ANNUAL REPORT 2017 - ARMATURY Group

ANNUAL REPORT 2017

2

CONTENT

Foreword / 5

Report of the Board of Directors on the

company‘s business activities and on the

state of its assets / 6

Domestic trade / 6

Foreign trade / 7

Manufacturing valves / 8

Services and repairs of valves / 9

Research and development / 10

Quality / 11

Human resources management / 12

Financial part / 13

3

4

Foreword

5

Ladies and gentlemen, dear business partners,

in 2017, in line with global trends, we were striving to reduce costs and we were also looking for

new sales areas to replace a downswing in the Russian market. And we succeeded, for the most

part.

In the area of cost reduction, we took a number of measures - optimizing the amount of material in

the warehouse, reducing operating costs, narrowing production assortment, standardizing inputs

into products, introducing more accurate and stronger monitoring of all production orders. We

managed to gain new sales areas, for example, in Africa, Canada and other countries.

As far as the results are concerned, we crossed the turnover plan in 2017, but due to the change in

the composition of assortment, we did not meet the overall EBITDA plan. Several influences came

to light - the global decline in the oil and gas sector reflected in declining ball valve orders.

However, prospects for the next period are positive. A slight increase is expected in the markets,

and we have a number of contracted projects and projects in development for the year 2018, which

fills us with optimism. We believe that 2018 will be a turning point, and we will achieve positive

results from both the economic and the commercial point of view.

Petr Holeček

Chairman of the Board

6

Report of the Board of Directors

on the company's business activities

and on the state of its assets

Domestic trade

From the point of view of domestic trade, we consider the year 2017 to be very successful. With

revenues from sales of valves on the domestic market in the amount of 423 million crowns we

managed to exceed the planned values by five percent. The situation on the global market, the

development of oil prices, persistent sanctions against Russia continued to affect the domestic

market. We deliver ARMATURY Group products all over the world through domestic business

partners. They are thus a part of the technological units in all areas of industry.

An important project in the chemical sector was the supply of valves to a refinery operated by MOL

Hungarian Oil and Gas in Szazhalombatta, Hungary. In the energy sector, we delivered supplies for

turbines for customers in Croatia, Poland, Uzbekistan, Kazakhstan, Egypt, England, Sweden, Chile,

Turkey, France and other countries. We continued to supply the nuclear power sector. For the

Temelín power plant we produced a special all-welded gate valves DN 600. For this contract, great

emphasis was placed on meeting the technical parameters and customer requirements. Among

other tests, testing of these gate valves was also carried out at ČKD Blansko in order to verify the

exact pressure drop. The test were excellent, the quality of our valves was appreciated primarily by

the customer.

Even in 2017 we participated in supplies of valves for Czech gas pipelines. The main customer was

NET4GAS, the exclusive gas carrier in the Czech Republic. In the field of metallurgy, we

successfully delivered supplies to Třinecké Železárny, where, inter alia, the construction of a coke

oven, a blast furnace wind heater, etc.

Sales of piping and accessories

The sale of metallurgical material saw significant changes in 2017. The structure and portfolio of our

customers changed with the reorganization of the department. We started to focus on projects and

supplies of metallurgical material for our major customers. We believe that these changes will help

us to consolidate our position in the market as a stable supplier not only of individual pipe parts, but

also to deliver complete prefabrication including necessary calculations, welding and preparation of

final documentation. Among the most important contracts in 2017 was the supply of pipe material

and accessories according to a framework contract for TERMONTA PRAHA and supplies for

Doosan Škoda Power. A challenging test, which we aced, was the delivery of pipeline parts for

CB&I for Pancevo.

7

Foreign trade

Even in 2017, strong competition showed in most territories due to fewer actively built projects and

greater competition from individual manufacturers. Competition is not only among European

manufacturers, new active players are eastern valvers, who improve the quality of their products

every year. Sales in the West were still affected in 2017 by the low purchase price of oil and gas,

which was a decision-making factor for medium and long-term projects for valves supplies.

The vast majority of achievements in 2017 were based on meeting the required short supply dates

for gas and oil pipeline systems in Algeria, Iraq and Austria. After a weak third quarter, we managed

to build on the successful first half of the year with implementation of orders with strictly pursued

short delivery deadlines. The West business center fulfilled 90% of its plan in 2017.

For the successes of 2017, several "prototype" products, such as the DN 400 metal seated

Trunnion mounted ball valve with zero leakage, its implementation and reliable operation in live

operation for one year. The innovative design stood the test of challenging operating condition at the

first attempt where our company tested the dynamic effects of the media and its cycling under full

differential pressure. The second project was the S43 DN 600/500 high-pressure gate valve

dispatched to Indonesian paper mills.

East: deterioration of geopolitical situation

Within the Russian Federation, relations between the EU and the Russian Federation deteriorated

at all levels. The introduction of the US and EU embargo on the Russian Federation resulted in the

launch of countermeasures favoring domestic producers. The consequences will be felt in the years

to come.

The only exception in Russia is the metallurgical industry where we are able to continue with slightly

growth. A relatively stable area for us still is the energy industry, where we supplied valves to new

power plants in the Kaliningrad region. In order to maintain positions in the Russian Federation and

the CIS countries, it is necessary to come to the market with valves that are not produced in Russia.

Last year, we made the first delivery of ball valves to Australia for Jemena Gas, a major distributor

of natural gas.

We see successful future of our company in the individual approach to the customer. We will

continue to flexibly offer what the customer needs. We will recognize their needs and experience

with using valves and track the trends in purchasing behavior that change over time. For example,

in the oil and gas sector, a metal-metal seal is now required exclusively. Similar trend is also found

in butterfly valves in metallurgy, and in the oil industry, ball valves are replaced with through-conduit

gate valves. Capturing these trends is essential for succeeding on the market.

8

Manufacturing valves

Our own production reached sales of 681 million. The second half of the year was much weaker

than the first half production-wise. In the future, we need to focus more on more evenly achieving

sales revenue. Throughout the year, we were very successful in generating revenue at plant 2. The

structure of the assortment was composed mainly of ball valves, valves and metallurgical valves.

We improve data quality for production

Many elements that enter the production system affect it. That is why we focused on inputs that

need to be corrected. In addition to reports of discrepancies that arise from quality management, we

began to generate reports of discrepancies between the reality of our production and the input

information influencing production. For example, errors in the drawing documentation, improperly

formulated technological procedures, or missing sales information. The data obtained that way is

then processed and corrected by the people concerned.

Welding with new technology

To improve the welding of 14MoV6-3 material, we used a new technology of welding with an

automaton under the welding flux fed with cord wire with a basic medium internationally marked

125. By using this technology, welding time has been shortened. The preheating was carried out in

a furnace for automatic process and for manual welding of the P91 and 14MoV6-3 combination

using heating pads with resistive heating. The quality of all welds was verified by X-ray inspection

and surface magnetic control.

Helping students with formula production

Formula Student is a prestigious international competition in which students of technical universities

pit their wits against each other in the development, construction and subsequent races of Formula-

type cars. One of the golden partners of this project is our company.

The issue of frame construction has been technologically solved by creating a CNC program.

Subsequently, the assembly department, machining department and also the welding department

did a great job. We wanted to make a frame with the accuracy up to one millimeter.

9

Service and repair of valves

The core of the Service and Repairs Center is the provision of warranty and post-warranty service

for the entire range of industrial valves that are within the range of the Armatury Group production

range. The duties of this center are also consulting services in the field of industrial valves, servo-

drives, hydro-gears, pneumatic actuators. At the same time, we produce switchboards for

controlling goggle valves and we also participate in small-scale investing MWE (small hydro power

plants with complex control). Of course, there is a non-stop emergency service, which is provided

24 hours a day with 3 fully equipped vehicles. The quality of our center is based on the high

qualification of our staff.

The year 2017 was marked by the consolidation of the "Service and repair of valves" center. In the

course of March 2017, negotiations with ŠKODA JS a.s. began. The subject of this meeting was the

total number of revitalized valves for the completion of MO 34 NPP Mochovce, price calculations,

contractual obligations, consideration and conditions of work safety (risk) and training of 15 workers

to obtain certificates for this activity. The result of almost three months of negotiations was the

arrival of our staff during the month of July 2017 at the Mochovce MO 34 nuclear power plant. This

is a key contract that, by its scope and length of anticipated work, is the key contract within the

repair plan.

A satisfied customer is the one who turns to us with thanks and trusts us

back

During the year 2017, a number of smaller contracts of no lesser importance were realized. On

these contracts, we worked with our permanent partners:

in the field of metallurgical plants: Arcelor Mittal Ostrava a.s., Třinecké železárny a.s., U.S.

Steel Košice

in the field of energy services: ČEZ, a.s., Veolia Energie ČR, a.s.,

in the field of heat distribution processing: heating plant Přerov, heating plant Krnov,

in the field of gas distribution: innogy Gas Storage, s.r.o.,

in the field of oil distribution: Mero ČR and Synthesia, a.s.

in the field of water management: Povodí Vltavy, Povodí Ohře, Povodí Odry and other

representatives in the field of wastewater treatment plants.

The plan, set at the beginning of 2017, was successfully fulfilled. For the following period, we have

set the following goals: increasing the plan, keeping existing and acquiring new customers,

improving the quality of our work.

10

Research and Development

Armatury Group a.s. has its own and strong team of developers. Of course, this team is made up of

a number of experienced designers. These experienced engineers, however, find strong support in

internal sources like technology, production, DRE and commerce and in external resources from

Universities and Research Institutes.

The assignments for this team are short and long term. Short-term assignments aim to develop a

product that is tailor-made according to the specific requirements of a particular customer, basically

meeting planned sales in a given year. Short-term assignments are mainly for the following

activities:

- extreme working parameters that are defined by pressure, temperature and composition of the

working substance

- specific requirements for materials and dimensions of the valve

- specific requirements for valve functions and properties

We improve technical solutions, we develop new valves

Long-term assignments aim to develop a product that will be unique on the world market due to its

unique characteristics. Examples of successful short-term R&D projects:

- production of the DN 600 PN 250 gate valve from material 1.7715 + A355 P91, for the

temperature of 538 ° C. The total weight was 7070kg.

