AANNNNUUAALL RREEPPOORRTT 22001133 · AANNNNUUAALL RREEPPOORRTT 22001133 pursuant to Section 40 of...

AANNNNUUAALL RREEPPOORRTT

22001133

pursuant to Section 40 of the Commercial Code No. 513/1991 Coll. and pursuant to Section 20 of the Act on Accounting No. 431/2002 Coll.

illegible signature ....................................... Discussed by the Board of Directors on: 8 April 2014 Ing. Ľudovít Černák, CSc. Approved by the General Meeting on: 20 May 2014 Chairman of the BoD

Annual Report * VÝVOJ Martin, a.s. year 2013

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1 Basic Information

Business name VÝVOJ Martin, a.s.

Address, registered office Komenského 19, 036 01 Martin

Registered in Companies Register of the District Court Žilina, section Sa, file No. 10119/L

CRN 36 381 829

VAT ID SK2020119475

Date of establishment 17 July 1998

Legal form joint stock company

Internet email: [email protected] with WEB pages: www.vyvoj.sk and www.vyvojmt.eu

The company VÝVOJ Martin, a.s. with its registered capital of €2,652,000 and 96 employees at the end of 2013 belongs to medium-sized subjects in the field of applied research, development and engineering production. VÝVOJ Martin, a.s., as engineering, production and service organization with a high portion of research, development and control activities focuses on specialized activities in engineering industry within the entire chain of research – development – design – engineering – production – service – trade with the following objectives:

1.1 to sell own products on the product market:

applications of armoured vehicles – container carriers TATRA 8x8 and vehicles TATRAPAN 6x6 and 8x8 and their subgroups (air handling units, air conditioning units, power supply systems and spare parts) for other products of special technology (including the preparation for installation of IT and communication systems) and providing service and supply loans for this groups of products,

development, production and service of technological containers with autonomous power supply in both civil and armoured design in wide assortment with various equipment and security class according to customer’s requirements,

applications of armoured vehicles RG-31, RG-32 for communication purposes,

industrial positioners with bearing capacity from 1 to 100 tonnes (both from the mass production or according to specific needs of customers) and providing of service and supply loans for this group of products,

technology and driving systems and providing of service and supply loan for this group of products

1.2 to sell engineering counselling, development services, tailor-made production and production cooperation on the service market:

counselling and support for military tests, codification,

innovative engineering during the preparation of structural funds projects within operational programmes Research and Development and Competitiveness and Economic Growth,

contractual research and development in the field of engineering with supply loan for these services provided to customers,

contractual production and production cooperation according to the customer’s documentation and supply loans for these services.

Fig. No. 1 / View of the office building

mailto:[email protected]


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2 Human Resources and Technical Infrastructure The highest added value of the company VÝVOJ Martin, a.s. consists in its highly skilled staff with 59 years of experience in the field of design and construction activities, as 59 years ago the manufacture of tank technology, and later also the manufacture of locomotives, engines, tractors, wheel and crawler special machines, construction and earth machines, as well as aggregates started in Martin. The qualification structure of our employees corresponds to the demands of the work performed, where 48% employees have university or higher education and 52% have secondary education. The detailed qualification structure is shown on Figure No. 2:

Fig. No. 2 / Qualification structure *Explanatory Notes: Vzdelanostná štruktúra zamestnancov Educational structure of employees Vysokoškolské III. stupňa Post-graduate university education Vysokoškolské II. stupňa Graduate university education Vysokoškolské I. stupňa Undergraduate university education Stredné odborné Vocational secondary education Stredné odborné s maturitou Vocational secondary with leaving exam

VÝVOJ Martin, a.s. and its employees have trade licences and certificates to perform professional specialized activities:

2.1 Research and development

general research and development pursuant to the certification licence of the Ministry of Education of the Slovak Republic,

research and development of agriculture and forestry machinery and technology,

research and development of road machinery and transport equipment,

research and development of rail vehicles,

research and development of military weapons and spare parts for military weapons,

electrician expert – electrical equipment designer,

development, manufacture, reconstruction, sale and service of aggregates and technology equipment for the processing industry with particular emphasis on mechanical engineering within the scope of unregulated trade licences,

development, manufacture, reconstruction, sale and service of positioners, technology equipment and robotic systems within the scope of unregulated trade licences.

