Made in Czech. Investor s Guide for Manufacturing and Logistics Companies 2015

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1 Made in Czech Investor s Guide for Manufacturing and Logistics Companies 2015

2 1 Made in Czech Investor s Guide for Manufacturing and Logistics Companies 2015 Foreword The Czech Republic has a long and rich history as one of the world s most successful manufacturing and logistics markets. We also believe that it has a very bright future. The Czech Republic is truly situated at the geographical heart of Europe and has the infrastructure in place to operate as the gateway between the East and the West. With its population at just a little over 10 million people, it is a relatively small market but, is a heavyweight in the manufacturing arena. It is a strategic location for numerous manufacturing and logistics companies planning activity throughout Europe, Central & Eastern Europe, Russia and other CIS countries. The well-established Czech highway and road network is continuously seeing further additions and improvements, particularly since the country s economic outlook has improved over the past few years. These advantages, linked with the highly skilled workforce, low labour costs, the availability of investment grants and incentives and EU Membership, since 2004, make the Czech Republic a very attractive, business-friendly location. Local knowledge is key to making the most of the opportunities that the Czech market has to offer. For this very reason, JLL has prepared this report in co-operation with the following partners: PwC and Hays. This report aims to offer guidance to international manufacturing and related service companies that wish to establish or grow their presence in the Czech Republic and provides an inside view of the country s manufacturing landscape. It also offers key expertise on the Czech labour market with regard to the manufacturing sector and advice on important legal topics such as the structure of grants and incentives, setting-up a business and taxes. Insights into the manufacturing industry are demonstrated with sector analysis. Commentary on the real estate market provides a guide to the different acquisition and rental methods, timeframes and market practices and trends. We would like to thank all partners involved for their valuable input in preparing this report. We firmly believe that Made in Czech is a useful source of information for investing in this country. Tewfik Sabongui Managing Director Czech Republic JLL Harry Bannatyne Head of Industrial Agency Czech Republic JLL

3 Content Table 1. Executive Summary 3 2. Labour Market 5 3. Grants & Incentives 8 4. The Infrastructure Map of the Czech Republic Key Manufacturing Sectors in the Czech Republic 12 Automotive sector 14 FMCG sector 18 Home Appliances, ICT and Electronics 22 Medical and Pharmaceutical Industry 24 General Machinery The Czech Industrial Real Estate Market Real Estate: Rent or Buy? 30 Rent a facility? 30 Buy a facility? 31 Overview of the permitting process 32 How quickly can you be operational? 32 Market practice for leasing space 33 Market practice for purchasing space Real Estate Acquisition Setting-up a Business Czech Tax Structure 39

4 3 Made in Czech Investor s Guide for Manufacturing and Logistics Companies Executive Summary The Czech Republic, with a population of just over 10 million people, is one of Europe s and the World s biggest success stories in terms of manufacturing. The Czech Republic s close connection to Western markets, particularly the German market, and good cooperation with central European countries, provides it with a balanced position and excellent economic stability in both booming times, as well as crises. The Czech Republic mainly benefits from its unique location in the heart of Europe, representing a junction of trans European transport corridors, in addition to a highly educated population and a well- developed infrastructure. Numerous international companies have already identified the country s potential and have taken advantage of the favourable conditions that we highlight in this paper. The following are our key rationale for investing in the Czech Republic: Czech investment rationale Central European hub and favourable geographic location Political and economic stability, with one of the highest GDP growth rates forecasted in the EU in 2014/2015 Availability of a highly skilled workforce Low labour costs vs. high labour productivity Quality logistics / industrial real estate stock Favourable government investment incentives, mainly focused on hi-tech projects One of the densest highway networks in Europe One of the densest rail networks in the world Excellent business opportunities in the areas of R&D, Design and Innovation Fast growing market In May 2014, the Czech Republic had its 10 th anniversary of becoming a member of the European Union. Being a part of the single European market has certainly brought trading benefits along with reforms that have provided a relatively stable market environment, for today s standards, and a reliable, safe business climate. According to Oxford Economics, The Czech Republic is forecast to experience one of the highest GDP growth rates in Europe with an average of 3.0% between 2014 and The country continues to attract a large share of Foreign Direct Investment (FDI), most recently with new investments from Nexen (tyres), Hyundai Mobis (automotive components) and Bell Helicopters. Investment rating The Czech Republic has the strongest country ranking in CEE from all three major rating agencies. Moody s have ranked the Czech Republic A1, Fitch giving the rank of A+, both of them confirming a stable outlook. S&P ranked the Czech Republic at AA. Country Fitch Moody s S&P Czech Republic Hungary Poland Romania Slovakia Slovenia A+ (stable) BB (stable) A (stable) BBB (stable) A+ (stable) BBB+ (stable) Source: Fitch, Moody s, S&P, 2015 Attractive labour market A1 (stable) Ba1 (stable) A2 (stable) Baa3 (stable) A2 (stable) Baa3 (stable) AA (stable) BB+ (stable) A (positive) BBB (stable) A (positive) A (stable) The population of the Czech Republic reaches over 10.5 million inhabitants. The largest city is the capital city of Prague with more than 1.2 million inhabitants. Other large cities include Brno, Ostrava and Pilsen, all with populations of above 150,000 inhabitants. The labour force of the Czech Republic, aged between years, exceeds 7.3 million people, which is ca. 70% of the population. With inhabitants per sq km, it has the highest density of inhabitants in the CEE region and the 13 th highest density of inhabitants among European countries. According to Eurostat, the Czech Republic offers some of the most competitive labour costs in Europe at EUR 10.3 per hour. This rate is more than half of the EU 28 average and 3 times lower than in neighbouring Germany. Educated workforce The Czech Republic offers a highly qualified workforce with wide ranging experience in the manufacturing sector. The well renowned and long industrial history of the country is supported by a network of universities, secondary technical schools and training centres, providing a significant number of graduates. The Czech Republic has 77 public and private universities, with a total of 375,000 students. The highest portion of students is, unsurprisingly, in the largest cities of Prague, Brno and Ostrava. On the other hand, in every single regional capital there is at least one university. The highly skilled workforce is therefore distributed across the regions and it is not concentrated purely in the largest cities.

5 Made in Czech Investor s Guide for Manufacturing and Logistics Companies Favourable grants & incentives In addition to its attractive labour market and availability of workforce, another important draw factor for manufacturers assessing where to locate a new development, is the availability of investment incentives offered by the government. These are handled by CzechInvest, the Investment and Business Development Agency, a state agency created by the Ministry of Industry and Trade. Attractive investment incentives are granted through many forms of state aid, including: corporate income tax relief, transfer of land for favourable prices, job creation grants, training and retraining grants, and cash grants for the acquisition of long-term tangible and / or intangible assets. Maturing real estate market The real estate market is maturing, offering high quality manufacturing and warehouse space. Many large international developers are present in the market. The various options of buying or renting an existing facility or commissioning a built-to-suit production facility are outlined in this report. According to the JLL Global Real Estate Transparency Index, based on a combination of quantitative market data and information gathered through a survey of the global business network of JLL and LaSalle Investment Management, the Czech Republic has a transparent real estate market which is closing the gap with Western Europe. The index is based on a review of the following categories: The manufacturing sector is evolving The Czech Republic is an export oriented, open economy, with a strong emphasize on manufacturing. The country has shifted from an assembly production market to an added value manufacturing and high technology production zone, serving also as a transit station and distribution hub for goods from the east and south east to northern and western Europe. The Czech Republic has the most developed industrialized economy in Central and Eastern Europe. Its strong industrial tradition dates back to the 19 th century when Czech countries represented the industrial engine of the Austro-Hungarian Empire. Performance Measurement Market Fundamentals Governance of Listed Vehicles Regulatory and Legal Transaction Process Europe Real Estate Transparency, 2014 Highly Transparent Transparent Semi-Transparent The manufacturing industry is one of the most important parts of the national economy, representing a substantial share of gross domestic product. The traditional industries are heavy and general machine-building, iron and steel production, metalworking, chemical production, electronics, transportation equipment, plastics, textiles, and pharmaceuticals. The long term leading sector is automotive production, which strengthen its position every year. On the other hand, we are recording a gradual decline of the mining sector. In the European, as well as global rankings of most industrialised countries, the Czech Republic always belongs among the top positions. Thanks to its strategic location, next to Germany, in the centre of continental Europe, the Czech Republic is an attractive place for manufacturers to near shore operations and also to progressively compete for cost-effective, value-added manufacturing, supported by a highly skilled workforce. Low Transparency Opaque Not Covered GB BE IE FR ES PT FI SE NO DK NL BY DE PL CZ SI UA AT HU SL RO IT RS CH HR G R BG IL TR RU KZ Source: JLL 2014 The Czech Republic is out of this world! The European Global Navigation Satellite Agency (GSA) has selected Prague as its headquarters for the Galileo navigation system project which is anticipated to attract a great deal of talent, knowledge and put a spotlight on the Czech Republic. This project will provide an opportunity, to both Czech companies and their partners, to push the boundaries in terms research and innovation into space related technologies and systems.

6 5 Made in Czech Investor s Guide for Manufacturing and Logistics Companies Labour Market Section contributed to by Hays Czech Republic Human capital is a key element in the investment process. The three main areas to assess with regard to investment potential include employment costs, availability of workforce and quality of labour. A focus on Czech labour dynamics will be outlined in this chapter. From a human resources perspective, the Czech Republic offers a highly qualified workforce with wide ranging experience in the manufacturing sector. The well renowned and long industrial history of the country is supported by a network of secondary technical schools and training centres, providing a significant number of graduates. In addition, the presence of technical universities across the country including: Prague, Brno, Liberec, Ostrava, Pilsen, Ústi nad Labem and Zlín, allow for a sustainable flow of electrical, mechanical and manufacturing engineers. Although the Czech Republic has slightly higher employment costs, when compared to other markets in the region, this is offset by the high levels of technical education and the general above average language knowledge (English and German) within the CEE region. Combined with the countries geographical location and developed transport network, it makes the country a very attractive location for manufacturing companies and also those with added value production or R&D Centres. Severance Employment lasted < 1 year employee is entitled to 1x average monthly earnings Employment lasted > 1 and < 2 years employee is entitled to 2x average monthly earnings Employment lasted > 2 years employee is entitled to 3x average monthly earnings Source: Hays Czech Republic Other information Notice period: Holidays/year: Bank holidays: 2 months by law, or by agreement 20 days by law Working hours/week: 40 (Typical) Sick Leave: Source: Hays Czech Republic 13 (Fixed to specific dates) 1 st 3 rd day no reimbursement, 4 th 14 th day reimbursed by employer, 15 th + day reimbursed by the state Labour law A trial period of up to 6 months can be agreed with so-called managerial/leading employees entitled to determine and assign tasks and give instructions to their subordinates and to organise and control their work. The trial period of a maximum 3 months, is applicable to other employees, regular staff. Employment for an indefinite period is the most common in the Czech Republic, preferred by both parties (employer and employee). Employment for a definite period concluded between the same contracting parties may not exceed 3 years. From the day when the first employment for a definite period is concluded, this employment term may be repeated twice only. Extended employment will be considered repeatedly concluded employment. Previous employment for a definite period will no longer be taken into account three years after the end of the last employment for a definite period. Employment costs The two most significant components of employer costs are salaries and Social Security Contributions (SSC). According to Eurostat, the Czech Republic offers one of the lowest labour costs in Europe at EUR 10.3 per hour. This rate is more than half of the EU 28 average and 3 times lower than in neighbouring Germany. Comparison of hourly total labour costs among selected European countries in the Industrial and Construction sectors (in EUR) 45,0 40,0 35,0 30,0 25,0 20,0 15,0 10,0 5,0 0,0 Sweden France Austria Germany EU (28 countries) Spain United Kingdom Slovenia Czech Republic Slovakia Poland Hungary Romania Source: Eurostat, 2013

7 Made in Czech Investor s Guide for Manufacturing and Logistics Companies Statutory employer costs Social security Sickness insurance 2.3 % Retirement / pension insurance 21.5 % Employment insurance 1.2 % Health security 9.0 % Total paid by employer on top of salary 34.0 % Source: Hays Czech Republic Additional costs Optional Benefits Costs average annually CZK / per head When assessing employment costs among the Czech regions, the variation between average salaries in each region should be considered. Salary levels mostly depend on the development of each region, as well as the type of industry situated in that particular area. Typical average gross monthly salaries for selected regions and general manufacturing positions (EUR) Prague Brno Pilsen Ostrava Skilled workers Unskilled workers Engineers 1,450 1,290 1,350 1,200 Source: Hays Czech Republic / CNB FX Rate (13/3/15) 1 EUR = CZK 1 extra week of holidays (over 80% companies) Lunch Vouchers (over 76% companies) Cafeteria / flexible benefits for culture etc. (around 30% companies) Health Care Benefits (common in organizations where expats are working) Training and Development programs Based on employees monthly gross salary 6,000 12,000 ( EUR) per employee annually (1 day average contribution is ( EUR) 6,000 15,000 ( EUR) per employee annually 0 24,000 (0 862 EUR) 5,000 40,000 (180 1,437 EUR) up to seniority level Availability of labour The labour force of the Czech Republic, calculated by the number of people aged between 15 and 64 years old, exceeds 7.3 million inhabitants which is ca. 70% of the population. At the end of February 2015, the Czech Republic s unemployment rate was reported at 7.5 %, according to the Czech National Statistical office. When assessing unemployment across the country, the spread between regions can be significant, as shown on the map below. The more developed regions, such as Prague, Central Bohemia and the Pilsen region, have unemployment rates below 6.5%, whereas some of the less developed regions, such as the Usti nad Labem region, have unemployment rates above 10%. Source: Hays Czech Republic / CNB FX Rate (13/3/15) 1 EUR = CZK Monthly salaries for manufacturing roles in the Czech Republic range from less than EUR 510 up to EUR 900 for blue-collar workers, from EUR 900 up to EUR 3,200 for white-collar staff (specialists) and from EUR 1,600 up to above 7,000 for management. It is worth noting that salary levels can be higher when seeking specialists with niche skills and/or when relocation is required. Average gross monthly salaries in the Czech Regions (in EUR) The unemployment map can indicate parts of the country where there is an accessible labour force, although it is worth considering that there are certain sub-regions in some of the most developed regions that also have a ready workforce. These regions can facilitate investment in proximity to a major hub, such as Prague, whilst also providing easy access and cheaper employment of the labour force, particularly when hiring blue-collar workers. Average unemployment rate (%) in the Czech Regions > 1000 > 10% LIBEREC LIBEREC % 5-7.5% ÚSTÍ NAD LABEM HRADEC KRÁLOVÉ PRAGUE KARLOVY VARY PARDUBICE CENTRAL BOHEMIA MORAVIA-SILESIA OLOMOUC ÚSTÍ NAD LABEM HRADEC KRÁLOVÉ PRAGUE KARLOVY VARY PARDUBICE CENTRAL BOHEMIA MORAVIA-SILESIA OLOMOUC PILSEN PILSEN VYSOČINA ZLÍN VYSOČINA ZLÍN SOUTH BOHEMIA SOUTH MORAVIAN SOUTH BOHEMIA SOUTH MORAVIAN Source: Czech National Statistical Office, Q3 2014, (1 EUR = CZK) Source: Czech National Statistical Office, February 2015

8 7 Made in Czech Investor s Guide for Manufacturing and Logistics Companies 2015 Skilled & educated workforce In the Czech Republic, there are 77 public and private universities with a total of 347,300 students (81,300 in technical fields) and 88,146 graduates (16,529 in technical fields). The highest proportion of students are, unsurprisingly, in the largest cities of Prague, Brno and Ostrava. On the other hand, in every single regional capital there is at least one university. Highly skilled labour is therefore distributed across regions and is not purely concentrated into the largest cities. Number of Students / Number of Faculties in the Czech Regions 467 / 1 KARLOVY VARY 15,522 / 10 PILSEN Source: MŠMT ,774 / 9 ÚSTÍ NAD LABEM 144,486 / 74 PRAGUE 1,435 / 2 CENTRAL BOHEMIA 17,987 / 12 SOUTH BOHEMIA 7,951 / 6 LIBEREC 12,263 / 6 HRADEC KRÁLOVÉ 3,242 / 2 VYSOČINA 10,328 / 7 PARDUBICE 78,382 / 35 SOUTH MORAVIAN 38,856 / 18 MORAVIA-SILESIA 22,887 / 10 OLOMOUC 11,730 / 9 ZLÍN The economic maturity of countries focused on hi-tech industries is determined by the quality of the tertiary education system and its share of students in technical fields. The Czech Republic has one of the largest proportions of students studying science, mathematics, computing, engineering, manufacturing and construction. Approximately 25.3% of all students are enrolled in the above mentioned fields of study. Students at ISCED levels 5 6, as % of all students Finland 33.9 Germany 32.9 Greece 32.7 Portugal 29.2 Romania 28.6 Ireland 28.3 Slovenia 26.7 Spain 26.4 Estonia 26.3 Sweden 25.9 Austria 25.6 Czech Republic 25.3 Bulgaria 25.1 France 25.1 Italy 24.7 Croatia 24.3 Switzerland 24.3 Slovakia 23.2 United Kingdom 23.2 Macedonia 23.0 Poland 22.7 Hungary 22.5 Liechtenstein 22.4 Lithuania 22.1 Latvia 21.1 Malta 20.9 Cyprus 20.8 Japan 19.8 Denmark 19.1 Luxembourg 18.2 Iceland 18.0 United States 17.8 Norway 17.0 Belgium 16.8 Netherlands 14.7 Source: Eurostat, 2014 Pavel Rufert TPG Powertrain Management ŠKODA AUTO a.s. ŠKODA AUTO a. s. highly value the personal growth of our employees and provide regular training, as it is vital for our continuous progress. ŠKODA AUTO a. s. has also established effective cooperations with the technical universities in Prague, Brno, Pilsen and Liberec, supporting students on various research and development projects, conducting student trainee programmes, providing consultancy on student theses and sharing expertise. In addition, ŠKODA has founded its own Škoda Auto University as another opportunity for theory to meet practical experience. As ŠKODA contributes significantly to improving regional employment rates, supports sporting and cultural activities, operates employee health programmes and helps enhance the environment and infrastructure in ŠKODA s locations, the Czech local authorities have always been keen to support ŠKODA s production and its growth.

