scm public report 2010

Dynamics, %

2010 Financial Results

assets, $ MILLION

18,539 +22.9222,788

2010 2009

sales volume, $ MILLION

8,151 +57.2712,819net pRoFit, $ MILLION

97 +776.29850eBitDa, $ MILLION

1,735 +94.583,376

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2 2010 financial results

4 CEO Statement

6 SCM Group events calendar 2010

10 About SCM Group10 SCM Group history

13 Corporate culture: mission, vision, values

14 SCM Group management

20 SCM Group corporate structure – 2010

22SCM Group corporate transformation program 2010

24 SCM Group business structure

26 SCM Group business28 Metals and mining

36 Energy

41 Financial services

43 Telecommunications

45 Real estate

47 Media

52 Clay mining

54 Retail trade

56 Petroleum products retailing

57 Heave Engineering

60 Pharmaceuticals

61 Transport and logistics

62 Associated companies

64 Football

66 Corporate social responsibility and sustainable development

72 Key post-reporting period events – 2010

contents

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CEO Statement

Dear Colleagues and Partners,

Two years ago, in the midst of the global eco-nomic recession, I made a promise that SCM would emerge stronger, more effective, and better prepared for intensive growth after the recession ended. I am proud to let you know that is precisely what we have achieved. Our financial indicators in 2010 are close to pre-recession levels. We have strengthened our competitive advantages, while continuing to invest in development. We enhanced our leadership and corporate culture, at the core of which is our management team.

This is the basis for further sustainable growth in the new economic reality, where instability has become an integral part of our lives. In this new reality, to be successful, we continue to focus on investing in growth as we did previously, however, we have become more efficient, adaptive, and effective.

We optimized the Group’s business port-folio, exited from non-core business areas, and prepared ourselves for entering new, promising areas. We secured control of our liquidity and this gave us financial mobility as the global and the national economies began to recover.

As a result of these actions, SCM was suc-cessful in 2010, when we saw the first signs of the economic growth, and delivered re-sults that make us rightly proud. Our revenue was $12,819m, profit was $850m, while more than $1,807m was paid in taxes, and approximately $1,162m was paid in remu-neration to our employees. Additionally, we invested over $1,118m in the organic

growth of our business and a further $204m in mergers and acquisitions1.

In 2010, Metinvest became the controlling shareholder in the Ilyich Steel Plant, based in Mariupol, one of Ukraine’s largest enterpris-es with a full metal production cycle. Acquir-ing the plant to become part of Metinvest Group was an important step in implement-ing SCM Group’s long-term strategy of en-hancing vertical integration, achieving maxi-mum production effectiveness in Ukraine, and strengthening our market position. The total volume of investment in the develop-ment of Metinvest Group in 2010 amounted to $582m (excluding M&A).

During 2010, DTEK’s enterprises demon-strated significant growth. The volume of coal mined increased by almost 1.5m tonnes to 19.2m tonnes. One of the key growth factors was the increased investment in highly efficient mining equipment and in-novative technologies during 2008-2010. The total output of DTEK’s power genera-tion companies (including Dneproenergo) also increased by 34% to 30.7bn kW/hour, while the total volume of power distributed increased to 13.3bn kW/hour - a 13% in-crease compared to 2009.

In the reporting year, our energy business strengthened its presence in international markets. DTEK exported approximately 2m tonnes of coal, thus, exceeding the 2009 figure by almost two-fold. The coal was shipped to customers in Turkey, Bulgar-ia, Poland, Romania, India, USA, and Brazil.

1 While Ukraine remains the main focus of our activity and investment, we significantly expanded our presence in international markets.

Also in 2010, DTEKbegan supplying power to consumers in Hungary, Slovakia, Roma-nia, Moldova, and Belarus. Last year, DTEK exported 1.21bn kW/hour of power. The to-tal investment in DTEK’s organic growth in 2010 amounted to $276m.

To strengthen its position in the domestic fi-nancial market, SCM made a decision to con-solidate First Ukrainian International Bank and Dongorbank into a single entity by merging Dongorbank into First Ukrainian International Bank. The consolidation is planned to be com-pleted in the second half of 2011.

To manage its media assets in television and digital media, SCM created the Ukraine Media Group. This new holding includes: Ukraine Television Channel, Football sports channel, Donbass regional channel, Media Partnership sales house, and Digital Ventures (tochka.net portal).

In 2010, we also made a decision to enter several new business areas, among which was pharmaceuticals. SCM Group acquired Pharmacy of Donbass, which owned a net-work of more than 120 pharmacies. To man-age the new business area, Ukrainian Phar-macy Holding was created, with its strategic goals being to grow market share and geo-graphical expansion.

The decision was also made to organize transport and logistics into a separate busi-ness area, concentrated around Avlita Ste-vedoring Company, the company specializes in grain and metal transshipment through its facilities in the non-freezing Sevastopol Bay on the Black Sea.

Overall, the reporting year helped us rec-ognize that in the 21st century a successful business has to move forward, driven by two

main goals. It has to grow shareholder value, while remaining a positive force of change in society. We at SCM consider both of these goals as strategic and are determined to fur-ther grow and develop in this new, balanced paradigm. Moreover, we believe that the val-ue we create will be greater than merely the sum of SCM’s shareholder and societal value. In terms of business goals, SCM Group’s pri-orities for 2011 remained unchanged. They include the organic development of our ex-isting assets, boosting their operational ef-fectiveness, through continual investment in modernization and personnel development, as well as entering new and attractive sectors of economy which have significant growth potential. In 2011, the new sectors we will focus on will be agriculture and the expan-sion of our transportation business which we intend to grow and to add value.

We will also strive for SCM’s growth to facilitate the development of the regions where we are present. This is not only due to the taxes and salaries we pay, we have been doing this since SCM Group was created2.

At SCM, we feel that our success is con-nected with the way the society progresses. We know, every time our employee comes to a factory, goes down a mine, enters an of-fice, or drives a excavator, that he or she is changing not only their lives, but the lives of hundreds of people. What we do and how we do it is important, not only for us and our employees, but also for hundreds and thou-sands of people outside SCM.

Sincerely,Oleg PopovChief Executive Officer

SCM Group Public Report 2010

CEO

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2 What we want is to create a clear, direct connection between our economic growth and society’s social progress.

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JanuaRy

15 January Service-Invest (DTEK) completed the $4m reconstruction of Vozrozhdenie substation

26 January DTEK joined EURACOAL, the European Asso-ciation of Coal and Lignite producers

27 January SCM participated in the annual meeting of the World Economic Forum in Davos for the fourth consecutive year. SCM is a strategic partner of the Forum

27 January First Ukrainian International Bank completed the restructuring of its obligations to bond holders and creditors

FeBRuaRy

18 February Stepnaya mine (DTEK) put a new rock wind-ing set into operation at its Unit #2

24 February Vega launched its services in Zhitomir, Uzh-gorod, Rovno, and Khartsyzsk (Donetsk Oblast)

maRch

3 March SCM Limited (Cyprus), a holding company, paid a further $82.9m installment on its $545m syn-dicated loan, secured in March 2007

4 MarchMetinvest joined the UN Global Compact

17 March DTEK’s corporate university was launched

22 March DTEK and Dnepropetrovsk National Mining University signed a long-term cooperation agreement

30 March DTEK, Kurakhovo (Donetsk Oblast) City Council, and USAID Municipal Heating Re-form Project in Ukraine signed a memoran-dum of cooperation

apRil 12 April Yenakiyevo Steel Plant (Metinvest) success-fully completed the product quality supervi-sory audit, conducted by CARES, the UK Cer-tification Agency of Reinforcing Steels

12 April SCM Group established Mining Machines Company to become the holding for its heavy engineering businesses

20 April SCM was ranked #1 in Gvardia Rating of So-cially Responsible Companies for the third consecutive time

SCM Group events calendar 2010

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22 April Yenakiyevo Steel Plant (Metinvest) launched the preparations to certify its environmental management system to ISO 14001:2004 standard

28 April DTEK successfully placed a $500m Eurobond issue with a 5-year term

30 April System Capital Management General Share-holders’ Assembly made a decision to allo-cate $92.4m of company profits for 2009 for business development

may

13 May SCM presented the results of the Ukrainian National Higher Educational Institutions Rat-ing, Compass 2010

14 May The portfolio of individual clients’ deposits at First Ukrainian International Bank exceeded $500m

18 May Khartsyzsk Pipe Plant (Metinvest) complet-ed the construction of new X80 straight-seamed electro-welded large diameter steel piping production line

21 May ESTA Group completed the purchase of 50% stake in Kiev Hotel (Donetsk)

25 May Metinvest successfully placed a $500m Eu-robonds issue with a 5-year term

June

24 June Metinvest Eurasia opened a new warehouse in Mineral Waters (Russia)

July

13 July DTEK made a decision to invest $63m in Rovenkyanthracite and Sverdlovanthracite state-owned companies within the frame-work of renovation projects, using a public-private partnership mechanism

14 July DTEK joined EURELECTRIC, the association uniting the electricity industry companies in Europe

29 July Metinvest signed a $700m three-year syndi-cated pre-export loan facility

august

2 August Brusnytsya retail chain expanded add-ing stores in Kramatorsk (Donetsk Oblast), Melitopol (Zaporozhye Oblast), and 2 stores in Zaporozhye

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septemBeR

2 September SCM Limited (Cyprus), a holding company, paid a further $81m installment on its $545m syndicated loan, secured in March 2007

10 September The Supervisory Councils of First Ukrainian International Bank and Dongorbank made the decision to consolidate the banks by merging Dongorbank into First Ukrainian In-ternational Bank

22 September Pharmacy of Donbass became part of SCM Group

30 September Vesko (United Minerals Group) obtained the approval of the Anti-Monopoly Committee of Ukraine to concentrate a stake of more than 50% in the statutory capitals of Keram-mekhanizatsiya and Capital-Service, which both specialize in the geological research of clay deposits

30 September DTEK and other SCM Group companies in-creased their stake in Zapadenergo’s statu-tory capital to 24.99%

30 September C4Gas S.A. (France), the main common sourcing portal of major European oil and gas companies, completed the certification procedure of Metinvest Group’s products and sales system

novemBeR

4 November SCM made a decision to create Ukraine Media Group on the basis of Ukraine Televi-sion Channel

10 November DTEK began exporting electric power to Belarus

17 November Metinvest became the controlling sharehold-er of the Ilyich Steel Plant in Mariupol

19 November SCM celebrated its 10th anniversary

19 November Metinvest’s Makeyevka Steel Plant became the first company in Ukraine to launch the produc-tion of reinforcing bars with negative tolerance, according to DSTU 3760-2006 standard

29 November First Ukrainian International Bank became the first bank in Ukraine to be successfully audited for compliance with the international information security standard, PCI DSS

DecemBeR

1 December The Parallel chain of gas stations expanded, adding 3 new gas stations in Lugansk

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6 December Metinvest Group enterprises completed the registration procedure, in compliance with the EU’s REACH directive

9 December DTEK increased its share in Kievenergo statu-tory capital to 39.98%

17 December ESTA Group purchased Kiev’s Central Univer-mag Shopping Mall

17 December Brusnytsya retail chain expanded adding 3 stores in Kharkov and Kharkov Oblast and one store in Zaporozhye

20 December Mining Machines Company secured a $35m credit line from Prominvestbank

20 December DTEK signed an agreement with state-owned NEK Ukrenergo, securing access to the inter-state electric power export networks for 2011

22 December Metinvest began rolling reinforcing rods at Makeyevka Steel Plant

22 December SCM and Renaissance Credit Group signed an agreement for SCM to purchase a 100% stake in Renaissance Capital Bank (Ukraine)

31 December Ukraine Television Channel was ranked #2 among Ukraine’s television channels in 2010 (audience of 18 years+ in cities with popula-tion of 50,000+) – for the first time

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SCM Group historySystem Capital Management (SCM) was founded by Rinat Akhmetov (100% owner) in 2000 in Donetsk, Ukraine. Its main purpose is to be a strategic investor in key segments of the Ukrainian economy. These are, primarily, min-ing, metals, and energy. Since its foundation, SCM has been developing its business, based on the industrial assets it owns and making large-scale investments, both in Ukraine and internationally. SCM is constantly seeking to expand its business by gaining presence in other dynamic sectors of economy including: banking, insurance, telecommunications, real estate, media, clay mining, heavy engineering, retail trade and others.

AboutSCM Group

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2000-2002 growing the portfolio

SCM expands its investment portfolio. It is dur-ing this period that the company acquires most of its businesses and begins introducing a sin-gle standard of management across the Group.

2002-2004 investing

During this period, the main focus is on es-tablishing international standards of business management at all of the company’s key as-sets. Meanwhile, enterprises are modernized and production indicators are raised, where possible, using experience and know-how, accumulated by SCM professionals. The company begins to implement its long-term growth strategy and to increase the effec-tiveness of its business. This means building vertically-integrated industrial businesses and forming a team of world-class managers capable of running them.

2004-2006 expansion and transparency

During this period, SCM begins actively ex-panding its corporate transformation pro-gram, aimed at increasing the effectiveness of the Group’s corporate structure and cor-porate governance. The first steps within the program’s framework are forming Metinvest and DTEK holdings to exercise strategic and operational management of the Group’s as-sets in metals, mining, and energy, respec-tively. During this period, SCM also actively invests in the new areas: media, real estate, and telecommunications. SCM also grows its presence in its main business areas: min-

ing, metals, energy, and financial sector. The company institutes the preparation of con-solidated financial statements in accordance with International Financial Reporting Stand-ards (IFRS) and begins the process of build-ing a transparent business and management structure for the Group.

