Granolio d.d.

Quarterly Report • May 5, 2015

Granolio d.d. - Report on Business Operations for the Period January to March 2015

GRANOLIO d.d. ("Company") is a joint stock company registered at the Commercial Court in Zagreb, Croatia. OIB: 59064993527; Reg. number (MBS) 080111595 The company's seat is located in Zagreb, Budmanijeva 5.

The company has an Assembly, Supervisory Board and Management Board.

Members of the Management Board	Hrvoje Filipović, President Tomislav Kalafatić, Member Drago Šurina, Member Vladimir Kalčić, Member
Members of the Supervisory Board	Franjo Filipović, President Jurij Detiček, Vice-president Braslav Jadrešić, Member Davor Štefan, Member since 16 January 2015 Josip Lasić, Member since 16 January 2015

The total share capital of the Company on 31 March 2015 is HRK 19,016,430.00, divided into 1,901,643 ordinary shares with the nominal value of HRK 10.00 per share. The shares are traded under the ticker symbol GRNL and were listed on the Official Market of the Zagreb Stock Exchange on 23 March 2015.

The majority shareholder is Mr. Hrvoje Filipović with 60.74% of the share capital.

A list of Granolio's 10 major shareholders on 30 March 2015 is given in the following table.

Ten major shareholders of Granolio d.d.

No.	Shareholder	share in share capital
1	Filipović Hrvoje	60.74%
2	Hypo alpe-adria-bank d.d./PBZ CO Compulsory Pension Fund - category B - custodial account	7.89%
3	Societe Generale-Splitska banka d.d./Erste plavi Compulsory Pension Fund category B - custodial account	7.85%
4	Prima ulaganja d.o.o.	5.89%
5	HOK- osiguranje d.d.	3.93%
6	Agrokor d.d.	2.75%
7	Hypo alpe-adria-bank d.d./SZAIF d.d. - custodial account	1.58%
8	PBZ d.d. - custodial account	1.47%
9	Primorska banka dioničko društvo Rijeka - custodial account	1.44%
10	Erste & Steiermarkische bank d.d. - custodial account	0.79%
		94.33%

The Company's main activities are the production of and trade in agricultural products and live stock. On 31 December 2014 the Company had seven business units, 4 of which are production centres: Farina (Gornji Draganec), Kopanica (Velika Kopanica), Belje (Beli Manastir) and Vinkovci mills in charge of production, packing, storage and dispatch of mill products. Business units Belje and Vinkovci are leased production facilities with lease agreements until May 2015.

The Bjeliš business unit is a silo used for cereal drying and storage.

The Osijek business unit is used for storage, sale and dispatch of planting material, sale of grains and oil crops and management of the operations of selling points.

The Granolio business unit, located in Zagreb, is in charge of logistics, management, accounting and IT support to the Company's business operations.

The Farina mill is compliant with IFS, allowing the Company to sell flour to the EU Member States. As it is focused on the quality of products and delivery, as well as on building long-term customer relations, Granolio produces private label products for the majority of the leading retailers in Croatia.

The Company's milling capacities on 31 March 2015 are presented in the following table.

Milling capacities on 31 March 2015:

Mill	tonnes/year
Farina	108,900
Kopanica	79,200
	188,100

Significant business events in the accounting period

The Company's shares were listed on the Official Market of the Zagreb Stock Exchange on 23 March 2015.

In March 2015, the Company completed the process of business rationalisation and reorganisation in the Production, Development and Technology Sector, which resulted in the cancellation of flour production in the Vinkovci and Belje mills for the purpose of business optimisation and increased costefficiency of flour production. The total flour production of these mills was allocated to other Group mills: Farina (Gornji Draganec) and Kopanica (Velika Kopanica).

In the process of recapitalisation, the Company issued 701,643 shares with the nominal value of HRK 10.00 per share through the public offering held in the second half of 2014. The shares were sold at the price of HRK 134 per share, which resulted in HRK 87 million of share premium. The share premium was decreased by HRK 1.6 million of recapitalisation costs incurred in 2014. The share premium (capital gain) was decreased by additional recapitalisation costs for which invoices in the amount of HRK 423 thousand were received in the first quarter of 2015.

