and financial areas.  (v)Other
operating income (expenses), net  Other operating income and
expenses correspond to the effects of major events occurring during the year
that do not meet the definition for the other statement of income
lines.


F-40

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 4.Significant accounting policies –
Continued 4.22.Income (expenses)
recognition – Continued (vi)Finance
income (expenses)  Finance expenses include
substantially all expenses generated by net debt and receivables sales during
the year, offset by capitalized interest, losses related to the measurement of
derivatives at fair value, losses on derecognition of financial assets, finance
charges on lawsuits and taxes and interest charges on finance leases, as well as
discount charges.  Financial income includes income
generated by cash and cash equivalents and restricted deposits and gains related
to the measurement of derivatives at fair value. 4.23.Taxation Income taxes comprise Corporate
Income Tax (“IRPJ”) and Social Contribution on Net Income (“CSLL”), calculated
based on taxable income (adjusted income), at the applicable rates set forth in
the legislation in force: 15% on taxable income plus an additional 10% on annual
taxable income exceeding R$240 (two hundred and forty thousand Brazilian reais)
for IRPJ, and 9% for CSLL  Current income tax and social
contribution  Current income tax and social
contribution assets and liabilities for the current and prior years are measured
at the amount expected to be recovered from or paid to the tax authorities. The
tax rates and tax laws used to calculate taxes are those in force or
substantially in force at the end of the balance sheet dates.  Deferred income tax and social
contribution  Deferred income tax
and social contribution are generated by temporary differences at the end of the
reporting periods between the tax bases of assets and liabilities and their
carrying amounts.  Deferred income tax
and social contribution assets are recognized for all deductible temporary
differences and unused tax loss carryforwards to the extent that it is probable
that taxable income will be available against which to deduct temporary
differences and unused tax loss carryforwards, except where the deferred income
tax and social contribution assets relating to the deductible temporary
difference arise from the initial recognition of an asset or liability in a
transaction that is not a business combination and, at the time of the
transaction, affects neither accounting profit nor tax income or
losses.  Deferred income tax
and social contribution liabilities are recognized for all temporary taxable
differences, except when the deferred tax liability arises from the initial
recognition of goodwill or of an asset or liability in an transaction other than
a business combination and which, at the time of the transaction, affects
neither accounting profit nor tax losses.  With respect to
deductible temporary differences associated with investments in subsidiaries and
associates, deferred income tax and social contribution are recognized only to
the extent that it is probable that the temporary differences will reverse in
the foreseeable future and taxable income will be available against which the
temporary differences can be utilized.  The carrying amount of
deferred income tax and social contribution assets is reviewed at the end of
each reporting period and reduced to the extent that it is no longer probable
that sufficient taxable income will be available to allow all or part of the
deferred income tax and social contribution to be used. Unrecognized deferred
income tax and social contribution assets are reassessed at the end of each
reporting period and are recognized to the extent that it has become probable
that future taxable income will allow these assets to be recovered.


F-41

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 4.Significant accounting policies –
Continued 4.23.Taxation –
Continued Deferred income tax
and social contribution assets and liabilities are measured at the tax rates
that are expected to apply in the year when the asset is realized or the
liability is settled, based on tax rates (and tax laws) in effect or
substantively in effect at the end of the reporting period.  Deferred taxes related to items
directly recognized in equity are also recognized in equity and not in the
statement of income.  Deferred income tax and social
contribution assets and liabilities are offset if there is a legal or
contractual right to offset tax assets against income tax liabilities, and the
deferred taxes refer to the same taxpayer entity and to the same tax
authority.  Other taxes  Revenue from the sales of goods
and services are subject to taxation by State Value-Added Tax (“ICMS”) and
Services Tax (“ISS”), calculated based on the rates applicable to each region,
as well as contribution for the Social Integration Program (“PIS”) and
contribution for Social Security Financing (“COFINS”), and are presented net of
sales revenue.  Revenue and expenses
are recognized net of taxes, except where the sales tax incurred on the purchase
of assets or services is not recoverable from the tax authority, in which case
the sales tax is recognized as part of the cost of acquisition of the asset or
as part of the expense item, as applicable. 4.24.Business
combinations and goodwill Business combinations
are recorded using the acquisition method. The consideration transferred in a
business combination is measured at fair value, which is calculated as the sum
of the acquisition-date fair values of the assets transferred, liabilities
incurred by the Company to the formers owners of the acquiree and the equity
interest issued by the Company in exchange for control of the acquiree. For each
business combination, the Company measures the non-controlling interest in the
acquired at fair value or through the proportional interest in the acquiree
identifiable net assets. The acquisition costs incurred are treated as an
expense and included in administrative expenses.  When the Company
acquires a business, it assesses its financial assets and liabilities in order
to appropriately classify and designate them in accordance with contractual
terms, economic circumstances and relevant conditions on the acquisition date.
This includes the separation of derivatives embedded in agreements by the
acquiree.  If the business
combination occurs in phases, the fair value on the acquisition date of the
interest previously held by the acquirer in acquiree is adjusted to fair value
on the acquisition-date and the effects recorded in the statement of
income.  Any contingent payment
to be transferred by the acquirer will be recognized at fair value on the
acquisition date. Subsequent changes in the fair value of the contingent payment
considered as an asset or liability will be recognized in the statement of
income.  Goodwill is initially
measured as the excess of the sum of consideration transferred, the amount of
any non-controlling interests in the acquiree, and the fair value of the
acquirer’s previously held equity interest in the acquire (if any) over the net
of the acquisition-date amounts of the identifiable assets acquired and
liabilities assumed. If, after reassessment, the net of the acquisition-date
amounts of the identifiable assets acquired and liabilities assumed exceeds the
sum of the consideration transferred, the amount of any non-controlling
interests in the acquiree and the fair value of the acquirer’s previously held
interest in the acquiree (if any), the excess is recognized immediately in the
statement of income as bargain purchase gain.


F-42

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 4.Significant accounting policies –
Continued 4.24.Business
combinations and goodwill - Continued After initial
recognition, goodwill is measured at cost, less any impairment losses. For
impairment testing purposes, the goodwill is allocated to the operating segment
level that is expected to benefit from synergies of the combination.  When
goodwill is part of a cash-generating unit and part of the operation at this
unit is sold, the goodwill related to the sold operation is included in the
carrying amount of the operation when calculating profit or loss from the sale
of the operation. This goodwill is then measured based on the relative amounts
of the sold operation and part of the cash-generating unit, which was
maintained. 4.25. Corporate
restructuring  under common control Corporate restructurings under
common control are recorded at historical cost. CompanyThe difference between
the transaction and carrying amounts is recorded directly in equity, since these
transactions do not qualify as business combination in the terms of IFRS
3. 4.26.Foreign currency
translation The financial statements are
presented in millions of Brazilian reais, which is the functional currency of
CBD (parent company)Company. Each entity determines its own functional currency
and all their financial transactions are measured in that currency.  The financial statements of
subsidiaries that use a different functional currency from the Parent Company
are translated into Reais, at closing date according to the
following:  ·Assets and liabilities, including
goodwill and fair value adjustments, are translated into reais at the closing
rate; ·Income statement and cash flow
items are translated into reais using the average rate of the period unless
significant variances occurs, when is used the rate of the transaction date ·Equity is recorded into Reais at
historical cost and the exchange rate variation is recorded in equity valuation
adjustments as other comprehensive income.   Exchange differences are
recognized within a separate component of equity. When a foreign operation is
sold, the accumulated value of exchange differences on the equity is
reclassified to the statement of income.  The resulting exchange differences
are recognized directly within a separate component of equity. When a foreign
operation is disposed of, the cumulative amount of the exchange differences in
equity relating to that operation is reclassified to the statement of income.  Foreign currency
transactions (i.e. transactions that use currency different from functional
currency of entity) are translated using the exchange rate at the transaction
date. Monetary assets and liabilities denominated in foreign currencies are
translated at the closing rate and the resulting exchange differences are
recognized in the income statement. Non-monetary assets and liabilities
denominated in foreign currencies are translated at the exchange rate at the
transaction date.


F-43

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 4.Significant accounting policies –Continued 4.27.Pension
plan a)Defined contribution
plan:  The pension plan, funded through
payments to insurance companies, are classified as a defined contribution plan
according to IAS 19. A defined contribution plan is a pension plan whereby an
entity pays fixed contributions to a separate legal entity. The Company’ have no
legal or constructive obligation to pay additional contributions in relation to
the plan’s assets.  b)Benefit
contribution plan:  The defined benefit plan is
granted only to employees of the subsidiaries headquartered in France, since its
employees are eligible to a compensation to be paid in retirement. The French
entities obligation is measured using the projected unit credit method based on
the agreements effective in each Company. Under this method, each period of
service gives rise to an additional unit of benefit entitlement and each unit is
measured separately to build up the final obligation. The final obligation is
then discounted to the present value. The obligation is evaluated by independent
actuaries, at least, annually for the employment termination benefit.
Assumptions include expected rate of future salary increases, estimated average
working life of employees, life expectancy and staff turnover rates.  Actuarial gains and losses arise
from the effects of changes in actuarial assumptions and historical adjustments
(differences between results based on previous actuarial assumptions and what
has actually occurred). All actuarial gains and losses arising on defined
benefit plans are recognized in other comprehensive income.  The past service cost related to
an increase in the obligation resulting from the introduction of, or changes to,
benefit plans, is recognized as an expense on the period.  Expenses related to defined
benefit plans are recognized in operating expenses (service cost) or other
finance income (expenses) (interest cost and expected return on plan
assets).  Curtailments, settlements and past
service costs are recognized in operating expenses or other finance income
(expenses) depending on their nature. The liability recognized in the balance
sheet is measured as the net present value of the obligation. 4.28.Customer loyalty
programs Customer loyalty programs are used
by the Company to provide incentives to its customers in the sale of products or
services. If customers buy products or services, the Company grant them credits.
Customers may redeem the credits free of charge as a discount in the amount of
products or services, in next purchases.  The Company estimate the fair
value of the points granted according to the “Programa Mais” customer loyalty
plan, by applying statistical techniques, considering the two-year expiration of
the plan defined in the regulations, the percentages of points conversion, and
the cost of conversion, which starts by converting 3,000 points into twenty
reais (R$20.00) in products.  The Company recognize the points
initially granted and the reversal of points expired under net operating
revenue.


F-44

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 5.Adoption of new standards,
amendments to and interpretations of existing standards issued by the IASB 
and standards issued but not yet effective 5.1.Changes to
IFRS and new interpretations or mandatory application starting in the current
year In the current year,
the Company has applied amendments and new interpretations to IFRSs issued by
IASB that are mandatorily effective for an accounting period that begins on or
after January 1, 2014. The main changes
are:  Statement
    Description
    ImpactAmendments to IFRS 10, IFRS 12 and IAS 27 -
      Investment Entities
    These amendments define an “investment entity” and
      require that a reporting entity that falls under the definition of an
      investment entity does not consolidate its subsidiaries but measures its
      subsidiaries at fair value through profit or loss in its consolidated and
      separate financial statements.
    As the Company is not an investment entity (using
      the criteria defined by IFRS
      10 from January 2014), the application of
      adjustments brought no impact on disclosures or in amounts recognized in
      the consolidated financial statements.Amendments to IAS 32 - Presentation of Net Financial
      Assets and Financial Liabilities
    The amendments to IAS 32 clarify the requirements
      related to offsetting financial assets and financial liabilities.
      Specifically, the amendment clarifies the meaning of "legally enforceable
      right" to settle on a net basis” and “realize the asset and settle the
      liability simultaneously.
    The Company assessed whether certain financial
      assets and financial liabilities are eligible for compensation based on
      the criteria of changes in the standard and concluded that no impact on
      the consolidated financial statements.Amendments to IAS 36 – Impairment of Non-Financial
      Assets
    The amendments to IAS 36 remove the requirement to
      disclose the recoverable value of a cash-generating unit for which the
      goodwill based on future earnings or other intangible asset with
      indefinite intangible asset has been allocated when no reduction to the
      recoverable value of an asset or reversal of the reduction to the
      recoverable value relating to this cash-generating unit has
      occurred.
    The application of these changes had no impact on
      the consolidated financial statements.Amendments to IAS 39 - Novation of Derivatives and
      Hedge Accounting Continuity
    The amendments to IAS 39 remove the requirement to
      discontinue hedge accounting when a derivative instrument designated as
      hedge instrument is novated under certain circumstances
    As the Company has no derivative that has undergone
      a novated, the implementation of these changes did not have impact on
      disclosures or in amounts recognized in the consolidated financial
      statements.IFRIC 21 – Levies
    IFRIC 21 provides guidance on when to recognize a
      liability for a levy imposed by a government. The interpretation defines
       ́taxes` and identifies the obligating event for the recognition of a
      liability as the activity that triggers the payment of the levy in
      accordance with the relevant legislation.
    The application of this interpretation did not
      result in a material impact on the disclosures and amounts recognized in
      the annual financial statements


F-45

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 5.Adoption of new standards,
amendments to and interpretations of existing standards issued by the IASB and
standards issued but not yet effective 5.2.New or
revised standards issued but not yet effective/adopted The Company has not
early adopted the following new and revised IFRSs already issued and not yet
effective: Standard
    Description
    Applicable
      to
      annual
      periods
      beginning on or afterAnnual
      improvements to IFRSs: 2010-2012 cycle
    Changes to IFRS 2 –
      Definition of vesting conditions, market and performance, IFRS 3 –
      Describes changes in the measurement of contingent considerations, IFRS 8
      – Requires disclosure of management’s judgment regarding the application
      of aggregation, IFRS 13 – Measurement of short term receivables and
      payables, IAS 16 and IAS 38 – Case of revaluation of assets and IAS 24 –
      Disclosure of entities providing management services;
    07/01/2014Annual
      improvements to IFRSs: 2012-2014 cycle
    Changes to IFRS 5 – In
      situations where asset are held for sale or distribution, IFRS 7 –
      Clarification on whether a service agreement represents continued
      involvement with a transferred asset, IAS 9 – Considerations on the
      discount rate of the post-employment benefit and IAS 34.
    01/01/2016Amendments
      to IFRS 10 and IAS 28 – Sale or contribution of assets between an investor
      and its associate or joint venture
    The sale or contribution
      considered as a business (IFRS 3) must be recognized in the investor’s
      financial statements, and must be partially recognized in the statement of
      income when it is not considered as a business.
    01/01/2016IFRS 9 –
      Financial Instruments
    Several changes in
      classification and measurement, measurement of impairment and hedge
      accounting.
    01/01/2018IFRS 15 –
      Revenue from contracts with customers
    Implements a principle-based
      model and a definitive guide as when to recognize revenue. It also
      introduces new disclosures.
    01/01/2017Amendments
      to IAS 16 and IAS 38 – Clarification of acceptable methods of depreciation
      and amortization
    Determines that the use of
      depreciation and amortization using the revenue curve is
      inappropriate.
    01/01/2016Amendments
      to IFRS 11 – Accounting for acquisitions of interests in joint
      operations
    Requires acquirers of
      interests in joint operations in which the activity of the joint operation
      constitutes a business (IFRS 3) to apply the entire Business Combination
      concept, except for interests that conflict with IFRS 11.
    01/01/2016Annual
      improvements to IFRSs: 2011-2013 cycle
    Amendments to IFRS 1 -
      Defines the IFRS versions that can be used in first-time adoption, IFRS 3
      – Establishes scope exemption for joint ventures, IFRS 13 – Clarifies the
      scope of portfolio exception in paragraph 52; IAS 40 – Clarifies the
      interrelationship between IFRS 3 and IAS 40 in certain cases.
    07/01/2014Amendments
      to IAS 19 – Defined Benefit Plan
    Clarifies how contributions
      should be recognized as a reduction in the service cost;
    07/01/2014
 The Company continues
to evaluate the impacts of the standards above. There are no other
standards and interpretations issued but not yet adopted that, in Management's
opinion, are expected to a significant impact Companyon consolidated financial
statements.


F-46

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 6.Significant
accounting judgments, estimates and assumptions The preparation of the
consolidated financial statements of the Company requires management to make
judgments, estimates and assumptions that impact the reported amounts of
revenues, expenses, assets and liabilities, and the disclosure of contingent
liabilities at the end of the year; however, uncertainty about these assumptions
and estimates could result in outcomes that require material adjustments to the
carrying amount of the asset or liability impacted in future periods. In the
process of applying the Company’s accounting policies, management has made the
following judgments, which have the most significant impact on the amounts
recognized in the consolidated financial statements: 6.1.Finance
lease commitments – the Company as a lessee The Company has
entered into certain commercial property lease agreements in its leased property
portfolio and, based on an evaluation of the terms and of conditions of the
agreements, it retains all the significant risks and of rewards of ownership of
these properties and recorded the agreements as finance lease. 6.2.Impairment According to the accounting policy
disclosed in note 4.9, the Company performed test to verify that the assets
might not be recoverable and the year ended December 31, 2014 and concluded that
there was not impairment loss to be recognized into financial
statements.  To verify the recoverability of
property and equipment, the Company has allocated the operating assets and
intangible assets, including commercial rights directly attributable to the Cash
Generating Units – CGU, which was define as the stores, and performed the
following procedures:  ·Step 1:
the Company compared the carrying amount of CGUs with a multiple of sales (15%
to 30%), representing transactions between retail companies. For CGUs
multiple-valued lower than the carrying amount, the Company performed a more
detailed test, as described in Step 2;  ·Step 2: the Company
estimated the discounted cash flow of CGU, using sales growth rate between 5.9%
and 7.5% (6.6% and 6.7% as of December 31, 2013) for the next 5 years. The
discount rate used was 11.4% (10.8% as of December 31, 2013).  For impairment purposes, goodwill
acquired through business combinations and licenses with indefinite life was
allocated to four cash generating units, which are also operating segments that
disclose financial information, namely Retail, Home Appliances, Cash and Carry
and E-commerce. Segments’ recoverable value is
calculated using the value in use based on estimated cash flow derived from
financial budgets approved by senior management for the following three years.
The discount rate before income tax on cash flow projections is 11.4% (10.8% as
of December 31, 2013), and the cash flows exceeding three years are extrapolated
using a growth rate of 6.7% (6.5% as of December 31, 2013). Based on this
analysis, no impairment loss was identified. “ASSAÍ” refers to cash and carry
brand, and “PONTO FRIO” and “CASAS BAHIA” refer to home appliance brands. These
brands were recorded due to the business combinations with companies that held
right over them.  The carrying of these brands was
tested for impairment based on the income approach methodology - relief from
royalty, which consists of determining the asset value by measuring the fair
value of future benefits. Given the brand’s indefinite useful life, the Company
considered a perpetuity growth rate of 6.7% during the preparation of the
discounted cash flow. The royalty rate used was 0.4% for “ASSAI” brand, 0.8% for
“PONTO FRIO” and 0.9% for “CASAS BAHIA”.


