Czech Business and Trade 1/2010

TRADITIONAL CZECH MANUFACTURER OF CABLES: www.kabelovna.cz FIBRE OPTIC CABLES TELECOMMUNICATION CABLES SIGNALLING CABLES INSTALLING CABLES DATA CABLES POWER CABLES KABELOVNA Děčín-Podmokly, s.r.o. Ústecká 33, 405 33 Děčín, Czech Republic

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| 4 What are the priorities of the Czech government programme for 2010? The executive that I am heading had taken office for five months up to early elections scheduled for October, as an utmost non- political government avoiding politically controversial steps, and had subordinated its priorities to this. When the Constitutional Court cancelled the date of the early elec- tions, it put me and the other government members in a much more complicated situation. It was all the more complicated that we had to define the mandate and programme of a government which did not rely on a majority in the Chamber of Depu- ties having a clear policy and programme, but was to lead the country until the regular I N T R O D U C T I O N as a lower-risk country. In competition with other countries in the region of Central and Eastern Europe, we can certainly consider this a competitive advantage. However, the question that I am asking remains whether we shall be able to keep this rating over the long term with regard to the rising pub- lic debt. The preservation of a favourable rating in future is conditional precisely on whether accord is achieved on a more solid fiscal framework and whether the long-term budget pressures are resolved. This requires a government with a strong political man- date, a sensible economic programme, and the will to address the quickly rising debt of public finances. Entrepreneurs all over the world are slowly re-gaining optimism, which also influences the business environment in the Czech Republic. As indicated by a survey conducted by the global network of advisory services firms KPMG, manu- facturers start to be slightly optimistic, although some Czech firms still find them- selves in a difficult economic situation. What opportunities and what threats do you see for Czech firms in 2010? The main opportunity for Czech firms this year will be a recovery of the global econ- omy and the related increase in orders from customers in the Czech Republic, and above all in the European Union. For a relatively small and very open economy as that of the Czech Republic, recovery of the market and demand from foreign firms, whether based in this country or abroad, is absolutely cru- cial. Here, Czech firms still have a major comparative advantage at least in labour costs as compared to the “old“ EU member states. According to statistics from CzechIn- vest - an organisation under the Ministry of Trade and Industry - a recovery has been clearly recorded in the global markets. This is evident in an increased interest not only in the Czech Republic as a place for new investment, but also in a higher interest in Czech suppliers especially from Asian cor- porations, mainly from Japan. The higher demand is a general phenomenon which is not limited to Asian territory. A risk in the coming year can be for Czech firms the ability to respond quickly to the recovering demand, with regard to the situation of last year, which brought a slump in production for many companies. Questions of the Month for Jan Fischer, Prime Minister of the Czech Republic Jan Fischer elections in May 2010. The agenda and programme priorities of October 2009 follow up the objectives of the government programme of June 2009. My government will maintain continuity, its chief priority will be to continue combating the impact of the economic crisis and preparing a realistic and responsible budget, it will continue to be pro-European, to fulfil its commitments to NATO, will be transparent and open in re- lation to the Chamber of Deputies, political parties, local governments, and the public, it does not have political ambitions and will remain a government of experts. The gov- ernment’s professional and non-partisan status was reflected in the 2010 draft state budget which, to tell the truth, was demol- ished at the end of 2009, and also in the government’s legislative and non-legislative plan. Therefore, the government will sub- mit to the Chamber of Deputies only such government proposals which have support in the Chamber, and will prepare expert analyses and concepts of legal acts, includ- ing both the“left“ and“right“ versions of the 2011 State Budget Act, for a government which is to be formed after the parliamen- tary elections. The Standard & Poor‘s ratings agency kept in December 2009 its A rating for the Czech Republic, which is a signal to investors that the country is capable of managing fiscal risks. Does this mean, in your view, that our economy is competi- tive and diversified? The Czech economy is diversified without doubt. Eurostat statistics show that the lay- out of the economy roughly corresponds to all our competitors in the region, but also for example to Germany and France. Following the transformation of the 1990’s, about 60% of Czechs work in medium- to small-sized companies. This fact is a good basis for a rel- atively less painful overcoming of periods unfavourable for the economy. In this con- text, it is useful to be aware that a diversified and competitive economy requires a quali- fied labour force in a whole range of sectors, which involves considerable costs needed for education. On the other hand, to some extent the above-mentioned assessment is not related so much to diversification of the economy. Thanks to the good rating by S&P - as well as by other similar organ- isations - investors see the Czech Republic Photo:CzechGovernmentarchives,www.sxc.hu

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5 | C Z E C H B U S I N E S S A N D T R A D E Czech Economy: Fragile Stabilisation on a Lower Level Early December brought along the revised data on economic develop- ment in the third quarter of 2009. According to the Czech Statistical Office, Czech economy subtracted 4.1% compared to the same period of 2008 and the average rate of fall in 2009’s first three quarters amounted to 4.3%. The figures are more optimistic than were the mar- ket expectations. Performance of the economy measured by the volume of production recently corresponds to the level reached in 2007. Technically, the data confirm the end of Czech economic recession. After growing 0.3% q/q in the second quarter, real GDP was 0.8% q/q up in the third quar- ter. Compared with the last recession of late 1990s, the downfall lasted shorter but its scope was much larger. Still, the turnaround is rather poor so far – the average quarter- on-quarter growth during the previous period of economic expansion in 2005-7 amounted to strong 1.6%. Moreover, growth rates reflect the effect of previous periods’ comparative bases – weakening perform- ance since late 2008 tends to technically improve recent results. Ongoing downfall of industrial production and orders, declining retail sales, negative foreign trade dynamics and deteriorating labour market situation prompt to high cautiousness when evaluat- ing the performance of the real economy. SLUMP OF MANUFACTURING INDUSTRY PRODUCTION In year-over-year perspective, the negative trend in Czech economic performance was mainly determined by the lasting slump of manufacturing industry production.The drop reached considerable 9% in the third quarter, which is somewhat less compared to the pre- vious quarter, but still does not give a favour- able picture of the situation in Czech industry. Further drops were registered in energetic sector, mining and quarrying and trade; mild- er negative tendencies were recorded in con- struction and services of hotels and restau- rants. On the other hand, agriculture, financial intermediation, and healthcare exhibited positive development. In quarter-on-quar- ter view, manufacturing industry production returned to red numbers after a favourable result of the second quarter; similar nega- tive development was registered in energetic sector. In contrast, positive contribution was brought in by financial intermediation, con- struction, transport, trade, and services. EFFECTIVE DOMESTIC DEMAND STAYS VERY WEAK Demand side structure confirmed trends from previous period and, furthermore, revealed the expected contraction of con- sumer demand, resulting from unfavour- able labour market situation. Although the year-on-year dynamics sustained in black numbers (+1.3%), household expenditure tumbled 0.6% compared to previous quar- ter. Government consumption increased considerably (+5.3% y/y, +2.2% q/q) mainly on account of healthcare expenditure pick up. In contrast, the data show a lasting drastic curb in firms’ investment as a result of adverse economic development and un- certain future outlook. Gross capital forma- tion shrank 23.8%, when gross fixed capital formation fell 9.5%. Therefore, the most pronounced slump happened in stock of inventories which cut off 3.4 percentage points from overall GDP growth. Relatively solid growth of net exports was dampened by the negative effect of terms of trade and ended up in a 2.7% y/y real increase of ac- tive trade balance. This is considerably bet- ter outcome than in the previous quarter, mainly due to the effect of foreign fiscal stimulation programmes. In the third quar- ter, foreign trade represented a stabilisation element of economic development. EMPLOYMENT REDUCTIONS Employment in the national economy kept falling as a lagged labour market reaction to unfavourable situation of the real economy. Weak economic activity pushes the firms towards cuts in costs and employment re- ductions. The most dynamic growth of un- employment has already taken place dur- ing the first half of the year and December witnessed the unemployment rate at 9.2%. While the increase in the number of unem- ployed has been decelerating, rapid fall in supply of vacancies does not tend to slow down. In December, there were 17.4 unem- ployedpervacancy,whichrepresentsa year- on-year drop of more than two-thirds.

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| 6 E C O N O M I C P O L I C Y REAL GDP GROWTH (%, seasonally adjusted) Source: Czech Statistical Office CONTRIBUTIONS TO VARIATION IN GDP (percentage points, seasonally adjusted) Source: Czech Statistical Office FACTORS OF PUSHING CZECH ECONOMY We expect an ongoing stabilisation of general economic conditions during next quarters with a return of the year-over- year growth into black numbers by the beginning of 2010. Still, a prompt return to the former growth dynamics is not re- alistic and recent turnaround has to be considered highly fragile so far. Domes- tic consumption remains very weak and, given the expected continuing deteriora- tion of labour market situation and 2010’s fiscal restriction, we can certainly not ex- pect any strong growth in this segment until mid-2010 at least. Financial situation of firms determined by falling profit mar- gins and tight credit conditions does not allow for any considerable growth in in- vestment either. A factor that is promising is the expected gradual recovery of stock of inventories, both in the Czech Repub- lic and abroad. Foreign trade was recently stimulated by foreign scrapping premia and other fiscal measures. Still, this effect is to gradually disappear and it is doubtful whether the slowly reviving foreign de- mand will be able to compensate for this shortage. Nevertheless, the most impor- tant factor, potentially pushing the Czech economy up in 2010, is a sustainable re- covery of foreign demand, particularly the demand of the euro area. ECONOMIC FORECAST During last months, eurozone countries have shown some signs of stabilisation and certain sluggish improvement of economic conditions. This development was reflected in several upward revisions of economic forecasts for the Czech Re- public as well. In its November’s econ- omic outlook, OECD expects the 2010’s Czech economic growth rather high at 2%, i.e. 0.6 percentage point more than five months ago. Presumably, the main driver of these expectations is Germany, whose 2010’s economic dynamics was raised to 1.4%. Consequently, fast spill- over to Czech industry and exports is expected. Recent turnaround of Czech foreign industrial orders‘ dynamics partly confirms this view. Nevertheless, 2009 October’s drop and November’s weak growth of German industrial orders indi- cates substantial fragility of the positive tendencies, being largely driven by fiscal and monetary stimuli rather than improv- ing economic fundamentals. A moderate improvement in economic sentiment was recorded also domestically. Composite indicator of economic senti- ment exhibited an increasing trend after hitting its low in February 2009, with the consumers’ component growing slightly more than the business’ component. Czech PMI (purchasing managers‘ index) reached 53.1 in January 2009, overgrow- ing the threshold between contraction and expansion. In reaction to the signs of stabilisation, domestic institutions re- vised their economic forecasts as well. Alongside with increasing the estimates of economic downturn from 3.8% to 4.4% in 2009, in November 2009 Czech National Bank improved the projected GDP growth for 2010 from 0.7% to 1.4%. In contrast, Ministry of Finance foresees the 2009’s economic slump even at 5% and this year’s recovery very poor at 0.3% only. We expect the full-year GDP drop of 4% y/y in 2009, followed by a mild growth around 1.5% in 2010. Kamila Fialová Macroeconomic Analyst Komerční banka (e-mail: kamila_fialova@kb.cz) Photo:www.sxc.hu -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Gross fixed capital formation External balance Government consumption Others Effective domestic demand (% y/y) Household consumption Change in inventories GDP growth (% y/y) -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 Q102 Q202 Q302 Q402 Q103 Q203 Q303 Q403 Q104 Q204 Q304 Q404 Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 % q/q % y/y

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7 | C Z E C H B U S I N E S S A N D T R A D E Let Us Not Be Misled by Growth in Average Wages! In 2009, the world economic recession took its full toll on the performance of the Czech economy. The volume of all production in the first three quarters of 2009 dropped by 4.3% (measured in constant prices). In several months, the Czech economy lost all the performance increase gained in the previous two years – its performance measured by GDP in constant prices went down below the 2007 level. DOWNTURN IN ECONOMY = UNEMPLOYMENT GROWTH With the declining economy, unemploy- mentlogicallyincreased,aspresumedbythe simple economic law describing the inverse relationship between economic growth and unemployment,whichisknowntoeconom- ists as Okun’s law. Another economics rule says that with unemployment growth, the rate of inflation, and similarly wage growth, slow down temporarily. This rule is known as the Phillips Curve. These rules are valid, which has been proved by the development of unemployment and wages in the Czech Republic in the last few quarters. In the lan- guage of figures, according to the Czech Statistical Office this meant an unemploy- ment increase of 161 000 people to 387 000 at the end of September 2009. The number of those employed dropped by 93 000 and found itself below the five-million mark. The volume of wages and salaries paid in the na- tional economy as a whole returned to the level of 2007 and early 2008. PARADOX 1: GROWTH IN AVERAGE WAGES Unemployment hit the most employees in the manufacturing industry. Almost 200 000 people lost their jobs between September 2008 and September 2009. Tens of thou- sandswerelaidofffromadministrationwork, transport and warehousing, trade, and the building industry.These are branches where average wages are below the state-wide average. Dismissals of persons with below- average wages, combined with a drop in sickness rate, led to a growth in the average wage which looked paradoxical at first sight – in the first three quarters of 2009 the av- erage wage in the Czech Republic rose by 3.6%, to EUR 861, while in the third quarter alone it went up by 4.8%, to EUR 912. If, hy- pothetically, employment had remained at the original level of the end of September 2008, then the average wage in the Czech Republic would not have been EUR 912, but merely EUR 846. This would have meant the return of the average wage to the level of the 2008 first quarter. The exceptionally extensive lay-offs left their imprint on the average wage. In what seemed to be a paradox, the average wage itself rose hand in hand with the deepen- ing recession, and its year-on-year increase even accelerated (from 3% in the first quar- ter of 2008 to 4.8% in the third quarter of 2009). Besides the above-mentioned lay- offs of lower-salaried employees and the drop in sickness rate, also the state con- tributed to the average wage growth by raising salaries in the public sector. Due to this measure, the average wage in the non- commercial sector increased by 4.8% in the first three quarters of 2009 and by 5.6% in the 2009 third quarter alone. Some of the highest increases in average wages were thus recorded by public servants in the health service, social care, and education. It should be noted that wages in these sectors are below the national average. The highest growth of all was achieved by employees in the production and distribution of electric- ity, gas and heat – their average wage rose by 10.3% in the third quarter, to EUR 1 418. Normally the highest-salaried people are the employees of banks and other financial institutions – in the third quarter their aver-

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| 8 E C O N O M I C P O L I C Y age wage amounted to EUR 1 722. However, as is usually the case in a recession, there were branches where wages were lowered. During the first three quarters of 2009, the average wage of miners and other employ- ees of mining and quarrying companies fell by 4.8% against last year’s level, and that of hotel and restaurant employees dropped by 0.2%. In other words, these are sectors that have been affected the most by the econ- omic recession in terms of wages. PARADOX 2: INVERTED J-CURVE OF HOURLY LABOUR COSTS Another paradox of the economic reces- sion in the area of wages is the rise in hourly labour costs. When the recession hit with full force at the end of 2008, it de- prived companies of orders from one day to another. Firms began to cut working hours, lay off workers, and some even re- duced the working week. Even this did not prevent an increase in hourly labour costs, because the numbers of hours worked were declining faster than the numbers of employees. Besides that, companies had to pay severance money, and thus other costs of labour were going up. At the end of 2008, hourly labour costs were 10% higher than in the previous year. They con- tinued to grow in 2009, albeit at a slower pace. According to calculations, labour costs increased above EUR 9 per hour dur- ing 2009, from EUR 8.5 in 2008 and EUR 7.9 in 2007. Although the Czech Republic was not the only European country where labour costs increased, costs per Czech employee were rising faster than in most developed European countries, including Germany. While in 2005-2006, costs per Czech employee equalled one-quarter compared to German employee, in 2009 they amounted to almost one-third. 2010 – YEAR OF INSIGNIFICANT WAGE GROWTH In 2010, when the economy starts recover- ing from recession, we do not expect any dramatic increase in wages and labour costs. The present level of wages of gov- ernment employees will be preserved, the salaries of judges and elected officials will drop by 4%. The private sector, too, will exercise wage restraint. Trade unions have not been heard much recently. They are no longer clamouring for substantial wage increases as they did in 2008. According to their own words, they prefer job preserva- tion. Despite that, some companies have announced wage decreases or at least re- duction in employee benefits. The volume of wages paid in the economy will increase very little and the average wage will prob- ably record the lowest rise in the history of the Czech Republic (approximately 2%), and that only due to the lingering decline in employment. With price growth taken into account, the average real wage will remain at the 2009 level at best. Hourly la- bour costs will no longer increase at last year’s rate. Owing to increasing foreign or- ders, the output and thus also the hours worked will start to rise gradually. Produc- tion will rise only slowly. With a few excep- tions, companies will find their present employee numbers sufficient. If the recov- ery of the world economy receives solid foundations in 2011, the growth in wages and employment rate will increase. Hourly labour costs will rise in the Czech Republic as well, and the only way for the economy to maintain its performance is to focus on production with a higher value added. The higher wage costs will be dissolved in it more easily. Helena Horská Analyst Raiffeisenbank a.s. (e-mail: Helena.HORSKA@rb.cz) PHILIPS CURVE Source: Czech Statistical Office, Raiffeisenbank‘s forecast LABOUR COSTS Source: Eurostat 2008 0 4 8 12 16 20 2009 estimation 2010 forecast Unemployment rate (ILO) % 3 4 55 6 7 8 9 10 Q4-06 Q2-07 Q4-07 Q2-08 Q4-08 Q2-09 0 2 4 6 8 10 12 Labour cost index Trend y/yin%

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| 1 0 A N A L Y S I S Photo:www.sxc.hu Building Industry Expects Way Out of Crisis The financial crisis, which hit Western Europe and turned into the deepest depression since World War II, razed everything to the ground. One of the worst hit was the real estate market. This was where the crisis began and then spread around the globe. The situation in the Czech Republic is clear from building performance statistics. WE ARE PAST THE WORST The building industry as a whole was re- cording a growth of more than 11% in Sep- tember 2008, and a decline of more than 14% in February 2009. The market was at the peak of crisis. A change for the better came in the summer of 2009, and now it is evident that we are past the worst. In September 2009, construction accelerated its year-on-year growth up to 3.6%. Taken by the number of workdays, the result was better still, the rise was 4.6%. The growth structure has been un- changed in the last months. The decline of 5.12% in structural engineering has been compensated by growth of 23% in civil en- gineering. The development of the build- ing industry as a whole is thus disparate. Construction financed mainly from private resources, such as housing construction and office building, must be separated from construction financed mainly from public resources, such as infrastructure building. DIFFERENT DEVELOPMENT IN DIFFERENT BRANCHES Whereas private resources were exhausted by the crisis, money is still in public re- sources, as public budgets respond with delay. Public revenues declined dramati- cally, but expenditures had been planned more than a year ago and must be fulfilled. The result is a rapidly increasing debt in public budgets and continuing construc- tion of the infrastructure. On the contrary, structural engineer- ing is falling, the market responded with lightning speed. Banks were scared by de- velopments beyond the ocean, followed the example of their foreign parents, and toughened the granting of credits. The big- gest present problem of developers is the need to fund projects from their own re- sources to a much larger extent. Moreover, the willingness of banks to lend money nears the freezing point at the moment when developers do not have a large part of the project sold before building works begin. This is a vicious circle. Hardly any in- vestor is willing to purchase or rent a real estate which does not stand and for which no credit is granted as yet. At the time of crisis, everybody is nervous and distrustful. The bank does not lend and the client does not purchase – round and round in circles. DECLINE ON OFFICE MARKET Before the crisis, developers expected to build more than 270 000 sq. m of office areas in the next three years, and now this is to be approximately one-third. It is note- worthy that in view of the number of its in- habitants Prague has a shortage of offices. It has less than, for instance, the smaller Düsseldorf. Surprisingly, prices are higher than in Brussels where the army of EU of- ficials are increasing the demand for office