In the previous years the Company financed a portion of its investments from its operations, due to unavailability of investment loans and capital. In that period a part of the short-term liabilities was substituted with long-term sources on several occasions, but this was not sufficient to allow for full maturity matching. The Company is currently negotiating with commercial banks regarding a long-term loan that would ensure the necessary funds for the acquisition of Agrokor's milling business and strengthen the Company's financial position.

Currently, a dispute is in progress with the company Osatina grupa d.o.o. where the Company is the defendant regarding the collection of the amount of HRK 5,020 thousand together with penalty interest. The Management Board is of the opinion that the factual and legal basis lead to the conclusion that the claimant does not have standing to sue in these proceedings and that the claim by Osatina grupa d.o.o. will be rejected. More particularly, on 26 March 2015 the Company received a letter by Osatina grupa d.o.o. accepting the stated objection regarding lack of standing and announcing its withdrawal of the claim, and a letter by PZ Osatina (different legal person) requesting payment of the same debt and threatening to initiate the procedure of enforced collection.

In the Company's accounts, items of property are recognized under the revaluation model. In order to meet the requirements of the International Accounting Standard 16, a procedure was initiated in February 2015 to establish the value of the Company's buildings and land.

Results for the First Quarter of 2015

Granolio's unconsolidated revenue from sales in the first quarter of 2015 amounted to HRK 145 million and is equal to the revenue from sales in the same period of 2014, but the revenue structure changed considerably. In the first quarter of 2014 the most significant sales were attributed to planting materials, while this year that role has been taken over by revenue from flour sales.

The quantity of flour sales has more than doubled in the first quarter (109%) compared to the same period last year. The revenue from flour sales in the first quarter of 2015 has increased by HRK 35 million compared to the same period of 2014.

An increase in sales was also recorded with cereals/oil crops.

Due to changes in revenue structure, i.e. increase in flour production and decrease in the sales of planting materials, there has been an increase in the costs of raw materials and materials in the amount of HRK 28.4 million and a decrease in the costs of sold goods in the amount of HRK 39.4 million, which is 39% less than in the first quarter of last year.

The results in the first quarter of this year were also influenced by rationalisation and reorganisation costs in the Production, Development and Technology Sector.

Annex 1. Reporting period		1.1.2015	to	31.3.2015
			Quarterly financial report TFI-POD
Tax number (MB):	01244272
Company registration number (MBS):	080111595
Personal identification number (OIB):	59064993527
Issuing company: GRANOLIO d.d.
Postal code and place	10000		Zagreb
Street and house number: BUDMANIJEVA 5
	E-mail address: granolio@granolio.hr
Internet address www.granolio.hr
Municipality/city code and name	ZAGREB 133
County code and name	GRAD ZAGREB 21			Number of employees:	185
Consolidated report:	NO			(period end) NKD code:	1061
Companies of the consolidation subject (according to IFRS):			Seat:
				MB:
Bookkeeping service:
	Contact person: JASENKA KORDIĆ (only surname and name)
Telephone: 01/6320261			Telefaks:	01/6320224
	E-mail address: jkordic@granolio.hr
Family name and name: HRVOJE FILIPOVIĆ	(person authorized to represent the company)

L.S.

(signature of the person authorized to represent the company)

