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MARWICK First-hand content

November/December 2015

The end of the real estate crisis in Europe

Four rules we have learned from the Japanese regarding family businesses Can Czech authorities work in the cloud? Klรกra Spilkovรก: The best Czech female golfer talks money matters The secrets of a bar business where patrons keep their own tabs A magazine for clients and friends of KPMG Czech Republic

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Visions, falls, rises, experience, inspiration What were the secrets behind the individual entrepreneurial successes of the past 25 years?

Read all the interviews with outstanding Czech business personalities at Â

www.28pribehu.cz.


editorial

Good news from the real estate market

As the proverb has it, it’s always darkest before the dawn. I would like to borrow this old adage to illustrate the economic cycle. Nothing is dawning on the current real estate market, instead it seems to be around noon. The KPMG Property Lending Barometer 2015, the main topic of this current issue of Marwick, also measured a fair share of optimism. Due to a lack of alternative investments, investors have their eye on real estate, which is offering very interesting margins with interest rates at a record low. The Czech Republic also ranked first in one of the categories of the survey – all surveyed bankers confirmed an optimistic outlook. Together with Swedish banks, Czech banks also hold the lowest share of subprime building and construction loans. In the first half of 2015, our country surpassed Poland in the volume of real estate investments. Housing construction is running at full throttle; new logistic parks, new office buildings and new shopping centres are being built. I often hear comments that this growth phase is bound to be again followed by a recession, but that’s just the essence of not only the real estate market. In a growth phase, it’s wrong just to work under the expectation of an inevitable decline. Instead, let’s think about how to best make use of the day ahead of us, to again borrow from the proverb mentioned above. Pavel Kliment Partner in charge of Building, Construction and Real Estate Services KPMG Czech Republic pkliment@kpmg.cz @PavelKliment

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MARWICK November/December 2015

commentary

Our obsession with the exchange rate Are we poorer or richer after the Czech crown weakened? Zdeněk Tůma’s commentary. page 5

top story

Bankers trust real estate Manageable risk and a sound return – investing in real estate pays off, and banks know that, too. page 6

infographics

Calendar of corporate duties Don’t forget about legal obligations linked to the end of the accounting period. page 18

money

Czech public administration in the cloud How does the cloud work in Great Britain and what inspiration can the Czech Republic take from the UK? page 26

coffee break

Golf and money An interview with Klára Spilková on a season’s costs and whether one can earn a living playing golf. page 28

business lunch

Making a big fuss about wine The owner of the On the Bank of the Rhône wine bar reveals how to run a business where people jot down their consumption themselves. page 34

Marwick - A magazine for clients and friends of KPMG in the Czech Republic. Published every two months by KPMG in the Czech Republic, Pobřežní 1a, Praha 8. MK ČR E 22213. Subscriptions on www.marwick.cz. Editor-in-chief: Michaela Rakova, art director: Štěpán Prokop, photo editor: Barbora Mráčková. © 2015 KPMG Česká republika, s. r. o., a Czech limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative („KPMG International“), a Swiss entity. All rights reserved.


commentary

Our obsession with the exchange rate In the media, we often hear or read that we’ve become poorer because of the weakening of the Czech crown. Trips abroad have become more expensive and so have imports. Simply put, after converting our savings to euros, we can now buy less than two years ago before the Czech National Bank began its interventions. Our own experience may easily lead us to this conclusion. Say that in November 2013 we were planning to take our family on a skiing trip to the Alps – then this trip that winter did in fact end up about five percent more expensive. However, we probably sense that simply considering the money we spent on a  trip abroad does not suffice. The effects that movements of exchange rates and interest rates have on the economy are manifold. First, merely using the argument of the overall volume of savings, as many are doing, is useless because most of our expenditures go to the domestic, crown-denominated economy. For example, rent, or housing costs in general, have no connection with the CZK/EUR exchange rate but are nevertheless a substantial part of the spending of a vast majority of households. The conversion of savings to euros would, needless to say, make sense if the Czech Republic joined the eurozone. This is clearly not under way now, but let’s consider it simply theoretically anyway. This would imply converting not only our savings but everything to euros. Let us look at the figures. As the basis, I will take numbers from late 2013, when the Czech crown weakened, and I will assume that on 1 January 2014 we adopted the euro. Would we be poorer or richer after the Czech crown weakened? The bank deposits of residents totalled CZK 3 210 billion at that time, CZK 1 810 billion of which belonged to households and the rest to Czech companies. A  five percent weakening of the crown would therefore trigger a loss of CZK 160 billion, and the value of euros that we would find in our accounts at the beginning of the year would be lower by this amount compared to the balance in the case of a  possible conversion to euros two months earlier. We must, however, not just convert our savings but everything because we also have debts. Czech residents’ bank loans totalled CZK 2 230 billion at that time, about half of which belonged to households. It is probably not surprising to see that most of these household debts were used to buy housing. The dynamics of mortgage loans have been considerable in the past years. This begins to offsets our “loss” since the euro value of our loans was, logically, lower after the weakening of the crown.

“We must not just convert our savings but everything because we also have debts.”

Zdeněk Tůma Partner KPMG Czech Republic ztuma@kpmg.cz @zdetuma Comparing deposits and loans, the former exceed the latter. This confirms a well-known fact that savings in the Czech economy are high and banks have sufficient resources to finance loans. Our account does not end here, though. We must also consider the state deficit. We don’t consider it part of our household budget but must still acknowledge it here. The government or the state has no money of its own and runs state affairs using money collected from taxes or, if that doesn’t suffice, from borrowings that all of us have to repay. Even with interest rates currently low, debt repayments amount to tens of billions of crowns per year. In total, in late 2013, the debt amounted to 1 700 billion and a major part was denominated in Czech crowns. We thus also have to include this amount, minus the value of the debt in euros, in our calculation. And here we now come to realise that the total debt indeed exceeds our savings in the bank. Now, I do not want to demagogically infer from this consideration that we would in fact profit from the weakest exchange rate possible. What I  did want to point out using this simple example is that the impact of the central bank’s changes in interest or forex rates varies for individual parts of the economy. An interest rate increase or decrease will of course have different consequences for creditors and debtors, exporters and importers, etc. Central banks make these decisions with the aim of curbing the economic cycle and slightly boosting or slowing down the economy in a recession or a boom, respectively. I  personally have the feeling that we put too much emphasis on the nominal exchange rate of the Czech crown and instead forget about inflation, which might make us victims of our own success. Some ten years ago, we managed to reduce inflation to the levels common in developed economies; in recent years, however, we have nearly forgotten about it. But inflation and exchange rate alterations have similar effects: higher inflation and consequently higher wages have the same impact on our competitiveness as the strengthening of the Czech crown. Be that as it may, both inflation and exchange rates are mere nominal indicators. Although these economic indicators do help us express how rich we are, they themselves do not generate wealth. We are rich based on what we are able to produce and create and not in which currency we denominate the product.

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top story

Bankers trust real estate. Low interest rates attract investors to the Czech Republic

Banks are increasingly looking into the real estate market. And it makes sense – for a long time, interest rates on debentures have been extremely low, even negative; interbank interest rates are not too high either and banks need to invest their liquid funds somewhere. Real estate seems like a good choice: with manageable risk and a sound return. Text: Jiří Táborský, Illustration: Nikola Logosová Download the survey at www.kpmg.cz.

The sector is becoming of crucial importance for banks in developed economies; for Czech ones, the importance of real estate is rated as average among surveyed countries and continues to grow. This trend is supported by the sixth edition of the Property Lending Barometer, an annual survey published by the KPMG international network of professional firms.

