Annual Repor T

Metinvest_AR09_Cover_AW.indd 1

www.metinvestholding.com ’s-Gravenhage, TheNetherlands Alexanderstraat 23,2514JM Metinvest B.V.

08 eport R nnual A INVESTING

DEVELOPING 08

GROWING

ANNUAL REPORT

Additional Information Financial Statements and Notes Management and Governance Business Review Overview 03 57 55 51 ADDITIONAL INFORMATION 49 48 47 46 AND NOTES FINANCIAL STATEMENTS 42 40 38 and GOVERNANCE MANAGEMENT 24 23 20 14 BUSINESS REVIEW 10 08 06 04 02 01 OVERVIEW

Explanatory Notes 32 28 24 Sales Offices andLocations Principal SubsidiariesofMetinvestB.V. Glossary Abbreviated StatementofCashFlows Abbreviated IncomeStatement Abbreviated BalanceSheet Auditors’ Report Corporate SocialResponsibility Executive Committee Corporate Governance Divisional Review Group Structure andOverview Consolidated FinancialReview Corporate Strategy General Director’s Review Chairman’s Statement Market Review At aGlance Highlights Key FinancialandOperatingFigures Company HistoryandTimeline

Steel &RolledProducts Division Coke &CoalDivision Iron Ore Division

minority stake(25%)withablockinginterest. owninga with JSCSmartHolding(SMART) JSC SystemCapitalManagement(SCM)(75%), Metinvest B.V. ismajority-ownedby in more than75countriesaround theworld. The Group’s products are marketedandsold society asawhole. towards theenvironment, ourpeople,localcommunitiesand efficiency, whilstdemonstratingaproactive and responsible approach anticipate ourclients’needs.We aspire toworld-classstandards of producing highquality, value-addedproducts whichsatisfyand We metal andmininggroup aimtobuildawell-balancedinternational Vision on ourcommitments. at thesametimedemonstratingfinancialstability anddelivering the highestlevelsoftransparency toallofourstakeholders,while Our InvestorsandPartners.We aspire tocommunicatewith with theopportunitiestheyneedtodeveloptheirprofessional careers. conditions thatwillensure safety andprovide theGroup’s employees Our Employees.We aimtoprovide thebestpossibleworking global markets. existing clientsandtodeveloprelationships withnewonesinkey at competitiveprices,tofurtherstrengthen ourrelationships with Our Clients.We strivetoensure thehighestqualityproducts Values positions worldwide. well‑balanced metalandminingcompany, achievingleading Metinvest’s strategicgoalistocreate a highlyefficient and Strategy sectors locatedinUkraine,Europe andtheUSA. 26 companieswithintheminingandsteel East, andNorthAfrica.TheGroup comprises key sales markets of Europe, the CIS, the Middle geographic locationandcloseproximity tothe pipes. Metinvestbenefitsfrom afavourable products, coke,aswellrolled products and iron ore, themanufacturingofsteelandiron ore is primarilyinvolvedintheminingofcoaland producers ofsteelintheworld.TheCompany Netherlands, andoneofthelowestcost and mining company headquartered in the verticallyintegratedmetal international, METINVEST GROUP(Metinvest)isan

AnnualReport2008

21/8/09 15:54:12 Metinvest_AR09_Cover_AW.indd 1

www.metinvestholding.com ’s-Gravenhage, TheNetherlands Alexanderstraat 23,2514JM Metinvest B.V.

08 eport R nnual A INVESTING

DEVELOPING 08

GROWING

ANNUAL REPORT

Steel &RolledProducts Division Coke &CoalDivision Iron Ore Division

society asawhole. towards theenvironment, ourpeople,localcommunitiesand efficiency, whilstdemonstratingaproactive and responsible approach anticipate ourclients’needs.We aspire toworld-classstandards of producing highquality, value-addedproducts whichsatisfyand We metal andmininggroup aimtobuildawell-balancedinternational Vision on ourcommitments. at thesametimedemonstratingfinancialstability anddelivering the highestlevelsoftransparency toallofourstakeholders,while Our InvestorsandPartners.We aspire tocommunicatewith with theopportunitiestheyneedtodeveloptheirprofessional careers. conditions thatwillensure safety andprovide theGroup’s employees Our Employees.We aimtoprovide thebestpossibleworking global markets. existing clientsandtodeveloprelationships withnewonesinkey at competitiveprices,tofurtherstrengthen ourrelationships with Our Clients.We strivetoensure thehighestqualityproducts Values positions worldwide. well‑balanced metalandminingcompany, achievingleading Metinvest’s strategicgoalistocreate a highlyefficient and Strategy minority stake(25%)withablockinginterest. owninga with JSCSmartHolding(SMART) JSC SystemCapitalManagement(SCM)(75%), Metinvest B.V. ismajority-ownedby in more than75countriesaround theworld. The Group’s products are marketedandsold sectors locatedinUkraine,Europe andtheUSA. 26 companieswithintheminingandsteel East, andNorthAfrica.TheGroup comprises key sales markets of Europe, the CIS, the Middle geographic locationandcloseproximity tothe pipes. Metinvestbenefitsfrom afavourable products, coke,aswellrolled products and iron ore, themanufacturingofsteelandiron ore is primarilyinvolvedintheminingofcoaland producers ofsteelintheworld.TheCompany Netherlands, andoneofthelowestcost and mining company headquartered in the verticallyintegratedmetal international, METINVEST GROUP(Metinvest)isan

AnnualReport2008

21/8/09 15:54:12 Metinvest_AR09_Cover_AW.indd 2 Overview 01 Company history and timeline • • • • • 2007 • • • • 2006 World SteelAssociation). Iron andSteelInstitute(IISI, currently calledthe Becomes amemberoftheInternational and twoIndependentDirectors Forms SupervisoryBoard with fourcommittees with Metinvest tomergeitsminingandsteelassets SMART Reaches anagreement inprincipalwith S.A. as MetinvestInternational Renames LemanCommoditiesS.A.(Geneva) LLC toeachcompanyaccordingly wholesale andretail assetsofLemanUkraine in UkraineandtheCIS,transfers restructuring ofitssalesdistributionchannels Metinvest SMCLLC,asaresult ofthe Establishes MetinvestUkraineLLCand needs existing debt,aswellforworkingcapital Ukrainian company, whichisusedtorefinance term facility, thelargesteverbyaprivate Signs aUS$1.5billionsyndicatedpre-export Issues IFRSauditedaccountsfor2005/2006. Works a 27%stakeinJSCYenakiieve Metallurgical retail metaltradingcompany, andanadditional a leadingUkrainianwholesaleand Acquires a100%stakeinLemanUkraineLLC, businesses ofSCM management ofthemetalandmining Metinvest isestablishedtoprovide strategic • • • • • • • • • • 2008 Receives ACCAaccreditation. Standards System basedonthe18001:1999OHSAS Implements anIndustrialSafetyManagement on theJORC methodology of CGOK,SevGOK,andInGOKreserves based Completes anauditbySRKConsultingUKLtd of thetop-10taxpayersin Ukraine SevGOK andInGOKare includedinthelist Siemens VAI Signs apartnershipagreement with Credit SuissefortheacquisitionofTrametal Paribas, RoyalBankofScotland,INGand Obtains aUS$1.189millioninloansfrom BNP Steel Works casting machineatJSCAzovstalIron & Begins operatinganewslabcontinuous (Ukraine) Acquires a51%stakeinInkor&CoLLC Kingdom) from theMalacalzafamily and itssubsidiarySpartanUKLtd(United Acquires a100%stakeinTrametal S.p.A.(Italy) producer ofiron ore materialsintheworld Metinvest isrankedastheseventhlargest

AnnualReport2008

Explanator * EBITDAwasadjustedbynon-cashlossesfrom assetimpairmentanddevaluation. Headcount Metallurgical coke Coking coal Pellets Merchant iron ore concentrate Finished products Crude steel Production, milliontonnes Adjusted EBITDAmargin,% Adjusted consolidatedEBITDA*,US$million Consolidated revenue, US$million Key financialandoperating figures Alexanderstraat 23,2514JM, The Hague. The completefinancialstatements togetherwiththeauditor’s report are availableon request at by theIFRS. statements asofandfortheyearended31 December2008,whichincludealldisclosures required abbreviated financialstatementsshouldbe read inconjunctionwiththeMetinvest’s audited financial For abetterunderstandingofMetinvest’s financialpositionandthe results ofoperations,these off tothenearest millionexceptwhere otherwiseindicated. These abbreviated financialstatementsare presented inmillionsofUSdollarsandallvaluesare rounded financial statements. as adoptedbyEuropean Union.Theauditorissuedanunqualifiedopiniononthecomplete Metinvest B.V., asofandfortheyearended31December2008,prepared inaccordance withIFRS, The abbreviated financialstatementshavebeenderivedfrom theauditedfinancialstatementsof in theUkraine,aswellmanyotherrisksspecifically related toMetinvestanditsoperations. others, generaleconomicconditions,ourcompetitiveenvironment, risksassociatedwithoperating materially from thosecontained insuchprojections orforward-looking statements, including,among and actualeventsorresults maydiffer materially. Manyfactorscould causetheactualresults todiffer or “might”,thenegativeofsuchtermsothersimilarexpressions. Thesestatementsare onlypredictions statements bytermssuchas“expect”,“believe”,“anticipate”,“estimate”,“intend”,“will”,“could”,“may” regarding future eventsorthefuture financialperformanceofMetinvest. You canidentifyforward-looking Some oftheinformationinthisreport maycontainprojections orotherforward-looking statements

AnnualReport2008 y notes

31December2008 Y ear ended 89,000 13,213 35.4% 4,681 11.4 18.7 5.2 6.2 9.2 8.2 31 December2007 Y ear ended

99,000

30.8% 2,286 7,425 13.3 18.9 5.2 5.7 9.5 9.2

02 Key Figures

Overview Designed andproduced by85FOUR. Metinvest Trametal Europe SPRL Metinvest Trametal DeutschlandGmbH Metinvest Trametal DeutschlandGmbH Spartan UKLtd. Metinvest Trametal S.p.A. METINVEST TRAMETAL S.p.A. Name (fulllegalname) Sales officesandlocations AnnualReport2008 Rue ColonelBourg105,B–1030Bruxelles Vertriebsbüro Nord, Almastrasse10,D,D–45130Essen Carl-von-Linde Str. 40,D–85716Unterschleißheim/München Ropery Road,Teams, Gateshead,Tyne &Wear NE82RD,UK XIIOttobreVia 3, Piano cap16121Genova,Italy Fax: Tel: Fax: Tel: Fax: Tel: Fax: Tel: Fax: Tel: Registered office +32 27264779 +32 27265371 +49 (0)20117789797 +49 (0)2011778970 +49 (0)8930907979 +49 (0)8930907910 +44 (0)1914600567 +44 (0)1914604245 +39 0105762990 +39 0105762911 continued

21/8/09 15:54:12 59

Additional Information Metinvest_AR09_Cover_AW.indd 2 Overview 01 Company history and timeline • • • • • 2007 • • • • 2006 World SteelAssociation). Iron andSteelInstitute(IISI, currently calledthe Becomes amemberoftheInternational and twoIndependentDirectors Forms SupervisoryBoard with fourcommittees with Metinvest tomergeitsminingandsteelassets SMART Reaches anagreement inprincipalwith S.A. as MetinvestInternational Renames LemanCommoditiesS.A.(Geneva) LLC toeachcompanyaccordingly wholesale andretail assetsofLemanUkraine in UkraineandtheCIS,transfers restructuring ofitssalesdistributionchannels Metinvest SMCLLC,asaresult ofthe Establishes MetinvestUkraineLLCand needs existing debt,aswellforworkingcapital Ukrainian company, whichisusedtorefinance term facility, thelargesteverbyaprivate Signs aUS$1.5billionsyndicatedpre-export Issues IFRSauditedaccountsfor2005/2006. Works a 27%stakeinJSCYenakiieve Metallurgical retail metaltradingcompany, andanadditional a leadingUkrainianwholesaleand Acquires a100%stakeinLemanUkraineLLC, businesses ofSCM management ofthemetalandmining Metinvest isestablishedtoprovide strategic • • • • • • • • • • 2008 Receives ACCAaccreditation. Standards System basedonthe18001:1999OHSAS Implements anIndustrialSafetyManagement on theJORC methodology of CGOK,SevGOK,andInGOKreserves based Completes anauditbySRKConsultingUKLtd of thetop-10taxpayersin Ukraine SevGOK andInGOKare includedinthelist Siemens VAI Signs apartnershipagreement with Credit SuissefortheacquisitionofTrametal Paribas, RoyalBankofScotland,INGand Obtains aUS$1.189millioninloansfrom BNP Steel Works casting machineatJSCAzovstalIron & Begins operatinganewslabcontinuous (Ukraine) Acquires a51%stakeinInkor&CoLLC Kingdom) from theMalacalzafamily and itssubsidiarySpartanUKLtd(United Acquires a100%stakeinTrametal S.p.A.(Italy) producer ofiron ore materialsintheworld Metinvest isrankedastheseventhlargest

AnnualReport2008

AnnualReport2008 y notes

31December2008 Y ear ended 89,000 13,213 35.4% 4,681 11.4 18.7 5.2 6.2 9.2 8.2 31 December2007 Y ear ended

99,000

30.8% 2,286 7,425 13.3 18.9 5.2 5.7 9.5 9.2

02 Key Figures

21/8/09 15:54:12 59

Additional Information AnnualReport 2008 MARKET REVIEW * EBITDAwasadjustedbynon-cashlossesfrom assetimpairmentanddevaluation. Debt US$ Net ProfitUS$ Consolidated revenueUS$ 12,000 15,000 1,200 1,800 2,400 3,000 1,200 1,800 2,400 3,000 3,000 6,000 9,000 600 600 0 0 0 n n

Net debt Total debt 1,578 m 06

2006 813 2006 5,271 2006 1,354

2,952 m

2007 1,321 2007 7,425 IRON ORE 2007 1,818

2,685

2008 2,803 2008 13,213 2008 2,024 D 24 IVISION m Net operating cashflowUS$ Consolidated eBITDA*US$ DIVISION COKE &Coal Revenue bydivisionUS$ 10.0% Coke &Coal 1,000 2,000 3,000 4,000 5,000 1,200 1,800 2,400 3,000 600 0 0 19.9% Iron Ore

28 2006 1,468 2006 472 70.1% Products Steel &Rolled

2007 2,286 DIVISION PRODUCTS STEEL &ROLLE D 2007 1,125

m 2008 4,681 2008 2,856 m 32 m

03 Highlights

Overview Overview 04 At a glance STEEL &ROLLEDPRODUCTSDIVISION COKE &COALDIVISION IRON OREDIVISION and closeproximity tokeyEuropean markets. located withina540kmradiusofeachother, of theCompany’s core production assetsbeing cost production, low transportation costs by virtue with anumberofadvantages.Theseincludelow- of theCompany’s keyassets provide Metinvest operations.Thegeographiclocations international quality products throughout its vertically integrated, A DIVERSIFIEANHIGQUALITYPROUCTPORTFOLIO Metinvest SEMI-FINISHED PRODUCTS PROCESSING &DRESSING TRADING &DISTRIBUTION CHEMICAL PRODUCTION PIG IRONPRODUCTION FINISHED PRODUCTS COKE PROCESSING IRON OREMINING END PRODUCTS COAL MINING IRON ORE produces awiderangeofhigh > > > > > > > > > > > > > > > > products chemical Range of and cokebreeze coke, nutcoke Blast furnace and concentrate Coking coal Pellets Iron ore Metal products merchant bars Channels and Rails Rebars Wire-rods SAW pipes Hot-rolled coils Hot-rolled plates Slabs andbillets Pig iron concentrate Merchant JSC CentralMiningandProcessingWorks JSC SeverniyMiningandProcessingWorks JSC InguletsMiningandProcessingWorks JSC CentralMiningandProcessingWorks JSC SeverniyMiningandProcessingWorks JSC InguletsMiningandProcessingWorks JSC CentralMiningandProcessingWorks JSC SeverniyMiningandProcessingWorks Inkor &CoLLC JSC AzovstalIron&SteelWorks JSC AvdiivkaCoke&ChemicalWorks JSC AzovstalIron&SteelWorks JSC AvdiivkaCoke&ChemicalWorks United CoalCompanyLLC JSC KrasnodonvugilliaCoalMiningCompany Metinvest SMCLLC Metinvest UkraineLLC Metinvest EurasiaLLC Metinvest InternationalS.A. JSC AzovstalIron&SteelWorks JSC YenakiieveMetallurgicalWorks JSC AzovstalIron&SteelWorks JSC YenakiieveMetallurgicalWorks JSC YenakiieveMetallurgicalWorks JSC KhartsyzskTubeWorks Ferriera ValsiderS.p.A. Spartan UKLtd Metinvest TrametalS.p.A. Ferriera ValsiderS.p.A. JSC AzovstalIron&SteelWorks JSC YenakiieveMetallurgicalWorks JSC AzovstalIron&SteelWorks JSC YenakiieveMetallurgicalWorks JSC AzovstalIron&SteelWorks

AnnualReport 2008 DTEK (part of SCM Group) SCM of (part DTEK HUNGARY SLOVAKIA US andEUROPEANOPERATIONS 5 4 3 2 1 UKRAINian OPERATIONS 13 Inkor &CoLLC JSC Avdiivka Coke&Chemical Works JSC InguletsMiningandProcessing Works JSC CentralMiningandProcessing Works MiningandProcessingJSC Severniy Works WEST VIRGINIA

PORTS STEEL &ROLLEDPRODUCTS COKE &COAL IRON ORE POLAND AnnualReport 2008

ROMANIA MOLDOVA BELARUS 9 8 7 6 JSC KhartsyzskTube Works JSC Yenakiieve MetallurgicalWorks JSC AzovstalIron &Steel Works JSC KrasnodonvugilliaCoalMining Company KYIV SEVASTOPOL 2 1 3 2 2 1 DNIPROPETROVSK 3 3 D DNIPROPETROVSK 12 GATESHEAD NIPR GENOVA O 13 12 11 10 PETR

United CoalCompanyLLC Spartan UKLtd Metinvest Trametal S.p.A. Ferriera Valsider S.p.A. 11 O 10 540 KM V MARIUPOL VERONA S MARIUPOL MARIUPOL K DONETSK U DONETSKDO RUSSIA RUSSIA OL NET 4 4 7 7 4 5 59 7 59 LUHANS LUHANSK S 9 LUHANSK 8 8 K

8 KIEV K 6 6 6 05

Overview Overview 06 Market review trends withinthesteelsector. local marketdynamicsandtobetterpredict markets, enablingtheCompanytounderstand Metinvest accesstothemostimportantglobal regions intheworld.Thiswidereach gives sales networkwhichcoversmostofthekey BASE ANDAVANTAGEOUS DISTRIBUTIONANSALESNETWORK METINVEST’S SUPERIORGEOGRAPHICLOCATION ENSURESaLOWCOST Metinvest 2008 Revenuebyregion( 8.6% CIS 9.8% Africa and Northern Middle East Locations ofMetinvestSalesOffices Potential Market Existing Market 2007 2008 TOTAL

13.6% Asia Eastern South Sales, mt 9.9 9.8 5.6% Other 26.9% Rest ofEurope hasbuiltabroad international 35.5% Ukraine %) 2007 2008 North America Sales, mt

0.3 0.3

AnnualReport 2008

Santo Domingo, Dominican Republic Dominican Domingo, Santo 2007 2008 Europe* Sales, mt 3.2 3.0 2007 2008 Ukraine 2007 2008 CIS 2007 2008 Persian Gulf 2007 2008 and Africa Middle East Sales, mt Sales, mt Sales, mt Sales, mt 1.3 1.1 1.4 1.2 0.3 0.5 1.8 1.8 2007 2008 East Asia and South Far East Sales, mt 1.6 1.9 2007 2008 TOTAL Sales, mt 9.9 9.8 2007 2008 North America Sales, mt

0.3 0.3

Gateshead, England Gateshead,

Brussels, Belgium Brussels, Mediterranean region andNorthAfrica. marketssuchasthe to international structural shapes,inUkraineandalso its longproducts, suchasbarsand construction sector. TheCompanysells have avarietyofapplicationswithinthe and Ukraine *excluding Russia Construction

Geneva, Switzerland Geneva,

2007 2008 Europe*

Essen, Germany Essen, Genova, Italy Genova,

Sales, mt Milan, Italy Milan,

3.2 3.0

Munich, Germany Munich, Belgrade-Savski, Serbia Belgrade-Savski, Metinvest’s longproducts