as of 31.03.2015.
Company: GRANOLIO d.d.
Position	AOP	Previous period	Current period
1	2	3	4
ASSETS	001
A) RECEIVABELS FOR SUBSCRIBED NOT PAID CAPITAL B) NON-CURRENT ASSETS (003+010+020+029+033)	002	459.457.934	458.147.344
I. INTANGIBLE ASSETS (004 do 009)	003	189.501.298	189.043.856
1. Expenditure for development	004
2. Concessions, patents, licenses, trademarks, service marks, software and other rights	005	129.027.778	128.664.784
3. Goodwill	006	60.379.072	60.379.072
4. Advances for purchase of intangible assets	007
5. Intangible assets in progress	008
6. Other intangible assets	009	94.448
II. PROPERTY, PLANT AND EQUIPMENT (011 do 019)	010	148.433.387	147.467.312
1. Land	011	8.182.140	8.182.140
2. Buildings	012	116.824.540	115.861.365
3. Plant and equipement	013	21.189.304	20.529.606
4. Tools, working inventory and transportation assets	014	565.791	498.645
5. Biological assets	015
6. Advances for purchase of tangible assets	016
7. Tangible assets in progress	017	1.590.810	2.315.035
8. Other tangible assets	018	80.802	80.521
9. Investment in real-estate III. NON-CURRENT FINANCIAL ASSETS (021 do 028)	019 020	120.159.808	0 120.272.735
1. Share in related parties	021	98.952.813	99.086.719
2. Loans to related parties	022
3. Participating interests (shares)	023	20.461.690	20.461.690
4. Loans to companies with participating interest	024
5. Investments in securities	025
6. Loans, deposits, etc.	026	745.305	724.326
7. Other non-current financial assets	027
8. Equity-accounted investments	028
IV. RECEIVABLES (030 do 032)	029	1.363.441	1.363.441
1. Receivables from related parties	030
2. Receivables arising from sales on credit	031
3. Other receivables	032	1.363.441	1.363.441
V. DEFERRED TAX ASSET	033
C) CURRENT ASSETS (035+043+050+058)	034	311.452.447	315.947.621
I. INVENTORIES (036 do 042)	035	97.912.059	68.250.863
1. Raw materials and supplies	036	11.433.117	16.969.138
2. Production in progress 3. Finished products	037 038	857.040 3.169.954	907.669 4.258.907
4. Merchandise	039	82.451.948	46.115.150
5. Advances for inventories	040
6. Long term assets held for sale	041
7. Biological assets	042
II. RECEIVABLES (044 do 049)	043	111.382.131	129.570.657
1. Receivables from related parties	044	5.137.735	2.086.042
2. Receivables from end-customers	045	100.831.972	122.655.010
3. Receivables from participating parties	046
4. Receivables from employees and members of the company	047		7.342
5. Receivables from government and other institutions	048	1.810.766	2.339.754
6. Other receivables	049	3.601.658	2.482.509
III. CURRENT FINANCIAL ASSETS (051 do 057)	050	100.944.420	114.368.156
1. Share in related parties	051
2. Loans to related parties	052	51.316.792	32.070.054
3. Participating interests (shares)	053
4. Loans to companies with participating interest 5. Investments in securities	054 055	875.279	875.305
6. Loans, deposits, etc.	056	48.752.349	81.422.796
7. Other financial assets	057
IV. CASH AND CASH EQUIVALENTS	058	1.213.837	3.757.945
D) PREPAYMENTS AND ACCRUED INCOME	059	1.373.823	1.087.043
E) TOTAL ASSETS (001+002+034+059)	060	772.284.204	775.182.008
F) OFF BALANCE SHEET ITEMS	061

