ESTIMATED BUSINESS PERFORMANCE OF THE COMPANY POSLOVNI SISTEM MERCATOR, D.D. AND THE MERCATOR GROUP FOR 2004 AND THE BUSINESS PLAN FOR 2005

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1 Pursuant to The Securities Market Act stipulations and the Ljubljana Stock Exchange Listing Rules, the company Poslovni sistem Mercator, d.d., Ljubljana, is hereby announcing the following public release: ESTIMATED BUSINESS PERFORMANCE OF THE COMPANY POSLOVNI SISTEM MERCATOR, D.D. AND THE MERCATOR GROUP FOR 2004 AND THE BUSINESS PLAN FOR 2005 The Supervisory Board of the company Poslovni sistem Mercator, d.d., adopted the Business Plan of the company Poslovni sistem Mercator, d.d. and the Mercator Group for the year 2005 on its session on The Summary of the Business Plan for the year 2005 is presented hereinafter. In the year 2004 we concluded the exceptionally successful period in the development of the Mercator Group, which began in the year We have built the biggest retail chain in Slovenia and paved the way among the biggest and the best retailers on the markets of the former Yugoslavia. Our business network has been expanded by takeovers as well as by greenfield investments which has resulted in high growth rates of sales, profits, market shares and the number of employees. The forthcoming period brings us new opportunities, and challenges. The trends prevailing in the retail trade sector show, that the expansion will be switched from the Western Europe to the markets where we operate, which will be reflected in a keen competitive struggle. We are aware that the retail trade on the Western Europe markets is stagnating and successful European trading companies are seeking for new opportunities on the markets with high development potential markets of the South Eastern Europe. We expect the coming period to be denoted by a moderate, but stable growth. Our efforts will be directed to realization of a stable long-term development based mainly on greenfield investments. Despite the prevailing and keen conditions on the market, our goals remain to be ambitious. In the year 2005 we shall thus proceed with the established business strategy. The priority will be given to people, our customers who will be provided with the best supply and services in all the Mercator stores, on all the markets where we operate and will receive the greatest value

2 for their money. This will maintain the loyalty of our customers notwithstanding the existing and newly coming competition. We will continue with the realization of a public and social role by responding to the needs of a broader environment. We will build and care for human relations with donations and develop and strengthen the activities of local and national importance in various life spheres. The Mercator Group is always ready to help when the quality of life is concerned. In Mercator's mission it is written that we bring to people the best quality, choice and convenience for their money. Our vision is to be the leading trading company on the markets of the South Eastern Europe. On all the markets where we operate we wish to provide the customers with equal supply and service standard, to increase the business efficiency and reach the performance level of the best European retailers. 1. Planned key activities for the year 2005 Concern for customer satisfaction and attraction of new customers: we are aware that a satisfied customer is the result of numerous activities, yet mostly of attentive and cared for relationship and high service level. We wish to offer to our customers the best quality, choice and convenience for their money, to please them and pleasantly surprise them. This will be obtained by development and further expansion of Mercator private label product lines (until the end of 2005 we expect to have more than 800 private label products which will generate 13% share in total sales); by preparing numerous marketing activities permanent low prices, national baskets, regular sales campaigns, events and shows, etc.; by development of new sales formats and by development of specialized store chains. We will further develop the loyalty system based on the Pika payment card (green and gold) and Pika cash card (blue). We are striving for Pika card to become «the first card in a wallet». For this reason beside the activities enabling the customers to make even more favorable purchases in Mercator, we are developing partnerships with companies from other service activities (tourism, telecommunications, publishing, fuel, etc.) aiming at making possible the more wide use of Pika card and bonus acquisition. In this sphere, beside the hitherto partners, the recently concluded partnership with Petrol will by all means have a great significance. By the end of 2005 we wish to have more than Pika card holders on all the markets where we operate, however, we also hope to introduce the Pika payment card to the new markets. The processes of business rationalization, reorganization of the Mercator Group and trade activity consolidation will be continued next year. The aim is to have one trading

