annual report 2006. liptovský hrádok a.s. 2 contents evaluation of the year 2006 3 identification...

Annual Report 2006

Liptovský Hrádok a.s.2

Contents

Evaluation of the Year 2006 3

Identification Data 9

Company’s Organization Chart 10

Quality Management System 11

Company’s Production Profile 12

Marketing Realization According to Territories 13

Overviews 15

Balance Sheet 20

Profit and Loss Account 25

Auditor’s Report 27

Remarks to Financial Statements 29

Cash Flow Statement 48

Business Objective for 2007 50

Development of employees from ESF 54

3Liptovský Hrádok a.s.

Evaluation of the Year 2006

Report of Company’s Board of Directors on Economic Results and Property Status in the Year 2006In the year 2006 Company’s Board of Directors set out on a way to financial and economic recovery of the Company due to adoption and realization of the project of assets reclassification and on a way to transformation of Company’s culture by means of preparation and definition of main areas and goals for implementation of principles of new form of organizing the work, i.e. team structure, then by means of definition and subsequent application of principles of 5S, TPM, autonomous quality, autonomous maintenance as well as via defining and adopting principles and rules of Company’s culture. Due to defining the position of customers’ oriented philosophy of the Company inwards, i.e. to its employees, between particular departments and sections to each other as well as outwards, i.e. to its suppliers, customers and the others in its environment, the Board of Directors gave a clear signal, that its ambition to create conditions for transformation of the Company on all levels in the modern market environment and to push them through into the daily activity of individuals and through them into the activity of the whole company is indubitable and feasible. All these processes in connection with constant effort to improve the personal quality in all managing and executive job positions are directed only at the same aim: to build up a company of worldwide class in conditions of TESLA Liptovský Hrádok.

Simultaneously with changes in the area of company’s culture and internal organization, the process of improvement and betterment of Quality Management System in accordance with ISO 9001:2000 as well as Environment Management System in accordance with ISO 14001:2004 continued due to the supervisory audit carried out in the course of December in 2006. Certification of principles of Quality Management System and Environment Management as a part of strategic goals directed towards creation of a customers’ oriented company is a positive signal for our customers and a guarantee of our respectable approach to fulfillment of their requirements as well as to requirements for working up a modern, partnering business cooperation opened to each other.

The year 2006 was a breakthrough from the point of view of subsequent stabilization of volumes of revenues from sales of own products above the level of 30.0 Mil. SKK per month, whereby even in months from September till December – in spite of distinctly negative influence of strengthened Slovakian currency towards EUR – the Company managed to maintain this trend started in March. The average volume of revenues from sales per month in 2006 constituted 33.9 Mil. SKK in total, whereby the average monthly level of revenues from sales for own products only reached 30.9 Mil. SKK.

In 2006 economic results were achieved in quantitative indicators acknowledging the maintenance of moderate growth trend which directly refers to previous periods. The increase of 9.3% in revenues from sales in spite of constant strengthening the rate of exchange of SKK – EUR gives evidence of growth possibilities and strengthening the market position of the Company among processing entities. A significant share in this result was increase in revenues from sales of Company’s electrical engineering products, where in comparison with the year 2005 the increase in the area of assembly and of PCB production constituted 3.5% and 27.2% accordingly, while revenues from sales of metal part production achieved relatively lower increase of only 3.8% and revenues from sales of telecommunication systems increased only by 1.8%. However ambitions, especially in the area of telecommunications, were significantly higher. But the critical problem was and remains a technical preparedness of TeslaPhonet systems for application particularly for users requiring a larger range of superstructure system functions used. Despite exceeding the last year indicators in revenues from metal part production and electrical engineering production the planned tasks were not fulfilled in any of production branches. Failures in revenues from sales in comparison with the business objective in metal part production (-63.1 Mil. SKK), in electrical engineering production and assembly (-15.0 Mil. SKK) and in telecommunication production (-41.2 Mil. SKK) together with moderate exceeding of planned revenues from sales of services and merchandise (+2.8 Mil. SKK) causes that the plan of revenues from sales was fulfilled only for 77.7%. The volume of export constitutes 52.6 % from total revenues from sales of own products.



In comparison with the previous year it is a decrease by 15 percentage points. The most important for this change was the fact of growth in revenues from sales to inland customers in electrical engineering assembly as well as the strengthening of exchange rate of SKK to EUR with impact of general decrease of revenues from sales in EUR. Financially represented the revenues achieved from sales of own products constitute the volume of 370,147 Th. SKK, the revenues from sales of services and merchandise constitute the volume of 37,001 Th. SKK. However possibilities for increase of sales in metal part production were significantly higher. Due to order backlogs there were ensured volumes exceeding the present capacity and organization abilities of operation departments. Further factor causing the non-fulfillment of planned volumes of sales was insufficient realization of telecommunication products, where expectations concerning sales of TeslaPhonet systems were not met even by 25%. It was partly caused by overestimating the technical preparedness of systems for introduction into severe operation, by extending dates and terms for removal and complete solution of shortcomings found out in particular complementary functions, by subsequent current detection of further technical restrictions in case of mass implementation of systems and not least by qualitative level of personal equipment in departments for sales and sales promotion of telecommunication devices. As to the area of revenues from sales of products from electrical engineering assembly, the basic dominating factor of non-fulfillment of planned volumes of sales was lack of order backlogs meeting requirements for adhering to parameters of effective sales. The existing portfolio of customers occupies available capacities during one shift by its requirements for production, in case of emergency need the use of capacities was operatively ensured by prolonged and extra shifts. Consolidation of capacities by technology of lead-free soldering in the middle of 2006 extended possibilities of increasing this level of using capacities towards the trend which ensures observance of even the strictest environmental requirements for this type of production. Decrease in revenues from sales of services by 9.1 % between the years (financially presented by 3.3 Mil. SKK) is caused by termination of the lease agreement with MOLTES in February 2006 and by its not-full-valued substituting by means of sales arising from the lease agreement with Eltek Energy Slovakia as well as by opening valid and previously confirmed contractual relations concerning deliveries of services for the Army of SR in a second half of 2006, whereby the volume of services was increased by 7 % by comparison between the years. As to basic qualitative indicators, i.e. volume of pretax profit, added value and value-added labor productivity, expectations set out in the Business Objective was not fulfilled. The Company’s economic result for the year 2006 is the loss in the amount of 47,214 Mil. SKK, while the assumption in the Business Objective has laid down to achieve the profit in the amount of 24.1 Mil. SKK. The important share in this result had the process of implementing the project of reclassification of Company’s assets, where due to transferring the long-term debt only there was made a book entry of the loss in the amount of 38.925 Mil. SKK. The positive influence upon the stated economic result in the amount of 13.6 Mil. SKK was exerted by making charge for sale of immovable property to Eltek Energy Slovakia and sale of further movable property (steel and iron scrap, low-value tangible property, personal cars). From the viewpoint of structure of the achieved economic result, the income from economic activity constitutes the loss of –44.097 Mil. SKK, the income from financial activity constitutes the loss of –2.853 Mil. SKK and the income from extraordinary activity constitutes the profit of +4 Th. SKK. A vehement consolidation of exchange rate of SKK to EUR in the last four months in 2006 caused an increase of exchange rate losses which were not such an important item exerting influence upon financial profit formation in the previous course of the year. At the same time the long-term trend of exchange rate development was in accordance with expectations in the Business Objective: the parity level of 37.50 SKK per 1 EUR, near which the rate of exchange oscillated till the half of September 2006, was in accordance with parameters of BO. The partial elimination of exchange rate incidences, especially in case of receivables payable within 30 and more days, was ensured by factoring of selected receivables. From the viewpoint of impact on economy, the opposite influence, i.e. positive one was exerted by exchange rate development of SKK to USD, where in the course of the year 2006 its appraisement by 15.7% was carried out and in recalculating the liability on the bank credit from Cidel Bank by 31 December 2006 there was quoted a exchange rate profit in the amount of 3.421 Th. SKK. The total balance of exchange rate profits and losses for the whole year 2006 constitutes the value of +984 Th. SKK, while the Business Objective supposed the loss on the level of –1.0 Mil. SKK.



Together with the amount of outstanding loss from previous years kept in accounting books in full as the amount of 172.8 Mil. SKK, the total loss from the Company’s economy incl. the loss shown for the fiscal year 2006 constitutes the sum of 220.0 Mil. SKK. In view of important influence of this fact upon judging the total financial standing of the Company on the side of partner financial institutions and commercial companies, the Company’s Board of Directors proposes to solve it by reduction of basic capital in a form of diminution in value of shares issued.

In the area of formation and consumption of expenses the Company ensured crucial expenses items in accordance with the plan. In dependence on the volume of revenues from sales of own products the material expenses was drawn in accordance with normative tasks planned, where its moderate overdrawal (+2.43% of total consumption) was influenced due to inevitable correction of non-conformity products as well as by change of structure in production assortment and parameters. In the matter of energy consumption the overdrawal was caused especially in the item of heat energy, where in comparison with original assumptions worked into the Business Objective the supplier did not start production of a medium from secondary raw materials, i.e. from wood chips, but from the beginning of the heating season 2006/2007 he continued energy production under present conditions with impact on unit price of 1GJ. Savings in the personnel expenses item depends directly on the lower level of revenues from sales, where the total number of employees in the average recalculated condition was lower by 96 persons in comparison with the planned condition. The important item, where the real condition exceeds the planned level, is depreciation expense of tangible and intangible fixed assets, in which especially due to carrying out the leaseback of technologies in the 1st quarter 2006 the additions to depreciation were higher by 3.0 Mil. SKK till the end of the year and due to inclusion of assets (mainly SW and HW) by 31 December 2006 there were carried out depreciation of ca 2.1 Mil. SKK. In comparison with planned values the difference exists also in the item Other Operating Expenses, where expenses for material consumption were accounted in the amount of 5.1 Mil. SKK due to additions to provisions for dubious inventory in 2005.

The lower formation of added value by 72,890 Th. SKK in comparison with the Business Objective constitutes the fulfillment of BO to 62.6% in this area, at the same time on the basis of this development even the planned level of value-added labor productivity was not achieved. Although the Business Objective supposed to achieve it in the amount of 416,239 SKK per employee, in accordance with the actual facts there was achieved a level of 352,610 SKK per employee. However compared between the years this result constitutes the increase by 35.7% because in the previous year 2005 the value-added labor productivity constituted 259,889 SKK per employee. At the same time the re-counted number of employees was lower by 96 persons than it was requested by the plan and by 31 December 2006 the average re-counted number was 372 persons in total. The labor productivity in sales was also lower by 24,533 SKK per employee in comparison with the planned values, it reached the level of 1,094,484 SKK. Via comparison between the years we see 24.4% increase in this indicator as well, because in 2005 the labor productivity in sales was 880,156 SKK per employee.

