Statement on rating

The Slovak Rating Agency grants following ratings to City Ružomberok:

Long-term local currency rating	BBB+ ( stable outlook )
Long-term foreign currency rating	BB+ ( stable outlook )
Short-term rating	S2

The granted long-term rating in the category of transactions in Slovak crowns BBB+ (stable outlook) is one degree below the rating of the Slovak Republic (A - stable outlook). In the category of foreign currencies rating BB+ (stable outlook) has been granted to City Ružomberok, which is one degree below the risk level of the Slovak Republic (BBB- stable outlook). Short-term rating of City Ružomberok is S2, which is the best possible short-term rating for the entities attaining long-term rating BBB+.

Rationale:

• City Ružomberok is the business and cultural centre of lower Liptov. From the political and administrative point of view is Ružomberok the seat of the district of Ružomberok associating 25 municipalities that ranks the district among the smaller districts within the Slovak Republic. A part of the city is the city ward Vlkolínec listed in the list of the World cultural and natural heritage of UNESCO. With the population of 31.356 inhabitants as of May 26, 2001 Ružomberok belongs to the smaller cities in Slovakia. The sector structure within the industry of Ružomberok is not diversified markedly. The industry in the City is focussed on paper and pulp industries as well as textile industry, which are represented by large industrial concerns with foreign capital. Nevertheless, the unemployment rate of Ružomberok is relatively high with 19,5 % as of March 31, 2002, which is more than the unemployment rate in the district of Ružomberok (18,35 % as of March 31, 2002) and more than the national unemployment rate representing 16,89 % as of March 31, 2002.
• In the financial area, the strength of the city is a clearly defined concept in key areas of the local management. High level of financial management brings certain stability into the development of financial indicators. City shows stable surplus in the local management as of the end of current year, which are the sources of financing of various activities providing future development of the city. A supporting tool within the financial management is the central information system of the city, which allows the automation of management processes, as well as control mechanisms. City has a well-developed system of internal regulations and general statutes governing the primary functions of the city and the disposal with its property.
• We evaluate positively the total liquidity of Ružomberok. The volume of available funds of the city reached the amount of SKK 36,121 mil. as of ultimo of 2001, which represented nearly 40 % of current assets of the city. Short-term liabilities and debt service of the city were in the amount of SKK 11,906 mil. as of ultimo of 2001, which means that the mentioned short-term liabilities of the city has been covered 3 times by the volume of available funds. We appreciate positively the development of the service-debt-to-revenues indicator showing descending trend of development and the service-debt-to-revenues ratio has reached 4,15 % as of ultimo of 2001. According to the new budget regulations, the service-debt-to-current-revenues ratio will represent 6,4 % for the year 2002, which means that at present the city will keep the principle of covering of current expenditure by current revenues. Structure of the budgeted revenues started to be diversified in 2001, when the percentage share of grants and transfers in the total revenues of the city has increased.
• We positively appreciate the fact that for the purpose of more effective control of the fulfilment of tax liability, the city started with the use of so-called Digital map, which represents a modern and unique system of the evidence of immovable assets in the Slovak Republic. The system includes interconnection of the evidence of immovable assets between the state administration (land register departments) and the self-administration (evidence for the purposes of definition and control of the fulfilment of tax liability).
• In spite of the fact that the city has no entry of funds in foreign currency, a part of its investments is financed by credit in foreign currency (USD). We negatively see the existence of the currency risk and from the long term point of view the city should avoid drawing credits in foreign currency.
• Within the scope of public administration reform, the city is prepared to assume the competencies. We positively appreciate the fact that the city established a commission for the area of education consisting of city representatives and district authorities for the purpose of getting relevant information concerning the delimitated assets. We highly appreciate also the fact that the city has financial reserves for covering the potential hidden debt within delimitated assets.
• In the area of environment, the city aims to create the best possible conditions for a healthy living of its inhabitants. In the meantime unsolved problem is a strong pollution of the environment in the city and its surroundings caused by an important company of the Slovak Republic, which is the biggest employee in the city as well. Although one of the strategic goals of the city development is the development of the tourism, the extent of environment pollution negatively effects achievement of the goal.
• We positively appreciate the co-operation of the city with the tertiary sector. In order to enhance the living standard of the inhabitants, the city is spending considerable financial means for development of education, cultural and sports activities. We also see positively the marketing activities of the city, when the city maintains the awareness on the facts, events and tourist attractions of the city and its surroundings in the form of a presentation on Web page.

Slovak rating agency, Ltd.
Bratislava, 28 May 2002