Six Month Financial Statements of Mega Retail Ltd. Have Been Approved; Alon Blue Square is Expected to Record a One-Time Write-Off in Second Quarter Results

YAKUM, Israel, August 19, 2015

Alon Blue Square Israel Ltd. (NYSE: BSI) (hereinafter: the "Company") announced today that the financial statements of its subsidiary Mega Retail Ltd. for the six month period ended June 30, 2015 have been approved. Mega Retail recorded a loss of approximately NIS 55 million attributable to operations at supermarket branches expected to continue operations, and an additional loss of approximately NIS 577 million attributable to one-time write-offs, one-time expenses (including expenses due to efficiency measures), and losses attributable to supermarket branches which ceased operations (out of which the amount of approximately NIS 360 million is due to balance sheet write-offs of goodwill, intangible and fixed assets, that have no current or future effect on the cash flow). The total losses recorded by Mega Retail for the six month period ended June 30, 2015 are approximately NIS 632 million. Since August 1, 2015, Mega is operating according to the Creditor's Arrangement as approved by the  District Court.

The Company is expected to record a one-time write-off in an amount of approximately NIS 250 to 300 million attributable to write-offs on account of loss of goodwill recorded with respect to Mega Retail's assets as well as with respect to other assets of the Company, such as Diners Club Israel Ltd. and  Naaman Group (NV) Ltd. influenced by Mega Retail's financial situation. The Total amount of write-offs and one-time expenses (including the Company's share in the one-time write-offs and expenses of Mega) is expected to be approximately NIS 500 milion to NIS 570 million.

The Company has yet to complete its review of the second quarter 2015 financial results, and is therefore unable at this time to provide final amounts and data for the period ended June 30, 2015. Final results of the Company may also be influenced by other factors not included in this report. Consequently, projections are preliminary in nature, may be different, and are subject to possible changes based on final review. In connection with the publication of its financial results for the six month period ended June 30, 2015, the Company shall also provide further information on the financial results of Mega Retail for such period. The Company is filing this report due to the particular results provided herein.

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Alon Blue Square Israel Ltd. (hereinafter: "Alon Blue Square") operates in four reportable operating segments and is the largest retail company in the State of Israel. In the Fueling and Commercial Sites segment, Alon Blue Square through its 71.17% subsidiary, which is listed on the Tel Aviv Stock Exchange ("TASE"), Dor Alon Energy in Israel (1988) Ltd is one of the four largest fuel retail companies in Israel based on the number of petrol stations and a leader in the field of convenience stores operating a chain of 212 petrol stations and 219 convenience stores in different formats in Israel. In its supermarket segment, Alon Blue Square, as a pioneer in the modern food retail, through its 100% subsidiary, Mega Retail Ltd., currently operates 192 supermarkets under different formats, each offering a wide range of food products, "Near Food" products and "Non-Food" products at varying levels of service and pricing. In its "Houseware and textile" segment, Alon Blue Square, through its TASE traded 77.51% subsidiary, Na'aman Group (NV) Ltd. operates specialist outlets in self-operation and franchises and offers a wide range of "Non-Food" products as retailer and wholesaler. In the Real Estate segment, Alon Blue Square, through its TASE traded 61.19% subsidiary Blue Square Real Estate Ltd., owns, leases and develops income producing commercial properties and projects. In addition, Alon Blue Square through its 100% subsidiary, Alon Cellular Ltd, operates an MVNO network in Israel, through Diners Club Israel Ltd., an associate held at 49%, which operates in the sector of issuance and clearance of YOU credit cards to the customer club members of the group and through Dr. Baby Marketing and Distribution 888 Ltd. 100 % held subsidiary as a retailer and wholesaler in the baby products sector.

Forward-looking statements