The content of the Annual Report for 2010

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2 The content of the Annual Report for INTRODUCTION 3 11 Introductory Word by the Company s Managing Director 3 12 Identification Basic Facts of VÍTKOVICE CYLINDERS as 4 13 Position in the Group 5 14 Management of VÍTKOVICE CYLINDERS as 7 2 PRODUCTION BASIC FACTS 8 21 Investments and Modernisation 8 22 Technology and Reasearch 8 23 Environment 9 24 Employees 9 3 SALES - BASIC FACTS Steel Cylinders Grinding Balls and Bars Engineering 11 4 FINANCIAL STATEMENTS of the Company as of AUDITOR S REPORT as of on the Audit of the Financial Statements, Related Parties Report and the Annual Report for RELATED PARTIES REPORT for REPORT OF THE BOARD OF DIRECTORS on the Entrepreneurial Activities of VÍTKOVICE CYLINDERS as and on Its Assets in

3 1 Introduction 1 INTRODUCTION 11 Introductory Word by the Company s Managing Director Dear shareholders, ladies and gentlemen, If I was to describe the year of 2010 and its impact on our Company VÍTKOVICE CYLINDERS as, I would have to conclude that, this year once again, we were not spared the consequences of the negative economic developments in the world markets It was not until the second half of 2010 that we experienced a stronger recovery of demand for steel cylinders On the other hand, however, we had to face a difficult situation caused by a major increase in the prices for input raw materials, for extruded cylinders 2010 was marked by our continued efforts to maintain the trend of optimizing our production and our product prices in order to maximize the Company s financial performance We worked very intensively to ensure a continuous increase in the capacities of the existing production aggregates and lines; we enhanced our production technology with innovations and continued in permanent improvement In the new steel cylinder plant, we were able to achieve the so-far maximum production volume since the very start of the line, with an increase in the sold quantity of steel cylinders of as much as 84% over 2009 We achieved very positive results in the sale of grinding balls where our sales revenue jumped up by 11% compared to 2009, amounting to nearly CZK 416 million and in the sale of highpressure accumulators where we sold 41% more than in 2009 The total sale volume of steel cylinders at the level of 425,722 pieces represented a 23% increase over 2009 We successfully obtained an ISO/TS certificate, which we consider a very significant step forward; this is also related to the launch of our cooperation with a German car manufacturer where we became a supplier of CNG-1 high-pressure steel cylinders designed for the automotive industry In our opinion, CNG-1 car cylinders constitute a very important market segment; the increase of supplies recorded in this industry in 2010 is a major success for our Company, whether it involves cylinders intended for OEM customers (Original Equipment Manufacturer car maker) or for car conversions The fact that our cylinders have built up a leading position both in the Czech and the world markets is not only pleasing but, at the same time, also binding We cooperate and communicate with other modern steel works and metallurgical plants to secure further development of our Company as well as of the entire industry We rely on the skills of our employees, on our organization and the technical facilities, as well as on the important support from VÍTKOVICE MACHINERY GROUP Our success builds on the high-quality team work delivered by all staff in our Company In 2011 we want to face new challenges, particularly in the automotive field, and we are convinced that we will be able to fully seize all opportunities and to strengthen our position, reputation and good relationships with our business partners Our goal is also to continue in the dynamic development of the project concerning the transition of car drive systems from conventional fuels to the alternative compressed natural gas (CNG) drive Ing Jaroslav Šarovský, MBA Company Managing Director - 3 -

4 1 Introduction 12 Identification Basic Facts of VÍTKOVICE CYLINDERS as Business name: VÍTKOVICE CYLINDERS as Legal form: Joint stock company Headquarters: Ruská 24/83, Ostrava Vítkovice ID no: VAT no: CZ Date of Entry in the Register: 1st January 2000 Registering Court: Regional Court in Ostrava Entry in the Register: Section B, File 2260 Telephone: Fax: URL: wwwvitkovicecylinderscz Registered capital: Core activity: Shareholders: ,- CZK Installation, repair, reconstruction, inspection and tests of reserved pressure facilities and periodical tests of gas vessels VTK CYLINDERS sro Ruská 2887/ Ostrava - Vítkovice ID