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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 E space. The reason is that Brussels has more officials, but also more office space. FEAR OF REAL ESTATE PURCHASE Structural engineering is recording a slump in both offer and demand. People are afraid that interest in apartments will not be as high as it used to be. It is estimated that in the recent years foreigners speculatively purchased some 2 000 apartments a year in Prague alone. They leased them immedi- ately and waited for further growth in real estate prices. Taken into consideration the strengthening CZK, they made incredible profit on this investment in view of the low risk. These people are now missing on the market. SAME DEVELOPMENT ACROSS EU Development is similar in the whole EU. Problems with funding and fear of declin- ing real estate prices are everywhere. For example, it seemed that real estate prices would be rising in the United Kingdom, but development brought a drop again. Structural engineering is on the decline everywhere. On the contrary, state budg- ets did not count with such big economic problems, and so countries are continuing to increase infrastructure expenditures. The result is an all-European growth in civil en- gineering. The difference between Czech and foreign buildings industry rests in the fact that foreign capital construction is not rising at a double-digit rate, and so the drop in construction in the whole 27-member EU is 11%. We have nothing to complain about. WE ARE EXPECTING REVIVAL The world is slowly preparing for revival. We are noticing sprouts of new orders and new projects at many places. The industry will start up as soon as demand increases abroad. Banks will be more willing to lend as soon as the rate of uncovered credits de- creases. This will not be easy in the building industry, which is impeded by problems of the public finance and these will be un- precedented. The state is plunging into record indebtedness and not much will be left for public construction. The 2010 budget will be radically reduced. Spending is careful everywhere, everything is under- funded. This means that all hands will be held out in 2011 as never before, because long-term underfunding is impossible. The infrastructure package is of utmost impor- tance to the economy, but it is so large that it will always be politically easier to take from it than from the pensions or educa- tion packages. And so investment will be weaker in 2011. Growth in the building industry was 0.1% throughout 2009, and it will not be much better in 2010. The better structural engineering does, the worse off will civil engineering be. Vladimír Pikora Chief Economist of Next Finance e-mail: Vladimir.pikora@nextfinance.cz

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| 1 2 L E G I S L A T I O N Photo:www.sxc.hu Acquisition of Real Estate The rules for the acquisition of real estate in the Czech Republic are not applicable universally.There are still exceptions which limit foreign persons (including citizens of the European Union) in acquiring certain types of real estates, despite the fact that the Czech Republic has been a member of the European Union since 2004. RESTRICTIONS APPLYING TO ACQUISITION OF REAL ESTATE The internal market of the European Union is based on the application of four basic freedoms, which are the free movement of goods, persons, services, and capital. Free movement of capital includes unrestricted acquisition of real estate in particular Euro- pean Union member states. In accordance with such principle, Article 56 of the Treaty establishing the European Community pro- hibits any restrictions of the free movement of the capital, both between European Un- ion member states and in relation to third countries. On the basis of these freedoms, citizens of the European Union are free to acquire real estates in other states of the Eu- ropean Union without any restrictions. Upon its accession to the European Union, the Czech Republic was granted two ex- emptions related to the above mentioned Article 56 of the Treaty establishing the European Community, which were imple- mented by the introduction of the so-called transition periods for the acquisition of real estate in the territory of the Czech Repub- lic. During these transition periods, certain restrictions were maintained in the area of the acquisition of domestic real estate by foreign persons, and that in the duration of 7 years for the acquisition of farmland and woodland, and in the duration of 5 years for the acquisition of other real estate. Both transition periods became effective as of the Czech Republic’s accession to the Euro- pean Union, i.e. as of 1 May 2004, and were incorporated into documents signed by the Czech Republic upon its entry into the Euro- pean Union. These transition periods are im- plemented in the Czech law by the Foreign Exchange Act (Act No. 219/1995 Coll.). With respect to the above mentioned, in the case of land which is part of the agricul- tural land resources, and land designated for the fulfilment of forest functions, the tran- sition period still lasts and will end in May 2011 (i.e. on the expiry of 7 years from the Czech Republic’s accession to the European Union). As regards other types of real estates – especially residential and commercial – the exemption restricting their acquisition by the foreign persons, granted for 5 years from the Czech Republic’s accession to the European Union, expired in May 2009. The acquisition of this type of real estates is thus no longer restricted, despite the fact that the respective amendment to the Foreign Exchange Act has not yet been approved by the Parliament of the Czech Republic. To summarise, as regards the acquisition of real estates in the Czech Republic by the for- eign entities, the Foreign Exchange Act still distinguishes two categories of real estates, namely the agricultural and forest land, and other real estates. Both types of real estates may be acquired without restrictions by in- dividuals with permanent residence on the territory of the Czech Republic or legal enti- ties with the registered offices in the coun- try (resident status). Foreign individuals and

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1 3 | C Z E C H B U S I N E S S A N D T R A D E legal persons (non-residents) are restricted at present only from the acquisition of the agricultural and forest land because, due to the expiry of the five-year transition period, they are entitled to acquire other real estates under the same conditions as the resident individuals and legal entities. AGRICULTURAL LAND Restrictions on the acquisition of real es- tates in the territory of the Czech Republic thus currently apply only to the acquisition of the agricultural and forest land, which is available to the non-residents under the conditions stipulated in Section 17 of the Foreign Exchange Act. Besides the resident individuals and legal entities, agricultural and forest land may be acquired also by: non-residents who are Czech citizens; and non-residents who hold the residence permits for nationals of the European Union member states, provided that they are (i) registered as agricultural en- trepreneurs in the territory of the Czech Republic, and (ii) have been permanent residents in the Czech Republic for a minimum of 3 years. If an acquirer of the agricultural and forest land does not meet the above mentioned conditions, a non-resident may acquire the agricultural land only: by inheritance; for the diplomatic representation of a state; into a co-ownership of a married couple if one of the spouses is a Czech citizen; from parents or grandparents, brother or sister, or spouse; through exchange for other agricultural land if its price does 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 cases the agricultural land forms a func- tional unit with a building owned by a non-resident; or wherestipulatedbyspeciallaws(e.g.Prop- erty Restitution and Privatisation Acts). PROPERTY ACQUISITION BY NON-RESIDENTS The existing legal regulation of the real es- tate acquisitions in the Czech Republic does not restrict the Czech residents and legal entities, who may acquire the real estates (with the exception of the so-called reserved property that, pursuant to the Charter of the Fundamental Rights and Freedoms and the implementing regulations, may be acquired only by the state, municipalities, or listed le- gal persons) without any limitations. Thus, if a foreign individual or legal person wishes to invest in the real estates in the Czech Re- public, although they are formally prevent- ed from such intention by a legal restriction or the continuation of the transition period, they may acquire the real estates through a resident legal entity (e.g. a limited liabil- ity company) established for such specific purpose. This practice was common during the existence of more extensive restrictions on the acquisition of the real estates for the non-residents, even with the aim to acquire the real estates for residential purposes. BASIC PRINCIPLES In addition, certain basic principles of the applicable laws must be respected by the acquisition of the real estates in the Czech Republic. These principles are as follows: Real estates situated in the territory of the Czech Republic are registered in the publicly accessible Land Register. The Land Register contains facts about the particular real estates as well as informa- tion about legal relationships to them, es- pecially the identification of their owners and limitations of the ownership rights. Before any acquisition, it is thus advisable to check the Land Register for the legal status of the real estates being acquired, preferably with the help of an appointed consultant who is specialising in the rel- evant legal field. The principle “superficies solo cedit“ (the surface yields to the ground) does not ap- ply in the Czech Republic. Thus, if some- one is acquiring a building, he/she is not automatically acquiring the land on which the building is situated.Therefore, it is nec- essary in every acquisition to ensure that besides the ownership title to the building being acquired, the acquirer also acquires the ownership (or at least the enjoyment) right to the land on which it stands. Real estates in the Czech Republic are be- ing acquired upon entry of the ownership right in the Land Register (referred to as a two-phase acquisition of ownership right). Thus, for the transfer of an own- ership right to an acquirer it is not suffi- cient to sign the respective contract (e.g. on purchase or on a donation), but the ownership right must also be entered in favour of the acquirer in the Land Regis- ter. Only then is the property acquisition accomplished. From the formal point of view, a written form is obligatory for legal acts (especially contracts) concerning the transfer and ac- quisition of the real estates, and the signa- tures of the parties (i.e. the transferor and acquirer) must be on the same document. In order to prove the identity of the parties vis-á-vis the respective cadastral office, it is regularly required that the signatures on this document be officially certified. Transfers of the real estates are subject to real estate transfer tax, which amounts to 3% of the price of the real estates be- ing transferred. The tax is payable by the transferor, but the real estates acquirer becomes by operation of law the guaran- tor of the tax liability. Consultation with specialists is advisable on other tax liabil- ities related to the acquisition of the real estates. Jakub Adam Partner e-mail: jakub.adam@wolftheiss.com Petr J. Syrovátko Lawyer e-mail: petr.syrovatko@wolftheiss.com WOLF THEISS, advokáti (Attorneys-at-Law)

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| 1 4 C Z E C H T O P Photo:INEKONGROUParchives,Novasoftarchives Czech Inekon’s Tramcars Ply American Roads Three Czech tramcars will soon be running on the rails ofWashington, D. C., andWashington is not the only city in the USA whose inhabitants have the opportunity of testing the quality and comfort of tramcars made by the Czech manufacturer INEKON GROUP. Since its establishment in 1990, the company, initially export- ing rail vehicles and importing raw materials for the chemical industry, has developed into a trading and manufacturing group operating in three areas of business: manufacture and sale of rail vehicles, chemicals, and whole plant export. CZECH-MADE TRAMCARS SCORING SUCCESS IN THE USA Tramcars supplied by INEKON GROUP to Washington, D.C., will be first put down onto the tracks at the end of 2010, when the first tramway line will open in the city. Thereby the contract, signed by the Czech company in 2004 and worth 24 million dollars, will be consummated. As part of the contract, at the turn of the years 2006 and 2007, the company delivered three cars to Portland and in the au- tumn of 2007 other three to Seattle. Upon the client’s request, the tramcars for Washington, D.C. were stored in the depot of Dopravní podnik (Transport Corporation) Ostrava for two years, as at that time the US capital did not have the tramway line in place. Its con- structionstartedonlyin2009,andwhencom- pleted, its length will be three kilometres. “We are proud that the first tramcars to serve public transport in the US capital come from the Czech Republic. References of the successful realisation of this order are opening up the door for us in many places,” Josef Hušek, Chairman of the Board and Managing Director of INEKON GROUP, said. Currently, public transport in the US capi- tal is only operated by underground railway and buses. INEKON 12-TRIO-type tramcars will connect the residential south-eastern part of the city with the district, where, for example, the Department of Homeland Security, the third largest US government department in terms of the number of em- ployees, has its headquarters. RAIL TRANSPORT IS VERY POPULAR IN SEATTLE In Seattle, Czech low-platform tramcars have been in operation for more than two years. The tramway line built there is greatly re- sponsible for the rapid development of the South Lake Union suburban district. It is an alternative to automobile transport, which was very complicated in view of the heavy motor car traffic. The Mayor of the City ex- plained why Seattle’s choice fell on Czech tramcars: “In the process of seeking suitable tramcars, we address several manufacturers. In the end we decided for tramcars from the Czech Republic, because we simply found them to be the best.”A great role in the deci- sion-making process was played by the fact that INEKON tramways already operated in neighbouring Portland. Satisfaction with them naturally played an important role in our decision-making.” TRAMCARS FROM THE CZECH REPUBLIC ARE RECKONED WITH IN THE USA Czech tramcars will become part of Seat- tle’s public transport system, which will carry one million passengers daily. In the next twenty years, Seattle expects a mas- sive population growth. Already now, traf- fic around the city centre is badly jammed, and the enlargement of tramway services is seen as a suitable traffic solution in the city. An advantage for the Czech compa- ny’s negotiations is that tramcars have become popular with the public and that their operation is absolutely reliable. The hundreds of thousands of passengers who are using the city’s first line are an indica- tion of the tremendous potential of tram- cars. Currently, however, only one modern tram line about 4.2 km long is operated in Seattle, which uses only three tramcars of the Czech manufacturer, INEKON GROUP. More at www.inekon.cz. The inaugural run of tramcars in Seattle was a real event; there was a celebration at each stop.

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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 NovaVoice Gets the Czech Head Award In 2009, Consulting Company Nova- soft won the 2009 prestigious Czech Head Industry Prize. The Industry Prize is awarded each year by the Ministry of Industry and Trade for the most outstanding technological or product innovation. The company director, Vladimír Moravec, received the prize for the product named NovaVoice, appraised by the jury as clever software converting spoken words into written text with high precision. PHYSICIANS PRAISE NOVAVOICE The company’s core business is the devel- opment of software for company informa- tion systems. Since 2007, in co-operation with the University of West Bohemia in Plzeň, it has been developing its Nova Voice software. The software finds application especially in the healthservice and judicial practice, branches involving large volumes of text requiring good-quality processing. Physicians in particular appreciate Nova- Voice for its precision and especially its com- prehensive specialised vocabulary. Many hospitals in the Czech Republic are already using the product. TECHNOLOGY FOR PRACTICAL WORK How does NovaVoice work? For example, the physician describes an X-ray picture, and “dictates” the medical data into the com- puter. He needs no keyboard, and merely dictates orders to the computer. The Nova- Voice has a vocabulary of dozens of thou- sands of medical terms in Czech and Latin, so that the medical record is more accurate than records written by physicians using the keyboard. “We are pleased that our product is serving a branch such as healthcare. However, other sectors,e.g.thejudiciary,education,andeven the police, also benefit from its use. We also develop other sound technologies, which are certain to find application,”Vladimír Moravec said. In the development of NovaVoice, the Novasoft also co-operates with Speechtech, the company which developed the core of the programme. This co-operation is an ex- ample of the practical application of research results. The high precision of the conversion is made possible primarily thanks to the spe- cialised dictionaries for different branches and the contextual evaluation of the text. This means that the programme does not work solely with individual words, but it also calculates the probability of verbal connec- tions in sentences. The latest new item from Novasoft’s workshop is a surgery dictionary containing approximately 100 000 items. WHAT IS THE CZECH HEAD PROJECT? Czech Head, a project for the support of scientific and technical intelligence, was launched in March 2002. Its purpose is to popularise science and raise the social pres- tige of Czech technical and scientific work- ers as the main proponents of the country’s economic prosperity. The climax of the project each year is the award of Czech Head national prizes for the best personages in the area of science and technology.The Industry Prize was first awarded, in the framework of the Czech Head project, in 2006. More at www.ccnovasoft.cz www.ceskahlava.cz AWARDS OBTAINED BY CONSULTING COMPANY NOVASOFT, A.S.: Invex 2008, Crystal Disk – “Professional software” category Manager of the Year 2008 – “Manager in the area of data processing and related activities” category Manager of the Year 2008 – “Outstanding man- ager of a small company with under 50 employ- ees” category Vladimír Moravec, director of Consulting Company Novasoft, in the background behind the notebook showing NovaVoice software.

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| 1 6 Y O U N G S T A R S Photo:Optaglioarchives Optaglio Is Fighting Forgeries Libor Kotačka Combating counterfeiting is a process placing high demands on research and development. Protection against counter- feiting must always be ahead of the forg- ers. More than 15% of the world economy turnover is linked with trade in counterfeit- ed goods or illegal goods distribution. This extremely high figure encourages armies of fakers to forge or imitate the actual pro- tective safety elements. The same problem is linked with organised crime, which prof- its from its skills enabling the unhindered movement of its members between states, both as regards counterfeited documents and visas. Its financing is also partly linked with the counterfeiting of alcohol and ciga- rette stamps, banknotes and other valuables connected with excise duty collection. NEW PROTECTION IMPROVES SAFETY Researchers of Optaglio, a company con- cerned with the manufacture of extra-high- quality optical safety elements on a world scale, were aware of these facts in the devel- opment of new holographic elements. The most difficult thing is to place on the market a safety element, which not only contains hidden information intended for profes- sional control, but also, and firstly, identifies the valuable or product in a way showing at first sight that it is an original. DR KOTAČKA’STEAM INTHE FIRST LINEWITH NANOGRAVURETM These visual safety elements are frequent objects of forgery or imitation. That is why in the past Libor Kotačka’s team focused on the development of a completely new type of safety elements enabling lay control by mere visual examination. These new safety elements must be dif- ferent from those that are already being used, they must not be manufacturable or imitable by potential forgers and the technology used in their production must be unique, unavailable on the market. The outcome of such development is the Na- nogravureTM element designed exclusively for the protection of banknotes against forgery. The basis of this element is that it evokes a three-dimensional visual per- ception, making the object emerge to the surface, or on the contrary sink below the surface, although to the touch it is a com- pletely flat relief. Other products designed exclusively for the protection of state documents and valuables are Optaglio’s achromatic optical safety elements. A spe- cial feature is that those elements are very well distinguishable even in poor illumi- nation conditions. For the development of both these elements the company has won a number of awards. APPARENTLY IMPOSSIBLE How does such a specifically optical ele- ment arise? Basically it is a very accurate “nano-engraving” method, where, with the use of a narrow beam of electrons in the electron beam litograph machine, the fine structure of contour lines is recorded with information about accurate inclination at each point. Thus, hundreds of millions of pixels can be recorded within a relatively short time.“Basically, it is not an impossible task until the moment you get down to it,” says Libor Kotačka. “So far, no one except the team of our experts, in co-operation with the Institute of Technical Instruments of the Academy of Sciences of the CR, has managed to record this type of structure, and our success has been confirmed by statements of many experts and even our competitors. The value of our achievement rests in the fact that we have developed such an element, although the principle on which it is based has been known for a very long time.” What is especially valuable, and what has won the NanogravureTM element world renown, is the courage of the team to set about such a task, and also the fact that ba- sically it is a very simple optical trick. THE CZECH HEAD AWARD FOR OPTAGLIO For the development of innovative protec- tive optical elements, Optaglio won the 2008 Czech Head Award, in appreciation of the attainment by Czech research and de- velopment workers of the highest level of perfection in their branch on a world scale. Currently, Optaglio exports its products to more than 60 countries the world over, and thanks to the work of people such as Dr Kotačka, forgers will find it ever more dif- ficult to pursue their unlawful activities. Jan Bitman Optaglio s.r.o. e-mail: jan.bitman@optaglio.cz

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1 7 | Technologies: sixteen colours, entching, painting, cutting, engraving, sandblasting, diamond cutting Designers: Jean Marie Massaud, Arik Levy, Marco Sousa Santos, Studio olgoj Chorchoj... Moravské sklárny Květná s.r.o., nám. E. Zahna 329, 687 66 Strání-Květná phone: +420 572 619 110, fax: +420 572 695 343, www.moravskesklarny.cz e-mail: sales@moravskesklarny.cz, marketing@moravskesklarny.cz HAND MADE GLASS SINCE 1794 CZECH REPUBLIC tradition design quality

