Annual Report 2010 - Magnitogorsk Iron & Steel Works

ContentsAnnual Report2010Editor-in-Chief:O.V.Fedonin7.Key Results of 20118.Statement of the Chairman ofthe Board of DirectorsEditors:V.E.RugaO.V.RashnikovaProject Coordinator:A.A.SmirnovContributorsL.K.BuriakovaA.D.DeviatovE.N.KovtunovE.A.RubantsevI.V.TsapovskyM.M.FaritovI.O.KosmarovaDesign and proofing:Zh.O.AnufrievaFotos:S.LikhachevA.SerebriakovE.RukhmalevA.BardentsevAddress:Ul.Kirova 93,Magnitogorsk, Russiatel.: (3519) 24 4009fax: (3510 24 7309http://www.mmk.ru10. Events of 2010 and 2011 16.MMK’sBusiness Model22. MMK’s Mission and Strategy 26.OJSC MMK Board of Directors’ Report onStrategic Plan Implementation28.The Company’s ProductionOperations32.38.46.48.Overview and Analysis of theSteel MarketFinances(Events after the accounting date)Raw Materials andEnergy SuppliesNEWS«Good Luck and Bon Voyage!»

MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtection50.Corporate Governance(Events after the accounting date)67.Risk Management68.Social Responsibility72.Environmental Protection78.Stakeholder Engagement82.Information forShareholders and Investors88.96.97.100.106.107.Accounting Statements as per the IFRSStatement of management’s responsibilitiesfor the preparation and approval of the consolidated financialstatementsIndependent Auditor’s ReportConsolidated Statement of Comprehensive incomeConsolidated Statement of Financial PositionConsolidated Cash Flow StatementInformation on Companies in Which OJSC MMKHolds Less Than 50% of SharesCompliance of the MMK 2010 Annual Report withStandard & Poor's Information Transparency CriteriaUse of the GRI 3.0 Reporting Framework Elementsand Performance Indicators in the MMK 2010 Annual ReportGeneral Information on OJSC MMKGeneral Information on the Report

Products for the Automotive Sector6Ul.Kirova 93, Magnitogorsk, 455000, RussiaTel. (3519) 24 7929, fax: (3519) 24 9200www.mmk.ru

Key Results of 2011Steel & Style , 10 MMK ANNUAL REPORT 7

Statement of the Chairmanof the Board of DirectorsDear shareholders, colleagues and partners!Throughout 2010 the global steel sector continuedto recover from the crisis. The year ended on anoptimistic note, with a growth in production levelsand a rise in steel prices.The domestic steel sector has been evolving intune with the global trends. Market changes haveled to positive structural changes in Russia’s steelproduction. Growing domestic steel demand is boundto become one of the factors driving productionvolumes.Under these conditions MMK is steadily moving ahead,pursuing a strategy of organic growth. Last year theCompany took active efforts to build up its productionlevels and managed to maintain its leading positionin the Russian steel market, with a 17% share of themarket. Our focus on the Russian customer proved tobe strategically correct: the share of our shipments tothe domestic market in 2010 reached 69% of the totalsales."In 2010 the MMK Groupset up a full-fledged rawmaterials division"Victor Rashnikov,Chairman of the Board of Directors,Magnitogorsk Iron and Steel WorksIn 2010 MMK produced 11.419 m tons of crudesteel, bettering the 2009 result by 19%, and 10.245m tons of commercialproducts, 17% up on"In 2010 MMK produced11.419 m tons of steel,19% more than in 2009"2009. This, to a largeextent, became possiblethanks to diversifyinginto new lucrativetypes of products tomeet the demand onthe home market, interalia, through import substitution. Increasing output ofhigher value added products is a strategic priority forour Company, and the share of such products in 2010rose to 34% compared to 27% in 2009. This increaseis, first and foremost, attributable to the 5,000 mmPlate Mill reaching its design capacity.The implementation of a long-term modernizationprogram has enabled MMK to minimize lossesassociated with the global economic crisis. MMKmaintains its focus on raising production efficiency,cutting costs and improving product quality.In 2010 the Company was able to keep up its highoperational and financial performance thanks to anumber of steps taken by the management to improveproduction and sales. The MMK Group’s 2010 revenuestands at USD 7.719 bn, with EBITDA at USD 1.606 bnand EBITDA margin at 20.8%.8

Highlights of 2010 and 20112010JanuaryA 200,000 tpy colour coatingline was put into operation inIskenderun (MMK's steel-makingplant in Turkey).MMK held a meeting of thecoordination council with OJSCTMK, the largest Russian pipeproducer ranking #3 in the world.FebruaryMMK's BOF Division started up anew secondary steel treatment unitwhich allows to produce pipemakinghigh strength steel gradesto international standards for the5,000 mm Plate Mill.ProjectFinance, part of theEuromoney media Group,recognized the financingtransaction for MMK's Turkish steelmaking plant as "the Deal of theYear".MarchMMK was visited by Ralph Lysyshyn,the ambassador of Canada.MMK was certified for compliancewith STO Gazprom 9001:2006quality management systemstandards.Trade Finance Magazine, aspecialized publication of theEuromoney Institutional InvestorGroup, recognized the financingtransaction for MMK's Turkish steelmaking plant as "the Deal of theYear"A coordination council of MMKand the ChTPZ (ChelyabinskPipe-Making Plant) Groupreviewed the results of 2009 andconsidered the prospects for along-term cooperation between thecompanies.APRILMMK joined the ranks of ForbesGlobal 2,000.MMK announced the IFRS financialresults for 2009:• MMK's 2009 revenuetotaled USD 5.081 bn.• EBITDA margin was 25%.A new product - rolled strip coatedwith protective and decorativefilm - was introduced at MMK's newcolour coating line.MMK joined the Forbes Global2,000, the list of the world's leadingcompanies.MMK won the prize for the BestInnovative Project as part ofthe Russian Industrialists andEntrepreneurs Union's Competition"Best Russian Companies. Growth,Performance, Reliability 2009".MMK's steel making plant in Turkeycommissioned a 450,000 tpy hot dipgalvanizing line.MMK placed a 3-year, RUB 8 bnissue of exchange-traded bondsincluded in the MICEX quotationlist, with a coupon rate of 7.65%.MMK's registrar, ZAO Status,changed its address toUl.Novorogozhskaya 32, Bldg 1,Moscow, 109544.10

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionMayMMK's Annual GeneralShareholders' Meeting took place.MMK hosted the conference"Russian Rolled Steel Market2010" attended by executives andspecialists of steel making and steeltrading companies, steel servicecentres, and specialized media fromRussia, Ukraine and Belarus.MMK took part in the XVIIISpecialized International Exhibition"Gas, Oil, Technology 2010".MMK's Coating Division producedone millionth ton of colour coatedsheet since the first CC line's startupin 2004. ИJuneMMK and AVTOVAZ held the 16thsession of the two companies'coordination council.MMK announced its IFRS results forthe 1st quarter of 2010:• MMK Group's 1Q 2010 revenuetotaled USD 1.652 bn;• EBITDA margin was 22.6%.MMK won in the competition "BestRussian Exporter 2009" sponsoredby the Russian Ministry of Industryand Trade.A consortium of the RussianDirectors Institute and the leadingnational rating agency Expert RAassigned to MMK a rating of "7+"(Advanced practice of corporategovernance) on the nationalcorporate governance rating (NCGR)scale.The coal producer OJSC Belon, acompany of the MMK Group, wonthe auction for the mineral rights toa part of the Nikitinsky coal deposit,with estimated reserves of 132million tons of coking coal.JulyVictor Rashnikov, the Chairmanof MMK's Board of Directors, tookpart in the meeting of the RussianPresident Dmitry Medvedev andthe German Chancellor AngelaMerkel with Russian and Germancompanies and businessmen,including the leading Germanequipment manufacturers whichsupply over 70% of equipment forMMK's modernization program.Victor Rashnikov, the Chairmanof MMK's Board of Directors, waselected President of the RusskayaStal Non-Commercial Partnership.OJSC Belon increased coalproduction by 996,000 tons in the1st half of the year, 32% up on theprevious year.Vladimir Putin, the Russian PrimeMinister, chaired a meeting inChelyabinsk dedicated to theRussian steel sector's development.MMK's modernization effort andenvironment protection measureswon high recognition at themeeting. .Steel & Style , 10 MMK ANNUAL REPORT 11

Highlights of 2010 and 20112010JulyThe Metallosnabzheniye y Sbytmagazine recognized MMK as thebest producer of flat products inRussia.Moody’s upgraded MMK's outlookunder the corporate credit ratingand the national scale rating fromStable to Positive.A contract was signed for theconstruction of a new slagprocessing unit, Amcom-3, with acapacity of 2.5 m tons of slag peryear. The aggregate capacity ofMMK's slag processing units willreach 9 m tons of slag per year,yielding up to 1 m tons of ironcontainingmaterial every year andallowing to clear away the slagdumps around the Works within thenext 10 years.MMK and the ChTPZ Group, oneof MMK's key customers, signedan agreement of cooperation for aperiod uip to 2015.AugustMMK proceeded to the installationof the 2,000 cold rolling millequipment (Rolling Shop 11). Themill's key purpose is be to producepremium quality cold rolled andgalvanized steel products for theautomotive sector, white goodsmanufacturers and the constructionsector. The mill will have an annualcapacity of 2 m tons.MMK was ranked 21st in theRussian companies' socialresponsibility rating conductedby the Trud daily and the Agencyof Political and EconomicCommunications.SeptemberThe 5,000 Plate Mill's productswere successfully certified forcompliance with the DNV-0S-F101international quality standards.MMK announced its IFRS results forthe 2nd Q of 2010:• MMK Group's 2Q 2010revenue totaled USD 2.068 bn;• EBITDA margin was 21.1%.Fitch Ratings upgraded MMK'scredit rating outlook to Positive.MMK placed a 3-year, RUB 5 bnissue of exchange-traded bondsincluded in the MICEX quotationlist, with a coupon rate of 6.47%.MMK's annual report won the 1stprize in the category "Design andIdea" of the VII Open Competition ofAnnual Reports held as part of theIX International Investment Forum"Sochi-2010".Октябрь12

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionOctoberMMK's steel plant in Iskenderun,Turkey, put into operation a750,000 tpy cold rolling mill.One year before, the first trainloadof iron ore had been shippedfrom the Sosnovsky Mine (LLCBakal Mining Administration, acompany of the MMK Group). Overthe course of the year the BMAmined about 1 million tons ofore. The ore concentrate from theSosnovsky Mine covers 10% ofMMK's requirement cutting downproduction costs by RUB 1.15million a year.MMK was visited by a delegationof companies involved in theShtokman Gas Deposit Project, forthe purpose of qualifying ММК's forparticipation in the Project.A project of the MMK-sponsoredMetallurg Charity Foundation,Give the Warmth of Your Heart toChildren, became the winner of theAll-Russia 2010 Grants Competition.MMK had its facilities successfullyaudited by Renault-Nissan inpreparation for production of steelfor the automotive sector.MMK and Hatch Engineering &Consulting signed a contract forpre-design work to determine theoptimum method for developingthe Prioskol Iron Ore Deposit.MMK hosted the 8th InternationalRolling Engineers' Congress.NovemberMMK commissioned the 1st stage ofits stamping plant and steel servicecentre near St.Petersburg, whoseproducts are intended for theleading international automakersand for Russian and foreignmanufacturers of white goods. Thecommissioning was attended bythe Russian Prime Minister VladimirPutin.MMK's 2009 Annual Report won inthe annual competition of annualreports and corporate websitessponsored by the RBC Media Groupand MICEX in the key category -Best Level of Information Disclosurein an Issuer's Annual Report.MMK's 2009 Annual Report wonin the XIII Federal Competition ofAnnual Reports organized by theRTS Exchange, in two out of a totalof 13 categories.MMK was visited by the MinisterIndustry and Trade VictorKhristenko who made a tour ofthe production facilities of keyimportance for MMK's strategicobjectives.Shipbuilding steel from MMK's5,000 mm Plate Mill received acompliance certificate from DetNorske Veritas, Norway.НоябрьSteel & Style , 10 MMK ANNUAL REPORT 13

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionMARCHRussian President Dmitry Medvedevvisited MMK for the first time.Mr.Medvedev chaired a session ofthe Presidential Commission forModernization and TechnologicalDevelopment as part of the visitwhere the issue of training qualifiedpersonnel for industrial enterpriseswas discussed.MMK won in the All-RussiaCompetition "Best RussianCompanies. Growth, Performance,Reliability 2010" sponsoredby the Russian Industrialistsand Entrepreneurs Union, inthe category "EnvironmentallyResponsible Business".MMK announced the acquisitionof a 100% interest in MMK's steelmaking JV in Turkey. The value ofthe deal to acquire an additional50% minus 1 share totaled USD 485million.The Inskederun site of MMK'ssteel making plant in Turkeycommissioned an electric arcfurnace facility with an annualcapacity of 2.3 m t.APRILMMK announced its IFRS resultsfor the 12 months and the 4th Q of2010:• MMK Group's 2010 revenuetotaled USD 7.719 bn;• EBITDA margin was 21%.MMK became a winner in the IXAnnual National Prize Award "ITLeader". The event was attendedby over 500 representativesof companies engaged in thedevelopment and implementationof innovative solutions in IT.MAYMMK held its Annual GeneralShareholders' Meeting whichadopted the following resolutions:• The authority of LLC MMKManaging Company as the soleexecutive body of MMK wasterminated;• Boris Dubrovsky was appointedGeneral Director of MMK;• A new Board of Directors waselected consisting of VictorRashnikov, Vitaly Bakhmetiev,Boris Dubrovsky, Nikolai Lyadovand Oleg Fedonin as executivedirectors, David Herman andBernard Sucher as newly electedindependent directors, andDavid Logan, Zumrud Rustamovaand Peter Charow as reelectedindependent directors (see thesection on Corporate Governancefor more details).• ZAO KPMG was approved as thenew auditor of the Company;• The 2010 financial year dividendswere calculated at RUB 0.33 perordinary share.The Fitch rating agency upgradedMMK's long-term default ratingfrom BB to BB+, and the Company'snational scale long-term rating rosefrom AA- (rus) to AA (rus).Steel & Style , 10 MMK ANNUAL REPORT 15

Business Model ММК16

16 22 26 28 32 38 50 72MMKBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionModern, High-Performance AssetsPage 30Intercos-IVSteel service centre and astamping plant, started upin Nov. 2010ZAO ProfitCovers 100% of scraprequirementMMK-MetizOne of the largest metalwareproducers in RussiaFinished products’ output in2010: 450,000 tonsCJSC Belon4.2 m tons of coking coalproduced in 2010. Coversup to 40% of MMK coalsupplyTurkey ProjectSteel making and rollingcomplex, scheduled toproduce 2.3 m tons of rolledsteel by 2012Captive iron oreproduction4.7 m tons in 2010.Covers up to 30% of MMKiron ore supplySteel segmentRaw materials segmentDistribution network of Torgovy Dom MMK LLCNetwork of ZAO Profit scrapcollection sitesPrioskol Iron OreDeposit ProjectMMK’s license for Russia’slargest undeveloped ironore deposit with reserves ofover 2 bn tonsOJSC MMK: Europe’s largest and the world’s second largest single-site steel producingcomplexMMK-produced ironore (up to 30% oftotal need )MMK-produced coalconcentrate(up to 40% of total need )Sinter productionCoke and chemicalby-productsSinter:11.6 m tonnesCoke5.7 m tonnesPig iron:10.1 m tonnesCommercial steelproducts:13.3 m tonnesScrap:5.7 m tonnesCrude steel: 14.3m tonnesRollingPage 29M tons Capacities as at the end of 2010Steel & Style , 10 MMK ANNUAL REPORT 17

18Diverse Product Mix and Sales Footprint

16 22 26 28 32 38 50 72MMKBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionBalanced Financial PolicySteel & Style , 10 MMK ANNUAL REPORT 19

Significant Growth Potential20

The human eye is capable of distinguishing10 million colours – we can offer you any of those!Colour coated steelСталь Steel & Стиль Style Ul.Kirova , 10 ГОДОВОЙ MMK 93, ANNUAL Magnitogorsk, ОТЧЕТ REPORT ММК 455000, 21RussiaTel. (3519) 24 7929, fax: (3519) 24 9200www.mmk.ru

NEW TRACKSMMK’s Missionand StrategyMMK’s missionis to produce and sell high quality steel products that meet the current andfuture requirements and expectations of our customers for the purpose of earning sufficientprofit to secure the Company’s position as a global leader.The principal strategic goal of MMKis to maintain its long-term competitive position on theglobal steel markets.To attain this goal, MMK is taking the following steps:1. Expansion into new markets;2. Diversification into new product lines;3. Cost reduction;4. Securing supplies of raw materials and power resources.EXPANSION INTO NEW MARKETSIncreased Sales of Hot Rolled ProductsThe Company continues to modernize the 2,500mm Hot Rolling Mill, which willincrease its capacity to 5.5 mtpy of products in a wider range of sizes (1.5-25.0 mmthick instead of 1.8-14.0 mm, and 1,000-2,350 mm wide), and in coils of up to 40tonnes(instead of the current 25 tonnes).In July 2010, a new, state-of-the-art cut-to-length line was put into operation, whichis designed to cut hot rolled strip 5-25 mm thick and 1,000-2,350 mm wide woundinto coils, into sheets 3 to 24 m long. The capacity of this line is 1.125 mtpy.Stronger Presence in the Central Region of RussiaOn November 22, 2010, ZAO Intercos-IV, a company of the MMK Group, commissioneda steel service centre in St.Petersburg with a design capacity of 250,000 tonnes ofsheet blanks to produce stamped parts for the automotive sector and white goodsmanufacturers.Promoting Relations with Key CustomersIn November, 2010, OJSC MMK signed a memorandum with OJSC KAMAZ regardingconstruction of a steel service centre in the city of NaberezhniyeChelny (whereKamaz’s main truck manufacturing facilities are located). The centre will be equippedwith a shot blasting machine, the first of its kind in Russia. It is scheduled to go on22

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionstream in 2012 and will process 170,000 tonnes of hot rolled steel per year for the automotive, constructionand machine building sectors.Construction of a Steel Producing Complex in TurkeyMMK is determined to consolidate its position on the Middle Eastern market, and is moving ahead withconstruction of a steel production complex in Turkey that is designed to produce 2.3 million tonnes of rolledproducts per year. The complex will be located in two cities: Iskenderun and Istanbul.In October 2010 the Iskenderun site commissioned a cold rolling complex comprising a continuous pickling line,two-stand reversing cold mill, a continuous hot dip galvanizing line and a colour coating line. A sea port wasbuilt and certified for operation.The Istanbul site commissioned cutting lines at its service centre, and in now installing a continuous hot dipgalvanizing line and a colour coating line.DIVERSIFICATION INTO NEW PRODUCT LINESNew Steel GradesIn February of 2010 a secondary steel treatment unit went on stream in the Company's BOF Shop. It willproducesteel for large-diameter longitudinal welded tubes with increased hydrogen sulphide resistance and corrosionresistanttubes of up to Х-120 strength, special steels, automotive steel (ultra-low carbon, high strength, dualphase,multi-phase and TRIP-steel) and steel for household appliances.In 2010 MMK launched production of 30 new steel grades, including K65, 80HFU, RSA, SAWL 485 FD, DNV485FD, and adopted a process for pouring pipe-making steel grades on the # 6 Continuous Caster of the BOF Shop.Cold-Rolled Auto Body SheetIn 2010 the Company's existing facilities launched the following new products for the automotive sector:• for OJSC AVTOVAZ:• 0.7-2.8 x 1,000-1,500 mm,08GSUT grade cold rolled coils ,• 3.5 x 190 mm,St 10 grade cold rolled band with enhanced quality (P), high gauge precision (V) androughness (Ra) not exceeding 0.63;• 0.7-2.0 х 1,000-1,400 mm,St Н220Р grade CR coils ;• 0.75 х 1.19 х 1,050-1,600 mm,St006/IF steel grade hot dip galvanized (HDG) coils .• for Ford Motor Company:• 0.6-0.79 х 1,000-1,600 mm, stHX260BD grade HDG coils;• DX56D and DX54D grade HDG coils.• for the Urals Automotive Plant:• Cold rolled coils with roughness not exceeding 10 μ.Cold Rolling Shop (#11) commissioning:1st Stage: July 20112nd Stage: July 2012HSS44.5%(HX280YD, DP500...)AHSS15.6%(TRIP, DP600-DP800...)Mild Steel30.8%(IF, DX510, HX180YD...)UHSS9.1%(DP100-DP1200...)Key Parameters of the Cold Rolling Mill:Capacity, mtpy 2.0Width range, mm 850 – 1,880Gauge, mm 0.28 – 3.0Steel gradesHSLA, IF-HSS, BH, TRIP, HX, DP, DX* IF HSS - Interstitial Free High Strength SteelBH - Bake HardeningTRIP - Transformation-Induced PlasticityHSLA - High Strength Low AlloyTensile strength, MPa up to 1,500Steel & Style , 10 MMK ANNUAL REPORT 23

