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

In the period 1–3 2014, Mercator Group generated EUR 625 million of net revenue, which is consistent with the plan for the period and 5.1% below the revenue generated in the equivalent period of the year before. The drop in revenue is a result of the withdrawal from the market of Bulgaria, closing down of some underperforming units of FMCG, as well as 13 Modiana (textile/apparel) and Tehnika (technical consumer goods) business units, the impact of the time lag of holidays this year and further decline in purchasing power of the general population resulting from the harsh economic conditions.

Result from operating activities is positive at EUR 5 million. The result is consistent with the plan and it exceeds the figure for the same period of last year four-fold.

In the first quarter of the year, Mercator Group EBITDA amounted to EUR 22.7 million, which is 5.1% more than in corresponding period of the previous year.

In the first quarter of the year, Mercator Group further pursued extensive activities in marketing competitiveness. It continued to refurbish its existing stores according to the Sosed ("Neighbour") concept.

In March, Mercator introduced a notable change in the pricing policy in order to become the best in price competitiveness. The changes in pricing policy were also introduced in the Serbian market in May.

In all markets of its operations, Mercator is upgrading its offer of local products and produce, this carrying on its focus on local sourcing.

In 2014, Mercator Group continues to introduce cost optimization measures. Relative to the same period of last year, costs at the Group level were lower by 5% in the first quarter of 2014.

Business restructuring measures were further implemented, including revision of operations of the company Mercator–H, d.o.o., and the activities of Tehnika and Modiana. The activities of the company Modiana in Slovenia were transferred in early 2014 to the parent company; its merger is planned for the second half of 2014. In the Croatian market, extensive activities were introduced in 2014 in order to improve the performance, with positive initial results. Revitalization measures for Tehnika and Modiana include closing down underperforming units.

Despite the improved cost efficiency, result for the period is a loss of EUR 8.5 million, which is slightly lower that the result in the equivalent period of the year before. This is mostly the result of higher finance expenses of the Group, which is a result of the time lag of the financial restructuring process and negative currency translation differences in the first quarter.

In late April, Mercator obtained signed commitments by all required creditor banks of the Mercator Group to implement the proposed financial restructuring of the Group according to the detailed legal and commercial terms and conditions which have now been agreed upon with all such creditors. The signing of the agreement on financial restructuring will notably decrease Mercator's liquidity risk as the repayment plan is adapted to Mercator's expected cash flow in the coming years.

Business Report of the Mercator Group and the company Poslovni sistem Mercator, d.d., for the period 1–3 2014 is attached herewith.

This announcement shall also be published as of May 20, 2014 on the company website at www.mercator.si where it shall remain available for a period of no less than five years.