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With banks in 21 European countries surveyed, this year’s issue confirmed that last year’s excellent results were not just a short-term improvement, but rather the beginning of a positive trend. According to the survey, 2014 represented a turning point from which the market hit by the crisis has started to recover.


top story

Invest in the Czech Republic, loans are cheap! People in charge of real estate at the more than 90 major banks surveyed by KPMG have agreed that this favourable trend is likely to continue. One of the key real estate market indicators is the level of interest premiums compared to reference rates such as EURIBOR or Czech PRIBOR; and it shows that the financing of real estate is still much easier in developed Western economies. While in Germany interest premiums are between 2 and 2.5 percent for new development projects and as low as 1.5 percent for existing buildings, on the other end of the scale, in Croatia, the premium is up to 7.5 percent for developers and roughly one percent lower for existing projects.

Interest premium across Europe (for industrial objects) Baltics

4,7–5,7 %* 4–5,5 %**

Croatia Czech Republic Germany Greece

6–7,5 %* 5–6,3 %** 2,5–3 %* 2,4–2,7 %** 2–2,5 %* 1,5–2 %** 3,6–4,8 %* 3,5–4,7 %** * new development projects ** existing investment buildings

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top story “This year it again holds that the Czech Republic has the lowest interest premiums among the countries of Central and Eastern Europe,” comments Pavel Kliment, partner in charge of Building, Construction & Real Estate Business Services at KPMG Czech Republic. His words are supported by numbers: interest premiums are around 2.5 percent for development projects, and, interestingly, the figure is also similar for financing transactions in existing buildings. For the best projects, premium may drop even further, to around 2 percent. Notably, the Czech banking sector is in excellent condition. According to the bankers surveyed, 98 percent of real estate loans granted by Czech banks are without any problems. In this indicator, we are surpassed only by Sweden, with 99 percent. Contrariwise, in neighbouring Slovakia only 73 percent of loans are problem-free. “The Czech Republic is a very promising economy: banks expect positive developments in the future, risk is relatively low, and return remains at a decent level,” adds Kliment.

Willingness to finance hotels

interest premium on construction of new hotels Czech Republic

2,7–3,1 %

Greece

3,7–5 %

Cyprus

4,2–5 %

Croatia

6,4–7,5 %

Development or a finished building? There are still considerable differences in the banks’ willingness to finance existing projects generating a secure income or development projects. The willingness to lend for development projects is the lowest in traditional economies such as Great Britain. In the Czech Republic, on the other hand, it is rather high. “Although Czech banks still prefer to finance finished buildings, there is a visible year-on-year increase in their willingness to finance development projects as well, which they refused to do during the crisis. The reason is that there are no longer that many finished buildings to finance, and if the banks want to do business in real estate, which they do, they simply have to go in for development projects,” says Kliment. Czech real estate lending is specific in other ways: a major shift has been observed in the financing of hotel construction. In the past, banks were rather unwilling in this respect, as the segment is unpredictable and competition high. But this year was very favourable for tourism and a number of transactions were realised in the hotel market. This had an impact on the year-on-year increase in the banks’ willingness to lend to the hotel segment – while it is still the least preferred segment, the situation is not as dramatic as it was a couple of years ago.

Club financing

Willingness of the surveyed banks to cooperate* Austria Czech Republic

90 %

Poland

80 %

Slovakia

80 %

* open or very open to cooperation

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100 %

“Czech banks are also most willing to take part in club financing, where one project is financed by a number of banks. All banks surveyed in the Czech Republic support this strategy. The volume of individual loans is huge and club financing helps the banks dilute the risks,” comments Kliment. Another interesting comparison involves the banks’ willingness to grant loans in foreign currencies. According to the survey, Czech banks do not have problems with this, and it happens frequently. There may be two reasons for this: firstly, a substantial number of Czech banks have foreign parents operating in Eurozone countries, therefore granting loans in euro is not an issue. A second possible explanation is the stability of the country’s exchange rate – if the Czech crown fluctuated strongly, banks issuing loans in euros would have to hedge their currency risk. But the Czech crown has been very stable for a long time, partly due to the Czech National Bank’s interventions making the exchange rate between the Czech crown and the euro predictable in a long-term perspective. Another likely reason is that rents are mostly nominated in euros.

Build an industrial facility For many investors, another key question is how the banks’ approach changes depending on the type of real property to be financed. As mentioned above, a certain shift is observable in the hotel segment – while it is still the least preferred area, the situation is improving. Czech banks are also interested in financing industrial buildings, offices and residential projects. In European countries in general, the banks’ willingness to lend is traditionally the highest for residential projects, closely followed by retail premises and offices. Hotels are the least attractive segment, due to the riskiness of this business; even though countries with a significant share of tourism, such as Greece or Cyprus, are an exception.


top story

Every country is unique Indeed, Europe is anything but a homogenous economy. Differences in both history and the present development generate huge gaps between countries, while for investors from, for instance, the United States it is often hard to grasp that just a few miles away, everything is different.

Switzerland

Greece

Spain

Switzerland has not been mentioned yet, despite the fact that it is a very interesting economy in many aspects, and even warranted a special study by KPMG. The real estate market in the country has been growing steadily for 15 years, and is now in danger of overheating. To prevent this, in 2013 the Swiss central bank adopted a series of measures. Notably, these mostly affected the mortgage market, while financing of investment projects has not shown many changes. Loan amounts come to between 40 and 70 percent of projects’ total budgets, while the least money is obtained for industrial buildings, and the most for offices and residential projects.

From this perspective, it is interesting to take a look at Greece, for instance, going through one of the worst debt crises in its history. Last year, its GDP still grew by 0.8 percent, but no growth is expected for this year. Also, it is obvious that without agreeing with the EU on the third rescue programme, the country would have long gone bankrupt. The uncertainty caused by this is reflected by the Greek real estate market: the willingness of foreign investors to invest in Greece is minute, with everything resting on the shoulders of local players. However, this uncertainty goes hand-in-hand with rewards – in Athens, returns are currently expected between 6.5 and 10 percent, depending on the type of property. Still, 45 percent of bad loans with varying level of risk is not a good sign.

On the other hand, a remarkable development has been observed in another southern country – Spain. The country was also hit by major economic crisis, and is still recovering. Nevertheless, the activity in their property market deserves attention: the number of real estate transactions in the country has grown dramatically from last year, with Spain even overtaking France. Last year, the country’s share in the total volume of real estate transactions was only 2.9 percent; for the first half of this year, it is already 7.9 percent. No wonder – two thirds of Spanish banks rated real estate lending as important or extremely important to their business. Interest premiums in the country do not look too bad either, between two and four percent, according to the type of property.

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top story

How to stop tax wolves from devouring your real property

Even though real property may seem permanent and everything around it seems ­longwinded, the tax system monitors and watches this area very carefully, making sure that no levies go astray, irrespective of our relationship with real property.. Illustration: Nikola Logosová

Real property may be built for the purpose of sale or lease, or used for one’s own business activities or speculative trading. Each of these areas is subject to specific tax requirements that must be carefully considered. For every tax, there are special provisions that apply to real property, some of which have only been adopted to cover the ownership of and trade in immovables.

