ANNUAL REPORT 2004 - merkur.eu

ANNUAL REPORT 2004

ANNUAL REPORT OF MERKUR, D. D.
AND CONSOLIDATED ANNUAL REPORT
OF THE MERKUR GROUP
FOR THE YEAR 2004
The English edition is a translation of the Slovene original, which remains the legal version.
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ANNUAL REPORT OF MERKUR, D. D.
AND CONSOLIDATED FINANCIAL STATEMENTS
OF THE MERKUR GROUP FOR THE YEAR 2004
Published by: Merkur, d. d., Marketing, Cesta na Okroglo 7, SI-4202 Naklo, Slovenia
Production: Merkur, d. d.
Concept and Design: Ajda Savinšek, Merkur, d. d.
Texts: Rok Istenič, Merkur, d. d.
Translation: Simona Žgeč, Merkur, d.d., & Co.
Proofreading: Alan McConnell-Duff and Amidas
Photography: David Comba, Tomaž Lunder, Artum d.o.o., Ljubljana (scanning and photo processing)
Prepress: B&T repro studio, Bled
Print: Tiskarna Merkur
Circulation: 300 copies
May 2005

Merkur’s concern is to ensure the customers’
satisfaction and to maintain long-term
partnership.
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HIGHLIGHTS ON OPERATIONS
MERKUR GROUP’S OPERATIONS IN THE PAST AND PROJECTIONS FOR 2005
SIT million
Plan
1997 1998 1999 2000 2001 2002 2003 2004 2005
Net sales revenues 46,023 55,851 58,967 100,165 105,974 124,391 142,564 178,743 192,995
Gross profit from sales 8,697 11,280 11,699 18,274 20,603 25,237 27,714 34,218 37,002
Balance sheet total as at 31 Dec. 36,621 46,262 60,869 91,085 99,851 110,648 120,464 140,393 148,358
Equity as at 31 Dec 18,360 20,614 22,694 24,770 26,884 28,519 36,666 38,395 40,846
Number of employees as at 31 Dec. 1,403 1,742 1,859 2,944 2,824 2,988 3,108 3,370 3,685
MERKUR’S OPERATIONS IN THE PAST AND PROJECTIONS FOR 2005
SIT million
Plan
1997 1998 1999 2000 2001 2002 2003 2004 2005
Net sales revenues 44,824 52,155 48,825 56,108 88,321 104,571 121,364 152,101 160,908
Gross profit from sales 8,102 9,323 9,113 10,521 16,263 19,698 21,984 26,935 27,662
Net profit 909 1,239 1,102 1,524 1,706 1,863 2,368 2,810 3,400
Dividend per share (in SIT)
payable in the year to come 600 450 500 550 600 650 700 600* *
Balance sheet total as at 31 Dec. 35,181 42,803 52,838 62,927 90,250 104,566 115,758 127,014 129,353
Equity as at 31 Dec. 18,374 20,456 22,702 25,735 28,688 30,355 38,501 40,372 42,684
Added value per employee
(in SIT thousand) 4,233 4,478 4,192 4,505 4,682 5,523 6,055 7,772 7,361
Investments in current assets –
net payments (exclusive of
investment through long-term
operating leasing) 2,213 2,920 2,290 1,810 1,339 3,221 3,371 6,759 2,931
Number of employees as at 31 Dec. 1,317 1,419 1,441 1,568 2,401 2,411 2,453 2,523 2,595
* The General Meeting decides on the dividend payment.

MERKUR GROUP’S SALES REVENUES IN THE PAST
AND PROJECTIONS FOR 2005
46,023
44,824
55,851
58,967
52,155 48,825
100,165
105,974 124,391 142,564
MERKUR’S NET OPERATING REVENUES IN THE PAST
AND PROJECTIONS FOR 2005
56,108 88,321 104,571
Highlights on Operations
121,364
178,743
152,101
SIT million
192,995
Plan
1997 1998 1999 2000 2001 2002 2003 2004 2005
SIT million
160,908
Plan
1997 1998 1999 2000 2001 2002 2003 2004 2005
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CONTENTS
page
BUSINESS REPORT 4
Presentation of the Merkur Group 8
Strategic Objectives and Plans 9
Core Programme 10
Organisation Charts of Merkur Group and Merkur 11
Letter from the Chairman of the Management Board 12
Report by the Supervisory Board 14
Milestones of 2004 16
Important Events after the End of the Business Year 17
Business in 2004 18
Merkur, d. d. 18
The Merkur Group 22
Trends in the Slovene Economy in 2004 26
Risk Management 27
Suppliers and Buyers 29
Investments 30
Research and Development 32
Merkur’s Share 34
Staff 38
Social Role of the Merkur Group 42
Business Performance and Control 42
Environmental Report 43
Sports, Culture and Charity 43
FINANCIAL STATEMENTS 47
Highlights on operations in the past and projections for 2005 48
Audited financial statements of Merkur, d. d. 49
Audited consolidated financial statements of Merkur Group 56
Notes and disclosures to the financial statements
of Merkur, d. d. and Merkur Group 62
Introduction 62
Accounting policies 62
General disclosures 69
Notes and disclosures to balance sheet 70
Disclosures and notes to the income statement 88
Disclosures of the items included in the statements of
cash flow and changes in equity 93
Other disclosures 94
Performance Ratios 96
Additional disclosures to the consolidated annual report 98
Management Presentations 101
Auditor’s Report 102
Statement regarding compatibility of Merkur’s
corpoprate governance system with corporate governance code 104
Report on internal audit 106
Basic data on the companies of the Merkur Group 108

The employees believe in the company and
kindle enthusiastic response in business
partners. The partners and the employees
work hand in hand to make the ideas come
true and to attain the set objectives.
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PRESENTATION OF THE MERKUR GROUP
The Merkur Group is a trading organisation. Its mission is to sell high quality products, provide for userfriendly
and expert services, and give satisfaction to the customers. The Group has been moulding its
character in a day-to-day effort to keep the leading position on the market. The Group employs 3,370
people, who are trustworthy partners to the customers.
Merkur Group is composed of Merkur, d. d., its nine subsidiaries in Slovenia and beyond, and two agency
offices in Beograd and in Moscow. The network includes 34 Merkur sales centres in Slovenia, seven
MERKUR centres in Croatia, and a small outlet in Macedonia. Bofex, Merkur’s subsidiary, adds another
25 Big Bang sales centres to the Group, including nine franchise shops and three BOF sales centres. The
Group has 21 franchise outlets in Slovenia, two in Bosnia and Herzegovina, and website shopping sites at
http://nakup.merkur.si and www.bigbang.si .
The Group’s Wholesale creates nearly a half of the revenue total and is assisted by the Purchasing
Department. The level of supply readiness is high, and the ordering procedure is simple. The customers
may order goods through catalogues and get high-quality services, including prompt deliveries of
merchandise to the shelves and conveyor belts, processing and packaging of goods. The specialisation
according to target groups of customers has made the operations even more intense and focused, and the
company is fine-tuned to the customers’ needs.
The Merkur Group has been pursuing its vision, and has become the market leader in the sales of home
products and DIY, electro-installation materials, machinery, apparatuses and appliances, ferrous and nonferrous
metal products, and industrial items for professional use. Even more, the company has entered the
foreign markets as well.
Merkur adapts flexibly to the market changes, finds and exploits market opportunities, is willing to learn
and develop, and strives for perfection. All this allows the company to maintain its 108-year tradition.
Furthermore, the company focuses on development and eagerly accepts new challenges, which provide
the opportunity for further growth.
Merkur takes pride in its past achievements and looks forward to accepting new challenges.

STRATEGIC OBJECTIVES AND PLANS
Presentation of the Merkur Group
The Merkur Group intends to pursue its mission and promote its brand name. The Group closely observes
its strategic guidelines, sells high-quality merchandise, introduces novelties, and upgrades its services. All
that will give satisfaction to the Group’s customers and guarantee long-term successful co-operation with
its partners in the future as well.
It is expected that in the future the competition will grow even keener, and more foreign companies will
offer sales programmes on the Slovene market which are at the moment almost exclusively supplied by the
Group. The Group’s fundamental plans are to further perfect the performance, pursue the specialisation, and
supplement the lines of merchandise in all core programmes. Merkur intends to keep the leading position
in many segments on the domestic market by developing and expanding its sales network. It plans to build
new sales centres in Velenje and Ptuj, and continue preparations for the construction of large sales centres in
Lesce, Škofja Loka, Koper, and Maribor. In addition to that, new warehousing facilities will also be built.
Merkur intends to work hand in hand with its subsidiary Bofex to increase the market share in the
extremely vulnerable and attractive segment of household appliances and fun electronics. Furthermore,
the company plans to continue the specialisation and increase the sales of construction materials,
gardening programme, bathroom fixtures and equipment. Merkur wishes to remain the key account
partner of the industrial companies, entrepreneurs and craftsmen in sales of construction materials,
ferrous and non-ferrous metal products, and technical items for industrial applications.
Merkur has attained an almost 40% market share in certain sales programmes in Slovenia, and gained
experience in the process. Consequently, the company has successfully applied its sales centre model
abroad. New sales centres, which will primarily focus on DIY items, electro-installation products and
technical items for domestic and industrial applications, are being built in Croatia, Serbia, Bosnia and
Herzegovina, and Macedonia. Besides that, Merkur’s regional steel centres are expected to flourish in those
countries as well. Croatia, Serbia, Bosnia and Herzegovina, and Macedonia are Merkur’s primary target
markets abroad, so a very ambitious medium-term development plan has been drawn. According to it,
present sales facilities of 33,000 square metres will have been increased to 117,000 square metres by 2010 by
observing the concept of MERKURDOM and MERKURMOJSTER sales centres.
The network abroad will be further extended to Serbia. The largest Merkur’s sales centre abroad will open
in Beograd at the end of 2005. In addition to that, the procedure for construction of another Serbian sales
centre in Novi Sad will be launched. Merkur plans to win at least 10% market shares on foreign markets
within a three-year period.
The logistic facilities are essential if Merkur is to carry out the plan, according to which the quantities
sold on foreign markets in 2005 would exceed 100,000 tons. The company plans to finish warehousing
facilities and install all the necessary machinery in Naklo, construct warehouses in Rijeka and Sarajevo,
and later on in Beograd.
Selected specialised sales programmes will also be developed to sell goods on Merkur’s other target
markets, where the subsidiaries have already been established: in Italy, Czech Republic, and Germany.
The management intends to improve all the companies of the Merkur Group to function successfully,
develop sales capacities, and apply modern logistic methods. This is essential if the Merkur Group is to
compete successfully with large European companies and local competitors. The growing Group intends
to remain an attractive, interesting and useful local partner, and to present itself as an appealing potential
partner of global trading corporations. The sales network will be further expanded, sales revenues in
2008 are planned to exceed ECU one billion, and the return on equity is expected to grow.
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CORE PROGRAMME
CONSTRUCTION MATERIALS AND WOOD
Cement and lime; reinforcing steel and mats; bricks and roofing materials;
insulating materials; wood and wooden products.
TECHNICAL GOODS FOR DOMESTIC AND INDUSTRIAL APPLICATIONS
Locks and furniture fittings; fasteners; power tools and accessories; grinding
materials; machine tools and accessories; measuring devices; lifting and
handling equipment; hand tools; gardening programme; agricultural and
forestry programme.
INSTALLATION AND ELECTRO-MATERIALS
Electro-installation materials; lighting equipment; wires and cables; switching
and protection devices; electro-materials for power distribution; plumbing and
fittings; tiles, sanitary ceramics and equipment; air-conditioning and heating
systems; other installation and electro-materials.
FERROUS AND NON-FERROUS METAL PRODUCTS
Sheet metal and strips; girders and sections; welding consumables; steel rods,
bars and wire; pipes and tubes; tooling pool; non-ferrous metal products.
CONSUMER GOODS AND CHEMICAL PRODUCTS
Audio and video appliances; small household appliances; major household
appliances; heating appliances; kitchen utensils; paints and chemical products;
paper and graphic materials; office machinery, equipment, and personal
computers; telecommunication equipment; other consumer goods.

ORGANISATION CHARTS OF MERKUR GROUP AND MERKUR
ORGANISATION CHART OF MERKUR GROUP
STRUCTURE OF MERKUR, D. D.
PARENT COMPANY MERKUR, D. D.
COMPANIES IN SLOVENIA
COMMERCE SALES TO FOREIGN
MARKETS
WHOLESALE
AND
RETAIL SALES
MARKETING
PURCHASING
DEPARTMENT
SALES
LOGISTICS
Bofex, d.o.o.
Kovinotehna, d. o. o.
SALES TO FOREIGN
MARKETS
MARKETING
MERKUR, D. D.
ECONOMICS
AND FINANCES
FINANCES
ACCOUNTING
COMPANIES ABROAD
Presentation of the Merkur Group
Merkur International Zagreb, d.o.o.
Merkur Beograd, d. o. o.
Merkur International Praha, spol.S.r.o.
Merkur Makedonija, doo, Skopje
Merkur MI Handels GmbH., München
Perles Merkur Italia, s.r.l., Villesse
Intermerkur, d.o.o., Sarajevo
Merkur Polska, Sp. Z. o. o. (dormant)
OFFICES ABROAD
MANAGEMENT BOARD
Office in Moscow, Russia
Office in Beograd, Serbia and Montenegro.
HRM AND
LEGAL MATTERS
INVESTMENT,
MAINTENANCE
AND ENGINEERING
DEVELOPMENT, IT
AND ORGANISATION
INFORMATION
TECHNOLOGIES
ORGANISATION
OF BUSINESS
OPERATIONS
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LETTER FROM THE CHAIRMAN OF THE MANAGEMENT BOARD
In 2004, the performance of Merkur Group has been the best so far. The Group appeared
on foreign markets, increased its sales significantly, and exerted close control over the costs.
In Bofex, the Group’s subsidiary, certain irregularities and losses were established, but they
were recouped and recovered to debit the present result. Even so, Merkur’s net profit for 2004
amounted to SIT 2.8 billion. This was more than planned and by 18.6% more than in 2003. Net
profit has never been so high so far.
In 2004 both, Merkur, d. d. and the Merkur Group, increased net sales revenues by 25.3% in comparison
to the year before, and exceeded the plan by more than 10%. The sale of ferrous and non-ferrous metal
products saw the sharpest increase, and its share represented more than 33% of the Group’s sales
volume total. The prices of those items went up gradually in 2004, so average sales prices in Merkur
increased by 24% in comparison to the price levels of 2003. The quantities of ferrous and non-ferrous
metal products sold by Merkur soared as well. Merkur sold 440 thousand tons or 30% more than the
year before, whilst the entire Group sold almost 470 thousand tons. The annual consumption of metal
products in Slovenia totals slightly more than a million tons. The company increased its sales by more
than 10% in other core programmes as well. Moreover, the significant rise in sales was observed despite
the fact that the number of employees increased by a mere 1.4% in comparison to the year before. Even
so, the productivity increased by 16%. The company’s sales on foreign markets soared, and retail sales
and wholesale in Slovenia went up by 20% as well.
The subsidiaries were, likewise, very successful. Bofex increased its sales by 14% in its outlets (total sales
increased by 10%), whilst Merkur’s subsidiaries abroad almost doubled their sales. Merkur invested
substantially into the development of sales network of MI Zagreb, so sales in Croatia grew substantially.
The increase in gross profit of Merkur, d. d. and that of the Group almost equalled the rise in sales
volume. The costs increase, however, was not so high, and lagged behind by almost a half. The company
rewarded its employees for successful performance, so the labour costs increased by 14.6%, whilst other
costs saw less than a 10% rise. Operating profit amounted to SIT 4.9 billion, and actually doubled in
comparison to 2003.
Merkur Group significantly expanded its presence on the Croatian market in 2004, and it acted very
rationally in the process. Growth of current costs lagged behind the increase in gross profit by six percentage
points. However, certain irregularities established in Bofex’s operations triggered negative trends in the
entire Group. A detailed audit showed that Bofex had not presented its operating costs correctly in the
past. Valuation of inventories exposed considerable differences, and current operations were not up to the
expectations. In addition to all that, Bofex was burdened with the costs of closing down the Austrian outlets.
Total costs of withdrawal from the Austrian market amounted to SIT 2.6 billion, and burdened partly Bofex,
and partly Merkur. The loss in Bofex and its Austrian outlets affected Merkur and Merkur Group’s financial
statements by slightly more than SIT 4.5 billion. From that, SIT 3.3 billion were settled by selling financial
investments, whilst the remaining sum was discharged through regular business operations.

Letter from the Chairman of the
Management Board
Despite the financial loss, the investment into Bofex influenced certain other business categories positively,
such as the prevailing market share, and supply synergies, so Merkur decided not to sell its subsidiary to
the foreign bidder. Notwithstanding Bofex’s loss, Merkur’s net profit totalled SIT 2.8 billion in 2004, which
was more than planned and by 18.6% more than in 2003. Net profit has never been so high so far.
In 2004, the company continued the development of its sales network in observance of its long-term
strategy. A modern sales centre was opened in BTC Ljubljana, the sales centre in Celje was further
enlarged, and a BOF centre opened in Maribor. In addition to that, new sales centres opened in Croatia:
in Zadar, Šibenik, Čakovac, and Pula (in February 2005). The construction of new sales centres started
in Samobor and Beograd, and two new plots of land were bought in Ptuj and Velenje. The large sales
volume required new storage capacities, so an additional 20,000 square metres of warehousing facilities
were put to use in Naklo, and investment into office premises in Naklo and Celje was completed.
The performance in 2004 indicates that Merkur is developing in the right direction. Thanks to its versatile
core programme, the company managed to combine successfully sales to end consumers and to entire
companies. It deals in high-quality products and services, and thus closely follows its mission. Its
customers have acknowledged that by placing Merkur higher than certain well established merchants
of the kind. The increasing sales, appearance on new markets and high-quality range of goods will give
customers satisfaction, and benefit employees and owners alike.
Bine Kordež, mag.
Chairman of the Management Board and CEO
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REPORT BY THE SUPERVISORY BOARD
In compliance with Article 274a of Companies Act, the Supervisory Board composed of: Jakob Piskernik,
Chairman, Dr. Tomaž Subotič, Deputy Chairman, and members: Zlatko Kavčič, Igor Kušar, Gregor Tratnik, Sally
A. Warren (a member until 30 April 2004), Matjaž Gantar (a member since 30 June 2004), Marta Bertoncelj,
Igor Hudobivnik, and Marjan Smrekar (the latter three are employees’ representatives), report to the General
Meeting of Shareholders on the work of the Supervisory Board in 2004.
BUSINESS PLAN OF THE MERKUR GROUP AND MERKUR FOR 2004
The Supervisory Board at their seventh meeting of 18 December 2003 approved the Business Plan of
the Merkur Group and Merkur for the year 2004 and at their eighth meeting of 26 th February 2004
determined the criteria for the remuneration of the Management Board members relative to the fulfilment
of the annual plan. The Supervisory Board discussed operations in the first quarter at their ninth meeting
of 27 May, half-yearly operations at their tenth meeting of 26 August, and three-quarterly operations at
their twelfth meeting of 12 October 2004. In all periods, performance exceeded the plan, despite the fact
that Bofex, a subsidiary of Merkur’s, presented a loss in 2004, and the accrued losses from previous years
were established later on. It was established that Big Bang Handels Austria did not fulfil the plans due to
both objective and subjective reasons, which incited the decision to start the procedure of winding up
the Austrian company incurring additional loss in Bofex.
SUPERVISON OF MERKUR GROUP AND MERKUR IN 2004
In 2004, the Supervisory Board met at six regular meetings, and had two correspondence sessions.
The Management Board drew high-quality transparent materials to familiarize all the members with
the situation discussed under individual points of the Agendas. Upon the request of the individual
Supervisory Board members, the Management Board also presented additional information either
verbally, or in writing. At every Supervisory Board meeting, the Management Board presented a report
on the fulfilment of the resolutions passed by the Supervisory Board. In most cases, all the members
of the Management Board were present at the meetings to provide direct answers or supplementary
explanations for the Supervisory Board members. In line with their competences, the Supervisory Board
members followed and supervised the following important segments of managing the company:
• Discussion and adoption of the annual report for the year 2003 drawn by the Management Board;
• Vision and plan of the strategic development of Merkur Group until 2008;
• Finding out the reasons for additional losses disclosed in Bofex, and the applicable short-term and
long-term measures;
• Discussion of the solutions to the problems concerning Big Bang Handels Austria, and the process of
closing down that outlet;
• Discussion of the auditing company’s proposals included in the letter to the Management Board and
examination of the measures;
• Discussion and approval of the Business plan of Merkur Group and Merkur for the year 2005.
ELECTION AND REMOVAL OF A MANAGEMENT BOARD MEMBER
According to the Articles of Association of Merkur, Article 21, the Management Board shall consist
of up to eight (8) members. Following the proposal of the Chairman of the Management Board, the
Supervisory Board is to determine in a resolution the number of members to the Management Board and
its composition. The Management Board had been composed of five members until 15 April 2004, so the
Supervisory Board passed the proposal submitted by the Chairman of the Management Board and on 15
April 2004 elected Alenka Podbevšek to the function of Director of Economics and Finances for a five-year
term of office. The Supervisory Board consequently approved the proposal submitted by the Chairman of
the Management Board for the mutually agreed early termination Alenka Podbevšek’s term of office from
the post of member of the Management Board of Merkur as of 31 December 2004.
ANNUAL REPORT DISCUSSION
At their fourteenth meeting of 24 February 2005 the Supervisory Board discussed the unaudited nonconsolidated
annual report of Merkur, d.d., and the unaudited consolidated annual report of Merkur
Group for the year 2004. Zlatko Kavčič, the chairman of the auditing committee, proposed discussing the
draft of the audited annual report with the auditors of the auditing company KPMG on 31 March 2005.

The report focused on the following points:
• Audit carried out in the subsidiaries;
• Risk management, especially the risks connected with the interest and exchange rates, and collection of
receivables;
• Valuation of inventories;
• Bad investments and the exploitation of reserves from financing and their effect on the business performance;
• Adequate system of controlling;
• Organisation of the internal auditing service.
The auditing committee and the representatives of the auditing company believed that the discussed
areas were appropriately organised, explained and controlled.
At their fifteenth meeting of 21 April 2005, the Supervisory Board examined the audited annual report
and the proposal for the allocation of the distributable profit submitted by the Management Board. The
Supervisory Board agreed with the opinion of the certified auditors and confirmed the annual report. The
Supervisory Board had studied the report and found that it was drawn thoroughly, transparently and in
compliance with the Companies Act and the applicable accounting standards. The annual report presents
a true and fair view of Merkur and Merkur Group’s performance in 2004 and development plans for the
future. The Supervisory Board established that despite the losses incurred by Bofex, the Merkur Group
performed well in 2004, and also exceeded the plans. The presented development plans serve as an
excellent basis for the development of the company in the future.
RESOLUTION
At their meeting of 21 April 2005, following the examination of the annual report, financial statements
and notes and the opinion of certified auditors, the Supervisory Board gave their unqualified opinion of
the annual report of Merkur, d.d. and consolidated annual report of Merkur Group for the year 2004.
The Supervisory and Management Boards propose to the General Meeting of Shareholders to allocate
distributable net profit for 2004 in the amount of SIT 10,152,005,848.72 as follows:
• Payment of dividends (at SIT 600 per share) to shareholders in the amount of SIT 728,751,000.00;
• Participation in profit to the Supervisory Board members in the amount of SIT 24,711,230.00;
• Participation in profit to the Management Board members in the amount of SIT 31,695,300.00;
• The remaining profit in the amount of SIT 9,366,848,318.72 shall remain undistributed and its
allocation shall be decided in 2006.
Drawn at Naklo, on 21 April 2004
Report by the Supervisory Board
Jakob Piskernik
Chairman of the Supervisory Board
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MILESTONES OF 2004
REDUCTION OF CAPITAL IN KOVINOTEHNA, D.O.O. (LTD)
On 22 March 2004, the reduction of Kovinotehna’s subscribed capital was
entered into the Register of Companies. Kovinotehna’s subscribed capital totals
SIT 5.0 million, whilst its equity capital equals SIT 10.9 million. Because of the
aforesaid reduction in Kovinotehna’s subscribed capital, Merkur’s long-term
financial investment was decreased by SIT 8,048 million.
THE EUROPEAN BANK FOR RESTRUCTURING AND DEVELOPMENT
SOLD ITS STAKE IN MERKUR
The European Bank for Restructuring and Development (EBRD) had had a
holding of 174,634 shares in Merkur, and concluded a contract to sell its entire
stake on 22 April 2004. In October 1997, when the company issued new shares,
EBRD became one of the owners in Merkur. EBRD’s investment essentially
influenced the development of Merkur. The bank usually withdraws from a
company and sells its stake after having invested into it for a period of five to
seven years. A few large Slovene investment funds and the employees bought off
the EBRD’s 14.4% holding in Merkur. The shares were sold at SIT 23,000 per share
in lots to Kapitalska družba, KD Group, NFD, Gorenjska banka and the employees.
NEW SALES CENTRES AND OTHER BUSINESS PREMISES
23 January: a new BOF sales centre opened in Kranj
12 March: a renovated MERKUR sales centre opened in Brežice
18 March: a new Big Bang Mega sales centre opened in Jesenice
31 March: the fellow-workers from other offices moved to the third office block in Naklo
9 April: a renovated MERKUR sales centre opened in Studenci – Maribor
22 April: a new BOF sales centre opened in Maribor
14 May: a new MERKUR sales centre opened in Zadar
15 June: a new Merkur Partner franchise outlet opened in Slovenska Bistrica
30 June: the construction of three new warehousing facilities in Naklo was completed
9 July: a renovated MERKUR sales centre opened in Hudinja – Celje
29 July: a new MERKUR sales centre opened in Šibenik
26 August: a new MERKUR sales centre opened in BTC – Ljubljana
26 August: a renovated Big Bang Mega sales centre opened in Slovenj Gradec
30 September: a new MERKUR sales centre opened in Čakovac
12 October: a new Big Bang franchise outlet opened in Kočevje
19 November: a renovated Kovinar franchise outlet opened in Kočevje

PRIZES AND AWARDS
On 30 January 2004, Chairman of the Management Board and CEO of Merkur, Bine
Kordež, received the prestigious prize awarded by the Chamber of Commerce and
Industry of Slovenia for exceptional economic and entrepreneurial achievements.
On 24 May 2004, Dun & Bradstreet, an international credit reporting agency,
proclaimed Merkur as the first among the largest Slovene trading organisations
to enter the highest credit rating category.
Merkur’s corporate monthly magazine “Novice” (The News) was awarded
“Zlato pero” (Golden Pen) as the best of its kind in Slovenia.
On 7 October, Merkur’s project of re-organisation and IT-support applied in
annual discussions with the employees was pronounced as the second best
among HRM projects.
Merkur was awarded its third Top Ten prize on 18 November 2004 for
employee training at the conference “Izobraževalni menedžment 2004”
(Training Management 2004).
Merkur’s Internet pages were awarded as the best business site for the third
consecutive year, and won the silver “Netko” on 24 November. The award list
now includes one golden and two silver “Netkos.”
IMPORTANT EVENTS AFTER THE END OF THE BUSINESS YEAR
17 February 2005: opening of the new MERKUR sales centre in Pula, Croatia
Milestones of 2004
24 February 2005: opening of the new Merkur Makedonija business premises in Skopje
3 March 2005: opening of the renovated franchise outlet Merkur Komplet in Logatec
In 2005, Merkur continued the process of dissolution of its company, Big Bang
Handels Austria, owned in 80% by Bofex. The merchandise from the Graz
outlet was sold off, and the outlet was returned to the lessors. A new company,
BOF Handels, has assumed trade in the Vienna outlet. Merkur has withdrawn
from the operations in Austria, and settled the liabilities to the employees,
creditors and the state. However, a part of the affiliate’s liabilities to the present
and past owners have still remained opened. The former joint owners filed a
lawsuit against Merkur because of the losses incurred by the Austrian project.
Merkur believes that the lawsuit is not justified.
The examination of the documentation from the time when Bofex was run
by Jurij Schollmayer disclosed several irregularities. These give the grounds
for suspicion of a criminal act. Bofex has filed criminal information at the
competent public prosecutor’s office. In the interest of legal procedure and
investigation, the contents of the information cannot be revealed to the public.
17
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18
AR 2004
BUSINESS IN 2004
MERKUR, D. D.
RETAIL SALES
Merkur’s Retail Sales department performed very well in 2004. In fact, the retail business has never been
better. The sales amounted to SIT 53.135 billion, which was 7% more than planned and 19% more than in
2003. Merkur’s sales centres successfully sold goods to the end consumers and companies.
Operating costs were in accordance with the plan throughout 2004. The proportion between sales
volume, difference in prices and costs yielded higher-than-planned profit. Operating profit was higher by
85% than in 2003.
Productivity is the most important indicator of business performance in sales centres. In comparison to
the year before, productivity index reached 115 in terms of net sales revenues per employee, and net
difference in prices per employee improved by 15%.
High-quality items and services sold at competitive prices provide for satisfaction of Merkur’s customers. In
2004, the company continued the specialisation into two types of sales centres, MERKURDOM and
MERKURMOJSTER. Targeting different groups of end-consumers, the core programme was supplemented
with new appealing items.
The sales personnel are vigorously trained to acquire high standards of communication. Merkur has
invested a considerable effort to ensure the credibility and consistence of Merkur’s trade mark in the
long run. The sales managers and sales personnel pursue high standards of attending to customers, and
adhere to internal relationship standards, which round up the communication strategies.
The sales centre in Hudinja, Celje was enlarged and rearranged, and another large sales centre opened in
BTC, Ljubljana. Both facilities made it possible for Merkur to increase its offer in the greenery and gardening
programme. Merchandising in lighting department was improved, and items of high pricing class introduced
in that segment. In addition to that, the company added wellness programmes to its bathroom range.
Merkur started preparation for the construction of new sales centres in Ptuj, Velenje, Lesce and Škofja Loka.
RETAILING BY SALES PROGRAMMES IN 2004
11%
17%
17%
18%
37%
CONSTRUCTION MATERIALS
TECHNICAL PRODUCTS FOR DOMESTIC
AND INDUSTRIAL APPLICATIONS
INSTALLATION MATERIALS
FERROUS AND NON-FERROUS METAL PRODUCTS
CONSUMER GOODS