- production of check valves to protect turbines operating at 570 ° C

- change of seat and ball design for ball valves to DN 300. The altered design has ensured the

leakage A according to API Spec 6D also for the PEEK seal, which ensures full functionality of the

ball valves at a temperature of 250 ° C and a pressure of 400 bar.

Examples of successful long-term projects

- the second phase of the Cryogenic Ball Valve Development project has been successfully

completed, which is being developed in cooperation with TU Ostrava as a part of the TRIO project

listed by the Ministry of Industry and Trade

- the first phase of the project on the development of ball valves metal x metal with a degree of

leakage A according to API Spec6 D was successfully completed. The project is supported by the

Ministry of Industry and Trade within the project OPPIK -Application.

11

Quality

In July 2017, we defended the Material Organization Certificate to produce and supply material

according to ASME BPV CODE Section III related to nuclear energy. TÜV NORD auditors verified

the system and project documentation as defined in the Quality Manual and consequently all

relevant processes in production, control and testing, material identification and qualification of

professional staff. The certificate was validated.

On August 22, 2017 the NDT laboratory was assessed according to ČSN EN ISO / IEC 17025 by a

TÜV NORD auditor. Testing is carried out in accordance with the established management system

according to EN ISO 9001. The result of this audit was the issuance of a Certificate of Conformity to

the NDT laboratory at AG premises to perform non-destructive RT, UT, MT, PT and VT tests.

On 23 - 26 October 2017, a recertification audit of quality management system was carried out in

accordance with the newly issued standard EN ISO 9001: 2015, environmental management

system according to EN ISO 14001: 2015 and health and safety at work according to BS OHSAS

18001: 2007 . The functionality of the management system was reviewed by TÜV NORD. During

the audit, no significant discrepancies were found. Finally, the auditors stated that the system was in

compliance with the specified requirements and recommended issuing new certificates.

During the year, several customer audits were carried out to test the functionality of established

management systems with the aim to recommend or not recommend ARMATURY Group a.s. to

their supplier' registry.

In the context of product certification, random inspections were carried out in the course of the year

by a notified body of TÜV SÜD Czech. The result was confirmation of compliance with the

requirements of the European PED Directive 2014/68 / EU in the reports of certification company.

253

57

289 259

51

282

0

200

400

Dělník Režijní THP

2016 2017

12

Human resources management

Th year 2017 was for human resources a period of mainly searching for new, skilled workers in the

field of blue-collar professions, the lack of which was noted by engineering companies throughout

the region. Throughout the year, we succeeded in getting workers to reinforce many workplaces,

both from the rank of experienced staff and fresh school graduates.

As we realize that it is increasingly difficult to provide quality and qualified staff for operating

individual workshop stations, we are increasingly developing cooperation with specialist engineering

schools and their students. We focus mainly on students from nearby surroundings who attend

technical high school in Opava and Vítkovice secondary technical school in Ostrava, with whom we

cooperate in the field of professional training, excursions or competitions. In the technical-economic

fields we involve university students in the form of short-term practices and agreements to perform

work. By doing so, we involve young students and apprentices in active collaboration and interest in

engineering disciplines and our company. In cooperation with our partner companies, the excursion

of students from Austrian city of Linz was also held last year.

At 31 December 2017, our company had a total of 592 employees. Even though there was a

decrease in the total number of employees compared to 2016, there was an increase of 6

employees in the blue-collar professions, which confirms our focus on workshop professions and

support of the workshops of our company.

Support for vocational training through grant programs

In the field of education, we implemented a number of technical and language training courses

through the grant program "Support for Employee Professional Training II." We started the training

cycle in January 2017 with the training of quality controllers in the field of NDT methods, in the

production division there was training of welders for welding tests, welding technologist and

annealing furnace. The designers gained new knowledge at Solidworks, and the staff of the

business division familiarized themselves with new trends in online marketing as part of the training.

We successfully finished the project "Guarantees for young people in the Moravian-Silesian Region"

aimed at increasing the employment of graduates and young people.

Thanks to the ongoing training and subsidy projects, we gradually deepen the level of knowledge

needed by our employees. Last year, we trained a total of 602 people, 100 of which were trained

through subsidies.

Graph: Employee Structure in 2016 -2017

Financial part

Balance sheet / 14

Profit and loss account / 16

Cash-flow / 17

Overview of Changes in Equity / 18

Notes to Financial Statements / 19

Report on Relationships between

Controlling and Controlled Entity / 40

Supervisory Board‘s Report / 43

Independent Auditor‘s Report / 44

Organization chart of company / 45

EMS AND OHSAS POLICY / 46

13

Designation ASSETSLine

numberCurrent accounting period

Previousacc. period

a b c GrossAdjustm

entNet Net

TOTAL ASSETS 1 2 306 983 -761 772 1 545 211 1 939 277A. Receivables for capital subscription 2 0 0 0 0B. Fixed assets 3 1 279 383 -597 204 682 179 790 051B. I. Intangible fixed assets 4 56 606 -53 820 2 786 4 832

I.1. Research and development 5 0 0 0 0I. 2. Valuable rights 6 56 606 -53 820 2 786 4 832I. 2. 1. Software 7 56 606 -53 820 2 786 4 832I. 2. 2. Other valuable rights 8 0 0 0 0I. 3. Goodwill 9 0 0 0 0I. 4. Other intangible fixed assets 10 0 0 0 0

I. 5. Advance payments for intangible fixed assets and intangible fixed assets in progress 11 0 0 0 0I. 5. 1. Advance payments for intangible fixed assets 12 0 0 0 0I. 5. 2. Intangible fixed assets in progress 13 0 0 0 0

B. II. Tangible fixed assets 14 1 188 684 -543 384 645 300 718 901II. 1. Land and buildings 15 684 654 -178 124 506 530 527 421II. 1. 1. Land 16 10 982 0 10 982 10 982II. 1. 2. Buildings 17 673 672 -178 124 495 548 516 439II. 2. Individual movables and sets of tangible movables 18 503 127 -364 642 138 485 191 336II. 3. Valuation difference of acquired assets 19 0 0 0 0II. 4. Other tangible fixed assets 20 92 0 92 92II. 4. 1. Planting complexes of perennial crops and stands 21 0 0 0 0II. 4. 2. Bred animals and its groups 22 0 0 0 0II. 4. 3. Other tangible fixed assets 23 92 0 92 92II. 5. Advance payments for tangible fixed assets and tangible fixed assets in progress 24 811 -618 193 52II. 5. 1. Advance payments for tangible fixed assets 25 618 -618 0 0II. 5. 2. Tangible fixed assets in progress 26 193 0 193 52

B. III. Financial investments 27 34 093 0 34 093 66 318III. 1. Shares and ownership interests in controlled enterprises 28 34 093 0 34 093 66 318III. 2. Intergroup loans - controlling party 29 0 0 0 0III. 3. Shares and ownership interests in accounting units under substantial influence 30 0 0 0 0III. 4. Intergroup loans - under substantial influence 31 0 0 0 0III. 5. Other securities and ownership interests 32 0 0 0 0III. 6. Loans and credits - others 33 0 0 0 0III. 7. Other financial investments 34 0 0 0 0III. 7. 1. Other financial investments 35 0 0 0 0III. 7. 2. Advance payments for financial investments 36 0 0 0 0

C. Current assets 37 1 019 449 -164 568 854 881 1 139 402C. I. Inventory 38 433 915 -31 894 402 021 385 043

I. 1. Materials 39 87 190 -6 340 80 850 77 369I. 2. Work-in-progress and semi-finished products 40 122 949 -5 243 117 706 72 242I. 3. Products and merchandise 41 179 663 -20 311 159 352 211 907I. 3. 1. Products 42 22 718 -11 832 10 886 44 988I. 3. 2. Merchandise 43 156 945 -8 479 148 466 166 919I. 4. Young and other animals and its groups 44 0 0 0 0I. 5. Advance payments for inventory 45 44 113 0 44 113 23 525

C. II. Receivables 46 577 443 -132 674 444 769 666 655II. 1. Long-term receivables 47 106 004 0 106 004 88 495II. 1. 1. Assets from trading relations 48 61 275 0 61 275 73 885II. 1. 2. Assets - controlling party 49 0 0 0 0II. 1. 3. Assets - substantial influence 50 0 0 0 0II. 1. 4. Deferred tax receivables 51 42 835 0 42 835 13 425II. 1. 5. Other receivables 52 1 894 0 1 894 1 185II. 1. 5. 1. Assets for associates, cooperative members and partners 53 0 0 0 0II. 1. 5. 2. Supplied long-term deposits 54 327 0 327 35II. 1. 5. 3. Estimated accrued receivables 55 0 0 0 0II. 1. 5. 4. Other receivables 56 1 567 0 1 567 1 150II. 2. Short-term receivables 57 471 439 -132 674 338 765 578 160II. 2. 1. Assets from trading relations 58 463 932 -132 674 331 258 535 981II. 2. 2. Assets - controlling party 59 472 0 472 28 072II. 2. 3. Assets - substantial influence 60 0 0 0 0II. 2. 4. Other receivables 61 7 035 0 7 035 14 107II. 2. 4. 1. Assets for associates, cooperative members and partners 62 0 0 0 0II. 2. 4. 2. Social security and health insurance 63 0 0 0 0II. 2. 4. 3. State - tax receivables 64 2 685 0 2 685 9 895II. 2. 4. 4. Granted short-time deposits 65 1 177 0 1 177 1 228II. 2. 4. 5. Estimated accrued receivables 66 2 676 0 2 676 1 753II. 2. 4. 6. Other receivables 67 497 0 497 1 231

C. III. Short-term financial assets 68 0 0 0 0III. 1. Shares and ownership interests in controlled enterprises 69 0 0 0 0III. 2. Other short-term financial assets 70 0 0 0 0

