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ANNUAL REPORT OF MERKUR, D. D.

, FOR THE FINANCIAL YEAR 2010

Annual Report Merkur, d. d., 2010

ANNUAL REPORT OF MERKUR, D. D., FOR THE FINANCIAL YEAR 2010

Annual Report Merkur, d. d., 2010

TABLE OF CONTENTS
Annual Report Merkur, d. d., 2010

Merkur The Most Significant Events in Merkur, d. d., in 2010 Most Significant Events in Merkur, d. d., after the 2010 Financial Year Report of the Management Board Chairman Supervisory Board Report Shares and Ownership Structure

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BUSINESS REPORT

Social Responsibility Governance and Management System Employees Analysis of Business Performance of Merkur, d. d. The Development Strategy

ACCOUNTING REPORT OF MERKUR, D. D., FOR THE FINANCIAL YEAR 2010 Audited Financial Statements of Merkur, d. d. Notes to the Audited Financial Statements of Merkur, d. d. Statement of Management Responsibility Auditors Report

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COMPANIES IN THE MERKUR DIVISION

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Merkur
Merkur has developed from a small shop opened by merchant and industrialist Peter Majdi in 1896 into a successful European chain store. Quality products and services, and the Merkur prima kvaliteta (Merkur prime quality) brand, which was registered already in 1933, have been the foundations of Merkurs mission. We are the leading Slovenian provider of quality products for home, do-it-yourself goods, electro-installation, metal and construction materials, and technical products for professionals, and we keep developing and strengthening our brand on nearby foreign markets. We aim to exceed our customers expectations with a whole range of extra services. Half of our sales revenue comes from wholesale, while end users know us best for our modern, well-stocked and user-friendly shopping centers. Our goal is to grow further while not losing touch with our main goal: to create satisfaction among buyers, business partners and employees. Merkur is the largest seller of products for home, garden and workshops, for end users, companies and craftsmen

THE MERKUR DIvISION

Merkur, d. d., Naklo


Merkur Hrvatska, d. o. o., Croatia Merkur Nekretnine, d. o. o., Croatia Merkur International, d. o. o., Serbia Merkur elik, d. o. o., Serbia Intermerkur - Nova, d. o. o., Bosnia and Herzegovina Merkur, d. o. o., Montenegro Perles Merkur Italia, s. r. l., Italy (In voluntary liquidation proceedings since 24 August 2010)

The Merkur Division


The Merkur Division comprises parent company Merkur, d. d., and 7 other companies in 5 countries. Their core activity is selling products for home improvement and for skilled craftsmen. The company is recognizable through its broad network of sales centers, which comprises 27 centers in Slovenia, 6 in Croatia, 3 in Serbia, and 1 in Bosnia and Herzegovina and Macedonia. Their main advantage is bringing together in one place the concept of successfully selling products for construction, renovation and maintenance, for entertainment, luxury and high-quality living. The demanding concept is also followed by Merkurs 18 franchise stores in Slovenia, 1 in Bosnia and Herzegovina, and the online store www.merkur.si. The Merkur Division supplies companies through three sales channels. Wholesale buyers can purchase goods at the sales centers, where they can view and try out the products, and immediately take them over personally. The majority of goods are sold to the companies by wholesale agents directly from central warehouses or through transit. The third channel is the MERKURPARTNER website, designed for wholesale business partners in Slovenia. The most loyal buyers enjoy the benefits of Merkurs loyalty card. At the end of 2010, the number of active loyalty card users stood at some 500,000. Similar cards are used in Croatia, Bosnia and Herzegovina, and Serbia. The year 2010 was especially tough for Merkur. The audit of financial statements for 2009 and the first half of 2010 revealed insolvency, so we decided to restructure Merkur under courts protection through compulsory settlement proceedings. In September, we officially declared insolvency and started drafting a Financial Restructuring Plan. We also started implementing operational restructuring measures prepared in collaboration with the consultancy company Roland Berger. On 26 October we filed all the required documents at the Kranj District Court, and on 3 November 2010 the compulsory settlement proceedings were officially launched. Urgent operational and financial restructuring measures and measures for increasing trust through the compulsory settlement proceedings helped us gain liquidity and solvency of Merkur, d. d. The only strategy that we have followed in the past 12 months was the strategy of survival, which is still in full swing and is supported by appropriate documents. In May 2011, we recorded positive operating result and profit for the first time since the crisis began. Merkurs financial weakness remains the obstacle preventing the company from fully moving from the strategy of survival to a growth strategy. A lot of work and effort will be necessary to eliminate risks from the environment and the balance sheet. After the adopted compulsory settlement, Merkurs capital adequacy will not be optimal, and it will be necessary to consider a capital injection in the company together with the development plans.

Mission
We provide satisfaction to our customers by offering them quality products and excellent advice.

Vision
We will become the market leader in Southeast Europe in the sale of products for home, DIY goods, construction, electro-installation and metal materials and technical products for professional use.

Merkurs Values
The key values of Merkurs modern and flexible organizational culture are employees creativity, loyalty and enthusiasm. We carry on the 115-year tradition of success by adjusting to changes in the environment, with the ability to find and exploit market opportunities, and with the desire for constant development.

Annual Report Merkur, d. d., 2010

Merkur Companies Product Portfolio


Merkurs versatile product portfolio comprises over 900 product groups with over 150,000 products. Groups of products are combined in the following strategic programs: Metal products: sheet metal, stainless sheet metal, girders and sections, welding and technical materials, steel rods and bars, wires, pipes, tool steels, reinforcing steel and mats, non-ferrous metal products. Construction materials and wood: cement and lime, bricks and roofing, insulation materials, drywall systems, products for the garden, agriculture and forestry, wood and wooden products, doors and windows, wall panels and flooring. Tools and hardware: locks, fittings and fasteners, power tools and accessories, grinding materials, tools and accessories, measuring devices, lifting and handling equipment, hand tools, industrial rubber products, protective clothing and equipment. Electro and installation materials: electro-installation materials, lighting equipment, wires and cables, switching and protection devices, energy-related equipment, plumbing and fittings, tiles, bathroom ceramics and equipment, wellness program, heating, ventilation and air-conditioning systems, other installation and electro materials. Consumer goods: audio and video equipment, small household appliances, big household appliances, heating appliances, kitchen utensils, office supplies and personal computers, telecommunication equipment, gardening program, agricultural and forestry program, other consumer goods. Chemical and Paper Products: paint and chemical products, faade systems, industrial chemicals, plastic granulates, printing paper and materials, packaging materials. Value Added Own Labels Private labels BIvA, MTECH and MQ, which are managed by the Merkur Division, are gaining importance in the Merkur Group. BOF is meanwhile a brand of the Big Bang Division. Private labels offer the best quality in their price range. They are a synonym for products matching the products and brands of established manufacturers in quality, while having more affordable prices. Private labels are aimed at expanding and upgrading the existing product portfolio. Our vision is to bring high quality and esthetics closer to all consumers.

The Most Significant Events in Merkur, d. d., in 2010 EvENTS RELATED TO THE COMPULSORY SETTLEMENT PROCEEDINGS
Decision on Insolvency of Merkur, d. d.
At its session on 16 September 2010, the Management Board adopted a decision on insolvency of Merkur, d. d. Based on the re-audited annual report for 2009, financial statements from 30 June 2010, and documents produced by relevant support offices and consultants, the Management Board estimated that Merkur, d. d., met all the criteria for declaring insolvency as determined in Article 14 of the Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act, which defines long-term insolvency. The loss in that year and the losses brought forward have amounted to one half of the share capital and could not be covered with the profits brought forward or the reserves. The decision on insolvency is part of Merkurs reorganization plan and presents legal protection of the companys assets and the creditors receivables.

Management Board of Merkur, d. d., Files the Financial Restructuring Plan in Court
On 26 October 2010 and within the deadline set by the court, Management Board of Merkur, d. d., filed the Financial Restructuring Plan in court. The Supervisory Board approved the plan in the session held on the same day. In the last weeks before that, the Management Board of Merkur, d. d., harmonized the Financial Restructuring Plan with the banks, shareholders, creditors, suppliers and subsidiaries.

The Financial Restructuring Plan of Merkur, d. d., contains the following key elements:
A capital injection for Merkur, d. d, in the amount of at least EUR 85 million, which will be performed by converting creditors receivables into equity. This means that the creditors receivables will be converted into equity of Merkur, d. d. The price per share is EUR 57.5 for ordinary (unsecured) creditors, and EUR 40 per share for creditors with the right to separate settlement (secured). The part of receivables of unsecured creditors, which the creditors do not choose to convert, will be evenly paid in the extent of 60% over the next 5 years.

The Court Issues a Decision on Launching Compulsory Settlement Proceedings in Merkur, d.d.
On 3 November 2010, the Kranj District Court issued a decision on launching the compulsory settlement proceedings. The decision meant that we successfully passed a significant milestone in saving Merkur. The presented Financial Restructuring Plan provides legal protection for all the creditors and even repayment of due debts in a transparent way. This was also provided by Ladislav Hafner, a receiver appointed by the court, who monitored and approved all the transactions of Merkur, d. d., throughout the compulsory settlement proceedings. All important documents, including the Financial Restructuring Plan, are published on the AJPES website under the tab with published decisions and documents issued in insolvency proceedings. The AJPES website also contains all other notifications related to the compulsory settlement proceedings.

Merkur Gets Loan for Purchasing New Stock


On 11 November 2010, the Management Board of Merkur, d. d., received a proposal from 15 banks, which would give a EUR 35 million syndicated loan to Merkur in the same month so that it could purchase new stocks and refill the shelves. On 15 November 2010, the proposal was first discussed by the creditors committee, which the court appointed in the compulsory settlement proceedings. The loan also requires a courts approval, because Merkurs Management Board is not allowed to manage any transactions independently during the compulsory settlement proceedings. In the Financial Restructuring Plan, the Management Board set the minimum amount of the loan required to revive the operations at EUR 40 million. After receiving EUR 35 million from the banks, the Management Board would try to get the remaining EUR 5 million from other sources. Getting the syndicated bank loan presents the second step necessary to successfully conclude the compulsory settlement proceedings in Merkur.

Annual Report Merkur, d. d., 2010

The Supervisory Board Approves the Loan Contract


On 24 November 2010, the Supervisory Board approved the loan contract between Merkur and the banks, under which Merkur would get a EUR 35 million syndicated loan earmarked solely for purchasing products and covering costs related to the purchase. In the following days, contracts were signed with all 11 banks participating in the loan. The banks must follow internal rules upon signing the contract and the appropriate internal bodies must examine it, so the date when Merkur would receive the funds has not been set yet. The loan is intended for purchasing goods and providing an appropriate range of products in Merkurs sales centers also after the New Year season.

new Management Board members of Merkur, d. d., for the term from 15 July 2010 to 1 July 2015: Bla Pesjak was in charge of finance, investments and controlling, Rok Ponikvar of procurements, sales and logistics, and Uro Zajc of marketing, product portfolio and development. Marjan Smrekar, the workers director, remained a member of the Management Board.

Management Board Chairman Bojan Knuple Dies


On the evening of Thursday, 23 September 2010, Management Board Chairman of Merkur, d. d., Bojan Knuple passed away at his home. The remaining four members of the Management Board kept their full mandate and continued performing the work necessary to revive Merkurs operations.

Payments to Former Merkur Employees


On 28 December 2010, Merkur paid out severance pay and compensation for wages to former employees based on the approval by receiver Ladislav Hafner. After the parliament supported the authentic interpretation of a part of the Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act in a 57-0 vote at an extraordinary session on 23 December 2010, and the act was published in issue 106 of the Official Gazette of the Republic of Slovenia on 27 December 2010, receivers in both companies approved the payment. According to this interpretation, the unpaid severance pay to workers laid off before the compulsory settlement preferential receivables. Merkur paid EUR 453,000 to 50 former employees, EUR 10,900 of which was spent on compensations, wages and compensations for wages.

On 29 September 2010, the Supervisory Board of Merkur, d. d., debated the half-year report and talks with the banks, and adopted decisions regarding the management of the company after the sudden death of Bojan Knuple. The remaining four members of the Management Board kept their full mandate and continued performing the work necessary to revive Merkurs operations. The Supervisory Board appointed the Management Board member in charge of finance, investments and controlling Bla Pesjak as temporary Chairman of the Management Board. The Management Boards priority is drafting a Financial Restructuring Plan.

Merkur Gets the Syndicated Loan


On 28 December 2010, the Management Board of Merkur, d. d., signed the eagerly awaited approval for a EUR 35 million syndicated loan. The approval of the loan is one of the key elements of the Financial Restructuring Plan. Merkur should start drawing the loan in the first weeks of 2011, mostly for purchasing goods to provide a quality range of products in its retail network in 2011. The banks will monitor the drawing of the loan and fulfillment of the set goals annually until 2016, when the loan will be repaid.

OTHER EvENTS
Letter of Intent on Collaboration with the Mercator Group
On 5 May 2010, Merfin, d. o. o., the majority owner of Merkur, d. d., and Mercator, d. d., signed a letter of intent on including Merkur in the Mercator Group. With this, several procedures were launched, including due diligence in Merkur. According to plans, the Merkur Division would be excluded from the Merkur Group, and would be owned by Mercator, d. d. Mercator would preserve the Merkur brand, and merge Merkur and Mercators entire technical sales range under this name. At the end of June 2010, with the banks support and after an agreement between Merkurs owners and the Management Board, the option in which the Merkur Group preserves its integrity upon acquiring additional financial resources, proved the best solution for the future of Merkur Group and its business partners.

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PERSONNEL CHANGES
Agreement on Terminating Employment Agreement with Goran elesnik
At the extraordinary session on 22 March 2010, the Supervisory Board approved the agreement on consensually terminating the employment agreement with Management Board member Director of Commerce Goran elesnik. On 1 April 2010, his tasks were taken over by Mersteel director Gregor Krajnik, who was however not appointed a Management Board member. After that, the management Board of Merkur, d. d., comprised three members: Bine Korde, Milan Jelovan and Marjan Smrekar. On 1 April 2010, Darko Gregori, the director of Logistics in Mersteel, took over as the director of Mersteel.

The National Investigation Bureau Investigates Transactions of Merkurs Former Management Board
Early in the morning on 2 December 2010, the National Investigation Bureau visited Merkurs premises in Naklo and Celje. It was investigating the operations under the previous Management board of Merkur, d. d. The Management Board of Merkur, d. d., met the representatives of the National Investigation Bureau in a three-hour meeting and promised them full cooperation. They provided the detectives with information on the companys operations during the time when Merkur was managed by the Management Board chaired by Bine Korde. The investigation is focusing on business decisions made by the previous Management Board in the final years, especially decisions related to the company takeover. The National Investigation Bureau detectives finished the search in Merkurs offices in Naklo late in the night, carrying with them numerous documents on Merkurs operations under Bine Kordes management.

New Supervisory Board Appointed


At the 21st general meeting on 23 June 2010, all shareholders of Merkur, d. d., unanimously supported the proposal to appoint a new Supervisory Board, after the members of the existing Supervisory Board tendered their resignations. Matev Slapniar, the Risk Management Office Director at Gorenjska Banka, d. d., and Antonija Pirc, the Strategic Controlling Director at Sava, d. d., were appointed as representatives of the shareholders, with Slapniar becoming the new Supervisory Board chairman. Ana Hochkraut, the chairwoman of Merkurs Workers Council, was appointed the workers representative in the Supervisory Board.

Former Management Board Chairmans Term Ends, New Management Board Chairman and Members Appointed
The new Supervisory Board held its first session immediately after the General Meeting, on 23 June 2010. They approved the proposal filed by Albin Korde on consensually terminating his term as the chairman of the Management Board on 1 July 2010, and appointed Bojan Knuple, the director of Bing Bang, the new Management Board chairman for the term from 1 July 2010 to 1 July 2015. On 12 July 2010, the Supervisory Board appointed three

Annual Report Merkur, d. d., 2010

Supervisory Board Appoints Temporary Management Board Chairman

Notification on Changes in Significant Interests


On 25 August 2010, Merfin, d. o. o., cut its stake in Merkur, d. d., by 120,145 shares or 9.15% of voting rights (from 67.41% to 58.26%), while Sava, d. d., increased its stake by the same percentage, from 10.01% to 19.17%. On 19 October 2010, Iskratel, d. o. o., H&R, d. d., and GBD, d. d., received payment from the pledged securities in Merkur owned by Merfin, d.o.o. With this, Merfins stake in Merkur, d. d., decreased by 202,729 shares (from 58.26% to 42.81%). Iskratel, d. o. o., got 99,383 shares or 7.57% of votes in Merkur, d. d. H&R, d. d. got 58,600 shares or a 4.46% voting power in Merkur, d. d. GBD, d. d., got 44,746 shares or a 3.41% voting power in Merkur, d. d. These companies did not hold a stake in Merkur, d. d., before this transaction. On 4 November 2010, Ananke Handels und Beteiligungs Gmbh received payment from Merkurs pledged securities owned by Merfin, d. o. o. It acquired 328,145 shares or 25% of votes in Merkur, d. d., while Merfins stake in Merkur, d. d., decreased from 42.81% to 17.81%. Ananke Handels und Beteiligungs Gmbh did not own shares in Merkur, d. d., before this transaction. On 24 November 2010, Merfin, d. o. o., decreased its stake in Merkur, d. d., from 17.81% to 11.71%. On the same day ML Ineniring, d. o. o., decreased its stake in Merkur, d. d., by 9,060 shares (from 0.69% to 0.00%). On 24 November 2010, Banka Koper, d. d., acquired 89,223 shares or 6.80% of votes in Merkur, d. d. After the transaction, Banka Koper has 165,488 shares or 12.61% of votes in Merkur, d. d. On 21 December, Salonit Anhovo, d. d., received payment from Merkurs pledged securities owned by Merfin, d. o. o. It acquired 38,000 shares or 2.90% of votes in Merkur, d. d., while Merfins stake in Merkur, d. d., decreased from 11.71% to 8.81%. Before this transaction, Salonit Anhovo, d. d., did not own shares in Merkur, d. d.

Prizes and Awards


Merkur Becomes Respected Employer of 2009 At the end of 2009, the MojeDelo.com employment portal carried out an in-depth and professional survey on most respected employers in 2009, and published the results in January. Over 3,000 job seekers participated in the survey and by different criteria assessed the reputation that Slovenian companies have on the labor market. Merkur made it onto this elite list of respected employers and proved that it was a successful and stable company, which was recognized also by potential job candidates assessing the companies. Merkurs Private Label BIVA Wins Important International Award Wolda In June 2010, Merkurs private label BIvA, developed by creative director Aljoa enk (an internationally acknowledged designer with two Red Dot awards) and brand manager Bla Bezek, received the Wolda Best of Nation award for the logo of high-tech protective coatings BIvA Nan. The quality of innovative protective coatings developed in Slovenia is thus also complimented with internationally acknowledged high-end design of Nan products. Wolda Worldwide Logo Design Annual is an internationally acknowledged award conferred by ICOGRAD (The international Council of Graphic Design Association World body for professional communication design), and it presents the main authority in the field of assessing excellence in design of logos. In addition to this, Aljoa enk also received an acknowledgment for the logo of the THNTNK consultancy firm, which presents one half of the Wolda awards presented in Slovenia this year. Merkur Wins Trusted Brand 2010 Title On 30 September 2010, Trusted Brand 2010 titles were conferred at Ljubljanas Union hall. Forty winning companies took the stage, after readers of Readers Digest revealed in an independent survey that these are the brands they trust and like the most. Merkur received the title in the Shopping centers for home and garden category, where it got a total of 39.1% of all votes. We are also proud that Merkurs brand was mentioned in the Paints for home category, where we were placed 4th5th. This reflects our activities in developing our private label, which is resolutely entering Slovenian consumers memory with the BIvA Lestet and BIvA Freska brands. Merkurs Private Label BIVA Receives the Second International Award Merkurs creativity and dedication to bring the premium quality products closer to average buyers keeps catching international attention, and Merkurs private label BIvA received another award in 2010. After winning the WOLDA international award, which was conferred on the young team of Aljoa enk (creative director) and Bla Bezek (brand manager) two months ago, the packaging of BIvA Nan products also received the silver Creativity International Award. The BIvA Nan high-tech protection coatings were the only Slovenian winner of the 40th Creativity International Awards.

New Sales Center and Warehouses


New Sales Center in kofja Loka On 24 March 2010, Merkur opened a new, 14,000 m2 sales complex in kofja Loka. Over 9,000 m2 large warehousing and sales facility with Merkurs sales center also hosts EngroTus supermarket, and Gorenjska banka. Reissued Operating Permit for the Sales Center in Vimarje Ministry of the Environment and Spatial Planning decided that the rejection of the operating permit for Merkurs sales center in vimarje was not justified. The Ministry decided that Merkur, as the investor, was not responsible for construction waste from the moment this was passed to the appropriate company that was to process it. Based on this decision, the administrative unit issued on 26 March 2010 an operating permit for the center, which was technically flawless from the beginning. We reopened the center on 9 April 2010. Merkur Gets a New Franchise in Idrija On Tuesday, 6 April 2010, Kolektor Koling opened a 780 m2 franchise store MERKUR KOLING in Idrija. From then, people from Idrija and nearby places can find at one place everything they need to improve their home, garden or home workshop. The store is open for consumers as well as entrepreneurs and craftsmen. Merkur Rodovita Opens in Lendava On 29 May 2010, Semenarna Ljubljana opened a new MERKUR RODOvITA franchise store in Lendava. Now people from Lendava and nearby places can find at one place everything they need to improve their home, garden or home workshop. The store is open for consumers as well as entrepreneurs and craftsmen. Merkur Launches State-of-the-Art Online Store On 13 December 2010, Merkur joined in the December shopping spirit by opening a new online store at www. merkur.si. In line with Merkurs tradition, the store sells everything for home, garden, free time, construction and renovation. The new online store follows the concept of user-friendly shopping, which is a characteristic of MERKUR sales centers, which have a carefully planned shopping routes, placed in a contemporary, elegantly designed environment. Instead of having a carefully designed shopping route, the online store is divided into ten virtual departments: seasonal products, appliances, household products, accessories, gardens, forests and farming, construction, heating and cooling, bathroom, workshop, and electronics. This also helps Merkur bring the sales range of its sales centers closer to the buyers, as the online store also presents a display window. To help users decide, the website also provides information on current special offers, benefits, and tips for do-it-yourself enthusiasts and home.

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Annual Report Merkur, d. d., 2010

Most Significant Events in Merkur, d. d., after the 2010 Financial Year EvENTS RELATED TO THE COMPULSORY SETTLEMENT PROCEEDINGS
Merkur Draws the Loan
After signing the eagerly awaited approval for a EUR 35 million syndicated loan in December, Merkur, d. d., received a green light to start drawing the loan from the bank consortium on 4 February 2011. By the end of April, the company spent the new money on refilling its stocks in sales centers and warehouses, and on boosting the wholesale segment.

Decision on Approving the Compulsory Settlement at Merkur, d. d.


On 15 July 2011, the Kranj District Court issued a decision on adopted compulsory settlement in Merkur, d. d., which was launched on 3 November last year. By 26 June 2011, when the vote was closed, the compulsory settlement received support by a sufficient number of creditors (95.35%). The decision became final on 11 August 2011.

PERSONNEL CHANGES
Supervisory Board Member Miro Medveek Resigns
Annual Report Merkur, d. d., 2010
Miro Medveek, Supervisory Board member elected in February, resigned from the post on 25 March 2011 due to conflict of interest.

Shareholders at MERKURs 22nd General Meeting Support Capital Injection


At the 22nd General Meeting of MERKUR, d. d., which was held on 25 February 2011, the shareholders unanimously supported a capital injection, which is extremely important for successfully completing the compulsory settlement proceedings. The capital injection performed by converting the creditors receivables is one of the key measures in Merkurs financial restructuring. In order for the capital injection to succeed, the creditors must register and convert into stakes at least EUR 85 million of receivables within a month. At the General meeting, the shareholders adopted all the resolutions on the agenda with the necessary number of votes. The General Meeting resolutions related to the capital injection will step into force after the compulsory settlement is approved. The General Meeting, in which 82% of the shareholders were present, also elected two new Supervisory Board members: Miro Medveek and vanja Jeraj Markoja.

Bla Pesjak Appointed Chairman of the Management Board Until the End of the Term
At a late afternoon session on 9 June, the Supervisory Board of Merkur, d. d., unanimously appointed Bla Pesjak as the Chairman of the Merkur, d. d., Management Board until the end of the term. The Management Board of Merkur, d. d., justified the trust bestowed on its members, and the temporary appointment of the Management Board chairman was revoked and Bla Pesjak was appointed Chairman of the Management Board for the remaining part of the term until 30 June 2015. Uro Zajc and Rok Ponikvar remain Management Board members. On 29 September 2010, the Supervisory Board appointed Bla Pesjak as temporary Chairman of the Management Board, whose term started on 30 September 2010 and would finish when a new Supervisory Board chairman was appointed or on 30 June 2015. When this decision was taken, the composition of the Management Board was uncertain due to the sudden death of the former Management Board Chairman Bojan Knuple. After the appointment, Merkurs Management Board reached the agreements necessary to continue the companys operations in the compulsory settlement proceedings, and at the same time adopted measures regarding the companys operations and drew guidelines for restructuring the company and groups operations.

Amended Financial Restructuring Plan


On 8 March 2011, the court published the amended Financial Restructuring Plan, and issued a decision on permitting changes to the Financial Restructuring Plan on the same day. The company amended the Financial Restructuring Plan and offered ordinary creditors more shares for a euro of their receivables than in the original financial restructuring plan. Every creditors that transferred its receivables onto the debtor, in line with the call on creditors to subscribe and pay new shares by paying in an in-kind contribution, received one share with the share capital of EUR 1 for every EUR 53.00 of converted ordinary receivables. The price for creditors with secured receivables remained the same at EUR 40.00 per share.

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OTHER EvENTS
The MERKUR Brand among si.Brands TOP 50 Brands in 2010
At the end of January 2011, the si.Brand Consumer Association for classifying and defining product and service brands published the latest si.Brand TOP 50 list for 2010. Slovenian consumers selected 50 best Slovenian product and service brands in 2010, and Merkur was ranked 14th. By making it among the si.Brand TOP 50 brands in 2010, Merkur got the right to use the si.Brand 2011 logo for a year.

Umbrella Agreement on Rescheduling the Loan


On 31 March, the Management board of Merkur, d. d., signed an umbrella agreement with the consortium of banks on rescheduling the loan that was envisaged in the companys Financial Restructuring Plan. Under the agreement, which is a key element for the success of the compulsory settlement, the interest rate will stand at 1% throughout the year 2011, and will be in accordance with the Financial Restructuring Plan later. The umbrella agreement on rescheduling the loan also determines that none of the secured principals, which are included in the rescheduling, will be due before 31 March 2016. After that, the principals will be due every three months until the year 2019. After the compulsory settlement is approved, annexes to the contract will be signed with the banks. Successful compulsory settlement proceedings now require subscribed capital injection in the amount of at least EUR 85 million, and the vote on compulsory settlement.

Merkurs Sales Range Now Only Available in Medium-Sized and Large Sales Centers
In order to optimize the operations, and fulfill the reorganization plan and Financial Restructuring Plan, MERKUR, d. d., closed three smaller sales centers around Slovenia: Merkur Mojster Kranj Primskovo was closed at the end of February 2011, and Merkur Mojster Ljubljana Beigrad and Merkur Mojster Ljubljana Jama were closed at the end of March 2011. As of April, the improved and more user-friendly sales range is only available in the existing medium-sized and large Merkur sales centers. Having only two sizes of sales centers (medium-sized with 3,0004,000 m2 and large with 6,000 7,500 m2) makes them easier to manage, and makes the Merkur brand more visible and user friendly. All employees from sales centers that were closed have kept their jobs. They were relocated to other sales centers or posts in the Sales, and the vicinity of their homes was taken into account. All three buildings were owned by Merkur, and selling them will help reduce Merkurs debt. Merkurs sales center in Celje was the first to have its surface optimized. The entire sales center was moved to the ground floor, and its surface was reduced from 10,260 m2 to 6,100 m2, which proved to be a good business decision.

Conversion of Receivables Successfully Completed, According to Merkurs Information


According to the information of Merkur, d. d., enough creditors sent statements on converging the receivables to the court by the deadline (8 April 2011), and at least EUR 85 million were provided for the capital injection. In line with the Financial Restructuring Plan, another important step was made towards successfully completing the compulsory settlement proceedings launched on 3 November 2010 with a decision by the Kranj District Court.

Voting in Merkur, d. d., Starts


On 26 May 2011, the Kranj District Court called on the creditors to vote on approving the compulsory settlement in Merkur, d. d. The creditors sent the voting ballots to the Kranj District Court within one months of the call.

Report of the Management Board Chairman


The year 2010 was doubtlessly the hardest in the 115-year history of the company. In the 1990s, Merkur set the right strategy of expanding from a wholesale company to a wholesaler and retailer, and unlike its rivals, it has constantly grown since then. It expanded its sales network throughout Slovenia, a large part of Croatia, and is also present in Bosnia and Herzegovina, Macedonia and Serbia. However, rapid growth in revenue also resulted in new costs and investments in new, increasingly larger sales centers, which turned out to be too expensive after the breakout of the economic crisis, especially from the aspect of financing cost. When the Management Board decided to carry out a management buyout in 2007 and started transferring the financial burden of the buyout onto Merkur, d. d., and its subsidiaries in the following years, the burden was too heavy and the company had to declare insolvency pursuant to the Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act.

The second set of problems resulted from the wrong business model with extremely high costs, above all the overheads. A review of Merkur, in which the consultancy firm Roland Berger made an international comparison of the operations, revealed that Merkur sells too few products per a square meter of sales facilities, and that the cost of selling them was significantly too high. Added value per employee was thus significantly lower than at our rivals, and this was reflected in the profitability of the operations. Companys business processes were not in line with good business practice in trade and resulted in extra, mostly cost burdens for the company. The third set of problems was caused by the environment and is mostly linked with the global economic crisis. In sales, the crisis caused a drop in investment demand, and later general illiquidity in business. Both had a significant impact on Merkurs performance, because the companies sales dropped and a large share of realized transactions was never paid. In sales in the retail sector changes arose in the size and structure of the consumption. The average amount per purchase spent in our stores dropped, and the structure of the average purchase changed from more expensive to cheaper products. The Management Board chaired by late Mr. Knuple prepared a plan for comprehensive restructuring of Merkur, d. d., and its subsidiaries. The program presented the basis for the companys Financial Restructuring Plan, which has been actively implemented since it was filed on 26 October 2010. In 2010, we managed to provide basic conditions for the companys survival and prevented its bankruptcy. Contrary to expectations, we managed to fill the shelves with products before the New Year shopping season through cost optimization and collection measures, showing to our creditors that a turnaround in operations is possible. We carried out the operational and financial restructuring during the compulsory settlement proceedings, and successfully concluded the process on 11 August. We are still successfully meeting the goals from the program, and since March our cash flow has been positive. The sales are constantly increasing and the companys role in the market is strengthening, so we remain the leading seller of technical products in Slovenia. Will Merkur succeed again? We believe it will, after all, we have been here for 115 years.

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Bla Pesjak, Chairman of the Management Board

Annual Report Merkur, d. d., 2010

Our team thoroughly analyzed the reasons for the companys problems and found out that Merkurs financial crisis was above all caused by an outflow of over EUR 180 million, which were rerouted through HTC DvA, d. o. o., to Merfin, d. o. o., which carried out the MBO. In addition to this, the resources were flowing out of the company through different transaction with shares and real estate, derivative financial instruments, and through issuing sureties and guarantees for the acquiring company.

Supervisory Board Report


Dear shareholders!
In the first half of 2010, the Supervisory Board of Merkur, d. d., comprised: Marta Bertoncelj (the Chairwoman), Jakob Piskernik (Deputy Chairman), and Branko Dernovek (member workers representative). At the 21st General Meeting on 23 June 2010, where all shareholders of Merkur, d. d., were present, all three Supervisory Board members stepped down and a new Supervisory Board was elected for a four-year term. The new Supervisory Board comprises Matev Slapniar (Chairman) and Antonija Pirc (Deputy Chairwoman) as shareholders representatives, and Ana Hochkraut as workers representative. At the General Meeting on 23 June 2010, shareholders also adopted changes to the Articles of Association, increasing the number of Supervisory Board members from three to six. At the 3rd session of the Workers Council, which was held in Naklo on 22 July, its members elected Peter Fink as the second workers representative in the Supervisory Board. At the companys General Meeting held on 25 February 2011, vanja Markoja Jeraj and Miro Medveek were appointed to the remaining two posts in the Supervisory Board as shareholders representatives. On 25 March 2011, Miro Medveek resigned due to conflict of interest.

At its sessions in 2010, the Supervisory Board spent the most time on issues related to the operations and their restructuring in the parent company and the group. The majority of time was spent on preparing and monitoring the compulsory settlement proceedings, and related harmonization with all the stakeholders. The Financial Restructuring Plan, which was prepared as part of the compulsory settlement proceedings, which were launched on 3 November 2010, is being implemented and all the necessary procedures in the compulsory settlement proceedings are running according the deadlines set by the law. The compulsory settlement was made final by the Kranj District Court on 11 August 2011. Alongside the compulsory settlement proceedings, the company also drafted a five-year plan and program of measures for meeting the targets, which was discussed by the Supervisory Board. The Supervisory Board discussed several other issues related to the company and groups current operations at its sessions.

Examination of the Annual Report


On 19 August 2011, the companys Management Board presented to the Supervisory Board the 2010 Annual Report with audited financial statements of Merkur, d. d., and the auditors opinion. According to the auditor, the financial statements and explanatory notes present a true and fair picture of the companys financial situation on 31 December 2010, and are compliant with the International Financial Reporting Standards adopted by the EU. At the 20th regular session on 26 August 2011, the Supervisory Board discussed the audited Annual Report of Merkur, d. d., for the year 2010, which was audited by Deloitte Revizija, d. o. o. The auditing company issued a positive opinion to the Annual Report on 17 August 2011. The Supervisory Board had no comments regarding the audit report by Deloitte Revizija, d. o. o. After carefully examining the audited Annual Report for the year 2010, the Supervisory Board did not have any comments regarding the report, and verified it unanimously at its session on 26 August 2011.

Work of the Supervisory Board


In 2010, the Supervisory Board met in 19 (16+3) regular sessions, in which it discussed regular reports on the operations on Merkur, d. d., and Merkur Group, and other current topics and important issues. At their 20th regular session on 10 May 2010, the Supervisory Board members listed in the first paragraph adopted the Annual Report of Merkur, d. d., for 2009, and the Consolidated Annual Report of Merkur Group for 2009.

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At our first session on 23 June 2010, members of the new Supervisory Board were acquainted with the resignation of the Chairman of the Merkur, d. d., Management Board Bine Korde, and appointed Bojan Knuple as the new Chairman of the Management Board for the term from 1 July 2010 to 1 July 2015. The company is presented by the Chairman of the Management Board, and represented by two members of the Management Board, or a Management Board member and a procurator. The Management Board can issue one or more procurations. The Supervisory Board approves the appointment or recall of procurators. At the second regular session on 7 July 2010, members of the Supervisory Board were informed about the companys performance in the first six months of 2010. They were informed about the notification on withdrawal of the audit report, which director of the auditing company KPMG, d. o. o., Marjan Mahni sent to the Chairman of the Management Board Bojan Knuple on 1 July 2010. Based on the withdrawal, a new audit of the 2009 operations and the drafting of the third annual report were launched. At the third regular session on 12 July 2010, we appointed Bla Pesjak, Rok Ponikvar and Uro Zajc as members of the Merkur, d. d., Management Board for the term from 15 July 2010 to 1 July 2015. Marjan Smrekar, the workers director, remained a member of the Management Board. The fourth regular session on 15 July 2010 was carried out by correspondence. At this session we adopted the resignation of Milan Jelovan, who prematurely terminated his term as a member of the Management Board on 15 July 2010. At the fifth regular session on 12 August 2010, members of the Supervisory Board were informed about the companys performance in July 2010. At the sixth regular session on 20 September 2010, the Supervisory Board was acquainted with the audited annual report and issued a positive opinion. The Supervisory Board verified the Annual Report of Merkur, d. d., for 2009, and the Consolidated Annual Report of the Merkur Group for 2009, issued on 30 August 2010. At the same time, the Supervisory Board also revoked its decision from the session held on 10 May 2010, with which it verified the Annual Report of Merkur, d. d., for 2009, and the Consolidated Annual Report of the Merkur Group for 2009, which were issued on 30 April 2010. At the seventh regular session on 29 September 2010, the Supervisory Board was informed that the term of Chairman of the Management Board Bojan Knuple was terminated on 24 September 2010 due to death. The Supervisory Board appointed member of the Management Board Bla Pesjak as the Chairman of the Management Board.

Proposal on Distributing the Distributable Profit


Together with verifying the Annual Report for 2010, the Supervisory Board also established that the company did not generate distributable profit. The Supervisory Board prepared this report for the General Meeting of shareholders in line with Article 282 of the Companies Act.

Conclusion
Last year, the companys excessive debt and tougher economic situation vitally impacted the performance and results, and the situation required that the company declared insolvency and launched compulsory settlement proceedings. Considering the significantly changed conditions in which Merkur, d. d., is operating, the company actively started implementing short-term measures and activities, and preparing a long-term business plan and strategic guidelines for the companys operational and financial reorganization. The Supervisory Board would like to thank the Management Board and all the employees for their contribution and effort in these difficult conditions. In the coming times we will have to face numerous big challenges, and we believe that with joint forces we can successfully overcome them and fulfill the planned goals. Naklo, 26 August 2011 mag. Matev Slapniar, Chairman of the Supervisory Board

Annual Report Merkur, d. d., 2010

All Supervisory Board members actively contributed to the boards work by regularly attending the sessions and participating in the discussions, as well as by preparing proposals and comments on the discussed issues.

Shares and Ownership Structure


Until 6 March 2008, the share of Merkur, d. d., was a prime market share at the Ljubljana Stock Exchange with the symbol MER. Prime market shares only include shares of the most successful Slovenian joint-stock companies. At the 18th regular General Meeting on 17 January 2008, the shareholders of Merkur, d. d., voted on delisting the shares of Merkur, d. d., with the symbol MER. The decision was adopted with 99.99% of the votes present or represented at the meeting.

Shares Owned by Management or Supervisory Board Members on 31 December 2010


On 31 December 2010 no old or new management or supervisory board members owned shares of Merkur, d. d.

Social Responsibility
Responsibility for Correct Business Decisions

Information on Merkurs Shares


The shares give the shareholder the right to: one vote at the General Meeting, proportional dividends paid out of profit, and proportional share of the remaining assets if the company goes bankrupt or is liquidated. All shares are freely transferable, ordinary, and bring the same dividend. Merkur, d. d., does not have preferred shares with fixed dividends. Every shareholder has the right to dividends, and to sell or transfer the shares to another person. Key Information on Merkurs Shares Information No. of shares* No. of shareholders
* 131,258 of these are treasury shares

We have introduced the tested operational standards of the parent company throughout the Merkur Group. We control the subsidiaries through monthly financial reports, annual external audits, and regular monitoring of their financial operations, receivables and stocks. In the times of difficult economic conditions, our main goal is to ensure stable operations and build foundations for new growth once the global economy picks up.

31 Dec. 2010 1,312,585 17

31 Dec. 2009 1,312,585 7

Index 100.0 242.9

Responsibility towards People and Environment


Proportionally to our performance, we support groups or individuals who need our help. By using contemporary construction methods and carefully planning the logistics paths, Merkur avoids needless impact on the environment. We pay attention to selling environmentally-friendly products. We were among the first to join the Energija Si project. We have undertaken to promote energy-efficient products, and educate customers and employees on the importance and ways of conserving energy. We are also a co-founder of ZEOS, d. o. o., the first and the largest Slovenian non-profit organization for waste electric and electronic equipment management. We were among the first Slovenian companies to introduce the option to return waste electric or electronic equipment free of charge upon purchasing new. We have an in-house Ecology Office, which brings together related environmental issues. This gives us transparent overview and control over implementing environmental programs, and provides a more detailed definition of responsibility and faster adjustments to legal requirements. In our offices, we are especially careful about waste batteries, chemicals, oils, and office supplies, especially cartridges, glue, detergents, and paper.

