ANNUAL REPORT 2020

Železiarne Podbrezová a.s. ANNUAL REPORT 2020 66 22 The actual tax rate differs from the tax rate of 21% (2019: 21%) set by law mainly owing to differences in the classification of certain items of expenses and income for accounting and tax purposes, and tax rules for a group of companies that prepares consolidated financial statements in Slovakia. At present, companies in Slovakia are required to present their tax returns individually and the law does not allow for the preparation of common tax declaration for a group of companies. Deferred tax is calculated at the income tax rate that is expected to be applied in the period when the asset is to be realised or the liability settled. As a result, the Company applied the income tax rate effective in the following reporting period, ie 21%. In Slovakia, the 2016 to 2020 taxation periods remain open and are subject to inspection by the Tax Authority. The Group prepared documentation on related - party transactions in accordance with effective Slovak tax legislation. 25 SUBSIDIES 31 Dec 2020 Receivables from subsidies Deferred income on subsidies, non -current (Note 15) Deferred income on subsidies, current Release of subsidies in the statement of comprehensive income Investment subsidies 190 370 3 159 588 504 823 502 960 Operating subsidies 1 771 693 - - 9 570 222 Total subsidies 1 962 063 3 159 588 504 823 10 073 182 31 Dec 2019 Investment subsidies - 3 121 170 474 784 480 056 Operating subsidies 50 337 - - 2 787 822 Total subsidies 50 337 3 121 170 474 784 3 267 878 The statement of comprehensive income mainly includes the parent company’s revenues from: an investment subsidy for the “Reconstruction of the Dust - Collection System of the Electric Arc and Ladle Furnace” project (EUR 182 thousand), an investment subsidy for the “Tungsten and Boiler Steel” project (EUR 9 thousand), an investment subsidy for the “Refurbishment, Modernisation and Construction of a Football Stadium” project (EUR 45 thousand), an investment subsidy for the “Construction of FA Skalica” project (EUR 40 thousand), support during the Covid - 19 pandemic (EUR 6 398 thousand), compensation to entrepreneurs for the production of electricity from renewable energy sources (EUR 2 050 thousand), compensation from the environmental fund (EUR 112 thousand), dual education support (EUR 85 thousand) and a “Šanca pre všetkých” operating subsidy (EUR 79 thousand) and revenues from subsidies in the subsidiaries, primarily ŽP EKO - QELET (EUR 472 thousand) and Tále (EUR 230 thousand). 26 FINANCIAL RISK MANAGEMENT POLICIES 26.1 Capital risk management The Group manages its capital to ensure that the Group is able to continue as a going concern with the aim of achieving an optimum debt and equity balance. The Group’s overall strategy remains unchanged from 2019. The gearing ratio at the year - end was as follows: 31 Dec 2020 31 Dec 2019 Debt (i) (105 752 573) (92 530 609) Cash and cash equivalents 14 440 278 11 690 438 Net debt (91 312 295) (80 840 171) Equity (214 929 197) (221 657 774) Net debt to equity ratio 42% 36% (i) Debt is defined as current and non-current interest bearing loans and borrowings. 26.2 Categories of financial instruments 31 Dec 2020 31 Dec 2019 Available - for - sale investments 159 387 159 387 Investments in associates 2 047 883 2 178 794 Loans, borrowings and receivables (including cash and cash equivalents) 80 334 551 73 248 427 Financial assets 82 541 821 75 586 608 Bank loans recognised at amortised costs 98 151 315 84 535 115 Obligations under finance lease 7 601 258 7 995 494 Trade payables and other liabilities 35 838 880 34 262 107 Financial liabilities 141 591 453 126 792 716 a) Financial risk factors The Group’s activities expose it to a variety of financial risks that include the effects of changes in foreign currency exchange rates and loan interest rates, bonds and obligations under financial leases. The Group’s overall risk management program focuses on the unpredictability of financial marketsandseekstominimisepotentialadverse effects onthefinancial performance ofthe Group.The Groupuses derivativefinancial instruments to manage certain exposures. Credit risk Group management has a credit policy in place and the exposure to credit risk is monitored on an on - going basis. Credit evaluations are performed on all customers requiring credit over a certain amount. The Group does not require collateral in respect of financial assets. At the reporting date there were no significant concentrations of credit risk. Derivative counter - parties and cash transactions are limited to high credit quality financial institutions. The Group did not limit the amount of credit exposure to any financial institution. Interest rate risk The Group’s operating income and operating cash flows are relatively independent of changes in market interest rates. Interest rate risk arises on long - term borrowings, which are issued at fixed rates and expose the Group to fair value interest rate risk. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020 (IN EUROS)