AnnualReport 2008

Vilnius, Lithuania Vilnius,

Istanbul, Turkey Istanbul,

Khartoum, Sudan Khartoum,

Beirut, Lebanon Beirut,

Moscow, Russia Moscow, Tehran, Iran Tehran, 2007 2008 Ukraine 2007 2008 CIS Persian Gulf 2007 2008 and Africa Middle East 2007 2008 bridge building. they are oftenutilisedinshipand of the manufacturing sector. For instance, thicknesses, are usedwithinmanyareas flat products, whichhaveavarietyof Manufacturing Metinvest’s highquality Sales, mt Sales, mt Sales, mt Sales, mt 1.3 1.1 1.4 1.2 0.3 0.5 1.8 1.8 HUNGARY SLOVAKIA

POLAND 2007 2008 East Asia and South Far East

ROMANIA Singapore Sales, mt UKRAINE

1.6 1.9

MOLDOVA BELARUS Vyshneve

pipeline projects. commonly usedingas,oilandwater the infrastructure sectorandare to companiesoperatingwithin The Company’s pipeworksare sold the largestproducers ofpipesintheCIS. JSC KhartsyzskTube Works, isoneof Infrastructure Metinvest’s subsidiary, Odesa (2) Odesa

Kyiv (2) Kyiv

Brovary

Mykolaiv

Kryvyi Rih Kryvyi

Kremenchug

Sevastopol

Simferopol

Dnipropetrovsk Partyzanske

Kharkiv RUSSIA

Vasyscheve Donetsk 07

Overview Overview 08 Chairman’s Statement remains unchanged. in keyglobalmarkets, and asignificantpresence group, withaproduction baseinUkraine building averticallyintegratedmetalandmining market environment, ourlong-termstrategyof However, despitetherecentin downturn the steelsectorandMetinvestinparticular. with theglobalfinancialcrisisseverely impacting began toreverse inthelastquarterof2008, experienced inthefirstninemonthsofyear The positivedevelopmenttrends whichwe activities in2008. of theCompany’s financial andoperating for Metinvest,whichprovides anoverview I ampleasedtopresent thefirstannual report Dear Stakeholders, Chairman Oleg Popov

AnnualReport 2008 stable businessstructure. synergies andamore balancedand in2009,whichwillleadtofurther SMART the otherassetsfrom themergerwith plans tocompletetheintegrationof the consolidationofthisasset.Metinvest received asignificantcontribution from Processing Works (InGOK)andwehave integration ofJSCInguletsMiningand position. In2008,wecompletedthe strengthened theGroup’s market SMART’s assetshasconsiderably We believethattheintegration of already commenced. completing projects which wehave priorities intheshort-termlie cash flowgeneration.Ourinvestment service ourdebtthrough our robust free remains conservative,and weexpectto debt financing.Metinvest’s debtposition market demandandlimitedaccessto spend lessin2009duetodecreased us toachievethisgoal.We expectto expenditure onprojects whichwillenable we investedUS$679millionofcapital producers ofsteelglobally. Inparticular, of becomingonethelowestcost our production facilitieswiththegoal In 2008,wecontinuedtomodernise the sector, wheneveritmaycome. to takeadvantageoftherecovery in longer term,theGroup iswellplaced inthesteelmarket.Over downturn we willbeabletowithstandthecurrent in theindustryandweare confidentthat significantly strengthened ourposition base. Overthepasttwoyears,wehave geographic diversificationofitsasset and metallurgicalcompaniesthe a uniqueexperienceindevelopingmining integration; a modern corporate structure; advantages whichincludevertical producer andutiliseitskeycompetitive Metinvest willbecomeaworld-classsteel raw materialsbase.Iamconfidentthat and furtherdevelopourinfrastructure and energy-efficient production processes our steelproduction, deploythemost increase thelevelofprocessing in In thecomingyears,weintendto enable us toachievethisgoal. of capitalexpenditure onprojects which will globally. In particular, we invested US$679 million one ofthelowest costproducers ofsteel production facilitieswiththegoalofbecoming our In 2008,wecontinuedtomodernise AnnualReport 2008 companies movingforward. In2009, dynamic developmentoftheGroup’s processes inorder tofacilitatethe and improving ourdecision-making balancing theinterests ofallstakeholders programmegovernance aimedat in 2008Metinvestcreated acorporate Tocorporate governance. thisend, of complyingwithbestpracticesin We alsorecognise theimportance conditions forouremployees. the environment andimproving thesafety important initiativesaimedatprotecting 2008, Metinvestcarriedoutanumberof Responsibility (CSR)policies.Throughout and implementingourCorporateSocial in mind,weare consistently improving this but alsotosocietyasawhole.With our employeesandthelocalpopulation, responsibility tosociety, inparticularto operations, wefirmly recognise our Furthermore, giventhescale ofour for growth’s sake. we are notfocusedongrowth simply and Iwouldliketoemphasisethat long-term valueandtoobtainsynergies, future acquisitionsare theabilitytocreate M&A opportunities.Themaincriteriafor We willalsocontinuetostudypotential pressure onourfinancialposition. current market situation to avoid excessive plansinlinewiththe modernisation already optimisedourproduction and of theGroup’s operations.We have structure, whileimproving theefficiency our liquidityandreducing ourcost In 2009,weplantofocusonmanaging Metinvest asatrulyglobalsteelproducer. significant steptowards establishing was completedinApril2009,isa reserves. TheacquisitionofUCC,which high qualitymetallurgicalandsteamcoal million tonnesofproven andprobable well-developed salesnetworkand157 is aprofitable businesswithitsown States. UnitedCoalCompanyLLC(UCC) acquire aminingcompanyintheUnited In early2008,webegannegotiationsto Yours sincerely, development ofourGroup. team spiritandcontributiontothe to thankeveryonefortheirdedication, main competitiveadvantage.Iwouldlike whose professionalism andloyaltyisour Metinvest’s mostvaluableassetand Chairman oftheSupervisoryBoard Oleg Popov our employeeswhoare, withoutadoubt, And finally, Iwouldalsoliketothank development plans. in fulfillingourshort-andlong-term operating companiesplayakeyrole thank allofMetinvest’s Directors, whose our goalsin2008.Iwouldalsoliketo individual contributionstowards achieving for theirexcellentworkand entire ExecutiveCommitteeatMetinvest, and itscommittees,aswelltothe all membersoftheSupervisoryBoard I wouldliketoextendmygratitude in ourindustry. structure commensuratewiththebest goal ofcreating acorporategovernance structurecorporate governance withthe we willcontinuetodevelopMetinvest’s

Overview Overview 10 general Director’s Review industrial sectorinUkraine. and richhistoryofoperatingwithinthe of companiesalready hasawell-established inaugural annualreport, theMetinvestgroup like toemphasisethatalthoughthisisour Company’s firsteverannual report. Iwould Thank youfortakingthetimetoreview our Dear Stakeholders, General Director IGOR SYR Y

AnnualReport 2008 we are alsodevelopingourdownstream In additiontoupstream integration, flows more stableandpredictable. synergies and,finally, makingourcash fluctuation, allowingforoperational cushioning usfrom rawmaterial price the competitivenessofGroup, with tangible benefits by further improving coking coal.Thispositionprovides us we are self-sufficient iniron ore and As averticallyintegratedorganisation, producers ofsteelintheworld. coals andweare oneofthe lowestcost we havereserves oftop-quality coking with strong positionsinregional markets, a low-costproducer ofiron ore globally rare balanceintheircombination. We are production assetsintheindustry anda We are proud tohavesomeofthebest and theEnvironment. Social Responsibility, Health&Safety emphasis onCorporateGovernance, management ofresources, withastrong profitable growth andefficient between thedivisionsandtoensure designed torealise thesynergies strategy. Ourcorporatestructure is function underacoordinated Group respective industrysector. Thedivisions operating, andmarketexpertiseinits each of which has extensive technological, Iron Ore, andSteel&RolledProducts, organised in three divisions: Coke & Coal, companies inUkraineandabroad, andis Today, theGroup comprises26 strategic acquisitions. since thenwehavecarriedoutadditional SMART’s metalandminingunits, began theprocess ofmergingwith largest shareholder. InMay2007we that were controlled bySCM,Metinvest’s 20 leadingmetalandminingcompanies to consolidatetheoperationsofover Metinvest wasformedin2006order Mining LeaderwithaClearVision Metinvest: AnEmergingMetaland and predictable. and, finally, makingourcashflows more stable fluctuation, allowing foroperationalsynergies Group, cushioning usfrom rawmaterial price by furtherimproving thecompetitivenessof This positionprovides uswithtangiblebenefits we are self-sufficient iniron ore andcokingcoal. As averticallyintegratedorganisation, AnnualReport 2008 hot-rolled platesforMetinvestinItaly UK Ltd(Spartan),whichproduce Trametal S.p.A.(Trametal) andSpartan Last year, we integratedintotheGroup over 11milliontonnesofpellets. of merchant iron ore concentrateand metallurgical coke,over18milliontonnes steel, more than5 milliontonnesof produced 8.2milliontonnes ofcrude quarters oftheyear. In2008,Metinvest in theglobalmarketsfirstthree production levelsduetohigh demand In 2008,wealsoachievedrecord in generalandadministrativeexpenses. distribution costsandimprovements million) asaresult ofreductions in to US$4,708million(FY07:US$2,530 profit increasing by86.1%year-on-year management ofdirect costs andgross (FY07: US$1,773million)duetothestrict 123.4% year-on-year toUS$3,961million growth, withoperatingprofit upby year. We alsoreported solidbottom-line demand inthefirstninemonthsof US$7,425 million)onthebackofstrong year-on-year toUS$13,213million(FY07: Total revenue increased by78.0% our keyfinancialandoperatingtargets. in manyways,asweoutperformed 2008 wasarecord yearforMetinvest Developments in2009 A Record Y the Europeanmarkets. andinternational will enableustobecomeatopplayerin a focusonvalue-addedproducts, which more efficient metallurgicalcompanywith Our long-termstrategyistocreate a of ourbusinessprocesses andfacilities. standards ofbestpracticethroughout all company byadoptinginternational a leadingintegratedmetalandmining our employeesandpartners,tobecome heritage andare working,togetherwith We are veryproud ofourUkrainian high value-added products in our portfolio. capacities andincreasing theshare of ear in2008withExciting The keyrationalefortheacquisitionwas metallurgical coalintheUnitedStates. one oftheleadingproducers of acquisition ofUnitedCoalCompanyLLC, important strategicdevelopmentwiththe On 30April2009,weannouncedavery optimising our own production processes. we canbestmeettheseneedsby current andfuture needsare, andhow with themtounderstandwhattheir now closertoourclientsandare working collaboration withourcustomers.We are markets through aprocess ofcontinual service inkeyEuropean and international products andhighlevelsof customer company deliveringspecialisedfinished a massproducer ofcommodities toa Our long-termgoalistoshiftfrom being further inthemonthsandyearstocome. develop ourfinishedproduct portfolio of platesintheworldandweintendto In 2008,webecameatop-10supplier strategically importantplatemarket. and increased ourpresence inthe augmented ourEuropean footprint centres. Theseacquisitionshavealso our growing businessofmetalservice to thepremium retail marketthrough and helpedusincrease ourexposure model hasenhancedourexpertise Trametal’s service-orientedbusiness production volumeoffinishedgoods. strategy andithasincreased our of Metinvest’s downstream integration a stepforward intheimplementation which wasconcludedin2008, The purchase ofthesetwobusinesses, tonnes ofhighqualityplatesperannum. capacity ofapproximately 2.4million European marketandatotalGroup-wide capacity ofover1 milliontonnesinthe unit withanannualhot-rolled plate our plant in Italy, to form a single business with FerrieraValsider S.p.A.(Ferriera), enterprises havenowbeencombined and theUKrespectively. Thetwo

Overview Overview 12 general Director’s Review • • • were asfollows: important developmentsduringtheyear of ouroperations.Somethemost equipment andmaximisingtheefficiency programme of modernising our production Throughout 2008wecontinued our Reporting Period Key Highlightsfrom the all stakeholdersmovingforward. forward todeliveringstrong returnsfor team andemployees,welook alongside UCC’s excellentmanagement working hard ontheintegrationin2009, rebound ofworldmarkets.We willbe this transactionpositionsuswellforthe significant stepchangeforMetinvestand of anddedicationtosafety, represents a employed byUCC,withitsstrong record to theworld-classminingmethods most stablesupplier, andgainingaccess assets intheUnitedStates,world’s prospective salesmarkets.Obtaining be more competitiveincurrent and characteristics. TheGroup willthereafter production costsandimprove quality quality cokewhichwillreduce iron steel workswillbeprovided withahigher Following thisacquisition,theGroup’s produce abetterqualityfeedstock. Metinvest’s cokeandchemicalfacilities quality metallurgicalcoaltohelp to secure significant reserves ofhigh

In 2008,theIron Ore division launched The Iron Ore divisionputintouse The Coke&Coaldivisionputanew environmentally friendly. is consumedintheprocess) andmore be more cost-competitive(aslessgas pellets andtheproduction process will will beabletoproduce betterquality year. Atthesametime,Company approximately 13.5milliontonnesper tonnes, toproduce atotalcapacityof pelletising capacityby2million will enableMetinvesttoincrease its pelletising machineatSevGOKwhich division alsoinstalledaLurgi process ofbeingcompleted. The (#15 and#16)ofSevGOKare inthe (SevGOK). Afurthertwosections Mining andProcessing Works sections #13and#14atJSCSeverniy of theCompany’s coke. 2008, inorder toimprove thequality Works (Avdiivka Coke)inJanuary JSC Avdiivka Coke&Chemical plant coke batteryintooperationatthe and Processing Works. Work is separation atJSCInguletsMining a project tointroduce flotation partnering withusonthisproject. andEcoAllianceareInternational Molodogvardeyskaya mines.Green Gas at theSukhodolskayaVostochnaya and by theKyotoProtocol wasalsolaunched methane gasusingmethodsstipulated to increase therecycling volumesof our degasification systems. A programme major projects inorder toreconstruct 18001 standards. We alsolaunched systems toISO14001andOHSAS certification ofourHSEmanagement Committee level.In2008,weachieved Supervisory Board andExecutive priority forMetinvestatboththe on theenvironment. Thisremains ahigh series ofactivitiestominimiseourimpact During theyear, wealsoundertooka at thetopofeveryone’s minds. that thesafetyofMetinvest’s peopleis consistent approach isvital asitensures for SafetyAudits.Thiscollaborativeand on aregular basisthroughout theyear the ExecutiveCommitteevisitsoursites As part of this process, every member of to thegreatest extentthat we can. strive tominimisethenumberofinjuries about safetyonaconstantbasis,aswe everyone intheorganisationisthinking causes ofaccidentsandaimtoensure focused onunderstandingtheroot Group’s ExecutiveCommittee.We are Director beingamemberof Metinvest Directorate inMay2008,with theHSE (HSE), weformedaCorporateHSE of Health,SafetyandtheEnvironment led andcoordinated efforts inthearea Understanding theneedforcentrally Responsible CorporateCitizen A ClearFocusonBeinga •

The Steel&RolledProducts division per year. casting capacitiesby2milliontonnes the expansionofsteelcontinuousslab of Metinvest’s slabsandplates through improvements inthequality of highvalue-addedflatproducts Metinvest toincrease theproduction & SteelWorks (Azovstal).Itwillallow casting machineatJSCAzovstalIron plant andanewslabcontinuous and avacuumdegasser)intheBOF secondary metallurgy(ladlefurnaces commissioned acomplexfor of over68%. world-class qualitywithaFecontent to produce iron ore concentrateofa finished, it will give Metinvest the ability ongoing and,whentheproject is AnnualReport 2008 in thesecondhalfof2009;however, We currently expecta mild recovery are alignedwithmarketdemands. key marketstoensure ouroperations constantly monitorthetrends inour Moving forward, wewillcontinueto vertically integratedbusinessmodel. and highlightstheadvantagesofour extreme changeinoperatingconditions testament toourabilitycopewiththis of ourproducts profitably, whichis managed tocontinueproducing all been successfulthusfarandwehave so farthrough 2009.Theplanhas and quicklyhaveadhered toit We adoptedouranti-crisis strategyearly and reprioritised ourcapital spending. productivity increasing measures sales andproduction plans, accelerated immediate results. We restructured our could bepromptly implemented toyield most criticalareas inwhich measures plan weconcentratedonafewofthe created anAnti-CrisisAction Plan.Inthis weakening inourmarketsandaccordingly we begantoanticipateasignificant At thestartofsummerlastyear, markets, hasdeclineddramatically. in boththeconsumerandproduction crisis, theglobalconsumptionofsteel, consequence oftheensuingfinancial high uncertaintyandinstability. Asa financial marketsentered a periodof the lastquarterof2008,global As youare already wellaware, during Market Conditions Reacting SwiftlytoChanging and mininggroup. Metinvest intoaleadingglobalmetal evaluation ofourplanstodevelop who provide valuableadviceandrigorous Our shareholders are strategicinvestors, auditor isPricewaterhouseCoopers. on anannualbasisandourcurrent statements inaccordance withIFRS committees. We produce financial and CompensationAppointment we alsohaveStrategy, Audit,HSE At theSupervisoryBoard level, members are IndependentDirectors. Two outoftenSupervisoryBoard (our25%shareholder).by SMART 75% shareholder) andthree members of whichwere nominatedbySCM(our currently consistsoftenmembers,seven for Metinvest.OurSupervisoryBoard isalsoimperative corporate governance Maintaining thehigheststandards of AnnualReport 2008 General Director Igor Syry Yours sincerely, working withyouinthecomingyears. during 2008,andwelookforward to their continuedsupportofMetinvest 89,000 employeesandourclientsfor thank ourshareholders, our more than I wouldliketotaketheopportunity for bothMetinvestanditsclients. enabling long-termmutualbenefit quality products attherightprice, fulfil their requirements withthehighest their needsandmakingsure wecan customers, thismeansunderstanding whose future issecure. Andforour and meaningfuljobsatacompany in place,asafeworkingenvironment the bestpossiblemanagementteam For ourpeople,thismeanshaving solid andstablefinancial returns. transparent andcontinuingtoproduce For ourinvestors,thismeansbeing of choiceforallourstakeholders. management toremain acompany It isveryimportanttoMetinvest’s of Our Stakeholders Delivering Value toAll at everystage. needs are beinganticipatedandmet and willworkwithclientstoensure their we willremain cautiousinourapproach

Overview Business Review 14 Corporate Strategy environmental responsibility. standards ofsocial,corporateand strategy isafocusonadheringtothehighest initiatives. Oneofthecore elementsofthe projects andoperationalprogrammes and the business,amultitudeofcapitalinvestment balanced set of priorities for the development of comprehensive strategywhichembracesa is supportedbytheCompany’s specificand markets across theworld.Thisgeneralgoal companies operatinginthemostimportant effective world-classmetalandmining Metinvest goals andcreating valuefor theGroup. people are workingtowards thesame the Companytoensure that allofMetinvest’s These objectivesare cascaded throughout certain financialandoperatingKPIs. and ismotivatedrewarded byattaining is focusedonachievingtop-levelgoals, following pages.TheExecutiveCommittee corporate strategyare set out onthe The core elementsofMetinvest’s shareholders, clients,employeesandsocietyasawhole. consistent andprofitable growth ofthebusiness,creating valuefortheCompany’s For Metinvest’s managementteamandshareholders, thekeypriorityistoachieve Director ofStra Andrey Bolshakov aimstobecomeoneofthemost tegy & Investments

AnnualReport 2008 AnnualReport 2008 and outsourcing non-core operations. finished product outputper employee labour productivity andincreasing (BOFs);improvingoxygen furnaces withmorehearth furnaces efficient basic replacingfurnaces; inefficient open- introducing PCItechnology atitsblast Company aimstoreduce costs by: example, inthesteelmakingarea, the with theworld’s leadingexperts.For including operatingefficiency projects based onworld-classknow-how, facilities andtheuseofitsresources maximise theefficiency of itsoperating Along theselines,Metinvestplansto position inthelongrun. for Metinvesttomaintainitslow-cost key end-markets.Itisastrategicpriority proximity tobothnaturalresources and location, whichaffords Metinvestaclose Company’s advantageousgeographic cost advantagesinUkraineandthe globally. Thisisprimarilyduetoinput one ofthelowestcostproducers ofsteel has enabledtheCompanytooperateas capital-intensive resources inUkraine The concentrationofMetinvest’s most in OperationalEfficiency Through ContinualImprovements Championing Low-ostProduction 01

and settingincentives. evaluating theperformanceofpersonnel managers, especiallyinrelation to improving themanagerialskills ofline when theyare implemented and in theuseofnewtechnologiesasand include thetrainingofproduction workers programmes. Keyinitiatives inthisarea carry outaseriesofhumanresources Metinvest alsoplanstocontinue attention ondevelopmentopportunities. focus employees’andmanagement’s of moneydirectly, andtheyalsohelp programmes savesignificantamounts out through thethree divisions.These major enterprisesandare beingrolled programmes havebeenlaunchedat Continuous operatingimprovement