The total value of Company’s assets by 31 December 2006 is lower by 33.1 Mil. SKK in comparison with the last year, where there are shown losses in long-term intangible fixed assets in the amount of –5.0 Th. SKK (in software: +27.122 Th. SKK due to inclusion of acquired intangible assets of –32.164 Th. SKK), further losses of long-term tangible assets of –6.352 Th. SKK (lands: +475 Th. SKK, building constructions: –7.255 Th. SKK, machinery and equipment: +9.645 Th. SKK, due to inclusion of acquired long-time assets: –9.190 Th. SKK), losses of long-term financial assets in the amount of -200 Th. SKK due to depreciation of shares in TercioM s.r.o. because of its erasure from the companies’ register by the District Court in Banska Bystrica. The further influence on reduction of value of Company’s assets was exerted by decrease of short-term assets by –19.869 Th. SKK in total, where inventory between the years increased by +15.127 Th. SKK, long-term receivables decreased by –1.14 Mil. SKK, short-term receivables decreased by –34.501 Th. SKK and funds in bank accounts and in cash were increased between the years by +645 Th. SKK. The last influence on reduction of Company’s assets is exerted by time differentiation accounts which decreased by –1.709 Th. SKK between the years.



The coverage of Company’s assets by capital showed structural changes, when the share of equity capital in total capital decreased from 56.25% in 2005 to 48.55% in2006, the share of foreign capital – both of long-term and short-term capital – increased accordingly from 10.58% to 15.68% and from 32.81% to 33.64%, at the same time the share of other liabilities in total capital remained the lowest: - 0.36% in 2005 and 2.13% in 2006. This development reflects a reduction of owner’s equity due to adjustments to Company’s assets in 2005 (to receivables and inventory), due to cumulation of losses shown from Company’s economy as well as due to a moderate increase of payables and influence of re-structurization of bank credits by means of reduction of short-term credits in favor of medium-term bank credits. For its business the Company used also foreign sources gained for the project financing from funds of European Union and the national budget of Slovak republic. Continuation of the project of further education of Company’s employees, in which the gamut of Company’s employees took part on all levels of management thanks to financial means of European Social Fund (ESF), was currently supported by drawing external sources for financing in the amount of 1.183 Mil. SKK and by 40% co-financing from own Company’s funds. In the year 2006 individual training programs were concentrated mainly on gaining skills necessary for mastering the team organization structure, on verifying and selecting suitable typologies of managers, on meeting new requirements at the basic management stage and on creating the new company’s culture. The further project, for which the Company drew external financial means, is telecommunication development, where in accordance with the flowchart of the project in cooperation with Technical University in Košice there was completed a two year cycle of works connected with the development of telecommunication system under the name VoiceNet05. The current financing of the part of expenses spent upon the project from the funds of Science and Research Agency of Slovak republic was accounted in the amount of 735 Th. SKK for the year 2006 The last realized project – expenses on this project are partly covered by external sources gained through Slovak Energetic Agency from the support project de minimis (co-financing in the amount of 100,000 EUR) within SOP Industry and Services – was the project of reconstruction of heating and regulation of heat-exchanger stations with the total budget of 7.265 Th. SKK. The project was completed by 12 May 2006 after technical tests and official approval. Then in accordance with conditions and terms of the project there was elaborated an application for repaying the share of legitimate expenses in the amount of 3.845 Th. SKK, the commission check was carried out by the implementing agency SEA directly in the Company, but financial means were not remitted till the end of the year 2006. In 2006 for financing of operating needs there were used methods of combined credit financing of operation: via short-term bank overdraft from VÚB by 31 December 2006 in the amount of 15.0 Mil. SKK, medium-term time credits for receivables to Dexia banka Slovensko by 31 December 2006 in the amounts of 12.947 Th. SKK and 14.0 Mil. SKK and via foreign credit from Cidel Bank Barbados, where conditions for credit repayment in the course of the year 2006 were changed through the Annex to the Loan Contract from short-term to medium-term loan for operations. Its volume reaches the amount of 600 Th. USD by 31 December 2006, what constitutes 15.748 Th. SKK at the valid rate of exchange. The support of financing of operating needs is the factoring of receivables through the company ČSOB Factoring for selected range of receivables, the financed volume of which was 174,233.90 EUR by 31 December 2006, what constitutes 4.82 Mil. SKK at the valid rate of exchange and 80% financing of receivables. The part of foreign bank sources are balances of medium-term time credits by 31 December 2006 from VÚB for settlement of the part of expenses connected with purchase of the license in the amount of 4.92 Mil. SKK with maturity in August 2008 and for realization of the project “Reconstruction of Heating” from Dexia banka in the amount of 2.625 Th. SKK with maturity in July 2008.



In ensuring sources for financing of development needs there were used services of leasing companies ČSOB Leasing (a leaseback for the surface finish line with powder painting and a lease for purchase of the personal car AUDI), CAC Leasing (a leaseback for CNC punching and CNC press braking technologies from Trumpf), KOFIS Leasing (CNC bending technology CIDAN) and PSA Finance (a lease for the personal automobile Peugeot). The amount of outstanding installments by 31 December 2006 constitutes 22.552 Th. SKK divided in contractual relations based on EUR currency with the outstanding amount of 323.9 Th. EUR and in contractual relations based on SKK currency with the outstanding amount of 11.352 Th. SKK. The Company fulfilled its tasks with less number of employees than planned one. In 2006 the average re-counted number of employees reached the above-mentioned 372 persons, what is by 96 persons less than it was planned; that is with average monthly earning of 16,670 SKK, what is a lower level by 211 SKK (by 1.24%) in comparison with the Business, however compared between the years the earning is increased by 2,254 SKK, i.e. by 15.64% relatively. The volume of personnel expenses in comparison with the plan was by 29.097 Th. SKK lower, however between the years it is by 1.46% higher and by 1.565 Mil. SKK absolutely. In the structure according to particular categories the downward trend continues with regard to employees of THP (technique and economy area) category (from 146 persons in 2003, 111 persons in 2004, 105 persons in 2005, to 93 persons filed by 31 December 2006); the trend moderately falls with respect to the number of employees of Rr (workers) category ( from 78 persons in 2003, 72 persons in 2004 and 2005 to 70 persons by 31 December 2006), at the same time the number of employees of Rj category is in direct proportion to the need of ensuring the production in particular operating plants and periods of the year in dependence upon order backlogs (decrease from 309 persons in 2003, 279 persons in 2004, 246 persons in 2005, to 209 persons by 31 December 2006). The entered trend of ensuring customers’ requirements by more effective use of available machinery and personnel capacities, mobilization of reserves and by increasing involvement in creation of added value is documented also in this development of number of employees. From the viewpoint of fulfillment of Company’s obligations towards institutions of social and health insurance system the positive trend continued also in the year 2006 with observance of prescribed terms regulated by the law in paying particular types and kinds of premiums. The defined penalization recorded in books for premiums paid with delay in previous periods (1996–2003) is solved by the Board of Directors by means of applying for remission of penalties. The final solution as well as a way, methods, total amount and a form of settlement will depend on a prepared version of the state support scheme for settlement of receivables of Social Insurance Office, which is going to be realized in 2007.

Company’s Board of Directors

TESLA Liptovský Hrádok a.s.



Identification data

Commercial name: TESLA Liptovský Hrádok a.s.

Registered office: Pálenica 53/79

033 17 Liptovský Hrádok

CRN: 00009687

TRN: 2020428729

VAT RN: SK 2020428729

Date of establishment:30 November 1990

Date of record: 1 January 1991

Legal form: Joint-Stock Company

Recorded in: Company´s Register

District Court in Žilina,

section: Sa, inset No: 9/L

10

Company´s Organization Chart

Liptovský Hrádok a.s.

General Meeting

Board of Directors

Supervisory Board

General Director´s Section

Economy Section

Business and Marketing Section

Human Resources and Services Section

Production Section

Logistics Section

Quality Management System

Integrated Management System For more than ten years in accordance with its strategic intentions TESLA Liptovský Hrádok a.s. has been applying the Quality Management System in conformity with requirements of the valid international standard EN ISO 9001 : 2000, which was extended by certification of the Environment Management System according to EN ISO 14 001 : 2004 in the year 2005. In accordance with the declared quality and environmental policy the management of the Company creates conditions and ensures sources for further improvement of the system directed at fulfillment of customer’s requirements and at assurance of general development of the Company. Exercise of process management, implementation of team structures and further forms of improvement are a basic task of the Company’s management with the final aim to involve each Company’s employee actively in the system applied and thereby to achieve fulfillment of the given tasks and satisfaction of customers. Demandingness of these intentions were confirmed by results of the supervisory audit of the management system which was carried out by the certification company SKQS Žilina. The effective certified Company’s management system orientated towards customers creates basic presuppositions for guaranteeing quality of our products, customer’s satisfaction and development of the Company. Environmental behavior of the Company is an inevitable condition not only towards own employees and environment, but at present time it is also a preferred requirement of our customers. Improvement of the integrated management system of the Company is a priority task of each employee of the Company with the aim to satisfy all parties engaged.


Jan Borsik Quality Manager

Company´s Production Profile

TELECOMMUNICATION DEVICES Deliveries of ISDN communication systems via Slovak Telecom, a.s. Deliveries of ISDN communication systems for commercial market in SR and CzR Made-to-order solutions for Defense Department of SR and Home Office of SR Made-to-order solutions of terminal devices of communication systems for Czech republic

SUBCONTRACTING PRODUCTION Metal Part Production Precise sheet metal processing – forming of metal sheets on presses, CNC milling, punching and bending Production of parts by cutting, welding, turning Forming of plastic parts by injection moulding Surface treatment by powder painting on the continuous line Eloxal coating and titanium coating of aluminum parts Zinc coating

Production of Printed Circuit Boards for Leaded Component and SMD Assembly Single-sided PCBs Both-sided and multi-layer PCBs up to 6 layers Guaranteed accuracy class 4 and 5 with minimal diameter of PTH 0.4 mm and non-soldering mask applied by photosensitive screen print Outer contours cut, scored, stamped or milled Gold plated edge connector fingers up to 15 mm Elaboration of technological photo documentation from GERBER data sent and 100% electrical testing incl. SMT UL certificate for PCBs – Underwrites Laboratories Inc., USAPassivating of PCBs

Final Assembly Component placement on rigid or flexible PCBs by both-sided SMT on the full automated line followed by reflowing or soldering Placement of leaded component on PCBs followed by tin wave soldering, final assembly and testing Debugging and testing of plug-in units for analogue and digital telephone exchanges Assembly and testing of final projects Assembly of backup power supply units LP 11 of 3 up to 10 k VA for markets in Europe and USA and three-phase supply units of 5 up to 10 k VA Assembly and testing of backup power supply units LP 31 of 8, 10, 15, and 20 k VA Production of cabling Realization of guarantee and after-guarantee repairs


Market realization according to territories

Important outward deliveries

GERMANY Dewert Antriebsystems GmbH – Kirchlegen Freudenberg Mektec GmbH – Weinheim - projekty pre fy. Nokia, Siemens, Bosch Hengstler GmbH – Aldingen Rose Elektronic GmbH – Porta Westfalica AEG SVS Power Supply Systems GmbH - Warstein

BENELUXGeneral Desing and Manufacturing Electronics bvba – Herentals, Belgicko Udenco – Holandsko

SWITZERLAND Mountair – Kreuzlinger

HUNGARY Carrier CR Hungary Ltd– Phoenix – Jaszároszakáss Phoenix Mecano - Kecskemet