Balance Sheet

EQUITY AND LIABILITIES
A) ISSUED CAPITAL AND RESERVES (063+064+065+071+072+075+078)	062	161.246.144	156.503.903
I. SUBSCRIBED SHARE CAPITAL	063	19.016.430	19.016.430
II. CAPITAL RESERVES	064	85.379.031	84.956.364
III.RESERVES FROM PROFIT (066+067-068+069+070)	065	183.484	183.484
1. Legal reserves	066	183.484	183.484
2. Reserve for own shares	067
3. Treasury shares and shares (deductible items)	068
4. Statutory reserves	069
5. Other reserves	070
IV. REVALUATION RESERVES	071	67.384.068	67.384.068
V. RETAINED EARNINGS OR LOSS CARRIED FORWARD (073-074)	072	32.142.333	-10.717.092
1. Retained earnings	073	32.142.333
2. Loss carried forward	074		10.717.092
VI. NET PROFIT OR LOSS FOR THE PERIOD (076-077)	075	-42.859.202	-4.319.350
1. Net profit for the period	076
2. Net loss for the period	077	42.859.202	4.319.350
VII. MINORITY INTEREST	078
B) PROVISIONS (080 do 082)	079	0	0
1. Provisions for pensions, severance pay and similar libabilities	080
2. Provisions for tax liabilities	081
3. Other provisions	082
C) NON-CURRENT LIABILITIES (084 do 092)	083	79.362.283	66.087.414
1. Liabilites to related parties	084	10.852.931	10.192.026
2. Liabilities for loans, deposits, etc.	085
3. Liabilities to banks and other financial institutions	086	51.663.335	39.049.371
4. Liabilities for advances	087
5. Trade payables	088
6. Commitments on securities	089
7. Liabilities to companies with participating interest	090
8. Other non-current liabilities	091
9. Deferred tax liabilities	092	16.846.017	16.846.017
D) CURRENT LIABILITIES (094 do 105)	093	531.675.777	552.590.691
1. Liabilites to related parties	094	5.303.932	3.143.969
2. Liabilities for loans, deposits, etc.	095	0	56.805.107
3. Liabilities to banks and other financial institutions	096	288.337.259	267.164.764
4. Liabilities for advances	097	2.713.586	1.961.706
5. Trade payables	098	115.320.681	166.129.737
6. Commitments on securities	099	109.802.353	42.000.000
7. Liabilities to companies with participating interest	100
8. Liabilities to emloyees	101	995.667	3.119.722
9. Taxes, contributions and similar liabilities	102	4.300.847	7.866.293
10. Liabilities arising from share in the result	103
11. Liabilities arising from non-current assets held for sale	104
12. Other current liabilities	105	4.901.452	4.399.393
E) ACCRUED EXPENSES AND DEFERRED INCOME	106
F) TOTAL EQUITY AND LIABILITIES (062+079+083+093+106)	107	772.284.204	775.182.008
G) OFF BALANCE SHEET ITEMS	108
ADDITION TO BALANCE SHEET (only for consolidated financial statements)
ISSUED CAPITAL AND RESERVES
1. Attributable to majority owners	109
2. Attributable to minority interest	110

Income statement period 01.01.2015. to 31.03.2015.

