www.scmholding.com NEWSOctober 2013

How We Work: Principles & Values of SCM Group

SCM Group has published how the company manages its standards and principles its business and what it document, How We Work, thinks to be the right way of which sets out the ethical doing business and what is values for business conduct unacceptable. to be followed by the Group’s “Actions speak louder than employees and serves as the words. The behaviour of every- basis for the codes of ethics for one from senior manager to HOW WE WORK SCM’s operating businesses. shop worker influences how successful we are, how effect- SCM Group’s Principles ively we work and how SCM of Business Ethics is seen and perceived by the 4honesty and good faith in relations wider public,” said SCM CEO within the company Oleg Popov. 4integrity in relations with “If everyone at SCM works to these principles, we are sure to customers and business partners 4respect for the individual and succeed and share this success observance of human rights with others. This would be a 4transparency and openness success for which both Ukraine 4Employees at the presentation of How We Work 4zero tolerance for bribery and and the world will recognise corruption and respect us,” he continued. each business area, develop feedback to senior executives 4sustainable development and SCM is launching a ethical codes for its businesses and supervisory boards. social responsibility number of practical tools to based on group-wide rules, SCM encourages current 4legitimacy and the rule of law ensure principles and values principles and values, and and future business partners are embedded into the organise training sessions to to follow these ethical How We Work is based Group’s corporate culture. roll out the policy. SCM has values and business conduct on SCM’s key principles of The company will establish also set up the SCM Group standards outlined in the business ethics and describes Business Ethics Committees for trust line as a way to give direct document.

Metinvest Joins Forces with Canada’s Black Iron to Develop Iron Ore Assets

Metinvest, Ukraine´s largest its development projects. the advancement of its new currently a subsidiary of Black mining and steel business, has Metinvest has a strong track project. Iron and develops its Shyman- come to an agreement with record of developing and Subject to final regulatory ovskoye and Zelenovskoye Black Iron Inc, a Canadian iron operating iron ore projects approvals, Metinvest will invest deposits, both located in Krivoy ore exploration and develop- in Ukraine, which will prove $20m to buy a 49% share- Rog, Ukraine. ment company, to invest in invaluable to Black Iron in holding of BKI Cyprus, which is >> Continued on Page 2 METINVEST IRON & BLACK

DTEK Starts Gas Imports FUIB Strengthens Brand New Sinter Plant Opened Mining Machines Sign MoC from Europe Page 2 Image Page 3 at Zaporozhstal Page 3 with VINACOMIN Page 4 Page 1 NEWS October 2013

>> Continued from Page 1 Metinvest Joins Forces with Black Iron

Based on projected total capital well as its operational history in Ukraine. investment requirements of over $1bn, This agreement greatly strengthens our Metinvest’s potential investment could development team and I look forward to reach as much as $536m. being closely associated with Metinvest. Metinvest will also be granted a non- Together, we will help bring new world- transferable option to acquire additional class iron ore processing, safety and shares in BKI Cyprus to increase its effective environmental technologies to Ukraine.” ownership to 51% following achieving full Further reaction came from Igor Syry, run rate production of 9.2m tonnes per CEO of Metinvest, who said, “Metinvest annum of iron ore concentrate for three believes that development of Black Iron’s consecutive months. Shymanovskoye project will be important Completion of the arrangement for Ukraine and its economy. It will is subject to all necessary regulatory represent a major investment in Ukraine, METINVEST IRON & BLACK approvals, including Ukraine’s Anti- resulting in increased local employment, Monopoly Committee. the improvement of local infrastructure The agreement was welcomed by Matt and environmental standards in Krivoy Simpson, President and CEO of Black Iron, Rog, and it will be a catalyst for regional who said, “Black Iron selected Metinvest and national social and economic for its industry-leading experience in development.” 4Metinvest annual report 2012 iron ore mining and steel making as SCM is a major shareholder of Metinvest. Click to download Stage 2 of Botievo Wind Farm Nears Completion Wind Power, a subsidiary of SCM Group’s energy holding DTEK, has raised a €138m loan from LandesBank Berlin, one of the largest banks in Germany. The 10-year term credit will finance construction of Stage 2 of Botievo Wind Farm which will include 35 of the latest Vestas V-112 wind turbines with a total capacity of 105 MW. The installation is to be completed in 2014. 4The Botievo Wind Farm DTEK CFO Vsevolod Starukhin said, conduct. These steps enhance trust of in the construction of Botievo wind farm. “DTEK has been active in introducing new investors and provide a good basis for The previous €107m deal was recognised technologies into the production process raising finance from international banks.” a Deal of the Year 2012 by Euromoney’s and the world’s best practices of corporate This is the second time Wind Power Trade Finance and Global Trade Review management and transparent business and LandesBank Berlin have cooperated magazines.