9 Made in Czech Investor s Guide for Manufacturing and Logistics Companies Grants & Incentives Section provided by PwC Legal Introduction Choosing the appropriate investment location relies on a thorough analysis of potential costs and benefits of the sites. One of the key factors influencing the decision on location is often the availability of state aid. Investors considering investment in the Czech Republic are able to benefit from various types of incentives. The amount of incentives provided depends on the location of the investment. The incentives are provided in the form of: (i) cash grants, (ii) tax relief and (iii) discounts on the purchase price of land. Incentive procedures are handled by CzechInvest, the Investment and Business Development Agency, a state agency created by the Ministry of Industry and Trade. CzechInvest acts as an intermediate in the incentive application process and for communications between an applicant and the relevant ministries. Eligible Investments Investment incentives can be provided for the following investments: introduction or expansion of production in certain sectors of the manufacturing industry; construction or expansion of research and development centres; launch or expansion of technology centres; and launch or expansion of business support services centres. Forms of the incentives being provided: corporate income and real estate tax relief; transfer of land for a favourable price; job creation grants; training and retraining grants; and cash grant for the acquisition of long-term tangible and / or intangible assets. Corporate income tax relief An entity can apply for corporate income tax relief for ten years or for ten consecutive tax periods. The first relief period can be drawn when the statutory conditions for the state aid are met but can be no later than within three years from the moment when the investment incentive has been granted. An entity can also apply for tax relief concerning land or real estates situated in the favourable industrial areas. Tax relief is subject to approval of the municipality and may be applied for 5 years at maximum. Transfer of land for a favourable price The nature of this grant represents the possibility for the applicant to acquire land plots owned by the state or municipalities for favourable prices. The incentive is then represented by the difference between the purchase price and the market price of the particular land plots. Job creation and training/re-training grants These grants can only be provided for investments made in certain regions (regions where the unemployment rate is at least 50 % higher than the average rate in the Czech Republic). For every newly created job a cash grant in the amount of CZK 200,000 (approximately EUR 7,200) can be granted. In addition to that, grants of up to 45 % of the amount of expenses spent for training and retraining, depending on the size of the enterprise, can be provided to the applicant. These grants may be changed in the future as the Act on Incentives, amended in 2015, predicts also related regulations to be amended: the grants may be provided also for investments in regions where the unemployment rate is at least 25% and grants for job creations may be raised up to CZK 300,000 (approximately EUR 10,800). Cash grant on capital investment The capital investment grant is provided for a strategic investment (as described further in the text) to launch or expand new manufacturing or technology centres. A cash grant is provided to the amount of 10 % of the eligible costs. This grant could be increased up to 12.5 % of the eligible costs if both manufacturing and technology centres are launched at the same time. Amount of Incentive The amount of incentive is limited by a ceiling the amount stipulated in the implementing regulation depends on the region. Currently, a ceiling varies from 30 % to 40 % of the eligible costs. In February 2014, the European Commission adopted a new map of amounts of state aid applicable for the Czech Republic, decreasing the amount of the incentive to 25 % of eligible costs. Investments in the territory of Prague are not eligible to receive any incentives. Conditions Any entity that makes its investment in the Czech Republic is entitled to apply for an incentive. The applicant can be both Czech or foreign entities; whereas the recipient of the incentive can only be an entity with its registered seat in the Czech Republic. The Investment Incentives Act stipulates basic conditions for granting the incentive, among others: the investment must be implemented in the territory of the Czech Republic; the activity subject matter of the investment, construction or facility must be environmentally friendly; work connected to implementing the investment shall be started only after CzechInvest has approved the investment and incentives.

10 9 Made in Czech Investor s Guide for Manufacturing and Logistics Companies 2015 Conditions for eligibility for incentives in the case of investment in manufacturing industry: General Conditions: the investment in long-term tangible and non-tangible assets shall exceed CZK 100 million of which the minimum of CZK 50 million is intended for investment into new machinery; creation of at least 20 new jobs. Strategic Investment: the investment in long-term tangible and non-tangible assets shall exceed CZK 500 million of which a minimum of CZK 250 million is intended for investment into new machinery and the creation of at least 500 new jobs; Conditions for eligibility for incentives in the case of investment in technological centres: General conditions: the investment in long-term tangible and non-tangible assets shall exceed CZK 10 million of which a minimum of CZK 5 million is intended for investment into new machinery; creation of at least 20 new jobs. Strategic Investment: investment in long-term tangible and non-tangible assets exceeding CZK 200 million of which a minimum of CZK 100 million is intended for investment into new machinery and the creation of at least 100 new jobs; In the case of an investment into a strategic development centre, an additional 20 jobs in the case of software development and 170 jobs in the case of other strategic development centres or, 500 jobs in the case of customers support centres, must be created by the investment as a condition for granting the incentive. The above criteria are reduced to half in case the investment is being made either in a district in which the unemployment rate is at least 50 % higher than the average unemployment rate in the Czech Republic or in the favourable industrial area. The above conditions must be fulfilled by the recipient of the incentive within 3 years from the moment when the incentive has been granted. Application process The application is filed by the applicant with CzechInvest who then elaborates an opinion on the investment and forwards the application to the Ministry of Industry and Trade. The Ministry will assess the intent of the investment in cooperation with other relevant ministries. The process usually takes from five to six months. In case the applicant and recipient are the same entity/person, the process is usually faster and should take from three to four months.

11 4. The The Infrastructure Map Map of of the the Czech Czech Republic Republic Bayreuth 1 GERMANY Sokolov 6 Cheb Nürnberg München Karlovy Vary GERMANY Motorways and express roads Under construction/ Preparatory works Main roads In operation Planned construction 5 Litvínov Chomutov Key Jirkov Plzeň Dresden Berlin Teplice Most Kladno 6 Děčín Ústí nad Labem 7 8 Klatovy Regional cities 8 Strakonice Cities over 50,000 inhabitants Příbram Cities 20,000-50,000 inhabitants Main International Airports Regional International Airports Litoměřice 4 1 Mladá Boleslav Písek 3 Česká Lípa Tábor 11 Liberec 10 PRAHA 1 3 České Budějovice Linz Jablonec nad Nisou 35 Jičín Kolín Kutná Hora Trutnov Pardubice Havlíčkův Brod Jihlava Jidřichův Hradec 11 Hradec Králové 35 Wroclaw Chrudim 1 Třebíč AUSTRIA Náchod Žďár nad Sázavou Znojmo Svitavy 52 POLAND 43 BRNO 2 Šumperk 35 Olomouc Opava Prostějov 55 Přerov 46 1 Blansko Vyškov Břeclav Kroměříž Hodonín Bratislava Wien Source: JLL based on ŘSD, 2015 Krnov 55 OSTRAVA Zlín 56 1 Kopřivnice Nový Jičín 49 Uherské Hradiště Valašské Meziříčí Warszawa Bohumín Orlová Vsetín Havířov Žilina 48 Frýdek- -Místek SLOVAKIA Transport Infrastructure Motorways and Express Roads Existing network Under Construction Major roads planned till 2018 Czech Republic - At a Glance Economy Czech Republic - Facts and Figures Population (a) 10,538,275 Territory km2 (a) 78,866 GDP Volume in milllion USD (b) 212,688 GDP per Capita in USD (b) 19,552 Consumer Price Index (b) 0.4% Unemployment Rate as of February 2015 (a) 7.5% Government Gross Debt (as % of GDP) (b) 41.3% 10 Year Government Bonds (b) 1.6% Exchange Rate EUR/CZK, period average (b) 27.5 Exchange Rate USD/CZK, period average (b) 20.8 Source: (a) Czech Statistical Office, (b) Oxford Economics, 2015 Karviná Český Těšín Třinec Katowice Largest cities in the Czech Republic City Population Prague 1,246,780 Brno 378,327 Ostrava 297,421 Pilsen 167,472 Liberec 102,113 Olomouc 99,471 Ústí nad Labem 93,747 České Budějovice 93,467 Hradec Králové 93,035 Pardubice 89,467 Source: Czech Statistical Office, ,234 km 31 km D1 Motorway (Prague - Brno - Ostrava) - Completion of the section Přerov - Lipník D3 Motorway (Prague - Linz) - Completion of the section Veselí nad Lužnicí - Úsilné D8 Motoway (Prague - Dresden) - Completion of the final section Lovosice - Řehlovice D11 Motorway (Prague - Wroclaw) - Completion of the section Osičky - Hradec Králové R4 Express Road (Prague - Písek) - Completion of the section Skalka - křižovatka II/118 (Háje) R6 Express Road (Prague - Bamberg) - Completion of the section Lubenec - Bošov R7 Express Road (Prague - Chomutov) - Completion of the section Postoloprty - Bítozeves R35 Express Road (Hradec Králové - Olomouc) - Completion of the section Opatovice nad Labem R49 Express Road (Hulín - Slovak border) - Completion of the section Hulín - Fryšták Airport Network 10 International Airports

12 Made in Czech Investor s Guide for Manufacturing and Logistics Companies Key Manufacturing Sectors in the Czech Republic Successful then, successful now The Czech Republic is one of the most prosperous economies of the Central and Eastern European region. It benefits mainly from its unique location in the heart of Europe representing a junction of trans European transport corridors, as well as from a well-educated population and a well-developed infrastructure. The country also has the most developed industrialized economy in Central and Eastern Europe. Its strong industrial tradition dates back to the 19 th century when Czech countries represented the industrial engine of the Austro-Hungarian Empire. During the interwar times, the Czechoslovakian Republic steadily ranked among the top ten most developed countries in the world. The manufacturing industry is one of the most important parts of the national economy, representing a substantial share of gross domestic product. The traditional industries are heavy and general machine-building, iron and steel production, metalworks, chemical production, electronics, transportation equipment, plastics, textiles and pharmaceuticals. The long term strongest sector is automotive production, which strengthens its position every year. On the other hand, we are recording a gradual decline of the mining sector. In the European, as well as the global rankings of the most industrialised countries, the Czech Republic always features among the top positions. Manufacturing, value added 2012 (worldwide ranking; % of GDP; trend 2012/2009) 1 Thailand 34% 2 Korea, Rep. 31% 3 Belarus 25% 4 Czech Republic 25% 5 Malaysia 24% 9 Ireland 23% 10 Germany 22% 12 Slovakia 21% 17 Switzerland 19% 19 Austria 18% 25 Poland 18% 30 Croatia 16% 77 United Kingdom 10% 78 France 10% Source: The World Bank, 2014 Strong FDI influence In the last fifteen years, the Czech economy has been significantly influenced by a strong inflow of foreign direct investment. The period between 2003 and 2007 saw the strongest inflow of FDI, as the incoming corporations and investors were significantly increasing the production capacity of country. Over the past few years, we have recorded more reinvestment of capital and expansions of existing investments rather than the inflow of new investors. A substantial number of corporations that set-up their production facilities in the Czech Republic several years ago, are now expanding their operations, mainly into Research and Development centres, IT centres, Central European or European distribution hubs, or even European headquarters. The Czech economy is thus gradually moving from the production and assembly part of the industry, to higher added value sectors. Despite the relatively small size of the country, thanks to existing know how and technical excellence, sustaining cost effectiveness, excellent transport infrastructure and strategic location, it is still one of the major destinations of foreign investment in Europe. Foreign direct investment, net inflows 2012 (BoP, current bil. US$, trend 2012/2011) 1 China United States Brazil United Kingdom Russian Federation France Germany Czech Republic Hungary Poland Romania Slovak Republic 1.5 Source: The World Bank, 2014 Growing sectors in the Czech Republic The largest share in the Czech national production accounts is obviously covered by the services and trade & wholesale sectors, with a share of 61% of Gross Value Added in As depicted on the following graph, services and trade are followed by manufacturing (27% share), construction, utilities, agriculture and extraction.

13 13 Made in Czech Investor s Guide for Manufacturing and Logistics Companies 2015 Czech GVA Structure on National Accounts in 2012 Manufacturing 24% Other dominating sectors, based on value added, are metal processing (3.8% of GVA), electronics and electrical equipment (2.5%), FMCG (2.4%) and general machinery (3.4%). Agriculture 2% Utilities 5% Services 51% Based on economic forecasts, the value added on manufacturing in the Czech Republic is forecast to grow by more than 46% in the coming decade, leaving the estimated growth of the services sector (28% by 2023) far behind. Czech Gross Value Added, real, LCU (billions CZK: 2010 prices) Construction 6% Source: JLL, CZSO, 2014 The manufacturing sectors have grown in the past two decades by 260%. The fastest growing industrial subsector was the manufacturing of plastics and rubbers with a 1,261% growth of gross value added between 1993 and The plastics and rubber manufacturers key customers recruit mainly from the automotive, electronics and packaging industries. The next biggest industry jumpers were mainly the automotive and other transportation manufacturing industries with an 851% increase and the electronics & electrical equipment industries with a 737% increase. Czech GVA Structure in Manufacturing Industries Automotive and other transport Source: JLL, CZSO, 2014 Trade & Wholesale 11% Metals Electronics and electrical equipment FMCG Extraction 1% Machinery The production of automotive and other transportation vehicles with its 4.9% share on total GVA, is not only the largest manufacturing subsector, but also the sector with largest share growth on total GVA with an approximate growth of 3.2 percentage points in the past 20 years. Rubber and plastics Pharmaceuticals and medical other Non-mettalic mineral products Wood and paper Textile Fuels Agriculture and forestry Industry incl. Manufacturing Source: Oxford Economics, 2014 Manufacturing Services From the various different manufacturing sectors, five (FMCG, domestic appliances & electronics, automotive, medical & pharma and general machinery) are outlined in more detail in the following sections. Although we have selected these sectors as an example, great potential also exists in many other sectors. Mark Kelleher Vice-President, European Operations Smiths Medical Smiths Medical, part of Smiths Group, is a leading global provider of medical devices and equipment for the healthcare industry. Worldwide the company employs over 7,500 people, with manufacturing concentrated in the US, UK, Italy, Mexico and from 2013, the Czech Republic. Smiths Medical chose the Czech Republic to expand its operational base in Europe to serve our European customers and EU markets. The key benefits included the country s stable economic base, its strategic location within Central Europe, the availability of highly skilled labour and the over cost effectiveness. After considering other locations in CEE and the Czech Republic, Smiths Medical chose to locate its CEE production base in Hranice, in northern Moravia, near the University cities of Olomouc, Ostrava and Brno. The location benefits from a combination of lower total operating costs, direct access to the European motorway networks and close proximity to skilled labour and a regional supply base.

14 Made in Czech Investor s Guide for Manufacturing and Logistics Companies Automotive sector The Czech Republic is currently the 5 th biggest car producer in Europe and the 13 th largest worldwide. In 2013, the number of passenger cars produced in the country reached almost 1.13 million units, which places the country as the second largest global car manufacturer (after Slovakia) in production per capita. In 2012, production per 1,000 inhabitants reached 111 car units. During 2013, the number of cars produced per 1,000 inhabitants decreased to 107 units; however, the latest data for H (+10.3%) indicates another strong year for the Czech automotive sector. With such statistics, it is no wonder that automotive and automotive parts productions currently represent the most dominant Czech manufacturing industry. The automotive sector in the Czech Republic includes the production of a wide variety of vehicles ranging from passenger cars (Škoda Auto Mladá Boleslav, TPCA Kolín, Hyundai Nošovice.), to trucks (Tatra Kopřivnice), buses (Iveco (ex Karosa) Vysoké Mýto, SOR Libchavy), motorcycles (Jawa Týnec nad Sázavou), trailers (Schwarzmuller Žebrák, PANAV Senice na Hané, Agados Velké Meziříčí) and sport roadsters (Kaipan Smržovka). As one of the most important industries in the Czech Republic, the sector boasts the highest inflow of FDI and currently employs approximately 120,000 people across the country in car plants or related services. In H1 2014, the Czech Republic accounted for over 7% of the total European car production market. In the past few years, the initial inflow of mainly large car producers has been accompanied by a significant inflow of automotive suppliers and research and development centres tied to these manufacturers. The strong automotive background is also attracting more and more distribution centres, usually for the central European or, the entire European market area. The main drivers behind other leading automotive manufacturers moving their production to the country include: the tradition of car production and access to a skilled labour-force, further supported by a large number of technical university graduates, the availability of relatively cheaper materials and the central location of the country which gives proximity to both growth and core markets. Major Car Producers The tradition of car production in the Czech Republic is tied to Škoda Auto, one of the most famous and most valued Czech brands worldwide. Škoda Auto, a car manufacturer with over 115 years of tradition in motor vehicle production is the largest Czech exporter with nearly 600,000 cars produced per annum. Moreover, it is the only car manufacturer in the country who is involved not only in production, but also in actual car development. The company is based in Mladá Boleslav, north-east of Prague, with production situated in three locations (Mladá Boleslav, Kvasiny and Vrchlabí) where nine different models, including one of the most popular brands globally, within its category, the Škoda Octavia, are being produced. In 1991, Škoda Auto became part of leading car producer Volkswagen Group. Its R&D centre in Mladá Boleslav, which was further extended by a new Engine centre this September, is the fourth largest of the entire group in the world. Pavel Rufert TPG Powertrain Management ŠKODA AUTO a. s. ŠKODA AUTO a. s. follows the tradition, success and expertise of more than 100 years of uninterrupted car manufacturing, technical development and customer after-sales care. In the Czech Republic alone, ŠKODA AUTO a. s. has been operational in three production plants: Mladá Boleslav, Vrchlabí and Kvasiny, employing a total of 24,500 employees (in 2013). It was mainly the company s great potential, successful car models, skilled labour and other advantages of automotive production in the Czech Republic that sparked VW s interest to connect the ŠKODA brand with the VW Group in The high quality and reliability of ŠKODA products has been the result of the introduction of new technologies, building on the expertise of skilled professionals and cooperating on common projects and platforms. VW Group s confidence in ŠKODA s technical know-how was proved by assigning ŠKODA with the full development of a new series of 3-cylinder 1.2l MPI engines for three VW Group brands, starting in Between 1991 and 2014, a total of 280 billion Czech crowns have been invested by ŠKODA AUTO a.s. in the Czech Republic. For example, the latest R&D activities have been endorsed by the investment into a new Engine Centre in Mladá Boleslav, where new development projects are integrated into the Group s strategic programmes. The stable economic environment in the Czech Republic, cost-efficient production and human resources have not only been beneficial for ŠKODA but also for our suppliers who have been opening new plants, creating local automotive clusters close to our factories. TPCA (Toyota Peugeot Citroen Automobile) started production in their brand new manufacturing plant in Kolín, east of Prague, in The total construction cost, which amounted to 20 billion CZK, represented the largest greenfield investment in CEE at the time. The factory, which is focused on the manufacturing of small city cars (Toyota Aygo, Peugeot 107 and the Citroen C1) currently employs 3,200 people and its annual production reaches 300,000 vehicles. To date, the largest foreign direct investment in the history of the country is represented by the new production plant of leading Korean car producer Hyundai, who set up in Nošovice in the Moravia-Silesia region, close to the Slovak borders (another Korean car producer, KIA, is situated in Žilina approximately 80 km from Nošovice). It is the first manufacturing plant of Hyundai in Europe and the serial production started there in November 2008, after only 19 months of construction. The annual production of five car models, especially designed for the European market, totals 300,000. This major investment of the Korean producer initiated a huge inflow of OEM suppliers, first closely tied to Hyundai and KIA, but later reaching other producers within and also beyond the Czech Republic.

