Czech Business and Trade 4/2012

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4 2011 CZECH FIRMS AND SCIENTISTS SCORE IN SPACE PROJECTS ENERGY ACT GIVES BETTER PROTECTIONTO CUSTOMERS ZLÍN REGION – PICTURESQUE AND DIVERSE THE CZECH REPUBLIC HAS IMPROVED ITS RATING A HIGHLY OPEN ENERGY SECTORin the Czech Republic 4 2011 AGRICULTURE,FOODINDUSTRY,ANDFORESTRY SupplementofCzechBusinessandTrade

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| 4 I N T R O D U C T I O N According to the OECD November report, the Czech Republic is a stable and successful economy with a good reform programme. In spite of this, the organisation’s estimate is that next year the Czech economy will slow down its growth to 1.6% from this year’s 2.1%.To learn more about the current economic situation of the Czech Republic, we approached the Minister of Finance, Miroslav Kalousek, with the following questions: Questions for Miroslav Kalousek, Minister of Finance of the Czech Republic At the end of August 2011, the Standard & Poor’s international rating agency improved its rating of the Czech Republic on its foreign currency long- term sovereign debt by two points, from A to AA-. Its local currency long-term sovereign debt rating was also improved, from A to AA. Which indicators were most responsible for the improvement of the Czech Republic’s credibility? Among other things, the agency appreci- ated the government efforts to reduce public budget deficits and the fact that it is preparing and applying unpopular, albeit indispensable, reforms. This is a challenge for us not to let up our efforts. Next year, according to the estimates of the Organisation for Economic Cooperation and Development (OECD), the Czech economy will slow down its growth to 1.6% from this year’s 2.1%. What measures is your Ministry plan- ning for next year? Economic growth estimates for next year differ. At the moment (beginning of De- cember 2011), we are working with a 1% real GDP growth estimate, but are point- ing to considerable potential risks in consequence of the situation in the Euro- zone. At the moment, we are preparing, together with the Government National Economic Council (see Box), various sce- narios of potential economic develop- ment, which, in case of necessity, could serve as a basis for a State Budget Act Amendment. At the beginning of next year, we’ll have more accurate estimates, and only after that will we be able to take corresponding measures. At the beginning of October, the Ministry of Finance launched a “Citizens’ Govern- ment Bond” issue, the long-term target of which is to raise the proportion of household government bond holding to an approximately 10% level. Standard issues by the Ministry of Finance are expected in 2012. What results do you think this move will have? We want to offer our citizens the same op- portunity to invest their money as we are offering large financial groups. Our long- term aim is to increase the proportion of households’ holding of government debt to a 10% level, from the less than 2% hold- ing. We’ll also diversify the government debt financing risks by not relying on a single source. In September you were awarded the prestigious title of Finance Minister of the Year for Emerging Europe 2011. What does this award mean to you personally? It is an award not only for me person- ally, but also for the whole government. It means that, in other countries, they are tak- ing notice of the Czech Republic and of the fact that its government has set itself the target to achieve balanced public budg- ets in a couple of years. This is in profound contrast to other European states. NERV The Government National Economic Council (NERV) is an advisory body which assists the Czech government to find the most suitable form of reforming the country’s economy and to take adequate economic measures. Discussing government structural politics with that body is described by OECD as a praiseworthy practice. According to OECD, NERV has pre- pared a number of economic and political materials dealing with different aspects of the Czech economy, which the government has used in making important political decisions. At the same time, the NERV materials have stimulated broad public discussion. Currently, NERV has several working groups, each of which has an important Czech economist in its midst as a guarantor of expertise. Public finance – guarantor: Tomáš Sedláček Pension reform (work terminated) – guarantor: Vladimír Bezděk Anti-corruption policy – guarantor: Pavel Kohout Relations with the EU – guarantor: Petr Zahradník Competitiveness and business promotion – guarantor: Michal Mejstřík Health care financing – guarantor: Miroslav Zámečník More about NERV in the English version at www.vlada.cz/en/ppov/ekonom- icka-rada/national-economic-council-51372/ Miroslav Kalousek Photo:MinistryofFinanceoftheCzechRepublic

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5 |5 | C Z E C H B U S I N E S S A N D T R A D E The Czech Republic‘s GDP growth dynamics will slow down to 1% next year. This results from the Macroeconomic Prediction pub- lished by the Ministry of Finance at the end of October. The Ministry substantiates the revision mainly by the Eurozone‘s debt crisis and by the worsening of the global economic situation. What, however, is the actual economic situation? Industry and ForeignTrade Support Czech Economy According to the preliminary GDP figures for the third quarter of 2011, the Czech economy grew by 1.5%. The Czech Sta- tistical Office (CSO) reports that, as in the previous quarter, the gradual decline in domestic demand was again offset by the favourable development of foreign trade, which, despite weaker foreign demand, remains the only growing GDP income item. On the supply side of the economy, the main source of growth was again the manufacturing industry and in its framework the manufacture of transport vehicles. The year-on-year gross added value decline, on the other hand, had the opposite effect, especially in agriculture and construction. INDUSTRY IN THE 3RD QUARTER OF 2011 Industrial production in the 3rd quarter 2011 showed a 4.2-per cent real growth year-on-year. Most responsible for the year-on-year growth of industrial production was the manufacture of mo- tor vehicles, trailers and semi-trailers, machines and equipment, and the man- ufacture of rubber and plastic products. Industrial production declined most in sectors such as the manufacture of com- puters, electronic and optical devices and equipment, the production and distribu- tion of electricity, gas, heat and condi- tioned air, and food production. Revenues from industrial activities, in current prices, were 3.9% higher in the 3rd quarter of 2011 year-on-year. Revenues from direct exports of industrial enterprises in the 3rd quarter 2011 increased by 14.8% year-on- year in current prices. The average regis- tered number of employees in enterprises with 50 employees and more in industry rose by 2.9% in the 3rd quarter 2011 year- on-year. Their average monthly nominal wages in the period under review rose by 3.5% year-on-year to CZK 25 132 (ap- prox. EUR 1000). New orders in selected branches rose by 0.2% in the 3rd quarter 2011 year-on-year. At the same time, new orders from other countries rose by 8.1%, while domestic new orders dropped by 12.1%. Industrial production in the EU27, after adjustment for the number of work- ing days, rose by 4.3% year-on-year, ac- cording to Eurostat figures published in August 2011. FOREIGN TRADE IS HOLDING ON After surprisingly poor foreign trade re- sults in August 2011, when the balance of trade showed a surplus of a mere CZK 1.8 billion (approx. EUR 72 million), in Sep- tember foreign trade made up for it by showing a massive surplus of CZK 20.97 billion (approx. EUR 840 million). As a re- sult, in October the foreign trade balance sheet ended with the second highest sur- plus in the history of the Czech Republic. On the other hand, the September rate of the year-on-year growth of exports and imports was the lowest this year, accord- ing to CSO. The results were affected by the high comparative base of last year’s September. Owing to the strengthening of the Czech crown against the euro and the dollar, foreign trade grew faster when quoted in euros and dollars than when quoted in Czech crowns. Less satisfactory, however, were export and import dy- namics, both of which fell to single-digit values for the first time since December 2009. GREAT DEPENDENCE ON THE EU The surplus of the balance of trade with EU states increased by CZK 3.9 billion year-on-year to CZK 55.9 billion (approx. EUR 2.24 billion). Trade with states out- side the EU, on the other hand, ended with a deficit, of CZK 34.9 billion, CZK 6.5 billion less than in September of last year. The surplus in trade with Germany, Spain, the USA, and Slovakia showed an increase and the balance of trade with Norway re- versed from deficit to surplus. The deficit in trade with China and Russia declined, and that in trade with Korea and Azerbai- jan increased. CAR EXPORTS ARE GROWING In October, the Czech Republic sur- mounted the magic limit of one million manufactured cars. In comparison with last year, the production increase was more than 12%. According to the Auto- motive Industry Association (SAP), pro- duction was driven especially by exports, which increased by 12%, while domestic sales grew by less than 1%. “The January to October 2011 car manufacture and ex- port figures show that the domestic au- tomotive industry is currently a real mo- tor force of Czech industrial production. This production is not limited to car man- ufacture, but involves a large number of manufacturing groups making car parts and accessories, which account for ap- proximately 45% of the production and export of the Czech automotive indus- try,” said Martin Jahn, president of SAP. According to the Association, domestic car sales rose by a mere 0.65%, and lorry manufacture declined by nearly one- tenth, to 977 lorries. A 26% increase in production was shown by Avia Letňany, while the manufacture of Tatra lorries dropped by nearly 27%. For the whole of 2011, the Association expects an 8% de- cline. “On the basis of current results, the estimate is that the 2011 car output in the Czech Republic will be around 1 177, representing more than 9.5% growth year-on-year,” Jahn said.

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| 6| 6 E C O N O M I C P O L I C Y New Export Strategy WHERE DO CZECH EXPORTS GO The Czech Republic is a very open economy, which exports two-thirds of its GDP Most of its exports go to the EU (83%), with 33% going to Germany Strong orientation to transport engineering and electrical engineering (65% of exports) Internal deliveries within concerns or to direct buyers (60-70% of exports) Concentration of exports in the hands of 10 big exporters; ten firms are responsible for 50% of total exports Territorial orientation to EU states results in high dependence on the economic cycles in Europe, with even greater sensitivity to cutting orders than in those states themselves in the case of world market shocks To reduce the dependence of Czech exports on EU markets, to increase the number of export branches and to involve a larger number of small and medium-sized firms in exports are aims of the new 2012-2020 draft export strategy published by the Ministry of Industry andTrade at the end of October 2011. performance of our economy, as at a time when Europe is in decline, other regions may be stagnant or even show dynamic growth. These facts, the same as the great concentration of exports in the hands of two or three main sectors, or the extremely high shares of just a few big exporters, are the reason for a large number of measures the Ministry of Industry and Trade (MIT) has incorporated in the 2012-2020 Draft Export Strategy. The draft, which was presented at the Export Conference held at the end of October 2011, will be supplemented with comments and will be edited into its final form so as to be prepared for parliamentary debate and then submitted to the govern- ment this year. THE MAIN LINES OF THE FUTURE EXPORT PROMOTION STRATEGY Basically, the export promotion measures now being prepared can be divided into two groups – diversification and integra- tion. In the first case, the aim is to diversify exports both geographically and sector- ally, with a view to exporter segmentation. As the number of exporters is falling on a long-term basis, it is the ambition of MIT to get more firms involved, especially small and medium-sized businesses, and in- crease the number of exporters to at least 15 000 by the year 2020. The other group – integration measures – is guided by the interest to bring together all state institu- tions involved in export promotion, gener- ally speaking in business promotion. COORDINATION AND COMPREHENSIVENESS OF MEASURES “Greater coordination of state institutions supporting Czech firms in their export endeavours is precisely what the Czech Chamber of Commerce has long been calling for. The businessman does not care which institution and which expert will help him. To have a chance to succeed in a foreign country he needs relevant, reli- able, and fresh information, someone who will help him with his initial contacts, for example a representative of the Czech state, and sometimes he will need some- one to help him with financial matters. In brief, the state should help Czech firms find opportunities, open up the door for them, and the rest will be up to the busi- nessman himself,” said Petr Kužel, Presi- dent of the Czech Chamber of Commerce, adding that it should be the ambition of the Czech Republic to become a country that will not export just semi-finished goods and make sub-deliveries for others, but a “state whose firms will export mainly products with high added value, top tech- nologies and comprehensive wholes, and supply them directly to end customers all over the world.” While in terms of the exports to GDP ratio the Czech Republic occupies a top position on the European scale, as it exports rough- ly two-thirds of its annual output, in terms of per capita exports it compares rather with states of a comparable size, like Bel- gium, the Netherlands, Denmark, and Aus- tria. A great challenge is the fact that 83% of Czech exports go to EU states, which makes the Czech economy extremely de- pendent on the EU’s economic cycle. In times of growing demand this is a source of new trading and investment opportunities, while in times of economic stagnation and decline this dependence limits the possi- bilities of responding to reduced demand. This has directly negative impacts on the Photo:www.sxc.hu

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| 8 Education currently ranks highest on the popularity scale of tax-advan- taged benefits, according to a survey conducted in June 2011 by ING Pojišťovna insurance company and the Confederation of Industry of the Czech Republic, which involved 112 Czech firms.Tax-advantaged benefits are provided by 78% of firms. Education knocked the long-prevailing luncheon vouchers from the top position, down to third position. Interest in insur- ance products, too, continues to rise – supplementary pension insurance is offered by 71% of enterprises, life insurance by 54%. Mobile telephones and company cars are among the non- tax advantaged benefits very popular on a long-term basis. The Popularity of Education and Supplementary Pension Insurance Is Growing among Benefits According to the survey, Czech firms are better off economically this year than they were in 2010, with 40% of firms showing an improvement in their economic situation. With the progressive growth of the economy, firms are becom- ing more generous in offering benefits to their employees. Altogether, 98% of com- panies currently provide tax-advantaged benefits to their employees. For years, the highest-ranking benefits were luncheon vouchers, which this year have been re- placed by education. Nearly four-fifths of enterprises are offering this type of ben- efit, and it is expected that next year its popularity will rise by another 11%. “The popularity of education as an employee benefit supports the trend manifesting it- self for several months now, with firms in- vesting more in the future of their people instead of material remuneration,” notes Radek Špicar, Vice President of the Con- federation of Industry of CR for economic policy and competitiveness. TAX RELIEFS AS MOTIVATION FOR EMPLOYERS TO CONTRIBUTE TOWARDS SUPPLEMENTARY PENSION INSURANCE PAYMENTS The trend towards providing regular ben- efits is supported by the growing inter- est of employers in insurance products. “The proportion of companies which pay their employees contributions towards life insurance and pension insurance has increased by 15% and 11%, respectively, in comparison with last year. The interest in insurance products is rising on a long- term basis and employers are using them as additional motivational instruments,” says Jiří Beťák, Employee Benefits Director of ING Pojišťovna. Contributions towards supplementary pension insurance are currently granted by 71% of companies, and life insurance is supported by 54% of enterprises. Companies pay their em- ployees up to CZK 2 000 (approx. EUR 80) per month in insurance contribu- tions. This figure is also confirmed by the Association of Pension Funds of the CR, which states that, on an average, 22.5% of Czech firms pay contributions towards their employees’ pension insurance schemes. Enterprises are motivated to pay pension insurance contributions by being allowed tax reliefs: employers’ pay- ments are exempted from income tax to the total amount of CZK 24 000 (approx. EUR 960.- ) per year. “Supplementary pen- sion insurance contributions have been practically unchanged for the past few years and they remain at approximately the same level. About 60% of employees receive regular contributions. The basic amount of the monthly contribution is 3% of gross wages, the monthly maxi- mum being CZK 550 (approx. EUR 22),” remarks Marek Síbrt of OKD company, in connection with the benefits granted to employees. “In our company, 85% of em- ployees draw supplementary pension in- surance benefits, each obtaining CZK 350 (approx. EUR 14) per month,” says David Slowik, Marketing Manager of Slévárny Třinec Company. Firms often leave it up to their employees whether to use the benefit for supplementary pension insur- ance or for life insurance. Firms often also require their employees to participate fi- nancially in the project. Some companies set a minimum amount to be paid by the employees as participation in the scheme to qualify for drawing the benefit. THE MOBILE PHONE ENJOYS THE GREATEST POPULARITY As in 2010, this year, too, non-tax advan- taged benefits are very popular among employers. Firms offer about six differ- ent types of such benefits. Employees of larger firms are better off in this respect. The most popular, on a long-term basis, is the mobile phone, which is granted as a benefit by 84% of companies. Com- pany cars are provided by 80% of firms as benefits to their employees. The results of the survey further revealed that the improving prosperity of firms influences especially the granting of standard ben- efits, and offering additional motivation services is not a priority. This year, 10% more firms (altogether 40% of them) found themselves in a better economic situation than in 2010, and approxi- mately the same number of companies, i.e. 40%, offer their employees additional motivational benefits. The most popular motivational measures among firms are performance benefits (provided by 42% of firms), followed by financial bonuses for years worked (18%) and one extra week of holiday (13%). E N T E R P R I S E

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| 1 0 K A L E I D O S C O P E The First High-pressure Gas Pipeline Interconnector Opened between the Czech Republic and Poland In September 2011, Czech Minister of Industry and Trade Martin Kocourek symbolically inaugurated the STORK gas pipeline interconnecting for the first time the high-pressure gas systems of the Czech Republic and Poland. Prior to this, the Prime Ministers of the two countries, Petr Nečas and Donald Tusk, had signed an interconnection agreement that for- mally completed the construction of the pipeline. “This is the first time that gas can be transported between Poland and the Czech Republic. It will significantly reinforce the energy security of both countries, especially in view of the fact the pipeline connects two major indus- trial centres on both sides of the border“, Minister Martin Kocourek emphasised. “In addition, the STORK pipeline is a very important part of the route that is to con- nect all countries in the Visegrad Group and Croatia in the future, running from the shores of the Baltic Sea to the Adri- atic.“ The newly completed north-south gas interconnection will be an important safeguard in ensuring the energy secur- ity of the entire Central European region. It will be possible to fill the pipeline from liquid gas terminals both in the north from the Polish city of Świnoujście, or the south from the Croatian town of Krk The two-way gas transport is now pos- sible thanks to the newly opened STORK interconnector. The interconnector, ten kilometres long on the Czech side, is linked to another 22 kilometres on the Polish side. Via the transfer station on the border in Těšín, it connects the gas pipe- lines between Skoczów and Třanovice. In addition, there is an underground pe- destrian passage between the two coun- tries, about half a kilometre long, under the river Olše and the railway and roads. The price of the construction of the gas pipeline interconnector was EUR 28 mil- lion, a half of which was paid by the Eu- ropean Union from the European Energy Programme for Recovery, launched after the 2009 gas crisis. LLCs Are Most Popular for Starting Business The Limited Liability Company (LLC), or společnost s ručením omezeným (s.r.o. in Czech) is the form of company used most frequently by entrepreneurs in the Czech Republic to start a business, which is docu- mented by data from the first half of 2011 recording 11 622 newly founded LLCs in this period. The LLC is a suitable form for businessmen planning large-scale op- erations with their own employees, and equally, when a business is to be based on a trademark - the company name. The form of a Limited Liability Company is also more creditable in commercial relations, an as- pect that can be used especially in search for partners or application for a bank loan. However, establishing an LLC takes about one month - it is necessary to prepare the Memorandum of Association, open a bank account, and establish the company seat. The Czech Republic Has Improved Its Ranking In the last year, the Czech Republic has made the payment of taxes easier and reduced the tax burden for businesses. The biggest progress of all the countries of the world in overall reforms was made by China, India, and Russia. This was re- ported by Doing Business 2012 from a survey undertaken by the International Finance Corporation (IFC) and the World Bank. Thanks to its reforms, the Czech Republic improved its ranking from last year’s 70th position to 64th. “The Czech Republic revised its tax legislation to sim- plify provisions relating to administrative procedures and relationships between tax authorities and taxpayers“, the report says. It also notes that the Czech Repub- lic has sped up real estate registration, owing to computerisation of Cadastre Offices, data digitisation, and introduc- tion of electronic communication with law offices. Photo:www.sxc.hu,Cushman&Wakefieldarchive

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1 1 | C Z E C H B U S I N E S S A N D T R A D EC Z E C H B U S I N E S S A N D T R A D E Quality is our success Babcock Borsig Steinmüller CZ s.r.o. is an important producer of steam generators and power plant equipment. Our pro- ducts generate thermal and electrical power while using environmental friendly technologies. We provide compre- hensive solutions for applications using a wide range of fuels and/or waste heat utilization. Our scope of works and ser- vices extend from the technical feasibility study up to the ﬁnal erection, putting the plants into operation and lifetime services. Babcock Borsig Steinmüller CZ s.r.o. Křižíkova 72 612 00 Brno, Czech Republic www.bbs-cz.bilﬁnger.com New Shopping Centres in the Czech Republic More than 2.1 million sq. metres of new shoppingcentreswerecompletedinEurope in the first half of 2011.“In the Czech Repub- lic, 2011 will be clearly marked as a year of the construction of shopping parks, as some 60 000 sq. metres are to be built by the end of the year“, says Alexander Rafajlovič, Head of Research for the Czech Republic and Slovakia at Cushman & Wakefield. “Areas of about 116 000 sq. metres should be opened in this country in shopping centres next year, with the lion’s share of them in north- ern Moravia. Given the increased activity, and with lessons from the years 2009 and 2010, less experienced or starting devel- opers are also becoming more inclined to sell their projects or seek partners for joint ventures. This opens new opportunities for players who are not represented in the mar- ket at present“, Alexander Rafajlovič adds. Source: Cushman & Wakefield, October 2011 Project Town (locality) Developer Expected opening OC Lihovar Říčany Titan Real Invest 11/2011 Forum Nová Karolina Ostrava Multi Development 3/2012 Futurum Hradec Králové - expansion Hradec Králové TK Development 5/2012 Breda & Weinstein Opava Mint Investments 11/2012 Galerie Moritz Olomouc Reality management 2012 Géčko Ostrava Ostrava Reflecta Development Autumn/2012