F-47

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Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 6.Significant
accounting judgments, estimates and assumptions Judgments, estimates
and assumptions- Continued 6.3.Income
taxes Given the nature and
complexity of the Company business, the differences between actual results and
assumptions, or future changes to such assumptions, could result in future
adjustments to already recorded tax revenue and expenses. The Company record
provisions, based on reasonable estimates, for the eventual consequences of
audits by the tax authorities of the respective countries in which it operates.
The amount of these provisions is based on various factors, such as previous tax
audits and different interpretations of tax regulations by the taxpayer and the
appropriate tax authority. Such differences in interpretation may refer to a
wide range of issues, depending on the conditions prevailing in the respective
entity's jurisdiction.  Deferred income tax and social
contribution assets are recognized for all unused tax losses to the extent that
it is probable that taxable income will be available against which to offset the
tax credits. Significant management judgment is required to determine the amount
of deferred income tax and social contribution assets that can be recognized,
based on income estimates and future taxable income, based on the annual
business plan approved by the Board of Directors.  The Group’ tax losses
carryforward amounting to a tax benefit of R$354 as of December 31, 2014 (R$794
as of December 31, 2013). These losses do not expire; however, their use is
limited by law to 30% of taxable income for each year.Group.  For details on taxes, see note
21.  6.4.Fair value
of derivatives and other financial instruments When the fair value
of financial assets and liabilities recorded in the financial statements cannot
be obtained in active markets, it is determined according to the hierarchy set
by technical pronouncement IFRS 13, which establishes certain valuation
techniques, including the discounted cash flow model. The data for these models
are obtained, whenever possible, from observable markets or from information on
comparable operations and transactions in the market. The judgments include the
analyses of data, such as liquidity risk, credit risk and volatility. Changes in
assumptions about these factors may affect the reported fair value of financial
instruments.  The fair value of financial
instruments actively traded on organized markets is determined based on market
quotes, at the end of the reporting periods, without deducting transaction
costs. For financial instruments not actively traded, the fair value is based on
valuation techniques defined by the  and compatible with usual market
practices. These techniques include the use of recent market arm’s length
transactions, the benchmarking of the fair value of similar financial
instruments, the analysis of discounted cash flows or other valuation
models. When the fair value of financial
assets and liabilities recorded in the balance sheet cannot be observed in
active markets, it is determined by valuation techniques, including the
discounted cash flow method. The inputs used by these methods are collected from
the market, where applicable, when these inputs are not available judgment is
required to determine the fair value, this judgment considers liquidity risk,
credit risk and volatility. Changes in assumptions for these factors may affect
the fair value of the financial instruments.


F-48

---



Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 6.   
Significant accounting judgments, estimates and assumptions -Continued Judgments, estimates
and assumptions- Continued 6.5.Share-based payments The  measures the costs of
transactions with employees eligible for share-based remuneration based on the
fair value of the equity instruments on the grant date. Estimating the fair
value of share-based payment transactions requires determining the most
appropriate valuation model, which depends on the terms and conditions of the
grant. This estimate also requires determining the most appropriate inputs for
the valuation model, including the expected useful life of the stock options,
volatility and dividend yield, as well as making assumptions about them. The
assumptions and models used to estimate the fair value of share-based payment
transactions are disclosed in note 26.6. 6.6.Provision
for risks The Company are parties to several
proceedings at the judicial and administrative levels (see note 23). Provisions
for legal claims are recognized for all cases representing reasonably estimated
probable losses. The assessment of the likelihood of loss takes into account
available evidence, the hierarchy of laws, former court decisions and their
legal significance, as well as the legal counsel’s opinion. The Group's
management concluded that the provisions for tax, civil and labor claims are
properly stated in the consolidated financial statements. 6.7.Estimated
losses in allowance for doubtful accounts Subsidiary Via Varejo has in its
accounts receivable the amount of installment sales to be received by individual
customers, over which the estimate of losses is made based on the expected
percentage of losses, obtained by analyzing the behavior of the portfolio over
the past months and updated at each accounting closing procedure. 6.8.Tax
recoverable The Company has recoverable tax
credits related to ICMS, ICMS from Tax Substitution, PIS and Cofins. The
estimate of future recoverability of these tax credits is made based on the
projections prepared by management, which considers operational issues and the
consumption of the creditsCompany. For details, see note 11.


F-49

---



Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
  7. Cash and cash
equivalents 2014
    2013Cash on hand and bank accounts
    
    1,388
    343Cash
      equivalents:Itaú BBA
    
    1,400
    779Itaú – Fundo
    Delta
    
    186
    181Banco do
Brasil
    
    2,752
    1,426Bradesco
    
    1,438
    2,051Santander
    
    995
    996CEF
    
    992
    732Votorantim
    
    593
    439Safra
    
    1,076
    645Credit
Agricole
    
    156
    363BNP
    
    66
    279Other(*)
    
    107
    13311,149
    8,367
 (*) Refers to overnight
investments at the end of each month. Cash equivalents as of
December 31, 2014 and 2013 are substantially represented by certificated of
deposits guaranteed and earn interest corresponds to 101.03% of the Interbank
Deposit Certificate (“CDI”) and redeemable in terms of less than 90 days.


F-50

---



Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 8. Trade receivables,
net 2014
    2013Credit card companies (note 8.1)
    
    220
    269Sales vouchers
    
    169
    148Consumer finance – CDCI (note 8.2)
    
    2,475
    2,249Trade receivables from cash and carry
      customers
    
    317
    18Accounts receivable from related parties (note
      12)
    
    28
    -Estimated losses in doubtful accounts (note
      8.3)
    
    (340)
    (229)Accounts receivables from suppliers
    
    256
    18Other trade receivable
    
    85
    43Current
    
    3,210
    2,516Consumer finance – CDCI (note 8.2)
    
    115
    125Estimated losses in doubtful debts (note
      8.3)
    
    (10)
    (10)Noncurrent
    
    105
    1153,315
    2,631
 8.1.Credit
card companies The Company sells credit card
receivables to banks or credit card companies in order to strengthen their
working capital, without recourse or obligation related. 8.2.Consumer
finance – CDCI Refers to direct consumer credit
through an intervening party (CDCI), which can be paid in up to 24 installments,
however, the most frequent term is substantially less than 12 months. The Company maintains agreements
with financial institutions where it is referred to as the intervening party of
these operations (see note 18).


F-51

---



Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 8. Trade receivables,
net – Continued 8.3.Estimated
losses in doubtful accounts  2014
    2013At the beginning
      of the year
    
    (239)
    (198)Losses in the
      year
    
    (518)
    (476)Reversal
    
    494
    435Corporate
      restructuring (note 1.4)
    
    (82)
    -Exchange rate
      variations
    
    (5)
    -At the end of
      the year
    
    (350)
    (239)Current
    
    (340)
    (229)Noncurrent
    
    (10)
    (10)
 Below is the breakdown
of gross accounts receivable by maturity term: Past-due receivablesTotal
    Current
    <30
      days
    30-60
      days
    61-90
      days
    >90
      days2014
    3,665
    3,229
    141
    60
    39
    1962013
    2,870
    2,566
    163
    57
    36
    48
  9.   Other
receivable 2014
    2013Accounts
      receivable related to sale of fixed assets
    45
    55Supplier
      receivables (note 9.2)
    30
    21Advances to
      suppliers
    11
    29Rental advances
    14
    13Accounts
      receivable – Audax
    13
    13Amounts to be
      reimbursed
    145
    108Rental
      receivable
    51
    22Accounts
      receivable - Paes Mendonça (note 9.1)
    532
    515Accounts
      receivable from sales of companies (note 9.3)
    54
    49Other
    36
    32931
    857Current
    295
    227Noncurrent
    636
    630


F-52

---



Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 9.   Other
accounts receivable -- continued 9.1 Accounts receivable – Paes
Mendonça  Accounts receivable from
Paes Mendonça relate to amounts arising from payments made by the  related
to contingent liabilities of subsidiaries Novasoc and Sendas. Pursuant to
contractual agreement, these accounts receivable are monetarily restated by
IGP-M (General Market Price Index) and guaranteed by commercial lease rights
(“commercial rights”) of certain stores currently operated by CBD, Sé
Supermercados, Novasoc, Sendas and Xantocarpa. The maturity of accounts
receivable is linked to the lease agreements, which expire in May 10, 2015 and
remained in noncurrent due to the possibility of conversion of guarantees in
commercial rights. 9.2Supplier
receivables Derive from the compliance with
purchase volume, price protection, and as part of agreements defining the
supplier’s participation in marketing and advertising expenses. 9.3 Accounts receivable from sales
of companies Accounts receivable related to the
exercise by the counterparty of an option to buy gas stations. The original
amount of this receivable was R$50; subsequently, monetarily restated since the
signature of the agreement on May 28, 2012, at a rate of 110% of the CDI, with
payment in 240 monthly installments.


F-53

---



Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 10.Inventories, net 2014
    2013Stores (note 10.1)
    
    4,089
    3,597Distribution centers (note 10.1)
    
    4,402
    2,836Real estate inventories under construction (note
      10.3)
    
    172
    172Estimated losses on obsolescence and breakage (note
      10.2)
    
    (86)
    (51)Total
    
    8,577
    6,554Current
    
    8,405
    6,382Noncurrent
    
    172
    172
 10.1.Bonuses in
inventories and storage cost The Company records bonuses
received from suppliers and storage costs in the statement of income as a
reduction of cost of sales, as the inventories that gave rise to the bonuses or
storage costs are sold. 10.2.Estimated losses
on obsolescence and breakage 2014
    2013At the beginning of the
      year
    
    (51)
    (53)Additions
    
    (86)
    (65)Write-offs / reversal
    
    58
    67E-commerce corporate restructuring
    
    (7)
    -At the end of the year
    
    (86)
    (51)
 10.3.Real estate
inventories under construction The amount of inventories of real
estate units under construction refers to the fair value of the barter of land
for real estate units, based on the market value of real estate units received
as observed in comparable market transactions. Barter revenue refers to the
transaction whereby the Company gave lands in exchange of the real estate units
of the projects Thera Faria Lima Pinheiros (“Thera”), Figue and Classic and
Carpe Diem, plus one store to be built on the ground floor of the Thera Faria
Lima Pinheiros building.Construction and development are being carried out by
Cyrela Polinésia Empreendimentos Imobiliários Ltda., Pitangueiras
Desenvolvimento Imobiliário SPE Ltda. and Hesa Investimentos Imobiliários Ltda.Barter
revenue corresponds to the fair value of the land exchanged, net of its carrying
amount. The apartment units of the Thera project are scheduled to be delivered
within 52 months from December 18, 2011. For the Figue project, the delivery
will occur in February 2015 and for Classic e Carpe Diem (Bosque Maia Project)
the delivery will occur between 36 and 48 months from November 11, 2012.


F-54

---



Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
  11.Recoverable taxes 2014
    2013CurrentState value-added tax on sales and services – ICMS
      (note 11.1)
    
    591
    769Social Integration Program/ Contribution for Social
      Security Financing-PIS/COFINS
    
    54
    20Income tax on financial investments
    
    20
    51Income tax and social contribution
    
    12
    31Social security contribution - INSS
    
    -
    31Value-added tax recoverable - France
    
    85
    -Other
    
    46
    6Total current
    
    808
    908NoncurrentICMS (note 11.1)
    
    1,681
    1,089PIS/COFINS
    
    308
    254INSS
    
    147
    86Total noncurrent
    
    2,136
    1,429Total noncurrent
    
    2,944
    2,337
 11.1.ICMS expected
realization is as follows: Up to one year
    5912016
    5742017
    5452018
    4012019
    1122020
    492,272
  Since 2008, the Brazilian States
have been substantially changing their laws aiming at implementing and
broadening the ICMS (State VAT) tax substitution system. Under this system, the
prepayment of ICMS is made throughout the commercial supply chain, upon goods
outflow from manufacturer or importer or their inflow into the State. The
creation of such system to a wider range of products traded at retail is based
on the assumption that the trading cycle of these products will end in the State
in which the transaction was originated. In these cases, the ICMS is fully owed
thereto.  In order to supply its stores, the
Company maintain warehouses strategically located in certain States and in the
Federal District, which receive goods with ICMS of the entire commercial chain
(tax substitution system) already prepaid by suppliers of the Company, and then,
goods are sent to locations in other States. Such interstate shipment gives
right to the Company to refund prepaid ICMS, i.e., the ICMS of the commercial
chain paid in acquisition becomes a tax credit to be refunded, pursuant to each
State laws.  The refund process requires the
evidence through tax documents and digital files referring to the operations
that entitled the to refund. Only after its previous legal ratification by State
Tax Authorities and/or compliance with specific ancillary obligations aiming
such evidence then credits may be used by the, which occurs in periods after
these are generated.


F-55

---



Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 11.Recoverable taxes – continued Since the number of items traded,
subject to tax substitution system, has been continuously increasing, the tax
credits to be refunded by the Company have also grown.  The Company has been realizing
these credits with an authorization for immediate offset with those debits due
in view of its operations, under Special Tax Regime and other requirements
related to the State rulings.  For recoverable tax credits, which
cannot be offset immediately, management based on a technical feasibility study,
understands that based on the projections of futures tax payables, these tax
credits will be realized. These projections were prepared based on information
derived from strategic plan report approved by Board of Directors.  The takes tax credits, every time
that brings together legal, documentary and factual understanding of such
credits that allow their recognition, including the estimation of
recoverability. Such credits are recognized as a reduction of cost of goods
sold. In 2014, among other credits, there was an unused credit by associate
companies of R$302, in Via Varejo subsidiary. The elements that support the
registration and utilization of such credit were obtained during current
year.


F-56

---



Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
  12.Related parties 12.1.Management
compensation The expenses related to management
compensation (officers appointed pursuant to the Bylaws, including members of
the Board of Directors and the related support committees), Fiscal Council and
Audit Committee remuneration recorded in the statement of income for the years
ended December 31, 2014, 2013 and 2012, were as follows: Based
salary
    
    Variable
      compensation
    
    Stock option
      plan
    
    Total
    
    % expense share basis
      payment2014
    2013
    2012
    
    2014
    2013
    2012
    
    2014
    2013
    2012
    
    2014
    2013
    2012
    
    2014
    2013
    2012Board of directors (*)
    4
    7
    8
    
    -
    
    -
    
    -
    -
    -
    
    4
    7
    8Executive officers
    56
    19
    17
    
    20
    19
    23
    
    6
    12
    21
    
    82
    44
    61Fiscal council
    -
    1
    -
    
    -
    -
    -
    
    -
    -
    -
    
    -
    1
    -60
    26
    25
    
    20
    19
    23
    
    6
    12
    21
    
    86
    52
    69
    
    7.0%
    23.1%
    30.4%
 (*) The compensation of the support committees of the
Board of Directors (Human Resources and Compensation, Audit, Finance,
Sustainable Development and Corporate Governance) is included in this line
item.


F-57

---



Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 12.Related parties –continued 12.2.Sales, purchase of
goods, services and other operations Balances
    
    TransactionsTrade
      receivables
    
    Other assets
    
    Trade
      payables
    
    Other
      liabilities
    
    Purchases
    
    Revenues(expenses)2014
    2013
    
    2014
    2013
    
    2014
    2013
    
    2014
    2013
    
    2014
    2013
    2012
    
    2014
    2013
    2012Controlling shareholderCasino (i)
    -
    -
    
    -
    3
    
    2
    1
    
    104
    -
    
    -
    -
    -
    
    (30)
    (12)
    (6)Wilkes
      Participações (xi)
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    -
    
    (3)
    (2)
    (3)Euris
    -
    -
    
    -
    -
    
    -
    -
    
    1
    -
    
    -
    -
    -
    
    -
    -
    -AssociatesCasino France -
      Cash Pool (note 12.3)
    -
    -
    
    -
    -
    
    -
    -
    
    50
    -
    
    -
    -
    -
    
    -
    -
    -Polca (note
      12.3)
    -
    -
    
    -
    -
    
    -
    -
    
    12
    -
    
    -
    -
    -
    
    -
    -
    -Other (note
      12.3)
    -
    -
    
    -
    -
    
    -
    -
    
    9
    -
    
    -
    -
    -
    
    (1)
    -
    -Cchez (note
      12.3)
    -
    -
    
    -
    -
    
    26
    -
    
    26
    -
    
    -
    -
    -
    
    (22)
    -
    -EMC (note
      12.3)
    -
    -
    
    -
    -
    
    -
    -
    
    15
    -
    
    -
    -
    -
    
    (37)
    -
    -BCG
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    -
    
    (6)Exito (note
      12.3)
    28
    -
    
    -
    -
    
    -
    -
    
    4
    -
    
    -
    -
    -
    
    (35)
    -
    -Big Thailandia
      (note 12.3)
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    -
    
    (16)
    -
    -Banque Casino
      (note 12.3)
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    -
    
    24
    -
    -Easydis (note
      12.3)
    -
    -
    
    -
    -
    
    55
    -
    
    -
    -
    
    -
    -
    -
    
    (49)
    -
    -FIC (iv)
    -
    -
    
    8
    -
    
    9
    13
    
    14
    9
    
    -
    -
    -
    
    8
    15
    19Dunnhumby (xii)
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    -
    
    -
    (1)
    (1)Joint operation
    
    
    
    
    
    
    
    
    
    -
    
    
    
    
    
    
    
    
    -Indústria de
      Móveis Bartira Ltda.(ix)
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    
    -
    438
    449
    
    -
    -
    -Subtotal
    28
    -
    
    8
    3
    
    92
    14
    
    235
    9
    
    -
    438
    449
    
    (167)
    -
    9


F-58

---



Companhia Brasileira de Distribuição  Notes to the Consolidated
Financial Statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 12.Related parties - continued Balances
    
    TransactionsTrade
      receivables
    
    Other assets
    
    Trade
      payables
    
    Other
      liabilities
    
    Purchases
    
    Revenues(expenses)2014
    2013
    
    2014
    2013
    
    2014
    2013
    
    2014
    2013
    
    2014
    2013
    2012
    
    2014
    2013
    2012Other related partiesGrupo Diniz (iii)
      (*)
    -
    -
    
    -
    -
    
    -
    2
    
    -
    -
    
    -
    -
    -
    
    -
    (15)
    (19)Globalbev Bebidas
      e Alimentos (*)
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    
    -
    8
    18
    
    -
    -
    -Globalfruit
      (*)
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    
    -
    4
    3
    
    -
    -
    -Bravo Café(*)
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    
    -
    1
    2
    
    -
    -
    -Casas Bahia
      Comercial Ltda (v)
    -
    -
    
    263
    134
    
    -
    -
    
    26
    24
    
    -
    -
    -
    
    (264)
    (224)
    (152)Fazenda da Toca
      Ltda. (x) (*)
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    
    -
    6
    7
    
    -
    -
    -Sykué Geração
      Energia (vii)(*)
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    
    -
    21
    25
    
    -
    (1)
    (2)Indigo
      Distribuidora
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    
    -
    3
    3
    
