Business Report of the Mercator Group and the company Poslovni sistem Mercator, d.d., for the period

Transcription

1 Business Report of the Mercator Group and the company Poslovni sistem Mercator, d.d., for the period Poslovni sistem Mercator, d.d. Management Board August 2012

2 Table of contents SUMMARY... 1 INTRODUCTION... 3 MERCATOR GROUP PROFILE... 3 MERCATOR GROUP BUSINESS STRATEGY... 6 MAJOR EVENTS IN THE PERIOD MERCATOR GROUP PERFORMANCE HIGHLIGHTS IN THE PERIOD BUSINESS REPORT... 9 EFFECT OF ECONOMIC CONDITIONS AND COMPETITION ON MERCATOR GROUP OPERATIONS IN THE PERIOD DEVELOPMENT AND REAL ESTATE MANAGEMENT SALES AND MARKETING COUNTER-CRISIS MEASURES FINANCIAL MANAGEMENT MERCATOR SHARE AND INVESTOR RELATIONS RISK MANAGEMENT SUSTAINABILITY REPORT RESPONSIBILITY TO CUSTOMERS RESPONSIBILITY TO EMPLOYEES RESPONSIBILITY TO NATURAL ENVIRONMENT RESPONSIBILITY TO SOCIAL ENVIRONMENT RESPONSIBILITY TO SUPPLIERS RESPONSIBILITY OF PROVIDING SECURITY RESPONSIBILITY TO QUALITY FINANCIAL REPORT ACCOUNTING POLICIES CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF THE MERCATOR GROUP Condensed consolidated statement of financial position Condensed consolidated income statement Condensed consolidated statement of comprehensive income Condensed consolidated statement of changes in equity Condensed consolidated statement of cash flows Notes to condensed consolidated interim financial statements FINANCIAL REPORT OF THE COMPANY POSLOVNI SISTEM MERCATOR, D.D Condensed statement of financial position Condensed income statement Condensed statement of comprehensive income Condensed statement of changes in equity Condensed statement of cash flows Notes to condensed interim financial statements MANAGEMENT BOARD STATEMENT PURSUANT TO ARTICLE 113 OF THE MARKET IN FINANCIAL INSTRUMENTS ACT i

3 SUMMARY Mercator Group revenue in the first half of 2012 remains the same as in the corresponding period last year; revenue growth in international markets just under 5 percent. In the first half of 2012, Mercator Group revenue exceeded EUR 1.4 billion which is approximately the same as in the corresponding period last year. Revenue in Slovenia dropped by 1.6 percent while in international markets, it rose by 4.9 percent. Greatly challenged economic recovery, mounting uncertainty, increase in fuel prices, and changes in exchange rates had a strong and pronouncedly negative effect on Mercator Group operations and performance. This resulted in negative Mercator Group income in the amount of EUR 16.5 million. The Management Board of Poslovni sistem Mercator, d.d., adopted three sets of counter-crisis measures to proactively hedge the risks related to the hostile market situation. Harsh economic conditions in all Mercator's markets In the first half of 2012, the euro zone saw weak economic activity and rising uncertainty. In Slovenia and international markets alike, Mercator is still facing high levels of unemployment leading to starkly reduced purchasing power of the consumers. Changes in consumer behaviour are manifest in the drop of shopping frequency, lower value of shopping basket, and in the tendency to look for the most inexpensive retailers and products. Increase in the value-added tax rate in Croatia exerted negative pressure on consumption as well. Higher prices of fuel and some raw materials caused upward pressure on product prices. Depreciation of the Serbian dinar also had a negative effect on Mercator's results. Further growth in international markets despite negative currency translation differences In the period , Mercator Group generated revenue of EUR 1,402,022 thousand, which is 47.3% of the figure planned for the entire year. Revenue in Slovenia shrunk by 1.6 percent relative to the corresponding period last year. In international markets, however, revenue continued to grow at a rate of 4.9%; assuming constant exchange rates, the growth would have amounted to 9.4%. The highest growth was seen in Bosnia and Herzegovina as Mercator's revenue there soared by 54.6 percent as a result of the takeover of the company Drvopromet, d.o.o. Continuing with strategic projects and development activities Mercator Group invested EUR 37,281 thousand in the development of retail network in the period , gaining over 31 thousand square meters of new gross area. We carried on the project of refreshment of FMCG offer; 24 supermarkets in Slovenia and 9 supermarkets in Croatia were refurbished according to the new sales concept. We are aware of the rapid changes in the market that move from making major purchases in hypermarkets towards increasing smaller purchases and visiting neighbourhood stores. Therefore we have engaged actively in the development of different store formats in order to adapt to changes in shopping habits Accelerated continuation of monetization project To reduce the debt and thereby to relieve the banking sector in Slovenia, we want to continue with the monetization project. With the start of the new Management Board, the project was accelerated. We have received several non-binding offers by the global real estate investment funds, which we assess as a positive signal for the continuation and successful conclusion of the project. Mercator will be able to reduce the debt by the end of this year. Employees As at June 30, 2012, Mercator Group had 24,414 employees. Relative to the end of 2011, the number of employees rose by 148 or 0.6 percent, which is mostly the effect of the acquisition of the trade activities of Drvopromet, d.o.o. 1

4 Stable Financial Operations In the period , Mercator Group succeeded in improving the composition of financial liabilities by maturity and reducing the net financial debt as at the last day of the financial period. Optimization of working capital and current liability management, and the resulting additional release of financial assets tied up in working capital was among the key projects at all Mercator Group companies in the first half of In the first half of 2012, we thus managed to decrease the value of inventory by 11.4 percent or EUR 35,477 thousand. Business performance Mercator Group performance was negatively affected especially by strong fluctuation of the Serbian dinar exchange rate, as well as by the increase in the prices of fuel and some raw materials. Responding to all these adverse circumstances, we allocated more resources in the first half of the year for sales promotion and increasing the sales, as well as for adjustment of our assortment to the changes in consumer behaviour. EBITDAR amounted to EUR 91.6 million (42.1% of the annual plan); Group results from operating activities in the first half reached EUR 24.5 million (32.1% of the amount planned for the entire year 2012). In the period , Mercator Group incurred a loss of EUR 16.5 million as a result of the strongly detrimental effects of the economic crisis and negative currency translation differences pertaining to the substantial depreciation of the Serbian dinar. Measures to rationalize the operations Challenging economic conditions and uncertainty in the market require efficient operations. To this end, the Management Board of the company Poslovni sistem Mercator, d.d., launched upon the start of its term a series of measures to rationalize the operations. Three sets of counter-crisis measures were developed. The first stage to be completed by the end of 2012 includes simple, yet very specific shortterm measures with instant cost cutting effects. The second stage will introduce more challenging and complex changes with more long-term consequences. The third stage will involve long-term strategic measures and policies based on the previously implemented short-term and long-term measures. 2

