Report jan sep 2014 3 11 2014

Laško Group and Pivovarna Laško, d. d.

Report

JANUARY – SEPTEMBER 2014

Laško, 3 November 2014

Laško Group and Pivovarna Laško 3

C O N T E N T S

1 INTRODUCTION 4

1.1 Address by the Chairman of the Management Board 4

2 BUSINESS REPORT 6

2.1 Composition of the Laško Group 6

2.2 Sales 8

2.3 Investments 16

2.4 The financial position of the Laško Group 20

2.5 Financial risks 23

2.6 Overview of events during and after the reporting period 25

3 FINANCIAL REPORT 39

3.1 Consolidated financial statements 39

3.2 Notes to the consolidated financial statements 43

3.3 Notes to separate financial statements 50

Appendices: Appendix 1 – Separate income statement

Appendix 2 – Separate statement of financial position

Appendix 3 – Separate cash flow statement

Appendix 4 – Separate liquidity statement


1 INTRODUCTION

1.1 Address by the Chairman of the Management Board

Beginning the process of seeking for and selecting the most appropriate investor

The operations of the Laško Group companies in the first nine months of 2014 were marked by some significant milestones. The processes relating to reducing the debt and finalising the finances of the companies continued intensively. Through the sale of their stake in Mercator, Laško Group companies significantly reduced their level of debt with banks. In the sprint, an agreement was reached with the crediting banks, resulting in the signing of a Stand-still and Restructuring Agreement up to 2016, which will allow the companies to strengthen the position of their brands on the most important markets and continue to achieve good current operating results. The agreement concluded with the crediting banks also envisages the capital increase of the parent Pivovarna Laško. On 16 July 2014, the sale of the investment in Birra Peja and the receivable due from the same was also closed. In the second half of the year, the sale of ČZP Večer was also concluded. The sales processes related to Delo and Radenska continue.

The process of looking for and selecting the most appropriate investment began before the summer of 2014. The Unicredit bank was selected as our advisor. The first steps leading to the capital increase were taken already in July 2014, when, together with our UniCredit advisory, a Teaser was sent to potential investors. In accordance with the provisions of the agreement concluded with the crediting banks, the capital increase is expected to be completed in 2015. One of the most important aims of the capital increase is to reduce the debt of the Group to approximately three times the Group's EBITDA, which is a debt burden comparable to other companies in the industry.

There was no true summer

In the first nine months of 2014, the Laško Group companies achieved fair operating results. Especially in the first half of the year we succeeded in improving the quantities sold compared to the same period of 2013 both on the domestic market, and especially on our most important foreign markets. The strategy of strengthening the market shares of our brands on the most important foreign markets has for the most part allowed us to compensate the risks stemming from the small domestic market, which has been in a deep recession in the past few years. On the domestic market we have succeeded in retaining the leading position of our brands in all segments, while the market shares on the most important foreign markets have been strengthened. Unfortunately, the weather was not favourable in July in August, which are the two months (in addition to June) when quantitative sales are highest. Not only was this year's summer one of the most rainy in Slovenia, the summer storms and frequent rainfall, in addition to low temperatures, also marked the whole region, which comprises the Laško Group's most important markets. Although such weather conditions have a strong impact on the quantities of beverages sold, we succeeded in


retaining the market positions of our brands on the most important markets, while the strategy of strengthening our brands on foreign markets, which has been in place for some years, has allowed us to reduce risks relating to quantities sold; as a result, the fall in quantities of beverages sold is not as great as it would have been had we been dependent on domestic sales only. Despite bad weather conditions, net sales revenues on foreign markets are up EUR 4.8 million on the same period of 2013. Regardless of prolonged winter period and poor summer, in the first nine months of 2014, the Laško Group realised 73% of the planned annual net sales revenues.

Boldly and optimistically into the last quarter of 2014

Despite the bad weather and difficult market conditions, we have an optimistic outlook on the last three months of the year. On the one hand, we concluded earlier this year a Restructuring and Standstill Agreement until 2016, which will allow the Laško Group companies to stabilize, and have sold our shares in Mercator, Birra Peja and Večer, while on the other hand, we are looking forward to many good things relating to our companies and brands in this period. In the beginning of next year we are looking forward to the grand opening of the Pub, which will be opened on the site of Pivovarna Union to celebrate the 150th anniversary of the brewery. We are also beginning preparations for the 190th anniversary of Pivovarna Laško, which will be celebrated in 2015.

mag. Dušan Zorko, Chairman of the Management Board of Pivovarna Laško Laško, 3 November 2014


2 BUSINESS REPORT

2.1 Composition of the Laško Group

In addition to the controlling entity Pivovarna Laško, d. d., as at 30 September 2014, the Laško Group is comprised of the following subsidiaries: RADENSKA, d. d., Radenci

PIVOVARNA UNION, d. d., Ljubljana

JADRANSKA PIVOVARA - Split, d. d. and

VITAL Mestinje, d. o. o.

In addition to beverage producers, the Group also comprises the following companies: DELO, časopisno iz založniško podjetje, d. d., Ljubljana, LAŠKO GRUPA, d. o. o., Sarajevo (up to July 2011, this company was RA&LA,

d. o. o., Sarajevo), FIRMA DEL, d. o. o., Laško, LAŠKO GRUPA, d. o. o., Zagreb and LAŠKO GRUPA Kosovo, Sh. p. k.

Pivovarna Laško, d. d., Trubarjeva 28, Laško, drafts an unaudited consolidated semi-annual report for the controlling entity and the subsidiaries in the Laško Group. The full consolidation method is used in drafting the consolidated financial statements.

The consolidated financial statements comprise the financial statements of the controlling entity Pivovarna Laško and its subsidiaries, in which the controlling entity has a controlling interest.

As Pivovarna Union sold its stake in the Birra Peja Group, the Birra Peja Group is thus at 30 September 2014 no longer part of the Laško Group through the UNION GROUP.

The consolidated statements also comprise the DELO GROUP, which consists of the parent Delo and its subsidiary Izberi, Ljubljana.

Due to their material irrelevance, the following companies are not included in the consolidation: Firma Del, d. o. o., Laško, Laško Grupa, d. o. o., Sarajevo, Laško Grupa, Sh. p. k., Kosovo, Radenska Miral, d. o. o., Radenci, Radenska, d. o. o., Zagreb in Radenska, d. o. o., Beograd.


Organisational structure of the Laško Group as at 30. 9. 2014

The ownership of DBS of 600,000 (11.853%) shares of Radenska is also registered with the Central Securities Clearing Corporation (KDD) in addition to the 82.131% stake held by Pivovarna Laško. In substance, this regards a redemption right, whereby under the contract, the voting rights arising from the ownership lie with the temporary seller, that is, Pivovarna Laško, which as at 30 September 2014 had a total of 93.984% of the voting rights.

PIVOVARNA JADRANSKA LAŠKO FIRMA LAŠKO LAŠKO RADENSKA, d. d., UNION, d. d., PIVOVARA - Split, VITAL Mestinje, DELO, d. d., GRUPA, d. o. o., DEL, d. o. o., GRUPA, d. o. o., GRUPA Kosovo, Radenci Ljubljana d. d. d. o. o. Ljubljana Sarajevo Laško Zagreb Sh. p. k. Ownership: 82.131% Ownership: 98.069% Ownership: 99.460% Holding: 96.92% Ownership: 100% Holding: 100% Holding: 100% Holding: 100% Holding: 100% Num. of sh. 4,157,327 Num. of sh. 442,405 Num. of sh. 5,396,932 Num. of sh. 667,464

RADENSKA Pivovarna Laško Pivovarna Laško MIRAL, d. o. o. Ownership Holding in Laško

Radenci in Delo Grupa Sarajevo Holding: 100% I80.834% I69.22%

Num. of sh. 539,536

Radenska Radenska Ownership Holding in Laško in Delo Grupa SarajevoI19.166% I15.39% Num. of sh. 127,928

Subsidiary of Delo: Pivovarna Union IZBERI, d.o.o. Holding in Laško

Ljubljana Grupa Sarajevo Holding: 100% I15.39%

Controlling company

Subsidiary Subsidiary

LAŠKO GROUP

PIVOVARNA LAŠKO, d. d.

Subsidiary Subsidiary Subsidiary SubsidiarySubsidiary Subsidiary Subsidiary

as at 31 September 2014


2.2 Sales

1. Sales, marketing and development in the Laško Group

Sales

Despite minor improvements to the macroeconomic indicators, consumers remain very cautious. A drop in purchasing power is reflected in greater inclination to saving and changes in purchasing habits, meaning customers are ever more cautious and prices are impacting purchasing decisions more and more. Changes in the consumption structure reveal the continuous growth in the discount supermarket segment and customer inclination towards supermarket brands. This year, the region was significantly marked by the weather, sleet, floods and lots of rain in July and August, which are the most important months of the year in terms of sales of the Group.

The economic situation has brought about changes in retail and has completely transformed the business environment. Payment indiscipline is on the rise, while retailers are reducing the number of different products offered and are above all maintaining lower inventory levels. In addition, more and more products are sold in various promotions.

Despite more difficult market conditions, we have successfully maintained our sales at last year's levels in accordance with our business strategy and the utilisation of the synergies of the joint performance of all companies in the group.

Since we sold the company Birra Peja as one of the companies in the Laško Group in July 2014, the data on the sales generated in the January - September 2014 period cannot be compared with that for the same period of 2013. In order to ensure comparability of data, the data for both years only considers sales of Birra Peja during the January - June period.

In the first nine months of 2014, the Laško Group sold a total of 2,967,840 hectolitres of all beverages, which is the same as in the same period of 2013 and 3.9% below the plan. Quantitative sales of beverages of the Laško Group

Sales of beer have increased by 3.4% compared to the same period in 2013 and are 1.3% below the plan. The sales of soft drinks decreased by 2% compared to the same period in 2013 and is 4.6% below the plan. The sales of water (mineral water, spring water

Index Index Index (in hl) I.-IX./2014 2014/2013 2014/dyn.pl. 2014/ann.plan

Beer 1.739.672 103,4 98,7 80,9 Water 805.697 94,5 91,3 74,1 Soft beverages 422.471 98,0 95,4 77,2

T O T A L 2.967.840 100,0 96,1 78,4


and flavoured waters) decreased by 5.5% compared to the same period in 2013 and is 8.7% below the plan.

Marketing and Development

BEER

Laško Group

We have developed a completely new line of special beer under the LAŠKO SPECIAL brand, and designed a new bottle and image specifically for this new line, which is significantly different from our basic line of beer packaging. The new product will be launched on the market in 12 bottle packages in 0.33l non-refundable bottle. The first three beers sold under the Laško Special brand are Golding, Striptis and Cita Lager 01. Currently the fourth beer under the Laško Special brand is being developed and we are planning further development of this new line also in the future.

In the segment of our own brands of beer we have introduced Export Pils 4.5 vol. % sold in 0.66l PET packaging for Italian and Croatian market, Export Pils 4.5 vol. % sold in 0.5l cans and Kalbier 4 vol. % packaged in 0.55l cans. In September we put on the market special packaging of Prvak beer (The Maribor Football Club) in 0.33l non-refundable bottle.

A "Full of Pride" image campaign has been underway since May with respect to the Laško brand; this includes a complete media mix. A mini communication campaign began in June of the Laško Malt brand which was given a completely new image in addition to introduction of a new strawberry flavour. In addition to media advertising campaigns, on line prize competition ran on social networks for both brands. We activated the Laško Zlatorog brand for the football world cup in Brazil with the slogan "Viva Brazil", a special can, an online prize competition and retail and hospitality promotions were also organised. The campaign was conducted on the markets of Slovenia, Croatia, Bosnia and Herzegovina, Serbia and Hungary. The "Pivo in cvetje" festival is our main event, this year celebrating 50 years, and which will see over 100,000 people visit Laško. In the mountains, we are continuing the largest mountaineering project in Slovenia entitled "Gremo v hribe" ("Let’s go to the mountains"). This year we again participated in a number of renowned quality tests of beverages and at the Monde Selection award ceremony we were awarded the Grand Gold medal for our Eliksir brand and gold medals for Laško Zlatorog, Laško Club, Laško Dark and Jubilejnik brands. At the local quality tests organised at the Agricultural and Food Fair Agra, the strawberry flavour of Laško Malt brand was awarded a gold medal. In August and September we were actively involved in designing our marketing strategy, including marketing communication, positioning, distribution and sales promotion activities of our Laško Special line of beer. Plans for marketing campaigns to celebrate the 190th anniversary of Pivovarna Laško are currently underway.

Exports

Tested sales promotions were conducted on our export markets. In May and June, Croatia and Bosnia and Herzegovina saw an image campaign, which was a slight adaptation of the campaign in Slovenia, involving TV, printed media, advertising on


billboards and online. Billboards and radio campaigning was launched in Italy in June, while a national competition was organised in Croatia.

Union

In this, our jubilee year, all the activities of Pivovarna Union have been aimed at celebrating the 150th anniversary of the brewery and we launched on the market the retro line of Union Triglav, Union Amber, Union Ležak and Union Bok. At the same time as introducing the redesigned range of Union beers, we launched a new corporate TV and radio advertisement for Pivovarna Union, emphasising its 150th anniversary, and launched a series of print and citylight advertisements.

Unionfest, which took place on 6 and 7 June in Tivoli Park, was the main event of the year. This two-day event, which offered a myriad of music and entertainment, attracted around 10,000 people each day. We also activated viewers at home watching (live) the final "Raketa" programme from Tivoli Park, which saw us selecting the Golden Barmaid, who will help promote Pivovarna Union.

In summer months we were busy designing new proposals and material for positioning the special Union beer in our regular product range, while majority of our focus was and continues to be devoted to the impending opening of the Union Pivnica.

In the second half of the year we worked on redesigning the entire line of Union Radlers, which are expected to find their place on the shelves of retail stores and also in hospitality facilities by the end of this year.

SOFT DRINKS

After testing and developing of a new orange and lemon flavour fruit drink began in 2014, in late-April we launched a new fruit juice drink called Sola Hey (orange and lemon flavour) on the market, thus widening the range of Sola fruit juice drinks. The product received support in the form of tastings at supermarkets and FB advertising. In summer months major promotions of the new drink were held in towns and cities across the country and at sea resorts.

As the leading brand of ice teas in Slovenia, Sola Ice tea was the sponsor of Goran Dragić basketball camp organised specifically for all young basketball players. We made sure no participants at the camp went away thirsty. The project was organised in cooperation with the Friends of Youth who at our initiative selected two teenagers who took part in the camp and in the training sessions.

We began the new school year with the "S Solo v Šolo" campaign that ran in the Tuš stores, while an online competition "Sola ni šala" was primarily aimed at teenagers. The campaign was focussing on 9 essential things that should be included in every school bag and above all, a refreshing drink Multi sola containing 9 essential vitamins.

Ora

Redesign of labels for the entire Ora brand with new cheek-in-tongue names such as "Ora sončni exotic" instead of Ora exotic, with the involvement of all the packaging units. All communications (TV advertising, print advertisements, outdoor – Supreme, bus) were focused on the new flavour and introducing the new TO GO can under the


"Preoblekla se je" and "Vse za novo Oro" slogans. A FB competition for the new can was also organised. Point of sales promotions of the new flavour will take place throughout the year (tastings with rewards for purchases, special exposure of pallets). Sampling and promotions at all major events.

Pepsi

New Pepsi label design for the football world cup (Messi, Luiz, Ramos and others) including new cans with pictures of football players. In addition, outdoor advertisement in Ljubljana, on-line advertisement and a FB competition were organised.

WATER

Radenska Classic

TV advertisements (during the "Skriti šef" programme on POP TV, during the football world cup on TV SLO, new print media advertising - Kapljica, Pljusk). Sale promotional activities at the points of sales (Radenska Light during the world water day, and Radenska Classic involving branded finals and special exposure pallets). Sale promotions involving packages for branding of pubs, coffee shops and bars (sunshades, branded walls, chair cushions, posters, table cloths, activities involving coffee) organised for hospitality facilities.

Radenska Naturelle

TV advertising ("lepota prihaja iz globin", co-branding with Ilirija - Green Line HydroMineral face cream based on Radenska Naturelle water); BB advertising ("ne izgubite niti kapljice" - for Naturelle 0.75l, bottle top with sport design - redesign of the label), printed advertising ("lepota prihaja iz globin"), online advertising and social networks (FB competition), promotions at events (junior size promotion, BB).

The following promotional activities were organised at sale outlets: water project, co-marketing with reception, shelving promotions, markers, wobblers, packages, branding including branded walls, activities involving coffee, banners on the fences of pubs, bars and coffee shops. BIB: TV spots (presentation of BIB operations, printed advertisements)

Radenska In

TV advertising during the "Skriti šef" programme and the football world cup, printed advertisements promoting the new flavour, online advertising and social networks - FB; Radenska IN selected as the "2014 Product of the Year", promotions at various events.

Point of sales promotions of the new flavour will take place throughout the year (tastings with rewards for purchases, branded finals), tags attached to the product, special exposure of pallets, saving of receipts and competitions. IN barman of Pomurje (branding of terraces, search for the IN barman - sale promotions of the products by personnel working in pubs, coffee shops and bars, pancakes making at events with Radenska IN.


Oaza

Some print advertisements were ordered to promote the new summer flavour; events promotions and points of sales promotions (rewarding purchases and samplings) were organised.

Zala

Successful sponsorship activation of Zala in cooperation with the Tennis Association of Slovenia at the ATP tournament in Portorož, cooperation with the hospitality personnel, inclusion of the web and points of sale in the promotions. Point of sales promotions were organised for the Zala brand with added value; excellent promotion at the Tuš stores, and continued sales push of Zala 1l.

Advertising on giant billboards along the motorway, which was organised over the summer months concluded in September and the billboards received good visibility. Continued communication on online channels such as FB focusses on the young target group which we wish to attract back.

Nula

In cooperation with R&D we completed the project of developing flavoured water with no sugar. The new raspberry flavour drink with no sugar or sweeteners, will be sold under NULA brand and is the solution proposed by the entire Laško Group to the issue of health concerns concerning sugar and negative publicity sugar has received in the last six months. The launch and tests were made in the second half of the year and the new drink was put on the market in August. The Nula raspberry flavour drink is aimed at consumers who are looking for something other than just water and are conscious of their sugar intake.

A special event involving 30 selected women and market tests with participation of 400 consumers were also organised. In cooperation with our sales team and based on the feedback received it was decided to launch the new drink on the market once the final image of the label and basic supporting materials for the points of sale have been designed.

In communications terms, it was supported by a mini website and social network IG. Market response has been very positive and exceeded our expectations - currently this is a niche product with large potential for future development.