    -
    -
    -Management of
      Nova Pontocom (vi)
    -
    -
    
    38
    34
    
    -
    -
    
    -
    -
    
    -
    -
    -
    
    3
    3
    3Audax SP and RIO
      (viii)
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    -
    
    -
    (20)
    (28)Instituto Grupo
      Pão de Açúcar
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    
    
    (6)
    (8)
    (30)Other
    -
    -
    
    4
    1
    
    -
    1
    
    -
    -
    
    -
    -
    1
    
    -
    -
    -Fundo Península
      (ii) (*)
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    -
    
    -
    (112)
    (157)Pão de Açúcar
      S.A. Indústria e Comércio (xiii) (*)
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    -
    
    -
    (1)
    (9)Viaw Consultoria
      Ltda (xiv)
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    -
    
    (3)
    -
    -Habile Segurança
      e Vigilância Ltda
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    -
    
    -
    (7)
    (8)Assoc. Rec. Cult.
      Emp P.A
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    
    -
    -
    -
    
    (1)
    -
    -Subtotal
    -
    -
    
    305
    169
    
    -
    3
    
    26
    24
    
    -
    43
    59
    
    (271)
    (385)
    (402)Total
    28
    -
    
    313
    172
    
    92
    17
    
    261
    33
    
    -
    481
    508
    
    (438)
    (385)
    (393)
 (*) Balances were presented until
the date of settlement, September 7, 2013, considering that they are no longer
considered as related parties as per note 1.1


F-59

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 12.Related parties – Continued 12.2.Sales, purchases
of goods, services and other operations – Continued Transactions with related parties
refer mainly to transactions between the Company and other related entities and
were substantially accounted for in accordance with the prices, terms and
conditions agreed between the parties, including: (i)Casino:
Technical Assistance Agreement, signed with Casino on July 21, 2005, whereby, in
exchange for the annual payment of US$2 million. This agreement was approved by
the Extraordinary Shareholders’ Meeting held on August 16, 2005, terminated on
August 1, 2014. Cost Sharing Agreement, signed
between with Casino on August 1, 2014, relates to expenses reimbursements
incurred by Casino’s Company employees when rendering services to the . This
agreement was approved by the Board of the Directors’ Meeting held on July 22,
2014. Global Sourcing, cost
reimbursement to Casino relating to Global sourcing agreements and costs
reimbursement relating to Cnova’s IPO. (ii)Fundo
Península:62 real estate lease agreements.Due to the agreement described in
note 1.1, since September 2013, Fundo Peninsula is no longer considered as a
related party. (iii)Grupo
Diniz:lease of 17 properties to the Company.Due to the agreement described in
note 1.1, since September 2013, Grupo Diniz is no longer considered as a related
party. (iv)FIC:(i) refund of expenses arising from the
infrastructure agreement, such as: expenses related to the cashiers’ payroll,
and commissions on the sale of financial products; (ii) finance costs expenses
related to the sale of receivables (named “financial discount”); (iii) property
rental revenue; and (iv) the cost apportionment agreement. (v)Casa
Bahia Comercial Ltda:Via Varejo has an accounts receivable related to the
“First Amendment to the Shareholders ́ Agreement” between The Company and CB,
which guarantees to Via Varejo the right to be reimbursed by CB for certain
contingencies recognized that may be payable by Via Varejo as of June 30, 2010.
Additionally CB has lease contracts of 312 properties between distribution
centers, commercial buildings and administrative requirements under specific
conditions with management of CB. (vi)Management of Nova Pontocom:in November 2010, within the
context of the restructuring of  e-commerce business, the Company granted
to certain statutory members of Nova Pontocom’s Management an updated loan
amounting to R$10 (as of December 31, 2013) and entered into exchange agreement
in the updated amount of R$24 (as of December 2013), both maturing on January 8,
2018 and duly restated. (vii)Sykué
Geração de Energia:acquisition of power in the free market to supply several
of the  consumer units. Due to the agreement described in note 1.1.,Sykué
Geração de Energiano longer considered a related party since September
2013.


F-60

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 12.Related parties – Continued 12.2.Sales, purchases
of goods, services and other operations – Continued (viii)Audax:loans
to the soccer teams Audax SP and Audax RJ, in addition to the financial support
in training professional athletes, the Company and third parties signed on
September 14, 2013 a binding agreement to transfer definitively the maintenance
and management of Audax SP and Audax RJ. The agreement contained for certain
conditions precedents, which were met, and the definitive agreements were signed
in November 2013. The remaining balance was reclassified to "Other receivables",
as shown in note 9. (ix)Indústria de Móveis Bartira Ltda:amounts
arising from infrastructure expenses and the purchase and sale of
goods. (x)Fazenda
da Toca Ltda: contract for the supply of organic eggs, conventional
oranges and organic juices, etc. Due to the agreement described in note
1.1,Fazenda da Tocais no longer considered a related party since September
2013. (xi)Wilkes: commissions paid related to the  loan agreements in
which Wilkes is a guarantor. (xii)Dunnhumby:information management service
agreement. Since July 2013, the Company no longer holds a 2% interest in
Dunnhumby and negotiates an operational agreement (xiii)Pão de Açúcar S.A.
Indústria e Comércio: temporary equipment assignment agreement.Due to the agreement
described in note 1.1,Pão de Açúcar S.A Indústria e Comérciois no longer
considered a related party since September 2013. (xiv)Viaw
Consultoria Ltda.: Company hired to render services in the managerial
consulting area, as well as information technology area, in market conditions.
The partner of Viaw is a member of the Company’s management. 12.3.Balances with
associates in the Casino Group: Companies that have
been consolidated since July 31, 2014 composing the e-commerce business of
Cdiscount have parts of balances related to other companies of the Casino
Company in the amount of R$493 to pay and R$273 to receive, composed mainly
of: (i)Casino: Cdiscount has loans to pay
R$78 with Casino Guichard Perrachon, R$7 to pay the Big C Thailand and R$8 to
other entities of the Casino Group, and R$6 to receive also the Company's
entities loans Casino; (ii)Polca: Entity of Casino Group has
centralized its cash operations according to the Cdiscount Group entities. This
balance is paid by the EONIA (Euro Overnight Index Average), plus 0.25% per
annum on the outstanding cash balance is in favor of Polca or Cdiscount. The
remaining balance payable on December 31st, 2014 was R$220 and to receive R$210
receivable; Cdiscount has in its
balance of accounts payable the amount of R$180 related to transactions with
Casino Group entities not consolidated in GPA, including Easydis - Group
Logistics Company R$55, Distribution Casino France - Product Buy R$63, CChez
vous - Delivery Home delivery R$26 EMC - Centralization of purchases R$15
Success - Product Purchase R$6 and R$15.


F-61

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 12.Related parties – Continued 12.1.Balances with
associates in the Casino Group: Additionally, Cdiscount
has in its balance of accounts receivable of R$57 related to transactions with
Casino Group entities not consolidated in GPA as, including: Success - Sale of
Products - R$30 Distribution Casino France - Sale of Products R$13 IRTS -
centralized negotiation with suppliers - R$7 and Other - R$7. Related party expenses
incurred at Cdiscount amount to R$178, and refer to: centralized purchases of
products with EMC - R$37; purchase logistic products with EasyDis - R$49;
freight with Cchez Vous - R$22; others R$12; bank fees BGC - R$6; purchase of
goods with Exito Colombia - R$35 and purchase of goods with Big C Thailandia -
R$16; Related party revenue at Cdiscount
with related parties amounted to R$45, and refers to IT services provided to
other Group companies - R$1; sales of goods to Distribution Casino France -
 R$10; reimbursed costs by Banque Groupe Casino SA - R$24, and others -
R$10;  13.Investments FIC
    BINV
    Other
    TotalBalances at 2012
    256
    19
    87
    362Share of profit
      of associates
    47
    -
    -
    47Dividends
      receivable
    (13)
    -
    -
    (13)Acquisition of
      Bartira (i)
    -
    -
    (87)
    (87)Other
    -
    -
    1
    1Balances at 2013
    290
    19
    1
    310Share of profit
      (loss) of associates
    109
    2
    (3)
    108Corporate
      restructuring (note 1.4)
    -
    -
    9
    9Dividends
      receivable
    (26)
    -
    -
    (26)Balances at 2014
    373
    21
    7
    401
 (i)Acquisition of Bartira As mentioned on note 14, in 2013,
the Company through its subsidiary Via Varejo exercised a purchase option to
acquire the control of Bartira. As required by IFRS 3, the previously held
interest was remeasured at fair value on the acquisition date through the
discounted cash flow method, resulting in a gain in the amount of R$71,
recognized in other operating income (expenses).


F-62

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 14.Business combinations Business combinations are recorded
according to the acquisition method in compliance with IFRS 3. Until October 31, 2013, Via Varejo
and CB were partners in Bartira, holding interests of 25% and 75%, respectively.
Since the association between the Company and CB (November 1, 2010), the
subsidiary Via Varejo held a purchase option to buy the other 75% of interest,
which could be exercised between 3 and 6 years of association.  In 2013, this fair value option
was calculated through the Black & Scholes method, using a volatility of 28%
and a risk-free rate of 5.8% p.a., which resulted in a fair value of R$314 on
the exercise date. Up to the exercise date, this option was recorded as
financial instrument in the consolidated financial statements. On October 31, 2013, the
shareholders approved the exercise of option to purchase the remaining interest
in Bartira (“Purchase Option”), followed by the submission to CB of the exercise
notification on November 1, 2013. The quotas of Bartira’s capital stock were
transferred on December 2, 2013. The price paid for the exercise of the purchase
option on November 1, 2013 was R$212. After the transaction, Via Varejo holds
Bartira’s entire capital stock. As of the date of notification to
CB, Via Varejo holds substantive rights on Bartira, and November 1, 2013 was
defined as the of the business combination date. Prior to the business combination,
Via Varejo held a 25% interest in Bartira. The fair value of the previously held
interest was measured at fair value on the acquisition date, as defined in IFRS
3 (R),  the fair value of interest was remeasured through the discounted
cash flow method, and amounted to R$176. The fair value of remeasurement of the
investment previously held, compared to the book value of the investment,
resulted in a gain of R$71, presented in 2013 and recorded in “Other operating
expenses and income”. Thus, the consideration
transferred for the execution of the business combination is determined by (i)
the exercise price of the call option in the amount of R$212; (ii) the fair
value of the call options held by the Company prior to the business combination
in the amount of R$314; and (iii) the remeasurement at fair value of the
investment previously held in the amount of R$176. Below are the fair values of
identifiable assets and liabilities acquired from Bartira on the business
combination date:


F-63

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 14.Business combinations - Continued  Preliminary
      11.01.2013
    
    Final
      11.01.2014AssetsCash and cash equivalents
    
    1
    
    1Inventories
    
    51
    
    46Deferred tax income
    
    4
    
    -Other
    
    40
    
    38Property and equipment
    
    139
    
    139Intangible
    assets
    
    82
    
    82Acquired assets
    
    317
    
    306LiabilitiesBorrowings and financing
    
    (19)
    
    (19)Materials and services
    
    (62)
    
    (62)Contingencies
    
    (119)
    
    (118)Deferred tax income
    
    -
    
    (12)Other
    
    (18)
    
    (20)Assumed liabilities
    
    (218)
    
    (231)Net identifiable assets
    
    99
    
    75Acquisition price
    
    212
    
    212Call option fair value
    
    314
    
    314Previous interest fair value
    
    176
    
    176Goodwill
    
    603
    
    627
 The main Intangible identified in
Bartira business combination refers to: (i)Brands - R$46 - Related to
"BARTIRA" brand, which was calculated using the method of "royalties", whose
useful life is indefinite. (i)Contractual relationship (Rent on
favorable terms) - R$36 million - related to favorable terms compared to the
market in the rent of the property used as a manufacturing plant of Bartira.
This asset will be amortized over the remaining term of 7-year
contract. Goodwill relating to the
acquisition of Bartira control is supported by the strategic plan to ensure a
continuous supply of furniture from an important player in this market. In
addition, the acquisition also enabled the Company to (i) vertically integrate
its retail furniture operations, (ii) benefit from Bartira’s low cost structure
given its scale as one of the largest manufacturers in Latin America in terms of
production volume, and (iii) maintain the significant operating efficiencies and
synergies (including logistics, sales and administrative costs) developed
through the historical relationship between Company and Bartira. The combined
effects of these factors, in turn, enables Company to maintain relatively higher
margins on the sales of furniture manufactured by Bartira and sold at Via
Varejo’s stores.The future deductible portion of the goodwill will be
R$157. Furthermore, a replacement
supplier for Bartira would be difficult to find in the local market and would
negatively affect the furniture line of products that are traded by Via
Varejo. For purposes of the presentation
of the consolidated statement of cash flow, the amount paid was deducted from
the cash acquired. Thus, the amount recorded was R$212, less 75% of Bartira’s
cash equivalent, totaling R$211. Goodwill on acquisition was fully allocated in
the home appliance segment. Subsequent measurement – finally
allocation of the purchase price. The acquisition of Bartira’s
control was accounted for under the acquisition method, in accordance with IFRS
3(R). In compliance with this standard, in 2014 the Company concluded collecting
the data and assessing the fair value of the net assets acquired on November 1,
2013, adjusting R$24, and, consequently increasing the goodwill on acquisition.
The adjustments mainly refer to effects on measuring income tax and inventories
on acquisition date.


F-64

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 15.Property and equipment, net 2012
    Additions
    Depreciation
    Acquisition of
      subsidiary (*)
    Write-offs
    Transfers
    2013
    Additions
    Depreciation
    Write-offs
    Sale
      of
      subsidiary(**)
    Transfers
    Corporate
      restructuring(***)
    Exchange
      rates
    2014Land
    1,265
    142
    -
    -
    (5)
    10
    1,412
    38
    -
    -
    -
    (1)
    -
    -
    1,449Buildings
    2,056
    43
    (66)
    -
    -
    (16)
    2,017
    48
    (66)
    (1)
    -
    48
    1
    -
    2,047Leasehold improvements
    2,243
    370
    (173)
    -
    (13)
    360
    2,787
    274
    (199)
    (14)
    -
    334
    -
    -
    3,182Machinery and equipment
    1,108
    376
    (231)
    118
    (45)
    120
    1,446
    395
    (275)
    (23)
    (1)
    61
    2
    -
    1,605Facilities
    285
    55
    (31)
    3
    -
    14
    326
    72
    (37)
    (10)
    (2)
    17
    14
    1
    381Furniture and fixtures
    494
    140
    (64)
    -
    (8)
    (47)
    515
    139
    (72)
    (6)
    (1)
    3
    11
    1
    509Vehicles
    230
    15
    (20)
    1
    (46)
    (14)
    166
    13
    (16)
    (41)
    (1)
    -
    -
    -
    121Construction in progress
    205
    445
    -
    -
    -
    (450)
    200
    448
    -
    (2)
    -
    (489)
    -
    -
    157Other
    80
    36
    (22)
    -
    -
    (7)
    87
    30
    (25)
    -
    -
    (1)
    2
    -
    93Total
    7,966
    1,622
    (607)
    122
    (117)
    (30)
    8,956
    1,457
    (690)
    (97)
    (5)
    (28)
    30
    2
    9,625Finance lease:Equipment
    23
    -
    (2)
    -
    -
    (1)
    20
    -
    (4)
    -
    -
    -
    -
    -
    16Hardware
    79
    -
    (29)
    -
    (8)
    1
    43
    -
    (18)
    -
    -
    1
    -
    -
    26Facilities
    1
    -
    -
    -
    -
    -
    1
    -
    -
    -
    -
    -
    -
    -
    1Furniture and fixtures
    9
    -
    (1)
    -
    -
    -
    8
    -
    (1)
    -
    -
    -
    -
    -
    7Vehicles
    10
    -
    -
    -
    (7)
    (2)
    1
    -
    -
    -
    -
    -
    -
    -
    1Buildings
    26
    -
    (2)
    -
    -
    -
    24
    -
    (1)
    -
    -
    -
    -
    -
    23148
    -
    (34)
    -
    (15)
    (2)
    97
    -
    (24)
    -
    -
    1
    -
    -
    74Total
    8,114
    1,622
    (641)
    122
    (132)
    (32)
    9,053
    1,457
    (714)
    (97)
    (5)
    (27)
    30
    2
    9,699
 (*) Refers to the acquisition of
Bartira, as shown in note 14. (**) Refers to the sale of CBCC,
as shown in note 29 (e). (***) Refers to the e-commerce
corporate restructuring, as shown in note 1.4.   The net effect of the transfers
columns in 2014 and 2013 are mainly due to transfer to intangible assets and
investment properties.


F-65

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 15.Property and equipment, net - Continued 2014
    
    2013Cost
    Accumulateddepreciation
    Net
    
    Cost
    Accumulateddepreciation
    NetLand
    1,449
    -
    1,449
    
    1,412
    -
    1,412Buildings
    3,013
    (966)
    2,047
    
    2,922
    (905)
    2,017Leasehold improvements
    4,929
    (1,747)
    3,182
    
    4,396
    (1,609)
    2,787Machinery and equipment
    3,191
    (1,586)
    1,605
    
    2,809
    (1,363)
    1,446Facilities
    722
    (341)
    381
    
    631
    (305)
    326Furniture and fixtures
    1,171
    (581)
    590
    
    1,033
    (518)
    515Vehicles
    179
    (58)
    121
    
    231
    (65)
    166Construction in progress
    157
    -
    157
    
    200
    -
    200Other
    188
    (95)
    93
    
    158
    (71)
    8714,999
    (5,374)
    9,625
    
    13,792
    (4,836)
    8,956Finance leaseEquipment
    36
    (20)
    16
    
    36
    (16)
    20Hardware
    174
    (148)
    26
    
    183
    (140)
    43Facilities
    2
    (1)
    1
    
    2
    (1)
    1Furniture and fixtures
    15
    (8)
    7
    
    15
    (7)
    8Vehicles
    2
    (1)
    1
    
    2
    (1)
    1Buildings
    44
    (21)
    23
    
    43
    (19)
    24273
    (199)
    74
    
    281
    (184)
    97Total
    15,272
    (5,573)
    9,699
    
    14,073
    (5,020)
    9,053
 15.1.Guarantees As of December 31, 2014 and 2013,
the Company had collateralized property and equipment items for some legal
claims, as disclosed in note 23.6. 15.2.Capitalized borrowing costs The amount of the borrowing costs
capitalized during the year ended of December 31, 2014 was R$14 (R$25 as of
December 31, 2013). The rate used to determine the borrowing costs eligible for
capitalization was 105.3% (104.6% for the year ended December 31, 2013) of CDI,
corresponding to the weight-average interest rate of the Company’s
borrowings. 15.3.Additions
to property and equipment 2014
    2013Additions (i)
    1,457
    1,622Capitalized interest
    (14)
    (25)Real estate - Additions (ii)
    (289)
    (129)Real estate - Payments (ii)
    225
    188Total
    1,379
    1,656
 (i)The additions made by the
 are mainly related to the purchase of operating assets, acquisition of
land and buildings to expand activities, building of new stores, improvements of
existing distribution centers and stores and investments in equipment and
information technology.