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Treasury Shares
Merkur, d. d., owns 131,258 treasury shares, which presents 10% of all shares. Ownership Structure on 31 December 2010 No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. Name Ananke Handels und Beteiligungs GmbH Sava, d. d. Banka Koper d. d. Merkur, d. d. Merfin d. o. o. Iskratel, d. o. o. Perutnina Ptuj d. d. H & R d. d. GBD d. d. Salonit Anhovo, d. d. Sam d. o. o. Domale CP Murska Sobota d. d. Grafist d. o. o. Mura -vGP d. d. TAP d. o. o. P.G.M. ineniring d. o. o. ML ineniring d. o. o. TOTAL No. of shareholders 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 17 All shares No. % 328,145 25.00 251,566 19.17 147,298 11.22 131,258 10.00 115,646 8.81 99,383 7.57 64,198 4.89 58,600 4.46 44,746 3.41 38,000 2.90 8,268 0.63 8,000 0.61 7,166 0.55 4,000 0.30 3,554 0.27 2,756 0.21 1 0.00 1,312,585 100.00

Annual Report Merkur, d. d., 2010

We carefully upgrade business and commercial processes in the Merkur Group. We use modern information technologies to provide good oversight over business events and fast access to important business information, and for high-quality risk management.

Governance and Management System


Merkur Group and its three divisions are managed by the holding company, Merkur, d. d. The Management Board of the Merkur, d. d., holding company is responsible for planning and realizing the strategic goals for all companies. The Supervisory Board monitors the management boards operations in line with the rules of the two-tier management structure. Up to four members of the Supervisory Board represent the interests of shareholders. They are elected by shareholders at a General Meeting. Up to two members of the Supervisory Board represent the interests of employees. By design this post is taken by the president of the Workers Council who may be joined by one of the members of the Workers Council.

Employees
The number of employees was reduced by more than 500 in 2010; we decided to systematically reduce the number of employees due to lower sales. In 2010 Merkur, d. d. began to prepare the program of discharging surplus employees and also carried our various soft methods of reducing employee numbers, namely by consensual termination and termination of employment with the right to compensation from the Employment Service of Slovenia. All surplus employees were granted the right to a severance pay in accordance with the law and the collective contract of Merkur, d. d. We were aware of the sensitive nature of the issue of lowering the number of employees, and put extra effort into communication with employees, especially through joint workers council and the unions.

The Management Board of Merkur, d. d. until 30 June 2010:


Bine Korde, president of the Management Board the general director Goran elesnik, member of the Management Board the director of commerce (until 22 March 2010) Milan Jelovan, member of the Management Board director of organization and IT (until 15 July 2010) Marjan Smrekar, workers director

The Management Board of Merkur, d. d. since 1 July 2010 (the term until 1 July 2015):
Bojan Knuple, president of the Management Board the general director (until 24 September 2010) Bla Pesjak, president of the Management Board (since 29 September 2010) Bla Pesjak, member of the Management Board, director of finance, investments and controlling (17 July 201028 September 2010) Rok Ponikvar, member of the Management Board, director of procurement, sales and logistics (since 15 July 2010) Uro Zajc, member of the Management Board, director of marketing, sales portfolio and development (since 15 July 2010) Marjan Smrekar, member of the Management Board workers director (until 31 August 2013) The Management Boards term ends on 1 July 2015.

Employees by Companies of Merkur Division Number Company 31 Dec. 2010 31 Dec. 2009 MERKUR DIVISION 2,918 3,686 Merkur, d. d. 2,142 2,675 Merkur Hrvatska, d. o. o. 380 517 Merkur International Beograd, d. o. o. 291 339 Intermerkur Nova, d. o. o., Sarajevo 101 139 Perles Merkur Italia, s.r. l. 3 8 Merkur, d. o. o., Cetinje 1 8

Index 79.2 80.1 73.5 85.8 72.7 37.5 12.5

Employees by hours worked 2010 2009 Index 3,225.6 3,493.8 92.3 2,376.6 2,579.7 92.1 458.0 495.1 92.5 262.0 264.0 99.2 118.0 140.0 84.3 5.0 9.0 55.6 6.0 6.0 100.0

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Educational Structure of Employees on 31 December 2010 The educational structure of employees did not change much in comparison with 2009. Due to the fact that the majority of employees terminated in 2010 had lower levels of education the most noticeable changes are in categories I, II, and III (unfinished primary school, primary school, and lower vocational education).

The Supervisory Board of Merkur, d. d. until 22 June 2010:


Shareholders representatives: Marta Bertoncelj the president Jakob Piskernik the vice-president Employees representative: Branko Dernovek 45.0 40.0 35.0 33.7 33.1 38.9 39.3

The Supervisory Board of Merkur, d. d. since 23 June 2010 (the term until 23 June 2014):
Shareholders representatives: Matev Slapniar, president of the Supervisory Board Antonija Pirc, vice-president Miro Medveek, member (25 February 201125 March 2011) vanja Jeraj Markoja, member (25 February 201124 February 2015) Employees representatives: Ana Hochkraut, member Peter Fratnik, member (since 22 July 2010-31 May 2014) The Supervisory Boards term ends on 23 June 2014.

30.0 25.0 20.0 15.0 10.0 5.0 0 0.7 1.0 3.9 4.9 2.1 9.2 9.8 10.8 10.4

0.7

0.7 0.8

0.0 0.0

I.

II.

III.

IV.

V.
Merkur, d. d.

VI.

VII.

VIII.

IX.

Merkur Division

Annual Report Merkur, d. d., 2010

The numbers of employees were reduced in the parent company Merkur, d. d., as well as in the subsidies of the Merkur Division.

ANALYSIS OF BUSINESS PERFORMANCE OF MERKUR, D. D.


1 Business Performance of Merkur, d. d.

Analysis of Business Performance of Merkur, d. d.


1 Business Performance of Merkur, d. d.

Operating Costs and Operating Profit/loss


The original costs fell by 8.3% compared to 2009. More than a half was generated by labor costs which in spite of the smaller number of employees fell by only 1.7% compared to 2009, because the discharged employees got their severance pay and compensations. The operating loss amounted to EUR 36,485 thousand.

Overview of the Most Important Financial Indicators of Merkur, d. d. Overview of the Most Important Financial Indicators of Merkur, d. d.
In thousand EUR Item OPERATING INCOME Sales revenue Other operating income OPERATING COSTS Costs Operational costs Costs by nature Costs of materials Costs of services Labor costs Amortization expense Long-term reservations Other operating expense Other operating costs 2010 1 326,184 316,574 9,610 -362,670 -236,494 -126,175 -94,131 -4,971 -26,704 -49,982 -9,782 0 -2,693 -32,044 80,080 -14,051 -36,485 -158,512 24,768 -219,765 -718 -220,483 2009 2 505,701 503,147 2,554 -493,012 -387,153 -105,859 -102,658 -5,649 -34,254 -50,854 -9,381 -302 -2,218 -3,201 115,994 13,336 12,689 -150,595 0 -137,907 -1,719 -139,626 Index 3=1/2 64.5 62.9 376.3 73.6 61.1 119.2 91.7 88.0 78.0 98.3 104.3 121.4 69.0 105.3 159.4 41.8 157.9

Financial revenue and expenses

Among other significant financial expenses are also interests inamount of EURof EUR 30.853 thousand. Among other significant financial expenses are also interests in the the amount 30.853 thousand.
Nearly three quarters of financial income came from the interest receivables in the amount of EUR 13,487 Nearly three quarters of financial income came from the interest receivables in the amount of EUR 13,487 thousand. thousand.expenses in the amount of EUR 24,768 thousand went to provisions for given guarantees. Other

Other expenses in the amount of EUR 24,768 thousand went to provisions for given guarantees.

Profit or Loss for the Financial Year Profit or Loss for the Financial Year
The loss generated in the financial year amounted to EUR 220,483 thousand. The loss generated in the financial year amounted to EUR 220,483 thousand.

2 Assets, Equity and Liabilities of Merkur, d. d.

2 Assets, Equity and Liabilities of Merkur, d. d.


In thousand EUR 31 December 2010 1 207,956 252,974 460,930 39,111 5,584 45,035 89,730 550,660 -100,446 131,571 368,910 150,624 519,534 651,105 550,660 31 December 2009 2 252,732 340,812 593,543 62,717 4,684 204,466 271,866 865,409 124,246 177,081 325,603 238,479 564,082 741,164 865,409 Index 3=1/2 82.3 74.2 77.7 62.4 119.2 22.0 33.0 63.6 74.3 113.3 63.2 92.1 87.2 63.6

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GROSS SALES INCOME PROFIT/LOSS FROM PRINCIPAL ACTIVITIES PROFIT/LOSS FROM OPERATIONS NET FINANCIAL INCOME/EXPENSES Other expenses PROFIT/LOSS BEFORE TAXES Tax on profit PROFIT/LOSS FOR THE FINANCIAL YEAR

Item Property, plant, equipment and intangible assets Financial assets, investment property and other noncurrent assets Total noncurrent assets Inventory Current financial assets and cash at bank Current trade and other receivables and other assets Total current assets TOTAL ASSETS Total equity Total noncurrent liabilities Current financial liabilities Current trade and other liabilities Total current liabilities Total liabilities TOTAL EQUITY AND LIABILITIES

Income from Operations and Gross Profit/loss from Sales

Income from Operations and Gross Profit/loss from Sales

Merkur, d. d. d., generated EUR 317 millionsales revenue in 2010, which iswhichless37.1% less thanshare of sales Merkur, d., generated EUR 317 million in in sales revenue in 2010, 37.1% is than in 2009. The in 2009. Thecarried outsales carried out in Sloveniaand the sales to foreign markets to 9.9%. in foreign contributed 29.7% of share of in Slovenia amounted to 90.1% amounted in 90.1% and the sales Wholesale markets to 9.9%. Wholesale contributed 29.7% ofremaining 70.3%. the sales revenue and retail the the sales revenue and retail the remaining 70.3%.
Other operating income reached EUR 9.6 million which is four times more than in 2009. Less than a third came Other operating income reached EUR 9.6 million which is four times more than in 2009. Less than a from profits after selling real estate, devices and equipment, and a quarter from paid receivables. third came from profits after selling real estate, devices and equipment, and a quarter from paid receivables. income fell by 31% compared to 2009 because of a drop in sales. Gross sales

Gross sales income fell by 31% compared to 2009 because of a drop in sales.

Operating Costs and Operating Profit/loss


The original costs fell by 8.3% compared to 2009. More than a half was generated by labor costs which in spite of the smaller number of employees fell by only 1.7% compared to 2009, because the discharged employees got their severance pay and compensations. The operating loss amounted to EUR 36,485 thousand. 27

On 31 December 2010 the total equity and liabilities of Merkur, d. d., amounted to EUR 550,660 On 31 The total was lower largely due to the mentioned impairments to EUR 550,660 thousand. The total thousand.December 2010 the total equity and liabilities of Merkur, d. d., amounted of financial investments and was lower which consequently bring significantly lower company assets. issued loans, which consequently issued loans, largely due to the mentioned impairments of financial investments andAccording to the data of 31 bring significantly current trade assets. According to the made up nearly 80% of all liabilities. After the December 2010 the lower company and financial liabilitiesdata of 31 December 2010 the current trade and financial liabilities settlement is 80% of all the financing structure will settlement is finalized, the financing structure will compulsory made up nearlyfinalized, liabilities. After the compulsorychange significantly in favor of noncurrent change these will in favor of to 85% of all liabilities, with contribute of current liabilities, sources as significantlycontributenoncurrent sources as these will only 15% to 85% of allliabilities.with only 15% of current liabilities.

Annual Report Merkur, d. d., 2010

Financial revenue and expenses We had extremely high financial expenses in 2010 as well. These were mainly caused by impairments of investments into subsidiaries in the total amountas well. These were mainly caused by impairments of Mersteel, We had extremely high financial expenses in 2010 of EUR 57,137 thousand (the biggest two are d. o. o., Naklo in the amount of EUR 34,916 thousand and Merkur Hrvatska, d. o. o., in the amount of investments into subsidiaries in the total amount of EUR 57,137 thousand (the biggest two are Mersteel, d. o. o., EUR 13,302 thousand) and impairments of loans given in the amount of EUR 67,723 thousand (the most Naklo in the amount of EUR 34,916 thousand and Merkur Hrvatska, d. o. o., in the amount of EUR 13,302 thousand) significant among these is the impairment of the loan given to HTC DVA, d. o. o., in the amount of EUR and impairments of loans given in the amount of EUR 67,723 thousand (the most significant among these is the 42.134 thousand). impairment of the loan given to HTC DvA, d. o. o., in the amount of EUR 42.134 thousand).

Cash Flow of Merkur, d. 3 3 Cash Flow of Merkur, d. d.


In thousand EUR Item CASH FLOW FROM OPERATIONS Financial result for the financial year Adjustments for non-cash items in profit or loss Change in net operating current assets and provisions Return/payment of income tax Net cash flow from operations CASH FLOW FROM INVESTMENTS Net cash flow from investments CASH FLOW FROM FINANCING Net cash flow from financing -33,862 14,399 8,374 -124,907 -220,483 215,341 33,108 2,775 30,740 -139,626 163,837 92,686 -6,416 110,481 2010 2009

The Development Strategy


The development strategy is aimed towards expanding our offer of high quality products and services in order to provide customer satisfaction. The key values of a modern and flexible organizational culture are employee innovation, loyalty and dedication. By adapting to the changes in the environment, discovering and exploiting market opportunities, and being driven to constant development weve been able to uphold the 115-year old tradition of successful business operations. Our goal is to become the number one seller of home products, DIY products, construction, electro-technical and professional technical equipment in Southeast Europe.

Due to the market conditions in 2010 the company's cash flow from operations dropped by two thirds Due to the market conditions in 2010 the positive cash flow from operations and investments compared to compared to the year before. All of the companyscash flow from operations dropped by two thirdswas used to the year before. loans and repaying the from operations and investments was used to pay interests on loans and pay interests on All of the positive cash flow loans. repaying the loans.

Well achieve our goals by finishing the reorganization in terms of operations and content as planned, and by starting and concluding the said operational and content reorganization throughout the entire group. We aim to establish the conditions that would help strengthen Merkurs position in the region. We will achieve them by enforcing the following strategies: expansion, adapting to marketing trends, future positioning of Merkur, changing and unifying the format of sales centers. The Expansion Strategy 1. Expanding to new markets: Analyze the buying power of the bigger cities in the region, Invest in new sales premises, Invest in the sales program, Expand the franchise network in Bosnia and Herzegovina, and Serbia. 2. Increasing our presence in capital cities and bigger economic centers: Invest in up to two sales centers in Zagreb, Invest in a sales center in Belgrade, Invest in a sales center in Ni or Novi Sad, Invest in a sales center in Ljubljana. 3. Carry the B2B operations over to other markets of the region: Additional human resources in subsidiaries, Identify the appropriate sales programs, Increase sales. Adapting to Marketing Trends The future positioning of Merkur is defined by the following assumptions: a) Customers need solutions: instead of comfort, nice atmosphere and a wide range of products, the customers of the sales centers look for ecologically sound and sustainable solutions and services. b) Split demand: Customers want high quality product brands by established manufacturers at sensible prices on one hand and cheaper own brand products on the other. c) Market segments: the biggest growth is expected in the renovations market. d) Converged sales channels: bring together the ranges of specialized stores and DIY sellers, FMCG sellers enter the technical sector, internet growing increasingly important as a sales and communications channel (multichannel retailing). e) Sales premises: further growth of total sales premise surfaces and average size of DIY centers. f) Prices: continue to push the prices down. Customers expect the best price. g) Consolidation: further consolidation of DIY sellers. The principle formats will gain from consolidation. h) Concept as the key factor to success: the concept will present the key competitive advantage. Having just the lowest prices will no longer suffice.

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Annual Report Merkur, d. d., 2010

Merkurs range of products comprises high quality products of established brands by Slovenian and foreign manufacturers. Whichever market we operate in, we aim to connect local and global suppliers with consumers and business customers. Were expanding our offer by developing our own quality product brands BIvA, MTECH and MQ.

The future positioning of Merkur Companies/professionals HORNBACH BAUHAUS

Hybrid Merkur Sales Centers exterior:

Sales to companyes B2B entrance

TARGET CUSTOMERS

B2C
MERKUR

B2B

PRAKTIKER

OBI BAUMAX MERKUR

Drive through

Sales to consumers B2C entrance

Hobby, DIY/standard users

Functionalities and products presentation

Design and solution presentation

Hybrid Merkur Sales Centers interior and the paths for customers

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Merkur must get closer to professionals and the DIY customers. The companys presentation must feature a greater emphasis on the design and presentation of solutions. This is especially important in the DIY segment. The key to increasing traffic and frequency of the sales centers is a live green (gardening) program. Changing and Unifying the Format of Sales Centers Retail is Merkurs main activity; 75% of sales are carried out through the sales centers (both B2B and B2C sales). Thus the sales center format is one of the key components of the company strategy as it defines its operations in the long run. In July 2010 Merkurs sales network comprised 32 sales centers in Slovenia, 8 in Croatia, 1 in Bosnia and Herzegovina, 3 in Serbia, and 1 sales center in Macedonia. The surface area of the sales centers was extremely heterogeneous as was the graphic design and the building type. Hybrid Model of Sales Centers We decided to standardize the image of sales centers and thus simplify the product range management and provide a uniform shopping experience for our customers. Taking into account the global trends that were aimed towards combining sales centers for consumers and sales centers for businesses in the last decade, and also analyzing consumer habits and following our competition at home as well as abroad, we decided on a hybrid model of sales centers combining the MERKURDOM and MERKURMOJSTER sales center types. The new guidelines also include the classic DIY and the more consumer-oriented sales centers (so called soft DIY) that also market items for home and garden, which also fits in with the future format of Merkurs sales centers. The format is also adapted to the future investment projects that strive for lower investment costs for a square meter of surface because it does not include building garages on the ground floors of sales centers. Sales Center Size Looking at the existing centers and available surfaces we decided to close all centers smaller than 3,000 m2. We grouped the mid-sized sales centers for the 3,0004,500 m2 format, this size is suitable for towns and mid-sized cities, while the larger centers were grouped in the 6,0007,500 m2 format, which we think is suitable for bigger cities. On the basis of the existing surfaces we made a plan of downsizing or growing of sales centers so that we can use them for one of the two selected formats.

Dr ive th ro ug h

Entrance B2B

Entrance B2C

According to the new format and center standardization plan we already downsized the SC (shopping centre) Merkur Hudinja center and expanded the surface of the SC Merkur Primskovo in the first half of 2011. In the second half of 2011 we plan to renovate or combine the centers in Nova Gorica (combine the centers), and in Novo Mesto, downsize the SC Merkur Murska Sobota and expand the product range in SC Merkur Rudnik (adding the construction and the professional range). In the future we plan to renovate the remaining centers, and invest in a new center in Koper at the Semedela location (and consequently close three existing centers: SC Koper, SC Izola, SC Lucija). We also feel that in the future, the model of classic lease should be used for new centers, because due to the simultaneous financial rehabilitation the investments in new centers will not be possible. We plan to implement this model when expanding our operations on Croatian, Bosnian, and Serbian markets.

Annual Report Merkur, d. d., 2010

Audited Financial Statements of Merkur, d. d.

Audited Financial Statements of Merkur, d. d.

All derived data (totals, differences, ratios and indices) have been from a value in euros and not euros and All derived data (totals, differences, ratios and indices) have been calculatedcalculated from a value inin thousands of euros. not in thousands of euros.

Balance Sheet of Merkur, d. d., as on 31 December 2010


In thousand EUR

Balance Sheet of Merkur, d. d., as on 31 December 2010

Item Property, plant and equipment Intangible assets Investment property Investments in subsidiaries Noncurrent financial assets Loans given Other noncurrent receivables Deferred tax assets Total noncurrent assets Inventories Current financial assets Loans given Current tax receivable Current trade receivables and other assets Cash and cash equivalents Total current assets TOTAL ASSETS Issued capital Capital reserves Revenue reserves Own shares (as a deductible item) Retained earnings/losses Fair value reserve Total equity Noncurrent financial liabilities Noncurrent liabilities from financial leases Deferred tax liabilities Other noncurrent liabilities Long-term provisions Total noncurrent liabilities Current financial liabilities Current liabilities from financial leases Trade and other liabilities including derived financial instruments Short-term provisions Total current liabilities Total liabilities TOTAL EQUITY AND LIABILITIES

Note 5.1 5.2 5.3 5.4 5.6 5.7 5.8 5.21 5.9 5.10 5.11 5.12 5.13

31 Dec. 2010 206,984 971 36,162 73,983 130,795 11,805 229 0 460,930 39,111 0 15,407 0 29,628 5,584 89,730 550,660 54,773 0 53,159 -53,159 -218,080 62,861 -100,446 41,880 55,463 0 40 34,189 131,571 366,700 2,211 150,064 560 519,534 651,105 550,660

31 Dec. 2009 Corrected 251,452 1,280 16,646 134,973 183,986 1,388 75 3,743 593,543 62,717 4,351 55,562 3,048 145,856 332 271,866 865,409 54,773 0 54,189 -53,159 1,373 67,069 124,246 96,848 57,602 14,659 63 7,908 177,081 323,547 2,056 237,962 517 564,082 741,164 865,409

31 Dec. 2008 Corrected 201,396 1,562 16,822 152,087 186,614 2,519 85 4,725 565,811 73,315 5,126 103,770 0 171,002 359 353,573 919,384 54,773 76,701 68,054 -53,159 50,398 86,080 282,848 114,549 51,194 12,694 70 9,845 188,352 269,261 517 173,256 2,534 448,184 636,536 919,384

ACCOUNTING REPORT OF MERKUR, D. D., FOR THE FINANCIAL YEAR 2010

30

5.14 5.15 5.16 5.21 5.17 5.18 5.19 5.16 5.20 5.18

The accounting notes and explanations are an integral part of financial statements and should bebe read accordingly. The accounting notes and explanations are an integral part of financial statements and should read accordingly.

36

Annual Report Merkur, d. d., 2010

Income Statement of Merkur, d. d., for the Period between 1 January 2010 and 31 December 2010 Statement of Merkur, d. d., for the Period between 1 January 2010 and 31 December 2010 Income Income Statement of Merkur, d. d., for the Period between 1 January 2010 and 31 December 2010
In thousand EUR Item REVENUE Item Cost of sold items REVENUE GROSS SALES INCOME Cost of sold items Other operating income GROSS SALES INCOME Distribution expenses Other operating income Administrative expenses Distribution expenses Other operating expenses Administrative expenses OPERATING PROFIT/LOSS Other operating expenses Financial income OPERATING PROFIT/LOSS Financial expenses Financial income NET FINANCIAL COSTS Financial expenses Other expenses NET FINANCIAL COSTS LOSS BEFORE TAX Other expenses Income tax expense LOSS BEFORE TAX Note 6.1 Note 6.1 6.2 6.3 6.2 6.3 6.3 6.4 6.3 6.4 6.5 6.5 6.5 6.5 6.6 6.6 6.7 6.7 2010 316,574 2010 -236,494 316,574 80,080 -236,494 9,610 80,080 -68,224 9,610 -25,907 -68,224 -32,044 -25,907 -36,485 -32,044 17,273 -36,485 -175,785 17,273 -158,512 -175,785 -24,768 -158,512 -219,765 -24,768 -718 -219,765 -220,483 -718 In thousand 2009 EUR Corrected 2009 503,147 Corrected -387,153 503,147 115,994 -387,153 2,554 115,994 -74,053 2,554 -28,604 -74,053 -3,201 -28,604 12,689 -3,201 27,957 12,689 -178,553 27,957 -150,595 -178,553 0 -150,595 -137,907 0 -1,719 -137,907 -139,626 -1,719

Cash Flow Statementof Merkur, d. d., for the Period between 1 January 2010 and 31 December 31 Cash Flow Statement of Merkur, d. d., for the Period between 1 January 2010 and 2010 December 2010
In thousand EUR Item CASH FLOW FROM OPERATING ACTIVITIES Profit/loss for the financial year Adjustments for: Amortization of property, plant and equipment Amortization of intangible assets Impairment of assets Reservation expense Profit/loss from disposal of property, plant and equipment, and investment property Investment expenditure Financial expenses Foreign exchange profit/loss Fall/increase in long-term provisions Income taxes paid Change in net working capital and provisions Decrease in trade and other receivables Decrease in inventories Increase/decrease in trade and other payables Increase/decrease in accruals and provisions Cash flow from operating activities Return/payment of income tax Net cash flow from operating activities CASH FLOW FROM INVESTMENT ACTIVITIES Interest received Foreign exchange gains received Dividends received Proceeds from sale of property, plant and equipment Proceeds from sale of investment property Proceeds from sale of investments Proceeds from paid loans Proceeds from return of later payments Acquisition of property, plant and equipment Acquisition of intangible assets Acquisition of investment property Acquisitions of investments in subsidiaries Acquisition of financial investments Acquisition of received loans Net cash flow used in investing activities CASH FLOW FROM FINANCING ACTIVITIES Proceeds from loans taken Costs of repaying taken loans Payment of foreign exchange differences Interest paid Net cash flow used in financing activities INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at the beginning of the financial term Cash and cash equivalents at the end of the financial term 213,552 -227,353 -123 -19,939 -33,862 5,252 332 5,584 468,013 -428,481 34 -25,167 14,399 -27 359 332 7,705 81 3,463 9,196 323 37,116 4,396 4,000 -3,405 -110 -135 -183 -10,751 -43,324 8,374 15,519 150 3,303 41,604 131 27,886 147,737 0 -60,551 -247 0 0 -74,990 -225,449 -124,907 -220,483 215,341 9,343 439 22,400 28,522 2,279 122,350 30,853 -40 -1,523 718 33,108 97,526 21,475 -86,047 154 27,966 2,775 30,740 -139,626 163,837 8,882 499 1,957 0 -118 125,602 25,476 -174 302 1,719 92,686 20,245 9,965 66,732 -4,256 116,897 -6,416 110,481 2010 2009 Corrected

PROFIT/LOSS FOR THE FINANCIAL TERM Income tax expense

PROFIT/LOSS FOR and FINANCIAL are an -139,626 The accounting notes THE explanations TERM integral part of financial statements and -220,483 read accordingly. should be

The accounting notes and explanations are an integral part of financial statements and should be read accordingly.

The accounting notes and explanations are an integral part of financial statements and should be read accordingly.

32

Other Comprehensive Income Statement of Merkur, d. d., for the Period between 1 January 2010 and 31 December 2010 Other Comprehensive Income Statement of Merkur, d. d., for the Period between 1 January 2010 and 31 December 2010 Other Comprehensive Income Statement of Merkur, d. d., for the Period between 1 January 2010 and 31
December 2010
Item Net Itemprofit/loss for the financial year Other comprehensive income in the financial year Net profit/loss for the financial year Changes in the fair value of property Other comprehensive income in the financial year Changes in the fair value of property Changes in the fair value of available-for-sale financial assets Eliminated/changed value of derived financial instruments for Changes in the fair value of available-for-sale financial assets cash flow hedging Eliminated/changed value of derived financial instruments for cash Disposal of available-for-sale financial assets flow hedging Effects of eliminating deferred tax assets and liabilities Disposal of available-for-sale financial assets Effects of eliminating deferredincome in the financial year Total other comprehensive tax assets and liabilities Total comprehensive income for the financial year Total other comprehensive income in the financial year In thousand EUR Note Note 7.1 7.1 7.2 7.2 7.3 7.3 7.4 7.4 2010 -220,483 2010 -220,483 -19,363 -19,363 3,513 3,513 11,641 11,641 -4,208 -224,691 -4,208 In thousand 2009 EUR Corrected 2009 -139,626 Corrected -139,626 39,798 39,798 -48,097 -48,097 185 -8,882 185 -1,980 -8,882 -1,980 -18,976 -158,602 -18,976

Total comprehensive income for the financial year -158,602 The accounting notes and explanations are an integral part of financial statements and -224,691 read accordingly. should be The accounting notes and explanations are an integral part of financial statements and should be read accordingly.

The accounting notes and explanations are an integral part of financial statements and should be read accordingly.

37 37

The accounting notes and explanations are an integral part of financial statements and should be read accordingly.

38

Annual Report Merkur, d. d., 2010

Statement Changes in Equity of Merkur, of d., for d. Period the Period between and the Period between 1 January 2010 Statement d. Changes in Equity of 1 January 2010 January 2010 and Statement of of Changes in Equity of Merkur,the d., for between Merkur, d. d.,1for31 December 2010 31 December 2010 and 31 December 2010
In thousand EUR In thousand EUR

Item

Item

Share capital

Fair Fair Fair value value Interest value Fair value Reserves Reserves reserve reserve rate reserve reserve Legal Own Legal Retained own for Own land and financial Retained swap TOTAL for own Share land and financial reserves shares capital reserves shares earnings Net loss buildings shares shares earnings Net loss buildings assets reserve EQUITY assets 1,030 53,159 54,773 -53,159 1,030 1,373 53,159 -53,159 31,928 1,373 0 37,952 0 -2,811 31,928 124,246 37,952

Interest rate swap reserve -2,811

TOTAL EQUITY 124,246

Balance on 31 December 2009 Balance on 31 December 2009 54,773

Comprehensive income for the financial year income for the financial year Comprehensive Net profit/loss for the financial year profit/loss for the financial year Net 0 0 0 -220,483 0 8,089 -220,483 -220,483 2,811 2,811 -220,483 -4,208 -224,691

Other comprehensive income inOther comprehensive income in the financial year the financial year Total comprehensive income Total comprehensive income for the financial year for the financial year 0 0 Transactions with owners Purchase of own shares Sale of own shares Transactions with owners Purchase of own shares Sale of own shares -

-15,108 -

2,811 8,089 -4,208 -15,108

0 1,373

-220,483 0

8,089 1,373 -220,483 -15,108 2,811 8,089 -224,691 -15,108

-3,812 3,812 -

-3,812 3,812 -

-3,812 3,812 0

-3,812 3,812 0 -100,446

Covering the total loss from the Coveringyeartotal loss from the financial year by the financial the by the decision of the management board decision of the management board -1,030

- -1,030 -1,373

- 2,403

- -1,373

- 2,403

34

Balance on 31 December 2010 Balance on 31 December 2010 54,773 0 53,159 54,773 -53,159 0 53,159 0 -218,080 -53,159 40,017 The items of other comprehensive income of other comprehensive income are shown in the net worth minus the deferred taxes. The items are worth minus thedeferred taxes. minus the deferred taxes. shown in the net worth The items of other comprehensive income are shown in the net The accounting notes and explanations are an integraland explanationsstatements and part of financial accordingly.and should be read accordingly. The accounting notes part of financial are an integral should be read statements

22,844 0 -218,080

0 40,017 -100,446 22,844

The accounting notes and explanations are an integral part of financial statements and should be read accordingly.

40

40

Annual Report Merkur, d. d., 2010

Statement of Changes in Equity ofof Changes d., Equity of Merkur, d. d., for the Period between December 2009 and 31 December 2009 Statement Merkur, d. in for the Period between 1 January 2009 and 31 1 January
Statement of Changes in Equity of Merkur, d. d., for the Period between 1 January 2009 and 31 December 2009
In thousand EUR In thousand EUR

Comprehensive income for the Comprehensive income for the financial year financial year Net profit/loss for the financial yearprofit/loss for the financial year Net Other comprehensive income in the comprehensive income in the Other financial year financial year 0 0 0 0 0 0 0 0 34 34 -139,626 -139,626 0 -139,626 -139,626 148 148 -139,626 -18,976 -158,602

-31,759 031,759

34 -50,917

14831,759 -18,976 -50,917

Total comprehensive income for the Total comprehensive income for the financial year financial year 0 0 Transactions with owners Transactions with owners Covering the total loss from the financialthe total loss from the financial Covering year by the decision of the management decision of the management year by the board board -76,701

34 -50,917 -139,626 14831,759 -158,602 -50,917

-4,521

-76,701 -9,344 -4,521 -

-49,378 -9,344 139,945

-49,378 -

139,945 -

-2,811

0 124,246

36

Balance on 31 December 2009 Balance on 31 December 2009 54,773 0 1,030 54,77353,159 0 01,030 -53,159 53,159 1,054 The items of other comprehensiveshown in the other comprehensive income arethe deferred taxes. The income are worth minusthedeferred taxes.minus shown in the net worth minus the deferred taxes. items of net shown in the net worth The items of other comprehensive income are

0 319 -53,15931,9281,054 37,952

319 -2,81131,928 124,246 37,952

The accounting notes and explanations are an notes and explanations are an integral part of financial statements and should be read accordingly. The accounting integral part of financial statements and should be read accordingly.

The accounting notes and explanations are an integral part of financial statements and should be read accordingly. financial years.

* The amendments to the equityThe amendments to the 2008 are explained December 2008 are the the previous financial Errors in the previous financial years. The amendments to the equity items for 31 December 2008 areitems for 31 in chapter 3.6 Errorsexplained in chapter 3.6 years. * for 31 December equity explained in chapter 3.6 Errors in in previous

41

41

Annual Report Merkur, d. d., 2010

Share Capital Item Item capital reserves Balance on 31 December 2008 Balance on 31 December 2008 amended* amended* 54,773 76,701

Fair Fair Fair Fair Other Other value value Interest value value Reserves reserves Reserves reserves reserve reserve rate reserve reserve Legal Share own for Retained from Own and financial land Retained swap and financial TOTAL for Capital fromLegal Own own land reserves capitalshares earnings sharesshares earnings loss buildings reserves reserves earnings Net shares earnings assets loss buildings Net reserve EQUITY assets 5,551 54,77353,159 76,701 9,3445,551 -53,159 53,159 50,398 9,344 -53,159 0 169 50,398 88,869 0 -2,959 169 282,848 88,869

Interest rate swap reserve -2,959

TOTAL EQUITY 282,848

Notes to the Audited Financial Statements of Merkur, d. d.


1 The Reporting Company

3. 2

Declaration of Compliance

The financial statements have been prepared in accordance with the IFRS as adopted by the EU. The accounting and reporting rules of the IFRS and the Companies Act were observed in the process.

New Standards and Notes that have not yet stepped into Force
In preparing the financial statements for 2010 the standards and notes that have not been in force yet on 31 December 2010 or their use was not mandatory in 2010 were not applied. IAS 24 Related Party Disclosure simplifies the demands for the disclosure of companies related to the government, and explains the definitions of related parties (applies for financial years starting on 1 January 2011 or later). IAS 32 Financial Instruments: Presentation calculates the issuing of shareholders rights (applies for financial years starting on 1 February 2010 or later). IFRS 1 First Time Adoption of International Financial Reporting Standards additional exemptions for the first adoption (applies for financial years starting on 1 July 2010 or later). IFRIC 14 and IAS 19: The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction advance payment of the minimum funding requirements (applies for financial years starting on 1 January 2011 or later). IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (applies for financial years starting on 1 July 2010 or later). The Company estimates that changes to these standards, corrections and notes will not significantly affect the financial statements in the initial stages of their use. The IFRS adopted by the EU are currently not significantly different from those adopted by the International Accounting Standards Committee, except for the following standards and notes that have not yet been approved on 31 December 2010: IFRS 9 Financial Instruments (applies for financial years starting on 1 January 2013 or later). IFRS 7 Financial Instruments: Disclosures the transfer of financial assets (applies for financial years starting on 1 July 2011 or later). Changes to standards and notes: IFRS Amendments (2010) the amendments to IFRS 1, IFRS 3, IFRS 7, IAS 1, IAS 27, IAS 34, IFRIC 13, mainly to clear the inconsistencies and explanations (most of the changes apply to financial years starting on 1 January 2011 or later). The Company estimates that the adoption of these standards, changes and notes will not significantly affect the financial statements in the initial stages of their use. However, accounting the risk protection related to the financial assets and liabilities portfolio remains unregulated as the EC has not adopted it yet. The Company estimates that using the accounting of the risk protection related to the financial assets and liabilities in accordance with the obligations of IAS 39: Financial Instruments: recognition and measurement, would not significantly affect the financial statements of the company if used on the date of the balance.

Merkur, trgovina in storitve, d. d. (hereinafter referred to as the Company) is registered in Slovenia at the following address: Cesta na Okroglo 7, 4202 Naklo. The financial statements and the annual report have been prepared in accordance with the International Financial Reporting Standards as adopted by the EU (hereinafter referred to as IFRS) and the Companies Act (ZGD-1). The financial year coincides with the calendar year. The principal Company activities comprise wholesale and retail of technical products, construction materials and wood, consumer products, chemicals, fitting materials end energetics. The management board confirmed the financial statements on 16 August 2011.

Controlling the Company

MERFIN, Holding Company, d. o. o., registered at verovkova ulica 55, 1000 Ljubljana, Slovenia, lost its control over Merkur, d. d. in 2010 because its ownership share dropped to 8.81% (9.79% voting rights) according to the balance on 31 December 2010. On 31 December 2009 MERFIN, d. o. o., had a 67.50% ownership or 75% of voting rights. On 30 June 2010 the company still had a 68.60% share, but had no influence on decision making since 1 July 2010 after the new management board of Merkur, d. d., started its term. In the second half of 2010 the creditors of MERFIN, d. o. o., were selling the seized shares of Merkur, d. d., this is why the ownership changed significantly compared to the last day of 2009 (see item Shares and the ownership structure in the Business report), but none of the owners have a controlling share. The bankruptcy procedure of MERFIN, d. o. o., Ljubljana was launched on 3 June 2011.

38

3 3.1

The Grounds for Compiling Financial Statements Assumption of an Operating Company

The financial statements are prepared on the assumption that the company in question is an operating one, which means that the assets are gained and sold and that the payables are covered on conditions of standard operations. Financial statements do not include the adjustments that would be necessary if the assumption of an operating company was not true, except in including the noncurrent receivables and payables of deterred taxes. These were eliminated entirely, and that is explained in item 5.21 Deferred taxes. On 16 September the Management Board of Merkur, d. d., established that the Company is insolvent and must therefore observe the regulations of the Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act (hereinafter referred to as ZFPPIPP). The Management Board also notified the Supervisory Board. In accordance with the ZFPPIPP, since the day when the insolvency was established, the Company settled its due obligations according to the said act. Merkur, d. d., filed a bankruptcy petition on 30 September 2010, which included a financial restructuring plan (FRP). The court issued a decision to launch the compulsory settlement and appointed the Official Receiver. The compulsory settlement procedure is described in item 9 Business events after the balance sheet date According to Article 40 of the ZFPPIPP the regulations of the act are used after compulsory settlement is confirmed and final, and until the debtor does not pay all its creditors for whom the compulsory settlement is in action. In accordance with the confirmed compulsory settlement the planned deadline for paying the creditors is 31 December 2015. In the event that the Company fails to fulfill the obligations of the financial reorganization plan the ability of the Company to continue its activities as an operating company will become uncertain.

3. 3

The Grounds for Measurement

The consolidated financial statements have been prepared on the historical cost basis except for the following items that are measured at fair value: Property, Investment property, Available-for-sale financial assets, Derivative financial instruments. The methods used to measure fair value are described in notes related to these assets, namely: 4.3 Property 4.5 Investment property 4.6 Financial assets 4.2 Financial instruments

Annual Report Merkur, d. d., 2010

Liabilities from financial lease Retained earnings Profit from 2009

58,603 50,398 139,626

19,133 49,344 139,945

39,470 1,054 319

3. 4

Functional and Presentation Currency

These financial statements are presented in euros (EUR), which is the Companys functional currency. All financial information presented in EUR has been rounded to the nearest thousand. Rounding may cause slight differences when adding the values.

3. 5

The Use of Estimates and Judgments

Reclassification Costs and Income in Connection Operating Receivables Reclassification of of Costs andIncome in Connection toto Operating Receivables In its financial statements for 2010 Merkur, d. d., recognized the costs of value impairment and write-off of operating In itsreceivables statements for 2010 Merkur, d. d., recognized the costs of as otherimpairment and write-off financial as other operating expenses, and the income from paid receivables value operating income. For better of operating receivables as other operating expenses, and the income from paid receivables andother data comparison the Company also reclassified the said categories from financial costs to operating costs as from operating income. For better data comparison the Company also reclassified the profit/loss from the term, financial income to operating income respectively. The reclassification does not affect the said categories from financial costs to operating costs and from financial d. d., for 2009. operating income respectively. The which is also shown in the bellow balance sheet of Merkur, income to reclassification does not affect the profit/loss from the term, which is also shown in the bellow balance sheet of Merkur, d. d., for 2009.

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The estimates and assumptions are regularly revised. Revisions to accounting estimates are recognized in the period in which the estimate is revised. Important assessments of uncertainty and critical judgment that the management discussed in the process of preparing the accounting policies and that affect the values in the financial statements the most apply to the classification of leases, valuations of property and financial assets, impairments of given loans and receivables from customers and reservation estimates.

The The Effect of Error Correction and Reclassification of and Income in ConnectionConnection with Effect of Error Correction and Reclassification of Costs Costs and Income in with Operating Operating Receivables on the Profit/loss of d., for 2009:d., for 2009: Receivables on the Profit/loss of Merkur, d. Merkur, d.