2.2 Services

lease of agricultural and forestry machines and equipment for roads and highway maintenance,

counselling and expert activities in the field of quality management, regulatory activities and revitalisation processes within the scope of unregulated trade licence,

real estate lease, including parking lots for motor vehicles and lease of machines and equipment,

trade in military materials within the scope of military material specifications included in the authorisation issued by the Ministry of Defence of the Slovak Republic,

assembly and repair of measuring and regulating technology,

counselling and expert activities, engineering and project management,

NATO stock number assignment pursuant to the authorisation of the Ministry of Defence of the Slovak Republic,

organisation of courses, training and lectures.


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2.3 Trade and production

wholesale within the scope of unregulated trade licence,

production, repairs, modifications, purchase and sale of agriculture and forestry machinery and technology,

production, repairs and modifications of road machinery and transport equipment,

production of machines and equipment for general purposes,

trade and services agency.

2.4 Structure of employees

The company started the year 2013 with 109 full-time employees and the number of employees was reduced to 96 by the end of the same year. The company employment rate slightly decreased throughout the year due to optimisation of capacities in relation to the business plan of 2013. The employment of skeleton staff ranged monthly from 96 to 109 employees. The number of contract-based employees (performance contracts and trade licences) fluctuated during the year from 7 to 15 employees monthly. The number of all employees of the company is shown in the Fig. No. 3.

Fig. No. 3 / Development of employment *Explanatory Notes: Zamestnanosť Employment rate Zamestnanci Employees Dohody a živnosti Performance contracts and trade licences Celková zamestnanosť Total employment

The structure of skeleton staff according to categories is shown in the Fig. No. 4 :

ITP-J unit designers and technicians

THP-R oncost office works and service activities

R-J unit production workers

R-R oncost aid workers

Fig. No. 4 / Development of the structure of employees


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Out of the average number of 97 employees in 2013 17% were women, the average age of employees was 45.91 years, what represents a "slight increase" as compared to the previous year by 4.03 years. The average salary in 2013 was in the amount of 889 EUR, which means it dropped as compared to the 2012 average by 3.93%. In connection to business activities of the company in the field of defensive technology and the validity of the licence for the sale of military material, the National Security Authority of the Slovak Republic verified for the level of "confidential", 26 employees with regard to the protection of classified matters (personal security), which number represents 27% of all employees. Due to increased administrative security and security of buildings and other items, the company also holds the certificate of industrial security confirmed by the National Security Authority.

2.5 Certification of the company management system

The company vindicated in 2013 in the supervisory audit performed by the Defence Standardisation, Codification and Government Quality Assurance Authority at the Slovak Ministry of Defence the Certificate of Compliance of the Quality Assurance System with requirements of the Slovak Defensive Standard AQAP 2110: 2010. The certified company QSCERT, Zvolen performed the audit of the company with following results of vindication and acquisition of certificates:

certificate vindicated by 1st

control audit pursuant to the ISO 9001:9008 (quality management system),


control audit pursuant to the BS OHSAS 18001:2007 (safety of work and protection of health at work),


control audit pursuant to the ISO 9001:2008 in combination with the ISO 3834-2:2005 (quality management system for fusion welding of metal materials),

certificate vindicated by 2nd

control audit pursuant to the ISO 14001:2004 (environmental behaviour of the company).

The integrated management system was completed to the level of 20 managed processes pursuant to the ISO 9001.

Fig. No. 5 / Certificates


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The company has an audit of qualification to perform research and development in compliance with Act No. 233/2008 Coll., valid until October 2015 performed by the Ministry of Education of the Slovak Republic, which confirmed not only the professional approach but also system and technological infrastructure for the performance of research and development of the company.