To localize their production, foreign automakers need high-strength steels to beproduced in Russia. At present the volume of such production is insignificant, and thedemand is mainly met by imports. To tap that market, MMK is building a new, 2,000mm cold rolling mill. This project will allow the Company to provide automakerswith high quality cold rolled and galvanized steel sheet (including sheet made ofhigh-strength steel, such as HSLA, IF-HSS, BH, dual-phase, multi-phase and ТRIPsteel,meeting all modern requirements for these products). Products from this linewill also be used by manufacturers of household appliances, who require highqualitycold-rolled and galvanized sheet with the required drawing quality and freeof surface defects – a product also used for manufacturing exposed parts of cars.This 2.1 mtpy mill will produce cold rolled coils of up to 43.5 tonnes, 0.28-3.0 mmthick and 850-1,880 mm wide.Cost ReductionEnhancing production efficiency through cost reduction has always been one ofMMK’s priorities. Steps to reduce costs are being developed and implemented ona regular basis. In 2010 MMK’s successful cost-cutting measures helped to reduceproduction costs by 2 bnroubles (1.1%) or RUB 1,900 per tonne of commercialproduct, including through:• reduction of specific consumption and composition change of materials: RUB 0.9b.n., including:• raw and primary input materials: RUB 0.4 bn;• auxiliary materials: RUB 0.5 bn.• reduction of maintenance and repair costs: RUB 0.7 bn (due to lower contractorcosts as a result of increased competition and optimizations to work regulations);• reduced prices for material resources: RUB 0.2 bn.A new program for 2011 designed to bring down costs by at least RUB 2 bn is beingimplemented.Raw Materials and Energy Resources’ ProcurementIn 2010 MMK continued its efforts to develop the Company's own raw materialsbase.2 slag processing units were started up, bringing MMK's total slag processingcapacity up to 9 mtpy, and the capacity for extracting iron containing materials, to 1mtpy.Iron ore deliveries from the Sosnovskaya Mine, Chelyabinsk Region, passed the 1mtpy mark, with the design capacity of 2-2.5 mtpy.In the future MMK plans to build an iron ore beneficiation plant at the PrioskolskyIron Ore Deposit, the largest undeveloped deposit in Russia. In 2010 the Canadiancompany Hatch continued design work on various options for ore mining at thedeposit.24

Premium quality steel productsfor the automotive sectorUl.Kirova 93, Magnitogorsk, 455000, RussiaTel. (3519) 24 7929, fax: (3519) 24 9200www.mmk.ru

OJSC MMK Board of Directors' Reporton Strategic Plan ImplementationIn 2008 the Board of Directors approved OJSC MMK'sStrategic Development Plan for the Period up to2017 ("the SD Plan"). The SD Plan covers the toppriorityareas of sales and marketing, technologicaldevelopment, financial management, environmentprotection, raw materials and power supply, HRdevelopment, social policy, risk management, andinformation technologies.As part of the SD Plan, MMK, on an annual basis,develops new 3-year business plans. In 2010 theCompany approved its plan for the period up to2012. Every year the Board of Directors approvesthe Company's budget for the current year. Theparameters of the approved budget serve as targetsfor the Balanced Scorecard System (BSS) whichis used to evaluate the achievement of strategicobjectives and current operations.Thisbusiness planning system enables the Companyto respond to the changing environment whilemonitoring its short- and medium-term objectives inpriority areas.In 2010 an analysis of the key overall BSSperformance targets showed that 17 out of 20 higherlevelstrategic objectives were met, bringing theCompany's total strategy implementation index to92.2%, compared to 95.1% in 2009.Strategic goals in the Finances sphere were implementedat 80.4% (against 99.2% in 2009).20092010221.51.7590.9921.659Ф1 Increase in Company'smarket capФ2 Income growth1.510.51.1990.968Ф3 Positive investorexpectationsФ4 Increase inoperationalmargin10.50.5990.9640.8040.910 0.7940 Ф1 Ф2 Ф3 Ф40 Ф1 Ф2 Ф3 Ф4It should be noted that, although the Company was unable to reach the mark of USD 20 bn for its market value,the MMK Group's capitalization (LSE) increased 29% compared to 2009 to reach USD 12.5bn as of31 December2010.2009Strategic goals in the Clients sphere were implemented at a level of 92.6%, against97.8% in 2009.201021.510.51.197 0.8760.9781.2901.0901.1991.406K1 – Expansion of marketpresenceK2 – Image enhancementK3 – Customer-specificapproachK4 – Consistent productqualityK5 – Broad product mixK6 – Deliveries onschedule21.510.51.0011.1110.9260.9240.9981.1110.6820К1 К2 К3 К4 К5 К6 0 К1 К2 К3 К4 К5 К6Objectives K3 "Customer-Specific Approach" and K6 "Deliveries on Schedule" are in the zone of criticaldeviations mainly due toproducts quality downgrading.(in the tables, green represents a target met, yellow represents a target in the zone of acceptable deviations, and red indicates a target, in the zone ofcritical deviations.)26

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtection20092.5Strategic goals in the Internal Processes spherereached 95.6%, up from 91.4% in 2009.20102.4052.5221.9271.51.51.31611.094 0.9541.2020.9141.1480.9561.010 1.067 1.0101 0.885 0.7911.014 1.0340.50.9310.5480.50ВП1 ВП2 ВП3 ВП4 ВП5 ВП6 ВП7 ВП80 ВП1 ВП2 ВП3 ВП4 ВП5 ВП6 ВП7 ВП8ВП1– develop customer-specific approachВП2 - develop product quality managementВП3 - diversify into new products with a higher added valueВП4 - raise production processes' efficiencyВП5 - develop and adopt new technologyВП 6 - improve logisticsВП7 - secure long-term raw materials suppliesВП8 - pursue responsible social and environmental policiesObjective VP2 "Develop Product Quality Management" was not met due to the learning curve related to newplate production processes. Production levels were raised thanks to the 5,000 mm Plate Mill commissioned in2009 (with 943,000 t of plate produced in 2010).Objective VP7 "Secure Long-Term Raw Materials Supply" was met, largely thanks to the inclusion of OJSCBelon in the MMK Group which enabled MMK to avoid the coal shortage in connection with the accident at theRaspadsky Mine.The implementation of strategic goals in the Education and Development spherereached 100%,against 94.5% in 2009.The Company achieved the objectives of raising employee qualifications, improving staff motivation andproviding informational support to the Company's operations.20092ОР1 Conformity of personnel'squalification to strategyrequirements201021.510.9081.0151.0000.9450.878ОР2 Conformity of motivationto strategyОР3 Conformity of informationresources to strategyОР4 Conformity of corporateculture to strategy1.511.0621.6851.001.004 0.9290.50.50 ОР1 ОР2 ОР3 ОР40 ОР1 ОР2 ОР3 ОР4This analysis of MMK's results in strategic priority areas in 2010 demonstrates that the Company's long-termgoals set out in the corporate strategy have generally been achieved.Steel & Style , 10 MMK ANNUAL REPORT 27

The Company's ProductionOperationsThe Magnitogorsk Iron and Steel Works is a state-of-the-art, fully integrated steel making complex located inthe city of Magnitogorsk, Russia.MMK's Production Levels By DivisionIron OreBeneficiationDivisionCoke and ChemicalBy-Products DivisionBlast FurnaceDivisionSteel-SmeltingDivisionHR Flat ProductsDivisionLong ProductsDivisionDownstreamproducts20092010m tonnes 0 2 4 6 8 10 1228

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionOJSC MMK's Production FacilitiesDescription Equipment Final productIron OreBeneficiationDivisionCoke andChemical By-Products DivisionProductionlevel in 2009,m tonnesProductionlevel in 2010,m tonnesCapacityutilizationin 2010, %Productionlevel in 2011*,m tonnes13 sinter machines Sinter 10.9 11.3 100 11.69 coke oven batteries Metallurgical coke 4.5 5.2 92 5.7Blast FurnaceDivision8 blast furnaces Pig iron 8.2 9.2 92 10.1Steel-SmeltingDivision3 converter vessels2 electric arc furnaces1 twin-bath furnaceSteel billets 9.6 11.4 76 13.0Power generation 4 power plants Electric power 5.1 MWh* 5.2 MWh* 90 5.1 MWh*Long ProductsDivision3 long products mills Long products 1.0 1.1 51 1.4Flat ProductsDivision5 hot rolling mill HR flat products 9.3 9.7 84 11.24 cold rolling mills CR flat products 2.2 2.3 79 2.73 hot dip galvanizinglines2 tinning lines2 colour coating linesCoated flatproducts1.1 1.2 74 1.5Downstreamproducts1 cold rolling mill CR narrow strip 0.1 0.2 40 0.14 cold forming millsCold formedsections0.1 0.2 31 0.23 pipe welding mills Pipes 0.1 0.1 63 0.1* Plan for 2011 approved by the BoD on17 December 2010The Magnitogorsk Iron and Steel Works is the organizational and business core of MMK Group, comprising 104 companies andorganizations engaged in the supply of raw materials to MMK, downstream steel processing, manufacture of other types of products,services, and steel sales.Steel & Style , 10 MMK ANNUAL REPORT 29

The Company's Production OperationsScope of Activities Company Name LocationОАО Belon Belovo, Kemerov RegionRaw materials supplyООО Baka I Mining, Administration Bakal, Chelyabinsk RegiZAO Profit Magnitogorsk, Chelyabinsk RegionSteel smelting androllingОАОMagnitogorsk Iron and SteelWorksMagnitogorsk, Chelyabinsk RegionOJSCMagnitogorsk Metizno-Kalibrovochny Zavod MMK-METIZMagnitogorsk, Chelyabinsk RegionDownstream steelprocessingOJSC MMK-Profil-Moskva Schelkovo-2, Moscow RegionЗАОIntercos-lVGorelovo, Lomonosovsly District,Leningrad RegionЗАОSteel-making complex inTurkeyIskenderun & Instanbul, TurkeyООО Refractories Plant Magnitogorsk, Chelyabinsk RegionОАОMagnitogorsk Cement andRefractories PlantMagnitogorsk, Chelyabinsk RegionOther products andservice*ЗАОMekhano-RemontnyKompleksMagnitogorsk, Chelyabinsk RegionЗАО Stroitelny Kompleks Magnitogorsk, Chelyabinsk RegionООО Elektroremont Magnitogorsk, Chelyabinsk RegionSteel salesОООTorgovy Dom ММК (TradingHouse)Magnitogorsk, Chelyabinsk RegionММК TradingZug, Switzerland30

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionProducts and Services Markets 2010 Production ResultsProduction and processing of cokingand steam coalSiderite iron ore (52% Fe), calcinedsiderite concentrate, sinter oreMMK as priority customerMMK as priority customer6.6 m t of concentrate(3.7 mt coking and 2.9 mt steam)2 m tCollection and processing of scrap ММК 2.2 m tIntegrated steel production, fromsintering to long and coated flatproductsWire, CR narrow strips, strip, railwayand mechanical fasteners, calibratedsteel, steel mesh, nails, steel rope(metalware)Corrugated floor board, steel tile,siding, sandwich panels, formedsectionsStampings, steel service centreproductsDomestic market: 62%,CIS: 7%export: 31%30% of the Russian metalwaremarketMoscow RegionLeningrad Region10.2 m t of steel products450,000 t56,000 t240, 000 tFlat products, incl. coated products Republic of Turkey 156, 000 tAlumino-silicate and magnesiacarbonaceousrefractory materialsCementDolomiteSteel structures, replaceableequipment, rolling mill rolls,maintenance and repair services10% of the Russianrefractories marketUrals RegionRussian plants of the ferrousand nonterrous sectors231,000 t571, 000 t416,000 t109,000 tConstruction, erection and repairs Magnitogorsk RUB 1.8 bn [USD 60 m)Installation and repair of electricalequipment, maintenance servicesMagnitogorsk RUB 1.8 bn [USD 60 m)Sale of ММК and MMK-Metiz products Russia, CIS1.4 m t of steel productsSale of MMK products Export 2.7 m t of steel productsSteel & Style , 10 MMK ANNUAL REPORT 31

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionIn 2010 steel consumption and production grew in most part of the world.According to World Steel Association (WSA), in 2010 world steel production equalledapproximately 1.4 bn tonnes, a 15% increase over 2009. Global steel consumptiongrew 13.1%, reaching 1.3 bn tonnes, after an 8.6% decline in 2009. GRAPH 1Global Steel Production and ConsumptionGRAPH 1млн16001400Темпы роста/падения потребления-8%+13%1200100080060040020002007 2008 2009 2010Steel consumptionSteel productionThe recovery in steel demandenabled steel producers toincrease production levelsand implement modernizationprojects.The leading regions in terms of the rate of growthin steel production were Europe (+25%) and NorthAmerica (+36%), primarily due to the low baseeffect as a result of a sharper decline in productionthe previous year. Asia produced 881.2 m tonnes ofsteel (up 12% on 2009), which represented 65.5% ofglobal production, compared to 63.5% in 2009. Steelproduction in CIS countries grew by 11%, to 108 mtonnes.Commercial Production at MMK201010.2 m tonnes20098.8 m tonnes+17%Russia increased crude steel production by 12% compared to 2009 (67 m tonnes), putting the country in 4 th placeafter China, Japan and the US. MMK produced 19% more crude steel than in 2009 (2010: 11.4 m tonnes),increasing production at a faster rate than the average for Russia.Domestic andCIS MarketsShipments to the domestic market (including the CIS)totalled 7.0 m tonnes, an increase of 43.6% comparedto 2009. The share of domestic shipments in MMKsales increased to 69%, up from 56% in 2009, reachingthe highest level in recent years. GRAPH 2Due to its geographical proximity and higher margins,the domestic market is strategically more importantto MMK. In 2010 average domestic steel prices inRussia wereUSD 190/tonne higher than internationalprices.2502001501005007816249% 50%MMK's Share of Domestic Sales asa Function of Price Premium22515054%15460%66%15056%19069%2004 2005 2006 2007 2008 2009 2010GRAPH 290%80%70%60%50%40%30%20%domestic price premiumshare of domestic salesSteel & Style , 10 MMK ANNUAL REPORT 33

Russian MarketMMK maintains its leadership on the Russian steel market.GRAPH 3In 2010 MMK's share of the Russian market increased to 17% from 16% in 2009, driven by sales from the 5,000mm Plate Mill. GRAPH 4Other6%ChMK4% 5% 7%NTMK3% NLMKZSMK Uralskaya StalIn 2010 steel consumption in Russia grew by 38%compared to 2009, reaching a total of 36.6 mtonnes. MMK increased its Russian sales by 47%,which is higher than the growth of consumption inRussia. In terms of physical volumes,MMK's domesticshipments were on a par with 2008 levels.MMK's largest customers on the Russian market arepipe makers, machine builders and the constructionsector (70% of the sales).GRAPH 46500600055005000450040003500300025002000Structure of the Russian Steel Market in 201029%35.4 26.6 36.600.96.2Imports14%GRAPH 5MMK's domestic sales, m t0.24.217%GRAPH 315%MMK5.42008 2009 2010MMK'sshare17% 16% 17%Internal consumption, m tonnesMMK sales without Plate MillPlate MillSeverstal7000600050004000300020001000MMK strives to become astrategic supplier of steel forRussia's major sectoral customers.Pipe Making IndustrySectoral Sales Structureof the Russian Market2008 2009 2010OtherRegional distributionConstruction11%26%11%15%37%+47%12%18%12%21%37%Machine-buildingPipe-makingIn 2010 Russia experienced a surge of demand forpipes, which totalled 9.6 m tonnes, 63% higher thanin 2009. The surge was driven by demand from the oiland gas sector, construction and machine building.GRAPH 5Russian pipe-makers increased their productionto 9.1 m tonnes (+33%) while reducing exports(-39%). Nevertheless, there was a shortfall, which wascompensated by increased pipe imports (+139%).GRAPH 6Prices on the Russian pipe market are practicallyalways higher than international market prices, whichis attractive for imports (specifically, from Ukraine).The Russian market has a partial protection fromimports in the form of quotas and high import duty ondeliveries above quotas.34

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionGRAPH 6,000 tonnes10 0005 000Growth rate in Russian pipe-making sectorProduction growth+33%2009 2010Pipe imports Russian made pipe sconsumptionPipe exportRussian pipe productionPipe consumption in RussiaThus, in 2010 the Russian pipe sector recovered topre-crisis levels of consumption, and continuedtogrow due to ongoing large-scale projects for gasdelivery to Europe. Growing oil prices are alsoincreasing demand and prices for Russian pipemakingindustry products.Machine BuildingConsumption growth+63%Russian railway car building demonstrated growthin 2010. Russian plants manufactured 47,900 railwaycars, which is twice the level of 2009. On average,rolling stock manufacturing capacity was utilized atthe level of 85%-95%.According to National Railways Company (RZhD), theaverage wear for Russian rolling stock is about 70%,which has created a significant shortage of railcarsand forced railways to use equipment beyond itsrecommended service life as the volume of railwaytransportation has steadily grown over the last fouryears.Currently the railway car building industry iswitnessing one of the highest growth rates in theRussian industrial sector.The steps taken by the government to stimulatedemand for cars in Russia have had the intendedeffect. The vigorous recovery of the market resultedin an overall growth in car sales for all types ofautomobiles, reaching 2.08 million new units sold,an increase of 33% vs. 2009. GRAPH 7Production of cars per 1,000 people80706050403020 ChinaRussia10India00 10 20 30 40 50GDP per capita, USD '000Construction SectorFor the first time in the last decade, in 2009the Russian construction sector experienced asignificant slowdown. A recovery began in 2010,primarily due to projects backed or financed by thegovernment. According to preliminary estimates,construction of housing will not exceed 2009levels, and will equal approximately 59 million sqm. The value of construction work performed inRussiain January-October 2010 totalled RUB 3.6trillion, 0.4% higher than in 2009. The housingsegment is seen as the most promising in the shortterm.OutlookProduction of carsper 1,000 people in 2010JapanGermanyGRAPH 7USAAccording to 2011 forecasts, the steel sector will beone of the fastest-growing Russian industries.The Russian automotive sector achieved 93.7%growth, producing 1.4 million vehicles in 2010,compared to 0.7 million in 2009.Steel & Style , 10 MMK ANNUAL REPORT 35

