Wednesday, 20th December 2017, Velenje, Slovenia

Gorenje's sponsorship of Torpedo was transparent and effective

Gorenje's sponsorship of Torpedo was transparent and effective

Gorenje's response to allegations from an anonymous letter sent to the media

An anonymous electronic message was addressed today to Gorenje's Management Board and Supervisory Board, and the editorial boards of Slovenian media outlets, accusing Gorenje Group of illegal and harmful transactions: fictitious contracts, money laundering, and misleading the Supervisory Board. The hurtful allegations pertaining to Gorenje's sponsorship of the Russian football club Torpedo in the 2014/2015 season are entirely inaccurate and false, and they give a misleading impression of non-transparent and dubious operations of the Gorenje Group, which is detrimental to the company's and the Management Board's reputation, and stirs unnecessary uncertainty and agitation among our stakeholders. In the spirit of transparent communication, we have decided to clarify the deal to the interested public with a release on Seonet. We resolutely reject the false allegations brought forth by the author of the anonymous letter, as well as the credibility of the documents attached therewith.

Gorenje has a long tradition of supporting sports activities. On the one hand, this is a part of the Group's corporate social responsibility; on the other hand, sponsorships support the key goals of the 2016–2020 Strategic plan, such as improving brand recognition and reputation in select markets.

Football is the most popular sport in the Russian Federation. Gorenje started to invest in sponsorship of Russian football clubs in order to improve the Gorenje brand recognition in Russia and other countries of the former Soviet Union, as these are highly important markets for the Gorenje Group. Sponsorships of Russian football have proven exceptionally effective. In 2012, Gorenje brand ranked 33rd in terms of domestic appliance brand recognition in Russia (source: TNS Media Intelligence Index 2012). Just under 35% of respondents were familiar with the Gorenje brand (Aided Brand Awareness). Sponsorships have improved Gorenje brand recognition and ultimately placed it on the perception map of the majority of Russian consumers. By the second half of 2015, recognition increased to 45.1% (source: TNS Media Research). According to Valicon research from 2015, as many as 73% of all respondents were familiar with the Gorenje brand (Aided Brand Awareness).

In October 2014, Gorenje started its sponsorship of Football Club Torpedo Moscow which was promoted to the top tier of the Russian league in that season. The partnership lasted one season, until the end of the spring 2015. Before that, Gorenje had sponsored FC Anzhi Makhachkala, followed by FC Spartak. Sponsorship of Torpedo in the 2014/2015 season was based on a Promotional Agreement with a value of EUR 1,541,000. The agreement was signed with club representative for marketing services Emmani, with whom Gorenje signed the Promotional Agreement on September 25, 2014. On September 30, 2014, this agreement was annulled based on a proposal by the partner Emmani, and a tripartite Assignment Agreement was signed between the companies Gorenje, Emmani, and Algoritm that managed the payment through cession. Gorenje did not have an agent, broker, or representative in this affair.

The allegations from the anonymous letter that the costs were recorded differently than in the provisions of the agreement are false. The cost was recorded in our financial statements as sponsorship expense, and not as purchase of computer equipment. Bank transfers were conducted via a Slovenian bank, transparently and in compliance with the agreements, to the accounts and to the companies as requested by our business partner. All original documents are kept and are traceable in our archives. The invoice with the sign "destroyed" ("annulled") in our documentation also proves that we do not owe anything to the partner, and the cession ensured that the funds ended up at the right address, as payment based on an effective and valid agreement.

Gorenje and Torpedo broadly communicated the partnership in the territory of the Russian Federation. All mutual liabilities, precisely specified in the agreement, were fully honoured and executed, of which Gorenje keeps an extensive archive. Moreover, execution of the agreement can be verified at Russia Premier League TV (Naš futbol TV) which broadcasts all football matches in the top tier of the football league.

The sponsorship dating from 2014 was not presented to the Audit Committee as it was a part of marketing promotional activities in the Russian market. Until and including 2014, such sponsorship activities were recorded as a part of marketing costs of the Gorenje brand. In May 2015, Gorenje Group established a Corporate Marketing department that merged sponsorships with market communication. Since then, the sponsorships have been managed centrally.

The only reason that the Audit Committee was not informed about the Torpedo sponsorship from 2014 is the organizational change introduced in 2015, as expert services that deal with sponsorships and which prepared the report for the 24th Audit Committee session, did not have the information about contracts from before 2015.

Disclaimer: The English text for all announcements is for information purposes only!