3 Organization Structure and Executive Bodies of the Company In 2013 a change of owners of company shares occurred:

transfer of 85.9% of shares from SITNO a.s. Bratislava to SITNO Holding a.s. Kremnica

transfer of 14.1% of shares from minority shareholders to SITNO Holding a.s. Kremnica

SITNO Holding a.s. Kremnica has become the sole shareholder on 23 July 2013

executive and supervisory bodies of the company were changed at extraordinary general meetings on 11 March 2013 and 29 July 2013

3.1 Executive bodies until 11 March 2013

Executive bodies - Board of Directors of the company Name and surname Body name

Ing. Milan SLAŠŤAN chairman of the BoD

Ing. Jiří HEDĚNEC member of the BoD

Ing. Marian STANÍK member of the BoD

Supervisory bodies - Supervisory Board Name and surname Body name

Ing. Bohuslav LIPOVSKÝ member of the Supervisory Board

Ing. Miloš ČERETKA member of the Supervisory Board

Ing. Milan LACA member of the Supervisory Board

3.2 Executive bodies from 11 March 2013 until 29 July 2013


Ing. Ľudovít ČERNÁK, CSc. chairman of the BoD

Ing. Tomáš MAGYARICS member of the BoD

Ing. Jiří HEDĚNEC member of the BoD


Ing. Marián TKÁČ chairman of the Supervisory Board

Mgr. Filip ČERNÁK member of the Supervisory Board


3.3 Executive bodies from 29 July 2013


Ing. Ľudovít ČERNÁK, CSc. chairman of the BoD

Ing. Tomáš MAGYARICS member of the BoD

Ing. Marián TKÁČ member of the BoD


Ing. Jana RAKICKÁ chair of the Supervisory Board

Mgr. Filip ČERNÁK member of the Supervisory Board


3.3 Executive company management in 2013

Name and surname

Ing. Ján BALHÁREK, PhD. charged director general and director of the production-technical section


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Ing. Milan LACA director of economic section

Ing. Karol CHRENO director of business section

Ing. Jozef KOŽÁR director of development section

Ing. Romana ŠOŠKOVÁ director of control and quality section management representative for quality

3.4 Organisational structure of the company

Fig. No. 6 shows organisational structure of the company valid from 1 August 2013 after effected organisational changes. The aim of said organisational changes was to stabilise the company and optimise capacities aimed at the performance of the business plan.

Fig. No. 6 / Organisational structure of the company

*Explanatory Notes: Predstavenstvo Board of Directors Generálny riaditeľ Director General Dozorá rada Supervisory Board Úsek riadenia a kontroly kvality Section of quality management and control Predstaviteľ manažmentu pre kvalitu Management representative for quality Vedúci bezpečnostný manažér Senior safety manager Vedúci environmentálny manažér Senior environmental manager Vedúci manažér BOZP OSH senior manager Úsek výrobno-technický Production-technical section Úsek vývoja Section of development Úsek obchodný Business section Úsek ekonomický Economic section Výrobná sekcia Division of production Technická sekcia Technical division Projektové riadenie Project management Obchod, predaj a expedícia Trade, sales and dispatching Financovanie, pokladňa Financing, cash desk Technická príprava výroby Technical preparation of production Projekcia Design Špecializácia IT IT specialisation Marketing Marketing Plánovanie a controlling Planning and controlling Výrobné haly Production halls Strojná konštrukcia Machinery design Nákup Purchase Personalistika Human resources Elektromontáž Electric installations Elektro konštrukcia Design of electric installations Sklady Warehouses Informatika Informatics Príprava materiálu Preparation of materials Informačné technológie Information technology Správa, údržba a ochrana majetku Property administration, maintenance and protection Výdajňa náradia Tools distribution Skúšobňa Testing room Externé účtovníctvo External accounting Normalizácia a archív Standardisation and archives


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4 Activity Development of the Accounting Unit

4.2 CASH FLOW

Figure No. 7 shows that the company drew revolving loan in 2013 with loan framework €2,000K - €3,000K to cover expenses (material and cooperation) in production of 38 pieces of containers SHELTERS. The company also drew current loan to cover common expenses not exceeding €340K during 2013. In addition to said loans, the company is also repaying consumption loan to cover costs of the TATRAPAN 8x8 in the amount of €305K. All loans were provided by TATRABANKA.