15 15 Made in Czech Investor s Guide for Manufacturing and Logistics Companies 2015 OEM parts suppliers It might sound like a bold statement but the spectrum of OEM parts production in the country indicates that almost every single part of a car is being produced in the Czech Republic. Out of 50 leading European OEM parts suppliers 36 are producing in the country. For example, TPCA uses 80% of spare parts for its car production in their plant in Kolin from Czech based producers. The manufacturers include both major multinationals who entered the country in the past two decades as well as traditional Czech companies. Out of the Top 100 global OEM parts suppliers, there are 69 companies based and producing in the Czech Republic. The first and major inflow of automotive suppliers was originally connected to Škoda production in Mladá Boleslav, in the Central Bohemian region. The area around Mladá Boleslav and nearby Liberec region have attracted a number of leading companies from the sector, TRW in Řepov and Stará Boleslav, Mahle Behr in Mnichovo Hradiště, Continental in Brandýs nad Labem, Faurecia, Magna, Johnson Controls in Mladá Boleslav and FIAMM, an Italian producer who took over local company, Akuma. The establishment of the TPCA plant in Kolín, reinforced the interest of international OEM parts producers to enter the Czech market. The third major impulse represented the opening of the Hyundai production site in Nošovice. The strongest and most developed OEM parts manufacturing sector in the Czech Republic includes tyres, rubber and plastics production, which draws upon the long history of the Czech and Czechoslovakian companies active in this field, such as: Mitas, Gumárny Zubří and Barum, now part of the Continental group. The newest addition to this subsector is Korean tyre producer Nexen who will be investing 1 billion USD into a new plant in Žatec. Interior and seating producers, including: Faurecia, Hyundai Mobis and Johnson Controls, represent another strong group of manufacturers supplying parts not only to Czech automotive producers but, also to other manufacturers outside of the country. One recent, large investment, included Johnson Controls who decided to move its production of car seating from Germany to CTPark Bor in the Pilsen region. The plant will supply car seating to BMW factories in Germany and to domestic producers as well. Automotive electronics and brake systems production is another thriving part of OEM production in the country. Brembo, an Italian supplier of brakes systems to Porsche, BMW, Mercedes and Land Rover opened its 25,000 m 2 plant in Ostrava, Northern Bohemia in This year, they extended their premises by another 30%. Lighting systems and HVAC are also represented by a large number of producers including strong players like Visteon Autopal and Mahle Behr. One of the largest, recent investments into the automotive sector included Hyundai Mobis who, in mid-2014, announced its decision to invest 120 million USD into a new factory for the production of lighting systems in Mošnov, in the vicinity of the Hyundai car production site in Northern Moravia. The booming automotive sector also represented an opportunity for once renowned but, recently subdued sectors; such as textiles and glass production. AGC Automotive Czech, a successor of a traditional glass producer from Northern Bohemia, Sklo Union in Teplice, is nowadays the largest producer of flat glass in CEE for the construction and automotive sectors. Fezko Strakonice, once a world recognised producer of hats, is now a part of Johnson Controls and a supplier of textiles for car interiors to leading car producers including Škoda Auto, Opel, VW and Ford. Top 50 European OEM parts suppliers, based on 2012 European OEM parts sales (Manufacturing in the Czech Republic marked in red) Robert Bosch Continental Faurecia Magna International ZF Friedrichshafen Johnson Controls BASF Valeo Delphi Automotive TRW Automotive Lear Gestamp Automocion Magneti Marelli Benteler Automobiltechnik HELLA KGaA Hueck & Co. Denso BorgWarner Brose Fahrzeugteile Schaeffler Aisin Seiki Mahle Behr Autoliv Plastic Omnium Draeximaier Group Eberspaecher Holding GKN PLC Hyundai Mobis Leoni Visteon Federal-Mogul Grupo Antolin IAC Group Honeywell Tenneco Dana Holding Goodyear Tire & Rubber KSPG Webasto WABCO Takata JTEKT Cummins Leopold Kostal Alpine Electronics NTN Corp. TI Automotive TrelleborgVibracoustic Bayer MaterialScience Georg Fischer Automotive Source: JLL based on Supplement to Automotive News, June 2013

16 Selection of Manufacturers Automotive Sector Central Bohemian Region Bakov nad Jizerou Faurecia Exhaust Systems Bělá pod Bezdězem Tiberina Automotive Bělá Benátky nad Jizerou LINDE + WEIMANN CZ UACJ Extrusion Czech Brandýs nad Labem Continental Automotive Czech Republic Březnice Zbrojovka Březnice Čenkov KOSTAL Kontakt Systeme Hořovice KOSTAL CR Saint-Gobain Sekurit ČR Kladno Keihin Thermal Technology Czech (Showa Aluminium Czech) Kněžmost Kautex Textron Bohemia Kolín Lear Corporation Czech Republic MC Syncro Kolín TPCA (Toyota Peugeot Citroen Automobile) Komárov BUZULUK Lysá nad Labem LINDE + WEIMANN CZ Mělník MTX Mladá Boleslav Autoliv B.V. & Co. Faurecia Interior Systems Grupo Antolin Bohemia HP-Pelzer Magna Seating Johnson Controls Recticel Interiors CZ SAS Autosystemtechnik Škoda Auto (Volkswagen Group) TI Group Automotive Systems Yapp Czech Automotive Systems SAI Automotive Bohemia Tower Automotive Czech Trelleborg Automotive Czech Republic Yapp Czech Automotive Systems Pilsen Region Bor u Tachova Autoneum CZ Eissmann Automotive Česká Republika Ideal Automotive Rieter Automotive CZ Technické pružiny Scherdel Domažlice BEHR Thermot-tronik Czech Holýšov Evobus Bohemia Dýšina Gerresheimer Wilden Czech Chotěšov MD Elektronik Janovice nad Úhlavou OLHO-Technik Czech Nýřany Faurecia Automotive Czech Republic Ostrov u Stříbra Ideal Automotive Lear Corporation Czech Republic Neumatic CZ Mnichovo Hradiště Hella - Mahle Behr - Plastic Omnium (HBPO Czech) Mahle Behr Mnichovo Hradiště Nymburk Magna Exteriors & Interiors (Bohemia) Příbram AIR Čenkov DUVE ČR KARSIT HOLDING Rakovník BRANO GROUP Eberspacher Rakovník Valeo Autoklimatizace Rudná L&L Products Řepov TRW Carr Slaný Mitsubishi Electric Automotive Czech Stará Boleslav TRW Carr Týnec nad Sázavou JAWA Unhošť Furukawa Electric Autoparts Central Europe T.RAD Czech Úvaly u Prahy Essa Czech Zdice KOSTAL CR Zruč nad Sázavou Asmo Czech TRW Autoelektronika Žebrák Mubea Muramoto Manufacturing Europe Valeo Climate Contro Karlovy Vary Region Hranice u Aše Grupo Antolin-CML Nejdek Metalis Nejdek Witte Nejdek Plzeň Alfmieier CZ Boshoku Automotive Czech DAIHO Fuji Koyo Czech HP-Pelzer JTEKT Automotive Czech Plzen MTX Specialty Coating Systems Viza Auto CZ Yazaki Wiring Technologies Czech Přeštice International Automotive Components Group (IAC) Tachov Grammer CZ Johnson Controls South Bohemian Region Ústí nad Labem Region Chabařovice Magna Seating Chomutov Eaton Industries Magna Seating Chomutov Jirkov Hillside Plastics Kadaň Donaldson Industrial CR Oiles Czech Manufacturing Roudnice nad Labem Thermal Products Czech Republic Johnson Controls Automobilové součástky Klášterec nad Ohří Donaldson Czech Republic Rumburk Toyoda Gosei Czech Benteler Automotive Rumburk BOS Automotive Products CZ Krupka Auto-Kabel Krupka Litvínov INNO-COMP Bohemia Prague Region Lovosice Aoyama Automotive Fasteners Czech Fukoku Czech KOS WIRE EUROPE Tokai Rika (TRCZ) Most AFSI Europe Grammer CZ Nemak Czech Republic Recticel Automotive (RAI Most) Vysočina Region Byňov Teplice AGC Automotive Czech Snoeks Automotive CZ Ústí nad Labem ArcelorMittal - Stainless Automotive- -Tubes Czech Republic KS Kolbenschmidt Czech Republic Žatec Grammer CZ Gestamp Louny HITACHI Automotive Systems Czech HP-Pelzer JC Interiors Czechia Koito Czech Neturen Nexen Tire Liberec Region South Moravian Region Česká Lípa EKOBUS Fehrer Bohemia Grammer CZ Johnson Controls Autobaterie Johnson Controls Automobilové součástky Dolní Chrastava Grupo Antolin Bohemia Frýdlant Thermolast TRW Automotive Czech Hodkovice nad Mohelkou Tenneco Monroe Czechia Hrádek nad Nisou KSM Castings (CITIC Dicastal) Chrastava Benteler ČR Jablonec nad Nisou A.Raymond Jablonec Benteler ČR Megatech Industries Jablonec TI Group Automotive Systems TRW Automotive Czech Turnov Rumburk Frýdlant Jilemnice Grupo Antolin Turnov BRANO GROUP KAMAX Louny Hrádek nad Nisou Stráž nad Nisou Neumatic CZ Aisan Bitron Czech Chrastava Smržovka CIE Automotive CZ Nový Bor Liberec Zákupy Fujikoki Czech Stráž pod Ralskem Chabařovice Ústí nad Labem Adršpach International Automotive NACHI Czech Zákupy Jablonec nad Nisou Vrchlabí Components Group (IAC) Krupka Česká Lípa Turnov Trutnov Litvínov Teplice Velké Mnichovo Hradiště Jilemnice Březno Dolní Kalná Červený Kostelec Jirkov Bělá pod Kněžmost Lovosice Jičín Bezdězem Bakov Chomutov Most Roudnice nad Jizerou Jaroměř Klášterec nad Ohří Louny Mladá Boleslav Řepov Libáň České Meziříčí Kadaň nad Labem Kralupy Mělník Benátky nad Jizerou Nejdek Žatec nad Vltavou Brandýs Kvasiny Hanušovice nad Labem Lysá nad Labem Rychnov Kostelec nad Orlicí nad Kněžnou Slaný Nymburk Krnov Hranice u Aše Podbořany Kladno Přelouč Pardubice Štíty Unhošť Choceň Libchavy Úvaly Rychvald Karviná Rakovník Rudná PRAHA Kolín Moravany Lanškroun Zábřeh Hradec nad Moravicí Žebrák Vysoké Mýto Ostrava Český Těšín Zdice Česká Třebová Mohelnice Uničov Frýdek-Místek Dýšina Hořovice Týnec nad Sázavou Třemošnice Hlinsko Svitavy Kopřivnice Třinec Komárov Nový Jičín Litovel Nošovice Tachov Ostrov Moravská Třebová u Stříbra Plzeň Hranice Frenštát pod Radhoštěm Zruč nad Sázavou Jevíčko Senice Nýřany Havlíčkův Brod na Hané Příbram Olomouc Valašské Meziříčí Bor u Tachova Chotěšov Jiřice Lipník nad Holýšov Přeštice Přerov Rožnov pod Radhoštěm Mírovice Humpolec Žďár Bečvou Zubří nad Sázavou Vsetín Domažlice Tábor Blansko Ivanovice na Hané Kroměříž Klatovy Blatná Jihlava Batelov Velké Meziříčí Otrokovice Zlín Písek Soběslav Vyškov Brno Janovice nad Úhlavou Okříšky Uherské Hradiště Bojkovice Strakonice Oslavany Bzenec Uherský Brod Jemnice Prachatice Dačice Hluk Hodonín Vimperk České Mikulov Břeclav Budějovice České Velenice Blatná DURA Automotive CZ Tesla Blatná České Budějovice MOTOR JIKOV Robert Bosch České Velenice Magna Cartech Dačice TRW - DAS Praha PMP PAL Satrema TRW Volant Horní Počernice Kamenice nad Lipou Edscha Automotive Kamenice Písek Aisin Europe Manufacturing Czech Faurecia Automotive Czech Republic Faurecia Components s.n.o.p. cz Heyco Werk ČR Prachatice InTiCa Systems Soběslav BANES MOTOR JIKOV Strakonice ČZ DURA Automotive CZ Ideal Automotive Johnson Controls Fabrics Strakonice Mahle Filter Systems Metal Progress Strakonice Tábor BRISK Tábor Greiner Perfoam Vimperk SAK Batelov Motorpal Havlíčkův Brod Futaba Czech Humpolec Valeo Compressor Europe Jemnice Motorpal Jihlava Automotive Lighting Jihlava Bosch Diesel Motorpal Kosyka Tesla Jihlava Jiřice Connaught Electronics CZ Okříšky Fraenkische CZ Mann Hummel CZ Velké Meziříčí Agados Construct Czech Motorpal Žďár nad Sázavou Cooper-Standard Automotive Česká republika TOKOZ Blansko BLATA Brno Daido Metal Czech IFE-CR IGE-CZ Mergon Czech Břeclav Gumotex LINDE + WEIMANN CZ Bzenec AVX Czech Republic Hodonín International Automotive Components Group (IAC) Ivanovice na Hané Fischer Automotive Systems Mikulov Gebauer A Griller Kabeltechnik Nichias Czech Oslavany Metaldyne Vyškov SMC Industrial Automation Lear Corporation Czech Republic Zlín Region Bojkovice Zeveta Bojkovice Hluk Halla Visteon-Autopal Czech Republic Kroměříž Magneton Plastika Otrokovice Continental Barum MITAS Tomatex Otrokovice Rožnov pod Radhoštěm Brose CZ Robert Bosch ZPV Uherské Hradiště Schlote-Automotive Czech Liberec CleverGlass DENSO Air Systems Czech Fehrer Bohemia Grupo Antolin Bohemia Inteva Products Czech Republic Knorr Bremse Systémy pro užitková vozidla ČR LIPLASTEC Magna Exteriors & Interiors (Bohemia) Matador Automotive ČR Sarnamotive Bohemia TI Group Automotive Systems Nový Bor Brano Group Smržovka Kaipan Stráž nad Nisou Benteler ČR PEKM Kabeltechnik Stráž pod Ralskem Johnson Controls Automobilové součástky Uherský Brod Mann Hummel Innenraumfilter CZ Teknia Uherský Brod Valašské Meziříčí Antolín-CIE Czech Republic CIE Automotive CZ PWO Unitools CZ Vsetín Indet Safety Systems Nippon Kayaku CZ Zlín D PLAST - EFTEC Zubří BRANO GROUP Gumárny Zubří Hradec Králové Region Adršpach Continental Automotive Czech Republic Červený Kostelec Saar Gummi Czech Dolní Kalná Takata - Petri Parts Jaroměř KARSIT HOLDING Jičín Continental Automotive Czech Republic RONAL CR Tucker Kostelec nad Orlicí Federal-Mogul Friction Products Kvasiny Škoda Auto Libáň Magna Exteriors & Interiors (Bohemia) Nový Jičín Varroc Lighting Systems Rychnov nad Kněžnou Assa Abloy Czech & Slovakia Johnson Controls Automobilové součástky Magna Seating Trutnov Continental Automotive Czech Republic Vrchlabí Škoda Auto (Volkswagen Group) Olomouc Region Hanušovice ZKL Hranice AVL Čechy Henniges Automotive Lipník nad Bečvou MetalPlast Lipník nad Bečvou Litovel BRANO GROUP (Deltacol CZ) Mohelnice Hella Autotechnik Nova Olomouc Koyo Bearings Česká republika OTSUKA-BRANO Moravia Silesia Region Český Těšín Donghee Czech Pyeong Hwa Automotive Czech Frenštát pod Radhoštem Continental Automotive Czech Republic Siemens Automobilové Systémy Frýdek-Místek Hanwha L&C Czech Frýdlant nad Ostravicí BATZ Czech Hradec nad Moravicí BRANO GROUP Karviná Sejong Czech Stant Manufacturing Kopřivnice Brose CZ DURA Automotive Systems CZ Erich Jaeger Rieger Automotive International Rochling Automotive Kopřivnice Tawesco Krnov Erdrich Umformtechnik Nošovice Hyundai Motor Manufacturing Czech Huyndai Dymos Hyundai Mobis Czech Pardubice Region Brandýs nad Labem C.I.E.B. Kahovec Česká Třebová Bohm Plast-Technik Hlinsko Megatech Industries Hlinsko Choceň Autoneum CZ Composite Components Rieter Automotive CZ Jevíčko GST Automotive Safety Czech Rehau Lanškroun Schott CR Libchavy SOR Libchavy Moravany Acerbis Czech Moravská Třebová ATEK Treboplast (Industrias Tajo) Rehau Pardubice Faurecia Interiors Pardubice JTEKT Automotive Czech Pardubice KYB Manufacturing Czech Panasonic Automotive Systems Czech RONAL CR Přelouč Kiekert CS Svitavy Fibertex Třemošnice Electropoli-Galvia Vysoké Mýto Iveco Czech Republic Prostějov Maier CZ Mubea HZP Mubea IT Spring Wire Přerov PSP Speciální strojírna Senice na Hané PANAV Štíty Klein & Blažek Uničov BRANO GROUP Hexopol Compounding Zábřeh HDO Nový Jičín Halla Visteon-Autopal Czech Republic Ostrava Cromodora Wheels BRANO GROUP (Deltacol CZ) Brembo Czech Cirex CZ CTS Czech Republic Daechang Seat Goodyear Engineered Products Grupo Antolin Ostrava Hayes Lemmerz Autokola HP-Pelzer ITT Corporation KES - kabelové a elektrické systémy Mahle Behr Ostrava PLAKOR Czech Rossignol Galvanik CZ Schroeder CZ Sungwoo Hitech UFI Filters Rychvald Halla Visteon-Autopal Czech Republic Varroc Lighting Systems Třinec Daechang Seat Matador - Dongwon CZ