2007-2008 creating stability

SCM group develops a distinct business de-velopment strategy. Business expansion is based on organic growth, as well as on new acquisitions in strategically important seg-ments of the economy and industry (min-ing and metals, energy, financial sector, tel-ecommunications, real estate, retailing, and others). Simultaneously, SCM begins exiting from sectors, presence in which does not comply with the approved business develop-ment strategy. During this period the Group also accumulates the necessary financial reserves to ensure business stability during volatile economic periods. At the foundation of this stability are balanced approach to do-ing business, effective and efficient decision-making, conservative approach to borrow-ing, clear priority setting, and, undoubtedly, the team of talented professionals.

2009-present time. Looking to the future

By the 10th year of operations SCM becomes Ukraine’s largest private national investor. The Group’s share in the country’s GDP amounts to 7%, while its enterprises employ approxi-

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mately 200,000 people. SCM’s geography of presence includes Ukraine, Russia, Swit-zerland, Italy, Bulgaria, United Kingdom, and USA. In spite of the global economic changes, the Group’s approach to doing business re-mains unchanged: balanced diversification,

as well as long-term investment in businesses with high growth and ROI potential. The main goal also remains constant – to become not only Ukraine’s leading financial and industrial group, but also a truly competitive and suc-cessful global business.

The SCM mission: success, together

We invest in the continuous growth and ef-fectiveness of our business, and through this support the economic and social develop-ment of society as a whole.

The SCM vision: creating through development

We build effective businesses and manage them according to the best world standards and practices, ensuring long-term returns on our investment and participation in the devel-opment of the regions in which we are present.

The SCM values: effectiveness, professionalism, accountability

Effectiveness as a means to achieve the best re-sults in everything we do. For us, effectiveness is:

� reaching the goals we set;

� applying contemporary technologies and approaches to doing business;

� constantly improving the processes and methods of doing business;

� rational allocation and use of resources;

� seeking new opportunities;

� preparedness for change.

Professionalism in doing business, includ-ing investing in people and stimulating inno-vation and enthusiasm towards work. For us, there is particular importance in:

� meeting the highest standards;

� stimulating initiative and innovation;

� investing in professional development and loyalty of employees;

� attracting and retaining highly qualified personnel;

� evaluating achievements fairly.

Accountability to our employees, our part-ners, our communities, and society as a whole.

Corporate culture: mission, vision, values

014

�CEO of SCM since January 2006.

�2001-2006 – Executive Director of SCM.

�2000 – Joined SCM as Deputy to the CEO.

�1992-2000 – Worked in various

government offices.

Chairman of the Board of FC Shakhtar.

Represents SCM interests on the Supervisory

Boards of Metinvest, DTEK, First Ukrainian Inter-

national Bank, Dongorbank, and Ukraine Media

Group.

Areas of responsibility: taking and approval of the

key financial, investment, and personnel deci-

sions, both directly at SCM and in the Group’s as-

sets, as well as evaluating the performance of top

management of these assets.

Education:Graduated from Donetsk State University in 1996.

Graduated from Donetsk Polytechnical Institute in

1991.

�SCM’s Financial Director since September 2009.

�July 2008 – September 2009 – Deputy

Financial Director of SCM.

�2003 – Joined SCM as Chief Accountant.

Prior to joining SCM, Ms. Povazhnaya worked as

Chief Accountant in various large Ukrainian com-

panies (Scandic South, Artemovsk Champagne

Winery, etc.).

Started her career in 1996 by being accepted to the

Donetsk Oblast State Tax Inspection as State Tax In-

spector for the Individual Persons’ Audit Department.

Member of Metinvest and DTEK Audit Committees.

Chairs the Audit Committees of Bureau of Economic

and Social Technologies (BEST) Analytical Center,

and SCM Finance.

Areas of responsibility: organizing tax and financial

audit of SCM Company and SCM Group’s foreign

assets, budgeting and cash flow planning for SCM

Group.

Education:Graduated from Donetsk State University of Man-

agement with a postgraduate degree in 2008.

Other credentials include: Ph.D. in Public Adminis-

tration, International Financial Reporting ACCA Di-

ploma, mini-MBA diploma.

Graduated from Donetsk State Commercial Univer-

sity with major in Industrial Management in 1995.

SCM Group management

OlegPopovChief Executive Officer

Margarita Povazhnaya Chief Financial Officer

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�SCM Metals and mining Business

Development Director since November 2009.

�August 2008-November 2009 – Strategy

and Investment Director, Clever Management.

�2003-2008 – Senior Project Manager,

McKinsey & Company, Moscow

and Dubai offices.

Represents SCM interests on the Metinvest Hold-

ing Supervisory Board.

Areas of responsibility: strategy, investment, fi-

nance, and risk management for SCM’s metals

and mining business.

Education:Graduated from Georgetown University School

of Business (Washington, USA) with an MBA in

2003.

Graduated from Kazakhstan National Technical

University with major in Economics and Enterprise

Management in 2001.

�SCM Energy Business Development

Director since March 2010.

�2008-2010 – member of Microsoft Russia

Board of Directors, responsible for cooperation

with telecommunications sector.

�2002-2008 – advanced from Consultant

to Junior Partner in McKinsey & Company,

Denmark and Moscow offices.

Represents SCM interests on the DTEK Supervisory

Board.

Areas of responsibility: strategy, investment,

finance, and risk management for SCM’s energy

business.

Education:Graduated from Moscow State University named

after M.V. Lomonosov with major in Computational

Mathematics and Cybernetics in 1993.

Sergey KorovinEnergy Business Development Director

Amir AysautovMetals and mining Business Development Director

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�Business Development Director at SCM

since November 2005.

�2001-2005 Consultant, McKinsey & Co,

Moscow.

�2000-2001 – Operations Manager

for Russia’s largest on-line auction resource,

Molotok.ru for NetBridge, an internet company.

�1995-2000 – Consultant, Coopers & Lybrand

and PriceWaterhouseCoopers, Moscow.

Represents SCM’s interests on the Supervisory

Boards of Farlep-Invest, First Ukrainian Interna-

tional Bank, Dongorbank, ASKA Insurance Com-

pany.

Areas of responsibility: participating in determin-

ing the Group’s business strategy for telecommu-

nications, banking, and insurance sector.

Education:MBA from INSEAD (France), a leading European

business school, in 2004.

Graduated from the Plekhanov Academy of Eco-

nomics in Russia as a Specialist in Enterprise Man-

agement in 1999.

�New Business Development Director

at SCM since September 2007.

�2002-2007 – Senior Manager for Strategy

Development for a range of the Group’s new

businesses, such as heavy engineering,

real estate, etc.

�2001 – Joined SCM as Manager of the

Financial Control Department.

�1997-2001 – Worked at Keramet Invest,

having grown from Stock Broker to

General Manager.

Currently is heading ESTA Holding – SCM sectoral

holding, managing its real estate projects, as well

as is chairing the Supervisory Board of ESTA Prop-

erty Management. Sits on the Supervisory Boards

of SCM Group hotels.

Areas of responsibility: determining SCM’s strate-

gic business development in real estate, heavy en-

gineering, pharmaceuticals, and transport sectors,

as well as seeking new areas for investment.

Education:MBA from INSEAD (France), a leading European

business school, in 2007.

Graduated from the Financial Accounting Depart-

ment of Donetsk State University in 1998.

Nikolai NesterenkoNew Business Development Director

Ilya ArkhipovBusiness Development Director

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�Media Business Development Director

at SCM since August 2010.

�November 2008 - August 2010 – Investment

Director and Junior Partner at Adela Holding

Limited (Russia).

�August 2006 - September 2008 – Deputy

Business Development Director at Energoprom

Management.

�March 2004 - August 2006 – Senior

Consultant at Ernst & Young.

Represents SCM’s interests on Supervisory Boards

of the Group’s media businesses.

Areas of responsibility: strategy, investment, fi-

nance, and risk management for SCM’s media

business.

Education:Graduated from the Russian Federation State Fi-

nancial Academy with Masters Degree in Econom-

ics in 2005.

Graduated from the Institute of International Eco-

nomic Relations (Moscow) with a Bachelor’s De-

gree in Economics in 2003.

Other credentials include: CMA (Certified Financial

Manager) Certificate, 2nd level candidate for CFA

(Certified Financial Analyst) Program.

�Public Relations and Communications Director

at SCM since December 2006.

�2005-2006 – Public Relations Manager for

SCM Group.

�2003 – Joined SCM Group as a Sector Group

Manger.

�2001-2003 – Director, Keramet Invest.

�1998-2001 – Financial Manager at KOLO,

an investment company.

Chairs the Audit Committee and the Editorial

Council of Ukraine Television Channel.

Areas of responsibility: communicating with stake-

holders, including media, employees, residents in

regions of company presence, government au-

thorities, community organizations, and the gen-

eral public, as well as company reputation man-

agement.

Represents SCM’s interests on the Supervisory

Board of Ukraine Media Group, as well as Chairs

the Audit Committee and the Editorial Board of

Ukraine Television Channel.

Education:Currently enrolled in EMBA program at INSEAD

(France), a leading European business school.

Graduated from Donetsk National University as a

Specialist in Finance and Credit in 1998.

Natalia YemchenkoPublic Relations and Communications Director

Yekaterina LapshinaMedia Business Development Director

018

�International and Investor Relations Director

at SCM since 2006.

�2005-2006 – Director of Corporate

Communications for the SCM Group.

�1989 – Launched his own PR consultancy

in London.

�1984 – Began his career with Ford

Europe Company.

Worked Regional Director for Middle East and

North Africa at Promoseven Weber Shandwick PR

(Dubai), later – as Regional Director for Eastern

Europe at Mmd. Advised U.S. Government agen-

cies on their public diplomacy programs in the

Middle East.

Areas of responsibility: developing and imple-

menting communications strategies and pro-

grams, aimed at establishing contacts with both

government authorities and NGOs; developing re-

lations with international governments, business,

and media, as well as maintaining relations with

the investment and finance community.

Education:Graduated as an Economist from Herriot-Watt

University (Edinburgh, Scotland) in 1984.

�Corporate Rights and Foreign Asset

Management Director at SCM since

September 2007.

�2005-2007 – Manager of the

Corporate Rights Department for SCM Group.

�2003 – Joined SCM Group as Economist.

�2002-2003 – Economist at Keramet Invest.

�1996-2002 – Worked in the Donetsk Oblast

Office of the Anti-Monopoly Committee of

Ukraine as a Specialist, Senior Specialist, then

Department Manager.

Serves as Director of a range of SCM’s foreign

companies. Represents SCM interests on the Su-

pervisory Board of DTEK. Sits on the Audit Com-

mittee of Ukraine Television Channel.

Areas of responsibility: determining and implement-

ing company policy regarding the management of

corporate rights; organizing and handling operations

involving corporate rights belonging to the company

and its subsidiaries; and organizing the activities of

foreign companies belonging to SCM.

Education:Graduated from the Donetsk Institute of Entrepre-

neurship as a Specialist in Organizational Manage-

ment in 2000, with major in Economic and Legal

Aspects of Commercial Activity.

Jock Mendoza-Wilson International and Investor Relations Director

Roman BugayovCorporate Rights and Foreign Asset Management Director

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�Human Resources Director at SCM since

August 2010.

�2007 – Joined SCM as Human Resources

Manager.

�2005-2007 – Worked as Head of

HR Department at Baker Tilly Ukraine.

�2002-2004 – Worked as Leading

HR Specialist at UTEL Telecommunications

company.

Areas of responsibility: personnel selection, devel-

opment and implementation of human resources

management policies, development of KPI for per-

sonnel evaluation and career planning, designing

motivation, rotation, and promotion programs for

personnel.

Education:Graduated from Kiev National Linguistic Univer-

sity with major in Organizational Management in

2008.

Marta MoonenHuman Resources Director

SCM Group target corporate governance system

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SCM Group corporate structure

3.1. Sectoral Holding Supervisory Board

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when decision is made not to create a sectoral holding

when decision is made to create a sectoral holding

* Applies only to Metinvest and DTEK

3.1.1.Auditing Committee

3.1.2.Strategy and Investment Committee

3.1.3.Appointment and Compensation Committee

3.1.4. Health, Occupational Safety, and Environment Committee*

3.3.Holding General Director

3.4.Holding Board

3.2. Sectoral Holding Managing Company

1. SCM Company

2. Minority shareholders

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SCM’s system of corporate governance is in line with the highest international standards and is based on world best practice. It allows the company to quickly and effectively make the decisions, necessary to ensure the stability and growth of all the Group’s sectoral hold-ings and business areas.

As the majority shareholder and the main in-vestor, SCM Group governs its sectoral hold-ings by delegating its representatives to sit on the respective Supervisory Boards. The participation of minority shareholders in the governance of these holdings is also executed through their representatives on the Supervi-sory Boards.

The Supervisory Boards govern the sectoral holdings. These Boards include representa-tives of SCM, minority shareholders, and ex-ternal experts. The members of each Board vote to elect a Chair from among their num-ber. The Supervisory Boards determine busi-ness development areas and the standards for engaging in specific businesses; they approve strategies, budgets and major transactions, as well as oversee their implementation; they track business indicators, appoint top manag-ers, establish incentives for them, and evalu-ate their performance. The members of the Supervisory Boards, along with independent experts, may also participate in specialized committees including: the Audit Committee, the Strategy and Investment Committee, the Appointment and Compensation Committee, and the Health, Occupational Safety, and En-vironment Committee.

