Performance Highlights

Table 1: Financial highlights of the Gorenje Group TEUR Consolidated sales revenue EBITDA EBITDA margin (in %) EBIT EBIT margin (in %) PBT PAT ROS (return on sales) ROA (return on assets) ROE (return on equity) Closing number of employees Average number of employees Added value per employee Free cash flow (narrow)* Financial liabilities Net financial liabilities** Earnings per share (in EUR) 2010 QQQQ2009 QQQQ1 2009
1,382,185 416,366 355,746 319,122 290,951 1,185,937 320,125 297,871 281,328 286,613 108,675 7.9% 56,438 4.1% 22,472 20,024 1.4% 1.6% 5.3% 10,721 11,174 31.60 13,362 25,314 6.1% 12,041 2.9% 2,592 3,210 0.8% 1.0% 3.3% 10,721 11,058 8.53 40,007 38,049 10.7% 24,698 6.9% 12,035 11,906 3.3% 3.8% 12.6% 11,323 10,758 9.49 22,329 24,229 7.6% 11,932 3.7% 5,583 4,391 1.4% 1.5% 4.8% 10,805 10,699 7.51 -6,285 21,083 7.2% 7,767 2.7% 2,0.2% 0.2% 0.6% 10,560 10,587 7.20 -42,689 68,199 5.8% 12,149 1.0% -9,308 -12,232 -1.0% -1.0% -3.2% 10,675 10,907 26.36 33,022 24,747 7.7% 11,578 3.6% 1,198 2,336 0.7% 0.8% 2.5% 10,675 10,825 7.92 36,616 22,724 7.6% 8,079 2.7% 4,221 3,427 1.2% 1.2% 3.7% 10,847 10,846 7.06 21,209 13,593 4.8% -479 -0.2% -1,324 -3,253 -1.2% -1.1% -3.5% 10,917 10,901 6.04 19,085 7,135 2.5% -7,029 -2.5% -13,403 -14,742 -5.1% -4.8% -15.3% 10,950 11,056 5.36 -43,888
483,947 483,947 479,494 487,778 471,039 402,219 402,219 445,225 462,759 453,014 1.34 0.20 3.14 1.13 0.12
452,242 452,242 484,108 504,761 515,825 425,112 425,112 460,262 490,729 506,226 -0.83 0.17 0.85 -0.82 -1.06
* PAT-amortisation and depreciation expense-Capex-+change in inventories-+allowances for trade receivables-+ change of trade payables ** long-term financial liabilities + short-term financial liabilities - cash and cash equivalents
Chart 1: Quarterly movement of sales revenue in TEUR
1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,Q1 Q2 Q3 QQ1 Q2 Q3 Q2010 2010
Chart 2: Quarterly movements of EBIT and EBITDA in TEUR

Home Interior Division The division is engaged in the manufacture and sale of kitchen and bathroom furnishings, sanitary equipment and ceramic tiles. Home furnishings account for a minor share of its production. The products of this division are sold primarily in the markets of Southeastern Europe. Its highest sales revenue is generated in the domestic, Croatian, Bosnian and Serbian markets, where we intend to strengthen our presence in the future. We are also recognisable and well-represented in the Austrian and Czech markets. In our battle against crisis market conditions in the past two years, we substantially optimised production processes and renewed our product range. These novelties were successfully presented in 2010 at the two-day Gorenje Home Interior Trade Show.
Interior furnishings account for 4 percent of the Group's total sales revenue. Our plans in the year 2011 include further restructuring and optimisation of the division's production processes, and a three-percent growth in sales revenue. In the design of furniture, sanitary equipment and ceramics, great emphasis is given to the quality of materials and the excellence of services. The main focus in kitchen furnishings is, alongside the abovementioned, on harmonising their design with the contours of household appliances. The division employs 926 persons. Our managerial employees actively and directly participate, while other employees indirectly participate in our integral quality management system according to the requirements of the ISO 9001:2000 standard. The division generates approximately four percent of the total sales revenue of the Gorenje Group.
Ecology, Energy and Services Division The division offers integral solutions in the areas of ecology and energy, and provides services in the areas of trade, engineering, agency services, restaurant and catering services, tourism, real estate management, as well as toolmaking and the manufacture of industrial equipment, including the production of military vehicles. Our key service in the area of environmental protection is integral waste management for the needs of industrial companies, where we are successfully applying our skills and forty years of experience. In the area of energy management, we are engaged in the marketing and sale of electric power, wood biomass, and coal. In the area of services, trade and catering account for the most important share of revenue generated in the domestic market.
The division generates 18 percent of the Group's total sales revenue. Key markets of the division are in Southeastern Europe, where we intend to strengthen our presence in the future. Despite the difficult economic conditions in 2010, we managed to increase our sales revenue by 34.3 percent, whereas in the current year its growth is estimated at 5.5 percent. Within the division we are constantly searching for business opportunities with a higher potential for growth than our core activity. In the area of solar power, we began to offer comprehensive turnkey solar power plants in 2010. The Ecology, Energy Management and Services Division employs on average 1,206 persons, and accounts for an 18 percent share in the total sales revenue of the Gorenje Group.

Bojana Rojc Head of IR Gorenje, d.d. Partizanska 12, 3503 Velenje, Slovenia Tel.: +45 GSM: +Faks: +27 bojana.rojc@gorenje.si
10 Corporate Governance Statement
Gorenje, d.d. and the Gorenje Group have introduced high standards of corporate governance, which we observe and implement consistently. Observing and surpassing the prescribed, recommended and agreed-upon standards is our permanent task. A high degree of transparency of operations and proper communication with shareholders and other stakeholders are also recognised in our environment as important values of Gorenje. For this reason we are continuously improving the level attained in this area, and updating it according to the best practice principle. The Company consistently implements a two-tier system of management, on the basis of which the Management Board is responsible for managing the affairs of the Company, and the Supervisory Board is responsible for supervising the Company's operations. In April of 2010, the Management Board and the Supervisory Board adopted the Corporate Governance Policy of the entire Gorenje Group, thereby strengthening cooperation in the area of corporate governance. In accordance with the adopted documents, we proactively and regularly published all relevant information that could affect the business decisions of investors or interested public. We also responded regularly and quickly to the questions of journalists, thus reducing the probability of rumours and articles with untruthful contents. The Management Board and Supervisory Board adopted the Corporate Governance Policy of the entire Gorenje Group. With the purpose to preserve the integrity of the Company and the employees, an open and consistent communication with all participants and stakeholders is observed, whereas the response to public letters by some Gorenje stakeholders was adequate as well. Further, the Company encourages an open and dynamic communication among members of the Management and the Supervisory Board. Although opinions on individual business decisions differ, their harmonisation and co-ordination is always directed towards the Company's future development. Accordingly, we shall continue to respond to any letters in a similar manner and thus protect the Company's reputation, which is all the more important in these intense times.

Her contributions are published in distinguished scientific and professional magazines specialising in international operations and marketing, both in Slovenia and abroad. Her bibliography comprises more than 300 scientific and professional papers. Her research work is focused primarily on the internationalisation of companies, relation-based marketing, international marketing, and the connectedness of marketing and sales. She also spreads her knowledge among Slovenian companies operating abroad, and offers consulting in the areas of internationalisation, marketing development and marketing strategies. She heads the post-graduate international business programme at the Faculty of Economics and, as Deputy Dean of the Faculty is responsible for the development of new products, the strategy of the FE, and quality assurance. She is also Vice-President of the University of Ljubljanas Quality Committee, member of the FE Quality Committee, President of the NAKVIS Council, and member of the Council for Higher Education. 10.5.3 Marcel van Assen, Ph.D. Member of the Supervisory Board Currently a Managing Consultant at Berenschot, a leading Dutch consultancy firm, where he is responsible for all consultancy activities with respect to Operational Excellence. His consulting experience covers various operations management and innovation management issues, from operational excellence, lean six sigma to value-innovation based on strategic conversation, roadmapping and foresight, aiming to professionalise both industrial and service organisations. Marcel van Assen is a Full Professor of Operational Excellence for Services at TiasNimbas Business School, the business school of the University of Tilburg and the Technical University of Eindhoven, where he teaches various courses, workshops and Masters classes. He holds a M.Sc. degree in mechanical engineering from the University of Twente, a M.Sc. degree in strategy and organisation from the Open University, and a Ph.D. in business administration from Erasmus University in Rotterdam. He is also an ambassador of the University of Twente. He is co-author of various articles and books, including i) Operational Excellence new style: implementation, instruments and models for management excellence, Practices of Supply Chain Management, Key Management Models, and Reconfigurations of chains and networks. Since the 1 of February, 2011 he has been a Full Professor of Operational Excellence at the TiasNimbas Business School in Tilburg.
10.5.4 Peter Kralji, Ph.D. Member of the Supervisory Board Obtained his B.Sc. degree in metallurgy from the University of Ljubljana, his Ph.D. from the Technical University of Hanover, and his MBA from INSEAD, Fontainebleau. From 1970 until his retirement in 2002 he was employed at McKinsey & Co., Inc., acting as Director after 1982. Prior to this, he worked at La Continental Nuclaire, Luxembourg from 1967 until 1970, at TH Hanover from 1965 to 1967, and in 1964 he was active in the welding industry in Slovenia. His activities are mainly related to industrial activities, such as chemical, pharmaceutical, automobile and steel industries, as well as industry service sectors in Germany, Austria, France and Eastern Europe. He has published numerous scientific and business papers in reputable journals. He has also been a speaker at numerous meetings, institutions and forums, where he lectured on several topics, including industry and company restructuring in Eastern Europe. He is a member of the supervisory boards of the companies SID, LEK, and Severstal. He was also president of IEDC Bled School of Management, as well as a member of the McKinsey Global Institute Advisory Council. In 2002 he was a member of the Federal Committee for the Restructuring of the German Employment Agency.