C. IV. Finances 71 8 091 0 8 091 87 704IV. 1. Cash 72 561 0 561 999IV. 2. Bank accounts 73 7 530 0 7 530 86 705

D. Accruals 74 8 151 0 8 151 9 824D. 1. Deferred expenses 75 7 528 0 7 528 9 711D. 2. Complex deferred expenses 76 0 0 0 0D. 3. Accrued revenues 77 623 0 623 113

Annual report 2017 Balance sheet

Balance sheet – as at 31st December 2017 (in thousands of CZK)

1

Designation LIABILITIESLine

number

Currentaccounting

period

Previous acc. period

a b c 5 6TOTAL LIABILITIES 78 1 545 211 1 939 277

A. Equity 79 808 434 735 815A. I. Registered capital 80 501 200 501 200

I. 1. Registered capital 81 501 200 501 200I. 2. Own stock and shares in business 82 0 0I. 3. Changes in registered capital 83 0 0

A. II. Share premium and capital funds 84 6 062 38 127II. 1. Share premium 85 0 0II. 2. Capital funds 86 6 062 38 127II. 2. 1. Other capital funds 87 0 0II. 2. 2. Difference in valuation from overpriced property and liabilities 88 6 062 38 127II. 2. 3. Difference in valuation from overpriced changeovers 89 0 0II. 2. 4. Difference from change of legal form 90 0 0II. 2. 5. Difference in valuation from bussiness corporation' changes 91 0 0

A. III. Funds from profit 92 243 067 243 067III. 1. Other reserve funds 93 243 067 243 067III. 2. Corporate and other funds 94 0 0

A. IV. Profit/loss of previous years 95 -46 579 318 551IV. 1. Retained earnings of previous years 96 318 551 318 551IV. 2. Accumulated losses of previous years 97 -365 130 0IV. 3. Different profit/loss of previous years 98 0 0

A. V. Profit/loss of current accounting period 99 104 684 -365 130A. VI. Decisions on advances for the payment of profit sharing 100 0 0B. + C. Not-own capital 101 736 588 1 203 461B. Reserves 102 6 029 5 018B. 1. Reserve for pensions and similar liabilities 103 0 0B. 2. Income tax reserve 104 0 0B. 3. Reserves under special legislation 105 0 0B. 4. Other reserves 106 6 029 5 018C. Liabilities 107 730 559 1 198 443C. I. Long-term liabilities 108 114 968 178 416

I. 1. Bonds payable 109 0 0I. 1. 1. Convertible bonds 110 0 0I. 1. 2. Other bonds 111 0 0I. 2. Liabilities to credit institutions 112 114 450 178 157I. 3. Long-term advance payments received 113 0 0I. 4. Accounts payable 114 0 0I. 5. Long-term notes payable 115 0 0I. 6. Liabilities - controlling party 116 0 0I. 7. Liabilities - substantial influence 117 0 0I. 8. Deferred tax debt 118 0 0I. 9. Other payables 119 518 259I. 9. 1. Liabilities to associates 120 0 0I. 9. 2. Conjectural debt account 121 0 0I. 9. 3. Other payables 122 518 259

C. II. Short-term liabilities 123 615 591 1 020 027II. 1. Bonds payable 124 0 0II. 1.1. Convertible bonds 125 0 0II. 1.2. Other bonds 126 0 0II. 2. Liabilities to credit institutions 127 344 600 631 809II. 3. Short-term advance payments received 128 34 979 42 198II. 4. Accounts payable 129 178 301 292 778II. 5. Short-term notes payable 130 0 0II. 6. Liabilities - controlling party 131 25 651 25 276II. 7. Liabilities - substantial influence 132 0 0II. 8. Other payables 133 32 060 27 966II. 8. 1. Liabilities to associates 134 0 0II. 8. 2. Short-term financial assistances 135 1 214 1 214II. 8. 3. Payables to employees 136 13 252 12 610II. 8. 4. Payables to social security and health insurance 137 7 551 7 090II. 8. 5. State - due taxes and subsidies 138 3 590 1 573II. 8. 6. Estimated accrued payables 139 6 453 5 479II. 8. 7. Other payables 140 0 0

D. Accruals 141 189 1D. 1. Accrued expenses 142 189 1D. 2. Deferred revenues 143 0 0

Balance sheet – as at 31st December 2017 (in thousands of CZK)

Annual report 2017 Balance sheet

2

Designation Text Line number Accounting period

a b c Current Previous

I. Revenues from sales of products and services 1 1 131 128 1 081 274

II. Revenues from sales of goods 2 270 234 324 245

A. Production 3 1 213 203 1 056 966

A.1. Cost of sales 4 231 754 267 157

A.2. Consumption of materials and energy 5 789 379 634 622

A.3. Services 6 192 070 155 187

B. Variation in inventory by self activity (+/-) 7 -10 373 140 640

C. Capitalisation (-) 8 -1 769 -26 723

D. Personal expenses 9 284 564 282 009

D.1. Wages and salaries 10 209 263 207 959

D.2. Social security expenses and health insurance and other social expenses 11 75 301 74 050

D.2.1. Social security expenses and health insurance 12 70 420 69 253

D.2.2. Other social expences 13 4 881 4 797

E. Value adjustments in operating area 14 -109 952 319 835

E.1. Value adjustments of long-term intangible and tangible assets 15 79 852 84 731

E.1.1. Value adjustments of long-term intangible and tangible assets - pernament 16 79 852 84 731

E.1.2. Value adjustments of long-term intangible and tangible assets - temporary 17 0 0

E.2. Value adjustments of inventories 18 -166 263 190 518

E.3. Value adjustments of receivables 19 -23 541 44 586

III. Other operating revenues 20 165 781 280 691

III.1. Revenues from sales of fixed assets 21 1 722 3 394

III.2. Revenues from sales of materials 22 144 304 271 097

III.3. Other operating revenues 23 19 755 6 200

F. Other operating expenses 24 156 084 291 586

F.1. Net book value of fixed assets sold 25 2 1 010

F.2. Net book value of material sold 26 127 023 261 868

F.3. Taxes and fees 27 1 537 1 799

F.4. Reserves in operating area and complex deferred expenses 28 1 011 5 018

F.5. Other operating expenses 29 26 511 21 891

* Operating profit/loss (+/-) 30 35 386 -378 103

IV. Revenues from financial investments 31 68 059 0

IV.1. Revenues from shares in controlled and directed parties 32 68 059 0

IV.2. Other revenues from shares 33 0 0

G. Expenses on sold shares 34 160 0

V. Revenues from other long-term financial assets 35 0 0

V.1. Revenues from other long-term financial assets - controlling party 36 0 0

V.2. Other revenues from other long-term financial assets 37 0 0

H. Expences related to other long-term financial assets 38 0 0

VI. Interest revenues 39 0 38

VI.1. Interest revenues - controlling party 40 0 0

VI.2. Other interest revenues 41 0 38

I. Value and reserves adjustments in the financial area 42 0 0

J. Interest expenses 43 8 363 11 583

J.1. Interest expenses- controlling party 44 385 1 043

J.2. Other interest expenses 45 7 978 10 540

VII. Other financial revenues 46 32 085 27 280

K. Other financial expenses 47 51 734 34 743

* Profit/loss from financial operations (+/-) 48 39 887 -19 008

** Pretax trading income (+/-) 49 75 273 -397 111

L. Income tax on ordinary activity 50 -29 411 -31 981

L.1. - due 51 0 -594

L.2. - deferred (+/-) 52 -29 411 -31 387

** Profit after tax (+/-) 53 104 684 -365 130

M. Transfer of share in income from operation to associates (+/-) 54 0 0

*** Profit/loss for the accounting period (+/-) 55 104 684 -365 130

* Net turnover for the accounting period 56 1 667 287 1 713 528

Profit and loss account – as at 31st December 2017 (in thousands of CZK)

Annual report 2017 Profit and loss account

16

Designati

on Text 2017 2016

a b c d

P. Cash and cash equivalents at the beginning of fiscal period 87 704 14 459

Cash flow on principal gainful activity (operation)

Z. Accounting profit or loss before tax 75 274 -397 111

A. 1 Adjustments by non-cash operations -162 025 336 417

A. 1 1 Depreciation of fixed assets and amortisation of adjustments for acquired assets 88 024 87 135

A. 1 2 Change in adjustments, reserves -188 793 240 121

A. 1 3 Profit on fixed assets sold -64 464 -2 384

A. 1 4 Revenues on shares in profit -5 155 0

A. 1 5 Charged interest cost, excl. cost of valuation of fixed assets, and charged interest revenue 8 363 11 545

A. 1 6 Possible adjustments by other non-cash operations 0 0

A. * Net cash flow on operating activity before tax and changes to working capital -86 751 -60 694

A. 2 Changes in non-cash items of working capital 297 532 269 926

A. 2 1 Changes in operating receivables and transitional asset accounts 266 030 16 155

A. 2 2 Change in current operating liabilities and transitional liability accounts -117 782 29 805

A. 2 3 Inventory change 149 284 223 966

A. 2 4 Change in financial current assets not falling within cash and cash equivalents 0 0

A. ** Net cash flow on operating activity before tax 210 781 209 232

A. 3 Interest paid excl. interest included in the valuation of fixed assets -7 978 -11 583

A. 4 Interest received 0 38

A. 5 Income tax paid and additional tax assessment for past periods 2 309 2 252

A. 6 Shares in profit received 5 155 0

A. *** Net cash flow on operating activity 210 267 199 939

Cash flow on investment activity

B. 1 Expenses for acquisition of fixed assets -3 590 -11 070

B. 2 Income from sale of fixed assets 64 626 3 394

B. 3 Loans and credits for related entities 0 0

B. *** Net cash flow on investment activity 61 036 -7 676

Cash flow on financial activities

C. 1 Impacts of changes to fixed and current liabilities -350 916 -119 018

C. 2 Impacts of changes to equity on cash and cash equivalents 0 0

C. 2 1 Increase in cash as a result of increased registered capital, share premium and profit funds 0 0

C. 2 2 Reimbursment of partners for shares in equity 0 0

C. 2 3 Partners' and shareholders' other financial contributions 0 0

C. 2 4 Reimbursement of loss by partners 0 0

C. 2 5 Direct payments from funds 0 0

C. 2 6 Reimbursed shares in profit incl. reimbursed tax 0 0

C. *** Net cash flow on financial activity -350 916 -119 018

F. Net increase or decrease in cash -79 613 73 245

R. Cash and cash equivalents at the end of fiscal period 8 091 87 704

Přehled o peněžních tocích Výroční zpráva

2017

Cash-flow – as at 31st December 2017 (in thousands of CZK)