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| 1 8 S E R V I C E S The Czech Republic Attracts Visitors Not Only to Its Spas, But Also to Golf Resorts Come and visit the Czech Republic, a country ideal for holidaymakers of all age categories, as well as for busi- ness meetings.The capital, Prague, is one of the most beautiful metropo- lises of the world, with the unforget- table atmosphere of a one-thousand- year-old city.“The other regions are unjustly somewhat neglected in my opinion, they too have certainly much to offer – we have 13 cultural herit- age sites on the UNESCO list which is, by the way, the highest density per area compared with the world,“ says Mr RostislavVondruška, the Minister for Regional Development. Mr Vondruška, how do you assess the development of tourism in the Czech Republic in 2009, to what extent do you think it has been affected by the world crisis? According to surveys, the segment of tour- ism was first affected when households con- sidered their expenses in connection with the economic downturn, the financial, cred- it, and mortgage crunch, or simply in the loss of consumer confidence. According to our analyses, more than a half of the Czech households that were questioned said their holiday expenses figured among those on top of the list of cuts they were making to maintain their financial security. In my opin- ion, the Czech Republic was affected by the downturn later than other economies. What do you expect for the future? I would not probably associate the year 2010 with a major recovery – we will likely still feel the effects of the crisis, in incoming and out- going travel, as well as in domestic tourism within the country although the latter was not affected so much. Personally I expect stagnation,orperhapsa slightrecoveryinthe segment of domestic tourism, which grew even during the downturn, albeit insignifi- cantly. I think that the effects will differ region by region; Prague will probably overcome the consequences of the crisis more quickly. However, it is important to say that even in this situation Czech tourism is in surplus, in the first nine months of 2009 it amounted to CZK 32 billion (approximately EUR 1.3 billion), and this is a favourable result. When you mention the Czech Republic, Prague is what comes to mind for foreign tourists, but few foreigners probably have an idea what they can see and experi- ence here. Do you believe that there is something other Czech regions can offer tourists from abroad in a world-wide comparison? I amsureaboutthat.True,Pragueisregarded as the gateway to the Czech Republic, and is the country’s most visited city, but there are also towns that have gained long-term popularity – Karlovy Vary, Český Krumlov, Kutná Hora, and others. In my opinion, the other regions have been unjustly ignored, but they have certainly much to offer as well – we have 13 cultural heritage sites on the UNESCO list, which, by the way, is the highest density per area compared with the world. Remarkable phenomena include the Czech spa industry, gastronomy, and golf. The regions are working hard and investing money in promotion. I expect a boom for Czech regions after the crisis fades away. The Czech Republic has been sometimes mentioned of late as a “golf power“. Don’t you think that this is exaggerated? Are facilities at the golf courses comparable with those abroad? Certainly, the Czech Republic has its limits as a golf destination, but it also has features that have no match in the Central European area, and that is namely the speed at which new courses and new facilities for players are being established. We have now over 80 full-fledged, i.e. 18-hole courses. This has no parallel among the countries of the former East bloc, nor in Central Europe. A lot of work has been done in this area. This is why we have won a prestige award as the fastest developing golf destination, and the Czech Republic has thus become a country much sought-after by golf players.The limits I have mentioned are rather of the climatic nature, because golf is played in this country from April to October, we will never be a Spain or a Portugal where it is a year-long affair, but we do not have such an ambition. I believe that golf has a great potential to expand as part of the tourist industry. Besides the play itself, it helps to promote regional develop- ment, the courses require additional infra- structure, and it brings a fair number of jobs in the regions. As compared to golf, which is experienc- ing a recent boom, the Czech spa industry is a phenomenon with a long-time tradi- tion in the country. What are the pros- pects of Czech spas in the coming years? The phenomenon of the Czech spa industry has been considered specific in the Euro- pean context over the long term. And this is true especially about medicinal spa treat- ment. The wellness segment, which is also developing dynamically, runs separately be- sides the medicinal spa programmes. I think that Czech spas are currently capitalising on people’s awareness that they are respon- sible for their health. There is much the spas can offer. It is a shared goal for Czech diplomacy to emphasise the specific na- ture of the Czech spa industry, which rests Photo:MinistryforRegionalDevelopmentoftheCzechRepublicarchives,CzechTourismarchives

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1 9 | C Z E C H B U S I N E S S A N D T R A D E in its links with the natural resources of the particular locations. But it is also the high professional quality of the personnel, which is attractive, the staff are much in demand, and many countries are interested in the ex- port of Czech know-how and also in Czech qualified staff which, of course, is contrary to the interests of the Czech spa industry. Congress tourism is also mentioned fre- quently in connection with the develop- ment of the Czech tourist industry. Congress tourism is not typical of the Czech Republic, but there are very good prerequi- sites especially in large cities, we can or- ganise medium-sized conventions without any problems. A great deal of work has been done lately to mobilise the regions and their interest in this segment. Besides the ongoing project of the Prague Conven- tion Bureau publicising the capital city, the Czech Convention Bureau project has been launched at the beginning of 2010 to pro- mote congress tourism in other cities than Prague. This entity, set up within the frame- work of the CzechTourism structure, cooper- ates with cities that have congress ambitions – Karlovy Vary, Plzeň, Liberec, and Ostrava. (Editor’s note: More on the project in the ar- ticle Tourism Faces Lower Demand). The Czech Republic receives money from the Structural Funds. What projects in the area of tourism are financed from the EU funds? Could you mention some success- ful projects that have received support? Tourism is supported within two types of programmes – on one hand the Integrated Operational Programme, which is organised by the Ministry for Regional Development, and on the other by the Regional Oper- ational Programmes in the regions. These programmes have given rise to many infra- structure projects. I would like to mention those run by us, as the Ministry for Regional Development. These are primarily statistical projects which are aimed at providing infor- mation on tourism with sufficient detail. It is very important to know where revenues are obtained and for what, as well as from which countries people arrive. This is essential for a future successful marketing in tourism. This is one thing. Another one is a complex of projects focused on the quality, certifica- tion, classification, and standardisation of the processes in tourism. Our entire effort will represent a major competitive advan- tage for the future. We have recently seen attempts to pro- mote the Czech gastronomy and acquaint tourists with it. Can you say more about this effort? This activity, launched in 2009, runs into 2010. It is really to publicise the Czech gas- tronomy, in cooperation with the Associa- tion of Hotels and Restaurants and the Chefs Association. The project is called Czech Spe- cials and attempts to present the foods of traditional Czech cuisine. It means not just “fatty“ foods, as foreign tourists often know them in this country, but foods which had once really formed the basis of the Czech culinary art, including fish. Participants are hundreds of hotels and restaurants all over the country. Foods which are served to for- eigners as well as locals as Czech gastron- omy are denoted with the Czech Specials symbol. I believe that the Czech gastronomy deserves such support. If you were not born in the Czech Repub- lic, why do you think you would like to visit the country? At the moment, for me personally it would be precisely for the great golf boom. I am a be- ginning player, but I am very much interested in the processes connected with this devel- opment, because I think that golf is unjustly labelled as something almost indecent that takes much time and is seen as a privilege for a limited group of people. I believe that the recent tremendous increase in the number of golf courses testifies to the opposite trend – that golf is no exclusive affair and is accessible toanyone.WhatI seeasthenextessentialstep is that many courses should become public if they want to survive, and that is good. Šárka Kratochvílová Kutná Hora – one of the UNESO-listed Czech sites Karlovy Vary, a famous West Bohemian spa

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HOTEL KASKÁDA**** Hotel Kaskáda**** offers its guests pleasant accommodation in beauti- ful surroundings near the Brno Dam. The bungalows in which they are accommodated have a total of 100 beds and offer a wonderful view of the golf course of which the hotel is a part. The harmonic view from the hotel windows is very rare.The Guests will find themselves in a picturesque green world only a few kilometres from the city bustle. www.hotelkaskada.cz KASKÁDA WELLNESS CENTRE Have an enjoyable rest. Come and relax at the Kaskáda Wellness Cen- tre near Brno.You will see exceptional and unique design at every step. The Kaskáda relaxation and regeneration Wellness Centre offers a swimming pool with contraflow, sauna, steam bath, a private whirl- pool, restroom, and professional massages. Enjoy the active and pas- sive relaxation services provided by the best body care experts. Let your body be pampered with massages by the experienced physiothe- rapist, Leoš Vinter. KASKÁDA CONGRESS CENTRE The Kaskáda Resort is a popular venue for courses, working sessions, seminars, presentation events, conferences and congresses. Your events will take on absolutely new dimensions in the modern congress hall, with a seating capacity of up to 180, which can be di- vided into 4 separate areas. The hall is provided with modern techni- cal equipment. The Congress Restaurant with its spacious bar is part of the new com- plex. All your requirements will be met and all your ideas translated into reality.

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2 1 | S E R V I C E S Photo:CzechTourismarchives Tourism Faces Lower Demand 4 695 059 foreign tourists came to the Czech Republic during the first three quarters of 2009, which was 9.9% less than during the same period of 2008. Despite the number of tourists being smaller, this 10% decline is a reason for some optimism. Spain, France, or Portugal, are also struggling with the declining numbers of British tourists. There are several reasons for the 20% drop in the numbers of Russian arrivals to the Czech Republic. One of them is the significant weakening of the rouble against the EUR, by almost 25-30%. There has also been a 30% year-on-year decline in the number of ap- proved visa applications. Last but not least, Russian foreign travel has been influenced by cuts in social programmes of big companies. The hotel business has also been affected by the economic crisis, especially through lower revenue (up to 15% in some cases), overall oc- cupancy has also declined. However, another reason for this development in Prague is the fact that there are new hotels being opened all the time, and the supply in the form of 82 809 beds exceeds demand by a signifi- cant margin. Prague has a lot more beds than Barcelona (approx. 70 000), Vienna (approx. 55 000), or Budapest (approx. 40 000). CONGRESS TOURISM Congress and incentive tourism belongs among the most efficient forms of the in- dustry. Congress events bring not only high earnings to the state and towns (a congres- sional tourist spends on average EUR 240 per day), but also new job opportunities. As congress and conference participants utilise many services in given destinations, they become better acquainted with current of- ferings, which leads to a growing awareness especially about monuments and histori- cal objects. Congress tourism is developing mainly in larger towns in the Czech Republic, such as Prague, Brno, Hradec Králové, Os- trava, Plzeň, Karlovy Vary, or Teplice, and in some smaller destinations. According to the results of an ICCA (International Congress and Convention Association) survey, 7 545 big congresses took place in the world in 2008. Prague came in the thirteenth place with 74 congresses with 21 500 delegates. PREDICTIONS FOR 2010 The percentage decline in arrivals of for- eign tourists in the Czech Republic should further improve in 2010. According to the predictions of the World Tourism Organis- ation (UNWTO), further improvement of the situation in the tourist trade should occur in 2010. However, the World Tourism Organis- ation does not expect the numbers from 2008 to reappear before 2011. CZECHTOURISM AGENCY 2010 Inordertosupporttheincomingtouristtrade, CzechTourism focuses on the promotion of particular areas of the tourist trade. Besides gastronomy and the congress and incentive tourism, these include, for example, spas, weddings, and golf. To promote the Czech Republic on foreign markets, CzechTour- ism also uses other topics, such as historical treasures or active holidays. When it comes to promoting the regions and national products abroad, CzechTourism mainly organises fam and press trips to regions for foreign tour op- erators, corporate customers, journalists, and BALANCE SLOWLY IMPROVING Plummeting percentages of tourist arrivals from the beginning of 2009 have been grad- ually improving. The decline reached 18% in the first quarter, 12.2% in the second, and 9.9% in the third. These numbers allow us to deduce that the tourist trade is slowly com- ing out of the worldwide recession. The aver- age length of stay of foreign tourists in the Czech Republic was around four days during the first three quarters of 2009. The overall number of nights spent in Czech hotels and guest houses has climbed to almost 14 mil- lion (13 947 498), which is a decline of 11.5%. DECLINING NUMBERS OF TOURISTS ARE COMMON The decline has been recorded in the case of mostsourcecountries,withthegreatestbeing in the United Kingdom and Russia. 25% fewer tourists (277 thousand) than the year before came to the Czech Republic from the United Kingdom in the first three quarters of 2009. On the other hand, other destinations, such as FLY FROM PRAGUE The website www.letejtezprahy.cz features tips for visits to other towns from Prague (let us mention, for example, Belfast, Damascus, Dublin, Istanbul, Cairo, Copenhagen, Larnaca, Lisbon, Rome, Stockholm, and Tbilisi). The website features the most complete information regarding towns serviced by direct flights from the Prague Airport on the Czech Internet. The description of each destina- tion includes basic information about history, all practical information regard- ing visa requirements, vaccination, local transport, and customs. It is a matter of course that the website also offers tips about visiting monuments, accommoda- tion, restaurants, culture, etc. The content of the website is being improved by its readers who submit tips about interest- ing possibilities of accommodation, din- ing, and cultural or social events. Prague – the National Museum in Wenceslas Square

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| 2 2 S E R V I C E S television crews. Participation in trade fairs is of similar importance, as well as the foreign offices of the CzechTourism agency which promote the regions directly in their place of activity. Foreign offices maintain direct contacts with the media, professional public, and individual in- terested parties in their place of activity. Foreign representatives keep lists of journalists, key media outlets, and tour operators specialising in the Czech Republic, and prepare reviews of the destination market situation. Foreign offices play an important role in co-organising fam and press trips to the CR. CZECH CONVENTION BUREAU PROJECT When discussing the promotion of Czech regions on foreign markets, it is necessary to mention the Czech Convention Bureau project, which was launched on 1 January 2010. The aim of the Czech Convention Bureau institution, sponsored by CzechTourism, will be to coordinate a uniform promotion of the CR as an ideal congressional and incen- tive destination both on the domestic and on foreign markets. Besides coordinating all marketing and commercial activities towards foreign partners and potential clients, the goal of this institution is to draw con- gresses into regions that expressed their interest in participating in this project and possess the potential for holding congressional events. CZECH SPECIALS PROJECT When it comes to gastronomy, we must not fail to mention the Czech Specials project (Taste the Czech Republic – www.ochutnejteCR.cz). The project will be supported by many domestic (Czech Specials Food Cup 2010 – gastronomical competitions in the regions of the Czech Republic emphasising the Czech cuisine and everything re- lated to the CzechSpecials project) and foreign (Poland and Lithuania –Wandering Dumpling – a road show through big Polish and Lithua- nian towns combined with Czech Days and competitions in the art of cooking the Czech dumpling. Austria – Knödl Tour) activities in 2010. YOUR STUNNINGLY DIFFERENT WEDDING Your Stunningly Different Wedding – the name of a campaign pro- moting the Czech Republic in the United Kingdom as an attractive destination for wedding and honeymoon tourism. Starting in Janu- ary, a campaign has begun in the London underground trying to at- tract with the catchy slogan LET PRAGUE BEYOURVALENTINE. Czech- Tourism will also promote the Czech “wedding” Republic at the UK Wedding Show and The National Wedding Show trade fairs. COMMON PROJECTS Cooperation of the countries of the Visegrad Group will continue in 2010 with common projects with the aim to support incoming tourist trade in the region of the member states. Main activities will traditionally include participation at important world fairs, ITB Asia Singapore and COTTM Peking. There will also be workshops and roadshows organised in the main source countries, especially in Russia, Japan, and the USA. A new version of the www.european- quartet.com website should be launched during 2010, which will contribute to the awareness about the countries of the V4, introduc- ing them as a unique cultural and historical tourism region. Filip Remenc www.czechtourism.com

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THE LARGEST GOLF RESORT IN CENTRAL EUROPE Prosper Golf Resort Čeladná is an exclusive destination situated on 140 hectars in the picturesque village of Čelad- ná, which is positioned in the heart of the beautiful Beskydy Mountains in the northeast of the Czech Republic. Two Championship 18-hole golf courses with numerous golfing facilities and the stylish Golf restaurant with a sum- mer patio are part of the resort as well as Prosper Horse Ranch and the luxurious alpine-styled Mountain Golf Hotel ****, which creates a pleasant atmosphere in the mountainous landscape of the Beskydy. Prosper Golf Resort belongs to PGA European Tour, the highest golf competition in Europe, which our Resort proudly hosts from 19th to 22nd August. You can play Pro-Am Tournament on18th August! As an option, we would like to offer accommodation in Elektra Hotel *** in the centre of Ostrava near the famous Stodolni Street, where more than 70 pubs, bars, discos and restaurants are located. You can enjoy the rich night life... PROSPER GOLF RESORT ČELADNÁ 739 12 Čeladná 741 E-mail: travel@prosper-golf.cz Managing Comp.: Prosper Trading a.s. www.prosper-golf.cz Phone: +420 605 234 636, +420 558 440 410

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2 5 | S E R V I C E S Czech Golf Republic If you travel to the Czech Republic, do not forget to bring your golf equipment. This simple rule should be remembered by any golf lover heading to this country in the heart of Europe. The Czech Republic boasts not only historic jewels, such as Prague Castle, Karlštejn Castle, or Charles Bridge, has not gained fame in the world only thanks to its excellent beer - let us mention the famous Pilsner - but is increasingly attracting foreign visitors‘ attention also as number one in golf in Central and Eastern Europe. It was no ac- cident that in 2007 the International Association of Golf Tour Operators named it the Undiscovered Golf Destination of the Year. CZECH GOLF FOR EVERYBODY The Czech Republic offers grounds both for absolute golf beginners as well as players of professional level. Almost a hundred out- door courses (the current list is available in the golf guide on the website www.czech- tourism.com – Active Holidays – Golf, in English and German) feature diverse back- drops as well as top-class facilities for play- ers. The overwhelming majority of them meet the strictest international criteria. An ideal way of learning about Czech his- tory and airing your golf gear at the same time is offered by eleven unique resorts which are incorporated into the charm- ing sceneries of chateau parks. A random list: a chateau golf course can be found at Hrádek u Nechanic in East Bohemia – thanks to the unique combination of the chateau complex with golf holes it has been reputed as the most English-style Czech course, but shots can be played right next to the cha- teau building also at Šilheřovice in North Moravia, a technically very demanding course can be found for a change at Štiřín in Central Bohemia, two eighteen-hole championship courses can be negotiated at a short distance from Prague in one of the mostimpressivecomplexesinthecountryat Konopiště-Tvoršovice, a stunning view is of- fered by the neo-Gothic chateau of Hluboká in South Bohemia, which shapes the scen- ery of the course there. Some golf resorts associated with historic environments also offer the unrepeatable experience of a night spent directly in a chateau hotel. At the Štiřín chateau course, you can also find the most difficult hole of last year in the Czech Republic. And, if you are competitive, you can compare your score card at other most difficult holes in the country which are a true sports challenge for any player. THE MOST DIFFICULT HOLES AT CZECH GOLF COURSES IN 2009 Štiřín - hole 9, par 5, average number of strokes above par +4.5 length: 516 metres and 461 metres Clearly the most difficult hole of the Štiřín course.The view from the tee area says: a nar- row, long hole across a pond, with a number of hazards. The landing zone of the first shot is very uneven, even the slightest error makes the second stroke difficult, as it must overcome a ninety-metre water surface. Be- yond the water hazard there is a row of tall oaks which limit the landing of the ball on the fairway. Although the fairway is spacious beyond the water, the green can be attacked only from its right half. Shots from the left of the fairway are limited by a tall pine tree. A sunny, large level green, with an amazing weeping beech towering beyond it. Hrádek u Nechanic Golf Club Photo:CzechTourismarchives

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| 2 6 S E R V I C E S Kestřany - hole 1, par 5, average number of strokes above par +3.92 length: 558 metres (yellow) Placed third among the fifty most difficult holes in the Czech Republic. A clear hole with considerable elevation and a wide landing zone for the first stroke begins inno- cently but requires a good guess of distance to fly the ball over the pond which forms the first major hazard. The second stroke is the most difficult, played over the horizon, moreover sloping steeply to the left. The stroke requires careful thinking, and so does the choice of the right club in order to get to the uneven fairway beyond the pond, from where only 120 metres remain to the slop- ing green with a break in the top half and a big bunker left at the front. Janov - hole 5, par 5, average number of strokes above par +3.79 length: 542 metres and 476 metres At first sight from the teeing area, players ex- pectnosurprises.Theyseea wide,openhole without apparent hazards. Certain nervous- ness may be aroused only by its length. At the first landing area, the hole turns slightly to the right. Here, the fairway is lined on the inner side of the bend by a fence, which forms the boundary of the course. At this point the fairway is sufficiently wide and its left side features a generous and not- too-wild semi rough. The second and third landing areas are reached via a straight fair- way with a sufficiently wide semi rough. The green of the hole is of medium width, and easily readable. It is flanked by three side bunkers. The hole’s challenge rests in its length, and in the fact that it rises slightly all the way from the drive to the green. Hrádek - hole 3, par 4, average number of strokes above par +3.75 length: 408 metres and 376 metres Golfers face difficult moments at all strokes because there is no scope for mistakes. Along the entire hole length the right side is out of bounds and there is woodland on the left. The first shot from the tee must send the ball over bushes some 120-140 metres distant and avoid two sprawling locust trees on the left. The second shot is played from a great distance and keeping the ball on the green after it lands from the air is next to impossible. Thus virtually surgical preci- sion is required to place the ball within the ten-metre-wide passage between a water hazard and a biozone and let it run towards the putting green. On the sloping green, it is not easy to single-putt to the hole from a distance of more than 1.5 metres. Cínovec - hole 8, par 5, average number of strokes above par +3.72 length: 496 metres and 428 metres The most difficult hole of nine, mostly due to its length, where the play of some golf- ers seems to be of the kind of tilting at windmills. The basis of a success must be a long and well-placed drive, because the following shot should be with a wood as well. Be careful about two deep fairway