Item REVENUE Cost of sold items GROSS SALES INCOME Other operating income Distribution expenses - of which property amortization - of which leases for sales centers Administrative expenses Other operating expenses OPERATING PROFIT/LOSS Financial income Financial expenses - of which interests NET FINANCIAL COSTS PROFIT/LOSS BEFORE TAXES Tax on profit PROFIT/LOSS FOR THE FINANCIAL TERM

2009 Corrected 503,147 -387,153 115,994 2,554 -74,053 9,381 7,024 -28,604 -3,201 12,689 27,957 -178,553 25,167 -150,595 -137,907 -1,719 -139,626

2009 Previously published 503,147 -387,153 115,994 1,539 -75,480 8,822 9,010 -28,604 -1,878 11,572 28,972 -178,769 24,060 -149,797 -138,226 -1,719 -139,945

The difference because of correction 1,427 -559 1,986 1,427 -1,107 -1,107 -1,107 319 319

The difference because of the reclassification of costs and income 0 0 0 1,014 0 0 0 -1,323 -310 -1,014 1,323 310 0

3. 6

Errors in the Previous Financial Years

Merkur, d. d., corrects the errors from previous financial years retrospectively in accordance with IAS 8 in the first financial statements approved for publication following the discovery of errors. The errors are corrected by: recalculating the comparative values for the presented previous term or terms in n which the errors occurred, recalculating the initial balance of assets, debts and equity for the first presented previous term if the error occurred before the first presented previous term.

40

In 2010 Merkur, d. d., corrected an error from the previous terms occurred in classification of leases for certain sales centers in Slovenia. The management adopted this decision based on the acquired documentation which shows that certain business leases are treated as financial leases because of the existence of contractual rights or obligations towards lease givers for buying the property after the lease term expires. The error correction affects the financial position of the Company and also the balance because property is amortized based on the same amortization rates as apply for this group of assets according to accounting policies of the Company, this is why the amortization cost increased, as did the interest cost while the cost of leases dropped. Because correcting the error in the year it occurred would not be sensible and cost-efficient, the error is corrected by recalculating the starting balance of assets, debts and equity for the first presented previous term, that is, 31 December 2008. The errors from the previous terms are explained below.

The Effect of the Error Correction on the Financial Position of Merkur, d. d. The Effect of the Error Correction on the Financial Position of Merkur, d. d.
In thousand EUR Asset/equity item Property, plant and equipment Liabilities from financial lease Retained earnings 31 Dec. 2008 Corrected 201,396 51,194 50,398 31 Dec. 2008 Previously published 159,994 10,846 49,344 The difference because of correction 41,402 40,348 1,054

Significant Accounting Policies

45

The company has strictly followed the below listed accounting policies in all periods presented in the attached financial statements.

4.1

Foreign Currency Translation

Asset/equity item Property, plant and equipment Liabilities from financial lease Retained earnings Profit from 2009

31 Dec. 2009 Corrected 251,452 58,603 50,398 139,626

31 Dec. 2009 Previously published 210,609 19,133 49,344 139,945

Foreign Currency Transactions


The difference because of correction 40,843 39,470 1,054 319

Transactions in foreign currency are translated to the respective functional currency of the company at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to the functional currency at the ECB exchange date at that date. The foreign currency gain or loss is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for the active interests and payments during the period, and the amortized cost in foreign currency translated at the ECB

Reclassification of Costs and Income in Connection to Operating Receivables In its financial statements for 2010 Merkur, d. d., recognized the costs of value impairment and write-off

Annual Report Merkur, d. d., 2010

In thousand EUR

exchange rate at the end of the period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated into the functional currency at the exchange rate at the date when the fair value was determined. Foreign currency losses or gains are recognized in profit or loss, except for differences arising on retranslation of available-for-sale equity instruments, or a non-financial liability designated as cash flow hedges, which are recognized directly in equity.

4.3

Property, Plant and Equipment

Initial Measurement
An item of property, plant and equipment (hereinafter: PPE) is initially recorded at cost, which comprises their purchase price, import duties and non-refundable purchase taxes, and any costs necessary to bring the asset to working condition for its intended use. The cost also comprises borrowings costs (interest) related to the construction of an item of property, plant and equipment until the item is brought into use. Subsequent or agreed investments and improvements made to assets held under finance or operating lease are recognized as property, plant and equipment, or their part.

4.2

Financial Instruments

Non-Derivative Financial Instruments


The companys non-derivative financial instruments comprise: investments in equity of subsidiaries, available-for-sale financial assets, loans given and taken, and receivables and liabilities. Non-derivative financial instruments are recognized at their fair value, plus any costs directly attributable to the transaction on the date they are incurred, or on the day the company becomes a party to the contractual terms of the instrument. The company derecognizes a financial instrument when all contractual rights to receive cash flows expire, or when it transfers the contractual rights to receive cash flows from a non-derivative financial instrument with a transaction transferring all the risks and benefits of owning the non-derivative financial instrument. Any share in the transferred financial asset, which the company makes or transfers, is recognized as individual asset or liability. Nonderivative financial assets and liabilities are offset, and the net amount is reported in the balance sheet when, and only when the company has the legally enforceable right to set off the recognized amounts and there is an intention to settle on the net basis, or to realize the asset and settle the liability simultaneously. After the initial recognition, non-derivative financial instruments are measured as described below under individual categories of financial instruments. Accounting for financial revenue and expense is described under item 4.20 Financial Revenue and Expense.

Costs of replacing a part on a PPE are recognized in the book value of the asset, if it is probable that the company will enjoy economic benefits from the part of the asset in the future, and if the cost can be measured reliably. Subsequent expenditures on repairs and maintenance of PPE, the purpose of which is the restoration or maintenance of future economic benefits, are, on the basis of the originally estimated rate of efficiency and the service life of the asset, recognized as maintenance costs in the financial statements and as expenditure in the period when they are incurred.

Revaluation of Property, Plant and Equipment


After recognition as an asset, an item of property, plant and equipment is carried under the cost model, except for property that is carried under the revaluation model, which is based on the fair value less any subsequent depreciation and accumulated impairment losses. Revaluation is performed at least every five years. The company revaluated its real estate on 31 December 2009. It also checked the values at the end of 2010, and carried out revaluation on 31 December 2010 where necessary. If an assets book value is increased as a result of a revaluation, the increase is recognized in other comprehensive income as revaluation reserve under equity. Any decrease is recognized in other comprehensive income as a decrease in the revaluation reserve if the amount related to certain property was recognized as surplus under equity before, while the remaining loss is recognized directly in the profit or loss.

Derivative Financial Instruments

42

Merkur, d. d., holds derivative financial instruments in order to hedge its interest rate risk exposure, and holds options for purchasing shares. Derivatives are recognized initially at their fair value and attributable transaction costs are recognized in profit or loss when incurred. Subsequently, derivatives are measured at their fair value, and changes therein are accounted for as described below. Interest rate risk management is successful if it remains between 80 and 125%.

Determining Fair Value of Real Estate Carried Under Revaluation Model


The fair value of property is based on the market value. The market value of a property is the estimated amount for which a property could be exchanged on the date of valuation between knowledgeable, willing parties in an arms length transaction.

Determining Fair Value


The fair value of interest rate swaps is based on broker quotes. Adequacy of these quotes is tested by using discounted net cash flow analysis based on the terms of each contract, and using market interest rates for similar instruments at the valuation date.

Derecognizing Property, Plant and Equipment


When an asset is derecognized (disposed of or withdrawn from use), the revaluation reserve included in equity is transferred directly to retained earnings.

Cash Flow Hedges


For a derivative designated as a cash flow hedge, the effective portion of the derivatives gain or loss is initially recognized at fair value as a component of other comprehensive income, and is disclosed as hedge reserve, which is an item of equity. The amount recognized in equity is excluded and included in profit or loss in the same period in which the hedged cash flow affected profit or loss, and is recorded under the same item as the hedged item in the financial statement. Any ineffective portion of changes in the fair value of the derivative is recognized directly in profit or loss. The company discontinues hedge accounting, if the hedging instrument no longer meets the criteria for hedge accounting, or the hedging instrument is sold, terminated or exercised, or if the company revokes the hedge designation. The cumulative gain or loss recognized in other comprehensive income remains presented in the hedging reserve as long as the forecast transaction does not affect profit or loss. Since the company is in compulsory settlement proceedings, hedge accounting was discontinued in accordance with contract provisions, and the company recognized the cumulative effect in the profit and loss statement for 2010.

Depreciation, Depreciation Methods, and Useful Lives


Depreciation of PPE items begins on the first day of the month following the month when they are available for use. Depreciation is calculated on a straight-line basis over the estimated useful lives of each item of property, plant and equipment, and is recognized in the profit and loss statement. The estimated useful lives of assets are as follows:

Annual Report Merkur, d. d., 2010

Subsequent Costs

Type of property, plant and equipment Business premises, shops, warehouses Auxiliary warehouses and other facilities External surfaces and rail tracks Warehouse tents, containers, greenhouses Warehouse equipment Technological equipment, work devices, and machines Shop, office and other equipment Small tools above EUR 500 Computer and telecommunications equipment

Useful life 40 years 30 years 25 years 10 years 520 years 616 years 410 years 4 years 35 years

Measurement Subsequent to Initial Recognition


Subsequent to initial recognition, investment property is measured at fair value. Fair value of the property reflects the market conditions on the balance sheet day. The company revaluated the investment properties on 31 December 2010. The valuation of fair values of investment properties is performed by an authorized appraiser and in line with the prescribed methodology. Gains or losses arising from a change in the fair value of investment property are recognized in profit or loss for the period in which they arise.

Determining Fair Value


An external independent appraiser valuates the companys investment portfolio. The fair value of a property is based on the market value, which is the estimated amount for which a property could be exchanged on the date of valuation between knowledgeable, willing parties in an arms length transaction. In case it is impossible to determine current prices in an active market, the valuations are prepared by considering the aggregate of the estimated cash flows expected to be received from renting out the property. A yield that reflects the specific risks inherent in the net cash flows is then applied to the net annual cash flows to arrive at the property valuation.

Land, advances for PPE, PPE under construction or in process of acquisition, and art works are not depreciated.

4.4

Intangible Assets

Assets recognized as intangible assets include non-monetary intangible assets, such as computer software, longterm patents and licenses. Cost of internal research and development, brands and similar items are not recognized as intangible assets, but are immediately recognized as cost or operating expenses in the period when they are incurred. Intangible assets are carried at cost, less any amortization, and any accumulated impairment loss (see accounting policy Impairment of Assets).

Derecognizing Investment Property


An investment property is derecognized on disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. The gain or loss on disposal should be calculated as the difference between the net disposal proceeds and the book value of the asset and should be recognized in profit or loss.

Amortization
Amortization is calculated on a straight-line basis over the estimated useful lives of intangible assets, and is recognized in the profit and loss statement. Amortization of intangible assets begins when the asset is available for use. Estimated useful lives are as follows: Type of intangible assets Software Long-term licenses Useful life 5 years According to contract

4.6

Financial Assets

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Available-for-Sale Financial Assets


The majority of companys financial assets are classified as available for sale. Initially, financial assets and liabilities should be measured at fair value on the date of acquisition. Subsequently, they should be measured at fair value, which is based on the market value. The fair value of financial instruments that are quoted in an active market is their uniform bid price at the balance sheet date; the fair value of financial instruments that are not quoted in an active market is the weighted average price of securities from the transactions in the period, or a value based on a valuation model. Changes in fair value are recognized directly in other comprehensive income. When the asset is derecognized, the cumulative gain or loss is recognized in profit or loss. Impairment losses and foreign exchange gains or losses on available-for-sale financial assets are recognized in profit or loss. On disposal of financial assets, the company uses the weighted average price method.

Derecognizing Intangible Assets


An intangible asset is derecognized on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss upon derecognizing an intangible asset is the difference between any net disposal proceeds and book value of the asset. It is recognized in profit or loss when derecognition occurs.

4.5

Investment Property

Determining Fair Value


Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arms length transaction. When determining the fair value, the company follows the following hierarchy: The first level presents quoted market prices in an active market on 31 December (unadjusted) for assets or liabilities of the same class; Level two measurements use market based inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly. The third level presents inputs on assets and liabilities that are not based on observable market data. The company uses quoted market prices as the basis for determining the fair value of financial assets. If the financial instrument is not listed, or the market is deemed inactive, the company determines the fair value of the financial instrument by using inputs from levels two and three.

Investment properties are properties which the company holds either to earn rental income, or for capital appreciation, or for both.

Initial Measurement
An investment property is initially measured at its cost, comprising the purchase price and transaction costs. These costs include legal fees, property transfer taxes, and other transaction related costs. If it needs to be determined whether an asset is an investment property or property, the asset is deemed investment property if over 80% of its total value is used for renting out.

Annual Report Merkur, d. d., 2010

Financial Investments in Subsidiaries


Financial investments in subsidiaries are accounted for at cost in the companys financial statements. After acquisition, these investments are not revaluated due to exchange rate changes (if the investment was made into a company abroad), or due to increased value of the proportionate part of the equity of the company in which the company has invested. If the evaluation of the recoverable amount of the investment in a subsidiary shows that the book value exceeds the recoverable amount, the investment needs to be impaired to the recoverable amount.

Considering experience from the previous years and the difficult economic situation in 2010, the Management Board assessed that the possibility to recover the receivables has decreased significantly and decided to amend the estimation regarding the recoverable amount. The receivables are adjusted by 100% of their book value if their maturity has expired by over 180 days. Receivables for which a collection procedure has been launched in court, and receivables in compulsory settlement proceedings, are adjusted by 100%. Until 2009, receivables have been impaired by different percentages by groups or based on individual assessments and supported by bad debt insurance. Previous assessments on recoverability of receivables are explained in more detail under 1.13 of the Accounting Report for 2009. The company evaluates evidence about the impairment of loans individually for each significant loan. An impairment loss of a financial asset measured at amortized cost is calculated as the difference between its book value and the estimated future cash flows discounted at the original effective interest rate. Losses are recognized in profit or loss. Part of the impaired asset thus continues to be recognized through the unwinding of the discount. When a subsequent event results in a decrease of impairment loss, the decrease in impairment loss is reversed through profit or loss.

Financial Investments in Associated Undertakings


Financial investments in associated enterprises are accounted for at cost in the companys financial statements.

4.7 Loans Given


Loans given are initially measured at their fair value, and subsequently at amortized cost. Any differences between the fair value and amortized cost are recorded in the financial statements over the period of the loan repayment. The effective interest method is applied.

Impairment of Available-for-Sale Financial Assets


The company assesses evidence on impairment of available-for-sale financial assets for each asset individually. If the impairment in the fair value of an available-for-sale financial asset was recognized directly as revaluation surplus and there is objective evidence that the assets was long-term impaired, the impairment loss is recognized as a financial expense in the profit and loss statement. Objective evidence of impairment of an investment for a listed company is a prolonged or significant decrease of the financial investments fair value below its book value. A prolonged decrease is a decrease of over 9 months, and a significant decrease means that the fair value dropped under the book value by 40% or more.

4.8 Impairment of Assets


An asset is impaired when its book value exceeds its recoverable amount. At each balance sheet date, all assets are reviewed to look for any indication that an asset may be impaired. If there is an indication that an asset may be impaired, then the company must calculate the assets recoverable amount. The recoverable amount is the assets fair value less costs to sell, or its value in use, depending on which is higher. If the assets book value must be decreased, impairment loss is recognized in profit or loss for the period, unless it can be offset against revaluation reserve from past revaluations of the same asset.

Non-Financial Assets
The company reviews at each reporting date the book value of significant non-financial assets, except for deferred tax assets, to determine whether there is any indication of impairment. If such indication exists, the assets recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit is the higher of its value in use and its fair value less costs to sell. The assets value in use is estimated by discounting the estimated future cash flows to their present value, using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit). The impairment of an asset or a cash-generating unit is recognized if its book value exceeds its recoverable amount. Impairment is recognized in the profit and loss statement. Impairment losses recognized in respect of a cashgenerating unit are allocated first to reduce the book value of any goodwill allocated to the unit, and then to reduce the book values of the other assets in the unit (group of units) on a pro rata basis.

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Financial Assets (Including Receivables)


A financial asset is impaired, and impairment losses are recognized, if there is objective evidence that as a result of one or more events that occurred after the initial recognition of the asset the estimated cash flow from the asset has decreased, and this can be reliably measured. Objective evidence on impairment of assets can be: debtors failure to fulfill obligations or breach of contract; restructuring of the amount that debtors owe to the company in agreement with the company; indications that the debtor will go bankrupt; the disappearance of active market for the security. In case of equity securities, the objective evidence on the impairment includes a significant and prolonged drop of the fair value below the purchase price.

Impairment of Receivables and Loans Given


The company can assess the evidence of impairment individually or collectively. All significant receivables are assessed individually for specific impairment. If it is assessed that the book value of receivables exceeds their fair value, i.e. the recoverable amount, the receivables are impaired. If it is assumed that the receivables will not be settled by the set date of payment or in their full amount, they are deemed doubtful. If court proceedings have been launched, they are deemed disputed. Receivables of smaller values are assessed for impairment collectively, by grouping together receivables with similar risk characteristics. Receivables are grouped together by maturity. When assessing collective impairment, the company uses past trends of the probability of default, time required to collect the receivables and the losses incurred, adjusted for managements assessment as to whether the actual losses are likely to be higher or lower than suggested by historical trends considering current economic and credit conditions.

Annual Report Merkur, d. d., 2010

4.9

Inventories

4.11

Cash and Cash Equivalents

Measurement of Inventories
Inventories must be stated at the lower of historical cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling. The company determines the cost of inventories by using the weighted average cost method. The cost of purchase of inventories comprises the purchase price, import duties and other taxes (other than those subsequently recoverable from the tax authorities), and transport, handling and other costs directly attributable to the acquisition of goods or materials. Trade discounts, rebates and other similar items are deducted in determining the cost of purchase. When inventories are sold, their book value is recognized as an expense in the period in which the related revenue was accounted for.

Cash and cash equivalents comprise cash on hand and in the bank, and demand deposits. Automatic bank overdrafts are not cash but a short-term financial liability.

4.12

Equity

Total equity of the company is the total of its liabilities to owners that fall due if the enterprise discontinues its operations. It is defined by the amounts invested by owners and the amounts generated during operations that belong to owners, and reduced by loss from operations, repurchased treasury shares, and withdrawals (payouts). Total equity includes share capital, capital reserves, revenue reserves, retained earnings, fair value reserves, and treasury shares as a deductible item.

Repurchase of Share Capital (Treasury Shares)


When own shares or stakes recognized as part of the share capital are repurchased, the amount paid, which includes directly attributable costs and is net of any tax effects, is recognized as a deduction from equity. Repurchased shares or stakes are classified as treasury shares and are deducted from total equity. When treasury shares are sold or reissued, the amount received is recognized as an increase in share capital, and the resulting surplus or deficit on the transaction is transferred to retained earnings or capital reserves.

Net Realizable Value of Inventories


The cost of inventories may not be recoverable if the inventories are damaged, or have become wholly or partially obsolete, or if their selling prices have dropped. The cost of inventories may also not be recoverable if the estimated costs of completing or selling them have increased. The practice of writing inventories down below cost to net realizable value is consistent with the view that assets should not be carried in excess of amounts expected to be realized from their sale or use. The amount of any write-down of inventories to net realizable value and all inventory related losses are recognized as an expense in the period in which write-down or losses occur. Write-offs or partial write-offs of damaged, expired or unserviceable inventories are performed regularly during the year or during the inventory by individual items. Based on a detailed review of the inventories through the criteria of the turnover and age in 2010, the Management Board estimated that the realizable value of slow-selling inventories is extremely low, and decided to amend the estimated realizable value of inventories, based on which a flat-rate correction was carried out in the amount of 100% of the book value of articles with zero turnover and inventories over one year old on the balance sheet day. Until 2009, lower criteria were used in estimating the inventories realizable value and the inventories were impaired by 580% of their book value, depending on the type of the product. Previous estimations on inventories realizable value are explained in more detail under 1.12 of the Accounting Report for 2009.

Dividends
Dividends are recognized as the companys liability towards shareholders in the financial statements in the period in which the shareholders meeting adopted a resolution on paying dividends.

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4.13

Loans Taken

Loans taken are initially recognized at fair value, which is not reduced by attributable transaction costs. Subsequent to initial recognition, loans are stated at amortized cost, and any difference between historical cost and amortized cost is recognized in the profit and loss statement over the period of the loan on an effective interest basis.

4.10

Trade and Other Receivables

4.14

Trade and Other Payables

Measuring the Receivables


At initial recognition, trade receivables are measured at amounts evident from the relevant documents under the assumption that the amounts owed will also be collected. As a rule, trade and other receivables are measured at amortized cost calculated under the effective interest method. Current trade receivables are not discounted at the balance sheet date.

As a rule, trade and other payables are measured at amortized cost calculated under the effective interest method. Current trade payables are not discounted at the balance sheet date. Trade and other payables are initially recognized at amounts evident from the relevant documents, which show the receipt of a product or a service, performed work or charged cost, or expense, or a share in profit or loss.

Impairment of Trade Receivables


If there is objective evidence of an impairment of receivables, the loss is measured as the difference between the book value and the expected recoverable amount of receivables. Impairment of receivables is described in more detail under 4.8 Impairment of Assets Writing of receivables requires appropriate supporting documents: rejection of statement of balances of receivables, court decision, conclusion of compulsory settlement, conclusion of bankruptcy, and other appropriate documents.

Annual Report Merkur, d. d., 2010

4.15

Provisions

4.17

Income Tax

Provisions are recognized when a present legal or constructive obligation has arisen as a result of a past event, and it is probable that settling the obligation will require an outflow of resources embodying economic benefits. The effect of the time value of money is material, so the amount of a provision equals the present value of the expenditures expected to be required to settle the obligation.

Income tax comprises current and deferred tax. Income tax is recognized as expense in the profit and loss statement, except to the extent that it refers to items recognized directly in comprehensive income, in which case it is recognized in equity. Current tax payable is the tax expected to be paid on the taxable income for the financial year, using tax rates applicable at the balance sheet date, and any adjustment to tax payable related to previous periods. Deferred tax is recognized using the balance sheet liability method, based on temporary differences between the book values and tax bases for individual assets and liabilities. The amount of deferred tax is based on the expected manner of realization or settlement of the book value of assets and liabilities, using tax rates applicable at the balance sheet date, or tax rates in the period in which elimination of deferred tax assets or liabilities is expected.

Provisions for Severance Pay and Anniversary Bonuses


In accordance with the legal requirements and the collective agreement, the company must pay anniversary bonuses and severance pay upon retirement to employees. There are no other liabilities in respect of pension and retirement plans.

Provisions for State Subsidies


The company carries provisions from retained subsidies for employing a surplus quota of disabled persons. The company uses the provisions for improving working conditions for disabled persons.

4.18
Provisions for Lawsuits and Other Possible Obligations
The company has provisions for lawsuits in which it is a defendant. Annually, the company reviews the need for setting aside provisions based on the situation in the dispute and expected outcome. The company also has provisions set aside for other obligations, for which there is a probability of settlement in the future, i.e. for issued sureties and for a decision issued by tax inspectors.

Revenue

Revenue from Sale of Goods


Sales revenue from sale of goods and products is recognized at the fair value of the consideration received or receivable, less returns, and trade and quantity discounts. Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, there is certainty about the recovery of the consideration and the associated costs, or possible return of goods and products, and when the amount of revenue can be measured reliably.

Short-Term Employee Income

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Obligations for short-term employee income are measured on an undiscounted basis and are recognized as expenses as the work in question is performed. A liability is recognized for the amount expected to be paid within twelve months after the period expires if the company has a present legal or constructive obligation to make this payment for a past service provided by the employee and the obligation can be reliably measured (e.g. obligation for a unspent annual leave).

The Customer Loyalty System


The company issues Merkurs Loyalty Card to its customers. The card is used to record every purchase in sales centers or franchise stores, which brings extra benefits to card holders. Every three months card holders receive a discount coupon, which they can use upon their next purchase. Depending on the total value of all purchases made in the three months, card holders receive a credit in the extent of 25% of the total value of purchases. Revenue from rewarding loyal customers is deferred based on the fair value of the awards and the awards expected to be redeemed, until the awards are actually redeemed.

4.16

Leases

Types of Leases
Leases where Merkur, d. d., assumes all the significant risks and benefits arising from ownership are classified as finance leases. Other leases are classified as operating leases. Leased assets are not recognized in the companys balance sheet.

Revenue from Services Rendered


Revenue from services rendered is recognized in the profit and loss statement in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is estimated by reviewing the performed work.

Finance Leases
Initially, finance leases are recognized as assets and liabilities in the balance sheets at amounts equal to the fair value of the leased asset or, if lower, the present value of the minimum sum of lease payments, each determined at the inception of the lease. Subsequent to initial recognition, the asset is accounted for in compliance with the accounting policies applied to such an asset.

Rental Income and Finance Leases


Rental income from investment property is recognized as revenue on a straight-line basis over the term of the lease. Payments made under finance lease are recognized as revenue on a straight-line basis over the term of the lease.

Other Operating Revenue


Other operating revenue includes income arising from disposal of property, plant and equipment, and investment property as a surplus of their sales value over their book value, and revaluation of investment property to fair value, and revenue from recovered receivables (including reversal of impairment loss from receivables).

Operating Leases
Payments made under operating leases are recognized on a straight-line basis over the term of the lease.

Annual Report Merkur, d. d., 2010

A deferred tax asset is recognized to the extent that it is probable that taxable profits will be available against which it can be utilized in the future. Deferred tax assets are reduced to the extent that it is no longer probable that it will be possible to utilize the benefit of that deferred tax asset.

4.19

Expenses

4.21 Cash Flow Statement


The cash flow statement has been prepared using the indirect method and based on data from the balance sheet as on 31 December 2009 and 31 December 2010, and data from the profit and loss statement for 2009. Cash and cash equivalents in the cash flow statement present cash on hand and in bank accounts, and bank deposits with original maturity of up to three months.

Operating Expenses Operating expenses are classified according to their function as cost of goods sold, selling cost, general and administrative expenses (administration and purchases), and other operating expenses that are not classified as costs. Cost of Goods Sold The reposting of cost of inventories of merchandise to cost of goods sold is made on the basis of the weighted average price method. The cost of goods sold is directly decreased by rebates and super-rebates that are subsequently granted by the suppliers. Rebates are partly included in the cost of goods sold. Selling Cost (Including Depreciation) Selling cost (including depreciation) includes all costs related to the sale of products and services. Since these costs are no longer held in inventories, they are recognized in their total amount under operating expenses in the accounting period in which they were incurred. Administrative Expenses (Including Depreciation) General and administrative expenses (including depreciation) include costs related to purchases and administration, including auxiliary activities. They are recognized in their total amount as operating expenses in the period in which they were incurred. Costs by Nature Cost of materials and cost of services are amounts stated in the suppliers invoices and other documents, less discounts granted upon the sale or subsequently, also due to an early payment. Depreciation/amortization is calculated per unit at rates taking into account the shortest useful life of an item of a tangible or intangible asset. Labor costs include gross wages and salaries under the collective agreement and the individual employment contracts, contributions and taxes paid by the employer, voluntary additional pension insurance, other labor costs (holiday allowance, transport allowance, meals allowance, etc.).

4.22 Financial Risk Management


In relation to exposure to business risks, Merkur, d. d., follows the current situation in world markets. The unsuccessful management buyout and the economic crisis had the most significant negative impact on the companys operations, and the most negative consequence was losing the trust of our partners especially banks and suppliers liabilities towards which were increased to the extent that we were unable to repay them fully in the originally agreed deadlines. For this reason, we pay special attention to financial, especially credit and liquidity risks. With the beginning of economic crisis new reporting methods have come to the forefront, which focus not only on numbers but also different scenarios and analyses, while risk has become a fact we must be aware of, monitor and manage. In managing financial risks we follow the adopted financial policy, which includes guidelines for efficient and systematic financial risk management. The aims of active risk management are: Achieving stability of operations and reducing the exposure to individual risks to an acceptable level, Increasing the market value of Merkur, d. d., its competitiveness and credit rating, Having more predictable cash flows and profit, Reducing tax liabilities, and Reducing the impact of extremely harmful events. Merkur, d. d., estimates financial risks by the following groups: Credit risks include the risk that customers or other business partners might fail to settle their liabilities to the company thus reducing the companys economic benefits; Market risks include the interest rate risk, foreign currency risk, inflation risk, liquidity risk, and risk of changes in the market prices of securities; Insolvency risk is the risk of short-term and long-term inability to settle the liabilities on time. In the Notes to Financial Statements, risks are also quantified.

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Other operating expenses arise in connection with impairment losses or write-downs and upon disposal of property, plant and equipment, and investment property due to loss on disposal. Other expenses are included in the presentation of the profit and loss statement due to significant one-off expenses, which however did not impact the profit or loss.

Credit Risk

4.20

Financial Income and Expenses

The exposure of Merkur, d. d., to credit risk depends on partners and economic situations in their countries of origin. Merkur, d. d., has adopted a policy of active credit risk management, which comprises the regular monitoring of outstanding receivables, limiting exposure to individual customers through cap system, offering incentives for early settlements, charging penalty interest, bad debt insurance, and a policy of collecting receivables. Because of the increased volatility of the global market, Merkur has been implementing risk management measures even more dynamically and consistently than in the past in order to reduce the impact of extraordinary and unpredictable harmful events. Smaller customers have also been monitored more intensively. Partners that were granted loans are also subject to credit risk monitoring. If there is risk of default, we make allowances for doubtful debts. At the beginning of September, we transferred the finance responsibility processes from the financial to the commercial department and modernized the ABC credit ranking of partners, thus improving the awareness on the importance of credit risk management in the company, and updated the main measures for efficiently managing the credit risk, which are:

Financial Income
Financial income comprises interest income from investments and trade receivables, foreign exchange gains, dividend income, and gains on the disposal of available-for-sale financial assets. Interest income is recognized in profit or loss as it accrues using the effective interest method. Dividend income is recognized in profit or loss on the date that the shareholders right to receive payment is realized, which in the case of listed securities is the ex-dividend date.

Financial Expenses
Financial expenses comprise borrowing costs, unwinding of the discount on provisions, impairment losses and writeoffs related to financial assets, and losses on hedging instruments that are recognized in profit or loss. All borrowing costs are recognized in profit or loss using the effective interest method, unless they are attributed to property, plant and equipment under construction. Foreign exchange gains and losses are reported on a net basis. Financial expenses are recognized when accounted for, irrespective of related payments.

Annual Report Merkur, d. d., 2010

Any future receivables must be insured already upon concluding the contract, and the credit rating of new and existing customers is evaluated by the credit rating office. Collateral can be in the form of a mortgage, securities, a bank guarantee or a letter of credit for customers with high risk. A special team monitors receivables of individual debtors. The team also coordinates the operations dynamics in advance and examines the adequacy of risk exposure, and based on this increases or decreases the cap in collaboration with the credit rating office. A cap is set for regular customers based on estimated turnover (depending on the credit rating and acquired collateral). A procedure for collecting receivables (including through court) from customers is in place.. ABC credit rating is static and performed at least once a year based on financial statements, or more frequently, depending on the partners size and activity. In addition, depending on the partners importance, the company also uses independent risk assessments and recommendations on the cap amount by an external, independent provider, information on current financial soundness, daily information on blocked bank accounts and ten-year history of transactions with Merkur, d. d., together with the activities of partners founders, owners and representatives and their involvement in critical procedures. The Management Board of Merkur, d. d., believes that despite these risk management measures the exposure to risks remains high, especially due to high impairments, and that the trend is not changing.

Currency Risk Currency risk is a risk that the economic benefits of the company will decrease as a result of changes in the foreign currency exchange rates. In 2009, Merkur, d. d., continued to hedge interest rate risks with the EUR/CHF cross-currency swap, which it concluded in December 2007. To mitigate the expected loss, Merkur prolonged the instrument until March 2015 at the end of 2009. The instrument was no longer valid once the compulsory settlement proceedings were launched. Most of transactions of Merkur, d. d., are made in its functional currency, so the Management Board estimates that the companys exposure to currency risk is unchanging and low. Risk of Changes in Market Prices of Securities

The market value of a security mostly depends on the issuer and its operations and other activities (for example mergers or restructuring). Market conditions can also be largely affected by changes in the legislation, especially regarding money and capital markets regulation, international operations and taxes. An investment into securities should be impaired, when there is objective evidence indicating that one or more events resulted in a decrease of estimated future cash flows from the investment. The evidence must be measurable, and in case of investments in equity securities the evidence can be significant or prolonged drop of the fair value below the cost. The most exposed investments of Merkur, d. d., in this group are shares of Gorenjska banka, d. d., Kranj, Sava, d. d., Kranj and Perutnina, d. d., Ptuj. Based on the above facts, the companys Management Board assesses that the exposure to the risk of changes in market prices of securities is unchanging and considerable.

Market Risk
The market risk is the risk that changes in market prices, such as those of foreign exchange rates, interest rates, or equity, will affect the revenue of Merkur, d. d, or value of its financial instruments. Market risk management is aimed at managing and controlling exposure to market risks within reasonable limits while at the same time optimizing the profit. Merkur, d. d., used derivatives to minimize the fluctuations in profit or loss due to market risks, however their validity expired when the compulsory settlement proceedings were launched.

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Interest Rate Risk The interest rate risk is a risk that the value of the financial instrument might fluctuate due to changes in market interest rates. Two thirds of loans of Merkur, d. d., are indexed with the EURIBOR variable interest rate, so the companys operations are exposed to interest rate risk. As the recession started, the EURIBOR rate became very unpredictable. After record high levels at the end of 2008, the reference level dropped to a record low level in the first half of 2009 and continued to drop slowly until the end of the first quarter of 2010, when it started growing again. As the market interest rates were decreasing, margins and bank costs were increasing, so the borrowing costs did not actually drop. On the other hand, we should not expect the margins to decrease now that the reference interest rate started increasing again. To avoid risks caused by the extreme volatility of interest rates, Merkur, d. d., adjusts the asset related interest rates to the interests from liabilities. The company also decided to hedge interest rate risk with derivative financial instruments based on the financial institutions forecasts on medium-term changes in interest rates. In 2010, Merkur, d. d., also hedged interest rate risks with interest rate swaps, which it applied to one fifth of the exposure to interest rate risks, however, the instrument was no longer valid once the compulsory settlement proceedings were launched. The share of loans indexed with the variable interest rate, and the trend of reference interest rates shifting from the record high levels indicate increased interest rate risk in Merkur, d. d. However, in line with the Financial Restructuring Plan and as part of the compulsory settlement proceedings, Merkur, d. d., will sign loan rescheduling contracts for the major part of its loans, which will bring a fixed interest rate, and return the interest rate risks within reasonable limits. The Management Board estimates that the exposure to interest rate risk in 2010 was moderate.

Insolvency Risk
The insolvency risk is a risk that the company may have difficulties in obtaining sufficient funds to settle its financial obligations. The company managed this risk with an active policy of liquidity management. The aim was to eliminate discrepancies between cash inflows and outflows. The policy comprised: A system of caps determining the lowest amount of cash and highly liquid assets available to the company at all times, Centralized management of cash transactions to provide liquidity and solvency, Dispersed external financial sources, Dispersed maturity dates for liabilities, Credit risk management policy ensuring regular settlement of receivables, Credit lines available at the banks enabling the company to draw loans when needed, The option of activating short-term investments. The constant inflow of retail payments makes risk management easier. The company is subject to international economic trends, which was the reason why it shortened the currency deadlines for suppliers due to decreased liquidity in the market as soon as the economic activity slowed down. The crisis was also reflected in smaller supply of loans and banks demand to increase collaterals and in higher margins for new loans. Due to lower inflows, we adopted several measures as the crisis started: Postponement of non-urgent investments, Redefinition of strategic decisions that required funding, and Stricter implementation of internal regulations in planning and collecting receivables from major customers. Nevertheless, despite the listed measures, the companys solvency deteriorated, above all due to excessive liabilities arising from unsuccessfully performed MBO in 2010, to the point where the company was unable to fully settle its liabilities towards banks and suppliers within originally agreed deadlines. This also resulted in one of most problematic consequences of difficult operating conditions the loss of trust from our partners (above all credit insurance companies, banks and suppliers).

Annual Report Merkur, d. d., 2010

Merkur, d. d., has equity shares in its portfolio. The most significant risk regarding equity shares is a decrease in their market price, which changes according to supply and demand, which are based on the market participants expectations regarding the companies future.

In the middle of the year, after new supervisory and management boards were appointed, the company started talks on financial restructuring with creditors and suppliers. The first step in the process was signing an agreement on mutual relations with the major creditor banks, in which we agreed on a grace period on the repayment of the principle until 30 September 2010, after which the consortium of banks would make a decision on the options and means of financial restructuring based on a presentation on Merkurs reorganization and revitalization prepared by the Management Board with the support of the strategic consultancy firm Roland Berger. Based on the re-audited annual report for 2009, financial statements from 30 June 2010, and documents produced by relevant support offices and consultants, the Management Board estimated on 16 September 2010 that Merkur, d. d., met all the criteria for declaring insolvency as determined in Article 14 of the Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act. The decision on insolvency was included in Merkurs reorganization plan and presented legal protection of the companys assets and the creditors receivables. On 3 November 2010, the Kranj District Court issued a decision on launching the compulsory settlement proceedings. The procedure is described in detail in the Financial Restructuring Plan, which defines the following measures among the key points: Acquiring a long-term liquidity loan to purchase stocks a contract for a loan in the amount of EUR 35 million was signed with the consortium of banks on 28 December 2010, Capital injection in the amount of at least EUR 85 million, Repaying 60% of ordinary claims in five years, Reschedule of all loans. After the compulsory settlement, which is a necessary but not sufficient condition for decreasing the insolvency risk, is approved, we will have to regain trust of our customers, suppliers and banks with successful operations, payments made in time, and well-stocked stores. This will be a long process and only strict implementation of the plan will revive the operations and relieve the solvency crisis. Based on the listed hedge measures and the current situation, the Management Board of Merkur, d. d., estimates that the exposure to insolvency risk is high, and the trend is currently unchanging.

5 5
5.1 5.1

Notes to the Balance Sheet Notes to the Balance Sheet

Notes to the Balance Sheet Property, Plant and Equipment

Property, Plant and Equipment Property, Plant and Equipment

5.1

Property, Plant and Equipment of Merkur, d. d., by Type Property, Plant and Equipment of Merkur, d. d., by Type Item Item Property, plant and equipment Property, plant and equipment Land and buildings Land and buildings - land - land - buildings - buildings Plant and equipment Plant and equipment Property, plant and equipment under construction Property, plant and equipment under construction

Property, Plant and Equipment of Merkur, d. d., by Type


31 December 2010 31 December 2010 206,984 206,984 184,579 184,579 81,552 81,552 103,027 103,027 11,486 11,486 10,920 10,920 In thousand EUR In thousand EUR 31 December 2009 31 December 2009 251,452 251,452 213,874 213,874 95,207 95,207 118,667 118,667 14,423 14,423 23,155 23,155

Changes in Property, Plant and Equipment (PPE) in Merkur, d. d., in 2009 and 2010 Changes Changes in Property, Plant and EquipmentMerkur, d. d., in 2009 and2009 and 2010 in Property, Plant and Equipment (PPE) in (PPE) in Merkur, d. d., in 2010
Item Item Cost on 1 January 2009 Cost on 1 January 2009 Acquisitions Acquisitions Revaluation recognized in equity Revaluation recognized in equity Revaluation recognized in profit/loss Revaluation recognized in profit/loss impairment impairment Disposal write-offs Disposal write-offs Cost on 31 December 2009 Cost on 31 December 2009 Cost on 1 January 2010 Cost on 1 January 2010 Acquisitions through business combinations Acquisitions through business combinations Acquisitions Acquisitions Transfer to investment property Transfer to investment property Transfer to intangible assets Transfer to intangible assets Revaluation recognized in profit/loss Revaluation recognized in profit/loss impairment impairment Disposal write-offs Disposal write-offs Cost on 31 December 2010 Cost on 31 December 2010 Revaluation on 1 January 2009 Revaluation on 1 January 2009 Amortization Amortization Revaluation recognized in equity Revaluation recognized in equity Revaluation recognized in profit/loss Revaluation recognized in profit/loss impairment impairment Disposal write-offs Disposal write-offs Revaluation on 31 December 2009 Revaluation on 31 December 2009 Revaluation on 1 January 2010 Revaluation on 1 January 2010 Amortization Amortization Transfer to investment property Transfer to investment property Transfer to intangible assets Transfer to intangible assets Revaluation recognized in profit/loss Revaluation recognized in profit/loss impairment impairment Disposal write-offs Disposal write-offs Revaluation on 31 December 2010 Revaluation on 31 December 2010 Carrying amount on 1 January 2009 Carrying amount on 1 January 2009 Carrying amount on 31 December 2009 Carrying amount on 31 December 2009 Carrying amount on 31 December 2010 Carrying amount on 31 December 2010 Land Land 68,125 68,125 15,070 15,070 20,490 20,490 -583 -583 -7,895 -7,895 95,207 95,207 95,207 95,207 1 1 -10,206 -10,206 -3,235 -3,235 -216 -216 81,552 81,552 0 0 0 0 0 0 0 0 68,125 68,125 95,207 95,207 81,552 81,552 Buildings Buildings 148,745 148,745 22,809 22,809 39,587 39,587 -227 -227 -14,781 -14,781 196,133 196,133 196,133 196,133 46 46 -20,362 -20,362 -1,260 -1,260 -1,137 -1,137 173,420 173,420 50,323 50,323 4,579 4,579 23,828 23,828 -50 -50 -1,214 -1,214 77,466 77,466 77,466 77,466 5,651 5,651 -11,797 -11,797 -75 -75 -852 -852 70,393 70,393 98,422 98,422 118,667 118,667 103,027 103,027 Plant and Plant and equipment equipment 46,557 46,557 3,947 3,947 -2,943 -2,943 47,561 47,561 47,561 47,561 113 113 1,032 1,032 -22 -22 -3,493 -3,493 45,190 45,190 31,726 31,726 4,304 4,304 -2,891 -2,891 33,138 33,138 33,138 33,138 3,692 3,692 -2 -2 -3,123 -3,123 33,704 33,704 14,832 14,832 14,423 14,423 11,486 11,486 PPE under PPE under construction construction 20,018 20,018 18,725 18,725 3,548 3,548 -19,137 -19,137 23,155 23,155 23,155 23,155 2,191 2,191 -383 -383 -14,042 -14,042 10,920 10,920 0 0 0 0 0 0 0 0 20,018 20,018 23,155 23,155 10,920 10,920

In thousand EUR In thousand EUR Property, plant and Property,equipment plant and equipment 283,445 283,445 60,551 60,551 63,626 63,626 -810 -810 -44,756 -44,756 362,056 362,056 362,056 362,056 113 113 3,270 3,270 -30,568 -30,568 -22 -22 -4,878 -4,878 -18,889 -18,889 311,082 311,082 82,049 82,049 8,882 8,882 23,828 23,828 -50 -50 -4,105 -4,105 110,604 110,604 110,604 110,604 9,343 9,343 -11,797 -11,797 -2 -2 -75 -75 -3,975 -3,975 104,098 104,098 201,396 201,396 251,452 251,452 206,984 206,984

56

Exposure to risks in 2010

Merkur, d. d.
credit Trend interest rate Trend high

CREDIT

S S

moderate

FINANCIAL

Foreign currency

considerable

MARKET

Trend change in the market prices of securities Trend Inflation Trend high considerable

INSOLVENCY
KEY: ExPOSURE TO RISK Low Moderate Considerable High Does not exist

insolvency Trend

Change Trend Increasing Unchanging

Exposure to risk is a product of the impact on business risk and the probability and frequency of possible hazards.