� The Audit Committee prepares recom-mendations for the sectoral holdings’ Su-pervisory Boards regarding the approval

of accounting policy and procedures for preparing financial reports; the depth and accuracy of financial reporting provided by each holding; the reliability and effec-tiveness of the internal auditing system, internal oversight and risk management; the independence of internal and external audits; and ensuring compliance with the laws and norms governing business ethics.

� The Strategy and Investment Committee prepares and submits for review to the Su-pervisory Board the necessary recommen-dations regarding the opportunities for the holdings to be involved in investment projects and exit strategies for specific projects. The Committee also prepares recommendations regarding the strategic goals and objectives of the various hold-ings, as well as the implementation of agreements on mergers and acquisitions (M&A).

� The Appointment and Compensation Committee recommends to the Supervi-sory Boards candidates for management positions in the sectoral holdings. With this purpose in mind, the Committee or-ganizes interviews with applicants for specific positions and decides whom to recommend for those positions. The Com-mittee also prepares recommendations regarding the rotation of top managers within the sectoral holdings, proposes ways to incentivize top managers, as well as participates in shaping the corporate culture and staffing, and in determining the prospects for personal development of managers.

022

� The Health, Occupational Safety, and Envi-ronment Committee was created to insti-tute the highest health and occupational safety standards across the Group, as well as to control the environmental impact of the Group’s industrial enterprises. The Committee develops SCM Group’s strat-egy for the areas of its authority; prepares budgets to finance modernization of, and equipment purchase, for the Group’s in-dustrial assets; ensures the compliance of all industrial enterprises with the ap-proved health and safety standards; as well as annually submits the Group enter-prises’ quarterly management reports to the Supervisory Board for review.

The General Director of a sectoral holding is appointed by the Supervisory Board and is tasked with managing the holding’s opera-tions. As a member of the Board, this person takes an active part in the strategic planning of the holding’s activities.

The Executive Council is the highest body in the operational management of the holding. Each holding’s Executive Council is established

collegially. The Chair of the Executive Council is the General Director of the holding.

The Supervisory Boards of operating compa-nies are responsible for their sustainable fi-nancial and commercial growth, improved ef-ficiency, and increased competitiveness of their operations. They keep track of the upholding of shareholder rights, make decisions regarding the time to hold General Shareholders’ Assem-blies, establish the agenda for such assemblies, draft corporate policy, and so on. The members of the Supervisory Boards of operating com-panies are appointed by the Executive Council and are approved by the Supervisory Board of the relevant sectoral holding.

For individual areas of business where there are no sectoral holdings, the system of cor-porate governance works through the im-mediate Supervisory Boards of the operating companies.

Through time, this corporate governance structure has demonstrated its effectiveness for achieving SCM Group’s goals and is being constantly improved.

Metals and miningIlyich Steel Plant in Mariupol was acquired by Metinvest Group.

Metinvest Group completed the process of integrating Makeyevka Steel Plant into its Steel and Rolled Products Division.

EnergyDTEK Holdings B.V. (Netherlands) became a holding company for DTEK.

DTEK and other SCM Group companies in-creased their stake in the statutory capital of Zapadenergo to 24.99%.

SCM Group corporate transformation program 2010


023

DTEK increased its stake in Kievenergo’s stat-utory capital to 39.98%.

Financial ServicesSCM made a decision to consolidate First Ukrainian International Bank and Dongor-bank into one organization.

SCM and Renaissance Credit Group signed an agreement for SCM to purchase a 100% stake in Renaissance Capital Bank (Ukraine).

TelecommunicationsWithin the framework of structural changes, the following companies became part of Farlep-Invest, managing company for Vega Telecommunications Group: Vilcom, Farlep, Matritsa, PP-Sveton, BTSTK, IP-Telecom, ORT-SOUTH, Telecom Ukraine, Optima Tele-com-Crimea, Altek.

Real EstateESTA Group purchased the Kiev’s Central Univermag Shopping Mall.

ESTA Group completed the purchase of 50% stake in Kiev Hotel (Donetsk).

MediaUkraine Media Group was created to include Ukraine Television Channel, Football (Sport Tel-evision Channel), Donbass (Regional Television Channel), Media Partnership sales house, and Digital Ventures (www.tochka.net portal).

SCM Group acquired a 22% stake in the statutory capital of Dnepropetrovsk Televi-sion Service.

Heavy EngineeringSCM Group purchased 11.54% stake in Sver-dlovskiy Heavy Engineering Plant and 4.57% stake in Donetskiy Energozavod Engineering Plant and now holds a 61.55% and 90.65%, respectively in these enterprises.

UMBH Ltd. (Cyprus) increased its stake in Kamensky Heavy Engineering Plant (Russia) by participating in the statutory capital in-crease and purchasing a 6.58% stake, thus, increasing its shareholding to 82.74%.

SCM completed purchase of a 6.4% stake in Donetskgormash Heavy Engineering Plant, thus, acquiring a controlling stake (50.05%) in the enterprise.

PharmaceuricalsSCM Group made a decision to develop its pharmaceutical business by purchasing Pharmacy of Donbass Company, which owns a network of more than 120 pharmacies. To manage this business area, SCM created Ukrainian Pharmacy Holding.

Transportation and LogisticsSCM Group made a decision to develop transportation and logistics as separate busi-ness area and transferred its 100% stake in Avlita Stevedoring Company to SCM Ltd. At the same time a transportation business strategy is being developed.

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Dobri Liky chain

Tsentralnaya Pharmacy

Avlita

tRanspoRt anD logistics

Banking

� First Ukrainian International Bank

� Dongorbank

insurance

� ASKA

� ASKA-Life

Financial seRvices

coal mining and enrichment

� Pavlogradugol

� Komsomolets Donbassa Mine

� Mospinskoye CEP

� Pavlogradskaya CEP

� Kurakhovskaya CEP

� Dobropolskaya CEP

� Oktyabrskaya CEP

power generation

� Vostokenergo

power Distribution

� PES Energougol

� Service Invest

trading

� DTEK Trading

� Power Trade

alternative energy

� Wind Power

eneRgy

DTEK

iron ore Division

� Northern Ore Mining and Enrichment Plant (SevGOK)

� Central Ore Mining and Enrichment Plant (CGOK)

� Inguletsky Ore Mining and Enrichment Plant (InGOK)

� Danube Shipping and Stevedoring

coke and coal Division

� Avdeyevka Coke and Chemical Plant (AKHZ)

� Krasnodonugol

� INKOR & Co

� United Coal Company

steel and Rolled products Division

� Azovstal Steel Plant

� Ilyich Steel Plant in Mariupol

� YeMZ Group (Yenakiyevo Steel Plant, Metalen)

� Makeyevka Steel Plant

� Khartsyzsk Pipe Plant (KHTZ)

� Promet Steel JSC

� Metinvest Trametal S.p.A.

� Spartan UK Ltd

� Ferriera Valsider

� Prometei

� Skif Shipping

sales Department, steel and Rolled products Division

� Metinvest International S.A.

� Metinvest Ukraine

� Metinvest Eurasia

� Metinvest SMC

metals & mining

METinvEsT

vega telecommunications group

telecommunications

investment projects

� Donbass Palace Hotel

� Opera Hotel

� Leonardo Business Center

� Kiev's Central Univermag Shopping Mall

� Office and logistics centers in Kiev and Donetsk

esta property management

ongoing projects

� Pushkinskiy multi-functional complex

� Andreyevskiy multi-functional complex

� Kiev Hotel

projects at development stage

land bank

Real estate

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scm group business structure – 2010 02

4

phaRmaceuticals

UKrAiniAn PhArMAcy holDing

associateD companies*

metals & mining:

� Zaporozhkoks (Zaporozhye Coke and Chemical Plant)

� Donetskkoks (Donetsk Coke and Chemical Plant)

� Dokuchayevsk Flux and Dolomite Plant (DFDK)

� Novotroitskoye Mines Management

� Krivbassvzryvprom Explosives Company

� Krivoy Rog Iron Ore Plant

energy:

� Dneproenergo

� Donetskoblenergo

� Kievenergo

� Zapadenergo

telecoms:

� Astelit

� MMDS Ukraine

other

� Krasnaya Polyana Sand Quarry

� Dnepropetrovsk Television Service

*Associated companies – are businesses where SCM Group, in its role as an investor, is capable of significant influence, but where it does not exercise full control.

FootBall

FC Shakhtar

Donbass Arena

ukraine media group

� Ukraine Television Channel

� Football Television Channel

� Donbass Television Channel

� Digital Ventures

segodnya multimedia

meDia

Vesko

Druzhkovskoe Mines Management

Ogneupornerud

Kerammekhanizatsiya

Capital-Service

clay mining

UniTED MinErAls groUP

Brusnytsya Retail Chain

Retail tRaDe

UKrAiniAn rETAil

Parallel Chain

Gefest Chain

PitStop Chain

petRoleum pRoDucts Retailing

PArAllEl

Druzhkovka Heavy Engineering Plant

Gorlovskiy Mashinostroitel Engineering Plant

Donetskgormash

Donetskiy Energozavod Engineering Plant

Kamensky Heavy Engineering Plant

Sverdlovskiy Heavy Engineering Plant

Mining Machines Engineering Technical Center

Mining Machines – Quality System

heavy engineeRing

Mining MAchinEs

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SCM Group consists of SCM, the manag-ing company, and all businesses, in which SCM invests. The Group integrates over 100 enterprises and companies in Ukraine, Rus-sia, Europe (Italy, Bulgaria, Great Britain, Switzerland), and the USA. SCM Group’s enterprises employ approximately 200,000 people.

SCM Group bussiness

1SCM Group’s 75% stake and Smart Group’s 25% stake represent statutory legal owner-ship structure of Metinvest as of December 31, 2010. Metinvest’s IFRS Financial Statements for 2010 were prepared, based on the share holdings structure, formed after the completion of the transaction for purchasing Ilyich Steel Plant in Mariupol, which is disclosed in Key post-reporting period events 2010 chapter.

2Main enterprises, consoli-dated in 2010 into Metinvest B.V. (Metinvest Group holding company) reporting, according to the IFRS.

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Metals and mining. Metinvest

Metinvest Group is an international verti-cally integrated metals and mining company which includes 37 enterprises in Ukraine, Europe, and the USA. The company controls every stage of the production cycle – from mining iron ore and coal, to coke and cok-ing coal production, to smelting steel, and producing rolled steel sections, structural shapes, large diameter pipes, and other steel products with high added value.

Metinvest B.V. (Netherlands) is a holding company for Metinvest Group. Metinvest Group’s shareholders are SCM Group (75%) and Smart Group (25%) and they manage the Group on a partnership basis1.

Metinvest Holding is a managing company for Metinvest Group.

Metinvest Group’s enterprises are located in close proximity to key transportation routes and sea ports, providing the company with additional competitive advantages when making shipments to customers in Ukraine, CIS, Europe, Middle East, and South-East Asia. Metinvest exports the majority of its products to more than 1000 customers in 75 countries worldwide, using its own interna-tional sales network which covers most of the key regional markets.

Metinvest Group’s enterprises employ ap-proximately 117,000 people.

Main2 Metinvest Group enterprises

IROn ORE DIvISIOnnorthern Ore Mining and Enrichment Plant (SevGOK) is one of the largest mining companies in Europe with a full production cycle for raw iron ore (concentrate and pel-lets) for metallurgy.

Central Ore Mining and Enrichment Plant (CGOK) specializes in mining, processing, and production of raw iron ore (concentrate and pellets) for metallurgy.

Inguletsky Ore Mining and Enrichment Plant (InGOK) specializes in mining and processing iron ore.

Danube Shipping and Stevedoring is a shipping and logistics company.

COKE AnD COAL DIvISIOnAvdeyevka Coke and Chemical Plant (AKHZ) is the largest high-technology com-pany in Europe’s coking coal industry pro-ducing coke and chemical products.

Krasnodonugol is one of the biggest coal mining companies in Ukraine and both mines and enriches coking coal.

InKOR and Co is one of the largest chemi-cal products manufacturers in the CIS and Europe.

United Coal Company is one of the leading producers of coking coal in the USA.

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3Metinvest Group exercises strategic management of Do-kuchayevsk Flux and Dolomite Plant, Novotroitskoye Mines Management, Krivbassvz-ryvprom Explosives Company, and Krivoy Rog Iron Ore Plant within the framework of the share holdings it belonging to the Group. SCM Limited (Cyprus) owns the shares of the stated enterprises.


029

STEEL AnD ROLLED PRODUCTS DIvISIOnAzovstal Steel Plant is a modern, high-technology company producing a wide range of steel products.

Ilyich Steel Plant in Mariupol is one of the largest companies in Ukraine and has a full steel production cycle.

Yenakiyevo Steel Plant (YeMZ) and Met-alen (together – YeMZ Group) are the world leaders in steel billet production. Makeyevka Steel Plant is high-technology company with the most modern steel rolling mills in Ukraine: medium-section mill-390 and wire mill-150.

Khartsyzsk Pipe Plant (KHTZ) is the largest producer of straight-seamed electro-welded large diameter steel piping in the CIS.

Promet Steel JSC is a steel rolling plant, pro-ducing rolled sections and structural shapes. It is located in Burgas (Bulgaria).