Thoughtful sales space design lends comfort
to the shopping areas, where the clients do
the shopping in a relaxed atmosphere.
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20
AR 2004
Merkur has been developing sales to companies through its sales centres. In 2004, the company
continued to train its sales officers and employed new sales personnel. The competences and
responsibilities of wholesale and retail channels were separated to exert better control and to meet the
needs of key account customers. The sales volume of individual customers was thus essentially increased.
WHOLESALE
In 2004, the company fulfilled all the expectations in sales to companies as far as the plan, difference in
prices, receivables, and operating cost control are concerned.
The sales amounted to SIT 74.702 billion. This was 8% more than planned, and 17% more than in 2003.
Thanks to tight cost control, control over receivables, and higher-than-planned sales volume and
difference in prices, operating profit was 136% higher than in 2003.
Merkur adapted its sales to eleven target groups of customers to attend even better to their requirements:
• Construction companies;
• Building completion works;
• Trading organisations;
• Heating, ventilating and air conditioning
(hardware, plumbing and heating equipment
and supplies);
• Electro-installation and power distribution
materials.
Merkur plans to create a unique sales system addressing legal entities, which will provide for:
• Complete and uniform control of the key account customer groups;
• Uniform sales and pricing policies;
• Sales promotion;
• Employee training to meet requirements of different sales channels.
This will result in further specialisation of employees involved in the sales, optimal procedures and
processes, reduced costs and improved rationality.
Merkur further divided its sales and introduced two new sales groups: Power Distribution and Tooling
Pool. This ensured more detailed specialisation of goods sold to power distribution companies and
industrial companies.
WHOLESALE BY SALES PROGRAMMES IN 2004
17%
8%
10%
49%
16%
• Tender sales;
• Tooling pool and automotive;
• Metal processing;
• Machine engineering;
• Chemical industry;
• Wood-processing industries;
CONSTRUCTION MATERIALS
TECHNICAL PRODUCTS FOR DOMESTIC
AND INDUSTRIAL APPLICATIONS
INSTALLATION MATERIALS
FERROUS AND NON-FERROUS METAL PRODUCTS
CONSUMER GOODS

Business in 2004
In 2004, Merkur improved purchasing processes and customer supplies. E-commerce allows customers
swiftly to obtain information, which is available non-stop 24 hours a day, seven days a week. Moreover,
the system makes prompt ordering possible and allows the customers to follow the order processing
phase. As far as Merkur is concerned, this results in reduced transaction and administrative costs, better
exploitation of human resources, better efficiency, and shorter time of processing the customer-related
data. B2B e-commerce PARTNER for Merkur’s partner companies was first introduced in operations with
Merkur’s franchising companies. The first results are very promising, and a sharp increase in e-ordering
has been noticed. According to the plans, e-commerce will be introduced in all sales groups.
As far as Merkur’s franchising partners are concerned, the company managed to eliminate all critical
receivables, terminate the co-operation with all not very promising partners, and open a new franchise
outlet in Slovenska Bistrica. Merkur also enlarged the franchising outlet in Kočevje.
SALES TO FOREIGN MARKETS
In comparison to the 2003 figure, net sales revenues from sales to foreign markets increased by 97% in 2004,
exceeding the plan by 57%. The attained 2004 difference in price exceeded the plan by 22%, and was 59%
higher than in 2003. Operating profit created by sales to foreign markets increased by 178%, which was much
more than planned for 2004. Last year, the most important export items included ferrous and non-ferrous
metal products. In addition to that, recently the sales of wood and wooden products abroad have increased
sharply. In early 2005, Merkur launched that programme on the markets of the European Union. The sales
volume is expected to amount to approximately SIT 700 million in those countries by end of the year. Sales
trends were not so good in the sales of electro-materials, because Slovenia became a European Union member
state in 2004, and consequently customs duties for export of goods to Croatia, Serbia, Bosnia and Herzegovina
went up considerably. The company gave up its presence on the markets of Romania, Kosovo and Albania.
Merkur, however, still occasionally exports to those countries, but does not work on them actively.
In 2004, the strategy concerning the sales to foreign markets changed. The supply function of the Group
was divided among the parent company and its foreign subsidiaries. These assumed complete supplies to
customers in their respective countries. Merkur used to sell merchandise to individual customers abroad
as well, which resulted in competition between the parent and its subsidiaries. Consequently, the control
over receivables was poor, and overall performance of the Group declined. The process of customer
transfer from the parent to it subsidiaries abroad will continue in 2005.
Organisational changes followed the sales strategy. On the foreign markets, where Merkur has its
subsidiaries, the sales divisions provide for product support, optimal course of processes, and intensive
sales. On the foreign markets void of Merkur’s subsidiaries, the company focuses on niche trade marks,
which need complete servicing.
EXPORT PROGRAMMES IN 2004
7%
10%
7%
71%
5%
CONSTRUCTION MATERIALS
TECHNICAL PRODUCTS FOR DOMESTIC
AND INDUSTRIAL APPLICATIONS
INSTALLATION MATERIALS
FERROUS AND NON-FERROUS METAL PRODUCTS
CONSUMER GOODS
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22
AR 2004
THE MERKUR GROUP
The Merkur Group is composed of the parent company and its nine subsidiaries in Slovenia and abroad.
The companies performed very well last year, and Bofex increased its sales by 10%, whilst the companies
abroad nearly doubled their sales.
Bofex is the second largest company in the Group, and attracted special attention of the media in
2004. The auditors of Deloitte&Touche recorded a substantial loss created by Bofex in their report of 20
July 2004. The loss established by the auditors was much higher than that presented in Bofex’s Annual
Report 2003. Merkur took immediate action after having learnt about the discrepancy, and put every
effort into finding out the true situation in its subsidiary. Several of Bofex’s employees were replaced to
gain complete control over the company.
4,000
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
BOFEX SALES IN THE PERIOD FROM 1999 TO 2004 (RETAIL OUTLETS ONLY)
SIT million per month
1999 2000 2001 2002 2003 2004
Bofex had been developing successfully before 2002, attaining a 40 to 50% annual growth. Merkur bought
Bofex, and its decision proved to be correct. Thanks to the purchase, Merkur overcame its domestic and
foreign competitors in Slovenia, and won the predominant market share in the sales of audio and video
appliances, major and small household appliances. Bofex is a modern specialized dealer in two established
brand names, Big Bang and BOF. At the beginning of 2003, the management of Bofex took certain hasty
and excessively optimistic decisions. In addition to that, a detailed audit of the operations disclosed that
operating costs in Bofex had not been presented correctly in the past few years. The auditors established
considerable discrepancies between the valuation of inventories and current operating balance.
Termination of business in Austria likewise burdened Bofex’s performance. Bofex used to be an 80%
owner of the Austrian subsidiary Big Bang Handels, which had run BOF sales centres in Vienna and in
Graz. On 31 January 2005, the Graz sales centre closed down, and the Vienna BOF centre was taken over
by a new company, BOF Handels. The loss in Bofex and its Austrian outlets affected Merkur and Merkur
Group’s financial statements by slightly more than SIT 4.5 billion. The loss has already been included in the
operating results, which, in spite of this setback, have been the best so far in the entire history of Merkur.
In the light of financing, the 2004 investment into Bofex proved negative. However, it did have a positive
effect on many other business categories. It resulted in the prevailing market share, so Merkur decided
not to sell its subsidiary to the bidder from abroad. Merkur intends to keep its market position, and to
further strengthen it by developing Bofex. Bofex is expected to present positive business results as soon
as at the end of 2005.

Experience and knowledge make Merkur’s
sales personnel honest and worthy advisors to
the customers. Sound business relationships
nurture long-term trust and partnership.
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24
AR 2004
Kovinotehna’s main objects of business in 2004 included property management and collecting receivables.
In 2005, the company plans to pursue the present business orientation in 2005 as well. The company will focus
on collecting receivables, selling the remaining real estate, and winding up or selling off certain subsidiaries.
As far as the strategic and development plans for 2004 are concerned, Merkur’s subsidiaries abroad
surpassed the expectations. The sales on markets where Merkur has its subsidiaries almost doubled in
comparison to 2003, and so did the companies’ profits. The growth of operating costs, however, lagged
behind the increase in sales by approximately 20 percentage points.
Ferrous and non-ferrous metal products presented the largest portion in the Groups’ sales. The
companies in Serbia, Italy, and Bosnia presented the largest growth. Merkur opened three new sales
centres in Croatia, and consequently doubled the sales of household, audio and video appliances,
apparatuses and DIY items.
SUBSIDIARIES’ NET SALES REVENUES
In 2004 the sales network was further expanded. The company prepared for the construction of new
sales centres and warehousing facilities. Merkur International Zagreb opened three new sales centres
in Croatia: in Zadar, Šibenik, and Čakovac. At the same time the preparations for the construction of a
regional steel centre in Rijeka started, and the completion of the facility is planned for the end of 2005.
In Skopje, Merkur Makedonija completed the construction of a small warehousing facility in
combination with a sales outlet, which began operation in February 2005.
SIT thousand
2003 2004 INDEX
Merkur International Zagreb, d.o.o. 5,715,132 10,940,485 191
Merkur International Beograd, d.o.o. 0 3,346,270 -
Intermerkur d.o.o., Sarajevo 1,440,995 2,913,212 202
Merkur Makedonija, doo, Skopje 927,054 1,217,582 131
Merkur MI Handels GmbH München 1,984,940 4,705,996 237
Merkur International Praga, spol. S.r.o. 6,881,312 10,276,756 149
Perles Merkur Italia, s.r.l., VILLESSE 6,064,033 10,415,301 172
TOTAL 23,013,466 43,815,602 190
In 2004, Merkur International Beograd launched everything necessary for the construction of the
largest sales centre in Beograd. The completion is scheduled for the end of 2005. The preparations for
the construction of the new regional warehousing facility for ferrous and non-ferrous metal products in
Beograd have also been started.
Intermerkur Sarajevo nearly doubled its sales in 2004, and plans to acquire new facilities in Bosnia and
Herzegovina, which will provide adequate logistic support for further development and sales of ferrous
and non-ferrous metal products.

PULA
RIJEKA
SAMOBOR
KARLOVAC
ZADAR
LEGEND:
ČAKOVAC
ZAGREB
present sales centers
new sales centers in 2005
present steel centres
new steel centres in 2005
new sales centers in 2006 - 2010
new steel centres in 2006 - 2010
new steel centres in 2006 - 2010,
acquired through leasing or partnerships
Business in 2004
DEVELOPMENT OF SALES OUTLETS AND STEEL CENTRES ABROAD UNTIL 2005
AND PROJECTION UNTIL 2010
ŠIBENIK
SPLIT
SISAK
BANJA LUKA
OSIEJK
SLAVONSKI
BROD
TUZLA
SARAJEVO
NOVI SAD
PANČEVO
BEOGRAD
ČAČAK
KRAGUJEVAC
NIŠ
MACEDONIA
SKOPJE
Last year, Perles Merkur Italia increased the sales of ferrous and non-ferrous metal products, tools and
spare parts. The company promoted its brand name Perles and certain other own brand names. The Italian
subsidiary plans to pay even more attention to business operations and specialisation in the future as well.
Merkur International Praha and Merkur MI Handels München mostly import ferrous and nonferrous
metal products and certain technical items for the Merkur Group. They have also started
developing their own niche programmes. Both companies have launched preliminary activities to start
selling ferrous and non-ferrous metal products on their respective markets.
The development of the group in the future will focus on an even greater increase in sales of ferrous
and non-ferrous metal products on foreign markets, DIY, household, audio and video appliances,
apparatuses, and other home products, development of the Group’s own sales network, and distribution
of assorted products, especially to the markets of Croatia, Serbia, Bosnia and Montenegro.
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26
AR 2004
TRENDS IN THE SLOVENE ECONOMY IN 2004
The year 2004 marked a milestone in the Slovene economy. Slovenia became a member state of the
European Union at the beginning of May 2004, and was included in the ERM2 system at the end of
June. Both events will influence the Slovene economy in the long-term, and have already altered certain
economic conditions. International exchange has increased, the level of inflation has become similar to
the levels in other countries of the European Union, the exchange rate for the Tolar has been stabilised,
and this means that the element of stability has been introduced into the business environment.
In 2004, the gross domestic product increased by 4.6%. The economic growth was the highest
since 1999. Buying power of the domestic market went up by approximately 3%. Domestic enquiries
grew, mostly due to the investments of the business companies who invested into the equipment and
machinery, dwellings, roads and infrastructure. Households increased their expenditures because of the
2% increase in wages and salaries and higher indebtedness at lower interest rates.
International trade grew essentially and exceeded the expectations in 2004. Exports rose by
approximately 9%, and import by between 10 and 11%, so the growth in real terms saw the highest
increase after the year 2000. The supplies to the new European Union members retained their high levels
of the previous two years. This was especially true for the Czech Republic and Hungary. The export to
Croatia, Serbia and Montenegro intensified.
Slovenia successfully decreased its inflation rate. In 2004, the average inflation presented by higher
consumer prices totalled 3.6%, which was two percentage points less than in 2003. Producers increased
the prices of manufactured goods by approximately 4.3% (in 2003 by a mere 2.5%), which were at the
end of 2004 higher by 4.9% than at the end of 2003.
In 2004, industrial production saw a 4.8% increase in comparison to the year before - the highest rise in
the past three years. The processing industries produced 4.9% more than in 2003. However, the output
of the processing industries depends tightly on the already high and still growing prices of raw materials,
and this incites further cost increase. In 2004, the favourable 2002 and 2003 trends continued in the
construction industry. The construction of buildings increased substantially, whilst the civil engineering
retained the high 2003 rate. In 2004, the construction works total increased by 11.2% nominally, and in
real terms by 2.5%.
In 2004, sales revenues in retail sales grew by 3.8% in real terms. Sales revenues in non-food items saw
the largest increase in the following segments: sales through mail (21%), specialised furniture shops,
household appliances and construction materials (10.7%), pharmaceutical, medical, cosmetic and items
for personal hygiene (6.1%).
Thanks to substantial economic growth and increased production in industries essential for Merkur’s
operations (metal processing, construction), the sales to companies grew in 2004 as well. Merkur’s sales,
however, exceeded the growth in both industries, and the company appeared to be highly competitive.
Thanks to the increased individual consumption, sales to end-consumers went up as well. Merkur’s sales
to end-consumers increased by 10% in real terms. This indicates that the company exerted excellent
market control, and won a certain part of the market share over the less successful competitors.

RISK MANAGEMENT
Risk Management
Risk management is in line with the company’s business policy and has become an important part in the
complete management process. Effective risk management enhances competitiveness of the company, cost
control, predictability of cash flow, profit, and consequently results in higher market value of the company.
The financial risk is assessed in the following groups:
• Credit risk indicates the risk that customers or other business partners will not settle their receivables;
• Market risk includes the interest risk, foreign exchange risk, inflation risk, liquidity risk, risk of changes in
the security market prices;
• Insolvency risk is the short-term and long-term ability to settle the liabilities on time.
CREDIT RISK
Merkur and the Merkur Group have adopted effective risk management policies, including the regular
monitoring of outstanding receivables, limiting exposure to individual customers, offering incentives
for early settlements, charging penalty interest, receivable collateral and receivable collection policies.
Merkur is aware that an over-strict credit risk policy could reduce the competitiveness of the company,
resulting in the loss of certain customers and revenues.
The same principles of receivable control and the related risk control apply for Merkur and its subsidiaries.
To minimise the exposure to the risks, the company applies an elaborate and uniform management of the
credit risk, which includes as follows:
• Upon the conclusion of any contract, any future receivables must be insured. Credit rating of a new
customer is evaluated by the Credit Rating Department. Credit rating is evaluated in observance of:
– quantitative indicators obtained in the business process (including solvency),
– financial statement ratios, and
– assessment of quality based on the information provided by sales agents, managers, etc.
• Collaterals must be obtained, including mortgages, securities, bank guarantees, or letters of credit, for
any receivable exceeding SIT 30 million.
• Collateralisation of receivables to customers abroad, which includes – in addition to letters of credit and
bank guarantees – the risk insurance concluded with a Slovene export company.
• Systematic receivable control is performed by a commission which meets once a month to discuss
financially indebted entities, and by a credit committee, which discusses large receivables exceeding
SIT 30 million.
• Specification of the maximum limit for long-term and established partners in observance of:
– credit rating assessment,
– turnover amount, and
– payment discipline in the past relative to the insurance amount and quality.
• Credit limit must be determined for new clients in observance of their credit rating and collaterals.
• The established receivable collection procedure must be observed in collection of any receivables to
customers, including the enforced claims.
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28
AR 2004
INTEREST RISK
The interest risk represents a risk that the value of the financial instrument might fluctuate due to changes
in the market interest rates. Due to the current trend of falling interest rates, this risk is assessed as
immaterial. Furthermore, interest rates charged to customers are in line with the rates paid on loans.
CURRENCY RISK
The currency risk presents a risk that the value of property may fluctuate as a result of changes in the value of
foreign currency rates. The currency risk occurs when the value of foreign currency increases, if the company
manages it with relevant difference in price and increased exports. As far as the Euro is concerned, it applied in
98% of the import and in 100% of the export. Considering the predictability and solid ECU-SIT exchange rate,
the risk has been assessed as immaterial. A slightly higher risk rate level has been observed in the Croatian
subsidiary arising from the volatile ECU-KN exchange rate. If one considers the share of Merkur’s business in
Croatia in relation to the entire business, then the Group risk exposure was nevertheless assessed as minimal.
INSOLVENCY RISK
The insolvency risk presents a risk that the company may incur difficulties in obtaining sufficient funds to
meet its financial obligations. The insolvency risk is managed by the active liquidity management policy
that eliminates any discrepancies between the cash inflows and outflows including the following measures:
• a system of limits specifying the lowest amount of cash and high liquidity assets that must at all times be
available and at the company’s disposal,
• treasury function – as a centralised management of cash transactions it ensures short and long-term
liquidity,
• diverse external sources of funds,
• dispersed liability maturity dates,
• credit risk management policy ensuring regular settlement of receivables,
• credit lines available at the banks enabling the withdrawal of funds as and when the need arises,
• the possibility to activate short-term financial investments.
Constant in-flow of retail payments, which represent 20% of the revenue total, make the risk management
easier.
All the points and facts stated above indicate that management ensures risk control at low exposure rate.
INFLATION RISK
Low inflation rate is essential if the state is to become integrated into the European Monetary Union. The
inflation rate in Slovenia has been on the decline, and Merkur Group pursues the policy of transferring
the purchasing price increase to the sales prices, so it is estimated that Merkur is exposed to minimum
inflation risk.
The situation is very much the same in those countries outside the European Union where Merkur has
established its subsidiaries. All those countries have put a lot of effort into limiting and reducing the
inflation rate. The possibility of transferring the increase in purchasing prices to sales prices also helps to
maintain risk exposure on those markets at minimum level.
PRICE RISK
Price risk is also believed to be low, because Merkur invested mostly into the shares of Gorenjska banka,
d.d., and these are valued at much higher prices than posted in Merkur’s records, which ensures
additional reserves (see the chapter on financial investments).

SUPPLIERS AND BUYERS
Merkur serves as a link between the suppliers from Slovenia and abroad, end-consumers and companies.
Fundamental strategic tasks of the Purchasing Department are to develop new programmes, and find
the most convenient sources of supply for high-quality articles produced by the domestic and foreign
manufacturers.
SALES OF MERKUR BY TARGET GROUPS OF CUSTOMERS IN 2004
16%
17%
5%
28%
24%
10%
Merkur focuses on the specialisation of its programmes, works with many different suppliers, and remains
loyal to the Slovene manufacturers. In 2004, Merkur started looking for new suppliers and manufacturers
from the Far East. The import of goods from the Far East rose by 320% in certain lines of products. Merkur
plans to make its business operations as rational as possible. In 2004, the number of articles was reduced
by 20,000 and the number of suppliers by 200. This enabled the company to reduce slow-selling stock.
MERKUR’S SALES BY SALES PROGRAMMES IN 2004
14%
11%
12%
42%
21%
CONSTRUCTION COMPANIES
CRAFTSMEN AND SMALL COMPANIES
INSTALLATION COMPANIES
INDUSTRIAL ENTERPRISES
END CONSUMERS
SALES OUTLETS
CONSTRUCTION MATERIALS
TECHNICAL PRODUCTS FOR DOMESTIC AND
INDUSTRIAL APPLICATIONS
INSTALLATION MATERIALS
FERROUS AND NON-FERROUS METAL PRODUCTS
CONSUMER GOODS
Suppliers and Buyers
According to the analyses, the wholesale customers were greatly satisfied with Merkur’s sales personnel.
Over 93% of the buyers claimed that they were always properly advised at Merkur when they needed
information on choice articles. The wholesale buyers also thought well of the responsiveness of the
employees and their kind communication.
According to the research, Merkur’s retail employees in sales to end consumers fared much better
than those of the competitive dealers, and were thought to be more professional, kind and responsive
than their peers elsewhere. It is not surprising that the number of holders of Merkur’s payment card
“Merkurjeva kartica zaupanja” (Merkur’s Card of Trust) has been increasing. On 31 December 2004, the
number amounted to 305,000 of active card holders. In 2004, the holders were offered certain articles
at especially advantageous prices. In 2004, Merkur launched new supporting processes to monitor the
purchases made with the company’s payment card as well.
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30
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INVESTMENTS
On 31 December 2004, the Merkur Group’s investments into land, buildings and equipment totalled SIT 42
billion. These included modernisation of the retail sales centre network, construction of warehousing facilities,
and modernisation of the office building in Naklo. In March 2004, the administrative employees from offices
in Kranj were moved into the third block of the office building in Naklo, and in June new parking lots were
arranged near the building. In November 2004, the second phase of the warehouse construction was started.
The largest retail investment in 2004 was the modernisation of Hala 17 in the Ljubljana BTC. An old hall
was transformed into a modern sales centre. Several sales centres were modernised as well: sales centre
in Hudinja, Celje, was rearranged so that part of the centre was moved onto the first floor; sales centre in
Studenci, Maribor, was modernised, and sales centre in Brežice was enlarged. In Croatia, three new sales
centres were opened: in Zadar, Šibenik and Čakovac.
In Hudinja, Celje, the addition of another 12,000 square-metre warehousing area provided adequate
storage space for construction materials, consumer goods, electro- and other installation materials.
Certain lines of goods were moved from Naklo to Celje to rationalize the storage space. The conditions
in the warehouse in Naklo were adapted for storage of technical goods for domestic and industrial
applications. In May 2004, three new warehouses in Naklo totalling 10,500 square metres for ferrous
and non-ferrous metal products were completed. In the second and third quarters of 2004, new cranes
were installed into the new warehousing premises, and the cassette warehouse was constructed. This
allows for optimal logistic process control, especially traceability of goods, and maximum exploitation of
warehousing space and technology. The warehouse consists of 3,308 cassettes, and its storage capacity
for steel rods, bars and wire, and non-ferrous metal products totals 12,000 tons.
In November, construction of another three-warehouse block was started. The facility on 10,500 square metres
is expected to be finished in May 2005, and will be used for storage of ferrous and non-ferrous metal products.
Merkur started developing a warehouse network in the countries of former Yugoslavia to promote sales of
ferrous and non-ferrous metal products on foreign markets, improve the supply readiness, and optimise
logistic costs. In 2004, the preparations for construction of a steel centre in Rijeka were started.
MERKUR GROUP SALES AREAS
300
280
260
240
220
200
180
160
140
120
100
80
60
40
20
0
1.0
34
1.4
43
1.4
49
1.6
59
90
119
135
000 square metres
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
up to 1,000 1,000 to 3,000 more than 3,000 average sales centre surface in
thousand square metres
Long-term financial investments in Merkur Group retained their 2004 nominal level of SIT 10 billion. The
parent company reduced its investments into the subsidiaries by approximately SIT 11 billion, mostly by
reducing share capital in Kovinotehna by SIT 8 billion, and settling losses in Bofex in total of SIT 3.3 billion.
Because of the Gorenjska banka share transactions (purchases and sales), Merkur disposed of the 5,830
Gorenjska banka shares, and decreased its stake in that bank from 11.9% to 10.1%.
1.6
2.5
2.6
2.9
152
3.1
169
3.7
197
3.9
217
4.2
253
4.2
265
4.2
290

Co-operation between the fellow workers, dedicated
assistance, and open-minded exchange of opinion
provide for a stimulating working environment.
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RESEARCH AND DEVELOPMENT
Research and development are very important to Merkur, because they help the company to attain its
strategic objectives and find new business opportunities.
In 2004, several strategic market research assignments were carried out to determine the customer
behaviour, and analyse global development trends in hardware trade. Merkur invested SIT 50 million
in the research. The company used the results to determine the most suitable marketing strategies
for fulfilment of business objectives, and passed development guidelines, in particular those for the
development of services.
The correctness of the development decisions has been proved by trends in global hardware trade. With
the introduction and development of new programmes, and emphasis on sales to small companies and
entrepreneurs, Merkur follows the most progressive guidelines pursued by the most successful and the
largest trading companies in the world. Merkur faithfully pursues its aim of creating customer-friendly
shopping centres, and builds new sales centres ranging from 3,000 to 8,000 square metres.
Merkur has always been well-aware of the importance of services. In 2004, the company perfected its
retail sales standards. In 2005, Merkur intends to design and implement the standards of behaviour,
which will be observed by the employees in the Purchasing Department, Wholesale, and Logistics. These
standards will apply in Merkur International Zagreb and on other foreign markets as well.
In 2005, Merkur intends to continue the planned strategy of marketing communications. It is important
to promote the company’s brand name, and to maintain credibility, flexibility and creativity. Merkur is an
end-consumer oriented company, so it employs advertising actions to improve placement and promotion
of individual lines of products (e.g. complete bathroom equipment, gardening programme, major and
small household appliances, audio and video appliances, lighting, construction materials, etc.). Merkur’s
advancement in the sales of the advertised programmes is notable, and the company has become
the leading specialist in the advertised lines of merchandise. It not only competes with similar trading
organisations, but also with individual local or regional specialised shops (bathroom salons, gardening
centres, dealers in construction materials, etc.). Merkur also carefully prepares product-oriented sales
actions. It offers goods at the most convenient prices, which are advertised in action brochures “Najboljši
v akciji” (“The Best Items at Bargain Prices”). Merkur sells the bargain item at a “promised price”, and
guarantees that for the duration of such an action, the advertised articles may not be obtained at lower
prices anywhere in Slovenia. The consistence and distinction result in synergy of such advertising activities
in which all elements of marketing mix converge.
Merkur communicates with target groups of customers in a very complex way, so the company has
started developing its own media. In 2004, Merkur introduced its own internal radio and upgraded its
magazine Ritem. This presents inventions, gives ideas for home decoration, and advises skilful handymen.
Communication support in the sales process targeting other companies rests on the sales strategy, which
observes different target groups of customers. Basic communication activities include:
• Fairs;
• Merkur Days;
• Catalogues and special offers;
• Special Internet pages addressing Merkur’s business partners;
• Communication support for services rendered to companies, and
• Franchise shop support.

