Steel Funding Limited OJSC Novolipetsk Steel

10SEP201212251660 U.S.$800,000,000 4.45 per cent. Loan Participation Notes due 2018 (Issued by, with limited recourse to,) Steel Funding Limited (incorporated under the laws of Ireland) for the sole purpose of financing a loan to OJSC Novolipetsk Steel (an open joint stock company incorporated under the laws of the Russian Federation) Issue Price: 100 per cent. Steel Funding Limited, a company incorporated as a limited liability company under the laws of Ireland (the ‘‘Issuer’’), is issuing an aggregate principal amount of U.S.$800,000,000 4.45 per cent. Loan Participation Notes due 2018 (the ‘‘Notes’’) for the sole purpose of financing a loan (the ‘‘Loan’’) to OJSC Novolipetsk Steel, an open joint stock company organized under the laws of the Russian Federation (‘‘NLMK’’ or the ‘‘Borrower’’), pursuant to a loan agreement dated February 14, 2013 (the ‘‘Loan Agreement’’) between the Issuer and the Borrower. Pursuant to the trust deed (the ‘‘Trust Deed’’) relating to the Notes between the Issuer and Deutsche Trustee Company Limited, as trustee (the ‘‘Trustee’’), the Issuer will provide certain security for all payment obligations in respect of the Notes for the benefit of the holders of Notes (the ‘‘Noteholders’’), including a first fixed charge in favour of the Trustee of all amounts paid and payable to it under the Loan Agreement and an assignment to the Trustee of the Issuer’s rights and interests under the Loan Agreement, other than in respect of certain reserved rights (as more fully described in ‘‘Overview of the Transaction Structure and the Security’’). Interest on the Loan will be payable at a rate of 4.45 per annum semi-annually in arrears on the interest payment date falling on February 19 and August 19 in each year, commencing on August 19, 2013, and, provided that the Issuer receives such payment in full, the Notes will bear interest from, and including, August 19, 2013 and payable on such dates at the same rate. The Notes are limited recourse obligations of the Issuer. In each case where amounts of principal, interest, premium (if any) and additional amounts (if any) are stated to be payable in respect of the Notes, the obligation of the Issuer to make any such payment shall constitute an obligation only to account to the Noteholders, on each date upon which such amounts of principal, interest, premium (if any) and additional amounts (if any) are due, for an amount equivalent to the principal, interest, premium (if any) and additional amounts (if any) actually received and retained (net of tax) by or for the account of the Issuer from the Borrower pursuant to the Loan Agreement. The Issuer will have no other financial obligation under the Notes. Noteholders will be deemed to have accepted and agreed that they will be relying solely and exclusively on the credit and financial standing of the Borrower in respect of the obligations of the Borrower under the Loan Agreement. The Loan, and correspondingly the Notes, may be redeemed early at the option of NLMK in certain circumstances, all as more fully described in ‘‘Loan Agreement’’ and ‘‘Terms and Conditions of the Notes’’. AN INVESTMENT IN THE NOTES INVOLVES A HIGH DEGREE OF RISK. SEE ‘‘RISK FACTORS’’ BEGINNING ON PAGE 11. The Notes and the Loan (together, the ‘‘Securities’’) have not been, and will not be, registered under the U.S. Securities Act of 1933 (the ‘‘Securities Act’’), and, subject to certain exceptions, may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S under the Securities Act (‘‘Regulation S’’)). The Notes may be offered and sold (i) within the United States only to qualified institutional buyers (‘‘QIBs’’), as defined in Rule 144A under the Securities Act (‘‘Rule 144A’’), that are also qualified purchasers (‘‘QPs’’), as defined in Section 2(a)(51) of the U.S. Investment Company Act of 1940 (the ‘‘Investment Company Act’’), in reliance on the exemption from registration under Section 5 of the Securities Act provided by Rule 144A or on another exemption therefrom, (the ‘‘Rule 144A Notes’’) and (ii) to non-U.S. persons in offshore transactions as defined in and in reliance on Regulation S (the ‘‘Regulation S Notes’’). The Issuer has not been and will not be registered under the Investment Company Act. Prospective purchasers are hereby notified that sellers of the Rule 144A Notes may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. For a description of these and certain further restrictions on offers, sales and transfers of the Notes and this distribution of the Prospectus (as defined below), see ‘‘Subscription and Sale’’ and ‘‘Transfer Restrictions’’. This prospectus (the ‘‘Prospectus’’) has been approved by the Central Bank of Ireland (the ‘‘Central Bank’’), as competent authority under Directive 2003/71/EC (the ‘‘Prospectus Directive’’). The Central Bank only approves this Prospectus as meeting the requirements imposed under Irish and E.U. law pursuant to the Prospectus Directive. Application has been made to the Irish Stock Exchange for the Notes to be admitted to the official list (the ‘‘Official List’’) and trading on its regulated market (the ‘‘Main Securities Market’’). The Main Securities Market is a regulated market for the purposes of Directive 2004/39/EC (the ‘‘Markets in Financial Instruments Directive’’). Such approval relates only to the Notes which are to be admitted to trading on a regulated market for the purposes of Directive 2004/39/EC and/or which are to be offered to the public in any Member State of the European Economic Area. The Notes are rated BBB by Fitch Ratings Ltd (‘‘Fitch’’), Baa3 by Moody’s Investors Service, Inc. (‘‘Moody’s’’) and BBB by Standard & Poor’s Credit Market Services Europe Ltd (‘‘Standard and Poor’s’’). A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning rating agency. NLMK is rated as being investment grade by S&P, Moody’s and Fitch. The Group’s credit ratings are as follows: Rating agency Long-term rating National rating scale Outlook Standard and Poor’s ...... BBB RuAAA Negative Moody’s ...... Baa3 Aaa.ru Stable Fitch ...... BBB AA(ru) Stable Fitch Ratings Ltd is established in the European Union and is registered under the Regulation (EC) No. 1060/2009, as amended (the ‘‘CRA Regulation’’). As such, Fitch Ratings Ltd is included in the list of credit rating agencies published by the European Securities and Markets Authority (‘‘ESMA’’) on its website in accordance with the CRA Regulation. Moody’s Investors Service, Inc. is not established in the European Union and has not applied for registration under the CRA Regulation. The ratings are expected to be endorsed by Moody’s Investors Service Ltd in accordance with the CRA Regulation. Moody’s Investors Service Ltd is established in the European Union and registered under the CRA Regulation and, as such, is included in the list of credit rating agencies published by ESMA on its website in accordance with the CRA Regulation. Standard and Poor’s is established in the European Union and is registered under the CRA Regulation. As such, Standard and Poor’s is included in the list of credit rating agencies published by ESMA on its website in accordance with the CRA Regulation. The Notes will be offered and sold in the minimum denomination of U.S.$200,000 and higher integral multiples of U.S.$1,000. The Regulation S Notes will initially be represented by interests in a global note certificate in registered form (the ‘‘Regulation S Global Note Certificate’’), without interest coupons, which will be deposited with a common depositary for Euroclear Bank SA/NV (‘‘Euroclear’’) and Clearstream Banking, société anonyme (‘‘Clearstream, Luxembourg’’), and registered in the name of a nominee, on or about February 19, 2013 (the ‘‘Issue Date’’). The Rule 144A Notes will initially be represented by interests in a global note certificate in registered form (the ‘‘Rule 144A Global Note Certificate’’ and, together with the Regulation S Global Note Certificate, the ‘‘Global Note Certificates’’), which will be registered in the name of Cede & Co., as nominee of, and deposited with a custodian for, The Depository Trust Company (‘‘DTC’’) on or about the Issue Date. Beneficial interests in the Global Note Certificates will be shown on, and transfers thereof will be effected only through records maintained by, DTC, Euroclear or Clearstream, Luxembourg (as the case may be) and their respective participants. See ‘‘Clearing and Settlement’’. Individual note certificates in registered form will only be available in certain limited circumstances as described herein. Joint Lead Managers Deutsche Bank J.P. Morgan Société Générale Corporate & Investment Banking

Prospectus dated February 14, 2013 IMPORTANT INFORMATION ABOUT THIS PROSPECTUS This Prospectus comprises a prospectus for the purposes of the Prospectus Directive for the purpose of giving information with regard to the Issuer, NLMK and NLMK and its subsidiaries taken as a whole (the ‘‘Group’’) which, according to the particular nature of the Issuer, NLMK, the Group, the Notes and the Loan, is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and losses and prospects of the Issuer, NLMK and the Group and of the rights attaching to the Notes. Each of the Issuer and NLMK (whose registered office is set out on page 217 of this Prospectus) accepts responsibility for the information contained in this Prospectus. To the best of the knowledge of each of the Issuer and NLMK (each of whom has taken all reasonable care to ensure that such is the case), the information contained in this Prospectus is in accordance with the facts and does not omit anything likely to affect the import of such information. This Prospectus does not constitute an offer of, or an invitation by or on behalf of the Issuer, NLMK, the Joint Lead Managers (as defined in ‘‘Subscription and Sale’’) or the Trustee to subscribe for or purchase any Notes in any jurisdiction where it is unlawful to make such an offer or invitation. The distribution of this Prospectus and the offering of the Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes are required by the Issuer, NLMK, the Joint Lead Managers and the Trustee to inform themselves about and to observe any such restrictions. For a description of certain further restrictions on offers and sales of Notes and distribution of this Prospectus, see ‘‘Subscription and Sale’’ and ‘‘Transfer Restrictions’’. No person is authorized to provide any information or to make any representation not contained in this Prospectus and any information or representation not so contained must not be relied upon as having been authorized by or on behalf of the Issuer, NLMK, the Joint Lead Managers or the Trustee. The delivery of this Prospectus at any time does not imply that the information contained in it is correct as at any time subsequent to its date. Neither the delivery of this Prospectus nor the offering, sale or delivery of any Note shall in any circumstances create any implication that there has been no adverse change, or any event reasonably likely to involve any adverse change, in the condition (financial or otherwise) of the Issuer or NLMK since the date of this Prospectus. None of the Issuer, NLMK, the Joint Lead Managers, the Trustee or any of its or their respective representatives or affiliates makes any representation to any offeree or purchaser of the Notes offered hereby regarding the legality of an investment by such offeree or purchaser under applicable legal, investment or similar laws. Each investor should consult with its own advisers as to the legal, tax, business, financial and related aspects of the purchase of the Notes. Prospective purchasers must comply with all laws that apply to them in any place in which they buy, offer or sell any Notes or possess this Prospectus. Any consents or approvals that are needed in order to purchase any Notes must be obtained. The Issuer, NLMK, the Joint Lead Managers and the Trustee are not responsible for compliance with these legal requirements. The appropriate characterization of the Notes under various legal investment restrictions, and thus the ability of investors subject to these restrictions to purchase the Notes, is subject to significant interpretative uncertainties. No representation or warranty is made as to whether, or the extent to which, the Notes constitute a legal investment for investors whose investment authority is subject to legal restrictions, and investors should consult their legal advisers regarding such matters. In connection with the issue of the Notes, J.P. Morgan Securities plc (the ‘‘Stabilising Manager’’) (or any person acting on behalf of the Stabilising Manager) may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilising Manager (or any person acting on behalf of the Stabilising Manager) will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the Notes is made and, if commenced, may be discontinued at any time and must be brought to an end no later than the earlier of 30 days after the Issue Date of the Notes and 60 days after the date of the allotment of the Notes. The contents of NLMK’s website do not form any part of this Prospectus. No representation or warranty, express or implied, is made by the Joint Lead Managers, the Trustee or any of their or its affiliates or any person acting on their behalf as to the accuracy or completeness of the

i information set forth in this Prospectus. Nothing contained in this Prospectus is, or shall be relied upon as, a promise or representation, whether as to the past or the future. Each person receiving this Prospectus acknowledges that such person has not relied on the Joint Lead Managers, the Trustee or any of its or their affiliates or any person acting on their behalf in connection with its investigation of the accuracy or completeness of such information or its investment decision. Each person contemplating making an investment in the Notes from time to time must make its own investigation and analysis of the creditworthiness of NLMK and the Group and its own determination of the suitability of any such investment, with particular reference to its own investment objectives and experience, and any other factors which may be relevant to it in connection with such investment. The Prospectus as approved by the Central Bank, will be filed with the Irish Companies Registration Office in accordance with Regulation 38(1)(b) of Prospectus (Directive 2003/71/EC) Regulations 2005. Any investment in Notes does not have the status of a bank deposit and is not within the scope of the deposit protection scheme operated by the Central Bank. The Issuer is not and will not be regulated by the Central Bank as a result of issuing the Notes.

NOTICE TO UNITED KINGDOM RESIDENTS This document is only being distributed to and is only directed at (1) persons who are outside the United Kingdom, (2) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the ‘‘Order’’) or (3) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as ‘‘Relevant Persons’’). The Notes are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such Notes will be engaged in only with, Relevant Persons. Any person who is not a Relevant Person should not act or rely on this document or any of its contents.

NOTICE TO PROSPECTIVE U.S. INVESTORS THE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE ‘‘SEC’’), ANY STATE SECURITIES COMMISSION IN THE UNITED STATES OR ANY OTHER U.S. REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OF NOTES OR THE ACCURACY OR THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE IN THE UNITED STATES. THIS OFFERING IS BEING MADE IN THE UNITED STATES IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT FOR AN OFFER AND SALE OF THE NOTES WHICH DOES NOT INVOLVE A PUBLIC OFFERING. IN MAKING YOUR PURCHASE, YOU WILL BE DEEMED TO HAVE MADE CERTAIN ACKNOWLEDGMENTS, REPRESENTATIONS AND AGREEMENTS. SEE ‘‘SUBSCRIPTION AND SALE’’ AND ‘‘TRANSFER RESTRICTIONS’’. THIS PROSPECTUS IS BEING PROVIDED (1) TO A LIMITED NUMBER OF INVESTORS IN THE UNITED STATES THAT THE ISSUER REASONABLY BELIEVES TO BE ‘‘QIBS’’ THAT ARE ALSO ‘‘QPS’’ FOR INFORMATIONAL USE SOLELY IN CONNECTION WITH THEIR CONSIDERATION OF THE PURCHASE OF THE NOTES AND (2) TO INVESTORS OUTSIDE THE UNITED STATES WHO ARE NOT U.S. PERSONS IN CONNECTION WITH OFFSHORE TRANSACTIONS COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S.

NOTICE TO NEW HAMPSHIRE RESIDENTS NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES (‘‘RSA 421-B’’) WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS

ii OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

NOTICE TO RUSSIAN INVESTORS This Prospectus does not constitute an offer, or an invitation to make offers, to purchase, sell, exchange or transfer any Notes in the Russian Federation or to, or for the benefit of, any Russian person, and does not constitute an advertisement of Notes in the Russian Federation. This Prospectus must not be passed on to third parties or otherwise be made publicly available in the Russian Federation. Neither Notes, nor this Prospectus nor any other document relating to them have been registered with the Federal Service for the Financial Markets of the Russian Federation or admitted to public placement and/or public circulation in the Russian Federation. The Notes are not intended for ‘‘placement’’ or ‘‘circulation’’ in the Russian Federation except as permitted by Russian law.

AVAILABLE INFORMATION The Issuer and NLMK have agreed that, for so long as any Notes are ‘‘restricted securities’’ within the meaning of Rule 144(a)(3) under the Securities Act, they will, during any period in which they are neither subject to Section 13 or 15(d) of the U.S. Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’) nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder, provide to any holder or beneficial owner of such restricted securities or to any prospective purchaser of such restricted securities designated by such holder or beneficial owner or to the Trustee for delivery to such holder, beneficial owner or prospective purchaser, in each case upon the request of such holder, beneficial owner, prospective purchaser or the Trustee, the information required to be provided by Rule 144A(d)(4) under the Securities Act.

iii FORWARD-LOOKING STATEMENTS Certain statements in this Prospectus are not historical facts and are forward-looking statements. Forward- looking statements appear in various locations, including, without limitation, under the headings ‘‘Overview’’, ‘‘Risk Factors’’, ‘‘Operating and Financial Review’’ and ‘‘Business’’. The Group may also from time to time make written or oral forward-looking statements in reports to shareholders and in other communications. Forward-looking statements include, but are not limited to, statements concerning the Group’s plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, its competitive strengths and weaknesses, its business strategy and the trends the Group anticipates in the industries and the political and legal environment in which it operates and other information that is not historical information. Words such as ‘‘believes’’, ‘‘anticipates’’, ‘‘estimates’’, ‘‘expects’’, ‘‘intends’’, ‘‘predicts’’, ‘‘projects’’, ‘‘could’’, ‘‘may’’, ‘‘will’’, ‘‘plans’’ and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward-looking statements will not be achieved. These risks, uncertainties and other factors include, among other things, those listed under ‘‘Risk Factors’’, as well as those included elsewhere in this Prospectus. Each prospective investor should be aware that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include, among others: • economic, social, legal and political developments in the Russian Federation and the international markets in which the Group operates; • the prices of the Group’s steel products and the raw materials which it requires; • tariffs and other restrictions on the import or export of steel or raw materials; • the costs of energy and transportation; • the Group’s ability to fund its future operations and capital needs through borrowing or otherwise; • the Group’s ability to successfully implement any of its business strategies; • the Group’s ability to integrate its businesses, including recently acquired businesses, and to realize anticipated cost savings and operational benefits from such integration; • an increase or decrease in demand for the Group’s products and services; • the Group’s ability to obtain the licenses necessary for its businesses; • the effects of competition; • the effects of international political events; • inflation, interest rate and exchange rate fluctuations; and • the Group’s success in identifying other risks to its businesses and managing the risks of the aforementioned factors. This list of factors is not exhaustive. Some of these factors are discussed in greater detail in this Prospectus, in particular, but not limited to, discussion in ‘‘Risk Factors’’. When relying on forward-looking statements, each prospective investor should carefully consider the foregoing factors and other uncertainties and events, especially in light of the political, economic, social and legal environment in which the Group operates. Such forward-looking statements speak only as of the date on which they are made. Accordingly, neither the Issuer nor NLMK undertakes any obligation to update or revise any of them, whether as a result of new information, future events or otherwise, unless required to do so by applicable law. NLMK does not make any representation, warranty or prediction that the results anticipated by such forward- looking statements will be achieved, and such forward-looking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most likely or standard scenario.

iv PRESENTATION OF FINANCIAL AND OTHER INFORMATION Presentation of Financial Information The Group’s financial information set forth herein has, unless otherwise indicated, been derived from its audited consolidated financial statements as of and for the years ended December 31, 2011, 2010 and 2009 (the ‘‘Annual Financial Statements’’) and its unaudited interim condensed consolidated financial statements as of September 30, 2012 and for the nine months ended September 30, 2012 and 2011 (the ‘‘Interim Financial Statements’’), each prepared in accordance with U.S. GAAP, included in this Prospectus. In this Prospectus, the Annual Financial Statements and the Interim Financial Statements are referred to collectively as the ‘‘Financial Statements’’. The Group is preparing for adoption of International Financial Reporting Standards and plans to publish its first IFRS financial statements for the year ended December 31, 2015.

Non-U.S. GAAP Financial Measures This Prospectus contains certain non-U.S. GAAP financial measures relating to the Group’s business and financial results, including Adjusted EBITDA, Adjusted EBITDA margin, net debt and cash costs. These non-U.S. GAAP financial measures are not prepared in accordance with U.S. GAAP and may be different from non-U.S. GAAP financial measures used by other companies. NLMK uses these non-U.S. GAAP financial measures as supplemental measures since it believes they provide meaningful supplemental information regarding the Group’s operational performance. Investors are encouraged not to put undue weight on these non-U.S. GAAP financial measures and to review U.S. GAAP financial measures as provided in the Financial Statements included in this Prospectus. See ‘‘Selected Consolidated Financial Information’’.

General Information In this Prospectus, all references to ‘‘Russia’’ are to the Russian Federation. References to ‘‘U.S.’’ or the ‘‘United States’’ are to the United States of America. References to ‘‘U.K.’’ or the ‘‘United Kingdom’’ are to the United Kingdom of Great Britain and Northern Ireland. References to ‘‘Ireland’’ are to Ireland. References to the ‘‘E.U.’’ or the ‘‘European Union’’ are to the union formed following ratification of the Maastricht Treaty and currently comprising 27 states, and references to ‘‘Europe’’ are to the geographical region of Europe, including those states which are members of the European Union. Definitions of certain terminology associated with the Group’s business are set forth under ‘‘Glossary of Terms’’.

Currencies and Exchange Rates In this Prospectus, references to ‘‘U.S. dollars’’, ‘‘U.S.$’’ or ‘‘$’’ are to the lawful currency of the United States, references to ‘‘rubles’’ or ‘‘RUB’’ are to the lawful currency of the Russian Federation and references to ‘‘euro’’ or ‘‘EUR’’ are to the lawful currency of the member states of the European Union that adopted the single currency in accordance with the Treaty of Rome establishing the European Economic Community, as amended. The functional currency of the majority of the Group entities is considered to be the ruble. The functional currency of the foreign subsidiaries is their local currency. The Group’s Financial Statements have been prepared using the U.S. dollar as the Group’s reporting currency, utilizing period-end exchange rates for assets and liabilities, corresponding period quarterly weighted average exchange rates for the consolidated statement of income accounts and historic rates for equity accounts.

v The following tables show, for the periods indicated, certain information regarding the exchange rate between the ruble and the U.S. dollar, based on the official exchange rate quoted by the Central Bank of the Russian Federation (the ‘‘CBR’’).

Rubles per U.S. dollar Period For the period High Low Average(1) end Year ended December 31, 2007 ...... 26.58 24.26 25.58 24.55 Year ended December 31, 2008 ...... 29.38 23.13 24.98 29.38 Year ended December 31, 2009 ...... 36.43 28.67 31.68 30.24 Year ended December 31, 2010 ...... 31.78 28.93 30.36 30.48 Year ended December 31, 2011 ...... 32.68 27.26 29.35 32.20 Nine months ended September 30, 2012 ...... 34.04 28.95 31.06 30.92

(1) The average of the exchange rate for the relevant period, based on the rates in such period for each Russian business day (quoted by the CBR for that day) and each Russian non-business day (which is equal to the rate quoted by the CBR for the preceding Russian business day). It should be noted that the methodology for calculating average rates for a period for the purposes of the Financial Statements is different than the methodology used in this table.

Rubles per U.S. dollar For each month from October 2012 to February 2013 High Low October 2012 ...... 31.52 30.72 November 2012 ...... 31.73 30.94 December 2012 ...... 30.99 30.37 January 2012 ...... 30.42 30.03 February 2013 (up to and including February 14) ...... 30.17 29.93 The exchange rate between the ruble and the U.S. dollar on February 14, 2013 was 30.07 rubles per $1.00. The exchange rate between the ruble and the euro on September 30, 2012 was 39.98 rubles per EUR 1.00 (41.67 rubles per EUR 1.00 on December 31, 2011; 40.33 rubles per EUR 1.00 on December 31, 2010; and 43.39 rubles per EUR 1.00 on December 31, 2009). No representation is made that amounts presented in a particular currency in this Prospectus could have been converted into such currency at any particular rate or at all. A market exists for the conversion of rubles into other currencies, but the limited availability of other currencies may tend to inflate their values relative to the ruble. Fluctuations in the respective exchange rates between the ruble and the U.S. dollar and the ruble and the euro in the past are not necessarily indicative of fluctuations that may occur in the future. These rates may also differ from the actual rates used in the preparation of certain information in this Prospectus. Solely for the convenience of the reader, certain amounts included in ‘‘Business’’ and elsewhere in this Prospectus have been translated from rubles into U.S. dollars at the rate of RUB 30.92 per $1.00, the official exchange rate as published by the CBR on September 30, 2012.

Rounding Certain amounts that appear in this Prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

Reproduction of Information NLMK obtained the market data used in this Prospectus under the headings ‘‘Overview’’, ‘‘Risk Factors’’, ‘‘Operating and Financial Review’’, ‘‘The Steel Industry’’ and ‘‘Business’’ from internal surveys, industry sources and currently available public information. The main sources for information on the steel industry were: (i) the World Steel Association (formerly the International Iron and Steel Institute), an international steel industry body and a provider of statistical information on the global steel industry; (ii) the Federal Customs Service of the Russian Federation; (iii) Metall Expert, a steel industry publication in Russia and the Commonwealth of Independent States (‘‘CIS’’); (iv) The Federal State Statistics Service of the Russian Federation; (v) Chermet Corporation, a provider of statistical information on the Russian steel industry; and (vi) OAO NIIBTMET, a Russian research institute which compiles statistical information on health

vi and safety in the Russian metallurgical industry. NLMK also obtained Russian macroeconomic and foreign exchange data from the CBR. The Issuer and NLMK accept responsibility for having correctly reproduced information obtained from industry publications or public sources, and, as far as the Issuer and NLMK are aware and have been able to ascertain from information published by those industry publications or public sources, no facts have been omitted which would render the reproduced information inaccurate or misleading. However, investors should keep in mind that neither the Issuer nor NLMK have independently verified information which they have obtained from third-party sources, including from industry and Russian government bodies. Certain market share information and other statements in this Prospectus regarding the industry in which the Group operates and the position of the Group relative to its competitors are not based on published statistical data or information obtained from independent third parties. Rather, such information and statements reflect the reasonable estimates of NLMK based upon information obtained from trade and business organizations and associations and other contacts within the metallurgical industry. This information from the internal estimates and surveys of the Group has not been verified by any independent sources.

vii ENFORCEABILITY OF JUDGMENTS The Issuer is a limited liability company incorporated under the laws of Ireland. NLMK is an open joint stock company incorporated under the laws of the Russian Federation. Most of the assets of the Issuer and most of the assets of NLMK are located outside the United Kingdom and the United States. In addition, all of the directors of the Issuer and substantially all of the directors and executive officers of NLMK named in this Prospectus reside outside the United Kingdom and the United States, and a substantial part of the assets of such persons are located outside the United Kingdom and the United States. As a result, it may not be possible for Noteholders or the Trustee to effect service of process within the United Kingdom or the United States upon any of the Issuer or NLMK or their respective officers and directors or to enforce against any of them court judgments obtained in English or U.S. courts. In addition, it may be difficult for the Noteholders or the Trustee to enforce, in original actions brought in courts in jurisdictions located outside the United Kingdom and the United States, liabilities predicated upon English laws or U.S. federal securities laws. Courts in the Russian Federation will generally recognize judgments rendered by a court in any jurisdiction outside the Russian Federation only if an international treaty providing for the recognition and enforcement of judgments in civil cases exists between the Russian Federation and the jurisdiction where the judgment is rendered or a federal law is adopted in the Russian Federation providing for the recognition and enforcement of foreign court judgments. No such treaty for the reciprocal recognition and enforcement of foreign court judgments in civil and commercial matters exists between the Russian Federation and certain other jurisdictions (including the United Kingdom and the United States), and no relevant federal law on enforcement of foreign court judgments has been adopted in the Russian Federation. As a result, new proceedings may have to be brought in the Russian Federation in respect of a judgment already obtained in any such jurisdiction against NLMK or its officers or directors. These limitations, as well as the general procedural grounds set out in Russian legislation for the refusal to recognize and enforce foreign court judgments in the Russian Federation, may significantly delay the enforcement of such judgment or deprive the Issuer and/or the Noteholders of effective legal recourse for claims related to the investment in the Notes. In the absence of an applicable treaty, enforcement of a final judgment rendered by a foreign court may still be recognized by a Russian court on the basis of reciprocity, if courts of the jurisdiction where the foreign judgment is rendered have previously enforced judgments issued by Russian courts. In two recent instances, Russian courts have recognized and enforced a foreign court judgment (an English court judgment in one instance and a Dutch court judgment in the other instance), on the basis of a combination of the principle of reciprocity and the existence of a number of bilateral and multilateral treaties to which both the United Kingdom and the Russian Federation, and both the Netherlands and the Russian Federation, respectively, are parties. The courts determined that such treaties constituted grounds for the recognition and enforcement of the relevant foreign court judgment in the Russian Federation. In the absence of established court practice, however, no assurances can be given that a Russian court would be inclined in any particular instance to recognize and enforce a foreign court judgment on these or similar grounds. The existence of reciprocity must be established at the time the recognition and enforcement of a foreign judgment is sought, and it is not possible to predict whether a Russian court will in the future recognize and enforce on the basis of reciprocity a judgment issued by a foreign court, including an English court. The Loan Agreement and any non-contractual obligations arising out of or in connection with the Loan Agreement will be governed by English law and will provide for disputes, controversies and causes of action brought by any party thereto against NLMK to be settled by arbitration in accordance with the rules of the LCIA (formerly the London Court of International Arbitration) (the ‘‘LCIA Rules’’). The place of such arbitration shall be London, England. The Russian Federation and the United Kingdom are parties to the United Nations (New York) Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the ‘‘New York Convention’’). Consequently, Russian courts should generally recognize and enforce in the Russian Federation an arbitral award from an arbitral tribunal in the United Kingdom on the basis of the rules of the New York Convention (subject to qualifications provided for in the New York Convention and compliance with Russian procedural regulations and other procedures and requirements established by Russian legislation). The Arbitrazh Procedural Code of the Russian Federation (the ‘‘Arbitrazh Procedural Code’’) sets out the procedure for the recognition and enforcement of foreign arbitral awards by Russian courts. The Arbitrazh Procedural Code also contains a list of grounds for the refusal of recognition and enforcement of foreign

viii arbitral awards by Russian courts, which grounds are broadly similar to those provided by the New York Convention. The Arbitrazh Procedural Code and other Russian procedural legislation could change, and other grounds for Russian courts to refuse the recognition and enforcement of foreign courts’ judgments and foreign arbitral awards could arise in the future. Furthermore, any arbitral award pursuant to arbitration proceedings in accordance with the LCIA Rules and the application of English law to the Loan Agreement and any non-contractual obligations arising out of or in connection with the Loan Agreement may be limited by the mandatory provisions of Russian laws relating to the exclusive jurisdiction of Russian courts and the application of Russian laws with respect to bankruptcy, winding up or liquidation of Russian companies and credit organizations in particular.

ix TABLE OF CONTENTS

OVERVIEW ...... 1 RISK FACTORS ...... 11 USE OF PROCEEDS ...... 32 CAPITALIZATION ...... 33 SELECTED CONSOLIDATED FINANCIAL INFORMATION ...... 34 OPERATING AND FINANCIAL REVIEW ...... 37 THE STEEL INDUSTRY ...... 87 BUSINESS ...... 93 MANAGEMENT AND CORPORATE GOVERNANCE ...... 130 PRINCIPAL SHAREHOLDERS ...... 134 RELATED PARTY TRANSACTIONS ...... 135 REGULATORY MATTERS ...... 136 DESCRIPTION OF THE ISSUER ...... 151 OVERVIEW OF THE TRANSACTION STRUCTURE AND THE SECURITY ...... 153 LOAN AGREEMENT ...... 155 TERMS AND CONDITIONS OF THE NOTES ...... 177 SUMMARY OF THE PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM ..... 189 TRANSFER RESTRICTIONS ...... 193 CERTAIN ERISA CONSIDERATIONS ...... 197 CLEARING AND SETTLEMENT ...... 199 TAXATION ...... 203 SUBSCRIPTION AND SALE ...... 213 INDEPENDENT AUDITORS ...... 216 GENERAL INFORMATION ...... 217 GLOSSARY OF TERMS ...... 219 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ...... F-1

x OVERVIEW This overview may not contain all the information that may be important to prospective purchasers of the Notes and, therefore, should be read in conjunction with this entire Prospectus, including the more detailed information regarding the Group’s business and the financial statements and related notes included elsewhere in this Prospectus. Prospective purchasers of the Notes should also carefully consider the information set forth under the heading ‘‘Risk Factors’’. Certain statements in this Prospectus include forward-looking statements that also involve risks and uncertainties as described under ‘‘Forward-Looking Statements’’.

OVERVIEW OF THE GROUP The Group is an international steel producer with a high degree of vertical integration and operations throughout all major stages of steel production, from the mining of raw materials to sales of high value added products to end users. With global operations across Europe, North America and Asia, the Group has a high level of self-sufficiency in key raw materials and energy resources, low cost steelmaking operations located in the Central District of Russia and rolling assets located in close proximity to its key customers in Russia, Europe and the United States. The Group has a diversified portfolio of steel products, with a strong presence in many industry sectors in both its Russian and international markets. NLMK is the largest producer of steel in Russia with approximately 20% of total Russian steel production through the first 11 months of 2012. The Group’s product range includes slabs, hot-rolled steel, long steel products such as rebar and wire rod and a variety of high value added products, which include a range of hot-rolled thick plates, cold-rolled steel, galvanized and pre-painted steel, electrical grain-oriented (transformer) and non-grain-oriented (dynamo) steel and metalware. High value added products represented 37% of the total volume of sales of steel products of the Group in the nine months ended September 30, 2012. In 2011, the Group had sales revenue of $11,728.6 million, Adjusted EBITDA of $2,254.3 million and Adjusted EBITDA margin of 19.2% and in the nine months ended September 30, 2012 the Group had sales revenue of $9,353.7 million, Adjusted EBITDA of $1,510.9 million and Adjusted EBITDA margin of 16.2%. The Group’s products are sold to over 70 countries in Europe, North America, Asia, Africa and the Middle East. The diversity of the Group’s products and export strength gives it the flexibility to focus on the most attractive markets and helps to protect it from downturns in a particular customer segment or geography. The Group identifies the most attractive markets using a range of criteria, including market growth potential, supply and demand balance, profitability, lead times and the complexity of the supply chain. In the nine months ended September 30, 2012, the Group’s Russian assets produced 19.6% of the overall Russian crude steel output, 19.1% of the overall Russian flat products output and 17.0% of the overall Russian rebar steel output, according to Metall Expert. The Group’s Russian operations produced 29.8% of the overall output of high value added products in Russia. The Group is a steel producer with a high degree of vertical integration and with control over a substantial part of its production chain, from its upstream operations, comprising the mining of raw materials and upstream diversified steelmaking (with a balance between BOF and EAF routes of crude steel production), to downstream steel processing (both flat and long finished steel products) close to the end users of its products and export seaports. The Group’s Russian operations represent 100% of the mining capacity of the Group, approximately 95% of its crude steelmaking capacity and approximately 50% of its downstream (production of rolled steel) processing capacity, including flat and long steel production. The Group’s mining division supplies raw materials, including iron ore concentrate, fluxing materials, coke and scrap to the Group’s Russia-based steelmaking operations. The Group’s core mining business is OJSC Stoilensky GOK (‘‘Stoilensky’’), an open pit mine with approximately 5 billion tonnes of primary iron ore reserves and one of the lowest cash costs of production (cost of mining and beneficiation per tonne of iron ore concentrate) in the global iron ore industry. Stoilensky supplies all of the Group’s iron ore concentrate and sinter ore requirements. The Group’s other raw material producing subsidiaries include OJSC Dolomit (‘‘Dolomit’’) and OJSC Studenovskaya Joint Stock Mining Company (‘‘Stagdok’’), which supply fluxing materials, and OJSC Altai-Koks (‘‘Altai-Koks’’), Russia’s largest non-integrated coke producer, which, together with the Lipetsk site’s coke production facilities, supplies all of the Group’s coke requirements. In addition, over 80% of all scrap consumed by the Group’s sites in Russia in 2011 was supplied by the Group’s captive scrap businesses which collect and process ferrous scrap, making NLMK one of the largest scrap collecting and processing companies in Russia. As part of the ongoing upstream development, the Group is currently seeking to expand the production of iron ore at Stoilensky by approximately 30% while also constructing a plant expected to produce 6 million tonnes per year of iron

1 ore pellets, which management expects to be operational in 2015. In addition, the Group has commenced feasibility studies in respect of two coal deposit development projects, specifically Zhernovskoye-1, including Zhernovski-Gluboki, in the Kemerovo region, Western Siberia, and Usinsky-3 in the Komi Republic. The Group expects that it will require at least another four to six years before it begins commercial mining at these deposits, subject to completion of the feasibility studies and approval to proceed with the projects. The Group seeks to control costs throughout the production cycle and believes that it enjoys one of the most competitive production cost structures in the global steel industry. Management believes that the Group’s main production site in Lipetsk, which accounts for approximately 80% of the overall crude steel capacity of the Group, has one of the lowest cash costs of steel production among the world’s steel producers and one of the lowest among its Russian competitors. The Group achieves this by ensuring economies of scale in the production process and by upgrading its production facilities, which Management believes include some of the most modern in the global steel industry. The Group also operates a long steel division in Russia comprising electric arc furnace-steel production and rolling mills producing rebar, wire-rod and metalware. The Group enjoys an advantageous geographical position, with production sites located close to its customer base in regions with extensive transportation infrastructure. The Group’s Russian operations benefit from a long-term agreement with its former subsidiary LLC Independent Transportation Company (‘‘NTK’’), a transportation company, for the supply of transport and rail logistics services. NTK is part of Universal Cargo Logistics Holding B.V. (‘‘UCL Holding’’), one of the largest railway wagon fleet owners in Russia. Both NTK and UCL Holdings are currently entities under common control. The Group’s main production site in Lipetsk (Novolipetsk) has convenient access to the Black Sea and Baltic Sea ports from where its products are shipped overseas. In addition, iron ore deposits are situated in close proximity to the Group’s main production site in Lipetsk. Most of the Group’s Russian customers are located within 500 kilometers of its main production site in Lipetsk, helping to streamline company logistics. In addition, the Group operates rolling mills in two of its key overseas markets through its subsidiaries in the European Union (in Belgium, Denmark, France and Italy), which together form the NLMK Europe business unit, and in the United States, which together form the NLMK USA business unit. NLMK Europe and NLMK USA together represent approximately 50% of the downstream processing capacity of the Group (or over 7 million tonnes a year). A substantial part of the feedstock (slabs) used by NLMK Europe and NLMK USA in the manufacturing of high value added products is supplied by the Group’s Russian operations. The Group pursues a strategy of sustainability and value-enhancing growth of its business, investing heavily into consolidating and developing its competitive advantages. The Group is currently in the final stage of the second phase of its investment program, which is designed to expand low-cost steel production in Russia, upgrade the Group’s production equipment and implement advanced technologies in order to increase production levels and efficiency, enhance fuel and energy facilities and expand mining operations to further increase the level of vertical integration. In 2009 to 2011, the Group invested a total of $4.6 billion in this program and a total of $9.7 billion since the program was launched in 2000. The Group expects to complete the second phase of the investment program in 2012-2013. The Group is currently undertaking project planning for the third stage of the program mainly aimed at further development of integration into key resources, including energy, improvement of its operations and in the efficiency of its business processes, and expansion of its downstream portfolio, including development of niche products.

2 of 0.9 million tonnes per year of long products, with a potential launch of an additional 0.6 million tonnes per year of long steel rolling capacity (the ‘‘NLMK-Kaluga Mini-Mill’’). Pursuing vertical integration remains the Group’s principal means of reducing industry risks. The Group has a high degree of vertical integration comprising a wide range of upstream assets ranging from mining and energy generation to primary steelmaking, processing and distribution. The Group seeks to grow its business by developing and acquiring upstream assets in cost-efficient locations and finishing facilities close to its customers without creating imbalances along the production chain, such as insufficient or surplus production capacities. While the Group seeks to take advantage of acquisition opportunities which enhance its growth potential, it approaches external expansion with a stringent value and synergy criteria, including an evaluation of the impact of the acquisition on the Group’s equity value and the synergy potential of the target. Management believes that continuing expansion of its downstream capacity enables the Group to meet evolving customer requirements and to improve profitability by offering higher value-added products. By producing high value-added products, the Group is able to safeguard the value generated at its upstream production facilities and to improve their capacity utilization rates. Following the acquisition of the rolling assets of Steel Invest and Finance S.A. (‘‘SIF’’), the Group is able to process approximately 90% of its steel into finished product after the recent growth in its BOF steelmaking capacity by 36% to 12.4 million tonnes. The Group intends to expand its product offering by developing its downstream capabilities, capturing opportunities in both growing markets, like Russia, as well as in mature markets, in each case by offering high value added products, including niche products, manufactured in close proximity to the end-user.

Self-sufficiency in key resources The Group has been pursuing self-sufficiency in key resources in order to secure supplies and to control the costs of steel. The Group’s upstream assets, such as its mining, coke production and scrap processing facilities, supply it with the key input materials, such as iron ore, coke, scrap and fluxes required for crude steel production, and enable it to manage risks associated with price fluctuations for raw materials. In 2011, iron ore concentrate and sinter ore production at Stoilensky was in excess of the Group’s requirements (comprising approximately 85% of its total requirements in primary ferrous materials), Stagdok and Dolomit supplied all of the fluxes required by the Group and Altai-Koks (together with the coke operations at the Lipetsk site) fully covered its coke requirements. In addition, over 80% of all scrap consumed by the Group’s Russian assets was supplied by the Group’s captive scrap processing network. The Group has also built a portfolio of mining rights for coking coal deposits, and is currently performing various preparatory activities for the construction of two coal mines in Russia.

Low-cost and efficient operations Efficiency remains the cornerstone of the Group’s strategy. The Group is a cost leader and it strives to secure and maintain cost leadership positions in all the core markets where it competes. For instance, the cash cost of slabs produced at the Group’s Lipetsk site in 2011 was $396 per tonne, which was considerably below the global average of $550 per tonne (according to data published by World Steel Dynamics). The Group produces most of its raw materials and liquid steel in low cost locations combining integrated (BOF) and scrap-based (EAF) production routes, while more than a third of the Group’s finished products are produced in developed markets in close proximity to its diverse customer base. The Group also controls its costs by operating in-house raw materials and energy production, as well as by maintaining lower conversion costs across the entire production chain. The level of in-house generated electric energy self-sufficiency at the Lipetsk site was 52.6% in the nine months ended September 30, 2012 (47.9% in 2011). In order to manage the risk related to coking coal prices the Group is implementing alternative technologies (such as tar pitch, which is already rolled out at Altai-Koks, as well as hot stamping and pulverized coal injection) that allow it to replace premium grades of coal with less expensive coal, while maintaining the same quality of coke. The Group also aims to replace the consumption of coke and natural gas with steam coals, also known as PCI coal, with the first of the Group’s blast furnaces being transferred to PCI technology in 2013. The increase in productivity in terms of output of steel per employee at the Group’s Lipetsk site (from 269 tonnes in 2009 to 329 tonnes in 2011, representing an increase of 22%) reflects the Group’s commitment to maximizing efficiency in its operations. The Group also runs management efficiency initiatives identifying cost reduction opportunities and converting them into cost savings.

3 Flexibility The Group has a flexible business model, which enables it to address the increasing challenges in the industry. The diversity and the flexibility of the Group’s business are enhanced by its extensive product mix, which helps manage exposure to divergent industry cycles. The Group’s product portfolio is well balanced between both finished and semi-finished and standard and high-end products, contributing to superior asset performance and profitability. Ongoing technological innovation and product development increases the share of new products in the Group’s product mix, making its business more adaptable to the needs of its clients. In most product categories, the Group seeks to maintain a healthy balance between exposure to emerging and mature markets, thereby balancing growth and stability. In line with its strategy of building its market share in its core export markets and creating a more diversified product offering, in 2011, the Group acquired the remaining 50% interest in SIF, its former 50:50 joint venture with the Duferco Group. The transaction has significantly enhanced the Group’s international downstream portfolio and improved its product mix through the complete integration into the Group of 7 rolling facilities with a total capacity of over 5.5 million tonnes per year and a combined output in 2011 of 3.4 million tonnes, as well as a network of distribution and service centers.

Solid financial standing and operational performance The Group believes that its balanced business model, control over a significant portion of its raw material and energy supplies and its program of modernizing production facilities have enabled it to achieve a high level of operating and financial performance. In 2011, the Group’s net debt to Adjusted EBITDA ratio was approximately 1.49. NLMK is rated as being investment grade by Standard and Poor’s, Moody’s and Fitch. The Group’s credit ratings are as follows:

National Long-term rating Rating agency rating scale Outlook Standard and Poor’s ...... BBB RuAAA Negative Moody’s ...... Baa3 Aaa.ru Stable Fitch ...... BBB AA(ru) Stable

Strategy Management’s mission is to increase the Group’s long-term value through continuously improving its operational business model. To achieve this mission, the Group plans to pursue the following strategies:

Developing niche segments The Group strives to maximize its profitability by entering premium niche product segments, such as niche grades of plate steel, and offering new high-quality products for the automotive, construction, home appliance manufacturing and electrical engineering industries. The Group focuses on achieving continuous product quality improvements and the development of its competitive edge and know-how.

Improving efficiency of operations The Group aims to enhance the efficiency of its operations at every step of the value chain by investing in capital expenditures and streamlining its processes. In particular, the Group seeks to maximize the efficient use of secondary energy resources.

4 Operating in a safe, socially and environmentally responsible manner The Group is committed to operating in a safe, socially and environmentally responsible manner. To that end, the Group has a corporate responsibility policy aimed at achieving sustainable development objectives which are aligned with its long-term economic interests and which promote high standards of public welfare and the conservation of the environment.

Risk Factors Investment in the Notes involves a high degree of risk. For a detailed discussion of the risks and other factors to be considered when making an investment with respect to the Notes, see ‘‘Risk Factors’’ and ‘‘Forward-Looking Statements’’. Prospective investors in the Notes should carefully consider the risks and other information contained in this Prospectus prior to making any investment decision with respect to the Notes. Prospective investors should note that the risks described in this Prospectus are not the only risks the Group faces. NLMK and the Issuer have described only the risks they consider to be material. However, there may be additional risks that they currently consider immaterial or of which they are currently unaware.

5 OVERVIEW OF THE OFFERING The following overview of the Offering should be read in conjunction with, and is qualified in its entirety by, ‘‘Terms and Conditions of the Notes’’, ‘‘Clearing and Settlement’’ and ‘‘Loan Agreement’’.

The Notes Issuer ...... Steel Funding Limited. Joint Lead Managers ...... Deutsche Bank AG, London Branch, J.P. Morgan Securities plc and Societ´ e´ Gen´ erale.´ Notes Offered ...... U.S.$800,000,000 4.45 per cent. Loan Participation Notes due 2018. Issue Price ...... 100 per cent. of the principal amount of the Notes. Issue Date ...... February 19, 2013 Maturity Date ...... February 19, 2018 Trustee ...... Deutsche Trustee Company Limited. Principal Paying and Transfer Agent . Deutsche Bank AG, London Branch. Registrar (Regulation S Notes) ..... Regulation S Notes: Deutsche Bank Luxembourg S.A. U.S. Paying Agent, Rule 144A Registrar and Transfer Agent ..... Deutsche Bank Trust Company Americas. Interest ...... On each interest payment date (being February 19 and August 19 in each year and commencing on August 19, 2013), the Issuer shall account to the Noteholders for an amount equivalent to amounts of interest actually received by or for the account of the Issuer pursuant to the Loan Agreement, which interest under the Loan accrues at a rate of 4.45 per cent. per annum from and including the Issue Date. Form and Denomination ...... The Notes will be issued in registered form, in denominations of U.S.$200,000 and higher multiples of U.S.$1,000. The Regulation S Notes and the Rule 144A Notes will be represented by a Regulation S Global Note Certificate and a Rule 144A Global Note Certificate, respectively. The Regulation S Global Note Certificate and the Rule 144A Global Note Certificate will be exchangeable for Definitive Certificates in the limited circumstances specified in the Regulation S Global Note Certificate and the Rule 144A Global Note Certificate. Initial Delivery of Notes ...... On or before the Issue Date, the Regulation S Global Note Certificate shall be registered in the name of a nominee of, and deposited with a common depositary for, Euroclear and Clearstream, Luxembourg and the Rule 144A Global Note Certificate shall be registered in the name of Cede & Co. as nominee of, and deposited with a custodian for, DTC. Status of the Notes ...... The Notes are limited recourse, secured obligations of the Issuer as more fully described in ‘‘Terms and Conditions of the Notes— Status’’. The sole purpose of the issue and the Notes is to provide the funds for the Issuer to finance the Loan.

6 The Notes will constitute the obligation of the Issuer to apply the proceeds from the issue of the Notes solely for financing the Loan and to account to the Noteholders for an amount equivalent to sums of principal, interest and other amounts (if any) actually received and retained (net of tax) by or for the account of the Issuer pursuant to the Loan Agreement less any amount in respect of Reserved Rights, all as more fully described in ‘‘Terms and Conditions of the Notes—Status’’. Security ...... The Notes will be secured by the Charge (as defined in ‘‘Overview of the Transaction Structure and the Security’’) on: • all principal, interest and other amounts now or hereafter payable to the Issuer by NLMK under the Loan; • the right to receive all sums which may be or become payable by NLMK under any claim, award or judgment relating to the Loan Agreement; and • all the rights, title and interest in and to all sums of money now or in the future deposited in the Account (as defined in ‘‘Overview of the Transaction Structure and the Security’’) and the debts represented thereby (including interest from time to time earned on the Account, if any), pursuant to the Trust Deed, provided that Reserved Rights and any amounts relating to Reserved Rights are excluded from the Charge. The Notes will also be secured by an assignment with full title guarantee by the Issuer to the Trustee of its rights under the Loan Agreement (save for the Reserved Rights and those rights subject to the Charge) pursuant to the Trust Deed. Withholding Taxes ...... All payments of principal and interest in respect of the Notes by or on behalf of the Issuer will be made without deduction or withholding for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed or levied, collected, withheld or assessed by or on behalf of Ireland or any political subdivision or any authority thereof or therein having the power to tax, other than as required by law. In the event that any such deduction or withholding is required by law, the Issuer will be required, except in certain specified circumstances, to pay increased amounts of principal, interest or any other payment due thereon to the extent that it receives corresponding amounts from NLMK under the Loan Agreement. The sole obligation of the Issuer in this respect will be to pay to the Noteholders sums equivalent to the sums received by the Issuer from NLMK. Optional Redemption by NLMK for Taxation Reasons ...... The Issuer will be required to redeem in whole, but not in part, the Notes at the principal amount thereof, together with accrued and unpaid interest and additional amounts, if any, to the date of redemption should (1) NLMK elect to repay the Loan in the event that it is required to pay increased amounts under the Loan Agreement on account of Russian or Irish withholding taxes or as a result of the enforcement of the security provided for in the Trust Deed, or (2) NLMK elect to repay the Loan in the event it is required to pay additional amounts on account of certain costs incurred by the Issuer pursuant to the Loan Agreement.

7 Optional Redemption by the Issuer for Illegality ...... In limited circumstances as more fully described in the Loan Agreement, the Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time, upon giving notice to the Trustee and the Noteholders, at the principal amount thereof, together with accrued and unpaid interest and additional amounts, if any, to the date of redemption, in the event that it becomes unlawful for the Issuer to fund the Loan or allow the Loan to remain outstanding under the Loan Agreement or allow the Notes to remain outstanding or for the Issuer to maintain or give effect to any of its obligations in connection with the Loan Agreement or the Notes and/or to charge or receive or to be paid interest at the rate then applicable to the Loan or the Notes and, in such case, the Issuer shall require the Loan to be repaid in full. Relevant Events ...... Upon the occurrence of a Relevant Event (as defined in the Trust Deed), the Trustee may, subject as provided in the Trust Deed and subject to being indemnified and/or secured and/or prefunded to its satisfaction, enforce the security created in its favor pursuant to the Trust Deed. Ratings ...... The Notes are rated: • BBB by Fitch; • Baa3 by Moody’s; and • BBB by Standard & Poor’s. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning rating organization. Similar ratings on different types of notes do not necessarily mean the same thing. The ratings do not address the likelihood that the principal on the Notes will be prepaid or paid on a particular date before the legal final maturity date of the Notes. The ratings do not address the marketability of the Notes or any market price. Any change in the credit ratings of the Notes could adversely affect the price that a subsequent purchaser will be willing to pay for the Notes. The significance of each rating should be analyzed independently from any other rating. Listing ...... Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and trading on the Main Securities Market. Selling Restrictions ...... The Notes are subject to selling restrictions in the United States, the United Kingdom, Ireland, the Russian Federation and any other applicable jurisdictions. See ‘‘Subscription and Sale’’. Governing Law and Arbitration ..... The Notes, the Trust Deed, the Paying Agency Agreement (as defined below) and any non-contractual obligations arising out of or in connection with them shall be governed by and construed in accordance with English law and the Issuer has submitted in such documents to the jurisdiction of the courts of England. Use of Proceeds ...... The gross proceeds to the Issuer from the offering of the Notes are expected to be U.S.$800,000,000, which the Issuer intends to use for the sole purpose of financing the Loan to NLMK pursuant to the terms of the Loan Agreement.

8 Security Codes ...... Regulation S Notes: Common Code: 080863284 International Security Identification Numbers (‘‘ISIN’’): XS0808632847 Rule 144A Notes: Common Code: 078395052 ISIN: US85812PAB94 CUSIP: 85812PAB9 Clearing Systems ...... DTC (in the case of the Rule 144A Notes) and Euroclear and Clearstream, Luxembourg (in the case of the Regulation S Notes). Yield ...... The annual yield of the Notes when issued is 4.45 per cent. Risk Factors ...... An investment in the Notes involves a high degree of risk. See ‘‘Risk Factors’’. Certain Covenants ...... The Issuer has covenanted under the Trust Deed that, as long as any Notes remain outstanding, it will not, without the prior written consent of the Trustee, agree to any amendment or any modification or waiver of, or authorize any breach or proposed breach of, the terms of the Loan Agreement, except as otherwise expressly provided in the Trust Deed or the Loan Agreement. The Loan Lender ...... Steel Funding Limited, a company organized and existing as a limited liability company under the laws of Ireland. Borrower ...... OJSC Novolipetsk Steel, an open joint stock company incorporated under the laws of the Russian Federation. Status of the Loan ...... The Loan is a direct, unconditional, unsubordinated and unsecured obligation of NLMK and obligations under the Loan will rank at least pari passu with all other direct, unconditional, unsubordinated and unsecured indebtedness of NLMK. Principal Amount of the Loan ...... U.S.$800,000,000 Interest on the Loan ...... 4.45 per cent. per annum, payable semi-annually in arrears on February 19 and August 19 in each year starting on August 19, 2013. Use of Proceeds ...... NLMK intends to use the proceeds of the Loan for its general corporate purposes, including the refinancing of indebtedness. See ‘‘Use of Proceeds’’. Early Prepayments by NLMK ...... See ‘‘Optional Redemption by NLMK for Taxation Reasons’’ and ‘‘Optional Redemption by the Issuer for Illegality’’ above and Clause 5 (Repayment and Prepayment) described in ‘‘Loan Agreement’’. Withholding Taxes and Increased Costs ...... Payments under the Loan Agreement shall, except in certain limited circumstances, be made without deduction or withholding for or on account of Russian or Irish taxes, except as required by law. In the event that any deduction or withholding is required by law with respect to payments under the Notes or the Loan Agreement, NLMK will be obliged, except in certain limited circumstances, to increase the amounts payable under the Loan Agreement by an amount equivalent to the required tax payment.

9 Certain Covenants ...... The Loan Agreement contains a negative pledge, a restriction on certain reorganizations, a covenant to pay taxes and information delivery requirements, all as more fully described in ‘‘Loan Agreement’’. Events of Default ...... The Loan Agreement contains various events of default, including a cross-acceleration provision in respect of certain indebtedness of NLMK or any Material Subsidiary (as defined in the Loan Agreement) in excess of $50 million (or its equivalent in another currency), all as more fully described in ‘‘Loan Agreement’’. Governing Law ...... The Loan Agreement and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with English law.

10 RISK FACTORS Investment in the Notes involves a high degree of risk. Prospective investors in the Notes should carefully consider the following information about the risks described below, together with other information contained in this Prospectus prior to making any investment decision with respect to the Notes. The risks highlighted below could have a material adverse effect on the Group’s business, results of operations, financial condition or prospects, which, in turn, could have a material adverse effect on the ability of NLMK to service its payment obligations under the Loan Agreement and, as a result, the debt service on the Notes. In addition, the trading price of the Notes could decline if any of these risks materialize, and Noteholders may lose some or all of their investment. Prospective investors should note that the risks described below are not the only risks the Group faces. NLMK and the Issuer have described only the risks they consider to be material. However, there may be additional risks that they currently consider immaterial or of which they are currently unaware, and any of these risks could have the effect set forth above.

RISKS ASSOCIATED WITH THE GROUP’S BUSINESS AND INDUSTRY The Group’s business is dependent on the global economic environment. The global economic downturn which began in 2008 has had an extensive adverse impact on the steel industry, the effects of which have continued to some degree into 2011 and 2012. The substantial contraction in industrial activity in 2009 had a significant impact on both pricing and demand for steel products and iron ore. Furthermore, the global financial and economic crisis led to extreme volatility in the debt and equity markets, which led to severe reductions in liquidity, as well as to a general increase in the cost of borrowing for private sector borrowers. The second half of 2009, the year 2010 and the first half of 2011 were characterized by a number of positive developments in the global markets, as key emerging and developing economies demonstrated a strong demand for raw materials, supported by government stimulus initiatives. These trends were coupled with general restocking in the steel market and growth of consumption in developed markets. The second half of 2011 was in turn characterized by increased market volatility globally, and the low level of economic activity in Europe in that period combined with a significant deterioration in the steel market contributed to a gross loss of $60.5 million for the Group’s foreign rolled product segment from July 1, 2011 (the date of its consolidation within the Group) to December 31, 2011. The global economy continues to be subject to a number of uncertainties, including mounting government deficits, discontinuation of certain government stimulus programs, deflation in certain markets, continuing high levels of unemployment and concerns over the stability of monetary union in the European Union (see ‘‘—Risks relating to the Eurozone Crisis’’). If global economic conditions deteriorate or a similar economic contraction were to reoccur, the resulting contraction in demand for many of the Group’s products and the tightening of the credit markets could have a material adverse effect on the Group’s business, results of operations and financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes.

The Group operates in a cyclical industry, and any local or global downturn in the steel industry may have an adverse effect on its results of operations and financial condition. The steel industry is cyclical in nature because the industries in which steel customers operate are cyclical and sensitive to changes in general economic conditions. The demand for steel products thus generally correlates to macroeconomic fluctuations in the economies in which steel producers sell products, as well as in the global economy. The prices of steel products are influenced by various factors, including global and regional steel consumption, worldwide production capacity and capacity utilization rates, raw material costs, exchange rates, trade barriers and improvements in steelmaking processes. The global economic downturn which began in 2008 resulted in a deceleration in steel demand and a decline in steel prices, and, although prices subsequently exhibited a limited recovery in response to a partial recovery in economic conditions, steel prices are still below 2008 levels, and no assurance can be given that economic conditions will not deteriorate again with resulting adverse effects on steel prices. Further, the continuing adverse global economic conditions, including in the Eurozone, have led to a decline in steel prices in the third quarter of 2012. The deceleration in steel demand has also resulted in global overcapacity of steel production, which has led to reduced capacity utilization rates and, in some cases, closures of production capacity. See ‘‘—The Group’s business is dependent on the global economic environment’’. In the fourth quarter of 2012, the global economic situation continued to deteriorate and this had a negative impact on

11 steel markets, including European markets, which has resulted in, among other things, a lower level of customer demand for steel products, lower utilization rates and a downturn in steel prices. In the fourth quarter of 2012, the management of NLMK La Louviere, a rolling facility of NLMK Europe Strip Division in Belgium, formulated a restructuring plan in response to decreased customer demand and continued losses. The precise parameters of the plan are currently being negotiated with employee representatives and local government. See ‘‘Business—NLMK Europe’’. The demand for steel products and global steel production capacity have been strongly influenced by the developing world, particularly China, as well as India and other emerging markets. China is the largest global steel producer and the balance between its domestic production and consumption has been one of the major drivers of global steel prices. The rate of growth of gross domestic product in China decelerated in the second quarter of 2012, and, to the extent the surplus of domestic steel production relative to domestic steel demand in China results in increased volumes of export sales by Chinese producers, the global steel markets may experience further downward pricing trends. In the future, demand for steel products and prices of steel may continue to experience significant fluctuations as a result of these and other factors, many of which are beyond the Group’s control. Prolonged declines in global steel demand or prices would have a material adverse effect on the Group’s business, results of operations and financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes.

Risks relating to the Eurozone Crisis. In 2011, the European Union was the Group’s second largest market in terms of revenues, accounting for 23.6% of total revenues (21.0% in the nine months ended September 30, 2012). Recent developments in the region comprising the member states of the European Union that have adopted the euro (the ‘‘Eurozone’’) have been affected by the global economic crisis. Financial markets and the supply of credit are likely to continue to be impacted by concerns surrounding the sovereign debts of Greece, Ireland, Italy, Portugal and Spain, the possibility of further credit rating downgrades of, or defaults on sovereign debt, concerns about a slowdown in growth in certain economies and uncertainties regarding the stability and overall standing of the European Monetary Union (the ‘‘Eurozone Crisis’’). Governments and regulators have implemented austerity programs and other remedial measures to respond to the Eurozone debt crisis and stabilize the financial system but the actual impact of such programs and measures is difficult to predict. If the Eurozone Crisis is not resolved, it may be the case that one or more countries may default on their debt. If such an event were to occur, it could result in unpredictable market volatility with potential materially adverse effects on the Group’s business, results of operations and financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes. In addition, the departure of one or more countries from the European Monetary Union may result in the imposition of, inter alia, exchange control and mandatory payment laws. The exact nature of the risks that the Group faces is difficult to predict and guard against in light of the difficulties in predicting the outcomes of the remedial measures being undertaken in Europe, the extent to which the Eurozone Crisis, slowdown in growth or recession in Europe and elsewhere will impact on the global economy and the fact that the risks are outside of the Group’s control. In the fourth quarter of 2012, the management of NLMK La Louviere, a rolling facility of NLMK Europe Strip Division in Belgium, formulated a restructuring plan in response to decreased customer demand and continued losses. The precise parameters of the plan are currently being negotiated with employee representatives and local government. See ‘‘Business—NLMK Europe’’. To the extent that the Eurozone Crisis leads to a significant ongoing deterioration or dislocation in economic conditions in the European Union, the Group’s business, results of operations and financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes could be materially adversely affected.

The Group’s largest market in terms of revenues is Russia, and an economic downturn in Russia could have a material adverse effect on its business and financial condition. The Group derived 38.1% of its total revenues from sales to customers in Russia in 2011 (35.4% in the nine months ended September 30, 2012) and is therefore vulnerable to economic conditions in Russia. The Russian economy has experienced significantly fluctuating growth rates over the last two decades. In 2009, Russia’s real GDP declined by 7.8%, to a large extent as a result of the effects of the global economic and financial crisis. Although Russia’s real GDP increased by 4.3% in each of 2010 and 2011 and by 3.9% in the

12 nine months ended September 30, 2012, there can be no assurance that such recovery will be maintained. Furthermore, a significant portion of the Group’s products in Russia are used in the construction and infrastructure, automotive and engineering industries, which are particularly vulnerable to general economic downturns. In July 2012, the Group announced the temporary closure of blast furnace no. 2 at its main Lipetsk site, with an annual capacity of 0.8 million tonnes of pig iron, in response to falling demand in the Russian pig iron market, although the suspension did not impact the Group’s steel production. A downturn in the Russian economy, or in a particular sector of it, could result in a significantly reduced demand for the Group’s products, which would have a material adverse effect on the Group’s business, results of operations and financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes.

The steel industry is highly competitive. The Russian and international markets for steel and steel products are highly competitive. The Group competes primarily on the basis of price, volume, quality, technical innovation and the ability to meet customers’ product specifications and delivery schedules. The Group’s competitors include foreign steel producers, some of which are larger, have greater capital resources and more extensive global operations than the Group, as well as competitors in developing economies which may have comparable production costs. Furthermore, the highly competitive nature of the steel industry combined with excess production capacity for some steel products has resulted, and may in the future continue to result, in downward pressure on prices of some of the Group’s products. The intensity of competition, combined with the cyclical nature of steel markets, results in significant variations in economic performance, which may lead to a decrease in the Group’s expected profits.

The Group is dependent on suppliers for some of the raw materials that it uses and a disruption in supply or change in price could have a material adverse effect on its results of operations. The Group requires substantial amounts of raw materials in the steel production process, in particular iron ore and coking coal. While the Group has developed a substantial degree of self-sufficiency in raw material supplies for its Russian operations (which represent more than 90% of the Group’s total crude steel capacity), particularly with regard to iron ore concentrate and sinter ore requirements, coke and scrap (in which it is 100%, 100% and over 80% self-sufficient, respectively), the Group currently relies on third- party suppliers to provide all its coking coal requirements. Although the Group has acquired licenses for the exploration and development of coal deposits in Russia (Zhernovskoye-1, including Zhernovski- Gluboki, in Western Siberia and Usinsky-3 in the Komi Republic in the north west of Russia), the Group is currently at the stage of conducting feasibility studies at these deposits and expects that, subject to completion of the feasibility studies and approval to proceed with the projects, it will require at least another four to six years before it begins commercial mining at these deposits. In addition, the Group’s operations require various other raw materials, including iron ore pellets, ferro-alloys and non-ferrous metals, which are currently sourced from third-party suppliers. The price and availability of raw materials sourced from third parties are subject to market conditions, and the Group may not be able to adjust the prices of its steel products to recover the costs of significant increases in the prices of such raw materials. Any significant change in the prices or supply of raw materials could have a material adverse effect on the Group’s business, results of operations and financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes. See ‘‘—Increased energy costs or an interruption in the Group’s electricity or natural gas supply could materially adversely affect its business and results of operations’’.

Increased energy costs or an interruption in the Group’s electricity or natural gas supply could materially adversely affect its business and results of operations. Energy costs, particularly the costs of electricity and gas, comprise a significant portion of the Group’s cost of production. Electricity prices have been increasing in recent years in Russia, as well as in the European Union and the United States. In 2011, the price of electricity consumed by the Group’s Russian subsidiaries, which in 2011 accounted for 94% of the Group’s total crude steel production, increased by 8.0%. Further price increases for electricity may also occur in the future, and there is currently uncertainty as to the longer-term effects on pricing trends of the implementation of full price liberalization in the Russian electricity sector on January 1, 2011. In addition, in 2011, the Group purchased 2.7 billion cubic meters of natural gas, including 2.4 billion cubic meters purchased by the Group’s Russian operations from OJSC Gazprom (‘‘Gazprom’’) and other suppliers. Gazprom is the dominant producer and monopoly

13 transporter of natural gas within Russia, as well as a significant supplier of natural gas to Western Europe. Domestic natural gas prices are regulated by the government and have been rising in recent years in line with a restructuring plan for the Russian gas sector aimed at achieving a comparable level of gas prices on the domestic and international markets. In 2011, the average price (in rubles) of natural gas purchased by the Group’s Russian companies increased by 14.8% as compared with 2010. The price of gas purchased by the Group’s subsidiaries in the European Union has also been increasing in recent years. To the extent that the price the Group pays for natural gas continues to increase, the Group’s costs will rise and its profitability could be adversely affected. The Group may also be affected if Gazprom further diverts its sales from Russian to foreign markets, resulting in an insufficient supply of natural gas in the Lipetsk region or in Russia. An interruption in the Group’s electricity or natural gas supplies would have a significant effect on its business and results of operations. In the event of a failure in the electricity grid, production of the Group’s steel products could continue for only a limited time. Gas is one of the heating fuels, in addition to coke, that the Group uses in its blast furnaces and any interruption in supply could result in a decrease in the production levels of the blast furnaces and require the Group to consume significantly more coke.

Increased rail transportation costs or a disruption in rail transportation could significantly affect the Group’s operations, product distribution, business and financial results. Railway transportation is the Group’s principal means of transporting raw materials and steel products to its facilities. Railway tariffs for freight of the Group’s raw materials and products increased, on average, by approximately 7.5%, 9.4% and 10.6% in 2011, 2010 and 2009, respectively, resulting in significant increases in the Group’s transportation costs. A further significant increase in rail tariffs could adversely affect the Group’s profitability. The Group has a long-term cooperation arrangement (expiring in 2017) with NTK (a former subsidiary and currently an entity under common control), which is part of the UCL Holding group, one of the largest railway wagon fleet owners in Russia. However, transportation for the Group’s Russian operations is ultimately dependent on the railway network operated by the state-owned monopoly, Joint Stock Company Russian Railways (‘‘RZD’’). The Russian railway system is subject to risks of disruption as a result of the declining physical condition of the facilities, the limited capacity of border stations and load shedding, including those due to poorly maintained rail cars and train collisions. The Group’s coking operations are located in the Altai region of Russia, which is approximately 3,600 kilometers from the Group’s steel production units in Lipetsk, and, therefore, the Group is subject to the risk that the transportation of these supplies may be disrupted. Any prolonged disruption in the supply of raw materials to the Group or delivery of the Group’s steel products could have a material adverse effect on the Group’s business, results of operations and financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes. See ‘‘—Risks Relating to the Russian Federation—Some of Russia’s physical infrastructure is in very poor condition, which could disrupt normal business activity of the Group or lead to increased costs’’.

Wage increases in Russia may reduce the Group’s profit margins. In the nine months ended September 30, 2012, the average number of employees of the Group’s Russian operations represented 94% of the total average number of Group employees in that period. Wage costs in Russia have historically been significantly lower than wage costs in the more economically developed countries of North America and Europe for similarly skilled employees. However, if wage costs were to increase in Russia, this could result in a reduction in the Group’s profit margins. Although the Group has been able in the past to increase production efficiency in order to offset cost pressures resulting from wage inflation, to the extent that the Group is unable to continue to increase the efficiency and productivity of its employees, wage increases could have a material adverse effect on the Group’s business, results of operations and financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes.

Equipment failures or production curtailments or shutdowns could adversely affect the Group’s sales and profitability. Interruptions in production capacities will inevitably increase production costs and reduce sales and earnings. In addition to equipment failures, the Group’s facilities are also subject to the risk of catastrophic loss due to unanticipated events, such as fires, explosions or adverse weather conditions. The Group’s

14 manufacturing processes depend on critical pieces of steelmaking equipment, such as blast furnaces, basic oxygen furnaces, continuous casters and rolling equipment, as well as electrical equipment such as transformers, and this equipment may, on occasion, be out of service as a result of unanticipated failures. In the future, the Group may experience material plant shutdowns or periods of reduced production as a result of any equipment failures. Although the Group has insurance for equipment damage and business interruption, there can be no assurance that amounts recoverable under such insurance policies would be sufficient to compensate the Group for losses and expenses resulting from equipment failure or shutdown. Furthermore, a longer-term business disruption could result in a loss of customers. If this were to occur, future sales and the Group’s profitability could be adversely affected. In addition, the climate of the regions of Russia where the Group’s production facilities are located affects its operations during various times of the year. If colder weather starts earlier or ends later in the year, then the Group’s operating capacity may be reduced or stockpiles of raw materials may be increased.

The Group will require a significant amount of cash to fund its capital investments, and, if the Group is unable to generate this cash through its operations or through external sources, this program may not be completed on schedule or at all. The Group’s business is and will continue to be capital-intensive. In 2011, the Group’s capital expenditures were $2.0 billion and approximately $1.5 billion in 2012. In the past, the Group has generated a substantial portion of the cash necessary for these improvements and repairs through internal operations, and NLMK expects to continue to do so in the foreseeable future. If the Group’s cash flows are reduced, and the Group is not able to obtain alternative sources of external financing at an acceptable cost or in the amounts required, the Group’s planned capital investments may be substantially delayed or interrupted. In addition, the Group’s capital investments are subject to a variety of other uncertainties, including changes in economic conditions, delays in completion, cost overruns and defects in design or construction. No assurance can be given that the Group’s capital projects will be completed on schedule or that expected operational improvements will be fully realized as currently envisioned.

The Group has substantial short-term borrowings. The Group had short-term borrowings of $2,433.5 million as at September 30, 2012. The Group’s ability to refinance its short-term debt may depend on factors outside its control, including conditions in Russian and global credit markets. If the Group is unable to refinance such short-term borrowings on acceptable terms, the Group may need to reprioritize the allocation of its capital resources, which could have a material adverse effect on the Group’s business, results of operations and financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes.

The Group’s existing and future level or scope of insurance coverage may not be adequate. The Group operates many industrial facilities in which hazardous materials and substances that have the potential to present risks to the health or safety of workers and neighboring populations are in use. In relation to the Group’s Russian operations, the insurance industry in Russia is not as well developed as in certain other jurisdictions. Although the Group believes that, with respect to such Russian operations, it maintains insurance levels generally in line with the relevant local market standards, some of its business units do not have comprehensive business interruption insurance and do not maintain environmental liability insurance. Should any claims arise involving the Group’s business or products, it may be held liable for amounts exceeding applicable coverage ceilings or funding requirements and for uninsured events. Furthermore, any accident, whether it occurs at a production site or during the transport or use of products made by the Group, may result in production delays or claims for compensation, particularly contractual claims or product liability claims, which could have material adverse effect on the Group’s business, results of operations and financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes. See ‘‘Business—Insurance’’.

New or more stringent environmental or health and safety laws and regulations or stricter enforcement of existing environmental or health and safety laws and regulations in the countries in which the Group operates may have a significant negative effect on the Group’s operating results. The Group operates in an industry which affects the environment and requires compliance with stringent regulatory requirements. The operations of steelmaking plants have potential environmental problems, including the generation of pollutants and their decontamination, and storage and disposal of wastes and

15 other hazardous materials. Pollutant emissions and discharges, as well as disposed wastes, contain such substances as benzopyrene, nitrogen and sulfur oxides, sulfates, phenols and sludges (including those containing chrome, copper, nickel and zinc). Pollution risks and associated clean-up costs are often impossible to assess until audits of compliance with environmental standards have been performed and the extent of liability under environmental laws can be clearly determined. Environmental regulations are being revised in the Russian Federation and elsewhere, and the Group regularly evaluates its obligations in line with new or amended legislation. New and stricter environmental requirements have recently been imposed, and fines and other payments have been significantly increased. In addition to its Russian operations, the Group now has operations in the European Union and the United States and must comply with the environmental regulations in those regions. The Group’s operations are associated with the emission of ‘‘greenhouse gases’’, and the introduction of prospective international obligations on ‘‘greenhouse gases’’ regulations may have an adverse impact on Group’s operations. The Group is also subject to health and safety laws, regulations and standards, including workplace health and safety requirements. The Group’s compliance with these environmental, health and safety laws and regulations requires a commitment of significant financial resources. These laws and regulations may allow governmental authorities and private parties to bring lawsuits based upon damages to property and injury to persons resulting from environmental, health and safety incidents and other impacts of the Group’s past and current operations, and could lead to the imposition of substantial fines, penalties, other civil or criminal sanctions, the curtailment or cessation of operations, orders to pay compensation, orders to remedy the effects of violations and/or orders to take preventative steps against possible future violations. In addition, the Group, as a rule, has not been indemnified when it acquired businesses against (or released from) any environmental liabilities, or with respect to required expenses for the natural environment restoration, arising from activities that occurred prior to the acquisition of these businesses and the Group does not maintain insurance for such risks; therefore, the Group may be responsible for the entire amount of such liabilities (if any) and any expenses with regard to their discharge. Furthermore, evolving regulatory standards, enforcement and expectations may result in increased litigation or increased costs, all of which could have a material adverse effect on the Group’s business, results of operations and financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes.

The Group may consider further acquisitions as part of its strategic development but there can be no assurance that the Group will be able to integrate successfully such acquired businesses or identify suitable acquisition targets. As part of the implementation of its business strategy, the Group may consider further acquisitions which will help it to meet its production requirements, increase vertical integration or enhance future growth. The acquisition and integration of new companies and businesses pose significant risks to the Group’s existing operations, such as the difficulty of integrating the operations and personnel of the acquired business, problems with minority shareholders in acquired companies and their material subsidiaries, the potential disruption of the Group’s own business, the assumption of liabilities, including in relation to tax and environmental matters, relating to the acquired assets or businesses, the possibility that indemnification agreements with the sellers of those assets may be unenforceable or insufficient to cover potential tax or other liabilities, the difficulty of implementing effective management, financial and accounting systems and controls over the acquired business, the imposition and maintenance of common standards, controls, procedures and policies and the impairment of relationships with employees and counterparties as a result of difficulties arising out of integration. Furthermore, the value of any business the Group acquires or invests in may be less than the amount that the Group pays for it if, for example, there is a decline in the position of that business in the relevant market in which it operates or there is a decline in the market generally, which could impact the Group’s profitability. See ‘‘Operating and Financial Review—Significant Factors Affecting the Group’s Results of Operations—Acquisitions and Disposals’’.

Estimates of the Group’s mining reserves and resources are subject to uncertainties. The estimates concerning the reserves of iron ore deposits and other raw materials that the Group’s mining segment has a license to mine are subject to considerable uncertainties. These estimates are based on interpretations of geological data obtained from sampling techniques and projected rates of production in the future. Actual production results may differ significantly from reserves estimates. In addition, it may take many years from the exploration phase before production is possible. During that time, the economic feasibility of exploiting a discovery may change as a result of changes in the market price of the relevant raw material.

16 The Group’s ability to develop these reserves is subject to its ability to obtain, maintain and renew the licenses to those reserves. See ‘‘—The Group’s business could be adversely affected if it fails to obtain, maintain or renew necessary licenses, including subsoil licenses, and permits or fail to comply with the terms of its licenses and permits’’.

The Group’s mining and steel operations are subject to hazards and risks that could lead to unexpected production delays, increased costs, damage to property or injury or death to persons. The Group’s mining operations, like those of other companies engaged in mining operations, are subject to all of the hazards and risks normally associated with the exploration, development and production of natural resources, any of which could result in production shortfalls or damage to persons or property. In particular, hazards associated with the Group’s open-pit mining operations include flooding of the open pit, collapses of the open-pit wall, accidents associated with the operation of large open-pit mining and ore handling equipment, accidents associated with the preparation and ignition of large-scale open-pit blasting operations, production disruptions due to weather and hazards associated with the disposal of mineralized waste water, such as groundwater and waterway contamination. There are also hazards associated with the Group’s steel production operations, including fires or accidents at blast furnaces and other industrial accidents, and such operations may involve the use of hazardous materials and substances that have the potential to present risks to the health and safety of workers and neighboring populations. The Group is at risk of experiencing any, some or all of these hazards. The occurrence of any of these hazards could result in material damage to, or the destruction of, mineral properties or production facilities, human exposure to pollution, personal injury or death, environmental or natural resource damage, delays to production or shipping, reduced sales, increased costs, losses associated with remedying the situation, as well as potential legal liability for the Group. The liabilities resulting from any of these risks may not be adequately covered by insurance, and no assurance can be given that the Group will be able to obtain additional insurance coverage at rates it considers to be reasonable. The Group may therefore incur significant costs that could have a material adverse effect on the Group’s business, results of operations and financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes. See ‘‘—The Group’s existing and future level or scope of insurance coverage may not be adequate’’.

Inflation, or appreciation in real terms of the ruble against the U.S. dollar or the euro, may materially adversely affect the Group’s results of operations. A substantial majority of the Group’s production activities are located in Russia, and the majority of its direct costs are incurred in Russia. Russia has experienced high levels of inflation since the early 1990s. Inflation increased dramatically after the 1998 financial crisis, reaching a rate of 84.4% in that year. Notwithstanding recent reductions in the inflation rate, which in 2009 and 2010 was 8.8%, in 2011 was 6.1% and in the nine months ended September 30, 2012 was 5.2%, the Group tends to experience inflation-driven increases in some of the costs of its Russian operations, such as salaries, that are linked to the general price level in Russia. However, the Group may not be able to increase the prices that it receives for its products sufficiently in order to preserve operating margins, particularly, in the case of export sales, if that inflation is accompanied by real appreciation of the ruble against the U.S. dollar or the euro. Accordingly, high rates of inflation in Russia could increase the Group’s costs in Russia and decrease its operating margins. The Group’s reporting currency is the U.S. dollar. The Group’s products are typically priced in rubles for sales in the Russian Federation and in U.S. dollars and euros for sales outside the Russian Federation, whereas the majority of the Group’s direct costs are incurred in rubles. The ruble appreciated relative to the U.S. dollar by 3% and 4% in 2010 and 2011, respectively, although it has depreciated in the first nine months of 2012. Appreciation of the ruble against the U.S. dollar or the euro results in an increase in the Group’s costs relative to revenues, adversely affecting the Group’s results of operations. In this situation, due to competitive pressures, the Group may not be able to raise the prices that it charges for its products sufficiently to preserve its expected operating margins, and real appreciation of the ruble against the U.S. dollar or the euro may materially adversely affect the Group’s results of operations.

17 The Group’s business could be adversely affected if it fails to obtain, maintain or renew necessary licenses, including subsoil licenses, and permits or fails to comply with the terms of its licenses and permits. The Group’s mining subsidiaries do not have property rights to the deposits that they mine. Instead, they have licenses to explore and develop those deposits. Therefore, the Group’s business depends on the continuing validity of its licenses, including subsoil licenses for its mining operations, and the issuance of new licenses and the Group’s compliance with their terms. In relation to the Group’s three mining subsidiaries, the principal mining license of Stoilensky is due to expire on January 1, 2016, while the principal mining licenses of Stagdok and Dolomit are due to expire in 2028 and 2029, respectively. In addition, the Group may require new licenses or permits if it seeks to expand its existing operations or commence new operations. Regulatory authorities exercise considerable discretion in the timing of license issuance and renewal and the monitoring of licensees’ compliance with license terms. Requirements imposed by these authorities, which require the Group to comply with numerous industrial standards, recruit qualified personnel, maintain necessary equipment and quality control systems, monitor operations, maintain appropriate filings and, upon request, submit appropriate information to the licensing authorities, may be costly and time-consuming and may result in delays in the commencement or continuation of exploration or production operations. The Group has missed certain development targets set out in its license to mine the Zhernovskoye-1 coal deposit. Future audits may therefore record that the Group has not been in full compliance with the license terms. Although the Group considers such an outcome unlikely, there is a risk that the authorities could take action against the Group, including potentially a suspension or termination of the Zhernovskoye deposit license, for a failure to comply with the terms of such license. Private individuals and the public at large possess rights to comment on and otherwise engage in the licensing process. Accordingly, the licenses and permits the Group needs may be invalidated and may not be issued or renewed, or if issued or renewed, may not be issued or renewed in a timely fashion, or may involve requirements which restrict the Group’s ability to conduct its operations or to do so profitably. The legal and regulatory basis for the licensing requirements is often unclear, and ministerial acts and instructions that attempted to clarify licensing requirements are often inconsistent with legislation, which increases the risk that the Group may be found in non-compliance. In addition, it is possible that licenses applied for and/or issued in reliance on acts and instructions relating to subsoil rights issued by the Ministry of Natural Resources and Ecology of the Russian Federation could be challenged by the governmental authorities or otherwise as being invalid if they were found to be beyond the authority of that ministry. In the event that the licensing authorities discover a material violation, the Group may be required to suspend its operations or incur substantial costs in eliminating or remedying the violation, which could have a material adverse effect on the Group’s business, results of operations and financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes.

The Group’s competitive position and future prospects depend on its senior management’s experience and expertise. The Group’s ability to maintain its competitive position and to implement its business strategy is dependent to a large degree on the services of its senior management team. The loss or diminution in the services of members of the Group’s senior management team or an inability to attract, retain and maintain additional senior management personnel could have a material adverse effect on the Group’s business, financial condition, results of operations or prospects. Competition in Russia for personnel with relevant expertise is intense due to the limited quantity of qualified individuals, and this situation seriously affects the Group’s ability to retain its existing senior management and attract additional qualified senior management personnel, which could have a material adverse effect on the Group’s business, results of operations and financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes.

An increase in existing trade barriers or the imposition of new trade barriers in the Group’s principal export markets could cause a significant decrease in the demand for its products in those markets. Some of the products of the Group’s Russian operations are subject to various trade barriers, such as anti-dumping duties, tariffs and quotas, in its principal export markets, including the United States, Indonesia and Thailand. See ‘‘Regulatory Matters—Trade Barriers and Anti-Dumping Regulations’’. These trade barriers affect the demand for the Group’s products by effectively increasing the prices for those products compared to domestically available products. An increase in existing trade barriers, or the imposition of new trade barriers, could cause a significant decrease in the demand for the Group’s

18 products in its principal export markets, which could have a material adverse effect on the Group’s business, results of operations and financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes.

The Russian Government may impose export tariffs or pricing restrictions on Russian steel and mining producers, which could adversely affect the demand for its products. Historically, the Russian Government has considered adopting export tariffs on certain steel and mining products, potentially including products produced by the Group. Certain of the Group’s major customers, as well as other major consumers of steel products, have presented, and may in the future present, to the Russian Government initiatives to introduce such export tariffs in order to affect the pricing of steel and mining products in the domestic market. However, no decision has been made to this effect and, therefore, the impact of any such export tariffs or measures as may be adopted on the Group’s business, results of operations and financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes is uncertain. The Group’s ability to determine prices for the sales of its products in Russia could also be adversely affected to the extent that pricing ceilings or other restrictions are imposed. See ‘‘—Risks Relating to the Russian Federation—The Group is subject to anti-monopoly laws enforced by the FAS, which may result in certain limitations being imposed on the Group’s activities, the violation of which may result in civil, administrative and even criminal liability’’.

If transactions the Group or its predecessors have entered into are challenged for non-compliance with applicable legal requirements, the transactions could be invalidated or liabilities imposed on the Group. The Group and its predecessors have taken a variety of actions relating to share issuances, share disposals and acquisitions, valuation of property, interested party transactions, major transactions and anti-monopoly issues, in respect of which the Group, or its predecessors, did not fully comply with applicable legal procedures and which, therefore, could be subject to a legal challenge. A successful challenge against the Group for not complying with applicable legal requirements could result in the invalidation of those transactions or the imposition of liabilities on the Group. Moreover, since applicable provisions of law in various jurisdictions are subject to many different interpretations, the Group may not be able to successfully defend any challenge brought against similar transactions, and the invalidation of any such transactions or imposition of any such liability may, individually or in the aggregate, have a material adverse effect on the Group’s business, results of operations and financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes.

The Group’s operations could be adversely affected by labor relations. Most of the Group’s employees are members of a trade union. Although the Group considers the Group’s employee relations to be satisfactory, large union representation subjects the Group’s businesses to the threat of interruptions through strikes, lockouts or delays in renegotiations of labor contracts. In NLMK Europe and NLMK USA divisions, 88% and 74% of employees, respectively, were represented by a trade union as at September 30, 2012, as well as approximately 91% of employees of the Lipetsk site. The Group’s existing collective bargaining agreement with its main trade union at the Lipetsk site is due to expire in December 2013. To the extent that the Group is not able to renew such collective bargaining agreement on terms favorable to the Group or if the Group’s operations are affected by work stoppages or labor disputes at its NLMK Russia, NLMK Europe or NLMK USA divisions, including in connection with the restructuring plan currently being negotiated with employee representatives at NLMK La Louviere in Belgium (see ‘‘Business—NLMK Europe’’) the Group’s business, results of operations and financial condition or the trading price of the Notes could be materially adversely affected.

NLMK is beneficially controlled by a single person. NLMK is beneficially controlled by Mr. Vladimir Lisin (the ‘‘Majority Shareholder’’), who as at the date of this Prospectus, controlled indirectly 85.54% of NLMK’s shares (see ‘‘Principal Shareholders’’). As a result, the Majority Shareholder has the ability to exert significant influence over certain actions in respect of NLMK. While transactions with the Majority Shareholder and affiliates of the Majority Shareholder can benefit the Group and NLMK believes that such transactions have been conducted on an arm’s length basis, there can be no assurance that the Group could not have achieved more favorable terms had such transactions not been entered into with related parties. To the extent that the interests of the Majority Shareholder were to conflict with the interests of the Noteholders, the trading price of the Notes could be materially adversely affected.

19 RISKS RELATING TO THE RUSSIAN FEDERATION Emerging markets are subject to greater risks than more developed markets, including significant legal, economic and political risks. Investors in emerging markets such as Russia should be aware that these markets are subject to greater risk than more developed markets, including in some cases significant legal, economic and political risks. Moreover, financial turmoil in any emerging market country tends to adversely affect prices in debt or equity markets of all emerging market countries as investors move their money to more stable, developed markets. As has happened in the past, including during the current global economic crisis, financial problems or an increase in the perceived risks associated with investing in emerging economies may adversely affect the level of foreign investment, which may, in turn, adversely affect the economies in those countries. In addition, during such times, companies that operate in emerging markets can face severe liquidity constraints as foreign funding sources are withdrawn. As a result, even if the Russian economy remains relatively stable, financial turmoil in Russia could seriously disrupt the Group’s business and its ability to service its payment obligations under the Loan Agreement, as well as result in a decrease in the trading price of the Notes. Investors should also note that an emerging economy such as that of Russia is subject to rapid change and that the information set out in this Prospectus may become outdated relatively quickly. Accordingly, investors should exercise particular care in evaluating the risks involved and must decide for themselves whether, in light of those risks, their investment is appropriate. Generally, investment in emerging markets is only suitable for sophisticated investors who fully appreciate the significance of the risks involved. Potential investors are urged to consult with their own legal and financial advisors before making an investment in the Notes.

Some of Russia’s physical infrastructure is in very poor condition, which could disrupt normal business activity of the Group or lead to increased costs. Russia’s physical infrastructure largely dates back to Soviet times and has not been adequately funded and maintained since the dissolution of the Soviet Union. The rail and road networks, power generation and transmission, communications systems and building stock have been particularly affected. In the past, Russia has experienced electricity and heating shortages and blackouts, and the Russian railway system is subject to risks of disruption as a result of the declining physical condition of rail tracks and a shortage of rail cars. The poor condition or further deterioration of the physical infrastructure in Russia may harm its national economy, disrupt the transportation of goods and supplies, increase the costs of doing business and interrupt business operations, each of which could have a material adverse effect on the Group’s business, results of operations and financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes.

Potential political or social conflicts could create an uncertain operating environment hindering the Group’s long-term planning ability and could have a material adverse effect on the value of investments in Russia, including the trading price of the Notes. The Russian Federation is a federation of sub-federal political units, consisting of republics, territories, regions, cities of federal importance and autonomous regions and districts, some of which have the right to manage their internal affairs pursuant to agreements with the federal government and in accordance with applicable laws. The delineation of authority and jurisdiction among the members of the Russian Federation and the federal government is, in some instances, unclear. In practice, the division of authority and uncertainty could hinder the Group’s long-term planning efforts and may create uncertainties in the Group’s operating environment, which may prevent it from effectively carrying out its business strategy. In addition, ethnic, religious, historical and other divisions have, on occasion, given rise to tensions and, in certain cases, acts of terrorism (principally connected with the North Caucuses region) and military conflict, including the military conflict between the Russian Federation and Georgia in 2008. If existing conflicts remain unresolved, or new disturbances or hostilities arise, the Group may be unable to access capital, or access capital on terms reasonably acceptable to it, which may have a material adverse effect on the Group’s business, results of operations, financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes.

Political and governmental instability could adversely affect the value of investments in Russia, including the Notes. Since 1991, Russia has been moving from a one-party state with a centrally planned economy to a federal republic with democratic institutions and a market-oriented economy. The Russian political system, though

20 more stable than in the 1990s, remains vulnerable to popular dissatisfaction, including dissatisfaction with the results of privatizations in the 1990s, as well as to demands for autonomy from particular regional and ethnic groups. The course of political, economic and other reforms has in some respects been uneven, and the composition of the Russian Government has, at times, been unstable. However, over the period from 2000 to 2008, President Vladimir Putin achieved and generally maintained political and governmental stability in the country which accelerated the reform process and made the political and economic situation in Russia more conducive to investment. In March 2008, Mr. Dmitry Medvedev was elected as the President of Russia, and a significant degree of continuity has been maintained, in large part, to the appointment by President Medvedev of Vladimir Putin as the Russian Prime Minister, and, following Mr. Putin’s election as President of Russia in March 2012, the subsequent appointment of Mr. Medvedev as Prime Minister. It is possible, however, that future presidents may take a different approach to reforms and to the state’s foreign and domestic policies in the future. Moreover, in December 2011 and in 2012, there have been public protests alleging voting irregularities in federal parliamentary and presidential elections and demanding political reform. Any significant further increases in political instability could have a material adverse effect on the value of investments relating to Russia and as such on the Group’s business, results of operations, financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes.

Economic instability in Russia could harm the Group’s business and investment plans. Over the last two decades, the Russian economy has experienced at various times: • significant volatility in its GDP; • high levels of inflation; • increases in, or high, interest rates; • sudden price declines in the natural resource sector; • instability in the local currency market; • lack of reform in the banking sector and a weak banking system providing limited liquidity to Russian enterprises; • the continued operation of loss-making enterprises due to the lack of effective bankruptcy proceedings; • capital flight; and • significant increases in poverty rates, unemployment and underemployment. In addition, despite the campaign pursued by the Russian government against crime and corruption, the then President (and current Prime Minister) Mr. Dmitry Medvedev acknowledged in April 2012 that these measures had yielded only limited results to date. The Russian economy has been subject to abrupt downturns in the past. In late 2008, at the outset of the global economic downturn, the Government announced plans to institute more than $200 billion in emergency financial assistance in order to ease taxes, refinance foreign debt and encourage lending. However, these measures had a limited effect, although there has been some improvement, and the Russian economy has not yet fully recovered from the economic downturn. The impact of the global economic downturn on the Russian economy led to, among other things, several suspensions of trading on MICEX and RTS by market regulators since September 2008, a reduction in the Russian GDP and disposable income of the general population, a severe impact on bank liquidity, a significant devaluation of the ruble against the U.S. dollar and euro, sharp decrease in industrial production and a rise in unemployment. Any deterioration in the general economic conditions in Russia could have a material adverse effect on the Group’s business, results of operations, financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes.

The ongoing development in the Russian legal system and Russian legislation creates an uncertain environment for investment and for business activity. Russia continues to develop its legal framework in accordance with international standards and the requirements of a market economy. Since 1991, new Russian domestic legislation has been put into place. Currently, this system includes the Constitution of the Russian Federation of 1993, the Civil Code of the Russian Federation and other federal laws, decrees, orders and regulations issued by the President, the Russian Government and federal ministries, which can be complemented by regional and local rules and

21 regulations, adopted in certain spheres of regulation. Several fundamental Russian laws have only recently become effective and there still remain gaps and inconsistencies in regulatory infrastructure. Consequently, certain areas of judicial practice are not yet fully settled, and are therefore sometimes difficult to predict. Among the risks of the current Russian legal system are: • inconsistencies among (i) federal laws, (ii) decrees, orders and regulations issued by the President, the Russian Government, federal ministries and regulatory authorities and (iii) regional and local laws, rules and regulations; • limited judicial and administrative guidance on interpreting Russian legislation; • the relative inexperience of judges, courts and arbitration tribunals in interpreting new principles of Russian legislation, particularly business and corporate law; • substantial gaps in the regulatory structure due to delay or absence of implementing legislation; and • a high degree of unchecked discretion on the part of governmental and regulatory authorities. There are also legal uncertainties relating to property rights in Russia. During Russia’s transformation to a market economy, the Russian Government has enacted legislation to protect property against expropriation and nationalization, and, if property is expropriated or nationalized, legislation provides for fair compensation. However, there is no assurance that such protections would be enforced. Notwithstanding the implementation of recent measures, including the reforms of the Russian court system introduced by then President Dmitry Medvedev with the stated aim of ‘‘making the courts become as much as possible independent from the state authorities’’, the transitional state of the Russian legal system could affect the Group’s ability to enforce its rights under contracts, or to defend itself against claims by others, which could have a material adverse effect on the Group’s business, results of operations, financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes.

Findings of failure to comply with existing laws or regulations, unlawful, arbitrary or selective government action or increased governmental regulation of the Russian operations of the Group could result in substantial additional compliance costs or various sanctions. The Group’s operations and properties in Russia are subject to regulation by various government entities and agencies at both the federal and regional levels. Regulatory authorities often exercise considerable discretion in matters of enforcement and interpretation of applicable laws, regulations and standards, the issuance and renewal of licenses and permits and in monitoring licensees’ compliance with license terms, which may lead to inconsistencies in enforcement. Russian authorities have the right to, and frequently do, conduct periodic inspections of operations and properties of Russian companies throughout the year. Any such future inspections may conclude that the Group violated applicable laws, decrees or regulations. Findings that the Group failed to comply with existing laws or regulations or directions resulting from government inspections may result in the imposition of fines, penalties or more severe sanctions, including the suspension, amendment or termination of the Group’s licenses or permits or in requirements that the Group suspend or cease certain business activities, or in criminal and administrative penalties being imposed on the Group’s officers. In addition, unlawful, arbitrary or selective government actions directed against other Russian companies (or the consequences of such actions) may generally impact on the Russian economy, including the securities market. Any such actions, decisions, requirements or sanctions, or any increase in governmental regulation of the Russian operations of the Group, could increase the Group’s costs and could have a material adverse effect on the Group’s business, results of operations, financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes.

Shareholder liability under Russian legislation could cause NLMK to become liable for the obligations of its subsidiaries. Under Russian law, NLMK may be primarily liable for the obligations of its Russian subsidiaries jointly and severally with such entities if: (a) NLMK has the ability to make decisions for such Russian subsidiaries as a result of its ownership interest, the terms of a binding contract or in any other way; (b) NLMK has the ability to issue mandatory instructions to such Russian subsidiaries or joint venture entities and that ability is provided for by the charter of the relevant Russian subsidiary or in a binding

22 contract; and (c) the relevant Russian subsidiary concluded the transaction giving rise to the obligations pursuant to NLMK’s mandatory instructions. In addition, NLMK may have secondary liability for the obligations of its Russian subsidiaries if the subsidiary becomes insolvent or bankrupt as a result of the action of NLMK. Accordingly, NLMK could be liable in some cases for the debts of its subsidiaries, which could have a material adverse effect on the Group’s business, results of operations, financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes.

The recent accession of the Russian Federation to the World Trade Organization may lead to changes in the business and legal environment in Russia. The Russian Federation officially became a member of the World Trade Organization (‘‘WTO’’) on August 22, 2012. The accession may lead to significant changes in Russian legislation including, among others, the regulation of foreign investments in Russian companies and competition laws, as well as changes in the taxation system and customs regulations in Russia. In addition, implementation of the WTO rules may lead to the increase of competition in the markets where the Group operates. It is unclear yet if and when these legislative developments may take place; however, if new legislation is implemented in Russia as a result of accession to the WTO, such legislation could have a material adverse effect on the Group’s business, results of operations, financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes.

The Group is subject to anti-monopoly laws enforced by the FAS, which may result in certain limitations being imposed on the Group’s activities, the violation of which may result in civil, administrative and even criminal liability. The Federal Law No. 135-FZ ‘‘On Protection of Competition’’ dated July 26, 2006, which came into force on October 26, 2006 (the ‘‘Competition Law’’), generally prohibits any concerted action, agreement or coordination of business activity that results or may result in, among other things: (a) price fixing, discounts, extra charges or margins; (b) coordination of auction bids; (c) partition of a commodity market by territory, volume of sales or purchases, types of goods, customers or suppliers; (d) refusal to enter into contracts with buyers (customers) for reasons other than economic or technological reasons; (e) imposing unfavorable contractual terms; (f) fixing disparate prices for the same goods, for reasons other than economic or technological reasons; (g) creation of barriers to entering or exiting a market; and (h) restriction of competition in any other way. There is no established court practice on what concerted actions or coordination of business activity is and courts interpret these concepts inconsistently. As a result, there is significant uncertainty as to what actions may be viewed as violation of the Competition Law. In a number of precedents, Russian courts found concerted actions where market participants acted in a similar way within the same period of time, although, arguably, there have been legitimate economic reasons for such behavior and the behavior was not aimed at restriction of competition. Therefore, there is a risk that the Group can be found in violation of the Competition Law if its market behavior vis-a-vis` its customers or suppliers is viewed as being similar to behavior of the Group’s competitors and perceived by the FAS as a purported restriction of competition. Such broad interpretations of the Competition Law may result in the FAS imposing substantial limitations on the Group’s activities, may limit operational flexibility and may result in civil, administrative and even criminal liability. As a major Russian steel and metalware producer, the Group appears on the register maintained for companies with a 35% share in a particular goods market in Russia. For some of the products that the Group sells, its market share in Russia exceeds 65%, which means that the Group is deemed to have a dominant position in those markets. Under the current Russian competition law, companies entered on the register and having a dominant position are subject to restrictions on their ability to set prices for their products, which may adversely affect the Group’s results of operations. See ‘‘Regulatory Matters— Regulation of Competition’’. The FAS, which has extensive powers to investigate perceived violations of the Competition Law, has been very active over the last several years in policing marketing, sales and supply strategies of major participants of the Russian steel industry. In 2011, following an investigation, the FAS concluded that the Group had breached the Competition Law in setting prices for sales in Russia of electrical (transformer) steel, and, following the upholding of the FAS decision by the Moscow Arbitrazh Court, the Group filed an appeal against this decision with the Ninth Arbitrazh Court of Appeal on September 10, 2012, which has been rejected. The Group filed cassation appeals with the Federal Arbitrazh Court of Moscow District on December 17 and 18, 2012. The Group has also filed an appeal against the administrative procedural

23 decision regarding the amount of the penalty imposed by the FAS (approximately RUB 63.4 million) with the Moscow Arbitrazh Court on October 16, 2012, which is aimed at decreasing the sum of the fine. If the FAS decisions referred to above are upheld by the higher courts , the Group could be subject to a fine in the amount of approximately RUB 63.4 million ($2.1 million) imposed by the FAS, or ordered to change its business operations in a manner that increases costs or reduces profit margin and revenue, which could adversely affect the Group’s business, results of operations, financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes. In addition, the Group’s gas pipeline facility at its Lipetsk site is deemed to be a ‘‘natural monopoly’’ for the purposes of Russian law, and, as a result, the Group may face additional regulation or restrictions on the use of such pipeline, including requirements to provide access to the pipeline to third parties or the imposition of pricing conditions. See ‘‘Regulatory Matters—Regulation of Natural Monopolies’’.