DTEK Starts Gas Imports from Europe DTEK Trading, a trading business with both domestic and global partners. operating under the umbrella of SCM Andrey Favorov, DTEK’s Commercial Group´s energy holding DTEK, has Director, commented, “Our goal is to begun importing gas from Europe. improve business efficiency and the The company imported an estimated competitive strength of our products 100m cubic metres of natural gas in July. and services. Having built up an effi- Further imports throughout the rest of cient vertically integrated chain in coal, this year will depend on the economic we are now turning to gas, as DTEK con- feasibility and outlook for the Ukrainian sumes over 3bn cubic metres of natural

DTEK IMPORTS GAS DTEK and European gas markets. gas per year. Currently, European gas Following its development strategy prices are lower than those of Naftogaz to 2030 DTEK envisages the creation of a of Ukraine, so we are planning not only diversified energy company operating to produce our own gas, but also to both domestically and internationally. import it.” The goal of the strategy forsees energy The entire SCM Group consumes a to- 4DTEK annual report 2012 sales, including gas, on energy trading tal of 6bn cubic metres of natural gas Click to download platforms and under direct contracts per year. Page 2 NEWS October 2013 FUIB Strengthens New Sinter Plant Opened at Zaporozhstal Brand Image and Ukrainian President Viktor Yanukovych has opened the new sinter plant at Reputation Zaporozhstal, said to be one of the most advanced facilities in Eastern Europe. First Ukrainian International Bank (FUIB) is Zaporozhstal is 49.9% owned by going from strength to strength, featuring Metinvest. prominently in global and national surveys. New cutting-edge technology means A survey by The Banker, the UK-based the plant will be able to recycle about international financial affairs publication, 6,000 tonnes of iron-containing waste reports that FUIB boosted its position in per year and slash dust and gas emis-

the annual rankings of the world’s largest sions by approximately 10% of its total ZAPOROZHSTAL banks. emissions. In 2013, it is placed 844 in the world´s The new facility is expected to help 4Rinat Akhmetov at the opening ceremony top 1,000 banks, some 82 positions higher Zaporozhstal reduce its environmental He added, “I am sure that Zaporozhye than in 2012. FUIB has been ranked in the footprint in the region. will have clean air as it will benefit top 1,000 for the third year running. Rinat Akhmetov, the President of everybody: businesses, employees, the Sergey Chernenko, Chairman of the SCM which is the largest shareholder in city, the region, and the country.” Management Board at FUIB, said, “We Metinvest, said at the opening ceremony, Further comment came from Zaporo- were pleased to see the higher position “We are committed to making this plant zhstal CEO Rostislav Shurma, who said, of FUIB in the ranking of the Top 1000 one of the best facilities in Eastern Europe. “To date we’ve done a lot. We built a coal world’s largest banks by assets published We have two major objectives: economy terminal for the pulverized coal injection by The Banker. Once again it shows the and environment, which cannot be facility and launched new sinter plant effectiveness of our development strategy, achieved without significant investment. No.1. We have new ambitious targets which in the continuing challenging Despite the current crisis in the global ahead. Our staff understand well the economic conditions facing Ukraine markets we will continue to support “efficiency-future” linkage and work to continues to provide business growth at a modernisation. I am confident that we win the prize of being the most efficient controlled risk level. For 1.5m individuals will build a strong economy.” steel mill.” and more than 20,000 corporate customers FUIB remains one of the largest and most reliable banks in the country.” SCM Sells Ukrainian Pharmacy Holding FUIB has also joined the Top 100 Biggest Banks in the CIS by Assets, a SCM has closed the deal to sell 100% rating compiled by Ria Analitika Centre of Ukrainian Pharmacy Holding for Economic Studies (Russia). Although (Zdravitsa and Dobri Liky pharmacy economic growth has slowed down in chains, Tsentralnaya Pharmacy, and Ukraine, the bank maintains 76th place A’STA regional wholesale pharmacy on the list. company), which have operated under Along with strong positions in SCM Group’s umbrella since September financial rankings, FUIB systematically 2010. and consistently follows best corporate The parties agreed not to disclose the governance practices. This is the verdict amount and other details of the deal. of Concorde Capital’s research team in the fourth Corporate Governance Standards 2013 study covering Ukrainian public companies. This year the ranking included SCM Group Public Report 2012 FUIB for the first time and recognised the “Our actions speak louder than any words... According bank as a leader in corporate governance to the Economic and Social Impact Assessment we quality by placing it 3rd on its bond issuer conducted with Ernst&Young, added value of SCM list. Group comprises 3.9% of Ukrainian GDP. Group FUIB Financial Performance, enterprises employ 1% of the economy’s workforce, H1 2013 and taxes and fees to all budgets and off-budget Key indicators Growth funds equaled $2bn or 4.7% of total tax revenues SCM PUBLIC REPORT 4Net profit $26.3m + 47.8% of Ukraine... Our capital investments account for 4Net assets $3.9bn + 19.6% nearly 10% of the total fixed asset investments in the Ukrainian economy. In 2012 we spent over $2.2bn in 4Loan portfolio $2.7bn + 5.8% total on modernisation of our business.” 4Customer accounts $2.5bn +19.0% 4Equity $661m + 7.1% Excerpt from SCM CEO Oleg Popov Statement Download the report