Drawing of loans from TATRABANKA as of 31.12.2013 value (K€)

Revolving loan 2 563 Current loan 338 Consumption loan 193

TOTAL 3 094

Fig. No. 7 / Cash flow of the company in 2013 (per individual months) *Explanatory Notes: Stav účtov Balance of accounts Príjmy Incomes Výdaje Expenses

4.2 Implementation of the business plan 2013

A total of 110 business cases (projects - contracts) were handled in 2013. Out of the total planned volume of incomes from the sale of products and services €10,555K, the plan was fulfilled to 72% what represents the volume of €7,652K. Figure No. 9 shows the portfolio of business activity of the company in years 2009 - 2013. The biggest 67% share in sales belong for the last 5 years to the sale of products and services in the field of defence - special technologies.

Field of sale (values in K€)

2009 2010 2011 2012 2013 Total % share

Innovations 155 2 478 1 810 115 16 4 574 16.81% Defence technology 2 793 306 7 263 1 580 6 331 18 273 67.15% Technologies 217 369 24 199 154 963 3.54% Positioners 116 138 67 74 297 692 2.54% Cooperation and services 38 31 527 542 158 1 296 4.76% Lease services 100 95 94 91 94 474 1.74% Goods and others 42 10 221 65 602 940 3.45%

TOTAL 3 461 3 427 10 006 2 666 7 652 27 212 100.00%


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Fig. No. 8 / Trend of the business activity portfolio

*Explanatory Notes: Inovácie Innovations Obranná technika Defence technology Technológie Technologies Polohovadlá Positioners Kooperácie Cooperation Služby Services Tovar a ostatné Goods and others

Within its business activities and sale, the company focused its attention in 2013 to the currently biggest project C2 Shelters for FMV. In addition to the general contract, the company concluded with FMV following options:

OPTION No. 1 for the delivery of shelters - 1 pc CNS20 T2, 11 pcs CNS10 T2 and 1 pc TWS in the volume of €2,128K

OPTION No. 2 for the delivery of shelters - 34 pcs SWS, 15 pc CNS10 T2 and 8 pcs TWS in the volume of €9,609K

OPTION No. 3 for the delivery of shelters - 4 pcs BS20 in the volume of €730K

OPTION No. 4 for the delivery of shelters - 3 pcs CWS in the volume of €800K

and order for documentation, production and delivery of 1 pc of showering shelter MSS in the volume of €247K

Fig. No. 9 / Interior of the SWS shelter workplace

In the field of defence technology steps were taken to maintain good relations with decisive partners such as BAE Systems or Ministry of Defence of the Slovak Republic, what created the basic precondition for the acquisition of new projects in years 2013-2014. An intensive work took place with regard to the acquisition of order for the delivery of carriers for the Armed Forces of the Slovak Republic. Military testing of the carrier TATRAPAN 8x8 CC were performed in close cooperation with the production-technical section as a necessary precondition for concluding a contract for future deliveries of carriers with the Ministry of Defence of the Slovak Republic. At the same time, several demonstration events for the vehicle were organised in order to support the conviction about the importance of implementation of this vehicle in the equipment of the Army of the Slovak Republic and subsequently also other units of NATO. Intensive negotiations with a foreign partner with regard to the project of building repair capacities for recovery tanks VT 72 B in India continued during the whole year 2013. Said negotiations resulted in conclusion of contract with the company


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CENZIN Warsaw (PL) for the first stage of the project (stage of preparation of the implementation documentation) in 09/2013 in the volume of €420K. Activities such as purchase and sale of weapons and spare parts for products of foreign partners on the Slovak market were also performed in 2013 in the volume of €602K. Activities in the field of sale of civil products were aimed at projects for the range of customers acquired in recent past and on the grounds of contracts concluded with companies SANECA, a.s. Hlohovec and Prvá zváračská, a.s. Bratislava, the performance of which was started in 2012 and successful delivery occurred in 2013. We also obtained several interesting demands for development and delivery of test stands for the railway sector from customers on the domestic market and in the Czech Republic. Until August 2013 we also dealt with the production of weldments for our partner PPS Group, a.s. Detva in total volume of 31 pieces.