F-66

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 15.Property and equipment,
net - Continued 15.3.Additions
to the property and equipment - continued (ii)The
additions to property and equipment above are presented to demonstrate the
acquisitions during the year, in order to reconcile as shown as in the statement
of cash flows and the total additions presented above. 15.4.Other
information The Company recorded in cost of
sales the amount of R$112 for the year ended December 31, 2014 (R$78 for the
year ended December 31, 2013) referring to the depreciation of its fleet of
trucks, equipment, buildings and facilities related to warehouses. As of December 31, 2014, there was
no loss related to impairment. The recoverable amount was calculated based on
the value in use and was determined relative to the cash-generating unit. A
cash-generating unit consists of assets in stores, in each of the Company’s
segment. To determine the value in use of the cash-generating unit, the cash
flows were discounted at a rate of 11.4% (10.8% as of December 31, 2013), before
taxes.


F-67

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 16.Intangible assets, net 2012
    Additions
    Amor-tization
    Acquisition of
      subsidiary
      (*)
    Write-off
    Transfers
    2013
    Additions
    Amor-tization.
    Sale of
      subsidiary
      (**)
    Corporate
      re-organization
      (***)
    Write-off
    Transfers
    Exchange
      rates
    2014Goodwill - cash and carry
    362
    -
    -
    -
    -
    -
    362
    -
    -
    -
    -
    -
    -
    -
    362Goodwill - home appliances
    297
    604
    -
    -
    -
    (5)
    896
    24
    -
    -
    -
    -
    -
    -
    920Goodwill - retail
    747
    -
    -
    -
    -
    -
    747
    -
    -
    -
    -
    -
    -
    -
    747Goodwill - e-commerce
    -
    -
    -
    -
    -
    -
    -
    -
    -
    -
    236
    -
    2
    16
    254Brand - cash and carry
    39
    -
    -
    -
    -
    -
    39
    -
    -
    -
    -
    -
    -
    -
    39Brand - home appliances
    2,015
    
    -
    46
    -
    -
    2,061
    -
    -
    -
    -
    -
    -
    -
    2,061Brand - e-commerce
    -
    -
    -
    -
    -
    -
    -
    -
    -
    -
    11
    -
    17
    2
    30Commercial rights - home appliances
    608
    -
    (8)
    -
    -
    (24)
    577
    4
    (6)
    -
    -
    -
    -
    -
    574Commercial rights - retail
    35
    8
    -
    -
    -
    -
    43
    2
    -
    -
    -
    -
    1
    -
    46Commercial rights - cash and carry
    10
    19
    -
    -
    -
    -
    29
    5
    -
    -
    -
    -
    -
    -
    34Customer relationship - home
appliances
    12
    -
    (6)
    -
    -
    -
    6
    -
    (4)
    -
    -
    -
    -
    -
    2Lease agreement –stores under advantageous
      condition
    149
    -
    (47)
    36
    -
    -
    138
    -
    (41)
    -
    -
    -
    -
    -
    97Advantageous furniture supply
agreement
    61
    -
    (61)
    -
    -
    -
    -
    -
    -
    -
    -
    -
    -
    -
    -Contractual rights
    -
    -
    -
    -
    -
    -
    -
    187
    (8)
    -
    -
    -
    -
    -
    179Software
    641
    184
    (97)
    -
    (1)
    -
    727
    286
    (146)
    (1)
    203
    (4)
    (65)
    12
    1,012Software CL
    -
    81
    (4)
    -
    -
    -
    77
    25
    (11)
    -
    -
    -
    -
    -
    91Other
    -
    -
    -
    -
    -
    -
    -
    4
    (1)
    -
    2
    -
    40
    2
    47Total
    4,976
    896
    (223)
    82
    (1)
    (29)
    5,701
    537
    (217)
    (1)
    452
    (4)
    (5)
    32
    6,495
 (*) Refers to the acquisition of
Bartira, as shown in  note 14. (**) Refers to the sale of CBCC,
as shown in note 29 (e) (**) Refers to the e-commerce
corporate restructuring, as disclosed in  note 1.4. In 2013, the transfer
column is impacted by the amount of R$28 on the goodwill and commercial rights
home appliance, respectively, of the stores to be sold, as mentioned in note
1.3.


F-68

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 16.Intangible assets, net – Continued 2014
    
    2013Cost
    Accumulatedamortization
    Net
    
    Cost
    Accumulatedamortization
    NetGoodwill - cash and carry (note 16.1)
    371
    (9)
    362
    
    371
    (9)
    362Goodwill - home appliances (note 16.1)
    920
    -
    920
    
    896
    -
    896Goodwill - retail (note 16.1)
    1,848
    (1,101)
    747
    
    1,848
    (1,101)
    747Goodwill - e-commerce (note 16.1)
    254
    -
    254
    
    -
    -
    -Brand - cash and carry (note 16.2)
    39
    -
    39
    
    39
    -
    39Brand - home appliances (note 16.2)
    2,061
    -
    2,061
    
    2,061
    -
    2,061Brand - e-commerce (note 16.2)
    30
    -
    30
    
    -
    -
    -Commercial rights - home appliances (note
      16.5)
    637
    (63)
    574
    
    635
    (59)
    576Commercial rights - retail (note 16.5)
    46
    -
    46
    
    43
    -
    43Commercial rights - cash and carry (note
      16.5)
    34
    -
    34
    
    29
    -
    29Customer relationship - home appliances
    34
    (32)
    2
    
    34
    (28)
    6Lease agreement under advantageous condition (note
      16.4)
    292
    (195)
    97
    
    292
    (154)
    138Advantageous furniture supply agreement (note
      16.3)
    -
    -
    -
    
    221
    (221)
    -Contractual rights
    186
    (7)
    179
    
    -
    -
    -Software
    1,621
    (609)
    1,012
    
    1,093
    (366)
    727Software CL
    112
    (21)
    91
    
    81
    (4)
    77Other
    58
    (11)
    43
    
    -
    -
    -8,543
    (2,048)
    6,495
    
    7,643
    (1,942)
    5,701
 16.1.Impairment testing of
goodwill and intangible assets  As of December 31, 2014, for
impairment testing purposes, the goodwill acquired through business
combinations, brands and commercial rights with indefinite useful lives were
allocated to four Company of cash generating units, which are also operating
segments that disclose information: retail, home appliances, cash and carry and
e-commerce.  The recoverable amount of the
segments was defined by means of a calculation based on the value in use based
on cash projections arising from the financial budgets approved by Board of
Directors for the next three years. The discount rate before taxes applied to
cash flow projections is 11.4% (10,8% as of December 31, 2013), and cash flows
exceeding 3 years are extrapolated by using a growth rate of 6.7% (6.4% as of
December 31, 2013). Based on this analysis, no impairment loss was
identified. 16.2.Brands Brands substantially refer to
“ASSAÍ”, “PONTO FRIO” and “CASAS BAHIA”.  The carrying amount was subject to
impairment tests through the income approach – Relief from Royalty, which
consists of determining the value of an asset by measuring the present value of
future benefits. Given the indefinite useful life of the brands, the Company
considered a perpetual growth of 6.7% in the preparation of the discounted cash
flow. The royalty rate used was 0.4% for “ASSAÍ”, 0.8% for “PONTO FRIO” and 0.9%
for “CASAS BAHIA”.  As a result of this analysis, no
impairment loss was identified.


F-69

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 16.Intangible assets, net – Continued 16.3.Advantageous furniture
supply agreement – Bartira  Prior to the acquisition of
control of Bartira in 2013, Via Varejo had exclusive supply contract with
Bartira. This contract present advantageous condition in the acquisition of
furniture for resale compared the margins established in the sector. The amount
was recorded at the business combination and has been established for
information on comparable transactions in the market, refined methodology
"Income Approach".  The useful life of that asset was
defined as three years, ending during the year 2013.  16.4.Lease agreement under
advantageous condition Refers to properties from Casa
Bahia Comercial Ltda., comprised of stores, warehouses and buildings, which are
subject to operating leases on advantageous terms with Via Varejo. Its
measurement was performed by information on comparable transactions in the
market, applying the "Income Approach" methodology. The assets were recognized
because of the business combination between the Company   and Casa
Bahia during 2010.  The useful life was defined as 10
years in accordance with the association agreement and the related lease terms.
No impairment indicator was identified, since the market conditions has not
deteriorated.  16.5.Commercial
rights  Commercial rights are the right to operate the stores
referred to acquired rights, or allocated on business combinations. Commercial
rights are considered recoverable, considering its recovery by cash flows return
or the possibility of negotiating with third parties.  16.6.Additions to intangible
assets 2014
    2013Additions
    537
    896Goodwill (note 14)
    (24)
    (604)Other payables
    -
    (17)Payment of intangible added in prior
    year
    5
    -Addition to intangible assets through finance
      leases
    -
    (82)Total
    518
    193


F-70

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 17.Trade payables, net 2014
    2013Trade payables
    
    13,437
    8,833Service suppliers
    
    775
    490Rebates (note 17.1)
    
    (890)
    (776)13,322
    8,547
  17.1Accounts
receivable from vendors Refer to bonuses and discounts
obtained from suppliers. These amounts are established in agreements and include
amounts for discounts on purchase volumes, joint marketing programs, freight
reimbursements, and other similar programs. The receipt of these receivables is
by offsetting the amounts payable to suppliers. 18.Borrowings and financing 18.1.Debt
breakdown Weighted
      average rate
    2014
    2013CurrentDebenturesDebentures, net
      (note 18.4)
    
    2,672
    1,245Borrowings and
      financingLocal currencyBNDES (note 18.5)
    TJLP (*) + 3.51
      p.y.
    89
    82BNDES (note 18.5)
    3.74%
      p.y.
    14
    29IBM
    CDI - 0.71%
      p.y.
    34
    24Working capital (i)
    108.00% of
      CDI
    3,493
    3,357Working capital
    11.58%
      p.y.
    213
    191Finance lease (note 24)
    
    34
    56Swap contracts (note 18.6)
    102.00% of
      CDI
    (12)
    (12)Borrowing costs
    
    (3)
    (5)3,862
    3,722Foreign currencyWorking capital
    USD + 1.22%
      p.y.
    56
    294Swap contracts (note 18.6)
    105.46% of
      CDI
    4
    (89)Borrowing costs
    
    -
    -60
    205Total current
    
    6,594
    5,172


F-71

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 18.Loans and financing – Continued 18.1.Debt breakdown –
Continued Noncurrent
    Weighted
      average
      rate
    12.31.2014
    12.31.2013DebenturesDebentures, net (note 18.4)
    
    896
    2,599Borrowings and
      financingLocal currencyBNDES (note 18.5)
    TJLP + 3.60
      p.y.
    82
    191BNDES (note 18.5)
    3.08%
      p.y.
    57
    10IBM
    CDI - 0.71%
      p.y.
    74
    96Working capital (i)
    107.36% of
      CDI
    1,142
    1,246Working capital
    TR (***) + 9.80
      p.y.
    21
    -Finance lease (note 24)
    99% of
      CDI
    229
    199Swap contracts (nota 18.6)
    
    -
    (12)Borrowing costs
    
    (6)
    (6)1,599
    1,724Foreign currencyWorking capital
    USD + 1.88%
      p.y.
    669
    -Swap contracts (note 18.6)
    103.88% of
      CDI
    (30)
    -639
    -Total noncurrent
    
    3,134
    4,323
 (i)These
balances include the amount of R$2,875 (R$2,867 as of December 31, 2013) of
direct consumer finance (CDCI).   (*) Long- term interest rate – TJLP (**) Interbank deposit certificates - CDI (***) Benchamark  Reference Rate - TR


F-72

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 18.Borrowings and financing – Continued 18.2.Changes in
loans At December 31, 2012
    
    10,492Additions
    
    5,278Accrued interest
    
    919Swap
    
    (21)Mark-to-market
    
    2Inflation adjustment and exchange rate changes
    
    62Borrowing cost
    
    3Interest paid
    
    (721)Repayments
    
    (6,519)Payment of derivative financial
      instruments
    
    -At December 31, 2013
    
    9,495Additions
    
    6,780Accrued interest
    
    928Swap
    
    (17)Mark-to-market
    
    (3)Inflation
      adjustment and exchange rate changes
    
    55Borrowing cost
    
    9Interest paid
    
    (1,069)Repayments
    
    (6,500)Payment of
      derivative financial instruments
    
    50At December 31, 2014
    
    9,728
  18.3.Maturity schedule
of borrowings and financing recorded in noncurrent liabilities Year2016
    7262017
    1,1352018
    199After
      2019
    1,084Subtotal
    3,144Borrowing
      costs
    (10)Total
    3,134


F-73

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 18.Borrowings and financing – Continued DateType
    Issue Amount
    Outstanding
      debentures
    Issue
    Maturity
    Annual finance
      charges
    Unit price
    2014
    2013Parent Company8th Issue – 1st series -
CBD
    No preference
    500
    -
    12/15/09
    12/15/14
    109.5% of CDI
    207
    -
    2019th Issue – 1st series -
CBD
    No preference
    610
    -
    1/5/11
    1/5/14
    107.75% of CDI
    1,333
    -
    81310th Issue – 1st series -
    CBD
    No preference
    800
    80,000
    12/29/11
    6/29/15
    108.5% of CDI
    11
    801
    80011th Issue – Single series - CBD
    No preference
    1,200
    120,000
    5/2/12
    11/2/15
    CDI + 1% p.y.
    10
    1,223
    1,21912th Issue – Single series - CBD
    No preference
    900
    900,000
    9/12/14
    9/12/19
    107.00% of
      CDI
    1
    930
    -Subsidiaries3rd Issue – 1st series - Via
      Varejo
    No preference
    400
    40,000
    1/30/12
    7/30/15
    CDI + 1% p.y.
    10
    420
    4171st Issue – 1st series – Via
      Varejo
    No preference
    200
    -
    6/29/12
    12/29/14
    CDI + 0.72%
    10
    -
    2001st Issue – 2nd Series – Via
      Varejo
    No preference
    200
    20,000
    6/29/12
    1/29/15
    CDI + 0.72%
    10
    200
    200Borrowing cost
    
    
    
    
    
    
    
    (6)
    (6)3,568
    3,844Current liabilities
    
    
    
    
    
    
    
    2,672
    1,245Noncurrent liabilities
    
    
    
    
    
    
    
    896
    2,599
 18.4.Debentures


F-74

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 18.Borrowings and financing – Continued 18.4.Debentures –
Continued  The Company uses the issuance of
debentures to strengthen its working capital, maintain its cash strategy,
lengthen its debt profile and perform investments. The debentures issued are
unsecured, without renegotiation clauses and not convertible into shares. The
debentures issued by Via Varejo are guaranteed by the CBD. These debentures are amortized
according to the following conditions: (i) payment only at maturity with annual
remuneration (10th issue of CBD), (ii) payment only at maturity with semiannual
remuneration (11th issue of CBD and 3rd issue of Via Varejo) and (iii) annual
installments payments as of the 4th anniversary of the issue (12th
issue of CBD) and semiannual payments. The 10th,
11th and 12th issues are entitled to early redemption, at any time,
in accordance with the conditions established in the issue. The third issues of
Via Varejo can only be redeemed after 18 months. The Company is required to
maintain certain debt financial covenants in connection with the issues made.
These ratios are calculated based on consolidated interim financial information
prepared in accordance with accounting practices adopted in Brazil, in the
respective issuing entity as follows: (i) net debt (debt minus cash and cash
equivalents and trade receivables) not greater than equity and (ii) consolidated
net debt/EBITDA ratio lower than or equal to 3,25. As of December 31, 2014, the
Company has complied with these ratios. On September 12, 2014,CBD issued
the 12th debenture in the amount of R$900 (Bradesco and Safra Banks) at the rate
of 107% of CDI in the unit price of R$1,00, 60-month maturity in 2 installments
(12/09/2018 and 12/09/2019) and interest will be paid semi-annually (March and
September). 18.5Guarantees The  signed promissory notes
and letters of credit as collateral for borrowings and financing from the
BNDES.  18.6Swap
contracts The  uses swap in all of
funding in US dollars and fixed interest rate operations, to exchange these
obligations for Brazilian Real linked to CDI (floating) interest rates. These
contracts have a total debt term and protect the interest and the principal. The
weighted average annual rate of CDI in 2014 was 10.81% (8.06% in 2013).  18.7New credit
lines The Company entered into an
agreement to new credit lines in the amount of R$1,350. The agreements were made
in accordance with market conditions and are effective for 2016 and
2017.


F-75

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 19.Financial instruments The  uses derivative
financial instruments only for protecting identified risks, limited to 100% of
these risks. Derivative transactions have the sole purpose of reducing the
exposure to the interest rate and foreign currency fluctuations and maintaining
a balanced capital structure.  The main financial instruments
recorded in the consolidated financial statements, by category, as the
followings:  Carrying amount2014
    2013Financial assets:Loans and receivables (including cash)Cash and cash
      equivalents
    11,149
    8,367Trade and other
      receivables
    4,246
    3,488Related parties -
      assets (*)
    313
    172Financial assets mensured at fair value through
      profit or lossMarketable securities
    -
    24Total of financial assets
    15,708
    12,051Financial liabilities:Other financial
      liabilitiesRelated parties -
      liabilities (*)
    (261)
    (33)Trade payables
    (13,322)
    (8,547)Financing for
      property
    (90)
    (48)Acquisition of
      noncontrolling interests
    (130)
    (177)Borrowings and
      financing
    (8,809)
    (8,937)Financial
      liabilities mensured at fair value through profit or lossBorrowings and
      financing, including derivatives
    (919)
    (558)Total of financial liabilities
    (23,531)
    (18,300)
   (*)Transactions with related
parties refer mainly to transactions between the Company and other related
entities and were substantially accounted for in accordance with the prices,
terms and conditions agreed between the parties.