Chart 29: Movement of the annual EBIT 60,000 50,000 TEUR 40,000 30,000 20,000 10,15,970 56,790
Chart 30: Movement of EBIT in the last quarter 20,000 15,000 TEUR 10,000 5,QQ17,837 14,664
Earnings before interest and taxes (EBIT) of the HA Division achieved 56.8 million EUR in 2010 and improved by 40.8 million EUR over the year 2009. The EBIT margin also increased substantially - from 1.8
percent to 5.8 percent. Before the effect of the Asko Group, it achieved the level of 41.7 million EUR and improved by 25.7 million EUR over the year 2009 or
from the aspect of the EBIT margin from 1.8 percent to 4.6 percent. In the last quarter of the year 2010, profitability at the EBIT level dropped from 7.5 percent to 4.9 percent or
to 5.2 percent before the effects of the Asko Group due to significant increases in the prices of raw materials and materials, and due to increases in the costs of services in the segment of logistic costs as a result of sales model changes in the territory of Russia.
Earnings before interest, taxes, depreciation and amortisation (EBITDA)
Chart 31: Movement of the annual EBITDA 120,000 100,000 TEUR 80,000 60,000 40,000 20,63,834 100,853 TEUR Chart 32: Movement of EBITDA in the last quarter 30,000 29,000 28,000 27,000 26,000 25,000 24,000 QQ25,871 28,785
A similar improvement was also achieved at the level of earnings before interest, taxes, depreciation and amortisation (EBITDA). In the last year the Division increased it by 37.0 million EUR and achieved the level of 100.9 million EUR when theEBITDA margin improved from 7.3 percent to 10.3 percent. Before the effect of the Asko Group it achieved the level of 83.4 million EUR and improved by 19.6 million EUR over the year 2009 when the EBITDA margin improved from 7.3 percent to 9.1 percent. In the last quarter of the year 2010, profitability at the level of EBITDA decreased from 12.1 percent to 8.7 percent and to 9.0 percent before the effects of the Asko Group.
Financial result In 2010, financial revenue decreased by 8.9 million EUR compared to the last year. Financial expenses increased by 4.1 million EUR, due mostly to exchange losses and allowances for receivables. The financial result was negative and amounted to -33.0 million EUR. In comparison with the year 2009 it lowered by an additional 13.0 million EUR. Without the effect of extraordinary events (Asko and Merkur) the financial result amounted to -26.5 million EUR and was by 6.5 million EUR lower than the one achieved in 2009. In the last quarter of the year 2010, the Division improved the negative financial result by 1.5 million EUR over the year 2009, and by 0.6 million EUR before the effects of the Asko Group.
Net profit In 2010, net profit amounted to 22.6 million EUR.
Chart 33: Movement of the annual PAT 25,000 20,000 15,000 TEUR 10,000 5,-5,000 -10,-6,TEUR 22,581 Chart 34: Movement of the PAT in the last quarter 12,000 10,000 8,000 6,000 4,000 2,QQ9,731 7,697

Available-for-sale financial assets Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the fair value reserve in equity, to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss recognised previously in profit or loss.
Changes in impairment provisions attributable to application of the effective interest method are reflected as a component of interest income. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognised in profit or loss, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income. (ii) Non-financial assets The carrying amounts of the Groups non-financial assets, other than investment property, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the assets recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year prior to the compilation of the financial statements. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGU. For the purposes of goodwill impairment testing, goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination. An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

2009 20,736 4,516 9,455 1,089 35,796
Other short-term receivables include, as a major item, input VAT receivable recorded by the Gorenje Group in the amount of TEUR 19,425 as at the year-end 2010 (in 2009: TEUR 10,398). A significant portion of other current assets includes accrued receivables recorded by Gorenje, d.d. Shortterm deferred costs include costs of services billed but not yet provided. Note 31 Cash and cash equivalents
in TEUR Cash in hand Cash balances in banks and other financial institutions Total 82,325 82,728

82,728 TEUR

26,725 27,130

Note 32 Equity

392,096 TEUR
In accordance with the resolution of the 14th Shareholders' Meeting of Gorenje, d.d. of 28 May 2010 and the District Court Order of 5 July 2010 on a change in share capital, the share capital was increased by 1,876,876 ordinary, freely transferable, registered, no par value shares. At 31 December 2010, the share capital of Gorenje, d.d. amounted to EUR 66,378,217.32 (at 31 December 2009: EUR 58,546,152.56) and was divided into 15,906,876 ordinary, freely transferable, registered, no par value shares. Capital surplus (share premium) in the amount of TEUR 175,575 includes paid-in capital in excess of par value of shares in the amount of TEUR 64,352, surplus in excess of book value of disposed own shares in the amount of TEUR 15,312 (1,070,000 own shares were disposed in 2008 in order to acquire the ATAG company), and general equity revaluation adjustment in the amount of TEUR 78,048 transferred upon the transition to IFRS. Legal and statutory reserves in the amount of TEUR 21,990 include legal reserves in the amount of TEUR 12,895 (31 December 2009: TEUR 12,895), reserves for own shares in the amount of TEUR 3,170 (31 December 2009: TEUR 3,170), and statutory reserves in the amount of TEUR 5,925 (31 December 2009: TEUR 5,632). Retained earnings in the amount of TEUR 107,382 (31 December 2009: TEUR 97,788) were decreased by the value of a derivative financial instrument held for trading in the amount of TEUR 7,646, which was designated in 2009 as a hedging derivative financial instrument in a cash flow hedge and recorded in the statement of comprehensive income. In 2010, however, it did not meet the criterion for classification as a hedging derivative financial instrument of that kind. A decrease in the amount of TEUR 2,390 relates to the purchase of a minority interest in Gorenje Surovina, d.o.o. Translation reserve was decreased by TEUR 8,563 compared to 2009 and amounted to TEUR 8,842 as at 31 December 2010. The decrease is due to exchange differences arising from the translation of individual items in the financial statements of companies operating abroad from the national currencies to the reporting currency. Own shares in the amount of TEUR 3,170 are stated as a deductible item of equity and recorded at cost.