DEMNARK Triax – Hornsyld Styromatic Electronic A/S - Århus

SWEDEN PEGES i Färila AB - Färila CABO S.B.C.T. HB – Stockholm

FRANCE JABIL CIRCUIT SAS- Brest Alcatel Business Systems – Illkirch Cedex Créations André Renault – Saint Gildas des Bois Artem – Paris Saft power systems - Tours

CZECH REPUBLIC IRCR Manufacturing – Uničov EUROTEC – Uherský Ostroh Gatema – Boskovice 2N – Praha Connect – Praha Prison Service of Czech republuc


Territorial Structure of sales of own products

Important inward deliveries MKEM - Stará Ľubovňa Protherm - Skalica Eltek Energy – Liptovský Hrádok Ministerstvo obrany SR Ministerstvo vnútra SR Slovak Telecom, a.s. – BratislavaTesla Stropkov – Stropkov Hengstler – Kežmarok N-CODE – Bratislava OVP - Trstená Emerson – Nové Mesto nad Váhom Embraco – Spišská Nová Ves Punch – Námestovo SESO Vráble – Vráble Letecké opravovne – Banská Bystrica DUEL – Námestovo ABB ELEKTRO – Bratislava SIIX - Nitra Vönsch - Brezno ERS – Bratislava IMCO Power – Bratislava

Liptovský Hrádok a.s. 14

TERRITORIAL STRUCTURE OF SALES OF OWN PRODUCTS - 2006 Slovakia 48,9%

Germany 21,2%

Czechrepublic 10,6%France 9,3%

Switzerland 4,9%

Belgium 3,4%

Hungary 1,1%

Denmark 0,5%

Sweden 0,1%

Target Country / Share thous.SKKSlovakia 48,9% 180 945Germany 21,2% 78 334Czech republic 10,6% 39 148France 9,3% 34 324Switzerland 4,9% 18 197Belgium 3,4% 12 592Hungary 1,1% 4 232Denmark 0,5% 1 891Sweden 0,1% 484


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IN TH. SKK

2002 2003 2004 2005 2006YAER

SALES IN TOTAL AND IN THE STRUCTURE FOR 2002 - 2006

Sales in total Sales of own products Sales of services Sales of merchandise

2002 2003 2004 2005 2006Sales in total 279 270 318 967 363 979 372 306 407 148Sales of own products 235 157 272 704 324 246 334 005 370 147Sales of services 43 942 42 894 37 816 36 586 33 242Sales of Merchandise 171 3 369 1 917 1 715 3 759

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2002 2003 2004 2005 2006YEAR

PRODUCTION OF GOODS IN INTERNAL NET BOOK VALUE FOR 2002 - 2006

Telecommunication equipment

Made-to-order production

2002 2003 2004 2005 2006Production of goods in internal net book value 216 676 298 352 323 090 353 459 330 246Telecommunication equipmnet 21 245 14 671 12 918 10 026 11 945Made-to-order production 195 431 283 681 310 172 343 433 318 301

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2002 2003 2004 2005 2006 YEAR

DEVELOPMENT AND STRUCTURE OF INVENTORY IN 2002 - 2006

Inventory in total Material Work-in-progress and semi-finished goods Finished goods

2002 2003 2004 2005 2006Inventory in total 59 458 66 986 83 354 49 464 64 591Material 26 136 26 258 36 036 20 747 34 533Work-in-progress and semi-finished goods 25 171 21 938 33 921 17 292 17 062Finished goods 7 741 18 482 12 974 11 417 12 996

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2002 2003 2004 2005 2006YEAR

EMPLOYEES (CALCULATED PERSONS) 2002 - 2006

Employees (calculated number)Engineers and clerks

Workers

2002 2003 2004 2005 2006Employees (calculated number) 494 533 462 423 372THP (engineersand clerks) 180 146 111 105 93Workers 314 387 351 318 279

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LABOR PRODUCTIVITY INDICATORS IN 2002 - 2006

Labor productivity from production of goods

Labor productivity from sales

Labor productivity from added value

2002 2003 2004 2005 2006Labor productivity from production of goods 438 615 559 760 699 329 835 600 887 758Labor productivity from sales 565 320 598 437 787 833 880 156 1 094 484Labor productivity from added value 233 563 217 702 292 128 259 889 352 610

2002 2003 2004 2005 2006Expences in total 353 769 419 152 477 593 547 640 602 013Revenues 348 983 421 100 482 396 500 555 554 799Profit. Loss -4 786 1 948 4 803 -47 085 -47 214

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2002 2003 2004 2005 2006 YEAR

EXPENCES, REVENUES AND PROFIT IN 2002 - 2006

Expences in total Revenues Profit, loss

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STRUCTURE OF CAPITAL BY 31 DECEMBER 2006

48,55%

15,68%

33,64%

2,13

%

Own capital 180 085

Long-term foreign capital 58 166

Short-term foreign capital 124 775

Other liabilities 7 907

Overviews


STRUCTURE OF ASSETS BY 31 DECEMBER 2006

53,30%17,41%

23,29%

4,93%

1,0

6%

Long-term intangible and tangible assets:197 725

Long.term financial assets: 18 300

Inventory: 64 591

Receivables: 86 389

Financial accounts, deferring: 3 929


Balance sheet

Row indicat. ASSETS SIDE number of in current accounting period

previous

account gross correction net period

net

A b c 1 2 3 4

01 Total assets 02+03+32+62 950 720 579 787 370 933 404 078

02 A Receivables for subscription 353

for own equity capital

03 B Fixed assets 04+13+23 783 564 567 539 216 025 227 592

04 B.I. Long-term intangible

assets 05 až 12 116 862 66 472 50 390 55 432

05 B.I. 1. Incorporation expenses B 011

K -071, 091

06 2. Research and development B 012 expenses

K -072, 091 16 794 16 794

07 3. Software B 013 K -073, 091 99 564 49 174 50 390 23 268

08 4. Valuable rights B 014

K -074, 091

09 5. Goodwill B 015 K -075,091

10 6 Other long-term B 019, 01X

intangible assets K-079,07X,091 504 504

11 7 Acquired long-term B 041 intangible assets K -093 32 164

12 8 Advance payments for B 051 long-term intangible assets K-095

13 B.II. Long-term tangible assets 14 až 22

646 802 499 467 147 335 153 660

14 B.II. 1. Lands B 031 K -092 9 796 9 796 9 321

15 2. Buildings B 021

K -081,-092 226 680 131 992 94 688 101 943

16 3. Self-contained things in B 022 possession and sets of K -082,092

things in possession 383 033 340 980 42 053 32 408

17 4. Perennial crops B 025 K -085,092

18 5. Breeding & draught B 026

animals K -082,092

19 6. Other long-term tangible B 029,02X,032

assets K-089,08X,092 26 495 26 495

20 7. Long-term tangible assets B 042

being acquired K-094 798 798 9 988

Balance sheet


row indicat. ASSETS SIDE number of in current accounting period

previous

account gross correction net period

net

a b c 1 2 3 4

21 8. Advance payments for B 052 long-term tangible assets K 095

22 9. Adjustments to acquired B+ - 097 assets K+ - 098

23 B.III. Long-term financial assets

24 až 31 19 900 1 600 18 300 18 500

24 B.III. 1. Securities and shares in B 061 controlled legal entity K -096 18 000 18 000 18 200

25 2. Securities and shares with B 062

substantial influence in companies K -096

26 3. Other long-term securieties B 063

and shares K -096 1 900 1 600 300 300

27 4. Loans to unit of account B 066 in consolidated whole K -096

28 5. Other long-term financial B 067, 069,06X assets K -096

29 6. Loans with max. period of B 066,067,06X

repayment during one year K -96

30 7. Long-term financial assets B 043 being acquired K -96

31 8. Advance payments for B 053

Long-term financial assets K -096

32 C. Short-term assets 33+41+48+56 166 473 12 248 154 225 174 094

33 C.I. Inventory 34 až 40 64 591 64 591 49 464

34 C.I. 1. Material B 112, 119,011X K -191,19X 34 533 34 533 20 747

35 2. Work-in-progress and B 121, 122,12X

semi-finished goods K -192, 193,19X 17 062 17 062 17 292

36 3. Made-to-order production B 12X with assumed time of K -192 termination more than

one year

37 4. Products B 123 K -194 12 996 12 996 11 417

38 5. Animals B 124

K -195

39 6. Merchandise B 132,13X,139 K -196,19X 8

40 7. Advance payments for B 314 inventory K -391


Balance sheet

in current accounting period

row

I ndicat.

ASSETS SIDE

number of account gross correction net

previous period

net

a b c 1 2 3 4

41 C.II. Long-term receivables 42 ž 47 10 10 1 150

42 C.II. 1. Receivables from B 311 až 315

commercial traffic K -391

43 2. Receivables from controlled B 351 and controlling legal entity

K -391

44 3. Other receivables within B 351 consolidated whole K -391

45 4. Receivables from partners, B 354,355,358,

members and association K -391

46 5. Other receivables B 335,375,378 K -391 10 10 70

47 6. Deferred taxes receivables 481 1 080

48 C.III. Short-term receivables 49 až 55 98 627 12 248 86 379 120 880

49 C.III. 1. Receivables from B 311 až 315

commercial traffic K -391 94 105 11 590 82 515 52 222

50 2. Receivables from controlled B 351 and controlling legal entity

K -391

51 3. Other receivables within B 351 consolidated whole K -391

52 4. Receivables from partners, B 354,355,358,

members and association K -391

53 5. Social security B 336 K -391

54 6. Taxes receivables B 341,342,343, 345 K -391 2 780 2 780 4 135

55 7. Other receivables B 335,371-378

K -391 1 742 658 1 084 64 523

56 C.IV. Financial accounts 57 up to 61 3 245 3 245 2 600

57 C.IV.1. Cash B 211,213,21X 100 100 201

58 2. Bank accounts B 221,22X,261 2 545 2 545 1 799

59 3. Bank accounts blocked B 221X

for more than 1 year 600 600 600

60 4. Short-term financial assets B 251,253,256-7 K -291,293

61 5. Short-term financial assets B 259

being acquired K -291

62 D. Time differentiation 63 + 64 683 683 2 392

63 D.I .1. Deferred expenses B 381,382

601 601 2 310

64 2. Accrued revenues B 385 82 82 82

888 CHECK NUMBER 01 up to 64 3 802 197 2 319 148 1 483 049 1 613 920

Balance sheet


row indicat. LIABILITIES SIDE number of statement statement

account in current in previous

acc.period acc.period

a b c 1 2

65 Equity and payables 66+86+116 370 933 404 078

66 A. Equity 67+71+78+82+85 180 085 227 299

67 A.I. Registered capital 68 až 70 398 900 398 900

68 A.I. 1. Registered capital 411 398 900 398 900

69 2. Own shares and business /-/252 participations

70 3. Change of regist. Capital -419

71 A.II. Capital funds 72 až 77 719 719

72 A.II. 1. Share premium 412

73 2. Other capital funds 413

74 3. Legal reserve fund from 417,418 contributions of capital

75 4. Gains or losses from reval. of assets and payabl. + - 414

76 5. Gains or losses from investments + - 415 719 719

77 6. Gains or losses from +/-416 rev.by consolid.or separat.