Decreasing

63

Annual Report Merkur, d. d., 2010

Building activation Plant and equipment purchase Plant and equipment purchase Current investments: buildings and equipment Current investments: buildings and equipment TOTAL TOTAL

46 1,032 1,032 2,191 2,191 3,270 3,270

Key Changes in Property, Plant and Equipment in 2010 These were the biggest drops in property, plant and equipment in 2010: In 2010 the investments in property, plant and equipment reached EUR 2010: These were the biggest drops in property, plant and equipment in 3,270 thousand which were allocated as follows: 216 LandLand sale activation 1 216 Land sale Building activation 46 Building sale 284 284 PlantBuilding sale purchase and equipment 1,032 370 Sale and destruction of plant and equipment Current investments: buildings and equipment 2,191 370 Sale and destruction of plant and equipment TOTAL 3,270 Artwork write-off 2 Artwork write-off 2 These were the current drops in property, plant and equipment13,167 in 2010: Sale of biggest investments LandSale of current investments sale 216 13,167 Write-off of current investments 875 Building sale of current investments 284 Write-off 875 SaleTOTAL and destruction of plant and equipment 370 14,913 TOTAL 14,913 Artwork write-off 2 Sale of current investments 13,167 The companyof currentout the property revaluation on 31 December 2009. It also revised the value at the end Write-off carried investments 875 The company carried out therevaluation or impairment to the profit or loss in revised the value at the end of 2010 and carried out a property revaluation on 31 December 2009. It also the amount of EUR 4,803 TOTAL carried out a revaluation or impairment to the profit or loss in the amount of EUR 4,803 14,913 of 2010 and those properties that had their book value higher than the fair value acquired by means of thousand for thousand for those properties that had their book 31 December 2009. It also revised the value at the end of The company carried out the property revaluation on value higher than the fair value acquired by means of valuation. valuation. carried out a revaluation or impairment to the profit or loss in the amount of EUR 4,803 thousand for those 2010 and properties that had their book value higher than the fair costs for 2010 means of valuation. The calculated amortization included in the operating value acquired byamounted to EUR 9,343 thousand and The calculated amortization included in the operating costs for 2010 amounted to EUR 9,343 thousand and EUR 8,882 thousand for 2009 respectively. The calculated amortization included in the operating costs for 2010 amounted to EUR 9,343 thousand and EUR 8,882 EUR 8,882 thousand for 2009 respectively. thousand for 2009 respectively. On 31 December the Company corrected the error of incorrect classification of leases for certain sales OnOn 31 Note 3.6 (Errors from the correctedterms) provides more information onfor certain sales centers. Note 31 December the Company previous the of incorrect classification of leases of issue. centers.December the Company corrected the error error of incorrect classification the leases for certain sales centers. Note 3.6the previous terms)previous more information on the information on the issue. 3.6 (Errors from (Errors from the provides terms) provides more issue.
Property, Plant and Equipment of Merkur, d. d. Acquired under Financial Lease Property, Plant and Equipment of Merkur, d. d. Acquired under Financial Lease 31 December 31 December 2010 2010 61,581 61,581 61,453 61,453 128 128

We also have a financial lease on 4 vehicles; their carrying value on 31 December 2010 was EUR 128 We also have a financial leasein 2010, and their carrying value was EUR 70 thousand. was EUR 128 thousand. We sold 3 vehicles on 4 vehicles; their carrying value on 31 December 2010 thousand. We sold 3 vehicles in 2010, and their carrying value was EUR 70 thousand. The also have a financial lease on 4 vehicles; their carrying Merkur, d. d., on 31 December 2010 was EUR We carrying value of mortgages on the property owned by value on 31 December 2010 was EUR 128 The carrying value of vehicles in 2010, and their carryingby Merkur, d. d., 70 thousand. 116,581 thousand. 3 mortgages on the property owned value was EUR on 31 December 2010 was EUR thousand. We sold 116,581 thousand. 5.2 Intangible Assets The carrying value of mortgages on the property owned by Merkur, d. d., on 31 December 2010 was EUR 5.2 116,581Intangible Assets thousand. 5.2 Intangible Assets Intangible Assets of Merkur, d. Intangible Assets of Merkur, d. d. d.
Intangible Assets of Assets d. d. 5.2 Intangible Merkur, Item 31 December 2010 Intangible Assets of Merkur, d. d. Item 31 December 2010 Intangible assets 971 Intangible assets 971 Property rights (software licenses) 971 Item 31 December 2010 Property rights (software licenses) 971 Intangible assets 971 Changes rights (software licenses) in Property, Plant and Equipment (PPE) in Merkur, d. d., in 2009 and 2010 971 Property Changes in Property, Plant Equipment (PPE) in Merkur, d. d., d., in 2009 2010 Changes in Property, Plant andand Equipment (PPE) in Merkur, d. in 2009 andand 2010 Item Changes in Property, Plant and Equipment (PPE) in Merkur, d. d., in 2009 and 2010 Item Cost on 1 January 2009 Cost on 1 January 2009 Item Acquisitions Acquisitions write-offs Disposals and Disposals and write-offs2009 Cost on 1 January 2009 Cost on 12 December Cost on 12 December 2009 Acquisitions Acquisitions Disposals and write-offs Acquisitions property, plant and equipment Transfer from Cost on 12 December 2009 Transfer from property, plant and equipment Cost on 31 December 2010 Cost on 31 December 2010 Acquisitions on 1 January 2009 Revaluation Transfer from property, plant and Revaluation on 1 January 2009 equipment Amortization Cost on 31 write-offs AmortizationDecember 2010 Disposals and Disposals and write-offs Revaluation on 1 January 2009 Revaluation on 31 December 2009 Revaluation on 31 December 2009 Amortization Amortization Disposals and write-offs Amortization property, plant and equipment Transfer from Revaluation on 31 December 2010 Transfer from on 31 December 2009 Revaluation property, plant and equipment Revaluation on 31 December 2010 Amortization Transfer from property, plant and equipment Carrying amount on 1 January 2009 Revaluation on 31 December 2010 Carrying amount on 1 January 2009 Carrying amount on 31 December 2009 Carrying amount on 31 December 2009 Carrying amount on 31 December 2010 Carrying amount on 31January 2009 1 December 2010 Carrying amount on 31 December 2009 Carrying amount on 31 December 2010 In thousand EUR In thousand EUR 31 December 2009 31 December 2009 In thousand1,280 EUR 1,280 31 December 1,280 2009 1,280 1,280

Property, Plant and Equipment of Merkur, d. d. Acquired under Financial Lease

58

Item Item Total Total Property Property Plant and equipment Plant and equipment

In thousand EUR 31 December In thousand EUR 31 December 31 December 31 December 2009 2008 2009 2008 62,715 45,183 62,715 45,183 62,445 45,183 62,445 45,183 270 270 -

4,122 22 4,254 4,254 110 2,393 22 2,393 499 4,254 499 -50 -50 2,393 2,842 2,842 499 439 -50 439 2 2,842 2 3,282 3,282 439 2 1,562 3,282 1,562 1,280 1,280 971 971 1,562 1,280 971

Currently thethe Company leases 5 properties: Currently Company leases 5 properties: Currently the Company leases 5 properties:
In thousand EUR In thousand EUR Sales center Sales center TC Brljin Novo mesto TC Brljin Novo mesto TC Murska Sobota TC Murska Sobota TC Hudinja TC Hudinja TC Ljubljana Rudnik TC Ljubljana Rudnik TC kofja Loka TC kofja Loka Year of contract Year of contract 2002 2002 2009 2009 2002 2002 2001 2001 2010 2010 Carrying amount Carrying amount 3,568 3,568 17,641 17,641 16,816 16,816 8,973 8,973 14,455 14,455

5.3 5.3

Investment Property, Plant and Equipment of Merkur, d. d., by Type 5.3 Investment Property Investment Property, Property Equipment of Merkur, d. d., by Type 5.3 Investment Plant and

Investment Property Investment Property

We also have a financial lease on 4 vehicles; their carrying value on 31 December 2010 was EUR 128 thousand. We sold 3 vehicles in 2010, and their carrying value was EUR 70 thousand. The carrying value of mortgages on the property owned by Merkur, d. d., on 31 December 2010 was EUR 116,581 thousand.

64 64

lease and EUR 369rental income from lease of investment property amounted to EUR 444 thousand in 2010 period. The thousand in 2009. 2010 investment property leased by the Company generates a constant rental income throughout the and EUR 369 thousand in 2009. TheThe investment property leased by the Company generates a constant rental income throughout the lease period. lease period. The rentallease of investment property amounted to EUR 444amounted to EUR 444 369 thousand The rental income from income from lease of investment property thousand in 2010 and EUR thousand in 2010 2009.EUR 369 thousand in 2009. in and

In thousand EUR In thousand EUR Item 31 31 December 2009 Investment Property, Plant Equipment of Merkur, d. d., by Type December 2010 Investment Property, Plant and and Equipment of Merkur, d. d., by Type Item 31 December 2010 31 December 2009 Investment Property 36,162 16,646 In thousand EUR Investment Property 36,162 16,646 Land 18,443 9,594 Item 31 December 2010 31 December 9,594 2009 Land 18,443 Buildings 17,719 7,052 Investment Property 36,162 16,646 Buildings 17,719 7,052 The investment property leased by the Company generates a constant rental income throughout the Land 18,443 9,594 The investment property income from lease of investment property amounted toincome444 thousand in lease period. The rental leased by the Company generates a constant rental EUR throughout the Buildings 17,719 7,052

65 65 65

Annual Report Merkur, d. d., 2010

1,280 In thousand EUR In thousand EUR Intangible assets Intangible assets In thousand EUR 3,955 3,955 Intangible assets 247 247 -80 -80 3,955 4,122 4,122 247 110 -80 110 22

Changes in Investment Property of Merkur, d. d., in 2009 and 2010 Changes in Investment Property of Merkur, d. d., in 2009 and 2010 Changes in Investment Property of Merkur, d. d., in 2009 and 2010
Item Item Value on 1 January 2009 Value on 1 January 2009 Disposals Disposals Value on 31 December 2009 Value on 31 December 2009 Acquisitions through business combinations Acquisitions through business combinations Acquisitions Acquisitions Adjustment to fair value Adjustment to fair value Transfer from property, plant and equipment Transfer from property, plant and equipment Disposals Disposals Value on 31 December 2010 Value on 31 December 2010 Land Land 9,692 9,692 -97 -97 9,594 9,594 -1,332 -1,332 10,206 10,206 -25 -25 18,443 18,443

Equity of Subsidiaries 31 31 December 2010 Equity of Subsidiaries on onDecember 2010 and and Their Profit/Loss in 2010 Equity of Subsidiaries on 31 December 2010 and Their Profit/Loss in 2010 Their Profit/Loss in 2010
In thousand EUR In thousand EUR Investment Investment Buildings Property Buildings Property 7,130 16,822 7,130 16,822 -78 -175 -78 -175 7,052 16,646 7,052 16,646 220 220 220 220 135 135 135 135 1,747 415 1,747 415 8,565 18,771 8,565 18,771 -25 -25 17,719 36,162 17,719 36,162 In thousand EUR In thousand EUR Total equity Profit/loss Total equity Profit/loss Total equity2010 Profit/loss2010Total equity2009 Profit/loss2009 Company 31 Dec. 31 Dec. Company 31 Dec. 2010 2010 31 Dec. 2009 2009 - Mersteel, d. o. o., Naklo -13,421 -54,018 39,898 -69,382 - Mersteel, d. o. o., Naklo -13,421 -54,018 39,898 -69,382 - Big Bang, d. o. o., Ljubljana 7,517 -6,009 17,525 1,695 - Big Bang, d. o. o., Ljubljana 7,517 -6,009 17,525 1,695 - Kovinotehna, d. o. o., Celje* 0 -42 810 37 - Kovinotehna, d. o. o., Celje* 0 -42 810 37 - Merkur Hrvatska, d. o. o., Zagreb 3,624 -10,068 13,718 -2,993 - Merkur Hrvatska, d. o. o., Zagreb 3,624 -10,068 13,718 -2,993 - Merkur International Beograd, d. o. o. 48,299 -2,180 56,937 407 - Merkur International Beograd, d. o. o. 48,299 -2,180 56,937 407 - Perles Merkur Italia, s.r.l. -2,349 -2,765 286 -730 - Perles Merkur Italia, s.r.l. -2,349 -2,765 286 -730 - Merkur elik, d. o. o., Beograd 10,627 -239 12,277 -143 - Merkur elik, d. o. o., Beograd 10,627 -239 12,277 -143 - Merkur, d. o. o., Cetinje -442 -355 -87 -286 - Merkur, d. o. o., Cetinje -442 -355 -87 -286 - Intermerkur Nova d. o. o., Sarajevo -1,163 -2,394 1,231 -1,114 - Intermerkur Nova d. o. o., Celje was liquidated on 30 September 2010. -2,394 o., -1,163 1,231 -1,114 * Kovinotehna, d. o.was Sarajevo * Kovinotehna, d. * Kovinotehna, d. o. o.,o., Celjeliquidated on 30 September 2010. o. Celje was liquidated on 30 September 2010. Long-term Investments of Merkur, d. d., in Subsidiaries in 2009 and 2010 Long-term Investments of Merkur, d. d., in Subsidiaries in 2009 and 2010

The Company revised the fair value of investment property and carried out a revaluation on 31 December The Company the revaluationvalue of investment property and carried out a revaluation on 31 December The Company revised the fair for land amounts to EUR -1,332 out a revaluation on 31 December 2010. 2010. The result of revised the fair value of investment property and carriedthousand and EUR 1,747 thousandThe 2010. Thethe revaluation for land amounts to EUR -1,332 thousand and EUR 1,747 thousand for buildings. result for buildings. of result of the revaluation for land amounts to EUR -1,332 thousand and EUR 1,747 thousand for buildings. The value of mortgages on the investment property of Merkur, d. d., on 31 December 2010 was EUR 24,961 thousand. The value of mortgages on the investment property of Merkur, d. d., on 31 December 2010 was EUR The value of mortgages on the investment property of Merkur, d. d., on 31 December 2010 was EUR 24,961 thousand. 24,961 thousand. 5.4 Financial Investments in Subsidiaries 5.4 Financial Investments in Subsidiaries

Long-term Investments of Merkur, d. d., in Subsidiaries in 2009 and 2010

In thousand EUR In thousand EUR

5.4

Financial Investments in Subsidiaries

Financial Investments of Merkur, d. d., in Its Subsidiaries Financial Investments of Merkur, d. d., in Subsidiaries Financial Investments of Merkur, d. d., in Its Its Subsidiaries

In thousand EUR In thousand EUR 31 December 2010 31 December 2009 31 December 2010 31 December 2009 73,983 134,973 73,983 134,973 In thousand EUR In thousand EUR

60

Item

Item Investments in subsidiaries Investments in subsidiaries

Item Item Net value on 1 January 2009 Net value on 1 January 2009 Acquisitions Acquisitions Impairment of financial investments in subsidiaries Impairment of financial investments in subsidiaries Net value on 31 December 2009 Net value on 31 December 2009 Capital increase of a subsidy Capital increase of a subsidy Purchase of additional stake Purchase of additional stake Return of subsequent payments Return of subsequent payments Liquidation of a subsidiary Liquidation of a subsidiary Impairment of financial investments in subsidiaries Impairment of financial investments in subsidiaries Net value on 31 December 2010 Net value on 31 December 2010

Long-term investments in subsidiaries Long-term investments in subsidiaries 152,087 152,087 1,545 1,545 -18,659 -18,659 134,973 134,973 130 130 53 53 -4,000 -4,000 -36 -36 -57,137 -57,137 73,983 73,983

Company Company

Ownership Ownership Value of Value of Ownership Ownership Value Value Ownership share in % share in % investment of investment of Ownership share in % share in % investment investment share since 31 Dec. 2010 31 Dec 2009 31 Dec. 2010 31 Dec. 2009 share since 31 Dec. 2010 31 Dec 2009 31 Dec. 2010 31 Dec. 2009

Investments in shares and stakes in Investments in shares and stakes in subsidiaries in Slovenia subsidiaries in Slovenia - Kovinotehna, d. o. o., Celje* 1999 100 - Kovinotehna, d. o. o., Celje* 1999 100 - Big Bang, d. o. o., Ljubljana 1999 100 100 11,191 - Big Bang, d. o. o., Ljubljana 1999 100 100 11,191 - Mersteel, d. o. o., Naklo 2008 100 100 4,982 - Mersteel, shares Naklostakes in d. o. o., and 2008 100 100 4,982 Investments in Investments in shares and stakes in subsidiaries abroad subsidiaries abroad - Merkur Hrvatska Zagreb, d. o. o., Croatia 1994 100 100 3,624 - Merkur Hrvatska Zagreb, d. o. o., 1994 100 100 3,624 - Merkur International Beograd, d. o. o., Croatia - Merkur International Beograd, d. o. o., Serbia 1994 100 100 48,302 Serbia 1994 100 100 48,302 - Perles Merkur Italia, s.r.l., Italy 1994 100 100 - Perles Merkur Italia, s.r.l., Italy 1994 100 100 - Merkur elik, d.o.o., Beograd, Serbia 2007 66,16 66,16 5,883 - Merkur elik, d.o.o., Beograd, Serbia 2007 66,16 66,16 5,883 - Merkur, d. o. o., Cetinje, Montenegro 2008 100 76 - Merkur, d. o. o., Cetinje, Montenegro 2008 100 76 - Intermerkur Nova, Sarajevo d. o. o., - Intermerkur Nova, Sarajevo d. o. o., Bosnia and Herzegovina 2007 100 100 Bosnia and Herzegovina 2007 100 100 Total 73,983 Total 73,983 *The *The company was erased fromRegister of companiescompanies based on a simple liquidation. company was erased from the the Register of based on a simple liquidation. *The company was erased from the Register of companies based on a simple liquidation.

36 36 15,191 15,191 39,898 39,898 16,926 16,926 52,345 52,345 286 286 5,883 5,883 152 152 4,256 4,256 134,973 134,973

According to the assessment of the recoverable value of investments in subsidiaries the Company found According to book value of the investments exceeds their recoverable value on 31 December 2010. This is that the the assessment of the recoverable value of investments in subsidiaries the Company found According to the assessment of the recoverable value of investments in subsidiaries the Company found that the that why bookinvestments were impaired to the their recoverable value value and recognized the financial the the value of the investments exceeds estimated recoverable on 31 December 2010. This is book value of the investments exceeds their recoverable value on 31 December 2010. This is why the investments why expense in the amount impaired 57,137 estimated recoverable value in therecognizedsubsidiaries were the investments were of EUR to the thousand. The investments and following the financial were impaired to the estimated recoverable value and recognized the financial expense in the amount of EUR 57,137 expense in the amount of EUR 57,137 thousand. The investments in the following subsidiaries were impaired: thousand. The investments in the following subsidiaries were impaired: impaired: Mersteel, d. o. amount of EUR amount of EUR 34,916 thousand, the Mersteel, d. o. o., Naklo in the o., Naklo in amount of EUR 34,916 thousand, Mersteel, d. o. o., Naklo in the 34,916 thousand, Merkur Hrvatska, Merkur Merkur Hrvatska, d. o.in the o., ZagrebEURthe amount of EUR 13,302 thousand, Hrvatska, d. o. o., Zagreb d. o.Zagreb in the amount of EUR 13,302 thousand, amount of in 13,302 thousand, o., Intermerkur Intermerkur Nova, Sarajevoin the amount of EURin the thousand,of EUR 4,256 thousand, Nova, Sarajevo d. o. o., Sarajevo d. o. o., Sarajevo 4,256 amount Intermerkur Nova, Sarajevo d. o. o., Sarajevo in the amount of EUR 4,256 thousand, Merkur Beograd in the amount of EUR 4,043 thousand, Merkur IntrernationalIntrernational Beograd in the amount of EUR 4,043 thousand, Merkur Intrernational Beograd amount of EUR EUR 4,043 thousand, Perles Merkur Italia in the in the amount of Perles Merkur Italia in the amount of EUR 416 thousand, and 416 thousand, and Perles Merkur Italia in the amount of EUR 416 thousand, and Merkur, d. o.Merkur, d. o. o., Cetinje in the amount of EUR 205 thousand. o., Cetinje in the amount of EUR 205 thousand. Merkur, d. o. o., Cetinje in the amount of EUR 205 thousand. Changes in Investments in Subsidiaries in 2010 Changes in Investments in Subsidiaries inin 2010 Changes in Investments in Subsidiaries 2010

There were no significant changes in the financial investment structure or the ownership stakes of There were significant changes in in the financial investment structure or the ownership d. d., in of the stakes of There were d.no significant changesthe financial investment structure orr. l., ownership a capitalMerkur,stakes means Merkur, nod., in subsidiary companies. Perles Merkur Italia, s. received injection by subsidiary in subsidiary companies. s. r. l., received a Italia, injection by meansbought Merkur,ad. d.,companies. Perles Merkur Italia,Perles Merkur capital s.thel., received a capitalainjection by means r. Company of a non-cash contribution minority of non-cash contribution (operating receivables), and stake of the of a(operating receivables), o., Cetinje. non-cash contribution (operating receivables), of the minority owner Merkur, a stake of owner Merkur, d. o. and the Company bought a stakeand the Company bought d. o. o., Cetinje.the minority owner Merkur, d. o. o., Cetinje. Subsidiary Capital Injection in 2010 Subsidiary Capital Injection in 2010
In thousand EUR In thousand EUR Capital injection Non-cash Non-cash Date Capital injection amount contribution Date amount contribution 29 June 2010 130 130 29 June 2010 130 130

The data on the equity of subsidiaries and their balance in 2010 is presented in the table below. The data on the equity of subsidiaries and their balance in 2010 is presented in the table the table below. The data on the equity of subsidiaries and their balance in 2010 is presented in below.

Company name Company name Perles Merkur Italia, s.r.l. Perles Merkur Italia, s.r.l.

66

66

67

67

Annual Report Merkur, d. d., 2010

There were no significant changes in the financial investment structure or the ownership stakes of Merkur, d. d., in subsidiary companies. Perles Merkur Italia, s. r. l., received a capital injection by means of a non-cash contribution (operating receivables), and the Company bought a stake of the minority owner Merkur, d. o. o., Cetinje. Subsidiary Capital Injection in 2010 Subsidiary Capital Injection in 2010
In thousand EUR Company name Perles Merkur Italia, s.r.l. Date 29 June 2010 Capital injection amount 130 Non-cash contribution 130

Kemo Ni d.o.o., Ni, Serbia

1991

30

30

Kemo Ni d. o. o., Ni, Serbia, is an associated enterprise in the process of liquidation that was not yet completed in 2010.

Noncurrent Financial Assets 5.6 5.6 Noncurrent Financial Assets


Noncurrent Financial Assets of Merkur, d. d., by type

Noncurrent Financial Assets of Merkur, d. d., by type


In thousand EUR 31 December 2010 130,795 128,650 2,145 31 December 2009 183,986 172,999 10,988

Item Noncurrent Financial Assets Available-for-sale financial assets Deposits and collateral Available-for-sale Financial Assets in Merkur, d. d., in 2009 and 2010

Purchase Additional Stakes from Minority Owners Subsidiaries 2010 Purchase of Additional Stakes from from Minority Owners in in Subsidiaries in 2010 Purchase ofof AdditionalStakes Minority Owners in Subsidiaries inin 2010
In thousand EUR EUR In thousand Company Company equityequity on on Payment for Payment for day ofday of Acquired Purchased acquired Acquired Purchased acquired Date Date purchase stake stake equityequity stake stake purchase

67

In thousand EUR Item Net value on 1 January 2009 Acquisitions Change of fair value in other comprehensive income Disposals and write-offs Impairment loss through profit/loss Impairment write-off Net value on 31 December 2009 Acquisitions Change of fair value in other comprehensive income Disposals Impairment loss through profit/loss Impairment write-off Net value on 31 December 2010 Available-for-sale financial assets 184,470 70,351 -48,097 -25,763 -8,085 68 123 172,999 10,739 -19,363 -25,106 -10,665 46 128,650

Company name name Company

Merkur, d. o. o., CetinjeCetinje date ofdate of purchase purchase Merkur, d. o. o., (purchased by Merkur, d. d., d. d., (purchased by Merkur, Naklo) Naklo) 25 March March 2010 25 2010

-138 -138

24.00 24.00

-33

-33

53

53

Partial Return of Subsequent Payments from Subsidiary Big Bang,Bang,o. o. o. Partial Return of Subsequent Payments from Subsidiary Big Bang, d. o. o. Partial Return of Subsequent Payments from Subsidiary Big d. o. d.
Based decision of the only partner, Merkur, d., d., The The Company received subsequent equity BasedBased on the decision ofofonly partner, Merkur,Merkur, d. d., Company receivedreturn ofa partial return of on the on the decision thethe only partner, d. d. The Company received a partial a partial return of payments equity payments to subsidiary21 January 2010 in the amount January in the in the amount of EUR to subsidiaryto subsidiary o., onBang, Bang, o., on o., on 21 of EUR 4,000 thousand. of EUR Big Bang, d. o. Big Big d. o. d. o. 21 January 2010 2010 amount subsequent equity payments subsequent 4,000 4,000the register of companies, the hypothecation of ownership stakes in favor of the banks for securing the loans thousand. In thousand. received by Merkur, d. d., has been entered for the following companies: In the In the registerd. o.companies,in thehypothecation of ownership stakes in of the of the banks for securing the register Bang, of o., Ljubljana the amount of 100%, Big of companies, the hypothecation of ownership stakes in favor favor banks for securing the loans received by Merkur, d. d., haso. o., Croatia in the amountthe100%, loansMerkur Hrvatska Zagreb, d.d., has entered for thefor of following companies: received by Merkur, d. been been entered following companies: BigMerkur International Beograd, d. o. o., Serbia in the amount of 100%. Big d. o. d. o. o., Ljubljana amount of 100%, Bang, Bang,o., Ljubljana in the in the amount of 100%, Merkur Hrvatska Zagreb, d. o. o., Croatia in the in the amount of 100%, Merkur Hrvatska Zagreb, d. o. o., Croatia amount of 100%, Merkur International Beograd, d. o. o., Serbia in the in the amount of 100%. Merkur International Beograd, d. o. o., Serbia amount of 100%.

62

5.5

Financial Investments in Associate Enterprises 5.5 Financial Investments in Associate Enterprises

5.5

Financial Investments in Associate Enterprises

Noncurrent Financial Investments in Enterprises Noncurrent Financial Investments in AssociateAssociate Enterprises Noncurrent Financial Investments in Associate Enterprises
In thousand EUR EUR In thousand Ownership Investment Ownership Investment Ownership Investment Ownership Investment stake in % in % value value in % in % value value stake stake stake 31 31 31 31 31 31 31 31 Ownership December December December December Ownership December December December December Relevant financial information of the of the company stake since since 2010 2010 2010 2010 2009 2009 2009 2009 Relevant financial information company stake Investments in the stake in associated Investments in the stake in associated enterprise: enterprise: Kemo Kemo Ni d.o.o., Ni, Serbia Ni d.o.o., Ni, Serbia

The Company assessed the fair value of available-for-sale financial assets on 31 December 2010. The The Company assessed the fair value of important investments is below December value, and the value of valuation showed that the fair value of available-for-sale financial assets on 31 their book2010. The valuation showed that the fair value to their fair value. The below of the impairment the value of investments 19,363 investments was impairedof important investments is effect their book value, and in the amount of EURwas impaired to their fair value. in the of the comprehensive income EUR 19,363 namely as a reduction of thousand was recognized The effectother impairment in the amount ofstatement, thousand was recognized in the other comprehensive income of the change recognized in the other comprehensive part of comes reserve for fair value. A large part statement, namely as a reduction of reserve for fair value. A largeincomethe change recognized in the other comprehensive income comes d. the Kranj in in amount of EUR 19,390 from the investment in the shares of Gorenjska banka,from d., investmentthethe shares of Gorenjska banka, d. d., Kranj thousand. in the amount of EUR 19,390 thousand.
The value of financial assets for which the Company had not previously recognized the reserves for fair value, The value of financial assets for which the Company had not previously recognized the reserves for fair was impaired and burdened the profit or loss for EUR 10,665 thousand. A greater part of this amount comes from value, was impaired and burdened the profit or loss for EUR 10,665 thousand. A greater part of this impairment of the investment in the shares of Sava, d. d., in the amount of EUR 8,959 thousand. amount comes from impairment of the investment in the shares of Sava, d. d., in the amount of EUR 8,959 thousand. 2010 the Company recognizes the fair value of the investment in the shares of Gorenjska banka, d. d. On 31 December at EUR 1,550 per share, and that corresponds to the value according to the valuation model. In addition, an agreement On has been reached between Merkur and Sava, d. d., based thewhich value of the commit that they will sell the joint 31 December 2010 the Company recognizes on fair the companies investment in the shares of Gorenjska banka, d. d. banka (Sava ownsper share, and that corresponds 45.9% equity stake). 57.9% stake in Gorenjska at EUR 1,550 152,110 shares which corresponds to a to the value according to the valuation model. In addition, an agreement has been reached between Merkur and Sava, d. d., based on In the companies commit that the valuation model to measure the fair value of financial banka (Sava owns which2010 the Company decided to use they will sell the joint 57.9% stake in Gorenjska investment in the shares of Sava, d. d., Kranj, which is listed on the stock exchange, instead of the official market price on 31 December 152,110 shares which corresponds to a 45.9% equity stake). 2010, because to the low market liquidity the market price does not reflect the true value of the financial investment. For the purposes of the accounting reporting the recognized to measure the fair value was EUR 175 per share In 2010 the Company decided to use the valuation modelprice of Sava, d. d., Kranj sharesof financial investment (the official of Sava, d. d., December 2010 listed 89.50 per share). in the sharesmarket value on 31Kranj, which iswas EURon the stock exchange, instead of the official market price on 31 December 2010, because to the low market liquidity the market price does not reflect the true value of the financial investment. For the purposes of the accounting reporting the recognized price of Sava, d. d., Kranj shares was EUR 175 per share (the official market value on 31 December 2010 was EUR 89.50 per share).

1991 1991

30

30

30

30

Kemo d. o. o., Ni, Serbia, associated enterprise in in the process of liquidation not was was not KemoKemo Ni o., o. o., Serbia, is is anassociated enterprisethe process of liquidationof liquidation thatnot yet in yet Ni d. o.Ni d.Ni, Ni, Serbia, an is an associated enterprise in the process that wasthat yet completed 2010. completed in 2010. 2010. completed in

5.6

Noncurrent Financial Assets 5.6 Noncurrent Financial Assets

Noncurrent Financial Assets of Merkur, d. d., by type type Noncurrent Financial Assets of Merkur, d. d., by In thousand EUR EUR In thousand Item Item Noncurrent Financial Assets Noncurrent Financial Assets Available-for-sale financial assets assets Available-for-sale financial Deposits and collateral Deposits and collateral 31 December 31 December31 December 31 December 2010 2010 2009 2009 130,795 130,795 128,650 128,650 2,145 2,145 183,986 183,986 172,999 172,999 10,98810,988

The largest financial investments of Merkur, d. d., according to their value on 31 December 2010 are listed below:
Number of shares on 31 Dec. 2010 43,089 1,434,485 Stake in % on Investment 31 Dec. 2010 value 13.00 24.26 44,313 25,821 In thousand EUR Corrected Investment investment revaluation value 22,475 -

Investment Gorenjska banka Kranj Perutnina Ptuj d. d.

Annual Report Merkur, d. d., 2010

Available-for-sale Financial Assets in Merkur, d. d., in 2009 and 2010

price on 31 December 2010, because to the low market liquidity the market price does not reflect the true value of the financial investment. For the purposes of the accounting reporting the recognized price of Sava, d. d., Kranj shares was EUR 175 per share (the official market value on 31 December 2010 was EUR 89.50 per share). The largest financial investments of Merkur, d. d., according toto their value on December 2010 2010 are The largest financial investments of Merkur, d. d., according their value on 31 31 December are listed below: listed below:
Number of shares on 31 Dec. 2010 43,089 1,434,485 500,000 134,923 Stake in % on Investment 31 Dec. 2010 value 13.00 24.26 3.00 6.72 44,313 25,821 7,789 32,571 In thousand EUR Corrected Investment investment revaluation value 22,475 -4,375 -8,959 Deposits and Collateral of Merkur, d. d., in 2009 and 2010

Additional burdens on securities with the ban on the right to dispose: 1,434,485 shares of Perutnina Ptuj, 3,000 shares of Gorenjska banka Kranj already pledged, and 63,500 shares of Sava, d. d., Kranj already pledged. On 31 December 2010 the entire securities portfolio was subject to a claim for execution of financial receivables, which was partially lifted in 2011. More on this is explained in item 8.3. Lawsuits against Merkur, d. d.

Investment Gorenjska banka Kranj Perutnina Ptuj d. d. Cimos Koper Sava d. d. Kranj

Deposits and Collateral of Merkur, d. d., in 2009 and 2010


In thousand EUR

On 18 July 2010 Perutnina Ptuja sent a note to Merkur about its intentions of realizing the option contract for switching Perutnina Ptuj shares with Merkur shares. The Merkur management dismissed this based on the legal opinion that the said contract could possibly be illegal and therefore void as, based on it, Merkur would gain own shares in conflict with the legal restrictions.

64

Deposits and Collateral of Merkur, d. d., in 2009 and 2010 Item Net value on 1 January 2009 Deposits and Collateral of Merkur, d. d., in 2009 and 2010 Increase Item Net value on 31 December 2009 Net value Decrease on 1 January 2009 Item Increase Net value on 31January 2009 Net value on 1 December 2010 Net value on 1 January 2009 Net value on 31 December 2009 Increase Decrease on 31 December 2009 Net value on 31 December 2009 Net value Net value on 31 December 2010 Net value on 31 December 2010 Decrease Net value on 1 January 2009 Net value on 31 December 2010 The interest rate December 2009 Net value on 31 for long-term deposits is is EURIBOR % 1.6 % markup a year. The interest rate for long-term deposits EURIBOR + 1.6 + markup a year. Net value on 1 January 2009 Net value on 31 December 2010 Net 5.7 value on 31 December 2009 Loans Given Net value on 31 December 2010 The interest rate for long-term deposits is EURIBOR + 1.6 % markup a year. Long-term Loans Given by Merkur, d. d., by Type 5.7 Loans Given Item 5.7Long-term Loans Given by Merkur, d. d., by Type Loans Given Long-term Loans Given by Merkur, d. d., by Type Loans given Long-term Loans Given by Merkur, d. d., by Type Loans given to other companies Item Receivables from financial lease

Deposit provided In thousand EUR 2,145 8,843 In thousand EUR Deposit provided 10,988 2,145 -8,843 Deposit provided 8,843 2,145 2,145 10,988 2,145 8,843 -8,843 10,988 10,988 2,145 2,145 -8,843 2,145 2,145 10,988 2,145 2,145 10,988 2,145 In thousand EUR 31 December 2009

Disposal of Financial Assets Available for Sale in 2010


In 2010 the Company disposed of the following available-for-sale financial assets: 51,577 shares of Sava, d. d., Kranj (SAvA shares) in three transactions at average price of EUR 221.23 per share; the total value of transactions was EUR 11,410 thousand. The book value of the shares was EUR 12,273 thousand, so the sale generated a loss of EUR 863 thousand. 26,748 shares of NLB, d. d., Ljubljana at EUR 225 per share; the total value of the transaction was EUR 6,018 thousand. The sale generated a loss of EUR 67 thousand. 11,000 shares of Gradis skupina G d. d., Ljubljana (GRSR shares) at EUR 40.00 per share; the total value of the transaction was EUR 440 thousand. The sale was carried out by the book value of the shares. 64,940 shares of Zavarovalnica Triglav, d. d., Ljubljana (ZTvG shares) at EUR 78.70 per share; the total value of the transaction was EUR 5,111 thousand. The Company acquired the shares in 2009 priced at EUR 73.30 per share. Based on the note from viator & vektor, d. d., on exercising the option, the purchase agreement was signed on 13 September 2010. 22,576 shares of ETI, d. d., Izlake (ETIG shares) at EUR 57.06 per share; the total value of the transaction was EUR 1,288 thousand. The company had a Contract on relationship regulation for these shares which regulated the sale of shares at EUR 53.30 per share. On 16 August 2010 a deal was reached with Gorenje, d. d., velenje on the sale of shares, by which the option contract was executed. On 31 December 2010 the following securities of the Company were pledged: 43,000 shares of Gorenjska banka, Kranj, book value at EUR 66,650 thousand, 1,434,485 shares of Perutnina Ptuj, book value at EUR 25,821 thousand, 130.000 shares of Maksima Invest Ljubljana, book value at EUR 384 thousand, and 133,547 shares of Sava, d. d., Kranj, book value at EUR 23,371 thousand.