Za

Our summer project "#ZApoletje" where points of sale were connected with the web was completed. The response was very good and this year's platform will serve for activities we have planned for the next year, with slight alterations and improvements. Point of sales promotions were organised including promotional materials for use of the sales teams. Online promotion on social networks IG and FB, linking the contents.

Oda

A new six-pack Oda water 0.5l was placed on the market in June depicting a socially responsible theme "Pomagajmo slovenskemu risu" in support of the project organised


by the Dinaricum association. A mini image communications campaign of the Oda spring water brand began in June on giant billboards alongside an online competition on social networks. At the local quality tests organised at the Agricultural and Food Fair Agra, the Oda spring water was awarded the gold medal. In addition, in August Oda spring water received an important design award, the Slovenian Oscar for packaging. This biennial design competition is organised by the Pomurje trade fair under the auspices of the Chamber of Commerce of Slovenia. This year the competition celebrated its 35th anniversary.

2. Sales of Laško Group products on the Slovenian market

Sales

Key objectives of our sales and marketing activities in the trade and hospitality industry were to maintain our market position in the categories of beer, water and soft drinks, to achieve the sales plan and secure profitability of our brands and products. Activities carried out in cooperation with our largest customers were aimed at fulfilling customer wishes and finding the best solutions to benefit the final customer. We will continue optimising the points of sales. Special focus will be placed on planograms, optimising the product range, communications with consumers, promotional activities, labelling, measuring and considering the behaviour of consumers in retail outlets. Brand management projects are also linked to beverage category development activities. We focussed mainly on themed activities for the Union brand celebrating the 150th anniversary and for the Laško brand focussing on the world football cup. The water project, picnic packages of beer and meat and sales packages of our products with added value were again organised in this year. We continued searching for returnable packaging solutions, developing meal deals (beer - pizza, soft drinks - sandwich), updating and improving standards governing promotions (price labels, instructions for sales persons, labelling additional positions, etc.), managing impulse coolers, etc. Our efforts were focussed on excellence at points of sale and we have successfully improved our position, communication and visibility of our brands. Quantitative sales of beverages of the Laško Group in Slovenia

Retail market trends and shares

According to the survey carried out by the marketing research agency, a Slovenian consumer visits on average 4.7 different traders in a year compared to the European average of 3.4 traders. Over 40% of consumers said they were willing to change their preferred store or brand on account of a good promotion. The most important


Beer 974.465 95,1 95,4 76,3 Water 650.949 95,3 94,0 76,0 Soft beverages 272.711 92,2 92,7 73,4

T O T A L 1.898.125 94,7 94,5 75,8


promotions that attract consumers is price reduction (83%), followed by loyalty points (8%) and co-marketing with buy one get the second product free-of-charge (5%).

Considering the situation on the Slovenian market with high concentration of traders, social and economic conditions, high taxes and excise duty on alcohol beverages, in the beer category the growth of trade brands (both traditional traders as well as discount stores) has continued. In view of present trends we can expect trade brands to play an important role in the decision making process of Slovenian consumers when making a purchase. Traders have been increasingly promoting trade brands by giving them more shelve space, following innovations in the trade brand development and by investing in marketing of their own trade brands.

According to the results of survey by the marketing research agency, this year there was a noted drop in the consumption of all categories of beverages compared to the same period of last year. The volume sales of beer are down by 2.6% where the highest drop was recorded in the sale of beer mixtures with 20.6% lower sales, the market of water fell by 2.9%, a 17.7% reduction was recorded in the sale of ice teas, and a 17.2% decline in the market of fruit juices. The reasons for a drop in consumption are low consumer confidence in the economic situation, reduced buying power which results in a drop of personal consumption with consumers replacing the preferred brands for cheaper trade brands, and an increased share of consumers that are buying products only when on special promotional offers. In addition, extremely bad weather conditions had a significant impact on the drop in the consumption of beverages. According to the data of the marketing research agency, in the summer months of July and August, the sale of individual categories of beverages was between 15% and 20% lower than in the comparable period of 2013. Another reason for a decline in the consumption of soft drinks is the negative media campaign aimed against sweet beverages.

3. Sales of Laško Group products on foreign markets

Sales

The Laško Group sales data includes sales of Pivovarna Laško, Pivovarna Union, Radenska, and Vital Mestinje over the first nine months of the year, as well as sales data of Birra Pea's own and licensed products in the first six months of the year since the company was sold and is no longer a member of the Laško Group.

For the Croatian market, the Group has established its own company Laško Grupa, Zagreb, whose sales team helps promote sales of Laško Group products in Croatia. In addition, this company fills products in PET packaging for the markets of Croatia and Bosnia and Herzegovina. Also in Bosnia and Herzegovina the Group has its own company, Laško Grupa, Sarajevo, which coordinates activities with the importers and principals.

Sales of Laško Group on foreign markets in the first nine months of 2014 reached 1,069,715 hectolitres in total, up 11.1% on the comparable period of 2013 but 0.9% below the plan. This is a relatively good result since our plan of sales on foreign markets for 2014 was again rather ambitious. The Group sold most beer on foreign markets - 16.3% more than last year and 3.3% more than planned. We sold 8.6% less water than last


year and 18.6% less than planned. Sales of soft drinks also grew by 10.6% compared to last year and 0.8% more than planned.

The sales data includes sale of beer and soft drinks produced under the licence by Birra Peja in the first six months of 2014. In addition, in the third quarter of 2014 Birra Peja Sh. a. sold 31,646 hectolitres of beverages produced under a licence; although Birra Peja Sh. a. is no longer a member of the Union Group, the company continues to produce beer under the Laško Zlatorog licence for the markets of Kosovo, Macedonia and Montenegro with sales of total 8,111 hectolitres in the third quarter of 2014, and Sola ice tea peach flavour for the markets of Kosovo and Macedonia with sales totalling 23,536 hectolitres in the third quarter of 2014. In the nine months of 2014, Birra Peja, Sh. a., sold a total 66,688 hectolitres of beverages produced under the licence (67,827 hectolitres in the same period of 2013. Quantitative sales of beverages of Laško Group on foreign markets

Pivovarna Laško

The sales of Pivovarna Laško on foreign markets increased by 15.2% compared to the nine months of 2013, just slightly (0.6%) below the planned sales. Beer is the most important sales segment, while malt drinks have a smaller share (0.8%).

Sales on the key markets of Bosnia and Herzegovina, Kosovo and Macedonia and other markets are up compared to last year and compared to the plan. On the key markets of Italy and Croatia, Pivovarna Laško has already exceeded last year's results, but has not yet achieved the plan.

Pivovarna Union

The sales of Pivovarna Laško on foreign markets increased by 20.2% compared to the nine months of 2013, up 5.4% on the planned sales. The sales of beer increased by 23.9% compared to the nine months of 2013, up 5.5% on the planned sales; the sales of soft drinks are up 12.1% compared to the nine months of 2013 and 5.8% above the plan. The sales of water dropped by 3.9% compared to 2013, down 27.7% on the plan.

The sales of end products on the key markets of Kosovo, Croatia, Hungary and other markets together are up on the nine-month period of 2013 and also above the plan. On key markets of Italy, Bosnia and Herzegovina and Austria, Pivovarna Union has already exceeded last year's results, but has not yet achieved the plan. On the key market of Macedonia, the sales of end products have not reached last year's results, however the planned volumes have already been exceeded.


Beer 765.207 116,3 103,3 87,5 Water 154.748 91,4 81,4 67,1 Soft beverages 149.760 110,6 100,8 85,0

T O T A L 1.069.715 111,1 99,1 83,5


Radenska

The sales of Radenska on foreign markets are down 10.3% compared to the nine months of 2013, and 20.2% below the planned sales. The most important ranges sold are mineral water, followed by soft drinks, flavoured water and flavoured mineral water (altogether less than 1%). Sales on the key markets of Kosovo, Macedonia and Hungary grew compared to last year and exceeded the plan. On the key market of Macedonia, Radenska has already exceeded last year's results, but has not yet achieved the plan. So far Radenska has not equalled last year's results on the key markets of Italy, Croatia, Bosnia and Herzegovina and Austria, and is still behind the plan, while on other markets it is lagging behind last year's sales but has already exceeded the plan.

Vital Mestinje, d. o. o.

On foreign markets, Vital sells small amounts of syrups, which account for a 17.8% decline in sales compared to the same period last year, down 25.6% on the plan.

Birra Peja

In the nine months of 2013 Birra Peja was a member of Laško Group over the entire period, while in the current year, the company was a member of the Group only the first six months of the year. Therefore, data is not comparable. Although Birra Peja is no longer a member of the Laško Group, in the first nine months its sales of Zlatorog beer are 17,9% down on the same period of 2013, while sales of soft drinks (Sola ice tea peach flavour) are up 6.6% over the same period of 2013. In total, its sales of licensed brands in the first nine months of 2014 are down 1.7% compared to the same period of 2013.

2.3 Investments

In the first nine months of 2014 we continued some key projects such as the renovation of key filling lines for returnable glass bottles, the energy renovation and the gradual refurbishment of the technological equipment.

Considering the financial significance of investments into production equipment, which also result in savings in maintenance and energy costs as well as the environment, the long-term impact on these costs is even more pronounced. As such, diligent investment planning and their correct appraisal in line with the full lifetime costs of the production equipment result in the corresponding savings being more than doubled.

Development of new beverages, use of alternative technologies, new packaging materials and compliance with the most advanced technical achievements are the areas covered by the technical and technology sector.

Through reduction of costs of spare parts and maintenance services which is, given the age of the production equipment a rather major achievement, the Laško Group is now at the point when in order to stabilise the situation and secure its production, it needs to invest in new production equipment.


In today's modern business environment, where products and services are developed extremely rapidly, one of a company's significant competitive advantages can be its focus on final consumers, where state-of-the-art technology and development can allow us to acquire completely new consumers, who are interested in an optimum price performance, in addition to our existing loyal customers. Striving for the highest criteria in all operating processes is surely the best way to generate added value for our customers, owners and employees.

Investments in Pivovarna Laško

ST2 filing line - dry part

In the first quarter, most emphasis in terms of investment projects was placed on the renovation of the dry part of the ST2 line, which began already in late 2013. Although the project was concluded in March 2014, the line will begin operating at full capacity in the New Year, when it will be complemented with new machinery in the wet part of the ST2 line.

10 x 0.5l cases

As the new part of the ST2 line comes on-line, we will be able to supply the market with more environmentally-friendly packaging, resulting in us purchasing 116,000 of 10 x 0.5 litre cases. In May, the World Packaging Organisation awarded us its highest recognition of excellence (World Star of Packaging) for this case.

Kisters packaging machine

In April 2014 we concluded the renovation of the Kisters packaging machine, which now allows us to supply the market with new packaging formats in accordance with our marketing findings.

Procurement of fixed assets

In order to promote sales, we also purchased computer equipment and peripherals (coolers, pumps, glass bottles) in the first half of the year in accordance with our annual procurement plan.

SPTE 400 kWel + 500 kWel

In June 2014 we obtained the utility permit for the SPTE 400 + 500 kWel facility. The kWel 400 device was put into operation in February 2014 and has proven energy efficient, while the 500 kWel device is expected to be put into operation by the end of 2014 when the equipment, to which the energy will be transferred from the unit on the tunnel pasteurizing equipment TP-PL2, is installed. In August another 50 kWel unit was installed in the SPTE engine room which will be put into operation in the forthcoming winter 2014 season.

Eco project - pilot tests of beer press residue degradation.

Using the pilot device installed on the purifying plant, beer press residue degradation tests have continued since last year. The pilot project is now concluded and the results are very encouraging, as they show our substrate can be degraded up to 90%, resulting


in us obtaining approximately 110 m3 of bio-gas from one tonne of substrate in the industrial reactor.

ST2 filing line - wet part

From early 2014 we have been intensively collecting and drafting the technical and commercial documentation for the renovation of the wet part of the ST2 filing line. The designs have been drafted, bids obtained, we have inspected reference buildings and made an optimal selection of bidders for individual orders. The equipment is planned for supply in March 2015, while the completion of assembly and trial and regular run are expected in June 2015.

CO2 Drier and Purifier

In August 2014 we successfully replaced the obsolete purifier on the combined drier and purifier system used for CO2collection. The newly installed equipment is fully operational and with increased operational efficiency and improved quality of feedback gas, the new equipment is already covering the shortfalls which we had to fill by purchasing gas on the market. Installation of new equipment has already resulted in some savings due to reduction in operating costs and decrease in the costs of overhaul and repair.

CO2 gas detectors

Over 20 years old and obsolete CO2gas detector for the entire production area was in September replaced with a new, modern one, which fully complies with relevant standards as well as health and safety at work requirements. In all critical production areas where

CO2is present, 17 detection sensors were fixed which report any potential overrun of limit concentrations over the central alarm system, thus ensuring timely response and appropriate action to be taken.

Laško Special

To celebrate the 190th anniversary of the Laško brewery, we developed a new Laško Special line of beer and launched on the market three new types of beer.

The Laško Special beers are sold in the above-standard and completely newly designed 0.33l bottle. This required installation of additional format parts on the ST3 filling line.

A total of EUR 2,365,444 was spent in the first nine months of 2014 on investment projects, while EUR 1,499,115 was spent on investments in the property, plant and equipment of the production and technical sector, the sales department and the IT department, representing 81.7% of the total funds earmarked for investments in 2014.

Investments in Pivovarna Union

In the first nine months of 2014, Pivovarna Union spent EUR 3.7 million on investments and purchases of property, plant and equipment, which is 63.2% of the annual investment plan.

In late June we concluded phase I of the renovation of the dry part of the S4 filling line, which will allow filling and packing into the new "10" cases. The project has been


completed and officially handed over. We have signed the relevant agreements with the two main suppliers - KHS and KRONES - for the renovation of the wet part of the line. We have already begun the preparatory construction and installation works, while assembly of the equipment will begin in early January. Due to the approval of the investment in the wet part of the S4 line, we have reallocated funds from the other planned investments to the wet part of line S4.

We also reconstructed the technological lines for beer during the fermentation process, which ensures the flexibility of beer lines and tanks and allows us to clean cisterns. This will make transporting beer and beer mixes to plastic bottling lines easier and cheaper.

Implementation of the MEPIS system for production monitoring has been concluded. The system is operational and the first data is available. The project will be officially handed over after the meeting between the group and the supplier. Minor deficiencies are currently being remedied and functioning optimised.

We purchased a large number of half cases and bottles, which required us to reallocate funds earmarked for renovation of the PET bottling line. The value of these items of property, plant and equipment amounts to EUR 774,000.

Some of the funds earmarked for investments were used for the purchase of returnable packaging and equipment used in sales promotion (casks, coolers, pumping devices, etc.).

The project "Filter for the Pall" beer was completed. The filter is now operating and meets all the required technical parameters. In early 2014 we organised the closing meeting with the supplier and officially took over the equipment.

We replaced both pairs of rollers for fruit grinding in the beer production plant. We ordered new drives for the meal pans. After assembly, we will be able to increase the share of barley in the meal.

We have initiated the Pivnica investment. We have acquired the building permit and concluded agreements with equipment suppliers and the providers of construction, electrotechnical and engineering works. We have temporarily relocated the staff canteen. Until the kitchen can be used, food is supplied by an outside caterer. The investment is currently in the closing phase. Rough construction and installation work has been completed. The technical inspection is scheduled for 5 November 2014 and we expect to obtain the utility permit at that time.

Investments in Radenska

In the first nine months of 2014, Radenska spent EUR 726,113 on capital investments, which is 50.6% of the annual investment plan. A part of this amount also relates to investments that were unfinished at the end of last year.

Most of the funds, EUR 520,521, were spent on preparatory, construction and installation works relating to the blowing and filling block on the Sidel-2 line. In operative terms, the project has been completed, although we are still waiting for some of the relevant invoices. This project was partially covered by the 2013 investment plan,


while the other part of EUR 777,600 was financed from investment funds earmarked for 2015 and 2016.

We refurbished the floor in the warehousing and production facilities and repaired damage to the production facilities for the sum of EUR 47,559.

Other major investments include the procurement of a 4.5 ton electrical forklift, the repairs to the roofing of the separation hall and the procurement of a laboratory device for measuring brix and CO2 as well as a measuring device for CO2 on the UPET filling line.

We spent EUR 80,483 or 77.6% of the budget on coolers for the market.

The remaining funds were spent on the energy cost rationalisation project and on the erection of an energy IT system. Some funds were spent on purchasing small items of property, plant and equipment (due to obsolescence or unforeseen malfunction).

Radenska thus spent EUR 1,150.998 or 53.9% of the plan on investments and purchasing property, plant and equipment in the first nine months of 2014.

A total of EUR 195,565 was expected to be spent on returnable packaging in 2014. Considering market needs we were forced to overspend as the amount is actually EUR 275,774, which is 41% above the annual plan. The overspending mainly relates to the purchases of 0.5 litre bottles.

2.4 The financial position of the Laško Group

Financing in the Laško Group

In liquidity terms, the first nine months of the year is the worst part of the year in the beverages industry, which usually begins in January and ends in May. During these times, due to lower quantities sold and the poor payment discipline of our major customers, we usually face difficulties managing our current liquidity. On average, we received payment for over 70% of our quantities sold within 75 days, meaning that we only receive payment for quantities sold in the summer by early autumn, thus improving the liquidity of the companies.

Until 30 April 2014, the Group had commitments due to banks according to loan agreements stemming from the restructuring of loan liabilities concluded on 29 July 2013 by 30 April 2014.

On 30 April 2014, Pivovarna Laško, Pivovarna Union and Radenska signed a Restructuring and Standstill Agreement with all of the 18 creditor banks. The Agreement defines important financial restructuring milestones, whereas final maturity of the majority of the companies’ borrowings has been rescheduled to the end of 2016.

The Agreement regulates the Group's commitments to creditors until the end of 2016. In addition to deleveraging through repayments to creditors from the cash flow from the Group's principal activity, the Agreement sets important deleveraging milestones


from the consortium sale of Mercator and processes for disposal of Radenska, Birra Peja and Delo, all of which began in 2013.

One of the key milestones for all stakeholders, including creditors, the Company and the owners, is the capital increase of Pivovarna Laško. After a transparent process of finding the investor, the capital increase was discussed and approved by the owners at the General Meeting of Pivovarna Laško.

The first significant milestone was repayment of loans by the end of June 2014 using the consideration received from the sale of investments in Mercator. The repayment was effected on 27 June 2014. The proceeds of EUR 75.5 million, which Pivovarna Laško, Pivovarna Union and Radenska received for their 23.3% share significantly contributed to the deleveraging of the Laško Group and realisation of the first significant milestone referred to in the Restructuring and Standstill Agreement.