The Russian taxation system is relatively underdeveloped. The Russian Government is constantly reforming the tax system by redrafting parts of the Tax Code of the Russian Federation (the ‘‘Russian Tax Code’’). These changes have resulted in some improvement in the tax climate. As of January 1, 2009 the corporate profits tax rate was reduced to 20 per cent. For individuals who are tax residents in Russia the current personal income tax rate is 13 per cent. The general rate of VAT is 18 per cent. Since January 1, 2010 the Unified Social Tax was replaced by social security charges to the Russian pension, social security and medical insurance funds. The total rate of the respective social security charges equals 30 per cent on the taxable base for up to RUB 568,000 of an employees’ annual remuneration and 10 per cent on the amount exceeding RUB 568,000 for 2013. In addition, the new Russian transfer pricing legislation has been in force since January 1, 2012. Russian tax laws, regulations and court practice are subject to frequent change, varying interpretations and inconsistent and selective enforcement. In accordance with the Constitution of the Russian Federation, laws that introduce new taxes or worsen a taxpayer’s position cannot be applied retroactively. Nonetheless, there have been several instances when such laws have been introduced and applied retroactively. Despite the Russian Government having taken steps to reduce the overall tax burden in recent years in line with its objectives, there is a possibility that the Russian Federation would impose arbitrary or onerous taxes and penalties in the future, which could have a material adverse effect on the Group’s business, results of operations, financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes. In addition to the usual tax burden imposed on Russian taxpayers, these conditions complicate tax planning and related business decisions. These uncertainties could possibly expose the Group to significant fines and penalties and potentially severe enforcement measures despite its best efforts at compliance, and could result in a greater than expected tax burden, and could have a material adverse effect on the Group’s business, results of operations and financial condition or prospects. Generally, taxpayers are subject to tax audits for a period of three calendar years immediately preceding the year in which the decision to carry out a tax audit has been taken. In certain circumstances repeated tax audits (i.e. audits with respect to same taxes and the same periods) are possible. Generally, the statute of limitations for the commission of a tax offence is also limited to three years from the date on which it was committed or from the date following the end of the tax period during which the tax offence was committed (depending on the nature of the tax offence). Nevertheless, according to the Russian Tax Code and based on current judicial interpretation, there may be cases where the tax offence statute of limitations may be extended beyond three years. Tax audits or inspections may result in additional costs to the Group, in particular if the relevant tax authorities conclude that the Group did not satisfy its tax obligations in any given year. Such audits or inspections may also impose additional burdens on the Group by diverting the attention of management resources. The outcome of these audits or inspections could have a material adverse effect on the Group’s business, results of operations, financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes. In October 2006, the Plenum of the Supreme Arbitrazh Court of the Russian Federation issued a ruling concerning judicial practice with respect to unjustified tax benefits. In this context, a tax benefit means a reduction in the amount of a tax liability resulting, in particular, from a reduction of the tax base, the receipt of a tax deduction or tax concession or the application of a lower tax rate, and the receipt of a right

24 to a refund (offset) or reimbursement of tax. The ruling provides that, where the true economic intent of operations is inconsistent with the manner in which they have been taken into account for tax purposes, a tax benefit may be deemed to be unjustified. The same conclusion may apply when an operation lacks a reasonable economic or business rationale. As a result, a tax benefit cannot be regarded as a business objective in its own right. On the other hand, the fact that the same economic result might have been obtained with a lesser tax benefit accruing to the taxpayer does not constitute grounds for declaring a tax benefit to be unjustified. Moreover, there are no rules and little practice for distinguishing between lawful tax optimization and tax avoidance or evasion. The tax authorities have actively sought to apply this concept when challenging tax positions taken by taxpayers in court, and are anticipated to expand this trend in the future. Although the intention of this ruling was to combat tax law abuses, in practice there can be no assurance that the tax authorities will not seek to apply this concept in a broader sense than may have been intended by the Supreme Arbitrazh Court. The above conditions create tax risks in the Russian Federation that are more significant than the tax risks typically found in countries with more developed taxation, legislative and judicial systems. These tax risks impose additional burdens and costs on the Group’s operations, including management resources. Furthermore, these risks and uncertainties complicate the Group’s tax planning and related business decisions, potentially exposing the Group to significant fines, penalties and enforcement measures, and could materially adversely affect the Group’s business, results of operations, financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes. Furthermore, Russian tax legislation is consistently becoming more sophisticated. It is possible that new revenue raising measures could be introduced. Although it is unclear how any new measures would operate, the introduction of such measures may affect the Group’s overall tax efficiency and may result in significant additional taxes becoming payable. No assurance can be given that no additional tax exposures will arise. Additional tax exposures could have a material adverse effect on the Group’s business, results of operations, financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes.

Consolidation of the certain Group companies for Russian tax purposes under the recently adopted Russian law could be subject to challenge by the Russian tax authorities. In accordance with the amendments to the Russian Tax Code introduced in November 2011, in 2012 NLMK’s management set up a consolidated group of taxpayers (the ‘‘Consolidated Group of taxpayers’’) which includes ten Group companies. The companies among the Consolidated Group of taxpayers are considered as a single taxpayer for profits tax purposes. Furthermore, as part of the Consolidated Group of taxpayers the Group companies may reduce the profits tax base of the current tax period by the amount of tax losses incurred by one of the members of the Consolidated Group of taxpayers in such tax period. According to Russian tax law, the transactions conducted between Group companies included in the Consolidated Group of taxpayers should not be considered as controlled transactions for transfer pricing purposes. However, there can be no assurance that the above Russian tax treatment of the Group companies as the Consolidated Group of taxpayers will not be challenged by the Russian tax authorities throughout the term of the Loan.

New Russian transfer pricing rules may subject the Group’s transfer prices to challenge by the Russian tax authorities. Since January 1, 2012, new transfer pricing legislation has been introduced to Russian tax law. In summary, this transfer pricing legislation results in new transfer pricing rules. In particular, the methods for monitoring the prices of controlled transactions have been expanded and the list of controlled transactions currently includes: • cross-border transactions with certain types of commodities where the amount of income attributable to one counterparty exceeds RUB 60 million; • Russian domestic transactions between related entities if the total annual turnover of such transactions exceeds RUB 1 billion (RUB 3 billion for 2012 and RUB 2 billion for 2013); • transactions with residents of offshore jurisdictions included in the list established by the Ministry of Finance of the Russian Federation where the amount of income attributable to one counterparty exceeds RUB 60 million; and

25 • transactions between Russian legal entities and related foreign legal entities. The new transfer pricing law requires taxpayers to notify the Russian tax authorities as to all controlled transactions (for 2012 and 2013, the notification must be made in the event that the income attributable to one counterparty exceeds RUB 100 million and RUB 80 million, respectively). Taxpayers must also be required to present to the Russian tax authorities transfer pricing documentation upon their request. The Russian transfer pricing law could have a material adverse effect on the Group’s business, results of operations and financial condition, its ability to service its payment obligations under the Loan Agreement or the trading price of the Notes. See also ‘‘—Consolidation of the certain Group companies for Russian tax purposes under the recently adopted Russian law could be subject to challenge by the Russian tax authorities’’.

RISKS RELATING TO THE NOTES AND THE TRADING MARKET Payments under the Notes are limited to the amount of certain payments received by the Issuer from NLMK under the Loan Agreement. The Issuer has an obligation under the Terms and Conditions of the Notes and the Trust Deed to pay such amounts of principal, interest, and additional amounts (if any) as are due in respect of the Notes. However, the Issuer’s obligation to pay is limited to the amount of principal, interest, and additional amounts (if any) actually received and retained (net of tax) by, or for the account of, the Issuer pursuant to the Loan Agreement. Consequently, if NLMK fails to meet its payment obligations under the Loan Agreement, this will result in the Noteholders receiving less than the scheduled amount of principal or interest or any other amounts, if any, on the relevant due date. Moreover, except as otherwise expressly provided in the ‘‘Terms and Conditions of the Notes’’ and in the Trust Deed, the Noteholders will not have any proprietary or other direct interest in the Issuer’s rights under, or in respect of, the Loan Agreement. Subject to the terms of the Trust Deed, no Noteholder will have any entitlement to enforce any of the provisions of the Loan Agreement, or have direct recourse to NLMK, except through action by the Trustee under the Charge (as defined in the ‘‘Terms and Conditions of the Notes’’) or any assignment of rights, including the Assigned Rights (as defined in the ‘‘Terms and Conditions of the Notes’’). Furthermore, Noteholders should be aware that neither the Issuer or the Trustee accepts any responsibility for the performance by NLMK of its obligations under the Loan Agreement (see ‘‘Terms and Conditions of the Notes’’).

The right of the Issuer to receive payments under the Loan (and therefore its ability to make payments under the Notes as they fall due) is effectively subordinated to any liabilities of NLMK’s subsidiaries, and the ability of Noteholders to recover in full could be adversely affected if NLMK, or any of its subsidiaries, declares bankruptcy, liquidates or reorganizes. Some of the Group’s operations are conducted through NLMK’s subsidiaries, and, to a certain extent, NLMK depends on the earnings and cash flows of these subsidiaries to meet its debt obligations, including its obligations under the Loan Agreement. Some of NLMK’s subsidiaries have material liabilities, and many of those liabilities are secured. Since NLMK’s subsidiaries do not guarantee its payment obligations under the Loan Agreement or the Issuer’s payment obligations under the Notes, neither the Issuer nor Noteholders will have any direct claim on NLMK’s subsidiaries’ cash flows or assets. In the event of a bankruptcy, liquidation or reorganization of any of NLMK’s subsidiaries, their creditors will generally be entitled to payment of their claims from the cash flows and assets of those subsidiaries before any cash flows or assets are made available for distribution to NLMK as a shareholder. This may adversely affect NLMK’s ability to service its payment obligations under the Loan Agreement. In addition, a Noteholder’s claims in the currency of the Notes (U.S. dollars) may be converted into rubles in any Russian bankruptcy proceedings and, therefore, in addition to the general risks of less than full recovery associated with any bankruptcy (or similar) proceedings, Noteholders may be adversely affected by movements in the currency exchange rates between the ruble and the U.S. dollar.

The trading price of the Notes may be volatile. The trading price of the Notes could be subject to significant fluctuations in response to actual or anticipated variations in the Group’s or its competitors’ operating results, adverse business developments, changes to the regulatory environment in which the Group operates, changes in financial estimates by securities analysts, and the actual or expected sale of a large number of debt securities similar to the Notes, as well as other factors. Any such disruptions may harm Noteholders. In addition, in recent years, the

26 global financial markets have experienced significant price and volume fluctuations that, if repeated in the future, could adversely affect the trading price of the Notes without regard to the Group’s results of operations, prospects or financial condition.

The lack of a public market for the Notes could reduce the value of an investment in the Notes. There may not be an existing market for the Notes at the time they are issued. The Notes are expected to be listed and admitted to trading on the Main Securities Market of the Irish Stock Exchange. However, there can be no assurance that a liquid market will develop for the Notes, that Noteholders will be able to sell their Notes or that such holders will be able to sell their Notes for a price that reflects their value.

Payments on the Loan may be subject to Russian withholding tax. In general, interest payments on borrowed funds made by a Russian legal entity to a non-resident legal entity or organization are subject to Russian withholding tax at a rate of 20 per cent. for legal entities and 30 per cent. for non-resident individuals, unless such withholding is reduced or eliminated pursuant to the terms of an applicable double tax treaty. Based on professional advice received, NLMK believes that interest payments on the Loan made to the Issuer should not be subject to withholding tax under the terms of the applicable double tax treaty between the Russian Federation and Ireland. However, there can be no assurance that such double tax treaty relief will be available or will continue to be available throughout the term of the Loan. The application of tax benefits under the double tax treaty could be influenced by changes in the position of the Russian tax authorities to look beyond the mere form of the transaction while assessing the availability of treaty benefits. On the other hand, the amendments to the Russian Tax Code introduced by the Federal Law No. 97 FZ dated June 29, 2012 (the ‘‘Amendments’’) should allow the interest on the Loan not to be subject to withholding. In particular, the Amendments introduce into the Russian Tax Code an exemption from the obligation to withhold tax from interest paid under transactions similar to the transactions described herein. The Amendments entered into force starting from July 1, 2012. According to the Amendments, in respect of bonds issued prior to January 1, 2014, Russian borrowers are exempted from the obligation to withhold Russian withholding tax from interest payments made to foreign companies on debt obligations arising in connection with placement by these foreign companies of quoted bonds, provided that (i) there is a double tax treaty between the Russian Federation and the jurisdiction of tax residence of the issuer, and (ii) the issuer duly confirms its tax residence. The Amendments do not provide tax exemption for the holders of Eurobonds from Russian tax on interest payments, although at present there is no mechanism or requirement for non-residents to self-assess and pay the tax. For the purpose of the Amendments ‘‘quoted bonds’’ mean bonds and other debt obligations which passed the listing procedure and/or were admitted to circulation on one or more foreign stock exchanges and/or rights to which are recorded by a foreign depositary-clearing organization, provided such foreign stock exchanges and depositary-clearing organizations are specified in the list approved by the Federal Service for Financial Markets of the Russian Federation (the ‘‘FSFM’’) in consultation with the Ministry of Finance of the Russian Federation (the ‘‘List’’). The List was adopted on October 25, 2012 and includes the Irish Stock Exchange amongst the recognized foreign stock exchanges. Provided that the Notes have passed the listing procedure and/or have been admitted to circulation on the Irish Stock Exchange, the Notes should be recognized as ‘‘quoted bonds’’ for the purposes of the Amendments and, therefore, payments under the Loan should not be subject to Russian withholding tax. According to the Amendments the above exemption established for the interest payments is also applicable to (i) income payable by a Russian legal entity in connection with a guarantee, surety or other security granted by such Russian organization with respect to a debt obligation to a foreign organization and/ or with respect to quoted bonds and (ii) other income payable by a Russian organization, providing that the payment of such income is established by the provisions of the respective debt obligation or such income is paid due to a change in the terms and conditions of the respective quoted bonds and/or debt obligations including the cases of their early repurchase or redemption. The Amendments address Russian withholding tax treatment of interest payments or other above payments to be made to foreign companies on debt obligations arising in connection with the issuance by these foreign companies of quoted bonds before January 1, 2014. The Amendments do not address Russian tax treatment of payments under the quoted bonds issued on or after January 1, 2014.

27 If any payments under the Loan are subject to any Russian or Irish withholding tax, NLMK will be obliged to increase the amounts payable as may be necessary to ensure that the recipient receives a net amount equal to the amount it would have received in the absence of such withholding taxes. In addition, payments in respect of the Notes will, except in certain limited circumstances, be made without deduction or withholding for or on account of Irish taxes except as required by law. Payments in respect of the Notes should only be subject to deduction or withholding for or on account of Irish taxes as described in ‘‘Taxation—Ireland’’. In the event of such a deduction or withholding, the Issuer will be required to increase payments to the extent that it receives corresponding amounts from NLMK under the Loan Agreement. If withholding in respect of payments pursuant to the Loan Agreement occurs as a result of application of any amendments or clarification to, or change in the Russian/Ireland tax treaty, NLMK has a right to prepay the loan in accordance with the Loan Agreement. While the Loan Agreement provides for NLMK to pay such corresponding amounts in these circumstances, there are some doubts as to whether a tax gross up clause such as that contained in the Loan Agreement is enforceable under Russian law. Due to the limited recourse nature of the Notes, if NLMK fails to pay any such gross-up amounts, the amount payable by the Issuer under the Notes will be correspondingly reduced. Any failure by NLMK to increase such payments would constitute an Event of Default under the Loan Agreement. In certain circumstances (including following enforcement of the security upon the occurrence of a ‘‘Relevant Event’’ as defined in the Trust Deed), in the event that NLMK is obliged to increase the amounts payable, it may prepay the principal amount of the Loan together with accrued interest and/or additional amounts payable (if any) thereon, and all outstanding Notes would be redeemed by the Issuer (to the extent that it has actually received the relevant funds from NLMK). The Issuer will grant security over certain of its rights in the Loan Agreement to the Trustee in respect of its obligations under the Notes. The security under the Trust Deed will become enforceable upon the occurrence of a Relevant Event, as defined in the Trust Deed. In these circumstances, payments under the Loan Agreement (other than in respect of ‘‘Reserved Rights’’, as described in ‘‘Terms and Conditions of the Notes’’) would be required to be made to, or to the order of, the Trustee. Under Russian tax law, payments of interest and other payments made by NLMK to the Trustee will in general be subject to Russian income tax withholding at a rate of 20 per cent. (or, potentially, 30 per cent. in respect of non-resident individual Noteholders). It is not expected that the Trustee will, or will be able to, claim a withholding tax exemption under any double tax treaty. In addition, while it may be possible for some Noteholders who may be eligible for an exemption from Russian withholding tax under double tax treaties to claim a refund of tax withheld, there would be considerable practical difficulties in obtaining any such refund. There is a risk that under the Russian thin capitalization rules in certain circumstances where parties related to NLMK (i.e. any foreign corporate shareholder of NLMK owning directly or indirectly more than 20% share in NLMK’s charter capital and, potentially, affiliates of such foreign corporate shareholder, collectively the ‘‘Related Parties’’) hold Notes, part or all of the interest to be paid by NLMK under the Loan could be reclassified as dividends for Russian tax purposes. This would occur if the overall amount of the ‘‘controlled debt’’ of NLMK, calculated on an individual related party basis, exceeded three times the capital of NLMK, calculated in accordance with the requirements of the Russian Tax Code. Interest in the amount of such excess would be reclassified as dividends for Russian tax purposes. There is a risk that the ‘‘controlled debt’’ of NLMK may include all or part of the Loan, to the extent that any Related Parties acquire any portion of the Notes. Such reclassification of all or a portion of the interest under the Loan as dividends could potentially lead to the imposition of Russian withholding tax on such reclassified interest at the rate of 15 per cent., subject to possible tax relief under the double tax treaty between the Russian Federation and Ireland, and the non-deductibility of such interest for Russian profit tax purposes by NLMK. Also, such withholding on dividends would trigger the gross-up obligation of NLMK discussed above. Based on the assumption that the amount of NLMK’s ‘‘controlled debt’’ calculated in accordance with the requirements of Article 269 of the Russian Tax Code does not exceed three times the amount of ‘‘own capital’’ (‘‘sobstvenniy capital’’) of NLMK calculated on an individual Related Party basis, the Russian thin capitalization rules should not apply currently to the interest on the Loan. However, changes in these assumptions could result in all or a portion of such interest being subject to the thin capitalization rules in the future so as to treat ‘‘excess interest’’ related to the Loan as a dividend under the double tax treaty between the Russian Federation and Ireland subject to 15 per cent. withholding tax applicable to dividends (subject to possible tax treaty relief, if any) rather than zero withholding tax applicable to interest. Such withholding on dividends would trigger the gross-up obligation of NLMK discussed above.

28 It is currently unclear whether the provisions obliging NLMK to gross-up payments will be enforceable in the Russian Federation. If, in the case of litigation in the Russian Federation, a Russian court does not rule in favor of the Issuer or the Trustee and Noteholders, there is a risk that the tax gross-up for withholding tax will not take place and that payments made by NLMK under the Loan Agreement will be reduced by Russian income tax withheld by NLMK. See ‘‘Taxation—Russian Federation’’.

Tax might be withheld on disposals of the Notes in the Russian Federation, reducing their value. If a non-resident Noteholder that is a legal person or organization, which in each case is not organized under Russian law and which holds and disposes of the Notes otherwise than through a permanent establishment in Russia, sells the Notes and receives proceeds from a source within the Russian Federation, there is a risk that any part of the payment that represents accrued interest may be subject to a 20 per cent. Russian withholding tax (even if a disposal is performed at a loss). The foreign Noteholder may be entitled to a reduction of such Russian withholding tax under an applicable double tax treaty. Where proceeds from a disposal of the Notes are received from a source within the Russian Federation by a non-resident Noteholder that is an individual, there is a risk that Russian withholding tax would be charged at a rate of 30 per cent. on gross proceeds from such disposal of the Notes less any available cost deduction. There is no assurance that advance double tax treaty relief would be granted to an individual and obtaining a refund can involve considerable practical difficulties. The imposition or risk of imposition of this withholding tax could adversely affect the value of the Notes. See ‘‘Taxation—Russian Federation’’.

The Notes may or must be redeemed early in a number of circumstances, and NLMK may be unable to repay its obligations under the Loan Agreement. In certain circumstances, as more fully described in ‘‘Terms and Conditions of the Notes’’, NLMK may, or in some cases must, prepay the Loan in whole or in part together with accrued interest at any time, and (to the extent that it has actually received the relevant funds from NLMK) the Issuer shall redeem all outstanding Notes in accordance with the Terms and Conditions of the Notes. On such redemption, or at maturity, NLMK may not have the funds to fulfil its obligations under the Loan Agreement and it may not be able to arrange for additional financing. If the early repayment or maturity date of the Loan occurs at a time when other arrangements prohibit NLMK from repaying the Loan, NLMK may try to obtain waivers of such prohibitions from the lenders under those arrangements, or it could attempt to refinance the borrowings that contain the restrictions. If NLMK could not obtain the waivers or refinance these borrowings, it may be unable to repay the Loan.

Changes to NLMK’s credit rating or that of the Russian Federation may adversely affect the Notes’ trading price. It is expected that the Notes will be rated BBB by Fitch, Baa3 by Moody’s and BBB by Standard & Poor’s. Any changes in the credit ratings of NLMK or the sovereign rating of the Russian Federation could adversely affect the trading price of the Notes. In January 2012, Fitch Ratings Ltd. lowered its credit rating of the Russian Federation from positive to stable based on perceived increased political uncertainty and global economic outlook, and, in March 2012, Fitch Rating Ltd. announced it may further lower the Russian sovereign credit rating if the Government does not restrict its budget policy and fails to limit expenditure. A change in the credit rating of one or more other Russian corporate borrowers or banks could also adversely affect the trading price of the Notes. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating organization.

Noteholders’ rights will be limited so long as the Notes are issued in book-entry interests. Owners of book-entry interests will not be considered owners or holders of Notes unless and until definitive notes are issued in exchange for book-entry interests. Instead, Euroclear, Clearstream, Luxembourg, or DTC or their nominees, will be the sole holders of the Notes. Payments of principal, interest and other amounts owing on or in respect of the Notes in global form will be made as described in ‘‘Summary of the Provisions Relating to the Notes in Global Form’’ and none of the Issuer, the Trustee or any paying agent will have any responsibility or liability for any aspect of the records relating to, or payments of interest, principal or other amounts to, Euroclear, Clearstream, Luxembourg or DTC, or to owners of book-entry interests.

29 Owners of book-entry interests will not have the direct right to act upon any solicitation for consents or requests for waivers or other actions from holders of the Notes, including enforcement of security for the Notes. Instead, Noteholders who own a book-entry interest will be reliant on the nominees for the common depositary or custodian (as registered holder of the Notes) to act on their instructions and/or will be permitted to act directly only to the extent such holders have received appropriate proxies to do so from Euroclear, Clearstream, Luxembourg or DTC or, if applicable, from a participant. There can be no assurances that procedures implemented for the granting of such proxies will be sufficient to enable the Noteholders to vote on any requested actions or to take any other action on a timely basis.

Examiners, preferred creditors under Irish law and floating charges may impose additional risks on the Notes. COMI The Issuer has its registered office in Ireland. As a result there is a rebuttable presumption that its centre of main interest (‘‘COMI’’) is in Ireland and consequently that any main insolvency proceedings applicable to it would be governed by Irish law. In the decision by the European Court of Justice (‘‘ECJ’’) in relation to Eurofood IFSC Limited, the ECJ restated the presumption in Council Regulation (EC) No. 1346/2000 of May 29, 2000 on Insolvency Proceedings, that the place of a company’s registered office is presumed to be the company’s COMI and stated that the presumption can only be rebutted if ‘‘factors which are both objective and ascertainable by third parties enable it to be established that an actual situation exists which is different from that which locating it at the registered office is deemed to reflect’’. As the Issuer has its registered office in Ireland, has Irish directors, is registered for tax in Ireland and has an Irish corporate services provider, the Issuer does not believe that factors exist that would rebut this presumption, although this would ultimately be a matter for the relevant court to decide, based on the circumstances existing at the time when it was asked to make that decision. If the Issuer’s COMI is not located in Ireland, and is held to be in a different jurisdiction within the European Union, Irish insolvency proceedings would not be applicable to the Issuer.

Examinership Examinership is a court procedure available under the Irish Companies (Amendment) Act 1990, as amended (the ‘‘1990 Act’’) to facilitate the survival of Irish companies in financial difficulties. The Issuer, the directors of the Issuer, a contingent, prospective or actual creditor of the Issuer, or shareholders of the Issuer holding, at the date of presentation of the petition, not less than one-tenth of the voting share capital of the Issuer are each entitled to petition the court for the appointment of an examiner. The examiner, once appointed, has the power to halt, prevent or rectify acts or omissions, by or on behalf of the company after his appointment and, in certain circumstances, negative pledges given by the company prior to his appointment will not be binding on the company. Furthermore, where proposals for a scheme of arrangement are to be formulated, the company may, subject to the approval of the court, affirm or repudiate any contract under which some element of performance other than the payment remains to be rendered both by the company and the other contracting party or parties. During the period of protection, the examiner will compile proposals for a compromise or scheme of arrangement to assist in the survival of the company or the whole or any part of its undertaking as a going concern. A scheme of arrangement may be approved by the Irish High Court when a minimum of one class of creditors, whose interests are impaired under the proposals, has voted in favor of the proposals and the Irish High Court is satisfied that such proposals are fair and equitable in relation to any class of members or creditors who have not accepted the proposals and whose interests would be impaired by implementation of the scheme of arrangement and the proposals are not unfairly prejudicial to any interested party. The fact that the Issuer is a special purpose entity and that all its liabilities are of a limited recourse nature means that it is unlikely that an examiner would be appointed to the Issuer. If however, for any reason, an examiner were appointed while any amounts due by the Issuer under the Notes were unpaid, the primary risks to the holders of Notes would be as follows: (i) the Trustee, acting on behalf of Noteholders, would not be able to enforce rights against the Issuer during the period of examinership; and (ii) a scheme of arrangement may be approved involving the writing down of the debt due by the Issuer to the Noteholders irrespective of the Noteholders’ views.

30 Preferred Creditors If the Issuer becomes subject to an insolvency proceeding and the Issuer has obligations to creditors that are treated under Irish law as creditors that are senior relative to the Noteholders, the Noteholders may suffer losses as a result of their subordinated status during such insolvency proceedings. In particular: (i) under the terms of the Trust Deed, the Issuer will charge to the Trustee on behalf of Noteholders by way of first fixed charge (the ‘‘Charge’’) as security for its payment obligations in respect of the Notes certain rights under the Loan Agreement and to the Account. Under Irish law, the claims of creditors holding fixed charges may rank behind other creditors (namely fees, costs and expenses of any examiner appointed and certain capital gains tax liabilities) and, in the case of fixed charges over book debts, may rank behind claims of the Irish Revenue Commissioners for PAYE and VAT; (ii) under Irish law, for a charge to be characterized as a fixed charge, the charge holder is required to exercise the requisite level of control over the assets purported to be charged and the proceeds of such assets including any bank account into which such proceeds are paid. There is a risk therefore that even a charge which purports to be taken as a fixed charge may take effect as a floating charge if a court deems that the requisite level of control was not exercised; and (iii) in an insolvency of the Issuer, the claims of certain other creditors (including the Irish Revenue Commissioners for certain unpaid taxes), as well as those of creditors mentioned above, will rank in priority to claims of unsecured creditors and claims of creditors holding floating charges.

31 USE OF PROCEEDS The Issuer will use the proceeds received from the issue and sale of the Notes for the sole purpose of making the Loan. NLMK intends to use the proceeds of the Loan for its general corporate purposes, including the refinancing of indebtedness. The commissions, costs and expenses in connection with the issuance and offering of the Notes and the admission to trading thereof will be paid by NLMK.

32 CAPITALIZATION The following table sets forth NLMK’s consolidated capitalization as of September 30, 2012, derived from the Interim Financial Statements included elsewhere in this Prospectus. The following table should be read in conjunction with ‘‘Selected Consolidated Financial Information’’, ‘‘Operating and Financial Review’’ and the Financial Statements included elsewhere in this Prospectus.

As of September 30, 2012 (Amounts in millions of U.S. dollars) Cash and cash equivalents ...... 1,802.9 Long-term borrowings ...... 2,850.1 Stockholder’s equity Common stock ...... 221.2 Statutory reserve ...... 10.3 Additional paid-in capital ...... 306.4 Accumulated other comprehensive loss ...... (1,177.9) Retained earnings ...... 11,604.0 Non-controlling interest ...... (45.4) Total stockholder’s equity ...... 10,918.6 Total long-term borrowings and stockholders’ equity ...... 13,768.7 Except in relation to the ruble bond Series 08 issued by NLMK on December 07, 2012 in a total amount of RUB 10,000 million, there have been no material changes in the consolidated capitalization of NLMK and its subsidiaries since September 30, 2012. See ‘‘Operating and Financial Review—Liquidity’’. The Group expects to receive net proceeds from the offering of the Notes of approximately $797,092,629 (taking into account the estimated total commissions and expenses payable in relation to the offering of the Notes and the admission to trading of the Notes, which are expected to be approximately $2,907,371).

33 SELECTED CONSOLIDATED FINANCIAL INFORMATION The tables set forth below show certain selected historical consolidated financial information of the Group. The selected historical consolidated financial information as of and for the years ended December 31, 2011, 2010 and 2009 set forth below has been derived from the Annual Financial Statements included elsewhere in this Prospectus. The financial information as of September 30, 2012 and for the nine months ended September 30, 2012 and 2011 has been derived from the Interim Financial Statements. The selected historical consolidated financial information should be read in conjunction with ‘‘Operating and Financial Review’’ and the Financial Statements included elsewhere in this Prospectus.

Nine months ended Year ended December 31, September 30, 2011 2010 2009 2012 2011 (Amounts in millions of U.S. dollars unless otherwise indicated) Selected consolidated statement of income data Revenue ...... 11,728.6 8,350.7 6,139.9 9,353.7 8,675.1 Cost of sales ...... (8,369.0) (5,402.6) (4,150.4) (7,079.2) (6,077.7) Production cost ...... (7,780.3) (4,933.2) (3,672.3) (6,510.1) (5,617.7) Depreciation and amortization ...... (588.7) (469.4) (478.1) (569.1) (460.0) Gross profit ...... 3,359.6 2,948.1 1,989.5 2,274.5 2,597.4 General and administrative expenses ...... (556.1) (263.1) (297.2) (335.1) (365.6) Selling expenses ...... (972.7) (708.9) (654.6) (870.6) (690.5) Taxes other than income tax ...... (165.1) (123.3) (102.1) (127.0) (117.8) Impairment losses ...... — (58.2) (43.7) — — Operating income ...... 1,665.7 1,794.6 891.9 941.8 1,423.5 Losses on disposals of property, plant and equipment ...... (29.3) (9.7) (4.4) (37.6) (23.2) Gains/(losses) on investments, net ...... 11.9 (27.9) (10.9) (0.2) 69.0 Interest income ...... 29.5 45.1 59.7 18.5 19.9 Interest expense ...... — (15.9) (170.9) (38.0) — Foreign currency exchange gain/(loss), net . . 18.6 (59.3) (78.0) (10.8) 44.8 Other (expenses)/income, net ...... (14.3) (4.6) (92.7) (34.9) 3.9 Income before income tax ...... 1,682.1 1,722.3 594.7 838.8 1,537.9 Income tax expense ...... (421.0) (391.0) (181.8) (223.4) (400.1) Income, net of income tax ...... 1261.1 1,331.3 412.9 615.4 1,137.8 Equity in net earnings/(losses) of associates . 54.3 (107.3) (314.8) 0.3 54.1 Net income ...... 1,315.4 1,224.0 98.1 615.7 1,191.9 Add: Net loss attributable to the non-controlling interest ...... 42.2 31.0 117.0 1.7 12.3 Net income attributable to NLMK stockholders ...... 1,357.6 1,255.0 215.1 617.4 1,204.2 Income per share—basic and diluted: Net income attributable to NLMK stockholders per share (U.S. dollars) . . 0.2265 0.2094 0.0359 0.1030 0.2009 Weighted-average shares outstanding, basic and diluted (in thousands) ...... 5,993,227 5,993,227 5,993,227 5,993,227 5,993,227

Nine months ended Year ended December 31, September 30, 2011 2010 2009 2012 2011 (Amounts in millions of U.S. dollars) Selected consolidated statement of cash flows data Net cash provided by operating activities ...... 1,805.1 1,431.1 1,394.3 1,491.2 1,484.9 Net cash used in investing activities ...... (1,868.7) (1,847.4) (1,771.4) (1,062.9) (1,134.1) Net cash provided by/(used in) financing activities . 48.2 (79.1) (534.7) 635.2 (305.4) Net (decrease)/ increase in cash and cash equivalents ...... (15.4) (495.4) (911.8) 1,063.5 45.4 Cash and cash equivalents at the end of the period 797.2 748.0 1,247.0 1,802.9 830.0

34 As of December 31, As of 2011 2010 2009 September 30, 2012 (Amounts in millions of U.S. dollars) Selected consolidated balance sheet data Current assets ...... 5,503.8 4,105.3 3,876.7 6,287.5 Non-current assets ...... 11,753.4 9,793.7 8,625.2 12,661.0 Total Assets ...... 17,257.2 13,899.0 12,501.9 18,948.5 Current liabilities ...... 2,939.9 1,651.8 1,417.2 4,154.7 Non-current liabilities ...... 4,212.1 2,693.4 2,474.9 3,875.2 Total Liabilities ...... 7,152.0 4,345.2 3,892.1 8,029.9 NLMK stockholder’s equity ...... 10,105.2 9,553.8 8,609.8 10,918.6 Total liabilities and stockholders’ equity ...... 17,257.2 13,899.0 12,501.9 18,948.5

Nine months ended Year ended December 31, September 30, 2011 2010 2009 2012 2011 (Amounts in millions of U.S. dollars unless otherwise indicated)) Non-U.S. GAAP measures Adjusted EBITDA(1) ...... 2,254.3 2,322.2 1,413.8 1,510.9 1,883.5 Adjusted EBITDA margin (%)(2) ...... 19.2 27.8 23.0 16.2 21.7 Net debt(3) ...... 3,355.9 1,470.7 1,241.1 3,470.0 2,933.0 Net debt to Adjusted EBITDA(4) ...... 1.49 0.63 0.88 n/a n/a

(1) The Group’s Adjusted EBITDA for all periods presented was calculated as shown in the reconciliation below. The Group previously reported EBITDA calculated using a different method and those amounts are not presented in this Prospectus. NLMK presents Adjusted EBITDA because it considers it an important supplemental measure of the Group’s operating performance and believes it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in NLMK’s industry. Adjusted EBITDA has limitations as an analytical tool, and investors should not consider it in isolation, or as a substitute for analysis of the Group’s operating results as reported under U.S. GAAP. Some of these limitations are as follows:

• Adjusted EBITDA does not reflect the impact of depreciation and amortization on the Group’s operating performance. The assets of the Group’s businesses which are being depreciated and/or amortized will have to be replaced in the future and such depreciation and amortization expense may approximate the cost to replace these assets in the future. By excluding this expense from Adjusted EBITDA, Adjusted EBITDA does not reflect the Group’s future cash requirements for these replacements. Adjusted EBITDA also does not reflect the impact of equity in net earnings of associate, loss on disposal of property, plant and equipment, gain/loss on investments, foreign currency exchange gains/losses, impairment losses, or other income/expenses.

• Other companies in the NLMK’s industry calculate EBITDA or Adjusted EBITDA differently or may use it for different purposes as compared with NLMK, limiting its usefulness as a comparative measure. NLMK compensates for these limitations by relying primarily on its U.S. GAAP operating results and using Adjusted EBITDA only supplementally. See the Group’s consolidated statements of income and consolidated statements of cash flows included in the Financial Statements. A reconciliation of Adjusted EBITDA to net income is as follows:

Nine months ended Year ended December 31, September 30, 2011 2010 2009 2012 2011 (Amounts in millions of U.S. dollars) Net income ...... 1,315.4 1,224.0 98.1 615.7 1,191.9 Adjustments for: Interest (income)/expense, net ...... (29.5) (29.2) 111.2 19.5 (19.9) Income tax ...... 421.0 391.0 181.8 223.5 400.0 Depreciation and amortization ...... 588.7 469.4 478.1 569.1 460.0 Equity in net (earnings)/losses of associate ...... (54.3) 107.3 314.9 (0.3) (54.0) Loss on disposals of property, plant and equipment ...... 29.3 9.7 4.4 37.6 23.2 (Gain)/loss on investments ...... (11.9) 27.9 10.9 0.2 (69.0) Foreign currency exchange loss/(gain), net ...... (18.7) 59.3 78.0 10.8 (44.8) Impairment losses ...... — 58.2 43.7 — — Other expenses/(income), net ...... 14.3 4.6 92.7 34.9 (3.9) Adjusted EBITDA ...... 2,254.3 2,322.2 1,413.8 1,510.9 1,883.5

35 Adjusted EBITDA is a measure of the Group’s operating performance that is not required by, or presented in accordance with, U.S. GAAP and should not be considered as an alternative to net income, operating income or any other performance measures presented in accordance with U.S. GAAP or as an alternative to cash flow from operating activities or as a measure of the Group’s liquidity. In particular, Adjusted EBITDA should not be considered as a measure of discretionary cash available to the Group to invest in the growth of its business. (2) Adjusted EBITDA margin is calculated as a percentage of revenue for the relevant period. (3) Net debt is calculated as the sum of long-term and short-term borrowings less cash and cash equivalents and bank deposits with maturities over three months included in short-term financial investments at the end of the relevant period. (4) Net debt to Adjusted EBITDA is calculated as net debt as at the end of the relevant period divided by Adjusted EBITDA for the relevant period. Net debt to Adjusted EBITDA is not presented for interim financial periods.

36 OPERATING AND FINANCIAL REVIEW The following review of the Group’s financial condition and results of operations as of September 30, 2012 and for the nine months ended September 30, 2012 and 2011 and as of and for the years ended December 31, 2011, 2010 and 2009 includes forward-looking statements that involve risks and uncertainties. See ‘‘Risk Factors’’ and ‘‘Forward-Looking Statements’’ for a discussion of important factors that could cause the actual results to differ materially from the results described in the forward-looking statements contained in this Prospectus. The following should be read in conjunction with the Group’s Financial Statements and the related notes included in this Prospectus. Investors should not rely solely on the information contained in this section. Selected consolidated financial information in this section has been derived from the audited Annual Financial Statements and the Interim Financial Statements (which are unaudited), in each case without material adjustment, unless otherwise stated.

Overview The Group is an international steel producer with a high degree of vertical integration and operations throughout all major stages of steel production, from the mining of raw materials to sales of high value added products to end users. With global operations across Europe, North America and Asia, it has a high level of self-sufficiency in key raw materials and energy resources, low cost steelmaking operations located in the Central District of Russia and rolling mill assets located in close proximity to its key customers in Russia, Europe and the United States. In 2011, the Group had total revenue of $11,728.6 million, operating income of $1,665.7 million, Adjusted EBITDA of $2,254.3 million and Adjusted EBITDA margin of 19.2%, and, in 2010, it had total revenue of $8,350.7 million, operating income of $1,794.6 million, Adjusted EBITDA of $2,322.2 million and Adjusted EBITDA margin of 27.8%. In the first nine months of 2012, the Group had total revenue of $9,353.7 million, operating income of $941.8 million, Adjusted EBITDA of $1,510.9 million and Adjusted EBITDA margin of 16.2%. The Group’s has the following four major reporting segments: • Steel • Foreign rolled products • Long products • Mining The Group’s principal business segment is the steel segment, comprising the operations of the Russian steel production companies Novolipetsk (the main production site in Lipetsk representing approximately 80% of the steelmaking capacity of the Group), VIZ-Stal LLC (‘‘VIZ-Stal’’), as well as Altai-Koks, a metallurgical coke producer, and steel trading companies. The steel segment produces and sells steel slabs (semi-finished steel products), hot-rolled steel, cold-rolled steel, galvanized and pre-painted steel and electrical grain-oriented (transformer) and non-grain-oriented (dynamo) steel, as well as other products including coke. The steel segment generated revenue from external customers, which are defined as revenues from customers other than the Group’s other operating segments or businesses, of $8,042.7 million in 2011 and $6,703.2 million in 2010 ($5,446.5 million in the nine months ended September 30, 2012). Gross profit for the steel segment, on a standalone basis before consolidation adjustments, was $2,186.3 million in 2011 and $2,146.3 million in 2010 ($1,352.1 million in the nine months ended September 30, 2012) and its operating income was $1,075.3 million in 2011 and $1,316.8 million in 2010 ($466.9 million in the nine months ended September 30, 2012). The foreign rolled products segment produces and sells flat steel products: hot- and cold-rolled steel, galvanized and pre-painted steel, a wide range of thick plates, quenched and tempered steel and ingots for forging. The foreign rolled products segment comprises the operations of the Group’s downstream companies located outside Russia, including steel producing and rolling assets in the United States and Europe that were consolidated from July 1, 2011. See ‘‘—Significant Factors Affecting the Group’s Results of Operations—Acquisitions and Disposals—Consolidation of rolling assets of Steel Invest and Finance S.A.’’. The foreign rolled products segment was created following the consolidation of the SIF rolling assets in July 2011. The segmental information in the Financial Statements and this ‘‘Operating and Financial Review’’ section for periods prior to July 1, 2011 has been adjusted to conform to the current composition and presentation of the Group’s reportable segments.

37 The foreign rolled products segment generated revenue from external customers of $2,381.5 million in 2011 and $700.3 million in 2010 ($2,774.5 million in the nine months ended September 30, 2012). In 2011, the foreign rolled products segment, on a standalone basis before consolidation adjustments, made a gross loss of $60.5 million, compared to a gross profit of $7.9 million in 2010 (a gross loss of $12.1 million in the nine months ended September 30, 2012) and it made an operating loss of $305.2 million in 2011 and $31.0 million in 2010 ($229.4 million in the nine months ended September 30, 2012). The 2011 operating loss was primarily due to depressed economic conditions in Europe and a significant deterioration in the market environment. In the first half of 2011, the operating profit of the SIF rolling assets (which were consolidated from July, 1 2011) amounted to $60.8 million. The core activities of the long products segment are ferrous and non-ferrous scrap collection and processing, steelmaking (EAF-based), long products (rebar and wire-rod) and metalware manufacturing. The long products segment primarily comprises the operations of OJSC Nizhneserginsky Metizino- Metallurgicheskiy Zavod (‘‘NSMMZ’’) and Uralskiy Zavod Pretsizionnyh Splavov LLC (‘‘UZPS’’), as well as the scrap unit Vtorchermet NLMK and CJSC Kaluzhsky Nauchno-Proizvodstvenny Elektrometallurgichesky Zavod (‘‘KNPMZ’’), which was subsequently renamed ‘‘NLMK-Kaluga’’ and is currently constructing a new EAF mini-mill with a capacity of 1.5 million tonnes per year. The long products segment generated revenue from external customers of $1,154.2 million in 2011 and $864.8 million in 2010 ($918.1 million in the nine months ended September 30, 2012). Gross profit for the long products segment, on a standalone basis before consolidation adjustments, was $208.4 million in 2011 and $208.7 million in 2010 ($216.9 million in the nine months ended September 30, 2012), and its operating loss was $54.7 million in 2011 and $27.8 million in 2010 (operating income of $76.1 million in the nine months ended September 30, 2012). The 2011 operating loss was primarily due to pressure from the substantial increases in scrap prices and electricity tariffs, as well as the temporary closure of an EAF transformer following an accident with a resulting increase in purchases of billets from third-party suppliers. In 2012, the equipment was repaired and the segment’s steelmaking capacity production rates have since returned to normal levels. The loss after taxes of the long products segment was $317.3 million in 2011 and $244.9 million in 2010 ($60.0 million in the nine months ended September 30, 2012). The net loss in the long products segment was primarily due to interest expenses amounting to $122.3 million in the nine months ended September 30, 2012, primarily in relation to intragroup indebtedness that was created in connection with the restructuring and refinancing of the indebtedness of NSMMZ and UZPS outstanding at the time of their acquisition by the Group in 2007. The mining segment mines and processes iron ore concentrate, sinter ore, fluxing limestone and metallurgical dolomite, principally for use in the Group’s steel business. The mining segment primarily comprises the operations of iron ore producer Stoilensky and producers of fluxing materials Dolomit and Stagdok. The mining segment generated revenue from external customers of $148.9 million in 2011 and $81.4 million in 2010 ($214.2 million in the nine months ended September 30, 2012). Gross profit for the mining segment, on a standalone basis before consolidation adjustments, was $1,075.1 million in 2011 and $603.7 million in 2010 ($702.2 million in the nine months ended September 30, 2012), and its operating income was $991.9 million in 2011 and $544.5 million in 2010 ($605.5 million in the nine months ended September 30, 2012). The following table shows for the periods indicated revenue, gross profit/(loss) and operating income/(loss) for the Group’s segments on a standalone basis, before giving effect to eliminations on consolidation, as

38 well as any consolidation adjustments. These consolidation adjustments are referred to as ‘‘intersegmental operations’’.

Nine months ended Year ended December 31, September 30, 2011 2010 2009 2012 2011 (Amounts in millions of U.S. dollars) Revenue(1) Steel ...... 9,027.7 7,053.7 5,256.9 6,626.7 6,810.6 Foreign rolled products ...... 2,384.7 700.3 410.6 2,775.8 1,475.4 Long products ...... 1,794.3 1,376.9 882.5 1,275.8 1,409.0 Mining ...... 1,439.8 912.6 515.5 990.9 1,078.8 All other(2) ...... 1.4 1.2 5.3 0.5 0.6 Intersegmental operations(3) ...... (2,919.3) (1,694.0) (930.9) (2,316.0) (2,099.3) Total revenue ...... 11,728.6 8,350.7 6,139.9 9,353.7 8,675.1 Gross profit/(loss)(1) Steel ...... 2,186.3 2,146.3 1,715.6 1,352.1 1,729.9 Foreign rolled products ...... (60.5) 7.9 (31.2) (12.1) (37.7) Long products ...... 208.4 208.7 51.8 216.9 179.2 Mining ...... 1,075.1 603.7 216.9 702.2 808.7 All other(2) ...... 0.5 0.3 2.3 0.2 0.2 Intersegmental operations(3) ...... (50.2) (18.8) 34.1 15.2 (82.9) Total gross profit ...... 3,359.6 2,948.1 1,989.5 2,274.5 2,597.4 Operating income/(loss)(1) Steel ...... 1,075.3 1,316.8 898.8 466.9 918.4 Foreign rolled products ...... (305.2) (30.9) (64.6) (229.4) (174.7) Long products ...... (54.7) (27.8) (141.8) 76.1 10.0 Mining ...... 991.9 544.5 159.8 605.5 746.3 All other(2) ...... (0.9) (0.9) 1.4 (1.1) (0.8) Intersegmental operations(3) ...... (40.7) (7.1) 38.3 23.8 (75.7) Total operating income ...... 1,665.7 1,794.6 891.9 941.8 1,423.5

(1) Including intersegmental operations. (2) Comprises revenue primarily derived from the Group’s finance business, which provides insurance services to the Group and to other commercial and retail customers. (3) Represent consolidation adjustments eliminating intersegmental operations and balances. The following table shows as of the periods indicated assets for the Group’s segments on a standalone basis, before giving effect to eliminations on consolidation, as well as any consolidation adjustments.

Nine months ended Year ended December 31, September 30, 2011 2010 2009 2012 (Amounts in millions of U.S. dollars) Assets Steel ...... 13,061.0 12,814.4 10,897.2 14,969.8 Foreign rolled products ...... 4,225.5 652.6 610.2 3,897.1 Long products ...... 2,471.9 2,276.4 2,104.8 2,763.7 Mining ...... 1,871.0 1,195.5 1,000.9 2,223.7 All other ...... 45.8 43.0 41.7 54.4 Intersegmental operations(1) ...... (4,418.0) (3,082.9) (2,152.9) (4,960.2) Total assets ...... 17,257.2 13,899.0 12,501.9 18,948.5

(1) Represent consolidation adjustments eliminating intersegmental operations and balances. The prices for the sale and purchase of goods and services among the Group’s operating segments are determined by reference to market prices, but are not the result of an arm’s length negotiation.

39 Significant Factors Affecting the Group’s Results of Operations The Group’s results of operations are affected by a number of external factors, including the demand and price for steel products in the markets in which the Group operates, Russian macroeconomic trends, production costs (in particular, raw materials, energy and transportation costs) and currency exchange fluctuations, as well as acquisitions and disposals made by the Group.

Demand and price for steel in the markets in which the Group operates The demand for steel products generally correlates to macroeconomic fluctuations in the economies in which steel producers sell products, as well as in the global economy. The prices of steel products are influenced by various factors, including global and regional steel consumption, worldwide production capacity and capacity utilization rates, raw material costs, exchange rates, trade barriers and improvements in steelmaking processes. The demand for steel products and global steel production capacity have been strongly influenced by the developing world, particularly China, as well as India and other emerging markets. The global economic downturn which began in 2008 resulted in a decline for steel demand and prices. Although prices have recovered to a certain extent in response to a partial recovery in economic conditions, steel prices in the first nine months of 2012 were still below prices for the corresponding period of 2008, particularly in the European, North American and Asian markets, with average prices for products lower by between 11% to 35% as compared with the first nine months of 2008. The management of NLMK La Louviere, a rolling facility of the NLMK Europe Strip Division in Belgium, has been in discussions with representatives of its employees regarding a possible plant restructuring as a result of decreased customer demand and continued losses. The continued performance of NLMK La Louviere, as well as the outcome of these discussions, may have an impact on whether an impairment needs to be taken in connection with the preparation of the Group’s consolidated financial statements as of and for the year ended December 31, 2012.

Russian macroeconomic trends A substantial part of the Group’s operations is based in Russia and the Group generates a significant proportion of its sales in Russia, with 35.4% and 40.1%, respectively, of the Group’s total revenue being generated from Russia in the nine months ended September 30, 2012 and 2011 and 38.1%, 41.1% and 37.1%, respectively, in the years ended December 31, 2011, 2010 and 2009. As a result, Russian macroeconomic trends, including the overall growth in the economy, significantly influence the Group’s performance. The table below summarizes certain key macroeconomic indicators relating to the Russian economy in the years ended December 31, 2011, 2010 and 2009.

Year ended December 31, 2011 2010 2009 GDP growth ...... 4.3 4.3 (7.8) Percentage change in consumer price index ...... 6.1 8.8 8.8 Unemployment rate ...... 6.6 7.5 8.4

Source: Russian Federal State Statistics Service In 2011, domestic consumption of steel products increased by approximately 13.8% year-on-year, driven by demand from the construction, machine-building and energy sectors. In the first nine months of 2012, domestic consumption of steel products increased by approximately 5.1% year-on-year, driven largely by the demand from the construction sector. Inflation in the Russian Federation was 5.2% in the nine months ended September 30, 2012 and 6.1% in 2011, 8.8% in 2010 and 8.8% in 2009. Russian inflation has generally not had a material impact on the Group’s revenues in the periods under review, primarily because the prices of the Group’s products and the raw materials which it uses are mainly determined by global trends. While some of the Group’s costs, in particular employee salaries, are affected by inflation, they have not historically represented a substantial percentage of production costs.

Costs The Group requires substantial amounts of raw materials in the steel production process, in particular iron ore concentrate, sinter ore, pellets, coking coal, limestone, dolomite, ferro-alloys, non-ferrous metal and

40 scrap metal. In furtherance of its vertical integration strategy, the Group has invested in iron ore mining and processing companies primarily to secure a supply of iron ore concentrate at competitive market rates and to insulate the Group to a significant extent, on a consolidated basis, from the impact of increases in prices of iron ore materials. Stoilensky, an open pit iron ore mine, currently produces iron ore concentrate and sinter ore in excess of the Group’s needs. Management expects to launch additional iron ore concentrate production facilities at Stoilensky and a pelletizing plant with an estimated capacity of 6 million tonnes of pellets per year, in 2015, which it expects will cover the Group’s pellet requirements. The Group is already self-sufficient in metallurgical coke due to its coke production facilities at Altai-Koks and its main production site in Lipetsk. The Group is carrying out feasibility studies for two coal deposit development projects, Zhernovskoye-1 (including Zhernovski Gluboki), in Western Siberia and Usinsky-3 in the Komi Republic, with the aim of further reducing any impact from volatility in coal and coke price levels on its production costs. The Group expects that it will require at least another four to six years before it begins commercial mining at these deposits, subject to completion of the feasibility studies and approval to proceed with the projects. Meanwhile, in order to reduce risks associated with the growth in costs related to coking coal consumption in its blast furnace operations, the Group has been introducing a number of new technologies including pulverized coal injection, tar pitch granulation and coke stamping. The Group has to date installed tar pitch granulation at its Altai-Koks site that improves coke quality and reduces consumption of high grade coking coal in coke manufacturing. In addition, the Group is aiming to complete the installation of Pulverized Coal Injection (PCI) technology at its blast furnace operations in Lipetsk which it expects will enable it to substitute approximately 20% and 60%, respectively, of coke and natural gas consumption per tonne of pig iron with cheaper energy (PCI) coal grades. The Group’s limestone and dolomite demands are fully satisfied by its subsidiaries, Stagdok and Dolomit, respectively, and various strategies are being pursued to ensure that output meets the Group’s growing demand. The Group’s scrap collecting and processing unit, Vtorchermet NLMK, provides over 80% of the ferrous scrap required by its Russian steelmaking plants, mitigating the risk of third-party supply interruptions. Management expects to establish new scrap metal processing sites in various regions across Russia by 2016 in order to meet the Group’s growing scrap requirements, which it believes may increase further following the launch of the NLMK-Kaluga, a mini-mill in the Central European part of Russia with an expected long steel capacity of 1.5 million tonnes per year from 2013. The Group also consumes large volumes of electricity and natural gas and its operating costs are therefore influenced by increases in energy prices. In 2011 and 2010, the Group’s integrated electricity generation facilities supplied approximately 47.9% and 45.9%, respectively, of the electricity requirements of the Group’s main production site in Lipetsk (which, in 2011, produced 81.5% of the Group’s total steel output), with the remainder being purchased from the electricity market. In the first nine months of 2012, approximately 52.6% of the electricity requirements of the Lipetsk site were supplied from the Group’s integrated electricity generation facilities. The Group is seeking to mitigate the risk of electric energy price inflation through increasing its in-house generating capacity using by-product gases, as well as through implementing improvements in production efficiency to reduce the volume of energy consumed in steel production. In 2011, natural gas tariffs increased by 14.8% and electricity prices increased by 8.0% (in each case as compared to the average price paid by the Group’s Russian companies in 2010). The Group meets a significant proportion of its rail transportation requirements under a long-term agreement (expiring in 2017) with NTK. See ‘‘—Significant Factors Affecting the Group’s Results of Operations—Acquisitions and Disposals—Disposal of interest in NTK’’.

Currency exchange fluctuations The Group’s export sales generate foreign currency earnings. As the Group exports a significant part of its production, for which payment is made in U.S. dollars and euros, the Group is exposed to currency exchange rate fluctuations. See ‘‘—Quantitative and Qualitative Disclosures about Market Risk—Foreign currency exchange rate risk’’.

41 The table below shows the average exchange rate of the ruble against the U.S. dollar and the euro for the periods indicated.

Nine months Year ended December 31, ended 2011 2010 2009 September 30, 2012 Average exchange rate(1) (rubles per U.S. dollar) ...... 29.35 30.36 31.68 31.06 Average exchange rate(1) (rubles per euro) ...... 40.88 40.30 44.13 39.82

Acquisitions and Disposals In the periods under review, the Group has completed the acquisition and disposal of various businesses as part of the implementation of its strategy to increase vertical integration and to otherwise serve the Group’s growth objectives. NLMK believes that the continuing efficient vertical integration of the Group’s business will help it to better control access to low cost raw materials and energy sources and to lower the Group’s overall unit production costs, as well as capture some of the profits on a consolidated basis from higher raw material prices that may have otherwise been retained by third-party suppliers and gain it direct access to the end users in the key markets through the integration of the downstream (rolling) facilities with the core assets of the Group.

Consolidation of rolling assets of Steel Invest and Finance S.A. In July 2011, the Group completed the acquisition of the remaining 50% of SIF from the Duferco Group for a total cash consideration of $600 million, payable in four equal annual installments, with the first two tranches paid on June 30, 2011 and 2012, respectively, plus interest accrued on unpaid amounts at a rate equal to the U.S. dollar London interbank offered rate (‘‘LIBOR’’) for the relevant three-month interest period plus 1% until June 30, 2013 and at a rate of LIBOR for the relevant three-month interest period plus 2% until the earlier of June 30, 2014 or the date of payment. As part of the restructuring, SIF also transferred to the Duferco Group certain non-core assets consisting of its long product operations and Belgian steelmaking operations. This transaction significantly enhanced the Group’s international downstream portfolio through the complete integration into the Group of SIF’s seven flat steel rolling mills with a total capacity of over 5.5 million tonnes per year and a combined output in 2011 of 3.4 million tonnes per year, as well as a network of distribution and service centers. In the second half of 2011, the Group combined the rolling assets of SIF with its other rolling businesses located outside the Russian Federation to form its foreign rolled products segment.

Disposal of interest in NTK In June 2011, the Group disposed of its 100% interest in NTK to UCL Rail B.V., a subsidiary of UCL Holding, a related party. NTK’s core business is railroad transportation using its own and leased freight car fleet. The cash consideration in the transaction was $325 million and the net debt of NTK at the completion of the transaction was approximately $238 million. This divestment was in line with the Group’s strategy aimed at streamlining its asset structure and splitting off non-core assets. In connection with this sale, NLMK and NTK signed a long-term agreement (expiring in 2017) for NTK to continue supplying transport and rail logistics services to the Group. NTK will render transport services to the Group and other freight owners using rolling stock owned by UCL Holding, one of the largest railway wagon fleet owners in Russia. Management expects that the rail transportation needs of the Group’s Russian operations will be fully met by the arrangements with NTK.

Other acquisitions and disposals Other acquisitions and disposals by the Group in the reporting period included: • Acquisition of Nippon Transcore Private Limited: In October 2011, the Group acquired a 100% stake in Nippon Transcore Private Limited (subsequently renamed ‘‘NLMK India Service Center Pvt Ltd’’), a grain-oriented (transformer) steel service processing and distribution company in India for a total consideration of approximately $8 million. The acquisition was aimed at enhancing the Group’s position

42 in the niche segment of the growing Indian market. This company has processing and warehousing capacities of 16,000 tonnes per year and 15,000 tonnes per year, respectively, located 200 kilometers from Mumbai. It also has a warehousing capacity of 40,000 tonnes located 20 kilometers from Mumbai, in close proximity to the port that facilitates the delivery of imported Group material. • Acquisition of a license to explore Usinsky-3: In March 2011, the Group acquired a license for the exploration and extraction of coal in Usinsky-3, the third mining area in the Usinsky coal deposit in the Komi Republic. The Group was selected following a competition organized by the Federal Subsoil Agency for the Komi Republic. The license fee was $27.2 million. The Usinsky-3 deposit has more than 227 million tonnes of on-balance reserves of high-quality hard coking coal (grades Zh and KZh, Russian categories of reserves C1+C2). • Acquisition of LLC VMI Recycling Group: In October 2010, the Group acquired a 100% stake in LLC VMI Recycling Group, which owns scrap collection and processing assets located in the Moscow region, for a consideration of $28.4 million. This acquisition enabled the Group to expand its scrap reach area in the Moscow region (one of the largest scrap generating areas in Russia) and consequently further improve its self-sufficiency in ferrous scrap. • Disposal of OJSC Tuapse Seaport (‘‘TMTP’’): In January 2009, the Group completed the disposal of its 69.41% stake in TMTP to UCL Holding, a related party. The Board of Directors had classified TMTP as a non-core asset in February 2006. The transaction valued NLMK’s stake at $258.2 million. The Group consolidates revenues and expenses of newly acquired entities from the date on which it obtains a controlling interest. Earnings attributable to minority interests in these entities for the portion of the year prior to the date upon which the Group obtained a controlling interest are included in minority interests.

Seasonality Seasonal effects have a relatively limited impact on the Group’s results due to market and product diversification. Nonetheless, while the prices of most of the Group’s raw materials are not subject to seasonal variations, the price of scrap metal does fluctuate seasonally, typically rising in spring and autumn and falling in summer and winter, largely as a result of the creation and depletion of winter stockpiles. Consumption of combustive, lubricative and energy supplies during the winter months is generally higher than during the rest of the year. In addition, the Group’s costs of transporting, unloading and storing raw materials in the winter months are higher. There is also usually a lower demand for long steel products (rebar, metalware and wire rod) in the winter period.

Trading Update for the Year Ended December 31, 2012 The production and sales information for the year ended December 31, 2012 presented below is derived from the Group’s preliminary results of operations and may be subject to further revision.

Production and Sales by the Group In the year ended December 31, 2012, the Group’s production of crude steel was 14.9 million tonnes, an increase of 24.7% as compared with 2011. Total Group production of finished products was 15.2 million tonnes in 2012, an increase of 16.2% as compared with 2011. The increase was primarily attributable to the

43 consolidation of SIF from July 1, 2011. The table below shows a breakdown of steel production at the Group by category of product:

Year ended December 31, Product 2012 2011 Change (%) (Amounts in thousands of tonnes) Pig iron ...... 11,880 9,793 21.3 Steel ...... 14,923 11,968 24.7 Commercial pig iron ...... 562 929 (39.5) Semi-finished steel products ...... 3,846 3,251 18.3 Flats ...... 9,019 7,256 24.3 Long products and metalware Long products ...... 1,454 1,307 11.2 Metalware ...... 287 239 20.1 Total ...... 15,168 13,052 16.2 In the year ended December 31, 2012, the Group’s sales of steel products totaled 15.2 million tonnes, an increase of 18.4% compared with 2011. The table below shows a breakdown of steel sales of the Group by category of product:

Year ended December 31, Product 2012 2011 Change (%) (Amounts in thousands of tonnes) Commercial pig iron ...... 615 962 (36.1) Semi-finished steel products ...... 3,979 3,130 27.1 Flats ...... 8,904 7,137 24.8 Long products and metalware Long products ...... 1,420 1,287 10.4 Metalware ...... 285 239 19.0 Total ...... 15,203 12,840 18.4 Sales of flat products increased in 2012 to 8.9 million tonnes, an increase of 24.8% as compared with 2011, and included an increase of 27% in sales of high value added products. This increase resulted primarily from the consolidation of SIF in July 2011 and increased sales of rolled steel by the Lipetsk site, primarily to Russian customers. Sales of semi-finished steel products (slabs) to third parties (including sales in Russia) increased by 0.85 million tonnes in 2012 to 4.0 million tonnes.

NLMK Russia Flat steel In 2012, crude steel production at the Lipetsk site increased by 24.8% as compared with 2011 and totalled 12.2 million tonnes. Production of flat products increased by 7% to 5.2 million tonnes over the same period following the upgrade of reheating furnaces which enabled an increase in hot rolling capacities to 5.6 million tonnes per year. Sales increased by 22% in 2012 as compared to 2011 to 12.1 million tonnes, with sales of finished steel increasing by 5% over the same period. Total sales to the Russian market increased 13% in 2012 from 2011 to 3.1 million tonnes. Sales of slabs increased by 56.5% in 2012 as compared to 2011 to 6.5 million tonnes, with approximately 2.6 million tonnes being supplied to other Group companies for further re-rolling into finished steel. In 2012, production of transformer steel at Viz-Stal totalled 164.3 thousand tonnes (a decrease of 3.7% as compared with 2011) and sales totaled 157.1 thousand tonnes (a decrease of 7.2% as compared with 2011). The decrease resulted from market conditions, as well as from production upgrade activities.

Long steel In 2012, steel production of the Long Steel division, following the re-launch of an electric arc furnace (EAF) stopped for repairs in the middle of 2011, increased by 22.6% as compared with 2011 to 1.8 million tonnes in response to increased demand from the local construction sector. Finished steel output at the division increased by 7.8% over the same period to 1.7 million tonnes. In 2012, sales of the Long Steel

44 division increased by 3.1% as compared to 2011 to 1.7 million tonnes. The division processed 2.1 million tonnes of scrap in 2012, a decline of 3.6% as compared to 2011.

NLMK Europe In 2012, the operating results of NLMK Europe were impacted by the weakening in European industrial production in the second half of 2012, which resulted in lower demand for steel products. Annual production at the strip products unit at NLMK Europe declined by 14% in 2012 as compared to 2011 to 1.2 million tonnes, while sales decreased by 5.6% to 1.3 million tonnes over the same period. Annual production and sales at the plate products unit at NLMK Europe declined by 10.6% in 2012 as compared to 2011 to 0.9 million tonnes. The decline in sales and production was also attributable to the upgrade of the rolling facilities at one of NLMK Europe’s plants where a new rolling mill was installed.

NLMK USA In 2012, finished steel output at NLMK USA increased by 6.5% as compared to 2011 to 1.8 million tonnes. Sales of steel products by NLMK USA increased by 5.0% in 2012 as compared to 2011 to 1.7 million tonnes.

Raw Materials In 2012, the Group’s production of iron ore concentrate increased by 4.1% to 13.9 million tonnes, while sinter ore output totaled 1.7 million tonnes. Sales of iron ore concentrate and sinter ore in 2012 were 14.1 million tonnes and 1.7 million tonnes, respectively, representing increases of 7.1% and 1.9%, respectively, as compared with 2011. In 2012, Altai-Koks produced 4.3 million tonnes of coke with 6% moisture content, representing an increase of 12.4% as compared with 2011, while sales of dry coke totaled 4.2 million tonnes (an increase of 11.2% as compared with 2011). The increase was driven by growing supplies of coke to the Lipetsk site in response to increased demand following the launch of Blast Furnace No.7. The Group’s total production of coke with 6% moisture content in 2012 was 6.8 million tonnes, representing an increase of 8% as compared with 2011.

45 CONSOLIDATED FINANCIAL RESULTS OVERVIEW The following table sets forth a summary of the Group’s consolidated financial results for the nine months ended September 30, 2012 and 2011.

Nine months ended September 30, 2012 2011 (Amounts in millions of U.S. dollars) Consolidated statements of income Revenue ...... 9,353.7 8,675.1 Cost of sales ...... (7,079.2) (6,077.7) Production cost ...... (6,510.1) (5,617.7) Depreciation and amortization ...... (569.1) (460.0) Gross profit ...... 2,274.5 2,597.4 General and administrative expenses ...... (335.1) (365.6) Selling expenses ...... (870.6) (690.5) Taxes other than income tax ...... (127.0) (117.8) Operating income ...... 941.8 1,423.5 Losses on disposals of property, plant and equipment ...... (37.6) (23.2) (Losses)/gains on investments, net ...... (0.2) 69.0 Interest income ...... 18.5 19.9 Interest expense ...... (38.0) — Foreign currency exchange (loss)/gain, net ...... (10.8) 44.8 Other (expenses)/income, net ...... (34.9) 3.9 Income before income tax ...... 838.8 1,537.9 Income tax expense ...... (223.4) (400.1) Income, net of income tax ...... 615.4 1,137.8 Equity in net earnings of associates ...... 0.3 54.1 Net income ...... 615.7 1,191.9 Add: Net loss attributable to the non-controlling interest ...... 1.7 12.3 Net income attributable to NLMK stockholders ...... 617.4 1,204.2

Revenue Total revenue increased by $678.6 million, or 7.8%, to $9,353.7 million in the nine months ended September 30, 2012 from $8,675.1 million in the nine months ended September 30, 2011. This increase was primarily attributable to the consolidation of the SIF rolling assets into the Group from July 1, 2011, which, together with the Group’s other rolling businesses located outside the Russian Federation, now comprise the foreign rolled products segment. The following tables show a breakdown of revenue from external customers, on a consolidated basis after intersegmental eliminations, from sales of the Group’s main products for the periods indicated.

Nine months ended September 30, 2012 2011 Change Revenue (%) Revenue (%) (%) (Amounts in millions of U.S. dollars, except percentages) Pig iron ...... 240.2 2.6 247.7 2.9 (7.5) (3.1) Semi-finished ...... 1,477.8 15.8 1,680.0 19.4 (202.2) (12.0) Flat ...... 5,044.2 53.9 4,330.5 49.9 713.7 16.5 Plates ...... 691.9 7.4 461.0 5.3 230.9 50.1 Long...... 887.0 9.5 864.2 10.0 22.8 2.6 Others(1) ...... 1,012.6 10.8 1,091.7 12.5 (79.1) (7.2) Total ...... 9,353.7 100.0 8,675.1 100.0 678.6 7.8

(1) Includes sales of iron ore, coke and scrap.

46 Nine months ended September 30, 2012 2011 Change Sales (%) Sales (%) (%) (Amounts in thousands of tonnes, except percentages) Pig iron ...... 568.2 4.9 513.6 5.5 54.6 10.6 Semi-finished ...... 2,726.6 23.7 2,516.4 27.1 210.2 8.3 Flat ...... 6,145.0 53.4 4,605.7 49.6 1,539.3 33.4 Plates ...... 760.8 6.6 453.5 4.9 307.3 67.8 Long...... 1,305.0 11.4 1,198.8 12.9 106.2 8.9 Total ...... 11,505.6 100.0 9,288.0 100.0 2,217.5 23.9 In the nine months ended September 30, 2012, the volume of sales of flat products increased on 33.4% to 6,145.0 million tonnes, and comprised 53.4% of total volume of sales (49.6% in the nine months ended September 30, 2011). In addition, the volume of sales of plate coils increased on 67.8% to 760.8 million tonnes in the nine months ended September 30, 2012. These increases in sales volumes of flat products and plates were driven by the consolidation into the Group of the SIF rolling assets from July 1, 2011. In the nine months ended September 30, 2012, the Group’s average price for steel products decreased to $725 per tonne, a 11% decrease from $813 per tonne in the nine months ended September 30, 2011, primarily due to a deterioration in pricing trends in the Group’s key sales markets as a result of falling demand in Europe and increased capacity, particularly in China. The following table shows a breakdown of revenue from external customers, on a consolidated basis after intersegmental eliminations, by geographic region for the periods indicated. The region ‘‘European Union’’ comprises revenue from sales to customers in the member states of the European Union while ‘‘other regions’’ includes revenue from sales to customers in European states which are not a member of the European Union.

Nine months ended September 30, 2012 2011 Change Revenue (%) Revenue (%) (%) (Amounts in millions of U.S. dollars, except percentages) Russia ...... 3,311.2 35.4 3,560.9 41.0 (249.7) (7.0) European Union ...... 1,961.0 21.0 2,136.9 24.6 (175.9) (8.2) Middle East, including Turkey ...... 660.8 7.1 964.9 11.1 (304.1) (31.5) North America ...... 1,351.1 14.4 825.3 9.5 525.8 63.7 Asia and Oceania ...... 1,140.0 12.2 470.7 5.4 669.3 142.2 Other regions ...... 929.6 9.9 716.4 8.4 213.2 29.8 Total ...... 9,353.7 100.0 8,675.1 100.0 678.6 7.8 In the nine months ended September 30, 2012, the Group recorded the following increases in revenues from export markets: Asia and Oceania (142.2%, or $669.3 million) and North America (63.7%, or $525.8 million). The reorientation of sales of the Group’s products to the markets of South East Asia and North America compensated a decrease in revenue from sales to the countries of the Middle East, including Turkey, and to the European Union. The Group’s revenues from sales to Russia were lower by 7.0% in the nine months ended September 30, 2012 as compared with the nine months ended September 30, 2011.

47 The following table shows revenue from external customers for each of the Group’s segments for the periods indicated.

Nine months ended September 30, 2012 2011 Change Revenue (%) Revenue (%) (%) (Amounts in millions of U.S. dollars, except percentages Steel(1) ...... 5,446.5 58.2 6,156.7 71.0 (710.2) (11.5) Foreign rolled products ...... 2,774.5 29.7 1,475.2 17.0 1,299.3 88.1 Long products ...... 918.1 9.8 894.8 10.3 23.3 2.6 Mining ...... 214.2 2.3 147.8 1.7 66.4 44.9 All other ...... 0.4 0.6 (0.2) (33.3) Total ...... 9,353.7 100.0 8,675.1 100.0 678.6 7.8

(1) Revenue of the steel segment also includes revenue from sales to external customers of Altai-Koks, which produces coke and coke by-products, as well as revenues from sales of the Group’s trading companies, Novex and Novexco, which, in addition to products of the steel segment, sell products of the long product segment, iron ore concentrate, coke and other chemical products.

Steel segment The tables below show a breakdown by product of revenue from external customers and volume of sales to external customers of the steel segment for the periods indicated.

Nine months ended September 30, 2012 2011 Change Revenue (%) Revenue (%) (%) (Amounts in millions of U.S. dollars, except percentages) Revenue from external customers Pig iron ...... 240.2 4.4 247.7 4.0 (7.5) (3.0) Slabs ...... 1,434.6 26.3 1,604.3 26.1 (169.7) (10.6) Hot-rolled ...... 945.7 17.4 1,018.0 16.5 (72.3) (7.1) Cold-rolled ...... 842.5 15.5 952.6 15.5 (110.1) (11.6) Galvanized ...... 418.5 7.7 433.7 7.0 (15.2) (3.5) Pre-painted ...... 478.6 8.8 458.3 7.4 20.3 4.4 Transformer ...... 337.5 6.2 354.4 5.8 (16.9) (4.8) Dynamo ...... 187.1 3.4 228.7 3.7 (44.6) (19.5) Coke ...... 142.1 2.6 280.9 4.6 (138.8) (49.4) Other segments products: Including steel products(1) ...... 5.0 0.1 79.0 1.3 (74.0) (93.7) Including other products(2) ...... 5.0 0.1 53.9 0.9 (48.9) (90.7) Other revenue ...... 412.7 7.5 445.2 7.2 (32.5) (7.3) Total revenue from external customers ...... 5,446.5 100.0 6,156.7 100.0 (710.2) (11.5)

(1) Includes revenue from sales of long products by the Group’s trading companies. (2) Includes revenue from sales of coke and iron ore concentrate by the Group’s trading companies.

48 Nine months ended September 30, 2012 2011 Change Volume (%) Volume (%) (%) (Amounts in thousands of tonnes, except percentages) Sales volumes to external customers Pig iron ...... 568.2 8.1 513.6 7.7 54.6 10.6 Slabs ...... 2,682.1 38.1 2,402.4 36.1 279.7 11.6 Hot-rolled ...... 1,478.3 21.0 1,358.9 20.4 119.4 8.8 Cold-rolled ...... 1,128.8 16.0 1,085.1 16.3 43.7 4.0 Galvanized ...... 409.5 5.8 409.9 6.2 (0.4) (0.1) Pre-painted ...... 384.2 5.5 357.5 5.4 26.7 7.4 Transformer ...... 176.9 2.5 173.0 2.6 3.9 2.3 Dynamo ...... 201.5 2.9 213.8 3.2 (12.3) (5.8) Other segments products(1) ...... 6.6 0.1 132.9 2.1 (126.2) (95.0) Total sales ...... 7,036.1 100.0 6647.1 100.0 389.0 5.9

(1) Includes revenue from sales of long products by the Group’s trading companies. Revenue of the steel segment, on a consolidated basis, decreased by 11.5% to $5,446.5 million in the nine months ended September 30, 2012 from $6,156.7 million in the nine months ended September 30, 2011, representing 58.2% of consolidated revenue in the nine months ended September 30, 2012, compared to 71.0% in the nine months ended September 30, 2011. The decrease in steel segment revenue was primarily due to a decrease in average prices of products of the steel segment. The total volume of sales by the steel segment increased by 5.9% in the nine months ended September 30, 2012 as compared with the nine months ended September 30, 2011 primarily as a result of growth of slabs and hot-rolled products sales to external customers and the expansion of the capacity and steel production volumes at the Lipetsk site following the launch of a new blast furnace No. 7.

Foreign rolled products segment The tables below show a breakdown by product of revenue from external customers and volume of sales to external customers of the foreign rolled products segment. The SIF rolling assets, which comprise the major part of this segment, were consolidated under the Group for periods from July 1, 2011.

Nine months ended September 30, 2012 2011 Change Revenue (%) Revenue (%) (%) (Amounts in millions of U.S. dollars, except percentages) Revenue from external customers Slabs ...... 43.3 1.6 30.2 2.0 13.1 43.4 Plate ...... 691.9 24.9 461.0 31.3 230.9 50.1 Hot-rolled ...... 994.7 35.9 570.2 38.7 424.5 74.4 Cold-rolled ...... 371.4 13.4 125.5 8.5 245.9 196.0 Coated steel ...... 471.1 17.0 189.2 12.8 281.9 249.0 All others ...... 202.1 7.2 99.1 6.7 103.0 104.0 Total sales ...... 2,774.5 100.0 1,475.2 100.0 1,299.3 88.1

Nine months ended September 30, 2012 2011 Change Volume (%) Volume (%) (%) (Amounts in thousands of tonnes, except percentages) Sales volumes to external customers Slabs ...... 44.3 1.4 29.9 2.0 14.4 48.0 Plate ...... 760.8 24.0 453.5 30.4 307.3 67.8 Hot-rolled ...... 1,437.7 45.4 692.0 46.4 745.7 107.8 Cold-rolled ...... 415.9 13.1 134.8 9.0 281.0 208.4 Coated steel ...... 511.1 16.1 180.6 12.1 330.4 182.9 Total sales ...... 3,169.8 100.0 1,491.0 100.0 1,678.8 112.6

49 Revenue of the foreign rolled products segment, on a consolidated basis, increased by 88.1% to $2,774.5 million in the nine months ended September 30, 2012 from $1,475.2 million in the nine months ended September 30, 2011, representing 29.7% of consolidated revenue in the nine months ended September 30, 2012, compared to 17.0% in the nine months ended September 30, 2011. The increase in foreign rolled products segment revenue in the nine months ended September 30, 2012 was primarily due to the consolidation of the SIF rolling assets from July 1, 2011, which was largely responsible for the increase in volume of sales of 112.6% on a period-to-period basis. The increase in revenues resulting from higher volume of sales was partially offset by a decrease in average prices for the products of the foreign rolled segment of approximately 11.5% in the nine months ended September 30, 2012 as compared with the nine months ended September 30, 2011.

Long products segment The tables below show a breakdown by product of revenue from external customers and volume of sales to external customers of the long products segment.

Nine months ended September 30, 2012 2011 Change Revenue (%) Revenue (%) (%) (Amounts in millions of U.S. dollars, except percentages) Revenue from external customers Billets ...... 1.0 0.1 0.0 0.0 1.0 0.0 Long products ...... 717.3 78.1 672.0 75.1 45.3 6.7 Metalware ...... 163.6 17.8 158.7 17.7 4.9 3.1 Scrap ...... 24.3 2.6 37.1 4.1 (12.8) (34.5) All others ...... 11.9 1.4 27.0 3.1 (15.1) (55.9) Total revenue from external customers ...... 918.1 100.0 894.8 100.0 23.3 2.6

Nine months ended September 30, 2012 2011 Change Volume (%) Volume (%) (%) (Amounts in thousands of tonnes, except percentages) Sales volumes to external customers Billets ...... 1.9 0.1 2.4 0.2 (0.4) (19.0 Long products ...... 1,078.9 83.1 954.5 83.0 124.3 13.0 Metalware ...... 217.8 16.8 193.0 16.8 24.7 12.8 Total sales ...... 1,298.5 100.0 1,149.9 100.0 148.6 12.9 Revenue of the long products segment, on a consolidated basis, increased by 2.6% to $918.1 million in the nine months ended September 30, 2012 from $894.8 million in the nine months ended September 30, 2011, representing 9.8% of consolidated revenue in the nine months ended September 30, 2012, compared to 10.3% in the nine months ended September 30, 2011. The increase in long products segment revenue in the nine months ended September 30, 2012 was primarily due to an increase in the volume of sales of products of the long products segment,which was partially offset by a decrease in average prices. The increase in volume of sales by 12.9% of products of the long products segment in the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011 was primarily due to an increase in demand for long products from the Russian construction industry. In the nine months ended September 30, 2012, average prices (including delivery fee) for long products and metalware decreased by approximately 5.6% and 8.6%, respectively, as compared with the nine months ended September 30, 2011.

50 Mining segment The tables below show a breakdown by product of revenue from external customers and volume of sales to external customers of the mining segment. A substantial majority of the volume of sales of the mining segment are made to other Group companies.

Nine months ended September 30, 2012 2011 Change Revenue (%) Revenue (%) (%) (Amounts in millions of U.S. dollars, except percentages) Revenue from external customers Iron ore concentrate ...... 143.3 66.9 85.6 57.9 57.7 67.5 Sinter ore ...... 30.2 14.1 22.4 15.1 7.8 34.8 Limestone ...... 3.9 1.8 4.7 3.2 (0.8) (17.0) Dolomite ...... 9.6 4.5 8.6 5.8 1.0 11.6 All others ...... 27.2 12.7 26.5 18.0 0.5 1.9 Total revenue from external customers ...... 214.2 100.0 147.8 100.0 66.4 44.9

Nine months ended September 30, 2012 2011 Change Volume (%) Volume (%) (%) (Amounts in thousands of tonnes, except percentages) Sales volumes to external customers Iron ore concentrate ...... 1,562.8 48.8 720.0 37.1 842.8 117.1 Sinter ore ...... 453.9 14.2 330.4 17.0 123.5 37.4 Limestone ...... 524.0 16.4 395.5 20.4 128.5 32.5 Dolomite ...... 661.3 20.7 497.0 25.6 164.3 33.1 Total sales ...... 3,202.1 100.0 1,942.9 100.0 1,259.1 64.8 Revenue of the mining segment, on a consolidated basis, increased by 44.9% to $214.2 million in the nine months ended September 30, 2012 from $147.8 million in the nine months ended September 30, 2011, representing 2.3% of consolidated revenue in the nine months ended September 30, 2012, compared to 1.7% in the nine months ended September 30, 2011. The increase in revenue was primarily due to an increase in the volume of sales of iron ore concentrate to external customers. The volume of sales by the mining segment to external customers increased by 64.8% in the nine months ended September 30, 2012 as compared with the nine months ended September 30, 2011, largely as a result of an increase of 117.1% in sales of iron ore concentrate to external customers due to the expansion of the beneficiation capacity of Stoilensky in 2011. See ‘‘Business—Raw Materials and Energy—Iron ore concentrate and pellets’’.

Cost of sales and gross margin, depreciation and amortization Total cost of sales as a percentage of revenue increased to 75.7% in the nine months ended September 30, 2012 from 70.1% in the nine months ended September 30, 2011, decreasing the gross margin to 24.3% in the nine months ended September 30, 2012 from 29.9% in the nine months ended September 30, 2011. Production cost (excluding depreciation and amortization) increased by $892.3 million, or 15.9%, to $6,510.1 million in the nine months ended September 30, 2012 from $5,617.7 million in the nine months ended September 30, 2011, primarily due to the consolidation of the SIF rolling assets and an increase in the volume of sales of the Lipetsk site as a result of the expansion of the basic oxygen furnace production capacities. Depreciation and amortization increased by $109.1 million, or 23.7%, to $569.1 million in the nine months ended September 30, 2012 from $460.0 million in the nine months ended September 30, 2011, primarily due to the commencement of operations of new fixed assets. The following tables show the gross profit and gross margin for the steel, foreign rolled products, long products and mining segments and all other operations for the periods indicated, in each case on a

51 standalone segmental basis before giving effect to eliminations on consolidation, as well as any consolidated adjustments. These consolidation adjustments are referred to as ‘‘intersegmental operations’’.

Nine months ended September 30, 2012 Foreign rolled Long All Intersegmental Steel products products Mining other(3) operations Total (Amounts in millions of U.S. dollars, except percentages) Revenue from external customers(1) ..... 5,446.5 2,774.5 918.1 214.2 0.4 — 9,353.7 Intersegmental revenue(2) ...... 1,180.2 1.3 357.7 776.8 — (2,316.0) — Depreciation and amortization ...... (304.3) (153.0) (63.2) (48.6) (0.0) — (569.1) Gross profit ...... 1,352.1 (12.1) 216.9 702.2 0.3 15.1 2,274.5 Gross margin (%) ...... 20.4 — 17.0 70.9 75.0 24.3

Nine months ended September 30, 2011 Foreign rolled Long All Intersegmental Steel products products Mining other(3) operations Total (Amounts in millions of U.S. dollars, except percentages) Revenue from external customers(1) ..... 6,156.7 1,475.2 894.8 147.8 0.6 — 8,675.1 Intersegmental revenue(2) ...... 653.9 0.2 514.2 931.0 — (2,099.3) — Depreciation and amortization ...... (255.8) (105.5) (68.2) (30.5) (0.0) — (460.0) Gross profit/(loss) ...... 1,729.9 (37.7) 179.2 808.7 0.2 (82.9) 2,597.4 Gross margin (%) ...... 25.4 — 12.7 75.0 33.3 29.9

(1) Represents sales to external customers outside of the Group. (2) Represents sales to customers within the Group. Revenues attributable to these sales are eliminated on consolidation. (3) Principally comprises the Group’s finance business.

Steel segment Gross profit of the steel segment, on a standalone basis before consolidation adjustments, decreased to $1,352.1 million in the nine months ended September 30, 2012 from $1,729.9 million in the nine months ended September 30, 2011, and its gross margin decreased to 20.4% in the nine months ended September 30, 2012 from 25.4% in the nine months ended September 30, 2011. The decrease in gross margin of the steel segment was primarily due to a decrease in the average prices of products of the steel segment and an increase in production costs as a result of increased consumption of more expensive raw materials (such as iron ore pellets and high-quality coal) due to increased volume of sales following the expansion of the production capacity of the Lipetsk site. The table below shows the components of the cost of sales of the steel segment for the periods indicated on a standalone segmental basis.

Nine months ended September 30, 2012 2011 Cost of sales of Cost of sales of steel segment steel segment Change (%) (%) (%) (Amounts in millions of U.S. dollars, except percentages) Iron ore ...... 1,444.5 27.4 1,181.5 23.1 22.3 Coal and coke ...... 1,169.6 22.2 1,231.3 24.1 (5.0) Scrap ...... 410.7 7.8 380.1 7.4 8.1 Ferro-alloys ...... 206.1 3.9 177.2 3.5 16.3 Other materials, including zinc(1) ...... 733.5 13.9 804.4 15.7 (8.8) Electricity (external supplies) ...... 215.5 4.1 242.2 4.7 (11.0) Gas...... 207.7 3.9 183.5 3.6 13.2 Payroll costs ...... 414.8 7.9 395.7 7.7 4.8 Depreciation ...... 304.3 5.8 255.8 5.0 19.0 Other costs ...... 167.9 3.1 228.9 5.0 (26.6) Total cost of sales of steel segment ...... 5,274.6 100.0 5,080.7 100.0 3.8

(1) Also includes costs attributable to spare parts and ongoing maintenance.

52 Cost of sales of the steel segment increased by 3.8% in the nine months ended September 30, 2012 to $5,274.6 million from $5,080.7 million in the nine months ended September 30, 2011. The increase in cost of sales was mainly due to an increase in consumption of iron ore pellets sourced from third parties and increased depreciation due to implementation of new production facilities at the Lipetsk site.

Foreign rolled products segment Gross loss of the foreign rolled products segment, on a standalone basis before consolidation adjustments, decreased to a loss of $12.1 million in the nine months ended September 30, 2012 from a loss of $37.7 million in the nine months ended September 30, 2011, and its gross margin was (0.4)% in the nine months ended September 30, 2012 compared to (2.6)% in the nine months ended September 30, 2011. The gross loss of the foreign rolled products segment was primarily due to the consolidation of the SIF rolling assets from July 1, 2011, which increased exposure to the effects of the deterioration in the global steel market, and the fall in steel prices, particularly in Europe. The segment had an operating loss of $229.4 million in the nine months ended September 30, 2012, as compared to operating loss of $174.7 million in the nine months ended September 30, 2011. The operating loss for the 2011 period was primarily due to consolidation of the SIF rolling assets starting from July 2011 and the deterioration in the global steel markets.

Long products segment Gross profit of the long products segment, on a standalone basis before consolidation adjustments, increased to $216.9 million in the nine months ended September 30, 2012 from $179.2 million in the nine months ended September 30, 2011, and its gross margin increased to 17.0% in the nine months ended September 30, 2012 from 12.7% in the nine months ended September 30, 2011, primarily as a result of an increase in capacity utilization and a decrease in production costs. The segment had an operating income of $76.1 million in the nine months ended September 30, 2012, as compared to $10.0 million in the nine months ended September 30, 2011. The table below shows the components of the cost of sales of the long products segment for the periods indicated on a standalone segmental basis.

Nine months ended September 30, 2012 2011 Cost of sales of Cost of sales of Long products Long products segment segment Change (%) (%) (%) (Amounts in millions of U.S. dollars, except percentages) Scrap ...... 670.9 63.4 823.1 67.0 (18.5) Ferro-alloys ...... 26.0 2.5 26.5 2.2 (1.9) Other materials ...... 122.7 11.6 125.9 10.2 (2.5) Electricity (external supplies) ...... 67.6 6.4 66.5 5.4 1.7 Gas...... 10.3 1.0 10.6 0.9 (2.8) Other energy(1) ...... 10.4 1.0 6.6 0.5 57.6 Payroll costs ...... 78.4 7.4 83.0 6.7 (5.5) Depreciation ...... 63.2 6.0 68.2 5.5 (7.3) Other costs ...... 9.4 0.7 19.6 1.6 (52.0) Total cost of sales of long segment ...... 1,058.9 100.0 1,230.0 100.0 (13.9)

(1) Includes fuels and lubricants. Cost of sales of the long segment decreased by 13.9% in the nine months ended September 30, 2012 to $1,058.9 million from $1,230.0 million in the nine months ended September 30, 2011. The decrease in cost of sales was mainly due to a decrease in purchased scrap prices.

Mining segment Gross profit of the mining segment, on a standalone basis before consolidation adjustments, decreased to $702.2 million in the nine months ended September 30, 2012 from $808.7 million in the nine months ended September 30, 2011, and its gross margin decreased to 70.9% in the nine months ended September 30,

53 2012 from 75.0% in the nine months ended September 30, 2011, primarily due to a decrease in the price of products of the mining segment, coupled with relatively stable production costs. The following table shows, for the nine months ended September 30, 2012 and 2011, a cost of sales breakdown for the Group’s mining segment.

Nine months ended September 30, 2012 2011 Cost of sales of Cost of sales of Mining segment Mining segment Change (%) (%) (%) (Amounts in millions of U.S. dollars, except percentages) Raw materials(1) ...... 26.7 9.2 24.4 9.0 9.4 Electricity (external supplies) ...... 72.8 25.2 74.1 27.4 (1.8) Gas...... 2.2 0.8 3.2 1.2 (31.3) Other energy(2) ...... 16.2 5.6 13.6 5.0 19.1 Payroll costs ...... 74.6 25.8 64.5 23.9 15.7 Depreciation ...... 48.6 16.8 30.5 11.3 59.3 Other costs ...... 47.7 16.6 59.8 22.2 (20.2) Total cost of sales of mining ...... 288.8 100.0 270.1 100.0 6.9

(1) Includes grinding and explosive materials. (2) Includes fuels and lubricants. Cost of sales of the mining segment increased by 6.9% in the nine months ended September 30, 2012 to $288.8 million from $270.1 million in the nine months ended September 30, 2011. The increase in cost of sales was mainly due to an increase in sales volumes following the expansion of the beneficiation capacity of Stoilensky in 2012.

Selling, general and administrative and other operating expenses Total selling, general and administrative and other operating expenses increased by $158.7 million, or 13.5%, to $1,332.7 million in the nine months ended September 30, 2012 from $1,173.9 million in the nine months ended September 30, 2011. The following table shows a breakdown of selling, general and administrative and other operating expenses for the periods indicated.

Nine months ended September 30, 2012 2011 Change (%) (Amounts in millions of U.S. dollars, except percentages) General and administrative expenses ...... 335.1 365.6 (30.5) (8.3) Selling expenses ...... 870.6 690.5 180.1 26.1 Taxes other than income tax ...... 127.0 117.8 9.2 7.8 Total selling, general and administrative and other operating expenses ...... 1,332.7 1,173.9 158.8 13.5 General and administrative expenses decreased by $30.5 million, or 8.3%, to $335.1 million in the nine months ended September 30, 2012 from $365.6 million in the nine months ended September 30, 2011, primarily due to the consolidation into the Group of the SIF rolling assets. Selling expenses increased by $180.1 million, or 26.1%, to $870.6 million in the nine months ended September 30, 2012 from $690.5 million in the nine months ended September 30, 2011, primarily due to an increase in sales volumes, including a higher volume of intersegment sales of slabs by the Group’s Russian operations to its subsidiaries in Europe and the United States, and transportation expenses. Taxes other than income tax increased by $9.2 million, or 7.8%, to $127.0 million in the nine months ended September 30, 2012 from $117.8 million in the nine months ended September 30, 2011, primarily due to the consolidation of taxes of SIF and other companies in which the Group acquired a controlling interest in 2011, as well as an increase in property tax as a result of the commissioning of fixed assets.

54 As a percentage of total revenue, selling, general and administrative and other operating expenses increased to 14.2% in the nine months ended September 30, 2012, compared to 13.5% of total revenue in the nine months ended September 30, 2011.

Loss on disposals of property, plant and equipment Loss on disposals of property, plant and equipment was $37.6 million in the nine months ended September 30, 2012, compared to $23.2 million in the nine months ended September 30, 2011, an increase of 62.1%. The increase was primarily attributable to write-off of advances for equipment from a supplier in the amount of $36.1 million.

(Losses)/gains on investments, net Losses on investments, net were $0.2 million in the nine months ended September 30, 2012, compared to a net gain of $69.0 million in the nine months ended September 30, 2011. The losses on investments in the nine months ended September 30, 2012 was primarily attributable to disposal of investments related to former subsidiaries of Maxi Group. The gain on investments in the nine months ended September 30, 2011 was primarily attributable to the revaluation to fair value of the shares of SIF acquired by the Group.

Interest income Interest income decreased by $1.4 million, or 7.0%, to $18.5 million in the nine months ended September 30, 2012 from $19.9 million in the nine months ended September 30 2011, primarily as a result of a decrease in interest income from deposits as a result of decrease in cash and cash equivalents held as deposits in the Group’s accounts.

Interest expense Interest expenses were $38.0 million in the nine months ended September 30, 2012. All interest expenses were capitalized in the nine months ended September 30, 2011 and were not reflected in the profit and loss accounts for that period. Capitalized interest expenses increased to $156.6 million in the nine months ended September 30, 2012 from $114.4 million in the nine months ended September 30, 2011. The increase in interest expenses was mainly attributable to additional borrowings to finance the technical upgrading program.

Foreign currency exchange (loss)/gain, net The Group recorded a net foreign currency exchange loss of $10.8 million in the nine months ended September 30, 2012, compared to a net gain of $44.8 million in the nine months ended September 30, 2011. The net foreign currency exchange loss in the nine months ended September 30, 2012 was primarily due to a higher rate of appreciation of the ruble relative to the U.S. dollar and euro as compared with the corresponding period in 2011.

Other (expenses)/income, net Other (expenses)/income, net in the nine months ended September 30, 2012 was a $34.9 million expense, as compared with an income of $3.9 million in the nine months ended September 30, 2011.

Income tax expense Income tax expense in the nine months ended September 30, 2012 was $223.4 million, compared to $400.1 million in the nine months ended September 30, 2011. The effective tax rate for the nine months ended September 30, 2012 was 26.6%, compared to 26.0% for the nine months ended September 30, 2011. The increase in effective tax rate was partially attributable to the consolidation of SIF from July 1, 2011, as some losses carried forward did not result in recognition of deferred tax asset.

Net income For the reasons set forth above, net income decreased by $576.2 million, or 48.3%, to $615.7 million in the nine months ended September 30, 2012 from $1,191.9 million in the nine months ended September 30, 2011.

55 CONSOLIDATED FINANCIAL RESULTS OVERVIEW The following table sets forth a summary of the Group’s consolidated financial results for the years ended December 31, 2011, 2010 and 2009.

Year ended December 31, 2011 2010 2009 (Amounts in millions of U.S. dollars) Consolidated statements of income Revenue ...... 11,728.6 8,350.7 6,139.9 Cost of sales ...... (8,369.0) (5,402.6) (4,150.4) Production cost ...... (7,780.3) (4,933.2) (3,672.3) Depreciation and amortization ...... (588.7) (469.4) (478.1) Gross profit ...... 3,359.6 2,948.1 1,989.5 General and administrative expenses ...... (556.1) (263.1) (297.2) Selling expenses ...... (972.7) (708.9) (654.6) Taxes other than income tax ...... (165.1) (123.3) (102.1) Impairment losses ...... — (58.2) (43.7) Operating income ...... 1,665.7 1,794.6 891.9 Losses on disposals of property, plant and equipment ...... (29.3) (9.7) (4.4) Gains/(losses) on investments, net ...... 11.9 (27.9) (10.9) Interest income ...... 29.5 45.1 59.7 Interest expense ...... — (15.9) (170.9) Foreign currency exchange gain/(loss), net ...... 18.6 (59.3) (78.0) Other expenses, net ...... (14.3) (4.6) (92.7) Income before income tax ...... 1,682.1 1,722.3 594.7 Income tax expense ...... (421.0) (391.0) (181.8) Income, net of income tax ...... 1261.1 1,331.3 412.9 Equity in earnings/(losses) of associates ...... 54.3 (107.3) (314.8) Net income ...... 1,315.4 1,224.0 98.1 Add: Net loss attributable to the non-controlling interest ...... 42.2 31.0 117.0 Net income attributable to NLMK stockholders ...... 1,357.6 1,255.0 215.1

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010 Revenue Total revenue increased by $3,377.9 million, or 40.5%, to $11,728.6 million in 2011 from $8,350.7 million in 2010. This growth was primarily attributable to the consolidation of the SIF rolling assets from July 1, 2011, which contributed to an increase in volume of steel product sales by 9.5% to 12.8 million tonnes in 2011 from 11.7 million tonnes in 2010, as well as higher annual average sales prices. The following tables show a breakdown of revenue and sales volumes from external customers, on a consolidated basis after intersegmental eliminations, from sales of the Group’s main products for the periods indicated.

Year ended December 31, 2011 2010 Change Revenue (%) Revenue (%) (%) (Amounts in millions of U.S. dollars, except percentages) Revenue Pig iron ...... 461.2 3.9 236.7 2.8 224.5 94.8 Semi-finished ...... 2,187.1 18.7 2,082.8 25.0 104.3 5.0 Flat ...... 5,909.1 50.4 4,170.1 49.9 1,739.0 41.7 Plates ...... 707.7 6.0 275.5 3.3 432.2 156.9 Long...... 1,113.2 9.5 842.4 10.1 270.8 32.1 Others(1) ...... 1,350.3 11.5 743.2 8.9 607.1 81.7 Total ...... 11,728.6 100.0 8,350.7 100.0 3,377.9 40.5

(1) Includes sales of iron ore, coke and scrap.

56 Year ended December 31, 2011 2010 Change Sales (%) Sales (%) (%) (Amounts in thousands of tonnes, except percentages) Sales Volume Pig iron ...... 962.0 7.5 582.3 5.0 379.7 65.2 Semi-finished ...... 3,214.2 25.0 4,097.8 34.9 (883.6) (21.6) Flat ...... 6,440.8 50.2 5,325.3 45.4 1115.5 20.9 Plates ...... 696.4 5.4 348.2 3.0 348.2 100.0 Long...... 1,526.4 11.9 1,377.1 11.7 149.3 10.8 Total ...... 12,839.8 100.0 11,730.7 100.0 1109.1 9.5 In 2011, sales of flat products grew by 20.9% to 6.4 million tonnes, and comprised 50.2% of total volume of sales (45.4% in 2010). The increase in sales of flat products included year-on-year increases in the volume of sales of galvanized steel (59.3%), pre-painted steel (56.1%) and transformer steel (20.5%). In addition, the volume of sales of plates increased by 100.0% in 2011 as compared with 2010. This growth in sales was driven by the launch of new capacities at the Group’s Russian facilities (including the start up in testing mode of a new blast furnace), as well as the consolidation of the SIF rolling assets from July 2011. The volume of sales of semi-finished products to external customers declined by 21.6% in 2011 to 3.2 million tonnes as an increased portion of semi-finished products were sold on an intersegmental basis to the Group’s foreign rolled products segment for processing into value-added products. In 2011, the average price for steel products grew to $808.3 per tonne, a 24.6% increase from $648.5 per tonne in 2010, primarily due to a shift in product mix in favor of more value-added products in the portfolio. Steel prices were also supported by the impact of higher production costs resulting from increasing raw material prices. The following table shows a breakdown of the revenue from external customers, on a consolidated basis after intersegmental eliminations, by geographic region for the periods indicated.

Year ended December 31, 2011 2010 Change Revenue (%) Revenue (%) (%) (Amounts in millions of U.S. dollars, except percentages) Russia ...... 4,462.9 38.1 3,434.4 41.1 1,028.5 29.9 European Union ...... 2,771.2 23.6 1,802.6 21.6 968.6 53.7 Middle East, including Turkey ...... 1,238.2 10.6 1,162.1 13.9 76.1 6.5 North America ...... 1,189.6 10.1 797.2 9.5 392.4 49.2 Asia and Oceania ...... 997.5 8.5 698.2 8.4 299.3 42.9 Other regions ...... 1,069.2 9.1 456.2 5.5 613.0 134.4 Total ...... 11,728.6 100.0 8,350.7 100.0 3,377.9 40.5 In 2011, the Group continued to grow revenue in its strategically important Russian market, with domestic revenue increasing by 29.9% to $4,462.9 million, or 38.1% of total revenue, as a result of increased volume of sales and higher prices. The Group also strengthened its position in all other markets, with the largest increases in revenue being in the European market, where revenue increased by 53.7% to $2,771.2 million (23.6% of total revenue); the North American market, with an increase of 49.2% to $1,189.6 million, or 10.1% of total revenue; and the Asian and Oceanian market, with an increase in revenue of 42.9% to $997.5 million (8.5% of total revenue). The increases in the European and U.S. markets were primarily attributable to the consolidation of the SIF rolling assets from July 2011. The increase in revenue from sales to Asia and Oceania resulted from increased volume of sales and higher prices, reflecting the more positive steel market trends in that region as compared with other global regions.

57 The following table shows revenue from external customers for each of the Group’s segments for the periods indicated.

Year ended December 31, 2011 2010 Change Revenue (%) Revenue (%) Revenue (%) (Amounts in millions of U.S. dollars, except percentages) Steel(1) ...... 8,042.7 68.6 6,703.2 80.3 1,339.5 20.0 Foreign rolled products ...... 2,381.5 20.3 700.3 8.4 1,681.2 240.1 Long products ...... 1,154.2 9.8 864.8 10.3 289.4 33.5 Mining ...... 148.9 1.3 81.4 1.0 67.5 82.9 All other ...... 1.3 — 1.0 — 0.3 30.0 Total ...... 11,728.6 100.0 8,350.7 100.0 3,377.9 40.5

Steel segment The tables below show a breakdown by product of revenue from external customers and volume of sales to external customers of the steel segment for the periods indicated.

Year ended December 31, 2011 2010 Change Revenue (%) Revenue (%) (%) (Amounts in millions of U.S. dollars, except percentages) Revenue from external customers Pig iron ...... 461.2 5.7 236.7 3.5 224.5 94.8 Slabs ...... 2,107.0 26.2 1,926.9 28.8 180.1 9.3 Hot-rolled ...... 1,286.8 16.0 1,139.1 17.0 147.7 13.0 Cold-rolled ...... 1,207.1 15.0 1,065.8 15.9 141.3 13.3 Galvanized ...... 562.5 7.0 510.6 7.6 51.9 10.2 Pre-painted ...... 624.4 7.8 409.7 6.1 214.7 52.4 Transformer ...... 494.4 6.1 441.3 6.6 53.1 12.0 Dynamo ...... 293.4 3.7 242.7 3.6 50.7 20.9 Coke ...... 388.8 4.8 220.4 3.3 168.4 76.4 Other segments products: including steel products(1) ...... 86.7 1.1 192.1 2.9 (105.4) (54.9) including other products(2) ...... 61.5 0.8 14.1 0.2 47.4 336.2 Other revenue ...... 468.9 5.8 303.8 4.5 165.1 54.3 Total revenue from external customers ...... 8,042.7 100.0 6,703.2 100.0 1,339.5 20.0

(1) Includes revenue from sales of long products by the Group’s trading companies. (2) Includes revenue from sales of coke and iron ore concentrate by the Group’s trading companies.

