I. STATEMENT ON RATING

Slovak rating agency granted following rating to City Nové Zámky:

Long-term local currency rating	B-     (negative outlook)
Long-term foreign currency rating	CCC (negative outlook)
Short-term rating	S4

In the category of transaction in Slovak crowns, long-term rating B- (negative outlook) has been granted to City Nové Zámky. In the category of transactions in foreign currencies rating CCC (negative outlook) has been granted to City Nové Zámky. Short-term rating of City Nové Zámky is S4, which is the best possible short-term rating for the entities attaining long-term rating B-.

Rationale:

• City Nové Zámky situated in South-western Slovakia represents an important nodal point of Southern Slovakia. From the political and administrative point of view, City Nové Zámky is the seat of the district Nové Zámky associating 62 municipalities. With the population of 42 262 inhabitants as of May 26, 2001 Nové Zámky is one of the smaller cities in Slovakia. The industry is focussed on traditional sectors - agriculture and food industry, electrical and engineering industries are also represented in the city. Industrial enterprises are represented by companies with Slovak, as well as foreign capital. The unemployment rate of district Nové Zámky achieved the value of 23,15% as of December 31, 2002, which is more than the unemployment rate in the region of Nitra (21,51 %), and more than the national unemployment rate (17,45 %).
  
  
• City Nové Zámky has well developed municipal information system. Information together with so-called digital map is interconnected to the evidence of population. So, both database systems are a basis for regulation of tax liability (local taxes and charges and real estate tax) of city inhabitants and business area and effective tool for check of their fulfilment. The whole system is interconnected to the city accounting and reporting system. Information system is so an individual automated solution for interconnection of various agenda within the performance of the city.
  
  
• In spite of high level of information databases offered to the city by municipal information system, being so a significant staging post within management processes, the outputs of applied management and procedure system are not standard. Slovak rating agency sees three basic areas that should be modified - settlement of liabilities of the city, city indebtedness, creation of reserves. City has evidence of all liabilities after maturity date and the payment of vendor invoices is realised with around two months delay. Slovak rating agency sees negatively high indebtedness of the city, representing almost 73 % of total revenues of the city (as of ultimo of 2001). If the city doesn't reduce its indebtedness until January 1st, 2005, it will be not able to abide by regulations of relevant legislation (Act on budget rules). City doesn't create any financial reserves and if the budgeted revenues will not be met, the city may face the deficient liquidity, which may affect the credit repayment.
  
  
• We see the strive of the city for fulfilment of communal services. The top priority strive is the improvement of living standard of city inhabitants. City supports ordinal inhabitants (e.g. in form of grants, tax allowances), as well as the business area with which the cooperation is on a high level. Provision of grants and other forms of allowance has to respect current financial situation of the city.
  
  
• Even though the city may be used as an example for other cities situated within the district Nové Zámky in the area of municipal information system as well as in the area of knowledge level enhancement in smaller cities, according to Slovak rating agency, its top priority task for the coming period has to be the consolidation of public finance. City has to guarantee the settlement of liabilities before the maturity date; otherwise it will face the risk of possible executions and loss of confidence on the part of creditors. Second significant task is the reduction of city indebtedness and creation of financial reserves intended to be used for contingences. Otherwise, city will not be able to fulfil its defined tasks.

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

Slovak Rating Agency
Bratislava, 26 February 2003