The 5.7 interest rate for long-term deposits is EURIBOR + 1.6 % markup a year. Loans Given

31 December 2010

11,805 1,388 In thousand EUR 11,805 1,274 31 December 2010 31 December 2009 In thousand EUR 114 Loans given 11,805 1,388 Item 31 December 2010 31 December 2009 Receivables from Assets of the Merkur, d. d., Loaned under Financial Lease by11,805 Maturity Loans given to other companies 1,274 Loans given 11,805 In thousand 1,388 EUR Receivables from financial lease 114 Loans given to other companies 11,805 1,274 Maturity of receivables from assets loaned under financial Receivables from Assets lease 114 Receivables from financialof the Merkur, d. d., Loaned under Financial Lease by Maturity 31 December 2009 lease: 31 December 2010-

Receivables a In due in less than from Assets of the Merkur, d. d., Loaned under Financial Lease by Maturity thousand EUR 42 328 Receivables fromyear* of the Merkur, d. d., Loaned under Financial Lease by Maturity Assets due betweenreceivables from assets loaned under financial 114 Maturity of 1 to 5 years In thousand EUR lease: 31 December 2010 31 December 2009 Total 42 442 Maturity of receivables from assets loaned under financial due in 42 328 *lease: less than short-term trade receivables. Recognized in a year* 31 December 2010 31 December 2009 due between 1 to 5 years 114 due in less than a year* 42 328 Long-term Loans Given by Merkur, d. d., in 2009 and 2010 Total 42 442 due between 1 to 5 years 114 In thousand EUR * Recognized in short-term trade receivables. Total 42 442 Receivables from * Recognized in short-term trade receivables. receivables. 2009 and 2010 * Recognized in short-term trade Long-term Loans Given by Merkur, d. d., in Item Loans given financial lease In thousand EUR Gross value on 1 January 2009 3,270 420 Long-term Loans Given by Merkur, d. d., in 2009 and 2010 Acquisitions 10,623 76 In thousand EUR Receivables from Interest 80 Item Loans given financial lease Repayment -11,564 -383 Receivables from Gross exchange January 2009 3,270 420 Foreignvalue on 1 differences 35 Item Loans given financial lease Acquisitions on 31 December 2009 10,623 76 Gross value 2,443 114 Gross 3,270 420 Interestvalue on 1 January 2009 80 Transfer from short-term to long-term given loans 157,500 -Acquisitions 10,623 76 Repayment -11,564 -383 Acquisitions 29,759 -Interest 80 Foreign exchange differences 35 Interest 35 Repayment on 31 December 2009 -11,564 -383 Gross value 2,443 114 Repayment -8,179 -114Foreign from short-term to long-term 35 Transfer exchange differences 157,500 Gross value on 31 December 2010 given loans 181,560 0Gross value on 31 December 2009 2,443 114 Acquisitions on 1 January 2009 29,759 Revaluation short-term to long-term given loans 1,171 0Transfer 157,500 Interest from 35 Full write-off -13 -Acquisitions 29,759 Repayment -8,179 -114 Value impairment during the year 14 -Interest 35 Gross value on 31 December 2010 181,560 0 Impairment write-off -3 Repayment on 1 January 2009 -8,179 -114 Revaluation 1,171 0 Revaluation on 31 December 2009 1.169 0 Gross value on 31 December 2010 181,560 0 Full write-off -13 Transfer of correction from short-term to long-term loans 126,395 -Revaluation on 1during the2009 January year 1,171 0 Value impairment 14 -

Annual Report Merkur, d. d., 2010

The financial investments in the equity of Perutnina, d. d., Ptuj in which the Company has a 24.26% stake The Kopitarna, d. d., Sevnica in which the company has a 24.20% stake are a 24.26% stake and of and of financial investments in the equity of Perutnina, d. d., Ptuj in which the Company hasclassified as investments Kopitarna, d., Sevnica Company does not influence the are classified as decision making in these two available ford.sale. The in which the company has a 24.20% stakeoperations or investments available for sale. The Company because of the mentioned uncertainty about ownership the investment in Perutnina Ptuj is not companies, does not influence the operations or decision making in these two companies, because of the mentioned uncertainty about ownership the investment in Perutnina Ptuj not there is an ongoing an associated treated as an investment in an associated enterprise,is andtreated as an investment in dispute about the enterprise, and described further on. repurchase right there is an ongoing dispute about the repurchase right described further on. Merkur and Perutnina Ptuj, d. d. entered a Protocol on mutual assistance a mutual agreement on the repurchase rights for their shares. Perutnina owns 64,198 MER shares valued at EUR 26,000 thousand and Merkur owns 1,434,485 69 PPTG shares valued at EUR 25,821 thousand. Based on the protocol the repurchase rights must be exercised simultaneously by entering a contract on the double purchase and sale of shares. If one of the parties demands it, the other is obliged to realize the option immediately. The PPTG shares are further burdened with the ban on the right to dispose of shares.

lease: due in less than a year* due between 1 to 5 years Total * Recognized in short-term trade receivables. Long-term Loans Given by Merkur, d. d., in 2009 and 2010

31 December 2010 42 42

31 December 2009 328 114 442

Long-term Loans Given by Merkur, d. d., in 2009 and 2010


In thousand EUR Loans given 3,270 10,623 80 -11,564 35 2,443 157,500 29,759 35 -8,179 181,560 1,171 -13 14 -3 1.169 126,395 -5 42,196 -1 169,705 2,099 1,274 11,805 Receivables from financial lease 420 76 -383 114 -114 0 0 0 0 420 114 0

Mortgages Other securities - insurance companies Bills surety property - movable - guarantors Other securities - insurance companies - other forms of collateral - movable property - guarantors Without collateral - insurance companies - other forms of collateral Maturity - guarantors of Long-term Loans given by Merkur, Maturity collateral Without of Long-term Loans given by Merkur, d. d.d. d. - other forms of collateral Maturity collateral Without of Long-term Loans given by Merkur, d. d.

38 10,867

95 843 315 78 412 843 315 38 78 412 10,867 315 38 412 10,867

Item Gross value on 1 January 2009 Acquisitions Interest Repayment Foreign exchange differences Gross value on 31 December 2009 Transfer from short-term to long-term given loans Acquisitions Interest Repayment Gross value on 31 December 2010 Revaluation on 1 January 2009 Full write-off Value impairment during the year Impairment write-off Revaluation on 31 December 2009 Transfer of correction from short-term to long-term loans Full write-off Value impairment during the year Impairment write-off Revaluation on 31 December 2010 Net value on 1 January 2009 Net value on 31 December 2009 Net value on 31 December 2010

Item 31 December 2010 Maturity of Long-term Loans given by Merkur, d. d. Loans given 11,805 Item 31 December 2010 Mature in 12 years 11,147 Loans given 11,805 Mature in 25 years 402 Item in 12 years 31 December 2010 Mature 11,147 Mature in more than 5 years 256 Loans given years 11,805 Mature in 25 402 Mature in 12 years 5 years 11,147 Mature in more than 256 Long-term25 years Mature in Loans given by Merkur, d. d., by Currency and Interest Rate 402

45 In thousand EUR 18 In thousand EUR 31 December 2009 In thousand1,274 EUR 31 December 2009 446 1,274 470 31 December 2009 446 358 1,274 470 446 358 470

107 1,049 400 100 78 526 1,049 400 45 78 526 18 400 45 526 18

Value in Long-term Loans given by Merkur, d. d., by Currency and Interest Rate Currency thousand EUR Value in EUR 11,805 Currency thousand EUR Total 11,805 EUR 11,805 Value in Currency thousand EUR Total 11,805 5.8 EUR Other Noncurrent Receivables 11,805 Total 11,805

Interest rate from Interest 1.59% rate from 1.59% Interest rate from 1.59%

Interest rate to Interest 5.50% rate to 5.50% Interest rate to 5.50%

5.8

Other Noncurrent Receivables 5.8 5.8 Other Noncurrent Receivablesd. d., by Type Other Noncurrent Receivables of Merkur,
Other Noncurrent Receivables of Merkur, d. by by Type Other Noncurrent Receivables of Merkur, d. d., d., Type Other noncurrent receivables Item Trade receivables Other noncurrent receivables Item Trade receivables Other noncurrent receivables
Trade receivables Item

Other Noncurrent Receivables of Merkur, d. d., by Type In thousand EUR 31 December 2010 229 31 December 2010 229 229 31 December 2010 229 229 229 31 December 2009 In thousand EUR 75 31 December 2009 In thousand EUR 75 75 31 December 2009 75 75 75 72

Other Noncurrent Receivables

66

The short-term loan given to HTC DvA, d. o. o., in the amount of EUR 147,500 thousand was converted to a long-term 71 The short-term loanmaturity on 23 April 2010. The o., in the took the receivables of the loan taker due from Merfin in loan with 25 year given to HTC DVA, d. o. Company amount of EUR 147,500 thousand was converted to a long-termof the principal value as maturity In addition, HTC DvA, The o., assumed the debt that Factor druba za the amount loan with 25 year collateral. on 23 April 2010. d. o. Company took the receivables of the loan taker due from Merfin in the amount of the principal value as collateral. In addition, HTCmaturity: 28 svetovanje, trgovino in leasing, d. o. o., Ljubljana owed to Merkur in the amount of EUR 10,000 thousand, DVA, d. o. o., March 2013.the debt that Factor druba za svetovanje, trgovino in leasing, d. o. o., Ljubljana owed to assumed Merkur in the amount of EUR 10,000 thousand, maturity: 28 March 2013. In 2010 HTC DvA, d. o. o., was given another loan in the amount of EUR 29,681 thousand. After the start of the bankruptcy proceedings of was given o. o., was loan in the amount of EUR 29,681 thousand. After the start In 2010 HTC DVA, d. o. o., HTC DvA, d. another announced on 4 November 2010, the value of the loan was further impaired in the proceedings of HTC DVA, The o., was announced on 4 November 2010, the value of of the bankruptcyamount of EUR 42,134 thousand. d. o.management speculates that as a creditor in the process the of compulsory settlement or bankruptcy they can challenge the debtors legal The management speculates that loan was further impaired in the amount of EUR 42,134 thousand. actions from the year before the bankruptcy. The management compulsory settlement a bankruptcy they can challenge the debtors legal as a creditor in the process of is discussing whether to fileor challenging action for disputable transactions that are the from of special audit. actionssubjecttheayear before the bankruptcy. The management is discussing whether to file a challenging action for disputable transactions that are the subject of a special audit. On 31 December the company recorded the long-term loan given to HTC DvA, d. o. o., with the gross value of EUR 179.390 thousand, the correction for this loan stands at EUR 168,528 thousand, and so the loan given is worth EUR On 31 December the company recorded the long-term loan given to HTC DVA, d. o. o., with the gross 10,862 thousand. value of EUR 179.390 thousand, the correction for this loan stands at EUR 168,528 thousand, and so the

72

5.9

5.9

Inventories

Inventories

72

Inventories of Merkur, d. Inventories of Merkur, d. d. d.


In thousand EUR Item Inventories Materials Merchandise: - in store - in shops - in transit 31 December 2010 39,111 78 39,033 7,275 31,396 363 31 December 2009 62,717 111 62,606 19,287 41,985 1,333

loan given is worth EUR 10,862 thousand.

Collateral for Long-term Loans given by Merkur, d. d.

Collateral for Long-term Loans given by Merkur, d. d.


In thousand EUR

Item Total Mortgages Bills surety Other securities - movable property - insurance companies - guarantors - other forms of collateral Without collateral Maturity of Long-term Loans given by Merkur, d. d.

31 December 2010 11,805 95 843 78 315 412 38 10,867

31 December 2009 1,274 107 100 1,049 78 400 526 45 18 In thousand EUR

At the endend2010, the net realizable value inventories, determined on the on the basis of estimated net sales At the of of 2010, the net realizable value of of inventories, determined basis of estimated net sales prices of prices of items minus the direct cost of sale,the carrying amount of inventories. The inventories. The inventories items minus the direct cost of sale, exceeded exceeded the carrying amount of inventories are subject to pledge are subject to 37,110 thousand (EUR 2,825 thousand of this(EUR 2,825 thousand thethis amount went d. o. o.). of worth EUR pledge worth EUR 37,110 thousand amount went to loans of of subsidiary Mersteel, to loans the subsidiary Mersteel, d. o. o.).
Inventory Surplus and Shortage after Stocktaking of Merkur, d. d. In thousand EUR Item Merchandise net surplus shortage 2010 -375 462 837 2009 -618 385 1,003

No significant surplus or shortages were discovered during the interim stocktaking.

Annual Report Merkur, d. d., 2010

Long-term than 5 years Mature in moreLoans given by Merkur, d. d., by Currency and Interest Rate Long-term Loans given by Merkur, d. d., by Currency and Interest Rate

256

358

At in transit of 2010, the net realizable value of inventories, determined on the basis363estimated net sales of - the end 1,333 prices of items minus the direct cost ofvalue of inventories, carrying amount of basis of estimated net sales sale, exceeded the determined on the inventories. The inventories At the end of 2010, the net realizable are the of itemspledge the direct cost ofvalue of inventories, carrying amount of basis of estimated net sales At subject to minus worth EUR 37,110 thousand (EUR determined on the inventories. The to loans of prices end of 2010, the net realizable sale, exceeded the2,825 thousand of this amount went inventories the subsidiary Mersteel, d.direct cost of sale, exceeded the carrying amount of inventories. The to loans of prices of items minus the o. o.). are subject to pledge worth EUR 37,110 thousand (EUR 2,825 thousand of this amount went inventories
Inventory Surplus and Shortage after Stocktaking of Merkur, d. d. 5.9 Inventories Inventory Surplus and Shortage after Stocktaking of Merkur, d. d. Inventories of Merkur, d. d. after Stocktaking of Merkur, d. d. Inventory Surplus and Shortage Item Merchandise net Item surplus Item Merchandise net shortage Merchandise Inventories net surplus surplus Materials shortage

in shops -- in transit

31,396 363

41,985 1,333

are Inventory Mersteel, d. o.EUR 37,110 thousand (EUR 2,825 thousand of this amount went to loans of subject to pledge worth o.). the subsidiary Surplus and Shortage after Stocktaking of Merkur, d. d. the subsidiary Mersteel, d. o. o.).
In thousand EUR

Corrections during 2.130 634 Inventory 31 December -619 -469 Status onwrite-off the year 2,531 1,020 Inventory Surplus and Shortage after Stocktaking of Merkur, d. d. Inventory write-off -619 -469 Status on 31 December 2,531 1,020 Based on the Decemberaccounting estimate regarding the realizable value of inventory (seethousand1,020 an Status on 31 changed 2,531 In item 4.9)EUR

additional correction of accounting estimate regarding the realizableof EUR 2,130 thousand item 4.9)the Based on the changed the value was made in 2010 in the amount value of inventory (see debiting an balanceonon the changedthe value was made regarding realizable value of inventory (seethousand debiting2009 Item Based sheet. changed accounting estimate in 2010 in the amount value 2,130 2010 (see additional an Based the item additional correction of accountingestimate regarding the the realizableof EURof inventory 4.9) anitem 4.9)the
Merchandise of the additional correction of was made was made amount in the amount of EUR 2,130 -375 the balance sheet. net value the value in 2010 in the in 2010 of EUR 2,130 thousand debiting thethousand debiting-618 correction balance sheet. balance sheet. surplus 462 385 5.10 Current Financial Assets shortage 837 1,003

5.10 Current Financial Assets Current Financial Assets 5.105.10Current Assets of Assets were by Type Current Financial FinancialMerkur, d. d., discovered during the interim stocktaking. No significant surplus or shortages

68

In thousand Current Financial Assets of Merkur, d. d., by Type EUR Current of Inventory Value due to the by Type to Realizable Value in Merkur, d. d., in 2009 In thousand Financial AssetsMerkur, d. d., Adjustment of Merkur, d. d., by Type Current Financial Assets of Corrections and 2010 Item 31 December 2010 31 December 2009 In thousand EUR In thousand EUR Current financial assets 0 Item 31 December 2010 31 December4,351 2009 Item 2010 2009 Item 31 December 2010 31 December4,351 2009 Deposits, collateralassets and 4,351 Currenton 1 January advances 0 Status financial 1,020 855 Current collateral and advances 0 4,351 Deposits,financial assets 4,351 Corrections during the year 2.130 634 The commercial paper advancesd. d. that the Company recognized at the end of last year in the amount of of GBD Deposits, collateral 4,351 Inventory write-off and decreased in 2010 with the handover of 625,670 Maksima -619 -469 EUR 4,351 thousand, Invest shares worth

The The commercial paper of GBD d. d. that the Company recognized at theat the end year in the amount ofamount of commercial paper of GBD d. d. that the Company recognized end of last of last year in the EUR 4,351 EUR commercial paper decreased d.Agreement the covering the liabilities of thelast year in the amount of on handover commercial paper,1,020 and Status on thousand based 2,531 The 3,44131 Decemberof GBD the handover of 625,670 Maksimaof at shares worth EUR Invest shares worth EURthousand, decreased in 2010on d. thethat the Company recognized625,670 Maksima 3,441 thousand based 4,351 thousand, with in 2010 with Invest the end of by purchasing the shares ofon thein 2010 with valued at EUR 720 thousand and shares shares worth Gorenjska banka on covering the liabilities of the commercialof Kopitarna EUR 3,441 thousand based 4,351 thousand, covering EURon the Agreement ondecreased liabilities of the the handover of 625,670 Maksima Invest of Agreement commercial paper, and by purchasing the shares paper, and Sevnica valued theEUR 190of on the estimate regarding the realizable value of the commercialofGorenjskaan Based on the at shares thousand. EUR 3,441 thousand based Gorenjska banka valued at EUR 720 thousandthousand. the Agreement on covering the liabilities of and shares paper, by purchasing changed accounting and shares of Kopitarna Sevnica valued at EUR 190inventory (see item 4.9)and Kopitarna banka correction of the at EUR 720 thousand additional valuedat EUR 190 value was made in valued at amount of EUR 2,130 thousand debiting the by purchasing Sevnica valued the shares of Gorenjska banka2010 in the EUR 720 thousand and shares of Kopitarna thousand. balance sheet. at EUR 190 thousand. Sevnica valued 5.10 Current Financial Assets 5.11 Given Short-term Loans and Financial Lease Short-term Loans and Financial Lease given by Merkur, d. d., by Type
Short-term Loans Assets of Merkur, d. d., by Type Current Financial and Financial Lease given by Merkur, d. d., by Type

5.11

Given Short-term Loans and Financial Lease

73 73

EUR 3,441 thousand based on the Agreement on covering the liabilities of the commercial paper, and Receivables from financial lease 42 328 by purchasing the shares of Gorenjska banka valued at EUR 720 thousand and shares of Kopitarna Sevnica valued at EUR Loans given by Collateral for Short-term 190 thousand. Merkur, d. d.
Item Total Mortgages Bills surety Other securities 31 December 2010 15,365 14 15,165 186

In thousand EUR 73 In thousand EUR Item 31 December 2010 31 December 2009 Item 31 December 2010 31 December 2009 Given Short-term Loans and Financial Lease 15,407 55,562 Current financial assets 0 4,351 Loans given to subsidiaries 15,165 15,165 Deposits, collateral and advances 4,351 Loans given to other companies 200 40,069 - short-term part paper long-term loans 200 465 The commercialof given of GBD d. d. that the Company recognized at the end of last year in the amount of EUR 4,351 thousand, decreased in 2010 with the handover of 625,670 Maksima Invest shares 39,604 worth - given short-term loans -

1.59% 5.50% Interest Interest rate from rate to In thousand EUR EUR 15,365 1.59% 5.50% Short-term Loans Given by Merkur, d. d., in 2009 and 2010 Short-term Total 15,365 In thousand EUR Receivables Short-term Loans Given by Merkur, d. d., in 2009 and 2010 Short-term loans given to loans given to other from financial Short-term Short-term Loans Given by Merkur, d. d., in 2009 and 2010 Item subsidiaries loans given to companies lease Short-term Receivables In thousand EUR Gross value on 1 January 2009 14,854 89,819 from financial 758 loans given to other Item subsidiaries companies lease Short-term maturity of long-term loans -5,200 -1,870 -758 Short-term Short-term ReceivablesGross value on 1 January 2009 14,854 89,819 758 Acquisitions 15,165 loans given to 199,626 loans given toother Short-term maturity of long-term loans -5,200 -1,870 from financial -758 Short-term maturity of long-term loans 465 328 Item subsidiaries companies leaseAcquisitions 15,165 199,626 Repayment -9,654 -119,915 Gross value on 1 January 2009 14,854 89,819 758 Short-term maturity of long-term 2009 465 328 Gross value on 31 December loans 15,165 168,124 328 Short-term maturity of long-term loans -5,200 -1,870 -758 Repayment short-term to long-term given loans* -9,654 -119,915 Transfer from 0 -157,500 0 Acquisitions on 31 December 2009 15,165 199,626 Gross value 15,165168,124 328Acquisitions 43,381 Short-term maturity of long-term loans 465 328 Transfer from short-term to long-term given loans* 0-157,500 0 Repayment -25,735 -286 Repayment -9,654 -119,915 Acquisitions on 31 December 2010 43,381 Gross value 15,165 28,270 42 Gross value on 31 December 2009 15,165 168,124 328 Repayment on 1 January 2009 --25,735 -286 Revaluation 1,660 0 Transfer fromon 31 December 2010 given loans* short-term 0 -157,500 0 Gross impairment duringto long-term 15,16528,270 42Value value the year 126,395 Acquisitions 43,381 Revaluation on 1 January 2009 1,660 0 Revaluation on 31 December 2009 0 128,055 0 Repayment -25,735 -286 Value impairment during the year -126,395 -Value value on 31 December 2010 25,500 Gross impairment during the year 15,165 28,270 42 Revaluation on 31 December 2009 to long-term loans 0128,055 0Transfer of correction from short-term -126,395 Revaluation on 1 January 2009 1,660 0 Value impairment during the year -25,500 -Impairment write-off 910 Value impairment during the year 126,395 Transfer of correction from short-term to long-term loans -126,395 Revaluation on 31 December 2010 0 28,070 0 Revaluation on 31 December 2009 0 128,055 0 Impairmenton 1 January 2009 write-off 910 Net value 14854 88,159 758 Value impairment during the year 25,500 Revaluation on 31 December 2010 0 28,070 0 Net value on 31 December 2009 15,165 40,069 328 Transfer of correction from short-term to long-term loans -126,395 Net value on 1 January 2009 14854 88,159 758 Net value on 31 December 2010 15,165 200 42 Impairment write-off 910 Net value on inDecember 2009 15,165 40,069 328 * Explanation31 31 December 2010 Revaluation on item 5.7. 0 28,070 0 Net value on 31 December 2010 15,165 200 42 Net value on 1 January 2009 14854 88,159 758 74 * Explanation in item 5.7. Net value on 31 December 2009 15,165 40,069 328 Net value on 31 December 2010 15,165 200 4274

EUR Short-term Loans Given by Merkur, d. d., in 2009 and 2010 Total Currency:

15,365 Value in 15,365 thousand EUR

* Explanation in item 5.7. * Explanation in item 5.7.

74

In thousand EUR 31 December 2009 55,234 19 52,780 73 233

Annual Report Merkur, d. d., 2010

385 111 1,003 1,003 62,606 - in store 7,275 19,287 No significant surplus or shortages were discovered during the interim stocktaking. Corrections of Inventory Value due to the Adjustment to Realizable Value stocktaking. d., in 2009 and 2010 No significant surplus or shortages were discovered during the interim in Merkur, d. - in shops 31,396 41,985 In in and 2010 EUR Corrections of Inventory Value due to the Adjustment to Realizable Value in Merkur, d. d., d. d., thousand 1,333 - in Corrections of Inventory Value due to the Adjustment to Realizable Value in Merkur, in 2009 2009 and transit 363 2010 of Inventory Value due to the Adjustment to Realizable Value in Merkur, d. d., in In thousand 2009 Corrections EUR Item 2010 2009 and 2010 In thousand EUR At the end of 2010, the net realizable value of inventories, determined on the basis of estimated net sales Item 2010 2009 Status on 1 January 1,020 855 prices of items minus the direct cost of sale, exceeded the carrying amount of inventories. The inventories Item 2010 2009 Corrections during the year 2.130 634 Status on 1 January 1,020 855 are subject to pledge worth EUR 37,110 thousand (EUR 2,825 thousand of this amount went to loans of Inventory write-off the year o. o.). -619 -469 Status on January 1,020 855 Corrections1during 2.130 634 the subsidiary Mersteel, d.

In thousand EUR 2010 In thousand2009 EUR -375 -618 2010 2009 462 385 2010 31 December 2010 31 December 2009 -375 -618 837 1,003 -375 -618 39,111 62,717 462 385 462 78 837

No significant surplus shortages were discovered during interim stocktaking. 39,033 No significant surplus oror shortages were discovered during the the interim stocktaking. 837 shortage Merchandise:

In thousand EUR Given Short-term Loans and Financial Lease 15,407 55,562 Loans given to other companies 200 40,069 Loans given to subsidiaries 15,165 15,165 - short-term part of given long-term loans 200 465 Item 31 December 2010 31 December 2009 Loans given to other companies 20040,069 - given short-term Loans 39,604 Given Short-term loans and Financial Lease 15,407 55,562 -Receivables from financial lease loans short-term part of given long-term 200 465 42 328 Loans given to subsidiaries 15,165 15,165 - given short-term loans 39,604 Loans given to other companies 200 40,069 Collateral for Short-term Loans given by Merkur, Collateral for Short-term Loans given by Merkur, d. d. d. d. Receivables from financial lease 42 328 - short-term part of given long-term loans 200 465 In thousand EUR - given short-term loans Loans given by Merkur, d. d. 39,604 Collateral for Short-term Item 31 December 2010 31 December 2009 Receivables from financial lease 42 328 In thousand EUR Total 15,365 55,234 Item 31 December 2010 31 December 2009 Mortgages 14 19 Collateral for Short-term Loans given by Merkur, d. d. Totalsurety 15,365 55,234 Bills 15,165 52,780 In thousand EUR Mortgages 14 19 Other 186 233 Item securities 31 December 2010 31 December 2009 Bills surety 15,165 52,780 - with 83 115 Total insurance companies 15,365 55,234 Other securities 186 233 - guarantors 103 118 Mortgages 14 19 - with insurance companies 83115 Without collateral 2,202 Bills surety 15,165 52,780 - guarantors 103 118 Other securities 186 233 Short-term Loans Given by Merkur, d. d., by Currency and Interest Rate Without collateral 2,202 - with insurance companies 83 115 Short-term Loans Given by Merkur, d. by by Currency Interest Rate Rate d., Currency and and Interest - guarantors 103 118 Short-term Loans Given by Merkur, d. d., Without collateral 2,202 Value in Interest Interest Currency: thousand EUR rate from rate to Short-term Loans Given by Merkur, d. d., by Currency and Interest Rate Value in Interest Interest EUR 15,365 1.59% 5.50% Currency: thousand EUR rate from rate to Total 15,365

5.12

5.12

Trade Receivables and Other Assets

Trade Receivables and Other Assets

Own Shares
In 2008, Merkur acquired 131,258 of own shares, or 10% of total share capital.
In thousand EUR In thousand 2009 31 December 2010 31 December EUR 29,628 145,856 31 December 2010 31 December 2009 1,917 119 29,628 145,856 10,058 72,569 1,917 119 11,201 57,026 10,058 72,569 6,452 16,142 11,201 57,026 6,452 16,142

5.12Short-termReceivables and Other Assets Trade Trade Receivables of Merkur, d. Short-term Trade Receivables of Merkur, d. d. d.
Short-term Trade Receivables of Merkur, d. d. Item Trade Item receivables and other assets Advances for inventory Trade receivables and other assets Trade receivables due Advances for inventory from customers Trade receivables due from subsidiaries Trade receivables due from customers Trade receivables due from others and Trade receivables due from subsidiariesactive accruals Trade receivables due from others and active accruals

These shares were acquired in relation to ZGD, Article 247, second indent, namely to be offered for repurchase to employees of the Company or a related company. Because the shares were not offered to employees for repurchase within a year, the management proposed to the general meeting that the shares be withdrawn. The decision on the withdrawal was adopted at the 22th shareholders general meeting on 25 February 2011. In 2010 the Company acquired 13,615 of own shares valued at EUR 3,812 thousand and immediately sold them to Merfin, d. o. o., at the same price. 16,090 MER shares have been hypothesized in favor of the bank as a loan security.

Corrections of of the valueof receivables and the maturity structure of receivables arein item 5.22 item 5.22 Corrections the value of receivables and the maturity structure of receivables are shown shown in Financial Financial Instruments and Risk Management. maturity structure of receivables are shown in item 5.22 Instruments and Risk Management. Corrections of the value of receivables and the Financial Instruments and Risk Management. 5.13 5.13

Establishing and Covering the Net Loss Generated in 2010


The management of Merkur, d. d., established that the company generated a net loss of EUR 220,483 thousand in 2010, EUR 2.403 thousand of which will be covered by: retained net profit from previous years in the amount of EUR 1,373 thousand, and remains of the legal reserves in the amount of EUR 1,030 thousand. The remainder of the net loss from 2010 in the amount of EUR 218,080 thousand is the accumulated loss that will be covered in 2011.

5.13

Cash and Cash Equivalents

Cash and Cash Equivalents of Merkur, d. d. In thousand EUR 31 December 2010 31 December EUR In thousand 2009 332 31 December 5,584 31 December 2009 2010 233 5,584 965 233 4,385 285 332 47 285 Item

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash Cash Equivalents of Merkur, d. d. Cash and and Cash Equivalents of Merkur, d. d.

Cash Item and cash equivalents Cash and cash equivalents Cash in hand Cash in bank Cash in hand
Callable deposits Cash in bank Callable deposits

Establishing and Covering the Accumulated Loss Generated in 2010


The established accumulated loss of EUR 218,080 thousand will be covered in 2011 from the effects of the finalized compulsory settlement and from capital reserves arising from the decision on the simplified reduction of the share capital, which passed the vote on the 22th shareholders meeting on 25 February 2011.

4,385 965

47-

70

The Company did not opt for automatic bank overdrafts on its transaction accounts. On 31 December 2010 the balance on its account with is negative of On 819 thousand The The Company did not opt for automaticGorenjska banka its on its transaction accounts.EUR 31 December Company did not for automatic bank overdrafts transaction in the amount December 2010 the bank overdrafts on accounts. On 31 and is subject to on itsopt compulsory settlement. The interest rate for callable deposits is between 0.40% and 2010 the balance balance on account account with Gorenjska banka is negative in the amount of EUR 819 thousand 2.00% subjectits fixed. with Gorenjska banka is negative in the amount of EUR 819 thousand and is subject to and compulsory settlement. The interest rate for The interest ratebetween 0.40%deposits is between 0.40% and is annually compulsory settlement. callable deposits is for callable and 2.00% annually fixed. to 2.00% annually fixed. 5.14 Equity and Reserves 5.145.14Equity and and Reserves Equity Reserves Share capital of Merkur, d. d. totals totals EUR 54,773and is divided into 1,312,585 individual ordinary share Share capital of Merkur, d. d. EUR 54,773 thousand thousand and is divided into 1,312,585 individual ordinary share of Merkur, been totals have been fully ordinary An certificate registered in the name of the Share capitalAll shares have d. d. fully paid in. An54,773 thousand shareindividual isordinary share certificate is certificates. certificates. All shares EUR individual paid in. and is divided into 1,312,585 individual registered in the name of the holder and gives its fully paid in. An individual ordinary share certificate is ordinary sharegives its holder All right to: have been holder the right to: holder and certificates. the shares one the name of the meeting, registeredvote at a at a shareholders and gives its holder the right to: one in vote shareholdersholder meeting, a rata dividend from from profit appropriated for payout, one vote at a shareholders meeting, a propro rata dividend profit appropriated for dividenddividend payout, a pro rata portion of profit appropriated estate liquidation in a pro rata dividend from the of estate in bankruptcy orin bankruptcy or liquidation in theliquidation. a pro rata portion of the remainder remainder of for dividend payout, the event of bankruptcy or event of bankruptcy portion of the a pro rata or liquidation. remainder of estate in bankruptcy or liquidation in the event of TheThe shares have been issued inin dematerialized formentered in the central securities securities registerrun by shares have been issued dematerialized form and and entered in the central register run by KDD bankruptcy or liquidation. KDD Centralna been issued in dematerialized form and The Centralna klirinko depotna druba d. d. Ljubljana. Ljubljana. entered in the central securities register run by shares have klirinko depotna druba d. d. KDD Centralna klirinko depotna druba d. d. Ljubljana. Approved Capital Approved Capital Merkur, d. Capital adopted any resolutions on approved capital. Approved d. has not

5.15

Loans Taken

5.15 5.15 Loans Taken Loans Taken Long-term Loans Taken by Merkur, d. d., by Type
Long-term Loans Taken by Merkur, d. d., by Type Long-term Loans Taken by Merkur, d. d., by Type Item Item Noncurrent financial liabilities Noncurrent financial liabilities In thousand EUR In thousand EUR 31 December 2010 31 December 2010 41,880 41,880 41,880 41,880 31 December 2009 31 December 2009 96,848 96,848 96,848 96,848

Long-term loans taken from banks Long-term loans taken from banks Long-term Loans Taken by Merkur, d. d., in 2009 and 2010 Long-term Loans Taken byby Merkur, d., d., 2009 and 2010 Long-term Loans Taken Merkur, d. d. in in 2009 and 2010

In thousand EUR In thousand EUR Item Item Balance on 1 January 2009 Balance on 1 January 2009 New loans New loans Loan repayment Loan repayment Transfer to short-term loans due to failure to fulfill obligations Transfer to short-term loans due to failure to fulfill obligations Short-term part of long-term loans Short-term part of long-term loans Balance on 31 December 2009 Balance on 31 December 2009 Transfer from short-term loan to long-term (reprogramming) Transfer from short-term loan to long-term (reprogramming) New loans New loans Transfer to short-term loans due to failure to fulfill obligations Transfer to short-term loans due to failure to fulfill obligations Short-term part of long-term loans Short-term part of long-term loans Balance on 31 December 2010 Balance on 31 December 2010 Long-term Loans Taken by Merkur, d. d., by Currency and Interest Rate Long-term Loans Taken by Merkur, d. d., by Currency and Interest Rate Long-term loans taken from banks Long-term loans taken from banks 114,549 114,549 99,550 99,550 -240 -240 -41,500 -41,500 -75,510 -75,510 96,848 96,848 49,300 49,300 12,800 12,800 -17,142 -17,142 -99,926 -99,926 41,880 41,880

Merkur, d. d. d. has notadopted anyresolutions onon approved capital. Merkur, d. has not adopted any resolutions approved capital. Conditional Capital Increase The Articles Capital Increase Conditional of Association of Merkur, d. d. do not include any provisions on conditional capital increase.

The Conditional Capital Increase Articles of Association of Merkur, d. d. do not include any provisions on conditional capital increase. Reserves amount to EUR 53,159 thousand and comprise only reserves for own shares, and will be The Articles of Association d. d. do not their withdrawal. released amount to EUR of Merkur, thousand include any provisions on conditional capital increase. Reservesupon disposal of own shares or upon and comprise only reserves for own shares, and will be 53,159

Reserves amount to EUR own thousand upon their withdrawal. released upon disposal of 53,159shares or and comprise only reserves for own shares, and will be released upon Own Shares own shares or upon their withdrawal. disposal of In 2008, Merkur acquired 131,258 of own shares, or 10% of total share capital. Own Shares These Merkur acquired 131,258 of own to ZGD, 10% total share indent, In 2008,shares were acquired in relation shares, orArticleof247, secondcapital. namely to be offered for repurchase to were acquired in relation to ZGD, Article 247, second indent, namely to be offered for These shares employees of the Company or a related company. Because the shares were not offered to employees for repurchase the Company the management proposed to the general meeting that to repurchase to employees of within a year, or a related company. Because the shares were not offeredthe shares be for repurchase decision on the withdrawal was adopted to the general meeting general employees withdrawn. The within a year, the management proposedat the 22th shareholders that the meeting on 25 February 2011. shares be withdrawn. The decision on the withdrawal was adopted at the 22th shareholders general meeting on 25 February 2011.

75

Value in Value in

Interest Interest

Interest Interest

Annual Report Merkur, d. d., 2010

Fair value reserve totals at EUR 62,861 thousand and represents the effects of a change in fair value of availablefor-sale financial assets and property.

Short-term part of long-term2009 Balance on New loans 31 December loans Balance to short-term loans due long-term to fulfill obligations on 31 December 2009 Transfer from short-term loan to to failure (reprogramming) Transfer from short-term loan to long-term (reprogramming) Short-term New loans part of long-term loans New loans short-term loans due to failure to fulfill obligations Balance to 31 December 2010 Transfer on Transfer to short-term loans due to failure to fulfill obligations Short-term part of long-term loans Short-term part of long-term2010 Balance on 31 December loans Long-term Loans Taken by Merkur, d. d., by Currency and Interest Rate Long-term Loans Taken by Merkur, d. d., by Currency and Interest Rate Balance on 31 December 2010

-75,510 96,848 12,800 96,848 -17,142 49,300 49,300 -99,926 12,800 12,800 41,880 -17,142 -17,142 -99,926 -99,926 41,880 41,880

Long-term Loans Taken by Merkur, d. d., by Currency and Interest Rate Value in Interest Interest Long-term Loans Taken by Merkur, d. d., by Currency and Interest Rate Currency: thousand EUR rate from rate to EUR 41,880 1.73% 9.00% Value in Interest Interest Currency: thousand EUR rate from rate to Value in Interest Interest Total 41,880 Currency: thousand EUR rate from rate to EUR 41,880 1.73% 9.00% EUR 41,880 1.73% 9.00% Total 41,880 Collateral for Long-term Loans Taken by Merkur, d. d. Total 41,880 In thousand EUR Collateral for Long-term Loans Taken by Merkur, d. Collateral for Long-term Loans Taken by Merkur, d. d. d. Item 31 December 2010 31 December 2009 Collateral for Long-term Loans Taken by Merkur, d. d. In thousand EUR Loans taken 41,880 96,848 InDecember EUR Item 31 December 2010 31 thousand 2009 Mortgages 35,880 32,991 Item taken 31 December 2010 31 December 2009 Loans 41,880 96,848 Bills surety 6,000 6,000 Loans taken 41,880 96,848 Mortgages 35,880 32,991 Collateralized by securities 57,857 Mortgages 35,880 32,991 Bills surety 6,000 6,000 Bills surety 6,000 6,000 Collateralized by securities 57,857 Maturity of Long-term Loans Taken by Merkur, d. d. Collateralized by securities 57,857 In thousand EUR Maturity of Long-term Loans Taken by Merkur, d. d. Item 31 December 2010 31 December 2009 Maturity of Long-term Loans Taken by Merkur, Maturity of Long-term Loans Taken by Merkur, d. d.d. d. In thousand EUR Loans taken 41,880 96,848 In thousand 2009 Item in 12 years 31 December 2010 31 December EUR Mature 29,880 43,453 Item taken 31 December 2010 31 December 2009 Loans 41,880 96,848 Mature in 25 years 12,000 53,395 Loans taken years 41,880 96,848 Mature in 12 29,880 43,453 Mature in 12 years 29,880 43,453 Mature in 25 years 12,000 53,395 Mature in 25 years 12,000 53,395

72

Short-term part of liabilities from financial leases Item Acquisitions Balance on 1 January 2009 Repayment Short-term part of liabilities from financial leases Item Interest Acquisitions Balance on 1 January 2009 Short-term part of liabilities from financial leases Repayment Balance on part of liabilities from financial leases Short-term 31 December 2009 Interest Acquisitions Short-term part of liabilities from financial leases Short-term part of liabilities from financial leases Repayment Balance on 31 December 2009 Interest Short-termpart of liabilities from financial leases Short-term part of liabilities from financial leases Repayment 2009 Balance on 31 December 2010 Interest Short-term part of liabilities from financial leases Short-term part of liabilities from financial leases Repayment Balance on 31 Noncurrent Liabilities December 2010 5.17 Interest Other Short-term part of liabilities from financial leases Balance on 31 Noncurrent Liabilities 5.17 Other December 2010 Item

5.16 Noncurrent andand Current Liabilities from Financial Leases Noncurrent Current Liabilities from Financial Leases 5.16
Noncurrent and Current Liabilities from Financial Lease of Merkur, d. d.