4.3 Overhead costs analysis

Total overhead costs reached in 2013 volume of €2,247K. As compared to the previous year, the decrease of overhead costs was by 19.15%, and the company did not achieve the planned overhead (plan 410%, reality 568%). Ten biggest items of overhead costs in 2013 are shown in the below table:

TYPE OF COST value (K€)

Overhead wages 622.8 Deductions 349.9 Depreciation 594.5 Services 162.3 Overhead material, protective means, fuel, long-term tangible investment assets

49.9

Energies 119.8 Audit, bookkeeping, agency 37.1 Severance pay, social costs and social fund 61.9 Repairs and maintenance 15.5 Interest, leasing, exchange rate differences 145.2 Other costs 88.2

TOTAL COSTS 2 247.1

5 Expenditure on Activities in the Field of Engineering and Development Key research and development activities of the company in 2013 included innovative defence technology solutions covering, at the applied research level, an increased anti-mine and ballistic resistance of shelters for the safety of crews and operators. The solution of EMC/EMI resistance using new materials and technologies used for the manufacture of shelters as well as aggregates themselves was confirmed also by tests with positive results in the authorised testing laboratory. The development of the vehicle TATRAPAN 8x8 CC shelter carrier was successfully completed at the end of the year by final control and military testing with acceptable result. Innovative activities of civil products were successfully ended by the completion of production, functional tests of the welding 100 t positioner in cooperation with Prvá zváračská, a.s. and delivery in 11/2013 to the end user the company Škoda, a.s. Plzeň. Integration of individual components of the welding workplace, animating and complete tests of the workplace confirmed designed parameters and satisfaction of the end user. Solving of innovative activities of the product portfolio took place in close cooperation with following partners:

Faculty of Electrical Engineering and Information Technology of the Slovak University of Technology in Bratislava,

Academy of Armed Forces Liptovský Mikuláš,

Military Technical and Testing Institute Záhorie,

VOP CZ, s.p. Vyškov. Following projects outside those specified in the introduction of this chapter were started within the preparation of research solutions and conditions for future development solution of new production programmes for years 2013 - 2015:

• intelligent shelters with remote diagnostics and own security monitoring system, • control of group movement of flying pilotless means based on biological principles, • mobile delaboration shelter ammunition workplaces.


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Fig. No. 10 and 11 / Shelter carrier TATRAPAN 8x8 CC with the MOKYS shelter during military testing

Fig. No. 12 / COS C2 Shelter test Fig. No. 13 / COS C2 GEN SET Shelters test

Fig. No. 14 and 15 / Installation of welding positioner 100 t components

6 Trading Profit/Loss in the Accounting Period The regular General Meeting approved business plan for 2013 with the profit min. €548.5K before taxation. The loss achieved in 2013 was €683.2K. The figure No. 16 shows the course of trading profit/loss in 2013. The average required added value was set for 2013 to the amount of 2,600 EUR / employee / month. The total added value was reached in the amount of 1,560 EUR / employee / month, what represents 60% of the plan.


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Fig. No. 16 / The course of trading profit/loss in 2013 *Explanatory Notes: HV - skutočnosť Trading profit/loss - reality HV - plán Trading profit/loss - plan

(K€)

TYPE OF COST value

Costs of goods, material, energies sold 3,451.48 Repairs, travel expenses and services 1,466.99 Salaries and social costs 1,430.05 Taxes and fees 34.63 Other operational expenses 268.42 Depreciation, reserves and rectifying items 594.48 Financial costs 148.63

TOTAL COSTS 7,394.69

TYPE OF REVENUE value

Performance and goods sales 7,645.75 Change of status of unfinished work and products -1,005.61 Activation of assets, material and services 0.00 Other revenues from economic activity 68.36 Clearing of reserves and rectifying items of revenues 0.00 Financial revenues 2.97

TOTAL REVENUES 6,711.47

TRADING PROFIT/LOSS before taxation -683.21

Taxable trading profit/loss -672.07

Trading profit/loss after taxation -682.35

The annual financial statements were audited in compliance with Act No. 431/2002 Coll., on Accounting, by Ing. Jarmila Rumannová, an auditor of the Slovak Chamber of Auditors, who in her report of an independent auditor for shareholders dated 3 April 2014 confirmed that the annual financial statement for 2013 gives a true view of the financial position of the company. The auditor’s statement to the annual report is attached hereto. The report of an independent auditor on annual financial statements as to December 31, 2013, completed by the balance sheet, the profit and loss statement and the notes to the financial statement as to December 31, 2013 are attached hereto as an independent annex.


