GORENJE, d.d., Velenje

Acquisition of property in Valjevo in line with the Gorenje strategy of production outside Slovenia

On August 26, 2004, the associated Gorenje d.d. undertaking Gorenje, aparati za domaćinstvo, d.o.o. (Gorenje Household Appliances Ltd) with its head office in Valjevo, Republic of Serbia and Montenegro, signed an agreement for the purchase of 5.7 hectares of land within the industrial zone in the town of Valjevo. On this property Gorenje intends to erect a factory for the production of household appliances.

Following the takeover of Czech household appliance producer Mora Moravia Gorenje had already started to realize its strategy of constructing production plants outside Slovenia. Valjevo figures as step two in the line of realizing this strategy. The decision for this new construction was made after Gorenje had performed meticulous analyses of business opportunities in the region of Southeastern Europe, and it is expected to provide Gorenje the status of local producer on this strategically important market, thereby strengthening its supply chains in the area and developing new supply partnerships.

The newly erected factory is expected to employ 200 to 250 people in the first year of production. Regular production is anticipated to start in the second half of the year 2005, with the annual capacity of 300,000 appliances, while the entire location has potential for the production of one million units per year. Estimated investment for the year 2005 amounts to approximately EUR 12 million, with later expansion in accordance with the construction schedule of new production capacities.

The appliances will be produced under all Gorenje brand names, and they are intended for all markets on which Gorenje is present. Production program will start with chest-freezers and partly refrigerator and freezer line, with consequent enlargement to other production programs.

Along with the production plant, Gorenje intends to use this logistically attractive location with good road and railroad infrastructure to erect the logistics and distribution center for the entire region.

By constructing production plants in Serbia and Montenegro, Gorenje hopes to create long term conditions for the preservation of its market share in the region, and provide appropriately economical activities to enhance its international competitiveness.

Date: 30. 8. 2004