58 Year ended December 31, 2011 2010 Change Volume (%) Volume (%) (%) (Amounts in thousands of tonnes, except percentages) Sales volumes to external customers Pig iron ...... 962.0 10.8 582.3 6.1 379.7 65.2 Slabs ...... 3,094.0 34.7 3,788.1 39.8 (694.1) (18.3) Hot-rolled ...... 1,769.6 19.9 1,862.7 19.6 (93.1) (5.0) Cold-rolled ...... 1,406.7 15.8 1,527.3 16.1 (120.6) (7.9) Galvanized ...... 533.3 6.0 575.7 6.1 (42.4) (7.4) Pre-painted ...... 488.4 5.5 332.0 3.5 156.4 47.1 Transformer ...... 238.8 2.7 198.2 2.1 40.6 20.5 Dynamo ...... 276.8 3.1 267.7 2.8 9.1 3.4 Other segments products(1) ...... 138.1 1.5 374.2 3.9 (236.1) (63.1) Total sales ...... 8,907.7 100.0 9,508.2 100.0 (600.5) (6.3)

(1) Includes revenue from sales of long products by the Group’s trading companies. Revenue of the steel segment, on a consolidated basis, grew by 20.0% to $8,042.7 million in 2011 from $6,703.2 million in 2010, representing 68.6% of consolidated revenue in 2011, compared to 80.3% in 2010. The increase in steel segment revenue in 2011 was primarily due to an increase in average prices (including delivery fee) on a year-on-year basis for the Group’s products, including slabs (33.9%), cold-rolled (23.0%), hot-rolled (18.9%) and galvanized (18.9%). The volume of sales by the steel segment decreased in 2011 by 6.3% from 2010, mainly due to an increase of intersegmental sales of slabs to the foreign rolled products segment (created in mid-2011). The overall decrease in volume of sales in 2011 was partially offset by an increase of 47.1% in sales of pre-painted rolled products following the startup of a new pre-painting line. In addition, the volume of sales of pig iron increased following startup in testing mode of a new blast furnace, which resulted in an increase of 94.8% in revenues from sales of pig iron.

Foreign rolled products segment The tables below show a breakdown by product of revenue from external customers and volume of sales to external customers of the foreign rolled products segment.

Year ended December 31, 2011 2010 Change Revenue (%) Revenue (%) (%) (Amounts in millions of U.S. dollars, except percentages) Revenue from external customers Slabs ...... 31.0 1.3 24.7 3.5 6.3 25.5 Plate ...... 707.7 29.7 275.5 39.4 432.2 156.9 Hot-rolled ...... 841.0 35.3 360.9 51.5 480.1 133.0 Cold-rolled ...... 239.0 10.0 — — 239.0 — Coated steel ...... 360.5 15.2 — — 360.5 — All others ...... 202.3 8.5 39.2 5.6 163.1 416.1 Total revenue from external customers ...... 2,381.5 100.0 700.3 100.0 1,681.2 240.1

Year ended December 31, 2011 2010 Change Volume (%) Volume (%) (%) (Amounts in thousands of tonnes, except percentages) Sales volumes to external customers Slabs ...... 36.2 1.5 47.1 4.9 (10.9) (23.1) Plate ...... 696.4 28.3 348.2 36.4 348.2 100.0 Hot-rolled ...... 1,099.7 44.7 561.6 58.7 538.1 95.8 Cold-rolled ...... 214.7 8.7 — — 214.7 100.0 Coated steel ...... 413.7 16.8 — — 413.7 100.0 Total sales ...... 2,460.7 100.0 956.9 100.0 1,503.8 157.2

59 Revenue of the foreign rolled products segment, on a consolidated basis, grew by 240.1% to $2,381.5 million in 2011 from $700.3 million in 2010, representing 20.3% of consolidated revenue in 2011, compared to 8.4% in 2010. The increase in foreign rolled products segment revenue in 2011 was primarily due to the consolidation of the SIF rolling assets in July 2011. Average prices for the products of the foreign rolled segment increased in 2011 as compared with 2010, although prices continued to fluctuate in the European and North American markets, with increases at the beginning of 2011 followed by decreases in the second half of 2011 in response to falling demand and negative economic forecasts. The average sales price for NLMK Europe increased by 28% on a year-on-year basis, with a price increase (including delivery fee) of 28.4% for plates and 19.0% for hot-rolled coils. The increase in revenues from sales of other products in 2011 was due to sales of raw material stocks and inventories in the second half of 2011.

Long products segment The tables below show a breakdown by product of revenue from external customers and volume of sales to external customers of the long products segment.

Year ended December 31, 2011 2010 Change Revenue (%) Revenue (%) (%) (Amounts in millions of U.S. dollars, except percentages) Revenue from external customers Billets ...... 1.7 0.1 6.6 0.8 (4.9) (74.2) Long products ...... 880.4 76.3 622.3 71.9 258.1 41.5 Metalware ...... 193.4 16.8 152.6 17.6 40.8 26.7 Scrap ...... 50.4 4.4 57.6 6.7 (7.2) (12.5) All others ...... 28.3 2.4 25.7 3.0 2.6 10.1 Total revenue from external customers ...... 1,154.2 100.0 864.8 100.0 289.4 33.5

Year ended December 31, 2011 2010 Change Volume (%) Volume (%) (%) (Amounts in thousands of tonnes, except percentages) Sales volumes to external customers Billets ...... 4.7 0.3 14.3 1.1 (9.6) (67.1) Long products ...... 1,227.4 83.4 1,032.0 81.6 195.4 18.9 Metalware ...... 239.4 16.3 219.3 17.3 20.1 9.2 Total sales ...... 1,471.5 100.0 1,265.6 100.0 205.9 16.3 Revenue of the long products segment, on a consolidated basis, grew by 33.5% to $1,154.2 million in 2011 from $864.8 million in 2010, representing 9.8% of consolidated revenue in 2011, compared to 10.4% in 2010. The increase in long products segment revenue in 2011 was primarily due to higher prices and sales volumes. In 2011, average prices for the products of the long products segment increased by approximately 15.4% on a year-on-year basis, including average price increases (including delivery fee) of approximately 19.0% for long products and approximately 16.1% for metalware. The increase in volume of sales of products of the long products segment by 16.3% in 2011 as compared to 2010 was primarily due to increased sales of long products and metalware. The segment’s production of steel in 2011 was impacted by the breakdown of a transformer on one of NSMMZ’s EAF furnaces in July 2011, although the segment managed to stabilize production levels by increasing the production of high value added products and reducing commercial grades, partially compensating for lost steel production through the purchase of third-party billets, resulting in an increase in overall production volumes on a year-on-year basis. The EAF furnace was back in operation in January 2012.

60 Mining segment The tables below show a breakdown by product of revenue from external customers and volume of sales to external customers of the mining segment.

Year ended December 31, 2011 2010 Change Revenue (%) Revenue (%) (%) (Amounts in millions of U.S. dollars, except percentages) Revenue from external customers Iron ore concentrate ...... 64.5 43.3 0.4 0.5 64.1 Sinter ore ...... 29.0 19.5 48.5 59.6 (19.5) (40.2) Limestone ...... 10.2 6.8 2.5 3.1 7.7 308 Dolomite ...... 12.6 8.5 8.1 9.9 4.5 55.6 All others ...... 32.6 21.9 21.9 26.9 10.7 48.9 Total revenue from external customers ...... 148.9 100.0 81.4 100.0 67.5 82.9

Year ended December 31, 2011 2010 Change Volume (%) Volume (%) (%) (Amounts in thousands of tonnes, except percentages) Sales volumes to external customers Iron ore concentrate ...... 560.4 23.1 4.0 0.2 556.4 Sinter ore ...... 426.9 17.6 971.7 47.6 (544.8) (56.1) Limestone ...... 566.5 23.4 363.6 17.8 202.9 55.8 Dolomite ...... 871.4 35.9 703.9 34.4 167.5 23.8 Total sales ...... 2,425.2 100.0 2,043.2 100.0 382.0 18.7 Revenue of the mining segment, on a consolidated basis, grew by 82.9% to $148.9 million in 2011 from $81.4 million in 2010, representing 1.3% of consolidated revenue in 2011, compared to 1.0% in 2010. The increase in revenue was primarily due to an increased volume of sales, as well as higher sales prices. The volume of sales by the mining segment to external customers increased by 18.7% in 2011 as compared with 2010, largely due to a substantial increase in volume of sales of iron ore concentrate which resulted primarily from the launch of the external section of concentrate enrichment at Stoilensky. This increase was partially offset by a reduction in external sales of sinter ore. Average prices for the mining segment’s products increased in 2011 on a year-on-year basis, including increases in average prices for sinter ore (approximately 36.1%), dolomite (approximately 25.7%) and iron ore (approximately 15.1%).

Cost of sales and gross margin, depreciation and amortization Total cost of sales as a percentage of revenue increased to 71.4% in 2011 from 64.7% in 2010, decreasing the gross margin to 28.6% in 2011 from 35.3% in 2010. Production cost (excluding depreciation and amortization) increased by $2,847.1 million, or 57.7%, to $7,780.3 million in 2011 from $4,933.2 million in 2010, primarily due to the consolidation of the SIF rolling assets in July 2011, which contributed to an increase in sales volumes, a significant increase in the prices for raw materials and higher tariffs for energy and transportation services. In 2011, the slab production cost at the Lipetsk site was $396 per tonne (an increase of approximately 24% from 2010), due mostly to the increase in prices for coking coal (30%), pellets (35%) and transportation and energy costs (railway services: 7.5%; natural gas: 14.9%; electric energy: 8.0%). Billet production costs at the long products segment, and slab production costs at NLMK Indiana, were both impacted by higher prices for ferrous scrap in Russia and the United States. Depreciation and amortization increased by $119.3 million, or 25.4%, to $588.7 million in 2011 from $469.4 million in 2010, primarily due to the consolidation of the SIF rolling assets from July 1, 2011.

61 The following tables show the gross profit and gross margin for the steel, foreign rolled products, long products and mining segments and all other operations for the periods indicated, in each case on a standalone segmental basis before giving effect to eliminations on consolidation, as well as any consolidated adjustments. These consolidation adjustments are referred to as ‘‘intersegmental operations’’.

Year ended December 31, 2011 Foreign rolled Long All Intersegmental Steel products products Mining other(3) operations Total (Amounts in millions of U.S. dollars, except percentages) Revenue from external customers(1) ...... 8,042.7 2,381.5 1,154.2 148.9 1.3 — 11,728.6 Intersegmental revenue(2) ..... 985.0 3.2 640.1 1,290.9 0.1 (2,919.3) Depreciation and amortization . (332.5) (119.4) (89.1) (47.6) (0.1) — (588.7) Gross profit/(loss) ...... 2,186.3 (60.5) 208.4 1,075.1 0.5 (50.2) 3,359.6 Gross margin (%) ...... 24.2 (2.5) 11.6 74.7 35.7 28.6

Year ended December 31, 2010 Foreign rolled Long All Intersegmental Steel products products Mining other(3) operations Total (Amounts in millions of U.S. dollars, except percentages) Revenue from external customers(1) ...... 6,703.2 700.3 864.8 81.4 1.0 — 8,350.7 Intersegmental revenue(2) ...... 350.5 — 512.1 831.2 0.2 (1,694.0) Depreciation and amortization . . (306.3) (31.6) (74.3) (57.1) (0.1) — (469.4) Gross profit/(loss) ...... 2,146.3 7.9 208.7 603.7 0.3 (18.8) 2,948.1 Gross margin (%) ...... 30.4 1.1 15.2 66.2 25.0 35.3

Steel segment Gross profit of the steel segment on a standalone basis before consolidation adjustments increased to $2,186.3 million in 2011 from $2,146.3 million in 2010, and its gross margin decreased to 24.2% in 2011 from 30.4% in 2010. The decrease in gross margin of the steel segment was primarily due to a substantial increase in raw material prices and, to a lesser degree, increases in energy prices. The table below shows the components of the cost of sales of the steel segment for the periods indicated on a standalone segmental basis.

Year ended December 31, 2011 2010 Cost of sales of Cost of sales of steel segment steel segment Change (%) (%) (%) (Amounts in millions of U.S. dollars, except percentages) Iron ore ...... 1,665.2 24.3 1,016.7 20.7 63.8 Coal and coke ...... 1,704.4 24.9 1,169.4 23.8 45.7 Scrap ...... 515.3 7.5 322.0 6.6 60.0 Ferro-alloys ...... 240.7 3.5 212.2 4.3 13.4 Other materials, including zinc(1) ...... 1,059.4 15.5 751.5 15.3 41.0 Electricity (external supplies) ...... 312.6 4.6 258.6 5.3 20.9 Gas...... 248.5 3.6 191.4 3.9 29.8 Payroll costs ...... 544.4 8.0 436.8 8.9 24.6 Depreciation ...... 332.5 4.9 306.4 6.3 8.5 Other costs ...... 218.4 3.2 242.4 4.9 (9.9) Total cost of sales of steel segment ...... 6,841.4 100.0 4,907.4 100.0 39.4

(1) Also includes costs attributable to spare parts and ongoing maintenance.

62 Cost of sales of the steel segment increased by 39.4% in 2011 to $6,841.4 million from $4,907.4 million in 2010. The increase in cost of sales was mainly due to higher sales volumes and substantial increases compared to 2010 in the prices for coking coal (approximately 30%), pellets (approximately 35%) and the products and services of natural monopolies.

Foreign rolled products segment The foreign rolled products segment made a gross loss on a standalone basis before consolidation adjustments of $60.5 million in 2011, compared to a $7.9 million gross profit in 2010. The loss was primarily due to the depressed economic conditions in Europe in the second six months of 2011 and a significant deterioration in the global steel market. The segment had an operating loss of $305.2 million in 2011, as compared to $30.9 million in 2010. The operating losses in those periods primarily reflected depressed economic activity in Europe and a significant deterioration in the market environment. In the first half of 2011, the operating profit of the SIF rolling assets (which were consolidated from July, 1 2011) amounted to $60.8 million.

Long products segment Gross profit of the long products segment on a standalone basis before consolidation adjustments remained largely flat at $208.4 million in 2011 compared to $208.7 million in 2010, and its gross margin decreased to 11.6% in 2011 from 15.2% in 2010, primarily as a result of pressure from the higher scrap prices and electricity tariffs. The segment had an operating loss of $54.7 million in 2011, as compared to $27.8 million in 2010. The operating losses in those periods primarily reflected substantial increases in scrap prices and electricity tariffs. The table below shows the components of the cost of sales of the long products segment for the periods indicated on a standalone segmental basis.

Year ended December 31, 2011 2010 Cost of sales of Cost of sales of Long products Long products segment segment Change (%) (%) (%) (Amounts in millions of U.S. dollars, except percentages) Scrap ...... 1,004.5 63.3 761.1 65.2 32.0 Ferro-alloys ...... 31.3 2.0 35.3 3.0 (11.3) Other materials ...... 208.9 13.2 125.6 10.8 66.3 Electricity (external supplies) ...... 84.3 5.3 81.9 7.0 2.9 Gas...... 14.8 0.9 12.0 1.0 23.3 Other energy(1) ...... 9.7 0.6 6.0 0.5 61.7 Payroll costs ...... 107.4 6.8 92.5 7.9 16.1 Depreciation ...... 89.1 5.6 74.3 6.4 19.9 Other costs ...... 35.9 2.3 (20.5) (1.8) 275.1 Total cost of sales of long segment ...... 1,585.9 100.0 1,168.2 100.0 35.8

(1) Includes fuels and lubricants. Cost of sales of the long segment increased by 35.8% in 2011 to $1,585.9 million from $1,168.2 million in 2010. The increase in cost of sales was mainly due to higher sales volumes of long products and metalware, an increase in purchases of long products from third-party suppliers as a result of a disruption in production at NSMMZ following the breakdown of an EAF transformer and higher scrap prices and electricity tariffs.

Mining segment Gross profit of the mining segment on a standalone basis before consolidation adjustments increased to $1,075.1 million in 2011 from $603.7 million in 2010, and its gross margin increased to 74.7% in 2011 from 66.2% in 2010, primarily due to higher sales prices and volumes, together with constant control over production costs.

63 The following table shows, for 2011 and 2010, a cost of sales breakdown for the Group’s mining segment.

Year ended December 31, 2011 2010 Cost of sales of Cost of sales of Mining segment Mining segment Change (%) (%) (%) (Amounts in millions of U.S. dollars, except percentages) Raw materials(1) ...... 33.2 9.1 23.0 7.4 44.3 Electricity (external supplies) ...... 96.5 26.5 84.6 27.4 14.1 Gas...... 4.7 1.3 3.6 1.2 30.6 Other energy(2) ...... 19.2 5.3 11.8 3.8 62.7 Payroll costs ...... 85.3 23.4 67.5 21.9 26.4 Depreciation ...... 47.6 13.0 57.1 18.5 (16.6) Other costs ...... 78.2 21.4 61.3 19.8 27.6 Total cost of sales of mining ...... 364.7 100.0 308.9 100.0 18.1

(1) Includes balls and explosive materials. (2) Includes fuels and lubricants. Cost of sales of the mining segment increased by 18.1% in 2011 to $364.7 million from $308.9 million in 2010. The increase in cost of sales was mainly due to higher sales volumes of iron ore concentrate, in response to demand from the Group’s main steel production site, as well as increases in the price of energy and fuel.

Selling, general and administrative and other operating expenses Total selling, general and administrative and other operating expenses increased by $540.4 million, or 46.8%, to $1,693.9 million in 2011 from $1,153.5 million in 2010. The following table shows a breakdown of selling, general and administrative and other operating expenses for the periods indicated.

Year ended December 31, 2011 2010 Change (%) (Amounts in millions of U.S. dollars, except percentages) General and administrative expenses ...... 556.1 263.1 293.0 111.4 Selling expenses ...... 972.7 708.9 263.8 37.2 Taxes other than income tax ...... 165.1 123.3 41.8 33.9 Impairment losses ...... — 58.2 (58.2) (100) Total selling, general and administrative and other operating expenses ...... 1,693.9 1,153.5 540.4 46.8 General and administrative expenses increased by $293.0 million, or 111.4%, to $556.1 million in 2011 from $263.1 million in 2010, primarily due to the consolidation into the Group of the SIF rolling mills. Selling expenses increased by $263.8 million, or 37.2%, to $972.7 million in 2011 from $708.9 million in 2010, primarily due to an increase in sales volumes and transportation expenses. Taxes other than income tax increased by $41.8 million, or 33.9%, to $165.1 million in 2011 from $123.3 million in 2010. This increase was primarily due to the consolidation of taxes of SIF and other companies in which the Group acquired a controlling interest in 2011, as well as an increase in property tax as a result of the commissioning of fixed assets, including the fourth section of the beneficiation plant at Stoilensky, the new section mill at the Berezovski site of NSMMZ and various assets at the main production site in Lipetsk. Impairment losses of $58.2 million in 2010 represented goodwill impairment of the long products segment’s assets resulting from the deterioration in market conditions in the industry. As a percentage of total revenue, selling, general and administrative and other operating expenses increased to 14.4% in 2011, compared to 13.8% of total revenue in 2010.

64 Loss on disposals of property, plant and equipment Loss on disposals of property, plant and equipment was $29.3 million in 2011, compared to $9.7 million in 2010, an increase of 202.1%. The increase was primarily attributable to the recognition of expenses attributed to the retirement of fixed assets of NSMMZ.

Gains/(losses) on investments, net Gains/(losses) on investments, net was an $11.9 million gain in 2011, compared to a $27.9 million loss in 2010. The gain on investments in 2011 was primarily attributable to a revaluation of the 50% stake that the Group held in SIF prior to acquiring a 100% interest in July 2011.

Interest income Interest income decreased by $15.6 million, or 34.6%, to $29.5 million in 2011 from $45.1 million in 2010, primarily as a result of the elimination, on a consolidated basis, of interest received by the Group on loans provided to SIF following the consolidation of SIF with the Group in July 2011.

Interest expense In accordance with U.S. GAAP, all interest expenses were capitalized and were not reflected in the profit and loss accounts in 2011. Interest expenses were $15.9 million in 2010. Capitalized interest expenses decreased marginally to $171.8 million in 2011 from $173.4 million in 2010. The stable level of interest expenses despite the growing gross debt portfolio of the Group was mainly attributable to changes in foreign currency exchange rates and debt portfolio optimization.

Foreign currency exchange gain/(loss), net Foreign currency exchange gain, net was $18.6 million in 2011, compared to a $59.3 million loss in 2010. The foreign currency exchange gain, net in 2011 primarily resulted from the higher rate of depreciation of the U.S. dollar relative to the ruble and the euro in 2011 as compared with 2010.

Income tax expense Income tax expense in 2011 was $421.0 million, compared to $391.0 million in 2010. The effective tax rate for 2011 was 25.0%, compared to 22.7% for 2010. The increase in effective tax rate was partially attributable to the consolidation of SIF from July 1, 2011, as some losses carried forward did not result in recognition of deferred tax asset.

Net income For the reasons set forth above, net income increased by $91.4 million, or 7.5%, to $1,315.4 million in 2011 from $1,224.0 million in 2010.

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009 Revenue Total revenue increased by $2,210.8 million, or 36.0%, to $8,350.7 million in 2010 from $6,139.9 million in 2009. This growth was primarily the result of recovering prices and increased sales of high value added products, as well as substantial growth in output.

65 The following tables show a breakdown of revenue and sales volume from external customers, on a consolidated basis after intersegmental eliminations, from sales of the Group’s main products for the periods indicated.

Year ended December 31, 2010 2009 Change Revenue (%) Revenue (%) (%) (Amounts in millions of U.S. dollars, except percentages) Revenue Pig iron ...... 236.7 2.8 148.0 2.4 88.7 59.9 Semi-finished ...... 2,082.8 25.0 1,342.7 21.9 740.1 55.1 Flat ...... 4,170.1 49.9 3,142.4 51.2 1,027.7 32.7 Plates ...... 275.5 3.3 195.9 3.2 79.6 40.6 Long...... 842.4 10.1 607.9 9.9 234.5 38.6 Others ...... 743.2 8.9 703.0 11.4 40.2 5.7 Total ...... 8,350.7 100.0 6,139.9 100.0 2,210.8 36.0

Year ended December 31, 2010 2009 Change Sales (%) Sales (%) (%) (Amounts in thousands of tonnes, except percentages) Sales Volume Pig iron ...... 582.3 5.0 559.2 5.3 23.1 4.1 Semi-finished ...... 4,097.8 34.9 3,715.9 35.1 381.9 10.3 Flat ...... 5,325.3 45.4 4,701.0 44.3 624.3 13.3 Plates ...... 348.2 3.0 219.1 2.1 129.1 58.9 Long...... 1,377.1 11.7 1,404.2 13.2 (27.1) (1.9) Total ...... 11,730.7 100.0 10,599.4 100.0 1,131.3 10.7 In 2010, sales of flat products grew by 13.3% to 5.3 million tonnes, and comprised 45.4% of total sales (44.3% in 2009). The highest rates of growth were recorded for dynamo steel (66.0%), transformer steel (28.5%) and metalware (16.7%). Sales of semi-finished products increased by 10.3%, mostly due to larger deliveries to the SIF joint venture rolling facilities, as well as an overall recovery in demand for this type of product. In 2010, average prices for steel products grew to $648.5 per tonne, a 26.4% increase from $512.9 per tonne in 2009, which largely followed global market trends. The increase in prices was mainly driven by growing raw material prices, forcing steel producers to compensate against growing production costs. The following table shows a breakdown of revenue from external customers, on a consolidated basis after intersegmental eliminations, by geographic region for the periods indicated.

Year ended December 31, 2010 2009 Change Revenue (%) Revenue (%) (%) (Amounts in millions of U.S. dollars, except percentages) Russia ...... 3,434.4 41.1 2,280.5 37.1 1,153.9 50.6 European Union ...... 1,802.6 21.6 847.1 13.8 955.5 112.8 Middle East, including Turkey ...... 1,162.1 13.9 1,301.6 21.2 (139.5) (10.7) North America ...... 797.2 9.5 300.5 4.9 496.7 165.3 Asia and Oceania ...... 698.2 8.4 1,225.5 20.0 (527.3) (43.0) Other regions ...... 456.2 5.5 184.7 3.0 271.5 147.0 Total ...... 8,350.7 100.0 6,139.9 100.0 2,210.8 36.0 Russian domestic revenue increased by 50.6% to $3,434.4 million, or 41.1% of total revenue, primarily as a result of growing demand from the construction and machine-building sectors. A gradual recovery in the European and North American economies, particularly in machine-building, led to increased sales in those markets. Revenue from the European Union totalled $1,802.6 million (21.6% of total revenue), an increase of 112.8%, while revenue from North America was $797.2 million (9.5% of total revenue), representing an increase of 165.3%. Revenue from the Middle East and Asia and Oceania contracted by

66 10.7% and 43.0%, respectively, returning to the historical average following local sales peaks in those regions in 2009. The following table shows revenue from external customers for each of the Group’s segments for the periods indicated.

Year ended December 31, 2010 2009 Change Revenue % of total Revenue % of total (%) (Amounts in millions of U.S. dollars, except percentages) Steel(1) ...... 6,703.2 80.3 5,066.5 82.5 1,636.7 32.3 Foreign rolled products ...... 700.3 8.4 410.6 6.7 289.7 70.6 Long products ...... 864.8 10.3 572.5 9.3 292.3 51.1 Mining ...... 81.4 1.0 85.0 1.4 (3.6) (4.2) All other ...... 1.0 — 5.3 0.1 (4.3) (81.1) Total ...... 8,350.7 100.0 6,139.9 100.0 2,210.8 36.0

(1) Represents revenues from all sales other than intersegmental sales to the Group’s other operating segments or businesses.

Steel segment The tables below show a breakdown by product of revenue from external customers and volume of sales to external customers of the steel segment for the periods indicated.

Year ended December 31, 2010 2009 Change Revenue (%) Revenue (%) (%) (Amounts in millions of U.S. dollars, except percentages) Revenue from external customers Pig iron ...... 236.7 3.5 148.0 2.9 88.7 59.9 Slabs ...... 1,926.9 28.8 1,234.8 24.4 692.1 56.0 Hot-rolled ...... 1,139.1 17.0 858.8 16.9 280.3 32.6 Cold-rolled ...... 1,065.8 15.9 842.1 16.6 223.7 26.6 Galvanized ...... 510.6 7.6 267.8 5.3 242.8 90.7 Pre-painted ...... 409.7 6.1 351.3 6.9 58.4 16.6 Transformer ...... 441.3 6.6 506.4 10.0 (65.1) (12.9) Dynamo ...... 242.7 3.6 129.5 2.6 113.2 87.4 Coke ...... 220.4 3.3 192.4 3.8 28.0 14.6 Other segments products: Including steel products(1) ...... 192.1 2.9 228.8 4.5 (36.7) (16.0) Including other products(2) ...... 14.1 0.2 23.3 0.5 (9.2) (39.5) Other revenue ...... 303.8 4.5 283.3 5.6 20.5 7.2 Total revenue from external customers ...... 6,703.2 100.0 5,066.5 100.0 1,636.7 32.3

(1) Includes revenue from sales of long products by the Group’s trading companies. (2) Includes revenue from sales of coke and iron ore concentrate by the Group’s trading companies.

67 Year ended December 31, 2010 2009 Change (%) (%) (%) (Amounts in thousands of tonnes, except percentages) Sales volumes to external customers Pig iron ...... 582.3 6.1 559.2 6.3 23.1 4.1 Slabs ...... 3,788.1 39.8 3,419.2 38.4 368.9 10.8 Hot-rolled ...... 1,862.7 19.6 1,915.1 21.5 (52.4) (2.7) Cold-rolled ...... 1,527.3 16.1 1,541.5 17.3 (14.2) (0.9) Galvanized ...... 575.7 6.1 327.7 3.7 248.0 75.7 Pre-painted ...... 332.0 3.5 331.2 3.7 0.8 0.2 Transformer ...... 198.2 2.1 58.1 0.6 140.1 241.1 Dynamo ...... 267.7 2.8 161.3 1.8 106.4 66.0 Other segments products(1) ...... 374.2 3.9 595.3 6.7 (221.1) (37.1) Total sales ...... 9,508.2 100.0 8,908.6 100.0 599.6 6.7

(1) Includes revenue from sales of long products by the Group’s trading companies. Revenue of the steel segment, on a consolidated basis, grew by 32.3% to $6,703.2 million in 2010 from $5,066.5 million in 2009, representing 80.3% of total revenue in 2010, compared to 82.5% in 2009. The increase in steel segment revenue in 2010 was primarily due to higher prices, as well as an increase of 6.7% in volumes of sales. The average price for steel segment products (including delivery fee) grew in 2010 on a year-on-year basis, including increases in prices for slabs (29.0%), hot-rolled coils (26.7%) and cold-rolled coils (21.7%). Revenue from sales of slabs increased by 56.0% in 2010 from 2009 as a result of an increase in average prices of approximately 29.0% and an increase in volume of sales of 10.8%. Revenue from sales of high value added products, comprising approximately 39.8% of total steel segment revenue in 2010, increased by 27.3% in 2010 compared to 2009 due to a higher volume of sales and an increase in average prices of 6.2%. The increase in revenue in high value added products was mainly attributable to an increase in revenue from sales of cold-rolled and galvanized products, as well as non-grain-oriented (dynamo) steel.

Foreign rolled products segment The tables below show a breakdown by product of revenue from external customers and volume of sales to external customers of the foreign rolled products segment.

Year ended December 31, 2010 2009 Change Revenue (%) Revenue (%) (%) (Amounts in millions of U.S. dollars, except percentages) Revenue from external customers Slabs ...... 24.7 3.5 10.0 2.4 14.7 147.0 Plate ...... 275.5 39.4 195.9 47.7 79.6 40.6 Hot-rolled ...... 360.9 51.5 186.6 45.5 174.3 93.4 All others ...... 39.2 5.6 18.1 4.4 21.1 116.6 Total revenue from external customers ...... 700.3 100.0 410.6 100.0 289.7 70.6

Year ended December 31, 2010 2009 Change Volume (%) Volume (%) (%) (Amounts in thousands of tonnes, except percentages) Sales volumes to external customers Slabs ...... 47.1 4.9 23.8 3.9 23.3 97.9 Plate ...... 348.2 36.4 219.1 36.0 129.1 58.9 Hot-rolled ...... 561.6 58.7 366.1 60.1 195.5 53.4 Total sales ...... 956.9 100.0 609.0 100.0 347.9 57.1 Revenue of the foreign rolled products segment, on a consolidated basis, grew by 70.6% to $700.3 million in 2010 from $410.6 million in 2009, representing 8.4% of total revenue in 2010, compared to 6.7% in 2009.

68 The increase in foreign rolled products segment revenue in 2010 was primarily due to an increase in volumes of sales of 57.1%, largely as a result of higher volumes of sales of plate and hot-rolled flat products, as well as an increase in prices of approximately 7.2%. The increase in prices (including delivery fee) on a year-on-year basis included increases for hot-rolled coils (approximately 26.1%) and slabs (approximately 24.8%). The increase in plate sales revenue in 2010 of 40.6% was largely attributable to the increase in volume of sales for these products of 58.9% compared to 2009. The increase in revenue from hot-rolled flats of 93.4% in 2010 resulted from an increase in volumes of sales of 53.4%, as well as higher prices.

Long products segment The tables below show a breakdown by product of revenue from external customers and volume of sales to external customers of the long products segment.

Year ended December 31, 2010 2009 Change Revenue (%) Revenue (%) (%) (Amounts in millions of U.S. dollars, except percentages) Revenue from external customers Billets ...... 6.6 0.8 2.2 0.4 4.4 200.0 Long products ...... 622.3 71.9 373.5 65.2 248.8 66.6 Metalware ...... 152.6 17.6 101.3 17.7 51.3 50.6 Scrap ...... 57.6 6.7 37.6 6.6 20.0 53.2 All others ...... 25.7 3.0 57.9 10.1 (32.2) (55.6) Total revenue from external customers ...... 864.8 100.0 572.5 100.0 292.3 51.1

Year ended December 31, 2010 2009 Change Volume (%) Volume (%) (%) (Amounts in thousands of tonnes, except percentages) Sales volumes to external customers Billets ...... 14.3 1.1 6.0 0.5 8.3 138.3 Long products ...... 1,032.0 81.6 887.9 82.1 144.1 16.2 Metalware ...... 219.3 17.3 187.9 17.4 31.4 16.7 Total sales ...... 1,265.6 100.0 1,081.8 100.0 183.8 17.0 Revenue of the long products segment, on a consolidated basis, grew by 51.1% to $864.8 million in 2010 from $572.5 million in 2009, representing 10.4% of total revenue in 2010, compared to 9.3% in 2009. The increase in long products segment revenue in 2010 was attributable to improved market conditions, which resulted in an increase of 39.4% on a year-on-year basis in the average price for the products of the long segment, including increases for prices of long products (43.3%) and metalware (29.1%). The volume of sales of the long products segment also increased by 17.0% in 2010 as compared with 2009, largely due to increases in volume of sales of long products (by 16.2%) and metalware (by 16.7%). In relation to the individual products of the long products segment, revenue from long products sales increased by 66.6% in 2010 from 2009 and revenue from metalware sales increased by 50.6% over the same period. These revenue increases were attributable to both higher prices and an increased volume of sales.

69 Mining segment The tables below show a breakdown by product of revenue from external customers and volume of sales to external customers of the mining segment.

Year ended December 31, 2010 2009 Change Revenue (%) Revenue (%) (%) (Amounts in millions of U.S. dollars, except percentages) Revenue from external customers Iron ore concentrate ...... 0.4 0.5 45.0 52.9 (44.6) (99.1) Sinter ore ...... 48.5 59.6 12.7 15.0 35.8 281.9 Limestone ...... 2.5 3.1 2.9 3.4 (0.4) (13.8) Dolomite ...... 8.1 9.9 7.3 8.6 0.8 11.0 All others ...... 21.9 26.9 17.1 20.1 4.8 28.1 Total revenue from external customers ...... 81.4 100.0 85.0 100.0 (3.6) (4.2)

Year ended December 31, 2010 2009 Change Volume (%) Volume (%) (%) (Amounts in thousands of tonnes, except percentages) Sales volumes to external customers Iron ore concentrate ...... 4.0 0.2 1,060.5 38.7 (1,056.5) (99.6) Sinter ore ...... 971.7 47.6 489.5 17.8 482.2 98.5 Limestone ...... 363.6 17.8 437.5 15.9 (73.9) (16.9) Dolomite ...... 703.9 34.4 756.9 27.6 (53.0) (7.0) Total sales ...... 2,043.2 100.0 2,744.4 100.0 (701.2) (25.6) Revenue of the mining segment, on a consolidated basis, decreased by 4.2% to $81.4 million in 2010 from $85.0 million in 2009, representing 1.0% of total revenue in 2010, compared to 1.4% in 2009. The decrease in mining segment revenue in 2010 was primarily due to a reduction of sales volumes to external customers of 25.6%, which was partially offset by an increase in prices of 17.7%. The decrease in volume of sales in 2010 was primarily attributable to a reduction in the volume of sales of iron ore concentrate to third parties from 1,060.5 thousand tonnes to 4.0 thousand tonnes as the Group’s iron ore concentrate output was sold almost exclusively to the Group’s own steel segment in response to increased demand from the Group’s expanding steel production. The increase in prices on a year-on-year basis in 2010 included increases in prices (including delivery fee) for iron ore concentrate (135.7%), sinter ore (92.4%) and dolomite (19.3%). While revenue from sales of iron ore concentrate decreased by 99.1% in 2010 due to the decrease in sales to third parties from 1.060.5 thousand tonnes to 4.0 thousand tonnes described above, revenue from sales of sinter ore increased by 281.9% in 2010 as compared with 2009 as a result of an increase in volume of sales of 98.5% and higher sales prices.

Cost of sales and gross margin, depreciation and amortization Cost of sales increased by $1,252.2 million, or 30.2%, to $5,402.6 million in 2010 from $4,150.4 million in 2009. As a percentage of revenue, cost of sales decreased to 64.7% in 2010 from 67.6% in 2009, which resulted in gross profit margin increasing to 35.3%. Production cost (excluding depreciation and amortization) increased by $1,260.9 million, or 34.3%, to $4,933.2 million in 2010 from $3,672.3 million in 2009, primarily due to higher sales volumes, higher prices for coking coal and scrap and an increase of energy tariffs and tariffs for natural monopolies services. Depreciation and amortization decreased by $8.7 million, or 1.8%, to $469.4 million in 2010 from $478.1 million in 2010, primarily due to a decrease in depreciation expenses by Stoilensky as a result of extending the useful life of its minerals extraction license from 10 years to 25 years.

70 The following tables show the gross profit and gross margin for the steel, foreign rolled products, long products and mining segments and all other operations for the periods indicated, in each case on a standalone segmental basis before giving effect to eliminations on consolidation, as well as any consolidated adjustments. These consolidation adjustments are referred to as ‘‘intersegmental operations’’.

Year ended December 31, 2010 Foreign rolled Long All Intersegmental Steel products products Mining other(3) operations Total (Amounts in millions of U.S. dollars, except percentages) Revenue from external customers(1) . 6,703.2 700.3 864.8 81.4 1.0 — 8,350.7 Intersegmental revenue(2) ...... 350.5 — 512.1 831.2 0.2 (1,694.0) Depreciation and amortization ..... (306.3) (31.6) (74.3) (57.1) (0.1) — (469.4) Gross profit/(loss) ...... 2,146.3 7.9 208.7 603.7 0.3 (18.8) 2,948.1 Gross margin (%) ...... 30.4 1.1 15.2 66.2 25.0 35.3

Year ended December 31, 2009 Foreign rolled Long All Intersegmental Steel products products Mining other(3) operations Total (Amounts in millions of U.S. dollars, except percentages) Revenue from external customers(1) . 5,066.5 410.6 572.5 85.0 5.3 — 6,139.9 Intersegmental revenue(2) ...... 190.4 — 310.0 430.5 — 930.9 Depreciation and amortization ..... (287.6) (36.0) (72.5) (81.2) (0.8) — (478.1) Gross profit/(loss) ...... 1,715.6 (31.2) 51.8 216.9 2.3 34.1 1,989.5 Gross margin (%) ...... 32.6 (7.6) 5.9 42.1 43.4 32.4

Steel segment Gross profit of the steel segment on a standalone basis before consolidation adjustments increased to $2,146.3 million in 2010 from $1,715.6 million in 2009, and its gross margin decreased to 30.4% in 2010 from 32.6% in 2009. The decrease in gross margin of the steel segment was primarily attributable to the rate of increase in prices of raw materials purchased by the steel segment exceeding the rate of increases in prices for steel products sold by the steel segment. The table below shows the components of the cost of sales of the steel segment for the periods indicated on a standalone segmental basis.

Year ended December 31, 2010 2009 Cost of sales of Cost of sales of steel segment steel segment Change (%) (%) (%) (Amounts in millions of U.S. dollars, except percentages) Iron ore ...... 1,016.7 20.7 519.8 14.7 95.6 Coal and coke ...... 1,169.4 23.8 592.1 16.7 97.5 Scrap ...... 322.0 6.6 132.8 3.8 142.5 Ferro-alloys ...... 212.2 4.3 138.3 3.9 53.4 Other materials, including zinc(1) ...... 751.5 15.3 694.3 19.6 8.2 Electricity (external supplies) ...... 258.6 5.3 121.5 3.4 112.8 Gas...... 191.4 3.9 551.1 15.6 65.3 Payroll costs ...... 436.8 8.9 329.4 9.3 32.6 Depreciation ...... 306.4 6.3 287.5 8.1 6.6 Other costs ...... 242.4 4.9 174.5 4.9 (38.9) Total cost of sales of steel segment ...... 4,907.4 100.0 3,541.3 100.0 38.6

(1) Also includes costs attributable to spare parts and ongoing maintenance.

71 The increase in cost of sales of the steel segment in 2010 as compared with 2009 was mainly attributable to a higher volume of purchases of raw materials in connection with increased sales volumes, as well as higher prices for coking coal and scrap and an increase in energy tariffs and tariffs for natural monopolies services.

Foreign rolled products segment Gross profit of the foreign rolled products segment on a standalone basis before consolidation adjustments was $7.9 million in 2010, compared to a $31.2 million loss in 2009. The change in gross profit was primarily due to rate of increase in prices for the segment’s products exceeding the rate of increase in the price of raw materials and energy consumed by the segment. The segment had an operating loss of $30.9 million in 2010, as compared to $64.6 million in 2009. The decrease of operating losses in 2010 was attributable to improved market conditions.

Long products segment Gross profit of the long products segment on a standalone basis before consolidation adjustments increased to $208.7 million in 2010 from $51.8 million in 2009, and its gross margin increased to 15.2% in 2010 from 5.9% in 2009. These changes were primarily the result of the launch of a new rolling mill at NSMMZ (Berezovski mill). The segment had an operating loss of $27.8 million in 2010, as compared to $141.8 million in 2009. The decrease of operating losses in 2010 was attributable to improved market conditions and an improved product mix, including increased sales of metalware.

Year ended December 31, 2010 2009 Cost of sales of Cost of sales of Long products Long products segment segment Change (%) (%) (%) (Amounts in millions of U.S. dollars, except percentages) Scrap ...... 761.1 65.2 459.0 55.3 65.8 Ferro-alloys ...... 35.3 3.0 31.6 3.8 11.7 Other materials ...... 125.6 10.8 104.9 12.6 19.7 Electricity (external supplies) ...... 81.9 7.0 70.0 8.4 17.0 Gas...... 12.0 1.0 10.2 1.2 17.6 Other energy(1) ...... 6.0 0.5 7.4 0.9 (18.9) Payroll costs ...... 92.5 7.9 88.4 10.7 4.6 Depreciation ...... 74.3 6.4 72.5 8.7 2.5 Other costs ...... (20.5) (1.8) (13.3) (1.6) 54.1 Total cost of sales of long segment ...... 1,168.2 100.0 830.7 100.0 40.6

(1) Includes fuels and lubricants. The increase in cost of sales of the long products segment in 2010 as compared with 2009 was mainly attributable to a higher volume of purchases of raw materials in connection with increased sales levels, as well as substantial increases in scrap prices and electricity tariffs.

Mining segment Gross profit of the mining segment on a standalone basis before consolidation adjustments increased to $603.7 million in 2010 from $216.9 million in 2009, and its gross margin increased to 66.2% in 2010 from 42.1% in 2009. These increases were primarily due to higher sales, better operational performance and relatively low cost of production.

72 The following table shows, for 2010 and 2009, a cost of sales breakdown for the mining segment for the periods indicated on a standalone segmental basis.

Year ended December 31, 2010 2009 Cost of sales of Cost of sales of Mining segment Mining segment Change (%) (%) (%) (Amounts in millions of U.S. dollars, except percentages) Raw materials(1) ...... 23.0 7.4 22.2 7.4 3.6 Electricity (external supplies) ...... 84.6 27.4 60.3 20.2 40.3 Gas...... 3.6 1.2 2.5 0.8 44.0 Other energy(2) ...... 11.8 3.8 9.0 3.0 31.1 Payroll costs ...... 67.5 21.9 59.9 20.1 12.7 Depreciation ...... 57.1 18.5 81.2 27.2 (29.7) Other costs ...... 61.3 19.8 63.5 21.3 (3.5) Total cost of sales of mining ...... 308.9 100.0 298.6 100.0 3.4

(1) Includes balls and explosive materials. (2) Includes fuels and lubricants. The increase in cost of sales of the mining segment in 2010 as compared with 2009 was mainly attributable to higher electricity tariffs and increased prices for grinding bodies used in grinding operations by the companies in the mining segment.

Selling, general and administrative and other operating expenses Total selling, general and administrative and other operating expenses increased by $55.9 million, or 5.1%, to $1,153.5 million in 2010 from $1,097.6 million in 2009. The following table shows a breakdown of selling, general and administrative and other operating expenses for the periods indicated.

Year ended December 31, 2010 2009 Change (%) (Amounts in millions of U.S. dollars, except percentages) General and administrative expenses ...... 263.1 297.2 (34.1) (11.5) Selling expenses ...... 708.9 654.6 54.3 8.3 Taxes other than income tax ...... 123.3 102.1 21.2 20.8 Impairment losses ...... 58.2 43.7 14.5 33.2 Total selling, general and administrative and other operating expenses ...... 1,153.5 1,097.6 55.9 5.1 General and administrative expenses decreased by $34.1 million, or 11.5%, to $263.1 million in 2010 from $297.2 million in 2009, primarily due to management initiatives to reduce costs and allowances for receivables. Selling expenses increased by $54.3 million, or 8.3%, to $708.9 million in 2010 from $654.6 million in 2009, primarily attributable to higher sales volumes. Taxes, other than income tax, increased by $21.2 million, or 20.8%, to $123.3 million in 2010 from $102.1 million in 2009, primarily due to increased property taxes as a result of commencing operations with new equipment. Impairment losses of $58.2 million in 2010 and $43.7 million in 2009 represented goodwill impairment of the long product segment assets resulting from the deterioration in market conditions in the industry. As a percentage of total revenue, selling, general and administrative and other operating expenses decreased to 13.8% in 2010, compared to 17.9% of total revenue in 2009.

73 Loss on disposals of property, plant and equipment Loss on disposals of property, plant and equipment was $9.7 million in 2010, compared to $4.4 million in 2009, an increase of 120.5%.

Losses on investments, net Losses on investments, net were a $27.9 million in 2010, compared to a $10.9 million in 2009. The loss on investments in 2010 and 2009 was primarily attributable to disposal of investments related to former subsidiaries of Maxi-Group. The Group acquired a controlling stake in OJSC Maxi-Group in 2007.

Interest income Interest income decreased by $14.6 million, or 24.5%, to $45.1 million in 2010 from $59.7 million in 2009, primarily due to a decrease in interest income from deposits as a result of a decrease in cash and cash equivalents held as deposits in the Group’s accounts.

Interest expense Interest expenses were $15.9 million in 2010, compared to $170.9 million in 2009. This reduction was primarily attributable to the capitalization of a substantial proportion of interest expenses as part of construction in progress. Capitalized interest expenses were $173.4 million in 2010 and $29.7 million in 2009.

Foreign currency exchange loss, net Foreign currency exchange loss, net was $59.3 million in 2010, compared to $78.0 million in 2009. The foreign currency exchange loss, net in both 2010 and 2009, primarily resulted from foreign currency exchange gains/losses received by the Group.

Other income/(expenses), net Other expenses, net was $4.6 million in 2010, compared to other expenses, net of $92.7 million in 2009. The decrease was primarily to non-recurring expenses incurred at certain of the Group’s subsidiaries in 2009.

Income tax expense Income tax expense in 2010 was $391.0 million, compared to $181.8 million in 2009. The effective tax rate for 2010 was 22.7%, compared to 30.6% for 2009. The decrease in effective tax rates in 2010 as compared with 2009 was primarily attributable to losses incurred by certain subsidiaries in 2009, which did not result in recognition of deferred tax assets.

Net income For the reasons set forth above, net income increased by $1,125.9 million, or 1,147.7%, to $1,224.0 million in 2010 from $98.1 million in 2009.

Liquidity and Capital Resources Historically, the Group’s major source of cash has been cash provided by operating activities, and NLMK expects that this will continue to be the Group’s principal source of cash in the future. As of September 30, 2012, the Group had cash and cash equivalents of $1,802.9 million and total debt of $5,283.6 million. See ‘‘—Liquidity’’.

Capital requirements The Group’s principal financing requirements have been, and continue to be, to finance production of steel and steel products and mining operations, and to fund capital expenditures, including the purchase of equipment and modernization of facilities, as well as acquisitions. Historically, funding of the Group’s capital requirements has come from cash flows from operating activities. NLMK intends to continue to fund the Group’s capital expenditures primarily from these cash flows, as well as, if necessary, external sources of financing.

74 Capital expenditures The Group’s business is heavily dependent on plant and machinery for the production of steel and steel products and mining. Investments to maintain, expand and increase the efficiency of production facilities are, accordingly, an important priority and have a significant effect on the Group’s cash flows and future results of operations. The Group’s capital expenditures in the nine months ended September 30, 2012 totaled $1,157.5 million, as compared with $1,529.0 million in the nine months ended September 30, 2011. The capital expenditure funds were primarily invested in ongoing projects under the Group’s Technical Upgrade Program, including the construction of the NLMK-Kaluga Mini-Mill (the first and second stages of which are scheduled for launch at the beginning of 2013) and the construction by Stoilensky of a pelletizing plant with a capacity of six million tonnes per year, which is currently expected to be commissioned by 2015. In 2011, the Group’s capital expenditures were $2,047.9 million, compared to $1,463.2 million in 2010. The capital expenditure funds were primarily invested in the completion of the construction of a new blast furnace, the construction of a new basic oxygen furnace and the comprehensive upgrading of the secondary steelmaking facilities and the power plant at the Lipetsk site; the continuing construction of the NLMK-Kaluga Mini-Mill; the launch of beneficiation facilities and the start of the construction of the pelletizing plant at Stoilensky; the new quenching and tempering line at NLMK Clabecq S.A. (‘‘NLMK Clabecq’’) in Belgium; the upgrade of rolling equipment of NLMK Dansteel A/S (‘‘NLMK Dansteel’’) in Denmark; and a number of other projects aimed at increasing production efficiency, improving steel product quality and expanding the Group’s range of value-added products (including niche products); as well as ecological projects aimed at further reducing the environmental impact of the Group’s operations. In 2010, the Group’s capital expenditures were $1,463.2 million, compared to $1,120.8 million in 2009. The major part of investments was allocated to the construction of a new blast furnace No. 7 and a new basic oxygen furnace, the reconstruction of Continuous Casting Machine No.8 in BOF shop No.2, the construction of a power plant at the Lipetsk site, the start of construction of the NLMK-Kaluga Mini-Mill and the initiation of a new project to increase capacity at Stoilensky capacities.

Recent acquisitions In July 2011, the Group completed the acquisition of the remaining 50% stake in SIF from the Duferco Group for a total cash consideration of $600 million, payable in four equal annual installments, with the first two tranches paid on June 30, 2011 and 2012, respectively, plus interest accrued on unpaid amounts at a rate equal to LIBOR for the relevant three-month interest period plus 1% until June 30, 2013 and at a rate of LIBOR for the relevant three-month interest period plus 2% until the earlier of June 30, 2014 or the date of payment. In September 2012 the Duferco parties assigned the instalment due on June 30, 2013 to ING Belgium, Brussels, Geneva Branch, and in December 2012 ING and Duferco agreed to the extension of the instalment payment due to June 30, 2014, in consideration of certain fees payable to ING. As part of the restructuring, SIF also transferred to the Duferco Group certain non-core assets consisting of its long product operations and Belgian steelmaking operations. In connection with such acquisition, LLC NLMK Overseas Holdings (the Group entity which entered into the acquisition agreement with Duferco) entered into an agreement on guarantees in a total amount of $180 million with ZAO ‘‘ING Bank (Eurasia)’’ in respect of its deferred payment obligations to Duferco, and NLMK (as guarantor) and ZAO ‘‘ING Bank (Eurasia)’’ entered into a suretyship agreement in respect of the performance of all payment of obligations of LLC NLMK Overseas Holdings under such agreement on guarantees. Under the suretyship agreement, NLMK must ensure that, in relation to the Group on a consolidated basis: (i) the ratio of net consolidated financial indebtedness to EBITDA (as defined in such agreement) must not exceed 3.5; and (ii) the ratio of net consolidated financial indebtedness to tangible net worth must not exceed 1.54. In addition, the obligations of LLC NLMK Overseas Holdings under the agreement on guarantees are secured by direct debit rights over certain of its bank account. In October 2011, the Group acquired Nippon Transcore Private Limited (subsequently renamed ‘‘NLMK India Service Center Pvt Ltd’’), an electrical steel service center in India. In March 2011, the Group acquired a license for the exploration and extraction of coal in Usinsky-3 expiring in 2031. The license fee was $27.2 million. In October 2010, the Group acquired a 100% stake in LLC VMI Recycling Group, which owns scrap processing assets located in the Moscow region, for a consideration of $28.4 million. See ‘‘Significant Factors Affecting the Group’s Results of Operations—Acquisitions and Disposals’’.

75 Cash flows The table below sets forth the Group’s summarized cash flows for the periods indicated:

Nine months ended Year ended December 31, September 30, 2011 2010 2009 2012 2011 (Amounts in millions of U.S. dollars) Net cash provided by operating activities ...... 1,805.1 1,431.1 1,394.3 1,491.2 1,484.9 Net cash used in investing activities ...... (1,868.7) (1,847.4) (1,771.4) (1,062.9) (1,134.1) Net cash provided by/(used in) financing activities . 48.2 (79.1) (534.7) 635.2 (305.4) Net increase/(decrease) in cash and cash equivalents ...... (15.4) (495.4) (911.8) 1,063.5 45.4

Operating activities Cash provided by operating activities primarily consists of net income adjusted for certain non-cash items, including depreciation, amortization and other items, and the effect of changes in working capital. Net cash provided by operating activities was $1,491.2 million and $1,484.9 million in the nine months ended September 30, 2012 and 2011, respectively. Net cash provided by operating activities was $1,805.1 million, $1,431.1 million and $1,394.3 million in the years ended December 31, 2011, 2010 and 2009, respectively. The increase in net cash provided by operating activities during these periods was primarily due to the increase in steel prices in 2011 and 2010 and working capital optimization in 2009. Changes in working capital items from period to period, including as a result of external factors, have had and will continue to have a significant effect on cash provided by operating activities. For example, increasing prices of purchased raw materials or the threat of disruption to the supply of those raw materials may warrant maintaining higher inventory levels in order to hedge against further price increases. Deteriorating economic conditions may result in delayed collections of accounts receivable and vendors may require more prompt payments as a condition of doing business with the Group. The increasing size of the Group’s business has required and will continue to require higher levels of working capital.

Investing activities Net cash used in investing activities for the nine months ended September 30, 2012 was $1,062.9 million and was primarily attributable to net cash used for purchases and construction of property, plant and equipment of $1,157.5 million and payments for acquisition of interests in new subsidiaries of $156.5 million, which was partially offset by withdrawal of bank deposits, proceeds from sale of other investments and loans settled in a total amount of $260.7 million. Net cash used in investing activities for the nine months ended September 30, 2011 was $1,134.1 million and was primarily attributable to net cash used for purchases and construction of property, plant and equipment of $1,529.0 million, purchases of investments and placement of bank deposits of $270.6 million and payments for acquisition of interests in new subsidiaries of $41.8 million, which was partially offset by the withdrawal of bank deposits, proceeds from sale of other investments and loans settled of $691.3 million. Net cash used in investing activities for the year ended December 31, 2011 was $1,868.7 million and was primarily attributable to net cash used for purchases and construction of property, plant and equipment of $2,047.9 million, purchase of investment in SIF of $41.7 million and placement of bank deposits of $523.7 million, partially offset by the withdrawal of bank deposits, proceeds from sale of other investments and loans settled of $717.5 million. Net cash used in investing activities for the year ended December 31, 2010 was $1,847.4 million and was primarily attributable to net cash used for purchases and construction of property, plant and equipment of $1,463.2 million, and purchases of investments and placement of bank deposits of $832.5 million, partially offset by withdrawal of bank deposits, proceeds from sale of other investments and loans settled of $450.3 million. Net cash used in investing activities for the year ended December 31, 2009 was $1,771.4 million and was primarily attributable to net cash used for purchases and construction of property, plant and equipment of $1,120.8 million, purchases of investments and placement of bank deposits of $536.1 million and loans issued of $403.6 million, which was partially offset by the withdrawal of bank deposits, proceeds from sale of other investments and loans settled of $510.3 million. See ‘‘—Capital Requirements—Capital expenditures’’.

76 Financing activities Net cash provided by financing activities during the nine months ended September 30, 2012 of $635.2 million was primarily due to proceeds from borrowings and notes payable in a total amount of $1,319.7 million, principally due to the issuance of two series of ruble bonds by NLMK in September 2012 in the aggregate principal amount of RUB 10,000 million (or approximately $318.4 million) and the completion of NLMK’s debut Eurobond offering of $500 million with an annual coupon rate of 4.95% Loan Participation Notes due 2019 on September 26, 2012 (see ‘‘—Ruble bonds’’ and ‘‘—$500,000,000 4.95% Loan Participation Notes due 2019’’). These amounts were offset in part by the repayment of borrowings and notes payable in a total amount of $551.4 million and the payment of dividends of $115.9 million to shareholders. Net cash used in financing activities during the nine months ended September 30, 2011 of $305.4 million was due to $313.2 million in proceeds from the disposal of the Group’s 100% interest in NTK to a company under common control (see ‘‘Significant Factors Affecting the Group’s Results of Operations—Acquisitions and Disposals’’) and $830.0 million in proceeds from borrowings and notes payable, which was partially offset by $1,171.6 million in repayment of borrowings and notes payable, the payment of dividends to shareholders of $247.3 million and capital lease payments of $29.8 million. Net cash provided by financing activities during the year ended December 31, 2011 of $48.2 million was due to $1,967.4 million in proceeds from borrowings and notes payable and $313.2 million in proceeds from disposal of assets to the entity under common control as a result of the sale of the Group’s interest in NTK, partially offset by $1,683.5 million in repayment of borrowings and notes payable and $516.3 million in dividends to shareholders. Net cash used in financing activities during the year ended December 31, 2010 of $79.1 million was primarily due to $802.1 million in repayment of borrowings and notes payable and $164.5 million in dividends to shareholders, partially offset by $933.9 million in proceeds from borrowings and notes payable. Net cash used in financing activities during the year ended December 31, 2009 of $534.7 million was primarily due to $1,540.2 million in repayment of borrowings and notes payable, partially offset by $1,076.8 million in proceeds from borrowings and notes payable. See ‘‘—Capital Requirements—Recent acquisitions’’.

Liquidity Historically, the Group has relied on cash from operating activities as the main source of liquidity. The Group had cash and cash equivalents of $1,802.9 million as of September 30, 2012. This amount included time deposits in a total amount of $645.2 million, of which $126.8 million was held in U.S. dollars, $68.8 million was held in euros and $449.6 million was held in rubles. A majority of the Group’s cash and cash equivalents are held in several major Russian banks and Russian subsidiaries of foreign banks. As of September 30, 2012, the Group had total debt of $5,283.6 million. A summary of the Group’s principal outstanding borrowings is set out below.

PXF Facility In July 2008, NLMK entered into a pre-export finance agreement with, amongst others, BNP Paribas SA as facility agent, for a maximum principal amount of $1,600 million with a maturity period of five years (the ‘‘PXF Facility’’). The principal amount outstanding under the facility bears interest at a rate equal to LIBOR for the relevant three-month interest period plus 1.2% per annum. As of September 30, 2012, the amount outstanding was $375.0 million. Under the pre-export finance agreement, NLMK must ensure that, in relation to the Group on a consolidated basis, at all times: (i) the ratio of net borrowings to tangible net worth shall not exceed 1:1; and (ii) the ratio of net borrowings to EBITDA (as defined in the facility agreement) shall not exceed 3:1. NLMK’s obligations under this facility are secured in favor of the lenders by an assignment of rights under certain export contracts and a pledge over certain U.S. dollar bank accounts.

NLMK Clabecq Facility In June 2009, NLMK Clabecq (as borrower) and NLMK (as guarantor) entered into an export credit backed facility agreement with Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (as lender) for a loan in principal amount of EUR 74.7 million with a maturity period of 7 years. The facility was used to finance the construction and purchase of a heat treatment plant for the production of quenched and tempered steel plates at NLMK Clabecq. The principal amount outstanding under the facility bears an

77 interest at a rate equal to the euro interbank offered rate (‘‘EURIBOR’’) for the relevant six-month interest period plus 1.50% per annum. As of September 30, 2012, the principal amount outstanding was EUR 63.28 million. Under the facility agreement, NLMK must ensure that, in relation to the Group on a consolidated basis, at all times: (i) the ratio of total net indebtedness to total net worth shall not exceed 1.5:1; and (ii) the ratio of net indebtedness to EBITDA (as defined in the facility agreement) shall not exceed 3.5:1.

Export Credit Financing Facility In November 2009, NLMK entered into a master export credit financing facility agreement and a number of facilities within the framework of such master agreement with, amongst others, Deutsche Bank AG as global facility agent for a maximum principal amount of EUR 524.0 million with a maturity period of 10 years, insured by Export Credit Agencies. The principal amount outstanding under the facility bears interest at a rate equal to EURIBOR for the relevant six-month interest period plus a margin, which, on an average basis, is 1.53% per annum. This facility was used to finance the Group’s Technical Upgrading Program. As of September 30, 2012, the amount outstanding was EUR 394.4 million. Under the export credit financing facility agreement, NLMK must ensure that, in relation to the Group on a consolidated basis, at all times: (i) the ratio of net borrowings to tangible net worth shall not exceed 1:1; and (ii) the ratio of net borrowings to EBITDA (as defined in the facility agreement) shall not exceed 3:1. NLMK’s obligations under this facility are secured in favor of the lenders by a pledge (direct debit rights) over bank accounts.

European Bank for Reconstruction and Development Loan In July 2010, NLMK entered into a loan agreement with the European Bank for Reconstruction and Development for a loan in the principal amount of EUR 125.0 million (comprising a EUR 100.0 million A Loan and a EUR 25.0 million B Loan) with a maturity period of five years. The principal amounts outstanding under the facility bear interest at a rate equal to EURIBOR for the relevant three-month interest period plus 3.5% per annum for the A Loan and 3.23% per annum for the B Loan. The proceeds of this loan were used to finance the Group’s program to increase energy efficiency at its operations. As of September 30, 2012, the amount outstanding was EUR 81.7 million. Under the loan agreement, NLMK must ensure that, in relation to the Group on a consolidated basis, at all times: (i) the ratio of net borrowings to tangible net worth shall not exceed 1:1; and (ii) the ratio of net borrowings to EBITDA (as defined in the loan agreement) shall not exceed 3:1.

Kaluga Hermes Facility In December 2010, NLMK-Kaluga (as borrower) and NLMK (as guarantor) entered into an export credit backed facility agreement with, amongst others, Societ´ e´ Gen´ erale´ as facility agent for a loan in the principal amount of EUR 46.5 million with a maturity period of 10 years. The principal amount outstanding under the facility bears interest at a rate equal to EURIBOR for the relevant six-month interest period plus 0.9% per annum. As of September 30, 2012, the amount outstanding was EUR 37.1 million. Under the export credit backed facility agreement, NLMK must ensure that, in relation to the Group on a consolidated basis, at all times: (i) the ratio of net borrowings to tangible net worth shall not exceed 1:1; and (ii) the ratio of net borrowings to EBITDA (as defined in the facility agreement) shall not exceed 3:1. NLMK-Kaluga’s obligations under this facility are secured in favor of the lenders by a pledge over a bank account.

Alfa Bank Facility In December 2010, NLMK (as borrower) and OJSC Alfa-Bank (as lender) entered into a facility line agreement for a loan in the principal amount up to RUB 15 billion ($ 457.2 million) with a maturity period of 5 years. The principal amount of the loan may be utilized in EUR, USD or RUB. The interest rate is set by additional agreements and applies to each utilized tranche individually. As of September 30, 2012, such interest rate amounted to 8.5% and the amount outstanding was RUB 10 billion ($323.4 million).

Kaluga SACE Facility In July 2011, NLMK-Kaluga (as borrower) and NLMK (as surety provider) entered into an export credit backed facility agreement with, amongst others, Deutsche Bank S.p.A. as facility agent for a loan in the principal amount of EUR 46.3 million with a maturity period of 9 years. The principal amount outstanding

78 under the facility bears interest at a rate equal to EURIBOR for the relevant six-month interest period plus 1.0% per annum. As of September 30, 2012, the amount outstanding was EUR 39.3 million. Under the export credit backed facility agreement, NLMK must ensure that, in relation to the Group on a consolidated basis, at all times: (i) the ratio of net borrowings to tangible net worth shall not exceed 1:1; and (ii) the ratio of net borrowings to EBITDA (as defined in the facility agreement) shall not exceed 3:1. NLMK-Kaluga’s obligations under this facility are secured in favor of the lenders by a pledge over a bank account.

Receivables Financing In July 2011, NLMK Sales Europe SA, NLMK Coating SA, NLMK Verona S.P.A. (‘‘NLMK Verona’’) (each as borrowers) and NLMK (as guarantor) entered into a revolving collateralized facility agreement with, amongst others, Deutsche Bank AG, Amsterdam Branch as facility agent for a loan in the principal amount of EUR 400.0 million (including a sub-limit of $100 million for NLMK Verona) with a maturity period of four years. The amount outstanding under the facility bears interest at a rate equal to EURIBOR for the relevant interest period (which, at the election of the borrower, may be from one week to four months) plus 1.45% per annum. As of September 30, 2012, the principal amount outstanding was EUR 330.0 million. Under the revolving collateralized facility agreement, NLMK must ensure that, in relation to the Group on a consolidated basis, at all times: (i) the ratio of net borrowings to tangible net worth shall not exceed 1.5:1; and (ii) the ratio of net borrowings to EBITDA (as defined in the facility agreement) shall not exceed 3:1 for so long as any amount is outstanding under the PXF Facility, and at any time thereafter, 3.5:1. The borrowers’ obligations under this facility are secured in favor of the lenders by pledges over bank accounts and inventory and an assignment of rights under certain steel sale contracts.

Revolving Standby Liquidity Facility In September 2011, SIF (as borrower) and NLMK (as guarantor) entered into a fourth amendment and restatement agreement to a standby facility agreement with Cooperatieve Centrale Raiffeisen- Boerenleenbank B.A. (as lender) for a loan in the principal amount of EUR 50 million. The principal amount outstanding under the facility bears interest at a rate equal to EURIBOR for the relevant interest period (which, at the election of the borrower, may be from one week to six months or other shorter period agreed by the parties) plus 1.75% per annum. As of September 30, 2012, the principal amount outstanding was EUR 50 million. Under the facility agreement, NLMK must ensure that, in relation to the Group on a consolidated basis, at all times: (i) the ratio of total net indebtedness to tangible net worth shall not exceed 1.5:1; and (ii) the ratio of net indebtedness to EBITDA (as defined in the facility agreement) shall not exceed 3.5:1. The Group is currently contemplating terminating this loan and entering into a new working capital facility for its NLMK Europe division.

NLMK Dansteel Hermes Export Credit Facility In October 2011, NLMK Dansteel (as borrower) and NLMK (as guarantor) entered into an export credit backed facility agreement with Societ´ e´ Gen´ erale´ as facility agent and original lender for a principal amount of EUR 90.1 million with a maturity period ending in 2020. This facility was used to finance modernization of a heavy plate mill of NLMK Dansteel. The amount outstanding under the facility bears an interest at a rate equal to EURIBOR for the relevant six-month interest period plus 0.90% per annum. As of September 30, 2012, the amount outstanding was EUR 41.9 million. Under the export credit facility, NLMK must ensure that, in relation to the Group on a consolidated basis, at all times: (i) the ratio of net indebtedness to tangible net worth shall not exceed 1.5:1; and (ii) the ratio of net indebtedness to EBITDA (as defined in the facility agreement) shall not exceed (a) for so long as any amount is outstanding under the PXF Facility mentioned above, 3:1; and (b) at any time thereafter, 3.5:1.

Gazprombank Facility In April 2012, NLMK (as borrower) and OJSC Gazprombank (as lender) entered into facility line agreement for a loan in the principal amount of up to RUB 15 billion ($457.0 million) with a maturity period of three years. The interest rate under the facility, at the election of the Borrower, may be either fixed or floating at a maximum rate: (i) up to 12% per annum for a fixed-rate tranche; or (ii) for a floating rate tranche, a reference rate fixed by the Russian National Foreign Exchange Association based on the offered rates of ruble deposits as quoted by leading participants of the interbank market (‘‘MosPrime’’) for

79 the relevant three-month period plus 7% per annum (or, for a tranche of 30 days or less, MosPrime for the relevant one-month period plus 5% per annum). As of September 30, 2012, the amount outstanding was RUB 10 billion ($323.4 million) and the interest rate was 9.2% per annum.

RBS Facility In August 2012, SIF (as borrower) and NLMK (as guarantor) entered into a facility agreement with the Royal Bank of Scotland N.V. (as lender) for a loan in the principal amount of EUR 50 million. The principal amount outstanding under the facility bears interest at a rate equal to EURIBOR for the relevant three months interest period plus 1.50% per annum. As of September 30, 2012, the amount outstanding was EUR 48 million.

$500,000.000 4.95% Loan Participation Notes due 2019 On September 26, 2012, NLMK completed its debut Eurobond offering of $500,000,000 4.95% Loan Participation Notes due 2019. The notes were issued by Steel Funding Limited on a limited recourse basis for the sole purpose of financing a loan to NLMK.

Ruble bonds The following table sets forth a summary of the key terms of all outstanding ruble bond issuances by NLMK as of September 30, 2012.

07 BO-04 BO-03 BO-02 BO-07 BO-06 BO-014 BO-055 (Amounts in millions of rubles) Date of placement .... September September December December November March December November 2012 2012 2011 2011 2011 2010 2009 2009 Face value ...... 5,000 5,000 5,000 5,000 10,000 10,000 5,000 10,000 Coupon rate (% per annum) ...... 8.5 8.25 8.75 8.75 8.95 7.75 9.75 10.75 Payment period ...... 182 days 182 days 182 days 182 days 182 days 182 days 182 days 182 days Maturity ...... 10 years(1) 3 years(2) 3 years(3) 3 years(3) 3 years 3 years 3 years 3 years

(1) The terms of ruble bond series 07 include a put option under which holders of the bonds may elect to require NLMK to redeem the bonds in full in March 2015. (2) The terms of ruble bond series BO-04 include a put option under which holders of the bonds may elect to require NLMK to redeem the bonds in full in September 2014. (3) The terms of ruble bond series BO-03 and BO-02 both include a put option under which holders of the relevant bonds may elect to require NLMK to redeem the bonds in full in June 2013. (4) The ruble bond series BO-01 was redeemed in December 2012. (5) The ruble bond series BO-05 was redeemed in October 2012. In addition, on December 7, 2012, NLMK issued ruble bond series 08 in the total amount of RUB 10,000 million and with a coupon rate of 8.40% per annum. The term of the bond is ten years, although holders of the bonds have the option to require NLMK to redeem the bonds in December 2015. Also on December 28, 2012 a new ruble bond program (series BO-08 - BO-14) with a nominal value of 50,000 million rubles and maturity of 3 years was registered by MICEX Stock Exchange.

80 Contractual Obligations, Commercial Commitments and Contingencies The following table sets forth the amount of the Group’s contractual obligations and commercial commitments as of September 30, 2012.

Payments due by period More Less than 4 - 5 than 5 Total 1 year 2 - 3 years years years (Amounts in millions of U.S. dollars) Short-term borrowings and current portion of long-term debt ...... 2,433.5 2,433.5 — — — Long-term debt obligations, net of current portion . . . 2,850.1 — 1,955.0 237.3 657.8 Interest payable(1) ...... 60.0 49.4 10.6 — — Purchase Obligations ...... 283.8 142.5 141.3 — — Short-term finance lease obligations ...... 17.6 17.6 — — — Long-term finance lease obligations ...... 25.0 — 17.6 6.3 1.1 Estimated interest expense(2) ...... 532.2 246.9 155.0 76.6 53.7 Estimated average interest rate(2) ...... 5.37 6.09 4.83 3.88 4.14 Total contractual obligations and commercial commitments ...... 6,142.2 2,840.5 2,268.9 313.9 711.5

(1) Interest payable as of September 30, 2012 amounted to $49.4 million and $10.6 million for short-term borrowings and current portion of long-term debt and long-term debt obligations, net of current portion, respectively. (2) Interest expense is estimated for a five-year period based on (1) estimated cash flows and change of the debt level, (2) forecasted LIBOR rate where applicable and (3) actual long-term contract interest rates and fixed rates, forecasted with reasonable assurance on the basis of historic relations with major banking institutions. Management estimates that the Group had total capital commitments of $797.6 million related to contracts for equipment supply and construction works as of September 30, 2012, and $1,396.6 million, $1,973.0 million and $1,678.7 million as of December 31, 2011, 2010 and 2009, respectively. As of December 31, 2010 and 2009, the Group had outstanding guarantees amounting to $218.6 million and $214.1 million, respectively, which primarily related to SIF and its subsidiaries (see ‘‘Related Party Transactions’’). The Group had no guarantees outstanding as of December 31, 2011 or September 30, 2012. The Group does not currently have any other off-balance sheet arrangements.

Significant Accounting Policies and Critical Accounting Estimates Use of estimates The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the periods reported. Estimates are used when accounting for certain items such as allowances for doubtful accounts; employee compensation programs; useful lives for the purposes of depreciation and amortization; asset retirement obligations; legal and tax contingencies; inventory values; valuations of investments and determining when investment impairments are other than temporary; goodwill; assets and liabilities assumed in a purchase business combinations and deferred tax assets, including valuation allowances. Estimates are based on historical experience, where applicable, and other assumptions that management believes are reasonable under the circumstances. Actual results may differ from those estimates under different assumptions or conditions.

Inventories Inventories are stated at the lower of acquisition cost inclusive of completion expenses or market value. Inventories are released to production or written off otherwise at average cost. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads.

81 The provision for obsolescence is calculated on the basis of slow-moving and obsolete inventories analysis. Such items are provided for in full.

Property, plant and equipment Owned assets Items of property, plant and equipment are stated at acquisition cost less accumulated depreciation and adjustments for impairment losses. The cost of self-constructed assets includes the cost of materials, direct labor and an appropriate portion of production overheads directly related to construction of assets. Property, plant and equipment also include assets under construction and plant and equipment awaiting installation. Where an item of property, plant and equipment comprises major components having different useful lives, they are accounted for as separate items of property, plant and equipment.

Subsequent expenditures Expenditures incurred to replace a component of an item of property, plant and equipment that is accounted for separately, are capitalized with the carrying amount of the component subject to depreciation. Other subsequent expenditures are capitalized only when they increase the future economic benefits embodied in an item of property, plant and equipment. All other expenditures are recognized as expenses in the consolidated statement of income as incurred.

Capitalized interest Interest costs are capitalized against qualifying assets as part of property, plant and equipment in accordance with the requirements of U.S. GAAP. Such interest costs are capitalized over the period during which the asset is being acquired or constructed and borrowings have been incurred. Capitalization ceases when construction is interrupted for an extended period or when the asset is substantially complete. Further interest costs are charged to the statement of income. Where funds are borrowed specifically for the purpose of acquiring or constructing a qualifying asset, the amount of interest costs eligible for capitalization on that asset is the actual interest cost incurred on the borrowing during the period. Where funds are made available from general borrowings and used for the purpose of acquiring or constructing qualifying assets, the amount of interest costs eligible for capitalization is determined by applying a capitalization rate to the expenditures on these assets.

Mineral rights Mineral rights acquired in business combinations are recorded in accordance with provisions of ASC No. 805, Business Combinations (‘‘ASC No. 805’’) at their fair values at the date of acquisition, based on their appraised fair value. The Group reports mineral rights as a separate component of property, plant and equipment in accordance with the consensus reached by ASC No 930, Extractive Activities—Mining (‘‘ASC No. 930’’) subtopic 360, Property, Plant and Equipment.

Depreciation and amortization Depreciation is charged on a straight-line basis over the estimated remaining useful lives of the individual assets. Plant and equipment under capital leases and subsequent capitalized expenses are depreciated on a straight-line basis over the estimated remaining useful lives of the individual assets. Depreciation commences from the time an asset is put into operation. Depreciation is not charged on assets to be disposed of and land. The range of the estimated useful lives is as follows:

Buildings and constructions ...... 20 - 45 years Machinery and equipment ...... 2 - 40 years Vehicles ...... 5 - 25 years Mineral rights are amortized using the straight-line basis over the license term given approximately even production during the period of license.

82 Goodwill Goodwill represents the excess of the purchase price over the fair value of net assets acquired. Under ASC No. 350, Intangibles—Goodwill and Other, (‘‘ASC No. 350’’) goodwill is first assessed with regard to qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. It is required to calculate the fair value of a reporting unit only if a qualitative assessment indicates that it is more likely than not that its carrying amount is more than its fair value. The impairment test under ASC No. 350 includes a two-step approach. Under the first step, management compares fair value of a ‘‘reporting unit’’ to its carrying value. A reporting unit is the level at which goodwill impairment is measured and it is defined as an operating segment or one level below it if certain conditions are met. If the fair value of the reporting unit is less than its carrying value, step two is required to determine if goodwill is impaired. Under step two, the amount of goodwill impairment is measured by the amount, if any, that the reporting unit’s goodwill carrying value exceeds its ‘‘implied’’ fair value of goodwill. The implied fair value of goodwill is determined by deducting the fair value of all tangible and intangible net assets of the reporting unit (both recognized and unrecognized) from the fair value of the reporting unit (as determined in the first step). Intangible assets that have limited useful lives are amortized on a straight-line basis over the shorter of their useful or legal lives.

Impairment of long-lived assets Long-lived assets, such as property, plant and equipment, mineral rights and purchased intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset, generally determined by reference to the discounted future cash flows. Assets held for sale that meet certain criteria are measured at the lower of their carrying amount or fair value less cost to sell.

Pension and post-retirement benefits other than pensions The Group follows the Pension and Social Insurance legislation of the Russian Federation and other countries where the Group operates. Contributions to the Russian Federation Pension Fund by the employer are calculated as a percentage of current gross salaries. Such contributions are expensed as incurred. The Group maintains defined benefit pension and defined contribution plans that cover the majority of its employees in Europe. The plans cover statutory and voluntary obligations and include pensions and other post-retirement benefits, e.g., long-term severance benefits and some additional benefits. The Group’s net obligation in respect of long-term severance indemnity funds and other post-employment pension plans is calculated by estimating the amount of future benefit that employees have earned in return for their services in the current and prior periods. Any unrecognized past service costs and the fair value of any plan assets are deducted. The obligation is calculated using the projected unit credit method and is discounted to its present value. NLMK and some other Group companies have an agreement with a non-Government pension fund (the ‘‘Fund’’) in accordance with which contributions are made on a monthly basis. Contributions are calculated as a certain fixed percentage of the employees’ salaries. These pension benefits are accumulated in the Fund during the employment period and distributed by the Fund subsequently. As such, all these benefits are considered as made under a defined contribution plan and are expensed as incurred. Accordingly, the Group has no long-term commitments to provide funding, guarantees or other support to the Fund. In addition, lump sum benefits are paid to employees of a number of the Group’s companies on retirement depending on the employment period and the salary level of the individual employee. The scheme is considered as a defined benefit plan. The expected future obligations to the employees are assessed by the Group’s management and accrued in the consolidated financial statements; however these are not material.

83 Asset retirement obligations The Group’s land, buildings and equipment are subject to the provisions of ASC No. 410, Asset Retirement and Environmental Obligations. This ASC addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The Group’s asset retirement obligation (‘‘ARO’’) liabilities primarily consist of spending estimates related to reclaiming surface land and support facilities at surface mines in accordance with federal and state reclamation laws as defined by each mining permit. The Group estimates its ARO liabilities for final reclamation and mine closure based upon detailed engineering calculations of the amount and timing of the future cash spending for a third party to perform the required work. Spending estimates are escalated for inflation and then discounted at the credit- adjusted risk-free rate. The Group records an ARO asset associated with the discounted liability for final reclamation and mine closure. The obligation and corresponding asset are recognized in the period in which the liability is incurred. The liability is accreted to its present value each period and the capitalized cost is depreciated in accordance with the Group’s depreciation policies for property, plant and equipment. As changes in estimates occur (such as mine plan revisions, changes in estimated costs, or changes in timing of the performance of reclamation activities), the revisions to the obligation and asset are recognized at the appropriate credit-adjusted risk-free rate.

Commitments and contingencies Contingent liabilities, including environmental remediation costs, arising from claims, assessments, litigation, fines, penalties and other sources are recorded when it is probable that a liability can be assessed and the amount of the assessment and/or remediation can be reasonably estimated. Estimated losses from environmental remediation obligations are generally recognized no later than completion of remedial feasibility studies. The Group companies accrue expenses associated with environmental remediation obligations when such expenses are probable and reasonably estimable. Such accruals are adjusted as further information becomes available or circumstances change.

Income tax Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period when a different tax rate is enacted. Pursuant to the provisions of ASC No. 740, Income Taxes, the Group provides valuation allowances for deferred tax assets for which it does not consider realization of such assets to be more likely than not. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the projected future taxable income, the reversal of existing deferred tax liabilities and tax planning strategies in making this assessment. The Group accounts for uncertain tax positions and reflects liabilities for unrecognized income tax benefits together with corresponding interest and penalties in the consolidated statement of income as income tax expense.

Revenue recognition Goods sold Revenue from the sale of goods is recognized in the consolidated statement of income when there is a firm arrangement, the price is fixed and determinable, delivery has occurred, and collectability is reasonably assured.

84 Interest income Interest income is recognized in the consolidated statement of income as it is earned.

Segment reporting According to ASC No.280, Segment Reporting, segment reporting follows the internal organizational and reporting structure of the Group. The Group’s organization comprises four reportable segments: the steel segment, the foreign rolled products segment, the long products segment and the mining segment, and other segments, not reported separately in the consolidated financial statements. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

Guarantees The fair value of a guarantee is determined and recorded as a liability at the time when the guarantee is issued. The initial guarantee amount is subsequently remeasured to reflect the changes in the underlying liability. The expense is included in the related line items of the consolidated statements of income and comprehensive income, based on the nature of the guarantee. When the likelihood of performing on a guarantee becomes probable, a liability is accrued, provided it is reasonably determinable on the basis of the facts and circumstances at that time.

Quantitative and Qualitative Disclosures about Market Risk In the normal course of business, the Group’s financial position is routinely subject to a variety of market risks. The Group is exposed to market risks associated with interest rates, foreign currency exchange rates and commodity prices.

Interest rate risk The risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with floating interest rates. To manage this risk the Group analyzes interest rate risks on a regular basis. The Group reduces its exposure to this risk by having a balanced portfolio of fixed and variable rate loans and by hedging of interest rates. As of September 30, 2012, the Group held variable rate instruments, comprising only financial liabilities, in a total amount of $2,190 million. All of the Group’s other interest-bearing financial liabilities, as well as all its financial assets, are at fixed rate. An increase of 100 basis points in interest rates at September 30, 2012 would have decreased equity and annualized profit by $11.8 million. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

Foreign currency exchange rate risk The Group’s functional currency is the ruble and its reporting currency is the U.S. dollar. Revenue from the Group’s export sales in the nine months ended September 30, 2012 comprised 64.6% of total revenue, compared to 61.9%, 58.9% and 62.9% in 2011, 2010 and 2009, respectively. As the Group exports a significant portion of its production, including directly from its operations in Russia and through its overseas subsidiaries in Europe and the United States, it is exposed to foreign currency risk, as well as global economic and political risks. To minimize foreign currency risks the export program is designed taking into account potential (forecast) major foreign currencies’ exchange fluctuations. The Group diversifies its revenues in different currencies. In its export contracts the Group controls the balance of currency positions: payments in foreign currency are settled with export revenues in the same currency. The Group has also used hedging instruments such as forward contracts to manage foreign currency risk.

85 The following table sets forth the Group’s net foreign currency position as of December 31, 2011.

Other U.S. dollar Euro currencies (Amounts in millions of U.S. dollars) Cash and cash equivalents ...... 336.7 228.3 4.0 Accounts receivable and advances given ...... 243.9 623.2 20.6 Investments ...... — 1.5 7.8 Accounts payable and other liabilities ...... (600.1) (437.1) (1.5) Short-term borrowings ...... (454.3) (359.2) — Long-term borrowings ...... (275.1) (1,522.9) —

Commodity price risk In the normal course of business, the Group is primarily exposed to market risk of price fluctuations related to the purchase, production and sale of steel products, and, to a lesser extent, to the purchase, production and sale of coal, coke, iron ore and other products. The Group does not use commodity derivatives or long-term sales or supply agreements to manage commodity price risks. The prices of products under the Group’s sales contracts are typically determined on a quarterly and monthly basis, although, in relation to certain products, the Group may agree to fix prices for longer periods. The Group seeks to mitigate the effects of steel price volatility through increasing the production volume and range of finished steel products, including high value added and niche products, which are typically less subject to price volatility and variations in seasonal demand as compared with semi-finished products, while correspondingly reducing, as a portion of total output, production of semi-finished products. The Group minimizes its risks related to production distribution, by having a wide range of geographical zones for sales including captive rolling facilities located in close proximity to the end-users of steel products, which allows the Group to respond quickly to changes in the situation on one or more sales markets on the basis of an analysis of the existing and prospective markets. As a result of the Group’s high degree of vertical integration, NLMK believes it is able to exert greater cost control and effective management of the entire process of production: from mining of raw materials and generation of electric and heat energy to production, processing and distribution of steel products.

86 THE STEEL INDUSTRY Global Steel Industry Overview Steel is one of the most important, multi-functional and adaptable materials in use today, and is considered to be a backbone of industrial development. The versatility of steel is attributable to the fact that it is hot and cold formable, weldable, hard, resistant to corrosion, water and heat, 100% recyclable and has good machinability. Among the myriad industries in which steel is used are the automotive, oil and gas, consumer appliances, construction, transportation, packaging and engineering industries. The global steel industry is cyclical and is affected by a combination of factors, including periods of economic growth or recession, worldwide production capacity and the existence of, and fluctuations in, steel imports and protective trade measures. Steel prices respond to supply and demand and have fluctuated in response to general and industry-specific economic conditions. Moreover, the global steel industry is highly competitive and has historically been characterized by oversupply. The rapid growth of steel consumption in China and India in 2004 and in late 2006, respectively, briefly changed the historical supply-demand balance and contributed to a period of price growth until the first half of 2008. In the third quarter of 2008, global steel prices declined sharply in response to a fall in global demand caused by adverse macroeconomic conditions and a large-scale industry destocking. Steel prices started to recover gradually in the second half of 2009 in response to improving global economic conditions and increased sharply in the first half of 2010 as industry restocking mitigated the effect of destocking which occurred in 2009. According to Steel Business Briefing, steel prices rose again towards the end of 2010, reaching $565 per tonne of hot-rolled coil (‘‘HRC’’) in December 2010, a 38% increase compared to December 2009. There was a sharp increase in steel prices in the first quarter of 2011, which in certain markets was as high as 18-20%. This increase was driven by higher global demand largely caused by restocking and by growing prices for raw materials. However, by the second quarter of 2011, the price growth began to slow as the conditions in the global steel market continued to deteriorate as a result of worldwide macroeconomic uncertainty and the risk of escalating recession in the European Union. The slowing economic growth rates in China and the United States, as well surplus steelmaking capacities worldwide, were also contributing factors. Nevertheless, global steel prices in 2011 were higher than in 2010, with hot-rolled coil prices growing by an average of 13.5%. Although steel prices increased in the first four months of 2012, prices subsequently began to decrease in response to uncertainties over demand and falling raw materials prices, and, in July 2012, HRC prices were on average 4.8% lower as compared with year end 2011. While global steel production has been historically concentrated in the European Union, North America, Japan and the former Soviet Union, steel production in China and the rest of Asia has grown in importance over the past decade, as a result of rising domestic consumption and low manufacturing costs. Europe, Japan and the United States remain significant producers and consumers of steel, particularly the rolling and finishing of semi-finished products.

Global Steel Production and Consumption Production According to the Worldsteel Association, global crude steel output in 2011 was 1,526.9 tonnes, which represented a growth of 6.8% compared to 2010. China maintained its position as the world’s largest single producer of crude steel at 695.5 million tonnes. China’s steel production in 2011 increased by 8.9% compared to 2010, and accounted for approximately 46% of global steel production.

87 The following table sets forth estimated crude steel production data by country or region for the years 2007 to 2011.

World Crude Steel Production 2011 2010 2009 2008 2007 (Amounts in millions of tonnes) Europe (including CIS) ...... 329.0 314.4 266.1 344.3 365.0 U.S...... 86.2 80.5 58.2 91.4 98.1 North America (excluding the U.S.) ...... 32.7 30.9 24.4 33.1 34.5 South America ...... 48.4 43.9 37.8 47.4 48.2 Middle East/Africa ...... 35.2 36.2 33.0 33.6 35.2 China ...... 695.5 638.7 577.1 512.3 489.7 Japan ...... 107.6 109.6 87.5 118.7 120.2 Asia (excluding China and Japan) ...... 185.1 167.5 145.8 152.0 147.4 Oceania ...... 7.2 8.1 6.0 8.4 8.8 World total ...... 1,526.9 1,429.8 1,235.9 1,341.2 1,347.1 Annual change (%) ...... 6.8 15.7 (7.9) (0.4) —

Source: Worldsteel Association The global industry is currently seeing a shift in demand from ‘‘commodity steel’’ to ‘‘high value-added steel’’ or ‘‘specialized steel’’ in developed markets. However, the strategy and product mix of steel producers generally varies between producers in industrial countries and producers in emerging markets. Historically, the steel industry had been dominated by steel producers in industrialized countries. Producers in Western Europe and Japan had limited export markets due to the high cost of transporting steel relative to the low value of commodity steel grades. In the second half of the last century, producers in emerging markets began to compete with industrialized country steel producers as they took advantage of the lower manufacturing costs in their countries to offset high transportation costs. Despite the limitations associated with transportation costs, as well as the restrictive effects of protective tariffs, duties and quotas, global imports and exports increased during the last decade. In response, producers in Western Europe and Japan invested heavily in new technology and capacity to produce high value-added (HVA) steel grades in order to differentiate their product portfolio and protect their margins by reducing their exposure to commodity steel prices. However, these similar and simultaneous investments resulted in a build-up of production overcapacities and have put pricing pressures on the value-added segments. More recently, the industry has been characterized by the globalization of the competitive landscape mainly due to the ability of low-cost emerging market producers to overcome entry barriers, including quality thresholds, reliability of supply, transportation costs and quotas. The increasing pressure on manufacturing companies’ costs has also prompted a growing globalization of production towards emerging markets. The globalization of end-customers is triggering a reduction of steelmaking capacity in mature markets. Given the high cost of production in these markets due to the lack of available raw materials, the high cost of labor and energy and other factors, liquid steel production in mature markets is becoming increasingly uncompetitive. The increasing bargaining power of raw materials suppliers and growing raw materials prices led many steel producers, including the Group, to seek to acquire mining companies in order to obtain greater control over raw material supplies and retain increased mining profits internally.

88 Consumption The following table sets forth estimated finished steel consumption data by country or region for the years 2007 to 2011.

World Finished Steel Consumption 2011 2010 2009 2008 2007 (Amounts in millions of tonnes) European Union ...... 153.7 144.9 119.7 182.9 198.4 Other Europe ...... 33.4 29.6 23.9 28.9 31.6 CIS...... 55.5 48.6 36.1 50.0 56.3 U.S...... 89.2 79.9 59.2 98.4 108.3 NAFTA (excluding the U.S.) ...... 31.8 31.0 24.3 32.1 33.4 South America ...... 46.6 45.6 33.7 44.1 41.1 Middle East/Africa ...... 71.3 72.1 68.5 69.9 64.5 China ...... 623.3 587.6 551.4 446.9 418.4 Japan ...... 64.0 63.5 52.8 77.9 81.2 Asia (excluding China, India and Japan) ...... 134.7 126.2 106.5 127.4 125.0 India ...... 67.7 64.9 57.9 51.4 51.5 Oceania ...... 6.5 7.9 6.1 8.5 8.4 World total ...... 1,377.7 1,301.8 1,140.1 1,218.4 1,218.1 Annual change (%) ...... 5.8 14.2 (6.4) 0.0 —

Source: Worldsteel Association The majority of the consumption of commodity steel is in Asian and other emerging markets. In 2011, China maintained its position as the world’s largest consumer of finished steel at 623.3 million tonnes.

Consolidation of the Global Steel Industry Over the last decade, a number of factors emerged which affected the relative bargaining power of major steel producers and adversely impacted their profit margins. Among such factors were the emergence of China as the world’s largest producer and consumer of steel, high prices for raw materials, coupled with the increasing bargaining power of raw materials suppliers, and the overall globalization of the steel industry. In response, the steel industry itself began a phase of consolidation which included, among others, the merger of Arcelor and Mittal Steel in 2006, Essar Group’s purchase of the Algoma Steel Corporation and Tata Group’s acquisition of Corus Group (both in 2007). The consolidation trend is also apparent in the CIS where, in 2010, Metinvest Group and Ilyich Iron and Steel Works decided to combine their assets creating a steel producer with a combined production capacity of 20 million tonnes per annum. In line with this global trend and with the Group’s strategy of maximizing vertical integration, the Group made a number of acquisitions of rolling and mining assets, both in Russia and overseas, most recently acquiring the remaining 50% stake in SIF, its former 50:50 joint venture with the Duferco Group. For further information regarding the Group’s recent acquisitions, see ‘‘Operating and Financial Review— External Factors Affecting the Group’s Results of Operations—Acquisitions and Disposals’’. Consolidation has enabled steel companies to lower their production costs and allowed for more stringent supply-side discipline, including through selective capacity closures which helped enhance the overall efficiency and utilization rates across the board. However, despite the level of consolidation over the last decade, the steel industry remains highly fragmented. According to Steel Business Briefing, in 2011, the five largest crude steel producers (ArcelorMittal, Hebei I&S, Angang Group, Baosteel and Wuhan) together accounted for approximately 19% of total worldwide crude steel production, with ArcelorMittal (91.9 million tonnes), the world’s largest producer, accounting for approximately 6%.

Russian Steel Industry Overview Following the collapse of the Soviet Union, the Russian steel industry suffered a substantial decline in production from over 77 million tonnes in 1991 to 44 million tonnes in 1998. Since then, output has increased significantly, and, in 2011, Russia produced 68.4 million tonnes of crude steel, or 4.5% of the global production, making it the world’s fifth largest producer of crude steel. Russia’s crude steel output in 2011 increased by 2.9% compared to 2010, and its finished steel output increased by 3.2% during the same period.

89 According to the information of the Federal Customs Service of the Russian Federation, in 2011, the Russian steel industry exported over 23.8 million tonnes of finished and semi-finished steel products, or 40% of its total output of finished steel products, primarily to Asia, the Middle East and the European Union. In 2011, Russian exports of steel products comprised 6% of all global exports for steel products, making Russia the number seven exporter of such products globally. Russian steel producers tend to focus on vertical integration, as a result of Russia’s large reserves of natural resources, which enables them to secure a stable supply of certain raw materials, such as iron ore and coking coal for pig iron. For instance, as a result of the Group’s policy of maximizing vertical integration, in 2012, all of the Group’s coke, sinter ore, iron ore and flux requirements were met by its own mining assets. In addition, Russian companies are modernizing former state-owned steel production facilities, achieving significant reductions in manufacturing costs, and placing their costs well below those of Western European and North American producers, and improving product quality and technology.

Domestic market Domestic consumption of steel in Russia in 2011 amounted to 40.5 million tonnes, representing an increase of 13.8% compared to 2010. Construction, machine building and energy sectors were the key drivers of domestic demand. Despite this increase, volumes of steel consumed in Russia are substantially less than in developed countries such as Japan, which consumed 64 million tonnes in 2011, and the United States, which consumed approximately 89 million tonnes in 2011, according to Worldsteel Association. In 2011, prices in the domestic market increased, on average, by 16% for hot-rolled steel, 21% for cold-rolled steel and 17% for galvanized steel, in each case compared to 2010. Russia does not import significant quantities of steel. Imported steel comprised only approximately 13% of total steel consumed in Russia during 2011.

Export market The total volume of exports of finished steel products represented 16% of overall Russian steel production in 2011. In 2011, Russian producers exported 10.9 million tonnes of finished steel products. Semi-finished products (including slabs and billets) accounted for 54% of exports of steel products, and rolled steel products accounted for the remaining 46%. The majority of exports of rolled steel products in 2011 comprised flat products (30% of total volume of exports and 64% of volume of exports of rolled steel products) and long products (16% of total volume of exports and 36% of volume of exports of rolled steel products). Europe, Asia and the Middle East are the main export destinations for Russian steel producers. The following table sets forth by percentage the export destinations for Russian flat-rolled steel products in 2011.

Region Percentage Europe ...... 38% Asia ...... 13% North and South America ...... 8% Middle East, including Turkey ...... 39% Other ...... 2% Total ...... 100%

Source: Metall Expert, Federal Customs Service of the Russian Federation

Producers The Russian steel industry is characterized by a relatively high concentration of production, with the six largest steel companies (the Group, Evraz, Severstal, OAO Magnitogorsk Iron & Steel Works, Holding Company Metalloinvest and Mechel) accounting for 84% of Russia’s total domestic crude steel production in 2011.

E.U. Steel Industry Overview Domestic consumption of steel in the European Union in 2011 amounted to 153.7 million tonnes, representing an increase of 5% compared to 2010, and comprising approximately 11% of global

90 consumption of finished steel. The member states of the European Union produced 177.2 million tonnes of crude steel in 2011 (12% of global total crude steel output). Total E.U. exports of finished and semi-finished steel products in 2011 amounted to 146 million tonnes, of which 108 million tonnes comprised intra-E.U. exports, while 38 million tonnes (representing 21% of E.U. steel output) were sold outside the E.U.. Imports of steel into the European Union from outside the European Union in 2011 were 35.9 million tonnes, representing 23% of E.U. consumption in that period. (Source: World Steel Association).

U.S. Steel Industry Overview Domestic consumption of steel in the United States in 2011 amounted to 89.2 million tonnes, representing an increase of 12% compared to 2010, and comprising approximately 6% of global consumption of finished steel. The United States produced 86.4 million tonnes of crude steel in 2011 (approximately 6% of global output). Total U.S. exports of finished and semi-finished steel products in 2011 amounted to 13.3 million tonnes, representing 15% of U.S. steel output, while imports of finished and semi-finished steel products amounted to 26.9 million tonnes, representing 30% of U.S. consumption in that period. (Source: World Steel Association).

Types of Steel Steel products are broadly subdivided into two categories—flat and long products. Flat products include hot and cold-rolled steel, plates, galvanized steel, pre-painted steel, transformer steel and dynamo steel. Long products include blooms, billets, wire, bars and metalware. Flat products have various applications in many industries, including construction, electrical engineering, machine building, automotive, energy, shipbuilding, and tube and pipe production. Long steel is largely used in the construction and infrastructure projects which account for over two-thirds of its total consumption. Long steel is also used in the machine building sector.

Raw Materials: Overview of Iron Ore and Metallurgical Coal Industries Iron Ore Global Iron Ore Industry Overview Iron ores are rocks and minerals from which metal is extracted. The global iron ore industry is characterized by a high degree of consolidation, with BHP Billiton, Vale, and Rio Tinto accounting for approximately 60% of the global seaborne iron ore trade. The major iron ore producing countries are Australia, Brazil, China and India, as well as Russia. The dominance of the major producers in the market has led to significant changes in pricing terms. The first half of 2008 was a very strong period in terms of pricing, with iron ore spot prices rising well above contract prices. However, as a result of previously established price contracts, global iron ore producers were unable to realize higher profits. In response to this, the major producers have established a new quarterly pricing mechanism based on the spot price over three previous months. According to Steel Business Briefing, spot iron ore concentrate prices have decreased from $183 per tonne in January 2011 to $145 per tonne at the end of 2012. Global iron ore production has risen by 86% from 980 million tonnes in 2000 to 1,824 million tonnes in 2011. Historically, Europe, Japan and China have been the major iron ore consumption centers. Since 2002, China and certain countries in the CIS have been showing significant increases in demand as a result of the increases in their domestic steel production. Since that time, global consumption of steel, and, consequently, of iron ore, has significantly increased. China has recently experienced the highest growth in steel consumption, with an increase in demand of more than 39.6% from 446.9 million tonnes in 2008 to 623.9 million tonnes in 2011, according to Worldsteel.

Russian Iron Ore Industry Overview According to Metall Expert, in 2011, total iron ore production in Russia was approximately 106million tonnes. During the same period, total iron ore exports were approximately 28 million tonnes, and total imports were approximately 10 million tonnes. Imports to Russia mostly comprise shipments from Kazakhstan and are generally limited by high transportation costs and the lack of port facilities in the Far East and on the Black Sea.

91 Russian iron ore production is highly concentrated, and the four largest producers accounted for approximately 81% of total iron ore production in Russia in 2011, according to Metall Expert and Rudprom. One of the Group’s core mining businesses, Stoilensky, which currently supplies all the Group’s iron ore concentrate requirements, is the third largest iron ore manufacturer in Russia.

Coal Global Coal Industry Overview Coal may be divided into steam (thermal) coal and coking (metallurgical) coal. Steam coal is used in electricity generation and for industrial applications, while coking coal is used to manufacture coke for use in blast furnaces and other metallurgical applications. Coke is used as a raw material in the production of pig iron and is obtained by baking a blend of several grades of ground coking coals in coke ovens. Approximately 13% of total hard coal production is currently used by the steel industry, and approximately 70% of total global steel production is dependent on coal according to Worldsteel. In the production of steel, approximately 400-500 kilograms of coke is used per tonne of hot metal (pig iron). Historically, Australia, China, Indonesia and South Africa have been the largest coal-producing countries, with Russia increasing its share of world supply in recent years. Between 1990 and 2011, world coal production was estimated to have increased from 4,719 million tonnes to 7,302 million tonnes according to BP Statistical Review of World Energy.

Russian Coal Industry Overview Russia has the world’s second largest proven coal reserves after the United States. As of the end of 2010, Russia’s proven coal reserves totaled approximately 157 billion tonnes, accounting for 19.0% of the world’s proven reserves according to BP Statistical Review of World Energy. World Coal Association estimates that, in 2011, Russia exported approximately 103 million tonnes of coal, of which approximately 86% was steam coal and the balance was coking coal. In 2011, approximately 70% of Russia’s coking coal production capacity was owned by, or by entities affiliated with, Russian steel producers according to Metall Expert. Coal production in Russia is concentrated in the Kuznetsk Basin and the Kansko-Achinskii Basin, which are east of the Ural Mountains, and together account for the majority of Russia’s total coal production. In 2011, coking coal production in Russia was approximately 60 million tonnes, according to Metall Expert.