"After the construction of the Formula-1track is completed, our sportsmenand motor sport fans will have a newexcellent site for training and holdingvarious competitions".Vladimir Putin, October 14, 2011, duringthe meeting with Formula-1 promoterBernie EcclestoneФото -Константин БредниковGrowth will be driven by direct and indirectgovernment support, such as expansion of militaryorders as well as higher volumes of housing androad construction. The so-called “national projects,”in particular, construction of facilities for the 2014Winter Olympics in Sochi, the APEC summit inVladivostok (2012), the World University Games inKazan (2013) and the World Football Championship(2018) will contribute significantly to demand in thecoming years. All these construction projects willrequire large quantities of steel, which means Russiansteel mill capacities will be significantly utilized.The annual growth in steel consumptionin Russia in2011-2012 is expected to reach 5-10%. GRAPH 812 00010 0008 0006 0004 0002 0000Russia's Steel Consumption by Sector, ,000 tonnes+18% +6% +10%+10%GRAPH 8+14% +14%+9%+24%Pipe-making Cosntruction Machine-building Metalwareplants2009 г. 2010 г. 2011 г. (est.) 2012 г. (est.)ExportWhile production increased in 2010, MMK's exportshipments for the year decreased 17% comparedto 2009.GRAPH 9 GRAPH 9In 2010 steel shipments to Asia and the Far Eastdecreased by 56% compared to 2009 due toincreased steel productionin these countries.This shifted the geography of our exports towardsItaly, UK and Poland in Europe (+52% compared to2009), as well as Brazil and Columbia in Central andLatin America (+82% compared to 2009), due tothe more favourable pricing in these countries.Exports to the Middle East decreased slightly (-8%vs.2009), with the bulk of shipments going to Iran andTurkey.MMK's key export products are hot rolled (80%) andcold rolled (11%) flat products.4 5004 0003 5003 0001 5001 000500MMK's Exports By Region, ,000 tonnes35%11%43%-56%+52%-8%-17%19%20%48%2008 2009 2010Central and Latin AmericaAfricaNorth AmericaAsia and Far EastEUMiddle East36

Any colouror hue foryourproduct!Colour coated productsSteel & Style Ul.Kirova , 10 MMK 93, Magnitogorsk, ANNUAL REPORT 455000, 37 RussiaTel. (3519) 24 7929, fax: (3519) 24 9200www.mmk.ru

DRIVING FORCE BEHIND SUCCESSFinances38

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancialStatementsCorporateGovernanceEnvironmentProtectionIn 2010 the Group'skey IFRS financialperformanceindicators grew,including theoperating profitmargin, which rosefrom 6% in 2009 to8%in 2010. GRAPH 1GRAPH 110 0007 5005 0002 500Evolution of the MMK Group's Revenue and Profit in 2006-20101055040%27%8197771930%642418%508120%11%8%17656%10%1453 1174312 6102006 2007 2008 2009 2010 0%revenue operating income operating margin (in % of revenue)MMK Group's Financial ResultsIn 2010 revenue increased by USD 2.639bn (growth of 52% vs.2009) to USD 7.719 bn, including:- Steel segmentrevenue, which increased by USD 2.533 bn, and- Coal segmentrevenue (external sales), which increased by USD 105 m. TABLE 1EBITDA rose 23% to USD 1.606 bn, and MMK’s EBITDA margin was 21%.TABLE 296% growth inoperating incomeTABLE 1Financial Results by SegmentUSD m 2009 2010 ChangeTotal revenue 5081 7719 2638Steel segment's revenue 5029 7562 2533Coal segment's revenue 94 556 462sales to third parties 52 157 105sales between segments 42 399 357Steel segment's share 99% 98% -1%Coal segment's share (third party sales) 1% 2% 1%TABLE 2Consolidated financial results for2009 and 2010USD m 2009 2010 ChangeRevenue 5 081 7 719 2 638 52%Cost of goods sold 3 940 5 952 2 012 51%Gross profit 1 141 1 767 626 55%Gross profit margin 22% 23% 1%Commercial expenses 429 565 136 32%Administrative expenses 349 495 146 42%Other operating expenses/income 51 97 46 90%as a% of revenue 16% 15% -1%Operating income 312 610 298 96%Operating profit margin 6% 8% 2%EBITDA 1 309 1 606 297 23%EBITDA margin 26% 21% -5%Earnings before tax and minority share 99% 83% -16%as a% of revenue 1% 17% 16%Profit for the period (before minority share) 219 232 13 6%Net profit margin(befor minority share) 4% 3% -1%Steel & Style , 10 MMK ANNUAL REPORT 39

MMK’s gross profit increased 55% compared to2009 (plusUSD 626 m), and gross profit margin rosefrom 22% to 23%, as the revenue grew faster thancost of sales.Commercial, administrative and other expensesincreased by USD 328 m, while decreasing as apercentage of revenue from 16% in 2009 to 15% in2010.Operating income stood at USD 610 m,significantly higher than in 2009 (up 96%), with profitfor the period rising 13% to USD 232 m. Net profitgrowth during the period was slower than operatingincome growth for several reasons:• financing costs grew by USD 44 m;• an FX loss of USD 24 m (compared to FX income ofUSD 9 m in 2009);• The one-off effect in 2009 of the positiverevaluation (USD 175 m) of the assets of OJSCBelon's (an MMK subsidiary).The net profit margin stood at 3% in 2010 (1percentage point down on 2009).TABLE 3Steel SegmentUSD m 2009 2010Change+/- %Revenue fromsales5 029 7562 2533 50%Cost of goodssold3 909 6019 2110 54%EBITDA 1 301 1 336 35 3%EBITDA margin 26% 18% -8%Operatingincome337 458 121 36%Operating margin 7% 6% -1%In 2010 steel segment revenue grew by USD 2.533 bn(50% higher than 2009) to USD 7.562 bn. TABLE 3This growth was driven by:• Sales of OJSC MMK steel products, including:• A 17%, or USD 883 m, increase in steel sales;• Changes in the structure of sales: USD 167m (steel plate increased from 7% to 13% as apercent of sales, and the share of downstreamproducts rose by 5%);• growth of average sale price by 20%, or USD1.186bn;• strengthening of therouble against the USdollar: USD 197 m;• Sales of other products:USD 101 m.Production costs grew by54%, or USD 2.210 bn, over2009, reaching USD 6.019 bn. The main COGS driverswere:• Higher production levels: USD 686 m;• Increased prices for key raw materials: USD1.135bn;• Higher prices for goods provided by Russia’snatural monopolies: USD 75 m;• Strengthening of the rouble against the US dollar:USD 153 m;• increase in other costs and expenses: USD 61 m.Steel segment 2010 EBITDA increased by USD35 m (3% higher than 2009), reachingUSD 1.336 bn.GRAPH 2EBITDAmargin at 21%GRAPH 2Factors Impacting Steel Segment EBITDA3500300025001 186-1 210200015001 301220-1601 33610005000EBITDA2009productionlevelproductpriceraw materialspricesotherfactorsEBITDA201040

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancialStatementsCorporateGovernanceEnvironmentProtectionTABLE 4Coal SegmentUSD m 2009 2010Change+/-Revenue fromsales94 556 462Cost of goodssold72 332 260EBITDA 8 270 262EBITDA margin 9% 49% 40%Operating -25 152 177incomeOperatingmargin-27% 27% 54%The coal segment's revenue in 2010 was USD 556 m,with EBITDA at USD 270m and EBITDA margin at 49%for the reported period. Operating profit margin for2010 was 27%. TABLE 4MMK began consolidating Belon from Q4 2009.The coal segment'srevenue (Belon) reachedUSD 556 mAnalysis of MMK Group's Financial PositionTABLE 5млн. USDAggregated Balance Sheet for 2009 – 201031.12.2009 31.12.2010 Changevalue % value % +/- %AssetsCurrent assets 2 430 16% 2 985 18% 555 23%cash and short-term financialinvestments386 3% 708 4% 322 83%receivables 839 6% 791 5% -48 -6%inventories 958 6% 1 236 7% 278 29%Non-current assets 12 419 84% 13 753 82% 1 334 11%long-term financial investments 627 4% 1 051 6% 424 68%property, plant and equipment 11 292 76% 12 226 73% 934 8%Total assets 14 849 100% 16 738 100% 1 889 13%LiabilitiesShort-term liabilities 1 777 12% 2 084 12% 307 17%payables 928 6% 971 6% 43 5%short-term loans and borrowings 808 5% 1 074 6% 266 33%Long-term liabilities 2 747 18% 3 968 24% 1 221 44%long-term loans and borrowings 1 266 9% 2 454 15% 1 188 94%Equity 10 325 70% 10 686 64% 361 3%Total liabilities 14 849 100% 16 738 100% 1 889 13%The MMK Group has a sustainable financial position evidenced by relevant financial indicators.Steel & Style , 10 MMK ANNUAL REPORT 41

TABLE 6MMK Group's Key Financial Indicators for 2009-20102009 год 2010 годChange+/-Financial stability indicatorsEquity to assets ratio 70% 64% -6%Short-term loans and borrowings to assets ratio 5% 6% 1%Long-term loans and borrowings to assets ratio 9% 15% 6%Liquidity, unit fractionsCurrent liquidity ratio 1,4 1,4 0,0Absolute liquidity ratio 0,2 0,3 0,1Quick liquidity ratio 0,8 0,8 0,0Turnover, daysInventories turnover 89 76 -13Receivables turnover 60 37 -23Payables turnover 86 60 -26Sales margins, %Sales margin 6% 8% 2%Net income margin 4% 3% -1%EBITDA margin 26% 21% -5%AssetsAs o f31 December 2010, MMK Group's total assetswere USD 16.7 bn, an increase of 13% on the yearbeginning. TABLE 5Fixed assets increased by 8% (USD 934 m higherthan in 2009), a result of the Group's modernizationefforts.The value of long-term financial investments grew by68%, mainly due to a positive revaluation of shares ofFortescue(up USD 424 m).Current assets grew 23% to USD 2.985 bn.Inventories increased by USD 278 m (29% higherthan in2009) to USD 1.236 m, includingthe followingchanges:• growth of USD 556 m due to a 51% increase incosts;• decrease of USD 278 m due to a 13 days' decreasein turnover period.Receivables decreased USD 48 m, (6% down on2009), to USD 791m, includingthe following changes:• growth of USD 48 m due to a 52% increase inrevenue;• decrease of USD 96 m due a decrease in turnoverperiod of 23 days.The turnover periods for inventories and receivablesdeclined as a result of measures to improvemanagement of working capital .MMK’s current liquidity ratio did not change in 2010,remaining at 1.4 at year end. The company seeksto maintain this ratio between 1 to 2. The absoluteliquidity ratio increased from 0.2 to 0.3; MMK seeks tomaintain this ratio at 0.1 or higher. TABLE 642

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancialStatementsCorporateGovernanceEnvironmentProtectionLiabilitiesThe Company's equity grew by 3% y-o-y for 2010, dueto an increase of USD 128 m in retained profit and thepositive revaluation of Fortescue shares.Payables increased by USD 43 m (a 5% increase from2009) to USD 971 m, with the following changes:• increase of USD 86 m due to a 51% increase in costs;• reduction of USD 43 m due to a decrease in turnoverperiod of 26 days.The share of equity in the structure of financingsources is consistently high, and amounted to 64% at31 December 2010.Debt ManagementWhile gross debt increased in 2010 as a result oflarge-scale investment projects, the Company’s debtload remains at a relatively low level. The share ofborrowings on the balance sheet grew from 14.2% to21.4%, with the debt to equity ratio standing at 1:3.GRAPH 310000MMK Group Gross Debt and Equity11 7869 852GRAPH 310 325 10 68640%30%The EBITDA to interest expense ratio rose to 19.1 in2010. The EBITDA to debt servicing costs ratio rose to4.3in 2010. GRAPH 5GRAPH 530,025,0Debt Service Costs and Interest Expenses27,7750050004 02725001 0061 4541 7092 1193 54820%10%2006 2007 2008 2009 2010 0%Total debtEquityDebt/Equity20,015,010,05,001,4200721,21,9200812,11,5200919,14,32010Gross debt, including financial leasing, amountedto USD 3.5 bn as of 31 December2010. The debt toEBITDA ratio stood at 2.21, comparedto 1.65 in 2009. GRAPH 4GRAPH 425002000150010005002 005MMK EBITDAand Debt/EBITDA2 4072 2041 3091 60620%10%EBITDA/Debt serviceEBITDA/Interest ExpenseMMK Group Debt Policy Highlights:• Achieve maximum reduction in borrowing needsby financing day-to-day operations from theCompany's own cash flow to the greatest degreepossible;• Secure long-term financing for contracts related tothe modernization program in order to ensure theCompany’s financial sustainability; GRAPH 6• Diversification of funding between three keycurrencies (US dollars, Euro and Roubles) in order tominimize currency risks; GRAPH 7• Strict adherence to debt covenants, includingmonitoring and compliance with covenants relatingto MMK’s operations.02006200720082009 2010EBITDADebt/EBITDASteel & Style , 10 MMK ANNUAL REPORT 43

MMK Group DebtStructureGRAPH 6By Loan TermGRAPH 7By Currency3500350030002 1122 20930002500250020002000150010001 2401 6131500100050050002007200820092010020062007200820092010short-term debt, USD mlong-term debtfixed assets acquisitionUSDEURRUBChanges in the debt policy led to changes in the structure of the Company’s debt, which is reflected in theincreased share of long-term debt and loans denominated in Euros.MMK's responsible debt policy has helped the Company to achieve high credit ratings from various creditrating agencies. In July 2010 Moody's changed its outlook for MMK from Ba3/Stable to Ba3/Positive, and inSeptember Fitch Ratings raised its outlook from BB/Stable to BB/Positive.Evolution of MMK RatingsGRAPH 8EVENTS AFTER THE ACCOUNTING DATEП2009 2010 2011СНПСBa2Ba3НПСНBBApr.09May.09June.09July.09Aug.09Sept.09Oct.09Nov.09Dec.09Jan.10Feb.10Mar.10Apr.10May.10June.10July.10Aug.10Sept.10Oct.10Nov.10Dec.10Jan.11Feb.11Mar.11Apr.11Moody , s InvestorsServiceFitchRatings44

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancialStatementsCorporateGovernanceEnvironmentProtectionCash Flow Structure in 2010Cash Flow AnalysisGRAPH 91 163-2 0051 17316519 515balance atperiod begincurrentoperationsfinancialoperationsinvestmentoperationsexchangedifferencebalanceat period endCash and cash equivalents at the beginning of theperiod equalled USD 165 m. GRAPH 9Cash generated from operating activities in 2010was USD 1.173 bn, USD 308 m higher than in 2009.Net income for the period was USD 232 m (USD 13 mhigher than 2009).Cash used in investment activities was USD 2.005 bnin 2010.Investments in fixed assets increased in 2010 toUSD 2.209 bn (growth of 37% over 2009). TABLE 7When compared to depreciation and amortisation ofUSD 826 m for 2010, the ratio of capital expenditureto depreciation illustrates MMK's ambitiousmodernization program aimed at revamping theCompany's production assets and introducing newtechnologies.TABLE 7Investments targets Amount (USD m)OJSC MMK 1276MMK's Turkey Project 658OJSC Belon 100Cash inflows from investment activities(USD 225 mfrom disposals) primarily came in the form of incomefrom the sale of Belon assets(Listviazhnaya Mine and CoalCleaning Plant), with thetotal value of the transactionat USD 280 m (the remainingamount due for payment in2011).Record capexof USD 2.209 bnIn order to support the Company's ambitiousmodernization program, MMK's management decidedto secure additional financing. The cashinflow fromfinancing activities totalled USD 1.163 bn, as a resultof:• rouble bond issuance totalling USD 428 m (USD273 m issued in April at 7.65% p.a. and USD 161 missued in September at 6.47% p.a.);• loans amounting to USD 3.011bn;• repayment of debt in the amount of USD 2.024 bn;• cash inflow from other operations amounting toUSD 252 m.In 2010 the net increase in cash and cash equivalentswas USD 331 m, with total cash as of31 December,2010, totalling USD 515 m.Project in St.Petersburg 58Other Group companies 117Итого 2209EVENTS AFTER THE ACCOUNTING DATEMMK Group's Financial Results for 1Q 201USD m 1Q 2010 1Q 2011change+/- %Sales revenue 1652 2 216 564 25%EBITDA 374 403 29 7%in % of revenue 23% 18% -4 п.п.Operating income 135 155 20 13%in % of revenue 8% 7% -1 п.п.Steel & Style , 10 MMK ANNUAL REPORT 45

Raw Materials and EnergySuppliesMMK’s production and financial results are directly linked to the supply of raw materials and energy resources.Raw materials account for 62% of the production cost of commercial goods.Auxiliary materials 7,9% Natural gas 5,7%Polymers 0,8%Electric power 2,2%Zinc 1,6%Tin 0,4%Wages 6,2%Ferroalloys 7,1%Depreciation 5,9%Scrap 11,0%Other 10,2%Coal 18,2%Sinter 12,6%Pellets 9,2%Sintering raw materials are iron ore concentrates forproduction of sinter. Pellets are the product of ironore grounding and pelletizing. Sinter and pellets areiron-containing raw materials for processing in a blastfurnace. In 2010 the key supplier of both types of rawmaterials (70% sinter materials and 100% pellets) wasthe company ENRC, with which a contract was signedfor delivery of iron ore materials from Sokolovsko-Sarbaiskiy Ore Mining and Processing Plant in the cityof Rudnyi, Republic of Kazakhstan, for a period up to2017.The share of MMK’s captive Fe-containing rawmaterials in 2010 was up to 30%. Ore mining atcaptive deposits in the vicinity of Magnitogorsk andrecycling of waste materials provided MMK with 3.3m tonnes of Fe-containing raw materials in 2010.The MMK subsidiary Bakal Mine Administration alsosupplied 1.4 m tonnes of iron ore concentrate.Coking coal concentrate is used for production of coke– the principal fuel used in the blast furnace process.The key supplier of coking coals is Belon, a member ofthe MMK Group. In 2010 supplies from Belon covered35% of MMK’s coking coal requirements. Othercoking coal suppliers include Raspadskaya (a 5-yearcontract), Siberian Business Union Holding Company,Sibuglemet (a 5-year contract), Vorkutaugol andAnzherskaya Coal Dressing Plant.The third most important raw material is scrap metal.The sole supplier to MMK is ZAO Profit, a Groupsubsidiary. Profit has been engaged in the collectionand preparation of scrap for 14 years. It is one of thebiggest companies in its sector, with an extensivenetwork of scrap processing plants throughout Russia.Profit supplied 2.2 m tonnes (61% of total OJSC MMKconsumption) in 2010. MMK’s own scrap covers theremaining 39% of scrap consumed by the Company.Ferroalloys – alloy combinations of Fe withother elements (Cr, Si, Mn, Ti, etc.) - are used fordeoxidation and alloying of steel. In 2010 MMKconsumed 144 thousand tonnes of ferroalloys. TheCompaby’s largest supplier is Transnational CompanyKazchrome (42% of ferroalloys in 2010).46