The importance of proper planning From a tax perspective, all real property needs proper planning both in terms of its current and future use. A  tax regime incorrectly set from the very beginning is quite difficult to change later. And every subsequent alteration requires additional costs. Consequently, everyone who has any dealings with real estate should make every effort to plan each individual step. This does not only concern entrepreneurs, for whom real property represents

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the centre of the universe, but also others who may only want to settle their own living. For some, planning a real property’s future use may seem a  matter of course. But it is sometimes quite difficult to foresee and cover all hypothetical circumstances. In practice we often come across imperfections that may seem trivial at the start but cause grave problems to investors later on. These faults usually originate from a lack of knowledge or interest in real property issues and as a result of constant, year-on-year changes in legislative requirements. It is not easy to interpret all these changes, which further deteriorates the position of real property owners, lessees and users.


top story

How can tax wolves tear into real property? — In contrast with 2015, the sale of some plots of land may be liable to a 21% VAT in 2016. If these plots cannot be sold this year, it is to some extent possible to make use of advance payments. — A change in the person liable to immovable property acquisition tax may increase the cost of an acquisition by an additional 4% where the selling price has been set as fixed. — If real property holders claim the entitlement to a VAT deduction on the construction of a residential building for the purpose of the subsequent sale of its residential units and, as a result of market developments, the residential units are sold after the deadline for claiming a tax exemption, property holders must adjust the claimed part of the VAT deduction. If property holders take this alternative into account beforehand, they may be able to eliminate adverse effects by adopting appropriate measures to fix original conditions under certain circumstances. — An individual acquires a flat for one’s own living through a mortgage. After a longer period of time they decide to lease it if the mortgage loan conditions allow it. If proper attention to income tax is not paid on the inception of this lease, choosing a relatively advantageous and simple lump sum amount of expenses, income tax will certainly have to be paid on this lease. If an individual chooses a proper method of depreciation and monitoring of actual expenditures, any income tax liability will be significantly lower, verging on zero. — A tax-exempt lease of real estate may significantly affect the possibility to claim the entitlement to a VAT deduction both on the acquisition of real estate and on the construction of related technical improvements. However, any negative effects may be reduced or even eliminated by adopting suitable measures. — If the lessor enters into a lease contract with a lessee and if a permit to build related technical improvements has been granted, upon the termination of the lease it will be necessary to examine how this will affect the lessor’s  as well as the lessee’s  tax base. It is possible to adjust the lease contract beforehand in a way to ensure that tax implications for both parties will be at an optimum. This may also be resolved through the modification of an agreement to terminate the lease, but in most such cases the contracting parties no longer have the will to cooperate any further, whereas in some cases their intentions may in fact be adverse. — When deciding on the method of real property depreciation, potential future technical improvements must be considered. The accelerated method of depreciation allows for higher tax depreciation in the first years but, on the other hand, extends the period over which technical improvements are depreciated. There are various perspectives of how to treat this situation, depending on whether the owner has long-term or short-term plans for the real property. — Foreign companies planning to acquire real property in the CR have to decide whether they will do so through a subsidiary or a direct purchase, as each of the methods has specific tax implications, including not only immovable property acquisition tax.

Real property and taxes go hand in hand None of us is all-knowing; all risks and alternatives cannot be assessed. When planning it is therefore highly necessary to examine the exiing assumptions and plans and reconsider all appropriate eps. Since the relevant processes are usually of a long-term nature, this is often negleed. And then, in the lea desirable moment, one ascertains that the original setting does not correond with reality. Taxes play a  crucial role in such situations. Other aes such as changes to legislation regulating the Real Eate Regier, conruion business, territorial planning etc. are also important. A recent amendment to the Civil Code, introducing a  number of new concepts into real eate regulations that remain unclear deite attempts to alleviate the situation through a number of amendments to various as, may serve as a fitting example.

In the least desirable moment, one ascertains that the original setting does not correspond with reality. Fa and operational tax planning in real eate ju makes perfe sense even if not many people would think so considering its nature. Hopefully, no tax wolf took a bigger bite than necessary out of your real property while you were reading this article. Petr Toman Partner in Tax Services KPMG Czech Republic ptoman@kpmg.cz

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top story

A building that’ll never get old Five floors, a big atrium in the middle, a generous foyer and a unique covering made of special weathered steel, resistant against rain and wind, thanks to which the building will preserve its beauty for many years to come. The recently constructed KPMG building, nicknamed the Apple Strudel due to its distinctive lattice design, is located in the Kirchberg commercial quarter in Luxembourg. It offers 18 thousand square metres of office space as well as three underground parking floors. The design of Luxembourg’s Valentiny Architects architecture studio has won a European Steel Design Award of Merit this year.

Photo: Louis Bavent

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top story

Endless staircase The “coolest” staircase in the world. A journey with no end. The stairs to emptiness. That’s how art aficionados describe the staircase sculpture outside the KPMG building in Munich, Germany. The stairs standing nine meters tall and forming a double spiral of steel were designed by renowned Danish artist of Icelandic origin Olafur Eliasson, who has become famous for his installations playing with light, curved shapes or water. For example, some time ago he impressed New York with large artificial waterfalls. He titled his Munich work Umschreibung (paraphrasing).

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family business

“The founding father must leave amidst cheers” USSPA, a family business from the Ústí nad Orlicí district, is the largest spa manufacturer in the Czech Republic and one of the three top producers in Europe. This year, the company is celebrating its twentieth anniversary. USSPA has developed several patents and exports its products to twenty countries worldwide. Four years ago, the company was successfully taken over by the first family successors – the founder’s daughter, Kateřina Kadlecová, and her husband. Text: Lenka Medvecová

Founder Petr Kolář started doing business in the 1990s, importing shells and spa components from a US manufacturer. Soon, the company launched its own production and development. First, the company’s success was spurred by the founder’s technical expertise and desire to have his own production. “In this way, we got crucial processes under control and development into our hands so that we could set ourselves apart from the competition and gradually achieve various competitive advantages. Good relations with the US supplier, who taught us a lot and was supportive of our business plan, played a big role too,” says Kateřina Kadlecová, the current director, and adds: “Initially, my dad did not primarily intend to found a family business. Still, it was quite natural for my mum to join him. I was around from the beginning, so it was also clear that I would join the company after graduation. My husband got involved, too and is now the executive director.” Twenty years ago in the CR, there was nobody from whom to learn how to run a family business. Kadlecová says that first it was more about will, enthusiasm and belief than about any elaborated business plans.

The business should strengthen the family For Kateřina Kadlecová, a family firm’s main advantage lies in the mutual trust and support among family members. Family companies are more flexible and humane inside and out. “Most importantly, in the management of a family company, personal responsibility is counterbalanced by freedom. You do not have to account to anyone but yourself. Moreover, you are free to make decisions based on your heart rather than any figures. What is vital is the ability to maintain good relations both within the company and the family. Work must not jeopardise the family but should instead strengthen it,” Kadlecová says.

Strategic decisions are also made at home during dinner Kateřina feels it is quite natural to discuss work at home and admits that trying to separate work and private lives within a family business could be counterproductive, as she would only be torturing herself needlessly. For operational reasons, she and her husband are able to discuss important things only at home in the evenings. “That is when strategic decisions are formed anyway. Don’t get me wrong, we don’t live only for our business. We live a happy and diverse family life; we have enough time for ourselves, our hobbies and entertainment and know how to relax, since we’re experts in it. That, however, does not rule out that on vacation we may have, let’s say, an incredibly fruitful discussion over an unresolved business matter,” adds Kadlecová.

“Strategic decisions are often made on vacation or at dinner” 14


family business

“We constantly have new visions and daring goals. What’s crucial for us is doing a thorough job and doing it with joy, which is reflected in the final product,” says Kateřina Kadlecová, USSPA’s director.

Joint businesses evolve naturally Kateřina Kadlecová and her husband are USSPA’s first family successors. The company managed the generational hand-over successfully and this can be seen from the outside, as well – this year’s domestic sales jumped 100%. The couple grew alongside the company and acquired their expertise gradually. Now, they are already pondering their possible successors. “My husband and I are talking about whether and how to motivate our son towards our company. He is still small but he already lives with the company. He’s present at every Christmas party for employees, he comes with me to trade fairs and on his birthday he hands out candy to the staff. He’s always said that he will be USSPA’s director, so at this point it is us who need to show him other possibilities and to give him the freedom of choice,” the director describes her vision of her succession.