17 Made in Czech Investor s Guide for Manufacturing and Logistics Companies FMCG sector Since the early 1990 s, when the country was undergoing an economic transformation, the long manufacturing tradition combined with a skilled workforce and local consumer base, attracted a large number of international investors to the then state owned companies. Some of the first pioneers included Procter & Gamble who acquired Rakona Rakovník, a traditional soap producer, in 1991 and Coca-Cola and Nestlé that entered Pražské Sodovkárny and Pražské Čokoládovny respectively in It was the same year when Phillip Morris bought the state-owned Tabák company in Kutná Hora through privatisation. The strategic location in the heart of Europe, favourable labour costs and the skilled and motivated labour pool, represented key drivers for brand new investment in the Czech Republic. Over the next twenty years, the number of foreign investors greatly increased and their initial investments were multiplied by upgrading facilities, building new plants, distribution and R&D centres. One of the best examples of a successful investment which grew over the years was the establishment of a production plant by Danish toy- producer LEGO, who opened in Kladno, near to Prague in Over the following years, the company further invested into three production plants, moving part of its production from Denmark to the Czech Republic. During this time, the company also set up a 100,000 m 2 global distribution warehouse near Prague and have established an R&D centre. In 2015, they are planning to open a fourth factory and increase the number of employees from the current 2,000 up to 3,000. The attractiveness of the Czech FMCG market is proven by the presence of eight out of the top 10 global producers on the local market. Besides those already mentioned, these include the large soft beverages producer Pepsico with two manufacturing sites, in Prague and Teplice nad Metují in Eastern Bohemia and Mondelez (ex-kraft Foods CR), who is operating four plants in the country, two in Moravia Opava and Valašské Meziříčí and two in Bohemia Mariánské Lázně and Lovosice. The majority of the largest international producers have entered the market via the purchase of one of the traditional and well established local brands, including production plants and qualified staff. Gradually they have incorporated these production facilities into their own portfolio and have very often extended the line of products with their established brands. After the Czech Republic s entry into the EU, the number of investments grew with green-field projects such as MARS Czech opening a new plant in Central Bohemia in 2006, Tivall (Nestlé) establishing a manufacturing site in Northern Bohemia in 2007 and Hill s Pet Nutrition (Colgate Palmolive) investing into brand new production premises in Southern Bohemia in Leading 25 FMCG companies worldwide in 2012, based on net sales (in billion U.S. dollars) (Manufacturing in the Czech Republic marked in red) Nestlé Procter & Gamble Unilever Pepsico Coca & Cola Company AB Inbev JBS Mondelez Archer Daniels Midland Tyson Foods Philip Morris International L'Oreal Danone British American Tobacco Heineken Holding Japan Tobacco Asahi Breweries* Kirin Breweries Kraft Foods Altria Group Colgate Palmolive Diageo SAB Miller General Mills Kimberly Clark *Asahi Super Dry is produced in licence in Pivovary Staropramen of Molson Coors Brewing Company Source: JLL based on Statista, 2014 Net sales in billion U.S. dollars Other strong international FMCG brands producing in the Czech Republic include among others: cheese producers Fromageries Bel and Bongrain, Danone, Bidvest, La Lorraine, Kimberly-Clark, Euroserum, Tereos TDD, Lyckeby Amylex and pets food brands / producers Brit (Vafo) and Propesko (Provimi).

18 19 Made in Czech Investor s Guide for Manufacturing and Logistics Companies 2015 Location FMCG manufacturing facilities are mainly concentrated close to the large cities of Prague, Brno, Pilsen, Olomouc and České Budějovice, due to proximity to large consumer bases and access to workforce. In addition, the excellent infrastructure of the country enables manufacturing sites to be close to natural sources. Parts of the country which are strong in agriculture, such as Southern Bohemia, Southern Moravia, Vysočina, Central Bohemia and the Olomouc Regions are well known for production of dairy and meat products. Southern Moravia is also famous for wine production and fruit and vegetable processing. The western part of the country, Karlovy Vary and the Pilsen regions, are well known for mineral waters (Mattoni, Korunní), destilates (Jan Becher Karlovarská Becherovka Pernod Ricard, Plzeň Stock Božkov) and sparkling wine production (Bohemia Sekt Starý Plzenec). Strong local producers In addition to the strong multinationals, domestic producers also play a very important role in the food and beverages industry. One of the strongest and largest producers is Agrofert holding which operates a wide spectrum of companies from meat processing and dairy and to bakeries and frozen food production. Among these are renowned Kostelecké Uzeniny, Vodňanská drůbež, Olma, Penam, Profrost and Mlekárna Hlinsko. Another important domestic player is dairy producer Madeta, with plants situated in six different locations in Southern Bohemia. Hamé, a traditional Czech producer of tinned vegetables, ketchups, children s food and paté has seven production plants in the south-eastern part of the country. EMCO is the largest Czech muesli producer with a more than 50% share of the local muesli market. Another strong local producer is Kofola, a manufacturer of a popular soft drink which was almost forgotten but, thanks to local investors, managed to successfully return to the Czech market. Breweries A special category within the food and beverages sector in the Czech Republic is held by breweries. In 2013, the total beer production in the country rose by 0.6 % to 19.3 mil hectolitres. Czechs, according to some rankings, are the largest consumer of beer per capita in the world. Each inhabitant who drinks on average 144 litres per annum, has a large variety of different tastes and brands to choose from. The interest in Czech beer is also increasing abroad with export rising by 9% in 2013 and includes new markets such as South Korea. The long tradition and global reputation of Czech beer production was proven once again in early summer 2014 with two new entries of major investors from the brewery sector: Carlsberg announced its investment in Žatecký pivovar and Anheuser-Busch (AB inbev) acquired Pivovar Samson in České Budějovice, the town where the famous Budějovický Budvar (Budweiser), is produced in a state owned brewery and is a direct competitor to AB inbev. At the same time, the owner of Pivovary Lobkowicz brewery launched its IPO on the Prague Stock Exchange. There are approximately 50 large and 215 micro breweries in the Czech Republic. Other large multinational investors active in the country include SABMiller, the owner of five breweries including the famous Pilsner lager (Plzeňský Prazdroj), Heineken (Královský pivovar Krušovice, Pivovar Starobrno and Pivovar Velké Březno) and Molson Coors Brewing Company (Staropramen Praha and Pivovar Ostravar). Small to mid-size local breweries continue to play a strong role such as Rodinný Pivovar Bernard in Humpolec which started out on a small scale and managed to develop in to one of the most important players on the market. Retail distribution Hypermarket operators, mostly Dutch and German chains, were pioneers in the Czech retail market. The development of the first hypermarkets started in the mid-1990s, when international retailers were taking advantage of opportunities arising in the transitional booming Czech economy. The first hypermarket in the country was opened by German chain Globus. The first retail schemes were hypermarket anchored shopping centres consisting of a hypermarket and a service line. Dutch retailer Ahold, owner of the Albert chain, is currently the most active retail operator with regard to expanding its foodstore chain on the market. In 2014, Ahold acquired its competitor Interspar in the Czech Republic and currently operates more than 330 hypermarkets and supermarkets across the country, including the former Interspar units. Major food operators in the Czech Republic Type Hypermarkets Supermarkets Discounters Chains Albert (Netherlands), Globus (Germany), Kaufland (Germany), Tesco (UK) Albert (Netherlands), Billa (Austria), Tesco (UK) Lidl (Germany), Norma (Germany), Penny Market (Germany)

19 Selection of Manufacturers FMCG Sector Karlovy Vary Region Cheb Playmobil CZ Karlovy Vary Pernod Ricard (Jan Becher - Karlovarská Becherovka) Klimentov PENAM Korunní Karlovarská Korunní Kyselka Karlovarské Minerální Vody (Mattoni) Pilsen Region Horažďovice Lyckeby Amylex Klatovy Mlekárna Klatovy Mariánské Lázně Mondelez (Kolonáda) Plzeň SABMiller (Plzensky Prazdroj) SABMiller (Pivovar Gambrinus Plzeň) STOCK Plzeň-Božkov United Bakeries Starý Plzenec Bohemia Sekt Starý Plzenec Stříbro EUROSERUM Sušice SPAK Foods Ústí nad Labem Region South Bohemian Region Blatná Frutana Hrdly Emco Hrobčice Shanghai MaLing Czech Lovosice Mondelez (Deli) Rumburk United Bakeries Teplice Tivall CZ (Nestlé) Velké Březno Heineken ČR (Pivovar Velké Březno) Varnsdorf Orkla ASA (Vitana) Žatec Carlsberg (Pivovar Žatec) United Bakeries Byňov Dobrá Voda České Budějovice AB InBev (Měšťanský pivovar České Budějovice) Budějovický Budvar KOH-I-NOOR HARDMUTH Madeta PENAM Viscofan CZ Záruba Food Český Krumlov Madeta Schwan Cosmetics CR Schwan-STABILO ČR Jindřichův Hradec Fruko-Schulz Madeta Mírovice Vodňanská drůbež Pelhřimov Madeta Roudnice nad Labem Orkla ASA (Vitana) Planá nad Lužnicí Kostelecké uzeniny Madeta Central Bohemian Region Benešov Schreiber Foods (Danone) Brandýs nad Labem United Bakeries Byšice Orkla ASA (Vitana) Dobrovice Tereos TTD (Lihovar Dobrovice) Tereos TTD (Cukrovar Dobrovice) Kladno La Lorraine Bakery Group LEGO Production Klášter Hradiště nad Jizerou Pivovary Lobkowicz (Pivovar Klášter) Kralupy nad Vltavou Bidvest Kralupy Krušovice Heineken ČR (Královský Pivovar Krušovice) Kutná Hora Philip Morris ČR Prague Region Liberec Region Vysočina Region Hradec Králové Region Broumov KOH-I-NOOR HARDMUTH Budčeves Aveflor České Meziříčí Tereos TTD (Cukrovar České Meziříčí) Jaroměř Kimberly-Clark Nové Město nad Metují Detecha Teplice nad Metují PEPSICO CZ Police nad Metují Merkur Kyšice u Unhoště Rumburk Třebechovice pod Orebem RYOR Union Cosmetics Městec Králové Varnsdorf Liberec KOH-I-NOOR HARDMUTH Hrádek nad Nisou Ústí nad Mnichovo Hradiště Labem Kofola Teplice Velké Březno Svijany Teplice nad Metují Broumov Chabařovice Klášter Hradiště Police nad Metují Hrobčice Lovosice nad Jizerou Mnichovo Hradiště Chomutov Hrdly Dobrovice Jaroměř Nové Město nad Metují Budčeves Roudnice nad Labem České Meziříčí Korunní Žatec Nelahozeves Byšice Kralupy nad Vltavou Brandýs nad Městec Králové Třebechovice pod Orebem Krnov Karlovy Vary Labem Krušovice Kladno Letohrad Kyselka Radonice Poděbrady Pardubice Bohumín Karviná Cheb Helvíkovice Šumperk Opava Rakovník Kyšice PRAHA Ostrava Mariánské Lázně Klimentov Vysoké Mýto Zábřeh Velké Popovice Kutná Hora Chrudim Uničov na Moravě Nošovice Poříčí nad Sázavou Příbor Plzeň Benešov Hlinsko Stříbro Jevíčko Dolany Kunín Litovel Starý Plzenec Sedlčany Olomouc Přibyslav Vrbátky Valašské Meziříčí Vysoký Chlumec Žďár nad Sázavou Horní Prostějov Humpolec Moštěnice Polná Otinoves Holešov u Kroměříže Mírovice Tišnov Tábor Lobodice u Vřesce Blatná Jihlava Blansko Tovačova Klatovy Horažďovice Planá nad Lužnicí Kostelec Kroměříž Zlín Brno Strakonice Řípec Velký Rosice Ratmínov Želetava Modřice Uherské Hradiště Třebíč Sušice Protivín Veselí nad Bzenec Uherský Brod Vodňany Lužnicí Jindřichův Hradec České Hustopeče Kunovice Budějovice Třeboň Jemnice Hodonín Vimperk Znojmo Velké Pavlovice Boršov Lednice Velké Bílovice nad Vltavou Protivín Mikulov Břeclav Pivovary Lobkowicz (Pivovar Protivín) Český Krumlov Valtice Byňov South Moravian Region Strakonice United Bakeries Tábor Friall Swallowfield Třeboň Pivovar Ťřeboň Veselí nad Lužnicí Efko cz Provimi (Propesko) Veselí nad Lužnicí - Řípec Madeta Velký Ratmínov Vafo (Brit) Vimperk Vimperská Masna Vodňany Vodňanská drůbež Vřesce Emco Nelahozeves Wet Wipes International Poděbrady Poděbradka Polabské Mlékárny Poříčí nad Sázavou MARS Czech Radonice Němcova Selská Mlekárna Rakovník Procter & Gamble Sedlčany Bongrain (Povltavské Mlekárny) Velké Popovice SABMiller (Pivovar Velké Popovice) Vysoký Chlumec Pivovary Lobkowicz (Pivovar Vysoký Chlumec) Praha ASTRID Cosmetics Coca-Cola Česká republika HELLADA Mlekárna Pragolaktos Molson Coors Brewing Company (Pivovary Staropramen) PENAM PEPSICO CZ Shanghai MaLing Food United Bakeries Vafo (Brit) Hrádek nad Nisou Drylock Technologies Liberec United Bakeries Svijany Pivovar Svijany Humpolec Rodinný pivovar Bernard Jemnice Tata Global Beverages CR (Jemča) Jihlava Pivovary Lobkowicz (Pivovar Jihlava) Kostelec Kostelecké uzeniny Polná Mlekárna Polná Přibyslav Bongrain (Pribina) Telč Krahulík - Masozávod Krahulčí Třebíč PENAM Žďár nad Sázavou Efko Želetava Fromageries BEL (Bel Sýry Česko) Blansko Mlekárna Olešnice Pivovary Lobkowicz (Pivovar Černá Hora) Brno Dermacol Emco Heineken ČR (Pivovar Starobrno) PENAM United Bakeries Břeclav Hamé (FRUTA Podivín) PENAM Saloos Bzenec Hamé (PIKA Bzenec) Zámecké vinařství Bzenec Hodonín Bongrain (TPK Hodonín) Hustopeče Hill's Pet Nutrition Lednice Chateau Lednice Pardubice Region Helvíkovice Dibaq Hlinsko Mlekárna Hlinsko Chrudim Pivovary Lobkowicz (Pivovar Rychtář) Tereos TTD (Lihovar Chrudim) Jevíčko Czech Blades Letohrad Hamé (BAPA Letohrad) Pardubice United Bakeries Vysoké Mýto Tomil Mikulov Vinařství Mikrosvín Mikulov Modřice Vodňanská drůbež Tišnov VITAR Rosice PENAM Valtice Vinné sklepy Valtice Velké Bílovice Vinařství Velké Bílovice Velké Pavlovice České vinařské závody Znojmo United Bakeries Znovín Znojmo Olomouc Region Dolany LN Group Horní Moštěnice Molinari (Hanácká Kyselka) Litovel Kimberly-Clark Europasta (Zátkovy těstoviny) Lobodice u Tovačova LN Group Olomouc Vrbátky Archer Daniels Midland Cukrovar Vrbátky Europasta (Zátkovy těstoviny) Hamé (Apetit Hněvotín) Zábřeh na Moravě Hanácký Masokombinát OLMA Nestlé (Zora Olomouc) OLMA PENAM Zlín Region Moravia Silesia Region Bohumín Unilever (Bochemie) Emco Karviná United Bakeries Krnov Kofola Kunín Mlekárna Kunín Nošovice SAB Miller (Pivovar Radegast) SAB Miller (Pivovar Nošovice) Opava Bidvest Opava Mondelez (Opavia) Ostrava Molson Coors Brewing Company (Pivovar Ostravar) PENAM Příbor Amoené Holešov u Kroměříže Nestlé (SFINX Holešov) Kroměříž Kmotr - Masna Kroměříž Kunovice Hamé Uherské Hradiště Hamé (OTMA - Sloko) Hamé (Slovácká Fruta) Pivovary Lobkowicz (Pivovar Uherské Hradiště) Uherský Brod United Bakeries Otinoves Mlekárna Otinoves Prostějov PENAM Profrost Šumperk PENAM Uničov United Bakeries Valašské Meziříčí Mlekárna Valašské Meziříčí Mondelez (Dadák CZ) Zlín Rudolf Jelinek Vizovice PENAM