Research and Development
On 8 September 2004, ten years passed since Merkur had acquired the certificate on compliance with the
ISO 9000 standard requirements. These were later on supplemented with the requirements for Merkur’s
business operations, and so the company developed its own standards of operations. The team of internal
assessors has helped to transfer these to all working environments in the company.
In 2004, the company invested a large portion of development funds in expansion and modernisation
of metal processing and cutting services in the segment of ferrous and non-ferrous metal products. The
development focused on automation of the metal processing procedures, in particular computer support
for monitoring the processes required by business partners in the metal processing industry.
Merkur has developed its own information system and solutions. In 2004 MERKURPARTNER was
launched. It was designed so to allow Merkur to do e-business with its company buyers. The system
was first applied in certain of Merkur’s franchise outlets, and will gradually be made available for other
interested business partners as well. In 2004, the modernisation of IT systems observed the time and
volume of changes to adapt to the following requirements:
• accession of Slovenia to the European Union;
• introduction of the KASTO cassette storage system;
• improvements in the “claim-placing system”;
• improvements in the “cash register records”;
• improvements of controlling “retail inventories”;
• preparation of commercial plans in the commercial analysis system (KAS).
Geocentrex, a new telecommunications system was introduced to modernize the system of telephone
calling in all Merkur premises in Slovenia. This allows Merkur to make free telephone calls in Merkur
throughout the county.
Merkur modernised users’ tools and advanced new application development tools (Internet technology)
to satisfy the requirements of flexible development of own information solutions.
Merkur pays a lot of attention to and invests substantially in the computer support applied in business
operations in Slovenia. The company has made market studies of its subsidiaries abroad. According
to these and in observance of Merkur Group’s development guidelines, Merkur will have to apply
that computer support model in our subsidiaries abroad as well. In 2004, as part of the project
Internacionalizacija Merkurja (Internationalization of Merkur), Merkur started preparing everything
necessary to implement its IT internationally, which will in turn help Merkur to pursue good operation
practices in all the Group companies.
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MERKUR’S SHARE
Merkur’s share presented constant growth in 2004, and its yield increased significantly. Merkur
underwent certain ownership changes, and the number of shareholders rose.
HIGHLIGHTS ON MERKUR’S SHARE
Average
Daily Price
MER
40,000
38,000
36,000
34,000
32,000
30,000
28,000
26,000
24,000
22,000
AVERAGE DAILY PRICE OF MER AND SBI20 IN 2004
15. 1.
30. 1.
16. 2.
27. 2.
15. 3.
31. 3.
15. 4.
30. 4.
17. 5.
31. 5.
15. 6.
30. 6.
15. 7.
30. 7.
16. 8.
31 Dec. 2004 31 Dec. 2003 Index
Number of shares 1,214,585 1,214,585 100
Market capitalization (SIT thousand) 45,437,260 29,625,186 153
Number of shareholders 5,096 4,291 119
Price of a share (in SIT) 37,410 24,391 153
Book value of share (in SIT) 33,239 31,699 105
Lowest daily price (in SIT) 23,900 20,800 115
Highest daily price (in SIT) 38,300 26,500 145
Average daily price (block trades excluded) (in SIT) 31,177 23,984 130
Net profit per share (in SIT) 2,314 2,175 106
Price per earnings ratio (P/E) 16.2 11.2 145
Dividend per share (gross in SIT) 600 700 86
Equity yield (%) 53.4 - 3.0 -
Dividend yield (%) 2.5 2.8 88
Total yield (%) 55.8 - 0.2 -
Market price of a share in comparison to its book value 1.13 0.77 146
VALUE OF A SHARE
In 2004, Merkur traded its shares successfully, and the price per share was increasing year-long. At the
end of 2004, the price of Merkur’s share amounted to SIT 37,410, or 53% more than at the end of 2003,
and SBI grew by 25%.
31. 8.
15. 9.
30. 9.
Average Daily Price MER SBI20 Index
15. 10.
29. 10.
15. 11.
30. 11.
15. 12.
30. 12.
SBI20
Index
6,150
5,900
5,650
5,400
5,150
4,900
4,650
4,400
4,150
3,900

The employees closely monitor business
processes and strive for best performance.
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DIVIDENDS
In 2004, Merkur closely observed the adopted policy of dividend payments. According to this, up to a
third of net profit may be appropriated for the dividend payment, depending on the performance. In
July 2004, the dividend for 2003 was paid in accordance with the Resolution of the General Meeting of
Shareholders. It amounted to SIT 700 gross per share. According to the proposal to General Meeting of
Shareholders, the 2004 dividend payable in 2005 will amount to SIT 600 gross per share.
800
700
600
500
400
300
200
100
0
360
OWNERSHIP STRUCTURE
DIVIDEND PER SHARE PAYABLE IN THE YEAR TO COME
500
540
600
450
500
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
- PROPOSAL
In April 2004, EBRD withdrew from Merkur. At 31 December 2004, the ownership structure was much
changed in comparison to the end of 2003:
550
600
650
700
31 Dec. 2004 31 Dec. 2003
Number of Total Number of Total
Shareholders shareholders Shares % shareholders Shares %
1. Kapitalska družba, d. d. 1 219,328 18.06 1 177,600 14.62
2. EBRD 0 0 0.00 1 174,634 14.38
3. NFD 1 investicijski sklad, d. d. 1 168,235 13.85 1 161,793 13.32
4. Slovenska odškodninska družba, d. d. 1 93,194 7.67 1 93,194 7.67
5. KD Investments, d. d., VS Galileo 1 60,438 4.98 1 61,172 5.04
6. Gorenjska banka, d. d. 1 47,455 3.91 1 7,455 0.61
7. KD Investments, d. d., VS Rastko 1 36,746 3.02 1 29,277 2.41
8. Zlata moneta I, d. d. 1 36,108 2.97 1 18,911 1.56
9. KD ID d. d. 1 34,337 2.83 1 34,337 2.83
10. Salonit Anhovo, d. d. 1 32,810 2.70 1 15,000 1.23
11. Posebni vzajemni sklad Alfa 1 24,509 2.02 1 11,909 0.98
12. Emplyees 744 89,781 7.39 522 62,159 5.12
13. Other legal entities 201 228,162 18.79 170 242,935 20.00
14. Other shareholders 4,141 143,482 11.81 3,588 124,209 10.23
Total 5,096 1,214,585 100.00 4,291 1,214,585 100.00
600

SHARES OWNED BY MANAGEMENT AND
SUPERVISORY BOARD MEMBERS AS AT 31 DEC. 2004:
Merkur’s Share
In 2003, the number of Merkur’s shareholders leaped upwards by more than a thousand, and in 2004 by
another 800. In 2004, Kapitalska družba increased its stake in Merkur, and became the largest holder of
Merkur’s shares at the end of 2004. Gorenjska banka considerably increased its stake in Merkur in 2004 as
well. As far as the employees are concerned, 29.5% of total staff own 7.4% Merkur’s shares, and this is by
2.3 percentage points more than at the end of 2003.
Management and Supervisory Board Members Number of Shares Holding in %
Management Board 4,546 0.374
Kordež, Bine 1,516 0.125
Čelesnik, Goran 1,022 0.084
Vauhnik, Viktor 810 0.067
Jelovčan, Milan 709 0.058
Kajzer, Marijanca 489 0.040
Supervisory Board 3,649 0.301
Piskernik, Jakob 1,209 0.100
Bertoncelj, Marta 1,366 0.112
Dr. Subotič, Tomaž 510 0.042
Tratnik, Gregor 340 0.028
Hudobivnik, Igor 144 0.012
Smrekar, Marjan 80 0.007
Kušar, Igor - -
Kavčič, Zlatko - -
Gantar, Matjaž - -
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STAFF
STAFF BY MERKUR GROUP’S COMPANIES
Average no. of staff
Company hours worked in 2004 31 Dec. 2004 31 Dec. 2003
Merkur, d. d. 2,380 2,523 2,453
Subsidiaries in Slovenia 484 481 466
Bofex 484 481 455
Kovinotehna 0 0 11
Subsidiaries abroad 294 366 189
Merkur International Praha, spol. S.r.o. 11 9 11
Perles Merkur Italia, s.r.l., Villesse 7 7 8
Merkur International Zagreb, d. o. o. 239 311 142
Merkur MI Handels GmbH, München 4 4 3
Merkur Makedonija, doo, Skopje 13 12 10
Intermerkur, d. o. o., Sarajevo 10 11 9
Merkur International Beograd, d. o. o. 10 12 6
Merkur Group 3,158 3,370 3,108
PERSONNEL BY INDIVIDUAL DEPARTMENTS AS AT 31 DEC. 2004
Number of
Departments of Merkur, d. d. employees %
Commercial Department and Sales 77 3.1
Logistics 451 17.9
Retail Sales 1,210 48.0
Wholesale 220 8.7
Purchasing Department 195 7.7
Sales to Foreign Markets 60 2.3
Other 310 12.3
MERKUR, d. d. 2,523 100.0
In comparison to 2003, the personnel qualification profile did not change essentially in 2004. Merkur has
been trying to increase its education level by employing educated individuals and by the further training
of its employees. Merkur gives its employees the opportunity to enrol in studies while still performing
their regular jobs, especially to those who aspire to work as sales officers.
In 2004, the profile of the employees did not change much in comparison to the year before. The proportion
between men and women was 56.6% to 43.4% in favour of men. Most of the employees belonged to the
age group from 36 to 45 years of age. The majority of employees under 25 worked in two departments,
Retail Sales and Logistics. Average age for men in Merkur was 39.6 years, and 39.0 years for women. In
general, the average age of Merkur’s employees was 39.3 years, and was roughly the same as in 2003. The
average age and the average working period was gradually increasing, and reached 19.0 years for men and
19.7 for women. Average working period was 19.4 years, or just under half a year more than in 2003.

Permanent training closely follows
the adopted business strategy and
implementation of new projects.
Learning and gaining experience
are both part of the regular working
process.
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QUALIFICATION PROFILE OF THE EMPLOYEES AS AT 31 DECEMBER 2004
ABSENCES AND FLUCTUATION
In 2004, sicknesses-related absences increased by 0.47% in comparison to 2003.
In comparison to 2003, the fluctuation (number of new employments and termination of working
relationships) increased in 2004. The Retail Sales employed most of the new workers, because a new sales
centre opened in BTC – Ljubljana, and the Celje centre was enlarged. It was closely followed by Logistics, the
increase being due to more work, and to absenteeism of workers (termination of working relationship, sick
leaves, maternity leaves). The most common reason for termination of a working relationship in 2004 was
mutually agreed termination of the contract on employment. In 2004, the fluctuation rate totalled 4.90, and
saw a slight increase if compared to the year before, mostly in the following departments: Logistics, Retail
Sales and Purchasing Department. In other departments the fluctuation proved to be not significant.
MERKUR: ORGANISATION OF COMPETENT PEOPLE PROGRAMME
Merkur Organizacija Kompetentnih Ljudi (MOKL) (Merkur: Organisation of Competent People) was
designed to implement the basic human resource objectives determined in Vision of 2001 at the Merkur
Group level. This human resource project translated the visions and strategies into the everyday practice,
and alleviated the drawbacks in human resource area.
In 2004, in observance of the MOKL design, Merkur introduced the last two modules, Upravljanje delovne
uspešnosti (Working Efficiency Management) and Razvoj kadrov (Human Resource Development). The
employers carried out regular annual discussions with their employees. These serve as an important
communication tool employed to analyse the achievements at work, draw assignment schemes, set the
future objectives, and consider promotion for each employee individually.
The Slovene financial magazine, Gospodarski vestnik, proclaims the best HRM project in Slovenia every
year. Merkur entered the competition with its project Prenova in informatizacija letnih razgovorov
(Modernisation and Computer Support of the Regular Annual Discussions), and won the second place
once again. This placement proved that Merkur had implemented modern methods in the area of human
resources, and successfully applied new technologies.
ORGANISATIONAL CLIMATE
Secondary
Primary Semi- school / Higher University
Unskilled school skilled Skilled Highly skilled education degree
Qualification levels Level I Level II Level III Level IV Level V Level VI Level VII Total
Merkur, d. d.
Number of staff 74 134 22 859 1,052 179 203 2,523
% 2.9 5.3 0.9 34.1 41.7 7.1 8.0 100.0
Merkur Group
Number of staff 77 134 71 1,089 1,538 203 258 3,370
% 2.3 4.0 2.1 32.3 45.6 6.0 7.7 100.0
In 2004, Merkur applied the SiOK method for the fourth consecutive year. The method was devised
by the Chamber of Commerce and Industry of Slovenia to measure the organisational climate in the
companies. Over the past eight years, the climate in Merkur was measured by a selected sample of
employees. In 2004, however, the research for the first time included all Merkur’s employees.
The employees’ response rate to the questionnaire was 64%, which is a relatively high response level, and
provided a solid research sample. The results proved to be quite satisfactory. According to the measurements,
the average of the basic 12 categories amounted to 3.60. In Merkur International Croatia, the result was
almost equal to that of the parent company. However, the total of SiOK 2003 was by 0.03 points higher than
total SiOK 2004. The difference arose because the sample was much larger in 2004 than the year before. In
terms of the organisational climate, Merkur kept approximately the same level as in 2003, even though it
dropped for the fourth successive time on the national level, and for the first time in the trading industry.

A rather high level of satisfaction of Merkur’s employees resulted from carefully planned work, long-term
investments into the employees, and allowed benefits. The employees have the opportunities for training
and education, and are included into the subsidised additional pension insurance scheme, may obtain a
loan to buy or renovate their homes, participate in various sports or cultural events, spend their holidays
at Merkur’s holiday facilities, and their children receive Christmas presents, etc.
4.50
4.00
3.50
3.00
2.50
2.00
3.94
Attitude towards quality
EDUCATION
3.81 3.78 3.88
Creativity
Motivation and dedication
Loyalty to the firm
3.51
MERKUR 04 SLO 04 TRADE 04
3.69 3.70
3.51 3.65
3.45
3.17 3.14
In 2004, Merkur’s training budget totalled SIT 106.7 million. This may translate into 48,921 study hours.
From that, 29,720 or nearly 61% were organised during the regular working time, and slightly less than
40% after it. An average employee spent 23.95 hours on education (the external afternoon studies are not
included). The bulk of courses took place inside Merkur (39%), and 37% of the attendants enrolled for
specialised merchandise-oriented forms of training.
Lecturers from Merkur and guest lecturers were invited to organise 32 different seminars and lectures,
attended by a total of 3,012 people. In 2004, 183 employees continued studies while still performing their
regular jobs, from that 88% enrolled for studies to complete either VII or VIII level of schooling.
Merkur received its third consecutive TOP 10 prize awarded by GV Izobraževanje, in co-operation with
“Sofos,” to the most successful companies in the area of education and training. Only two other Slovene
companies share the success with Merkur.
NEW EMPLOYMENT CONTRACTS
Relationships in the company
Qualifications and learning
Awareness of mission, vision and objectives
On 1 January 2004, the new collective agreement for companies entered into force, and Merkur was
the first enterprise from Gorenjska region to have signed it. The basic guideline for the contract was to
keep the employees’ rights and duties relatively unchanged in comparison to the previous collective
agreement. The draft contract had been thoroughly discussed in all working environments to ensure that
the shop steward and the Chairman of the Management Board signed an agreement which meets the
expectations of the majority of employees.
Organisation
Management
Personnel interaction and information flow
Career advancement
Employees
Remuneration
3.62
Additional questions on systems
4.07
Comparisons
3.66
Satisfaction
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EMPLOYEE ADVANTAGES
Merkur provides for working environment, and offers its employees opportunities for training and
promotion. In addition to that, the employees may benefit from Merkur’s 67 holiday facilities offering
a total of 346 beds in health resorts, mountain accommodation, and on the coast. The employees
may apply for loans to renovate or buy their homes as well. In 2004, Merkur continued its regular
contributions for subsidised additional pension funds for its employees, which will improve their social
security retirement benefits.
SAFETY AT WORK
According to the data provided by Služba za zdravo delo (Service for Protection of Safety and Health
at Work), 66 employees received injuries at work, which translated to 1,087 days lost to work. This
amounted to four injuries and 44 lost working days more than last year. Thirty people sustained injuries
upon their way to or from work, or 11 more than in 2003. The number of lost working days due to injuries
amounted to 773 or 63% more than the year before. The seriousness of injuries sustained at work, which
is presented by average lost days, dropped from 18 to 16.
Legislative requirements themselves do not alone suffice to make the working environment safe. Safety
has become an integral part of any Management Board’s business policy. It must be observed by all the
employees, whose duty is to prevent injuries at work to the greatest possible extent. Služba za zdravo
delo (Service for Protection of Safety and Health at Work) works hard to develop and promote the safety
culture, so that every employee embraces and becomes aware of it. This is the only way to reduce the
number of injuries at work.
SOCIAL ROLE OF THE MERKUR GROUP
The Merkur Group’s management policy is to stimulate, respect and co-operate with all the stakeholders
in the environments where Merkur is present. These list as follows:
• Business environment shared by two large groups of buyers: more than one thousand legal entities, and
more than three-hundred thousand end consumers;
• Internal environment of Merkur and its subsidiaries, consisting of 3,370 employees;
• Wide circle of shareholders, who trust in the company, its performance and success;
• Stakeholders, who follow the operations and are in any other way connected with Merkur in all those
environments where Merkur has built its sales centres, business premises and logistic facilities.
Mutual attention, respect and wish to overcome any hindrances, are essential to make stakeholders
satisfied and to develop Merkur in all environments, so that the necessary adjustments are made.
Merkur acts highly responsibly and monitors the satisfaction in different environments. If the stakeholders
require more attention or different management, Merkur immediately undertakes appropriate measures.
The company does constant research which primarily focuses on the customers and employees. The
customers believe that the company is reliable, trustworthy, and – with its wide assortment of highquality
goods – a market leader. According to the analyses, the employees are satisfied, have the chances
for training and promotion, and understand that Merkur and the entire Group must develop. Merkur is
acclaimed externally, and offers chances for safe long-term investments to the investors.
BUSINESS PERFORMANCE AND CONTROL
Since its very beginning, Merkur has been a well-organised, uniform, and well-managed company. The
firm has exerted control over all the processes in the company. The control had been particularly strict
in the areas of finances, accounting and controlling. It further tightened in the times of hyper-inflation
followed by financial consolidation of the economy. The company has made great progress in controlling
the receivables, which are one of the company’s best controlled items at present.

Merkur has recently undergone considerable changes. The company underwent the process of
reorganisation between 1998 and 2003. The functions and procedures in commerce, purchasing,
wholesale, retail and logistics have changed the most. The responsibilities and competences of the
managers were specified in great detail. KAS (Commercial Analytic System), a very powerful company
analysis tool, has been introduced. In addition to that, an exact scheme has been drawn up to plan and
measure the performance, control core groups of products, sales channels and buyers. Upon mergers
with Kovinotehna, Soča and Novotehna, Merkur developed new a corporate culture and values.
Flexible strategies, projects, and carefully designed commercial processes supported by other processes,
ensure for consistent development, constant growth, successful performance and good management.
Merkur has strengthened its control over the fast-growing subsidiaries. These are not only required to
prepare the regular monthly accounting and financial statements and undergo external audit annually,
but special control is also exerted over their financial operations, receivables, inventories and other
important items. Merkur has established an internal auditing service which carries out preliminary
internal audit in the company and its subsidiaries.
The strategic programme IMER – Internacionalizacija poslovnega modela Merkur (Internationalisation of
the Merkur Business Model) has now been launched. Its objective is to apply uniform business processes,
logistic operations, and management in the entire Merkur Group. To do that, partial reorganisation of
the Group will be unavoidable. The programme will provide for flexible operations of the Group, uniform
management and thorough control. The strategic IMER programme focuses on central management and
control of the subsidiaries on the level of individual business transactions.
ENVIRONMENTAL REPORT
Already in the preliminary activities for the construction of its sales centres, warehousing facilities and
office buildings, Merkur constantly observes environmental standards. The construction burdens the
environment as little as possible, and all the environmental standards and requirements of the closest
neighbours are observed. After the buildings are put to use, Merkur controls them closely and takes good
care that the buildings and the related activities do not affect the environment. The sources of energy,
materials and technologies employed in heating and cooling of buildings are all environmentally friendly,
and the company has also introduced monitoring of energy use and consumption.
All the employees are committed to environmental protection. Constant training ensures safe and nonhazardous
handling of goods and raw materials. Railroad tracks have been laid to all the company’s
largest warehousing facilities to replace the less environment-friendly road transport connections. Upon
purchase of small and major, audio and video appliances, customers are entitled to ask Merkur to take
over and deposit free of charge their used appliances at the appropriately equipped depots. Merkur has
successfully implemented several other environmental projects.
Used batteries, battery inserts, and certain electronic parts pose a threat to the environment, in particular
if they contain lead, cadmium, and certain other hazardous substances. Merkur intends to collect such
merchandise upon the customer’s request, and to ask suppliers to dispose of the hazardous waste in the
most appropriate way. If goods include non-hazardous substances, appropriate certificates are issued to
the customers, confirming that the chosen items are not dangerous for health.
Legal provisions are closely observed in dangerous substances. Projekt EMB, governing packaging materials
and hazardous waste disposal, has entered its final stage. All the waste materials generated in Merkur are
identified, brought in line with the plan and appropriately sorted. In 2004, the project on disposal of used
batteries and battery inserts was completed. It was implemented to deal with other waste materials as well,
including chemicals, waste oil, office materials, especially ink cartridges, glue and detergents.
SPORTS, CULTURE AND CHARITY
Social Role
Social responsibility of the company is always reflected in the welfare of people and the environment.
Merkur has in mind its employees and their families, customers and different interest groups. So far
Merkur has attended to the needs expressed in different social environments. In critical moments, Merkur
offered moral and financial support to various groups and individuals, while still observing its business
strategy, company’s values, and financial limits. Merkur is an inseparable part of the wider society, and it
re-invests into it as much as it can.
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Merkur set aside a fund in total of SIT 110 million for various charitable activities. The company financially
assisted individuals and groups beyond Merkur, and those employees who were in need of financial
assistance. A certain amount was invested into environmental projects and for the construction of
environment-friendly buildings presented as investment costs.
The company has bonded strongly with the towns marked by Merkur’s business beat. Those towns
gratefully accept Merkur’s donations for humanitarian, sports, and cultural activities. Many would fare
much worse were it not for Merkur’s financial assistance. Merkur has streamlined its donation to towns
mostly overlooked by large sponsors, and especially to activities not directly advertised in the media, very
much appreciated by other sponsors.
Merkur has been a long-term sponsor of institutions that take care of physically and mentally disabled
children. In 2004, another donor action was launched: “Drevo dobrih želja” (Wishing-well Tree). Merkur
raises funds together with the Relief Foundation for Children, our customers and suppliers. Funds are
collected for children who have developed cancer, and for prevention of other serious diseases. This
action will certainly continue.
For several years now, Merkur has sponsored cultural events. Prešernovo gledališče (Prešeren’s Theatre)
from Kranj has been sponsored to organise “Teden slovenske drame” (The Week of Drama Performances),
and Slovensko ljudsko gledališče Celje (Celje Theatre) to stage “Dnevi komedije” (Days of Comedy).
Merkur’s funds have also been involved in staging the opera performances in Kranj.
Merkur is proud of many young and upcoming athletes, their results and work with younger generations.
The ski-runners and female table tennis players from Kranj, and female basketball players from Celje
have assumed Merkur’s name. For several years, all three clubs have been national champions in their
respective categories.

Merkur is aware of its social
responsibility for the future, and
the company acts very responsibly
towards the society and the
environment.
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FINANCIAL STATEMENTS
FOR 2004
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FINANCIAL HIGHLIGHTS OF 2004
OPERATING PROFIT
In 2004, Merkur Group’s net sales amounted to SIT 178.7 billion, whilst those of Merkur totalled SIT
152.1 billion. This figure represents 25% more than sales for the previous year, and the plan for 2004 was
exceeded by slightly more than 10%. Gross profit increase lagged only slightly behind growth in net
sales revenues. Merkur’s operating costs increased considerably less than gross profit, so operating profit
doubled in comparison to the 2003 figure, and exceeded the plan by a half. In Merkur Group, cost increase
showed somewhat slower growth than that of gross profit. In comparison to 2003 figures, operating profit
and net sales revenues presented an equal rate of growth. Merkur’s net operating profit amounted to SIT
2.81 billion, while the Merkur Group’s operating profit was SIT 150 million less than that. Both, however,
were larger than in 2003, with Merkur up by 19% and the Merkur Group up 15% respectively. Merkur
therefore exceeded its profit plan, whilst the Merkur Group realised 95% of the plan for 2004.
ASSETS AND LIABILITIES
As at 31 December 2004, assets and liabilities of Merkur amounted to SIT 127.0 billion, whilst those of
Merkur Group reached SIT 140.4 billion, 10% and 17% more respectively than at the end of 2003. Equity
to liabilities at the end of 2004 amounted to 31.8% in Merkur, and 27.3 in Merkur Group, which was 1.5
and 3.1 percentage points less than the year before.
RETURN ON EQUITY
Net return on equity ratio (ROE) at Merkur rose from 7.0% in 2003 to 7.4% in 2004. In the Group, ROE
amounted to 7.3% in 2004. In 2004, return on assets ratio (ROA) grew by 8% and amounted to 2.3% at
Merkur, and 2.0% at Merkur Group respectively.
SOLVENCY
In 2004, solvency in settling short-term liabilities improved, which is reflected in quick and short-term
ratios. In Merkur, these grew by 15% and 23% in comparison to their respective figures for 2003.
TURNOVER OF RECEIVABLES AND LIABILITIES
In 2004, Merkur and Merkur Group presented positive trends in turnover of receivables and settlement of
liabilities. In 2004, the period for the collection of receivables dropped by 10 days in comparison to 2003,
averaging 107 days in Merkur. In Merkur Group the collection period dropped by 15 days and averaged
106 days. In 2004, the average collection period for short-term liabilities in Merkur dropped by 34 days
and in Merkur Group by 27 days respectively in comparison to 2003.
RATIONALITY AND PRODUCTIVITY
In 2004, Merkur’s net profitability amounted to 1.77%, and to 1.42% at Merkur Group. The average
number of employees in Merkur grew by 1.4% according to the calculated hours worked, and by 6.2% in
Merkur Group, yet net revenues and net profit saw an even sharper rise, so employee-related indicators
improved substantially in comparison to 2003 as well. Added value per employee in 2004 totalled SIT
7.77 million in Merkur, and SIT 6.77 million in Merkur Group, while labour costs per employee averaged
SIT 4.54 million and SIT 4.21 million respectively per annum.
INVESTMENTS
The Merkur Group invested substantially in intangible long-term assets, which include fixed assets
acquired on the basis of a financial lease in BTC Ljubljana and Hudinja in Celje, and software. Tangible
fixed assets were augmented by the addition of three new sales centres in Croatia, modernisation and
extension of four sales centres in Slovenia, further construction of the warehousing facilities in Naklo,
purchase of land and preparation work for the construction of new sales centres and warehouses in the
countries of the former Yugoslavia. In 2004, investments in intangible and tangible fixed assets in Merkur
Group amounted to SIT 8.5 billion. Considering sales of real estate and equipment, and including the
depreciation, intangible and tangible fixed assets grew by SIT 4.8 billion.

AUDITED FINANCIAL STATEMENTS OF MERKUR, D. D.
BALANCE SHEET OF MERKUR, D. D.
Financial Statements of Merkur, d. d.
SIT thousand % %
Item Note 31 Dec. 2004 31 Dec. 2003 Index 31 Dec. 2004 31 Dec. 2003
ASSETS 127,014,480 115,757,981 110 100.0 100.0
A. FIXED ASSETS 54,643,828 61,870,551 88 43.0 53.5
I. Intangible fixed assets 4.1. 2,728,583 1,424,328 192 2.1 1.2
II. Tangible fixed assets 4.2. 38,432,759 35,809,369 107 30.3 31.0
III. Long-term investments 4.3. 13,482,486 24,636,854 55 10.6 21.3
B. CURRENT ASSETS 72,233,400 53,752,252 134 56.9 46.4
I. Inventories 4.4. 25,742,510 16,768,994 154 20.3 14.5
II. Operating receivables 4.5. 40,268,740 31,389,113 128 31.7 27.1
a) Long-term operating receivables 330,525 147,742 224 0.3 0.1
b) Short-term operating receivables 39,938,215 31,241,371 128 31.4 27.0
III. Short-term investments 4.6. 6,036,384 5,281,171 114 4.8 4.5
IV. Cash at banks, cheques, and cash in hand 4.7. 185,766 312,974 59 0.1 0.3
C. DEFERRED COSTS AND ACCRUED REVENUES 4.8. 137,252 135,178 102 0.1 0.1
LIABILITIES AND EQUITY 127,014,480 115,757,981 110 100.0 100.0
A. EQUITY 4.9. 40,371,825 38,501,179 105 31.8 33.3
I. Called-up capital 12,145,850 12,145,850 100 9.5 10.5
II. Capital surplus 4,809,029 4,713,830 102 3.8 4.1
III. Reserves from profit 2,260,428 1,598,242 141 1.8 1.4
IV. Retained earnings from previous years 8,341,867 6,670,738 125 6.6 5.8
V. Net profit or loss for the accounting period 1,810,138 2,368,430 76 1.4 2.0
VI. Equity capital revaluation reserves 11,004,513 11,004,089 100 8.7 9.5
B. PROVISIONS 4.10. 124 68 182 0.0 0.0
C. FINANCIAL AND OPERATING LIABILITIES 84,963,018 76,949,577 110 66.9 66.4
I. Long-term financial and operating liabilities 18,336,959 16,056,167 114 14.4 13.8
a) Long-term financial liabilities 4.11. 17,499,308 15,197,565 115 13.8 13.1
b) Long-term operating liabilities 4.12. 837,651 858,602 98 0.6 0.7
II. Short-term financial and operating liabilities 66,626,059 60,893,410 109 52.5 52.6
a) Short-term financial liabilities 4.13. 36,133,114 25,290,634 143 28.4 21.8
b) Short-term operating liabilities 4.14. 30,492,945 35,602,776 86 24.1 30.8
D. ACCRUED COSTS AND DEFERRED REVENUES 4.15. 1,679,513 307,157 547 1.3 0.3
OFF-BALANCE SHEET ITEMS 4.16. 51,871,942 47,478,746 109
49
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50
AR 2004
INCOME STATEMENT OF MERKUR, D. D.
SIT thousand
Item Note 2004 2003 Index
1. NET SALES REVENUES 5.1. 152,100,851 121,363,982 125
2. Purchase value of goods sold 125,166,102 99,379,867 126
3. GROSS PROFIT OR LOSS FROM SALES (1 - 2) 26,934,749 21,984,115 123
4. Selling expenses 5.2. 16,555,890 14,835,482 112
5. Administrative expenses 5,913,440 5,070,416 117
a) Normal administrative expenses 5.2. 5,255,715 4,627,132 114
b) Revalued operating expenses from intangible fixed assets
and tangible fixed assets 5.3. 36,844 43,685 84
c) Revalued operating expenses from current assets 5.3. 620,881 399,599 155
6. Other operating revenues 5.4. 569,870 376,977 151
OPERATING PROFIT OR LOSS FROM SALES (1 - 2 - 4 - 5 + 6) 5,035,289 2,455,194 205
7. Financial revenues from shares 5.5. 3,978,459 2,631,701 151
8. Financial revenues from long-term receivables 5.5. 246,327 228,368 108
9. Financial revenues from short-term receivables 5.5. 1,874,840 1,818,593 103
10. Financial expenses for write-offs of long-term and short-term financial investments 5.5. 3,525,989 743,575 474
11. Financial expenses for interests and other liabilities 5.5. 4,394,908 3,973,083 111
12. NET PROFIT OR LOSS FROM ORDINARY ACTIVITIES
(1 - 2 - 4 - 5 + 6 + 7 + 8 + 9 - 10 - 11) 3,214,018 2,417,198 133
13. Extraordinary revenues 5.6. 106,053 78,688 135
14. Extraordinary expenses 5.6. 372,700 98,248 379
15. PROFIT OR LOSS FROM EXCEPTIONAL ITEMS (13 - 14) - 266,647 - 19,560 -
16. Income tax 5.7. 137,233 29,208 470
17. NET PROFIT OR LOSS OF THE BUSINESS YEAR (12 + 15 - 16) 5.8. 2,810,138 2,368,430 119
APPROPRIATION OF THE 2004 DISTRIBUTABLE NET PROFIT
SIT thousand
Item 31 December 2004
1. Net profit for the financial year 2004 2,810,138
a) Losses carried forward -
b) Legal reserves -
c) Own shares 230,116
d) Other reserves from profit 1,000,000
2. Undistributed net profit of the business year,
carried forward as the 2004 distributable profit 1,580,022
In observation of the Management Board’s resolution, net profit of the business year 2004 totalling
SIT 230,116,451.04 shall be employed to form reserves for own shares, which were acquired and paid in
2004. Furthermore, a part of the net profit for the business year 2004 shall serve to form reserves in total
of SIT 1,000,000,000.00. The remaining net profit in total of SIT 1,580,022,253.70 shall be carried forward
as the 2004 distributable profit.