92 BUSINESS Overview The Group is an international steel producer with a high degree of vertical integration and operations throughout all major stages of steel production, from the mining of raw materials to sales of high value added products to end users. With global operations across Europe, North America and Asia, the Group has a high level of self-sufficiency in key raw materials and energy resources, low cost steelmaking operations located in the Central District of Russia and rolling assets located in close proximity to its key customers in Russia, Europe and the United States. The Group has a diversified portfolio of steel products, with a strong presence in many industry sectors in both its Russian and international markets. NLMK is the largest producer of steel in Russia with approximately 20% of total Russian steel production through the first 11 months of 2012. The Group’s product range includes slabs, hot-rolled steel, long steel products such as rebar and wire rod and a variety of high value added products, which include a range of hot-rolled thick plates, cold-rolled steel, galvanized and pre-painted steel, electrical grain-oriented (transformer) and non-grain-oriented (dynamo) steel and metalware. High value added products represented 37% of the total volume of sales of steel products of the Group in the nine months ended September 30, 2012. In 2011, the Group had sales revenue of $11,728.6 million, Adjusted EBITDA of $2,254.3 million and Adjusted EBITDA margin of 19.2% and in the nine months ended September 30, 2012 the Group had sales revenue of $9,353.7 million, Adjusted EBITDA of 1,510.9 million and Adjusted EBITDA margin of 16.2%. The Group’s products are sold to over 70 countries in Europe, North America, Asia, Africa and the Middle East. The diversity of the Group’s products and export strength gives it the flexibility to focus on the most attractive markets and helps to protect it from downturns in a particular customer segment or geography. The Group identifies the most attractive markets using a range of criteria, including market growth potential, supply and demand balance, profitability, lead times and the complexity of the supply chain. In the nine months ended September 30, 2012, the Group’s Russian assets produced 19.6% of the overall Russian crude steel output, 19.1% of the overall Russian flat products output and 17.0% of the overall Russian rebar steel output, according to Metall Expert. The Group’s Russian operations produced 29.8% of the overall output of high value added products in Russia. The Group is a steel producer with a high degree of vertical integration and with control over a substantial part of its production chain, from its upstream operations, comprising the mining of raw materials and upstream diversified steelmaking (with a balance between BOF and EAF routes of crude steel production), to downstream steel processing (both flat and long finished steel products) close to the end users of its products and export seaports. The Group’s Russian operations represent 100% of the mining capacity of the Group, approximately 95% of its crude steelmaking capacity and approximately 50% of its downstream (production of rolled steel) processing capacity, including flat and long steel production. The Group’s mining division supplies raw materials, including iron ore concentrate, fluxing materials, coke and scrap to the Group’s Russia-based steelmaking operations. The Group’s core mining business is Stoilensky, an open pit mine with approximately 5 billion tonnes of primary iron ore reserves and one of the lowest cash costs of production (cost of mining and beneficiation per tonne of iron ore concentrate) in the global iron ore industry. Stoilensky supplies all of the Group’s iron ore concentrate and sinter ore requirements. The Group’s other raw material producing subsidiaries include Stagdok and Dolomit, which supply fluxing materials, and Altai-Koks, Russia’s largest non-integrated coke producer, which, together with the Lipetsk site’s coke production facilities, supplies all of the Group’s coke requirements. In addition, over 80% of all scrap consumed by the Group’s sites in Russia in 2011 was supplied by the Group’s captive scrap businesses which collect and process ferrous scrap, making NLMK one of the largest scrap collecting and processing companies in Russia. As part of the ongoing upstream development, the Group is currently seeking to expand the production of iron ore at Stoilensky by approximately 30% while also constructing a plant expected to produce 6 million tonnes per year of iron ore pellets, which management expects to be operational in 2015. In addition, the Group has commenced feasibility studies in respect of two coal deposit development projects, specifically Zhernovskoye-1, including Zhernovski- Gluboki, in the Kemerovo region, Western Siberia, and Usinsky-3 in the Komi Republic. The Group expects that it will require at least another four to six years before it begins commercial mining at these deposits, subject to completion of the feasibility studies and approval to proceed with the projects. The Group seeks to control costs throughout the production cycle and believes that it enjoys one of the most competitive production cost structures in the global steel industry. Management believes that the

93 Group’s main production site in Lipetsk, which accounts for approximately 80% of the overall crude steel capacity of the Group, has one of the lowest cash costs of steel production among the world’s steel producers and one of the lowest among its Russian competitors. The Group achieves this by ensuring economies of scale in the production process and by upgrading its production facilities, which Management believes include some of the most modern in the global steel industry. The Group also operates a long steel division in Russia comprising electric arc furnace-steel production and rolling mills producing rebar, wire-rod and metalware. The Group enjoys an advantageous geographical position, with production sites located close to its customer base in regions with extensive transportation infrastructure. The Group’s Russian operations benefit from a long-term agreement with its former subsidiary NTK, a transportation company, for the supply of transport and rail logistics services. NTK is part of UCL Holding, one of the largest railway wagon fleet owners in Russia. Both NTK and UCL Holdings are currently entities under common control. The Group’s main production site in Lipetsk (Novolipetsk) has convenient access to the Black Sea and Baltic Sea ports from where its products are shipped overseas. In addition, iron ore deposits are situated in close proximity to the Group’s main production site in Lipetsk. Most of the Group’s Russian customers are located within 500 kilometers of its main production site in Lipetsk, helping to streamline company logistics. In addition, the Group operates rolling mills in two of its key overseas markets through its subsidiaries in the European Union (in Belgium, Denmark, France and Italy), which together form the NLMK Europe business unit, and in the United States, which together form the NLMK USA business unit. NLMK Europe and NLMK USA together represent approximately 50% of the downstream processing capacity of the Group (or over 7 million tonnes a year). A substantial part of the feedstock (slabs) used by NLMK Europe and NLMK USA in the manufacturing of high value added products is supplied by the Group’s Russian operations. The Group pursues a strategy of sustainability and value-enhancing growth of its business, investing heavily into consolidating and developing its competitive advantages. The Group is currently in the final stage of the second phase of its investment program, which is designed to expand low-cost steel production in Russia, upgrade the Group’s production equipment and implement advanced technologies in order to increase production levels and efficiency, enhance fuel and energy facilities and expand mining operations to further increase the level of vertical integration. In 2009 to 2011, the Group invested a total of $4.6 billion in this program and a total of $9.7 billion since the program was launched in 2000. The Group expects to complete the second phase of the investment program in 2012-2013. The Group is currently undertaking project planning for the third stage of the program mainly aimed at further development of integration into key resources, including energy, improvement of its operations and in the efficiency of its business processes, and expansion of its downstream portfolio, including development of niche products.

History and Development The Group’s predecessor, Novolipetsk Iron and Steel Works, a state-owned enterprise, first began construction of an iron and steel plant at the Lipetsk iron ore mine in 1931 and produced its first pig iron in 1934. After the plant was dismantled during World War II, Novolipetsk Iron and Steel Works began reconstruction of the iron and steel plant at Lipetsk in 1947 and, during the next four decades, continued to develop its production facilities and product range, including the introduction of cold-rolled grain- oriented (transformer) steel in 1960 and cold-rolled carbon steel in 1980. In accordance with the Russian government’s program of the privatization of Russian industry in the early 1990s, NLMK was formed as an open joint stock company on December 31, 1992, and was privatized in stages from 1993, initially through a distribution to its employees of vouchers that could be exchanged for shares in NLMK. By the middle of the 1990s, several investors had acquired significant stakes in NLMK. Between 2000 and 2004, the Group’s current beneficial owner, Mr. Vladimir Lisin, had, through a series of transactions, acquired beneficial ownership of NLMK from this group of investors and NLMK management. In December 2005, NLMK obtained admission of global depositary receipts, each evidencing ordinary shares of NLMK, to listing on the Official List of the United Kingdom Listing Authority and to trading on the regulated market of the London Stock Exchange. NLMK is the parent company of the Group and holds the main assets of its steel operations. In addition, the Group has acquired a number of businesses worldwide, including mining assets that produce raw materials used in the Group’s steel production operations.

94 In 1997, the Group acquired Dolomit, which mines and processes metallurgical dolomite and, in 1999, it acquired Stagdok, which mines and processes fluxing limestone. Both of these companies are located in the Lipetsk region. In 2004, the Group acquired Stoilensky, an open pit iron ore mine, located approximately 350 kilometers from Lipetsk, which currently supplies all the iron ore concentrate requirements of the Group’s main steel plant in Lipetsk. In 2005, the Group acquired the license for the exploration and development of the Zhernovskoye-1 coal deposit in the Kemerovo region, Western Siberia. In 2006, the Group acquired Altai-Koks, which currently supplies all the coke requirements of the Group’s main steel plant in Lipetsk. The Group made additional downstream investments in 2006, including the acquisition of DanSteel A/S (now ‘‘NLMK Dansteel’’ and, since the second half of 2011, a part of NLMK Europe Plate business unit), a steel rolling company based in Denmark and VIZ-Stal, the second largest electrical steel producer in Russia, as well as establishing a joint venture with the Duferco Group through the acquisition of a 50% stake in SIF, which consisted of steelmaking assets and five rolling mill companies (together with a network of metal services centers) in Europe and the United States. In 2007, SIF subsequently acquired Sharon Coating LLC (‘‘Sharon Coating’’, currently a part of NLMK USA business unit), a galvanized steel manufacturer located in the United States. In December 2007, NLMK acquired 50% plus one share of OJSC Maxi-Group, which operated a number of scrap collecting and processing facilities as well as two Electric Arc Furnaces (EAF) and long steel production facilities located in the Urals region of Russia. Following a restructuring of the Maxi-Group businesses, these assets became part of the Group’s long steel division. In 2008, the Group acquired Beta Steel LLC (subsequently renamed ‘‘NLMK Indiana LLC’’, currently a part of NLMK USA business unit), a manufacturer of steel (EAF production) and hot-rolled coils in the United States. In 2009 NLMK completed the disposal of its 69.41% shareholding in TMTP (Tuapse Sea Port). In 2010, the Group acquired LLC VMI Recycling Group, which has a ferrous scrap collecting and processing capacity of 500 thousand tonnes per year and is located in the Moscow region. In July 2011, the Group completed the restructuring of SIF, in which it acquired the remaining 50% interest from the Duferco Group and consolidated the rolling assets within the Group, and SIF transferred certain non-core (steelmaking) assets to the Duferco Group. In October 2011, the Group acquired Nippon Transcore Private Limited (subsequently renamed ‘‘NLMK India Service Center Pvt Ltd’’), an electrical steel service center in India. In March 2011, the Group acquired a license for the exploration and extraction of coal in Usinsky-3 expiring in 2031. In line with the Group’s strategy of streamlining its asset structure and splitting off non-core assets, in June 2011, the Group sold its 100% interest in NTK to UCL Rail B.V., a subsidiary of UCL Holding, a related party, and entered into a long-term agreement (which expires in 2017) with NTK for the supply of transport and rail logistics services. UCL Holding, one of the largest railway wagon fleet owners in Russia, is a holding company comprised of a number of railway and logistics, seaport and stevedoring, and shipping and other assets, including Freight One, a major rail freight operator in Russia.

Competitive Strengths Sustainable growth capabilities The Group is a growth business whose objective is to deliver above average long-term growth relative to its competitors, while minimizing risks arising out of operating in a highly cyclical industry. The Group’s Russian low-cost steelmaking platform remains its main growth engine, and the Group has focused on expanding its steelmaking capacity. In 2012, the Group commissioned into operation a new blast furnace and a new basic oxygen furnace, increasing its steelmaking BOF capacity by 36% to 12.4 million tonnes per year. In 2013, in order to increase its market share in the dynamic construction steel products market of Central Russia, the Group also plans to complete the construction of NLMK-Kaluga, a mini-mill located in the Central European part of Russia, which will be equipped with an electric arc furnace with a production capacity of 1.5 million tonnes per year and is expected to have rolling capacities of 0.9 million tonnes per year of long products, with a potential launch of an additional 0.6 million tonnes per year of long steel rolling capacity. Pursuing vertical integration remains the Group’s principal means of reducing industry risks. The Group has a high degree of vertical integration comprising a wide range of upstream assets ranging from mining and energy generation to primary steelmaking, processing and distribution. The Group seeks to grow its business by developing and acquiring upstream assets in cost-efficient locations and finishing facilities close to its customers without creating imbalances along the production chain, such as insufficient or surplus production capacities. While the Group seeks to take advantage of acquisition opportunities which enhance its growth potential, it approaches external expansion with a stringent value and synergy criteria,

95 including an evaluation of the impact of the acquisition on the Group’s equity value and the synergy potential of the target. Management believes that continuing expansion of its downstream capacity enables the Group to meet evolving customer requirements and to improve profitability by offering higher value-added products. By producing high value-added products, the Group is able to safeguard the value generated at its upstream production facilities and to improve their capacity utilization rates. Following the acquisition of the SIF rolling assets, the Group is able to process approximately 90% of its steel into finished product after the recent growth in its BOF steelmaking capacity by 36% to 12.4 million tonnes. The Group intends to expand its product offering by developing its downstream capabilities, capturing opportunities in both growing markets, like Russia, as well as in mature markets, in each case by offering high value added products, including niche products, manufactured in close proximity to the end-user.

Self-sufficiency in key resources The Group has been pursuing self-sufficiency in key resources in order to secure supplies and to control the costs of steel. The Group’s upstream assets, such as its mining, coke production and scrap processing facilities, supply it with the key input materials, such as iron ore, coke, scrap and fluxes required for crude steel production, and enable it to manage risks associated with price fluctuations for raw materials. In 2011, iron ore concentrate and sinter ore production at Stoilensky was in excess of the Group’s requirements (comprising approximately 85% of its total requirements in primary ferrous materials), Stagdok and Dolomit supplied all of the fluxes required by the Group and Altai-Koks (together with the coke operations at the Lipetsk site) fully covered its coke requirements. In addition, over 80% of all scrap consumed by the Group’s Russian assets was supplied by the Group’s captive scrap processing network. The Group has also built a portfolio of mining rights for coking coal deposits and is currently performing various preparatory activities for the construction of two coal mines in Russia.

Flexibility The Group has a flexible business model, which enables it to address the increasing challenges in the industry. The diversity and the flexibility of the Group’s business are enhanced by its extensive product mix, which helps manage exposure to divergent industry cycles. The Group’s product portfolio is well balanced between both finished and semi-finished and standard and high-end products, contributing to superior asset performance and profitability. Ongoing technological innovation and product development increases the share of new products in the Group’s product mix, making its business more adaptable to the needs of its clients. In most product categories, the Group seeks to maintain a healthy balance between exposure to emerging and mature markets, thereby balancing growth and stability.

96 In line with its strategy of building its market share in its core export markets and creating a more diversified product offering, in 2011, the Group acquired the remaining 50% interest in SIF, its former 50:50 joint venture with the Duferco Group. The transaction has significantly enhanced the Group’s international downstream portfolio and improved its product mix through the complete integration into the Group of 7 rolling facilities with a total capacity of over 5.5 million tonnes per year and a combined output in 2011 of 3.4 million tonnes, as well as a network of distribution and service centers.

Rating agency Long-term rating National rating scale Outlook Standard and Poor’s ...... BBB RuAAA Negative Moody’s ...... Baa3 Aaa.ru Stable Fitch ...... BBB AA+(ru) Stable

Maintaining efficient and sustainable growth The Group seeks to grow its business by developing and acquiring upstream assets in cost-efficient locations and ensuring finishing facilities are close to its customers. The following projects were implemented as part of this strategy: • Expansion of the Group’s low cost steel production facilities in Lipetsk. In July 2012, the Group commissioned into operation the new Blast Furnace No. 7 and a new basic oxygen furnace increasing its steelmaking capacity by 3.4 million tonnes per year at its site in Lipetsk, considered to be one of the most efficient steel plants in the world. This project has increased the Group’s blast furnace capacity to 12.4 million tonnes of pig iron per year. The expansion of the site’s blast furnace capacity was matched by the expansion of the basic oxygen furnace capacity, which increased the Lipetsk site’s steelmaking capacity by 36% to 12.4 million tonnes per year. • Developing the Group’s downstream business. In 2011 NLMK completed the restructuring of SIF, its former joint venture with the Duferco Group. This transaction has significantly enhanced the Group’s international downstream portfolio through the complete integration into the Group of 7 rolling mills with a total capacity of over 5.5 million tonnes of finished flat steel products per year and a combined output in 2011 of 3.4 million tonnes, as well as a network of distribution and service centers. The acquisition has enabled the Group to further increase its downstream capabilities, ensure a better market and product mix exposure, and ensure stable off-take of its expanded crude steel production in Russia. • Construction of the NLMK-Kaluga Mini-Mill. The Group is currently finalizing the construction of a new long products plant in the Kaluga region with a capacity of 1.5 million tonnes per year, which will be located approximately 80 kilometers south of Moscow and will be equipped with an electric arc furnace and rolling mills. It is expected to be completed in 2013. This greenfield project is expected to increase the Group’s long steel production capacity by around 70%, to 3.5 million tonnes per year.

Developing niche segments The Group strives to maximize its profitability by entering premium niche product and industry segments. The Group focuses on achieving continuous product quality improvements and the development of its competitive edge and know-how. Following the launch of the new basic oxygen furnace at the Lipetsk site, the Group has significantly enhanced its secondary steel treatment facilities, including the construction of vacuum degassing units and ladle furnaces. These additions have enabled the Group to improve the quality of its existing product

97 portfolio and to enter niche markets, offering new high-quality products for the automotive, construction, home appliance manufacturing and electrical engineering industries. NLMK has also refurbished its casting machine (CCM-8) with a capacity of 2.5 million tonnes per year to expand its product mix and ensure a consistently high quality of continually cast slabs for further conversion into flats. Following the CCM-8 refurbishment, the Group commenced the production of new types of slabs with thicknesses of up to 355 millimeters for further conversion into thick plates, including at the Group’s European subsidiaries NLMK DanSteel and NLMK Clabecq. The Group’s long-term objectives include continually improving the quality of rolled products produced at its Lipetsk site and further strengthening its position in the Russian automotive steel market. The Group is also in the process of implementing a transformer steel production capacity increase and quality improvement program at its Lipetsk site and at VIZ-Stal. Furthermore, the Group has acquired a local service center processing grain-oriented steel in India, making it possible to supply products directly to end-users in that expanding market. The Group’s European assets are also undergoing a significant modernization aimed at developing niche products. In particular, NLMK Europe Plate is focusing on achieving higher production volumes and improving the quality of niche grades of plate steel. In 2011, NLMK Clabecq launched Direct Quenching and Quenching & Tempering (Q&T) lines to produce higher strength and abrasion resistant plates for use in the yellow goods (including construction and earth moving equipment, quarrying equipment, and fork lift trucks), transportation, energy and shipbuilding industries. In October 2012, NLMK DanSteel completed the construction of a new plate mill facility, which includes a 4300 mm plate mill stand. This facility enables NLMK DanSteel to produce 4300 mm wide and 5-200 mm thick plates, which are widely used in the energy industry, including the construction of oil and gas drilling platforms and in shipbuilding.

Maximizing upstream integration into key resources The Group intends to continue to enhance its upstream integration by developing the production and reducing the consumption of key resources, including, in particular, those resources in which it is not fully self-sufficient. In particular, the Group intends to pursue the following strategic objectives: • Improving efficiency of coke and coking coal consumption and managing coal prices growth. The Group aims to install Pulverized Coal Injection (‘‘PCI’’) technology at its blast furnace operations in Lipetsk, which it expects will enable it to substitute up to 20% and 60%, respectively, of coke and natural gas consumption per tonne of pig iron with cheaper PCI coal grades. The Group has also registered a patent for using tar pitch granulation in the coke mix in order to improve the quality of coke used in the blast furnaces. In addition, the Group is testing other new technologies, including hot stamping of the coal mix, in an effort to improve the quality of the coke produced from the medium-quality coking coal grades and therefore further decrease coal costs. In order to provide for the sourcing of coking coal, the Group has an option to develop its greenfield coking coal projects, the coking coal deposits of Zhernovskoye-1, including Zhernovski-Gluboki, in the Kemerovo region, Western Siberia, as well as Usinsky-3 in the Komi Republic. • Developing a network of scrap collection and processing sites. As part of its development program, the Group’s scrap collecting and processing unit, Vtorchermet NLMK, has established 18 new scrap metal processing sites in various regions across Russia. The largest investment project is a new scrap processing site in Podolsk (Moscow region), which is currently under construction. The Group seeks to maintain its self-sufficiency in in-house scrap at its Russian operations at 80-85%, assuming a 40% increase in steelmaking capacities in 2011-2013. • Setting up iron ore pellets production. The Group is developing a project for the construction of a pelletizing plant at Stoilensky, with a capacity of 6 million tonnes of pellets per year. The project will also include the development of beneficiation facilities designed to supply raw materials for the production of high-grade pellets. In order to ensure the supply of the required raw materials for the pelletizing plant, as well as to maintain the necessary iron ore supplies to the blast furnaces, the Group plans to increase iron ore output at Stoilensky’s operating mine by 30%, as compared to 2011 output. The Group expects that the construction of the pelletizing plant will be completed in 2015 and that the plant will fully cover the Group’s pellet requirements (taking into account the launch of the new Blast Furnace No. 7 at the Lipetsk site), enabling the Group to achieve 100% self-sufficiency in all iron ore materials.

98 Improving efficiency of operations The Group aims to enhance the efficiency of its operations at every step of the value chain by investing in capital expenditures and streamlining its processes. In particular, the Group seeks to maximize the efficient use of secondary energy resources. In September 2011, the Group commissioned a new recovery cogeneration plant at Lipetsk comprising three 50 MW turbine generators. This cogeneration plant has increased electricity generation capacity at the Group’s main steel plant by 150 MW to 482 MW through processing blast furnace gas from Blast Furnace No. 7 and has consequently raised the level of in-house energy self-sufficiency at the Lipetsk site to 52.6% in the nine months ended September 30, 2012 from 45.9% in 2010 (prior to the launch of the recovery cogeneration plant) and from 47.9% in 2011. Further, in recognition of the Group’s commitment to maximizing energy efficiency, in October 2012, it became the first major Russian steel producer to successfully complete a TUV¨ SUD¨ certification audit for compliance of the energy management system used at the Lipetsk with the ISO 50001:2011 international standard. The Group intends to continue to take steps aimed at reducing costs and improving operational efficiency of its production sites, including streamlining its auxiliary processes and functions.

Operating in a safe, socially and environmentally responsible manner The Group is committed to operating in a safe, socially and environmentally responsible manner. To that end, the Group has a corporate responsibility policy aimed at achieving sustainable development objectives which are aligned with its long-term economic interests and which promote high standards of public welfare and the conservation of the environment. The Group continuously monitors operating practices across its divisions to ensure that they comply with health and safety standards. The Group delivers on its safety commitment by a thorough review of its operating practices and assessment of associated risks. In order to mitigate operating risks and to prevent accidents, the Group creates safe working environments by improving processes, investing in employee education and enforcing compliance. The Group invests in environmental projects to minimize the impact on the communities and environments where it operates. In 2011, the Group invested approximately $135 million for environmental protection projects at its main production site in Lipetsk. To date, the Group has implemented approximately 100 environmental projects aimed at the refurbishment and upgrading of process equipment and operations. The Group was the first steelmaking company in Russia to achieve zero wastewater discharge at its main production site in Lipetsk. In addition, the Group has completed the installation of a new industrial waste neutralization plant with the capacity to process 1,200 tonnes of waste per annum. The plant will be used to burn low-hazard waste materials generated by the Group’s main production site in Lipetsk, including oiled cloth, sawdust, paper and wooden packaging and soil contaminated with oil products, with the minimal environmental impact. The technical solution used at the new facility ensures almost complete waste incineration, which Management believes will substantially reduce the environmental impact when compared to the technological solutions used previously. The Group develops and implements programs to encourage better productivity and performance by all employees, to attract the best young talent and to retain skilled professionals. In 2011, approximately 70% of the Group’s employees completed professional training programs, an increase of 23% from 2010.

Steel Products The Group’s steel product line includes pig iron, slabs (semi-finished steel products for flat steel production), flat steel and long steel products. Slabs represented 24.2% of the Group’s total volume of sales of steel products in 2011 (23.5% in the nine months ended September 30, 2012), while flat steel products represented 55.4% of its total volume of sales of steel products in 2011 (60.0% in the nine months ended September 30, 2012). The Group’s flat steel product range includes hot-rolled steel, thick plates, cold-rolled steel, coated steel (including galvanized and pre-painted steel) and electrical grain-oriented (transformer) and non-grain-oriented (dynamo) steel. The Group also produces long products and metalware (representing 12% of total sales in 2011) which is produced and sold in the Russian market. The Group’s products comply with the main Russian and international quality standards and are sold across various sectors (from construction to energy to machinery building sectors) in over 70 countries.

99 The table below shows the production results of the Group’s principal steel products for the periods indicated.

Nine months Year ended ended December 31, September 30, 2011(1) 2010 2009 2012 2011 (Amounts in millions of tonnes, except for percentages) Product Pig Iron ...... 9.8 9.3 8.5 9.0 7.0 Crude steel ...... 12.0 11.6 10.6 11.2 8.8 NLMK Russia Flat ...... 9.8 9.3 8.5 9.2 7.1 NLMK Russia Long ...... 1.5 1.7 1.7 1.4 1.2 NLMK Europe Plate ...... 0.1 — — 0.2 0.1 NLMK USA...... 0.6 0.6 0.4 0.6 0.5 Products for sale: Commercial pig iron ...... 0.9 0.6 0.5 0.5 0.6 Semi-finished steel products ...... 3.4 3.8 3.7 2.8 2.3 Slabs ...... 3.3 3.6 3.4 2.8 2.2 Billets ...... 0.1 0.2 0.3 0.0 0.1 Total rolled products ...... 8.7 7.1 6.4 8.2 6.4 Flats ...... 7.2 5.7 5.0 6.9 5.2 Hot-rolled steel ...... 2.9 2.4 2.3 3.7 2.6 Plates ...... 0.7 0.4 0.2 1.5 1.2 Cold-rolled steel ...... 1.7 1.5 1.5 0.9 0.6 Galvanized steel ...... 0.9 0.6 0.4 0.4 0.4 Pre-painted steel ...... 0.5 0.3 0.3 0.2 0.2 Grain-oriented steel ...... 0.2 0.2 0.1 0.1 0.0 Non-grain-oriented steel ...... 0.3 0.3 0.2 0.2 0.2 Long products and metalware ...... 1.5 1.4 1.4 1.3 1.2 Long products ...... 1.3 1.2 1.2 1.1 1.0 Metalware ...... 0.2 0.2 0.2 0.2 0.2 TOTAL STEEL PRODUCTS ...... 13.0 11.5 10.6 11.6 9.3

(1) Includes products produced by SIF from the date of its consolidation with the Group in July 2011. In 2011, the Group produced 12.0 million tonnes of crude steel (11.2 million tonnes in the nine months ended September 30, 2012), 7.2 million tonnes of flats and 1.5 million tonnes of long products and metalware. The Group’s total crude steel production increased in 2011 by 0.4 million tonnes, or 3.4%, from 11.6 million tonnes in 2010 primarily due to high capacity utilization rates and the starting up in test mode of a new blast furnace and the associated basic oxygen plant at Lipetsk, as well as a two-fold increase in flat steel rolling capacity following the consolidation of the SIF rolling assets in Europe and the United States from July 2011.

100 The tables below show the sales attributable to the Group’s steel products for the periods indicated.

Nine months ended September 30, 2012 2011 Amount % Amount % (Amounts in millions of tonnes, except for percentages) Product Slabs ...... 2.7 23.5 2.4 25.8 Pig iron ...... 0.6 5.2 0.5 5.4 Pre-painted steel ...... 0.4 3.5 0.4 4.3 Hot-rolled steel ...... 3.7 32.2 2.6 28.0 Cold-rolled steel ...... 1.5 13.1 1.2 12.9 Galvanized steel ...... 0.9 7.8 0.6 6.5 Billets ...... — 0.0 — 0.0 Grain-oriented (transformer) steel ...... 0.2 1.7 0.2 2.1 Non-grain-oriented (dynamo) steel ...... 0.2 1.7 0.2 2.1 Long Products ...... 1.1 9.6 1.0 10.8 Metalware ...... 0.2 1.7 0.2 2.1 Total ...... 11.5 100.0 9.3 100.0

Year ended December 31, 2011 2010 2009 Amount % Amount % Amount % (Amounts in millions of tonnes, except for percentages) Product Slabs ...... 3.1 24.2 3.8 32.5 3.4 32.1 Pig iron ...... 1.0 7.8 0.6 5.1 0.6 5.7 Pre-painted steel ...... 0.5 3.9 0.3 2.6 0.3 2.8 Hot-rolled steel ...... 3.6 28.1 2.7 23.1 2.4 22.6 Cold-rolled steel ...... 1.6 12.5 1.5 12.8 1.5 14.2 Galvanized steel ...... 0.9 7.0 0.6 5.1 0.3 2.8 Billets ...... 0.1 0.8 0.3 2.6 0.3 2.8 Grain-oriented (transformer) steel ...... 0.2 1.6 0.2 1.7 0.2 1.9 Non-grain-oriented (dynamo) steel ...... 0.3 2.3 0.3 2.6 0.2 1.9 Long Products ...... 1.3 10.2 1.2 10.3 1.2 11.3 Metalware ...... 0.2 1.6 0.2 1.7 0.2 1.9 Total ...... 12.8 100.0 11.7 100.0 10.6 100.0 In 2011, the Group’s total sales of steel products grew by 9.4%, to 12.8 million tonnes from 11.7 million tonnes in 2010. Finished flat products accounted for the majority of sales (7.1 million tonnes, or 55.6%), with the share of high value added products growing to 35% of total sales of steel products, primarily due to the integration of the SIF rolling assets that process the Group’s semi-finished products produced in Russia into finished flat-rolled products. This growth was supported additionally by increased deliveries of pre-painted steel following the launch of the new pre-painting line at the Lipetsk site. In 2010, total sales of steel products by the Group was 11.7 million tonnes, an increase of 10.7% from 10.6 million tonnes in 2009. The increase in sales in 2010 was made possible by a return to positive growth of output in steel-consuming industries. Sales volumes increased across all product groups, with the exception of billets, which stayed at approximately the same level. Flats accounted for the majority of the Group’s total sales of steel products (48.4%). This was coupled with an increase in the share of high value added products, rising from 28% in 2009 to 30% in 2010 and mostly attributed to an increase in sales of galvanized steel and grain-oriented (transformer) steel.

101 Geographic Operating Divisions The Group’s operations are organized into three geographical operating divisions: NLMK Russia, NLMK Europe and NLMK USA. The following map shows the Group’s operations through these three divisions.

NLMK GROUP

NLMK RUSSIA NLMK EUROPE NLMK USA

NLMK RUSSIA FLAT NLMK EUROPE STRIP NLMK Indiana

Novolipetsk (main site) NLMK La Louvière NLMK Pennsylvania

VIZ-Stal (electrical steel) NLMK Coating Sharon Coating

NLMK RUSSIA LONG NLMK Strasbourg

NSMMZ (rebar) Service and Distribution Centers SERVICES

UZPS(metalware) Trading House NLMK

Kaluga mill (under constr.) NLMK EUROPE PLATE Novexco

NLMK RUSSIA RAW MATERIALS NLMK DanSteel Novex Trading

Stoilensky (iron ore) NLMK Clabecq Insurance companies

Altai-Koks (coke) NLMK Verona

Stagdok (limestone)

Dolomit (dolomite)

Vtorchermet NLMK (scrap) 25JAN201315114689

NLMK Russia NLMK Russia comprises the Group’s mining, coke, steel producing and rolling assets in Russia. NLMK Russia is the Group’s principal operating division, producing 100% of its raw materials, over 90% of its crude steel production, approximately 60% of its flat steel products and 100% of its long products. NLMK Russia comprises three business units: Flat Steel (including NLMK and its subsidiary VIZ-Stal); Long Steel (including subsidiaries NSMMZ and UZPS, as well as NLMK Kaluga, a mini-mill under

102 development which is expected to be operational in the first half of 2013) and Raw Materials (including subsidiaries Stoilensky, Altai-Koks, Stagdok, Dolomit and a scrap processing unit, Vtorchermet NLMK).

Products of NLMK Russia NLMK Russia produces flat steel products (slabs, hot-rolled steel, cold-rolled steel, galvanized steel, pre-painted steel, electrical steel (transformer and dynamo steel) and billets), long steel products (rebar and wire rod), metalware and raw materials (iron ore concentrate, sinter ore, coke, limestone, dolomite and scrap). NLMK Russia also produces raw materials, including iron ore concentrate, sinter ore, coke, fluxing materials and scrap, which cover almost all of its requirements in these raw materials. The table below shows the production results of NLMK Russia’s principal products for the periods indicated.

Nine months Year ended ended December 31, September 30, 2011 2010 2009 2012 2011 (Amounts in millions of tonnes) Product Raw materials Coke ...... 6.6 6.0 5.6 5.4 4.9 Iron ore concentrate ...... 13.4 12.1 10.9 10.4 9.9 Sinter ore ...... 1.7 1.8 1.7 1.3 1.3 Limestone ...... 3.3 3.3 3.1 2.7 2.4 Dolomite ...... 2.1 1.5 1.7 1.5 1.4 Pig Iron ...... 9.8 9.3 8.5 9.0 7.0 Steel ...... 11.3 11.0 10.2 10.5 8.3 NLMK Russia Flat ...... 9.8 9.3 8.5 9.2 7.1 NLMK Russia Long ...... 1.5 1.7 1.7 1.4 1.2 Commercial pig iron ...... 0.9 0.6 0.5 0.5 0.6 Semi-finished steel products ...... 4.5 4.2 3.9 4.7 3.0 Slabs ...... 4.4 4.0 3.6 4.7 2.9 Billets ...... 0.1 0.2 0.3 0.0 0.1 Total rolled products ...... 6.4 6.2 5.8 5.2 4.8 Flats ...... 4.8 4.8 4.4 3.9 3.6 Hot-rolled steel ...... 1.8 1.9 1.9 1.5 1.4 Cold-rolled steel ...... 1.4 1.5 1.5 1.1 1.1 Galvanized steel ...... 0.6 0.6 0.4 0.4 0.4 Pre-painted steel ...... 0.5 0.3 0.3 0.4 0.4 Grain-oriented steel ...... 0.2 0.2 0.1 0.2 0.2 Non-grain-oriented steel ...... 0.3 0.3 0.2 0.2 0.2 Long products and metalware ...... 1.5 1.4 1.4 1.3 1.2 Long products ...... 1.3 1.2 1.2 1.1 1.0 Metalware ...... 0.2 0.2 0.2 0.2 0.2 TOTAL STEEL PRODUCTS ...... 11.8 11.0 10.2 10.4 8.4

Iron ore concentrate Iron ore concentrate is an ore in the form of powder size fractions which contains between 65% and 68% of iron as well as other valuable minerals. Most of the waste is removed from iron ore concentrate by means of mechanical and electro-magnetic treatment or using the beneficiation processes. Approximately 90% of iron ore concentrate produced at Stoilensky is delivered to the Lipetsk site for further processing and to be subsequently used in the blast furnace process. The remaining iron ore concentrate is sold to third parties, both domestically and internationally. In 2011, NLMK Russia produced 13.4 million tonnes of iron ore concentrate (representing approximately 13% of Russia’s total output of iron ore concentrate) and 1.7 million tonnes of sinter ore.

Sinter ore Sinter ore is an ore in the form of larger fractions which contain a high proportion of iron (approximately 52%). Throughout the production process mined iron ore undergoes mechanical processes such as crushing and sorting in order to remove waste and ensure that the fractions are of the required size.

103 Approximately 50% of sinter ore produced at Stoilensky is delivered to the Lipetsk site and is used in the production of sinter and pig iron, while the remaining sinter ore is sold to third parties.

Coke Coke is a processed form of coking coal which is used in blast furnaces for the smelting of iron. In 2011, NLMK Russia produced 6.6 million tonnes of coke (representing approximately 22% of Russia’s total coke output). The coke output of NLMK Russia exceeds the Group’s current coke requirements, and, in 2011, NLMK Russia sold 1.2 million tonnes of coke (dry weight) to third parties.

Scrap NLMK Russia sources scrap both externally, from companies and individuals who collect scrap metal, and internally, by utilizing amortization scrap and production waste. In 2011, NLMK Russia processed 2.2 million tonnes of ferrous scrap which was almost entirely consumed by the Group.

Slabs Slabs are used for the production of flat steel at the Lipetsk site and at the Group’s international rolling facilities. In 2011, approximately 1.4 million tonnes of slabs produced by NLMK Russia were processed into flat-rolled products at the Group’s rolling mills in Europe. The remaining portion of the slab output was sold to third parties, who process it into other forms of finished steel.

Pig iron NLMK Russia uses the majority of its pig iron output to produce crude steel. A small proportion (up to 6%) of pig iron produced at blast furnace operations in Lipetsk is sold to third parties, primarily in the metallurgy and machine-building sectors, including the automotive industry.

Hot-rolled steel NLMK Russia produces hot-rolled steel for use in various constructions and items, including steel structures, guardrails, ship hulls, machine casings, road-building machinery components and building structures.

Cold-rolled steel NLMK Russia produces cold-rolled steel for the construction, machine-building, automotive and pipes and tubes industries to use in casing components for machinery and installations, frame elements, pipes and tubes, floodlight towers and agricultural machinery.

Galvanized steel NLMK Russia produces galvanized steel for use in the manufacture of casing components for machinery, roofing as well as frame elements for use in corrosive environments.

Pre-painted steel NLMK Russia produces pre-painted steel sheet for use in the construction industry, in particular in the manufacture of roofing and finishing materials, as well as casings for household and commercial goods. NLMK is the largest producer of pre-painted steel in Russia, with a 26% market share in 2011.

Grain-oriented (transformer) steel NLMK Russia produces grain-oriented (transformer) steel for use in the electro-technical industry for the manufacture of transformer cores and stationary components of electric machines. Grain-oriented (transformer) steel is one of the most technically sophisticated types of steel, and NLMK understands that it is produced by less than 20 steel plants worldwide. Approximately 90% of the transformer steel that the Group produces is covered by steel of highest grades and is used in the manufacture of technologically advanced twisted power and distribution transformer cores. In 2011, NLMK Russia produced the first samples of a brand new product, a nanostructured, high-permeability transformer steel, using a process developed specifically by the Group’s engineers. The pre-production preparation project for this product is currently in its final stages at the Lipetsk site and NLMK Russia expects to commence industrial

104 fine-tuning of the production technology in 2013. This product is principally used in the production of economically efficient high rate power transformers and heavy duty distribution transformers. Management believes that there is a growing demand for this type of steel in emerging and developed markets. In 2011, NLMK Russia’s share of the global transformer steel sales market increased from 7.1% (in 2010) to 8%. The Group acquired Nippon Transcore Private Limited (subsequently renamed ‘‘NLMK India Service Center Pvt Ltd’’), a transformer steel processing and distribution company, in October 2011 with the aim of enhancing NLMK Russia’s position in the niche segment of the fast-growing Indian market. NLMK Russia has processing and warehousing capacities of 16,000 tonnes per year and 15,000 tonnes per year, respectively, located approximately 200 kilometers from Mumbai. NLMK Russia also has warehousing capacities of 40,000 tonnes per year located approximately 20 kilometers from Mumbai, in close proximity to the seaport, which facilitates delivery of imported products of NLMK Russia. The advantageous location of NLMK Russia’s sites in India not only provides access to customers based in Western India, which account for a significant share of the total national transformer steel consumption, but also significantly enhances NLMK Russia’s distribution capability in India generally by reducing delivery lead-time.

Non-grain-oriented (dynamo) steel NLMK Russia specializes in the production of non-grain-oriented (dynamo) steel for use in electrical equipment such as electric motor components and generators. NLMK Russia produces dynamo steel in different alloying groups, ranging from non-alloyed silicon-free dynamo steel to high-alloyed dynamo steel, to both a fully-processed and semi-processed standard. In 2011, sales by NLMK Russia accounted for 63% of the total sales of electrical steel in Russia (comprising both transformer and dynamo steel).

Billets Billet is a semi-finished product which NLMK Russia produces from scrap through an Electric Arc Furnace steelmaking process at its Russia-based long steel production segment. The bulk of NLMK Russia’s billets are further processed into finished long steel products (rebar, wire rod and metalware). A small portion of the billets are sold to third parties. The key purchasers of billet are rolling mills located internationally, which produce rebar and other downstream products principally used in the construction sector.

Long products (rebar and wire rod) The rebar that NLMK Russia produces is used to strengthen concrete in highway and building construction and as a component in machinery. In 2011, NLMK Russia’s share of the Russian rebar market exceeded 20% according to Metall Courier. Management expects to produce extra-high strength (AT1000) rebar as well as a range of other value-added long products, such as angles and channels, at the new NLMK-Kaluga facility, which is currently under construction. This steel is used in the construction of high-rise buildings where advantage can be taken of its high-strength to reduce the amount of steel employed. In addition, NLMK Russia produces wire rod for use in wire products that are applied mainly in the construction industry, as well as in transport machinery.

Metalware NLMK Russia produces metalware for use in the construction industry, including bolts, nails, fixing hardware, nails, mesh, and as a component in transport machinery. Metalware is principally sold in the Russian market.

Steel Production Facilities at NLMK Russia NLMK Russia is the largest member of the Group in terms of product output and is comprised of raw materials, steel production as well as flat and long steel rolling businesses primarily located in the center of the European part of Russia. NLMK Russia’s operations have a combined capacity of approximately 14.6 million tonnes of crude steel per year, including 12.4 million tonnes of basic oxygen furnace (BOF) steel capacity and approximately 2.2 million tonnes of EAF steel capacity.

105 The BOF steel capacity of NLMK Russia is principally located at its Lipetsk site. Its integrated steelmaking facility occupies approximately 28 square kilometers. NLMK Russia owns the facility and the land on which it is constructed. The facility comprises: • a sinter plant (with four agglomerators); • a coke plant (with four coke batteries with a capacity of 2.57 million tonnes); • a blast furnace plant, comprising two blast furnace shops and in total, six blast furnaces with a total inner volume of 15,700 m3 (including the newly built Blast Furnace No. 7, which is one of the most advanced blast furnaces in the world and has a capacity of 3.4 million tonnes per year) and overall output capacity of 12.5 million tonnes per year; • a steelmaking plant, comprising two BOF shops (comprising three BOFs, each with a capacity of 300 tonnes and three BOFs, each with a capacity of 160 tonnes, respectively); • nine continuous casting lines (comprising six curvilinear, one radial-curved and two vertical); • one hot strip finishing plant; and • three cold-rolling plants (a cold rolling plant, a non-grain-oriented steel plant and a grain-oriented steel plant), including production of galvanized and pre-painted steel. In addition, the Group’s subsidiary, VIZ-Stal, located in Yekaterinburg, has the capacity to produce 170 thousand tonnes of transformer steel per year. The Group’s long product operations are conducted by NSMMZ and UZPS, which it acquired in 2007. Both NSMMZ and UZPS are located in the Urals region of Russia. NSMMZ operates two electric arc furnaces with an aggregate capacity of approximately 2.2 million tonnes of steel per year. The semi-finished products (billets) are then rolled into rebar and wire at its two rolling facilities. UZPS is one of Russia’s largest metalware manufacturers. NSMMZ supplies re-rolling stock (wire rod) to UZPS. In addition, the Group is completing construction of the NLMK-Kaluga Mini-Mill, which has an aggregate design capacity of 1.5 million tonnes of crude steel and 0.9 million tonnes of long products per year, with a potential launch of an additional 0.6 million tonnes per year of long steel rolling capacity, and will consume mainly ferrous scrap supplied largely by NLMK’s own scrap collecting facilities. The NLMK-Kaluga Mini-Mill is expected to be commissioned in 2013.

Sales Division and Marketing at NLMK Russia The Group’s Russian steelmaking operations sell their products primarily pursuant to sales contracts with their customers, typically based on standard terms and conditions, in which they typically agree to provide their customers with an agreed quantity of products during the course of a 12-month period. Prices are determined on a monthly basis in order to allow adjustments in line with its price lists, although, in the case of some of the Group’s major customers, prices may be fixed for a period of three to six months. Prices are established largely by reference to price trends in the international steel market. The Group may, in some circumstances, including, for example, for large purchase orders, offer discounted prices. Generally, the Group requires its Russian customers to pay it in advance of the delivery of its products. The main steel consuming sectors in Russia are the construction and infrastructure sectors (which together account for approximately 80% of total sales) and the machine building sector, including the automotive and the electrical engineering sectors.

Transportation of Products at NLMK Russia Management believes that the advantageous geographic location of the Group’s Russian operations near the Baltic Sea and Black Sea ports and the possibility of transporting finished products by inland waterways provide them with a competitive position as compared to other companies. A specialist transportation company, NTK, which was a subsidiary of the Group until June 2011, manages the Group’s relations with RZD and, in relation to products sold outside of Russia, the port authorities. NTK is owned by UCL Holding, a related party, which holds a number of railway and logistics, seaport and stevedoring, and shipping and other assets, including Freight One, a major rail freight operator in Russia. NLMK Russia’s products are shipped from Baltic Sea ports (St. Petersburg and Kaliningrad) for end-customers in Europe and North America and Black Sea ports (Novorossiysk, Tuapse and Port Yuzhny) for end-customers in the Middle East and South-East Asia). The remaining portion of NLMK Russia’s

106 products that are sold to customers outside of Russia is transported by rail, mainly to customers in other CIS countries. For sales within Russia, title to the products normally transfers upon loading of products into railway wagons at Lipetsk. NLMK Russia delivers substantially all of its products by rail. Generally, in return for a fee which is determined by reference to market rates, NLMK Russia arranges transportation of these products. NLMK Russia has convenient rail access to the major steel consuming regions located in the center of the European part of Russia and the Volga region.

NLMK Europe NLMK Europe comprises the Group’s production and distribution facilities in Europe. NLMK Europe includes two business units: Strip Products (NLMK La Louviere` in Belgium, NLMK Coating in France and NLMK Strasbourg in France), with an aggregate annual capacity of 2.4 million tonnes of flat steel products, including galvanized and pre-painted steel, and Plate Products (NLMK DanSteel in Denmark, NLMK Clabecq in Belgium and NLMK Verona in Italy), with an aggregate annual capacity of 1.9 million tonnes. The division includes the SIF rolling assets which were previously part of the joint venture with the Duferco Group and were consolidated into the Group beginning in July 2011. NLMK Europe is very strongly integrated with NLMK Russia which supplies almost all of its slab requirements for further re-rolling. In October 2012, the management of NLMK La Louviere, a rolling facility of the NLMK Europe Strip Division in Belgium, announced that, as a result of decreased customer demand and continued losses there was a need for a plant restructuring to decrease high production costs. The management of the enterprise has developed a restructuring plan covering, among other initiatives, a revision of labor contracts and growth in labor productivity and production flexibility, and invited the representatives of the employees to participate in the discussion in order to adopt a restructuring plan approved by both parties in December 2012. Discussions with the employee representatives are continuing. The continued performance of NLMK La Louviere, as well as the outcome of these discussions, may have an impact on whether an impairment needs to be taken in connection with the preparation of the Group’s consolidated financial statements as of and for the year ended December 31, 2012.

Products of NLMK Europe NLMK Europe produces strip products (hot-rolled steel, cold-rolled steel, galvanized steel and pre-painted steel) and plate products (thick plates, including several niche grades). The table below shows the production results of NLMK Europe’s principal products for the periods indicated.

Nine months Year ended ended December 31, September 30, 2011 2010 2009 2012 2011 (Amounts in millions of tonnes) Product(1) NLMK Europe Plate Steel ...... 0.3 0.2 0.1 0.2 0.2 Steel products ...... 1.1 1.1 0.7 0.8 0.8 Forged ingots ...... 0.1 0.1 0.1 0.05 0.1 Plates ...... 1.0 1.0 0.6 0.8 0.8 NLMK Europe Strip ...... 1.4 1.5 1.3 1.0 1.1 Hot-rolled steel ...... 0.9 1.0 0.9 0.7 0.7 Cold-rolled and full hard steel ...... 0.1 0.1 0.1 0.05 0.1 Galvanized steel ...... 0.3 0.3 0.2 0.1 0.2 Pre-painted steel ...... 0.1 0.1 0.1 0.1 0.05 Total steel products ...... 2.5 2.6 2.0 1.8 1.8

(1) The production data for NLMK Europe was calculated based on the data for the companies comprising NLMK Europe as at the end of 2011.

107 Forged ingots Ingots are produced at the steelmaking facilities of NLMK Verona by solidifying liquid steel at the final stage of its production by using a bottom pouring ingot casting system. Ingots are either sold to third parties, in particular to oil and gas, wind power and energy, machinery and general power generation industries, or rolled by the Group’s own thick plates rolling mill.

Thick plates Thick plates are produced in a variety of grades, including medium and heavy plates, as well as forged plates. Thick plates are principally sold to customers in the construction, shipbuilding, energy, transport, lifting, quarrying and mining equipment industries.

Quenched and tempered plates Quenched and tempered thick plates produced at the quenching and tempering line at NLMK Clabecq are lighter than ordinary thick plates and have superior mechanical properties. The product is principally sold to customers in the yellow goods (earth moving and mining equipment), lifting and transport industries.

Hot-rolled steel NLMK Europe produces a broad range of high-quality hot-rolled steel (including pickled coils) which complies with European standards, including quality and dimensional standards. Purchasers of hot-rolled steel include the construction industry.

Cold-rolled and full-hard steel The cold-rolled coils complies with European quality standards and with automotive manufactures’ specifications and includes various grades, such as Interstitial Free High Strength steels (Y), micro-alloyed steels (LA) and phosphorus alloyed steels (P). It includes full-hard steel, which has undergone a rolling process to reduce the thickness of the steel by up to 50%. The main consumer of cold-rolled steel is the automotive industry.

Galvanized steel Galvanized steel is intended to protect steel against corrosion and is used in the automotive industry and for other purposes where steel is subjected to deformation.

Pre-painted steel Pre-painted steel is used in the construction and home appliance industries for the manufacture of profiles and panels for cladding and facing, as well as for the manufacture of doors, suspended ceilings and lighting. Pre-painted steel is also used in the manufacture of furniture, air conditioning and cladding for heating appliances.

Steel Production Facilities at NLMK Europe Using semi-finished products (slabs) supplied by the Group’s Russian operations, NLMK Europe produces flat high value added products in close proximity to its customers. NLMK Europe benefits from a network of service and sales centers located in Belgium and France. The service centers specialize in cutting steel coils to size and producing metal systems for building shells with finished products being used in machine building and construction. NLMK Europe’s production facilities include: • a continuous caster at NLMK Verona, which produces ingots with a thickness of up to 500 millimeters; • a rolling mill at NLMK Verona which produces hot-rolled plates (‘‘HRPs’’) with a thickness of between 20 and 200 millimeters and forged plates with a thickness of between 150 and 800 millimeters; • a rolling mill at NLMK Clabecq, which produces thin gauge plate products (60% of products have a thickness of between 3 and 10 millimeters); • a quenching and tempering line at NLMK Clabecq with a production capacity of 250 thousand tonnes per year;

108 • a rolling mill at NLMK DanSteel for the production of thick plates between 5 and 200 mm in thickness and widths of up to 4,300 mm and with a production capacity of over 550 thousand tonnes per year; • a hot strip mill at NLMK La Louviere` in Belgium with a hot-rolled steel production capacity of 2.4 million tonnes per year; • a galvanizing line, which produces coils with width up to 1520 millimeters at NLMK Strasbourg; • a pre-painted steel line, which produces coils with a width of up to 1520 millimeters and thickness of between 0.23 millimeters and 1.25 millimeters at NLMK Strasbourg; and • a cold strip mill and a galvanizing line at NLMK Coating at Beautor in France.

Sales Division and Marketing at NLMK Europe NLMK Europe sells its products pursuant to long-term contracts (with a term of 12 months), medium-term contracts (with a term of 6 months) and short-term contracts (with a term of 3 months). The pricing of supply contracts is adjusted quarterly or monthly by reference to Steel Business Briefing’s index or another steel index. In short-term contracts, prices are fixed at the beginning of a specific period, typically at the beginning of each quarter. Export sales are typically project-based and pricing under such contracts is linked to spot prices, with adjustments for longer lead-times to release orders into production, which is a common feature of project-based sales. The key steel consuming sectors in Europe are the machine-building sector (accounting for approximately 75% of total sales in Europe), including the automotive, energy and shipbuilding sectors. NLMK Europe also supplies steel products to the construction and infrastructure sectors.

Transportation at NLMK Europe NLMK Europe generally receives its input materials from the Group’s Lipetsk site. Ships carrying slabs (the main input material used in the manufacture of rolled steel and steel plates) arrive from Russia on a weekly basis and unload slabs in NLMK DanSteel’s own harbor facilities as well as in the ports of Ghent (situated near NLMK La Louviere,` located in close proximity to a variety of transport links, including road, waterway and railway links and NLMK Clabecq) and Marghera (situated near NLMK Verona). Slabs are delivered from the ports to the production facilities (with distances of between 70 and 130 kilometers) by road and railways.

NLMK USA NLMK USA comprises the Group’s flat steel producing assets in the United States. NLMK USA has three production sites: NLMK Indiana in Portage, Indiana; Sharon Coating in Sharon, Pennsylvania; and NLMK Pennsylvania in Farrell, Pennsylvania. The total annual production capacity of NLMK USA includes approximately 0.9 million tonnes of crude steel and approximately 2.8 million tonnes of hot-rolled steel. NLMK USA purchases its supplies of slabs from NLMK Russia, as well as local suppliers in the United States.

109 Products of NLMK USA NLMK USA produces slabs, hot-rolled steel, cold-rolled steel and galvanized steel. The table below shows the production results of NLMK USA’s principal products for the periods indicated.

Nine months Year ended ended December 31, September 30, 2011 2010 2009 2012 2011 (Amounts in millions of tonnes) Product(1) Steel ...... 0.6 0.6 0.4 0.6 0.5 Steel products ...... 1.6 1.7 1.2 1.3 1.3 Hot-rolled steel ...... 0.8 0.9 0.6 0.7 0.7 Cold-rolled steel ...... 0.5 0.5 0.3 0.3 0.4 Galvanized steel ...... 0.3 0.3 0.3 0.3 0.2 Slabs ...... — — 0.0 0.0 0.01

(1) The production data for NLMK USA was calculated based on the data for the companies comprising NLMK USA as at the end of 2011.

Slabs Slabs produced at NLMK Indiana using the electric arc furnace process are re-rolled at the plant’s HRC rolling line.

Hot-rolled steel Hot-rolled steel is supplied to service centers, pipe and tube manufacturers and the machine building industry.

Cold-rolled steel Cold-rolled steel (including full-hard steel) is supplied to service centers and machine building industries.

Galvanized steel Galvanized steel is manufactured in the form of a number of products, including galvanized coils and Z-mill products. Galvanized steel is supplied to service centers and the construction and machine building industries.

Steel Production Facilities at NLMK USA NLMK USA has a total electric arc furnace steelmaking capacity of 0.9 million tonnes per year and a hot-rolling capacity of 2.8 million tonnes per year. NLMK Indiana is a steel mini-mill specializing in the production and sale of hot-rolled coils. It operates an electric arc furnace with a production capacity of 900 thousand tonnes per year and a hot strip mill with a capacity of 1 million tonnes per year. NLMK Pennsylvania produces carbon steel, including hot-rolled, cold-rolled and full hard products, as well as other cold-rolled fully finished product types. The plant has a capacity of 1.8 million tonnes per year of hot-rolled steel. Sharon Coating is a producer of hot dip galvanized steel of various types, as well as bake-hardenable (low carbon) steel. It operates three hot dip galvanizing lines with a total capacity of 800 thousand tonnes per year.

Sales Division and Marketing at NLMK USA NLMK USA predominantly sells its products in the spot market due to the volatility of key input costs such as scrap and slab prices. Most customers’ purchasing requirements vary little from month to month, however, NLMK USA typically negotiates the price of its products with the majority of its customers on a monthly basis. Approximately 80% of NLMK USA’s sales are subject to monthly price reviews. The remaining portion of NLMK USA’s sales is represented by contracts ranging from three months to one

110 year. Currently, fixed price contracts are generally limited to three-month contracts, although NLMK USA may utilize six-month contracts under which supplies for the first three months are charged at a fixed price, while the price for the next three months is linked to the CRU index. In respect of such contracts, NLMK USA fixes its own supply costs for the first three months and then, depending on market conditions, either fixes costs for the remaining three months or allows costs and sales price to fluctuate with the market. For annual contracts, NLMK USA offers CRU index-based price adjusted contracts. The key steel consuming sectors in the United States include, among other sectors, the pipe and tube and construction sectors.

Transportation at NLMK USA Due to the geographic location of NLMK USA’s facilities, the majority of outbound shipments are made by road (approximately 97% of shipments from NLMK Pennsylvania and 80% of shipments from NLMK Indiana), with the remainder comprising rail shipments. Occasional barge shipments, representing less than 1% of all shipments, are utilized for shipping to the southern regions of the United States. NLMK USA cooperates with a preferred logistics operator which schedules and secures shipments from all three facilities. This operator handles approximately 76% of Pennsylvania shipments and 25% of Indiana shipments. The remaining shipments are arranged through the customer with their preferred carrier.

Steel Production Process NLMK Russia Sintering The primary process involves the agglomeration, or sintering, of prepared raw materials, including iron ore concentrate, iron-bearing tailings and flux, or limestone, followed by crushing, to produce particles of at least 40 millimeters in size. The finished product is referred to as agglomerate, or sinter, and is one of the main raw materials used in the blast furnace process. In 2011, the Group produced approximately 14.5 million tonnes of sinter (11.1 million tonnes in the first nine months of 2012).

Production of coke and by-products Coke is obtained from coal concentrate and is one of the main raw materials used in the blast furnace process as a source of heat and as a reducing agent. The primary process involves non-oxidation heating of a prepared coal mixture to a temperature of 900C to 1100C for a period of 15 to 17 hours. The coking distillation process is integrated with a by-product plant, which uses coal screenings and other by-products for the production of different types of chemicals, including ammonium sulphate, crude benzol, and coke pitch. Four of the Group’s nine operational coking batteries are equipped with dry quenching units, while the remaining five coking batteries are equipped with wet quenching units (which the Group has no current plans to replace). Dry quenching technology is used to regenerate a portion of the heat, improve coke quality and reduce pollution. After quenching, coke is fed via conveyor to coke screening, where it is sorted into fractions using roll screens. Metallurgical coke (above +25 mm size) is transported to blast furnace hoppers via conveyors or coke cars. Altai-Koks and the coke batteries at the Lipetsk site meet all of the Group’s requirement in metallurgical coke used in the blast furnaces to produce pig iron. In 2011, the Group produced approximately 6.6 million tonnes of coke with 6% moisture (5.4 million tonnes of coke with 6% moisture in the first nine months of 2012).

Blast furnace process To smelt pig iron, iron ore products, principally comprising sinter and pellets, and also coke, natural gas and other fuels, are fed in the blast furnaces. In the resulting combination, the charge is smelted and produces pig iron and slag (a by-product of the blast furnace process which is typically granulated or processed into crushed stone used for road construction). The smelted product is released from the furnace between 12 and 20 times per day. The pig iron is poured into hot-metal ladle cars and taken to the oxygen converter plant for making into steel, while the slag is poured into slag ladle cars and taken to the slag plant for processing. In 2011, the Group produced approximately 9.8 million tonnes of pig iron (9.0 million tonnes in the first nine months of 2012).

111 NLMK Russia Flat—Lipetsk site production flow chart STEELMAKING: NOVOLIPETSK

29JAN201304085088

112 Steelmaking—BOF route Molten pig iron is the main component of the metal charge used in the production of steel in the Group’s basic oxygen converters, which are also referred to simply as oxygen converters. The molten pig iron is transported to the basic oxygen converter shop in hot-metal ladle caps. The pig iron is poured into charging ladles and then into the converter. In addition to pig iron, the metal charge consists of scrap metal. The basic oxygen steelmaking process is exothermic, which requires the use of scrap as a cooling agent. Oxygen, in a form which is over 99.5% pure, is blown into the oxygen converter. This oxidizes the carbon and silicon contained in the molten pig iron. The combustion of carbon monoxide (CO) as it exits the oxygen converter vessel also transmits heat. During this melting process, impurities, including sulfur and phosphorus, are removed from the charge. The finished product at this stage is crude steel, ready for further processing at the refining stands. During this processing stage, relatively small quantities of deoxidizers and ferroalloys (for example, aluminum, vanadium and molybdenum) may be added to the crude steel to adjust the quality of the liquid steel to the specific grades required by customers. Depending on the targeted content of carbon, the liquid steel may undergo a further processing stage, referred to as vacuum degassing, before casting. Vacuum degassing is used to achieve ultra-low carbon grades, which are particularly useful for automotive applications. Molten steel is delivered to the continuous casting machines, where it is cast via a tundish (a refractory- lined distributer which receives steel from the ladle), providing for the continuity of the process due to the possibility of ladle turning, into the mold of the required width, where the solid shell of a future slab is formed. After the primary cooling in the mold the liquid core strand passes secondary air mist (or water) cooling, where it solidifies completely, after which it is cut to length, and the slabs obtained are transferred either to the slab yard for gradual cooling or to the hot-rolling shop (a workshop specializing in hot flat steel). Following this stage of the process, the slabs may be sold or processed further, initially by being rolled into sheets (plates) or coils at the hot-rolling plant, to produce the required dimensions or physical properties in accordance with one or more of the methods described below. In 2011, the Group’s Russian flat assets produced approximately 9.8 million tonnes of crude steel (9.2 million tonnes in the first nine months of 2012).

Hot-rolled production In order to produce hot-rolled steel, slabs from the steelmaking plant at the Lipetsk site are re-heated in a methodical furnace to a temperature of around 1250C and rolled in a steel rolling mill. Slabs are reduced in a set of 12 consecutive stands to a thickness of 1.5 to 16 millimeters. Part of the product is sent to the finishing plant for cutting and dispatch, while the rest is further processed into cold-rolled product. In 2011, the Group’s Russian flat assets produced approximately 5.2 million tonnes of hot-rolled steel, of which 1.8 million tonnes was salable hot-rolled steel, as compared with 5.2 million tonnes of hot-rolled steel in 2010, of which 1.9 million tonnes was salable hot-rolled steel. In the nine months ended September 30, 2012, the Group’s Russian flat assets produced approximately 4.3 million tonnes of hot-rolled steel, of which 1.5 million tonnes was finished hot-rolled steel.

Cold-rolled production In the cold-rolling plant, the hot-rolled product is de-scaled by acid pickling and then rolled with no preheating. The rolled metal is then annealed to obtain the required mechanical and exploitative characteristics (depending on the type of steel). At the final stage, the metal is then cut into the required size and packed. In 2011, the Group’s Russian flat assets produced approximately 2.2 million tonnes of cold-rolled steel, of which 1.4 million tonnes was salable cold-rolled steel, representing an increase of 9.1% in cold-rolled steel production and a decrease of 6.7% in salable cold-rolled production from 2010, during which the Group’s Russian flat assets produced 2.2 million tonnes of cold-rolled steel, of which 1.5 million tonnes was salable cold-rolled steel. In the nine months ended September 30, 2012, the Group’s Russian flat assets produced approximately 1.7 million tonnes of cold-rolled steel, of which 1.1 million tonnes was salable cold-rolled steel.

113 galvanizing, zinc ions are transferred by means of applying electric current from a soluble anode to the strip placed in an electrolyte solution. In the process of hot-dip galvanizing the strip passes through the line, where it is first heat-treated in the annealing furnace, then is dipped into the pot with molten zinc, after which the required thickness of zinc coating is obtained using air knives. Finished galvanized strip is coiled. In 2011, the Group’s Russian flat assets produced approximately 1.1 million tonnes of galvanized steel, of which 0.6 million tonnes was salable galvanized steel, representing an increase of 10.0% in galvanized steel production and the same level of salable galvanized production as compared with 2010, during which the Group’s Russian flat assets produced 1.0 million tonnes of galvanized steel, of which 0.6 million tonnes was salable galvanized steel. In the nine months ended September 30, 2012, the Group’s Russian flat assets produced approximately 0.8 million tonnes of galvanized steel, of which 0.4 million tonnes was salable galvanized steel.

Pre-painting During the organic coating process, steel passes first through a unit of chemical preparation, then through a paint application appliance and then receives a heat treatment to set the color and give a uniform coating to the sheet. This process presents the technological challenge of ensuring a perfect application of paint during a short painting process, a uniformity of sheet surface and the required thinness of the applied layer. In 2011, the Group’s Russian flat assets produced approximately 0.5 million tonnes of pre-painted steel (0.4 million tonnes in the first nine months of 2012).

Grain-oriented (GO, or transformer) steel The production process for grain-oriented (transformer) steel involves the pickling of hot-rolled strip, followed by a first cold-rolling stage, decarburizing annealing, a second cold-rolling stage, the application of heat resistant coating, high temperature annealing, the application of electric insulation coating, thermo-flattening and a final stage of annealing. In 2011, the Group’s Russian flat assets produced approximately 0.2 million tonnes of transformer steel (0.2 million tonnes in the first nine months of 2012).

Non-grain-oriented (NGO, or dynamo steel) The production process for non-grain-oriented (dynamo) steel involves the pickling of hot-rolled strip, followed by cold-rolling, decarburizing annealing and the application of electric insulation coating. In 2011, the Group’s Russian flat assets produced approximately 0.3 million tonnes of dynamo steel (0.2 million tonnes in the first nine months of 2012).

114 NLMK Russia Long production flowchart STEELMAKING: LONG DIVISION

29JAN201304090186

Steelmaking—EAF An Electric Arc Furnace (EAF) is a steelmaking furnace that heats charged materials by means of an electric arc. A typical alternating current furnace has three electrodes. The arc forms between the charged material and the electrode, and the charge is heated both by a current passing through the charge and by the radiant energy evolved by the arc.

115 Scrap is a raw material for EAF production. Scrap is melted to a liquid steel condition in electric-arc furnaces. Then liquid steel is refined in ladle furnaces to the specified chemical composition (through the addition of deoxidizers and additives). After that liquid steel is cast at a continuous casting machine with simultaneous solidification to a solid square billet. Carbon and low-alloyed square concast steel billets with 125 125 mm cross section and length between 8,000 and 12,000 mm are the final products of EAF production. The major portion of billets is rolled at the next production stage and the remaining portion is sold to customers. In 2011, the Group’s Russian long assets produced approximately 1.5 million tonnes of crude steel (1.4 million tonnes in the first nine months of 2012).

Long products Long products are processed through heating billets and re-rolling them using bar-rolling mills. In 2011, the Group’s Russian long assets produced approximately 1.5 million tonnes of long products, of which 1.3 million tonnes was finished long products (1.3 and 1.1 million tonnes in the first nine months of 2012 respectively).

Metalware Metalware products are processed using special machines, including drawing mills and nail makers. Finished products are treated with chemicals and heat, galvanized and bonderized. In 2011, the NLMK Russia Long assets produced approximately 0.2 million tonnes of metalware products (0.2 million tonnes in the first nine months of 2012).

Steel Production at NLMK Europe and NLMK USA The production data for the Group’s international (non-Russian) assets in 2011 is for the entire year, including prior to the consolidation of the SIF rolling assets commencing in July 2011.

Steelmaking—EAF At NLMK Indiana scrap metal is delivered to a scrap bay, and comes in two main grades: shred (home appliance, cars and other objects made of similar light-gauge steel) and heavy melt (large slabs and beams), along with some direct reduced iron or pig iron for chemical balance. Following loading, the electrodes are lowered onto the scrap, an arc is struck, and the electrodes are set to bore into the layer of shred at the top of the furnace. Once the scrap has completely melted down and the temperature and chemistry are correct, the steel is tapped out into a preheated ladle through tilting the furnace. During tapping some alloy additions are introduced into the metal stream, and more lime is added on top of the ladle to begin building a new slag layer. At NLMK Verona the scrap is melted in EAF and refined in a ladle furnace. The vacuum degassing (VD) is an important step in the process to ensure quality steel with low gas content. The liquid steel is solidified by the bottom pouring ingot casting system. Ingots are sold to forging companies or rolled by rolling mill. In 2011, the Group’s international assets produced approximately 0.7 million tonnes of crude steel (0.8 million tonnes in the first nine months of 2012).

Hot-rolled production Slabs are heated and subsequently reduced in the roughing mill to a transfer bar which is coiled in a coil box. This coiled transfer bar is rolled in a finishing train (the part of the mill used to impart the desired finish to the steel) to produce a hot-rolled coil. In 2011, the Group’s international assets produced approximately 3.1 million tonnes of hot-rolled steel, of which 1.7 million tonnes was finished hot-rolled steel. In the first nine months of 2012, the Group’s international assets produced approximately 2.4 million tonnes of hot-rolled steel, of which 1.4 million tonnes was finished hot-rolled steel.

116 Plate production NLMK DanSteel In order to produce HRPs, slabs are re-heated in one of two reheating furnaces to a temperature of between 1150-1250 C, and subsequently rolled in new 4300 mm heavy plate rolling stand. A number of passes—typically between 12 to 20—deliver plate thicknesses between 5-200 mm. A major part of production is normalized in one of two normalizing furnaces, before being cut to size and dispatched. Some part of the finished plates are also delivered shot blast and primed.

NLMK Clabecq NLMK Clabecq produces heavy plates from 3 to 120 mm (maximum final width 2730 mm) through a Quarto mill and a finishing mill. Slab work pieces are reheated in one of two reheating furnaces to a temperature between 1180 and 1320C. Plates between 25.4 and 120 mm are rolled at a Quarto reversing mill in 9 to 21 passes. The rolling of thinner plates from 3 to 25.4 mm is finalized in a finishing mill which incorporates 4 Quarto non-reversing stands.

NLMK Verona NLMK Verona produces HRPs from 20 to 200 mm thick, and forged plates from 150 to 800 mm thick. Plates are rolled on the plates rolling mill from slabs supplied by third parties (mainly by NLMK) and from slab ingots that it produces on site using EAF. In 2011, the Group’s international assets produced approximately 1.0 million tonnes of finished plates. In the first nine months of 2012, the Group’s international assets produced approximately 0.8 million tonnes of finished plates.

Cold-rolled production The hot-rolled coils are cooled and then dispatched to customers or the pickling and skin-passing area. Pickling phase consists of removing the oxide coat from hot-rolled coils by making them pass through various baths of hydrochloric acid. The reversible cold-rolling mill reduces the thickness of pickled coils by several passes and the skin pass (a steel rolling process which used to achieve a smooth steel surface) gives the mechanical properties and the surface condition required by customers. In 2011, the Group’s international assets produced approximately 1.2 million tonnes of cold-rolled steel, of which 0.6 million tonnes of finished cold-rolled steel (0.8 and 0.4 million tonnes in the first nine months of 2012 respectively).

Galvanizing Galvanizing of cold-rolled (or hot-rolled) strip results in higher steel resistance to corrosion. Galvanized flats are consumed in large quantities by automotive, construction and home appliance industries. There are two ways of steel strip galvanizing: electrolytic and hot-dip galvanizing. In the process of hot-dip galvanizing the strip passes through the line, where it is first heat-treated in the annealing furnace, then is dipped into the pot with molten zinc, after which the required thickness of zinc coating is obtained using air knives. Finished galvanized strip is coiled. In 2011, the Group’s international assets produced approximately 0.7 million tonnes of galvanized steel, of which 0.6 million tonnes was finished galvanized steel. In the first nine months of 2012, the Group’s international assets produced approximately 0.5 million tonnes of galvanized steel, of which 0.4 million tonnes was finished galvanized steel.

Pre-painting During the organic coating process, steel passes first through a unit of chemical preparation, then through a paint application appliance and then receives a heat treatment to set the color and give a uniform coating to the sheet. This process presents the technological challenge of ensuring a perfect application of paint during a short painting process, a uniformity of sheet surface and the required thinness of the applied layer. The Group’s international assets produced approximately 0.1 million tonnes of pre-painted steel in 2011 and 0.1 million tonnes in the first nine months of 2012.

117 Sales and Transportation of Products The Group’s products are sold in over 70 countries in Asia and Oceania, Europe, the Middle East and North America, in addition to customers in a range of industrial sectors in Russia. In 2011, non-Russian markets accounted for 61.9% of sales revenue (64.6% in the nine months ended September 30, 2012). The following table shows, as a percentage of the Group’s total sales revenue and the regions in which the Group’s steel products were sold for the periods indicated.

Year ended Nine months December 31, ended 2011 2010 2009 September 30, 2012 (%) Region Russia ...... 38.1 41.1 37.1 35.4 European Union(1) ...... 23.6 21.6 13.8 21.0 North America ...... 10.1 9.5 4.9 14.4 Middle East, including Turkey(2) ...... 10.6 13.9 21.2 7.1 Asia and Oceania ...... 8.5 8.4 20.0 12.2 Other regions(3) ...... 9.1 5.5 3.0 9.9 The following table shows, as a percentage of the Group’s total sales volume, the regions in which the Group’s steel products were sold for the periods indicated.

Year ended Nine months December 31, ended 2011 2010 2009 September 30, 2012 (%) Region Russia ...... 33.2 31.6 27.3 30.9 European Union(1) ...... 22.3 25.9 18.9 19.4 North America ...... 13.5 11.8 22.7 15.1 Middle East, including Turkey(2) ...... 12.5 16.3 6.3 8.5 Asia and Oceania ...... 10.4 10.2 22.0 16.6 Other regions(3) ...... 8.1 4.1 2.9 9.5

(1) Comprises the member states of the European Union only. (2) Includes sales to third parties which NLMK understands are sold to end customers in Iran (approximately 1.58% and 1.02% of total volume of sales of steel products in 2011 and the nine months ended September 30, 2012, respectively) and Syria (approximately 0.07% of total volume of sales of steel products in 2011; there were no such sales in the nine months ended September 30, 2012). The Group does not engage in any direct sales to any person or entity in Iran or Syria. (3) Includes sales to customers in European states which are not a member of the European Union.

Non-Russian sales Non-Russian sales generated $7,265.7 million of revenue, or 61.9% of total revenue, in 2011 and $6,042.5 million of revenue, or 64.6% of total revenue, for the nine months ended September 30, 2012. In 2011, slabs accounted for 36.5% of the Group’s international sales in terms of volume, hot-rolled steel for 30.5% and high value added products for 29.8%. A substantial proportion of the slab production manufactured at the Group’s main Russian production site in Lipetsk was processed into high value added products at the Group’s rolling mills in Europe and the United States (approximately 2.0 million tonnes in the nine months ended September 30, 2012).

118 The table below shows the proportion of the Group’s total non-Russian sales volume attributable to its principal products for the periods indicated.

Year ended Nine months December 31, ended 2011 2010 2009 September 30, 2012 (%) Product Pig iron ...... 10.2 6.7 7.0 7.0 Slabs ...... 36.5 47.8 44.7 33.1 Hot-rolled steel ...... 30.5 23.9 23.1 37.0 Cold-rolled steel ...... 10.4 11.3 13.4 11.6 Galvanized steel ...... 4.6 0.4 0.2 5.9 Pre-painted steel ...... 0.4 0.2 0.2 0.7 Long products and metalware ...... 1.6 2.0 4.8 0.8 Non-grain-oriented (dynamo) steel ...... 2.5 2.6 1.6 2.0 Grain-oriented (transformer) steel ...... 2.3 2.0 1.6 1.8 Billets ...... 0.9 3.1 3.5 0.0 The European Union remained the Group’s key market outside of Russia in 2011, although high economic instability and the softening of demand for steel led to a reduction in the portion of the volume of the Group’s total non-Russian sales made to the European Union to 33.4% in 2011 from 37.9% in 2010, with a proportionate increase in sales to more attractive markets, including North America, Asia and Oceania. In 2011, the volume of sales of steel products to North America and Asia and Oceania, as a percentage of total non-Russian sales, were 20.2% and 15.6%, respectively (and 21.8% and 24.0%, respectively, in the first nine months of 2012). The following table shows, as a percentage of the Group’s total non-Russian sales volume, the regions in which the Group’s steel products were sold for the periods indicated.

Year ended Nine months December 31, ended 2011 2010 2009 September 30, 2012 (%) Region European Union ...... 33.4 37.9 26.1 28.0 North America ...... 20.2 17.2 7.1 21.8 Middle East, including Turkey ...... 18.7 23.9 31.2 12.3 Asia and Oceania ...... 15.6 15.0 30.2 24.0 Other regions ...... 12.1 6.1 5.5 13.9

Russian sales Russian sales generated $4,462.9 million of revenue, or 38.1% of total revenue, in 2011 and $3,311.2 million of revenue, or 35.4% of total revenue, for the nine months ended September 30, 2012. NLMK believes that it was the largest supplier in Russia, in terms of volume, of cold-rolled coil, pre-painted steel and galvanized steel in 2011 (with a market share of 21%, 26% and 19%, respectively), according to Metall Expert.

119 The table below shows the percentage of total volume of Russian sales that the Group derived from each of its principal products for the periods indicated.

Year ended Nine months December 31, ended 2011 2010 2009 September 30, 2012 (%) Product Metalware ...... 4.8 5.1 5.3 5.5 Long products ...... 27.8 27.7 30.4 29.4 Non-grain-oriented (dynamo) steel ...... 1.4 1.6 1.4 1.2 Grain-oriented (transformer) steel ...... 1.0 1.0 1.0 0.9 Pre-painted steel ...... 11.3 8.6 10.8 10.6 Galvanized steel ...... 12.3 14.6 10.8 11.3 Cold-rolled steel ...... 17.1 16.8 17.5 17.7 Hot-rolled steel ...... 22.2 23.0 21.7 22.6 Pig iron ...... 2.0 1.1 0.8 0.3 Billets ...... 0.1 0.4 0.2 0.0 Slabs ...... 0.1 — — 0.4 The following table shows, as a percentage of total volume of Russian sales, a breakdown of the Group’s sales by industry in Russia for the periods indicated.

Year ended Nine months December 31, ended 2011 2010 2009 September 30, 2012 (%) Industry Automotive industry ...... 4.6 1.0 1.2 5.7 Household appliances ...... 1.7 1.9 1.7 1.8 Metal traders ...... 58.7 60.3 61.4 62.7 Machine building ...... 2.5 2.3 2.4 2.3 Metallurgical complex ...... 2.5 3.6 5.2 2.0 Construction ...... 21.0 23.8 22.4 20.0 Tube and pipe ...... 4.6 2.9 2.1 2.3 Electric and instrument engineering ...... 2.0 2.3 2.4 1.8 Others ...... 2.5 2.0 1.3 1.4 The majority of Russian sales are made to customers located in the European part of Russia, including the Central region, the Volga region, the North-Caucasian region and Black Earth region, to which the Group made 54.9%, 11.5%, 9.4% and 8.0%, respectively, of its total volume of Russian sales in 2011 (52.7%, 13.1%, 9.5% and 6.9%, respectively, in the nine months ended September 30, 2012).

Quality Control The Group has implemented a comprehensive set of measures to enhance the quality of its products, which it continually develops in order to meet the requirements of its customers. The Group’s quality control system extends from management level to its production plant floor. The Group’s products have been certified by leading Russian and international authorities. In particular, in 2012, the Lipetsk site successfully completed a TUV¨ SUD¨ (Germany) certification audit for compliance with the ISO/TS 16949:2009 international standard, which enables it to supply products to the global automotive industry. In the course of the certification audit, TUV¨ SUD¨ verified the Group’s operating processes and working documentation confirming quality control at all production stages and confirmed the compliance of its quality management processes with international requirements applied to the production of flats for the automotive industry. The Lipetsk site also confirmed the compliance of its Quality Management System with international standard ISO 9001:2008, the European Council Directives 97/23/EC (the Pressure Equipment Directive) and 89/106/EEC (the Construction Products Directive) and was granted the right to use27JAN201306383775 the mark on steel produced for the construction industry.

120 Raw Materials and Energy The principal raw materials which the Group uses to produce steel include iron ore concentrate, pellets, coking coal, limestone and dolomite, non-ferrous metal and ferro-alloys and scrap metal. The Group’s production operations also require water, gas, electricity, heat power and ancillary raw materials. Vertical integration is a key strategic priority of the Group to better control its cost base through access to raw materials and energy supply, thereby decreasing its dependence on volatile raw material markets and further increasing its share of high value added products. The Group’s subsidiary Stoilensky, an open pit mine with approximately 5 billion tonnes of iron ore reserves, has a total iron ore concentrate production capacity of 14 million tonnes per year and sinter ore production capacity of up to 1.6 million tonnes per year. Management believes that this asset has one of the lowest cash costs of production in the global industry at $20 per tonne of 65% iron content ore concentrate. Stoilensky is conveniently located approximately 350 kilometers from the main production site of NLMK Russia in the Central District of Russia. In 2011, Stoilensky fully met the Group’s iron ore concentrate and sinter ore requirements. Management expects to launch additional iron ore concentrate production facilities at Stoilensky, as well as a pelletizing plant with a capacity of 6 million tonnes of pellets per year, in 2015. Following this launch, the Group will be fully self-sufficient in iron ore pellets which are currently supplied pursuant to a long-term agreement (effective until 2015) by a third party. The Group also internally supplies other raw material and energy requirements, including, in 2010 and 2011, producing 44.9% and 46.7%, respectively, of the electricity needs of the Group’s steel segment (50.2% in the nine months ended September 30, 2012). The Group pursues a policy of diversifying its supplier base. Currently all purchases of raw materials, supplies and equipment are based on market analysis, tenders and negotiations with suppliers for long-term contracts and fixed purchase prices. NLMK Trading House, which is responsible for consolidated supplies of some raw materials and inputs to the Group, in part centralizes the commercial functions for the Group’s business. In this way, the Group is able to minimize its purchasing costs and to streamline its transportation expenses.

Iron ore concentrate and pellets Stoilensky supplied all of the Group’s iron ore concentrate requirements in 2011 and in the nine months ended September 30, 2012. In addition, Stoilensky also supplies iron ore concentrate and sinter ore to third parties, with sales to third parties accounting for approximately 11% of total sales of iron ore concentrate and 65% of total sales sinter ore in 2011 (16% and 64%, respectively, in the nine months ended September 30, 2012). Stoilensky’s external consumers in 2011 and the first nine months of 2012 included steelmakers in Russia, Ukraine, Eastern Europe and China. The table below shows the raw materials sold by Stoilensky for the periods indicated.

Year ended Nine months December 31, ended 2011 2010 2009 September 30, 2012 (Amounts in thousands of tonnes) Sinter ore ...... 1,692 1,805 1,996 1,279 Iron ore concentrate ...... 13,174 12,023 11,875 9,890 Total ...... 14,866 13,828 13,871 11,169 Stoilensky is one of Russia’s largest mining companies, specializing in the extraction and processing of iron ore and located in the Belgorod region in Central Russia, 350 kilometers from the Group’s main production site in Lipetsk. It is a conventional open-pit operation. Following a drilling and blasting stage, ore is hauled via rail to the concentrator plant. At the concentrator, the ore is crushed and ground to a fine particle size, then separated into an iron concentrate slurry and a waste stream using wet magnetic separators. The iron ore is upgraded from approximately 34% iron to a concentrate that contains approximately 66.5% iron. The current production facilities comprise an iron ore concentrate plant and a sinter ore plant. In 2011, Stoilensky increased its sales of iron ore concentrate by 10% to 13.2 million tonnes following the launch of new beneficiation facilities. Sales of sinter ore decreased by 6% in 2011 as compared with 2010 and totaled 1.7 million tonnes. In the nine months ended September 30, 2012, Stoilensky sold 9.9 million tonnes of iron ore concentrate and 1.3 million tonnes of sinter ore. NLMK estimates that Stoilensky has

121 reserves of approximately 5 billion tonnes, which is sufficient to maintain production at current levels for approximately 120 years. NLMK made capital expenditures of $211.0 million in Stoilensky in 2011, of which management estimates $166.7 million was allocated to expansion and upgrading. In the nine months ended September 30, 2012, NLMK made capital expenditures of $181.1 million in Stoilensky, of which management estimates $143.2 million was allocated to expansion and upgrading. Capital expenditures in these periods was primarily attributable to the construction of a pelletizing plant with a capacity of 6 million tonnes of pellets per year, which Management expects to launch in 2015 and the expansion of the open cast mine at Stoilensky, resulting in an expected increase of its output capacity to 32 million tonnes of iron ore per year. NLMK expects that, upon completion, the pelletizing plant will provide all the Group’s pellet requirements for its main steel production plant in Lipetsk. In 2011, the Group purchased approximately 2.7 million tonnes of pellets (4.9 million tonnes in the first nine months of 2012). All of the Group’s pellet requirements were sourced externally from Russian suppliers.

Coal and coke The Group purchased approximately 9 million tonnes of coking coal in each of 2009, 2010 and 2011, respectively (7 million tonnes in the nine months ended September 30, 2012). The Group purchases coking coal at market prices that largely correlate with the steel market dynamics. CJSC Sibuglemet, CJSC Stroyservis, OJSC Kuzbassrazrezugol, OJSC Belon, CJSC Raspadskaya Coal Company are the main suppliers of coal concentrate. In accordance with the Group’s policy of vertical integration, in 2005, the Group obtained a prospecting and development license to the Zhernovskoye-1 coal deposit in the Kemerovo region, Western Siberia. In 2011, the Group acquired a license for the exploration and extraction of coal in the Zhernovski-Gluboki deposit, located below the Zhernovskoye-1 deposit. The Zhernovskoye-1 deposit, including Zhernovski- Gluboki, has approximately 236 million tonnes of reserves of high-quality hard and semi-soft coking coal (grade GZh, Zh and GZhO according to Russian standards). The Group is currently completing a technical assessment for the development of Zhernovskoye-1 (including a revised technical project documentation for a second filing with the relevant authorities), and project design work for the mining complex is expected to be completed in 2013. The Group has missed certain development targets set out in its license to mine the Zhernovskoye-1 coal deposit. See ‘‘Risk Factors—Risks Associated with the Group’s Business and Industry—The Group’s business could be adversely affected if it fails to obtain, maintain or renew necessary licenses, including subsoil licenses, and permits or fails to comply with the terms of its licenses and permits’’. Based on current estimates, if the development project is approved, this complex would have a capacity of 3.6 million tonnes per year of coking coal concentrate. In 2011, the Group also acquired a license for $27.2 million for the exploration and extraction of coal in Usinsky-3, the third mining area in the Usinsky coal deposit in the Komi Republic, North-West Russia. The Usinsky-3 deposit has approximately 227 million tonnes of reserves of high-quality hard coking coal (grades Zh and KZh, Russian categories of reserves C1+C2). The Group is currently conducting geological exploration and feasibility studies at the Usinsky-3 deposit. The Group expects that it will require at least another four to six years before it begins commercial mining at these deposits, subject to completion of the feasibility studies and approval to proceed with the projects. The Group currently produces metallurgical coke in excess of its total requirements at its coke batteries at Altai-Koks and the Lipetsk site, which have capacities of up to 4.4 and 2.6 million tonnes per year of coke, respectively. Altai-Koks is Russia’s largest non-integrated coke producer, accounting for 13% of gross coke supplies in Russia. It is located in the Altai Region, in close proximity to the Kuznetsk coal basin mining companies. In 2011, Altai-Koks produced 4.0 million tonnes of coke with 6% moisture content, a 13% increase from 2010 (3.5 million tonnes in the nine months ended September 30, 2012, increased by 17%). Increased output was driven by higher demand for coke-chemical products. Coke sales in 2011 totalled 3.8 million tonnes dry weight (3.3 million tonnes in the nine months ended September 30, 2012), of which 1.4 million tonnes, or 37%, were sold to third parties (0.7 million tonnes, or 21%, in the nine months ended September 30, 2012). External consumers in 2011 included Russian, Kazakh, European and Asian steelmakers, non-ferrous metal and petrochemical companies.

122 The table below shows the coke of 6% moisture produced by Altai-Koks and the Lipetsk site in the periods indicated.

Year ended Nine months December 31, ended 2011 2010 2009 September 30, 2012 (Amounts in thousands of tonnes) Altai-Koks ...... 4,026 3,562 3,147 3,483 Novolipetsk ...... 2,554 2,477 2,425 1,941 Total ...... 6,580 6,039 5,572 5,424

Scrap In 2011, the Group’s ferrous scrap collecting and processing business, Vtorchermet NLMK, supplied over 80% of the Group’s scrap requirements. In 2011, Vtorchermet NLMK processed 2.2 million tonnes of scrap, an increase of 15.8% from 1.9 million tonnes in 2010 (1.6 million tonnes in the nine months ended September 30, 2012). Vtorchermet NLMK has a scrap processing capacity of 2.8 million tonnes per year. The Vtorchermet NLMK facilities include special cutting and packaging lines for processing scrap so that it is ready for use in the smelting process. Scrap is sourced both externally from companies and individuals who collect scrap metal and internally, by utilizing amortization scrap and production waste. The Group uses scrap in all steel melting processes. The average proportion of scrap metal in the metal charge used in the smelting process is approximately 98.6%. In respect of the operations of NLMK USA, NLMK Indiana’s facility is located in the American Midwest, a region which accounts for approximately 40% of scrap generation in the United States.

Other raw materials The Group obtains limestone from its wholly owned subsidiary, Stagdok, whose production facilities are located within 20 kilometers of Lipetsk. Stagdok sold 3.0 million tonnes of limestone in 2011, of which 2.5 million tonnes was sold to entities within the Group. In the nine months ended September 30, 2012, Stagdok sold 2.8 million tonnes of limestone, of which 2.3 million tonnes was sold to entities within the Group. Assuming that the current levels of production are maintained, Management estimates that these reserves should be sufficient to meet the Group’s limestone needs for approximately 30 years. The license under which Stagdok mines the limestone deposit is scheduled to expire in 2028. The Group obtains flux dolomite from its wholly-owned subsidiary, Dolomit, whose operations are located in Dankov, close to Lipetsk. Dolomit sold 2.0 million tonnes of dolomite in 2011 and 1.6 million tonnes in the nine months ended September 30, 2012, of which 47% and 49%, respectively was sold to entities within the Group. Assuming that the current levels of production are maintained, Management estimates that the reserves of Dolomit (approximately 380 million tonnes) should be sufficient to meet the Group’s limestone needs for over 100 years (based on Dolomit’s current output of approximately 3 million tonnes of limestone per year). Dolomit mines the deposit under a license which is scheduled to expire in 2029. Dolomit is continuing to implement a technical upgrade and development program, comprising the renovation and reconstruction of equipment. The Group also requires a wide range of ferro-alloys for its steelmaking process. The Group purchases most of its ferro-alloy requirements from third-party suppliers based both in Russia and overseas (principally in Ukraine), generally under annual contracts. The Group also requires a range of non-ferrous metals, including zinc, manganese and aluminium, for use primarily in its production of high value-added steel products, including, for example, galvanized sheet. The Group purchases all of its non-ferrous metal requirements from third-party suppliers in Russia.

Energy The steelmaking process which the Group operates requires significant amounts of electricity and fuel gases to power the blast furnaces, steel melting and rolling facilities. During 2011, the Group consumed 10.2 billion kilowatt-hours of power energy (8.3 billion kilowatt hours in the first nine months of 2012). In 2011, the Group’s electricity generating facilities provided 46.7% of the electricity requirements of its steel segment (approximately 50.2% in the nine months ended September 30, 2012). These facilities generate electricity by burning natural gas and waste by-product gasses, including blast-furnace gas and

123 coke oven gas. In September 2011, the Group launched its new Recovery Cogeneration Plant at the Lipetsk plant, comprising three 50 MW turbine generators, which runs on by-product BF gasses. The Group does not use coal to generate electricity. The Group purchases the remainder of its electricity requirements for its Russian operations from the electricity market. The cost of electricity which the Group produces is approximately 40% less than that of electricity purchased from external suppliers. The Group uses blast furnace gas, coke oven gas and natural gas as a heat source in its blast furnaces, reheating lines and power plants. The Group purchases all its natural gas, including those which it uses in its electricity generation plants, from Gazprom, the national gas supplier of Russia, and other suppliers. In 2011, the Group purchased 2.7 billion cubic meters of natural gas (2.2 billion cubic meters in the nine months ended September 30, 2012). The Group has sought to reduce its energy and natural gas consumption by implementing innovative technologies and utilizing secondary energy. Over the last decade, the Group has reduced the energy intensity of its steelmaking operations at the Lipetsk site by approximately 12%. In October 2012, the Group became the first major Russian steel producer to successfully complete a TUV¨ SUD¨ certification audit for compliance of the energy management system used at the Lipetsk site with the ISO 50001:2011 international standard. In respect of the operations of NLMK USA, NLMK Indiana benefits from stable electricity prices set pursuant to long-term supply agreements with fuel surcharge provisions.

Transportation of raw materials In 2011, the Group received substantially all its raw materials by rail. The Group’s principal supplier of rail transportation services is NTK. In line with the Group’s strategy aimed at streamlining its asset structure and splitting off non-core assets, in June 2011, NLMK disposed of its 100% interest in NTK to UCL Rail B.V., a subsidiary of UCL Holding, a related party. See ‘‘Operating and Financial Review—External Factors Affecting the Group’s Results of Operations—Acquisitions and Disposals—Disposal of interest in NTK’’ and ‘‘Related Party Transactions’’. In connection with this sale, NLMK signed a long-term agreement with NTK to continue supplying transport and rail logistics services to the Group. NTK will render transport services to the Group and other freight owners using rolling stock owned by UCL Holding, one of the largest railway wagon fleet owners in Russia. NLMK expects that the Group’s transportation needs will be fully met by the arrangements with NTK.

Technical Upgrading Program The Group’s technical upgrading program is a key component of its strategy. Phase I of the Group’s technical upgrading program, which was focused on the reconstruction and large-scale overhaul of the existing operating facilities and construction of new facilities, was successfully completed in 2006. Phase II of the technical upgrading program was launched in 2007, with the following main strategic goals: • increasing crude steel production at the main production site in Lipetsk by 40% from 9 million tonnes per year up to 12.4 million tonnes per year; • developing upstream assets (including iron ore and coking coal) to achieve efficient self-sufficiency of the steelmaking segment in major raw materials, taking into account the projected increase in steel production volumes; • increasing production of finished flat steel products and balance the Group’s value chain through pursuing strategic acquisition opportunities with respect to high-quality rolling facilities in the Group’s core non-Russian markets; and • enhancing fuel and energy facilities at the Lipetsk production site.

124 The table below shows details of the key projects of the Group’s technical upgrading program for the years 2009 to 2012.

Year Key Projects 2009 ...... Construction of a new blast furnace with a capacity of 3.4 million tonnes per year at the Lipetsk site (‘‘Blast Furnace No. 7’’) Reconstruction of the gas exhaust ducts at the Lipetsk site, installing a secondary emissions collection and cleaning system (‘‘gas exhaust ducts’’) Construction of the basic oxygen furnace complex with gas exhaust ducts Construction of a Recovery Cogeneration Plant at the Lipetsk site, comprising three 50 MW turbine generators (‘‘Construction Cogeneration Plant’’) Construction of NLMK-Kaluga Mini-Mill, a long steel plant in the Kaluga region with a capacity of 1.5 million tonnes per year, which will be equipped with an electric arc furnace and rolling mills) Launch of the fourth section of the beneficiation plant at Stoilensky 2010 ...... Continuing construction of Blast Furnace No. 7 Continuing reconstruction of the gas exhaust ducts Continuing construction of the basic oxygen furnace complex with gas exhaust ducts Continuing construction of a Recovery Cogeneration Plant Refurbishment of Continuous Casting Machine No. 8 at the Lipetsk site (‘‘CCM-8’’), allowing NLMK to produce slabs with a thickness of up to 355 millimeters Continuing construction of the NLMK-Kaluga Mini-Mill Launch of the fourth section of the beneficiation plant at Stoilensky Expansion of the open cast mine at Stoilensky, increasing the output capacity of the mine to 32 million tonnes of iron ore per year 2011 ...... Continuing construction of Blast Furnace No. 7 (including start-up in testing mode) Continuing construction of the basic oxygen furnace complex with gas exhaust ducts Upgrading BOF Shop No. 2 at the Lipetsk site, including the installation of new equipment Continuing construction of the Recovery Cogeneration Plant Continuing refurbishment of CCM-8 Continuing construction of NLMK-Kaluga Expansion of the open pit mine at Stoilensky for the subsequent construction of a beneficiation facility with a capacity of 4 million tonnes per year and a pelletizing plant with a capacity of 6 million tonnes per year Continuing expansion of the open pit mine at Stoilensky Installation of Direct Quenching and Quenching & Tempering lines at NLMK Clabecq. A number of projects aimed at ensuring railway transportation for steel output of 12.4 million tonnes per year 2012 ...... Near completion of construction of Blast Furnace No. 7. Upgrading Basic Oxygen Furnace operations at the Lipetsk site, including the installation of new equipment and upgrade of gas exhaust ducts Refurbishment of a vertical continuous casting machine (CCM-3) with a capacity of 1 million tonnes per year Construction of a two-station hot metal desulfurization unit with a capacity of 5.8 million tonnes per year Continuing expansion of the open pit mine at Stoilensky Construction of a 4 million tonnes per year iron ore beneficiation plant and a 6 million tonnes per year pelletizing plant at Stoilensky Construction of a ladle furnace (LF) for the production of high-grade steel with a capacity of 2 million tonnes per year Continuing construction of NLMK-Kaluga Construction of a new rolling mill at NLMK DanSteel Construction of a cold-rolling mill at the Lipetsk site Construction of a new plate mill facility at NLMK DanSteel which includes a 4300 mm plate mill stand Construction of a new reversing cold rolling mill with an annual capacity of approximately 75,000 tonnes at VIZ-Stal Commencement of the first stage of the technical upgrade of the secondary cooling system and the reconstruction of the 8-roller section of CCM No.8 in BOF Shop No.2 Commencement of the construction of a lime kiln

125 Corporate Responsibility Management regards sustainable development as one of the Group’s key objectives. In 2002, the Group (at its Lipetsk site) first obtained certification of its environmental management system (‘‘EMS’’) for compliance with ISO 14001:1996 (2004) standards by the German certification agency, TUV¨ CERT, and the Group’s EMS was most recently re-certified by the same agency in 2011. The Group’s EMS monitors current Russian and international environmental regulations, in order to enable the Group to comply with applicable regulations and implement any necessary remedial actions. The Group seeks to anticipate potential issues, and, if it concludes that action is necessary, it is generally able to implement measures to address the problem at a relatively early stage. The Group also regularly engages international experts and auditing firms to assist it at various stages in this process. In 2011, the Group spent $153 million on environmental protection technology upgrades, bringing its total environmental investment over the 5-year period 2007-2011 to $638 million. The Group has implemented programs to reduce the impact of its operations on the environment. For example, in 2011, across the Lipetsk site, specific air emissions per tonne of steel declined by 5% in 2011, while steel output across the Group’s Russian assets increased by 5% compared to 2010. Furthermore, the Group achieved a reduction in water consumption with the completion of its process water supply network upgrades. In particular, a number of the Group’s production sites, including Lipetsk, Stoilensky, Altai-Koks and VIZ-Stal, now benefit from zero-discharge water disposal systems. In 2011, water consumption was reduced at VIZ-Stal by 20.5% compared to 2010 while product output increased by 9.9% and at NSMMZ water consumption was reduced by 26% compared to 2010 while steel output reduced by 13.5%. In addition, the Group has completed the installation of a new industrial waste neutralization plant with the capacity to process 1,200 tonnes of waste per annum. The plant will be used to burn low-hazard waste materials generated by the Group’s main production site in Lipetsk, including oiled cloth, sawdust, paper and wooden packaging and soil contaminated with oil products, with minimal environmental impact. The technical solution used at the new facility ensures almost complete waste incineration, which Management believes will substantially reduce the environmental impact when compared to the technological solutions used previously. In 2011, the Lipetsk site and Altai-Koks won ‘‘The Most Environmentally Responsible Business’’ awards in a contest held by the Russian Union of Industrialists and Entrepreneurs. The Lipetsk site also came first in Russia’s ‘‘Top 100—Ecology and Environmental Management’’ competition organized by the State Duma and the Council of the Federation of Russia. The Group recognizes that the long-term sustainability of its operations depends greatly upon the economic state of the communities surrounding its production facilities. For this reason, it pursues a number of social programs, including mandatory and voluntary medical coverage for its employees, participation in a private pension benefit program and other activities. The Group reinforces its social work with a strong commitment to charity work promoting health and fitness, sports, science, culture and the arts.

Research and Development The Group maintains specialist departments to carry out basic research and applied technology development activities, primarily focusing on the improvement of existing technologies and products in accordance with its end customers’ requirements, new product and equipment development and increasing production efficiency. The Group’s research and development departments employed, in aggregate, 1,131 staff as of December 31, 2011. As a result of these programs and policies, the Group’s research and development staff hold 250 patents with five new patent applications submitted in 2011, three of which are international patents. The Group invested approximately RUB 4.8 billion ($160 million) in its research and development activities during 2009 to 2011 (approximately $35.4 million in the nine months ended September 30, 2012).

Employees and Health and Safety The Group considers its employees to be one of the most important assets of the organization and has implemented a personnel policy which incorporates mutual accountability for results, a performance-based wage structure, equal opportunities for all employees and the provision of safe working environments.

126 The table below shows the average number of employees of the Group for the periods indicated.

Nine months Year ended ended December 31, September 30, 2011 2010 2009 2012 (thousands of employees) NLMK Russia ...... 58.0 58.6 62.1 58.5 NLMK Europe ...... 1.7 0.4 0.4 2.9 NLMK USA...... 0.7 0.3 0.3 1.1 Group total ...... 60.4 59.3 62.8 62.5

(1) The increase of the average number of employees from the year ended December 31, 2011 to the nine months ended September 30, 2012 was mainly due to the consolidation of SIF in July 2011. As at September 30, 2012, 94% of the Group’s personnel were employed at the Group’s Russian operations, with the remainder in the Group’s European and U.S. operations. From 2009 to 2011, the productivity per employee at the Group’s Lipetsk site increased, in terms of output of steel per employee in its steel operations, to 329 tonnes in 2011 from 269 tonnes in 2009, an increase of 22%. The Group’s staff remuneration structure consists of a base component, calculated according to the qualifications and experience of the employee, and a performance-related bonus. The remuneration package that NLMK Russia offers its employees also includes voluntary medical insurance, dental care and membership of a non-state pension fund scheme. Within the Group’s Russian businesses, average monthly salaries were RUB 31,800 ($1,084) in 2011. Since 2007, the Group’s Occupational Health and Industrial Safety Management System at the Lipetsk site has been certified by Bureau Veritas Certification as in compliance with OHSAS 18001:2007, the internationally recognized standard for occupational health and safety management systems. In November 2010, a recertification audit was held by Bureau Veritas Certification, resulting in the issuance of a new certificate of compliance, expiring in November 2013. Following this recertification audit, two regular annual compliance audits were successfully carried out in September 2011 and July 2012. The Group has also completed certification for OHSAS 18001:2007 by independent auditors at VIZ-Stal in October, 2012. The certificate is undergoing official registration, which is expected to be completed in February 2013. In 2011, the Group invested approximately $16 million in its occupational health and safety program, an increase of approximately $14 million from 2010. As at September 30, 2012, approximately 91% of employees of the Group’s Lipetsk and approximately 37% of employees of Stoilensky were members of a trade union (88% and 74% of employees in NLMK Europe and NLMK USA, respectively). The number of industrial accidents at the Group’s facilities was 76, 75 and 77 in 2011, 2010 and 2009, respectively (57 in the first nine months of 2012). The number of industrial accidents which resulted in serious injury or death was 15 in 2011 (13 in the first nine months of 2012). NLMK Russia has established its non-state pension fund program, Sotsialnoye Razvitie NPF, in cooperation with various other organizations and enterprises. As of June 30, 2012, 18,393 of the employees of NLMK Russia were members of the pension fund. In 2011 and in the nine months ended September 30, 2012, NLMK Russia paid $5.7 million and $0.9 million, respectively, into the fund. In addition, the Group maintains defined benefit pension and defined contribution plans for the majority of its employees at its operations in the European Union.

Insurance One of the most important ways in which the Group manages its risk exposure is by developing and managing its insurance program. NLMK Russia has a unified insurance program, with the principal component companies of that division maintaining insurance policies with similar terms. NLMK Russia is continually expanding its Russian insurance protection, which now consists of property damage and business interruption, voluntary health, directors’ and officers’ liability and general liability insurance, as well as the insurance policies it is required to maintain by Russian law (including third-party liability insurance for hazardous facilities).