Annual report 2017 Cash-flow

17

Date:. 15 6. 2018

Signature: Chairman of the Board of Directors

Annual Report 2017 Overview of Changes in Core

18

Registered

Capital

Differences in

Valuation from

Revaluation of

Assets and

Liabilities

Other

Reserv

e Funds

Undistributed

Profit from Past

Years

Operating Results of

Current Accounting

Period

Total

Balance as per

1.1.2017 501 200 38 127 243 067 318 551 -365 130 735 815

Transfer of

operating

results

-- -- -- -365 130 365 130 --

Change of

differences in

valuation

-- -32 065 -- -- -- -32 065

Operating

results for

current year

-- -- -- -- 104 684 104 684

Balance as per

31.12.2017 501 200 6 062 243 067 -46 579 104 684 808 434

Registered

Capital

Differences in

Valuation from

Revaluation of

Assets and

Liabilities

Other

Reserv

e Funds

Undistributed

Profit from Past

Years

Operating Results of

Current Accounting

Period

Total

Balance as per

1.1.2016 501 200 68 355 243 067 275 705 5 900

1 094

227

Transfer of

operating

results

-- -- -- 5 900 -5 900 --

Dopad fúze k

1.1.2016 -- -36 946 -- 36 946 -- --

Change of

differences in

valuation

-- 6 718 -- -- 6 718

Operating

results for

current year

-- -- -- -- -365 130 -365 130

Balance as per

31.12.2016 501 200 38 127 243 067 318 551 -365 130 735 815

OVERVIEW OF CHANGES IN CORE CAPITAL

ror year ending on December 31, 2017

(in thousands CZK)

Attachment to Financial Statements as per 31. 12. 2017

(in thousands CZK)

Organization and contextual definitial of explanatory and supplementary information

according to § 39 of the Public Notice No. 500/2002 Coll. implementing certain provisions of

the Act No. 563/1991 Coll., on Accounting, as amended by later regulations, for accounting

units, entrepreneurs accounting in the system of double-entry bookkeeping.

§ 39 Clause 1) Item a)

Description of Company

Name of Accounting Unit: ARMATURY Group a.s.

Registered Office: Nádražní 129, 747 22 Dolní Benešov

Company ID-No.: 255 72 881

Date of Registration: 23. 8. 1999

Registered: Companies Register kept by the Regional Court in Ostrava, file

number B 2572

Legal Form: Joint stock company

Scope of Business: - Joinery, floor making, locksmithery, toolmaking, machining

- Production, installation and repair of electric machines and

appliances, electronic and telecommunication equipment

- Assembly, repair and testing of gas equipment and filling of

containers with gas

- Assembly, repair and testing of electric equipment

- Bookkeeping, tax records keeping

- Production, trade and services not stated in Appendices 1 to 3 of

the Trade Licensing Act

Entities with substantial or decisive influence (share is higher than 20 % of registered

capital)

Entity Name Contribution in %

DEMURE HOLDINGS LIMITED, with its

registered office at Arch. Makariou III. , 199

Neocleous house, Limassol, P.C. 3030, Cyprus

100 %

Changes in the Companies Register: YES NO

§ 39 Clause 1) Item b) to i)

Basic Inputs for Processing Financial Statements

Attached individual financial statements were prepared in accordance with the Act No. 563/1991

Coll., on Accounting, as amended by later regulations and Public Notice No. 500/2002 Coll.

implementing certain provisions of the Act No. 563/1991 Coll., on Accounting, as amended by later

regulations, for accounting units who are entrepreneurs accounting in the system of double-entry

accounting, as amended by later regulations. Amounts in the financial statements are in thousands

CZK.

Annual Report 2017 Attachment to Financial Statements

On March 1, 2017 number of members of the board of directors was reduced from four to one. On

June 16, 2017 Mr. Petr Groh was registered as a company confidential clerk.

On July 7, 2017 form of stocks was changed from stock certificates to bookshares.

Changes in organizational structure: YES NO

19

General Accounting Principles, Accounting Methods and their Changes and Deviations

The following valuation methods were applied when processing financial statements for 2017:

A) Tangible Fixed Assets

The accounting unit did not account tangible fixed assets. YES

In accordance with § 25, Clause 1) Item a) Act No. 63/1991 Coll., the accounting unit valuated

tangible fixed assets at acquisition prices including price for acquisition, transportation cost,

customs duties and other expenses relating to acquisition.

The accounting unit valuates freely acquired tangible fixed assets at reproduction acquisition prices

in accordance with § 25, Clause 1) Item l.) Act No. 563/1991 Coll.

Valuation of tangible fixed assets was reduced by subsidies from the national budget.

The accounting unit created tangible fixed assets by their own activity:

YES NO

In accordance with § 25, Clause 1) Item b) Act No. 563/1991 Coll., the accounting unit valuated

tangible fixed assets created by their own activity at their own cost including:

Direct material and wage expenses

Production overhead expenses related to creating tangible fixed assets

Indirect expenses of administrative character (administrative overhead)

Otherwise - supplementary information No.

B) Intangible Fixed Assets

The accounting unit did not account intangible fixed assets. YES

In accordance with § 25, Clause 1) Item h) Act No. 563/1991 Coll., the accounting unit valuated

intangible fixed assets at acquisition prices including price for acquisition and other expenses

relating to acquisition.

The accounting unit created intangible fixed assets by their own activity :

YES NO

In accordance with § 25, Clause 1) Item i) Act No. 563/1991 Coll., the accounting unit valuated

intangible fixed assets created by their own activity at their own cost including:

Direct material and wage expenses

Production overhead expenses related to creating intangible fixed assets

Indirect expenses of administrative character (administrative overhead)

Otherwise - supplementary information No.

Schedule for Depreciating Tangible and Intangible Fixed Assets

Method of drawing schedule for depreciating tangible fixed assets and intangible fixed assets and

applied methods for depreciating when determining accounting depreciation for tangible fixed

assets and intangible fixed assets:


20

The accounting unit issued their depreciation schedule for accounting depreciation for tangible fixed

assets by issue of their internal regulation resulting from expected wear and tear of the assets complying

with common conditions of their use. Accounting and tax depreciations of the accounting unit are not

identical.

The accounting unit issued their depreciation schedule for accounting depreciation for tangible fixed

assets by issue of their internal regulation based on the methods applied when calculating tax

depreciation. Accounting and tax depreciations of the accounting unit are identical.

Depreciation schedule for accounting depreciation for intangible fixed assets based on method of

depreciation according to accounting regulations (§ 56 vyhlášky No. 500/2002 Coll.). Accounting and tax

depreciations of the intangible fixed assets are not identical.

Depreciation schedule for accounting depreciation for intangible fixed assets was based on method of

depreciation according to tax depreciations. Accounting and tax depreciations of the intangible fixed

assets are identical.

Depreciation Schedule

Depreciation schedules for fixed assets are put together in accordance with an internal regulation. In

the monitored fiscal period, all fixed assets were depreciated evenly by months over a number of

years according to individual groups pursuant to the Income Tax Act or based on supposed lifetime

of assets determined by competent technician, which in the opinion of the company displays wear

and tear of the assets truly. Tax depreciations were determined in accordance with the Income Tax

Act. Tax depreciations of original owner continues within included assets. Time depreciation is

applied in accordance with internal regulation in respect of moulds, templates, software,

preparatives and light and temporary structures. Included low-value fixed assets are depreciated at

value of 50 % on entry and 50 % on exclusion. Newly acquired low-value fixed assets are

depreciated with monthly time depreciation over 24 months, unless it is a new equipment of

operation that would disrupt the time and factual relationships between costs and revenues

significantly.

Pursuant to decision of the financial director, produced preparatives have been activated in assets

since 1. 1. 2016.

Applied depreciation system for low-value fixed assets: 24 months

C) Financial Assets

The accounting unit owned financial assets in current year: YES NO

In accordance with § 25, Clause 1) Item f) Act No. 563/1991 Coll., shares, securities and derivatives

were valuated at acquisition prices including price for acquisition and direct expenses related to their

acquisition.

D) Cash

In accordance with § 25, Clause 1) Item e) Act No. 563/1991 Coll., the accounting unit valuated

cash and tokens at their nominal values.

E) Inventory

The accounting unit did not account inventories. YES

When accounting inventories, the accounting unit proceeded in accordance with Article 4 of the

Czech Accounting Standard for Entrepreneurs No. 015.

Method A Method B

The accounting unit purchased inventory: YES NO


21

In accordance with § 25, Clause 1) Item c) Act No. 563/1991 Coll., inventory is valuated at

acquisition prices including price for acquisition and costs related to the acquisition. Pursuant to

ČÚS No. 015 and according to § 49 Public Notice No. 500/2002 Coll.:

The cost related to acquisition of inventory were counted per acquired inventory at prices for

acquisition when accepted in stock.

The cost related to acquisition of inventory was divided in analytical records into price for

acquisition, cost related to acquisition and deviation from real price for acquisition. Costs related to

acquisition and deviation from real price for acquisition are dissolved into the price of sold or

consumed inventories according to method determined bindingly in internal regulation of the

accounting unit.

Price for acquisition was divided into pre-determined price for acquisition and deviation from real

price for acquisition in analytical records. When excluding inventories from stock, this deviation is

dissolved in method determined bindingly in internal regulation of the accounting unit.