The next milestone is the end of 2014, when repayment of borrowings is planned from the consideration received for disposal of investments in auxiliary activities. On 16 July 2014, the sale of the investment in Birra Peja owned by Pivovarna Union was finally closed. The contractually-agreed proceeds amount to EUR 14.75 million. In accordance with the sales agreement, most of the proceeds - EUR 13 million - were received, which were distributed pro-rata among the creditor banks of Pivovarna Union in accordance with the Standstill and Restructuring Agreement.

The third key milestone is deleveraging from additional injection of capital in mid-2015.

In the first nine months of the year, the Laško Group has reduced its exposure to banks by repaying net principal of EUR 87 million, of which EUR 27.8 million was repaid by Pivovarna Laško, EUR 52.4 million by Pivovarna Union, and EUR 5.8 million by Radenska (including changes to the utilisation of the approved revolving loan). The difference was repaid by the remaining Laško Group companies excluding Birra Peja, which is no longer part of the Laško Group as at 30 September 2014. As at 30 September 2014, the Group's debt to the banks resulting from the principal of loans received amounts to EUR 241.4 million. The intra-Group debt remains at the same level as at the end of 2013.

In the first nine months of the year, the Laško Group recorded EUR 10.7 million of financial expenses from financial liabilities due to banks and recorded an EBITDA of EUR 33.8 million. Most financial expenses from financial liabilities due to banks were recorded by Pivovarna Laško, namely EUR 7.7 million. This resulted in an EBITDA of EUR 11.5 million, meaning that the EBITDA generated in the first three quarters of the year is more than sufficient to cover all financial expenses from financial liabilities due to banks.

Sale of the investments of the Laško Group

In 2014, the Laško Group continues activities related to the divestment of financial investments and other assets not necessary for its operations. Pursuant to the operational and financial restructuring plan of the Laško Group, in order to deleverage the Group to an acceptable level and ensure its widely recognised brands and jobs are retained, in addition to continuing divestment processes already begun, we began


selling investments that comprise our core activity - namely our investments in Radenska and Birra Peja - in September 2013. The disposals process is being managed by the M&A advisers, UniCredit Banka Slovenije.

Sale of the shares of Mercator

This transaction closed on 27 June 2014. For more information, see the chapter entitled Events during the reporting period.

Sale of the shares of Večer

On 10 July 2014, the sales agreement for the stake in ČZP Večer, Maribor, was concluded. This transaction closed on 6 October 2014. For more information, see the chapter entitled Events during the reporting period.

Sale of the shares of Birra Peja, Peć

This transaction closed on 16 July 2014. For more information, see the chapter entitled Events during the reporting period.

Sale of the shares of Delo

was temporarily halted in 2012 after we failed to receive any binding offer fulfilling the tender requirements. In light of the sales process of Večer we also continued the sales process for Delo. As part of the Laško Group restructuring process, the sale of Delo is being managed by the M&A advisers, namely UniCredit Banka Slovenija, which began sales efforts on 1 September 2013 by sending a teaser to potential buyers. An IM was sent in December to those who agreed to sign an NDA. The non-binding proposals arrived in March 2014. In light of the conclusion of the sales agreement for Večer, which was successfully closed in early October, we will also continue the sales process for Delo.

The sale of Radenska, Radenci began on 1 September 2013 according to the project of operational and financial restructuring of the Laško Group. In September, a teaser was sent to potential investors in Radenska, followed by an IM. In December, management pitches were organised for potential investors at Radenska's headquarters. In January and February 2014, due diligence reviews and negotiations with the investors that provided binding bids were underway. In 2014, one common binding bid was received from two bidders; negotiations are currently underway.

The sale of Jadranska pivovara – Split

closed unsuccessfully in December 2012 as no party expressed its serious interest. In January 2013 we began selling off the remaining production equipment and the remaining assets of Jadranska pivovara. A sales agreement for the production equipment was concluded with a broker; some of the production was sold, with the proceeds being received by the end of May 2014. The sale of the remaining production equipment is currently underway.


In 2014, the Laško Group continues activities related to the divestment of assets not necessary for its operations, namely:

Pivovarna Laško: the Hum hotel in Laško, the "Tri lilije" sports hall in Laško and the warehouse at Letališka 32, Ljubljana. The warehouse was sold and the transaction closed in late December 2013,

Pivovarna Union: the "Center Bellevue" development and plots of land, and warehouses in Maribor,

Radenska: the commercial building in Radenci,

both breweries also began activities relating to the sale of some holiday chalets and also concluded a few transactions relating to the sale of holiday chalets and apartments.

Since the Group will continue to intensively conduct all sales proceedings, all divestment activities will continue in 2014, thus following the milestones of the Group restructuring process, which was agreed with the Restructuring and Standstill Agreement agreed with all creditor banks of Pivovarna Laško, Pivovarna Union, and Radenska on 30 April 2014.

2.5 Financial risks

All the risk management activities in the Laško Group focus on the unpredictability and illiquidity of financial markets, that have increased under the conditions of the financial crisis, and attempt to minimize the potential negative effects on the financial stability and performance of the Group. The finance department predominantly deals with financial risks while the sales department is also involved in credit risk management.

Long-term stability of the Group’s operations dictates concurrent and detailed monitoring and assessment of financial risks. In 2014, the Group continues to follow the objective of achieving stable operations and reducing exposure to individual risks to a sustainable level. The companies are unable to fully hedge all risks, but can reduce or avoid risks from materialising with timely measures. To this end, the companies continuously recognise and assess risks, taking the relevant measured depending on the target risk exposure. Risk management measures have been built into our day-to-day operations. All recognised risks have been recorded in the risks register, which is amended as needed. Particularly significant among financial risks faced by the Group are liquidity risk, risk related to the decrease in investment fair value, credit risk and to some extent also interest rate risk. The exposure to particular types of financial risks and measures for protection against them are implemented and evaluated based on the impacts on cash flows.

The Group, and especially Pivovarna Laško, disclose an excess of current liabilities over current assets, signifying the existence of a significant liquidity risk in particular in the parent company. After activities spanning nearly a year, we managed to come to an agreement with the banks on the long-term financial restructuring of Pivovarna Laško, Pivovarna Union and Radenska until 2016, which also contains the significant


milestones relating to the disposal of financial investments as part of the companies' restructuring. The Restructuring and Standstill Agreement up to 31 December 2016, which was signed on 30 April 2014, represents a significant reduction of the insolvency risk and a significant improvement of the structure of financing sources.

By selling its investment in Mercator, which closed on 27 June 2014, the Group realised an important milestone in the restructuring process and significantly reduced its debt to banks. In addition, the Group has also closed the sale of the investment of Pivovarna Union in Birra Peja. The Group has recovered its claims due from this company and the proceeds were used to repay the crediting banks of Pivovarna Union.

To avoid liquidity issues, Group companies manage their liquidity risk, design and implement a policy of regular liquidity management including the planning of cash outflows and sufficient inflows both on an annual and a monthly level.

Liquidity risk

Monitoring of the fundamental financing and liquidity ratios pursuant to Article 14 of the Financial Operations, Insolvency Proceedings and Compulsory Dissolution Act, which prescribes criteria under which an entity is deemed insolvent, is particularly important and necessary in ensuring effective liquidity risk management. Regular monitoring of an entity's liquidity position is of particular importance as it ensures timely response and helps to avoid unfavourable consequences of an emerging liquidity crisis.

Due to the signing of the Restructuring and Standstill Agreement and the successful divestment, the liquidity situation has improved; however, in view of the difficult situation on financial markets and the entire economic environment, the Group's exposure to liquidity risk is still very high and requires special attention.

The risk of changes in fair value

The risk of changes in fair value of financial investments, property, plant and equipment and investment property is undoubtedly also an important financial risk. The risk can be observed in the segment of financial expenses where financial expenses from the impairment and write-offs are disclosed. The sale of the investment into Mercator, which closed in June of this year, has significantly reduced the risk of a reduction in fair value due to the impairment of investments. However, the risk of the fall in value of other financial investments and real estate of Group companies remains.

Credit risks

include all those risks resulting in the decline of the company’s economic benefits due to insolvency of the company’s business partners (customers) and failure to meet their contractual obligations. To this end, the receivables from our business partners, wholesalers and retailers, are regularly monitored. In addition, we actively manage receivables, rapidly implement collection procedures by reminding customers, collecting receivables via telephone or in the field, as well as debt recovery through an external agent and through the courts. Part of our receivables are insured with the SID insurance company, while others are secured with guarantees, mortgages and bills of


exchange. Business with less credit-worthy customers is made on the basis of advance payments and immediate payments so that the risk of non-payment for the purchased goods is avoided to some extent.

Receivables due from our major wholesalers on the local market are only partly collateralised and subsequently, there is a large credit risk exposure to this particular segment. It is believed that there is a considerable risk of spreading late-payment culture also in 2014, which is the result of the financial crisis in all the segments of the economy. The management believes that the credit risk is increasing due to fierce economic conditions.

Interest rate risk

is the risk of a possible change in the reference interest rate on the financial market, mainly due to Euro borrowings linked to a variable interest rate (EURIBOR). Interest rate hedging of long-term debt at variable interest rate is doubtlessly sensible; however, since our loans were restructured until 31 December 2016 on 30 April 2014, we will monitor events on the financial markets and act when appropriate. Even though the reference interest rate (EURIBOR) is currently in a downward trend, the management have assessed the Company's interest rate risk as rather high but manageable.

2.6 Overview of events during and after the reporting period

EVENTS DURING THE REPORTING PERIOD

1. Signing of the Restructuring and Standstill Agreement

At the end of April 2014, Pivovarna Laško, Pivovarna Union and Radenska signed a Restructuring and Standstill Agreement with all of the 18 creditor banks. The Agreement defines important financial restructuring milestones, whereas final maturity of the majority of the companies’ borrowings has been rescheduled to the end of 2016.

The project of determining the concept of operational and financial restructuring of the companies continued over the entire 2013 period with close participation of all companies involved, creditors, and consultants. The aim of the project was to define an agreement that will on the one hand ensure the financial stability of the Laško Group through the long-term reprogramming of its borrowings and through deleveraging the Group to a sustainable level of debt, and on the other hand, to ensure fulfilment of creditors' expectations for rapid deleveraging and simultaneous maximizing of the value for the owners. This will ensure the Laško Group of companies a sustainable development of quality brands and preservation of jobs.

A total of 17 various scenarios of the Group's restructuring plan were prepared and following their analysis from the financial, fiscal and legal points of view, the concept which provided the basis for the signed Agreement was dully selected.

The Agreement regulates the Group's commitments to creditors until the end of 2016. In addition to deleveraging through repayments to creditors from the cash flow from


the Group's principal activity, the Agreement sets important deleveraging milestones from the consortium sale of Mercator and processes for disposal of Radenska, Birra Peja and Delo, all of which began in 2013.

One of the key milestones for all stakeholders, including creditors, the Company and the owners, is the capital increase of Pivovarna Laško. After a transparent process of finding the investor, the capital increase was discussed and approved by the owners at the General Meeting of Pivovarna Laško.

The first significant milestone, which has already been achieved, is the repayment of borrowings with the proceeds from sale of Mercator by the end of July 2014. The next milestone is the end of 2014, when repayment of borrowings is planned from the consideration received for disposal of investments in auxiliary activities. The sale of the investment in Birra Peja and the recovery of our receivables represents the partial fulfilment of the second milestone. The third key milestone is deleveraging from additional injection of capital, planned for mid-2015.

2. Closing the sale of the shares of Mercator

On 14 June 2013, the consortium of sellers of the stake in Poslovni sistem Mercator (hereinafter: Mercator) comprised of Pivovarna Laško, Pivovarna Union, Radenska, NLB, Nova KBM, Gorenjska banka, Prvi faktor – Faktoring, Banka Koper, Hypo Alpe-Adria Bank, NFD, Banka Celje, and NFD holding (hereinafter: consortium of sellers) concluded with Agrokor, d. d. (hereinafter: Agrokor) an Agreement on the sale and purchase of a total 53% share in Mercator (hereinafter: SPA); an Annex to the SPA was concluded on 28 February 2014.

The signing of the SPA was the result of an extensive procedure lead by the London team of international investment bank ING Bank N.V. The process was performed in compliance with international good practice with the aim of involving all potential investors. Transparency of the process as well as maximising benefits for all Mercator's stakeholders were ensured.

Closing of the transaction, resulting in the proceeds being paid, was tied to several conditions, including obtaining the relevant regulatory approvals, the rescheduling of Mercator's debt, and Laško Group companies concluding an Escrow Agreement with the crediting banks with collateral on MELR shares.

On 27 June 2014, the process for the sale of the 53% equity stake held by the consortium of sellers in Mercator was concluded.

Agrokor paid a total of EUR 172 million to the consortium of sellers for their 53% stake in Mercator.

The proceeds of EUR 75.5 million which Pivovarna Laško, Pivovarna Union and Radenska received for their 23.3% share will significantly contribute to the deleveraging of the Laško Group and represents the first significant milestone referred to in the Restructuring and Standstill Agreement concluded between Pivovarna Laško, Pivovarna Union and Radenska with the crediting banks in late April 2014.


3. Closing of the sale of the investment in Birra Peja

The sale of Birra Peja began in October 2013 based on the project of operational and financial restructuring of the Laško Group. Negotiations with the potential buyer were successfully closed in June 2014. On 11 June 2014, the Supervisory Board of Pivovarna Union consented to the Management Board beginning implementation of the sales agreement on the sale of 14,620 shares in Birra Peja, Peć, Kosovo, representing a 57.63% stake in the company, as well as the receivable of Pivovarna Union due from Birra Peja, Peć, Kosovo. The contractually-agreed proceeds amount to EUR 14.75 million. On 16 July 2014, the transaction was successfully concluded by the satisfaction of the suspensive conditions agreed in the sales agreement and the transfer of proceeds for the share and claim amounting to EUR 13 million. The remaining claim of EUR 1.75 million, which is collateralised and bears interest, is expected to be paid within one year. In accordance with the Restructuring and Standstill Agreement, the proceeds were used to effect pro-rata disbursement to the crediting banks of Pivovarna Union.

This sale represents the successful completion of one of the financial restructuring milestones of the Laško Group as defined in the Restructuring and Standstill Agreement concluded with the crediting banks.

4. Closing the sale of the shares of Večer

Activities relating to the sale of our 79.25% stake in Večer, which began already in 2010, continued in 2013 and 2014. In January 2013, the CPA prolonged the deadline for the sale of the company to 31 March 2013, which was in March again prolonged to 31 July 2013. For the second time, a sales agreement was concluded with a potential buyer containing several suspensive conditions, which however remained unfulfilled by the cut-off date. As a result, negotiations with thus buyer fell through in early April 2013. Delo continued negotiations aiming at the sale of ČZP Večer with other potential buyers. In June, a two-month exclusivity agreement was signed with one of the buyers who in the past expressed its interest in acquiring Večer. The buyer performed a due diligence review but decided not to continue the procedure. On 26 July 2013 the Delo publishers addressed a request to the Republic of Slovenia Agency for Protection of Competition for another extension of the deadline for the sale of 79.24% share in Večer; however, the request was rejected.

A public auction for the sale of shares of ČZP Večer was held on 28 February 2014 at 12 noon in the premises of Delo. The Committee determined that the security required for participation in the auction had not been paid within the set deadlines. Consequently, the auction was unsuccessful.

Delo continued activities aimed at selling the shares in ČZP Večer as soon as possible. In May 2014, a new sales mandate was provided to KF Finance, Ljubljana, which began actively searching for potential buyers. After lengthy negotiations, the best bid was selected among those received. On 10 July 2014, the sales agreement for the stake in ČZP Večer, Maribor, was concluded. The agreement contains the suspensive condition that the Competition Protection Agency provides its consent. The buyer has already acquired the prior consent of the Ministry of Culture.


On 19 September 2014, the Public Agency of the Republic of Slovenia for Competition (the CPA) issued the buyer Dober Večer, d. o. o., Murska Sobota resolution no. 3061-15/2014-15. In the resolution, the CPO found the merger of Dober večer, d. o. o., Murska Sobota and ČZP Večer, d. d., Maribor consistent with the rules on competition and thus did not object to the merger. The finality of the CPA resolution (approval of the merger) represents the fulfilment of the final suspensive condition upon which the validity of the agreement on the sale of the stake in ČZP Večer dated 10 July 2014 was conditional.

On 6 October 2014, Delo and Dober Večer successfully closed the sale of the stake in ČZP Večer. Dober Večer paid the seller Delo for 202,788 regular no-par-value shares in ČZP Večer (representing a 79.24% stake in ČZP Večer) proceeds of EUR 1 million, thus becoming the owner of a 79.24% stake in ČZP Večer upon paying the consideration on 6 October 2014.

Thus the sale of shares in ČZP Večer pursuant to the sales agreement concluded on 10 July 2014 between Delo and Dober Večer has been successfully closed. The fulfilment of the sales agreement represents the fulfilment of the resolution of the Competition Protection Office of the Republic of Slovenia (now the Public Agency of the Republic of Slovenia for the Protection of Competition) no. 306-195/2008-57 of 23 September 2009, which ordered Delo to dispose of at least a 75% stake in ČZP Večer.

5. Sale of investments of the subsidiaries of Pivovarna Laško

Processes relating to the sale of investments of the subsidiaries of Pivovarna Laško, Delo, Radenska and Jadranska pivovara - Split are described in the chapter FINANCIAL POSITION OF THE LAŠKO GROUP, under the heading Sale of Laško Group investments.

6. Beginning of the capital increase process of Pivovarna Laško

In July 2013, the Management Board of Pivovarna Laško determined in cooperation with the crediting banks a general debt restructuring framework, which was included in the Restructuring and Standstill Agreement signed on 30 April 2014. The Restructuring and Standstill Agreement sets important deleveraging milestones from the consortium sale of Mercator, which was successfully closed on 27 June 2014, and processes for disposal of Radenska, Birra Peja and Delo. The last, but one of the key milestones, is searching for an investor to provide a capital increase in Pivovarna Laško.

In order to ensure the expert and transparent sale of our stakes in Birra Peja, Radenska and Delo, and search for the relevant investors, the Laško Group has instructed the UniCredit bank to act on its behalf.

In accordance with the Restructuring and Standstill Agreement, with the help of UniCredit, the Laško Group is beginning to look for an investor interested in taking a significant interest in Pivovarna Laško by securing funds for additional capital injection in return for newly issued shares of Pivovarna Laško, d. d. The exact capital increase and share expected or to be acquired by the investor has not yet been determined. We assume investors will be interested in acquiring a controlling interest


in Pivovarna Laško by purchasing new shares issued in the capital increase and by offering to purchase other already issued shares.