5 INTRODUCTION MERCATOR GROUP PROFILE Company profile The company Poslovni sistem Mercator, d.d., is the controlling company of a group of associated companies (the Mercator Group), one of the largest corporate groups in Slovenia and the entire region of Southeastern Europe. Full name Poslovni sistem Mercator, d.d. Abbreviated name Activity Mercator, d.d. Registration number VAT tax code Court registry date January 1, 1990 Company share capital as at June 30, 2012 Number of shares issued and paid-up as at June 30, 2012 G Retail in non-specialized food retail outlets EUR 157,128, ,765,361 Share listing President of the Management Board Senior Vice Presidents Supervisory Board Chairman Deputy Supervisory Board Chairman Ljubljana Stock Exchange, d.d., prime market, symbol MELR Toni Balažič Drago Kavšek, Igor Maroša, Stanka Pejanović Matej Lahovnik Rok Rozman 3

6 Mercator Group Composition As at June 30, 2012, Mercator Group included the following companies: MERCATOR GROUP MERCATOR OPERATIONS SLOVENIA Poslovni sistem Mercator, d.d., Slovenia Mercator IP, d.o.o., Slovenia (100.0 %) M - Tehnika, d.d., Slovenia (100.0 %) M.COM, d.o.o., Slovenia (100.0 %)* Mercator centar tehnike d.o.o. za trgovinu i usluge, Croatia (100.0 %) M - Energija, d.o.o., Slovenia (100.0 %) TP Vesna, d.d., Slovenia (100.0 %) MERCATOR OPERATIONS SOUTHEASTERN EUROPE Mercator - S, d.o.o., Serbia (100.0 %) Mercator - B, e.o.o.d., Bulgaria (100.0 %) Mercator - H, d.o.o., Croatia (99.9 %) Mercator - A, sh.p.k., Albania (100.0 %) Mercator - BH, d.o.o., Bosnia and Herzegovina (100.0 %) Mercator Makedonija, d.o.o.e.l., Macedonia (100.0%)* M - BL, d.o.o., Bosnia and Herzegovina (100.0 %) Mercator - K, l.l.c., Republic of Kosovo (100.0 %)* Mercator - CG, d.o.o., Montenegro (100.0 %) MERCATOR REAL ESTATE Investment Internacional, d.o.o.e.l., Macedonia (100.0 %)* Argentum - D, d.o.o., Slovenia (100.0 %)** Mercator - Optima, d.o.o., Slovenia (100.0 %) Argentum - E, d.o.o., Slovenia (100.0 %)** M - nepremičnine, d.o.o., Slovenia (100.0 %) Argentum - F, d.o.o., Slovenia (100.0 %)** Argentum - A, d.o.o., Slovenia (100.0 %)** Argentum - G, d.o.o., Slovenia (100.0 %)** Argentum - B, d.o.o., Slovenia (100.0 %)** Argentum - H, d.o.o., Slovenia (100.0 %)** Argentum - C, d.o.o., Slovenia (100.0 %)** Argentum - I, d.o.o., Slovenia (100.0 %)** OTHER OPERATING ACTIVITIES Intersport ISI, d.o.o., Slovenia (100.0 %) Modiana, d.o.o., Slovenia (100.0 %) Intersport S-ISI, d.o.o., Serbia (100.0 %) Modiana, d.o.o., Serbia (100.0 %) Intersport H, d.o.o., Croatia (100.0 %) Modiana, d.o.o., Croatia (100.0 %) Intersport BH, d.o.o., Bosnia and Herzegovina Modiana, d.o.o., Bosnia and Herzegovina (100.0 %) (100.0 %) Mercator - Emba, d.d., Slovenia (100.0 %) * The company has not yet commenced its business operations. ** Project-based real estate company, established for real property monetization purposes. Corporate governance Supervisory Board of the company Poslovni sistem Mercator, d.d., held nine sessions in the period Six new Supervisory Board members were appointed at the Shareholders Assembly on March 30, The New Supervisory Board held their first session on April 10, At the first session, the Supervisory Board appointed Mr. Matej Lahovnik as the new Supervisory Board chairman. They also appointed the new members of the Audit Committee and the Human Resource Committee. Moreover, they were presented the Business Report of the Mercator Group and the company Poslovni sistem Mercator, d.d., in the period On March 29, 2012, the five-member Management Board, consisting of Mr. Žiga Debeljak, Mrs. Vera Aljančič Falež, Mrs. Melita Kolbezen, Mrs. Stanka Pejanović (Čurović), and Mr. Peter Zavrl, submitted their resignation. At the session held on May 22, 2012, the Supervisory Board relieved Mr. Žiga Debeljak of his duties as the President of the Management Board, effective as of May 31, The Supervisory Board further agreed that Mr. Toni Balažič was the most appropriate candidate to succeed Mr. Debeljak as the President of the Management Board. At their 6th meeting, the Supervisory Board relieved of duty the Management Board member Mrs. Melita Kolbezen, effective May 31, 2012, and appointed a new 4

7 Senior Vice President in charge of finance and IT Mr. Drago Kavšek. At their 7th meeting, the Supervisory Board relieved of duty Mr. Peter Zavrl, Mrs. Vera Aljančič Falež, and Mrs. Stanka Pejanović (Čurović), all effective June 18, Mrs. Stanka Pejanović (Čurović) was reappointed as Senior Vice President in charge of Mercator Operations Southeastern Europe. The Supervisory Board furthermore appointed Mr. Igor Maroša as Senior Vice President in charge of Mercator Operations Slovenia and Croatia. All new Management Board members were appointed for a term of five years. As of June 19, 2012, Mrs. Vera Aljančič Falež assumed the post of assistant to the President of the Management Board in charge of human resources, legal affairs, and organization; Mr. Peter Zavrl was appointed advisor to the President of the Management Board in charge of retail. 5