Business Review Business Review 16 Corporate Strategy acquisition ofFerrieraValsider S.p.A. Europe. Combinedwiththeearlier hot-rolled platesforcustomersacross (Spartan), bothofwhichproduce S.p.A. (Trametal) andSpartanUKLtd the acquisitionsofMetinvestTrametal this hasbeenachievedprimarilythrough further integrationdownstream. Thusfar, developments, Metinvesthasseen In additiontotheseupstream investments involumeexpansion. operational improvements and targeted Processing Works through both Works Miningand andJSCSeverniy JSC CentralMiningandProcessing to increase theproduction ofiron ore at quality cokingcoal.Metinvestalsoplans secured long-termsupplies ofhigh was announcedinApril2009,hasfurther Company LLC in the United States, which technology. The acquisition of United Coal of cost,revenue, procurement and yielded anumberofsynergiesinterms Company’s positioniniron ore and has in2007greatlySMART strengthened the high qualitycoal.Metinvest’s mergerwith increasing itsproduction ofiron ore and and thesecurityofitssupplyby sought tofurtherenhanceitsprofitability for itssteelproduction. Metinvestthen the Companyhadcaptiverawmaterials Group upstream andbyensuringthat began withthedevelopmentof Metinvest’s verticalintegrationmodel Throughout theGroup Enhancing V 02 ertical Integration

them toend-usersinprofitable markets. high-value addedproducts andselling to (3)rolling semi-finishedsteelinto supplying thebalancetomarket, to (2)convertingmostintosteeland move from (1)securingvital rawmaterials downstream. Theultimate goalisto to developthebusinessfurther Metinvest isconstantlyevaluatingways Company’s existingoperationsand These efforts are ongoingwithinthe consumption. extent neededforinternal semi-finished products, except tothe ultimately ceasetobeasupplierof steel products suchasslabs and on salesoflowervaluesemi-finished long-term strategytoreduce itsreliance Such activitiesformpartofMetinvest’s margins andhavehigherbarrierstoentry. structural products which yield higher Company toincrease itsproduction of capacity. hasallowedthe This, inturn, downstream flatproduct finishing added products byexpanding its Metinvest’s marketpositioninvalue- of theseassetshasalsostrengthened plants from Ukraine.Theintegration semi-finished goodsshippedtothese to sellfinishedproducts intheEUfrom acquisitions haveenabledMetinvest in theEuropean platemarket.These strengthened theCompany’s position (FV), thesemillshavesignificantly

AnnualReport 2008 AnnualReport 2008 expensive cokingcoalsbyreplacing reduce theconsumptionofmore of Metinvest’s andalso blastfurnaces process willincrease the productivity the consumptionofnaturalgas.This consumption ofcokingcoalandminimise allow theCompanytoreduce its facilities,which will main blastfurnace implement PCItechnologyacross its VAI. Inparticular, Metinvestplansto with technicaladvisersincludingSiemens with astrategydevelopedinpartnership & RolledProducts division,inaccordance technologies, particularlywithinitsSteel Metinvest intendstoinvestinimproved Through T Further EnhancingProductivity 04 Coke-making capacitiesare alsobeing to grindingbeneficiationpelletising. increases atallstages:from extraction leads tostep-by-stepbalancedcapacity modular investmentprogramme that The miningbusinesseshaveadetailed existing capacitiesacross alldivisions. competitiveness byfullyutilisingits Metinvest intendstoleverageitscost Company’s ExistingAssetBase Driving OrganicGrowth From the 03

echnological Improvements in thecomingyears. in thisarea whenitisprudenttodoso operations andwillcarryoutinvestments ofits steel the large-scalemodernisation long-term capitalinvestmentplansfor The Companyhasdevelopeddetailed, coking coalswithlow-sulphurPCIcoal. in pigiron bysubstitutinghigh-sulphur metal andreducing thesulphurcontent consistency ofthequalityhot stability,furnace improving the it willassisttheCompanyinmaintaining coal injection(PCIcoals).Inaddition, coke withcheapercoalsforpulverised to themarketdemand. casting machinestorolling millstargeted BOFswithcontinuousslab to modern from newerPCI-enabledblastfurnaces Strategic Technology Planforrenovation: Similarly, theGroup’s steelplantshavea needs. from andexternal bothinternal managed according tothedemand

Business Review Business Review 18 Corporate Strategy for concentrateproduction. from severaldifferent minesandquarries customers’ demandsistheuseofore method ofachievingthequalitytomeet to ensure awidebasicityrange). Another (such asfine-tuningthepelletisingplants flotation) andoperationalimprovements magnetic separationprocess and projects (suchasaprogressive five-stage metrics bybothcapitalinvestment significant progress inincreasing these factors. TheCompanyhasachieved quality, basicity andsizeare important addition totheincomingconcentrate content, andmoisture. For pellets,in parameters includeFecontent,silica In iron ore concentrate,keyquality it doesnotalready doso. standardsthe highestinternational where quality ofitsproducts meets orexceeds core divisionsinorder toensure thatthe intensive improvements across itsthree process ofoperationalandcapital- The Companyhasimplementeda semi-finished andfinishedsteel products. of products: from rawmaterialsto of qualitythroughout itsfullrange its clientswiththehigheststandards Metinvest iscommittedtoproviding Across Metinvest’s Product Range Ensuring HighQualityStandards 05

pipeline builders. demanding applicationsfrom world-class stripsthatsuitthemost good example,asthemillcanproduce & SteelWorks’ pipe-grade plateisa In rolled products, JSCAzovstalIron casters withnickel-coatedmoulds. continuous degasser) andmodern andavacuum metallurgy (ladlefurnaces integrity byinstallingsecondary increased surfacequalityand internal is paramount.Inslabs,Metinvesthas In iron andsteelproduction, quality controllable costs. world-class qualitycharacteristicsat enables theproduction of coke with volatility. This compositionofcoals American cokingcoalswithmidtolow Ukrainian coalswithhighqualityNorth low-cost (extractionandtransportation) a uniquecombinationofrelatively April 2009,Metinvestnowbenefitsfrom the successfulacquisitionofUCCin and reasonably pricedcoal.Following factor istheavailabilityofhighquality In cokeproduction, thecriticalsuccess

AnnualReport 2008 AnnualReport 2008 the comingthree yearsinorder to initiatives thatwillbeundertaken in This documentoutlinesthemain of Metinvestapproved theHSEStrategy. Committee andtheSupervisoryBoard and, inSeptember2008,theExecutive Corporate HSEDirectorate inMay2008 practice. TheCompanyformeda been formulatedinlinewithglobalbest Environmental (HSE)strategywhichhas implement fullyitsHealth,Safetyand Over time,Metinvestintendsto Environmental (HSE)Initiatives Prioritising Health,Safetyand 07 is toworkcloselywithitsclientsinorder Russia andacross Asia.The Group’s aim Western andCentralEurope, theCISand and SouthAmericatoNorthAfrica network whichspreads from North sales the developmentofitsinternational end, Metinvestiscontinuingtoinvestin markets.Towithin keyinternational this further expandingitscustomerbase sectors. TheCompanyisfocusedon both intermsoftheirgeographiesand Metinvest’s clientsare welldiversified, to aDiversifiedGlobalClientBase Providing FlexibilityandServiceExcellence 06

for severalofitsfacilities. of compliancewithOHSASstandards Metinvest hasobtainedcertificates and root causeanalysisforallincidents. Safety AuditsattheGroup’s facilities initiatives, includingseniormanagement of HealthandSafetyprogrammes and The Companymaintainsanarray area ofHSEacross theMetinvestGroup. achieve asignificantimprovement inthe of serviceitprovides toits clients. processes anddelivery thequality and flexibilityofitsmanufacturing and qualityofitsproducts, thespeed be amarketleaderintermsoftherange commercial process. Metinvestaimsto service throughout allstagesofthe competitive pricesandensuringexcellent delivering highqualityproducts at the bestsolutionsfortheserequirements, to understandtheirneeds,andprovide

Business Review Business Review 20 Consolidated Financial Review in 2008. revenue andnetprofit to Metinvest’s consolidated net profit, contributingUS$756millionand a positiveimpactontheGroup’s revenue and and theUnitedKingdomrespectively, alsohad which runsteelrolling millslocatedinItaly and itssubsidiarySpartanUKLtd(Spartan), beginning of2008Trametal S.p.A.(Trametal) revenue in2008.Theacquisitionatthe (FY07: 78.5%)oftheGroup’s totalconsolidated Products division,whichaccountedfor70.1% increase inthesalesofSteel&Rolled in 2008.Thisgrowth wasmainlyduetoarobust US$7,425 millionin2007toUS$13,213 Group’s consolidatedrevenue increased from in 2008,compared to40.9%in2007.The Metinvest US$98 million respectively Chief F inancil Officer Sergiy Novikov generated78.0%revenue growth

AnnualReport 2008 in thefirst ninemonthsof 2008. as wellhigher contract andspotprices conditions andeconomic growth inUkraine, year-on-year asaresult ofpositive market Total revenue in the Ukrainianmarketdoubled compared to30.8%in2007. margin increased to35.4% in2008, Therefore, Metinvest’s adjustedEBITDA US$59 millionintheprevious year. US$79 millionin2008,compared to asset impairmentanddevaluationof was impactedbynon-cashlossesfrom months of2008.TheGroup’s EBITDA Metinvest’s products inthefirstnine due tosignificantincrease inpricesfor period, upfrom 30.0%in2007, mainly expanded to34.8%inthereporting the previous year. TheEBITDAmargin compared toUS$2,227million in year-on-year to US$4,602 million in 2008, Metinvest’s EBITDAmore thandoubled EBITDA into thebeginningof2009. weak inthefourthquarterof2008and demand forsteelproducts remained the middleof2008.Subsequently, the to comedownfrom theirpeaklevelsin over thesameperiod.Steelpricesbegan Ukrainian steelproduction fellby37% fourth quarterof2008.Asaresult, reducing thedemandby22%in a significantimpactonthesteelmarket, of theyear. Theglobalfinancialcrisishad growth ratesinthefirstthree quarters demand andrapidsteelpigiron were mainlytheresult ofhighmarket revenue respectively. Theseincreases 8.6% oftheGroup’s consolidated 2008 andaccountedfor26.9% up by98.5%and19.0%respectively in from salestoEurope andtheCISwas months of2008.Revenuegenerated contract andspotpricesinthefirstnine growth inUkraine,aswellhigher positive marketconditionsandeconomic doubled year-on-year asaresult of Total revenue intheUkrainianmarket Revenue AnnualReport 2008 19.6% intheprevious year. increasing slightlyto21.2%from in 2007,withtheeffective taxrate in 2008,compared toUS$321 million Income taxexpensewasUS$755million debt conversion. foreign exchangelosseson foreign impacted byUS$258millionof to US$128 millionintheprevious year, US$424 million in2008,compared Net financecostsamountedto and Profits Other Consolidatedosts operating transactions. foreign exchangegainsarising from US$621 million contributionfrom net as apercentage ofrevenue, anda general andadministrativeexpenses following thereduction indistribution, up from 23.9%intheprevious year margin expandedto30.0%in2008, costs. TheGroup’s operatingprofit US$59 million)ofcorporateoverhead EBIT includedUS$34million(FY07: respectively. Additionally, consolidated (FY07: 55.4%)and12.2%8.8%) divisions accountingfor41.2% Rolled Products andCoke&Coal consolidated EBIT, withtheSteel& 46.6% (FY07:35.8%)ofMetinvest’s the Group’s Iron Ore divisioncontributed to US$1,773millionin2007.In2008, to US$3,961millionin2008,compared operating profit (EBIT)year-on-year Metinvest more thandoubledits Operating Profit (EBIT) equipment attheendof2007. of theGroup’s property, plantand the Iron Ore divisionandtherevaluation following theacquisitionofInGOKin US$454 million intheprevious period, US$641 millionin2008,compared to increased by41.2%year-on-year to Depreciation andamortisationexpense Amortisation Expense Depreciation and

additional US$214millioninloans for theacquisitionofTrametal andan Bank ofScotland,INGandCredit Suisse loans obtainedfrom BNPParibas, Royal in 2008includedUS$1.189million in 2007.Majorchangesfinancing cash generatedfrom financing activities compared toUS$1,173million ofnet amounted toUS$653millionin2008, Net cashusedinfinancingactivities completed inApril2009. Coal CompanyLLC(UCC),whichwas payment fortheacquisitionofUnited region ofUkraine;andanadvance a phenolproducer basedin theDonetsk respectively; Inkor&CoLLC (Inkor), mills inItalyandtheUnitedKingdom Spartan whichoperatesteelrolling of businessesincludingTrametal and spent US$2,304milliononacquisitions to US$1,424millionin2007.TheGroup was US$3,059millionin2008,compared Net cashusedininvestingactivities Group’s operations. as aresult ofthestrong growth inthe to US$1,125millionintheprevious year, US$2,856 million in2008,compared than doubledyear-on-year to Net cashflowfrom operationsmore Consolidated ashFlow previous period. compared toUS$182millioninthe amounted toUS$352millionin2008, Dividend paymentstoshareholders Dividends compared toUS$368millionin2007. amounted toUS$872millionin2008, Net profit attributabletominorityinterests previous year. in 2008,ascompared to17.8%inthe net profit marginexpandingto21.2% from US$1,321millionin2007,withthe year toUS$2,803millionin2008,up Net profit more thandoubledyear-on-

Business Review Business Review 22 Consolidated Financial Review to US$493 millionin2007.TheSteel& was US$679millionin2008,compared Group capitalexpenditure (CAPEX) CAPEX institutions duringthereporting period. of US$1,591millioninloanstoitslending financing needs.Metinvest repaid atotal obtained from otherbanksforitsongoing in 2008,compared toUS$1,773millionin2007. profit (EBIT)year-on-year toUS$3,961million Metinvest more thandoubleditsoperating Chief FinancialOfficer Sergiy Novikov US$1,818 millionasatendof2007. as attheendof2008,compared to net debtstoodatUS$2,024million compared to56.9%in2007. Metinvest’s 50.9% ofthetotalGroup debt in2008, 2007. Short-termdebtaccountedfor US$2,952 million asat31December as at31 December2008,compared to debt amountedtoUS$2,685million 31 December 2007.TheGroup’s total compared toUS$1,134millionasat of UCC)asat31December2008, reserved inescrow fortheacquisition US$661 million(includingUS$400 The Group’s cashbalancesstoodat Liquidity andCapitalResources 14.3% (FY07:16.8%)ofthetotal. and the Coke & Coal division representing accounting for42.0%(FY07:30.4%) CAPEX in2008,withtheIron Ore division 43.7% (FY07:52.7%)ofMetinvest’s Rolled Products divisionaccountedfor 12,000 15,000 Consolida Consolida * Net ProfitUS$ EBITDA wasadjustedbynon-cashlossesfrom asset impairment anddevaluation. 3,000 6,000 9,000 1,200 1,800 2,400 3,000 1,000 2,000 3,000 4,000 5,000 600 0 0 0

2006 813 2006 1,468 2006 5,271 ted eBITDA*US$ ted revenueUS$ m

2007 1,321 2007 2,286 2007 7,425 AnnualReport 2008

2008 2,803 2008 4,681 2008 13,213 m m Europe andtheUSA. production facilitieslocatedinUkraine, headquartered intheNetherlandswith metalandminingcompany international the Coke&oaldivision,andSteelRolledProducts division. The Group comprisesthree divisions:theIron Ore division, proximity tothekeysalesmarketsofCIS,Europe, MiddleEastandAsia. ore andcoke.TheGroup benefitsfrom afavourablegeographiclocationandclose chain from rawmaterialstoready-made products andisfullyself-sufficient iniron companies. Beingverticallyintegrated,Metinvestmanagestheentire production and pipes.Itownsoperates16industrial,sevensalesthree transportation as welltheproduction ofsteelandiron ore, cokeandcoal,rolled products JSC Smart Holding. The Group is involved in coal and iron ore mining and processing, Metinvest B.V. is75%ownedbyJSCSystemCapitalManagementand25% Metinvest Group * EntitiesacquiredbytheGroupin2009. JSC KhartsyzskTubeWorks Metallurgical Works JSC Yenakiieve JSC AzovstalIron&SteelWorks United CoalCompanyLLC* Coal MiningCompany JSC Krasnodonvugillia Mining andProcessingWorks JSC Severniy COKE &COALDIVISION STEEL &ROLLEDPRODUCTS DIVISION IRON OREDIVISION METINVEST GROUPSTRUCTURE(keyoperatingcompanies) AnnualReport 2008 (Metinvest)isan Spartan UKLtd Metinvest TrametalS.p.A. Ferriera ValsiderS.p.A. Coke &ChemicalWorks JSC Avdiivka Mining andProcessingWorks JSC Central

Mining andProcessingWorks JSC Ingulets Metinvest SMCLLC Metinvest UkraineLLC Metinvest EurasiaLLC Metinvest InternationalS.A. Inkor &CoLLC

23 Group Structure and Overview

Business Review Business Review 24 Divisional review pellet producer inEurope andtheCIS. tonnes ofpellets.TheGroup isthethird largest being usedfortheproduction of11.4million was merchant concentrate,withtheremainder concentrate, ofwhich18.7milliontonnes produced 31.3 milliontonnesofiron ore around theworld.In2008,Iron Ore division suppliers tomanyothermetallurgicalcompanies production andisalsooneoftheleading fully self-sufficient iniron ore foritsownsteel iron ore concentrateandpellets.Metinvestis 2008. TheGroup’s Iron Ore divisionproduces Ukraine andwasrankedseventhgloballyin Metinvest isthelargestiron ore producer in IRON OREDIVISION

AnnualReport 2008 468 milliontonnes ofore reserves, tonnes ofmineralresources andincluded deposit whichconstituted1,020 million of ferruginousquartziteattheIngulets InGOK sources iron ore from the deposits within theUkrainianindustry. beneficiation ofiron ore whichisunique technologies includingflotation and 68.0%.Itutilisesthemostadvanced concentrate withFecontentsof63.8% types ofiron ore magnetitesintering with SMART. InGOKproduces two in November2007aspartofitsmerger 1965 and was then acquired by Metinvest Processing Works wasestablishedin concentrate. JSCInguletsMiningand ore miningandtheproduction ofiron ore enterprise inUkraine,specialisingiron InGOK isthelargestiron ore mining Works (InGOK) JSC InguletsMiningandProcessing Key Assets Group’s production divisions. management systemsacross the Metinvest hasimplementedquality standards andindustrialregulations. ISO requirements aswellUkrainian and pelletswhichcomplywiththe Metinvest produces iron ore concentrate Products European market.” our salesfootprintwithinthe we are focusedonexpanding our ownsteelproduction needs, are self-sufficient iniron ore for industrial regulations. Aswe ISO requirements andstrict iron ore materialscomplywith ore products andallofour produce thebestqualityiron “W IRON OREDIVISION OLEXANDR VILKUL e are continuallystrivingto AnnualReport 2008

facilities comprise amainore dressing of 2008.SevGOK’s mainproduction to theJORCstandards, asattheend million tonnesofore reserves, according mineral resources and included726 constituted 3,997milliontonnes of Pervomayskiy depositswhichintotal quartzite attheAnnovskiyand iron ore from thedeposits offerruginous Mining andProcessing Works sources iron ore contentof62.2%.JSCSeverniy content of66.0%andpelletswithan merchant concentratewithaniron ore mining enterprisesinEurope, producing SevGOK isoneofthelargestiron ore Processing Works (SevGOK) Miningand JSC Severniy of steel products. 43.8% EBIT marginexpandedto used internally fortheproductionused internally approximately 7.3%ofwhich was concentrate output(12.6milliontonnes), of theGroup’s totalmerchant iron ore In 2008,InGOKproduced 67.6% flotation facilities where it is further refined. it byrailtoInGOK’s beneficiationand open-pit quartzite field and then transports tonnes. Itcurrently minesiron ore from an iron ore production capacityof14million the endof2008.InGOKhasanannual according totheJORCstandards, asat Iron ore concentrateproduction Operating profit (EBIT) Revenue US$1,860 million US$4,248 million 31.3 mt 20 tonnes of pellets. iron ore concentrateand over11 million Volumes Divisional Production approximately 13.4milliontonnesof production capacityofSevGOKis three ore crushingfactories. Theannual factory, three pelletisingfactoriesand 12 16 0 4 8 n n

18.9 Pellets Merchant iron ore concentrate (millions oftonnes) 2007 13.3

18.7

2008 11.4

Business Review Business Review 26 9.5% Asia Eastern South (G 2008 SalesDynamics 0.6% CIS eographical Analysis) 14.1% Europe Rest of Divisional review 1.0% Africa Northern Middle Eastand 1.6% Other IRON OREDIVISION 73.2% Ukraine