Description or reference to supplementary information:

The cost related to acquisition of inventory was divided into price for acquisition, cost related to

acquisition and deviation from real price for acquisition in analytical records. These costs are

dissolved into the price of sold or consumed inventories according to method determined bindingly

in internal regulation of the accounting unit.

Purchased inventory is valuated at acquisition prices applying the following method (according to §

25 Act No. 563/1991 Coll. and according to ČÚS No. 015):

FIFO

At fixed prices and differences in valuation

At weighted arithmetic mean and differences in valuation

The accounting unit created inventory with their own activity: YES NO

In accordance with § 25, Clause 1) Item d) Act No. 563/1991 Coll., inventory created by own activity

is valuated at own costs:

- According to actual amount of cost comprising of:

- Direct expenses

- A part of indirect expenses related to this activity

- According to operative (scheduled) calculation

- Valuation of inventory of own production according to description or supplementary

information:

F) Valuation of New Animals and Newly Born Animals

The accounting unit valuated new animals and newly born animals: YES NO

In accordance with § 25, Clause 1) Item j) Act No. 563/1991 Coll., the accounting unit valuated new

animals at own cost.


22

G) Receivables

When arising, receivables are valuated with their nominal value, when acquired for a price or a

contribution, with acquisition price in accordance with § 25, Clause 1) Item g) Act No. 563/1991 Coll.

Receivables as well as estimated receivables are divided into short-term (due date within 12 months

incl.) and long-term liabilities (due date above 12 months). Short-term liabilities are due within one

year from the balance sheet date.

1. Total Amount of Overdue Receivables: (line 58 + 48 of the balance sheet) 205 110

Total amount of overdue receivables as per 31. 12. 2016 254 636

2. Receivables Overdue for More than 5 Years: 86 511

The company does not register any receivables overdue for more than 5 years.

3. Receivables Secured with Material Guarantees: YES NO

4. Receivables Encumbered with Right of Lien: YES NO

5. Receivables towards Related Entities: YES NO

H) Liabilities

When arising, liabilities were valuated by the accounting unit with their nominal value in accordance

with § 25, Clause 1) Item G) Act No. 563/1991 Coll.

Liabilities as well as estimated liabilities are divided into short-term (due date within 12 months incl.)

and long-term liabilities (due date above 12 months). Short-term liabilities are due within one year

from the balance sheet date.

Description of Receivables Value Character, Form and Value of

Encumbrance

Czech Receivables 8 600 Česká spořitelna

95 583 Komerční banka

62 080 ČSOB

Foreign Receivables 99 305 Česká spořitelna

30 673 Komerční banka

30 270 ČSOB

Related Entity Value Description of Receivables

ARMATURY Group. CO 472 Z obchodních vztahů

Total 472


23


1. Total amount of overdue liabilities (line 129 of the balance sheet) 45 826 Total amounto f overdue liabilities as per 31.12.2016 58 784

2. Liabilities overdue for more than 5 years: 47 The company does not register any liabilities overdue for more than 5 years.

3. Liabilities secured with right of lien or guarantee for the benefit of creditor YES NO

4. Liabilities not Stated in Bookkeeping, Pension Liabilities, Conditional Liabilities: YES NO Company registers non-payment bank guarantees over guarantee period, order and for good contract implementation towards their business partners amounting to 68 837 thousands CZK. Company does not register other liabilities not stated in bookkeeping. 5. Liabilities towards Related Entities and Stockholders YES NO

24

Related entity Value Description of liability

ARMATURY GROUP Co., Ltd – CN 2 479 Business relationships

ARMATÚRY GROUP, s.r.o. SK 2 879 Business relationships

Stockholders of parent company 20 293 Loans + accessories

Total 25 651

I) Rectifying Items

In the course of the year, the accounting unit created rectifying items for assets:

YES NO

J) Converstion of Amounts in Foreign Currencies to Czech Currency

The accounting unit accounted assets and liabilities in a foreign currency: YES NO

When converting amounts in foreign currencies to Czech Crowns, the accounting unit applied

method in accordance with § 24, Clause 2) Act No. 563/1991 Coll. The accounting unit accounts

pursuant to monthly exchange rate. Exchange rate declared by the Czech National Bank (ČNB) on

the last working day in a month is applied.

Amounts in foreign currencies were converted with exchange rates as per 31. 12. of given year:

YES NO

K) Determination of Real Value of Assets and Liabilities

In accordance with legal regaulations, the accounting unit determined real value of assets and

liabilities:

YES NO

L) Valuation by Equivalence

The accounting unit valuated share amounting to participation in controlled entity or in entity with

substantial influence by equivalence.

YES NO

M) Derivative Accounts

The accounting unit accounted derivatives in the accounting period (ČÚS No. 009, § 52 and § 53

Public Notice No. 500/2002 Coll.

YES NO

N) Information on Deviations from Methods according to § 7 Clause 5) Act No. 563/1991

Coll., on Accounting

The following methods were changed within course of the year: ……………….

Valuation Accounting procedures

Depreciation Structure of items of financial statements

Type of Rectifying Item Metod of Determining Rectifying

Item

Source of Information for

Determining Amount of

Rectifying Item

For inventory Unsalable and otherwise

unusable inventories

Stocktaking 19. - 21. 10. 2017.

For receivables According to Act No. 593/1992

Coll., on Reserves, Act No.

563/1991 on Accounting and

Czech Accounting Standard No.

005, accounting rectifying items

for invoices being overdue for

more than 1 year + for invoices

from EU for more than 180 days

Stocktaking of receivables as

per 31. 12. 2017

For advance payments for fixed

assets

According to Act No. 563/1991

Coll., o Accounting and Czech

Accounting Standard No. 005

Stocktaking of advance

payments


25

Type of Change Content of Change(s)

Reason for Change(s)

Impact of Change on

X)

Financial Impact in

Thousands CZK

X) Impack of change (+ increase, - decrease) on: assets (+M, -M), liabilities (+Z, -Z), financial situation (+FS, -FS), profit/loss (+HV, - HV)

O) Amounts of Advance Payments, Earnest Money, Loans, Credits, Guarantees and other

Performance for Partners, Stockholders, Members of Statutory, Supervisory and Managing

Bodies (§ 39b Clause 6):

Inapplicable for the accounting unit. YES

Rozpis půjček, zápůjček a úvěrů:

P) Average Full-Time Equivalent of Employees within Fiscal period: 583 Of which by categories (§ 39b Clause 6):

Q) Financial Investments

Type of Performance Statutory

Bodies

Supervisory

Bodies

Managing

Bodies Partners

Stockholder

s

Paid advance payments and

earnest money

Provided credits

Provided loans and

borrowings

Other receivables

Provided guarantees and

securities

Free use of vehicles

Pension insurance

Other performances

(including nonmonetary)


§ 39b Clause 1) to 4)

The accounting unit has a substantial or decisive influence on other companies:

YES NO

26

Name and Registered

Office /

Year 2017

Share in Registered

Capital

absolutely

Share in Registered

Capitalv %

Core Capital for the Last

Accounting Period

Profit/Losst for the Last

Accounting Period

ARMATURY GROUP

s.r.o. Slovensko,

janošíkova 264, Žilina

248 100 14 109 -920

ARMATURY GROUP

Poland Sp. z o.o.,

Poland Sp. Zo.o., ul.

Osala 1, Brzeszcze

376 100 850 -5

MARTINOV Group, a.s.,

bolatická 39, Kravaře

0,001 100 68 0

ARMATURY Group

Corporation Ltd. China,

Corporation ltd.,

Zhangjiagang čína

27 407 100 19 065 5 004

Investments are valuated with a method of equivalence. Value of core capital is equal to equivalence value.

Controlling contract concluded: YES NO

Agreements on decision rights among

partners condluded: YES NO

Contract on profit transfer concluded:

YES NO

§ 39b Clause 5)

Accounting unit is a partner with unlimited liability: YES NO


Name and Registered

Office / Year 2016

Share in Registered

Capital

Share in Registered

Capital

v %

Core Capital for the Last

Accounting Period

(in thousands CZK)

Profit/Losst for the Last

Accounting Period

(in thousands CZK)

absolutely in CZK)

ARMATÚRY GROUP s.r.o.Slovensko, Janošíkova 264, Žilina

248 100 15 902 187

ARMATURY GROUP Poland Sp. z o.o., ul. Osala 1, 32-620 Brzeszcze

376 100 939 -2

Průmyslový areál Martinov s. r. o., Martinovská, Ostrava Martinov

0,001 100 33 284 7 412

MARTINOV Group, a.s., Bolatická 39, Kravaře

0,001 100 68 0

ARMATURY Group, Corporation Ltd. , Zhangjiagang, Čína;

27 407 100 15 860 470

STROOB spol. s r. o., Hlučínská 628, Dolní Benešov

160 100 265 105

27

Consolidated financial statements of the broadest group of accounting units, to which the

accounting unit as a consolidating accounting unit belongs, are prepared by the company

ARMATURY Group a.s. with registered office at Dolní Benešov, Nádražní 129.

These consolidated financial statements are available at the same address.


§ 39b Clause 6)

Registered Capital

A) Joint Stock Company

Stocks issued by the accounting unit within fiscal period: YES NO

If applicable, provide more detailed description (number, nominal value):

Exchangeable Bonds

Exchangeable bonds issued by the accounting unit within fiscal period: YES NO

On December 17, 2012, the company ARMATURY Group a.s. issued bonds ISIN: CZ0003508137,

amounting to total nominal value of 1.000 million CZK. The bonds are due on December 17, 2027

with a revenue of 8 % p.a. The company is prepared to pay for their scheduler dynamic

development with these bonds. As per December 31, 2017, the company ARMATURY Group a.s. is

the only owner of the bonds – there was no subscription.