127 NLMK Europe and NLMK USA have insurance programs which cover potential risks of loss to the Group, its employees, assets, operations, customers and reputation. All risks of direct physical loss or damage to property, including Business Interruption and Boiler & Machinery risks, are covered under a unified property insurance program. NLMK Europe and NLMK USA also have insurance in respect of workers’ compensation and employee healthcare, as well as vehicle, management, strict liability and environmental liability insurance.

Litigation On March 31, 2011 the International Commercial Arbitration Court (ICAC) of the Chamber of Commerce and Industry of the Russian Federation rendered an award in favor of Mr. Nikolay Maximov, the minority shareholder of OJSC Maxi-Group, against NLMK, in connection with proceedings brought by Mr. Maximov relating to the acquisition by NLMK of a controlling interest in OJSC Maxi-Group from Mr. Maximov pursuant to a share purchase agreement dated November 22, 2007 between Mr. Maximov and NLMK. The order of the ICAC required NLMK to pay Mr. Maximov RUB 8.9 billion (or $313.1 million), representing the remainder of the purchase price alleged to be due by NLMK under the terms of the share purchase agreement as calculated by the ICAC panel, plus RUB 638 million (or $22.4 million) of accrued interest. On April 7, 2011, NLMK applied to the Moscow Arbitrazh Court to have the ICAC arbitral award set aside. Following a hearing, on June 21, 2011 the Moscow Arbitrazh Court ruled to set aside the ICAC arbitral award. The ruling to set aside the award was based on several grounds, including violation of public policy, lack of jurisdiction and breach of due arbitral procedure. Following appeals by both Mr. Maximov and NLMK to the Moscow District Federal Arbitrazh Court, on September 26, 2011 the Moscow District Federal Arbitrazh Court dismissed both appeals and agreed with the Moscow Arbitrazh Court Ruling to set aside the ICAC arbitral award, ruling that all grounds supporting the decision of the first instance court were reasonable and also finding that by violating the due arbitration procedure the arbitrators had violated fundamental principles of independency and impartiality. On November 10, 2011, Mr. Maximov appealed both the Ruling of Moscow Arbitrazh Court and the Decision of Moscow District Federal Arbitrazh Court to the Supreme Arbitrazh Court of Russian Federation. Mr. Maximov also filed a separate complaint with the Constitutional Court of Russian Federation to declare the provisions of the Arbitrazh Procedural Code of Russian Federation that provide for the non-arbitrability of corporate disputes and that give rise to one of the bases on which the ICAC arbitral award was set aside as unconstitutional. On December 21, 2011, the Constitutional Court of Russian Federation rejected Mr. Maximov’s complaint and, on January 30, 2012, a panel of three judges of the Supreme Arbitrazh Court of Russian Federation dismissed Mr. Maximov’s appeal and refused to refer the case to the Presidium of Supreme Arbitrazh Court of Russian Federation for hearings and review. On June 9, 2012, Mr. Maximov filed a further complaint with the Constitutional Court of Russian Federation which in substance repeats the arguments made in his previous complaint rejected on December 21, 2011 and making further arguments challenging the grounds on which the ICAC arbitral award was set aside. On July 17, 2012, this complaint was rejected by the Constitutional Court of the Russian Federation. Following the ICAC decision, and notwithstanding the decision by the Moscow Arbitrazh Court setting the award aside, Mr. Maximov has sought to enforce the ICAC award against NLMK’s assets located in various jurisdictions outside Russia, including the Netherlands, Luxembourg and France, and has brought attachment proceedings in Cyprus. In April 2011, the Amsterdam District Court imposed a pre-judgment attachment on all shares in NLMK International B.V. On November 17, 2011, the Amsterdam District Court dismissed Mr. Maximov’s request to enforce the ICAC award in the Netherlands. Mr. Maximov has appealed this decision to the Amsterdam Appellate Court, which is considering the appeal. On June 20, 2012, the Court of Luxembourg dismissed an appeal by Mr. Maximov that sought to freeze the shares of SIF, the joint venture with the Duferco Group which the Group acquired in July 2011, and a case on the merits of claims made by Mr. Maximov against NLMK International in Luxembourg was dismissed on procedural grounds. On November 14, 2011, the Nicosia (Cyprus) Court dismissed attachment proceedings against property of Novexco (Cyprus), NLMK’s affiliated trading company, in Cyprus. On May 16, 2012, in connection with a proceeding brought by Mr. Maximov on an ex parte basis, a French judge issued an order recognizing the ICAC award and making it enforceable in France. On August 16, 2012, NLMK appealed this decision, which prevents the enforcement of the ICAC award in France while the appeal is

128 pending. There can be no assurance that Mr. Maximov will not continue to seek to enforce the ICAC award against NLMK’s assets located outside of Russia. The parties have brought other claims and actions in relation to this dispute and it is likely that further actions will be brought in the future. For instance, NLMK has commenced an action in the Moscow Arbitrazh Court seeking to declare the November 22, 2007 share purchase agreement and the share purchase transaction documented by it void and the restitution of the advance in favor of NLMK, or alternatively seeking recovery from Mr. Maximov for unjust enrichment, in that the market price for the shares purchased from Mr. Maximov was allegedly less than the advance paid for such shares. This case is still pending. In addition, on December 6, 2012, NLMK received a new claim filed by Mr. Maximov with the ICAC, seeking approximately RUB 16.3 billion purportedly owed to him for the purchase of the OJSC Maxi-Group shares under a 2007 Shareholders’ Agreement between the parties. In January 2013, Mr. Maximov filed a derivative action making similar claims with the Moscow Arbitrazh Court. NLMK intends to contest these claims vigorously. In August 2011, the Moscow Arbitrazh Court recognized OJSC Maxi-Group as bankrupt. Management of the Group concluded that this bankruptcy procedure resulted in the loss of control of OJSC Maxi-Group and therefore deconsolidated this entity from the date of the court decision, resulting in a net loss on investments of $26,830 thousand. See Note 13 to the Annual Financial Statements. Save as disclosed above, there are no governmental, legal or arbitration proceedings nor, so far as NLMK is aware, are any governmental, legal or arbitration proceedings pending or threatened, which may have, or have had in the 12 months preceding the date of this document, significant effects on NLMK’s or the Group’s financial position or profitability.

129 MANAGEMENT AND CORPORATE GOVERNANCE Board of Directors The Board of Directors is responsible for general management matters, with the exception of those matters designated by law and NLMK’s charter as being the exclusive responsibility of the General Meeting of Shareholders. The Board of Directors currently consists of nine members. Three members of the Board of Directors are independent directors in accordance with the criteria set out in the Russian Federal Law ‘‘On Joint Stock Companies’’ No. 208-FZ dated 26 December 1995, as amended (the ‘‘Joint Stock Companies Law’’) and NLMK’s Corporate Governance Code, which differ in certain respects from the criteria for independent directors that are set out in the U.K. Corporate Governance Code. Those directors are referred to as independent directors. The table below shows the current members of the Board of Directors. All of the current directors were elected on May 30, 2012 and their terms expire on the date of the next annual shareholders’ meeting. The business address for all directors is Pl. Metallurgov 2, Lipetsk 398040, Russian Federation.

Name Year of Birth Position Mr. Vladimir Lisin ...... 1956 Chairman of the Board of Directors, Chairman of the Human Resources, Remuneration and Social Policies Committee and Chairman of the Strategic Planning Committee Mr. Vladimir Skorokhodov 1951 Director and Deputy Chairman of the Board of Directors Mr. Oleg Bagrin ...... 1974 Director Mr. Karl Doering ...... 1937 Director Mr. Nikolai Gagarin ..... 1950 Director Mr. Karen Sarkisov ...... 1963 Director Mr. Benedict Sciortino. . . 1950 Director (Independent) and Chairman of the Audit Committee Mr. Franz Struzl ...... 1942 Director (Independent) Mr. Helmut Wieser ...... 1953 Director (Independent) Mr. Vladimir Lisin Chairman of the Board of Directors since 1998. Member of the Board of Directors since 1996. Graduated from the Siberian Metallurgical Institute. In 1990, graduated from the Moscow Higher School of Commerce. In 1992, graduated from the Academy of National Economy under the Russian Government, Moscow in Economics and Management. PhD, Tech; PhD, Economics; Professor, Department of Market and Economy Issues, Academy of National Economy. Winner, USSR Council of Ministers Prize for Science and Technology. Honorary Metallurgist of the Russian Federation. Knight of the Order of Honor. Started career in 1975. Worked at Tulachermet, rising from assistant steelmaker to shop manager. From 1986, worked as Deputy Chief Engineer, and Deputy CEO of the Karaganda Steel Plant. Member of the Boards of Directors of several leading Russian steel companies since 1993. Mr. Vladimir Skorokhodov Deputy Chairman of the Board of Directors. Member of the Board of Directors since 1996. Graduated from Moscow Institute of Steel and Alloys in 1973. In 1976, completed post-graduate studies and obtained a PhD, Tech. (1991). Professor. Holder of National Prize for Science and Technology. Author of six books and holder of 158 patents. Between 1977 and 1991, worked as a researcher, head of laboratory, Deputy Director of the Bardin Central Institute of Ferrous Metallurgy, Moscow. Between 1992 and 1994, worked as Chief Expert in the Ministry of Industry and the Ministry of Economy of the Russian Federation. Mr. Oleg Bagrin Member of the Board of Directors since 2004. Holds a graduate degree in Operations Research and a post-graduate degree in Economics from State Management University, Moscow and a degree in Business Administration from the University of Cambridge. Member of the Strategic Planning Committee and President (Chairman of the Management Board). Board member of a number of NLMK subsidiary companies, including NLMK International B.V. (Netherlands), NLMK Pennsylvania Corp., NLMK Indiana LLC, Sharon Coating LLC. (USA). Chairman of the Board of Libra Capital, a Moscow- based investment management company. Board member of Freight One, a railroad transportation company. Mr. Karl Doering Member of the Board of Directors since 2006. Graduated from the Moscow Institute of Steel and Alloys. Post-graduate degrees in Economics and Engineering from the Moscow Institute of Steel and Alloys and Hochschule fur¨ Okonomie¨ Berlin. From 1967 to 2000, held senior positions in metallurgical

130 companies in the German Democratic Republic and subsequently the Federal Republic of Germany. From 1979 to 1985, Deputy Minister of the Mining, Metals and Potassium Industries of the German Democratic Republic. Until 2002, Chief Representative for Central and Eastern Europe at USINOR. Managing Director of PROJECT CONSULTING. Mr. Nikolai Gagarin Member of the Board of Directors since 2001. Graduated from Moscow State University, majored in Law. Professional experience: since 2003, Chairman of Reznik, Gagarin and Partners Law Offices. Managing Partner since 1999. Merited Lawyer of Russia. Mr. Karen Sarkisov Member of the Board of Directors since 2010. Graduated from Tashkent State University in 1986, majored in Oriental History. From the early 1990s to 2008, held various executive offices in metals trading companies. In 2006 to 2007, Chairman of VIZ-Stal steel mill, Russia. Adviser to the Chairman of the Board of Directors since 2009. Mr. Benedict Sciortino Member of the Board of Directors since 2012. Serves as a director of several operating companies, NLMK Pennsylvania Corp., Sharon Coating and NLMK Indiana LLC. Graduated from Queens College, New York and received JD and LLM degrees from New England School of Law, Boston, MA, and New York University Law School, New York, respectively. From 1977 to 1995, worked as an attorney-at-law and a partner with Baker & McKenzie, New York. Joined the Duferco Group in 1995. Managing Director of Duferco S.A. responsible for Duferco Group North American and South African business, as well as trading operations, finance and legal matters, mergers and acquisitions. Mr. Franz Struzl Member of the Board of Directors since 2011. Graduated from the University of Economics, Vienna in 1964. Joined Alpine Steelgroup, later Voestalpine AG, Austria., in 1967. In 1981, appointed CFO before becoming CEO of Voestalpine Long Products Group and a member of the Executive Board in 1991. From 1995 until 2001, served as Vice Chief Executive Officer of the Group. In 2001, appointed as CEO and Chairman of Voestalpine Group. Held those positions until 2004, when became CEO of Voestalpine, Brazil—Villares Metals, remaining there until 2010. Mr. Helmut Wieser Member of the Board of Directors since 2011. Received a Master’s degree in Mechanical Engineering and Economics from the University of Graz in 1981. Professional experience: serves on the Board of Governors of the International Graduate University in Washington D.C. on Capitol Hill. Until 2011, was an Executive VP and Group President of Alcoa, and oversaw Alcoa’s businesses in the Asia Pacific region. Before that, worked for Austria Metal Group for 10 years, including as executive board member and COO. Earlier, held several senior positions with Voestalpine, including President of Voestalpine, Venezuela.

Management Board The Management Board is NLMK’s collective executive body and is appointed by the Board of Directors. The Management Board is principally responsible for the day-to-day management of the Group’s business. The President (Chairman of the Management Board) exercises executive authority over all activities, except for issues assigned to the exclusive competence of the General Meeting of Shareholders or the Board of Directors. An Extraordinary General Meeting of NLMK’s shareholders was held on October 25, 2012 at which Mr. Oleg Bagrin was elected as the new President (Chairman of the Management Board). The table below shows the current members of the Management Board. The business address for all members of the Management Board is Pl. Metallurgov, 2, Lipetsk 398040, Russian Federation.

Name Year of Birth Position Mr. Oleg Bagrin ...... 1974 President (Chairman of the Management Board) Mr. Dmitry Baranov ..... 1968 Vice-President, Sales Mr. Alexander Burayev . . . 1963 Director, Long Products and Metalware Mr. Sergey Filatov ...... 1959 Managing Director Mr. Grigory Fedorishin . . . 1979 Vice-President, Chief Financial Officer Mr. Brijesh Garg ...... 1964 Vice President, Procurement Mr. Alexander Gorshkov . . 1961 Vice President, Head of Iron Ore Division Mr. Yuri Larin ...... 1952 Vice-President, Development and Environment Mr. Alexander Sapronov . . 1953 Vice President, Logistics Mr. Alexander Saprykin . . 1967 Vice-President, Head of Coal Division Mr. Stanislav Tsyrlin ..... 1968 Vice-President, HR and Management System

131 Mr. Oleg Bagrin Member of the Board of Directors since 2004. Holds a graduate degree in Operations Research and a post-graduate degree in Economics from State Management University, Moscow and a degree in Business Administration from the University of Cambridge Board member of a number of NLMK subsidiary companies, including NLMK International B.V. (Netherlands), NLMK Pennsylvania Corp., NLMK Indiana LLC, Sharon Coating LLC. (USA). Chairman of the Board of Libra Capital, a Moscow-based investment management company. Board member of Freight One, a railroad transportation company. Mr. Dmitry Baranov Vice-President, Sales. Graduated from the Moscow Aviation Institute and the Finance Academy under the Russian Government. Served as Sales Director at NLMK Trading House from 2004 to 2006. Between 2000 and 2004, worked as an expert in the Domestic Market Analysis Division at LLC Rumelco, and later became head of the same division. Prior to that, served as a sales manager for a group of trading companies from 1999 to 2000. Mr. Alexander Burayev Director, Long Products and Metalware. Holds a master’s degree with a major in Steelmaking and Welding Technologies from the Lipetsk Technical Institute. Between 2002 to 2007, worked as Head of Cold Rolled and Coated Flats Shop at the Lipetsk plant. Between 2007 and 2011, served as Head of Production, Operations Department. Mr. Sergey Filatov Managing Director. Graduated from the Moscow Institute of Steel and Alloys, holds a Ph.D. (Tech.), and is an Honorary Metallurgist of Russia. From 2009 to 2012, he served as Chief Engineer at NTMK. He has been with NLMK since October 2012, serving as Deputy Senior Vice President— General Director for Production and Technology prior to his appointment as Managing Director in January 2013. Mr. Grigory Fedorishin Vice-President, Chief Financial Officer. Between 2009 and 2011, worked as an investment manager at Libra Capital, a Moscow-based investment management company. Between 2001 and 2009, worked for PricewaterhouseCoopers consulting company where he held various positions, including as a director of its business restructuring practice. Graduated from the Academy of Finance, Moscow. Holds a master’s degree in Business Administration from INSEAD Business School (France & Singapore). Member of the Association of Certified Financial Analysts (CFA). Mr. Brijesh Garg Vice President, Procurement. Started his career in 1985 with Tata Steel, India as an Industrial Engineer and moved through various positions within the company. Worked at other steel plants, including New Zealand Steel and ArcelorMittal in Kazakhstan and Ukraine. Has 14 years of experience in supply chain management and business processes re-engineering in the steel industry and 13 years of experience in industrial engineering. Holds a Bachelor of Engineering degree with a major in Industrial Engineering and a CPIM certification from the American Production and Inventory Control Society (APICS). Certified SAP Solution Consultant. Mr. Alexander Gorshkov Vice-President, Head of Iron Ore Division. Graduated from the Novosibirsk Electro-Technical Institute. General Director of Stoilensky since 2004. From 2003 to 2004, worked as Deputy Director of the Lipetsk branch of LLC Rumelco. From 1999 to 2003, served as General Director of Dolomit. Mr. Yuri Larin Vice-President, Development and Environment. Graduated from Voronezh Polytechnic Institute. PhD, Tech. From 2006 to 2007, Vice-President, Technology and Environment. Prior to that, Director of the NLMK Engineering Center from 1999 to 2006, and, from 1996 to 1999, worked as Deputy Director of NLMK’s Central Laboratory in charge of technology. Mr. Alexander Sapronov Vice President, Logistics. From 2009 to January 2012, served as the General Director of NTK. Prior to that, served as the General Director for Strategy and Corporate Development at Freight One and Vice-President at Rosneft. Graduated from the All-Union Correspondence Law Institute and the Russian Management Academy. Holds a master’s degree in Business Administration in Logistics and Supply Chain Management from the State University Higher School of Economics. Mr. Alexander Saprykin Vice-President, Head of Coal Division. Graduated from the Moscow Mining Institute. From 2006 to 2007, served as Vice-President, Head of Iron Ore Division. From 2002 until 2006, headed the Raw Materials Market Department at LLC Rumelco, and served as General Director of RUDPROM between 1998 and 2001. In 1997 and 1998, General Director of VIZEL. Prior to that, worked as chief specialist for Metallurg CJSC in 1996 to 1997. Mr. Stanislav Tsyrlin Vice-President, HR and Management System. Graduated from the Moscow Institute of Physics and Technology, Stanford University. Professional experience: from 2004 to 2006, served as

132 Director for Strategy and Management Systems, having previously worked for LLC Rumelco from 2003 to 2004. Prior to that, Mr. Tsyrlin worked for the Boston Consulting Group from 1996 to 2003, serving initially as a consultant, then as a project manager before being appointed Deputy Director.

Remuneration of Directors and Management The aggregate amount of remuneration paid by NLMK to the Directors and members of the Management Board as a group for services as Directors of NLMK and Management, respectively, during the year ended December 31, 2011 was approximately $1,800,000 and $5,700,000, respectively, in salary and bonuses.

Interests of Directors and Management As of the date of this Prospectus, Mr. Vladimir Lisin, the Chairman of the Board of Directors, is the beneficial owner of 85.54% of NLMK’s share capital. See ‘‘Principal Shareholders’’. In addition, members of the Board of Directors (other than Mr. Lisin) and Management hold in aggregate approximately 3.18% of NLMK’s share capital.

Corporate Governance As a public company, NLMK consistently strives to improve its standards of corporate governance, to improve management efficiency and to support the sustainability of its business model and long-term economic growth. As part of NLMK’s corporate governance measures, the Board of Directors has established the following three committees:

Audit Committee The Audit Committee is chaired by one of the independent Directors, Mr. Benedict Sciortino, and also includes Directors, Mr. Karen Sarkisov, Mr. Nikolai Gagarin, Mr. Karl Doering and Mr. Franz Struzl. This Committee drafts and submits to the Board of Directors recommendations regarding the efficient supervision of the financial and business activities of NLMK, including annual external audits of financial statements, the quality of services provided by the external auditor and compliance with the requirements for external auditor independence. In addition to the Audit Committee, NLMK maintains an Internal Audit Commission in accordance with the requirements of the Joint Stock Companies Law.

Strategic Planning Committee The Strategic Planning Committee is chaired by the Chairman of the Board of Directors, Mr. Vladimir Lisin and includes the President (Chairman of the Management Board), Mr. Oleg Bagrin, Director and Deputy Chairman of the Board of Directors, Mr. Vladimir Skorokhodov, the three independent Directors, Mr. Benedict Sciortino, Mr. Franz Struzl and Mr. Helmut Wieser, and Directors, Mr. Karl Doering and Mr. Karen Sarkisov, as well as the Advisor of the Chairman of the Board of Directors, Mr. Alexey Lapshin. This Committee drafts and submits recommendations to the Board of Directors regarding NLMK’s long-term development strategy, areas of activity and projects that ensure the achievement of strategic objectives.

Human Resources, Remuneration and Social Policies Committee The Human Resources, Remuneration and Social Policies Committee is chaired by the Chairman of the Board of Directors, Mr. Vladimir Lisin, and includes Director and Deputy Chairman of the Board of Directors, Mr. Vladimir Skorokhodov, the President (Chairman of the Management Board), Mr. Oleg Bagrin, member of the Management Board, Mr. Stanislav Tsyrlin, the Advisor of the Chairman of the Board of Directors, Mr. Alexey Lapshin, and former member of the Management Board, Mr. Sergei Melnik. The primary purpose of this Committee is the development of draft guidance regarding NLMK personnel policies and remuneration policies for members of NLMK Management Board and the Internal Audit Commission. This Committee also reviews issues pertaining to company social policies, environmental safety and federal and municipal government relations.

133 PRINCIPAL SHAREHOLDERS The following table shows the name and shareholding of each registered shareholder of NLMK holding over 5% of its share capital as of the date of this Prospectus based on the information received from NLMK’s share registrar and as notified by those shareholders.

Percentage share in share capital Name of the registered shareholder (%) Fletcher Group Holdings Limited(1) ...... 85.54 Other ...... 14.46 Total ...... 100

(1) Mr. Vladimir Lisin, Chairman of the Board of Directors of NLMK, is the beneficial owner of Fletcher Group Holdings Limited. See ‘‘Management and Corporate Governance’’. Mr. Vladimir Lisin is the beneficial owner of NLMK. NLMK is not aware of any arrangements in existence as of the date of this Prospectus which could reasonably be expected to result in a change of control of NLMK.

134 RELATED PARTY TRANSACTIONS The following is a summary of the Group’s transactions with related parties for the nine months ended September 30, 2012 and 2011 and the years ended December 31, 2011, 2010 and 2009. Related parties relationships are determined with reference to ASC (Accounting Standards Codification) No. 850. For further details, see Note 24 to the Annual Financial Statements and Note 14 to the Interim Financial Statements included in this Prospectus.

Sales to and Purchases from Related Parties Sales Sales to SIF and one of its subsidiaries were $726.6 million, $777.6 million and $483.5 million for the years ended December 31, 2011, 2010 and 2009, respectively ($726.6 million in the nine months ended September 30, 2011). SIF was a joint venture established in 2006 between the Group and the Duferco Group. In July 2011, the Group increased its stake in SIF from 50% to 100% as part of the restructuring of SIF. See ‘‘—Common Control Transfers and Disposal of Investments’’. Sales to other related parties were $8.3 million and $9.9 million in the nine months ended September 30, 2012 and 2011, respectively, and $12.8 million, $13.6 million and $6.8 million for the years ended December 31, 2011, 2010 and 2009, respectively.

Purchases Purchases from a subsidiary of an associate of SIF were $1.0 million and $1.8 million in the years ended December 31, 2011 and 2010, respectively ($1.0 million in the nine months ended September 30, 2011). There were no such purchases for the year ended December 31, 2009. Purchases from companies under common control were $499.6 million and $265.0 million in the nine months ended September 30, 2012 and 2011, respectively, and $422.6 million, $37.4 million and $6.7 million for the years ended December 31, 2011, 2010 and 2009, respectively. The purchases in 2011 and the nine months ended September 30, 2012 comprised primarily the purchase of transportation services from NTK (following the disposal by the Group of its 100% interest in NTK to a related party in June 2011).

Financial Transactions Deposits and current accounts of Group companies in banks under significant influence of the Group’s beneficial owner (OJSC Bank ZENIT and OJSC Lipetskcombank) amounted to $110.6 million as of September 30, 2012 and $56.4 million, $94.1 million and $108.7 million as of December 31, 2011, 2010 and 2009, respectively. Related interest income from these deposits and current accounts was $1.0 million and $0.8 million for the nine months ended September 30, 2012 and 2011, respectively, and $0.9 million, $1.5 million and $1.9 million for the years ended December 31, 2011, 2010 and 2009, respectively. During the year ended December 31, 2010, a company under significant influence of the Group’s beneficial owner (OJSC Bank ZENIT) purchased bonds issued by NLMK in a total amount of $11.7 million (as of the date of issue). The carrying amount of loans to SIF, including interest accrued, was $515.3 million and $589.5 million as of December 31, 2010 and 2009, respectively. As of December 31, 2010 and 2009, the Group had issued guarantees for SIF and its subsidiaries amounting to $217.5 million and $201.9 million, respectively. These guarantees were mostly issued in favor of banks.

Common Control Transfers and Disposal of Investments In June 2011, NLMK completed the disposal of 100% of its interest in NTK to UCL Holding, an entity under common control, for a cash consideration of $325 million. See ‘‘Operating and Financial Review— Significant Factors Affecting the Group’s Results of Operations—Acquisition and Disposals—Disposal of interest in NTK’’.

Contributions to Non-Governmental Pension Fund and Charity Fund Total contributions to a non-governmental pension fund and charity fund amounted to nil, $3.5 million and $3.3 million in 2011, 2010 and 2009, respectively. The Group has no long-term commitments to provide funding, guarantees, or other support to the abovementioned funds.

135 REGULATORY MATTERS Regulation of the Russian Steel Industry The Russian Federation has not enacted any specific legislation governing the operation of the steel industry and the business of steel-manufacturing companies. The production, sale and distribution of steel in the Russian Federation is regulated by general civil legislation and administrative and special legislation relating to quality standards, industrial safety, environmental, employment and other rules. The Ministry of Industry and Trade of the Russian Federation on March 18, 2009 approved the ‘‘Strategy for the Development of the Metal Manufacturing Industry of the Russian Federation for the Period until 2020’’ (the ‘‘Strategy’’). The Strategy supersedes the ‘‘Strategy for the Development of the Metal Manufacturing Industry of the Russian Federation for the Period till 2015’’ dated May 29, 2007. The Strategy, among other things, outlined the key trends and factors relevant for the development of national ferrous and non-ferrous metallurgy, set out three stages for the development of Russian metallurgy (2009-2011, 2012-2015 and 2016-2020) and determined that innovative growth would be the priority for improving competitive strength of national manufacturers. The Federal Law ‘‘On Technical Regulation’’ No. 184-FZ dated December 27, 2002, as amended (the ‘‘Technical Regulation Law’’), introduced a new regime for the development, enactment, application and enforcement of mandatory rules applicable to products, manufacturing, storage, transportation, sales and certain other operations and processes, as well as new regulations relating to the quality of products and processes, including technical regulations, standards and certification. Following their adoption, the technical regulations will replace the previously adopted state standards (the ‘‘GOSTs’’). However, the Russian Government has not yet implemented most of the technical regulations, and, in the absence of such technical regulations, the existing federal laws and regulations, including GOSTs, that prescribe rules for different products and processes, remain in force to the extent that they protect health, property, the environment or consumers. In any event, the federal authority has declared GOSTs and interstate standards adopted before July 1, 2003 to be the applicable national standards. Under the Technical Regulation Law, technical rules and regulations relating to industrial safety and environmental protection can be enacted only by federal laws, decrees of the Russian President, resolutions of the Russian Government and by-laws adopted by state authorities responsible for technical regulation. In those cases where the Technical Regulation Law provides for mandatory confirmation of product conformity to the established technical regulations (standards), certain Group companies are obliged to obtain certificates of compliance evidencing that their products meet the requirements of the technical regulations, standards, codes of practice or terms and conditions of contracts. Where Russian laws and regulations relating to industrial safety provide for mandatory issuance of permits to use technical equipment at hazardous production facilities, certain Group companies are obliged to obtain the required permits which prove that their products meet the relevant industrial safety requirements. Where certification is not mandatory, a company may elect for voluntary certification by applying for a compliance certificate from the relevant authorities. Following the issuance of that certificate, the applicant has the right to use the relevant compliance mark on its products.

Federal, regional and local regulatory authorities governing the steel industry At the federal level, regulatory authority over the steel industry is divided primarily between the Ministry of Industry and Trade and the Ministry of Natural Resources and Ecology. The Ministry of Industry and Trade is responsible for the development of governmental policy in respect of, and regulation of, the steel industry. In addition, it regulates certain aspects of the export from and import into Russia of steel products. The Ministry of Natural Resources and Ecology is responsible for the development of governmental policy in respect of, and regulation of, natural resources, including subsoil. In particular, the Ministry of Natural Resources and Ecology passes regulations, among other things, setting: • the safety requirements in respect of exploration and the development of natural resources; • the order of re-issuance and transfer of subsoil licenses; • the rules governing access to geological information belonging to the state; and • the accounting rules in respect of on-balance sheet natural resources belonging to the state and classification and evaluation of natural resources.

136 The federal ministries in Russia are not responsible for compliance control or management of state property and provision of services, which are directed by the federal services and the federal agencies, respectively. The federal services and agencies that are relevant to the Group’s activities include: • the Federal Service for Environmental, Technological and Nuclear Supervision (‘‘Rostekhnadzor’’), which sets procedures for, and oversees compliance with, industrial safety and environmental rules and issues licenses for certain industrial activities and activities relating to safety and environmental protection; • the Federal Agency for Subsoil Use (‘‘Rosnedra’’), which organizes auctions and issues licenses for subsoil use and approves design documentation for subsoil production activities; • the Federal Agency for Technical Regulation and Metrology, which determines and oversees levels of compliance with obligatory state standards and technical regulations; and • the Federal Service for the Supervision of the Use of Natural Resources (‘‘Rosprirodnadzor’’), which exercises supervision over the observance of environmental legislation (including legislation relating to handling of hazardous wastes), controls geological exploration, the rational use and protection of subsoil (including compliance with the relevant terms and conditions of subsoil licenses) and exercises the land control. Aside from the above-mentioned federal executive bodies, which are directly involved in regulating and supervising the steel sector in Russia, there are a number of other federal regulators that, together with their structural subdivisions, have authority over general issues relevant to the Russian steel industry, such as defense, internal affairs, security, border services, justice, tax enforcement, rail transport and other matters. Generally, regional and municipal authorities with jurisdiction over the specific territory in which a steel- producing enterprise is located have authority in certain matters, in particular with regard to land-use allocations.

Licensing of Operations The Group is required to obtain numerous licenses, authorizations and permits from Russian governmental authorities for its operations. The Federal Law No. 99-FZ ‘‘On Licensing of Certain Types of Activities’’ of May 4, 2011, as amended (the ‘‘Licensing Law’’), as well as other laws and regulations, set forth the activities which are subject to license and establishes the procedures for issuing licenses. In particular, some of the Group’s Russian companies need to obtain licenses, permits and approvals of executive authorities to carry out certain activities, including, among others: • the use of subsoil, which is described in more detail below in ‘‘—Subsoil Licensing’’; • the exploitation of chemically hazardous, explosive and flammable industrial objects; • the deactivation and disposal of waste of hazard classes I to IV; and • the collection, storage, processing and sale of ferrous steel scrap. Under the Licensing Law, licenses are issued for an unlimited term. Nevertheless, licenses can be suspended by the licensing authority and/or revoked by court order for non-compliance. Licensing regulations and the terms of licenses and permits require compliance with numerous industrial standards. In particular, the Group must employ qualified personnel, provide training, maintain certain equipment and a system of quality controls, monitor operations, maintain and make appropriate filings and, upon request, submit specified information to the licensing authorities that control and inspect their activities. However for some types of operations licenses are issued for a limited term (typically, 5 years). Nevertheless, licenses can be suspended and, in relation to licenses for the use of subsoil, cancelled by the licensing authority.

Subsoil Licensing In Russia, the mining of minerals requires a subsoil license with respect to an identified mineral deposit, as well as the right (through ownership, lease or other right) to use the land where such licensed mineral deposit is located. In addition, as discussed above, operating permits are required for all types of operations associated with subsoil use.

137 The licensing regime for the use of subsoil for geological research, exploration and production of mineral resources is established primarily by the Federal Law of the Russian Federation ‘‘On Subsoil’’ No. 2395-1 dated February 21, 1992, as amended (the ‘‘Subsoil Law’’). The procedure for subsoil use licensing, as well as certain rules in respect of the exploration and production of mineral resources, was established by Resolution of the Supreme Soviet of the Russian Federation on July 15, 1992, as amended (the ‘‘Licensing Regulation’’). There are several types of license applicable to the exploration, development and production of natural resources, including: • licenses for geological exploration and assessment of a subsoil plot (‘‘exploration licenses’’); • licenses for production of natural resources (‘‘production licenses’’); and • combined licenses for geological research, exploration, assessment and production of natural resources (‘‘exploration and production licenses’’). Pursuant to the Subsoil Law, the payment system for the use of subsoil currently consists of the following payment obligations: • one-off payments in cases specified in the license; • regular payments for subsoil use; • fees for the right to participate in tenders and auctions; and • other payments and fees set forth by the legislation of the Russian Federation on taxes and duties. The Subsoil Law contains a range of minimum and maximum rates of regular payments for the use of subsoil and the federal authorities have authority to set the rate for any particular license. The Russian Tax Code contains the relevant rates of mineral extraction tax and water extraction tax.

Issuance of licenses Subsoil licenses are generally issued by Rosnedra. Most of the currently existing production licenses owned by companies derive from (1) pre-existing rights granted during the Soviet era and up to the enactment of the Subsoil Law to state-owned enterprises that were subsequently reorganized in the course of post-Soviet privatizations; or (2) tender or auction procedures held in the post-Soviet period. The Subsoil Law and the Licensing Regulation contain the major requirements relating to tenders and auctions. In general, production licenses and combined licenses are currently issued by tender or auction. The tenders (auctions) for licenses in respect of subsoil deposits are conducted by special commissions of Rosnedra. While the auction or tender commission formed by Rosnedra must include a representative of the relevant region, the Subsoil Law no longer requires the separate approval of regional authorities in order to issue subsoil licenses. The Subsoil Law provides that, in a tender, the license should be awarded to the bidder which has submitted the most technically competent, financially attractive and socially and environmentally sound proposal that meets the relevant, published tender terms and conditions; and, in an auction, to the bidder which has offered the largest one-off payment for the use of the subsoil plot. In limited circumstances defined by law, production licenses may also be issued without holding an auction or tender, including, for instance, to holders of exploration licenses that discover natural resource deposits through exploration work at their own expense. Regional authorities may also issue production licenses for ‘‘common’’ mineral resources, such as clay, sand or limestone. A tender or auction in respect of subsoil plots of federal importance (as defined by Article 2.1 of the Subsoil Law) and in certain other cases is arranged by the Russian Government, and the Russian Government may set forth limitations for Russian legal entities with foreign shareholders to participate in the tenders and auctions in respect of subsoil plots of federal importance. Exploration licenses are generally awarded, without a tender or auction process, by a special commission formed by Rosnedra, which includes representatives of the relevant regional executive authority. The Ministry of Natural Resources and Ecology of the Russian Federation maintains an official list of deposits in respect of which exploration licenses can be issued. A company may obtain a license for geological exploration (to be conducted at the company’s own expense) of a deposit included in the above-mentioned list by filing an application with Rosnedra (or its regional department). The special commission decides whether to grant the license based upon the merits of the application, unless there is more than one

138 application with respect to the same deposit (in which case Rosnedra sets up an auction for an exploration and production license for the deposit).

Extension of licenses Under the Subsoil Law, as currently in effect, the maximum term of a regular geological research license is five years (although the maximum term of a license for geological research of subsoil plots under inland sea waters, territorial waters and continental shelf of the Russian Federation is 10 years), and Rosnedra may issue a production license and combined license for the useful life of a mineral reserves field, calculated on the basis of a feasibility study for exploration and production that ensures rational use and protection of the subsoil. The Subsoil Law permits a subsoil licensee to request an extension of a production license in order to complete production or vacate the land once the use of the subsoil is complete. In order to change any condition of a subsoil license, including extension of its term, a company should file an application with the federal authorities to amend the license. In practice, the factors that may affect a company’s ability to obtain approval for the amendment of a license include its compliance with the terms and conditions of the license and its management’s experience and expertise relating to subsoil issues, including experience in amending licenses.

Maintenance and termination of licenses A license granted under the Subsoil Law is generally accompanied by a licensing agreement. The licensing agreement sets out the terms and conditions for the use of the subsoil license. Currently, Rosnedra and the licensee are the only parties to license agreements. Licensing agreements for subsoil use identify the terms and conditions for the use of the subsoil, the rights and obligations of the licensee and the manager of the subsoil plot and the level of payments. Although most of the conditions set out in a license are based on mandatory rules, the parties may negotiate a number of provisions in a licensing agreement. Under a licensing agreement, the licensee makes certain environmental, safety and production commitments, including extracting annually an agreed target amount of reserves; conducting agreed mining and other exploratory and development activities; protecting the environment in the license areas from damage; providing geological information and data to the local authorities; submitting on a regular basis formal progress reports to regional authorities; making all obligatory payments when due and commitments with respect to social and economic development of the region. If the license holder fails to fulfill the license conditions, upon notice, the license may be terminated by the governmental authorities that issued the license. However, if a license holder cannot meet certain deadlines or achieve certain volumes of exploration work or production output as set forth in the license due to material changes in circumstances, it may apply to amend the relevant license conditions. The Subsoil Law and other Russian legislation contain extensive provisions for license termination. A licensee can be fined or the license can be limited, suspended or terminated for the reasons noted above, for repeated breaches of the law, upon the occurrence of a direct threat to the lives or health of people working or residing in the local area, or upon the occurrence of certain emergency situations. A license may also be limited, suspended or terminated for violations of ‘‘material’’ license terms. Although the Subsoil Law does not specify which terms are material, failure to pay subsoil taxes and failure to commence operations in a timely manner have been common grounds for suspension or termination of licenses. Consistent underproduction and failure to meet obligations to finance a project or to submit data reports (as required by law) would also likely constitute violations of material license terms. In addition, certain licenses provide that the violation by a subsoil licensee of any of its obligations may constitute grounds for limiting, suspending or terminating the license. If the licensee does not agree with a decision of the licensing authorities, including a decision relating to a license limitation, suspension or termination or the refusal to reissue an existing license, the licensee may appeal the decision through administrative or judicial proceedings. In certain cases of termination, the licensee has the right to attempt to cure the violation within three months of its receipt of notice of the violation. If the issue has been resolved within such a three-month period, no termination or other action may be taken. For the violation of license terms, the subsoil user can also be held administratively or criminally liable.

139 Licenses may be transferred only under certain limited circumstances that are identified in the Subsoil Law, including the reorganization of the license holder or in the event that an initial license holder transfers its license to a legal entity that has been established for the purpose of continuing operations at the relevant subsoil site and in which the initial license holder has an ownership interest of at least 50%, provided that the transferee possesses the equipment and authorizations necessary to conduct the exploration or production activity that is covered by the transferred license.

Land Use Rights Land use rights are needed and obtained for only the portions of the license area actually being used, including the plot being mined, access areas, and areas where other mining-related activity is occurring. Under the Land Code of the Russian Federation No. 136-FZ of October 25, 2001, as amended (the ‘‘Land Code’’), companies may have one of the following rights with regard to land in the Russian Federation: (1) ownership; (2) lease; (3) right of free use for a fixed term; or (4) right of perpetual (unlimited) use. Rights of perpetual (unlimited) use are now less common and are granted to a limited number of entities, including governmental and municipal institutions and federal public enterprises, and those companies that had obtained a right of perpetual use over land prior to the enactment of the Land Code were required, by July 1, 2012, either to purchase the land from, or to enter into a land lease agreement with, the relevant federal, regional or municipal authority owning the land. Those companies that have a right of perpetual use over land containing linear facilities (such as power transmission lines, communication lines, pipelines, railway lines, etc.) may either purchase such land or enter into a land lease agreement by January 1, 2015. Most land in the Russian Federation is owned by federal, regional or municipal authorities, which can sell, lease or grant other rights of use to third parties, including through public auctions or tenders. Under Russian federal laws, land that is owned by state or municipal authorities and is required for subsoil use is leased to subsoil users without holding an auction or a tender. The rights for areas required for subsoil use are typically granted upon the submission of a license, application and other relevant documents. Documents that grant surface rights generally require that the holder make lease payments and return the land plot to a condition sufficient for future use, at the license holder’s expense, upon the expiry of the permit. The Group’s mining subsidiaries generally have a property right to their land plots or a long-term lease. A land plot lessee has a priority right to enter into a new land lease agreement with a lessor upon the expiration of a land lease. In order to renew a land lease agreement, the lessee must apply to the lessor (usually state or municipal authorities) for a renewal prior to the expiration of the agreement. Any lease agreement for a period of one year or more must be registered with the relevant state authorities.

Environmental Considerations The Group is subject to laws, regulations and other legal requirements relating to the protection of the environment, including those governing the discharge of polluting substances into the air and water, the management and disposal of hazardous substances and wastes (including their neutralization, where applicable), the rehabilitation of the contaminated areas on the production sites, as well as the protection of natural environment. Issues of environmental protection in Russia are regulated primarily by the Federal Law ‘‘On Environmental Protection’’ No. 7-FZ of January 10, 2002, as amended (the ‘‘Environmental Protection Law’’), as well as by a number of other federal and regional legal acts.

Payments for negative impact on the environment The Environmental Protection Law establishes a ‘‘pay-to-pollute’’ regime administered by federal and local authorities. The Ministry of Natural Resources and Ecology of the Russian Federation formulates regulatory documents governing the permissible impact on the environment and the extraction of resources, while Rosprirodnadzor establishes limits on emissions and disposals of substances and waste. A company may obtain approval for exceeding these statutory limits from the federal or regional authorities depending on the type and scale of the environmental impact. As a condition for such approval, a plan for the reduction of emissions or disposals must be developed by the company and cleared with the appropriate governmental authority. Fees, as set forth in the Decree of the Russian Government No. 344 ‘‘On Rates of Payments for Pollutant Emissions into the Air by Stationary and Mobile Sources, Pollutant Disposals into Surface and Underground Waters, Disposal of Production and Consumption Waste’’ dated

140 June 12, 2003, are assessed on the sliding scale for both the statutory and individually approved limits on emissions and effluents and for pollution in excess of these limits. Under this sliding scale, the lowest fees are imposed for pollution within the statutory limits, higher fees are imposed for pollution within the individually approved limits and the highest fees are imposed for pollution exceeding such limits. Payments for negative impact on the environment do not relieve a company from its responsibility to take environmental protection measures and undertake restoration of the territory after the activities are completed.

Ecological approval The Federal Law dated November 23, 1995 No. 174-FZ ‘‘On Ecological Expert Examination’’, as amended (the ‘‘Ecological Examination Law’’), provides for mandatory ecological approval of certain documentation required for the implementation of certain types of business activities in order to prevent the negative impact of such activities on the environment, and the receipt of a positive conclusion of the state ecological expert examination comprises one of the key preconditions for financing and implementation of a relevant project. State ecological approval must be obtained from federal or regional authorities. Violation of the requirements of the Ecological Examination Law may result in administrative fines, civil liability (to compensate for damages and losses) and criminal liability as described below in ‘‘—Environmental liability’’.

Environmental protection authorities Rosprirodnadzor, Rostekhnadzor, the Russian Federal Agency on Water Resources, Rosnedra, Rospotrebnadzor, the Russian Federal Service for Hydrometrology and Environmental Monitoring and the Russian Federal Agency on Forestry (along with their regional branches) are primarily responsible for environmental control and the monitoring, implementation and enforcement of the relevant laws and regulations. The Russian Government and the Ministry of Natural Resources and Ecology are responsible for the development of regulatory documents in the sphere of environmental protection for coordinating the activities of the regulatory authorities in this area. The regulatory authorities, along with other state authorities, individuals and public and non-governmental authorities, also have the right to initiate lawsuits for the compensation of damage caused to the environment. The statute of limitations for such lawsuits is 20 years.

Environmental liability If the operations of a company violate environmental requirements or cause harm to the environment or any individual or legal entity, the environmental authorities may suspend these operations (for up to 90 days) or a court action may be brought to suspend or terminate these operations and require the company to remedy the effects of the violation. Any company that fails to comply with environmental regulations may incur administrative or civil liability, and its employees may be held disciplinary, administratively or criminally liable. A court may impose an obligation to conduct reclamation measures pursuant to a plan of restorative works. The Group has, in the past, been subject to fines and, in some cases, court actions in relation to breaches of environmental regulations. Although none of these court actions and fines have had, individually or in aggregate, a material adverse effect on the business and performance results of the Group, its business and results of operations, there can be no assurance that any such court actions or fines will not have a material adverse effect on the Group in the future.

Reclamation Reclamation activities such as re-cultivation, restoration, regeneration and other methods of rehabilitation are prescribed in the Basic Regulations on Land Reclamation, Removal, Preservation, and Rational Use of the Fertile Soil Layer, approved by Order No. 525/67 of December 22, 1995 of the Ministry for the Protection of the Environment and Natural Resources of the Russian Federation and the Russian Committee for Land Resources and Land Use. In general, reclamation activities of the Group involve both a technical stage and a biological stage. In the first, technical stage, the Group performs landscaping operations (backfilling of the pits, grades and terraces mound slopes, leveling of the surface of the mounds, and adding clay rock on top for greater adaptability of young plants). In the second, biological stage, the Group plants conifers, such as pine, larch or cedar, on horizontal and gently sloping surfaces, as well as shrubs and bushes to reinforce inclines. The stipulations of the Russian environmental regulations do not require the reclaimed sites to achieve the approximate original contour of the property as is required, for example, in the United States.

141 Environmental protection programs The Group has been developing and implementing environmental protection programs. The Group’s programs include measures to achieve compliance with limits imposed on air and water pollution and storage of industrial waste, in particular the introduction of environmentally friendly industrial technologies, the construction of purification and filtering facilities, the repair and reconstruction of industrial water supply systems, the installation of metering systems, reforestation and the treatment of water and industrial waste recycling.

Health and Safety Due to the nature of the Group’s business, much of its activity is conducted at industrial sites by large numbers of workers, and workplace safety issues are of significant importance to the operation of these sites. The principal law regulating industrial safety is the Federal Law dated July 21, 1997 ‘‘On Industrial Safety of Dangerous Industrial Facilities’’ No. 116-FZ, as amended (the ‘‘Safety Law’’). The Safety Law applies, in particular, to industrial facilities and sites where certain activities are carried out with respect to the usage, production, processing, storage, transportation or utilization of fuels and explosive, toxic and environmentally dangerous substances. The Safety Law also contains a list of dangerous substances, and, in the event of critical concentration of these dangerous substances at the industrial facility or site, a company is obliged to adopt an industrial safety declaration. Other Russian regulations address safety rules for coal mines, the production and processing of ore and alloy production. Additional safety rules also apply to certain industries, including metallurgical and coke chemical enterprises, and the foundry industry. Any construction, reconstruction, liquidation or other activity in relation to regulated industrial sites is subject to a state industrial safety review. Any deviation from project documentation in the process of construction, reconstruction and liquidation of industrial sites is prohibited, unless the revised documentation is examined by a state expert and approved by Rostekhnadzor. Companies that operate regulated industrial sites have a wide range of obligations under the Safety Law and the Labor Code of the Russian Federation (the ‘‘Labor Code’’). In particular, they must limit access to such sites to qualified specialists, maintain industrial safety controls and carry mandatory civil liability insurance for damage resulting from accidents. The Safety Law also requires these companies to enter into contracts with professional accident-rescue service companies or create their own accident- rescue services in certain cases, conduct personnel training programs, create systems to cope with and inform Rostekhnadzor of accidents and maintain these systems in good working order. In certain cases, companies operating regulated industrial sites must also prepare declarations of industrial safety that summaries the risks associated with operating such sites and the measures that the company has taken and will take to mitigate such risks. Such declarations must be adopted by the chief executive officer of the company, who is personally responsible for the completeness and accuracy of the data contained therein. Both an industrial safety declaration and an industrial safety expert review are required for the issuance of a license permitting the operation of a dangerous industrial facility. In the case of an accident, a special commission led by a representative of Rostekhnadzor conducts a technical investigation of the cause. The company operating the industrial facility where the accident took place bears all costs of such investigation. Rostekhnadzor has the right to access industrial sites and may inspect documents to ensure a company’s compliance with safety rules. Rostekhnadzor may also impose administrative liability on a company or its officials, as well as suspend a company’s operations. Any company or individual violating industrial safety rules may incur administrative and/or civil liability and individuals may also incur criminal liability. A company that violates safety rules in a way that negatively impacts the health of an individual may also be liable to compensate the individual for lost earnings and health-related damages and, in certain cases, its activity may be suspended.

Regulation of Competition The antimonopoly regulation of the Russian Federation is based on the Competition Law, and other federal laws and regulations governing antimonopoly issues. Compliance with antimonopoly legislation in the Russian Federation is monitored by the FAS. As part of its competition monitoring activities, the FAS keeps a register of companies which have more than a 35%

142 share in a particular goods market. As a major Russian steel producer, NLMK appears on the register in relation to certain types of steel products. For some of the products that the Group sells, its market share in Russia exceeds 65%, which means that it is deemed to have a dominant position in those markets. Under the current Russian competition law, companies entered on the register and having a dominant position are prohibited from, among other things, entering into agreements which have the effect of price fixing or which otherwise have the effect of limiting competition, artificially limiting the supply of goods, maintaining high or low monopolistic prices and refusing without justification to sell goods to third parties. Relevant persons must obtain prior anti-monopoly clearance from the FAS in respect of the acquisition of: (1) more than 25% of the voting shares in a Russian joint stock company (or a one-third interest in a Russian limited liability company) and any subsequent increase of that stake to more than 50% or more than 75% of the voting shares (or a one-half and two-third interest in a Russian limited liability company); (2) subject to certain exceptions, fixed production assets or goodwill of a company located in Russia in an amount exceeding 20% of the aggregate balance sheet value of all fixed production assets and goodwill of such company; (3) the right to control the business activities of another Russian company or perform the functions of its executive body; or (4) more than 50% of the voting shares (or a 50% interest) in a company registered outside Russia, which delivered goods to the Russian territory in the amount exceeding RUB 1 billion within the previous year, or other right to control its business activities or perform the functions of its executive body. Certain other transactions are also subject to a prior anti-monopoly clearance from the FAS. Any of the above acquisition transactions would require prior approval by the FAS if according to the latest balance sheet: (1) the aggregate asset value of a purchaser (and its group) together with the target (and its group) exceeds RUB 7 billion, or the total revenues of such persons for the preceding calendar year exceed RUB 10 billion and (2) the total asset value of the target (and its group) exceeds RUB 250 million. In addition, prior approval is required if any of the purchaser (or its group entity) or the target (or its group entity) is included in the register maintained by the FAS of companies with a share in excess of 35% in a particular commodity market (both federal and regional). Mergers and acquisitions within the same group are exempt from pre-transactional clearance by the FAS, subject to compliance with certain reporting requirements. The same acquisition transactions outlined above would require subsequent notification (within 45 days post-closing) to the FAS if according to the latest balance sheet the aggregate asset value or total revenues of a purchaser (and its group) and a target (and its group) for the preceding calendar year exceeds RUB 400 million and, at the same time, the total asset value of the target (and its group) according to the latest balance sheet exceeds RUB 60 million. The Competition Law expressly provides for extraterritorial application to transactions which are made outside of the Russian Federation but lead, or may lead, to the restriction of competition in the Russian Federation and which relate to assets located in the Russian Federation or to the shares (or participation interests) in Russian companies or rights in relation to such companies. Under the Competition Law, if an acquirer has acted in violation of the merger control rules and acquired, for example, shares without obtaining the prior approval of the FAS, the transaction may be invalidated by a court order initiated by the FAS, provided that such transaction has led or may lead to the restriction of competition, for example, by means of strengthening of a dominant position in the relevant market. More generally, Russian legislation provides for civil, administrative and criminal liability for the violation of antimonopoly legislation.

Regulation of Natural Monopolies Federal Law No. 147-FZ on Natural Monopolies of 17 August 1995, as amended (the ‘‘Natural Monopolies Law’’) defines a ‘‘natural monopoly’’ as a condition of the commodities market where a demand for particular products or services is satisfied more effectively in the absence of competition and where the monopoly product or service cannot be easily replaced. NLMK is entered on the list of natural monopolies in respect of gas pipeline transportation in Lipetsk. Consequently, NLMK’s operation of this facility is subject to the terms of the Natural Monopolies Law, Federal Law No. 69-FZ ‘‘On Gas Supply in the Russian Federation’’ dated March 31, 1999 (as amended) and Resolution of the Government of the Russian Federation No. 1021 ‘‘On State Regulation of Gas Prices and Tariffs for Gas Transportation within the Territory of the Russian Federation’’ dated December 29, 2000 (as amended). Pursuant to these laws and resolution, NLMK is obliged, inter alia, to accept offers to enter into a gas transportation agreement

143 with particular customers, disclose additional information about its pipeline operation and seek the prior approval of the Russian authorities of certain investments by NLMK that exceed 10% of NLMK equity capital. Furthermore, NLMK is subject to additional regulatory measures, including determination of tariffs for use of the gas pipeline by the Federal Tariff Service of Russia.

Investments in Russian Companies of Strategic Importance The Federal Law ‘‘On the Procedure for Making Foreign Investments in the Companies of Strategic Importance for the Defense and Security of the State’’ No. 57-FZ, as amended (the ‘‘Strategic Investments Law’’) came into force in May 2008. The Strategic Investments Law establishes certain restrictions for foreign investments into Russian companies involved in certain types of activities that, pursuant to the Strategic Investments Law, are deemed to be of strategic importance for national defense and national security. The Strategic Investments Law establishes an exhaustive list of such strategic activities, including operations of a company included in the register of natural monopolies (with certain exceptions), activities of a company holding a dominant market position and included in the relevant antimonopoly register, geological exploration and/or production on subsoil plots of federal importance. The Strategic Investments Law sets forth a general prohibition on transactions resulting in the acquisition of control over strategic companies by foreign states and international organizations or an organization controlled by any foreign state or international organization; and requires other foreign investors to obtain prior approval of the Governmental Commission on Foreign Investments of the Russian Federation (the ‘‘Governmental Commission’’) for the acquisition of control over a strategic company. The Strategic Investments Law contains special rules for obtaining control over and regulating strategic companies engaged in the geological exploration of subsoil plots and/or production of natural resources on subsoil plots classified as of federal importance (‘‘Strategic Subsoil User’’). In particular, the Russian Government may impose restrictions on the right of a Russian entity with a direct or indirect foreign participation to participate in any auction or tender for the right of subsoil use in a subsoil plot of federal importance. Such restrictions are not subject to the criteria for control pursuant to the Strategic Investments Law. In respect of subsoil plots of federal importance, only production licenses and combined licenses may be issued. Licenses for subsoil plots of federal importance are issued by Rosnedra pursuant to a decision of the Russian Government based either on the results of a tender or auction, or upon the discovery of such subsoil plot. Under a combined license, advanced exploration and production operations in a subsoil plot of federal importance may only commence after geological study operations are fully completed, in contrast to the general rule applicable to other deposits, according to which advanced exploration and production under a combined license may be conducted simultaneously with geological study. A person is deemed to control a strategic company if such person: (1) (directly or indirectly) more than 50% (25% or more in the case of a Strategic Subsoil User) of the total number of votes attributable to the voting shares or stakes making up the share capital of a strategic company; (2) has the right (on the basis of an agreement or otherwise) to direct decisions of a strategic company, including the terms of its business operations; (3) has the right to appoint the sole executive body of a strategic company and/or more than 50% (25% or more in the case of a Strategic Subsoil User) of the members of its collective executive body; (4) has an unconditional ability to procure the election of more than 50% (25% or more in the case of a Strategic Subsoil User) of the members of a strategic company’s board of directors or other management body; or (5) acts as a management company for a strategic company. Also, a strategic company is deemed to be controlled by a foreign entity if the controlling foreign entity controls (directly or indirectly) less than 50% of the total number of votes attributable to the voting shares or stakes making up the share capital of a strategic company, provided that the proportion between the number of votes available to the foreign entity and the number of votes available to other shareholders provides the foreign entity with an opportunity to determine the decisions of the strategic company. If the proportion of votes available to the foreign entity changes due to: (1) the buyback or transfer to it of shares in a strategic company and, consequently, the formation of a block of treasury shares; (2) the distribution of treasury shares in a strategic company among its shareholders; (3) the conversion of preferred stock into ordinary stock; or (4) any other reason; and the foreign entity subsequently obtains control over the strategic company, such foreign entity is obliged under the Strategic Investments Law to file an application to the Governmental Commission within three months upon obtaining control over the strategic company.

144 Prior approval of the Governmental Commission is also required if a foreign state, international organization or an organization controlled by either a foreign state or an international organization acquires direct or indirect control over more than 25% (more than 5% in the case of a Strategic Subsoil User) of the votes represented by shares in a strategic company or other ability to block decisions of the management bodies of such entity. In addition, foreign investors are required to notify the Governmental Commission about any transaction which they undertake resulting in the acquisition of 5% or more of the charter capital of a strategic company. The Strategic Investments Law provides for certain exceptions to the general rules described above. No prior approval or post-closing notification is required for obtaining control over a Strategic Subsoil User if the Russian Government owns or has the right to vote (directly or indirectly) more than 50% of the voting shares of such strategic company; or for making foreign investments in the Russian Federation if such investment activity is governed by other federal laws or international treaties of the Russian Federation, including treaties on military and technical cooperation. The Strategic Investments Law governs the procedure for review by the Governmental Commission of an application by a foreign investor seeking to obtain control over a strategic company. A foreign investor initiates this process by filing an application with the FAS. The term for review of such an application is three months and may be extended for another three months. The FAS will issue its approval upon confirmation from the Federal Security Service of the Russian Federation and the Governmental Commission that the acquisition of control does not threaten the national defense and security of the Russian Federation. Transactions which are subject to review under the Strategic Investments Law and are not subsequently approved by the Governmental Commission are void, and the foreign investor, by order of the courts, may be denied its right to vote at the shareholder meetings of the strategic company.

Trade Barriers and Anti-Dumping Regulations Steel-producing countries generally view their steel industries as strategically important and therefore as requiring protection from foreign competition. In addition, the governments of some emerging economies use non-market methods for the protection and development of their steel industries, and, while those governments seek to achieve the desired balance in their economies between production levels and product mix and consumption, they may resort to protectionist measures against steel imports. Currently exports of steel from the Russian Federation are primarily regulated by the Federal Law ‘‘On Fundamentals of State Regulation of Foreign Trade Activities’’ No. 164-FZ dated December 8, 2003, and a bilateral agreement between Russia and the United States, which establishes minimum prices and quotas for the export of hot-rolled steel from Russia. Russian exporters of steel products to the United States are required to obtain a license for the export of certain steel products from the Ministry of Industry and Trade of the Russian Federation. Following the Russian Federation’s accession to the WTO on August 22, 2012, exports of steel from the Russian Federation are also subject to the relevant WTO agreements, including the Accession Protocol of Russia and the GATT 1994. The Accession Protocol does not impose any additional restrictions on Russian steel exports. In general, the recent trend worldwide has been for the relaxation of import restrictions. The largest importers of the Group’s products are Asia and Oceania, the European Union countries, the Middle East and North America. Restrictive measures on imported steel introduced by certain Latin American countries have not affected the Group’s business adversely, as the Group’s exports have, for geographical reasons, been principally directed at markets in Asia and Oceania, the European Union, the Middle East and North America. NLMK believes that, due to the Russian Federation being granted ‘‘market economy’’ status by the European Union and the United States (both in 2002), as well as by South Africa and Brazil and other countries, it has become relatively easier for Russian steel producers to defend their interests in anti-dumping and other trade proceedings. Moreover, following the Russian Federation’s formal accession to the WTO on August 22, 2012, Russian steel exporters have obtained improved legal status to challenge the application of anti-dumping duties and are now generally able to export steel products into overseas markets of WTO members without quantitative restrictions (subject to the existing trading limitations in the United States, as discussed below).

145 United States Russian steel producers are currently able to operate in the U.S. market in accordance with the following two agreements, which limit Russian exports of metal products: • a suspension agreement on hot-rolled cut-to-length steel plate, which establishes minimum prices without quotas based on information about the costs and expenses of Russian exporters. Russian exporters concluded this market economy cost-based agreement with the U.S. Department of Commerce (the ‘‘U.S. Department’’) on December 20, 2002, replacing the non-market economy agreement that had been in force since 1997, although the Group is not a party to this agreement; and • a suspension agreement on hot-rolled flat carbon-steel products, which established minimum prices and quotas. The agreement established the following minimum prices per tonne for the period from January 1, 2013 through March 31, 2013: • Commercial and Structural Quality Steel (A36; A1011-CS; A1011-SS-Grades 30, 33, 36, 40; A1018-SS-Grades 30, 33, 36, 40; API 5L Grades A & B): $583.80; • HSLA & HSLA-F Quality Steel Grades (A752; A1011-HSLAS; A1018-HSLAS; A1011-HSLAS-F; A1018-HSLAS-F; API 5L Grades X42, X46, X52, X56, X60; API 5CT Grades J55 and K55): $642.17; and • High Grade Coils and Sheets for Pipes and Casings (API 5L Grades X65, X70, X80): $747.26. The quota for 2012 was approximately 987 thousand tonnes (of which NLMK was allocated approximately 133.6 thousand tonnes). The quota for 2011 was approximately 931.2 thousand tonnes (of which NLMK was allocated approximately 125 thousand tonnes). While these quotas have generally been enough to satisfy Russian producers’ needs, NLMK did not export hot-rolled coils or thin sheets to the U.S. in 2010, 2011 or 2012. On November 30, 2012, the U.S. Department published the Final Results of Administrative Review and Revision of Agreement Suspending Antidumping Duty Investigation, in which it upheld the current status of the agreement but raised the reference price, which is the minimum price for Russian exports of hot-rolled steel into the United States. This does not affect the Group’s current operations because NLMK does not export hot-rolled steel to the United States. Instead, hot-rolled steel is supplied to the U.S. market by the Group’s U.S. operations. The Russian Federation’s recent accession to the WTO has not prejudiced the above suspension agreements or altered the steel trade treatment currently extended by the United States to the Russian Federation, given that in December 2011, as allowed by the WTO rules, the United States opted out of its WTO obligations towards the Russian Federation as a newly acceding member and the Russian Federation took reciprocal action. In relation to other steel products such as cold-rolled, galvanized and semi-finished steel and long products, Russian exporters have been operating in the U.S. market without any restrictions on the import of these products since the expiry of the Comprehensive Steel Agreement on July 11, 2004. NLMK expects that this trend will continue following the Russian Federation’s recent accession to the WTO (which took place on August 22, 2012).

European Union Starting from the date of the Russian Federation’s formal accession to the WTO, August 22, 2012, Russian steel exporters have been able to operate in the European Union market without any restrictions. Before then Russian steel producers operated in the European Union market in accordance with the agreement between the European Union and the Russian Federation, dated October 26, 2007, regulating trade in certain steel products. This agreement established a quota for the export of Russian metals into the European Union and superseded the previous quota system for the export of Russian metals, which had been in place since December 1, 1997 in the form of a bilateral agreement.

146 The table below shows the quotas for the export of Russian steel into the European Union that applied for 2010, 2011 and, until the date of termination of the October 2007 E.U./Russian Federation agreement, 2012.

For the Year ending December 31, Quota 2010 2011 2012 (Amounts in tonnes) SA. Flat products SA1.Coils ...... 1,087,397 1,230,897 1,142,446 SA2.Heavy plate ...... 288,922 297,127 303,549 SA3.Other flat products ...... 625,122 676,140 656,769 SA4.Alloyed products ...... 110,316 113,444 115,900 SA5.Alloyed quarto plates ...... 26,266 27,011 27,595 SA6.Alloyed cold-rolled and coated sheets ...... 115,569 121,096 121,419 SB. Long products SB1.Beams ...... 57,784 63,570 60,710 SB2.Wire rod ...... 340,402 374,481 357,635 SB3.Other long products ...... 532,667 586,180 559,633 Total ...... 3,184,445 3,379,946 3,345,656 Pursuant to clause 10.4 of the October 2007 E.U./Russian Federation agreement and Regulation (EU) No. 529/2012 of the European Parliament and of the Council, dated June 13, 2012, the October 2007 E.U./ Russian Federation agreement and associated European Council Regulation implementing the agreement terminated on the date when the Russian Federation became an official member of the WTO, and, as a result, Russian steel exporters are now able to operate in the European Union market without quota restrictions.

Anti-Dumping proceedings The most significant anti-dumping proceedings against Russian steel exporters were initiated between 1996 and 2001 by the United States in respect of a wide range of hot-rolled and cold-rolled steel products. NLMK actively participated, along with other Russian steel producers, in all those proceedings. In general, the granting of market economy status to the Russian Federation by the United States in April 2002 has led to the prevention of anti-dumping measures against Russian steel producers within the U.S. market, benefiting, in particular, the ferrous metal industries. For example, the United States terminated the anti-dumping proceedings against imports of cold-rolled steel products, which it initiated on June 21, 1999 and October 18, 2001. In 2004 and 2005, the following key decisions were made regarding Russian steel exporters by foreign governmental authorities: • Expiration of the U.S.-Russia Comprehensive Steel Agreement, which established quotas on various types of steel products such as cold-rolled, galvanized and semi-finished steel and long products, on July 14, 2004. Since that time, Russian exporters have operated in the U.S. market without any restrictions on these products. • Termination of anti-dumping measures against hot-rolled and cold-rolled products in Canada. • Termination of anti-dumping measures against electrical steel products in China. • Termination of anti-dumping measures against cold-rolled steel products in South Africa, hot-rolled products in Indonesia and cold-rolled and long steel products in Colombia. • Opening of the U.S. cut-to-length market through the establishment of minimum prices under a market economy suspension agreement with the U.S. Department, as a result of co-operation between the U.S. Department and NLMK. • Possibility of the export of new grades of hot-rolled products within the framework of the United States- Russia suspension agreement on hot-rolled flat carbon-steel products. In addition, anti-dumping measures against cold-rolled steel products in China were terminated in 2008. Currently, there are relatively few trade restrictions in force against exports from the Russian Federation in countries such as China, Indonesia, Mexico and Thailand, although, in 2011, Mexico decreased the rate of

147 anti-dumping duty from 88% to 15% for cold-rolled steel products exported from Russia. Also in 2011, Peru, Argentina and Brazil abolished their anti-dumping measures against certain steel products exported from Russia. These restrictions did not have, and are not expected to have, a material effect on the Group’s business. A number of anti-dumping duty measures against Russian steel products expired after being in force for five years, including measures relating to grain-oriented electrical steel in China and cold-rolled steel in Colombia. Moreover, in 2012, China terminated its interim review of anti-dumping duty measures against silicon electrical steel products exported from Russia. A sunset review on Russian hot-rolled steel is being conducted in Indonesia with the final decision expected to be issued in 2013. On November 28, 2012, Thailand initiated a safeguard investigation in relation to the hot-rolled steel market. The Group does not export this kind of product to Thailand; therefore its operations will not be affected if this trade defense measure is introduced in Thailand. As a result of the Russian Federation’s recent accession to the WTO, Russian exporters have obtained improved legal status to challenge the application of anti-dumping measures.

Employment and Labor The Labor Code is the key law in Russia which governs labor matters. In addition to this core legislation, various federal laws, such as the Law dated April 19, 1991 ‘‘On Employment of Population in the Russian Federation’’ No. 1032-1, as amended, regulate relationships between employers and employees.

Employment contracts As a general rule, employers must conclude employment contracts for an indefinite term with all employees. Russian labor legislation expressly limits the possibility of entering into fixed term employment contracts. However, employers and employees may enter into an employment contract for a fixed term in certain cases where it is not possible to establish labor relations for an indefinite term due to the nature of the duties or the conditions of the performance of such duties, as well as in other cases expressly identified by federal law. An employer may terminate an employment contract only on the basis of the specific grounds stated in the Labor Code, including, among others: • the liquidation of the enterprise or downsizing of staff; • the failure of the employee to comply with the position’s requirements due to incompetence; • the systematic failure of the employee to fulfill his or her labor duties if he or she was the subject of disciplinary measures; • a gross violation by the employee of labor duties; and • the provision by the employee of false documents upon entering into the employment contract. The Labor Code provides an employee with certain minimum rights, which an employer may extend by an employment contract, including the right to a working environment that complies with health and safety requirements, the right to receive a salary on a timely basis and the right to participate in the management of the authorized entity, whether directly or through an authorized party, including in connection with the approval of any collective agreements, resolution of labor disputes or electing representatives to the employer’s labor disputes committee (if applicable). An employee dismissed from an enterprise due to downsizing or liquidation is entitled to receive compensation from his or her employer, including a severance payment and, depending on the circumstances, payments equal to his or her average salary for between one to three months. The Labor Code also provides protections for specified categories of employees. For example, except in limited circumstances, an employer cannot dismiss minors, expectant mothers, mothers with a child under the age of three, single mothers with a child under the age of 14 (or with a disabled child under the age of 18) or other persons caring for a child under the age of 14 without a mother. Any termination by an employer that is inconsistent with the Labor Code requirements may be invalidated by a court which may require the employer to reinstate such employee. Lawsuits resulting in the reinstatement of illegally dismissed employees and the payment of damages for wrongful dismissal are increasingly frequent and Russian courts tend to support employees’ rights in most cases. Where a court

148 reinstates an employee, the employer must compensate the employee for unpaid salary for the period between the wrongful termination and reinstatement, as well as for any mental distress.

Work time The Labor Code sets the regular working week at 40 hours. In general, an employer must compensate an employee for any time worked beyond 40 hours per week, as well as work on public holidays and weekends, at a higher rate. Annual paid vacation leave under the law is generally 28 calendar days. The Group’s employees who perform open-pit mining works or other work in harmful conditions are entitled to additional paid vacation of at least seven calendar days. Employees required to work non-standardized working hours are entitled to additional paid vacation of at least three calendar days. The retirement age in the Russian Federation is generally 60 years for males and 55 years for females. However, the retirement ages of males who have worked in arduous working conditions for at least 12 years and six months and females who have worked in arduous working conditions for at least 10 years are 55 years and 50 years, respectively. In the case of work involving underground operations, hazardous conditions or hot workshops, the retirement age is 50 years for males who have worked in such conditions for at least 10 years and 45 years for females who have worked in such conditions for at least 7 years and six months. Persons who have worked as miners in open-pit mines or underground mines for at least 25 years, and, in specified circumstances, for at least 20 years, may also retire, regardless of age.

Salary The minimum monthly salary in Russia is established by federal law from time to time. Starting from January 1, 2013, the minimum monthly salary is set at an amount of RUB 5,205. Although the law requires that the minimum wage be at or above a minimum subsistence level, the current statutory minimum monthly salary is generally considered to be less than the minimum subsistence level. Salaries of the Group’s employees are higher than the statutory minimum in the region and none are below such minimum.

Strikes The Labor Code defines a strike as the temporary and voluntary refusal of workers to fulfill their work duties with the intention of settling a collective labor dispute. Russian legislation contains several requirements which must be met for strikes to be legal. An employer may not use an employee’s participation in a legal strike as grounds for terminating an employment contract, although Russian law generally does not require employers to pay wages to striking employees for the duration of the strike. Conversely, an employee’s participation in an illegal strike may provide adequate grounds for termination of his or her employment contract.

Trade unions Trade unions are defined by the Federal Law dated January 12, 1996 No. 10-FZ ‘‘On Trade Unions, Their Rights and Guaranties of Their Activity’’, as amended (the ‘‘Trade Union Law’’), as voluntary unions of individuals with common professional interests which are created for the purposes of representing and protecting social and labor rights and interests of their members. Russian law also permits national trade union associations, which coordinate activities of trade unions throughout Russia. Although Russian labor regulations have curtailed the authority of trade unions, they still retain significant influence over employees and, as such, may affect the operations of large industrial companies in Russia. The Group’s management routinely interacts with trade unions in order to ensure the appropriate treatment of its employees and the stability of the Group’s business. The activities of trade unions are generally governed by the Trade Union Law and applicable legal acts including the Labor Code. As part of their activities, trade unions may: • negotiate collective contracts and agreements such as those between the trade unions and employers, federal, regional and local governmental authorities and other entities; • monitor compliance with labor laws, collective contracts and other agreements;

149 • access work sites and offices, and request information relating to labor issues from the management of companies and state and municipal authorities; • represent their members and other employees in individual and collective labor disputes with management; • participate in strikes, meetings to protect social and labor rights of employees; and • monitor the redundancy of employees and seek action by municipal authorities to delay or suspend mass redundancies. Russian laws require that companies cooperate with trade unions and do not interfere with their activities. Trade unions and their members enjoy certain guarantees as well, such as: • the retention of job positions for those employees who stop working due to their election to the management of trade unions; • protection from dismissal for employees who previously served in the management of a trade union for two years after the termination of the office term; and • the provision of the necessary equipment, premises and transportation vehicles by the employer for use by the trade union free of charge, if provided for by a collective bargaining contract or other agreement. If a trade union discovers any violation of work conditions requirements, notification is sent to the employer with a request to cure the violation and to suspend work if there is an immediate threat to the lives or health of employees. The trade union may receive information on social and labor issues from an employer (or employers’ unions) and state and local authorities, as well as cooperate with state authorities for the purposes of supervision of compliance with Russian labor laws. Trade unions may also initiate collective labor disputes, which may lead to strikes. To initiate a collective labor dispute, trade unions must present their demands to the employer. The employer is then obliged to consider the demands and notify the trade union of its decision. If the dispute remains unresolved, a reconciliation commission attempts to end the dispute. If this proves unsuccessful, collective labor disputes are generally referred to mediation or labor arbitration. The Trade Union Law provides that those who violate the rights and guarantees of trade unions and their officers may be subject to disciplinary, administrative and criminal liability. Although neither the Russian Code on Administrative Offences of December 30, 2001, as amended, nor the Russian Criminal Code of June 13, 1996, as amended, currently has provisions specifically relating to these violations, general provisions and sanctions may be applicable.

150 DESCRIPTION OF THE ISSUER The Issuer The Issuer was incorporated in Ireland as a private limited company on August 14, 2012, registered number 516421 under the name Steel Funding Limited, under the Companies Acts 1963-2012 (as amended) of Ireland (the ‘‘Companies Acts’’). The registered office of the Issuer is 5 Harbourmaster Place, IFSC, Dublin 1, Ireland and phone number +353 1 680 6000. The authorized share capital of the Issuer is EUR 100 divided into 100 ordinary shares of par value EUR 1 each (the ‘‘Shares’’). The Issuer has issued one Share, which is fully paid and is held on trust by Deutsche International Finance (Ireland) Limited (the ‘‘Share Trustee’’) under the terms of a declaration of trust (the ‘‘Declaration of Trust’’) dated August 22, 2012, under which the Share Trustee holds the Shares on trust for charity. The Share Trustee has no beneficial interest in and derives no benefit (other than any fees for acting as Share Trustee) from its holding of the Shares. The Share Trustee will apply any income derived from the Issuer solely for the above purposes. Deutsche International Corporate Services (Ireland) Limited (the ‘‘Corporate Services Provider’’), an Irish company, acts as the corporate services provider for the Issuer. The office of the Corporate Services Provider serves as the general business office of the Issuer. Through the office and pursuant to the terms of the corporate services agreement entered into on September 24, 2012 between the Issuer and the Corporate Services Provider (the ‘‘Corporate Services Agreement’’), the Corporate Services Provider performs various management functions on behalf of the Issuer, including the provision of certain clerical, reporting, accounting, administrative and other services until termination of the Corporate Services Agreement. In consideration of the foregoing, the Corporate Services Provider receives various fees and other charges payable by the Issuer at rates agreed upon from time to time plus expenses. The terms of the Corporate Services Agreement provide that either party may terminate the Corporate Services Agreement upon the occurrence of certain stated events, including any material breach by the other party of its obligations under the Corporate Services Agreement which is either incapable of remedy or which is not cured within 30 days from the date on which it was notified of such breach. In addition, either party may terminate the Corporate Services Agreement at any time by giving at least 90 days written notice to the other party. The Corporate Services Provider’s principal office is 5 Harbourmaster Place, IFSC, Dublin 1, Ireland.

Business The principal objects of the Issuer are set forth in clause 2 of its Memorandum of Association (as currently in effect) and permit the Issuer, inter alia, to lend money and give credit, secured or unsecured, to issue debentures, enter into derivatives and otherwise to borrow or raise money and to grant security over its property for the performance of its obligations or the payment of money. The Issuer is organized as a special purpose company. The Issuer was established to raise capital by the issue of debt securities and to use an amount equal to the proceeds of each such issuance to advance a loan to NLMK. Since its incorporation the Issuer has not engaged in any material activities other than those incidental to its registration as a private company under the Companies Acts and those related to the issue of (i) U.S.$500,000,000 4.95 per cent. Loan Participation Notes due 2019 issued on September 26, 2012 and (ii) the Notes. The Issuer has no employees.

Directors and Company Secretary The Issuer’s Articles of Association provide that the Board of Directors of the Issuer will consist of at least two Directors. The Directors of the Issuer and their business addresses are as follows: Adrian Bailie 5 Harbourmaster Place, IFSC, Dublin 1, Ireland. Eimir McGrath 5 Harbourmaster Place, IFSC Dublin 1, Ireland. The Company Secretary is Deutsche International Corporate Services (Ireland) Limited.

151 Financial Statements Since its date of incorporation, no financial statements of the Issuer have been prepared as at the date of this Prospectus. The Issuer intends to publish its first financial statements in respect of the period ending on December 31, 2012. The Issuer will not prepare interim financial statements. The financial year of the Issuer ends on December 31 in each year. The profit and loss account and balance sheet can be obtained free of charge from the registered office of the Issuer. The Issuer must hold its first annual general meeting within 18 months of the date of its incorporation (and no more than 9 months after the financial year end) and thereafter the gap between its annual general meetings must not exceed 15 months. One annual general meeting must be held in each calendar year. The auditors of the Issuer are PricewaterhouseCoopers of 1 Spencer Dock, North Wall Quay, Dublin 1, Ireland who are chartered accountants and are members of the Institute of Chartered Accountants and registered auditors qualified to practice in Ireland.

152 OVERVIEW OF THE TRANSACTION STRUCTURE AND THE SECURITY The following summary description should be read in conjunction with, and is qualified in its entirety by, ‘‘Terms and Conditions of the Notes’’ and the form of the Loan Agreement.

Principal and Interest on the Loan

Issuer NLMK

Loan

Payment of amounts Proceeds of received the Notes under the Loan

Noteholders

25JAN201315073505 The transaction will be structured around the Loan from the Issuer to NLMK. The Issuer will issue the Notes, which will be limited recourse secured loan participation notes issued for the sole purpose of funding the Loan to NLMK. The Notes will be constituted by, be subject to, and have the benefit of, the Trust Deed. The obligations of the Issuer to make payments under the Notes shall constitute an obligation only to account to the Noteholders for an amount equal to the sums of principal, interest and/or additional amounts (if any) due under the Loan and actually received and retained (net of tax) by or for the account of the Issuer from NLMK pursuant to the Loan Agreement less any amount in respect of the Reserved Rights (as defined in the Trust Deed). In the event that the amount due and payable by the Issuer under such Notes exceeds the sums so received or recovered and retained (net of tax), the right of any person to claim payment of any amount exceeding such sums shall be extinguished, and Noteholders may take no further action to recover such amounts. As provided in the Trust Deed, the Issuer, with full title guarantee and as continuing security for the payment of all sums under the Trust Deed and the Notes, will charge by way of first fixed charge in favor of the Trustee (the ‘‘Charge’’): • all its rights to principal, interest and other amounts now or hereafter payable to the Issuer by NLMK under the Loan Agreement; • the right to receive all sums which may be or become payable by NLMK under any claim, award or judgment relating to the Loan Agreement, as the case may be; and • all the rights, title and interest in and to all sums of money now or in the future deposited in an account with the Principal Paying Agent in the name of the Issuer (the ‘‘Account’’) and the debts represented thereby (including interest from time to time earned on the Account, if any), provided that, for the avoidance of doubt, the Issuer shall remain the legal and beneficial owner of the property subject to the Charge following the granting of the Charge and that Reserved Rights and any amounts relating to Reserved Rights are excluded from the Charge. In addition, the Issuer with full title guarantee will assign to the Trustee for the benefit of the Trustee and the Noteholders all the rights, interest and benefits, both present and future, which have accrued or may accrue to the Issuer as lender under or pursuant to the Loan Agreement (including, without limitation, all moneys payable to the Issuer and any claims, awards and judgments in favor of the Issuer in connection with the Loan Agreement and the right to declare the Loan immediately due and payable in certain circumstances and to take proceedings to enforce the obligations of NLMK thereunder) other than any rights, title, interests and benefits which are subject to the Charge and other than the Reserved Rights and any amounts relating to the Reserved Rights. As a consequence of such assignment, the Trustee will

153 assume the rights of the Issuer under the Loan Agreement as set out in the relevant provisions of the Trust Deed. Formal notice of the Charge and assignment will be given to NLMK, who will be required to acknowledge the same. The Issuer will covenant not to agree to any amendments to, or any modification, recession, cancellation, termination or waiver of, or authorize any breach by any counterparty or proposed breach by any counterparty of, the terms of the Loan Agreement unless the Trustee has given its prior written consent or unless authorized to do so by an Extraordinary Resolution (as defined in the Trust Deed) or Written Resolution (as defined in the Trust Deed) of the Noteholders (except in relation to Reserved Rights). The Issuer will further agree to act at all times in accordance with any instructions of the Trustee from time to time with respect to the Loan Agreement, save as otherwise provided in the Trust Deed or the Loan Agreement. Any amendments, modifications, waivers, recession, cancellation, termination or authorizations made with the Trustee’s consent shall be notified to the Noteholders in accordance with Condition 13 of the Terms and Conditions relating to the Notes.

154 LOAN AGREEMENT The following is the text of the Loan Agreement to be entered into between NLMK and the Issuer. This Agreement is made on 14 February 2013 between: (1) OJSC NOVOLIPETSK STEEL (‘‘NLMK’’); and (2) STEEL FUNDING LIMITED (the ‘‘Lender’’).

Whereas: The Lender has at the request of NLMK agreed to make available to NLMK a loan facility in the amount of U.S.$800,000,000 on the terms and subject to the conditions of this Agreement. Now it is hereby agreed as follows:

1 Definitions and Interpretation 1.1 Definitions In this Agreement (including the recitals), the following terms shall have the meanings indicated: ‘‘Account’’ means the account in the name of the Lender with the Principal Paying Agent, account number 20402101 (or such other account as may from time to time be agreed by the Lender with the Trustee and NLMK pursuant to the Trust Deed and notified to NLMK in writing at least five Business Days in advance of such change); ‘‘Accounting Standards’’ means, with respect to a person, as applicable, U.S. GAAP, or, to the extent that such person has elected to prepare its consolidated financial statements on the basis of IFRS or other generally accepted accounting standards within the European Union (each an ‘‘EU Accounting Standard’’) and has commenced generating financial data on such alternative basis, IFRS or such EU Accounting Standard; ‘‘Advance’’ means the advance to be made under Clause 3 of the sum equal to the amount of the Facility; ‘‘Agency’’ means any agency, authority, central bank, department, committee, government, legislature, minister, ministry, official or public or statutory person (whether autonomous or not) of, or of the government of, any state or supra-national body; ‘‘Agreement’’ means this Agreement as originally executed or as it may be amended from time to time; ‘‘Business Day’’ means a day on which (a) the London interbank market is open for dealings between banks generally and (b) if on that day a payment is to be made hereunder, commercial banks generally are open for business in New York City, Moscow and in the city where the specified office of the Principal Paying Agent is located; ‘‘Closing Date’’ means 19 February 2013; ‘‘Consolidated Assets’’ means the total amount of assets appearing on the consolidated balance sheet of NLMK, prepared in accordance with the Accounting Standards, as of the date of the most recently prepared consolidated financial statements; ‘‘Definitive Certificate’’ means the definitive certificates in registered form representing the Notes, to be issued in limited circumstances pursuant to the Trust Deed; ‘‘Dollars’’, ‘‘U.S.$’’ and ‘‘U.S. Dollars’’ means the lawful currency of the United States of America; ‘‘Domestic Relevant Indebtedness’’ means any Relevant Indebtedness which is not quoted, listed or ordinarily dealt in or traded on any stock exchange or any public or institutional securities market, in each case outside the Russian Federation; ‘‘Event of Default’’ has the meaning assigned to such term in sub-clause 10.1 hereof; ‘‘Facility’’ means the facility specified in Clause 2; ‘‘Global Certificate’’ means the Regulation S Global Certificate and the Rule 144A Global Certificate; ‘‘Group’’ means the Borrower and its Subsidiaries for the time being;

155 ‘‘IFRS’’ means International Financial Reporting Standards (formerly International Accounting Standards) issued by the International Accounting Standards Board (‘‘IASB’’) and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (as amended, supplemented or re-issued from time to time); ‘‘Indebtedness’’ means, in respect of any person, any indebtedness for, or in respect of (without duplication): (a) moneys borrowed; (b) any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent; (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument: (d) any amount of money raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing; (e) the amount of any liability in respect of a capital lease that would be required to be capitalised on a balance sheet in accordance with the Accounting Standards and (without double counting) the amount of any liability in respect of any guarantee or indemnity (whether on or off balance sheet) for any of the items referred to above; provided that, for the avoidance of doubt, Indebtedness shall not include moneys raised by way of the issue of share capital (whether or not for cash consideration) and any premium on such share capital; and provided further that Indebtedness shall not include Indebtedness among NLMK and Subsidiaries or among Subsidiaries; and provided further that Indebtedness shall not include any trade credit extended to such person in connection with the acquisition of goods and/or services on arm’s length terms and in the ordinary course of trading of that person; ‘‘Interest Payment Date’’ means 19 February and 19 August of each year, commencing on 19 August 2013; ‘‘Loan’’ means, at any time, an amount equal to the aggregate principal amount of the Facility granted by the Lender pursuant to this Agreement or the principal amount outstanding for the time being under the Facility; ‘‘Material Adverse Effect’’ means a material adverse effect on (a) the financial condition or operations of NLMK or the Group, or (b) NLMK’s ability to perform its payment or other material obligations under this Agreement or (c) the validity, legality or enforceability of this Agreement or the rights or remedies of the Lender under this Agreement; ‘‘Material Subsidiary’’ means any Subsidiary of NLMK: (a) whose gross assets constitute ten per cent (10%) of the total consolidated gross assets of the Group; or (b) whose gross revenue constitutes ten per cent (10%) or more of the total consolidated gross revenue of the Group, determined by reference to the most recent annual consolidated financial statements of the Group and the most recent annual stand-alone reporting forms of the relevant Subsidiary, which were used for the purposes of preparing the Group’s consolidated financial statements and, for the avoidance of doubt, excluding intra-Group items, in each case taking into account, on a pro-forma basis, any subsequent consolidation, amalgamation or merger referred to in Clause 9.2; ‘‘Noteholder’’ means, in relation to a Note, the person in whose name such Note is for the time being registered in the register of Noteholders (or, in the case of a joint holding, the first named holder thereof); ‘‘Notes’’ means the loan participation notes proposed to be issued by the Lender; ‘‘Officers’ Certificate’’ means a certificate signed by two authorised signatories of NLMK, one of whom shall be the principal executive officer, a member of the management board, principal accounting officer or principal financial officer of NLMK;

156 ‘‘Opinion of Counsel’’ means a written opinion from international legal counsel who is acceptable to the Lender and the Trustee, each acting reasonably; ‘‘Paying Agency Agreement’’ means the paying agency agreement to be dated on or about 14 February 2013, as amended, varied, novated, supplemented, extended or restated relating to the Notes; ‘‘Paying Agent’’ shall have the meaning attributed to it in the Paying Agency Agreement; ‘‘Permitted Security Interest’’ means: (a) any Security Interests: (i) existing on the Closing Date; or (ii) securing Refinancing Indebtedness in respect of Indebtedness existing on the Closing Date, provided that such Security Interests are limited to all or part of the assets, undertaking, property or revenues that secured the original Indebtedness and that the aggregate principal amount of such Refinancing Indebtedness secured over such assets does not exceed the sum of (x) the aggregate principal amount of the Indebtedness being refinanced; (y) accrued and unpaid interest on such Refinancing Indebtedness and (z) fees, premiums and other costs and expenses incurred in connection with such Refinancing Indebtedness; (b) any Security Interest created or existing in respect of Domestic Relevant Indebtedness; (c) any Security Interests: (i) existing on any undertaking, property, assets or revenues of any person at the time such person becomes a Subsidiary of NLMK or such undertaking property, assets or revenues are acquired by NLMK or any Subsidiary provided that such Security Interest was not created in contemplation of such event and that no such Security Interest shall extend to other undertaking property, assets or revenues of such person or the Group; or (ii) securing Refinancing Indebtedness in respect of the Indebtedness specified in paragraph (c)(i) above provided that such Security Interests are limited to all or part of the undertaking, assets, property or revenues that secured the original Indebtedness and that the aggregate principal amount of such Refinancing Indebtedness secured over such assets does not exceed the sum of (x) the aggregate principal amount of the Indebtedness being refinanced; (y) accrued and unpaid interest on such Refinancing Indebtedness and (z) fees, premiums and other costs and expenses incurred in connection with such Refinancing Indebtedness; (d) any Security Interest on the undertaking, property, assets or revenues of NLMK or any Subsidiary created or existing in respect of Relevant Indebtedness the principal amount of which (when aggregated with the principal amount of any other Relevant Indebtedness which then has the benefit of a Security Interest on the undertaking, property, assets or revenues of NLMK or any Subsidiary) does not exceed 20 per cent. of Consolidated Assets, as determined by reference to the most recently available consolidated financial statements prepared in accordance with the Accounting Standards; or (e) any Security Interest created or existing in respect of any Indebtedness or other obligation or liability that is not Relevant Indebtedness; ‘‘person’’ means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organisation, limited liability company or government or other entity; ‘‘Potential Event of Default’’ means an event or circumstance which could with the giving of notice, and/or the lapse of time, or the making of any determination under this Agreement, become an Event of Default; ‘‘Principal Paying Agent’’ means Deutsche Bank AG, London Branch; ‘‘Prospectus’’ means the prospectus of even date herewith prepared in connection with the issue of the Notes; ‘‘Rate of Interest’’ has the meaning assigned to such term in Clause 4.1; ‘‘Refinance’’ means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, purchase, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. ‘‘Refinanced’’ and ‘‘Refinancing’’ shall have correlative meanings;

157 ‘‘Refinancing Indebtedness’’ means Indebtedness that is incurred to Refinance any existing Indebtedness, including Indebtedness that Refinances Refinancing Indebtedness; ‘‘Regulation S Global Certificate’’ means the single, permanent global certificate in fully registered form without interest coupons representing the Notes to be issued pursuant to Clause 3.1 of the Trust Deed outside the United States to non-U.S. persons in reliance on Regulation S under the Securities Act; ‘‘Relevant Indebtedness’’ means any present or future Indebtedness in the form of, or represented by, notes, debentures, bonds or other debt securities (but for the avoidance of doubt, excluding term or revolving loans (whether syndicated or unsyndicated), credit facilities, credit agreements and other similar facilities and evidence of indebtedness under such loans, facilities or credit agreements) which either are by their terms payable, or confer a right to receive payment, in any currency and are for the time being, or ordinarily are quoted, listed or ordinarily dealt in or traded on any stock exchange or any public or institutional securities market; ‘‘Repayment Date’’ means 19 February 2018; ‘‘Reserved Rights’’ has the meaning specified in the Trust Deed; ‘‘Rule 144A Global Certificate’’ means the single, permanent global certificate in fully registered form without interest coupons representing the Notes to be issued pursuant to Clause 3.1 of the Trust Deed to qualified institutional buyers (as defined in Rule 144A under the Securities Act) that are also qualified purchasers (as defined in Section 2(a)(51)(A) of the U.S. Investment Company Act of 1940) in reliance on the exemption from registration under the Securities Act provided by Rule 144A thereunder; ‘‘Same-Day Funds’’ means Dollar funds settled through the New York Clearing House Interbank Payments System or such other funds for payment in Dollars as the Lender may at any time determine to be customary for the settlement of international transactions in New York City of the type contemplated hereby; ‘‘Securities Act’’ means the U.S. Securities Act of 1933, as amended; ‘‘Security Interest’’ means any mortgage, charge, pledge, lien or other form of encumbrance or security interest securing any obligation of any person; ‘‘Subscription Agreement’’ means the agreement between NLMK, the Lender and the Joint Lead Managers (as defined therein) dated on or about 14 February 2013 providing for the issuance of the Notes; ‘‘Subsidiary’’ means any corporation or other business entity of which NLMK owns or controls (either directly or through one or more Subsidiaries) more than 50 per cent. of the issued share capital or other ownership interest having ordinary voting power to elect a majority of the directors, managers or trustees of such corporation or other business entity; ‘‘Taxes’’ means any present or future taxes, levies, imposts or duties (including interest or penalties thereon) imposed, assessed, charged, collected, demanded, withheld or claimed by the Russian Federation, Ireland or any tax authority thereof or therein provided, however, that for the purposes of this definition the references to Ireland shall, upon the occurrence of a Relevant Event (as this term is defined in the Trust Deed), be deemed to be references to the jurisdiction in which the Trustee is domiciled for tax purposes; and the term ‘‘Taxation’’ shall be construed accordingly; ‘‘Trust Deed’’ means the trust deed between the Lender and the Trustee to be dated on or about the Closing Date as amended, varied, novated, supplemented, extended or restated from time to time; ‘‘Trustee’’ means Deutsche Trustee Company Limited as trustee under the Trust Deed and any successor thereto as provided thereunder; ‘‘U.S. Dollar Equivalent’’ means with respect to any amount denominated in a currency other than U.S. Dollars, at any time for the determination thereof, the amount of U.S. Dollars obtained by converting such other currency involved into U.S. Dollars at the spot rate for the purchase of U.S. Dollars with such other currency as most recently published under ‘‘Currency Rates’’ in the section of the Financial Times entitled ‘‘Currencies, Bonds & Interest Rates’’ (or, if the Financial Times is no longer published, or if such information is no longer available in the Financial Times, such other source as may be selected in good faith by NLMK); and

158 ‘‘US GAAP’’ means generally accepted accounting principles set forth as of the relevant date in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are in effect and applicable to the circumstances as of the date of determination.

1.2 Other Definitions Unless the context otherwise requires, terms used in this Agreement which are not defined in this Agreement but which are defined in the Trust Deed, the Notes, the Paying Agency Agreement or the Subscription Agreement shall have the meanings assigned to such terms therein, provided that in the case of terms defined or references herein to documents to which NLMK is not a party, NLMK has been sent an up-to-date copy of such documents by the Lender as soon as reasonably practicable (including any amendments thereto that may affect the meaning or interpretation of any such term or reference).

1.3 Interpretation Unless the context or the express provisions of this Agreement otherwise require, the following shall govern the interpretation of this Agreement: 1.3.1 all references to ‘‘Clause’’ or ‘‘sub-clause’’ are references to a Clause or sub-clause of this Agreement. 1.3.2 the terms ‘‘hereof’’, ‘‘herein’’ and ‘‘hereunder’’ and other words of similar import shall mean this Agreement as a whole and not any particular part hereof. 1.3.3 words importing the singular number include the plural and vice versa. 1.3.4 the table of contents and the headings are for convenience only and shall not affect the construction hereof. 1.3.5 a reference to ‘‘this agreement’’ or to any other agreement or document referred to in this agreement is a reference to this agreement or such other document or agreement as varied, amended, novated, supplemented, extended or restated (in each case, other than in breach of the provisions of this agreement) from time to time. 1.3.6 a reference to a statute or statutory provision shall include all subordinate legislation under that statute or statutory provision, or replacement or substitution of such legislation, made from time to time. 1.3.7 a Potential Event of Default or an Event of Default is ‘‘continuing’’ if has not been remedied or waived.

2 Facility 2.1 Facility On the terms and subject to the conditions set forth herein, the Lender hereby agrees to lend NLMK, and NLMK hereby agrees to borrow from the Lender, U.S.$800,000,000.

2.2 Purpose The proceeds of the Advance will be used for the purposes as set out in the Prospectus, but the Lender shall not be concerned with the application thereof.

2.3 Facility Fee NLMK shall pay a fee to the Lender in consideration of the arrangement of the Facility of U.S.$2,907,371.12 (the ‘‘Facility Fee’’).

159 3 Drawdown 3.1 Drawdown On the terms and subject to the conditions set forth herein, on the Closing Date the Lender shall make the Advance to NLMK and NLMK shall make a single drawing in the full amount of the Facility.

3.2 Payment of the Facility Fee NLMK agrees to pay the Facility Fee to the Lender in Same-Day Funds by 2:30 p.m. (London time) (or such earlier time as the Lender and NLMK may otherwise agree) one Business Day prior to the Closing Date to such account as the Lender and NLMK may agree in writing.

3.3 Disbursement Subject to the conditions set forth herein, on the Closing Date the Lender shall transfer in Same Day Funds (unless the Lender and NLMK agree otherwise) the amount of the Advance to such account as the Lender and NLMK may agree in writing.

3.4 Ongoing Fees and Expenses In consideration of the Lender (i) making the Loan available to NLMK; and (ii) supporting such a continuing facility, NLMK shall pay in one or more instalments within 10 Business Days of demand to the Lender each year an additional amount equating to all documented ongoing costs and expenses of the Lender properly incurred in connection with this Agreement or the Notes (including, without limitation, any taxes and any properly incurred and documented corporate service provider fees, legal fees, listing fees, audit fees and any expenses incurred in order to maintain the Lender as a validly incorporated company and any expenses required to cover the Lender’s anticipated winding-up expenses) as set forth in an invoice from the Lender to NLMK. Before such payment is made by NLMK, the Lender shall submit an invoice providing, in reasonable detail, the nature and calculation of the invoiced amount, and shall provide NLMK with an executed act of acceptance (an ‘‘Act of Acceptance’’), the form of which NLMK shall provide to the Lender in advance.

4 Interest 4.1 Rate of Interest NLMK will pay interest in U.S. Dollars to the Lender on the outstanding principal amount of the Loan from time to time hereunder at the rate of 4.45 per cent. per annum (the ‘‘Rate of Interest’’).

4.2 Payment Interest at the Rate of Interest shall accrue from day to day, starting from (and including) the Closing Date and shall be paid in respect of each Interest Period in arrear not later than 2.30 p.m. (London time) one Business Day prior to each Interest Payment Date to the Account. Interest on the Loan will cease to accrue from (and excluding) the due date for repayment thereof unless payment of principal is improperly withheld or refused, in which event interest will continue to accrue (before or after any judgment) at the Rate of Interest to but excluding the date on which payment in full of the principal thereof is made. The amount of interest payable in respect of the Loan for any Interest Period shall be calculated by applying the Rate of Interest to the Loan, dividing the product by two and rounding the resulting figure to the nearest cent (half a cent being rounded upwards). If interest is required to be calculated for any other period, it will be calculated on the basis of a 360 day year consisting of 12 months of 30 days each and, in the case of an incomplete month, the number of actual days elapsed. ‘‘Interest Period’’ means each period beginning on (and including) the Closing Date or any Interest Payment Date and ending on (but excluding) the next Interest Payment Date.

160 5 Repayment and Prepayment 5.1 Repayment Except as otherwise provided herein, NLMK shall repay the Loan not later than 2.30 p.m. (London time) one Business Day prior to the Repayment Date.

5.2 Special Prepayment If, (i) either (a) as a result of the application of any amendments or clarifications to, or change in, the double tax treaty between the Russian Federation and Ireland or the laws or regulations of the Russian Federation or Ireland or of any political sub-division thereof or any authority having power to tax therein (including as a result of a judgment of a court of competent jurisdiction) or a change in the application or official interpretation of such double tax treaty, such laws or regulations which in each case becomes effective on or after the date of this Agreement or (b) as a result of the enforcement of the security provided for in the Trust Deed, NLMK would thereby be required to make or increase any payment due hereunder as provided in sub-clauses 6.2 or 6.3, or (ii) (for whatever reason) NLMK would have to or has been required to pay additional amounts pursuant to Clause 8, then NLMK may (without premium or penalty), upon not less than 30 days’ notice to the Lender (which notice shall be irrevocable), prepay the Loan in whole (but not in part).

5.3 Illegality If, at any time, by reason of the introduction of any change after the date of this Agreement in any applicable law, regulation, regulatory requirement or directive of any Agency the Lender reasonably determines (setting out in reasonable detail the nature and extent of the relevant circumstances) (following receipt of such determination NLMK may request from the Lender an Opinion of Counsel with the cost of such Opinion of Counsel being borne solely by NLMK) that it is or would be unlawful or contrary to such applicable law, regulation, regulatory requirement or directive for the Lender to allow all or part of the Loan or the Notes to remain outstanding or for the Lender to maintain or give effect to any of its obligations in connection with this Agreement or the Notes and/or to charge or receive or to be paid interest at the rate then applicable to the Loan or the Notes, then upon notice by the Lender to NLMK in writing, NLMK and the Lender shall consult in good faith as to a basis which eliminates the application of such circumstances; provided, however, that the Lender shall be under no obligation to continue such consultation if a basis has not been determined within 30 days of the date on which it so notified NLMK. If such a basis has not been determined within the 30 days, then upon notice by the Lender to NLMK in writing, NLMK shall prepay the Loan in whole (but not in part) without premium on the next Interest Payment Date or on such earlier date as the Lender shall certify on not less than 15 days notice to be necessary to comply with the requirements of such law, regulation, regulatory requirement or directive (in any event being not earlier than the last Business Day of any grace period allowed by applicable laws or regulations).

5.4 Reduction of Loan Upon Cancellation of Notes The Lender, NLMK or any member of the Group may from time to time, in accordance with the terms and conditions of the Notes, purchase Notes in the open market or by tender or by a private agreement at any price. The Lender, NLMK or any such member of the Group may, at its option, hold, reissue, resell or, in the case of NLMK or such member of the Group, from time to time deliver to the Lender Notes together with a request (a ‘‘Request’’) for the Lender to present such Notes to the Registrar for cancellation or from time to time procure the delivery to the Registrar of instructions (‘‘Instructions’’) to redeem and thereafter cancel a specified aggregate principal amount of Notes represented by a Global Certificate in each case upon not less than 30 days’ notice. Any Instructions shall be accompanied by evidence reasonably satisfactory to the Issuer and Registrar that the Lender, NLMK or any such member of the Group is entitled to give such Instructions or Request (or, in the case of Notes represented by a Global Certificate, request that the account entries in the records of the relevant clearing system reflecting the Lender’s, NLMK’s or any such member of the Group’s beneficial interest in such part of the relevant Global Certificate be updated to reflect such cancellation) on the date specified in the Instructions or Request (as the case may be) whereupon the Register shall be updated accordingly to reflect such cancellation. On and with effect from the date specified in any Request or, as the case may be, Instructions, the Loan shall be deemed to be prepaid

161 for all purposes in an amount as corresponds to the aggregate principal amount of Notes so cancelled and no further interest shall be payable with respect thereto.