20 Made in Czech Investor s Guide for Manufacturing and Logistics Companies Home Appliances, ICT and Electronics The Czech and Czechoslovak electrical engineering and electronics sector was one the most highly developed within the former Eastern bloc between the 1960 s and 1980 s. Its advances in technology and cutting edge were gradually weakened, compared to Western countries, by the lack of investment into innovation. However, the large technology base that was created by the thousands of engineers and state institution researchers employed in the industry, provided a strong base for future development potential of this sector in the country. ICT and Home Appliances In the past 20 years, ICT products have become one of the most important export commodities on the local market, covering ca. 1/7 of the total export (in 2012). This makes the Czech Republic not only one of the largest exporter of ICT in Europe but also worldwide. Based on numbers from 2012, the country was the third largest exporter of ICT products in Europe. The export of ICT is dominated by computers and peripherals with an almost 50% share, followed by consumer electronics, communication devices and electronic components. The largest local computer producers include AT Compus (member of AB) and ed system Czech (producing brand LYNX) both located in Ostrava. Behind the growth of the ICT sector in the Czech Republic there is a long tradition of production, such as the Tesla group dating back to 1921, as well as strong foreign investments over the past 20 years from producers such as Panasonic in Pilsen and Pardubice, Changhong in Nymburk, Bang & Olufsen in Kopřivnice, Alps Electrics and Foxconn. These are only a few examples of Czech ICT industry development. FOXCONN CZ: established its operations in the Czech Republic in 2000, setting up a central regional production hub for Europe in the city of Pardubice; in 2008, opened the second manufacturing plant in Kutná Hora after moving production from Scotland; Foxconn Global Services Division opened in 2002; one of the largest employers in the Czech Republic (nearly 8,000 employees); one of the leading exporters in the country; in 2013 produced and exported goods worth ca. 100 billion CZK, ranking the third largest exporter of the Czech Republic; manufacturing for HP, Cisco and many others. The long history of Czech home appliances production, represented by brands such as ETA, Romo and MORA, also has its place on the local market. Currently, the largest producers on the Czech market are represented mainly by Mora Moravia who is owned by Gorenje and produces in Mariánské Údolí, near to Olomouc, Miele a German manufacturer of washing machines, dishwashers and tumble dryers in Uničov, R-fin successor of traditional producer Romo in Fulnek and ETA who moved its production from traditional Hlinsko to Milotice nad Bečvou. Electron Microscopes The Czech Republic was one of the first countries in the world to build an electron microscope back in the 1950 s and continues to be one of the world leaders of this high-tech manufacturing, supported by R&D activities. TESCAN, a Czech company that was established in 1991 by former highly qualified engineers of TESLA Brno, is today one of the global suppliers of electron microscopes. Brno, due to its tradition in electron microscope production, supported by the presence of technical universities, was selected as the local branch for FEI Company, a global leader in electron microscopes production, back in 1993.The Brno branch, supported by the local R&D Centre, has developed into one of the fastest growing divisions of FEI worldwide, increasing its capacity from 10% to 60% of the company s total production. Approximately every fourth electron microscope in the world is manufactured in Brno. Electrical Engineering (EE) and Electronics The history of production of EE/Electronics products in the Czech Republic is tied to TESLA, which before 1990, was one of the most renowned Czech companies in general, producing a wide spectrum of products varying from electric motors and consumer electronics to semi-conductors. It was in one of its divisions, Tesla Pardubice, where the renowned Tamara radar was developed and produced. Nowadays, the extensive technological know-how of the former Tesla group was transferred to both successors and newly established EE/electronic companies over the last twenty years. One of the direct successors is Metra Blansko, a producer of measuring instruments and ERA, a manufacturer of a new generation of the Tamara radar system, VERA. The Czech Republic has attracted all major players in the EE/ electronics sectors including: Siemens, Eaton, Honeywell, Schneider Electric, ON Semiconductors and ABB. In addition to a number of manufacturing sites, many investors have increased their initial investment by opening R&D Centres, Repair Centres or Service Centres. For example, Schneider Electric, a French world renowned producer of electro-mechanical instruments, originally entered the market by privatising the then state-owned firm Elektropřístroj Písek in Southern Bohemia. In 1998, the company decided to invest into the construction of a new production facility. Between 2002 and 2008, the company further expanded its manufacturing premises by 60% and moved its production from Ireland, France, Spain and Italy to the Czech Republic. Nowadays, their Písek production facility is one of the company s largest production sites in Europe, manufacturing mostly for export. One of the most important parts of the Czech electrical engineering industry is the production of semiconductors. Building on the Czech traditions in the industry, a number of the well-known global as well as local producers have settled down in the Czech Republic to manufacture or design semiconductors here. Honeywell, ABB, Certicon, ON Semiconductors, HC Electronics, Unites Systems and Arsil Crystal are just a few examples of the local players.

21 Selection of Manufacturers Consumer Electronics & Electrical Engineering Sector Selection of Manufacturers Consumer Electronics & Electrical Engineering Sector Prague Region Ústí nad Labem Region Central Bohemian Region Pardubice Region Králíky Drásov Praha OEZ Pardubice Region Aveo Engineering Group ABB Prague Region Děčín Central Bohemian Region Bosch KDP Ústí Assembly nad Labem Region Lanškroun Králíky Kladno Drásov Elcom Praha AVX OEZ Nkt Aveo Cables Engineering Group Czech Republic (Kyocera) Eximet ABB Chomutov Děčín Trafo Wendell Saltek Bosch JJS KDP Electronics Assembly Lanškroun Kutná KladnoHora Siemens Elcom PULS investiční Letohrad AVX Czech Republic (Kyocera) Audiologicka Technika Foxconn Nkt Cables CZ Hradec Králové Region SPEEL Eximet Praha Trafo Chomutov OEZ Wendell Škoda Saltek Klášterec JJS Electronics (POLL) nad Ohří Libušín Kutná Hora Hradec Králové Tesla Siemens Audiologicka Technika ZF PULS Electronics investiční Helukabel CZ HC Electronics Pardubice Letohrad Foxconn CZ Hradec Králové Region TTC SPEEL Marconi Praha TL Elektronic Commscope OEZ Krupka Vinci Škoda Energies (POLL) Klášterec nad Ohří (Cegelec Praha) Auto - Kabel Krupka Nymburk Libušín Hradec Králové Eldis Tesla ZF Electronics Changhong Helukabel CZ Europe Electric Jičín HC Electronics ERA Pardubice TTC Marconi AEG TL Elektronic Components Flextronics Commscope Louny Krupka International Vinci Energies (Cegelec Praha) Karlovy Vary Region Žebrák LAMIREL PCB Europe Foxconn Eldis Materion Auto - Kabel Czech Krupka Nymburk CZ Rimaster AB Muramato Changhong Manufacturing Europe Electric Europe Jičín Panasonic ERA Automotive Systems Náchod AEG Components Czech Flextronics International Louny Aš AMETEK elektromotory T-CZ MTG Karlovy Montagetechnik Vary Region Teplice Žebrák LAMIREL PCB Europe Foxconn CZ Materion Czech Panasonic Automotive Systems Melecs Rimaster ETS AB Muramato Manufacturing Europe Liberec Region Nová Náchod Czech Paka Dolní Aš Rychnov Quittner AMETEK & elektromotory T-CZ Šimek Vishay MTG Montagetechnik Teplice Electronic Česká Lípa Melecs ETS Johnson Liberec Region Controls Olomouc Region Trutnov Nová Paka Chyše Dolní Rychnov Modus ABB Quittner & Šimek Lamela Vishay Electric Electronic Česká Lípa Jeseník Jablonec Johnson Controls nad Nisou Tyco Electronics EC Trutnov Fenix Olomouc Region Trutnov Karlovy Chyše ABB Modus Vary Vrchlabí ABB Tronic Lamela Control Electric Milotice Jeseníknad Bečvou Liberec Jablonec nad Nisou Nkt Tyco Cables Electronics EC Trutnov ETA Fenix Kynšperk Karlovy Vary CiS ABB nad Ohří Systems Vrchlabí Nexans Tronic Control HOKAMI Mohelnice Milotice nad Bečvou Power Accessories (GPH) Laird Liberec Nkt Cables Technologies Hella ETA Autotechnik Nova Ostrov Kynšperk nad nad Ohří Ohří CiS Systems Konfektion Nexans Power E (KE Accessories Ostrov - Electrik) (GPH) Malá HOKAMI Skála Olomouc Mohelnice Schurter Laird Technologies Gorenje Hella Autotechnik (MORA Moravia) Nova Plesná Ostrov nad Ohří Honeywell Aerospace ELROZ Konfektion E (KE Ostrov - Electrik) Stráž Malá Skála nad Nisou O&M Olomouc Solar PEKM Schurter Kabeltechnik Gorenje (MORA Moravia) Sokolov Plesná Postřelmov Honeywell Aerospace Wieland ELROZ Stráž nad Nisou MEP O&M Postřelmov Solar Electric PEKM Kabeltechnik Česká Lípa Malá Skála Svatava Sokolov Krupka Děčín Vrchlabí Šternberk Postřelmov ept Wieland connector Electric Trutnov Invesys MEP Postřelmov Appliance Controls Teplice Česká Lípa Malá Skála Svatava Krupka Děčín Vrchlabí Náchod Šumperk Šternberk ept connector Chomutov Jičín Nová Paka Trutnov EPCOS Invesys Appliance Controls Teplice Klášterec nad Ohří Louny Jeseník Ostrov Náchod Uničov Šumperk Chomutov Jičín Hradec Králové nad Ohří Nová Paka Miele EPCOS technika Klášterec nad Ohří Nymburk Aš Svatava Karlovy Vary Louny Jeseník Ostrov Libušín Králíky Uničov Plesná Sokolov Hradec Králové nad Ohří Miele technika Dolní Rychnov Chyše Bruntál Karviná Kladno Nymburk Letohrad Šumperk Rychvald Aš Svatava Karlovy Vary Libušín Kynšperk nad Ohří PRAHA Pardubice Králíky Plesná Sokolov Postřelmov Ostrava Žebrák Lanškroun Dolní Rychnov Chyše Kutná Hora Uničov Nový Třemošná Kladno Letohrad Šumperk Bruntál Rychvald Karviná Štemberk Kynšperk nad Ohří PRAHA Pardubice Postřelmov Jičín Planá Mohelnice Milotice Ostrava Žebrák Lanškroun Kopřivnice Plzeň nad Bečvou Stříbro Drásov Kutná Hora Uničov Nový Třemošná Olomouc Štemberk Chotěšov Nové Město na Moravě JičínRožnov pod Radhoštěm Planá Sebranice Mohelnice Milotice u Boskovic Plzeň Valašské nad Bečvou Meziříčí Kopřivnice Blovice Stříbro Drásov Olomouc Přeštice Chotěšov Humpolec Nové Město na Moravě Ráječko Rožnov pod Radhoštěm Holešov-Všetuly Velké Meziříčí Sebranice u Boskovic Valašské Meziříčí Blovice Blansko Milevsko Pilsen Region Blatná Tábor Jihlava Kuřim Přeštice Humpolec Ráječko Brankovice Otrokovice Holešov-Všetuly Blovice Písek Telč Velké Meziříčí Brno Blansko Milevsko Buchlovice Faiveley Pilsen Region Transport Lekov Jihlava Nišovice Blatná Tábor Kuřim Uherské Hradiště Čičenice Brankovice Otrokovice Chotěšov Blovice Písek Telč Jemnice Jevišovice Brno BuchloviceHluk RSF Faiveley Elektronik Transport Lekov Nišovice Uherské Hradiště Vimperk Čičenice Suchdol nad Lužnicí Plzeň Chotěšov Znojmo Prachatice Jemnice Mikulov Jevišovice Hluk Moravia Silesia Region Asteelflash RSF Elektronik Plzeň Daikin Industries CZ Bruntál GEMTEK.CZ Vimperk Suchdol nad Lužnicí Plzeň Znojmo Prachatice Mikulov OSRAM Moravia Česká Silesia republika Region GES Asteelflash - Electronics Plzeň Panasonic Daikin Industries AVC Networks CZ Czech Karviná Bruntál GEMTEK.CZ Dexon OSRAM Czech Česká republika Planá GES - Electronics Panasonic Electric AVC Networks Works Czech South Moravian Region Kopřivnice Karviná Přeštice Vysočina Region Bang Dexon & Czech Planá Olufsen Blansko Jevišovice Rexxam Panasonic Czech Electric Works Czech Humpolec Vishay Electronic Metra South Blansko Moravian Region Eximet Trafo HDEL Technology Nový Kopřivnice Jičín Přeštice Vysočina Region RACOM Visteon-Autopal Bang & Olufsen Stříbro Blansko Jemnice Kuřim Jevišovice Rexxam Czech Humpolec RSF Vishay Elektronik Electronic Egston System Electronic Brankovice Metra Blansko Tyco Eximet Electronics Trafo HDEL Technology Czech Ostrava Nový Jičín EMS-PATVAG RACOM Třemošná ABB Visteon-Autopal Stříbro Jihlava Jemnice Sebranice Kuřim u Boskovic EPIQ RSF Elektronik CZ AKI Egston Electronic System Electronic Siemens Brno Brankovice ALPS Tyco Electronics Electric Czech Czech Ostrava South Bohemian Region ELSA ABB EMS-PATVAG Třemošná Kosyka Rychvald ABB Jihlava Blatná Písek ADC Czech Republic Mikulov Sebranice u Boskovic EPIQ CZ Tesla AKI Electronic Jihlava Visteon-Autopal Siemens Tesla South Blatná Bohemian Region LOVATO Electric Andrew Brno Corporation Gebauer ALPS Electric A Griller Czech ELSA Vishay Electronic Schneider Electric Nové Město na Moravě AU ABB Kosyka Optronics Kabeltechnik Rychvald Blatná SIBA Písek Písek RACOM AŽD ADC Praha Czech Republic Mikulov Tesla Jihlava Zlín Region Visteon-Autopal Pewtronic České Tesla Blatná Budějovice LOVATO Electric Combustion Andrew Corporation Controls Ráječko Gebauer A Griller ZETT Vishay (Hellux Electronic Schneider Electric Elektra) Telč Nové Město na Moravě Buchlovice Rožnov pod Radhoštěm Commscope AU Optronics TYCO Kabeltechnik Safety Products Prachatice SIBA Písek Heiru RACOM CZ BD Sensors ON Semiconductor Czech InTiCa Systems Daikin AŽD Praha Device CZ Zlín Region Pewtronic Republic Číčenice České Budějovice ESKO Combustion Brno Controls Znojmo Ráječko Velké Meziříčí Hluk Deutronic ZETT (Hellux Elektra) Telč Buchlovice Rožnov pod Radhoštěm Suchdol nad Lužnicí Nkt Cables FEI Commscope Heiru CZ Czech Republic Egston TYCO Safety System Products Prachatice Visteon-Autopal BD Sensors Uherské ON Semiconductor Hradiště Czech Eaton InTiCa Elektrotechnika Systems Prysmian Group (Draka Honeywell Daikin Device Environmental CZ Electronic AVX Republic Czech Republic Milevsko Číčenice Kabely) and ESKO Combustion Brno Velké Meziříčí Controls Znojmo Tábor Holešov-Všetuly Hluk (Kyocera) AURA Deutronic Suchdol nad Lužnicí Nkt Cables Wistron FEI Czech InfoComm Republic Egston System Brisk Tábor Prysmian Group (Draka ELKO Visteon-Autopal EP Uherské Hradiště Eaton Elektrotechnika Inventec Honeywell Environmental Electronic Valašské AVX Czech Meziříčí Republic Nišovice Milevsko Kabely) Vimperk Mesing and Combustion Controls Tábor Otrokovice Holešov-Všetuly Codaco (Kyocera) Electronic Emerson AURA (Knurr) Rhode & Schwarz Czech Republic Nitto Wistron Denko InfoComm Brisk Tábor Czech Tronic ELKO Control EP Schott Solar CR TESCAN Inventec Brno Valašské Meziříčí Nišovice Volary Vimperk Mesing Otrokovice Codaco Electronic Emerson (Knurr) Vishay Rhode & Electronic Schwarz Czech Republic Nitto Denko Czech Tronic Control Schott Solar CR TESCAN Brno

22 Made in Czech Investor s Guide for Manufacturing and Logistics Companies Medical and Pharmaceutical Industry The Czech Republic not only has a long tradition in the field of pharmaceutical production and life sciences, but also in medical appliances manufacturing. Medical technologies and devices The major development of the Czech medical devices industry started in the 20 th century with international successes of the introduction of the first external cardio defibrillator and the invention of hydrogel contact lenses by Otto Wichterle, for example. On the contrary to the pharmaceutical market, where only a few companies have a dominant market share, the medical devices, materials and technologies sector consists of a large number of small producers. In the past few years, Czech companies, as well as international firms producing in the Czech Republic, have proven to be more than competitive and many of them are very active in the field of innovation. The competitive edge of Czech medical devices companies is based on its high quality of products, innovation, as well as competitive labour costs and excellent labour quality. In the past 20 years, the industry has grown by more than 140%. The production portfolio varies from technical gases, hospital beds and furniture, surgical instruments and x-ray machines, to sterilizers and other medical materials, appliances and devices. The large international producers have been entering the market since the early nineties. Traditional producers already operating on the market include: Arrow International / Teleflex manufacturing catheters in two plants in Hradec Králové and Žďár nad Sázavou, Hartmann Rico with three production plants in Veverská Bytíška, Havlíčkův Brod and Chvalkovice, Lohmann & Rauscher producing bandaging materials in Nová Paka and in Slavkov u Brna, Rodenstock, Gerresheimer and many others. Medical companies can also be very often located within industrial parks with a suitable background. In the logistics and production park CTP Hranice, there are currently two large international producers of medical devices: Medi Globe, manufacturing products for gastroenterology and urology and Smiths Medical, who produce a range of high-tech products at the plant, primarily single-use medical devices to support breathing and for drug delivery. It is not only international manufacturers that are active and successful on the local market. Many of the Czech producers have already established themselves as some of the world s market leaders. Such companies, amongst others, include: Borcad, established in 1990 and focused on the development, construction and production of birthing beds, gynaecological, transport and dialysis chairs or, BMT Medical Technology (member of MMM Group), successor of the famous traditional Czech sterilisers producer Chirana. The best recent example of a successful Czech company who expanded on a global level is one of the largest worldwide manufacturers of medical beds and mattresses Linet. The company was established in 1990 in Želevnice near Slaný and employs 600 people, producing around 40,000 beds per year. The majority of these are designated for export into 100 countries all over the world. Pharmaceutical industry and life sciences Thanks to the Czech Republic s superb academic background, in the field of chemistry and biochemistry, biotechnology, genetics and immunology, there are a large variety of research institutes, commonly tied to universities, as well as centres of excellence. Many of these belong under the Academy of Sciences of the Czech Republic. Productivity and scientific contributions of these institutions can be best illustrated by the global achievements and success of Dr. Antonín Holý and his team in the field of anti-aids and hepatitis B medicaments development. The reputation and high quality of this academic background, supported by educated and skilled local personnel has also attracted several international companies to invest into manufacturing or R&D centres in the Czech Republic. Examples of the largest global companies operating production and/or R&D centres include: Sanofi, who bought a 25% share in the largest Czech pharmaceutical producer Zentiva in 2006, Teva Pharmaceuticals, who entered the local market in 1997 and nine years later acquired production company Ivax Pharmaceuticals, successor of Galena company and Lonza Biotec, entering in 1992 via taking over the research institution SPOFA in Kouřim, and in 2006, investing into a new research and development centre there. Other large companies operating on the local research and manufacturing market include: Baxter BioScience in Jevany, Synthon in Blansko, Sotio in Prague, Interpharma, member of Otsuka group and many others. The area of health supplements is represented by one of the most dynamic local manufacturers, Walmark. Strength of Czech medical and pharma industries: excellent quality and availability of university students and educated workforce from an industry specific area; highly competitive salary and overall cost levels; close cooperation of universities and academia with pharmaceutical and medical business; regulation and patent environment harmonised with European Union standards; high quality of products; constantly developing R&D, educational and training activity; well-developed supplier network; long term commitment of the Czech government to invest into research & development and hi tech centres.