Together with its advisers, Pivovarna Laško began looking for an investor in July 2014 by issuing a Teaser. All interested bidders who signed a non-disclosure agreement (NDA) received an Information Memorandum in mid-October, which summarises the operating data of the Laško Group. Interested bidders were invited to submit bids for a capital increase of no less than EUR 75 million. The best bid will be successful, while the best price offered per share will be the key selection criterion. Assuming the price and other conditions are acceptable, the company will propose that its shareholders, with the statutory-required 75% majority of votes at the general assembly, approve the capital increase with the exclusion of the priority right of existing shareholders. After the capital increase, the selected investor is expected to publish a takeover bid in accordance with the Takeover Act. This will allow the remaining shareholders to exit the company at the same share price.

To date, both strategic and financial investors have expressed their interest to participate in the capital increase. In accordance with the Restructuring and Standstill Agreement, the capital increase must be completed by no later than mid-2015.

The company regularly informs the public of the progress of the capital increase on the SEOnet portal of the Ljubljana Stock Exchange and on the Company's website www.pivo-lasko.si.

7. Settlement claims of Pivovarna Union and Radenska in accordance with Article 542 of the Companies Act (ZGD-1)

On 23 April 2014, Pivovarna Laško received the letters entitled "Settlement claim pursuant to paragraph 1 of Article 542 of the Companies Act", both dated 22 April 2014 and sent by Pivovarna Union and Radenska. In the letters, the aforementioned companies inform Pivovarna Laško of the unaudited amounts of their settlement claims aimed to cover the losses of both companies generated during the contractual group with Pivovarna Laško as the controlling entity. The unaudited amount of the claim of Pivovarna Union for the period from 11 April to 26 April 2012 amounts to EUR 0 (nil), while the unaudited amount of the claim of Radenska for the period from 6 February to 26 April 2012 amounts to EUR 1,044,183.99. An overview of the calculations was attached to the letters.

On 23 April 2014, Pivovarna Laško replied to the letters of Pivovarna Union and Radenska, informing both companies that it has been informed of their claims. At the same time, both companies were requested to provide confirmation of the amounts by auditors.

In light of the aforementioned, provisions of EUR 1,044,183.99 have been disclosed in the financial statements of Pivovarna Laško for the financial year ended 31 December 2013.

8. Compensatory actions against Atka-Prima / Boško Šrot

In early 2011, compensatory actions were filed at the relevant courts against the defendants Atka-Prima and Boško Šrot, demanding the defendants pay damages to the


plaintiffs relating to the damages incurred by the plaintiffs as a result of transactions effected in 2008 and 2009. The following actions were filed: by Pivovarna Laško on 12 January 2011 for the payment of EUR 13,336,488.76 plus costs and interest; by Pivovarna Union for the payment of EUR 51,662,307.74 plus costs and interest; by Radenska, Radenci for the payment of EUR 46,238,893.69 plus costs and interest, by Delo for the payment of EUR 8,003,311.06 plus costs and interest, and by Fructal for the payment of EUR 10,784,720.85 plus costs and interest (the latter were all filed on 15 February 2011). These proceedings are all pending.

On 14 July 2014, Pivovarna Laško received the interim judgement of the Celje District Court in the industrial dispute between Pivovarna Laško as the plaintiff and Atka Prima, Celje and Boško Šrot as defendants for the payment of EUR 13,336,488.76 plus costs and interest. The court decided that the claim of the plaintiff for damages arising from the transactions or loan agreements concluded in 2009 by the plaintiff and Infond Holding and the plaintiff and Center naložbe, and the sales agreement concluded in 2008 for the purchase of shares in Thermana between Infond Holding as the seller and the plaintiff Pivovarna Laško as the buyer, is justified. At the same time, the court halted the proceedings for the payment made on 24 September 2013 of EUR 89,382.56 from the bankruptcy estate of Infond Holding, d. d. – in bankruptcy and the payment made on 30 December 2013 of EUR 410,236.03 from the bankruptcy estate of Center naložbe, d. d. - in bankruptcy. The interim judgement and decision are not yet final.

9. Compensatory actions against the Republic of Slovenia, the CPO and the then director of the CPO - now the CPA

On 14 September 2012, Pivovarna Laško, Pivovarna Union and Radenska, Radenci (hereinafter referred to as: the Laško Group companies) filed a compensatory action against the Republic of Slovenia (the Competition Protection Office; hereinafter referred to as: CPO) and the director of the CPO. In the opinion of the Laško Group companies, the reason for the action was the unlawful prevention of the sale of the shares of Mercator owned by the Laško Group companies by the CPO in 2011. Because of the decision of 26 April 2011 taken by CPO, the Laško Group companies were not able to accept the binding offer of Agrokor for the purchase of the shares of Mercator owned by the Laško Group companies in 2011 since the above-mentioned decision prevented the Laško Group companies from disposing of their shares of Mercator. The Laško Group companies believe that the CPO unlawfully prevented the conclusion of the aforementioned transaction with Agrokor, which consequently resulted in damages arising to the Laško Group companies of a total EUR 59.2 million up to the date the action was filed (of that, Pivovarna Laško incurred damages of EUR 21,877,385.84 plus costs and interest, Pivovarna Union damages of EUR 31,322,586.77 plus costs and interest, and Radenska, Radenci damages of EUR 6,157,355.78 plus costs and interest).

On 14 October 2013 we received the judgement of the Supreme Court of the Republic of Slovenia ruling the aforementioned CPO decision dated 26 April 2011 unlawful. The judgement of the Supreme Court was forwarded to the court dealing with the plaintiffs' actions.


10. Infond Holding

Bankruptcy proceedings were instigated against the debtor Infond Holding at the end of 2009. In the bankruptcy proceedings, Laško Group companies have reported the following claims: Pivovarna Laško: EUR 1,892,319.26, Pivovarna Union: EUR 28,107,482.28, Radenska: EUR 17,062,078.14 and Delo: EUR 6,771,147.94, amounting to a total of EUR 53,833,027.62. The bankruptcy proceedings are still pending.

The first interim division of the bankruptcy estate was performed on 24 September 2013. Pivovarna Laško received EUR 89,382.56, Pivovarna Union EUR 1,485,332.23, Radenska EUR 805,916.99 and Delo EUR 319,831.10. The bankruptcy proceedings are still pending.

11. Center naložbe

Bankruptcy proceedings were instigated against the debtor Center naložbe at the end of 2009. In the bankruptcy proceedings, Laško Group companies have reported the following claims: Pivovarna Laško: EUR 6,487,493.35, Pivovarna Union: EUR 19,991,859.46, Radenska: EUR 26,414,066.45 and Delo: EUR 547,784.42, amounting to a total of EUR 53,441,203.68.

The first interim division of the bankruptcy estate was performed on 30 December 2013. Pivovarna Laško received EUR 410,236.03, Pivovarna Union EUR 1,695,898.66, Radenska EUR 1,670,291.01 and Delo EUR 34,639.10. The bankruptcy proceedings are still pending.

12. Action of minority shareholders in Jadranska pivovara - Split

On 4 April 2012, Jadranska pivovara - Split received the action of 28 minority shareholders challenging the resolution of the General Meeting of Jadranska pivovara adopted on 24 February 2012 on the exclusion of the minority shareholders. On 13 February 2013, Jadranska pivovara received the judgement of the court of first instance recognising the claim of two shareholders and finding the resolution on the exclusion of the minority shareholders void. Jadranska pivovara appealed the judgement. On 10 July 2013, Jadranska pivovara received the judgement of the Zagreb High Court annulling the decision of the court of first instance and deciding the case should be re-examined.

On 3 December 2013, Jadranska pivovara received the judgement of the court of first instance, which again recognised the claim of the two shareholders and found the resolution on the exclusion of the minority shareholders void. Jadranska pivovara appealed the judgement. The high court has not ruled yet.

13. Denationalisation claims at Radenska, Radenci

The proceedings are taking place before the Gornja Radgona Administrative Unit in compliance with the Denationalisation Act and in the non-contentious proceedings before the District Court in Novo mesto pursuant to the Enforcement and Criminal Actions Act. The beneficiaries are demanding restitution of their shares in property, company, trademarks and mineral springs that were nationalised, as well as the payment of damages.


The Gornja Radgona Administrative Unit issued a decision on 27 June 2012, which rejected the request for the privatisation of the nationalised company Zdravilišče Slatina Radenci, Höhn and Comp., public trading company in Radenci with a 48% stake owned by Wilhelmina Höhn Šarič. With the supplementary decision issued on 31 August 2012 the Zdravilišče Slatina Radenci, Höhn and Comp., public trading company is corrected and renamed Kuranstalt Sauerbrun Radein AG. The claim was lodged by the legal successor Dr Rudolf Höhn Šarič on 4 May 1993. In the appeal proceedings, the Ministry of Economic Development and technology on 25 February 2013 rejected the appeal against the decision of the Gornja Radgona Administrative Unit as unjustified. The beneficiary lodged a lawsuit and the proceedings continue before the Administrative Court of the Republic of Slovenia.

In the denationalisation proceedings managed by the Gornja Radgona Administrative Unit, on 5 August 2014, Radenska received the resolution of the Gornja Radgona Administrative Unit, ref. no. 301-35/1993-528, 339-33/2009 of 31 July 2014 rejecting the request for the denationalisation of nationalised assets - namely, 48% of all the assets of Kuranstalt Sauerbrunn – Radein Aktiengesellschaft, Bad Radein to the former owner the deceased Ante Šarič, rejected the denationalisation request of Rudolh Hohn Šarič for the return of assets belonging to Zdravilišče Slatina Radenci, Hohn & Comp., Javna trgovinska družba, Readenci, and rejected the denationalisation request filed by the deceased Wilhelmina Wiesler (maiden name: Šarič) as the heir to the deceased Ante Šarič and Wilhelmina Šarič. The resolution is not yet final.

On 29 August 2014, the Gornja Radgona Administrative Unit rejected the claim for the return of one half of certain items of real estate owned by Radenska, which had been taken from Dr Ante Šarič. The Ministry of Agriculture, Forestry and Food rejected the appeal on 13 October 2014.

Non-contentious proceedings for the return of property pursuant to the Enforcement and Criminal Actions Act are taking place before the District Court in Novo mesto. The motion was filed on 20 December 2010 for the benefit of the beneficiaries, the grandchildren of Dr Anton Šarič. The District Court in Novo mesto issued an order, which was received on 19 June 2013, dismissing the request for the return of nationalised property. An appeal was filed with the Ljubljana High Court, which was rejected and the decision of the Novo mesto District Court upheld. The latter also rejected the return of the nationalised property. This matter is thus res iudicata as concerns regular legal remedies. The beneficiaries filed an audit request with the Supreme Court in Ljubljana against the decision of the Ljubljana High Court on 5 May 2014.

14. Action of Perutnina Ptuj against Pivovarna Laško

The plaintiff filed a claim against Pivovarna Laško on 31 December 2010 at the District Court of Celje demanding payment of EUR 10,116,488.71 inclusive of the legally prescribed default interest. The plaintiff justified its claim by stating that the legal representative of Pivovarna Laško signed a comfort letter on 10 January 2009 and thus allegedly committed to fulfil the liability of Perutnina Ptuj to Poslovni sistem Mercator on account of loan contracts. The proceedings are pending.


15. Enforcement proceedings of NKBM against Pivovarna Laško

Pursuant to the agreement on the pledge of book-entry securities concluded on 5 June 2009 between Nova kreditna banka Maribor (NKBM) as the creditor, Center naložbe as the debtor and Pivovarna Laško as the lienor, Pivovarna Laško pledged to NKBM 345,304 shares of Radenska (ticker symbol: RARG) as collateral for a loan raised by Center naložbe with NKBM. The aforementioned agreement on the pledge of book-entry securities was signed by the former director Boško Šrot on behalf of Pivovarna Laško.

On 22 November 2011, Pivovarna Laško received the judgement of the Maribor District Court allowing the enforcement on the pledged shares to repay the claim in the amount of EUR 7,349,552.52 plus costs and interest from 29 July 2011 in the commercial dispute between NKBM as the plaintiff and Pivovarna Laško as the defendant. The court thus allowed the enforcement against the 345,304 RARG pledged shares, ruling that the defendant Pivovarna Laško is obligated to suffer the sale of these shares and repay the claim from the proceeds of the sale. The judgement became final and enforceable on 8 December 2011.

Pursuant to the aforementioned judgement and the enforcement motion of NKBM, on 22 December 2011 the court issued an enforcement order whereby the court approved the proposed enforcement against the pledged RARG shares by selling the shares and repaying the creditor from the proceeds. So far the RARG shares have not been sold in the enforcement procedure. NKBM proposed deferred enforcement and accordingly on 28 October 2013 the court ruled for the enforcement to be postponed until 1 October 2014.

On 17 June 2014, Pivovarna Laško received the decision of the Celje District Court allowing the intervention of the new creditor in the enforcement proceedings. The Bank Assets Management Company (Družba za upravljanje terjatev bank, Ljubljana - DUTB) took the place of the original creditor Nova KBM, Maribor, as the disposal of the underlying claim has resulted in the automatic transfer of the lien from the former to the current creditor.

16. The action of MIP against Pivovarna Laško

On 21 March 2013 we received from the Celje District Court the action of MIP, Gornji Vakuf, Uskoplje, for the payment of EUR 1,135,481.43. In the action, the plaintiff demands the payment of damages for loss of income of EUR 1,085,481.43 alleged to have arisen as a result of the unlawful withdrawal of Pivovarna Laško from the sales agreement, as well as damages for the loss of reputation in the amount of EUR 50,000.00. On 22 April 2013 the Group issued its response stating that the plaintiff's claim was unfounded. The court of first instance has not ruled on this matter yet.

17. The action Pivovarna Laško against MIP

On 25 September 2012, Pivovarna Laško filed an action against MIP demanding payment of EUR 200,975.51 plus costs and interest due to the failure to pay for the goods that Pivovarna Laško sold and supplied to the defendant, as well as the payment of EUR 245,316.75 plus costs and interest due to packaging not returned, for a total of EUR 446,292.26 plus costs and interest. On 23 April 2013 we received the reply of the


defendant stating that the claim of Pivovarna Laško is unjustified. On 3 June 2013, a request for the partial withdrawal of the claim was filed for the amount of EUR 2,362.95 after the parties mutually offset their claims on 21 May 2013. The court of first instance has not ruled on this matter yet.

18. CEN ADRIA, d. o. o. – in bankruptcy, Matulji (Croatia)

In 2006 Pivovarna Laško filed an application for enforcement against Cen Adria, Matulji, demanding payment of outstanding invoices totalling Kn 857,292.53 (Euro equivalent of 114,764.73) inclusive of the legally prescribed default interest. Cen Adria appealed against the enforcement ruling and currently the case is proceeding in the same way as in the case of an appeal against a payment order in contentious proceedings. In 2006, during the above proceedings, Cen Adria filed a counter action against Pivovarna Laško and Jadranska pivovara - Split, Vranjic, demanding payment of damages totalling kn 25.000.000,00 (Euro equivalent of approx. 3,346,720.21), which Cen Adria allegedly incurred due to the early termination of the Business Cooperation Agreement (Ugovor o poslovnoj suradnji). The proceedings are pending.

In 2012, bankruptcy proceedings were instigated against Cen Adria.

In the case of Pivovarna Laško against Cen Adria, on 8 November 2013 Pivovarna Laško received the judgement of the court of first instance awarding Pivovarna Laško the total amount of kn 1,688,990.71 (EUR 221,361.82). Cen Adria - in bankruptcy - appealed the judgement. The high court has not ruled yet on the appeal.

19. Non-litigious proceedings for the judicial verification of monetary compensation

The applicants, namely Skandij (384 PULG shares; amount at issue: EUR 211,084.80), Enlux (22 PULG shares; amount at issue: EUR 12,093.40), Marko Potočnik (118 PULG shares; amount at issue: EUR 64,864.60 and 1451 RARG shares; amount at issue: EUR 30,819.24), BPH (169 PULG shares; amount at issue: EUR 3,589.56), Sonja Slatnar (2,063 RARG shares; amount at issue: EUR 39,197.00 and 50 RARG shares; amount at issue: EUR 24,344.00), Javna razsvetljava, (22 PULG shares; amount at issue: EUR 12,093.40), Mif Invest (50 PULG shares; amount at issue: EUR 24,344.00), and Nina Pintar (100 PULG shares, amount at issue: EUR 44,700.00) filed a request for the judicial verification of monetary compensation paid for the shares of Pivovarna Union and the shares of Radenska against Pivovarna Laško as the defendant. The applicants request the court defines appropriate compensation for the purchase of all PULG and RARG shares owned by the applicants, while some applicants also demand that Pivovarna Laško as the main shareholder be required to purchase their PULG and/or RARG shares and conclude the relevant sales agreement. In our replies to the applications we objected to them in full.

The cases of Enlux, Skandij, Marko Potočnik, Javna razsvetljava, BPH, Mif Invest and Sonja Slatnar are now final. Pivovarna Laško has purchased the shares of the aforementioned applicants.


20. Criminal investigation ref. no. KP 53791/2010

On 9 March 2012, Pivovarna Laško received the decision of the Ljubljana High Court allowing, pursuant to the appeal of the district state prosecutor, the criminal investigation which the Ljubljana District Court had already suspended on 3 June 2011. These criminal proceedings are being conducted against Marko Pogačnik, Tomaž Toplak, Boško Šrot, Igor Bavčar, Pivovarna Laško and Istrabenz as the suspects. Marko Pogačnik and Tomaž Toplak are suspected of abuse of office pursuant to Article 244 of the CC, Igor Bavčar and Boško Šrot are suspected of fraud pursuant to Article 217 of the CC in conjunction with Article 25 of the CC, while the legal entities are suspected of fraud pursuant to Article 217 of the CC in conjunction with Article 25 of the CC on account of the alleged actions of Boško Šrot and Igor Bavčar. In the case of Pivovarna Laško, the purchase of Mercator shares from SOD on 30 August 2005 is at issue. The investigation is still pending.

21. Criminal proceedings ref. no. X K 59294/2010

These criminal proceedings refer to two groups of crimes - on the one hand to actions related to the conclusion of loan agreements with Infond Holding and Center naložbe, and on the other hand to actions related to the sale of Istrabenz shares (ticker symbol: ITBG). Initially, the proceedings were joined, however, the court has now issued a resolution dividing the proceedings into two: against Boško Šrot as the defendant and Igor Bavčar as the co-defendant, as well as against Kristjan Sušiski and Nastja Sušinski, for, inter alia, crimes pursuant to Article 244/II of the Criminal Code (KZ-1), and against Boško Šrot as the defendant and Matjaž Rutar, Vesna Rosenfeld and the legal entity Atka Prima for crimes according to Article 240/I of the KZ-1 and others (now with reference no. X K 6155/2013).