Metinvest Trametal S.p.A. is a leader in Italian and European markets for structural carbon steel plates.

Spartan UK Ltd. is the only producer of high-quality steel plates in the United King-dom.

Ferriera valsider (Italy) is a steel plant pro-ducing structural rolled steel.

Prometei is among the most important play-ers in Ukraine’s iron and steel scrap market.

Skif Shipping provides cargo transportation and dispatch services for vessels in the Sea of Azov ports.

SALES DEPARTMEnT, STEEL AnD ROLLED PRODUCTS DIvISIOnMetinvest International S.A. is responsible for the sale and export of Metinvest Group rolled steel products.

Metinvest Ukraine is responsible for sales and marketing of the steel products pro-duced by Azovstal Steel Plant, Yenakiyevo Steel Plant, and Makeyevka Steel Plant in Ukraine and CIS countries.

Metinvest Eurasia is responsible for selling Azovstal Steel Plant, Yenakiyevo Steel Plant, and Makeyevka Steel Plant’s products in Russia.

Metinvest SMC is a steel stockholding com-pany selling the products of Metinvest Group Enterprises to customers in Ukraine and East-ern Europe.

ASSOCIATED COMPAnIES3

Zaporozhkoks (Zaporozhye Coke and Chemical Plant) is Ukraine’s leading coke and chemical enterprise.

Donetskkoks (Donetsk Coke and Chemi-cal Plant) is one of Ukraine’s largest coke and chemical enterprises.

Dokuchayevsk Flux and Dolomite Plant (DFDK) is one of Ukraine’s largest mining enterprises, specializing in fluxing limestone and dolomite extraction and processing.

030

metinvest gRoup Financial inDicatoRs, $ m

Indicators 2009 2010 Dynamic,%

Asset Value 12,170.0 14,668.0 +20.53

Sales Volume 6,026.0 9,357.8 +55.29

Net profit (loss) 334.0 437.0 +30.84

EBITDA 1,400.0 2,552.0 +82.29

Metinvest Group key production

indicators dynamics,

thousand tonnes

novotroitskoye Mines Management is a large mining enterprise, specializing in lime-stone and dolomite extraction and processing.

Krivbasszvryvprom Explosives Company is an industrial production enterprise, spe-cializing in explosion works in Ukraine’s open cast mines.

Krivoy Rog Iron Ore Plant is Ukraine’s larg-est producer of iron ore.

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Production indicators, iron ore division, thousand tonnes

Production indicators, steel and rolled products division, thousand tonnes

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Production indicators, coke

and coal division, thousand tonnes

Metinvest Group sales geography

2010,%

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Focus points of the year

Metinvest became the controlling share-holder of Ilyich Steel Plant in Mariupol. The acquisition of the plant is an important step towards implementing the Group’s long-term strategy, aimed at enhancing vertical integration, achieving maximum production effectiveness in Ukraine, and strengthening the company’s market positions.

Metinvest completed the process of integrat-ing Makeyevka Steel Plant into its Steel and Rolled Products Division.

Metinvest Eurasia opened new warehouses in Voronezh, Volgograd, and Mineral Waters (Russia). Currently, Metinvest Group has 16 regional warehouses in Russia.

C4Gas S.A. (France), the main common sourcing portal of major European oil and gas companies, successfully completed the certification procedure of Metinvest Group’s products and sales system.

Yenakiyevo Steel Plant successfully completed a product quality supervisory audit, conducted

by CARES, the British Certification Agency of Reinforcing Steel. As result, the plant’s prod-ucts were declared compliant with technical processes and met the UK’s quality standard BS4449:11997 (reinforcing steel).

Metinvest became the first company in Ukraine to launch production of reinforcing bars with negative tolerance, according to DSTU 3760-2006. In November 2010, the first shipment of reinforcing bars, produced in compliance with the new quality stand-ard, was made.

Metivnest successfully completed the regis-tration procedure, in compliance with EU’s directive #1907/2006 (REACH). Comply-ing with REACH ensures that the Group’s enterprises will be able to continue shipping products to clients in EU after November 30, 2010.

Green Gas International B.V. and Krasno-donugol signed an agreement for the utili-zation of methane from the Sukhodolskoe-Vostochnoe Mines Management Company.

metinvest gRoup sales geogRaphy 2010, $ m

Indicators Steel Coke and coal Raw iron ore Total

Ukraine 1,282 681 1,490 3,453

South-East Asia 855 3 625 1,483

Europe 1,898 17 348 2,263

CIS 880 34 - 914

Middle East and North Africa 729 37 38 804

North America 10 358 - 368

Other 54 19 - 73

Total 5,708 1,149 2,501 9,358

034

The project will allow ultilisation of close to 20m3 of methane per year. The annual de-crease of greenhouse gas emissions into the atmosphere resulting from the project will amount to 200-250 thousand tonnes in CO2 equivalent.

Metinvest was awarded another Climate Ac-tion certificate for participating in environ-mental programs, aimed at following CO2 emission norms. According to the preliminary calculations, the planned environmental activi-ties will allow Metinvest Group’s enterprises to decrease the volume of greenhouse gas emis-sions into the atmosphere by more than 8m tonnes in CO2 equivalent during 2008-2012.

Investments

The total volume of Metinvest Group’s in-vestment in 2010 amounted to $582m (ex-cluding M&A).

Iron Ore DivisionSevGOK began iron ore mining at Pervomay-sky open cast mine, using cyclic-and-continu-ous technology, which will allow it to maintain the level of iron ore output at 22.5m tonnes per year. In 2010, the volume of investment in the necessary production equipment amount-ed to $14.7m. The total volume of project in-vestment will amount to $315.3m.

Also, in 2010 SevGOK renewed its program of upgrading the equipment, used to pro-duce pellets and to enrich iron ore concen-trate. The total project budget amounts to

$187.6m, while in 2010 the total invest-ment was $12.9m. The implementation of this project will allow the plant to increase annual production capacity to 14.7m tonnes of concentrate and 13.7m tonnes of pellets.InGOK continued the construction of a sec-ond launching platform for magnetic floata-tion beneficiation of iron ore concentrate. The new platform will increase volume of iron ore concentrate with 67% of iron con-tent and lowered content of silicon dioxide (4.3%) produced from 3.2m tonnes to 6.8m tonnes annually. The volume of investment in 2010 amounted to $7.3m. The total volume of investment will amount to $38.8m.

The total volume of investment in upgrading the main production equipment of Metinvest Group’s three ore mining and enrichment plants amounted to $51.6m.

The total volume of investment in maintain-ing the production capacity and capital re-pairs of Iron Ore Division amounted to ap-proximately $200m.

Coke and Coal DivisionDuring the year, Krasnodonugol put 8 new coal faces into operation, with total project investment volume amounting to $32.1m. The total investment in upgrading production equipment and implementing environmental and occupational safety programs at Krasno-donugol amounted to $48.9m.

The volume of investment of Avdeyevka Coke and Chemical Plant in maintenance and up-grading of production equipment, aimed at

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producing high quality coking coal, as well as in environmental, resources efficiency, and IT-development programs amounted to $9.4m.

The total amount of the plant’s investment in equipment maintenance and retrofitting to achieve the strategic goal of satisfying 100% of Meinvest’s internal demand for proper quality coke for steel production amounted to $13.6m.

United Coal Company continued implement-ing the construction of the Affinity Coal Min-ing Complex project. The mining complex consists of the mine with four mining sections and a coal enrichment factory, equipped with high-speed railway shipping station. In 2010, the project investment was $19.5m.

Steel and Rolled Products DivisionAzvostal Steel Plant continued the construc-tion of a controlled cooling system for its steel plate production facilities. The project will allow the plant to expand its range of sheet produc-tion and roll products using high durability steel grades, with lower production costs. The sum invested in 2010 amounted to $3.1m. The to-tal project investment to date is $14.9m.

Yenakiyevo Steel Plant continued the con-struction of blast furnace #3, which will al-low it to reduce the amount of coke used in cast iron production to 463 kg / tonne and to minimize the intensity of iron discharge – to 1000 kg / tonne. In 2010, the project invest-ment volume amounted to $57.8m. The total investment volume will amount to $220.9m.

The overall level of investment in maintenance and capital repairs of Steel and Rolled Products Division amounted to approximately $70m.

Loans

In May 2010, Metinvest B.V. (Netherlands) placed $500 Eurobonds at a coupon rate of 10.25%, due on May 20, 2015. The fund-ing will be used for further modernization of the Group’s enterprises.

On July 29, 2010 Metinvest signed a $700m three-year syndicated pre-export loan facility.


036

Energy. DTEK

DTEK is the largest private vertically integrat-ed energy company in Ukraine, and includes 20 enterprises, located in Donetsk, Dnepro-petrovsk, Lugansk, and Zaporozhye Oblasts.

The company occupies leadership positions in Ukraine’s coal mining, thermal power gen-eration, and distribution industries, as well as implements a range of projects in alternative energy.

DTEK Holdings B.V. (Netherlands) is the holding company for DTEK and is 100% owned by SCM Group.

Donbass Fuel and Energy Company (DTEK) is the managing company for DTEK.

DTEK enterprises employ approximately 42,000 people4.

DTEK enterprises

COAL MInInG AnD EnRICHMEnTPavlogradugol is the largest coal mining en-terprise in Ukraine.

Komsomolets Donbassa Mine is one of the largest producers of thermal coal in Ukraine. Mospinskoye Coal Enrichment Plant (CEP) is a producer of enriched coal and con-centrate for thermal power plants (TPPs).

Pavlogradskaya Coal Enrichment Plant is one of the largest coal enrichment enter-prises in Ukraine.

Kurakhovskaya Coal Enrichment Plant produces coal concentrate for thermal power plants.

Dobropolskaya and Oktyabrskaya Coal En-richment Plants are producers of enriched coal.

POWER GEnERATIOnvostokenergo is a power-generating company.

POWER DISTRIBUTIOnPES Energougol manages 395 substations in Dnepropetrovsk and Donetsk Oblasts.

Service Invest manages 81 substations in Dnepropetrovsk and Donetsk Oblasts.

4The total number of DTEK employees (including associated companies) exceeds 80 thousand

people

DteK Financial inDicatoRs, $ m

Indicators 2009 2010 Dynamic,%

Asset Value 2,531.5 3,219.9 +27.19

Sales Volume 1,926.4 3,061.6 +58.93

Net profit (loss) 109.9 360.0 +227.57

EBITDA 402.0 722.0 +79.60

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TRADInGDTEK Trading carries out coal trading opera-tions in Ukrainian and international markets.

Power Trade exports electricity to European and CIS markets.

ALTERnATIvE EnERGYWind Power implements wind energy projects.

ASSOCIATED COMPAnIESDneproenergo is Ukraine’s second largest electric power producer.

Donetskoblenergo specializes in electric power distribution and supply.

Kievenergo is a thermal and electric power producer and supplier.


By the end of the year, DTEK’s enterprises demonstrated substantial growth in their production indicators. Coal mining increased significantly, amounting to 19.2m tonnes; total electric power output (including Dne-proenergo) increased to 30.7bn Kw/hour while total power distribution increased to 13.3bn Kw/hour. One of the key factors in the high growth of coal production was the use of high-capacity mining equipment and innovative technologies in 2008-2010.

In 2010, DTEK Trading carried out coal trad-ing operations in domestic and foreign mar-

kets. In Ukraine, its main customers are local energy generation companies, large metal-lurgy companies, and other industrial en-terprises. Last year, the company exported approximately 2m tonnes of coal, exceeding the 2009 results two-fold (764 thousand tonnes). The coal was exported to customers in Turkey, Bulgaria, Poland, Romania, India, Brazil, and the USA. Besides, the company im-ported 1.3m tonnes of coal to supply DTEK’s thermal power plants.

Since January 2010, DTEK has been distrib-uting electric power to consumers in Hun-gary, Slovakia, Romania, Moldova, and Be-larus. During 2010, the company exported 1.21bn Kw/hour of electric power.

DTEK increased its stake in the statutory capital of Kievenergo to 39.98%. The company oper-ates a unique power complex with a full produc-tion cycle in Kiev covering thermal and electric energy generation, transport, and distribution.

DTEK and other SCM Group companies in-creased their stake in the statutory capital of Zapadenergo to 24.99%.

The company launched DTEK Academy, the corporate university, to serve as a unified center for knowledge management for all the Group’s enterprises. Annually, DTEK Acad-emy accepts 1,500 of the company’s best employees who study within the framework of specialized programs. DTEK top manag-ers and tutors from the best local and foreign business schools teach at DTEK Academy.

038

Power distribution dynamics,

m Kw/h

DteK Key pRoDuction inDicatoRs, $ m

Indicators 2009 2010 Dynamics, %

Coal mining, thousand tonnes: 17,635.8 19,164.5 +8.67

Thermal coal 14,618.1 17,134.1 +17.21

Coking coal 3,017.7 2,030.4 (32.72)

Coal enrichment, thousand tonnes:

Raw coal enrichment 11,607.4 12,490.0 +7.6

Concentrate production 7,625.8 7,738.0 +1.47

Power generation, m, KW/h

Power generation, Vostokenergo 14,504.7 16,352.6 +12.74

Power generation, Dneproenergo 11,788.6 14,331.9 +21.57

Power distribution, m, KW/h

Volume of power purchased from Wholesale Energy Market

11,802.0 13,287.0 +12.58

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Investments

The total volume of DTEK investment in 2010 amounted to $276m (excluding M&A).