5 1 Introduction 13 Position in the Group Des Business name Headquarters VÍTKOVICE HOLDING, as Ostrava, Vítkovice, Ruská 2887/101, PSČ VTK CYLINDERS sro Ostrava, Vítkovice, Ruská 2887/101, PSČ VÍTKOVICE CYLINDERS as Ostrava-Vítkovice, Ruská 24/83, PSČ VÍTKOVICE Kordt und Rosch GmbH Plettenberg, Německo 112 LAHVARNA BROD doo Vladimira Filakovca 3, Slavonski Brod, Croatia 12 VÍTKOVICE MILMET SA Sosnowiec , ul Gen Grota-Roweckiego 130, Polsko 121 VÍTKOVICE HTB as Ostrava, Vítkovice, Ruská 2887/101, PSČ KZWM OGNIOCHRON SA Andrychów , ul Krakowska 83 C, Polsko 122 KZWM OGNIOCHRON SA Andrychów , ul Krakowska 83 C, Polsko 1221 Silesian Gaz w Siemianowicach sp z oo Siemianowice Slaskie , ul Žeromskiego 21, Polsko 13 SAINVER SA Sarmiento 846, 7 piso, dpto A, Capital Federal, Argentina 14 CIDEGAS SA Av San Martin 6445, (1419) Capital, Buenos Aires, Argentina 141 SAINVER SA Sarmiento 846, 7 piso, dpto A, Capital Federal, Argentina 15 VÍTKOVICE, as Ostrava-Vítkovice, Ruská 2887/101, PSČ VÍTKOVICE, as Ostrava-Vítkovice, Ruská 2887/101, PSČ VÍTKOVICE REVMONT as Ostrava, Vítkovice, Ruská 2887/101, PSČ VTK SECURITIES sro Ostrava, Vítkovice, Ruská 2887/101, PSČ VÍTKOVICE, as Ostrava-Vítkovice, Ruská 2887/101, PSČ VÍTKOVICE HEAVY MACHINERY as Ostrava - Vítkovice, Ruská 2887/101, PSČ Hutní montáže, as Ostrava, Vítkovice, Ruská 1162/60, PSČ HMO Stahlbau und Montage GmbH Hammerstrasse 88, Plauen, Německo CHEMONT, as Brno, Vídeňská 119, okres Brno-město, PSČ Ti kran servis sro Sviadnov, Nádražní 448, PSČ Mostárna Hustopeče, as Hustopeče u Brna, Nádražní 43, PSČ INTERMONTÁŽ - servis, sro ul M Stelmacha 3, Kyjev - 40, Ukrajina PRIS - Hutní montáže Ostrava Nusupbekova st 32, Almaty, Kazachstán GEO - CZ Construction Engineering, spol s ro ul Mazniašvili 4, Tbilisi, okres Čugureti, Gruzie 412 VÍTKOVICE Lisovna, spol s ro "v likvidaci" Ostrava-Vítkovice, Ruská VÍTKOVICE ITS as do Ostrava, Vítkovice, Ruská 60, PSČ VÍTKOVICE RP Slovakia s ro do Vstupný areál U S Steel, Košice , Slovensko 415 VÍTKOVICE SLOVAKIA as (do HBS Invest, as) Zámočnícká 8, Bratislava, PSČ , Slovensko 416 VÍTKOVICE ÚAM as Ostrava, Vítkovice, Ruská 2887/101, PSČ VÍTKOVICE TESTING CENTER s r o Ostrava - Hulváky, Pohraniční 584/142, PSČ VÍTKOVICE MECHANIKA as Ostrava, Vítkovice, Ruská 2929/101A, PSČ VÍTKOVICE GEARWORKS as Ostrava - Vítkovice, Ruská čp 83/24, PSČ VÍTKOVICE MKV sro Plzeň 1, Lochotínská 407/13, okres Plzeň-město, PSČ VÍTKOVICE Doprava, as Ostrava, Moravská Ostrava, ulice 1 máje 3302/102 A, PSČ VÍTKOVICE POWER ENGINEERING as Ostrava, Vítkovice, Ruská 1142/30, PSČ VÍTKOVICE HARD POLSKA sp z oo Sosnowiec , ul Gen Grota-Roweckiego 130, Polsko 4113 VÍTKOVICE REALITY DEVELOPMENTS sro Ostrava, Vítkovice, Ruská 2887/101, PSČ VTK SERVICE sro Ostrava, Vítkovice, Ruská 468/58, PSČ AIRCRAFT RENT as Ostrava, Vítkovice, Ruská 2887/101, PSČ VÍTKOVICE NP as Ostrava, Vítkovice, Ruská 2887/101, PSČ PRVNÍ VÍTKOVICKÁ PERSONÁLNÍ sro Ostrava, Vítkovice, Ruská 2887/101, PSČ VTK SPECIAL as Praha 1, Nové Město, Václavské náměstí 773/4, PSČ PA SPECIAL, as Praha 1, Nové Město, Václavské náměstí 773/4, PSČ od

6 1 Introduction Des Business name Headquarters 4118 VÍTKOVICE HAMMERING as Ostrava, Vítkovice, Ruská 2887/101, PSČ VL Servis sro od Ostrava-Vítkovice, Ruská 24/83, PSČ VÍTKOVICE GREEN TECHNOLOGY as Ostrava, Vítkovice, Ruská 2887/101, PSČ VÍTKOVICE IT SOLUTIONS as (do VÍTKOVICE CTM as) Ostrava, Vítkovice, Ruská 2887/101, PSČ VÍTKOVICE ITS as od Ostrava, Vítkovice, Ruská 60, PSČ NETPROSYS, sro od Brno, Zábrdovice, Cejl 62, PSČ MEDIUM SOFT as od Ostrava, Moravská Ostrava, Cihelní 14, PSČ TAXNET, sro od Moravská Ostrava, Cihelní 14, PSČ MEDIUM SOFT Slovakia, as od Miletičova 23, Bratislava , Slovensko MEDIUM SOFT - Polska SP z o o od Poznaň , ul Lindego 6, Polsko 4122 VÍTKOVICE RECYCLING as Ostrava, Vítkovice, Ruská 2927, PSČ Spojené slévárny, spol s ro Praha 10, Srbínská 4/867, PSČ NETPROSYS, sro do Brno, Zábrdovice, Cejl 62, PSČ MEDIUM SOFT as do Ostrava, Moravská Ostrava, Cihelní 14, PSČ TAXNET, sro do Moravská Ostrava, Cihelní 14, PSČ MEDIUM SOFT Slovakia, as do Miletičova 23, Bratislava , Slovensko MEDIUM SOFT - Polska SP z o o do Poznaň , ul Lindego 6, Polsko 4126 VÍTKOVICE SCHREIER sro Ostrava, Vítkovice, Kotkova 431/4A, PSČ ARS VÍTKOVICE sro Ostrava, Vítkovice, Ruská 681/72A, PSČ VÍTKOVICE - IOS sro Kadaň, Tušimice 13, okres Chomutov, PSČ Langfang Panwei Enviromental Engineering Co LTD provincie Hebei, okres Guan, Lirangdian, ul Kangli č 8, Čína 4130 Przedsiebiorstwo Budownictwa, Eksportu i Uslug Techniczno-Handlowych "BUDEH" spz Sosnowiec , ul Gen St Grota-Roweckiego 130, Polsko o o 4131 idtax Česká republika, sro od Ostrava, Moravská Ostrava, Cihelní 1575/14, PSČ VITKOVICE INDIA POWER PRIVATE Ground Floor, Block F, International Trade Tower, Nehru Place, New Delhi , LIMITED od Delhi, INDIA 5 VÍTKOVICE ACCOUNTING as Ostrava, Vítkovice, Ruská 2887/101, PSČ

