I. STATEMENT ON RATING

Slovak Rating Agency grants following rating to City Snina:

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

The long-term rating in the category of transactions in Slovak crowns BB- (stable outlook) has been granted to City Snina. In the category of transactions in foreign currencies the rating B- (stable outlook) has been granted to City Snina. Short-term rating of City Snina is S3, which is the best possible short-term rating for the entities attaining long-term rating BB-.

Rationale:

• City Snina, locating in the Eastern part of Slovakia, is the starting point for getting to the territory of the national park Poloniny. From the political and administrative point of view, City Snina is the seat of the district Snina associating 34 municipalities, which ranks the city among the smaller district in Slovakia. With the population of 21 325 inhabitants as of May 26, 2001, Snina is also one of the smaller cities in the Slovak Republic. Traditional sectors within the industry are wood-processing, machine and shoemaking industries represented principally by small and middle enterprises with Slovak capital. Belgian capital is represented in the machine industry within the city. The unemployment rate in district of Snina reached the level of 22 % as of August 30, 2000, which is almost comparable value with the rate of unemployment in the region of Prešov achieving 22,5%, but essentially higher level than the national unemployment rate reaching 17,2%. Small number of working opportunities, as well as the average level of education appearing to be unsatisfactory affect negatively the high unemployment rate in district of Snina, as well as in the city alone.
• In budget area, the volume of real incomes of the city shows unsteady development trend. The structure of budgeted revenues is diversified, which we evaluate as positive. One of the finance sources are grants and transfers, their contribution to total revenues as well as their absolute volume decreased as of ultimo of 2001 in comparison with previous periods. The volume of available funds of the city achieved the amount of SKK 11,992 million as of June 30, 2002, short-term liabilities and debt service of the city represented the volume of SKK 8,458 million as of June 30, 2002, which means that they have been covered almost 1,5 times. Available funds were at the level of SKK 8,1 million as of September 30, 2002.
• We see opportunities in the management of receivables. The city recorded high volume of receivables the amount of which achieved almost SKK 39 million as of June 30, 2002. The highest amounts are the real estate tax receivables, receivables of rental for rented land and non-residential premises and receivables of residential trade and industry and heat economy, whereby most of them are receivables that have been arisen since 1993, i.e. they are difficult to demand. Even though the city has been successful in debt recovery within the last years, in our opinion, the city should pay more attention to the receivables and to proceed the debt recovery more effective. We suggest verifying of the creditworthiness of new potential partners more in detail to the city.
• We highly appreciate the cooperation of the city with the business sphere. In order to solve both current and long-run problems within the city or the region, the city supports all business activities contributing to keeping the employment rate. Sample of the cooperation of the city with the business sphere is creation of conditions supporting the development of business area within the city (e.g. sale of real estates to the business entities under favourable conditions, lower rent costs for the leased premises, remission of local taxes and charges etc.). We see opportunities in management of the assets of the city in using tools enabling the city to acquire the sold, or leased real estate when the entity would not be successful in business (e.g. pre-emption right).
• The city is one of the founders of the First contact centre, starting its activities on October 1, 2002. The First contact centre is helpful in processing of documentation required for taking the finance from EU funds, in providing of consulting services to new as well as existing business entities. First contact centre has been established based on the resolution of the government of the Slovak Republic as one of the nine centres in trouble district of Slovakia with the high unemployment rate and unsatisfactory infrastructure.

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

Slovak Rating Agency
Bratislava, 29 October 2002