The changes in fair value reserve are shown in the table below:
Fair value reserve for available-forsale financial assets 3,0 -50 3,500 Fair value reserve for available-forsale financial assets 6,-878 -3,517 3,117
in TEUR Balance at 1 Jan 2010 Revaluation of land Disposal of land Change in fair value of cash flow hedge Change in fair value of available-for-sale financial assets Disposal of available-for-sale financial assets Impairment of available-for-sale financial assets Disposal of a subsidiary Acquisition of non-controlling interests Deferred taxes Balance at 31 Dec 2010
Fair value reserve for land 17,0 -7,9,842
Fair value reserve for derivatives -7,0 9,-2,050 -48
Total 12,0 9,-7,-1,942 13,294
in TEUR Balance at 1 Jan 2009 Revaluation of land Disposal of land Change in fair value of cash flow hedge Change in fair value of available-for-sale financial assets Disposal of available-for-sale financial assets Impairment of available-for-sale financial assets Disposal of a subsidiary Acquisition of non-controlling interests Deferred taxes Balance at 31 Dec 2009
Fair value reserve for land 17,316 -84 17,461
Fair value reserve for derivatives -8,0 -1,2,062 -7,756
Total 15,087 --1,014 -878 -3,2,663 12,822
Note 33 Earnings per share Earnings per share amounted to EUR 1.34 in 2010 (in 2009: EUR -0.83). No preference shares have been issued by the Group, hence basic and diluted earnings per share are equal. The calculation of EPS ratio is based on net profit or loss of the Group and the weighted average number of ordinary shares in the period:
2010 Net profit or loss Weighted average number of ordinary shares Basic / Diluted earnings per share (in EUR) 2009 Net profit or loss Weighted average number of ordinary shares Basic / Diluted earnings per share (in EUR) (in TEUR) 19,923 14,847,127 1,34 (in TEUR) -11,504 13,908,689 -0.83
All issued shares are of the same class and give their owner the right to participate in the management of the company. Each share gives one vote and a right to dividend. Dividends were not paid in 2010. Note 34 Provisions
in TEUR Provisions for warranties Provisions for retirement benefits and jubilee premiums Other provisions Total 2010 50,261 22,687 15,219 88,167

88,167 TEUR

2009 38,000 19,623 4,535 62,158
Provisions for warranties were created on the basis of estimated costs of warranties calculated by taking into account the past known data on the quality level of products and the costs of repairs under warranties. Provisions for retirement benefits and jubilee premiums were created on the basis of the actuarial calculation of estimated future payments of retirement benefits and jubilee premiums, which was made as at 31 December 2010. The actuarial calculation was based on the following assumptions: a discount rate of 4.90 percent in December 2010 representing the rate of return on 10-year entrepreneurial bonds with high credit rating in the euro area; current retirement benefits and jubilee premiums as defined in the internal acts of individual companies or in the national regulations; an employee turnover depending in particular on the employees age; a mortality rate stated in the latest available mortality tables of the local population; an increase in wages and salaries due to adjustment for inflation and career promotion. Actuarial deficits or surpluses occurring in connection with retirement benefits and jubilee premiums are recognised in the income statement as expense (income). A significant portion of other provisions includes provisions for corporate restructuring and anticipated losses in the amount of TEUR 9,800 which were created in line with the anticipated costs of post-acquisition activities for the Asko Group, provisions for costs in connection with the Directive on Waste Electrical and Electronic Equipment in the amount of TEUR 1,955 recorded by ZEOS, d.o.o., and provisions for compensation claims arising from legal actions brought against Gorenje, d.d. in the amount of TEUR 1,900. Movement of provisions in 2010

When the hedged item is a non-financial asset, the amount accumulated in equity is transferred to the carrying amount of the asset when the asset is recognised. In other cases the amount accumulated in equity is reclassified to profit or loss in the same period that the hedged item affects profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected to occur, then the balance in other comprehensive income is recognised immediately in profit or loss. Other non-trading derivatives When a non-trading derivative financial instrument is not designated in a hedge relationship that qualifies for hedge accounting, all changes in its fair value are recognised immediately in profit or loss. c) Subsidiaries Investments in subsidiaries are valued at cost. Incremental costs directly attributable to the acquisition of a subsidiary are recognized as an increase in the cost of equity investment. Share of profit is recognized as income when a resolution on dividend payment is adopted by the Shareholders Meeting. d) Property, plant and equipment (PPE) (i) Recognition and measurement Items of property (expect land), plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of selfconstructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and capitalised borrowings costs. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying item of property, plant and equipment were capitalised subject to the following conditions: if the value of qualifying asset in total sales exceeded 5 percent, and if the duration of construction exceeded 6 months. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Fair value model or revaluation model is applied to land. The effect of revaluation is recorded in other comprehensive income. Impairment of land previously increased in value results in a decrease in revaluation surplus in other comprehensive income; otherwise, it is recognised in the income statement. The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and is recognised net within other income in profit or loss. When revalued assets are sold, any related amount included in the fair value reserve is transferred to retained earnings. (ii) Reclassification to investment property Property that is being constructed for future use as investment property is accounted for as property, plant and equipment and measured at cost until construction or development is completed, at which time it is reclassified as investment property. Any gain or loss arising on remeasurement is recognised in profit or loss. When the use of a property changes from owner-occupied to investment property, the property is remeasured to fair value and reclassified as investment property. Any gain arising on remeasurement is recognised in profit or loss to the extent that it reverses a previous impairment loss on the specific property, with any remaining gain recognised in other comprehensive income and presented in the fair value reserve in equity.

continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit, or CGU). For the purposes of goodwill impairment testing, goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination. An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. j) Non-current assets held for sale or distribution Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale or distribution rather than through continuing use, are classified as held for sale or distribution. Immediately before classification as held for sale or distribution, the assets, or components of a disposal group, are remeasured in accordance with the Companys accounting policies. Thereafter generally the assets, or disposal group, are measured at the lower of their carrying amount and fair value less costs to sell. Any impairment loss on a disposal group first is allocated to goodwill, and then to remaining assets and liabilities on pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets or investment property, which continue to be measured in accordance with the Companys accounting policies. Impairment losses on initial classification as held for sale or distribution and subsequent gains and losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss. Intangible assets and property, plant and equipment once classified as held for sale or distribution are not amortised or depreciated. In addition, equity accounting of equity-accounted investees ceases once classified as held for sale or distribution. k) Employee benefits

measurement of equity instruments issued to extinguish a financial liability is at the fair value of those equity instruments, unless that fair value cannot be reliably measured, in which case the equity instrument should be measured to reflect the fair value of the financial liability extinguished. The difference between the carrying amount of the financial liability (or part of the financial liability) extinguished and the initial measurement amount of equity instruments issued should be recognized in profit or loss. The Company did not issue equity to extinguish any financial liability during the current period. Therefore, the Interpretation will have no impact on the comparative amounts in the Companys financial statements for the year ending 31 December 2010. Further, since the Interpretation can relate only to transactions that will occur in the future, it is not possible to determine in advance the effects the application of the Interpretation will have. Amendment to IAS 32 Financial Instruments: Presentation Classification of Rights Issues (effective for annual periods beginning on or after 1 February 2010) The amendment requires that rights, options or warrants to acquire a fixed number of the entitys own equity instruments for a fixed amount of any currency are equity instruments if the entity offers the rights, options or warrants pro rata to all of its existing owners of the same class of its own non-derivative equity instruments. The amendments to IAS 32 are not relevant to the Companys financial statements as the Company has not issued such instruments at any time in the past.
4. Determination of fair value A number of the Companys accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and / or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. (i) Property, plant and equipment The fair value of property, plant and equipment recognised as a result of a business combination is based on market values. The market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arms length transaction after proper marketing wherein the parties had each acted knowledgeably and willingly. The items of property, plant and equipment are measured at cost. A revaluation of land is based on the independent valuers report and is carried out every five to eight years. The Company examines, on an annual basis, if revaluation of land is required. (ii) Intangible assets The fair value of patents and trademarks acquired in a business combination is based on the discounted estimated royalty payments that have been avoided as a result of the patent or trademark being owned. The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets. (iii) Investment property An external, independent valuation company, having appropriate recognised professional qualifications and recent experience in the location and category of property being valued, values the Companys investment property portfolio every five years. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arms length transaction after proper marketing wherein the parties had each acted knowledgeably and willingly. In the absence of current prices in an active market, the valuations are prepared by considering the estimated rental value of the property. A market yield is applied to the estimated rental value to arrive at the gross property valuation. When actual rents differ materially from the estimated rental value, adjustments are made to reflect actual rents. Valuations reflect, when appropriate, the type of tenants actually in occupation or responsible for meeting

Other non-current investments include long-term loans in the amount of TEUR 489 (31 Dec 2009: TEUR 1,083) and other non-current investments in the amount of TEUR 676 (31 Dec 2009: TEUR 690). In respect of non-current investments, the Company is not exposed to higher financial risks because most of these investments are made in subsidiaries. Long-term loans to other entities are to a great extent secured by bills. Changes in other non-current investments in TEUR Opening balance at 1 January Increase Decrease Transfer to current investments Closing balance Changes in long-term loans in TEUR Opening balance at 1 January Increase Decrease Transfer to current investments Closing balance 28 -5,0 -5,261 690