The hand-over should be magnificent She pictures the hand-over as a momentous occasion, the same she experienced herself. The preparations for the hand-over took less than a year because the decision came about quickly. However, her parents left the company gradually and only after thorough debates and plans. The big day itself was indeed a grandiose culmination of this significant event and Kadlecová sees it as a must: “The founding father should take his leave amidst cheers and applause, but he must also be 100% sure and should not exit only half-way. The new generation must be given trust and enough space. The leaving generation must be ready to give up its own importance, as my dad aptly described the essence of the ability to hand over a company. From my own experience, I feel you can’t really perfectly prepare for the most important thing in taking over the family business – the assumption of full responsibility. For the company, for its employees and for the family.”

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family business

Four rules we have learned from the Japanese regarding family businesses Many a word has recently been written about Czech family businesses and their growing succession issues. The inevitable change from one generation to the next, which is bound to occur in a few years’ time but with which Czech family-owned businesses established after 1989 do not have any direct experience, made us search for inspiration and examples abroad. In Japan we found family businesses with the longest tradition.

Illustration: Maria Makeeva

The Hoshi family business, a traditional Japanese spa inn called ryokan, was established in 718. One Japanese construction firm, founded in 518, was even older but did not survive the economic turmoil of the 1980s and ceased to exist after more than forty generations. At KPMG we have drawn inspiration from the Japanese tradition and have prepared four rules that apply to family businesses and not only to the issue of succession.

Rule 1: Succession must be planned from the successors’ early childhood Every morning at quarter to seven 78-year-old Zengoro Hoshi sounds a gong. His guests sit down on tatamis around him, sip tea and silently listen to the Buddhist truths the inn owner has for them for the day. The speaker is none other than the descendant of a business that has been in his family for 46 generations. The most important thing not to be underestimated is thinking through all succession possibilities and raising successors in compliance with the family business’s mission, values and ethics. It is quite wise to involve descendants in the operation of a family business from their early childhood, thus preparing them for their future responsibilities. If they become enthusiastic and strongly motivated to work in the family business early on, the risk that they will fail in their adulthood is much lower. Another important factor is proper education, ideally in the same line of business in which the family business operates. Especially mechanical engineering companies currently struggle with a lack of managers with adequate education. If a family business is engaged in the provision of services, its future successors should ideally study law, marketing, management or economics. The more the future successors know about the business their family does, the better for the family business and themselves. They may use their knowledge in practice, not leaving the family business for something they feel more strongly about. The Japanese are traditionally very strict when it comes to raising successors who will one day assume the family business. In the Hoshi family, the father himself knows when his son is ready. The son then assumes the name of Zengoro and takes over the business. The current Zengoro is the 46th in line.

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Rule 2: Fathers must know when to retire The Hoshi family tradition and principles are in many ways linked with the traditions of old Japan and Buddhism. Japanese ryokans are traditional inns known for their very close contact between guests and inn owners who often serve as mentors in Buddhist rituals and practices. Owing to these specific requirements, the preparation of future successors is long and elaborate, involving not only knowledge and capabilities but also beliefs and soft skills. Many say that if family business owners still sit in their director’s chairs at 80, they will also die in them. The recommended age for retirement is 75 at the latest. Why the older generation should quit in good time becomes apparent from a KfW banking group study showing that if managers get too old at their positions, they tend to lose their ability to innovate and adapt to market needs. Upon their departure, former directors usually accept positions in supervisory or advisory boards. The current Zengoro Hoshi would at his age like to enjoy his retirement but lost his successor a few years ago. His son Hiroshi, whom he had raised as his successor, died unexpectedly of heart failure at 48, which caused many complications. Zengoro immediately began to consider


family business other succession possibilities. He contemplated his sonsin-law but in the end opted for his youngest daughter, Hisae, whom he began preparing at once.

Rule 3: Successors may sometimes be sought outside the family In the Hoshi family’s history there were generations either without male heirs or with male heirs considered unsuitable to take over the family business by their fathers. In such cases, Japanese law used to allow the adoption of a son-in-law, i.e. the husband of a daughter, and giving him both the name and the family business. This option is no longer embedded in Japanese law. The current Zengoro Hoshi has thus been preparing his unmarried daughter, Hisae, who has been actively involved in the family business’ operations. In the long history of this firm, Hisae will be the first woman to take over the family business. More than one Czech family business is likely to deal with the problem of who will take over their business. The majority of them believe that it will be their offspring who will continue with the business. If there is more than one descendant, it is possible to demerge the business, which is one of the greatest risks. With this option, it becomes necessary to consult professionals who can manage the demerger either so that all parts of the business continue to be dependent on one another (if the family business owner insists on preserving the integrity of the business) or so that each part will be managed independently. The Hoshi family does not divide its property on principle. The one who becomes the successor acquires not only the entire family business but also all other related family assets and wealth. In Europe we might think this unfair towards the other offspring and next of kin; but this practice has been proven by almost fifty generations managing the ever-growing business. English researchers have discovered that handing family businesses over to daughters may actually be smoother than to sons since daughters generally tend to build on the foundations created by their fathers. They do

not want to pull the foundations down and are therefore much more willing to avoid intergenerational conflicts. It is also possible to hand over the family business to professional managers, which would of course be unthinkable in Japan. This option does exist and does not mean the cessation of the family business. The business remains under family ownership but its management is carried out by professional managers until a new successor comes of age. This may therefore be the right solution for family businesses which lack experienced and suitable family members. This option may also have some advantages. Professionals may often be able to manage a business with a broader perspective, giving family members the chance to supervise activities from supervisory boards.

Rule 4: Preserve tradition and go on with the mission Family businesses in the Czech Republic as well as all around the world put emphasis on long-term development. They do not usually make risky investments and do not like to be in debt. They anxiously protect their name, reputation and brand, which are the guarantees of quality and represent principal commodities. Owing to their stability, family businesses are also attractive employers. Stability and gradual development are also the principles of the Hoshi family. Their family motto, having been implanted in the minds of all successors, is a Japanese saying: “Learn from the water flowing down from a small spring”. Zengoro elaborates that the water stream is very thin but strong, gradually overcoming all obstacles and eventually turning into a mighty river. To preserve tradition and simultaneously adapt to new customer and market requirements may sometimes be quite difficult. All new bosses have to decide what they can sacrifice from traditions without losing neither face nor clients. It is an ever-present dilemma that all family businesses have to deal with. Hisae, who will take over the family business from her father, is sceptical about his old-fashioned ideas regarding the future development of their business. He wants to attract a  higher number of young Japanese but is unable to react to their needs for greater comfort. Potential young clients would rather sleep in a bed than on a futon and rather drink wine than saké. It is therefore likely that the first woman in the history of this family business will introduce changes and new strategies as she knows very well that tradition alone will not suffice.

Milan Bláha Partner in charge of services for family businesses KPMG Czech Republic mblaha@kpmg.cz @BlahaMil & Alexander Koeberle-Schmid Senior Manager, KPMG Deutschland

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A company’s accounting period usually lasts 12 months and corresponds to the calendar year, i.e. begins on 1 January and ends on 31 December. Instead of using the calendar year, companies may choose a fiscal year as their accounting period, which may start on the first day of any month other than January. A company may change its accounting period through a decision of its general meeting or statutory body in line with its memorandum of association or its by-laws. The accounting period immediately preceding the change will be shorter or longer than the said twelve months. The company must inform the competent tax authority about the change in advance. Companies may also apply a longer or shorter accounting period at their foundation or during a transformation. Ordinary financial statements are prepared on an annual basis as at the last day of the accounting period.

