In the broadcast Svet na Kanalu A, an article was announced on 27 August with a title KAD and SOD Agitated, which quoted numerous untrue facts. To correctly inform the shareholders and the interested public we hereby sharply reject these untruths.  With regard to the mentioned article and also certain other reports in the media that have been published recently, we give a detailed explanation.   

The company Sava d.d. has acquired a 20% shareholding in Merkur in 2006 when it obtained  the Merkur shares as a partly payment for a profitable sale of its trading subsidiary Sava Trade.  Upon a public bid for a managers’ take-over of the company Merkur, Sava concluded with the company Merfin in 2008 a put/call option contract to secure itself a possibility for a later,  but not earlier than within a year, demand from Merfin to repurchase these shares increased by interest accruing (the put option), whereas Merfin secured itself under the same terms and conditions a possibility to  request such a sale from Sava (call option).

Last December, the company Sava d.d. realised with the company Merfin d.o.o. the first part of the put/call option contract, as due to the economic crisis and unsuccessful managers' take-over  Merfin was not in a position to settle all the liabilities arising from the put/call option contract. In negotiations with Merfin,   Sava, therefore, achieved the closing out of option for 10%  of Merkur, at which it agreed that Merfin would settle the purchase price in several instalment, whereas  the option for the remaining 10% of Merkur was prolonged.  

Hence, it follows that it was not about a »fictive business« or »a »friendly business«, which can be even »damaging« as stated in the article on Kanal A; this business was made to realise through the put/call option contract the agreed liability of the company Merfin,  which this company was not able to assume and carry out at that time.   

In this year, the position of Merfin and Merkur further aggravated, which we state in our semi-annual business report as well. Sava  »did not generate a great loss in one afternoon« as quoted in Kanal A, but on account of a strong uncertainty as to the operation of Merkur and Merfin it estimated that the profit which it had expected to be generated in this transaction last year and which in accordance with the accounting standards and policies had been incorporated in the results of the past year, this year would not be »realised« with a suitable inflow of cash. Sava d.d. therefore merely reversed a part of the already accounted for but not yet realised profit, generated with the conclusion of the put/call option contract with Merfin. Exactly the size of (so far mainly) not realised profit shows that concluding the contract with Merfin was anything but »damaging«. Sava has not suffered any real loss from the investment in Merkur, it is true that it estimated that the proceeds which it had assured  through concluding and partial implementation of the put/call option contract with Merfin might not be realised, therefore it decided to carry out impairments.  

In drawing up financial statements Sava d.d. has always consistently applied suitable accounting policies, its reports about operations have presented a true and fair view of the company assets and results from operations. Therefore the insinuation of Kanal A that Sava d.d. manipulated last year's annual report and showed »even profit instead of a loss« is not true and damages the reputation of the company and its management team.  

The examination of transactions made in last five years (including Sava's transactions with Merkur and Merfin) carried out by both the external auditor KPMG and internal auditors, which in joint letters was demanded by the shareholders KAD and SOD, demonstrated that the procedures of making decisions from the formal and material view were carried out in a suitable manner, in accordance with the legislation, valid internal rules and good corporate governance practice.   The findings from the audits of transactions were publicly announced and made accessible to all shareholders.  

The dynamics of the business performance in the current business year varies by quarter. Many times in its history, Sava showed a loss in the interim results, which in this year's case when a loss is due to impairments, is not connected with a negative cash flow, therefore it is less painful as it would be if it resulted from poor results in our divisions.  

Additional impairments originating from the investment in Merkur or its future decrease will depend mainly on the success of Merkur's operation. The present situation in Merkur does not allow a final judgment about the value of Sava's stake in Merkur and, therefore a reliable forecast  about the development of this difficult situation in Merkur cannot be made. When it will be clear whether the situation in Merkur will be improved, or a compulsory settlement will be introduced, or it will go bankrupt, we will be able to evaluate more realistically  how this will reflect in the business result of Sava.

At Sava d.d., we, are confident  that owing to our good operation, and, in particular, if banks and business partners will help the new management team of Merkur to carry out business properly, these effects, which have led to impairments and, consequently, losses,  will be compensated in foreseeable future. Sava so far has done and will in the future do everything to protect its interest in the business relation with Merkur as well as the interests of all its shareholders, including the both mentioned KAD and SOD.  

Sava, d.d.
Corporate Communications