2010 1,-353 -241 489

2009 1,-400 -111 1,083
Long-term loans by maturity in TEUR Maturity from 1 to 2 years Maturity from 2 to 3 years Maturity from 3 to 4 years Maturity from 4 to 5 years Maturity over 5 years Total 165 1,083
Long-term loans bear interest at the nominal interest rate ranging from 6.00 % to 6.50 %. Loans with a maturity over 5 years include housing loans under the Housing Act of 1991. Long-term loans to specific groups of persons No long-term loans were granted to the Management Board members, the Supervisory Board members, and internal owners. Note 21 Deferred tax assets and liabilities Tax assets in TEUR PPE Investments Receivables Provisions for retirement benefits and jubilee premiums Provisions for warranties Unused tax losses Unused tax incentives Cash flow hedge interest rate swaps Total 1,2,87 1,2,220 Tax liabilities 2010 1,491 -1,565 -85 Tax assets Tax liabilities -1,400 1,2,098 -1,478 1,2,220

1,360 3,767 1,191

1,482 1,2,062 9,989

-12 1,402 1,480

1,360 3,767 1,9,565

1,482 1,2,062 8,509

10,967
in TEUR PPE Investments Receivables Inventories Liabilities from litigations Provisions for retirement benefits and jubilee premiums Provisions for warranties Unused tax losses Unused tax incentives Cash flow hedge interest rate swaps Total
Tax assets Tax liabilities -1,400 -1,478 1,854 1,662
Through profit or loss -76 -13 -122 -123
Through other comprehensive income -8 532

139 1,403 623

2,032 -2,050 2,062 2,668
Note 22 Inventories in TEUR Materials Work in progress Products Merchandise Advances Total 2010 52,389 9,085 16,118 15,93,660
93,660 TEUR 2009 42,242 9,109 16,374 6,396 1,094 75,215
The book value of inventories of products, of which corrections were made from production cost to net realisable value, amounts to TEUR 2,351 (in 2009:TEUR 2,736). Note 23 Current investments in TEUR Available-for-sale financial assets Short-term loans Short-term interest receivable Other short-term receivables from investments Total 2010 9,035 64,128 1,023 2,286 76,472

76,472 TEUR 2009 12,175 70,4,668 87,684
Other short-term receivables from investments include receivables transferred from non-current to current investments due to their maturity less payments received. They relate to non-operating assets disposed in 2008. A portion of other short-term receivables in the amount of TEUR 718 include receivables from the sale of available-for-sale shares that will be paid in January 2011. Changes in available-for-sale shares and interests in TEUR Opening balance at 1 January Acquisition Disposal Impairment loss Closing balance at 31 December 2010 12,175 1,358 -3,243 -1,255 9,18,-3,538 -2,800 12,175
A portion of available-for-sale shares and interests was sold. Loss on disposal of these shares and interests amounted to TEUR 792. Impairment loss in the amount of TEUR 1,129 was recorded under financial expenses and impairment loss in the amount of TEUR 126 was recorded in the statement of comprehensive income as net change in fair value. Short-term loans in TEUR Short-term portion of long-term loans to companies in the Gorenje Group Short-term loans to companies in the Gorenje Group Short-term portion of long-term loans to other entities Short-term loans to other entities Short-term deposits with banks Total 46,16,64,100 39,15,218 15,122 70,532
Short-term loans bear interest at a nominal interest rate ranging from 4.534 % to 7.5 %. As for short-term loans, the Company is not exposed to higher financial risks because most of these loans are granted to its subsidiaries. Short-term loans to other entities are secured by bills.
Short-term loans to specific groups of persons No short-term loans were granted to the Management Board members, the Supervisory Board members, and internal owners. Note 24 Trade receivables in TEUR Trade receivables companies in the Gorenje Group Trade receivables other companies Total Short-term trade receivables due from Group companies in TEUR Trade receivables domestic market Trade receivables foreign market Total 2010 9,923 121,950 131,6,616 109,129 115,131,873 52,094 183,967
183,967 TEUR 2009 115,745 49,436 165,181
Short-term trade receivables due from Group companies domestic market Company Gorenje Tiki d.o.o.,Ljubljana Energygor, d.o.o., Ljubljana ZEOS, d.o.o., Ljubljana PUBLICUS, d.o.o., Ljubljana Kemis, d.o.o., Radomlje GENI, d.o.o., Krko Gorenje Surovina, d.o.o., Maribor Gorenje Notranja oprema, d.o.o., Velenje Gorenje I.P.C., d.o.o., Velenje Gorenje GTI, d.o.o., Velenje Gorenje Gostinstvo, d.o.o., Velenje Gorenje Orodjarna, d.o.o., Velenje ERICo, d.o.o., Velenje Gorenje design studio, d.o.o., Velenje Gorenje Projekt, d.o.o., Velenje Indop, d.o.o., otanj Total Short-term trade receivables due from Group companies foreign market Company Gorenje Zagreb, d.o.o., Croatia KEMIS-Termoclean, d.o.o., Croatia Gorenje, d.o.o., Serbia Gorenje aparati za domainstvo, d.o.o., Serbia Gorenje Tiki, d.o.o., Serbia Gorenje Studiot, d.o.o., Serbia 2010 27,8,1,in TEUR 2009 21,5,049 3,1,186 1,5,849 9,923 in TEUR 270 2,311 2,747 6,616

The Management

Joe Stani, Chairman of the Management Board Franjo Bobinac, Member of the Management Board, responsible for sales and marketing Marija Miheljak, Member of the Management Board, responsible for finance and economics Drago Bahun, Member of the Management Board, responsible for human resources, social and general issues and employee-elected manager
The management of the company consists of a chairman and members

Drago Bahun

Marija Miheljak

Joe Stani

Franjo Bobinac
Report by the Chairman of the Supervisory Board
2. Report by the Chairman of the Supervisory Board In the year 2000 the Supervisory Board performed its tasks within its responsibility to monitor the business performance of Gorenje d.d. as well as the whole of the Gorenje Group. The business results were compared to the overall economic situation worldwide and in Slovenia, and the Supervisory Board considers, that the business performance of the Gorenje d.d. company as well as the Gorenje Group as a whole was successful. After giving its approval of the project the Supervisory Board of Gorenje d.d. closely monitored the individual stages of the construction of the new refrigerator production facility, keeping in mind its importance for the development perspective of the household appliances sector and the business strategy of the Gorenje Group. We have been always aware that it was an extremely development-oriented and export-based investment. The challenges and process of globalisation demanded modernisation and flexibility of the production, cost-effective and competitively priced products, continuous improvement of the quality not only of the products but the production processes and business excellence as well. With the completed production facility featuring a state-of-the-art supervisory system and doubling the capacity to meet the various expectations and requirements of customers and end users, Gorenje will thus easier meet their requirements while facing tough world-wide competition in the field of household appliances. The construction of the new plant was a great test and a challenge for the professionals and the whole Gorenje staff. It is needless to say that the people of Gorenje made a wonderful job. The decision for going ahead with the new plant was also a tough challenge for the Gorenje shareholders. Based on their support the development oriented thinking and logic prevailed against a short-sighted one requiring dividends to be paid. For the first time ever the wisdom of such a decision was proven by the possibility of paying dividends, considering the performance of Gorenje in 2000. The dividends support the credibility of the views by the management and the Supervisory Board, who guaranteed shareholders long-term stability and economic viability of their investment in Gorenje. The Supervisory Board would like to express its satisfaction and enthusiasm for the quick construction and start-up of the new galvanisation plant and of course the effective crisis management in times of facing tough consequences of the autumn fire. There are few companies in Slovenia with a management like Gorenje, and a staff with so much corporate loyalty and internal solidarity. They really deserve all the merits for the results and achievements shown. The Supervisory Board would like to thank everybody who contributed its share to the construction of the new refrigerator production facility, the start-up of the new galvanisation plant as well as meeting of business goals for the last year. With this deed last year's 50th anniversary was accompanied by reassurances of the vitality of the company, its development and business continuity in the decades to come. Chairman of the Supervisory Board Marko Volj M. Sc.