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2 7 | C Z E C H B U S I N E S S A N D T R A D E level green in the regulation, it is necessary to hit the iron accurately at 150 metres to over- come a relatively dense rough and a right bunker below the putting green. Darovanský dvůr (Sv. Anna) - hole 9, par 5, average number of strokes above par +3.56, length: white 543m, yellow 543m, red 510m One of the extraordinary and most difficult holes at Darovanský dvůr, clearly in the cat- egory of the “unforgettable“ ones. The tra- ditional hole, reputed for its narrow fairway lined with the wooden fence of a paddock with curious horses on the left side, and red and yellow markers along a path on the other. In addition, the green is unexpected- ly crowned with a lake and a sand “beach“ separated from the water surface merely by the thin edge of wooden sleepers. With the need of a shot over a water surface, the green may potentially bring a tournament “final“ shake-up. The heartbeat of every player starts racing here before the final putt towards the pin. If you feel like getting to know the Czech Republic with a golf bag on your back, then lose no time and set off. You can combine an active rest with historic sight-seeing and culture over a weekend as well as during longer holidays. You will certainly be not disappointed by the golf destination in the heart of Europe. David Hort www.czechtourism.com bunkers about 50 metres before the green. However, the green is large enough, so that much can be saved with a good chip. Take care especially to avoid a slice, as the ball then lands in the rough. Kestřany - hole 18, par 5, average number of strokes above par +3.58 length: 500 metres (yellow) In the past, one of the most difficult holes at Czech golf courses has been shortened from this year and the tee has been moved to the right. Although the players must make the first drive over the horizon, the shifting of the teeing area has straightened the shot and there is no landing problem. On further ap- proach to the green, the shot must be long enough to overcome a transverse water haz- ard and a fairway bunker on the right beyond it, while a water surface is also hidden on the right. If we want to reach the elevated and 2;A 4;D COURSES AT CHATEAU GROUNDS 1. GOLF KRAVAŘE Alejní 26, 747 21 Kravaře 2. GOLF ŠTIŘÍN Kamenice 711, 251 68 Štiřín 3. GOLF ŠILHEŘOVICE klubovna PGC TJ Mittal Ostrava 747 15 Šilheřovice 4. GOLF HRÁDEK Zámecká kavárna Hrádek, 503 15 Nechanice 5. GOLF KONOPIŠTĚ Tvoršovice 27, 256 01 Benešov 6. GOLF MYŠTĚVES Myštěves č.p. 111, 503 15 Myštěves 7. GOLF BECHYNĚ Panství Bechyně, Zámek č.p. 1 391 65 Sudoměřice u Bechyně 8. GOLF HLUBOKÁ Náměstí ČSLA 26, 373 41 Hluboká nad Vltavou 9. GOLF CASA SERENA Areál Casa Serena, 285 41 Roztěž 10. GOLF KLUB KYNŽVART Zámek 1/418, Lázně Kynžvart 11. GOLF CLUB KRÁSNÝ DVŮR Krásný Dvůr, 439 72, (Červená Hájenka) THE MOST DIFFICULT HOLES A. Štiřín, B. Kestřany, C. Janov (Děčín) D. Hrádek (Nechanice), E. Cínovec F. Darovanský dvůr Photo:PhotoCombo

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| 2 8 K A L E I D O S C O P E New Industrial Park Completed After nearly five years of preparations, the Holešov Strategic Industrial Park opened ceremonially in November 2009. It is one of the largest development projects of the Zlín Region. Actual building work to connect the Park to roads, electricity, water, and other supply systems started only in October 2008, so that the infrastructure was completed within a very short time. “The builders strictly observed the timetable, which was a real achievement for such a large project. It is a perfect recommendation for new investors, who can see that the Park is a real priority for the Czech Republic,” Alexandra Rudyšarová, General Director of CzechInvest Agency, pointed out at the ceremonial opening of the Park. According to CzechInvest, this strategic park may be of interest especially to companies operating in the automotive industry, aviation, engineering, and the plastics industry, sectors which have a long tradition in the region. Holešov can offer investors an area of three hundred hectares. More at www.zonaholesov.cz Photo:www.sxc.hu,TECHOarchives The Czech Republic is the Third Most Successful Country in Drawing Money from EU Funds third in drawing money from EU funds. The most successful among the new member states so far is Estonia and Cyprus, with Lithuania ranking second and the Czech Re- public third. At the other end of the statis- tics is Slovakia. “The growing volume of Eu- ropean money for Czech beneficiaries was appreciated by the European Commission. The Ministry for Regional Development is preparing a plan and legislative measures to simplify the drawing and make it more effi- cient,”Minister Rostislav Vondruška said. The statistics of the European Commission also show that 15 000 people participate in the administration of the fund of EUR 26 billion, which the Czech Republic is entitled to draw during the 2007-2013 programme period. This means that one employee is in charge of a sum of EUR 17 million, similarly as is the case in Hungary. The Czech Republic is one of the states with the lowest number of ad- ministration workers charged with the allo- cation of money from EU funds. Among the twelve new EU members who joined the European Union between 2004 and 2007, the Czech Republic has placed Elmarco Becomes a Member of the Consortium ELMARCO s.r.o. signed a co-operation con- tract with Akron University, Ohio, the USA, and became a new member of the world consortium concerned with the research and development of efficient filters that can separate smoke, vapours, mist, or aerosol containing dangerous substances. This type of coalescent filters is used for the protec- tion of the environment and workplaces, for water and air filtration and for the rescue of lives. “For ELMARCO this signifies its entry into an élite scientific and research commu- nity,” Stanislav Petrík, the company’s strategy and trade manager, explained. “Our primary input into the consortium is the use of its unique laboratory equipment for nanofibre production, Nanospider TM Lab. In this way we’ll participate in the development of a new generation highly efficient filters, suitable for the separation of oil substances from water or the air, for the filtering of exhaust fumes from diesel engines and for many other pur- poses,” the company’s executive secretary and co-owner Ladislav Mareš added. Czech Scientific Instruments Travel into Outer Space The Russian Rokot carrier rocket, launched from Pleseck cosmodrome on 2 December 2009, put into orbit the SMOS and Proba-2 satellites. On board the latter are two Czech scientific instruments. The Czech Republic participated in the development of the Proba- 2 satellite with the design and manufacture of two scientific instruments for surrounding plasma analyses. Specifically, these devices are the TPMU instrument for the measuring of the density and temperature of ions, their composition and electron temperature, and the DSLP instrument designed for the study of magnetospheric plasma. Both instruments have been developed by CSRC in Brno, under the scientific guidance of teams from the Insti- tute of Physics of the Atmospere of the Czech Academy of Sciences, as a follow-up of the successful series of Czechoslovak Magion sat- ellites. The satellite, weighing 130 kilograms, belongs to the small satellite category. "With this project, the European Space Agency (ESA) has provided smaller firms and laboratories with the opportunity to test their instruments and technologies in outer space,”Jan Kolář, di- rector of the Czech Space Office, said. Main Interest Rate Down to 1.0% In December 2009, the Czech National Bank reduced the main interest rate to 1.0% from the previous 1.25%, a record low in the bank’s history.The reduction of the main interest rate (two-week repo rate) to 1.0% has reduced the span between this rate and the discount rate, which is customarily 1 percentage point be- low the repo rate.The discount rate, however, has not been reduced and remains on the 0.25% level. The Lombard rate, together with the repo rate, dropped by 25bp to 2.0%.

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2 9 | C Z E C H B U S I N E S S A N D T R A D E Optimism Is Returning Optimism is slowly returning to businessmen all over the world, including those in the Czech Republic. Although a number of Czech companies are still bogged in a serious economic situation, manufacturers are becoming moderately optimistic, a KPMG survey has revealed. Manufacturers, however, expect revenues to continue declining until October 2010, as companies will be pushing the prices down to maintain their share of the market. The survey also indicates that Czech manufacturers will tend to reduce the number of their employees so as to keep their costs down. National Quality Prize – Valuable Appreciation Themostprestigiousappreciationoffirmsand organisations–theNationalQualityPrizeofthe Czech Republic in the Excellent Firm category, was won by TECHO, a.s., a manufacturer of of- fice furniture; and the Excellent Organisation award went to the Czech Statistical Office.The National Quality Prize is the most prestigious award a firm or organisation can obtain. It is awarded in 80 countries the world over, in accordance with criteria assessing the firm or organisation from different aspects.The award does not consider exclusively the quality of products and services, but also the quality of management, economic results, approach to employees, customers, and sub-contractors. More at www.narodnicena.cz. TECHO, a.s.

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| 3 0 R E G I O N Liberec Praha České Budějovice Jihlava Brno Zlín Ostrava Olomouc Pardubice Hradec Králové Ústí n/L Karlovy Vary Plzeň An economically important region with an advantageous position in the south-eastern part of the Czech Republic, along the borders with Austria and Slovakia, it has always been a strategic European crossroads. GERMANY AUSTRIA SLOVAKIA POLAND Brno Znojmo Břeclav Blansko South Moravia Region Christianity came to Europe through this region, people founded towns and villages along the banks of local rivers for centuries, and planted vineyards and fruit orchards. There is a broad range of cultural, natural, and technical monuments, valuable archi- tectural monuments of all styles, four loca- tions included in UNESCO lists, attractive folklore and wine tourism – all that makes South Moravia the most visited area of the Czech Republic, along with Prague and the Karlovy Vary Region. BRNO – REGIONAL METROPOLIS Brno, the second largest city in the Czech Re- public, is the centre of the Region. One-third of the Region‘s population lives in Brno. Its economic significance clearly exceeds that of other towns in the Region, and it is of considerable supra-regional importance as well. It is the seat of a number of national institutions, especially judicial, serves as an economic and administrative centre, and is the fair centre of Central Europe with many years of tradition in hosting fairs (more at www.bvv.cz) annually visited by over a mil- lion people from around the world. Brno also holds an important position in the area of science and research which is related to its industrial tradition and a broad selection of universities. Brno is the second largest centre of education in the Czech Republic, offering a complete range of fields of study. TRANSPORT The Region‘s advantage is its excellent trans- port accessibility and the strategic position on the crossroads of trans-European long- distance roads and railways which function as important arteries connecting Europe‘s west and east, and north and south. The backbone of the transport system in the east-west direction are the D-1 (Praha-Brno) and D–2 (Brno-Bratislava) motorways. Both motorways are parts of the trans-European motorway network. The north is connected to the south by the R-43 and R-52 express- ways. The town of Brno represents an im- portant transport hub for road, motorway, and rail transport, and for the integrated transport system of the Region of South Moravia. The Region is intersected by two main railway corridors linking EU countries. The town of Brno is a member of an associ- ation of European towns interested in build- ing a fast railway. The Brno-Tuřany civilian airport (www.airport-brno.cz) is capable of accommodating all types of aircraft year round, and with over half a million travellers checked-in in 2008, it holds second place among airports in the CR. There are direct flights to London and Prague every day, and a connection to Moscow twice a week. Regional Office of South Moravia (Krajský úřad Jihomoravského kraje) Žerotínovo nám. 3/5 601 82 Brno Phone: +420 541 651 111 Fax: +420 541 651 209 E-mail: podatelna@kr-jihomoravsky.cz www.kr-jihomoravsky.cz Vyškov Hodonín Brno Fairgrounds Photo:CzechTourismarchives

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3 1 | C Z E C H B U S I N E S S A N D T R A D E Distance from Brno to European cities: Vienna 120km Bratislava 130km Prague 200km Budapest 330km Berlin 540km Munich 550km Warsaw 560km Brussels 1100km ECONOMIC POTENTIAL The South Moravia Region is one of the regions with significant economic poten- tial. The structure of industrial sector in the Region has long been characterised by the dominance of machine building and electrical engineering with centres in Brno and Blansko. However, the dominant posi- tion in the Region‘s economy is held by the processing industry.There has been growth, especially in recent years, in a number of business entities in the area of computer technologies, telecommunications, soft- ware development, and other hi-tech fields. The South Moravia Region provides consid- erable support to the development of tech- nology and biotechnology incubators in- tended for start-up firms. The quality system of higher education is one of the reasons for the above-average level of education of the region‘s population. AgricultureisalsowelldevelopedinSouth Moravia. Over 60% of the entire area of the Region is agricultural land, 83% of which is arable land. Above-average natural condi- tions allow for the continuation of the long tradition of specialised types of agricultural production, such as viticulture, fruit grow- ing, and vegetable growing. Over 90% of vineyard area in the CR is in the Region. Viticulture is the Region‘s speciality. It has mainly developed in the District of Břeclav, where there is 48% of the vineyard area in the CR, but also in the Districts of Hodonín, Znojmo, and partially also Brno-venkov. It is typical for the Region that there are many small producers of wine and many wine cellars. As for livestock production, the Re- gion of South Moravia holds one of the top spots in pig and poultry breeding. TOURISM PARADISE The Region of South Moravia is undoubt- edly an attractive tourism destination. Of all the architectural monuments, let us mention two: the Tugendhat villa in Brno TERRITORIAL AND ADMINISTRATIVE ORGANISATION OF THE REGION IS CHARACTERISED BY SEVEN DISTRICTS: NUTS Area (in sq. km) Population Number of municipalities Population ppl/sq. km LAU 1 Blansko 863 106 248 116 123 LAU 1 Brno-město 230 370 592 1 1 610 LAU 1 Brno-venkov 1 499 198 379 187 132 LAU 1 Břeclav 1 038 113 479 63 109 LAU 1 Hodonín 1 099 157 084 82 143 LAU 1 Vyškov 876 88 057 80 101 LAU 1 Znojmo 1 590 113 307 144 71 NUTS 3 – South Moravia Region 7 196 1 147 146 673 159 NUTS 1 – Czech Republic 78 867 10 489 183 6 249 133 Source: Czech Statistical Office (in 2009) NUTS-territorial unit according to unified EU classification, LAU 1 = district Latest data about the South Moravia Region Population As of 09/30/2009 1 151 508 Gross income 1-3 quarter of 2009 CZK 21 310 (EUR 840) Unemployment As of 12/31/2009 10.59% (www.tugendhat-villa.cz) and the cultural landscape of the Lednice-Valtice park area (www.lednicko-valticky-areal.cz), both of which have been recognised by a record in the list of UNESCO World Heritage Sites. UNESCO also protects two nature reserves – Dolní Morava (Lower Moravia, includes Pálava PLA, Lednice-Valtice park area, and the area around the junction of the Dyje and Morava rivers) and the White Carpathians. One of the four national parks of the Czech Republic also lies within the Region – Podyjí, an extensive complex of stalactite caves, including the Macocha Gorge. Hid- den in the picturesque wine cellars is the folklore heritage, whose importance is evi- denced by an entry of the male solo dance, verbunk, in the UNESCO list of the Master- pieces of the Oral and Intangible Heritage of Humanity. Important businessmen or scientists and inventors who left their mark on the Region of South Moravia: František Ondřej POUPĚ, called the “gen- ius brewer”, is considered the founder of professional Czech brewing. He toured Czech, Moravian, Austrian, German, and Polish breweries for six years. His principle: wheat for cakes, oats for horses, and only barley for beer. He was the first European to introduce the use of the thermometer for brewing in 1790. Prokop DIVIŠ, physicist and designer, he experimented with static electricity and is mainly known for inventing the ground- ed lightning conductor. Few know that Prokop Diviš also authored another fa- mous invention – a string musical instru- ment powered by electricity. Its name was Denis d´or (Golden Diviš). The instrument got lost after Diviš‘s death and has never been recovered. Viktor KAPLAN, Austrian engineer, profes- sor at the German Technical University in Brno, inventor in the field of kinetics and engineering, turbines, and the harnessing of the power of water. He applied for 280 patents in 27 countries during his lifetime. He is the author of the revolutionary in- vention of the so-called Kaplan‘s water turbine (1912).The anniversary of his birth has been included in the UNESCO list of world anniversaries. Johann Gregor MENDEL, considered the founder of genetics. He acquired world fame as the founder of the theory of in- heritance. The three Mendel‘s laws – of segregation, of independent assortment, and of dominance – have become the basis for the cultivation of plants and ani- mals and an important part of medicine and other fields of science.

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| 3 2 R E G I O N Photo:XXXX DISTRICTS OF THE REGION Blansko The economy of the District has always had an industrial-agricultural character. Machine building, with its tradition of a hundred years, is the most important industry. Commuters can easily access the most important compa- nies thanks to the proximity of the railway.The easytransportaccessibilityofBrnocompanies helps to improve the employment rate in the Blansko District. The District of Blansko is one of the ecologically cleanest in the country. One of the reasons are the large wooded ar- eas. The utilisation of gas energy also helps to keep the air healthy here.The town of Blansko, 30 km to the north of Brno, is called the gate- way to the Moravian Karst. The Karst is an at- tractivetourismdestinationforbothdomestic and foreign visitors, thanks to a number of ac- cessible caves and the Macocha Gorge (www. propast-macocha.cz/). Brno-město Brno-město is one of the oldest industrial centres in Central Europe. It is the traditional commercial and social centre of the South Moravia Region, as well as the centre of fair and congress tourism. Owing to its lo- cation, Brno is an area with a rather dense network for transport. The city of Brno also offers many possibilities for accommoda- tion, shopping, and dining. The accommo- dation is provided by over a hundred hotels, motels, pensions, and lodging houses and other private and seasonal establishments. A number of supermarkets, hypermarkets, and malls present a wide range of goods on a sales area of almost 500 thousand sq. m. The Olympia Centre at the southern edge of the city and the multifunctional palace, Velký Špalíček (www.velkyspalicek.cz), situ- ated in the centre of the town, offer both shopping and entertainment (multiplexes). Brno-venkov The District of Brno-venkov has remained, de- spite the changes in the economy during the last decade, a mainly industrial-agricultural district. Thanks to favourable soil and climate conditions, there is a rich agricultural tradi- tion in the District, oriented at the production of cereals, root-crops, and the cultivation of fruits, vegetables, and grapevines. The town of Kuřim is the most populated in the District, the second is Ivančice.The latter was founded on the site of prehistoric settlements. Břeclav Approximately 113 thousand people live in the District of Břeclav. The industry is repre- MUNICIPAL COUNCIL BRNO (MAGISTRÁT MĚSTA BRNA) Dominikánské náměstí 196/1, 602 00 Brno-město Phone: +420 542 171 111, Fax: +420 542 173 530 E-mail: informace@brno.cz, www.brno.cz MUNICIPAL OFFICE BLANSKO (MĚSTSKÝ ÚŘAD BLANSKO) náměstí Svobody 32/3, 67801 Blansko Phone: +420 516 426 111 e-mail: mesto@blansko.cz www.blansko.cz MUNICIPAL OFFICE BŘECLAV (MĚSTSKÝ ÚŘAD BŘECLAV) nám. Tomáše Garrigue Masaryka 3, 690 02 Břeclav Phone: +420 519 311 111, Fax: 519 311 238 e-mail: posta@breclav.org www.breclav-city.cz/cze/urad/ MUNICIPAL OFFICE HODONÍN (MĚSTSKÝ ÚŘAD HODONÍN) Masarykovo náměstí 1, 695 01 Hodonín Phone: +420 518 398 111, Fax: +420 518 353 686 e-mail: podatelna@muhodonin.cz www.hodonin.eu MUNICIPAL OFFICE VYŠKOV (MĚSTSKÝ ÚŘAD VYŠKOV) Masarykovo náměstí 108/1, 68201 Vyškov Phone: +420 517 301 111, Fax: 517 301 300 e-mail: posta@meuvyskov.cz www.vyskov-mesto.cz MUNICIPAL OFFICE ZNOJMO (MĚSTSKÝ ÚŘAD ZNOJMO) Obroková 1/12, 669 22 Znojmo Phone: +420 515 216 111, Fax: +420 515 216 362 e-mail: info@muznojmo.cz, www.znojmocity.cz sented by the rubber, plastics, chemical, ma- chine-building, printing, and food-processing industries. The District may pride itself on its relatively clean environment, which is in part causedbytheconstructionofsewerageplants and the effort to connect the sewer system to these facilities. The quality of watercourses has been improving in recent years, which has been evidenced by the reappearance of beavers along the Dyje and Morava rivers.The Břeclav District is known for viticulture, which has a long tradition there. The sunny slopes of the Pavlovské vrchy Hills are covered with vineyards and the obligatory wine cellars. Hodonín For a long time, the development of the District had, thanks to favourable natural conditions, conformed to agriculture. There are several oil and gas reservoirs, as well as deposits of gravel-sand and raw materials for brickmaking. Mineral waters could also be put to greater healing use in the future. The ever-present vineyards and wine cellars are a symbol of the District. The entire vine- growing region is intersected by wine paths for cyclists with stops at the most remark- able historic wine cellars. Vyškov The economy of the District has always had an industrial-agricultural character. The easy transport accessibility of Brno companies helps to improve the employment rate in the Vyškov District. According to avail- able data, a third of those who commuted for work outside their home municipality commuted to the regional capital of Brno. St. Nicholas Church in Znojmo Photo:CzechTourismarchives