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionZinc coating enhances steel's resistance to corrosion. The Chelyabinsk Zinc Plant is the key supplier of zinc toMMK. In 2010 the consumption of zinc amounted to 37 thousand tonnes.Aluminium is used at MMK as an alloying element for production of certain steel grades and also as an additivefor hot-dip zinc baths. Aluminium consumption in 2010 amounted to 26 thousand tonnes, of which 50% wassupplied by UCRusalTrading House.Tin is used for tin plating. In 2010 MMK consumed 1,309 tonnesof tin. MMK’skey supplier of tin is NovosibirskIntegrated Tin Works (47% in 2010).MMK’s long-term goal is to achieve self-sufficiency in electric power. The Company currently has 657 MW ofpower generating capacity. The use of captive electric power, which has a production cost 2.1 times lower thanmarket prices, MMK was able to save RUB 6.1 billion in 2010. MMK’s self-sufficiency in electric power reached75% in 2010.8,0Power Supply to MMKbn kWh2 500Price Difference between Purchasedand Captive Electric PowerRUB/1,000 kWh7,57,020006,56,01 5005,55,01 0004,54,05003,53,02006 2007 2008 2009 201002006 2007 2008 2009 2010Captive powercost of captive powerTotal power consumptionprice of purchased powerSteel & Style , 10 MMK ANNUAL REPORT 47

News"Good luckand bon voyage!"It was no accident that Magnitogorskbecame the venue of a session of thePresidential Commission for Modernizationand Technological Development whichtook place on 30 March 2011, underthe chairmanship of President DmitryMedvedev.The Magnitogorsk Iron and Steel Works is a vividexample of how Russia is implementing the strategyof modernization. The country's largest single-sitesteel making enterprise located on the geographicalboundary between Europe and Asia, MMK has formany years been upgrading its production lines andbuilding highly productive facilities. Thanks to thislarge-scale modernization effort, the Company hasbeen able to minimize the negative impact of therecent economic crisis and preserve its position of thecountry's leading steel producer.Before the start of the Commission's sessionMr.Medvedev was able to see for himself the scope ofMMK's technological overhaul. The President visitedone of MMK's key production divisions, the BOF Shop,and then was shown around MMK's pride – the 5,000mm Mill which rolls heavy-gauge steel plate formaking large-diameter pipes.48

The Head of the State also highly praised MMK's efforts to complete another state-of-the-art facility, the 2,000 cold rollingmill which will produce cold rolled sheet for the automotive sector. The President put his signature on the plan of the mill andwished "good luck and bon voyage" to the future facility.http://twitter.com/#!/blog_medvedevhttp://twitpic.com/4hbjon@MedvedevRussiaДмитрий Медведев April 6, 2011Click here to login or create an account >Tweet 270Sign in with TwitterThe session of the Commission for Modernization andTechnological Development, apart from the RussianPresident and Governor of the Chelyabinsk Region MikhailYurevich, was attended by First Deputy Head of thePresident's Administration Vladislav Surkov, Aide to thePresident Arkady Dvorkovich, Deputy Chairman of theRussian Government Viacheslav Volodin, RF Minister ofEconomic Development Elvira Nabiullina, RF Ministerof Education and Science Andrei Fursenko, RF Ministerof Industry and Trade Victor Khristenko, the President'sPlenipotentiary Representative in the Urals FederalDistrict Nikolai Vinnichenko, Chairman of the MMK Boardof Directors Victor Rashnikov, Mayor of Moscow SergeiSobyanin, General Director of the Rosnanotekh StateCorporation Anatoly Chubais, General Director of theRosatom State Corporation Sergei Kirienko, Presidentof the ONEXIM Group Mikhail Prokhorov, President andBoard Chairman of Sberbank German Gref, Chairmanof the State Duma Committee for Civil, Criminal andProcedural Legislation Pavel Krasheninnikov, OJSC MMK'sManaging Director Yuri Bodiayev, and Rector of theMagnitogorsk Technological University Valery Kolokoltsev.Last week visited Magnitka.It's a very big and complex operation.One of the photos.Steel & Style , 10 MMK ANNUAL REPORT 49

Corporate Governance ObjectivesOJSC MMK conducts its business in line with Russianand international corporate governance standards.This fact, along with the Company’s strong financialperformance, makes it a reliable and trustworthypartner for Russian and foreign investors.MMK’s corporate governance guidelines andprocedures are set out in the Company’s CorporateGovernance Code (approved by the OJSC MMK Boardof Directors on September 21, 2001).http://www.mmk.ru/corporate_governance/internal_documents/code_of_corporate_governance/In order to make sure that the Company's governingbodies and officers comply with the laws and bylawsguaranteeing exercise and protection of the Companyshareholders' rights and interests, a post of theCorporate Secretary was introduced in 2003.The guidelines are as follows:• protection of shareholder rights and interests;• equal treatment of all shareholders;• mutual trust and respect for all interested parties;• transparency and timelydisclosure of informationon the Company’s strategy and activities;• bona fide management practices aimed at the longtermprosperity of the Company;• minimization of the Company's environmentalimpact;• maintaining a consistent corporate policy withrespect to all subsidiary and associated companiesor other legal entities in which MMK is aparticipant, founder or member.The Company’s financial statements are prepared inaccordance with International Financial ReportingStandards (IFRS) and Russian Accounting Standards(RAS).MMK discloses information in Annual Reports,Quarterly Reports, lists of affiliated parties,statements on material developments and anyinformation which may influence the Company’s shareprice.Information is disclosed in accordance with theCompany's Regulations on Information Policyavailable at:http://www.mmk.ru/corporate_governance/internal_documents/group_documents/.The Company is also implementing a programmeto enhance its corporate governance, which wasapproved by the Board on September 24, 2010.50

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionMMK Corporate Governance StructureThe General Shareholders’ Meeting is the supremegoverning body. The Board of Directors overseesthe Company’s general management and alsosets the strategy for future development. TheManagement Board and LLC MMK ManagingCompany (the executive bodies) are in charge of theCompany’s day-to-day operations. In accordancewith Russian legislation and international standards,an independent Auditor and the Audit Committeesupervise the Company’s financial and economicactivities.MMK Corporate Governance StructureCorporate bylaws regulating the operation of thegoverning and supervision bodies can be found on theCompany’s website at:http://www.mmk.ru/corporate_governance/internal_documents/regulations_approved/and http://www.mmk.ru/corporate_governance/internal_documents/group_documents/.General Shareholders' MeetingAuditCommitteeBoD Committeefor StrategicPlanning andCorporateGovernanceBoD Committee forNominations andRemunerationBoard of DirectorsChairman of BoDSecretary of BoDBoD membersCorporate SecretaryAuditorBoD Committeefor AuditBoD Committee forInvestment Policyand Liaison withGovernment BodiesManagement Board (MB)MB ChairmanMB membersMB SecretaryIndividual Executive Body –LLC MMK Managing CompanySteel & Style , 10 MMK ANNUAL REPORT 51

EVENTS AFTER THE ACCOUNTING DATEMMK has reached a new stage in its development as a large diversified company. In order to adapt the MMKGroup’s management system to the changed conditions, the Company’s annual general meeting on 20 May 2011approved a new revision of the Charter. The Board of Directors’ responsibilities have been expanded to include,in addition to determining the Company’s priorities and strategy, approval of all transactions with a value inexcess of 0.3% of the Company’s assets’ book value as of the latest accounting date. The management structurein accordance with the newly revised Charter is shown below:MMK Corporate Governance Structure ( 20.05.2011)AuditorGeneral Shareholders' MeetingAuditCommitteeBoard of DirectorsCorporateSecretaryChairman of BoDSecretary of BoDBoD members(5 out of 10 independent)BoD Committee forAudit(independentdirectors)BoD Committee forNominations andRemuneration(independentdirectors)BoD Committeefor StrategicPlanning andCorporateGovernanceControlAdministrationIndividual Executive Body –General DirectorShareholders’ StructureThe authorized capital of MMK totals RUB 11,174,330,000 and is comprised of 11,174,330,000 ordinaryregistered shares with a par value of 1 rouble each. All shares are placed securities. The Company is entitled toplace, in addition to those already placed, ordinary shares amounting to 26,299,840,577 shares, with a par valueof 1 rouble each (declared shares). Declared ordinary shares grant the same rights as placed ordinary shares.Equity capital structure as of 04.04.2011shareholder , Share, % of equity capitals name02.04.2010 04.04.2011Mintha Holding Limited* 45 45Fulnek Enterprises Limited* 41 41The Bank of New York International Nominees ** 9,7 9,7Other shareholders 4,3 4,3Total shares 100 100* The company's beneficiary isV.F. Rashnikov, Chairman of theOJSC MMK Board of Directors.** Beneficiaries are owners ofglobal depositary receipts listedon the London Stock Exchange52

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionOJSC MMK’s management has no information aboutany shareholders with over 5% of shares except asdisclosed above.The Company calculates and pays dividends inaccordance with Russian laws and the Regulations onDividend Policy approved by the Board of Directors on14 February 2008, which can be found at:http://www.mmk.ru/corporate_governance/internal_documents/group_documents/.MMK's dividend policy is based on the balanceof shareholders' interests and the Company’srequirements for growth and technology upgrades.The Annual Report contains information aboutaccrued dividends in the section “Information forShareholders and Investors”.General Shareholders’ MeetingHolders of the Company’s ordinary shares, inaccordance with the Federal Law “On Joint StockCompanies” and OJSC MMK’s Charter, have the rightto participate in General Shareholders’ Meetings withthe right to vote on all matters raised at the meeting,to receive dividends or a part of the Company’sproperty at its liquidation, and other rights providedfor by the above mentioned law.Shareholders who in their totality own not less than2% of the Company’s ordinary registered shares areentitled to propose issues for the agenda of AnnualGeneral Shareholders’ Meetings and to nominatecandidates to the Board of Directors whose numbershall not exceed the number of members of that body.Such proposals must be submitted to the Companynot later than 40 days following the end of thefinancial year.Interfax and AK&M, authorized agencies forinformation disclosure in the stock market,named MMK the winner of the annualcompetition “For Active Corporate Policy inthe Area of Information Disclosure”.According to the information transparencyresearch conducted by Standard&Poor’s, in2010 the Company rose from the 3rd to 2ndposition among Russia’s 90 largest companies.Shareholders owning not less than 10% of theCompany’s ordinary registered shares are entitled torequest the Company’s Board of Directors to hold anExtraordinary General Shareholders’ Meeting.Shareholders exercise their rights related to theCompany's management by voting at GeneralShareholders’ Meetings.In 2010, the Company held one Annual GeneralShareholders’ Meeting.The following issues were on the agenda of theGeneral Shareholders’ Meeting held on 21 May 2010:• approval of the annual report, annual financialstatements, including profit and loss accountsof the Company, as well as profit distribution,including dividend payments, and lossesdistribution according to the results of 2009;• election of members of the Board of Directors;• election of members of the Audit Committee;• approval of the Auditor;• determination of the size of remuneration andcompensation to be paid to the members of theOJSC MMK Board of Directors;• determination of the size of remuneration andcompensation to be paid to the members of theAudit Committee;• approval of OJSC MMK’s revised internal documentsregulating the operation of OJSC MMK’s bodies:“Regulations on OJSC MMK’s General Shareholders’Meeting”, “Regulations on OJSC MMK’s Board ofDirectors”;• approval of interested party transactions.Reports on the results of voting at the Shareholders’Meeting and relevant materials can be found at:http://www.mmk.ru/corporate_governance/the_structure_of_government/shareholders_meeting/1302/.EVENTS AFTER THE ACCOUNTING DATEAn extraordinary general shareholders' meeting on 20 January 2011 approved a number of interested partytransactions.Steel & Style , 10 MMK ANNUAL REPORT 53

GENERALISTSBoard of DirectorsPositions on the Board of Directors are filled by candidates with broad knowledge required to take strategicdecisions, including decisions on environmental and social risks and opportunities.Information on the Board of DirectorsThe OJSC MMK’s Board of Directors consists of 10members, five of whom are independent.Victor F. Rashnikov is Chairman of the OJSC MMK’sBoard of Directors.No changes in the composition of the Board ofDirectors have been made during the accountingperiod (21.05.2010 – 01.04.2011).The Board of Directors has the overall responsibilityfor the management of the Company, with theexception of matters which are addressed at theGeneral Shareholders’ Meeting. The Board alsooversees the implementation of resolutions adoptedby the General Shareholders' Meeting or the Board ofDirectors.The responsibility of the Board of Directors isprovided for by the Company’s Charter which can befound on the MMK website at:http://www.mmk.ru/corporate_governance/internal_documents/index.php.Election of members of the Board of Directors:Members of the Company’s Board of Directors areelected by the General Shareholders’ Meeting bycumulative voting for a term until the followingAnnual General Shareholders' Meeting. The size of theBoard is determined by the Company’s Charter, andis currently 10 persons. Members of the Company’scollective executive body must not make up morethan one fourth of the Company’s Board of Directors.In line with the best Russian and internationalcorporate governance practices, independentdirectors have been elected to the Board of Directorsto enhance supervision, transparency and efficiencyof the Company's governing bodies' operation.Independent directors include Peter Charow, Sir DavidLogan, Andrey M. Gorodisskiy, Kirill Y. Liovin andZumrud Kh. Rustamova.Members of the Company’s Board of Directors aredeemed to be independent directors if they meet thefollowing requirements:• members who at the moment of election or for aterm of one year prior to it are not or have not beenofficers or employees of the Company;• members who are not officers of another companyin which any of the Company's officers is a memberof the committee of such company's board ofdirectors for nominations and remunerations;• members who are not spouses, parents, children,brothers or sisters of the Company's officers;• members who are not affiliated persons of theCompany other than members of the Company'sBoard of Directors;• members who are not parties to commitments withthe Company under which they can acquire propertyor receive monetary funds the value of whichamounts to 10 or more per cent of the aggregateannual income of such persons, with the exceptionof remuneration for participation in the activities ofthe Board of Directors.• members who are not representatives of the State,i.e. persons who represent the Russian Federationor its administrative subdivisions.To be nominated for election to the Board ofDirectors, a candidate must have knowledge sufficientfor making strategic decisions, including on issuesrelated to environmental and social risks andresponsibilities.Decision makingIn taking decisions at a meeting of the Company'sBoard of Directors, each Board member shall haveone vote. Voting at meetings of the Board of Directorswith respect to issues on the agenda for the meetingshall be open and by name.It is prohibited to transfer votes from members ofthe Board of Directors to other persons, includingother Board members. Decisions of the Board ofDirectors shall be taken by majority of the Boardmembers taking part in the meeting unless otherwiseprovided for by the Law "On Joint Stock Companies",the Company’s Charter and relevant Regulations. Indetermining the quorum and the results of votingon agenda items, the Board shall take into accountthe opinion of any Board member absent from themeeting, submitted in writing.Such a Board member shall submit his/her writtenopinion to the Chairman of the Board prior to theBoard meeting. The Board Chairman shall announcethe written opinion of such a Board member prior tovoting on each issue of the meeting's agenda. In casethe Board member, who submitted his/her opinionprior to the meeting, is present at the meeting, his/her written opinion shall be disregarded.EVENTS AFTER THE ACCOUNTING DATEIn keeping with the highest international standards, the Company is perfecting its corporate governance: MMK’sshareholders at their meeting on 20 May 2011 approved a new Board of Directors meeting the independencerequirements set out in the UK Corporate Governance Code. The new Board includes five directors meeting theindependence criteria, among them, the newly elected directors Bernard Sucher and David Herman.54

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionComposition of the Board of Directors Elected at the Annual General Shareholders’ Meeting Held on 21 May 2010(positions as of 1 January 2011)Victor F. Rashnikov(born in 1948) – Chairman of the OJSC MMK Board of Directors, President of LLC MMKManaging Company; Russian citizen; member of the Board of Directors since 2 February1993; has represented the interests of an OJSC MMK shareholder, Mintha HoldingLimited; since 1999, President of the Metallurg Ice Hockey Club; since 2001, memberof the Management Board of the Autonomous Non-Profit Organisation Medical CareUnit of the City Administration of Magnitogorsk and OJSC MMK; since 2005, memberof the Board of Directors of the World Steel Association (formerly International Ironand Steel Institute);since 2008, member of the Management Board of Directors of theLLC Continental Hockey League; since 2010, President of the Non-profit PartnershipKonsortsium Russkaya Stal; and member of the Chelyabinsk Region’s LegislativeAssembly.Graduate of the Magnitogorsk Institute of Mining and Metallurgy (1974), metallurgicalengineer; graduate of the Magnitogorsk Academy of Mining and Metallurgy (1993),manager; D.Sc (Technology); Professor.Andrey M. Gorodisskiyindependent director(born in 1956) – Managing Partner of Andrei Gorodisskiy and Partners Law Firm;Russian citizen; member of the Board of Directors since 22 April 2005; the candidatewas proposed by the OJSC MMK Board of Directors; since 2000, General Director of LLCBusiness and Law; since 2009, member of the Board of Directors of OJSC Marine ArcticEngineering-Geological Expeditions.Graduate of Moscow State Institute of International Relations in 1978, PhD ininternational law.Kirill Y. Liovinindependent director(born in 1968), Russian citizen; member of the Board of Directors since 21 April 2005;since 2009, member of the Supervisory Board of OJSC Belpromstroibank; since 2010,member of the OJSC Aeroflot Board of Directors.Graduate of the Moscow Aviation Institute in 1990.Steel & Style , 10 MMK ANNUAL REPORT 55

Zumrud Kh. Rustamovaindependent director(born in 1970), Deputy CEO of OJSC Polymetall UK; Russian citizen;member of the Board of Directors since 21 April 2006, proposed bythe OJSC MMK Board of Directors; since 2008, member of the Boardof Directors of OJSC Sheremetyevo International Airport; since 2009,member of the Board of Directors of OJSC KHANTY-MANSIYSK BANK, andmember of the Board of Directors of OJSC Polyus-Zoloto.Graduate of the Moscow Institute of Economics and Statistics in 1992..Rafkat S. Takhautdinov(born in 1958), First Vice-President of LLC MMK Managing Company forStrategic Development and Steel Production; Russian citizen; memberof the Board of Directors since 21 May 1999; represents a shareholder ofOJSC MMK, Mintha Holding Limited.Graduate of the Magnitogorsk Institute of Mining and Metallurgy in 1986with a degree in metallurgical engineering, D.Sc (Technology).Vladimir I. Shmakov(born in 1960), Vice President of LLC MMK Managing Company for Sales;Russian citizen; represents a shareholder of OJSC MMK, Mintha HoldingLimited; since 2004, Director of ММК Finance S.A.; since 2010, member ofthe Management Board of the Metallurg Municipal Charitable Foundation;since 2008, member of the MMK Board of Directors; deputy of theChelyabinsk Region’s Legislative Assembly.Graduate of the Magnitogorsk Institute of Mining and Metallurgy in 1983with a degree in metallurgical engineering; PhD (Economics) from theRussian Presidential Academy of National Economy in 1998.56

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionOleg V. Fedonin(born in 1967), Vice President of LLC MMK Managing Company for Financeand Economics; Russian citizen; executive director of ММК Finance S.A.;member of the Board of Directors of MMK International S.A.; since 2009,member of the MMK Management Board; since 2010, member of theMMK Board of Directors, deputy of the Chelyabinsk Region’s LegislativeAssembly.Graduate of the Magnitogorsk Institute of Mining and Metallurgy in1983with a degree inmetallurgical engineering; Urals Academy of PublicAdministration (1996), PhD (Economics) (2002).Peter Charowindependent director(born in 1954), BP Plc’s Regional Director for Russia, CIS and Turkey, OJSCBritish Petroleum; U.S. citizen; member of the Board of Directors since 30March 2007, proposed by the OJSC MMK Board of Directors.Bachelor of Arts in Political Science from Swarthmore College,Pennsylvania, USA;Master of Arts in Political Science, Columbia University,New York, USA; Executive MBA in 2006 from Tuck School of Business,Dartmouth College, New Hampshire, USA.Sir David Loganindependent director(born in 1943), 1997-2001 British Ambassador to Turkey; 2002-06 Directorof Centre for Studies in Security and Diplomacy, University of Birmingham;2002-07, Chairman of GAP Activity Projects; 2002-07 Member of theInternational Advisory Board, Thames Water; 2002-2011 member of theSupervisory Board of Efes Breweries International; 2002-2011, nonexecutivedirector of European Nickel plc; since 2005, Chairman of theBritish Institute of Archaeology at Ankara; citizen of the United Kingdom;member of the Board of Directors since 30 March 2007, proposed by theOJSC MMK Board of Directors.Master of Arts (Hons) from Oxford University, UK in 1965.Steel & Style , 10 MMK ANNUAL REPORT 57