Company: GRANOLIO d.d.
Position	AOP		Previous period Previous period Current period Current period
		Cummulative	Quarter	Cummulative	Quarter
1	2	3	4	5	6
I. OPERATING INCOME (112 do 113)	111	145.060.641	145.060.641	145.003.103	145.003.103
1. Rendering of services	112	144.467.651	144.467.651	144.106.663	144.106.663
2. Other operating income	113	592.990	592.990	896.440	896.440
II. OPERATING COSTS (115+116+120+124+125+126+129+130)	114	147.611.444	147.611.444	143.439.045	143.439.045
1. Change in inventories of work in progress	115	-739.992	-739.992	-1.115.540	-1.115.540
2. Material expenses (117 do 119)	116	140.212.846	140.212.846	132.650.361	132.650.361
a) Costs of raw materials	117	32.541.347	32.541.347	60.927.685	60.927.685
b) Cost of goods sold	118	102.318.961	102.318.961	62.893.551	62.893.551
c) Other material expenses	119	5.352.538	5.352.538	8.829.124	8.829.124
3. Employee benefits expenses (121 do 123)	120	3.598.482	3.598.482	5.536.962	5.536.962
a) Net salaries	121	2.214.142	2.214.142	3.207.147	3.207.147
b) Tax and contributions from salary expenses	122	913.817	913.817	1.523.647	1.523.647
c) Contributions on salary	123	470.522	470.522	806.168	806.168
4. Depreciation and amortisation	124	2.029.960	2.029.960	2.576.958	2.576.958
5. Other expenses	125 126	705.951 0	705.951 0	2.851.413 0	2.851.413 0
6. Write down of assets (127+128) a) non-current assets (except financial assets)	127
b) current assets (except financial assets)	128			0	0
7. Provisions	129
8. Other operating costs	130	1.804.197	1.804.197	938.891	938.891
III. FINANCIAL INCOME (132 do 136)	131	977.832	977.832	1.307.380	1.307.380
1. Interest, foreign exchange differences, dividens and similar income from related parties	132	380.683	380.683	637.741	637.741
2. Interest, foreign exchange differences, dividens and similar income from third parties	133	509.005	509.005	669.639	669.639
3. Income from investments in associates and joint ventures	134
4. Unrealised gains (income) from financial assets	135
5. Other financial income	136	88.144	88.144
IV. FINANCIAL EXPENSES (138 do 141)	137	6.735.512	6.735.512	7.190.788	7.190.788
1. Interest, foreign exchange differences, dividens and similar income from related parties	138
2. Interest, foreign exchange differences, dividens and similar income from third parties	139	6.314.353	6.314.353	7.189.687	7.189.687
3. Unrealised losses (expenses) from financial assets	140	3.091	3.091
4. Other financial expenses	141	418.068	418.068	1.101	1.101
V. SHARE OF PROFIT FROM ASSOCIATED COMPANIES	142
VI. SHARE OF LOSS FROM ASSOCIATED COMPANIES	143
VII. EXTRAORDINARY - OTHER INCOME	144
VIII. EXTRAORDINARY - OTHER EXPENSES IX. TOTAL INCOME (111+131+144)	145 146	146.038.473	146.038.473	146.310.483	146.310.483
X. TOTAL EXPENSES (114+137+143+145)	147	154.346.956	154.346.956	150.629.833	150.629.833
XI. PROFIT OR LOSS BEFORE TAXES (146-147)	148	-8.308.483	-8.308.483	-4.319.350	-4.319.350
1. Profit before taxes (146-147)	149	0	0	0	0
2. Loss before taxes (147-146)	150	8.308.483	8.308.483	4.319.350	4.319.350
XII. TAXATION	151
XII. PROFIT OR LOSS FOR THE PERIOD (148-151)	152	-8.308.483	-8.308.483	-4.319.350	-4.319.350
1. Profit for the period (149-151)	153	0	0	0	0
2. Loss for the period (151-148)	154	8.308.483	8.308.483	4.319.350	4.319.350
ADDITION TO PROFIT AND LOSS ACCOUNT (only for consolidated financial statements)
XIV. PROFIT OR LOSS FOR THE PERIOD
1. Attributable to majority owners	155
2. Attributable to minority interest	156
STATEMENT OF OTHER COMPREHENSIVE INCOME (only for IFRS adopters)
I. PROFIT OR LOSS FOR THE PERIOD (=152)	157	-8.308.483	-8.308.483	-4.319.350	-4.319.350
II. OTHER COMPREHENSIVE INCOME/LOSS BEFORE TAXES (159 TO 165)	158	0	0	0	0
1. Exchange differences from international settlement	159
2. Changes in revaluation reserves of long-term tangible and intangible assets	160
3. Profit or loss from re-evaluation of financial assets held for sale	161 162
4. Profit or loss from cash flow hedging 5. Profit or loss from hedging of foreign investments	163
6. Share of other comprehensive income/loss from associatied companies	164
7. Actuarial gains/losses from defined benefit plans	165
III. TAXATION OF OTHER COMPREHENSIVE INCOME FOR THE PERIOD	166
IV. NET OTHER COMPREHENSIVE INCOME FOR THE PERIOD (158 TO 166)	167	0	0	0	0
V. COMPREHENSIVE INCOME OR LOSS FOR THE PERIOD (157+167)	168	-8.308.483	-8.308.483	-4.319.350	-4.319.350
ADDITION TO STATEMENT OF OTHER COMPREHENSIVE INCOME (only for consolidated financial statements)
VI. COMPREHENSIVE INCOME OR LOSS FOR THE PERIOD
1. Attributable to majority owners	169
2. Attributable to minority interest	170

Cash flow statement - indirect method

period 01.01.2015. to 31.03.2015.