5.16 Noncurrent and Current Liabilities from Financial Leases Noncurrent and Current Liabilities from Financial Lease of Merkur, d. d.
Noncurrent and Current Liabilities from Financial Lease of Merkur, d. d. Item Noncurrent liabilities from financial leases Item Current liabilities from financial leases Noncurrent liabilities from financial leases Total liabilities from financial leases Current liabilities from financial leases Total liabilities from financial leases 31 December 2010 31 December 55,463 2010 2,211 55,463 57,673 2,211 57,673

5.17 78
In thousand EUR 31 December thousand EUR 1 January In 78 2009 2009 31 December 1 January 57,602 51,194 2009 2009 2,056 57,602 59,659 2,056 59,659 517 51,194 51,711 517 51,711

5.17 Other Noncurrent Liabilities Other noncurrent liabilities


Other Noncurrent Liabilities

517 Noncurrent liabilities from financial leases In thousand9,629 EUR 51,194 -3,397 517 Noncurrent liabilities from financial leases 1,715 9,629 51,194 -2,056 -3,397 57,602 517 1,715 9,629 2,056 -2,056 -3,397 -3,221 57,602 1,715 1,236 2,056 -2,056 -2,211 -3,221 57,602 55,463 1,236 2,056 -2,211 -3,221 55,463 1,236 In thousand EUR -2,211 55,463 31 December 2010 31 December 2009 In thousand EUR 40 63 40 31 December 2010 40 40 31 December 2010 40 40 63 31 December 2009 In thousand EUR 63 63 31 December 2009 63 63

Noncurrent operating liabilities to be paid to others Item Other noncurrent liabilities Noncurrent operating liabilities to be paid to others Item Other noncurrent liabilities Noncurrent operating liabilities to be paid to others

78

79

5.18

Long-term and Short-term Provisions

Receivables from Assets of Merkur, d. d., Leased Under Financial Lease by Maturity

Receivables from Assets of Merkur, d. d., Leased Under Financial Lease by Maturity Receivables from assets leased under financial lease: due in less than a year* Receivables from assets leased under financial lease: due between 1 to 5 years due in less than a year* due in more than 5 years due between 1 to 5 years Total more than 5 years due in Total 31 December 2010 31 December2,211 2010 22,992 2,211 32,471 22,992 57,673 32,471 57,673

Receivables from Assets of Merkur, d. d., Leased Under Financial Lease by Maturity

In thousand EUR In thousand EUR 31 December 2009 31 December2,056 2009 23,435 2,056 34,167 23,435 59,659 34,167 59,659

5.18 Long-term and Short-term Provisions Long-term Provisions of Merkur, d. d., by Type
Long-term Provisions of Merkur, d. d., by Type

79 79

In thousand EUR Item Long-term provisions Provisions for severance pay Provisions for guarantees Provisions for taxes Other provisions Changes in Long-term Provisions of Merkur, d. d., in 2009 and 2010 31 December 2010 34,189 4,331 24,768 3,649 1,440 31 December 2009 7,908 5,969 1,940

Noncurrent Liabilities from Financial Lease of Merkur, d. d., by Currency and Interest Rate Noncurrent Liabilities from Financial Lease of Merkur, d. d., by Currency and Interest Rate Value in Interest Currency: thousand EUR rate from Value in Interest EUR 55,463 2.51% Currency: thousand EUR rate from Total 55,463 EUR 55,463 2.51% Total Noncurrent Liabilities from Financial Lease in 2009 and 2010 Noncurrent Liabilities from Financial Lease in 2009 and 2010 55,463 In thousand EUR Interest rate to Interest 4.26% rate to 4.26%

In thousand EUR Provisions for severance pay 6,092 Provisions Provisions for share for options guarantees 2,138 0

Item Balance on 1 January 2009

Provisions Other for taxes provisions 0 1,615

Long-term provisions 9,845

Annual Report Merkur, d. d., 2010

due in less than a year* 2,211 2,056 Receivables from 5 years of Merkur, d. d., Leased Under Financial Lease by Maturity due between 1 to Assets leased under financial lease: 22,992 23,435 Receivables from assets 31 December 2010 31 December 2009 In thousand EUR due in more than 5 years 32,471 34,167 due in less than a year* 2,211 2,056 Total 57,673 59,659 due between 1 to 5 years 22,992 23,435 Receivables from assets leased under financial lease: 31 December 2010 31 December 2009 due in more than 5 years 32,471 34,167 due in less thanLiabilities from Financial Lease of Merkur, d. d., by Currency2,211Interest Rate a year* 2,056 Noncurrent and Total 57,673 59,659 Noncurrent Liabilities from Financial Lease of Merkur, d. d., by Currency and Interest Rate due between 1 to 5 years 22,992 23,435 due in more than 5 years 32,471 34,167 Value Interest Interest Total 57,673 in 59,659 Noncurrent Liabilities from Financial Lease of Merkur, d. d., by Currency and Interest Rate Currency: thousand EUR rate from rate to EUR 55,463 2.51% 4.26% Value in Interest Interest Noncurrent Liabilities from Financial Lease of Merkur, d. d., by Currency and Interest Rate Total 55,463 Currency: thousand EUR rate from rate to EUR 55,463 2.51% 4.26% Noncurrent Liabilities from Financial Lease in 2009 and 2010 Value in Interest Interest Total 55,463 Currency: thousand EUR rate from rate to In thousand EUR EUR 55,463 2.51% 4.26% Noncurrent Liabilities from Financial Lease in 2009 andand 2010 Noncurrent Liabilities from Financial Lease in 2009 2010 Total 55,463 Item Noncurrent liabilities from financial leases In thousand EUR Balance on 1 January 2009 51,194 Noncurrent Liabilities from Financial Lease in 2009 and 2010

Provisions for severance pay Provisions for guarantees Provisions for taxes Other provisions Changes in Long-term Provisions of Merkur, d. d., in 2009 and 2010 Provisions for severance pay 6,092 302 -426 5,969 5,969 -281 -1,356 4,331

4,331 24,768 3,649 1,440

5,969 1,940

Changes in Long-term Provisions of Merkur, d. d., in 2009 and 2010


In thousand EUR Provisions Provisions for share for options guarantees 2,138 0 -121 -2,018 0 0 0 0 0 24,768 24,768

Ministry of important comments were taken into account, in item 6.7 Income the none of theFinance. More on the tax inspection is describedso it complained to Tax.second instance, the Ministry of Finance. More on the tax inspection is described in item 6.7 Income Tax. second instance, the none of the important comments were taken into account, sosale-and-leaseback of real estate, and to Other provisions apply to long-term deferred income from it complained to the Other provisions apply on the tax inspection income from item 6.7 Income Tax. estate, and to Ministry of Finance. Moreto long-term deferred is employment sale-and-leaseback of real is dedicated to retained contribution for exceeding the quote for described insale-and-leaseback ofwhich is dedicated to retained contribution for exceeding the quote income from of disabled persons, real Other provisions apply to long-term deferredfor employment of disabled persons, which estate, and to improving the working environment of disabled employment of disabled persons, which improving the working environment of quote for retained contribution for exceeding thedisabled persons. from sale-and-leaseback of real is dedicated to Other provisions apply to long-term deferred persons. income estate, and to improving the workingfor exceeding of disabledfor employment of disabled persons, which is dedicated to retained contribution environment the quote persons. Short-term Provisions of Merkur, d. d., by Type improving the workingof Merkur, d. d., by Type persons. Short-term Provisions environment of disabled
Short-term Provisions of Merkur, d. d., by Type Short-term Provisions of Merkur, d. d., by Type Short-term Provisions of Merkur, d. d., by Type Item 31 December 2010 Item 31 December 2010 Short-term provisions 560 Item 31 December 2010 Short-term provisions 560 Provisions for lawsuits 277 Short-term for lawsuits 560 Item 31 December 2010 Provisions provisions 277 Provisions for liabilities for employees that have not used up their Provisions provisions Provisions for lawsuits for employees that have not used up their 277 Short-termfor liabilities 560 leave 283 leave 283 Provisions for liabilities for employees that have not used up their Provisions for lawsuits 277 leave 283 Provisions for liabilities for employees that have not used up their for The The short-term provisionsof the Company comprise thethe liabilityemployees who do not do notofuse all of their The short-term provisions of the Company comprise the liability for employees who 283 not use all of their short-term provisions of the Company comprise liability for employees who use all their leave 240 do leave leave days, and the provision for lawsuits. The value of these provisions is not significantly different from In thousand EUR In thousand EUR 31 December 31 December In thousand EUR 2009 2009 31 December In thousand EUR 517 2009 517 31 December 277 517 2009 277 277 517 240 240 277 240

Balance on 1 January 2010 Non-cash contribution of owner Provisions formed during the year Provisions used during the year Provision withdrawal Balance on 31 December 2010

0 3,649 3,649

1,940 16 104 -454 -167 1,440

7,908 16 28,522 -735 -1,523 34,189

5.19 Loans Taken Short-term Loans Taken by Merkur, d. d., by Type Short-term Loans Taken by Merkur, d. d., by Type 5.19Short-term TakenTaken by Merkur, d. d., by Type Loans Loans
Short-term Loans Taken by Merkur, d. d., by Type Short-term Loans Taken by Merkur, d. d., by Type Item Item

74

Provisions for severance pay and long-service bonuses set set according to the amount of expected Provisions for severance pay and long-servicebonuses areare according to the amount of expected payouts, payouts,discounted at the end of the of the reporting term. The following estimates are used in calculating discounted at the end reporting term. The following estimates are used in calculating potential liabilities: the growth potential liabilities: of the average salary in the Republic of Slovenia is estimated at 2.5% a year, and growth of salaries in the Company the average salary in the Republic of Slovenia is estimated the growth of at 0,5% a year, which represents the estimated long-term salary growth,at 2.5% a year, and the calculation of payables Company pays is connected which represents of estimated long-term growth of salaries in the for severanceat 0,5% a year, to the years of servicetheindividual employees, the selected discount rate stands at 4.00% a year, salary growth, the Slovenian of payables for 20002002 also is connected to the years of service of individual the calculationdeath rate tablefor severanceispaysobserved. employees,this category decreased in 2010 due to severance pays at regular retirement and paid long-service Provisions in the selected discount 281 thousand at 4.00% a year, provision withdrawal in the amount of EUR 1,356 thousand bonuses totaling at EUR rate stands and also due to the the Slovenian deathlower table forof employees. is also observed. as a consequence of a rate number 20002002 Based on category decreased in 2010 due to 2009, all of pays at regular retirement and paid longProvisions in thisthe decision of the management board inseverancethe unrealized share options from the previous years were withdrawn, and EUR 281 thousand cancelled. service bonuses totaling at the provisions for themand also due to the provision withdrawal in the amount of EUR 1,356 thousand as a consequence of 2010 comprised the reservations for guarantees to third parties for their Companys provisions on 31 December a lower number of employees.

Item taken Loans taken Loans Item taken from banks Loans taken Loans Loans taken from banks -- short-term from of taken long-term loans short-term part banks Loans taken part of taken long-term loans Loans taken --short-term transfer from long-term long-term to the failure to fulfill obligations -Loans takenpart ofbanks loans due loans failure to fulfill obligations transfer from long-term loans due to the from taken - taken short-term loans taken short-term loans long-term loans ---transfer from long-term loans due to the failure to fulfill obligations short-term part of taken Short-term loans taken from other parties --Short-term loans taken from other parties failure to fulfill obligations taken short-term loans loans due to the transfer from long-term - taken short-term loans taken short-term loans Short-term loans taken from other parties -- taken short-term loans -Short-term loans taken from other parties taken short-term loans

31 December 2010 31 December 2010 31 December 2010 366,700 366,700 31 December 2010 347,365 347,365 366,700 99,926 99,926 347,365 366,700 17,143 99,926 17,143 347,365 230,296 230,296 17,143 99,926 19,335 19,335 230,296 17,143 19,335 19,335 19,335 230,296 19,335 19,335

In thousand EUR In thousand EUR In thousand 31 December EUR 31 December 2009 2009 In thousand EUR 31 December 2009 323,547 323,547 31 December 2009 289,154 289,154 323,547 75,510 75,510 289,154 323,547 41,500 75,510 41,500 289,154 172,144 172,144 41,500 75,510 34,393 34,393 172,144 41,500 34,393 34,393 34,393 172,144 34,393 34,393 34,393 Interest Interest rate to rate to Interest 9.00% rate to 9.00% Interest 9.00% rate to 9.00%

liabilities towards subsidiaries which are in the process of compulsory settlement, bankruptcy or liquidation and for Based on the decision of the management board in 2009, all of the unrealized share options from the liabilities of Merfin, d. o. o., and Alpos, d. d., in the amount of EUR 24,768 thousand. The reasons for setting provisions previous years were withdrawn, and the provisions for them cancelled. and the used assumptions are described in item 5.23 Conditional liabilities and receivables.

- taken short-term 19,335 Short-term Loans loans by Merkur, d. d., by Currency and Interest Rate Short-term Loans Taken by Merkur, d. d., by Currency and Interest Rate Taken Short-term Loans Taken by Merkur, d. d., by Currency and Interest Rate Short-term Loans Taken by Merkur, d. d., by Currency and Interest Rate Short-term Loans Taken by Merkur, d. d., by Currency and Interest Rate Value in Interest rate Value in Interest rate Currency: thousand EUR Currency: thousand EUR Interest from from Value in rate EUR 347,365 1.70% Currency: thousand EUR Interest rate from EUR 347,365 1.70% Value in Total 347,365 EUR 347,365 1.70% Currency: thousand EUR from Total 347,365 Total 347,365 EUR 347,365 1.70%

Companys provisions on 31 December for tax liabilities based on the income tax assessment by DURS Special Tax In 2010 the Company set a provision 2010 comprised the reservations for guarantees to third parties for their Office No. DT 0610-98/2010 0203 31whichMarchin the namely in thecompulsory settlement, bankruptcyof the liabilities towards subsidiaries of 16 are 2001, process of amount of 60% or EUR 3,649 thousand or liquidation andincome tax liability Merfin, d. o. o., and Alpos, d. d., in the tax for theof EUR 24,768 thousand. whole for liabilities of for legal entities for 2009 and of value-added amount June 2009 tax period. According The reasons for setting is a standard liability subject toassumptions are described in item 5.23 Conditional to the ZFPPIPP this provisions and the used compulsory settlement (40% discount). The Company filed a liabilitiescomplaint against the records and the decision, but none of the important comments were taken into account, so and receivables. it complained to the second instance, the Ministry of Finance. More on the tax inspection is described in item 6.7 In 2010 Income Tax. the Company set a provision for tax liabilities based on the income tax assessment by DURS Special Tax Office No. DT 0610-98/2010 0203 31 of 16 March 2001, namely in the amount of 60% or Other provisions the to long-term deferred income from sale-and-leaseback of real of value-added tax EUR 3,649 thousand ofapplywhole income tax liability for legal entities for 2009 and estate, and to retained for contribution period. According to the ZFPPIPP of disabled persons, liability subject the June 2009 tax for exceeding the quote for employment this is a standard which is dedicated to improving the compulsory working environment The Company filed a complaint against the records and the decision, but settlement (40% discount). of disabled persons. 80

Total 347,365 Short-term Loans Taken by Merkur, d. d., from Other Companies by Currency and Interest Rate Short-term Loans Taken by Merkur, d. d., from Other Companies by Currency and Interest Rate Short-term Loans Taken by Merkur, d. d., from Other Companies by Currency and Interest Rate Short-term Loans Taken by Merkur, d. d., from Other Companies by Currency and Interest Rate Value in Interest rate Short-term Loans Taken by Merkur, d. d., from Other Companies by Currency and Interest Rate Value in Interest rate Interest Interest Currency: thousand EUR rate to Currency: thousand EUR Interest from Interest from rate to Value in rate EUR 19,335 3.00% 9.00% Currency: thousand EUR Interest rate from rate to EUR 19,335 3.00% Interest 9.00% Value in Total 19,335 EUR 19,335 3.00% 9.00% Currency: thousand EUR from rate to Total 19,335 Total EUR Total 19,335 19,335 19,335 3.00% 9.00%

Collateral for Short-term Loans Taken by Merkur, Collateral for Short-term Loans Taken by Merkur, d. d.d. d.
In thousand EUR Item Loans taken Mortgages Inventories Bills surety Collateralized by securities and stakes in subsidiaries Without collateral 31 December 2010 366,700 105,662 34,285 50,845 148,743 27,165 31 December 2009 323,547 143,919 81 81 66,150 81 34,864 3,133 75,480 81

5.20

Trade and Other Payables Including Derived Financial Instruments

Annual Report Merkur, d. d., 2010

Item Balance on 1 January 2009 Provisions formed during the year Provisions used during the year Provision withdrawal Balance on 31 December 2009

Provisions Other for taxes provisions 0 1,615 786 -461 0 1,940

Long-term provisions 9,845 1,088 -1,007 -2,018 7,908

days, and the the provision for lawsuits. The value of these for employees significantly value for from leave days, and provision for the Company comprise the liabilitynot significantly different from use all of the The short-term provisions oflawsuits. The value of these provisions is provisions is notwho do notthedifferent their the value foryear. the provision for lawsuits. The value of these provisions is not significantly different from the previous the previous of the leave days, andprovisions year. Company comprise the liability for employees who do not use all of their The value for the previous year. short-term the value for and previous year.for lawsuits. The value of these provisions is not significantly different from leave days, the the provision the value for the previous year. 5.195.19Loans Taken Loans Taken 5.19 Loans Taken

Bills surety Inventories Collateralized by securities and stakes in subsidiaries Bills surety Without collateral

5.20

Collateralized by securities and stakes in subsidiaries Without collateral

5.20

Trade and Other Payables Including Derived Financial Instruments

50,845 34,285 148,743 50,845 27,165 148,743 27,165

66,150 75,480 34,864 66,150 3,133 34,864 3,133

In accordance with the facts listed in item 3.1 Assumption of An Operating Company, the long-term liabilities and receivables from deferred taxes were eliminated from accounting statements.
In accordance with the facts listed in item 3.1 Assumption of An Operating Company, the long-term liabilities and receivables from deferred taxes were eliminated from accounting statements. The following table shows the differences between book value and tax value of assets and liabilities and a deferred following table shows the differences betweenassumption of tax value of assets and liabilities not been The tax value that would be recognized if the book value and an operating company had and a deferred compromised. would be recognized if the assumption of an operating company had not been compromised. tax value that
In thousand EUR Difference between book and tax value 148 93,857 201,470 23,890 16,716 3,099 51,865 391,046 50,870 22,844 1,187 74,902 20% 20% 20%

Trade and Other Payables Including Derived Financial Instruments

5.20 Trade and Other Payables Including Derived Financial Instruments Short-term Trade and Other Payables Including the Derived Financial Instruments of Merkur, d. d. Short-term Trade and Other Payables Including the Derived Financial Instruments of Merkur, d. d.
Short-term Trade and Other Payables Including the Derived Financial Instruments of Merkur, In thousand EUR d. d. Item Trade and other payables including derived financial instruments Advances payable Item Trade payables to suppliers Trade and other payables including derived financial instruments Bills payable Advances payable Trade payables (including bills) to subsidiaries Trade payables to suppliers Trade payables to associated enterprises Bills payable Trade payables to others Trade payables (including bills) to subsidiaries - salaries payable Trade payables to associated enterprises - payables to state institutions Trade payables to others interest payables -- salaries payable payables on assignment -- payables to state institutions accrued costs -- interest payables other payables -- payables on assignment Short-termcosts payables interest rate swaps - accrued trade - other payables Short-term trade payables interest rate swaps 31 December 2010 31 December 2009 In thousand EUR 150,064 237,962 491 12,127 31 December 2010 31 December 2009 84,687 139,636 150,064 237,962 568 49112,127 37,927 64,734 84,687 139,636 -56826,958 17,383 37,927 64,734 3,996 3,572 1,395 3,842 26,958 17,383 9,593 2,276 3,996 3,572 266 653 1,395 3,842 2,764 5,706 9,593 2,276 8,943 1,334 266 653 3,513 2,7645,706 8,943 1,334 3,513

Item Property, plant and equipment Financial assets investments Financial assets loans Trade receivables Provisions Other items Tax loss Total receivables for deferred taxes Property, plant and equipment (revaluation) Financial assets (revaluation) Other items Total liabilities for deferred taxes

Tax rate 20% 20% 20% 20% 20% 20% 20%

Deferred tax 30 40,294 4,778 3,191 620 10,373 78,058 10,174 2,321 237 12,733 65,325 18,771

5.21 5.21

Deferred Taxes

5.21

Deferred Tax Assets and Tax Liabilities of Merkur, d. d.

Deferred Taxes

Deferred Taxes
In thousand EUR Tax liabilities In 31 Dec. 2009 31 Dec. 2010 thousand EUR Tax liabilities 10,161 31 Dec. 2010- 31 Dec. 2009 1 -10,161 4,255 --0 14,255 242 14,659 242

76

Tax assets Deferred Tax Assets and Tax Liabilities of Merkur, d. d. Item 31 Dec. 2010 31 Dec. 2009 Tax assets Property, plant and equipment 30 Item 31 Dec. 201031 Dec. 2009 Investment Property Property, plant and equipment -30Financial assets Investment Property Provisions Financial assets Other items --0 1,042 2,672

Deferred Tax Assets and Tax Liabilities of Merkur, d. d.

Net liabilities for deferred taxes

Provisions Net tax assets / tax liabilities Other items Net tax assets / tax liabilities

1,042 3,743 2,672 3,743

14,659

Changes in the Temporary Difference in Merkur, d. d., in 2010

Changes in the Temporary Difference in Merkur, d. d., in 2010


In thousand EUR Balance at the beginning Recognized in Recognized in of the year expenses equity 10,139 -2,050 -8,089 1 -1 4,255 -4,255 -1,042 1,042 -2,430 1,727 703 10,923 718 -11,641 Balance at the end of the year 82 82 0

83

Item Property, plant and equipment Investment Property Financial assets Provisions Other items Total

In accordance with the facts listed in item 3.1 Assumption of An Operating Company, the long-term liabilities and receivables from deferred taxes were eliminated from accounting statements.

The following table shows the differences between book value and tax value of assets and liabilities and a deferred tax value that would be recognized if the assumption of an operating company had not been compromised.

Annual Report Merkur, d. d., 2010

5.22 5.22

Financial Instruments and Risk Management 5.22 Financial Instruments and Financial Instruments and Risk Management Risk Management Credit Risk

Credit Risk

Credit Risk

Maximum Exposure of Merkur, Exposure of Merkur, d. d., to Credit Risk in 2010 and 2009 Maximum d. d., to Credit Risk in 2010 and 2009

Maximum Exposure of Merkur, d. d., to Credit Risk in 2010 and 2009


Exposure of the Receivables of Merkur, d. d., Due from Customers to Credit Risk by Geographical Region in 2010 In thousand EUR In thousand EUR Exposure of the Receivables of Merkur, d. d., Due from Customers to Credit Risk by Geographical Region in 2010 and 2009 and 2009 In thousand EUR Gross Net CorrectionsGross Corrections Concentration* Gross Net Concentration* Net CorrectionsGross Corrections Concentration* Concentration* In thousand EUR Book value 31 Dec. 2010 2010 312010 2010 Dec.Dec. 2010 Dec. 2009 2010 312009 2009 312009 2009 Dec.Dec. 2009 31 Dec. 31 Dec. Dec. 31 31 2010 31 31 Dec. 31 Dec. Dec. 31 Dec. Dec. 31 31 2009 31 Dec. 2009 Book value Item 2010 2009 148,289 128,650 19,639 148,289 100% 19,639 172,999 100% 182,019 172,999 9,020 182,019 100% 9,020 100% Item 2010 2009 2,145 2,145 - 2,145 100% 15,339 100% 15,339 15,339 15,339 100% 100% Slovenia 6,204 110,159 Slovenia 56,507 129,225 6,204 110,159 224,08527,170 196,915 224,085 98% 196,915 56,507 98% 185,732 185,732 98% 129,225 98% EU countries 310 884 EU 310 884 42 42 42 100% 442 100% countries 442 442 - 442 100% 100% Ex-Yugoslavian countries* 14,741 18,358 41,31821,259 20,059 41,318 49% 20,059 129,595 49% 141,049 129,595 11,453 46% 11,453 46% Ex-Yugoslavian countries*141,049 14,741 18,358 Other countries 4 195 24,794 8,598 16,196 24,794 61% 16,196 16,336 61% 20,818 16,336 4,482 20,818 94% 4,482 94% Other countries 4 195 Total 332 332 21,259 129,595 5,584 5,584 - 5,584 100% 332 100% - 332 100% 100% Total 21,259 129,595 446,256 193,448 252,808 446,256 252,808 391,550 545,731 391,550 154,181 545,731 154,181

Item

Item

Net 31 Dec. 2010

Total

Total

193,448

* Concentration describes what percentage of exposure applies to top 10 partners.

78

* Concentration describes what percentage of exposure applies of top 10 partners. to top 10 partners. * Concentration describes what percentage to exposure applies In 2010 and before the compulsory settlement, we reprogrammed the following loans, given to: Impairment Losses 2010 d. o. o. in the In compulsory settlement, we reprogrammed the 2010 to 30 June 2010, and from 30 InRenta Aand before the2010 of EUR 5,500 thousand; extended from 30 Marchfollowing loans, given to: amount and before the compulsory settlement, we reprogrammed the following loans, given to: Impairment Losses - June 2010 to 30 September 2010, of of EUR 5,500 thousand;in the correction on 31 December 201030 June 2010, and from 30 June 2010 to 30 September 2010,30 September 2010, of which EUR Renta A d. o. o. in-the amount which in the amount of EUR 5,500 thousand; extended from 30 March 2010 to 30 June 2010, and from 30 June 2010 to of which EUR Renta A d. o. o. EUR 5,500 thousand extended from 30 March 2010 to Impairment of Trade Receivables of Merkur, d. d., Due from Customers, in 2010 and 2009 Ageing Losses 5,500 leasing d. o. in in5,500 thousand 31 the correction on 31 December 2010 to 3 May 2011, of which thousand o. the correction on in December 2010 Factor the amount of EUR 20,000 thousand; extended from 3 May 2010 Ageing of Trade Receivables of Merkur, d. d., Due from Customers, in 2010 and 2009 - EUR 20,000 thousand-ino. incorrection on 31 December amount of EUR 20,000 thousand; extended 3 May 2011,2010 to 3 EUR 2011, ofthousand in the correction on 31 thed., Due fromon 31 Factor leasing d. o. Factor leasing d.of EUR 20,000 thousand; extended from 3 May 2010 to from 3 May of which May 20,000 which EUR 20,000 thousand in d. correction Customers, in 2010 and 2009 the the amount o. o. in the 2010 Ageing of Trade Receivables of Merkur, In thousand EUR December 2010 o. o.December 2010EUR 15,000 thousand; extended from 23 March 2010 to 23 March 2011 Merkur Hrvatska d. in the amount of In thousand EUR Gross value Impairment Gross value Impairment Merkur d. o. o. in the o. o. in the amount thousand; extended fromEUR 15,000 from 23 March 2010 to 23 March 2011 - Merkur Hrvatska d. o. o. in the amount of 28 March 2010 to 28 March 2013, of which - HTC Dva Hrvatska d. amount of EUR 147,500of EUR 15,000 thousand; extended thousand; extended from 23 March 2010 to 23 March 2011 Gross 2010 Gross 2009 31 Dec. 2009 Impairment - EUR 136,638d. o. o. in in the correction EUR 147,500 thousand; extended thousand; extended from 28 March 2010 to 28 March 2013, of which EUR 136,638 thousand 31 the correction on 31 Impairment HTC Dva thousand the amount of on 31 December 2010. EUR 147,500 from 28 March 2010 to 28 March 2013, of which EUR Item - HTC Dva d. o. o. in the amount of 136,638 thousand in the correction on in 31 Dec.value 31 Dec. 2010 31 Dec.value Itemyet due 31 Dec. 5,517 31 Dec. 2010 2010 31 Dec. 2009 31 Dec. 2009 December 2010. December 2010. Not 55,754 The disclosure on securities, received for loans that have matured or have been impaired are in item 5.11, and in most Not yet due 5,517 55,754 Overdue 030 days 2,771 7 54,737 47 cases disclosure on securities, received for loans that have matured or have been impaired have been impaired are most casesOverdue 030 days apply to bills. The apply to bills. The disclosure on securities, received for loans that have matured or are in item 5.11, and in in item 5.11, and in most cases apply to bills. 2,771 7 54,737 47
Exposure of the Receivables Merkur, d. d. Due from Customers to Credit Risk Risk by Geographical Region in 2010 Exposureof the Receivables ofof Merkur, d., d., Due from Customers to Credit by Geographical Region in and 2009 2010 and 2009
In thousand EUR Book value Item Slovenia EU countries Ex-Yugoslavian countries* Other countries Total
* In the countries of ex-Yugoslavia the receivables are mainly due from the companies of the group.

* In the countries of ex-Yugoslavia the receivables are mainly due from the companies of the group. * In the countries of ex-Yugoslavia the receivables are mainly due from the companies of the group. Other credit risk to balance items mainly applies to the risks in Slovenian market. Other credit risk to balance items mainly applies to the risks in Slovenian market.

Overdue 31180 days Overdue 31180 days Overdue 181365 days Overdue 181365overdue More than a year days More than a year overdue Total Total

10,997 10,997 2,720 2,720 19,314 19,314 41,318 41,318

14,464 20,059 20,059

2,765 2,765 2,824 2,824 14,464

19,319 141,049 141,049

8,537 8,537 2,702 2,702 19,319

10,857 11,453 11,453

142 142 408 408 10,857

2010 6,204 310 14,741 4 21,259

2009 110,159 884 18,358 195 129,595

Ageing of Receivables of Merkur, d. d., Due from Others, in 2010 and 2009 Ageing of Receivables of Merkur, d., Due from Others, in 2010 and 2009 Ageing of Receivables of Merkur, d. d. d., Due from Others, in 2010and 2009 Item Itemyet due Not Gross value Gross value 31 Dec.2010 31 Dec.2010 3,509 3,509 2,333 2,333 2,222 2,222 12,138 12,138 4,592 4,592 24,794 24,794

84

* In the countries of ex-Yugoslavia the receivables are mainly due from the companies of the group. Other credit risk to balance items mainly applies to the risks in Slovenian market. Other credit risk to balance items mainly applies to the risks in Slovenian market.
Impairment Losses Ageing of Trade Receivables of Merkur, d. d., Due from Customers, in 2010 and 2009 In thousand EUR Item Not yet due Overdue 030 days Overdue 31180 days Overdue 181365 days More than a year overdue Gross value 31 Dec. 2010 5,517 2,771 10,997 2,720 19,314 Impairment 31 Dec. 2010 7 2,765 2,824 14,464 Gross value 31 Dec. 2009 55,754 54,737 8,537 2,702 19,319 Impairment 31 Dec. 2009 47 142 408 10,857

Not yet due Overdue 030 days Overdue 030 days Overdue 31180 days Overdue 31180 days Overdue 181365 days Overdue 181365overdue More than a year days More than a year overdue Total Total

Impairment Impairment 31 Dec. 2010 31 Dec. 2010 138 138 2,151 2,151 8,976 8,976 4,930

84

Gross value Gross 2009 31 Dec.value 31 Dec. 2009 15,213 15,213 368 368 310 310 187 187 4,739

In thousand EUR In thousand EUR Impairment Impairment 31 Dec. 2009 31 Dec. 2009 18 18 55 55 160 160 4,248 4,248 4,482 4,482

4,930 16,196 16,196

4,739 20,818 20,818

Classification of Customers to Risk Grades According to the Chances of Their Insolvency Classification of Customers to Risk Grades According to the Chances of Their Insolvency

The classification into grades is based on the credit rating. On 31 December 2010 the Company had EUR

Classification grade Classification grade Above average risk Above average risk Average risk Average risk risk Below average Below average risk Total Total

Share of Share of receivables receivables 31 Dec. 2010 31 Dec. 2010 17% 17% 72% 72% 11% 11% 100% 100%

Share of Share of partners partners 31 Dec. 2010 31 Dec. 2010 22% 22% 49% 49% 29% 29% 100% 100%

Share of Share of receivables receivables 31 Dec. 2009 31 Dec. 2009 46% 46% 42% 42% 11% 11% 100% 100%

Share of Share of partners partners 31 Dec. 2009 31 Dec. 2009 24% 24% 42% 42% 34% 34% 100% 100%

Annual Report Merkur, d. d., 2010

Available-for-sale shares and stakes Available-for-sale shares and stakes 128,650 Bank deposits Bank deposits 2,145 Loans given Loans given 27,170 Receivables from financial lease from financial lease Receivables 42 Receivables due from Receivables due from customers customers 21,259 Receivables due from Receivables due from others others 8,598 Cash and cash equivalents and cash equivalents Cash 5,584

Overdue 31180 days Overdue 181365 days More than a year overdue Total

2,222 12,138 4,592 24,794

2,151 8,976 4,930 16,196

310 187 4,739 20,818

55 160 4,248 4,482

Impairment write-off Balance on 31 December

-39 196,915

129,233

Classification of Customers to Risk Grades According to the Chances of Their Insolvency

Classification of Customers to Risk Grades According to the Chances of Their Insolvencye

Liquidity Risk

Liquidity Risk

The following section provides the stipulated due dates of of financial liabilities, including the estimated payments The following section provides the stipulated due dates financial liabilities, including the estimated interest interest paymentsthe effects of offset agreements. offset agreements. and excluding and excluding the effects of
Share of partners 31 Dec. 2009 24% 42% 34% 100%

Classification grade Above average risk Average risk Below average risk Total

Share of receivables 31 Dec. 2010 17% 72% 11% 100%

Share of partners 31 Dec. 2010 22% 49% 29% 100%

Share of receivables 31 Dec. 2009 46% 42% 11% 100%

Stipulated Dates of Non-derivative Financial Assets and Liabilities of Merkur, d. d., in 2010 Stipulated Due Due Dates of Non-derivative Financial Assets and Liabilities ofMerkur, d. d., in 2010

In thousand EUR 25 years 9,982 442 10,423 More than 5 years 35,284 296 35,580

85

Corrections of Receivables
Corrections of Receivables Corrections of Receivables Corrections of Values Due to the Impairment of Trade Receivables of Merkur, d. d., in 2010 and 2009 Corrections of Values Due to the Impairment of Trade Receivables of Merkur, d. d., in 2010 and 2009 In thousand EUR In thousand EUR Item 2010 2009 Item 2010 2009 Balance on 1 January 15,935 16,718 Balance on 1 January 15,935 16,718 Full write-off -895 -2,653 Full write-off -895 -2,653 Value impairment during the year* 23,598 2,884 Value impairment during the year* 23,598 2,884 Impairment write-off -2,382 -1,014 Impairment write-off -2,382 -1,014 Balance on 31 December 36,255 15,935 Balance on 31 December 36,255 15,935
*Value impairments apply to trade receivables from the sales of from the sales of goods EUR 20,270 thousand (2009: amount of EUR *Value impairments apply to trade receivables goods and services in the amount ofand services in theEUR 1,324 thousand) and *Value impairments apply to trade receivables(2009: EUR 1,560 thousand).goods and services in the amount of EUR from interest receivables in the amount of EUR 3,328 thousand from the sales of 20,270 thousand (2009: EUR 1,324 thousand) and from interest receivables in the amount of EUR 3,328 20,270 thousand (2009: EUR 1,324 thousand) and from interest receivables in the amount of EUR 3,328 thousand (2009: EUR 1,560 thousand). thousand (2009: EUR 1,560 thousand).

193,448 -405,394 -1,464 -1,722 -57,673 -122,615 -27,489 -34,749 -651,105 -457,657

193,695 -486,070 -1,464 -1,722 -71,274 -122,615 -27,489 -34,749 -745,383 -551,687

83.341 -90,578 -1,464 -1,722 -2,111 -4,263 -19,393 -283 -119,814 -36,473

6,051 -25,597 -2,105 -23,670 -1,619 -6,086 -59,078 -53,027

58,300 -11,168 -4,230 -23,670 -1,619 -7,242

Corrections of Values Due to the Impairment of Trade Receivables of Merkur, d. d., in 2010 and 2009

80

-40,809 -317,919 -25,211 -37,617 -71,011 -4,858 -17,929 -3,207

Total non-derived financial liabilities Net balance on 31 December 2010

-47,930 -159,518 -358,743 10,371 -149,395 -323,164

Corrections of Values Due to the Impairment of of Given Loans of Merkur,d. d., in 2010 and 2009 2009 Corrections of Values Due to the Impairment Given Loans of Merkur, d. d., in Corrections of Values Due to the Impairment of Given Loans of Merkur, d. d., in 2010 and 2009 In thousand EUR In thousand EUR Item 2010 2009 Item 2010 2009 Balance on 1 January 129,233 2,839 Balance on 1 January 129,233 2,839 Full write-off -3 -11 Full write-off -3 -11 Value impairment during the year 67,723 126,405 Value impairment during the year 67,723 126,405 Impairment write-off -39 Impairment write-off -39 Balance on 31 December 196,915 129,233 Balance on 31 December 196,915 129,233

Bridging the Liquidity Gap

Bridging the Liquidity Gap

86

In line with withFinancial Restructuring Plan we will bridge the established liquidity gap by meansmeans of converting In line the the Financial Restructuring Plan we will bridge the established liquidity gap by of converting the the liabilities into capital, discounts on common liabilities, reprogramming the existing secured loans, selling property and liabilities into capital, discounts on common liabilities, reprogramming the existing secured loans, selling property and shares, received dividends and payments from guarantors, and new the abovementioned actions shares, received dividends and payments from guarantors, and new credits. The results of credits. The results of the abovementioned actions arebelow: are illustrated in the table illustrated in the table below:
In thousand EUR More than 5 years -

Bridging the liquidity gap: Discount (40% write-off of common liabilities) Capital injection (conversion of liabilities into shares) Property sale Sale of financial assets (the shares of Sava and Gorenjska banka) Guarantor payment New credit in line with the Financial Restructuring plan Dividends from Gorenjska banka and Big Bang The outcome

Book value 51,693 97,608 31,163

Stipulated cash flows 51,693 97,608 31,163

6 months or less -

612 months 10,339 97,608 15,591

12 years 25 years 10,339 15,572 31,016 -

Liquidity Risk Liquidity Risk The following section provides the stipulated due dates of financial liabilities, including the estimated The following section provides the stipulated due dates of financial liabilities, including the estimated interest payments and excluding the effects of offset agreements. interest payments and excluding the effects of offset agreements.
Stipulated Due Dates of Non-derivative Financial Assets and Liabilities of Merkur, d. d., in 2010 Stipulated Due Dates of Non-derivative Financial Assets and Liabilities of Merkur, d. d., in 2010 In thousand EUR In thousand EUR 25 25 years years 9,982 9,982 442 442 More More than 5 than 5 years years 35,284 35,284 296 296 -

95,511 6,920 66,000 16,442 -92,320

95,511 6,920 66,000 16,442 -186,350

21,700 5,420 2,442 -6,910

5,935 300 2,500 79,245

57,895 1.200 7,000 2,500 104,876

9,982 42,000 9,000 -57,397

17,000 -306,164

Item Item Non-derivative financial Non-derivative financial assets assets Noncurrent Financial Assets Noncurrent Financial Assets Loans given Loans given Receivables from financial lease Receivables from financial lease Receivables due from customers Receivables due from customers Receivables due from others

Book value Book value 130,795 130,795 27,170 27,170 42 42 21,259 21,259

Stipulated Stipulated cash flows cash flows 130,795 130,795 27,416 27,416 43 43 21,259 21,259

6 months 6 months or less or less 21,700 21,700 26,399 26,399 30 30 21,259 21,259

612 612 months months 5,935 5,935 103 103 13 13 -

12 12 years years 57,895 57,895 177 177 -

Annual Report Merkur, d. d., 2010

The classification into grades is based on the credit rating. On 31 December 2010 the Company had EUR The classification into grades is based on the credit rating. On 31 December 2010 the Company had EUR 13,982 13,982 thousand in secured receivables. On 1 May 2011 the Company entered a contract with an thousand in secured receivables. On 1 May 2011 the Company entered a contract with an insurance company to insurance company to further curb its exposure to credit risk. further curb its exposure to credit risk.

Item Non-derivative financial assets Noncurrent Financial Assets Loans given Receivables from financial lease Receivables due from customers Receivables due from others Cash and cash equivalents Total non-derivative financial assets Non-derived financial liabilities Secured loans Other loans Bank overdraft Liabilities under financial lease Trade payables Other payables Provisions

Book value 130,795 27,170 42 21,259 8,598 5,584

Stipulated cash flows 130,795 27,416 43 21,259 8,598 5,584

6 months or less 21,700 26,399 30 21,259 8,369 5,584

612 months 5,935 103 13 -

12 years 57,895 177 229 -

Dividends from Gorenjska banka and Big Bang The outcome

16,442 -92,320

16,442 -186,350

2,442 -6,910

2,500 79,245

2,500 104,876

9,000 -57,397

-306,164

Secured loans Trade receivables from banks Trade liabilities Secured loans from banks Balance sheet exposure Trade liabilities

-387,523 21,372 -122,194 -387,523 -488,345 -122,194

-64

-145 -210

- -145

-9,132 -222 -9,132 -9,132 -222 - -222 -222 -9,132 In thousands

Stipulated Due Dates of Non-derivative Financial Assets and Liabilities of Merkur, d. d., in 2009 Book value 188,337 56,507 442 129,595 16,336 332 391,550 -416,591 -3,133 -671 -59,659 -204,370 -44,801 -8,425 -737,650 -346,100 Stipulated cash flows 188,337 56,887 445 129,595 16,336 332 391,933 -422,888 -3,171 -671 -74,384 -204,370 -44,801 -8,425 -758,711 -366,778 6 months or less 9,382 55,419 209 129,595 16,336 332 211,274 -237,764 -2,517 -671 -1,655 -204,370 -30,142 -240 -477,360 -266,086

Stipulated Due Dates of Non-derivative Financial Assets and Liabilities of Merkur, d. d., in 2009
In thousand EUR More 612 than 5 months 12 years 25 years years 15,119 328 122 15,568 -40,088 -654 -1,792 -14,659 -2,257 -59,450 -43,882 21,700 221 114 22,036 -66,340 -4,209 -1,446 -71,995 -49,959 3,812 522 4,334 -78,696 -26,256 -945 -105,897 -101,563 138,325 397 138,721 -40,472 -3,536 -44,008 94,713

Balance sheet exposure -488,345 -210 Currency Risk Exposure of Merkur, d. d., in Nominal Values, in 2009 Currency Risk Exposure of Merkur, d. d., in Nominal Values, in 2009 Item EUR HRK Receivables and liabilities on 31 December Item2009 EUR HRK Receivables and liabilities on 31 December 129,390 -64 2009Trade receivables Secured loans from banks -385,331 Trade receivables 129,390 -64 Trade liabilities Secured loans from banks Balance sheet exposure Trade liabilities Balance sheet exposure -204,370 -385,331 -460,312 -204,370 -460,312

Currency Risk Exposure of Merkur, d. d., in Nominal Values, in 2009

USD USD - -285 -285 -285 -285 CHF

In CHFthousandsRUB RUB - -32 -32 -32 -32 8,335 8,335 -9,132 -798

Sensitivity Analysis A 10 percent strengthening of the euro against the following currencies on 31 December 2010 would have A 10 percent strengthening of the euro against the following currencies on 31 December 2010 would have increased increased (decreased) the profit or loss by the amounts shown below. This analysis assumes that all other (decreased) the profit of the the amounts the following in particular A 10 percent strengtheningor loss byeuro againstshown below. This analysis assumes that all other variables,same have for variables, in particular interest rates, remain unchanged. currencies on is performed on the would basis The analysis 31 December 2010 interest rates, remain profit or loss analysis is performed on the same This analysis increased (decreased) the unchanged. Theby the amounts shown below.basis for 2009. assumes that all other 2009. variables, in particular interest rates, remain unchanged. The analysis is performed on the same basis for In thousand EUR 2009.
Item ItemHRK USD HRK CHF USD RUB CHF RUBTotal effect on profit or loss Total effect on profit or loss 31 December 2010In thousand EUR2009 31 December 31 December 2010 12 December 2009 31 293 12 11 293 244 20 2 20 326 14 11 244 2 14 271

Sensitivity Analysis

82

Liabilities under financial lease Trade liabilities Other payables Provisions Total non-derived financial liabilities Net balance on 31 December 2009

326 271 A 10 percent weakening of the euro against thethe above currencies December 2010 would have had anhave had an A 10 percent weakening of the euro against above currencies on 31 on 31 December 2010 would equal equal but opposite effect on or but opposite effect on profit profit or loss by the amounts shown above, on the assumption that all other A 10 percent weakening of the euroloss by thethe above currencies on the assumption that all other variables had an against amounts shown above, on 31 December 2010 would have remain variables remain unchanged. unchanged. equal but opposite effect on profit or loss by the amounts shown above, on the assumption that all other variables remain unchanged.