Steel Works ofMariupol,Zaporizhstal steel producers, suchasIlyichIron and for iron ore materialsinclude domestic customersinUkraine Its mainexternal plants, suchasAzovstalandYenakiieve. and pelletstosupplyitsownsteelmaking sufficient amountsofiron ore concentrate As notedabove,Metinvestproduces Major Customers capacity of2.2milliontonnes pellets. and apelletisingfactorywithannual 5.5 million tonnesofiron ore concentrate with anannualproduction capacityof crushing factory, anore dressing factory of three processing factories:anore main production facilities of CGOK consist standards, asattheendof 2008.The of ore reserves, according totheJORC resources and included 724 million tonnes constituted 2,807 Ordzhonikidze depositswhich intotal Petrovskyi, Artyomovskyiand ferruginous quartziteattheHleyevatskyi, sources iron ore from largedepositsof Central MiningandProcessing Works recycling ore processing wastes.JSC underground miningofore aswell producer inUkraineutilising open-pitand CGOK is the largest iron ore raw materials Works (CGOK) JSC CentralMiningandProcessing

million tonnes of mineral continued production facilities Maximising theefficiency ofexisting • • • steel production facilities Providing iron ore totheGroup’s Strategic Objectives Iron Ore division’s totalrevenue. in aggregate, approximately 56.1%ofthe Metinvest’s iron ore divisionrepresented, customersof the top-10external divisional outputwasexported.In2008, many more. In2008,26.7% ofthetotal and SteelWorks, IDSDunaferr Zrt.and as Arcelor Mittal,U.S.Steel, Trinec Iron Europe,in CentralandEastern such a numberofsteelmakingcompanies long-term partnershipagreements with Works, amongstothers.Metinvest has Donbass” andDonetskstalIron andSteel the Corporation“IndustrialUnionof Integrated Iron andSteelWorks,

To implement anumberofprojects To strengthen anddiversifythe To ensure stableandcontinuous aimed atreducing production costs. raw materialsbase. division’s product portfolioand Metinvest’s steelproduction facilities. in order tomeettheneedsof supply ofiron ore rawmaterials AnnualReport 2008 improvement protection andlaboursafety technologies forenvironmental Investing inthemostadvanced Utilising production capacity Optimising the quality of raw materials first nine monthsof2008. domestic andglobal pricesforiron ore inthe previous year, followingsignificant growth in in 2008,compared toUS$656 millioninthe nearly tripledyear-on-year toUS$1,860 million The Iron Ore division’s operatingprofit (EBIT) • Key Milestonesin2008 • • • • • • • • •

The Iron Ore divisionobtained To provide healthyworkingconditions To introduce technologiesforthe To equipmentand usemodern To consolidateproposals intheCIS To increase production volumes To furtherimprove thequalityofraw To furtherimprove internal To control andmaintainproduction certifications incompliancewith environmental andindustrialsafety and professional development. providing opportunitiesfor education offering competitivesalaries and practices inlabourmanagement, for employeesbyimplementingbest industrial waste. recycling andreprocessing of minimising damagetotheenvironment. a numberofotherinitiativesaimedat as welltocontinueimplementing technologies atproduction plants, introduce up-to-dateenergy saving to managestrategicrisks. Europeanand Eastern markets improvements. of investmentsandoperating through anoptimalcombination markets. domestic andexternal competitive advantagesinboththe materials inorder toachievelong-term concentrate forsteelmaking. facilities withthehighqualityiron ore control.and internal processes, systemsmanagement systems, automationofproduction Enterprise Resource Planning(ERP) management byintroducing operating efficiency. systems inorder toimprove To provide Metinvest’s steel production AnnualReport 2008 performance in2008. impact onthedivision’s operating the acquisitionofInGOKhadapositive first ninemonthsof2008.Inaddition, and domesticpricesforiron ore inthe for raw materials and an increase in world largely resulted from growth indemand US$1,923 million in2007.Thisincrease US$4,248 million in2008,compared to than doubledyear-on-year to in 2007.Thedivision’s revenue more revenue in2008,compared to10.2% 19.9% ofMetinvest’s consolidated The Iron Ore divisionaccountedfor Sales • • • • •

Developed andintroduced anew Further improved itssalesand Introduced several projects to increase Began thefifth stageofmagnetic of itsproduction facilities. enhance theoperatingefficiency (SAP R/3)atInGOKtofurther Implemented anERPsystem 0.75 milliontonnes. volumes ofiron ore concentrateby year, increasing theannualproduction plant were alsolaunchedduringthe and #14oftheSevGOKprocessing increasing itto66.0%.Sections#13 improve thequalityofconcentrateby separation atSevGOKinorder to operations atInGOK. aimed atfurtherimproving its strategic multi-tiered programme exporting toChinaand Turkey. also expandeditssalesnetworkby Ukrainian steelproducers. Thedivision for thesupplyofiron ore materialsto large pricebenchmarkingexercise, long-term agreements, following a the divisionsignedanumberof customer networks.InJanuary2008, flotation separationatInGOK. pelletising machineandmagnetic the installationofLurgi278-B of sections#15and#16atSevGOK, its products, including the construction volume andtoimprove thequalityof its InGOKandCGOKsubsidiaries. OHSAS 18001byBureau Veritas for

management systemsinquality ore concentrate.InGOKhas certified amounts to14milliontonnesofiron basin. Theannualproduction capacity partoftheKryvyiRihironsouthern ore from theInguletsdepositsituated inthe concentrate, sourcing the raw materials and production ofmerchant iron ore InGOK specialisesiniron ore mining shares topartiescontrolled bySMART. in exchangeissued2,250newordinary and Processing Works from and SMART an 82.5%interest inJSCIngulets Mining In November2007,Metinvestacquired Recent M&AActivity working capital. pricing policyaswellminimising product portfolioandadjustmentofits production cycle,optimisationofits aim ofcuttingrawmaterialcostsinthe cost reduction programme withthe and itsmarketpositionsincludinga aimed atmaintainingfinancialcontrol implemented anumberofinitiatives pricing. Asaresult, thedivision decrease iniron ore production and demand forsteelproducts ledtothe of 2008.Thedeclineinconsumer division’s operationsinthefourthquarter in Ukrainehadanegativeimpactonthe and deterioratingeconomicconditions 34.1% in2007.Theglobalfinancialcrisis margin expandedto43.8%in2008from nine monthsof2008.Thedivision’s EBIT and globalpricesforiron ore inthefirst following significantgrowth indomestic to US$656 millionintheprevious year, US$1,860 million in2008,compared (EBIT) nearlytripledyear-on-year to The Iron Ore division’s operatingprofit Operating Profit (EBIT) the top-10iron ore producers worldwide. 53.0% andtherefore tobecomeoneof to increase itsproduction capacitiesby integration enabledtheIron Ore division Metinvest’s Iron Ore division.This InGOK hasbeenintegratedinto (SA 8000). Sincethebeginningof2008, (OHSAS 18001) andsocialresponsibility (ISO 14001), laboursafety (ISO 9001), environmental protection

Business Review Business Review 28 Divisional review Inkor &CoLLC(Inkor). products atseveralofitsfacilitiesincluding Additionally, thedivisionmanufactures chemical Coke &ChemicalsWorks (Avdiivka Coke). Company (Krasnodonvugillia)andJSCAvdiivka including JSCKrasnodonvugilliaCoalMining Group’s cokeandcoalproduction facilities The Coke&Coaldivisioncomprisesthe Coke &oalDIVISION

AnnualReport 2008 increasing theoverallqualityof high qualitycokingcoal,thereby us with access to large volumes of to ensure the best possible conditions the reporting period,Metinvestacquired As notedabove,followingthe end of Company (DTEK),anSCMsubsidiary. also buyscoalfrom DonbassFuelEnergy will ceaseproduction by2020.Metinvest Group believesthatfiveofthesemines seven underground coalminesbutthe reserves. Metinvestcurrently operates included 187milliontonnesofproven Commission ofMineralResources, and methodology oftheUkrainianState the endof2008,according tothe estimated at610 milliontonnes Metinvest’s coalresources were Coal Reserves coking coalinUkrainerespectively. production ofmetallurgical cokeand accounted for31.0%and21.3%oftotal in cokingcoal.In2008,theGroup Metinvest increased itsself-sufficiency LLC (UCC)inApril2009however, the acquisitionofUnitedCoalCompany buyer ofcokingcoalin2008.Following of itscokeneeds,butremained anet Metinvest isfullyself-sufficient interms in line with the previous year’s production. unit produced 5.2milliontonnes ofcoke, year-on-year, whilstMetinvest’s coke increasing itsproduction by7.7% 6.2 million tonnesofcokingcoal, In 2008,Krasnodonvugilliamined the Group’s steelproducts.” acquisition ofUCCwhichprovides very excitedabouttherecent for allofouremployees.W Group. W as itisthroughout therest ofthe priority fortheCoke&oaldivision, “Health andsafetyremains thehighest Coke &oalDIVISION Volodymyr Gusak e are constantlyworking AnnualReport 2008

e are also 1 Luhansk region ofthecountry, emerged In 2008,Krasnodonvugillia,located inthe Company (Krasnodonvugillia) JSC KrasnodonvugilliaCoal Mining Key Assets naphthalene toanumberofcountries. and cresols inUkraineandexports Inkor isthesoleproducer ofphenols customers. of Ukrainianandinternational sells itschemicalproducts toanumber coke wasconsumedinternally. Metinvest approximately 69.7%oftheproduced productioninternal needsand (74.0%) wasusedbytheGroup forits In 2008,themajorityofMetinvest’s coal sulphate, coal-tar pitch and crude benzol. chemical products including ammonium and cokebreeze aswell arangeof coke,nutcoke coking coal,blastfurnace The Coke&Coaldivisionproduces Products 19.0% EBIT marginexpandedto on page31. UCC, pleaseseeRecentM&AActivity further informationontheacquisitionof premium grademetallurgical coal.For than 80%ofthesereserves representing metallurgical andsteamcoal,withmore and probable reserves ofhighquality controls 157million UCC, aUS-basedcoalproducer, which Calculated in accordance withtheSEC guidelines,December 2008. Coking coalproduction Operating profit (EBIT) Revenue

1 tonnesofproven US$2,566 million US$487 million 6.2 mt in 2007respectively. output, compared to58.8%and41.2% accounted fortheremaining 36.4%of Azovstal’s cokeproduction facilities of Metinvest’s totalcokeoutputand In 2008,Avdiivka Cokeproduced 63.6% throughout theplantduringyear. blower andanairconditioningsystem coal reservoirs andinstalledanewgas company alsoreconstructed nine operating anewcokebattery. The January 2008,Avdiivka Cokestarted in theDonetskregion ofUkraine.In auxiliary plants.Thecompanyislocated a washingplantandchemical facilities, includingeightcokebatteries, in Europeproduction withmodern Avdiivka Cokeisatop-five cokeproducer (Avdiivka Coke) JSC Avdiivka Coke&Chemical Works and safetyofitsemployees. making majorinvestmentsintothehealth drilling equipmentfordegassing,thus mines, andithasalsopurchased new has improved theventilation inoneofits company hasopenedanewshaft,which plants andauxiliaryfacilities.The seven underground mines, twowashing Ukraine. Thecompanycurrently operates as thelargestproducer of coking coalin

Business Review Business Review Volumes Divisional Production 30 3 2 7.5 of acquisition(August2008). and Inkor. Inkor’s production isincludedfrom thedate in 2008and2007. Includes chemicalproduction atAzovstal,Avdiivka Coke Includes cokeproduction atAzovstal’s cokefacilities 1.5 3.0 4.5 6.0 0 n n n

Divisional review 5.7 Metallurgical coke Coking coal Chemical products (millions oftonnes) 5.2

2007 0.8

Coke &oalDIVISION

2 6.2

5.2

2008 0.8

and SteelWorks, Yenakiieve Cokeand Works toDonetskstal Iron andexternally Coke andJSCAzovstalIron andSteel sells cokingcoalprimarilytoAvdiivka Works ofMariupol.Krasnodonvugillia and SteelWorks andIlyichIron andSteel external coke customers are Makiivka Iron Metallurgical Works. Thedivision’s largest Iron &SteelWorks andJSCYenakiieve products toJSCAzovstal internally The Coke&Coaldivisionsellsitscoke Major Customers a newtraypackagingIineatInkor. at Inkor. In2008,Metinvestinstalled with theproduction ofnaphthalene phenol oilatAvdiivka Cokeandfinishing obtaining naphthalenefractionand from theprocessing ofcoal-tarto forms afullproduction cycle starting Inkor, together withAvdiivka Coke, 30,000 tonnesofphenolsandcresols. annual capacityofnaphthaleneand Inkor has60,000tonnesofinstalled producer ofnaphthalenein Europe. in Ukraineandisthesecond-largest naphthalene, phenolsandcresols Inkor istheleadingproducer ofrefined in theDonetskregion ofUkraine, August 2008.LocatedinDzerzhynsk Metinvest acquired Inkor& CoLLCin Inkor &CoLLC(Inkor) continued • • coal supplies Diversifying thedivision’s Strategic Objectives and France. Egypt, China,Pakistan,Poland,Russia sold totheUnitedKingdom,Germany, of itsphenolsandcresols’ outputis Saudi ArabiaandtheUAE,while75.0% exported toIndia,China,Egypt,Turkey, 100% ofitsnaphthaleneproduction is majority ofitschemicalproducts abroad: The Coke&Coaldivisionsellsthe Yasinovsky Coke andChemicalWorks. Chemical Works, Zaporizhia Cokeand Chemical Works, Makiivka Cokeand

UCC, theUS-basedcompany that Metinvest intendstodiversifyand expects tobenefit from theproduction sulphur content.Asaresult, Metinvest quality metallurgicalcoalwithlow possesses significant reserves ofhigh Metinvest acquired inApril2009, be equippedwithPCItechnology. Metinvest’s whichwill blastfurnaces production ofpigiron atthoseof to importPCIcoalforuseinthe and Australia.Metinvestalsoplans CIS, primarilytheUnitedStates coal from countriesoutsideofthe imports ofhighquality, lowsulphur secure itssuppliesofcoalthrough AnnualReport 2008 Improving standards ofproduction Optimising production costs • • • Environmental (HSE)initiatives Prioritising Health,Safety& coke and coalinthefirst nine monthsof2008. year, followingasignificantgrowth inpricesof compared toUS$161millionintheprevious tripled year-on-year toUS$487millionin 2008, The Coke&Coaldivision’s EBITmore than

active participantinthetradingofCO division alsoplanstobecomean their operations.TheCoke&Coal in order toincrease theefficiency of improvements atitswashingplants on implementingaprogramme of subsidiaries. Thedivisionisfocused fibre opticcommunications atits for itschemicalproducts and bylaying packaginglines installation ofmodern its production standards through the Metinvest planstofurtherimprove Metinvest intendstooptimise Metinvest plansanumberofinitiatives standards ofmaintenance. equipment andimproving its the qualityofrepairs ofproduction management isfocusedonmonitoring production equipment.The division’s and tocarryoutrepair works of purchasing andsupplierrelationships costs andheadcount;tooptimiseits control andreduction ofitsenergy comprehensive programme forthe It alsointendstointroduce a utilisation ofitsproduction capacities. demand through themore efficient coal plantsinaccordance withcurrent production volumesatitscokeand ensure compliancewithbestpractice. other facilitieswithinthedivisionto continues toimplementstandards at standards forKrasnodonvugilliaand Certificate ofCompliancewithOHSAS practices. TheGroup hasobtaineda according tobestinternational objectives which have been developed with regard totheexecutionofitsHSE Coal division. UCC operationsintotheCoke& begin theintegrationprocess with In 2009,Metinvestintendsto higher qualitysteelproducts. of highqualitycokeand,therefore, emissions quotas. AnnualReport 2008

up 43.3%from 2007(FY07: 53.3% in2007. total revenues in2008,compared to accounted for48.7%ofthedivision’s coke demandrespectively. TheGroup 69.7% ofMetinvest’s coaland internal In 2008,thedivisionmet74.0%and 1.8% year-on-year to0.8milliontonnes. whilst chemicalproducts increased by 7.7% year-on-year to6.2milliontonnes the production volumesof coalgrew by US$188 pertonnein2008.Inaddition, prices totheaverageweightedpriceof 75.6% year-on-year increase incoal to US$390pertonnein2008andthe price ofcokeby85.6%year-on-year the increase intheaverage weighted in 2007.Thisgrowth largely reflected revenues for2008compared to11.3% 10.0% ofMetinvest’s consolidated US$1,791 million) andaccountedfor revenue ofUS$2,566 millionin2008, The Coke&Coaldivisionreported Sales • • • Key Milestonesin2008 • Developing andmotivatingemployees

Molodogvardeyskaya mine. in Krasnodonvugillia’s and constructedanewshaft professionals initsbusinessunits. management of Metinvest and financial two pilottrainingprojects forsenior The Group ispresently conducting in itspersonneltrainingcentres. training sessionswithitssubsidiaries Metinvest intendstoholdjoint subsidiaries ofMetinvest.Inparticular, and motivatingitsstaff inallofthe set ofprocedures fordeveloping Began operatinganewcokebattery aventilationsystem Modernised Developed acomprehensive plan The Group intendstocreate aunified drilling equipment. Vostochnaya mineandinstallednew in Krasnodonvugillia’s Sukhodolskaya- to improve degasificationnetworks at Avdiivka Coke.

of 157million possesses proven andprobable reserves coal intheUnitedStates.TheCompany of theleadingproducers ofmetallurgical the strategicacquisitionofUCC,one On 30April2009,Metinvestcompleted Recent M&AActivity in 2007. expanded to19.0%in2008from 9.0% of 2008.Thedivision’s EBITmargin of cokeandcoalinthefirstninemonths following a significant growth in the prices to US$161 millionintheprevious year, US$487 million in2008,compared more thantripledyear-on-year to The Coke&Coaldivision’s EBIT EBIT 4 into itsCoke&Coaldivision. the fullintegrationofUCC’s operations In 2009,Metinvestintendstobegin far belowtheUSnationalaverage. safety culture withlost-time injuryrates previous year. UCCpossessesastrong compared to8.0milliontonnes inthe produced 9.8milliontonnes ofcoal, andKentucky.Virginia In2008,UCC four miningcomplexesinWest Virginia, steelproducts.in turn, UCCoperates production ofhighqualitycoke and, Metinvest expectstobenefitfrom the tonnes ofmetallurgicalcoal.Asaresult, including approximately 180 million be availableforleasinginthefuture, of contiguouscoalreserves whichmay to approximately 227million tonnes content andsteamcoalhasaccess metallurgical coalwithlowsulphur year-on-year respectively. Europe increased by63.5%and9.8% Sales tocustomersinUkraineand Ukraine, compared to89.4%in2007. & Coaldivisionwere tocustomersin of thethird-party saleswithintheCoke For theyear, approximately 92.8% December 2008. Calculated inaccordance withtheSECguidelines, 4 tonnesofhighquality

Business Review Steel & rolled products DIVISION The Steel & Rolled Products division comprises the steelmaking, rolled products and large diameter pipe manufacturing businesses of Metinvest. In 2008, the operating companies of this division produced 8.2 million tonnes of crude steel and over 9.2 million tonnes of finished goods, including 0.4 million tonnes of large diameter line pipes. Business Review Divisi o n al re vi ew

32 Annual Report 2008 long-term partnerships.” and developing mutually beneficial them withworld-classservice relationships with clients, providing on expandinganddeepeningour • rails, channelsandmerchant bars. hot-rolled coils,pipes,wire-rods, re-bars, include slabs,billets,hot-rolled plates, Metinvest’s steelandrolled products Products products. W products towards more value-added production awayfrom semi-finished In thelong-term,ouraimistoshift Metinvest’s globalsalesnetwork. marketsthroughkey international quality products thatare soldin produces awiderangeofhigh “The Steel&RolledProducts division Steel &rolledproductsDIVISION Jack MacLachln

for furtherrolling. from theirownsteel-makingfacilities mills are suppliedwithslabsandbillets products. Metinvest’s downstream mills thatproduce finishedlong are mainlydelivered tomanufacturing Metallurgical Works (Yenakiieve) and produced atJSCYenakiieve 100-150mm x4,000-12,000mmare with across sectionof100-150mmx as steelplatesandcoils.Steelbillets producers offlat-rolled products such to end-users,whoare typically requirements andare primarilysold according tothecustomers’ (Azovstal) inavarietyofsteelgrades JSC AzovstalIron &Steel Works 5,000-10,000mm, are produced at 220-270mm x1,250-1,900mm as slabswithacross section of rolled products. Slabproducts, such to re-rollers whichproduce finished S.A.,primarily Metinvest International Slabs andbilletsare soldthrough AnnualReport 2008 e are alsofocused