7 1 Introduction 14 Management of VÍTKOVICE CYLINDERS as Ing Jaroslav Šarovský, MBA Office: Managing Director He graduated from the Mining University (VŠB - TU Ostrava), Faculty of Metallurgy and Materials Engineering He has working in the company since nd January 2010 he was appointed CEO Ing Marcel Ujfaluši Office: Commercial Director He graduated from the University of Economics in Prague, faculty of International Business In the business department in the company he has working since 2006 Since 2007 he was a Head of Grinding balls and Trade and since 1 July 2010 he became a Commercial Director Ing Alena Zezulková Office: Financial Director She graduated from the Mining University (VŠB - TU Ostrava), faculty of Economy, major subject The Economy of Industry She has working for the company as a Financial Director since 20 August 2010 Ing Pavel Pawlas Office: Technical Director He graduated from the Mining University (VŠB - TU Ostrava), Faculty of Metallurgy, major subject the Foundry Industry He has working in the company since 1997 Since 1 July 2009 he was on position of Production Director and since 1 July 2010 he became a Technical Director Ing David Otruba Office: Production Director He graduated from the Mining University (VŠB - TU Ostrava), Faculty of Metallurgy and Materials Engineering, major subject the Metal Forming He has working in the company since 1 March 2010, when he was appointed a Production Director - 7 -

8 2 Production Basic facts 2 PRODUCTION BASIC FACTS 21 Investments and Modernisation An amount of CZK 12,270 th was allocated for acquisition of capital assets in 2010 The most important investment project was the acquisition of a machine tool center for CZK 7,000 th Another major project implemented this year involved the renewal of CNG transport technology for an amount of CZK 1,085 th The total volume of capitalized assets was CZK 8,085 th in 2010 The investment plan for 2011 envisages total expenses of CZK 44,900 th, with the acquisition of a LEIFELD steel cylinder capping machine being the most important project in the 2011 investment plant 22 Technology and Reasearch In 2010, the product and product technology development focused on homologation of additional types of CNG-1 cylinders used in the automotive industry, which are produced by applying reverse extruding We successfully implemented new production technology for cylinders with the outside diameters of 204 mm, 222 mm and 320 mm The main emphasis was placed on the development of cylinders, in which it was possible to reach the weight / inner volume ratio coefficient of 09 A quality management system according to EN ISO/TS has been successfully implemented and certified as part of the supplies of CNG-1 cylinders for the automotive industry In the next year, we also plan to extend the homologation for cylinders, which are and will be required by the Asian market 2010 was marked by the increasingly stricter and ever more demanding requirements of our customers for the quality and fixed-date deliveries of our products Our Company faced these requirements with determination and started to build a production planning system primarily based on respecting the agreed deadlines for our deliveries in the form of campaign schedules for the particular batches, ie product groups, in order to not only ensure timely deliveries, but also to minimize the costs associated with frequent technological idle times of the individual machinery aggregates The timely delivery indicator has become the primary objective of production planning and has also been integrated in the incentives programme for our staff Minimization of technological idle times has a clearly favourable effect of reducing incompatible products coming from the individual aggregates Very intensive efforts were made in 2010 to increase production on our most advanced production line in Plant 3 The new line produced 1347% more steel cylinders compared to 2009, and this trend will continue in 2011 as well In engineering applications, development activities were directed towards mobile and stationary storage systems for trailers, home filling stations and container filling stations In 2010, the development was focused mainly on trailers for an Asian customer It concerned trailers with a total capacity of 8,480 litres of transported natural gas As for occupational safety and health protection, the year of 2010 was successful in terms of increasing occupational safety at the workstations We achieved a significant reduction in the number of work accidents by 60% compared to

9 2 Production Basic facts 23 Environment VÍTKOVICE CYLINDERS as pays continuous attention to environmental protection improvement The analysis of graphite lubricant consumption in the Acheson moulding tool per moulded product area implies that the lubricant consumption in the Plant 3 extrusion shop decreased by 1081% compared to 2009 This contributed significantly to the reduction of polluted waste water volume and the reduction in quantity of dangerous waste Oil slurry The occurrence of the O waste was also substantially reduced in Employees Staff and wagess The average relative headcount in 2010: Plan 430 Fact 397 The wage policy was performed in accordance with the agreed remuneration principles based on the collective agreement The Company reached an agreement with the trade union and concluded a single Collective Agreement of VÍTKOVICE MACHINERY GROUP, which was signed, in total, by 11 VMG companies The signing of this collective agreement entails a substantial harmonization of rules and commitments taken in the field of employment, remuneration, working conditions, occupational safety, social and legal security The average wage increased by 38% on a year-to-year basis against the actual 2009 figure, amounting to CZK 24,027 Motivation system The company has preferred, on a long-term basis, a motivation system which emphasises the specific contribution of employees to increasing work productivity, while achieving the required quality of products and services A motivation system, which has been applied for a production employee, regulated the variable portion of wages bonus depending on the meeting and exceeding of defined shift performances Administrative employees in the production technical unit receive monthly bonuses if they meet defined criteria (meeting the sale plan and meeting the planned volume indicators for individual productions) Administrative employees of the commercial section receive bonuses according to their assurance of job orders in their business groups for the given month and the proportion of overdue receivables in total receivables Indicator Average relative head count Actual as of in Employees, total Of this: workers Administrative Employees by age, Average < > 60 as of age Employees, total 40, Of this: workers 39, Administrative 41, Employees by education, Primary Vocational Secondary University as of Employees, total Of this: workers Administrative