Stipulated Dates of Derivative Financial Liabilities of Merkur, d. d., in 2010 and 2009 Stipulated Due Due Dates of Derivative Financial Liabilities of Merkur, d. d., in 2010and 2009
Stipulated Due Dates of Derivative Financial Liabilities of Merkur, d. d., in 2010 and 2009 Book Item value Derived financial liabilities Item Interest rate swaps used for risk protection Derived financial liabilities Total on 31 December 2010 Interest rate swaps used for risk protection Interest rate swaps used for risk protection Total on 31 December 2010 Total on 31 December 2009 Interest rate swaps used for risk protection Total on 31 December 2009 Currency Risk Book value0 3,513 0 3,513 3,513 3,513

In thousand EUR InStipulated cash thousand EUR flows 25 years Stipulated cash flows 25 years0 3,513 0 3,513 3,513 3,513

87

Interest Rate Risk


Interest Rate Risk
Characteristics of Interest Rates Applied to Interest-bearing Financial Instruments of Merkur, d. d. Characteristics of Interest Rates Applied to Interest-bearing Financial Instruments of Merkur, d. d.
Book value Item Fixed rate instruments Financial assets Financial liabilities Variable rate instruments Financial assets Financial liabilities 2010 -100,417 26,123 -126,540 -338,545 1,047 -339,592 2009 37,907 179,599 -141,692 -334,824 3,304 -338,128 In thousand EUR

88 88

Currency Risk Currency Risk Exposure of Merkur, d. d., in Nominal Values, in 2010
Currency Risk Exposure of Merkur, d. d., in Nominal Values, in 2010 Item EUR Receivables and liabilities on 31 December 2010 Item EUR Trade receivables 21,372 Receivables and liabilities on 31 December Secured loans from banks 2010 Trade liabilities Trade receivables Secured loans from banks Balance sheet exposure Trade liabilities -387,523 -122,194 21,372 -387,523 -488,345 -122,194 HRK HRK -64 -145 -64 -210 -145 -210 BAM BAM -0 0 USD

Currency Risk Exposure of Merkur, d. d., in Nominal Values, in 2010

Currency Risk

In thousands USD thousands RUB In USD -222 -222 -222 -222 CHF RUB -9,132 -9,132 -9,132 -9,132

Fair Value Sensitivity Analysis for Fixed Rate Instruments The Company does not account for any fixed rate financial assets at fair value through profit or loss, Fair Value Sensitivity Analysis on the reporting date would therefore a change in interest ratesfor Fixed Rate Instruments not affect the profit or loss. The Company does not account for any fixed rate financial assets at fair value through profit or loss, therefore a change Sensitivity on the reporting date would not affect the profit Cash Flowin interest ratesAnalysis for Variable Rate Instruments or loss. A change of 100 basis points in interest rates on the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. The analysis assumes that all other variables, in Cash the foreign currency rates, remain unchanged. The analysis is performed on the same basis for particularFlow Sensitivity Analysis for Variable Rate Instruments A 2009.change of 100 basis points in interest rates on the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. The analysis assumes that all other variables, in particular the foreign currency rates, remain unchanged. The analysis is performed on the same basis for 2009.
In thousand EUR Effect on profit or loss Variable rate instruments on 31 December 2010 Cash flow sensitivity (net) +100 b. p. -3,396 -3,396 -100 b. p. 3,396 3,396

Balance Risk exposure -488,345 Currencysheet Exposure of Merkur, d. d., in Nominal Values, in 2009

In thousands Currency Risk Exposure of Merkur, d. d., in Nominal Values, in 2009HRK Item EUR Receivables and liabilities on 31 December 2009 RUB In thousands

Annual Report Merkur, d. d., 2010

Item Non-derivative financial assets Noncurrent Financial Assets Loans given Receivables from financial lease Receivables due from customers Receivables due from others Cash and cash equivalents Total non-derivative financial assets Non-derived financial liabilities Secured loans Other loans Bank overdraft

- -36 -36 -101

-9,132 -798

-101

Sensitivity Analysis

equity and profit or loss by the amounts shown below. The analysis assumes that all other variables, in particular the foreign currency rates, remain unchanged. The analysis is performed on the same basis for 2009.
In thousand EUR Effect on profit or loss Variable rate instruments on 31 December 2010 Cash flow sensitivity (net) Variable rate instruments on 31 December 2009 Interest rate swap Cash flow sensitivity (net) +100 b. p. -3,396 -3,396 -3,381 600 -2,781 -100 b. p. 3,396 3,396 3,381 -600 2,781

Level 1 decreased in 2010 because the Sava, d. d., shares were moved to level 3, and level 2 decreased because the Gorenjska banka, d. d., shares were moved to level 3. Level 1 thus includes all shares listed at the stock exchange, valuated according to their stock exchange price, while all other shares are on level 3.
Hierarchy in Setting Fair Value of of Financial Assets on 31 December 2009 Hierarchy in Setting the the Fair Value Financial Assets on 31 December 2009
In thousand EUR Item Available-for-sale shares and stakes Interest rate swaps used for risk protection Level 1 45,709 Level 2 86,178 3,513 Level 3 41,112 Total 172,999 3,513

Fair Value Fair Value


In thousand EUR In thousand EUR Book value Fair value Book value Fair value 31December 31 December December 31 December 31 2010 2010 2010 2010 128,650 128,650 128,650 128.650 2,145 2,145 2,145 2.145 27,170 25,297 27,170 25.297 42 43 42 43 21,259 21,259 21,259 21.259 8,598 8,598 8,598 8,598 5,584 5,584 5,584 5,584 -405,394 -309,350 -405,394 -309,350 -1,464 -1,464 -1,464 -1,464 -1,722 -1,722 -1,722 -1,722 -57,673 -57,673 -57,673 -57,673 -122,615 -122,615 -122,615 -122,615 -27,489 -27,489 -27,489 -27,489 --Book value Fair value Book value Fair value 31December 31 December December 31 December 31 2009 2009 2009 2009 172,999 172,999 172.999 172.999 15,339 14,249 15.339 14.249 56,507 54,471 56.507 54.471 442 445 442 445 129,595 129,595 129.595 129.595 16,336 16,336 16,336 16,336 332 332 332 332 -416,591 -413,730 -416,591 -413,730 -3,133 -3,171 -3,133 -3,171 -671 -671 -671 -671 -59,659 -59,659 -59,659 -59,659 -204,370 -204,370 -204,370 -204,370 -30,142 -30,142 -30,142 -30,142 -3,513 -3,513 89 -3,513 -3,513

Contingent liabilities of Merkur, d. d., come from guarantees provided for third persons for the liabilities of subsidiaries and liabilities of Merfin, come from guarantees provided forcontingent liabilities are recognized in Contingent liabilities of Merkur, d. d., d. o. o., and Alpos, d. d. The third persons for the liabilities of subsidiaries the off-balance sheet. and liabilities of Merfin, d. o. o., and Alpos, d. d. The contingent liabilities are recognized in the off-balance sheet.
In thousand EUR Item Guarantees for subsidiaries, except for leasing Guarantees for subsidiaries for leasing Guarantees for others Total 31 December 2010 32,229 93,554 10,068 135,851 31 December 2009 90 126,275 93,554 26,909 246,738

84

Item Item Available-for-sale shares and stakes Available-for-sale shares and stakes Deposits and collateral Deposits and collateral Loans given Loans given Receivables from financial lease Receivables from financial lease Trade receivables Trade receivables Receivables due from others Receivables due from others Cash and cash equivalents Cash and cash equivalents Secured loans from banks Secured loans from banks Other loans taken Other loans taken Bank overdraft Bank overdraft Liabilities from financial lease Liabilities from financial lease Trade liabilities Trade liabilities Other payables Other payables Interest rate swaps used for risk protection Interest rate swaps used for risk protection

In 2010 Company recognized the liabilities or set the provisions for guarantees given to companies In 2010 thethe Companyrecognizedthe liabilities or set the provisions for guarantees given to companies that were in insolvency proceedings (Perles Merkur Italia s.r.l.), compulsory settlement (Mersteel d. o. o., Alpos d. d.) or bankrupt that were in insolvency proceedings (Perles Merkur Italia s.r.l.), compulsory settlement (Mersteel d. o. o., (Merfin d. o. bankrupt (Merfin d. o. o., Merkur companies except Mersteel d. For all companies the Alpos d. d.) or o., Merkur International Praha s.r.o.). For allInternational Praha s.r.o.). o. o., and Merfin d. o. o.,except Company o., and Merfin d. o. o., the Company recognized their liabilities to main creditors in entirety Mersteel d. o.recognized their liabilities to main creditors in entirety with regard to the actual liability of the main creditor on 31 actual liability of the main creditor on 31 December 2010, while taking into account the with regard to theDecember 2010, while taking into account the effect of compulsory settlement (40% discount). The set provisions are further explained (40% 5.18 Long-term and Short-term are further explained in item 5.18 effect of compulsory settlement in item discount). The set provisionsProvisions. Long-term and Short-term Provisions. in setting the provisions for Mersteel d. o. o., and Merfin d. o. o.: The following assumptions were used The liabilities to the main creditors for guarantees, given to subsidiary Mersteel, d. o. o., were recognized in the amount of the estimated contingent liability of Merkur while taking into account the repayments of the main The following assumptions were used in setting the provisions for Mersteel d. o. o., and Merfin d. o. o.: creditor (Mersteel) through the finalized compulsory settlement of Mersteel, which includes payment of the main The liabilities to the main creditors for guarantees, given to subsidiary Mersteel, d. o. o., were separation liabilities and main common liabilities while taking into account the effects of the compulsory recognized in the amount of the estimated contingent liability of Merkur while taking into account settlement on Mersteel (45% discount) and the effects of the finalized compulsory settlement on Merkur (40% the repayments of the main creditor (Mersteel) through the finalized compulsory settlement of discount). The Estimated liability/provision of Merkur for paying off the main creditors of Mersteel amounts to Mersteel, which includes payment of the main separation liabilities and main common liabilities EUR 11,075 thousand and is recognized as a long-term provision. For informative purposes, in addition to that while taking into account the effects of the compulsory settlement on Mersteel (45% discount) amount weeffects of the maximum contingent liability of Merkur that assumes the repayment of the Estimated and the also show the finalized compulsory settlement on Merkur (40% discount). The main liability supposing Mersteel going into bankruptcy (inoff the mainmain liability is reduced only by the share for which liability/provision of Merkur for paying this case the creditors of Mersteel amounts to EUR 11,075 Mersteel is ensured, while the rest asthelong-term provision. For informativecompulsory settlement applied thousand and is recognized of a amount has had the effects of Merkurs purposes, in addition to that toamount we also liability the maximum contingent liability of Merkur that assumes the repayment of it. The maximum show of Merkur for paying main creditors of Mersteel thus amounts to EUR 15,041 thousand. The difference between the set provision and the maximumbankruptcy (in in thecase the EUR 3,967 the main liability supposing Mersteel going into potential liability this amount of main liability is thousand was recognized in thefor which Mersteel is ensured, while the rest of the amount has had the reduced only by the share off-balance sheet. The liabilities to main creditors for the two guaranteesapplied Merfin,The o., were recognized whole with regard effects of Merkurs compulsory settlement given to to it. d. o. maximum liability of Merkur for topaying main creditors of creditor on 31 December 2010to EUR 15,041 thousand. The difference the actual liability of the main Mersteel thus amounts for the following: between theMerfinprovision and the Banka Koper, d. d., in the liability of EUR 6,000 thousandEUR for guarantee to set for the main creditor maximum potential amount in the amount of , and 3,967 thousand was recognized in the off-balance sheet. d. d., in the amount of EUR 5,000 thousand (the guarantee to Merfin for the main creditor viator & vektor, contingent liability of Merkur, d. d., for the two guarantees given to Merfin, d. of Merkur, d. d., when the The liabilities to main creditorsarising from this was converted to the share capitalo. o., were recognized whole with settlement was confirmed). compulsory regard to the actual liability of the main creditor on 31 December 2010 for the following: two guarantees were recognized in the off-balance sheet for the following reasons: o guarantee to Merfin for creditor GBD, d. d., Banka Koper, EUR 5,159 thousand because the main the guarantee to Merfin for the mainthe main creditor in the amount ofd. d., in the amount of EUR 6,000 liability isthousand action for annulment, thus the same goes for the corresponding contingent liability of subject to , and for o d.guarantee to Merfin for the main creditor Viator & Vektor, d. d., in the amount of EUR Merkur, d., and 5,000 thousand the contingent Cimos, of Merkur. d. d., of EUR from this was converted the guarantee to Merfin for (themain creditor liabilityd. d., in the amount arising4,909 thousand as the main to the share capital of Merkur, d. d., when the compulsory settlement was confirmed). liability has already been closed. two guarantees were recognized in the off-balance sheet for the following reasons: The balance sheetguarantee totwo guarantees tomain creditor in the total amount of EUR 11,000of EUR 5,159 o the thus includes Merfin for the Merfin, d. o. o., GBD, d. d., in the amount thousand, while two guarantees to Merfin, d. o. o., remainmain liability is subject the total amountannulment, thus the same thousand because the in the off-balance sheet in to action for of EUR 10,068 thousand. goes for the corresponding contingent liability of Merkur, d. d., and o the guarantee to Merfin for the main creditor Cimos, d. d., in the amount of EUR 4,909 thousand as the main liability has already been closed. The balance sheet thus includes two guarantees to Merfin, d. o. o., in the total amount of EUR

The Company uses the stock marketprices as as a basis for the fair value of assets. If a financial instrument is not The Company uses the stock market prices a basis for the fair value of financial financial assets. If a financial instrumenton a regulated on a regulated market or a inactive, thedeemed inactive, the Company usesfairmodelof listed is not listed market or a market is deemed market is Company uses a model for assessing the a value for assessing the fair The item Available-for-sale sharesThe stakesAvailable-for-sale of Perutnina Ptuj, valued with the the financial asset. value of the financial asset. and item includes the shares shares and stakes includes the shares ofprice model (the reason for such valuation is explained in item 4.6).(the purchase price model was also used purchase Perutnina Ptuj, valued with the purchase price model The reason for such valuation is explained in item 4.6). The purchase price model was also used for valuation of a small number of stakes for valuation of a small number of stakes with a value insignificant for fair financial statements, because valuating with a value insignificant for fair financial statements, because valuating these stakes would not be these stakes would not be economically viable. economically viable.
Hierarchy in Setting the Value of of Financial Assets on 31 December 2010 Hierarchy in Setting the Fair Fair ValueFinancial Assets on 31 December 2010
In thousand EUR Item Available-for-sale shares and stakes Level 1 2,643 Level 2 Level 3 126,007 Total 128,650

LevelLevel 1 decreased in 2010becausethe Sava, d. d., shares were moved moved 3, and level 2 decreased2 decreased 1 decreased in 2010 because the Sava, d. d., shares were to level to level 3, and level because the because the Gorenjska banka,were moved to were3.moved thus includes all shares listed at the stockshares listed Gorenjska banka, d. d., shares d. d., shares level Level 1 to level 3. Level 1 thus includes all exchange, at the stock exchange, valuated according to their stock exchange price, while all other shares are on valuated according to their stock exchange price, while all other shares are on level 3. level 3.
Hierarchy in Setting the Fair Value of Financial Assets on 31 December 2009 In thousand EUR Item Available-for-sale shares and stakes Level 1 45,709 Level 2 86,178 Level 3 41,112 Total 172,999

Annual Report Merkur, d. d., 2010

The calculations of the effects of variable interest rates areare prepared actual data from 31from 31 December not The calculations of the effects of variable interest rates prepared with with actual data December 2010 and 2010the data from the Financial Restructuring Restructuring Plan. and not the data from the Financial Plan.

5.23 5.23 Contingent Liabilities and Receivables Contingent Liabilities and Receivables

Balance / Off-balance Guarantees Given by Merkur, d. d. Balance / Off-balance Guarantees Given by Merkur, d. d. Balance / Off-balance Guarantees Given by Merkur, d. d. Recognizing the guarantee Receiver of guarantee Recognizing the guarantee Balance Balance Alpos, d.d., entjur Receiver of guaranteeMerfin, d. o. o., Ljubljana Alpos, d.d., entjur Recognized provision 2010 2010 Recognized provision In thousand EUR Recognizing 600 the guarantee 11,000 Balance 547 1,546 11,075 24,768 Off-balance -

2010 In thousand EUR Recognizing the guarantee Balance

Merkur International Praha, spol. S. r. 600 o. Perles Merkur Italia, s. r. l. Merfin, d. o. o., Ljubljana 11,000 Merkur International Praha, spol. d. o. o. Naklo Mersteel, S. r. o., Perles Merkur Italia, s. r. l. Total 547 1,546

Merkur, d. d., also has contingent receivables due from Merfin, d. o. o., arising from the claim for returning the difference between the purchase and sale value of the property that Merfin realized as profit from sales in 2008 and 2009 when it was still the controlling company, namely: based on the agreement according to which Merfin is obliged to return the difference between the purchase and sales value of the property shopping centre Primskovo in the amount of EUR 9,271 thousand with interest from the date of sale on 24 December 2008 to 31 October 2010 in the amount of EUR 781 thousand, and based on the agreement according to which Merfin is obliged to return the difference between the purchase and sales value of the stake in HTC DvA in the amount of EUR 8,500 thousand with interest from 23 December 2009 to 31 October 2010 in the amount of EUR 107 thousand. Total receivables due from Merfin thus amount to EUR 18,659 thousand, but since the conditions for recognizing the income according to IAS 14 are not met because it is not likely that the economical gains, related to this transaction, will be realized, the receivables are only recognized in the off-balance sheet. However, they will be lodged in the bankruptcy estate of Merfin.

Merkur Hrvatska, d. o. o., Zagreb d. o. o., Sarajevo Mersteel, Mersteel Profil doo, Beograd d. o. o., Ljubljana Merfin, Mersteel, d. o. o., Sarajevo Total

6
6
6.1

Notes on the Income and Loss Statement


Notes on the Income and Loss Statement

0 Merfin, d. o. o., Ljubljana * For Mersteel, the difference between the minimum and maximum liability was left recognized in the offTotal 0 balance sheet. * For Mersteel, the difference between the minimum and maximum liability was left recognized in the offbalance sheet. 2009 Off-balance Off-balance Merfin, d. o. o. In thousand EUR Alpos, d.d. Merkur Hrvatska, d. o. o., Zagreb 25,909 Merfin, d. o. o. Alpos, d.d. 1,000 Merkur International, d. o. o., Beograd Intermerkur Merkur Hrvatska, d. o. o., Zagreb - Nova d. o. o., Sarajevo 53,328 Merkur International, d. PerlesBeogradItalia, s. r. l. o. o., Merkur 49,359 Intermerkur - Nova d. o.Mersteel, d. o. o., Naklo o., Sarajevo 1,841 Mersteel, d. o. o., Beograd Perles Merkur Italia, s. r. l. 3,720 Mersteel, d. o. o., NakloMersteel Profil doo, Beograd 70,945 Mersteel, d. o. o., Beograd 4,000 Mersteel, d. o. o., Sarajevo Merkur Mersteel Profil doo, Beograd International Praha, spol. S. r. o. 12,000 Mersteel, d. o. o., Sarajevo Merkur - MI Handels, GmbH Merkur International Praha, spol. S. r. o. Total Merkur - MI Handels, GmbH 22,636 1,000 1,000
* For Mersteel, the difference between the minimum and maximum liability was left recognized in the off-balance sheet.

6.1

Sales Revenue

2009
25,909 1,000 53,328 49,359 1,841 3,720 70,945 4,000 12,000 22,636 1,000 1,000 246,738

2009

6 SalesNotes on the Income and Loss Statement Revenue Merkur, d. d. Sales Revenue of of Merkur, d. d.
6.1
Item 2010 2009 Sales Revenue of Merkur, d. d. Sales revenue by categories 316,574 503,147 In thousand EUR Revenue from selling goods and products 307,962 490,275 Item 2010 2009 Revenue from selling services 6,109 10,347 Sales revenue by categories 316,574 503,147 Rental income 2,503 2,525 Revenue from selling goods and products 307,962 490,275 Revenue from selling services is reduced by discounts given to holders of Merkur's 6,109 card. In 2010, a loyalty Revenue from selling goods 10,347 Revenue from selling goods is (2009: EUR 2,241 thousand) of Merkurs loyalty card. In total ofincome 1,725 thousandreduced by discounts given to holders of discounts were 2,5032010,basedof 2,525 EUR granted a total on the Rental

Sales Revenue

Sales Revenue

In thousand EUR

In thousand EUR

86

EUR 1,725 thousand the loyalty card, which of discounts were granted based on the purchases made with the purchases made with(2009: EUR 2,241 thousand) presents 1.3% of the total retail sales in that year. Provisions loyalty card, selling goods is reduced by discounts 280 to Provisions in the estimated amount redeemed in the estimated amount of 1.3% of the rewards EURthat year. holders have been made card.revenue for Revenue from which presents redeemed total retail sales ingiven thousand of Merkur's loyalty from ofIn 2010, a rewards EUR 280 purchases made made last thousand) of discounts were granted based use credits EUR for thethousand (2009: EUR from revenue of 2010, which loyalty card holders can on the total of issued 1,725 thousand have beenin the2,241quarter for credits issued for the purchases made in the last by the quarter April 2011. loyalty card holders can presents 1.3% April 2011. end of made which purchasesof 2010, with the loyalty card, which use by the end of of the total retail sales in that year. Provisions in the estimatedgenerates of redeemedby renting out property and investment property, and partly by subleasingfor The company amount rental income rewards EUR 280 thousand have been made from revenue The company generates rental made inby renting out property and investmentcard holders partly by credits issued for the purchases income through finance or operating lease (for example, sales centers can use by the last quarter of 2010, which loyalty property, and parts of property that with subleasingApril 2011. the companythe company leases through finance or operating lease (for example, parts of property that leases the accompanying bars, restaurants and shops). end of sales centers with accompanying bars, restaurants and shops).

The Companys contingent liabilities come from guarantees given to third persons for the liabilities of subsidiaries Total 246,738 The Companys are thus only recognized in the off-balance sheet. given to third persons which settle their liabilities on time, andcontingent liabilities come from guaranteesAmong these are also the for the liabilities of subsidiaries which settle their liabilities on according are thus only recognized in the following contingent liabilities for guarantees given for property lease, time, andto which Merkur, d. d. enters into the off-balance sheet. a joint these are also the following Thelease relationship asAmong liabilities come of non-payment: contingentthird persons for the liabilities of for property lease, Companys contingenttenant in the event from guarantees given to liabilities for guarantees given according liabilitieso.Merkur, amount ofthus48,795 recognized in the off-balance tenant in the event of non guarantees given to Merkur to which o., time, and enters only thousand, subsidiaries which settle theirZagreb, d. on in the d. d. are EURinto the lease relationship as a joint sheet. Among these are also the following contingent liabilities for guarantees given for property lease, guarantees given payment:Beograd, d. o. o., in the amount of EUR 44,415 thousand, to Merkur guarantees o. o., to Merkur Zagreb, d. o. thousand, according to which Merkur, d. d. entersd.into thethe amount of EUR 21,980o.,joint tenant in the event of non guarantees given to Mersteel Sarajevo, givenin lease relationship as a in the amount of EUR 48,795 thousand, guarantees given to of EUR 10,068 thousand, o., in the amount of EUR 44,415 thousand, payment: guarantees given to Merfin, d. o. o., in the amount Merkur Beograd, d. o. guarantees given to o., in the Sarajevo, EUR 48,795 amount of guarantees given to Merkur d. o. o., in the Mersteel amount thousand, guarantees given to Mersteel Profil,Zagreb, d. o.amount of EUR 5,083 of d. o. o., in thethousand, EUR 21,980 thousand, guarantees given to Merfin, d. amount of amount the difference between the guarantees given to Merkur Beograd, d. amount of EUR 3.967 thousand(justof EUR 10,068 guarantees given to Mersteel, d. o. o., Naklo in theo. o., in theo. o., in theEUR 44,415 thousand, thousand, guarantees guarantees given to Mersteel Sarajevo, d. o. o., in Profil, d. o. of in the amount of EUR minimum and maximum liability), and given to Mersteel the amount o., EUR 21,980 thousand,5,083 thousand, guarantees o. in to amount d. o. 1,543 thousand, amount guarantees given to Merfin, d. o. o., o., theMersteel, of EURo., Naklo in thetotaling EUR 135,851 guarantees given to Intermerkur Nova, d.givenin the amountof EUR 10,068 thousand, at of EUR 3.967 thousand(just the difference between the in the amount of EUR 5,083 thousand, guarantees given to Mersteel Profil, d. o. o., minimum and maximum liability), and thousand. guarantees given to Intermerkur Nova, EUR 3.967 thousand(just the guarantees given to Mersteel, d. o. o., Naklo in the amount ofd. o. o., in the amount of EUR 1,543 thousand, totaling at EUR 135,851 thousand. difference between the minimum and maximum liability), and guarantees given to Intermerkur Nova, d. o. o., in the amount of EUR 1,543 thousand, totaling at EUR 135,851 thousand.

The company generates rental income by renting out property and investment property, and partly by subleasing parts of property that the company leases through finance or operating lease (for example, 6.2 Other Operating Revenue sales centers with accompanying bars, restaurants and shops).

6.2 Other Operating Revenue Other Operating Revenue of Merkur, d. d.


Item Other Operating Revenue of Merkur, d. d. Other Operating Revenue of Merkur, d. d. Other Operating Revenue Gains on disposal of property, plant and equipment Item Recovered receivables Other Operating Revenue Gains from reversal of long-term provisions Gains on disposal of property, plant and equipment Gains on disposal of investment property Recovered receivables Gains on revaluating investment property Gains from reversal of long-term provisions Income from government grants Gains operating revenue Other on disposal of investment property Gains on revaluating investment property Income from government grants 6.3 operating by Nature Other Costs revenue

6.2

Other Operating Revenue

In thousand EUR 2010 9,610 2009 2,554 EUR 2,733 In thousand1,042 2010 2009 2,382 1,014 9,610 2,554 1,523 1 2,733 1,042 299 2,382 1,014 415 1,523 1 142 128 299 2,116 369 415 142 128 2,116 369 In thousand EUR 2010 2009

92 Costs of Merkur, d. d., by Nature 92 6.3 Costs by Nature


Item Costs of Merkur, d. d., by Nature

Annual Report Merkur, d. d., 2010

Off-balance

Mersteel, 11,075 Off-balance d. o. o., NakloMersteel, d. o. o., Naklo Total 24,768 Intermerkur - Nova d. o. o., Sarajevo Mersteel, d. o. o., NakloMerkur International, d. o. o., Beograd Intermerkur - Nova d. o.Merkur Hrvatska, d. o. o., Zagreb o., Sarajevo Merkur International, d. Mersteel Profil doo, Beograd o. o., Beograd -

Off-balance

Gains on disposal of investment property Gains on revaluating investment property Income from government grants Other operating revenue

299 415 142 2,116

128 369

6.3

6.3

Costs by Nature

Costs by Nature

Financial income Foreign exchange gains Interest Dividend income Foreign disposal of financial assets Gains on exchange gains Dividend income Other financial income Gains on disposal of financial assets

17,273 178 12,449 3,463 178 143 3,463 1,038 143 1,038

27,957 174 10,503 3,303 174 8,882 3,303 5,096 8,882 5,096

Financial Expenses Other financial income of Merkur, d. d. Financial Expenses of Merkur, d. d.


Financial Expenses of Merkur, d. d. Item Financial expenses Item Interest expenses Foreign exchange losses Financial expenses Losses on disposal of financial assets Interest expenses Impairment of financial investments in subsidiaries Foreign exchange losses Impairment of available-for-sale financial assets Losses on disposal of financial assets Impairment of loans given Impairment of financial investments in subsidiaries Impairments and write-offs of interest receivables (including subsidiaries) Impairment of available-for-sale financial assets Elimination ofof loans given Impairment derivative financial instruments Impairments expenses Other financialand write-offs of interest receivables (including subsidiaries) Elimination of derivative financial instruments

Costs of Merkur, d. d., by Nature Costs of Merkur, d. d., by Nature


In thousand EUR Item Costs by Nature Cost of materials Cost of services Labor costs - wages and salaries - pension insurance - other insurance - other labor costs Amortization and depreciation Long-term provisions Other operating costs 2010 94,131 4,971 26,704 49,982 32,121 4,073 2,378 11,410 9,782 2,693 2009 102,658 5,649 34,254 50,854 34,374 4,364 2,572 9,544 9,381 302 2,218

In thousand EUR 2009 In thousand EUR 175,785 178,553 2010 30,853 138 175,785 1,280 30,853 57,137 138 10,665 1,280 67,723 57,137 3,328 10,665 4,308 67,723 3,328 352 4,308 2009 25,167 178,553 25,167 18,659 8,085 126,405 18,659 236 8,085 126,405 236 2010

In 2010, the company introduced strict cost cutting measures. The total operating costs were reduced by 8% compared to the year before. In 2010, the company introduced strict cost cutting measures. The total operating costs were reduced by 8% compared to the year before. 94

Other financial expenses include a a EUR 350,000 finerealizing the option obligation towards Saturo towards Other financial expenses Other financial expenses include EUR 350,000 fine for not for not realizing the option obligation 352 Saturo Establishment from Liechtenstein. The transaction to a special audit.special audit. Establishment from Liechtenstein. The transaction is subject is subject to a Other financial expenses include a EUR 350,000 fine for not realizing the option obligation towards Saturo Establishment from Liechtenstein. The transaction is subject to a special audit. 6.6 Other Expenses
Other Expenses of Merkur, d. d.

6.6

6.6

Other Expenses

Other Expenses

Other Expenses of Merkur, d. d. Other Item Expenses of Merkur, d. d.

In thousand EUR 2009 In thousand EUR 24,768 2010 2009 24,768 - 95 2010

Other Operating Expenses 6.4 6.4 Other Operating Expenses 6.4 Other Operating Expenses

Other expenses issued sureties* Item Other expenses issued sureties*


*Note under 5.23 Contingent liabilities and receivables

88

Other Operating Expenses of Merkur, d. d. Other Operating Expenses of Merkur, d. d.

Other Operating Expenses of Merkur, d. d.


In thousand EUR In thousand EUR 2009 2009 3,201 3,201 760 760 90 90 30 30 634 634 1,324 1,324 45 45 319 319

95
*Note under 5.23 Contingent liabilities and receivables 6.7 Income Tax *Note under 5.23 Contingent liabilities and receivables

Item Item Other operating expenses Other operating expenses Expenses from revaluation of property Expenses from revaluation of property Write-offs and losses on disposal of property, plant and equipment Write-offs and losses on disposal of property, plant and equipment Write-offs of intangible assets Write-offs of intangible assets Write-offs of inventories to the realizable value Write-offs of and write-offs of realizable from Impairments inventories to thereceivablesvalue customers (including Impairments subsidiaries) and write-offs of receivables from customers (including subsidiaries) Losses on disposal of investment properties Losses on disposal of investment properties Tax provisions Tax provisions Other operating expenses Other operating expenses

2010 2010 32,044 32,044 4,803 4,803 922 922 2,130 2,130 20,270 20,270 3,649 3,649 270 270

6.7 6.7

Income Tax of Merkur, d. d.

Income Tax Income Tax Income Tax of Merkur, d. d. Income Tax of Merkur, d. d.

6.5 Net Financial Income and Expenses Net Financial Income and Expenses 6.5 6.5 Net Financial Income and Expenses
Financial Income of Merkur, d. d. d. Financial Income of Merkur, d. Financial Income of Merkur, d. d. Item Item Financial income Financial income Interest income Interest income Foreign exchange gains Foreign income Dividendexchange gains Dividend income Gains on disposal of financial assets Gains on disposal of financial assets Other financial income Other financial income Financial Expenses of Merkur, d. d. Financial Expenses of Merkur, d. d. Item Item Financial expenses Financial expenses

Item Item Current tax expense tax liability Current tax expense tax liability Deferred tax expense deferred tax liability Deferred tax expense deferred tax liability Total tax expense in the profit and loss statement Total tax expense in the profit and loss statement Effective Income Tax Rate Effective Income Tax Rate Effective Income Tax Rate

In thousand EUR In thousand EUR 2010 2009 2010 2009 786 786 718 933 718 933 718 1,719 718 1,719 In thousand EUR In thousand EUR 2010 2009 2010 2009 -219,765 -138,226 -138,226 155,696 155,696 -3,303 -3,303 -10,381 -10,381

In thousand EUR In thousand EUR 2010 2009 2010 2009 17,273 27,957 17,273 27,957 12,449 10,503 12,449 10,503 178 174 178 174 3,463 3,303 3,463 3,303 143 8,882 143 8,882 1,038 5,096 1,038 5,096

Item Item before taxes Profit Profit before taxes Expenses not deductible for tax purposes Expenses not deductible for tax purposes Untaxed income Untaxed income Other adjustments Other adjustments Tax loss Tax loss base Tax base Income Tax* Income Tax*

-219,765 174,934 174,934 -6,538

-6,538 -496 -496 -51,865 -51,865

3,786 3,786 757 757

In thousand EUR In thousand EUR 2010 2009 2010 2009 175,785 178,553 175,785 178,553

Note on Tax Loss in 2010 Note on Tax Loss in 2010 From 1 January 2010 to 31 December 2010, the company recorded a tax loss in the amount of EUR 51,865 January while generating a EUR 219,765 company recorded a tax loss in the amount of EUR From 1 thousand,2010 to 31 December 2010, the thousand loss before taxes. 51,865 thousand, while generating a EUR 219,765 thousand loss before taxes.

Annual Report Merkur, d. d., 2010

Note on Tax Loss in 2010


From 1 January 2010 to 31 December 2010, the company recorded a tax loss in the amount of EUR 51,865 thousand, while generating a EUR 219,765 thousand loss before taxes. The operating loss was decreased by expenses not deductible for tax purposes in the total amount of EUR 174,934 thousand, and increased by untaxed income from dividends, income from already taxed reversed provisions for severance pay, and income from reversal of impairments in the amount of EUR 6,538 thousand, and other adjustments in the amount of EUR 496 thousand.

Tax Inspection
In 2010, an inspection was carried out in the company regarding tax on income of legal entities for years 2008 and 2009. Upon completing the tax review on 16 March 2011, the tax authority issued a decision no. DT 0610-98/2010 0203 31, in which it charged additional tax liability from tax on income of legal entities for the period from 1 January 2009 to 31 December 2009 in the amount of EUR 4,277 thousand, and vAT for June 2009 in the amount of EUR 1,805 thousand. The company already commented on the tax authoritys minutes, and on 16 April 2011 it filed a complaint regarding the decision at the Special Tax Office, and on 26 April 2011 it filed a complaint at Ministry of Finance due to violation of procedure regulations, the fact that the actual situation was stated erroneously and incompletely, and due to incorrect application of the substantive law. The tax inspection also looked into the transactions related to the purchase and sale of the stake in HTC DvA d. o. o., and the purchase of the Primskovo sales center property. In these dubious transactions the company suffered outflow of assets, while the tax authority increased the companys tax base for tax on income of legal entities and did not recognize deduction of input vAT. Based on the opinion of tax consultants, the Management Board believes that it is very likely that the second-instance tax authority will annul the decision of the first-instance body and remit the case for re-examination. Nevertheless, the company has set aside provisions in the amount of 60% of the charged tax liability for the 2010 profit or loss.

7
7.1 7.1

Notes on the Other Comprehensive Income Statement

Notes on the Other Comprehensive IncomeComprehensive Income Statement 7 Notes on the Other Statement

Notes on Items in Other Comprehensive Income Statement of Merkur, d. d., for 2010 of Merkur, d. d., for 2010 7.1 Notes on Items in Other Comprehensive Income Statement Notes on Items in Other Comprehensive Income Statement of Merkur, d. d., for 2010
In thousand EUR In thousand EUR

90

Item Year 2010

Item Year 2010

Note

Provisions for Provisions for Provisions for Provisions for the fair valuethe fair value ofthe fair valuethe fair value of OTHER Provisions for TOTAL Provisions for TOTAL OTHER Retained of land and Retained financial of land and rate financial interest COMPREHENSIVE interest rate COMPREHENSIVE earnings buildings Note earnings assets buildings swaps assets INCOME swaps INCOME -220,483 0 7.1 7.2 7.3 8,089 7.4 8,089 8,089 -220,483 0 - -19,363 - 4,255 -15,108 -220,483 -15,108 0 0 0 -19,363 4,255 -15,108 -220,483 0 -19,363 3,513 11,641 -4,208 -224,691 0 3,513 -703 2,811 2,811 -220,483 0 -19,363 3,513 11,641 -4,208 -224,691

Net profit or loss for the accounting period for the accounting period Net profit or loss Changes in the fair value of property Changes in the fair value of property 7.1

Changes in the fair value of available-for-sale financial assets Changes in the fair value of available-for-sale financial assets 7.2 Elimination of derivative financial instrumentsderivativeflow hedging Elimination of for cash financial instruments for cash flow hedging 7.3 Effect of eliminating deferred tax assetseliminating deferred tax assets and7.4 Effect of and liabilities liabilities -

- 3,513 8,089 -703 8,0892,811

Total other comprehensive income in the accounting period Total other comprehensive income in the accounting period Total comprehensive income in the accounting period Total comprehensive income in the accounting period -220,483 Year 2009 Year 2009 -139,626 -

8,089 2,811 -15,108

Net profit or loss for the accounting period for the accounting period Net profit or loss Changes in the fair value of property Changes in the fair value of property 7.1

0 39,798 7.1 7.2 -8,039 31,759 31,759

-139,626 0 - -48,097 -8,882 6,062 34 -50,917 34 -139,592 -50,917

0 39,798 -

0 -

0 -48,097 -8,882 6,062 -50,917 -50,917

-139,626 39,798 -48,097 185 -8,882 -1,980 -18,976 -158,602

0 185 -37 148 148

-139,626 39,798 -48,097 185 -8,882 -1,980 -18,976 -158,602

Changes in the fair value of available-for-sale financial assets Changes in the fair value of available-for-sale financial assets 7.2 Changes in the fair value of derivative financialfair value of derivative financial instruments for cash Changes in the instruments for cash flow hedging flow hedging Disposal of available-for-sale financial assets Disposal of available-for-sale financial assets Effect of deferred tax assets and liabilities Effect of deferred tax assets and liabilities 34 Total other comprehensive income in the accounting period Total other comprehensive income in the accounting period 34 Total comprehensive income in the accounting period Total comprehensive income in the accounting period -139,592

- 185 -8,039 -37

31,759 148 31,759 148

97

97

Annual Report Merkur, d. d., 2010

Notes on Items in Other Comprehensive Income Statement of Merkur, d. d., for 2010 7.1 Changes in the Fair Value of Property

8 8.1

Other Notes Related Parties

Changes in the fair value arise from revaluation of property based on the fair value model. The company revaluates the value of property at the balance sheet date. In 2010, no discrepancies that would affect other comprehensive income were established in valuating the property, while in 2009 the effect of revaluation amounted to EUR 39,798 thousand.

