ANNUAL REPORT 2021

75 23 25 SUBSIDIES 31 Dec 2021 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 15 000 3 891 329 545 210 548 076 Operating subsidies 68 672 - - 5 311 205 Total subsidies 83 672 3 891 329 545 210 5 859 281 31 Dec 2020 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 The statement of comprehensive income primarily 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 “Energy Intensity Reduction of ŽP” project (EUR 86 thousand), an investment subsidy for the “Refurbishment, Modernisation and Construction of a Football Stadium” project (EUR 41 thousand), an investment subsidy for the “Construction of FA Skalica” project (EUR 17 thousand), support during the COVID - 19 pandemic (EUR 2 491 thousand), compensation to entrepreneurs for the production of electricity from renewable energy sources (EUR 1 736 thousand), compensation fromthe environmentalfund (EUR 309 thousand),dual education support (EUR180 thousand),financial compensation for Ag testing (EUR 37 thousand), and revenues from subsidies in the subsidiaries, primarily ŽP EKO - QELET (EUR 865 thousand) and FK Železiarne Podbrezová (EUR 10 thousand). 26 FINANCIAL RISK MANAGEMENT POLICIES 26.1 Capital risk management The Groupmanages 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 2020. The gearing ratio at the year - end was as follows: 31 Dec 2021 31 Dec 2020 Debt (i) (126 521 180) (105 752 573) Cash and cash equivalents 11 687 851 14 440 278 Net debt (114 833 329) (91 312 295) Equity (234 015 561) (214 929 197) Net debt to equity ratio 49% 42% (i) Debt is defined as current and non-current interest bearing loans and borrowings. 26.2 Categories of financial instruments 31 Dec 2021 31 Dec 2020 Available - for - sale investments 65 000 159 387 Investments in associates 2 418 798 2 047 883 Loans, borrowings and receivables (including cash and cash equivalents) 110 679 558 80 334 551 Financial assets 113 163 356 82 541 821 Bank loans recognised at amortised costs 116 669 071 98 151 315 Obligations under finance lease 9 852 109 7 601 258 Trade payables and other liabilities 56 199 845 35 838 880 Financial liabilities 182 721 025 141 591 453 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 markets and seeks tominimise potential adverse effects on the financial performance of the Group. The Group uses derivative financial instruments tomanage 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 inmarket 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. The sensitivity analysis (see below) has been determined based on the exposure to interest rates for both derivative and non - derivative instruments at thereporting date.Forfloatingrate liabilities,theanalysis ispreparedassumingtheamountof liabilityoutstandingatthereporting datewasoutstanding for the whole year. If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group’s profit for the year ended 31 December 2021 would increase/decrease by EUR 386 thousand (2020: increase/decrease by EUR 283 thousand). This is mainly attributable to the Group’s exposure to interest rates for variable rate borrowings. Foreign currency risk The Group incurs foreign currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currency. The Group uses forward currency contracts and options to hedge its foreign currency risk. Most of the derivatives havematurities of less than one year after the reporting date. The Group has a number of financial investments in foreign subsidiaries whose net assets are exposed to currency translation risk. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021 (IN EUROS)