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7 Property Structure The property of the company reached as per 31 December 2013 volume of €7,337K. Changes occurred in the volume and in the property structure in 2013 when the property of the company dropped as compared to 2012 by €1,546K. The biggest share in the property drop had long-term intangible assets (decrease by €434K - depreciation), unfinished production (decrease by €1,006K) and goods (decrease by €441K). On the other hand, receivables increased most significantly (increase by €758K). Figure No. 17 shows the property structure of the company as per 31 December 2013.

Fig. No. 17 / Property structure of the company *Explanatory Notes: Dlhodobý nehmotný majetok Long-term intangible assets Pozemky Lands Stavby Buildings Samostatné hnuteľné veci Individual movable things Obstarávaný DHIM Procured long-term tangible investment assets Materiál na sklade Material on stock Nedokončená výroba Unfinished production Výrobky a tovar Products and goods Pohľadávky Receivables Účty a pokladňa Accounts and cash Ostatné Other

The premises of the company are located on the site with an area of 27,154 square meters and consists of an eight-floor administrative building of the design and construction section, two production halls, 1,296 square meters each, a still-room and a warehouse building. The company has 2 parking areas for motor vehicles with capacity of 80 parking slots and 2 meeting rooms. The office and laboratory premises are connected to the telecommunications network with own automatic digital switchboard and the INTRANET computer network which is connected to own e-mail, intranet and CAD servers serving to the exchange and sharing of joint documents and construction documentation. The main administrative building is equipped with utility mains and management system through which also the buildings of the neighbouring companies are connected. The Internet access system and the attendance and access control systems are managed through the access right matrix. All key employees (49% of employees) have access to the services of a mobile phone network operator under a fleet agreement.

8 Environmental Behaviour In 2013, the company VÝVOJ Martin, a.s. followed its own corporate environmental policy and programme and fulfilled all environmental objectives in compliance with the implemented standard STN EN ISO 14001: 2004 that was successfully confirmed by re-certification control audit performed by the company QSCert on 5 November 2013.

The company has concluded valid contracts with companies collecting other and dangerous waste.

According to the Report of waste creation and disposal for 2013 (filed to the District Environmental Office in Martin on 13 January 2014) VÝVOJ Martin, a.s. produced in 2013 a total of 7.75t of other and dangerous waste, out of which a total of 2.65t of waste was handed over to companies Ekotur s.r.o., MEWA Textil Service s.r.o. and EKO-QELET, a.s. in 2013.


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As the operator of a small air pollution source - painting chamber we sent on 9 January 2013 a notification to the Municipal Office Martin and subsequently we were charge a fee of €66.38 and paid it within its due date.

Packaging waste - mixed paper and cardboard was given to the waste collection centre in 2013 in the value of €45.

Plastic secondary raw material stored in 1100l plastic yellow collection container located in the VMT yard were once per week collected by the company Brantner FATRA s.r.o.

Glass as the secondary raw material stored in a green collection container located in the VMT yard was collected by the company Brantner FATRA s.r.o. according to need.

Heat consumption The company consumed 3847GJ of heat in 2013, what represents as compared to 2012 (4694GJ) saving by 18%. We hereby

fulfilled also the commitment resulting from the project - "Reduction of energy demand of objects".

Electricity consumption The company consumed 472 MWh in 2013, out of which 358 MWh by VMT and 114 MWh by external clients. The slight increase of electricity consumption in 2013 as compared to 2012 (334 MWh) was caused by increased production.