Last day of the accounting period (and its change)

31/12

Text: Iva Šteflová, KPMG Legal

Every company controlled by another entity is obliged to prepare a report on relations within three months from the end of each accounting period. The controlled entity’s statutory bodies, i.e. statutory representatives or members of the board of directors, are responsible for the preparation of the report. The report on relations describes relations between the controlled and its controlling entities and other entities within the group. The purpose of the report is to create a comprehensive overview of all acts made by the controlled person affected by specific relations arising as a result of the company’s integration within a business association. The report should assess the advantages and drawbacks for the company as a result of its participation in the group, and indicate possible damage incurred as a result of another entity’s influence. The report on relations is attached to an annual report, if such is prepared, otherwise it is issued as a separate document.

Preparation of a report on relations

1/1 – 31/3

Is your joint-stock or limited liability company’s accounting period about to end? Don’t forget the necessary legal steps that need to accompany this transition.

The end of the accounting period


Every company is obliged to publish its financial statements in the Commercial Register’s registry of documents. Companies whose financial statements are subject to statutory audits publish them together with their annual reports after the audit and after their approval by the general meeting within 30 days from the date on which both of the above obligations were met. Regardless of whether the financial statements and the annual report have been approved in the stipulated manner, companies must file the required documents into the registry of documents within 12 months from the end of the accounting period. Accounting units are also required to publish an auditor’s report and disclose if the published accounting documents have not been approved. Companies not subject to statutory audits file their financial statements directly after their preparation into the registry of documents without unnecessary delay. Together with the financial statements and annual reports, companies also file profit distribution or loss settlement proposals and their final versions with the registry of documents, unless the proposals are part of the financial statements.

Filing documents in the registry of documents

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Preparation of ordinary financial statements (and annual report)

1/1 – 30/6

Would you like to know more about other legal aspects when founding and managing a company? Get in touch with our experts from KPMG Legal at mhrdlik@kpmg.cz.

The general meeting has to discuss the financial statements within six months from the last day of the accounting period. As part of this discussion, it approves the financial statements and makes a decision about the distribution of profit and other resources or about the settlement of loss.

Deadline for the discussion of the financial statements by the general meeting

30/6


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“Real estate financing boom triggered by central banks” One of the main drivers of growth in real estate financing is the loose monetary policy

practiced by central banks across the world. Indeed, low interest rates caused the market to grow significantly. However, experts believe that we are already past the current boom’s peak. There are increasing concerns as to what will happen once central banks tighten their monetary policies. KPMG organised a discussion on this topic, where questions were answered by Pavel Kliment, who is in charge of services for the construction and real estate sector at KPMG Czech Republic; Jan Rýdl, responsible for real estate financing at Raiffeisenbank; and Zdeněk Havelka, executive director of CPI Property Group. Text: Jiří Táborský, Photo: Barbora Mráčková

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one-on-one The Property Lending Barometer survey for 2014 and part of 2015 has just been released. How would you summarise the survey results? Are the crisis years behind us? PK: From a real estate financing perspective, the crisis is over. Markets are currently characterised by considerable optimism, mainly because low interest rates have resulted in the good availability of financing. The margin between returns on real estate financing and interest rates has returned to its pre-crisis level. Speaking of low interest rates, can central banks’ extremely loose monetary policy be considered one of the drivers of growth in the real estate market? PK: Without a  doubt, it’s  one of the main reasons. For all investors, the range of assets offering a reasonable return and a tolerable level of risk has got much narrower. Properties, however, have so far managed to retain their rate of return. JR: This is a completely new situation for our bank. We are faced with negative rates such as PRIBOR and EURIBOR. We find this situation illogical. The idea that the client should pay the bank for depositing money with it is absurd. Mr Havelka, what do you, as a representative of a group that invests in this area and owns a large amount of real estate, make of the current trend? ZH: All around us I can see that times are even better than they were before the crisis, largely thanks to really cheap credit. That makes investment in real estate very attractive because we are generating a significant positive return, and currently it’s  a  good alternative investment option. Let’s take a look at the Czech Republic from an investor’s point of view. Does our market have potential? If I were an investor, would I want to invest in real estate in the Czech Republic, Mr Havelka? ZH: You certainly would. Although the actual base is not growing too much, it’s very stable and did not diminish significantly even during the downturn. The level of rent is really very stable here, which is due to the capacity of the Czech economy as such. For example, for rents to continuously grow in Prague, new investors would have to come here and stir up the market a little bit. The question is, why is that not happening? I think the answer lies in the attractiveness of the Czech Republic as such. Mr Rýdl, would you recommend the real estate market to investors or would you rather suggest it’s not the best avenue? JR: I would definitely recommend it. However, so far we have been talking mainly about offices. Don’t forget there are also residential properties and apartments. For

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“In boom years, we can’t concentrate solely on another slump coming. Instead, let’s think about how to make the most of the good years.” Pavel Kliment is KPMG Czech Republic’s partner in charge of services for the construction and real estate sector


one-on-one two years now, our bank has been witnessing increasing investment in this type of real estate, which is fostered not only by low interest rates but also by the low cost of construction work and other factors. Mr Havelka, the condition of the Czech real estate market depends on large firms choosing the Czech Republic. What are the factors that determine the location of a new headquarters? ZH: Slovakia, for instance, benefits from being in the eurozone. In that country, investors can simply forget about foreign exchange risk issues. Warsaw, in turn, can draw on its huge and rapidly growing market, which makes it Prague’s  major competitor. Other than that, it’s obviously about transport infrastructure, accessibility by air, and other factors.

“The idea that the client should pay the bank for depositing money with it is absurd.” Jan Rýdl is responsible for real estate financing at Raiffeisenbank

In the Barometer, there is a statement to the effect that the situation may be good now but some concerns exist regarding the sustainability of the current trend. What causes such concerns? PK: The problem is that a lot of investments in the market will only work at current interest rates. Changes in central banks’ policies, and the ensuing availability of financing, will play a  key role in the real estate market. Another factor is that the market is cyclical. All market participants know this and are used to it. I  believe that presently we are already past the boom’s peak. Logically, some sort of decline is to be expected sooner or later. ZH: Mr Kliment has put it quite accurately. I should add that it’s not just about the passive ownership of this or that property. How the investor works with the property is equally important. Today, when money is cheap, apartments are sought after by tenants and everything is generally going well for investors, making money from real estate is not a problem. The question is whether investors can cope even when the ideal conditions are no longer present in the market. Large and seasoned investors will probably not experience difficulties because they’ll be able to take advantage of the synergies within their property portfolios. Small investors, however, especially those with only one property, may run into trouble. According to the survey, Czech banks readily provide large amounts of euro-denominated loans. From a purely property financing perspective, are you at all concerned by the Czech National Bank’s monetary policy, or is it the European Central Bank that you follow more closely? JR: We do provide a large amount of loans in euros, but they relate to projects where rent is also euro-denominated, which primarily involves offices. On the other hand, in the retail sector, rents are usually denominated in crowns and we consequently opt for crown-denominated financing to minimise foreign exchange risk, which turned out to be a big problem in Hungary and Poland.