F-76

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 19.Financial instruments – Continued The fair value of the financial
instruments detailed in table above approximates of the related carrying amount
based on the existing terms conditions. The financial instruments measured at
amortized cost, which the related fair values differ from carrying amount are
disclosed in note 19.3. 19.1.Considerations on risk
factors that may affect the business of the Company The  adopts risk control
policies and procedures, as outlined below: (i)Credit risk ·Cash and
cash equivalents: in order to minimize credit risk of these investments, the
 adopts investment policies at financial institutions approved by the
 Cash Flow Committee, also taking into consideration monetary limits and
financial institution evaluations, which are periodically updated (see note 7
for a list of financial institution). ·Accounts
receivable: credit risk related to accounts receivable is minimized by the fact
that big portion of the sales are paid with credit cards, and the  sells
these receivables to banks and credit card companies itself, aiming strength
working capital. The sales of receivables result in derecognition of the
accounts receivable due to the transfer of the credit risk, benefits and control
of such assets. ·The
 also has counterparty risk related to the derivative financial
instruments; such risk is mitigated by the Company’s policy of carrying out
transactions, according to policies approved by governance boards. ·Consumer
Finance (CDCI): sales are made through credit lines with banks Bradesco, Safra
and Banco do Brasil for granting loans to their customers, through intervention
with their financial institutions, with the aim of enabling and encouraging the
sale of goods in the home appliance stores. In this type of sale, Via Varejo has
ultimate responsibility for the settlement of loans and the credit risk of the
operation. ·There are no amounts receivable that are individually
higher than 5% of accounts receivable or sales, respectively. (ii)Interest rate risk The Company raise
borrowings and financing with major financial institutions for cash needs for
investments and growth. As a result, the Company are mainly exposed to relevant
interest rates fluctuation risk, especially in view of derivatives liabilities
(foreign currency exposure hedge) and CDI-pegged debt. The balance of cash and
cash equivalents, indexed to CDI, partially offsets the interest rate
risk. (iii)Exchange rate risk The Company are exposed to
exchange rate fluctuations, which may increase outstanding balances of foreign
currency-denominated borrowings. The Company use derivatives, such as swaps,
with a view to mitigating the exchange exposure risk, converting the cost of
debt into currency and domestic interest rates.


F-77

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 19.Financial instruments – Continued 19.1.Considerations on
risk factors that may affect the business of the Company - Continued  (iv)Capital
management risk The main objective of the
Company’s  capital management is to ensure that the Company sustains its
credit rating and a well-defined equity ratio, so that to support businesses and
maximize shareholder value. The  Company manages the capital structure and
makes adjustments taking into account changes in the economic conditions. There were no changes as to
objectives, policies or processes during the year ended December 31,
2014. 2014
    2013Borrowings and
      financing
    9,728
    9,495(-) Cash and cash
      equivalents
    (11,149)
    (8,367)Net debt (cash)
    (1,421)
    1,128Equity
    14,482
    12,712Equity and net
    debt
    13,061
    13,840Net indebtedness
      rate
    (0.10)
    0.09
  (v)Liquidity management
risk The Company  manages
liquidity risk through the daily follow-up of cash flows, control of financial
assets and liabilities maturities and a close relationship with main financial
institutions. The table below summarizes the
aging profile of financial liabilities of the Company  as of December 31,
2014 and December 31, 2013. Up to 1 Year
    
    1 – 5 years
    
    More than 5 years
    
    Total2014
    2013
    
    2014
    2013
    
    2014
    2013
    
    2014
    2013Borrowings and financing
    4,076
    4,046
    
    2,465
    1,784
    
    46
    19
    
    6,587
    5,849Debentures
    2,964
    1,539
    
    1,315
    2,837
    
    -
    -
    
    4,279
    4,376Derivatives
    50
    (97)
    
    (36)
    (14)
    
    1
    -
    
    15
    (111)Finance for property
    48
    75
    
    174
    176
    
    101
    52
    
    323
    303Trade payables
    13,322
    8,547
    
    -
    -
    
    -
    -
    
    13,322
    8,547Acquisition of noncontrolling
interests
    73
    69
    
    71
    142
    
    -
    -
    
    144
    211Total
    20,533
    14,179
    
    3,989
    4,925
    
    148
    71
    
    24,670
    19,175


F-78

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 19.Financial instruments – Continued 19.1.Considerations on
risk factors that may affect the business of the Company - Continued   (vi)Derivative
financial instruments Certain swap transactions are
classified as fair value hedge, whose objective is to hedge against foreign
exchange exposure (U.S. dollars) and fixed interest rates, converting the debt
into domestic interest rates and currency. As of December 31, 2014 the
reference value of these contracts were R$842 (R$460 as of December 31, 2013).
These operations are usually contracted under the same terms of amounts,
maturities and fees, and preferably carried out with the same financial
institution, observing the limits set by management. According to the Company’s
 treasury policies, swaps cannot be contracted with restrictions (“caps”),
margins, as well as return clauses, double index, flexible options or any other
types of transactions different from traditional “swap” operations to hedge
against debts. The Company’s  internal
controls were designed to ensure that such transactions are conducted in
compliance with this treasury policy. The  Company evaluates the
effectiveness of operations and hedge accounting is applied on inception date
and on continuing basis. Hedge operations contracted in the year ended December
31, 2014 were effective in relation to the covered risk. For derivative
transactions qualified as hedge accounting according to IAS 39, the debt (hedged
item), is also adjusted at fair value.


F-79

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 19.Financial instruments – Continued 19.1.Considerations on
risk factors that may affect the business of the Company – Continued  (vi) 
Derivative financial instruments – Continued Notional value
    Fair value2014
    2013
    2014
    2013Fair value
      hedge:Purpose of hedge
      (debt)
    
    842
    460
    959
    680Long position
      (buy)Prefixed rate
    11.58%
      p.y.
    151
    260
    234
    385US$ +
      fixed
    1.78%
      p.y.
    691
    200
    732
    294842
    460
    966
    679Short position
      (sell)CDI 102.53%
      p.y.
    (842)
    (460)
    (928)
    (565)Net hedge
      position
    
    -
    -
    38
    113
  Realized and unrealized gains and
losses over these contracts during the year ended December 31, 2014 are recorded
in finance income (expenses) and the balance payable at fair value is R$38
(R$114 at December 31, 2013), recorded as “Borrowings and financing”. Fair value “hedge” effects
recorded in the statement of income for the year ended December 31, 2014 were a
gain of R$20 (R$54 for the year ended December 31, 2013). (vii)  Fair values
of derivative financial instruments Fair value is the amount for which
an asset could be exchanged, or a liability settled, between knowledgeable,
willing parties in an arm’s length transaction. Fair values are calculated by
projecting the future cash flows of operations, using the curves of CDI and
discounting them to present value, using CDI market rates for swaps both
disclosed by BM&FBovespa. The market value of exchange
coupon swaps versus CDI rate was obtained applying market exchange rates
effective on the date of the consolidation financial statements and the rates
are projected by the market calculated based on currency coupon curves, In order
to calculate the coupon of foreign currency indexed-positions, the straight-line
convention - 360 consecutive days was adopted and to calculate the coupon of CDI
indexed-positions, the exponential convention - 252 business days was
adopted.


F-80

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 19.Financial instruments – Continued 19.2.Sensitivity
analysis of financial instruments The sensitivy analysis was
developed for each type or market risk deemed as relevant by management. According to the management’s
assessment, the most probable scenario is what the market has been estimating
through market curves (currency and interest rates) of BM&FBovespa, on the
maturity dates of each operation. Therefore, in the probable scenario (I), there
is no impact on the fair value of financial instruments already mentioned in
item (vi) above, which considers exchange rate weighted was R$3.17 on the due
date, and the interest rate weighted was 12.91% per year. For scenarios (II) and
(III), for the sensitivity analysis effect, a deterioration of 25% and 50% was
taken into account, respectively, on risk variables, up to the maturity date of
the financial instruments. In case of derivative financial
instruments (aiming at hedging the financial debt), changes in scenarios are
accompanied by respective hedges, indicating effects are not significant, see
note 19.2 (ii). The Company disclosed the net
exposure of the derivatives financial instruments, corresponding financial
instruments and certain financial instruments in the sensitivity analysis chart
below, for each of the scenarios mentioned: (i)Fair value hedge (fixed
rate) Market projectionOperations
    
    Risk
    
    Balance at
      12.31.2014
    
    Scenario I
    
    Scenario II
    
    Scenario IIIDebt at fixed
      rate
    
    
    
    (234)
    
    (290)
    
    (290)
    
    (290)Swap (long
      position in fixed rate)
    
    
    
    234
    
    290
    
    290
    
    290Net
      effect
    
    -
    
    -
    
    -
    
    -Swap (short
      position in CDI)
    
    CDI increase
    
    (221)
    
    (294)
    
    (328)
    
    (372)Total net effect (loss)
    
    
    
    
    
    (73)
    
    (107)
    
    (151)
  (ii)Fair value hedge (exchange
rate) Market
      projectionOperations
    
    Risk
    
    Balance at
      12.31.2014
    
    Scenario
      I
    
    Scenario
      II
    
    Scenario
      IIIDebt -
      US$
    
    US$
      increase
    
    (726)
    
    (928)
    
    (1,160)
    
    (1,392)Swap (long
      position in US$)
    
    
    
    732
    
    934
    
    1,168
    
    1,401Net
      effect
    
    6
    
    6
    
    8
    
    9Swap (short
      position in CDI)
    
    CDI
      increase
    
    (706)
    
    (920)
    
    (972)
    
    (1,026)Estimated
      financial liabilities
    
    
    
    (700)
    
    (914)
    
    (964)
    
    (1,017)Total net effect
      (loss)
    
    
    
    
    
    (215)
    
    (265)
    
    (318)


F-81

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 19.Financial instruments – Continued (iii)Other financial
instruments Market projectionOperations
    Risk (CDI decrease)
    Balance at 12.31.2014
    Scenario I
    
    Scenario II
    
    Scenario IIIDebentures
    CDI + 1% p.y.
    (1,223)
    (1,378)
    
    (1,343)
    
    (1,307)Debentures
    107.83% of CDI
    (1,731)
    (2,080)
    
    (2,026)
    
    (1,972)Debentures - Via Varejo
    100% CDI + 0.8% p.y.
    (620)
    (697)
    
    (679)
    
    (661)Bank loans – CDB
    106.25% of CDI
    (1,739)
    (2,062)
    
    (2,008)
    
    (1,955)Leases
    100.09% of CDI
    (207)
    (231)
    
    (225)
    
    (219)Leases
    IGP-DI (*8) + 6% p.y?
    (30)
    (37)
    
    (35)
    
    (34)Leases – Via Varejo
    95% CDI
    (26)
    (28)
    
    (27)
    
    (26)Bank loans – Via Varejo
    109.43% of CDI
    (2,990)
    (3,633)
    
    (3,539)
    
    (3,444)Total borrowings and financing
exposure
    
    (8,566)
    (10,145)
    
    (9,882)
    
    (9,618)Cash and cash equivalents
    100.66% do CDI (*)
    11,149
    12,568
    
    12,242
    
    11,916Net exposure
    
    2,583
    2,423
    
    2,360
    
    2,298Net effect - loss
    
    
    (160)
    
    (223)
    
    (285)(*) weighted average(**) IGP – General price index
 19.3.Fair value
measurements The Company discloses the fair
value of financial instruments measured at amortized cost when the related fair
value differs from carrying amount as required by IFRS13, which are those
referring concept from evaluation and requirements of disclosure. As mentioned
in note 19.1, except for borrowings and financing included in the table below,
the fair value of the financial instruments held by the Company approximates of
its carrying amount based on the exiting terms conditions. The table below represents the
hierarchy of fair value of financial assets and liabilities recorded at fair
value and of financial instruments measured at amortized cost, which the fair
value is disclosed in the consolidated financial statements: Carrying
      Amount
      12.31.2014
    Fair value
      12.31.2014
    Hierarchy of fair value measurement at the end of
      the reporting period adopting other observable relevant assumptionsFinancial
      instruments measured at fair value through profit/loss:Cross-currency
      interest rate swaps
    26
    26
    Level
    2Interest rate
      swaps
    12
    12
    Level
    2Borrowings andfinancing
    (957)
    (957)
    Level
    2Financial instruments measured at amortized cost,
      which the related fair value is disclosued.Borrowings andfinancing
    (5,241)
    (5,304)
    Level
    2
 There were no changes between the
fair value measurements levels in the year ended December 31, 2014. Foreign exchange and
interest rate swaps and borrowings and financing are classified on level 2,
since the fair value of such financial instruments was determined based on
readily observable market inputs, including expected interest rate and current
and future foreign exchange rate.


F-82

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 19.Financial instruments – Continued 19.4.Consolidated
position of operations with derivatives financial instruments Below is the consolidated position
of outstanding derivative financial instruments transactions: Outstanding
    
    
    
    
    Amount payable or receivable
    Fair valueDescription
    Counterparties
    Notional value (in millions)
    Contracting date
    Maturity
    2014
    2013
    2014
    2013Exchange swapsregistered with Cetip
      (*)(US$ x CDI)
    Citibank
    US$ 40
    2/13/2012
    2/13/2014
    -
    13
    -
    14Banco Tokyo
    US$ 75
    1/14/2014
    1/10/2017
    16
    -
    11
    -Itaú Unibanco
    US$ 100
    5/5/2011
    4/16/2014
    -
    73
    -
    76Banco JP Morgan
    US$ 50
    3/19/2014
    3/21/2016
    14
    -
    11
    -Citibank
    US$ 16
    10/14/2014
    10/14/2015
    3
    -
    2
    -Mizuho
    US$ 50
    10/31/2014
    10/31/2017
    8
    -
    4
    -Citibank
    US$ 85
    11/21/2014
    11/21/2016
    3
    -
    (4)
    -Citibank
    US$ 50
    10/14/2014
    10/14/2015
    1
    -
    1
    -Interest rate swapregistered with Cetip
    Banco do Brasil
    R$130
    6/28/2010
    6/6/2014
    -
    12
    -
    12(fixed rate x CDI)
    Banco do Brasil
    R$130
    6/28/2010
    6/2/2015
    13
    11
    12
    11Itaú BBA
    R$21
    11/11/2014
    11/5/2026
    1
    -
    1
    -59
    109
    38
    113
 (*)Clearing House for the Custody
and Financial Settlement of Securities


F-83

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 20.Taxes and contribution payable and taxes payable in
installments 2014
    2013PIS and COFINS payable
    360
    368Provision for income tax and social contribution
    161
    167ICMS payable
    153
    227Other
    118
    63792
    825Taxes payable in
      installments -Law 11941/09 (i)
    680
    1,188INSS
    -
    13Other
    12
    16692
    1,217Current
    867
    969Noncurrent
    617
    1,073
  (i)     Taxes payable in installments
(Law 11941/09) - Law 11941, was enacted on May 27, 2009, establishing
a special federal taxes and social security debt installment program for debts
overdue until November 2008, granted certain benefits to taxpayers, including
reduction of penalties, interest and legal charges. This program allows
taxpayers to use tax loss carryforwards to settle penalties and interest.
Additionally, such program allows taxpayers to pay the debt in 180-month term
and use the restricted deposits to reduce the debt balance. During 2014, Law
12996/14 was enacted, allowing taxpayers to use tax loss carryforward to settle
70% of the remaining debt balance. Therefore, management settled certain debts
in the amount of R$366, (R$256 - using tax loss carryforward and and  R$97
paid in cash). (ii)   
Maturity structure of taxes in the noncurrent liabilities will occur as
follows In2016
    742017
    742018
    712019
    70After
      2019
    328617


F-84

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 21.Income tax and social contribution 21.1.Income tax and social contribution
expenses reconciliation 2014
    2013
    2012Profit before income tax and social contribution
    
    2,496
    1,756
    1,676Income tax and social contribution at the notional
      rate
    
    (749)
    (526)
    (503)of 25% for the CBD and 34% for its subsidiaries
      (*)
    
    -
    -Tax penalties
    
    (2)
    (5)
    (5)Credit recovery/reversal
    
    -
    -
    (17)Share of profit of associates
    
    32
    14
    3Reversal of deferred income tax and social
      contribution and other tax credits (**)
    
    -
    124
    -Other permanent differences (nondeductible)
    
    (17)
    33
    2Effective income tax and social contribution
    
    (736)
    (360)
    (520)Income tax and social contribution for the year:Current
    
    (514)
    (269)
    (327)Deferred
    
    (222)
    (91)
    (193)Income tax and social contribution
      expenses
    
    (736)
    (360)
    (520)Effective rate
    
    29.49%
    20.50%
    31.01%
 (*) Based on a final and
unappealable court decision in the past, CBD does not pay social contribution
(9%). (**) Refers mainly to deferred
taxes on Bartira call option, which occurred with the option exercise in October
2013, since such option is no lonfger a financial instrument, after the
acquisition of Bartira (see note 14). 21.2.Breakdown of deferred income tax
and social contribution 2014
    2013Tax losses carryforward
    
    354
    794Provision for risks
    
    346
    302Provision for derivative transactions taxed on a
      cash basis
    
    (10)
    6Estimate losses on doubtful accounts
    
    94
    82Provision for current expenses
    
    63
    64Goodwill tax amortization
    
    (469)
    (396)Present value adjustment
    
    (6)
    (1)Lease adjustment
    
    (95)
    (75)Mark-to-market adjustment
    
    (2)
    1Fair value of assets acquired in business
      combinations
    
    (790)
    (808)Technological innovation – future
      realization
    
    (21)
    (21)Depreciation of fixed assets as per tax rates
    
    (124)
    (90)Other
    
    18
    32Deferred income tax and social contribution
    
    (642)
    (110)Noncurrent assets
    
    491
    951Noncurrent liabilities
    
    (1,133)
    (1,061)Deferred income tax and social contribution
    
    (642)
    (110)


F-85

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 21.Income tax and social contribution –
Continued 21.2.Breakdown of
deferred income tax and social contribution – Continued Management has prepared an
analysis on the future recoverability of deferred tax assets, considering the
probable capacity to generate taxable income in the context of the main
variables of their business. This analysis was prepared based on information
extracted from the strategic planning report previously approved by the
Company’s Board of Directors. The Company’s  management
estimates to recover deferred tax assets, as follows: Year
    Amount2016
    3462017
    1132018
    192019
    13491
 21.3.Changes in
deferred income tax and social contribution 2014
    2013At the beginning of the year
    
    (110)
    (55)Expense in the year
    
    (222)
    (91)Corporate restructuring
    
    41
    -Exchange rate changes
    
    4
    -Payment of taxes payable in installments and other
      fiscal obligations
    
    (379)
    -Other
    
    24
    36At the end of the year
    
    (642)
    (110)
 22.Acquisition of noncontrolling interests 2014
    2013Acquisition of
      interest in Assaí (a)
    6
    6Acquisition of
      interest in Sendas (b)
    124
    171130
    177Current liabilities
    73
    69Noncurrent liabilities
    57
    108
 (a)   
Refers to accounts payable due to the acquisition of a noncontrolling interest
in Assaí, a subsidiary that operates in the “cash and carry” segmentCompany. (b)   
Refers to accounts payable for the acquisition of noncontrolling interest in
Sendas in December 2010, corresponding to 42.57% of the capital for the total
amount of R$377. As of December 31, 2014, two annual installments were
remaining, recorded at present value, estimated to be adjusted by the IPCA, the
last amortization will occur in July 2016.