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| 1 2 DEZA Company Wins 2010 Business Project of the Year Title in Energy Saving Category DEZA, a.s., a joint-stock company found- ed in 1990, has won the competition with its project “Modernisation of the Compressor of DEZA, a.s“. This modernis- ation increased performance and effec- tiveness in the generation, transmission, and consumption of energy designed for the company‘s own use. The reasons for the upgrade were outdated technol- ogy and excessive operational and econ- omic loads on the former equipment. In 1999, the company was incorporated into the ownership structure of AGRO- FERT HOLDING, a.s. Its main plant is in the town of Valašské Meziříčí and its division is based in Otrokovice. Second in the competition was Saint-Gobain Construction Products CZ, a.s., manu- facturer of thermal, acoustic, and fire in- sulation materials, the biggest producer and number one in the branch in the Czech market. The aim of the project, called “Waste Heat Recovery from Cu- pola Furnaces“, was the utilisation of waste technological heat from the cool- ing of the cupola furnace shell. In the comprehensive process, the technologi- cal heat was used to produce a coolant and for heating. Third place was taken by the Oncology and Pulmonology In- stitute at Pleš. The medium-sized en- terprise is a self-sufficient economic and technical unit which has its own source of water, a sewage treatment fa- cility, and standby power sources. The project “Energy Saving in the Produc- tion of Heat and Service Hot Water“ was focused on the overall reconstruction of the heat management at the complex of the Institute. A mazut boiler was re- moved and the steam boiler room was converted into a hot water boiler room using wood pellets as the main fuel. The operation is now controlled by new au- tomatic systems of measurement and regulation. More at www.czechinvest. org/podnikatelsky-projekt-roku-2010. What Gas Consumption is Expected for the Czech Republic? From January to June 2011, natural gas consumption in the Czech Republic amounted to 4 667 million cubic metres, calculated per normal. Average tempera- ture in the 1st half of the year 2011 was 1.5°C higher. “Although consumption in the 1st half of this year was almost the same as in the same period of last year, gas consumption has been slightly de- creasing in the Czech Republic in the last five years. Firstly, Czech households have lowered their consumption, the thermal insulation of buildings is taking effect, and so are other savings such as the in- creasing share of energy from renewable resources. We do not expect consump- tion to increase until the construction of gas-fired combined cycle power plants“, says Oldřich Petržilka, President of the Czech Gas Union (CGU). According to the Ministry of Industry and Trade, between 2009 and 2020 the share of gas consump- tion in the Czech Republic could rise by 50%, to more than 12 billion cubic metres. The consumption of compressed natural gas (CNG) for transport has been constantly rising as well. “CNG sale to- talled 10.058 million cubic metres of gas in the Czech Republic in 2010. Compared with 2009, this was a 24.2% year-on- year increase in CNG consumption“, says Markéta Schauhuberová, CGU Manager. “The high prices of electricity, the increas- ing demand for it, and the speed of con- struction make gas-fired combined cycle plants a preferred source. The growing trend of gas consumption for electricity generation is indisputable. In the EU 27 countries, the share of gas in electric- ity production is now 21%, while in the Czech Republic it is only 4%“, says CGU President Oldřich Petržilka. K A L E I D O S C O P E Photo:www.sxc.hu

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I N V E S T M E N T CzechInvest, the Investment and Busi- ness Development Agency, mediated 123 investment projects worth a total of CZK 16.3 billion (approx. USD 935 million) from January to June 2011. Compared with the same period of 2010, this represented an increase of 132%.The investors plan to create 8 000 new jobs. Every second project is in the sector of Information Technology and software develop- ment.“In the first six months of 2011, the CzechInvest Agency arranged the same quantity, in terms of the volume of investments, as during the whole of last year.The investments are mostly connected with Research, Development, and Innovation, which bring the highest value added, and this is precisely in accord with the government’s International Com- petitiveness Strategy that has just been adopted,”said Martin Kocourek, Minister of Industry andTrade. Investment in the First Half of 2011: The SameVolume as during theWhole of LastYear THEMOSTPROJECTS GOTOTHESOUTHMORAVIAREGION “The first six months of this year have con- firmed the trend that the Czech Republic is interesting primarily to investors from the IT sector and the manufacture of transport equipment.The most projects, 34 in all, were recordedintheSouthMoraviaRegion,which is considered the centre of IT and software development in the country,” says Miroslav Křížek, Chief Executive Officer of CzechIn- vest, and adds: “South Moravia is also the region where the greatest number of new jobs, a total of 1 836, are to be created.“ The largest portion of the finance will go to the Hradec Králové Region. “Projects in the IT sector and software development rather rank among smaller, but quality and long-term, projects with lower investment and lower numbers of newly created jobs. On the other hand, in the largest produc- tion projects of foreign companies, which operate, for example, in the manufacture of transport equipment and car accessories, investment is in the range of hundreds of millions of CZK,” Křížek notes, adding that the motor industry has attracted investment worth a total of CZK 11 billion in the first half of 2011. The largest number of investment projects (104) in the first half of the year came from investors who had already been in the Czech Republic and had decided to develop their projects. Their investment ac- counted for 54% of the total volume of in- vestment and they promised a total of 4 131 new jobs. The second largest number came from Germany, followed by the United States and the United Kingdom. THE LARGEST PROJECT WAS BROUGHT BY THE LEGO GROUP The largest project of the period came from the LEGO Group, which invested CZK 1.6 billion (approx. USD 91.4 million). The com- pany will expand its production in Kladno and employ 600 people. This was followed by the Robert Bosch and Mubea Engineer- ing AG companies, which committed CZK 1.4 billion in investment each, and which are categorised in the sector of transport equipment. The Mubea Engineering com- pany plans to create 608 new jobs within the project, the highest number of all the companies that chose the Czech Republic for their investment in the first half of 2011. More at www.czechinvest.org INVESTMENT BY TYPE OF ACTIVITY IN 2011 1ST HALF Type of activity Number of firms Size of investment (CZK million) Size of investment (USD million) Jobs Manufacturing 26 15 165.85 870.55 5 449 Services 73 152.02 8.73 1 959 Technology centres 24 975.89 56.02 584 Total 123 16 294 935.30 7 992 Region Number of projects Size of investment (CZK million) Size of investment (USD million) Jobs South Bohemia Region 8 1 834.4 105.3 576 South Moravia Region 34 589 34 1 836 Karlovy Vary Region 1 126 7 15 Vysočina Region 5 97 6 63 Hradec Králové Region 7 4 471 257 782 Liberec Region 3 475 27 157 Moravia-Silesia Region 17 459 26 459 Olomouc Region 9 1 825 105 753 Pardubice Region 2 521 30 768 Plzeň Region 10 738 42 664 Central Bohemia Region 16 2 301 132 1 067 Ústí Region 6 2 582 148 722 Zlín Region 7 273 16 130 Total 123 16 294 935 7 992 INVESTMENT BY REGIONS IN 2011 1ST HALF

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| 1 4 R E S E A R C H Czech Firms and Scientists Score in Space Projects Success in the area of Research and Development has been achieved by the Czech Space Alliance (CSA). In a tender of the European Space Agency (ESA) focused on Research and Development projects, firms of this industrial association were awarded eight contracts worth EUR 2.98 million, that is a majority of the industry budget. The projects in the European Space Agency tender ranged from techno- logies for more efficient processing of data from Earth remote sensing research to the testing of passive components and technologies of rocket fuel tanks, up to the development of mechanical components for satellites. Contracts for the implementation of the projects have been awarded to ANF Data, CSRC, EGGO Space, Frentech, Iguassu Software Sys- tems, Synpo, and Explosia companies. PRIORITY SECTORS The aerospace industry is one of the prior- ity sectors for CzechInvest. The Agency is currently sponsoring international meet- ings with future partners in the area of the aviation industry, in collaboration with the Czech Republic’s Ministry of Transport, which also coordinates space activities and relations with the European Space Agency. Within the Czech Tech- nology Days, for example, CzechInvest has organised large meetings on space projects and space technology in Japan and Brazil. In both countries, the Czech Republic has signed agreements on co- operation in space projects. “In the area of the aerospace industry, our country ranks among the pioneers of innovative solu- tions and CzechInvest is striving to ensure that Czech development capacities are involved in research projects conducted by aerospace manufacturers. One of the means of accomplishing this is through the Czech Technology Days project fo- cused on Research, Development, Tech- nology and Innovation among the Czech Republic and advanced foreign countries,” says Miroslav Křížek, CzechInvest‘s Chief Executive Officer. “As we are now demon- strating in the European Space Agency, the technological level of the Czech space industry is high. However, what is miss- ing is a broad international network of partners, as in other member states, with which it is necessary to form consortiums. International events such as seminars at the Ministry of Transport or CzechInvest’s Czech Technology Days abroad are of key importance for our further success in the ESA,” says Petr Bareš, President of the Czech Space Alliance. CZECH SCIENTISTS IN SPACE PROJECT PROVE THE THEORY OF RELATIVITY Czech scientists in space research are keeping abreast of development as well. They are involved in the “European La- ser Timing” (ELT) space project, which is aimed at synchronising super-accurate atomic clocks in space and on Earth by means of laser pulses and proving that time runs at different speeds in the two places. By this, they want to supply proof of the validity of Albert Einstein’s Theory of Relativity. The ELT project is a purely Czech contribution to the important in- ternational experiment, Atomic Clock Ensemble in Space (ACES), coordinated by the European Space Agency (ESA). In MORE AT: Czech Space Office: www.czechspace.cz/ Czech Space Alliance: http://www.czechspace.eu/ Photo:StanceCommunications Czech student, Stanislav Fořt, had the op- portunity of experiencing what astronauts feel like in the state of weightlessness, dur- ing his Zero-G parabolic flight. The flight, a highlight of the international student project “Youth Inspiration Program 2011”, took place in Las Vegas on 8th October.

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1 5 | C Z E C H B U S I N E S S A N D T R A D E FUNDING FOR HALF OF THE RECORD BUDGET OF CZECH SCIENCE AND RESEARCH CAME FROM BUSINESSES According to the Czech Statistical Office, almost CZK 60 billion (approx. EUR 2.4 billion), i.e. about 1.6 % of GDP, went to Science and Research in the Czech Republic in 2010, which was the highest amount since 1993. The increase was mainly due to private companies, which invested almost CZK 30 billion (approx. EUR 1.2 billion) in Science. One quarter of the funding from the business sector went to the motor industry. Other important sectors were the engineering and pharmaceutical industries. The Czech Republic spends more on Science and Research than Italy, Greece or Spain. Compared with Hungary, Czech invest- ment in Science is twice as high. In comparison with Slovakia it is seven times as high. Last year, private companies invested CZK 28.9 billion (approx. EUR 1.2 billion) in Science, i.e. almost half of the total amount. The business sector is the main source of funding for Czech Science and, at the same time, it is the main sector where the money is spent. Last year, private firms received 60 % of all resources for Science. Second was the government sector, although its share in the total expenditure has dropped in the last decade, mainly to the benefit of universities. Their share was almost level last year, at 19 % and 18 % respectively. Given the dominance of the business sector in Czech Research, the most money is spent on experimental development (CZK 25.3 billion - approx. EUR 1 billion). 2015, the ELT device will be installed with ACES aboard the International Space Sta- tion (ISS), namely the Columbus labora- tory module, where the Czech Space Re- search Centre (CSRC), based in Kroměříž, and the Faculty of Nuclear Sciences and Physical Engineering (FNSPE) of the Czech Technical University in Prague (CTU) are participating in work on its development. “FNSPE laboratories have developed the special optical detector, SPAD, or Single- Photon Avalanche Diode, which is capable of detecting the individual photons and is thus the key element of the ELT device”, comments Michal Václavík of the Czech Space Office. “Our Office has a wealth of experience in space research. The SPAD detector is installed in 25 ground stations designed for laser measurement of satel- lite distance. These stations are on all the continents except Antarctica. We devel- oped a laser rangefinder for the Russian Mars 96 probe, and also for the US Mars Polar Lander. The ELT project now un- der way has been the latest use to date of the unique method developed in our institute,” says Professor Ivan Procházka of the CTU Faculty of Nuclear Sciences and Physical Engineering, recalling the history of the device. MANUFACTURE OF INSTRUMENTS FOR THE SWARM INTERNATIONAL SPACE PROJECT In August 2011, Czech designers from the AeronauticalResearchandTestInstitute(VZLÚ) in Prague completed the last flying micro ac- celerometer – a special measuring instrument for the Swarm international space mission which is to survey changes in the magnetic field of the Earth and the processes taking place in it. The measurements will be con- ducted by means of a new generation of sat- ellites carrying special measuring instruments on board.These will include apparatuses from the Czech Republic, micro accelerometers supplied for the project by the Aeronautical Research andTest Institute in Prague in collab- oration with 14 other Czech institutes.“Thanks to the Czech Republic’s membership of the ESA, our involvement in this mission is sig- nificant and, in a way, irreplaceable.The Czech Republic holds a top position in the develop- mentandproductionofmicroaccelerometers in the world, the development of the first gen- eration of these instruments already began in this country in the second half of the 1980’s,” Jan Kolář, Director of the Czech Space Office, remarks about micro accelerometers. Designs of spacecraft and bases on other planets, which have even attracted the attention of American space agency NASA experts, have been produced by Czech ar- chitects, Ondřej Doule and Tomáš Rousek.

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| 1 6 S E R V I C E S Sufficient Output Must Be Ensured By Balanced Mix Is the Czech Republic a suitable place for investment in the energy sector? It is a country with an industrial tradition, still quite well staffed with qualified techni- cians and engineers. Over the long term, the government has been providing systematic support to energy self-sufficiency or surplus (whatever the particular focus of the state energy concept may be). It is a country with a highly open energy sector (the export ca- pacity of the system exceeds 35% of domes- tic maximum consumption). It is surround- ed by energy-deficient countries (Austria, Hungary, and Slovakia), or countries which will become deficient soon (Germany, and Poland). Regulation in the energy industry has been stable and rational over the long term. So, definitely yes. What have been the greatest changes in the energy sector this year? It was certainly the Fukushima accident and the impacts on the halting of the nu- clear energy resuscitation in Europe, and the related nuclear phase-out in Germany, which I consider final this time. It is also the inauguration of the Nord Stream Pipe- line and the increasing amount of infor- mation about shale gas in Poland, though extraction is still far off. The great boom of photovoltaic sources in Germany and the Czech Republic, but this is rather an echo of last year. In the Czech Republic, they certainly include the Energy Act amend- ment, and I expect also the amendment to the act on the support of renewable energy resources. Also, it is the new Chair- woman of the Energy Regulatory Office, at a time when the ERO has become one of the most powerful and strongest author- ities in the country. What does the Czech energy sector need especially at present? Political consensus on where the energy sector is to head, a comprehensive, clear, and especially feasible energy concept, and particularly its anchoring and broad acceptance as a task for the legislature, the executive, and foreign policy. These two factors would produce stability and long- term predictability of the legislative envi- ronment in the power industry, what is pre- cisely what the sector needs.Then, it will be clear what to do about allowances, taxes, permit procedures for energy projects, en- ergy diplomacy, etc. According to all forecasts energy con- sumption is to increase. What measures are thus being planned in the Czech Republic? The electric power base of the Czech Republic is mainly formed by nuclear power plants, coal-fired stations, heating plants, large hy- dro power stations and enterprise power plants. This mix is supple- mented with renewable sources, especially wind and photovoltaic power plants, and facilities burning biomass and biogas. The highest increases have been recorded in photovoltaic resources in recent years. Thanks to the system of support that has been in place, and the price of the technology, capac- ities of almost 2 GW were installed in these renewable resources in 2009 and 2010.“We are a country with a highly open energy industry and a long-term stable and ra- tional regulation“, says Ms Zuzana Šolcová, Executive Director of the Association of Energy Managers. Source: OTE. a. s.. as of 31 December 2010 Primary energy source MW % Nuclear 3 874 19.38 Brown coal 8 574 42.90 Black coal 1 674 8.27 Natural gas 760 3.80 Water 2 198 11.00 Wind 218 1.09 Sun 1 959 9.80 Biomass 340 1.70 Biogas 113 0.57 Technological gases 168 0.84 Heating oils 88 0.44 Biodegradable municipal waste 43 0.22 Total 19 988 100.00 TOTAL INSTALLED CAPACITY IN CR BY TECHNOLOGY Photo:www.sxc.hu

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1 7 | C Z E C H B U S I N E S S A N D T R A D E I am not sure whether planning is not an overstatement. In the proposed state en- ergy concept, the idea is nuclear, nuclear, and nuclear. We shall see what will come of it. For the time being, we are the second biggest exporter with mighty cross-border capacities, so that we have at least ten to twelve years before anything worrisome starts happening. On the other hand, it is true that today it is decided what will hap- pen in twelve years‘ time. In addition to planning and support programmes, greater stress should be definitely placed on saving, as a comprehensive state-run programme with clear objectives. And further, clear and specific state support to the completion of the Temelín nuclear power plant and streamlining of the permission processes for all energy projects. This has been de- clared, but practically nothing has been happening. Due to Germany’s decision on the phase-out of its nuclear power stations and the further development of electric- ity generation from renewable energy SAFE AND RELIABLE ENERGY TRANSMISSION 220 / 400 kV ČEPS, a.s. Elektrárenská 774/2 101 52 Praha 10, Czech Republic phone: +420 211 044 111, fax: +420 211 044 568 e-mail: ceps@ceps.cz www.ceps.cz ČEPS joint stock company operates the transmission system of the Czech Republic. ČEPS manages the transmission system and develops it as part of the European electricity network. ČEPS ensures equal and transparent conditions of access to the transmission system for all participants in the electricity market. ČEPS ensures the balance between electricity generation and consumption at any given time. resources, even massive investment in the Czech transmission grid may not be sufficient to ensure reliable operation of the transmission system. What way do you see to the protection of our networks? In the medium term, it is the strength- ened integration of markets in electricity, services, and regulation energy, as well as of the transmission systems, and intensive operational cooperation in the manage- ment of flows and in joint measures. Add simultaneously a quick preparation of de- fensive measures for the protection of the network against overload (technical equip- ment of the operator) and acceleration of the permission processes for the renewal and modernisation of the transmission network, including its strengthening. In the long term, it is the securing of sufficient output in our system in a suitable structure, which is a balanced mix of nuclear energy, coal (though slowly ending), and natural gas, and reasonable integration of renew- able sources, including the implementa- tion of intelligent networks.

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| 1 8 The Energy Regulatory Office (ERO) has gained new powers. Investors into Renewables (and most nota- bly into the photovoltaic sector) argue that the support for power generation from Renewables is diminishing. Time will tell whether this could actually mean less power from Renewables balanced by more power of the ERO. Sadly, the latter power will not heat our water or turn on our lights. Energy Regulation: More Powers to the Regulator, Less Power from Renewables? In any case, allegations by solar inves- tors need be taken seriously. In a nutshell, solar investors and their organisations sug- gest that they are being discriminated and that the Czech Republic has switched almost overnight from very generous support to Re- newables to unfair taxation of revenues from solar energy by the so-called “Solar Tax”. At the time of writing this article (end of Octo- ber 2011), the Czech Constitutional Court is still deliberating over the petition by certain senators for the abolition of the SolarTax.The Court’s decision will be the very key for fur- ther developments. In any case, one can safely assume that the overly critical voices are usually motivated by a specific interest (e.g. to maximise the revenues of solar installations) of a specific pressure group (e.g. solar investors). As such, they do not and can not reflect the interests of others, such as the interests of the gov- ernment or consumers, who have in recent years seen the prices of electricity rising very steeply. But this does not mean that the criti- cal voices can easily be ignored. 2012 - YEAR OF SUBSTANTIAL CHANGES The coming year 2012 will see substantial changes, if not a complete overhaul, of en- ergy regulation in the Czech Republic. Firstly, this concerns a key piece of legislation – the Czech Energy Act – which now fully imple- ments the third EU liberalisation package and some of its important provisions will come into effect early in 2012. Secondly, the Czech Parliament is discussing a brand-new Act on Supported Energy Sources, which should re- place the existing Law on Renewables. Thirdly – and perhaps most importantly – the newly designed Energy Act has result- ed in the very strong powers of the Energy Regulatory Office (Czech national energy regulator). All the above-mentioned changes are fundamental and substantially reshape the current framework. NEW RULES FOR RENEWABLES With respect to the bill supporting energy sources, we believe that changes in the regulation of Renewables are needed. Just as an example, the existing law has caused interpretation problems with respect to the quality and duration of the state support of Renewables. Also, it prioritised only certain Renewable sources (e.g. wind and solar) and did not include other types of preferred sources, such as combined heat and power generation (cogeneration) or waste-to-en- ergy projects. Last but not least, the existing law does not reconcile the support for Re- newables with market mechanisms. Instead, it is forcing distribution system operators to buy out power from Renewable sources to cover the losses in the grid.This does not cor- respond to reality. At the same time, the bill on the new rules on Renewables was intensely criticised by investors – and not without cause. They criti- cised (among other things) the binding char- acter of the National Action Plan for Renew- ables and expressed concerns as to whether it would not undermine the development of Renewables, instead of supporting it. It remains to be seen how the legislative process will progress and what its final re- sults will be. At this moment, one can only safely assume that all players may expect a higher level of complexity in the rules and that distributors will likely be relieved of the burden of having to buy out power from the producers. S E R V I C E S Photo:www.sxc.hu

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| 2 0 STRONGER DISPATCH CONTROL It did not help much to relieve the stress of investors in the Czech Renewables sec- tor when the new Amendment to the Energy Act introduced a specific obliga- tion under which all power plants of more than 100 kW installed capacity must have a remote-control device which enables dispatch control (i.e. a potential restriction of its output), and to maintain the remote- control device functional. No compensa- tion for the purchase and installation of the remote-control device is provided and the costs are borne in full by the power gen- erator. It is widely known that this provision de facto targets mainly solar installations whose intermittent production is a poten- tial cause of the instability of the grid in summer months. STRENGTHENED ROLE OF ERO Arguably, the stress of investors may also be reinforced by the fact that the Amended Energy Act has substantially strengthened the role of ERO with the aim of increasing its independence of the government. In addition to the power to generally supervise compliance with en- ergy regulations and competition on en- ergy markets, the ERO has also gained the power to organise on-the-spot inspec- tions, so-called “dawn raids”, well known from the anti-trust arena. ERO employees are entitled to force their way into commercial premises, seal off the premises during an inspection, open closed boxes, inspect commercial records, and make copies. Failure to assist ERO employees during a dawn raid may lead to fines of up to 1% of net turnover. These police-like powers may be exer- cised without any supervision of the court and it remains to be seen how the Office will use them – and who against. We can only hope that the Office will act cau- tiously and issue sufficient “soft law” well in advance, to be available to market play- ers and the general public, so as to ensure S E R V I C E S the transparency and predictability of fu- ture steps. SUNNY FUTURE AHEAD? We have listed here only a few of the nu- merous legal and regulatory issues cur- rently in play in the energy sector. We have no ambition to describe these in detail. In- stead, they are mentioned so as to illustrate the challenges which the energy industry (and the Renewables sector in particular) are facing in our ever-changing legal envi- ronment. Sometimes one cannot help but wonder whether less legislative activity would not assist the industry more – but, if so, the European Commission will also need to slow down its hectic pace. Tomáš Rychlý, Kateřina Babická Wolf Theiss advokáti/Attorneys-at-Law Any views expressed in this article are the personal views of the authors and should not be attributed to Wolf Theiss.