78 A.III. Reatained earnings 79 up to 81 480 480

79 A.III. 1. Legal reserve fund 421 480 480

80 2. Indivisible fund 422

81 3. Statutory and other funds 423,427,42X

82 A.IV. Trading income from previous years 83+84 -172 800 -125 715

83 A.IV.1. Retaine earnings from previous years 428

84 2. Accumulated losses from previous years /-/429 -172 800 -125 715

85 A.V. Trading income from current accounting period 01-/+67+71+78+82+86+116/ -47 214 -47 085

86 B. Payables 87+91+102+112 182 941 175 332

87 B.I. Reserves 88 až 90 4 114 2 109

88 B.I. 1. Legal reserves 451

89 2. Other long-term reserves

459,45X

90 3. Short-term reserves 323,32X,451,459, 4 114 2 109

91 B.II. Long-term payables 92 až 101 19 859 11 315


Balance sheet

row indicat. LIABILITIES SIDE number of statement statement

account in current in previous

acc.period acc.period

a b c 1 2

92 B.II. 1. Long-term payables from 479 commercial traffic

93 2. Long-term non-invoiced deliveries 476

94 3. Long-term payables to cont-

rolled and controlling entity 471

95 4. Other long-term payables within consolidated whole 471

96 5. Long-t. advances received 475

97 6. Long-term bills of exchange to be paid 478

98 7. Bonds issued 473/-/255

99 8. Payables to social security 472 194 115

100 9. Other long-term payables 474,479,472,373,377 17 575 8 029

101 10. Deferred taxes liability 481 2 090 3 171

102 B.III. Short-term payables 103 up to 111 93 875 83 527

103 B.III. 1. Commercial traffic 321,322,324

payables 325,475,478,479 84 375 69 160

104 2. Deliveries not invoiced 326,476 160 68

105 3. Payables to controlled and 361,471

controlling entity

106 4. Other payables within 361,36X, consolidated whole 471,47X

107 5. Payables to partners and 364 up to 368,398

association 478,479

108 6. Payables to employees 331,333,479, 33X 5 537 5 527

109 7. Social security payables 336,479 3 158 2 891

110 8. Taxes and subsidies

payables 341 up to 347,34X 645 1 149

111 9. Other payables 372,373,377,379,474 4 732

112 B.IV. Bank loans and

subsidies 113 up to 115 65 093 78 381

113 B.IV.1. Long-term bank loans 461 38 307 19 231

114 2. Current bank loans 231,232,461,221 26 723 59 032

115 3. Short-term emergency 241,249 loans 473,-255 63 118

116 C.I. Time differentiation 117 and 118 7 907 1 447

117 C.I. 1. Accrued expenses 383

118 2. Deferred revenues

384 7 907 1 447

999 CHECK NUMBER 65 up to 118 1 523 039 1 661 950


Profit and Loss Account

Indic. TEXT row account fact of per. fact of past

under cons period

I. revenues from merchandise 1 604 3 759 1 715

A. expenses for merchandise sold 2 504

3 336 1 062

trade margin 3 r.01-02 423 653

II. production 4 r.05+06+07 402 467 384 502

II.1. revenues from own products and services 5 601,602 403 389 370 591

2. changes in intraplant inventory 6 (+ -)acc.gr. 61 -8 221 -8 597

3. capitalization 7 acc.gr. 62 7 299 22 508

B. production consumption 8 r.09+10 280 980 275 222

B.1. consumption of material, energy and other 9 501 up to 503

non-storable deliveries 241 860 226 591

B.2. services 10 acc.gr.51 39 120 48 631

added values 11 r.03+04-08 121 910 109 933

C. personnel expenses 12 r.13 up to 16 109 103 107 538

C.1. wages and salaries 13 521,522 74 414 73 178

C.2. renumeration of board members 14 523 4 811 4 428

C.3. social security expenses 15 524,525,526 24 539 23 682

C.4. social expenses 16 527,528 5 339 6 250

D. taxes and fees 17 acc.gr.53 1 969 1 524

E. depreciation of long-t. intang. and tang.assets 18 551 42 202 29 801

III. revenues from sales of long-t.assets and mat. 19 641,642 12 995 13 020

F. net book value of long-term assets and 20 541,542

material sold 6 540 2 462

IV. Use and cancellation of reserves for revenues 21 652,654,655

from econ.act. and KNBO origin accounting 2 109 3 613

G. Additions to reserves for econ.activity and 22 552,554,555

accounting for complex deffered expenses 4 114 2 118

V. Accounting and cancellation of adjustments 23 657, 658, 659

to revenues from economic activity 32 844 4 334

H. Additions to provisions to economic activity 24 557, 558, 559

expenses 36 36 877

VI. Other revenues from economic activity 25 644-646,648 87 652 81 887

I. Other economic activity expenses 26 543,5,6,8,9 137 643 75 360

VII. Transfer of revenues from economic activity 27 (-)697

J. Transfer of economic activity expenses 28 (-)597

TRADING INCOME FROM ECONOMIC 29 11-12-17-18+19-

ACTIVITY 20+21-22+23-24+

25-26+(-)27-(-28) -44 097 -42 893


Profit and Loss Account

Indic. TEXT year account fact of per. fact of past under cons period

VIII. revenues from sales of securities and shares 30 661 2 000 K. securities a shares sold 31 561 867 IX. revenues from long-term financial assets 32 r.33+34+35 200 0 1. revenues from securities and shares with 33 665

subst.infl. in controlled entity and company 2. revenues from other long-term securities 34 665

and shares 200 3. revenues from other long-t. financial assets 35 665

X. revenues from short-term financial assets 36 666 L. short-term financial assets expences 37 566 XI. revenues from revaluation of securities and 674

revenues from derivation transactions 38 664,667 M. Expenses for revaluation of securieties and 574

for derivation transactions 39 564,567 XII. revenues interests 40 662 5 938 7 120 N. expenses interests 41 562 6 770 5 997 XIII. exchange rate gains 42 663 6 746 2 364 O. exchange rate losses 43 563 5 762 7 255 XIV. Other revenues from financial activity 44 668 81 P. Other financial activity expenses 45 568,569 3 286 1 553 XV. use and cancellation of reserves for revenues (-)698

from financial activity 46 674 Q. Additions to reserves for financial activity 47 574 XVI. accounting and cancellation of adjustments

to revenues from financial activity 48 679 R. additions to provisions to financial activity

expenses 49 579 XVII. transfer of financial revenues 50 698 S. transfer of financial expenses 51 598

TRADING INCOME FROM FINANCIAL 52 30-31+32+36-37+ ACTIVITY 38-39+40-41+42- 43+44-45+46-47+48-49 -2 853 -4 188

T. income taxes on ordinary income 53 54+55 268 1. due 54 591,595 268 2. deferred 55 592

TRADING INCOME FROM ORDINARY 56 r.29+52-53 ACTIVITY -47 218 -47 081

XVIII. extraordinary revenues 57 acc.gr.68 8 U. extraordinary expenses 58 acc.gr.58 4 4 V. income taxes on extraordinary income 59 60+61 0 1. due 60 593 0 2. deferred 61 594

TRADING INCOME FROM 62 57-58-59 EXTRAORDINARY ACTIVITY 4 -4

U. transfer of share of trading income 596 to partners 63

ACCOUNTING PERIOD TRADING INCOME 64 56+62-63 -47 214 -47 085

CHECK NUMBER 99 1 up to 64 1 930 785 1 784 792


Auditor´s Report

INDEPENDENT AUDITOR’S REPORT

For shareholders of TESLA Liptovský Hrádok a.s., Palenica 53/79, Liptovsky Hradok 033 17 Report on Financial Statements We have carried out the audit of attached financial statements of TESLA Liptovský Hrádok a.s., which include Balance Sheet by 31 December 2006, Profit and Loss Account for the year ending in that time as well as an overview of essential accounting rules and further explicative comments. Responsibility of Management for Financial Statements The management is responsible for elaboration and objective presentation of these financial statements in accordance with national statements for financial reporting. Its responsibility includes: proposal, implementation and maintenance of internal check which is relevant for preparation and objective presentation of financial statements not containing significant wrong facts whether due to fraud or error; selection and application of suitable accounting rules; elaboration of accounting estimates reasonable for existing circumstances. Auditor’s Responsibility Our responsibility is to express our opinion on these financial statements on the basis of our audit. Our audit was carried out in accordance with international audit standards. In conformity with these standards we have to adhere to ethical requirements, to plan and to carry out an audit in order to assure ourselves adequately that financial statements do not contain any significant wrong facts. A part of the audit is execution of procedures for gaining auditor’s evidences about amounts and data shown in financial statements. Selected procedures depend on auditor’s decision incl. considering the risk of significant wrong facts in financial statements, whether due to fraud or error. In evaluating such risk the auditor considers an internal check relevant for elaboration and objective presentation of financial statements in order to propose auditor’s procedures suitable under given circumstances, however not for the purpose of getting his viewpoint off about efficiency of an internal check of the accounting unit. Moreover the audit includes an appraisement of fitness of accounting rules used and reasonability of important accounting estimates elaborated by the management as well as an appraisement of presentation of financial statements as a whole. We are convinced that auditor’s evidences gained by us are sufficient and suitable as a starting point for our opinion.


Auditor´s Report

Opinion In our opinion financial statements provide a true and objective view of financial position of the company by 13 December 2006 and of its economy results and cash flows for the year terminating in accordance with national standards for financial reporting. In Presov, on 23 March 2007 ACCEPT AUDIT & CONSULTING, s.r.o. Responsible auditor: Oktobrova 35, 080 01 Presov Ing. Ivan Bosela, PhD. license SKAU No. 000124 license SKAU No. 000161 OR OS Presov


Remarks to Annual Financial Statement

Name of accounting unit: TESLA LIPTOVSKÝ HRÁDOK A.S. Registered office of accounting unit: LIPTOVSKÝ HRÁDOK Street and building No.: PÁLENICA 53/79 ZIP: Name of municipality: 033 17 LIPTOVSKÝ HRÁDOK CRN: 00009687 Date of establishment: 30 November 1990 Date of record in Companies’ Register: 1 January 1991

Elaborated on 19 March 2007

Signature of accounting unit’s statutory body

Signature of person responsible for elaboration of financial statement

Signature of person responsible for keeping accountancy

Approved on

TESLA Liptovský Hrádok a.s. has elaborated Remarks in accordance with Regulation of Treasury Department of SR No.4455/2003-92, whereby details are set out with regard to organization, identification and content definition of items for an individual financial statement and range of data determined from an individual financial statement for disclosure to entrepreneurs keeping accounts in the system of double entry bookkeeping.