On 7 March 2013, Pivovarna Laško brought a claim for damages against Boško Šrot, Igor Bavčar and the other defendants due to crimes relating to the sale of a block of ITBG shares in 2007. The claim for damages demands repayment of lost profit of EUR 25,490,616.16, plus statutory default interest due to the sale of a block of ITBG shares at an excessively low price. On 19 July 2013, the court of first instance issued its guilty verdict, while Pivovarna Laško's claim for damages was referred to the civil court. The criminal case became final on 14 July 2014.

22. Criminal proceedings ref. no. X K 6155/2013

On 29 November 2013, we received notification of the Ljubljana District Court concerning the pre-trial hearing in the criminal proceedings against Boško Šrot, Matjaž Rutar, Vesna Rosenfeld and the legal entity Atka-Prima as suspects of crimes according to 244/II of the Criminal Code, and others.

On 17 January 2014 we informed the court of the course of the claims against Boško Šrot and the legal entity Atka-Prima for damages, and that we would not claim damages in the criminal proceedings due to the fact that claims for damages had already been lodged against Boško Šrot and the legal entity Atka-Prima. On 24 February 2014, we lodged claims for damages against Vesna Rosenfeld (Pivovarna Union: EUR 23.2 million) and Matjaž Rutar (Pivovarna Laško EUR 2.3 million, Pivovarna Union EUR 36.8 million, Delo EUR 8.9 million, Radenska EUR 2.4 million).


23. Filing criminal charges

On 25 October 2013, Pivovarna Laško filed criminal charges against the former director of Pivovarna Laško, Boško Šrot. Pivovarna Laško believes that reasons exist to suspect that the actions of the former director Boško Šrot, who pledged 345,304 RARG shares with NKBM pursuant to the pledge agreement of book-entry securities dated 5 June 2009, constitute an abuse of office or trust in an economic activity, a crime referred to in Article 240 of the Criminal Code (CC). The amount of damages Pivovarna Laško will incur as a result of this damaging transaction cannot be assessed at this moment in time since the actual amount of damages will be known when the shares are sold in the enforcement proceedings of NKBM against Pivovarna Laško. - See: The enforcement proceedings of NKBM against Pivovarna Laško. Thus Pivovarna Laško as the legal entity incurring damages will subsequently file a claim for damages.

24. General Meeting of Shareholders of Pivovarna Laško

On 30 June 2014, the 22nd General Meeting of Shareholders of Pivovarna Laško was held. The General Meeting was briefed on the audited Annual Report for 2013 and the Report of the Supervisory Board on its verification of the Annual Report, on the cover of net loss, on the remuneration of the Management and Supervisory Board members and granted discharge to the Management Board and the Supervisory Board. The General Meeting appointed Mr Janez Škrubej as new member of the Supervisory Board (capital representative) from 30 June 2014 to 31 August 2017. The General Meeting appointed the audit firm Ernst & Young, Ljubljana as the auditor of the company's 2014 financial statements.

The General Meeting was also briefed on the signing of the Restructuring and Standstill Agreement and the beginning of the search for an investor.

The minutes of the General Meeting is published on the SEOnet portal of the Ljubljana Stock Exchange and on the Company's website www.pivo-lasko.si.

25. General Meeting of Shareholders of Pivovarna Union

On 27 August 2014, the 23rd General Meeting of Shareholders of Pivovarna Union was held. The General Meeting was briefed on the audited Annual Report of the Union Group and Pivovarna Union for 2013, the Report of the Supervisory Board on its verification of the Annual Report, and the Report of the Supervisory Board on its verification of the Management Board's report on transactions with related parties. The General Meeting decided on using the distributable profit, which amounted to EUR 2,255,570.00 as at 31 December 2013, to cover dividend payments to the shareholders of EUR 5 per share. The General Meeting granted discharge to the Management and Supervisory Board for 2013 and appointed Mr Goran Brankovič as the new member of the Supervisory Board from 27 August 2014 to 22 June 2015 inclusive. The General Meeting appointed the audit firm Ernst & Young, Ljubljana as the auditor of the company's 2014 financial statements.

The minutes of the General Meeting are available from the company's website: www.pivo-union.si.


26. General Meeting of Shareholders of Radenska, Radenci

The 22nd General Meeting of the shareholders of Radenska was held on 28 August 2014. The General Meeting was briefed on the audited Annual Report of Radenska for 2013, the Report of the Supervisory Board on its verification of the 2013 Annual Report, and the Report of the Supervisory Board on its verification of the Management Board's report on transactions with related parties. The General Meeting was also briefed on covering the net loss incurred in the 2013 financial year of EUR 3,685,485.71, which the Management Board had already covered by the time it drafted the annual report. The General Meeting was also briefed on the fact that the financial statements as at 1 January 2012 and 31 December 2012 have been adjusted. Due to these adjustments, the net loss for previous periods amounts to EUR 5,066,206.86, which the Management Board has already covered by the time it drafted the annual report. The General Meeting also decided to grant discharge to the Management and Supervisory Board for 2013. The General Meeting appointed the audit firm Ernst & Young, Ljubljana as the auditor of the company's 2014 financial statements. The General Meeting was also briefed on the fact that the Workers' Council appointed Frank Lipičar and Dominik Omar as members of the Supervisory Board (labour representatives) for a term of office of 4 years, which began on 9 November 2013.

The General Meeting resolutions are published on the company's website: www.radenska.si.

27. Founding of Laško Grupa, Sh. p. k., Peć, Kosovo

In March 2014, Pivovarna Laško filed documents (the memorandum of association and company statute) for the founding of Laško Grupa Kosovo, Sh. p. k., Peć as a limited liability company. The subsidiary was founded on 28 August 2014 and it began operations on 1 September 2014. The company is fully (100%) owned by Pivovarna Laško, and its subscribed capital amounts to EUR 1,000. Petra Matjašič Nader was appointed company director.

The company's fundamental activity is to perform marketing activities. The company performs marketing activities for the Laško and Sola brands on the Kosovar, Macedonian and Montenegrin markets. The company is also engaged in trade as it sells the products Birra Peja produces according to the licence agreement for Pivovarna Laško and Pivovarna Union on the Macedonian and Montenegrin markets.

28.) Disposal of other assets

More information about the sale of the remaining property is included in the Section The financial position of the Laško Group- Disposal of Laško Group investments. SUBSEQUENT EVENTS

Approval of the Laško Group Strategy for the 2015 - 2019 period

At its 17th session on 13 October 2014, the Supervisory Board of Pivovarna Laško approved the Strategy of the Laško Group for the 2015 - 2019 period. The Supervisory Board of Pivovarna Union also approved the Strategy at its 35th session on 23 October 2014. The Strategy envisages the growth of quantities sold and revenue; revenues from


the growth of products and services will grow on average 1.8% a year and are expected to reach EUR 175.5 million in 2019. At that time, EBITDA is expected to exceed EUR 52 million. The capital increase for a minimum of EUR 75 million will also continue, and is expected to be completed by mid-2015. The sale of investments in the subsidiaries Delo and Radenska will also continue, as envisaged by the Restructuring and Standstill Agreement concluded between the Laško Group and its crediting banks in April 2014. The cash flow generated by the capital increase, disposal of investments and the profits generated will be primarily earmarked for deleveraging. The aim is to reach a sustainable level of debt as early as by the end of 2016. The Laško Group will achieve the goals outlined in the strategy through 12 strategic initiatives, which include the legal merger of Pivovarna Laško and Pivovarna Union into a single company, which is expected to take place on 1 January 2016.

In the future, the Laško Group will focus most on developing and investing in its own brands and strengthening their market position. It will continue to strengthen its presence on foreign markets, focusing on Bosnia and Herzegovina, Italy, Serbia, Croatia and Kosovo, and breakthrough to new markets. In Slovenia, the Group will continue to maintain its market position.

A significant portion of cash flow will be earmarked for new investments, for enhancing our technological and energy efficiency, improving our logistics and environmental sustainability. As a result, the total investments over the five years until 2019 will exceed total amortisation and depreciation. The vision of the Laško Group is to become the leading producer of bear and soft drinks in the region.

A summary of the Laško Group Strategy for the 2015 - 2019 period was is published on the SEOnet portal of the Ljubljana Stock Exchange and on the Company's website www.pivo-lasko.si on 13 October 2014.


3 FINANCIAL REPORT

3.1 Consolidated financial statements

Consolidated income statement of the Laško Group for the period 1 January to 30 September 2014

Plan

(in EUR) I.-IX./2014 I.-IX./2013 I.-XII./2014

Net sales revenues 197.093.216 209.589.143 270.296.625Change in inventories of products and work in progress 1.117.966 2.336.835 40.290Other operating revenue 1.764.316 2.701.788 1.094.466Costs of goods, materials and services (123.715.585) (133.944.817) (170.781.251)Employee benefit costs (35.498.155) (36.389.850) (48.202.208)Amortisation of intangible assets and depreciation of property, plant and equipment (11.496.507) (13.265.548) (17.113.859)Revaluation operating expense (1.044.663) (931.846) (2.633.819)Provisions - - -Other operating expenses (4.451.374) (3.711.878) (8.874.070)Operating revenue from investment disposal (Birra Peja) 804.408 - -

OPERATING PROFIT OR LOSS 24.573.622 26.383.827 23.826.174

Financial income 3.374.618 3.174.404 30.898.777Financial expenses (13.401.621) (40.110.503) (13.876.171)

PROFIT OR LOSS BEFORE TAX 14.546.619 (10.552.272) 40.848.780

Tax (1.841.094) (247.930) (8.963.986)

NET PROFIT OR LOSS FOR THE YEAR 12.705.525 (10.800.202) 31.884.794

Share of non-controlling interests in net profit /loss 315.261 (95.852) 31.021.614Share of the controlling interests in net profit /loss 12.390.264 (10.704.350) 863.180


Consolidated statement of financial position of the Laško Group at 30 September 2014

Plan(in EUR) 30 Sept. 2014 31 Dec. 2013 31 Dec. 2014

ASSETS

Non-current assets 268.059.631 284.057.058 208.688.684Intangible assets 71.048.336 72.409.028 64.608.374Property, plant and equipment 154.946.371 170.065.814 124.407.805Investment property 5.846.928 5.847.085 4.253.120Long-term investments in the subsidiaries 427.413 427.413 203.792Financial assets available for sale 1.240.869 1.207.647 611.640Long-term financial lease receivables 518.013 287.276 408.742Long-term loans 2.345.799 283.544 261.377Long-term operating receivables 2.194.996 2.196.510 3.570Long-term deferred tax assets 29.490.906 31.332.741 13.930.264

Short-term assets less short-term deferred and accrued items 102.357.337 169.578.147 105.595.310Non-current assets held for sale 8.313.059 9.208.603 -Inventories 22.416.062 21.918.999 16.838.522Short-term operating receivables 58.274.718 52.960.981 44.547.133Short-term receivables for excess corporate tax payment 1.067.011 351.495 -Financial assets available for sale 3.593.357 75.658.238 7.676.033Short-term loans 7.355.281 6.475.107 4.949.038Cash and cash equivalents 1.337.849 3.004.724 31.584.584

Short-term accruals and prepaid expenditure 1.070.465 856.090 205.280

Total short-term assets 103.427.802 170.434.237 105.800.590

TOTAL ASSETS 371.487.433 454.491.295 314.489.274


Consolidated statement of financial position of the Laško Group at 30 September 2014

(continued)

Plan(in EUR) 30 Sept. 2014 31 Dec. 2013 31 Dec. 2014

EQUITY 71.385.407 58.213.883 102.666.286

Equity of the owners of non-controlling stake 10.777.915 9.804.281 2.857.032

Equity of the owners of the controlling stake 60.607.492 48.409.602 99.809.254Share capital 36.503.305 36.503.305 36.503.305Share premium 2.566.995 30.993.977 35.273.055Profit reserves 3.650.331 3.650.331 3.650.331Revaluation reserve 5.447.386 5.701.570 9.579.884Retained earnings 29.071 (72.940) (16.267.949)Net profit or loss 12.390.264 (28.354.042) 31.058.991Translation reserve 20.140 (12.599) 11.637

LIABILITIES 300.102.026 396.277.412 211.822.988

Provisions and long-term accrued costs and deferred income 13.622.450 13.929.629 2.685.822Provisions for retirement grants and jubilee awards 5.136.993 5.293.280 2.345.669Other provisions 8.435.824 8.587.422 249.862Long-term accrued costs and deferred revenue 49.633 48.927 90.291

Long-term liabilities 119.822.037 17.225.540 129.444.751Long-term financial liabilities 119.822.037 17.225.540 129.444.453Long-term operating liabilities - - 298

Short-term liabilities 159.278.855 358.968.015 76.728.245Liabilities for non-current assets held for sale 412.330 1.090.807 -Short-term operating liabilities 36.358.094 40.130.798 26.026.403Short-term financial liabilities 122.508.431 317.746.410 50.701.842

Short-term accrued costs and deferred income 7.378.684 6.154.228 2.964.170

Total short-term liabilities 166.657.539 365.122.243 79.692.415

TOTAL EQUITY AND LIABILITIES 371.487.433 454.491.295 314.489.274


Consolidated cash flow statement of the Laško Group for the period from 1 January to 30 September 2014

(in EUR) I.-IX./2014 I.-IX./2013

OPERATING PROFIT 24.573.622 26.383.827Adjustments for:Elimination of revaluation operating expense from fixed assets 9.487 38.877Depreciation of PPE and investment property 10.750.407 12.519.242Amortisation of intangible assets 746.100 746.306Long-term assets written-off 544.045 279.995Short-term assets written-off 399.099 612.974Net movements in provisions (307.179) (253.594)

Total adjustments 12.141.959 13.943.800

MOVEMENTS IN WORKING CAPITALInventories and non-current assets held for sale (497.063) (1.687.994)Operating and other receivables (6.871.209) (23.386.737)Operating and other liabilities (3.226.725) 13.070.114

Total movements in working capital (10.594.997) (12.004.617)

NET CASH FLOWS FROM OPERATING ACTIVITIES 26.120.584 28.323.010

Cash flows from investing activities Acquisition /disposal of property, plant and equipment 4.359.706 (6.057.789)Acquisition / disposal of intangible non-current assets 70.547 (142.617)Acquisition / disposal of financial assets 69.996.235 5.002.971 - of that, net cash flows from the disposal of Birra Peja 2.033.431 -Interest income 201.171 250.225Dividends and capital profits received 3.173.447 2.924.179

NET CASH FLOWS FROM INVESTING 77.801.106 1.976.969

Cash flows from financing activity Interest paid (13.401.621) (13.955.926)Capital increase / reduction 498.071 -Increase / decrease in financial debt (92.641.482) (15.439.826)Dividends paid to the owners (43.533) -

NET CASH FLOWS FROM FINANCING (105.588.565) (29.395.752)

NET INCREASE / DECREASE IN CASH AND CASH EQUIVALENTS

(1.666.875) 904.227

Cash and cash equivalents at the beginning of year 3.004.724 2.188.615Cash and cash equivalents at the end of year 1.337.849 3.092.842


3.2 Notes to the consolidated financial statements

Operational analysis of the Laško Group

Data on operations

Accounting policies

The same accounting policies were applied in 2014 as in previous years. The accounting policies are presented in detail in the Annual Report of the Laško Group for the 2013 financial year, which was published on SEOnet, the website of the Ljubljana Stock Exchange, on 30 April 2014.

The separate financial statements drafted for the nine months ended 30 September 2014 have not been audited and have been drafted in accordance with IAS 34 - Interim Financial Reporting, and should be read in conjunction with the annual financial statements drafted for the financial year ended 31 December 2013.

The 2013 annual report contains adjustments of the financial statements of previous years, as disclosed in a special note of the annual report. For this reason, the nine-month financial statements for 2013 in this report have also been adjusted. Disclosures to the individual items of the income statement

of the Laško Group for the January – September 2014 period

a.) Profit or loss from operations

In the nine months of 2014, net revenues from the sale of goods and services amounted to EUR 196.4 million, which is EUR 12.5 million less than in the same

(in EUR) I.-IX./2014 I.-IX./2013 Plan I.-XII./2014

Net sales revenues 197.093.216 209.589.143 270.296.625

EBIT 24.573.622 26.383.827 23.826.174Normalised EBIT 24.863.171 29.024.316 23.826.174

EBITDA 36.070.129 39.649.375 40.940.033

Normalised EBITDA 36.359.678 42.289.864 40.940.033Net interest expence1 11.233.122 13.338.709 13.757.487

Net profit or loss 12.705.525 -10.800.202 31.884.794

Normalised net profit or loss 12.901.402 13.293.580 31.884.794

Return on equity (ROE)2 21,2 % 15,9 % 38,1 %Return on assets (ROA)3 3,1 % 2,6 % 6,3 %

EBIT margin4 12,9 % 14,1 % 9,1 %

EBITDA margin5 18,9 % 20,5 % 15,7 %

1 Interest income - interest expense2 Normalised net profit or loss / average equitiy in the period3 Normalised net profit or loss / average assets in the period4 Normalised EBIT / net revenue from the sale of products and services5 Normalised EBITDA / net revenue from the sale of products and services


period of the previous year, representing a reduction of 6%. This reduction is mainly due to the exclusion of Birra Peja from the consolidation as the company was sold in June 2014, and partly also due to a decrease in net revenue from sales as a result of lower sales on the domestic market. On the domestic market, the Group generated EUR 163.2 million of net sales revenues, which is EUR 17.3 million or 9.6% less than in the same period of the previous year. Again, major reduction in net revenue from sales is due to the sale of Birra Peja since most of the company's sales revenue generated in the comparable previous period was reported as sales on the domestic market. In the third quarter of 2013 Birra Peja generated EUR 6.9 million of net sales revenues on the domestic market. Net sales revenues on foreign markets increased by EUR 4.8 million or 16.5% over the same period of the previous year. Revenues on foreign markets account for 17.2% of revenues, while the share in the same period of the previous year was 13.9%. In the period, the Laško Group realised 73% of the planned annual net sales revenues.

The total operating revenues of the nine months of the year amount to EUR 200.8 million, representing 74% of the annual plan. The operating revenues of 2014 are boosted by the positive impact of the sale of the investment in Birra Peja shares of EUR 0.8 million.