Type / Number of

stocks

Nominal

Value

Unpaid Portion of

Contribution

Maturity

Date

12 pcs registered

ordinary stocks in

certified form

100 0

500 pcs registered

ordinary stocks in

certified form

1 000 0


28

Proposal for Profit/Loss Distribution of Current Fiscal Period

Proposal for profit/loss distribution of current fiscal period is as follows:

Undistributed profit from past years

Unpaid loss of past years

Others – more detailed description, specification:

Fixed Assets

a) Intangible fixed assets and rectifying items and accumulated depreciation - year 2017

ACQUISITION PRICE

Initial

Balance Added Discarded

Transferr

ed

Final

Balance

Intangible research and development

results

0 0 0 0 0

Software 56 192 123 583 0 55 732

Other valuable rights 0 0 0 0 0

Goodwill 0 0 0 0 0

Low-value intangible fixed assets 1 515 15 656 0 874

Provided advance payments on

intangible fixed assets

0 0 0 0 0

Intangible fixed assets under

construction

0 0 0 0 0

Total 2017 57 707 138 1 239 0 56 606


29


RECTIFYING ITEMS

AND ACCUMULATED

DEPRECIATION

Initial

Balance of

Accumulat

ed

Depreciati

on

Depreci

ation

Discarde

d

Transferr

ed

Final

Balance

of

Accumul

ated

Deprecia

tion

Rectifyin

g Items

Intangible research and

development results

0 0 0 0 0 0

Software 51 468 2 088 584 0 52 972 0

Other valuable rights 0 0 0 0 0 0

Goodwill 0 0 0 0 0 0

Low-value intangible

assets

1 407 97 656 0 848 0

Provided advance

payments for intangible

fixed assets

- - - - - -

Intangible fixed assets

under construction

- - - - - -

Total 2017 52 875 2 185 1 240 0 53 820 -

Intangible fixed assets and rectifying items and accumulated depreciation - year 2016

30

ACQUISITION PRICE Initial Balance Added Discarded Transferred Final Balance


development results

0 0 0 0 0

Software 51 108 5 084 0 0 56 192

Other valuable rights 0 0 0 0 0

Goodwill 0 0 0 0 0

Other intangible fixed assets 1 473 42 0 0 1 515

Provided advance payments for

intangible fixed assets

0 0 0 0 0


construction

0 0 0 0 0

Total 2016 52 581 5 126 0 0 57 707

RECTIFYING ITEMS AND

ACCUMULATED

DEPRECIATION

Initial Balance

of

Accumulated

Depreciation

Depreciati

on

Discarded Transferred Final

Balance of

Accumulate

d

Depreciation

Rectifying

Items


development results

0 0 0 0 0 0

Software 49 675 1 793 0 0 51 468 0

Other valuable rights 0 0 0 0 0 0

Goodwill 0 0 0 0 0 0

Low-value intangible assets 1 374 33 0 0 1 407 0

Provided advance payments

for intangible fixed assets

- - - - - -


construction

- - - - - -

Total 2016 52 875 1 826 0 0 52 875 -

ACQUISITION PRICE Initial

Balance

Added

and

transferr

ed

Discarde

d and

transferr

ed

Transferr

ed

Final

Balance

Lands 10 982 0 0 0 10 982

Buildings 672 130 1 542 0 673 672

Tangible personal assets and groups

of them

527 359 2 385 26 617 0 503 127

Difference in valuation for acquired

assets

0 0 0 0 0

Floricultural sets of permanent

growths

0 0 0 0 0

Adult animals and groups of them 0 0 0 0 0

Other tangible fixed assets 92 0 0 0 92

Provided advance payments for

tangible fixed assets

618 0 0 0 618

Tangible fixed assets under

construction

52 141 0 0 193

Total 2017 1 211 233 4 068 26 617 0 1 188 684

RECTIFYING ITEMS

AND ACCUMULATED

DEPRECIATION

Initial

Balance

of

Accumul

ated

Deprecia

tion

Deprecia

tion

Discarde

d

Transferr

ed

Final

Balance

of

Accumul

ated

Deprecia

tion

Rectifyin

g Items

Lands 0 0 0 0

Buildings 155 691 22 433 0 0 178 124 0

Tangible personal assets

and groups of them

336 023 55 234 26 615 0 364 642 0

Difference in valuation

for acquired assets

0 0

Floricultural sets of

permanent growths

0 0

Adult animals and

groups of them

0 0

Other tangible fixed

assets

0 0

Provided advance

payments for tangible

fixed assets

- - - - - 618

Tangible fixed assets

under construction

- - - - -

Total 2017 491 714 77 667 26 615 0 542 766 618

b) Tangible Fixed Assets Tangible fixed assets, rectifying items and accumulated depreciation - year 2017


31


Tangible fixed assets, rectifying items and accumulated depreciation – year 2016

ACQUISITION PRICE Initial

Balance

Added Discarded Transf

erred

Final

Balance

Lands 10 982 0 0 0 10 982

Buildings 587 547 84 584 1 0 672 130

Tangible personal assets and groups of

them

508 223 31 983 12 847 0 527 359

Difference in valuation for acquired

assets

0 0 0 0 0

Floricultural sets of permanent growths 0 0 0 0 0

Adult animals and groups of them 0 0 0 0 0

Other tangible fixed assets 92 0 0 0 92

Provided advance payments for tangible

fixed assets

1 208 1 648 2 238 0 618


construction

85 027 31 463 116 438 0 52

Total 2016 1 193 076 149 678 131 524 0 1 211

233

RECTIFYING ITEMS

AND ACCUMULATED

DEPRECIATION

Initial

Balance of

Accumulat

ed

Deprediati

on

Depreciatio

n

Discarded Transferre

d

Final

Balance

of

Accumul

ated

Deprediat

ion

Rectifyin

g Items

Lands 0 0 0 0

Buildings 133 977 21 714 0 0 155 691 0

Tangible personal assets

and groups of them

286 482 62 289 12 749 0 336 023 0

Difference in valuation for

acquired assets

0 0

Floricultural sets of

permanent growths

0 0

Adult animals and groups

of them

0 0

Other tangible fixed assets 0 0

Provided advance

payments for tangible

fixed assets

- - - - - 618


construction

- - - - -

Total 2016 420 459 84 003 12 749 0 491714 618

32

c) Long-term financial assets Long-term financial assets - year 2017

Long-term financial assets - year 2016

Initial

Balance

Added Discar

ded

Revalued Final

Balance

Shares - controlled or controlling

entity

66 318 -160 -32 065 34 093

Loans and credits - controlled or

controlling entity

Shares - substantial influence

Loans and credits - substantial

influence

Other long-term securities and

shares

Loans and credits - others

Other long-term financial assets

Provided advance payments for long-

term financial assets

Rectifying items to long-term

financial assets

Total 2017 66 318 -160 -32 065 34 093


Initial

Balance

Added Discarded Revalued Final

Balanc

e

Shares - controlled or controlling entity 59 604 6 714 66 318

Loans and credits - controlled or

controlling entity

Shares - substantial influence

Loans and credits - substantial

influence

Other long-term securities and shares

Loans and credits - others

Other long-term financial assets

Provided advance payments for long-

term financial assets

Rectifying items to long-term financial

assets

Total 2016 59 604 6 714 66 318

33

d) Total Amount of Assets not Stated in the Balance Sheet in Acquisition Prices:

e) Assets Encumbered with Right of Lien, Easements of Real Estate Property:

YES NO

The accounting unit owns the following encumbered property:

f) Assets under Operational or Financial Lease:

The accounting unit has leased property YES NO

g) Assets with Significantly Higher Market Price than Valuation in Accounts:

The accounting unit owns such a property:

YES NO

h) Foreign Assets Listed in the Balance Sheet, Rental of a Business or Rental of a Part of a

Business:

The accounting unit registers such a property: YES NO

Description, supplementary information:

Type of Assets Value

Assets kept on operative accounts 1 978

Type and Specification of Assets Character and Function of Encumbrance

Houses, halls, Buildings Pledge of assets for the benefit of Česká

spořitelna a.s., Komerční banka a.s. and ČSOB

a.s., in the land registry territory D. Benešov a

Kravaře

Stand-alone personal property – machining

centres and machining equipment

Pledge of assets for the benefit of Česká


a.s.

Lands Pledge of assets for the benefit of Česká


a.s., in the land registry territory of D. Benešov

and Kravaře

Type of Assets Accounting Value Market Value Valued according to


34

Deferred Tax

The accounting unit accounted deferred tax liability / receivable:

YES INAPPLICABLE

If applicable, please provide more detailed description, amount of deferred tax:

42 835 – tax receivable

Deferred tax as per 31. 12 . 2016 13 424 – tax receivable

Deferred tax results from all temporary differences between accounting and tax value of residential

cost of fixed assets, accounting rectifying items for inventory, accounting reserves and also from tax

loss.

When calculating deferred tax, expected tax rate valid for the period in which tax obligation or tax

receivable will be applied is used – 19 % for 2017 as well as 2016.

Deferred tax receivable is accounted only when it is probable that it will be applied in the following

accounting periods.

Operations not Included in the Balance Sheet

Character and business purpose of operations not included in the balance sheet and their financial

impact on the accounting unit.


§ 39b Clause 6) Item I), § 39b Clause 7), § 39b Clause 8)

Information on transactions with related entity and transactions not concluded under normal market

conditions – quantity of transactions, character of relationship with related entity and other

information on transactions that is necessary to understand financial situation of the accounting unit.


Receivables towards related entities: see page 5 of the Attachment to Financial Statements

Liabilities towards related entities: see page 6 of the Attachment to Financial Statements

Sale to related entities: 39 548*

Purchase from related entities : 109 231*

Other significant transactions with related entities: received loans amounting to total of 19 250

thousands CZK from stockholders of parent company*

Transactions with related entities that were not concluded under normal market conditions: NOT

APPLICABLE – see Report on Relationships 2017*

§ 11 Clause 5) Public Notice No.. 500/2002 Coll.

The accounting unit accounted reserve for income tax and so reduce the item „C.II.2.4.3. State – tax

receivables“ by supposed tax up to the amount of paid advance payments for income tax.

YES NOT APPLICABLE

§ 15a Public Notice No.. 500/2002 Coll.