General data - Main activities of the Company in accordance with extract from companies’ register Abstract of extract from companies’ register of District Court in ZILINA Date of extract 7 March 2007 List of extracts No. 1849/06 Section Sa Inset No. 9/L Line of business :

Production, repair of medical devices, tools for medical needs. Assembly, maintenance, repair and service of telecommunication equipment. Development and production of telecommunication equipment. Production of one purpose mechanical and electronic machines. Production of devices for development of informatics and security engineering. Trade in goods of all kinds except of trade for which a prescribed qualification is necessary. Trade in goods of all kinds except of trades under license. Locksmith and fitter’s works, tool making, metal sheet processing. Accommodation services. Automated processing of data and providing of software. Providing of professional courses in the area of telecommunication equipment. Designing of telecommunication equipment (except of projects in investment

constructions). Providing of catering. Development and production of communication devices. Repair of machines and equipment, production of spare parts. Production of metals and metal products. Galvanizing of metals. Intermediation of business, works and services in the range of business for which no license

or prescribed qualification is required. Administration of housing stock. Operation of own water supply, water handling, sale of drinking water and draining of

waste water. Production, distribution and sale of heat and hot service water. Carrying out calibration of working gauges not defined in the range of business for which

no license or prescribed qualification is required. Distribution of electric energy and heat. Business in the area of waste handling in the range of business for which no license or

prescribed qualification is required. Assembly, repair and service of telecommunication devices. Non-public non-mass personal transport for a contracting carrier except of taxi service. Business in the area of hazardous waste handling.



List of members of statutory, supervisory and other bodies of the Company Board of Directors Position Name Chairman of BoD Ing. Emil Rychvalský Vice-Chairman of BoD Ing. Daniel Devečka Member of BoD Ing. Ján Matej Member of BoD Ing. Zdenko Zvada Supervisory Board Position Name Chairman of Supervisory Board Ing. Jozef Hric Vice-Chairman of Supervisory Board Ing. Peter Valent Member of Supervisory Board Ján Gajdoš Structure of partners (shareholders) Name Share in basic capital

in th. SKK Share in basic capital in %

Share in voting right

TLH – HOLDING, a.s. Bratislava 290 762 72.89 72.89 Other minority shareholders 108 138 27.11 27.11 Name and registered office of company elaborating a consolidated financial statement for

the biggest group of companies having the Company as a subsidiary Name of company: TLH – HOLDING A.S. Registered office of company: BRATISLAVA Street and building No.: RADLINSKÉHO 2 ZIP Name of municipality: 811 07 BRATISLAVA Name and registered office of company elaborating a consolidated financial statement for

the smallest group of companies having the Company as a subsidiary Name of company: TLH – HOLDING A.S. Registered office of company: BRATISLAVA Street and building No.: RADLINSKÉHO 2 ZIP Name of municipality: 811 07 BRATISLAVA CRN: 35758945



- Place where these consolidated financial statements are available: Companies’ register of District Court in Bratislava I

- Name, registered office and legal form of companies, for which the Company is a general partner

Name of company Registered office of company Legal form no any - Average number of employees Average number of employees Thereof managers

373 24 - Reason for elaboration of annual financial statement The company elaborated the annual financial statement by 31 December 2006 for reason of uninterrupted continuation of its business activity. - Approval of previous annual financial statement The proper annual financial statement for previous accounting period (by 31 December 2005) was approved by the general meeting of shareholders on 31 October 2006. Information about accounting methods and general accounting principles

Method of appraisement of particular items 1.a) Long-term intangible assets purchased Evaluated by means of purchase price 1.b) Long-term intangible assets generated by own activities Evaluated by means of: - real actual expenses; a part of real actual expenses included into evaluation are:

direct expenses, indirect expenses (factory expense/indirect product cost)

(depreciation, energy consumption, co-operation, general indirect expenses, i.e. administrative overhead expenses)

1.c) Long-term tangible assets purchased Evaluated by means of purchase price. A part of purchase price is:

value of acquisition. Expenses connected with purchase: projecting works, technical evaluation, transport charges, assembly.



1.d) Long-term tangible assets generated by own activities Evaluated by means of real actual cost. A part of real actual (prime) cost are:

- direct expenses, indirect expenses connected with generation of assets (factory expenses)

1.e) Long-term financial assets Evaluated by means of purchase price (value of acquisition) 1.f) Inventory purchased Evaluated by means of purchase price A part of purchase price are:

- value of acquisition, transport charges, customs duty, further secondary cost connected with purchase.

For the year 2006 TESLA Liptovský Hrádok a.s. kept records of purchasing material inventories in purchase prices. Material inventories in store were recorded in fixed store prices With these prices material inventories were put into consumption. The difference between a purchase price and fixed store price in time of acquisition was recorded in the separate analytical account to the account 112- Material in store - in a form of evaluated differences. In the separate analytical account to the account 112 there were recorded also secondary purchase expenses connected with purchase of material inventories. Balances of such accounts were dissolved by TLH into expenses in accordance with the formula set out by internal company’s directive. 1.g) Inventories generated by own activities 1. Work-in-progress

Evaluated by means of - real actual cost in accordance with operative (planned) calculations. Real actual cost include: - direct material cost, semi-finished goods, direct labor cost, other direct cost, factory

expenses.

2. Semi-finished goods internally produced Evaluated by means of - real actual cost in accordance with operative (planned) calculations Real actual cost include: - direct material cost, semi-finished goods, direct labor cost, other direct cost, factory

expenses

3. Finished goods Evaluated by means of - real actual cost in accordance with operative (planned) calculations Real actual cost include: a) direct material cost, semi-finished goods, direct labor cost b) other direct cost, factory expenses



1.h) Receivables Evaluated by means of

- nominal value 1.i) Short-term financial assets Evaluated by means of

- nominal value

1.j) Deferred accounts 1. 381 – Deferred expenses Evaluated by nominal value 2. 385 – Accrued revenues Evaluated by nominal value 3. 383 – Accrued expenses Evaluated by nominal value 4. 384 – Deferred revenues Evaluated by nominal value 1.k) Payables Evaluated by nominal value 1.l) Reserves Evaluated by means of appraised (estimated) value (price). 1.m) Loans and credits Loans and credits in Slovak crowns are evaluated by nominal value. Loans and credits in

foreign currency are converted at the rate of exchange in NBS. 1.n) Method of appraisement of dedicated property The company did not obtain any property through dedication in 2006. 1.o) Method of appraisement of property obtained by means of privatization or purchase

through National Property Fund The company did not obtain any property via privatization or purchase through NPF. 1.p) Derivations, property and payables assured by derivations. The company did not recorded any derivations in 2006. 1.r) Property leased and property obtained on the basis of the Lease-Purchase Agreement Property let on lease and property acquired on the basis of the Lease-Purchase Agreement is kept by the Company in sub-balance accounting records with the price set out in the concerned lease agreement. The property acquired on the basis of the Lease-Purchase Agreement concluded after 1 January 2004 is recorded in accounts of long-term assets, namely with the price stated in the Lease Agreement as a purchase price with the related entry in the account 474 – Long-term payables.



1.s) Income tax payable for current accounting and taxable period and deferred income tax The due income tax by 31 December 2006 is recorded by the Company in the amount of 4,959.45 SKK. This tax consists of:

- credit interest tax from deposits in commercial companies. By 31 December 2006 the Company shows deferred income tax (for future accounting and taxable periods) in the total amount of 2,090,299.00 SKK. 1. Method of elaboration of depreciation plan for long-term assets, depreciation time, rate of

depreciation and depreciation methods in setting out the book depreciation By its internal instruction TESLA Liptovský Hrádok a.s. set out rules for depreciation of long-term assets. Long-term intangible assets and long-term tangible assets are included into the depreciation group and depreciated by appropriate % in the mentioned depreciation group in the time assets were included there according to the law of income tax. For long-term intangible and tangible assets there is applied a uniform depreciation time. In the year 2006 there was interrupted a depreciation of long-term assets referring to the years 2005 and 2004. The book depreciation was set up on the implemented software for the period of 10 years. 2. Principles of additions to provisions The Company creates adjustments to almost irrevocable receivables (debts) which are more than 365 days after the date of maturity. The Company creates adjustments to commercial traffic receivables which are registered for bankruptcy in the amount of 100% of nominal value of debt. 3. Conversion of data in foreign currencies into Slovak currency

a./ during accounting period

Assets and liabilities (payables) expressed in foreign currency are converted by the Company into Slovak currency by means of: a) rate of exchange in NBS (National Bank of Slovakia) valid by the date of execution of an

accounting event - in accounting any monetary transactions in foreign currency between the accounting unit

and monetary institutions at the exchange rate (purchase or sale) valid by the date of execution of accounting event in an appropriate bank.

The date of execution of accounting event is considered: - fulfillment date of delivery, date of bank payment, date of settlement of outstanding

account (debt collection), date of tax liability occurrence in delivering goods or services; - date when the accounting unit had bookkeeping documents at its disposal.

b./ by the date of elaboration of annual financial statement Assets and liabilities (payables) expressed in foreign currency by the date of elaborating the annual financial statement are converted into Slovak currency at the rate of exchange in NBS valid by the date of elaborating the annual financial statement.



Changes of methods of appraisement, depreciation, accounting procedures, placement of items of annual financial statement and content specification of these items in comparison with previous accounting period

In the course of the accounting period the Company did not carry out any changes of methods of appraisement of long-term assets. Method of tax depreciation for long-term assets the Company set out in accordance with principles stated in the Act of income taxes No.595/2003 of Code and its amendments which came into effect from 1 January 2004. The method of book depreciation was not changed by the Company. Accounting procedures, placement of items of annual financial statement and content specification of these items are in conformity with the wording of the Accountancy Act No. 431/2002 of Code and its amendments which came into effect from 1 January 2004. III. Additional data to Balance Sheet and Profit and Loss Account - Name, registered office, owner’s equity and economic result for current and previous

accounting period 1.a) Securities and ownership interests in controlled companies (subsidiaries) Name and registered office Current period Previous period Share

in % Owner’s

equity Economic result

Owner’s equity

Economic result

INTOP s.r.o. Liptovsky Hradok 18 268 -652 18 916 653 100 1.b) Shared securities and ownership interests in companies with substantial influence (affiliate companies) Name and registered office Current period Previous period Share

in % Owner’s

equity Economic result

Owner’s equity

Economic result

The company haven’t any 1.c) Other long-term equity Long-term financial assets constituting the share in basic capital in other accounting unit where the Company has less than 20% share in voting rights, was not appraised by 31 December 2006 as a real value because it was not possible to define it reliably. 2. Method and amount of insurance of long-term assets The value of property insurance in 2006 constitutes 1,667,397 SKK. The insurance includes: insurance of automobiles, other tangible and intangible assets, things and values theft insurance, money holdup insurance and liability insurance. TLH a.s. placed insurance of its long-term property with the insurance company Komunalna poistovna a.s. in accordance with the insurance contracts.