5.5 Payment If the Loan is to be prepaid by NLMK pursuant to any of the provisions of Clauses 5.2 or 5.3: 5.5.1 no later than one Business Day prior to the due date for such prepayment, NLMK shall deposit in the Account an amount in cash equal to the amount required to be paid on such due date; and 5.5.2 NLMK shall, simultaneously with such prepayment, pay to the Lender (by deposit in the Account) accrued but unpaid interest thereon to (but excluding) the date of such prepayment and all other sums then payable by NLMK pursuant to this Agreement in relation to the amount to be prepaid.

5.6 Provisions Exclusive NLMK may not voluntarily prepay the Loan except in accordance with the express terms of this Agreement. Any amount prepaid may not be re-borrowed.

6 Payments 6.1 Making of Payments All payments of principal and interest and other amounts payable under Clause 6.2 hereof (other than those in respect of Reserved Rights) to be made by NLMK under this Agreement shall be made unconditionally by credit transfer to the Lender not later than 2.30 p.m. (London time) one Business Day prior to each Interest Payment Date, the Repayment Date or any other due date for redemption (as the case may be) in Same-Day Funds to the Account, or as the Trustee may otherwise direct following the occurrence of a Relevant Event (as defined in the Trust Deed). The Lender agrees with NLMK that the Lender will not deposit any other monies into the Account and that no withdrawals shall be made from the Account other than for payments to be made in accordance with the Trust Deed and Paying Agency Agreement.

6.2 No Set-Off, Counterclaim or Withholding; Gross-Up All payments to be made by NLMK under this Agreement (including any amounts payable under Clause 6.3) shall be (i) made in full without set-off or counterclaim and (except to the extent required by law) without deduction or withholding for or on account of any Taxes and (ii) made only from the Russian Federation, Ireland or such other jurisdiction which would not require any deductions or withholding from any such payment. If NLMK shall be required by applicable law to make any deduction or withholding from any payment under this Agreement for or on account of any such Taxes, it shall, on the due date of such payment, increase any payment due hereunder to such amount as may be necessary to ensure that the Lender receives a net amount in Dollars equal to the full amount which it would have received had payment not been made subject to such Taxes, it shall account to the relevant authorities for the relevant amount of such Taxes so withheld or deducted within the time allowed for such payment under the applicable law and shall deliver to the Lender without undue delay evidence reasonably satisfactory to the Lender of such deduction or withholding and of the accounting therefor to the relevant taxing authority. If the Lender pays any amount in respect of any Taxes, including penalties or interest, NLMK shall reimburse the Lender in Dollars, for such payment within 5 Business Days of demand. Any notification by the Lender to NLMK in connection with this Clause 6.2 shall be given as soon as reasonably practicable after the Lender becomes aware of any obligation on it to make any such withholding or deduction or pay any Taxes. The Lender shall, as soon as reasonably practicable following request by NLMK, provide NLMK (at NLMK’s expense) with reasonable detail in writing as to the reasons for such withholding or deduction or payment of Taxes. Nothing in this paragraph shall prejudice in any way the obligation to gross up contained in this Clause 6.2.

162 6.3 Withholding on the Notes If the Lender notifies NLMK (setting out in reasonable detail the nature and extent of the obligation and providing, upon the request of NLMK, an Opinion of Counsel in respect of the existence of such obligation, with the cost of such Opinion of Counsel to be borne solely by NLMK) that it has become obliged to make any withholding or deduction for or on account of any Taxes imposed or levied, collected, withheld or assessed by or on behalf of Ireland or any political subdivision or any authority thereof or therein having the power to tax from any payment which it is obliged to make, or would otherwise be obliged to make but for the imposition of any such withholding or deduction for or on account of any such Taxes, under or in respect of the Notes, NLMK agrees to pay into the Account for the benefit of the Lender, not later than 2:30 p.m. (London time) one Business Day prior to the date on which payment is due to the Noteholders in Same-Day Funds, such additional amounts as are equal to the said additional amounts which the Lender would be required to pay in order that the net amounts received by the Noteholders after such withholding or deduction will equal the respective amounts which would have been received by the Noteholders in the absence of such withholding or deduction; provided, however, that the Lender shall immediately upon receipt from any Paying Agent of the reimbursement of any sums paid pursuant to this provision, to the extent that the Noteholders, as the case may be, are not entitled to such additional amounts pursuant to the terms and conditions of the Notes, pay such additional amounts to NLMK (it being understood that neither the Lender, nor the Principal Paying Agent nor any Paying Agent shall have any obligation to determine whether any Noteholder is entitled to such additional amounts).

6.4 Reimbursement To the extent that the Lender subsequently obtains and uses any tax credit or allowance or obtains any other reimbursements or refunds relating to a deduction or withholding or payment of Taxes with respect to which NLMK has made a payment pursuant to this Clause 6, the Lender shall promptly pay to NLMK so much of the benefit or refund it received as will leave the Lender in the same position as it would have been had no additional amount been required to be paid by NLMK pursuant to this Clause 6; provided, however, that the question of whether any such benefit or refund has been received, and accordingly, whether any payment should be made to NLMK, the amount of any such payment and the timing of any such payment, shall be determined reasonably by the Lender, in consultation with NLMK, and the Lender shall notify NLMK promptly upon determination that it has received any such benefit or refund.

6.5 Mitigation and Substitution 6.5.1 If at any time either party hereto becomes aware of circumstances which would or might, then or thereafter, give rise to an obligation on the part of NLMK to make any deduction, withholding or payment as described in sub-clauses 6.2 or 6.3, then, without in any way limiting, reducing or otherwise qualifying the Lender’s rights, or NLMK’s obligations, under such sub-clauses, such party shall as soon as reasonably practicable upon becoming aware of such circumstances notify the other party, and, thereupon the parties shall consider and consult with each other in good faith with a view to finding, agreeing upon and implementing a method or methods by which any such obligation may be avoided or mitigated and, to the extent that both parties can do so without taking any action which in the reasonable opinion of such party would have any adverse effect upon its business, operations or financial condition or would be in breach of any provision of the NLMK Agreements, take such reasonable steps as may be available to it to avoid such obligation or mitigate the effect of such circumstances. NLMK agrees to reimburse the Lender upon receipt of an original demand for payment for all reasonable, properly incurred and documented costs and expenses (including but not limited to legal fees) incurred by the Lender in connection with this sub-clause. 6.5.2 If the Lender ceases, as a result of the Lender’s actions, to be tax resident in Ireland for the purposes of a double taxation treaty between the Russian Federation and Ireland, and such cessation results in NLMK being required to make payments pursuant to sub-clauses 6.2 or 6.3 or Clause 8 then, except in circumstances where the Lender has ceased to be tax resident in Ireland by reason of any change of law (as described in sub-clause 5.2) (including without limitation, a change in a double taxation treaty or in such law or treaty’s application or interpretation), NLMK may require the Lender to seek the substitution of the Lender as

163 obligor under the Notes and as lender under any Loan. NLMK shall bear all costs and expenses relating to or arising out of such substitution.

6.6 Tax Treaty Relief 6.6.1 The Lender shall once in each calendar year, no later than 10 Business Days prior to the first date on which any payment by NLMK is due hereunder in that calendar year, deliver to NLMK, at the expense of NLMK (provided that the incurred expenses are reasonable and documented), a notarised tax residency certificate issued or certified by (as applicable) the competent authorities of Ireland confirming that the Lender is resident in Ireland for the purposes of the agreement between Ireland and the Russian Federation for the avoidance of double taxation with respect to income in that calendar year. At the cost of NLMK (provided that the incurred expenses are reasonable and documented), the residency certificate shall be apostilled at the Irish Department of Foreign Affairs, or otherwise approved by the competent authority in Ireland as contemplated by applicable law or regulations. The Lender shall not be responsible for any failure to provide, or any delays in providing, such tax residency certificate as a result of any action or inaction of any authority of Ireland, but shall notify NLMK promptly about any such failure or delay with a detailed description of the actions taken by the Lender to obtain such tax residency certificate. 6.6.2 If Russian legislation regulating the procedures for obtaining an exemption from Russian withholding tax on income changes, the Lender shall use its reasonable and timely efforts to assist NLMK to obtain relief from such tax pursuant to the double taxation treaty between the Russian Federation and Ireland. In all other cases, the Lender shall, subject to being fully indemnified by NLMK for all documented costs it incurs in so doing, co-operate with NLMK in completing any procedural formalities necessary for NLMK to obtain authorisation to make any payment without any deduction or withholding on account of any Taxes. 6.6.3 Notwithstanding Clause 6.4, if NLMK makes a withholding or deduction for or on account of Taxes from a payment under or in respect of this Agreement, NLMK may apply on behalf of the Lender to the relevant taxing authority of the Russian Federation (the ‘‘Russian Taxing Authority’’) for a payment to be made by such authority to the Lender with respect to such Tax. If, whether following a claim made on its behalf by NLMK or otherwise, the Lender receives such a payment (‘‘Russian Tax Payment’’) from the Russian Taxing Authority with respect to such Taxes, it will as soon as reasonably possible notify NLMK that it has received that payment (and the amount of such payment); whereupon, provided that NLMK has notified the Lender in writing of the details of an account (the ‘‘Borrower Account’’) to which a payment or transfer should be made, and that the Lender is able to make a payment or transfer under applicable laws and regulations, the Lender will, as soon as reasonably practicable, pay or transfer an amount equal to the Russian Tax Payment to the Borrower Account. 6.6.4 The Lender agrees promptly, upon becoming aware thereof, to notify NLMK if it ceases to be resident in Ireland for tax purposes. 6.6.5 Subject to Clauses 6.5 and 8.2, the Lender agrees that it shall maintain its residency for tax purposes only in Ireland. 6.6.6 The Lender represents and warrants to NLMK as of the Closing Date as follows: (i) the Lender is a resident of Ireland for taxation purposes and is subject to taxation in Ireland not merely on the basis of the source of its income or location of its property but on the basis of its registration as a legal entity, location of its management body or other similar criteria. The Lender will be able to receive certification to the effect that it is resident in Ireland for taxation purposes and, in particular, for the purposes of the Agreement between Ireland and the Russian Federation for the avoidance of double taxation with respect to taxes on income from the relevant Irish authority; (ii) at the date hereof, the Lender does not have a permanent establishment or presence outside Ireland, including in particular in the Russian Federation; (iii) the Lender does not have a branch, representation, division, bureau, office, agency or any other economically autonomous subdivision or other place of business in any other

164 country than Ireland through which the business of the Lender is wholly or partially carried out; (iv) the Lender did not explicitly grant authority to and is not aware of an implied authority for NLMK or any other person located outside Ireland to negotiate key parameters of any contracts or sign any contracts on behalf of the Lender, bind the Lender to any contracts by other means or otherwise represent the Lender in dealings with third parties; (v) the Lender has its central management and control in Ireland. The Lender’s place of effective management is only in Ireland; (vi) the directors of the Lender are Irish nationals and reside in Ireland and shall at all times act independently and exercise their authority from and within Ireland by taking all key decisions relating to the Lender in the Ireland; (vii) the Notes and the Loan will be fully accounted for by the Lender on its balance sheet, meaning that the Loan will be treated as an asset of the Lender under generally accepted accounting practice applicable in Ireland, while the Notes will be treated as a liability of the Lender under generally accepted accounting practices applicable in Ireland; (viii) the Lender does not own, either directly or indirectly, any shares of NLMK; (ix) there is no reference to the territory of Russia as the actual place of the Lender’s activity in the memorandum or articles of association of the Lender; and (x) the board of directors of the Lender is located in Ireland.

7 Conditions Precedent The obligation of the Lender to make the Advance shall be subject to the further conditions precedent that as of the Closing Date (a) the Lender shall have received the proceeds of the issue of the Notes pursuant to the Subscription Agreement and (b) the Lender shall have received the Facility Fee.

8 Change in Law; Increase in Cost 8.1 Compensation In the event that after the date of this Agreement there is any change in or introduction of any tax, law, regulation, regulatory requirement or official directive (whether or not having the force of law but, if not having the force of law, the observance of which is in accordance with the generally accepted financial practice of financial institutions in the country concerned) or in the official interpretation or application thereof by any Agency and/or any compliance by the Lender in respect of the Loan or the Facility with any request, policy or guideline (whether or not having the force of law but, if not having the force of law, the observances of which is in accordance with the generally accepted financial practice of financial institutions in the country concerned) made or issued after the date of this Agreement from or of any Agency, which: 8.1.1 subjects or will subject the Lender to any Taxes with respect to payments of principal of or interest on the Loan or any other amount payable under this Agreement (other than any Taxes payable by the Lender on its overall net income or any Taxes referred to in sub-clauses 6.2 or 6.3); or 8.1.2 increases or will increase the taxation of or changes or will change the basis of taxation of payments to the Lender of principal of or interest on the Loan or any other amount payable under this Agreement (other than any such increase or change which arises by reason of any increase in the rate of tax payable by the Lender on its overall net income or as a result of any Taxes referred to in sub-clauses 6.2 or 6.3); or 8.1.3 imposes or will impose on the Lender any other condition affecting this Agreement, the Facility or the Loan, and if as a result of any of the foregoing: (i) the cost to the Lender of making, funding or maintaining the Loan or the Facility is increased; or

165 (ii) the amount of principal, interest or other amount payable to or received by the Lender hereunder is reduced; or (iii) the Lender makes any payment or foregoes any interest or other return on or calculated by reference to the gross amount of any sum receivable by it from NLMK hereunder or makes any payment or foregoes any interest or other return on or calculated by reference to the gross amount of the Loan, then subject to the following, and in each such case: (a) the Lender shall, as soon as practicable after becoming aware of such increased cost, reduced amount or payment made or foregone, give written notice to NLMK, together with a certificate signed by one authorised officer of the Lender describing in reasonable detail the introduction or change or request which has occurred and the country or jurisdiction concerned and the nature and date thereof and demonstrating the connection between such introduction, change or request and such increased cost, reduced amount or payment made or foregone, and setting out in reasonable detail the basis on which such amount has been calculated, and enclosing all relevant supporting documents evidencing the matters set out in such certificate; and (b) NLMK, in the case of Clauses (i) and (iii) above, shall promptly on demand by the Lender, pay to the Lender such additional amount as shall be necessary to compensate the Lender for such increased cost, and, in the case of Clause (ii) above, at the time the amount so reduced would otherwise have been payable, pay to the Lender such additional amount as shall be necessary to compensate the Lender for such reduction, payment or foregone interest or other return; provided, however, the amount of such increased cost, reduced amount or payment made or foregone shall be deemed not to exceed an amount equal to the proportion thereof which is directly attributable to this Agreement and provided that the Lender shall not be entitled to such additional amount where such increased cost arises as a result of the negligence or wilful default of the Lender, provided that this sub-clause 8.1 will not apply to or in respect of any matter for which the Lender has already been compensated under sub-clauses 6.2 or 6.3.

8.2 Mitigation In the event that the Lender becomes entitled to make a claim pursuant to sub-clause 8.1, the Lender shall consult in good faith with NLMK and shall use reasonable efforts (based on the Lender’s reasonable interpretation of any relevant tax, law, regulation, requirement, official directive, request, policy or guideline) to reduce, in whole or in part, NLMK’s obligations to pay any additional amount pursuant to such sub-clause, except that nothing in this sub-clause 8.2 shall obligate the Lender to incur any costs or expenses in taking any action (other than minor costs of an administrative or similar nature) which, in the reasonable opinion of the Lender, is prejudicial to its interests, unless NLMK agrees to reimburse the Lender for such costs and expenses.

9 Covenants The covenants in this Clause 9 shall remain in force from the date of this Agreement for so long as the Loan or any other sum owing to the Lender hereunder remains outstanding.

9.1 Negative Pledge NLMK will: (a) not, and will procure that no Material Subsidiary will, create or permit to subsist any Security Interest other than a Permitted Security Interest upon the whole or any part of its respective undertaking, property, assets or revenues, present or future, to secure for the benefit of the holders of any Relevant Indebtedness: (i) payment of any sum due in respect of any such Relevant Indebtedness; (ii) any payment under any guarantee of any such Relevant Indebtedness; or (iii) any payment under any indemnity or other like obligation relating to any such Relevant Indebtedness;

166 (b) procure that no Material Subsidiary gives any guarantee of, or indemnity in respect of, any of NLMK’s Relevant Indebtedness (other than Domestic Relevant Indebtedness) to the holders thereof, without in any such case at the same time or prior thereto procuring that the Loan (x) is secured at least equally and rateably with such Relevant Indebtedness for so long as such Relevant Indebtedness is so secured or (y) has the benefit of such other guarantee, indemnity or other like obligations or such other security (in each case) as the Lender in its absolute discretion shall deem to be not materially less beneficial to it or as otherwise shall be approved by the Lender (for as long as such Relevant Indebtedness has the benefit of such other guarantee, indemnity, other like obligation or other security).

9.2 Mergers NLMK shall not enter into or become subject to, and shall not permit any Material Subsidiary to enter into or become subject to, any reorganisation (as such term is construed by applicable legislation, including, without limitation and where applicable, any amalgamation, demerger, merger or corporate reconstruction) or other analogous event (as determined by the legislation of the relevant jurisdiction) if such reorganisation or other analogous event would have a Material Adverse Effect.

9.3 Payment of Taxes NLMK shall, and shall ensure that its Subsidiaries shall, pay or discharge or cause to be paid or discharged, before the same shall become overdue, all taxes, levies, imposts or duties levied or imposed upon, or upon the income, profits or assets of NLMK or any Subsidiary (a ‘‘Relevant Tax’’), provided, however, that none of NLMK nor any of its Subsidiaries shall be required to pay or discharge or cause to be paid or discharged any Relevant Tax (x) whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with the Accounting Standards or other appropriate provision has been made or (y) where such non-payment or failure to discharge, together with non-payment or failure to discharge any other unpaid or undischarged Relevant Taxes, does not have in the aggregate a Material Adverse Effect, and provided further that in the case of either (x) or (y) above if any Relevant Tax (including any applicable penalties) is paid or discharged after becoming overdue, such payment or discharge shall be deemed to remedy any breach of this Clause 9.3 with respect to such Relevant Tax.

9.4 Delivery of Information 9.4.1 NLMK will (i) make available on its website and (ii) deliver to the Lender and the Trustee as soon as they become available, but in any event within 150 days after the end of each of its financial years, copies of NLMK’s consolidated financial statements for such financial year audited and prepared in accordance with the Accounting Standards. 9.4.2 NLMK will (i) make available on its website and (ii) deliver to the Lender and the Trustee as soon as the same become available, but in any event within 150 days after the end of the first half of each of its financial years, copies of NLMK’s consolidated financial statements for such period reviewed and prepared in accordance with the Accounting Standards. 9.4.3 NLMK will ensure that each set of consolidated financial statements delivered by it pursuant to this Clause 9.4 is accompanied by a report or review thereon by or of its auditors (including any accompanying notes). 9.4.4 NLMK will deliver to the Lender and the Trustee on each Interest Payment Date (or, if such Interest Payment Date is not a Business Day, on the first succeeding Business Day) or within 14 days of any request of the Lender or the Trustee an Officers’ Certificate stating that, to the best of the knowledge, information and belief of the signatories to such Officers’ Certificate, having made all reasonable enquiries, no Potential Event of Default or Event of Default is continuing as at a date (the ‘‘Certification Date’’) not more than 5 Business Days before the date of such certificate, or, if any Potential Event of Default or Event of Default are, to the knowledge, information and belief of such signatories, continuing as at the Certification Date, specifying such Potential Event of Default or Event of Default. 9.4.5 Subject to any restrictions under applicable law or regulations (including without limitation regarding insider dealing or market abuse), NLMK hereby undertakes that it will deliver to

167 the Lender and the Trustee, without undue delay, such additional information as it or the Trustee reasonably requires for the purposes of the discharge of the duties and discretions vested in it under this Loan Agreement or the Trust Deed, including providing, without limitation (a) an Officers’ Certificate certifying (i) those Subsidiaries which are Material Subsidiaries and (ii) as to the Notes held by or on behalf of NLMK or any member of the Group as at the date of such certificate, such Officers’ Certificate to be provided within 14 days of NLMK’s audited and consolidated annual accounts being made available pursuant to Clause 9.4.1 above, and (b) a notification whenever it or any member of the Group purchases and retains Notes for its own account. 9.4.6 NLMK undertakes to furnish to the Lender such information as the Irish Stock Exchange Limited (or any other or further stock exchange or stock exchanges on which the Notes may, from time to time, be listed or admitted to trading) may require in respect of NLMK or the Group as necessary in connection with the listing or admission to trading on such stock exchange of such instruments. 9.4.7 NLMK agrees that any information provided to the Lender pursuant to this Clause 9.4 may also be provided to the Trustee, if so requested by the Trustee, without violating any duty of confidentiality or secrecy that the Lender may owe to NLMK under the laws of Ireland.

10 Events of Default 10.1 Events of Default If one or more of the following events shall occur and be continuing (each, an ‘‘Event of Default’’), the Lender shall be entitled to exercise the remedies set forth in sub-clause 10.3: 10.1.1 NLMK fails to pay any amount of principal, interest or other amounts payable hereunder within seven Business Days (in the case of principal) or fourteen Business Days (in the case of interest or other amounts) of when the same were due hereunder; 10.1.2 NLMK fails to perform or observe any of its other obligations under this Agreement and except where such default is not capable of remedy, such default remains unremedied for the period of 45 calendar days after written notice thereof, addressed to NLMK by the Lender, has been delivered to NLMK; or 10.1.3 any present or future Indebtedness of NLMK or any Material Subsidiary (i) is not paid upon the later of (a) when due upon final maturity or (b) if there is an originally applicable grace period in respect of such Indebtedness at final maturity, upon the expiration of such originally applicable grace period or (ii) becomes due and payable prior to its specified maturity as a result of an event of default (however described); provided that, either, (x) the individual amount of such Indebtedness that is not so paid (after the expiration of any such originally applicable grace period) or so due and payable equals or exceeds U.S.$50,000,000 or (y) the aggregate amount of such Indebtedness that is not so paid (after the expiration of any such originally applicable grace period) or so due and payable equals or exceeds U.S.$150,000,000 or, in the case of an amount specified in (i) or (ii) above, its U.S. Dollar Equivalent; or 10.1.4 an effective resolution is passed by NLMK or an order of a court of competent jurisdiction is made (and has come into force) that NLMK be wound-up or dissolved, in each case otherwise than for the purposes of or pursuant to a reorganisation, consolidation, amalgamation, merger or reconstruction permitted by this Agreement or the terms of which shall have previously been approved in writing by the Lender; or 10.1.5 an effective resolution is passed by a Material Subsidiary or an order of a court of competent jurisdiction is made (and has come into force) for the winding-up or dissolution of any Material Subsidiary except (i) for the purposes of or pursuant to a consolidation or amalgamation with or merger into NLMK or any other Subsidiary (provided such Subsidiary will be a Material Subsidiary following such consolidation, amalgamation or merger), (ii) for the purposes of or pursuant to a reorganisation, consolidation, amalgamation, merger or reconstruction permitted by this Agreement or the terms of which shall have previously been approved in writing by the Lender or (iii) by way of a voluntary winding-up or dissolution and there are surplus assets in any Material Subsidiary and any such surplus assets attributable to NLMK and/or any Material Subsidiary are distributed to NLMK and/or any other Subsidiary

168 (provided such Subsidiary will be a Material Subsidiary following such winding-up or dissolution); or 10.1.6 an encumbrancer takes possession or a receiver is appointed of the whole or a material part of the assets or undertaking of NLMK or any Material Subsidiary and the same has a Material Adverse Effect, if such possession or appointment is not discharged or rescinded within 120 days thereof (or such longer period as the Lender, acting reasonably, may consider appropriate in relation to the jurisdiction concerned); or 10.1.7 a distress, execution or seizure before judgment is levied or enforced upon the whole or a material part of the property of NLMK or any Material Subsidiary and the same has a Material Adverse Effect, unless such distress, execution or seizure is stayed or discharged within 120 days of its commencement (or such longer period as the Lender, acting reasonably, may consider appropriate in relation to the jurisdiction concerned); or 10.1.8 NLMK or any Material Subsidiary through an official action of the board of directors of NLMK or such Material Subsidiary (as the case may be) announces its inability to pay, or is unable to pay its debts generally as and when they fall due; or 10.1.9 proceedings shall have been initiated against NLMK or any Material Subsidiary for its liquidation, insolvency, bankruptcy or dissolution under any applicable bankruptcy or insolvency law and, in respect of a Material Subsidiary only, such liquidation, insolvency, bankruptcy or dissolution would have a Material Adverse Effect, and such proceedings shall not have been discharged or stayed within a period of 120 days (or such longer period as the Lender, acting reasonably, may consider appropriate in relation to the jurisdiction concerned) unless, and for so long as, the Lender, acting reasonably, is satisfied that it is being contested in good faith; or 10.1.10 NLMK or any Material Subsidiary shall initiate or consent to proceedings for its liquidation, insolvency, bankruptcy or dissolution relating to itself under any applicable bankruptcy, or insolvency law or make a general assignment for the benefit of, or enters into any general composition with, its creditors generally, unless, in respect of a Material Subsidiary only, such liquidation, insolvency, bankruptcy or dissolution would not have a Material Adverse Effect; or 10.1.11 a moratorium is agreed or declared in respect of any Indebtedness of NLMK or any Material Subsidiary and the same has a Material Adverse Effect, or any governmental authority or agency condemns, seizes, compulsorily purchases, transfers or expropriates all or (in the reasonable opinion of the Lender) a material part of the assets, licences or shares of NLMK or any Material Subsidiary and in respect of a Material Subsidiary only, the same has a Material Adverse Effect; or 10.1.12 any event occurs which under the laws of Ireland, the Russian Federation or, in the case of a Material Subsidiary, the jurisdiction of its incorporation (if different), has an analogous effect to any of the events referred to in Clauses 10.1.4 to 10.1.11 above.

10.2 Notice of Default NLMK shall deliver to the Lender and the Trustee, promptly after becoming aware thereof, written notice in the form of an Officers’ Certificate of any event which is an Event of Default, or a Potential Event of Default, its status and what action, if any, NLMK is taking or proposes to take with respect thereto.

10.3 Default Remedies If any Event of Default shall occur and be continuing, the Lender may, by notice in writing to NLMK, (a) declare the obligations of the Lender hereunder to be immediately terminated, whereupon such obligations shall terminate, and (b) declare the principal outstanding amount of the Loan, together with accrued interest to such date, to be immediately due and payable, whereupon all such amounts shall become immediately due and payable, all without diligence, presentment, demand of payment or protest of any kind, which are expressly waived by NLMK.

169 10.4 Rights Not Exclusive The rights provided for herein are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law.

10.5 Right of Set-off If any Event of Default shall occur and be continuing, NLMK authorises the Lender to proceed, to the fullest extent permitted by applicable law, without prior notice, by right of set-off, banker’s lien, counterclaim or otherwise, against any assets of NLMK in any currency that may at any time be in the possession of the Lender, at any branch or office, to the full extent of all amounts due and payable to the Lender hereunder.

11 Indemnity 11.1 Indemnification NLMK undertakes to the Lender, that if the Lender, or any director, officer, employee or agent of the Lender (each an ‘‘indemnified party’’) incurs any loss, liability, claim, demand or damage, charge or expense (including without limitation reasonable legal fees, costs and expenses) (a ‘‘Loss’’) as a result of or in connection with the Loan or this Agreement (or enforcement thereof) (excluding any Loss that is the subject of the undertakings contained in Clauses 8 and 12.8 of this Agreement (it being understood that the Lender may not recover twice in respect of the same Loss) and excluding any taxes (which exclusion shall, for the avoidance of doubt, be without prejudice to the provisions of Clause 12.4 below)), and/or the issue, constitution, sale, listing and/or enforcement of the Notes and/or the Notes being outstanding, NLMK shall pay to the Lender within 5 Business Days of demand an amount equal to such Loss and (without duplication) all documented costs, charges and expenses which it or any indemnified party has reasonably incurred or may reasonably incur in connection with investigating, disputing or defending any such action or claim as such costs, charges and expenses are incurred unless such Loss, cost, charge or expense was either caused by any indemnified party’s gross negligence, bad faith, fraud or wilful misconduct or arises out of a breach of the representations, warranties or undertakings of the Lender contained in this Agreement, the Trust Deed, the Paying Agency Agreement or the Subscription Agreement. The Lender shall not have any duty or obligation whether as fiduciary or trustee for any indemnified party or otherwise, to recover any such payment or to account to any other person for any amounts paid to it under this Clause. The indemnity set out in this Clause 11.1 shall not apply to: (a) any indirect Loss, or special or punitive damages, or (b) any loss of profits, suffered or incurred by any indemnified party, whether any claim for such loss or damage is based on tort (including negligence), strict liability, contract (including breach of or failure to perform the agreement or the breach of any representation or warranty hereunder, whether express or implied) or otherwise, other than any such indirect Loss, special or punitive damages or loss of profits of a person that is not an indemnified party and which have been awarded against an indemnified party where the indemnified party has complied in full with any requirements imposed upon it by Clause 11.2.

11.2 Conduct of Claims 11.2.1 NLMK agrees that: (i) if it becomes aware of any claims, actions, suits, proceedings (including any government or regulatory investigation), demands, judgments and awards, joint or several (each a ‘‘Claim’’) relevant for the purpose of Clause 11.1 or any matter which may give rise to a Claim, NLMK shall notify the Lender, on behalf of the indemnified parties thereof and shall provide them with such information and copies of such documents relating to the Claim as the Lender, on behalf of the indemnified parties may reasonably request; and (ii) it will not, without the prior written consent of the Lender, on behalf of the indemnified parties, settle or compromise or consent to the entry into of any judgment with respect to any pending or threatened Claim in respect of which indemnification may be sought under Clause 11.1 (whether or not any indemnified party is an actual or potential party

170 to such Claim) unless such settlement, compromise or consent includes an unconditional release of the indemnified party from all liability arising out of such Claim and does not include a statement as to, or an admission of, fault, culpability or failure to act by or on behalf of any indemnified party. 11.2.2 Promptly after it becomes aware of any Claim made or threatened within the scope of the indemnity set out above, the Lender shall, in strict confidence, notify NLMK of the relevant Claim (indicating the nature of the allegations being made), provided that any failure to so notify shall not relieve NLMK of its obligation to indemnify under Clause 11.1 unless and to the extent that NLMK did not otherwise learn of such action and such failure results in NLMK being materially prejudiced. 11.2.3 Subject to this Clause 11.2.3 NLMK may elect to participate in the defence of any Claim. If it so elects after receipt of the notice referred to in Clause 11.2.2, NLMK may assume the defence of the Claim at its own expense with legal advisers chosen by it and reasonably satisfactory to the indemnified party. Notwithstanding such election, the indemnified parties may employ separate legal advisers and NLMK shall bear the reasonable fees and expenses of such separate legal advisers if (i) NLMK has failed within a reasonable time to retain legal advisers reasonably satisfactory to the Lender; (ii) the Lender shall have reasonably concluded that there may be legal defences available to them that are different from or in addition to those available to NLMK; or (iii) the parties in any such Claim include both NLMK and an indemnified party and representation of all parties by the same legal advisers would be inappropriate due to actual or potential differing interests between them, provided that (unless it would be inappropriate due to actual or potential differing interests among indemnified parties) NLMK shall not be responsible for the fees and expenses of more than one counsel (including local counsel) with respect to all indemnified parties in a Claim for which indemnification is sought without the consent of NLMK. If NLMK assumes the defence of the Claim, NLMK shall not be liable for any fees or expenses of legal advisers of the indemnified parties incurred thereafter in connection with the Claim, except as stated above. 11.2.4 NLMK shall not be liable in respect of any settlement or any action effected without its prior written consent, such consent not to be unreasonably withheld or delayed. 11.2.5 Save as provided in Clause 11.1 and 11.2, indemnified parties other than the Lender will not be entitled directly to enforce their rights against NLMK under this Agreement, under the Contracts (Rights of Third Parties) Act 1999 or otherwise. The Lender (without obligation) has the right to enforce any rights of the indemnified parties on their behalf. NLMK and the Lender may agree to terminate this Agreement or vary any of its terms without the consent of any indemnified party and the Lender will have no responsibility to any indemnified party under or as a result of this Agreement.

11.3 Independent Obligation Sub-clause 11.1 constitutes a separate and independent obligation of NLMK from its other obligations under or in connection with this Agreement and shall not affect, or be construed to affect, any other provision of this Agreement.

11.4 Evidence of Loss A certificate of the Lender setting forth the amount of Loss described in Clause 11.1 and specifying in full detail the basis therefor shall, in the absence of manifest error, be prima facie evidence of the amount of such losses, expenses and liabilities.

11.5 Survival The obligations of NLMK pursuant to Clause 11.1 shall survive the execution and delivery of this Agreement, the drawdown of the Facility and the repayment of the Loan and all payments due thereunder, in each case by NLMK.

171 12 General 12.1 Evidence of Debt The entries made by the Lender in the accounts maintained by the Lender in accordance with its usual practice and evidencing the amounts from time to time lent by and owing to it hereunder shall, in the absence of manifest error, be prima facie evidence of the existence and amounts of NLMK’s obligations recorded herein.

12.2 Stamp Duties NLMK shall pay all stamp, registration and documentary taxes or duties (if any) imposed on or payable by NLMK or the Lender in the United Kingdom, the Russian Federation or Ireland which may be payable or determined to be payable in connection with the execution, delivery, performance, enforcement or admissibility in evidence of this Agreement. NLMK shall indemnify the Lender against any and all costs and expenses which may be incurred or suffered by the Lender with respect to, or resulting from, delay or failure by NLMK to comply with its obligation under this Clause 12.2 to pay such taxes or similar charges.

12.3 VAT Where a sum is payable under this Agreement to the Lender, NLMK will, in addition, pay in respect of VAT: 12.3.1 where the payment (or any part of it) constitutes the consideration (or any part thereof) for any supply of services made to NLMK, such amounts as equal any VAT properly chargeable thereon on receipt of a valid VAT invoice; 12.3.2 where the payment is to reimburse or indemnify the Lender for any cost, charge or expense incurred by it (except where the payment falls within sub-clause 12.3.3 below), such amount as equals any VAT, which the Lender represents in good faith is not recoverable by it or by the representative member of any VAT group of which it is a member, charged to or incurred by the Lender in respect of any cost, charge or expense which gives rise to or is reflected in the payment on production of relevant invoices or equivalent evidence of such payment having been made; and 12.3.3 where the payment is in respect of costs or expenses incurred by the Lender as agent for NLMK and except where section 47(3) of the United Kingdom Value Added Tax Act 1994 (or any equivalent legislation in a jurisdiction outside the United Kingdom) applies, such amount as equals the amount included in the costs or expenses in respect of VAT and in such case the Lender shall use reasonable efforts to procure that the actual supplier of goods or services which the Lender received as agent issues a valid VAT invoice directly to NLMK in respect of the relevant supply.

12.4 Payment Gross-Up Where any payment is made under this Agreement to the Lender pursuant to an indemnity, compensation or reimbursement provision, the sum payable shall take into account (i) any charge to Taxation in the hands of the Lender in respect of such payment and (ii) any tax relief available to the Lender in respect of the matter giving rise to the payment and which may be offset against the charge to Taxation, such that the Lender shall be left with a sum equal to the sum that it would have retained in the absence of such a charge to Taxation and such tax relief.

12.5 Waivers No failure to exercise and no delay in exercising, on the part of the Lender or NLMK, any right, power or privilege hereunder and no course of dealing between NLMK and the Lender shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and not exclusive of any rights, or remedies provided by applicable law.

172 12.6 Notices 12.6.1 Method Each communication under this Agreement shall be made by fax or otherwise in writing (by hand, courier or pre-paid express delivery service). Each communication or document to be delivered to any party under this Agreement shall be sent to that party at the fax number or postal address, and marked for the attention of the person (if any), from time to time designated by that party to each other party for the purpose of this Agreement. The initial fax number, postal address and person so designated by the parties under this Agreement are set out below: if to NLMK: Address 2, pl. Metallurgov, Lipetsk 348040, Russia Fax: +7 4742 44 40 80 Attention: Eugene Ovcharov, Director for Corporate Finance Nelly Mescheryakova, Head of Corporate Liquidity & Financial Risks Management Department Alexander Kravchenko, Head of Legal Department E-mail: [email protected] [email protected] [email protected] if to the Lender: Address 5 Harbourmaster Place IFSC Dublin 1 Ireland Fax: +353 (1) 680 6050 Attention: The Directors E-mail: [email protected] or to such other address or fax number as any party may hereafter specify in writing to the other.

12.6.2 Deemed Receipt Any communication from any party to any other under this Agreement shall be effective, (if by fax) when the relevant delivery receipt is received by the sender and, (if in writing) when delivered; provided that any communication which is received (or deemed to take effect in accordance with the foregoing) outside business hours or on a non-business day in the place of receipt shall be deemed to take effect at the opening of business on the next following business day in such place. Any communication delivered to any party under this Agreement which is to be sent by fax will be written legal evidence.

12.7 Assignment 12.7.1 Subject to Clauses 12.7.2 and 12.7.3, this Agreement shall inure to the benefit of and be binding upon the parties, their respective successors and any permitted assignee or transferee of some or all of a party’s rights under this Agreement. Any reference in this Agreement to any party shall be construed accordingly and, in particular, references to the exercise of any rights, benefits and discretions or the making of any determination (including forming an opinion) by, and the delivery of notices, certificates and information to, the Lender, shall include references to the exercise of any such rights, benefits or discretions by or the making of such determination (including forming an opinion) by the Trustee (as Trustee). Notwithstanding the foregoing, the Trustee shall not be entitled to participate in any determinations by, and the delivery of notices, certificates and information to, the Lender or

173 any discussions between the Lender and NLMK or any agreements of the Lender or NLMK, pursuant to Clauses 6.4, 6.5 or 8. 12.7.2 NLMK shall not assign or transfer all or any part of its rights or obligations hereunder to any other party or person. 12.7.3 Subject to the provisions of Clause 16 of the Trust Deed, the Lender may not assign or transfer, in whole or in part, any of its rights, obligations and benefits under this Agreement other than the Reserved Rights except that the Lender may charge by way of first fixed charge in favour of the Trustee (as Trustee) certain of the Lender’s rights and benefits under this Agreement and assign to the Trustee certain rights, interests and benefits under this Agreement, in each case, as set out in Clause 4 of the Trust Deed.

12.8 Currency Indemnity To the fullest extent permitted by law, the obligation of NLMK in respect of any amount due in Dollars under this Agreement shall, notwithstanding any payment in any other currency (whether pursuant to a judgment or otherwise), be discharged only to the extent of the amount in Dollars that the Lender may, in accordance with normal banking procedures, purchase with the sum paid in such other currency (after any reasonable premium and costs of exchange) on the Business Day immediately following the day on which the Lender receives such payment. If the amount in Dollars that may be so purchased for any reason falls short of the amount originally due (the ‘‘Due Amount’’), NLMK hereby agrees to indemnify and hold harmless the Lender against any deficiency in Dollars. Any obligation of NLMK not discharged by payment in Dollars shall, to the fullest extent permitted by applicable law, be due as a separate and independent obligation and, until discharged as provided herein, shall continue in full force and effect. If the amount in Dollars that may be purchased exceeds that Due Amount the Lender shall promptly pay the amount of the excess to NLMK.

12.9 Contracts (Rights of Third Parties) Act 1999 Except as otherwise specifically provided herein and other than in the case of the Trustee who shall have rights under the Contracts (Rights of Third Parties) Act 1999 under this Agreement, a person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement. This Agreement may be terminated and any term may be amended or waived without the consent of any such person so expressly provided for under this Agreement.

12.10 Governing Law This Agreement and any non-contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with English law.

12.11 Jurisdiction The parties irrevocably agree that any dispute arising out of or in connection with this Agreement, including a dispute as to the formation, validity, existence breach, enforceability, applicability or termination of this Agreement and/or this Clause 12.11 or the consequences of its or their nullity (a ‘‘Dispute’’), shall be referred to and finally resolved by arbitration seated in London, England. The arbitration shall be conducted in the English language by three arbitrators, in accordance with the rules set down by the LCIA (formerly the London Court of International Arbitration (‘‘LCIA Rules’’) in effect at the time of the arbitration, except as they may be modified herein of by mutual agreement of the parties. The LCIA Rules are deemed to be incorporated by reference into this Clause. The claimant shall nominate an arbitrator in its request for arbitration, and the respondent shall nominate an arbitrator within 30 days of receipt of the request for arbitration. The two arbitrators so nominated shall jointly nominate a third arbitrator within 30 days of the nomination of the second arbitrator. The third arbitrator shall be the Chairman of the tribunal. If any of the three arbitrators is not nominated within the time periods prescribed above, any party may request that the LCIA chooses and appoints that arbitrator. The arbitration award shall be final and binding on the parties. The parties agree to exclude the jurisdiction of the English court under Sections 45 and 69 of the Arbitration Act 1996.

174 12.12 Waiver of Immunity To the extent that NLMK or the Lender may now or hereafter be entitled, in any jurisdiction in which any legal action or proceeding may at any time be commenced with respect to this Agreement, to claim for itself or any of its undertaking, properties, assets or revenues present or future any immunity (sovereign or otherwise) from suit, jurisdiction of any court, attachment prior to judgment, attachment in aid of execution of a judgment, execution of a judgment or award or from set-off, banker’s lien, counterclaim or any other legal process or remedy with respect to its obligations under this Agreement and/or to the extent that in any such jurisdiction there may be attributed to NLMK or the Lender any such immunity (whether or not claimed), NLMK and the Lender hereby irrevocably agree not to claim, and hereby waive, any such immunity.

12.13 Severability In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

12.14 Counterparts This Agreement may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same agreement.

12.15 Language The language which governs the interpretation of this Agreement is the English language.

12.16 Amendments Except as otherwise provided by its terms, this Agreement may not be varied except by an agreement in writing signed by the parties.

12.17 Partial Invalidity The illegality, invalidity or unenforceability to any extent of any provision of this Agreement under the law of any jurisdiction shall affect its legality, validity or enforceability in such jurisdiction to such extent only and shall not affect its legality, validity or enforceability under the law of any other jurisdiction, nor the legality, validity or enforceability of any other provision.

12.18 Prescription In the event that any Notes become void pursuant to Condition 10 of the Notes, the Lender shall forthwith repay to NLMK the principal amount of such Notes subject to the Lender having previously received from NLMK, and being in possession of, a corresponding amount in respect of principal pursuant to this Agreement.

12.19 Limited Recourse and Non-Petition NLMK hereby agrees that, notwithstanding any other provisions hereof, it shall have recourse in respect of any claim against the Lender only to sums in respect of principal, interest or other amounts (if any), as the case may be, received by or for the account of the Lender pursuant to this Agreement (after deduction or withholding of such taxes as may be required to be made by the Lender by law in respect of each such sum or in respect of the Notes and for which the Lender has not received a corresponding payment (also after deduction or withholding of such taxes or duties as may be required to be made by the Lender) in respect thereof pursuant to this Agreement) (the ‘‘Lender Assets’’), subject always to (i) the Security Interests and (ii) to the fact that any claims of the Managers (as defined in the Subscription Agreement) shall rank in priority to any claims of NLMK hereunder and that any such claim by any and all such Managers or NLMK shall be reduced pro rata so that the total of all such claims does not exceed the aggregate value of the Lender Assets after meeting claims secured on them.

175 Neither NLMK nor any person acting on behalf of it shall be entitled to take any further steps against the Lender to recover any further sums and no debt shall be owed by the Lender to NLMK in respect of any such further sum. In particular, neither NLMK nor any other person acting on behalf of it shall be entitled at any time to institute against the Lender, or join in any institution against the Lender of any bankruptcy, administration, moratorium, reorganisation, controlled management, arrangement, insolvency, examinership, winding-up or liquidation proceedings or similar insolvency proceedings under any applicable bankruptcy or similar law in connection with any obligation of the Lender relating to the Notes or otherwise owed to the Lender’s creditors, save for lodging a claim in the liquidation of the Lender which is initiated by another party or taking proceedings to obtain a declaration or judgment as to the obligations of the Lender. No party to this Agreement shall have any recourse against any director, shareholder, or officer of the Lender in respect of any obligations, covenants or agreement entered into or made by the Lender in respect of this Agreement, except to the extent that any such person acts in bad faith or is negligent or is wilfully in default in the context of its obligations. The provisions of this Clause 12.19 shall survive the termination of this Agreement.

176 TERMS AND CONDITIONS OF THE NOTES The following is the text of the Terms and Conditions of the Notes, which contains summaries of certain provisions of the Trust Deed, and which (subject to completion and amendment) will be attached to the Notes in definitive form (if any) and (subject to the provisions thereof) will apply to the Global Certificates. The U.S.$800,000,000 4.45 per cent. Loan Participation Notes due 2018 (the ‘‘Notes’’ which expression includes any further Notes issued pursuant to Condition 14 and forming a single series herewith), without coupons, of Steel Funding Limited (the ‘‘Issuer’’ which expression shall include any entity substituted for the Issuer in accordance with the Trust Deed) are constituted by, are subject to, and have the benefit of a trust deed (the ‘‘Trust Deed’’, which expression includes such trust deed as from time to time modified in accordance with the provisions therein contained and any deed or other document expressed to be supplemental thereto, as from time to time so modified) dated 19 February 2013 and made between the Issuer and Deutsche Trustee Company Limited (the ‘‘Trustee’’, which expression shall include any successor as trustee) as trustee for the Noteholders (as defined below). The Issuer has authorised the creation, issue and sale of the Notes for the sole purpose of financing a U.S.$800,000,000 loan (the ‘‘Loan’’) to OJSC Novolipetsk Steel (‘‘NLMK’’). The terms of the Loan are set forth in a loan agreement (the ‘‘Loan Agreement’’) dated 14 February 2013 between the Issuer and NLMK. In each case where amounts of principal, interest and additional amounts (if any) are stated herein or in the Trust Deed to be payable in respect of the Notes, the obligations of the Issuer to make any such payment shall constitute an obligation only to account to the Noteholders on each date upon which such amounts of principal, interest and additional amounts (if any) are due in respect of the Notes, for an amount equivalent to sums of principal, interest and additional amounts (if any) actually received by or for the account of the Issuer pursuant to the Loan Agreement, less any amounts in respect of the Reserved Rights (as defined in the Trust Deed). Noteholders must therefore rely on the covenant to pay under the Loan Agreement and the credit and financial standing of NLMK. Noteholders shall have no recourse (direct or indirect) to any other asset of the Issuer. The Issuer has charged, by way of first fixed charge in favour of the Trustee for the benefit of itself and the Noteholders, certain of its rights and interests as lender under the Loan Agreement and under the Account (as defined in the Trust Deed) as security for its payment obligations in respect of the Notes and under the Trust Deed (the ‘‘Charge’’) and has assigned certain other rights under the Loan Agreement to the Trustee (the ‘‘Assigned Rights’’ and, together with the Charge, the ‘‘Security Interests’’), in each case excluding the Reserved Rights. In certain circumstances, the Trustee can (subject to it being indemnified and/or secured and/or prefunded to its satisfaction) be required by Noteholders holding in aggregate at least 25 per cent. of the principal amount of the Notes outstanding (as defined in the Trust Deed) or by an Extraordinary Resolution (as defined in the Trust Deed) of the Noteholders to exercise certain of its powers under the Trust Deed (including those arising under the Security Interests). Payments in respect of the Notes will be made (subject to the receipt of the relevant funds from NLMK under the Loan Agreement) pursuant to a paying agency agreement (the ‘‘Paying Agency Agreement’’) dated 14 February 2013 and made between the Issuer, NLMK, Deutsche Bank AG, London Branch as the principal paying agent, and a transfer agent (the ‘‘Principal Paying Agent’’, the ‘‘Regulation S Transfer Agent’’, which expressions shall include any successors), Deutsche Bank Luxembourg S.A. as the Regulation S registrar (the ‘‘Regulation S Registrar’’, which expression shall include any successors), Deutsche Bank Trust Company Americas as the Rule 144A registrar, the U.S. paying agent and a transfer agent (the ‘‘Rule 144A Registrar’’ (and together with the Regulation S Registrar, the ‘‘Registrars’’ and each a ‘‘Registrar’’)), the ‘‘U.S. Paying Agent’’ and the ‘‘Rule 144A Transfer Agent’’ (and together with the Regulation S Transfer Agent, the ‘‘Transfer Agents’’ and each a ‘‘Transfer Agent’’), which expressions shall include any successors, and the U.S. Paying Agent together with the Principal Paying Agent, the ‘‘Paying Agents’’) and the Trustee. References herein to the ‘‘Agents’’ are to the Registrars, the Paying Agents and the Transfer Agents and any reference to an ‘‘Agent’’ is to any one of them. Copies of the Trust Deed, the Loan Agreement and the Paying Agency Agreement are available for inspection during normal business hours at (i) the registered office of the Trustee being, at the date hereof, at Winchester House, 1 Great Winchester Street, London EC2N 2DB; (ii) the registered office of the Issuer being, at the date hereof, 5 Harbourmaster Place, IFSC, Dublin 1, Ireland ; and (iii) at the specified office of the Principal Paying Agent, the initial specified office of which is set out below.

177 Certain provisions of these terms and conditions (the ‘‘Conditions’’) are summaries or restatements of, and are subject to, the detailed provisions of the Trust Deed, the Loan Agreement (the form of which is scheduled to and incorporated in the Trust Deed) and the Paying Agency Agreement. Noteholders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and are deemed to have notice of all the provisions of the Loan Agreement and the Paying Agency Agreement that are applicable to them. Unless otherwise stated, terms not defined herein shall have the meanings given to them in the Trust Deed.

1 Status The Notes are limited recourse secured obligations of the Issuer. The sole purpose of the issue of the Notes is to provide the funds for the Issuer to finance the Loan. The Notes constitute the obligation of the Issuer to apply the proceeds from the issue of the Notes solely for financing the Loan and to account to the Noteholders for an amount equivalent to sums of principal, interest and additional amounts (if any) actually received (after deduction or withholding of such taxes or duties as may be required to be made by the Issuer by law in respect of each such sum to the extent that the Issuer has not received a corresponding payment (also after deduction or withholding of such taxes or duties as may be required to be made by the Issuer) in respect thereof) by or for the account of the Issuer pursuant to the Loan Agreement less any amount in respect of the Reserved Rights. The Trust Deed provides that payments in respect of the Notes equal to the sums actually received by or for the account of the Issuer by way of principal, interest or additional amounts (if any) pursuant to the Loan Agreement, less any amount in respect of the Reserved Rights will be made pro rata among all Noteholders (subject to Condition 7), on the Business Day following the date of, and in the currency of, and subject to the conditions attaching to, the equivalent payment pursuant to the Loan Agreement. The Issuer shall not be liable to make any payment in respect of the Notes other than as expressly provided herein and in the Trust Deed. As provided therein, the Issuer shall be under no obligation to exercise in favour of the Noteholders any rights of set-off or to combine accounts or counterclaim that may arise out of other transactions between the Issuer and NLMK. Noteholders have notice of, and have accepted, these Conditions and the contents of the Trust Deed, the Paying Agency Agreement and the Loan Agreement. It is hereby expressly provided that, and Noteholders are deemed to have accepted that: (a) neither the Issuer nor the Trustee makes any representation or warranty in respect of, or shall at any time have any responsibility for, or, (in the case of the Issuer) save as otherwise expressly provided in the Trust Deed, in Condition 1(f) below or in the Loan Agreement (in the case of the Issuer), any liability or obligation in respect of the performance and observance by NLMK of its obligations under the Loan Agreement or the recoverability of any sum of principal or interest (or any additional amounts) due or to become due from NLMK under the Loan Agreement save that nothing in this Condition shall absolve the Trustee from responsibility and liability for performance of its trusts, duties and obligations pursuant to, and subject to the terms of, the Trust Deed; (b) neither the Issuer nor the Trustee shall at any time have any responsibility for, or obligation or liability in respect of, the condition (financial or otherwise), creditworthiness, affairs, status, nature or prospects of NLMK; (c) neither the Issuer nor the Trustee shall at any time be liable for any representation or warranty or any act, default or omission of NLMK under or in respect of the Loan Agreement; (d) neither the Issuer nor the Trustee shall at any time have any responsibility for, or liability or obligation in respect of, the performance and observance by the Agents of their respective obligations under the Paying Agency Agreement; (e) the payment of principal, interest and other amounts, if any, under, and performance of the terms of, the Notes depend upon performance by NLMK of its obligations under the Loan Agreement, and NLMK’s credit and financial standing; (f) the Issuer and the Trustee shall be entitled to rely on delivery to them of Officers’ Certificates (as defined in the Trust Deed) and/or any other certificates (whether or not addressed to the Issuer

178 or the Trustee) from NLMK as a means of monitoring whether NLMK is complying with its obligations under the Loan Agreement or as to the identity of NLMK’s Material Subsidiaries (as defined in the Loan Agreement) and shall not otherwise be responsible for investigating any aspect of NLMK’s performance in relation thereto and, (in the case of the Issuer) subject as further provided in the Trust Deed, neither the Issuer as lender under the Loan Agreement nor the Trustee will be liable for any failure to make the usual or any investigations which might be made by a lender or a security holder (as applicable) in relation to the property which is subject to the Security Interests and held by way of security for the Notes, and shall not be bound to enquire into or be liable for any defect or failure in the right or title of the Issuer to the property which is subject to the Security Interests whether such defect or failure was known to the Trustee or might have been discovered upon examination or enquiry or whether capable of remedy or not, nor will the Trustee have any liability for the enforceability of the security created by the Security Interests whether as a result of any failure, omission or defect in registering or filing or otherwise protecting or perfecting such security; the Trustee has no responsibility for the value of such security; (g) neither the Trustee nor the Issuer shall at any time be required to expend or risk its own funds or otherwise incur any financial liability in the performance of its obligations or duties or the exercise of any right, power, authority or discretion pursuant to these Conditions until the Issuer, or the Trustee, as the case may be, has received an indemnity and/or security to its satisfaction and/or the funds that are necessary to cover the costs and expenses in connection with such performance or exercise, or has been (in its sole discretion) sufficiently assured that it will receive such funds; and (h) the Issuer will not be liable to make any payments to compensate for any withholding or deduction required to be made by or on behalf of the Issuer in respect of any payment relating to the Notes, or for any payment for or on account of tax required to be made by the Issuer on or in relation to any sum received by it under the Loan Agreement, save to the extent that it has received additional amounts under the Loan Agreement in respect of such withholding or deduction or payment. The Issuer shall not be obliged to take any actions or measures as regards such deduction or withholding or payment, other than those set out in this context in the Loan Agreement. The Trustee shall have no liability in respect of any such deduction, withholding or payment. Under the Trust Deed, the obligations of the Issuer in respect of the Notes rank pari passu and rateably without any preference among themselves. In the event that the payments under the Loan Agreement are made by NLMK to, or to the order of, the Trustee or (subject to the provisions of the Trust Deed) the Principal Paying Agent, they will pro tanto, to the extent of such payment, satisfy the obligations of the Issuer in respect of the Notes, unless, upon the due presentation of a Note, payment is improperly withheld or refused. Save as otherwise expressly provided herein and in the Trust Deed, no proprietary or other direct interest in the Issuer’s right under or in respect of the Loan Agreement or the Loan exists for the benefit of the Noteholders. Subject to the terms of the Trust Deed, no Noteholder will have any entitlement to enforce the Loan Agreement or direct recourse to NLMK except through action by the Trustee pursuant to the relevant Security Interests granted to the Trustee in the Trust Deed. Neither the Issuer nor, following the enforcement of the Security Interests created in the Trust Deed, the Trustee shall be required to take any steps, actions or proceedings to enforce payment under the Loan Agreement unless it has been indemnified and/or secured and/or prefunded by the Noteholders to its satisfaction. As provided in the Trust Deed, and notwithstanding any other provision hereof, the obligations of the Issuer are solely to make payments of amounts in aggregate equal to each sum actually received by or for the account of the Issuer pursuant to the Loan Agreement from NLMK in respect of principal, interest, additional amounts (if any), as the case may be, (less any amount in respect of the Reserved Rights) (after deduction or withholding of such taxes or duties as may be required to be made by the Issuer by law in respect of each such sum or in respect of the Notes and for which the Issuer has not received a corresponding payment (also after deduction or withholding of such taxes or duties as may be required to be made by the Issuer) in respect thereof pursuant to the Loan Agreement), the right to which will be subject to the Security Interests as provided in the Trust Deed. Accordingly, all payments to be made by the Issuer under the Notes will be made only from and to the extent of such

179 sums received or recovered by or on behalf of the Issuer or the Trustee (following a Relevant Event (as defined in the Trust Deed) or (if applicable) an Event of Default (as defined in the Loan Agreement)). Noteholders shall look solely to such sums for payments to be made by the Issuer under the Notes, the obligation of the Issuer to make payments in respect of the Notes will be limited to such sums and Noteholders will have no further recourse to the Issuer or any of the Issuer’s other assets (other than those subject to the Security Interests) in respect thereof. Noteholders must therefore rely upon the covenant to pay under the Loan Agreement and the credit and financial standing of NLMK and no other assets of the Issuer (other than those subject to the Security Interests) will be available to the Noteholders. Notwithstanding any other provisions of these Conditions and the provisions in the Trust Deed, the Trustee and the Noteholders shall have recourse only to the Security Interests in accordance with Clause 4 of the Trust Deed. After realisation of the security which has become enforceable and distribution of the proceeds in accordance with Clause 8 of the Trust Deed, the obligations of the Issuer with respect to the Trustee and the Noteholders in respect of the Notes shall be satisfied and none of the foregoing parties may take any further steps against the Issuer to recover any further sums in respect thereof and the right to receive any such sums shall be extinguished. In particular, none of the Noteholders, the Trustee, nor any other person acting on behalf of any of them shall be entitled at any time to institute against the Issuer, or join in any institution against the Issuer of, any bankruptcy, administration, moratorium, reorganisation, controlled management, arrangement, insolvency, examinership, winding-up or liquidation proceedings or similar insolvency proceedings under any applicable bankruptcy or similar law in connection with any obligation of the Issuer relating to the Notes or otherwise owed to the creditors or the Trustee, save for lodging a claim in the liquidation of the Issuer which is initiated by another party or taking proceedings to obtain a declaration or judgment as to the obligations of the Issuer. No Noteholder or the Trustee shall have any recourse against any director, shareholder, or officer of the Issuer in respect of any representations, warranties, obligations, covenants or agreements entered into or made by the Issuer in respect of the Notes except to the extent that any such person acts in bad faith or is negligent or is wilfully in default in the context of its obligations.

2 Form, Denomination, Register and Transfers 2.1 Form and denomination: Notes are in registered form, in the denominations of U.S.$200,000 or integral multiples of U.S.$1,000 in excess thereof (each an ‘‘Authorised Holding’’), without coupons attached. The Notes will be initially issued in global, fully registered form, and represented by (i) a Rule 144A Global Certificate (the ‘‘Rule 144A Global Certificate’’), interests in which are to be sold to qualified institutional buyers (each a ‘‘QIB’’) within the meaning of, and pursuant to, Rule 144A (‘‘Rule 144A’’) under the Securities Act and (ii) a Regulation S Global Certificate (the ‘‘Regulation S Global Certificate’’ and, together with the Rule 144A Global Certificate, the ‘‘Global Certificates’’), interests in which are to be offered outside the United States to non-U.S. persons within the meaning of, and pursuant to, Regulation S under the Securities Act (‘‘Regulation S’’) which will each be exchangeable for Notes in definitive, fully registered form in the limited circumstances specified in the Global Certificates and the Paying Agency Agreement.

2.2 Register, Title and Transfers: (a) Register The Registrar will maintain a register (the ‘‘Register’’) in respect of the Notes in accordance with the provisions of the Paying Agency Agreement. In these Conditions the ‘‘holder’’ of a Note means the person in whose name such Note is for the time being registered in the Register (or, in the case of a joint holding, the first named thereof) and ‘‘Noteholder’’ shall be construed accordingly. A definitive certificate (a ‘‘Definitive Certificate’’) will be issued to each Noteholder in respect of its registered holding of Notes.

(b) Title Title to the Notes will pass by and upon registration in the Register. The holder of each Note shall (except as otherwise required by law or as ordered by a court of competent jurisdiction) be treated as

180 the absolute owner of such Note for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any other interest therein, any writing on the Definitive Certificate relating thereto (other than the endorsed form of transfer) or any notice of any previous loss or theft of such Definitive Certificate) and no person shall be liable for so treating such holder.

(c) Transfers Subject to the terms of the Paying Agency Agreement and paragraphs (d), (e), (f) and (g) of this Condition 2.2, a Note may be transferred upon surrender of the relevant Definitive Certificate, with the endorsed form of transfer duly completed, at the specified office of the Registrar or at the specified office of the Transfer Agent, together with such evidence as the Registrar or the Transfer Agent may reasonably require to prove the title of the transferor and the authority of the individuals who have executed the form of transfer; provided however, that a Note may not be transferred unless the principal amount of the Notes transferred and (where not all of the Notes held by a holder are being transferred) the principal amount of the balance of the Notes not transferred are Authorised Holdings. Where not all the Notes represented by the surrendered Definitive Certificates are the subject of the transfer, a new Definitive Certificate in respect of the balance of the Notes not transferred will be issued to the transferor.

(d) Registration and delivery of Definitive Certificates Subject to paragraph (e) of this Condition 2.2, within five business days of the surrender of a Definitive Certificate in accordance with paragraph (c) above, the Registrar will register the transfer in question and deliver a new Definitive Certificate to each relevant holder at its specified office or (at the request and risk of such relevant holder) by uninsured first class mail (airmail if overseas) to the address specified for the purpose by such relevant holder. In this paragraph, ‘‘business day’’ means a day on which commercial banks are open for business (including dealings in foreign currencies) in the city where the Registrar has its specified office. In the case of the transfer of only a part of the Notes, a new Definitive Certificate in respect of the balance of the Notes not transferred will be so delivered or (at the risk and, if mailed at the request of the transferor otherwise than by ordinary uninsured mail, at the expense of the transferor) sent by mail to the transferor.

(e) No charge The transfer of Notes will be effected without charge to the holder or transferee thereof but against such indemnity as the Registrar or the Transfer Agent, as applicable, may require in respect of any tax or other duty of whatsoever nature which may be levied or imposed in connection with such transfer.

(f) Closed periods Noteholders may not require transfers to be registered (i) during the period of 15 days ending on the due date for any payment of principal or interest in respect of the Notes, (ii) after any Note has been called for redemption.

(g) Regulations concerning Transfers and Registration All transfers of Notes and entries on the Register are subject to the detailed regulations concerning the transfer of Notes scheduled to the Paying Agency Agreement. The regulations may be changed by the Issuer with the prior written approval of the Trustee and the Registrar. A copy of the current regulations will be mailed (free of charge) by the Registrar to any Noteholder who requests in writing a copy of such regulations and who can confirm they are a Noteholder to the satisfaction of the Registrar and a copy of such regulations will also be available at the specified office of the Registrar.

3 Restrictive Covenant As provided in the Trust Deed, so long as any of the Notes remains outstanding (as defined in the Trust Deed), the Issuer will not, without the prior written consent of the Trustee or an Extraordinary Resolution or a Written Resolution (each as defined in the Trust Deed), agree to any amendment to or any modification or waiver of, or authorise any breach or proposed breach of, or agree any novation, assignment, rescission, cancellation or termination of the terms of the Loan Agreement (other than in respect of Reserved Rights) and will act at all times in accordance with any instructions of the Trustee from time to time with respect to the Loan Agreement, except as otherwise expressly

181 provided in the Trust Deed or the Loan Agreement, as the case may be. Any such amendment, modification, waiver, authorisation, novation, assignment, recission, cancellation or termination made with the consent of the Trustee shall be binding on the Noteholders and, unless the Trustee agrees otherwise, any such amendment or modification shall be notified by the Issuer to the Noteholders in accordance with Condition 13. Save as provided above, so long as any Note remains outstanding, the Issuer, without the prior written consent of the Trustee or an Extraordinary Resolution or a Written Resolution, shall not, inter alia, incur any other indebtedness for borrowed money other than the issue of Notes and any further notes in accordance with Condition 14 or the issue of notes on a limited recourse basis, provided that such notes are not secured on assets of the Issuer over which the Security Interests have been created or the Issuer’s share capital, engage in any business (other than entering into any agreements related to the Notes or any other issue of notes as aforesaid, activities reasonably required to maintain its existence or comply with any applicable law, regulation, judgment or its constitutional documents and performing any acts incidental to or necessary in connection with the Notes or any other issue of notes as aforesaid or such related agreements (including the holding of any security in connection with any of the foregoing), making the Loan to NLMK pursuant to the Loan Agreement or any future loans to NLMK in connection with the issue of notes as aforesaid and performing any act incidental to or necessary in connection therewith), declare any dividends, have any subsidiaries or employees, purchase, own, lease or otherwise acquire any real property, consolidate or merge with any other person or convey or transfer its properties or assets substantially as an entirety (to the extent the same is within the control of the Issuer) to any person (otherwise than as contemplated in these Conditions and the Trust Deed), issue any further shares (other than those required to convert the Issuer’s status to that of a public limited company or as are in issue as at the date of the Trust Deed) (to the extent the same is within the control of the Issuer) or make any distribution to its shareholders, give any guarantee or assume any other liability (other than in connection with any act or agreement permitted pursuant to this Condition 3), or, unless required under the laws of Ireland, petition for any winding-up or bankruptcy.

4 Interest On each Interest Payment Date (or such later date as amounts equivalent to amounts of interest due on such date are received) the Issuer shall account to the Noteholders for an amount equal to the amount of interest actually received by or for the account of the Issuer pursuant to the Loan Agreement which interest under the Loan is payable at a rate of 4.45 per cent. per annum calculated on the outstanding principal amount of the Loan from time to time as set out in Clause 4 of the Loan Agreement. Interest shall cease to accrue on each Note on the due date for redemption unless, upon due presentation, payment is improperly withheld or refused, in which event interest shall accrue (after as well as before judgment) at the rate of interest and until the time set out in Clause 4 of the Loan Agreement. In these Conditions, ‘‘Interest Payment Date’’ means 19 February and 19 August of each year commencing on 19 August 2013.

5 Redemption and Purchase (a) Final Redemption Unless previously prepaid or repaid pursuant to Clauses 5.2, 5.3, 5.4 or 10 of the Loan Agreement, NLMK will be required to repay the Loan on 19 February 2018 (the ‘‘Repayment Date’’) and, subject to such repayment, as set forth in the Loan Agreement, all the Notes then outstanding will on the Repayment Date be redeemed or repaid by the Issuer at 100 per cent. of the principal amount thereof together with accrued interest.

(b) Early Redemption Under the Loan Agreement: (i) NLMK may, in the circumstances set out in Clause 5.2 of the Loan Agreement prepay the Loan in whole but not in part; or

182 (ii) NLMK may be required to prepay the Loan in whole but not in part in the circumstances set out in Clause 5.3 of the Loan Agreement. If the Loan should become repayable pursuant to Clauses 5.2, 5.3 or 10 of the Loan Agreement prior to the Repayment Date, as set forth in the Loan Agreement, all Notes then remaining outstanding will thereupon become due and redeemable or repayable at 100 per cent. of the principal amount together with accrued interest and (subject to the Loan being repaid together with accrued interest and such amounts actually being received by the Issuer) shall be redeemed or repaid by the Issuer on the date specified pursuant to the Loan Agreement and the Issuer will endeavour to give not less than 14 days’ notice thereof to the Trustee and the Noteholders in accordance with Condition 13.

(c) Purchases The Loan Agreement provides that the Issuer, NLMK or any member of the Group (as defined in the Loan Agreement) may, among other things, purchase Notes from time to time, in the open market or by tender or by private agreement at any price. Such Notes may, at the option of the Issuer, NLMK or such member of the Group, be held, reissued, resold or, in the case of NLMK or such member of the Group, delivered to the Issuer together with a request for the Issuer to present such Notes to the Registrar for cancellation on not less than 30 days notice, whereupon the Issuer shall, pursuant to the Paying Agency Agreement, instruct the Registrar, subject to the satisfaction of certain conditions set out in the Loan Agreement, to cancel such Notes. Upon the cancellation of such Notes, the Loan shall be treated as prepaid by NLMK in an amount corresponding to the aggregate principal amount of the Notes surrendered for cancellation, together with accrued interest (if any) thereon, and no further payment shall be made or required to be made by the Issuer in respect of such Notes. The Issuer may compel any beneficial owner of Rule 144A Certificates to certify that it is a qualified institutional buyer (as defined in Rule 144A under the Securities Act) and a qualified purchaser (as defined in Section 2(a)(51)(A) of the U.S. Investment Company Act of 1940) and may compel any such beneficial owner to sell its interest in such Rule 144A Certificates, or may sell such interest on behalf of such holder, if such holder is a U.S. person that is not a qualified institutional buyer (as defined in Rule 144A under the Securities Act) and a qualified purchaser (as defined in Section 2(a)(51)(A) of the U.S. Investment Company Act of 1940).

6 Payments (a) Principal and interest Payment of principal and interest in respect of the Notes will be made to the person(s) shown as the holder in the Register at the opening of business on the Record Date (as defined below). Payments of all amounts other than as provided in this Condition 6(a) will be made as provided in these Conditions.

(b) Payments Each payment in respect of the Notes pursuant to Condition 6(a) shall be made by U.S. Dollar cheque drawn on, or, upon request by a Noteholder to the specified office of the Principal Paying Agent not later than the relevant Record Date, by transfer to a U.S. dollar account maintained by or on behalf of the payee with a bank in New York City and (in the case of interest payable on redemption) upon surrender of the relevant Definitive Certificates at the specified office of the Principal Paying Agent or at the specified office of a Transfer Agent. Payment instructions or U.S. Dollar cheque, as the case may be, (for value on the due date or, if that is not a business day (as defined in (d) below), for value the first following day which is a business day) will be initiated or drawn, as the case may be, on the business day preceding the due date for payment (for value the next business day). Where payment in respect of a Note is to be made by cheque, the cheque will be, at the expense of the Issuer, mailed to the address shown as the address of the Noteholder in the Register at the opening of business on the relevant Record Date.

(c) Payments subject to fiscal law All payments in respect of the Notes are subject in all cases to any applicable fiscal or other laws and regulations in the place of payment, but without prejudice to the provisions of Condition 7. No commissions or expenses shall be charged to the Noteholders in respect of such payments.

183 (d) Payments on business day A Note may only be presented for payment on a day which is a business day in the place of presentation. If the due date for payment of interest or principal is not a business day, the holder of a Note shall not be entitled to payment of the amount due until the next following business day and shall not be entitled to any further interest or other payment in respect of any such delay. In this paragraph, ‘‘business day’’ means a day on which (i) the London interbank market is open for dealings between banks generally and (ii) if on that day a payment is to be made hereunder, commercial banks generally are open for business in Dublin, New York City and in the city where the specified office of the Principal Paying Agent is located.

(e) Record Date Each payment in respect of a Note will be made to the person shown as the holder in the Register at the opening of business (in the place of the Registrar’s specified office) on the fifteenth day before the due date for each payment (the ‘‘Record Date’’).

(f) Agents The Paying Agency Agreement provides that the Issuer may at any time, with the prior written approval of the Trustee appoint a successor Registrar or Principal Paying Agent and/or additional or successor paying agents or transfer agents provided that for so long as the Notes are listed on the Irish Stock Exchange Limited (the ‘‘Stock Exchange’’), the Issuer will use its best efforts to ensure that it maintains (i) a Paying Agent in a European Union member state that will not be obliged to withhold or deduct tax pursuant to any law implementing European Council Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council meeting on 26-27 November 2000; and (ii) a Registrar. Any such appointment of successor or other Agents shall only take effect (other than in the case of insolvency, when it shall be of immediate effect) after not more than 45 days’ and not less than 30 days’ notice thereof shall have been given to the continuing Agents, NLMK, the Trustee and to the Noteholders in accordance with Condition 13. In acting under the Paying Agency Agreement and in connection with the Notes, the Agents act solely as agents of the Issuer and (to the extent provided therein) the Trustee and do not assume any obligations towards or relationship of agency or trust for or with any of the Noteholders.

(g) Payments by NLMK Save as directed by the Trustee at any time after the Security Interests created under the Trust Deed become enforceable, the Issuer will require NLMK to make all payments of principal, interest and additional amounts (if any) to be made pursuant to the Loan Agreement to an account in the name of the Issuer with the Principal Paying Agent. Pursuant to the Charge, the Issuer will charge by way of first fixed charge, all its rights, title and interest in and to all sums of money (with the exception of sums relating to the Reserved Rights) then or in the future so deposited in such account and the debts represented thereby to the Trustee for the benefit of the Trustee and the Noteholders.

(h) Currency other than U.S. Dollars In respect of the Issuer’s obligations under Conditions 4, 5, 6 and 7, and subject to the following sentence, if the Issuer receives any amount under the Loan Agreement in a currency other than U.S. Dollars, the Issuer’s obligation under the relevant Condition shall be fully satisfied by paying such sum (after deducting any costs of exchange) as the Issuer receives upon conversion of such sum into U.S. Dollars in accordance with customary banking practice in the spot market on the business day immediately following the day on which such sum is received by the Issuer, provided that the Issuer shall use its best efforts to procure payment of any amounts due from NLMK pursuant to Clause 12.8 of the Loan Agreement. If the Issuer receives any payment from NLMK pursuant to Clause 12.8 of the Loan Agreement with respect to amounts due under the Notes, the Issuer shall pay such sum to the Noteholders in accordance with this Condition 6.

7 Taxation All payments in respect of the Notes by or on behalf of the Issuer shall be made without deduction or withholding for or on account of any present or future taxes, duties, assessments or governmental

184 charges of whatever nature imposed or levied, collected, withheld or assessed by or on behalf of Ireland or any political subdivision or any authority thereof or therein having the power to tax, unless the deduction or withholding of such taxes or duties is required by law. In such event, the Issuer shall, except as provided below, make such additional payments as shall result in the receipt by the Noteholders of such amount as would have been received by them if no such withholding or deduction had been required. However, the Issuer shall only be required to make such additional payments to the extent and at such time as it shall receive equivalent sums from NLMK under the Loan Agreement. To the extent that the Issuer does not receive any such equivalent sum, the Issuer shall account to the relevant Noteholder for an additional amount equivalent to a pro rata proportion of such additional amount (if any) as is actually received by, or for the account of, the Issuer pursuant to the provisions of the Loan Agreement on the date of, in the currency of, and subject to any conditions attaching to the payment of such additional amount to the Issuer provided that no such additional amount will be payable: (i) to a Noteholder who is liable for such taxes or duties by reason of his having some connection with Ireland other than the mere holding of such Notes or the receipt of payments in respect thereof; (ii) in respect of a Note presented for payment of principal more than 30 days after the Relevant Date except to the extent that such additional payment would have been payable if such Note had been presented for payment on such thirtieth day; (iii) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 on the taxation of savings income or any law implementing or complying with, or introduced in order to conform to, such Directive; or (iv) in respect of a Note held by or on behalf of a Noteholder who would have been able to avoid such withholding or deduction by arranging to receive the relevant payment through another Paying Agent in a Member State of the European Union. As used herein, ‘‘Relevant Date’’ means the later of (i) the date on which the equivalent payment under the Loan Agreement first becomes due and (ii) if the full amount payable by NLMK corresponding to such payment has not been received by, or for the account of, the Issuer pursuant to the Loan Agreement on or prior to such date, it means the date on which such full amount shall have been so received and notice to that effect shall have been duly given to the Noteholders by or on behalf of the Issuer in accordance with Condition 13. Any reference herein or in the Trust Deed to payments in respect of the Notes shall be deemed also to refer to any additional amounts which may be payable in accordance with the Trust Deed and this Condition 7 or any undertaking given in addition thereto or in substitution therefor pursuant to the Trust Deed. If the Issuer becomes subject to any taxing jurisdiction other than or in addition to Ireland, references in these Conditions to Ireland shall be construed as references to Ireland and/or such other jurisdiction.

8 Enforcement The Trust Deed provides that only the Trustee may pursue the remedies under the general law, the Trust Deed or the Notes to enforce the rights of the Noteholders and no Noteholder will be entitled to pursue such remedies unless the Trustee (having become bound to do so in accordance with the terms of the Trust Deed) fails to do so within a reasonable period and such failure is continuing. The Trust Deed also provides that, in the case of an Event of Default that is continuing, or of a Relevant Event, the Trustee may, and shall, if requested in writing to do so by Noteholders holding at least 25 per cent. in principal amount of the Notes outstanding, or if directed to do so by an Extraordinary Resolution, and, in any such case, subject to it being secured and/or indemnified and/or prefunded to its satisfaction, institute such steps (subject to the non-petition covenant in Condition 1), actions or proceedings as it may think fit to enforce the rights of the Noteholders and the provisions of the Trust Deed, including to declare all amounts payable under the Loan Agreement by NLMK to be immediately due and payable in certain circumstances (in the case of an Event of Default), or exercise any rights under the Security Interests created in the Trust Deed in favour of the Trustee (in the case

185 of a Relevant Event). Upon repayment of the Loan following an Event of Default and a declaration as provided herein, the Notes will be redeemed or repaid at their principal amount together with accrued interest thereon and thereupon shall cease to be outstanding.

9 Meetings of Noteholders; Modification of Notes, Trust Deed and Loan Agreement; Waiver; Substitution of the Issuer (a) Meeting of Noteholders The Trust Deed contains provisions for convening meetings of Noteholders to consider any matter affecting their interests, including any modification of, or any arrangement in respect of, the Notes, the Loan Agreement or the Trust Deed. Noteholders will be entitled to one vote per U.S.$1,000 in principal amount of Notes held by them. Such a meeting may be convened by the Issuer, NLMK or the Trustee and shall be convened by the Issuer or by the Trustee, subject to its being indemnified and/or secured and/or prefunded to its satisfaction, upon the request in writing of holders of the Notes holding not less than one tenth of the principal amount of the outstanding Notes. The Trust Deed provides that special quorum provisions apply for meetings of Noteholders convened for the purpose of amending certain terms concerning, inter alia, the amount payable on, and the currency of payment in respect of, the Notes and the amounts payable and currency of payment under the Loan Agreement. Under the terms of the Trust Deed, an Extraordinary Resolution means a resolution passed at a meeting of the Noteholders duly convened and held in accordance with the provisions contained therein by (i) the affirmative vote of holders of outstanding (as defined in the Trust Deed) Notes present in person or represented by proxy or representative owning in the aggregate more than half in principal amount of the outstanding Notes owned by the Noteholders who are so present or represented at the meeting or (ii) in respect of an Extraordinary Resolution the business of which includes the modification of certain terms, conditions and provisions as listed in the proviso to paragraph 5 (Powers of Meetings) of Schedule 4 (Provisions for Meetings of the Noteholders) of the Trust Deed the affirmative vote of holders of outstanding Notes present in person or represented by proxy or representative owning in aggregate not less than two-thirds. in principal amount of the outstanding Notes owned by the Noteholders who are present or represented at the meeting. Any resolution duly passed at a meeting of Noteholders will be binding on all the Noteholders, whether present or not. The Trust Deed provides that a Written Resolution signed by or on behalf of the holders of not less than 75 per cent. in principal amount of the Notes outstanding shall for all purposes be as valid and effective as an Extraordinary Resolution passed at a meeting of Noteholders duly convened and held. Such a resolution in writing may be contained in one document or several documents in the same form, each signed by or on behalf of one or more Noteholders.

(b) Modification and Waiver The Trustee may agree, without the consent of the Noteholders, to any modification of the Notes and the Trust Deed, the Paying Agency Agreement or the Loan Agreement which, in each case, in the sole opinion of the Trustee is of a formal, minor or technical nature, is made to correct a manifest error or (other than as mentioned in the Trust Deed) in the opinion of the Trustee is not materially prejudicial to the interests of the Noteholders. The Trustee may also waive or authorise or agree to the waiving or authorising of any breach or proposed breach by the Issuer of the Conditions or the Trust Deed or, following the creation of the Security Interests, by NLMK of the terms of the Loan Agreement or determine that any event which would or might otherwise give rise to a right of acceleration under the Loan Agreement or any Relevant Event shall not be treated as such, if in the sole opinion of the Trustee, to do so would not be materially prejudicial to the interests of the Noteholders, provided always that the Trustee may not exercise such power of waiver in contravention of a written request given by holders of 25 per cent. in aggregate principal amount of the Notes then outstanding or any express direction by Extraordinary Resolution. Any such modification, waiver, authorisation or determination shall be binding on the Noteholders and, unless the Trustee agrees otherwise, shall be promptly notified to the Noteholders in accordance with Condition 13.

186 (c) Substitution The Trust Deed contains provisions to the effect that the Issuer may, with the consent of NLMK, and further provided certain conditions have been met (as further set out in the Trust Deed), and subject to having complied with the requirements set out in the Trust Deed and such requirements as the Trustee may direct (without obtaining the consent of the Noteholders) in the interest of Noteholders, substitute any entity in place of the Issuer as creditor under the Loan Agreement, as issuer and principal obligor in respect of the Notes and as obligor under the Trust Deed, subject to the substitute’s entity’s rights under the Loan Agreement being charged and assigned to the Trustee as security for the payment obligations of the substitute obligor under the Trust Deed and the Notes. Not later than 14 days after compliance with the aforementioned requirements, notice thereof shall be given by the Issuer to the Noteholders in accordance with Condition 13, failing which the Issuer shall use its best endeavours to ensure that the substitute obligor does so.

(d) Exercise of powers In connection with the exercise of any of its powers, trusts, authorities or discretions, the Trustee shall have regard to the interests of the Noteholders as a class and, in particular, shall not have regard to the consequences of such exercise for individual Noteholders resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory. No Noteholder is entitled to claim from the Issuer, NLMK or the Trustee any indemnification or payment in respect of any tax consequence of any such exercise upon individual Noteholders.

10 Prescription Notes will become void unless presented for payment within 10 years (in the case of principal) or five years (in the case of interest) from the due date for payment in respect thereof.

11 Indemnification and Removal of the Trustee The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility in certain circumstances, including provisions relieving it from taking steps, actions or proceedings to enforce payment unless indemnified and/or secured and/or prefunded to its satisfaction, and to be paid its costs and expenses in priority to any claims of Noteholders. In addition, the Trustee is entitled to enter into business transactions with the Issuer and/or NLMK and any entity relating to the Issuer and/or NLMK without accounting for any profit. The Trustee’s responsibilities are solely those of trustee for the Noteholders on the terms of the Trust Deed. Accordingly, the Trustee makes no representations and assumes no responsibility for the validity or enforceability of the Loan Agreement or the security created in respect thereof or for the performance by the Issuer of its obligations under or in respect of the Notes and the Trust Deed or by NLMK in respect of the Loan Agreement. The Trustee is entitled to assume that NLMK is performing all of its obligations pursuant to the Loan Agreement and that the Issuer is performing its obligations under the Notes, the Loan Agreement and the Trust Deed (and shall have no liability for doing so) until it has actual knowledge to the contrary. The Trustee shall have no liability to any Noteholder or any other person for any shortfall such Noteholder or other person may suffer if such Noteholder or other person is liable for tax in respect of any payments received by such Noteholder or other person or as a result of the Security Interests being enforced by the Trustee. The Trust Deed provides that the Noteholders shall together have the power, exercisable by Extraordinary Resolution, to remove the Trustee (or any successor trustee or additional trustees) provided that the removal of the Trustee or any other trustee shall not become effective unless there remains a Trustee in office after such removal.

12 Replacement of Notes If a Definitive Certificate shall become mutilated, defaced, lost, stolen or destroyed it may, subject to all applicable laws and regulations and requirements of the Stock Exchange (or any other stock exchange on which the Notes are listed or quoted from time to time), be replaced at the specified offices of the Transfer Agents in London on payment of such costs, expenses, taxes and duties as may

187 be incurred in connection therewith and on such terms as to evidence, security and indemnity and otherwise as may reasonably be required by or on behalf of the Issuer and/or the Transfer Agents. Mutilated or defaced Definitive Certificates must be surrendered before replacements will be issued.

13 Notices All notices to Noteholders shall be deemed to have been validly given if published in a leading newspaper having general circulation in London (which is expected to be the Financial Times) or, if in the opinion of the Trustee such publication shall not be practicable, in an English language newspaper of general circulation in Europe. Any such notice shall be deemed to have been given on the date of such publication or, if published more than once or on different dates, on the first date on which such publication is made. The Issuer shall also ensure that all notices are duly published (if such publication is required) in a manner which complies with the rules and regulations of the Stock Exchange or any other stock exchange on which the Notes are for the time being listed and/or admitted to trading. Any such notice shall be deemed to have been given on the date of such notice. In case by reason of any other cause it shall be impracticable to publish any notice to Noteholders as provided above, then such notification to such Noteholders as shall be given with the approval of the Trustee in accordance with the rules of the Stock Exchange (or any other stock exchange on which the Notes are listed or quoted from time to time) shall constitute sufficient notice to such Noteholders for every purpose hereunder.

14 Further Issues The Issuer may from time to time, with the consent of NLMK but without the consent of the Noteholders, create and issue further securities having the same terms and conditions as the Notes in all respects (or in all respects except for the first payment of interest on them, the date of issue and the amount of principal) so as to be consolidated and form a single series with the Notes, provided, however, that either such further securities, as the case may be, and the Notes are part of the same ‘‘issue’’ within the meaning of United States Treasury Regulation Section 1.1275-1(f) (including, for the avoidance of doubt, being part of a ‘‘qualified reopening’’ within the meaning of U.S. Treasury Regulation Section 1.1275-2(k)) or neither the Notes nor such securities are issued with original issue discount for U.S. federal income tax purposes. Such further notes shall be issued under a deed supplemental to the Trust Deed containing such provisions as the Trustee may reasonably require. In relation to any further issue which is to be consolidated and form a single series with the Notes, the Issuer will enter into a loan agreement with NLMK on the same terms as the Loan Agreement (or the same terms except for the date, the first payment of interest the provisions relating to the fees payable by NLMK to the Issuer and the amount of principal) and supplemental to the Loan Agreement, or may amend and restate the same with NLMK on substantially the same terms as the Loan Agreement (except for the date, the first payment of interest, the provisions relating to the fees payable by NLMK to the Issuer and the amount of principal). The Issuer will provide a first fixed charge in favour of the Trustee in respect of certain of its rights and interests under such loan agreement and will assign absolutely to the Trustee certain of its rights under such loan agreement, which will secure both the Notes and such further securities and which will supplement the Security Interests in relation to the existing Notes or may amend and supplement the Security Interests for such purpose. The Trust Deed contains provisions for convening a single meeting of the Noteholders and the holders of securities of other series where the Trustee so decides. Application will be made for such further securities to be listed and admitted to trading on the stock exchange on which the Notes are from time to time listed or quoted.

15 Contracts (Rights of Third Parties) Act 1999 No person shall have any right to enforce any term or condition of the Notes or the Trust Deed under the Contracts (Rights of Third Parties) Act 1999.

16 Governing Law The Notes, these Conditions, the Trust Deed and any non-contractual obligations arising out of or in connection therewith, are governed by, and shall be construed in accordance with, English law. The Issuer has submitted in the Trust Deed to the jurisdiction of the courts of England and has appointed an agent for the service of process in England.

188 SUMMARY OF THE PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM The Global Note Certificates The Regulation S Notes will be evidenced on issue by the Regulation S Global Note Certificate registered in the name of a nominee for, and deposited with a common depository on behalf of, Euroclear and Clearstream, Luxembourg. Beneficial interests in the Regulation S Global Note Certificate may be held only through Euroclear or Clearstream, Luxembourg at any time. See ‘‘Clearing and Settlement— Book-Entry Procedures for the Global Note Certificates’’. By acquisition of a beneficial interest in the Regulation S Global Note Certificate, the purchaser thereof will be deemed to represent, among other things, that it is not a U.S. person, that it is located outside the United States and that, if it determines to transfer such beneficial interest prior to the expiration of the ‘‘distribution compliance period’’ (as such term is defined in Rule 902 of Regulation S), it will transfer such interest only (a) to a non-U.S. person in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S or (b) in accordance with Rule 144A to a person that it and any person acting on its behalf reasonably believe is a QIB that is also a QP purchasing for its own account or the account of a QIB that is also a QP, in each case in accordance with any applicable securities laws of any state of the United States. See ‘‘Transfer Restrictions’’. The Rule 144A Notes will be evidenced on issue by the Rule 144A Global Note Certificate deposited with a custodian for, and registered in the name of a nominee of, DTC. Beneficial interests in the Rule 144A Global Note Certificate may only be held through DTC at any time. See ‘‘Clearing and Settlement— Book-Entry Procedures for the Global Note Certificates’’. By acquisition of a beneficial interest in the Rule 144A Global Note Certificate, the purchaser thereof will be deemed to represent, among other things, that it is a QIB and that, if in the future it determines to transfer such beneficial interest, it will transfer such interest in accordance with the procedures and restrictions contained in the Trust Deed. See ‘‘Transfer Restrictions’’. Beneficial interests in Global Note Certificates will be subject to certain restrictions on transfer set forth therein and in the Trust Deed and the Global Note Certificates will bear the applicable legends regarding the restrictions set forth under ‘‘Transfer Restrictions’’. A beneficial interest in the Regulation S Global Note Certificate may be transferred to a person who takes delivery in the form of an interest in the Rule 144A Global Note Certificate only in denominations greater than or equal to the minimum denominations applicable to interests in the Rule 144A Global Note Certificate and only upon receipt by the Registrar of a written certification (in the form provided in a Paying Agency Agreement relating to the Notes (the ‘‘Paying Agency Agreement’’)) to the effect that the transferor reasonably believes that the transferee is a QIB and that such transaction is in accordance with any applicable securities laws of any state of the United States or any other jurisdiction. Beneficial interests in the Rule 144A Global Note Certificate may be transferred to a person who takes delivery in the form of an interest in the Regulation S Global Note Certificate only upon receipt by the Registrar of a written certification (in the form provided in the Paying Agency Agreement) from the transferor to the effect that the transfer is being made in an offshore transaction in accordance with Regulation S. Any beneficial interest in the Regulation S Global Note Certificate that is transferred to a person who takes delivery in the form of an interest in the Rule 144A Global Note Certificate will, upon transfer, cease to be an interest in the Regulation S Global Note Certificate and become an interest in the Rule 144A Global Note Certificate, and, accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable to beneficial interests in the Rule 144A Global Note Certificate for as long as it remains such an interest. Any beneficial interest in the Rule 144A Global Note Certificate that is transferred to a person who takes delivery in the form of an interest in the Regulation S Global Note Certificate will, upon transfer, cease to be an interest in the Rule 144A Global Note Certificate and become an interest in the Regulation S Global Note Certificate and, accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable to beneficial interests in the Regulation S Global Note Certificate for so long as it remains such an interest. No service charge will be made for any registration of transfer or exchange of Notes, but the Registrar may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Except in the limited circumstances described below, owners of beneficial interests in Global Note Certificates will not be entitled to receive physical delivery of Definitive Certificates. The Notes are not issuable in bearer form.

189 Exchange For Definitive Certificates Exchange Subject to receipt by the Issuer of the funds necessary to cover the cost realized from NLMK, each Global Note Certificate will be exchangeable, free of charge to the holder, on or after its Exchange Date (as defined below), in whole but not in part, for Notes in definitive form if: (i) a Global Note Certificate is held by or on behalf of (A) DTC, and DTC notifies the Issuer that it is no longer willing or able to discharge properly its responsibilities as depository with respect to the Global Note Certificate or ceases to be a ‘‘clearing agency’’ registered under the Exchange Act or if at any time it is no longer eligible to act as such, and the Issuer is unable to locate a qualified successor within 90 days of receiving notice or becoming aware of such ineligibility on the part of DTC or (B) Euroclear or Clearstream, Luxembourg, as the case may be, and Euroclear or Clearstream, Luxembourg, as the case may be, is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention to permanently cease business or does in fact do so, by the holder giving notice to the Registrar or any Transfer Agent and the Issuer or (ii) the Issuer would suffer a material disadvantage in respect of the Notes as a result of a change in the laws or regulations (taxation or otherwise) of any jurisdiction referred to in Condition 7 which would not be suffered were the Notes in definitive form and a note to such effect signed by the requisite number of signatories of the Issuer is delivered to the Trustee, by the Issuer giving notice to the Registrar or any Transfer Agent and the Noteholders of its intention to exchange the relevant Global Note Certificate for Definitive Certificates on or after the Exchange Date (as defined below) specified in the notice or (iii) the Trustee has instituted or has been directed to institute any judicial proceeding in a court to enforce the rights of the Noteholders under the Notes and the Trustee has been advised by counsel that in connection with such proceeding it is necessary or appropriate for the Trustee to obtain possession of the Notes, by the Trustee giving notice to the Registrar or any Transfer Agent and the Noteholders. The Registrar will not register the transfer of, or exchange of interests in, a Global Note Certificate for Definitive Certificates for a period of 15 calendar days ending on the date for any payment of principal or interest in respect of the Notes. If only one of the Global Note Certificates (the ‘‘Exchanged Global Note Certificate’’) becomes exchangeable for Definitive Certificates in accordance with the above paragraphs, transfers of Notes may not take place between, on the one hand, persons holding Definitive Certificates issued in exchange for beneficial interests in the Exchanged Global Note Certificate and, on the other hand, persons wishing to purchase beneficial interests in the other Global Note Certificate. ‘‘Exchange Date’’ means a day falling not later than 90 days after that on which the notice requiring exchange is given and on which banks are open for business in the city in which the specified office of the Registrar and any Transfer Agent is located.

Delivery In such circumstances, the relevant Global Note Certificate shall be exchanged in full for Definitive Certificates and the Issuer will, at the cost of the Issuer (and against such indemnity as the Registrar or any relevant Transfer Agent may require in respect of any tax or other duty of whatever nature which may be levied or imposed in connection with such exchange), cause sufficient Definitive Certificates to be executed and delivered to the Registrar for completion, authentication and dispatch to the relevant Noteholders. A person having an interest in a Global Note Certificate must provide the Registrar with (a) a written order containing instructions and such other information as the Issuer and the Registrar may require to complete, execute and deliver such Notes and (b) in the case of the Rule 144A Global Note Certificate only, a fully completed, signed certification substantially to the effect that the exchanging holder is not transferring its interest at the time of such exchange or, in the case of simultaneous sale pursuant to Rule 144A, a certification that the transfer is being made in compliance with the provisions of Rule 144A to a QIB that is also a QP. Definitive Certificates issued in exchange for a beneficial interest in the Rule 144A Global Note Certificate shall bear the legend applicable to transfer pursuant to Rule 144A, as set forth under ‘‘Transfer Restrictions’’.

Legends The holder of a Definitive Certificate may transfer the Notes evidenced thereby in whole or in part in the applicable minimum denomination by surrendering it at the specified office of the Registrar or any

190 Transfer Agent, together with the completed form of transfer thereon. Upon the transfer, exchange or replacement of a Rule 144A Definitive Certificate bearing the legend referred to under ‘‘Transfer Restrictions’’, or upon specific request for removal of the legend on a Rule 144A Definitive Certificate, the Issuer will deliver only Rule 144A Definitive Certificates that bear such legend, or will refuse to remove such legend, as the case may be, unless there is delivered to the Issuer and the Registrar such satisfactory evidence, which may include an opinion of counsel, as may reasonably be required by the Issuer that neither the legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act and the Investment Company Act. In addition, each Global Note Certificate will contain provisions which modify the Terms and Conditions of the Notes as they apply to the Notes evidenced by the Global Note Certificate. The following is a summary of these provisions:

Payments Payments of principal and interest in respect of Notes evidenced by a Global Certificate shall be made to the person who appears at the relevant time on the register of Noteholders as holder of the relevant Global Certificate against presentation and (if no further payment falls to be made on it) surrender thereof to or to the order of the Principal Paying Agent (or to or to the order of such other Paying Agent as shall have been notified to the Noteholders for this purpose) which shall endorse such payment or cause such payment to be endorsed in Schedule A to the relevant Global Certificate (such endorsement being prima facie evidence that the payment in question has been made). No person shall however be entitled to receive any payment on the relevant Global Certificate falling due after the Exchange Date, unless the exchange of the relevant Global Certificate for the relevant Definitive Certificates is improperly withheld or refused by or on behalf of the Issuer.

Notices Notwithstanding Condition 13, so long as the Global Note Certificate is held by or on behalf of DTC, Euroclear, Clearstream, Luxembourg or any other clearing system (an ‘‘Alternative Clearing System’’), notices to Noteholders represented by the Global Note Certificate may be given by delivery of the relevant notice to DTC, Euroclear, Clearstream, Luxembourg or (as the case may be) such Alternative Clearing System provided that, for so long as the Notes are listed, all notices will also be given in accordance with the rules of the relevant stock exchange.

Record Date All payments in respect of Notes represented by a Global Certificate will be made to, or to the order of, the person whose name is entered on the Register at the close of business on the Clearing System Business Day immediately prior to the date for payment, where ‘‘Clearing System Business Day’’ means (i) in respect of the Regulation S Global Note Certificate, held on behalf of Euroclear or Clearstream, Luxembourg, a day when Euroclear or Clearstream, Luxembourg is open for business and (ii) in respect of a the Rule 144A Global Note Certificate held on behalf of DTC, a day when DTC is open for business.

Meetings The holder of the Global Certificate will be treated as being two persons for the purposes of any quorum requirements of, or the right to demand a poll at, a meeting of Noteholders and in any such meeting as having one vote in respect of each U.S.$1,000 in principal amount of Notes represented by the relevant Global Certificate.

Trustee’s Powers In considering the interests of Noteholders whilst the Global Certificate is held on behalf of a clearing system, the Trustee, to the extent it considers it appropriate to do so in the circumstances, may have regard to any information provided to it by such clearing system or its operator as to the identity (either individually or by category) of its accountholders with entitlements to the Global Certificate and may consider such interests as if such accountholders were the holders of the Global Certificate.

191 Cancellation Cancellation of any Note required by the Terms and Conditions of the Notes to be cancelled will be effected by reduction in the principal amount of the Global Certificate by a record made in the Register.

Prescription Claims in respect of principal, interest and other amounts payable in respect of the Global Certificates will become void unless it is presented for payment within a period of 10 years (in the case of principal) and five years (in the case of interest or any other amounts) from the due date for payment in respect thereof.

Benefit of the Conditions Unless a Global Certificate has been exchanged or cancelled the holder hereof shall, except as provided in the relevant Global Certificate, be entitled to the same rights and benefits and subject to the Conditions as if such holder were the holder of the relevant Definitive Certificates for which the Global Certificate may be exchanged. Each Global Certificate shall not be valid or become obligatory for any purpose until authenticated by or on behalf of the Registrar. The Global Certificates and any non-contractual obligations arising out of or in connection with them shall be governed by and construed in accordance with English law.

192 TRANSFER RESTRICTIONS Because of the following restrictions, you are advised to consult legal counsel prior to making any offer, resale or other transfer of the Notes offered hereby.