10 3 Sales Basic facts 3 SALES - BASIC FACTS The company s sales are divided into three sales groups Steel Cylinders, Engineering and Grinding Equipment All of these sales groups perform their own sales policy and strategy, because they are quite different 31 Steel Cylinders Steel pressure cylinders are a strategic product for our Company; their sale accounted for 705% of the total turnover generated by the Company in 2010 After more than a decade of continuous growth, the sale of these products recorded a strong decline in 2009, both in the total quantity sold and in financial terms During 2010, the market climate related to the global economic slowdown has been changing and the demand has gradually recovered We were able to return to a growth path, particularly as a result of the strong sale in the third and fourth quarter, thus achieving that 2010 was more successful than 2009 both overall as well as in most particular aspects The highest year-on-year increases were achieved in the sale of extruded cylinders with a diameter of mm and accumulators In most segments, however, the increase in quantity was significantly stronger than the increase in sales revenue, which proves the year-to-year decrease of unit prices and, in particular, the increased share of smaller volume cylinders in the total sales There was a significant excess of supply over demand on the market throughout the year, both on the European continent and globally For most cylinder types, there was a continued trend for the market being increasingly occupied by Asian producers with products of lower quality, but also lower price On contrary, the special product range comprising cylinders with an operating pressure above 300 bar, with a capacity of more than 100 litres, with multiple threading or more corrosion-resistant coating does not have to face such a fierce price competition We achieved a major breakthrough in the segment of cylinders for the automotive industry In 2010, the sale volume of these cylinders was 16 times higher than in the previous year Serial deliveries take place with both European and Asian car manufacturers as destination, while the obtained ISO TS certificates open the doors for us in additional car factories In the product range of seamless pressure steel cylinders, the customer portfolio experienced further broadening, particularly as a result of the production expansion in the most advanced line of Plant 3 We have won a number of new clients, especially for cylinders with a water capacity above 140 litres In 2010, our vessels continued to be exported all around the world, including Latin America, Middle and Far East Traditionally, our most important customers are still in our closer vicinity, with more than half of the production being intended for EU customers 32 Grinding Balls and Bars We were able to generate sufficient sales for favourable prices among our customers throughout 2010 In the first half of the year, the market for grinding balls showed good price stability at the level of end 2009 As a result of the sharp price increase of input materials, we were forced to adapt our price policy during the second quarter of the year Most customers accepted the changes; in some segments, however, there was a short-term loss of our position of the main supplier Also this commodity is finding its position on the global markets, but the portfolio of traditional customers is anchored in Europe even more strongly than with vessels The changes in the national political conditions in several post-soviet republics were negatively reflected in the ownership structures of a number of mining companies and, consequently, in the distortion of the developed

11 3 Sales Basic facts distribution networks On contrary, price changes at the global level allowed the first larger deliveries of grinding balls to the Latin America as well as our return to the African markets Overall, the year of 2010 in this commodity was the most successful in the Company s history, and all fundamental indicators were met as planned 33 Engineering In 2010 we continued to develop our customer portfolio both at the domestic and foreign markets Thanks to our partners, we are gaining access to the largest players in CNG and LNG segments We achieved significant progress in the supplies of CNG filling stations, particularly in the Central European territory We successfully performed several deliveries of bundles for manufacturers of CNG and LCNG filling stations and gas (CNG a CBG) transport containers

12 4 Financial Statements of the Company as of FINANCIAL STATEMENTS of the Company as of Balance Sheet - Assets

13 4 Financial Statements of the Company as of

14 4 Financial Statements of the Company as of Balance Sheet - Liabilities

15 4 Financial Statements of the Company as of

16 4 Financial Statements of the Company as of Profit and Loss Account

17 4 Financial Statements of the Company as of

18 4 Financial Statements of the Company as of Cash Flow Statement The balance sheet day was not followed by any facts that would have a significant influence on the data specified in the annual report The company VÍTKOVICE CYLINDERS as does not have any organizational department abroad The annex to the financial statement of the company VÍTKOVICE CYLINDERS as for the year 2010 is stored in the seat of the company

19 5 Auditor's Report on Financial Statements as of AUDITOR S REPORT as of on the Audit of the Financial Statements, Related Parties Report and the Annual Report for

20 5 Auditor's Report on Financial Statements as of

21 5 Auditor's Report on Financial Statements as of

22 6 Related Parties Report for RELATED PARTIES REPORT for 2010 VÍTKOVICE CYLINDERS as is part of the business concern VÍTKOVICE HOLDING, as Its sphere of business covers essentially the production of pressure devices, their assembly, repairs, reconstruction, revisions and testing The present report describes its relationships with other entities in the VÍTKOVICE HOLDING, as Group Table No 1 includes a list of companies controlled by VÍTKOVICE HOLDING, as All of the companies mentioned in this Schedule were examined, for the 2010 accounting period or, to be more precise, as at 31 December 2010, in relation to the accounting entity as regards - Any concluded contracts; - Performances and counter-performances Tables No 2 and 3 provide an overview of the number of contracts signed in 2010 in relation to both purchasing and sales transactions All of these contracts were concluded at the arm s length principle, ie under standard commercial terms and conditions Table No 4 includes the 2010 turnovers for both purchasing and sales, as well as the balance of receivables and liabilities as at 31 December 2010 in relation to the companies that also belong to VÍTKOVICE HOLDING, as VÍTKOVICE CYLINDERS as provided performance (sale eg of products and services) to related parties and received financial counter-performance, or provided financial counter-performance (purchase) to related parties in return for their performance in the form of deliveries, such as services, materials, goods, etc The Company suffered no loss as a result of the contracts concluded with the related parties or as a result of other measures with these related parties