3. Inventory data 3.a) Overview of adjustments Kind of inventory by 1 Jan. Additions Decrease Cancellation by 31 Dec. to materials 0 5 111 0 5 111 0 to work-in-prog. and semi-fin. products 0 9 147 0 9 147 0 to finished products 0 442 0 442 0 to animals 0 0 0 0 0 to merchandise 0 32 0 32 0 to advance payments for inventory 0 0 0 0 0 Based on General Director’s decision No. 10/2006 by 31 December 2005 there were made adjustments to inventories which were dissolved by 31 August 2006. It was retirement of dubious inventories. 3.b) Method and amount of inventory insurance Company’s inventories are insured within the property insurance with Komunalna poistovna a.s. 3.c) Data connected with made-to-order production The accounting unit did not account made-to-order production in the course of 2006. Receivables data 4.a) Overview of adjustments to receivables Balance item by 1 Jan. Additions Cancellation by 31 Dec. Long-term receivables Receivables from business relations Receivables from partners and participants in association

Receivables in enterprises with controlling influence

Receivables in enterprises with substantial influence

Other receivables Short-term receivables 30 449 36 18 237 12 248 Receivables from business relations 12 991 36 1 437 11 590 Receivables from partners and participants in association

Social security State – tax receivables State – deferred tax receivables Receivables in enterprises with controlling influence

Receivables in enterprises with substantial influence

Other receivables 17 458 0 16 800 658 By 31 December 2006 the Company made adjustments to almost irrevocable debts from business relations with more than 365 days after maturity date in the amount of 35,716.02 SKK: 15,152.82 SKK from Auxilium and 20,563.20 SKK from Steelimex.



By 31 December 2006 the Company accounted for adjustments to receivables from business relations after termination of bankruptcy proceedings in Presovske stavomontaze in the amount of 51,120.21 SKK, in Crapy s.r.o. in the amount of 958,458.80 SKK, from the liquidation of Tercio M in the amount of 415,179.80 SKK, from Bartosova in the amount of 12,190 SKK (receivables paid), from Baxter to interests in the amount of 16,799,610.69 SKK. 4.b) Amount of receivables before and after the date of maturity Receiv. by 1 Jan. of c.y. Receiv. by 31 Dec. of c.y. Receivables before the date of maturity 91 741 81 513 Receivables after the date of maturity 30 289 17 124 4.c) Receivables covered by right of lien or otherwise ensured Receivables Amount of receivables Ensured by no any 4.d) Amount and description of receivables from partners Balance item Amount Description Long-term receivables no any Receivables from business relations Receivables from controlling and controlled entity

Other receivables within the consolidated whole

Other receivables Deferred tax receivables Short-term receivables Receivables from business relations 29 759 000 TLH Holding – carrying to

account and settling the amount from the transfer of Baxter’s debt

Receivables from controlled and controlling entity

Other receivables within the consolidated whole

Social security Tax receivables Other receivables Financial assets data 5.a) Description of short-term financial assets The accounting unit owns short-term financial assets shown in the annual financial statement. Description of short-term financial assets Appraisement Cash 63 Stamps & vouchers 37 Financial means in bank accounts 2 545 By 31 December 2006 the Company does not keep any records of adjustments to short-term financial assets. By 31 December 2006 the Company does not keep any records about short-term financial assets concerning close partners.



Deferred assets data 6.a) Description of important deferred items and methods of their dissolution Description of item Amount Method of dissolution 381 – Deferred expenses 601 in 2007 after receipt of

bookkeeping document - DE leasing 171 - advance payment etc. 430 385 – Accrued revenues 82 6.b) Deferred accounts towards close partners Description of item Amount Method of dissolution 381 – Deferred expenses 0 385 – Accrued revenues 0 Owner’s equity data 7.a) Description of basic capital By 31 December 2006 the basic capital of TESLA Liptovský Hrádok a.s. constitutes the amount of 398,900 thousand SKK. Number of shares is 398,900 pieces with nominal value 1,000 SKK per share. 7.b) Amount of subscribed basic capital not registered in companies’ register Amount of subscribed basic capital not registered in companies’ register

Subscribed Thereof unpaid

0 0 0 7.c) Description and amount of changes in owner’s equity Text State of owner’s equity

in current period State of owner’s equity in previous period

Owner’s equity, therein: 180 085 227 299 Basic capital 398 900 398 900 Own shares 0 0 Share premium 0 0 Other capital funds 0 0 Gains and losses from revaluation 719 719 Legal reserve fund 480 480 Indivisible fund 0 0 Statutory and other funds 0 0 Retained earnings from previous years 0 0 Accumulated losses from previous years -172 800 -125 715 Net profit (economic result) in current accounting period

-47 214

-47 085



7.d) Distribution of accountable profit or settlement of loss Use of profit Allocation to legal reserve fund Allocation to increase of basic capital Allocation to statutory funds Allocation to other funds Use for settlement of accumulated losses from previous years Dividends, profit sharing Retained earnings from previous years Other distribution of profit Settlement of loss Amount Settlement of loss from reserve fund Settlement of loss from statutory and other funds Settlement of loss by partners Settlement of loss by reduction of basic capital Settlement of loss by clearing with retained earnings from previous years Re-accounting for accumulated losses from previous years Other settlement of loss In total 7.e) Proposal of net profit distribution to be approved and submitted to appropriate body of the accounting unit Proposal of profit distribution Amount Profit for distribution Allocation to legal reserve fund Allocation to increase of basic capital Allocation to statutory funds Allocation to other funds Use for settlement of accumulated losses from previous years Dividends, profit sharing Retained earnings from previous years Other distribution of profit Proposal of settlement of loss Amount Loss to be settled -47 214 Settlement of loss from reserve fund Settlement of loss from statutory and other funds Settlement of loss by partners Settlement of loss by reduction of basic capital Settlement of loss by clearing with retained earnings from previous years Re-accounting to accumulated losses from previous years -47 214 Other settlement of loss



Reserve data 8.a) Description of particular reserves Kind of reserve thousand SKK Short-term reserves in total 4 114 - reserve for wages for holiday not used 359 - reserve for deliveries non-invoiced 952 - reserve for wages unpaid 2 803 8.b) Reserves concerning close partners Kind of reserve thousand SKK no reserves Payables data 9.a) Amount of payables before and after date of maturity Payables by 1 Jan. of c.y. Payables by 31 Dec. of c.y. Payables before date of maturity

148 995

136 782 Payables after date of maturity 26 337 46 159 9.b) Structure of payables according to the remaining due time Balance item Remaining due time within 1 year from 1 till 5

years by 1 Jan. of c. y.

Reserves 4 114 2 109 Payables from business relations 84 375 69 160 Deliveries not invoiced 160 68 Payables to employees 5 537 5 527 Payables for social security 3 158 2 891 State: Tax payables and subsidies 645 1 149 State: Deferred tax payables 0 0 Payables for social fund 194 115 Other payables 17575 8029 Long-term advance payments received 0 0 Issued bonds 0 0 Long-term bills of exchange to be paid 0 0 Bank loans 26 723 38 307 78 381 Short-term financial subsidy 63 118



9.c) Amount and description of payables to close partners Balance item Amount Description Long-term payables 0 Payables from business relations Payables to partners and participants in association Payables to enterprises with controlling influence Payables to enterprises with substantial influence Other payables Short-term payables 0 Payables from business relations Payables to partners and participants in association Payables to enterprises with controlling influence Payables to enterprises with substantial influence Other payables 9.d) Social Fund Overview

Text Amount in th. SKK State of social fund by 1 January 115 Funding by obligatory allocation from expenses 694 Funding by profit distribution 0 Funding by allocation from other funds 0 Funding from gifts, subsidies, allocations received 0 Other funding 480 Funding in total 1 174 Drawing for catering of employees and regeneration of labor resources 228 Drawing for social subsidy, contribution to transport to job and additional annuity insurance

326

Drawing for social policy realization 480 Other drawing 61 Drawing in total 1 095 State of social fund by 31 December 194 9.e) Bonds data By 31 December 2006 the Company has not any bonds recorded in its accountancy.



10. Bank loans and subsidies data Data are stated in thousands. Bank DEXIA a.s.

Zilina, bank branch in Lipt. Mikulas

DEXIA a.s. Zilina, bank branch in Lipt. Mikulas

DEXIA a.s. Zilina, bank branch in Lipt. Mikulas

Cidel bank Barbados

VUB a.s. Bratislava, bank branch in Lipt. Mikulas

VUB a.s. Bratislava, bank branch in Lipt. Mikulas

Amount 3 500 th. 18 500 th. 17 000 th. 600 th. 15 000 th. 7 800 th. Currency SKK SKK SKK USD SKK SKK Amount in SKK

2 625 th. 12 947 th. 14 000 th. 15 748 th. 14 790 th. 4 920 th.

Interest 7.11 % 6.83 % 6.91 % 11.38 % 7.11 % 7.77 % Maturity 20.7.2008 14.6.2010 14.2.2011 26.10.2011 30.6.2007 20.8.2008 Secured by Long-term

assets, receivables

Long-term assets, receivables

Receivables Dewert, Protherm

Long-term assets

Long-term assets, receivables

Long-term assets

Purpose Term loan Term loan Term loan Coverage of operating needs

Bank overdraft

Term loan

11. Data of deferred liabilities accounts 11.a) Description of important deferred items and method of their dissolution Description of item Amount Dissolution method 383 – Accrued expenses 0 384 – Deferred revenues 7 907 in 1/2007 - deferred revenues from leasing 7 005 till 2009 - leases invoiced for 2006 902 1/2007 11.b) Deferred assets accounts towards close partners Description of item Amount Dissolution method 383 – Accrued expenses 0 384 – Deferred revenues 0 12. Information about revenues and expenses Data concerning revenues from sales of own products, goods and services according to

market segments and territories Kind of revenues Segment / Territory Inland Abroad Czech republic 2006 2005 2006 2005 2006 2005 Sales of merchandise 3 759 1 715 0 0 0 0 Sales of own products 174 216 105 339 156 783 190 649 39 148 38 017 Sales of services 32 572 35 061 670 1 475 0 50



2. Inventory status change data Text Difference in status

by 31 Dec. of c.y. minus

by 31 Dec. of p.y.

Change of status 61x

Difference Reason of difference

Work-in-progress -1 578 -1 578 0 Semi-finished goods of own production -7 799 -7 799 0 Finished goods 1 156 1 156 0 Animals 0 0 0 3. Revenues from capitalization of expenses

Text thous. SKK Capitalization of material 1 138 Capitalization of long-term intangible assets 6 151 Capitalization of long-term tangible assets 10 Date about other revenues from economic activity

Text thous. SKK Revenues from sale of long-term assets 8 477 Revenues from sale of material 4 518 Other operating revenues 12 996 Accounting for provisions (i.e. reduction) 32 844 Financial revenues data

Text thous. SKK Revenues from bank interests 15 Revenues from financial transactions (loans) 5 923 Exchange rate gains from financial transactions 2 358 Exchange rate gains from conversions by 31 December 4 387 Other revenues from financial activity 82 6. Data about expenses for services provided

Text thous. SKK Repair and maintenance 7 962 Travel expenses 1 636 Representation expenses 490 Other services 29 031 7. Personnel expenses data

Text thous. SKK Wages and salaries 74 414 Remuneration of board members 4 811 Tax-based income policy 24 539 Contributions for transport of employees to job 1 079 Other social expenses 4 260



8. Data about other expenses for economic activity Text thous. SKK

Road tax 29 Real estate tax 1 421 Other taxes and fees 519 Net book value of long-term assets sold 5 600 Material sold 939 Gifts 181 Fines and penalties 433 Write-off of receivables 131 215 Other expenses for economic activity 696 Depreciation of long-term assets 42 202 9. Financial expenses data

Text thous. SKK Shares and ownership interests sold 0 Credit interests 6 770 Exchange rate losses from financial transactions 4 042 Exchange rate losses from conversions by 31 December 1 720 Other expenses for financial activity (568) 3 085 10. Data about revenues from long-term financial assets

Description of financial investment thous. SKK Revenues from sales of shares and ownership interests 200 Accounting for provisions to financial assets 0 11. Data about property damages caused No. of account Description of damage thous. SKK 549-100 Damages to property 5 099 569-100 Damages to financial assets 200 12. Data about extraordinary expenses and extraordinary revenues

Description thous. SKK Damages 0 Correction of accounting for previous accounting periods 0 Other extraordinary expenses 8 IV. Overview of property which market evaluation differs significantly from its evaluation in accountancy The company has not any entry of property in its accountancy, which market evaluation differs significantly from its evaluation in the bookkeeping.