The Supervisory Board

- representatives of the shareholders Marko Volj, M.Sc., Chairman Chairman of NLB, d.d., Ljubljana Management Board Toma Kuntari, M.Sc., Member Deputy chairman of the Kapitalska druba, d.d. Management Board for legal issues Anton Majzelj, Member General manager of Mobitel, Ljubljana Branko Pavlin, M. Sc., Membe Chairman of the KBM Infond, Maribor Management Board Alojz Soan, Ph. D., Member University professor representatives of the employees Ivan Atelek, Deputy Chairman Retired Gorenje general manager Irena Brlonik, Member Consultant at the department for ecology and analytical chemistry Gorenje, d.d. Peter Kobal, Member Maintenance manager, Gorenje, d.d. Drago Krenker, Member Production manager of the refrigerators and freezers programme, Gorenje, d.d. dr. Emil Rojc, Member Secretary to the Management board, Gorenje, d.d.
Gorenje Group corporate profile
3. Gorenje Group corporate profile 3.1. Organisational structure of the Gorenje Group The Gorenje Group consists of the Gorenje, gospodinjski aparati, d.d., in short Gorenje d.d. parent company and 35 affiliates, members of the group subject to mutual stakes in their equities. The Gorenje d.d. parent company is also founder of the TCL institute, testing and certification laboratory, Velenje. Gorenje maintains a strong world-wide network of affiliates and representative offices. The companies abroad are trading companies with a sales-network, warehousing, transportation and service departments in place. Companies based in Austria and the Czech republic also produce kitchen furniture, which is sold together with built-in household appliances. In 2000 the following companies ceased to operate as independent legal entities or the interests in the following companies were sold: Gorenje Servis, EMKOR Rogatec and Gorenje Point, because of merging with the parent company; Gorenje Kuanski aparati and Gorenje Tuzla as well as EKI, rnomelj for the sale of the interest; Gorenje Sarajevo for the purpose of liquidation; Gorenje Split because of merging with Gorenje Zagreb. 3.2. The Gorenje Group business activities There are four major areas of business activities performed by the Gorenje Group: production and sale of household appliances, including refrigerators and freezers, gas, electric and combined cookers, washing machines and tumble dryers. This field also includes the sale of complementary range like dishwashers, small household appliances and the production and sale of water heaters as well as components for household appliances; production and sale of tools and industrial equipment; services like trading, catering and tourism, computer services; manufacture and sale of kitchen furniture;
Essential data on the Gorenje, d.d. company
Gorenje, gospodinjski aparati, delnika druba, Velenje Seat Partizanska 12 Short form of the company name Gorenje, d.d. Registry number 5163676 VAT-number 72615320 Court register file number 97/01 044, file no. 1/00461/00 Equity 12,200,000,000 SIT Nominal value of individual share 1,000 SIT Trading stock exchange Ljubljana stock exchange, listed shares Stock acronym GRVG Company name

3.5. Events in festive 2000 The year of the anniversary was shaped particularly by the following events: At the largest exhibition of household appliances in 2000, the Confortec in Paris, Gorenje introduced its new jubilee line of products PININFARINA, which was developed in cooperation with the renowned designer house Pininfarina. Gorenje decided to produce this jubilee product line with the aim to bring to market a leading product as far as design, technical specifications and technology are concerned. The products feature subtle details, simple handling, low energy consumption and silent operation. The product line was introduced to the public in the cultural and congress centre Cankarjev dom in Ljubljana with the participation of the Pininfarina general manager Mr. Paolo Pininfarina. In March the 25th anniversary of the company Gorenje Austria seated in Vienna was celebrated. The company employs 138 people and has a central warehouse, showrooms, service centres throughout Austria and a furniture production site in Freistadt. Their 7th anniversary of operations was also celebrated by the companies Gorenje Orodjarna and Gorenje Indop. Gorenje has 40 years of experience in tool-die making. Both companies successfully participated at the 52nd international exhibition for craft IHM in Munich, Germany. On April 5th Gorenje celebrated its 50th anniversary. On that day in 1950 the otanj based Municipal People's Committee Mozirje passed the decision to establish the District Metalworks Gorenje with its seat in the village of Gorenje. In April operations on two out of five production lines in the new Factory of refrigeration appliances were started, while by the end of this year four of them should be in full operation. The new production site will provide employees with considerably better working conditions, it will enhance productivity and increase the capacity in the field of refrigerators and deep-freezers to 1,5 million pieces annually. Students of the Academy of Fine Arts, department for design participated in the project "Gorenje Home 2000", by demonstrating their original solutions of new kitchens in Gorenje. Prizes were awarded to the best solutions, while the "Frajla" project, an integrated miniature kitchen also became one of the prize-winners at the 17th biennial of industrial design BIO 2000, held at the Ljubljana castle. By participating at the furniture trade fair in Poznan, Poland, the 11th furniture trade fair in Ljubljana and by opening a showroom of kitchen furniture in Limbu_, Slovenia, Gorenje announced its come-back in the field of kitchen furniture. By its kitchen and bathroom furniture the Gorenje Interieri company has proven visitors that the company doesn't lag behind competition. By the acquisition of a stake in the Gorenje Notranja oprema company, the furniture programme has been rounded off. Gorenje opened a warehouse and business premises in Bosnia and Herzegovina as well as in Prague, the Czech republic. The new business centres will secure a long-term presence in both markets. September 3rd, a sunny Sunday will remain unforgettable for many generations. Around 5.30 p.m. Gorenje was covered in black smoke. A fire broke out at the galvanisation plant, which burnt to the ground. Several companies, institutions and individuals expressed their solidarity with Gorenje. Once again Gorenje has demonstrated that even in crisis situation it can emerge as a winner. Alternative solutions for the supply of semi-finished products were found, so that the production continued almost as if nothing had happened. Soon after the fire, construction works at the new plant were started, and the new plant literally shot up like mushrooms after the rain. On November 10th, after two and a half years of OTC trading, Gorenje d.d. became listed on the official market of the Ljubljana stock exchange. This way it joined the twenty most prestigious companies in Slovenia. In December Gorenje d.d. and Gorenje Indop were successfully certified according the requirements of the ISO 14001 environmental standard. In 2000 Gorenje celebrated the 30th anniversary of organised recreation. On this occasion several competitions were held, while at a special exhibition the work during the last 30 years was presented. Special acknowledgements were awarded to the most meritorious organisers of recreation activities.

M E S S A G E

ort Annual Rep 2000

F R O M

C R E A T I V I T Y
4. Household appliances Production and marketing of household appliances has remained the core activity of the Gorenje Group throughout the year 2000. This business sector consists of the parent company Gorenje d.d. headquartered in Velenje and of 23 mainly Europe-based companies of the foreign sales network. The household appliances sector furthermore includes the manufacture of water heaters produced by the Gorenje Tiki company in Ljubljana, as well as the manufacture of components for household appliances produced by the companies Gorenje I.P.C from Velenje and Biterm, from Bistrica ob Sotli. 4.1. Developments in the household appliances sector The household appliances sector is in the mature phase for quite some time and is showing no notable growth, the key success factors being price competitiveness and a well-established brand name. The global market for household appliances accounts for some 200 million appliances per year and is split up into three main domains, i.e. Europe, North and South America and Asia; each domain represents approximately one third of the global market. There are very few new players, since the access barriers are relatively high and demand high initial investments. Gorenje is present with its products mainly on the European markets, which experienced a slight growth in 2000. The market grew slower in terms of value than in terms of quantity, which caused the price-cut trend setting in a couple of years ago to continue. The manufacturers made quite some efforts to introduce e-business and e-commerce in order to respond to the changes of the business environment better and to adapt to the emerging needs of optimising business processes. In 2000, manufacturers in Western Europe increased their presence in the Eastern European markets, however, the trends of business mergers are still present. Europe witnessed also a breakthrough by Asian, especially Chinese, manufacturers. The globalisation process is continuing also in the trade sector. The biggest global traders have increased their presence, especially in Eastern European countries. The biggest trading companies focused particularly on promoting their own trademarks and introducing e-commerce, as well as on purchases through Internet auctions. By the end of 2000, all key markets were facing the first signs of recession. For the last ten years, 2000 was one of the toughest for the manufacturers of household appliances, since prices of raw materials and components increased considerably, which was more or less a consequence of the oil price increase and the strong US dollar. In the light of the economic growth, consumers have adopted their own style and attitude towards consumer goods, which, in order to comply with future trends, require these goods to be developed with special emphasis on features like personal attitude and individual touch of the product. This way the research and development departments are facing new challenges in the search for innovations regarding household appliances. The year 2000 brought a breakthrough in the introduction of home automation, which is not likely to stop. Unlike previous years the products for the intelligent home started to flood the market. New functional possibilities for networked household appliances have thus opened. Apart from a good design and functional features of the products a lot of effort was made to cut their energy consumption. The red thread of development and innovation still remains the increase in energy conservation, since both, the USA and the European Union are about to introduce new standards regulating this field based on a very restrictive legislation.