CASH FLOW STATEMENT OF MERKUR, D. D.
Financial Statements of Merkur, d. d.
SIT thousand
Item 2004 2003 Index
A. CASH FLOWS FROM OPERATING ACTIVITIES
a) Inflows from operating activities 143,199,409 119,500,833 120
Operating revenues 152,616,353 121,740,768 125
Extraordinary revenues associated with operations 106,053 78,688 135
Opening minus closing operating receivables - 9,520,923 - 2,373,270 401
Opening minus closing deferred costs and accrued revenues - 2,074 54,647 -
b) Outflows from operating activities 158,219,856 114,336,392 138
Operating expenses excluding depreciation and long-term provisions 144,979,958 116,964,813 124
Extraordinary expenses associated with operations 372,700 98,248 379
Income tax and any other tax not included in operating expenses 137,233 29,208 470
Closing minus opening inventories 9,037,003 1,727,114 523
Opening minus closing operating debt 5,065,318 - 4,651,316 -
Opening minus closing accrued costs and deferred revenues - 1,372,356 168,325 -
c) Net outflows (-) or inflows (+) from operating activity - 15,020,447 5,164,441 -
B. CASH FLOWS FROM INVESTMENT ACTIVITIES
a) Inflows from investing 11,746,751 2,497,544 470
Financial revenues associated with the investment activities * 3,591,656 2,497,544 144
Net decrease in long-term investments* 8,155,095 - -
b) Outflows from investing activities 6,682,798 10,141,067 66
Net increase in intangible fixed assets ** 1,558,527 743,276 210
Net increase in tangible fixed assets ** 4,403,713 4,404,366 100
Net increase in long-term investments * - 2,271,789 -
Net increase in short-term investments * 720,558 2,721,636 26
c) Net inflows (+) or outflows (-) from investing activities 5,063,953 - 7,643,523 -
C. CASH FLOWS FROM FINANCING ACTIVITIES
a) Inflows from financing activities 15,086,741 13,628,616 111
Financial revenues associated with financing activities* 1,942,518 2,048,274 95
Increase in equity capital (excluding net profit) - 6,946,000 -
Net increase in long-term financial debt * 2,301,743 4,634,342 50
Net increase in short-term financial debt * 10,842,480 - -
b) Outflows from financing activities 5,257,455 11,212,521 47
Financial expenses associated with financing activities * 4,317,963 3,973,081 109
Decrease in equity capital (excluding net loss for the period) 939,492 1,168,007 80
Net decrease in short-term financial debt * - 6,071,433 -
c) Net inflows (+) from financing activities 9,829,286 2,416,095 407
D. CLOSING BALANCE OF CASH AND CASH EQUIVALENTS 185,766 312,974 59
x) Net flow for the period (sum total of net cash
receipts / disbursements under Ac, Bc in Cc) - 127,208 - 62,987 202
y) Opening balance of cash flow and cash equivalents 312,974 375,961 83
* excluding revaluation
** excluding revaluation and tangible capital contributions
51
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52
AR 2004
STATEMENT OF CHANGES IN EQUITY CAPITAL OF MERKUR, D. D.
FOR THE PERIOD FROM 1 JANUARY 2004 UNTIL 31 DECEMBER 2004
CALLED-UP CAPITAL
CAPITAL SURPLUS RESERVES FROM PROFIT
SIT thousand
Reserves
Share Capital Legal for own Other
Capital items capital surplus reserves shares reserves
A. Opening balance as at 1 January 2004 12,145,850 4,713,830 1,330,273 267,505 464
B. Equity capital inflows 0 2,894 0 0 0
Entry of net profit or loss of the period - - - - -
Entry of the amount of the specific equity
capital revaluation adjustments - - - - -
Other increases of equity capital components - 2,894 - - -
C. Changes in equity capital 0 92,305 0 - 267,505 999,536
The 2003 net retained earnings - - - - -
Distribution of net profit for the financial year to other
reserves according to the Management Board’s decision - - - - 1,000,000
Creation of reserves for own shares from other
equity capital components - - - 230,116 -
Elimination of reserves for own shares
from other equity capital components - 92,305 - - 497,621 - 464
D. Equity capital outflows 0 0 0 0 - 69,845
Payment of dividends and other participations in capital - - - - -
Other eliminated equity capital components - - - - - 69,845
E. Closing balance as at 31 December 2004 12,145,850 4,809,029 1,330,273 0 930,155
NET PROFIT OF
RETAINED THE FINANCIAL EQUITY CAPITAL
NET PROFIT YEAR REVALUATION ADJUSTMENTS
SIT thousand
Retained Net profit of General equity Specific equity
net the financial capital revalua- capital revalua- TOTAL
Capital items profit year tion adjustment tion adjustment CAPITAL
A. Opening balance as at 1 January 2004 6,670,738 2,368,430 11,004,089 0 38,501,179
B. Equity capital inflows 0 2,810,138 0 424 2,813,456
Entry of net profit or loss of the period - 2,810,138 - - 2,810,138
Entry of the amount of the specific
equity capital revaluation adjustments - - - 424 424
Other increases of equity capital components - - - 2,894
C. Changes in equity capital 2,544,094 - 3,368,430 0 0 0
The 2003 net retained earnings 2,368,430 - 2,368,430 - - 0
Distribution of net profit for the financial year to other
reserves according to the Management Board’s decision - - 1,000,000 - - 0
Creation of reserves for own shares from
other equity capital components - - 230,116 - - 0
Elimination of reserves for own shares
from other equity capital components 175,664 230,116 - - 0
D. Equity capital outflows - 872,965 0 0 0 - 942,810
Payment of dividends and other participations in capital - 872,965 - - - - 872,965
Other eliminated equity capital components - - - - - 69,845
E. Closing balance as at 31 December 2004 8,341,867 1,810,138 11,004,089 424 40,371,825

STATEMENT OF CHANGES IN EQUITY CAPITAL OF MERKUR, D. D.
FOR THE PERIOD FROM 1 JANUARY 2003 UNTIL 31 DECEMBER 2003
Financial Statements of Merkur, d. d.
CALLED-UP CAPITAL
CAPITAL SURPLUS RESERVES FROM PROFIT
SIT thousand
Reserves
Share Capital Legal for own Other
Capital items capital surplus reserves shares
A. Opening balance as at 1 January 2003 9,125,850 787,830 1,330,273 267,969 513,050
B. Equity capital inflows 3,020,000 3,926,000 0 0 0
Subscription of called-up share capital 3,020,000 - - - -
Entry of additional payments of capital - 3,926,000 - - -
Entry of net profit or loss of the period - - - - -
Other increases of equity capital components - - - - -
C. Changes in capital 0 0 0 - 464 464
Creation of reserves for own shares
from other equity capital components - - - 137,700 - 137,700
Elimination of reserves for own shares
from other equity capital components - - - - 138,164 138,164
The 2002 retained net earnings - - - - -
D. Equity capital outflows 0 0 0 0 - 513,050
Payments of dividends and other participations in capital - - - - - 513,050
E. Closing balance as at 31 December 2003 12,145,850 4,713,830 1,330,273 267,505 464
NET PROFIT OF
RETAINED THE FINANCIAL EQUITY CAPITAL
NET PROFIT YEAR REVALUATION ADJUSTMENTS
SIT thousand
Net profit of General equity Specific equity
Retained the financial capital revalua- capital revalua- TOTAL
Capital items net profit year tion adjustment tion adjustment CAPITAL
A. Opening balance as at 1 January 2003 5,519,112 1,806,583 11,004,089 - 30,354,756
B. Equity capital inflows 1,596 2,368,430 0 0 9,316,026
Subscription of called-up share capital - - - - 3,020,000
Entry of additional payments of capital - - - - 3,926,000
Entry of net profit or loss of the period - 2,368,430 - - 2,368,430
Other increases of equity capital components 1,596 - - - 1,596
C. Changes in equity capital 1,806,583 - 1,806,583 0 0 0
Creation of reserves for own shares from
other equity capital components - - - - -
Elimination of reserves for own shares
from other equity capital components - - - - -
The 2002 retained net earnings 1,806,583 - 1,806,583 - - -
D. Equity capital outflows - 656,553 0 0 0 1,169,603
Payment of dividends and other participations in capital - 656,553 - - - - 1,169,603
E. Closing balance as at 31 December 2003 6,670,738 2,368,430 11,004,089 0 38,501,179
53
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54
AR 2004
DISTRIBUTABLE PROFIT FOR 2004
THE DISTRIBUTABLE PROFIT FOR 2004 INCLUDES THE FOLLOWING COMPONENTS:
SIT thousand
Item 2004
1. Net profit for the financial year 2,810,138
2. Retained net profit from previous periods 8,166,203
3. Decrease in reserves 405,780
a) Decrease in legal reserves -
b) Decrease in reserves for own shares 405,780
c) Decrease in statutory reserves -
d) Decrease in other reserves from profit -
4. Increase in reserves 1,230,116
a) Increase in legal reserves -
b) Increase in reserves for own shares 230,116
c) Increase in statutory reserves -
d) Increase in other reserves from profit 1,000,000
5. Distributable profit for the financial year (1 + 2 + 3 - 4) 10,152,005
Proposal on allocation of the distributable net profit for 2004
The General Meeting of Shareholders will decide on Management and the Supervisory Boards’ proposal
for the allocation of distributable net profit for 2004 in the amount of SIT 10,152,005,848.72.
The Management Board will propose to the General Meeting of Shareholders to allocate the distributable
profit for 2004 as follows:
• Payment of dividends to shareholders in the amount of SIT 728,751,000.00,
• Participation in profit to the Supervisory Board members in the amount of SIT 24,711,230.00,
• Participation in profit to the Management Board members in the amount of SIT 31,695,300.00.
A part of the distributable profit will be allocated for payment of dividends and participation in profit.
Accumulated net profits from previous years until and including 1999, for which the five-year restriction
related to the investment tax relief has expired, will be appropriated for the payment. According to the
proposal, the dividend for 2004 would amount to SIT 600.00 gross per share.
The remaining amount of distributable profit in total of SIT 9,366,848,318.72 shall remain undistributed
and its employment will be decided in the year to come.

Core programme design follows the latest
trends and innovations, which draws
an enthusiastic response from Merkur’s
customers, and encourages them to buy.
Even the most demanding and experienced
customers are satisfied.
55
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56
AR 2004
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF MERKUR GROUP
CONSOLIDATED BALANCE SHEET OF MERKUR GROUP
SIT thousand %
Item Note 31 Dec. 2004 31 Dec. 2003 Index 31 Dec. 2004 31 Dec. 2003
ASSETS 140,393,331 120,464,936 117 100.0 100.0
A. FIXED ASSETS 57,553,765 53,098,697 108 41.0 44.1
I. Intangible fixed assets 4.1. 5,199,483 4,022,480 129 3.7 3.4
II. Tangible fixed assets 4.2. 42,358,822 38,673,979 110 30.2 32.1
III. Long-term investments 4.3. 9,995,460 10,402,238 96 7.1 8.6
B. CURRENT ASSETS 82,586,531 67,111,845 123 58.8 55.7
I. Inventories 4.4. 34,575,944 24,839,589 139 24.6 20.6
II. Operating receivables 4.5. 40,108,509 34,727,361 115 28.6 28.8
a) Long-term operating receivables 339,976 149,623 227 0.2 0.1
b) Short-term operating receivables 39,768,533 34,577,738 115 28.4 28.7
III. Short-term investments 4.6. 6,449,694 6,273,961 103 4.6 5.2
IV. Cash at banks, cheques, and cash in hand 4.7. 1,452,384 1,270,934 114 1.0 1.1
C. DEFERRED COSTS AND ACCRUED REVENUES 4.8. 253,035 254,394 99 0.2 0.2
LIABILITIES AND EQUITY 140,393,331 120,464,936 117 100.0 100.0
A. EQUITY 4.9. 38,395,464 36,666,290 105 27.3 30.4
A./1 MAJORITY SHAREHOLDERS’ EQUITY 38,372,611 36,644,634 105 27.3 30.4
I. Called-up capital 12,145,850 12,145,850 100 8.7 10.1
II. Capital surplus 4,809,029 4,713,830 102 3.4 3.9
III. Reserves from profit 2,260,428 1,598,242 141 1.6 1.3
IV. Retained earnings from previous years 6,483,117 4,864,725 133 4.6 4.1
V. Net profit or loss for the accounting period 1,652,193 2,315,161 71 1.2 1.9
VI. Capital revaluation reserves 11,006,268 11,006,294 100 7.8 9.1
VII. Consolidation equity capital adjustment 15,726 532 0.0 0.0
A./2 MINORITY SHAREHOLDERS’ EQUITY 22,853 21,656 106 0.0 0.0
B. PROVISIONS 4.10. 159,233 68,577 232 0.1 0.1
C. FINANCIAL AND OPERATING LIABILITIES 100,055,607 83,338,736 120 71.3 69.2
I. Long-term financial and operating liabilities 20,921,033 17,679,954 118 14.9 14.7
a) Long-term financial liabilities 4.11. 19,911,079 16,648,230 120 14.2 13.8
b) Long-term operating liabilities 4.12. 1,009,954 1,031,724 98 0.7 0.9
II. Short-term financial and operating liabilities 79,134,574 65,658,782 121 56.4 54.5
a) Short-term financial liabilities 4.13. 42,307,135 32,809,802 129 30.2 27.2
b) Short-term operating liabilities 4.14. 36,827,439 32,848,980 112 26.2 27.3
D. ACCRUED COSTS AND DEFERRED REVENUES 4.15. 1,783,027 391,333 456 1.3 0.3
OFF-BALANCE SHEET ITEMS 4.16. 54,226,121 48,083,582 113

CONSOLIDATED INCOME STATEMENT OF MERKUR GROUP
Financial Statements of the Merkur Group
SIT thousand
Item Note 2004 2003 Index
1. NET SALES REVENUES 5.1. 178,743,080 142,563,740 125
2. Purchase value of goods sold 144,525,328 114,850,211 126
3. GROSS PROFIT OR LOSS FROM SALES (1 - 2) 34,217,752 27,713,529 123
4. Selling expenses 5.2. 22,848,108 19,517,065 117
5. Administrative expenses 9,257,223 6,405,639 145
a) Normal administrative expenses 5.2. 6,702,256 5,632,172 119
b) Revalued operating expenses from
intangible fixed assets and tangible fixed assets 5.3. 258,813 213,227 121
c) Revalued operating expenses from current assets 5.3. 2,296,154 560,240 410
6. Other operating revenue 5.4. 818,051 535,436 153
OPERATING PROFIT OR LOSS FROM SALES (1 - 2 - 4 - 5 + 6) 2,930,472 2,326,261 126
7. Financial revenues from shares 5.5. 3,629,330 2,548,423 142
8. Financial revenues from long-term receivables 5.5. 275,505 255,219 108
9. Financial revenues from short-term receivables 5.5. 2,703,836 2,379,812 114
10. Financial expenses for write-offs of long-term and short-term financial investments 5.5. 982,769 379,119 259
11. Financial expenses for interests and other liabilities 5.5. 5,373,049 4,662,323 115
12. NET PROFIT OR LOSS FROM ORDINARY ACTIVITIES
(1 - 2 - 4 - 5 + 6 + 7 + 8 + 9 - 10 - 11) 3,183,325 2,468,273 129
13. Extraordinary revenues 5.6. 137,297 122,880 112
14. Extraordinary expenses 5.6. 446,760 142,233 314
15. PROFIT OR LOSS FROM EXCEPTIONAL ITEMS (13 - 14) - 309,463 - 19,353 -
16. Income tax 5.7. 219,477 126,925 173
16.a Net profit or loss of the minority owners 2,192 6,834 32
17. NET PROFIT OR LOSS OF THE BUSINESS YEAR (12 + 15 - 16 - 16.a) 5.8. 2,652,193 2,315,161 115
57
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58
AR 2004
CONSOLIDATED CASH FLOW STATEMENT OF MERKUR GROUP
SIT thousand
Item 2004 2003 Index
A. CASH FLOWS FROM OPERATING ACTIVITIES
a) Inflows from operating activities 172,823,101 141,209,761 122
Operating revenues 179,512,956 143,078,303 125
Extraordinary revenues associated with operations 137,297 122,880 112
Opening minus closing operating receivables - 6,828,511 - 2,265,576 301
Opening minus closing deferred costs and accrued revenues 1,359 274,154 -
b) Outflows from operating activities 177,252,722 138,429,685 128
Operating expenses excluding depreciation and long-term provisions 171,368,009 137,640,669 125
Extraordinary expenses associated with operations 446,760 142,233 314
Income tax and any other tax not included in operating expenses 219,477 126,925 173
Closing minus opening inventories 10,662,023 3,312,434 322
Opening minus closing operating debt - 4,051,853 - 3,140,234 129
Opening minus closing accrued costs and deferred revenues - 1,391,694 347,658 -
c) Net outflows (-) or inflows (+) from operating activity - 4,429,621 2,780,076 -
B. CASH FLOWS FROM INVESTMENT ACTIVITIES
a) Inflows from investing 3,627,626 3,535,930 103
Financial revenues associated with the investment activities * 3,627,626 2,528,950 143
Net decrease in long-term investments* - 1,006,980 -
b) Outflows from investing activities 8,525,341 8,586,373 99
Net increase in intangible fixed assets ** 1,704,044 1,922,830 89
Net increase in tangible fixed assets ** 6,038,706 4,232,965 143
Net increase in long-term investments * 641,513 - -
Net increase in short-term investments * 141,078 2,430,578 6
c) Net inflows (+) or outflows (-) from investing activities - 4,897,715 - 5,050,443 97
C. CASH FLOWS FROM FINANCING ACTIVITIES
a) Inflows from financing activities 15,500,087 15,519,921 100
Financial revenues associated with financing activities* 2,731,275 2,635,031 104
Increase in equity capital (excluding net profit) - 6,946,532 -
Increase in equity capital of minority shareholders - 44,700 -
Net increase in long-term financial debt * 3,234,392 5,893,658 55
Net increase in short-term financial debt * 9,534,420 - -
b) Outflows from financing activities 5,991,301 12,843,234 47
Financial expenses associated with financing activities * 5,066,116 4,662,323 109
Decrease in equity capital (excluding net loss for the period) 924,190 1,168,007 79
Decrease in equity capital of minority owners 995 - -
Net decrease in short-term financial debt * - 7,012,904 -
c) Net inflows (+) from financing activities 9,508,786 2,676,687 355
D. CLOSING BALANCE OF CASH AND CASH EQUIVALENTS 1,452,384 1,270,934 114
x) Net flow for the period
(sum total of net cash receipts/disbursements under Ac, Bc in Cc) 181,450 406,320 45
y) Opening balance of cash flow and cash equivalents 1,270,934 864,614 147
* excluding revaluation
** excluding revaluation and tangible capital contributions

Financial Statements of the Merkur Group
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CAPITAL OF MERKUR GROUP
FOR THE PERIOD FROM 1 JANUARY 2004 UNTIL 31 DECEMBER 2004
CALLED-UP CAPITAL
CAPITAL SURPLUS RESERVES FROM PROFIT
SIT thousand
Reserves
Share Capital Legal for own Other
Capital items capital surplus reserves shares reserves
A. Majority shareholders’ equity capital
as at 1 Jan. 2004 12,145,850 4,713,830 1,330,273 267,505 464
B. Equity capital inflows 0 2,894 0 0 0
Entry of net profit or loss of the period - - - - -
Entry of the amount of the specific equity
capital revaluation adjustments - - - - -
Other increases of equity capital components - 2,894 - - -
C. Changes in equity capital 0 92,305 0 - 267,505 999,536
The 2003 retained earnings - - - - -
Distribution of net profit for the financial year to
other reserves according to the Management Board’s decision - - - - 1,000,000
Creation of reserves for own shares from
other equity capital components - - - 230,116 -
Elimination of reserves for own shares from
other equity capital components - 92,305 - - 497,621 - 464
Transfer of equity capital consolidation difference - - - - -
D. Equity capital outflows 0 0 0 0 - 69,845
Payment of dividends and other participations in capital - - - - -
Transfer of specific equity capital revaluation adjustments - - - - -
Other eliminated equity capital components - - - - - 69,845
E. Majority shareholders’ equity capital
as at 31 Dec. 2004 12,145,850 4,809,029 1,330,273 0 930,155
Minority shareholders’ equity capital as at 31 Dec. 2004 2,553 - 11,159 - -
Majority and minority shareholders’
equity capital as at 31 December 2004 12,148,403 4,809,029 1,341,432 0 930,155
NET PROFIT OF
RETAINED THE FINANCIAL EQUITY CAPITAL
NET PROFIT YEAR REVALUATION ADJUSTMENTS
SIT thousand
Net profit of General equity Specific equity Consolidating
Retained the financial capital revalua- capital revalua- equity capital TOTAL
Capital items net profit year tion adjustment tion adjustment revaluation CAPITAL
A. Majority shareholders’ equity capital
as at 1 Jan. 2004 4,864,725 2,315,161 11,004,089 2,205 532 36,644,634
B. Equity capital inflows 0 2,652,193 0 424 15,726 2,671,237
Entry of net profit or loss of the period - 2,652,193 - - - 2,652,193
Entry of the amount of the specific
equity capital revaluation capital - - - 424 - 424
Other increases of equity capital components - - - - 15,726 18,620
C. Changes in equity capital 2,491,357 - 3,315,161 0 0 - 532 0
The 2003 net retained earnings 2,315,161 - 2,315,161 - - - 0
Distribution of net profit for the financial
year to other reserves according to
the Management Board’s decision - - 1,000,000 - - - 0
Creation of reserves for own shares from
other equity capital components - - 230,116 - - - 0
Elimination of reserves for own shares and
distribution to other equity capital components 175,664 230,116 - - - 0
Transfer of equity capital consolidation difference 532 - - - - 532 0
D. Equity capital outflows - 872,965 0 0 - 450 0 - 943,260
Payments of dividends and
other participations in capital - 872,965 - - - - - 872,965
Transfer of specific equity capital adjustments - - - - 450 - - 450
Other eliminated equity capital components - - - - - - 69,845
E. Majority shareholders’ capital
as at 31 Dec. 2004 6,483,117 1,652,193 11,004,089 2,179 15,726 38,372,611
Minority shareholders’ capital as at 31 Dec. 2004 6,714 2,192 303 - 68 22,853
Majority and minority shareholders’ equity
capital as at 31 December 2004 6,489,831 1,654,385 11,004,392 2,111 15,726 38,395,464
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CAPITAL OF MERKUR GROUP
FOR THE PERIOD FROM 1 JANUARY 2003 UNTIL 31 DECEMBER 2003
CALLED-UP CAPITAL
CAPITAL SURPLUS RESERVES FROM PROFIT
SIT thousand
Reserves
Share Capital Legal for own Other
Capital items capital surplus reserves shares reserves
A. Majority shareholders’ equity capital
as at 1 January 2003 9,125,850 787,830 1,330,273 267,969 513,050
B. Equity capital inflows 3,020,000 3,926,000 0 0 0
Subscription of called-up share capital 3,020,000 - - - -
Entry of additional payments of capital - 3,926,000 - - -
Entry of net profit or loss of the period - - - - -
Other increases of equity capital components - - - - -
Other increases of equity capital components (FX gains ) - - - - -
Entry of specific equity capital revaluation adjustments - - - - -
C. Changes in equity capital 0 0 0 - 464 464
Creation of reserves for own shares from
other equity capital components - - - 137,700 - 137,700
Elimination of reserves for own shares from other
equity capital components - - - - 138,164 138,164
The 2002 retained earnings - - - - -
D. Equity capital outflows 0 0 0 0 - 513,050
Payment of dividends and other participations in capital - - - - - 513,050
Uses of specific equity capital revaluation adjustments - - - - -
E. Majority shareholders’ equity
as at 31 December 2003 12,145,850 4,713,830 1,330,273 267,505 464
Minority shareholders’ equity as at 31 Dec. 2003 2,656 - 9,526 - -
Majority and minority shareholders’
equity capital as at 31 December 2003 12,148,506 4,713,830 1,339,799 267,505 464
NET PROFIT OF
RETAINED THE FINANCIAL EQUITY CAPITAL
NET PROFIT YEAR REVALUATION ADJUSTMENTS
SIT thousand
Net profit of General equity Specific equity Consolidating
Retained the financial capital revalua- capital revalua- equity capital TOTAL
Capital items net profit year tion adjustment tion adjustment revaluation CAPITAL
A. Majority shareholder’s equity capital
as at 1 January 2003 3,695,368 1,824,314 11,004,089 0 0 28,548,743
B. Equity capital inflows 1,597 2,315,161 0 3,010 532 9,266,300
Subscription of called-up share capital - - - - - 3,020,000
Entry of additional payments of capital - - - - - 3,926,000
Entry of net profit or loss of the period - 2,315,161 - - - 2,315,161
Other increases of equity capital components 1,597 - - - - 1,597
Other increases of equity capital components
(FX gains) - - - - 532 532
Entry of specific equity capital revaluation
adjustments - - - 3,010 - 3,010
C. Changes in equity capital 1,824,314 - 1,824,314 0 0 0 0
Creation of reserves for own shares from
other equity capital components - - - - - -
Elimination of reserves for own shares from
other equity capital components - - - - - -
The 2002 retained earnings 1,824,314 - 1,824,314 - - - -
D. Equity capital outflows - 656,554 0 0 - 805 0 - 1,170,409
Payment of dividends and other
participations in capital - 656,554 - - - - - 1,169,604
Uses of specific equity capital
revaluation adjustments - - - - 805 - - 805
E. Majority shareholders’ equity as at
31 December 2003 4,864,725 2,315,161 11,004,089 2,205 532 36,644,634
Minority shareholders’ equity as at 31 Dec. 2003 2,219 6,834 317 - 104 21,656
Majority and minority shareholders’
equity as at 31 December 2003 4,866,944 2,321,995 11,004,406 2,205 636 36,666,290