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2 1 | C Z E C H T O P NOEN a.s. is a leading Czech com- pany which has been operating on Czech and foreign markets for nearly 15 years. The company’s core business is seeking out orders in the areas of research, development, and project designing for open-cast mining companies. In addition to these activities, NOEN devotes itself to the engineering of long-dis- tance and technological transport of loose materials, materials han- dling equipment, and stock-yard (coal handling) equipment. NOEN employs a team of more than 90 highly specialised technicians and project designers with many years of experience. new KK 1300 bucket-wheel excavator will not only meet all the technical parameters laid down by the customer, but it will also fulfil unconventional, modern expectations regarding the colour scheme. An important consideration in choosing the colours was the environment in which the machine would be working, and that is the mine, a specific place with a lot of dust around. This was the underlying idea for choosing the colour scheme. Over the years, NOEN has become the main partner to important Czech companies, such as Severočeské doly (North Bohemian Mines), Mostecká uhelná společnost (Most Mining Company) and Sokolovská uhelná (Sokolov Mining Company). NOEN\'s coop- eration with the ČEZ energy company (in preparing due diligence studies involving mining equipment for selected future ČEZ foreign acquisitions) is also of importance. This year, NOEN could boast a unique event: after nearly twenty-five years, a new giant bucket-wheel excavator (BWE) has been built for use in brown coal mines, de- signed by NOEN for the North Bohemian Mines Company. NOEN not only created the design, but also supervised the BWE erec- tion and long term performance test.The KK 1300 BWE will be used for open-cast min- ing in the Bílina Mine, currently the deepest open-cast coal mine not only in the Czech Republic, but also in the whole of Europe. The excavator is unique, besides the fact that it was conceived by Czech minds and NOEN DesignsWorld’s Largest Mining Machine built by Czech hands, in that it has sur- passed all other comparable machines in size: it is 53 metres high, only 7 metres less than Prague’s Petřín lookout tower, and 180 metres long. To learn more details about the machine, we addressed Mr Jaroslav Veverka, Chairman of NOEN’s Board of Directors. Whatwerethebeginningsoftheprojectlike? Attheendof2005,theNorthBohemianMines company came forward with the request for a new excavator with specific parameters. In 2006, NOEN received an enquiry with the request to prepare a study of the excavator, and at the end of 2007 a contract was signed between the companies PRODECO a.s. and NOEN a.s., in which NOEN was named as the supplier of the project design, workshop, as- sembly, and supporting documentation. In view of its size, the assembly and transport of the excavator required very special procedures. Can you tell us some- thing about it? Most of the excavator parts were manufac- tured byVítkovice Gearworks, a.s. Extra-large parts were transported to the erection site in Duchcov near Teplice in sections, and their size had to be adjusted to the dimensional limits of the roads. At the erection site, the parts of the excavator were assembled ac- cording to the technological requirements and then welded or screwed together. A special jig was needed for machining the base plate of the spherical path, which is 16 m in diameter. This could only be done after the lower structure and the slewdeck had been welded. The special rotating arm with a milling head at its end was developed and supplied by the Krušnohorské strojírny Komořany, a.s. engineering works. The excavator was moved from the as- sembly site to the quarry on special crawler undercarriages. The excavator can also pride itself on its very interesting colour scheme, devised in collaboration with leading Czech design- ers, specifically the Olgoj Chorchoj Studio. Why did you decide to collaborate with these professionals? For us, Olgoj Chorchoj means assurance of quality and originality, and that is why we addressed them. We like to supply our customers with new, modern machines and always to be ahead of the times. The You are one of six world firms, and the only Czech company, capable of prepar- ing documentation for the construction of such a machine. Wherein do you see your uniqueness? NOEN employs a team of project designers who have been working in the branch for more than 30 years. Their profound knowl- edge and experience are essential for this specific field. Moreover, the uniqueness en- sues from the very substance of our work, and that is that each and every bucket- wheel excavator designed by our company is an original piece. The reason is the avail- ability of the most up-to-date technologies and the specific mining conditions. Both re- quire new calculations and adjustments to be made to the whole machine. Photo:NOENarchive

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EQUIPMENT FOR THE CHEMICAL AND PETROCHEMICAL INDUSTRIES MANUFACTURE AND ASSEMBLY OF TECHNOLOGICAL EQUIPMENT FOR INDUSTRIAL WASTE WATER TREAT- MENT PLANTS ECOLOGICAL SYSTEMS FOR INDUSTRIAL WASTE INCINERATION PLANTS CRANES, STEEL STRUCTURES DESIGN AND SUPPLY OF PROCESS UNITS INCLUD- ING TECHNOLOGICAL PROCESS AUTOMATION COMPLETE LOW VOLTAGE CABLING NETWORK SOL- UTION WITH ACCESSORIES FOR INDUSTRIAL USE INCLUDING NPP MANUFACTURE AND REFURBISHMENT OF TECHNOLOGICAL EQUIPMENT FOR THE PRIMARY AND SECONDARY CIRCUIT OF NPP Contact: ČERNOLESKÁ 1930, 256 01 BENEŠOV, CZECH REPUBLIC PHONE: +420 261 305 198, E-MAIL: ATOMEX@ATOMEX.CZ www.atomex.cz THE ATOMEX4ENERGY PROJECT IS CO-FINANCED BY THE EUROPEAN UNION PROJECT: ATOMEX4ENERGY ATOMEX GROUP – Technological Equipment Manufacturers Association for Power Engineering and Industry S T R O N G P A R T N E R F O R Y O U R E N E R G Y P R O J E C T S

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| 2 4 S E R V I C E S Energy Act Gives Better Protection to Customers The Czech Republic can pride itself on being at the forefront of the member states who are fulfill- ing their duties in relation to the European Union in the area of energy and the implementation of Euro- pean directives. This is proved by an amendment, the fifteenth in a row, to Act No.458/2000 Coll., the Energy Act, which became effective on 18 August 2011, under the nice number 211/2011 Coll. This amendment transposed the requirements of what was known as the Third Energy Pack- age of the European Union. The gist of the amended legislation is mainly in the area of the exercise of pub- lic administration and the protection of the customer – consumer. The powers of the Energy Regulatory Office (ERO) have been significantly strengthened. It is be- coming a very strong and independent body with the competence of supervi- sion over the energy markets (electric- ity and gas) and the power of decision- making in the area of disputes among participants in the electricity and gas markets. Electricity traders are compelled Photo:LukášBíba ENVIROS, S. R. O., MEMBER OF SKM ENVIROS NA ROVNOSTI 1, 130 00 PRAGUE 3, CZECH REPUBLIC PHONE: +420 284 007 498, FAX: +420 284 861 245, E-MAIL: office@enviros.cz www.enviros.cz ENVIROS – business and environmental consultancy, and member of SKM ENVIROS, has many satisfied clients, particularly in the following areas of energy and environmental consulting: I European funds I Energy efficiency and renewable energy I Energy audits I Energy certification of buildings I Energy management (Monitoring & Targeting) I Sustainable production and consumption; clean energy sources I Integrated pollution prevention and control (IPPC) I Environmental Due Diligence (member of CAT Alliance Ltd.) I Feasibility studies and project financing, EPC I Waste Management I Industrial and municipal energy efficiency I Action plans I National and transnational energy and environmental policies and strategies I Energy and environmental legislation of EU and the Czech Republic I Energy management at the level of district and local administrations I Regional and local energy policies, strategies, and planning I Thermal imaging studies and measurements etc. MARIE BREJCHOVÁ We asked Marie Brejchová, President of the Union of Company Lawyers, what other changes have been brought about by the Amendment. Ms Brejchová also represents company lawyers of the Czech Republic in the European Company Law- yers Association, and is Head of the legal section of the Pražská energetika (PRE).

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2 5 | C Z E C H B U S I N E S S A N D T R A D E to store data, for a period of 5 years, on supplies based on contracts concluded with participants in the electricity whole- sale market with the transmission system operator, which concern the supply of electricity or electricity derivatives. Fur- thermore, they have the obligation to publish, in a way allowing remote access, the European Energy Consumer Checklist on the rights of the consumer, prepared by the European Commission and made public by the Energy Regulatory Office, and must inform their customers about the possibility of acquainting themselves with the European Energy Consumer Checklist. STRENGTHENING CONSUMER PROTECTION Consumer protection has been signifi- cantly strengthened. If the conditions of a contract are changed by the sup- plier (including an increase in price), the consumer has the right to withdraw from the contract within three months of the change, if he/she has not been notified of the change at least 30 days before it is effected. In such a case, the consumer can use this right no later than ten days before the day of the actual increase in price or change in the conditions of the contract. The law now specifically al- lows the distribution system operator to expropriate, in accordance with the Ex- propriation Law, the ownership right to a building, land, and equipment for the construction of a distribution system fa- cility. Further, the Amendment specifies the duty to adopt by an internal regula- tion what is called the Equal Treatment Programme, in order to exclude discrimi- natory practices. In it, the distributor sets out measures to exclude the discrimina- tory behaviour of the distribution system operator in relation to participants in the electricity market who are not members of the same vertically integrated entre- preneur (a concern of enterprises which holds licences for electricity production, distribution, and trading). In this context, the Amendment further introduces the duty of the distributor to behave in such a way as not to mislead another partici- pant in the electricity market regarding the possibility of confusion with an elec- tricity trader or electricity producer who is a member of the same vertically inte- grated undertaking. The Amendment has greatly strengthened the powers of the Energy Regulatory Office. Can you go into detail? The Energy Regulatory Office recently received competences in the areas of the protection of the rightful interests of customers, consumers, and licence hold- ers in the energy sectors, support of eco- nomic competition in the energy sectors, exercise of supervision over the markets in the energy sectors, and support for the utilisation of renewable and secondary

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| 2 6 energy sources. A very important compe- tence is the exercise of power in deciding disputes between customers and licence holders on the fulfilment of obligations from contracts concerning the supply or distribution of electricity or gas. In addi- tion, there is the competence for decid- ing disputes about the determination whether a legal relationship between a customer and a licence holder concern- ing the supply or distribution of electricity or gas has originated, is continuing, or has expired. To mention a measure with an impact (though negligible) on the price of electricity and gas, this is the new fee for ERO activity, payable by market partici- pants in the price for the clearance of the market operator – 2 CZK/MWh (approx. 0.08 EUR) in electricity and 1 CZK/MWh (approx. 0.04 EUR) in gas. Further, while carrying out checks, the ERO is entitled to enter, to an absolutely essential extent, other owners’ land or buildings used for business activities by a licence holder or persons carrying out activities connected with the rights and duties of a licence holder, on the basis of a Power of Attor- ney or contract concluded with a licence holder, and request the necessary infor- mation, documents, records of data on storage media, data and written or verbal explanations, as well as demand the eluci- dation of any facts concerning the subject of the check. The Amendment also introduces a new administrative barrier to all investors for entrance into the energy sector – what is known as the Generation Authorisation. What is this? The Authorisation is also allowed by the European directive and the reason for the re-introduction of this duty is the ne- cessity of the State to secure its influence on resources in the Czech Republic. The process must be transparent, and this applies particularly to rules in second- ary legislation, in decrees. The State must have a tool for deciding on the energy mix, i.e. on the proportion of the sources which will produce electricity. The new rules require electricity generating plants to install equipment at their facilities which will enable remote disconnection from the system. However, this duty will not apply to electricity production from renewable sources up to 10 megawatts, including run-of-the-river hydropower stations which were put into operation up to the year 2000. Why? Nowadays, there are already many small sources which have an important share in the performance of the electricity sys- tem, and thus it is necessary to ensure dispatch control and thus prevent a state of emergency or a black-out. Thus, some large sources have the duty to offer sup- port services, which are used by the transmission system operator to ensure a balance in the system. What other innovations are we to expect in the Energy Laws? An Amendment to the Act on Energy Management, No. 299/2011 Coll., ap- proved recently, brings about a change in the Energy Law regarding the com- petences of the State Energy Inspec- tion. At the moment (end of October 2011), working groups at the Ministry of Industry and Trade are drafting another amendment to meet the duty of imple- mentation of another European direc- tive. The government Bill on Supported Sources, now in its Third Reading in the House of Deputies, will also change some provisions of the Law. All these changes have an impact on secondary legislation, so that we can expect changes in the regulations implementing the acts men- tioned above. S E R V I C E S Photo:TOSVARNSDORFarchive,www.dreamstime.com

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C Z E C H B U S I N E S S A N D T R A D E 2 7 | Horizontal boring and milling machines manufactured by TOS VARNSDORF operate reliably in dozens of countries all over the in- habited continents. These machines are used by many industrial sectors, although during recent years the power generation sector has seen the highest growth. TOS VARNSDORF ma- chines very effectively ma- chine parts of wind-power plants (consoles, propeller hubs etc.). They can be found at manufacturers of hydraulic and coal-fired power plants, and they also have their place at manufacturers of nuclear power-generating equip- ment. The universality of the horizontal boring ma- chines, the wide spectrum of drilling options, rang- ing from basic machin- ing, machining generally defined surfaces (turbine blades) up to machining very large and heavy parts (the already mentioned wind-pow- ered plants, pumps, boilers, turbines, exchangers, valves, gate-valves, prod- uct-carrying pipe lines, etc.), provides a good argument when deciding which TOSVARNSDORF Feels at Home in Power Industry machine to select. The Company does not only supply individual products, but can also provide a complete technologi- cal solution. Varnsdorf machines are not just suit- able for the sector – they seem to be predestined for it.

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| 2 8 S E R V I C E S The new technical standard, EN 16001:2009 Energy Management Systems, published by the European Committee for Standardization, has been in force for more than a year. The purpose of the standard is to support organisations in creating systems and processes necessary for raising energy efficiency. Besides existing energy optimisation tools, such as the energy audit, this is another instrument aimed at energy saving. The following are the replies by Mr Viktor Šaroch of TÜV SÜD Czech, a company providing compre- hensive services in this area, to the most commonly asked questions on the subject. The Energy-saving Formula to Be Followed Is: Plan – Do – Check – Act How is the standard conceived and what impact can it have on the energy efficien- cy of enterprises? The system of management according to EN 16001 is practically identical with the structure of the Environmental Management System (EMS), i.e. with ISO 14001 – it is a generically risk-oriented standard based on the Deming “Do – Check – Act Cycle”plan.The difference is especially in replacing the word and meaning of “environmental” with the word and mean- ing of “energy”. So we have an energy policy, energy aspects and aims and also documen- tation, with top management internal audits, or checks, relating to the Energy Manage- ment System. Moreover, compatibility with ISO 14001 is a great advantage, as firms using EMS just need to supplement it with EN 16001 requirements. The certification can be com- bined, and consequently it will cost less. The management system creates prerequi- sites for the broadest possible compliance with the requirement to continuously raise energy efficiency. It obliges companies to ascertain their legal commitments and specific energy leakage risks and react to the ascertained facts bysystemic,organisational,andtechnicalmeas- ures.Inaddition,feedbackelementswillmakeit possibletostreamlinethesystemintherequired direction and improve it continuously.The new form can therefore be seen as a process aimed at harmonising different saving efforts and pooling them to form a single organic stream. Is the standard intended for certification and what kind of companies is it intended for? Why should firms be certified? National authorities are already issuing, or will soon be issuing, certificates of ac- creditation in the framework of the In- ternational Accreditation Forum under this standard. The Czech Institute for Ac- creditation started providing this service in May 2011. The standard itself states that it is intended for making self-assessments, statements or issuing certificates to exter- nal organisations. Its application has neither sectoral nor geographic limitations and can be used by all enterprises interested in raising their en- ergy efficiency. Those enterprises could use the certification to argue with parties feel- ing they are affected, for whatever reason, by theirenergy policy. A typical example is companies carrying out the facility management for their cli- ents. They could prove to them that they are managing their affairs responsibly, both economically and environmentally. Another example is hotels, which may wish to give evidence that they have their costs under control. Indeed, all state enterprises and organisations should have the ambition to prove that they are handling public means with maximum forethought and that, in pur- chasing labour, services, and products, ener- gy efficiency is one of their considerations. Will it not be another “ISO certificate” and a new set of directives for company collections? It is not the standards that are to blame if something like that happens. If they remain a voluntary commitment for responsible firms and not a legal obligation imposed on firms seeking public contracts, there is, in my opinion, nothing to fear. High cred- ibility, however, must also be the concern of accreditation institutions and certification organisations themselves, which should prepare and observe strict and demanding certification rules. And it should be a matter of honour for auditors and consulting firms that will apply the system to ensure that their work will generate the highest poss- ible added value. What is actually the difference between the system audit and the energy audit? In brief, the system audit examines the ex- tent to which the system for the manage- ment of energy aspects is used, while the aim of the energy audit is to amass infor- mation about how energy is used in build- ings and in energy management. Viktor Šaroch Photo:TÜVSÜDarchive

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inzerce TÜV SÜD Czech Certiﬁcation - Inspection - Testing - Training Providing complete inspection and certiﬁcation services of an EU notiﬁed body and accredited entity in the construction, reconstruction and update of power sources. Conformity Assessment • of pressure devices including welding processes • machinery and electrical devices • nuclear power engineering • lifting equipment • and others Areas of Services • the environment • functional safety • efﬁcient power management in practice • biogas stations • renewable power sources www.tuv-sud.cz TÜV SÜD Czech s.r.o. • Novodvorská 994 • 142 21 Praha 4 e-mail: info@tuv-sud.cz • tel: 844 888 783

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| 3 0 S E R V I C E S From Renewable Sources Research to Joint Advance to New Markets After 2000, members of the CREA Hydro&Energy cluster started their collaboration in the implementation of projects in developing countries. After the first experience of mu- tual enhancement of capacities and a widening of their potential, the export-oriented CREA (Czech Renew- able Energy Alliance) was established with assistance from the CzechTrade Agency, with the main task of provid- ing marketing support and commer- cialisation of the results and positions achieved in development projects, and thus increasing the competitive- ness of the members as well as the group as a whole. The effort to capitalise on the expertise in the management of dams and link it with the traditional as well as newly promis- ing sector of hydro-power generation di- rected its profile to water management projects. The most active members of the export alliance were joined by other pro- gressive firms and this gave rise to the core of the cluster formed by six companies, surrounded by a group of small firms and microfirms complementing the portfolio in specialist areas with links to traditional partner scientific and educational institu- tions. The CREA Hydro&Energy cluster was officially formed in 2008. Assisted by the Operational Programme Enterprise and Innovation, the cluster start- ed to build its infrastructure and implement research projects in the areas of small water power plant technologies, methods for in- creasing the safety of hydro-power facilities, in problems of waste as well as research into new methods of municipal waste disposal, including its use in energy production. Most of the technologies that are being devel- oped are to be used in developing coun- tries. An example of the closest cooperation and involvement of members is the market in Northern Iraq. ACTIVITIES OF THE CLUSTER IN IRAQI TERRITORY In the last few years, the CREA Hydro&Energy alliance has become actively involved in the reconstruction of hydro-power energy and supply facilities in the Republic of Iraq. Members of the Alliance have participated in a number of events in the Czech Republic and Iraq, organised training programmes in Bagh- dad and Erbil with the support of Czech minis- tries, and exerted all-round efforts to promote Czech-Iraqi relations. The most important moment was the establishment of the 100%- Czech-owned CREA Company in Erbil. As the Ministry of Agriculture andWater Resources of the Kurdistan Region of Iraq prepared a plan for the construction of about 120 dams within about 10-15 years, the CREA Hydro&Energy cluster has become involved in a number of theprojects.Anexampleofactivitiesthathave already been completed was the implemen- tation project for the Quatabian Dam, which was designed as a multipurpose reservoir for water storage, flood protection, irrigation, power generation, and recreation. Success was also scored by Czech firms in Kurdistan in the tender for projects for the construction of the Bawanur irrigation reservoir on the Sirwan River in the east of the country, where CREA Hydro&Energy is supplying a feasibility study and construction designs. TECHNOLOGICAL SAFETY INSTRUMENTATION FOR DAMS AnotherprojectbeingimplementedbyCzech firms is for monitoring instrumentation for the Dokan and Darbandikhan Dams, which rank among the largest dams in Iraq. After more thanfiftyyearsofoperation,ithasbecomeevi- CONSULTANT PANEL FOR THE MINISTRY OF AGRICULTURE AND WATER RESOURCES In 2010, CREA Hydro&Energy also succeeded in a tender of the Kurd- ish Regional Government for running a Consultant Panel. For over a year, Czech specialists have thus been assisting de- signers and construction contractors of dams in Kurdistan with expert consultan- cy. The team has prepared a total of 159 reports on 18 sites in Northern Iraq. The most extensive reports assessed com- plete designs for water projects, while some of the reports were recommenda- tions or opinions on specific technical problems at different water projects. More at www.creacz.com dentthattheexistingmeasuringandmonitor- ing equipment of technological safety super- vision (TSS) is inadequate in both extent and function. The purpose of the project is thus to modernise the TSS monitoring systems and increase the safety of the water projects. At Darbandikhan, we extended the TSS facilities with additional upward pressure bore holes in the injection adits and the sloping territory on the left bank. New inclinometer bore holes were made in the sloping territory to measure landslides. Some of the equipment included new sensors with automatic transmission of data to the control room. At Dokan, we ex- tended the TSS system with a new inverted pendulum in the injection adit. The original apparatus received some 50 new sensors of various types (dilatometers, temperature sen- sors, pressure sensors, seepage measuring devices and a telependulum) with automatic transition of data to the control room. Břetislav Skácel CREAHydro&Energy e-mail: bret@creacz.com Darbandikhan Dam Photo:CzechRenewableEnergyAlliancearchive