Rule 144A Notes Each purchaser of Rule 144A Notes, by accepting delivery of this Prospectus and the Notes, will be deemed to have represented, agreed and acknowledged that: 1. It is (a) a QIB that is also a QP, (b) not a broker-dealer that owns and invests on a discretionary basis less than $25 million in securities of unaffiliated issuers, (c) not a participant-directed employee plan, such as a 401(k) plan, (d) acquiring such Notes for its own account, or for the account of one or more QIBs each of which is also a QP, (e) not formed for the purpose of investing in the Notes or the Issuer, and (f) aware, and each beneficial owner of such Notes has been advised, that the seller of such Notes to it may be relying on Rule 144A. 2. It will (a) along with each account for which it is purchasing, hold and transfer beneficial interests in the Rule 144A Notes in a principal amount that is not less than $200,000 and (b) provide notice of these transfer restrictions to any subsequent transferees. In addition, it understands that the Issuer may receive a list of participants holding positions in its securities from one or more book-entry depositories. 3. It understands that the Rule 144A Notes have not been and will not be registered under the Securities Act and may not be offered, sold, pledged or otherwise transferred except (a) in accordance with Rule 144A to a person that it and any person acting on its behalf reasonably believe is a QIB that is also a QP purchasing for its own account or for the account of one or more QIBs that are also QPs each of which is purchasing not less than $200,000 principal amount of Notes or (b) in an offshore transactions to a person, that is not a U.S. person in accordance with Rule 903 or Rule 904 of Regulation S under the Securities Act, and in each case in accordance with any applicable securities laws of any State of the United States. 4. It understands that the Issuer has the power under the Trust Deed to compel any beneficial owner of Rule 144A Notes that is not a QIB and also a QP to sell its interest in the Rule 144A Notes, or may sell such interest on behalf of, or purchase such interest from, such owner at a price equal to the least of (x) the purchase price therefor paid by the beneficial owner, (y) 100 percent of the principal amount thereof or (z) the fair market value thereof. The Issuer has the right to refuse to honor the transfer of an interest in the Rule 144A Notes to a U.S. person who is not a QIB and also a QP. 5. It understands that the Rule 144A Notes, unless otherwise agreed between the Issuer and the Trustee in accordance with applicable law, will bear a legend to the following effect: THIS NOTE AND THE LOAN IN RESPECT THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE ‘‘SECURITIES ACT’’) OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH RULE 144A UNDER THE SECURITIES ACT (‘‘RULE 144A’’) TO A PERSON THAT THE HOLDER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT (A ‘‘QIB’’) THAT IS ALSO A QUALIFIED PURCHASER (A ‘‘QP’’) WITHIN THE MEANING OF SECTION 2(a)(51) OF THE U.S. INVESTMENT COMPANY ACT OF 1940 (THE ‘‘INVESTMENT COMPANY ACT’’) PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB THAT IS ALSO A QP WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, AND IN AN AMOUNT FOR EACH ACCOUNT OF NOT LESS THAN U.S.$200,000 PRINCIPAL AMOUNT OF NOTES OR (2) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT (‘‘REGULATION S’’), AND IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE NOTES IN RESPECT HEREOF OF THE RESALE RESTRICTIONS REFERRED TO ABOVE. TRANSFER

193 IN VIOLATION OF THE FOREGOING WILL BE OF NO FORCE OR EFFECT, WILL BE VOID AB INITIO AND WILL NOT OPERATE TO TRANSFER ANY RIGHTS TO THE TRANSFEREE, NOTWITHSTANDING ANY INSTRUCTIONS TO THE CONTRARY TO THE ISSUER OF THIS NOTE, THE TRUSTEE OR ANY INTERMEDIARY. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF ANY EXEMPTION UNDER THE SECURITIES ACT FOR RESALES OF THIS NOTE. EACH BENEFICIAL OWNER HEREOF REPRESENTS THAT (1) IT IS A QIB THAT IS ALSO A QP; (2) IT IS NOT A BROKER-DEALER THAT OWNS AND INVESTS ON A DISCRETIONARY BASIS LESS THAN U.S.$25,000,000 IN SECURITIES OF UNAFFILIATED ISSUERS; (3) IT IS NOT A PARTICIPANT-DIRECTED EMPLOYEE PLAN, SUCH AS A 401 (k) PLAN; (4) IT IS HOLDING THIS NOTE FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QIB THAT IS ALSO A QP; (5) IT WAS NOT FORMED FOR THE PURPOSE OF INVESTING IN THE ISSUER OR THIS NOTE; (6) IT, AND EACH ACCOUNT FOR WHICH IT HOLDS NOTES, WILL HOLD AND TRANSFER AT LEAST U.S.$200,000 IN PRINCIPAL AMOUNT OF NOTES; (7) IT UNDERSTANDS THAT THE ISSUER MAY RECEIVE A LIST OF PARTICIPANTS HOLDING POSITIONS IN ITS SECURITIES FROM ONE OR MORE BOOK-ENTRY DEPOSITORIES AND (8) IT WILL PROVIDE NOTICE OF THE FOREGOING TRANSFER RESTRICTIONS TO ITS SUBSEQUENT TRANSFEREES. THE BENEFICIAL OWNER HEREOF HEREBY ACKNOWLEDGES THAT, IF AT ANY TIME WHILE IT HOLDS AN INTEREST IN THIS NOTE IT IS A PERSON WHO IS NOT A QIB THAT IS ALSO A QP, THE ISSUER MAY (A) COMPEL IT TO SELL ITS INTEREST IN THIS NOTE TO A PERSON (1) WHO IS ALSO A QIB THAT IS ALSO A QP AND WHO IS OTHERWISE QUALIFIED TO PURCHASE THIS NOTE IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OR (2) IN AN OFFSHORE TRANSACTION TO A PERSON THAT IS NOT A U.S. PERSON IN ACCORDANCE WITH RULE 903 OR 904 OF REGULATION S OR (B) COMPEL THE BENEFICIAL OWNER TO SELL ITS INTEREST IN THIS NOTE TO THE ISSUER OR AN AFFILIATE OF THE ISSUER OR TRANSFER ITS INTEREST IN THIS NOTE TO A PERSON DESIGNATED BY OR ACCEPTABLE TO THE ISSUER AT A PRICE EQUAL TO THE LEAST OF (X) THE PURCHASE PRICE THEREFOR PAID BY THE BENEFICIAL OWNER, (Y) 100 PERCENT OF THE PRINCIPAL AMOUNT THEREOF OR (Z) THE FAIR MARKET VALUE THEREOF. THE ISSUER HAS THE RIGHT TO REFUSE TO HONOR A TRANSFER OF AN INTEREST IN THIS NOTE TO A PERSON WHO IS NOT A QIB AND ALSO A QP. THE ISSUER HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE INVESTMENT COMPANY ACT. BY ACCEPTING THIS NOTE (OR ANY INTEREST IN THE NOTES REPRESENTED HEREBY) EACH BENEFICIAL OWNER HEREOF, AND EACH FIDUCIARY ACTING ON BEHALF OF THE BENEFICIAL OWNER (BOTH IN ITS INDIVIDUAL AND CORPORATE CAPACITY), WILL BE DEEMED TO REPRESENT, WARRANT AND AGREE THAT, DURING THE PERIOD IT HOLDS ANY INTEREST IN THIS NOTE (1) EITHER (A) IT IS NOT, AND IT IS NOT ACTING ON BEHALF OF (AND FOR SO LONG AS IT HOLDS THIS NOTE (OR ANY INTEREST THEREIN) WILL NOT BE, OR BE ACTING ON BEHALF OF) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (‘‘ERISA’’) SUBJECT TO THE PROVISIONS OF PART 4 OF SUBTITLE B OF TITLE I OF ERISA, A PLAN TO WHICH SECTION 4975 OF THE U.S. INTERNAL REVENUE CODE OF 1986, AS AMENDED (‘‘CODE’’), APPLIES, OR ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE ‘‘PLAN ASSETS’’ UNDER SECTION 3(42) Of ERISA, 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE BY REASON OF SUCH AN EMPLOYEE BENEFIT PLAN’S OR PLAN’S INVESTMENT IN SUCH ENTITY (EACH, A ‘‘BENEFIT PLAN INVESTOR’’) OR A GOVERNMENTAL, CHURCH OR NON U.S. PLAN WHICH IS SUBJECT TO ANY FEDERAL, STATE, LOCAL, NON U.S. OR OTHER LAWS OR REGULATIONS THAT ARE SUBSTANTIALLY SIMILAR TO THE FIDUCIARY RESPONSIBILITY AND/OR THE PROHIBITED TRANSACTION PROVISIONS OF ERISA AND/OR SECTION 4975 OF THE CODE (‘‘SIMILAR LAWS’’) AND/OR LAWS OR REGULATIONS THAT PROVIDE THAT THE ASSETS OF THE ISSUER COULD BE DEEMED TO INCLUDE ‘‘PLAN ASSETS’’ OF SUCH PLAN UNDER SECTION 3(42) OF ERISA, 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE, AND NO PART OF THE ASSETS TO BE USED BY IT TO PURCHASE OR HOLD SUCH NOTES OR ANY INTEREST HEREIN

194 CONSTITUTES THE ASSETS OF ANY BENEFIT PLAN INVESTOR OR SUCH A GOVERNMENTAL, CHURCH OR NON U.S. PLAN OR (B) IT IS, OR IS ACTING ON BEHALF OF A GOVERNMENTAL, CHURCH OR NON U.S. PLAN, AND SUCH ACQUISITION DOES NOT AND WILL NOT RESULT IN A NON EXEMPT VIOLATION OF ANY SIMILAR LAWS AND WILL NOT SUBJECT THE ISSUER TO ANY LAWS, RULES OR REGULATIONS APPLICABLE TO SUCH PLAN SOLELY AS A RESULT OF THE INVESTMENT IN THE ISSUER BY SUCH PLAN; AND (2) IT WILL NOT SELL OR OTHERWISE TRANSFER THIS NOTE OR ANY INTEREST HEREIN OTHERWISE THAN TO A PURCHASER OR TRANSFEREE THAT IS DEEMED TO MAKE THESE SAME REPRESENTATIONS, WARRANTIES AND AGREEMENTS WITH RESPECT TO ITS PURCHASE, HOLDING AND DISPOSITION OF THIS NOTE. NO PURCHASE BY OR TRANSFER TO A BENEFIT PLAN INVESTOR OF THIS NOTE, OR ANY INTEREST HEREIN, WILL BE EFFECTIVE, AND NEITHER THE ISSUER NOR THE TRUSTEE WILL RECOGNIZE ANY SUCH ACQUISITION OR TRANSFER. IN THE EVENT THAT THE ISSUER DETERMINES THAT THIS NOTE IS HELD BY A BENEFIT PLAN INVESTOR, THE ISSUER MAY CAUSE A SALE OR TRANSFER IN THE MANNER DESCRIBED IN THIS PROSPECTUS. THE ISSUER MAY COMPEL EACH BENEFICIAL OWNER HEREOF TO CERTIFY PERIODICALLY THAT SUCH OWNER IS A QIB AND ALSO A QP. 6. It understands and acknowledges that its purchase, holding and disposition of such Notes constitutes a representation and agreement by it that at the time of purchase and throughout the period it holds such Notes or any interest therein (1) either (i) it is not, and is not acting on behalf of (and for so long as it holds such Notes (or any interest therein) will not be, or be acting on behalf of), a Benefit Plan Investor or a governmental, church or non U.S. plan which is subject to any Similar Laws and/or laws or regulations that provide that the assets of the Issuer could be deemed to include ‘‘plan assets’’ of such plan under Section 3(42) of ERISA, the Plan Assets Regulation or otherwise, and no part of the assets used by it to purchase or hold such Note or any interest therein constitutes the assets of such Benefit Plan Investor or such plan, or (ii) it is, or is acting on behalf of, a governmental, church or non U.S. plan, and such purchase or holding of such Note does not and will not result in a non-exempt violation of any Similar Laws, and will not subject the Issuer to any laws, rules or regulations applicable to such plan solely as a result of the investment in the Issuer by such plan; and (2) it will not sell or otherwise transfer any note or interest therein to any person without first obtaining these same foregoing representations, warranties and covenants from that person with respect to its acquisition, holding and disposition of such Note. 7. It acknowledges that the Issuer, NLMK, the Registrars, the Joint Lead Managers and their respective affiliates, and others will rely upon the truth and accuracy of the above acknowledgements, representations and agreements and agrees that, if any of the acknowledgements, representations or agreements deemed to have been made by it by its purchase of Rule 144A Notes is no longer accurate, it shall promptly notify the Issuer, NLMK and the Joint Lead Managers. If it is acquiring any Notes as a fiduciary or agent for one or more investor accounts who are QIBs that are also QPs, it represents that it has sole investment discretion with respect to each such account, and that it has full power to make the above acknowledgements, representations and agreements on behalf of each such account. 8. It understands that the Rule 144A Notes will be evidenced by the Rule 144A Global Note Certificate. Before any interest in the Rule 144A Global Note Certificate may be offered, sold, pledged or otherwise transferred to a person who takes delivery in the form of an interest in the Regulation S Global Note Certificate, it will be required to provide a Transfer Agent with a written certification (in the form provided in the Paying Agency Agreement) as to compliance with applicable securities laws. Prospective purchasers are hereby notified that sellers of the Notes may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A.

Regulation S Notes Each purchaser of Regulation S Notes, by accepting delivery of this Prospectus and the Regulation S Notes, will be deemed to have represented, agreed and acknowledged that: 1. It is, or at the time Regulation S Notes are purchased will be, the beneficial owner of such Regulation S Notes and (a) it is not a U.S. person and it is located outside the United States (within the meaning of Regulation S) and (b) it is not an affiliate of the Issuer, NLMK or a person acting on behalf of such an affiliate.

195 2. It understands that the Regulation S Notes have not been and will not be registered under the Securities Act and that, prior to the expiration of the ‘‘distribution compliance period’’ (as such term is defined in Rule 902 of Regulation S), it will not offer, sell, pledge or otherwise transfer such Notes except (a) in accordance with Rule 144A to a person that it and any person acting on its behalf reasonably believes is a QIB that is also a QP purchasing for its own account or for the account of a QIB that is also a QP or (b) in an offshore transaction to a person that is not a U.S. person in accordance with Rule 903 or Rule 904 of Regulation S, in the case of (a) and (b), in accordance with any applicable securities laws of any state of the United States. 3. It understands that the Regulation S Notes will be evidenced by the Regulation S Global Note Certificate. Before any interest in the Regulation S Global Note Certificate may be offered, sold, pledged or otherwise transferred to a person who takes delivery in the form of an interest in the Rule 144A Global Note Certificate, it will be required to provide a Transfer Agent with a written certification (in the form provided in the Paying Agency Agreement) as to compliance with applicable securities laws. 4. It understands and acknowledges that its purchase, holding and disposition of such Notes constitutes a representation and agreement by it that (1) either (i) it is not, and is not acting on behalf of (and for so long as it holds such Notes or any interest therein will not be, or be acting on behalf of), a Benefit Plan Investor or a governmental, church or non U.S. plan which is subject to any Similar Laws and/or laws or regulations that provide that the assets of the Issuer could be deemed to include ‘‘plan assets’’ of such plan under Section 3(42) of ERISA, the Plan Assets Regulation or otherwise, and no part of the assets used by it to purchase or hold such Note or any interest therein constitutes the assets of such Benefit Plan Investor or such plan, or (ii) it is, or is acting on behalf of, a governmental, church or non U.S. plan, and such purchase or holding of such Note does not and will not result in a non-exempt violation of any Similar Laws, and will not subject the Issuer to any laws, rules or regulations applicable to such plan solely as a result of the investment in the Issuer by such plan; and (2) it will not sell or otherwise transfer any Note or interest therein otherwise than to any person without first obtaining these same foregoing representations, warranties and covenants from that person with respect to its acquisition, holding and disposition of such Note.

196 CERTAIN ERISA CONSIDERATIONS This Prospectus was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal tax law. This Prospectus was written to support the promotion or marketing of the Notes. ERISA imposes fiduciary standards and certain other requirements on employee benefit plans subject thereto (collectively ‘‘ERISA Plans’’), including collective investment funds, separate accounts, and other entities or accounts whose underlying assets are treated as assets of such plans pursuant to the U.S. Department of Labor ‘‘plan assets’’ regulation, 29 CFR Section 2510.3-101 (as modified by Section 3(42) of ERISA, the ‘‘Plan Asset Regulation’’) and on those persons who are fiduciaries with respect to ERISA Plans. Section 406 of ERISA and Section 4975 of the Internal Revenue Code of 1986 (the ‘‘Code’’) prohibit certain transactions involving the assets of an ERISA Plan (as well as those plans that are not subject to ERISA but which are subject to Section 4975 of the Code (together with ERISA Plans, ‘‘Plans’’)) and certain persons (referred to as ‘‘parties in interest’’ or ‘‘disqualified persons’’) having certain relationships to such Plans, unless a statutory or administrative exemption applies to the transaction. In particular, an extension of credit between a Plan and a ‘‘party in interest’’ or ‘‘disqualified person’’ may constitute a prohibited transaction. A party in interest or disqualified person who engages in a prohibited transaction may be subject to excise taxes or other liabilities under ERISA and the Code. The Issuer or the Trustee, directly or through affiliates, may be considered a party in interest or disqualified person with respect to many Plans. Prohibited transactions within the meaning of Section 406 of ERISA or Section 4975 of the Code may arise if the Notes are acquired by a Plan with respect to which the Issuer or the Trustee or any of their respective affiliates is a party in interest or a disqualified person, unless the Notes are acquired pursuant to and in accordance with an applicable exemption. Certain exemptions from the prohibited transaction provisions of Section 406 of ERISA and Section 4975 of the Code may apply depending in part on the type of Plan fiduciary making the decision to acquire a Note and the circumstances under which that decision is made. Under a ‘‘look-through rule’’ set forth in the Plan Assets Regulation, if a Plan invests in an ‘‘equity interest’’ of an entity and no other exception applies, the Plan’s assets include both the equity interest and an undivided interest in each of the entity’s underlying assets. This rule will only apply where equity participation in an entity by benefit plan investors is ‘‘significant.’’ Equity participation by benefit plan investors is significant if 25% or more of the value of any class of equity interest in the entity is held by benefit plan investors. The term ‘‘benefit plan investor’’ includes (a) an employee benefit plan (as defined in Section 3(3) of ERISA), that is subject to Title I of ERISA; (b) a plan defined in Section 4975(e)(1) of the Code that is subject to Section 4975 of the Code; or (c) any entity whose underlying assets include ‘‘plan assets’’ by reason of any such plan’s investment in the entity. The Plan Asset Regulation defines the term ‘‘equity interest’’ as any interest in an entity other than an instrument that is treated as indebtedness under applicable local law and which has no substantial equity features, and specifically includes a beneficial interest in a trust. Where the value of an equity interest in an entity relates solely to identified property of the entity, that property is treated as the sole property of a separate entity. Because the Notes do not represent an interest in any property of the Issuer other than the Loan, they may be regarded for ERISA purposes as equity interests in a separate entity whose sole asset is the Loan. Furthermore, neither the Trustee nor the Issuer will be able to monitor the Noteholders’ possible status as benefit plan investors. Accordingly, the Notes may not be purchased or held by any benefit plan investor. While not subject to ERISA, the Code or the Plan Assets Regulation, a governmental, church or non U.S. plan may be subject to federal, state, local, non U.S. or other laws or regulations that are substantially similar to the fiduciary responsibility and/or the prohibited transaction provisions of ERISA and/or Similar Laws and/or laws or regulations that provide that the assets of the Issuer could be deemed to include ‘‘plan assets’’ of such plan under Section 3(42) of ERISA, 29 C.F.R. Section 2510.3-101 or otherwise. Accordingly, the Notes either (a) may not be purchased or held by any such a governmental, church or non U.S. plan or (b) may be purchased or held by any such governmental, church or non U.S. plan where such acquisition does not and will not result in a non-exempt violation of any Similar Laws and will not subject the Issuer to any laws, rules or regulations applicable to such plan solely as a result of the investment in the Issuer by such plan. BY ITS PURCHASE, HOLDING OR DISPOSITION OF THE NOTES (OR ANY INTEREST THEREIN) PURCHASER OR TRANSFEREE, AND EACH FIDUCIARY ACTING ON BEHALF OF

197 SUCH PURCHASER OR TRANSFEREE (BOTH IN ITS INDIVIDUAL AND CORPORATE CAPACITY), WILL BE DEEMED TO REPRESENT, WARRANT AND AGREE THAT, DURING THE PERIOD SUCH PURCHASER OR TRANSFEREE HOLDS ANY INTEREST IN THE NOTES (1) EITHER (A) IT IS NOT, AND IT IS NOT ACTING ON BEHALF OF (AND FOR SO LONG AS IT HOLDS THE NOTES (OR ANY INTEREST THEREIN) WILL NOT BE, OR BE ACTING ON BEHALF OF) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF ERISA) SUBJECT TO THE PROVISIONS OF PART 4 OF SUBTITLE B OF TITLE I OF ERISA, A PLAN TO WHICH SECTION 4975 OF THE CODE APPLIES, OR ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE ‘‘PLAN ASSETS’’ UNDER SECTION 3(42) OF ERISA, 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE BY REASON OF A BENEFIT PLAN INVESTOR OR A GOVERNMENTAL, CHURCH OR NON U.S. PLAN WHICH IS SUBJECT TO ANY FEDERAL, STATE, LOCAL, NON U.S. OR OTHER LAWS OR REGULATIONS THAT ARE SUBSTANTIALLY SIMILAR TO THE FIDUCIARY RESPONSIBILITY AND/OR THE PROHIBITED TRANSACTION PROVISIONS OF ERISA (‘‘SIMILAR LAWS’’) AND/OR LAWS OR REGULATIONS THAT PROVIDE THAT THE ASSETS OF THE ISSUER COULD BE DEEMED TO INCLUDE ‘‘PLAN ASSETS’’ OF SUCH PLAN UNDER SECTION 3(42) OF ERISA, 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE, AND NO PART OF THE ASSETS TO BE USED BY IT TO PURCHASE OR HOLD SUCH NOTES OR ANY INTEREST HEREIN CONSTITUTES THE ASSETS OF ANY BENEFIT PLAN INVESTOR OR SUCH A GOVERNMENTAL, CHURCH OR NON U.S. PLAN OR (B) SUCH PURCHASER OR TRANSFEREE IS, OR IS ACTING ON BEHALF OF A GOVERNMENTAL, CHURCH OR NON U.S. PLAN, AND SUCH ACQUISITION DOES NOT AND WILL NOT RESULT IN A NON EXEMPT VIOLATION OF ANY SIMILAR LAWS AND WILL NOT SUBJECT THE ISSUER TO ANY LAWS, RULES OR REGULATIONS APPLICABLE TO SUCH PLAN SOLELY AS A RESULT OF THE INVESTMENT IN THE ISSUER BY SUCH PLAN; AND (2) IT WILL NOT SELL OR OTHERWISE TRANSFER THE NOTES OR ANY INTEREST HEREIN OTHERWISE THAN TO A PURCHASER OR TRANSFEREE THAT IS DEEMED TO MAKE THESE SAME REPRESENTATIONS, WARRANTIES AND AGREEMENTS WITH RESPECT TO ITS PURCHASE, HOLDING AND DISPOSITION OF THIS NOTE. NO PURCHASE BY OR TRANSFER TO A BENEFIT PLAN INVESTOR OF THE NOTES, OR ANY INTEREST HEREIN, WILL BE EFFECTIVE, AND NEITHER THE ISSUER NOR THE TRUSTEE WILL RECOGNIZE ANY SUCH ACQUISITION OR TRANSFER. IN THE EVENT THAT THE ISSUER DETERMINES THAT THIS NOTE IS HELD BY A BENEFIT PLAN INVESTOR, THE ISSUER MAY CAUSE A SALE OR TRANSFER IN THE MANNER DESCRIBED HEREIN.

198 CLEARING AND SETTLEMENT Book-Entry Procedures for the Global Note Certificates Custodial and depository links are to be established among Euroclear, Clearstream, Luxembourg and DTC to facilitate the initial issue of the Notes and cross-market transfers of the Notes associated with secondary market trading. See ‘‘—Book-Entry Ownership’’ and ‘‘—Settlement and Transfer of Notes.’’

Euroclear and Clearstream, Luxembourg Euroclear and Clearstream, Luxembourg each hold securities for their customers and facilitate the clearance and settlement of securities transactions through electronic book-entry transfer between their respective accountholders. Indirect access to Euroclear and Clearstream, Luxembourg is available to other institutions which clear through or maintain a custodial relationship with an accountholder of either system. Euroclear and Clearstream, Luxembourg provide various services including safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Euroclear and Clearstream, Luxembourg also deal with domestic securities markets in several countries through established depository and custodial relationships. Euroclear and Clearstream, Luxembourg have established an electronic bridge between their two systems across which their respective customers may settle trades with each other. Their customers are worldwide financial institutions including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations. Investors may hold their interests in the Regulation S Global Note Certificate directly through Euroclear or Clearstream, Luxembourg if they are accountholders (‘‘Direct Participants’’) or indirectly (‘‘Indirect Participants’’ and together with Direct Participants, ‘‘Participants’’) through organizations which are accountholders therein.

DTC DTC has advised the Issuer as follows: DTC is a limited-purpose trust company organized under the laws of the State of New York, a ‘‘banking organization’’ under the laws of the State of New York, a member of the U.S. Federal Reserve System, a ‘‘clearing corporation’’ within the meaning of the New York Uniform Commercial Code and a ‘‘clearing agency’’ registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants (‘‘DTC Participants’’) and facilitate the clearance and settlement of securities transactions between DTC Participants through electronic computerized book-entry changes in accounts of its DTC Participants, thereby eliminating the need for physical movement of certificates. DTC Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Indirect access to DTC is available to others, such as banks, securities brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly. Investors may hold their interests in the Rule 144A Global Note Certificate directly through DTC if they are DTC Participants in the DTC system, or indirectly through organizations which are DTC Participants in such system. DTC has advised the Issuer that it will take any action permitted to be taken by a holder of Notes only at the direction of one or more DTC Participants and only in respect of such portion of the aggregate principal amount of the relevant Rule 144A Global Note Certificate as to which such DTC Participant or DTC Participants has or have given such direction.

Book-Entry Ownership Euroclear and Clearstream, Luxembourg The Regulation S Global Note Certificate will have an ISIN and a Common Code and will be registered in the name of a nominee for, and deposited with a common depositary on behalf of, Euroclear and Clearstream, Luxembourg. The address of Euroclear is 1 Boulevard du Roi Albert 11, B-1210 Brussels, Belgium, and the address of Clearstream, Luxembourg is 42 Avenue J.F. Kennedy, L-1855, Luxembourg.

DTC The Rule 144A Global Note Certificate will have a CUSIP number, an ISIN and a Common Code and will be deposited with a custodian (the ‘‘Custodian’’) for, and registered in the name of a nominee of, DTC. The Custodian and DTC will electronically record the principal amount of the Notes held within the DTC, system. The address of DTC is 55 Water Street, New York, New York 10041, United States of America.

199 Relationship of Participants with Clearing Systems Each of the persons shown in the records of Euroclear, Clearstream, Luxembourg or DTC as the holder of a Note evidenced by a Global Note Certificate must look solely to Euroclear, Clearstream, Luxembourg or DTC (as the case may be) for his share of each payment made by the Issuer to the holder of such Global Note Certificate and in relation to all other rights arising under that Global Note Certificate, subject to and in accordance with the respective rules and procedures of Euroclear, Clearstream, Luxembourg or DTC (as the case may be). The Issuer expects that, upon receipt of any payment in respect of Notes evidenced by a Global Note Certificate, the common depositary by whom such Note is held, or nominee in whose name it is registered, will immediately credit the relevant participants’ or accountholders’ accounts in the relevant clearing system with payments in amounts proportionate to their respective beneficial interests in the principal amount of the relevant Global Note Certificate as shown on the records of the relevant clearing system or its nominee. The Issuer also expects that payments by Direct Participants or DTC Participants (as the case may be) in any clearing system to owners of beneficial interests in such Global Note Certificate held through such Direct Participants or DTC Participants (as the case may be) in any clearing system will be governed by standing instructions and customary practices. Save as aforesaid, such persons shall have no claim directly against the Issuer in respect of payments due on the Notes for so long as the Notes are evidenced by such Global Note Certificate and the obligations of the Issuer will be discharged by payment to the registered holder, as the case may be, of such Global Note Certificate in respect of each amount so paid. None of the Issuer, the Trustee or any Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of ownership interests in any Global Note Certificate or for maintaining, supervising or reviewing any records relating to such ownership interests.

Settlement and Transfer of Notes Subject to the rules and procedures of each applicable clearing system, purchases of Notes held within a clearing system must be made by or through Direct Participants or DTC Participants (as the case may be), which will receive a credit for such Notes on the clearing system’s records. The ownership interest of each actual purchaser of each such Note (the ‘‘Beneficial Owner’’) will in turn be recorded on the Direct Participants’, Indirect Participants’ or DTC Participants’ records (as the case may be). Beneficial Owners will not receive written confirmation from any clearing system of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct Participant, Indirect Participant or DTC Participant (as the case may be) through which such Beneficial Owner entered into the transaction. Transfers of ownership interests in Notes held within the clearing system will be affected by entries made on the books of Direct Participants, Indirect Participants or DTC Participants (as the case may be) acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in such Notes, unless and until interests in any Global Note Certificate held within a clearing system are exchanged for individual note certificates. No clearing system has knowledge of the actual Beneficial Owners of the Notes held within such clearing system and their records will reflect only the identity of the Direct Participants or DTC Participants (as the case may be) to whose accounts such Notes are credited, which may or may not be the Beneficial Owners. The Direct Participants or the DTC Participants (as the case may be) will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by the clearing systems to Direct Participants or DTC Participants (as the case may be), by Direct Participants to Indirect Participants, and by Direct Participants, Indirect Participants or DTC Participants (as the case may be) to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. The laws of some jurisdictions may require that certain persons take physical delivery in definitive form of securities. Consequently, the ability to transfer interests in the Global Note Certificates to such persons may be limited. In particular, because DTC can only act on behalf of DTC Participants the ability of a person having an interest in the Rule 144A Global Note Certificate to pledge such interest to persons or entities that do not participate in DTC, or otherwise take actions in respect of such interest, may be affected by the lack of a physical certificate in respect of such interest.

200 Trading between Euroclear and/or Clearstream, Luxembourg Participants Secondary market sales of book-entry interests in the Notes held through Euroclear or Clearstream, Luxembourg to purchasers of book-entry interests in the Notes held through Euroclear or Clearstream, Luxembourg will be conducted in accordance with the normal rules and operating procedures of Euroclear and Clearstream, Luxembourg and will be settled using the procedures applicable to conventional Eurobonds.

Trading between DTC Participants Secondary market sales of book-entry interests in the Notes between DTC Participants will occur in the ordinary way in accordance with DTC rules and will be settled using the procedures applicable to U.S. corporate debt obligations in DTC’s Same-Day Funds Settlement system in same-day funds, if payment is effected in U.S. dollars, or free of payment, if payment is not effected in U.S. dollars. Where payment is not effected in U.S. dollars, separate payment arrangements outside DTC; are required to he made between DTC Participants.

Trading between DTC Seller and Euroclear/Clearstream, Luxembourg Purchaser When book-entry interests in Notes are to be transferred from the account of a DTC Participant holding a beneficial interest in the Rule 144A Global Note Certificate to the account of a Euroclear or Clearstream, Luxembourg accountholder wishing to purchase a beneficial interest in the Regulation S Global Note Certificate (subject to the certification procedures provided in the Paying Agency Agreement), the DTC Participant will deliver instructions for delivery to the relevant Euroclear or Clearstream, Luxembourg accountholder to DTC by 12:00 p.m., New York time, on the settlement date. Separate payment arrangements are required to be made between the DTC Participant and the relevant Euroclear or Clearstream, Luxembourg Participant. On the settlement date, the custodian of the Rule 144A Global Note Certificate will instruct the Registrar to (1) decrease the amount of Notes registered in the name of Cede & Co. and evidenced by the Rule 144A Global Note Certificate of the relevant class and (2) increase the amount of Notes registered in the name of the nominee of the common depository for Euroclear and Clearstream, Luxembourg and evidenced by the Regulation S Global Note Certificate. Book-entry interests will be delivered free of payment to Euroclear or Clearstream, Luxembourg, as the case may be, for credit to the relevant accountholder on the first business day following the settlement date.

Trading between Euroclear/Clearstream, Luxembourg Seller and DTC Purchaser When book-entry interests in the Notes are to be transferred from the account of a Euroclear or Clearstream, Luxembourg accountholder to the account of a DTC Participant wishing to purchase a beneficial interest in the Rule 144A Global Note Certificate (subject to the certification procedures provided in the Paying Agency Agreement), the Euroclear or Clearstream, Luxembourg participant must send to Euroclear or Clearstream, Luxembourg delivery free of payment instructions by 7:45 p.m., Brussels or Luxembourg time, one business day prior to the settlement date. Euroclear or Clearstream, Luxembourg, as the case may be, will in turn transmit appropriate instructions to the common depository for Euroclear and Clearstream, Luxembourg and the Registrar to arrange delivery to the DTC Participant on the settlement date. Separate payment arrangements are required to be made between the DTC Participant and the relevant Euroclear or Clearstream, Luxembourg accountholder, as the case may be. On the settlement date, the common depositary for Euroclear and Clearstream, Luxembourg will (a) transmit appropriate instructions to the custodian of the Rule 144A Global Note Certificate who will in turn deliver such book-entry interests in the Notes free of payment to the relevant account of the DTC Participant and (b) instruct the Registrar to (1) decrease the amount of Notes registered in the name of the nominee of the common depository for Euroclear and Clearstream, Luxembourg and evidenced by the Regulation S Global Note Certificate; and (2) increase the amount of Notes registered in the name of Cede & Co. and evidenced by the Rule 144A Global Note Certificate. Although Euroclear, Clearstream, Luxembourg and DTC have agreed to the foregoing procedures in order to facilitate transfers of beneficial interest in Global Note Certificates among participants and accountholders of Euroclear, Clearstream, Luxembourg and DTC, they are under no obligation to perform or continue to perform such procedure, and such procedures may be discontinued at any time. None of the Issuer, the Trustee or any Agent will have the responsibility for the performance, by Euroclear, Clearstream, Luxembourg or DTC or their respective Direct Participants, Indirect Participants or DTC

201 Participants, as the case may be, of their respective obligations under the rules and procedures governing their operations.

Pre-issue Trades Settlement It is expected that delivery of Notes will be made against payment therefor on the Closing Date, which could be more than three business days following the date of pricing. Settlement procedures in different countries will vary. Purchasers of Notes may be affected by such local settlement practices, and purchasers of Notes between the relevant date of pricing and the Closing Date should consult their own advisors.

202 TAXATION The following is a general description of certain tax laws relating to the Notes and does not purport to be a comprehensive discussion of the tax treatment of the Notes. Prospective investors in the Notes should consult their own tax advisors as to the tax consequences of the purchase, ownership and disposition of the Notes in light of their particular circumstances, including but not limited to the consequences of receipt of interest and sale or redemption of the Notes.

THE RUSSIAN FEDERATION Taxation of the Notes General The following is an overview of certain Russian tax considerations relevant to the purchase, ownership and disposal of the Notes, as well as the taxation of interest income on the Loan. The overview is based on the laws of the Russian Federation in effect on the date of this Prospectus, which are subject to potential change (possibly with retroactive effect). The overview does not seek to address the applicability of, and procedures in relation to, taxes levied by regions, municipalities or other non-federal authorities of the Russian Federation. Nor does the overview seek to address the availability of double tax treaty relief in respect of the Notes, and it should be noted that there may be practical difficulties, including satisfying certain documentation requirements, involved in claiming double tax treaty relief. Prospective investors should consult their own advisers regarding the tax consequences of investing in the Notes. No representations with respect to the Russian tax consequences of investing, owning or disposing of the Notes to any particular Noteholder is made hereby. The provisions of the Russian Tax Code applicable to Noteholders and transactions involving the Notes are ambiguous and lack interpretive guidance. Both the substantive provisions of the Russian Tax Code applicable to financial instruments and the interpretation and application of those provisions by the Russian tax authorities may be more inconsistent and subject to more rapid and unpredictable change than in jurisdictions with more developed capital markets or more developed taxation systems. In particular, the interpretation and application of such provisions will in practice rest substantially with local tax inspectorates. In practice, interpretation by different tax inspectorates may be inconsistent or contradictory and may constitute the imposition of conditions, requirements or restrictions not provided for by the existing legislation. Similarly, in the absence of binding precedents court rulings on tax or related matters by different Russian courts relating to the same or similar circumstances may also be inconsistent or contradictory. According to the Russian Tax Code, a tax resident is an individual who spent in Russia not less than 183 days within 12 consecutive months (days of medical treatment and education outside of the Russian Federation are also counted as Russian days if the individual departed from the Russian Federation for these purposes for less than six months). The interpretation of this definition by the Ministry of Finance of the Russian Federation states that for tax withholding purposes an individual’s tax residence status should be determined on the date of income payment (based on the number of Russian days in the 12-month period preceding the date of payment). The individual’s final tax liability in the Russian Federation for the reporting calendar year should be determined based on his/her tax residence status for such calendar year, i.e. based on the number of Russian days in the 12-month period as of the end of such period. For the purposes of this overview, a ‘‘non-resident Noteholder’’ means (i) an individual Noteholder who has not established a Russian tax residence status for the reporting calendar year as discussed above; or (ii) a legal entity or organization in each case not organized under Russian law that holds and disposes of the Notes otherwise than through a permanent establishment in Russia. For the purposes of this overview, a ‘‘Russian resident Noteholder’’ means (i) an individual Noteholder who has established a Russian tax residence status for the reporting calendar year as discussed above; or (ii) a legal entity or organization which is a Noteholder but is not qualified a non-resident Noteholder as defined in the previous paragraph. The Russian tax treatment of interest payments made by NLMK to the Issuer under the Loan Agreement may affect the holders of the Notes. See ‘‘—Taxation of Interest Income on the Loan’’ below.

203 Non-Resident Noteholders Generally, any non-resident Noteholder should not be subject to any Russian taxes on receipt from the Issuer of amounts payable in respect of principal, premium or interest on the Notes, subject to what is stated in ‘‘—Taxation of Interest Income on the Loan’’ below. In respect of gain or other income realized on a redemption, sale or a disposal of the Notes a non-resident Noteholder generally should not be subject to any Russian taxes, unless the proceeds of such redemption, sale or other disposal of the Notes are received from a source within the Russian Federation. In the event that proceeds from sales, redemption or a disposal of Notes are viewed as received from a source within the Russian Federation, the Russian tax implications should be as outlined below.

Legal entities and organizations A non-resident Noteholder that is a legal entity or organization should not be subject to Russian tax in respect of such proceeds, provided that no portion thereof is attributable to accrued interest. There is a risk that any portion of such sales proceeds attributable to accrued interest may be subject to Russian withholding tax on income at the rate of 20 per cent. subject to any available double tax treaty relief, even if the disposal itself results in a capital loss. In order to enjoy the benefits of an applicable double tax treaty, documentary evidence is required prior to payment being made to confirm the applicability of the double tax treaty under which benefits are claimed. Non-resident Noteholders that are legal entities or organizations should consult their own tax advisers with respect to possibility of obtaining a respective double tax treaty relief.

Individuals If proceeds from sales, redemption or other disposal of the Notes are received from a Russian source, a non-resident Noteholder who is an individual will generally be subject to tax at a rate of 30 per cent. subject to any available double tax treaty relief as discussed below, in respect of gross proceeds from such disposal less any available cost deduction (which includes the purchase price of the Notes). Any portion of the above proceeds from sale, redemption or other disposal of the Notes attributable to accrued interest income under the Notes which is received by a non-resident Noteholder from the Russian sources may be subject to tax at a rate of 30 per cent. subject to any available double tax treaty relief as discussed below. In this regard, if the Notes are disposed of in the Russian Federation, for Russian personal income tax purposes, the proceeds of such disposition (including any portion of such proceeds attributable to accrued interest income under the Notes) are likely to be regarded as received from a Russian source. In certain circumstances, if the disposal proceeds (including the interest income portion) are payable by a Russian legal entity, individual entrepreneur or a Russian permanent establishment of a foreign organization, the payer may be required to withhold this tax. Unless the tax is withheld by the payer, the non-resident individual Noteholder would be liable to pay the tax to the Russian budget. In such a situation, there is a risk that the taxable base may be affected by fluctuations in the exchange rates between the currency of acquisition of the Notes, the currency of sale of the Notes and rubles. Non-resident Noteholders who are individuals should consult their own tax advisers with respect to the tax consequences of the receipt of proceeds from a source within the Russian Federation in respect of a disposition of the Notes.

Resident Noteholders A Russian resident Noteholder is subject to all applicable Russian taxes and responsible for complying with any documentation requirements that may be established by law or practice in respect of gains from disposal of the Notes and interest income received on the Notes.

Legal entities and organizations A Russian resident Noteholder that is a legal entity or organization should, prima facie, be subject to Russian income tax at the rate of 20 per cent. on interest (coupon) income on the Notes as well as on the capital gains from sales, redemption or other disposal of the Notes. Generally, Russian resident Noteholders that are Russian legal entities are required to submit Russian income tax returns, assess and pay tax on capital gains and interest (coupon) income.

204 Individuals A Russian resident Noteholder who is an individual should generally be subject to personal income tax at a rate of 13 per cent. on deemed income resulting from acquisition of the Notes at a price below their market value, on interest (coupon) income on the Notes and capital gains from sales, redemption or other disposal of the Notes. Russian resident Noteholders who are individuals are required to submit annual personal income tax returns, assess and personally pay tax unless the above mentioned income is received via a Russian asset manager, broker or another entity which acts as the Noteholder’s agent based on a relevant contract and this entity withholds and pays in full Russian income tax on behalf of the Noteholder. Resident Noteholders should consult their own tax advisers with respect to their tax position regarding the Notes.

Tax Treaty Relief Advance Treaty Relief Where proceeds from the disposal of the Notes are received from a Russian source, in order for the non-resident Noteholders, whether an individual, legal entity or organization, to receive the benefits of an applicable double tax treaty, documentary evidence is required to confirm the applicability of the double tax treaty for which benefits are claimed. Currently, a non-resident Noteholder—legal entity or organization should present to the payer of income an apostilled or legalized confirmation of its tax residence, attaching a notarized translation in Russian. The confirmation should be presented before any payment is made and should be certified by the competent authority of the country of the Noteholder’s tax residence. Such confirmation is valid for the calendar year in which it is issued. Non-resident Noteholders that are legal entities or organizations should consult their own tax advisers with respect to the possibilities to enjoy any double tax treaty relief and the relevant Russian procedures. For non-resident individual Noteholders, procedures for advance treaty clearance are not specifically provided for by current Russian legislation. Therefore, it is likely that, for non-resident individual Noteholders an advance reduction of the Russian withholding income tax or advance exemption from such tax provided by a respective double tax treaty between Russia and the country of the tax residence of such non-resident individual Noteholder could practically not be obtained. Non-resident individual Noteholders should consult their own tax advisers with respect to the possibilities to enjoy any double tax treaty relief or tax refund and the relevant Russian procedures.

Refund of Tax Withheld For a non-resident Noteholder which is not an individual and for which double tax treaty relief is available, if Russian withholding tax on income was withheld by the source of payment, a refund of such tax is possible within three years from the end of the tax period in which the tax was withheld. In order to obtain a refund, the tax documentation confirming the right of the non-resident recipient of the income to double tax treaty relief is required. If non-resident individual Noteholders do not obtain double tax treaty relief at the time the proceeds from a disposal of the Notes are paid to such non-resident individual Noteholders and income tax is withheld by a Russian payer of the income, such non-resident individual Noteholders may apply for a refund within one year from the end of the tax period in which the tax was withheld. The documentation requirements to obtain such a refund would include a confirmation of the income received and the taxes paid in the country of tax residence of the non-resident individual Noteholders as confirmed by the relevant tax authorities of such countries. However, there can be no assurance that the refund of any taxes withheld or double tax treaty relief (as described above) will be available for such non-resident individual Noteholders. The Russian tax authorities may, in practice, require a wide variety of documentation confirming the right to benefits under a double tax treaty. Such documentation, in practice, may not be explicitly required by the Russian Tax Code. Obtaining a refund of Russian tax withheld may be a time consuming process and can involve considerable practical difficulties, including the possibility that a tax refund may be denied for various reasons.

205 Taxation of Interest Income on the Loan In general, interest payments on borrowed funds made by a Russian legal entity to a non-resident legal entity or organization are subject to Russian withholding income tax at a rate of 20 per cent. (or 30 per cent. in respect of non-resident individuals), subject to reduction or elimination pursuant to the terms of an applicable double tax treaty. There is a risk that under the Russian thin capitalization rules that in certain circumstances where parties related to NLMK (i.e. the Related Parties) hold Notes part or all of the interest to be paid by NLMK under the Loan could be reclassified as dividends for Russian tax purposes. This would occur if the overall amount of the ‘‘controlled debt’’ of NLMK calculated on an individual Related Party basis exceeded three times the capital of NLMK, calculated in accordance with the requirements of the Russian Tax Code. Interest on the amount of such excess would be reclassified as dividends for Russian tax purposes. Under the Russian Tax Code, there is a risk that the ‘‘controlled debt’’ of NLMK may include all or part of the Loan to the extent that certain Related Parties acquire any portion of the Notes. Such reclassification of all or a portion of the interest as dividends could potentially lead to the imposition of Russian withholding tax on such reclassified interest at the rate of 15 per cent., subject to possible exemption under the double tax treaty between the Russian Federation and Ireland, and the non-deductibility of such interest for Russian profits tax purposes by NLMK. Based on the assumption that the amount of NLMK’s ‘‘controlled debt’’ calculated in accordance with the requirements of Article 269 of the Russian Tax Code will not exceed three times the amount of ‘‘own capital’’ (‘‘sobstvenniy capital’’) of NLMK calculated on an individual Related Party basis, the Russian thin capitalization rules should not apply currently to the interest on the Loan. However, changes in these assumptions could result in all or a portion of such interest being subject to the thin capitalization rules in the future so as to treat ‘‘excess interest’’ related to the Loan as a dividend under the double tax treaty between the Russian Federation and Ireland subject to 15 per cent. withholding tax applicable to dividends (subject to possible tax treaty relief, if any) rather than zero withholding tax applicable to interest. The Amendments should allow the interest on the Loan not to be subject to withholding. In particular, the Amendments introduce into the Russian Tax Code an exemption from the obligation to withhold tax from interest paid under transactions similar to the transactions described herein. The Amendments have recently been approved by the Russian State Duma, the Russian Council of the Federation and the President of the Russian Federation and have entered into force starting from July 1, 2012. According to the Amendments, in respect of bonds issued prior to January 1, 2014, Russian borrowers are exempted from the obligation to withhold Russian withholding income tax from interest payments made to foreign companies on debt obligations arising in connection with placement by these foreign companies of quoted bonds, provided that (i) there is a double tax treaty between the Russian Federation and the jurisdiction of tax residence of the issuer, and (ii) the issuer duly confirms its tax residence. The Amendments do not provide tax exemption for the holders of Eurobonds from Russian tax on interest payments, although at present there is no mechanism or requirement for non-residents to self-assess and pay the tax. For the purpose of the Amendments ‘‘quoted bonds’’ mean bonds and other debt obligations which passed the listing procedure and/or were admitted to circulation on one or more foreign stock exchanges and/or rights to which are recorded by a foreign depositary-clearing organization, provided such foreign stock exchanges and depositary-clearing organizations are specified in the list approved by the FSFM in consultation with the Ministry of Finance of the Russian Federation. The List includes the Irish Stock Exchange amongst the recognized foreign stock exchanges. Provided that the Notes have passed the listing procedure and/or have been admitted to circulation on the Irish Stock Exchange, the Notes should be recognized as ‘‘quoted bonds’’ for the purposes of the Amendments and, therefore, payments under the Loan should not be subject to Russian withholding tax. According to the Amendments the above exemption established for the interest payments is also applicable to (i) income payable by a Russian legal entity in connection with a guarantee, surety or other security granted by such Russian organization with respect to a debt obligation to a foreign organization and/ or with respect to quoted bonds and (ii) to other income payable by a Russian organization, providing that the payment of such income is established by the provisions of the respective debt obligation or such income is paid due to a change in the terms and conditions of the respective quoted bonds and/or debt obligations including the cases of their early repurchase or redemption.

206 The Amendments address Russian withholding tax treatment of interest payments or other above payments to be made to foreign companies on debt obligations arising in connection with the issuance by these foreign companies of quoted bonds before January 1, 2014. The Amendments do not address Russian tax treatment of payments under the quoted bonds issued on or after January 1, 2014. If the payments under the Loan are subject to any withholding taxes for any reason (as a result of which the Issuer would reduce payments under the Notes in the amount of such withholding taxes), NLMK is required to increase payments as may be necessary so that the Issuer receives the net amount equal to the full amount it would have received in the absence of such withholding. It should be noted, however, that tax gross-up provisions in contracts may not be enforceable in the Russian Federation. In the event that NLMK fails to increase the payments, such failure would constitute an Event of Default. If NLMK is obliged to increase payments, it may prepay the Loan in full. In such case, all outstanding Notes would be redeemable at par with accrued interest. Russian VAT is not applied to the rendering of financial services involving the provision of a loan in monetary form. Therefore, no VAT will be payable in the Russian Federation on any payment of interest or principal in respect of the Loan.

IRELAND The following is a summary of the principal Irish tax consequences for individuals and companies of ownership of the Notes based on the laws and practice of the Irish Revenue Commissioners currently in force in Ireland and may be subject to change. It deals with Noteholders who beneficially own their Notes as an investment. Particular rules not discussed below may apply to certain classes of taxpayers holding Notes, such as dealers in securities, trusts, etc. The summary does not constitute tax or legal advice and the comments below are of a general nature only. Prospective investors in the Notes should consult their professional advisers on the tax implications of the purchase, holding, redemption or sale of the Notes and the receipt of interest thereon under the laws of their country of residence, citizenship or domicile.

Withholding Tax In general, tax at the standard rate of income tax (currently 20 per cent.) is required to be withheld from payments of Irish source interest which should include interest payable on the Notes. The Issuer will not be obliged to make a withholding or deduction for or on account of Irish income tax from a payment of interest on a Note where: (a) the Notes are quoted Eurobonds, i.e. securities which are issued by a company, (such as the Issuer), which are listed on a recognized stock exchange, (such as the Irish, London or Luxembourg Stock Exchanges), and which carry a right to interest; and (b) the person by or through whom the payment is made is not in Ireland, or if such person is in Ireland, either: (i) the Notes are held in a clearing system recognized by the Irish Revenue Commissioners; (DTC, Euroclear and Clearstream, Luxembourg are, amongst others, so recognized); or (ii) the Noteholder is not resident in Ireland and has made a declaration to a relevant person (such as a paying agent located in Ireland) in the prescribed form; and (c) one of the following conditions is satisfied: (i) the Noteholder is resident for tax purposes in Ireland; or (ii) the Noteholder is a pension fund, government body or other person (other than a person described in paragraph (c)(iv) below), who is resident in a Relevant Territory (as defined below) and who, under the laws of that territory is exempted from tax that generally applies to profits, income or gains in that territory; or (iii) the Noteholder is subject, without any reduction computed by reference to the amount of such interest or other distribution, to a tax in a Relevant Territory which generally applies to profits, income or gains received in that territory, by persons, from sources outside that territory; or (iv) the Noteholder is not a company which, directly or indirectly, controls the Issuer, is controlled by the Issuer, or is controlled by a third company which also directly or indirectly controls the Issuer,

207 and neither the Noteholder, nor any person connected with the Noteholder, is a person or persons: (i) from whom the Issuer has acquired assets; (ii) to whom the Issuer has made loans or advances; or (iii) with whom the Issuer has entered into a Swap Agreement, where the aggregate value of such assets, loans, advances or Swap Agreements represents not less than 75 per cent. of the assets of the Issuer, or (v) the Issuer is not aware at the time of the issue of any Notes that any Noteholder of those Notes is (i) a person of the type described in (c)(iv) above AND (ii) is not subject, without any reduction computed by reference to the amount of such interest or other distribution, to a tax in a Relevant Territory which generally applies to profits, income or gains received in that territory, by persons, from sources outside that territory, where for these purposes, the term ‘‘Relevant Territory’’ means a member state of the European Union (other than Ireland) or a country with which Ireland has signed a double tax treaty; and ‘‘Swap Agreement’’ means any agreement, arrangement or understanding that— (i) provides for the exchange, on a fixed or contingent basis, of one or more payments based on the value, rate or amount of one or more interest rates, currencies, commodities, securities, instruments of indebtedness, indices, quantitative measures, or other financial or economic interests or property of any kind, or any interest therein or based on the value thereof, and (ii) transfers to a person who is a party to the agreement, arrangement or undertaking, or to a person connected with that person, in whole or in part, the financial risk associated with a future change in any such value, rate or amount without also conveying a current or future direct or indirect ownership interest in the asset (including any enterprise or investment pool) or liability that incorporates the financial risk so transferred. Thus, so long as the Notes continue to be quoted on the Irish Stock Exchange, are held in a clearing system recognized by the Irish Revenue Commissioners, (DTC, Euroclear and Clearstream, Luxembourg are, amongst others, so recognized), and one of the conditions set out in paragraph (c) above is met, interest on the Notes can be paid by any Paying Agent acting on behalf of the Issuer free of any withholding or deduction for or on account of Irish income tax. If the Notes continue to be quoted but cease to be held in a recognized clearing system, interest on the Notes may be paid without any withholding or deduction for or on account of Irish income tax provided such payment is made through a Paying Agent outside Ireland, and one of the conditions set out in paragraph (c) above is met.

Encashment Tax Irish tax will be required to be withheld at the standard rate of income tax (currently 20 per cent.) from interest on any Note, where such interest is collected or realized by a bank or encashment agent in Ireland on behalf of any Noteholder. There is an exemption from encashment tax where the beneficial owner of the interest is not resident in Ireland and has made a declaration to this effect in the prescribed form to the encashment agent or bank.

Income Tax, PRSI and Universal Social Charge Notwithstanding that a Noteholder may receive interest on the Notes free of withholding tax, the Noteholder may still be liable to pay Irish tax with respect to such interest. Noteholders resident or ordinarily resident in Ireland who are individuals may be liable to pay Irish income tax, pay related social insurance (‘‘PRSI’’) contributions and the universal social charge in respect of interest they receive on the Notes. Interest paid on the Notes may have an Irish source and therefore may be within the charge to Irish income tax. In the case of Noteholders who are non-resident individuals such Noteholders may also be liable to pay the universal social charge in respect of interest they receive on the Notes.

208 Ireland operates a self-assessment system in respect of tax and any person, including a person who is neither resident nor ordinarily resident in Ireland, with Irish source income comes within its scope. There are a number of exemptions from Irish income tax available to certain non-residents. Firstly, interest payments made by the Issuer are exempt from income tax so long as the Issuer is a qualifying company for the purposes of Section 110 of the Taxes Consolidation Act 1997 (‘‘TCA’’), the recipient is not resident in Ireland and is resident in a Relevant Territory and, the interest is paid out of the assets of the Issuer. Secondly, interest payments made by the Issuer in the ordinary course of its business are exempt from income tax provided the recipient is not resident in Ireland and is a company which is either resident in a Relevant Territory which imposes a tax that generally applies to interest receivable in that Relevant Territory by companies from sources outside that Relevant Territory or, in respect of the interest is exempted from the charge to Irish income tax under the terms of a double tax agreement which is either in force or which is not yet in force but which will come into force once all ratification procedures have been completed. Thirdly, interest paid by the Issuer free of withholding tax under the quoted Eurobond exemption is exempt from income tax, where the recipient is a person not resident in Ireland and resident in a Relevant Territory. Finance Act 2012 extends the foregoing exemption to companies which are under the control, whether directly or indirectly, of person(s) who by virtue of the law of a Relevant Territory are resident for the purpose of tax in a Relevant Territory and are not under the control of person(s) who are not so resident, and to 75% subsidiary companies of a company or companies the principal class of shares in which is substantially and regularly traded on a recognized stock exchange. For these purposes, residence is determined under the terms of the relevant double taxation agreement or in any other case, the law of the country in which the recipient claims to be resident. Interest falling within the above exemptions is also exempt from the universal social charge. Notwithstanding these exemptions from income tax, a corporate recipient that carries on a trade in Ireland through a branch or agency in respect of which the Notes are held or attributed, may have a liability to Irish corporation tax on the interest. Relief from Irish income tax may also be available under the specific provisions of a double tax treaty between Ireland and the country of residence of the recipient. Interest on the Notes which does not fall within the above exemptions is within the charge to income tax, and, in the case of Noteholders who are individuals, is subject to the universal social charge. In the past the Irish Revenue Commissioners have not pursued liability to tax in respect of persons who are not regarded as being resident in Ireland except where such persons have a taxable presence of some sort in Ireland or seek to claim any relief or repayment in respect of Irish tax. However, there can be no assurance that the Irish Revenue Commissioners will apply this treatment in the case of any Noteholder.

Capital Gains Tax A Noteholder will not be subject to Irish tax on capital gains on a disposal of Notes unless such holder is either resident or ordinarily resident in Ireland or carries on a trade or business in Ireland through a branch or agency in respect of which the Notes were used or held.

Capital Acquisitions Tax A gift or inheritance comprising of Notes will be within the charge to capital acquisitions tax (which subject to available exemptions and reliefs, will be levied at 33 per cent. (assuming that the measures announced on 5 December 2012 by the Minister for Finance are enacted into law within the relevant statutory time frame) if either (i) the disponer or the donee/successor in relation to the gift or inheritance is resident or ordinarily resident in Ireland (or, in certain circumstances, if the disponer is domiciled in Ireland irrespective of his residence or that of the donee/successor) on the relevant date or (ii) if the Notes are regarded as property situate in Ireland (i.e. if the Notes are physically located in Ireland or if the register of the Notes is maintained in Ireland)).

Stamp Duty No stamp duty or similar tax is imposed in Ireland (on the basis of an exemption provided for in Section 85(2)(c) of the Irish Stamp Duties Consolidation Act, 1999 so long as the Issuer is a qualifying company for the purposes of Section 110 of the TCA and the proceeds of the Notes are used in the course of the Issuer’s business), on the issue, transfer or redemption of the Notes.

209 E.U. Directive on Taxation of Savings Income Ireland has implemented the EC Council Directive 2003/48/EC on the taxation of savings income into national law. Accordingly, any Irish paying agent making an interest payment on behalf of the Issuer to an individual or certain residual entities resident in another Member State of the European Union or certain associated and dependent territories of a Member State will have to provide details of the payment and certain details relating to the Noteholder (including the Noteholder’s name and address) to the Irish Revenue Commissioners who in turn are obliged to provide such information to the competent authorities of the state or territory of residence of the individual or residual entity concerned. The Issuer shall be entitled to require Noteholders to provide any information regarding their tax status, identity or residency in order to satisfy the disclosure requirements in Directive 2003/48/EC and Noteholders will be deemed by their subscription for Notes to have authorized the automatic disclosure of such information by the Issuer or any other person to the relevant tax authorities.

U.S. FEDERAL INCOME TAX CONSIDERATIONS The following is a discussion of certain U.S. federal income tax considerations relating to the purchase, ownership and disposition of the Notes by U.S. Holders (as defined below) that purchase the Notes at their issue price (generally the first price at which a substantial amount of the Notes is sold, excluding sales to bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers) pursuant to this Offering and hold such Notes as capital assets. This discussion is based on the U.S. Internal Revenue Code of 1986, as amended (the ‘‘Code’’), U.S. Treasury regulations promulgated or proposed thereunder and administrative and judicial interpretations thereof, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect, or to different interpretation. This discussion does not address all of the U.S. federal income tax considerations that may be relevant to specific U.S. Holders in light of their particular circumstances or to U.S. Holders subject to special treatment under U.S. federal income tax law (such as banks, insurance companies, dealers in securities or other U.S. Holders that generally mark their securities to market for U.S. federal income tax purposes, tax-exempt entities, retirement plans, regulated investment companies, real estate investment trusts, certain former citizens or residents of the United States, U.S. Holders that hold a Note as part of a straddle, hedge, conversion or other integrated transaction or U.S. Holders that have a ‘‘functional currency’’ other than the U.S. dollar). This discussion does not address any U.S. state or local or non-U.S. tax considerations or any U.S. federal estate, gift or alternative minimum tax considerations. As used in this discussion, the term ‘‘U.S. Holder’’ means a beneficial owner of a Note that, for U.S. federal income tax purposes, is (i) an individual who is a citizen or resident of the United States, (ii) a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax regardless of its source or (iv) a trust (x) with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more United States persons have the authority to control all of its substantial decisions or (y) that has in effect a valid election under applicable U.S. Treasury regulations to be treated as a United States person. If an entity treated as a partnership for U.S. federal income tax purposes invests in a Note, the U.S. federal income tax considerations relating to such investment will depend in part upon the status and activities of such entity and the particular partner. Any such entity should consult its own tax advisor regarding the U.S. federal income tax considerations applicable to it and its partners relating to the purchase, ownership and disposition of a Note. PERSONS CONSIDERING AN INVESTMENT IN THE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE U.S. FEDERAL, STATE AND LOCAL AND NON-U.S. INCOME AND OTHER TAX CONSIDERATIONS RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES. EACH TAXPAYER IS HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF U.S. FEDERAL TAX ISSUES IN THIS PROSPECTUS IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED BY THE TAXPAYER, FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON THE TAXPAYER UNDER U.S. FEDERAL TAX LAW; (B) ANY SUCH DISCUSSION IS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN; AND (C) THE TAXPAYER SHOULD SEEK ADVICE BASED ON ITS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

210 Characterization of the Notes There are no regulations, published rulings or judicial decisions addressing the characterization for U.S. federal income tax purposes of securities issued under the same circumstances and with substantially the same terms as the Notes. The Issuer believes and intends to take the position that the Notes constitute debt for U.S. federal income tax purposes. However, no ruling will be obtained from the U.S. Internal Revenue Service (the ‘‘IRS’’) with respect to the characterization of the Notes as debt, and there can be no assurance that the IRS or the courts would agree with this characterization of the Notes. If, due to the capital structure of the Issuer or otherwise, the Notes were treated as equity interests in the Issuer, U.S. Holders would be treated as owning interests in a ‘‘passive foreign investment company’’ (‘‘PFIC’’). Treatment of the Notes as interests in a PFIC could have adverse U.S. tax consequences to certain categories of U.S. Holders. Accordingly, prospective investors should consult their own tax advisers regarding the characterization of the Notes for U.S. federal income tax purposes and the consequences of owning an equity interest in a PFIC. The remainder of this discussion assumes that the Notes will be treated as debt for U.S. federal income tax purposes.

Interest In general, interest payable on a Note will be taxable to a U.S. Holder as ordinary interest income when it is received or accrued, in accordance with such U.S. Holder’s regular method of accounting for U.S. federal income tax purposes. The Notes are not expected to be issued with more than a de minimis amount of original issue discount (‘‘OID’’). However, if the Notes are issued with more than a de minimis amount of OID, each U.S. Holder generally will be required to include OID in its income as it accrues, regardless of its regular method of accounting for U.S. federal income tax purposes, using a constant yield method, possibly before such U.S. Holder receives any payment attributable to such income. The remainder of this discussion assumes that the Notes are not issued with more than a de minimis amount of OID. Interest income on the Notes generally will be treated as income from sources outside the United States and generally will be categorized for U.S. foreign tax credit purposes as ‘‘passive category income’’ or, in the case of some U.S. Holders, as ‘‘general category income.’’ The rules relating to U.S. foreign tax credits are very complex, and each U.S. Holder should consult its own tax advisor regarding the application of such rules.

Sale, Exchange, Retirement or Other Disposition of the Notes Upon the sale, exchange, retirement or other disposition of a Note, a U.S. Holder generally will recognize gain or loss in an amount equal to the difference between the amount realized on such sale, exchange, retirement or other disposition (other than any amount attributable to accrued interest, which, if not previously included in such U.S. Holder’s income, will be taxable as interest income to such U.S. Holder) and such U.S. Holder’s adjusted tax basis in such Note. Any gain or loss so recognized generally will be capital gain or loss and will be long-term capital gain or loss if such U.S. Holder has held such Note for more than one year at the time of such sale, exchange, retirement or other disposition. Net long-term capital gain of certain non-corporate U.S. Holders is generally subject to preferential rates of tax. The deductibility of capital losses is subject to limitations. Such gain or loss generally will be from sources within the United States.

Medicare Tax Beginning in 2013, certain U.S. Holders that are individuals, estates or trusts will be subject to a 3.8% tax on all or a portion of their net investment income, which may include all or a portion of their interest income on a Note and gain from the sale, exchange, retirement or other disposition of a Note.

Information Reporting and Backup Withholding Under certain circumstances, information reporting and/or backup withholding may apply to a U.S. Holder with respect to payments of interest on, or proceeds from the sale, exchange, retirement or other disposition of, a Note, unless an applicable exemption is satisfied. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a U.S. Holder’s U.S. federal income tax liability if the required information is furnished by the U.S. Holder on a timely basis to the IRS.

211 Disclosure Requirements for Specified Foreign Financial Assets Individual U.S. Holders (and certain U.S. entities specified in U.S. Treasury Department guidance) who, during any taxable year, hold any interest in any ‘‘specified foreign financial asset’’ generally will be required to file with their U.S. federal income tax returns certain information on IRS Form 8938 if the aggregate value of all such assets exceeds certain specified amounts. ‘‘Specified foreign financial asset’’ generally includes any financial account maintained with a non-U.S. financial institution and may also include the Notes if they are not held in an account maintained with a financial institution. Substantial penalties may be imposed, and the period of limitations on assessment and collection of U.S. federal income taxes may be extended, in the event of a failure to comply. U.S. Holders should consult their own tax advisors as to the possible application to them of this filing requirement.

212 SUBSCRIPTION AND SALE Each of Deutsche Bank AG, London Branch, J.P. Morgan Securities plc and Societ´ e´ Gen´ erale´ (together the ‘‘Joint Lead Managers’’ and each a ‘‘Joint Lead Manager’’) have, in a subscription agreement dated February 14, 2013 (the ‘‘Subscription Agreement’’) among the Issuer, NLMK and the Joint Lead Managers upon the terms and subject to the conditions contained therein, severally and not jointly, agreed to subscribe and pay for the Notes at their issue price of 100 per cent. of their principal amount. The Joint Lead Managers shall make any offers and sales into the United States, to the extent necessary, through their U.S. registered broker-dealer affiliates as permitted by FINRA regulations. The Joint Lead Managers are entitled to commissions and reimbursement of certain expenses pursuant to the Subscription Agreement. The Joint Lead Managers are entitled in certain circumstances to be released and discharged from their obligations under the Subscription Agreement prior to the closing of the issue of the Notes.

Selling Restrictions United States The Notes and the Loan have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons, except in certain transactions exempt from the registration requirements of the Securities Act. Each Joint Lead Manager has agreed, severally and not jointly, that, except as permitted by the Subscription Agreement, it will not offer or sell the Notes (1) as part of its distribution at any time or (2) otherwise until 40 days after completion of the distribution compliance period within the United States to, or for the account or benefit of, U.S. persons, and it will have sent to each dealer to which it sells Notes (other than a sale pursuant to Rule 144A) during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons. Terms used in this paragraph have the meanings given to them by Regulation S. Each Joint Lead Manager has agreed, severally and not jointly, that neither it nor any of its affiliates (as defined in Rule 501(b) of Regulation D, nor any person acting on its or their behalf has engaged or will engage in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with any offer and sale of the Notes in the United States. The Joint Lead Managers only may directly or through their respective U.S. broker-dealer affiliates arrange for the offer and resale of the Notes in the United States only to QIBs in accordance with Rule 144A. The Notes are being offered and sold outside of the United States in reliance on Regulation S. The Subscription Agreement provides that the Joint Lead Managers may directly or through their respective U.S. broker-dealer affiliates arrange for the offer and resale of Notes in the United States only to persons whom they reasonably believe are QIBs that are also QPs who can represent that (a) they are QPs who are QIBs within the meaning of Rule 144A; (b) they are not broker-dealers that own and invest on a discretionary basis less than $25 million in securities of unaffiliated issuers; (c) they are not participant directed employee plans, such as a 401(k) plan; (d) they are acting for their own account, or the account of one or more QIBs each of which is also a QP; (e) they are not formed for the purpose of investing in the Issuer or the Notes; (f) each account for which they are purchasing will hold and transfer at least $200,000 in principal amount of Notes at any time; (g) they understand that the Issuer may receive a list of participants holding positions in its securities from one or more book-entry depositaries; and (h) they will provide notice of the transfer restrictions set forth in this Prospectus to any subsequent transferees. In addition, until 40 days after the commencement of the offering of the Notes, an offer or sale of Notes within the United States by a dealer that is participating in the Offering may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A. The Issuer and the Joint Lead Managers reserve the right to reject any offer to purchase the Notes, in whole or in part, for any reason. This Prospectus does not constitute an offer to any person in the United States or to any U.S. person other than any QIB who is also a QP and to whom an offer has been made directly by one of the Joint Lead Managers or its U.S. broker-affiliate. Distribution of this Prospectus by any non-U.S. person outside the United States or by any QIB who is also a QP within the United States to any U.S. person or any person within the United States other than any QIB who is also a QP, and those

213 persons, if any, retained to advise such person outside the United States or QIB who is also a QP with respect thereto, is unauthorized and any disclosure without the prior written consent of the Issuer of any of its contents to any such U.S. person or any person within the United States other than any QIB who is also a QP and those persons, if any, retained to advise such non-U.S. person outside the United States or QIB who is also a QP, is prohibited.

United Kingdom Each Joint Lead Manager has severally and not jointly nor jointly and severally represented and agreed that: • it has only communicated or caused to be communicated, and will only communicate or cause to be communicated, any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (the ‘‘FSMA’’)) received by it in connection with the issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer; and • it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.

Russian Federation Each Joint Lead Manager has severally agreed that the Notes will not be offered, transferred or sold as part of their initial distribution or at any time thereafter to or for the benefit of any persons (including legal entities) resident, incorporated, established or having their usual residence in the Russian Federation or to any person located within the territory of the Russian Federation unless and to the extent otherwise permitted under Russian Law.

Ireland Each Joint Lead Manager has represented and agreed that: • it will not underwrite the issue of, or place the Notes, otherwise than in conformity with the provisions of the European Communities (Markets in Financial Instruments) Regulation 2007 (Nos. 1 to 3), including, without limitation, Regulations 7 and 152 thereof and any codes of conduct used in connection therewith and the provisions of the Investor Compensation Act 1998; • it will not underwrite the issue of, or place, the Notes, otherwise than in conformity with the provisions of the Companies Acts 1963-2012 (as amended), the Central Bank Acts 1942 - 2011 (as amended) and any codes of conduct rules made under Section 117(1) of the Central Bank Act 1989; • it will not underwrite the issue of, or place, or do anything in Ireland with respect to the Notes otherwise than in conformity with the provisions of the Prospectus (Directive 2003/71/EC) Regulations 2005 (as amended) and any rules issued under Section 51 of the Investment Funds, Companies and Miscellaneous Provisions Act 2005, by the Central Bank; and • it will not underwrite the issue of, place or otherwise act in Ireland with respect to the Notes, otherwise than in conformity with the provisions of the Market Abuse (Directive 2003/6/EC) Regulations 2005 (as amended) and any rules issued under Section 34 of the Investment Funds, Companies and Miscellaneous Provisions Act 2005 by the Central Bank.

General Each Joint Lead Manager has agreed that it has, to the best of its knowledge and belief, complied and will comply with applicable laws and regulations in each jurisdiction in which it offers, sells or delivers Notes or distributes this Prospectus or any other offering or publicity material relating to the Notes, the Issuer or NLMK. No action has or will be taken in any jurisdiction by the Issuer, NLMK or any of the Joint Lead Managers that would, or is intended to, permit a public offer of the Notes or possession or distribution of any offering material in relation thereto, in any country or jurisdiction where action for that purpose is required. Accordingly, each Joint Lead Manager has undertaken to the Issuer and NLMK that it will not, directly or indirectly, offer or sell any Notes or distribute or publish this Prospectus, form of application, advertisement or other document or information in any country or jurisdiction except under circumstances

214 that will, to the best of its knowledge and belief, result in compliance with any applicable laws and regulations and all offers and sales of Notes by it will be made on the same terms. These selling restrictions may be modified by the agreement of the Issuer, NLMK and the Joint Lead Managers following a change in a relevant law, regulation or directive. The Joint Lead Managers and their respective affiliates have engaged in transactions with NLMK and other members of the Group (including, in some cases, credit agreements and credit lines) in the ordinary course of their banking business and the Joint Lead Managers performed various investment banking, financial advisory, and other services for NLMK, for which they received customary fees, and the Joint Lead Managers and their respective affiliates may provide such services in the future.

215 INDEPENDENT AUDITORS The Group’s consolidated financial statements as of and for the years ended December 31, 2011, 2010 and 2009 included in this Prospectus have been audited by ZAO PricewaterhouseCoopers Audit, independent auditors, as stated in their report appearing elsewhere in this Prospectus. ZAO PricewaterhouseCoopers Audit is a member of the Russian Chamber of Auditors (Auditorskaya Palata Rossii). With respect to the unaudited interim condensed consolidated financial statements of the Group as of September 30, 2012 and for the nine months ended September 30, 2012 and 2011 included in this Prospectus, ZAO PricewaterhouseCoopers Audit reported that they have applied limited procedures in accordance with professional standards for a review of such information. However, their separate report dated November 8, 2012 appearing elsewhere in this Prospectus states that they did not audit and they do not express an opinion on the unaudited interim condensed consolidated financial statements of the Group as of September 30, 2012 and for the nine months ended September 30, 2012 and 2011. Accordingly, the degree of reliance on their report on such information should be restricted in light of the limited nature of the review procedures applied.

216 GENERAL INFORMATION 1. NLMK was incorporated in the Russian Federation on January 28, 1993, as a joint stock company for an unlimited duration. NLMK operates under the laws of the Russian Federation. NLMK has its registered office at Pl. Metallurgov 2, Lipetsk 398040, Russian Federation, with state registration number 1024800823123, and its telephone number is +7 4742 44-00-41. 2. The Notes have been accepted for clearance through Euroclear, Clearstream, Luxembourg and DTC. The Common Code and the ISIN numbers for the Regulation S Notes are 080863284 and XS0808632847, respectively. The Common Code, CUSIP and ISIN numbers for the Rule 144A Notes are 078395052, US85812PAB94 and 85812PAB9, respectively. 3. It is expected that admission of the Notes to trading on the Main Securities Market of the Irish Stock Exchange will be granted on or before February 19, 2013, subject only to the issue of the Notes. Transactions will normally be effected for settlements in U.S. dollars and for delivery on the third business day after the day of the transaction. 4. The estimated expenses associated with the admission to trading on the regulated market of the Irish Stock Exchange of the Notes are expected to be approximately EUR 3,000. 5. Arthur Cox Listing Services Limited is acting solely in its capacity as listing agent for the Issuer in connection with the Notes and is not itself seeking admission of the Notes to the Official List of the Irish Stock Exchange or to trading on its regulated market for the purposes of the Prospectus Directive. 6. Hard copies of the following documents may be inspected at the registered office of the Issuer and the specified offices of the Principal Paying Agent during usual business hours on any weekday (Saturdays and public holidays excepted) for so long as the Notes are listed on the Irish Stock Exchange: • a copy of this Prospectus, together with any supplement to this Prospectus; • the memorandum and articles of association of the Issuer; • the charter of NLMK (English translation); • the consolidated financial information, including the report thereon, of the Group in respect of the financial years ended December 31, 2011, 2010 and 2009 and the nine months ended September 30, 2012 and 2011; • the Loan Agreement; • the Paying Agency Agreement; and • the Trust Deed, which includes the forms of the Global Certificates and the Definitive Certificates. A copy of this Prospectus will be available in hard copy at the offices of the Issuer and the Paying Agents. 7. The issue of the Notes and the entry into the Loan Agreement was authorized by a decision of the Board of Directors of the Issuer on February 13, 2013. 8. No consents, approvals, authorizations or orders of any regulatory authorities are required by the Issuer under the laws of the Ireland for maintaining the Loan or for issuing the Notes. 9. Since the date of its incorporation, there has been no material adverse change in the financial position or prospects of the Issuer. The Issuer has no subsidiaries. 10. Save for the fees payable to the Joint Lead Managers, the Trustee and the Agents, so far as the Issuer is aware, no person involved in the issue of the Notes has an interest that is material to the issue of the Notes. 11. Save as disclosed in the Prospectus, there has been no significant change in the financial or trading position of NLMK or of the Group since September 30, 2012 and no material adverse change in the financial position or prospects of NLMK or of the Group since December 31, 2011. 12. There has been no material adverse change in the prospects of the Issuer and no significant change in the financial or trading position of the Issuer since the date of its incorporation.

217 13. There have been no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which any of the Issuer is aware), during the previous 12 months in relation to the Issuer which may have, or have had in the recent past, significant effects on the Issuer’s financial position or profitability. 14. NLMK has obtained all necessary consents, approvals and authorizations in the Russian Federation in connection with its entry into, and performance of its obligations under, the Loan Agreement. 15. Deutsche Bank Luxembourg S.A. will act as Registrar in relation to the Regulation S Notes. Deutsche Bank Trust Company Americas will act as Registrar in relation to the Rule 144A Notes. 16. The loan to value ratio of the Notes is 100 per cent. 17. The Trust Deed provides that the Noteholders shall together have the power, exercisable by Extraordinary Resolution, to remove the Trustee (or any successor trustee or additional trustees) provided that the removal of the Trustee or any other trustee shall not become effective unless there remains a trustee in office after such removal. Furthermore, the Trust Deed provides, inter alia, that the Trustee may act and/or rely on the opinion or advice of or a certificate or any information obtained from any lawyer, banker, valuer, surveyor, broker, auctioneer, accountant, auditor or other expert (whether or not addressed to the Trustee), notwithstanding that such opinion, advice, certificate or information contains a monetary or other limit on the liability of any of the above mentioned persons in respect thereof. 18. The language of the Prospectus is English. Certain legislative references and technical terms have been cited in their original language in order that the correct technical meaning may be ascribed to them under applicable law. 19. The Issuer does not intend to provide any post-issuance transaction information regarding the Notes or the Loan.

218 GLOSSARY OF TERMS

Term or expression Meaning TECHNOLOGY Beneficiation ...... a variety of processes whereby extracted ore from mining is separated into mineral (for further processing or direct use) and gangue (the commercially worthless part of the ore). Blast furnace ...... Facility for converting prepared iron ore into liquid iron (pig iron). It works on the counter flow principle: the charge, consisting of iron ore (including iron ore concentrate and pellets) and coke, is introduced from the top—usually via a rotary chute. The hot blast flows in the opposite direction. The blast is pre-heated in stoves and injected into the furnace through tuyeres. Coke is used as reduction agent. Depending on charge and method of operation, different types of pig iron can be produced. A blast furnace remains in operation for many years (furnace campaign). Blast furnace by-products are blast furnace gas and blast furnace slag. Basic oxygen furnace (BOF)/ Converter ...... In the basic oxygen furnace, molten iron is made into steel. Oxygen is injected to drive out carbon and other impurities dissolved in the melt. This process generates a lot of heat, so scrap is added to keep the melt at around 1700C. The resulting crude steel is then further purified, alloyed in subsequent secondary metallurgy processes, or brought directly to the casting process. Ladle furnace ...... The facility used to maintain and adjust the temperature of liquid steel during processing after tapping from the BOF (or EAF). This also allows the molten steel to be kept ready for use in the event of a delay later in the steelmaking process. Vacuum degassing ...... Vacuum degassing involves exposing the liquid steel to vacuum to improve its properties by reducing the content of gases (hydrogen and oxygen) and the amount of non-metallic inclusions. Continuous casting ...... This is the process of continuously producing billets or slabs from liquid steel that is poured from a ladle, through a tundish into a cast or mould. Electric Arc Furnace (EAF) .... A method of producing steel through the melting of recycled steel and other sources of iron (pig iron, pellets, etc.) using electricity as a key energy source. Hot-rolling ...... The process of plastically deforming a hot slab into coil of specified thickness by passing it between rolls at a relatively high temperature. Cold-rolling ...... Changes in the structure and shape of steel achieved through rolling the steel at a low temperature (often room temperature). It is used to create a permanent increase in the hardness and strength of the steel. It is affected by the application of forces to the steel, which cause changes in the composition, enhancing certain properties. In order for these improvements to be sustained, the temperature must be below a certain range because the structural changes in the steel are eliminated at higher temperatures. Continuous rolling ...... In a Continuous Rolling Mill, rolling is performed simultaneously in several consecutive mill stands. The number of stands corresponds to the required amount of roll passes. Pickling ...... Removing surface oxides from metals by a chemical reaction.

219 Term or expression Meaning Hot dip galvanising ...... A process whereby steel is dipped into molten zinc or zinc alloy. The process can be performed continuously (by running steel strip through the molten metal) or in batches (by dipping complete products such as automobile bodies or gates into a metal bath). Pre-painting line ...... The method for applying organic coating involves the chemical treatment of the strip, followed by passing the strip through rolls to apply the paint and the subsequent thermal treatment of the strip to polymerize the paint. The goal is to apply the coating evenly in a short process, to obtain a uniform surface and the required coating thickness. Quenched and tempered steel . . Quenching and tempering lines are used for the thermal treatment of thick plates. Quenching is a heat treatment process involving heating steel to above the crystal structure transformation temperature, followed by rapid cooling. This improves the hardness of steel, but increases brittleness and makes it less ductile. Tempering is used after quenching to reduce brittleness and improve ductility and involves reheating the steel and then allowing it to cool slowly. As a result, ductility is improved, brittleness is reduced and the required hardness is achieved. Such steels are used to manufacture low-wear mechanism components (i.e. excavator buckets, etc.). Quarto Mill ...... A four-roll mill with rolls positioned in one vertical plane, two of which are interior and smaller in diameter (work rolls) and two are exterior and larger in diameter (back-up rolls). RAW MATERIALS AND SEMI-FINISHED PRODUCTS Coke ...... The basic fuel consumed in blast furnaces in the smelting of iron. Coke is a processed form of coking coal concentrate. Iron ore concentrate ...... Iron ore containing the valuable minerals of an ore from which most of the waste material has been removed by various treatment processes. Iron (Fe) content: 66.5%. Pellets ...... An enriched form of iron ore shaped into small balls used in the steelmaking processes. Fe content: 65%. Fluxes ...... Materials added to the charge to form slag and regulate its composition. Scrap (ferrous) ...... Ferrous (iron-containing) material that is generally remelted in electric arc furnaces. Steel mills also use scrap for up to 25% of their basic oxygen furnace charge. Scrap is waste steel, prepared for recycling. Sinter ...... A product of sintering iron-bearing particles under high temperature into chunks to remove impurities and agglomerate small fractions of iron ores and concentrates. Alloy ...... A material with metallic properties consisting of several chemical elements. Changing the composition and hence the microstructure of alloys enables the targeted engineering of desired material properties. Crude Steel ...... Steel in its primary form of hot molten metal.

220 Term or expression Meaning Slab ...... Rectangular block of steel, product of the casting process in the melt shop, used as a starting material in the rolling mills to produce hot strip. Pig iron ...... An alloy of iron and carbon that is produced in a blast furnace. Billet ...... A semi-finished steel form that is used for long steel products such as bars, channels, wire rod or other structural shapes. OTHER High value added products .... finished high value-added steel products, including hot-rolled plates (‘‘HRPs’’), cold-rolled steel, galvanized and pre-painted steel, electrical grain-oriented (transformer) and non-grain-oriented (dynamo) steel and metalware. Lipetsk site ...... The main production facility of NLMK Russia located in Lipetsk (Novolipetsk).

221 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) OF OJSC NOVOLIPETSK STEEL AS AT SEPTEMBER 30, 2012 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011 Report of Independent Accountants ...... F-4 Interim condensed consolidated balance sheets as of September 30, 2012 and December 31, 2011 (unaudited) ...... F-5 Interim condensed consolidated statements of income for the nine months ended September 30, 2012 and 2011 (unaudited) ...... F-6 Interim condensed consolidated statements of comprehensive income and stockholders’ equity for the nine months ended September 30, 2012 and 2011 (unaudited) ...... F-7 Interim condensed consolidated statements of cash flows for the nine months ended September 30, 2012 and 2011 (unaudited) ...... F-8 Notes to the interim condensed consolidated financial statements (unaudited) ...... F-9 ANNUAL CONSOLIDATED FINANCIAL STATEMENTS OF OJSC NOVOLIPETSK STEEL AS AT AND FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009 Report of Independent Auditors ...... F-25 Consolidated balance sheets as of December 31, 2011, 2010 and 2009 ...... F-26 Consolidated statements of income for the years ended December 31, 2011, 2010 and 2009 . . . F-27 Consolidated statements of cash flows for the years ended December 31, 2011, 2010 and 2009 F-28 Consolidated statements of stockholders’ equity and comprehensive income for the years ended December 31, 2011, 2010 and 2009 ...... F-29 Notes to the consolidated financial statements ...... F-30

F-1 OJSC NOVOLIPETSK STEEL INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) PREPARED IN ACCORDANCE WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA AS AT SEPTEMBER 30, 2012 AND DECEMBER 31, 2011 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

F-2 OJSC Novolipetsk Steel Interim condensed consolidated financial statements as at September 30, 2012 and December 31, 2011 and for the nine months ended September 30, 2012 and 2011 (unaudited) CONTENTS

Report of independent accountants ...... F-4 Interim condensed consolidated balance sheets ...... F-5 Interim condensed consolidated statements of income ...... F-6 Interim condensed consolidated statements of comprehensive income ...... F-7 Interim condensed consolidated statements of stockholders’ equity ...... F-7 Interim condensed consolidated statements of cash flows ...... F-8 Notes to the interim condensed consolidated financial statements ...... F-9 - F-22

F-3 10SEP201206443525

Report of Independent Accountants To the Board of Directors and Shareholders of OJSC Novolipetsk Steel: We have reviewed the accompanying interim condensed consolidated balance sheet of OJSC Novolipetsk Steel and its subsidiaries (‘‘the Group’’) as at September 30, 2012, and the related interim condensed consolidated statements of income, of cash flows, and of stockholders’ equity and comprehensive income and for each of the nine-month periods ended September 30, 2012 and September 30, 2011. These interim condensed consolidated financial statements are the responsibility of the Group’s management. We conducted our review in accordance with the standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review we are not aware of any material modifications that should be made to the accompanying interim condensed consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America. We previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of the Group as at December 31, 2011, the related consolidated statements of income, of cash flows, and of stockholders’ equity and comprehensive income for the year then ended (not presented herein), and in our report dated March 24, 2012, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as at December 31, 2011, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

29JAN201304094905 November 8, 2012

ZAO PricewaterhouseCoopers Audit, White Square Office Center, 10 Butyrsky Val, Moscow, Russia, 125047 T: +7 (495) 967 6000, F: +7 (495) 967 6001, www.pwc.com

F-4 OJSC Novolipetsk Steel Interim condensed consolidated balance sheets as at September 30, 2012 and December 31, 2011 (unaudited) (All amounts in thousands of US dollars, except for share data)

As at As at Note September 30, 2012 December 31, 2011 ASSETS Current assets Cash and cash equivalents ...... 2 1,802,885 797,169 Short-term investments ...... 10,726 227,279 Accounts receivable and advances given, net ...... 3 1,558,727 1,572,641 Inventories, net ...... 4 2,819,055 2,828,433 Other current assets ...... 42,333 59,355 Deferred income tax assets ...... 53,768 18,887 6,287,494 5,503,764 Non-current assets Long-term investments ...... 13,055 8,420 Property, plant and equipment, net ...... 5 11,458,385 10,569,828 Intangible assets, net ...... 146,286 158,611 Goodwill ...... 778,068 760,166 Deferred income tax assets ...... 239,902 237,113 Other non-current assets ...... 25,358 19,274 12,661,054 11,753,412 Total assets ...... 18,948,548 17,257,176 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable and other liabilities ...... 6 1,712,590 1,622,679 Short-term borrowings ...... 7 2,433,534 1,306,263 Current income tax liability ...... 8,628 10,994 4,154,752 2,939,936 Non-current liabilities Deferred income tax liability ...... 752,242 713,666 Long-term borrowings ...... 7 2,850,077 3,073,535 Other long-term liabilities ...... 272,880 424,878 3,875,199 4,212,079 Total liabilities ...... 8,029,951 7,152,015 Commitments and contingencies ...... 15 —— Stockholders’ equity NLMK stockholders’ equity Common stock, 1 Russian ruble par value—5,993,227,240 shares issued and outstanding at September 30, 2012 and December 31, 2011 ...... 221,173 221,173 Statutory reserve ...... 10,267 10,267 Additional paid-in capital ...... 306,391 306,391 Accumulated other comprehensive loss ...... (1,177,829) (1,489,442) Retained earnings ...... 11,603,984 11,098,635 10,963,986 10,147,024 Non-controlling interest ...... (45,389) (41,863) Total stockholders’ equity ...... 10,918,597 10,105,161 Total liabilities and stockholders’ equity ...... 18,948,548 17,257,176

The accompanying notes constitute an integral part of these interim condensed consolidated financial statements.

F-5 OJSC Novolipetsk Steel Interim condensed consolidated statements of income for the nine months ended September 30, 2012 and 2011 (unaudited) (All amounts in thousands of US dollars, except for earnings per share amounts)

For the For the nine months ended nine months ended Note September 30, 2012 September 30, 2011 Revenue ...... 12 9,353,666 8,675,117 Cost of sales Production cost ...... (6,510,018) (5,617,718) Depreciation and amortization ...... (569,121) (459,988) (7,079,139) (6,077,706) Gross profit ...... 2,274,527 2,597,411 General and administrative expenses ...... (335,057) (365,567) Selling expenses ...... (870,643) (690,591) Taxes other than income tax ...... (127,015) (117,781) Operating income ...... 941,812 1,423,472 Loss on disposals of property, plant and equipment ...... (37,566) (23,234) Gains / (losses) on investments, net ...... (159) 68,981 Interest income ...... 18,468 19,852 Interest expense ...... (37,959) — Foreign currency exchange gain / (loss), net ...... (10,792) 44,834 Other income / (expenses), net ...... (34,994) 3,948 Income before income tax ...... 838,810 1,537,853 Income tax expense ...... (223,451) (400,047) Income, net of income tax ...... 615,359 1,137,806 Equity in net earnings of associates ...... 333 54,048 Net income ...... 615,692 1,191,854 Add: Net loss attributable to the non-controlling interest ... 1,729 12,309 Net income attributable to NLMK stockholders ...... 617,421 1,204,163 Income per share—basic and diluted: Net income attributable to NLMK stockholders per share (US dollars) ...... 9 0.1030 0.2009 Weighted-average shares outstanding, basic and diluted (in thousands) ...... 9 5,993,227 5,993,227

The accompanying notes constitute an integral part of these interim condensed consolidated financial statements.

F-6 OJSC Novolipetsk Steel Interim condensed consolidated statements of comprehensive income and stockholders’ equity for the nine months ended September 30, 2012 and 2011 (unaudited) (thousands of US dollars)

Interim condensed consolidated statements of comprehensive income

Comprehensive Cumulative income attributable translation Comprehensive Non-controlling to NLMK Net income adjustment income interest stockholders For the nine months ended September 30, 2011 ...... 1,191,854 (454,868) 736,986 6,553 730,433 For the nine months ended September 30, 2012 ...... 615,692 309,816 925,508 (3,526) 929,034

Interim condensed consolidated statements of stockholders’ equity

NLMK stockholders Accumulated Additional other Non- Total Common Statutory paid-in comprehensive Retained controlling stockholders’ Note stock reserve capital loss earnings interest equity Balance at December 31, 2010 ...... 221,173 10,267 98,752 (916,901) 10,261,214 (120,691) 9,553,814 Net income / (loss) ...... — — — — 1,204,163 (12,309) 1,191,854 Cumulative translation adjustment ...... — — — (473,730) — 18,862 (454,868) Disposal of assets to an entity under common control . . . 11 — — 207,639 — — — 207,639 Change in non-controlling interest in deconsolidated subsidiaries ...... — — — — — 93,566 93,566 Dividends to shareholders . . . 9 — — — — (520,173) — (520,173) Balance at September 30, 2011 ...... 221,173 10,267 306,391 (1,390,631) 10,945,204 (20,572) 10,071,832 Balance at December 31, 2011 ...... 221,173 10,267 306,391 (1,489,442) 11,098,635 (41,863) 10,105,161 Net income / (loss) ...... — — — — 617,421 (1,729) 615,692 Cumulative translation adjustment ...... — — — 311,613 — (1,797) 309,816 Dividends to shareholders . . . 9 — — — — (112,072) — (112,072) Balance at September 30, 2012 ...... 221,173 10,267 306,391 (1,177,829) 11,603,984 (45,389) 10,918,597

The accompanying notes constitute an integral part of these interim condensed consolidated financial statements.

F-7 OJSC Novolipetsk Steel Interim condensed consolidated statements of cash flows for the nine months ended September 30, 2012 and 2011 (unaudited) (thousands of US dollars)

For the For the nine months ended nine months ended Note September 30, 2012 September 30, 2011 CASH FLOWS FROM OPERATING ACTIVITIES Net income ...... 615,692 1,191,854 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ...... 569,121 459,988 Loss on disposals of property, plant and equipment ..... 37,566 23,234 Losses / (gains) on investments, net ...... 159 (68,981) Equity in net earnings of associates ...... (333) (54,048) Deferred income tax (income) / expense ...... (2,170) 34,284 (Gains) / losses on derivative financial instruments ...... 8 (7,184) 4,819 Other ...... 8,248 91,913 Changes in operating assets and liabilities Decrease in accounts receivable ...... 74,681 23,118 Decrease / (increase) in inventories ...... 128,192 (489,604) Decrease in other current assets ...... 19,218 11,116 Increase in accounts payable and other liabilities ...... 50,187 244,176 (Decrease) / increase in current income tax payable ..... (2,207) 13,080 Net cash provided by operating activities ...... 1,491,170 1,484,949 CASH FLOWS FROM INVESTING ACTIVITIES Purchases and construction of property, plant and equipment ...... (1,157,451) (1,528,985) Proceeds from sale of property, plant and equipment .... 23,861 15,958 Purchases of investments and placement of bank deposits . (33,552) (270,589) Withdrawal of bank deposits, proceeds from sale of other investments and loans settled ...... 260,743 691,308 Payments for acquisition of interests in new subsidiaries . . 10 (156,510) (41,751) Net cash used in investing activities ...... (1,062,909) (1,134,059) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings and notes payable ...... 1,319,717 829,950 Repayment of borrowings and notes payable ...... (551,416) (1,171,552) Capital lease payments ...... (17,200) (29,805) Dividends to shareholders ...... (115,880) (247,286) Proceeds from disposal of assets to the company under common control ...... 11 — 313,246 Net cash provided by / (used in) financing activities ...... 635,221 (305,447) Net increase in cash and cash equivalents ...... 1,063,482 45,443 Effect of exchange rate changes on cash and cash equivalents ...... (57,766) 36,609 Cash and cash equivalents at the beginning of the year .... 2 797,169 747,979 Cash and cash equivalents at the end of the period ...... 2 1,802,885 830,031

The accompanying notes constitute an integral part of these interim condensed consolidated financial statements.

F-8 OJSC Novolipetsk Steel Notes to the interim condensed consolidated financial statements as at September 30, 2012 and December 31, 2011 and for the nine months ended September 30, 2012 and 2011 (unaudited) (thousands of US dollars)

1 BASIS OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARATION These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Open Joint Stock Company Novolipetsk Steel (the ‘‘Parent Company’’, or ‘‘NLMK’’) and its subsidiaries (together—the ‘‘Group’’) as at and for the year ended December 31, 2011. The December 31, 2011 condensed consolidated balance sheet information has been derived from the audited consolidated financial statements, however, since it is presented on a condensed basis it does not include all disclosures required by accounting principles generally accepted in the United States of America for annual consolidated financial statements. In the opinion of the Group’s management, the information furnished herein reflects all known accruals and adjustments necessary for a fair statement of the results for the periods reported herein. All such adjustments are of a normal recurring nature. The financial results of the periods reported herein are not necessarily indicative of future financial results.

Functional and reporting currency Functional currency of the majority of the Group entities is considered to be the Russian ruble. The functional currency of the foreign subsidiaries is their local currency. The accompanying interim condensed consolidated financial statements have been prepared using the US dollar as the Group’s reporting currency, utilizing period-end exchange rates for assets and liabilities, corresponding period quarterly weighted average exchange rates for interim condensed consolidated statement of income accounts and historic rates for equity accounts. The Central Bank of the Russian Federation’s Russian ruble to US dollar closing rates of exchange as of the reporting dates and the period weighted average exchange rates for corresponding reporting periods are indicated below.

RUR / USD RUR / USD As at December 31, 2010 ...... 30.4769 As at December 31, 2011 ...... 32.1961 For the 1st quarter of 2011 ...... 29.2698 For the 1st quarter of 2012 ...... 30.2642 For the 2nd quarter of 2011 ...... 27.9857 For the 2nd quarter of 2012 ...... 31.0139 For the 3rd quarter of 2011 ...... 29.0461 For the 3rd quarter of 2012 ...... 32.0072 As at September 30, 2011 ...... 31.8751 As at September 30, 2012 ...... 30.9169

Recent accounting pronouncements In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. Under these amendments an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 is effective for the Group from January 1, 2012. The Group has adopted ASU 2011-05 starting January 1, 2012, which changed only the presentation of comprehensive income. Subsequently in December 2011, the FASB issued ASU 2011-12: Comprehensive Income (Topic 220) which updates and supersedes certain paragraphs in ASU 2011-05. Its adoption had no significant impact on the Group’s financial position and results of operations. In July 2012, the FASB approved ASU 2012-02, Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. The amendments in ASU 2012-02 will allow an entity the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment test. Under these amendments, an entity would not be required to calculate the fair value of an indefinite-lived intangible asset unless the organization determines, based on a qualitative assessment, that it is ‘‘more likely than not’’ that the asset is impaired. The amendments in this Update are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early

F-9 OJSC Novolipetsk Steel Notes to the interim condensed consolidated financial statements as at September 30, 2012 and December 31, 2011 and for the nine months ended September 30, 2012 and 2011 (unaudited) (Continued) (thousands of US dollars)

1 BASIS OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS PREPARATION (Continued) adoption is permitted. The Group believes the adoption of ASU 2012-02 will not have an impact on the Group’s consolidated financial position and results of operations.

2 CASH AND CASH EQUIVALENTS

As at As at September 30, 2012 December 31, 2011 Cash—Russian rubles ...... 107,649 54,448 Cash—US dollars ...... 754,924 45,820 Cash—other currencies ...... 288,889 66,561 Deposits—Russian rubles ...... 449,577 173,644 Deposits—US dollars ...... 126,786 290,854 Deposits—Euros ...... 68,808 165,806 Other cash equivalents ...... 6,252 36 1,802,885 797,169

3 ACCOUNTS RECEIVABLE AND ADVANCES GIVEN

As at As at September 30, 2012 December 31, 2011 Trade accounts receivable ...... 927,983 944,250 Advances given to suppliers ...... 116,349 154,622 VAT and other taxes receivable ...... 537,587 511,118 Accounts receivable from employees ...... 4,779 2,799 Other accounts receivable ...... 79,070 87,710 1,665,768 1,700,499 Allowance for doubtful debts ...... (107,041) (127,858) 1,558,727 1,572,641

As at September 30, 2012 and December 31, 2011, accounts receivable of $299,815 and $297,902, respectively, served as collateral for certain borrowings (Note 7).

4 INVENTORIES

As at As at September 30, 2012 December 31, 2011 Raw materials ...... 1,195,686 1,215,944 Work in process ...... 770,557 685,472 Finished goods and goods for resale ...... 939,920 1,021,828 2,906,163 2,923,244 Provision for obsolescence ...... (87,108) (94,811) 2,819,055 2,828,433

As at September 30, 2012 and December 31, 2011, inventories of $687,266 and $641,654, respectively, served as collateral for certain borrowings (Note 7).

F-10 OJSC Novolipetsk Steel Notes to the interim condensed consolidated financial statements as at September 30, 2012 and December 31, 2011 and for the nine months ended September 30, 2012 and 2011 (unaudited) (Continued) (thousands of US dollars)

5 PROPERTY, PLANT AND EQUIPMENT

As at As at September 30, 2012 December 31, 2011 Land...... 262,030 201,852 Mineral rights ...... 544,198 522,577 Buildings, land and buildings improvements, machinery and equipment ...... 12,771,206 10,365,267 Vehicles ...... 376,244 324,953 Construction in progress and advances for construction and acquisition of property, plant and equipment ...... 3,691,902 4,630,558 Leased assets ...... 127,777 125,897 Other ...... 143,648 125,585 17,917,005 16,296,689 Accumulated depreciation ...... (6,458,620) (5,726,861) 11,458,385 10,569,828

As at September 30, 2012 and December 31, 2011, property, plant and equipment of $196,682 and $541,928 (net book value), respectively, served as collateral for certain borrowings (Note 7). The amounts of interest capitalized are $156,574 and $114,402 for the nine months ended September 30, 2012 and September 30, 2011, respectively.

6 ACCOUNTS PAYABLE AND OTHER LIABILITIES

As at As at September 30, 2012 December 31, 2011 Trade accounts payable ...... 817,178 818,729 Advances received ...... 160,421 133,402 Taxes payable other than income tax ...... 153,849 143,379 Accounts payable and accrued liabilities to employees ...... 247,625 199,300 Dividends payable ...... 2,148 2,061 Short-term capital lease liability ...... 17,589 14,757 Other accounts payable ...... 313,780 311,051 1,712,590 1,622,679

Other accounts payable as at September 30, 2012 and December 31, 2011 include short-term part of payables for SIF S.A. shares of $142,509 and $145,631, respectively (Note 10).

F-11 OJSC Novolipetsk Steel Notes to the interim condensed consolidated financial statements as at September 30, 2012 and December 31, 2011 and for the nine months ended September 30, 2012 and 2011 (unaudited) (Continued) (thousands of US dollars)

7 SHORT-TERM AND LONG-TERM BORROWINGS

As at As at September 30, 2012 December 31, 2011 Parent Company Loans, EUR denominated, with interest rates from EURIBOR (6 m) +1.5% to EURIBOR (3 m) +3.5% per annum, mature 2012 - 2019 ...... 674,961 757,788 Loans, RUR denominated, with interest rates from 8.5% to 9.2% per annum, mature 2012 - 2013 ...... 648,084 310,958 Bonds, USD denominated, with interest rate 4.95% per annum, mature 2019 ...... 500,342 — Bonds, RUR denominated, with interest rates from 7.75% to 10.75% per annum, mature 2012 - 2015 ...... 1,820,357 1,416,108 Loans, USD denominated, with interest rates from LIBOR +1.2% to 3.86% per annum, mature 2012 - 2013 ...... 376,776 678,077 Companies of the Foreign rolled products segment Loans, USD denominated, with interest rates LIBOR +1.625% and PRIME +0.625% per annum, mature 2012 - 2016 ...... 75,338 51,347 Loans, EUR denominated, with interest rates from EURIBOR +0.5% to EURIBOR +3.5% and 4.3% per annum, mature 2012 - 2020 ...... 1,031,273 1,014,160 Other borrowings ...... — 2 Other companies Loans, EUR denominated, with interest rates from EURIBOR (6 m) +0.9% to EURIBOR (6 m) +1.3% per annum, mature 2012 - 2020 ...... 108,934 107,119 Loans, EUR denominated, with interest rate EURIBOR (6 m) +5.5% per annum, mature 2012-2013 ...... 888 1,648 Loan, RUR denominated, with interest rate 10% per annum mature 2017 ...... 35,281 30,771 Other borrowings ...... 11,377 11,820 5,283,611 4,379,798 Less: short-term loans and current maturities of long-term loans . . . (2,433,534) (1,306,263) Long-term borrowings ...... 2,850,077 3,073,535

The Group’s long-term borrowings as at September 30, 2012 mature between 2 to 8 years.

Major terms of loan agreements Certain of the loan agreements contain debt covenants that impose restrictions on the purposes for which the loans may be utilized, covenants with respect to disposal of assets, incurrence of additional liabilities, issuance of loans or guarantees, obligations in respect of any future reorganizations procedures or bankruptcy of borrowers, and also require that borrowers maintain pledged assets to their current value and conditions. In addition, these agreements contain covenants with respect to compliance with certain financial ratios, clauses in relation to performance of the borrowers, including cross default provisions, as well as legal claims in excess of certain amount, where reasonable expectations of a negative outcome exist, and covenants triggered by any failure of the borrower to fulfill contractual obligations. The Group companies are in compliance with debt covenants as of September 30, 2012.

F-12 OJSC Novolipetsk Steel Notes to the interim condensed consolidated financial statements as at September 30, 2012 and December 31, 2011 and for the nine months ended September 30, 2012 and 2011 (unaudited) (Continued) (thousands of US dollars)

8 DERIVATIVE FINANCIAL ASSETS AND LIABILITIES The Group holds or purchases derivative financial instruments for purposes other than trading to mitigate foreign currency exchange rate risk. Forward contracts are short-term with maturity dates in October- December 2012. In the first half of 2012, the Group entered into Russian ruble / US dollar cross-currency interest rate swap agreements in conjunction with Russian ruble denominated bonds issued by the Group. As a result, the Group pays US dollars at fixed rates varying from 3.11% to 3.15% per annum and receives Russian rubles at fixed rate 8.95% per annum. Maturity of the swaps is linked to the Russian ruble denominated bonds redemption, appointed on November 2014. In accordance with ASC No. 820, the fair value of foreign currency derivatives is determined using Level 2 inputs. The inputs used include quoted prices for similar assets or liabilities in an active market. Fair value of forwards is determined as the sum of the differences between the discounted market forward rate in the settlement month prevailing at September 30, 2012 and the appropriate contract settlement rate, multiplied by the respective notional amount of the contract. Fair value of swaps is determined as the sum of the discounted contractual cash flows in Russian rubles and US dollars as at September 30, 2012. The amounts recorded represent the US dollar equivalent of the commitments to sell and purchase foreign currencies. The table below summarizes the contractual amounts and positive fair values of the Group’s unrealized forward exchange contracts in US dollars.

As at As at September 30, 2012 December 31, 2011 Notional amount Fair value Notional amount Fair value US dollars ...... 100,488 2,582 — — Euro ...... 70,438 562 — — 170,926 3,144 — —

The table below summarizes the contractual amounts and negative fair values of the Group’s unrealized forward exchange contracts in US dollars.

As at As at September 30, 2012 December 31, 2011 Notional amount Fair value Notional amount Fair value US dollars ...... 17,421 (19) Euro ...... 27,026 (233) — — 44,447 (252) — —

During the nine months ended September 30, 2012 gains from forward exchange contracts amounted to $4,351, while during the nine months ended September 30, 2011 losses comprised $4,819. These gains and losses were included in ‘‘Foreign currency exchange gain / (loss), net’’ line in the interim condensed consolidated statements of income.