4.2. Current standings of Gorenje and the basic strategic guidelines for the household appliances sector With the sale of almost 2.4 million of large household appliances, Gorenje ranks among the biggest European manufacturers and has a 4 % market share on the European market. In 2000, Gorenje continued to strengthen sales of its own brand names, up-grading its own sales network and expanding its comprehensive product range. Geographically, the Group focused on the European market, yet it also profited from opportunities arising on markets overseas. As goes without saying, Gorenje closely followed the global development trends in the year 2000. To meet the expectations of the ever more demanding customers is one of the most important criteria and is as such anchored in the conscience of our researchers and developers, designers and constructors. Elegant products with a personal touch, a pioneer in this field being the Old-timer refrigerator, enjoy increasing popularity within the Gorenje product range. The development of energy-saving products remained a constant element of the Group's strategy also in the year 2000, sweeping away even the slightest fear that stringent energy-saving laws governing the most demanding markets might cause a decrease of our market share. A major progress was reached in the field of home automation. This keeps Gorenje among the top players, researching and developing this currently very promising household appliances sector of the industrialised world. 4.3. Gorenje household appliances sales in the year 2000 Plan exceeded, growth of market shares In 2000 the household appliances sector generated 197.9 billion SIT of non-consolidated net sales revenues and exceeded its plan by 11 %. Compared to the year 1999, sales in terms of quantity increased by 10 % and in terms of value as much as 20 %. The main reason for higher sales in terms of value was the improved structure of the product range, a result of the enhancement and additional features of appliances. In 2000, the sale of water heaters increased by 20 % compared to the year before. Market 94 % of the total output was sold on foreign markets, whereby 70 % went to the common market of the European Union. The highest growth rate was recorded in Germany, the Scandinavian countries, in Bosnia and Herzegovina, Croatia and the United States. Furthermore, sales rose considerably in some of the emerging markets like India, where Gorenje has for the first time ever sold washing machines, as well as in Algiers, Iran and Israel. Products The highest growth rate in terms of value was achieved by the cookers range (+23 %) followed by the washing machines and dishwashers range (+21 %) and refrigerators and freezers range (+14 %). The household appliances range sold under our own brand names was supplemented by dishwashers, extractor hoods, built-in hobs and microwave ovens. Gorenje offered the markets, where it has a well-established brand name, especially in South-Eastern Europe, an additional programme generating almost 10 % of its total sales. As compared to 1999, major growth was recorded in the sales of television sets. In 2000, Gorenje introduced a considerable number of new products, which managed to secure the Group market shares in all segments of the market. Particularly successful were some innovative products, like the new Gorenje Pininfarina line, the new 500 cooker generation, the Prological electronic washing machines, the 1600-spin washing machines, the Old-timer refrigerators, etc., which make Gorenje as one of the major players of the industry.

Machine construction and tool making
5. Machine construction and tool making Two companies are involved in the field of machine construction and tool making: Gorenje Indop and Gorenje Orodjarna. Both companies show a remarkable growth matched by an insignificant growth in the number of staff. Both companies are strengthening their position and expanding its business as suppliers to the automotive industry, which is one of the fastest growing industries, while it demands from its suppliers quality, flexibility, short delivery times and competitive prices. The goal of both companies is to become part of as many production chains as possible thus becoming less dependant on one single buyer. Today, both companies are firmly incorporated into the Gorenje system, since three quarters of their turnover is generated within the system. It is definitely an industry branch, where Gorenje wishes to expand faster in the future. Even sales outside the Gorenje Group are to grow faster in the future. The rapid progress requires major efforts to be invested into the development of the branch per se and especially into workshop services, which calls for specialisation accompanied by a maximum use of the standard elements of machine construction and tool making. In the year 2000 the sector generated 3.9 billion SIT of non-consolidated net sales revenue. Gorenje Indop The trend of an exceptional sales volume growth continued in 2000. Sales revenues amounted to 2,250 million SIT and have increased by 58 % compared to 1999. The volume has more than doubled in the last two years. The year 2000 was shaped by three major orders. Gorenje Indop was producing the equipment for the new refrigerator and deep-freezer plant and galvanisation plant and for Revoz a horizontal metal cutting line. The Gorenje Group accounted for 75 % of the total sales, the automotive industry had a 19 % share, while other local and foreign buyers had a much lower share, only 6 % due to the fully booked production facilities. The equipment was designed, produced and assembled on a high technical and quality level, which makes it suitable for the use in the production processes of the household appliances and automotive industry. The complete production is based on the "idea to tangible tool" concept. At the end of 2000, Indop had 141 employees. The company has a well-trained and experienced engineering team and an adequate number of skilled workers in production to implement even the most demanding projects. The high level is maintained by constant training of personnel. In 2000, every employee of Gorenje Indop participated in average at 38.8 hours of training, which represent 1.87 % of the overall working time. Important achievements as far as investments are concerned are the concluded modernisation of the assembly hall for large machines and the installation of a modern CNC processing centre. The Xelex programme has up-dated the design process. In compliance with RENAULT standards, for the first time ever an electronic cutting line project was drawn up. In order to provide short lead times, a sales and design office focusing mainly on the needs of Revoz was opened in Novo mesto in July. This represents an important step of closer cooperation with important business partners. The year 2000 was concluded by the ISO 14001 certification. This proves that environment-friendliness remains one of the primary objectives of every employee of Gorenje Indop.

W E A R E R E S P E C T E D A T H O M E A N D A B R O A D

Investments

9. Investments Investments in tangible assets and intangible long-term assets In 2000 the Gorenje Group spent 14.0 billion SIT on investments, of which 13.8 billion SIT went for tangible assets and 0.2 billion SIT for intangible long-term assets. Compared to 1999 the amount of investments rose by 46 %. The share of investments in the consolidated net sales revenues represented 10.6 % (8.6 % in 1999), and 13.7 % of the total assets (11.6 % in 1999). The investment activity was strong particularly in the field of household appliances (13.1 billion SIT out of 14.0 billion SIT), since investments in the parent company amounted to 10.7 billion SIT. Most of the investments went to the construction of the new plant for the production of refrigerators, the new galvanisation plant and new product lines like: the Gorenje Pininfarina line, Old-timer line, new generation of cookers of 500 mm width, Prologic washing machines, 1600-spin Simple&Logical washing machines. The new products were successfully introduced to the market. When investing into technology and products the environment aspect was strongly considered, since the investment in the protection of the environment amounted to 1.6 billion SIT. The new plant for refrigerators Back in September 1998 the increase in demand for refrigerators and freezers and the lack of production capacities (maximum output of 3,800 appliances per day) were the main reasons for taking the decision to start the project. The construction was carried out in stages bringing a gradual increase in capacity. The project shall be completed by summer 2001. The total estimated cost of the project is around 10 billion SIT. By this investment Gorenje has implemented and mastered state-of-the-art technology of this component of household appliances in Europe and will increase its output to 5,300 units per day (in the second half of 2001). The new galvanisation plant The fire, which broke out September 3rd, 2000 completely devastated the galvanisation plant of the Mekom program (Mechanical components). Immediately after the fire available replacement capacities had to be found on the market, because the primary task was to ensure an uninterrupted production process. Parallel activities for activating proper capacities - the construction of a company owned galvanisation plant were started. The estimated cost of the investment was 4.7 billion SIT. The project is almost completed, operation with full capacity is expected by mid 2001. Regarding the household appliances division the investment in the construction and finalisation of the logistics centre in Prague in the amount of 1.0 billion SIT is also important as well as the investment in purchases of land for the construction of a business centre of Gorenje Zagreb d.o.o. in the amount of 325 million SIT and the investment in the modernisation of the production of the Gorenje I.P.C company in the amount of 111 million SIT. Major investments in other business fields within the Gorenje Group: purchase of equipment in the furniture division in the amount of 281 million SIT (wood processing machine, wood crushing machine and other types of machines), investments in the field of services in the amount of 100 million SIT, modernisation of the production premises and the purchase of a modern CNC processing centre Gorenje Indop, construction of the centre for immersion erosion and the purchase of milling and whetting machines at Gorenje Orodjarna.