Coal mining and enrichmentPavlogradugol put into operation a new rock winding set at Stepnaya mine. This set serves as important link in the technological chain of mining coal from the field of 37m tonnes. The new set will also allow faster preparation and lower energy consumption (25% less) when making Stepnaya mines coal faces ready for mining. The total investment was $5.2m.

Blagodatnaya mine (Pavlogradugol) com-missioned a new heat pump system which allows it to use the warm water discharged from the mine to heat the mining facilities. Gradually, the implementation of the new system will fully replace the current coal-fired boiler system, thus, significantly lowering the water heating costs and reducing emissions. The total investment was $0.4m.

Pavlogradugol purchased 18 tunneling ma-chines and 7 coal cutters, 13 belt conveyors and 7 scraper conveyors, at a total cost of $29m.

Komsomolets Donbassa mine purchased new modern equipment: 9 belt conveyors, 80 powered roof support sections, a coal cutter, and a scraper conveyor, at the total cost of $14m.

DTEK’s coal enrichment enterprises imple-mented a range of investment projects, including the installation of centrifuges at Dobropolskaya CEP; modernization of wa-ter-slurry system at Oktyabrskaya CEP; and development of a water-slurry system at Mospinskoye CEP.

DTEK signed investment agreements with two state-owned enterprises: Rovenkyanthracite and Sverdlovanthracite. The respective invest-ment agreements were approved by the Minis-try of Coal Industry of Ukraine on July 9, 2010. The investment agreements with both enter-prises are valid for five years and are subject to possible extension. Under the signed agree-ments, DTEK will finance technical upgrading projects at both enterprises, using a public-pri-vate partnership mechanism. Cooperation with these enterprises will allow DTEK to provide its power-generating plants with anthracite coal. The total volume of DTEK’s investment in Rovenkyanthracite and Sverdlovanthracite will amount to $37.9m and $25.3m, respectively.

Power generationDneproenergo renovated 18 of the 25 power generating units it operates. The renovations were aimed at prolonging the service life of the units and increasing the reliability of boil-er and turbine equipment. The reconstruc-tion of power generating units #9 at Pridne-provskaya TPP and #3 at Krivorozhskaya TPP is approaching completion. Both units are

040

scheduled to be put back into operation in the second half of 2011.

Following the reconstruction of generating unit #1 at Zuevskaya TPP (Vostokenergo) its energy output increased from 300 to 325 MV. The total volume of investment amount-ed to $23m.

Following the reconstruction of generating unit #7 at Kurakhkovsaya TPP (Vostokener-go) its energy output increased from 210 to 225 MV. The total volume of investment in 2010 amounted to $15.4m.

Power distributionService Invest completed the reconstruc-tion of Vozrohdenie substation, resulting in increasing its power from 35kV to 110 kV. The total volume of investment amounted to $3.8m.

Service Invest also completed retrofitting the equipment of HSKPZ-1 substation with 110/35/6 kV voltage indicators, which supplies power to the largest enterprises of Donetsk Oblast, to increase the reliability of power supply. The total volume of invest-ment amounted to $1.6m.

PES Energougol installed 26 km of 0,4 KWt electric wiring, using the self-carrying iso-lated cable, which allowed it to significantly

increase the reliability of energy supply to end-consumers. Additionally, 6 kV electric wiring was installed at Oktyabrsky Rudnik and Skochinskogo mines, to secure the back-up energy supply to the mines.

Loans

In April 2010, DTEK Finance B.V. (daughter company of DTEK Holdings B.V.) placed a $500m Eurobond issue with a coupon value of 9.5%, due on April 28, 2015.

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SCM’s Financial Services business is rep-resented by two banks and two insurance companies.

� First Ukrainian International Bank is one of the largest banks in Ukraine. It is a diversified banking institution serving about 14,000 corporate, and about 1m individual clients. The bank is national in scale and has a diverse country-wide net-work, covering most of Ukraine’s territory with 11 subsidiaries and 125 branches.

� Dongorbank is a leading regional bank with presence in the Eastern regions of Ukraine and Kiev.

� ASKA is one of the leading insurance companies in Ukraine. It is represented in 97 cities across Ukraine.

� ASKA-Life is one of the Ukrainian market leaders in life insurance, providing a full range of relevant services.

Financial services. Banking and insurance

FiRst uKRainian inteRnational BanK Financial inDicatoRs, $ m

Indicators 2009 2010 Dynamics,%

Assets 1,987.3 2,222.2 +11.82

Capital 375.7 434.8 +15.73

Loan portfolio 1,705.7 1,714.4 +0.51

Net profit (loss) (54.3) 54.4 +200.18

DongoRBanK Financial inDicatoRs, $ m


Assets 858.2 1,151.2 +34.14

Capital 73.5 92.3 +25.58

Loan portfolio 628.7 545.2 (13.3)

Net profit (loss) (45.7) 16.8 +136.76

042


SCM Group made a decision to consolidate its interests in the banking sector by merging First Ukrainian International Bank and Dongorbank. First Ukrainian International Bank will now be the group brand for its banking business. The main goal of the consolidation is creating a more scalable and effective platform for future

growth. It is planned to complete the consoli-dation in the second half of 2011.

Due to its balanced and transparent retail cli-ent service policy; profitable and functional portfolio of deposit accounts; as well as in-novative account management solutions,

asKa Financial inDicatoRs, $ m


Insurance assets 51.7 44.0 (14.89)

Capital 23.6 20.2 (14.4)

Insurance reserves 19.2 19.5 +1.56

Insurance premiums 44.1 36.5 (17.23)

Insurance payouts 17.7 15.1 (14.69)

Net profit (loss) (2.7) (3.5) (29.6)

asKaliFe Financial inDicatoRs, $ m


Insurance assets 20.1 16.0 (20.39)

Capital 0.4 2.4 +500

Insurance reserves 17.0 18.5 +8.82

Insurance premiums 1.7 1.4 (17.65)

Insurance payouts 1.4 0.9 (35.71)

Net profit (loss) 0.9 (2.0) (322)

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the volume of funds held on deposit by First Ukrainian International Bank’s retail custom-ers exceeded pre-recession levels, amount-ing to $641.2m (35% growth) by Decem-ber 31, 2010. As a result, the bank’s market share in the retail sector increased from 0.1% to 1.9% in 2010.

The installation of First Ukrainian Interna-tional Bank’s online system in March 2010 allowed clients to fully manage their ac-counts on-line, either from a computer or a mobile phone. The active promotion of the new service resulted in two-fold growth of its subscriber base. By the end of the year, the number of users had grown to 97,100 and 271,000 operations had been completed.

During 2010, the volume of funds held on account from corporate customers increased by 44.5% to $364.5, with the bank’s mar-ket share in the corporate segment growing from 0.3% to 1.8% in 2010.

Having maintained a high level of operational income, and having cut the costs on form-ing the reserves, First Ukrainian International Bank completed 2010 with $54.4m net profit, which fully covered last year’s loss of $54.3m.

In 2010, the bank’s assets increased by 11.8% to $2.22bn. As of December 31, 2010 the bank was ranked 13th by the Na-tional Bank of Ukraine by volume of assets, having improved its rating position by one point, compared to the beginning of the year.The bank also completed restructuring its ex-ternal obligations. The volume of its restruc-tured loan portfolio amounted to $512m.

During 2010, the bank’s external loan portfolio decreased by $124m (24%) to $393m. The bank continued to build its credit history, fulfill-ing its financial obligations in time and in full.

Vega Telecommunications Group (Vega) is one of Ukraine’s largest private fixed-line op-erators.

Vega possesses a full range of licenses to pro-vide fixed-line services across Ukraine. Servic-es include local, inter-city, and international telephone connection, broadband connec-tion, as well as transmission channel rental.

Vega provides services in 47 cities and 2 population centers, in 20 Oblasts of Ukraine,

with a full range of services (fixed-line tel-ephone connection, broadband internet access, and data transfer) available in 38 population centers of Ukraine. In 2010, the number of Vega’s broadband subscribers in Ukraine amounted to 127,000.

Vega has also developed its own powerful country-wide baseline network.

Operational management of Vega is under-taken by Farlep-Invest.

Telecommunications. Vega

044


Vega launched its services in Zhitomir, Uzh-gorod, Rovno, and Khartsyzsk (Donetsk Oblast).

The volume of voice communications ser-vices in 2010 amounted to: 13,291 lines to individual clients and 16,604 lines to corpo-rate clients (29,895 lines in total).

The number of new broadband custom-ers amounted to 36,997 among individual

clients and 7,791 among corporate clients (44,788 new clients in total).

Investments

The total volume of investment in Vega’s network modernization and development amounted to $2.5m.

number of lines, dynamics

vega telecommunications gRoup Financial inDicatoRs, $ m


Assets 116.0 94.0 (19.0)

Sales volume 109.0 93.0 (14.68)

Net profit (loss) (9.0) (7.0) 22.22

EBITDA 21.8 20.8 (4.59)

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ESTA Group is the holding company manag-ing SCM’s real estate assets and one of the largest players in Ukraine’s real estate market. Among the Group’s main business areas are: commercial property; including office centers, logistics centers, shopping malls, and hotels.

ESPV Limited (Cyprus) performs the holding company functions.

ESTA Holding serves as a managing compa-ny, defining investment approaches, devel-oping and managing projects both, during and post-construction.

ESTA Property Management manages the completed and operational real estate projects.

For every project a separate legal entity is registered.

ESTA Group’s stability and positive develop-ment dynamics are a result of its focus on high quality projects, which are less depend-ent on speculative demand, its attention to developing unique projects, and a strategy of balanced regional presence.

Investment real estate projects:

� Donbass Palace Hotel – a five-star hotel in the center of Donetsk. Total rooms: 129.

� Opera Hotel – a five-star hotel in the cent-er of Kiev. Total rooms: 136.

� Leonardo Business Center – a multi-func-tional complex in the center of Kiev. Total area: 38,000 square meters. ESTA Group

owns 50% of the project.

� Office center at Kudryavskaya Street, Kiev. Total area: 1,820 square meters. Office center at Baggovutovskaya Street, Kiev. Total area: 3,514.5 square meters. Office center at Postysheva Street, Donetsk. Total area: 14,500 square meters.

� Bereg Summer Camp for Children, Alushta. Total area: 16 hectares.

� Class B logistics center in Dnepropetrovsk. Total area: 20,000 square meters.

� Kiev’s Central Univermag Shopping Mall – a project with unique location in the center of Kiev, at the intersection of Khreshchatik and Bogdana Khmelnitskogo Streets. To-tal area: 21,200 square meters.

Ongoing5 real estate projects:

� Pushkinskiy multi-functional complex in the center of Donetsk. This is a class A pro-ject with the total area of 52,600 square meters. Total investment of $130m.

� Andreyevskiy multi-functional complex on Frolovska Street in Kiev, with the total area of over 70,000 square meters. Total investment $200m.

� Kiev Hotel – a three-star hotel in the center of Donetsk. Total rooms: 180. To-tal investment – $15m. ESTA Group owns 50% of the project.

Real Estate. ESTA Group

5The ongoing projects are the projects being implemented dur-ing the reporting period.

046

Projects at development stage:

� Business center at Moskovskaya Square, Kiev. Total area: more than 100,000 square meters.

� Premium-class residential complex at Pluty Village, Kiev Oblast. Total area: more than 45 hectares.

Land plots:

� Land plot in Poltava. Total area: 9.95 hec-tares.

� Land plot in Dnepropetrovsk, Karl Marx Street. Total area: 0.15 hectares.

� Land Plot in Donetsk, Leninskiy Avenue. Total area: 4 hectares.

� Land Plot in Kerch. Total area: 1.48 hec-tares.

� Land Plot in Yalta, Dzerzhinskogo Street. Total area: 1.85 hectares.


In 2010, revenue grew by $3.5m due to the increased income from the hotel business, as well as from increased rental income from commercial properties.

The net profit growth was backed by the growing value of ESTA Group’s investment project portfolio. In 2010, the increase from the re-evaluation of investment projects amounted to $19m (in 2009 the loss from re-evaluation amounted to $53.7m).

Investments

The total volume of investment in ESTA Group’s business development amounted to $32.14m.

Project-2012 Company (50% owned by ESTA Group) purchased Kiev Hotel, located in Donetsk’s Voroshylovsky district. The four-storey hotel building was built in 1973. The total area of the hotel complex is 5,665 square meters, with 45 rooms. The transac-tion amounted to $1.77m. The hotel will be reconstructed to develop a 3-star hotel, with the number of rooms increased to 180. The total investment will be $15m.

esta gRoup Financial inDicatoRs, $ m


Assets 224.6 370.3 +64.87

Sales volume 22.4 25.9 +15.62

Net profit (loss) (37.5) 15.0 +140.00

EBITDA 3.6 6.0 +66.66

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ESPV Limited purchased 23% of Kiev’s Cen-tral Univermag Shopping Mall6. It was decid-ed that ESTA Group representatives will par-ticipate in the management of the shopping mall, in order to further develop its concept.

A specially created company Stolichny Cen-tral Univermag will be managing and devel-oping this project.

Media

SCM Group is a significant player in Ukraine’s media market. We are actively strengthening our positions in this market by investing in the development of our media assets.