The accounting unit applied the item „A.IV.3. Other profit/loss of past years “.

If applicable, please provide a more detailed description:

YES NOT APPLICABLE


35

§ 40 Clause 4) Public Notice No.. 500/2002 Coll.,

§ 41 Clause 1) Public Notice No.. 500/2002 Coll.,

§ 43 Clause 4) Public Notice No.. 500/2002 Coll.

Organization and Contextual Definition of Cash Flow

Cash and cash equivalents include:

Cash flow in operating, investment or financial activities are stated in the Cash Flow Statement as

non-compensated.

YES NO

Cash flow related to paid interests included in valuation of fixed assets were reported within

investment activity in the Cash Flow Statement, were however not stated as a separate item.

§ 39c Clause 1)

Overview of sales on goods, products and services within current activity of the accounting

unit:

§ 39c Clause 2)

Bonuses for statutory auditor for 2017:

Other information:

1. Long-Term Bank Credits - rok 2017

31. 12. 2017 31. 12. 2016

Cash and tokens of value 561 999

Bank accounts 7 530 86 705

Debit balance of checking account included in usual bank credits

Cash equivalents included in current financial assets

Total cash and cash equivalents 8 091 87 704

Type of Revenue Czech Republic Foreign Countries

Revenues from sales of goods 137 204 133 030

Revenues from sales of own products 286 313 753 167

Revenues from sales of services 68 294 23 354

Revenues from sales of materials 140 324 3 980

Total revenues 632 135 913 531

Mandatory audit of annual financial statements 425

Other certification services 60

Tax consultancy

Other non-auditing services

Total 485


No liabilities are overdue for more than 5 years.

Credit Provider Amount Of which Recharges to

Short-Term

Instalments (Due Date

within One Year)

With Due Date in

1 – 5 Years

Security

Komerční banka 66 942 26 826 40 116 Real estate, personal property

Česká spořitelna 99 374 25 040 74 334 Real estate, personal property

Celkem 166 316 51 866 114 450

36


Long-Term Bank Credits - Year 2016

Credit Provider Amount Of which Recharges to

Short-Term Instalments

(Due Date within One

Year)

With Due Date in

1 – 5 Years

Security

Komerční banka 93 769 26 828 66 941 Real estate, personal property

Česká spořitelna 135 739 31 856 103 883 Real estate, personal property

ČSOB 22 000 14 667 7 333 Real estate, personal property

Total 251 508 73 351 178 157

2. Short-Term Bank Credits - Year 2017

Credit Provider Amount Security

Komerční banka 132 725 Receivables, inventory

Česká spořitelna 68 611 Receivables, inventory

ČSOB 143 264 Receivables, inventory

Total 344 600

Long-term credits with due date within one year are parts of short term credits.

Short-Term Bank Credits - Year 2016

Credit Provider Amount Security

Komerční banka 208 765 Receivables, inventory

Česká spořitelna 139 401 Receivables, inventory

ČSOB 241 118 Receivables, inventory

RB 42 525 Receivables, inventory

Total 631 809

Long-term credits with due date within one year are parts of short term credits.

Renewal of short-term financing takes place according to standard bank requirements

37

3. Received Subsidies for Investment and Operation Purposes for 2017

a) Subsidy received from the Ministry of Industry and Trade for solving project, registration No.

FV10717 „Development of a New Series of Cryogenic Ball Valves, Technology of their Production

and Testing“ amounting to 2.442 thousands CZK.

Received subsidies are used to pay for cost for research and development and are accounted in

other operating revenues in factual and time continuity with accounting costs on determined account

in accordance with conditions of the programme covering granting subsidies from the Ministry of

Industry and Trade in general. The company plans to purchase also selected assets, the acquisition

price of which will be reduced by a part of received subsidies for the future. They have not

purchased any till now.

b) Subsidy received from the Labor Office of the Czech Republic under registration number

CZ.03.1.52/0.0/0.0/15_021/0000053 – Support of Professional Education of Employees from the

Operation Programme Employment amounting to 2.172 thousands CZK.

c) Subsidy received from the Labor Office of the Czech Republic under registration number

CZ.03.1.48/0.0/0.0/15 – Guarantee for Young People in the Moravian-Silesian Region financed from

the Operation Programme Employment amounting to 512 thousands CZK.

Subsidies received from the Labor Office are used to pay for costs and re accounted in other

operating revenues in factual and time continuity with accounting costs on determined account in

accordance with conditions of the programme covering granting subsidies from the Labor Office in

general.

Received Subsidies for Investment and Operation Purposes for 2016

Subsidy received from the Ministry of Industry and Trade for solving project, registration No.

FV10717 „Development of a New Series of Cryogenic Ball Valves, Technology of their Production

and Testing“ amounting to 1.891 thousands CZK.

Received subsidy is used to pay for cost for research and development and are accounted in other

operating revenues in factual and time continuity with accounting costs on determined account in

accordance with conditions of the programme.

4. Amount of Remunerations Given to Members of Managing, Controlling or Administrative

Authorities for the Reason of their Function

* Labor costs on members of managing, controlling and administrative authorities are represented by

remunerations given to members of these authorities for the reason of their function.

Company did not have any pension liabilities towards former members of managing, controlling and

administrative bodies till December 31, 2017.


Average Full-Time

Equivalent Labor Costs in thousands CZK*

2017 2016 2017 2016

Employees 583 549 209 263 207 959

Of it members of

managing authorities 1 4 0 0

Of it members of

controlling authorities 0 0 0 0

Of it members of

administrative authorities 0 0 0 0

Total 583 549 209 263 207 959

38

5. Additional Assessments of Due Income Tax for Past Periods: 0

6. Legal and other Reserves: 0

a) Legal Reserves: 0

b) Other reserves:

Type and Designation

of Reserve

Initial Balance

as per 1. 1.

Creation Drawing Final

Balance

as per 31.

12.

Type and Designation

of Reserve

Initial Balance

as per 1. 1.

Creation Drawing Final

Balance

as per 31.

12.

Reserve for income tax 0 0 0 0

Reserve for wages 2 737 13 094 11 332 4 499

Reserve for social security and health

insurance

930 4 452 3 852 1 530

Reserve for risks - complaints 1 351 0 1 351 0

7. Due liabilities for social security insurance premium and state employment policy

contribution: 0

8. Due liabilities for public health insurance premium: 0

9. Amount of tax arrears: 0

Attachment prepared by: Halfarová Hana

Date: 15. 6. 2018

Signature:

Petr Holeček

Chairman of the Board of Directors


10. Following Events

On April 27, 2018, the company received stockholder´s loans amounting totally to 30 000

thousands CZK which are due on April 30, 2019.

On the date of making the financial statements, the company management does not know any

other important events that would influence financial statements as per December 31, 2017.

39

Annual Report 2017

Board of directors of the company ARMATURY Group a. s., with registered office at Nádražní 129,

747 22 Dolní Benešov, company ID-No. 25572881 (hereinafter refered to as only „Company“)

processed the following Report on Relationships between Controlling and Controlled Entity and on

relationships between controlled entity and other entities controlled by the same entity according to

provisions § 82 ZOK for accounting period of calendar year 2017.

I. ENTITIES BEING MEMBERS OF THE GROUP:

Controlling entity: Armatury Servis Kravaře a.s., with registered office at Bolatická 2045/39,

Kouty, 747 21 Kravaře, company ID-No. 258 17 060; company owns and controls 7 physical entities

in accordance:

• Leo Švančar, date of birth 17.09.1959, care of Ludmily Hořké 44/17, Dvořisko, 747 21 Kravaře;

• Ing. Jindřich Švančar, date of birth 12.03.1955, care of Cihelní 3361/47, 747 21 Kravaře;

• Josef Vavřínek, date of birth 01.06.1947, care of Sadová 666/4, 747 23 Bolatice;

• Jiří Vaněk, date of birth 25.01.1961, care of Ivana Kubince 1601/23a, Dvořisko, 747 21

Kravaře;

• Karel Černý, date of birth 16.12.1962, care of Drobná 2363/8, Poruba, 708 00 Ostrava;

• Petr Holeček, date of birth 07.06.1958, care of Údolní 93/23, 747 17 Darkovice;

• Ladislav Adámek, date of birth 15.1.1963, care of Brněnská 1190, 665 01 Rosice.

Controlled entity: DEMURE HOLDINGS LIMITED, Arch. Makariou III., 199 Neocleous house,

Limassol, P.C. 3030, Cyprus;

Controlled entity: ARMATURY Group a.s., Nádražní 129, 747 22 Dolní Benešov, Czech

Republic, company ID-No. 255 72 881;

Controlled entity: ARMATÚRY Group, s.r.o., Jánošíkova 264, Žilina, Slovenská republika,

company ID-No. 36194603;

Controlled entity: ARMATURY Group Corp. Ltd., Zhangjiagang, China;

Controlled entity: ARMATURY Group Poland Sp. Z o.o., Reymonta 14, Raciborz, Poland,

0000209828;

Controlled entity: PRŮMYSLOVÝ AREÁL MARTINOV, s.r.o., Martinovská 3168/48, Martinov,

723 00 Ostrava, Czech Republic, company ID-No. 27790720; 100 % business

share in the company was transferred to the company ELEKTROBOCK CZ s.r.o. on

26.07.2017

Controlled entity: MARTINOV Group a.s., Martinovská 3168/48, Martinov, 723 00 Ostrava,

Czech Republic, company ID-No. 26282399;

Controlled entity: STROOB, spol. s r.o., Hlučínská 628, 747 22 Dolní Benešov, Czech Republic,

company ID-No. 65141709; 100% business share in the company was sold to

a personal entity on 4.12.2017.

Report on Relationships between Controlling and Controlled Entity

of the company ARMATURY Group a.s., according to provisions § 82 Act No.

90/2012 Coll., on business corporation for accounting period of calendar year 2017

Report on Relationships

40

Annual Report 2017

Armatury Servis Kravaře a.s.