• • • 17.6% EBIT marginexpandedto Crude steelproduction Operating profit (EBIT) Revenue

constructions, amongst pipe weldingandsteelclad and automotivemanufacturing, for variouspurposesinmachine are produced atFVandare used maximum widthof1,500mm,which of 1.8-20mminthicknesswitha manufacturing andpipeproduction. of construction,automotive building, shipbuilding,varioustypes machinery manufacturing,bridge range ofapplicationsincluding UK Ltd(Spartan).Theyhaveawide Trametal S.p.A. (Trametal) andSpartan Valsider S.p.A.(FV),Metinvest are produced atAzovstal,Ferriera with athicknessof6-150mmwhich long pipeswhich are 1,220-1,420mm, diameter anddouble-seam12-metre- single-seam pipesof406-1,422mm in also produces longitudinallywelded in diameter)theCIS.Khartsyzsk line pipes(406-1,422mm,or18-56", producer of SAW longitudinally welded Works (Khartsyzsk)plantisthelargest Metinvest’s JSCKhartsyzskTube gas pipelinesandheatnetworks. of diametersthatare usedinoiland Pipes other functions. Hot-rolled coils Hot-rolled plates are steelproducts withavariety are thinflatproducts are flatproducts US$1,648 million US$9,343 million 8.2 mt of modern international standards. international of modern compliance withthestrictrequirements hot-rolled steelandpipes,are infull finished products, whichare primarily qualitative parametersoftheCompany’s steel production (downstream). The and ore mining(upstream) tofinished integrated production process, from coal is monitored ateverystageofan The qualityofMetinvest’s steelproducts • • • •

water, gasand oilpipelineswitha or 48-56",indiameter, forusein building ofbridgesandrailcars. used inconstruction,suchasthe at Yenakiieve andAzovstalare cross sections,whichare produced long-rolled products withavarietyof steel cords andotherwire products. used inthemanufacturingofwires, a diameterof5.5-12.5mmthatare industry, particularly withinreinforced and are usedintheconstruction which are produced atYenakiieve used fortheconstructionofrailways. are produced atAzovstalandare Channels Rails concrete structures. Re-bars Wire-rods working pressure ofupto10.2 MPa. are long-rolled products which are long-rolled products andmerchant barsare are long steel products with

Business Review Business Review in 2008(millionsoftonnes) D 34 * channels andmerchant bars. Note: “Sections”includeswire-rods, re-bars rails, ivision 2.9 Billets 1.0 Sections* Divisional review a l 0.4 Pipes P roduction 2.5 Slabs 2.2 Hot-rolled plates Steel &rolledproductsDIVISION 0.2 Hot-rolled coils

V olumes

of Azovstal’s products are exported. to 69.3% in 2007. A significant percentage Metinvest’s totalsteeloutput,compared In 2008,Azovstalproduced 66.8%of to theMariupol,andothersea ports. transportation ofgoodsfrom Azovstal at Mariupol,whichprovides cabotage operates amarinetransportationfacility fastener plant.Azovstalalsoownsand heavy sections mills); grind balls; and a rail that produce longproducts (merchant and including aplatemillandtworolling mills and BOFplant;rolled products facilities, steelmaking complexwithanOHFplant a a BFplantwithfiveblastfurnaces; comprised of:cokeandsinterplants; Azovstal’s production facilitiesare of highqualityrailwayrailsinUkraine. slabs. Azovstalisalsothesoleproducer world-class suppliersofsteelconcast terms ofproduction volume amongst of theGroup, andisranked secondin leading facilitywithinthesteelmakingarm JSC AzovstalIron &Steel Works isthe (Azovstal) JSC AzovstalIron &Steel Works Key Assets

a workingpressure of up to10.2MPa. used inwater, gasandoilpipelineswith diameter x12mlong.Thesepipes are that are 1,220-1,420mm(or48-56")in (or 18-56"),aswelldoubleseampipes which are 406-1,422mmindiameter longitudinally weldedsingleseampipes and #4.The#2plantmanufactures of KhTWare pipeweldingplants#2 worldwide. Themainproduction facilities oil andgaspipelinesheatnetworks which are usedintheconstructionof welded linepipes(478-1,422mm), producer intheCISofSAW longitudinally JSC Khartsyzsk Tube Works is the largest JSC KhartsyzskTube Works (KhTW) to 30.7%in2007. Metinvest’s totalsteeloutput,compared In 2008,Yenakiieve produced 33.2%of alloyed steelgrades. structures, andlow-carbon andlow- rolled square billets,sections,carbon The Companyproduces concast and world’s leadingconcastbilletproducers. JSC Yenakiieve SteelGroup isoneofthe (Yenakiieve) JSC Yenakiieve SteelGroup continued AnnualReport 2008 boiler andpressure vessels,pipelines used for structural purposes, shipbuilding, applications, includingsteelwhichis plates andcoilshaveawiderangeof coil onanannualbasis.FV’s heavy of flat-rolled products andhot-rolled FV produces more than500,000tonnes carbon steelplatesandhot-rolled coil. re-rolling companywhichproduces Ferriera Valsider S.p.A.isanItalian Ferriera Valsider S.p.A.(FV) to 5.3%in2007. Metinvest’s totalsteeloutput,compared In 2008,KhTWaccountedfor4.0%of them a lifespan of approximately 30 years. inner andoutersurfaces,whichgives a corrosion-resistant coatingtoboththeir reversing millfrom importedslabs. as itsplatesare produced inamodern uses innovativeproduction methods as otherconsumersectors.Spartan and heavyengineeringindustriesaswell carbon steelplatesfortheconstruction manufactures a wide range of high-quality of England,SpartanUKLtd(Spartan) Established in2001theNortheast of customersatisfaction. customers, whichresult in highlevels and reliable deliveryofitsproducts to and logisticalprocesses, and theefficient innovation, flexibilityinitsmanufacturing quality ofitsproducts, technological differentiates itselfthrough thehigh of plates.BasedinItaly, Trametal annual capacityof0.56milliontonnes heavy plates.Thecompanyhasatotal producer ofhighqualitycarbon steel well-established andinnovativeEuropean Metinvest Trametal S.p.A.(Trametal) isa UK Ltd Metinvest Trametal S.p.A.&Spartan and guardrails. At plant#4,allpipesproduced receive international markets. international through which itreaches customers inkey Metinvest hasalargeglobalsales network AnnualReport 2008

of thedivision’s total revenue. represented approximately 27.1% division’s customers top-10external In 2008,theSteel&RolledProducts Ukrzaliznystia, Al-EzzandEmiratesIron. Astoria BusinessVentures, Inc., Eurasian PipelineConsortiumTOO, and in2008includedIlvaS.p.A., and rolled products islargeanddiverse The customerbaseforMetinvest’s steel Major Customers its networkofservicecentres inRussia. and theCompanyalsoplanstodevelop outside ofUkraine,inBelgrade,Serbia, opened itsfirstmetalservicecentre of delivery. In February2008,theGroup bundles tothecustomer’s specifiedpoint cutting, bundlingandtransportationof customers a number of services including the CIS.MetinvestSMCcentres offer directly toend-customersinUkraineand manufactured byothersteelproducers, steel products, aswellthose Ukraine. MetinvestSMCsellstheGroup’s which isthelargestretail steeltraderin Metinvest SMCLLC(MetinvestSMC), sales network,theGroup alsooperates In additiontoMetinvest’s international within theRussianFederation. Metinvest’s steelproducts tothemarkets market andMetinvestEurasiaLLCsells steel products intheUkrainianandCIS LLC, locatedinDonetsk,sellsMetinvest’s S.A., basedinGeneva.MetinvestUkraine the CIS)through MetinvestInternational products toexportmarkets(excluding The Group sellsitssteelandiron ore markets. customers inkeyinternational network through whichitreaches Metinvest hasalargeglobalsales SalesNetwork International ( 2008 Salesdynamics 13.6% North Africa Middle Eastand Geographical Analysis 33.8% Europe Rest of 7.5% Other 16.7% Ukraine

16.6% Asia South East 11.8% CIS )

Business Review Business Review 36 Divisional review Steel &rolledproductsDIVISION and prospective salesmarkets. even more competitiveinitscurrent thereby enablingMetinvesttobecome improve itsqualitycharacteristics, reduce itsiron production costsand content. ThiswillhelptheGroup to of metallurgicalcoalwithlowsulphur now hasaccesstosignificant reserves LLC (UCC)inApril2009,theGroup the acquisitionofUnitedCoalCompany processes inthenearfuture. Following technology intoitssteelproduction Metinvest isplanningtointroduce PCI facilitiesovertime. of itsblastfurnace andreconstructionmodernisation and production efficiency through the raw materialandenergyconsumption and sustainingworld-classlevelsin The divisionisalsofocusedonreaching in themarket. services, whichcommandapremium towards value-addedproducts and away from semi-finished products operations andshifttheproduct portfolio Products divisionistoharmonise all The long-termgoaloftheSteel&Rolled Strategic Objectives led tobottom-lineimprovements Continuous improvement programme • • top- andbottom-linegrowth High utilisationratesresulted instrong Key Milestonesin2008 produced atthelowestpossible cost. planned for, enabling products tobe demands canbeanticipatedand process withclientswhereby customer sales function,andcreate a collaborative establish amore efficient client-centric division aimstodiversifyitsclientbasis, Finally, theSteel &RolledProducts

A continuousimprovement High utilisationratesreported inthe had adirect impactonthebottom-line. speeds andenergyutilisation, which to optimiseproduction yieldsand programme wasimplementedinorder in thelastthree monthsoftheyear. demand andpricingbegantosoften growth fortheyear, eventhough led tostrong top-andbottom-line high. Thecombinationofthesefactors the yearaspricesreached anall-time important inthefirstsixmonthsof facilities in2008whichwasespecially division’s iron andsteelproduction continued AnnualReport 2008 further broadened andstrengthened The division’s managementteamwas steel production oftheMetinvest’sfull modernisation Long-term plansputinplaceforthe • • • long-term benefits development andmarketingtoyield New approach towards product in thefirstnine months of2008. a significantgrowth inpricesforsteelproducts US$1,015 million intheprevious year, following to US$1,648millionin2008,compared to operating profit (EBIT)increased by62.3% The Steel&RolledProducts division’s

The leadershipofthedivisionwas Established aProject Management Launched aProduct &Marketing within thePMO. of HR,andarangenewemployees a newFinanceDirector, anewDirector including a new Director of Purchasing, of globalbusinessbackgrounds of newexecutivesfrom adiverse range greatly enhancedthrough theaddition prudent mannerinthecomingyears. improve itscostcompetitiveness ina the divisiontoupgradeitsfacilitiesand flexible andmodularfashion,enabling emphasis onhotprocesses), ina steel producing operations (withan complete modernisation of the Group’s implemented detailedplansforthe investments. ThePMOhas optimise thedivision’s CAPEX long-term plantomanageand Office (PMO)inorder todevelopa new marketandclientneeds. CAPEX investmentsare alignedto the longterm,willensure thatplanned on athree tofiveyearhorizonand,in the division to plan supply and demand markets. ThePMDinitiativewillenable innovative newproducts and/or customer-centred developmentof and marginsthrough thetimelyand at protecting Metinvest’s marketshare Development (PMD)initiativeaimed AnnualReport 2008 Action Planresulted insignificant Early adoptionofAnti-Crisis in 2007. compared to78.5%oftotal revenue consolidated revenues for 2008, represented 70.1%ofMetinvest’s US$5,895 million).Thisdivisiontherefore in 2008,up58.9%from 2007 (FY07: reported revenue ofUS$9,343million The Steel&RolledProducts division Sales • • • cost savings

Overall, thedivisionreacted quickly Accelerated theshuttingdownof Adopted anAnti-CrisisActionPlan and non-vitalmaintenanceactivities. investments, capitaldevelopment employment costs,training in areas suchascashconsumption, and tomakesignificant reductions was abletocututilisationrates By expeditingtheseplans,thedivision as aresult oftheglobalfinancialcrisis. in thelastthree monthsoftheyear in thedemandforitssteelproducts response toasignificantweakening early inthesecondhalfof2008 by theGroup’s verticalintegration. the importance of the flexibility afforded players intheindustry, underscoring greater degree thanmanyother able tostabiliseitsbusinessa market dynamicsandwastherefore and effectively torapidlychanging thus created furthersavingsin 2008. scheduled to take place at a later time, whichwasalreadyfurnaces, certain cokeovensandolderblast management’s expectations. and reported results inlinewith rapidly tochangingmarketdynamics division wasabletoadjustitsbusiness in thelastquarterofyear, the pricing begantodeclinesignificantly of 2008.Eventhoughdemandand markets throughout thefirstninemonths products andhighpricesintheglobal the result ofhighdemandforsteel The strong top-linegrowth wasprimarily of platessupplied. producer globallyinterms of thevolume industry andtheGroup isnow atop-10 become asignificantplayerintheplate Spartan hasenabledMetinvestto Group. TheadditionofTrametal and providing anumberofsynergies forthe Steel &RolledProducts division, form onebusinessunitwithinMetinvest’s have beenintegratedwithFVandnow at theendof2008.Thetwobusinesses exceeded 0.8milliontonnesofplateas combined annualcapacityoftheplants in ItalyandSpartantheUK.The heavy plates,withTrametal beinglocated producers ofhighqualitycarbon steel The twocompaniesare both modern were givenregulatory approval in2008. Metinvest in2007,andbothtransactions Trametal and Spartanwere acquired by and SpartanUKLtd(Spartan) Metinvest Trametal S.p.A.(Trametal) Recent M&AActivity 17.2% in2007. EBIT marginwas17.6%in2008,upfrom first ninemonthsof2008.Thedivision’s growth inpricesforsteelproducts inthe previous year, followingasignificant compared toUS$1,015millioninthe 62.3% toUS$1,648millionin2008, operating profit (EBIT)increased by The Steel&RolledProducts division’s Operating Profit (EBIT)

Business Review Management and Governance 38 Corporate Governance and communications. transparency throughout allofitsactivities and highest levelsofcorporategovernance practices. TheGroup strivestomaintainthe system inaccordancebest withinternational and aimstodevelopitscorporategovernance the importanceofsoundcorporategovernance Metinvest Group EXECUTIVE COMMITTEE SUPERVISORY BOARD BUSINESS UNITS (ten members) (ten members) • • • • • • related to the Group’s activities, including: Board isresponsible forkeydecisions Independent Directors. TheSupervisory of tenSupervisoryBoard membersare (our25%shareholder).SMART Two out shareholder) andthree membersby nominated bySCM(our75% of tenmembers,sevenwhichwere A SupervisoryBoard currently consists Supervisory Board

on businessplantargets Approval of allM&Atransactions Approval oftheGroup’s annual Approval auditor oftheexternal Appointment ofthetopmanagement, Annual assessmentofthedelivery Approval ofMetinvest’s long-term reports andfinancialstatements on annualbonuses system andKPIsdecisions approval oftheircompensation business plans business strategyandannual (Metinvest)recognises its subsidiaries the Companyandmostof IFRS onanannualbasisfor statements inaccordancewith by PricewaterhouseCoopers > > > > > > Compensation&Appointment Health,Safety&Environment Audit Strategy Metinvestproducesﬁnancial Financialstatementsaudited FINANCIAL REPORTING the SupervisoryBoard) BOARD COMMITTEES (Specialised areasof expertise tosupport

the followingfourBoard Committees: The SupervisoryBoard isassistedby Board Committees • • • • • • •

Compensation &Appointment Health, Safety&Environment Audit Committee Strategy Committee Board’s fourCommittees(seebelow). of workandannualreports forthe Approval oftheannualschedule Approval fundraising ofexternal Approval ofallinvestment projects Committee. (HSE) Committee US$50 million decisions foramountsexceeding with budgetsexceedingUS$20million AnnualReport 2008

• • • • for thefollowingareas: The HSECommitteeisresponsible safety culture throughout theGroup. of health,labour, andenvironmental in implementingthehigheststandards the managementteamwithsupport The HSECommittee’s aimistoprovide (HSE) Committee Health, Safety&Environment • • • • • • • responsible forthefollowingareas: audit function.TheAuditCommitteeis analyse andsupporttheGroup’s internal The aimoftheAuditCommitteeisto Audit Committee • • • Board onthefollowingtopics: recommendations totheSupervisory Committee istoreview andprovide The keyresponsibility oftheStrategy Strategy Committee

recommendations on for managingrisk,including control systemandtheprocedures Review ofinvestigationsand Development andimplementation Involvement inkeyHSEprojects, Recommendations totheSupervisory Compliance withlegislationand Analysis andsupportoftheinternal Analysis oftheGroup’s internal auditor Relationship withtheexternal auditor be appointedastheexternal Recommendations onnomineesto Financial reporting processes, Investment projects withbudgets M&A projects Strategic objectivesofthe highest international standardshighest international reporting inaccordance withthe of areliable systemofHSEmanagerial and newbusinesses Group, includingitsexisting environment (bothon-siteandoff-site) resulting indamagetohealthor accidents andothermajor preliminary conclusionsforfatal of plansandbudgets including analysisandtheapproval of theGroup’s HSEstrategy the developmentandimplementation Group’s financialstatements. Board regarding theapproval ofthe business conductstandards audit system their improvement accounting policies any changestotheGroup’s including recommendations regarding exceeding US$20million. Leadership and proactive promotion of AnnualReport 2008

• • The IADperformsthefollowingfunctions: comprises fivemembers. AuditDepartmentofMetinvest Internal basis. Asof31 December2008,the management oftheGroup onaregular to theAuditCommitteeandsenior Department reports onits performance control, accountingandaudit. The experience andexpertiseininternal The IADcomprisesprofessionals with as tosupporttheAuditCommittee. and corporatemanagement,aswell controlmanagement system,internal improvement oftheGroup’s risk The IADwascreated tofacilitate AuditDepartment(IAD) Internal • • • • • • following areas: Committee isresponsible forthe The Compensation&Appointment Appointment Committee Compensation & • •

Ensuring thecomplianceof Providing anindependentand The Group’s motivation,assessment The Group’s successionpolicy Recommendations totheSupervisory Recommendations totheSupervisory The termsandconditionsofthe Organisation ofplannedand Discovery oftheactualcauses minimise risksforthefuture development ofactionplansto of fatalitiesandaccidents, and theknowledgeskills sites (i.e.processes, controls, real-life HSEpracticesatproduction unplanned sitevisitstocheckthe regulatory requirements. Group’s andexternal internal on theirimprovement as preparing recommendations controlinternal system,aswell Group’s riskmanagementand sufficiency andefficiency ofthe unbiased assessmentofthe and reward systems. for seniormanagement Board onKPIsandannual bonuses within MetinvestGroup appointments fortheseniorpositions Board ondismissalsandnew positions notedabove employment contractsforthe Group’s enterprises including GeneralDirectors ofthe and topmanagersoftheGroup, members oftheExecutiveCommittee of staff and management). The frameworkfortheremuneration of

of itsmajorentities. at theGroup’s headquartersandinmost The Departmenthasallocatedresources the implementation of the IC&RM system. Department provides active supportin Control &RiskManagement Commission (COSO).TheInternal Organisations oftheTreadway by theCommitteeofSponsoring Integrated Framework”developed as the“EnterpriseRiskManagement– controland internal frameworks,such riskmanagement on leadinginternational Metinvest’s IC&RMsystemisbased • • • • for thefollowingareas: Metinvest’s IC&RMisresponsible in atimelyandefficient manner. are identified,monitored andcontrolled system toensure thatsignificantrisks Management introduced theIC&RM performance. goals, aswellstrong financial Company’s strategicandoperational significant supportinachievingthe enterprise managementprovides controlinternal systemandeffective Management believesthatMetinvest’s (IC&RM) ControlInternal &Risk Management reviewing financialandoperating results. business processes andstructures and as wellapproving newfunctions, management reports andaccounts Board isalsoresponsible forpreparing business andaffairs. TheExecutive day-to-day managementoftheGroup’s Metinvest Group whoare inchargeof body consistingofkeytopmanagers The ExecutiveCommitteeisaworking consisted oftenmembersin2008. Metinvest Group’s ExecutiveCommittee Executive Committee •

Development andimplementationof Implementation ofacommonand Monitoring ofrisksthattheholding Achievement ofthegoalssetby Introduction ofasystem internal the Group’s management appropriate measures ofriskresponse levels oftheGroup in decision-makingprocesses atall formal approach toriskmanagement of theorganisation) potential impact(across alllevels their degree ofprobability and company mayfaceandunderstanding mitigate risks. and effectiveness ofmeasures to control toensure theimplementation

Management and Governance Management and Governance 40 EXECUTIVE COMMITTEE • • Education: FSU (Moscow, Russia) 2000-2002 –BusinessAnalyst,McKinsey&Company, Inc. (Moscow, Russia) 2002-2003 –Associate,McKinsey&Company, Inc.FSU Irkutskenergo (Irkutsk,Russia) of Affiliated andAssociatedCompaniesManagement, Information Technologies &AdvisorforExecutiveDirector 2003-2004 –DeputyDirector ofDevelopmentand System CapitalManagement(SCM) 2004-2005 –M&AandBusinessDevelopmentManager, Metinvest HoldingLLC Since 2006–Director forStrategy&Investments, • • • Education andMemberships: Western NISEnterpriseFund(Kyiv, Ukraine) 1995-1997 –Credit Manager, PricewaterhouseCoopers (Kyiv, Ukraine) 1999-2002 –SeniorConsultant, System CapitalManagement(SCM) 2002-2006 –SeniorManager, Metinvest HoldingLLC Since 2006–GeneralDirector, Director ofStrategy &Investments Andrey Bolshakov General Director,MetivestHoldigLLC Executive Director,MetinvestB.V. IGOR SYRY