UKRAInE MEDIA GROUP

� Ukraine Television Channel is one of Ukraine’s leading nationwide television channels. In 2004, the channel was grant-ed national status. The channel’s 24-hour broadcasting includes informational, edu-cational, children’s, entertainment, artis-tic, and sports programs. The Channel’s monthly audience exceeds 35m people.

� Football Television Channel is Ukraine’s first specialized channel, dedicated exclu-sively to football. The channel is an official broadcaster of Ukraine’s Premier League. European and Latin American football in the channel’s programming is repre-sented by the national championships of England, Spain, Germany, France, Brazil, UEFA Champions League, Italian Cup, and English FA Cup. The channel also features matches of the English national team, Ukraine youth national team, and other matches. The channel is broadcast through cable television networks and is available through more than 500 cable TV operators, as well as Viasat satellite TV op-erator. The channel’s technical coverage

through cable networks exceeds 85% of Ukrainian homes (Gfk Ukraine).

� Donbass Television Channel is a gen-eral interest channel for viewers in East-ern Ukraine. The channel’s programming features socially-oriented content, includ-ing news and political talk-shows, which highlight the problems and the events in the region. The channel is broadcast in Donetsk, Makeyevka, Yasinovataya, as well as through cable networks. Among the channel’s plans is expanding broad-casting to cover all of Eastern Ukraine and gaining access to satellite broadcasting.

� Media Partnership is a sales house, which has the exclusive rights to sell advertising air time on Ukraine Media Group’s channels.

� Digital ventures is an internet holding, which is developing a large horizontal portal, www.tochka.net, characterized by high number of unique users and its popu-larity. When developing its projects, Digital Ventures focuses on professional staff and unique content. The portal’s journalists publish daily news from Ukraine and the world, as well as produce reports and pho-to-galleries from the current events. The portal intends to achieve market leadership positions in Ukraine by the end of 2011.

6Kiev’s Central Univermag Shopping Mall was consolidated in SCM Group’s IFRS Financial Statements as of December 31, 2010, based on the option agreement to acquire the remaining voting rights in Kiev’s Central Univermag Shopping Mall.

048

Ukraine Media Group plans include launch-ing Football+ and News television channels

in 2011, as well as creating a production-house to produce its own program content.


Ukraine Television ChannelBy the end of 2010, Ukraine Television Chan-nel increased its audience share by 20%, compared to 2009 (Gfk Ukraine). With 10.21% audience share and a 1.57% rat-ing, the channel ranked #2 among Ukraine’s general interest channels (18+ audience in cities with population 50,000+), thus, con-firming its status as the most dynamic na-tional TV channel in Ukraine.

The channel’s strategic goal is developing and producing its own content production. Among its most successful projects in 2010 were:

� Events – informational and analytical pro-gram (average audience share 14.56%, 33% growth);

� People’s Star – music show (audience share 11.69%, rating 3.55%);

� Marusya – television show (audience share 12.18%, rating 4.83%);

� Critical Point – journalist investigation pro-gram (average audience share 11.85%, 36% growth).

Ukraine Television Channel continued to broadcast high quality movies content as part of its programming by offering Ukrain-ian viewers the best foreign and domestic premiers.

The channel’s 2010 revenue from advertis-ing and sponsorship amounted to $34.54m and $2.61m, respectively.

Football Television ChannelIn 2010, Football Television Channel had the following indicators: 1.4% audience share, 0.2% rating (male audience 18+ in cities

7Ukraine Media Group was cre-ated in 2010.

uKRaine meDia gRoup Financial inDicatoRs7, $ m

Indicators 2010

Assets 88.5

Sales volume 36 .0

Net profit (loss) (12 .0)

EBITDA (5.0)

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with population 50,000 plus, Gfk Ukraine). The channel’s audience share grew 2.3 times, compared to 2009.

The channel’s broadcast coverage of cable networks grew by 18.4% from (76.67% to 90.77%) in 2010 in cities with population 50,000+, and by 27% in cities with population up to 50,000 (up from 67.94% to 86.26%).


Donbass Television ChannelIn 2010, Donbass Television Channel had a 2.3% audience share and a 0.32% rating (Donetsk audience, Gfk Ukraine).


Digital venturesThe average monthly audience of the tochka.net portal in 2010 amounted to 2.03m us-ers, and its average monthly coverage of Ukraine’s internet audience amounted to 20.95% (Gemius Audience).

In December 2010, tv.tochka.net platform was launched to provide legal, high quality content.

The total volume of investment in the portal development amounted to $6.1m.

050

SEGODnYA MULTIMEDIA PUBLISHInG HOLDInG

SCM Group’s publishing business is con-solidated under the Segodnya Multimedia holding, which is responsible for the strate-gic management of the following print and online media:

� Segodnya – a national socio-political daily newspaper with 5 regional editions in Kiev, Odessa, Kharkov, Donetsk, and Dnepropetrovsk. Average daily circulation – 98,000 copies.

� vecherniy Donetsk newspaper – a re-gional edition, aimed at a wide readership of all ages and social groups. Distributed in Donetsk and Donetsk Oblast.

� Donetskie novosti – a weekly newspa-per and Donetskie Novosti Kurier, a free advertising weekly. Distributed in Donetsk.

� Salon Dona i Basa – a weekly socio-po-litical newspaper featuring classifieds and advertising. Distributed in Donetsk and Donetsk Oblast.

� Salon. Million Obyavleniy – advertising weekly newspaper. Distributed in Donetsk and Donetsk Oblast.

� Priazovskiy Rabochiy – large circulation socio-political newspaper, targeting the South of Donetsk Oblast. Distributed in Mariupol and Donetsk Oblast.

� RIO newspaper – positioned in the inex-pensive TV-guides segment; promoted as an attractive advertising medium. Distrib-uted in Donetsk and Donetsk Oblast.

� Mariupolskaya nedelya – weekly fami-ly newspaper. Distributed in Mariupol and adjacent rural areas.

� Dom Sovetov newspaper – entertain-ment edition featuring practical advice re-garding: housekeeping, gardening, grow-ing vegetables, cuisine, fashion, home remedies, growing flowers. Distributed in Mariupol and adjacent areas.

� Privet, Rebyata! newspaper – youth-oriented edition. Distributed in Mariupol and Donetsk Oblast.

� Priazovye Reklama newspaper – twice-monthly advertising edition. Distributed in Mariupol and the adjacent regions.

� The holding also has its own production fa-cilities, the modern Segodnya Multimedia printing house, in Vyshgorod which offers a range of full-color printing services.

Segodnya Multimedia also manages the fol-lowing online-portals: www.segodnya.ua, www.dnews.donetsk.ua, www.pr.ua, www.vecherka.donetsk.ua, www.salon.donetsk.ua, www.million.donetsk.ua.

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Investments

The total volume of investment in Segodnya Multimedia business development amount-ed to $0.2m.


In 2010, the main achievement of Segodnya Multimedia was maintaining the stable cir-culation of Segodnya newspaper at a daily average of 98,000 copies.

Segodnya newspaper currently ranks #2 among Ukraine’s daily editions, by single is-sue audience (TNS Ukraine).

In 2010, the printed media market in Ukraine did not demonstrate a significant growth of key business indicators, despite the end of the economic recession. The circulation vol-umes of most market players were stagnant. However, the print media advertising market volume in Ukraine demonstrated positive dynamics – 3.2% growth (Press Monitor-ing). The volume of advertising in Segodnya newspaper grew by 4% in 2010.

The advertising revenue of Segodnya news-paper from printed and online editions in-creased by 7% - from $1.93m in 2009 to $2.07m in 2010.

During the reporting year, the copy sales revenue of Segodnya newspaper increased by 10.8% from $4.11m to $4.56m. At the same time, the volume of Segodnya news-paper sales in copies decreased by 4%, from 29,153 to 27,999 copies.

Segodnya Multimedia revenues from print-ing services outsourced to it by other pub-lishers increased by 9% from $1.69m in 2009 to $1.84m in 2010.

2010 became a turning point for the www.se-godnya.ua portal. The portal was ranked #3 by the annual number of visitors, compared to the previously occupied position #10 (Bigmir.Net).

The portal’s audience currently covers 10% of Ukraine’s overall internet audience. The portal’s monthly audience exceeded 1m visi-tors – 58% more than in 2009. This allowed www.segodnya.ua to take the leadership po-sition among Ukraine’s news portals.

The revenue from www.segodnya.ua in-creased by 101% compared to 2009.

segoDnya multimeDia Financial inDicatoRs, $ m


Assets 20.0 26.0 +30

Sales volume 11.8 9.0 (23.73)

Net profit (loss) (6.1) 2.0 +67.21

EBITDA (1.3) (1.0) +23

052

United Minerals Group Ltd. (UMG) manages SCM Group’s assets in clay mining. UMG is Ukraine’s largest supplier of white ball clay. The production capacity of the company’s en-terprises is almost 3m tonnes per year, while confirmed clay reserves of UMG’s enterprises amount to 250m tonnes. Unconfirmed re-serves amount to additional 100m tonnes. UMG’s production facilities are located in Donetsk, Kharkov, and Lugansk Oblasts. The total number of employees is 1,200 people.

Currently, UMG holding owns the following major clay mining companies:

� vesko which specializes in mining and processing clay for the ceramics, china, and fireproofing industries. It is the big-gest supplier of clay in Ukraine and Russia, as well as one of the biggest suppliers to Italy, Spain, Turkey, India, and the United Arab Emirates (UAE). The annual volume of extracted clay is 1.7m tonnes.

� Druzhkovskoye Mines Management specializes in mining and processing clay and molding sand for the ceramics, china, and fireproofing industries. It is the big-gest supplier of clay in Ukraine, Belarus, and Russia. Annual volume of clay extrac-tion is 0.8m tonnes.

� Ogneupornerud specializes in clay min-ing for the ceramics, china, and fireproof-ing industries. Annual volume of clay ex-traction is 0.5m tonnes.

� Kerammekhanizatsiya owns licenses, entitling it to explore and mine clay re-serves at Dobropolsky site (about 2.4m tonnes of clay).

� Capital-Service owns licenses entitling it to explore and mine white ball clay re-serves at the Vidny-2 (2.3m tonnes) and Pokrovskoye (about 10m tonnes) sites.

Clay mining. United Minerals Group

uniteD mineRals gRoup Financial inDicatoRs, $ m


Assets 171.5 123.0 (28.28)

Sales volume 41.1 79.0 +92.21

Net profit (loss) 14.1 31.0 +119.86

EBITDA 24.0 38.9 +62.08

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In 2010, UMG’s total sales volume increased by 88% – to 0.94m tonnes, compared to 2009.

During the reporting year, UMG enterprises shipped their products to 27 countries. The company entered the markets of Mexico, United Arab Emirates, Syria, and Hungary, as well as added 14 new clients.

UMG’s share in the total white ball clay pro-duction volume in 2010 increased by 5% and exceeded 40% (State Statistics Commit-tee of Ukraine).

UMG’s enterprises prepared new plots for clay mining with a total area of 200 hectares.

Clay mining dynamics, m tonnes

Investments

In 2010, UMG invested $1.2m in obtaining licenses to mine new clay reserves, in order to expand its production base. In the next 5 years, the company intends to invest approximately $7m in obtaining new clay mining licenses.

UMG increased its stake in Capital-Service to 100%, which allowed it to grow its clay re-

serves by 12.3m tonnes. The company also increased its stake in Kerammekhanizatsiya by 50%, which allowed it to grow its clay re-serves by additional 2.4m tonnes.

In 2010, the total investment in upgrading UMG’s production facilities amounted to $0.2m.

054

Ukrainian Retail is developing SCM Group’s retail business under the Brusnytsya brand in the Eastern regions of Ukraine. The main goal of the company is to create and oper-ate one of the largest retail convenience store chains in Ukraine.

The Brusnytsya chain operates convenience (or ‘neighborhood’) format stores, with floor space of 300–400 square meters and a product range of 3,500 items. Brusnytsya’s retail chain includes 78 stores in Donetsk, Kharkov, Dnepropetrovsk, Lugansk, and Zaporozhye Oblasts.

The company’s headquarters are located in Donetsk. The total number of employees is

about 3,000 people. All company person-nel are enrolled in training and development programs at the in-house learning center.

Ukrainian Retail also owns a 3,500 square meter logistics center as well as production facilities, which provide the stores with meat products, fresh bakery, and gastronomy products.

The main competitive advantages of the Brusnytsya chain include: convenient store design, carefully selected product range, optimal numbers of staff, high levels of cus-tomer service, and an efficient response to customer preferences in each geographic location.

Retail trade. Ukrainian Retail


In 2010, within the framework of boosting op-erational effectiveness, the decision was made to close 14 stores which had low profitability. At the same time 24 new stores were opened.

During the reporting year, Brusnytsya’s sales per square meter increased by 104.1% from $2,2 to $4,49.

In 2010, Brusnytsya increased its turno-ver by 80% up from $50.71m in 2009 to $91.74m. The number of visitors increased from 15.04m to 24.60m.

uKRainian Retail Financial inDicatoRs, $ m


Assets 77.2 88.5 +14.64

Sales volume 50.8 75.0 +47.68

Net profit (loss) (1.4) (5.0) +257.14

EBITDA (2.8) 2.0 +175

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Investments

The total investment in Brusnytsya chain’s de-velopment in 2010 amounted to $15.62m.

Brusnytsya retail chain growth dynamics, number of stores

number of visitors, thousand people

056

Parallel manages SCM Group’s assets in the petroleum products wholesale and retail sec-tor. In SCM’s portfolio, this business is rep-resented by petrol station chains, operating under the Parallel, Gefest, and PitStop brands.

