I. STATEMENT ON RATING

Slovak rating agency granted following rating to City Bánovce nad Bebravou

Long-term local currency rating    BB+ (stable outlook)
Long-term foreign currency rating    BB- (stable outlook)
Short-term rating    S3

The granted long-term rating in the category of transactions in Slovak crowns BB+ (stable outlook) is four degrees below the rating of the Slovak Republic (A - stable outlook). In the category of transactions in foreign currencies rating BB - (stable outlook) has been granted to the City Bánovce nad Bebravou, which is four degrees below the risk level of the Slovak Republic (BBB stable outlook) as well. Short-term rating of City Bánovce nad Bebravou is S3, which is the best possible short-term rating for the entities attaining long-term rating BB+.

Rationale:

From the political and administrative point of view, City Bánovce nad Bebravou is the seat of the district Bánovce nad Bebravou associating 43 municipalities that ranks it among the middle-sized districts within the Slovak republic. With the population of 20 901 inhabitants as of May 26, 2001 the city Bánovce nad Bebravou is one of the smaller cities in Slovakia. Companies with foreign capital have been established in the city, offering new working opportunities for the inhabitants of the city and surroundings and operating mainly within the shoemaking, clothing and automobile industries. District of Bánovce nad Bebravou is the district with high unemployment rate among all districts in region of Trenčín reaching the unemployment rate of 16,14 % as of ultimo of 2002. Unemployment rate of region of Trenčín achieved the value of 10,91 % as of ultimo of 2002. Unemployment rate of the district of Bánovce nad Bebravou is little bit lower than the national unemployment rate reaching 17,45 % as of ultimo of 2002.
The city has a development plan elaborated until 2010, focused mainly on economic development of the city enabling creation of new working opportunities and creation of better living conditions in the city. The city has developed land use planning with expected aspect until 2015, providing sufficient space in all areas for investments within the city.
Development and construction of industrial parks on the territory of the city creates conditions for increasing the number of working opportunities. In land use planning of the city, five localities are selected for construction of industrial parks: Dolné Ozorovce, Horné Naštice, Biskupice - Priehradné, Biskupice - Kráčiny and Horné Ozorovce. Industrial park Dolné Ozorovce is one of already operating industrial parks that started to be realised in 1995 by the company Gabor - Slovensko, subsidiary of the German concern Gabor Shoes. In the near future, further company will enter this industrial park - it is the German multinational company HELLA, producing accessories for automobile industry.
City economy of the last period can be seen as well-balanced, despite the fact that the city showed during the time period 1999-2002 surplus, we suggest the city to improve the planning process and not to budget the revenues as maximalistic, because expenditure regulation is limited in case of started investment activities. Grants and transfers as irrecoverable and convenient financing source are presented in budgeted revenues during the monitored time period, which is seen positively. As of ultimo of 2002, share of capital grants in capital revenues achieved 33 %. Within the monitored period, the city reached positive values of indebtedness as well as debt service indicators.
In last time period, the city assumed liability for the commercial entity providing services for benefit of the city and granted a credit to the next commercial entity. Despite the fact that the risk of the city is attended in both cases of outstanding loans, possible affects of these transactions on the city have not been analysed satisfactory. In our opinion, monitoring process of the mentioned entities is insufficient and in occurrence of problems in economic development of these entities the city may not realise the first warning signals of their negative financial situation. Therefore, we suggest tightening of the monitoring process of these business entities with the aim to minimise the risk resulting from impossibility to perform business activities by the mentioned entities.
Equity shares in two companies, in which the city is the only partner, are not booked by the city. In our opinion, management of business companies with equity participation of the city is differentiated. The economy of the first company is monitored consequently and the results are regularly presented to the municipal corporation. The city has insufficient information concerning the activities of the second company, which has been established purposely with a foreign investor. As the company failed to start the planned project, the city considers its future operation.
Please don't hesitate to address your questions to autner@slovakrating.sk, or call +421 2 5464 5151.

Slovak Rating Agency
Bratislava, 24 June 2003

Long-term local currency rating	BB+ (stable outlook)
Long-term foreign currency rating	BB- (stable outlook)
Short-term rating	S3