8 MERCATOR GROUP BUSINESS STRATEGY Vision To be the consumers' first choice when shopping for fast moving consumer goods and home products. Mission Mercator s mission is: 1) To provide optimum value for the consumers with our service and offer of fast moving consumer goods and home products. 2) To provide consumers with the best possible service in a pleasant shopping environment, by offering expert support of highly motivated employees. 3) To provide returns for our shareholders through growth and efficient operation. 4) To manage our operations in a way that improves the quality of life in our social and natural environment. Corporate values Following are Mercator's corporate values: Responsibility Each employee is responsible for their work. Integrity We work honestly and fairly. Respect Each individual matters and deserves respect. Responsiveness Prompt response is our advantage. Learning We build on our knowledge and experience. Cooperation What one person cannot do, we can accomplish together. Strategic objectives Following are Mercator Group's fundamental strategic goals: 1) In our domestic market (Slovenia): a) To retain the position of the leading fast moving consumer goods retailer. b) To consolidate the position of the second largest retailer of home products. c) To develop supplementary trade services related to our customer loyalty system. 2) In existing foreign markets (Serbia, Croatia, Bosnia and Herzegovina, Montenegro): a) To consolidate or attain the position of the second largest fast moving consumer goods retailer. b) To rank among the top three retailers of home products. c) To develop supplementary trade services related to our customer loyalty system. 6

9 MAJOR EVENTS IN THE PERIOD Retail network development In the period , we: - invested EUR 37,281 thousand, - divested EUR 1,079 thousand, - acquired 44 new units spanning 31,137 square meters of gross retail area on all our markets of operations, which includes real estate owned by Mercator and operating leases. Strategic combinations On February 23, 2012, the agreement on strategic combination based on which the company Poslovni sistem Mercator, d.d., increased its shareholding in the company Vesna, trgovsko podjetje (trade company), d.d., Ljutomer, from 45 percent to 100 percent, thus acquiring seven stores in Northeastern Slovenia, which operated as Mercator franchise units to date, entered into force. Corporate activities In February 2012, the Mercator Group Management Board held an international press conference to present the Group operations and performance in 2011 and the business plans for this year. On April 24, 2012 Mercator participated on 7th Slovene Capital Markets Day, organised by Ljubljana Stock Exchange and partners - the Central Securities Clearing Corporation (KDD), Alta Invest, d.d. and NLB, d.d., where the companies presented themselves through individual presentations and oneon-one meetings aimed at exclusively portfolio investors. Awards received At the 12th competition of bread, pastry, and pasta, held by the Bakery Section of the Chamber of Agricultural and Food Companies with the Chamber of Commerce and Industry of Slovenia, Mercator's own bakery Pekarna Grosuplje received the highest possible rating for all nine zeroadditive products submitted 7

10 MERCATOR GROUP PERFORMANCE HIGHLIGHTS IN THE PERIOD Mercator Group Index / restated* restated* Revenue (EUR thousand) 1,402,022 1,387, Results from operating activities (EUR thousand) 24,504 47, Profit before income tax (EUR thousand) -13,318 24,200 - Profit for the financial period (EUR thousand) -16,536 18,525 - EBITDA (EUR thousand) 64,245 87, EBITDAR (EUR thousand) 91, , Capital expenditure (EUR thousand) 37,281 67, Return on sales -1.2% 1.3% - EBITDA / revenue 4.6% 6.3% 72.5 EBITDAR / revenue 6.5% 7.9% 83.1 Number of employees based on hours worked 22,998 22, Number of employees as at the end of the period 24,414 23, * Considering the changes in accounting policies, revenue for the period was restated accordingly. Detailed explanation is provided in the financial report. 8

11 BUSINESS REPORT EFFECT OF ECONOMIC CONDITIONS AND COMPETITION ON MERCATOR GROUP OPERATIONS IN THE PERIOD Economic conditions in the markets of Mercator operations in the period The negative trend seen in previous years has persisted to this day and the short-term economic indicators in the euro zone continue to forecast feeble economic activity paired with high uncertainty. In addition to the slowdown in the growth of international trade, the bleaker outlook was mostly a result of the uncertainty regarding the Greek elections, amount of aid required for the Spanish banking system, and sustainability of sovereign debt in Italy. In the banking sector, conditions are once again turning more severe as the liquidity of the European banks has been greatly impaired. The banks avoid providing loans as they are uncertain about their exposure to the troubled countries. Stagnation of economic activity was seen in the entire euro zone. Manufacturing output in processing industries dropped; retail revenue continued to slip; and construction activity was also in decline. Real gross domestic product growth of the euro zone in the first quarter of 2012 remained at approximatela the same level as in the same period last year, after shrinking by 0.3 percent the quarter before. In Slovenia, too, the value of short-term indicators paints a similar picture. Retail revenue hit a low of the last two years and construction and manufacturing output also remains depressed. Household consumption is low and consumer confidence has suffered another blow in the recent months. Consumer confidence indicators slumped in the second quarter. Combined with the increase in savings rate of individuals as a response to instability in the labour market and high unemployment, this has a negative effect on consumption, particularly of durables. The drop in confidence in the entire euro zone resulted in the rise of year-on-year prices of fuels and unprocessed food. Inflation in the euro zone is gradually dropping. In June, it stood at 2.4%, which is 0.3 percentage point less than as at the beginning of the year. 6-month EURIBOR was at 0.930% at the end of the first half of 2012, which is percentage point lower than at the beginning of the year (at the start of 2012, the 6-month EURIBOR was at 1.606%). Average 6-month EURIBOR in the period was 1.163%; in the corresponding period last year, it amounted to 1.530%. European Central Bank's key interest rates in the period remained unchanged; however, they were decreased by 25 base points as at July 5, Slovenia's credit rating saw a strong downward revision in early August. Government bonds were downgraded by three notches from A2 to Baa2. While Slovenia is facing rising costs of financing and restricted access to financial markets, the state banks are increasingly dependent for liquidity on the European Central Bank. Slovenia Economic growth in 2011 was negative at -0.20%; for 2012, the economy is forecast to shrink even more than in 2011 as anticipated GDP growth rate is at -1.40%. In the first quarter of 2012, GDP growth stood at -0.20%. In June, year-on-year inflation was at 2.3%. In 2012, inflation is predicted at 2.20%. Serbia Economic growth in Serbia in 2011 amounted to 1.60%. For 2012, zero growth rate is estimated for the Serbian economy. Inflation reached 7% in 2011; in 2012, it is expected to be only 0.50 percentage 9