Parallel-M LTD serves the managing com-pany for the network of 69 gas stations and gas station complexes: 58 are in Donetsk and Lugansk Oblasts, 10 Gefest gas stations are spread over 6 regions of Ukraine, and 1 Pit Stop complex in Donetsk. Gefest man-ages the gas stations under its same name in Uzhgorod (Zakarpatye Oblast).

A mini-market chain operating under ZZZIP!! brand is present at the gas stations managed by Parallel. The ZZZIP! chain includes 62 mi-

ni-markets and offers a variety of associated goods and food products, as well as operat-ing 14 car washes.

Parallel also serves as the exclusive light oil supplier to the gas stations it manages, and provides fuel storage and transportation ser-vices. The company operates its own fuel testing and quality control facilities (an ac-credited laboratory), qualifying it to provide petrol product testing services. Parallel also owns the largest petroleum storage depot in Donetsk (Donetskgornefteprodukt) and Shakhtersk, as well as a fleet of modern pet-rol and gas tankers.

The total number of employees is about 2,000 people.

Petroleum products retailing. Parallel

Turnover, m $

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Mining Machines Company is Ukraine’s leading mining equipment maker. Its enterprises special-ize in the production of powered roof supports for coal-cutters and tunneling machines, dragline and band conveyors, lifters, rotary excavators, electric locomotives, pumping stations, aspira-tors, switch-yards, and other mining equipment components (in total about 400 items).

Mining Machines NPK is a managing compa-ny for SCM’s heavy engineering enterprises.

Ukrainian Machine Building Holding Ltd. (Cyprus) is a holding company for Mining Machines Company.

Heavy Engineering. Mining Machines


In 2010, 31 Gefest gas stations were retrofit-ted and re-branded under the Parallel name. Additionally, 3 new Parallel gas station com-plexes opened in Lugansk.

During the same period, 7 Gefest gas stations were closed in Kharkov and Sumy, due to the re-view of the company’s development strategy. The priority regions for Parallel currently are Donetsk, Lugansk, Dnepropetrosk, and Zaporozhye Oblasts. The company intends to strengthen its leadership positions in these regions.

The growth of the client base under Paral-lel’s CarteBlanche loyalty program in 2010 amounted to 16.9%.

The share of mini-markets in total sales in-creased by 3.9% to 12.8% by the end of the year, with sales volume per square meter growing from $4,683 to $5,266.

Investments

The investment in Parallel business develop-ment in 2010 was $11.12m.

paRallel Financial inDicatoRs, $ m


Assets 49.0 65.0 +32.65

Sales volume 239.0 290.0 +21.34

Net profit (loss) 4.3 10.0 +132.56

EBITDA 15.1 18.0 +19.21

058

Mining Machines Company includes the fol-lowing enterprises:

� Druzhkovka Heavy Engineering Plant is the leading producer of mining equip-ment in the CIS and Eastern Europe, pro-ducing: powered roof supports, convey-ors, wagons, line hangers, electric and inertia-type locomotives.

� Gorlovskiy Mashinostroitel Engineering Plant is a large producer of mining equip-ment, including: coal-cutters for flat-lying and steep coal banks, tunneling machines, plough machines, lever hoists, pumping stations, and hydraulic equipment.

� Donetskgormash is a large heavy engi-neering enterprise, producing equipment for mining industries. The company’s product range includes: multiple-rope and drum hoists, centrifugal and axial-flow blowers, load-haul-dump machines, lever hoists, underground belt conveyors (800-1200 mm belt size), parachutes, line hangers, charging ladles, rotary equipment for open-cast mining, and uni-versal rail brakes.

� Donetskiy Energozavod Engineering Plant is a leading producer of switch-

yards and dust-ignition-proof switch-yard substations in Ukraine and the CIS. The enterprise’s products are intended for supplying electricity to mines, as well as for open-cast works in coal and other mining industries.

� Kamensky Heavy Engineering Plant is one of Russia’s leading producers of powered roof supports for coal mining enterprises.

� Sverdlovskiy Heavy Engineering Plant specializes in capital repairs of powered roof support sections, rigging, metal construc-tions, and general mining equipment repairs.

� Mining Machines Engineering Techni-cal Center is intended to upgrade exist-ing, and construct new equipment for all the company’s production facilities.

� Mining Machines – Quality System ex-ercises control on incoming raw materials, ongoing control of technological produc-tion processes, as well as the quality con-trol of products manufactured at all com-pany’s enterprises.

The total number of employees is approxi-mately 10,000 people.

mining machines company Financial inDicatoRs, $ m


Assets (total) 325.5 409.0 +25.65

Assets (net) 128.4 176.6 +37.54

Sales volume 103.8 200.5 +93.15

Net profit (loss) (28.9) 13.5 +146.71

EBITDA (11.5) 22.0 +291.3

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In 2010, the enterprises of Mining Machines Company increased sales significantly by 95%, compared to 2009.

The company launched the process of creating its own distribution and service networks. In the second half of 2010 the company opened

four consignment warehouses in Pavlograd, Kirovskoye, Dobropolye, and Sverdlovsk.

The company’s sales revenue in 2010 was gener-ated in Ukraine and Russia, while the overall sales markets expanded to include Belarus, Kazakh-stan, Uzbekistan, Macedonia, and Georgia.

Investments

The total investment of Mining Machines Company in 2010 amounted to $4.6m.

In September 2010, Mining Machines Com-pany created its own engineering and tech-nical center, which will upgrade the equip-ment currently produced and develop new prototypes, as well as undertake research and development. The center will operate using a unified project system, which will allow opti-

mization of construction processes and will deliver significant improvement in the quality of pre-production perparations.

Mining Machines – Quality System Company was created to control the quality of incom-ing raw materials, ongoing control of techno-logical production processes, as well as quality control of the machinery produced by all of the company’s enterprises.

Main products sales revenue, m $

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The pharmaceutical sector recently became one of SCM Group’s new opportunity areas. Ukrainian Pharmacy Holding owns and man-ages at network of 120 pharmacies, serving over 30,000 customers daily.

30 pharmacies are operating under the Zdravitsa brand, 8 pharmacies under Dobri Liky brand, and one pharmacy under Tsen-tralnaya brand. The remainder of the phar-macies are currently operating without a unified brand, but will be rebranded under the Dobri Liky brand. Ukrainian Pharmacy Holding is also actively developing the small-batch pharmaceutical retailing format.

The Zdravitsa chain offers a wide assortment of the quality pharmaceuticals, personal hy-giene items, cosmeceuticals, children’s food, and cosmetics. The pharmacies also offer a high level of professional service and a wide range of additional services, including con-sulting assistance.

The Dobri Liky chain is a new, developing, socially-oriented network of pharmacies, formed on the basis of previously unbranded pharmacies. The differentiating factors of this chain are low prices and wide product range. The chain has also undertaken to service cus-tomers with reduced-price prescriptions, as well as serving customers covered by State Social Insurance Fund’s insurance programs against industrial accidents in Donetsk Oblast.

Tsentralnaya is a premium-class pharmacy.

The pharmacy chains under Ukrainian Phar-macy Holding currently cover Dnepropetro-vsk, Donetsk, Zaporozhye, Kiev, Lugansk, and Odessa Oblasts.

The strategic goals of Ukrainian Pharmacy Holding include expanding both its market share and its geographic presence.

The total number of employees is about 1,500 people.

Pharmaceuticals. Ukrainian Pharmacy Holding

8Ukrainian Pharmacy Holding was created in 2010.

uKRainian phaRmacy holDing Financial inDicatoRs8, $ m

Indicators 2010

Assets 17.0

Sales volume 16.0

Net profit (loss) 0

EBITDA 1.0

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Avlita Stevedoring specializes in trans-ship-ment of grain and metal products. The compa-ny’s trans-shipment facilities are located in the non-freezing harbor of Sevastopol, Black Sea.

Avlita Stevedoring is the core company of SCM Group’s new business area – transport and logistics.

The company owns two berths in Sevastopol-skaya and Dokovaya bays, with total length of 500 meters, capable of servicing vessels of up to 80,000 tonnes displacement. The berths are equipped with railway access and 15 cranes (8 gantry and 7 dockside).

Avlita Stevedoring operates a grain terminal, which is one of the largest in Ukraine, with a grain storage capacity of 170,000 tonnes, which allows the company to process up to 3m tonnes of cargo annually.

The company’s metal products trans-ship-ment facilities have the capacity to process more than 2m tonnes of cargo annually.

The total number of employees is approxi-mately 800 people.

Transport and logistics. Avlita Stevedoring


In 2010, 8 new pharmacies under Zdravitsa brand were opened which had previously op-erated as unbranded pharmacies. During the first 3 months of operations under the new brand name, the total turnover of the re-branded pharmacies increased two-fold.

Special attention is paid to the professional de-velopment of the chain’s employees through the company’s in-house training center.

avlita steveDoRing Financial inDicatoRs, $ m


Assets 105.1 119.5 +13.70

Sales volume 51.8 37.8 (27.03)

Net profit (loss) 23.4 13.3 (43.16)

EBITDA 36.4 24.2 (33.52)

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Associated companies are businesses where SCM Group, in its role as an investor, is capa-ble of significant influence, particularly with regard to defining financial and operational policy, but where it does not exercise full

control. SCM is involved in defining financial and operational policy of these associated companies through its representation on the Board of Directors.

Associated companies


In 2010, the volume of grain trans-shipment decreased significantly from 2.77m tonnes in 2009 to 0.98m tonnes in 2010. The rea-son for such sharp decrease was down to delays in VAT repayment by the government to grain traders in the first half of the year, as well as grain export quotas, imposed by the Cabinet of Ministers of Ukraine (Decree #938) on October 4, 2010. At the same

time, the volume of metal products trans-shipment increased from 1.74m tonnes in 2009 to 2.29m tonnes in 2010.

Investments

The total investment in the development of Avlita Stevedoring in 2010 was $1.76m.

Cargo transshipment

dynamics, m tonnes

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METALS AnD MInInGZaporozhkoks (Zaporozhye Coke and Chemical Plant) – Ukraine’s leading coke and chemical enterprise with a full technol-ogy cycle for chemical-recovery and product processing – 24.99% share.

Donetskkoks (Donetsk Coke and Chemi-cal Plant) – one of Ukraine’s largest coke and chemical enterprises, producing over 20 products – 37.47% share.

Dokuchayevsk Flux and Dolomite Plant (DFDK) – one of Ukraine’s largest mining enterprises, specializing in fluxing limestone and dolomite extraction and processing, and the largest producer of fired dolomite for metallurgy. It is also the only plant in Ukraine to produce powders for refractory materi-als – 49.98% share.

novotroitskoye Mines Management – a large mining enterprise, specializing in limestone and dolomite extraction and pro-cessing for metallurgy, refractory, glasswork, and sugar industries – 49.97% share.

Krivbassvzryvprom Explosives Com-pany – an industrial production enterprise specializing in blasting works at open casts Ukrainian mines. It is also a large producer of emulsified and hydrolabile explosives – 46.58% share.

Krivoy Rog Iron Ore Plant – Ukraine’s larg-est producer of iron ore – 49.94% share.

EnERGYDneproenergo – Ukraine’s second largest electric power producer. Dneproenergo’s production facilities include three thermal power plants (TPP) – Zaporozhskaya, Krivo-

rozhskaya, and Pridneprovskaya – with a cu-mulative installed capacity of 8.2 GW●hour, amounting to 30% of the total installed capacity of all TPP’s in Ukraine – 47.56% share.

Donetskoblenergo – specializes in electric power distribution at regulated tariffs and its supply using local transmission networks – 30.60% share.

Kievenergo – one of Ukraine’s largest pro-ducers and suppliers of electric and thermal power – 39.98% share.

Zapadenergo – one of Ukraine’s largest producers of thermal and electric power– 24.99% share.

TELECOMMUnICATIOnSAstelit – a national operator, providing mo-bile communication services to GMS 900 and GSM 1800 standards, operating under the life:) brand – 44.96% share.

MMDS Ukraine – a telecommunications company providing digital television services and internet access, based on MMDS (Mul-tichannel Multipoint Distribution System) – 25% share.

OTHERKrasnaya Polyana Sand Quarry – an en-terprise, specializing in quartz sand extraction and the production of concrete products using vibration casting technology – 24.99% share.

Dnepropetrovsk Television Service – a lo-cal free-to-air and cable broadcasting com-pany, operating under the ‘34’ brand. The broadcasting coverage includes Dnepropetro-vsk and the nearby localities – 22% share.

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Football. Shakhtar Football Club and Donbass Arena Stadium

Shakhtar Football ClubFC Shakhtar has a 70-year history and a track record of success having won the Ukrainian Championship (2002, 2005, 2006, 2008, 2010), the Ukraine Cup (1995, 1997, 2001, 2002, 2004, 2008), the Ukraine Su-per Cup (2005, 2008, 2010), and the UEFA Cup (2009).

The football club has a well-developed sport-ing infrastructure that includes, among others, a modern training base (originally opened in 1990) and a football academy.

Donbass Arena StadiumThe new 50,000-seat home stadium for FC Shakhtar, is the Donbass Arena, which is the first in Eastern Europe to be designed and built in compliance with UEFA’s 5-star standard. The overall investment in the sta-dium and landscaping the surrounding park amounted to $400m.