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inzerce Profile of the Association CREA Hydro&Energy, o.s. CREA Hydro&Energy, o.s. is a cluster of companies, research institutes, and universities operating in the branch of technologies for hydraulic structures, water and waste management and renewable energy resources. The members of the Cluster jointly participate in the development and innovations of products, in the promotion of the branch, and in the presentation and implementation of projects in the Czech Republic as well as all over the world. CREA Hydro&Energy, o.s. cooperates with large Czech and multinational companies and applies the most advanced technologies and know-how in the branch and participates in its creation and transfer within international cooperation. It is a partner of the Ministry of Foreign Affairs of the Czech Republic in the Aid for Trade programme and in the projects of foreign development cooperation. Its members work in international associations, such as ICOLD (International Commission on Large Dams), ESHA (European Small Hydropower Association), etc. CREA Hydro&Energy, o.s. provides Research, Consulting, Surveys, Design, Engineering, Manufacturing, Supply, Installation, Testing, Training, Special Services, etc. in the branch of: Water Structures (Dams, Pumping Stations, Water Resources, Hydropower Plants, Water Treatment Plants, Water Supply, etc.) Waste Management (Landfills, Waste Water Treatment, Waste to Energy, etc.) Renewable Energy (Small Hydro, Wind, Solar, Biogas). Foundation Members of the Cluster: G AQUA PROCON s.r.o. G AQUAS vodní díla s.r.o. G Czech Hydrometeorological Institute G GEOtest, a.s. G HG partner s.r.o. G AW-DAD, s.r.o. G MATOUŠEK CZ a.s. G Mendel University in Brno G PS PROFI s.r.o. G SIGMAINVEST spol. s r.o. G Strojírny Brno, a.s. G Sun Drive, s.r.o. G URGA, s.r.o. G VODNÍ DÍLA - TBD a.s. G Brno University of Technology

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| 3 2 W E A R E I N T R O D U C I N G IT Services Market in 2011 Shows RisingTrends and Higher Productivity Can you tell us something about the cur- rent priorities of your alliance? Czech ICT Alliance has several priorities. One of the most important is promoting Czech ICT in other countries, especially in the form of participation in prestigious trade fairs and trade missions in co-opera- tion with CzechInvest and Czech embas- sies, and also in the form of presentations promoting Czech ICT. We also support educational projects of Czech IT firms con- cerned with management soft skills, trade, marketing, and project management. Here, we have realised several projects worth more than CZK 40 million (approx. EUR 1.6 million) supported by EU funds. We also co-operate with the scientific and technical base and universities and other institutions of higher learning (e.g. the Czech Techni- cal University) in the area of innovation, es- pecially as regards beginning firms arisen either from the academic environment (set up by university students), or individuals from corporations wishing to pursue their own activities. These activities are financed from EU funds. In this regard, we have sub- mitted several projects in cooperation with public universities (Czech Technical Univer- sity) and private university-level schools (Business School, Unicorn College). How is your Alliance financed? As one of few specialised organisations, ow- ing to its ability to cover the cost of its activi- ties from the resources of realised projects supported by the European Union, the Alli- ance has no membership dues system. Cur- rently we are realising several projects worth approximately CZK 50 million (approx. EUR 2 million),andmoreprojectsinsupportofaca- demic cooperation, internships and innova- tions worth over CZK 100 million (approx. EUR 4 million) are in the pipeline. This allows us also to open up access to the Alliance to smaller firms. How many members do you have and what kind of firms are they? Currently, Czech ICT Alliance has approxi- mately 100 members operating in the area of Information and Communications tech- nologies. Members of the Alliance are not only large firms, such as HP, Microsoft, Intel and Cisco Systems, but also, and mainly, small and medium-sized IT firms with Czech capital and international ambitions. What can your members offer to foreign partners? How are Czech IT firms faring in foreign markets? Czech IT firms are very successful in foreign markets in two basic areas. One area com- prises product firms, which develop interest- ing and often innovative products with inter- national ambitions and international market prospects. An example is the success of firms such as Socialbakers (innovative instruments for Facebook), which, among other things, recently attracted relatively prestigious inves- tors, and also firms such as Sprinx (CRM sys- tem) and Adva ICT (security SW). The other group comprises companies which success- fully offer their development facilities and supplyexperiencedprogrammers.Here,great achievementshavebeenscoredbyCNGroup with development projects all over Europe. Your Alliance participates in a number of leading trade fairs abroad, for example, in May 2011 you exhibited at the INTEROP technology fair in Las Vegas. Which other important events or territories are the focus of your interest? This year we participated in several important events. With regard to trade fairs, we exhibited at CeBIT, the largest ICT trade fair in Europe. Altogether 25 firms drawing support from the “Joint participation in specialised exhibitions and trade fairs abroad programme” launched by CzechTrade Agency, displayed Czech IT products. Our other priority is North America (USA and Canada), where we participated in the INTEROP fair, and, in addition, the Alliance also had its representatives in the government delegation led by Deputy Prime Minister and Minister of Foreign Affairs Karel Schwarzen- berg. In Canada, the Alliance was a partner to Czech Technology Days, where we presented possibilities of cooperation with Canadian counterparts. As a result, negotiations are un- der way with several important partners. An- other sphere of our interest is trade missions. For example in October, in cooperation with the commercial attaché in Japan, we organ- ised an event, Czech IT Day, where we present- ed ourselves to some 70 Japanese partners. In addition, Czech ICT Alliance is a partner to sev- eral international conferences on outsourcing and cloud computing in Europe and Asia. Also, prestigious international organisations, such as OECD and the Inter-American Development Bank, invited representatives of the Alliance to be key speakers during their events in Uru- Czech ICT Alliance is an official ex- port alliance of CzechTrade Agency. Formally it came into being in Sep- tember 2005, and since then it has realised several foreign projects of key importance in support of Czech ICT exports. To learn more about its aims, visions, and projects, we approached Mr Michal Zálešák, Executive Director of the Alliance, with the following questions: Photo:Rapidarchive

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3 3 | C Z E C H B U S I N E S S A N D T R A D E guay and Kazakhstan. In addition, the Alliance will collaborate with OECD on the transfer of know-how and IT development in Kazakhstan. According to the results ofyour Alliance, despite the current stagnation, Czech IT firms have generated higher profits. Can you assess the economic performance of the members of your Alliance? The overall results of the firms under review for 2010, in year-on-year comparisons, showed a very poor growth, of a mere 0.2%, as against the comparison of financial indicators for 2009/2008, which attacked the 6% mark. The least affected category was enterprises with outputs of more than one billion crowns, Since 2004, the Czech Water Alliance (CWA) has been busy exporting and seeking new export opportunities for 14 firms which are members of the Alliance, with the aim of permanently broaden- ing export possibilities in the area of water management and related technologies. The annual turnover of the Association is more than CZK 1.4 billion, of which exports account for around 65%. of the export- p r o m o t i n g government agency and the presence of representatives of Czech embassies at the exhibitions are a great aid to us. In the eyes of our foreign partners, it is official confirmation of the interest of the Czech State in improving trade relations with the countries concerned,” says Ivan Nikl, CWA Chairman and Chief Executive of MAEP, s.r.o. The water management sector, like practi- callyanyothersector,hasbeenaffectedbythe economic recession. “For our members, this particularly involves payment problems on the part of their customers and lesser invest- ment requirements at home and abroad,”Nikl adds. The Alliance is trying to face up to this situation by expansion in the area of Research and Development. Now already, a number of firms in the Alliance are collaborating with the scientific and technical base and with univer- sities.“In this respect, for example, ASIO, which collaborates with the Slovak Technical Univer- sity, the Frauenhofer Institute, the Czech Acad- emy of Sciences, the Institute of Chemical Technology in Prague and Pardubice and the Technical University in Brno, is very active,”says Nikl.The Czech Water Alliance is not a rigid as- sociation. Currently, for example, negotiations are underway with another two firms regard- ing their joining the Alliance in 2012. The Alliance was one of the first such groupings in the Czech Republic to be set up with the organisational assistance of Czech- Trade Agency; co-operation with the Agency still continues. Thanks to CzechTrade, for ex- ample, the Alliance could join the Joint Par- ticipation in Specialised Exhibitions and Trade Fairs Abroad project, which makes it possible for professional organisations and individual enterprises to present themselves through joint participation in selected specialised trade fairs and exhibitions abroad. This project brings benefits both to the Czech State, which is broadly promoted at those events, and Czech water management companies associ- ated in the Czech Water Alliance, which con- cluded a number of international contracts during their presence at exhibitions in Peters- burg, Belgrade, Riga, and Kiev. “The support “I am glad that there is an agency such as CzechTrade, whose concern is the promotion of Czech exports, where one of the many forms of its activities is supporting alliances. Its office network covering practically the whole world is unique. Using its services provides us with opportunities for further expansion. The use of paid services, in my opinion, is well balanced, and in the final analysis it saves us time and money. Thanks to our experience gained during the many years of collaboration with the Agency, we can see and appreciate the more flexible and less bureaucratic method of its organisational management, which ensures prompter response to our requirements. The effect of being supported by a government agency is invaluable, adding to our credibility in negotiations with trade partners, especially those in the Eastern countries, on whom the CWA alliance concentrates the most.” Ivan Nikl, chairman for Czech Water Alliance. which in 2010 showed a 3.9% year-on-year growth. The most affected were small IT firms with turnovers of under CZK 100 million (ap- prox. EUR 4 million), whose output declined by10.9% in comparison with 2009. In 2011, on the other hand, the situation in the framework of the ICT market is positive in quarter-to-quar- ter comparisons. From the economic results of more than 50 firms, it ensues that in 2011 the IT services markets are growing and so is pro- ductivity:inthe2ndquarterof2011,morethan 40% of firms had higher revenues and gained more new orders than in the 1st quarter. Most firms attained these positive results with the same number of employees (60% of com- panies have taken on no new employees). Can you observe any strong trends that influence the IT sector? We can notice two very strong trends. In par- ticular cloud computing, where firms, instead of running their own servers and providing their own IT facilities, rent a central infrastruc- ture on the Internet and get remote access to their database, which means that they have it under better control.The other great trend is mobile social networks like Facebook and Google+. Here, Czech product firms have a great potential to develop applications for international markets. In the mobile area, it is easy to address dozens of millions of po- tential customers through central stores like Apple App Stores. International Co-operation under the Colours of the CzechWater Alliance

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inzerce Welding shop specialized in heavy welded parts such as machine parts and steel constructions up to 90 tonnes Certiﬁcate in accordance with EN ISO 3834 – 2: 2005 Large Certiﬁcate of Qualiﬁcation according to EN 1090 – 2: 2009 Methods of welding according to EN ISO 4063: Metal active gas welding (MAG – 135) Shielded metal arc welding (MMA – 111) Tungsten inert gas welding (TIG – 141) Oxy-acetylene welding (OAW – 311) Flux cored arc welding (136) Welded materials according to ISO/TR 15608: Material groups 1 - 11 Especially 1.1, 1.2, 1.4 We oﬀer preparation of factory documentation within the agreed range, the production of welded parts and machining of them at partner companies. FESTRA BRNO s.r.o., Křižíkova 68, 660 90 Brno, Czech Republic Phone: +420 544 500 730 – 733, Fax: +420 544 501 117 E-mail: festra@festra.cz www.festra.cz FESTRA BRNO s.r.o. QUALITY RELIABILITY RESPONSIBILITY

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| 3 6 R E G I O N Liberec Praha České Budějovice Jihlava Brno Zlín Ostrava Olomouc Pardubice Hradec Králové Ústí n/L Karlovy Vary Plzeň Source: Czech Statistical Office Zlín Region – Picturesque and Diverse The Zlín Region, with its long in- dustrial tradition, is linked with the name of Tomáš Baťa, the business- man who in the first half of the 20th century turned Zlín into a shoemak- ing empire. Still today, the Zlín Re- gion is one of the most industrialised parts of the Czech Republic, which at the same time boasts a healthy envi- ronment, a good prerequisite for the development of tourism. Nowhere else in the Czech Republic can such a diversity of landscape, folklore, historical and technical sights be found as in the Zlín Region. No other tourist area can simultaneously offer visitors mountain scenery, Mannerist garden architecture, spa treatment, and a grape harvest festival. Office of the Zlín Region třída Tomáše Bati 21, 761 90 Zlín Phone: +420 577 043 111 Fax: +420 577 043 202 podatelna@kr-zlinsky.cz www.kr-zlinsky.cz The Zlín Region is situated in the eastern part of the Czech Republic, stretching along the border with the Slovak Republic. To- gether with the Olomouc Region, it makes up what is termed a cohesion region - the Central Moravia NUTS II. With a surface area of 3 964 sq. km., it is one of the Czech Re- public’s three smallest regions. During the existence of Czechoslovakia, the Region’s territory formed the geographic centre of the state. After separation, the Zlín Region became a borderland area. It consists of four districts (Kroměříž, Uherské Hradiště, Vsetín, and Zlín). Public affairs in its territory are ad- ministered by 13 administrative districts of municipalities with extended competence. There are 305 municipalities altogether in the Zlín Region. ECONOMIC POTENTIAL In the first half of 2011, enterprises based in the Zlín Region had approximately 190 000 employees, according to the Czech Sta- tistical Office. The average monthly salary amounted to CZK 20 810 (approx. EUR 832), i.e. CZK 776 (EUR 31) more than in the same period of the previous year. The Zlín Region has a strong business base, consisting main- ly of small and medium-sized enterprises. In the past few years, the number of business enterprises has been growing, particularly in the construction and services sectors. However, despite its growth in the past two decades, the services sector remains rela- tively weak. In the coming years, its growth is nevertheless expected to intensify. Indus- try in the Zlín Region, with its 43% share, Zlín Region – basic data Population as at 30 June 2011 589 921 Gross salary 1st - 2nd Q 2011 CZK 20 810 (approx. EUR 832) Unemployment rate as at 30 Sept. 2011 8.79% SLOVAKIA POLAND AUSTRIA GERMANY holds an important position in terms of em- ployment. The services sector accounts for a 53.4% share of total employment, while agriculture provides employment for 2.8% of the economically active population. The Zlín Region has always been looked upon as an economically strong area with a high concentration of large industrial en- terprises. The emergence and development of a large part of the industrial manufactur- ing plants are linked with the name ofTomáš Baťa. In the past, the main manufacturing sector was the footwear industry, with other allied sectors, such as the rubber industry and engineering, developing in parallel with it. The Region is also known for its aircraft industry and other branches. These activi- ties were traditionally linked primarily with Zlín, the centre of the Region, and its hin- terland. In the course of time, other strong economic centres emerged in the Region, such as Vsetín, Kroměříž, Uherské Hradiště, and Uherský Brod. The current industrial potential of the Zlín Region is based on the existence of the original key manufactur- ing enterprises. The most important among these are involved in rubber manufacture, plastics production, electronics, electrical and mechanical engineering, and furniture manufacture. In the past few years, intensive development has been witnessed by the ICT sector. The Zlín Region offers skilled and flexible labour and very reasonable wage costs. The economic activity rate is 50.6%. TRANSPORT The Zlín Region has a dense transport net- work with great potential. Recently, the Region has been fully connected to the country’s motorway system, and the con- struction of more motorways and express- ways eastwards (Slovakia, the Ukraine) and southwards (Austria) is planned. Railway transport is also the focus of the Region’s Photo:RegionalAuthorityoftheZlínRegion Uherské Hradiště Zlín Kroměříž Vsetín

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3 7 |3 7 | C Z E C H B U S I N E S S A N D T R A D E DEVELOPMENTAL PRIORITIES OF THE ZLÍN REGIONAL GOVERNMENT UNTIL 2020 Economic Competitiveness – broader ap- plication of Research and Development results and Innovation, strengthening the role of small and medium-sized enter- prises and the services sector, competi- tiveness of the dominant sectors. Successful Society – a knowledge society and support of the knowledge economy, healthcare and social services, lower unemployment rate. Infrastructure and Rural Development – development of the public transport system, the Region as an inter-regional transport destination, making life more attractive and ensuring the diversification of activities in the countryside, improve- ment of the quality of the environment. Attractive Region – better exploitation of the tourism potential, care for the Region’s cultural heritage. attention, especially in connection with the railway corridor passing through the Re- gion, which is part of the North-South mul- timodal corridor (Poland – Czech Republic – Austria – Italy). The planning and realisation of the mod- ernisation of important regional railways and public transport terminals are currently underway. In connection with the develop- ment of tourism, a vast cycle path network is under construction, the most important of which is the backbone cycle path run- ning past the Baťa Canal and the Bečva cy- cle path. Cruises on the Baťa Canal are also an attraction for tourists. EDUCATION There are two universities in the Zlín Region: Tomáš Baťa University (www.utb.cz) in the regional city of Zlín, a university under pub- lic law, which awards Bachelor’s and Mas- ter’s Degrees in six faculties (more about the University on page 47), and the European Polytechnical Institute, a private university, in Kunovice (www.czechuniversity.com). THE REGIONAL CITY OF ZLÍN The statutory City of Zlín is the natural cen- tre of the whole of South-East Moravia. With its economic potential, Zlín maintains its position among the Czech Republic’s most important cities. It is a notable industrial, business, and cultural centre and the cen- tre of the Zlín Region. As a garden city, set harmoniously in the natural environment, it is a unique example of functionalist archi- tecture and 20th-century urban architec- ture, the heritage of Tomáš Baťa. The city is linked with the existence of film studios, the importance of which was enhanced by the success of animated films produced there in the latter half of the 20th century. Each year, the city is the venue for the International Film Festival for Children and Youth and the Barum Czech Rally motoring competition. An important aspect of Zlín are its cultural and educational efforts. The materialisation of these efforts is the Cultural and Univer- sity Centre, built between 2006 and 2011, according to the design of Eva Jiřičná. The peaceful countryside in the immediate vi- cinity provides a contrast to the busy city centre. Kroměříž District The Kroměříž District used to be an agricul- tural and industrial area. Currently it ranks alongside districts with an above-average unemployment rate, and has been included among regions with special state support. This opens up greater possibilities for inves- torstodrawsupportfromEUstructuralfunds. Velehrad - one of the most important pilgrimage sites in the Czech Republic. View of the Basilica of the Assump- tion of the Virgin Mary and of Sts Cyril and Methodius

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| 3 8 R E G I O N The engineering company of TOS Hulín, a.s. and TON, a.s. in Bystřice pod Hostýnem, the renowned bentwood furniture manufactur- ing company, are important representatives of local industry. The District boasts a new motorway crossroads, one of the largest in Central Europe. An important investment project in the territory of the District is the Strategic Industrial Zone in Holešov, built on an area of 360 ha in the vicinity of the mo- torway, with an infrastructure prepared to receive investors. The locality is suitable for investment in light industrial production.The Kroměříž District has very good prospects for the promotion of tourism, with a variety of attractive sights scattered around, such as the Archbishop’s Chateau, the Květná and Podzámecká Gardens in Kroměříž, which are included in the UNESCO List of World Natural and Cultural Heritage Sites. A pleasant way of spending active leisure time is visiting the Hostýnské Hills, where ideal conditions exist for cyclo-tourism. Uherské Hradiště District There are several important industrial enter- prises in the Uherské Hradiště District op- erating in engineering, electrical engineer- ing, and the arms industry, which provide employment to a large number of people. These include the companies Česká zbro- jovka, a.s., Slovácké strojírny, a.s. in Uherský Brod and AVX Czech Republic s.r.o. which manufacture passive electronic compo- nents. The countryside around Uherské Hradiště is referred to as “the land of sun- shine and wine”, renowned for its hospital- ity, folk traditions, and attractive sights. The most significant among the latter are the Velehrad compound of church structures, which is an important pilgrimage site, and the archaeological finds excavated in the District, dating back to the Greater Moravia era (9th-10th centuries A.D.). Running be- side the picturesque valley of the Morava River is a new cyclo-path linking up with a network of South Moravian wine trails. The White Carpathian foothills, a biosphere reserve under UNESCO protection, provide excellent opportunities for summer and winter holidays. Vsetín District The Vsetín District, just like that of Kroměříž, is afflicted by high unemployment and has been included among regions receiving special support from the state. Neverthe- less, there are several industrial centres in the District, specifically Vsetín, Valašské Meziříčí, and Rožnov pod Radhoštěm, with well-developed engineering, chemical, and electrical engineering industries. The most important firms in the District are ON Semi- conductor Czech Republic, s.r.o., DEZA in Valašské Meziříčí, and the engineering firm TES Vsetín, a.s. Vsetín and its environs is an attractive area for recreation with a dynam- ically developing offer of tourist services. The District’s greatest wealth is its attractive countryside. The Beskydy Protected Land- scape Area in the Vsetín District, in addition ZLÍN IS A REGION WITH GOOD OPPORTUNITIES FOR INVESTORS, WHICH INCLUDE: Its strategic position in Central Europe – close to both western and eastern markets Direct connection to the main trans-European transport corridors Diversified offer of skilled labour Industrial tradition in the Region Possibility of using EU Structural Funds Holešov Strategic Industrial Zone on an area of 360 ha Dynamically developing Tomáš Baťa University in Zlín Regional network associating entities supporting innovative business activities in the Region – The Innovation Infrastruc- ture of the Zlín Region Industrial clusters in the Region: plastics, footwear, woodwork- ing, and furniture clusters Excellent conditions for congress tourism, relaxation, regen- eration and incentive programmes Photo:CzechTourism One of the masterpieces of modern Czechoslovakian Constructivist architec- ture between the two World Wars was the office building of the Baťa company (No. 21), completed in Zlín in 1938, to the design of architect Vladimír Karfík