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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 SELECTED FIRMS IN THE SOUTH MORAVIA REGION Name Based in Sector Contact GEOtest Brno, a.s. Brno protection of the environment, hydrogeology, sanitation www.geotest.cz OHL ŽS, a.s. Brno transport structures – road, motorway, railway www.ohlzs.cz Veletrhy Brno, a.s. Brno organisation and realisation of fairs and exhibitions www.bvv.cz ALTA, a.s. Brno engineering, metallurgy, and energetics www.alta.cz Student Agency, s.r.o. Brno bus transport, arranging language stays www.studentagency.cz Destila, s.r.o. Brno food machinery and equipment www.destila.cz ASIO, spol. s r.o. Jiříkovice production of sewerage treatment plants www.asio.cz Deceuninck spol. s r.o. Popůvky wholesale of PVC profiles www.deceuninck.cz Dřevomonta s.r.o. Židlochovice wood production and realisation of custom interiors www.drevomonta.cz HARTMANN-RICO a.s. Veverská Bítýška production of pharmaceuticals http://cz.hartmann.info JAPEZ, spol. s r.o. Vranovice construction www.japez.cz VETROPACK MORAVIA GLASS a.s. Kyjov production of glass packaging www.veropack.cz KORDÁRNA a.s. Velká nad Veličkou production of technical fabrics for the rubber industry www.kordarna.cz MSO servis spol. s r.o. Kyjov construction – complex deliveries www.msos.cz KM Beta a.s. Hodonín production of concrete roofing and building elements www.kmbeta.cz LIVI, spol. s r.o. Dubňany viticulture and production of wine www.livi-dubnany.cz ATLANTA a.s. Nový Šaldorf realisation of constructions, production of cement products www.atlanta-as.cz DŘEVOTVAR, výrobní družstvo Znojmo Znojmo carpentry, production of upholstery, production of cartons www.drevotvarznojmo.cz Haas Profile s.r.o. Znojmo -Přímětice production of metal constructions, drums, containers www.haasprofile.com Inženýrské stavby Znojmo, spol. s r.o. Znojmo supplies of sewerage and water systems www.isznojmo.cz K-Produkt s.r.o. Znojmo production of furniture, flooring www.kprodukt.cz Alca plast, s.r.o. Břeclav sanitation equipment www.alcaplast.cz GUMOTEX, akciová společnost Břeclav rubber and plastic production www.gumotex.trade.cz MORAVIAPRESS, a.s. Břeclav offset rotational printing www.moraviapress.cz OTIS, a.s. Břeclav production of lifts, escalators production of lifts, escalators www.otis.com RACIO, s.r.o. Břeclav production of food www.racio.cz Bioveta, a.s. Ivanovice na Hané production of pharmaceuticals and healthcare products www.bioveta.cz EUROPEAN DATA PROJECT, s.r.o. Komořany production of slot machines www.edpsro.cz ROSTEX VYŠKOV s.r.o. Vyškov production of security armour, furniture ironwork www.rostex.cz ANTREG a.s. Vyškov production of cutting tools, moulds for plastic, pressing tools www.antreg.cz BUČOVICE TOOLS a.s. Bučovice production of tools www.tools-bu.cz Blata, s.r.o. Blansko production and sale of motorcycles, mini-bikes, four- wheelers, etc. www.blata.cz DSB EURO, s.r.o. Blansko operation of steel foundry, production of grey, nodular, and artistic cast iron www.dsbblansko.cz ČKD Blansko Engineering, a.s. Blansko water turbine component supplies, research and development thereof www.cbeng.cz SKS s.r.o. Blansko Projections, supply, and installation of security and camera systems www.sksblansko.cz STEKO, spol. s r.o. Blansko fireplaces, fireplace liners, wood stoves, production of automatic doors and gates www.steko.cz Large wooded areas (almost 30 thousand hectares) contribute to the fact that the Dis- trict of Vyškov is one of the ecologically pre- served districts. The utilisation of gas energy helps to keep the air in the District clean. Znojmo The District of Znojmo is the largest in the South Moravia Region and has been one of the economically weak districts in the long-term, facing an above-average rate of unemployment. Znojmo is a traditionally agricultural district with a long tradition in specialised growing (especially viticulture and fruit growing). The District also has a potential for the development of tourism, especially in the country. Znojmo strives to establish a favourable climate for businesses and to make suitable areas more attractive to investors. It is expected that the realis- ation of a by-pass highway, the construction of the Krystal Park industrial site, a greater cooperation with schools, and an overall active approach will contribute to the fulfil- ment of the long-term goal of a further in- crease in business activities in the town and the entire region.

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| 3 4 R E G I O N Photo:CzechTourismarchives The South Moravia Region and its centre, Brno, boast an advantageous geographical position in the centre of Europe and in close proximity to three Central European capitals, Prague, Vienna, and Bratislava. South Moravia Region and Investments gion to offer investors a good source of potential employees with corresponding qualifications. RANKING SECOND IN THE REGION Youcanmakea comparisonforyourselves.In the first half of 2009, 23 investors announced their intention to invest in the South Mora- via Region, thus placing the Region second in the national comparison of investments. Quite an important proportion of the total volume of investments announced in the first half of 2009 is accounted for by invest- ments in InformationTechnologies, Research and Development, and services. Thanks to the concentration of technical schools and talented specialists, in the period under re- view the South Moravia Region attracted six companies concerned with the develop- ment of software, thus raising the number of technological centres in the area of Research and Development to thirteen. The South Moravia Region maintains its position as an attractive location for inves- tors on a long-term basis. This is confirmed by the CzechInvest statistics for 1993-2009 (first half), in which the Region figures first, with a total number of 202 promised projects worth more than CZK 58 billion (approx. EUR 2.3 billion). In the past 15 years, the Region has provided a technical hinter- land for several large investors. One of them is IBM Global Services Delivery Center Czech Republic, s.r.o., which in 2006 realised an investment project in Brno for Information Technology outsourcing, worth over CZK 100 million (approx. EUR 4 million).The com- pany is responsible for the creation of 820 new jobs. Brno’s IBM is steadily enlarging its operations; currently it employs nearly 2 500 specialists from 70 different nationalities; in 2008, the company’s central office for Cen- tral and Eastern Europe was moved to Brno. The project of the International Clinical Research Centre (ICRC), which is being real- ised in Brno at St. Anne’s University Hospital (www.fnusa.cz/icrc.php), is a great success and the promise of a new flow of invest- ments in Science and Research. When com- pleted, the Centre will be the first interna- tional research centre in the area of medical and biotechnological research. CzechInvest www.czechinvest.org The strategic position and vicinity of the Brno-Tuřany International Airport are advan- tages attracting dozens of new investors to South Moravia each year. Other benefits are the concentration in the Region of several universities and institutions of higher learn- ing with different specialisations (Masaryk University, Technical University, private uni- versities) and a good supply of labour, which make it possible for the South Moravia Re- Paul Cormier, Executive Vice-Presi- dent of the Red Hat Company, visited Brno at the end of October 2009 to announce plans for expansion of the team there. He also presented the prize for the world’s best Red Hat engineering centre to engineers of this Moravian city. Red Hat in Brno: Expansion Plans Red Hat established its branch in Brno in 2006, but had started recruiting experienced engineers and incorporating them in the structure two years earlier. In 2009, some 200 engineers worked in the Brno office, and in the coming years their number is to increase significantly in re- sponse to the current needs of product development. Owing to the degree of integration in the Brno office, and the po- tential of Czech engineers, Red Hat is not planning to open another engineering centre anywhere else in the world in the foreseeable future. BEST ENGINEERING CENTRE During his visit to the Red Hat develop- ment centre, Paul Cormier presented the prize for the best Red Hat engineering centre in the world to its specialists. The Czech team won the first prize in a com- petition against three other centres of similar importance in Australia, India, and China. The criteria for the choice of the most efficient team included the ability to sign up and also to keep talented employ- ees, the ability to work in a team of people from various corners of the world – espe- cially the flexibility of the team members in terms of time, and inter-personal and language skills – as well as, thirdly, the ability to submit quality work in the short- est time possible. ABOUT RED HAT: The American company Red Hat Inc. is the world’s leading provider of business solutions based on an open source code. Its investment in the Czech Republic was announced in 2006, when the company made public, through the CzechInvest agency, its plan to build a technology centre in Brno worth more than CZK 38 million (approx. EUR 1.52 million). Source: CzechInvest, www.czechinvest.org

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3 5 | C Z E C H B U S I N E S S A N D T R A D E Cooperation with Foreign Regions Is Developing The South Moravia Region is de- veloping cooperation with regions abroad, following the establish- ment of contacts after the year 2000 (Bergamo Province, Bratislava Self-governing Region, the Gers Department, Khanty-Mansiysk Autonomous Area, Kaunas, Lenin- grad Region, Lodz Voivodship, Nizhny Novgorod Region, Tuscany, Trnava Self-governing Region, Varna Region, and Zadar Region). Cross-border cooperation has also de- veloped in recent years within the Eurore- gion on the Morava river (Pomoraví), which associates the areas of Weinviertel (Austria), South Moravia, and West Slovakia. The de- velopment of the Euroregion and cross- border cooperation, including support for the development of the territory and cooperation on various levels and in differ- ent areas, especially in science, education, health service, social services, culture, and sports, is one of the priorities of the South Moravia regional government. Since 1999, there has been an extensive exchange of experience in the areas of infrastructure, economy, agriculture, tourism, social serv- ices, culture, etc. Wine has not only given name to the Austrian part of the Eurore- gion. Wine growing and wine tourism are becoming a major inter-regional tourist and economic programme, as Weinviertel, South Moravia, and West Slovakia are the largest wine producing areas in Central Eu- rope. Cooperation and competition consti- tute optimum conditions for establishing a central European destination focused on wine festivals, wine cellars, and wine-relat- ed experience. EUREGIO CITY.NET EUREGIO City.net is a two-year cross-border project supported by the European Union within the Austria - Czech Republic 2007- 2013 programme under the European Territorial Cooperation Objective. Partners to the project, the Weinviertel Manage- ment and the South Moravia Regional Development Agency, have undertaken to promote the development of coopera- tion between municipalities in southern Moravia and Austria’s Weinviertel region in the economic, social, and cultural areas, and also to help profile these towns in the Czech-Austrian border region.

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| 3 6 R E G I O N Photo:CzechTourismarchives,JICarchives The extent of services provided in Brno reflects its importance as the second largest city of the Czech Republic. Services for Investors FINANCE Brno is the seat of branches, subsidiaries, and offices of about 30 Czech and foreign banks. Most of them are members of the Czech Banking Association. www.czech-ba.cz. The Czech Insurance Association is a group- ing of commercial insurance companies. About 30 commercial insurance companies have their headquarters or branches in Brno. www.cap.cz LEGAL SERVICES The statutory city of Brno is the seat of re- nowned offices of lawyers specialised in international law and EU law, commercial, civil, labour, family and criminal law, and intellectual property law. The offices pro- vide comprehensive legal services: real estate transfers, bankruptcies, represen- tation in legal proceedings, recovery of debts, and legal advice. More information can be obtained on the website of the Czech Bar Association, which has a branch office in Brno. More at www.cak.cz Brno is also the seat of the Notarial Chamber of the Czech Republic, which supervises the administration of notarial offices, regulates the professional practice of notaries, etc. About 20 notaries have their offices on the city’s territory. More at www.nkcr.cz. The fol- lowing courts of law are based in Brno: The Municipal Court in Brno, the Regional Court in Brno, the Supreme Court, the Supreme Administrative Court, and the Constitutional Court of the Czech Republic. REAL ESTATE Realestateagenciesprovidecomprehensive real estate services for the area of the South Moravia Region. They offer sale, lease, and purchase of all types of real estate, property within the network of the Czech Chamber of Commerce. The Brno Regional Chamber of Commerce seeks to promote business activities, and support and protect the inter- ests of its members. The Chamber provides especially business-related consultancy and services, organises educational activities, information service on professional educa- tion, etc. www.rhkbrno.cz CzechInvest, Regional Office for South Moravia Region, www.czechinvest.org/jihomoravsky-kraj REAL ESTATE RENTAL RATES IN BRNO: Brno City centre office space - approx. EUR 11 per sq.m/month commercial space - approx. EUR 15-25 per sq.m/month Outside the centre of Brno office space - approx. EUR 4 per sq.m/month commercial space - approx. EUR 6-10 per sq.m/month production space - approx. EUR 2-5 per sq.m/month Information about rentals is also available from major real estate agents in Brno: Real spektrum, a.s. - www.realspektrum.cz, CTP Invest, s.r.o. - www.ctp.cz (Source: Brno City Municipality) valuation, consultancy, and other services. Many of them are members of the Associa- tion of Real Estate Agencies of the Czech Republic. More at www.arkcr.cz Also operating in this area is the non-profit civic Association for Real Estate Market De- velopment, which seeks to improve the quality, stability, and transparency of the Czech real property market, extend public information in the area, promote the Czech real estate market, etc. www.artn.cz AUDITORS AND TAX ADVISERS Brno offers the services of 36 audit compa- nies and more than 100 auditors, led by the Chamber of Auditors of the Czech Republic. The Chamber of Auditors, with the seat in Brno, is a self-governing professional organ- isation established by law to regulate the audit profession in the Czech Republic. More at www.kacr.cz. The city is also the seat of the Chamber of Tax Advisers of the Czech Republic, which associates all tax advisers.Tax advisers based in Brno offer services in the area of all types of taxes, tax records, customs tariffs, ac- counting, social and health insurance, etc. More at www.kdpcr.cz CHAMBER OF COMMERCE IN BRNO Brno is the seat of the Brno Regional Cham- ber of Commerce, an independent entity Grand Prix Autodrome in Brno

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3 7 | C Z E C H B U S I N E S S A N D T R A D E The economic area is a priority in the South Moravia Region, focused on aid for investment opportunities, including support for tourism and public projects. For its development, the Region is taking advantage of financial resources not only from national sources, but often from EU Structural Funds. Use of EU Funds in South Moravia Region The INBIT biotechnological incuba- tor, operated by the South-Moravian Innovation Centre (JIC), was placed first in the 8th Entrepreneurial Real Estate of the Year Competition, in the category“Real Estate with the Greatest Benefits to Innovation and Research”. Competition Winner erational programmes for cross-border cooperation with Slovakia as well as Austria. The cross-border cooperation projects are frequently targeted at tourism. The Region receives money from the South East Regional Operational Programme – a project support- ed from this programme was chosen as the most interesting one in November 2009. It is the Villa Martha, a home adapted for wheel- chairs, with special arrangements and serv- ices for persons with lower self-sufficiency and specific needs caused by chronic mental diseases (age, Alzheimer’s, and other types of dementia). SUPPORT IS GIVEN TO ENTREPRENEURSHIP AS WELL The Regional Development Agency of South Moravia is active especially in the preparation of projects for the EU Structural Funds, investment support in the Region, se- lected information services, management of the Small Projects Fund in the South Moravia/ Lower Austria area within the European Ter- ritorial Cooperation Objective, development of the environment for the advancement of innovation, and support for brownfields re- generation (more at www.rrajm.cz). The Investment and Business Develop- ment Agency CzechInvest, working with the South Moravia Region, is an umbrella organisation for business support in the manufacturing industry, both from EU funds and the state budget. The projects of the Technology Park and the INBIT Biotechnology Incubator have been successfully implemented in cooper- ation with the above-mentioned entities. The importance of the Moravian capital of Brno, the centre of the South Moravia Region, is underscored by its advantageous location close to the Austrian and Slovak borders. This position enables it to take advantage of op- The operator of the INBIT biotechno- logical incubator is the South Moravi- an Innovation Centre. On an area of 2 957 sq. m, companies have the use of labora- tories, offices, conference rooms, and the necessary technical equipment. Czech Business and Trade asked JIC Direc- tor, Jiří Hudeček, two questions concerning the Centre’s possibilities of co-operation with foreign companies. How does the Centre co-operate with for- eign companies? Can you give examples of interesting co-operation programmes? The co-operation efforts of the South Moravian Innovation Centre are aimed primarily at linking up investors with the local environment, i.e. with scientific and research teams and smaller technologi- cal companies which have the comple- mentary know-how they may need. An interesting example is the co-operation project now being prepared by Honey- well with companies which have come into being with the assistance of the South Moravian Innovation Centre. An- other example is JIC assistance to firms co-operating with the International Clini- cal Research Centre Brno (ICRC Brno) in the development of new technologies for the performance of highly advanced operations. What terms does the Centre offer foreign investors wishing to enter the Region? The South Moravian Innovation Centre, in co-operation with its partners, offers high-tech foreign investors a variety of services. These include, in particular, the seeking of partners and the organisation of meetings at Brno universities and in- stitutes of the Academy of Sciences, in- formation on potential sub-contractors in the Region, on the availability of fur- nished spaces (offices, laboratories, con- ference rooms). The INBIT Building