Page 3 NEWS October 2013 Mining Machines & VINACOMIN Sign MoC FACT FILE SCM Transportation Business SCM Group’s Mining Machines, which Hong river, where most of the country’s is the CIS´s largest producer of mining coal is produced, was included into equipment, has signed a memorandum UNESCO’s World Heritage list. Therefore, of deeper cooperation with Vietnamese open-cast mining is impossible in the state-owned producer of mineral re- region. sources VINACOMIN. “Mining Machines has unmatched The deal will forge closer cooperation to expertise in extracting coal from thin install machinery and design mine shafts and steep seams, and our Vietnamese Established in 2010, Portinvest manages SCM’s port assets and implements investment projects in the and vertical handling systems for the partners can benefit from this,” said CEO Ukrainian transport industry. mines in Quang Ninh region. of Mining Machines, Yevgeniy Romaschin. 4Stevedoring services are performed by Sevastopol- VINACOMIN is set to almost double its The company has already been building based Avlita, one of Ukraine’s largest private transhipment

MINING MACHINES annual coal production to 75m tonnes two vertical shafts at Nui Beo mine and facilities in the the Black and Azov Sea basin. Annually it over the next four years, mostly through expects to be engaged as the general can handle up to 5.5m tonnes of cargo. underground mining operations. Quang contractor by VINACOMIN for a variety 4Portinvest Logistic provides ship agency, cargo forwarding, customs clearance, brokerage and container Ninh provence coal mines produce around of mine construction projects, offering transportation services. 90% of the national output. the full range of services from design and 4Marine Industrial Complex is one of the largest Underground mining is in the spotlight installation of machinery to coal mining shipyards in the Black and Azov Sea basin. It operates the in Vietnam today as the estuary of Song automation. largest dry dock in the region. 4Yuzhny Marine Terminal and Mariupol Marine Terminal are constructing terminals in the seaports, Follow SCM Group Directors’ insights at blog.scm.com.ua where SCM is the biggest consignor. 4Investment in Yuzhny will be $250m, in Mariupol - about $200m. THIS IS HOW WE WORK & WE WILL WORK ONLY THIS WAY 4Portinvest Holding’s CEO is Aleksandr Smirnov. Natalia Yemchenko, SCM Director of Public Relations and Communications, on the www.portinvest.com.ua principles and values of the SCM Group. “Today SCM Group employs about 300,000 people and there are over 5 million people in the regions where we operate. I believe that most of our employees share our principles and values and work in line with them. I also believe that if everyone at SCM, without exception, works to these principles, the quality of life for the people in the regions of our presence will become better.” . . . Read more Lemtrans is Ukraine’s biggest private company in the rail transportation and forwarding market offering railway cargo transportation services for SCM Group’s holdings. UKRTELECOM: NO REVOLUTIONS, ONLY WORK AHEAD 4The company operates more than 13,500 open rail- Ilya Arkhipov, Managing Director of SCM Advisors (UK) Limited, on making Ukrtelecom a cars and annually transports over 51m tonnes of freight. success and creating value for its subscribers. 4Lemtrans has a 18.4% share of the national open-car “We are ready to develop Ukrtelecom and we are ready to invest. We want freight transportation market. 4Lemtrans’s CEO is Vladimir Mezentsev. to attract new subscribers, offer new services to the existing subscribers, www.lemtrans.com.ua and build a modern telecommunications infrastructure in Ukraine. We understand the needs and wishes of end users and we are confident that Ukrtelecom will be able to meet their expectations with our help.”. . . Read more

IMPROVING THE INVESTMENT CLIMATE FOR UKRAINE Jock Mendoza-Wilson, SCM Director of International and Investor Relations, on Ukraine’s SCM Group set up Transinvest Holding in November steady progress and the challenges that remain to be addressed. 2012 to manage construction and repair of “Adoption of EU regulatory principles should lead to an improved ease railway tracks, initially, for SCM Group’s transport infrastructure. of doing business in the country, reduce risk and act in the medium term 4Transinvest Holding comprises Donbass Industrial and to boost foreign direct investment – where Ukraine has for long lagged Transportation Enterprise and Kerch Rail Switch Factory. behind its Eastern European neighbours. Many countries are chasing the 4Transinvest Holding focuses on construction,

SCM CORPORATE BLOG SCM CORPORATE same investment euro or dollar in competition with Ukraine. Enhancement modernisation and repair of railway tracks along with of the business climate and investment potential that regulatory reform production of railroad switches. would bring would significantly aid Ukraine’s competition for these funds.”. . . Read more 4Transinvest Holding’s CEO is Andrey Shpilka.

For further information, or to subscribe, please contact: Jock Mendoza-Wilson, Director of International and Investor Relations System Capital Management, 1 ul. Maryinskaya, Donetsk 83001, Ukraine [email protected] – www.scmholding.com