In the nine months of 2014, operating expenses of the Laško Group amount to EUR 176.2 million, down EUR 12 million or 6.4% on the same period of last year. The structure of operating expenses is similar to that of the same period of 2013. Costs of materials and energy account for most operating expenses (39.8%), followed by costs of services (28.3%), labour costs (20.2%), depreciation and amortisation (7.1%), other operating expenses (2.5%) and the cost of goods and materials sold (2.2%). In the nine months of 2014, costs of materials are down by €8.9 million on the same period in 2013, costs of services fell by EUR 2.4 million, depreciation and amortisation costs dropped by EUR 1.8 million, and labour costs are EUR 0.9 million below the costs of the same period in 2013. Cost of merchandise and other operating expenses are slightly up on the comparable period of 2013. In the period, the Group recorded 71.2% of its annual operating expenses planned.

In the nine months of 2014 the Laško Group generated an EBIT of EUR 24.6 million, which is EUR 1.8 million down on the nine months of 2013. Normalised EBIT, calculated from operating profit increased or decreased by the impact of one-off business events, amounts to EUR 25 million and is down EUR 4.1 million on the normalised EBIT recorded in the comparable period of 2013.

In the nine months of 2014, the Laško Group generated EUR 36.1 million of EBITDA, down EUR 3.6 million on the same period of last year. The normalised EBITDA of the period amounts to EUR 36.4 million, compared to EUR 42.3 million in the same period of 2013.

b.) Financing profit or loss

In the nine months of 2014, the Group generated a net financing loss of EUR 10 million, mainly on account of financial expenses for interest on bank loans. In the period in question, net financial expenses for interest amounted to EUR 11.2 million, which is EUR 2.2 million less than in the nine months of 2013. Financial expenses of


the nine months of 2014 include the costs of legal and financial advisers relating to the sale of financial investments and debt restructuring of EUR 2.1 million. In the nine months of 2013, such costs were recorded as operating expenses. In the comparable period of 2013, financial expenses amounted to EUR 40.1 million; of that, financial expenses on account of impairment of MELR shares amounted to EUR 26.2 million. The Laško Group incurred financing loss of total EUR 36.9 million in the nine months of 2013.

In the nine months of 2014, the Group recognised financial revenue on the disposal of Poslovni sistem Mercator (MELR) shares resulting from reversal of their impairment as the difference between the sales value at the transaction date and the stock-market value as at 31 December 2013 of EUR 2.9 million. Financial revenue also includes dividends received by the Laško Group amounting to EUR 0.2 million. In the comparable period of 2013, financial revenue amounted to EUR 3.2 million; of that, financial revenue on account of settlements from the bankruptcy estate amounted to EUR 1.9 million.

c.) Net profit or loss

In the nine months of 2014, the Group recorded a net profit of EUR 12.7 million. The normalised EBIT of the period amounts to EUR 12.9 million, down EUR 0.4 million on the same period in 2013. Disclosures of the individual items of consolidated statement

of financial position of the Laško Group at 30 September 2014

The consolidated statement of financial position as at 30 September 2014 does not contain the net assets of the Birra Peja due to the latter's sale. Accordingly, individual item's data are not comparable with the data as at 31 December 2013.

a.) Intangible assets

Intangible assets as at 30 September 2014 amount to EUR 71.5 million and include the value of Pivovarna Union brands (EUR 46.5 million), the value of goodwill relating to the investment in Pivovarna Union (EUR 17.2 million) and the value of Delo Group brands (EUR 4.1 million). The remaining EUR 3.7 million represents the value of material rights, software, licences, and similar rights. In the nine months of 2014, the value of intangible assets fell on account of amortisation of EUR 0.7 million and grew on account of new acquisitions of EUR 0.1 million. The value of the brands and goodwill relating to the investment in Pivovarna Union were not appraised as at 30 September 2014 as no signs of impairment exist.

b.) Property, plant and equipment

The balance of property, plant and equipment of EUR 154.9 million as at 30 September 2014 was down by EUR 15.1 million, mainly on account of the elimination of the Birra Peja Group from consolidation. In the nine months of 2014, property, plant and equipment reduced by EUR 10.8 million of depreciation and amortisation, and disposals of EUR 0.1 million. On the other hand, property plant and equipment increased by new acquisitions (including advances paid for acquisition of fixed assets)


of EUR 11.9 million. New acquisitions mainly refer to purchases of production equipment, packaging and marketing equipment.

c.) Available-for-sale financial assets

Compared to 31 December 2013, the value of long-term available-for-sale financial assets did not decrease as at 30 September 2014 and amounts to EUR 1.2 million.

d.) Long-term investments in the subsidiaries

The long-term financial investments in subsidiaries include investments in unconsolidated subsidiaries. There was no change to the value of these investments compared to 2013 year-end.

e.) Long-term investments into associated companies

Long-term investments in the Group's associates include a holding in Thermana, Laško, and a holding in Slopak, Ljubljana. Both investments have been impaired in full in previous years, and therefore their value equals nil as at 30 September 2014. These investments were not appraised as at 30 September 2014.

f.) Long-term loans issued

As at 30 September 2014, long-term loans granted amount to EUR 2.3 million. The balance of loans is up EUR 2.1 million in the first nine months of 2014 on account of the transfer of some short-term deposits to long-term deposits in accordance with the Restructuring and Standstill Agreement.

g.) Long-term deferred tax assets

As at 30 September 2014, long-term deferred tax assets stand at EUR 29.7 million. Long-term deferred tax assets relate mainly to the impairment of financial assets and the tax loss, and in a smaller part also to the write-down of receivables, provisions and liabilities due to employees. Long-term deferred tax liabilities refer to the revaluation of property and brands. In the first nine months of 2014, long-term deferred tax assets are down on account of the reversal of receivables due to the impairment of MELR shares and the shares of Birra Peja, and are up on account of new additions relating to the tax loss. The net reduction of long-term deferred tax assets amounts to EUR 1.8 million.

h.) Non-current assets held for sale

Non-current assets held for sale include the financial investment in Večer of EUR 3.1 million and the net value of the assets of Jadranska pivovara - Split of EUR 5.2 million. Compared to the last day of 2013, the value of non-current assets held for sale is down EUR 0.9 million as a result of the sale of certain production equipment belonging to Jadranska pivovara.

i.) Inventories

As at 30 September 2014, inventories amount to EUR 22.4 million. Compared to the last day of 2013, their value is up EUR 0.5 million. As a result of the elimination of Birra Peja from the consolidation, the value of inventories fell by EUR 2.7 million.


When considering the elimination of Birra Peja, the increase of EUR 3.2 million is mainly the result of seasonality.

Inventories of raw material and materials are up EUR 2.3 million, inventories of work in progress EUR 0.3 million, and inventories of products EUR 0.6 million, while the inventories of merchandise are at the same approximate level as at the end of last year.

j.) Short-term operating receivables

Short-term receivables (including receivables relating to the excess payment of corporate income tax) as at 30 September 2014 amount to EUR 59.3 million and are up EUR 6 million compared to 31 December 2013. This increase is mainly the result of seasonality, and in part also of prolonged payment terms and payment delays.

k.) Short-term available-for-sale financial assets

Over the first nine months of 2014, available-for-sale short-term financial assets recorded a drop of EUR 72.1 million, mainly as a result of the sale of shares in Poslovni sistem Mercator (MELR). As a result of this sale, in June, the Group received the proceeds from Agrokor of EUR 75.6 million, which is EUR 3.5 million over the value of the shares as at 2013 year-end.

l.) Short-term loans issued

As at 30 September 2014, short-term loans issued amount to EUR 7.4 million, an increase of EUR 0.9 million over the last day of 2013.

m.) Equity of the owners of the controlling stake

As at 30 September 2014, equity of the owners of the controlling interest amounts to EUR 60.6 million. Equity of the owners of the controlling interest represents 16.3% of the total equity and liabilities. Compared to 2013 year-end, the equity has increased by the value of the net profit of the year of EUR 12.4 million, and decreased on account of additional purchases of PULG and RARG shares from holders of the non-controlling interest of EUR 0.2 million.

n.) Equity of the owners of non-controlling interests

As at 30 September 2014, the equity of the non-controlling interests amounts to EUR 10.8 million, representing 15% of all equity. Compared to 31 December 2013, it is up EUR 1 million. This increase is mainly the result of the final consolidation upon the sale of the company Birra Peja, Peć, Kosovo, as well as the result of the net profit for the year.

o.) Liabilities

As at 30 September 2014, the total liabilities of the Group amount to EUR 300 million, representing 80.8% of the total equity and liabilities. Financial liabilities of EUR 242 million represent 65.2% of the total equity and liabilities. Compared to the last day of 2013, the balance of financial liabilities decreased by EUR 92.6 million, of which EUR 4.9 million relates to the elimination of Birra Peja from the consolidation. In 2014, the balance of all liabilities decreased by EUR 96.2 million, of which EUR 5.6 million relates to the elimination of Birra Peja from the consolidation.


p.) Provisions and long-term accrued costs and deferred income

As at 30 September 2014, long-term provisions amount to EUR 13.6 million, down 0.3 million on 31 December 2013. Provisions for termination benefits and jubilee awards amount to EUR 5.1 million; other provisions relating to the underpayment of water rates and contractual legal actions amount to EUR 8.4 million.

r.) Long-term financial liabilities

In 2014, in accordance with the Restructuring and Standstill Agreement concluded between the crediting banks and certain Laško Group companies, certain short-term loans were restructured, resulting in a significant increase in long-term financial liabilities. The impact amounts to EUR 102.6 million.

Long-term loans from banks are fully collateralised with shares, real estate, movable property and receivables pledged and guarantees.

s.) Short-term operating liabilities

As at 30 September 2014, short-term operating liabilities amount to EUR 36.4 million. Compared to the last day of 2013, the balance of short-term operating liabilities decreased by EUR 3.8 million, mainly on account of the elimination of Birra Peja from the consolidation. As at the last day of 2013, the operating liabilities of Birra Peja (due to unrelated persons) amounted to EUR 2.9 million.

t.) Short-term financial liabilities

In the first nine months of 2014, short-term financial liabilities fell by EUR 195.2 million, partly as a result of loan restructuring, and partly as a result of deleveraging from the proceeds from selling MELR shares. The reduction of short-term loans with banks of EUR 4.8 million relates to the elimination of Birra Peja from the consolidation. As at 30 September 2014, short-term financial liabilities of the Group amount to EUR 122.5 million.

In the nine months of 2014, the Laško Group repaid a total of EUR 87 million bank loans (both short-term and long-term loans).

Short-term financial liabilities due to banks are fully collateralised with shares, real estate, movable property and receivables pledged and guarantees.

u.) Short-term accruals and deferred income

As at 30 September 2014, short-term accrued costs and deferred income amounted to EUR 7.4 million, reflecting an increase by EUR 0.9 million compared to the last day of 2013.

v.) Collateralisation of financial liabilities

The loans raised with banks amounting to EUR 241.4 million as at 30 September 2014 are fully collateralised with liens on securities, mortgages, the pledge of movable property and receivables.


The Group has collateralised its long-term and short-term financial liabilities with 4,399,803 RARG (Radenska) shares, 440,295 PULG (Pivovarna Union) shares, 667,444 DELR (Delo) shares, 270,648 EGKG (Elektro Gorenjska) shares, 1,922,321 EMAG (Elektro Maribor) shares and 645,003 ZDRL (Thermana) shares, the value of which amounted to EUR 228.3 million at 30 September 2014. The value of real estate and equipment pledged amounts to EUR 116.6 million, the value of pledged receivables EUR 27.9 million, the value of pledged inventories EUR 2 million and the value of Pivovarna Laško brands pledged EUR 50 million.

z.) Excess short-term liabilities

As at 30 September 2014, the Group's total short-term liabilities amounted to EUR 166.7 million, while its short-term assets amounted to EUR 103.4 million. The excess short-term liabilities amount EUR 63.3 million, and will be settled in the future through the sale of assets and the increase of long-term equity and liabilities.


3.3 Notes to separate financial statements

The financial statements of Laško Group companies are provided in the appendices to this report. The notes below should be read in conjunction with these financial statements.

1. Performance analysis of Pivovarna Laško

Data on operations

The separate financial statements drafted for the nine months ended 30 September 2014 have not been audited and have been drafted in accordance with IAS 34 - Interim Financial Reporting, and should be read in conjunction with the annual financial statements drafted for the financial year ended 31 December 2013.

The 2013 annual report contains adjustments of the financial statements of previous years, as disclosed in a special note of the annual report. For this reason, the nine-month financial statements for 2013 in this report have also been adjusted. Disclosures to the individual items of the income statement

of Pivovarna Laško for the January – September 2014 period


In the first nine months of 2014, Pivovarna Laško saw 4% greater quantities sold and generated EUR 71.2 million of net operating revenue, EUR 0.1 million below the same period in 2013. Compared to the annual plan of revenues for the period in question, the revenues generated are down 1.9%, while the revenues generated stand at 78.9% of the annual plan. In the first nine months of 2014, net revenues from the sale of goods




EBITDA 11.510.623 12.855.602 14.569.935Normalised EBITDA 12.003.280 14.718.494 14.569.935

Net interest expence1 -9.349.712 -9.924.129 -11.622.572

Net profit or loss 1.065.226 -9.365.017 30.161.883Normalised net profit or loss 1.536.236 1.718.090 30.161.883

Return on equity (ROE)2 2,3 % 1,9 % 37,0 %

Return on assets (ROA)3 0,4 % 0,4 % 9,5 %EBIT margin4 15,2 % 19,6 % 13,6 %

EBITDA margin5 21,1 % 25,8 % 20,0 %



and services amounted to EUR 56.8 million, which is EUR 0.3 million less than in the same period of the previous year, standing at 78% of the plan. On the domestic market, the Group generated EUR 41.7 million of net sales revenues, which is EUR 2.7 million or 6% less than in the same period of the previous year. Net sales revenues on foreign markets amounted EUR 15.1 million, which is EUR 2.4 million or 18.8% more than in the same period of the previous year. Revenues on foreign markets account for 26.6% of revenues, while the share in the same period of the previous year was 22.2%. The growth of revenue on foreign markets is the result of increased quantities sold of both our own and supermarket brands, which in turn is the result of more intensive work, a concerted presence of Laško Group companies and through various marketing activities. The net revenues from sales of merchandise and materials amount to EUR 14.4 million, up EUR 0.2 million on the same period of last year.

Overall operating revenues of the first nine months amounted EUR 71.9 million, which is EUR 0.6 million or 0.9% less than in the same period of the previous year.

In the first nine months of 2014, operating expenses of Pivovarna Laško amount to EUR 63.8 million, up EUR 0.6 million or 0.9% on the same period of last year. Operating expenses are comprised as follows: costs of materials (EUR 21.3 million or 33.4%) are at the level of the same period of last year; costs of services (EUR 15 million or 23.5%) are EUR 0.4 million less than those recorded in the same period of last year; costs of merchandise sold (EUR 14.3 million or 22.4%), labour costs (EUR 7.9 million or 12.4%) are EUR 0.3 million greater than those recorded in the same period of last year, mainly on account of redundancy payments; depreciation and amortisation as well as revaluation operating expenses (EUR 3.4 million or 5.4) are EUR 0.3 less than those recorded in the same period of last year; and costs of other services (EUR 3 million or 4.7%).

In the period in question, costs of materials and services represent 80% of the plan, which is in line with the share of planned net sales revenue generated compared to the plan. Labour costs stand at 75%, depreciation and amortisation at 73.2%, and other operating expenses at 92% of the annual plan.

In the first nine months of 2014, Pivovarna Laško generated a net operating profit of EUR 8.1 million, which represents 81.7% of that planned for 2014. The net operating profit of the same period of last year was EUR 9.3 million. Normalised EBIT, adjusted for one-off events recognised in the first nine months (which had a negative impact of EUR 0.5 million), amounts to EUR 8.6 million, or EUR 2.6 million less than in the same period of 2013.

In the nine months of 2014, the Laško Group generated EUR 11.5 million of EBITDA, down EUR 1.3 million or 10.5% on the same period of last year.

The normalised EBITDA amounts to EUR 12 million and is down EUR 2.7 million on the previous year.


In the first nine months of 2014, Pivovarna Laško generated a net financing loss of EUR 7.4 million, mainly on account of interest on bank loans, as well as on account of financial expenses relating to the restructuring of EUR 1.4 million. In the period in


question, the company generated net interest revenue of EUR 9.3 million, up EUR 0.6 million on the same period last year and EUR 2.2 million less than the EBITDA of the period. All financial revenue on the reversal of loan write-downs in the amount of EUR 1.1 million relates to the prior write-down of the shares in Poslovni sistem Mercator (MELR). Compared to the planned financing profit or loss for the period of EUR 7 million, the actually generated financial loss is greater due to the absence of any dividend disbursement by Radenska and the lower than planned sales price of MELR shares.


In the first nine months of 2014 Pivovarna Laško generated a net operating profit of EUR 0.7 million, while the net loss of the same period of last year was EUR 10.3 million. In the first nine months of 2014, the Company generated a net profit of EUR 1.1 million. In the same period, it recognised certain one-off events, such as the positive accounting impact of the sale of MELR shares as the difference between their sales and carrying value as at 31 December 2013 of EUR 1.1 million. The normalised EBIT adjusted by EUR 0.5 million of the effects of these business events amounts to EUR 1.5 million. The Company does not disclose any corporate income tax due to the tax loss of EUR 44 million carried forward. Disclosures to the individual items of the statement

of financial position of Pivovarna Laško as at 30 September 2014


As at 30 September 2014, intangible assets of EUR 0.8 million comprise software licences and similar.