Sergey V. Krivoshchekov(born in 1961), Director for Property Management Administration; Russian citizen;member of the Board of Directors since 19 May,2000; represents a shareholder ofOJSC MMK, Mintha Holding Limited.Graduate of the Magnitogorsk Institute of Mining and Metallurgy in 1983 with adegree in metallurgical engineering; 2009, D.Sc (Economics).EVENTS AFTER THE ACCOUNTING DATEIn line with the best international practice and standards in corporate governance to which the Company is committed, MMK'sshareholders, at their annual meeting on 20 May 2011, elected a new Board of Directors where 5 members satisfy the independencecriteria, including the newly elected directors, David Herman and Bernard Sucher.David J.HermanBorn in 1946.Independent member of OJSC MMK's Board of Directors, Chairman of the Board of Directors, OJSCSOLLERS.Education:JD Harvard Law SchoolMA Harvard Graduate School (Ford Foundation, Fellow in Soviet and East European Studies)BA New York University (magna cum laude)Junior Year at London School of EconomicsEmployment History:2009 – Present - STRATEGIC INITIATIVES, Member of the Board2009 – Present - NEW HEALTH SCIENCES (US), Member of the Board to a venture capital healthdiagnostic start up2003 – Present - SEVERSTAL AUTO (NOW SOLLERS AUTO), Member of the Board/Chairman since 20062004-2008 – AUDIT COMMITTEE, GOLDEN TELECOM (RUSSIA), Member of the Board/ChairmanMr.Herman spent twenty nine years with General Motors. His career spans 9 foreign assignmentsand makes him GM’ longest serving international service person, during which he hasdistinguished himself by bridging the cultural differences between the US and other countries,for which he is known in the media, industry in general and Government circlesBernard SucherBorn in 1960.Independent member of OJSC MMK's Board of Directors, Member of the Board of Directors,Aton Group.Education:Graduate, University of Michigan, 1983, Bachelors, Business Administration with an additionalconcentration in Russian and Soviet Studies. 3.83 GPA.Graduate, Columbia University Graduate School of Business, 2001, Senior Executive Program.Business:2011 – Aton Group, Member of the Board of Directors2007-2010 – Bank of America-Merrill Lynch, Russia Country Head2002-2006 – Alfa Capital, Chairman of the Board.1993-2002 – Troika Dialog, Managing Director, Co-Founder.1993-1999 – I.M. Galt, Inc., President.Entrepreneur and capital markets business leader, with strong sales-orientation and practicedcross-cultural communication skills. Deep experience in asset management and trading/sales.58

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionInformation on the Board of Directors’ Meetings Held in 2010In 2010, OJSC MMK's Board of Directors held 11 meetings (five meetings in presentia and six absentee meetings) at which thefollowing issues were resolved:1. Determination of priorities for the Company’s activity;2. Approval of OJSC MMK’s Risks Report for 2010;3. Placement of OJSC MMK’s securities, i.e. documentary interest-bearing non-convertible exchange-traded bearer bonds with amandatory centralized custody of the BO-06 - BO-15 Series;4. Participation of OJSC MMK in legal entities;5. Approval of OJSC MMK’s revised internal documents;6. Approval of interested party transactions.In 2010, members of the Board of Directors participated in the following meetings of the Board of Directors and Committees:NameParticipationsinmeetingsVictor Rashnikov 11RafkatTakhautdinovAndreyGorodisskySergeyKrivoschekovBoard of Directors* Oleg V. Fedonin joined the Board of Directors and its committees (the Board’sCommittee for Strategic Planning and Corporate Governance,Committee for Investment Policy and Liaison with Government Bodies) on 21 May 2010.** Gennady S. Senichev was a member of the Board of Directors and its committees (the Board’sCommittee for Strategic Planning andCorporate Governance, Committee for Investment Policy and Liaison with Government Bodies) before 21 May 2010.Total Remuneration Paid to Members of the Board of Directors Based on the Results of the Reporting YearThe Board of Directors approved the Regulations on Remuneration and Compensation of Expenses of the OJSC MMK Board ofDirectors which set down the criteria for payment of remuneration and compensation to members of the Board of Directors.The Regulations can be found on the MMK website at:http://www.mmk.ru/upload/iblock/d4b/doc012.pdfThe size of remuneration and compensation for expenses to the members of the Board of Directors is approved annually by theGeneral Shareholder’s Meeting on the basis of the Board of Director’s recommendations as a lump-sum amount.Remuneration and compensations to the Board members, RUB '000:MonthlyremunerationTotalmeetingsCommittee for AuditParticipationsinmeetingsTotalmeetingsPhysical attendance of BoDmeetingsCommittee forNominations andRemunerationsParticipationsinmeetings11TotalmeetingsAbsenteeparticipation in BoDmeetingsCommittee for StrategicPlanning and CorporateGovernanceParticipationsinmeetings9TotalmeetingsCommittee forInvestment Policy andLiaison with GovermentBodiesParticipationsinmeetings11 9 511 1111 8Kirill Levin 11 12 11Sir David Logan 10 11 12 11 119 5ZumrudRustamova11 11 9Oleg Fedonin* 5 6 4Peter Charow 11 10VladimirShmakov11 5GennadySenichev **4 3 1Compensation of costs related toBoD member functions*Board Chairman 372 155 31 actual amountBoard 310 155 31 actual amountTotalmeetingsSteel & Style , 10 MMK ANNUAL REPORT 59

60*Compensation of costs related to the performance of BoD members' functions is included in the total amountof payments and is provided according to actual out-of-pocket expenses within 10 days and subject to provisionof documents evidencing such costs.Payments to the Board members in 2010:DescriptionRUB millionSize of payments as approved by the General Shareholders' Meeting for 2010 65,000Actual payments to the Board members in 2010 48,266Information on the Committees of the OJSC MMK Board of DirectorsTo improve the efficiency of the Board of Directors’ actions and their resolutions, OJSC MMK has set up thefollowing committees:• Committee for Strategic Planning and Corporate Governance;• Committee for Audit;• Committee for Nominations and Remuneration;• Committee for Investment Policy and Liaison with Government BodiesThese committees submit performance reports to the Board of Directors not later than thirty business daysbefore the date of the Annual General Shareholders’ Meeting.Committee for AuditMembers in 2010 Members for 2011Kirill Yu. Levin (independent director)Zumrud Kh. Rustamova (independent director)Peter Charow (independent director)Peter Charow (independent director)Bernard Sucher (independent director)Zumrud Kh. Rustamova (independent director)In 2010, the Committee held 12 meetings and considered the following key issues:• efficiency of the internal control and audit system;• analysis of financial statements (in accordance with RAS and IFRS);• outcome report on the review of OJSC MMK’s consolidated financial accounts carried out by CJSC Delloite andTouche CIS (IFRS-based);• competition selection (tender) of OJSC MMK’s Auditor;• determination of the size of remuneration to OJSC MMK’s Auditor;• recommendations to the Annual General Shareholders’ Meeting regarding a candidate for the position of theAuditor.An auditor is selected pursuant to the requirements set forth for tender participants:The Company's Auditor is selected according to the following criteria:• internationally recognised independent auditor;• experience with large companies;• experience in the steel industry;• rating figures (proceeds, number of employees, number of attested auditors, auditor’s presence in the market, otherrating parameters revealing its competitive advantages);• annual reduction of services cost in future years;• payment upon actual fulfilment of services;• economically feasible cost of auditing services, etc.Committee for Nominations and RemunerationMembers in 2010 Members for 2011Andrey M. Gorodissky (independent director)Victor F. RashnikovKirill Yu. Levin (independent director)Sir David Logan (independent director)Zumrud Kh. Rustamova (independent director)David J. Herman (independent director)Sir David Logan (independent director)In 2010, the committee held 11 meetings and considered the following key issues:• Recommendations to the Annual General Shareholders’ Meeting regarding the size of remuneration andcompensation payable to the members of the Board of Directors and the Audit Committee;• Consideration of proposals submitted by shareholders regarding candidates to the Board of Directors and AuditCommittee, and inclusion of such candidates in the voting ballot for elections to the Board of Directors and AuditCommittee;

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionMarina A. Zhemchueva(born in 1960) – Chief Accountant;Chief Accountant of LLC MMKManaging Company; member of theManagement Board since 19 May1997.Nikolai V. Lyadov(born in 1956) – Sales Director;member of the Management Boardsince 30 March 2007.Alexander L. Mastruev(born in 1952) –Vice-President forPersonnel and Social Programmes ofLLC MMK Managing Company; memberof the Management Board since 19 May1997.Vladimir E. Ruga(born in 1970) – Director for ExternalCommunications of OJSC MMK;member of the Management Boardsince 19 November 2010.Ivan V. Senichev(born in 1970) – Director for HumanResources of OJSC MMK; memberof the Management Board since 19November 2010.Dmitri A. Usanov(born in 1978) – Director for CapitalMarkets of OJSC MMK; member ofthe Management Board since 19November 2010.Oleg V. Fedonin(born in 1967) – Vice-President ofLLC MMK Managing Company forFinances and Economics; memberof the Management Board since 27November 2009.Arkadiy V. Chernov(born in 1953) – Head of the Staff of the Presidentof LLC MMK Managing Company; member of theManagement Board since 24 March 2000.Steel & Style , 10 MMK ANNUAL REPORT 63

EVENTS AFTER THE ACCOUNTING DATEThe general shareholders’ meeting on 20 May 2011 decided to terminate the authority of the Company'sManagement Board distributing its functions between the General Director and the Board of Directors.Total Remuneration Paid to Members of the Management Board Based on the Results of the Reporting YearCompany officers and directors are not paid any remuneration in their capacity as members of the ManagementBoard. They receive salaries for their main jobs in the Company which in 2010 totaled USD 5.3 m.Shares of Participation in the Company’s Share Capital Owned by Members of the Board of Directors andManagement BoardShare of ParticipationNameStake in the OJSC MMK Share Capital, %As of 01.01.2010 As of 01.01.2011Arkadiy V. Chernov 0,0004 0,0004No other members of the OJSC MMK Board of Directors or Management Board owned any shares in OJSC MMKin 2010.Remuneration to OJSC MMK's ManagementRemuneration to OJSC MMK's top managers includes monthly salaries and annual bonuses.The monthly salary consists of:• a constant part set by the contract;• a variable part (bonus) which is calculated according to the regulations in effect.The annual bonus depends on the achievement of key performance indicators which are determined based onthe Company's short- and long-term objectives.No remuneration is paid to MMK's managers for their work in the governing bodies of OJSC MMK or itssubsidiaries, such as MMK's Management Board of subsidiaries' boards of directors.Information on the Company’s Individual Executive BodyThe authority of the individual executive body is exercised by a managing company, LLC MMK ManagingCompany represented by the President, Viktor F. Rashnikov.LLC MMK Managing Company is located at: Ul.Kirova 93, Magnitogorsk, Chelyabinsk Region, 455000, Russia.The key objectives of LLC MMK Managing Company include ensuring an efficient management system,expanding the Company’s presence in the global steel market and modernising its productions assets.The remuneration (salaries) paid to the employees of LLC MMK Managing Company in 2010 totalled USD 5.1million.64

Risk ManagementIn 2010, the following risks materialized:1. Higher prices for iron ore raw materials, coal, metallic scrap, non-ferrous metals: the actual price growth forkey raw materials, which had been forecasted at 41%, in fact reached 59%.2. Lower demand and prices for steel products as compared with what had been budgeted: partially reflected inQ2 and Q3 of 2010 (budget compliance with respect to the steel sales proceeds was 95%).3. The risk of not meeting the Company’s financial and business targets as set out in its capex project businessplans (project in Turkey).32614DAMAGEFROM RISK10 7589Critical(over RUB 10 bn)11RISKMATERIALIZATIONPROBABILITYHigh(RUB 1-10 bn)Medium(RUB 100m -1 bn)Low(RUB 10-100 m)Very Low(less thanRUB 10 m)Very Low(eventimprobable)Low(eventimprobablewithin5-10 years)Medium(event improbablewithinnext 2-5 years)High(eventimprobablewithinnext 2 years)Very High(event improbablewithincurrent (next) year)- risk materialized in 2010- risk value change estimate for 20111. Low actual demand and prices for steel products2. Prices for iron ore raw materials, coal, metallic scrap, non-ferrous metals exceeding the planned level;3. OJSC MMK’s and contractors’ failure to perform obligations;4. Non-compliance with the financial and economic figures specified in investment project business plans;5. Claims for loan prepayments against OJSC MMK;6. Corporate fraud;7. Currency risk;8. Claims for recovery under OJSC MMK’s guarantees issued to third parties and affiliated companies;9. Accidents;10. Industrial accidents;11. Increased cost of borrowed funds.Relevant mitigation measures with respect to all the risks covered by OJSC MMK's Risk Map were developed andapproved. Each risk is matched with an indicator from the Balanced Scorecard.Steel & Style , 10 MMK ANNUAL REPORT 67

ММК LiveSocialResponsibilityMMK Group includes socially oriented companies which assumeresponsibility for the well-being of citizens of Magnitogorsk and otherregions where the Company has a presence. The list of social programmesincludes health protection and occupational safety for employees,environmental protection and resource conservation, personnel training,development of the local community and many others.By financing social programmes, MMK Group creates a sustainable basisfor the long-term development of Magnitogorsk and the regions where itoperates, by implementing a number of social and infrastructure projectsand programmes.In 2010, MMK Group spent USD 77 million on supporting various socialprogrammes, which is USD 8 million more than in 2009 (USD 69 million). Theparent company (OJSC MMK) allocated RUB 1.5 billion (USD 50 million) forsocial policy in 2010 .Health Care and Social Support to PersonnelMedical care programmes are the mainstay of the Company’s social policy.The Company spent RUB 353 million on implementing preventive health careand treatment programmes.MMK is implementing a programme of in-depth medical examinations whichallow it to carry out additional check-ups of workers involved in hazardousproduction.In 2010, 16,337 MMK’s employees with their families spent vacationsat MMK’s resorts and holiday centres, with 50% of them receiving spatreatment. The Company contributed RUB 238 million towards covering thecost of such vacations.68* - this amount includes the funds allocated for financing the Metallurg Ice Hockey Club

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionIn the summer of 2010 recreational and educational camps “Uralskie Zori”and “Gornoye Uschelye” received 3,620 children of MMK’s employees. MMKGroup spent RUB 40 million on compensations for the children’s stay in thesecamps.OJSC MMK continues to implement the maternity support programmelaunched in 2004. In 2010 the Company spent RUB 34 m on this programme.Besides, since 2008 OJSC MMK has been operating a programme of supportto large families. The programme reached 307 families of MMK’s employeeswith three or more children under 18 years old, with a cost in 2010 of RUB 9million.MMK’s housing programmes are implemented by the Klyuch housinginvestment fund. In 2010, it started the construction of a 17-storey buildingcomprising 112 apartments.As part of the national project “Affordable and Comfortable Housing”, in2006 OJSC MMK launched a programme to assist young steel-makers'families in purchasing apartments. Every year 30 young families receivesubsidies in the amount of RUB 80,000 each and a chance to purchase a oneroomapartment at a subsidised price.Much attention is devoted to sports. Every year, winter and summer sportscompetitions are held among various MMK’s divisions. 45 Sports events wereheld in 2010 at the sites and facilities of the Metallurg-Magnitogorsk SportsClub which gathered more than 8,800 employees and members of theirfamilies. Overall, the Company spent RUB 86 million for these purposes.Healthy Way of Life and SportsTo encourage sports and recreational activities MMK has built a number ofsports facilities.Every year, winter and summer sports competitions are held among variousMMK’s divisions which in 2010 gathered more than 3,400 participants.In 2010, Metallurg-Magnitogorsk sports grounds and sports clubs facilitieshosted 45 sporting events, drawing more than 8,800 employees and theirfamilies.MMK also offers corporate outings to the Company-owned ski resorts andthe Vodopad Chudes Water Park. In 2010, ski resorts in Abzakovo and at LakeBannoye near Magnitogorsk were visited by 12,671 employees and theirfamilies.The Company spent RUB 86 million to maintain the Metallurg-MagnitogorskSports Club and to arrange mass entertainment sporting events.MMK conducts its charitable activities and implements its social assistanceprogrammes through the Metallurg Charity Foundation.In 2010, the Metallurg Foundation received contributions for a total of RUB417 million, 93% of which were contributed by MMK Group.The Foundation’s main activity is focused on targeted social support andaid to the disabled, Company veterans, retirees, and the least protectedcategories of population through an extensive network of social facilities.In2010, OJSC MMK allocated RUB 230 million for social support of retirees anddisabled people within the framework of the Zabota("Care") Programme.Steel & Style , 10 MMK ANNUAL REPORT 69

Human Resources PolicyThe main factor of MMK’s strong performance is maintaining its long-term competitive ability achieved throughequipment modernization and balanced HR policy aimed at:• securing highly qualified personnel;• giving priority to developing the Company’s personnel potential over the modernization of process facilities;• ensuring adequate standards of living for its employees.The corporate PERSONAL Training Centre has developed programmes for fostering a future HR reserve coveringstages from foreman to top manager. Every year seminars and competitions are held for young specialists.In 2010, more than 36,000 employees from MMK Group underwent training under different occupational andadvanced training programmes.Key Indicators of MMK and MMK Group’s HR PolicyIndicator 2006 2007 2008 2009 2010Staff on Pay-Roll as of Year End, personsMMK Group 59 037 60 726 58 798 62 195 59 331ММК 27 079 25 015 24 123 22 334 21 475Average Monthly Wage, RUBMMK Group 16 792 21 118 23 149 23 925 29 979ММК 19 852 24 785 27 793 27 906 34 523MMK’s Labour ProductivityConv. tonne/personThousand RUB/person44.3 47.8 47.8 42.4 48.9517.3 616.1 811.2 545.9 798.0The turnover rate in 2009-2010 was 2.8-2.6%, down from 6.1-6.8% in 2006-2008.70

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionLabour SafetyThe corporate labour and industrial safety management system was certified for compliance with theinternational ОНSAS-18001- 2007 standards (2008). A supervision audit conducted in 2010 did not revealany non-compliance. The labour and industrial safety management system is recommended for certificationprolongation as per OHSAS 18001:2007. In 2010, under the Labour Safety Agreement 68 actions aimed atimproving labour conditions and preventing occupational diseases were implemented. 2,246 employees enjoyedbetter working conditions.Accidents in production, operation, construction, maintenance, overhauls, and modernization of facilities2009 2010Total accidents 18 19Total persons affected 18 19Fatal accidents 4 3Accidents resulting in severe injuries 2 4Frequency rate 0.790 0.886Severity rate 133.85 63.29The Company's employees are provided, in accordance with sectoral standards, with special clothes, footwear,and personal protection means. Shopfloor medical stations perform pre-shift medical check-ups of personneloperating automotive and railway transport, and heightened danger machines and mechanisms.Labour Safety Costs in 2010in million roublesDescription 2009 2010Provision of personal protective wear 127.3 146.1Purchase of polyvitamins and dietary products for employees working inhazardous conditions22.4 16.4Laboratory tests for workplace certification 17.1 17.9Purchasing of bottled mineral water for employees working in hotenvironments9.1 11.9Special dietary products for employees working in hazardous conditions 2.2 2.2Other labour safety costs 150.9 211.2Total 329.0 405.7Currently, the average employeeof MMK is a man 39 yearsold(69%), with a specializedprofessional training (86%) andsufficient experience and skills(average work record of 11 years).Managers, specialists and otherwhite collar workers account for21.8% of the total workforce, andblue collar workers, for 78.2%. Steel & Style , 10 MMK ANNUAL REPORT 71