Environment protection Gorenje is continuously adapting its environment protection policy to the requirements by customers and the wider social environment, particularly the legal stipulations, guidelines by the local and wider community, and is pursuing environmental, economic and social goals. Environment protection within the Gorenje group is an integral part of all planning and decision taking, so that it is considered an important part of the company management: technological processes are modernised following the principle of best available technology (BAT) thus reducing harmful effects on the environment; regular monitoring and assessing effects on the environment; education and training of employees and informing customers about environment guidelines and new features; cooperation with suppliers so that they use materials and components which are less harmful to the environment; cooperation with the interested internal and external public thus contributing to the joined success of ecological efforts. In 2000 according to the environment management policy Gorenje achieved the following results compared to 1999: reduction the quantity of hazardous waste by 19 % per product; reduction of the nickel content at the output of the central waste-water treatment plant by 11 %; reduction of dust and organic solvents emission by 90 %; reduction of water consumption by 19 % per product; reduction of gas consumption by 12 % per product. In 2000 Gorenje followed the trend of reducing the consumption of natural resources (power consumption, water consumption, washing agents consumption) and the noise level of devices, according to the given goals and restrictions contained in EU guidelines. The results are more cost-effective appliances. By its membership in the European Committee of Manufacturers of Domestic Equipment (CECED), Gorenje is actively involved in preparing new environment protection trends in the development of products and is quick to respond to them. The growing requirements of standards are already giving directions to the industry and allow that the company follows international trends, which determine the terms and conditions of behaviour, more successfully. The Gorenje Group has made it its strategic goal to meet the requirements of the environmental standard ISO 14001. Audits have been so far successfully carried out at Gorenje d.d., Gorenje GTI, Gorenje Indop, and Gorenje Orodjarna. A summary of ten years of achievements by Gorenje in the environmental field is presented in a special environment report.
Basic strategic focus and options for future development
11. Basic strategic focus and options for future development The production of household appliances, including the broadening of the overall palette of products, development of our own distribution channels and our own brand names, remain the strategic goals of the Gorenje Group. Gorenje will also develop all existing business fields, which have a growth potential and provide a mutually beneficial effect with respect to its main business activity. Among them special emphasis is given to machine construction, manufacturing of tools, furniture, water heaters, computer services, catering, tourism and trade. Gorenje will develop new activities which can in the long run contribute to the growth of the company and the contentment of owners, business partners, end-users of the products, the employees and the wider social environment. It will focus on the European market, where it sees new opportunities in East and Southeast Europe. Gorenje will pay special attention to cost-effectiveness and permanent improvement processes. It will play an active role in the integration of the industry while equity stakes have not been ruled out. By their skills and long-term experience the employees of the Gorenje Group are a competititve advantage, therefore one of the priority tasks will be a consistent and continuous development of human resources. The standing of Gorenje With its core business Gorenje is mainly active in an industry sector shaped by globalisation and low growth rates. This requires constant improvements of competitive advantages in a mature globalised industry. In the current market situation Gorenje can count on the following advantages: great flexibility and ability to adapt to market requirements; well positioned and developed proper sales network in Europe; recognised brand name in key markets, particularly in SE Europe; good relations with customer base; skilled staff with strong corporate loyalty; 50 years of tradition in the field of household appliances; export oriented. Growth rate and anticipated goals by division The anticipated growth rates are based on the internal growth of the Gorenje Group. The strategic view has been prepared based on the independent development of the Gorenje Group, while possibilities for capital links have not been ruled out. This means that Gorenje will play an active role in the integration within the industry sector, which predominantly means mergers and acquisitions of companies in Eastern Europe and countries of former Yugoslavia. In the next period the household appliance sector will probably grow at a slower pace than other activities. It was anticipated that by 2003 the sales should grow by 18 % compared to 1999, however sales figures have shown even higher current growth rates than laid out in the strategic plan. In 2001 Gorenje will already exceed the goals, anticipated for 2003. By growing investments a production output of 3,5 million large household appliances annually was achieved. Further growth will also focus on maintaining these figures. The sale of refrigerators and freezers will have a 47 % share of the total sales of final products, while for cookers this share will be 28 % and for washing machines and dishwashers 25 %. This activity will focus on marketing the complete spectre of products under our own brand name. The sale under our own brand name will be gradually expanded so that by 2003 it would have a 75 % share (currently 70 %).

100% 80% 60% 40% 20%

5.0 32.0
0.6 1.3 1.8 36.5 2.0 11.6 16.4 18.7 11.0

1.3 4.2 34.2

1.8 7.4 12.1 13.4

10.0 20.0 18.0 15.0

2.8 14.3 14.2 19.5 9.5

14.3 15.6 17.9 17.5

Ovnership structure

After privatisation

31.12.1998

31.12.1999

31.12.2000
Internal acquisition of shares Stockbrokers Banks and insurance institutions Internal shareholders Other legal entities Indemnity fund Investment Trusts PID Pension fund Individual shareholders
*Since 2000 only employees are considered internal shareholders, while in earlier years this category also included beneficiaries for internal acquisition (employees, former employees and retired members of staff).
The concentration of ownership continued even in 2000 with growing purchases by institutional investors reaching a share of 70.4 % at the end of 2000. Among institutional investors a large stake is held by the Pension Fund and Indemnity Fund, which altogether have a 32.2 % stake. As far as other institutional owners are concerned the ownership remains very dispersed. Despite concentration, the stock is still widely held.

Trading trends

2000 12,200,000 7,250 26,283 0.28 3,509 -9.-9.1 9.8,515,904 4,986 16,992 0.28 3,004.11.7,669,407 2,596 12,362 0.21 2,600.37 20.20,9 10.3
Number of shares trading Turnover (in millions of SIT) Average market capitalisation (in millions of SIT)* Value turnover (turnover/average capitalisation) Value of shares (in SIT) according to the books (Gorenje, d.d capital./ number of shares) Profitability of share - by capital gain in % - by dividend in % - altogether in % P/E ratio (market price of share/ earnings per share)
*For calculating the total capitalisation the actual number of traded shares has been considered
Proposal of profit distribution The profit distribution policy is one of the factors, which in the long run determine the growth, and development of the company. The strategy of allocating profits as laid out in the strategic plan of Gorenje is subject to the investment requirements and the policy of capital structure, however the expectations of the investors have not been neglected, which in the light of the ownership structure vary considerably. It is anticipated that Gorenje will allocate up to 1/3 of the net profit for the period of the validity of the strategic plan until 2003 to pay out dividends. Pending the approval by the Supervisory Board the management of the company will propose at the shareholders meeting in June the following: 1. net profit of the fiscal year 2000 in the amount of 2,884,829,006.39 SIT will be allocated as follows: reserves of the company in the amount of 1,730,897,403.83 SIT, non-allocated profit of the fiscal year in the amount of 1,153,931,602.56 SIT. 2. the non-allocated profit from the fiscal year 1998 with the corresponding appreciation will be distributed as follows: dividends for shareholders in the gross amount of 70 SIT per share, which totals 854,000,000 SIT. payment to the Management in the gross amount of 22,806,951 SIT arising from their share in the distribution of profit; payment of bonus to the Supervisory Board in the gross amount of 11,513,334 SIT. In 2001 the shareholders will receive dividends for the first time. In preparing this proposal the Management and Supervisory Board have considered that dividends are to be paid out from the unallocated profit for the fiscal year 1998 and not the year 2000 due to optimising taxation effects.

2.8 2.5 0.8

2.5 4.6 0.6

2.6 0.4

3.3 0.8
The Gorenje Group sales by Operational Sector
0% 1997 Furniture Services Machine constr, tools Household appliances 2000
Household Appliances Sector The main operational sector, both in terms of organisation and operations, consists of Gorenje d.d., the parent company headquartered in Velenje and subsidiary companies in the marketing network based in 19 foreign countries, mainly in Europe. The marketing activity in Slovenia is carried out by Gorenje d.d. This operational sector also includes the manufacture of component parts, which is carried out in the companies Gorenje, I.P.C. (manufacturing electrical components) and Biterm (manufacturing thermostats). In 2000 sales of products increased by SIT 16 billion compared to the year before, while the share in the consolidated sales structure fell by 1.1 per cent due to faster growth in the machine construction and tools&die making sector and in the furniture sector. The trend of sales in terms of value increasing faster than sales in terms of quantity continued in the year 2000. This was mostly contributed by strong sales of cookers, by higher range of products sold and by the raising foreign exchange rates. In 2000 Gorenje exported 94 per cent of the total production. The major markets remained those in Germany, Croatia, Slovenia, France, Bosnia and Herzegovina, Austria and the Scandinavian countries. Machine Construction and Tool&Die Making Sector This operational sector includes the subsidiaries Gorenje Orodjarna and Gorenje Indop. The sector generated SIT 3.9 billion of unconsolidated net sales revenues, 46.3 per cent more than in 1999. Most of these revenues, a considerable 74 per cent, were earned within the Gorenje Group as a consequence of intense engagement of both companies in building the new refrigerators and freezers plant. The sector earned SIT 1 billion of sales outside the Gorenje Group, which influenced the minimal 0.4 per cent increase of its share in sales compared to the year before. Furniture Sector The furniture sector includes Gorenje Interieri, Gorenje Kuchyne, operating in Czech Republic and the plant Kchenmbelfabrik Freistadt, operating within Gorenje Austria Handels. The sectors share in sales grew markedly in 2000 as a result of inclusion of Gorenje Interieri in the Gorenje Group consolidation. The sector generated SIT 4.4 billion of consolidated net sales revenues. Its share in sales increased by 0,7 per cent compared to 1999. Services Sector The services sector includes Gorenje Trgovina, Hyundai Auto Zagreb, Gorenje Gostinstvo, Gorenje Point, and Linea. The sector earned SIT 2.5 billion consolidated net sales revenues more than the year before. The growth in net revenues was in line with the growth in the Gorenje Group, hence the sector retained its 12.1 per cent share in sales from the year 1999. High growth in sales were recorded by the companies Hyundai Auto Zagreb(higher car sales) and Gorenje Gostinstvo(expansion of operations in Hotel Paka and introduction of catering services). The company Gorenje Point lagged behind its 1999 figures, when sales were particularly high due to change over to the year 2000.