The employees are well aware that each
individual contributes significantly to the
business success of the company. They are
caring, committed and diligent.
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NOTES AND DISCLOSURES TO THE FINANCIAL STATEMENTS OF
MERKUR, D. D. AND MERKUR GROUP
1. INTRODUCTION
Merkur – trgovina in storitve, d. d., with its headquarters in Naklo, Cesta na Okroglo 7, Slovenia, is the
controlling entity of Merkur Group. Established in 1896, the company was on November 11, 1994, in
compliance with the Law on the Ownership Transformation and resolution No. Srg 94/0312 of the Kranj
District Court, registered as a public limited company. Its primary activity code is G/51.540 – wholesale
trade in metal, installation materials and heating devices. Wholesale trade accounts for 63.8% of net income
generated in 2004, retail trade accounts for 34.8%, whilst services account for 1.4% of the net 2004 income.
On 31 December 2004, major shareholders of Merkur d. d. include Kapitalska družba with a 18.06%
stake, NFD1 investment fund with a 13.85% stake, and Slovenska odškodninska družba with a 7.67%
interest. The employees hold 7.39% of the company’s shares, whilst the remaining shares are held by
other legal and physical entities.
At the end of 2003 Merkur, d. d. employed 2,523 staff; average number of staff according to the hours
worked in 2004 was 2,380. Professional qualification structure of the employees is shown in the business
report. On 31 December 2004, Merkur Group employed 3,370 staff; average number of staff according to
the hours worked in 2004 was 3,158.
The consolidated financial statements of Merkur Group comprise, in addition to the financial statements of
the parent company Merkur, d. d., the financial statements of two domestic enterprises: Bofex, d. o. o., and
Kovinotehna, d. o. o., and seven subsidiaries located in Italy, Germany, Czech Republic, Croatia, Macedonia,
Bosnia and Herzegovina, and Serbia and Montenegro. The subsidiary in Serbia began operations in mid-2003
and was not included in the 2003 consolidation as was immaterial for the true and fair presentation of the
financial operations of the Group. Merkur Polska Sp.z.o.o. is a dormant company and was not included into
the consolidated financial statements in 2003 and 2004.
2. ACCOUNTING POLICIES
The books of accounts of the company are kept in compliance with the Companies Act. The financial
statements of Merkur, d. d., and Merkur Group are prepared in accordance with the accounting and
reporting requirements of the Slovenian Accounting Standards, which entered into force on 1 January 2002.
In 2004, the company changed its accounting policy concerning the reduction of long-term investments
in equity capital of its subsidiaries related to the depreciation of goodwill. According to the accounting
policy pursued so far the company would depreciate established goodwill in five years. The new mode of
evaluation of long-term investments enables the company to estimate the recoverable amount of assets
in the subsidiaries, to which goodwill belongs. The loss due to impairment is recognised at revaluatory
financial expenses, if recoverable amount is smaller than the carrying amount. The applied change in
policy is in compliance with the transition to the International Accounting Standards, especially to the
International Accounting Standard 36, and has been pursued since 1 January 2004.
The change affects decrease in revaluatory financial expenses in 2004 in total of SIT 113.4 million.
According to the evaluation of long-term financial investments in Bofex as at 31 December 2004, the
established value of the long-term investments surpasses the posted value, and the impairment of the
aforesaid investment was not necessary.
INTANGIBLE FIXED ASSETS
Long-term property rights, long-term deferred operating costs, goodwill, and advance payments for
intangible fixed assets are recorded as intangible fixed assets.
Intangible fixed assets are recognised at their costs of purchase and are proportionally depreciated
in observance of their economic life period. The economic life period averages from 10 to 14 years for

Notes and Disclosures
investments in assets owned by third parties (in observance of the contractually agreed lease period),
and five years for other long-term deferred costs and programme equipment. Depreciation is accounted
for individually.
The company estimates recoverable amount of intangible fixed assets and carries out revaluation because
of impairment. Loss due to the impairment of intangible fixed assets is reported as revaluatory operating
expense in relation to intangible fixed assets.
TANGIBLE FIXED ASSETS
Tangible fixed assets of the company include buildings, land, equipment and small tools, things under
construction or manufacture, and advance payments for acquisition of tangible fixed assets.
Fixed assets are initially presented at their cost of purchase. The actual value of the asset consists of
its purchase price, import duties, non-refundable purchase taxes, and all directly attributable costs of
bringing the asset into working condition for its intended use, including the interests on the loans for the
time from the acquisition until the asset is ready to use. An item of tangible assets, whose economic life
period exceeds a year, or its cost of purchase does not exceed the Slovenian Tolar equivalent of ECU 500,
is reported as small tools. If the company takes an item of tangible assets on financial lease, any related
additional investments are presented at tangible fixed assets as well. The costs incurred later on in relation
to an item of tangible fixed assets are presented as maintenance costs, decrease in allowance for an asset
item, or as an increase in purchasing value of the tangible asset item.
The company uses the straight-line depreciation method. Depreciation is accounted for individually.
Depreciation rates are determined according to the economic life period of an individual tangible asset
item, and are examined in relation to its importance.
Depreciation
Assets Economic life period rate %
• Offices, warehouses, sales outlets 50 years 2.00
• Garages, workshops, holiday facilities, gas mains 40 years 2.50
• Sheltering roofs 30 years 3.33
• Landscaping, container complexes, storage tents, warehouse equipment 20 years 5.00
• Boiler room equipment 15 years 6.67
• Office equipment, furniture, silos, computer cabinets,
Kasto technology equipment, sample houses 10 years 10.00
• Lifts and fork-lifts, shop equipment, Merkur signs 8 years 12.50
• Air-conditioning devices 7 years 14.30
• Heavy goods vehicles, mechanic and electrical devices and machinery,
printing machinery, containers for waste materials, safety and alarm systems 6 years 16.67
• Cars, typing machines, personal computers, fax machines,
telephone sets and phone-systems 5 years 20.00
• Small tools, bathroom equipment 4 years 25.00
• IT equipment, mobile telephone sets 3 years 33.33
• Equipment for lease 2.5 years 40.00
The company revalues tangible fixed assets to account for their impairment, if their carrying amount
exceeds their recoverable amount by at least 20%. The recoverable value is the higher of the net
selling price or the value of the asset in use. Basic tangible fixed asset items are considered. Loss due to
impairment of tangible fixed assets is presented at revaluatory operating expenses in relation to tangible
fixed assets.
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LONG-TERM INVESTMENTS
The company’s long-term investments include its equity capital investments in subsidiaries, other longterm
capital shares, long-term financial receivables and investment property, which are initially recognised
at their purchasing costs. Upon disposal of long-term investments the fifo method is applied.
Long-term investments which mature within a year from the date of the balance sheet are presented as
short-term financial investments.
The revaluation of long-term investments is a process of recognising an adjustment to their carrying
amount, usually due to the impairment. Contractually accrued interest and other adjustments to the
investment’s principal are not considered to be part of revaluation.
Long-term investments expressed in foreign currency, are translated into Slovene Tolars at the average
mid-exchange rate of the Bank of Slovenia effective on the balance sheet date.
Investments in equity capital securities are measured at their purchasing price in comparison to their
established fair value, and investments in debt securities are compared to their amortised cost. If the
established fair value of an equity capital security or the amortised cost is lower than the carrying amount
of an individual investment, then such investment is reduced to the established fair value or amortised
cost, and the effect is presented as the revaluatory financial expense in the income statement.
If a long-term investment into a security, which is not quoted on the stock market, is losing value, the
company estimates the required revaluation adjustment of its book value. The company may also opt
either for partial or complete write-off of a long-term investment, as soon as it is deemed necessary. The
decision is made in observance of reliable information concerning solvency, credit rating, and financial
position, any alteration in status, assessment of mutual co-operation (if the companies co-operate), and
any acquired collaterals.
Long-term investments into subsidiaries, which are included in consolidated financial statements, are
accounted for in accordance with the equity capital method. According to it, a financial investment is initially
recorded at its purchasing price. Its carrying amount is then either increased or decreased by the recognised
share in net profit or loss of the company after the date of acquisition of the financial investment. Profit or loss
of a subsidiary is reported as financial revenue or expense of the accounting period.
INVENTORIES
The general ledger records include the inventories of raw materials, materials and small tools,
construction works currently in progress or completed, and merchandise.
An item of inventories is initially recognised at costs of purchase, which include purchasing price, import
duties and other non-refundable purchase taxes, and directly attributable costs of acquisition. The
purchasing price is reduced by trade discounts stated on the suppliers’ invoices, and by accrued discounts
granted at a later date in compliance with the contractual provisions for the deliveries already carried out.
Direct costs of acquisition include costs of handling, transport, forwarding, transport insurance, special
packaging costs, costs of packaging and processing, breakage and spillage costs, and other costs. The
weighted average prices method is applied in valuation of the inventories and consumption thereof.
The physical stock count surplus and deficit in inventories are reported as adjustments in regular
operating expenses as costs of purchase of goods sold, and in inventories as costs of materials.
The revaluation of inventories is a process of recognising an adjustment to their carrying amount. It may
be carried out either at the end or during the financial year. Inventories are not revalued due to their
strengthening, but they are revalued due to their impairment if the carrying amount of the inventories
exceeds their market value. The adjustments and write-offs of the inventory value due to their impairment
are recorded as revaluatory operating expenses. The revaluation does not include reduced value and
write-offs of damaged goods, and reduced prices connected with sales actions and reduction in prices
of off-seasonal items. The reductions due to the aforesaid reasons result in increased operating expenses,
especially in the purchase costs of gods sold.

RECEIVABLES
Notes and Disclosures
In terms of their maturity, operating receivables may be classified as long-term and short-term
receivables, and include receivables to customers in relation to the goods sold, merchandise, services, and
sold tangible fixed assets, to the suppliers as well (advance payments), employees, and state in relation to
the initial tax on VAT. Advance payments are reported in balance sheet as the item they relate to.
In balance sheet, unsettled mature long-term receivables and long-term receivables falling due in a year
after the balance sheet date are reported as short-term receivables.
All kinds of receivables are initially recognised at amounts stated in relevant documents under the
assumption that they will be collected. Contractual or legally stipulated penalty interests apply in relation
to collection of short-term and long-term operating receivables. The interests payable for operating
receivables are accounted for in relation to the collected receivables from the date of maturity until the
last day of the accounting period unless otherwise stipulated in a contract.
The revaluation of receivables is a process of recognising an adjustment to their carrying amount. It may
be carried out either at the end or during the financial year. It appears predominantly as the revaluation
of receivables resulting from their impairment, or the revaluation of receivables resulting from the
elimination of their impairment. Operating receivables are not revalued due to changes in the national
purchasing power. Receivables expressed in foreign currency are translated into Slovene Tolars at the
average mid-exchange rate of the Bank of Slovenia effective on the balance sheet date. An increase in
receivables due to either of the above stated reasons results in an increase of ordinary financial revenues,
whist a decrease in receivables increases ordinary financial expenses.
Receivables must be revalued to account for their impairment when their fair value, i.e. their collectible
amount, exceeds their carrying amount. In observance of the past experience, and according to the
expectations for the accounting period, allowances are made for receivables in a percentage depending
on the maturity period, separately for domestic and foreign receivables. Lump sum allowances by
individual kinds of receivables are as follows:
Regular domestic Regular foreign Domestic and foreign interest
receivables for goods sold receivables for goods sold receivables, disputed
Lump-sum allowance (not exceeding SIT 30 million, (not exceeding SIT 6 million, receivables (not exceeding
in regard to maturity % of the value) % of the value) SIT 2.5 million, % of the value)
• up to 30 days 1 0 10
• in excess of 31 days 2 30 30
• in excess of 61 days 4 30 40
• in excess of 91 days 10 40 50
• in excess of 181 days 30 50 60
• in excess of a year 50 60 70
The company individually assesses the recovery of receivables in excess of the above stated limits,
receivables exceeding of SIT 5 million, for which collection procedures have been started at the courts,
and receivables undergoing the process of forced collection or bankruptcy. The individual assessment
is based on current operations, credit rating, and collaterals which support the likelihood that the
receivables might in fact be collected. For any other disputed receivables the company forms a lump sum
allowance in total of 60% of the due and outstanding amount. When, according to the information, there
is a strong probability of an even lower settlement, the allowances are increased accordingly. The lumpsum
amount is reduced by the estimated amount of recovered but not posted interest to a maximum of
2% of total disputed receivables.
SHORT-TERM INVESTMENTS
Short-term investments are those invested for a period shorter than 12 months, and are intended to
generate financial revenues and other benefits. The “fifo” method is applied in valuation and reversal of
short-term investments. The company treats the acquisition of own shares as a short-term investment as
well.
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The revaluation of short-term investments is a process of recognising an adjustment to their carrying
amount; contractually accrued interest and other adjustments to the principal of the debt are not
considered to be part of evaluation. It may be carried out either at the end or during the financial year.
It appears predominantly as the revaluation of short-term investments resulting from their impairment,
or the revaluation of short-term investments resulting from the elimination of their impairment, and the
applied rules are the same as those applied in long-term investments.
BANK BALANCES, CHEQUES AND CASH
Cash and cash equivalents include cash in Slovenian Tolars and foreign currencies kept in cash registers,
or bank accounts, payments by cheques, and other readily convertible securities. An item of cash is
initially recognised at an amount stated in the applicable document. If expressed in foreign currency, it is
converted in Slovenian Tolars at the mid-exchange rate valid on the date of receipt.
The revaluation only applies to cash expressed in foreign currencies, if the exchange rates have changed
and are different from those at which cash was initially recorded.
EQUITY CAPITAL
Equity capital reflects the financing of the company by the owners, and functions as the company’s
liability to them. It consists of the amounts invested by the owners, and of the amounts generated during
operations, and these belong to the company’s owners as well.
Total equity capital of a company includes subscribed capital, capital surplus, reserves from profit,
retained net profit or loss from the past periods, and equity capital revaluation adjustment. Share
capital of Merkur, d. d., is the equity capital nominally determined within the Articles of Association,
registered at court, subscribed and paid by the company’s owners. Capital surplus are amounts
generated through payments exceeding the nominal value of the issued shares paid by the owners.
Reserves from profit comprise retained net profits from previous periods earmarked for special
purposes. They are recognised by a resolution passed by the competent body in compliance with
the Articles of Association. Retained net profit or loss from previous years is the net profit that was
neither distributed to the shareholders in the form of dividends or other participations in capital, nor
earmarked as a reserve. Net profit or loss of the accounting period is recognised following the records
in the income statement for the financial year. Equity capital revaluation adjustment comprises general
revaluation equity capital adjustment, and specific revaluation equity capital adjustments.
The revaluation of equity capital is a process of recognising an adjustment to its carrying amount. The
revaluation does not include accrual of new capital inputs, and amounts paid generated from current
net profit or net loss. It may be carried out either at the end or during the financial year. It appears as
general equity capital revaluation of as specific equity capital revaluation. In compliance with the Slovene
Accounting Standards (SAS) 8.28, general equity capital revaluation is not carried out, if the Euro-Tolar
exchange rate increases by less than 5.5% (in 2003: 2.8%).
PROVISIONS
Provisions should be recognised in accounting records and the balance sheet, if the company has a
present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of
resources will be required to settle the obligation, embodying the economic growth, and making the
reliable measurement of the liability possible.
LONG-TERM LIABILITIES
Long-term liabilities are recognised obligations of a company associated with the financing of its assets
the settlement of which is expected usually in cash in a period longer than a year. Long-term liabilities
may be either financial, or operating.
Long-term liabilities are initially recognised at the amounts stated in the relevant documents recording
their accrual. Matured outstanding long-term liabilities, and long-term liabilities falling due within
twelve months from the balance sheet date, are presented in the balance sheet as short-term liabilities.

Notes and Disclosures
The revaluation of long-term liabilities is a process of recognising an adjustment to their carrying amount.
Long-term liabilities are revalued when expressed in a foreign currency and when after their initial
recognition the exchange rate has changed or, when expressed in the local currency and revaluation has
been agreed between the contractual parties in order to maintain the real value of the debt. The increase
is included in financial expenses, whilst the decrease is included in financial revenues.
SHORT-TERM LIABILITIES
Short-term liabilities are recognised obligations of a company associated with financing of its assets the
settlement of which is expected, usually in cash, not later than within twelve months. Short-term liabilities
may be either financial or operating.
Short-term financial liabilities consist of short-term loans received on basis of loan contracts, and shortterm
securities excluding cheques. Short term operating liabilities include short-term supplier credits
for goods and services received, short-term liabilities to employees, short-term liabilities associated
with interests, short-term liabilities to the government, and short-term liabilities associated with the
distribution of profit. A special category of short-term operating liabilities includes liabilities to customers
for advances paid and short-term collaterals received.
Short-term liabilities are initially recognised at the amounts stated in the relevant documents recording
their accrual. Contractually agreed and statutory prescribed penalty interests on short-term debt are
included in financial expenses.
The revaluation of short-term liabilities is a process of recognising an adjustment to their carrying amount.
Short-term liabilities are revalued when expressed in a foreign currency and when after their initial
recognition the exchange rate has changed or, when expressed in the local currency and revaluation has
been agreed between the contractual parties in order to maintain the real value of the debt. The increase
is included in financial expenses, whilst the decrease is included in financial revenues.
SHORT-TERM ACCRUED AND DEFERRED ITEMS
Short-term accrued and deferred items appear as capitalised deferred costs, deferred expenses and
accrued revenues or accrued costs, accrued expenses and deferred revenues. Short-term accrued and
deferred items are receivables and other assets and liabilities expected to arise within a period of twelve
months. Their occurrence is probable and their amount is reliably estimated.
Capitalised deferred costs, deferred expenses and accrued revenues include items of deferred costs or
deferred expenses as well as items of accrued revenues. Accrued costs, accrued expenses and deferred
revenues include items of accrued costs or accrued expenses as well as items of deferred revenues.
OFF-BALANCE SHEET ITEMS
Off-balance sheet records include transactions which have no immediate effect on balance sheet and income
statement items, although they are significant in the assessment of the exploitation of assets owned by others
and any possible future contingencies, and to control business processes and information flow.
OPERATING REVENUES – NET SALES REVENUES
Operating revenues are generated in the regular course of business. They include revenues from the sale of
products, merchandise and services in the accounting period. They are estimated on the basis of selling prices
on the invoices and other documents, and reduced by any rebates granted upon sale or generated later on,
also due to early payments. Initially presented revenues are reduced by any returned quantities of goods.
COSTS OF PURCHASE OF GOODS SOLD
When posting the consumption of the merchandise by the quantities sold, the company applies weighted
average prices method. The purchasing price of goods is directly reduced by any subsequent rebates and
super-rebates granted by the suppliers, which are not included in the costs of purchase of inventories.
Any surplus or deficit established upon the physical stock-counting procedure, and any decrease in the
value of inventories are reported as adjustment of operating expenses – costs of purchase of goods sold.
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SELLING COSTS AND GENERAL ADMINISTRATIVE EXPENSES
Selling costs (including depreciation) comprise any costs associated with the sales. These costs are not
posted at inventories, but are recognised entirely as operating expenses in the accounting period of their
accrual. Administrative expenses (including depreciation) comprise all costs associated with purchases
and management including supporting activities. These costs are recognised completely as operating
expenses in the accounting period of their accrual.
Selling costs and general administrative expenses by primary types may be classified as costs of materials
and services, depreciation and labour costs. Costs of materials and services include the amounts on
suppliers’ invoices and other documents reduced by rebates granted upon the sale or subsequently,
including early payments. Depreciation is accounted for individually at the rates that correspond to
the shortest economic life period of individual tangible or intangible fixed asset. Labour costs present
gross wages and salaries of the employees in accordance with collective and individual agreements on
employment, contributions and taxes charged directly to the employer, optional additional retirement
insurance and other labour costs (annual holiday bonus, transport to and from work, subsistence during
working time, service jubilee awards, termination benefits, indemnities, etc.).
REVALUED OPERATING EXPENSES AND REVALUED OPERATING REVENUES
Revalued operating expenses do not present costs. They are incurred in relation to tangible assets,
intangible fixed assets, and current assets as a result of their impairment. The same applies to the selling
price of an item which falls bellow the book value.
Revalued operating revenues are generated on disposal of tangible fixed assets and intangible fixed assets
when their selling price is higher than their book value.
FINANCIAL REVENUES AND EXPENSES
Financial revenues are revenues associated with investment activities. They arise in association with longterm
and short-term investments, as well as in association with receivables. They comprise acquired
interests and shares in profit of other parties, as well as revaluatory financial revenues. Revaluatory
financial revenues are generated upon the disposal of long-term and short-term investments, when their
selling price is higher than their carrying amount.
Financial expenses include financing and investment expenses. Revaluatory financial expenses arise in
association with long-term and short-term investments due to their impairment, unless the decrease
in their value is covered by a specific equity capital revaluation amount. The same applies to the deficit
incurred if their selling price is lower than their carrying amount.
EXTRAORDINARY REVENUES AND EXPENSES
Extraordinary revenues and expenses include extraordinary items, which increase or decrease the profit
or loss from regular activities in the given accounting period.
BASIS FOR CONSOLIDATION
Consolidated financial statements have been drawn in compliance with the Slovenian Accounting
Standards (SAS). Consolidated financial statements include financial statements of the parent company
and the subsidiaries in which the parent company exerts predominant influence. Consolidated financial
statements include the essential accounting policies of the subsidiaries, which have been harmonised
with those of the parent company.
Upon the preparation of the consolidated financial statements, investments of the parent company
in equity capital and debts of its subsidiaries have been excluded, as well as inter-company operating
receivables and debt, revenues and expenses, and uncollected profits or losses arising from business
transactions within the Group. Shares of minority owners in equity capital and net operating profit or loss
have been presented separately.

3. GENERAL DISCLOSURES
Financial year equals calendar year.
FOREIGN CURRENCIES
Notes and Disclosures
The asset and liability items originally stated in a foreign currency in the financial statements of the
parent company were converted into Slovenian Tolars at mid-exchange rate of the Bank of Slovenia as at
31 December 2004. Original financial statements of the subsidiaries were converted into the reporting
currency at mid-exchange rate of the Bank of Slovenia as at 31 December 2004 in balance sheet items,
and at the average mid-exchange rate of the Bank of Slovenia as at 31 December 2004 in income
statement items.
DIVISION INTO SECTORS
To meet the reporting purposes, Merkur, d. d. divided its business into three large sectors as follows:
• Wholesale focuses on wholesale sales of goods and services on domestic and foreign markets;
• Retail Sales comprises retailing of merchandise and services;
• Other includes sales of services by other sectors in the company.
The division into sectors is observed in external reporting in the income statement under the net sales
revenue item. The balance sheet, cash flow statement and changes in capital statement are drawn for the
company as a whole.
For two sectors, “Slovenia – domestic market” and “Foreign markets” Merkur and Merkur Group follow
only the data on net sales revenues and operating receivables and liabilities.
In Notes and Disclosures, the company states important disclosures necessary for fair presentation. Data,
however, which might harm the company, is not disclosed.
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4. NOTES AND DISCLOSURES TO BALANCE SHEET
Balance sheet is presented in the abbreviated form for clarity reasons. The balance sheet items, changes in
intangible and tangible fixed assets, and long-term investment items are presented in more detail in the
Notes and disclosures to the financial statements herein below.
4.1. INTANGIBLE FIXED ASSETS
BREAK-UP OF INTANGIBLE FIXED ASSETS
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31 December 2004 31 December 2003 31 December 2004 31 December 2003
I. Intangible fixed assets (1 + 2 + 3 + 4) 2,728,583 1,424,328 5,199,483 4,022,480
1. Long-term deferred operating costs 2,346,246 1,135,331 3,751,714 2,434,408
- investment in foreign fixed assets owned by third parties 2,195,445 972,989 3,580,922 2,249,468
2. Long-term deferred costs of development - - - 200,000
3. Concessions, patents, and licences 382,337 288,997 880,666 820,969
4. Goodwill - - 567,103 567,103
As at 31 December 2004, Merkur Group’s intangible fixed assets amounted to SIT 5,199.5 million. From
that, more than a half is owned by Merkur, whilst Bofex’s intangible fixed assets totalled SIT 1,644.2
million, and the goodwill established in the consolidation process in regard to a long-term investment in
Bofex, d.o.o. amounted to SIT 567.1 million.
As far as Bofex’s intangible fixed assets are concerned, the investments into fixed assets owned by third
parties (rentals of sales centres) amounted to SIT 1,174.0 million. Investments into the purchase of the
BOF trademark and licences for software programmes totalled SIT 470.2 million.
As at 31 December 2004, Merkur’s intangible fixed assets comprised investments into fixed assets owned
by third parties in the amount of SIT 2,195.4 million, and other investments in intangible assets amounted
to SIT 533.1 million, including investments in development of the logistic system, ferrous and non-ferrous
metal product programme, and licences for software programmes.
CHANGES IN INTANGIBLE FIXED ASSETS OF MERKUR, D. D. IN 2004
SIT thousand
Long-term
Deferred Concessions, Intangible
Operating patents, fixed
Item costs licences assets
Cost of purchase as at 1 January 2004 1,570,918 783,400 2,354,318
Additions 1,372,929 206,476 1,579,405
Disposals – write-offs - 369,557 - - 369,557
Cost of purchase as at 31 December 2004 2,574,290 989,876 3,564,166
Accumulated amortisation as at 1 January 2004 435,587 494,403 929,990
Amortisation 122,622 113,136 235,758
Transfers to costs 20,877 - 20,877
Disposals – write-offs - 351,042 - - 351,042
Accumulated amortisation as at 31 December 2004 228,044 607,539 835,583
Net carrying amount 1 January 2004 1,135,331 288,997 1,424,328
Net carrying amount 31 December 2004 2,346,246 382,337 2,728,583

Notes and Disclosures
In 2004, intangible assets in Merkur increased largely due to the investments in fixed assets owned by third
parties: a new Merkur sales centre in BTC in Ljubljana (SIT 912.3 million), the extension of the sales centre in
Hudinja Celje (SIT 333.0 million), and acquisition of software licences totalling SIT 206.5 million. Decrease in
intangible fixed assets included amortisation and transfers to costs in the amount of SIT 256.6 million, and
the investments into abandoned sales centres on lease at the carrying amount of SIT 18.5 million.
CHANGES IN INTANGIBLE FIXED ASSETS OF THE MERKUR GROUP IN 2004
SIT thousand
Long-term Long-term
deferred deferred Concessions, Intangible
operating costs of patents, and fixed
Item costs development licences Goodwill assets
Costs of purchase as at 1 January 2004 3,338,059 207,621 1,357,864 877,753 5,781,297
Exchange rate differences 3,075 98 635 - 3,808
Additions 1,896,849 - 258,758 - 2,155,607
Transfers within intangibles - 5,783 - 7,889 - 2,106
Disposals – write-offs - 801,583 - 207,719 -115 - - 1,009,417
Costs of purchase as at 31 December 2004 4,430,617 0 1,625,031 877,753 6,933,401
Accumulated amortisation as at 1 January 2004 903,651 7,621 536,895 310,650 1,758,817
Exchange rate differences 527 98 294 - 919
Amortisation 302,562 - 199,403 - 501,965
Transfers to costs 20,877 - - - 20,877
Transfers within intangibles - 7,760 - 7,882 - 122
Disposals – write-offs - 540,954 - 7,719 - 109 - - 548,782
Accumulated amortisation as at 31 December 2004 678,903 0 744,365 310,650 1,733,918
Net carrying amount as at 1 January 2004 2,434,408 200,000 820,969 567,103 4,022,480
Net carrying amount as at 31 December 2004 3,751,714 0 880,666 567,103 5,199,483
In 2004, intangible fixed assets in Merkur Group increased by SIT 1,177.0 million, or substantially less than
the new investments in the same period, mostly because of Bofex-related write-offs totalling SIT 442.1
million for deferred rental costs and development costs.
The estimation of useful life and recoverable amount in relation to intangible fixed assets in the company
and the Group indicated that they met the expected economic benefits of the assets.
4.2. TANGIBLE FIXED ASSETS
BREAK-UP OF TANGIBLE FIXED ASSETS
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31 December 2004 31 December 2003 31 December 2004 31 December 2003
II. Tangible fixed assets (1 + 2 + 3 + 4 + 5 + 6) 38,432,759 35,809,369 42,358,822 38,673,979
1. Land and buildings (a + b) 31,394,446 29,636,168 33,289,097 31,221,191
a) Land 6,919,748 6,928,961 7,520,598 7,258,017
b) Buildings 24,474,698 22,707,207 25,768,499 23,963,174
3. Other machinery and equipment 4,579,375 3,566,841 6,117,642 4,698,114
4. Fixed assets in the process of acquisition (a + b) 2,458,938 2,606,360 2,952,083 2,754,674
a) Advances for tangible fixed assets 470,043 397,269 470,043 404,376
b) Tangible fixed assets under construction or in progress 1,988,895 2,209,091 2,482,040 2,350,298
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In 2004, Merkur Group carried on with substantial investments. Investments in tangible assets totalled
SIT 6,383.3 million. The retail sales network was extended and modernised, new warehouses were built,
the office building in Naklo was extended and modernised, and the adjacent parking lot constructed. A
new modern sales centre opened in BTC Ljubljana, the sales centre in Hudinja was enlarged, and the sales
centres in Studenci-Maribor and in Brežice were modernised. In 2004, three new sales centres opened in
Croatia: in Zadar, Šibenik, and Čakovac. In addition to that, the preparations for the construction of a steel
centre in Rijeka began. In Serbia, the preparations for the construction of a modern sales centre on 10,000
square metres in Beograd were undertaken as well.
CHANGES IN TANGIBLE FIXED ASSETS OF MERKUR IN 2004
SIT thousand
Tangible fixed assets Advances
Other machinery under construc- for tangible Tangible
Item Land Buildings and equipment tion or in progress fixed assets fixed assets
Cost of purchase 1 January 2004 6,928,961 30,789,715 11,878,038 2,209,091 397,269 52,203,074
Acquisitions - - 26,967 4,734,706 72,774 4,834,447
Transfer of tangibles in process of acquisition 112,269 2,753,251 2,089,382 - 4,954,902 - 0
Disposals and write-offs - 121,482 - 656,360 - 706,025 - - - 1,483,867
Cost of purchase 31 December 2004 6,919,748 32,886,606 13,288,362 1,988,895 470,043 55,553,654
Accumulated depreciation
as at 1 January 2004 0 8,082,508 8,311,197 0 0 16,393,705
Depreciation - 744,206 1,017,786 - - 1,761,992
Decrease in accumulated depreciation - - 64,070 - 4,194 - - - 68,264
Disposals and write-offs - - 350,736 - 615,802 - - - 966,538
Accumulated depreciation
as at 31 December 2004 - 8,411,908 8,708,987 - - 17,120,895
Net carrying amount
as at 1 January 2004 6,928,961 22,707,207 3,566,841 2,209,091 397,269 35,809,369
Net carrying amount
as at 31 December 2004 6,919,748 24,474,698 4,579,375 1,988,895 470,043 38,432,759
Merkur holds a three-quarter share of all investments into tangible fixed assets of Merkur Group. In 2004,
the investments in total of SIT 4,954.9 million were activated. New investments were started in relation
to the acquisition of land for a sales centre in Ptuj, and Velenje, and the second phase of construction
of warehousing facilities for ferrous and non-ferrous metal products in Naklo. The investments into the
construction of sales centres in Vižmarje-Ljubljana and in Škofja Loka remained incomplete. As at 31
December 2004, investments into tangible fixed assets under construction or in progress totalled SIT
1,988.9 million.
In 2004, the company sold assets in the carrying amount of SIT 513.0 million (Elektro center Kranj, sales
outlet in Litija, a plot of land in Škofja Loka, and certain means of transport), generating profit from sales
in the amount of SIT 404.2 million and a SIT 18.3 million loss.
The economic life period of the tangible fixed assets was estimated, and met the expectations, so assets
were employed so as to bring economic benefits. According to the calculated asset value in relation to the
employment of fixed assets, which present cash carrying units, and data on net sales value of assets, there
is no reason for the impairment of tangible fixes assets.