23 Selection of Manufacturers Medical & Pharmaceutical Sector Selection Central Bohemian of Region Manufacturers Medical & Pharmaceutical Sector Český Brod Dyntec Central Bohemian Region Pchery - Theodor GALMED Hradec Králové Region Budčeves AVEFLOR Hradec Králové Region Jevany Roztoky u Prahy Hradec Králové Český Baxter Brod BioScience Pchery VUAB Pharma - Theodor Liberec Region Budčeves ARROW International CR (Teleflex) Dyntec GALMED AVEFLOR Dr. Kulich Pharma Jílové u Prahy Řež Jablonec nad Nisou Dr. Muller PHARMA Jevany BIOPHARM Výzkumný ústav Roztoky RadioMedic u Prahy PROFARMA-PRODUKT Hradec ITEST plus Baxter biofarmacie BioScience a veterinárních léčiv Králové VUAB Pharma Region ARROW SVUS Pharma Martin Bauer Group (Megafyt - Vrané nad Vltavou Liberec International CR (Teleflex) Jílové Pharma) Dr. Kulich Pharma u Prahy Řež Martin Bauer Jablonec TRUMPF nad Česká Nisou republika Dr. Chvalkovice Muller PHARMA BIOPHARM Výzkumný ústav RadioMedic (Megafyt - Pharma) PROFARMA-PRODUKT ITEST Hartmann plus- Rico Olomouc Region biofarmacie Kladno a veterinárních léčiv Turnov Martin BEZNOSKA SVUS Pharma Bauer Group (Megafyt - Vrané Želevčice nad Vltavou Liberec Ontex CZ Jičín Hranice na Moravě Pharma) Martin LINET Bauer TRUMPF Česká republika Chvalkovice Biomag CZ Medi-Globe Kolín (Megafyt - Pharma) Hartmann Danaher (SpofaDental) - Rico Pardubice Region Smith Medical Czech Republic Olomouc Region Kladno LONZA BIOTEC Turnov BEZNOSKA Želevčice Ontex CZ Jičín Nová Paka Dolní Dobrouč Hranice Olomoucna Moravě Kouřim LINET Biomag Lohmann CZ& Rauscher Contipro Medi-Globe FAGRON Kolín LONZA BIOTEC Danaher (SpofaDental) Pardubice Region Smith FARMAK Medical Czech Republic LONZA BIOTEC Rudník u Vrchlabí Chrudim Nová MZ Liberec Paka Dolní PENTA Dobrouč (Ing. Petr Švec) Olomouc Přerov Ústí Kouřim nad Labem Region Lohmann & Rauscher Contipro FAGRON Meopta - optika LONZA BIOTEC Pardubice FARMAK Olympus Medical Products Chomutov Rudník u Vrchlabí Chrudim Bionik Stapro Group Czech Mikron Chomutov MZ Liberec PENTA Herbacos (Ing. Recordati Petr Švec) Přerov Ústí nad Labem Region Meopta - optika Chuderov Pardubice Rybitví Olympus Medical Products Chomutov ImunomedicA Bionik VÚOS Stapro Group Czech Mikron Chomutov Liberec Jablonec nad Nisou Herbacos Recordati Litvínov Vysoké Mýto Chuderov Primed-Halberstadt CZ Rudník u Vrchlabí Turnov Rybitví Glenmark Pharmaceuticals ImunomedicA Litvínov Chuderov VÚOS Terezín Liberec Jablonec nad Nová Nisou Paka Litvínov Dyntec Vysoké Mýto Primed-Halberstadt CZ Chomutov Terezín Jičín Rudník u Vrchlabí Turnov Litvínov Chuderov Chvalkovice Glenmark Pharmaceuticals Budčeves Hradec Králové Terezín Želevčice Řež Nová Paka Krnov Dyntec Roztoky u Prahy Jičín Chomutov Pchery Terezín Český Brod Chvalkovice Budčeves Pardubice Kladno Kolín Rybitví Dolní Dobrouč Bohumín Hradec Králové Opava Bolatice Želevčice Karviná Řež PRAHA Krnov Vrané nad Vltavou Roztoky u Prahy Pchery Jevany Kouřim Chrudim Vysoké Mýto Ostrava Třinec Český Brod Pardubice Dolní Dobrouč Odry Fryčovice Bohumín Kladno Jílové u Prahy Kolín Rybitví Opava Bolatice Rokycany Hranice Karviná PRAHA na Moravě Kopřivnice Vrané nad Vltavou Jevany Kouřim Chrudim Vysoké Mýto Olomouc Ostrava Ejpovice Valašské Meziříčí Třinec Odry Fryčovice Jílové u Prahy Havlíčkův Brod Nové Město Rožnov Rokycany Žďár nad na Moravě Přerov Hranice pod Radhoštěm Jihlava Sázavou na Moravě Kopřivnice Horšovský Týn Tišnov Blansko Olomouc Slušovice Ejpovice Valašské Meziříčí Havlíčkův Brod Nové Město Veverská Bítýška Zlín Rožnov Klatovy Velké Meziříčí Žďár nad na Moravě Přerov pod Radhoštěm Jihlava Sázavou Veverské Horšovský Týn Tišnov Brno BlanskoSlavkov u Brna Ševětín Slušovice Knínice Vodňany Veverská Bítýška Zlín Klatovy Velké Meziříčí Strážnice Veverské Slavkov u Brna Brno Ševětín Trhové Sviny Knínice Pilsen Region Vodňany Moravia Silesia Region Ejpovice Strážnice Bohumín Rondo obaly Trhové Sviny Bochemie Horšovský Pilsen Region Týn Moravia Silesia Bolatice Region Gerresheimer Ejpovice Wilden Zlín Region Medis International Bohumín Rondo obaly Prague Region Rožnov pod Radhoštěm Bochemie Klatovy Praha ENERGOAQUA Fryčovice Rodenstock Horšovský Týn ČR APIGENEX South Moravian Region MEDITES PHARMA BORCAD Bolatice CZ Gerresheimer Wilden Beckman Coulter (Immunotech) Zlín Region Medis International Rokycany Biomedica Prague Region Blansko Rožnov Slušovice pod Radhoštěm Karviná Klatovy WAKE Praha Coopharma Synthon ENERGOAQUA MEDIAP Molnlycke Health Care Fryčovice Klinipro Rodenstock ČR APIGENEX Herbadent South Moravian Region MEDITES PHARMA BORCAD CZ Beckman LEROS Coulter (Immunotech) Brno Valašské Meziříčí Kopřivnice Rokycany Biomedica Otsuka (Interpharma Praha) Blansko Audy Slušovice Medkotech Karviná FAVEA WAKE South Bohemian Region Coopharma PENTA (Ing. Petr Švec) Synthon BioVendor MEDIAP Molnlycke Health Care Klinipro Herbadent PRO.MED.CS Praha BMT Medical Technology Zlín Odry Ševětín LEROS SEVAPHARMA IMUNA Brno Valašské Noventis Meziříčí Medi-Globe Kopřivnice Ardeapharma Otsuka Sotio (Interpharma Praha) PrimeCell Audy Theraupeutics (Národní Medkotech FAVEA BioVendor South Bohemian Region PENTA Synthon(Ing. Petr Švec) Centrum Tkání a Buněk) Opava Trhové Sviny PRO.MED.CS UJP Praha Praha BMT Medical Technology Zlín Teva Czech Industries Odry Ševětín MEDISIZE CZ SEVAPHARMA VAKOS XT a.s. IMUNA Slavkov u Brna Vysočina Region Noventis Medi-Globe Ardeapharma Sotio Zentiva (Sanofi Pasteur) PrimeCell Lohmann & Theraupeutics Rauscher (Národní Ostrava Vodňany Synthon Havlíčkův Brod Centrum Tkání a Buněk) Ekocentrum Ovalab Opava Trhové Laminar Sviny Medica Strážnice UJP Praha Hartmann - Rico Galenická Teva laboratoř Czech Industries Ostrava MEDISIZE CZ VAKOS XT a.s. Slavkov LEROS u Brna GALMED Zentiva (Sanofi Pasteur) Nové Vysočina Město Region na Moravě Lohmann & Rauscher MB Ostrava Pharma Vodňany Havlíčkův MEDIN Brod Tišnov Ekocentrum Ovalab Laminar Medica Hartmann - Rico Strážnice VITAR Galenická laboratoř Ostrava Třinec Velké Meziříčí LEROS Walmark Česká GALMED republika Nové ALPA Město na Moravě Veverská Bítýška MB Pharma MEDIN Tišnov Bioster Žďár nad Sázavou VITAR Hartmann - Rico Třinec Velké ARROW Meziříčí International CR Walmark Česká republika ALPA Veverská Veverské Bítýška Knínice Bioster RosenPharma Žďár nad Sázavou Hartmann - Rico ARROW International CR Veverské Knínice RosenPharma

24 Made in Czech Investor s Guide for Manufacturing and Logistics Companies General Machinery When we put automotive aside, which is nowadays the flagship of Czech industry, it is engineering in general that is one of the strongest, most traditional and globally recognized sectors of the Czech Republic. The spectrum of products manufactured in the country is overwhelming: from the smallest machine parts and tools like drills; to precise machinery equipment, military hardware, machinery tools, lifts, cranes, tractors, trams, aircraft, jet engines and turbines. Engineering production is evenly spread over the country and comprises all ranges of enterprises, from small companies to large holdings. Their location is usually determined by historical production. The synonym of the industry and one of the most famous Czech companies globally is Škoda which was originally established in Pilsen approximately 150 years ago. This world renowned producer of a wide range of transport vehicles including trams, trains, locomotives, metro wagons, trolleybuses as well as machine tools and turbines for power plants was recently divided into several companies. The division of Škoda that manufactures rail vehicles including locomotives and trolleybuses, currently employs approximately 4,000 people in a number of manufacturing sites: Pilsen (Škoda Transportation, Škoda Electric), Ostrava (Škoda Vagonka), and Šumperk (Pars Nova). The company is investing largely into innovation and operates its own R&D center. The Czech producer of turbines for power plants, Škoda Power, that separated from the original Škoda group, was acquired by Doosan Heavy Industries and Construction in The company has an 8% share of the global turbine market and its competitiveness will be further enhanced by a global R&D centre that opened last year in Pilsen. Another large producer, formerly part of the Škoda group, Škoda Machine Tools, now part of ALTA group, is one of the world s leading manufacturers of machinery tools, based in Pilsen. The Czech Republic has also gained global recognition from the production of heavy agricultural and construction vehicles. Among the largest names belong Tatra, LIAZ, Avia and Zetor. TATRA Kopřivnice, a world renowned manufacturer of trucks, draws upon its more than 100 years of experience, combined with the implementation of the latest knowledge from its own R&D centre. In 2011, the company introduced a strategic partnership with Dutch automotive producer DAF Trucks. Zetor, a traditional tractor manufacturer with a 68 year history, is exporting over 90% of products abroad. Other successful Czech engineering companies include: Brano mainly producing door systems and a wide range of components for the automotive industry, traditional weapon producer Česká Zbrojovka, in Uherský Brod, one of the largest European train manufacturers CZ Loko, ČZ Strakonice producer of Desta forklifts and many others. One example of a recently established company who benefited from the Czech tradition in engineering combined with new high tech innovations is AROJA, a Czech producer of the largest 3D printer in the world. The quality of local engineering talent, supported by education, expertise and the traditional background was recognised by international investors who have been coming to the Czech Republic since the early 1990 s. Many of these started by setting up local branches and commencing a co-operation with domestic manufacturers. Gradually, they have increased their initial investments by taking over local partners, developing new plants and in many cases setting up R&D centres. Such companies operating on the Czech market include for example: Bosch, Ingersoll Rand, Daikin Industries, Doosan Bobcat and Honeywell, who opened its first R&D laboratory outside of the USA in 1993 in Prague. Honeywell also set up a new R&D centre in 2003 in Brno, which was later upgraded to a European centre, part of Honeywell Technology Solutions. Robert Bosch entered the market in 1992 after a joint venture with Czech Motor Jikov. The factory focuses on production parts for the automotive industry. In 2005, it opened a new R&D and testing centre for almost 200 people and in 2013, relocated the production of Denoxtronics to the Czech Republic and extended the research centre capacity. Nowadays, it is one of the largest employers in the industry with manufacturing plants in Jihlava, České Budějovice, Brno, Krnov and Albrechtice. Another significant employer is Siemens who opened in 1990 and currently employs almost 10,000 people. Aviation The Aviation sector in the Czech Republic, which has a long tradition dating back to the 1920 s, nowadays includes both manufacturers of final products (small planes, ultralights and jet trainers) and suppliers of OEM parts to large producers such as Boeing, Airbus and Embraer. Moreover, the industry that employs approximately 5,000 people is gradually growing with overall revenues increasing by 30% last year. One of the largest domestic manufacturers is Aero Vodochody, producing, among others, L-159 jet trainers and S-76 Sikorsky Helicopters. Aircraft Industries based in Kunovice, which was acquired in 2008 by Russian owner UGMK, is a producer of the legendary L-410 Turbolet. Other traditional producers for the aviation industry include: Jihlavan, Jihostroj, PBS Velká Bíteš, Technometra, Zlín Aircraft, Mesit, Mikrotechna, Znojemské Strojírny and a number of others. In the last twenty years, the sector has attracted a number of major international companies such as Honeywell, Latecoere, GE Aviation, SAAB, Driessen Aerospace, Mt-Propeller and Bell Helicopters who announced this summer, their new investment into upgrading its Prague facility into their European customization, delivery and aftermarket service centre. Another large investment announced this summer included the 200 million USD to be invested by Malaysian company Aspirasi Pertiwi SDN BHD to Evektor, a Czech producer of EV-55 twin-engine turboprop outback aircraft. The investment will be used for finalising the development and commencing the serial production of the plane which can carry 14 passengers or 1,800 kg of cargo. The development of the plane represents one of the most important projects of the Czech Aviation Industry in the last 20 years.