Property, plant and equipment amounted to EUR 44.2 million as at 30 September 2014, up EUR 0.3 million on the last day of 2013. In this period, Pivovarna Laško made new acquisitions of EUR 3.7 million and reduced depreciation and amortisation to EUR 2.8 million.

c.) Investment property

There was no change to the value of these items of investment property compared to 2013 year-end.

d.) Long-term investments in the subsidiaries

The long-term financial investments in subsidiaries include investments in the subsidiaries. The investments were appraised as at 31 December 2013 and as at 30 September 2014, the value of these investments totalled EUR 224.9 million.

e.) B. Long-term investments into associated companies

Long-term investments in the Group's associates include a holding in Thermana, Laško, and a holding in Slopak, Ljubljana. Both investments have been impaired in full in previous years, and therefore their value equals nil as at 30 September 2014.


f.) Long-term deferred tax assets

As of 30 September 2014, the Company disclosed net long-term deferred tax assets amounting to EUR 27.2 million. Compared to the last day of 2013 they are EUR 0.3 million up. The increase of EUR 4.6 million relates to the tax on the tax loss as at 30 June 2014, while the reduction of EUR 4.2 million relates to the reversal of deferred taxes on the impairment of the investment in the shares of Poslovni sistem Mercator.

g.) Inventories

As at 30 September 2014, inventories amounted to EUR 7.7 million, an increase of EUR 0.8 million over the last day of 2013.

h.) Short-term operating receivables

As at 30 September 2014, short-term operating receivables amount to EUR 21.9 million, up 1.7 million on 31 December 2013. This increase is partially the result of seasonality, and partially the result of delays in effecting payments. Some 72.4% of all short-term trade receivables are not past due.

i.) Short-term loans issued

As at 30 June 2014, short-term granted loans including deposits granted amount to EUR 1.1 million, or EUR 0.8 million down on 2013 year-end. This reduction is mainly a result of the reduction of deposits with banks. In line with the approval of the crediting banks, short-term loans issued to Group companies have increased.

j.) Equity

As at 30 September 2014, the total equity of the Group amount to EUR 69.1 million, representing 20.7% of the total equity and liabilities. The equity has increased by the profit recorded in the first nine months of EUR 1.1 million.

k.) Liabilities

As at 30 September 2014, the total liabilities of the Company amount to EUR 255.6 million, representing 76.6% of the total equity and liabilities. The financial liabilities of EUR 229.3 million represent 68.7% of the total equity and liabilities and compared to 31 December 2013, they have fallen by EUR 28.2 million.

l.) Provisions and long-term accrued costs and deferred income

Compared to 31 December 2013, there has been no change to the balance of provisions as at 30 September 2014. Provisions for redundancy payments and years of service awards amount to EUR 1.3 million, other provisions amount to EUR 5.3 million, while long-term accrued costs and deferred income amount to EUR 49 thousand. The majority of the amount of other provisions of EUR 4.2 million relates to the underpayment of concession fees between 2005 and 2013, which has been recognised pursuant to the modification of the Waters Act adopted in 2013. The remaining amount of EUR 1 million refers to provisions for the contingent liabilities due to Radenska for the settlement claim for the loss recorded during the existence of the contractual group in accordance with Article 542 of the Companies Act. This potential


liability is currently based on the management's best estimate, although the amount may subsequently change as it has so far not been audited.

m.) Long-term and short-term financial liabilities

As at 30 September 2014, long-term financial liabilities amount to EUR 78.9 million, while short-term financial liabilities amount to EUR 150.4 million. Compared to the last day of the previous year, borrowings from banks decreased by EUR 27.7 million. Long-term loans from banks are fully collateralised with shares, real estate, movable property and receivables pledged and guarantees.

n.) Short-term operating liabilities

As at 30 September 2014, short-term operating liabilities amount to EUR 26.2 million (or 7.9% of all equity and liabilities), an increase of EUR 2.1 million over the last day of 2013. This increase is mainly the result of the prolongation of supplier payment terms.

o.) Short-term accruals and deferred income

Short-term accruals and deferred income of EUR 2.3 million relate to accrued expenses. Compared to the last day of 2013, their value is up EUR 1.5 million.

p.) Excess short-term liabilities

As at 30 September 2014, the Company's total short-term liabilities amount to EUR 176.6 million, while its short-term assets amount to EUR 31.4 million. Due to this high excess of short-term liabilities of EUR 145.2 million, the Company is exposed to significant liquidity risk. The excess short-term liabilities will be settled in the future through the sale of assets and the increase of long-term equity and liabilities.


2. Performance analysis of Pivovarna Union, Ljubljana

Data on operations

Normalised EBIT as operating profit increased or decreased by the impact of one-off business events such as disposal of property, plant and equipment and intangible assets, impairment reversal, payment of default interest, loss on disposal of fixed assets, write-off of receivables, overcharged water concession fee and other expenses not associated with products or services. Normalised EBITDA is the sum of normalised EBIT and depreciation and amortisation.

In addition to the listed adjustments, normalised EBIT is also adjusted for the impairment of investments, reversal of investment impairments, financial expenses associated with the restructuring process and deferred tax.

The same accounting policies were applied to the financial statements of Pivovarna Union for all of the periods presented in the report. Detailed description of the accounting policies applied in the recognition and reporting of the financial statement items is included in the Annual Report of Pivovarna Union, d. d. and the Pivovarna Union Group for the year 2013. There were no changes in the accounting policies applied in the period from 1 January to 30 September 2014.

The interim financial statements drafted for the nine months ended 30 September 2014 have been drafted in accordance with the Companies Act and IAS 34 - Interim Financial Reporting, and should be read in conjunction with the annual financial statements drafted for the financial year ended 31 December 2013.




EBITDA 16.664.833 17.973.606 20.754.300

Normalised EBITDA 16.753.406 18.730.284 20.754.300Net interest expence1 -2.037.442 -2.589.891 -2.034.600

Net profit or loss 11.054.461 -1.326.947 25.187.000



EBIT margin4 18,6 % 19,2 % 17,1 %

EBITDA margin5 23,6 % 25,2 % 22,4 %



The 2013 annual report contains adjustments of the financial statements of previous years, as disclosed in a special note of the annual report. For this reason, the periodic financial statements for 2013 in this report have also been adjusted. Disclosures to the individual items of the income statement

of Pivovarna Union for the January – September 2014 period


In the first nine months of 2014, Pivovarna Union generated EUR 75.6 million of operating revenue, which is 6.5% less than in the same period of 2013, and thus generated 77.2% of the planned operating revenue for 2014.

The company sold 0.9% more in quantitative terms, generating EUR 74.3 million of net operating revenues, which is down 5.3% on those generated in the same period of 2013. The revenue generated represent 76.3% of the revenue planned. Some 93.5% of all net revenue represents revenue on the sale of beverages, while the remaining revenue represents revenue on the sale of services, merchandise and other.

The company generated 77% of all revenue through sales of beverages on the Slovenian market, and 23% on foreign markets. Since the quantities sold in Slovenia fell by 7.5% compared to the same period last year, Pivovarna Union generated 9% less revenues from beverage sales and achieved 75.3% of its annual revenues planned. Other revenues on the Slovenian market of EUR 3.8 million represent a decline of 14.4%. The company sold 20.2% more in quantitative terms on export markets, generating 12.5% higher net operating revenues and 81% of its annual revenues planned. Other revenues generated on foreign markets of EUR 1 million are at the level achieved in the previous year. We succeeded in growing export revenue through more intensive work, a concerted presence of Laško Group companies and through various marketing activities. On all markets - including the domestic and export markets - we are recording growth in the supermarket brand segment.

The operating expenses of the company during the January - September 2014 period amount to EUR 62.5 million, 7.3% less than in the same period of 2013, and 76.1% of the annual plan.

Most – as much as 47.2% of all operating expenses – represent costs of materials of EUR 29.5 million. Compared to the same period of 2013, they are down 5.9% or EUR 1.9 million, representing 78% of the plan for 2014. In spite of the same sales volume, the costs of basic raw materials, intermediate goods and energy fell as the company succeeded in negotiating reduction in some of the purchase prices. The costs of written-off packaging – pallets are up predominantly due to increased exports as are the costs of spare parts. Energy costs recorded the greatest decline of EUR 0.5 million.

Costs of services of EUR 15.1 million represent 24.2% of all operating expenses and are down 9.2% on last year, representing 74.2% of the plan. Marketing costs represent a major component of costs of services. The former amount to EUR 7.4 million and are 6.1% or EUR 0.4 million up on the same period of 2013. This increase is mainly the result of launching new retro products and the Union Fest event that took place at the company's 150th anniversary. During January and September 2014, the company reduced transport costs (changed delivery methods) compared to the same period of


2013. Compared to the previous year, costs of sale services are also down. Costs of maintenance remain at the level of the same period in 2013.

Compared to last year, labour costs of EUR 9 million are up 1.3% and represent 73.8% of the annual plan. This increase is the result of the increase in other labour costs due to the payment of employee bonuses.

Write-offs amounting to EUR 3.6 million are down 22.4% due to lower depreciation and amortisation as a result of reduced investment activity in recent years.

Other operating expenses of EUR 1.9 million are down 1.9% and stand at 89.5% of the annual plan.

The operating profit of the company during the January – September 2014 period amounts to EUR 13.1 million, 2.9% less than in the same period of 2013. The profit generated is 82.8% of the plan for the year.

The EBITDA of the period January to September 2014 amounts to EUR 16.7 million, down EUR 1.3 million or 7.3% on the same period in 2013. Normalised EBITDA amounts to EUR 16.8 million, which is 10.6% less than that of the previous year.


In the period, the company recorded a financing loss of EUR 0.5 million. Compared to the planned financing profit or loss for the period, the actually generated financial loss is up by EUR 14.8 million due to the lower than planned sales price of MELR shares.

Compared to the January – September period of the previous year, financial revenue of EUR 2.9 million is up 17.5% or EUR 0.4 million. The first reason is the positive impact of the sale of the financial investment in Poslovni sistem Mercator, calculated as the difference between the sales price of the shares and their carrying amount as at 31 January 2013, which amounts to EUR 1.6 million. The second reason is the impact of the reversal of the impairment of the financial investment in Birra Peja as the difference between the sales price of the shares and their carrying value at Pivovarna Union, which amounts to EUR 0.5 million.

In the first nine months of 2014, financial expenses of EUR 3.4 million are down EUR 14.1 million or 80.4% compared to the same period of 2013. In 2014, the company has not impaired any financial assets, while in the comparable period of 2013, the company recorded EUR 13.4 million of expenses on the impairment of MELR shares to their stock-market price. Most financial expenses of the first nine months of 2014 relate to interest on loans of EUR 2.7 million, and are down 32.4%. Financial expenses of the first nine months of 2014 include the costs of legal and financial advisers relating to the sale of financial investments and debt restructuring of EUR 0.6 million. In the first nine months of 2013, such costs were recorded as operating expenses.


The net profit of the period amounts to EUR 11.1 million. In the comparable period of 2013, the company incurred EUR 1.3 million of losses. This is due to the fact that in the period January to September 2014, the company's financing result was up EUR 14.6 million compared to the same period of 2013.


The Company does not disclose any corporate income tax due to the tax loss of EUR 38.3 million carried forward. Tax loss was incurred as a result of recognition of impairment of MELR shares and impairment of investment in Birra Peja amounting to EUR 46.8 million. These impairments were not recognised as tax expenditure in the past periods. Due to the sale of investments in Mercator and Birra Peja, deferred tax receivables amounting to EUR 8 million were reversed; deferred tax assets were increased by EUR 6.5 million on account of tax losses. Deferred tax, which reduces the total operating profit or loss amounts to EUR 1.5 million.

Normalised net profit amounts to EUR 11.3 million, exceeding last year's figure by 15.9%. Disclosures to the individual items of the statement

of financial position of Pivovarna Union as at 30 September 2014

As at 30 September 2014, the total assets of Pivovarna Union amount to EUR 145.4 million, 23.2% or EUR 43.8 million less than at 31 December 2013 mainly on account of a fall in long-term assets.


As at 30 September 2014 intangible assets amounting to EUR 0.2 million include software licences, development costs and long-term deferred costs.


Compared to the last day of 2013, property, plant and equipment amount to EUR 70.2 million as at 30 September 2014, reflecting depreciation of EUR 3.5 million, disposals of EUR 0.1 million, additions amounting to EUR 3.7 million and advances paid for property, plant and equipment of EUR 2.2 million. The advances paid for property, plant and equipment, which were disclosed under short-term receivables as at 31 December 2013, amounted to EUR 1.4 million.


Investment property amounting to EUR 0.4 million as at 30 September 2014 has remain unchanged.

d.) Financial assets available for sale

Compared to 31 December 2013, the value of long-term available-for-sale financial assets has not changed significantly as at 30 September 2014 and amounts to EUR 0.3 million.

e.) Long-term investments in the subsidiaries

Due to a EUR 1.4 million disposal of investment in Birra Peja, as at 30 September 2014 the company no longer holds any investments in subsidiaries.



Long-term loans issued amounting to EUR 11.6 million as at 30 September 2014 are down 41.2% or EUR 8.2 million compared to the balance at 31 December 2013. Most changes relate to the repayment of loans given of EUR 10.4 million, a long-term bank deposit of EUR 2.1 million and the transfer of long-term financial receivables for interest amounting to EUR 0.05 million to short-term receivables.

The company also discloses a loan (principal only) of EUR 9.3 million given to the controlling entity Pivovarna Laško among long-term loans issued.


As of 30 September 2014, the company recorded long-term deferred tax assets amounting to EUR 6.7 million. Compared to the end of 2013, long-term deferred tax assets are down EUR 1.6 million mainly due to the reversal of the impairment of MELR shares and the relevant deferred tax impact.

h.) Inventories

Due to seasonality, the value of inventories grew by EUR 1.7 million or 23.1% compared to the end of the previous year. Inventories of materials increased by EUR 1,4 million, inventories of work in progress are up EUR 0.3 million, whereas inventories of products remained at the level recorded in the comparable period of 2013.

i.) Short-term operating receivables

Compared to 31 December 2013, short-term trade receivables, which amount to EUR 41.2 million as at 30 September 2014, are up EUR 5.9 million or 16.7%, which is partially the result of settlement delays, as well as the seasonal effect. Receivables due from Laško Group companies stand at 30% of all receivables. Some 52.1% of all short-term trade receivables are not past due. Short-term receivables for excess corporate income tax payment grew by EUR 1 million.

j.) Short-term available-for-sale financial assets

As at 30 September 2014, the company discloses short-term financial investments of EUR 2.4 million. Compared to the end of 2013, they are down EUR 38 million or 94% due to the sale of the investment in Mercator.

k.) Short-term loans issued

Over the period from January to September 2014, short-term loans issued decreased by EUR 2.9 million. The deposit of EUR 2.1 million was transferred to a long-term deposit, whereas EUR 1 million was cashed-in. The other increases relate to new short-term loans issued to companies in the Group in accordance with the consent of banks creditors and interest which was in the previous year reported in long-term financial liabilities.

l.) Equity

As at 30 September 2014, equity amounts to EUR 82.9 million, reflecting an increase of EUR 8.8 million compared to the last day of 2013, mainly on account of profit of the


first nine months of the year of EUR 11 million and payment of dividends amounting to EUR 2.2 million.

Some 57% of all liabilities are equity, while liabilities amount to 43%.

m.) Provisions

Compared to 31 December 2013, provisions are down 13.6% as at 30 September 2014. Majority of provisions were set aside for termination benefits and jubilee awards amounting to EUR 1.3 million. Compared to their balance at 31 December 2013, provisions are down 5.3% on account of utilised termination benefits and jubilee awards.

n.) Long-term financial liabilities

As at 30 September 2014, the company's long-term financial liabilities amount to EUR 44.1 million. Compared to the last day of 2013, the balance of long-term financial liabilities increased by EUR 33.5 million or 318%. By signing the Restructuring and Standstill Agreement, most of the company's loans have been prolonged until the end of 2016.

o.) Short-term financial liabilities

As at 30 September 2014, short-term financial liabilities amount to EUR 1.2 million, representing a EUR 86 million (or 98.6%) decrease from the end of 2013 due to the repayment of some loans from the sales proceeds of investments and the loan restructuring from short-term to long-term. Liabilities stemming from short-term loans due to banks amount to EUR 0.1 million, while other short-term financial liabilities amount to EUR 1.1 million. Among these, the company discloses a liability for the loan provided by Radenska of EUR 1.1 million.

p.) Short-term operating liabilities

As at 30 September 2014, short-term operating liabilities amount to EUR 13.2 million, a decrease of EUR 1.3 million over the last day of 2013. Supplier payables are down EUR 0.5 million or 6%, primarily on account of fewer delays in payments. Liabilities due to the Laško Group amount to EUR 1.5 million, up EUR 0.2 million or 16.3%. None of the liabilities to the companies in the Laško Group are past due. Liabilities to the Group account for 18.2% of all supplier payables. Some 99.4% of supplier payables are not past due, while 0.6% are due and outstanding.

Other short-term operating liabilities are down EUR 0.8 million or 13% due to a reduction in liabilities to the state on account of excise duty and VAT.

r.) Short-term accruals and deferred income

Compared to 2013 year-end, short-term accruals and deferred income as at 30 September 2014 of EUR 2.7 million increased by EUR 1.3 million due to the accrual of annual trade discounts to major customers and payment of excise duty on products held in non-tax warehouses.


3. Performance analysis of Radenska, Radenci

Data on operations

The separate financial statements drafted for the nine months ended 30 September 2014 have not been audited and have been drafted in accordance with IAS 34 - Interim Financial Reporting, and should be read in conjunction with the annual financial statements drafted for the financial year ended 31 December 2013. Disclosures to the individual items of the income statement

of Radenska for the January – September 2014 period


In the first nine months of 2014, Radenska realised EUR 22.3 million of net sales revenue, down EUR 1.7 million or 7.3% below the same period in 2013. In the first nine months of 2014, net revenues from the sale of products and services amounted to EUR 22.2 million, which is EUR 1.6 million (or 6.9%) less than in the same period of the previous year, standing at 74.1% of the annual plan. On the domestic market, the Group generated EUR 19.6 million of net sales revenues, which is EUR 1.5 million or 7.3% less than in the same period of the previous year. Net sales revenues on foreign markets amounted to EUR 2.6 million, which is EUR 0.1 million or 3.8% less than in the same period of the previous year. Revenues on foreign markets account for 11.7% of revenues, while the share in the same period of the previous year was 11.4%.

In the nine months of 2014, total operating revenues amount to EUR 22.7 million, down 8.1% or EUR 2.0 million on the same period of last year.




EBITDA 4.281.773 4.794.191 4.468.005

Normalised EBITDA 4.158.423 4.535.115 4.468.005Net interest expence1 1.072.862 778.300 1.449.403

Net profit or loss 3.464.437 1.554.637 5.831.006



EBIT margin4 11,6 % 11,9 % 7,2 %

EBITDA margin5 18,7 % 19,0 % 14,9 %



In the nine months of 2014, operating expenses of Radenska amount to EUR 20.0 million, down EUR 1.6 million or 7.4% on the same period of last year. Operating expenses are comprised as follows: costs of materials of EUR 7.8 million or 39.2% of total operating expenses; followed by costs of services amounting to EUR 5.8 million or 28.9% of operating costs, labour costs (EUR 4.3 million or 21.4%); depreciation and amortisation expenses (EUR 1.6 million or 7.9%); costs of other services amounting to EUR 0.5 million or 2.3% of total operating expenses, and cost of merchandise amounting to EUR 0.07 million accounting for 0.3% of total operating expenses. Costs of materials and services as well as amortisation and depreciation expenses are down, whereas labour costs and other operating expenses show a slight increase compared to the same period of the previous year.

In the period in question, costs of materials and services represent 70.7% of the plan, which is in line with the share of planned net sales revenue generated compared to the plan. Labour costs stand at 74.6%, depreciation and amortisation at 68.9%, and other operating expenses at 66.6% of the annual plan.