V. Leased and hired property recorded in off-balance account - Leased property recorded in sub-balance accounts Leasing company Subject of leasing Volume of leasing Actual balance Date of maturity Deutsche leasing Machinery 329 000 EUR 9 000 EUR 15 February 2007 Deutsche leasing Machinery 87 000 EUR 5 000 EUR 15 April 2007

Besides the above-mentioned facts the Company has records of property of Civil Defense in its sub-balance accounts as follows:

Account 760 – Material in the warehouse of Civil Defense in the amount of 1,081,955.10 SKK

Account 763 – Long-term property of Economy Department of SR in the amount of 28,751 SKK

- Hired property recorded in sub-balance accounts Lessee Subject of lease Value of lease Actual balance Termination of lease TLH Holding automobile 864 000 SKK 10 000 SKK 28 February 2008 VI. Events occurred after the date of elaboration of annual financial statement After the date of elaboration of annual financial statement no events occurred which could exert significant influence upon it. VII. Events not described in the annex, but they are a part of Annual Financial Statement TLH owns 32 pieces of shares as a registered stock issued by DEVIN BANKA a.s. with the nominal value of 1,600,000.00 SKK. Because on 28 September 2001 the bankruptcy of this financial institution was declared, TLH made an adjusting entry in the amount of 100% nominal value of financial investment to the debit of non-tax expenses by 31 December 2001. By 31 December 2006 there was not issued a resolution of bankruptcy court held in the matter of the bankrupted company. On the basis of the resolution No. 39-24K of District Court in Banska Bystrica the company TercioM s.r.o. was liquidated by 8 September 2006 due to lack of debtor’s property. On 6 October 2006 this company was deleted from companies’ register of District Court in Zilina. On the basis of above-mentioned facts the share of TESLA Liptovský Hrádok a.s. in the above-mentioned company in the amount of 200,000 SKK was annulled and written off. VIII. Overview of owner’s equity Text Status of owner’s

equity in current period

Status of owner’s equity in previous period

Owner’s equity therein: 180 085 227 299 Registered (basic) capital 398 900 398 900 Own shares 0 0 Share premium 0 0 Other capital funds 0 0 Gains and losses 719 719 Legal reserve fund 480 480 Indivisible fund 0 0 Statutory and other funds 0 0 Retained earnings from previous years 0 0 Accumulated losses from previous years -172 800 -125 715 Net profit or loss from current accounting period -47 214 -47 085 Dividends paid 0 0 Further changes in owner’s equity 0 0



X. Events not described in the annex which are a part of Annual Financial Statement TLH owns 32 pieces of shares as a registered stock issued by DEVIN BANKA a.s. with the nominal value of 1,600,000.00 SKK. Because on 28 September 2001 the bankruptcy proceeding of this financial institution was declared, TLH made an adjusting entry in the 100% amount of nominal value of financial investment to the debit of non-tax expenses by 31 December 2001. By 31 December 2006 there was not issued a resolution of bankruptcy court held in the matter of the company bankrupted. Transfer of business share of MOLTES s.r.o. On 22 November 2005 on the basis of decision of General Meeting of the Company there was signed an agreement about transfer of business share in MOLTES s.r.o. to MOLEX Slovakia Management s.r.o. Bratislava. The amount of the business share of 867 000 SKK was transferred to the above-mentioned company for recompense (repurchase) in the amount of 2 Mil. SKK. Through the transfer of the business share and its settlement (clearing), the investment interests in MOLTES s.r.o. ceased. On 30 November 2005 there was signed a Contract for sale of realty, i.e. lands between TESLA Liptovský Hrádok a.s. and TLH Holding a.s. Bratislava. The agreed upon cost of acquisition in the amount of 9,468,750 SKK was accounted in December 2005 on the basis of deposit to the realty cadastre. XI. Overview of changes of owner’s equity Text Status of owner’s

equity in current period

Status of owner’s equity in previous period

Difference between current and previous period

Owner’s equity therein: 227 299 274 385 -47 086 Registered (basic) capital 398 900 398 900 0 Own shares 0 0 0 Share premium 0 0 0 Other capital funds 0 0 0 Gains and losses 719 719 0 Legal reserve fund 480 195 285 Indivisible fund 0 0 0 Statutory and other funds 0 0 0 Retained earnings from previous years 0 0 0 Accumulated losses from previous years - 125 715 - 130 232 4 517 Net profit or loss from current accounting period -47 085 4 803 -42 282 Dividends paid 0 0 0 Further changes in owner’s equity 0 0 0


Cash Flow Statement

Cash Flow Statement

Item Name of item Row No. Accounting period current directly previous A. Cash flow from operating activity (OA) A.1 Operating activity expenses 01 -543 017 A.2 Adjustment of expenses for OA by the amount 02 -14 518 A.3 OA expenses adjusted (A.1+/-A.2) 03 -557 535 A.4 Revenues from OA 04 506 146 A.5 Adjustment of revenues into income from OA by

the amount 05 9 907

A.6 Revenues from OA adjusted by income (A.4+/-A.5)

06 516 053

A.7 Other income from OA 07 0 A.8 Other expenses for OA 08 0 A* Cash flow from operating activity without items stated

separately in the overview (A3+A6+A7+A8)

09 -41 482 -51 631

A.9 Items shown separately 10 -632 A** Cash flow from operating activity (A* + A9) 11 -42 114 -50 979 A.10 Income taxes from OA incl. overpayments

refunded (from account 341) 12 5

A.11 Extraordinary income referred to OA 13 8 A.12 Extraordinary expenses referred to OA 14 -4 A.13 Changes in social fund 15 194 A.14 Other items exerting influence on cash flows

from OA 16 0

A*** Net cash flow from OA (A**+A10 up to A14) 17 -41 911 -51 631 B. Cash flow from investment activity (IA) B.1 Expenses for acquisition of long-term assets 18 33 872 B.2 Income from sales of long-term assets 19 8 677 B.3 Expenses for long-term loans granted to the

consolidated whole 20 0

B.4 Incomes from repayment of long-term loans granted to the consolidated whole

21 0

B.5 Expenses for other long-term loans granted 22 0 B.6 Income from repayment of other long-term loans 23 0 B.7 Income from leasing of movable and immovable

assets 24 0

B.8 Income from subsidies for long-term assets acquired

25 0

B.9 Interests and dividends received except for ones included in OA

26 0

B.10 Extraordinary income referred to IA 27 0 B.11 Extraordinary expenses referred to IA 28 0 B.12 Other income referred to IA 29 9 294 B.13 Other expenses referred to IA 30 0 B. Net cash flow from IA (B1 + up to B13) 31 51 843 -10 776 C. Cash flow from financial activity (FA) C.1 Cash flow arising out of owner’s equity 32 0 C.1.1 Income from shares subscribed and ownership

interests and from further deposits into owner’s equity

33 0

C.1.2 Monetary gifts received 34 0 C.1.3 Income from settlement of loss by partners 35 0 C.1.4 Expenses for acquisition of own shares and

ownership interests 36 0


Cash Flow Statement

C.1.5 Expenses for pay-out of participation share in owner’s equity (compensation shares of partners, members and others)

37 0

C.1.6 Expenses connected with reduction of funds included into owner’s equity

38 0

C.1.7 Expenses for other reasons connected with reduction of owner’s equity

39 0

C.2 Cash flow from long-term payables from FA 40 -10 915 C.2.1 Income from credits and loans received, from

bonds issued and other long-term debentures and similar securities

41 88 822

C.2.2 Expenses for repayment of credits and loans, bonds issued and other long-term debentures and similar securities

42 -84 439

C.2.3 Income from other long-term payables 43 0 C.2.4 Expenses for repayment of other long-term

payables 44 -15 298

C.3 Expenses for repayment of interests and dividends except for ones included in OA

45 0

C.4 Extraordinary income referred to FA 46 0 C.5 Extraordinary expenses referred to FA 47 0 C.6 Other income referred to FA 48 0 C.7 Other expenses referred to FA 49 0 C. Net cash flow from FA (C1+ up to C7) 50 -10 915 40 548 D. Net increase or net reduction of finance 51 261 -21 859 E. Status of finance and monetary equivalents at the

beginning of accounting period 52 -11 805 10 054

F. Status of finance and monetary equivalents at the end of accounting period before considering exchange rate losses and gains calculated by the date of elaboration of Annual Financial Statement

53 -11 544 -11 805

G. Exchange rate losses or gains calculated from finance and monetary equivalents by the date of elaboration of Annual Financial Statement

54 0 0

G.1 Exchange rate losses or gains (from account 563) 55 0 G.2 Exchange rate gains (from account 663) 56 0 H Balance of finance and monetary equivalents at

the end of accounting period adjusted by exchange rate losses or gains calculated by the date of Annual Financial Statement

57 -11 544 -11 805


Business Objective for the year 2007

Business Objective for the year 2007 BUSINESS OBJECTIVE FOR THE YEAR 2007 The Business Objective for the year 2007 accepts the philosophy of a medium-term strategic intention adopted and approved by the Company till 2008 and confirms a trend to stabilization. It will be realized under conditions of terminating the Project of re-structuralization of Company’s assets, the aim of which is to create a sound structure of assets and a sufficient working capital, a positive balance of payments and to increase the solidity of the Company. The Business Objective for the year 2007 will be realized under conditions of continuing changes which are aimed at creation of a prosperous, modernly functioning company of the 21st century. It will be realized under conditions of using team structures in production plants, under conditions of pushing through the adopted principles of new company culture as well as under conditions of implementing TPM – 5S tools, autonomous maintenance and quality. In 2007 there will be implemented a project of improvement of personal quality in the production section to the full extent, there will be carried out other changes in accordance with the conception of implementing principles and directions of a modernly functioning company. All changes are carried out with low risk enabling to implement changes without subversion of the whole company as to its economy and organization.

- Basic parameters: sale, expenses, revenues, profit The BO 2007 is a transitional way from the stabilization phase to the phase of development and economic prosperity. This philosophy is confirmed by the change of basic annual goal, concentration on the rate of added value achieved from personnel expenses. The basic indicators supposed to achieve by the BO for the year 2007 are as follows: Revenues from sales Profit before taxation Added value Added value labor productivity per employee Added value / Personnel expenses In the area of metal part production our customers are commercial and production companies with which TESLA Liptovský Hrádok a.s. have been cooperating in previous years. It is assumed to achieve the volume of revenues from sales of products from metal part production in the amount of 372.6 Mil. SKK, thereof only 4.8 % constitutes revenues from sales to new customers. For achievement of this goal it is supposed to use existing capacities effectively, to harmonize logistics of purchase, production and sales, to ensure a balanced financing and to strengthen a technological capacity through purchasing machinery selected. As to electrical engineering production, there will be realized total sales in the amount of 143.2 Mil. SKK divided into sales of PCBs in the amount of 22.9 Mil. SKK and revenues from assembly and SMD placement in the amount of 120.3 Mil SKK. It is necessary to point out that additional technological equipment of the PCB production plant is inevitable for increasing production volumes in this area, especially as for automatic optical inspection devices and internal circuit tester which are necessary for increasing flexibility in working out quotations, for guaranteeing stability of production processes and quality level required.