25 Selection of Manufacturers General Machinery Sector Ústí nad Labem Region Chomutov Parker Hannifin Czech Republic Sandvik Material Technology Louny Legios Most KSK Komořany - Slovácké strojírny M.Ward Manufacturing Ústí nad Labem ADOZ Black & Decker KONE Industrial Varnsdorf TOS Varnsdorf Žatec Caterpillar (Solar Turbines ) Prague Region Praha Amcon Bell Helicopter (Textron) GE Aviation Czech (BGA Turboprops) LA Composite Latecoere Czech Republic (LETOV) LOM Praha Mikrotechna Praha Mt - Propeller (Avia Propeller) Karlovy Vary Region Klášterec nad Ohří ZKL Rotava Rotas Strojírny Pilsen Region Domažlice Rosenberg Hořovice Tedom Rotava Klatovy Aerotech Czech Mýto Carrier Refrigeration Operation- -Czech Republic Plzeň Aliatech Metal Amagasaki Pipe Czech Daikin Industries CZ Doosan Škoda Power GÜHRING Iscar ČR LOMA Systems Precision Castparts Corporate CZ Škoda Electric Škoda Machine Tools (Alta) Škoda Transportation TechnoCrane Zodiac Aerospace (Driessen Aerospace CZ) Stříbro Kermi South Bohemian Region Český Krumlov Fronius Linde Pohony Kaplice BRAWE Engel Strojírenská Hauser Milevsko ZVVZ Machinery Sezimovo Ústí Kovosvit MAS Central Bohemian Region Benátky nad Jizerou Družstevní závody Dražice Beroun Mladá Boleslav Carrier Refrigeration Operation Czech Republic Seco Group Čelákovice TOS Čelákovice Český Brod Technometra Český Brod Dobříš Doosan Bobcat Manufacturing Kolín C&F Manufacturing Dirac Industries EMERSON Electric (Alco Controls) Ingersoll-Rand CZ Česká Lípa Ústí nad Most Labem Dvůr Králové Chomutov Jičín Mladá Boleslav Hořice Náchod Česká Ves Benátky nad Jizerou Hradec Králové Klášterec Louny Odolena Voda Jeseník Krnov nad Ohří Žatec Čelákovice Vamberk Jablonné Slaný Nymburk nad Orlicí Holice Bohumín Karviná Kolín Hnátnice Šumperk Hradec Ostrava Beroun PRAHA Český Brod Ústí nad Orlicí Zábřeh Postřelmov nad Moravicí Hořovice Uničov Vítkovice Albrechtice Česká Třebová Studénka Komárov Žebrák Ledeč nad Sázavou Frýdek-Místek Stříbro Plzeň Mohelnice Olomouc Nový Jičín Kopřivnice Mýto Dobříš Vlašim Hranice Chotěboř Valašské Meziříčí Lutín Žďár nad Sázavou Přerov Lipník nad Bystřice pod Perštejnem Bečvou Rožnov pod Radhoštěm Milevsko Domažlice Pacov Velké Meziříčí Hulín Vsetín Drásov Blansko Jihlava Zlín Slušovice Sezimovo Ústí Klatovy Kuřim Okříšky Otrokovice Velká Bíteš Strakonice Uherské Soběslav Třebíč Říčany Brno Hradiště Staré Město u Brna Slavkov Kunovice Vodňany Hrotovice u Brna Uherský Brod Moravský Písek Strážnice Vimperk Znojmo Mikulov Český Krumlov Velešín Břeclav Valtice Soběslav M belt MOTOR JIKOV Strakonice ČZ DENIOS Česko Velešín Jihostroj Vodňany A. Pöttinger Vysočina Region Kaplice Bystřice pod Perštejnem ADOZ Hrotovice MICo Chotěboř Cheops Jihlava Bosch Diesel CZ LOKO Jihlavan Jihlava Ledeč nad Sázavou DATEL Ledeč Okříšky ALFA IN Pacov Pacovské strojírny Třebíč Tedom Velká Bíteš PBS Velká Bíteš Žďár nad Sázavou K. Hartwal Žďas Liberec Komárov BUZULUK Nymburk JDK Parker Hannifin Czech Republic Odolena Voda AERO Vodochody Technometra Radotín Slaný Demag Cranes & Components F.X. Meiller Slaný Vlašim Magtech (Sellier & Bellot) Semily Liberec Region Česká Lípa Bombardier Transportation Czech TTS Tooltechnic Systems (Narex) Liberec Elitronic Semily Charvát AXL Vrchlabí Trutnov South Moravian Region Blansko ČKD Blansko Brno ADOZ Aguna Alstom BOMAR Bosch Rexroth Brno Rifles - Zbrojovka Brno Daikin Device CZ Danaher Motion DESTILA EM Brno GKN Stromag Brno Honeywell Environmental and- -Combustion Controls IMI International - Norgren CZ Královopolská Michel Precizní Technika NTS Poclain Hydraulics Siemens, Industrial Šmeral Brno Turbomachinery ZETOR ZKL Břeclav Otis Hradec Králové Region Dvůr Králové KARSIT HOLDING Hořice DAHER KARBOX Hradec Králové ZVU POTEZ Jičín Seco Group Náchod ATAS elektromotory Náchod Trutnov Siemens (Nízkonapěťová spínací technika) Vamberk ESAB Vamberk Vrchlabí Siemens (Nízkonapěťová spínací technika) Pardubice Region Česká Třebová CZ LOKO Hnátnice Autoneum CZ Holice Zbrojovka Holice Jablonná nad Orlicí LUX Ústí nad Orlicí Rieter CZ Drásov Siemens Electric Machines Kuřim TOS Kuřim - OS (Alta) Mikulov Emerson Climate Technologies Moravský Písek Schmolz + Bickenbach Říčany u Brna Startech Slavkov u Brna EPM SAAB Czech Strážnice Aroja Valtice Mauting Znojmo Znojemské Strojírny Zlín Region Hulín Toshulin Kunovice AIRCRAFT Industries (LET Kunovice) Evektor Aearotechnik Meister Moravia Otrokovice ZLIN Aircraft Slušovice Mould & Matic Solutions Staré Město Ray Service Moravia Silesia Region Albrechtice Bosch Termotechnika Bohumín BONATRANS Frýdek-Místek Huisman Konstrukce Hradec nad Moravicí BRANO GROUP Karviná Gates Hydraulics Kopřivnice TATRA Kopřivnice Olomouc Region Česká Ves Řetězárna Hranice SSI Shafer Lipník nad Bečvou Stojtos Lipník Lutín Edwards Mohelnice Siemens (Elektromotory Mohelnice) Olomouc BRANO GROUP Honeywell Aerospace Moravské potravinářské strojírny SIGMET Postřelmov KARSIT HOLDING Přerov DSP Přerov Šumperk Škoda (Pars nova) Pramet Tools Uničov Ingersoll-Rand CZ Unex Zábřeh Slovácké strojírny Uherské Hradiště MESIT Uherský Brod Česká zbrojovka Slovácké strojírny Vsetín MEZ Pohony Vsetín TES Vsetín Zlín TAJMAC - ZPS Krnov Krnovské opravny a strojírny Nový Jičín Muller Weingarten ČR Ostrava DPO - INEKON SE-MI Technology (Alta) Siemens Kolejová vozidla Škoda Vagonka Studénka MSV Metal Studénka Vítkovice Vítkovice Holding

26 Made in Czech Investor s Guide for Manufacturing and Logistics Companies The Czech Industrial Real Estate Market Given the size of the country and number of its inhabitants, the Czech Republic offers one of the most developed industrial markets in Europe. The first modern logistics/industrial park was developed in Prague in The strong retail boom, attractive government incentives and the entry of the Czech Republic to the European Union in 2004, further enhanced both construction activity and demand in the warehousing sector, spreading out to the regions. The total modern industrial stock in the Czech Republic (which is offered on the letting market), currently stands at 5.1 million m 2 and consists of new, high quality buildings which meet the highest international standards. This comprises both distribution space as well as premises for light manufacturing purposes. In the last fifteen years, the pace of development underwent different stages. In the early years ( ) the total new supply in the country reached over 400,000 m 2. In the following five years ( ), which can be referred to as the first boom period, the total level of completions amounted to 3 million m 2. Between 2010 and 2014, additional new supply reached over 1 million m 2. This represents an annual supply of between 200,000 m 2 to 350,000 m 2 in the last five years, out of which, over 80% was developed after binding lease contracts were signed. Stock and Vacancy in the Czech Republic Source: JLL, April Stock Vacancy rate 25% 20% 15% 10% The most interesting areas for warehouse facilities are those within close proximity of highway connections. The most developed area in the Czech Republic is within the Greater Prague Region where nearly half of the total modern warehouse space is concentrated, followed by Brno, Pilsen and Ostrava. Recently, Mladá Boleslav in the Central Bohemian region, the seat of the Škoda Car Company, has experienced rapid development and today represents the fifth largest industrial submarket of the country. 5% 0% Industrial Supply in the Czech Republic 7% 8% 5% 14% 3% 2%2% 2% 1% Greater Prague 16% 40% Source: JLL, Industrial Research Forum, April 2015 Brno region Pilsen region Ostrava region Central Bohemia region Ústí nad Labem region Liberec region Pardubice region Olomouc region Jihlava region Hradec Králové region The largest logistics parks of the country are P3 Prague Horní Počernice with nearly 320,000 m 2, in Prague, followed by CTPark Bor (270,000 m 2 ) in the Pilsen region and Prologis Park Prague-Jirny (220,000 m 2 ). CTPark Ostrava and CTPark Brno conclude the top five major industrial parks. These five parks account for about 25% of the entire modern industrial stock on the Czech market. The major developers of industrial parks in the country include CTP Invest, Prologis, VGP, Panattoni and P3. Other large international groups active on the market are Segro, Goodman and Amesbury. In addition, there are strong domestic players such as D+D Real, Uno and Outulný Group. Strong competition among developers, fuelled by growing demand in the booming years around , led to speculative construction which came to a halt at the beginning of the financial crisis. The oversupply situation, which was suddenly a new experience for the market, was gradually overcome by steady absorption combined with a restrictive, conservative approach of developers and financial institutions. A focus on pre-let and built-to-suit construction has prevailed on the market since 2009 and has had a positive influence on the vacancy rate. From almost 19% in 2009, vacancy dropped over the following years to the current (Q1 2015) level of 7.8% for the Czech Republic and 8% for Prague. The other large submarkets of Brno, Pilsen and Ostrava are all between 7% 11%. The demand for distribution and light industrial space in the Czech Republic in the last five years was ranging between 0.8 million m 2 in 2011, to over 1.3 million m 2 in 2014, which was the best annual result in gross take-up in the markets history. The total volume leased to industrial tenants in the last 5 years amounted to over 5 million m 2. The most demanded regions are Prague, Brno and Pilsen. The major drivers of demand over the last several years were predominantly manufacturing companies (mostly from the automotive and electronics sectors), followed by logistics companies (3PLs). For the past two years, manufacturing companies recorded more than a 35%

27 29 Made in Czech Investor s Guide for Manufacturing and Logistics Companies 2015 share of net take-up. Recently, a number of companies from the retail sector, especially internet retailers, have started to take a higher share on the take-up. This trend is expected to increase further in the near future. Czech Republic Logistics Market Overview 0% % % ÚSTÍ NAD LABEM KARLOVY VARY PILSEN Source: JLL, IRF, April 2015 Remon L. Vos CEO CTP Invest % PRAGUE % SOUTH BOHEMIA % 0 LIBEREC % CENTRAL BOHEMIA % JIHLAVA % HRADEC KRÁLOVÉ UNDER CONSTRUCTION (sqm) TOTAL INDUSTRIAL STOCK (sqm) VACANCY RATE Initially, multinationals came to the Czech Republic for low cost manufacturing projects. They soon discovered the strategic location of the Czech Republic in relation to Germany, Austria and the rest of central Europe, in addition to its well-developed road network and the availability of a highly qualified and motivated workforce. Nowadays many of CTP s clients have full size factories with in-house R&D facilities in the Czech Republic. In many cases they have consolidated a number of their European operations with the Czech facility now operating as their main sites with long-term commitments. CTP s key clients include: TNT, DHL, UPS, Schenker, Brembo, Valeo, IMI, Honeywell, ABB. CTP has been investing in premium class properties throughout the Czech Republic since CTP s current portfolio includes more than 200 buildings, totalling 2.2 million sqm of let-able area and 400 clients who together employ 35,000 people. On average CTP constructs 200,000 sqm per year, 70% for existing clients which says a lot. A large portion of the network is strategically located in the regional cities close to the country s well renowned technical universities and long-term traditional manufacturing and engineering hubs. CTP owns and operates the CTPark Network, consisting of full service business parks, offering 5 unique property types from 350 sqm for suppliers and start-ups, to custom built projects of 70,000 sqm and more. CTP itself employs 150 people who are always available on site to provide project management, asset management and development services. CTP is privately owned and the investments are financed through equity and bank loans. CTP clients wish to invest in things they know and where money is to be made, property is not their core business. CTP cooperates closely with the Czech authorities to ensure smooth procedures % PARDUBICE % BRNO % OLOMOUC % ZLÍN % OSTRAVA Prime rents in the Czech Republic reflect the maturity of the market, predominantly with the evolution of supply and demand which has evolved considerably since 1997, when first industrial buildings were developed in the Greater Prague region. Since then, the market has registered a continuous stabilisation of prime rents reaching as high as 6.5 per m 2 / per month in 1997 and dropping to 5.5 per m 2 / per month towards the end of Increased competition from newly delivered projects, combined with the global economic downturn since 2008 led to a further stabilisation of prime rents to the current level of 4.25 per m 2 / per month. Prime Industrial Rents and Yields in the Czech Republic Source: JLL, April 2015 Prime Annual Rent Martin Polak Vice President & Country Manager Prologis Czech Republic & Slovakia Mid Point Yield 10% Located at the heart of Central Europe, the Czech Republic serves as a logistics hub with easy and efficient connections to key European markets, such as Germany, Poland, Austria and Slovakia, and, from them, to the rest of continental Europe. For producers and manufacturers with global supply chains, this ease of access is an essential factor in location strategy. Furthermore, manufacturers need to maximize their efficiency in every way, which means co-operating with all participants in the logistics chain. For that reason, the Czech Republic, which offers a skilled and experienced labour force in a central location, is a competitive solution. At Prologis we are mindful of the structural changes in consumer spending and technology, which lead to our customers needing to increase their requirements for logistics space. We receive demand from manufacturers to lease facilities in a variety of markets in the Czech Republic, especially Prague. With our global experience we are committed to meeting these requirements, by offering facilities that suit the needs of every customer in the Czech Republic and around the world. Our clients include: DHL, Globus, Raben, Gefco and Tesco. 8% 6% 4% 2% 0%

28 Made in Czech Investor s Guide for Manufacturing and Logistics Companies Real Estate: Rent or Buy? The decision to rent or buy a production facility is one of the first which should be taken in terms of real estate. This decision largely depends on the goals of the manufacturing company, the time needed to be operational, expansion plans, and the desired flexibility. Consideration is also given to tax implications, the cash flow position and the availability of real estate in a specific location. Three rental and three purchase methods for real estate will be described in this chapter, as well as their implications and timeframe. Rent a facility? Three main options Option 1: A Built-to-Suit facility on a greenfield site Built-to-Suit (BTS) is a dedicated building developed specifically to suit the particular needs of a given investor. The entire investment process is led by the developer, who: presents the site offers; proceeds with the due diligence of the selected site; purchases the chosen site (subject to a binding agreement with the investor); finances and supervises the entire development process; hands over the building to the investor in the form of a leasehold. extracts the land from the agricultural fund, which is an additional cost based on a fee per m 2 usually in Czech crowns. The investor acquires a building: in the form of a leasehold, based on a lease agreement (typically a minimum lease length of 7 10 years and usually a rent-free period is negotiated); designed and constructed according to the investor s requirements (location, technical specification, shape of the building, purpose of the facility e.g. heavy production, light production, warehouse- sorting plant). In this scenario the investor: does not have to commit any funds for the purchase and there are no initial payments; can benefit from additional incentives such as being located in a Special Economic Zone. Option 2: A Built-to-Suit facility in a warehouse park Built-to-Suit (BTS) in a Warehouse Park is a specific form of BTS project, where the specially designed facility is developed as a part of an existing or planned warehouse park. The main differences between a classic BTS and a BTS in a Warehouse Park are: shorter timeline for the process; the selection of the site is determined by the developer s portfolio; the construction of the premises can start almost immediately, as the site is typically equipped with the necessary infrastructure and connections. Usually the developer already holds all environmental and building permits required. The location of the BTS project: is determined by the developer s site portfolio; is limited to the logistics hub/main industrial regions in Czech, next to motorways, national road junctions and by-passes, which does, however, improve the transport connectivity. Option 3: Leasehold of an existing building In this scenario the investor becomes the lessee of a building in one of the parks located in the main logistics regions in the Czech Republic. The investor signs a lease agreement, with the typical minimum lease length being 3 years. The use of the space is determined by the developer (storage space, light production, etc). The leased premises have a standard technical specification. The space can be adapted to the lessee s needs, although the scope of such change is limited. Adaptations can be financed by the lessee or by the developer; the cost may be paid as additional rent or offset against incentives and in most cases, can benefit from tax exemptions, subject to meeting formal criteria. This option is preferable for investors who: need the space as soon as possible; only require a small production space; need more flexibility can conduct their manufacturing services in a standard A-class warehouse which has been adapted to their needs.

29 31 Made in Czech Investor s Guide for Manufacturing and Logistics Companies 2015 Buy a facility? Three main options Option 1: Fee development Fee development is a form of cooperation between an investor and a developer, where the developer takes all the responsibility in the development process and provides the investor (i.e. future owner) with a facility built on the Investor s site and according to the investor s technical specification. The developer: proceeds with the due diligence of the site (which has already been purchased by the Investor or is purchased by the Investor as part of the process); is responsible for financing and leasing the whole investment process; negotiates with the general contractor, provides all environment and building permits, telecom connections, road access, construction, permit for use and all paperwork for authorities and contractors; delivers the building according to the exact timing and technical specification required by the investor; having finished the development, hands over the building to the investor in the form of a freehold title. After completion of the whole process, the investor: is the owner of the site and the building; operates in a building, which has been designed and constructed according to the investor s specific business requirements; can benefit from government incentives in a form of tax relieve. Option 2: Own development The investor leads the whole development process. This involves: proceeding with due diligence and purchasing the site determining the technical specifications for the premises; being responsible for all paperwork and permits with regard to authorities and contractors; organising the tender for an architect and negotiating the conditions; organising the tender from general contractor among construction companies and negotiating conditions; supervising the whole development process. The funding of the project is the responsibility of the investor. The investor is the owner of the site and constructed building. The length of the project development is dependent on the investor. Option 3: Acquisition of an existing building In this scenario the investor acquires an existing building, and the land it is on, according to technical specification and location preferences. The building can be adapted to meet all of the investor s requirements and the Investor bears all the costs regarding any improvements. Tomáš Míček Country Head Czech Republic P3 The Czech Republic s industrial property market goes from strength to strength, reflecting how the country s manufacturing sector has become a key part of the European supply chain. Reasonable labour costs, political and economic stability, plus its proximity to Western Europe continue to make the country an attractive location in which to set up a factory. These pull-factors are reflected in development activity in the industrial property sector last year, which matched the record levels of What we are seeing across our portfolio, which is one of the largest in the country following our purchase of 11 parks last year, is also the growth in higher value-add output, research and investment into new technologies and services by Czech manufacturers. This is a sign of how far the industrial property market has developed and matured. The Czech Republic s central location in continental Europe makes it a key distribution centre in the supply chain to the West, particularly Germany, as we see with our auto component supplier customers such as Knorr-Bremse and Grupo Antolin. However, the Czech Republic also serves as a strategic location from which to distribute to Central Europe and Eastern Europe. We recently completed a 40,000 m 2 Build-to-Suit (BTS) project at one of our Prague parks for VF Corporation, the owner of premium designer wear brands Vans, Wrangler, The North Face and Timberland, which will serve as a distribution hub for the region, for example. E-commerce is another emerging trend in locations close to large cities, as we have found in the growing cluster at the Horní Počernice park on the outskirts of Prague. All these developments support the positive prospects for the Czech market, which we are responding to through our Build-to-Suit developments and ample land bank.

30 Made in Czech Investor s Guide for Manufacturing and Logistics Companies Overview of the permitting process Once the decision has been made as to how the property will be acquired, it is necessary to go through the steps of the various legal and technical procedures in order to obtain an occupancy permit and to be allowed to operate a constructed or refitted facility. The standard project delivery procedures are outlined in the table below with the provided average duration of each step being based on the typical project and typical location. The first step consists of the technical due diligence of the site and the investigation of whether the property is contained in the local master plan or, if a planning decision will be required. In addition, utilities connection and various consents relevant to the development, need to be obtained together with the environmental decision. The second step is drawing up a building design suitable for the building permit in order to obtain a valid building permit which will allow the construction of the facility. Finally, the commissioning and occupancy permit procedure should be followed in order to receive the final, valid occupancy permit which will allow the operation of the facility. Permit process and estimated timing Site selection Technical due diligence (audit) of the plot (2 to 5 weeks) Step 1 Zoning (Planning Decision required if there is no Local Master Plan) Environmental decision Utilities connection consents Building permit design development Additional consents which may be required for a particular development plot: archaeological survey tree cutting permits rainwater discharge permit (3 to 12 months) (3 to 6 months) (2 months) (2 to 5 months) (2 to 6 months) Step 2 Obtaining a valid building permit (3 to 6 weeks) Step 3 Construction (20 to 40 weeks) Step 4 Obtaining a valid occupancy permit (3 to 6 weeks) The above durations represent observed actual times of delivery for typical project in a typical location. In more complex situations the given forecasts might not be sufficient to complete the particular activity. Source: JLL, 2015 How quickly can you be operational? This largely depends on the option chosen, which is discussed in the previous chapter. The options involving BTS for renting or the fee development or, own development of a facility on a greenfield are the longest processes to realise and have to go through all four steps which are described in the above table. This takes approximately 62 to 92 weeks from the selection of a greenfield site to an occupancy permit being issued. The process of renting a facility that will be constructed according to the manufacturer s needs (BTS) but, located in an existing park, will take less time (33 to 65 weeks) as the different permits or work may, in many cases, already be available, including infrastructure work and environmental decisions. The building permit can also be obtained beforehand so the work can start as soon as the decision as to the particular site is taken and in parallel, modification to the existing building permit will be requested to incorporate the specific building requirements of the investor/manufacturer. Renting or acquiring an existing facility is the fastest way to become operational in the market. Only the modification of the existing premises (up to 10 weeks) and/or the request for the occupancy permit will be needed.