MBA Degree from Harvard BusinessSchool(USA) BS Degree from theUniversityofMaryland(USA) Member oftheAssociationChartered Certified Certified FinancialAnalyst(CFA) MBA degree fromUniversity(USA) Cornell Accountants (ACCA)intheUK

Education andMemberships: 1995-1996 –SeniorAnalyst,FidelityInvestments(USA) Philip Morris(USA) 1997-1998 –Budgeting&ReportingManager, 1998-2001 –FinancialController, Cereol (France) Japan Tobacco (JTI)(Ukraine) International 2001-2003 –FinancialDirector, 2003-2004 –FinancialDirector, Bunge(Ukraine) JSC AzovstalIron &SteelWorks (Ukraine) 2004-2006 –FinancialDirector, Metinvest HoldingLLC • • • Since 2006 • • • • Education andMemberships: Engineering (UK) Management/Engineering &Maintenance/Capital Project 1980-1989 –AtBritishSteelCorporation:Operations Manager, ClydesdaleTube MillsandServices(UK) Chief Engineer, Seamless Tubes Ltd; (Ebbw Vale Works/Redcar Ironworks Tinplate Teesside); 1989-1999 –AtBritishSteelPlc:Works Manager Tuscaloosa SteelCorporation (USA) President1999-2000 –Vice Manufacturing, Director (LightStripProducts UK/StripProducts UK)(UK) Managing Director, ColoursBusiness;Manufacturing 2000-2004 –AtCorusStripProducts Division: Continuous Improvement), CorusGroup Plc(UK) 2004-2007 –ManagingDirector (ManufacturingExcellence/ Products division,MetinvestHoldingLLC 2007-2008 –ChiefOperatingOfficer, Steel&Rolled Metinvest HoldingLLC Since 2008–Director ofSteel&RolledProducts Division, Chief FinacialOfficer Sergiy Novikov Director ofSteel&RolledProducts Jack MacLachlan

and Technology (CEng,FIET) Member ofAssociationChartered Certified Certified FinancialAnalyst(CFA) MBA Degree from theUniversityofCincinnati(USA) Chartered Engineer, Fellow InstitutionofEngineering BSc (firstclasshonours)inElectricalandElectronic MBA Degree from theUniversityofWarwick (UK) Leadership ProgrammeInternational at Wharton Business Accountants (ACCA)intheUK Engineering from Strathclyde University(UK) School (USA) –ChiefFinancialOfficer (CFO), AnnualReport 2008

• Education: Arkhangelskgeology, Russia) Siyanie Company, Ltd.(JVbetweenConoco,USAand 1994-2000 –Materials&LogisticsTeam Leader, Severnoye (Moscow, Russia) Manager, DuPont-Russia, DuPont Safety Resources Division 1998-2004 –Consultant(Part-time),thenOperations (Moscow, Russia) & Environment Department,TNK-BP, GasBusiness 2005-2008 –Manager, then Director ofHealth,Safety (HSE) Director, MetinvestHoldingLLC Since May2008–CorporateHealth,Safety&Environment • Education: OJSC Y 1997-1998 –HeadofFinance&Commerce Department, Commerce, OJSCY 1998-2001 –DeputyGeneralDirector forFinance& (an NGO) Economic Relations,AcademyofMiningScienceUkraine 2001-2002 –DeputyPresident forEconomy&External OJSC Y 2002-2003 – Deputy Chairman of the Board for Commerce, Processing Works (CGOK) 2003-2004 –GeneralDirector, JSCCentralMiningand post), JSCCentralMiningandProcessing Works (CGOK) Processing Works (SevGOK);GeneralDirector (asasecond 2004-2006 –GeneralDirector, Miningand JSCSeverniy Metinvest HoldingLLC Since 2006–HonoraryDirector ofIron Ore Division, (HSE) Director Corporate Health, Safety&Environmet SergEy R Honorar oLEXANDR VILKUL

Degree inMechanicalEngineeringfrom VladimirState University (Vladimir, Russia) Degree inMiningEngineeringfrom KryvyiRihTechnical University (Ukraine) uzhniy MiningandProcessing Works uzhniy MiningandProcessing Works y DirectorofIronOreivisio yabov uzhniy MiningandProcessing Works AnnualReport 2008 • • • • • Education: Group forUkrainianGovernment 1994-1996 –Advisor, Soros-Aslund EconomicAdvisory Company (USA) 1998 –Project Administrator, ChemonicsConsulting & Privatisation(Ukraine) 1999 –Accountant,Centre forEconomicReforms Department, DeloitteTouche Tohmatsu (Ukraine) 2000-2002 –Financial Analyst; Deputy Head of Restructuring 2002-2005 –Manager, SystemCapitalManagement(SCM) Metinvest HoldingLLC Education andMemberships: Iron &SteelWorks (Mariupol,Ukraine) 1990-1999 –HeadofLegalDepartment,JSCAzovstal Leman CommoditiesS.A.(Geneva) 1999-2006 –DeputyDirector, HeadofLegalDepartment, Metinvest HoldingLLC Since 2006–ChiefLegalOfficer/Head ofLegalFunction, • • Positions inOtherOrganisations: • • Since 2006 Chief LegalOfficer Igor Golchenko Director ofCoke&oaldivision Volodymyr Gusak

Chernihiv LawCollege (Chernihiv,Chernihiv Ukraine) Member oftheCommissionMinistry Industrial Certified Trustee, CrisisManager&Liquidator Member ofUkrainianBarAssociation Law Degree from DonetskStateUniversityand Candidate forMasterofLaws(LL.M)from Suffolk Policy ofUkraine in 2010 University LawSchool(Boston,USA),duetograduate Member oftheSupervisoryBoard atDonetskcoke Member oftheSupervisoryBoard atZaporizhcoke Degree inEnglish/GermanTranslation from Kyiv Masters Degree inEconomicsfrom Texas A&M Coking Plant Coking Plants Shevchenko NationalUniversity(Ukraine) University (USA) –Director ofCoke&CoalDivision,

• • • • Education: in Ukraine Affairs1981-2003 –SeveralpositionswithInternal bodies (Kramatorsk, Ukraine) Department, KramatorskHeavyMachine-Tool Plant 2003-2004 –DeputyGeneralDirector, BusinessSecurity Works (SevGOK) for BusinessSecurity, MiningandProcessing JSCSeverniy 2004-2006 –HeadofSecurityDepartment,thenDirector Holding LLC Education: Economic Relations(Minsk,Belarus) 1991-1994 –AssistanttotheMinister, MinistryofForeign Coca-Cola Company(Kyiv, Ukraine) 1996-2003 –Director, PublicAffairs &Communications, (Moscow, Russia) Groupat PRAgencyTheWillard –Burson-Marsteller 2004-2007 –Director, CorporateCommunications Metinvest HoldingLLC Since 2007–CorporateCommunicationsDirector, Since 2006–BusinessSecurityDirector, Metinvest Corporate Communicatio ns Director IGOR Kirilyuk Business SecurityDirector Volodymyr Bantush

of Foreign Languages(Minsk,Belarus) and Technical University(Kyiv, Ukraine) Degree inEnglish/Germanfrom MinskStateInstitute Master ofScienceinManagementfrom NewY Law Degree from DonetskStateUniversity Master ofLawfromScientific theInternational University (USA) (Donetsk, Ukraine)

ork

Management and Governance Management and Governance 42 Corporate Social responsibility of eachtheseareas isprovided below. and LocalCommunitySupport,asummary Welfare, TheEnvironment, Health&Safety of Metinvest’s CSRprogramme are Employee in managingtheGroup’s activities.Thekeyareas accordingly madethisoneoftheirtoppriorities Social Responsibility(CSR),andhave achieving thehigheststandards inCorporate Executive Committeeare committedto Metinvest’s SupervisoryBoard and maintain respectable working conditions choice”, Metinvestaimstocreate and strategic goaltobe“anemployerof its employees.AspartofMetinvest’s and foremost, takingresponsibility for being sociallyresponsible means,first 89,000 peopleworldwide.ForMetinvest, Metinvest todayemploysmore than Are OurMostV Employee Welfare –OurPeople aluable Asset

can befoundbelow: regards tothewelfare ofitsemployees A summaryofMetinvest’s prioritieswith to thesuccessofbusiness. given anassessmentoftheircontribution opportunities andthateachemployeeis employees are afforded equal safety. TheCompanyensures that standards ofoccupationalhealthand corporate culture andmaintaininghigh management, developingastrong methodsoflabour by applyingmodern • • • • • •

Implementing measures for improving Developing, implementingand Developing employees’professional Attracting, motivatingandretaining Implementing thebestmodern Protecting humanrightsand accidents andillnesses reducing theoccurrences ofinjuries, working conditions,withtheaimof of theCompany’s enterprises competitive salariesacross all remuneration andensuring highly improving effective systemsof skills andpotential all levels highly qualifiedemployeesacross resource management approaches inthefieldof human eliminating anykindofdiscrimination AnnualReport 2008 in order tocontributethesuccessful its employeesshouldhaveinthefuture, terms ofthequalificationsandaptitude is toanticipatetheCompany’s needsin One ofMetinvest’s keytasksinthisarea professional growth anddevelopment. the provision ofopportunities forongoing including thetrainingofemployeesand investments inhumanresources, Metinvest therefore undertakessignificant sustainable businessdevelopment. long-term competitivenessand in helpingtheCompanytocreate employees are themostvaluable asset Metinvest believesthatqualified the mainbenefitscanbefoundbelow: to theGroup’s financial results. Someof and benefits,someofwhichare linked additional (voluntary)compensation with labourlegislationandsome large numberofbenefitsinaccordance Metinvest provides its employees with a competitive compensationpackages, in thesamesector. Inadditionto large Ukrainianindustrialenterprises which are highincomparisonwithother Metinvest payscompetitivesalaries, Project” and the“MetinvestGroup Senior Management Development projects in2008:the“MetinvestGroup consulting companiesinitiated twopilot in collaborationwithleadingEuropean the HumanResources department, of knowledge. As part of this programme, strongest competencies,skillsandareas of eachemployeeanddeveloptheir a programme toidentifythepotential “talent pool”,andtheCompanylaunched in 2008tothecreation ofacorporate As partofthisinitiativeprioritywasgiven long-term developmentofthe Group. • • • • • • • •

labour contracts to employeesinaccordance withtheir Payments towards important events Leisure andsportfacilities Pension programmes Educational grants Health improvement programmes Medical insurance Developing astrong corporateculture Offering benefitsandcompensation (such asweddingsandbirths). across alloftheCompany’s enterprises. AnnualReport 2008

• • • • • • • in thisarea are: Some oftheCompany’s keyactivities environmental normsand regulations. ensure compliancewithapplicable staffed environmental departmentto each Metinvestenterprisehasafully enterprises isofthehighestpriorityand the ecologicalsustainabilityofMetinvest’s disposes ofwasteproducts. Thisiswhy polluting substancesintotheairand water intobodiesofwater, discharges operations, Metinvestdischargeswaste environment overtime.As partofits minimise theGroup’s impactonthe One ofMetinvest’s topprioritiesisto Our Impact Our Environment –Minimising cover personneltrainingexpenses. allocated intheCompany’s budgetto of employeesandsignificantfundsare training programmes coveringalllevels of theGroup carriesoutitsownin-house requirements. Everyyear, eachenterprise and skillsinaccordance withproduction the aimofexpandingtheirknowledge period ofaperson’s employment,with process thatisconductedovertheentire Metinvest viewstrainingasacontinuous functions throughout theGroup. programmes thatwillfocusonother as afoundationforfuture development The projects’ findingswillbeused Financial FunctionDevelopmentProject”.

Executing acorporateprogramme Introducing leadingtechnologiesfor Developing andimplementing Executing continuous Focusing onpreventive ratherthan Undertaking programmes aimed at the Tracking and managingpotential disrupted land for therevival andre-cultivation of energy efficiency andenergy of industrialwaste the recycling andrepeat processing saving programmes environmental monitoring “end ofpipe”measures activity ontheenvironment in order tominimisetheimpactoftheir technical re-equipping ofenterprises, ecological risks

In 2008,Metinvestinvested conservation programmes and measures. the financingofecologicalandnature of Metinvest’s enterprisesalsoenvisage damage totheenvironment. Thebudgets technologies withtheaimofminimising andimprovementmodernisation of takes intoaccounttheneedfor comprehensive investment programme an engineeringprogramme. This Metinvest iscurrently undertaking environmental impactofits operations, came intoforce. Inorder toreduce the before current environmental standards operating facilitieswere commissioned A significantnumberofMetinvest’s environmental goals. at achievingtheCompany’s strategic and developamasteractionplanaimed environmental risksandopportunities environmental consultants toassess working withleadingEuropean performance. Metinvestiscurrently aimed atimproving itsenvironmental Metinvest planstoundertakeprojects In accordance withitsHSE strategy, long-term environmental programme. of thedevelopmentalarge-scale, enterprises, whichwouldformthebasis environmental prioritiesforMetinvest’s and thedrawingupofalist an assessmentofthecurrent situation Group. Thefirststepinthisdirection was performance across theMetinvest order toimprove safetyandecological to themanagementofHSEissuesin to develop a vertically integrated approach Environment (HSE) Directorate was formed In 2008,aHealth,Safetyandthe • • environmental standard, andtheother compliant with the ISO:14000 Coke, havealready beencertified Azovstal, Krasnodonvugilliaand Avdiivka including SevGOK,CGOK,InGOK, respectively. NineofMetinvest’s plants, and Steel&RolledProducts divisions environmental technologyforitsIron Ore US$155 million andUS$33on

Engaging withlocalcommunities Developing Greenhouse Gas on environmental issues. (GHG) reduction programmes

Management and Governance Management and Governance 44 Corporate Social responsibility In order tocomplywiththeUnited organisations. Group incollaborationwithspecialist is performedatallcompanieswithinthe of activitiesrelated totheenvironment management system.Regularmonitoring the establishmentofanenvironmental controlled or influenced by the Group and of environmental aspectsthatcanbe includes theidentificationandevaluation standards,ISO: 14001international and legislation andtherequirements ofthe is conductedincompliancewith impact ofMetinvest’s enterprises The evaluationoftheenvironmental facilities andreducing harmfulemissions purpose ofdesignatingproblematic inventory oftheemissionsGHG forthe enterprises haveimplemented an and theKyotoProtocol, Metinvest’s Nation’s Convention onClimateChange • • • • • the environment include: Company’s products andserviceson in order tominimisetheinfluenceof initiatives thatMetinvestiscarryingout Some oftheotherkeyinvestmentsand ISO: 14000 compliantby2012. all ofitsfacilitieswillbecertifiedas certifications. Metinvestexpectsthat plants are currently takingstepstoobtain

to prevent hazardous emissionsinto ofsmelters plants andinfurnaces coke andchemicalsplants,glazing coke andcoalstoragefacilities, enrichment plants,pointsofloading, gas purificationequipmentatcoal Mechanical andbiologicalland The useofaclosedtechnological A reduction intheemission ofharmful The introduction ofstate-of-the-art, dustand Utilisation ofmodern processed rocks. remediation usingrefuse and mineralised waters water resources bytechnical,highly allow forthecontaminationofsurface cycle ofwatersupply, whichdoesnot clean typesofexplosives explosions usingenvironmentally substances byconductingmass energy-saving technologies the atmosphere

in theprinciplesoutlined below: Company’s focusonsafetyisexemplified Company’s management.The indicators oftheeffectiveness ofa of on-the-jobsafetyasonethekey Moreover, Metinvestviewsthelevel on theGroup’s coalminingenterprises. extent possible,focusingespecially fatalities andinjuriestothegreatest objective istoreduce thenumberof top prioritiesforMetinvest.Themain across itsenterprisesisoneofthe Increasing theleveloflaboursafety Health &Safety • • • • • • • of theKyotoProtocol. the JointImplementationprogramme different stagesofdevelopment,under had approximately tenGHGprojects in into theatmosphere. In2008,Metinvest

Ensuring priorityfinancingofmeasures Utilising progressive organisational Offering socialprivilegesand Ensuring thesafetyoftechnological Enhancing theleveloftrainingand Constant improvement of the Engaging inactivitiescompliance place ofemployment and hygieneconditionsatevery effective systemoflabour safety safe workingconditions incompliance and technicalsolutionsthatensure medical servicesrendered tothem labour conditionsandimproving the work insevere and/orhazardous compensation toemployeeswho when theydohappen their consequencesforemployees production facilities,andminimising at reducing theriskofaccidentsat implementation ofmeasures aimed processes andequipmentthe their duties of theirsurroundings whenperforming their ownpersonalsafetyand as therecognition ofresponsibility for qualifications ofemployees,aswell bestpractice of international on laboursafetyusingstandards with legislativeandnormativeacts and safeconditionsoflabour industrial safety, andcreating healthy the existingleveloflaboursafetyand of asetnormslaboursafety, raising aimed atachievingtheobservance AnnualReport 2008

Priority initiativesinthisarea include: training andconsultingcompanies. and safetysolutionsoffered by to usingthebestavailablehealth safety initiatives.Metinvestiscommitted implementation ofpriorityhealthand process accidentsthrough theeffective fatalities, occupationalinjuriesand to reduce significantlythe numberof systems andfacilities.Metinvestplans relating toMetinvest’s people,processes, outlines safetyimprovement actions formulated itsHSEstrategy, which As mentionedabove,in2008Metinvest and otherCIScountries. in similarprojects inEurope, Ukraine systems andhasextensiveexperience the developmentandcertificationofsuch Veritas isoneoftheworld’s leadersin of Metinvest’s industrialsafety. Bureau implementation andcertificationsystem Metinvest inthedevelopment, Bureau Veritas ispartneringwith implemented in2009andbeyond. Azovstal, andwillcontinuetobe Avdiivka Coke,SevGOK,CGOKand at majorMetinvestenterprises,including standard hasalready beenimplemented at theworld’s leadingenterprises.This the mostwidelyappliedsafetystandard OHSAS 18001:2007 Standards”, which is Management Systeminaccordance with “Labour Protection andIndustrialSafety implementing andcertifyingthe In 2008,Metinvestcontinued • • •

Enhancing Metinvest’s safetyculture Upgrading Metinvest’s existing Training Metinvest’s managers Resources, asafetyconsultancy conjunction withDuPontSafety management techniquesin and supervisorsineffective safety consultancy. in conjunctionwithaspecialist of healthandsafetycompetencies, through theoveralldevelopment capabilities medical emergencyresponse production facilities. reconstruction andlaunchof the process ofdesign,construction, protection andon-the-jobsafetyin and normativeactsonlabour with therequirements oflegislative AnnualReport 2008

• • • responsibility programme are listed below: key areas offocusinitssocial programmes. Someofthe Company’s investments andcontributionstosocial Group hasoperations,through of thelocalcommunitiesinwhich sustainable socio-economic development Metinvest playsakeyrole in the Local CommunitySupport and safetylegislationin Ukraine. • • material respects, withapplicable health believes thatitisincompliance,all the publishingofthisreport, Metinvest to supervisoryauthorities.Atthetimeof reports withincidentandinjurystatistics laws andregulations andsubmitsannual safety issues,ensures compliancewith Safety departmentthatconsultson operation hasafullystaffed Health& of itsannualrevenue. EachMetinvest representing approximately 0.5% on labourprotection andsafety, In 2008,MetinvestspentUS$71million to labourprotection andsafety. legislation to dedicate 0.5% of its revenue required underUkrainianlaboursafety standards andequipment.Metinvestis inspecting workingconditions,safety Supervision, whichisresponsible for Safety, LabourProtection andMining by theStateCommitteeofIndustrial is realised through anannualinspection health andsafetycontrol overMetinvest on industrialcompanies.Government imposes stringentnormsandregulations Ukrainian healthandsafetylegislation

quality ofmedicalservices communities, andtotheincreased of publicheathsystemsinlocal the areas ofsport,culture and Providing supporttoprojects in Developing andsupportingurban Supporting andparticipatingin Supporting government programmesSupporting government Contributing totheimprovement local communities. social capitaloftheCompany’s education, thusstrengthening the and institutionsinthesphere of the environment infrastructure andcommunity facilities plays acriticalrole and/or territoriesinwhichMetinvest municipal authoritiesintheregions programmes thatare initiatedby socio-economic development

the higheststandards inCSR. beyond astheGroup strivestoachieve and ExecutiveCommitteein2009 a toppriorityfortheSupervisoryBoard evolving anddevelopingwillremain Local CommunitySupportare continually Environment, HealthandSafety and areas ofEmployeeWelfare, the responsibility initiativesinthe fourkey Metinvest’s corporateandsocial prioritised around thefollowing areas: sponsorship andcharitableactivitiesare and financialaidtothoseinneed.Such possibility ofrendering services,work policy andcharityallowsforthe In addition,theCompany’s sponsorship the city. establishment ofgreen areas within of atownculturalcentre andthe of thestreet lightingsystem;thecreation and basketballcourts;thereconstruction playgrounds, includingfootballfields the constructionoftwolargechildren’s including theconstructionofbusstops; the developmentofacityroad system, than US$1million,whichresulted in Rih, withatotalinvestmentofmore Damasky districtinthetownofKryvyi reconstruction project fortheentire the majorinitiativesof2008wasa social infrastructure facilities.Among than US$5millionspentonsupporting projects inlocalcommunitieswithmore spent more thanUS$13milliononsocial in whichitoperates.In2008,Metinvest programmes inthelocalcommunities Metinvest alsosupportsvarioussocial • • • • •