v SIT m 5,000.0 4,000.0 3,520.2 3,000.0 2,000.0 1,000.0 2,180.0 1,685.4 3,105.0 2,317.6 3,062.2 2,801.3 4,183.3
Financial Items of Gorenje Group

Revenues Expenses

Extraordinary items The balance of extraordinary items was positive in 2000 and amounted to SIT 923.5 million, which was SIT 683.1 million up the 1999 figure. In comparison with 1999 both extraordinary revenues and extraordinary expenses were higher in 2000. The major part of extraordinary revenues related to loss recovered by the parent company Gorenje, d.d. from the insurer for insurance against fire, recovered bad debts from previous years and elimination of provisions. The major cause of growth in extraordinary expenses was exclusion of fixed assets due to fire in the plant Galvana of the company Gorenje, d.d. Tax on Profits Tax on profits was SIT 282 million and was higher than in 1999 by 32.2 per cent. On the level of individual companies we optimised the tax on profits and made optimum use of tax allowances on account of high investments, employment of invalids and additional employment. Consolidated Net Profit Consolidated net profit of the Gorenje Group for the financial year 2000 amounted to SIT 2,736 million, which was an increase of 8.7 per cent over the 1999 figure. It includes the profit of minority shareholders in the amount of SIT 93.2 million.
Changes in Balance Sheet Structure The balance sheet total in the consolidated balance sheet of the Gorenje Group as at 31 December 2000 amounted to SIT 102.4 billion, which was 23.7 per cent over the end of 1999 figure. The increase was a result of higher volume of business and extensive investments. Fixed assets grew by 27.3 per cent and current assets by 21 per cent. The share of fixed assets in the balance sheet structure rose from 42.9 per cent to 44.1 per cent and the share of current assets fell from 57.1 per cent to 55.9 per cent. The increase in fixed assets was due to large investments amounting to SIT 14 billion in 2000. SIT 0,4 billion were allocated to land, SIT 1 billion to buildings, SIT 12.3 billion to production equipment and other equipment and SIT 0.2 billion to intangible long-term assets. Within current assets a considerable growth was recorded by inventories, which make up 21 per cent of assets. Compared to 1999 inventories grew by SIT 4.5 billion or 26.7 per cent. Inventories of materials went up SIT 2 billion and inventories of products and merchandise SIT 2.1 billion. Increased inventories were due to higher output volume, real growth in prices of input materials, product range changes and strategic purchases of sheet metal and plastic resin.

Gorenje Group Structure of Assets
0% 1997 Short-term receivables and other current assets Inventories Long-term receivables Fixed assets 2000
The inventory turnover of finished products remained on the 1999 level (24 days) despite high sales growth. Short-term operating receivables represented 27.4 per cent in the consolidated balance sheet structure of the Gorenje Group. Compared to end of 1999 they were up SIT 3.5 billion or 14.2 per cent, while their share in the balance sheet structure was down 2.3 per cent due to smaller growth of short-term receivables compared to sales growth. Most of short-term operating receivables related to short-term receivables due from customers, which rose by SIT 3.6 billion or 17.4 per cent compared to 1999. As a result the average receivables turnover in terms of days improved from 65 days to 64 days in 2000.
Short-term investments were SIT 4.7 billion at the end of 2000. Compared to the end of 1999 they were up SIT 2.2 billion. Most of short-term investments were reported by Gorenje, d.d. which increased its short-term deposits with banks on account of remittances representing loss recovered from the insurer. The structure of liabilities recorded the following increases compared to the end of 1999: capital rose by 16 per cent, long-term provisions by 34.7 per cent, long-term liabilities by 71.7 per cent and short-term liabilities by 24.6 per cent. In 2000 the favourable coverage of fixed assets with long-term liabilities was retained with long-term liabilities exceeding by 26.6 per cent. The share of long-term provisions in the balance sheet structure continued to grow to reach 7.2 per cent at the end of 2000. The increase in capital is due to net profit for the year 2000, which amounted to SIT 2,736 million and revaluation, which amounted to SIT 3,277 million. Capital structure also changed due to reserves, which grew on account of profits from previous years.
Gorenje Group Structure of Liabilities
0% 1997 Operating liabilities Financial liabilities Long-term provisions Capital 2000
Long-term financial liabilities rose by SIT 2.9 billion, their share in the structure increased from 4.9 per cent to 6.8 per cent. Long-term debts grew on account of financing investments. Short-term financial liabilities grew slower than short-term assets and their share in the structure fell from 17.5 per cent to 16.8 per cent. Short-term operating liabilities were up SIT 5.7 billion compared to the end of 1999 figure. However, their share in the structure remained on the same level. Turnover ratio of liabilities to suppliers in terms of days increased from 67 days per year in 1999 to 71 days in 2000, mostly as a result of matching operating receivables and operating liabilities, which had a favourable effect on liquidity and lower costs of financing.

SIT 922,292 thousand of extraordinary expenses derive from excluded fixed assets due to fire in the plant Galvana of the company Gorenje, d.d.
Note 5 Tax on Profits 2000 282,012 SIT 282,012 thousand in SIT 213,350

Tax on profits

In 2000 tax on profits represented 9.3 per cent of the total profit while in 1999 it was 7.8 per cent. A major share of tax on profits was recorded by companies operating abroad. Growth in the tax structure is a result of increased tax bases in companies operating in countries with higher tax rates than profits.
Note 6 Tangible Fixed Assets 2000 4,159,510 15,490,087 16,990,874 4,765,996 744,737 42,151,204 SIT 42,151,204 thousand in SIT 3,403,843 12,781,532 11,828,580 3,219,329 1,010,948 32,244,232
Land Buildings Plant and equipment Tangible fixed assets under construction Advances Total
Tangible fixed assets make up 41.2 per cent of the consolidated balance sheet total. In value terms, SIT 30,218,851 thousand refer to Gorenje, d.d., and represent 71.7 per cent of all tangible fixed assets.
Movements of Fixed Assets Item
Net book value as at 31 Dec. 1999

Additions

Disposals
Effect of Amortizacija revaluation, exchange rate differences and transfers 288,762 2,758,760 -702,935 2,344,587 304,422 5,218,5,523,118
Depreciation value as at 31 Dec. 2000
Intangible fixed assets Tangible fixed assets Long-term investments Total fixed assets
1,072,714 32,244,232 2,193,963 35,510,909
228,208 13,748,781 1,002,590 14,979,579
10,305 1,382,382 727,707 2,120,394
in SIT 000 1,274,957 42,151,204 1,765,402 45,191,563
In 2000 investments in tangible and intangible fixed assets amounted to a total of SIT 13,976,989 thousand, 46.1 per cent over the year 1999 figure. The major increase in tangible fixed assets occurred in the buildings and equipment segment. Gorenje, d.d. contributed significantly with investments in the new factory of refrigerators and freezers and the new Galvana plant, manufacturing mechanical components. In the first half of the year the investments in warehouses in Prague and Sarajevo were completed. Intangible fixed assets grew on account of investments in computer software and deferred organisation costs.
Note 7 Long-term Investments 2000 1,270,140 394,612 100,650 1,765,402 SIT 1,765,402 thousand in SIT 922,484 1,188,256 83,223 2,193,963
Shares and participating interests Given long-term loans Long-term deposits Total
Gorenje, d.d. recorded SIT 602,442 thousand of acquired shares and participating interests, of which SIT 214,438 thousand representing shares in Gorenje Notranja oprama Velenje, SIT 114,378 thousand representing shares in banks and other financial organisations, SIT 37,649 thousand shares in associated companies and SIT 201,694 thousand other investments. A major part of investments amounting to SIT 637,420 thousand derives from the investment of the company Gorenje GTI in participating interest in the company Telemach. Under given long-term loans SIT 206,623 thousand refer to Gorenje, d.d. and SIT 171,914 thousand to Gorenje Beteiligungs.