CHANGES IN TANGIBLE FIXED ASSETS OF MERKUR GROUP IN 2004
Notes and Disclosures
SIT thousand
Tangibles
Other under con- Advances
machinery struction and for Total
Item Land Building and equipment in progress tangibles tangibles
Cost of purchase as at 1 January 2004 7,258,017 32,421,059 14,110,249 2,350,298 404,376 56,543,999
Acquisitions 183,995 34,523 708,769 5,383,241 72,774 6,383,303
Transfer of assets in process of acquisition 131,421 2,777,967 2,144,072 - 5,053,460 - 0
Transfers within groups of tangibles - 126,503 16,866 - 145,475 - - 2,106
Revaluation, exchange-rate differences 73,010 26,784 8,753 - 4,401 99 104,245
Disposals and write-offs - 125,845 - 905,809 - 1,049,756 - 48,163 - 7,206 - 2,132,779
Purchase costs as at
31 December 2004 7,520,598 34,481,028 15,938,953 2,482,040 470,043 60,892,661
Accumulated depreciation
as at 1 January 2004 0 8,457,885 9,412,135 0 0 17,870,020
Depreciation - 787,000 1,325,867 - - 2,112,867
Decrease in accumulated depreciation - - 64,070 - 8,912 - - - 72,982
Transfers within groups of tangibles - - 4,577 4,454 - - -123
Revaluation, exchange rate differences - 3,557 1,494 - - 5,051
Disposals and write-offs - - 467,266 - 913,727 - - - 1,380,993
Accumulated depreciation
as at 31 December 2004 0 8,712,529 9,821,311 0 0 18,533,840
Net carrying amount as at
1 January 2004 7,258,017 23,963,174 4,698,114 2,350,298 404,376 38,673,979
Net carrying amount as at
31 December 2004 7,520,598 25,768,499 6,117,642 2,482,040 470,043 42,358,822
TANGIBLE FIXED ASSETS ACQUIRED BY THE MERKUR GROUP IN 2004
ON THE BASIS OF A FINANCIAL LEASE
SIT thousands
Carrying Carrying
amount at Decrease - amount at
Enterprise 1. 1. 2004 Acquisitions depreciation 31. 12. 2004
Merkur, d. d. 1,029,322 41,373 - 24,547 1,046,148
TC Bršljin 1,028,010 - - 22,546 1,005,464
Equipment 1,312 41,373 - 2,001 40,684
Bofex d. o. o. 123,863 35,790 - 21,771 137,882
Facility in Postojna 116,272 - - 15,519 100,753
Facility in Rogaška Slatina - 39,459 - 5,635 33,824
Equipment 7,591 - 3,669 - 617 3,305
Obligations arising from the financial lease of tangible fixed assets are recognized by Merkur, d. d. as
a long-term operating liability of SIT 837.7 million, whilst current amount of SIT 208.4 million which
matures in 2005 is recognised as a short-term operating liability. Bofex, d. o. o. recognises SIT 137.9
million of operating liabilities arising from the financial lease of tangible fixed assets.
The following real estate owned by the Merkur Group has been mortgaged:
• 505,107m 2 of built-up and unbuilt land with a carrying value of SIT 5,685.4 million;
• 186,773m 2 of buildings with a carrying value of SIT 15,394.3 million.
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4.3. LONG-TERM INVESTMENTS
CLASSIFICATION OF LONG-TERM INVESTMENTS
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
III. Long-term investments (1 + 2 + 3) 13,482,486 24,636,854 9,995,460 10,402,238
1. Equity interests in the group 3,133,752 14,113,000 - -
2. Other long-term investment participations, of that 8,235,759 8,298,157 7,740,576 7,806,767
- investment property 1,616,366 1,545,619 1,121,183 1,052,061
3. Other long-term receivables due from others 2,112,975 2,225,697 2,254,884 2,595,471
98% of long-term investments of the Merkur Group are held by Merkur, d. d. and represent investments
in equity or financial debt of enterprises that do not belong to the Group. At the end of 2004 the parent
company’s investments can be broken down into:
• Equity interests in group enterprises, which account for 23% of total investments;
• Other long-term investment participations and other financial receivables representing 65% of total
investments;
• Investment property which accounts for 12% of total long-term investments of the parent company.
LONG-TERM INVESTMENTS IN ENTERPRISES WHERE
MERKUR, D. D. HOLDS NO LESS THAN 20% OF EQUITY INTERESTS
SIT thousand
Equity Percentage Investment Total Result
interests held at value at equity at in
Item held since 31. 12. 2004 31. 12. 2004 31. 12. 2004 2004
Equity interests held in enterprises in the group 3,133,752 2,591,256 - 2,888,085
Merkur Group enterprises located in Slovenia 784,537 219,191 - 3,096,592
• Kovinotehna, d. o. o., Celje 1999 100.00 144,142 145,898 133,346
• Bofex, d. o. o., Ljubljana 1999 100.00 640,395 73,293 - 3,229,938
Merkur Group enterprises located abroad 2,349,215 2,372,065 208,507
• Merkur International Zagreb, d. o. o. 1994 100.00 1,707,240 1,707,240 43,388
• Merkur Makedonija, doo, Skopje 1994 90.35 209,394 231,759 21,447
• Intermerkur, d. o. o., Sarajevo 1998 99.63 131,287 131,774 26,227
• Merkur International Praha spol. S.r.o. 1994 100.00 139,340 139,339 24,156
• Merkur MI Handels GmbH, München 1994 100.00 45,631 45,631 18,103
• Merkur Perles Italia, s.r.l., Villesse 1994 100.00 27,114 27,113 9,350
• Merkur Beograd, d. o. o. 1994 100.00 89,209 89,209 65,836

CHANGES IN LONG-TERM INVESTMENTS OF MERKUR, D. D. IN 2004
Notes and Disclosures
SIT thousand
Other Total long-term
Equity interests long-term equity interests
in enterprises investment Investment and investment
Item in the Group participations property property
Gross value at 1. 1. 2004 14,125,139 6,955,336 1,545,619 22,626,094
Increase (+) 364,387 2,597,720 439,381 3,401,488
New investments - 2,597,720 439,381 3,037,101
Participations in the profit of enterprises in the group 351,348 - - 351,348
Revaluation – exchange differences 13,039 - - 13,039
Decrease (-) - 11,355,774 - 2,723,728 - 368,634 - 14,448,136
Disposals - - 2,723,728 - 368,634 - 3,092,362
Withdrawal of equity of an enterprise in the group - 8,047,604 - - - 8,047,604
Loss incurred by enterprises in the group - 3,308,170 - - - 3,308,170
Other equity write-offs - - - 0
Gross value at 31. 12. 2004 3,133,752 6,829,328 1,616,366 11,579,446
Revaluation at 1. 1. 2004 12,139 202,798 0 214,937
Investments written-off, later recovered - - - 0
Final investment write-off - - - 0
Revalued during the year - 12,139 7,137 - - 5,002
Revaluation at 31. 12. 2004 0 209,935 0 209,935
Net value at 1. 1. 2004 14,113,000 6,752,538 1,545,619 22,411,157
Net value at 31. 12. 2004 3,133,752 6,619,393 1,616,366 11,369,511
Compared to 2003, investments in enterprises in the Group fell due to the withdrawal of SIT 8,047.6
million of equity of the subsidiary Kovinotehna, d. o. o. and settlement of losses of total SIT 3,308.1 million
incurred by Bofex, d. o. o.
The increase as well as the majority of the decrease of other long-term investment participations are
due to the acquisition and disposal of Gorenjska banka shares. The outcome of transactions with these
shares is disposal of 5,830 shares, reducing Merkur’s interest in the bank from 11.9% to 10.1%. When we
consider the latest transaction prices, this is an investment for the future worth SIT 3,527.3 million.
CHANGES IN LONG-TERM INVESTMENTS OF THE MERKUR GROUP IN 2004
SIT thousand
Other long-term Total long-term
investment Investment equity interests and
Item participations property investment property
Gross value at 1. 1. 2004 7,260,249 1,092,229 8,352,478
Increase (+) 3,308,962 439,381 3,748,343
New investments 3,318,324 439,381 3,757,705
Reclassifications - 13,086 - - 13,086
Revaluation – exchange differences 3,724 - 3,724
Decrease (-) - 2,731,884 - 370,259 - 3,102,143
Disposals - 2,723,728 - 370,259 - 3,093,987
Final investment write-off - 8,156 - - 8,156
Gross value at 31. 12. 2004 7,837,327 1,161,351 8,998,678
Revaluation at 1. 1. 2004 505,543 40,168 545,711
Reclassifications - 12,138 - - 12,138
Final investment write-off - 8,548 - - 8,548
Revalued during the year 733,077 - 733,077
Revaluation at 31. 12. 2004 1,217,934 40,168 1,258,102
Net value at 1. 1. 2004 6,754,706 1,052,061 7,806,767
Net value at 31. 12. 2004 6,619,393 1,121,183 7,740,576
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Credit ratings of enterprises in which Merkur Group holds investments are reviewed at least once a year to help
reduce the risks associated with investments in other enterprises and to maintain their fair value. Reduction of
no less than 20% of the investment is made for investments in enterprises which are undergoing restructuring.
CHANGES IN LONG-TERM FINANCIAL RECEIVABLES OF MERKUR, D. D.
AND THE MERKUR GROUP IN 2004
SIT thousand
Item Merkur, d. d. Merkur Group
Gross value at 1. 1. 2004 2,307,077 2,676,851
Current amounts of long-term receivables (+) 1,331,720 1,441,440
Increase (+) 781,200 839,127
Acquisitions 730,368 778,268
Interest accrual 2,469 6,310
Revaluation – exchange differences 48,363 54,549
Decrease (-) - 1,294,516 - 1,629,347
Repayments - 1,289,981 - 1,624,812
Final write-off - 4,535 - 4,535
Current amounts of long-term receivables (-) - 894,729 - 955,410
Gross value at 31. 12. 2004 2,230,752 2,372,661
Bad debt allowances at 1. 1. 2004 81,380 81,380
Long-term financial receivables written-off, later recovered - 115 - 115
Final write-offs of long-term financial receivables - 4,535 - 4,535
Bad debt allowances made during the year 41,047 41,047
Bad debt allowances at 31. 12. 2004 117,777 117,777
Net value at 1. 1. 2004 2,225,697 2,595,471
Net value at 31. 12. 2004 2,112,975 2,254,884
Long-term financial receivables of the Merkur Group were down 13% compared to 2003. 56% or SIT
1,261 million of long-term financial receivables arose from long-term deposits granted in relation to longterm
lease of Merkur shopping centres.
INSTRUMENTS USED TO HEDGE LONG-TERM FINANCIAL RECEIVABLES OF MERKUR, D. D.
AND THE MERKUR GROUP AT 31. 12. 2004
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
Long-term financial receivables 2,112,975 2,225,697 2,254,884 2,595,471
• Mortgages 277,915 550,009 347,557 672,400
• Guaranties - 7,318 - 7,318
• Bills of exchange 16,686 29,152 16,686 29,152
• Others* 1,609,964 1,368,306 1,625,356 1,586,189
• Unsecured 208,410 270,912 265,285 300,412
* counter-agreements, sureties and insurance premiums, movable property
MATURITY OF LONG-TERM FINANCIAL RECEIVABLES OF MERKUR, D. D.
AND THE MERKUR GROUP AT 31. 12. 2004
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
Long-term financial receivables 2,112,975 2,225,697 2,254,884 2,595,471
• Maturing over a period of 1 to 2 years 629,661 714,081 648,988 931,964
• Maturing over a period of 2 to 3 years 167,898 109,318 237,541 115,543
• Maturing over a period of 3 to 4 years 84,028 128,936 109,138 217,070
• Maturing over a period of 4 to 5 years 60,310 89,879 60,310 89,879
• Maturing over a period of more than 5 years 1,171,078 1,183,483 1,198,907 1,241,015

4.4. INVENTORIES
CLASSIFICATION OF INVENTORIES
Notes and Disclosures
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
I. Inventories (1 + 2 + 3) 25,742,510 16,768,994 34,575,944 24,839,589
1. Material 35,363 36,098 58,451 52,906
2. Products and merchandise 24,757,188 16,584,645 33,816,916 24,288,269
• in warehouses 16,765,020 9,024,268 20,429,546 12,130,049
• in stores 7,488,471 6,822,011 12,738,362 11,394,000
• goods in transit 503,697 738,366 649,008 764,220
3. Advances for inventories 949,959 148,251 700,577 498,414
At 31.12.2004, inventories of the Group were up 39% to SIT 34,575.9 million compared to 2003. The increase
was primarily the result of changes affecting the range of ferrous and non-ferrous products due to a worldwide
increase in prices in 2004 and also due to larger quantities purchased. Inventories held by Merkur, d. d. account
for 74% of all inventories of the Group; 13% of all inventories were held by Bofex, d. o. o., 9% by MI Zagreb and
4% of all inventories were held by the remaining enterprises in the Group.
In accordance with the assessed net selling prices, the net recoverable value of inventories held by the Merkur
Group exceeds their book value. No inventories are pledged as collateral.
STOCKTAKING SURPLUS AND DEFICIT, INVENTORY WRITE-OFFS DUE TO A REDUCTION IN QUALITY,
AND ADJUSTMENT OF THEIR VALUE RECOGNISED BY MERKUR, D. D. AND THE MERKUR GROUP IN 2004
MERKUR, D. D.
SIT thousand
Merchandise Merchandise Total
Item in warehouses held in stores merchandise
Changes in regular operating expenses - 112,260 - 121,434 - 233,694
• Surplus established during physical stock count 88,636 81,097 169,733
• Surplus determined during the period 29,571 2138 31,709
• Deficit established during physical stock count - 10,197 - 31,702 - 41,899
• Deficit determined during the period - 16,080 - 16,592 - 32,672
• Breakage and leakage determined during physical stock count - 28,948 - 93,125 - 122,073
• Breakage and leakage determined during the period - 175,242 - 63,250 - 238,492
Revaluation operating expenses - 51,405 - 12,082 - 63,487
• Allowances for obsolete inventory - 51,405 - 12,082 - 63,487
MERKUR GROUP
SIT thousand
Merchandise Merchandise Total
Item in warehouses held in stores merchandise
Changes in regular operating expenses - 205,740 - 130,686 - 336,426
• Surplus established during physical stock count 92,633 83,876 176,509
• Surplus determined during the period 25,571 2,138 27,709
• Deficit established during physical stock count - 34,018 - 36,829 - 70,847
• Deficit determined during the period - 16,080 - 16,592 - 32,672
• Breakage and leakage determined during physical stock count - 32,433 - 93,125 - 125,558
• Breakage and leakage determined during the period - 241,413 - 70,154 - 311,567
Revaluation operating expenses - 368,130 - 557,538 - 925,668
• Allowances for obsolete inventory - 59,022 - 12,082 - 71,104
• Other inventory impairment - 309,108 - 545,456 - 854,564
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In 2004 stocktaking differences and other write-offs of merchandise in the Group reached SIT 336.4
million, twice the amount recognised in 2003 (SIT 156.5 million). This increase was due to a significant
clear-out of stock by Merkur, d. d. and Bofex, d. o. o. Inventory impairment of total SIT 925.7 million was
recognised by the Group as revaluation operating expenses. Of this, SIT 71.1 million of allowances were
made for obsolete inventory (SIT 54.8 million in 2003), whilst SIT 854.6 million of inventory reduction
resulted from reconciliation of differences arising from the valuation of inventories held by Bofex, d. o. o.
in the past.
4.5. OPERATING RECEIVABLES
CLASSIFICATION OF OPERATING RECEIVABLES
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
II. Operating receivables (a + b) 40,268,740 31,389,113 40,108,509 34,727,361
a) Long-term operating receivables due from others 330,525 147,742 339,976 149,623
b) Short-term operating receivables (1 + 2 + 3) 39,938,215 31,241,371 39,768,533 34,577,738
1. Short-term accounts receivable 30,034,362 26,552,025 37,838,565 32,679,381
2. Short-term operating receivables due
from group enterprises less associates 8,975,650 3,436,036 - -
3. Short-term operating receivables due from others 928,203 1,253,310 1,929,968 1,898,357
At 31 December 2004, a total SIT 40,108.5 million of operating receivables of the Merkur Group
represented a 15% increase compared to 2003. Since net sales revenue was up 25% compared to the
15% increase of operating receivables, this was clear evidence of the successful risk management of
receivables. Compared to 2003, the receivable turnover period was 15 days shorter.
All classes of receivables except receivables due from state and public institutions were secured with blank
bills or guaranteed bills obtained when individual contract is signed. All receivables in excess of SIT 30
million must be secured with a bank guarantee, a mortgage, or securities.
The Group’s principles of receivables management (including the pertaining risks) are uniformly applied
by Merkur, d. d. and its subsidiaries (the financial risk management is described in the business report).
SHORT-TERM OPERATING RECEIVABLES OF MERKUR, D. D. AND THE MERKUR GROUP AT 31. 12. 2004
ACCORDING TO THEIR MATURITY
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
II.b) Short-term operating receivables 39,938,215 31,241,371 39,768,533 34,577,738
Not matured 23,922,778 18,936,452 24,974,006 20,690,595
Due and outstanding 17,892,837 14,199,014 18,238,940 16,804,535
• up to 30 days 11,261,663 9,126,904 8,691,871 9,002,736
• between 31 and 90 days 2,754,748 1,620,382 3,716,756 2,042,253
• between 91 and 180 days 1,159,705 386,238 1,301,752 743,702
• between 181 and 365 days 290,708 486,929 826,388 858,895
• in excess of 12 months* 2,426,013 2,578,561 3,702,173 4,156,949
Bad debt allowances - 1,877,400 - 1,894,095 - 3,444,413 - 2,917,392
*Receivables due and outstanding more than 12 months represent disputed receivables.
At the end of 2004, SIT 3,444.4 million of provisions were made against operating receivables of the Group
(SIT 2,917.4 million in 2003), whilst provisions made against operating receivables of Merkur, d. d. total
SIT 1,877.4 million (SIT 1,894.1 million in 2003). The amount of provisions made for short-term operating
receivables of the parent company fell by SIT 458.6 million primarily due to the receivable write-off
following the conclusion of bankruptcy proceedings, forced settlements and court disputes. On the other
hand, SIT 441.9 million of additional provisions were made in accordance with the adopted accounting
policy. Provisions made by the Group are up 18% as a result of reconciliation of the accounting policies.

Notes and Disclosures
The bankruptcy procedure introduced in Avtomontaža bus d.o.o. is currently in progress. Merkur, d. d.
reports outstanding receivables of total SIT 450 million due by the enterprise for which provisions were
made in the amount of 53% of total outstanding amount. These receivables were subject to two court
actions brought against the company:
1. a court action contesting the separation right was in 2004 partly rejected. Merkur appealed against the
decision of the first instance and is currently awaiting the resolution.
2. a court action contesting the actions and refund of the settlement. Authority of the second instance
ordered Merkur to refund SIT 412.1 million of the bankruptcy estate; the difference was annulled.
Merkur has instigated an audit of the final resolution and is currently awaiting the decision.
OPERATING RECEIVABLES OF MERKUR, D. D. AND THE MERKUR GROUP AT 31. 12. 2004
BY REGIONAL SEGMENTS
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
II. Operating receivables 40,268,740 31,389,113 40,108,509 34,727,361
a) Long-term 330,525 147,742 339,976 149,623
• Slovenia – local market 330,525 147,742 332,183 149,623
• Foreign markets - - 7,793 -
b) Short-term 39,938,215 31,241,371 39,768,533 34,577,738
• Slovenia – local market 31,228,815 26,957,450 31,695,235 29,014,042
• Foreign markets 8,709,400 4,283,921 8,073,298 5,563,696
4.6. SHORT-TERM INVESTMENTS
CLASSIFICATION OF SHORT-TERM INVESTMENTS
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
III. Short-term investments (1 + 2) 6,036,384 5,281,171 6,449,694 6,273,961
1. Own shares - 126,504 - 267,505
2. Short-term investments in other enterprises 6,036,384 5,154,667 6,449,694 6,006,456
Short-term investments of the Group were up 3% (14% in respect of Merkur, d. d.). This was primarily
the result of the acquisition of trading securities of Sava Kranj, which accounted for 28% of all short-term
investments.
INSTRUMENTS USED TO HEDGE SHORT-TERM INVESTMENTS OF MERKUR D. D.
AND THE MERKUR GROUP (LESS OWN SHARES) AT 31. 12. 2004
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
Short-term loans 6,036,384 5,154,667 6,449,694 6,006,456
• Mortgages 584,302 576,092 619,123 624,085
• Guaranties 658,970 - 658,970 -
• Bills of exchange 1,594,777 299,307 1,594,777 320,240
• Others* 445,662 797,231 630,229 830,002
• Unsecured 2,752,673 3,482,037 2,946,595 4,232,129
*Counter-agreements, shares, movable property
79
AR 2004

80
AR 2004
OWN SHARES
Average
Value price
Item Number of shares SIT thousand SIT/share
Balance at 01. 01. 2004: 17,658 267,505 15,149.20
Merkur, d. d. 8,443 126,504 14,983.30
Kovinotehna, d. o. o. 9,215 141,001 15,301.20
Acquisitions 10,152 230,116 22,667.10
6,198 83,859 13,530.00
3,954 146,257 36,989.80
Disposals 27,810 430,670 15,486.10
9,150 155,550 17,000.00
9,100 139,230 15,300.00
9,445 134,119 14,200.00
115 1,771 15,396.15
Balance at 31. 12. 2004: 0 0 0
In accordance with the approved option scheme, the company acquired its own shares in order to offer
these as awards to the management, Supervisory Board and business nominees of the controlling entity
and its subsidiaries (indent 2, Article 240 of the Companies Act).
In 2004 the company disposed of 27,810 of its own shares worth a total of SIT 430.7 million as part of this
option scheme. This accounts for 2.29% of total shares. The company acquired its own shares at a cost of
SIT 497.6 million. SIT 2.9 million of gains and SIT 69.8 million of losses arising from the transaction (the
difference between the acquisition price and the selling price of shares) are recognised as the increase or
decrease in equity.
Stock options were given to the members of the Management and Supervisory Boards and proxies for the
years 1999, 200 and 2001, while the option rights allowed to members of the Management Board and
proxies for 2002 and 2003 (totalling 26,960), and to the members of the Supervisory Board for the year
2003 (total of 1,620), remained unrealized.
4.7. BANK BALANCES, CHEQUES AND CASH ON HAND
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
IV. Bank balances, cheques and cash (1 + 2 + 3) 185,766 312,974 1,452,384 1,270,934
1. Cash on hand 44,441 45,131 62,550 54,224
2. Cash on bank accounts 120,898 192,342 1,121,918 1,088,967
3. Cheques 20,427 75,501 267,916 127,743
4.8. DEFERRED COSTS AND ACCRUED REVENUES
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
C. Deferred costs and accrued revenues (1 + 2) 137,252 135,178 253,035 254,394
1. Deferred costs and expenses 129,844 104,418 160,748 221,583
• interest - - 9,210 11,876
• other 129,844 104,418 151,538 209,707
2. Accrued revenues 7,408 30,760 92,287 32,811
Deferred costs and accrued revenues of the Merkur Group remained at the same level as at the end of the
preceding financial year. Deferred costs and accrued revenues of the controlling entity accounted for 54%
of the total recognised by the Group. The major amount represented SIT 129.8 million of accrued costs.
Amongst other group enterprises, Bofex, d. o. o. reported a total of SIT 88.6 million of deferred costs
and accrued revenues of which SIT 78.0 million represented accrued revenues from contractually agreed
supplier discounts approved for merchandise acquired in 2004.

4.9. EQUITY
Notes and Disclosures
At 31 December 2004, the share capital of Merkur, d. d. represented 1,214,585 ordinary registered shares.
One ordinary registered share par value SIT 10,000.00 ensures the following rights to its holder:
• One vote at the shareholders’ meeting,
• Proportionate amount of dividends,
• Proportionate amount of bankruptcy or liquidation estate in the event of bankruptcy or liquidation.
Dematerialised securities of Merkur, d. d. are registered in the central securities register at the Ljubljana
Central Securities Clearing Corporation (Centralna klirinško depotna družba d. d., Ljubljana – KDD).
Capital surplus represents amounts generated through payments exceeding the nominal value of shares
issued.
Reserves comprise retained net profits from previous periods earmarked primarily to settle potential
future losses. Reserves are classified as:
• Legal reserves earmarked as securing the interests of the creditors;
• Reserves for own shares which are made in the amount of investment in the enterprise’s own shares
recognised as the enterprise’s assets;
• Other reserves such as free reserves intended as reserves for own shares, loss settlement, share capital
increase, profit distribution to shareholders, employees and members of the Management Board and
the Supervisory Board, as reserves for other business risks, additional legal reserves and reserves used
for other purposes in accordance with the business policy of the enterprise.
CLASSIFICATION OF EQUITY
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
A. EQUITY (A./1 + A.2) 40,371,825 38,501,179 38,395,464 36,666,290
A./1. MAJORITY SHAREHOLDERS’ EQUITY
(I + II + III + IV + V + VI + VII) 40,371,825 38,501,179 38,372,611 36,644,634
I. Registered capital (1 + 2) 12,145,850 12,145,850 12,145,850 12,145,850
1. Share capital 12,145,850 12,145,850 12,145,850 12,145,850
2. Uncalled capital (deductible component) - - - -
II. Capital surplus 4,809,029 4,713,830 4,809,029 4,713,830
III. Reserves (1 + 2 + 3 + 4) 2,260,428 1,598,242 2,260,428 1,598,242
1. Legal reserves 1,330,273 1,330,273 1,330,273 1,330,273
2. Reserves for own shares - 267,505 - 267,505
3. Other reserves 930,155 464 930,155 464
IV. Net retained earnings 8,341,867 6,670,738 6,483,117 4,864,725
V. Net profit for the period 1,810,138 2,368,430 1,652,193 2,315,161
VI. Capital revaluation adjustment (1 + 2) 11,004,513 11,004,089 11,006,268 11,006,294
1. General capital revaluation adjustment 11,004,089 11,004,089 11,004,089 11,004,089
2. Specific capital revaluation adjustment 424 - 2,179 2,205
VII. Consolidation equity adjustments - - 15,726 532
A./2. MINORITY SHAREHOLDERS’ EQUITY - - 22,853 21,656
Compared to the year before, the majority shareholders’ equity of the Group was up 4.7% and 4.9%
in respect of the parent company. At 31 December 2004, SIT 38,372.6 million of equity of the majority
owner was lower than the total amount of the equity of the controlling entity (a difference of SIT 1,999.2
million). This was due to the elimination of the following: SIT 1,858.8 of profits generated from intragroup
transactions in the previous periods, SIT 157.9 million of differences in the net profit for the period and
capital revaluation adjustments, and SIT 17.5 million of consolidation differences recognised by the
Group.
81
AR 2004

82
AR 2004
MAINTAINING THE PURCHASING POWER OF EQUITY AND THE EFFECT
ON THE OPERATING RESULT OF MERKUR, D. D., AND THE MERKUR GROUP
MERKUR, D. D.
SIT thousand
Revaluation Revaluation General Revalued
Item basis coefficient revaluation equity
Total equity 40,371,825
Net profit for the period 2,810,138
• Revaluation based on the increase in Euro 37,561,687 0,0129 484,546
Equity after the revaluation based on Euro 40,856,371
• Revaluation based on the consumer prices increase 37,561,687 0,032 1,201,974
Equity after the revaluation based on consumer prices increase 41,573,799
MERKUR GROUP
SIT thousand
Revaluation Revaluation General Revalued
Item basis coefficient revaluation equity
Total equity 38,395,464
Net profit for the period 2,652,193
• Revaluation based on the increase in Euro 35,743,271 0,0129 461,088
Equity after the revaluation based on Euro 38,856,552
• Revaluation based on the consumer prices increase 35,743,271 0,032 1,143,785
Equity after the revaluation based on consumer prices increase 39,539,249
According to the provisions of SAS 8.28, no equity revaluation was made in 2004 since during the
preceding financial year the increase in the value of Euro did not exceed 5.5% (an increase of 2.8%).
However, in compliance with SAS 8.40, enterprises are required to disclose the effects on the operating
result of the general capital adjustment made for the purpose of maintaining the value of equity.
If in 2004 the equity was adjusted for the increase in the value of Euro, the operating result of Merkur, d. d.,
would be lower by SIT 484.5 million and SIT 461.1 million in respect of the Group. If equity was adjusted for
the increase in consumer prices, the operating result of Merkur, d. d. would be lower by SIT 1,202.0 million
and SIT 1,143.8 million in respect of the Group. If necessary, this could have been offset against strengthening
of the assets which was not recognised in the accounting records.
4.10. PROVISIONS
SIT thousand
Merkur, d. d Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
B. PROVISIONS (1 + 2 + 3) 124 68 159,233 68,577
1. Provisions for pensions and similar liabilities - - 3,045 10,300
2. Provisions for taxes - - - 4,558
3. Other provisions 124 68 156,188 53,719
The majority of long-term provisions of Merkur Group, that is, SIT 137.6 million, is recognised by
Kovinotehna, d. o. o. In 2004 provisions of SIT 45.6 million made in respect of the legal action brought by
TKB Trieste were reversed and credited to the result, whilst SIT 83.6 million of new provisions was made in
respect of the court resolutions. SIT 54.0 million of provisions made in the past in relation to SKB d.d. was
transferred from short-term financial liabilities to long-term provisions.