Donbass Arena is the cultural center of Don-bass’ regional capital, Donetsk. In addition, the stadium will host group stage matches and the semi-final of the forthcoming Euro 2012 Championships to be hosted jointly by Ukraine and Poland.

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Social responsibility at SCM

SCM is committed to following the highest standards of corporate responsibility and views this as a core element of its business strategy.

Corporate social responsibility and sustainable development

All businesses within the SCM Group have policies and plans in place, however, the main areas are determined according to their industrial focus, risks and opportunities:

� corporate governance and business ethics

� health and safety

� environment

� human resources

� local communities

� sponsorship and charity

SCM also contributes to the institutional de-velopment of social responsibility in Ukraine. We are a founder member of the United Na-tions Global Compact (UNGC) in Ukraine, having joined in 2006 and currently chair the UNGC Steering Committee.

SCM Group companies also contribute to the development corporate responsibility in Ukraine. DTEK and Metinvest joined UN Global Compact in 2007 and 2010, respec-tively. In May 2010 our insurance company ASKA was one of initiators of the Environ-mental Insurance Pool, set up to coordinate actions of Ukrainian insurers related to the insurance of risks that can have a negative environmental footprint.

SCM takes part in constructive dialogue with stakeholders including: employees, citizens in the regions where we are present, local governments, business partners, NGOs, me-dia and experts. Since 2007 we have been reporting to the international non-financial reporting standards on SCM Group’s projects and achievements in the area of sustainabil-

ity. You can access our reports at www.scm.com.ua in the section “Sustainability / Re-ports and presentations”.

Our industrial businesses, DTEK and Met-invest, also publish their own sustainability reports. You can access them at www.dtek.com and www.metinvestholding.com.

Awards

For the last three years (2007-2010) SCM has topped Ukraine’s corporate responsibil-ity rating compiled by Gvardiya magazine. In August 2010 SCM’s project to landscape the park area around the new Donbass Arena stadium and plant it with green plants and grasses won the nomination “Environment and Society” at the International Public Envi-ronmental Award “Terra Viva-2010”.

In 2010 DTEK and Metinvest took part in CSR Market Place, the first exhibition on Corpo-rate Social Responsibility in Ukraine, organ-ized by CSR Development Centre. DTEK won the “The Best Non-Financial Report” and “The Best Project” while Metinvest’s sustain-ability report was shortlisted as one of the Top 5 best non-financial reports in Ukraine.

Employment

SCM Group businesses employ approximate-ly 200,000 people and we believe that they are our most valuable resources. Our priority, particularly in our industrial businesses, is to ensure healthy and safe working conditions and good salaries, as well as to invest in pro-fessional development and training of our employees.

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Our employees

We are one of the largest employers in Ukraine and SCM seeks to apply modern ap-proaches in human resource management and development.

In 2010 our industrial plants continued to improve their motivation and remuneration systems. With a new system of job assess-ment based on Hay Group practices, we en-sured fair remuneration to every employee for his or her work, based on their level of knowledge, skills and professional expertise.

Professional development and training are a special focus for the SCM Group. We are committed to giving our employees the op-portunity to develop and fully realize their potential. DTEK delivers training for its em-ployees at its own purpose-built facility, the DTEK Academy - a corporate centre attended by future managers who have strong profes-sional competencies and leadership poten-tial. Segodnya Multimedia trains most of its employees through a corporate university programme where the company’s employ-ees attend courses developed and taught by senior managers of the company and invited guest lecturers.

Health and Safety

Creating healthy and safe working condi-tions is a first priority for SCM. To achieve this goal we introduce modern technologies and equipment, improve health and safety man-agement, and create a “safety first” culture.

SCM Group companies manage health and safety in line with the best global practices and in particular, international standard OH-SAS 18001.

In 2010 DTEK took a range of strategic health and safety initiatives, including devel-oping improved personal safety equipment and clothing; established an efficient system of occupational medicine and preventative health care; as well as implemented a sys-tem of financial and non-financial motivation of employees for excellent performance in health and safety.

Metinvest continued to introduce corporate safety standards designed to identify root causes of incidents and audit safety systems with the primary goal of encouraging em-ployees to work safely and to develop a safe-ty first culture throughout the business.

Our industrial holdings also prioritize educa-tion and advance training of employees in the area of health and safety. Metinvest has developed a system of internal coaches to teach corporate health and safety standards. The trainers are recently retired members of staff who are retrained as coaches and bring a wealth of detailed knowledge of the business and strong expertise in health and safety to the role, as well as the respect of their peers.

In 2010, SCM Group invested approximately $100,5m in health and safety programs, which is 60% more than in 2009.

Environment

Environmental safety and protection is a pri-ority for the SCM Group. We strive to reduce the environmental impact of our produc-tion cycles. The main areas of SCM Group programmes include: reducing air emissions (particularly, emissions of green house gas-es), consuming water and land sustainably,

cutting waste water discharges, reducing waste generation, increasing waste recycling and improving energy efficiency.

In 2010 our companies continued to intro-duce environmental systems in compliance with ISO 14001.

SCM Group’s steel mills, Azovstal and Yena-kiyevo Steel Plant (YeMZ), carried on their extensive modernization programmes that are expected to deliver both economic and environmental effects.

We recognize the climate change as a press-ing issue and work to reduce green house gas emissions. Metinvest and DTEK realize Join Implementation projects within the Kyoto Pro-tocol mechanisms. Metinvest is carrying out ten Joint Implementation projects in three ar-eas: 1 – coal mine methane recovery at Kras-nodonugol; 2 – producing heat and electricity from exhaust gases at Azovstal and YeMZ; 3 – improving energy efficiency at Azovstal and YeMZ. DTEK is working to reduce greenhouse gas emissions in two areas: coal mine meth-ane recovery at Komsomolets Donbassa Mine and reconstruction of the power equipment at its Vostokenergo generation business.

We also support initiatives that tackle climate change. As Ukraine’s only company with full membership in the World Steel Association, Metinvest joined its Climate Action project to identify the steel industry impact on the environment until 2050. In 2009 and 2010 Metinvest received Climate Action certifi-cates, which confirmed the commitment of Metinvest to Kyoto Protocol principles, in particular, to the reduction of greenhouse gas emissions.

In 2010 DTEK continued to work in its new area of operations – wind energy. We be-lieve that using renewables will deliver envi-ronmentally clean energy and contribute to higher energy security of Ukraine in future.

In 2010 the SCM Group invested more than $280m in the environmental programs, which is 45% more than in 2009.

Involvement with local communities

Encouraging social and economic develop-ment in the regions of our operations is a pri-ority for SCM. By making social investments we focus on systematic cooperation with local communities and identify the priority directions of social projects with local governments.

Many of our production companies are ma-jor employers and taxpayers in their com-munities, so most social investments within the Group come from Metinvest and DTEK. The social programmes at DTEK are based on Declarations on Social Partnership signed with local authorities that cover the princi-ples, types and approaches to cooperation in the key social investment areas. Metinvest continues to move from a number of chari-table actions and contributions to local de-velopment to a strategic approach with com-prehensive social partnership programmes with local governments.

SCM Group industrial holdings target their social investments at supporting the devel-opment of infrastructure, education, public health, culture and sport.

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SCM managing company implements na-tional-scale projects with the focus on social and economic development of Ukraine.

Education is a priority area for SCM’s social investment. Our social programme Contem-porary Education aims to improve the quality of education of Ukrainian graduates to meet the requirements of the real economy sector. Since 2008 we have initiated and supported the preparation of the annual national uni-versity ranking, Compass, which gives infor-mation about the universities where courses have the biggest practical value for students and deliver good employment prospects.

In March 2010 we launched FormulaS project where senior managers of the SCM Group give open master classes for Ukrainian stu-dents. The initiative helps the students to de-velop skills as public speaking, time manage-ment, leadership, negotiations and project management. More than 1 500 students have already benefited from this project.

In 2010, the overall social investments of SCM Group’s core businesses exceeded $8m, which is 28% more than in 2009.

Sponsorship and charity

Social investments are a priority for the SCM Group.

We also provide sponsorship support and make charitable donations. Most of the SCM Group’s sponsorship payments come from SCM managing company, which supports national and international projects and initia-tives. In our charitable activity we partner with NGOs and charitable foundations to support the projects that address social problems and seek to improve the quality of living in the re-gions of our operations and across Ukraine.

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January

DTEK agreed a 49 year lease for Dobropoly-eugol, a state-owned mining enterprise. The lease agreement was signed with the Regional Department of the State Property Fund of Ukraine in Donetsk Oblast, based on the results of a competitive tender held in December 2010. DTEK Dobropolyeugol, represented DTEK in the bid. The process of transferring Dobropolyeugol Mining to DTEK under the terms of the agreement was com-pleted on January 4, 2011. DTEK intends to invest more than $250m in Dobropolyeu-gol’s coal mines during the next five years.

Key post-reporting period events 2010

The investments will be mainly used to up-grade the current equipment, capital con-struction, increasing coal reserves, extend the existing coal faces, and build a health and safety management system, which is in compliance with the OHSAS 18001:2007 standard at all Dobropolyeugol mines.

SCM paid the final installment on its $545m syndicated loan. The syndicated four-year loan was granted to SCM in March 2007.

In 2010, Service-Invest (DTEK) completed the reconstruction of five substations and put into operation a new power transmission line. The total cost of works amounted to ap-proximately $7m.

February

Metinvest was granted a $75m pre-export loan facility, with repayment due in 2013, from Rabobank. The funding will be used for further upgrading of its production facilities and other corporate purposes.

Mining Machines Company signed an agree-ment with Sberbank of Russia for a $40m credit line. The funding will be used to im-plement investment programs, develop the company’s production facilities, and to re-plenish working capital due to the growth of sales volume and the development of the distribution network.

Metinvest placed a $750m, seven-year Eu-robond with a yield of 8.75%, due on Febru-ary 14, 2018. The funding will be used for its capital investment program and other corpo-rate purposes.

Azovstal Steel Plant (Metinvest) repaid its $175m Eurobond, which matured in February 2011.

DTEK and other SCM Group companies in-creased their stake in Zapadenergo statutory capital to 25.06%.

March

Metinvest signed an agreement with Sber-bank of Russia to open a $175m, 3-year amortizable reserve line of credit. The fund-ing will be used for the capital investment program and other corporate purposes.

SCM completed the transaction to purchase a 19.82% share in Donetskgormash and 21.75% share in Druzhkovka Heavy Engi-neering Plant, thus, increasing its stake in Donetskgormash to 69.87% and in Druzhkovka Heavy Engineering Plant to 87.13%.

Fourteen of DTEK’s enterprises complet-ed the certification of their environmental management system to comply with ISO 14001:2004 standard. The total investment in the project in 2010 was approximately $0.6m. The system audit was carried out by Moody International, a world leader in tech-nical inspection and certification services.

DTEK completed the certification of its oc-cupational safety management systems at its enrichment, distribution, and service enter-prises to comply with OHSAS 18001:2007 standard. The total volume of investment in the project in 2010 exceeded $22m. The au-dit was carried out by Moody International.

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Metinvest completed capital repairs of mixer #3 of the oxygen-converter facilities at Ilyich Steel Plant in Mariupol, within the frame-work of its continual improvement, recon-struction, and modernization program. The total volume of investment amounted to ap-proximately $0.8m.

April

Power Trade (DTEK) began the commercial supply of electric power to Moldova. The es-timated monthly supply volume will amount to 75-100m KW/hour, with a maximum supply capacity up to 150MW.

SCM presented its non-financial (sustain-ability) 2009-2010 report.

At System Capital Management’s General Shareholders Assembly a decision was made to retain the company profit for 2010 for business development.

Metinvest B.V. (Netherlands), Metinvest Group’s holding company, signed a $100m, 3-year pre-export line of credit with Uni-Credit bank.

Lviv, Burshtyn, and Dobrotvor cities joined DTEK’s Declaration of Social Partnership

May

Metinvest allocated $626,3m to invest in the development of its enterprises. The intended funding for SevGOK exceeds $323m, for InGOK – more than $169.1m, for CGOK – approximately $113m. The funding is pro-vided within the framework of a long-term

investment program, aimed at the continual improvement and development of produc-tion efficiency.

SCM presented IV annual Ukrainian National Higher Educational Institutions Rating, Com-pass, prepared jointly with Kiev International Sociology Institute.

SCM Group’s transportation assets are con-solidated under Portinvest, a new sectoral holding.

June

DTEK created DTEK Neftegaz, a daughter company, to develop projects in oil and gas industry, on the continent and offshore.

SCM and Smart Group made a decision to create HarvEast Group to manage the agri-cultural assets, obtained after Metinvest pur-chased Ilyich Steel Plant in Mariupol.

Vostokenergo (DTEK) began the upgrading of power-generating units with total cost of $199.41m.

The integration of Ilyich Steel Plant in Mari-upol into Metinvest Group was completed, and Clarendale Limited (Cyprus), with Vladimir Boyko being the end beneficiary, became one of Metinvest Group’s sharehold-ers. As a result, Metinvest’s ownership struc-ture changed to the following: SCM Group (71.25%), Smart Group (23.75%), Claren-dale Limited (5%).The shareholders of Met-invest approved the 5-year, $2bn investment program for Ilyich Steel Plant in Mariupol.

scm public report 2010

Documents

scm group events calendar

scm group public report

scm groups pridongorbank

key growth

economic growth

growth asduring

intensive growth

wherement of metinvest