23 6 Related Parties Report for 2010 Order No List of companies controlled by VÍTKOVICE HOLDING, as in the period from to TABLE No 1 Company name Registered office ID No VÍTKOVICE HOLDING, as Ostrava, Vítkovice, Ruská 2887/101, PSČ VTK CYLINDERS sro Ostrava, Vítkovice, Ruská 2887/101, PSČ VÍTKOVICE CYLINDERS as Ostrava-Vítkovice, Ruská 24/83, PSČ VÍTKOVICE Kordt und Rosch GmbH Plettenberg, Německo 112 LAHVARNA BROD doo Vladimira Filakovca 3, Slavonski Brod, Croatia 12 VÍTKOVICE MILMET SA Sosnowiec , ul Gen Grota-Roweckiego 130, Polsko VÍTKOVICE HTB as Ostrava, Vítkovice, Ruská 2887/101, PSČ KZWM OGNIOCHRON SA Andrychów , ul Krakowska 83 C, Polsko 122 KZWM OGNIOCHRON SA Andrychów , ul Krakowska 83 C, Polsko 1221 Silesian Gaz w Siemianowicach sp z oo Siemianowice Slaskie , ul Žeromskiego 21, Polsko 13 SAINVER SA Sarmiento 846, 7 piso, dpto A, Capital Federal, Argentina 14 CIDEGAS SA Av San Martin 6445, (1419) Capital, Buenos Aires, Argentina 141 SAINVER SA Sarmiento 846, 7 piso, dpto A, Capital Federal, Argentina 15 VÍTKOVICE, as Ostrava-Vítkovice, Ruská 2887/101, PSČ VÍTKOVICE, as Ostrava-Vítkovice, Ruská 2887/101, PSČ VÍTKOVICE REVMONT as Ostrava, Vítkovice, Ruská 2887/101, PSČ VTK SECURITIES sro Ostrava, Vítkovice, Ruská 2887/101, PSČ VÍTKOVICE, as Ostrava-Vítkovice, Ruská 2887/101, PSČ VÍTKOVICE HEAVY MACHINERY as Ostrava - Vítkovice, Ruská 2887/101, PSČ Hutní montáže, as Ostrava, Vítkovice, Ruská 1162/60, PSČ HMO Stahlbau und Montage GmbH Hammerstrasse 88, Plauen, Německo CHEMONT, as Brno, Vídeňská 119, okres Brno-město, PSČ Ti kran servis sro Sviadnov, Nádražní 448, PSČ Mostárna Hustopeče, as Hustopeče u Brna, Nádražní 43, PSČ INTERMONTÁŽ - servis, sro ul M Stelmacha 3, Kyjev - 40, Ukrajina PRIS - Hutní montáže Ostrava Nusupbekova st 32, Almaty, Kazachstán GEO-CZ Construction Engineering, spol s ro ul Mazniašvili 4, Tbilisi, okres Čugureti, Gruzie 412 VÍTKOVICE Lisovna, spol s ro "v likvidaci" Ostrava-Vítkovice, Ruská VÍTKOVICE ITS as do Ostrava, Vítkovice, Ruská 60, PSČ VÍTKOVICE RP Slovakia s ro do Vstupný areál U S Steel, Košice , Slovensko VÍTKOVICE SLOVAKIA as do HBS Invest, as) Zámočnícká 8, Bratislava, PSČ , Slovensko VÍTKOVICE ÚAM as Ostrava, Vítkovice, Ruská 2887/101, PSČ VÍTKOVICE TESTING CENTER s r o Ostrava - Hulváky, Pohraniční 584/142, PSČ VÍTKOVICE MECHANIKA as Ostrava, Vítkovice, Ruská 2929/101A, PSČ VÍTKOVICE GEARWORKS as Ostrava - Vítkovice, Ruská čp 83/24, PSČ VÍTKOVICE MKV sro Plzeň 1, Lochotínská 407/13, okres Plzeň-město, PSČ VÍTKOVICE Doprava, as Ostrava, Moravská Ostrava, ulice 1 máje 3302/102 A, PSČ VÍTKOVICE POWER ENGINEERING as Ostrava, Vítkovice, Ruská 1142/30, PSČ

