I. STATEMENT ON RATING

Slovak Rating Agency grants following rating to City Malacky:

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

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

Rationale:

• City Malacky is business, administrative and cultural centre of Záhorie. It has appropriate geographic position - near to the borders with Austria, Czech Republic and Hungary. With the population of 17 773 inhabitants as of May 26, 2001 Malacky is one of the smaller cities in the Slovak Republic. City Malacky is the centre of machine, furniture, food, oil and gas industries. Industrial corporations are represented by companies with Slovak as well as foreign capital. The unemployment rate in district Malacky achieved the level of 11,66 % as of May 31, 2002, which is more than the unemployment rate in the region of Bratislava (5,52 %), but less than the national unemployment rate of 17,67 %. Relative lower unemployment rate in the district Malacky is influenced by employment opportunities offered by the capital of the Slovak republic located ca 50 km from Malacky.
• System of internal management processes is influenced by process of changes since 1999. Need for such changes arose from the economic and financial situation of the city at the turn of 1998 and 1999 - many distraint proceedings were in process against the city and the city was insolvent, i.e. it was not able to pay its debts. Development of clear strategy in the areas of management processes, financial management, disposal with property and new system of internal regulations leads to more transparent municipal finance and property, as well as to more efficient usage of the granted finance. The head controller of the city plays important role in the area of management control. We appreciate positively the fact that check of correctness and integrity of financial statement of the city has been performed by another auditor since 1999. All disclosed failures and restrictions are in the process of continuous improvement. But it is necessary to continue the started processes tending to invigoration of management transparency and consolidation of municipal finances in the coming election period.
• Even though the year 1999 was the year of solving of city insolvency and later the year of stabilisation, the city showed surplus. Cumulative surplus for the period between 1999 and 2001 represented the absolute volume of SKK 13,432 million. The volume of available funds of the city reached the amount of SKK 5,775 million as of ultimo of 2001, the available funds of the city was at the value of SKK 9,83 million in the 1st half year in 2002. Short-term liabilities of the city were in the amount of SKK 4,285 million as of ultimo of 2001, they decreased to the value of ca SKK 309 thousand in the 1st half year in 2002 (for comparison - short-term liabilities represented the volume of SKK 17 016 thousand as of December 31,1998, which represented almost a quarter of the yearly budget at that time). Short-term liabilities and debt service of the city were in the amount of SKK 2,468 million as of June 30, 2002, which means they were covered nearly 4 times by the available funds. At the present, city doesn't record any liabilities out of maturity date. Debt-service-to-revenues indicator reached the level of 4,03 % as of ultimo of 2001, and 4,57 % as of June 30, 2002. According to the new budget regulations, the service-debt-to-current-revenues ratio will represent 5,26 % for the year 2002, which means that at present the city will keep the principle of covering of current expenditure by current revenues in compliance with the legally prescribed limits.
• One of the revenue resources are grants and transfers with 12 % share in total revenues considered to be a favourable resource of financing. In 2000, the city performed restructuring of existing credit portfolio within the started recovery process, so that three credits have been substituted by credit granted under better business conditions with positive effect on the city economy (saving of costs).
• We positively appreciate the cooperation of the city with the business sphere. The city seeks not only to fulfil its main role, but also to keeps its development. Business sphere within the city ensures employment for the city inhabitants and contributes to total development of the city. Small enterprises mainly contribute to the development of the business activities within the city. The city seeks for development of activities tending to increase of number of such enterprises and to improvement of conditions for performing business activities. For these purposes, the Incubator of small and middle enterprises for beginning and existing entrepreneurs will be established. The project represents support for beginning entrepreneurs in advisory and economic areas (e.g. by providing of premises for entrepreneurial activities, preferential terms of lease during the first years of entrepreneurial activities). In close cooperation with the city, Regional advisory and information centre Malacky has been established, having in mind support of small and middle enterprises in the region of Záhorie as well as the Regional development agency Záhorie with its registered office in Malacky covering the role of a tool for regional development support.
• Development of Malacky and its surroundings will be significantly influenced by prepared building of the Industrial and technological park Záhorie. City Malacky prepares the project of establishment of the Industrial park Malacky within the project mentioned above. Production facilities of many companies are located in this territory, like Swedwood, Ltd. Tower Automotive, Inc. etc. Remaining part of the whole territory will be rebuild for modern industrial park built on "green field". Joint-stock company Eurovalley will be the investor of the Industrial and technological park Záhorie, the part-owners of which are the City Malacky together with other municipalities and institutions.

Please don't hesitate to address your questions to autner@slovakrating.sk, or call +421 2 5464 5151.

Slovak Rating Agency
Bratislava, 17 September 2002