F-86

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 23.Provision for risks The provision for risks is
evaluated and estimated by Group’s management, supported by its internal and
external legal counsels. The provision was recognized to cover losses assessed
as probable risks: PIS/COFINS
    Taxes and
      other
    Social security
      and labor
    Civil
    TotalBalance at December 31, 2012
    87
    365
    191
    131
    774Additions
    191
    11
    160
    91
    453Payments
    (15)
    (6)
    (48)
    (13)
    (82)Reversals
    (57)
    (37)
    (47)
    (64)
    (205)Inflation
      adjustment
    16
    13
    28
    30
    87Acquisition of
      subsidiaries (note 14)
    8
    99
    13
    -
    120Transfers
    42
    (42)
    -
    -
    -Balance at December 31, 2013
    272
    403
    297
    175
    1,147Additions
    53
    173
    297
    195
    718Payments
    -
    (4)
    (64)
    (48)
    (116)Reversals
    (47)
    (2)
    (66)
    (141)
    (256)Inflation
      adjustment
    12
    16
    57
    48
    133Transfers
    -
    -
    -
    2
    2Payment under
      amnesty program
    (211)
    (85)
    -
    -
    (296)Corporate
      restructuring (note 1.4)
    -
    8
    3
    -
    11Exchange rate
      changes
    -
    1
    -
    -
    1Balance at
      December 31, 2014
    79
    510
    524
    231
    1,344
 23.1.Taxes As per prevailing legislation, tax
claims are monetary indexed, which refers to a monthly adjustment for provisions
for legal claims in accordance with the indexation rates used by each tax
jurisdiction. In all cases, both the interest charges and fines, when
applicable, were computed and fully provisioned with respect to unpaid
amounts. The main tax claims for which a
provision was recognized are as follows: COFINSandPIS Since the noncumulative regime to
calculate PIS and COFINS has been used, the Company has challenged the right to
deduct ICMS from the base of these two contributions. The provision recognized
as of December 31, 2014 totals R$72 (R$92 as of December 31, 2013). The
reduction is due to the change in the likelihood of losses (from “probable” to
“possible”) related to offsetting of PIS/COFINS tax debts against Federal VAT –
Inputs (IPI) credits subject to a zero tax rate or tax-exempt – acquired from
third parties (transferred based on a final and unappealable decision).


F-87

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 23.Provision for risks – Continued 23.1Taxes --
continued COFINSandPIS --
continued The Company  challenged
offsets of Finsocial, COFINS and PIS, which our legal counsel assesses as
probable loss in 2013 and, as of September 30, 2014, the balance was settled
based on the amnesty benefits granted by Law 12996/14 (R$173 as of December 31,
2013). Taxes and other Taxes The Company has tax claims, which
after analysis of its legal counsels, were deemed as probable losses; therefore,
accrued in the consolidated financial statements. These are: (i) tax assessment
notices related to purchase, industrialization and sale of soybean and
byproducts exports (PIS, COFINS and IRPJ); (ii) disagreement on the
non-application of Accident Prevention Factor - FAP for 2011; (iii) disagreement
on the “Fundo de Combate à Pobreza” (State Government Fund Against Poverty),
enacted by the Rio de Janeiro State government; (iv) disagreement on tax losses
carryforwards, as well as suppliers contracted considered disqualified before
the registration of the State Internal Revenue Service, error when applying
rate, ancillary obligations by State tax authorities; and (v) other less
relevant issues. The amount recorded in the balance
sheet as of December 31, 2014 is R$108 (R$100 at December 31, 2013). The Supreme Court ("STF") on
October 16, 2014, decided that the taxpayers whose trade products included in
the “basic consumer products basket” have no right to fully use the ICMS
credits. The Company, with the aid of its legal advisors, evaluated and recorded
a provision for this matter amounting to R$147 as of December 31,
2014,due to the
fact that the lilekyhood of loss related this claim is considered “probable”.
The amounts accrued represent the best management ́s estimation of the probable
losses. In addition, the Company
 discusses in the court the eligibility to not pay the contributions
provided for by Supplementary Law 110/01, referring to the FGTS (Government
Severance Indemnity Fund for Employees) costs. The accrued amount as of December
31, 2014 is R$48 (R$39 as of December 31, 2013).


F-88

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 23.Provision for risks – Continued 23.1Taxes --
continued Taxes and other --
Continued Tax contingent liabilities on
price purchase allocation on business combination Provisions for tax contingent
liabilities were recorded as a result of Via Varejo’s business combinations, and
as of December 31, 2014, the amount recorded was R$87 (R$165 at December 31,
2013) in tax contingent liabilities, and reduction is due to payments made in
connection with the amnesty program granted by law 12.996/14. These accrued
claims refer to administrative court claims related to the off set of fiscal
debts with credits over coffee export. Contingencies
Bartira In line with the business
combination of Bartira, occurred in 2013, tax contingent liabilities were
evaluated and recorded; the main contingencies  relates to possible failure
supporting documentation of transactions, totaling R$106 between income tax and
social contribution, PIS, COFINS and ICMS, and the total contingent liabilities
amounted to R$118 (remaining amount of R$12 refers to labor risks). Amnesty program Law 12.996/2014 amended by
Provisional measure - MP 651, introduced interest reduction benefits and
penalties for anticipated payments of litigations and taxes in installments on
federal debts. The Company understands is reasonable to enroll the Amnesty
program to pay part of its debts, utilizing also part of the deferred income tax
over tax losses carryforward to offset it. There was a reduction of the
provision for risks in the amount of R$296. The gain, net of other negative
effects, in the amout of 23, is shown in note 29. 23.2.Labor The Company is party to several
lawsuits involving disputes with its employees, primarily arising from layoffs
in the ordinary course of business. As of December 31, 2014, the  recorded
a provision of R$524 (R$297 as of December 31, 2013) referring to potential
risks of losses on labor lawsuits. Management, assisted by its legal counsel,
evaluates these claims recording provision for losses when reasonably estimable,
based on experiences in relation to the amounts claimed. Labor claims are
indexed to benchmark interest rate (“TR”) 0.86% as of December 31, 2014 (0.19%
as of December 31, 2013) plus a 1% monthly interest rate.


F-89

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 23.Provision for risks – Continued 23.3.Civil and
other The Company is part in civil
claims, at several court levels (indemnities and collections, among others). The
Company’s management recorded provisions to cover unfavorable court decisions,
supported by evaluation of its internal and external legal advisors when the
likelihood of losses are considered as “probable”. Among these lawsuits, we point out
the following: ·The Company is part in
several lawsuits in which it requests the renewals of lease agreements and the
review of the current amount of lease payment. The Company recognizes a
provision for the difference between the amount originally paid to rent stores
and the amounts pleaded by the adverse party (owner of the property) in the
lawsuit, when internal and external legal advisors evaluated a possibility to
change the lease amount.At December 31, 2014, the amount
accrued for these lawsuits is R$55 (R$43 at December 31, 2013), to which there
are no restricted deposits. ·Via Varejo is party to
lawsuits involving the consumer relations rights (civil actions and assessments
from PROCON (Consumer Protection Agency) and lawsuits involving contracts
terminated with suppliers and the amount referred to in these lawsuits totals
R$86 at December 31, 2014 (R$69 at December 31, 2013).  Total civil actions and other at
December 31, 2014 is R$231 (R$175 at December 31, 2013). 23.4.Other non-accrued
contingent liabilities The Company has other litigations,
which have been analyzed by the legal counsels the related likelihood of losses
were deemed as possible (not probable); therefore, they have not been accrued,
amounting to R$8,552 at December 31, 2014 (R$7,630 at December 31, 2013), and
are mainly related to: ·INSS (Social Security
Tax) – the Company was assessed regarding the non-levy of payroll charges on
benefits granted to its employees, and the likelihood of loss, considered as
possible, corresponds to R$318 at December 31, 2014 (R$283 at December 31,
2013). The proceedings are under administrative and judicial court
discussion. ·IRPJ,
withholding income tax - IRRF, CSLL, tax on financial transactions - IOF,
withholding income tax on net income  ILL, IPI – the Company has several
assessment notices regarding offsetting proceedings, rules on the deductibility
of provisions and payment discrepancies and overpayments; fine due to failure to
comply with ancillary obligation, amongst other less significant taxes. The
claims await administrative and judicial ruling. The amount involved is R$1,368
as of December 31, 2014 (R$1,297 as of December 31, 2013). Among those claims, a specific tax
assessment notice is questioning a difference in the payment of income tax,
allegedly due over goodwill amortization resulting in the transaction between
Abilio Diniz and Casino in relation to years 2007-2011. The amount involved (and
included in the paragraph above) is R$ 692 as of December 31, 2014 (R$ 637 as of
December 31, 2013), classified as possible. There are another part of the same
tax notice classified as remote.


F-90

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 23.Provision for risks – Continued 23.4.Other non-accrued
contingent liabilities – Continued ·Cofins, PIS and provisional contribution on financial
transactions - CPMF – the Company has been challenged about offset Cofins and
PIS against IPI credits submitted to zero rate – raw material with reduced tax
rate or free rate – acquired from third parties with a final decision, other
compensation order, collection of taxes on soybean export operations, tax
payment discrepancies and overpayments; fine due to failure to comply with
ancillary obligation, among other less significant taxes. These proceedings
await decision in the administrative and court level. The amount involved in
these assessments is R$921 as of December 31, 2014 (R$982 as of December 31,
2013). ·ICMS – the Company
received tax assessment notices by the State tax authorities regarding: (i) on
the appropriation of credits on electricity expenses; (ii) acquisitions from
vendors considered to be in arrears/default according to the Internal Revenue
Service of State; (iii) refund of tax replacement without due compliance of
ancillary obligations brought by CAT 17 (accessory obligation) of the State of
São Paulo; (iv) resulting from the sale of extended warranty, (v) financed from
sales; and (viii) among others, not relevant. The total amount of these
assessments is R$5,087 as of December 31, 2014 (R$4,032 as of December 31,
2013), which await a final decision in the administrative and court
levels. ·Municipal service tax -
ISS, Municipal Real Estate Tax (“IPTU”), Property Transfer Tax (“ITBI”) and
other – these are related to assessments on third parties retention, IPTU
payment discrepancies, fines due to failure to comply with ancillary obligations
and sundry taxes, the amount is R$353 as of December 31, 2014 (R$339 as of
December 31, 2013) and await administrative and court decisions. ·Other
litigations–they are related to administrative lawsuits, real estate
lease claims that the Company plead the renewal of leases and setting rents
according to the values prevailing in the market and the claims initiated
against the Company under the civil court scope, special civil court, Consumer
Protection Agency  - PROCON (in many States), Weight and Measure
Institute  - IPEM, National Institute of Metrology, Standardization and
Industrial Quality - INMETRO and National Health Surveillance Agency - ANVISA,
amounting to R$505 as of December 31, 2014 (R$697 as of December 31,
2013). The  Company engages external
attorneys to represent it in the tax assessments received, whose fees are
contingent upon a percentage over the amount on favorable final decision. This
percentage may vary according to qualitative and quantitative factors of each
claim, negotiated individually with external lawyers, and as of December 31,
2014, the estimated amount, in case of success, is approximately R$122 (R$109 as
of December 31,2013).


F-91

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 23.Provision for risks – Continued 23.5.Restricted
deposits from legal proceedings The Company is challenging the
payment of certain taxes, contributions and labor-related obligations and has
made court restricted deposits in the corresponding amounts, as well as
collateral deposits related to tax, civil and labor litigations under court
analysis. The  Company has recorded
restricted deposits in assets. Lawsuits
    2014
    2013Tax
    163
    145Labor
    612
    568Civil and other
    82
    102Total
    857
    815
 23.6.Guarantees given
to support lawsuit discussions Lawsuits
    Real
      estate
    Equipment
    Guarantee
    TotalTax
    843
    -
    6,596
    7,439Labor
    7
    3
    59
    69Civil and other
    10
    1
    1,193
    1,204Total
    860
    4
    7,848
    8,712
 The cost of guarantees is
approximately 0.5% of the involved amount of the lawsuits and is recorded by the
passage of time.  23.7.Tax
audits According to current tax laws,
municipal, federal, state taxes and social security contributions are subject to
auditing in periods varying between 5 and 30 years. In November 2013, Provisional
Measure (MP) 627 was issued, introducing changes in the tax rules and
eliminating the Transitional Tax System (RTT), converted in law 12973 in May
2014. The Company, supported by external advisors, analyzed the provisions
introduced by law 12973/14 and normative instruction from Federal Revenue
Service - IN 1492, the implications of early option exercise and the impacts in
the financial statements for the fiscal year ended December 31, 2014, concluding
that there are no material effects to be recorded.


F-92

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 24.Lease transactions 24.1.Operating
lease (i)Non-cancelable minimum
payments 2014
    2013Up to 1
      year
    18
    181 to 5
      years
    69
    69Over 5 years
    49
    66136
    153
 Refers to non-cancellable rental
agreements on the due date. The operating leasing agreements vary from five to
twenty years and in the table above are presented the non-cancelable agreements.
There are other operating leasing agreements that the Company management
classifies as cancelable, whose expenses are recorded in the statement of income
by the passage of time. The total annual amounting recorded as “noncontingent
payments” related to operating lease agreements is presented in item (iii)
below. (ii)Minimum rental payments
on agreements termination date The Company analyzed and concluded
that the rental agreements are cancelable over their duration. In case of
termination, minimum payments will be due as a termination fee, which can vary
from one to 12 months of rental or a fixed percentage over the remaining
agreement. 12.31.2014
    12.31.2013Minimum rental
      payments:Minimum payment
      on the termination date
    769
    685Total
    769
    685
 (iii)Contingent payments Management considers additional
rental payments as contingent payments, which may vary between 0.5% and 2.5% of
sales. 12.31.2014
    12.31.2013Contingent
      payments recognized as expense in the year
    628
    501Noncontingent
      payments
    916
    686Sublease
      rentals(*)
    (168)
    (164)
 (*) Refers to lease
agreements receivable from commercial shopping malls. (iv)Clauses with renewal or adjustment
option The lease term varies
between five and twenty-five years and the agreements may be renewed according
to Rental Law 12122/10. The agreements are periodically adjusted based on
inflation rates.


F-93

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 24.Lease transactions – Continued 24.2.Finance
leases Finance leases amounted to R$263
as of December 31, 2014 (R$255 as of December 31, 2013), according to the chart
below: 2014
    2013Finance lease
      liability – minimum lease payments:Up to 1
      year
    34
    561 - 5
      years
    133
    143Over 5
      years
    96
    56Present value
      of finance lease agreements
    263
    255Future finance
      charges
    60
    48Gross amount of
      finance lease agreements
    323
    303
  25.Deferred revenue The Company received in advance
amounts from business partners on exclusivity in the intermediation of services
and additional or extended warranties, in addition to advances related to the
rental of backlights for the exhibition of products from its suppliers.  2014
    2013Additional or extended warranties (note
      25.1)
    
    859
    472Bradesco agreement
    
    25
    11Barter agreement
    
    70
    50Investments in media
    
    48
    -Back lights
    
    28
    38Other
    
    18
    -1,048
    571Current
    
    214
    115Noncurrent
    
    834
    456


F-94

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 25.Deferred revenue - Continued 25.1.Agreement
entered into with Zurich Minas Brasil Seguros S.A. (“Zurich”) On August 29, 2014, Via Varejo
entered into new agreements with Zurich for the sale of extended warranty at
Casas Bahia and Ponto Frio stores. These agreements are effective for up to
eight years. On October 1, 2014, the precedent conditions included in the
agreements were concluded.  Via Varejo received R$850 as
up-front fee for sale of warranty insurance, of which R$150 was received in
September 2014 and R$700 in October 2014.  Also in September 2014, the former
extended warranty insurance provider was duly notified of the early termination
of the respective agreements, and Via Varejo agreed to pay R$584 as a result of
the (i) repurchase of the right granted to the former provider to operate its
customer base over the agreement term, properly recognized as intangible assets
(R$187); and (ii) return of the advances made upon the contract execution due to
its early termination (R$397). The amounts were settled on October 1,
2014. 26.Shareholders’ equity 26.1.Share
capital As of December 31, 2014, the
subscribed and paid-in capital is represented by 265,283 thousands (264,453
thousands as of December 31, 2013) of registered shares with no par value, of
which 99,680 thousands of common shares as of December 31, 2014 and 2013 and
165,603 thousands of preferred shares as of December 31, 2014 (164,773 thousand
as of December 31, 2013). The CBD is authorized to increase
its capital stock up to the limit of 400,000 thousands of shares, regardless of
an amendment to the Company’s Bylaws, upon resolution of the Board of Directors,
which will establish the issue conditions. During the year ended December 31,
2014, were approved a captal increase of R$28 through the issuance of 830 (in
thousand of shares) preferred shares. During the year ended December 31,
2013, were approved a captal increase of R$28 through the issuance of 743 (in
thousand of shares) preferred shares, R$38 by capitalizing the special goodwill
reserve without issuing new shares and R$30 by capitalizing the special goodwill
reserve with the of 300 preferred shares. During the year ended December 31,
2012, were approved a captal increase of R$21 through the issuance of 3,171 (in
thousand of shares) preferred shares. 26.2.Share
rights The preferred shares do not have
voting rights, assuring to its owners the following rights and advantages: (i)
priority in the capital reimbursement in case of CBD ́s liquidation, (ii)
priority in the receipt of annual minimum dividend in the noncumulative amount
of R$0.08 per share; (iii) right to receive dividends 10% higher than those
attributable to common shares, including for purposes of calculating the
respective of the preferred dividend amount  paid under the terms in item
(ii) above. When the Company purchases shares
of its own capital (treasury shares), the remuneration paid, including any
directly attributable incremental costs, is deducted from equity, and are
recorded as treasury shares until the shares are cancelled or reissued. When
these shares are subsequently reissued, any remuneration received, net of any
directly attributable incremental transaction costs, is included in equity. No
gain or loss is recognized on the purchase, sale, issue or cancellation of the
Company’s own equity instruments.