24 6 Related Parties Report for 2010 Order No Company name Registered office ID No 4112 VÍTKOVICE HARD POLSKA sp z oo Sosnowiec , ul Gen Grota-Roweckiego 130, Polsko 4113 VÍTKOVICE REALITY DEVELOPMENTS sro Ostrava, Vítkovice, Ruská 2887/101, PSČ VTK SERVICE sro Ostrava, Vítkovice, Ruská 468/58, PSČ AIRCRAFT RENT as Ostrava, Vítkovice, Ruská 2887/101, PSČ VÍTKOVICE NP as Ostrava, Vítkovice, Ruská 2887/101, PSČ PRVNÍ VÍTKOVICKÁ PERSONÁLNÍ sro Ostrava, Vítkovice, Ruská 2887/101, PSČ VTK SPECIAL as Praha 1, Nové Město, Václavské náměstí 773/4, PSČ PA SPECIAL, as od Praha 1, Nové Město, Václavské náměstí 773/4, PSČ VÍTKOVICE HAMMERING as Ostrava, Vítkovice, Ruská 2887/101, PSČ VL Servis sro od Ostrava-Vítkovice, Ruská 24/83, PSČ VÍTKOVICE GREEN TECHNOLOGY as Ostrava, Vítkovice, Ruská 2887/101, PSČ VÍTKOVICE IT SOLUTIONS as (do VÍTKOVICE CTM as) Ostrava, Vítkovice, Ruská 2887/101, PSČ VÍTKOVICE ITS as do Ostrava, Vítkovice, Ruská 60, PSČ NETPROSYS, sro od Brno, Zábrdovice, Cejl 62, PSČ MEDIUM SOFT as od Ostrava, Moravská Ostrava, Cihelní 14, PSČ TAXNET, sro od Moravská Ostrava, Cihelní 14, PSČ MEDIUM SOFT Slovakia, as od Miletičova 23, Bratislava , Slovensko MEDIUM SOFT - Polska SP z o o od Poznaň , ul Lindego 6, Polsko 4122 VÍTKOVICE RECYCLING as Ostrava, Vítkovice, Ruská 2927, PSČ Spojené slévárny, spol s ro Praha 10, Srbínská 4/867, PSČ NETPROSYS, sro do Brno, Zábrdovice, Cejl 62, PSČ MEDIUM SOFT as do Ostrava, Moravská Ostrava, Cihelní 14, PSČ TAXNET, sro do Moravská Ostrava, Cihelní 14, PSČ MEDIUM SOFT Slovakia, as do Miletičova 23, Bratislava , Slovensko MEDIUM SOFT - Polska SP z o o do Poznaň , ul Lindego 6, Polsko 4126 VÍTKOVICE SCHREIER sro Ostrava, Vítkovice, Kotkova 431/4A, PSČ ARS VÍTKOVICE sro Ostrava, Vítkovice, Ruská 681/72A, PSČ VÍTKOVICE - IOS sro Kadaň, Tušimice 13, okres Chomutov, PSČ Langfang Panwei Enviromental Engineering Co LTD Przedsiebiorstwo Budownictwa, Eksportu i Uslug Techniczno-Handlowych "BUDEH" spz o o provincie Hebei, okres Guan, Lirangdian, ul Kangli č 8, Čína Sosnowiec , ul Gen St Grota-Roweckiego 130, Polsko idtax Česká republika, sro od Ostrava, Moravská Ostrava, Cihelní 1575/14, PSČ VITKOVICE INDIA POWER PRIVATE LIMITED od Ground Floor, Block F, International Trade Tower, Nehru Place, New Delhi , Delhi, INDIA 5 VÍTKOVICE ACCOUNTING as Ostrava, Vítkovice, Ruská 2887/101, PSČ Poznámky: As at 1 January 2010, the merger by acquisition of VÍTKOVICE RP Slovakia sro and HBS Invest, as as the successor was registered in the Commercial Register of the entities concerned VÍTKOVICE RP Slovakia sro as the company being acquired was wound up and dissolved without liquidation, with a legal successor At the same time, the successor HBS Invest, as changed its trade name and the registered office of the company as follows: VÍTKOVICE SLOVAKIA as, Zámočnícka 13, Bratislava, postcode , Comp reg No , registered in the Commercial Register kept by the District Court in Bratislava, Section Sa, file No 1711/B

25 6 Related Parties Report for 2010 LIST OF CONTRACTS CONCLUDED (FROM AUTHOR) VÍTKOVICE CYLINDERS a s WITH RELATED PARTIES IN THE PERIOD FROM TABLE No 2 Order No Company name ID No Closed Sale Contracts VÍTKOVICE HOLDING, as VTK CYLINDERS sro VÍTKOVICE CYLINDERS as VÍTKOVICE Kordt und Rosch GmbH LAHVARNA BROD doo VÍTKOVICE MILMET SA VÍTKOVICE HTB as KZWM OGNIOCHRON SA 122 KZWM OGNIOCHRON SA 1221 Silesian Gaz w Siemianowicach sp z oo 13 SAINVER SA 14 CIDEGAS SA 141 SAINVER SA 15 VÍTKOVICE, as VÍTKOVICE, as VÍTKOVICE REVMONT as VTK SECURITIES sro VÍTKOVICE, as VÍTKOVICE HEAVY MACHINERY as Hutní montáže, as HMO Stahlbau und Montage GmbH CHEMONT, as Ti kran servis sro Mostárna Hustopeče, as INTERMONTÁŽ - servis, sro PRIS - Hutní montáže Ostrava GEO - CZ Construction Engineering, spol s ro 412 VÍTKOVICE Lisovna, spol s ro "v likvidaci" VÍTKOVICE ITS as VÍTKOVICE RP Slovakia s ro do VÍTKOVICE SLOVAKIA as (do HBS Invest, as) 416 VÍTKOVICE ÚAM as VÍTKOVICE TESTING CENTER s r o VÍTKOVICE MECHANIKA as