12 point lower at 6.50%. In the first half of 2012, GDP rose by 1.30 percent. In May, year-on-year inflation was at 3.9%. Average exchange rate of the Serbian dinar for 2012 is forecast to amount to RSD per 1 EUR, which is 10.8 percent more than the average rate of RSD per 1 EUR in In the first half of 2012, average exchange rate of the Serbian dinar was at RSD per 1 EUR. Croatia In 2011, economic growth rate in Croatia equalled zero; inflation was at 2.30%. GDP growth in 2012 is expected to be negative at -1.00%. According to the analysts, inflation in 2012 is expected at 3.00%. In the first quarter of 2012, the economy shrunk by percent. Average exchange rate for Croatian kuna amounted to HRK 7.43 per 1 EUR in For 2012, the exchange rate is forecast at HRK 7.56 per 1 EUR. Average rate in the first half of 2012 was at HRK 7.54 per 1 EUR. Bosnia and Herzegovina The growth rate of GDP in 2011 amounted to 1.90% while inflation reached 3.60%. In 2012, economic growth rate in Bosnia and Herzegovina is expected to be zero; inflation is anticipated at 2.20%. In June, year-on-year inflation was at 2.2%. The exchange rate of the convertible mark is pegged to euro at the rate of KM per 1 EUR. Montenegro In 2011, Montenegro saw economic growth of 2.50% and inflation rate of 3.50%. In 2012, inflation rate is forecast to be the same as in the year before. Economic growth in 2012 is expected to decelerate to 0.50%. Montenegrin official currency is the euro. Bulgaria In 2011, the growth of the Bulgarian economy was at 1.70%. For 2012, somewhat slower growth is expected, at 0.50%. In 2011, inflation rate was at 3.40%; the forecast for 2012 is at 2.70 percent. In the first half of 2012, inflation was at 0.50%; GDP growth also amounted to 0.50%. The exchange rate of Bulgarian lev is pegged to euro at the rate of BGN per 1 EUR. Albania Economic growth in Albania in 2011 reached 3.10%; inflation in that year was at 1.70%. In 2012, GDP growth is forecast at 2.00% while the inflation rate is expected at 2.30%. In the first quarter of 2012, GDP actually fell by percent. In June, year-on-year inflation amounted to 2.20%. Average annual exchange rate for Albanian lek in 2011 reached ALL per 1 EUR; in 2012, it is expected at ALL per 1 EUR. In the first half of 2012, average exchange rate of the Albanian lek was at ALL per 1 EUR. 10

13 Changes in consumer behaviour and effect of the market situation on consumption The economic crisis resulted in an increase of unemployment which has reached new historical highs in key markets of Mercator operations. Higher unemployment and lower purchasing power leave consumers more sensitive to prices and increase their propensity to save. This is reflected in lower number of shopping sessions and lower value of each shopping basket. In Slovenia, the recession is felt with the greatest intensity to date. As many as 77 percent 1 of the people believe that they can personally feel the effects of the economic crisis in their daily lives, which is five percentage points more than half a year ago. The share of those expecting their salary to drop in the near future has also increased considerably. The fact that individuals feel affected by the recession and their pessimistic expectations about the future have lead to a change in behaviour as consumers have grown more rational and their confidence has been shattered (consumer confidence index dropped to the level from early 2009 when it hit historical lows). Changes in consumer behaviour are manifest in the tendency to look for the most inexpensive products, shopping at several different retailers, and increased response to low-priced offers. In Mercator's international markets, consumers are also facing a profound recession. Due to low economic growth, rising unemployment, and low personal income, consumer purchasing power remains low. Changes in consumer behaviour are reflected in less frequent shopping or lower value of the shopping basket. Price sensitivity of consumers is also exhibited in increased shopping for private label products. DEVELOPMENT AND REAL ESTATE MANAGEMENT In the period , Mercator Group efforts in development and real estate management remained geared towards meeting the goals laid down in the adopted development strategy. Taking retail area on lease is preferred over own construction of retail facilities. We have also focused on refurbishments and updates of our existing retail network. The Refreshment of FMCG Offer project provides the conditions for the implementation of a new concept of sales. In the period at hand, we revised 24 supermarkets in Slovenia and 9 supermarkets in Croatia to comply with our new standards. In the period , we conducted various development activities to optimize Mercator's real estate management, and analyzed the possibilities of updating the concept of Mercator's shopping centers, improving the mix of products and services there, improving composition of third-party providers, and establishing strategic partnerships with renowned international tenants. Following are Mercator key goals in real estate management: Development of Mercator retail network Effective real estate management Improvement and update of shopping centers Monetization 1 Marketing Monitor, SMA, April

14 Investment and Divestment In the period , Mercator Group's investment into property, plant, and equipment (CAPEX) amounted to EUR 37,281 thousand. 67.7% of these funds was invested in Slovenia; 31.7% was invested in currently developed international markets (Serbia, Croatia, Bosnia and Herzegovina, and Montenegro); and 0.6% was invested in other markets (Albania, Bulgaria, and Macedonia). Capital expenditure (in EUR thousand) Composition (in %) Slovenia 25, % Serbia 5, % Croatia 2, % Bosnia and Herzegovina 2, % Montenegro % Bulgaria % Albania % TOTAL 37, % Investments in development of retail capacity (Mercator centers, trade centers, individual stores, and stores within other shopping centers) represent 61.3% of total investments; 23.6% was allocated for refurbishment of the existing facilities; and the remaining 15.1% was invested into logistics, IT, and non-trade activities. In the period , the company acquired 31,137 square meters of new gross area, of which 86.4% was obtained by operating lease and 13.6% was acquired by acquisitions, construction, or extension of existing facilities. In the period , Mercator Group divested EUR 1,079 thousand worth of property, plant and equipment. Share of newly launched facilities by markets Share of investments by markets 12

15 Summary of retail unit launches by markets Slovenia Area of new facilities: 11,442 m 2 Number of retail units: 8 Openings: Modiana Outlet in Ljubljana (Šmartinska 102), Tehnika Outlet in Mariboru (Tržaška 14), Department store Ljutomer, superettes in Veržej and Križevci, hypermarket in shoppig center Supernova in Nova Gorica, furniture store Ptuj, furniture store DOM in BTC in Ljubljana Other openings: petrol station in Kranj and in Ajdovščina Croatia Area of new facilities: 1,434 m 2 Number of retail units: 2 Openings: Modiana in City Center One East in Zagreb, superette in Vodice Serbia Area of new facilities: 6,145 m 2 Number of retail units: 3 Openings: supermarket in Čačak, Roda center Valjevo, hypermarket Beograđanka in Beograd Bosnia and Herzegovina Area of new facilities: 11,429 m 2 Number of retail units: 29 Openings: stores of the company Drvopromet (27 units) on total area 9,962 m 2, supermarket in Laktaši and supermarket Nova Varoš in Banja Luka Montenegro Area of new facilities: 186 m 2 Number of retail units: 1 Openings: Superette Dobrota in Kotor Bulgaria Area of new facilities: 501 m 2 Number of retail units: 1 Openings: Superette Dianabad in Sofija h 13