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one-on-one Discussions are going on about how high interest rates would have to be for people to default on their mortgages. Some mention three percent but I don’t think it’s that dramatic because, for private mortgages and development financing, we try to convince clients to fix the rates for as long as possible now that interest rates are low so that we can weather a crisis that may come in two or three years. Rates fixed for ten years or more are thus no exception. You have mentioned that we are going through a significant boom or that we may even be past its peak. What can trigger a downturn? JR: It’s very difficult to predict when a downturn will occur. The residential market can be affected by movement in interest rates. The investors will stop buying apartments. As a  result of higher interest rates, a  lot of people won’t be able to afford a mortgage, young people will go on living with their parents, and flats will not sell. ZH: In my opinion, real estate will be hit by a crisis imported from other sectors of the economy. It’s not just about people not being able to repay their mortgages as they become more expensive due to higher interest rates. They won’t be able to repay them at all because they will have no jobs. In the case of the Czech Republic, which is significantly dependent on exports, there may be factors imported from abroad. PK: It is really almost impossible to forecast a crisis. Nevertheless, I would like to add the following important point – in boom years, we can’t very well concentrate solely on another slump coming. Instead, I would think about how to make the most of those good years, i.e. how many big investments and how many big institutional investors we can attract to the Czech Republic in these favourable times. And it’s  not just the Czech Republic but the entire Central and Eastern European region. I  believe that to compete for the truly massive investments that are up for grabs in the global market, we must enter the arena as part of a greater whole. To conclude on a positive note, according to the Barometer, 98 percent of Czech banks’ real estate loans are in perfect order. In other countries, the volume of non-performing loans is much higher. How come that Czech banks are doing so well in this important respect? JR: We have very strict risk managers. Moreover, our business activities enable us to gain experience from the whole of Europe and the world. From the very beginning, we have approached real estate financing very rigorously because of the huge amounts involved and the long-term financing aspect, which requires an analysis of the economic cycle and other factors. ZH: In my opinion, it’s  also partly because Czech banks primarily finance Czech projects. The Czech market is relatively flat in the sense that it has experienced nei-

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ther extreme slumps nor extreme growth. And as a result of this flatness, Czech banks have never really had the opportunity to get involved in any extremely risky projects that could lead to an increase in the volume of impaired loans. PK: I agree with what has been said here. Let me just add that the fact that the Czech Republic is a very small market has not only a lot of negatives but also positives. And this is one of them. Because the market is small, it’s very easy to read and navigate, which helps avert major excesses.

“Times are even better than they were before the crisis – thanks to really cheap credit.” Zdeněk Havelka is the executive director of CPI Property Group


brĂ­fink

Six basic steps to SAM implementation In the previous article we described the financial benefits arising from a proper software licence administration set-up. We also mentioned certain obstacles that companies face when implementing their Software Asset Management (SAM). Most critical is the overall complexity of SAM implementation and its related tools, which also involves heavy expenditures. Text: Petr Marounek, KPMG Czech Republic

3

Assessment of the current IT environment By comparing the current licences with products actually deployed you will get an initial overview of your effective licence position. This procedure helps identify areas in which you are exposed to no risks (unused licences or supports; opportunities for re-use of licences no longer used, etc.), and areas in which a product has been utilised to a larger extent than to which your organisation is entitled. The comparison will give you precious time that can be used either to remedy the situation or to purchase licenses for negotiated prices (without additional mark-ups).

4

Definition of SAM goals and strategies

Is there any easier access to SAM which could be used? An alternative to the standard SAM process would be to introduce a SAM process based on risk elimination focusing only on high-risk products or on software producers who are likely to be subject to an audit inspection in the near future. In such a case, the following steps need to be considered:

Dedication of appropriate staff

1

It is extremely crucial that the responsibility for processes associated with the administration of software licences is assumed by an employee who understands licensing and has sufficient technical knowledge. This person will be required to cooperate with numerous other departments; accordingly, good communication and negotiation skills are highly advisable.

Risk assessment within the entire IT

2

Most companies focus on one or two major software producers and do not analyse risks within the entire IT environment. By doing this, however, they skip the basic step for prioritising areas in which the highest risk is usually found – e.g. too complex infrastructure, limited knowledge of internal employees, comprehensive licence conditions, difficulty in finding the relevant licences, high risk of an audit, etc.

Once you compare a number of products as described above, you will have a better understanding of the efficiency of your existing SAM tools and processes. Thanks to this, you will be able to define your SAM goals and strategies to the advanced level your company would like to achieve and point out the processes to be implemented, as well as tools, management and responsibility models to be introduced.

Creation of project roadmap

5

Your roadmap will depend on the scope of SAM activities you would like to introduce. However, it is important that your ambitions remain realistic. As mentioned above, the perceived overall complexity and high expenditure of implementing SAM are obstacles preventing you from gaining sufficient funds and support; therefore it is necessary to address these worries appropriately when creating a project roadmap.

Implementation of benefits

6

PYou will see the benefits of SAM immediately after you first compare licences against software actually deployed. Together with the financial benefits described in the first article, SAM also brings companies numerous in-kind benefits.

In the next issue of the series we will focus on potential in-kind

benefits and will also uncover the licensing of sofware products

in Cloud. Do you need more information now? Please contact the author of the article at pmarounek@kpmg.cz.

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money

Czech public administration in the cloud No more lengthy and non-transparent tenders for IT services. Czech authorities can function again a bit more effectively. Clear arrangements, transparency, time and money savings – all this by using cloud computing. What are the benefits of this approach for public institutions and what lessons can we learn from countries which have already implemented this system into their public administration? Ilustrace: Nikola Logosová

Almost a half of the state institutions in the United States use a cloud solution. As for the European countries, mainly the United Kingdom, France, and Spain have decided to go this way. The pioneers of this technology have been demonstrating the benefits of cloud computing for state administrations. It can make the process of ordering services more simple and transparent and save public money. In the United Kingdom, for example, the so-called G-Cloud for the procurement of IT services has been in operation for more than three years already. The Czech Republic is also considering launching a  similar system. What inspiration can we take from the UK?

One British IT service catalogue for all

Goals of the UK cloud 1. 2. 3. 4. 5. 6. 7.

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Limitation of purchasing expensive and tailor-made solutions Utilising inexpensive, standard, and compatible solutions An application already acquired by one authority can be used by other ublic administration authorities as well Purchasing only services which are really useful for the public administration Paying only for services actually utilised Scalability of services and fast adjustability to actual needs Flexibility in replacing applications or suppliers

The UK G-Cloud system enables the state administration to establish a unified overview of IT service bids. Thanks to this system, all institutions can utilise the same services for the same prices and under the same conditions, without having to initiate a traditional public tender. A list of all necessary services is available in an on-line catalogue unified for all institutions. So how does it work? A firm offering IT services will register, submit its bid and the state will subsequently conclude a framework contract with it, meeting all formal conditions connected with public tendering. The firm can subsequently offer its services via a common on-line catalogue called Digital Marketplace, accessible by all public institutions. Adhering to certain conditions, each authority or institution can choose just the service they need. The catalogue includes descriptions of all services and information about the suppliers. At present, more than 19,000 types of services from almost 1,900 suppliers are included in the UK catalogue. Each framework contract has a  limited duration of one year. Suppliers get the opportunity to conclude a new framework contract every six to nine months. The duration for all service contracts concluded based on the framework contract has been limited to a  maximum of two years.


money

G-Cloud saves both time and money This solution from the British Isles is relatively new, as it has been in operation for three years and is still under development. However, its advantages have already become obvious: public institutions do not have to initiate traditional tenders and thus can implement needed IT services much more quickly. The average term for new service implementations has been reduced to approximately 60 days. Pre-defined contract templates are an important component of the entire process. As for small municipalities, G-Cloud makes one obvious contribution: clerks neither have to know the public procurement act in detail nor have to have the experience necessary for drawing up contracts with suppliers. One and the same bid for everyone, flexibility, speed – all this can save public money. Surveys expect that thanks to G-Cloud costs will drop on average by 50%. Over the term of a framework contract, all rules apply to all parties. Everything is clear, simple, easy to find, and transparent. All parties must disclose any contracts and report required information. Failure to meet the rules results in the exclusion from G-Cloud. Transparency is thus G-Cloud’s key principle. The system’s features also open the market to a larger number of service providers, as there is no hustling of contracts for friends and the winner is not always the fiercest corporation. As it turns out, in the UK, 87% of all bids for IT services are now being submitted by small and medium-sized companies.

