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 informs the shareholders and the public of the following:

The defining aspect of Mercator Group's operations in the first half of 2014 was stabilization in several fields. Mercator Group operating profit for the period 1-6 2014, amounted to EUR 11.8 million. Revenue in the period amounts to EUR 1.3 billion, which is consistent with the plans and 4% less than in the equivalent period of the year before. Lower revenue is a result of changes in consumer behaviour as a response to the decline in purchasing power, stringent competition in all markets of our operations, and closing down of 35 underperforming business units as a part of the company's revitalization process. Successful completion of the challenging financial restructuring process in June 2014 grants Mercator Group long-term financial stability. Following the completion of the acquisition process, the company's ownership was stabilized as well. In the second half of the year, Mercator Group is further pursuing its strategy of business restructuring and preparation for integration processes related to the change in ownership.

In the period 1-6 2014, Mercator Group continued to carry out the measures designed to improve its operations. Cost rationalization activities continued, resulting in savings of EUR 13.4 million in the period. Extensive marketing activities were carried on to improve performance and competitiveness. Pricing policy was thoroughly revised. Prices of 10,000 products were reduced in Slovenia at the parent level, and prices of 800 best-selling products are guaranteed to be the lowest at Mercator. The project was successfully transferred and carried out also in the Serbian market. Moreover, a number of other sales promotion activities and activities regarding the Pika card customer loyalty system were stepped up as well. Positive effect of these activities is already evident as the perception of Mercator's price competitiveness among the customers has improved. With more intensive marketing activities, Mercator also successfully sustained in the first half of 2014 the trend of stabilization of its market share, stopping its decline that had been observed for several years before.

In the first half of 2014 Mercator continued with investments on Slovenian market, which were mostly focused on refurbishments of its retail network. Three new stores were opened in the period, refurbished according to the Sosed (Neighbour) concept. Mercator continued to develop its private label, which included revisions of the existing products and addition of new ones.

Committed to local sourcing, Mercator upgraded its offer of local products and produce in all markets. Thus, Mercator's purchase of Slovenian fruit and vegetables in terms of volume was 33% higher in the first half of 2014 than it was in the same period of the year before.

Revitalization measures in Croatia resulted in improvement of performance in the first half of the year relative to the equivalent period of the year earlier, topping the planned results.

Revitalization of the Modiana and M–Tehnika operations involved closing down of further 29 underperforming units. Moreover, the process of merging the company Modiana to the parent company was completed in the first half of 2014. Improving the core business also involved closure of 6 less profitable units.

In the first half of 2014, Mercator Group successfully completed the process of long-term restructuring of its financial liabilities, which considerably alleviated its financial risks. In addition to other aspects, the financial restructuring aligns repayments with the Group's expected cash flow, improves liquidity, and secures a higher rate of investment into Mercator Group operations. This provided the conditions to improve the performance and to secure the company's long-term financial stability.

At the end of June 2014, the acquisition process in which a 53.12-percent ownership share of the company Poslovni sistem Mercator, d.d., was acquired by the company Agrokor, d.d., was completed. As a result, the company's ownership structure has been stabilized, which is evident in its operations. Namely, unstable ownership composition in recent years had had negative effects on Mercator Group performance.

In the second half of 2014, Mercator Group will continue to pursue its strategy of business restructuring. Consistently with the completion of the acquisition process, integration processes related to the changes in the ownership composition will also commence.

Business Report of the Mercator Group and the company Poslovni sistem Mercator, d.d., for the period 1-6 2014 is attached.

This announcement will be published on the company’s website at www.mercatorgroup.si as of August 26, 2014, and will remain posted for a period of at least five years.