Company: GRANOLIO d.d.
Position	AOP	Previous period	Current period
1	2	3	4
CASH FLOWS FROM OPERATING ACTIVITIES
1. Profit before tax	001	-8.308.481	-4.319.572
2. Depreciation and amortisation	002	2.029.961	2.576.958
3. Increase of current liabilities	003		51.416.688
4. Decrease of current receivables	004
5.Decrease of inventories	005	29.964.003	29.661.196
6. Other cash flow increases	006		114.881
I. Total increase of cash flow from operating activities	007	23.685.483	79.450.151
1. Decrease of current liabilities	008	38.431.001
2. Increase of current receivables	009	6.590.694	34.408.337
3. Increase of inventories	010
4. Other cash flow decreases	011	2.821.083	133.906
II. Total decrease of cash flow from operating activities	012	47.842.778	34.542.243
A1) NET INCREASE OF CASH FLOW FROM OPERATING ACTIVITIES	013	0	44.907.908
A2) NET DECREASE OF CASH FLOW FROM OPERATING ACTIVITIES	014	24.157.295	0
CASH FLOW FROM INVESTING ACTIVITIES
1. Proceeds from sale of non-current assets	015
2. Proceeds from sale of non-current financial assets	016
3. Interest received	017	572.591	907.669
4. Dividend received	018	0	0
5. Other proceeds from investing activities	019	163.460.430	187.388.615
III. Total cash inflows from investing activities	020	164.033.021	188.296.284
1. Purchase of non-current assets	021	93.215	1.173.732
2. Purchase of non-current financial assets	022	162.183.954	185.213.430
3. Other cash outflows from investing activities	023	434.132	751.880
IV. Total cash outflows from investing activities	024	162.711.301	187.139.042
B1) NET INCREASE OF CASH FLOW FROM INVESTING ACTIVITIES	025	1.321.720	1.157.242
B2) NET DECREASE OF CASH FLOW FROM INVESTING ACTIVITIES	026	0	0
CASH FLOW FROM FINANCING ACTIVITIES
1. Proceeds from issue of equity securities and debt securities	027	32.955.623
2. Proceeds from loans and borrowings	028	117.090.549	233.316.451
3. Other proceeds from financing activities	029		20.979
V. Total cash inflows from financing activities	030	150.046.172	233.337.430
1. Repayment of loans and bonds	031	129.836.349	208.271.777
2. Dividends paid	032	2.398.665
3. Repayment of finance lease	033	158.413	361.674
4. Purchase of treasury shares	034
5. Other cash outflows from financing activities	035	93.609	68.225.020
VI. Total cash outflows from financing activities	036	132.487.036	276.858.471
C1) NET INCREASE OF CASH FLOW FROM FINANCING ACTIVITIES	037	17.559.136	0
C2) NET DECREASE OF CASH FLOW FROM FINANCING ACTIVITIES	038	0	43.521.041
Total increases of cash flows	039	0	2.544.109
Total decreases of cash flows	040	5.276.439	0
Cash and cash equivalents at the beginning of period	041	6.910.209	1.213.837
Increase of cash and cash equivalents	042	0	2.544.109
Decrease of cash and cash equivalents	043	5.276.439	0
Cash and cash equivalents at the end of period	044	1.633.770	3.757.946

period 31.3.2015 1.1.2015 to
Position	AOP	Previous year	Current year
1	2	3	4
1. Subscribed share capital	001	12.000.000	19.016.430
2. Capital reserves	002		84.956.364
3. Reserves from profit	003	160.917	183.484
4. Retained earnings or loss carried forward	004	7.911.034	-10.717.092
5. Net profit or loss for the period	005	-8.308.483	-4.319.350
6. Revaluation of tangible assets	006	83.504.118	67.384.068
7. Revaluation of intangible assets	007
8. Revaluation of available for sale assets	008
9. Other revaliuation	009
10. Total equity and reserves (AOP 001 to 009)	010	95.267.586	156.503.904
11. Foreign exchenge differences ffrom foreign investments	011
12. Current and deferred taxes	012
13. Cash flow hedge	013
14. Change of accounting policies	014
15. Correction of significant mistakes of prior period	015
16. Other changes	016	-34.725.904	-4.742.241
17.Total increase or decrease of equity (AOP 011 to 016)	017	-34.725.904	-4.742.241
17 a. Attributable to majority owners	018	-34.725.904	-4.742.241
17 b. Attributable to minority interest	019

STATEMENT OF CHANGES IN EQUITY