16 Summary of total gross retail area as at June 30, 2012 Gross retail area in m 2 Used for own operations Leased out Total Owned retail area 804, , ,635 Leased retail area 397,077 25, ,308 Total retail area 1,201, ,531 1,399,943 Owned warehouse capacity 142, ,150 Leased warehouse capacity 53, ,080 Total warehouse capacity 195, ,230 Owned commercial facilities 27,856 2,274 30,130 Leased commercial facilities 6, ,570 Total commercial facilities 34,383 2,317 36,700 GROSS AREA UNDER MANAGEMENT 1,430, ,933 1,631,874 - of which owned 974, ,659 1,149,915 - of which leased 456,685 25, ,959 Activities of Real Property Monetization As early as in 2011, the monetization project included an international tender to select an internationally renowned consultant, the global real estate consultancy Cushman & Wakefield from Great Britain; thus, the activities to carry out the project were commenced. In the first quarter of 2012, we worked with the consultancy to define the portfolio of real estate to be offered for sale to international investors, and to hold an international tender which resulted in the selection o the law firm Schoenherr, cooperating with the law firm SJ Berwin, as the best bidder of legal services. We also founded 9 project companies through which the monetization of real property will be effected, consistently with the prevailing international practice. In the second quarter of 2012, we developed a list of investors, consistently with the previously specified goals, to which documentation will be submitted in the third quarter, based on which we expect to obtain offers for the sale and lease back of a part of our real estate portfolio in Slovenia. Consistently with the adopted strategy, the proceeds from the monetization process will be allocated for reduction of debt. Final decision on the scope and timing of the project implementation will be adopted when all terms and conditions of the monetization are specified, considering the market conditions and investor interest. 14

17 SALES AND MARKETING Sales In the period , Mercator Group generated EUR 1,402,022 thousand of revenue, which is 1.1 percent more relative to the period Majority of Group revenue is generated by sales of goods, material, and products, mostly retail and wholesale of trade goods. Revenue in Slovenia has decreased by 1.6 percent relative to the same period last year; in foreign markets, revenue growth reached 4.9 percent. Mercator Group revenue by geographical segments: Mercator Group revenue from trade operations by programs: In the period , the majority of Mercator Group revenue resulted from sales of fast-moving consumer goods as they accounted for 85.9% of the total figure; revenue from other specialized programs amounted to 14.1%. 15

18 Marketing At Mercator Group, the consumer is always at the heart of our efforts. By conducting the activities for our customers we are pursuing our vision to be the consumer's first choice when shopping for fastmoving consumer goods and home products. Our goal is to please the customers who insist on giving priority to quality, safety, and product origin, despite the effects of the crisis and the tendency to choose cheaper products. Following are our key policies: 1. Mercator is providing competitively priced offer. 2. Mercator is developing high-quality private label products. 3. Shopping offered by Mercator is transparent, simple, and well-priced. 4. Mercator is committed to sustainability for the benefit of the consumer and the environment. 1. Mercator is providing competitively priced offer. In a time when consumers are reducing their spending and searching for inexpensive shopping, Mercator is carefully planning and conducting marketing activities in order to offer the most at the best price. In addition to regular and theme-oriented campaigns, we have also included products of renowned brands in our special activities "buy one, get one free" and "buy two, get one free", offered products at attractive rounded prices, and promoted examples of family meals at very good prices in our flyers. The sales promotion activities are adjusted carefully and deliberately to the local characteristics of individual markets. Key activities in the markets of Mercator's operations in the first half of 2012 included the following: Country Key activities Slovenia Revised regular and theme-oriented flyer; issued every two weeks; each week, households receive a different flyer. Presentation of private label products and revised private label lines in flyers. Tuesday's Yes! (To!) discounts, Thursday retiree discounts, awarding double Pika bonus points in refurbished stores on the opening day, and the Happy Hours activity. 20% discount coupon for selected product in the regular flyer. "Buy one, get one free" and "buy two, get one free" campaigns for branded products, and the "Rounded prices" activity. Weekend offers and theme-oriented category discounts. Introduction of the Good Price activity with in-store communication. "Five per day" project get a bagful of fruit and vegetables at half the price. "Cheer With Us" prize contest. Dormeo, M Holidays, and Smurfs customer loyalty programs. Serbia 10-percent discount on Saturdays and Sundays at the Roda format stores for purchases above RSD 2, Tuesday's Yes! (To!) discounts at Mercator hypermarkets. Wednesday's retiree discounts at Roda stores. Regular triweekly campaign at the Mercator hypermarkets and regular biweekly campaign at the Roda stores. Campaign flyer for the technical consumer goods program and discount on technical consumer goods from Monday to Friday. Weekend campaign Mercator and Roda. 16

19 Country Key activities "Super Offer, Super Price" campaign at Wednesdays and Thursdays Delimano and Dormeo Go! customer loyalty program. Croatia Saturday's 10-percent discount on purchases over HRK 100 at Mercator and Getro stores. Saturday's HRK 30 coupon awarded for purchases over HRK 300 at Getro centers (Getro friend card). Thursday's discount for retirees at Mercator stores, and Tuesday's discount at Getro stores. Regular weekly Mercator flyer and regular biweekly Getro flyer. Private label presentation flyer. Weekend campaigns and theme-oriented category discounts. Linked purchase issuing coupons for 10-percent discount in December to be used in January. "Five per day" project, exotic days at hypermarkets. Bosnia and Herzegovina Regular campaign Mercator and DP Marketi. Weekend campaigns at the Mercator and DP Marketi stores. Tuesday's Yes! (To!) discount and Thursday's retiree discount at Mercator stores. Tuesday's discount for DP card holders at DP Marketi stores. Delimano and Dormeo Go! customer loyalty program. Combined shopping Mercator and DP Marketi issuing coupons for a 10-percent discount at Modiana, Intersport, and Beautique stores. Montenegro Regular Mercator and Roda campaign and a weekend campaign. Weekend campaign Mercator and Roda. Tuesday's Yes! (To!) discounts at Mercator and Thursday's retiree discounts at Mercator and Roda stores. Sales promotion activities at critical locations. "Presenting the supplier" campaigns. "Exclamation Mark" activity at Roda format stores. Delimano and Dormeo Go! customer loyalty program. Bulgaria Biweekly flyers and weekly flyers presenting the offer of the bestpriced products "Top 10-19". 10-percent weekend discount for purchases above BGN 80 at megamarkets. Valentine's Day flyer and special offer flyer for products of nonmarket (non-fmcg) program. Delimano and Dormeo Go! customer loyalty program. Albania Tuesday's Yes! (To!) discounts. Special weekend campaigns. Special offer monthly flyer. Smart shopping monthly flyer. In Slovenia, we regularly conducted in the first half of 2012 our corporate campaigns of awarding double Pika bonus points at food stores, Hura stores, franchise stores, M Holidays and HoReCa outlets, Modiana stores, Intersport stores, and Beautique drugstores, and triple Pika bonus points at M Tehnika, M Gradnja (construction), M Pohištvo (furniture), and M Tehnika (technical consumer goods) web store. At M Tehnika, we introduced a new activity called "Magnetic Products", which includes discounts on popular or attractive products by 30 percent or more relative to the regular prices for that product in the market. 17