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inzerce Incipient businessmen and innovative companies are welcome in Holešov The Holešov Strategic Industrial Zone is open to all businessmen. Available there are not only plots for the construction of the production plant itself. From next year, it will be possible to rent an of¿ce, laboratory or production premises in the Progress Technology Park, which is being built in the Zone. The park is a complex of three buildings situated in the central part of the Zone. The Indu- stry Servis ZK Company, that takes care of the preparation and operation of the Holešov Zone, is the investor of the project. Project supported by EU The construction began this February and the total investment costs are CZK 150 million, CZK 112 million of which are covered by the Operational Program- me Enterprise and Innovation, that is administered by the Ministry of Industry and Trade of the Czech Republic. “The Holešov Industrial Zone belongs among the most important development projects of the Czech Republic. It is important that besides industry also science, research and innovations can be suppor- ted thanks to the Park,” stated Martin Kocourek, the Minister of Industry and Trade. The Business Incubator will be located in the Park, too. By extending the strategic zone of the Progress Technology Park, there are suitable premises available for any stage of entrepreneurship in Holešov. Place for innovations A larger part of the Progress Technology Park consists of two multi-purpose halls that offer premises for production. Among others there are also of¿ces, laboratories and background disposal in the halls. “Production and other pre- mises are in this case intended for innovatively oriented companies with a sig- ni¿cant potential of growth. Prevalent client is supposed to be a company with a short history, that disposes of unique technologies or know-how, but at the moment cannot afford its own grounds for construction,“ stated Jakub ýernoch, CEO of the Industry Servis ZK Company. The support of the project provided by the European Union contributed to the possibility to set very interesting prices. Applicants would pay € 18.5 for a rent of a square metre of the production area per year, in the case of a rent of of¿ces and laboratories it will be € 29. In the multi-purpose halls, there are available about 2.200 square metres for produc- tion, 600 square metres for laboratories, and 200 square metres for of¿ces. Business Incubator The Business Incubator will be situated in the third building that is designed as an administrative one. It mostly offers of¿ce spaces or laboratories. “In the business Incubator, the lease is preferential and some of the services are sub- sidised. This support is decreasing over time; the aim is a gradual adaptation to the market conditions. The incubation time is usually three years, after that lease and services are charged commercially,” adds Daniela Sobieská from the Technology Innovation Centre Company. This company, founded by Tomáš Ba a University together with the Regional Authority, will take care only of the part of the park designed for the incipient businessmen. The price for a square metre in the incubator is set at maximum € 29 per year. Progress Technology Park area of the Holešov Strategic Industrial Zone universal halls for innovatively oriented companies • ofoces, laboratories, production facilities • rental of production premises from € 18.5/sq. m/ year • rental of ofoces and laboratories from € 29 • available from 2012 • offer of additional services Business Incubator • preferential rent during the orst three years • incubation services • offer of additional services www.progresspark.cz petr.stibora@industryzk.cz Holešov Strategic Industrial Zone • plots technically prepared for construction • plots owned by the Zlín Region • area designated for industrial construction • no environmental burden, outside qood areas • archaeological survey carried out • plots located on qat land • plots size from 0.5 ha • high-quality highway linkage • price of plots € 18.5/sq. m • offer of additional services • assistance and consultancy during administ- rative procedures • engineering, technical support • legal and professional assistance • EU grant titles, projects New Address for Progress

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| 4 0 to the lure of mountain scenery with origi- nal virgin forests and the occurrence of rare animals and plants, provides opportunities for active sport – hiking, skiing, and cycling. The Wallachian open-air Folk Museum in Rožnov pod Radhoštěm is one of the oldest museums of folk architecture in Europe. The well-developed infrastructure and high- quality tourist services add to the Region’s attractions as a tourist destination within the framework of the CR. Zlín District The Zlín District is one of the economically most developed parts of the Zlín Region. The position of the rubber and plastics in- dustries is very important. Among the most significant enterprises are the Barum Conti- nental, spol. s.r.o., and Mitas, a.s. rubber com- panies, and the Fatra, a.s. plastics manufac- turer. Jelínek Vizovice is a world-renowned fruit brandy manufacturer. At the same time, the whole District also provides very good opportunities for recreation and relaxation. The hilly terrain with lovely natural scenery Statutory City of Zlín (Statutární město Zlín) Náměstí Míru 12, 761 40 Zlín Phone: +420 577 630 111 Fax: +420 577 432 911 muzlin@muzlin.cz www. zlin.eu Town of Kroměříž (Město Kroměříž) Velké náměstí 115, 767 01 Kroměříž Phone: +420 573 321 111 Fax: +420 573 331 481 meu@mesto-kromeriz.cz www.mesto-kromeriz.cz Town of Uherské Hradiště (Město Uherské Hradiště) Masarykovo nám. 19 686 70 Uherské Hradiště Phone: +420 572 525 111 Fax: +420 572 551 071 meu@mesto-uh.cz www.mesto-uh.cz Town of Vsetín (Město Vsetín) Svárov 1080, 755 01 Vsetín phone: +420 571491111 Fax: +420 571419278 posta@mestovsetin.cz www.mestovsetin.cz creates ideal conditions for hiking and cy- clo-tourism. The favourable climate and the curative springs of Moravia’s largest water- ing place, Luhačovice, attract visitors from all of Europe. The spa buildings were con- structed in Folk Art Nouveau Style according to the project by architect Dušan Jurkovič. Some 20 000 visitors come to Luhačovice each year. Another spa, smaller in size, with a modern golf course, is situated at Kostelec near Zlín.The most visited place in the entire region is the Zoo at the Chateau of Lešná near Zlín. The Baťa Canal, originally used for coal transportation, is an important tourist attraction. It passes through the District and ends at Hodonín. A pleasant way to see the surrounding countryside is to take a cruise along the Canal. Nearly 100 000 tourists ar- rive each year to enjoy the cruise. The statu- tory City of Zlín is the centre of the Zlín Dis- trict and the entire Region. Prepared by the Strategic Development Department Regional Authority of the Zlín Region R E G I O N Photo:RegionalAuthorityoftheZlínRegion The Flower Garden in Kroměříž, also known as the Pleasure Garden, is ranked among the most prominent achievements of gardening art on a global scale.

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inzerce Kroměříž is often referred to as the “Haná Athens”. It is a lovely, peaceful place resounding with music, filled with schools, art, and pleasant atmosphere. The Archbishop’s Palace with the Květná and Podzámecká Gardens is listed as a UNESCO World Heritage Site. Holding of company events in the city’s representative historical premises is certain to leave an unforgettable impression on all participants. The wine-growing Moravian Slovakia Region literally over- flows with opportunities for history lovers. Uherské Hradiště was founded by the 13th-century King of Bohemia, Přemysl Otakar II. The sumptuous castles of Buchlovice, Napajed- la, and Bojkovice will not only transport visitors back to the past, but can arrange an unforgettable experience for those wishing to spend glorious moments there - celebrations, weddings, or company events in an extraordinary, historical setting. In Napajedla and Bojkovice, visitors can even spend the night in the castle and savour the castle cuisine. Wallachia is an oasis of peace with an unforgettable atmosphe- re. Wallachia offers visitors excellent accommodation and ori- ginal food. Its perfectly equipped hotels, wellness centres, golf courses, conference halls and the supply of excellent services will be appreciated by all those seeking an undisturbed place for work and follow-up relaxation, rest and unusual experiences. Eastern Moravia combines the temperament of Moravian Slovakia, the serenity of Haná, and the stubbornness of Wallachia. The people in the Region like their piece of land, are kind-hearted and welcoming. You will feel safe there. The centre of the Region is the regional city of Zlín. The Tomáš Baťa University based there brings life and youthful fun to the city. The functionalist style of this industrial city, which is at the same time a city of parks and gardens, bears the marks of the booming times of the Bata firm which has its roots there. The Baťa compa- ny management system became famous throughout the world. The city is a traditional venue for businessmen, innovators, tourists, film-makers and physicians. Are you seeking original ideas and an attractive environment? Zlín must be your first choice. The Baťa Canal, a tourist waterway, is a unique technical site on which holidaymakers can go on cruises and even combine this experience with adrenalin aeroplane or balloon flights, or even parachuting. This is a good motivation for successful team-building events. Luhačovice Spa – The famous spa has 17 natural curative springs, favourable climatic conditions and unique Art Nou- veau architecture. At the same time, it provides excellent opportunities for business, congress and incentive tourism. There are large halls, as well as comfortable conference rooms. The quality of the environment, accommodation and catering hardly bears comparison. The Region You Will Like to Return To Centrála cestovního ruchu Východní Moravy, (East-Moravian Tourist Authority) ulice J. A. Bati 5520, 761 90 Zlín, Phone: +420 577 043 903 kongresy@vychodni-morava.cz www.east-moravia.com, www.vychodni-morava.cz

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inzerce

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| 4 4 R E G I O N inzerceWORLD-RENOWNED AIRCRAFT MANUFACTURER Aircraft Industries, a.s. The company is carrying on the tradition of more than 75 years of aircraft manufacture at the factory in Kunovice, which has produced aircraft of various categories to have scored success in the world market. In 1969, it launched what became probably the most successful product of the Kuno- vice plant, the L 410 aircraft. Over 1 100 airplanes of this type have so far been manufactured in various versions and modifications, and its serial production is still continuing uninterrupted. The L 410 forms the company’s main production programme at present. The company owns a non-public international airport, which is used for the test flights of the planes manufactured by Aircraft Indus- tries, a.s., as well as for normal air traffic. Throughout its history, the enterprise has had several owners. The last owner, Pamco Company, acquired it in 2005 and subsequently the new firm, Aircraft Industries, a.s., was established. In 2008, the major Russian mining enterprise, the Ural Mining and Metallurgical Company (UGMK), acquired 51% of the stock. The production of aircraft has been rising year by year. The company has launched a process of plane modernisation to in- crease the effectiveness and economy of its operation. It is investing in production expansion, thus increasing the number of employees. The company’s compound and production are being restructured and modernised. Thanks to its business approach, which places emphasis on the environmental aspects of enterprise, Aircraft Industries, a.s. won the 2011 Re- sponsible Firm of the Zlín Region award. It also received the Main Prize as the Zlín Region 2011 Company of the Year. The L 410 is a 19-seat passenger plane, powered by two turboprop engines, designed mainly for short and medium distances. The aircraft is capable of take- off and landing on short unpaved air- strips and of proven reliable operation in all climatic zones and extreme tempera- tures (-50°C to +50°C), has an excepti- onally rugged and versatile design, is highly resistant to corrosion and exter- nal influences, and has the largest cabin volume of all aircraft in its category which increases passenger comfort. The aircraft is also noted for its low operating and maintenance costs, and comprehen- sive support from the manufacturer. The L 410 may also be used for various purposes, due to the possibility of a quick modification of the interior – the luggage space can rapidly be expanded and the plane can be fitted with reclining seats, a cargo container, VIP chairs and tables, stretchers for the wounded, or equipment for parachutists. After completing a par- ticular mission, the aircraft can again be used for the transport of passengers. Besides this, the plane is manufactured in special single-purpose versions – namely for various applications such as a pat- rol, photogrammetry, VIP or ambulance aircraft, for parachutists, etc. Thanks to its variable design, the L 410 flies for air- lines, armies, government organisations, aero clubs, and other users as well. L 410 UVP-E20 AIRCRAFT Aircraft Industries, a.s., Na Záhonech 1177, 686 04 Kunovice, Czech Republic Phone: +420 572 816 002, +420 572 816 004, Fax: +420 572 816 006, E-mail: let@let.cz www.let.cz

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4 5 | The Zlín Region is Doing Well in Innovation The Zlín Region offers potential investors a well developed innovation infrastructure, its Holešov Strategic Industrial Park, the friendly approach of local institutions and many other benefits. In the first half of 2011, CzechInvest Agency attracted seven investment projects to the Region, worth CZK 273 million (approx. EUR 9.2 million).When completed, the projects will provide work for 130 people. Innovation is of basic impor- tance for the future of the economy, not only in the Zlín Region, but in the whole of the Czech Republic. In the Zlín Region, Innovation is faring well. SUPPORT FROM PUBLIC INSTITUTIONS IS NOTICEABLE The growing innovation potential of the Zlín Region is undoubtedly greatly due to the Region’s Innovation Strategy, approved by the regional authorities in 2008. Its aim is to raise the Region’s competitiveness and at- traction, especially in the area of Innovation. The Strategy also comprises the Action Plan for 2008-2013, which defines specific activities supporting the building of a good innovative,educational,andconsultingbase for firms, the supply of skilled labour and co- operationofthescientific,research,andbusi- ness sectors. At the end of 2009, an analysis was prepared to determine the innovation potential of the Zlín Region, describing the local business environment and its linkage to Research, Development, and Innovation. The brownfield issue in the Region is tack- led by another document, Brownfield Reuse Strategy in the Zlín Region. Its concept links up with the Region’s other strategic docu- ments, in particular the Development Strat- egy of the Zlín Region in 2009-2020 and the Zlín Region Development Programme. These efforts have helped to minimise the number of brownfields in the Region, where new entrepreneurial opportunities and new jobs are being created, accompanied by an improving environment. BUSINESSMEN’S RISING INTEREST IN EU GRANTS The availability and continuous develop- ment of institutions supporting Innovation, both public and non-public, are typical of the Region.This is borne out, for example, by the growing interest in subsidies provided by the Prosperity Programme, which is part of the Business and Innovation Operational Programme, supporting the building and development of innovation infrastructures, such as scientific and technical parks, busi- ness incubators, Tomáš Baťa University and other entities. Among other things, these institutions have established a regional net- work called the Innovation Infrastructure, the aim of which is not only promoting mutual co-operation, starting joint projects, and the sharing and transfer of know-how, but also the building of a consulting serv- ices network in the area of Innovation and activities defined by the Regional Innova- tion Strategy. Linking up with this area are innovation efforts in the business sector, as shown by the growing interest in obtaining financial support from the Innovation Pro- gramme, which is also part of the Business and Innovation Operational Programme. The number of institutions concerned with Research and Development in the Zlín Region is well above average, especially in the business sector. Much credit in this re- spect goes to Tomáš Baťa University in Zlín and the possibility of obtaining grants from the Business and Innovation Operational Programme, in particular the Potential Programme. Another indicator of the con- tinuing development of the Region is the number of manufacturing businesses seek- ing grants from the Real Estate Programme, which supports projects for the preparation, construction, development, and reconstruc- tion of real estate. Last Year the Holešov Strategic Industrial Park Attracted Six New Investors C Z E C H B U S I N E S S A N D T R A D E The Holešov Strategic Industrial Park is one of the largest develop- ment areas in the Czech Repub- lic. Its total surface area is 360 hectares. The basic technical and transport infrastructure of the Park was completed at the end of 2009, and now plots with surface areas of from 0.5 to 280 hectares are avail- able to new investors. The Holešov Park benefits from its good transport links and all the nec- essary technical facilities, in addition to skilled labour. According to a study pre- pared by two leading Czech economists, Petr Zahradník and Jan Jedlička, the Holešov Strategic Industrial Park assists in increasing employment, levelling out the difference between average earnings in the Region and the Czech Republic as a whole, raising the Region’s share of gross domestic product, improving trans- port infrastructure in the entire Region and further developing civic amenities in the vicinity of the Park. PERFECT TRANSPORT AVAILABILITY The Holešov Strategic Industrial Park boasts extremely good transport availability. The motorway is only 6.5 kilometres distant, the nearest public airport can be reached in about 30 minutes by car, and a railway sid- ing runs straight into the Park compound. In addition, just 6.5 kilometres from the Park, a new motorway crossroads is under construction near Hulín, one of the Czech Republic’s largest motorway intersections, called Moravian Cross, situated on the Cen- tral European West-East route, where the D1 motorway and the R55 and R49 high-speed

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| 4 6 R E G I O N “The Czech Republic has excellent results in ScienceandResearch,buttheproblemisthat we are not too good at putting them into practice from the laboratory. We have not yet learned how to make them earn money, which, according to international compari- sons, is one of the greatest hindrances to our competitiveness. Therefore, one of the principal aims of the Business and Innova- tion Operational Programme is to surmount this obstacle. Business incubators, such as the one in Kunovice, are the tangible results of our efforts to bring scientists and entrepre- neurs closer together,” said Martin Kocourek, Minister of Industry and Trade. “Beginning businessmen and entrepre- neurs with good ideas often do not have the money to start a business. This is where incu- bators can help. With their assistance, they can obtain subsidies for renting office rooms, laboratories and other space, and take ad- vantage of free consulting services and train- ing and re-qualification possibilities,” says Miroslav Křížek, General Director of CzechIn- vest Agency, adding: “In addition, by sharing space and laboratories, the firms which have joined the incubator can communicate and collaborate with each other more easily.” The project was realised in the framework of the Kunovice 2006-2010 Development Programme, in cooperation with the VŠCHT University of Chemical Technology and the Czech Technical University in Prague, and other organisations. In addition to support- ing businessmen, the aim of the project is to make research results available to inter- ested businessmen, and at the same time to motivate scientific workers. An interesting point is that the incubator is not a green- field project, but is the result of brownfield regeneration in the centre of the town. The town of Kunovice has obtained more than CZK 123 million (approx. EUR 5 million) from the Prosperity Programme, which is a part of the EU Business and Innovation Operational Programme, for the construction of a business incubator.The Kunovice- Panský dvůr business incubator is expected to help local businesses to grow and reduce unemployment in the Zlín Region.The Kunovice project was launched in 2009 and its construc- tion was completed in June 2011. New Business Incubator for Kunovice Photo:TomášBaťaUniversityinZlín,Kunovice-PanskýdvůrBusinessIncubator motorways will intersect. The latter will run straight along the southern border of the Park. The Park has a complete infrastructure, with gas pipelines, water mains, and electric- ity and communication cables covering its entire surface area. Naturally, wastewater and rainwater is drained away from the Park. To ensure an easy flow of supplies and effortless building of connections to the plots, the engineering mains are brought into the Park from two directions. Special care is given to sewage water disposal which, in the final analysis, greatly facili- tates the realisation of investors’ projects. The sewage water is carried to one of the most advanced sewage treatment plants in the Czech Republic by a feeder canal fit- ted with a pumping station. Reserve piping has been laid alongside the feeder canal for potential industrial water discharge. The rainwater canal empties into a dry polder with adequate capacity and the possibility of regulated discharge. The sites are con- nected to the backbone technical infra- structure, which is fully completed. The importance of this strategic Park is confirmed by the title awarded to it by CzechInvest Agency in its prestigious Busi- ness Property of the Year 2010 survey, as “The Most Successful Industrial Park of the Year 2010”. More at www.zonaholesov.cz/ TWO QUESTIONS FOR MS JANA BÁNOVSKÁ,DIRECTOR OFTHE KUNOVICE – PANSKÝ DVŮR BUSINESS INCUBATOR Doyoualsoofferyourservicestoforeignbusinessmen? Ourassistancetoforeignbusinessmenisprimarilybyofferingthemtheop- portunityofshort-termrentalsofourlecture,social,andvaulthalls.Thesehalls aresuitableforholdingtrainingcourses,seminars,conferences,company presentations,etc.Theseatingcapacityofthesocialhallisupto150,that ofthelecturehallis80,andthevaulthallhasacapacityof60.Thereisalso arestaurantandcafé,withthepossibilityoforderingcateringservices. Whichfirmsarealreadyestablishedinyourincubator? TheKunovicebusinessincubatorstartedoperationson1September2011.As wepublicisedourprojectforthewholedurationofitsreconstruction,allour officeroomsarealreadyfullyoccupiedbybeginningandinnovatingfirms. Moreatwww.pi.kunovice.eu/

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4 7 | C Z E C H B U S I N E S S A N D T R A D E University Open to New Ideas Tomáš Baťa University in Zlín offers its 13 500 students at six faculties opportunities to pursue technical, economic, humanity, medical, and art studies. An essential part of in- struction at the University is Science and Research, in which the Univer- sity collaborates with a number of institutions all over the world. well as with the Regional Research Centre helping firms in solving their problems, for which the centre obtains financial sup- port from these firms, the state budget, and the EU,” says Vladimír Vašek, Dean of the Faculty of Applied Informatics. The creation of new jobs for the University’s graduates, especially those who have completed their Ph.D. studies, i.e. repre- sentatives of the new generation of sci- entists and researchers, is also envisaged. In this connection, assistance is expected from emerging firms. “Also, the linkage between the research activities to be pur- sued by the technology park, the faculty and the centre and the educational activi- ties performed within Master’s and Ph.D. courses is hoped to lead to an important improvement of tuition based on the use of the modern equipment of the new fa- cilities,”Vladimír Vašek adds. The Faculty of Applied Informatics is currently building a research unit focused on the applica- tion of engineering informatics, alterna- tive energy sources, and safety. At the end of the year, the construction of another research unit, the Centre for Polymer Sys- tems, is to begin. It will employ more than 120 researchers, many of whom will be foreign scientists involved in the research into advanced polymer systems, such as polymer nanofibres, polymers for medical applications, biopolymers, and intelligent polymer materials. The Faculty of Technol- ogy, in turn, will be allocated new space in the Laboratory Centre, which is to be built next to the existing faculty building. THE UNIVERSITY BEARS THE NAME OF TOMÁŠ BAŤA (1876-1932), the founder of the footwear industry in Zlín and a world-renowned entre- preneur. The University is a member of a number of international organis- ations. As a respected higher educa- tion institution, it provides its gradu- ates with a Diploma Supplement recognised in all European states, ensuring them a better position on the European labour market. The Uni- versity holds the Diploma Supplement Label awarded by the European Com- mission, which enhances its prestige among European higher education institutions. EUROPEAN MONEY ASSISTS DEVELOPMENT This year marks the 10th anniversary of the University, which has become a repu- table educational, scientific, and research- focused higher education institution in the region and in the whole of the Czech Republic. In 2011, the University obtained money from the EU structural funds, which has been used to start several impressive projects worth more than CZK 1.8 billion (approx. EUR 72 million). These projects will significantly improve its possibilities as regards tuition, research, and cooper- ation with enterprises. Thanks to the grant, the University will be able to create new positions for highly specialised experts, which are also expected to attract foreign scientists. Currently, the construction of a new technology park specialising in in- formation and communication technol- ogy is underway. “We hope that the park will help to promote the activities of the Faculty of Applied Informatics as well as its educational, scientific, and research ef- forts, especially in the area of applied and contract research. Emphasis will be placed on closer cooperation with firms based in the park and with regional firms operat- ing in areas of interest to the University, as