26 6 Related Parties Report for 2010 Order No Company name ID No Closed Sale Contracts 419 VÍTKOVICE GEARWORKS as VÍTKOVICE MKV sro VÍTKOVICE Doprava, as VÍTKOVICE POWER ENGINEERING as VÍTKOVICE HARD POLSKA sp z oo 4113 VÍTKOVICE REALITY DEVELOPMENTS sro VTK SERVICE sro AIRCRAFT RENT as VÍTKOVICE NP as PRVNÍ VÍTKOVICKÁ PERSONÁLNÍ sro VTK SPECIAL as PA SPECIAL, as od VÍTKOVICE HAMMERING as VL Servis sro od VÍTKOVICE GREEN TECHNOLOGY as VÍTKOVICE IT SOLUTIONS as (do VÍTKOVICE CTM as) VÍTKOVICE ITS as od NETPROSYS, sro od MEDIUM SOFT as od TAXNET, sro od MEDIUM SOFT Slovakia, as od MEDIUM SOFT-Polska SP z o o od VÍTKOVICE RECYCLING as Spojené slévárny, spol s ro NETPROSYS, sro do MEDIUM SOFT as do TAXNET, sro do MEDIUM SOFT Slovakia, as do MEDIUM SOFT-Polska SP z o o do VÍTKOVICE SCHREIER sro ARS VÍTKOVICE sro VÍTKOVICE - IOS sro Langfang Panwei Enviromental Engineering Co LTD Przedsiebiorstwo Budownictwa, Eksportu i Uslug Techniczno-Handlowych "BUDEH" spz o o idtax Česká republika, sro od VITKOVICE INDIA POWER PRIVATE LIMITED od VÍTKOVICE ACCOUNTING as

27 6 Related Parties Report for 2010 LIST OF CONTRACTS CONCLUDED (FROM AUTHOR) VÍTKOVICE CYLINDERS a s WITH RELATED PARTIES IN THE PERIOD FROM TABLE No 3 Order No Company name ID No Closed Purchase Contracts VÍTKOVICE HOLDING, as VTK CYLINDERS sro VÍTKOVICE CYLINDERS as VÍTKOVICE Kordt und Rosch GmbH LAHVARNA BROD doo 12 VÍTKOVICE MILMET SA VÍTKOVICE HTB as KZWM OGNIOCHRON SA 122 KZWM OGNIOCHRON SA 1221 Silesian Gaz w Siemianowicach sp z oo 13 SAINVER SA 14 CIDEGAS SA 141 SAINVER SA 15 VÍTKOVICE, as VÍTKOVICE, as VÍTKOVICE REVMONT as VTK SECURITIES sro VÍTKOVICE, as VÍTKOVICE HEAVY MACHINERY as Hutní montáže, as HMO Stahlbau und Montage GmbH CHEMONT, as Ti kran servis sro Mostárna Hustopeče, as INTERMONTÁŽ - servis, sro PRIS - Hutní montáže Ostrava GEO - CZ Construction Engineering, spol s ro 412 VÍTKOVICE Lisovna, spol s ro "v likvidaci" VÍTKOVICE ITS as do VÍTKOVICE RP Slovakia s ro do VÍTKOVICE SLOVAKIA as (do HBS Invest, as) VÍTKOVICE ÚAM as VÍTKOVICE TESTING CENTER s r o

28 6 Related Parties Report for 2010 Order No Company name ID No Closed Purchase Contracts 418 VÍTKOVICE MECHANIKA as VÍTKOVICE GEARWORKS as VÍTKOVICE MKV sro VÍTKOVICE Doprava, as VÍTKOVICE POWER ENGINEERING as VÍTKOVICE HARD POLSKA sp z oo 4113 VÍTKOVICE REALITY DEVELOPMENTS sro VTK SERVICE sro AIRCRAFT RENT as VÍTKOVICE NP as PRVNÍ VÍTKOVICKÁ PERSONÁLNÍ sro VTK SPECIAL as PA SPECIAL, as od VÍTKOVICE HAMMERING as VL Servis sro od VÍTKOVICE GREEN TECHNOLOGY as VÍTKOVICE IT SOLUTIONS as (do VÍTKOVICE CTM as) VÍTKOVICE ITS as od NETPROSYS, sro od MEDIUM SOFT as od TAXNET, sro od MEDIUM SOFT Slovakia, as od MEDIUM SOFT-Polska SP z o o od VÍTKOVICE RECYCLING as Spojené slévárny, spol s ro NETPROSYS, sro do MEDIUM SOFT as do TAXNET, sro do MEDIUM SOFT Slovakia, as do MEDIUM SOFT-Polska SP z o o do VÍTKOVICE SCHREIER sro ARS VÍTKOVICE sro VÍTKOVICE - IOS sro Langfang Panwei Enviromental Engineering Co LTD Przedsiebiorstwo Budownictwa, Eksportu i Uslug Techniczno-Handlowych "BUDEH" spz o o idtax Česká republika, sro od VITKOVICE INDIA POWER PRIVATE LIMITED od VÍTKOVICE ACCOUNTING as

29 6 Related Parties Report for 2010 SUMMARY OF TURNOVERS, RECEIVABLES, PAYABLES (FROM AUTHOR) VÍTKOVICE CYLINDERS a s WITH RELATED PARTIES IN THE PERIOD FROM TABLE No 4 Order No Company name ID No Turnover from sales Turnover from purchases Receivables as of Payables as of VÍTKOVICE HOLDING, as VTK CYLINDERS sro VÍTKOVICE CYLINDERS as VÍTKOVICE Kordt und Rosch GmbH LAHVARNA BROD doo VÍTKOVICE MILMET SA VÍTKOVICE HTB as KZWM OGNIOCHRON SA 122 KZWM OGNIOCHRON SA 1221 Silesian Gaz w Siemianowicach sp z oo 13 SAINVER SA 14 CIDEGAS SA SAINVER SA 15 VÍTKOVICE, as VÍTKOVICE, as VÍTKOVICE REVMONT as VTK SECURITIES sro VÍTKOVICE, as VÍTKOVICE HEAVY MACHINERY as Hutní montáže, as HMO Stahlbau und Montage GmbH CHEMONT, as Ti kran servis sro Mostárna Hustopeče, as INTERMONTÁŽ - servis, sro PRIS - Hutní montáže Ostrava GEO - CZ Construction Engineering, spol s ro 412 VÍTKOVICE Lisovna, spol s ro "v likvidaci" VÍTKOVICE ITS as do VÍTKOVICE RP Slovakia s ro do VÍTKOVICE SLOVAKIA as (do HBS Invest, as) VÍTKOVICE ÚAM as VÍTKOVICE TESTING CENTER s r o VÍTKOVICE MECHANIKA as