F-13 OJSC Novolipetsk Steel Notes to the interim condensed consolidated financial statements as at September 30, 2012 and December 31, 2011 and for the nine months ended September 30, 2012 and 2011 (unaudited) (Continued) (thousands of US dollars)

8 DERIVATIVE FINANCIAL ASSETS AND LIABILITIES (Continued) The table below summarizes the contractual amounts and positive fair values of the Group’s unrealized cross-currency interest rate swap agreements in US dollars.

As at As at September 30, 2012 December 31, 2011 Notional amount Fair value Notional amount Fair value US dollars ...... 98,172 4,532 — — 98,172 4,532 — —

During the nine months ended September 30, 2012 gains from cross-currency interest rate swap agreements amounted to $4,386 and were included in ‘‘Foreign currency exchange gain / (loss), net’’ line in the interim condensed consolidated statements of income.

9 EARNINGS PER SHARE

For the For the nine months ended nine months ended September 30, 2012 September 30, 2011 Weighted average number of shares ...... 5,993,227,240 5,993,227,240 Net income (thousands of US dollars) ...... 617,421 1,204,163 Basic and diluted net income per share (US dollars) ...... 0.1030 0.2009

Basic net income per share of common stock is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the reporting period. The Parent Company does not have potentially dilutive shares outstanding. In May 2012, the Parent Company declared dividends for the year ended December 31, 2011 of 2 Russian rubles per share for the total of $375,776, including interim dividends for the six months ended June 30, 2011 of 1.4 Russian ruble per share for the total of $263,704 (at the historical rate). Dividends payable amounted to $2,148 at September 30, 2012. In June 2011, the Parent Company declared dividends for the year ended December 31, 2010 of 1.82 Russian rubles per share for the total of $378,687, including interim dividends for the six months ended June 30, 2010 of 0.62 Russian ruble per share for the total of $122,218 (at the historical rate).

10 BUSINESS COMBINATIONS In July 2011, the Group exercised its call option to acquire the remaining 50% of SIF S.A. shares from Duferco Group. This acquisition is aimed to enhance the Group’s competitive strengths on the global market through the expansion of vertical integration of assets, optimization of a product portfolio and geographic diversification. The purchase price is $600 million. The first tranche of $150 million was paid on June 30, 2011. The remaining tranches are payable in arrears in three equal annual installments. Management has assessed fair value of the purchase consideration for 50% acquired as a result of business combination as $577.3 million. Management has assessed fair value of 50% shares in SIF S.A. held before the business combination as $289.7 million. Fair value was based on values of assets and liabilities of SIF S.A. determined by an independent appraiser. The total purchase consideration that includes fair value of purchase consideration for 50% acquired as a result of business combination and the fair value of the previously held interest amounted to $867 million.

F-14 OJSC Novolipetsk Steel Notes to the interim condensed consolidated financial statements as at September 30, 2012 and December 31, 2011 and for the nine months ended September 30, 2012 and 2011 (unaudited) (Continued) (thousands of US dollars)

10 BUSINESS COMBINATIONS (Continued) The Group also recognized deferred tax assets on SIF S.A. losses carried forward as of approximately $200 million as the result of this consolidation. Most of these losses are in jurisdictions where there is an indefinite carry-forward period. The management anticipates utilization of these losses starting from 2013 and believes these assets will be recovered in the future. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed in this business combination. The fair values of property, plant and equipment and intangible assets were based on estimates determined by an independent appraiser. Management has determined that resulting goodwill primarily reflects the control premium paid for the acquisition and future synergies from using SIF S.A. assets for marketing Group metal products in Europe and USA.

Cash and cash equivalents ...... 112,806 Accounts receivable and advances given, net ...... 685,842 Inventories, net ...... 1,169,496 Other current assets ...... 26,874 Intangible assets ...... 11,597 Property, plant and equipment ...... 1,735,259 Deferred tax assets ...... 270,670 Other non-current assets ...... 787 Total assets acquired ...... 4,013,331 Accounts payable and other liabilities ...... (1,130,196) Other current liabilities ...... (860,231) Non-current liabilities ...... (1,065,347) Deferred income tax liability ...... (380,240) Total liabilities assumed ...... (3,436,014) Net assets acquired ...... 577,317 Purchase consideration ...... 867,028 Goodwill ...... 289,711

11 DISPOSAL OF ASSETS In June 2011, the Parent Company has completed disposal of 100% of its interest in NTK LLC and its subsidiaries (hereinafter, ‘‘NTK’’) to an entity under common control for a cash consideration of $325 million (as at the date of payment). An after-tax gain on this transaction of $207,639 was recognized by the Group, and included within the ‘‘Disposal of assets to an entity under common control’’ line in the interim condensed consolidated statements of stockholders’ equity for the nine months ended September 30, 2011.

F-15 OJSC Novolipetsk Steel Notes to the interim condensed consolidated financial statements as at September 30, 2012 and December 31, 2011 and for the nine months ended September 30, 2012 and 2011 (unaudited) (Continued) (thousands of US dollars)

11 DISPOSAL OF ASSETS (Continued) The carrying amounts of the major classes of assets and liabilities of NTK as at the date of disposal are as follows:

Current assets ...... 105,861 Non-current assets ...... 264,069 Total assets ...... 369,930 Current liabilities ...... (131,281) Non-current liabilities ...... (181,350) Total liabilities ...... (312,631) Net assets ...... 57,299

Information on NTK’s transactions up to the date of disposal is as follows:

Sales revenue ...... 243,685 Net income ...... 31,346

This transaction was carried out in line with the earlier announced strategy of the Group’s further development. In accordance with a resolution passed by the Board of Directors Strategic Planning Committee in April 2010, the interest in NTK was classified as a non-core asset. The Group continues using the transportation services provided by NTK after the disposal. Accordingly, operations of NTK in these interim condensed consolidated financial statements were reflected within continuing operations of the Group within the steel segment.

12 SEGMENT INFORMATION Starting from July 2011 the Group changed the composition and the presentation of its reportable segments as a result of a change in the Group’s structure (Note 10) and internal organization. Comparative financial information has been adjusted to conform to the presentation of current period amounts. The Group has four reportable business segments: steel, foreign rolled products, long products and mining. Results of the production of coke and coke-chemical products are now presented within the steel segment in these interim condensed consolidated financial statements. These segments are combinations of subsidiaries, have separate management teams and offer different products and services. The above four segments meet the criteria for reportable segments. Subsidiaries are consolidated by the segment to which they belong based on their products and management. Revenue from segments that do not exceed the quantitative thresholds is primarily attributable to two operating segments of the Group. Those segments include insurance and other services. None of these segments has met any of the quantitative thresholds for determining a reportable segment. The investments in equity method investee and equity in net earnings / (losses) of associates are included in the steel segment. The Group’s management determines intersegmental sales and transfers, as if the sales or transfers were to third parties. The Group’s management evaluates performance of the segments based on segment revenues, gross profit, operating income and income, net of income tax.

F-16 OJSC Novolipetsk Steel Notes to the interim condensed consolidated financial statements as at September 30, 2012 and December 31, 2011 and for the nine months ended September 30, 2012 and 2011 (unaudited) (Continued) (thousands of US dollars)

12 SEGMENT INFORMATION (Continued) Segmental information for the nine months ended September 30, 2012 and their assets as at September 30, 2012 is as follows:

Inter- segmental Foreign operations rolled Long All and Steel products products Mining other Totals balances Consolidated Revenue from external customers . . . 5,446,541 2,774,453 918,074 214,172 426 9,353,666 — 9,353,666 Intersegment revenue ...... 1,180,164 1,336 357,708 776,754 — 2,315,962 (2,315,962) — Gross profit ...... 1,352,147 (12,074) 216,852 702,168 279 2,259,372 15,155 2,274,527 Operating income / (loss) ...... 466,876 (229,366) 76,086 605,504 (1,064) 918,036 23,776 941,812 Income / (loss), net of income tax ... 709,826 (233,132) (60,036) 482,211 526 899,395 (284,036) 615,359 Segment assets, including goodwill . . . 14,969,779 3,897,130 2,763,651 2,223,744 54,440 23,908,744 (4,960,196) 18,948,548

Segmental information for the nine months ended September 30, 2011 and their assets as at December 31, 2011 is as follows:

Inter- segmental Foreign operations rolled Long All and Steel products products Mining other Totals balances Consolidated Revenue from external customers . . . 6,156,675 1,475,179 894,807 147,758 698 8,675,117 — 8,675,117 Intersegment revenue ...... 653,909 196 514,211 931,007 — 2,099,323 (2,099,323) — Gross profit ...... 1,729,889 (37,658) 179,186 808,672 266 2,680,355 (82,944) 2,597,411 Operating income / (loss) ...... 918,352 (174,716) 10,030 746,266 (780) 1,499,152 (75,680) 1,423,472 Income / (loss), net of income tax ... 953,069 (171,478) (153,013) 662,140 (145) 1,290,573 (152,767) 1,137,806 Segment assets, including goodwill . . . 13,060,968 4,225,510 2,471,958 1,870,993 45,774 21,675,203 (4,418,027) 17,257,176

13 RISKS AND UNCERTAINTIES (a) Operating environment of the Group The Russian Federation’s economy continues to display some characteristics of an emerging market. These characteristics include, but are not limited to, the existence of a currency that in practice is not freely convertible in most countries outside the Russian Federation and relatively high inflation. The international sovereign debt crisis, stock market volatility and other risks could have a negative effect on the Russian financial and corporate sectors. Management considered impairment provisions by taking into account the economic situation and outlook at the end of the reporting period. The future economic direction of the Russian Federation is largely dependent upon the effectiveness of economic, financial and monetary measures undertaken by the Government, together with tax, legal, regulatory, and political developments. Management believes it is taking all the necessary measures to support the sustainability and growth of the Group’s business. The major financial risks inherent to the Group’s operations are those related to market risk, credit risk and liquidity risk. The objectives of the financial risk management function are to establish risk limits, and then ensure that exposure to risks stays within these limits. The operational and legal risk management functions are intended to ensure proper functioning of internal policies and procedures, in order to minimize operational and legal risks.

F-17 OJSC Novolipetsk Steel Notes to the interim condensed consolidated financial statements as at September 30, 2012 and December 31, 2011 and for the nine months ended September 30, 2012 and 2011 (unaudited) (Continued) (thousands of US dollars)

13 RISKS AND UNCERTAINTIES (Continued) (b) Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprise of three types of risk: currency risk, interest rate risk and commodity price risk.

Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with floating interest rates. To manage this risk the Group analyzes interest rate risks on a regular basis. The Group reduces its exposure to this risk by having a balanced portfolio of fixed and variable rate loans and by hedging of interest rates.

Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The export-oriented companies of the Group are exposed to foreign currency risk. To minimize foreign currency risks the export program is designed taking into account potential (forecast) major foreign currencies’ exchange fluctuations. The Group diversifies its revenues in different currencies. In its export contracts the Group controls the balance of currency positions: payments in foreign currency are settled with export revenues in the same currency. At the same time standard hedging instruments to manage foreign currency risk might be used.

Commodity price risk Commodity price risk is a risk arising from possible changes in price of raw materials and metal products, and their impact on the Group’s future performance and the Group’s operational results. The Group minimizes its risks, related to production distribution, by having a wide range of geographical zones for sales, which allows the Group to respond quickly to changes in the situation on one or more sales markets on the basis of an analysis of the existing and prospective markets. The Group’s sales outside the Russian Federation in monetary terms for the nine months ended September 30, 2012 and September 30, 2011 were 65% and 60% of the total sales, respectively. One of the commodity price risk management instruments is vertical integration. A high degree of vertical integration allows cost control and effective management of the entire process of production: from mining of raw materials and generation of electric and heat energy to production, processing and distribution of metal products.

(c) Credit risk Credit risk is the risk when counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and control relating to customer credit risk management.

F-18 OJSC Novolipetsk Steel Notes to the interim condensed consolidated financial statements as at September 30, 2012 and December 31, 2011 and for the nine months ended September 30, 2012 and 2011 (unaudited) (Continued) (thousands of US dollars)

13 RISKS AND UNCERTAINTIES (Continued) The Group structures the levels of credit risk it undertakes by assessing the degree of risk for each counterparty or groups of parties. Such risks are monitored on a revolving basis and are subject to a quarterly, or more frequent, review. The Group’s management reviews ageing analysis of outstanding trade receivables and follows up on past due balances.

(d) Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Group is exposed to daily calls on its available cash resources. The Group monitors its risk to a shortage of funds using a regular cash flow forecast. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, debentures, finance leases. To provide for sufficient cash balances required for settlement of its obligations in time the Group uses detailed budgeting and cash flow forecasting instruments.

(e) Insurance To minimize risks the Group concludes insurance policies which cover property damages and business interruptions, freightage, general liability and vehicles. In respect of legislation requirements, the Group purchases insurance of civil liability of organizations operating hazardous facilities, compulsory motor third party liability insurance. The Group also buys directors and officers liability insurance, civil liability insurance of the members of self-regulatory organizations, voluntary health insurance for employees of the Group.

14 RELATED PARTY TRANSACTIONS Related parties relationships are determined with reference to ASC No. 850. Balances as at September 30, 2012 and December 31, 2011 and transactions for the nine months ended September 30, 2012 and September 30, 2011 with related parties of the Group consist of the following:

(a) Sales to and purchases from related parties Sales Sales to an associate (SIF S.A.) and one of its subsidiaries were $726,627 for the nine months ended September 30, 2011. Sales to other related parties were $8,297 and $9,889 for the nine months ended September 30, 2012 and September 30, 2011, respectively. Accounts receivable from related parties equaled $35,214 and $45,978 as at September 30, 2012 and December 31, 2011, respectively.

Purchases Purchases from subsidiary of an associate (SIF S.A.) were $978 for the nine months ended September 30, 2011. Purchases from the companies under common control were $499,569 and $264,975 for the nine months ended September 30, 2012 and September 30, 2011, respectively. Accounts payable to the related parties were $6,882 and $3,453 as at September 30, 2012 and December 31, 2011, respectively.

F-19 OJSC Novolipetsk Steel Notes to the interim condensed consolidated financial statements as at September 30, 2012 and December 31, 2011 and for the nine months ended September 30, 2012 and 2011 (unaudited) (Continued) (thousands of US dollars)

14 RELATED PARTY TRANSACTIONS (Continued) (b) Financial transactions Deposits and current accounts of the Group companies in banks under significant influence of the Group’s controlling shareholder (OJSC Bank ZENIT and OJSC Lipetskcombank) amounted to $110,566 and $56,395 as at September 30, 2012 and December 31, 2011, respectively. Related interest income from these deposits and current accounts for the nine months ended September 30, 2012 and September 30, 2011 amounted to $994 and $776, respectively.

15 COMMITMENTS AND CONTINGENCIES (a) Anti-dumping investigations The Group’s export trading activities are subject to from time to time compliance reviews of importers’ regulatory authorities. The Group’s export sales were considered within several anti-dumping investigation frameworks. The Group takes steps to address negative effects of the current and potential anti-dumping investigations and participates in the settlement efforts coordinated through the Russian authorities. No provision arising from any possible agreements as a result of anti-dumping investigations has been made in the accompanying interim condensed consolidated financial statements.

(b) Litigation The Group, in the ordinary course of business, is the subject of, or party to, various pending or threatened legal actions. The management of the Group believes that any ultimate liability resulting from these legal actions will not significantly affect its financial position or results of operations, and no amount has been accrued in the accompanying interim condensed consolidated financial statements. In January 2010, the Parent Company received a claim from the non-controlling shareholder of OJSC Maxi-Group filed with the International Commercial Arbitration Court at the Russian Federation Chamber of Commerce and Industry (hereinafter, ICA Court) to enforce the additional payment by the Parent Company for the shares of OJSC Maxi-Group in accordance with the binding agreement. This claim is based on the non-controlling shareholder’s interpretation of the binding agreement. In February 2010, as a result of due diligence of Maxi-Group entities, the Parent Company filed a counter-claim to ICA Court seeking collection from the non-controlling shareholder of OJSC Maxi-Group of excessively paid amounts for the acquired shares. In March 2011, the ICA Court partially (in the amount of about $308 million, at the exchange rate as of September 30, 2012) satisfied the claims of Maxi-Group’s non-controlling shareholder against the Parent Company. After this decision the non-controlling shareholder initiated court cases in certain European courts to enforce payment of this claim. In April 2011, the Group’s management initiated proceedings to challenge the resolution of the ICA Court, sending an application to the Arbitration Court of Moscow (the court of the first instance). In June 2011, the Arbitration Court of Moscow cancelled the respective resolution of the ICA Court. In August 2011, the Federal Arbitration Court of the Moscow Circuit initiated proceedings regarding cassation appeal filed by the non-controlling shareholder of OJSC Maxi-Group on revocation of the ICA Court decision. In September 2011, Federal Arbitrage Court of Moscow region adjudicated not to change the June decision of the Arbitration Court of Moscow. In November 2011, the Supreme Commercial Court of the Russian Federation registered a claim from the non-controlling shareholder of OJSC Maxi-Group for a supervisory review of the judicial acts of the corresponding courts. In January 2012, the Board of the Supreme Commercial Court adjudicated to refuse for a supervisory review. Accordingly, no accruals in relation to this claim were made in these interim condensed consolidated financial statements.

F-20 OJSC Novolipetsk Steel Notes to the interim condensed consolidated financial statements as at September 30, 2012 and December 31, 2011 and for the nine months ended September 30, 2012 and 2011 (unaudited) (Continued) (thousands of US dollars)

15 COMMITMENTS AND CONTINGENCIES (Continued) (c) Environmental matters The enforcement of environmental regulation in the Russian Federation is evolving and the enforcement posture of government authorities is continually being reconsidered. The Group periodically evaluates its obligations under environmental regulations. As obligations are determined, they are recognized immediately. Potential liabilities, which might arise as a result of changes in existing regulations, civil litigation or legislation, cannot be reasonably estimated. In the current enforcement climate under existing legislation, management believes that the Group has met the Government’s federal and regional requirements concerning environmental matters, therefore there are no significant liabilities for environmental damage or remediation.

(d) Capital commitments Management estimates the outstanding agreements in connection with equipment supply and construction works amounted to $797,646 and $1,396,561 as at September 30, 2012 and December 31, 2011, respectively.

(e) Social commitments The Group makes contributions to mandatory and voluntary social programs. The Group’s social assets, as well as local social programs, benefit the community at large and are not normally restricted to the Group’s employees. The Group has transferred certain social operations and assets to local authorities, however, management expects that the Group will continue to fund certain social programs through the foreseeable future. These costs are recorded in the period they are incurred.

(f) Tax contingencies Russian tax, currency and customs legislation is subject to varying interpretations and changes, which can occur frequently. Management’s interpretation of such legislation as applied to the transactions and activity of the Group may be challenged by the relevant regional and federal authorities. Recent events within the Russian Federation suggest that the tax authorities may be taking a more assertive position in their interpretation of the legislation and assessments, and it is possible that transactions and activities, including certain operation of intercompany financing of Russian subsidiaries within the Group, that have not been challenged in the past may be challenged. As a result, significant additional taxes, penalties and interest may be assessed, and certain expenses used for profit tax calculation may be excluded from tax returns. Fiscal periods remain open to review by the authorities in respect of taxes for three calendar years preceding the year of review. Under certain circumstances reviews may cover longer periods. Russian transfer pricing legislation was amended starting from January 1, 2012. The new transfer pricing rules appear to be more technically elaborate and, to a certain extent, better aligned with the international principles. The new legislation provides the possibility for tax authorities to make transfer pricing adjustments and impose additional tax liabilities in respect of controlled transactions (defined by applicable legislation), provided that the transaction price is not arm’s length. Management exercises its judgment about whether or not the transfer pricing documentation that the entity has prepared, as required by the new legislation, provides sufficient evidence to support the entity’s tax positions. Given that the practice of implementation of the new Russian transfer pricing rules has not yet developed, the impact of any challenge of the Group’s transfer prices cannot be reliably estimated; however, it may be significant to the financial position and the results of operations of the Group. As at September 30, 2012, management believes that its interpretation of the relevant legislation is appropriate and the Group’s tax, currency and customs positions will be sustained.

F-21 OJSC Novolipetsk Steel Notes to the interim condensed consolidated financial statements as at September 30, 2012 and December 31, 2011 and for the nine months ended September 30, 2012 and 2011 (unaudited) (Continued) (thousands of US dollars)

16 SUBSEQUENT EVENTS Deterioration in the steel markets In the fourth quarter of 2012, the global economic situation continued to deteriorate and this had a negative impact on steel markets, including European markets, which has resulted in, among other things, a lower level of customer demand for steel products, lower utilization rates and a downturn in steel prices. In October 2012, the management of NLMK La Louviere, a rolling facility of NLMK Europe Strip Division in Belgium, acquired as a part of business combination (Note 10), issued a press release, which outlined the decreased customer demand, continued losses and a respective need for a plant restructuring to decrease high production costs. The management of the enterprise has developed a restructuring plan covering, among other initiatives, revision of the labor contracts, growth in the labor productivity, and production flexibility, and invited the representatives of the employees for the discussion in order to adopt a plan approved by both parties in December 2012. The Group’s management has performed an evaluation of subsequent events through the period from October 1, 2012 to November 8, 2012, which is the date when these interim condensed consolidated financial statements were available to be issued.

F-22 OJSC NOVOLIPETSK STEEL CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA AS AT AND FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009 (WITH REPORT OF INDEPENDENT AUDITORS THEREON)

F-23 OJSC Novolipetsk Steel Consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 CONTENTS

Report of Independent Auditors ...... F-25 Consolidated balance sheets ...... F-26 Consolidated statements of income ...... F-27 Consolidated statements of cash flows ...... F-28 Consolidated statements of stockholders’ equity and comprehensive income ...... F-29 Notes to the consolidated financial statements ...... F-30 - F-60

F-24 10SEP201206443525

Report of Independent Auditors To the Board of Directors and Shareholders of OJSC Novolipetsk Steel: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of stockholders’ equity and comprehensive income and of cash flows present fairly, in all material respects, the financial position of OJSC Novolipetsk Steel and its subsidiaries (the ‘‘Group’’) as of December 31, 2011, 2010 and 2009 and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. These consolidated financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits of these statements in accordance with the auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

29JAN201304094905 March 24, 2012

ZAO ‘‘PricewaterhouseCoopers Audit’’, White Square Office Center, 10 Butyrsky Val, Moscow, Russia, 125047 T: +7 (495) 967-6000, F: +7 (495) 967-6001, www.pwc.com

F-25 OJSC Novolipetsk Steel Consolidated balance sheets as at December 31, 2011, 2010 and 2009 (All amounts in thousands of US dollars, except for share data)

As at As at As at Note December 31, 2011 December 31, 2010 December 31, 2009 ASSETS Current assets Cash and cash equivalents ...... 4 797,169 747,979 1,247,048 Short-term investments ...... 5 227,279 422,643 451,910 Accounts receivable and advances given, net . 6 1,572,641 1,259,596 913,192 Inventories, net ...... 7 2,828,433 1,580,068 1,134,095 Other current assets ...... 59,355 51,994 58,034 Deferred income tax assets ...... 17 18,887 43,069 72,467 5,503,764 4,105,349 3,876,746 Non-current assets Long-term investments ...... 5 8,420 687,665 468,236 Property, plant and equipment, net ...... 8 10,569,828 8,382,478 7,316,180 Intangible assets, net ...... 9(b) 158,611 181,136 203,490 Goodwill ...... 9(a) 760,166 494,654 556,636 Deferred income tax assets ...... 17 237,113 21,387 12,199 Other non-current assets ...... 19,274 26,356 68,457 11,753,412 9,793,676 8,625,198 Total assets ...... 17,257,176 13,899,025 12,501,944 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable and other liabilities ...... 10 1,622,679 1,107,434 841,230 Short-term borrowings ...... 11 1,306,263 525,559 556,563 Current income tax liability ...... 10,994 18,803 19,419 2,939,936 1,651,796 1,417,212 Non-current liabilities Deferred income tax liability ...... 17 713,666 400,601 396,306 Long-term borrowings ...... 11 3,073,535 2,098,863 1,938,652 Other long-term liabilities ...... 12 424,878 193,951 139,906 4,212,079 2,693,415 2,474,864 Total liabilities ...... 7,152,015 4,345,211 3,892,076 Commitments and contingencies ...... ——— Stockholders’ equity NLMK stockholders’ equity Common stock, 1 Russian ruble par value— 5,993,227,240 shares issued and outstanding at December 31, 2011, 2010 and 2009 .... 14(a) 221,173 221,173 221,173 Statutory reserve ...... 10,267 10,267 10,267 Additional paid-in capital ...... 306,391 98,752 112,450 Accumulated other comprehensive loss ..... (1,489,442) (916,901) (796,756) Retained earnings ...... 11,098,635 10,261,214 9,171,068 10,147,024 9,674,505 8,718,202 Non-controlling interest ...... 13 (41,863) (120,691) (108,334) Total stockholders’ equity ...... 10,105,161 9,553,814 8,609,868 Total liabilities and stockholders’ equity ...... 17,257,176 13,899,025 12,501,944

The consolidated financial statements as set out on pages 4 to 37 were approved on March 24, 2012.

The accompanying notes constitute an integral part of these consolidated financial statements.

F-26 OJSC Novolipetsk Steel Consolidated statements of income for the years ended December 31, 2011, 2010 and 2009 (All amounts in thousands of US dollars, except for earnings per share amounts)

For the year ended For the year ended For the year ended Note December 31, 2011 December 31, 2010 December 31, 2009 Revenue ...... 22 11,728,556 8,350,748 6,139,895 Cost of sales Production cost ...... (7,780,243) (4,933,236) (3,672,245) Depreciation and amortization ...... (588,707) (469,418) (478,117) (8,368,950) (5,402,654) (4,150,362) Gross profit ...... 3,359,606 2,948,094 1,989,533 General and administrative expenses .... (556,169) (263,146) (297,246) Selling expenses ...... (972,685) (708,868) (654,628) Taxes other than income tax ...... (165,073) (123,311) (102,076) Impairment losses ...... 9(a) — (58,179) (43,662) Operating income ...... 1,665,679 1,794,590 891,921 Loss on disposals of property, plant and equipment ...... (29,293) (9,657) (4,420) Gains / (losses) on investments, net ..... 11,922 (27,991) (10,903) Interest income ...... 29,531 45,071 59,733 Interest expense ...... — (15,865) (170,905) Foreign currency exchange gain / (loss), net...... 18,662 (59,262) (78,026) Other expenses, net ...... 25(b) (14,337) (4,598) (92,661) Income before income tax ...... 1,682,164 1,722,288 594,739 Income tax expense ...... 17 (421,034) (390,972) (181,784) Income, net of income tax ...... 1,261,130 1,331,316 412,955 Equity in net earnings / (losses) of associates ...... 5 54,272 (107,338) (314,859) Net income ...... 1,315,402 1,223,978 98,096 Add: Net loss attributable to the non-controlling interest ...... 13 42,192 31,065 116,959 Net income attributable to NLMK stockholders ...... 1,357,594 1,255,043 215,055 Income per share—basic and diluted: Net income attributable to NLMK stockholders per share (US dollars) . . 0.2265 0.2094 0.0359 Weighted-average shares outstanding, basic and diluted (in thousands) .... 16 5,993,227 5,993,227 5,993,227

The accompanying notes constitute an integral part of these consolidated financial statements.

F-27 OJSC Novolipetsk Steel Consolidated statements of cash flows for the years ended December 31, 2011, 2010 and 2009 (thousands of US dollars)

For the year ended For the year ended For the year ended Note December 31, 2011 December 31, 2010 December 31, 2009 CASH FLOWS FROM OPERATING ACTIVITIES Net income ...... 1,315,402 1,223,978 98,096 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ...... 588,707 469,418 478,117 Loss on disposals of property, plant and equipment . 29,293 9,657 4,420 (Gains) / losses on investments, net ...... (11,922) 27,991 10,903 Equity in net (earnings) / losses of associates ..... 5 (54,272) 107,338 314,859 Deferred income tax expense ...... 17 45,643 33,790 34,443 Losses / (gains) on unrealized forward contracts . . . 4,819 (4,225) (470,930) Impairment losses ...... 9(a) — 58,179 43,662 Other ...... 24,967 99,735 21,825 Changes in operating assets and liabilities Decrease / (increase) in accounts receivable ...... 130,417 (356,198) 493,751 (Increase) / decrease in inventories ...... (368,932) (458,033) 331,396 Decrease in other current assets ...... 13,495 5,517 17,193 Increase in accounts payable and other liabilities . . 97,616 213,979 10,534 (Decrease) / increase in current income tax payable . (10,118) (29) 5,990 Net cash provided by operating activities ...... 1,805,115 1,431,097 1,394,259 CASH FLOWS FROM INVESTING ACTIVITIES Purchases and construction of property, plant and equipment ...... (2,047,852) (1,463,209) (1,120,777) Proceeds from sale of property, plant and equipment ...... 26,980 26,362 12,719 Purchases of investments and placement of bank deposits ...... (523,661) (832,472) (536,098) Withdrawal of bank deposits, proceeds from sale of other investments and loans settled ...... 717,539 450,255 510,336 Payment for acquisition of interests in new subsidiaries net of cash acquired of $112,806 in 2011 ...... 21(a) (41,751) — — Acquisitions of subsidiaries, net of cash acquired of $22 in 2010 ...... 21(b) — (28,363) — Loans issued ...... — — (403,592) Settlement of abandoned acquisition ...... 25(b) — — (234,000) Net cash used in investing activities ...... (1,868,745) (1,847,427) (1,771,412) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings and notes payable ..... 1,967,362 933,873 1,076,756 Repayment of borrowings and notes payable ..... (1,683,536) (802,143) (1,540,242) Capital lease payments ...... (32,525) (46,356) (69,094) Dividends to shareholders ...... (516,335) (164,501) (1,981) Proceeds from disposal of assets to the entity under common control ...... 313,246 — — Dividends to non-controlling shareholders of existing subsidiaries ...... — — (127) Net cash provided by / (used in) financing activities .. 48,212 (79,127) (534,688) Net decrease in cash and cash equivalents ...... (15,418) (495,457) (911,841) Effect of exchange rate changes on cash and cash equivalents ...... 64,608 (3,612) (1,100) Cash and cash equivalents at the beginning of the year 4 747,979 1,247,048 2,159,989 Cash and cash equivalents at the end of the year ... 4 797,169 747,979 1,247,048 Supplemental disclosures of cash flow information: Cash paid during the year for: Income tax ...... 374,523 358,419 136,378 Interest (excluding capitalized interest) ...... — 15,865 170,702 Non cash investing activities: Capital lease liabilities incurred ...... 19 18,430 97,606 83,186 Fair value of net assets acquired from third parties in new subsidiaries, net of cash acquired of $112,806 in 2011 and $22 in 2010 ...... 21 464,511 28,363 —

The accompanying notes constitute an integral part of these consolidated financial statements.

F-28 OJSC Novolipetsk Steel Consolidated statements of stockholders’ equity and comprehensive income for the years ended December 31, 2011, 2010 and 2009 (thousands of US dollars)

NLMK stockholders Accumulated Additional other Non- Total Common Statutory paid-in comprehensive Retained controlling Comprehensive stockholders’ Note stock reserve capital loss earnings interest income / (loss) equity Balance at December 31, 2008 .. 221,173 10,267 52,395 (549,879) 8,956,013 33,100 — 8,723,069 Comprehensive loss: Net income / (loss) . . . — — — — 215,055 (116,959) 98,096 98,096 Other comprehensive loss: Cumulative translation adjustment ...... 2(b) — — — (246,877) (9,583) (256,460) (256,460) Comprehensive loss ... (158,364) (158,364) Disposal of assets to the entity under common control ...... 24(c) — — 85,345 — — (40,182) — 45,163 Change in non-controlling interest ...... 13 — — (25,290) — — 25,290 — — Balance at December 31, 2009 .. 221,173 10,267 112,450 (796,756) 9,171,068 (108,334) — 8,609,868 Comprehensive income: Net income / (loss) . . . — — — — 1,255,043 (31,065) 1,223,978 1,223,978 Other comprehensive income: Cumulative translation adjustment ...... 2(b) — — — (120,145) — 5,010 (115,135) (115,135) Comprehensive income . 1,108,843 1,108,843 Change in non- controlling interest . . 13 — — (13,698) — — 13,698 — — Dividends to shareholders ...... 14(b) — — — — (164,897) — — (164,897) Balance at December 31, 2010 .. 221,173 10,267 98,752 (916,901) 10,261,214 (120,691) — 9,553,814 Comprehensive income: Net income / (loss) . . . — — — — 1,357,594 (42,192) 1,315,402 1,315,402 Other comprehensive income: Cumulative translation adjustment ...... 2(b) — — — (572,541) — 4,991 (567,550) (567,550) Comprehensive income . 747,852 747,852 Disposal of assets to the entity under common control ...... 15 — — 207,639 — — — — 207,639 Change in non-controlling interest in deconsolidated subsidiaries ...... — — — — — 116,029 — 116,029 Dividends to shareholders ...... 14(b) — — — — (520,173) — — (520,173) Balance at December 31, 2011 .. 221,173 10,267 306,391 (1,489,442) 11,098,635 (41,863) — 10,105,161

The accompanying notes constitute an integral part of these consolidated financial statements.

F-29 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (thousands of US dollars)

1 BACKGROUND OJSC Novolipetsk Steel (the ‘‘Parent Company’’) and its subsidiaries (together—the ‘‘Group’’) is one of the world’s leading steelmakers with facilities that allow it to operate an integrated steel production cycle. The Parent Company is a Russian Federation open joint stock company in accordance with the Civil Code of the Russian Federation. The Parent Company was originally established as a State owned enterprise in 1934 and was privatized in the form of an open joint stock company on January 28, 1993. On August 12, 1998 the Parent Company’s name was re-registered as an open joint stock company in accordance with the Law on Joint Stock Companies of the Russian Federation. The Group is one of the leading global suppliers of slabs and transformer steel and one of the leading suppliers to the domestic market of high value added products including pre-painted, galvanized and electrical steel as well as a variety of long steel products. The Group also operates in the mining segment (Note 22). The Group’s main operations are in the Russian Federation, the European Union and the USA and are subject to the legislative requirements of the subsidiaries’ state and regional authorities. The Group’s primary subsidiaries, located in Lipetsk and other regions of the Russian Federation, comprise: • Mining companies OJSC Stoilensky GOK, OJSC Stagdok and OJSC Dolomite. The principal business activities of these companies are mining and processing of iron-ore raw concentrate, fluxing limestone and metallurgical dolomite. • Coke-chemical company OJSC Altai-Koks. The principal business activity of this company is the production of blast furnace coke, cupola coke, nut coke and small-sized coke. • Steel rolling company LLC VIZ-Stahl. The principal business activity of this company is the production of cold rolled grain oriented and non-oriented steel. • LLC NLMK Long Products, OJSC NSMMZ and scrap collecting companies. The principal business activities of these companies are the collection and recycling of iron scrap, steel-making and production of long products. The Group’s major subsidiaries, located outside the Russian Federation, comprise: • Steel Invest & Finance (Luxembourg) S.A. (‘‘SIF S.A.’’) holds 100% interests or majority votes in 22 companies located in Europe and USA which include one steel making plant and five steel rolling facilities as well as a network of steel service centers (Note 21(a)). • Danish steel rolling company NLMK DanSteel A/S. The principal business activity of this company is production of hot rolled plates. • Trading companies Novexco (Cyprus) Ltd. and Novex Trading (Swiss) S.A. The principal business activity of these companies is sales of the Group’s products outside the Russian Federation. • American hot rolled coils producer NLMK Indiana. The principal business activity of this company is production of hot rolled steel.

2 BASIS OF CONSOLIDATED FINANCIAL STATEMENTS PREPARATION (a) Basis of presentation The Group maintains its accounting records in accordance with the legislative requirements of the country of incorporation of each of the Group’s companies. The accompanying consolidated financial statements have been prepared from those accounting records and adjusted as necessary to comply, in all material respects, with the requirements of accounting principles generally accepted in the United States of America (‘‘US GAAP’’).

F-30 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

2 BASIS OF CONSOLIDATED FINANCIAL STATEMENTS PREPARATION (Continued) (b) Functional and reporting currency In accordance with the laws of the Russian Federation the accounting records of the Parent Company are maintained, and the Parent Company’s statutory financial statements for its stockholders are prepared, in Russian rubles. Functional currency of the majority of the Group entities is considered to be the Russian ruble. The functional currency of the foreign subsidiaries is their local currency. The accompanying consolidated financial statements have been prepared using the US dollar as the Group’s reporting currency, utilizing period-end exchange rates for assets and liabilities, corresponding period quarterly weighted average exchange rates for consolidated statement of income accounts and historic rates for equity accounts in accordance with the relevant provisions of ASC No. 830, Foreign currency matters. As a result of these translation procedures, a cumulative translation adjustment of $(567,550), $(115,135) and $(256,460) was recorded directly in stockholders’ equity in the years ended December 31, 2011, 2010 and 2009, respectively. The Central Bank of the Russian Federation’s closing rates of exchange as at December 31, 2011, 2010 and 2009 were 1 US dollar to 32.1961, 30.4769 and 30.2442 Russian rubles, respectively. The period weighted average exchange rates for the 1 quarter 2011, 2 quarter 2011, 3 quarter 2011 and 4 quarter 2011 were 29.2695, 27.9857, 29.0461 and 31.2304 Russian rubles to 1 US dollar, respectively. The period weighted average exchange rates for the 1 quarter 2010, 2 quarter 2010, 3 quarter 2010 and 4 quarter 2010 were 29.8903, 30.2430, 30.6200 and 30.7117 Russian rubles to 1 US dollar, respectively. The period weighted average exchange rates for the 1 quarter 2009, 2 quarter 2009, 3 quarter 2009 and 4 quarter 2009 were 33.9308, 32.2145, 31.3276 and 29.4729 Russian rubles to 1 US dollar, respectively.

(c) Consolidation principles These consolidated financial statements include all majority-owned and controlled subsidiaries of the Group. All significant intercompany accounts and transactions have been eliminated.

3 SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies have been applied in the preparation of the consolidated financial statements. These accounting policies have been consistently applied by the Group from one reporting period to another with the exception of newly adopted accounting pronouncements.

(a) Use of estimates The preparation of financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the periods reported. Estimates are used when accounting for certain items such as allowances for doubtful accounts; employee compensation programs; depreciation and amortization lives; asset retirement obligations; legal and tax contingencies; inventory values; valuations of investments and determining when investment impairments are other than temporary; goodwill; assets and liabilities assumed in a purchase business combinations and deferred tax assets, including valuation allowances. Estimates are based on historical experience, where applicable, and other assumptions that management believes are reasonable under the circumstances. Actual results may differ from those estimates under different assumptions or conditions.

(b) Cash and cash equivalents Cash and cash equivalents comprise cash balances, cash on current accounts with banks, bank deposits and other highly liquid short-term investments with original maturities of less than three months.

F-31 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

3 SIGNIFICANT ACCOUNTING POLICIES (Continued) (c) Restricted cash Restricted cash comprise funds legally or contractually restricted as to withdrawal.

(d) Accounts receivable and loans issued Receivables and loans issued are stated at cost less an allowance for doubtful debts. Management quantifies this allowance based on current information regarding the customers’ and borrowers’ ability to repay their obligations. Amounts previously written off which are subsequently collected are recognized as income.

(e) Value added tax (VAT) Output value added tax related to sales of goods (work performance, services provision) is payable to the tax authorities upon delivery of the goods (work, services) or property rights to customers. Input VAT on goods and services purchased (received) is generally recoverable against output VAT. VAT related to sales / purchases and services provision / receipt which has not been settled at the balance sheet date (VAT deferred) is recognized in the balance sheet on a gross basis and disclosed separately within current assets and current liabilities. Where a doubtful debt provision has been made, a loss is recorded for the gross amount of the debt, including VAT.

(f) Inventories Inventories are stated at the lower of acquisition cost inclusive of completion expenses or market value. Inventories are released to production or written-off otherwise at average cost. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads. The provision for obsolescence is calculated on the basis of slow-moving and obsolete inventories analysis. Such items are provided for in full.

(g) Investments in marketable debt and equity securities Marketable debt and equity securities consist of investments in corporate debt and equity securities where the Group does not exert control or significant influence over the investee. The Group classifies marketable debt and equity securities using three categories: trading, held-to-maturity and available-for-sale. The specific identification method is used for determining the cost basis of all such securities.

Trading securities Trading securities are bought and held principally for the purpose of selling them in the near term. Trading securities are carried in the consolidated balance sheet at their fair value. Unrealized holding gains and losses on trading securities are included in the consolidated statement of income.

Held-to-maturity securities Held-to-maturity securities are those securities which the Group has the ability and intent to hold until maturity. Such securities are recorded at amortized cost. Premiums and discounts are amortized and recorded in the consolidated statement of income over the life of the related security held-to-maturity, as an adjustment to yield using the effective interest method.

Available-for-sale securities All marketable securities not included in trading or held-to-maturity are classified as available-for-sale.

F-32 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

3 SIGNIFICANT ACCOUNTING POLICIES (Continued) Available-for-sale securities are recorded at their fair value. Unrealized holding gains and losses, net of the related tax effect, are excluded from earnings and reported as a separate component of accumulated other comprehensive income in the stockholders’ equity until realized. Realized gains and losses from the sale of available-for-sale securities, less tax, are determined on a specific identification basis. Dividend and interest income are recognized when earned.

(h) Investments in associates and non-marketable securities Investments in associates Associates are those enterprises in which the Group has significant influence, but not control, over the financial and operating policies. Investments in associates are accounted for using the equity method of accounting. The consolidated financial statements include the Group’s share of the total recognized gains and losses of associates from the date that significant influence effectively commences until the date that significant influence effectively ceases.

Investments in non-marketable securities Investments in non-marketable securities where the Group does not exercise control or significant influence over the investee are carried at cost less provisions for any other than temporary diminution in value. Provisions are calculated for the investments in companies which are experiencing significant financial difficulties for which recovery is not expected within a reasonable period in the future, or under bankruptcy proceedings.

(i) Property, plant and equipment Owned assets Items of property, plant and equipment are stated at acquisition cost less accumulated depreciation and adjustments for impairment losses (Note 3(l)). The cost of self-constructed assets includes the cost of materials, direct labor and an appropriate portion of production overheads directly related to construction of assets. Property, plant and equipment also include assets under construction and plant and equipment awaiting installation. Where an item of property, plant and equipment comprises major components having different useful lives, they are accounted for as separate items of property, plant and equipment.

Capitalized interest Interest costs are capitalized against qualifying assets as part of property, plant and equipment. Such interest costs are capitalized over the period during which the asset is being acquired or constructed and borrowings have been incurred. Capitalization ceases when construction is interrupted for an extended period or when the asset is substantially complete. Further interest costs are charged to the statement of income.

F-33 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

3 SIGNIFICANT ACCOUNTING POLICIES (Continued) Where funds are borrowed specifically for the purpose of acquiring or constructing a qualifying asset, the amount of interest costs eligible for capitalization on that asset is the actual interest cost incurred on the borrowing during the period. Where funds are made available from general borrowings and used for the purpose of acquiring or constructing qualifying assets, the amount of interest costs eligible for capitalization is determined by applying a capitalization rate to the expenditures on these assets.

Mineral rights Mineral rights acquired in business combinations are recorded in accordance with provisions of ASC No. 805, Business Combinations, (‘‘ASC No. 805’’) at their fair values at the date of acquisition, based on their appraised fair value. The Group reports mineral rights as a separate component of property, plant and equipment in accordance with the consensus reached by ASC No 930, Extractive Activities—Mining, (‘‘ASC No 930’’) subtopic 360, Property, Plant and Equipment.

(j) Leasing Leasing transactions are classified according to the lease agreements which specify the rewards and risks associated with the leased property. Leasing transactions where the Group is the lessee are classified into capital leases and operating leases. In a capital lease, the Group receives the major portion of economic benefit of the leased property and recognizes the asset and associated liability on its balance sheet. All other transactions in which the Group is the lessee are classified as operating leases. Payments made under operating leases are recorded as an expense.

(k) Goodwill Goodwill represents the excess of the purchase price over the fair value of net assets acquired. Under ASC No. 350, Intangibles—Goodwill and Other, (‘‘ASC No. 350’’) goodwill is first assessed with regard to qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. It is required to calculate the fair value of a reporting unit only if a qualitative assessment indicates that it is more likely than not that its carrying amount is more than its fair value. The impairment test under ASC No. 350 includes a two-step approach. Under the first step, management compares fair value of a ‘‘reporting unit’’ to its carrying value. A reporting unit is the level at which goodwill impairment is measured and it is defined as an operating segment or one level below it if certain conditions are met. If the fair value of the reporting unit is less than its carrying value, step two is required to determine if goodwill is impaired.

F-34 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

3 SIGNIFICANT ACCOUNTING POLICIES (Continued) Under step two, the amount of goodwill impairment is measured by the amount, if any, that the reporting unit’s goodwill carrying value exceeds its ‘‘implied’’ fair value of goodwill. The implied fair value of goodwill is determined by deducting the fair value of all tangible and intangible net assets of the reporting unit (both recognized and unrecognized) from the fair value of the reporting unit (as determined in the first step). Prior to adoption of ASC No. 805, if the excess of the fair value of net assets acquired over purchase cost was determined as negative goodwill, and was allocated to the acquired non-current assets, except for deferred taxes, if any, until they were reduced to zero. After adoption of ASC No. 805, the excess of the fair value of net assets acquired over acquisition cost represents negative goodwill (or ‘‘bargain purchase’’) which is recognized as a gain in the consolidated statement of income during the period of the acquisition. Intangible assets that have limited useful lives are amortized on a straight-line basis over the shorter of their useful or legal lives.

(l) Impairment of long-lived assets Long-lived assets, such as property, plant and equipment, mineral rights and purchased intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset, generally determined by reference to the discounted future cash flows. Assets held for sale that meet certain criteria are measured at the lower of their carrying amount or fair value less cost to sell.

(m) Pension and post-retirement benefits other than pensions The Group follows the Pension and Social Insurance legislation of the Russian Federation and other countries where the Group operates. Contributions to the Russian Federation Pension Fund by the employer are calculated as a percentage of current gross salaries. Such contributions are expensed as incurred. The Group maintains defined benefit pension and defined contribution plans that cover the majority of its employees in Europe. The plans cover statutory and voluntary obligations and include pensions, other post-retirement benefits, e.g. long-term severance benefits and some additional benefits (Note 12). The Group’s net obligation in respect of long-term severance indemnity funds and other post-employment pension plans is calculated by estimating the amount of future benefit that employees have earned in return for their services in the current and prior periods. Any unrecognized past service costs and the fair value of any plan assets are deducted. The obligation is calculated using the projected unit credit method and is discounted to its present value. The Parent Company and some other Group companies have an agreement with a non-Government pension fund (the ‘‘Fund’’) in accordance with which contributions are made on a monthly basis. Contributions are calculated as a certain fixed percentage of the employees’ salaries. These pension benefits are accumulated in the Fund during the employment period and distributed by the Fund subsequently. As such, all these benefits are considered as made under a defined contribution plan and are expensed as incurred. Accordingly, the Group has no long-term commitments to provide funding, guarantees, or other support to the Fund. In addition, lump sum benefits are paid to employees of a number of the Group’s companies on retirement depending on the employment period and the salary level of the individual employee. The scheme is considered as a defined benefit plan. The expected future obligations to the employees are assessed by the

F-35 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

3 SIGNIFICANT ACCOUNTING POLICIES (Continued) Group’s management and accrued in the consolidated financial statements, however these are not material.

(n) Asset retirement obligations The Group’s land, buildings and equipment are subject to the provisions of ASC No. 410, Asset Retirement and Environmental Obligations. This ASC addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The Group’s asset retirement obligation (‘‘ARO’’) liabilities primarily consist of spending estimates related to reclaiming surface land and support facilities at both surface and underground mines in accordance with federal and state reclamation laws as defined by each mining permit. The Group estimates its ARO liabilities for final reclamation and mine closure based upon detailed engineering calculations of the amount and timing of the future cash spending for a third party to perform the required work. Spending estimates are escalated for inflation and then discounted at the credit- adjusted risk-free rate. The Group records an ARO asset associated with the discounted liability for final reclamation and mine closure. The obligation and corresponding asset are recognized in the period in which the liability is incurred. The liability is accreted to its present value each period and the capitalized cost is depreciated in accordance with the Group’s depreciation policies for property, plant and equipment. As changes in estimates occur (such as mine plan revisions, changes in estimated costs, or changes in timing of the performance of reclamation activities), the revisions to the obligation and asset are recognized at the appropriate credit-adjusted risk-free rate.

(o) Borrowing activities The Group’s general-purpose funding is principally obtained from commercial paper and short-term and long-term borrowings. Commercial paper, when issued at a discount, is recorded at the proceeds received and accreted to its par value. Borrowings are carried at the principal amount borrowed, net of unamortized discounts or premiums.

(p) Commitments and contingencies Contingent liabilities, including environmental remediation costs, arising from claims, assessments, litigation, fines, penalties and other sources are recorded when it is probable that a liability can be assessed and the amount of the assessment and / or remediation can be reasonably estimated. Estimated losses from environmental remediation obligations are generally recognized no later than completion of remedial feasibility studies. The Group companies accrue expenses associated with environmental remediation obligations when such expenses are probable and reasonably estimable. Such accruals are adjusted as further information becomes available or circumstances change.

(q) Income tax Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period when a different tax rate is enacted. Pursuant to the provisions of ASC No. 740, Income Taxes, the Group provides valuation allowances for deferred tax assets for which it does not consider realization of such assets to be more likely than not. The

F-36 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

3 SIGNIFICANT ACCOUNTING POLICIES (Continued) ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the projected future taxable income, the reversal of existing deferred tax liabilities and tax planning strategies in making this assessment. The Group accounts for uncertain tax positions and reflects liabilities for unrecognized income tax benefits together with corresponding interest and penalties in the consolidated statement of income as income tax expense.

(r) Dividends Dividends are recognized as a liability in the period in which they are declared.

(s) Revenue recognition Goods sold Revenue from the sale of goods is recognized in the consolidated statement of income when there is a firm arrangement, the price is fixed and determinable, delivery has occurred, and collectability is reasonably assured.

Interest income Interest income is recognized in the consolidated statement of income as it is earned.

(t) Shipping and handling The Group bills its customers for the shipped steel products with product delivery to the place of destination in accordance with the delivery terms agreed with customers. The related shipping and handling expense is reported in selling expenses. The portion of this expense in selling expenses in 2009-2011 varied from 84% to 88%.

(u) Interest expense All interest and other costs incurred in connection with borrowings are expensed as incurred as part of interest expense, except for interest which is incurred on construction projects and capitalized (Note 3(i)).

(v) Non-cash transactions Non-cash settlements represent offset transactions between customers and suppliers, when exchange equivalents are defined and goods are shipped between the parties without exchange of cash. The related sales and purchases are recorded in the same manner as cash transactions. The fair market value for such transactions is based on the value of similar transactions in which monetary consideration is exchanged with a third party. Purchases of property, plant and equipment under capital lease arrangements are also recognized as non-cash transactions.

(w) Segment reporting According to ASC No.280, Segment reporting, segment reporting follows the internal organizational and reporting structure of the Group. The Group’s organization comprises four reportable segments: • steel segment, comprising production and sales of coke and steel products, primarily pig iron, steel slabs, hot rolled steel, cold rolled steel, galvanized cold rolled sheet and cold rolled sheet with polymeric coatings and also electro-technical steel;

F-37 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

3 SIGNIFICANT ACCOUNTING POLICIES (Continued) • foreign rolled products, comprising production and sales of steel products in Europe and the US; • long products segment, comprising a number of steel-production facilities combined in a single production system beginning from iron scrap collection and recycling to steel-making, production of long products, reinforcing rebar, and metalware; • mining segment, comprising mining, processing and sales of iron ore, fluxing limestone and metallurgical dolomite, which supplies raw materials to the steel segment and third parties; and other segments, not reported separately in the consolidated financial statements. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

(x) Guarantees The fair value of a guarantee is determined and recorded as a liability at the time when the guarantee is issued. The initial guarantee amount is subsequently remeasured to reflect the changes in the underlying liability. The expense is included in the related line items of the consolidated statements of income and comprehensive income, based on the nature of the guarantee. When the likelihood of performing on a guarantee becomes probable, a liability is accrued, provided it is reasonably determinable on the basis of the facts and circumstances at that time.

(y) Recent accounting standards In December 2010, the FASB issued ASU 2010-28, Intangibles—Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts. For the reporting units with zero or negative carrying value, an entity is required to perform the goodwill impairment test if it is more likely than not that a goodwill impairment exists. An entity should consider any adverse qualitative factors indicating that an impairment may exist. The Group adopted ASU 2010-28 from January 1, 2011. The adoption of ASU 2010-28 did not have an impact on the Group’s consolidated financial position and results of operations. In December 2010, the FASB issued ASU 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations. ASU 2010-29 specifies that an entity should disclose revenue and earnings of the combined entity in comparative period as though the business combination had occurred as of the beginning of the comparable prior annual reporting period. ASU 2010-29 also expands the supplemental pro forma disclosures. The Group adopted ASU 2010-29 for business combinations occurred from January 1, 2011. The adoption of ASU 2010-29 did not have an impact on the Group’s consolidated financial position and results of operations.

New pronouncements In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. ASU 2011-04 modifies the fair value measurement requirements and updates the wording to converge with IFRS. ASU 2011-04 becomes effective for the Group on January 1, 2012. Management is currently evaluating the potential impact of these changes on the Group’s consolidated financial position and results of operations. In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. Under these amendments an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. These amendments eliminate the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. ASU 2011-05 becomes effective for the Group on January 1, 2012. The Group believes the adoption of ASU 2011-05 will impact only the presentation of comprehensive income.

F-38 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

3 SIGNIFICANT ACCOUNTING POLICIES (Continued) In September 2011, the FASB approved ASU 2011-08: Testing Goodwill for Impairment—Intangibles— Goodwill and Other (Topic 350). The amendments in ASU 2011-08 will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under these amendments, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The amendments include a number of events and circumstances for an entity to consider in conducting the qualitative assessment. ASU 2011-08 will be effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Earlier adoption is permitted. The Group early adopted ASU 2011-08 from 1 October 2011. The Group management assessed qualitative factors for impairment of goodwill as at December 31, 2011 that indicated no need for further impairment testing. In December 2011, the FASB issued ASU 2011-12: Comprehensive Income (Topic 220). The amendments in this Update supersede certain pending paragraphs in Accounting Standards Update No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, to effectively defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments out of accumulated other comprehensive income. The amendments will be temporary to allow the Board time to redeliberate the presentation requirements for reclassifications out of accumulated other comprehensive income for annual and interim financial statements for public, private, and non-profit entities. Taking into account that Update 2011-05 will have not a significant impact on the Group’s financial position and results of operations, the Update 2011-12 also will have no significant impact on the Group’s financial position and results of operations.

4 CASH AND CASH EQUIVALENTS

As at As at As at December 31, 2011 December 31, 2010 December 31, 2009 Cash—Russian rubles ...... 54,448 131,555 79,793 Cash—US dollars ...... 45,820 117,343 125,917 Cash—other currencies ...... 66,561 45,353 64,197 Deposits—Russian rubles ...... 173,644 151,426 208,514 Deposits—US dollars ...... 290,854 210,743 729,092 Deposits—Euros ...... 165,806 91,147 25,778 Deposits—other currencies ...... — 3 11,474 Other cash equivalents ...... 36 409 2,283 797,169 747,979 1,247,048

F-39 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

5 INVESTMENTS Balance sheet classification of investments:

As at As at As at December 31, 2011 December 31, 2010 December 31, 2009 Short-term investments and current portion of long-term investments Loans to related parties (Note 24(b)) ...... — — 433,171 Bank deposits ...... 226,736 405,784 7,109 Other ...... 543 16,859 11,630 227,279 422,643 451,910 Long-term investments Loans to related parties (Note 24(b)) ...... — 515,264 156,371 Investments in associates ...... 7,786 170,192 311,514 Other ...... 634 2,209 351 8,420 687,665 468,236 Total investments ...... 235,699 1,110,308 920,146

Investments in associates

As at As at As at December 31, December 31, December 31, As at As at As at 2011 2010 2009 December 31, December 31, December 31, Ownership Ownership Ownership 2011 2010 2009 Steel Invest & Finance (Luxembourg) S.A. (Note 21(a)) ...... 100.00% 50.00% 50.00% — 164,009 305,284 TBEA & NLMK (Shenyang) Metal Product Co., Ltd. . . 50.00% 50.00% 50.00% 7,786 6,183 6,230 7,786 170,192 311,514

Steel Invest & Finance (Luxembourg) S.A. shares In December 2006, the Group acquired 50% of the issued shares of SIF S.A. for $805 million, previously accounted for by the Group under the equity method in line with a strategic partnership with the Duferco Group who held an equal participation in SIF S.A.’s share capital. As at the acquisition date, the difference between the cost of the Group’s investment and the amount of acquired equity in SIF S.A.’s net assets, appraised at fair value, amounted to $27,419 and was included in the value of investment in associate.

F-40 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

5 INVESTMENTS (Continued) Summarized financial information for SIF S.A. is as follows:

As at As at December 31, 2010 December 31, 2009 Current assets ...... 1,538,560 1,580,750 Non-current assets ...... 1,239,440 1,316,182 Total assets ...... 2,778,000 2,896,932 Current liabilities ...... (1,368,598) (1,086,909) Non-current liabilities ...... (1,528,189) (1,805,213) Total liabilities ...... (2,896,787) (2,892,122) Equity ...... (118,787) 4,810

The revenues and net loss of SIF S.A. for the year ended December 31, 2010 and 2009 amounted to $2,820,699 and $(136,908), $2,047,806 and $(619,557), respectively. The Group’s share in SIF S.A. losses amounted to $(107,338) and $(314,859) for the years ended December 31, 2010 and 2009, respectively. Information about the Group’s operations with SIF S.A. and its subsidiary is disclosed in Note 24. In July 2011, the Group exercised its call option to acquire the remaining 50% of SIF S.A. shares from Duferco Group (Note 21(a)).

6 ACCOUNTS RECEIVABLE AND ADVANCES GIVEN

As at As at As at December 31, 2011 December 31, 2010 December 31, 2009 Trade accounts receivable ...... 944,250 728,153 619,722 Advances given to suppliers ...... 154,622 201,745 91,858 VAT and other taxes receivable ...... 511,118 416,833 365,466 Accounts receivable from employees ...... 2,799 4,035 3,407 Other accounts receivable ...... 87,710 148,964 148,261 1,700,499 1,499,730 1,228,714 Allowance for doubtful debts ...... (127,858) (240,134) (315,522) 1,572,641 1,259,596 913,192

As at December 31, 2011, 2010 and 2009 accounts receivable of $297,902, $15,373 and nil, respectively, served as collateral for certain borrowings (Note 11). As at December 31, 2011, 2010 and 2009, the Group had other accounts receivable of $19,010, $88,951 and $126,705, respectively, from companies for which a 100% allowance was recorded.

F-41 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

7 INVENTORIES

As at As at As at December 31, 2011 December 31, 2010 December 31, 2009 Raw materials ...... 1,215,944 870,160 613,940 Work in process ...... 685,472 332,284 219,455 Finished goods and goods for resale ...... 1,021,828 445,961 351,879 2,923,244 1,648,405 1,185,274 Provision for obsolescence ...... (94,811) (68,337) (51,179) 2,828,433 1,580,068 1,134,095

As at December 31, 2011, 2010 and 2009, inventories of $641,654, $27,898 and nil, respectively, served as collateral for certain borrowings (Note 11).

8 PROPERTY, PLANT AND EQUIPMENT

As at As at As at December 31, 2011 December 31, 2010 December 31, 2009 Land...... 201,852 154,225 136,596 Mineral rights ...... 522,577 534,445 512,106 Buildings ...... 1,748,813 1,532,788 1,400,208 Land and buildings improvements ...... 1,280,211 1,322,321 1,221,530 Machinery and equipment ...... 7,336,243 6,150,022 5,850,662 Vehicles ...... 324,953 364,107 345,213 Construction in progress and advances for construction and acquisition of property, plant and equipment ...... 4,630,558 3,519,758 2,817,937 Leased assets (Note 18) ...... 125,897 372,405 328,204 Other ...... 125,585 72,168 68,398 16,296,689 14,022,239 12,680,854 Accumulated depreciation ...... (5,726,861) (5,639,761) (5,364,674) 10,569,828 8,382,478 7,316,180

In March 2011, the Group acquired a license for exploration and extraction of coal in the mine field area No. 3 of the Usinsky coal deposit expiring in 2031. The carrying value of this license as at December 31, 2011 is $27,193. In August 2005, the Group acquired a license for exploration and mining of Zhernovsky coal deposit, expiring in 2025. The carrying value of this license as at December 31, 2011 is $36,456. The other mineral rights relate to the mining segment, and were acquired by the Group in 2004 through a business combination. The carrying value of these mineral rights as at December 31, 2011 is $205,544. They expire on January 1, 2016 and management believes that they will be extended at the initiative of the Group. As at December 31, 2011, 2010 and 2009, property, plant and equipment of $541,928, $19,654 and $45,647 (net book value), respectively, served as collateral for certain borrowings (Note 11). The amounts of interest capitalized are $171,764, $173,402 and $29,693 for the years ended December 31, 2011, 2010 and 2009, respectively.

F-42 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

9 GOODWILL AND INTANGIBLE ASSETS (a) Goodwill

Balance as at December 31, 2008 ...... 613,668 Goodwill impairment ...... (43,662) Cumulative translation adjustment ...... (13,370) Balance as at December 31, 2009 ...... 556,636 Goodwill impairment ...... (58,179) Cumulative translation adjustment ...... (3,803) Balance as at December 31, 2010 ...... 494,654 Acquired in new subsidiaries ...... 289,711 Cumulative translation adjustment ...... (24,199) Balance as at December 31, 2011 ...... 760,166

Goodwill arising on acquisitions was allocated to the appropriate business segment in which each acquisition took place. Goodwill arising from the acquisition in 2011 of a controlling interest in SIF S.A. (Note 21(a)) amounted to $289,711. This goodwill was preliminarily assigned to foreign rolled products segment. As at December 31, 2011 goodwill relating to steel, long products, mining and foreign rolled products segments amounted to $312,523, $5,755, $116,451 and $325,437, respectively.

Goodwill impairment The Group performed a test for impairment of goodwill as at December 31, 2010 and 2009 using the income approach primarily with Level 3 inputs, in accordance with ASC No. 820. As a result the Group determined that the goodwill associated with the long products segment was partially impaired, recording an estimated charge of $58,179 and $43,662 in ‘‘Impairment losses’’ line in the consolidated statement of income for the years ended December 31, 2010 and 2009, respectively. The Group’s management believes that the recent global economic crisis and economic conditions within the industry were the primary factors that led to the impairment of goodwill. Pursuant to early adopted revised ASU 2011-08, the Group assessed qualitative factors for impairment of goodwill as at December 31, 2011 that indicated no need for further impairment testing.

(b) Intangible assets

Total Gross book Gross book Gross book useful life, value as at value as at value as at Subsidiary months December 31, 2011 December 31, 2010 December 31, 2009 Industrial intellectual property . . SIF S.A. 60 2,503 — — Industrial intellectual property . . LLC VIZ-Stahl 149 53,074 56,068 56,499 Customer base ...... LLC VIZ-Stahl 125 100,794 106,480 107,299 Customers relationships ...... NLMK DanSteel A/S 72 4,080 4,310 4,344 Beneficial lease interest ...... NLMK Indiana 38 8,700 8,700 8,700 Customers relationships (electricity) ...... NLMK Indiana 18 — 7,200 7,200 Customer base ...... Novexco, Novex 180 89,910 89,910 89,910 259,061 272,668 273,952 Accumulated amortization .... (100,450) (91,532) (70,462) 158,611 181,136 203,490

F-43 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

9 GOODWILL AND INTANGIBLE ASSETS (Continued) The intangible assets were acquired in business combinations and met the criteria for separate recognition outlined in ASC No. 805. They were recorded under the provisions of ASC No. 805 at fair values at the date of acquisition, based on their appraised values. Aggregated amortization expense amounted to $14,850, $16,268 and $23,102 for the years ended December 31, 2011, 2010 and 2009, respectively.

Estimated amortization expense in subsequent annual periods 2012 ...... (22,550) 2013 ...... (20,047) 2014 ...... (20,047) 2015 ...... (20,047) 2016 and later ...... (75,920)

10 ACCOUNTS PAYABLE AND OTHER LIABILITIES

As at As at As at December 31, 2011 December 31, 2010 December 31, 2009 Trade accounts payable ...... 818,729 466,988 400,236 Advances received ...... 133,402 199,407 114,472 Taxes payable other than income tax ...... 143,379 120,287 87,402 Accounts payable and accrued liabilities to employees ...... 199,300 149,827 130,813 Dividends payable ...... 2,061 2,102 2,574 Short-term capital lease liability (Note 18) ...... 14,757 38,430 30,383 Other accounts payable ...... 311,051 130,393 75,350 1,622,679 1,107,434 841,230

Other accounts payable as at December 31, 2011 include short-term part of payables to the Duferco Group for SIF S.A. shares of $145,631 (Note 21(a)).

F-44 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

11 SHORT-TERM AND LONG-TERM BORROWINGS

As at As at As at December 31, 2011 December 31, 2010 December 31, 2009 Parent Company Loans, EURO denominated, with interest rates from EURIBOR (6 m) +1.5% to EURIBOR (3 m) +3.5% per annum, mature 2012-2019 . . . 757,788 582,192 — Loan, RUR denominated, with interest rate 8.5% per annum, mature 2013 ...... 310,958 — — Bonds, RUR denominated, with interest rate from 7.75% to 10.75% per annum, mature 2012-2014 1,416,108 835,059 502,627 Loans, US$ denominated, with interest rates from LIBOR +1.2% to 3.86% per annum, mature 2012-2013 ...... 678,077 1,104,707 1,506,580 Companies of the Long products segment Russian rubles Loans with interest rates from 15% to 16% per annum, mature 2011 ...... — — 317,086 Bonds with interest rate 10% per annum, mature 2011 ...... — — 227 Other borrowings ...... 1,812 1,844 59,315 US dollars Loans with interest rate LIBOR (1 m) +3.75% per annum, mature 2011 ...... — — 19,355 Euros Loans with interest rates from EURIBOR (6 m) +0.9% to EURIBOR (6 m) +3.2% per annum, mature 2012-2020 ...... 107,119 23,585 52,209 Other borrowings ...... 705 4,416 11,277

F-45 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

11 SHORT-TERM AND LONG-TERM BORROWINGS (Continued)

As at As at As at December 31, 2011 December 31, 2010 December 31, 2009 Companies of the Foreign rolled products segment Loans, US$ denominated, with interest rates from LIBOR +1.625 and PRIME +0.625 to 5.25% per annum, mature 2012-2013 ...... 51,347 28,819 — Loans, EURO denominated, with interest rates from EURIBOR +0.5% to EURIBOR +2% and 4.34% per annum, mature 2012-2020 ..... 1,014,160 — — Other borrowings ...... 2 — — Other companies Loan, RUR denominated, with interest rate 10% per annum ...... 30,771 29,019 26,538 Loans, EURO denominated, with interest rate EURIBOR (6 m) +5.5% per annum, mature 2012-2013 ...... 1,648 2,910 — Other borrowings ...... 9,303 11,871 1 4,379,798 2,624,422 2,495,215 Less: short-term loans and current maturities of long-term loans ...... (1,306,263) (525,559) (556,563) Long-term borrowings ...... 3,073,535 2,098,863 1,938,652

The Group’s long-term borrowings as at December 31, 2011 mature between 2 to 8 years. The payments scheduled for long-term loans are as follows:

2013 ...... 1,408,338 2014 ...... 725,835 2015 ...... 579,782 2016 ...... 125,014 Remainder ...... 234,566 3,073,535

New borrowings The amount of loans and bonds, received by the Group under new loan agreements concluded in the year ended December 31, 2011, and outstanding as at December 31, 2011, is $1,401,285.

F-46 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

12 OTHER LONG-TERM LIABILITIES

As at As at As at December 31, 2011 December 31, 2010 December 31, 2009 Long-term capital lease liability (Note 18) ...... 26,389 191,102 137,592 Employee benefit obligation ...... 115,249 — — Other long-term liabilities ...... 283,240 2,849 2,314 424,878 193,951 139,906

Other long-term liabilities as at December 31, 2011 include payables of $282,738 to Duferco Group for SIF S.A. shares (Note 21(a)).

13 CHANGE IN NON-CONTROLLING INTERESTS IN COMPANIES OF LONG PRODUCT SEGMENT In June 2009, the Parent Company acquired through a public auction for $44,572 interests of between 32% and 100% in three companies of the long products segment. In accordance with the Russian legislation concerning pledges and pledge contracts terms, the auction was conducted by an independent organizer in order to discharge OJSC Maxi-Group subsidiaries’ pledge obligations under its loans taken prior to the date of acquisition. The auction’s starting price was determined by an independent appraiser. In July 2009, the Parent Company acquired an additional interest of 25% in one of the abovementioned companies of the long products segment and as a result increased its direct interest in this subsidiary to a controlling stake. As a result of these transactions between Group companies, there was an increase of non-controlling interest by $25,290 with a corresponding decrease in the additional paid-in capital. In May 2010, the Parent Company also acquired for $20,246 an interest of 100% in an additional company of the long products segment. As a result of this transaction between Group companies, there was an increase of non-controlling interest by $13,698 with a corresponding decrease in the additional paid-in capital. The above acquisitions were carried out for the purpose of more efficient management of the assets. In July 2009, a non-controlling shareholder of OJSC Maxi-Group initiated legal proceedings to contest the results of the public auction, for which a court has subsequently made a judgment to refuse the stated claims (Note 25(b)). In August 2011, the Moscow Arbitrage Court ruled to recognize OJSC Maxi-Group as bankrupt and appointed temporary management for six months. Management of the Group concluded that this bankruptcy procedure resulted in the loss of control of OJSC Maxi-Group and therefore deconsolidated this entity from the date of the court decision. Deconsolidation resulted in the derecognition of a non-controlling deficit of $149,194 related to OJSC Maxi-Group. Deconsolidation also resulted in the disposal of nominal share of 36% in OJSC NSMMZ, representing a non-controlling deficit of $33,165. The total result of the deconsolidation of OJSC Maxi-Group is a net loss of $26,830, included in ‘‘Gains / (losses) on investments, net’’ line in these consolidated financial statements.

14 STOCKHOLDERS’ EQUITY (a) Stock As at December 31, 2011, 2010 and 2009, the Parent Company’s share capital consisted of 5,993,227,240 issued common shares, with a par value of 1 Russian ruble each. For each common share held, the stockholder has the right to one vote at stockholders’ meetings.

F-47 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

14 STOCKHOLDERS’ EQUITY (Continued) (b) Dividends Dividends are paid on common stock at the recommendation of the Board of Directors and approval at a General Stockholders’ Meeting, subject to certain limitations as determined by Russian legislation. Profits available for distribution to stockholders in respect of any reporting period are determined by reference to the statutory financial statements of the Parent Company. As at December 31, 2011, 2010 and 2009, the retained earnings of the Parent Company, available for distribution in accordance with the legislative requirements of the Russian Federation, amounted to $9,104,566, $8,990,627 and $8,154,649, converted into US dollars using exchange rates at December 31, 2011, 2010 and 2009, respectively. The dividend policy provides for a minimum annual dividend payment of at least 20% of annual net income and sets an objective of reaching an average rate of dividend payments during the five-year cycle of at least 30% of net income, both determined in accordance with US GAAP. In September 2011, the Parent Company declared dividends for the six months ended June 30, 2011 of 1.4 Russian rubles per share for the total of $263,704 (at the historical rate). In June 2011, the Parent Company declared dividends for the year ended December 31, 2010 of 1.82 Russian rubles per share for the total of $378,687, including interim dividends for the six months ended June 30, 2010 of 0.62 Russian ruble per share for the total of $122,218 (at the historical rate). Dividends payable amounted to $2,061 at December 31, 2011 (Note 10). In September 2010, the Parent Company declared interim dividends for the six-month period ended June 30, 2010 of 0.62 Russian ruble per share for the total of $122,218 (at the historical rate). Dividends payable amounted to $2,102 at December 31, 2010 (Note 10). In June 2010, the Parent Company declared dividends for the year ended December 31, 2009 of 0.22 Russian rubles per share for the total of $42,679 (at the historical rate). In June 2009, the Parent Company declared dividends for the year ended December 31, 2008 of 2 Russian rubles per share for the total of $471,338 (at the historical rate), including interim dividends for the six months ended June 30, 2008 of 2 Russian rubles per share, declared in September 2008.

15 DISPOSALS OF ASSETS In June 2011, the Parent Company has completed the disposal of 100% of its interest in NTK LLC and its subsidiaries (hereinafter, NTK) to an entity under common control for a cash consideration of $325 million (as at the date of payment). An after-tax gain on this transaction of $207,639 was recognized by the Group and included within the ‘‘Disposal of assets to the entity under common control’’ line in the consolidated statements of stockholders’ equity and comprehensive income for the year ended December 31, 2011. The carrying amounts of the major classes of assets and liabilities of NTK as at the date of disposal are as follows:

F-48 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

15 DISPOSALS OF ASSETS (Continued) Information on NTK’s transactions up to the date of disposal is as follows:

Sales revenue ...... 243,685 Net income ...... 31,346

This transaction was carried out in line with the earlier announced strategy of the Group’s further development. In accordance with a resolution passed by the Board of Directors Strategic Planning Committee in April 2010, the interest in NTK was classified as a non-core asset. The Group continues using the transportation services provided by NTK after the disposal. Accordingly, operations of NTK in these consolidated financial statements are reflected within continuing operations of the Group within the steel segment.

16 EARNINGS PER SHARE

Year ended Year ended Year ended December 31, 2011 December 31, 2010 December 31, 2009 Weighted average number of shares ...... 5,993,227,240 5,993,227,240 5,993,227,240 Net income (thousands of US dollars) ...... 1,357,594 1,255,043 215,055 Basic and diluted net income per share (US dollars) ...... 0.2265 0.2094 0.0359

Basic net income per share of common stock is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the reporting period. The average shares outstanding for the purposes of basic and diluted earnings per share information was 5,993,227,240 for the years ended December 31, 2011, 2010 and 2009. The Parent Company does not have potentially dilutive shares outstanding.

17 INCOME TAX

For the year ended For the year ended For the year ended December 31, 2011 December 31, 2010 December 31, 2009 Current income tax expense ...... (375,391) (357,182) (147,341) Deferred income tax expense: origination and reversal of temporary differences ...... (45,643) (33,790) (34,443) Total income tax expense ...... (421,034) (390,972) (181,784)

The corporate income tax rate applicable to the Group is predominantly 20%. The income tax rate applicable to the majority of income of foreign subsidiaries ranges from 30% to 35%.

F-49 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

17 INCOME TAX (Continued) Income before income tax is reconciled to the income tax expense as follows:

For the year ended For the year ended For the year ended December 31, 2011 December 31, 2010 December 31, 2009 Income before income tax ...... 1,682,164 1,722,288 594,739 Income tax at applicable tax rate ...... (336,433) (344,458) (118,948) Change in income tax: —effect of different tax rates ...... 54,644 5,740 — —unrecognized tax loss carry forward for current year ...... (112,629) (32,797) (40,542) —other ...... (26,616) (19,457) (22,294) Total income tax expense ...... (421,034) (390,972) (181,784)

The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities are presented below:

As at As at As at December 31, 2011 December 31, 2010 December 31, 2009 Deferred tax assets Accounts payable and other liabilities ...... 70,420 75,044 75,296 Non-current liabilities ...... 2,172 43,841 33,940 Accounts receivable ...... 6,114 5,658 11,334 Net operating loss and credit carryforwards, including: ...... 561,567 194,957 171,183 —related to subsidiaries located in Russia (expiring in 2012-2020) ...... 74,878 57,995 45,950 —related to subsidiaries located in the USA (expiring in 2012-2029) ...... 138,705 136,962 125,233 —related to subsidiaries located in Europe (expiring in 2012-2029) ...... 1,308 — — —related to subsidiaries located in Europe (no expiration) ...... 346,676 — — Less: valuation allowance ...... (250,724) (54,078) (41,566) 389,549 265,422 250,187 Deferred tax liabilities Property, plant and equipment ...... (780,223) (537,245) (514,911) Intangible assets ...... (14,847) (23,501) (26,375) Inventories ...... (60,807) (39,994) (6,777) Other ...... (14,559) (7,550) (16,467) (870,436) (608,290) (564,530) Total deferred tax liability, net ...... (480,887) (342,868) (314,343)

The amount of net operating losses that can be utilized each year is limited under the Group’s different tax jurisdictions. The Group has established a valuation allowance against certain deferred tax assets. The Group regularly evaluates assumptions underlying its assessment of the realizability of its deferred tax assets and makes adjustments to the extent necessary. In assessing whether it is probable that future taxable profit will be available against which the Group can utilize the potential benefit of the tax loss carry-forwards, management considers the current situation and the future economic benefits outlined in specific business plans for each relevant subsidiary.

F-50 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

17 INCOME TAX (Continued) As of December 31, 2011, 2010 and 2009 the Group analyzed its tax positions for uncertainties affecting recognition and measurement thereof. Following the analysis, the Group believes that it is more likely than not that the majority of all deductible tax positions stated in the income tax return would be sustained upon the examination by the tax authorities.

18 CAPITAL LEASES

Capital leases Future minimum lease payments 2012 ...... 24,477 2013 ...... 21,795 2014 ...... 6,750 2015 ...... 3,001 2016 ...... 2,912 Remainder ...... 3,996 Total minimum lease payments ...... 62,931 Less: amount representing estimated executory costs (including taxes payable by the lessor) . . (637) Net lease payments ...... 62,294 Less: amount representing interest ...... (3,918) Present value of minimum lease payments ...... 58,376 Short-term capital lease liability, including advances given ...... 19,731 Less: advances given ...... (4,974) Short-term capital lease liability (Note 10) ...... 14,757 Long-term capital lease liability, including advances given ...... 38,645 Less: advances given ...... (12,256) Long-term capital lease liability (Note 12) ...... 26,389

The average capital lease contracts term is 6 years. The discount rate used for calculation of the present value of the minimum lease payments for assets received in 2011, 2010 and 2009 varied from 2.7% to 13.5%. Capital lease charges of $18,571, $36,773 and $23,179 were recorded for the years ended December 31, 2011, 2010 and 2009, respectively. At December 31, 2011, 2010 and 2009, net book value of the machinery, equipment and vehicles held under the capital lease arrangements was:

As at As at As at December 31, 2011 December 31, 2010 December 31, 2009 Machinery and equipment ...... 99,262 96,408 120,004 Vehicles ...... 26,635 275,997 208,200 125,897 372,405 328,204 Accumulated depreciation ...... (30,388) (69,661) (57,282) 95,509 302,744 270,922

F-51 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

19 NON-CASH TRANSACTIONS Approximately $24,800, $102,500 and $57,500 of the Group’s 2011, 2010 and 2009 revenues, respectively, were settled in the form of mutual offset against the liability to pay for goods supplied. Prices for goods sold and purchased through non-cash settlement arrangements are fixed in the respective contracts and generally reflect current market prices. In 2011, 2010 and 2009 the Group acquired equipment and vehicles under capital lease arrangements with the right to buy out leased assets upon completion of the underlying agreements. The amount of capital lease liabilities incurred during the years ended December 31, 2011, 2010 and 2009, were $18,430, $97,606 and $83,186, respectively.

20 FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The Group’s management believes that the carrying values of cash, trade and other receivables, trade and other payables, and short-term loans approximate to a reasonable estimate of their fair value due to their short-term maturities. The fair value of investments and notes receivable, excluding equity method investments, is defined using Level 2 inputs, which include interest rates for similar instruments in an active market. Fair values for these investments are determined based on discounted cash flows and approximate their book values. The fair value of long term debt is based on current borrowing rates available for financings with similar terms and maturities and approximates its book value. The fair values of trading and available-for-sale securities are based on quoted market prices for these or similar instruments.

21 BUSINESS COMBINATIONS (a) Acquisition of Steel Invest & Finance (Luxembourg) S.A. shares In July 2011, the Group exercised its call option to acquire the remaining 50% of SIF S.A. shares from Duferco Group. This acquisition is aimed to enhance the Group’s competitive strengths on the global market through the expansion of vertical integration of assets, optimization of a product portfolio and geographic diversification. The purchase price is $600 million. The first tranche of $150 million was paid on June 30, 2011. The remaining tranches are payable in arrears in three equal annual installments. Management has assessed fair value of the purchase consideration for 50% acquired as a result of business combination as $578 million. Management has assessed fair value of 50% shares in SIF S.A. held before the business combination as $289 million. Fair value was based on values of assets and liabilities of SIF S.A. determined by an independent appraiser. A gain of $104 million as a result of remeasuring to fair value the previously held equity interest was recognized and included in the line ‘‘Gains / (losses) on investments, net’’ in the consolidated statement of income. The total purchase consideration that includes fair value of purchase consideration for 50% acquired as a result of business combination and the fair value of the previously held interest amounted to $867 million. The Group also recognized deferred tax assets on SIF S.A. losses carried forward as of approximately $200 million as the result of this consolidation. Most of these losses are in jurisdictions where there is an indefinite carry-forward period. The management anticipates utilization of these losses starting from 2013 and believes these assets will be recovered in the future. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed in this business combination. The fair values of property, plant and equipment and intangible assets were

F-52 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

21 BUSINESS COMBINATIONS (Continued) based on estimates determined by an independent appraiser. Management has preliminarily determined that resulting goodwill primarily reflects the control premium paid for the acquisition and future synergies from using SIF S.A. assets for marketing Group metal products in Europe and USA.

Accounts receivable and advances given, net ...... 685,842 Inventories, net ...... 1,169,496 Other current assets ...... 139,680 Intangible assets ...... 11,597 Property, plant and equipment ...... 1,735,259 Deferred tax assets ...... 270,670 Other non-current assets ...... 787 Total assets acquired ...... 4,013,331 Accounts payable and other liabilities ...... (1,130,196) Other current liabilities ...... (860,231) Non-current liabilities ...... (1,065,347) Deferred income tax liability ...... (380,240) Total liabilities assumed ...... (3,436,014) Net assets acquired ...... 577,317 Purchase consideration ...... 867,028 Goodwill ...... 289,711

For the period from the date of acquisition to December 31, 2011 SIF S.A. has contributed to the Group revenue and net income of $1,503,903 and $(285,512), respectively. If the acquisition had occurred on January 1, 2011, the Group’s revenue and profit for the year ended December 31, 2011 would have been $13,014,855 and $1,407,592, respectively. If the acquisition had occurred on January 1, 2010, the Group’s revenue and profit for the year ended December 31, 2010 would have been $10,393,874 and $1,153,020, respectively.

(b) Other acquisitions In October 2010, the Group acquired a 100% stake in LLC VMI Recycling Group which owns scrap collection and processing assets located in the Moscow region, for a consideration of $28.4 million. This acquisition is in line with NLMK’s vertical integration strategy aimed at enhancing the Group’s self-sufficiency in main raw materials

22 SEGMENT INFORMATION Starting from July 2011 the Group changed the composition and the presentation of its reportable segments as a result of a change in the Group’s structure (Note 21(a)) and internal organization. Comparative financial information has been adjusted to conform to the presentation of current period amounts. The Group has four reportable business segments: steel, foreign rolled products, long products and mining. Results of the production of coke and coke-chemical products are now presented within the steel segment in these consolidated financial statements. These segments are combinations of subsidiaries, have separate management teams and offer different products and services. The above four segments meet the criteria for reportable segments. Subsidiaries are consolidated by the segment to which they belong based on their products and management. Revenue from segments that does not exceed the quantitative thresholds is primarily attributable to two operating segments of the Group. Those segments include insurance and other services. None of these

F-53 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

22 SEGMENT INFORMATION (Continued) segments has met any of the quantitative thresholds for determining a reportable segment. The investments in equity method investee and equity in net earnings / (losses) of associates are included in the steel segment (Note 5). The Group’s management determines intersegmental sales and transfers, as if the sales or transfers were to third parties. The Group’s management evaluates performance of the segments based on segment revenues, gross profit, operating income and income from continuing operations, net of income tax. Segmental information for the year ended December 31, 2011 is as follows:

Inter- segmental Foreign operations rolled Long and Steel products products Mining All other Totals balances Consolidated Revenue from external customers . . 8,042,717 2,381,534 1,154,202 148,858 1,245 11,728,556 — 11,728,556 Intersegment revenue ...... 985,008 3,182 640,140 1,290,944 — 2,919,274 (2,919,274) — Depreciation and amortization . . . (332,530) (119,432) (89,063) (47,625) (57) (588,707) — (588,707) Gross profit / (loss) ...... 2,186,262 (60,531) 208,426 1,075,097 576 3,409,830 (50,224) 3,359,606 Operating income / (loss) ...... 1,075,282 (305,210) (54,714) 991,854 (851) 1,706,361 (40,682) 1,665,679 Interest income ...... 280,318 2,630 2,815 8,248 1,141 295,152 (265,621) 29,531 Interest expense ...... (8,888) (51,942) (204,791) — — (265,621) 265,621 — Income tax ...... (245,235) 15,411 8,231 (210,795) (292) (432,680) 11,646 (421,034) Income / (loss), net of income tax . 1,159,764 (326,688) (317,333) 840,543 1,902 1,358,188 (97,058) 1,261,130 Segment assets, including goodwill . 13,060,968 4,225,510 2,471,958 1,870,993 45,774 21,675,203 (4,418,027) 17,257,176 Capital expenditures ...... (1,330,181) (103,642) (390,615) (219,940) (3,474) (2,047,852) — (2,047,852)

Segmental information for the year ended December 31, 2010 is as follows:

Inter- segmental Foreign operations rolled Long and Steel products products Mining All other Totals balances Consolidated Revenue from external customers . . 6,703,172 700,251 864,786 81,364 1,175 8,350,748 — 8,350,748 Intersegment revenue ...... 350,562 — 512,208 831,257 16 1,694,043 (1,694,043) — Depreciation and amortization .... (306,409) (31,579) (74,299) (57,059) (72) (469,418) — (469,418) Gross profit ...... 2,146,308 7,901 208,659 603,732 284 2,966,884 (18,790) 2,948,094 Operating income / (loss) ...... 1,316,822 (30,972) (27,811) 544,544 (914) 1,801,669 (7,079) 1,794,590 Interest income ...... 286,672 63 3,240 82 1,310 291,367 (246,296) 45,071 Interest expense ...... (15,604) (20,845) (225,712) — — (262,161) 246,296 (15,865) Income tax ...... (307,360) 3,633 17,640 (107,479) (407) (393,973) 3,001 (390,972) Income / (loss), net of income tax .. 1,466,372 (49,688) (244,897) 428,173 1,571 1,601,531 (270,215) 1,331,316 Segment assets, including goodwill . 12,814,485 652,647 2,276,364 1,195,472 43,092 16,982,060 (3,083,035) 13,899,025 Capital expenditures ...... (1,063,784) (15,291) (254,428) (126,241) (3,465) (1,463,209) — (1,463,209)

F-54 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

22 SEGMENT INFORMATION (Continued) Segmental information for the year ended December 31, 2009 is as follows:

Inter- segmental Foreign operations rolled Long and Steel products products Mining All other Totals balances Consolidated Revenue from external customers . . 5,066,531 410,619 572,476 84,997 5,272 6,139,895 — 6,139,895 Intersegment revenue ...... 190,385 — 309,984 430,457 41 930,867 (930,867) — Depreciation and amortization .... (287,548) (36,033) (72,504) (81,232) (800) (478,117) — (478,117) Gross profit / (loss) ...... 1,715,569 (31,184) 51,844 216,904 2,330 1,955,463 34,070 1,989,533 Operating income / (loss) ...... 898,769 (64,632) (141,753) 159,780 1,410 853,574 38,347 891,921 Interest income ...... 198,413 — 2,797 11,802 1,196 214,208 (154,475) 59,733 Interest expense ...... (87,017) (19,276) (226,598) (33) (4) (332,928) 162,023 (170,905) Income tax ...... (183,275) 13,028 21,612 (27,346) (806) (176,787) (4,997) (181,784) Income / (loss), net of income tax .. 1,240,577 (90,958) (400,638) 140,376 2,454 891,811 (478,856) 412,955 Segment assets, including goodwill . 10,897,199 610,226 2,104,795 1,000,955 41,729 14,654,904 (2,152,960) 12,501,944 Capital expenditures ...... (840,968) (19,213) (180,828) (79,718) (50) (1,120,777) — (1,120,777)

The allocation of total revenue by territory is based on the location of end customers who purchased the Group’s products. The Group’s total revenue from external customers by geographical area for the years ended December 31, 2011, 2010 and 2009, is as follows:

For the year ended For the year ended For the year ended December 31, 2011 December 31, 2010 December 31, 2009 Russia ...... 4,462,871 3,434,379 2,280,492 European Union ...... 2,771,159 1,802,638 847,098 Middle East, including Turkey ...... 1,238,150 1,162,157 1,301,566 North America ...... 1,189,609 797,183 300,536 Asia and Oceania ...... 997,546 698,167 1,225,460 Other regions ...... 1,069,221 456,224 184,743 11,728,556 8,350,748 6,139,895

Geographically, all significant assets, production and administrative facilities of the Group are substantially located in Russia, USA and Europe.

23 RISKS AND UNCERTAINTIES (a) Operating environment of the Group The Russian Federation’s economy continues to display some characteristics of an emerging market. These characteristics include, but are not limited to, the existence of a currency that in practice is not freely convertible in most countries outside the Russian Federation and relatively high inflation. The international sovereign debt crisis, stock market volatility and other risks could have a negative effect on the Russian financial and corporate sectors. Management considered impairment provisions by taking into account the economic situation and outlook at the end of the reporting period. The future economic direction of the Russian Federation is largely dependent upon the effectiveness of economic, financial and monetary measures undertaken by the Government, together with tax, legal, regulatory, and political developments. Management believes it is taking all the necessary measures to support the sustainability and growth of the Group’s business. The major financial risks inherent to the Group’s operations are those related to market risk, credit risk and liquidity risk. The objectives of the financial risk management function are to establish risk limits, and then ensure that exposure to risks stays within these limits. The operational and legal risk management

F-55 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

23 RISKS AND UNCERTAINTIES (Continued) functions are intended to ensure proper functioning of internal policies and procedures, in order to minimize operational and legal risks.

(b) Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise three types of risk: currency risk, interest rate risk and commodity price risk.

US dollar Euro Other currencies Cash and cash equivalents ...... 336,674 228,326 4,040 Accounts receivable and advances given ...... 243,954 623,215 20,637 Investments ...... — 1,478 7,786 Accounts payable and other liabilities ...... (600,120) (437,141) (1,501) Short-term borrowings ...... (454,330) (359,228) — Long-term borrowings ...... (275,094) (1,522,871) —

Commodity price risk Commodity price risk is a risk arising from possible changes in price of raw materials and metal products, and their impact on the Group’s future performance and the Group’s operational results. The Group minimizes its risks, related to production distribution, by having a wide range of geographical zones for sales, which allows the Group to respond quickly to changes in the situation on one or more sales markets on the basis of an analysis of the existing and prospective markets. One of the commodity price risk management instruments is vertical integration. A high degree of vertical integration allows cost control and effective management of the entire process of production: from mining of raw materials and generation of electric and heat energy to production, processing and distribution of metal products.

F-56 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

23 RISKS AND UNCERTAINTIES (Continued) (c) Credit risk Credit risk is the risk when counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and control relating to customer credit risk management. The Group structures the levels of credit risk it undertakes by assessing the degree of risk for each counterparty or groups of parties. Such risks are monitored on a revolving basis and are subject to a quarterly, or more frequent, review. The Group’s management reviews ageing analysis of outstanding trade receivables and follows up on past due balances.

(e) Insurance To minimize its risks the Group has voluntary insurance contracts to insure property, plant and equipment, land transport and aircraft as well as certain type of cargo and purchased accident and health insurance, and medical insurance for employees, and directors and officers liability insurance (D&O). The Group also purchases operating entities civil liability coverage for dangerous production units.

24 RELATED PARTY TRANSACTIONS Related parties relationships are determined with reference to ASC No. 850. Balances as at December 31, 2011, 2010 and 2009 and transactions for the years ended December 31, 2011, 2010 and 2009 with related parties of the Group consist of the following:

(a) Sales to and purchases from related parties Sales Sales to an associate (SIF S.A.) and one of its subsidiaries were $726,627, $777,573 and $483,546 for the years ended December 31, 2011, 2010 and 2009, respectively. Sales to other related parties were $12,807, $13,558 and $6,802 for the years ended December 31, 2010, 2009 and 2008, respectively. Related accounts receivable from associate (SIF S.A.) and its subsidiary equaled $215,649 and $145,243 as at December 31, 2010 and 2009, respectively. Accounts receivable from other related parties equaled $45,978, $5,559 and $690 as at December 31, 2011, 2010 and 2009, respectively.

Purchases Purchases from the subsidiary of an associate (SIF S.A.) were $978 and $1,825 for the years ended December 31, 2011 and 2010, respectively. There were no such purchases for the year ended December 31,

F-57 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

24 RELATED PARTY TRANSACTIONS (Continued) 2009. Purchases from companies under common control, were $422,615, $37,399 and $6,683 for the years ended December 31, 2011, 2010 and 2009, respectively. Accounts payable to the subsidiary of an associate (SIF S.A.) were $7,500 and nil as at December 31, 2010 and 2009, respectively. Accounts payable to the related parties were $3,453, $72,072 and $117 as at December 31, 2011, 2010 and 2009, respectively.

(b) Financial transactions The carrying amount of loans to an associate (SIF S.A.), including interest accrued, is $515,264 and $589,542 as at December 31, 2010 and 2009, respectively. As at December 31, 2010 and 2009, the Group issued guarantees for SIF S.A. and its subsidiaries amounting to $217,496 and $201,942, respectively. These guarantees are mostly issued in favor of banks. Deposits and current accounts of the Group companies in banks under significant influence of the Group’s controlling shareholder (OJSC Bank ZENIT and OJSC Lipetskcombank) amounted to $56,395, $94,147 and $108,722 as at December 31, 2011, 2010 and 2009, respectively. Related interest income from these deposits and current accounts for the years ended December 31, 2011, 2010 and 2009 amounted to $873, $1,463 and $1,899, respectively. During the year ended December 31, 2010, a company under significant influence of the Group’s controlling shareholder (OJSC Bank ZENIT) purchased bonds issued by the Parent Company of $11,731 (as at the date of issue).

(c) Common control transfers and disposal of investments In June 2011, the Parent Company has completed disposal of 100% of its interest in NTK to an entity under common control for a cash consideration of $325 million (as at the date of payment) (Note 15).

(d) Contributions to non-governmental pension fund and charity fund Total contributions to a non-governmental pension fund and charity fund amounted to nil, $3,538 and $3,349 in 2011, 2010 and 2009, respectively. The Group has no long-term commitments to provide funding, guarantees, or other support to the abovementioned funds.

25 COMMITMENTS AND CONTINGENCIES (a) Anti-dumping investigations The Group’s export trading activities are subject to from time to time compliance reviews of importers’ regulatory authorities. The Group’s export sales were considered within several anti-dumping investigation frameworks. The Group takes steps to address negative effects of the current and potential anti-dumping investigations and participates in the settlement efforts coordinated through the Russian authorities. No provision arising from any possible agreements as a result of anti-dumping investigations has been made in the accompanying consolidated financial statements.

F-58 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

25 COMMITMENTS AND CONTINGENCIES (Continued) through which NLMK acquired shares in companies, controlled by Maxi-Group (Note 13). Subsequently in November 2009, a Russian court of the first instance adjudicated against the claim from Maxi-Group’s non-controlling shareholder and an appellate court upheld this decision. Accordingly, no accruals in relation to this claim were made in these consolidated financial statements. In January 2010, the Parent Company received a claim from the non-controlling shareholder of OJSC Maxi-Group filed with the International Commercial Arbitration Court at the Russian Federation Chamber of Commerce and Industry (hereinafter, ICA Court) to enforce the additional payment by the Parent Company for the shares of OJSC Maxi-Group in accordance with the binding agreement. This claim is based on the non-controlling shareholder’s interpretation of the binding agreement. In February 2010, as a result of due diligence of Maxi-Group entities, the Parent Company filed a counter-claim to ICA Court seeking collection from the non-controlling shareholder of OJSC Maxi-Group of excessively paid amounts for the acquired shares. In March 2011, the ICA Court partially (in the amount of about $297 million, at the exchange rate as of December 31, 2011) satisfied the claims of Maxi-Group’s non-controlling shareholder against the Parent Company. After this decision the non-controlling shareholder initiated court cases in certain European courts to enforce payment of this claim. In April 2011, the Group’s management initiated proceedings to challenge the resolution of the ICA Court, sending an application to the Arbitration Court of Moscow (the court of the first instance). In June 2011, the Arbitration Court of Moscow cancelled the respective resolution of the ICA Court. In August 2011, the Federal Arbitration Court of the Moscow Circuit initiated proceedings regarding cassation appeal filed by the non-controlling shareholder of OJSC Maxi-Group on revocation of the ICA Court decision. In September 2011, Federal Arbitrage Court of Moscow region adjudicated not to change the June decision of the Arbitration Court of Moscow. In November 2011, the Supreme Commercial Court of the Russian Federation registered a claim from the non-controlling shareholder of OJSC Maxi-Group for a supervisory review of the judicial acts of the corresponding courts. In January 2012, the Board of the Supreme Commercial Court adjudicated to refuse for a supervisory review. Accordingly, no accruals in relation to this claim were made in these consolidated financial statements. In March 2009, NLMK and DBO Holdings Inc. signed a settlement agreement with respect to their dispute concerning NLMK’s abandoned acquisition of John Maneely Company, which provided for the full mutual release and discharge by the parties arising from the potential transaction and payment to DBO Holdings Inc. an amount of $234 million. This amount was fully paid to DBO Holdings Inc. in March 2009.

(c) Environmental matters The enforcement of environmental regulation in the Russian Federation is evolving and the enforcement posture of government authorities is continually being reconsidered. The Group periodically evaluates its obligations under environmental regulations. As obligations are determined, they are recognized immediately. Potential liabilities, which might arise as a result of changes in existing regulations, civil litigation or legislation, cannot be reasonably estimated. In the current enforcement climate under existing legislation, management believes that the Group has met the Government’s federal and regional requirements concerning environmental matters, therefore there are no significant liabilities for environmental damage or remediation.

(d) Capital commitments Management estimates the outstanding agreements in connection with equipment supply and construction works amounted to $1,396,561, $1,973,043 and $1,678,660 as at December 31, 2011, 2010 and 2009, respectively.

F-59 OJSC Novolipetsk Steel Notes to the consolidated financial statements as at and for the years ended December 31, 2011, 2010 and 2009 (Continued) (thousands of US dollars)

25 COMMITMENTS AND CONTINGENCIES (Continued) (e) Social commitments The Group makes contributions to mandatory and voluntary social programs. The Group’s social assets, as well as local social programs, benefit the community at large and are not normally restricted to the Group’s employees. The Group has transferred certain social operations and assets to local authorities, however, management expects that the Group will continue to fund certain social programs through the foreseeable future. These costs are recorded in the period they are incurred.

(f) Tax contingencies Russian tax, currency and customs legislation is subject to varying interpretations and changes, which can occur frequently. Management’s interpretation of such legislation as applied to the transactions and activity of the Group may be challenged by the relevant regional and federal authorities. Recent events within the Russian Federation suggest that the tax authorities may be taking a more assertive position in their interpretation of the legislation and assessments, and it is possible that transactions and activities, including certain operation of intercompany financing of Russian subsidiaries within the Group, that have not been challenged in the past may be challenged. As a result, significant additional taxes, penalties and interest may be assessed, and certain expenses used for profit tax calculation may be excluded from tax returns. Fiscal periods remain open to review by the authorities in respect of taxes for three calendar years preceding the year of review. Under certain circumstances reviews may cover longer periods. Russian transfer pricing legislation enacted during the current period is effective prospectively to new transactions from January 1, 2012. It introduces significant reporting and documentation requirements. As at December 31, 2011, management believes that its interpretation of the relevant legislation is appropriate and the Group’s tax, currency and customs positions will be sustained. Where management believes it is probable that a position cannot be sustained, an appropriate amount has been accrued for in these consolidated financial statements.

(g) Financial guarantees issued As at December 31, 2011, 2010 and 2009, the Group has issued guarantees amounting to nil, $218,553 and $214,148, respectively, which equals to their maximum potential amount of future payments. Most of these guarantees were issued for related parties (Note 24(b)). No amount has been accrued in these consolidated financial statements for the Group’s obligation under these guarantees as the projected outflows from such guarantees are immaterial.

26 SUBSEQUENT EVENTS The Group’s management has performed an evaluation of subsequent events through the period from January 1, 2012 to March 24, 2012, which is the date when these consolidated financial statements were available to be issued.

F-60 REGISTERED OFFICE OF THE BORROWER OJSC Novolipetsk Steel Pl. Metallurgov 2, Lipetsk 398040 Russian Federation

REGISTERED OFFICE OF THE ISSUER Steel Funding Limited 5 Harbourmaster Place IFSC Dublin 1 Ireland

JOINT LEAD MANAGERS Deutsche Bank AG, London Branch J.P. Morgan Securities plc Société Générale Winchester House 25 Bank Street 29, boulevard Haussmann 1 Great Winchester Street Canary Wharf 75009 Paris London EC2N 2DB London E14 5JP France United Kingdom United Kingdom

LEGAL ADVISERS TO THE BORROWER As to English and U.S. law: As to Russian law: Debevoise & Plimpton LLP Debevoise & Plimpton LLP Tower 42 Business Center Mokhovaya Old Broad Street Ulitsa Vozdvizhenka, 4/7 London EC2N 1HQ Stroyeniye 2 United Kingdom Moscow, 125009 Russian Federation

LEGAL ADVISERS TO THE JOINT LEAD MANAGERS AND THE TRUSTEE As to English and U.S. law: As to Russian law: Linklaters LLP Linklaters CIS One Silk Street Paveletskaya Square 2/2 London EC2Y 8HQ Moscow, 115054 United Kingdom Russian Federation LEGAL ADVISER TO THE ISSUER As to Irish law: Arthur Cox Earlsfort Centre Earlsfort Terrace Dublin 2 Ireland

AUDITORS TO THE BORROWER ZAO PricewaterhouseCoopers Audit White Square Office Center 10 Butyrsky Val Moscow, 125047 Russian Federation

PRINCIPAL PAYING AGENT TRUSTEE AND TRANSFER AGENT Deutsche Trustee Company Limited Deutsche Bank AG, London Branch Winchester House Winchester House 1 Great Winchester Street 1 Great Winchester Street London EC2N 2DB London EC2N 2DB United Kingdom United Kingdom

U.S. PAYING AGENT, RULE 144A REGISTRAR AND TRANSFER AGENT REGULATION S REGISTRAR Deutsche Bank Trust Company Americas Deutsche Bank Luxembourg S.A. 60 Wall Street 2, Boulevard Konrad Adenaur, New York, NY 10005 L-1115 Luxembourg United States of America

LISTING AGENT Arthur Cox Listing Services Limited Earlsfort Centre Earlsfort Terrace Dublin 2 Ireland