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| 3 8 R E G I O N Photo:FacultyofBusinessandManagementarchives Ever since its foundation in 1992, probably all those interested in edu- cation in the area of Business and the Economy have come across the name of the Faculty of Business and Management , which is a part of the Brno University of Technology. The Faculty of Business and Management: Prosperity and Humanity During the 17 years of its existence, the Faculty has turned out 8 500 graduates; it is a faculty focused on would-be economists and managers for industrial practice. Logi- cally, the Faculty’s tuition programmes must cover a wide range of areas, from pure Eco- nomics to Business Management and social subjects. Here, the business environment is seen comprehensively, and the same ap- proach applies to the preparation of spe- cialists, who must prove their abilities in that environment. Since its establishment, the Faculty has been awarded accreditation for Bachelor’s, Master’s and Doctoral study programmes. It also offers courses prepared in co-operation with renowned foreign uni- versities. Bachelor’s course graduates are specialists in the area of Taxation and Ac- counting, Information Systems and Infor- mationTechnologies. In the Master’s Degree courses, the university trains specialists in the area of Business and Enterprise, Finance and Trade, with an emphasis on knowledge of the EU environment. It trains managers for medium-sized and large companies. Doctoral programmes are oriented towards the education of top managers in the area of Company Management and Research. The two programmes in the prestigious MBA course of study are among the most valued in the Czech Republic. WHAT DOES THE DEAN, MS ANNA PUTNOVÁ, SAY ABOUT THE FACULTY OF BUSINESS AND MANAGEMENT? What can a graduate of your Faculty offer a foreign employer? The graduates of the Faculty of Business and Management are trained primarily for practical work in companies. It is a faculty which is strongly internationally oriented and our graduates have mastered special- ised subjects in a foreign language, and a number of them have studied abroad for at least one semester. They participate in international student competitions, such as Euroweek, and meet foreign students whom the Faculty accepts in the frame- work of the Erasmus Programme. The Fac- ulty has 55 partner universities in Europe, as well as in the USA, South America, and Asia. Lecturers from other countries regu- larly come to teach our students. To sum it all up, I would say that our students are accustomed to a multicultural environ- ment, have a good command of foreign languages and are highly skilled in their specialisations. With our graduates, em- ployers will get qualified employees. Does your Faculty co-operate with foreign partners in any projects? I consider it my priority to create well-bal- anced international relations at all levels. In particular, I would like to mention the projects of a pedagogical-research char- acter, in which both the Faculty’s lecturers and students participate. These include projects such as Erasmus Mundus, ori- ented towards co-operation with non-Eu- ropean partners, Tempus, under which we co-operate with Syria, Thalis international research projects concerned with inter- national accounting standards and EEA, a Czech-Icelandic project in support of equal opportunities in business. In addi- tion to other projects, such as Leonardo and Free Mover, I would like to mention our participation in the EU Sixth Frame- work Programme. Anna Putnová, Dean of the Faculty of Business and Management

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■ Printing ● Roller coverings ● Printing chemicals ● Printing blankets Main supplier of rubber rollers for printing machines of the brands HEIDELBERG, MAN-ROLAND, ADAST, KBA-PLANETA, KBA-GRAFITEC, WIFAG, GOSS, KOMORI, RYOBI ■ Sleeves ■ Escalator handrails ■ Rubber coverings for industrial rollers ■ Polyurethane application on the roller ■ Use of technical rollers: wrapping production, textile industry, steel industry, paper industry, tanning industry, plastic materials industry, furniture industry, chemical industry, food industry, electrical engineering, glass industry, mechanical engineering Böttcher ČR, k.s., Tovární 6, 682 01 Vyškov, Czech Republic, Phone: +420 517 326 521-5, Fax: +420 517 341 718 e-mail: bottcher@bottcher.cz, www.bottcher.cz

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Golf & Spa Kunětická Hora / Dříteč 155 / 533 05 Dříteč / tel.: +420 464 622 211 / recepce@gckh.cz / www.grkh.cz ACCOMODATION • Total capacity 106 beds • Doublerooms and suites • Air conditioned rooms • Free WIFI • Minibar • TV/SAT • Parking CONFERENCES WEDDINGS/ PARTIES CORPORATE EVENTS BALLS • Large and small hall • Total capacity up to 380 persons • VIP lounge • Entry for handicapped persons SPORT ACTIVITIES • 18-hole golf course • Indoor golf centre • Driving range • Three tennis courts • Multi-purpose sportgrounds (mini-football, basketball, floor-ball) • Cycle and roller skate track (4,2 km) • Badminton • Golf PRO Shop RESTAURANT • Large terrace with grill bar • Italian pizzeria with classic pizza oven • Daily updated menu • Total capacity up to 180 persons • VIP lounge • Terrace with view to golf course • Open daily to public WELNESS / SPA • Spa services (Roman spa, massage tubs, whirlpools, herbal inhalations, saunas, steams) • Sports medicine clinic (services of sports doctor, physical therapist, masseuse, expert doctors including technical equipment and special technology) • Relaxation Indonesian and Thai massages • Fitness centre • Entry for handicapped persons

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CZECHBuildingIndustry SupplementofCzechBusinessandTrade 1 2010

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| 2 www.ohlzs.cz Modern face of building industry

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3 | C Z E C H B U I L D I N G I N D U S T R Y Czech Building Industry Supplement of Czech Business and Trade 1/2010 CONTENTS Editorial 3 ANALYSIS Czech Real Estate Market: Slump Persists, Positive Signals Appearring 4 Building Industry Prospects in 2010 6 Turbulence in Central European Building Industry 8 INVESTMENT Czech Developers Needing a Push to Play 10 ENTERPRISE Possible Instruments to Revive Residential Market 12 Office in the Czech Republic? 14 CZECH TOP A7 Holešovice Brewery – Appreciation of Originality 16 Building of the Year 2009 Title for Library and Apartments 18 WE ARE INTRODUCING Crisis Presses Real Estate Prices Down and Benefits Green Housing 19 Passive Houses for the Future 20 EDUCATION University of Pardubice – Winner of 2009 Grand Prix of Architects 21 SURVEY Poll of Successful Companies Operating in Building Industry 22 PRESENTATION OF FIRMS: NAPKO spol. s r.o.; OHL ŽS, a.s.; Pontex, spol. s r.o.; WAREX spol. s r.o. MK ČR E 6379 This magazine is published as a supplement to the economic quarterly Czech Business andTrade. Managing Editor: Šárka Kratochvílová Graphic Design: Art director: Nina Nováková Graphic Designer: Jiří Hetfleisch Production: Anežka Zvěřinová Address: PP Agency s.r.o., Myslíkova 25, 110 00 Praha 1 Czech Republic, Phone: +420 221 406 620 Fax: +420 224 930 016, e-mail: journal@ppagency.cz www.ppagency.cz Deadline: 15/1/2010 Attitudes expressed by the authors of articles in this magazine are not necessarily consistent with the viewpoint of the Publisher. © PP Agency, Company with the ISO 9001 certified quality management system for publishing services Coverphoto:www.sxc.hu;page3photo:GrandPrixarchives Atrium of Building D of the Faculty of Architecture of Czech Technical University in Prague – Prize in the Interior category of the 2009 Grand Prix of Architecture

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| 4 A N A LYS I S Czech Real Estate Market: Slump Persists, Positive Signals Appearing Dear Readers, The monothematic supplement to the first 2010 edition of the Czech Business and Trade journal is devoted to the Czech building industry – pros- pects for 2010 and estimates of pos- sible development, shortly – a look to the future with hope for improved conditions. The present situation on the real estate market makes anticipa- tion of trends very difficult. Generally speaking, the economic situation of the Czech Republic is not at all fatal, but the real estate market will have to wait some time for better days. The building industry will continue to be a very important sector of the Czecheconomy.Thepotentialdemand for its products is huge.There is a rising share of low-energy buildings, struc- tures connected with environmental protection, and those which will be a boon to permanently sustainable de- velopment. An Interesting example of “passive houses” is given in the article on the Hostětín Veronica Centre. Thanks to a Deloitte and Hyposervis study, we offer several possible ways of reviving the residential market in the Czech Republic. This supplement also shows what varied projects can be awarded the Building of the Year title, and why the Grand Prix went to the new building of the University of Pardubice. Šárka Kratochvílová Petr Bým, Stavební forum e-magazine, e-mail: bym@msgroup.cz, www.stavebni-forum.cz Despite the fairly good condition of the Czech economy, redoubled by slight but encouraging signals of revival, the real es- tate market is still paralysed, and yet the main players on this market are looking to the near future with cautious hopes. The present situation does not allow any unequivocal prognoses. Trends are difficult to anticipate. In general, the economic situ- ation of the Czech Republic is not at all fatal, but the real estate market will have to wait for better days, and they will most likely be coming slowly... Promising“Macro” Is not Boosting Trade “When banks grant many loans, the number of the problematic ones logically rises. This is duly followed by a period in which banks turn the taps off,” Aleš Tůma of Part- ners commented one of the main aspects of the present economic recession in the Czech Republic. This indicates that in con- trast to others he does not put it down to external factors, and is convinced that the Czech economy does not show any signs of evident imbalance in relation to the Photo:www.sxc.hu

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5 | C Z E C H B U I L D I N G I N D U S T R Y surrounding environment. This, together with no marked internal imbalance, will facilitate its restart – especially when news about commencing convalescence is com- ing from the large world economies. Aleš Tůma expects that a new credit expansion, accelerated by increased public spending, will follow stabilisation with its typical drop in demand, consumption, prices, interest rates and inflation, and a clean-up of the market. Becalmed trade and general weakness of the economy naturally involve a decline in prices and the level of rentals. The first com- pany relocations from West European coun- tries to the Czech Republic have been re- corded, and there are other positive signals, such as revival of investment in the United Kingdom. Apartments: Difficult Decision Decisions are difficult – the purchase of housing is connected with a number of unclear factors. Potential buyers see many question marks in the present economic situation. One of them is the reliability of the seller – developer and the future of a con- crete project, another one is the estimate of the future incomes of the buyer, and also uncertainty about the development of apartment prices. For these reasons, people are postponing the decision to purchase. Hopeful – for developers – would be price reduction by an average of 10-15% either directly, or in various marketing drives. We are optimistic about the further develop- ment. It seems that the housing market and prices have touched the bottom. We expect a revival as soon as 2010 and some extent of growth in prices could follow. Rented Apartments Lack Prospects The locality of housing construction will be more important than in the past. Develop- ers can be expected to try to differentiate their projects from others and give them some exceptional qualities. This applies, for instance, to the much debated rented housing, which is far beyond the horizon of developers in the Czech Republic. In the advanced countries, rented housing is an integral part of the cycle – small apart- ment – large apartment – senior’s apart- ment. Many investors on the Czech market seek advantageous purchase. Projects with a twenty-year return on investment, which include rented apartment houses, are not at all attractive for them. Almost Rosy Future? Martin Lobotka of Česká spořitelna sees a somewhat rosier development on the housing market: “The Czech Republic has a sufficient number of apartments, but they are small. Their average size is 26 sq. m per one occupant, which is 10 sq. m less than the average in the west of Europe. Bridg- ing this gap means a potential of 1.4 million new apartments.”The analyst takes the view that the financial situation of Czech house- holds is not bad and their indebtedness is low compared with the situation in the EU, its advanced part in particular. The compari- son of the incomes of Czech families with the requirements of banks on the solvency of applicants for mortgages indicates free scope although they have been tough- ened, Martin Lobotka says and adds: “From this point of view, less than one-third of the market is saturated, and theoretically taken 30% of Czech households would reach for a mortgage.” It need be said in conclusion that really good projects have a chance on the market irrespective of the state of the economy. De- mand is not formed only by economic and financial connections, but also by the demo- graphic situation.The owners of small apart- ments will be seeking larger ones, and – in view of the stagnation of rented housing – the adolescent generation will have to solve the housing requirement by purchase.

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| 6 A N A LYS I S Václav Matyáš, President of the Association of Building Entrepreneurs of the Czech Republic, e-mail: matyas@sps.cz, www.sps.cz Building Industry Prospects in 2010 There is much to be done in the Czech Republic in the next decade. The intensity of construction in the different branches is given by the need to match building funds availability with the level of the advanced European countries. A turn in the unfavourable develop- ment caused by the present economic crisis can hardly be expected in the foreseeable future, especially not in 2010. Decline Expected A warning signal in 2010 is a shortage of new orders in conse- quence of low demand. This will be ever more apparent when com- menced works are gradually completed and the amount of new orders is much reduced. The adverse development, which has so far been more serious in structural engineering, will also start to influ- ence civil engineering in this period. No new transport infrastructure project will be commenced in 2010 and only unfinished ones will be gradually completed.The designing and preparation of new projects have been stopped. Since the preparation of large projects requires at least two years, prospects for 2010 are not very promising. Government Support to Infrastructure In its 2010 budget, the Government earmarked a record CZK 96 billion (approx.EUR4billion)fortheStateFundforTransportInfrastructure.This is proof that it is not seeking the easiest way to reduce the present defi- cit, i.e. radical limit on investment into the transport infrastructure, and is taking the more complicated way of savings. Even in the deepening crisis it is proceeding in accordance with the programme of measures againstit.ItistruethattheamountnearingCZK100billion (approx.EUR 4.2 billion) does not cover all needs and further funding would have to be secured for construction to continue with the shortest delay. Extensive Repairs Expected Whereas capital construction is on dramatic decline in almost all seg- ments, the development is favourable in repairs and maintenance, and the same trend can be expected this year. The entire construc- tion fund is highly neglected, and this applies to housing, includ- ing prefabricated construction, structures for the power industry, water economy and industry, and amenities. At present, repairs and maintenance account for almost 13% of the total construction, and this share must rise to 25% and preferably more in the future. This involves the removal of the consequences of the years-long neglect of maintenance, prevention of gradual devastation of buildings, and reduction of the energy consumption of buildings, which will im- prove the environment. Also important is the creation and preserva- tion of jobs especially in small and medium-sized enterprises which are the most frequent suppliers of works. The potential annual order is 100 000 of prefabricated apartments and 50 000 non-prefabricated apartments. For this reason, we wel- come every support to this area whether it comes from the PANEL Photo:www.sxc.hu

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7 | programme, or EU Structural Funds of the Operational Programme Environment. The latest source is the Green Savings subsidies from the sale of emission credits, a programme of support to renewable resources and energy saving in residential houses. Prognosis of Employment in Construction The completion of orders, procurement in particular, is worsening the situation of large enterprises. All construction enterprises need work. The building industry must maintain capacities as the work potential in the Czech Republic is huge and a revival is bound to come. It is only a question if it comes at the end of 2010 or, as pes- simists predict, after 2012. The prognosis of the development of employment is naturally based on this. A decline of 10% in the industry means a loss of 50 000 jobs in construction alone. This is followed by building ma- terials manufacture, transport and services. Entrepreneurs will strive to keep qualified workers even at the cost of freezing wages and reducing working time. According to the results of a poll, 1% of en- terprises expect an increase in the number of their workers in 2010, 42% will leave the number unchanged, and the rest expect a drop. Keeping Cool Is Important A crisis is exceptionally unfavourable for development, but it gives en- terprises an opportunity to tackle problems for which they previously lacked courage – reduce superfluous costs, consider a change in the trade,productionandpersonnelstrategy,changetheorientationofpro- duction, and revise priorities. The amount of profit should certainly not be the prime criterion in this period. Most important are orders, liquidity and solvency. If enterprises are to do all this and survive, they must not panic and their managements must invest skill and endeavour. Difficult Prediction It would be pleasant if the anticipation of the prospects of our sec- tor could be optimistic. However, the Czech economy will have a complicated year, and it is impossible to estimate the extent of influences on the different sectors, including the building industry. The situation will not be easy for many enterprises. Uncertainty is the most frequently heard word. The estimates of economists differ both in the prognosis of the intensity of impacts and the duration of the crisis. We must be sensitive to the economic development which depends on the world and European financial market, and be able to respond to it in time. C Z E C H B U I L D I N G I N D U S T R Y

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| 8 A N A LYS I S Based on the latest report published by CEEC Research in cooperation with KPMG Czech Republic and Ipsos Tambor, the building and construction industry in the four Visegrad countries – the Czech Repub- lic, Slovakia, Hungary and Poland – is ex- periencing a turbulent period. The crisis is apparent in all of the four countries, but the impact differs in dependence on the char- acteristics of this industry in the different countries. Despite some differences, the repre- sentatives of building companies across the region agree that one of the crucial problems limiting the growth of their companies is low demand. Companies are ever more using personal contacts to gain orders. The representatives’ view of the transparency of tenders is similar across the region, but they have differ- ent experience with bribes and breach of the companies’ own risk management to gain orders. The most frequently men- tioned investment area is establishment of contacts and making acquaintance. The most important issue for the next twelve months will be increasing the effective- ness of company operations in order to overcome the difficult period and if possi- ble to create stable foundations for future development. Turbulent Period of Building Industry Of the four countries, Slovakia recorded the largest year-on-year decline (January-Sep- tember 2009 – 8.8%), but the other coun- tries did not remain unaffected. Data of the Czech Statistical Office for the same period show a decline of 2.5%, mainly due to the decline in building construction. Hungary also reports a drop (2.7%). Moreover, the situation in Hungary is specific in view of the problems that its economy already had had before the world economic crisis broke out (countering fiscal and monetary policy, large state budget deficit, high tax burden etc.). Although the Hungarian Government sup- ported the building industry especially by large projects such as motorway construc- tion, the sector has been recording a decline since 2006. Poland is the only one of the mentioned countries to record at least a slight growth in the building industry. Nevertheless, a slowdown is also apparent: data of the January-September 2009 show a rise of only 4.7%, which was much less than in the previous years. The present moderate growth in the Polish building industry is mainly due to two factors – many infra- structure projects realised at present are funded from EU resources, and projects realised within preparations for EURO 2012 (European Football Championships organ- ised together with the Ukraine), which in- clude the construction of stadiums, roads, and hotels, and the construction of the second line of the Warsaw underground railway. This amount of projects gives the Polish building industry a great advan- tage over the other countries for the com- ing years. Low Demand Low demand is the crucial problem of build- ing enterprises in the Czech and Slovak Re- publics. In Hungary they regard limitation by stiff rivalry as most frequent (the most significant drop in demand was reported for the 2007/2008 period, and currently a high number of respondents still mention it as the key issue for their business: 70%). Polish companies mention most of all high costs of labour (96%), but low demand comes in close succession (94%). On the other hand, the issue that has shown the biggest drop in importance compared to last year is the shortage of skilled labour. Shortage of Orders Reduced Utilisation of Capacities The shortage of orders has already been reflected in the utilisation of the capacities of building companies. The lowest utilisa- tion is reported by building companies in Hungary, 74% in 2009 (decline from 79% in 2008), Polish building companies report uti- lisation of 77% (80% in 2008), Slovak compa- nies report a slightly higher utilisation (78%), but recorded the biggest drop of the four countries (92% in 2008).The Czech Republic reports 84% (89% in 2008). Companies in the Czech Republic have contracts on orders for an average of six Jiří Vacek, CEEC Research, e-mail: vacek@CEEConstruction.EU, www. CEEConstruction.EU Turbulence in Central European Building Industry Photo:www.sxc.hu

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9 | C Z E C H B U I L D I N G I N D U S T R Y months ahead, and Polish companies for seven months. However, the variability within the sample (duration of contracts) is longer in Poland due to the amount of the mentioned long-term projects on the one hand, and many short-term projects on the other hand. Gaining Orders All four countries mention personal con- tacts as the most frequent way of gaining building orders (in the Czech Republic 85% respondents, Slovakia 84%, Hungary 100% and Poland 92%). The other mentioned ways are long-term framework agreements, direct demand of clients, and tenders). Transparency of Tenders The representatives of building companies also assessed the transparency of tenders in which their companies participated. The results showed a very similar situation in the four countries. With the exception of Hungary, the building companies give a better rating to the transparency of publicly funded tenders than to tenders funded from private resources. Building companies have to some ex- tent different experience with corruption. The share of companies which state that they have not been asked for a bribe is the largest in Hungary – 60%, in the Czech Republic it is 59%, and the share of such companies is lowest in Slovakia (42%). Comparison with Poland is possible only on the basis of the 2008 poll, in which the situation was near the experience of Slo- vak companies (47% of respondents). More apparent is the difference in the breach of the companies’own risk manage- ment. This is least frequent in the Czech Re- public and Hungary (this is confirmed iden- tically by 43% of respondents), followed by Slovakia (56%), and most frequent is the breach in Poland (67% in 2008). Future Prospects The development and changes in clients’de- mand is the main factor which will have the decisive influence on the future of building companies, respondents from all countries agree. Investment into the establishment of contacts and making acquaintance has been the priority in 2009 and 2010 ac- cording to the largest share of companies in Slovakia (62%), Hungary (57%). In the Czech Republic it has been 51%. Czech companies mentioned more often plans to be innovative in their offer (61%). In the next twelve months, Czech and Polish building companies will focus their attention on growth in the effectiveness of their operations. This area was men- tioned by all of the questioned building companies in the Czech Republic and al- most all in Poland (94%). On the contrary, companies of both countries described the acquisition of another company as their lowest priority. We are now exerting great endeavour to secure orders for 2010 and 2011. There is no need to recall that it is ever more difficult to gain orders at this time when the ground structure market declined by more than 20%. We presume that builders will find the next two or three years very difficult, but our company expects growth again thanks to exports and developer activities. We are trying to compensate for the present state on the domestic market with orders abroad. At the same time, we are striving for municipal and government orders on the Czech market. František Vaculík General Manager and Chairman of the Board PSJ, a.s., one of the largest construction companies in the Czech Republic