GREEN LIGHTEnvironmentalProtection72

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionEnvironmental policyMMK carries out its production activities inaccordance with environment protection laws of theRussian Federation and in compliance with the ISO14001:2004 standard.All industrial processes are monitored in terms oftheir effect on health and environment:• ore extraction and beneficiation• sinter production• coke production• pig iron production• steel production• hot rolling• production of long products• cold rolling• application of metallic and polymer coatings• railway and automotive transportation• production, generation and transfer of fuels andpower• recovery, storage and recycling of industrial wastes.• the share of steel products shipped on reusablefastening frames reached 55%.In 2010 MMK took steps to modernize certainproduction processes which resulted in the reducedconsumption of power, fuel and other utilities:DescriptionReduction in consumptionElectric power6,172,000kWhFuel4,761,000 t of equiv.fuelHeat, total11,621 GCalCompressed airand air separation977,000m 3productsPotable water 42,500m 3Industrial water 367,000m 3In order to meet the requirements of EuropeanREACH (Registration, Evaluation and Authorizationof Chemicals) standards and to maintain access toEuropean markets, MMK opened a subsidiary inBrussels, MMK International S.A., which is tasked withobtaining permits for importing products into theEU and receiving the necessary certifications of theirchemical composition in accordance with relevantstandards.Reducing MMK’s impact on the environment is astrategic goal and a key element tothe Company’ssustainable, long-term growth. The Companycarries out its operations with full awareness of itsresponsibility for its impact on the environment.MMK’s Environmental Plan For the periodthrough2015, approved on 1 March 2010, sets out thefollowing long-term goals for environment protection:• reduction of emissions into the air and effluentdischarge;• dust: by more than 8,000 t/year;• ammonia: by more than 1,200 t/year;• SO2: 4,000 t/year;• NO: 1,800 t/year• disposal of industrial waste and land reclamation(over 160 ha of land to be reclaimed, and a 120,000t/year facility to be built for dewatering of BOFsludge);• rational use of natural and energyresources.MMK's Environmental Impactin 2010MMK's operations in the area of Magnitogorsk andthe Agapovsky District do not produce any significanteffect on the biodiversity of the adjoining territories,nor do they perturb the habitat of any animals,including endangered species listed in the Red Book.MMK does not monitor the emission of ozonedepletingsubstances produced by its operations.In 2010, MMK achieved the following results as partof its Environmental Plan:• gross emissions into the atmosphere were reducedby 8,200 tonnes (3.6%), down to 220,900 tonnes;• the volume of waste recycled in the sinteringprocess increased by 6.4% to 2,182 million t;• the share of recycled water equalled 97.3% of totalwater consumption for industrial needs.Steel & Style , 10 MMK ANNUAL REPORT 73

Emissions into the AtmospherePollutant2010 Emissions,tonnesParticulate matter (dust) 25,511.89Nitrogen dioxide (NO2) 16,037.61Ammonia 440.8Hydrogen sulphide 59.61Sulphur dioxide (SO2) 17,251.76Carbon oxide 153,544.47Phenol 95.99Total discharges 220,874.795Effluents:In 2010, MMK discharged effluents from 7 outlets into3 surface water bodies:• within the city limits from the cooling waterrecirculation system into the MagnitogorskReservoir, (230,434.6 m 3 );• within the city limits from the Co-GenerationPlant's ash dump into the Magnitogorsk Reservoir(2,410.2 m 3 );• into a fish habitat (Sukhaya River) from the #2 Sludge Deposit of the Ore Dressing Plant(8,000 m 3 );• contaminated water from the limestone mine intothe Ural River (a fish habitat) (22,354.7 m 3 );• contaminated water from the dolomite mine intothe Ural River (3,803.7 m 3 );• effluents from the Crushing and Calcination Plantinto the Ural River (588.0 m 3 );• within the city limits from the Co-GenerationPower Plant'scooling system into the MagnitogorskReservoir (71,954.5 m 3 );The main pollutants discharged into water bodiesfrom the industrial operations are iron, manganese,petroleum products, sulphates, phenols, fluorides andzinc.Effluents' DischargePollutantDischarge in2010, tonnesFe 34.124Mn 18.595Petroleum products 59.9Sulphates 46,198.47Dry residual 396.07Fluorides 46.83Zinc 92,129.48Total discharge 138,883.48Waste hazard classIndustrial Waste DisposalDeposited at landfills,tonnesClass 1 0Class 2 0Class 3 31,630.768Class 4 98,975.643Class 5 (withoutgangue)1,085,570.1Total (without gangue) 1,216,176.511Class 5 (gangue) 30,091,792Captive Generation of Electric Power, by Source,m kWhCo-Generation Power Plant 2,645Central Power Plant 1,714Steam and Air Blast Power Plant 762Steam Power Plant 86Hydro Power Plant 0TOTAL 5,207Supply of Electric Power to MMK(excl. MMK subsidiaries) from Third Parties, m kWhLLC MEK 1,740OJSC ChelyabEnergo 0.8OJSC BashkirEnergo 0.2OJSC Russian Railways 0TOTAL 1,741MMK does not perform cross-border transportation orcollection of waste (under the Basel Convention).74

MMK Industrial Waste108644,8Total steelmaking slag recycled(current and dumps), m tons5,095,556,899,15108646,7Total waste and slag usedfor reclaiming Mt.Magnitnaya'sexhausted pits8,429,398,549,32202006 2007 2008 2009 201002006 2007 2008 2009 2010Total industrial waste used insinter burden, m tons2,522,052,181,511,491,14 1,090,502006 2007 2008 2009 2010Environmental Protection Measures in 2010 andRelated ExpensesWithin the framework of the 2010 EnvironmentProgram the Company implemented 35 technicalmeasures of different levels of complexity aimed atthe reduction and prevention of negative impacts onthe environment.76

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionKey environmental protection measuresimplemented in 2010:MeasureConstruction of a water reusesystem, a treatment unit forCaster #6 and a secondary steeltreatment unit for Caster #6Construction of a gas treatmentsystem, a fume exhaust tractdownstream of gas cuttersfor Caster #6, secondary steeltreatment unit aspiration systemsfor Caster #6Reclamation of slag storagefacility #1 in the Ore-dressingPlant. Technical stage.Renovation water reuse systems inRolling Shop #4Construction of an electric filteraspiration system for blast-furnacestock houses #10Construction of slag processingunit aspiration systems (Amkom#1, 2)TimingExpenses, RUB million2010 Total to date2008-2010. 44.57 984.082009-2010 73.31 299.372000-2010 87.20 252.182010-2011 699.33 699.332008-2011 100.22 118.672010-2011 42.02 42.02ImpactPrevention of fresh waterconsumption for industrialpurposes by41,500 m 3 /hPrevention of dust emissionsby 885 t/year29 ha of damaged land havebeen re-cultivatedReduction of oil productdisposal into the waterreuse system by 21 t/yearReduction of emissions by600 t/yearPrevention of dust emissionsin the amount of 660 t/yearIn 2010 MMK spent a total of RUB 2,239.6 million on environmental protection. Expenses for construction ofnew, or renovation of existing, environmental facilities totalled RUB 1,373.3 million, including:• RUB 240.5 million on reduction of emissions into atmosphere;• RUB 1,012.8 million on reduction effluent;• RUB 120.0 million on industrial waste disposal.Expenditures on environmental protection in 2010:Cost descriptionAmount, RUB mCapital construction 1,373.3Capital repairs 12.9Maintenance (routine repairs and operational costs) 852.0R&D on environmental protection 1.4Total 2,239.6Environmental PerformanceIn 2010, MMK was named the winner of the IV All-Russia Competition “Leader in Environmental ProtectionActivity in Russia” competition that was conducted as part of the All-Russia Ecological Conference “NewPriorities for National Environmental Policy in the Real Economy”.Steel & Style , 10 MMK ANNUAL REPORT 77

Stakeholder EngagementCorporate social responsibility (CSR) is an integral partof MMK's operations. The Company takes a systematicapproach to CSR activities, with the aim of creatingefficient and safe workplaces, ensuring occupationaltraining for employees, supporting cultural and sportsactivities, protecting the environment and assistingthe development of local communities. The Companyinteracts with a wide array of stakeholders. The mostsignificant of them include:• suppliers and contractors;• public organizations and movements, as wellaspolitical parties;• the Company's employees and trade unions;• the investor community*;• educational establishments;• government bodies and municipal entities;• the population of Magnitogorsk and the regionswhereMMK has a presence.The Company believes it is extremely important tomaintain and expand a constructive dialogue with itsstakeholders, and constantly seeks ways to perfectstakeholder communication, feedback and interaction.Relations with SuppliersIn conducting its business, MMK strives to comply withthe applicable laws, its contractual obligations andgood business practices.MMK’s official web-site (http://www.mmk.ru) is anelectronic resource that provides comprehensiveinformation about the Company's needs for rawmaterials and services, tender announcements, as wellas requirements for suppliers, materials supplied andservices.Long-term and mutually beneficial cooperation isone of the key guiding principles for MMK in dealingwith its suppliers and contractors. MMK's long-termcontracts for the supply of iron ore raw materials,coal, and natural gas are all evidence of this. In 2010,raw materials supplied under long-term contractsaccounted for 88.8% of the primary raw materials usedby the Company.A constructive dialogue with key raw materials andgoods suppliers, combined with development andtimely signing of mutually beneficial agreements wereinstrumental in mitigating the negative impact of themarket decline on MMK’s business.* Information on MMK’ s relations with the investorcommunity is provided in the “Information for Shareholdersand Investors”section.Relations with CustomersMMK strives to establish long-term, mutually beneficialbusiness relations with its customers. Relations withcustomers are based on transparency and good faithprinciples.The “For Customers” Section of theMMK website offersinformation on the following issues:• Types of products;• Quality certificates;• Prices and delivery conditions;• Contact information for customers.MMK has an electronic trading platform (http://www.mmk.ru/rus/index.wbp) for Russian customers, whichenables them to place orders at any convenient timeirrespective of their location.The Company’s feedback system enables customers tosend information andreport on procedural violations orincorrect actions by MMK’s officers.Contact details:• Tel.: 24-30-30 (calls are free of charge and areaccepted on a 24-hour basis);• e-mail: 24-30-30@mmk.ru;• Postal address: P.O. box 000, 93 Ul.Kirova,Magnitogorsk, 455000, Russia.To increase customer satisfaction with productsand quality of service, MMK has introduced aquality management system that complies with therequirements of the ISO 9001:2000 internationalstandards.In order to improve the efficiency of sales in regionalmarkets and to further expand its regional network ofowned steel sales centres MMK operates the tradinghouse Torgovy Dom MMK. The trading house has astrong stockyard infrastructure and wide range ofproducts that are sufficiently stocked. This means thatMMK can maintain uninterrupted, prompt supplies of itsproducts to customers, and fulfil all of their demands.Establishing a secure and transparent trading structurewith minimal operating costs will enable MMK to havea more effectiveimpact on distribution channels and todevelop a more flexible approach to pricing products inthe spot market.The Company intends to continue its policy of closeinteraction with customers through such means asimproving information communication systems andpromptly responding to market changes.78

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionRelations with Company Employees and the Trade UnionSuccessful development in the modern world requires the Company’s staff tobe team-oriented and highly skilled. To achieve this, MMK’s policy focuses onprofessional development and on creating comfortable working conditionssupportive of career growth.MMK interacts with its workforce through the employee trade union, whoseprimary objective is to protect employees’ rights, provide them with socialprotection and represent their interests. Over 98% of MMK’s employees areunionized.The union focuses on the following key tasks:Monitoring the implementation of MMK's collective agreement,which sets forththe principles regulating social and labour relations, such as wages and salaries,production operations, work discipline, labour competitions, occupational safetyand health, work and vacation schedules, career training and education, andmedical services.Publicly controlling labour safety, including inspection of conditions in employees’rooms, medical stations and canteens. Union representatives take part ininspection of protective clothes and personal protective equipment.Supporting MMK’s social, recreation and health improvement programs foremployees and their families, cultural and popular events, and youth programs.The Company understands that it must develop its personnel, and, consequently,the social sphere. With this objective in mind, the Company works with the unionto successfully implement social programs for its employees; these programsare designed to create favourable conditions for solving social and occupationalproblems facing employees and their families.Relations with Educational EstablishmentsPersonnel training and development is carried out in leading Russian educationalcentres (Lomonosov Moscow State University, the Russian Presidential Academy ofNational Economy and Public Administration, the State University of Management,Moscow International Higher Business School “MIRBIS”, the Financial University,etc.)including overseas internship programs, and at international schools foreconomics and management such as the Stockholm School of Economics inSweden,and Bocconi University (Italy), including MBA programs.MMK has developed and implementeda competence attestation and assessmentsystem to determine the technical competencies required by its managerialstaff, and to help reveal potential areas for development. The system is designedto test the following areas: Occupational Knowledge, Occupational Skills, andManagement Skills.During 2010, more than 36,000 employees of MMK Group participated in variouseducational programs aimed at vocational and advanced training. Investmentsinto training, retraining and refresher training in 2010 amounted to USD 4.7million.One of the primary focuses of MMK’s training programs is on preparing specialiststo operate new facilities (the 5,000 mm Plate Mill, Caster #6, HDGL, CCL #2 in theSteel Coating Division, the 2,000 mm Cold Rolling Mill). In order to adopt bestengineering practices the Company has launched special training and internshipprograms at educational institutions and enterprises in Russia and abroad (SMSSteel & Style , 10 MMK ANNUAL REPORT 79

Demag, ThyssenKrupp, АМСОМ, ALTA, CJSC NKMZ, etc.).These programs give employees new qualifications andcareer skills.Since 2001, MMK has run CEO V.F. Rashnikov’s “TalentedChildren of Magnitka” charity program. To date 125children from Magnitogorsk schools and lyceums haveparticipated, and the 2011 budget for grant paymentis nearly RUB 1 million. Program participants go on tostudy at leading Russian universities.In order to improve the pool of qualified workers forMMK and MMK Group subsidiaries, the Company closelycooperates with the city’s vocational educationalinstitutions. The Company continues to cooperatewith the State Educational Institution SPO PolytechnicCollege in the area of training young specialists . Underthe terms of the agreement graduates will receivetraining for second and adjacent professions. Everyyear MMK defines the number of students requiredfor further employment by MMK’s structural divisions.Thus, in 2010, the Polytechnic College admitted 509first-year students.The Company continuesto develop and introducemultimedia training programs. In 2010 theMagnitogorsk Industrial College arranged professionaltraining for managers and the manager talent poolof the Company’s Long Products Shop, the BOF shop(based on “Distributor Operator”, “Refining UnitSteelmaker”, “LF Steelmaker”, “Specialist for ConverterHydraulic Equipment” multimedia materials), the EAFShop (“EAF Steelmaker”, “LF Steelmaker”), RollingShop #4 (Receptacle Operator in Slitting Line #2), SteelCoating Shop (“HDGL Entry/Exit Section Operator”,“HDGL Heat Treater”, “HDGL Zinc Pot Operator”),Rolling Shop #10 (“Process Operator for RM/FM”),Rolling Shop #9 (“Plate Mill Equipment Design”, “MainRolling Profiles for Plate Mill 5000”, “Plate FinishingLine Operating Principles for Plate Mill 5000”).Relations with Public Organizations and MovementsММК is committed to long-term cooperation with public organizations and movements with a view to creatinga favourable and predictable social and economic environment for MMK’s employees, as well as for localcommunities in the regions where MMK operates.MMK actively interacts with various public organizations and movements, including:Stakeholders (interested parties) Areas of Cooperation ActivitiesEnvironmental organizations (GreenpeaceRussia; Autonomous Non-Profit Organization"Independent Environmental Rating Agency",etc.)War veterans organizations (MMK War VeteransCouncil, Voinskoye Bratstvo, etc.), disabledpersons' organizations (All-Russian DisabledPersons Society, etc), charitable organizations(the Metallurg Charitable Foundation, etc)Women’s organizations (Social movement“Y aZhenschina”, NGO “AkademiyaPreobrazheniya”, etc.)Youth organizations (Magnitogorsk YouthPublic Organization “Young Steelmakers’Union”, National Public Organization“MolodayaGvardiya”, etc.)Environmentalprotection, rational useof natural resourcesSupport to sociallyvulnerable groups,charity activitiesMaternity and childcare support, supportto families with manychildren, benefitprograms for childrenAssistance to thesocial and economicdevelopment of theregions; support toeducation, culture andsportsNon-financial statements,participation in relevant meetings,conferencesJoint campaigns and activities,social work and consulting, workin deputies’ districts, meetings,discussion clubs, conferences,feedback sessions, informationsupport, joint activities, culturaland sport events, financial support80

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionStakeholders (interested parties) Areas of Cooperation ActivitiesReligious organizations (Russian OrthodoxChurch, Public Council of the Regional MuslimOrganization for the City of Magnitogorsk, etc.)Other organizations (e.g. Russian Union ofIndustrialists and Entrepreneurs, PublicChamber of Chelyabinsk Region, Extreme SportsFederation, Association of Russian Lawyers,Olympic Athletes Support Foundation, etc.)Spiritual and culturaldevelopmentPublic evaluation ofdraft laws, joint actionsto develop social andeconomic infrastructureMeetings, conferences,correspondence, charity activitiesForums, exhibitions, socialcommittees support, consultingcentres, media publications,websitesTo protect its interests MMK takes part in the following associations:• Russian Industrialists and Entrepreneurs' Union (member since 1999)• Not-for-profit Partnership "Konsortsium Russkaya Stal" (member since 2005).Relations with Local Communities in Magnitogorsk and the Regions of MMK’s OperationsMMK has operations in many regions of Russia, the CIS and foreign countries. MMK is one of the majortaxpayers in the Chelyabinsk Region and is the largest taxpayer and employer in Magnitogorsk. The future ofhundreds of thousands of Magnitogorsk citizens and those of the neighbouring areas depends on the Company’sability to remain competitive in the long term. This means that MMK’s key priorities are to build its long-termrelations with the local community and to resolve issues in such a way that both sides benefit. MMK supportseducational and cultural institutions in the city and its districts, helps to develop public sporting events, andmakes significant contributions to developing the social, utilities and transport infrastructures. MMK regularlyinforms the local community about the Company’s operations that may affect their interests through thecorporate mass media, such as:• the Magnitogorsky Metall newspaper (www.magmetall.ru),• broadcasts on local TV programs and radio stations,• the MMK corporate website (www.mmk.ru).Relations with Federal and Local Authorities and Political PartiesWorkingwith federal and local government authorities is an essential activity that contributes to thesustainable development of the Company. In 2009, MMK did not obtain any significant financial assistancefrom the government authorities. MMK, independently and as a participant of the Russkaya Stal Not-For-ProfitPartnership that unites the largest Russian steel producers, takes part in the public appraisal of draft laws, and,first and foremost, tax and customs laws, the Civil Code, and the laws regulating production, logistics, scientificand technical, social and demographic policies of the State. Regular meetings are held with experts and seniorofficers of Federal Ministries. MMK’s executives are invited to take part in discussions of legislative issues in theState Duma committees.MMK’s coordinates its operations with the authorities of the territories where the MMK Group is present. Thisrefers, primarily, to the Chelyabinsk Region, and the Republic of Bashkortostan. One of the forms of cooperationbetween MMK and regional authorities is entering into agreements on social and economic cooperation. Theseagreements stipulate mutual obligations of the regions and the Company, with a focus on developing the socialand economic infrastructure.MMK’s representatives take an active part in political life as deputies in representative bodies atvariouslevels. In 2010, elections of deputies to the Municipal Assembly of Magnitogorsk and the Chelyabinsk RegionLegislative Assembly were held. In the Municipal Assembly, 16 deputies not only represent their regionsand their constituencies but also continue their work in MMK and its subsidiaries. In the Chelyabinsk RegionLegislative Assembly MMK is represented by 8 deputies.Steel & Style , 10 MMK ANNUAL REPORT 81