DEMURE HOLDINGS LIMITED (100 %)

ARMATURY Group a.s. (100%)

ARMATURY Group Corp. Ltd. (100%)

ARMATURY Group Poland Sp. z o.o.

(100%)

MARTINOV Group a.s. (100%)

STROOB, spol.

s r.o. (100%)

PRŮMYSLOVÝ AREÁL MARTINOV, s.r. o.

(100%)

(do 26.07.2017)

ARMATÚRY GROUP. s.r.o. (100%)

Graphic Representation of Structure of Relationships between

Above Mentioned Entities:

II. ROLE OF THE COMPANY WITHIN THE GROUP:

The Company is acting towards their controlling company Armatury Servis Kravaře a.s. and their

direct stockholder DEMURE HOLDINGS LIMITED independently.

Entities controlled by the Company are independent business companies performing the task of

specialized production and business entities or their activity is totally independent from the

controlling entity (PRŮMYSLOVÝ AREÁL MARTINOV, s.r.o. a MARTINOV Group a.s.). Company

PRŮMYSLOVÝ AREÁL MARTINOV, s.r.o. was detached from the group as per 26.07.2017 and

their business share amounting to 100 % was transferred to a juridical person standing outside the

group against payment. Controlled companies use technical, economical, legal and other support

from the Company and sister companies.

III. METHODS AND MEANS OF CONTROLLING:

Unified management is applied within the group, namely and especially with applying the following

means:

- General meeting and decisions adopted by it

- Common meetings of the companies managements

- Coordination meetings of the board of directors and supervizory boards of all the companies

- Commercial contracts concluded under normal conditions and including normal prices

IV. OVERVIEW OF CONTRACTS CONCLUDED BETWEEN THE COMPANY AND GROUP

ENTITIES

Contracts concluded between the Company and ARMATURY Group Corp. Ltd.:

• The inspection contract from 27.10.2016 valid from 01.11.2016 to 31.10.2017 on ensuring

inspection of goods purchased by the Company in China. Pursuant to this contract, ARMATURY

Group Co. Ltd. delivered services amounting to 279 thousands CZK during 2017.

• In 2017, the Company implemented purchase orders towards ARMATURY Group Co. Ltd. for

goods with their total value of 100 168 thousands CZK.


41

Annual Report 2017

Contract concluded between the Company and ARMATÚRY Group s.r.o.:

Contract on data processing from 24.02.2005, as amended by the Amendment No. 3 from

1.12.2016, pursuant to which the Company ensures data administration, software maintenance

and bookkeeping for ARMATÚRY Group s.r.o. Pursuant to this contract, the Company

implemented services with their value of 1 126 thousands CZK, net of VATH in 2017.

In 2017, the Company implemented sales job orders for ARMATÚRY Group s.r.o. with their

value of 39 416 thousands CZK.

Contract concluded between the Company and PRŮMYSLOVÝ AREÁL MARTINOV, s.r.o.

before 26.07.2017:

• Contract on Credit from 14.12.2016 effective since 01.01.2017, with which the Company

obliged themselves to provide the company PRŮMYSLOVÝ AREÁL MARTINOV s.r.o. with a

credit amounting to 10.000.000,- CZK . Credit was paid on 10.05.2017 to full extent.

• Contract on Work from 24.02.2010, pursuant to which the Company ensures processing of

wages administration for PRŮMYSLOVÝ AREÁL MARTINOV s.r.o. Pursuant to this contract,

the Company implemented services amounting to 12.000,- CZK, net of VAT from 01.01.2017

to 26.07.2017.

• Contract on Work from 17.12.2009, pursuant to which the Company ensures technical help,

bookkeeping and other activities for PRŮMYSLOVÝ AREÁL MARTINOV s.r.o. Pursuant to

this contract, the Company implemented services amounting to 180.000,- CZK, net of VAT

from 01.01.2017 to 26.07.2017.

• From 01.01.2017 to 26.07.2017, the Company delivered energy to the company

PRŮMYSLOVÝ AREÁL MARTINOV, s.r.o. amounting to 249.320,- CZK.

Contracts concluded between the Company and stockholders of the company Armatury Servis

Kravaře a.s.

• Contract on Credit from 14.04.2015 as amended by the Amendment No. 1 from 13.03.2018

pursuant to which Mr. Ladislav Adámek providing the Company with a loan amounting to

5.500.000,- Kč, whereas half of the loan amounting to 2.750.000. CZK with interests

amounting to 2% p.s. is due till 16.04.2016 and half of it amounting to 2.750.000,- CZK with

interests amounting to 2% p.s. is due till 28.02.2018.

• Contract on Credit from 13.04.2015, as amended by the Amendment No. 2 from 19.03.2018

pursuant to which Mr. Leo Švančar providing the Company with a loan amounting to





pursuant to which Mr. Ing. Jindřich Švančar providing the Company with a loan amounting to





pursuant to which Mr. Josef Vavřínek providing the Company with a loan amounting to




• Contract on Credit from 16.04.2015 as amended by the Amendment No. 2 from 13.03.2018,

pursuant to which Mr. Jiří Vaněk providing the Company with a loan amounting to





42

Annual Report 2017


• Contract on Credit from 16.04.2015 as amended by the Amendment No. 1 from 13.03.2018 ,

pursuant to which Mr. Karel Černý providing the Company with a loan amounting to




• Contract on Credit from 16.04.2015 as amended by the Amendment No. 2 from 19.03.2018,

pursuant to which Mr. Petr Holeček providing the Company with a loan amounting to




Other companies withing the group did not conclude a contract with the Company within

decisive period.

V. OVERVIEW OF MEETINGS ORGANIZED IN THE LAST ACCOUNTING PERIOD ON

IMPULSE OR IN INTEREST OF THE CONTROLLING ENTITY OR ENTITIES CONTROLLED

BY THEM, IF SUCH A MEETING CONCERNED PROPERTY EXCEEDING 10 % OF

REGISTERED CAPITAL OF CONTROLLED ENTITY DETECTED ACCORDING TO THE LAST

FINANCIAL STATEMENTS:

During decisive period, the Company did not perform any meetings, legal acts or other

measures on impulse of controlled entity or entities controlled by them that would concern

property exceeding 10 % of registered capital of the Company detected according to the last

financial statements.

VI. EVALUATION:

All contractual relations of the Company and interconnected entities were concluded under

normal contractual terms and conditions and provided consideration comply with conditions of

normal business intercourse. Advantages consisting especially in strong economical

background result from relationships with interconnected entities for the benefit of the Company.

Advantages prevail from relationships between interconnected entities for the Company. The

Company did not sustained no injury, significant risk or disadvantage as a result of above

mentioned reasons within period of year 2017.

In Dolní Benešov, on 20.3.2018

Petr Holeček

Chairman of the Board of Directors

ARMATURY Group a.s.

43

Annual report 2017 Supervisory Board‘s Report

Supervisory Board‘s Report 2017

Concerning the review of annual financial statements of

ARMATURY Group a.s.

Dear shareholders,

In 2017, the Supervisory Board of ARMATURY Group a.s., ID: 25572881, Nádražní 129, 747

22 Dolní Benešov, carried out regular inspections and a Supervisory Board member

participated in the meetings of the joint stock company‘s Board of Directors many times.

In pursuing the control activity, the Supervisory Board did not find any serious deficiencies in

the company‘s business management.

The Supervisory Board carried out random checks of the company‘s accounting and

handling of the company‘s property and found no breach of applicable laws during these

checks on the company‘s part.

Regarding the 2017 financial statements, the Supervisory Board considers it as correct and

complete and proposes the general meeting to approve them.

In Dolní Benešov on 18. 6. 2018

……………………… Leo Švančar Chairman of the Supervisory Board

44

Annual report 2017

45

Organization chart

CH

AIR

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De

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De

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6.1. Design Department

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Annual report 2017

EMS AND OHSAS POLICY

46

Annual report 2017

47

ANNUAL REPORT 2017

Czech Republic

ARMATURY Group a.s.

Production plant and Headquarters

Nádražní 129, 747 22 Dolní Benešov

tel.: +420/553 680 111

fax: +420/553 680 333

e-mail: [email protected]

Registered office in Hranice

Lipnická 157, 753 61 Hranice IV-Drahotuše

tel.: +420/581 658 111

fax: +420/581 658 128


Slovakia

ARMATÚRY GROUP, s.r.o.

Registered office

Jánošíkova 264, 010 01 Žilina

tel.: +421/41/707 77 77

fax: +421/41/707 77 70


Registered office in Košice

Južná trieda č. 74, 040 01 Košice

tel.: +421/55/ 677 18 77

fax: +421/55/ 677 18 78


Registered office in Šala

Murgašova 27, 927 00 Šala

tel.: +421/31/770 00 67

fax: +421/31/770 00 69


China

ARMATURY GROUP Co., Ltd

Subsidiary company

Xinjing road 18

Zhangjiagang Economic & Technological

Development Zone

Jiangsu, China

mob.: (China): +86 137 7326 6078

mob.: (CZ): +420 606 713 721


Austria

Armatury Group GmbH

ARMATURY Group a.s. official representative for

Austria

Attemsgasse 45/1/7, A-1220 Wien

mob.: +43 (0) 664 /88 51 33 33

tel.: +43 (0) 1 / 20 21 985

fax: +43 (0) 1 / 20 21 985


Germany

Armatury Group GmbH


Germany

Technology Centrer Bissendorf

Gewerbepark 18

49143 Bissendorf

mob.: +43 (0) 664 /88 51 33 33

tel.: +49 (0) 5402 70 2532

fax: +49 (0) 5402 70 2531


Russia

AO „ARMATURY Group a.s.“


Russia

3rd street Tverskaya-Yamskaya, house 31/35, 125047

Moscow

tel./fax: +7/495 956 3335


Other business representatives abroad:

Poland, Norway, Turkey, Estonia, Romania, Egypt,

Iraq, Pakistan, India, Chin, Sudan, Algeria and other

countries.

Documents

ANNUAL REPORT 2017 - ARMATURY Group