F-95

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 26.Shareholders’ Equity – Continued 26.3.Capital reserve –
special goodwill reserve The capital reserve was generated
by the corporate restructuring conducted in 2006 and consisted of merging the
former holding company, resulting in deferred income tax assets savings of
R$103, representing a future tax benefit through the amortization of the merged
goodwill. The portion of the special goodwill reserve corresponding to the
benefit already received will be capitalized at the end of each year to the
benefit of the company ́s owners, with the issuance of new shares. The capital increase is subject to
the preemptive right of noncontrolling shareholders, according to each one's
interest by type and class of share at the time of issue, and the amounts paid
by noncontrolling shareholders will be directly transferred to the Company ́s
owners. The Extraordinary Shareholders’
Meeting of April 17, 2013 approved a capital increase of R$38 through the
capitalization of the special goodwill reserve. Out of this amount, R$8 were
capitalized without issuing new shares and R$30 were capitalized to the benefit
of Wilkes, pursuant to Article 7 of CVM (Brazilian SEC) Rule 319/99. 26.4.Stock options
recognized The line item “Share-based
expenses” is recognized the effects of the Company’s executives’ share-based
payments under technical pronouncement IFRS 2 – Share-based payment. 26.5.Profit
reserve (i)Legal
reserve: recognized by allocating 5% of profit for each year,
limited to 20% of the capital.  (ii)Expansion reserve: recognized by allocating an
amount set up by shareholders to finance additional investments ofproperty
and equipmentand working capital through the allocation of up to 100%
of the income remaining after the allocations required by law, supported by
capital budget, approved at a shareholders’ meeting. 26.6.Stock option plan
for preferred shares The Extraordinary General Meeting
of May 9, 2014 approved: (i) the discontinuation of Stock
Option Plan "Ações com Açúcar" ("Former Stock Option Plan"), approved by the
Extraordinary General Meeting held on December 20, 2006, for new options
granted, without any prejudice to the stock options already granted, which will
remain effective under the same terms and conditions; (ii) the creation of the Stock
Option Plan and its respective standard stock option agreement ("Option Plan");
and (iii) the creation of a Stock
Option Compensation Plan and its respective standard stock option agreement
(“Compensation Plan”). Below is a description of the
stock option plan that was effective in the fiscal year ended December 31, 2013
and the two stock option plans effective in the current fiscal year:


F-96

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 26.Shareholders’ Equity – Continued 26.1.Stock option plan
for preferred shares -- continued Former Stock Option Plan Our Former Stock Option Plan is
managed by a committee appointed by our Board of Directors named Stock Option
Plan Administration Committee ("Stock Option Committee"). This Committee
determined the employees that would periodically be benefited from stock
options, based on their roles, responsibilities and performance, defining the
applicable conditions. Our Stock Option Committee
developed annual stock option granting cycles. Each cycle received a serial
number beginning with the letter A. In the fiscal year ended December 31, 2014,
stock options of Series A5 to A7 under the Former Stock Option Plan were
effective. The stock options granted under
the Former Stock Option Plan were classified into “Silver” and “Gold”, as a
function of their exercise prices. The exercise price for the
Silver-type option corresponded to the average closing price of the CBD
preferred shares recorded in the last 20 BM&FBOVESPA trading sessions prior
to the date on which the Stock Option Committee resolved to grant the stock
option. After determining such average price, a 20% discount was applied. The
price for the Gold-type option corresponded to R$0.01. In both cases, the prices
will not be adjusted. The Stock Option Committee
approved in 2013 new criteria to calculate the reduction and/or increase index
of the number of stock options granted classified as “Gold” in each series of
the Former Stock Option Plan, according to the analysis of the compliance with
the return on invested capital (ROIC) concept. According to item 3.3 of the
former Stock Option Plan, the Stock Option Committee decided that, from series
A6 on, inclusive, the reduction or increase in the number of stock options
classified as “Gold” would be calculated based on the fact that the CBD met the
Return on Capital Employed (ROCE). There is no limit for a reduction
or acceleration under the new criteria approved. Upon the stock option vesting,
the average ROIC/ROCE of the last three fiscal years will be calculated,
compared to the ROIC/ROCE calculated upon granting of each series. As a general rule of the Stock
Option Plan, which could be changed by the Stock Option Committee in each
series, the stock option vesting right will be granted beginning the
36th and up to the 48th month, as of the signature date of
the respective adhesion agreement whereby the beneficiary will be entitled to
acquire 100% of the shares whose option was classified as “Silver”. The exercise
of stock options classified as “Gold” will occur in the same period, but the
percentage of these options subject to exercise will be determined by the Stock
Option Committee in the 35th month as of the date of signature of the
respective adhesion agreement. The stock options granted under
the Former Stock Option Plan may be exercised in whole or in part.  "Gold"
options are additional to "Silver" and, thus, "Gold" options may only be
exercised jointly with "Silver" options. The exercise price of the options
granted under the Former Stock Option Plan shall be fully paid in local currency
by the beneficiary in a lump sum which shall fall due 30 days after the
respective shares’ subscription date.


F-97

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 26.Shareholders’ Equity – Continued 26.1.Stock option plan
for preferred shares -- continued Compensation Plan The Compensation Plan will be
managed by the Company ́s Board of Directors, which established the Company ́s
Human Resources and Compensation Committee to advise it in the administration of
the Compensation Plan (the "Committee"). The Committee members will meet
for granting of the stock option grant of the Option Plan series and, where
necessary, to decide on matters related to the Stock Option Plan. Each series of
the stock options granted will receive the letter "C" followed by a number. In
the fiscal year ended December 31, 2014, stock options granted of C1 Series of
the Stock Option Plan. For each series of stock options
granted under the Stock Option Remuneration Plan, the exercise price of each
stock option shall be equivalent to 80% of the average closing price of
the  Company's preferred shares in the last twenty (20) BM&FBOVESPA’s
trading sessions prior to the date of call to the Committee meeting that decides
on the granting of the stock options of that series ("Exercise Price"). The stock options granted to a
Participant may be exercised for a period of 36 (thirty-six) months from the
granting date ("Grace Period") and may only be exercised in the period beginning
on the first day of the 37th (thirty-seventh) month as from the
granting date and ending on the last day of the 42nd (forty-second)
month as of the granting date ("Exercise Period"). A participant may exercise his/her
options fully or partially, in one or more times, as long as,  for each
year, he/she submits the corresponding Stock Option Exercise Agreement during
the Exercise Period. The exercise price of the options
shall be paid in full, in local currency, through a check or a wire transfer
available to the bank account held by the Company, on the tenth
(10th) day preceding the date of acquisition of the
shares. The Participant will not be
allowed for a period of 180 (one hundred and eighty) days as of the date of
acquisition of the shares, directly or indirectly, to sell, assign, exchange,
dispose of, transfer, grant stock options or  take actions or enter into
agreements that results or may result in the sale, directly or indirectly,
costly or free of charge, of all or any of the shares acquired through the
exercise of the stock option under the Compensation Plan.


F-98

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 26.Shareholders’ Equity – Continued 26.1.Stock option plan
for preferred shares -- continued Stock Option Plan The Stock Option Plan will be
managed by the Company ́s Board of Directors, which established the Company ́s
Human Resources and Compensation Committee to advise it in the administration of
the Stock Option Plan (the "Committee"). The Committee members will meet
for granting of the stock option grant of the Stock Option Plan series and,
where necessary, to decide on matters related to the Stock Option Plan. Each
series of the stock options granted will receive the letter "C" followed by a
number. In the fiscal year ended December 31, 2014, stock options granted of C1
Series was effective. The exercise price of each option corresponded to
R$0.01. The stock options granted to a
Participant may be exercised for a period of 36 (thirty-six) months from the
granting date ("Grace Period") and may only be exercised in the period beginning
on the first day of the 37th (thirty-seventh) month as from the
granting date and ending on the last day of the 42nd (forty-second)
month as of the granting date ("Exercise Period"). A participant may exercise his/her
options fully or partially, in one or more times, as long as,  for each
year, he/she submits the corresponding Stock Option Exercise Agreement during
the Exercise Period. The exercise price of the options
shall be paid in full, in local currency, through a check or a wire transfer
available to the bank account held by the Company, on the tenth
(10th) day preceding the date of acquisition of the
shares. The Company will withhold at
source any taxes applicable to stock option granting under the Brazilian tax
legislation. Accordingly, the Company will deduct from the number of shares the
amount equivalent to taxes withheld.


F-99

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 26.Shareholders’ Equity – Continued 26.6.Stock option plan
for preferred shares - continued Information on the Former Stock
Option Plan, Stock Option Plan, and Stock Option Remuneration Plan is summarized
below: Price
    Lot of
      sharesSeries granted
    Grant
      date
    1st date of
      exercise
    2nd date of
      exercise and expiration
    On the grant
      date
    End of the
      year
    Number of shares
      granted(in thousands
    Exercised
    Not exercised by
      dismissal
    Total in
      effectBalance at December 31, 2013Series A4 – Gold
    5/24/2010
    5/31/2013
    5/31/2014
    0.01
    0.01
    514
    (512)
    (2)
    -Series A4 - Silver
    5/24/2010
    5/31/2013
    5/31/2014
    46.49
    46.49
    182
    (181)
    (1)
    -Series A5 – Gold
    5/31/2011
    5/31/2014
    5/31/2015
    0.01
    0.01
    299
    (140)
    (14)
    145Series A5 - Silver
    5/31/2011
    5/31/2014
    5/31/2015
    54.69
    54.69
    299
    (140)
    (14)
    145Series A6 – Gold
    3/15/2012
    3/31/2015
    3/31/2016
    0.01
    0.01
    526
    (171)
    (25)
    330Series A6 - Silver
    3/15/2012
    3/31/2015
    3/31/2016
    64.13
    64.13
    526
    (171)
    (25)
    330Series A7 – Gold
    3/15/2013
    3/31/2016
    3/31/2017
    0.01
    0.01
    358
    (26)
    (16)
    315Series A7 - Silver
    3/15/2013
    3/31/2016
    3/31/2017
    80
    80
    358
    (26)
    (16)
    3153,062
    (1,367)
    (113)
    1,580
  Price
    Lot of
      sharesSeries granted
    Grant date
    1st date of exercise
    2nddate of exercise and
expiration
    On the grant
      date
    End of the
      year
    Number of
      shares granted(in thousands
    Exercised
    Not exercised by dismissal
    Total in
      effectBalance at December 31,
      2014Series A4 - Gold
    5/24/2010
    5/31/2013
    5/31/2014
    0.01
    0.01
    514
    (512)
    (2)
    -Series A4 - Silver
    5/24/2010
    5/31/2013
    5/31/2014
    46.49
    46.49
    182
    (181)
    (1)
    -Series A5 - Gold
    5/31/2011
    5/31/2014
    5/31/2015
    0.01
    0.01
    299
    (282)
    (14)
    3Series A5 - Silver
    5/31/2011
    5/31/2014
    5/31/2015
    54.69
    54.69
    299
    (282)
    (14)
    3Series A6 - Gold
    3/15/2012
    3/31/2015
    3/31/2016
    0.01
    0.01
    526
    (329)
    (32)
    165Series A6 - Silver
    3/15/2012
    3/31/2015
    3/31/2016
    64.13
    64.13
    526
    (329)
    (32)
    165Series A7 - Gold
    3/15/2013
    3/31/2016
    3/31/2017
    0.01
    0.01
    358
    (137)
    (27)
    194Series A7 - Silver
    3/15/2013
    3/31/2016
    3/31/2017
    80
    80
    358
    (137)
    (27)
    194Series B1
    5/30/2014
    5/30/2017
    11/30/2017
    0.01
    0.01
    239
    (5)
    (32)
    202Series C1
    5/30/2014
    5/30/2017
    11/30/2017
    83.22
    83.22
    239
    (6)
    (31)
    2023,540
    (2,200)
    (212)
    1,128
  As provided for in the Former
Stock Option Plan, on April 30, 2014 the Stock Option Committee approved that
there was no reduction and/or acceleration relating to Series A5. As of December 31, 2014 there were
232,586 preferred shares held in treasury, which might be used to back the stock
options granted under the Plan. The value of the Company ́s preferred share at
BM&FBovespa was R$97.81 per share.


F-100

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 26.Equity – Continued 26.6.Share-based
payment plans – Continued Below is the maximum percentage of
dilution to which current shareholders will be subject in case the stock options
granted are exercised up to 2014: 12.31.2014
    12.31.2013Number of shares
    265,283
    264,453Balance of effective stock options
    granted
    1,128
    1,580Maximum percentage of dilution
    0,43%
    0,60%
 The fair value of each stock
option granted is estimated on the granting date using the Black&Scholes
pricing model, taking into account the following assumptions for series B1 and
C1: (a) expected dividends of 0.96%, (b) expected volatility of approximately
22.09%, and (c) the risk-free weighted average interest rate of 11.70%. The
expected remaining average life of the series outstanding at December 31, 2014
was 1.52 year (1.46 year as of December 31, 2013). The weighted average fair
value of options granted at December 31, 2014 was R$69.71 (R$62.59 as of
December 31, 2013). Shares
    Weighted average
      of exercise price
    Weighted average
      of remaining contractual term
    Intrinsic value
      addedAt December 31, 2013Outstanding at
      the beginning of the year
    1,658
    26.40Granted during the
      year
    716
    40.02Cancelled during the
      year
    (51)
    36.43Exercised during the
      year
    (743)
    21.86Outstanding at the end of the
      year
    1,580
    34.39
    1.46
    112,091Total to be exercised at
      December 31, 2013
    1,580
    34.39
    1.46
    112,091At December 31, 2014Granted during the
      year
    477
    41.61Cancelled during the
      year
    (99)
    39.92Exercised during the
      year
    (830)
    33.33Expired during the yearOutstanding at the end of the year
    1,128
    38.16
    1.52
    66,905Total to be exercised at
      December 31, 2014
    1,128
    38.16
    1.52
    66,905
 As of December 31, 2014, there
were options to be exercised for Series A5. The amounts recorded in the income
statement, Parent and consolidated, as of December 31, 2014 were R$37 (R$43 at
December 31, 2013). 26.7.Accumulated other
comprehensive income Refers to: (i) the exchange rate
changes corresponds to the cumulative effect of exchange gains and losses on the
translation of assets, liabilities and profit (loss) in Brazilian reais,
corresponding to the consolidation of CDiscount operations; (ii) the effect of
actuarial gains or losses on defined benefit plans mentioned in note
33.1.


F-101

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 26.Equity – Continued 26.8.Dividends The Annual and Extraordinary
Shareholders’ Meeting (AGOE) of April 16, 2014 approved the payment of dividends
for the year ended December 31, 2013, in the amount of R$250, which includes
interim dividends already declared, in the amount of R$99, which was the amount
paid on June 13,2014. This amount corresponds to R$0.888957268 per common share
and R$0.977852995 per preferred share. The Board of Directors’ meeting of
April 24, 2014 approved the distribution of interim dividends in the amount of
R$36, R$0.14 per preferred share and R$0.127270 per common share. All
outstanding shares were entitled to dividends as of May 5, 2014. Beginning May
6, 2014, all shares were negotiated ‘ex-rights’ to dividends up to the date
these dividends were paid, on May 15,2014. The Board of Directors’ meeting of
July 22, 2014 approved the distribution of interim dividends in the amount of
R$36, R$0.14 per preferred share and R$0.127270 per common share. All
outstanding shares were entitled to dividends as of August 1, 2014. Beginning
August 4, 2014, all shares were negotiated ‘ex-rights’ to dividends up to the
date these dividends were paid, on August 13,2014. The Board of Directors’ meeting of
October 30, 2014 approved the distribution of interim dividends in the amount of
R$36, R$0.14 per preferred share and R$0.127270 per common share. All
outstanding shares were entitled to dividends as of November 10, 2014. Beginning
November 11, 2014, all shares were negotiated ‘ex-rights’ to dividends up to the
date these dividends were paid, on November 21,2014. Management proposed dividend
distribution calculated as shown below, considering interim dividends paid to
shareholders in the amount R$108, as mentioned above, in 2014. The dividend
payable on December 31, 2014 is R$194 (R$151 as of December 31, 2013), which
corresponds to a remuneration of R$0.6890176962 per common shares and
R$0.7579194658 per preferred shares.  Dividends proposed2014
    
    2013Profit for the
      year
    1,270
    
    1,052Legal
      reserve
    (63)
    
    (52)Calculation basis of
      dividends
    1,207
    
    1,000Mandatory minimum dividends –
      25%
    302
    
    250Payment of interim
      dividends
    (108)
    
    (99)Dividends
      payable
    194
    
    151
  Additionally, there are balances
of dividends payable in the amount of R$126 attributable to Via Varejo’s
noncontrolling interests.


F-102

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial statements December 31, 2014, 2013 and 2012 (In millions of Brazilian reais, except when otherwise stated)
 26.Equity –Continued 26.9.Transactions with noncontrolling shareholders In 2014, the amounts recorded directly in the statement of changes in shareholders’ equity, in line item Transactions with noncontrolling shareholders, in the amounts of R$(28) (Parent) and R$24 (noncontrolling interest), refers to:  Description

   

   Parent company

   

   Non-controlling interests

   

   ConsolidatedCorporate restructuring of C-Asia (note 1.4 (iv))

   (15)

   

   (21)

   

   (36)E-commerce segment corporate restructuring (note 1.4 (ii))

   

   (7)

   

   46

   

   39Others non-controlling transaction

   

   (6)

   

   (1)

   

   (7)(28)

   

   24

   

   (4)
  (iv)  Other effects of e-commerce corporate restructuring:  In 2013,the changes in equity related to the portion of noncontrolling shareholders refers, in addition to the results of the year, to amounts related to transactions with noncontrolling shareholders which represented an increase their interest in equity of controlled entity. Among the main transactions, we outline: (i) Secondary shares offering of Via Varejo; and (ii) interest acquisition of Nova Pontocom.   Description

   

   Parent company

   

   Non-controlling interests

   

   ConsolidatedPublic shares offering Via Varejo (note 1.5)Cash obtained

   

   897

   

   -

   

   897Investment costs and transactions costs

   

   (563)

   

   473

   

   (89)Deferred tax on capital gain

   

   (135)

   

   -

   

   (135)Equity net effects

   

   199

   

   473

   

   673Interest acquisition NPC (note 1.4 (i))

   

   (73)

   

   24

   

   (50)Capital transactions effects

   

   126

   

   497

   

   623


F-103

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 26.Equity –Continued  26.15Subsidiaries stock
option plans (i)Plans - Cdiscount Deferred stock – Plan of 1,319,999
stocks granted on November 19, 2014, which right of the beneficiaries was fully
vested at the grant date, however, awards it will be delivered with no cost
after 4 years. The expense for this plan was recognized immediately in the
income statement of R$19.  Stock Appreciation Right Awards –
Plan of 4,746,907 shares granted on November 19, 2014, which vesting will happen
in 4 years upon according with the time in the Company. The exercise price will
be settled for a gross amount in cash equal to the excess (if any) of (a) the
lesser of the closing price of an ordinary share on NASDAQ on the vesting date
and 220% of the IPO price over (b) 120% of the IPO price. (ii)Plans –
Via Varejo  Via Varejo has a remuneration plan
and a stock option plan, with rules similar to the Company ́s Plan. Plans vesting
are in 36 months, for the remuneration plan the exercise price is R$0.01, and
for the stock option plan the average of the latest 20 market quotes, or
R$19.98. The expense accumulated in the year is R$4 with 476,578 shares granted
in the remuneration plan and 476,387 shares granted in stock option
plan.