4.11. LONG-TERM FINANCIAL LIABILITIES
CLASSIFICATION OF LONG-TERM FINANCIAL LIABILITIES
Notes and Disclosures
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
I.a) Long-term financial liabilities (1 + 2) 17,499,308 15,197,565 19,911,079 16,648,230
1. Long-term financial liabilities to banks 17,499,308 15,197,565 19,911,079 15,204,832
• local banks 11,920,772 14,453,831 13,122,299 14,453,831
• foreign banks 5,578,536 743,734 6,788,780 751,001
2. Long-term financial liabilities to others - - - 1,443,398
Long-term financial liabilities of the Group and the parent company accounted for more than 95% of all
long-term liabilities and have, in line with the 2004 business and financial plan to ensure the relevant
resources structure, increased by 20% and 15% respectively.
A variable rate of interest tied to EURIBOR ranging from 0.7% to 1.0% was charged on long-term bank
credits. In the event of a late settlement, the interest rate charged increased by 2 percent.
Long-term debt arising from long-term bank credits was recognised at fair value.
As the interest on the majority of long-term credits was charged at EURIBOR rate which was continuing its
downward trend, in 2004 the interest rate risk was assessed as very low (detailed presentation of financial
risk management was included in the business report).
CHANGES IN LONG-TERM FINANCIAL LIABILITIES OF MERKUR, D. D.
AND THE MERKUR GROUP IN 2004
COLLATERALS GRANTED FOR LONG-TERM FINANCIAL LIABILITIES OF MERKUR, D. D.
AND THE MERKUR GROUP AT 31. 12. 2004
SIT thousand
Item Merkur, d. d. Merkur Group
Balance at 1. 1. 2004 15,197,565 16,648,230
Current amounts of long-term financial liabilities (+) 3,409,176 3,409,176
Increase (+) 6,696,009 7,977,490
New loans 6,468,409 7,673,416
Revaluation 227,600 304,074
Decrease (-) - 7,803,442 - 8,123,817
Repayments of the principal - 3,573,840 - 3,874,969
Current amounts of long-term financial liabilities - 4,229,602 - 4,248,848
Balance at 31. 12. 2004 17,499,308 19,911,079
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
I.a) Long-term financial liabilities 17,499,308 15,197,565 19,911,079 16,648,230
• Mortgages 8,332,748 10,446,132 9,778,029 11,889,529
• Bills of exchange 479,486 - 479,486 7,267
• Other 8,687,074 4,733,806 9,648,327 4,733,806
• No collateral - 17,627 5,237 17,628
83
AR 2004

84
AR 2004
MATURITY OF LONG-TERM FINANCIAL LIABILITIES OF MERKUR, D. D.
AND THE MERKUR GROUP AT 31. 12. 2004
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
I.a) Long-term financial liabilities 17,499,308 15,197,565 19,911,079 16,648,230
• Maturing over a period of 1 to 2 years 9,594,182 3,063,398 9,859,821 3,064,478
• Maturing over a period of 2 to 3 years 2,887,932 7,845,934 4,358,458 7,845,934
• Maturing over a period of 3 to 4 years 2,911,934 1,668,516 3,177,453 1,668,516
• Maturing over a period of 4 to 5 years 2,042,365 1,663,727 2,313,002 1,669,914
• Maturing over a period of more than 5 years 62,895 955,990 202,345 2,399,388
4.12. LONG-TERM OPERATING LIABILITIES
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
I.b) Long-term operating liabilities to others 837,651 858,602 1,009,954 1,031,724
Long-term operating liabilities represented financial lease obligations with maturity in excess of 5 years.
MATURITY OF LONG-TERM OPERATING LIABILITIES OF MERKUR, D. D.
AND THE MERKUR GROUP AT 31. 12. 2004
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
I.b) Long-term operating liabilities 837,651 858,602 1,009,954 1,031,724
• Maturing over a period of 1 to 2 years 68,033 59,214 149,533 59,214
• Maturing over a period of 2 to 3 years 70,427 60,807 98,140 60,807
• Maturing over a period of 3 to 4 years 76,431 63,047 90,726 63,047
• Maturing over a period of 4 to 5 years 73,381 65,370 88,478 71,615
• Maturing over a period of more than 5 years 549,379 610,164 583,077 777,041
4.13. SHORT-TERM FINANCIAL LIABILITIES
CLASSIFICATION OF SHORT-TERM FINANCIAL LIABILITIES
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
II.a) Short-term financial liabilities 36,133,114 25,290,634 42,307,135 32,809,802
1. Short-term financial liabilities to banks 34,966,713 24,463,094 41,138,638 31,977,570
• local banks 32,368,036 22,666,600 36,970,324 28,515,710
• foreign banks 2,598,677 1,796,494 4,168,314 3,461,860
2. Short-term financial liabilities to others 1,166,401 827,540 1,168,497 832,232
Short-term financial liabilities to banks accounted for 52% of all short-term liabilities of the Group and
the parent company. Short-term financial liabilities represented sources of funds for current assets. The
nominal rate of interest ranged between 6.75 and 4% and continued its downward trend. In the event
of late settlements, default interest was charged at the statutory rate. Repayments of interest and the
principal were reconciled with the revenue generated by the company.
Short-term financial liabilities were recognised at amounts recorded in loan contracts.

COLLATERALS GRANTED FOR SHORT-TERM FINANCIAL LIABILITIES OF MERKUR, D. D.
AND THE MERKUR GROUP AT 31. 12. 2004
Notes and Disclosures
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
II.a) Short-term financial liabilities 36,133,114 25,290,634 42,307,135 32,809,802
• Mortgages 5,957,479 7,388,861 5,957,479 7,388,861
• Warranties - - 6,134,541 5,446,498
• Bills of exchange 27,806,588 17,074,233 27,806,589 17,080,428
• Other 1,202,646 - 1,240,029 2,066,475
• No collateral 1,166,401 827,540 1,168,497 827,540
4.14. SHORT-TERM OPERATING LIABILITIES
CLASSIFICATION OF SHORT-TERM OPERATING LIABILITIES
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
II.b) Short-term operating liabilities (1 + 2 + 3 + 4 + 5) 30,492,945 35,602,776 36,827,439 32,848,980
1. Short-term operating liabilities from advances 275,829 139,756 316,492 209,746
2. Short-term accounts payable 24,638,025 22,423,724 33,340,396 30,109,224
3. Short-term bills payable 103,400 54,000 103,400 54,000
4. Short-term operating liabilities to group enterprises 3,208,290 11,466,406 - -
5. Short-term operating liabilities to others 2,267,401 1,518,890 3,067,151 2,476,010
Short-term operating liabilities of the Group were up 12% compared to 2003; of that, accounts payable
accounted for 92% of all short-term operating liabilities. In respect of the parent company, there was a
14% fall in short-term operating liabilities compared to 2003; of that, accounts payable represented 82%
of all operating liabilities, and 11% of all operating liabilities were due to enterprises in the group. The
average settlement period was 34 days shorter than in 2003 (in respect of Merkur, d.d.) and 27 days
shorter in respect of the Group.
SHORT-TERM OPERATING LIABILITIES OF THE MERKUR GROUP ACCORDING TO REGIONAL SEGMENTS
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
II.b) Short-term operating liabilities 30,492,945 35,602,776 36,827,439 32,848,980
• Slovenia – local market 22,533,729 28,233,385 24,706,249 22,724,870
• Foreign markets 7,959,216 7,369,391 12,121,190 10,124,110
4.15. ACCRUED COSTS AND DEFERRED REVENUES
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 31. 12. 2004 31. 12. 2003 31. 12. 2004 31. 12. 2003
D. Accrued costs and deferred revenues (1 + 2) 1,679,513 307,157 1,783,027 391,333
1. Accrued costs and expenses, of that: 1,621,172 230,504 1,636,430 237,295
• interest 92,533 217,809 98,124 217,809
• other 1,528,639 12,695 1,538,306 19,486
2. Deferred revenues, of that: 58,341 76,653 146,597 154,038
• interest - - 84,689 26,433
• other 58,341 76,653 61,908 127,605
85
AR 2004

86
AR 2004
At the end of 2004, SIT 1,783.0 million of deferred costs and accrued revenues of the Group represented
a 5.5 fold increase compared to 2003. Accrued costs and deferred revenues reported by the controlling
entity accounted for 94% of the total, with the majority (SIT 1,486.4 million) representing accrued costs of
collateral approved in respect of Big Bang Handels GmbH Austria.
4.16. OFF BALANCE SHEET ITEMS
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 2004 2003 2004 2003
Off balance sheet assets 51,871,942 47,478,746 54,226,121 48,083,582
• Mortgages approved 20,573,699 20,327,646 22,018,980 20,327,646
• Mortgages taken out 9,536,688 8,533,388 9,825,744 8,533,388
• Leased property 7,346,803 7,964,832 7,346,803 7,964,832
• Guaranties approved 11,363,804 7,936,512 11,363,804 8,347,962
- to subsidiaries 9,087,895 6,973,605 9,087,895 7,385,055
- to other enterprises 2,275,909 962,907 2,275,909 962,907
• Guaranties received 2,412,320 2,231,428 2,679,664 2,231,428
• Interests due from customers in the republics
of the former Yugoslavia 203,877 197,243 203,877 197,243
• Other off balance sheet records 173,578 92,874 526,076 92,874
• Consignment goods 140,437 128,445 140,437 128,445
• Liabilities from forced settlement of Novotehna 54,358 54,358 0
• Fixed assets undergoing privatization 66,378 66,378 66,378 259,764
GUARANTIES APPROVED
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Enterprise 2004 2003 2004 2003
Guaranties approved (1 + 2) 11,363,804 7,936,512 11,363,804 8,347,962
1. To subsidiaries 9,087,895 6,973,603 9,087,895 7,385,053
• Bofex, d. o. o. 4,955,212 3,781,132 4,955,212 4,192,582
• Perles Merkur Italia, s.r.l. 2,320,185 1,923,772 2,320,185 1,923,772
• Merkur International Zagreb, d. o. o. 1,198,715 - 1,198,715 -
• Merkur International Praha, spol. Sr.o. 490,315 484,071 490,315 484,071
• Merkur MI Handels, GmbH 123,468 784,628 123,468 784,628
2. To other enterprises 2,275,909 962,909 2,275,909 962,909
• Big Bang Handels GmbH 2,174,469 946,761 2,174,469 946,761
• BOF Handels GMBH 95,897 - 95,897 -
• Others 5,543 16,148 5,543 16,148
Guaranties were approved for loans drawn by subsidiaries and are reported within short-term liabilities of
the Merkur Group. Subsidiaries have not issued any guaranties to third parties.
There are no other contingencies, apart from those reported in the balance or off balance sheet items by
the controlling entity or its subsidiaries.

Experienced and well-trained employees offer
assistance and advice to the customers and business
partners, which is an invaluable part of a complex
and high-quality service.
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5. DISCLOSURES AND NOTES TO THE INCOME STATEMENT
The income statement format selected by the company is specified in SAS 25.6 as format II. Theoretically
viable items which are not applicable to the company are not presented. The income statement is
presented in a shortened version with detailed break-down of items presented in notes included in the
continuation of the report.
5.1. NET SALES REVENUES
CLASSIFICATION OF NET SALES REVENUES
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 2004 2003 2004 2003
1. Net sales revenues (a + b + c + d + e) 152,100,851 121,363,982 178,743,080 142,563,740
a) Wholesale of merchandise from the warehouse 47,079,231 34,292,371 37,728,392 27,998,696
b) Wholesale of merchandise in transit 49,872,510 40,501,936 60,868,139 46,500,981
c) Retail sale of merchandise to legal entities 22,045,595 17,456,759 26,443,067 23,994,689
d) Retail sale of merchandise to personal entities 30,898,897 27,012,719 51,266,981 41,053,425
e) Services 2,204,618 2,100,197 2,436,501 3,015,949
In 2004 the Merkur Group realised SIT 178,743.1 million of net sales, up 25% compared to 2003. Sales
on Slovenian market account for 83% of total sales, 11% of total sales were generated on the markets of
former Yugoslavia, and 6% on other markets. The majority, that is, over 99% of net sales, were achieved
with the primary activities of the Group which are wholesale and retail trade in merchandise.
In terms of net revenue from sales to entities outside the Group, 76% of net sales were achieved by the
parent company Merkur, d. d., 11% by Bofex, d. o. o., 6% by Merkur International Zagreb, d. o. o., and 7%
by all other enterprises.
NET REVENUES OF MERKUR, D. D. AND THE MERKUR GROUP BY BUSINESS SEGMENTS
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Business segment 2004 2003 2004 2003
Merkur, d. d. 152,100,851 121,363,982 178,743,080 142,563,740
• Wholesale 97,865,177 75,590,268 99,529,272 76,428,088
• Retail 53,135,212 44,578,270 77,900,770 64,940,208
• Other 1,100,462 1,195,444 1,313,038 1,195,444
NET REVENUES OF MERKUR, D. D., AND THE MERKUR GROUP BY REGIONAL SEGMENTS
(FROM THE VIEWPOINT OF THE CONTROLLING ENTITY)
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 2004 2003 2004 2003
Net sales revenues 152,100,851 121,363,982 178,743,080 142,563,740
Net sales on the local market - Slovenia 129,466,837 110,214,126 147,712,481 126,646,019
• Group enterprises 700,290 875,241 - -
• Associates - 32,784 - 39,129
• Others 128,766,547 109,306,101 147,712,481 126,606,890
Net sales on foreign markets 22,634,014 11,149,856 31,030,599 15,917,721
• Group enterprises 15,254,976 5,680,196 - -
• Others 7,379,038 5,469,660 31,030,599 15,917,721

NET SALES REVENUES GENERATED BY MERKUR, D. D. AND
THE MERKUR GROUP BY GEOGRAPHICAL MARKETS
Notes and Disclosures
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Geographical markets 2004 2003 2004 2003
SLOVENIA 129,466,837 110,214,126 147,712,481 126,646,019
FOREIGN MARKETS 22,634,014 11,149,856 31,030,599 15,917,721
Republics of the former Yugoslavia 14,170,245 7,817,088 20,104,172 10,920,418
• Croatia 7,310,578 4,110,718 10,922,882 6,510,149
• Bosnia in Herzegovina 4,095,807 2,348,803 5,178,836 2,842,782
• Serbia and Montenegro 1,889,160 868,429 2,988,522 922,155
• Macedonia 874,700 489,138 1,013,932 645,332
EU member states 7,849,884 1,683,750 10,312,542 3,348,285
• Italy 2,794,666 389,508 3,267,158 661,013
• Czech Republic 2,166,077 287,710 2,256,073 468,032
• Germany 953,685 830,824 707,691 854,606
• Austria 897,076 162,118 1,842,247 500,698
• Cyprus 507,649 13,438 507,649 13,438
• Other EU member states 530,731 152 1,731,724 850,498
Other foreign markets 613,885 1,649,018 613,885 1,649,018
• Russia 501,592 1,420,518 501,592 1,420,518
• Others 112,293 228,500 112,293 228,500
TOTAL NET SALES REVENUES 152,100,851 121,363,982 178,743,080 142,563,740
5.2. SELLING COSTS AND STANDARD ADMINISTRATIVE EXPENSES
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 2004 2003 2004 2003
Selling costs and standard administrative
expenses (4. + 5.a) 21,811,605 19,462,614 29,550,364 25,149,237
Costs of material 1,220,254 1,181,134 1,546,166 1,439,513
Costs of services 7,456,519 6,723,671 11,613,669 9,761,633
Long-term provisions - - 85,619 3,150
Labour costs 10,806,460 9,429,657 13,282,606 11,255,146
• Wages 7,012,162 6,222,932 8,737,611 7,196,697
• Retirement insurance costs 858,607 750,793 986,544 1,088,186
• Other costs of insurance 527,091 461,752 732,047 648,661
• Other labour costs 2,408,600 1,994,180 2,826,404 2,321,602
Depreciation and amortization 1,997,749 1,877,668 2,614,832 2,342,177
Other operating expenses 330,623 250,484 407,472 347,618
In nominal terms, operating costs incurred by the Merkur Group were up 18% compared to 2003; the
parent company recorded a 12% increase in operating costs compared to a 25% increase in the scope of
business. According to the natural types of costs, their structure was as follows:
Merkur, d. d. Merkur Group
• Costs of material 6% 6%
• Costs of services 34% 39%
• Labour costs 50% 45%
• Depreciation and amortization 9% 9%
• Other expenses 1% 1%
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AR 2004
Labour costs represented a more significant share of costs incurred by the trade sector. An 18% increase
of labour costs in the Group and 15% increase in the controlling entity were primarily due to the increase
in basic wages and reconciliatory monthly allowance of SIT 7,500 per employee in trade sector. Also, the
increase was partly due to the higher number of employees. According to the number of hours worked,
staff numbers were up 6.2% in the Group and 1.4% in Merkur, d. d. Labour costs also included costs of an
additional retirement pension scheme.
5.3. REVALUATION OPERATING EXPENSES
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 2004 2003 2004 2003
Revaluation operating expenses (5.b + 5.c) 657,725 443,284 2,554,967 773,467
5.b) Revaluation operating expenses from tangible
and intangible fixed assets 36,844 43,685 258,813 213,227
• Loss from sale and intangible fixed assets written-off 18,515 - 18,518 100,642
• Loss from sale and tangible fixed assets written-off 18,329 43,685 240,295 89,311
• Impairment of tangible fixed assets - - - 23,274
5.c) Revaluation operating expenses from current assets 620,881 399,599 2,296,154 560,240
• Receivable provisioning and write-off 557,393 350,608 1,341,500 489,976
• Inventory allowances and write-offs 63,488 48,991 925,668 54,759
• Other revaluation of assets - - 28,986 15,505
In 2004 revaluation operating expenses incurred by the Merkur Group were 3.3 times higher than
in 2003. SIT 1,547.3 million of revaluation operating expenses were recognised by Bofex, d. o. o. and
represented inventory impairment (SIT 853.4 million); SIT 543.9 million of receivables were written-off
and SIT 150.0 million represented other revaluation expenses associated with tangible and intangible
fixed assets. Impairments were made also in respect of events which took place in previous periods.
In order to reconcile the accounting policies applied by the Group, subsidiaries located abroad had
to increase the amount of provisions made against operating receivables to SIT 238.8 million in total.
Revaluation operating expenses recognised by Merkur, d. d., were up 48% compared to 2003, primarily
as a result of SIT 441.9 million of provisions made against receivables and final write-off of SIT 115.5
million of receivables which were debited against the company’s result.
5.4. OTHER OPERATING REVENUE
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 2004 2003 2004 2003
6. Other operating revenues (a + b + c) 569,870 376,977 818,051 535,436
a) Surplus from sale of tangible fixed assets 404,166 274,409 439,481 285,653
b) Receivables written-off, later recovered 111,346 102,568 227,537 184,999
c) Other operating revenues 54,358 - 151,033 64,784
Other operating revenues comprises SIT 439.5 million gained on disposal of fixed assets of the Group (the
majority, that is, 92% was generated by the controlling entity), and SIT 227.5 million of Group receivables
written-off in the past but which were later recovered. The parent company successfully recovered SIT 111.3
million of receivables which were previously written-off.

5.5. FINANCIAL REVENUES AND EXPENSES
FINANCIAL REVENUES
Notes and Disclosures
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 2004 2003 2004 2003
Total financial revenues (7 + 8 + 9) 6,099,626 4,678,662 6,608,671 5,183,454
7. Financial revenues from equity interests (a + b) 3,978,459 2,631,701 3,629,330 2,548,423
a) Financial revenues from equity interests in the group
less equity interest in associates 351,347 113,370 - -
b) Financial revenues from other equity interests
(including revaluation financial revenues) 3,627,112 2,518,331 3,629,330 2,548,423
8. Financial revenues from long-term
receivables due from others 246,327 228,368 275,505 255,219
9. Financial revenues from short-term receivables (a + b + c) 1,874,840 1,818,593 2,703,836 2,379,812
a) Interest revenues and financial revenues from short-term receiv-
ables due from the group less receivables due from associates 223,632 258,011 - -
b) Interest revenues and financial revenues from short-term
receivables due from associates - 109 - 604
c) Other financial revenues from receivables
(including revaluation financial revenue) 1,651,208 1,560,473 2,703,836 2,379,208
Over half of the financial revenues of the Group represented income from equity interests in other
enterprises, banks and insurance companies. Of that, the parent company reported SIT 3,283.6 million of
financial revenue from disposal of investments and SIT 308.0 million of dividends. These funds were used
for settlement of losses incurred by Bofex, Austria. Nearly all of the financial revenues derived from longterm
and short-term receivables represented interest accrued on loans approved to other enterprises; of
that, the Group earned SIT 2,979.3 million of interest revenues and the controlling entity SIT 1,897.5 million.
FINANCIAL EXPENSES
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 2004 2003 2004 2003
Total financial expenses (10 + 11) 7,920,897 4,716,658 6,355,818 5,041,442
10. Financial expenses associated with long-term
and short-term investment write-offs (a + b) 3,525,989 743,575 982,769 379,119
a) Revaluation financial expenses from investments
in the group less investments in associates 3,308,169 479,680 - -
b) Revaluation financial expenses from other investments 217,820 263,895 982,769 379,119
11. Interest costs and financial costs for
other liabilities (a + b + c) 4,394,908 3,973,083 5,373,049 4,662,323
a) Interest costs and financial costs associated with
enterprises in the group less associates 198,451 459,825 - -
b) Interest costs and financial costs associated with associates - 287 - 287
c) Other interest and financial costs 4,196,457 3,512,971 5,373,049 4,662,036
Financial expenses of the Group comprised interest costs, exchange rate losses and revaluation expenses
associated with long-term and short-term loans approved by others – especially banks. The latter represented
the major share of financial expenses (SIT 4,869.4 million in respect of the Group which accounted for 77%
of total financial expenses and SIT 3,126.3 million in respect of the controlling entity accounting for 39% of
total financial expenses). Revaluation financial expenses from investments in the Group recognised by the
parent company included SIT 3,308.2 million of net loss incurred by Bofex, d. o. o. and SIT 1,486.4 million of
provisions made against guaranties approved for loans drawn by Big Bang Handels GmbH Austria.
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AR 2004
5.6. EXTRAORDINARY REVENUES AND EXPENSES
EXTRAORDINARY REVENUES
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 2004 2003 2004 2003
13. Extraordinary revenues (a + b + c) 106,053 78,688 137,297 122,880
a) Receivables written-off, later recovered 42,153 19,836 52,992 19,836
b) Compensations received 37,941 37,526 43,954 62,296
c) Other extraordinary revenues 25,959 21,326 40,351 40,748
EXTRAORDINARY EXPENSES
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 2004 2003 2004 2003
14. Extraordinary expenses (a + b + c) 372,700 98,248 446,760 142,233
a) Fines 614 222 42,838 22,632
b) Economic damages 312,245 45,752 316,552 45,752
c) Other extraordinary expenses 59,841 52,274 87,370 73,849
A significant item of extraordinary expenses represented SIT 287.7 million paid as damages to IKEA
Immobilien GmbH, Wels, Austria for early termination of rental agreement in respect of business premises
of BOF Graz.
5.7. INCOME TAX
At the end of 2004 the company requested permission from the Special Tax Office to submit a consolidated
tax return of the following enterprises, i.e. taxable persons: Merkur, d.d., Bofex, d. o. o. and Kovinotehna,
d. o. o. The Tax Office granted permission to submit consolidated tax return for the period of three years
inclusive of fiscal year 2004. The consolidated tax return was to be submitted by Merkur, d.d.
SIT thousand
1. Tax basis of individual enterprises 593,634
• Merkur, d. d. 2,281,330
• Kovinotehna, d. o. o. 186,278
• Bofex, d. o. o. - 1,873,974
2. Tax rate (%) 25
3. Tax liability (1 x 2) 148,408
• Merkur, d. d. 137,205
• Kovinotehna, d. o. o. 11,203
• Bofex, d. o. o. -
5.8. OPERATING RESULT
SIT thousand
Merkur, d. d. Merkur, d. d. Merkur Group Merkur Group
Item 2004 2003 2004 2003
EBITDA (earnings before interest, taxes,
depreciation and amortization) 7,033,038 4,332,862 5,545,304 4,668,438
EBIT (earnings before interest and taxes = operating result) 5,035,289 2,455,194 2,930,472 2,326,261
Net profit from ordinary activity 3,214,018 2,417,198 3,183,325 2,468,273
Gross profit - EBT (earnings before taxes = gross profit) 2,947,371 2,397,638 2,873,862 2,448,920
Net profit for the period 2,810,138 2,368,430 2,652,193 2,315,161

6. DISCLOSURES OF THE ITEMS INCLUDED IN THE STATEMENTS OF
CASH FLOWS AND CHANGES IN EQUITY
Notes and Disclosures
The cash flow statement for financial year 2004 is prepared under the indirect method – Format II. Inflows
and outflows are derived from two successive balance sheets, the income statement and additional
information, less amortization, depreciation and revaluation adjustments. This means that revenues and
expenses are nearing the receipts and disbursements.
CHANGES IN EQUITY COMPONENTS DURING 2004
According to the resolution approved by the shareholders of Merkur d. d. at their 13th regular meeting
held on 30 June 2004, distributable profit for 2003 period of SIT 9,039.2 million was appropriated as
follows: SIT 837.9 million was paid to shareholders as dividends, SIT 18.9 million of dividends was paid to
members of the Management Board, whilst SIT 16.2 million was paid to members of the SB. The residual
amount of SIT 8,166.2 million remains unappropriated.
In 2004 the equity of Merkur, d. d. increased by SIT 2,810.1 million of the net profit of the period.
According to the decision of the Management Board of Merkur, d. d. SIT 230.1 million of the net profit
generated in 2004 was appropriated to reserves for own shares acquired and paid in 2004, whilst SIT
1,000.0 million was appropriated to other reserves. The residual amount of SIT 1,580.0 million was
appropriated to the balance sheet available profit of 2004.
Due to the disposal of Merkur’s own shares in 2004, SIT 497.6 million of reserves for own shares was
reversed and allocated to the original equity components from which they were derived. SIT 2.9 million
of the difference between the selling price and the acquisition price of own shares is recognised as an
increase of capital surplus or as a decrease of other reserves (SIT 69.8 million).
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AR 2004
7. OTHER DISCLOSURES
7.1. MERKUR, D. D. TRANSACTIONS WITH RELATED PARTIES
TRANSACTIONS WITH RELATED PARTIES IN 2004
SIT thousand
Sale of goods Procurement of Interest Interest
Enterprise and services goods and services revenue expenses
Total 15,955,265 21,924,035 131,097 104,692
Kovinotehna, d. o. o., Celje 8,775 1,254 8,914 67,782
Bofex, d. o. o., Ljubljana 691,514 95,160 4,908 10,342
Merkur International Zagreb, d. o. o. 6,882,973 430,307 83,079 -
Merkur Makedonija, doo, Skopje 612,634 468,623 6,328 -
Merkur International Praha, Spol. S.r.o. 776,048 9,754,848 - -
Intermerkur, d. o. o., Sarajevo 1,900,782 52,522 21,861 -
Merkur MI Handels GmbH, München 894,047 3,650,852 - 15,362
Perles Merkur Italia, s.r.l., Villesse 2,773,081 6,660,497 - 8,810
Merkur International d. o. o., Beograd 1,415,411 809,972 6,007 2,396
RECEIVABLES AND LIABILITIES OF MERKUR, D. D., DUE FROM/TO ITS RELATED PARTIES AT 31. 12. 2004
SIT thousand
Operating Operating
Enterprise receivables liabilities
Total 9,229,275 3,211,436
Kovinotehna, d. o. o., Celje 245,042 58,160
Bofex, d. o. o., Ljubljana 1,230,090 88,368
Merkur International Zagreb, d. o. o. 3,865,603 85,998
Merkur Makedonija, doo, Skopje 286,280 59,670
Merkur International Praha, Spol. S.r.o. 236,946 1,463,561
Intermerkur, d. o. o., Sarajevo 970,179 4,445
Merkur MI Handels GmbH, München 235,385 246,050
Perles Merkur Italia, s.r.l., Villesse 1,144,224 1,170,298
Merkur International d. o. o., Beograd 1,015,526 34,886