31 33 Made in Czech Investor s Guide for Manufacturing and Logistics Companies 2015 Time frame of the different rental and sales options (based on zoned land) BTS from 62 to 92 Buy Rent BTS in Park Existing Park Fee Development Own Development from 13 from 33 to 46 from 61 from 62 to 65 to 92 to 92 Acquisition of Existing Building from 13 to 46 Weeks Source: JLL, 2015 Market practice for leasing space Leasing space Lease length typically three to five years; seven to ten years more common for BTS projects. Rental basis Lease agreement collateral Rent increases paid monthly in advance with rents denominated in Euro but paid in CZK. bank guarantee or cash deposit equivalent of three to six months rent and service charge, all increased by VAT. Along with parent company guarantee. annually, according to Harmonised Index of Consumer Prices (HICP). Repairs Insurance Agency fees Service Charges internal, tenant; external/structural and common areas, landlord, although recovered through service charges. landlord covers costs of building insurance (recovered through service charges), tenant covers insurance of its own premises, contents and civil liability. 15% to 25% of the annual rent, increased by VAT, depending on the lease length. Fees are typically paid by the landlord. Remuneration may be also calculated as a percentage of monthly rent or a percentage of the total value of a lease contact. In case of renegotiations on behalf of the tenant, remuneration paid by the tenant may be based on the percentage of the savings secured for the tenant. ranges between 30 and 85 Eurocent / m² / month. Calculated on an open book basis. Reinstatement Other developers incentives Rental Cost negotiable lease by lease. partial or full fit-out, and/or rent-free periods: common practice in the market, usually in the range of four to eight months rent (in the case of a 60-month lease). Rent-free periods and fit out contributions depend on the transactional volume and lease length. largely depends on the fit-out requests.

32 Made in Czech Investor s Guide for Manufacturing and Logistics Companies Market practice for purchasing space Purchasing space Asset sale: Transfer of plots of land is subject to VAT in the following cases: Transfer of plots of land on which there are buildings firmly affixed to the land Transfer of plots of land on which utilities (water, gas, electricity etc.) are built Transfer of plots of land on which a building can be constructed according to a building permit VAT Real estate transfer tax Transfers of other immoveable property, including plots of land other than those listed above, will be VAT exempt after the expiry of three/five years from the first approbation (occupancy certificate) or from the date when the first use of the structure commenced, whichever occurs earlier. There is an option to tax the transfer of immovable property after the expiry of this period. Transfer of Intangible right to build (i.e. transfer of right to build on a plot of land owned by the third party) is subject to VAT. Tangible right to build (i.e. transfer of right to keep a building already constructed on a plot of land) is exempt from VAT after 3/5 years from the date of the issuance of the first permit to use. The 3 years period applies for Buildings or Tangible Right to build which were acquired before 2012, 5 years period applies for Buildings or Tangible Right that were acquired starting from The VAT rate of 21% VAT applies for buildings and land (commercial properties) with exception of the social housing. Sale of shares: is not subject to VAT. 4% of purchase price (typically payable by the Seller, but can be agreed otherwise) CIT Real estate tax Asset sale: 19% on the difference between tax book value of the assets and the agreed sales price Sale of share: is not subject to taxation, subject to meeting certain criteria Based on the size of the municipality and local coefficient. The basic tax rate is further increased by the number of floors in the building (e.g. RET on 100 m 2 of office space located in Prague is approx. CZK 1,500) Registration fee Fee for the registration in the Cadastral Register is CZK 1,000 (approx. EUR 36.50) Prologis Park Prague Úžice

33 35 Made in Czech Investor s Guide for Manufacturing and Logistics Companies Real Estate Acquisition Section provided by PwC Legal Definition of Property under Czech Law Under the principle superficies solo cedit which is effective in Czech republic from 2014 the space over and under the land, the buildings and other devices set up on land (except for temporary buildings), as well as everything embed in land or attached to wall of building, are parts of the land. Cadastral Register All plots of land and, with certain exceptions set forth in the law, all construction thereon in the Czech Republic (including residential apartments and non-residential premises that have been categorized as separate assets/units) are registered in the Cadastral Register. The Cadastral Register is a record of rights to real property including, in particular: ownership rights, mortgages, easements and pre-emption rights (where the latter takes effect as a right in rem). Leases and option agreements encumbering an ownership right are not obligatory recorded in the Cadastral Register, however voluntary registration is possible. The Cadastral Register also contains a Collection of Deeds, which includes decisions of public authorities, agreements and other deeds based on which the record in the Cadastral Register was made. The Cadastral Register is publicly accessible; anyone is entitled to access it in order to make extracts, copies and notes. Limited fees are payable. Owners of Real Estate Under Czech law, every individual and legal entity enjoys the same right of ownership of real property. The same applies to foreign citizens and foreign legal entities in the Czech Republic. There are no restrictions in acquisition a property in the Czech Republic for foreigners. Transfers of Real Estate In order to transfer ownership title to real property, the following formal requirements and procedures must be met and followed: An agreement on the transfer of real property must be made in writing. Signatures of the transferor and the transferee must be affixed in the same document and must be officially verified. The transfer agreement must contain a description of the real property to be transferred. For real property that is subject to registration, this will be the information recorded at the Cadastral Registry. For other real property not subject to registration, as detailed a description as possible is required. The transfer of real property that is subject to registration becomes effective on the date of registration of the new owner in the Cadastral Register. However, the transfer is effective retroactively as of the date of filing of the application for registration with the respective Cadastral Office. A transfer of real estate that is not subject to registration becomes effective on the effective date of the relevant transfer agreement. Since 1 January 2012 standardized forms are used for applications to the Cadastral Register. Rights to Real Property Owned by a Third Party (Iura in re aliena) Right to build (právo stavby) Right to build enables the placement of a building/construction on a land plot of a different party. It is time limited for the maximum length of 99 years after which the building becomes the property of land owner for the monetary compensation. Servitudes obligation of the owner to act or refrain from action in favour of a third party Lease (nájem) Right to use a property for a definite or indefinite period of time subject to payment. Tenancy (pacht) the right to use and collect profits from real estate for a definite or indefinite period of time, subject to payment There is no obligatory registration of the lease or tenancy in any register in the Czech Republic. Right and obligations of the landlord from the lease and/or tenancy are automatically transferred to the acquirer with the transfer of the ownership right to the leased property. Zoning Plan and Planning, Building and Use Permits Czech law generally requires planning and building permits for any property development. Any use of the development, when completed, must then be additionally approved by a building-use permit. A building- use permit must then additionally approve any use of the development, when completed. Planning permission, as a first stage permit, may be obtained only if the application for planning permission (i.e. the development project) complies with an approved urban study or zoning plan. If an urban study/zoning plan is not consistent with the intended development project, a change to the urban study/zoning plan is possible. This procedure would likely, however, be rather time-consuming. The approval process for planning permission can be extremely complex and protracted, since a number of public authorities would be involved; these include the Fire Department, Department of Hygiene, Heritage Protection Office, Chief Architect s Office, Transport Department, Environmental Office and others. Permission itself, when issued, comes from the relevant Building Office. For construction works, a building permit must be obtained from the Building Office. A building permit is required not only for new construction, but also for major reconstruction and renovations or alterations. Application for a building permit must be in compliance with prior planning permissions.

34 Made in Czech Investor s Guide for Manufacturing and Logistics Companies What is the acquisition processes when acquiring from private or public entities? Acquisition from a private party This acquisition process is straightforward and comparable to other EU countries. Private party refers to a private individual or entity. Process when buying from a private party Negotiation process Preliminary Agreement (not obligatory) The period between the preliminary agreement and the purchase agreement can be used to obtain financing. The vendor is obliged to make certain that the title to the real estate is clear and capable of being conveyed to the buyer. Purchase agreement The purchase agreement must be signed in a written form and signatures of parties must be on the same deed. The signatures must be verified. Proposal to register the transfer to Land Cadastre In a period of time between proposal and permission to register (completion of registration) the custody of purchase is often used in order to eliminate the insecurity. Permission to register Usually within 2 3 month from the submission of proposal to the relevant Cadastral Office. Acquisition from a public entity A significant proportion of real estate in the Czech Republic is owned by the state and local authorities. Such real estate can be sold: 1. Via direct purchase by the purchase agreement which must be confirmed by administrative body and the purchase price must be at arms-lengths principal in given place and time. 2. Via public tender. Tender process when buying from a public entity Initial contact public entity and investor The property assigned for sale is published by State representing office in property affairs (Urad pro zastupovani statu v majetkovych vecech). Valuation The public authority set the initial asking prices based on the valuation by an independent valuator. The initial asking price is mostly lower than usual price in given place and time Public tender process Announcement at least 30 days before the planned date of the tender. Payment of deposit as specified in the auction terms. Submission of offers. Assignment decision the contract is formed by the assignment decision.

35 37 Made in Czech Investor s Guide for Manufacturing and Logistics Companies Setting-up a Business Section provided by PwC Legal Introduction A major change of private law, as well as of the law of business corporations, took place in 2014 and simplified the process of setting up a business presence in the Czech Republic. All forms of business are accessible to foreign investors, entities and persons at the same conditions as those of Czech nationals. Below, we present the main features and requirements for setting up a business in the most frequent legal forms used in the Czech Republic. Limited Liability Company ( společnost s ručením omezeným s. r. o., spol. s r. o. ) A limited liability company is set up by a memorandum of association in the form of a notarial deed. Following that, the founder(s) deposit the registered capital in a special bank account or, hand the non-monetary contribution to the registered capital over to the entitled person. The minimum registered capital of a limited liability company is CZK 1 (approximately 3 Euro cents) An application for registering the new company must be filed with the relevant Commercial Register within a term of 6 months. Czech regulation also stipulates the possibility to directly register a newly established company through a notary who draws up the articles of association (please note that this system is not yet in operation). Setting up a limited liability company includes: execution of a memorandum of association or, a deed of association in the form of a notarial deed; payment of registered capital in the amount of at least 30% of the registered capital in the case of a monetary contribution or the whole contribution in case it is non-monetary; registration in the Commercial Register; obtaining trade licences in accordance with the scope of business; and registration with a tax office. The main features of a limited liability company are: maximum number of shareholders is not limited; ownership of a limited liability company with one shareholder by another limited liability company with one shareholder is permitted; nominal value of one share is at least CZK 1; shareholder can own more shares of several types (if stipulated in the articles of association); preference shares can be issued by the company; shareholders are personally responsible for the debts of the company only up to the unpaid part of their share of the registered capital; shares can also be issued in the form of certificates (in Czech: kmenové listy) similar to shares in a joint stock company; Certificates are transferable by endorsement and handover and do not require a written contract; transfer or pledge of (ordinary) shares can be made if not restricted by the memorandum of association. For a transfer, a written contract with verified signatures is required; company is represented by one or more executives. Legal entity can also be appointed as an executive of the company, in that case the executive of such a legal entity represents the company; creation of a supervisory board is optional only. Joint-Stock Company ( akciová společnost a. s., akc. spol. ) Incorporation of a joint-stock company generally involves procedures similar to those used for a limited liability company. Setting up a joint-stock company involves the adoption of articles of association in the form of a notarial deed. Both natural and legal persons can participate in a joint stock company. The company can be established by a sole founder. A joint-stock company establishes registered capital which is divided into shares of their nominal value. Contribution to registered capital can be made via a monetary or non-monetary contribution. In the case of a non-monetary contribution, the contribution is evaluated by an expert chosen by the founder(s) or board of directors After that, the company then issues shares. The issue rate cannot be lower than the nominal value of the share. The establishment of a joint- stock company is effective when each founder has paid (i) the share premium and (ii) at least 30% of the nominal/book value of the issued shares. Shares company can issue either shares with a nominal value or, so-called no-par value shares, whose value is set as a proportion between the actual registered capital and the number of issued shares bearer shares can be unlimitedly transferred, whereas registered shares are transferred by endorsement shares can be either certified or book-entry only rights and duties of a shareholder differ depending on the nature of shares. A joint-stock company is based on ordinary shares but can also issue preferred shares.

36 Made in Czech Investor s Guide for Manufacturing and Logistics Companies The main features of a joint-stock company are: shareholders are not personally responsible for the debts of the company minimum share capital is CZK 2,000,000 or, EUR 80,000 (the Czech legal system allows share capital to be in EUR if the company s accounting is kept in EUR.) founders of a joint-stock company shall decide whether the company will be administered by the board of directors and supervisory board (dualistic management) or, by an administrative board and statutory director (monistic management) Limited Partnership ( komanditní společnost k. s., kom. spol. ) similar to a shareholder in a limited liability company (limited partner). Profit and loss are divided between the company and the general partners. Part of the profit allotted to the company is distributed between the limited partners. Limited partners do not cover the losses of the company. Branch of a foreign company ( Pobočka zahraniční osoby ) The presence of a branch of a foreign entity also requires registration in the Commercial Register. The branch needs to apply for trade licences. The branch of a foreign entity does not have a separate legal entity and it is represented by the head of the branch appointed by the foreign entity. A limited partnership can be founded by at least two persons where one is responsible to an unlimited degree for the debts of the company (general partner) whereas the other is responsible to a limited degree, CTPark Bor

37 39 Made in Czech Investor s Guide for Manufacturing and Logistics Companies Czech Tax Structure Section provided by PwC Tax Corporate taxes on corporate income The 19% CIT rate applies to all business profits, including capital gains from the sale of shares (if not exempt under the participation exemption regime). There is a special tax rate of 15% levied on dividend income of Czech tax resident entities from non-resident entities (unless subject to participation exemption). Capital gains Capital gains from the sale of shares in a Czech company may be exempt from Czech taxation if all of the following conditions are met: The Czech or EU parent holds at least 10% of the shares of the subsidiary for at least 12 months. The subsidiary is a tax resident of the Czech Republic, another EU member state and/or Switzerland, Norway, Island and Liechtenstein 1. Both the parent and the subsidiary have one of the legal forms listed in the Annex to the EU P/S directive. The parent or the subsidiary are not exempt from corporate taxation or may not choose to be exempt, and the tax rate applicable to their income is greater than 0%. Thin capitalisation Thin capitalisation applies only to related-party loans. The debt-to-equity ratio for related-party loans is 4:1 (6:1 for the financial services industry), Unrelated-party loans (e.g. bank loans) guaranteed by a related party are not considered related-party loans for thin capitalisation purposes. If, however, a bank provides a back-to-back loan to a Czech entity where the loan is provided to the bank by a related party, such a bank loan to the Czech entity is considered a related party loan. Interest on profit-participating loans is not deductible for tax purposes. Controlled foreign companies (CFCs) There is no CFC legislation in the Czech Republic. Investment incentives Investment incentives are available only to Czech entities (including Czech subsidiaries of foreign companies). Incentives include income tax relief, financial support for the creation of new jobs, financial support for training or retraining of employees, cash grant on capital expenditures, and the transfer of land at a specially reduced price. Research and development (R&D) allowance Up to 100% of specific R&D expenses (or costs) incurred in a given tax year may be deducted from the tax base as a special tax allowance. These costs are deducted twice for tax purposes: once as a normal tax-deductible cost and then again as a special tax allowance. An additional 10% may be applied from the difference by which the current year qualifying costs exceed those of the prior period. Value-added tax (VAT) VAT is charged at 21% on the supply of goods and services within the Czech Republic, but certain supplies (such as groceries) are taxed at a rate of 15% or 10% respectively (e.g. books). Real estate transfer tax Real estate transfer tax is governed by a separate law, but the rules have mostly remain the same, as well as the tax rate of 4% on the greater of the transaction price or the officially appraised value. The taxpayer may be contractually agreed (previously, it was the transferor with the transferee as a guarantor). Currently an amendment is discussed by the government, which, among others shifts the tax liability on the buyer. 1 As of the relevant double tax treaty with Liechtenstein is effective.

38 Made in Czech Investor s Guide for Manufacturing and Logistics Companies Information on the content providers JLL (NYSE: JLLs a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual fee revenues of $ 4.7 billion and gross revenue of $ 5.4 billion, JLL has more than 230 corporate offices, operates in 80 countries and has a global workforce of approximately 58,000. JLL industrial and logistics services include: Tenant representation Landlord & landowner advisory Greenfield land search & acquisition Existing buildings search & acquisition Built-to-suit projects to own or to lease Property market research and consultancy Technical due diligence and feasibility study for developments Construction services: project management, value engineering, quality and cost control. Please visit and PwC helps organisations and individuals create the value they re looking for. We re a network of firms in 157 countries with more than 184,000 people who are committed to delivering quality in assurance, tax, legal and advisory services. Tell us what matters to you and find out more by visiting us at PwC. All rights reserved PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details. Hays Specialist Recruitment is the world s leading company in recruiting qualified, professional and skilled work. Today, with more than 40 years of recruitment experience, the Group operates out over 245 offices in 33 countries, employing around 7800 staff worldwide across 20 specialisms. We offer tailor-made recruitment services on permanent, contract and temporary basis along with Executive Search, Recruitment Process Outsourcing (RPO) and Employer Branding Solutions. Our role is a straight forward but very important one: we power the world of work by helping our clients find the best people they need to develop their businesses and helping our candidates find the best new role for themselves. Our customers benefit from the specialist sector knowledge, extensive office network, industry contacts and consultants experienced in recruiting staff for various manufacturing companies across the CEE region. To find out more about Hays please visit