3 company in each country pursuing the activities of market programme (in Slovenia there will be two companies - Poslovni sistem Mercator, d.d., and Mercator SVS, d.d.). In the year 2004 approx. SIT 1 billion of redundancy payments were paid out to approx. 400 employees due to company mergers. The same is anticipated also for the year Further rationalization will result in savings on the Mercator Group level, which is inevitable for compensation of the price difference reduction anticipated for the years to come. The building of trading facilities will be accelerated on all the new markets. Besides through the market analysis will be prepared for the expansion of business operations in Macedonia, Bulgaria, Romania, Moldavia and Ukraine. Further expansion and development of Mercator specialized chains: o Intersport chain is the biggest global chain with sports products. Mercator is the Intersport license holder for Slovenian, Croatian, Bosnian and Serbian market. At the moment Mercator is the second merchant with sports products in Slovenia. This chain's objective is to catch up with the leader on the market Hervis. On the new markets Mercator wants to become the leading merchant with sports products. o The aim of Mercator textile chain Modna hiša is to present the format Fashion Avenue also on the Slovenian market, which in its offer includes the renowned trademark clothing of the medium and high price ranges. These formats will be developed in larger towns in all the markets and larger Mercator Centres. We wish to present to the market also a new sales format a shop for men with total offer of men's clothing, footwear and fashion accessories as it has been established that this area actually represents a market niche. In the more price sensitive environment for market segment with a lower purchasing power in general, the shops of Modiana outlet type will be developed, where the clothing of past seasons will be sold out at favorable prices. Mercator Modna hiša vision is to remain the leading trading company with textile products in Slovenia and to become an important textile merchant on the markets where Mercator has been widening its retail network. We also hope to become a recognized trader in a segment of drugstores and perfumeries; therefore we plan to take over also the chain Beautique under the umbrella of Modna hiša in the year o According to the adopted marketing strategy of the Mercator Tehnical chain we will proceed with retail network consolidation in the future period, the existing and profitable stores will be reconstructed, the sales formats differentiated and unprofitable stores closed. The Technical chain shopping centers will be built and developed as self-standing facilities or as a

4 supplementary offer of Mercator Centers. The search for a strategic partner will also be continued in order to ensure and optimize the purchasing sources, provide for a global competitiveness of the offer, prices and services. o In Slovenia the intensive expansion of a new sales format Hura! discount will be continued also in the next year, and we also wish to present Hura! discounts on the new markets as soon as possible. The introduction of Category Management Process will be continued in order to provide our customers with a right offer in the right place, at a convenient time, in a suitable range and at a reasonable price. In this area it will be most important to maintain and further develop a partnership relationship with producers on the local markets and with the largest global producers. Together with our strategic partners we have set a goal to form the offer reflecting the customers' needs, requirements and expectations in our stores. Eventual risks identification will be continued in accordance with the accepted policy of risk management and critical factor control to manage the factors that could have a negative impact on planned performance of the Mercator Group. Investment in satisfaction and education of employees, maintenance of a high level of corporate culture and loyalty. We are well aware that the employees are our greatest competitive advantage and will remain so in the future. Improvement of business efficiency, assuring secure investments for creditors and generating greater value for shareholders. Providing for global competitiveness of non - trade companies of the Mercator Group. Persistence in a legal and transparent way of a successful takeover of the company C Market, a.d., Belgrade will be continued. Meeting our commitments to a broader natural, social and local environment.