20 2. Mercator is developing high-quality private label products. Mercator private label products represent a quality and reasonably priced choice for the consumers. The range of products is continuously expanded. A total of twelve lines provides comprehensive offer of alimentary products, household products, apparel and other textile products, technical consumer goods, cosmetic products, baby care products and toys, ready-made food, and products for a healthy diet. We renamed and revised the appearance of the "Healthy living" line; now, it is available with its new visual identity and the name Active life. Products of the Active Life line are carefully selected in compliance with the recommendations and modern trends in healthy nutrition. We are actively expanding and upgrading the assortment of the MyBody cosmetics line and revising the visual identity of the existing products in order to make them even more attractive for the consumers. We have revised the packaging designs for most product groups within the central Mercator line; for others, we have prepared blueprint solutions and thus nearly completed the project of concept designs for packaging update. Our offer was further enriched by the new product line called Pro Magic available exclusively at Mercator stores. The line offers products for home and household. In communicating the Lumpi line, we are working with Slovenia's best ski jumper, world champion, and winner of the small crystal globe in ski flying Robert Kranjec. Advantages of Lumpi products were related to the success of Robert Kranjec in an amusing way that is tailored to the target group of children and parents. At the 12th competition of bread, pastry, and pasta, Mercator's own bakery Pekarna Grosuplje received nine gold medals for quality and the highest score for zero-additive products (Krjavelj, Malnar, Sosed, Wholegrain bread, Dolenc, Homemade bread, Buckwheat homemade bread, Corn homemade bread, and Korošec). The gold medals were presented by the Bakers Section of the Chamber of Agricultural and Food Companies at the Slovenian Chamber of Commerce and Industry. 3. Shopping offered by Mercator is transparent, simple, and well-priced. In early 2012, Mercator launched the modernization of retail network in Slovenia and in Croatia. In the first half, we comprehensively refurbished a large number of supermarket format stores: we introduced new technologies, visual identity, and transparent tagging; we revised the offer (e.g. adding the service of baking pizzas, extending the fresh produce departments, extending the offer of readymade products); and we improved energy economy. We have been offering our customers various benefits with the Mercator Pika customer loyalty card for the 13th year. We appreciate and reward the loyalty of our customers by awarding double and triple Pika bonus points, offering discounts on selected products (special Pika discounts), offering deferred payment without charging any interest, and by offering 3-6% discount on the entire offer subject to the amount of collected Pika points. 18

21 At Mercator, we are constantly expanding and improving our offer of quality services. Thus, we have added new travel arrangements (we issued a new catalogue Spring-Summer and revised the M Holidays website), as well as the FotoFiniš photo services. In 2012, we opened M Maxen petrol stations (Kranj, Velenje, Ajdovščina) which are located next to Mercator Centers. In April, we launched the test of the M Maxen bonus system. 4. Mercator is committed to sustainability for the benefit of the consumer and the environment. At Mercator, we subscribe to the notion that a company will be more efficient in the long run if care for the environment, clean technologies, and offer of local produce are included in its development strategy. Hence, Mercator's business strategy is focused on three key areas of corporate social responsibility: social responsibility, responsibility to the broad environment, and business responsibility. Activities are conducted within each of these three areas, in pursuit of the goals laid down in compliance with the guidelines of sustainable development. Consistently with the medium term strategic alliances in sustainable development with the project "From Slovenian Farms", consumers are offered homemade fresh produce from local farms. Every product is hand packed and the packaging carries the stamp and description of the farm, which guarantees its origin. Products from Slovenian farms reach our aisles via the shortest possible routes. We wish to work with our suppliers and consumers in a sustainable way and to create a healthy and safe future for the people and our common environment. The first product within this project has already been offered to the consumers: Brešar farm's baby potatoes. To boost recognition and appeal of the products, we additionally labelled and exposed the fruit and vegetable produce with the slogan "Grown in Slovenia". Private label products were also labelled with a distinguishable sign "Slovenian Origin". 19

22 Digital Communication In digital communication, we are intensively preparing two major projects that are scheduled for launch in August or September 2012: "Click and Collect", and "Mercator Profile with a single banner". The "Click and Collect" project is aimed to establish and expand web sale and benefit from the trend of shopping via mobile devices, which has recently been especially evident abroad. The project included revision of Mercator's web store: integration with back-office systems assortment management technical support for commissioning new service "collect", initially at HM Šmartinka, according to the drive-in principle web payment improved user experience In order to offer fast and easy shopping for consumers with particularly busy schedules, the option of web payment with Mercator Pika card in the Mercator web store was added to the expanded assortment of products. Useful information about properties was added to product descriptions, as well as the option to rate the product. In Ljubljana, the option to collect the shopping basket at the drive-in point at Mercator Center on Šmartinska cesta will be offered for those looking to complete their shopping for food as quickly as possible. Considering the positive response and customer feedback, the project will most likely be expanded in terms of addition of new delivery areas, as well as the "collect" service allowing the customer to pick up the order at select Mercator stores. The "Click and Home" service (delivery to the selected location) will be introduced gradually, starting in Ljubljana, Maribor, Koper, Kranj, and Celje. The "Mercator Profile with a single banner" project will bring together communication and user experience of registered users across all Mercator websites, stores, and portals. This will also provide the basis for targeted monitoring of our users and, in turn, targeted communication. Mercator Profile will offer the users all Mercator's web services and products at a single place. Websites and web stores In March, we refurbished and upgraded the website We have set up new presentation websites for the visitors of Mercator centers MC Maribor Tabor II, MC Ljubljana, MC Kranj Primskovo, MC Koper, and MC Celje, at our central website at In the second quarter of 2012, we were also active in the Southeastern European markets where the following activities were conducted: a new website was set up for the Mercator Premium store format in Serbia, we revised our Croatian website we refurbished the "My Pika" portal in Croatia. Activities on social networking sites It has been found characteristic of the social media that a company that communicates openly with the users will appear more frequently in the users' conversations, which means more praise as well as more criticism. Above all, active communication on social networking sites involves building a relationship with the users, open communication between the users sharing their experiences and thereby expanding the number of sympathizers, consumers, and users of the services offered by the company. 20