Sales of telecommunication equipment proceeds from the requirement to realize Tesla-Phonet 3000 technologies on the market of Slovakia and on markets of neighboring countries of Central Europe in the minimal amount of 15.0 Mil. SKK. This volume is fulfillment of market expectations confirmed by development of order backlogs in 2005 as well as it is necessary condition for starting the process of evaluating investment and operational expenses spent at the stage of preparation for commencing serial production, acquisition activities and activities connected with marketing research and research of personnel and material expenses connected with commercial security of future contracts. In realizing telephone exchanges of prior generations we suppose demand for these products in the amount of 5.6 Mil. SKK. The remaining volume in the amount of 8.0 Mil. SKK constitutes sales of system telephone sets: 2N and DTP. The financial plan for the year 2007 assumes to achieve an economic result, i.e. profit in the amount of 29.0 Mil. SKK before taxation and an operating income of 39.6 Mil. SKK. Revenues are planned in the amount of 639.5 Mil. SKK, thereof revenues from sales of own products constitute the volume of 544.4 Mil. SKK and sales of services constitute the amount of 39.6 Mil. SKK. Revenues from sales of merchandise in the amount of 2.2 Mil. SKK constitute revenues from sales of tools to customers purchasing especially metal parts and products. On the revenues side we suppose also revenues from capitalization of materials in the amount of 1.0 Mil. SKK and capitalization of intangible and tangible assets in the amount of 0.1 Mil. SKK, revenues from sale of intangible and tangible assets in the amount of 0.2 Mil. SKK an sales of material for 1.4 Mil. SKK. The plan assumes revenues from receivables transferred in the amount of 38.4 Mil. SKK, these revenues are created due to transfer of receivables from certain customers to the factoring company. other revenues in the amount of 10.5 Mil. SKK are created due to lease of property in the amount of 10.3 Mil. SKK, refunding of wages in the amount of 160 thous. SKK and revenues from housing stock in the amount of 40 thous. SKK. The Business Objective assumed financial revenues in the amount of 1.1 Mil. SKK. They are created from credit interests from bank accounts in the amount of 0.1 Mil. SKK and the rest in the amount of 1.0 Mil. SKK constitutes exchange rate gains. Expenses in the year 2007 are planned in the amount of 616.01 Mil. SKK, thereof the highest item of expenses sharing 41.7 % in total expenses constitutes direct consumed material in the amount of 256.6 Mil. SKK. Consumption is calculated in accordance with development of actual purchase prices for main material items and according to the planned structure of sales of particular product lines. Energy consumption was calculated for electrical power with an estimated increase of prices and for heat (thermal) energy on the basis of an estimated price arising out from the price structure in using wooden chips as fuel in the winter heating season of 2007 –2008. Energy consumption is planned in the total amount of 46.1 Mil. SKK, thereof 20.2 Mil. SKK for heat energy (thereof 5.5 Mil. SKK re-invoiced to revenues) and 25.5 Mil. SKK for electric power (re-invoiced to revenues in the amount of 4.8 Mil. SKK), 400 thous. SKK for surface water consumption. Consumption of indirect cost-point items is planned in the amount of 23.9 Mil. SKK, of other services in the amount of 30.4 Mil SKK. The depreciation plan for 2007 supposes to debit expenses in the total amount of 50.9 Mil. SKK – compared between the years it is of significantly higher volume – due to increase of value of property written off. Depreciation consists of depreciation of assets put down till 31 December 2006 in the amount of 37.9 Mil. SKK and of depreciation calculated from investment intention for 2007 in the amount of 13.0 Mil. SKK. In financial expenses the crucial item are interests in the amount of 6.7 Mil. SKK. The Loan burden - incl. an assumed drawing of new loans and repayment of loans granted till now by the end of 2007 – is supposed in the amount of 62.895 Mil. SKK.



- Added value, profit, employees The company assumes to achieve the volume of added value of 228, 300 thous. SKK in 2007: growth index is 1.87; expressed in ratio indicator of added value to personnel expenses this volume constitutes 156.4%. In 2007 the Company will achieve profit before taxation in the amount of 29.0 Mil. SKK and profit from economic activity in the amount of 39.6 Mil. SKK. The planned volume of profit before taxation , depreciation and amortization (EBIT) will reach the level of 79.9 Mil. SKK and the planned volume of profit before taxation, depreciation, amortization and interests (EBITDA) will be in the amount of 86.6 Mil. SKK. It is supposed that the profit from financial activities will reach the loss in the amount of 10.6 Mil. SKK, which consists especially of interests from bank loans and of other financial expenses (insurance premiums, bank fees, factoring fees, exchange rate losses) and is reduced by financial revenues from credit interests and exchange rate gains. The plan of human resources and wages is based on calculation of need in direct workers from the submitted plan of sales and production. Total need in employees according to particular categories constitutes 433 persons: 283 persons of Rj category (63.9% from total number), 69 persons of Rr category (15.6%) and 91 persons of THP category (20.5%). - Investments The investment plan assumes acquisition of investments for purchase prices in the amount of 43.8 Mil. SKK. The scope of investments proceeds from need of solution of labor productivity and production quality in electric engineering production (electric tester, forming machine), in PCB production (spindle drilling device, photo plotter). For metal part production it is supposed to purchase TRUMATIC 3000 punching press, TRUMABEND press brake and to carry out a general reparation (renewal) of press for 160 t or 250 t. From the viewpoint of further operation of a part of technologies in metal part production the implementation of new degreasing technology will be essential in accordance with conditions of audit for certification in conformity with EMS 14001 standard. For ensuring current need in financing development it is supposed to fulfil the business plan of sales and gaining a portion of foreign sources what will be a subject of special negotiations with banks and leasing companies. Investments planned for evaluation of building constructions create preconditions for improving production premises, increasing labor protection and appraisement of tangible assets. - Preconditions for fulfillment of BO 2007 1. Fulfillment of expectations as to the volume of sales of TeslaPhonet telecommunication

systems is a reaction to development of order backlogs in 2006 and prediction of realization for the 1st quarter of the year 2007 at the stage of preparation of BO 2007, at the same time the project is still supported in pushing it through on the market. The positive development above the level planned can only improve the balance of BO 207 as to a qualitative point of view (higher rate of gains and higher creation of added value from 1 SKK of personnel expenses in comparison with other commodities), as to quantitative point of view (due to increase of revenues from sales above the planned level of 15.0 Mil. SKK), personnel point of view (need to consolidate production capacity via increase of number of direct workers) and as to marketing point of view (penetration of the trade mark and implanting the producer into the public awareness). An accompanying and supporting effect, especially towards the interior of the Company, would be the synergy arising out from business success and pushing itself forward on the market.



- Reaction to movements of exchange rate SKK:EUR towards strengthening of the Slovak crown. Deviation of each –0.50 SKK from levels calculated in BO will exert negative influence on creation of added value and gains in the amount of 1.4 Mil. SKK. It is necessary to direct an elimination of impacts of such influence towards the interior of the Company (logistics, purchase, technical preparation of production, economy) as well as towards the Company’s environment (suppliers, customers).

- The prolongation of the process of starting heat production in the supplying company on

the basis of wooden chips up to the end of the winter heating season 2006 – 2007 can cause changes in parameters of consumption of thermal energy and in the total expenses balance. By means of negotiation with the supplier of heat energy it is necessary to achieve the status minimizing negative impacts of that precondition.

Balancing of the volume of sales in metal part production to the maximal possible production capacity together with strengthening of technological capacity via investment – it all assumes an increase of requirements of customers in this segment above the level calculated in BO. The philosophy of necessity to acquire new technological machinery for punching and bending is supported by the fear included in BO, i.e. fear of failure of revenues from sales of telecommunication equipment (TeslaPhonet) and therefor it is substituted by revenues from sales of metal part production. This argumentation is supported by increased number of signals giving evidence of growth of interest of existing and potential customers. As to investments, BO contains a requirement for supplementing the technological capacity of punching and press braking in the amount of ca. 18.5 Mil SKK ( technology of TRUMPF) with use of leasing as a financing source. - Continuation of the project of personal quality improvement on all levels of Company’s

management with aim to intensify the process of carrying out changes, implementing TPM and 5S elements, starting activity of training center, implementing modern methods of management on the way to creation of a world class company.

Ing. Emil Rychvalsky Chairman of BoD General Director


Development of Employees from ASF

Development of Employees from ESF In the period from 1 January 2005 till 31 December 2006 TESLA Liptovský Hrádok a.s. has been implementing the project of education of employees from funds of SR SR and ESF. Name of program: Sector Operational Program “Human Resources” Priority: Qualification and adaptability improvement of employees and persons entering labor market Measure: 3.2. Increase of scope, improvement and wider providing of further education with the aim

to improve qualification and adaptability of employees Name of project: Education and development of employees in TESLA Liptovský Hrádok a.s. for

realization of the Company’s strategy till the year 2008 The project was directed at the realization of the approved Company’s development strategy till the year 2008. It was divided into several separate sections. 1. Development of managing skills of managers on all levels of management, development of

professional qualification of line managers - foremen in workshops; gaining managing skills and abilities by employees prepared as personnel substitutes and young talents of the Company.

2. Development of business skills for business representatives and purchasing agents of the Company. 3. Development of professional knowledge of foremen directed at production management. 4. Analysis of education needs in worker’s professions for multi-professionalism and mastering of new

technologies. 5. Creation of education program for workers and implementation of the pilot project. 6. Language education of employees. Education was carried out by following companies: NOVIDEA Poprad Development of managing skills of managers, development of business

skills for business representatives and purchasing agents of the Company in 2006

TRANSFER Slovensko Development of business skills for business representatives and purchasing agents of the Company in 2005

SLCP Consulting s.r.o. Zilina Development of professional knowledge of foremen directed at production management and training in worker’s professions for multi-professionalism and mastering of new technologies

ALADON L.Mikulas Language education of selected employees from all categories

Budget of project: 3,746,074.00 SKK Real expenses for project: 3,276,906.36 SKK Refunding from MPSVaR SR /ESF/: 1,966,143.82 SKK Number of training days: 98

Liptovský Hrádok a.s.

Pálenica 53/79

033 17 Liptovský Hrádok

Slovak Republik

tel.: + 421 – 44 – 5201 201

Fax: + 421- 44 – 5222 391

e-mail: [email protected]

www.teslalh.sk

annual report 2006. liptovský hrádok a.s. 2 contents evaluation of the year 2006 3 identification...

Documents

environment management

customers oriented company

company inwards

area of companys culture

rules of companys culture

autonomous quality

companys organization

personal quality