Annual Report 2005

Financial Management An issuance of EUR 15 million of the Company’s five-year bonds in December 2002 laid the basis for the financial strategy of recent years. In 2005, the Board of Directors reconsidered the structure of borrowed fund, and due to the changed business environment - in particular the reduced interest rates in the banking sector - they resolved upon further financial restructuring of the Company that was realized in the second half of the year. The decision was supported by both the possibility of a premature repayment of bonds, three years after their issue, and a simplified payment system that was previously delivered via eight banking institutions. The selection of banks for co-operation was realized based on the presentations and offers by 10 candidates and based on a tender. On 29 September 2005, through the signing of the Contract for Co-operation, the Company made an agreement with a syndicate of four bank houses. For the next 5 years, the Company will be provided with the services of: Citibank (Slovakia) a.s., HSBC Bank plc, CALYON BANK SLOVAKIA a.s. (a branch of a foreign bank), and Tatrabanka, a.s. The trust of these institutions in our Company is testified by the fact that the newly provided loans totalling SKK 1.9 billion are not pledged by any traditional instruments, i.e., assets under lien or promissory notes, etc. We see and respect this as being the highest manifestation of their trust. Provided loans include both short-term and long-term facilities. The whole credit line was invested in the repayment of old loans and a premature repayment of bonds in December 2005. With regard to the continuously strengthened SKK/EUR rate, including 2005, we entered into financial derivatives contracts to meet planned expected exchange rate of SKK/EUR 38, with realized foreign currency gains. In 2005, the actual average exchange rate reached SKK/EUR 38.49 and had a positive impact on the financial results of the Company. Meeting of Obligations During 2005 the Company met in full and on time its obligations towards financial institutions, the state, and all vendors. Expenses, Income, and Profit for 2005 Net profit for 2005 of SKK 883 324 thousand represents the difference between total income of SKK 10 148 786 thousand and total expenses of SKK 9 265 462 thousand. The structure of income has not substantially changed since 2004. Income from operations represented 94.6% of the total, and is mostly derived from revenue from the sale of own products (75.2%) and from own work capitalized (4.4%). Income from financial activities represented 5.4%. The structure of expenses is similar to the prior year; positive changes were recorded in consumed material (-6%). The structure of expenses for 2005: ° Consumed material ° Consumed energy ° Services ° Personnel expenses 45 % 9 % 6 % 16 % ° Fixed assets depreciation ° Other operating expenses ° Financial expenses ° Taxes and fees 3 % 14 % 5 % 2 % REPORT BY THE BOARD OF DIRECTORS Report by the Board of Directors Annual Report 2005 Železiarne Podbrezová 23