Medical institutions Cultural, educational,socialandsport Unprotected membersofsociety Orphanages Sports andyouthorganisations difficult circumstances pensioners) andindividualsin (i.e. World War IIveteransand Metinvest operates. measures intheregions inwhich

Management and Governance Financial Statements and Notes PricewaterhouseCoopers AccountantsN.V. A.J. Brouwer RA Amsterdam, 27July2009 in respect ofthismatter. financial statementswere derived andourunqualifiedauditors’ reportthereon dated29April2009.Ouropinionisnotqualified abbreviated financialstatements shouldbe read inconjunctionwiththeunabridgedfinancialstatements, from whichtheabbreviated For abetterunderstandingoftheCompany’s financialpositionand results andthescopeofouraudit,weemphasisethat Emphasis ofMatter financial statements. In ouropinion,theseabbreviated financialstatementshavebeenderivedconsistently, inallmaterial respects, from the Opinion We believethattheauditevidencewehaveobtainedissufficient andappropriate toprovide abasisforourauditopinion. assurance thattheabbreviated financialstatementshavebeenderivedconsistentlyfrom thefinancialstatements. We conductedourauditinaccordance withDutchlaw. Thislawrequires thatweplanandperformtheaudittoobtainreasonable Scope statements. the 2008financialstatementsofMetinvestB.V. Our responsibility istoexpress anopinionontheseabbreviated financial is responsible forthepreparation oftheabbreviated financialstatementsinaccordance withtheaccountingpoliciesasappliedin 2008. Inourauditors’report dated29April2009weexpressed anunqualifiedopiniononthesefinancialstatements.Management (as setoutonpages47to50)havebeenderivedconsistentlyfrom theauditedfinancialstatementsofMetinvestB.V., fortheyear We haveauditedwhethertheaccompanyingabbreviated financialstatementsofMetinvestB.V., Rotterdam, fortheyear2008 Introduction To: theGeneralMeetingofshareholders ofMetinvestB.V. Auditors’ report 46

AnnualReport 2008

General Director Igor Syry Signed andauthorisedforrelease onbehalfofMetinvestB.V. on29April2009: TOT TOT T Liabilities undermoratorium Trade andother payables Loans andborrowings Current liabilities T Other non-current liabilities Deferred taxliability Retirement benefitobligations Deferred income Loans andborrowings Non-current liabilities LIABITIES TOT Minority interest Equity attributabletotheCompany’s equityholders Retained earnings Other reserves Share premium Share capital EQUITY TOT T Cash andcashequivalents Trade andotherreceivables Inventories Current assets T Other non-current assets Deferred taxasset Available-for-sale investments Investments inassociates Property, plantandequipment Other intangibleassets Goodwill Non-current assets ASSETS All amountsinmillionsofUSdollars ABBREVIA otal current liabilities otal non-current liabilities otal current assets otal non-current assets AL LIABITIESANDEQUITY AL LIABITIES AL EQUITY AL ASSETS AnnualReport 2008

TED BalanceSheet

31 December2008 11,356 11,356 (4,339) 5,105 4,172 2,429 1,044 4,462 1,662 1,326 1,366 1,319 3,734 7,622 5,070 2,703 2,367 6,286 1,348 4,938 261 631 123 712 699 287 22 10 11 45 17 –

31 December2007 12,439 12,439 (1,500) 3,356 4,172 1,134 1,755 1,150 5,843 1,135 1,679 1,273 4,039 8,400 5,124 2,635 2,489 7,315 1,287 6,028 144 399 239 569 934 824 311 71 22 54 27 47 –

Financial Statements and Notes Financial Statements and Notes Profit fortheyear Minority interests Equity holdersoftheparent company Profit isattributableto: Profit fortheyear Income taxexpense Profit before incometax Share ofresult ofassociates Finance costs Finance income Operating profit Other operatingincome/(expenses),net General andadministrativeexpenses Distribution costs Gross profit Cost ofsales Revenue All amountsinmillionsofUSdollars Abbrevia 48 ted IncomeSt a tement

31 December2008 Year ended 13,213 (8,505) 2,803 1,931 2,803 3,558 3,961 4,708 (755) (477) (326) (839) 872 418 21 53 AnnualReport 2008 31 December2007 Year ended (4,895) 1,321 1,321 1,642 1,773 2,530 7,425 (321) (188) (230) (465) 368 953 (62) 60 (3)

Net cashusedininvestingactivities Proceeds from disposalofinvestmentsavailableforsale Dividends received Interest received Acquisition ofassociates Loans issuedtoSCMGroup companies Payments forsubsidiariesandminorityinterest –SCMGroup andrelated parties – third parties Payments forsubsidiariesandminorityinterest acquired inpriorperiods Prepayment forUnitedCoal Company Acquisition ofsubsidiaries,netcashacquired Proceeds from saleofinterest insubsidiary Proceeds from saleofproperty, plantandequipment Purchase ofproperty, plantandequipment Cash flowsfrom investing activities Net cashgeneratedfrom operatingactivities Interest paid Income taxespaid Cash generatedfrom operations Decrease inothernon-current liabilities Decrease inliabilitiesunder moratorium Increase/(decrease) intradeandotheraccountspayable Increase intradeandother accountsreceivable Increase ininventories Operating cashflowsbefore workingcapitalchanges Other non-cashoperatinggains Write-offs ofinventory Write-offs ofaccountspayable Share ofresult ofassociates Net increase inretirement benefitobligation Foreign exchangedifferences Finance costs Finance income (Reversal ofimpairment)/impairmenttradeandotherreceivables Loss ondisposalofproperty, plantandequipment Impairment anddevaluationofPPE of intangibleassets,netamortisationdeferred income Depreciation ofproperty, plantandequipment(“PPE”)amortisation Adjustments for: Profit before incometax Cash flowsfrom operatingactivities All amountsinmillionsofUSdollars Abbrevia AnnualReport 2008 ted St a tement ofCashFlows

31 December2008 Year ended (3,059) (1,699) 2,856 3,852 4,575 3,558 (130) (679) (169) (827) (318) (580) (621) (205) (400) 189 202 273 477 641 (11) (21) (53) 29 20 29 39 50 (3) 5 1 – – – – –

31 December2007 Year ended (1,424) 1,125 1,720 2,328 1,642 (456) (493) (150) (445) (372) (379) (462) 186 188 454 (46) (13) (30) (36) (11) (14) (60) 57 11 29 15 28 52 49 (8) 4 7 3 – – – –

Financial Statements and Notes Financial Statements and Notes Cash andcashequivalentsattheendofyear Cash andcashequivalentsatthebeginningofyear Net increase incashandequivalents Effect ofexchangeratechangesoncashandequivalents Net cashgeneratedinfinancingactivities Dividends paid Net tradefinancingproceeds/(repayments) Repayment ofloansandborrowings Proceeds from loansandborrowings Cash flowsfrom financingactivities All amountsinmillionsofUSdollars Abbrevia 50 ted St a tement ofCashFlows

continued 31 December2008 Year ended (1,591) 1,403 1,134 (873) (653) (352) (113) 261 (17) AnnualReport 2008 31 December2007 Year ended 1,545 1,173 1,134 (182) (614) 910 424 224 36

(NH Ammonium sulphate amounts greater than10%byweight. vanadium, silicon,boron ornickel,in molybdenum, manganese,chromium, Steel alloyedwithotherelements,usually Alloy steel TECHNICAL METAL &MININGTERMS Long steelproducts thatare rolled Bars is toreduce thesoilpH. In fertiliserthepurposeofsulfate cations, and 24% sulfur as sulfate anions. contains 21%nitrogen asammonium common useisasasoilfertiliser. It number ofcommercial uses.Themost as afuelwithinsteelworks. monoxide. Itiscommonlyused primarily ofnitrogen, oxygenand with coketometalliciron. Itconsists generated whentheiron ore isreduced A by-product thatis ofblastfurnaces gas Blast furnace the furnace. iron ore, cokeandlimestonethatload hot airandgasesforced upthrough the ore. Itsnamecomesfrom the“blast”of integrated steelmillstosmeltiron from resistant (refractory) bricks,usedby A toweringcylinderlinedwithheat- (BF) Blast furnace long products. processed byrolling toproduce finished rolled orcontinuouslycast andisfurther 150mm x150mm.Thisproduct iseither a square cross sectionofupto A semi-finishedsteelproduct with Billet slimes (fines rejected by washing). tailings (depletedofore minerals) and concentrates (enrichedinore minerals), beneficiation are referred toas: gangue minerals.Theproducts of and thenseparateore minerals from A seriesofunitoperationstoliberate Beneficiation of 10-100ovens. Coke ovensare constructed inbatteries Batteries into steel. iron from andscrap theblastfurnace refractory bricksthatrefines molten A pear-shaped linedwith furnace (BOF) Basic oxygenfurnace from billets. Glossar 4 ) 2 SO 4 isaninorganicsaltwitha AnnualReport 2008 y gases andimpurities. without oxygenfor18hoursto driveoff of acokeoven,inwhichcoalis heated It isproduced insidethenarrow confines weight oftheiron ore in theblastfurnace. and out,isnotcrushedbythe coke, however, steadilyinside burns reduces intoastickymass.Processed sporadically and metallurgical coalburns total energyuse.Cokeisusedbecause than 50%ofanintegratedsteelmill’s metal, anamountwhichconstitutesmore coke isneededtoprocess atonneofhot processed formofcoal.About450kg inthesmeltingofiron.furnaces Cokeisa The basicfuelconsumedinblast Coke transport sheetsteel. are themostefficient waytostore and can bemore thanonemile long;coils A slab,oncerolled inahot-strip mill, Steel sheetsthathavebeenwound. Coils and heterocyclic compounds. polycyclic aromatic hydrocarbons (PAHs) and variablemixtures ofphenols, to makecoalgas.Coaltarsare complex is carbonisedtomakecokeorgasified is amongtheby-products when coal and aromatic hydrocarbons. Coaltar viscosity, which smellsofnaphthalene Coal tarisabrown orblack liquidofhigh Coal-tar pitch cave passage. vertical shaftratherthanahorizontal A typeofnaturalcavewhichisa Closed-pit mine section. A rolled metalbarwithabracket-shaped Channels affect theproperties. present are inquantitiestoosmallto constituent iscarbon;theotherelements Steel inwhichtheonlymainalloying Carbon steel stiffening applications. Bulb flatsare tailor-made forplate Bulb flat long products. processed byrolling toproduce finished rolled orcontinuouslycastandisfurther 150mm x150mm.Thisproduct iseither a square cross sectiongreater than A semi-finishedsteelproduct with Bloom added duringthe process. the charge.Alloying elementscanbe charge creates intenseheatwhichmelts between theelectrodes andthemetallic in theroof. Theelectricarc travelling electrodes are lowered through holes is chargedandcovered, graphite of themetalcharge.Once furnace scrap usedcanbeincreased to100% steel. Inthisprocess, theproportion of from andscrapinto theblastfurnace whichrefinesA furnace moltenpigiron Electric arc(EAF) furnace production sequenceorproduction line. processes thatoccurlateronina In manufacturing,thistermrefers to Downstream which linkmineswiththesurface. through built-inpipelinesand boreholes, exhaust ofgasfrom mines iscarriedout gas-air mixtures outsidefrom mines.The Exhaust, confineanddeflategasorother Degasation Benzole Mixture. fuel underthetradenameNational mixed withpetrol andsold asamotor of benzeneandtoluene.Itwasformerly A coal-tarproduct, consisting mainly Crude benzol are more uniform. composition andmechanicalproperties an ingot.Becauseofthis,thechemical a fewminutes,versusseveralhoursfor Continuous castslabsalsosolidifyin for largemillstoroll ingots intoslabs. Continuous castingavoidstheneed shaped toformbilletsorslabs. a ladlethrough atundishinto amould A methodofpouringsteeldirectly from Continuous casting and downstream processing. minerals in order to facilitate transportation to increase thepercentage ofvaluable Material whichhasbeenprocessed Concentrate generally lowinsulphurandphosphorous. (BOFs), of steelinbasicoxygenfurnaces Bituminous coalusedintheproduction Coking coal into coke. A setofovensthatprocess coal Coke oven a 1/2-inchor3/4-inchscreen opening. of avaryingsizebutusuallypassing coke orfrom cokeastakenfrom ovens The finescreenings from crushed Coke breeze

Additional Information Additional Information blast furnace operation: blast furnace BF cokefulfilsthree main functions inthe coke thatisusedforiron making inBFs. The termisusedtorefer to metallurgical coke Furnace minerals tosink. hydrophobic tofloatandthe other to causethosemineralsrendered and subjectedtoagitationaeration of mineralsisconditionedwithreagents A process inwhichaprepared mixture Flotation plates andcoils. works andboilers.Theyincludeheavy and inshipbuilding,construction,major in theproduction oflargewelded pipes, automotive andwhitegoodsindustries, width. Flatproducts are usedinthe dimensions, varyinginthicknessand with smoothsurfacesandarangeof A product thatisproduced byrolls Flat product and “flat”products. categories ofproducts, namely“long” billets/slabs). Thesecovertwobroad or forgingofsemi-finishedsteel(blooms/ Products obtainedthrough thehot-rolling Finished products properties ofthefinalsteelproduct. improve thephysicalandchemical containing iron andothermetalsthat raw materialfeedinsteelmaking,usually A metalproduct commonlyusedasa Ferroalloy the source ofitschemicalsymbol,Fe. Ferrum istheLatinword foriron and Fe content shipbuilding or large-diameter pipes. used forconstruction, heavymachinery, a thicknessofat least5mm.Itismainly A steelsheetwithawidthupto 5mand Heavy plate and assulfidesulfateminerals. nature, itcanbefoundasapure element form isayellowcrystallinesolid. In multivalent non-metal.Sulfurinitsnative with thesymbolS.Itisanabundant, atomic number16andisdenoted The chemicalelementthathasthe Gas sulphur i) Glossar 52 iii) ii) inside theblastfurnace. bed ofiron ore, cokeandlimestone for movementofgasesthrough the It provides therequired permeability for thereduction ofiron ore; and carbon dioxidegasand all reactions; It actsasafuelproviding heat for It actsasareductant, providing y continued

or billets. “flat” andthat are produced from blooms products that are “long”ratherthan includes bars,rods andstructural A classificationofsteelproducts that Long products construction andotherapplications. to formslags,whichare thenusedin or CaCO of themineralcalcite(calciumcarbonate A sedimentaryrock composedlargely Limestone (EAF)andcasting. furnaces orelectricarcopen-hearth furnaces between basicoxygenfurnaces, usedforrefiningA furnace hotmetal Ladle furnace Mineral Resources andOre Reserves. for ReportingofExplorationResults, The 2004 edition of the Australasian Code JORC Code undergoing treatment. material hasbeenremoved by of anore from whichmostofthewaste Iron ore containingthevaluableminerals Iron ore concentrate of theelementforuseinsteelmaking. to beacommercially viable source A mineralcontainingenoughiron Iron ore fall underthiscategoryofmill. BOF, DRI-EAForMBF-EOFtechnology and majorproducers adopting Corex- steel plantsadoptingtheBF-BOFroute, and finishedsteel.Thus,allintegrated the production ofliquidsteel, crudesteel (optional) andiron making, followedby includes unitswithin-housecokemaking for variousapplications.Ittherefore from iron/coke makingisutilisedasfuel the sensibleheatofoutgoinggases plants alsohavecaptivecokeovensand shapes in-house.Conventionally, these steel, whichisfurtherrolled intofinished raw materialfortheproduction ofcrude A steelplantusingiron ore asthebasic Integrated steelmill steel isstillred). relatively hightemperature (whenthe production process iscarriedoutata a coilofspecifiedthickness;thewhole A rolling millthatreduces hotslabinto Hot-rolling mill being pickledandoiled(ifspecified). reduction orprocessing steps,asidefrom state ofthehot-rolling millwithnofurther Products thatare soldinthe“asproduced” Hot-rolled 3 ). It is used in the blast furnace ). Itisusedintheblastfurnace

square, flat,angled,andchannelled Merchants includelongbarswithround, Merchant bars per square metre. pascal isequivalenttoonenewton derived unitforpressure, andone 1,000,000 pascals.PascalistheSI One megapascal,whichisequalto Megapascal (MPa) as itisattractedtoamagnet. technique canbeusefulinminingiron a magneticforce. Thisseparation is extractedfrom amixture using which magneticallysusceptiblematerial Magnetic separationisaprocess in Magnetic separation the magneticparticles. mineral particlesare thendetached from gangue bymagneticmeans,andthe mineral particlesare separated from the the magneticparticleswithattached to thesurfaceofmagneticparticles, the mineralparticlesbecomeattached having ahydrophobic surface,whereby particles ofamagneticmaterialalso particulate form,iscontactedwith a hydrophobic surfaceandbeingin a gangue-associatedmineralhaving concentration, characterisedinthat A methodformineralupgradingor Magnetic flotation recycled solidstechnology. technology. Itisclassifiedasahot coal liquefactionandoilshaleextraction The Lurgiprocess isanabove-ground Lurgi machine of thicksections. weight toimprove thehardening ability or nickel,inamountsofupto10%by chromium, vanadium,silicon,boron usually molybdenum,manganese, Steel alloyedwithotherelements, Low-alloyed steel of cokingcoal. quality cokemadefrom specificblend operations; metallurgicalcoalis ahigh Not allcokecanbeusedinmetallurgical Metallurgical coal or fordirect use/consumption. customersforfurtherprocessingexternal concentrate products, whichare soldto A term used to designate various types of Merchant concentrate cross sections. AnnualReport 2008 connected with thehousing. the pressing roller andisreleasably the drive,andabearingblock supporting of therollers, ahousingaccommodating plungers, adriveforadjusting the height the positionofupperandlower adjustable pressing rollers whichcontrol matrix disc,avarietyofvertically A pelletisingmachinehasarotatable Pelletising machine and thencompressed intopellets. to friction.Therefore, itisfirstsintered distance, theore becomespowderdue which istransportedoveralarge Inthecaseofirona blastfurnace. ore, characteristics appropriate forusein to converttherawore intopelletswith agglomeration andthermaltreatment in diameter. The process combines spheres oftypically8-18mm (0.31-0.71") a pellet.Pelletisingofiron ore produces or mouldingaproduct into theshapeof Pelletising istheprocess of compressing Pelletising iron ore pellets. concentrate asitsinputandproduces A processing facilitythattakes iron Pellet plant of thecokerequirement. along withtheblasttoreplace part throughthe blastfurnace tuyers granulated/dust coalisinjectedinto Technologies wherein pulverised/ PCI (PulverisedCoalInjection) of avarietytechniques. valuable substancesorwastebyany The crushingandseparatingofore into Ore dressing extracted from apitorquarry. Surface mininginwhichtheore is Open-pit mine surface andtherefining takes7-9hours. supplied from alargeflameoverthe pig iron andscrapintosteel.Heatis A broad, shallowhearthusedtorefine Open-hearth furnace of piecesrangingfrom 10-25mm. A wharfcokefractionwiththesize Nut coke to 1,000,000kg. A millionmetricunitofweightequivalent mt (milliontonnes) a chemicalformula. material thatcanbeexpressed by A natural,inorganic,homogenous Mineral AnnualReport 2008 economic, marketing, legal, environmental, realistically assumed mining, metallurgical, consideration ofandmodification by have beencarriedout,andinclude Appropriate assessmentsandstudies occur whenthematerialismined. and allowancesforlosseswhich may Resource. Itincludesdilutingmaterials circumstances, aMeasured Mineral Indicated MineralSource and,insome economically mineablepartofan A “Probable Ore Reserve”isthe reasonably bejustified. time ofreporting, extractioncould assessments demonstratethat,atthe factors.These and governmental marketing, legal,environmental, social mining, metallurgical,economic, and modificationby realistically assumed carried out,andincludeconsiderationof assessments andstudieshavebeen material ismined.Appropriate losses whichmayoccurwhenthe diluting materialsandallowancesfor Measured MineralResource. Itincludes economically mineablepartofa A “Proved Ore Reserve”isthe Reserves (Proved, Probable) “Ladle furnace”). may bemadebefore itiscast (seealso steel andadditionsofothermetals impurities are removed from thecured crude steelduringwhichmostresidual A stageintheprocess ofmaking Refining building construction. strengthen concrete inhighwayand Commodity-grade steelusedto Deformed bar(Debar) Reinforcing bar(Rebar)/ molten metal. Steel intheprimaryformofhot Raw steel forming arailwaytrack. A steelbarthatislaidontheground, Rails railway lines. Metal devicesusedtolinkrailson Rail fasteners andcastinmoulds. blast furnace Crude iron obtaineddirectly from the Pig iron making process. used asrawmaterialinthesteel into smallballsorpellets.Pelletsare An enrichedformofiron ore shaped Pellets plate products. mills toberolled intocoiledsheetand to casting,slabsare senttohot-strip is approximately 5cmthick.Subsequent of recently developed“thinslab”casters about 6-12mlong,whiletheoutput thick x75-225cmwide,andare usually steel. Traditional slabsmeasure 18-25cm The mostcommontypeofsemi-finished Slab as aninput/rawmaterialinblastfurnaces. other metallurgicalreturnwastesused from relatively coarsefineiron ore and An aggregate whichisnormallyproduced Sinter structural steelandwire rod. more finishedproducts, including rebars, shapes are furtherprocessed tobecome steel makingprocess. These usable and billetsare thefirstsolid formsinthe slabs, bloomsandbillets.Slabs, A product categorythatincludes pigiron, Semi-finished (products) machinery andtransportationindustries. of purposesintheconstruction, Sections canbeusedforawidevariety welding togetherpiecesofflatproducts. Sections canalsobeproduced by “L”, “U”,“T”or“I”,amongstothers. in arolling milltoformshapes including Blooms orbilletswhichare hot-rolled Sections metallurgy iscalledsecondarymetallurgy. exclusively intheladle.Suchladle produce high-gradesteeltake place two steps.Allfurtherstepsrequired to of producing steelcanbe divided into technology,Using modern theprocess Secondary metallurgy Borings, etc. Scrap, Light Melting Scrap, and Turnings/ type, scrapisclassifiedasHeavyMelting products. Dependingonitsformand to produce liquidsteeltoproduce various its existing form, which is further re-melted Steel wastethatisnotusableassuchin Scrap submerged arc welding. Pipes thatare produced using SAW pipe by beingpassedthrough asetofrollers. Steel produced toadesired thickness Rolled steel(products) reasonably bejustified. at thetimeofreporting, extractioncould These assessmentsdemonstratethat, social and governmental factors. social andgovernmental