5 2. Estimated business performance in 2004 and business plan for 2005 for the Mercator Group in accordance with Slovenian Accounting Standards The table below shows the key estimated financial figures in 2004 and key planned financial figures for the year 2005 for the Mercator Group. Mercator Group 2003 Estimation 2004 Plan 2005 Net sales revenues (v mn EUR) Net profit (v mn EUR) EBITDA (v mn EUR) Capital expenditure (v mn EUR) Long - term financial investments (v mn EUR) EBITDA / sales (v %) 7,4% 6,9% 7,1% Number of employees (based on hours worked) Note: The Mercator Group operations have been planned in accordance with the Slovenian Accounting Standards 3. Comments to the planned business performance of the Mercator Group in the year 2005 Mercator Group plans for 2005 net sales revenues amounting to EUR mn surpassing estimated for 2004 by EUR 56 mn or by 3.6 %. In the trading activity the Mercator Group has planned to make 95.5 % of all its net sales revenues, 79.3 % on domestic market and 16.2 % on new markets. The increase of net sales revenues planned for the new markets is based on the planned opening of new shopping centres: MC Zadar and TC Koprivnica in Croatia, TC Zemun and MC Čačak in Serbia and Montenegro in the year 2005, as well as in the already opened MC Osijek in Croatia and TC Alipašino Polje in Bosnia and Herzegovina by the end of For the trading companies in Slovenia an increase of net sales revenues has been planned as a result of the companies Alpkomerc Tolmin, d.d., and Emona Maximarket, d.d. takeover in the second half of 2004, and opening of 2 Shopping centres Ivančna Gorica and Podpeč at the end of 2004, and reconstruction of 4 retail units in 2005 as well as the opening of 18 Hura! discount stores by the end of Net profit of the Mercator Group has been planned in the sum of EUR 25 mn for 2005, which is on the same level in comparison with the estimated net profit for the year Earnings before interest and taxes, depreciation and amortization (EBITDA) planned for the Mercator Group for 2005 amounts to EUR 114 mn thus surpassing estimated EBITDA for 2004 by 7.2 %.

6 Capital expenditures for the Mercator Group for 2005 are planned in the amount of EUR 135 mn, of which 92.1 % refer to trading companies and 7.9 % to non-trading companies. Capital expenditures on the domestic market represent 50.2 % of all planned CAPEX, however 49.8% of all of the Mercator Group CAPEX are earmarked for the companies on new markets. 4. Conclusion In the following year the Mercator Group will continue its successful performance. We shall even more concentrate on the increase of cost efficiencies of our operations, processes and activities. We will as well maintain the position of the leading retailer in Slovenia and ensure the growth of the competitive edge in all the markets where we operate. In spite of the stiffening competition and consolidation of trading activities, the Mercator Group will keep the position of the leading retailer in Slovenia also in the next year, and will increase the market share on the new markets by new investments and ensuring quality and attractive price offer. The competition on the markets where we operate has been strengthening and increasing. Foreign chains of hard discounts - Lidl, Eurospin, Hofer - have been entering the Slovenian market. In the same way the competition on the Croatian market has been stiffening due to penetration of foreign discount store chains, and Spar is also entering the market. Metro, the second largest European trading company developing the format Cash&Carry is entering the Serbian market. The additional risk on the new markets is also the problem of unsolved relationships among the countries arising from the political disagreements, reflected also in the sphere of retail, such as: on the Croatian market the people's initiative appeal to boycott the Slovenian products, delaying and postponing the issue of the required documents in case of new constructions by local communities and thus indirectly protecting the domestic trade, etc. In spite of all the stated hazards and obstacles, our expansion goals on the new markets are ambitious; moreover, new markets for our expansion have already been searched for. For this purpose we have been preparing market analysis of the Macedonian, Bulgarian, Romanian, Moldavian and Ukrainian markets. The development and continuous growth of the group are possible only with a large pool of potential customers, and that is the reason for our expanding to the above-mentioned new markets. Although on the existing markets with 20 million customers the potential for our expanding already exists, we still hope to enter to the new markets thus ensuring a 50 million people. All the major European chains have also been expanding to the new markets of the South Eastern Europe, as the domestic markets of the Western Europe have already become saturated. For the West European retailers the South Eastern European markets have become the only markets offering the opportunities and potentials for expansion and it is likely that these markets will become a real 'battlefield' for division of market shares in the forthcoming period. If the analyzed opportunities for retail network expansion to the new markets will show outstanding effects on business performance

7 according to all the evaluations, we shall exercise the option determined in the Company' Articles of Association, i.e. the institute of approved increase of capital which was endorsed by the General Shareholders' Meeting in the year 2002 and enables us to raise the equity capital by 20 %. It has been assessed by the Management Board that the company Poslovni sistem Mercator, d.d., and the Mercator Group will perform successfully in 2005 in spite of the stiffened competitive situation on the relevant markets and according to the set goals strive for the optimum realisation of the business performance and efficiency of the best European store chains as well as to our mission realisation, namely to bring to the people the best quality, choice and convenience for their money. Poslovni sistem Mercator d.d. Management Board