23 Over 140,000 users have joined the group of Mercator's friends on social networking sites. Store Formats Currently, Mercator Group's retail units are present in seven markets of different economic maturity. This requires adjusting our operations to the needs of the customers in each market. To this end, Mercator has put in place a multi-level strategy of store brands and a multi-format strategy with a broad range of store formats. These are intended to cater to major, previously planned shopping sessions, as well as minor, daily or occasional shopping for fast-moving consumer goods, technical consumer goods, cosmetics, and sportswear. MULTI-LEVEL STRATEGY OF STORE BRANDS and MULTI-FORMAT STRATEGY Slovenia Slovenia Current foreign markets Serbia, Croatia, Bosnia and Herzegovina, Montenegro New foreign markets Bulgaria, Albania Fast-moving consumer goods Mercator Group has developed a dense and extensive retail network throughout Slovenia and other countries, providing high-quality offer to meet every customer's desires, tastes, and needs. We are working to bring our shopping centers, hypermarkets, supermarkets, neighbourhood stores, convenience stores, and the web store as close as possible to the customers, and to provide a pleasant shopping experience. Home products Mercator Group is offering home products in stores called M Tehnika (technical consumer goods), M Gradnja (construction), and M Pohištvo (furniture); the offer of products is complemented by favourable terms of payment. The offer includes high-quality and reliable construction materials, modern furniture and equipment for every room in the home and office, modern home appliances and major appliances, and consumer electronics by globally renowned manufacturers. In order to accommodate the consumers' rapid pace of every day even better, we also offered technical consumer goods in our web store. Other operating activities In order to present a comprehensive offer to consumers, Mercator Group has been developing additional business activities that include the offer of sportswear at the Intersport stores, apparel at Modiana stores, Maxen self-service petrol stations, and M Holidays tourist services. Mercator Group also includes the manufacturing company Mercator - Emba, d.d. 21

24 Composition of retail units as at June 30, 2012 COUNTRY ACTIVITY SLOVENIA SERBIA CROATIA Number of units Number of units BOSNIA AND HERZEGOVINA Number of Number Number of units units of units Number of units Number of units Number of units Gross sales area Net sales area Hypermarkets , ,909 Supermarkets , ,537 Neighbourhood stores , ,954 Convenience stores ,544 3,752 Getro market ,785 7,461 Cash & Carry ,394 97,292 Hard discount stores ,452 4,820 Restaurants ,888 5,879 M holidays TOTAL FMCG program , ,833 Home program ,604 70,915 Furniture program ,425 22,810 TOTAL home program ,029 93,725 Clothing program and drugstores ,707 56,908 Clothing program ,523 54,193 Drugstores and perfumeries ,185 2,715 Intersport ,071 39,339 TOTAL specialised programs ,778 96,246 TOTAL retail units under management ,315 1,201, ,805 Franchise stores ,255 33,802 TOTAL with franchise stores ,609 1,252, ,607 MONTE- NEGRO ALBANIA BULGARIA MERCATOR GROUP Composition of retail units is not comparable between the periods due to the changes in the classification of retail units. Development of New Technological Solutions In order to be perceived as a modern and innovative retailer, Mercator is looking to keep up with the latest technological solutions that reduce energy consumption and waste, provide pleasant and stimulating shopping experience for the customers and a pleasant and healthier working environment for the employees. IMPLEMENTED EXAMINATION/ TESTING STAGE Info stands Digital advertising Photo corner Beverage vending machines Price readers Self-service checkouts (Tik Tak) Electronic labels Scales with LCD screen Closed cash management system at checkout PSA (Personal shopping assistant) 22

25 Development of New Store Concepts Hypermarkets The new concept of Mercator stores brings fresh produce to the fore of Mercator's offer. These products are offered at the entrance to the store. Another novelty in the offer is the "Minute" department located directly at the entrance into the store, which allows the customers to quickly and simply, from the walkway, purchase freshly prepared food suitable for immediate consumption. In May, we opened a new and attractive hypermarket that employs a modern sales concept as a response to the shopping trends and offers our customers a pleasant shopping experience. Neighbourhood stores Modern trends and changes in the market conditions again favour smaller stores. At Mercator, we are aware that neighbourhood stores are one of our major competitive advantages (number of stores, regional coverage, locations) which has not been fully utilized as some stores are in dire need of refurbishment and adjustment to the life on the fast lane. Therefore, Mercator launched a campaign to reposition this store format in order to maintain and consolidate the position of the best neighbour in every neighbourhood, one that is "always there, caring, friendly, and involved in the local community". We wish to contribute to the benefit of the neighbourhood and our customers by offering excellent fresh program and innovative ideas for the mix of products and services that will make our customers' lives easier. Convenience stores As an innovative retailer that keeps up to date with the modern market trends, we actively approached the development of the store format of convenience stores. The offer at this format is adjusted to each particular micro location and its main mission is to allow quick shopping and varied choice of readymade products for a customer in a hurry. 23

26 COUNTER-CRISIS MEASURES In an unstable global macroeconomic situation with stagnant economies and pessimistic expectations regarding any improvement in economic conditions, efficient operations require effective adjustment, management, and risk management. The Management Board of the company Poslovni sistem Mercator, d.d., has therefore started immediately upon assuming their term to implement some measures to rationalize the operations. These efforts include development of 50 counter-crisis measures divided into three stages. The first stage will include short-term measures which are simpler and deliver immediate effects; they will be implemented by the end of The second stage will introduce more complex changes with more long-term consequences. The third stage will involve the definition of long-term strategic measures and policies based on the measures previously implemented in the first and second stage. Improvement in employee productivity while maintaining the quality of service represents a big opportunity for Mercator. In addition, focusing on the consumers and identification of their desires and expectations is of key importance. Assortment will be adjusted to the changes in consumer behaviour and lower purchasing power, by introduction of more competitively priced products and renegotiation of terms with suppliers. Neighbourhood stores are one of Mercator's competitive advantages that should be retained and further developed. To this end, we shall analyze the under-performing units and find solutions for their revitalization and better utilization of our competitive edge. One very important short-term measure is the improvement of cost efficiency which involves focus on slashing the operating costs and expenses, suspension of currently non-essential projects, optimization of logistics costs, and a move towards more rational use of fuel and energy. Due to increasingly harsh economic conditions and identified potential for further optimization of working capital, we also specified new goals regarding the release of financial assets tied up in working capital at the level of Mercator Group. 24