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| 1 0 I N V E S T M E N T Czech Developers Needing a Push to Play After years of record-breaking in the Czech building industry, Czech developers have been under a cold shower for three half- years running and experiencing a contrast to the maybe slightly overshot growth of the recent years. But clients have a reason to celebrate. Developers Gasped for Breath What effect did the development of the global finances have on real estate in the last two years? Statistics are clear. Real es- tate for EUR 2.7 billion was sold in the Czech Republic in 2007, and one year later invest- ment into real estate amounted only to EUR 1.1 billion. Even so, this was a fascinating amount – only EUR 0.13 billion was invested in the first three quarters of 2009. At the very end of the year, a faint light at the end of the Jiří Sochor, e-mail: Jiri.Sochor@czechinvest.org, www.czechinvest.org Photo:www.sxc.hu tunnel was the record sale of the Gemini building for EUR 110 million. Banks Financed This and That Massive development of real estate projects – often of arguable quality – had been made possible until recently by the underbidding willingness of banks to finance any project at low interest. Real estate prices were soar- ing so what was there to fear? For example, builders of some apartment houses, even those in less attractive localities, could put into the project only 10% of their own fi- nance, and a similar minimum was required for pre-leased metres. 2009 – Touching the Bottom In the worst period of 2009, which is evi- dently behind us, Czech banks were refus- ing to fund projects without solvent tenants and full pre-lease secured, even if a simple investment could show certain return due to a full pre-lease. “Who has money and is not afraid to in- vest into real estate is a winner,” says Milan Kratina, director of the Project Placement Department of CzechInvest. “The terms un- der which banks offer developers credits are simply unacceptable, and so they are more than ever seeking private investors who would help with the funding.” Banks Stand Aloof According to Kratina, this could limit the role of banks on the real estate market at least for some time. “The present situation indicates that banks simply want no new projects. But this means that they are risking their privileged position on this market, also because they will miss good projects.” Small Investors Are Gaining Strength Kratina says that in contrast to the reserva- tion of banks concerning new real estate

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1 1 | C Z E C H B U I L D I N G I N D U S T R Y projects, the interest of private investors is increasing. They are naturally selecting the most interesting projects and offering much better terms than many banks can offer. “Consequently, many small investors will appear on the real estate market, each will own only a few projects, but in all their sig- nificance could make up for the diminishing role of banks. Moreover, they could snatch the very best projects”, Kratina predicts. The interest of private investors and the lack of interest of banks are two sides of one coin. Europe and the USA are greatly indebted and the north of the Atlantic is shudder- ing at the thought of massive inflation. This will not devalue money under the mattress completely, but investors with liquidity are looking for possibilities of stowing it away. After the correction of prices, which was not noticeable in the Czech Republic – if there was any at all – real estate could be very in- teresting for this purpose. Real Estate at Freezing Point The real estate market has been at freezing point for some time. Or rather nothing is happening on it – it is not declining (much), or growing (much), and its structure is not changing (much). Due to the massive development pushed up by cheap credits from 2006 to 2008, many speculative buildings – for industry, offices, and housing – emerged across the Czech Republic. Consequently, no new in- dustrial project, and only two large office centres and several new housing projects, appeared last year. Real Estate Prices Development Private housing was not at all affected by the declining prices of real estate. Apart- ment prices went neither up nor down. The situation is similar in industrial areas and offices, although it is a bit of a public secret that tenants have right now an op- portunity to profit from new contracts, es- pecially if they succeed in fixing the present prices for years to come. Besides cheap credits, the 2006-2008 building boom was aroused by the immi- nent changes in tax rates and other regu- lations due to which building prices went up as of the following years. Developers simply did all they could to complete projects at lower taxes. Tenants Are on a High Horse Due to this, tenants are in an excellent position. The cooled global economy pushed demand down so that develop- ers are ready to conjure with prices as never before – in the Czech Republic it will evidently be impossible to construct new buildings as cheaply as the present ones. In other words – developers are of- fering new projects of high quality, which they built very cheaply due to lower tax- es and, moreover, lower demand makes them willing to negotiate better prices and terms. Situation in Border Areas The cooling of the global economy had an unprecedented effect on the real estate market in a number of Czech localities. A special case is the area west of Plzeň, the fourth largest Czech town. It is situ- ated a little more than a half-hour drive on the motorway from the German fron- tier, and so it became a logical place for logistics. Thanks to this, unemployment dropped to 5% and less in the last years. In the 2006–2008 period, many develop- ers rushed to the area and occupied mo- torway exits. They are now adapting their logistics parks to suit the requirements of producers. Why is this so? Because of the cooled economy, unemployment rose in the whole of the Czech Republic, and the region west of Plzeň had to come to grips with the departure of an important investor. Experienced people, perfect in- frastructure, and high unemployment attracted the attention of many foreign enterprises. Until the 2008/2009 crisis, they had no need to seek ways of opti- mising costs, possibly by moving to Cen- tral Europe. Moreover, new industrial parks mush- roomed in the region and their rivalry is pushing prices down. What was the final outcome? The Plzeň Region, which had been in the shadow of giants such as North Bohemia and North Moravia, became a lo- cality most sought by investors. This does not apply only to the Plzeň area, but to the whole of the Czech Republic. Paradoxically, the cooled economy gave a push to invest- ment in this country.

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| 1 2 E N T E R P R I S E Possible Instruments to Revive Residential Market Study by Deloitte – www.deloitte.com/cz/onas and Hyposervis – www.hyposervis.cz Although the current situation on the resi- dential market in the Czech Republic is not a reason to panic as fluctuations are a com- mon phenomenon in the developed world, Deloitte and Hyposervis have elaborated an extensive study based on data collected over five months, and assessed the topical connections. The market is currently in the phase when problems can be actively pre- vented, and so the study formulated specific recommendations for market revival. Guarantee Insurance of Client The study recommended the introduction of a commercial guarantee product (in- volving a bank, an insurance company, and developer) based on insurance against inca- pability to pay off a credit resulting from the loss of a job, but for a longer period than the present products, ideally for the expected duration of the crisis. The best would be to take the instrument as a marketing bonus – instead of defraying the automobile cost, the developer would cover the mentioned insurance for the client. Clients would be sure to be protected in case of loss of em- ployment during the period in which im- pacts of the crisis could be expected. The product is designed for a lucrative segment of clients and a limited segment in view of participants – for the purchase of new de- veloper projects (secondarily also banks) to createa newenvironmentwithemphasison the elimination of the risk of the clients’loss of incomes. This proposal has been adopted and is being offered at this time. Help in Incapability to Pay off Credit Another suggestion is the establishment of a guarantee agency which would undertake the duty to pay off interest in case of a loss of job or reduced income. These would be transformed into a commercial loan when the crisis ends. This procedure could be com- bined with deferment of principal repayment granted by the financing institution. A major risk of this measure could be the setting of the upper limit which could exclude the targeted middle class. The measure would increase government expenditures by an estimated CZK 1.1 billion (EUR 44 million) in the first year, and CZK 5.5 billion (EUR 220 million) in the en- tire period of crisis (estimated 2-3 years). Support to Rented Housing More than 60% of the responding develop- ers expect the establishment of investment groups focused on the purchase and follow- ing rental of residential units on the market principle. These “rented apartment funds” could help the revival of the residential mar- Photo:www.sxc.hu ket and structural engineering, and main- tain the level of rents. Temporary Reduction of VAT Levied on Apartments TheAssociationofBuildingEntrepreneurssug- gested in 2009 a reduction of the VAT levied on housing construction to 5% for a limited periodof2oratthemost3yearstoencourage the construction of postponed projects and thus increase the performance of structural engineering. AVAT reduction to 0% would be at variance with EU regulations and would have to be permitted by EU bodies. The sug- gested measure could worsen the situation of residential development in the period before the reduced rate becomes valid, as the market could slow down noticeably in expectation of the change. Some housing plans would then be changed and the measure could partially draw forward the demand of 2012 and the following years.The measure could thus elimi- nate possible imbalance between demand and offer after the end of the crisis. A crucial factor of success is rapid announcement of

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1 3 | the beginning and end of the validity of the measure. The introduction of the suggested measure is not probable due to the political crisis and deficit in the state budget. Restoration of Tax Relief The provision allowing tax exemption for interest on mortgage bonds was included in the income tax law in 1994 to support this product. As the capital market devel- oped, the Ministry of Finance of the Czech Republic came to the conclusion that the significance of the provision had gradually weakened, and as of 1 January 2008 abol- ished the exemption for mortgage bonds issued after this date. This was to bring ap- proximately CZK 2 billion (EUR 80 million) to the state budget. As soon as the amend- ment was passed, there were speculations whether this additional revenue would not be set off by much higher indirect losses ensuing from a decline on the real estate market. In view of the present development, restoration of the tax relief could stimulate increased demand for mortgage bonds. Support to Apartment Construction in Small Municipalities A possibility of market development is the construction of rented municipal apart- ments in co-operation with developers, for example in the form of PPP projects – the municipality provides developers with sites in return for a part of the built apartments, and possibly services of ex- ternal project management to use avail- able capacities of developer companies and support structural engineering in regions which have been aside the in- terest of developer groups. This requires amendment to the relevant legal meas- ures, especially regulated rent which is still lower than market rent in many towns of the Czech Republic. More effective and targeted support to social housing is the removal of regulated rent (an advantage used irrespective of the social situation) and investment into municipal social rented housing, for instance in the form of the mentioned PPP projects. Possibilities of Tax Deduction The depreciation of an apartment (2%) can be deducted from the tax base.The state loses an estimatedCZK1.7billion(EUR68million)ofin- come tax revenue, which remain in the hands of mortgage holders. This measure should make investment into one’s own housing at- tractive. Changes on the apartment market could lead to the need to rent apartments be- low costs, especially in the case of expensive apartments. The mentioned costs cannot be deducted from the tax base of paid employ- ment. The relevant motivation is to improve the situation of small lessors of apartments, and eliminate possible unofficial leasing. Change in Mortgage Support The study recommended a change in the government decree on state financial sup- port to mortgages so that the support is granted according to the interest on a con- crete mortgage and not according to the average rate of interest on all mortgages granted in the preceding calendar year, as is the case at present.

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| 1 4 The office market in the Czech Republic was not hit by the econ- omic crisis as severely as in some other countries. Banks protected themselves in time, developers who were threatened sold a part of their portfolio in time, and so there has been no major collapse in the Czech Republic as yet. We talked to Pavel Skřivánek, senior con- sultant for corporate clients of Cushman & Wakefield, about devel- opments on the office market. Is the present economic situation reflected in the demand of businessmen and companies for rented offices in the Czech Republic? Demand for offices is declining. Consequently, the lessors have lately been more willing to grant bigger incentives for rent in the form of packages which lower the average rent. The packages can vary – for example, the contract can provide for a“rental holiday” (rent is not paid in the first few months), and possibly financial contribution to the arrangement of the areas, as most offices are class A (the highest level) and have “open space” without partitions. The lessor can also make a financial contribution towards office furnishings, or combine rental holiday and financial assistance. What development is expected in the coming period? The number of new office projects is declining noticeably, and so we expect a lower offer of new offices on the market in the next two years. Hand in hand with this goes the fact that the construction of a new building takes 16-18 months in most cases. Economic revival will allow enterprises to expand again and developers will increase building. The question is when the revival comes, but it is very prob- able that the offer of new A-offices will come later than demand and this will be influencing the market for some time. We are noticing another important trend – the offer of areas for sublease is on the rise. The reason is that before the crisis enterprises expected growth and rented areas which are now superfluous, and so some of them are trying to sublease offices. However, the subten- ant has some contractual limitations – the existing terms of rental must be respected. The usual period of sublease ranges between one and two years, and so it is, with regard to time, a flexible manner of acquiring area for business and, moreover, the sublease charges are mostly lower than market rent. How do service charges connected with rented offices influence the total rent? Parts of the rent are deposits for services such as security guard, elec- tricity, garbage collection, gas and water supplies. Although these services charges often amount up to 30% of total costs, tenants frequently attach no significance to them. Moreover, the growth of service charges is more rapid than the rises in the index rents. And so the whole “package of costs”should be monitored, especially in old office buildings, and the future costs should be estimated. Depos- its are settled at the end of the year, overpayment is returned, and possible outstanding balance paid, and this could be an unpleasant surprise if deposits are estimated incorrectly. I therefore recommend that specialised consultants are commissioned every time to con- duct an audit of services – what is included in services, what items they are and if the tenant must pay them, the correctness of the estimated amount of deposits, etc. E N T E R P R I S E Photo:PhotoCombo Office in the Czech Republic?

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1 5 | Does the development of demand in Prague differ in any way from other regions in the Czech Republic? Demand declined in Prague in consequence of the crisis, but the drop was not as noticeable as in the regional towns. Many multina- tional corporations had earlier moved their headquarters or “back offices”to localities outside Prague, and so they have sufficient space and are expanding to a lesser extent. The Government discontinued investment incentives some time ago, and this has a partial influ- ence. The Czech Republic has a very good reputation for the qual- ity of labour and foreign language knowledge, and yet is at present recording lower foreign demand than other Central European countries. The quality of A-offices is comparable throughout the Czech Re- public, as many projects in and outside Prague are realised by the same developers. But the dissimilarity in rents is due to the different prices of sites in particular localities. Are there unused offices in the Czech Republic at present? The rate of unused areas is shown by the vacancy rate, which rose from 5.25% to more than 10.5% in Prague over the last two years. The rise is apparent, but on the other hand, a healthy mar- ket has a standard vacancy rate of 10%, and so we are at the level of a healthy market. However, it must be taken into consideration that the figure does not include vacant offices for sublease, but compared with the total number of offices this has no major influ- ence at present. And so we have no signal of extremely unused offices in Prague. Prague is not hit severely, because the number of offices which developers built before the crisis could be absorbed by the market. The situation is different in regional towns mainly due to the above mentioned lower demand of multinational companies. The average vacancy rate higher than in Prague is in towns which had a boom in A-office construction (Brno and Ostrava). How are companies getting to grips with the impacts of the crisis in this respect? Companies are now moving from unsatisfactory areas or for reasons of merger. But most frequent is the re-negotiation of contracts of lease to optimise costs. What are the requirements of companies for office arrangements and furnishing? In the last years, companies have been preferring open space with desks arranged in “nests” with the possibility to move them for staff to form teams. This could seem inconvenient initially, but communication in teams is easier, and managers can better detect tendencies to deal with private affairs dur- ing working time. The sizes of desktops have been reduced for a long time, but the environment has not been worsening, only optimised. This has also been due to increased electronic data storage. Another modern trend is “hot desking”, the sharing of desks. Companies use this when employees spend much time travel- ling, do part-time work, and the like. The number of working places in offices is optimised and together with it the size of the rented area. Do the requirements of Czech and foreign tenant differ in any way? There is no marked difference between the requirements of Czech and foreign companies. Rather comical in the Czech Republic is the requirement for air conditioned offices to have opening windows. This makes no sense, but the Czechs simply want to have the feel- ing that they can open windows (even if they never do so), and the developers are obliging. Šárka Kratochvílová 0% 2% 4% 6% 8% 10% 12% 14% 16% 2004 2005 2006 2007 2008 2009 Prague Office Market Vacancy Rate 2004 2005 2006 2007 2008 2009 EUR/sq.m/month 0 5 10 15 20 25 Prime Office Rent per sq. m in Prague Prague Total Stock Development 0 50 000 100 000 150 000 200 000 250 000 300 000 350 000 2004 2005 2006 2007 2008 2009 sq.m sq.m 0 500 000 1 000 000 1 500 000 2 000 000 2 500 000 3 000 000 New supply Total stock Source: Cushman & Wakefield, PRF C Z E C H B U I L D I N G I N D U S T R Y

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| 1 6 C Z E C H TO P Photo:CrestCommunicationsarchives A7 Holešovice Brewery – Appreciation of Originality A multipurpose centre, including apart- ments, offices, and shops, has replaced the original complex of a brewery in the Prague quarter of Holešovice. The residential project A7 Holešovice Brewery by ING Real Estate Development offered above-stand- ard modern housing in symbiosis of historic buildings and contemporary architecture. New Use The residential project is comprised of new- ly built apartment houses and the recon- structed fermentation house of the former brewery with mostly loft-type apartments and commercial premises on the ground floor. Together with green areas it provides peaceful housing near the city centre. The original industrial complex was reconstruct- ed for commercial use, and one of the build- ings offers the much demanded loft-type apartments which provide specific and indi- vidual possibilities to create a unique home. Project Is Collecting Prizes The reconstruction of the original buildings and the construction of new apartment houses commenced late in 2006, and in November 2009 the project A7 Holešovice Brewery was the winner of the “Best of Realty 2009“ in the competition of many residential projects. The seven-member professional Jury appreciated the sensitive reconstruction of an industrial building in harmony with the creation of a new mod- ern dominant feature. The project also took the first place in the 9th annual CIJ Awards Czech Republic in the category “2009 Best Residential De- velopment”, especially in appreciation of the sophisticated architectural design and its boon to the transformation of Prague- Holešovice into a modern quarter with the genius loci preserved. The Holešovice Brewery as it changed in the course of time www.ingcentrumbydleni.cz, www.ingrealestate.cz, www.crestcom.cz

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1 7 | C Z E C H B U I L D I N G I N D U S T R Y Distinctive Architecture The project was designed by the renowned CMC architects. Participating in the initial conceptweretheprominentarchitectsFrank O. Gehry (author of the Dancing House) and Jean Nouvel (author of the multipurpose Golden Angel building). The architecture chosen for the exceptional locality of the former brewery is distinctive and its original- ity attracts at first sight and yet respects the surroundings and historic connections. The originality of the project rests in the combi- nation of reconstructed industrial buildings, modern apartment houses and administra- tive buildings, and in the contrast between the historic façades of the former brewery and the modern glazed façades at different height levels. The area inside and around the complex is green. The A7 Holešovice Brewery complex has two new apartment houses and the re- constructed former fermenting house of the brewery. The total offer is 129 standard apartments, 20 loft-type apartments, 6 at- tic apartments, 1 studio, 9 retail units, and 6 stores. History of the Place The First Prague Municipal Brewery “Měšťan”, founded in 1895, ranked among the exceptional industrial buildings in the Czech Republic. The project with neo- Renaissance elements was completed in 1897. The brewing commenced soon after and Holešovice Beer quickly became very popular. Before World War I, it was turn- ing out 160 000 hectolitres of beer a year, which was one of the largest amounts in Bohemia. The 1948 nationalisation of the brewery had an adverse effect on the qual- ity of the beer. Although a recovery com- menced after 1989, the brewery closed down definitively in the 1990s. The brewery complex documented the high standard of similar buildings of the late 19th century, which was an era of building boom and establishment of modern indus- trial enterprises. Several parts of the origi- nal brewery are now a cultural real estate monument due to the architectural and his- toric qualities. The change in the function allows further meaningful existence of the brewery. Project Developer ING Real Estate Development is a leading pan-European developer with a project pipeline of around EUR 9 billion. The com- pany focuses on retail-based mixed-use projects. ING Real Estate Development is a business of ING Group, a global financial institution of Dutch origin offering banking, investments, life insurance, and retirement services to over 85 million private, corpo- rate, and institutional clients in more than 40 countries. Other Awards ING Real Estate Development projects have gained a number of awards. The doubt- lessly best known work of the company in the Czech Republic is the Dancing House (Prague), which captured the first place in the design category of the 1997 poll of the US journal Time, and ranked among the five most important Czech buildings of the 1990s in a poll of the Czech journal Ar- chitekt. Laurels have also been collected by another commercial project – the multipur- pose building Golden Angel.The mentioned awards are not the only ones and probably not the last ones. The projects of ING Real Estate Develop- ment are not unique only from the archi- tectural view, as confirmed by the Detail/ Leisure Developer 2006 prize awarded by Property Week journal in 2006 at Expo Real in Munich. ING Real Estate Development also received the European Property Award as the best developer on the European retail market. 17-floor Tower in the middle