Information forShareholders andInvestors82

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionInformation on Company SecuritiesOrdinary SharesOJSC MMK's shares are traded on the leading Russianstock markets (MICEX, RTS) and are listed ontheLondon Stock Exchange.Trading PlatformMICEX, MoscowRTS, MoscowLSE, LondonIssuer codeMAGNMAGNMMKOn the London Stock Exchange MMK's shares aretraded as Global Depositary Receipts, GDRs, with 1GDR corresponding to 13 shares. MMK’s free floatrepresents 12.7% of outstanding shares.The Company's shares are included in the followingindices:IndexDate ofinclusionRTS Index 15.10.2007MICEX Index 15.10.2007RTS Metals and Mining Index 15.06.2007MICEX Metals and Mining Index 14.08.2007MICEX MC Index 06.08.2007DAX Global Russia 24.09.2007RDXxt 13.03.2008FTSE Russia IOB Index 22.06.2009OJSC MMK Share Quotes and Trading Volumes on LSE (USD)Minimum Maximum End of the PeriodAverage DailyTrading Volume2009 2.09 11.53 11.3 3,673,1852010 8.79 15.19 14.55 5,892,020Change, % 321% 32% 29% 60%EVENTS AFTER THE ACCOUNTING DATEQuotation, USD16US$Trading volume, USD m1514131211109811.01.201011.02.201011.03.201011.04.201011.05.201011.06.201011.07.201011.08.201011.09.201011.10.201011.11.201011.12.201011.01.201111.02.201111.03.2011Steel & Style , 10 MMK ANNUAL REPORT 83

OJSC MMK Share Quotes and Trading Volumes on MICEX (RUR)Share Quotes on MICEX (in RUB)Minimum Maximum End of the Period Average Daily Trading Volume2009 5.03 27.19 25.03 43,155,0312010 20.80 34.61 32.90 72,142,274Change, % 314% 27% 31% 67%EVENTS AFTER THE ACCOUNTING DATEQuotation, RUR40Trading volume, RUR m3836343230282624222011.01.201011.02.201011.03.201011.04.201011.05.201011.06.201011.07.201011.08.2010OJSC MMK Shares Quotes and Trading Volumes at RTS (USD)Share Quotes on RTS (in RUB)Minimum Maximum End of the Period Average Daily Trading Volume2009 0.15 0.89 0.85 3,1802010 0.726 1.105 1.132 6,574Change, % 384% 24% 33% 107%EVENTS AFTER THE ACCOUNTING DATE11.09.201011.10.201011.11.201011.12.201011.01.201111.02.201111.03.2011Quotation, USDUS$Trading volume, USD m1,11,0510,950,90,850,80,750,711.01.201011.02.201011.03.201011.04.201011.05.201011.06.201011.07.201011.08.201011.09.201011.10.201011.11.201011.12.201011.01.201111.02.201111.03.201184

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionSupported by global economic recovery andprogressively recovering demand for steel productsthat started in late 2009, investor demand forMMK shares increased in 2010. In June, share pricesdeclined in line with lower prices for steel products asa result of lower export sales. During this period MMKcontinued to implement its strategy of expanding itsexposure to the domestic market.Steady growth in MMK’s share price began in thethird quarter of the year. This was driven by upgradesfrom leading analysts, many of whom recognizedMMK’s shares as the preferable means for gainingexposure to Russian iron and steel companies. Oneof MMK’s key advantages is its increasing degreeof integration into iron ore raw materials and coaland greatpotential for production growth. As of31 December 2010, 12 of 17 analysts had a “Buy”recommendation on MMK shares. The target pricerose by 15% (or USD 2.11) during the year, reachingUSD 16.12 per GDR at the end of the year. In 2010,MMK’s shares outperformed the market. The RTSindex increased by 23%, while the price of MMKshares rose by 20%. On 31 December 2010 the closingprice forMMK GDRs was USD 14.55.The investor relations program implemented in 2010has helped to improve liquidity compared to 2009.The average daily trading volume for the three stockmarkets (RTS, MICEX, LSE) was USD 8.1 million in2010 (in 2009 the average daily trading volume wasUSD 4.9 million). About 75% of transactions with MMKshares/GDRstake place on the LSE.MMK's market cap in 2010, USD mEVENTS AFTER THE ACCOUNTING DATE14 00012 00010 0008 00012 507 12 55012 57512 42111 75911 33810 88211 149 11 12310 41810 745 9 7139 0439 172 9 533 7 9856 0004 0002 000дек янв фев мар апр май июн июл авг сен окт ноя дек янв фев мар(2011) (2011) (2011)*The market capitalization is calculated on the basis of the closing price of the previous month’s trading session.In 2010, MMK’s market capitalization increased by29% to USD 12,507 million as of 31 December 2010,bringing MMK the closest to its historical maximummarket cap among all publicly traded steel companiesin Russia.Relations with Investors and ShareholdersOne of the Company’s priorities is to maintain strongrelations with investors and shareholders through adirect dialogue and in line with existing legislationand globally accepted principles.MMK’s management hasfocused its efforts onbeing responsive to the interests of investors andshareholders, and establishing a relationship basedon trust by improving transparency.In keeping with the principle of transparency andaccessibility of information, the Company publishesstatements of significant events on the websiteof the London Stock Exchange, and also on itsown corporate site. The Company's official sitehas sections devoted to Investor Relations andCorporate Governance, which contain a wide arrayof information in Russian and English, including theCompany's internal documents and bylaws, annualreports, information for shareholders' meetings, dataon the Company's registrar and auditors, informationon dividend payments, as well as quarterly financialstatements under IFRS and RAS. The website alsofeatures a financial calendar with planned events andreporting dates.More detailed information can be found on MMK'sofficial site at: http://www.mmk.ru in the sectionsInvestor Relations and Corporate Governance.An effective dialogue with the capital marketsrequires constant attention from the Company'smanagement. MMK management regularlyparticipates in international conferences andmeetings with investors. Publication of quarterlyfinancial results always include telephoneSteel & Style , 10 MMK ANNUAL REPORT 85

conferences for investors with MMK management. Financial statements are supplemented with presentationsfor better insights into the results and the Company's strategy.MMK is committed to continuously improvin grelations with investors and shareholders in line with marketpractice, the latest legislation and the best practice standards.Investors are invited to contact our Shareholders Relations and Investor Relations divisions with any questions:Corporate Secretary:Valentina KhavantsevaTel: +7 (3519) 24-72-29Email: khavanceva.vn@mmk.ruInvestor Relations Dept,Andrei SerovTel: +7 (3519) 24-52-97. Fax: +7 (3519) 24-24-79. E-mail: serov.ae@mmk.ru2011 Financial Calendar*General Shareholders' Meetings20 January 2011 OJSC MMK Extraordinary General Shareholders' Meeting20May 2011OJSC MMK Annual General Shareholders' MeetingBoard of Directors Meetings15April 2011July 2011OJSC MMK Board of DirectorsSeptember 2011Publication of RAS Financial StatementsMarch 2011 IV quarter (12 months) of 2010April 2011 I quarter (3 months) of 2011August 2011 II quarter (6 months) of 2011October 2011 III quarter (9 months) of 2011Publication of IFRS Financial StatementsApril 2011 IV quarter (12 months) of 2010June 2011 I quarter (3 months) of 2011September 2011 II quarter (6 months) of 2011November 2011 III quarter (9 months) of 2011Publication of production results27 January 2011 IV quarter (12 months) of 2010April 2011 I quarter (3 months) of 2011July 2011 II quarter (6 months) of 2011October 2011 III quarter (9 months) of 2011*dates are subject to change (http://www.mmk.ru/for_investor/financial_calendar/)86

16 22 26 28 32 38 50 72MMK , sBusiness ModelMMK’s Missionand StrategyOJSC MMK Boardof Directors'The Company'sProductionSales MarketsFinancesCorporateGovernanceEnvironmentProtectionReport on Payment of Declared (Accrued) Dividends on OJSC MMK SharesThe total amount of dividend payments based on the results of 2010 will be RUB 3.6875289 bn.MMK's dividend policy is based on a balance of shareholders' interests and the Company’s requirements forfurther growth and technological upgrades.The Regulations on the Dividend Policy can be found at the following address:http://www.mmk.ru/corporate_governance/internal_documents/group_documents/Obligations to shareholders with regards to the payment of dividends are set forth in the Company's Charter.OJSC MMK Dividend PaymentsAmount ofBasis year fordividends per share,dividend accrualRUBDividends accrued2005 1.85419,708,392.77 RUB '000696,344.53 USD '0002006 3.20934,112,381.11 RUB '0001,287,696.70 USD '0002007 0.92010,488,754.52 RUB '000428,712.38 USD '0002008 0.3824,268,594.06 RUB '000173,891.90 USD '0002009 0.374,134,502.1 RUB '000130,921.54 USD '0002010 0.333,687,528.90 RUB '000121,420.12 USD '000Dividends to netprofit*74%90%24%16%56%48%*2005-2007 under US GAAP, 2008-2010 under IFRS (Parent company shareholders' profit for the period).Steel & Style , 10 MMK ANNUAL REPORT 87

Open Joint Stock CompanyMagnitogorsk Iron & Steel Works And SubsidiariesSTATEMENT OF MANAGEMENT’S RESPONSIBILITIES FOR THE PREPARATION ANDAPPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2010Management is responsible for the preparation of consolidated financial statements that present fairlythe financial position of Open Joint Stock Company Magnitogorsk Iron & Steel Works and its subsidiaries (the“Group”) at 31 December 2010, and the results of its operations, cash flows and changes in equity for the yearthen ended, in compliance with International Financial Reporting Standards (“IFRS”).In preparing the consolidated financial statements, management is responsible for:• properly selecting and applying accounting policies;• presenting information, including accounting policies, in a manner that provides relevant, reliable,comparable and understandable information;• providing additional disclosures when compliance with the specific requirements in IFRS is insufficient toenable users to understand the impact of particular transactions, other events and conditions on the Group’sfinancial position and financial performance;• making an assessment of the Group’s ability to continue as a going concern.Management is also responsible for:• designing, implementing and maintaining an effective and sound system of internal controls, throughout theGroup;• maintaining adequate accounting records that are sufficient to show and explain the Group’s transactions anddisclose with reasonable accuracy at any time the financial position of the Group, and which enable them toensure that the consolidated financial statements of the Group comply with IFRS;• maintaining statutory accounting records in compliance with statutory legislation and accounting standards;• taking such steps as are reasonably available to them to safeguard the assets of the Group;• preventing and detecting fraud and other irregularities.The consolidated financial statements for the year ended 31 December 2010 were approved on31 March 2011 by:O. V. Fedonin M. A. ZhemchuevaVice-President FinanceChief Accountant31 March 2011Magnitogorsk, Russia88

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2010 (In millions of U.S. Dollars, unless otherwise stated)NotesYears ended 31 December2010 2009REVENUE 7 7,719 5,081COST OF SALES 9 (5,952) (3,940)GROSS PROFIT 1,767 1,141General and administrative expenses 10 (495) (349)Selling and distribution expenses 11 (565) (429)Other operating expenses, net 12 (97) (51)OPERATING PROFIT 610 312Share of results of associates 18 11 (31)Gain on revaluation of investment in associate upon acquisition ofmajority ownership 5 - 175Finance income 8 20Finance costs (140) (96)Foreign exchange (loss)/gain, net (24) 9Excess of the Group’s share in the fair value of net assets acquired overthe cost of acquisition5 - 30Change in net assets attributable to minority participants (5) 6Other income 7 2Other expenses 13 (177) (170)PROFIT BEFORE INCOME TAX 290 257INCOME TAX 14 (58) (38)PROFIT FOR THE YEAR 232 219OTHER COMPREHENSIVE INCOME/(LOSSES)Increase in fair value of available-for-sale investments 424 397Income tax related to increase in fair value of available-for-saleinvestments(85) (79)Translation of foreign operations 24 2Effect of translation to presentation currency (80) (270)OTHER COMPREHENSIVE INCOME FOR THE YEAR,NET OF TAX283 50TOTAL COMPREHENSIVE INCOME FOR THE YEAR 515 269Profit attributable to:Shareholders of the Parent Company 254 232Non-controlling interests (22) (13)232 219Total comprehensive income attributable to:Shareholders of the Parent Company 529 290Non-controlling interests (14) (21)515 269BASIC AND DILUTED EARNINGS PER SHARE (U.S. Dollars) 0.02 0.02Weighted average number of ordinary shares outstanding (in thousands) 11,118,083 11,098,862Steel & Style , 10 MMK ANNUAL REPORT 89

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2010(IN MILLIONS OF U.S. DOLLARS)ASSETSNON-CURRENT ASSETS:31 December2010 2009Property, plant and equipment 12,226 11,292Goodwill 290 292Other intangible assets 34 37Investments in securities and other financial assets 1,051 627Investments in associates 29 22Deferred tax assets 106 132Other assets 17 17Total non-current assets 13,753 12,419CURRENT ASSETS:Inventories 1,236 958Trade and other receivables 791 839Investments in securities and other financial assets 193 221Income tax receivable 37 12Value added tax recoverable 213 235Cash and cash equivalents 515 165Total current assets 2,985 2,430TOTAL ASSETS 16,738 14,84990

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2010(IN MILLIONS OF U.S. DOLLARS)EQUITY AND LIABILITIESEQUITY:31 December2010 2009Share capital 386 386Treasury shares (176) (67)Share premium 1,109 1,103Investments revaluation reserve 680 341Translation reserve (2,294) (2,230)Retained earnings 10,552 10,424Equity attributable to shareholders of the Parent Company 10,257 9,957Non-controlling interests 429 368Total equity 10,686 10,325NON-CURRENT LIABILITIES:Long-term borrowings 2,454 1,266Obligations under finance leases 7 24Retirement benefit obligations 25 19Site restoration provision 18 16Deferred tax liabilities 1,464 1,422Total non-current liabilities 3,968 2,747CURRENT LIABILITIES:Short-term borrowings and current portion of long-term borrowings 1,074 808Current portion of obligations under finance leases 13 20Current portion of retirement benefit obligations 3 2Trade and other payables 971 928Net assets attributable to minority participants 23 19Total current liabilities 2,084 1,777TOTAL EQUITY AND LIABILITIES 16,738 14,849Steel & Style , 10 MMK ANNUAL REPORT 91

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2010(In millions of U.S. Dollars)Attributable to shareholders of theParent CompanyNotesSharecapitalTreasury sharesShare premiumBALANCE AT 1 JANUARY 2009 386 (72) 1,104Profit for the year - - -Other comprehensive income for the year, netof tax- - -Total comprehensive income for the year - - -Purchase of treasury shares - (2) -Issuance of ordinary shares from treasurysharesIncrease in non-controlling interests due toadditional share issue by subsidiaryIncrease in non-controlling interests due toacquisition of subsidiaries- 7 (1)5 - - -- - -BALANCE AT 31 DECEMBER 2009 386 (67) 1,103Profit for the year - - -Other comprehensive income for the year, netof tax- - -Total comprehensive income for the year - - -Purchase of treasury shares - (181) -Issuance of ordinary shares from treasurysharesIncrease in non-controlling interests due toadditional share issue by subsidiaryDecrease in non-controlling interests due toincrease of Group’s share in subsidiaries- 72 65 - - -- - -Dividends 23 - - -BALANCE AT 31 DECEMBER 2010 386 (176) 1,10992

Attributable to shareholders of the Parent CompanyInvestmentsrevaluationreserveTranslation reserve Retained earnings TotalNon-controllinginterestsTotal23 (1,970) 10,192 9,663 189 9,852- - 232 232 (13) 219318 (260) - 58 (8) 50318 (260) 232 290 (21) 269- - - (2) - (2)- - - 6 - 6- - - - 47 47- - - - 153 153341 (2,230) 10,424 9,957 368 10,325- - 254 254 (22) 232339 (64) - 275 8 283339 (64) 254 529 (14) 515- - - (181) - (181)- - - 78 - 78- - - - 81 81- - 7 7 (6) 1- - (133) (133) - (133)680 (2,294) 10,552 10,257 429 10,686Steel & Style , 10 MMK ANNUAL REPORT 93

CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2010(In millions of U.S. Dollars)OPERATING ACTIVITIES:NotesYears ended 31 December2010 2009Profit for the year 232 219Adjustments to profit for the year:Income tax 58 38Depreciation and amortisation 9,10 826 735Finance costs 140 96Loss on disposal of property, plant and equipment 12 159 118Excess of the Group’s share in the fair value of net assets acquired overthe cost of acquisition5 - (30)Change in allowance for doubtful accounts receivable 12,20 31 71Recovery of bad debts acquired as a part of business combinatio (16)Gain on revaluation and sale of trading securities 12,21 (52) (113)Change in allowance for obsolete and slow-moving items 19 (5) 11Finance income (8) (20)Foreign exchange loss/(gain), net 24 (9)Gain on sale of disposal group 6 (33) -Share of results of associates 18 (11) 31Gain on revaluation of investment in associate upon acquisition ofmajority ownership 5 - (175)Change in net assets attributable to minority participants 5 (6)1,350 966Movements in working capitalDecrease in trade and other receivables 40 113Decrease in value added tax recoverable 20 28(Increase)/decrease in inventories (330) 138Decrease in investments classified as trading securities 107 19Increase/(derease) in trade and other payables 147 (425)Cash generated from operations 1,334 9Interest paid (84) (109)Income tax (paid)/refunded (77) 135Net cash generated by operating activities 1,173 86594

CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2010(In millions of U.S. Dollars)INVESTING ACTIVITIES:NotesYears ended 31 December2010 2009Purchase of property, plant and equipment (2,209) (1,613)Purchase of intangible assets (10) (11)Proceeds from sale of property, plant and equipment 11 12Acquisition of subsidiaries, net of cash acquired - (278)Interest received 23Purchase of securities and other financial assets (42) (8)Proceeds from sale of disposal group 6 225 -Proceeds from sale of securities and other financial assets 8 34Net change in bank deposits - 148Dividends received from associate 4 4Net cash used in investing activities (2,005) (1,689)FINANCING ACTIVITIES:Proceeds from borrowings 3,439 2,935Repayments of borrowings (2,024) (2,974)Proceeds from capital transactions of subsidiaries 80 47Purchase of treasury shares (181) (2)Proceeds from issuance of ordinary shares from treasury shares 78 6Principal repayments of obligations under finance leases (29) (36)Dividends paid to:equity holders of the Parent Company (198) (16)- non-controlling interests (2) -Net cash generated by/(used in) financing activities 1,163 (40)NET INCREASE /(DECREASE) IN CASH ANDCASH EQUIVALENTS331 (864)CASH AND CASH EQUIVALENTS, beginning of year 165 1,106Effect of translation to presentation currency and exchange ratechanges on the balance of cash held in foreign currencies19 (77)CASH AND CASH EQUIVALENTS, end of year 515 165Steel & Style , 10 MMK ANNUAL REPORT 95