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| 4 8 R E G I O N COOPERATION WITH ENTERPRISES TBU cooperates with firms, public ad- ministration and self-government au- thorities, non-profit organisations and individuals, whose number exceeds 100. The collaborative possibilities are very varied. They include education, research, development, innovation, and other spe- cialised areas, such as expert opinions, consulting, marketing, publicity, and pro- motion. “An important role in this respect is played by our current technology park, which offers firms the commercial rental of specially equipped laboratories, of- fices and conference rooms, including our scientific know-how. Currently, eight firms are based in the technology park and several more are cooperating with it,” says TBU Vice-Rector for Social Affairs, David Tuček. The Technology Transfer Centre provides services in the area of the industrial and legal protection of research and development outcomes (e.g. dealing with the Industrial Property Office, the European Patent Office, the World Intellectual Property Organisation, etc.). Nearly 150 firms use its services. IMPORTANT INTERNATIONAL PROJECTS TheUniversitycollaborateswitha number of international schools and institutions. For example, this year its team led by Be- renika Hausnerová, TBU Vice-Rector for Research and Development, was invited to participate in the Erasmus Intensive Programme entitled “Polymer Process- ing and Functionalization” (PPF). As part of the project, Tomáš Baťa University in Zlín, in collaboration with two of its part- ner universities – Universita degli Studi di Salerno and Ecole Nationale Superieure de Chimie de Clermont-Ferrand – organ- ised in late June and early July a two- week summer school in Salerno, Italy, for 33 students and 10 teachers from the Czech Republic, Italy, and France. “The aim of the PPF project is to link theoreti- cal knowledge with practical experience in the fields related to polymer process- ing and polymer functionalisation and, in particular, to recruit students for con- ducting research within major research projects implemented by the participat- ing research units. In connection with the construction of the Centre for Polymer Systems, intensive recruitment of scien- tists and researchers has now become one of TBU’s key priorities. Even now, the University’s Ph.D. programmes special- ising in polymer research are of a high standard. This is clearly reflected in the number of prestigious awards received by students of the Centre for Polymer Materials (e.g. the Werner von Siemens Excellence Award). Other achievements include the best section at the WSEAS/ NAUN conference held on the Island of Corfu, Greece, in July 2011, where lec- tures were presented by Ph.D. students representing the Centre for Polymer Sys- tems,” Hausnerová points out. More about the University at www.utb.cz Photo:TomášBaťaUniversityinZlín

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inzerce pump units for energy RENETRA is a Czech company focused on designing, manufacture and supplies of pumping units for industry and energetics. Further, we provide services such as diagnostics, optimization and maintenance. Our company was founded in 1999 with its main premises located in Hranice na Morave with branch ofﬁces in Prague, Zilina (Slovakia) and in Moscow (Russia). We continue in more than a hundred years´ tradition of pump production in Hranice na Morave and the Olomouc region and we are gradually developing it while introducing contemporary production philosophies – design and manufacture of industrial pump units from individual well-proven components. A SPECIALIST FOR APPLICATION IN ENERGY AND NUCLEAR FACILITIES / BT III / SC 2b, 1b, 1a EXACT TECHNICAL SOLUTION BY THE QUALIFICATION AND QUALIFICATION REQUIREMENTS (for NPP) - for applications in the NPP RENETRA supplied, among other pump units, canned motor pumps for hermetic applications. These pump units are specially designed in accordance with the requirements of the NPP technology and documented by qualiﬁcation reports, seismic testing and detailed calculations. In addition to applications in NPP RENETRA supplied pump units for circuits in heating plants, cooling circuits of industrial plants, condensate pumps and vacuum pump packages for turbines in power systems. Canned motor pump, H3BO3, 45kW NPP Mochovce, BTIII SC1a 1st stage condensate pump Steam condensate, H = 187m, 200 kW Cooling system - ENERGY RENETRA always provides complete services for its customers. From the design of equipment and documents in 3D (Solid Works), over parameter validation in the hydraulic testing room (which is the most up-to-date facility of its kind in the Czech Republic) to servicing by highly qualiﬁed technicians. RENETRA service always includes a vibration diagnostics including monitoring long-term trends and equipment ﬁtness. For applications in NPP seismic category 1a, RENETRA documented out calculations and seismic tests for equipment operation, vibra- tion aging tests or IP test. 3D projecting Hydraulic testing room RENETRA ISO 9906 class I or II, for both horizontal and vertical pumps RENETRA s.r.o., Náměstí osvobození 6, 753 61 Hranice IV-Drahotuše, Czech Republic, phone: +420 581 655 111 www.renetra.cz

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inzerce VISION IS THE FIRST STEP TO ACTION www.spinvest.cz

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inzerce WE DO BIG THINGS We have designed and supplied more than a hundred of power generation units with a total output of more than 40,000 MW to 25 countries around the world (for example India, China, Turkey, Bulgaria, Romania, Denmark, Finland, Brazil, etc.). The scope of our major current projects comprises general supplies of construction of a new production unit with supercritical steam parameters in the Ledvice power plant, a CCGT plant in the Počerady power plant as well as a comprehensive renewal of the Tušimice II and Prunéřov II power plants. We oﬀer our experience gathered throughout the aforementioned projects, which is highly suitable for development of power engineering projects, primarily in the project design stage. We excel in a strong professional know-how that we have been building under the ŠKODA PRAHA trademark for 60 years. Our energy generation works stand out due to their high technological quality, eﬃciency, reliability, and they are environmentally friendly. We are a member of the ČEZ Group, a progressive power engineering entity which proves to be one of the leading power engineering groups in Central Europe. WE ARE THE LARGEST CZECH ENGINEERING CONTRACTOR ABLE TO DELIVER POWER GEN- ERATION PROJECTS FROM THE DESIGN, THROUGH IMPLEMEN- TATION AND ASSEMBLY, UP TO COMMISSIONING AND PROVI- SION OF BOTH WARRANTY AND EXTENDED WARRANTY SERVICE. WE ALSO SUPPLY BALANCE OF PLANT. WE PROVIDE ENGINEE- RING WORKS AND SERVICE TASKS. ŠKODA PRAHA Invest supplies power generation units, prima- rily for conventional and nuclear power plants as well as CCGT power plants. We construct new power production units and re- construct the existing ones.

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4 2011 AGRICULTURE,FOODINDUSTRY,ANDFORESTRY SupplementofCzechBusinessandTrade

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AGADOS

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3 | AG R I C U LT U R E , F O O D I N D U S T R Y, A N D F O R E S T R Y Agriculture, Food Industry, and Forestry Supplement of Czech Business and Trade 4/2011 CONTENTS ANALYSIS Improving Situation of Czech Agriculture 4 Revival of Demand for RawTimber 8 ENTERPRISE Trends in Food Consumption 7 Uniqueness of Czech Beer 10 Czech Required for Food Labels 13 High Quality of Czech Wine 14 Over 4000 Organic Farms in the Czech Republic 16 WE SUCCEED České houby Company: Guarantee of Product Quality and Safety 21 LEGISLATION Restriction on Purchase of Agricultural Land Finally Abolished 19 KALEIDOSCOPE Growing Popularity of Freshwater Fish 20 Rules of Food Import from Other EU Countries 20 Slight Decrease in Food Consumption 20 Record Growth of Popularity of Fair Trade Products 20 SURVEY Poll of Successful Companies Operating in the Agriculture, Food Industry, and Forestry 22 PRESENTATION OF FIRMS: A.W. spol. s r.o.; AGROGEN, spol. s r.o.; CZ biolines s.r.o.; ČESKÉ HOUBY a.s.; EXTRUDO Bečice s.r.o.; FARMTEC a.s.; J 4 s.r.o.; LESS a.s.; MIKROP ČEBÍN a.s.; OHL ŽS, a.s.; ZVU POTEZ a.s. MK ČR E 6379 This magazine is published as a supplement of the Czech Business and Trade economic quarterly. Managing Editor: Pavla Podskalská Editor: Jana Pike Graphic Designer: Jiří Hetfleisch, Anežka Zvěřinová Production: Anežka Zvěřinová Address: PP Agency s.r.o., Myslíkova 25, 110 00 Praha 1 Czech Republic, Phone: +420 221 406 622 Fax: +420 224 930 016, e-mail: journal@ppagency.cz www.ppagency.cz Deadline: 27/10/2011 Attitudes expressed by the authors of articles in this magazine are not necessarily consistent with the viewpoint of the Publisher. Coverphoto:CzechTourism;page3photo:PhotoCombo IN THE NEXT SUPPLEMENT TO CZECH BUSINESS AND TRADE In the first Supplement of the Czech Business and Trade journal in 2012, we will survey the branches of medical equipment, optical instruments, measuring apparatuses and bio- and nan- otechnologies. The latter two sectors have recorded particularly exciting development in recent years. Gratifyingly, the Czech Republic has kept abreast of this development and is now globally competitive in these sectors. Although nanotechnologies have only recently left research labora- tories, the number of scientific institutions, associations and private firms which are capable of using their potential has been rising significantly. More in the 1/2012 Supplement.

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| 4 A N A LYS I S Following the accession of the CR to the EU, the economic situation of Czech agriculture has improved significantly, despite fluctu- ations in individual years. According to data from the Czech Statistical Office, the overall business revenue (“income”) of the field saw a 2.5-fold year-on-year increase to CZK 6.2 milliard (approx. EUR 248 million). During the seven years after the CR’s ac- cession to the EU, the overall accumulated income reached approximately CZK 52 mil- liard (approx. EUR 2.08 milliard), i.e. about CZK 7.4 milliard (approx. EUR 296 million) on average per year, whereas the average for the three years before the accession was CZK -2.1 milliard (approx. EUR -84 million). Factor income (i.e. net added value, includ- ing subsidies, excluding production taxes) per one work unit, i.e. resources for the re- imbursement of work costs, rent and inter- est, saw a year-on-year increase of 7.8% to CZK 261 500 (approx. EUR 10 460) in 2010. The highest factor income per employee (over CZK 600 000 in 2009 – approx. EUR 24 000) tends to occur, in the long term, in big enterprises oriented at plant produc- tion and especially enterprises located in less favourable natural conditions with very extensive beef raising on perennial grasses. These enterprises have a very low employ- ment rate (roughly 1.4–1.7 employees per 100 hectares). Conversely, the lowest fac- tor income per employee, in the long term, occurs in enterprises oriented towards pig income. The growing share of investment subsidies for the modernisation of agricul- ture is a positive development. Weareobservinga constant,gradualdecline in the number of agricultural employees. In 2010, the number of work units was 114 200 (year-on-year decrease of 5%), whereas dur- ing the period of 2001-3, it was on average 154 600 and 530 000 in 1989. The decline in the number of employees, coupled with the improved economic situation of enterprises, is reflected in growing wages in agriculture, despitethefactthattheaveragewageinthis field is well below the national level. In 2010, the average wage in the field amounted to CZK 18 644 (approx. EUR 746), i.e. 77.8% of the average wage in the national economy. The “price scissors” for agriculture closed slightly in 2010 when compared to the year before. A year-on-year comparison shows an overall growth of the price index of agri- cultural producers (PIAP) by 5.4% (while the consumer price index only grew by 1.5%), and the prices of entry into agriculture went down by 1.8%. However, in the long term, the price scissors have been opening since 2003. Pressures for lowering the PIAP are also the result of the lower efficacy of the domestic food-processing industry, espe- cially in the segment of primary processing of agricultural raw materials. In 2006, the Czech agricultural industry achieved about 40% productivity when compared to the average in EU 15 countries. Impact of Economic and Market Conditions on Production Structures in Agriculture The listed economic and market conditions are reflected in changes to the production structure of Czech agriculture, which also result from the adaptation of Czech agri- culturalists to these conditions. The annual value of agricultural production (in com- mon prices) has been fluctuating between CZK 93 and 105 milliard (approx. EUR 3.7–4.2 milliard) since 2003, with the share of plant production growing: while the ratio of plant to animal production was 50.3% to 49.7% in 2001–3, it was 56.9% to 45.1% in 2010. The changes in plant production after 2003 have been mostly caused by higher Photo:www.sxc.hu Improving Situation of Czech Agriculture Tomáš Doucha, Institute of Agricultural Economics and Information , e-mail: doucha.tomas@uzei.cz, www.uzei.cz and poultry farming (approx. CZK 150 000 in 2009 – approx. EUR 6 000). Subsidies contribute to factor income in the CR by approximately 70%, which makes Czech agriculture one of the most subsi- dised in EU countries. This indicates an ex- traordinary dependence and sensitivity of Czech enterprises to subsidies, which allow even less efficient enterprises to survive. Czech agriculture as a whole is incapable of covering its costs without subsidies; it would be unprofitable. The share of intermedi- ate consumption (variable costs) in overall production may have been decreasing, but the current share of 77% is still dispropor- tionately high when compared to the ma- jority of EU 15 countries. This indicates a less efficient utilisation of production resources which results in approximately half nominal factor income per employee. Growing Share of Investment Subsidies, Declining Numbers of Employees Subsidies for agricultural enterprises (ex- cluding the so-called general services – research, consulting etc.) have grown, in comparison to the period before the acces- sion, almost 3-fold and currently amount to approximately CZK 9 600 (approx. EUR 384) per hectare, or CZK 260 000 (approx. EUR 10 400) per employee. The greater part (66%) is covered from EU funds, and more than 50% is intended for increasing enterprise Graph 1 – Development of operating surplus (“income”) and factor income/AWU factor income/AWUoperating surplus CZKbillion 12 0 2 4 6 8 10 -2 -4 CZKthous. 350 50 100 150 200 250 300 0 2001-3 2004 2005 2006 2007 2008 2009 2010

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5 | AG R I C U LT U R E , F O O D I N D U S T R Y, A N D F O R E S T R Y production of cereals and rape; the econ- omy of this field has been helped by the growing demand for bio-fuels. Conversely, due to the decline in the numbers of ani- mals, we are seeing a significant decrease in the acreage of feeding crops, which creates a structural imbalance in the use of land and other factors, which is in turn balanced by the energy use of biomass (e.g. in the growing number of agricul- tural bio-gas stations). In the area of animal production, there has been a continuing decline in the number of dairy cattle (35% less in 2010 than before the accession), which has been accompa- nied by increases in its use value. However, the decline in the number of dairy cattle has also been accompanied by a continuing increase in the numbers of cows without any market production of milk (35% more in 2010 than in 2003). There has been an enormous decline in the number of pigs (of almost 45% when compared to the period before the accession) and consequently in the production of pork (of more than 37%, when compared to the period before the accession). A similar, albeit more moderate, Graph 3 – Plant acreage and numbers of animals in 2010 compared to the period before the accession, 2001–3 (% of change) -60 -40 -20 0 20 40 -80 cereals rape feedingcrops onarableland dairycattle cowswithout marketproduction ofmilk pigs poultry Graph 2 – Development of subsidies for agriculture (in CZK billion) 10 15 20 25 30 35 5 0 2001-3 2004 2005 2006 2007 2008 2009 2010 Direct subsidies for enterprises – operating Direct subsidies for enterprises – investment General services (research, consulting etc.)

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| 6 A N A LYS I S trend can be seen in the number of poultry and in the production of poultry meat. The listed trends correspond with the dif- ferences in the overall cost-effectiveness of commodities. The significantly favourable cost-effectiveness of main plant commodi- ties (e.g. 26% for food wheat and 17.7% for rape in 2009/10) is in contrast with the loss-making of the majority of animal production commodities (e.g. -20.2% for pigs, -2.8% for poultry, 8.6% for fatstock in general in 2010). Conversely, thanks to the growth of the PIAP, the cost-effectiveness of milk production improved significantly in 2010 – from a loss of -11.2% in 2009 to a positive 9.4% in 2010. Extensive beef rais- ing with cows without market production of milk is also very profitable with the given subsidies. Compared to farms in more developed countries of the EU, the cost-effectiveness of main commodities, while allowing for all costs, is relatively favourable (with the exception of, for example, pigs, poultry, or beef-cattle feeding). It is a consequence of, among other things, the currently low price of work and land in the CR. The main causes of problems in animal production include lower productivity of work and use of feed- stuff, and lower use value, i.e. worse produc- tion parameters. Foreign Agrarian Trade The Czech foreign agrarian trade is char- acteristic for its year-on-year increases of negative balance accompanied by grow- ing turnover, increasing share of raw mate- rial export (cereals, rape, live animals, milk) and growing import of processed prod- ucts. The trade deficit further increased to CZK 33.2 milliard (approx. EUR 1.3 milliard) in 2010. Import of processed products has been growing in the long term, especially in the area of meat and meat products. Tra- ditional export products (beer, malt, hops) suffered a year-on-year decrease of export in 2010. The trade balance is significantly influenced by the aforementioned lower efficacy of the Czech food-processing industry. Czech Agriculture and Natural Environment Following the year 2004, we saw a stag- nation or just a slight improvement in the relations of agriculture towards the natural environment. Despite significant stimuli and stricter conditions for the provision of subsidies, problems in this area have not been eliminated. These are mainly prob- lems related to water and wind erosion, relations of agriculture towards the water regime and protection of biodiversity. The Photo:MinistryofAgriculture,www.sxc.hu ratio of perennial grass greens to the rest of agricultural land is still high (around 27%) and does not correspond with the natu- ral and climatic conditions of the CR. One positive thing is the growth of the share of ecological agriculture on agricultural land (10.6% in 2010). However, it is still totally dominated by low production of extensive agriculture on perennial grass greens. Future Challenges The prevalent production force in the Czech agriculture is big enterprises (the average Czech farm is approximately 7 times as large as the average in EU 25). However, agriculture has only a small share of high added-value sectors (veg- etables, fruit, flowers, vine etc.) and a low effectiveness of animal production, i.e. sectors with more exacting requirements for the quality of management, work and technological facilities. Compared to the more developed countries of the EU, our agriculture shows an above-average ratio of costs for a relatively low production per hectare, and the CR is thus a country with a costly extensive production. The cur- rently low prices of work and land create a temporary competitive advantage for the Czech agriculture, but the rising prices of these factors, without an increase in ef- fectiveness of their use, represent a signif- icant risk for the Czech agriculture in the future. On top of that, the high ratio of hired work and land increase the sensitiv- ity of Czech enterprises to the ever fiercer market fluctuations which, to a certain measure, lessens the advantage gained by the size of the enterprises. Graph 4 – Balance of foreign agrarian trade for 2005–2010 factor income/AWUbalance CZKbillion 0 -30 -25 -20 -15 -10 -5 -35 -40 100 40 50 60 70 80 90 30 20 0 10 % 2005 2006 2007 2008 2009 2010 2005-10 Source: Institute of Agricultural Economics and Information

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| 8 A N A LYS I S Revival of Demand for RawTimber The Czech Republic is a country with a high extent of forest coverage. Forest land currently covers 2 657 379 hectares, which is about 34% of the overall land area of the country. Since the second half of the 20th century, forest acreage has been continuously increasing. The Czech Republic thus occupies 12th place among European countries when measured by forest coverage. Following the substantial decline of economic results during 2008 and 2009, the economy of forest owners (the State, municipalities, and private entities) im- proved significantly last year. The high- est year-on-year growth of economic re- sults was recorded by State forests. This is based on the “Report on Forestry of the Czech Republic in 2010”. Economy of Forest Owners Improved Significantly Last Year The improvement of the economic situ- ation of forest owners was mainly influ- enced by a revival of the demand for raw timber along with a substantial increase in average prices of critical products. Thanks to this revival and the grow- ing consumption of timber, the wood- processing industry was able to offer forest owners significantly higher prices for their supplies of raw timber. The for- est area in the CR grew by 2 164 hectares last year, with the dominant factor being the ongoing afforestation of agricultural land which is supported financially by the State. Foresters have also had suc- cess with changes to the species compo- sition of forests, i.e. increasing the share of hardwood timber, such as oak, beech, ash, and maple. Timber production from forests in the CR amounted to 16.74 mil- lion cubic metres of raw timber in 2010 which is 1.24 million cu. m more than in 2009. The overall timber reserve in forests has grown to 680.6 million cu. m. Accord- ing to the Report, 2010 was rather less successful when it came to protecting the forests. Damage was mostly done by windbreaks and bark beetles. Despite the fact that the situation had improved in the majority of production forests when compared to 2009, problems still per- sisted on small forest properties, stands in difficult terrain and in the vicinity of protected natural areas with non-inter- ference regime. Timber Export and Import Export of raw timber decreased by 202 000 cu. m in 2010 to 5 364 000 cu. m, mainly because of a decline in exports of conifer logs, which amounted to 856 000 cu. m. On the other hand, there was an increase in ex- ports of conifer pulpwood (504 000 cu. m). Raw timber import grew by 754 000 cu. m to 2 616 000 cu. m in 2010. There was an in- crease in the following product categories: conifer logs and pulpwood by 470 000 cu. m, hardwood logs and pulpwood by 72 000 cu. m and firewood, wood chips, sawdust and remains by 212 000 cu. m. What Forests Do We Have? Foresters in the entire Czech Republic will be investigating the state and develop- ment of our forests from 2011 to 2015. This investigation is called the National Stock- taking of Forests, and it is an independent investigation of the real state and devel- opment of forests in the Czech Republic. “The stocktaking allows us to collect data about timber reserves, timber species, health status and functions of forests. We use state-of-the-art field instruments to collect the data,” explains Miloš Kučera, Director of the Stocktaking Department. Similar investigations take place in the majority of European countries which gives us the opportunity to compare our results with those of other countries. For example, the first forest stocktaking has revealed that the Vysočina Region is one of the regions with the highest timber reserves in the country. It is also one of the regions that has stands with the least damage from animals. More information is available at www.uhul.cz/nil. IMPORTANT CONTACTS LESY ČESKÉ REPUBLIKY The State-owned Lesy České republiky (Forests of the Czech Republic) was founded by the Ministry of Agricul- ture of the Czech Republic in 1992. The company’s main activity is to manage more than 1.3 million hectares of forest property owned by the State (almost 86% of all State-owned forests) and care for over 39 000 kilometres of specified water courses and streams. Annual produc- tion averages approximately 7 million cubic metres of timber, which is roughly 72% of the current increment. www.lesycr.cz CZECH FORESTRY ASSOCIATION http://cesles.silvarium.net/ FOREST MANAGEMENT INSTITUTE www.uhul.cz/nil/ FORESTRY AND GAME MANAGEMENT RESEARCH INSTITUTE www.vulhm.cz/ Ownership Structure 60.1% - State forests 2.64% - Legal entities 16.55% - Municipal and city forests 0.05% - Church and religious groups’ forests 1.18% - Forest cooperatives and companies 19.48% - Forests owned by physical entities Source: The Forest Management Institute