Sometimes, there are just too many bids In the United Kingdom, some disadvantages of the new system have also come to light, the main of which being the excessive number of bids. The simple process of adding a service to the framework contract may result in too many items in the catalogue with some services attracting no interest. Another issue emerged after the system was put into operation. An authority cannot request services if they are not listed in the catalogue. Suppliers thus do not receive information about asked-for services and in some events customers have to initiate standard tenders. The maximum service contract duration of 24  months may also cause some problems as customers have to frequently migrate their data.

The Czech Republic is at a crossroads, deciding which way to go The United Kingdom is just one of many examples. Different countries have been taking different directions and one single proven solution for establishing a cloud for the public sector does not exist. The individual countries differ e.g. in the type of providers offering IT services to the public sector. The model most frequently used is the so-called government cloud where state data centres working for all government departments provide shared services. Several other European countries have opted for a  commercial cloud solution where commercial entities provide shared services (G-Cloud in the UK). Some other countries have opted for the golden mean and launched a hybrid solution. The Czech Republic for the time being has been discussing how to best use cloud computing in public administration. We can thus examine the advantages and disadvantages of the systems applied in the other countries and get some inspiration and lessons. Whether shared services should be provided by the state or a commercial entity is one of the first questions the state should answer. It is also necessary to clarify cloud’s  institutional and legislative position while taking into consideration existing legislation, primarily the Public Procurement Act. The Czech Republic is now at a crossroads, deciding which way to go. If it chooses the right option, the Czech state may again function a bit more effectively.

G–Cloud in numbers 50 percent – It turns out that countries utilising G-Cloud in terms of IT services can attain savings of up to 50 %. 87 percent – The profile of UK firms providing IT services to the public sector has changed and thanks to G-Cloud small and medium-sized companies get a chance as well. 60 days – Lengthy tenders are a thing of the past; thanks to G-Cloud, authorities can on average utilise contracted services within two months from making a request. Jan Voříšek Manager KPMG Czech Republic jvorisek@kpmg.cz

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“I can’t be tied down by money” Klára Spilková, the best Czech golfer

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coffee break

Klára Spilková is the only Czech woman ever to play Europe’s most prestigious golf tournament – the Ladies European Tour. She would like to participate in the Rio Summer Olympic Games next year and has other ambitious sports plans. She of course knows that money is an important part of golf, but feels that one should not care much about it on the way to success. “It might tie me down and I may lose enthusiasm for the game, and I definitely don’t want that,” says Klára Spilková in an interview centring on finance.

Text: Jana Divišová, foto: Bogner archive

Can you remember what your first piggy bank looked like? I think it was indeed a piggy and I still have it at home (smiling). To be honest – I never put much money in it, as I was not a frugal little girl and if it wasn’t for my parents and my assistant Monika taking care of my finances, I would be spending in a similar fashion now as well. Or maybe not. For the time being I won’t find out, because I actually don’t care to know. I am generally aware of the most important facts about money – the approximate balance of my account, how the financing of the season is coming along, but I don’t get involved in the details.

“I don’t know what normal life is about. I’ve been playing golf since I was four.” 30

…so that money won’t stress you? Exactly. I need to address golf, not money matters. When I became a professional golfer, I certainly did take over more financial responsibility, but without the help of others, especially my parents, it would have been too big a load and worry that could have affected my game. So I am extremely grateful to my parents and others for their help. But as I said before, this does not mean I know nothing about money... (smiling). I usually attend tournaments on my own or only with a caddy, so I need to have money at my disposal and know how to use it. For this, I have a special account to which the necessary amount plus some spare money is transferred. If this account were to be hacked while I am abroad, which luckily hasn’t happened so far (knocking on wood), the total damage would not be that big. Undoubtedly, most of the money is spent on hotels and air tickets, which the largest part of the season’s budget. I expect you use cards rather than cash. Am I right? Definitely. I have a card in my hand practically all the time. I use it to pay worldwide. And I of course also use ATMs. One of them which communicated only in Chinese did surprise me quite a bit. But eventually, money did fall from it. However, I always have some


coffee break

5 Five things you might not know about Klára 1. 2.

3.

4.

5.

At the tender age of ten, she already had a 14.3 handicap. Since 2010, she’s been playing with the professionals; as a then sixteen-year old she started with a +4 handicap. She very much appreciates the help of her parents who support her as well as her bother who studies at a prestigious fashion design school in Antwerp. In Antwerp, Klára served as a model for her brother’s collection and enjoyed it tremendously. Her team includes a psychologist in addition to other experts.

small bills with me should cards not work, but I don’t remember this ever happening. What did you do with the first income you earned playing golf? That, I remember very well. I invested it into my next tournaments. And I still continue to do so. If I feel like treating myself to something nice, I do so from time to time, but most money is reinvested into golf. Naturally, like any girl of my age, I am fond of nice things and go shopping sometimes. But I am lucky that one of my sponsors produces sports and leisure clothes, dresses, shoes… They supply me abundantly, and I can choose whatever I want. My evening gowns are always made by my brother, who studied with fashion designer Liběna Rochová at the Academy of Arts and Architecture in Prague and now studies in Antwerp. So everything’s arranged quite well. What portion of your season’s budget is covered by sponsors’ money and how difficult is it to find sponsors nowadays? First, let me answer the second question – there are not many sponsors, but they can be found. This is Monika’s task on the team and she’s pretty good at it. Before a season starts, it is necessary to check what is left from the previous season, how much money is available from sponsors and determine which tournaments I can and which I cannot attend. One season costs approximately three million crowns; half of it is covered by my earnings and half of it by my sponsors, whom I naturally invite to various events to repay for their attention. If someone reads in the newspaper that last year I earned

“One season costs about CZK 3 million. One half is covered by my earnings; the other by my sponsors.”

EUR 58,172 and thinks now the money sits in my bank account, they are mistaken. Practically all of the money is reinvested into golf so that I can advance further. I am also responsible for the team surrounding me at KLARA SPILKOVA s. r. o., with my father at the helm. Can you imagine being employed somewhere? Just recently, I thought about it – what it would be like. And I realised that I actually don’t know what normal life is all about (laughing). I have been playing golf since I was four, touring Europe on my own since I was thirteen. I started to earn money at sixteen. So I said to myself – let’s try to get at least some temporary job to learn what it’s all about. But then I realised that I can’t really do that because of my responsibilities around golf, all those tournaments, practices, travelling and sponsors. Thirty weeks a year I am outside of the Czech Republic. For now, I don’t have the slightest chance to get even a temporary job, so maybe once I do, I might be in for quite a surprise. As a golfer, do you think about individual shots like: “If make this, there’s one thousand euros in my ­account?” Fortunately you rarely know the figures. It is interesting, though, that commentators on Czech TV frequently coin figures for individual shots. “He missed a putt and there go five thousand euros.” Obviously, they’re better informed. Of course you know that there’s money somewhere behind it, but you can’t think that way. At least I don’t want this. Golf is my love, I want to enjoy it and do my best.

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european cultural highlights

Cultural highlights for travellers Enjoy this year’s late autumn and early winter at the best cultural events on offer in

Europe. The following selection of theatre performances, music and literature will keep you entertained until the end of 2015.

Text: Anna Batistová

The Botticelli Renaissance Berlin Until 24 January 2016 Berlin’s renowned Gemäldegalerie is giving visitors an opportunity to view the work of one of the greatest renaissance masters – Sandro Botticelli (1445–1510). The impressive exhibition offers more than a hundred works by the Florentine painter (the Birth of Venus, the Abyss of Hell, Portrait of Dante, etc.). Since Botticelli’s distinctive style has been a major influence on many other artists, the Gemäldegalerie is also exhibiting works directly inspired by Botticelli (e.g. G. Moreau, D. Rossetti, E. Degas, M. Denis, R. Magritte, A. Warhol, B. Viola, C. Sherman, and D. LaChapelle).