27 FINANCIAL MANAGEMENT Net financial debt Mercator Group's net financial debt as at June 30, 2012 amounted to EUR 1,028,459 thousand, which is 4.3 percent less than as at June 30, in EUR thousand June 30, 2012 Dec. 31, 2011 June 30, 2011 Index June 30, 2012/ June 30, 2011 Non-current financial liabilities 743, , , Current financial liabilities 373, , , Derivative financial instruments (liabilities) 5,375 4,562 1, Financial liabilities including derivative financial instruments 1,123,046 1,189,295 1,164, Cash and cash equivalents 24,898 27,540 15, Derivative financial instruments (assets) Available-for-sale financial assets 2,704 2,628 3, Loans and deposits 66,958 67,824 70, Financial assets 94,587 98,150 89, NET FINANCIAL DEBT 1,028,459 1,091,145 1,075, Working capital management Harsh economic conditions compel us to tap into the internal improvement potential within the Mercator Group as much as possible. One such possibility is the improvement of working capital management that would release additional funds tied up in working capital. Hence, Mercator Group laid down in this year the working capital management project which is to improve the days outstanding for working capital. In the first half of 2012, Mercator Group decreased the value of inventory by EUR 35,477 thousand, especially by intensively conducting the following activities: optimizing the strategic stock; optimization of the ordering process; even more intensive adjustment of the product assortment to the needs of the customers, and adjusting the dynamics of ordering to the dynamics of sales, update and implementation of new application tools for aid in ordering and clearance of old inventory. Management of trade receivables included the following activities conducted at the Mercator Group: intensive efforts to collect unpaid overdue receivables; updating the application support for receivables management; faster calling on the instruments used as payment insurance; looking for additional possibilities to offset the receivables; earlier stop of deliveries in case of payment defaults; restricting open sales without first-grade insurance; raising the bar for suitability of payment insurance. Mercator Group shall continue to conduct the working capital optimization project in the future. 25

28 Diversifying the sources of financing Long-term operating lease of retail units has been a highly important and actively used form of financing for the Mercator Group in recent years. In the first half of 2012, Mercator Group decreased its financial liabilities by over EUR 65 million relative to the figure from December 31, Ratio of variable to fixed or hedged financial liabilities As at June 30, 2012 the ratio between variable and fixed or hedged financial liabilities at the Mercator Group amounted to 39.0 percent vs percent (as at June 30, 2011, the ratio was at 31.6 percent vs percent). Finance expenses The variable interest rate 6-month EURIBOR was at 0.930% at the end of the first half of 2012, which is percentage point lower than at the beginning of the year (at the start of 2012, the 6-month EURIBOR was at 1.606%). Average 6-month EURIBOR in the period was 1.163%; in the corresponding period last year, it amounted to 1.530%. Debt to equity and current to non-current financial liability ratio As at June 30, 2012 Mercator Group attained a debt-to-equity ratio of 1:1.46. The ratio is a quotient between equity, which includes share capital as reported in financial statements and net financial debt. In the first half of 2012, Mercator Group improved composition of financial liabilities by maturity. The share of non-current financial liabilities as at June 30, 2012, amounted to 66.6% (65.9% as at June 30, 2011). Compliance with financial covenants under loan agreements Under the existing loan agreements Mercator has agreed with the banks to comply with certain financial covenants on a consolidated basis that are expected to be fully met at the end of each financial year. The covenants are reviewed on the basis of the audited consolidated financial statements for the respective financial year. The exception are the syndicated loan facilities and one bilateral loan facility where financial covenants are reviewed on a semi-annual basis. Due to the partial breach of such financial covenants in the first half of the year 2012 Mercator will simultaneously with the publication of the respective half-year financial statements, approach the banks with a request for a waiver. 26

29 MERCATOR SHARE AND INVESTOR RELATIONS Mercator share and ownership structure Basic information on the share of the company Poslovni sistem Mercator, d.d., as at June 30, 2012 Code / Symbol MELR Type Ordinary share Listing Prime market of Ljubljana Stock Exchange, d.d. Share capital EUR 157,128, Number of shares 3,765,361 Number of treasury shares 42,192 Number of shareholders 15,282 Ownership structure of the company Poslovni sistem Mercator, d.d., as at June 30, 2012 Other legal entities, 11.56% PIVOVARNA UNION D.D., 12.33% NLB d.d., 10.75% Individuals, 14.57% Other commercial banks, 18.21% SOCIETE GENERALE- SPLITSKA BANKA D.D. - F, 8.87% Pivovarna Laško, d.d., 8.43% Investment funds, 7.26% UNICREDIT BANKA SLOVENIJA d.d., 8.01% Major Shareholders As at June 30, 2012, the following ten largest shareholders combined owned percent of the company. Major Shareholders Country Number of shares Share 1 Pivovarna Union, d.d. Slovenia 464, % 2 NLB d.d. Slovenia 404, % 3 Societe Generale-Splitska banka, d.d. Croatia 334, % 4 Pivovarna Laško, d.d. Slovenia 317, % 5 UniCredit banka Slovenija, d.d. Slovenia 301, % 6 Nova KBM d.d. Slovenia 197, % 7 GB d.d., Kranj Slovenia 142, % 8 Prvi faktor - faktoring, d.o.o., Beograd Serbia 125, % 9 Abanka, d.d. Slovenia 103, % 10 Radenska, d.d. Slovenia 96, % Total 2,488, % 27

30 Foreign shareholders As at June 30, 2012, the share in the company Poslovni sistem Mercator, d.d., held by foreign investors amounted to percent, which is 1.75 percentage point more than at the end of Shares held by Management and Supervisory Board Members as at June 30, 2012 First and last name Position Number of shares Share Management Board 1 Toni Balažič Management Board President % 2 Stanka Pejanović Senior Vice President % 3 Drago Kavšek Senior Vice President % 4 Igor Maroša Senior Vice President % Total % Supervisory Board 1 Matej Lahovnik Supervisory Board Chairman % 2 Rok Rozman Deputy Supervisory Board Chairman % 3 Boris Galić Supervisory Board member % 4 Zdenko Podlesnik Supervisory Board member % 5 Marjeta Zevnik Supervisory Board member % 6 Mateja Širec Supervisory Board member % 7 Sandi Leban Supervisory Board member % 8 Ivan Valand Supervisory Board member % Total % Movement of closing price per MELR share in last six month, compared to the movement of the SBITOP index 28