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LESS LESS a.s. Bohdaneč 136, 285 25 Bohdaneč CORPORATE BUSINESS CENTRE ICO: 26115271, DIC: CZ 699001327 Tel.: +420 322 318 057 Fax: +420 327 313 152 e-mail: sales@less.cz www.less.cz WWW.LESS.CZ PROFILE OF COMPANY LESS LESS WAS FOUNDED IN 1992 AS A FORESTRY COMPANY WHOSE MAIN ACTIVITIES WERE FELLING, FOREST CULTIVATION AND WOOD TRADE. IN 2003, THE BOARD OF DIRECTORS APPROVED A PROJECT TO RESTRUCTURE THE COMPANY INTO A HOLDING, THE ACTIVITIES IN THE FORESTRY AND TRANSPORT WERE PASSED ON TO LESS & FOREST S.R.O., THE WOOD PROCESSING AND PRODUCTION OF GLUED PRODUCTS WENT TO LESS & TIMBER. THE COMPANY PRIZES HIGHLY THE GOOD RELATIONSHIPS WITH THE CUSTOMERS WHO IN THEIR TURN APPRECIATE THE COOPERATION WITH EXPERIENCED PROFESSIONALS AS WELL AS THE STATE OF THE ART EQUIPMENT AND FLEXIBILITY IN REACTION TO THEIR DEMANDS. LESS & TIMBER NOWADAYS BELONGS WITH THE MOST IMPORTANT PROCESSORS OF LARGE DIAMETER LOGS IN EUROPE. ITS PRINCIPAL ACTIVITY IS COMPLEX PROCESSING OF WOOD, MAINLY HIGH QUALITY LARGE DIAMETER CONIFEROUS, ABOVE ALL SPRUCE. THE COMPANY EMPLOYED ALMOST 573 EMPLOYEES ON AVERAGE, THE OVERALL TURNOVER WAS USD 358 MIL. IN 2010. LESS & TIMBER CURRENTLY OPERATES 4 SAWMILLS IN THE CZECH REPUBLIC WITH AN OVERALL CUTTING CAPACITY OF 460 000 M3 . IN SPRING 2010 LESS A. S. FIRST BOUGHT SHARE IN HOLZWERK HEMAU GMBH (HWH) IN GERMANY. AFTER TA- KING OVER THE COMPANY, LESS HOLDING BECAME THE LARGEST EUROPEAN PRODUCER OF GLUED SEMI-FINISHED PRODUCTS FOR WINDOW AND DOOR PRODUCTION. PRODUCTS - SAWN TIMBER: Construction sawn timber, balk, laths (roof laths, wooden construction, wood structure) Joinery elements, scantlings, parquetry elements (beech, oak, maple,ash…) Sawn timber for producing of glued beams, joining beams (spruce,pine,larch) Joinery sawn timber - coniferous (spruce, pine, larch) Joinery sawn timber - broadleaf (oak, beech, ash) Railroad sleepers (oak,beech) Pallets elements and sawn timber for packaging (industrial packaging ,pallets, cases) PRODUCTS - GLUED TIMBER: Layered window and door scantling (spruce,pine,larch) Massive window scantling Battenboards (spruce,pine,beech) Eurodeck (alternative of layered door scant- lings for production of doors) Our products have found their way to clients in the Czech Republic as well as abroad e.g. in Slovakia, Germany, Switzerland, Italy, France and other European countries but also in China, South Korea, South Africa or United Arab Emirates among others.

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| 1 0 E N T E R P R I S E Uniqueness of Czech Beer We would be hard pressed to imagine the Czech reality without beer and the beer cul- ture. Not only is it a part of every celebration of sports achievements, every anniversary and a number of jokes, the frothy beverage is also considered a medicine. The brewing industry in the Czech Re- public represents an even larger econ- omic sector than might be expected. Let us review some numbers from an Ernst & Young study of August 2009 that was per- formed in 31 European countries, includ- ing the Czech Republic... 7400 employees were directly involved in the production of beer in breweries, but 12 300 more employees were in supplier fields. Apart from that, approximately 32 000 people were employed in restaurants, pubs, and other types of gastronomical establish- ments, and 2 800 people worked in stores of various sizes and types. “People seldom realise that the brewing industry, which makes beer mainly from domestic raw materials, is not just about beer – that it represents a very important and efficient part of the Czech economy. The brewing industry is also an important and stable employer – often in locations that do not have a surplus of job opportunities, espe- cially in the regions,” says Jan Veselý, the executive director of the Czech Beer and Malt Association.“What is more, our brew- ing industry is becoming ever more ex- port-oriented, and as such it is an impor- tant ambassador for the good name of the Czech Republic abroad. At the same time, it is undoubtedly an industry that contrib- utes to the influx of foreign tourists to our country because Czech beer is the second greatest attraction for visiting the Czech Republic after beautiful monuments and our cultural heritage,” adds Veselý. Despite the fact that some Czechs have recently started to prefer wine, the selec- tion on the Czech beer market has been growing continuously. New beers from industrial breweries or mini-breweries are cropping up. There are some 650 brands of beer on the market, including 110 spe- cial beers. Nonetheless, we continue to be loyal to the classic – despite the diverse range of cherry or nettle beers, the most popular beer remains the fermented lager, preferred by 99.5% of people. However, un- like the increasing diversity, the overall pro- duction does not follow the same trend of growth. The production of domestic brew- eries, members of the Czech Beer and Malt Association, which represents around 84% of the overall production of beer in the country, has only grown by 0.9% compared to last year. The rate of growth of domestic consumption and export is approximately the same. There has been no change to the ratio of tap beers and lagers. The segment of special and flavoured beers continues to grow, with consumption up by 69% and 155%, respectively. The share of these kinds of beers on the overall consumption is, however, small. Photo:BudějovickýBudvar The Czech brewing industry uses mostly domestic agri- cultural products for the production of beer. Three hop- growing regions with 133 hop-growers in 215 Czech and Moravian municipalities achieve annual production of approximately 4 600 tonnes of hops. Still, in 2010 the hop-growers exported 4 310 tonnes of hops, with over 40%oftheexportedamountheadedforJapan.Exportsto Vietnam are also on the rise. Other important customers include Peru, Poland, Columbia, the USA, New Zealand, the Ukraine, Romania, Hungary, and Slovakia.

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1 1 | AG R I C U LT U R E , F O O D I N D U S T R Y, A N D F O R E S T R Y Growing Popularity of Non-Alcoholic Beer The trend of the last ten years has been confirmed, and the production of non-al- coholic beers has increased, with year-on- year growth of almost 19%. Today, there are some 30 brands of non-alcoholic beers on the market, produced by 27 breweries. For example, 542 000 hectolitres of non- alcoholic beer were produced both for export and the domestic market in 2010, which is a year-on-year growth of 2.4%. It is expected that non-alcoholic beer will gradually make its way into the network of mini-breweries, which deem it necessary to quickly satisfy the rapidly growing de- mand for this kind of beer. “Non-alcoholic beer is becoming more popular mainly because of its increasing quality, which has been aided by the growing selection on the market. Marketing activities by brew- eries providing edification regarding the consumption of this beer have also been helpful,” says Veselý. “It is also sought by drivers or bicycle riders who like beer but cannot, for obvious reasons, choose the al- coholic variant of the beverage while driv- ing. Another reason is the generally more demanding lifestyle,”adds Veselý. Growing Production of Beer in Cans and PET Bottles While the consumption of beer in bot- tles and kegs corresponds with the 2010 level, the production of beer in cans and especially in PET bottles is growing. The production of beer distributed in this ever more popular packaging has seen a year- on-year growth of over 79% (21% for cans). Ten years ago, over 50% of beer was distributed from breweries to consumers in kegs, and beer was consumed mainly in pubs and other gastronomical establish- ments. This share has gradually decreased to 45.1% in 2010. Conversely, the position of bottles on the beer market has been growing stronger. In 2000, the dominant position among bottles was held by glass with 45.7% of the market. Today, glass bottles represent 46% of all the packag- ings used for distributing beer; PET bot- tles stand at 2.8%. PET bottles may have been on the market for ten years, but their share was almost non-existent just three years ago. Their greatest boom came after 2009 and in the following years. Promising Export to the United Kingdom and Russia “Concerns suggesting that our brewing industry has failed to overcome the state of stagnation, caused by the lingering impact of the growth of the consumer tax on beer and the continuing weak de- mand from abroad, have been confirmed,” says František Šámal, Chairman of the Czech Beer and Malt Association. “Import of cheap beers, especially from Poland, which soared in 2010, has not changed this year,” adds Šámal. Export of beer to Germany, which has traditionally been the IMPORTANT CONTACTS: Hop Growers Union of the Czech Republic www.czhops.cz/ Czech Beer and Malt Association www.cspas.cz/ Czech Association of Small Independent Breweries www.csmnp.cz/ Research Institute of Brewing and Malting www.beerresearch.cz/

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| 1 2 I N V E S T M E N T SYSTEM OF INSPECTIONS PROTECTS CZECH BEER AGAINST FAKES The rigorous system of inspections carried out by the Czech Agriculture and Food Inspection Authority (SZPI) prevents Czech beer with the Protected Geographical Indication (PGI), Czech Beer, from being imitated by other producers, especially from abroad. In mid-2011, 9 breweries were using this PGI for 46 beers (the Protected Geographical Indication Czech Beer is now being used by, for example, Plzeňský Prazdroj, Pivovar Černá Hora, PivovarVyškov, or Rodinný pivovar Bernard), which is 56% of the domestic beer market.This number is expected to grow. “Even though it has been three years since we acquired the Protected Geographical Indication Czech Beer,wemayyethavetofullyrealisethesignificanceofwhatweachievedforourbrewingindustryand especiallyforourconsumers,”saysJanVeselý,theexecutivedirectoroftheCzechBeerandMaltAssoci- ation.“Czechbeer,renownedtheworldoverandappreciatedforitsquality,isnowprotectedfrompla- giaristswhowouldwanttoabusethephenomenon.Atthesametime,theindicationguaranteesour brewersthepossibilitytoproducebeerusingmorepower-hungrytechnologiesandfromrawmaterials that need to be constantly innovated, even as it allows the beer to keep its much prized qualities, i.e. uniquetaste,colour,tangand,mostimportantly,drinkability.Alltold,theconsumerwantstohavean- otherbeerandcanneverbecontentwithjustone,”addsVeselý.TheProtectedGeographicalIndication (PGI)CzechBeerwasapprovedbytheEuropeanCommissionerforAgricultureandRuralDevelopment in December 2008. According to the conditions of the approved PGI Czech Beer, local producers from designatedlocationsmustuseatleast80%ofmaltfromapprovedvarietieswithspecificqualitiesand specifiedamountofCzechhopsfortheproductionofsuchbeer.Beersthatdonotsatisfythespecifica- tion may not use the PGI Czech Beer. And if they did, these would be fakes. Aprotected geographical indicationiscurrentlyapprovedfor18otherproductsintheCzechRepublic. PRESTIGE OF CZECH BEER According to the results of the long-term research project called Pubs and Beer in Czech Society, which is organised by the Public Opinion Research Centre of the Institute of Sociology of the AcademyofSciencesoftheCzechRepublic,approximately90%ofmenand50-60%ofwomenin theCRdrinkbeer.Theamountofconsumedbeerhas,inthelongterm,beenaroundninehalf-a- litresperweekformenandtwohalf-a-litresforwomen.Thelong-termpublicopinionregarding the future of Czech beer and the beer industry is predominantly optimistic, despite the fact that there are occasional hints of downturns in the prosperous expectations. This is evidenced, for example, by the fact that 74% of the population is not afraid of Czech beer being pushed from thedomesticmarketbyforeignbrands.Themajority(65%)oftheCzechpopulationstillbelieves that Czech breweries will break through to foreign countries. Czech consumers have a relatively clearly profiled taste in the long term. Approximately 80% of men choose beer from a particular brewery (50% for women). A continuous trend shows that people have a strong preference for taste when it comes to aspects of choice of beer (70%), and it is still growing. The price of the beer is much less important, with only 26% of Czechs considering it very important. greatest importer of beer from the Czech Republic, has suffered a year-on-year de- crease of 5%, and export to Sweden has dropped by more than a third. On the other hand, export of beer to Slovakia has increased significantly by 22%. Other im- portant importers with promising results include the United Kingdom and Russia. Furthermore, Czech beers have done well in international comparison. For exam- ple, Radegast beers recorded an impor- tant success at one of the most prestig- ious beer competitions in the world. At the Australian International Beer Awards in Melbourne, Radegast Birell won silver and Radegast Premium took bronze (243 breweries from 34 countries participated in the competition). THE BEST CZECH BEERS Awardsforthebestbeersweregiventobrewersduringthe eleventhannualcompetition,CzechBeer, at the end of September 2011. In the category of non-alcoholic beers, in which 10 beers competed, Birell, produced by the Plzeňský Prazdroj, a. s., group, successfully defended the first place it won last year. In the still popular category of light tap beer, in which breweries entered with 17 beers, the first place was split between Staropramen Světlý, produced by Pivovary Staropramen, a. s., and Holba Classic from the Holba, a. s., brewery which belongs to the PMS Přerov, a. s., group. The most prestigious category of beers is the light lager or pilsner – the first place went to Litovel Premium by Pivovary Litovel, a. s., the PMS Přerov, a. s., group. Connecting Research with Practice Czech beer does not rely only on its his- torical tradition but also tries to constantly come up with ground-breaking novelties. One of these innovations is a project by the Research Institute of Brewing and Malting, which introduced a unique technology that allows for the safe production of beer for people with the coeliac disease. Žatecký pivovar, spol. s r. o., expressed interest in the results and, in cooperation with the Insti- tute, implemented the gluten-free technol- ogy and produced the first batch of beer, which it is now introducing to the market as Celia. The main raw material for this beer remains Czech malt, which is processed in a specific way in a digester house and un- dergoes modified main fermentation and final fermentation. The new beer not only satisfies the most stringent limits pertaining to the content of substances dangerous for people suffering from allergy to gluten, but also retains all characteristic flavour qualities of Czech beer. Photo:BudějovickýBudvar

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1 3 | E N T E R P R I S E Czech Required for Food Labels Basic mandatory information provided by pro- ducers must be in Czech and at a visible place for consumers in the CR. The information must beunderstandableandeasilylegible.Itisa mat- ter of course that they must not be covered up or interrupted by other information and must be indelible.The font size is not stipulated. On packaged goods, producers must es- pecially provide the kind of information that is of interest to consumers – expiry date. This information is provided for foodstuffs that, from a microbiological point of view, are very susceptible to going bad and that have to have the “Best before...” data on their packag- ing. A product may not be sold after its date of expiry nor offered for free.The best-before date indicates a minimum period of time during which foodstuffs keep their specific qualities and satisfy conditions of health safety. These products may be sold even after their expiry date (for a discounted price as well) but need tobelabelledassuchandseparatedfromregu- lar goods. Other information provided include ways of use (such as for foodstuffs intended for microwave heating or for diluting) and storage. Thefollowinginformationisalsomandatory: name of enterprise, producer’s or import- er’s place of business; name of foodstuff – name of its kind (“but- ter”,“chocolate”,“processed cheese”); information about ingredients and prod- uct amount, so that a consumer can de- cide whether the price corresponds to the contents in order to avoid undesirable substances; the information also lists addi- tives denoted by E-codes; amount of units of the same kind pro- duced under the same conditions (batch) – production date (or a code if there is no best-before or expiry date); information regarding purpose (for special nutrition foodstuffs); information regarding possibilities of ad- verse influence on health and ionising ra- diation treatment. Special labelling requirements are in effect for, for example, bio-products, foodstuffs from genetically modified raw materials, foodstuffs for infantile nutrition, for various diets or supplements, and for wine. In spe- cial cases, nutrition values are required or in- formation about quality class. Exceptions to labelling are stipulated for small packagings or repeatedly used packagings labelled with indelible text. Labelling must not mislead about the qualities, amount or origin. Label- ling must not attribute to products qualities and virtues they do not posses, and it must not evoke the feeling that the producer offers food that exhibits special character qualities when in reality all similar foodstuffs have these characteristics. More detailed information pertaining to food labelling, including up-to-date im- plementing regulations for the act No. 110/1997 Coll., on food and tobacco prod- ucts, with specific requirements for indi- vidual groups of foodstuffs, can be found on the website of the Food Authority of the Ministry of Agriculture at www.food- safety.cz.

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| 1 4 E N T E R P R I S E High Quality of Czech Wine “Our wines are aromatic, full and balanced, with an adequate amount of alcohol and acids. Their success abroad is only logical be- cause competitions represent an objective comparison of the quality of wines from all over the world, and ours belong to the top,” says Mr Jiří Sedlo, the chairman of the Associ- ation of Czech Vinegrowers and Winemakers. TheconsumptionofwineintheCRis growing.Accordingtoyourassociation,it was20litrespercapitain2010.Isthatagood pieceofnewsforCzechgrowers,ordoesthe Czechconsumerpreferforeignwines? It is definitely good news, and it corresponds with our expectations. We expect further growth of wine consumption, all the way to 25 l per person per year, which would mean reaching the approximate average of consumption in the EU. The potential of vineyards in the CR does not allow for cov- ering more than half of domestic consump- tion, which means that consumers have a relatively broad selection of wines from the whole world. We usually import simpler wines into the CR, which we do not devote time to in our wineries. Our vintners try to produce quality wines and wines with spe- cial attributes. In the mid-90s, vineyards in the CR occupied roughly 11 500 hectares. Today, it’s significantly more. Before joining the EU, which limits the planting of new vineyards, Czech vintners expanded the areas of their vineyards with state support. Do you think the area is now sufficient for Czech vintners? As I have already indicated, our production potential is undersized with respect to con- sumption and its growth. We still have re- serves in per hectare yield – it is much lower than in France, Italy, and Austria, and when compared to Germany, it’s actually half. On the other hand, we do not want to increase the yield too much because that would in- fluence the quality of the wine, which we wish to maintain. At the same time, we sup- port limiting further expansion of vineyards in the EU because that is the only way to preserve the quality of European wines and curb the surplus of wine in the EU. Even though we are not an export country in the area of wine, our producers succeed in international competitions. What is it that makes our wines interesting? Our wines are aromatic, full and balanced, with an adequate amount of alcohol and acids. Their success abroad is only logical because competitions represent an objec- tive comparison of the quality of wines from all over the world, and ours belong to the top. If you’re asking why they have such good quality, I can list several reasons. For example, the favourable climatic condi- tions; the north is more suitable for getting aromatic substances, but the northernmost border is limited by winter frosts, their fre- quency and the resulting cost-effectiveness of vine growing. A very important role is un- doubtedly played by the thousand-year tra- dition of our wine-making, the use of mod- ern technologies and the regulated yield of grapes. Our ten-year average is around 5.6 tonnes per hectare; it’s about 7 tonnes in the EU and 12 tonnes per hectare in the USA, South Africa, or Australia. You’re right, we are awarded a medal from almost every competition, which is certainly nice in view of the amount of our production compared to the world. This year’s amended version of the act on vineyards and wine-making brought the elimination of the table wine category, the possibility to add acidity to products made from grapes in case of adverse GRÜNER VELTLINER AND SAINT LAURENT LEAD THE WAY According to a report by the Ministry of Agriculture, the poten- tial of vineyards in the CR in 2010 was approximately 19 633 hectares, with a planted area of 17 338 hectares. Other areas are taken up by grubbed vineyards, rights to repeated planting and states reserves.The most commonly grown varieties were: GrünerVeltliner(1680.1ha),MűllerThurgau(1664.8ha),Ries- ling (1 266.7 ha) and Welschriesling (1 209.5 ha) of the white varietiesandSaintLaurent(1405.7ha),Lemberger(1229.ha), Zweigeltrebe (842.5 ha) and Pinot Noir (717.5 ha) of the red varieties. In 2011, wine-makers produced approximately 360 thousand hectolitres of wine, with an average grape yield of 2.7 t/ha. During the wine-making year of 2009/2010 (i.e. from August 1 to June 31 of the next year), approximately 564 000 hectolitresofwinewereproduced,ofwhichabout367000hec- tolitres was white and about 197 000 hectolitres was red wine. The amount of wine produced saw a year-on-year decrease of almost one-third.This decrease was caused by a smaller grape harvest due to adverse weather. The overall import of wines into the CR grew by approximately 2% or 1.38 million hecto- litres when compared to 2009. Jiří Sedlo Photo:©P.Krška,J.Skoraysa-source:www.winofczechrepublic.cz,JiříSedloarchive

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1 5 | climatic conditions, and it also made it more difficult to falsify wines. What other measures are included in the amendment? It is basically a measure in accordance with the Council Regulation (EC) No. 1234/2007, which means the elimination of table wine (now called just “wine”) and, in limited cases, the possibility to state the variety and vintage even for these kinds of wines. That is an example of a measure we didn’t want in the act on wine-making, but we had to include it because of the EU. The possibility to increase the acidity of must puts the conditions on the same level with other member countries of the EU. The act also introduces, again because of the EU, the terms Protected Design- ation of Origin (PDO) and Protected Geo- graphical Indication (PGI). Fortunately, we can still use traditional labelling in parallel, such as “quality wine” or “quality wine with special attributes”, and instead of PGI, we can use “land wine”. It was necessary to make it harder to falsify wines because the amount of imported wine that had been falsely labelled as “Moravian” kept grow- ing; in truth the countries of origin includ- ed Italy, Hungary, Slovakia, and Austria. Do you perceive any strong, current trend, be it in the CR or worldwide, that influ- ences the area of wine-making? The worldwide popularity of wine peri- odically shifts from white to red and back. The amplitude of this change tends to be fifteen to twenty years. The “dominance” of red wines has recently ebbed and the pop- ularity of white wines is growing. At the same time, the demand for rosé wine has been on the rise; today, rosé made strictly from red grapes accounts for 7% of all do- mestic wine. Similarly to other foodstuffs, there is a growing interest in bio-wine.