A modern take on Bach and Vivaldi Prague, London, Munich, Madrid 8–12 November 2015

History of the future Paris Until 4 January 2016 One of the most anticipated exhibitions of 2015 can currently be visited at the Louvre in Paris. Entitled A Brief History of the Future (referring to Une brève histoire de l’avenir, the eponymous book by Jacques Attali, published in 2006), it integrates works of contemporary artists, such as Mark Manders, Tomás Saraceno, Wael Shawky, Camille Henrot, Isabelle Cornaro, Chéri Samba and Aj Wej-wej, with paintings and sculptures from different eras. The exhibition deals with the following four themes: world order, great empires, expansions, and today’s polycentric world.

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In November, phenomenal American violinist Gil Shaham will be performing in four European cities – Prague, London, Munich and Madrid. Accompanied by the Sejong Soloists, a New York-based orchestra, he will give a unique contemporary rendition to classical compositions such as Vivaldi’s Four Seasons and J. S. Bach’s Violin Concertos. Shaham’s recordings have garnered many accolades, including several Grammy awards. The violinist will perform at Prague’s Rudolfinum on 8 November from 7:30pm as part of the Strings of Autumn festival, which offers a selection of jazz, classical and world music.


european cultural highlights

Theatre Night Various Czech cities 21 November 2015

Lulu in cinemas Various Czech cities 21 November 2015

The third Saturday in November this year will also be the date of the third annual Theatre Night project. The unique nocturnal event gives visitors a chance to come to theatres to experience things not usually offered by cultural institutions during the season. In previous years, this included workshops, speeches, autograph signings, chats with directors, backstage tours at small and large theatres and – in one case – the dismantling of a stage. What will this year’s edition bring? Find out on 21 November at theatres across the Czech Republic. The event is part of the European Theatre Night project.

On 21 November, cinemas in 19 cities across the Czech Republic will host screenings of a live HD broadcast of Lulu, an opera by Alban Berg, performed at New York’s Metropolitan Opera. Although the performance is over four hours long, it will be worth it. Lulu tells a stunning story of love, passion and death. Berg’s music will be conducted by James Levine, music director of the Metropolitan Opera and one of today’s most experienced conductors. Starring in the challenging title role is soprano Marlis Petersen, with Susan Graham, Daniel Brenna and Johan Reuter as her co-stars. The top-notch cast is directed by Luc De Wit.

Writers and fear Prague 6–9 November 2015 Fear is the theme chosen for the 25th annual Writers’ Festival. Come find out what and who the invited writers fear and why. As usual, the programme includes author readings and discussions. The writers that have agreed to participate this year are Yishai Sarid (Israel), Mahmoud Dowlatabadi (Iran), ­Abderrahim El Allam (Morocco) and Arnon Grunberg (the Netherlands). The last one mentioned – in cooperation with the dybbuk publishing house and the Dutch embassy – will present his book Gstaad. Czech authors will be represented by Marek Šindelka and Miloslav Topinka.

The seventh instalment of Star Wars Just before Christmas, Czech cinemas will introduce the highly anticipated new Star Wars sequel. The seventh episode, entitled The Force Awakens and directed by J. J. Abrams, boasts the original actors who starred in 1983’s The Return of the Jedi, including Harrison Ford, Carrie Fisher and Mark Hamill. Judging by the trailers, fans will once again be treated to stunning visual effects. In 2012 George Lucas, the creator of the Star Wars universe, sold the rights to the franchise to the Walt Disney Company for four billion dollars. Additional instalments are therefore planned.

Delirious Goulding In November, twenty-eight-year-old pop-singer Ellie Goulding, who together with Adele ranks among the most prominent figures of the current British music scene, is set to release a new album, entitled Delirium. Artists who also contributed to the record include One Republic’s Ryan Tedder and Disclosure’s Guy Lawrence. The female singer will promote the album on her European tour, which will see her perform at Prague’s O2 Arena on 30 January 2016. BRITs Critics’ Choice Award winner Ellie Goulding has recently received praise for the hit single Love Me Like You Do, which is the theme song to the movie Fifty Shades of Grey.

A new McEwan novel In November, Odeon will publish the Czech translation of a new book by contemporary English prose writer Ian McEwan, who has become famous thanks to novels such as The Cement Garden, Atonement and On Chesil Beach. Entitled The Children Act, McEwan’s new book tells the story of Fiona, a judge dealing with a complicated case – a teenage boy is dying of leukaemia while his parents, members of Jehovah’s Witnesses, refuse to consent to a blood transfusion. In a professionally handled case, the judge upholds that the right to life is above the parent’s right… Translated from English by Ladislav Šenkyřík.

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business lunch

“They certainly make a big fuss about wine here“ Filip Hotový and Karel Karafiát came up with their business plan on their trips to the Rhône region in France and have been supplying high quality wines to Czech companies as well as running their own unique wine bars named On the Bank of the Rhône (Na břehu Rhôny) for four years now. Apart from buying bottled wines from family companies, you can pour your own glass of wine there and even note each glass you have had down on your bill yourself. “Czechs are usually honest, so the concept works well,” says Filip Hotový. A third wine bar opening in Prague proves his words. Text: Eva Samšuková, Photo: Jindřich Kodíček

You’re already opening a third wine bar in Prague. Are Czechs, despite their reputation, honest and accurately jot down how many glasses of wine they’ve had? You mean, are they stealing much? They aren’t, in fact. I  wouldn’t want to generalise, however. We simply decided to build our business on trust. So far, it has paid off and has been well-received. Of course, you’ll sometimes find people who come here to cheat but that’s an absolute minority. Overall, people are honest and if they are not sure how much they have had, they’ll mark down an extra glass. Which issues did you have to deal with that were different from standard wine bars? We knew from the beginning that we wanted to have a different wine bar. Different in terms of the offer of wines from small family wineries and in our effort to have this atmosphere permeate the whole company. We also wanted our guests to be able to try the wines before

deciding to buy them. In France, we do not buy anything from the winemakers without tasting it first. You also offer draught wine in bag-in-boxes. Do people trust it or do they think of it as cheap box wine? Well, yes, first they fear it. But we don’t try to fight their fear in any way. What is important is not to be afraid to taste it and being able to tell good quality wine. First, even cafés and restaurants said that boxed wine were raising people’s suspicions. That suspicion, however, is fading away. Are there any shortcomings on the Czech wine market? Apart from anonymous barrelled wines, poor-quality imported grapes, use of chemical fertilisers, excessive production of too sugary wines from synthetic yeast and other things, it is definitely the relatively high prices. The price of a bottle of wine is usually not a guarantee for its quality. If you want to buy good South Moravian wine from the retail network, you won’t be able to find any quality wines for less than CZK 200 or 300. This is incomparable to the prices of wines in the same category in France costing half of that with a much wider variety! I see another shortcoming in the snobbish attitude of people claiming that good wine has to costs a lot of money and making a big fuss about it. What reputation do Czech wines have in France? I  can’t generalise but when our French winemaker comes to a wine-tasting here he is often surprised by certain Czech wines. He often likes the white wines, especially the Rieslings. The problem would be with the high prices that would, together with the export costs, be rather uncompetitive compared to French wines of the same category. Where to find Rhône in Prague

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Na Hrobci 1, Praha 2 Rohanské nábřeží 7, Praha 8 Rašínovo nábřeží, Praha 2


business lunch

“We did not want any of the Czech clichés like wine barrels, taps on the wall, creeping grapevines, heavy oak tables or Thonet chairs here but a light French-style interior,” says Filip Hotový.


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Four rules we have learned from the Japanese regarding family businesses Can Czech authorities work in the cloud? Klรกra Spilkovรก: The best Czech female golfer talks money matters The secrets of a bar business where patrons keep their own tabs A magazine for clients and friends of KPMG Czech Republic

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