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| 1 8 C Z E C H TO P Building of the Year 2009 Title for Library and Apartments The competition had its seventeenth edi- tion in 2009. The competing structures cre- ate the milieu of our existence, serve us and influence us. The recession had no effect on the competition. This was natural as the entries underwent construction during the period of the building and the investment boom. Award-winning Buildings Are Unique The competition, arranged by the Architec- ture and Building Foundation, the Ministry of Industry and Trade, and the Association of Building Entrepreneurs, had 55 entries in 2009. Most of the structures were from the sectors of housing and transport, and pub- lic purpose buildings (libraries, aquacentres, multifunctional buildings, houses of culture etc.). Throughout the duration of the event, the lists of competitors have been reflecting the changes in the prevalent types of con- struction – in the first years the entries were banking, administration and car show facili- ties, housing was scant, private investors did not build apartments. The present variety testifies to the diverse social requirements. Gratifying is the rising number of residen- tial buildings (sporadically including family houses) and university buildings (Brno is the clear leader in this branch). Noticeable are new libraries – most of these are excellently designed and constructed. The first culture- serving buildings funded by municipalities appeared in 2009. Awards for the Best The Jury scrutinised the entries, 27 advanced to the second round, 15 of them were nomi- nated for the title, which was bestowed on five of them (without distinction of their or- der). Every year, the Jury judges structures of different amounts of investment and types – not to say if a railway tunnel is more than a family house, but which is good or excel- lent in its branch. Buildings of the Year 2009 are the following: The Research Library in Hradec Králové (authors: Projektil, contractor: VCES, a. s., in- vestor: SVK) Apartment house in Na Topolce Street in Prague (authors: Šafr Hájek architekti, investor and contractor: AT Development, a. s.) Radomíra Sedláková, Faculty of Civil Engineering of ČVUT, Department of Architecture, e-mail: radomira.sedlakova@atlas.cz, www.cvut.cz Jan Fibiger, Chairman of the Programme Council of the Building of the Year competition, e-mail: fibiger@abf-nadace.cz, www.stavbaroku.cz City Park Jihlava (authors: Kuba Pilař Architekti, contractor: PSJ Invest, a. s., investor: CEI Building, a. s.) Classic 7 building in Prague (authors: CMC architects, contractor PORR (CR), investor: NOFIM Czech Republic, s. r. o.) New Connection Prague (authors: SUDOP Praha, a. s., contractor: as- sociation of companies headed by Skanska DS, a. s., investor: Railroad Administration) The structures embrace the basic range of the present activities – housing, education, shopping, “white-collar” work, and railway transport. The public have been making their choice for several years. In 2009, it was somewhat unexpectedly the family house “The Bird” in the Beskydy Mountains (author and con- tractor: Ateliér Simona, s. r. o. investor: pri- vate person), an almost romantic building greatly different from the now mostly used functionalism and minimalism... Photo:BuildingoftheYeararchives,www.sxc.hu Classic 7 Business Park Apartment house in Na Topolce Street Research Library in Hradec Králové

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1 9 | Pressure on prices is the most noticeable trend on the real estate market at present. Buyers demand reductions and seek real estate with a price growth potential. The demand for cheaper housing triggered off a wave of interest in energy-saving real es- tate. However, the “energy-saving” label is often a way of bamboozling the customer. The traditional sale strategies are ceasing to function, and developers are introducing new manners of sale. The sale of real estate is still stagnating, but the market is getting going.“People are evidently looking for a suitable property, but are in no rush to buy as they are waiting for a decline in prices which is slowly coming,” according to Jakub Havrlant, Manager of the real estate server bezrealitky.cz. Most noticeable at this time is increased in- terest in rentals, lessors have a choice of ten- ants and apartments are let out very quickly. For example, demand for rentals is biggest in Prague and Ostrava where there is an aver- age of 15 potential lessors to one apartment. “Reduced Price” Notice Is no Exception Waiting for buyers is beginning to be re- flected in the attitude of developers and real estate owners. Reduced prices are of- fered especially by private sellers. First of all the price is set at the level of previous years and gradually reduced even by hundreds of thousands crowns, and a property which had been unsellable for several months is sold within several weeks. Developers had been waiting for long and instead of reduced prices offered clients presents such as kitchen furniture free of charge, and the prices of new buildings be- gan to fall slightly as late as in the summer of 2009. New buildings of good quality need no reduction, but if the developer does not take into consideration locality, dispositions or standards the situation is different. Devel- opers are reducing prices mainly of build- ings under construction, and possibly giv- ing client’s scope to make changes before apartments are completed. At the time of economic crisis, the Czechs are cautious about making an investment into real estate, which had been a matter of course when prices were rising steadily. Real Estate Is Turning Green Environmentally friendly housing is becom- ing a strong marketing puller. Demand for low-energy real estate rose almost by 50% during 2009. With the increasing energy prices, clients have not been interested only in the price of property, but also in costs connected with its running. The annual costs of energy in a standard apartment of an area of 90 sq. m are approx- imately EUR 600–800 higher than in a low- energy apartment. If energy prices rose by an average of 5% every year, the total sav- ings over 40 years would be a surprising EUR 70 000–80 000. A low-energy house does not need to dif- fer from an ordinary house visually. The dif- ference rests in heat consumption, which is up to 60% lower in a low-energy house. The annual heat consumption must not exceed 50 kilowatt-hours per one sq. m if the house is to be defined as low-energy one. The quality of a house is assessed in the so-called energy consumption certificate as in the case of electric appliances. The cer- tificate is a part of the building licence and the buyer can ask the developer to present it. Low-energy buildings are usually in class A and B. The state began to support low-energy buildings in 2009 with the Green Savings Programme. Subsidies can go to invest- ment in energy savings in reconstructions and new buildings, including houses in the passive energy standard. The applicants are the owners and not the developers. These criteria do not motivate saving measures of most developers. New Strategy The present approach of selling real estate seems to be outdated. Developers must do more than advertise their projects on the In- ternet and television and in the press. They must seek new ways to clients and stake on creative marketing, otherwise they will fail on the market. The same applies to estate agencies. Potential buyers want to know much about the locality and the property, and expect an active and more personal ap- proach of the seller. Virtual inspections and video presenta- tions on the Internet are now the most pop- ular and most interesting ways of acquaint- ing potential buyers with new buildings. Private owners who do not use services of estate agencies can increase the success of a deal. Instead of the traditional inspections “on appointment” they can use the popular “days of open doors” to show the property to more people in one go. Crisis Presses Real Estate Prices Down and Benefits Green Housing Jan Hlaváč, real estate server Bezrealitky.cz, e-mail: jan.hlavac@mediakom.cz, www.bezrealitky.cz W E A R E I N T R O D U C I N G

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| 2 0 Photo:HostětínVeronicaCentrearchives,GrandPrixofArchitectsarchives Passive Houses for the Future http://hostetin.veronica.cz/?language=en Criteria whether a house was “environmen- tally friendly” used to differ. As we have come to know in the last years, the far great- est threat to the environment is the rapid changeoftheclimate,whichwillbecontinu- ing for centuries to come whatever endeav- our all mankind exerts. It is already causing the extinction of species and ecosystems, and the rate of extinction will be increasing in the coming years. Unfortunately, we can- not prevent it. The consequences of the cli- matic changes include sudden changes of weather (gales, hail, and torrential rain). Fast reduction of the present emission of green- house gases could, perhaps, slow down the rate of change at the end of this century. Passive Houses Are no Environmental Burden The basic criterion of the environmen- tally friendly character of a building is the amount of fossil carbon burnt in it over decades. The carbon we burn we (or our children and grandchildren) shall have to separate somehow from the atmosphere and return it to the ground. The largest part of fossil fuels burned in houses is almost al- ways used for heating (in warmer countries for the air conditioning of offices). This part can be reduced up to ten-fold if the house is built correctly. In the best“passive”houses, the largest part is used for water heating and the operation of various appliances (motors, computers, lighting). Hostětín Veronica Centre Much has been thoroughly tested in dozens of thousands buildings abroad.The Hostětín Veronica Centre building is one of the first to demonstrate this in the Czech Republic, and it certainly is the first such well constructed building to be open to the public in this country. For years, Hostětín has been oper- ating as a centre of model environmentally friendly projects for rural areas. The Hostětín attractions include the first reed-bed sew- age treatment plant in the region, a fruit drying kiln, solar collectors, heating plant burning wood chips (heat is supplied to al- most all households in the village), juicing plant which uses apples harvested far and wide, straw used as heat insulation, wooden statues set in the landscape, and economi- cal public lighting. The number of visitors grows every year. They include mayors, ex- perts of many professions connected with municipal technologies, farmers, students, teachers, families with children, and every- body interested in environmental protec- tion, sustainable development, effective use of energy, and countryside renewal. THE BASIC PRINCIPLES OF PASSIVE HOUSE CONSTRUCTION ARE: strong layer of heat insulation, compact shape of the build- ing, minimum heat bridges excellent air-tightness of the building airing system with recuperation windows with excellent heat tightness parameters of both frames and glazing. The annual energy consumption for heating apassive house shouldbelowerthan15kWh/sq.m,whichis7-10timeslessthan in ordinary buildings. The heat passively gained by the house from the sun, its occupants, and electric appliances maintains apleasantinnertemperatureformostoftheyear.Thehousecan mostlydowithoutausual(active)systemofheating. The special construction procedures and technologies include the use of straw bales as insulation, airing and gaining heat from the outgoing air, solar heating of water, and the use of rain water. More about the project is at www.hostetin.veronica.cz/?language=en Source:Gaillyová,Y.,Hollan,J.:Eco-building,Passivehouseofthe HostětínVeronicaCentre.ZOČSOPVeronica,2009. View of the accommodation part from the garden, straw heat insulation is covered with casing, foil, and larch panelling The front façade of the seminar part of the building is partly formed by a vertical solar collector W E A R E I N T R O D U C I N G

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2 1 | University of Pardubice - interior University of Pardubice - exterior E D U C AT I O N University of Pardubice – Winner of 2009 Grand Prix of Architects Markéta Pražanová, Spokeswoman of the Czech Chamber of Architects, e-mail: Marketa.Prazanova@cka.cc, www.cka.cc The building of the Faculty of Chemical Technology of the University of Pardubice is the winner of the 2009 Grand Prix of Archi- tects – National Award for Architecture for the best buildings constructed in the Czech Republic. More than one hundred interesting build- ings competed for the award in 2009. The buildings entered for the competition were judged by a Jury of foreign professionals and architects. The competition is organ- ised by the Community of Architects and the Chamber of Architects. Antal Puhl of Hungary, Chairman of the Jury, regards the competition as important not only for architects, but also the public, because the presented buildings influence the refinement of the taste of all people and thus improve the image and aesthetic standard of the whole country which makes it a place for better life. Highest Award for University of Pardubice One highest prize is awarded every year. In 2009, the National Award for Architecture was bestowed on the Faculty of Chemical Technology and the Sport Facilities of Uni- versity of Pardubice.This was a great surprise for the public. The just completed build- ing, designed by the prominent architects of Brno Ladislav Kuba and Tomáš Pilař, had not yet attracted the wide attention of the professional public. But the planned new building in the university complex had been talked about for a long mainly due to the design which emerged as the best among many entries in the 2001 architectural con- test for a new building of the school. Interesting Conception Appreciated The design of the faculty buildings respects the rectangular order of the surrounding buildings, mainly prefabricated buildings from the 1970s and 1980s. “The new con- struction does not dominate, but comple- ments the array of buildings and gives it a new quality,” the professional Jury said in the assessment. An additional advantage of the location of the buildings is the proxim- ity of the student hostel and the university hall and library. Parts of the ground floors of the buildings are above the ground and form passageways. The three buildings are connected at the first floor level. The main building is situated in the south-north di- rection and with the library building marks the boundaries of the academic square. The other two buildings are connected with the main building by glazed passages.The com- plex has a rational arrangement. Although minimalism and moderation underlined by face concrete on the façades still have only a few favourers in the Czech Republic, their use corresponds with the standard of modern buildings abroad, as do glassed-in areas to the total height of the storey which let in enough light. Other Award-winning Buildings Information about other award-winning buildings is available at www.grandprix-ar- chitektu.cz/en/

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| 2 2 S U R V E Y OHL ŽS, a. s. Burešova 938/17, 660 02 Brno Phone: +420 541 571 111 E-mail: ohlzs@ohlzs.cz www.ohlzs.cz/en Turnover: approx. EUR 490 million Number of employees: 1790 OHL ŽS, a.s. (formerly ŽS Brno, a. s.) is a dy- namic multi-profession company with a tradition of more than fifty years, and ranks among the largest and most prominent construction companies in the Czech Re- public. It belongs to the Spanish multina- tional construction and investment OHL TOP FIRMS IN THE CZECH BUILDING INDUSTRY Name Based in Sector Contact Skanska CS a.s. Praha a full range of construction and development functions www.skanska.cz EUROVIA CS, a.s. Praha transport engineering construction www.eurovia.cz METROSTAV a.s. Praha management and implementation of challenging construction projects www.metrostav.cz STRABAG a.s. Praha transport, buildings, and engineering construction www.strabag.cz S group holding, a.s. Liberec construction, project development, property management www.sgroupholding.cz OHL ŽS, a.s. Brno transport, railway, road and motorway construction, water-management and ecological construction www.ohlzs.cz IMOS Brno, a.s. Brno, Ostrava buildings, water-management, and transport construction designing www.imosbrno.eu Eiffage Construction Česká republika Ostrava-Poruba construction of transport and industrial structures, amenities etc. www.tchas.cz GEOSAN GROUP a.s. Praha construction of buildings and roads, recultivation etc. www.geosan-group.cz PSG a.s. Otrokovice shopping centres, industrial structures, office buildings etc. www.psg.eu Pontex, s.r.o. Bezová 1658, 147 14 Praha 4 Phone: +420 244 462 231 Fax: +420 244 461 038 E-mail: kalny@pontex.cz www.pontex.cz Turnover: approx. EUR 7 million Number of employees: 90 Export: approx. EUR 700 000 Pontex, s.r.o., ranks among the best Czech designing and consulting enterprises spe- cialising in bridge, engineering, and transport structures. It also offers opinions on statics, structure calculation, and the Bridge Manage- ment System. The company co-operates with other designers in the preparation of large line transport structures in the CR and abroad. Lightway, s.r.o. Hostivická 13/22, 155 21 Praha 5 – Sobín Phone +420 235 300 694 Fax: +420 235 300 218 E-mail: info@lightway.cz www.lightway.eu.com Turnover: approx. EUR 2 million Number of employees: 18 Export: approx. EUR 800 000 Lightway is a Czech manufacturer and dis- tributoroftubelightguides,andranksamong the leaders in the branch in the Czech Re- public and Europe. It has distribution part- ners in more than 10 countries of the world, and realises projects in the Middle East, Asia, and Africa. The company’s significant awards include Construction Product of 2007. Please describe your offer and its possible specific uses. The lightguide needs no electricity to trans- mit daylight rays from the sky to the very spot where you want it or need it. This is due to the special shape of a glass cupola built into the roof or façade of the house. It catches daylight which is then directed into the lightguide tube. The company’s priority is the development of new products and in particular a high quality and effectiveness of the system. Em- phasis is laid on materials and the technolo- gy of the manufacture of the different com- ponents. Tubes as long as 50 metres have already been installed, and this is unique in Europe. Group. At present, OHL ŽS, a.s. has two branches focused on structural and trans- port construction. The different divisions of the company are based in Prague, Brno, Olomouc, Ostrava, České Budějovice and Chomutov. Can you give a brief introduction of your production programme? OHL ŽS, a.s. operates on foreign markets directly and through subsidiaries. Foreign orders account for a large part of company revenues, in 2008 it was 20% of the total.The company is operating, for example, in Slova- kia, Hungary, Bulgaria, Croatia, Monte Negro, Azerbaijan, Poland, and Russia. Can you give a brief mention of the most important orders? The important structures designed recently include the suspended bridge across the Labe River in Nymburk, the overhung con- crete bridge spanning the Hačka valley near Chomutov, and the bridge on the D8 mo- torway across Oparenské Valley near Lov- osice, which is a classical arch bridge built by a modern technology so that it left the picturesque valley intact. We have recently gained experience and many references abroad – for example, we have worked on a high-speed railway line in Taiwan, and realised projects in Ma- laysia, Azerbaijan, in the Middle East and the Arab countries, in Israel, and in Ger- many, the Netherlands, and the United Kingdom. Poll of Successful Companies Operating in Building Industry

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personal and forthcoming approach towards the individual needs of customers quality and modern product for a favourable price application of modern procedures in design, production, and realisation of steel constructions experienced and professionally mature team of experts short assembly times provision of service care during warranty period WAREX, spol. s r. o., holds the system quality certificate, ČSNENISO9001:2001,withtheapplicationofČSNENISO 3834-2, a significant and important certificate of compe- tency for the realisation of steel constructions according to ČSN 73 2601-Z2:1994, and is a respectable member of the Czech Constructional Steelwork Association. Should you be interested in our services, we will be glad to prepare a price offer for you, or visit you personally. WAREX, SPOL. S R. O., IS A MODERN, DYNAM- ICALLY DEVELOPING COMPANY ORIENTED AT DESIGNING, PRODUCING, AND REALIS- ING STEEL CONSTRUCTIONS AND ENCASING. DRAWING ON ITS MANY YEARS OF EXPERI- ENCEANDTHEKNOWLEDGEOFITSWORKERS IN PROJECT MANAGEMENT,CONSTRUCTION, AND REALISATION DEPARTMENTS, WAREX, SPOL. S R. O. WILL SUPPLY A COMPLETE OR- DER FROM PREPARATION TO DELIVERY. TODAY, THE COMPANY BELONGS AMONG THE LEAD- ING FIRMS IN THE FIELD OF STEEL CONSTRUCTIONS, THE FOLLOWING BEING THE MAIN REASONS: WAREX spol. s r.o., Na Radosti 184/59; 155 21 Praha 5, Ocelové konstrukce, Dukelská 722, 790 01 Jeseník, Czech Republic Phone: +420 584 411 926, Fax: +420 584 411 904, E-mail: ok@warex.cz www.warex.cz

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Jilemnického 46, 772 00 Olomouc – Nedvězí, Czech Republic Company holds the certificate ČSN EN ISO 9001:2001, 14001:2005, OHSAS 18001:2007 IČO 47 66 84 07, DIČ CZ 47 66 84 07 spol. s r.o.spol. s r.o. NAPKO, spol. s r.o. is a contractual partner of OVM PRESTRESSING SYSTEM and sole supplier for Europe THE PRESTRESSING SYSTEM IN ACCORDANCE WITH THE ETA 013 EUROPEAN STANDARD USES PRESTRESSING STRANDS 15.3 MM AND 15.7 MM IN DIAMETER AND 1860 MPA STRESS. THE ANCHORING EXTENT RANGES FROM 1TO 27 OR 37 PRESTRESSING STRANDS IN ONE CABLE. The manufacture and assembly uses special cables with double-deck HDPE coating. 1 to 43 prestressings are suitable for: vertical hangers of suspension bridges suspension bridge main cables cable-stayed bridges with spans of 600 m and more arch bridges assembly cables Both companies have introduced the ISO 9001 quality management system. They have extensive experience in the prestressing of bridges and other structures. phone/fax: +420 585 941 801, +420 585 941 076 +420 608 775 822, +420 608 830 929 e-mail: napko@napko.cz, mkorenek@napko.cz SKYPE: napko_olomouc

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