Water consumption The company consumed 2150 m

3 of water in 2013, out of which 1212 m

3 was consumed by VMT and 983 m

3 by external

clients. The decrease of water consumption and thereby also of the amount of fee charged for its supply was caused mainly by the reduced consumption of "technological water", i.e. by the reduced volume of discharge of the heating system and filling of the volume tank for the performance of pressure tests of the special. The decrease was caused also due to installation of ball valves on individual distribution branches in the AB building. It is no longer necessary to start the whole system in case of failure of a water faucet, but only the respective branch. The course of the environmental behaviour process is evaluated in a separate annual report of 5 February 2014.

9 Events of Particular Importance Occurring after the End of Accounting Period In the period from 1 January 2014 until 31 March 2014 when the financial statement for 2013 was drafted, the company was developing on stable basis and no events of particular importance occurred.

10 Acquisition of Equity Shares, Interim Certificates, Ownership Interests and Shares In 2013 the company has acquired neither any own equity shares, interim certificates nor owned any ownership interest

and any shares in other companies. The company had issued 156,000 book-entry shares in the nominal value of EUR 17.0

per share; the type of shares: publicly not marketable registered shares. As at December 31, 2013, the company VÝVOJ

Martin a.s. had registered capital in the amount of EUR 2,652,000.00 which remained unchanged.

11 Expected Future Development of the Company

11.1 Orientation to customers

In 2014 the company will further develop as a research and development, engineering and technical, production and trade centre. While performing its business activities, VÝVOJ Martin, a.s. focuses on the needs of its customers from the external business environment, paying attention to the programmes with high added value and foreign markets. The fundamental principle of this orientation is the understanding of current and future needs of customers and ensuring that their needs are met; and through innovative activities and proactive approach to fulfil their requirements and expectations at a high-standard and high-quality basis.

11.2 Management of VÝVOJ Martin, a.s.

Through the implementation of its quality assurance policy, business, environmental, personnel and safety policies, as well as the safety and protection of health at work policy (OSH), the social policy and the ethical approach to the management, the company creates a positive image of the company, promotes a uniform approach to the fulfilment of the purposes of its business activities, the focusing of the company, as well as the creation of a sound and healthy working environment. It creates conditions for fully-fledged involvement of the employees to the working process and fulfilment of the quality


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assurance quality, business, environmental, personnel, security and social objectives, as well as the objectives in the field of safety and protection of health at work and the implementation of the business plan for 2014.

11.3 Involvement of employees

Employees of VÝVOJ Martin, a.s. are effectively engaged, while holding their offices, in the working process and utilise their skills for the benefit of the company and for the achievement of the business activities of the company. The system of motivation based on the customer satisfaction, efficiency, performance and qualification improvement together with the personnel and social policies has a positive impact on work performance. The top management will support innovation activities of employees and will create conditions for the protection of such created intangible assets through industrial rights and copyrights.

11.4 Process-oriented approach

The management of the company VÝVOJ Martin, a. s. applies on the management of the company process-oriented approach for the purpose of efficient achievement of required outputs in order to effectively manage utilisable resources and activities in the company as a process. Within this process, the company expects in 2014 the improvement of efficiency, mutual interconnection and actuality of information necessary for the improvement of managing processes with overall application of the information system QAD.

11.5 Integrated approach to management

The fundamental strategic decision of the top management of the company VÝVOJ Martin, a.s consists of the identification, understanding, creation, documentation and application of the system of management of mutually related process aimed at a specific objective. The management system forms an integral part of the functioning of the company. Within the systemic assurance of the conditions for the implementation of business objectives in the field of defence technology, the company has already, since 2009, managed the company through the integrated management system certified under international standards STN EN ISO 9001: 2005, Slovak Defensive Standard AQAP 2110:2010, STN EN ISO 14001:2005 a STN OHSAS 18001:2007. The industrial security implemented within this system has been confirmed by the Slovak National Security Authority and professional research and development methods have been confirmed by the certificate of the Slovak Ministry of Education research and development.