Additional Information Additional Information Glossar 54 round cross sectiondimension. an intermediateproduct withauniform Formed from billets,wire rods incoilsare Wire rod structural cables. electrical conductors,rope wire and springs, furniturewire, concrete wire, include nets,screws, rivets,upholstery physical properties. Typical applications surface finish,dimensionalaccuracy, and of diestoreduce thediameter, improve wiredrawing wire rod through aseries by coldandhotreducing, orbydrawing A broad rangeofproducts produced Wire to levelsof8-9%. process ofdecreasing theashcontent coal from rawcokingcoal through the Washing plantsproduce cleancoking Washing plant extraction andproduction sectors. a termwhichdescribestheexploration, thesteelindustry,Within upstream is Upstream lance canberaisedandlowered. through whichawater-cooled oxygen closed bottomandanopenuppercone (BOF)witha A basicoxygenfurnace Top blowingconverter is alsoreferred toas“steamcoal”. further classifiedbytype.Thermalcoal and otherlow-gradecoalproducts not category are recovered slurries, middlings as cokingcoal.Alsoincludedinthis defined as all other hard coal not classified used primarilytogenerateheat.Itis A termusedtodescribecoalwhichis Thermal coal course materialinroad construction. fertiliser production aswellforbase the hotmetal.Slagisusedincementand limestone andcokeare separatedfrom nonferrous substancesiniron ore, Slag isaby-product generatedwhen Slag of themouldtocompleteprocess. casting, whichisejectedorbroken out The solidifiedpartisalsoknownasa shape, andthenisallowedtosolidify. contains ahollowcavityofthedesired a liquidmetalintomould,which In metalworking,castinginvolvespouring Slab conticaster y continued Donbass Fuel-EnergyCompany DTEK JSC CentralMiningandProcessing Works CGOK JSC AzovstalIron &SteelWorks Azovstal JSC Avdiivka Coke&ChemicalWorks Avdiivka Coke Company Abbreviations United CoalCompanyLLC UCC Spartan UKLtd Spartan JCS SmartHolding SMART (SMART Group) Processing Works Miningand JSC Severniy SevGOK Metinvest Trametal S.p.A. Trametal JCS SystemCapitalManagement SCM (SCMGroup) S.A. Metinvest International MISA Metinvest Group Metinvest Mining Company JSC KrasnodonvugilliaCoal Krasnodonvugillia JSC KhartsyzskTube Works KhTW Inkor &CoLLC Inkor Works JSC InguletsMiningandProcessing InGOK Ferriera Valsider S.p.A. FV JSC Yenakiieve MetallurgicalWorks Y enakiieve

was adoptedinKyoto,Japan, on on ClimateChange.TheKyotoProtocol United NationsFrameworkConvention agreementAn international linkedtothe Kyoto Protocol technology developments. devices, tothenewestinformation mechanical engineering,tomedical agriculture andconstruction,through standards foractivitiessuchas Standards,International rangingfrom ISO haspublishedmore than 16,500 Between 1947andthepresent day, standards developingorganisation. Standardisation, theworld’s largest Organisationfor International ISO Enterprise Resource Planning ERP Commonwealth ofIndependentStates CIS OTHER TERMS the ExecutiveDirectors and CEO. the companyandtohire and supervise their interests through of thegovernance shareholders ofacompany topromote A group ofindividualschosen bythe Supervisory Board Project ManagementOffice PMO Product &MarketingDevelopment PMD Key PerformanceIndicators KPI Health, Safety&theEnvironment HSE Supervisory Board. to themby, theBoard ofDirectors or behalf of,andwithinthepowersgranted A group ofDirectors appointedtoacton Executive Committee Corporate SocialResponsibility CSR Certified Accountants The AssociationofChartered ACCA Corporate Terms and theEuropean community. produced by industrialisedcountries greenhouse gas(GHG)emissions commitments forthereduction of Protocol establisheslegallybinding force on16February2005.TheKyoto 11 December 1997andentered into AnnualReport 2008 * JSC Avlita Leman UkraineLLC Metinvest UkraineLLC S.A. Metinvest International Spartan UKLtd* Metinvest Trametal S.p.A.* Ferriera Valsider S.p.A. JSC KhartsyzskTube Works JV MetalenLLC JSC Yenakiieve MetallurgicalWorks JSC AzovstalIron &SteelWorks Metinvest HoldingLLC Metinvest HoldingB.V. Name (fulllegalname) Principal subsidiariesofMetinvestB.V Entity acquired bytheGroup in2008 AnnualReport 2008 2-G, Prymorskastr., 2, Mechnikovastr., 80-A, Kovalyastr., Rue Vallin 2,Geneva,Switzerland Ropery Road,Teams, Gateshead, XIIOttobreVia 3, AntonioSaleri, Oppeano (VR)Via 9, Patonastr., Khartsyzsk86703, 12, Metalurghivav., 9, Metalurghivav., 1, Leporskogostr., Mariupol87500, 117, Postyshevastr., Alexanderstraat 23,2514JM 36 CAP37050,FrazioneVallese, Italy Donetsk region, Ukraine Donetsk region, Ukraine ’s-Gravenhage, theNetherlands Donetsk 83001,Ukraine Sevastopol 99016,Ukraine Piano cap16121,Genova,Italy Kyiv 01601,Ukraine Donetsk region, Ukraine Yenakiieve 86429, Donetsk region, Ukraine Yenakiieve 86429, Donetsk 83001,Ukraine Tel: Fax: Tel: Fax: Tel: Fax: Tel: Tel: Fax: Tel: Fax: Tel: Fax: Tel: Tel: Fax: Tel: Tyne andWear NE82RD,UK Fax: Tel: Fax: Tel: Fax: Tel: Fax: Registered office +38 0625297010 +38 0625253785 +38 0625254166 +38 0629527000 +38 0629527089 +38 06238816 +38 0623881600 +31 703640900 +38 06926764 03 +38 0692676402 +38 0445374488 +38 0445374437 +38 0623325277 +38 06233252 +41 2259363 +44 (0)1914600567 +44 (0)1914604245 +39 0105762990 +39 0105762911 +39 068841535 +39 0276013359 +38 0625745695 +38 0625742168 +38 0625251013

as at31December2008 Effective %ownership

. 100.0% 100.0% 100.0% 100.0% 100.0% 88.2% 94.6% 51.2% 65.6% 51.6% 70.0% 95.1% 95.6%

RolledProducts Rolled Products Rolled Products Rolled Products Rolled Products Rolled Products Rolled Products Rolled Products Rolled Products Rolled Products Coke &Coal Corporate Corporate Steel & Steel & Steel & Steel & Steel & Steel & Steel & Steel & Steel & Steel & Division 55

Additional Information Additional Information ** * JSC InguletsMiningandProcessing Works JSC CentralMiningandProcessing Works MiningandProcessingJSC Severniy Works United CoalCompanyLLC** Inkor &CoLLC* JSC KrasnodonvugilliaCoalMiningCompany JSC Avdiivka Coke&ChemicalWorks Name (fulllegalname) Principal subsidiariesofMetinvestB.V 56 Entity acquired bytheGroup in2009 Entity acquired bytheGroup in2008

47, Rudnastr., KryvyiRih50064, Kryvyi Rih50066, Kryvyi Rih50079, United CoalCompany 93-A, Ilyichaav., 5, Komsomolskastr., Krasnodon94400, 1, Industrialnastr., Avdiivka 86065, Donetsk region, Ukraine Luhansk region, Ukraine Dnipropetrovsk region, Ukraine Hurricane, WV25526 103 StationPlaceWay The USA,West Virginia Dnipropetrovsk region, Ukraine Dnipropetrovsk region, Ukraine Donetsk 83003,Ukraine Tel: Fax: Tel: Fax: Tel: Fax: Tel: Fax: Tel: Fax: Tel: Fax: Tel: Fax: Registered office +38 0623051757 +38 0564076311 +38 0564076301 +38 0564513282 +38 0564068165 +38 0564384362 +38 0564396301 +1 3047570297 +1 3047570292 +38 0623322433 +38 0623322433 +38 0643525146 +38 0643522354 +38 0623028102

as at31December2008

Effective %ownership . continued

82.5% 49.8% 41.5% 79.9% 79.9% 100% 51%

AnnualReport 2008 Coke &Coal Coke &Coal Coke &Coal Coke &Coal Iron ore Iron ore Iron ore Division Brovary MetalCentre Vyshneve MetalCentre Kyiv Branch Donetsk Branch Head Office LEMAN UKRAINELLC Authorised AgentforLatinAmerica SA Metinvest International SASudanBranch Metinvest International Singapore Representative Office SA Metinvest International SAIranRepresentativeMetinvest International Office SALebanonBranchOfficeMetinvest International SABaltija Metinvest International SAItaliaS.p.A Metinvest International SAIstanbulBranchOfficeMetinvest International Head Office METINVEST INTERNATIONAL SA Name (fulllegalname) Sales officesandlocations AnnualReport 2008 1, B.Khmelnytskohostr., Brovary 07400,Kyivregion 27, Kyivskastr., Vyshneve 08132,Kyiv region Parus BusinessCentre 48, Bilostokskastr., Donetsk83077 Tel: Santo Domingo,DominicanRepublic Ave. Enriquillo100,Residencial AlkhouIV, Apt403, P.O. Box2477,Khartoum,Sudan,Albustan,Gireif west, 038988, Singapore Penthouse level,SuntecTower Three, 8Temasek Boulevard, Unit 16-2,PAM Tower, No291,ZafarAve, AfricaExp, New Jdeideh,Sagessestr.,10th floorMontelibanoBuilding, Gostauto 40A,3rd floor, LT,Vilnius, Lithuania 01112 Centro Direzionale MilanofioriStrada1,PalazzoF1, 4° Piano, Atasehir Bulvari,42-AAda,Gardenya 7/1,Kat:21D:126, Tel: Beirut, Lebanon Block 1B,PlotNo.195,Khartoum,Sudan 20090 Assago,Milan,Italy 34758 Atasehir, Kadikoy, Istanbul, Turkey Tehran, Iran 2, Mechnikovastr., 22ndFloor, Kyiv01601 Fax: Tel: Fax: Tel: Fax: Tel: Fax: Tel: Fax: 2, rueVallin, 1201Geneva,Switzerland Fax: Tel: Fax: Tel: Fax: Tel: Fax: Tel: Fax: 2, Mechnikovastr., Kyiv01601 Fax: Tel: Fax: Tel: Fax: Tel: Fax: Tel: Registered office +38 0445374437 +41 229061828 +96 (1)893083 +96 (1)900872 +370 52496445 +370 52496440 +39 (02)52850931 +39 (02)52850911 +90 2164565681 +90 2164565680 +41 229061829 +38 (044)94670 30 +38 (044)4517498 +38 (044)4060825 +38 (044)4062204; 4062974 +38 (044)5374488 +38 (044)23000 +38 (062)2068960 +38 (062)3459942 +38 0445374488 +1 8094827634 +1 8094827456 +249 183224328 +249 155164516,183224328,+249912373130 +65 68663838 +65 68663767 +98 (21)88887381 +98 (21)88887367,2224

Additional Information Additional Information Kharkiv MetalCentre Kharkiv Branch Simferopol MetalCentre Simferopol Branch Sevastopol Branch Odesa MetalCentre Odesa Branch Kremenchug Branch Dnipropetrovsk MetalCentre Dnipropetrovsk Branch Name (fulllegalname) Sales officesandlocations 58 METINVEST SMCDOOBEOGRADLLC METINVEST EURASIALLC METINVEST UKRAINELLC Mykolaiv Branch Kryvyi RihMetalCentre Kryvyi RihBranch 15, Promyslova str., Vasyscheve 62495,Kharkivregion 63, Plekhanivskastr., office 314,Kharkiv61001 10, Montazhnastr., Simferopol 95493 56, Kymstr./ 69,Yevpatoriiske shose,Simferopol 95018 str.,134, Chernorichenska Sevastopol99010 23/1, Novomoskovskadoroga, Odesa65031 4, Shevchenkoav., office 44-46,Odesa65044 9 B,Yarmarochna str., Kremenchug 36930 25 D,Leninastr.(on thepremises ofCJSCBudindustriya), 11, Simferopolska str., Dnipropetrovsk 49005 28, Horkohostr., Mykolaiv54044 8, Shyrokivske shose,KryvyiRih50034 67/1, Ordzhonikidze str., KryvyiRih50005 Partyzanske 52012,Dnipropetrovsk region Tel: Fax: Tel: Fax: Tel: Fax: Tel: Fax: Tel: Fax: Tel: Fax: Tel: Fax: Tel: Fax: Tel: Fax: Tel: Fax: Tel: Fax: Fax: Tel: 36, Teodora Drajzerastr., Belgrade-Savski,Serbia Fax: Tel: 17, Vereiskaya str., office 105,Moscow121357,Russia Fax: Tel: 80-A, Kovalyastr., Donetsk83001 Fax: Tel: Fax: Tel: Registered office +38 (056)7901185;87 +38 (056)7903150;1184; +38 (056)4042355 +38 (056)4042355 +38 (057)75231 +38 (057)7550054 +38 (057)75231 +38 (057)7522000 +38 (0652)589845 +38 (0652)589845 +38 (0652)513212 +38 (0652)513212;522818 +38 (0692)631358 +38 (0692)631358 +38 (0482)339419 +38 (0482)3394 +38 (048)7760200 +38 (048)7760200 +38 (0536)741999 +38 (0536)740603 +38 (056)7893283 +38 (056)7901184;85 +38 (056)7901181 +381 1136748 81 +381 1136760 94 +7 4959801070 +7 4959801070 +38 0623325277 +38 06233252 +38 (0512)767128 +38 (0512)767128;26 +38 (056)4042355 +38 (056)4042355 continued

AnnualReport 2008

Metinvest_AR09_Cover_AW.indd 2 Overview 01 Company history and timeline • • • • • 2007 • • • • 2006 World SteelAssociation). Iron andSteelInstitute(IISI, currently calledthe Becomes amemberoftheInternational and twoIndependentDirectors Forms SupervisoryBoard with fourcommittees with Metinvest tomergeitsminingandsteelassets SMART Reaches anagreement inprincipalwith S.A. as MetinvestInternational Renames LemanCommoditiesS.A.(Geneva) LLC toeachcompanyaccordingly wholesale andretail assetsofLemanUkraine in UkraineandtheCIS,transfers restructuring ofitssalesdistributionchannels Metinvest SMCLLC,asaresult ofthe Establishes MetinvestUkraineLLCand needs existing debt,aswellforworkingcapital Ukrainian company, whichisusedtorefinance term facility, thelargesteverbyaprivate Signs aUS$1.5billionsyndicatedpre-export Issues IFRSauditedaccountsfor2005/2006. Works a 27%stakeinJSCYenakiieve Metallurgical retail metaltradingcompany, andanadditional a leadingUkrainianwholesaleand Acquires a100%stakeinLemanUkraineLLC, businesses ofSCM management ofthemetalandmining Metinvest isestablishedtoprovide strategic • • • • • • • • • • 2008 Receives ACCAaccreditation. Standards System basedonthe18001:1999OHSAS Implements anIndustrialSafetyManagement on theJORC methodology of CGOK,SevGOK,andInGOKreserves based Completes anauditbySRKConsultingUKLtd of thetop-10taxpayersin Ukraine SevGOK andInGOKare includedinthelist Siemens VAI Signs apartnershipagreement with Credit SuissefortheacquisitionofTrametal Paribas, RoyalBankofScotland,INGand Obtains aUS$1.189millioninloansfrom BNP Steel Works casting machineatJSCAzovstalIron & Begins operatinganewslabcontinuous (Ukraine) Acquires a51%stakeinInkor&CoLLC Kingdom) from theMalacalzafamily and itssubsidiarySpartanUKLtd(United Acquires a100%stakeinTrametal S.p.A.(Italy) producer ofiron ore materialsintheworld Metinvest isrankedastheseventhlargest

AnnualReport2008

AnnualReport2008 y notes

31December2008 Y ear ended 89,000 13,213 35.4% 4,681 11.4 18.7 5.2 6.2 9.2 8.2 31 December2007 Y ear ended

99,000

30.8% 2,286 7,425 13.3 18.9 5.2 5.7 9.5 9.2

02 Key Figures

21/8/09 15:54:12 59

Additional Information Metinvest_AR09_Cover_AW.indd 1

www.metinvestholding.com ’s-Gravenhage, TheNetherlands Alexanderstraat 23,2514JM Metinvest B.V.

08 eport R nnual A INVESTING

DEVELOPING 08

GROWING

ANNUAL REPORT

Steel &RolledProducts Division Coke &CoalDivision Iron Ore Division

minority stake(25%)withablockinginterest. owninga with JSCSmartHolding(SMART) society asawhole. towards theenvironment, ourpeople,localcommunitiesand efficiency, whilstdemonstratingaproactive and responsible approach anticipate ourclients’needs.We aspire toworld-classstandards of producing highquality, value-addedproducts whichsatisfyand We metal andmininggroup aimtobuildawell-balancedinternational Vision on ourcommitments. at thesametimedemonstratingfinancialstability anddelivering the highestlevelsoftransparency toallofourstakeholders,while Our InvestorsandPartners.We aspire tocommunicatewith with theopportunitiestheyneedtodeveloptheirprofessional careers. conditions thatwillensure safety andprovide theGroup’s employees Our Employees.We aimtoprovide thebestpossibleworking global markets. existing clientsandtodeveloprelationships withnewonesinkey at competitiveprices,tofurtherstrengthen ourrelationships with Our Clients.We strivetoensure thehighestqualityproducts Values positions worldwide. well‑balanced metalandminingcompany, achievingleading Metinvest’s strategicgoalistocreate a highlyefficient and Strategy JSC SystemCapitalManagement(SCM)(75%), Metinvest B.V. ismajority-ownedby in more than75countriesaround theworld. The Group’s products are marketedandsold sectors locatedinUkraine,Europe andtheUSA. 26 companieswithintheminingandsteel East, andNorthAfrica.TheGroup comprises key sales markets of Europe, the CIS, the Middle geographic locationandcloseproximity tothe pipes. Metinvestbenefitsfrom afavourable products, coke,aswellrolled products and iron ore, themanufacturingofsteelandiron ore is primarilyinvolvedintheminingofcoaland producers ofsteelintheworld.TheCompany Netherlands, andoneofthelowestcost and mining company headquartered in the verticallyintegratedmetal international, METINVEST GROUP(Metinvest)isan

AnnualReport2008

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