7.2. FEES PAID TO MEMBERS OF THE MANAGEMENT BOARD, THE SUPERVISORY BOARD
AND STAFF ON INDIVIDUAL WORK CONTRACTS
Notes and Disclosures
TOTAL FEES PAID IN 2004 TO THE GROUP OF KEY PERSONNEL ACCORDING TO THE COMPANIES ACT
INCLUDING INFORMATION OF LOANS APPROVED TO THE SAME GROUP OF PERSONNEL
Participation Net awards
in the Total Total from
Members of Variable profit of Other gross net options
The Management Board Number Fixed fees fees 2003 period receipts receipts receipts (estimated)
1 2 3 4 5 6=1 to 5 7 8
Bine Kordež 1 26,100,000 12,281,030 4,690,000 2,965,097 46,036,127 20,419,766 2,415,000
Goran Čelesnik 1 22,500,000 10,538,230 4,000,000 2,224,393 39,262,623 17,515,285 1,932,000
Viktor Vauhnik 1 20,250,000 9,803,250 3,470,000 1,501,596 35,024,846 15,540,219 1,932,000
Milan Jelovčan 1 19,350,000 8,943,086 3,470,000 2,554,562 34,317,648 16,208,925 1,932,000
Alenka Podbevšek 6 months 10,800,000 4,053,600 30,458,024 45,311,624 20,217,193
Marijana Kajzer 1 9,243,057 4,587,501 670,000 941,298 15,441,856 7,723,538 1,260,000
Total Management Board 5,5 108,243,057 50,206,697 16,300,000 40,644,970 215,394,724 97,624,926 9,471,000
Structure 55% 18% 8% 19% 100% 45 % - net/gross
Supervisory Board 9 14,675,980 10,185,941 24,861,921 18,206,993 6,804,000
Staff on individual
work contracts 67 692,956,493 49,860,000 81,939,206 824,755,699 470,221,102 46,956,000
In accordance with the provisions of individual work contracts, fixed fees represent the basic wage or the
lowest amount paid in the event that the planned business goals are not achieved.
Variable fees represent performance incentives.
Other receipts comprise the following: compensation, termination benefits, holiday pay, management
insurance benefits, the use of a company car and cell phone, additional retirement insurance and
reimbursement of costs of travel to and from work and a hot meal during working time.
Net receipts include the following: net fixed and variable fees, net participation in the profit generated in
2003, net compensation, termination benefits and holiday pay, management insurance benefits, the use
of a company car and cell phone, additional retirement insurance and reimbursement of costs of travel to
and from work and a hot meal during working time.
In accordance with the provisions of the stock option scheme, in 2004 the Supervisory Board awarded to
members of the Management Board, as the 2003 performance incentive, 2,255 stock options to purchase
Merkur d. d. shares at a price of SIT 24,000 per share (the average share price in 2003) with a purchase
option available from 1 June 2006 to 31 December 2008. 1,620 stock options were awarded under the
same conditions to members of the Supervisory Board, whilst 11,180 stock options were awarded to
staff on individual work contracts. The estimate of the net receipts was based on the assumption of a 7%
annual increase in the share price, a 5-year holding period, and tax rate of 50%.
A loan was approved to Goran Čelesnik, member of the Management Board. The amount outstanding at
31 December is SIT 11,132 thousand. At 31 December 2004 total outstanding amount of loans approved
to staff on individual contracts is SIT 58,283 thousand.
No advances or collateral were approved in 2004 in respect of receivables due from the above-mentioned
group of personnel. No long-term or short-term loans were raised from this group of personnel. In 2004
Merkur, d. d. did not conclude any transactions above the regular course of business with members of the
Management Board, SB or their related parties.
SIT
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AR 2004
8. PERFORMANCE RATIOS
8.1. PERFORMANCE RATIOS - MERKUR, D. D.
Ratio 31.12.2004 31. 12. 2003 Index
A. The basic ratios of financing state
1. Participation rate of equity (%)
(Equity / Liabilities (in broader sense)) 31.8 33.3 95
2. Participation rate of long-term financing (%) Total equity and long-term debt
(including long-term provisions) / Liabilities (in broader sense) 46.2 47.1 98
3. Financial standing (long-term liabilities / Average equity) 0.46 0.46 100
B. The basic ratios of investment utilisation
1. Operating fixed assets rate (%)
Fixed operating assets (at carrying amount) / Assets 30.3 30.9 98
2. Long-term investment rate (%) Total fixed operating assets (at carrying amount),
long-term investments and long-term operating receivables / Assets 41.1 52.3 79
3. Investment assets rate (%) Total long-term and short-term investments / Assets 15.4 25.8 60
C. The basic ratios of horizontal financial structure
1. Equity to fixed operating assets
Equity / Fixed operating assets (at carrying amount) 1.050 1.075 98
2. Acid test ratio
Liquid assets / Short-term liabilities 0.003 0.005 60
3. Quick ratio: Current assets (excluding long-term operating receivables
and inventories) / Short-term financial and operating liabilities 0.693 0.605 115
4. Current ratio: Current assets (excluding long-term operating receivables)
/ Short-term financial and operating liabilities 1.079 0.880 123
D. The basic ratios of efficiency
1. Operating efficiency ratio: Operating revenue / Operating expenses 1.034 1.021 101
2. Gross profit net revenue from sales profitability rate
Gross profit from sales / Net sales revenue 17.7 18.1 98
3. Total revenue net profitability rate (%) Net profit / Total revenue 1.77 1.87 95
E. The basic profitability ratios
1. Net return on equity – ROE (%)
Net profit for financial year / Average capital (less net operating result for the year) 7.38 7.02 105
2. Net return on assets – ROA (%): Net profit / Average assets 2.32 2.15 108
3. Dividend to share capital ratio
(Total dividends paid in the financial year / Average share capital)* 0.060 0.078 77
4. Share book value (SIT) 33,239 31,699 105
5. Share market value (SIT) 37,410 24,391 153
6. Net earnings per share (SIT) 2,314 2,175 106
7. Net earnings per share book value 0.070 0.069 101
8. Net earnings per share market value 0.062 0.089 70
9. Share market value at 31. 12. to net earnings per share (P / E) 16.2 11.2 145
F. Productivity ratios
1. Total revenue per employee (SIT thousands) 66,755 53,921 124
2. Net profit per employee (SIT thousands) 1,181 1,010 117
4. Gross profit per employee (SIT thousands) 7,772 6,055 128
5. Added value per employee (SIT thousands) 378 335 113
G. Turnover and liquidity ratios
1. Inventory turnover (in days) 109 97 112
2. Receivable turnover (in days) 107 117 91
3 Short-term liability turnover (in days) 176 210 84
* The 2004 dividend to be decided by the GMS

8.2. PERFORMANCE RATIOS OF MERKUR GROUP
Notes and Disclosures
Performance ratio 31.12.2004 31. 12. 2003 Index
A. The basic ratios of financing state
1. Participation rate of equity (%) (Equity / Liabilities (in broader sense)) 27.3 30.4 90
2. Participation rate of long-term financing (%) Total equity and long-term debt
(including long-term provisions) / Liabilities (in broader sense) 42.4 45.2 94
3. Financial standing (long-term liabilities / Average equity) 0.56 0.54 104
B. The basic ratios of investment utilisation
1. Operating fixed assets rate (%) Fixed operating assets (at carrying amount) / Assets 30.2 32.1 94
2. Long-term investment rate (%) Total fixed operating assets (at carrying amount),
long-term investments and long-term operating receivables / Assets 37.5 40.9 92
3. Investment assets rate (%) Total long-term and short-term investments / Assets 11.7 13.8 85
C. The basic ratios of horizontal financial structure
1. Equity to fixed operating assets Equity / Fixed operating assets (at carrying amount) 0.906 0.948 96
2. Acid test ratio: Liquid assets / Short-term liabilities 0.018 0.019 95
3. Quick ratio: Current assets (excluding long-term operating receivables and inventories) /
Short-term financial and operating liabilities 0.602 0.642 94
4. Current ratio: Current assets (excluding long-term operating receivables) /
Short-term financial and operating liabilities 1.039 1.020 102
D. The basic ratios of efficiency
1. Operating efficiency ratio: Operating revenue / Operating expenses 1.017 1.017 100
2. Gross profit net revenue from sales profitability rate
Gross profit from sales / Net sales revenue 19.2 19.4 99
3. Total revenue net profitability rate (%) Net profit / Total revenue 1.42 1.56 91
E. The basic profitability ratios
1. Net return on equity – ROE (%)
Net profit for financial year / Average equity (less net operating result of the year) 7.32 7.25 101
2. Net return on assets – ROA (%) Net profit / Average assets 2.03 2.00 102
F. Productivity ratios
1. Total revenue per employee (SIT thousands) 58,995 49,985 118
2. Net profit per employee (SIT thousands) 840 780 108
3. Gross profit per employee (SIT thousands) 910 825 110
4. Added value per employee (SIT thousands) 6.771 5.624 120
5. Average monthly costs of labour per employee (SIT thousands) 351 316 111
G. Turnover and liquidity ratios
1. Inventory turnover (in days) 154 119 129
2. Receivable turnover (in days) 106 121 88
3. Short-term liability turnover (in days) 170 197 86
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9. ADDITIONAL DISCLOSURES TO THE CONSOLIDATED ANNUAL REPORT
9.1. OFFSETTING OF INTRAGROUP ASSETS, LIABILITIES AND EQUITY, REVENUE AND EXPENSES
INCLUDING CONSOLIDATION DIFFERENCES AND ELIMINATION OF UNREALIZED PROFIT AND LOSS
SIT thousand
Consolidation
Offset balance sheet items Offset income differences,
Liabilities statement items unrealized
Item Assets and equity Revenue Expenses profit or loss
1. Long-term investments in the group 2,566,649 - - - -
Equity interests in the group- majority - 2,566,649 - - -
Long-term investments in the group - 567,103 - - - -
Goodwill 567,103 - - - -
2. Fixed assets 1,202,809 - - - -
Intangible fixed assets 2,874 - - - -
Long-term investments – investment property 527,887 - - - -
Equity interests in the group –
majority (retained earnings) - 1,709,232 - - -
Amortization of differences eliminated in prior periods
and allocated to intangible fixed assets - - - 113 -
Amortization of differences eliminated in prior periods
and allocated to tangible fixed assets - - - 6,237 -
Revaluation operating expenses from
intragroup sale of fixed assets - - - 448 -
Revaluation operating revenue from
intragroup sale of intangibles - - 3,894 - -
Revaluation operating revenue from
intragroup sale of fixed assets - - 27,242 - -
Consolidation differences - - - - 24,338
3. Inventories – unrealized current profit 268,640 - - - -
Consolidated inventory adjustment –
invoices not booked - 40,104 - - - -
Net sales revenue - - 268,640 - -
Equity – retained earnings –
unrealized inventory profit of the previous period - 149,518 - - -
Consolidated adjustment of liabilities to suppliers in the group - - 40,104 - - -
Purchase costs of quantities sold - - - 149,518
Consolidation differences - - - - 119,122
4. Short-term operating receivables 12,454,889 - - - -
Consolidated short-term receivable adjustment 6,597 - - - -
Consolidated short-term receivable
adjustment due to conversion 1,304 - - - -
Consolidated adjustment – net sales revenue - - 6,597 - -
Interest revenue - - - - -
Consolidated adjustment –
financial expenses for exchange differences - - - - 13,141 -
Short-term operating liabilities - 12,454,889 - - -
Consolidated adjustment – group suppliers - - 13,141 - - -
Consolidated equity adjustment – exchange
differences from conversion of receivables and liabilities - 22,282 - - -
Consolidated equity adjustment - - - - -
Consolidated differences – exchange differences
from conversion of receivables/liabilities - - 20,978 - - 19,738

Notes and Disclosures
SIT thousand
Consolidated
Offset balance sheet items Offset income differences,
Liabilities statement items unrealized
Item Assets and equity Revenue Expenses profit or loss
5. Net sales revenue - - 37,409,489 - -
Purchase costs of quantities sold - - - 36,933,958 -
Selling expenses - - - 421,455 -
General and administrative expenses - - - 54,076 -
Net profit for the period - 5,253 - -
Consolidated differences – restatement
of income statement profit / balance sheet - - - 5,253 -5,253
6. Interest revenue and financial revenue from
other long-term and short-term receivables
within the group - - 235,789 - -
Interest expense and financial expenses
for other liabilities within the group - - - 235,789 -
Interest expense and financial expenses
for other liabilities within the group - - - - -
7. Consolidated differences and
unrealized intragroup profit or loss - - - - 157,945
Equity of the group – majority - 157,945 - - -
Total offset 16,991,545 16,991,545 37,951,651 37,793,706 157,945
9.2. ENTERPRISES INCLUDED IN THE CONSOLIDATION
In addition to the controlling entity Merkur, d. d., the following related entities are included in the
consolidated financial statements of the Merkur Group for the financial year 2004. The schedule also
indicates the controlling entity’s equity interest in individual enterprises:
• Kovinotehna, d. o. o., Celje 100.00 %
• Bofex, d. o. o., Ljubljana 100.00 %
• Merkur MI Handels GmbH, München, Germany 100.00 %
• Perles Merkur Italia, s. r. l., Villesse, Italy 100.00 %
• Merkur International Zagreb, d. o. o., Croatia 100.00 %
• Merkur Makedonija doo, Skopje 90.35 %
• Merkur International Praha, spol. S r. o. Czech Republic 100.00 %
• Intermerkur, d. o. o., Sarajevo, Bosnia and Herzegovina 99.63 %
• Merkur International Beograd, d. o. o., Serbia and Montenegro 100.00 %
Merkur International Beograd, d. o. o., was not included in the 2003 consolidated financial statements as
it began its operations in the middle of 2003.
Merkur Polska, Sp. Z.o.o., Warsaw has been dormant for the past two years and is not included in the
consolidated financial statements of the Merkur Group for the financial years ended 31 December 2003
and 2004 respectively. The company is scheduled to be sold in 2005.
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9.3. EVENTS AFTER THE BALANCE SHEET DATE
17 February 2005: opening of the new MERKUR sales centre in Pula, Croatia
24 February 2005: opening of the new Merkur Makedonija business premises in Skopje.
3 March 2005: opening of the renovated franchise outlet Merkur Komplet in Logatec.
In 2005, Merkur continued the process of dissolution of its company, Big Bang
Handels Austria, owned in 80% by Bofex. The merchandise from the Graz
outlet was sold off, and the outlet was returned to the lessors. A new company,
BOF Handels, has assumed trade in the Vienna outlet. Merkur has withdrawn
from the operations in Austria, and settled the liabilities to the employees,
creditors and the state. However, a part of the affiliate’s liabilities to the present
and past owners have still remained opened. The former joint owners filed a
lawsuit against Merkur because of the losses incurred by the Austrian project.
Merkur believes that the lawsuit is not justified.
The examination of the documentation from the time when Bofex was run by Jurij Schollmayer disclosed
several irregularities. These give the grounds for suspicion of a criminal act. Bofex has filed criminal
information at the competent public prosecutor’s office. In the interest of legal procedure and investigation,
the contents of the information cannot be revealed to the public.
9.4. TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
Merkur, d. d., Naklo closely monitors the transition to international accounting standards by enterprises in
the EU. As Merkur shares are quoted on the Ljubljana stock exchange, the company is required to prepare
its consolidated financial statements for the financial year beginning on 1 January 2005 in accordance
with the International Financial Reporting Standards. For purposes of the first reporting in accordance
with IFRS in 2005, Merkur will have to comply with the provisions of IFRS 1 including the restatement
of the comparable 2004 data. Personnel in charge of adopting IFRS by the Merkur Group is currently
finalising the collection of data to be used in the preparation of the opening balance at 1 January 2005
and restatement of the 2004 information from all enterprises included in consolidation. So far we have
not encountered any significant problems and any outstanding issues are resolved with the assistance of
the external experts.

MANAGEMENT PRESENTATIONS
The Management Board confirms the financial statements of Merkur, d. d., and
the consolidated financial statements of the Merkur Group for the financial year
that ended 31 December 2004.
The Management Board also confirms that in the preparation of these financial
statements the relevant accounting policies were consistently applied.
Accounting assessments were made by observing the principle of prudence and
sound business practice; the annual report gives a true and fair presentation of
the financial position of both, the company and the Group and the results of
their operations in the financial year which ended 31 December 2004.
The Management Board is responsible for the appropriate accounting records
and adoption of the relevant measures to safeguard the company’s property
and other assets. The Management Board also confirms that these financial
statements and the pertaining notes are based on the assumption of a going
concern in respect of the company and also of the Group and that they are
prepared in accordance with the current legislation and Slovenian Accounting
Standards.
Bine Kordež, mag.
Chairman of the Management Board
Goran Čelesnik, mag.
Member of the Management Board
Viktor Vauhnik, mag.
Member of the Management Board
Milan Jelovčan, mag.
Member of the Management Board
Marijana Kajzer
Member of the Management Board
Management Presentations
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Independent Auditors’ Report
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STATEMENT REGARDING COMPATIBILITY OF MERKUR’S CORPORATE
GOVERNANCE SYSTEM WITH CORPORATE GOVERNANCE CODE
The Management Board of Merkur, d. d. approves of the stipulations and principles of the Corporate
Governance Code, and believes that the implementation of recommendations and uniform standards will
help improve corporate governance in all public companies. This is especially important as Slovenia has
become a European Union member state.
All business decisions passed by the Management Board closely observe the values, mission, and
basic strategic objectives adopted and presented by the Management Board in Vision, Mission and
Strategic Plan of the Merkur Group. Merkur’s basic values revolve around business success, renown,
stability, capital value of the company, motivation of the employees, dedicated work, and assumption of
responsibilities for the development of the company, establishment of fair and long-term relationships
with the partners and end consumers. Merkur’s Management Board endeavours to strengthen the
company’s leading position among the dealers in technical products for domestic and industrial
applications and the Merkur trademark in Slovenia, and on the neighbouring markets as well.
Merkur’s Management Board believes that the applied mode of management, close co-operation with
the Trade Union and workers’ representatives from all parts of the company, comply with the principles
included in the Corporate Governance Code. There are, however, certain principles which still need to be
integrated into Merkur’s management system, albeit with the prior approval of the Supervisory Board,
which will take some time.
Merkur, d. d. herewith explains certain discrepancies within the Code as follows:
Code Article 1.2.8. reads as follows: “When the election of members of
the Supervisory Board is an item of the agenda of a General Meeting
of Shareholders, the Supervisory Board shall in cooperation with the
Management Board provide for timely public announcement of background
information on the proposed candidates for the mandate (education,
professional experience, age, memberships on supervisory boards…).”
Merkur has not released such information so far, but plans to observe this stipulation in the future.
Code Article 2.2.1. reads as follows: “…The company’s Articles of Association
or, with the Supervisory Board’s consent, the board’s terms of reference shall
regulate the allocation of areas of responsibilities as well as the cooperation
among the members of the Management Board.”
The areas of responsibility for individual board members are determined in the resolution on the
appointment of the Management Board members.
Code Articles 2.3.4. to 2.3.6. on “Compensation and share ownership of the
company”
Merkur awards stock options as a form of remuneration. The company closely monitors the performance
and other criteria, and observes the Code’s stipulations on remuneration, including the stipulations
according to which “Changing such performance targets and other conditions in a stock option plan
retroactively has been excluded”, and “The members of the Management Board shall not exercise rights,

Statement Regarding Compatibility of
Merkur’s Corporate Governance System
With Corporate Governance Code
deriving from stock options or comparable financial instruments prior to the expiry of 2 years after their
acquisition.” However, the Code stipulates damages and financial compensation if the stock option right
is not exercised in time, and the Management Board plans to observe these in the future as well, and will
prepare the respective proposals.
Code Article 2.4.5. reads as follows: “Members of the Management Board
shall not be members of the Supervisory Boards in more than five (5)
unrelated companies simultaneously. Members of the Management Board
shall accept any such Supervisory Board mandate only after obtaining
approval of the Supervisory Board.”
The Supervisory Board’s consent for work on the Supervisory Board of another unrelated company has
not been required so far, but the stipulation will be observed in the future.
Code Articles 3.4.1. and 3.4.2. include the following stipulations:
3.4.1.: “Methods for determination of the appropriate compensation of
the Supervisory Board members (salary, returns and other benefits) are
determined by the company’s Articles of Association or by resolution of a
General Meeting of Shareholders. The criteria shall be specified in advance.”
3.4.2.: “The compensation of the members of the Supervisory Board shall be
comprised of a fixed and variable component. Variable components shall
include one-time and annually payable components linked to the business
performance of an individual member as well as of the Supervisory Board
as a whole.”
The payouts to the Supervisory Board members have already been composed of fixed and variable parts.
As for the variable part, the company has determined the criteria and compensation for the Supervisory
Board members in the adopted annual plan in advance every year.
Code Article 6.1.4. includes the following stipulation: “The appointed auditor
shall be present at a General Meeting of Shareholders.”
The auditor has so far not attended the General Meeting of shareholders, but the company intends to
comply with this stipulation in the future.
This statement on compliance with the Corporate Governance Code refers to
the Code stipulations observed in 2004.
The company shall report on compliance with the Corporate Governance
Code in its annual reports.
Management Board
Merkur, d.d.
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REPORT ON INTERNAL AUDIT
The internal audit serves to provide for an independent expert opinion, impartial assurance and advice.
The Management Board’s intention is to obtain impartial examination, assessment and report on the
internal control and fulfilment of plans aiming at optimum performance, business quality, and company’s
long-term operations.
The internal auditing service carries out continuous auditing in compliance with the accounting principles
and standards, Code of Professional Conduct of Auditors adopted by the Slovenian Institute of Auditors,
and in observance of the rules of the Internal Auditing Service on Organisation and Management of the
Internal Auditing Service in Merkur and the Merkur Group. The service is an independent part of the
organisation and is directly responsible to the Management Board. It is organisationally and functionally
separated from other parts of the company.
The Internal Auditing Service carries out continuous and extraordinary internal auditing, which may
either be complete, or partial. In 2004, the service worked in observance of the five-year auditing cycle. In
observance of the plan, the service carried out eight inspections, three of them regular, and the other five
extraordinary. The service also co-operated with the external auditors in regular and preliminary audit.
Following findings and recommendations by the internal Auditing Service, twenty-four (24) resolutions
were passed to improve the imperfections, faults and general operations of the company.
The audit itself does not ensure effective control. It is necessary to provide for internal control in all
working processes, and quality control must be exerted by all levels of management.

Merkur meets the expectations and fulfils the
requirements of its customers. Satisfied customers
are happy to keep on returning, and the employees
come to work full of energy and new ideas.
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BASIC DATA ON THE COMPANIES OF THE MERKUR GROUP
MERKUR GROUP IS COMPOSED OF:
PARENT COMPANY
MERKUR - trgovina in storitve, d. d.
Cesta na Okroglo 7, SI-4202 Naklo
Register of companies at: District Court in Kranj, entry no. 10001500
Share capital: SIT 12,145,850,000.00
Registry number: 5003563
Tax number: SI 98492462
Nature of business code: 51.540
Telephone: +386 (0)4 258 80 00
Fax: +386 (0)4 258 88 05
E-mail: info@merkur.si
Website: www.merkur.si
TRANSACTION ACCOUNTS
Gorenjska banka, d. d., Kranj: 07000-0000002321
SKB, d. d., Ljubljana: 03138-1002701594
Abanka, d. d. Ljubljana: 05100-8000018034
NKBM d. d., Maribor: 04515-0000270653
Banka Koper, d. d., Koper: 10100-0032602083
NLB, d. d., Ljubljana: 02923-0016828282
Banka Celje, d. d., Celje: 06000-0027015672 – foreign currency account
Raiffeisen krekova banka, d. d., Maribor: 24400-9001573348 – foreign currency account
Probanka, d. d., Maribor: 25100-9700292128 – foreign currency account
Bank Austria CA, d. d., Ljubljana: 29000-0001816667 – foreign currency account
MANAGEMENT BOARD
(TERM OF OFFICE 1 JANUARY 2003 – 1 DECEMBER 2008)
Mag. Bine Kordež, Chairman of the Management Board – CEO
Mag. Goran Čelesnik, Member of the Management Board – Director of Commerce
Mag. Viktor Vauhnik, Member of the Management Board – Director of Sales to Foreign
Markets and Marketing
Mag. Milan Jelovčan, Member of the Management Board – Director of IT and Organisation
Marijana Kajzer, Member of the Management Board – Director of Labour Relations
SUPERVISORY BOARD
(TERM OF OFFICE 19 DECEMBER 2002 – 19 DECEMBER 2006)
Shareholders’ Representatives:
Jakob Piskernik, Chairman of the Supervisory Board
Dr. Tomaž Subotič, Deputy Chairman
Matjaž Gantar
Zlatko Kavčič
Igor Kušar
Gregor Tratnik
Workers’ Representatives:
Marta Bertoncelj
Igor Hudobivnik
Marjan Smrekar

SUBSIDIARIES IN SLOVENIA
BOFEX, d. o. o.
Šmartinska cesta 152, 1000 Ljubljana
Registry number: 5464943
Tax number: SI 18224326
Nature of business code: G/52.120
Telephone: +386 (0)1 587 35 11
Fax: +386 (0)1 524 54 78
E-mail: info@bofex.si
Transaction accounts:
Abanka:, d. d., Ljubljana: 05100-8010040365
SKB, d. d., Ljubljana: 03171-1007727196
Ownership share of Merkur: 100 %
Director: Bojan Knuplež
KOVINOTEHNA, d. o. o., CELJE
Mariborska 7, SI-3502 Celje
Registry number: 5099501
Tax number: SI 94968683
Nature of business code: 51.540
Telephone: +386 (0)3 543 20 00
Fax: +386 (0)3 54 32 554
Transaction account:
Abanka, d. d. Ljubljana: 05100-8000029092
Ownership share of Merkur: 100 %
Director: Zoran Ledinek
Basic Data on the Companies
of the Merkur Group
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SUBSIDIARIES ABROAD
MERKUR INTERNATIONAL PRAHA, spol. S. r. o.
Slepa II. 1007/15, 14200 Praha 4 - Lhotka, Czech Republic
Telephone: +42 02 6171 0446, Fax: +42 02 4171 1574
E-mail: merkur@merkurpraha.cz
Ownership share of Merkur: 100%
Director: Marko Čop
MERKUR INTERNATIONAL ZAGREB, d. o. o.
Kelekova 18a, 10360 Zagreb - Sesvete, Croatia
Telephone: +385 1 2009 333, Fax: +385 1 2008 708
E-mail: merkur@merkurint.hr
Website: www.merkurint.hr
Ownership share of Merkur: 100%
Director: Bojan Vidmar
MERKUR MAKEDONIJA DOO Skopje
Ul. Edvard Kardelj Bl. 12, 1000 Skopje, Macedonia
Telephone: +389 3 219 701, Fax: +389 3 219 710
E-mail: merkursk@mt.net.mk
Ownership share of Merkur: 90,35%
Director: Metodi Petrov
MERKUR MI HANDELS, GmbH
Landsberger Str. 492, 81241 München, Germany
Telephone: +49 89 99 02 26 24, Fax: +49 89 99 02 01 60
E-mail: info@merkur-mi.de
Ownership share of Merkur: 100%
Director: Sanjin Butorac
PERLES MERKUR ITALIA, s.r.l.
Via Aquileia 15/A, 34070 Villesse, Italy
Telephone: + 39 0481 964611, Fax: +39 04 81 91 81 67
E-mail: perlessrl@virgilio.it
Website: www.perlesmerkur.com
Ownership share of Merkur: 100%
Director: Anton Serianz
INTERMERKUR, d. o. o., Sarajevo
Stupsko brdo b.b., BiH – 7605 Sarajevo,
Telephone: +387 33 625 135, +387 33 625 144, Fax: +387 33 625 150
E-mail: merkursa@bih.net.ba
Ownership share of Merkur: 99,63%
Director: Vide Glogovac
Merkur International d. o. o., Beograd
Bulevar Mihaila Pupina 165/a, 11070 Novi Beograd, Serbia and Montenegro
Telephone: +381 11 311 89 65, Fax: +0381 11 21 39 834
E-mail: merkurbg@merkurint.co.yu
Telephone: +381 11 213 18 64
E-mail: merkurbg@merkurint.co.yu
Website: www.merkurint.co.yu
Ownership share of Merkur: 100%
Director: Zoran Cvijović

OFFICES ABROAD
MOSCOW OFFICE
Olofa Palme 3, 119590 Moscow, Russia
Telephone: +70 95 143 67 42
Fax: +70 95 742 99 03
E-mail: merkur@co.ru
Head: Nekir Kukuruzović
BEOGRAD OFFICE
Basic Data on the Companies
of the Merkur Group
Bulevar Mihaila Pupina 165/a, 11070 Novi Beograd, Serbia and Montenegro
Telephone: +381 11 311 89 65
Fax: +381 11 139 834
E-mail: merkurbg@merkurint.co.yu
Director: Zoran Cvijović
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