11.6 Constant improvement

The management of the company VÝVOJ Martin, a.s. undertakes to improve consistently all processes leading to the prosperity of the company including permanent improvement of the effectiveness of the company’s management system. The management of the company VÝVOJ Martin, a.s. regularly revaluates the fulfilment of objectives of individual policies, and in particular the quality assurance objectives through the coordination of the implementation of the business plan and the preparation of new business plans in order to ensure the stability and liquidity of the company. The pre-project preparation of improvement represents a large portion of the permanent improvement of the processes with regard to the planning where in the field of the medium term planning projects for the future innovation objectives and related investments are being prepared under the Structural Funds and other additional funds in order to ensure personnel, financial and knowledge resources in order to support competitiveness, sustainability and for research and development in the European area.

11.7 Fact-based decision making

The management of the company VÝVOJ Martin, a.s. bases its decisions on the analysis of any and all available data and related information in order to improve efficiency of the decision-making activities.

11.8 Supplier relations with mutual benefit

The management of the company VÝVOJ Martin, a.s. creates preconditions for continuous improvement of its supplier-customer relationships through the implementation of transparency of selection procedures, including public tenders and public procurement, using the tools for the support of mutual trust and the performance of required quality in order to achieve mutual benefits. VÝVOJ Martin, a.s. does not have monopoly position with any commodity with regard to deliveries of goods and services.

12 Coverage of 2013 Loss On the grounds of results of the financial statement, the company created in the past accounting period from 1 January 2013 until 31 December 2013 loss in the amount of €682,348.26 after taxation. The distribution of profit is therefore irrelevant.


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At the same time, the sole shareholder of the company by its decision No. 1/2014 of 20 March 2014 decided about the usage of undistributed profit from previous years in the amount of €673,733.62 for the coverage of loss of the year 2013. The balance in the amount of €8,614.64 to be put to the account of unpaid loss from past years. Done in Martin, this 7

th day of April 2014

Prepared by: Ing. Milan Laca


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Addendum to Auditor’s Report on the verification of the compliance of the Annual Report with financial statement

pursuant to Section 23(5) of Act No. 540/2007 Coll.,

to the Executive Body of the company VÝVOJ Martin, a.s., Martin

l. I have audited the financial statement of the company VÝVOJ Martin, a.s., Komenského 19, 036 01 Martin, CRN 36 381 829 as at December 31, 2013 to which I have submitted on April 3, 2014 the auditor’s report in which I have expressed my auditor’s opinion with the following wording:

Opinion

In my opinion, the financial statement provides a true and fair view of the financial position of the joint-stock company VÝVOJ Martin, a.s., Komenského 19, 036 01 Martin, CRN 36 381 829 as at December 31, 2013 and of its trading profit/loss for the year then ending in accordance with the Act on Accounting.

II. I have also verified the compliance of the annual report with the aforementioned financial statement. The correctness of the preparation of the annual report is under sole responsibility of the Executive Body of the company. My task was to issue, based on my verifications, an opinion on the compliance of the annual report with the financial statement. I conducted my audit in accordance with the International Standards on Auditing. These standards require that the auditor plans and audits the annual accounts in such a way that he/she is able to obtain reasonable assurance that the information included in the annual report that are reflected in the annual accounts are in all material aspects in compliance with the respective annual accounts. I have compared the information included in the annual report with the information included in the financial statement as at December 31, 2013. I have not verified any other data or information but the data and information included in the annual accounts and accounting books. I am convinced that my verification provides for an appropriate basis in order to express my auditor’s opinion.

In my opinion, the accounting information included the annual report of the company VÝVOJ Martin, a.s., Komenského 19, 036 01 Martin, CRN 36 381 829, provide, in all material aspects, a true and fair view of the annual accounts as of December 31, 2013 and is in compliance with Act on Accounting No. 431/2002 Coll. as amended.

Auditor’s Name and Surname:

Ing. Jarmila Rumannová An imprint of a round stamp with the following text in the middle: „SKAU Licence No. 618“ and the following text around it: „Slovak Chamber of Auditors * Ing. Jarmila Rumannová“

Licence No.: 618

Auditor’s Signature illegible signature

Date of the Auditor’s Report

6 May 2014

Auditor’s Address: A. Hlinku 10, 038 61 Vrútky


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