F-104

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 27.Net operating
revenue 2014
    2013
    2012(Reclassified)
    (Reclassified)Gross salesGoods
    
    71,624
    63,907
    56,809Rendering of services
    
    1,737
    1,306
    1,271Barter revenue
    
    -
    -
    153Financial services
    
    1,419
    1,212
    898Sales return and cancellations
    
    (1,977)
    (1,884)
    (1,783)72,803
    64,541
    57,348Taxes
    
    (7,278)
    (6,687)
    (6,332)-Net operating revanue
    
    65,525
    57,854
    51,016
 28.Expenses by nature 2014
    2013
    2012(Reclassified)
    (Reclassified)Cost of sales
    
    (48,580)
    (42,750)
    (37,210)Personnel expenses
    
    (5,593)
    (5,095)
    (4,702)Outsourced services
    
    (2,959)
    (2,789)
    (2,858)Functional expenses
    
    (1,511)
    (1,458)
    (1,383)Selling expenses
    
    (978)
    (660)
    (644)Other expenses
    
    (746)
    (740)
    (577)(60,367)
    (53,492)
    (47,374)Cost of goods sold
    
    (48,580)
    (42,750)
    (37,210)Selling expenses
    
    (10,303)
    (9,257)
    (8,410)General and administrative expenses
    
    (1,484)
    (1,485)
    (1,754)(60,367)
    (53,492)
    (47,374)


F-105

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 29.Other operating expenses, net 2014
    2013
    2012Provision for legal claims(a)
    
    (151)
    (392)
    -Indemnified liability Via Varejo and CB and
      association costs (b)
    
    (101)
    (147)
    (18)Expenses of Cnova's IPO (c)
    
    (39)
    -Business combination Bartira (note 14
    b)
    
    -
    71Federal tax payable in installments
    
    23
    -Integration/restructuring expenses (d)
    
    (114)
    (105)
    (32)Loss (gain) on disposal of property and equipment
      and subsidiary (e)
    
    (58)
    (45)
    12Other
    
    (1)
    (55)
    5(441)
    (673)
    (33)
 a)In 2014,
due to the recent decision of the Supreme Court on the subject of ICMS on” basic
consumer products basket”, the Company's management, based on legal opinion of
its internal and external legal counsels, recorded the provision about the
matter the consolidated financial statements (see note 23). In 2013, the amount for
expenses relates to the provision for risk on Finsocial, PIS and COFINS, the
evaluation of management, supported by our legal counsel has become probable
loss during the year, revision of labor risks and related restricted
deposits. b)In 2014,
expenses incurred related to risks amounts referring to prior periods of the
association with CB. In 2013 the amount is
comprised by: i) Expenses related to external consultants concluded on October
2013 amounting R$69, including: Expenses of R$58 referring to association
expenses until June 30, 2013, R$55 referring to receivable write-off that were
deemed as uncollectible and not subject of reimbursement by the parties; gain of
R$57 referring to receivables considered, until now, as contingent assets; and
other expenses of R$8; and ii) Expenses of R$78 of indemnity effects to Via
Varejo and CB; c)Refers to
expenditures incurred related to concurring efforts for the IPO process of
subsidiary Cnova, considered as non directly attributable to the transactions
cost  of this transaction; d)Related to
severance costs to Group ́s executives and employees, which lay off was informed
or done during 2013 and 2014, and represent an important change in the
departments’ structure. e)Sale of subsidiary -
CBCC On December 30, 2014,
Via Varejo sold its shares on CBCC to Atento Brasil S.A. After the fulfillment
of all preceding conditions within the shares purchase agreement, Via Varejo
received R$20, resulting in a net gain of R$16 in other operating revenue. As a
consequence of the transfer of control, CBCC was deconsolidated on December 31,
2014 in the balance sheet and cash flow.


F-106

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 30.Finance income (expenses), net 2014
    2013
    2012Finance
    expenses:Cost of debt
    
    (687)
    (600)
    (908)Cost of sales of
      receivables
    
    (1,110)
    (895)
    (524)Liability monetary
      restatement
    
    (237)
    (238)
    (268)Other finance
    costs
    
    (161)
    (103)
    (87)Total finance
    cost
    
    (2,195)
    (1,836)
    (1,786)Finance income:Income on cash and cash
      equivalents
    
    417
    375
    358Assets monetary
      restatement
    
    247
    256
    217Other finance
      income
    
    23
    12
    18Total finance
      income
    
    687
    643
    593Total
    
    (1,508)
    (1,193)
    (1,193)
 The hedge effects in 2014 and 2013
are disclosed in note 19. 31.Earnings per share 2014
    
    2013
    
    2012Preferred
    Common
    Total
    
    Preferred
    Common
    Total
    
    Preferred
    Common
    TotalBasic numeratorBasic earnings allocated
    -
    -
    -
    
    161
    89
    250
    
    161
    89
    250Profit allocated to common and preferred
      shareholders
    820
    450
    1,270
    
    517
    285
    802
    
    514
    286
    802820
    450
    1,270
    
    678
    374
    1,052
    
    675
    375
    1,052Basic denominator (thousands of
      shares)Weighted average of shares
    165
    100
    265
    
    164
    100
    264
    
    162
    100
    262Basic earnings per thousands of shares
      (R$)
    4.96661
    4.51445
    
    
    4.12670
    3.75201
    
    
    4.15429
    3.77663Diluted numeratorProfit allocated to common and preferred
      shareholders
    820
    450
    1,270
    
    678
    374
    1,052
    
    675
    375
    1,052820
    450
    1,270
    
    678
    374
    1,052
    
    675
    375
    1,052Diluted denominatorWeighted average of shares (in
      thousands)
    165
    100
    265
    
    164
    100
    264
    
    162
    100
    262Stock call option
    -
    -
    -
    
    1
    -
    1
    
    1
    -
    1Diluted weighted average of shares (in
      thousands)
    165
    100
    265
    
    165
    100
    265
    
    163
    100
    263Diluted earnings per thousands of shares
      (R$)
    4.95197
    4.51276
    
    
    4.11039
    3.75092
    
    
    4.12057
    3.77663
 Stock options issued
by subsidiary CNova were not considered in the diluted earnings per share since
their effects are antidilutive.


F-107

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 32.Benefit plans 32.1.Pension
plan In France, an industry-specific
agreement between employers and employees determines the payment of allowances
to employees at the date of retirement depending on the years of service
rendered and their salary at the age of retirement.  Main assumptions used in
determining total obligations related to defined benefit
plans:  Cdiscount2014Discount
      rate
    2.20%Expected rate of future
      salary increase
    2.50%Retirement
      age
    64
  The discount rate is determined by
reference to the Bloomberg 15-year AA corporate composite index.  Reconciliation of liabilities in
the balance sheet Cdiscount2014At August 1, 2014
    5Cost for the
      period
    -Actuarial gain or loss
      recognized in equity
    2At December 31,
      2014
    7
 32.2.Defined contribution
private pension plan  In July 2007, the Company
established a supplementary defined contribution private pension plan on behalf
of its employees to be managed by the financial institutionBrasilPrev
Seguros e Previdência S.A.The Company pays monthly contributions on behalf of its
employees, and the amount paid referring to the period ended December 31, 2014
is R$3 (R$4 as of December 31, 2013), and employees contributionsare
R$7(R$5as
of December 31, 2013); the plan had 921 participants as of December 31, 2014
(R$1,012 as of December 31, 2013). 33.Insurance coverage The insurance coverage as of
December 31, 2014 is summarized as follows: ConsolidatedInsured assets
    Covered
      risks
    Amount
      insuredProperty, plant
      and equipment and inventories
    Determined risks
    22,096Profit
    Loss of profits
    8,628Cars and other
      (*)
    Damages
    620
 The  Company maintains
specific policies referring to civil liability and directors and officers
liability, amounting to R$334.


F-108

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 34.Segment information Management considers the following
segments: ·Retail – includes the
trade names “Pão de Açúcar”, “Minuto Pão de Açúcar”, “Extra Hiper”, “Extra
Supermercado”, “Mini-mercado Extra”, “Posto Extra”, “Drogaria Extra” and “GPA
Malls & Properties”. ·Home appliances –
includes the brands “Ponto Frio” and “Casas Bahia”. ·Cash & Carry –
includes the brand “ASSAÍ”. ·E-commerce includes the
“sites” www.pontofrio.com.br; www.extra.com.br; www.casasbahia.com.br;
www.barateiro.com.br, www.partiuviagens.com.br and
www.cdiscount.com.br Management monitors the operating
results of its business units separately making decisions about resource
allocation and performance assessment. Segment performance is evaluated based on
operating income and is measured consistently with operating income in the
consolidation financial statements, Company financing (including finance
expenses and finance income) and the income taxes are managed on a segment
basis. The Company is engaged in
operations of retail stores located in 19 states and the Federal District of
Brazil. Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker who has been identified
as the Chief Executive Officer. The chief operating decision-maker
allocates resources and assesses performance by reviewing results and other
information related to four segments. The Company deems irrelevant the
disclosure of information on sales per product category, given that similar
products are sold based on each business’ strategies and each segment has its
own management controls. Thus, adding any product for disclosure is practically
impossible. The Company measures the results
of segments using IFRS, among other measures, each segment’s operating profit,
which includes certain corporate overhead allocations, At times, the Company
reviews the measurement of each segment’s operating profit, including any
corporate overhead allocations, as dictated by the information regularly
reviewed by the chief operating decision-maker, when revisions are made, the
operating results of each segment affected by the revisions are restated for all
years presented to maintain comparability, Information about the segments is
included in the following table:


F-109

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 34.Segment information – Continued Description
    Retail
      Food
    Cash & Carry
    
    Home appliances
    
    E-commerce
    
    Total
    
    Eliminations(*)
    
    Total2014
    2013
    
    2014
    2013
    
    2014
    2013
    
    2014
    2013
    
    2014
    2013
    
    2014
    2013
    
    2014
    2013Net operating revenue
    26,415
    25,538
    
    8,326
    6,273
    
    22,674
    21,746
    
    8,175
    4,297
    
    65,590
    57,854
    
    (65)
    -
    
    65,525
    57,854Gross profit
    7,549
    7,107
    
    1,208
    914
    
    7,355
    6,690
    
    845
    393
    
    16,957
    15,104
    
    (12)
    -
    
    16,945
    15,104Depreciation and amortization
    (552)
    (594)
    
    (78)
    (56)
    
    (139)
    (130)
    
    (52)
    (7)
    
    (821)
    (787)
    
    -
    -
    
    (821)
    (787)Operating income
    1,478
    999
    
    233
    194
    
    2,091
    1,612
    
    94
    97
    
    3,896
    2,902
    
    
    
    
    3,896
    2,902Share of profit of associates
    79
    33
    
    -
    -
    
    32
    14
    
    (3)
    -
    
    108
    47
    
    -
    -
    
    108
    47Finance costs
    (887)
    (852)
    
    (71)
    (46)
    
    (1,035)
    (815)
    
    (249)
    (155)
    
    (2,242)
    (1,868)
    
    47
    32
    
    (2,195)
    (1,836)Finance income
    335
    375
    
    20
    23
    
    356
    264
    
    23
    13
    
    734
    675
    
    (47)
    (32)
    
    687
    643Profit before income tax and social contribution
    1,005
    555
    
    182
    171
    
    1,444
    1,075
    
    (135)
    (45)
    
    2,496
    1,756
    
    -
    -
    
    2,496
    1,756Income tax and social contribution
    (253)
    (14)
    
    (62)
    (59)
    
    (475)
    (304)
    
    54
    17
    
    (736)
    (360)
    
    -
    -
    
    (736)
    (360)Net income for the year
    752
    541
    
    120
    112
    
    969
    771
    
    (81)
    (28)
    
    1,760
    1,396
    
    -
    -
    
    1,760
    1,396-Current assets
    8,062
    7,088
    
    1,709
    1,359
    
    10,366
    8,753
    
    4,092
    1,412
    
    24,229
    18,612
    
    (96)
    (3)
    
    24,133
    18,609Noncurrent assets
    13,691
    12,717
    
    1,492
    2,457
    
    5,283
    4,376
    
    1,506
    550
    
    21,972
    20,100
    
    (605)
    (702)
    
    21,367
    19,398Current liabilities
    8,026
    5,380
    
    1,832
    2,604
    
    9,716
    7,830
    
    4,973
    1,901
    
    24,547
    17,715
    
    (699)
    (705)
    
    23,848
    17,010Noncurrent liabilities
    5,314
    6,300
    
    235
    279
    
    1,571
    1,699
    
    52
    7
    
    7,172
    8,285
    
    (2)
    -
    
    7,170
    8,285Equity
    8,413
    8,125
    
    1,134
    933
    
    4,362
    3,600
    
    573
    54
    
    14,482
    12,712
    
    -
    -
    
    14,482
    12,712
 (*)   The
eliminations consist of intercompany balances.


F-110

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
 34.Segment information –Continued Description
    Retail Food
    
    Cash &
      Carry
    
    Home appliances
    
    E-commerce
    
    Total
    
    Eliminations(*)
    
    Total2012
    
    2012
    
    2012
    
    2012
    
    2012
    
    2012
    
    2012Net operating revenue
    23,530
    4,639
    
    19,438
    
    3,409
    
    51,016
    
    -
    
    51,016Gross profit
    6,790
    675
    
    5,858
    
    483
    
    13,806
    
    -
    
    13,806Depreciation and amortization
    (552)
    (44)
    
    (153)
    
    (2)
    
    (751)
    
    -
    
    (751)Operating income
    1,498
    145
    
    1,107
    
    108
    
    2,858
    
    -
    
    2,858Share of profit of associates
    11
    -
    
    -
    
    -
    
    11
    
    -
    
    11Finance costs
    (872)
    (90)
    
    (745)
    
    (113)
    
    (1,820)
    
    34
    
    (1,786)Finance income
    422
    24
    
    171
    
    10
    
    627
    
    (34)
    
    593Profit before income tax and social contribution
    1,059
    79
    
    533
    
    5
    
    1,676
    
    -
    
    1,676Income tax and social contribution
    (287)
    (18)
    
    (213)
    
    (2)
    
    (520)
    
    -
    
    (520)Net income for the year
    772
    61
    
    320
    
    3
    
    1,156
    
    -
    
    1,156Current assets
    8,031
    899
    
    7,651
    
    862
    
    17,443
    
    (192)
    
    17,251Noncurrent assets
    12,377
    2,435
    
    3,234
    
    336
    
    18,382
    
    (236)
    
    18,146Current liabilities
    4,869
    2,075
    
    6,324
    
    1,115
    
    14,383
    
    (428)
    
    13,955Noncurrent liabilities
    8,337
    388
    
    1,648
    
    -
    
    10,373
    
    -
    
    10,373Equity
    7,202
    871
    
    2,913
    
    83
    
    11,069
    
    -
    
    11,069


F-111

---



Companhia Brasileira de Distribuição  Notes to the consolidated financial
statements December 31, 2014, 2013 and
2012 (In millions of Brazilian reais,
except when otherwise stated)
  34.Segment information –Continued  Brazil
    InternationalDescription
    Retail
      Food
    
    Cash &
      Carry
    
    Home
      appliances
    
    E-commerce
    
    E-commerce
    
    Total
    
    Eliminations
      (*)
    
    Total2014
    2013
    
    2014
    2013
    
    2014
    2013
    
    2014
    2013
    
    2014
    
    2014
    2013
    
    2014
    2013
    
    2014
    2013Net operating
      revenue
    26,415
    25,538
    
    8,326
    6,273
    
    22,674
    21,746
    
    5,747
    4,297
    
    2,428
    
    65,590
    57,854
    
    (65)
    -
    
    65,525
    57,854Current
      assets
    8,062
    7,088
    
    1,709
    1,359
    
    10,366
    8,753
    
    1,742
    1,412
    
    2,350
    
    24,229
    18,612
    
    (96)
    (3)
    
    24,133
    18,609Noncurrent
      assets
    13,691
    12,717
    
    1,492
    2,457
    
    5,283
    4,376
    
    851
    550
    
    655
    
    21,972
    20,100
    
    (605)
    (702)
    
    21,367
    19,398Current
      liabilities
    8,026
    5,380
    
    1,832
    2,604
    
    9,716
    7,830
    
    2,475
    1,901
    
    2,498
    
    24,547
    17,715
    
    (699)
    (705)
    
    23,848
    17,010Noncurrent
      liabilities
    5,314
    6,300
    
    235
    279
    
    1,571
    1,699
    
    17
    7
    
    35
    
    7,172
    8,285
    
    (2)
    -
    
    7,170
    8,285Equity
    8,413
    8,125
    
    1,134
    933
    
    4,362
    3,600
    
    101
    54
    
    472
    
    14,482
    12,712
    
    -
    -
    
    14,482
    12,712
   Brazil
    
    InternationalDescription
    Retail
    
    Cash &
      Carry
    
    Home appliances
    
    E-commerce
    
    E-commerce
    
    Total
    
    Eliminations(*)
    
    Total2012
    
    2012
    
    2012
    
    2012
    
    2012
    
    2012
    
    2012
    
    2012Net operating revenue
    53,530
    
    4,639
    
    19,438
    
    3,409
    
    -
    
    51,016
    
    -
    
    51,016Current assets
    8,031
    
    899
    
    7,651
    
    862
    
    -
    
    17,443
    
    (192)
    
    17,251Noncurrent assets
    12,377
    
    2,435
    
    3,234
    
    336
    
    -
    
    18,382
    
    (236)
    
    18,146Current liabilities
    4,869
    
    2,075
    
    6,324
    
    1,115
    
    -
    
    14,383
    
    (428)
    
    13,955Noncurrent liabilities
    8,337
    
    388
    
    1,648
    
    -
    
    -
    
    10,373
    
    -
    
    10,373Equity
    7,202
    
    871
    
    2,914
    
    82
    
    -
    
    11,069
    
    -
    
    11,069


F-112

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Companhia Brasileira de Distribuição  Notes to the consolidated financial statements December 31, 2014, 2013 and 2012 (In millions of Brazilian reais, except when otherwise stated)
 34.Segment information –Continued Company general information The Company operate primarily as a retailer of food, clothing, home appliances and other products. Total revenues are composed of the following types of products: 2014

   2013Food

   53.0%

   55.0%Nonfood

   47.0%

   45.0%Total sales

   100.0%

   100.0%
  As of December 31, 2014, capital expenditures were as follows: 2014

   2013Food

   1,110

   1,447Nonfood

   786

   402Total capital expenditures

   1,896

   1,849
  35.Events after the reporting period 35.1.Secondary listing on Euronext Paris On January 21, 2015, Cnova announced that obtained all approvals necessary from the Netherlands Authorities for Financial Markets (the “AFM”) and from Euronext Paris and was granted access to its listing prospectus by the AFM and the French Autorité des Marchés Financiers for a secondary listing of its common shares on the regulated market (marché réglementé) of Euronext Paris.  The Company did not issue or offer any new shares as a result of this listing. 35.2.Expansion reserve On April 24, 2015, the shareholders approved the retention of a portion of the net income of the year in the total amount of R$904, which R$814 as expansion reserve and R$90 based on the capital budget. 35.3.Dividends The Annual and Special Shareholders’ Meeting (AGOE) held on April 24, 2015 approved the payment of dividends for the fiscal year ended December 31, 2014, totaling R$302, including dividends in advance already distributed, corresponding to R$1,070505415 per one common share and R$1,177555957 per one preferred share. The dividends payable outstanding balance in the amount of R$194 (see note 26.8) wil be paid within 60 days after the AGOE’s date andl correspond to R$0.6889912644 per one common share and R$0.7578903909 per one preferred share. All the shares shall be entitled to dividends on April 24, 2015 base date. As of April 25, 2015, the shares shall be negotiated “ex-rights” to dividends.




F-113

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