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| 1 6 E N T E R P R I S E Over 4000 Organic Farms in the Czech Republic According to official data of the Ministry of Agriculture, the number of organic farmers ex- ceeded 4000 in the Czech Republic in August 2011, when there were 4022 farmers farming in accordance with environmentally-friendly regulations (there were 3517 at the beginning of this year). The area of land farmed in ac- cordance with the rules of organic agriculture increased from 448 202 hectares at the end of last year to 483 176 hectares by the end of August 2011. The share of organic farming on the overall acreage of agricultural land has in- creased from 10.56% in January to 11.4%. The number of producers of organic food has been increasing for several years, and 2011, with 24 new producers, is no excep- tion. There were 650 of these producers at the end of August. The acreage of arable land used for organic farming increased by 6 708 hectares to 62 645 hectares this year. SUBSIDIES IN MILLIARDS Organic farmers received subsidies in the amount of CZK 1.5 milliard (approx. EUR 460 million) last year, 80% of which was covered from EU funds. Supported projects include the introduction of organic food in schools and regional sales of organic food, with the main focus being on organic milk.These projects are successful and contribute to an environment in which both farmers and consumers have sufficient information about the advantages of organic food, high quality standards which mustbemetbysuchfood,andwheretobuyit. Organic farmers may not use chemical agents, either as fertilisers or as pest control or as pro- tection of crops against disease or weeds.They must adhere to stricter standards of animal care than conventional farmers. Subsidies for organic farmers are also higher than those for their conventional colleagues. According to the Action Plan of the Czech Republic for the Development of Organic Farming 2011–2015, theshareoforganicfoodonthedomesticfood market should increase to 3% in five years. These goals are to be supported by stronger marketing campaigns and efforts to raise the awareness of the public about the advantages of organic farming and organic products. The Ministry of Agriculture also wants the share of Czech products on the organic food market to increase to 60%; more than half of all organic products is currently imported. FACTS: The CR is one of the countries with the av- erage size of an organic farm significantly exceeding the European average, which is about 40 hectares (it was 127 hectares in the CR in 2010). Czechs are becoming more interested in organic food. According to estimates, ap- proximately CZK 2 milliard (approx. EUR 800 million) were spent on organic food in 2010. The main areas of organic farming have tra- ditionally been the less favourable moun- tainous and foothill areas of the CR. The largest areas of organically farmed land are located in the border, mountainous districts of the South Bohemia, KarlovyVary, Moravia- Silesia, and Ústí Regions. WINNER OF CZECH ORGANIC FOOD 2010 COMPETITION JosefSklenář,theownerofBiofarmaSasovclose to Jihlava, was awarded for his organic boar salami and became the winner of the Czech Organic Food 2010 competition. Moreover, this farm can be proud of its second win in the nine-year history of the competition. In 2004, it was awarded for its organic Hungarian salami, a qualityfermentedsalami.Theorganicboarsa- lami is a long-life fermented salami of the high- Photo:www.sxc.hu According to the Act on Organic Farming, all interested parties who wish to conduct an organic farming business must submit an application for regis- tration to the Ministry of Agriculture. Registration distinguishes among the following categories of entities: eco-friendly entrepreneur (i.e. organic farmer), producer of organic food (or processor of organic products), entity putting organic food or organic products in circulation (i.e. distributor), producer and supplier of organic feedstuff, producer and supplier of organic reproduction materials/seeds, organic apiarist

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1 7 | est quality, whose long life is achieved through stewing and fermentation with the use of start- ingcultures.Itismadesolelyfromorganicmeat and spices, with organic salt used as a natural cure, making the organic boar salami gluten- free. One salami weighs 400 grams, and its date ofexpiryisonemonthfromitsproductiondate. The meat from non-castrated baby boars from organicbreedingattheorganicfarminSasovin Vysočina is used to make the salami. The meat for the salami is butchered in the farm’s own abattoir, and production takes place in Kostelec u Jihlavy, which is only 10 km from the farm. THE COMPETITION HAS PRESTIGE AND STRONG BACKING The Czech Organic Food Competition, which isorganisedbytheFederationoftheFoodand Drink Industries of the Czech Republic togeth- er with the PRO-BIO Association of Ecological Farmers, was organised for the ninth time in 2010. 17 producers of organic food nomi- nated 42 products in the competition. Apart from the main prize, winners in the individual product categories were awarded as well. The winner of the Milk and Dairy Products catego- ry was Jogurt bílý 3% (white 3% yoghurt) from Mlékárna Valašské Meziříčí, which is produced for the “naše bio” (our organic) retail brand. The best-rated product in the Mill and Bakery Products category was the Chléb pšenično- žitný cereální s Nopalem BIO (wheat-rye cereal bread with Nopal BIO) from the Country Life, s. r. o., organic bakery. The jurors were intrigued by the winner in the Fruit andVegetable Prod- ucts category, the Hrušková bioláda (pear organic marmalade) by Hana Němcová of the Koldokolfamilyfarm.TheOrganicFoodinGas- tronomycategorywaswonbyExtrudoBečice, s. r. o., with the Bio Lívance product (organic pancakes). Results in the newly introduced category, Wine from Organic Grapes, were awaited with great suspense. The winner was Malverína pozdní sběr 2007, suché (Malverina late harvest 2007, dry) from the production of Vinselekt Michlovský.

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J4 J4 s.r.o., Průmyslová 96, 503 02 Předměřice nad Labem, Czech Republic phone: +420 495 581 137, 495 581 139, fax: +420 495 581 321 e-mail: j4@j4.cz, j4@j4.eu, www.j4.cz WE PROVIDE Production and installation of PPP tunnel baking band ovens adapted to suit the customers‘ needs, with various types of baking bands (wire-mesh, link plates, jalousie, metallic, stone [granite] plates) for bakeries and patisseries to bake quality brown and white bread, baked to hearth or in pans, various bakery products, pastry, biscuits, gingerbread, cookies, confectionery products, savoury snacks, etc. Deliveries of complete technological units for bakeries and patisseries, including lines for toast and moulded bread Deliveries of lines for baking biscuits for dogs and other animals Production and installation of steam generators Repairs and deliveries of components for PPC ovens, including new control panels, burners, and electrical equipment Production and assembly of indirect heat dryers of grain, maize, rape-seed, poppy-seed, and cereal seed Deliveries of equipment for waste heat utilisation www.j4.eu

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1 9 | X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X Restriction on Purchase of Agricultural Land Finally Abolished Petr J. Syrovátko, Ondřej Mánek, e-mail: petr.syrovatko@wolftheiss.com, WOLF THEISS advokáti / Attorneys-at-Law The Czech Republic has finally abolished the restrictions which limited foreigners (includ- ing citizens of the European Union) in direct acquisitions of agricultural land in the Czech Republic. Effective as of 19 July 2011, the ap- plicable Czech laws reflect the fact that the transitional period during which foreigners were not allowed to directly acquire Czech farmland and woodland has expired. Cur- rently, foreign investors are considering op- portunities in investment in Czech agricul- tural land including land currently owned by the Czech State. Former restrictions on purchase of agricultural land On the basis of the freedom of movement of capital, citizens of the European Union are, in general, free to acquire real estate in other states of the European Union without any restrictions. However, upon its acces- sion to the European Union in 2004, the Czech Republic was granted an exemption which was implemented by the introduc- tion of the so-called transitional period for a duration of seven years. During the transi- tional period, certain restrictions applicable to foreigners were maintained in the area of the acquisition of, among others, Czech farmland and woodland. During the transitional period, non-resi- dents (i.e. individuals without permanent residence and foreign entities) were only entitled to acquire farmland and wood- land in the Czech Republic if: the non-residents became Czech citizens; or the non-residents held residence per- mits as nationals of the European Union member states, provided that they were (i) registered as agricultural entrepre- neurs in the territory of the Czech Repub- lic, and (ii) had been permanent residents in the Czech Republic for a minimum of three years. In the case of the above-mentioned condi- tions not being met, a non-resident could acquire farmland and woodland in the Czech Republic only: by inheritance; for the diplomatic representation of a state; into a co-ownership of a married couple if one of the spouses was a Czech citizen; from parents or grandparents, brother or sister, or spouse; through exchange for other agricultural land if its price did not exceed the price of the exchanged land; on the basis of a legal or contractual pre- emption right or by virtue of a co-owner- ship of the land; in the case of the agricultural land forming a functional unit with a building owned by a non-resident; or where stipulated by special laws (e.g. Prop- erty Restitution and Privatisation Acts). In practice, the above-mentioned restric- tions did not actually prevent foreigners from the acquisition of farmland and wood- land in the Czech Republic. Foreign individ- uals and legal persons who wished to invest into real estate in the Czech Republic, al- though being formally prevented from such a purpose by the applicable laws, were able to acquire real estate through a Czech legal entity (e.g. a Limited Liability Company) be- ing established for such specific purpose. Free movement of capital applies to Czech agricultural land The transitional period expired in May 2011. Unlike other CEE countries, the Czech Republic did not apply for prolongation of the transition- al period and brought the applicable laws into compliance with the freedom of movement principle as of 19 July 2011. Currently, non-resi- dents are not in any way restricted from direct acquisition of farmland and woodland in the Czech Republic. The equal treatment principle is applied by local authorities to foreign invest- ments in Czech agricultural land. Purchase of state-owned agricultural land Investors now see rich investment opportu- nities in Czech agricultural land.The aggregate area of agricultural land in the Czech Republic is 4.25 million hectares. Thereof, 148 000 hec- tares (or 3.48%) is state-owned land intended for sale. Foreign investors are currently legally eligible for the acquisition of agricultural land from the Czech State as a result of direct appli- cation of the European free movement rules, despite the fact that the Czech laws regulating the transfers of state-owned land have not yet been amended in order to reflect the expiry of the transitional period. The Czech Parliament currently (end of October 2011) is debating a bill which would amend the existing rules for transfer of state-owned agricultural land to, among others, foreigners. We are not able to responsibly estimate how the bill will change in the course of the legislative process. How- ever, we see the strong concern of legislators topreventspeculativetradingwithagricultural landbymeansofthepreferentialsaleoflandto farmerswhohavepreviouslyfarmedonatleast ten hectares for a period of three years. Again, we think that such formal preferential treat- ment of existing farmers may not discourage potential foreign investors from the acquisition of state-owned land in the Czech Republic. Photo:PhotoCombo

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| 2 0 K A L E I D O S CO P E The consumption of food in the Czech Repub- lic, expressed in constant prices, decreased by 1.6% in 2010 when compared to the previous year. Due to rising consumer prices, consum- ers paid on average CZK 22 500 (approx. EUR 900) for food, which was CZK 278 (approx. EUR 11) more than in 2009. The year-on-year rise of grocery prices reached 1.5% in 2010 and corre- sponded with the overall rise in prices of con- sumergoodsandservices.Ininternationalcom- parison, the CR was among the 11 EU countries witha fasterthanaverageincreaseinconsumer prices for food and non-alcoholic beverages. The increase in food prices was influenced mainly by the 5% increase in the price index of agricultural producers, as well as by the price strategy of vendors who did not react to a de- crease in the prices of food production prices. More pronounced price rises were curbed by cheap imports of food and strong competition in Czech food retail. Consumers also limited the consumption of milk and dairy products, with the highest drop in consumption occurring in milk preserves, processed cheeses, and con- sumer milk. A slight decrease in consumption was also recorded in cereal products and eggs, despitea slightdecreaseintheirprices.Thecon- sumption of southern fruit increased while its price stagnated. Conversely, the consumption ofsugardecreasedslightly.Therewasa year-on- year increase in the consumption of vegetables in 2010, despite an increase in their prices. Rules of Food Import from Other EU Countries Food reaching the Czech market from other member countries of the European Union is not considered as imported. Business transac- tions within the EU are subject to the so-called free movement of goods. No special permits or certificates are required for conducting busi- ness. Of course, the food must be safe, properly labelled, and in compliance with the relevant generally binding legal regulations. All food introduced onto markets within the EU must be in compliance with the general require- mentsforlabellingasstipulatedbytheDirective 2000/13/ES, as amended (the requirements of the Directive were incorporated in the Czech ActNo.110/1997Coll.,asamended,andRegula- tion No. 113/2005 Coll., on methods of labelling foodandtobaccoproducts,asamended).Food may belong either to the harmonised category (there is a European legal enactment for the food) or non-harmonised category (there is no European legal enactment for the food). In the case of the non-harmonised category, the food mustsatisfytherequirementsoftherelevantna- tionalenactmentofthemembercountrywhere the food was produced or first introduced into Slight Decrease in Food Consumption circulation within the EC by the given importer (forexample,ifCzechbreadsatisfiestherequire- ments stipulated by our commodity regulation, it must not be refused in other member coun- tries of the EU, provided it is safe – i.e. a principle of mutual recognition). The principle of mutual recognitionisdefinedinArticle11oftheActon Food,anditisthebasicprincipleforintroducing foodfromothermembercountriesoftheECon to the Czech market. GROWING POPULARITY OF FRESHWATER FISH The consumption of freshwater fish increased to 1.415 kg per capita in the Czech Republic in 2010, which means that its popularity in Czech households has been increasing for the past two years.This is based on statistics regarding the production and consumption of freshwater fish prepared by the Czech Fish Farmers Association. The consumption of freshwater fish has been on the rise for the past two years, which is cer- tainly a positive development. Especially considering the fact that the consumption decreased slightly be- tween 2000 and 2008. However, we are still far behind other European countries. The European average is 5 kilograms of freshwater fish per capita. Record Growth of Popularity of Fair Trade Products Turnover from the retail of Fair Trade products (a way of trading that gives small growers and tradesmen from developing countries an op- portunity to make a living with their work in dignified conditions) reached a record CZK 80 million in the Czech Republic in 2010. This is a full 60% more than in 2009. CZK 38 million of theoverallturnoverfromlastyearwasachieved by members of the Czech Fair Trade Associa- tion. The remaining CZK 42 million (approx. EUR 1.7 million) was brought in by supermar- kets and coffee-house chains. The availability of Fair Trade products increased significantly in 2010, particularly because of Starbucks’de- cision to sell only espressos of the Fairtrade® brand. The Kaufland chain also included over 20 products of this brand in their stock in 2010 – in all of their 95 hypermarkets in the Czech Republic. At this time, Fair Trade products are available from Kaufland, Marks&Spencer, Globus, dm Drogerie, Tesco, Interspar, and Billa. Other big companies that offer Fairtrade branded products include Tchibo, Pfanner, and Dole.The most popular FairTrade product in the CR remains coffee with a share of 40%, followed by chocolate and cocoa with 17% and teas with 11%. Photo:www.sxc.hu,ČeskéHoubyarchive

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2 1 | W E S U CC E E D České Houby Company: Guarantee of Product Quality and Safety Dominant position on the Czech market, wide range of products meeting strict quality crite- riaandflexibledistributiontocustomers.These are the brief characteristics of České Houby (CzechMushrooms)a.s.,a companywhichhas achieved renown among its customers. Petr Zeman, founder and co-owner of České Houby, has been in this line of business for 20 years, successfully taking advantage of his wealth of experience in manufacturing and supplying to supranational food chain stores. Over the years, the company has gradually ex- panded the range of fresh mushrooms it cul- tivates, to which it has added lettuce sprouts and dried mushrooms. The firm ensures the distribution of its products in cooling vans. “Fresh mushrooms, however, continue to be thecorebusinessofourcompany,”PetrZeman points out at the beginning of this interview. You are a modern, dynamic firm. How big is the product output you offer your customers? Our annual output of oyster fungus is 200 tonnes and that of white mushrooms 1000 tonnes, which we grow in our own nurseries. An additional amount of fungi is processed and distributed to our partner firms. In 2010 we increased our production and it is our plan to increase our current production capacity by 100% by the end of 2013. We have the capac- ity to process our entire output, as well as ad- ditional products supplied by other growers, and to sort and pack them in different kinds of packaging materials, according to the cus- tomers’wishes.Wehavethecapacitytosupply our products daily, 365 days a year! As we also supply other products (dried mushrooms, lettuce sprouts, vegetable spreads, semi-finished mushroom prod- ucts, etc.), we are, in my opinion, important, comprehensive partners for chain stores. As producers, we guarantee them perfect qual- ity and freshness and, as manufacturers, top quality processing, packaging, and delivery in vans at temperatures between zero and 6 °C. We hold a number of certificates and awards which are most important to our customers, including the IFS, GlobalGAP, Top Czech Qual- ity certificates and the Czech Klasa national quality mark. We are able to supply informa- tion about all our products regarding their traceability and certificates of origin, and as a matter of course ensure their 100% safety. What,inyouropinion,ismostimportantfor buildingrelationswithforeigncustomers? The most complicated thing, in my opinion, is to surmount the initial general distrust in goods from the “East”. I can understand this attitude, but I think it is out of place. Our prod- ucts really stand up to high quality criteria. Evi- dence of this are our prestigious customers in the Czech and Slovak Republics – for example Tesco, Interspar, Globus, Penny Market, Ahold – Albert, Makro – Metro, etc. Howisthequalitycriterionappliedinyour branch?Whatrequirementsdoyouhaveto meet? Product quality and safety come first in our company. It is especially with regard to these two points where we would like to demon- strate the difference between us and rival firms, specifically those in Poland, a country with a strong tradition of cultivation.Therefore, allmushroomcompostsonwhichwecultivate mushrooms are manufactured in compliance with the BIO method requirements, without the use of chemicals. Another principle is that we do not use any pesticides or fungicides. All disinfection in our production facilities is only carried out by ethanol or steam. Where qual- ity management is concerned, we apply the Hazard, Analysis and Critical Control Points (HACCAP) system and are under the continu- ous control of the Czech Agriculture and Food Inspection Authority and the Quality Control departments of the supranational food-chain stores. Recentlyyouhaveinvestedinnewmodern technologies.Howdothesefunction? Their advantage is that they allow us to influ- ence our production more efficiently, both with regard to the timing of the harvest and the quality of the mushrooms. Investing in new technologies has made it possible for us to increase our crop yields and in particular to improve the quality of the mushrooms and their follow-up processing. The investment is definitely worth the money, although the cost was very high and the payment of the instal- ments may affect the firm’s economy. Whatareyourplansforthefuture? In2011,ourcompanystartedtheconstruction of a new distribution centre, which will make it possible to process, pack, and dispatch up to 50 tonnes of goods a day.The facility will be equipped with the most up-to-date packag- ing technologies, a large-capacity crate wash- ing machine, cooled storage surface facilities for nearly 500 pallets and, naturally, a modern warehouse management system, includ- ing a product traceability system. There is no other such advanced production facility in the Czech Republic, and only few exist elsewhere in the world! We own land in Soběslav, where more production facilities will spring up in the near future. According to the development plan, in 2013 the output of our firm will be more than 2000 tonnes of white mushrooms and 400 tonnes of oyster fungus per year. Cur- rently we are at the stage of looking out for new trade partners, mainly in neighbouring countries, or in countries where similar food chain stores as those existing in the Czech Republic are based, and where, consequently, wecanobtainthebestreferences.Wearecon- fident that we will attract customers not only with the wide range of our products, reliable delivery and the products themselves, but also with our philosophy that our top priority is freshness, quality, and the 100% safety of our products.

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| 2 2 S U R V E Y Českéhoubya.s. www.ceskehouby.cz Turnover: approx. EUR 6 000 000 Number of employees: 65 Export: Slovakia Brief Description of Company The firm’s core business is the cultivation of fresh mushrooms (white and brown field mushrooms, portobello, oyster and shiitake mushrooms, and other forest mushrooms), packing, processing and distribution of dried mushrooms and mushroom semi- finished products, mushroom food supple- ments, lettuce sprouts, and vegetable and herb pastes. Whathasrecentlybeenyourgreatestpride? I think our greatest pride is the investment process we started in 2009 and which, accord- ing to our plans, will continue until 2013 in four stages. Now already, we can boast several new mushroom nurseries at our Nedvědice farm. The1500sq.mofnewcultivationsurfacesbear no comparison in all Central Europe in terms of cultivation standards. The entire cultivation process is controlled by computer, and thanks to our advanced technology, our annual pro- ductioncapacityis200tonnesofoysterfungus of the highest quality. Another new facility we have launched is a field mushroom nursery in Soběslav with a capacity of 2000 tonnes/year. This facility, too, uses top-standard technol- ogy, which ensures production stability and quality. In 2012 we are planning to build a new distributioncentrecombinedwiththecompa- ny’s new head offices, and in 2012/2013 we’ll launch another field mushroom nursery with a capacity of 1000 tonnes/year. In 2013 we’ll further enlarge our oyster fungus nursery facili- ties. By the year 2015 we would like to become important mushroom producers and distribu- tors not only in the Czech Republic, but also in the whole of Europe. LESS a.s. www.less.cz Turnover: approx. EUR 276 million Number of employees: 1500 The main products of our sawmills are joinery timber for the furniture industry and quarter sawn timber for the manufacture of timber for window scantling.We also manufacture di- mension timber, squared timber and parquet- ry friezes. Our glued programme comprises mainly layered window and door scantlings. Brief Description of Company: The original LESS company was established in 1992 as a forestry firm. In 2004, LESS was transformed into a holding company with the aim of transferring certain activities of LESS a.s. to specialised subsidiaries: LESS & FOREST s.r.o. specialises in forestry activities, and LESS & TIMBER s.r.o. concerns itself with timber and sawmillproduction.In2007,theholdingsetup affiliations in Slovakia, Ukraine and Russia. Last year,LESStookovertheGermanfirm,Holzwerk Hemau GmbH, and became the largest manu- facturer of glued semi-products for the manu- facture of wooden windows in Europe. Whathasrecentlybeenyourgreatestpride? We are proud of the skills of the people work- ing in the firm, of our ability to react promptly to the continuously changing conditions in ourtradeandthewayinwhichwehavemana- ged to surmount all the domestic and global difficulties. Naturally we are proud of the sawing ma- chine we have, which is the most advanced saw of its kind in Europe, and the unique wood biomass power plant. This year, in addition, we can be proud of the fact that we have maintained the dominant position in the Czech forestry and timber market. How are you managing to cope with the aftermaths of the crisis? Are you feeling it? In particular, we are feeling the confidence cri- sis! In the economic sphere, we are especially worried by the long-lasting stagnation of the building sector. Raw lumber prices are rela- tively high, but the prices of sawmill products are far from matching them.

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A.W.

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OHL www.ohlzs.cz Modern face of building industry

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