Related parties include subsidiaries and associated companies, and related natural persons, which comprise members of the supervisory and management boards, management workers of the parent company and subsidiaries, and their close family members. All relations between Merkur, d. d., and companies in the group, including transactions and outstanding balances, as well as related natural persons, are disclosed below.

7.2

Changes in the Fair Value of Available-for-Sale Financial Assets

On 31 December 2010, the company valuated the fair values of available-for-sale financial assets. The valuation revealed that the fair value of individual investments was below the book value (revaluation reserve included). The change in the fair value was recognized in the other comprehensive income statement for 2010, and amounted to EUR 19,363 thousand (2009: EUR 48,097 thousand). The major part of the change, EUR 19,390 thousand, arises from the investment into shares of Gorenjska banka d. d., Kranj.

Business relations with subsidiaries and associated companies are mostly comprised of purchase and sale of goods, products, services and assets, and financial transactions related to the management of given and taken loans. As related parties, companies conducted business based on concluded sale and loan contracts. In transactions, the companies applied market prices of goods, products, services and assets without exceptions. Loans between related parties were granted under same conditions as apply to other companies with similar credit ranking. The controlling company of Merkur was MERFIN holding, d. o. o., with the headquarters at verovkova ulica 55, 1000, Ljubljana Slovenia. In 2010, MERFIN, d. o. o., lost the controlling interest in Merkur, d. d., after its stake dropped to 8.81% or 9.79% of votes as on 31 December 2010. According to the data from 31 December 2009, MERFIN, d. o. o., held a 67.5% stake or 75% of votes in the company. On 30 June 2010, MERFIN still held a 68.60% stake in MERKUR, it however lost its influence on decisions as the new Management Board of Merkur, d. d., took over on 1 July 2010. In the second half of 2010, creditors of MERFIN, d. o. o., sold seized shares of Merkur, d. d., which resulted in the company losing the major part of its only assets, and the company found itself in great financial difficulties. On 3 June 2011, bankruptcy proceedings were launched against MERFIN, d. o. o., Ljubljana.

7.3

Elimination of Derivative Financial Instruments

Merkur, d. d., used derivative financial instruments for interest rate hedging. In the past years, the company recorded a loss from valuation of fair value of derived financial instruments, which amounted to EUR 2,811 thousand. In 2010, compulsory settlement proceedings were launched, and in line with the contract provisions, the company stopped accounting for hedges, and the total effect of eliminating derivative financial instruments in the amount of EUR 3,513 thousand was recognized in other comprehensive income for 2010 (2009: EUR 185 thousand).

92

7.4

Eliminating Deferred Tax Assets and Liabilities

Report on Relations between Merkur, d. d., and Controlling Company Merfin, d. o. o., in Line with Article 545 of the Companies Act 1
Based on a decisions of the 22nd General Meeting held on 25 February 2011, the DELOITTE REvIZIJA, d. o. o., Ljubljana, audit company was appointed as special auditor to review how individual transactions were managed in the period from 26 April 2007 to 3 November 2010. The special auditor must review the regularity and commercial aptitude of all direct and indirect transactions between Merkur, d. d., (and its subsidiaries) and companies MERFIN, d. o. o., MERFINA DvA, d. o. o., MERFIN TRI, d. o. o., and MERFIN TIRI, d. o. o., all four with headquarters in Ljubljana; and direct and indirect transactions between Merkur, d. d., (and its subsidiaries) and HTC DvA, d. o. o. in bankruptcy, HTC ENA, d. o. o., and HTC G, d. o. o., all three with headquarters in Ljubljana. The special auditor must also review the management of all other transactions, for which suspicion exists that they might have harmed the company (and subsidiaries). The special auditor should also review all transactions between the company (and subsidiaries), and banks and other financial organizations related to all loan and other financial transactions, which Merkur, d. d., or any of its subsidiaries concluded in that period. The review should look at their regularity, commercial aptitude, and check whether a third party has used its power to intentionally influence management or supervisory bodies, or an authorized representative to act in a way that would harm Merkur, d. d., and its shareholders. In each of the listed cases, the special auditor should determine the damage Merkur, d. d., suffered in line with paragraph 3 of Article 545 of the Companies Act 1. Based on the findings of the special audit, the Management Board of Merkur, d. d., will apply due diligence and launch all the necessary procedures in line with the law. As a result, it is impossible to issue a statement on harm caused to Merkur, d. d., at the end of the 2010 financial year.

In line with the facts presented under 3.1 Assumption of An Operating Company, long-term deferred tax assets and liabilities were eliminated in the financial statements for 2010. Elimination of deferred tax liabilities from revaluated properties in the amount of EUR 8,089 thousand, and from available-for-sale financial assets in the amount of EUR 4,255 thousand was recognized in other comprehensive income. Elimination of deferred tax assets from cash flow hedges in the amount of EUR 703 thousand is recognized in other comprehensive income.

Annual Report Merkur, d. d., 2010

Relations with Subsidiaries and Associated Companies

Transactions between Merkur, d. d., and Related Companies and Related Companies Transactions between Merkur, d. d., Transactions between Merkur, d. d., and Related Companies
In thousand EUR Sale of Item goods YEAR 2010 Merfin, d. o. o., Ljubljana Purchase of goods Provided Sale of services goods -0 0 297,846 28 -4,921 227 -2,557 95 16 21 183 1 2,514 241 145--17 -707 7 17 3,246 458 19,722 3,421 Purchase Used of goods services 65 65 0 197 382 18 -82 39 -5574 628 16 -10,456 972 13 ---135 219 12 1,1968 8,100 114 21,964 1,184 Provided Charged services interest 32 32 0 29877 28 -227 47 -128 95 1632 1 2,514 1,159 24 1 4562 35 8 107 7 9 458 17 3,421 2,505 Received Used Charged services Receivables interest interest 147 65 147 65 2818 -1,242 39 -4 16 5 -509 972 3----12 17 8 436 114 2,240 1,184 32 32 0 -2,642 877 131 380 47 722 1,188 128 186 32 1,159 252 16 24 87 150 62 4,205 35 -8 1,298 107 -9 44 17 11,201 2,505 Received Loans Liabilities Receivables interest given 147 147 0 28 2-23,779 1,242 --1.037 5 1411,551 509 16 3 ---97-723 17 707 436 37,927 2,240 -00 -15,165 2,642 131 380 722 1,188 -1 86 252 16 87 150 4,205 -1,298 -44 15,165 11,201 Issued Liabilities sureties 10,068 10,068 0 -48,824 2 -23,779 44,415 -1,543 1.037 14 11,551 3,967 16 -5,083 21,980 97 -723 707 37,927 125,812 In thousand EUR Loans given 0 15,165 15,165 Issued sureties 10,068 10,068 48,824 44,415 1,543 3,967 5,083 21,980 125,812

Item YEAR 2010 Merfin, d. o. o., Ljubljana

Merkur, d. d., towards Merfin, d. o. o., total Merkur, d. d., towards Merfin, d. o. o., total 0 0 Kovinotehna, d. o. o., Celje Kovinotehna, d. o. o., Celje 197 Merkur Hrvatska, d. o. o., Zagreb Merkur Hrvatska, d. o. o.,7,846 Zagreb 382 Merkur Nekretnine, d. o. o., Zagreb Nekretnine, d. o. o., Zagreb Merkur Merkur International, d. o. o., Beograd Merkur International, d. o.4,921 o., Beograd 82 Merkur elik, d. o. o., Beograd Merkur elik, d. o. o., BeogradIntermerkur - Nova d. o. o., Sarajevo Intermerkur - Nova d. o. o., Sarajevo 2,557 557 Perles Merkur Italia, s. r. l. Perles Merkur Italia, s. r. l. 21 628 Merkur, d. o. o., Cetinje Merkur, d. o. o., Cetinje 183 Mersteel, d. o. o., Naklo Mersteel, d. o. o., Naklo 241 10,456 Mersteel, d. o. o., Beograd Mersteel, d. o. o., Beograd 13 Mersteel, d. o. o., Zagreb Mersteel, d. o. o., Zagreb Mersteel Profil doo, Beograd Mersteel Profil doo, Beograd Mersteel, d. o. o., Sarajevo Mersteel, d. o. o., Sarajevo -17 Merkur International Praha, spol. S. r.International Praha, spol. S. r. o. 135 Merkur o. Merkur Makedonija, doo, Skopje Merkur Makedonija, doo, Skopje 707 219 Merkur - MI Handels, GmbH Merkur - MI Handels, GmbH 17 1,196 Big Bang, d. o. o., Ljubljana Big Bang, d. o. o., Ljubljana 3,246 8,100

94

Merkur, d. d., towards subsidiaries, total towards subsidiaries, 21,964 Merkur, d. d., 19,722 total

In thousand EUR Sale of goods -

In thousand EUR Issued sureties 25,909 25,909

Item Item YEAR 2009 YEAR 2009 Merfin, d. o. o., Ljubljana Merfin, d. o. o., Ljubljana

Purchase Sale of Purchase Used Provided Provided Charged Used ReceivedCharged Received Loans Loans Loans Issued Loans of goods goods services goods of services services interest services interest interest Receivables Liabilities interest Receivables Liabilities Taken given Taken sureties given 0 0 4 4 0 0 4 4 588 588 0 16 16 588 588 0 16 16 0 - 419 0 419 0 0 419 25,909 419 25,909 0

Merkur, d. d., towards Merfin,d. d., towards Merfin, d. o. o., Merkur, d. o. o., total total 0

Kovinotehna, d. o. o., Celje Kovinotehna, d. o. o., Celje - 39 Merkur Hrvatska, d. o.Merkur Hrvatska, d. o. o., Zagreb o., Zagreb 16,987 674 16,987 119 674 Merkur Nekretnine, d. Merkur Nekretnine, d. o. o., Zagrebo. o., Zagreb Merkur International, d. o. o., Beograd Merkur International, d. o. o., 14,026 Beograd 60 14,026 396 60 Merkur elik, d. o. o., Beograd Merkur elik, d. o. o., Beograd Intermerkur - Nova d. o. o., Sarajevo Intermerkur - Nova d. o. o., Sarajevo 6,049 394 6,049 99 394 Perles Merkur Italia, s.Perles Merkur Italia, s. r. l. r. l. 1,965 2,658 1,965 24 2,658 Merkur, d. o. o., Cetinje Merkur, d. o. o., Cetinje 592 1 592 3 1 Mersteel, d. o. o., Naklo Mersteel, d. o. o., Naklo 809 15,708 809 4,123 15,708 Mersteel, d. o. o., Beograd Mersteel, d. o. o., Beograd 71 1 71 Mersteel, d. o. o., Zagreb Mersteel, d. o. o., Zagreb - 61 Mersteel Profil doo, Beograd Profil doo, Beograd Mersteel Mersteel, d. o. o., Sarajevo Mersteel, d. o. o., Sarajevo 23 - 10 23 Merkur International Praha, spol. S. r. o. Praha, spol. S. r. o. Merkur International 1 122 1 122 Merkur Makedonija, doo, Skopje Merkur Makedonija, doo, Skopje 2,584 328 2,584 108 328 Merkur - MI Handels, GmbH - MI Handels, GmbH Merkur 136 3,242 136 15 3,242 Big Bang, d. o. o., Ljubljana Big Bang, d. o. o., Ljubljana 10,626 8,963 10,626 492 8,963 Big Bang, d. o. o., Ljubljana Big Bang, d. o. o., Ljubljana -

39 725 119 682 484 396 278 301 99 143 45 24 26 3 1 749 4,123 3,407 1 45 61 96 10 477 10 17 108 124 15 15 11 252 492 2

- 38 725 484 301 45 4 749 59 17 15 17 252 140 -

4 682 5,368 - 175 278 48 - 962 143 2,677 26 305 1 530 3,407 36,064 45 46 - 62 96 125 477 5,880 10 4 124 1,956 11 44 - 2,776 2 5,303 57,026

38 1,006 4 - 682 5,368 175 -25,272 48 962 - 113 2,677 4 2,337 305 530 5927,341 36,064 54 46 62 125 - 5,880 45 4 22 1,956 17 1,100 44 140 6,763 2,776 25864,734 57,026

- 1,006 - 100 682 15,165 53,327 15,165 - 25,272 49,359 113 1,841 - 2,337 2,174 - 27,341 70,945 54 4,000 12,000 22,636 45 1,000 22 - 1,100 1,000 - 6,763 0 64,734 15,165 218,282 15,165 0

53,327 49,359 1,841 2,174 70,945 4,000 12,000 22,636 1,000 1,000 -

100 -

Merkur, d. d., towards subsidiaries, total subsidiaries, total Merkur, d. d., towards 53,774 32,244 53,7745,489 32,244 2,588 5,489 5,303 2,588 258

218,282

Annual Report Merkur, d. d., 2010

Relations with Related Natural Persons Relations with Relatedbusiness Persons with members of the supervisory and management boards, who TheRelations with Related Natural Persons company only has Natural relations are employed under individual contracts, and no other related natural persons or their close family TheThe company only hasbusinessrelations with members of the supervisory and management boards, who are who company only has business relations with members of the supervisory and management boards, members. are employed under individual contracts, and no other related natural persons or theirpersons or members. employed under individual contracts, and no other related natural close family their close family members. On On 31 December 2010, none of the old or new members of the Management Board of Merkur, d.Merkur, close family 31 December 2010, none of the old or new members of the Management Board of d., their d. d., their close family members, directors ofor members of Supervisory Boards of subsidiaries owned of subsidiaries d. d. members, directors of subsidiaries, subsidiaries, or members of Supervisory Boards shares of Merkur, owned On 31 December 2010, none of the old or new members of the Management Board of Merkur, d. d., their shares same applies to members of the Supervisory The of Merkur, d.d. The same applies to members of the Supervisory Board of Merkur, d. d. close family members, directors of subsidiaries,Board of Merkur,of Supervisory Boards of subsidiaries owned or members d. d. shares of Merkur, d.d. The same applies to members of the Supervisory Board of Merkur, d. d.
Gross Income Gross Income

8.2

Payments to Members of the Management and Supervisory Boards, and Employees with Individual Contracts

Total Income Received by Members of the Management and Supervisory Boards, and Employees with Individual Contracts in Merkur, d. d., for Their Work Performed in 2010
In thousand EUR Fixed part of the income 2 56 34 56 61 42 75 66 66 456 64% (6 months) (6 months) (5 months) (7 months) (7 months) (7 months) (5 months) 7 Other income 3 5 139 4 6 91 2 3 2 251 36% 9 6 6 14 9 10 7 61 Total gross income 4=2 +3 61 173 60 67 132 77 69 68 707 100% 51% 9 6 6 14 9 10 7 61 7 5 4 11 7 7 5 47 Total net income 5 85 34 38 64 39 36 35 363

Gross Income
In thousand EUR 2010 5,924 2010 707 5,924 5,156 707 61 5,156 61 2009 In thousand EUR 5,504 2009 520 5,504 4,937 520 47 4,937 47 In thousand EUR 31 December 2010 31 December EUR In thousand 2009 87 135 31 December 2010 31 December 2009 87 87 87 135 135 135

Recipient Bine Korde Goran elesnik Milan Jelovan Marjan Smrekar Bojan Knuple Bla Pesjak Rok Ponikvar Uro Zajc Management Board total Breakdown of the gross amount Net/gross Marta Bertoncelj Jakob Piskernik Branko Dernovek Matev Slapniar Antonija Pirc Ana Hochkraut Peter Fratnik Supervisory Board Employees with individual contracts

Period 1 (6 months) (3 months) (6 months) (12 months) (2.5 months) (5.5 months) (5.5 months) (5.5 months) 8

Total Related natural person Management Board members Total

Others employees with individual contracts Management Board members Members of the Supervisory Board of Merkur, d. d. Others employees with individual contracts Members of the Supervisory Board of Merkur, d. d. Receivables Due from Related Natural Persons

Receivables Due from Related Natural Persons Receivables Due from Related Natural Persons Related natural person
Total Related natural person Others Total employees with individual contracts Others employees with individual contracts

96

Receivables comprise receivables from housing loans to employees. The loans were granted at the interest rate applying at the date they housing loans to employees. The loans were granted Receivables comprise receivables from were granted. Receivables comprise receivables from housing loans to employees. The loans wereat the interest rate granted at the applying applying they were granted. interest rate at the date at the date they were granted. Company has no liabilities towards related natural persons. Company has no liabilities towards related natural persons. Company has no liabilities towards related natural persons.

94

4,075

1,081

5,156

3,200

In line with the provisions of the individual contract, the fixed part of the income comprises the base salary, i. e. the lowest possible amount paid if the operating targets are not being met. Other income of Management Board members and authorized representatives, comprises holiday allowance, severance pay upon retirement, bonuses from managers insurance, use of company cars, additional pension insurance, and transport and meal allowance. Other income of Supervisory Board members consists of attendance fees and reimbursement of costs related to attending the sessions. Net income comprises: net fixed and flexible income, net attendance fees, holiday allowance and severance pay, transport and meal allowance. In 2010, Merkur, d. d., did not pay advances or issue guarantees for liabilities of related natural persons, nor receive shortterm or long-term loans from these persons. In 2010, Merkur, d. d., did not conclude any transactions outside the regular scope of operations with new members of management and supervisory boards, or persons related to them. Transactions of the old management and supervisory board are being investigated by the National Investigation Bureau, and are subject of a special audit commissioned by the new Management Board based on a decision of the 22nd General Meeting of Merkur, d. d., held on 25 February 2011.

102 102

In 2010, the company cancelled a EUR 3,812 thousand advance given to a brokerage in 2009 for acquiring 13,615 of Merkurs shares at the option price with the purpose of rewarding employees with individual contracts. Based on the contract, the company acquired 13,615 of own shares worth EUR 3,812 thousand, which it immediately sold to Merfin, d. o. o., at the same price.

Annual Report Merkur, d. d., 2010

Related natural person

32

8. 3

Lawsuits Against Merkur, d. d.

9 9.1

Business Events after the Balance Sheet Date Compulsory Settlement Proceedings

On 16 September 2010, GBD, finanna druba, d. d., now G Skupina, d. d., Ljubljana filed a claim for execution supported with an authentic document bill of exchange for EUR 3,000 thousand plus the default interest from 10 September 2010 until the date the payment is made. On 17 September 2010, the Ljubljana Local Court issued a decision no. 129049/2010, in which it upheld the claim for execution. The company filed an appeal against the decision. On 5 October 2010, the Local Court issued a decision revoking the part of the decision no. vL 129049/2010 of 17 September 2010 which allowed execution. The decision on the claim and the court costs will be made by the Kranj District Court, in the civil procedure with ref. no. I Pg 65/2011. In the written submission, the plaintiff, G skupina, d. d., expanded the claim by additional EUR 2,204 thousand. The court has not called the main hearing in the case and no decision has been made yet. The claim is based on a loan contract between G skupina, d. d., and Merfin, d. o. o., with a principle of EUR 6,000 thousand and a 6-month EURIBOR + 3.45% annual interest rate. The companies signed 9 annexes to the loan contract. Annex no. 9 set the final maturity date on 17 June 2010. The loan was not repaid by this date. Merkur, d. d., who was the guarantor, did not repay the loan in time even though it was called upon to do so. The guarantor insured the liability with a bill of exchange and corporate guarantee. When the guarantors bill of exchange was presented, it was only partially realized in the amount of EUR 85 thousand. The defendant, Merkur, d. d., presented a corporate guarantee of 23 February 2009 to insure the loan, confirming that it was acquainted with the debtors liabilities under the loan contract, and that it will, as a guarantor and payer, cover any liability arising from the main contract or annexes that the borrower would fail to pay upon the first call of the plaintiff, G skupina, d. d. The corporate guarantee is a null and void transaction, which means it does note present an obligation for our company and has no legal effects. Based on the preliminary decision on execution by the Ljubljana Local Court with ref. no. vL 129049/2010 of 17 September 2010, which was based on an authentic document bill of exchange, a decision was issued on insuring the claim with a preliminary decision granting the creditor a lien on dematerialized securities held by Merkur, d. d., registered in the central register of dematerialized securities managed by KDD. The preliminary decision should be executed immediately and is valid 8 days from the date when the conditions for execution under the decision of the Ljubljana Local Court no. vL 129049/2010 of 17 September 2010, or within 8 days of the decision issued in the civil procedure launched after the defendants appeal becoming final. The company issued an appeal claiming the court had no local jurisdiction, which was granted.

On 3 November 2010, the Kranj District Court issued a decision no. 1358/2010, launching the compulsory settlement proceedings. Since the proceedings were launched, the companys operations have been managed in line with the Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act and overseen by a court-appointed receiver. The court also appointed a creditors committee, which comprises nine major creditors. The Financial Restructuring Plan of 26 October 2010, amendments to the plan of 8 March 2011, and the report by an authorized appraiser who issued a positive opinion upon valuating the company, indicate that the implementation of the proposed Financial Restructuring Plan will help the debtor acquire short- and long-term solvency, while the creditors will have their receivables repaid under better conditions than they would in case bankruptcy proceedings against the debtor. The Management Board adopted numerous financial restructuring measures. These can be divided in several groups: rationalizing overheads (decreasing the number of employees); improving product management; measures in the distribution chain and logistics; measures in procurements, wholesale and retail. The measures are aimed at eliminating operating problems and causes for inefficient operations. Financial restructuring measures also include disinvestments. By disposing of its assets, the company will pay part of the liabilities to creditors with the right to separate settlement with secured claims. The Companys Financial Restructuring Plan also envisages taking out new loans to purchase new stocks in order to allow normal operations and meet the plans regarding the volume of sales. The company would finance working capital with a new loan in the amount of EUR 40,000 thousand. The loan would come in the form of a syndicated loan from a consortium of banks, with Nova Ljubljanska banka, d. d., acting as the agent. The consortium comprises 11 banks. Long negotiations on the EUR 40 million loan with the banks were not completely successful, and in mid-November 2010 banks proposed giving the company a EUR 35 million liquidity loan. The company will cover the missing EUR 5 million by decreasing the working capital and from alternative sources. On 28 December 2010, the company and the consortium of banks signed a contract on the EUR 35,000 thousand liquidity loan. The approval of the loan was one of the key elements of the Financial Restructuring Plan. The company started drawing the loan on 4 February 2011. The company drew the loan successively and based on required documents, which justified the payments. At the 22nd General Meeting of MERKUR, d. d., which was held on 25 February 2011, the shareholders unanimously supported a capital injection, which was extremely important for successfully completing the compulsory settlement proceedings. Capital injection through the conversion of receivables was one of the key measures of financial restructuring. The capital injection will amount to EUR 97,608 thousand. On 8 March 2011, the court published the amended Financial Restructuring Plan, and issued a decision on permitting changes to the Financial Restructuring Plan on the same day. The company amended the Financial Restructuring Plan and offered ordinary creditors more shares for a euro of their receivables than in the original financial restructuring plan. Every creditor that transferred its receivables onto the debtor, in line with the call on creditors to subscribe and pay new shares by paying in an in-kind contribution, received one share with the capital stock of EUR 1 for every EUR 53.00 of converted ordinary receivables. The price for creditors with secured receivables remained the same at EUR 40.00 per share. On 9 March 2011, the court issued a call to creditors to subscribe and pay in new shares. In order for the capital injection to succeed, the creditors had to convert at least EUR 85,000 thousand worth of receivables into shares. The conversion was completed successfully, as receivables in the amount of EUR 97,608 thousand were converted into equity stakes. On 31 March 2011, the company and the consortium of banks signed an umbrella agreement on rescheduling the secured loans, which was part of the companys Financial Restructuring Plan. Under the agreement, which is a key element for the success of the compulsory settlement, the interest rate will stand at 1% throughout the year 2011, and will be in accordance with the Financial Restructuring Plan later. After the compulsory settlement proceedings were launched, all the necessary procedures for evaluating and recognizing registered creditors receivables were carried out in line with the provisions of the Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act. Recognition of the creditors receivables presented the legal foundation for granting voting rights to the creditors, who voted on approving the compulsory settlement against Merkur, d. d. The voting rights were also granted to creditors who transferred their receivables onto the insolvent debtor in the process of increasing the companys capital stock as part of the financial restructuring (ordinary receivables were converted with the coefficient 2, and secured with 3). 95.35% of creditors with voting rights voted in favor of compulsory settlement. Pursuant to the Financial Operations, Insolvency Proceedings and Compulsory Settlement Act, the court issued a decision on the approval of compulsory settlement proceedings against Merkur, d. d., which became final on 11 August 2011.

98

Annual Report Merkur, d. d., 2010

COMPULSORY SETTLEMENT PROCEEDINGS AGAINST MERKUR trgovina in storitve, d. d. Naklo Key dates Date 16 September 2010 26 October 2010 03 November 2010 15 November 2010 03 December 2010 28 December 2010 04 February 2011 04 February 2011 25 February 2011 08 March 2011 09 March 2011 09 March 2011 09 March 2011 31 March 2011 08 April 2011 11 April 2011 19 May 2011 25 May 2011 26 May 2011 25 June 2011 13 July 2011 15 July 2011 11 August 2011 Event Insolvency is declared Financial Restructuring Plan is filed Decision on launching compulsory settlement proceedings 1st session of the creditors committee Deadline for registering claims in the compulsory settlement proceedings Merkur and consortium of banks sign an agreement on a EUR 35 million liquidity loan The basic list of tested claims is published Merkur starts drawing the syndicated loan Capital injection is approved at a General Meeting Decision on permitting amendments to the Financial Restructuring Plan Amended Financial Restructuring Plan is published Call to creditors to subscribe and pay in new shares The amended list of tested claims is published Merkur and the consortium of banks sign a contract on rescheduling loans Deadline for filing statements on conversion at court The receiver files the updated list of tested claims The updated list of tested claims is published The final version of the list of tested claims and decision on testing of claims Call on creditors to vote on approving the compulsory settlement proceedings The voting closes The receivers report on established claims, outcome of the voting on paid in new shares The courts decision on the approval of compulsory settlement The courts decision on the approval of compulsory settlement becomes final
Reported to the court on 31 Dec. 2010 in line with Article 168 of the ZFPPIPP 1 Property, Plant and Equipment Intangible assets Investment property Financial investments in subsidiaries Long-term financial investments Loans given Other long-term receivables Deferred tax assets Total long-term assets Inventories Financial assets Loans given Trade and other receivables Cash and cash equivalents Total short-term-assets TOTAL ASSETS Issued capital Capital reserves Revenue reserves Treasury shares (as a deduction) Retained net earnings Fair value reserve Total equity Loans taken Finance lease liabilities Deferred tax liabilities Other long-term liabilities Provisions Total long-term liabilities Loans taken Finance lease liabilities Trade and other liabilities, including derivative financial instruments Provisions Total current liabilities Total liabilities TOTAL EQUITY AND LIABILITIES
*Withdrawal of treasury shares

In thousand EUR General Meeting decision of 25 Feb. after compulsory settlement was made final 5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -53,592 53,592 -53,159 53,159 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Item

Discrepa ncies after the audit 2= 3-1 35,825 0 0 -880 -19,916 -3,145 0 -6,176 5,709 0 -4,385 -7,620 1,491 4,385 -6,129 -421 0 0 -1,030 0 -44,382 -7,036 -52,448 -17,093 37,314 -14,672 0 28,417 33,967 17,093 1,155 -187 0 18,061 52,027 -421

Audited balance Effect of the sheet as on compulsory 31 Dec. 2010 settlement 3 206,984 971 36,162 73,983 130,795 11,805 229 0 460,930 39,111 0 15,407 29,628 5,584 89,730 550,660 54,773 0 53,159 -53,159 -218,080 62,861 -100,446 41,880 55,463 0 40 34,189 131,571 366,700 2,211 150,064 560 519,534 651,105 550,660 4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,885 95,723 0 0 51,728 0 149,336 260,854 0 0 38,831 -5,000 294,685 -318,417 0 -125,603 0 -444,020 -149,336 0

New balance sheet as on 31 Dec. 2010 with the effects of the compulsory settlement 6=3+4+5 206,984 971

171,159 971 36,162 74,863 150,711 14,950 229 6,176 455,221 39,111 4,385 23,027 28,137 1,199 95,859 551,080 54,773 0 54,189 -53,159 -173,699 69,898 -47,998 58,973 18,149 14,672 40 5,771 97,605 349,607 1,056 150,251 560 501,473 599,078 551,080

73,983 130,795 11,805 229 0 460,930 39,111 0 15,407 29,628 5,584 89,730 550,660 3,066 149,315 0 0 -166,352 62,861 48,890 302,733 55,463 0 38,871 29,189 426,256 48,282 2,211 24,460 560 75,514 501,770 550,660

100

After the audit of the 2010 financial year and financial statements as on 31 December 2010 was concluded, the company amended on 18 February 2011 the financial statements published on the website of the Agency of the Republic of Slovenia for Public Legal Records and Related Services in line with Article 168 of the Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act. Corrections resulting from the audit and a simulation of effects that approved compulsory settlement would have on the balance sheet as on 31 December 2010 are presented in the below table.

Annual Report Merkur, d. d., 2010

36,162

9.2

Comprehensive Reorganization in Merkur, d. d., in 2011

9.5

Contingent Liabilities

In addition to financial restructuring, measures aimed at improving efficiency of operations are also of key importance in Merkurs reorganization. The company clearly defined the roles in responsibilities to ensure successful implementation of measures. Key measures were integrated in a comprehensive reorganization project entitled Mozaik. The projects goals are synchronized with the companys financial plan and are of key importance for the success of the reorganization. The umbrella project comprises several sets of measures aimed at the final goal of increasing the operating profit by EUR 37 million by 2016. Key measures for achieving this goal are divided into 6 sets: optimizing the procurements, optimizing the supply chain, optimizing the sales network, product group management, increasing the wholesale, working capital management, measures for working capital management included an improved tool for planning and managing cash flows, which allows comprehensive working capital management. Measures in product group management include category management measures, which helped us increase the average value of the purchase in the retail, and the difference between prices is higher than the year before on average. Measures for optimizing procurement (optimizing all procurement processes and improving procurement terms) and sales network (optimizing the sales facilities and increasing the productivity) helped us cut the operating costs in sales centers. Successfully implemented measures in cutting the labor costs and optimizing the supply chain also contributed to cost cutting. The project is being implemented in line with the plan and the goals are consistently met. The goals are also linked to fulfilling the financial obligations, which are an integral part of the contract with the consortium of banks. The fulfillment of all the goals is overseen by the Roland Berger consultancy company, which prepares weekly reports for the Management Board and quarterly reports for the consortium of banks.

On 17 June 2008, Merkur, d. d., signed a surety bond for a EUR 250 thousand loan (with Dresdner Bank AG, now Commerzbank AG) for its subsidiary Merkur Handels GmbH Muenchen. On 2 October 2010, bankruptcy proceedings were launched against Merkur Handels GmbH Muenchen. Receiver Dr. Michael Jaffe is managing the bankruptcy proceedings independently and without the owners influence. When the bankruptcy proceedings were launched, the balance on the Commerzbank AG account was positive, which is supported by the account statement, so we wrote off the surety. On 11 March 2011, Commerzbank AG sent a letter to Merkur, d. d., calling on the company to pay EUR 117 thousand. Several letter have been exchanged, however the bank has failed to explain the negative balance on the account so far. Since we have no official documents that would support the existence of the debt, the surety given to Merkur Handels GmbH Muenchen is still recorded as contingent.

9.3

General Meeting Decision on Decreasing Capital Stock and a Capital Injection for Merkur, d. d.

102

At the 22nd General Meeting of MERKUR, d. d., held on 25 February 2011, a decision was adopted on decreasing the capital stock. The capital stock of the company, which amounted to EUR 54,773 thousand on the day the decision was adopted, shall be decreased by EUR 53,592 thousand. The decrease in the capital stock will be carried out in a simplified manner, by (a) withdrawing EUR 5,477 thousand worth of treasury shares, and (b) by transferring EUR 48,115 thousand from capital stock to capital reserve with the purpose of financial restructuring. At the same time, a decision was taken on increasing the capital stock with in-kind contributions. The in-kind contributions comprised claims towards the company from the list of ordinary claims from point 3 of paragraph 1 of Article 142 of the Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act, and from the list of secured claims from item 5 of paragraph 1 of article 142 of the Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act, in the case no. 1358/2010 conducted by the Kranj District Court. The decision will be implemented under the condition that the compulsory settlement proceedings become final.

9.4

Drop in the Value of Maksima Invest Shares

When determining the fair value of a listed financial instrument, the closing price on the day that the valuation is being made or the last available price is used. From 31 December 2010 to 30 June 2011, the price of the share decreased from EUR 2.95 to EUR 0.14 per share (-95.3%). The impairment loss of this investment in the first half of 2011 amounted to EUR 1,780 thousand, which increases the financial expenses and has direct impact on the profit or loss in the accounting period. Considering the long global economic crisis and the illiquidity of the share market, a significant turnaround is not to be expected. The biggest decrease of the shares price occurred this January and in February the share hit its record low value, followed by stagnation, and a slight increase in the second quarter. The shares value is changing slightly below EUR 0.14.

Annual Report Merkur, d. d., 2010

Statement of Management Responsibility


We hereby recognize our responsibility for preparing and for true and fair presentation of financial statements, which were prepared in line with the International Financial Reporting Standards. This responsibility comprises: establishing, managing and maintaining internal controlling related to preparing and fair presentation of financial statements, which free from material misstatement, whether due to fraud or error selection and application of appropriate accounting policies and preparation of accounting estimates that are reasonable in the circumstances. We confirm the financial statements. The Management Board declares to its best knowledge that the financial statements were drawn up in accordance with appropriate accounting policies and that the accounting estimates have been prepared under the principle of conservatism and the principle of due care, and that the annual report gives a true and fair view of the financial position of Merkur, d. d., and the results of its operations for the year ended 31 December 2010. The Management Board is also responsible for adequate and orderly accounting, establishment and maintenance of internal controlling related to preparing and fair presentation of financial statements. To the Management Boards best knowledge, the financial statements free from material misstatement, whether due to fraud or error; and the statements and notes are prepared in line with the valid legislation and International Financial Reporting Standards adopted by the EU. The Management Board has adopted all measures for protecting the assets. The chairman and members of the Management Board of Merkur, d. d., are acquainted with the content of the chapters of the annual report and the entire annual report of Merkur, d. d. We agree with it and confirm this with our signatures.

Auditors Report

Naklo, 16 August 2011

104

Bla Pesjak, Chairman of the Management Board

Rok Ponikvar, Management Board Member Director of Procurement, Sales and Logistics

Uro Zajc, Management Board Member Director of Marketing Product Portfolio and Development

Marjan Smrekar, Management Board Member Workers Director

Annual Report Merkur, d. d., 2010

106
Annual Report Merkur, d. d., 2010

COMPANIES IN THE MERKUR DIVISION


Parent company: MERKUR - trgovina in storitve, d. d. Cesta na Okroglo 7, 4202 Naklo Registered at: The Kranj District Court under no. 10001500 Capital stock: EUR 3,066,444 Company registration number: 5003563 vAT ID number: SI98492462 Activity code: G/46.740 Phone: +386 (0)4 258 80 00 Fax: +386 (0)4 258 88 05 E-mail: info@merkur.si Website: www.merkur.eu Bank accounts: Gorenjska banka, d. d., Kranj: 07000-0000002321 Banka Koper, d. d., Koper: 10100-0032602083 SKB, d. d., Ljubljana: 03138-1002701594 NLB, d. d., Ljubljana: 02923-0016828282 Abanka vipa, d. d. Ljubljana: 05100-8000018034 Probanka, d. d., Maribor: 25100-9700292128 NKBM d. d., Maribor: 04515-0000270653 Hypo Alpe Adria Bank, d. d., Ljubljana: 33000-0001958809 UniCredit Banka, d. d., Ljubljana: 29000-0001816667 Banka Celje, d. d., Celje 06000-1027015638 Factor banka, d. d., Ljubljana: 27000-0000097760 Management Board of Merkur, d. d., until 30 June 2010: Bine Korde, Chairman of the Management Board CEO Goran elesnik, member of the Management Board Commercial Director (until 22. March 2010) Milan Jelovan, member of the Management Board COO and CIO (until 15 July 2010) Marjan Smrekar, Workers Director Management Board of Merkur, d. d., after 1 July 2010 (term until 1 July 2015): Bla Pesjak, Chairman of the Management board (Since 29 September 2010) Bla Pesjak, member of the Management Board, in charge of finance, investments and controlling (from 15 July 2010 to 28 September 2010) Bojan Knuple, Chairman of the Management Board CEO (until 24 September 2010) Rok Ponikvar, member of the Management Board, in charge of procurements, sales and logistics (from 15 July 2010) Uro Zajc, member of the Management Board, in charge of marketing, product portfolio and development (since 15 July 2010) Marjan Smrekar, member of the Management Board Workers Director (until 31 August 2013) Supervisory Board of Merkur, d. d., until 22 June 2010: Shareholders representatives: Employees representatives: Marta Bertoncelj chairman Branko Dernovek Jakob Piskernik deputy chairman Supervisory Board of Merkur, d. d., after 23 June 2010 (term until 23 June 2014): Shareholders representatives: Matev Slapniar, chairman Antonija Pirc, deputy chairman Miro Medveek, member (from 25 February 2011 to 25 March 2011) vanja Jeraj Markoja, member (from 25 February 2011 to 24 February 2015) Employees representatives Ana Hochkraut, member Peter Fratnik, member (since 22 July 2010 to 31 May 2014)

SUBSIDIARIES IN THE MERKUR DIVISION:


MERKUR HRVATSKA, d. o. o. Kelekova 18/A, 10000 Zagreb, Croatia Phone: +385 1 2009 333 Fax: +385 1 2008 708 E-mail: merkurhr@merkur.eu Ownership structure: Merkur trgovina in storitve, d. d., 100% CEO: Gregor Adler (Bojan vidmar until 1 September 2010) MERKUR NEKRETNINE, d. o. o. Kelekova 18/A, 10000 Zagreb, Croatia Phone: +385 1 2009 333 Fax: +385 1 2008 708 E-mail: merkurhr@merkur.eu Ownership structure: Merkur Hrvatska, d. o. o., 100% CEO: Gregor Adler (Bojan vidmar until 1 September 2010) MERKUR INTERNATIONAL d. o. o., Beograd Partizanske avijacije 4, 11070 Novi Beograd, Serbia Phone: +381 11 20 57 200 Fax: +381 11 20 57 201 E-mail: merkurbg@merkur.eu Ownership structure: Merkur trgovina in storitve, d. d., 100% CEO: Bojan Pongrac MERKUR ELIK, d. o. o., Beograd Partizanske avijacije 4, 11070 Novi Beograd, Serbia Phone: +381 11 222 89 00 Fax: +381 11 222 89 01 E-mail: merkurbg@merkur.eu Ownership structure: Merkur trgovina in storitve, d. d., 66,16% Merkur International d. o. o., Beograd 33,84% CEO: Zoran Cvijovi MERKUR, trgovina i usluge, d. o. o., Cetinje Bajova br. 1,81250 Cetinje, Montenegro Phone: +38269090365 E-mail: marija.zaric@merkur.eu Ownership structure: Merkur trgovina in storitve, d. d., 100% CEO: Marija Zari INTERMERKUR NOVA, d. o. o., Sarajevo ul. Stupska bb, Novi Grad 71000 Sarajevo, Bosnia and Herzegovina Phone: +387 33 756 980 Fax: +387 33 756 941 E-mail: intermerkur-nova@merkur.eu Ownership structure: Merkur trgovina in storitve, d. d., 100% CEO: Enver oki (Igor Lipanovi until 5 December 2010) PERLES MERKUR ITALIA, s.r.l. (in voluntary liquidation proceedings since 24 August 2010) via Aquileia 15/A, 34070 villesse, Italy Phone: +39 04 81 96 46 11 Fax: +39 04 81 91 81 67 E-mail: info@perlesmerkur.com Ownership structure: Merkur trgovina in storitve, d. d., 100% CEO: Davorin Adler KOVINOTEHNA, d. o. o., CELJE (the company was deleted from the court register on 30 September 2010 based on the founders decision on simplified liquidation)

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OFFICE OF MERKUR, D. D., ABROAD:


CHINA (closed on 25 July 2011)

Annual Report Merkur, d. d., 2010

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ANNUAL REPORT OF MERKUR, D. D., FOR THE FINANCIAL YEAR 2010


Published by: Merkur, d. d. Cesta na Okroglo 7, SI4202 Naklo, Slovenia Production by: Merkur, d. d., Marketing Texts by: Merkur, d. d. Photography by: Lidija Mataja September 2011

Annual Report Merkur, d. d., 2010

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Merkur, d. d., Cesta na Okroglo 7, 4202 Naklo