The operating profit of Radenska during the January – September 2014 period amounts to EUR 2.7 million, up 24.2% on the 2014 plan. The net operating profit of the same period of last year was EUR 3.1 million. The normalised EBIT of 2014 and 2013 periods is adjusted for the impacts of one-off business events. In the nine months of 2014, the normalised EBIT amount to EUR 2.6 million, compared to EUR 2.8 million in the same period of 2013. This represents a decline of EUR 0.2 million or 9.2%.

The EBITDA of the period January to September 2014 amounts to EUR 4.3 million, down EUR 0.5 million or 10.7% on the same period of 2013. The normalised EBITDA amounts to EUR 4.2 million and is down EUR 8.3 million on the previous year.


Radenska generated EUR 1.5 million of financing profit in the first nine months of 2014. Financial income amounts to EUR 1.8 million, down EUR 0.4 million or 18.5% on the same period of 2013. This is mainly the result of the impairment reversal of the investment in Poslovni sistem Mercator as the difference between the share sales price and their stock market price as at 31 December 2013. The impairment reversal amounts to EUR 0.8 million.

In the first nine months of 2014, financial expenses of EUR 0.3 million dropped by 91.5% or EUR 3.1 million compared to the previous year.

This deviation is mainly the consequence of the impairment of the financial investment in Poslovni sistem Mercator to its fair value in the comparable period. The impairment amount in the first nine months of 2013 amounted to EUR 2.8 million.

In the first nine months of 2014, financial expenses for interest amounted to EUR 0.3 million, 50.3% below the same period in 2013. This is the result of deleveraging of Radenska.



The operating profit of Radenska during the January - September 2014 period amounts to EUR 4.2 million, up EUR 2.3 million or 19.9% on the comparable period of 2013. The Company does not report any corporate income tax due to the tax loss of EUR 5.9 million carried forward. Tax loss was incurred as a result of recognition of impairment of MELR shares amounting to EUR 10.2 million, which were not recognised as tax expenditure in the past periods. Due to the sale of investments in Mercator, deferred tax assets amounting to EUR 1.7 million were reversed; deferred tax assets were increased by EUR 1.0 million on account of tax losses. Deferred tax, which reduces the total operating profit or loss amounts to EUR 0.7 million.

In the nine months of 2014, net profit amounted to EUR 3.5 million, which is EUR 1.9 million more than in the same period of the previous year, representing an increase of 22.8%. Normalised net profit or loss for 2014 and 2013 have been adjusted for the impact of one-off business and financial events, as well as for the impact of corporate income tax payable for 2013. It amounts to EUR 3.0 million, down EUR 0.4 million or 13.2% on the comparable period of 2013. Disclosures to the individual items of the statement

of financial position of Radenska, Radenci as at 30 September 2014


As at 30 September 2014 intangible assets amounting to EUR 0.5 million include software licences, and development costs.


In the period under review, property, plant and equipment increased by EUR 0.7 million of 3.7%. In the nine months of 2014, the company invested EUR 2.2 million and thus exceeded amortisation and depreciation expenses by EUR 0.6 million or 39.3%. The largest of the investments is the investment in the puff and filling equipment on the Sidel line.


There was no change to the value of these items of investment property compared to 2013 year-end. The most recent valuation of investment property was made as at 31 December 2013.

d.) Available-for-sale financial assets

Compared to 31 December 2013, the value of long-term available-for-sale financial assets has not changed significantly as at 30 September 2014 and amounts to EUR 3.6 million (up 0.4%).


The long-term financial investments in subsidiaries include investments in subsidiaries not included in consolidation due to their insignificant impact on the


Group. There was no change to the value of these investments compared to 2013 year-end which stands at EUR 0.2 million.


At the end of 2010 Radenska carried out reprogramming of short-term loans issued to the controlling entity amounting to EUR 33,100,000 to long-term loans issued. Thus the loan repayment deadline has been extended to 31 December 2016. The loan is collateralised with bills of exchange.


As of 30 September 2014, the company recorded long-term deferred tax assets amounting to EUR 5.6 million, down EUR 0.8 million or 18.0%. Due to the sale of investments in Mercator, deferred tax assets amounting to EUR 1.7 million were reversed; deferred tax assets were increased by EUR 1.0 million on account of assessed tax losses amounting to EUR 5.9 million.

h.) Inventories

Due to timely preparations for the high season, inventories of intermediate goods and finished products are up EUR 0.5 million or 16.7%.


Compared to 31 December 2013, short-term trade receivables, which amount to EUR 5.6 million as at 30 September 2014, are up EUR 0.8 million or 17.3%, which is partially the result of settlement delays, as well as the seasonal effect.

j.) Short-term available-for-sale financial assets

As at 30 September 2014, available-for-sale short-term financial assets amounted to EUR 1.3 million, reflecting a drop of EUR 7.6 million compared to the last day of 2013. This is on account of the sale of the investment in Mercator.

k.) Short-term loans issued

As at 30 September 2014, short-term loans including interest amount to EUR 7.1 million, up 5.3 million on the same period of 2013. The surplus of inflows over the outflows was deposited amounting to EUR 5.4 million, and the loan of EUR 0.1 million issued by the company has been repaid.

l.) Equity

Due to the profit generated and changes to the revaluation reserve, equity at 30 September 2014 of EUR 66.1 million is up EUR 3.8 million or 6.0%.

m.) Provisions

Compared to 31 December 2013, the balance of provisions as at 30 September 2014 has not changed significantly. Compared to their balance at 31 December 2013, provisions amounting to EUR 0.7 million are down 0.8% on account of utilised termination benefits and jubilee awards.


Other provisions amounting to EUR 4.2 million are at the level recorded at 31 December 2013 and were set aside for liabilities arising from a legal action in accordance with the opinion of the company's legal counsel. At the end of 2013 the company set aside provisions in the amount of EUR 1,340,000 for bonuses to legal counsel representing Radenska in the denationalisation process. The basis for establishment of these provisions was the contract agreed between the legal counsel and the company. Provisions of EUR 1,367,000 relate to underpayment of concession fees between 2005 and 2013, which has been recognised pursuant to the modification of the Waters Act adopted in 2013.

n.) Short-term financial liabilities

Short-term financial liabilities of Radenska as at 30 September 2014 amount to EUR 2.7 million, down EUR5.8 million or 68.4% on the balance at 31 December 2013. Radenska used proceeds from the sale of its investment in Mercator amounting to EUR 5.8 million as means of deleveraging. Bank loans are fully collateralised with shares and real estate.

o.) Short-term operating liabilities

Compared to 2013 year-end, short-term operating liabilities amounted to EUR 4.8 million as at 30 September 2014, a decrease of EUR 0.1 million. Of total operating liabilities, EUR 0.9 million or 17.9% relates to investments made in acquisition of fixed assets, which have not yet matured.

p.) Short-term accruals and deferred income

As at 30 September 2014, accruals and deferred income amount to EUR 0.7 million, up 0.5 million or 125.8% on 31 December 2013. For the first nine months of 2014, the company has accrued estimated costs holiday pay and Christmas bonuses of EUR 0.2 million, costs of trade discounts of EUR 0.2 million, and recognised deferred income on late interest of EUR 0.1 million.


4. Performance analysis of Vital Mestinje

Data on operations

Disclosures to the individual items of the income statement

of Vital Mestinje for the January – September 2014 period


In the January to September period of 2014, Vital Mestinje realised EUR 3.77 million of net sales revenue, down EUR 0.27 million or 6.81% below the same period in 2013. In the first nine months of 2014, net revenues from the sale of goods and services amounted to EUR 3.68 million, which is EUR 0.24 million or 6.19% less than in the same period of the previous year, standing at 73% of the annual plan. On the domestic market, Vital generated EUR 3.59 million of net sales revenues, which is EUR 0.24 million or 6.35% less than in the same period of the previous year. Net sales revenues on foreign markets generated over the nine months of 2014 to 30 September are at the level reported in the same period of the previous year, amounting to EUR 86 thousand. Revenues on foreign markets account for 2.28% of revenues, while the share in the same period of the previous year was 2.1%.

In the nine months of 2014, total operating revenues amount to EUR 3.81 million, down EUR 0.36 million or 8.69% on the same period of last year.

In the period January to September 2014, operating expenses of Vital Mestinje amount to EUR 3.77 million, down EUR 0.37 million or 8.98% on the same period of 2013. Operating expenses are comprised as follows: costs of materials of EUR 2.66 million or 70.46% of total operating expenses; followed by labour costs (EUR 0.54 million or 14.35%); costs of services amounting to EUR 0.25 million or 6.72% of operating costs; depreciation and amortisation expenses (EUR 0.22 million or 5.73%); cost of merchandise amounting to EUR 87 thousand or 2.31%, and costs of other services amounting to EUR 16 thousand or 0.43% of total operating expenses.



EBIT 38.941 29.674 43.997EBITDA 255.216 236.903 323.145

Net interest expence1 10.817 15.429 11.656

Net profit or loss 49.758 45.103 55.653


EBIT margin4 1,1 % 0,8 % 0,9 %EBITDA margin5 6,9 % 6,0 % 6,4 %

1 Interest income - interest expense2 Net profit or loss / average equitiy in the period3 Net profit or loss / average assets in the period4 EBIT / net revenue from the sale of products and services5 EBITDA / net revenue from the sale of products and services


While there was a slight drop in the costs of materials (a decline of EUR 0.34 million), amortisation and depreciation expenses, costs of salaries and costs of services, are up slightly on the comparable period of 2013.

In the period in question, costs of materials and services represent 72% of the plan, which is in line with the share of planned net sales revenue generated compared to the plan. Labour costs stand at 74%, depreciation and amortisation at 77%, costs of services at 82%, and other operating expenses at 45% of the annual plan.

In the first nine months of 2014, Vital Mestinje generated a net operating profit of EUR 38.9 thousand, which represents 89% of that planned for 2014. The net operating profit of the same period of last year was EUR 29.6 thousand.

In the nine months of 2014, the company generated EUR 0.25 million of EBITDA, up EUR 18 thousand or 7.73% on the same period of last year.


In the first nine months of 2014, financial profit of EUR 10.8 thousand dropped by EUR 4.61 thousand compared to the same period of the previous year. Disclosures to the individual items of the statement

of financial position of Vital Mestinje at 30 September 2014


As at 30 September 2014 intangible assets amounting to EUR 18.63 thousand include software applications and licences, and similar costs.


Property, plant and equipment amounted to EUR 1.74 million as at 30 September 2014, down EUR 122 thousand on the last day of 2013. In this period, Vital Mestinje made new acquisitions of property, plant and equipment amounting to EUR 88 thousand and reduced depreciation and amortisation to EUR 210 thousand.

c.) Available-for-sale financial assets

Compared to 31 December 2013, the value of long-term available-for-sale financial assets did not change as at 30 September 2014 and amounts to EUR 58.7 thousand.

d.) Inventories

As at 30 September 2014, inventories amounted to EUR 809 thousand, a decrease of EUR 36 thousand over the last day of 2013.

e.) Short-term operating receivables

As at 30 September 2014, short-term operating receivables amounted to EUR 756 thousand, a decrease of EUR 32 thousand over the last day of 2013.


f.) Short-term available-for-sale financial assets

As at 30 September 2014, Vital Mestinje holds no available-for-sale short-term financial assets.

g.) Short-term loans issued

As at 30 September 2014, short-term granted loans including deposits granted amount to EUR 750 thousand, up EUR 150 thousand on the 2013 year-end. This increase is mainly the result of larger amount of deposits at banks.

h.) Equity of the owners of the controlling stake

As at 30 September 2014, the total equity of Vital Mestinje amounts to EUR 3.56 million, representing 82.1% of the total equity and liabilities. Over the period from January to 30 September 2014, the equity increased by the profit generated over the period amounting to EUR 49.7 thousand.

i.) Liabilities

As at 30 September 2014, the total liabilities of Vital amount to EUR 706 thousand, representing 16.30% of the total equity and liabilities. The financial liabilities of EUR 45 thousand represent 1.04% of the total equity and liabilities and compared to 31 December 2013, they have fallen by EUR 57.9 thousand.

j.) Provisions and long-term accrued costs and deferred income

Compared to 31 December 2013, the balance of provisions as at 30 September 2014 has not changed significantly. Provisions for redundancy payments and years of service awards amount to EUR 68 thousand, while long-term accrued costs and deferred income amount to EUR 0.8 thousand.

k.) Long-term and short-term financial liabilities

Long-term financial liabilities amount to EUR 25 thousand as at 30 September 2014, while short-term financial liabilities amount to EUR 600.6 thousand. Compared to the last day of the previous year, borrowings from banks decreased by EUR 57.9 thousand.

l.) Short-term operating liabilities

As at 30 September 2014 short-term operating liabilities amount to EUR 581 thousand, and account for 13.4% of total equity and liabilities, down EUR 113 thousand on the last day of 2013.

m.) Short-term accruals and deferred income

Short-term accruals and deferred income of EUR 80 thousand relate to accrued expenses. Compared to the last day of 2013, their value is up.

n.) Excess short-term liabilities

As at 30 September 2014, the total short-term liabilities of Vital amount to EUR 600 thousand, compared to EUR 2.49 million of short-term assets.


5. Performance analysis of Delo, Ljubljana

Data on operations

In the period, Delo generated a profit of EUR 552 thousand. The profit is up EUR 136 thousand on the same period of 2013. Disclosures to the individual items of the income statement

of Delo for the January – September 2014 period


In the first nine months of 2014, Delo recorded an operating profit of EUR 882 thousand, which is EUR 203 thousand more than in the same period of last year. The profit generated accounts for 132% of the plan for the year.

In the first nine months of 2014, Delo generated EUR 31 million of operating revenues, 6% less than last year (EUR -1,844 thousand). The revenue generated represents 76% of the revenue planned. Print revenues match the plan, and are EUR 117 thousand or 1% up on the plan and down EUR 971 thousand on the same period last year. Advertising revenue is 1% up on the plan but 9% down on those of last year (in nominal terms, EUR 642 thousand).

In the first nine months of 2014, Delo recorded EUR 30.1 million of operating expenses. Operating expenses are 6% down on those of the last year (EUR -2.047 thousand). Costs of services match the plan and are down 7% on the same period last year (EUR -763 thousand). Labour costs are as planned and 6% down on last year (EUR -731 thousand in nominal terms). Material costs are 6% down on last year (EUR -396 thousand in nominal terms).



EBIT 882.112 679.320 666.352EBITDA 2.211.125 2.051.101 2.461.496

Net interest expence1 -367.635 -437.582 -499.785

Net profit or loss 551.890 416.034 178.726


EBIT margin4 2,9 % 2,1 % 1,7 %EBITDA margin5 7,2 % 6,4 % 6,1 %

1 Interest income - interest expense2 Net profit or loss / average equitiy in the period3 Net profit or loss / average assets in the period4 EBIT / net revenue from the sale of products and services5 EBITDA / net revenue from the sale of products and services



In the nine months of 2014, Delo generated a financing loss of EUR 330 thousand.

In this period, financial revenues amounted to EUR 44 thousand, down EUR 223 thousand on those in the same period of 2013. Majority of the revenues generated in 2013 represent partial repayment of a loan - inflow from the bankruptcy estate of Infond holding, which covered interest and a portion of the principal amount.

Financial expenses of EUR 374 thousand recorded in the first nine months of the year are down 29% (EUR 156 thousand) on the 2013 figure. Disclosures to the individual items of the statement

of financial position of Delo as at 30 September 2014

Compared to 31 December 2013, the total assets of Delo as at 30 September 2014 of EUR 31.3 million are down EUR 2.2 million or 6.5%, which is the result of a reduction in long-term and short-term assets.


As at 30 September 2014, intangible assets of EUR 1.7 million are down EUR 0.4 million compared to the 2013 year-end as a result of amortisation expenses.


Property, plant and equipment amounted to EUR 18.4 million as at 30 September 2014, down EUR 0.8 million on the last day of 2013 as a result of depreciation expense in excess of the amount of new investments.


There was no change to the value of these items of investment property compared to 2013 year-end, amounting to EUR 56 thousand.

d.) Available-for-sale financial assets

Compared to 31 December 2013, the value of long-term available-for-sale financial assets as at 30 September 2014 amounts to EUR 432 million, up EUR 24 thousand resulting from their restatement to the market value.


The long-term financial investments in subsidiaries include investment in subsidiary Izberi, d. o. o., in which the company holds a 100% stake.

f.) Long-term deferred tax assets

As of 30 September 2014, the Company disclosed net long-term deferred tax assets amounting to EUR 2.9 million. Compared to the last day of 2013, there was no change in their value.


g.) Non-current assets held for sale

Non-current assets held for sale include the financial investment in Večer of EUR 3.1 million.

h.) Inventories

As at 30 September 2014, inventories amounted to EUR 1.1 million, a slight increase of EUR 0.1 million over the last day of 2013.


As at 30 September 2014, short-term operating receivables amount to EUR 2.7 million, down EUR 0.5 million on 31 December 2013. This reduction is primarily due to the seasonal impact of summer months where traditionally the turnover is reduced.

j.) Short-term loans issued

The company recognised impairment of total amount of short-term loans amounting to EUR 6.95 million issued to Infond holding and Centar naložbe since both the companies are subject to bankruptcy procedure.

k.) Equity of the owners of the controlling stake

Compared to the last day of 2013, equity of EUR 14.4 million is up EUR 552 thousand on account of the profit generated in the first nine months of 2014.

l.) Liabilities

As at 30 September 2014, the total liabilities of Delo amount to EUR 15.3 million, representing 48.8% of the total equity and liabilities. The financial liabilities of EUR 8.6 million represent 27.7% of the total equity and liabilities and compared to 31 December 2013, they have fallen by EUR 1 million.

m.) Provisions and long-term accrued costs and deferred income

Compared to 31 December 2013, the balance of provisions as at 30 September 2014 has not changed significantly. Majority of provisions were set aside for termination benefits and jubilee awards amounting to EUR 1.6 million.

n.) Long-term and short-term financial liabilities

As at 30 September 2014, Delo had EUR 8.6 million of short- and long-term financial liabilities due to banks. Compared to 31 December 2013, the company's debt has fallen by EUR 1 million. In August 2014 the company negotiated reprogramming of its borrowings from NLB. Accordingly, the short-term borrowings of EUR 2.8 million were transferred to long-term, with repayment period of five years and the final instalment due in June 2019.

o.) Short-term operating liabilities

Short-term trade payables of EUR 4.2 million as at 30 September 2014 are up EUR 233 thousand compared to the previous year.


p.) Short-term accruals and deferred income

Compared to 31 December 2013, accrued costs and deferred income of EUR 1.4 million have fallen by 58% (or EUR 1.9 million) on account of drawing on deferred income in the first nine months of the year due to the prepayment of subscription fees relating to 2014 in December 2013.

Documents

Report jan sep 2014 3 11 2014