30 6 Related Parties Report for 2010 Order No Company name ID No Turnover from sales Turnover from purchases Receivables as of Payables as of VÍTKOVICE GEARWORKS as VÍTKOVICE MKV sro VÍTKOVICE Doprava, as VÍTKOVICE POWER ENGINEERING as VÍTKOVICE HARD POLSKA sp z oo 4113 VÍTKOVICE REALITY DEVELOPMENTS sro VTK SERVICE sro AIRCRAFT RENT as VÍTKOVICE NP as PRVNÍ VÍTKOVICKÁ PERSONÁLNÍ sro VTK SPECIAL as PA SPECIAL, as od VÍTKOVICE HAMMERING as VL Servis sro od VÍTKOVICE GREEN TECHNOLOGY as VÍTKOVICE IT SOLUTIONS as (do VÍTKOVICE CTM as) VÍTKOVICE ITS as od NETPROSYS, sro od MEDIUM SOFT as od TAXNET, sro od MEDIUM SOFT Slovakia, as od MEDIUM SOFT - Polska SP z o o od VÍTKOVICE RECYCLING as Spojené slévárny, spol s ro NETPROSYS, sro od MEDIUM SOFT as od TAXNET, sro od MEDIUM SOFT Slovakia, as od MEDIUM SOFT - Polska SP z o o od VÍTKOVICE SCHREIER sro ARS VÍTKOVICE sro VÍTKOVICE - IOS sro Langfang Panwei Enviromental Engineering Co LTD 4130 Przedsiebiorstwo Budownictwa, Eksportu i Uslug Techniczno-Handlowych "BUDEH" spz o o idtax Česká republika, sro od VITKOVICE INDIA POWER PRIVATE LIMITED od VÍTKOVICE ACCOUNTING as Note: The amounts are exclusive of VAT

31 7 Report of the Board of Directors on the Entrepreneurial Activities of VÍTKOVICE CYLINDERS as and on Its Assets in REPORT OF THE BOARD OF DIRECTORS on the Entrepreneurial Activities of VÍTKOVICE CYLINDERS as and on Its Assets in 2010 Incorporation; Ownership; Payment of Registered Capital VÍTKOVICE CYLINDERS as ID No (hereafter referred to as the company ), is a joint stock company registered at the Commercial Register at the Regional Court of Ostrava, the Czech Republic It was incorporated through the transformation of VÍTKOVICE lahvárna spol s ro and was entered in the Commercial Register on 01/01/2000 under the new business name of VÍTKOVICE Lahvárna as On 17/08/2005 the business name was changed to VÍTKOVICE CYLINDERS as The company s headquarters are at Ostrava Vítkovice, Ruská 24/83, Ostrava The company s core activities are the production, installation and repair of reserved pressure facilities and forges The company s 100% owner as of 31/12/2009 was VTK CYLINDRES sro The company s registered capital is CZK It is fully paid and divided into shares Net Profits; Income Tax For the period of 1 January 2010 to 31 December 2010, the Company recorded a loss of CZK 15,769 thousand This economic result was caused by the significant increase in prices for the input raw materials, primarily billets and blocks, supplied by our strategic supplier Moravia Steel, as History of Tangible and Intangible Fixed Assets The company duly administered its assets in 2010 Tangible and intangible fixed assets totalling CZK 32,551 th were acquired The most important items include the machine tool center for CZK 7,000 th and the new line inventory with an acquisition price of CZK 16,716 th An advance payment for the acquisition of Leifeld EN 600/400 CNC was provided at the end of 2010 The total of tangible and intangible fixed assets was CZK 1,240,155 th net as of 31/12/2010 The assets are duly depreciated following the relevant depreciation plan In 2010, the Company created no provisions for the repair of tangible fixed assets For the repairs of assets the company outlaid in 2010 the amount of CZK 88,170 th, of which part was covered by reserves for repairs of assets created in the past period Inventory The company s inventory totalling CZK 386,581 th net relates especially to materials, products, merchandise and work in progress The increase in inventory balance compared to 31 December 2009 results primarily from the higher production volume, increased prices of input materials and the work-in-progress at the end of the year Adjustments in the amount of CZK 11,528 th were created for the inventory of work-in-progress, consisting mainly in unfinished steel cylinders, the realization price of which is lower than their accounting valuation Receivables Receivables are stated at their nominal amount The total receivables as of 31/12/2010 amounted to CZK 463,832 th, of which CZK 19,164 th relate to long term receivables payable to 01/2012 and CZK 444,668 th to short term receivables payable during

32 7 Report of the Board of Directors on the Entrepreneurial Activities of VÍTKOVICE CYLINDERS as and on Its Assets in 2010 Receivables from purchasers were CZK 367,256 th and the company created adjustments to receivables from purchasers totalling CZK 6,283 th Receivables from purchasers past due are CZK 12,210 th (more than 180 days past due) and CZK 92,692 th (less than 180 days past due) History of Financial Investments The company s short term financial assets amounted to CZK 36,632 th as of 31/12/2010 The financial assets are in bank accounts and term deposits with Komercni banka, as, Raiffeisenbank as, Ceska sporitelna, as, HSBC Bank plc, UniCredit Bank Czech Republic, as and Citibank as The company is able to fulfil all of its financial obligations in due time

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