Pursuant to the Rules and Regulations of the Ljubljana Stock Exchange, d.d, and the relevant legislation, the company Poslovni sistem Mercator, d.d., Ljubljana, hereby informs the shareholders and the public of the following:

In 2017, Mercator Group revenue from core retail operations increased for the first time after 2011. The Group's normalized EBITDA reached EUR 90.6 million, or 45.4% more than in 2016. Adjusting for the negative effect of non-recurring, one-off events, Mercator Group wrapped up last year with a profit of EUR 6 million. Contributing to the bottom line of EUR 184 million loss were one-off events or revaluation adjustments, particularly re-appraisal of own real estate which the Group had to conduct in compliance with the international accounting standards. As a result of the appraisal, the value of real estate decreased by mere 1.4%. According to the accounting standards, however, all impairments of real estate shall debit the income statement, while all increases in value shall be recognized in equity. Last year, Mercator Group re-entered the market of Bosnia and Herzegovina, resumed its monetization project that kicked off successfully with the divestment of Mercator Centre Belgrade, and reduced its debt through deleveraging efforts.

In order to correctly understand the income statement for 2017, it should be considered that Mercator Group, in compliance with the adopted accounting policy based on international accounting standards, re-appraised all real estate held by the Group. Real estate impairments amounted to EUR 145.8 million, while increases in value of real estate amounted to EUR 126.9 million. The differences in the value of 908 properties held by the Mercator Group is no more than EUR 18.8 million, which means that the value of real estate actually only decreased by 1.4%. Total value of real estate held by the Group still amounts to nearly EUR 1.4 billion. Appraisal of real estate, in compliance with the international accounting standards and professional practice, was conducted by an independent consulting company, and the results were reviewed and verified by two more independent expert institutions. While the one-off impairments to the value of real estate had a significant effect on Mercator Group's income statement, Mercator Group performance is much better than in the year before.

• For the first time after 2011, Mercator Group recorded growth of revenue from core retail operations, by 2.5%. Net retail revenue amounted to EUR 1.6 billion.
• Adjusting for the negative effect of one-off non-recurring events, Mercator Group's bottom line is a profit of EUR 6 million, which is considerably better than in 2016 when it ended the year with a loss of EUR 31 million (on comparable terms).
• Mercator Group generated normalized EBITDA of EUR 90.6 million, which is EUR 28 million more than in 2016, for a growth index of 145.4.

In 2017, Mercator Group was mostly focused on activities to boost cooperation with suppliers and business partners, and to provide the most competitive and quality offer for its customers. Mercator remains a reliable customer and business partner. Also contributing to Mercator's stability was the appointment of a special Management Board member appointed pursuant to the Act on Conditions for Appointment of Extraordinary Management Board Member in Companies of Systemic Importance to the Republic of Slovenia. Regular analyses and reports compiled by the extraordinary Management Board member verified the diligence, sound management, and credibility of Mercator's operations. The company Poslovni sistem Mercator d.d. did not sustain any loss or damage in any transaction with the majority shareholder or companies affiliated to it.

The Mercator Group Management Board, appointed in the spring of 2017, provided all conditions for the Group's further successful operation and long-term development. Just days after appointment, it concluded an agreement with creditor banks that prevented the problems of the majority shareholder to be transferred to Mercator Group operations. By summer, the Management Board concluded an agreement on re-entry into the market of Bosnia and Herzegovina, and secured the takeover of stores in this market by autumn, thus contributing significantly to the mitigation of credit risk related to lease payments. At the end of the year, the Group resumed its monetization project by signing a deal to divest Mercator Centre Belgrade.

By focusing on profitability and growth, with long-term cooperation with suppliers, development of a new store concept, and investment into development of employees, Mercator remains the store that is closest to the customers. Indeed, the customers rate highly time and again, especially in terms of quality of offer and friendliness of its staff. In 2017, Mercator refreshed its Mercator brand image and identity, winning over younger customers. It also celebrated the 18th birthday of the Pika card that is, in the customers' opinion, the best customer loyalty system, and it intensively refurbished and updated its stores.

Mercator Group is independent in all key business decisions. In addition to positive core activity revenue growth, net debt to creditor banks is also decreasing. A key assumption for Mercator's successful further development is deleveraging by monetization of real estate and divestment of non-operating assets, as specified in Mercator's development guidelines for the period until 2021.

Mercator will remain focused on its core activity and successful pursuit of its revised business strategy, including cost optimization and further growth, deleveraging, differentiation of its offer, strengthening of long-term cooperation with suppliers, and development of a new store concept. Mercator will continue to invest heavily in its employees and their development, while – considering the current challenges in the labour market – additionally stimulating the employees to work efficiently and with commitment.

This announcement will be published on the company’s website at www.mercatorgroup.si as of April 26, 2018, and will remain posted for a period of at least ten years.