Information on Companies in Which OJSC MMK HoldsLess Than 50% of SharesLegalstatusFull company name(abbreviated companyname)Company’s legal addressOJSC MMK’sShare,%Other Participants/ShareholdersRemarksCJSCMagnitogorsk Mill RollsPlant (ZAO MZPV)Ul. Kirova, 93,Magnitogorsk,Chelyabinsk Region,Russia18.18CJSCMekhanoremont:28,76%CJSC MRK: 4.06%VALI GROUPd.o.o.:49%OJSC MMK’saffiliateLLCTransportation andForwarding Companyof the MagnitogorskIron and Steel Works(OOO TEK MMK)Office 803, Ul.Gertsena6, Magnitogorsk, 455001,Chelyabinsk Region,Russia16.72CJSC TamozhennyBroker: 81.62%LLC MiG: 1.66%OJSC MMK’saffiliateLLCContinental HockeyLeague (OOO KHL)OvchinnikovskayaNaberezhnaya, 20, Bldg2, Moscow, 115035,Russia11.76 n/a -CJSCRusskayaMetallurgicheskayaKompaniya (ZAO RMK)Ul.Kirova 93,Magnitogorsk, 455002,Russia10.0 n/a -CJSCYuzhuralavtoban (ZAOYUAB)Ul. Frunze, 11,Magnitogorsk, Russia10.0 n/a -OJSCYeisk Sea Port (OAOEMP)Ul. Portovaya Alleya, 5,Yeisk5.94 n/a -CJSCMETALLURGTRANS(ZAOMETALLURGTRANS)Slavyanskaya Ploschad,2, Moscow, 109718,Russia5.47 n/a -Fortescue Metals GroupLTDLevel 2, 87 AdelaideTerrace, EAST PERTH,WA, AUSTRALIA, 60044.994 n/a -LLCErmak Urals DistrictTelevision Company(OOO UOTK Ermak)Ul.Narodnoy Voli, 52,2nd entrance, 2nd floor,Yekaterinburg, 6200262.0 n/a -OJSCBeloretsk Iron AndSteel Works (OAO BMK)Ul.Blyukhera, 1,Beloretsk, 453500,Baskortostan0.124 n/a -LLCAstra-Metall HealthInsurance Company(OOO SMK Astra-Metall)Ul. Zavenyagina, 1/2,Magnitogorsk, 455045,Chelyabinsk Region,Russia0.027 n/a -OJSCVladivistok Sea TradingPort (OAO VMTP)Ul. Strelnikova, 9,Vladivostok, 690950,Primorsky Krai, Russia0.0261 n/a -96

Compliance of the MMK 2010 Annual Report withStandard & Poor's Information Transparency CriteriaPart Description PagePart 1 Ownership Structure and Shareholders' RightsComponent 1. Ownership Structure1. Quantity and par value of issued ordinary shares 522. Quantity and par value of issued shares of other types 523. Quantity and par value of declared, unissued shares of all types 524. Information about the largest shareholder 525. Information about large shareholders (with blocking interests of at least 25%, and controllinginterest of over 50%)526. Information about shareholders owning an aggregate of at least 25% of voting shares 527. Information about shareholders owning an aggregate of at least 50% of voting shares 528. Information about shareholders owning an aggregate of at least 75% of voting shares 529. Number of shareholders owning over 10% of shares each; information about all suchshareholders5210. Statement that management are not aware of any shareholdings in excess of 5%, with theexception of those disclosed5311. Updating of information on shareholders' structure after reporting date 5212. Company's shareholdings owned by specific top managers 6413. Company's shareholdings owned by specific directors 6414. Description of share types 8315. Shareholders' structure by share type 5216. Percentage of shares in cross shareholding –17. Information about stock exchange listing 8318. Information about indirect shareholding (for instance, convertible instruments) 52Component 2. Shareholders' Rights19. Content of the Corporate Governance Code or Regulation 5020. References to the existence of a corporate conduct code 50-5121. Content of the Corporate Conduct Code Annex 222. Provisions of the Company's Charter (including amendments) 50, 5223. Voting rights for each voting and non-voting share 5324. Procedure for nomination of candidates for the Board of Directors 5425. Procedure of shareholders' calling extraordinary general meetings 5326. Procedure for proposing agenda items for the Board of Directors' meetings 5427. Procedure for proposing agenda items for general shareholders' meetings 5328. Existence of officially documented dividend policy 53, 8729. Declaration of recommended dividends prior to register closing –30. Overview of the most recent shareholders' meeting 5231. Full minutes of general shareholders' meetings 5332. Existence of a calendar of events important for shareholders 8633. Documents and material for general shareholders' meetings on the Company's website 5334. Detailed press releases on recent corporate events 5235. Information disclosure policy. 51Steel & Style , 10 MMK ANNUAL REPORT 97

Part Description PagePart 2: Financial and operational informationComponent 3. Financial InformationDisclosure of information according to the following criteria:36. The Company's accounting policy 50-5137. Standards used in preparing financial statements 5138. Financials prepared under national standards -39. Annual financial statements under IFRS/US GAAP 88-9540. Notes to the IFRS/US GAAP financial statements Annex 141. External auditor's opinion regarding IFRS/US GAAP financial statements 8842. Absence of qualifications in the auditor's opinion regarding IFRS/US GAAP financialstatements8843. Publication of audited IFRS/US GAAP financial statements by the end of April 8644. Publication of unaudited IFRS/US GAAP financial statements by the end of April not required.45. Publication of audited IFRS/US GAAP financial statements prior to the annual generalshareholders' meeting8646. Publication of unaudited IFRS/US GAAP financial statements by the end of June not required.47. Information on interested party transactions: volumes of purchases and sales, amounts ofaccounts payable and receivableAnnex 348. Indication that interested party transactions have been made at arm's length or otherwise 5049. Exact terms and conditions of interested party transactions Annex 350. Interim IFRS/US GAAP financial statements (quarterly or semi-annual) 5151. Notes to the above financial statements Annex 152. Information on whether the above financial statements have been audited 51, 5653. Consolidated financial statements under national standards 5154. Methods of assets' appraisal Annex 155. List of affiliated companies in which the Company is a minority shareholder 9656. Affiliated companies' ownership structure 9657. All sorts of forecasts of income from core activities –58. Detailed forecast of income –59. Segment analysis (by core activity) 33-36, 39-4560. Detailed structure of income Annex 161. Detailed structure of costs and expenses Annex 162. Name of the Company's Auditor 6663. Auditor's level of reputation 6664. Auditors' rotation policy 6665. Size of remuneration paid to the Auditor for its audit services 6666. Information on the Auditors' services not related to audit 6667. Size of remuneration paid to the Auditor for its non-audit services 66Component 4. Operational Information68. Information on the Company's activities 28-31, 33-3669. Information on the Company's products and services 28-31, 33-3670. Production levels in physical terms 771. Information on functional relations between the Group's production divisions 30-3172. Sectoral indicators for comparing the Company's performance to competition 7, 33-3673. Other financials 39-4574. Parameters of the fixed assets used (including licenses) 28-31,Annex 198

Part Description Page3: Composition and Functioning Procedures of the Company's Board of Directors and Management75. Performance indicators 26-2776. Discussion of the corporate strategy 22-24, 26-2777. Investment plans for the near future 22-2478. Detailed information on the investment plans for next year 22-2479. All sorts of forecasts of production levels 2080. Review of the sector's trends and regulatory measures 33-3681. The Company's market share by one or all types of activity 33-3682. Social reporting (e.g., under GRI) 100-10583. Information on environmental compliance 73-7784. Principles of corporate citizenship 68-71Component 5. Information on the Board of Directors and Management85. List of the Board of Directors' members 55-5886. Information on the current jobs and positions of the BoD members 55-5887. Other information (previous jobs and positions, education, etc.) 55-5888. Information on the dates of the BoD member's election to the Board 55-5889. Identification of the BoD chairman in the list of members 5590. Information on the BoD's role in the Company 5491. Scope of the BoD's competence 5492. List of the BoD's committees 6093. List of names of all the BoD's committees' members 60-6194. Regulations on the internal audit service 6695. Information on the proportion of the BoD's personal attendance and absentee votingmeetings5996. Information on attendance of BoD meetings 5997. List of the Company's top managers not on the Board of Directors 62-6398. CVs of the Company's top managers 62-6399. Detailed information on non-financial conditions of the contract with the Company's CEO 64-65100. Quantity of affiliated companies' shares owned by the Company's managers –101. BoD members' performance appraisal criteria and information on training for the Boarddirectors61Component 6. Remuneration to Management and Board Directors102. Decision-making process regarding remuneration to Board Directors 59-60103. Disclosure of detailed information on remuneration to Board Directors (level ofremuneration)59-60104. Form of directors' remuneration (e.g., cash or shares) 64105. Disclosure of information on dependence of the Board Director's remuneration on theCompany's performance–106. Decision-making process regarding remuneration to management (not on the Board ofDirectors)–107. Disclosure of detailed information on remuneration to the Company's management (not onthe Board of Directors), including salaries and bonuses–108. Form of remuneration to the Company's management (not on the Board of Directors) –109. Disclosure of information on dependence of the management's remuneration on theCompany's performance–110. Size and structure of the CEO's remuneration 65Steel & Style , 10 MMK ANNUAL REPORT 99

Use of the GRI Reporting Framework Elements andPerformance Indicators in the MMK 2010 AnnualReportNo. Description Pages Comments1 Defining Report Content1.1 Statement of a decision maker 8-91.2 Description of key impacts, risks and possibilities 67, 78-812. Company Profile2.1 Company’s name 1062.2 Products and services 18, 28-29, 33-362.3 Company’s functional structure 17, 30-312.4 Location and postal address of the Company’s governing bodies 1062.5 Countries in which the Company conducts its business 1062.6 Ownership and legal status 1062.7 The Company’s sales markets 1062.8 Scale of the Company 70-71, 85, 33-36, 72.9Significant changes of the scope, structure or characteristics occurred in thereporting period22-24, 28-292.10 Awards and ratings 10-153 Report Parameters3.1 Reporting period 1073.2 Date of the most recent previous report 1073.3 Reporting cycle 1073.4 Contact details 1073.5 Report content defining procedure 1073.6 Scope of the Report 1073.7 Limitations of the scope or boundary of the report 1073.8 Basis for reporting on Companies of the OJSC MMK Group 30-313.9 Data measurement and calculation methods Annex 13.10Explanation of the effect of any re-statements of information provided in earlierreports, and the reasons for such re-statement (e.g., mergers/ acquisitions,change of base years/periods, nature of business, measurement methods).1073.11 Significant changes relative to previous accounting periods 1073.12 Table showing the position of GRI Reporting Framework elements in the report 100-1053.13Policy and current practice with regard to seeking external assurance for thereport.4 Governance Structure and Relations with Interested Parties4.1 The Company’s governance structure 51-524.2 Information on the Chairman of the supreme governing body 554.3 Number of independent members of the supreme governing body 584.4Instruments used by the company’s shareholders or employees to influence theactivity of the supreme governing body79, 534.5 Payments to members of the supreme governing body 64MMK did not seek externalassurance for the report100

No. Description Pages Comments4.64.74.84.94.10Actions of the supreme governing body intended to prevent conflicts ofinterestsAssessment of qualification and competence of members of the supremegoverning bodyCorporate statements about a mission or values, codes of corporate conduct andprinciples which are important in terms of economic, environmental and socialperformanceProcesses used by the supreme governing body to monitor how the Companyassesses its performanceProcesses for evaluating the highest governance body’s own performance,particularly with respect to economic, environmental, and social performance.Annex 254Annex 2Annex 2, 26-27614.11 Environmental protection 73-774.124.13Principles and other initiatives developed by external companies which aresupported or applied by the CompanyMemberships in associations (such as industry associations) and/or national/international advocacy organizations73, 50-51,97, 100814.14 The list of interested parties with which the Company has relations 78-814.15Basis for the identification and selection of interested parties to establishrelations withMMK selects interested partiesbased on the experience ofinteracting with them4.164.17Approaches to relations with interested parties including frequency ofcooperation by forms and interested groupsKey issues and interests raised or identified when establishing relations withinterested parties78-8180-815 Information on Management Approaches and Performance IndicatorsEconomic Performance IndicatorsEC1 Generated and distributed direct economic value 39-45EC4 Significant financial assistance received from government.In the reporting period MMKdid not receive any financialassistance from the governmentEC5 Ratio of a wage paid at MMK and in Magnitogorsk 70EC6Policy, practices, and proportion of spending on locally-based suppliers atsignificant locations of operation.78EC7 Proportion of top management hired from local community50% of the Board of Director'smembers and 90% of theManagement Board members arelocal residentsEC9 Review of significant indirect economic impactsMMK does not monitor indirecteconomic impactsEnvironmental Performance IndicatorsEN1 Materials used 46-47Steel & Style , 10 MMK ANNUAL REPORT 101

No. Description Pages CommentsEN2 Percentage of materials used that are recovered or reused 75-76EN3 Direct energy consumption by primary energy source. 72EN4 Indirect energy consumption by primary source. 73-74EN5 Energy saved as a result of activities aimed at decreasing energy consumption 77EN6Initiatives to provide energy-efficient or renewable energy based products andservices, and reductions in energy requirements as a result of these initiativesRolled steel produced by MMK isnot an energy-consuming productEN7 Initiatives to reduce indirect energy consumption and reductions achieved. 77EN8 Total water withdrawal by source. 75EN9 Water sources significantly affected by withdrawal of water. 75EN10 Percentage ant total volume of recycled and reused water 75, 73EN11Location and size of land owned, leased, managed in, or adjacent to, protectedareas and areas of high biodiversity value outside protected areas.EN12EN13EN14EN15Description of significant impacts of activities, products, and services onbiodiversity in protected areas and areas of high biodiversity value outsideprotected areas.Habitats protected or restored.Strategies, current actions, and future plans for managing impacts onbiodiversity.Number of IUCN Red List species and national conservation list species withhabitats in areas affected by operations, by level of extinction risk.MMK operations carried out inMagnitogorsk do not produce anysignificant effect on biodiversityin adjacent areas, or disturb anyanimals' habitatsAreas affected by MMK'soperations do not containhabitats of any endangeredspeciesEN16 Atmospheric hazardous emissions 75EN17Other relevant indirect greenhouse gas emissions by weight.MMK does not monitorgreenhouse gas emissionEN18 Decrease in atmospheric hazardous emissions and reductions achieved 77EN19Emissions of ozone-depleting substances byweight.MMK does not have any specialmonitoring or recordingprocedure for emissions of ozonedepleting substanceEN20 NO, SO, and other significant air emissions by type and weight. 73EN21 Total water discharge by quality and destination. 74EN22 Total weight of waste by type and disposal method. 74102

No. Description Pages CommentsProduct Responsibility Performance IndicatorsPR1Life cycle stages in which health and safety impacts of products and servicesare assessed for improvement, and percentage of significant products andservices categories subject to such procedures.MMK's finished products produceno effect on consumers' healthor safetyPR2Total number of incidents of non-compliance with regulations and voluntarycodes concerning health and safety impacts of products and services duringtheir life cycle, by type of outcomes.All products shipped fromMMK comply to standards andregulationsPR3 Customer satisfaction 78PR4Total number of incidents of non-compliance with regulations and voluntarycodes concerning product and service information and labeling, by type ofoutcomes.78-81PR5Practices related to customer satisfaction, including results of surveysmeasuring customer satisfaction.PR6Programs for adherence to laws, standards, and voluntary codes related tomarketing communications, including advertising, promotion, and sponsorship.The subject of marketingcommunications was notidentified as significant in thereport content defining processPR7Total number of incidents of non-compliance with regulations and voluntarycodes concerning marketing communications, including advertising, promotion,and sponsorship by type of outcomes.PR8Total number of substantiated complaints regarding breaches of customerprivacy and losses of customer data.MMK received no suchcomplaintsSteel & Style , 10 MMK ANNUAL REPORT 105

General Information on OJSC MMKFull Name of the Company:– in Russian: Открытое акционерное общество «Магнитогорский металлургический комбинат»;– in English: Open Joint Stock Company Magnitogorsk Iron & Steel Works.Abbreviated Name of the Company:– in Russian: ОАО «ММК»;– in English: OJSC MMK.State Registration CertificateCertificate #0002 series GA (registration #186). Date of state registration: 17.10.1992.Certificate of Entry in the Uniform State Register of Legal Entities: series 74 # 000603904, OGRN1027402166835, date of entry: August 12, 2002.The Company’s location and postal address:Ul.Kirova 93, Magnitogorsk, 455000, Chelyabinsk Region, Russia.Tel: 24-72-92, 24-30-04, Fax: 24-73-09Communication and Public Relations:Phone: (3519) 24-03-02, fax: (3519) 24-85-54, е-mail: press@mmk.ruWebsite of the Company:Web-site: http://www.mmk.ruLegal Status of the OJSC MMKThe Magnitogorsk Iron and Steel Works is an open joint stock company. According to the legislation of theRussian Federation, a joint stock company is an organization whose authorized capital is divided into a certainnumber of shares which certify rights of obligation of the company’s members (shareholders) in relation to thecompany.The shareholders are not responsible for the Company’s obligations and bear the risk of losses in connectionwith the Company’s activity to the extent of their shares’ value.The Company is a legal entity which owns separate property entered in the Company’s independent balancesheet. The number of shareholders of the Company is not limited.Countries in Which the Organization Conducts its BusinessOJSC MMK runs its operations in the Russian Federation (Magnitogorsk, Belovo, Bakal, St. Petersburg, Moscow)and the Republic of Turkey (Istanbul, Iskenderun). The Company’s key suppliers are located in Russia andKazakhstan. MMK sells its products to 70 countries worldwide. The key shipment destinations include CIS, theMiddle East, Europe, and Asia.106

General Information on the ReportDate of Publication of the Latest Previous ReportAnnual reports of OJSC MMK are prepared annually pursuant to the Federal Law "On Joint-Stock Companies" #208-FZ dd. 24.11.1995 as amended and supplemented. In addition to their being mandatory, the Company viewsannual reports as an instrument for enhancing the transparency of its operations.The previous Annual Report of the OJSC MMK was prepared based of the 2009 results and approved by theAnnual General Shareholders' Meeting on 21.05.2009. OJSC MMK’s Annual Report 2009 is available for review atMMK's web site www.mmk.ru/for_investor/annual_reports/.Contact DetailsAlexander A. Smirnov, Acting Head of the Budget Planning and Analysis Departmenttel: (3519) 24-69-04, fax: (3519) 24-82-73, e-mail: smirnov.aa@mmk.ruProcedure for Determining Contents of the Annual ReportIn the preparation of this Annual Report, MMK aimed to achieve the fullest possible disclosure of informationrelated to all aspects of its operations in 2010. The Report includes the results of the Company’s diverseactivities (production, business, financial, social, environmental) of interest to all stakeholders. Stakeholderswere identified through a comprehensive analysis of the Company's operations and the influence exerted bythem on the social sphere and the environment.As a result, top priority was assigned to the following subjects: production, finances, sales, relations withstakeholders, as well as the social and environmental activities of MMK. All the facts and events influencing theachievement of the Company’s strategic goals were considered material.In the preparation of this Report use was made of the Regulations on Sustainability and Reporting (GRI,version 3.0) in order to present the results of the Company’s activities in the context of sustainability. All theinformation contained in the present Report is in line with the principles of GRI (relevance, party interestcoverage, stable development context, completeness).Scope of the ReportThe present Report has been prepared on the basis of the results of OJSC MMK’s operations, as presented inaccounting statements prepared according to the Russian Accounting Standards for the 2010 financial year, andconsolidated accounting statements of the MMK Group prepared according to IFRS. This Report can be regardedas a report on the entire MMK Group.Limitations Regarding the Scope of the ReportThis Report provides a complete picture of MMK’s operations, and any further expansion of the Report ispossible only in terms of increasing the number of performance indicators, should such interest be expressed byusers of the Company’s information.Influence on the Comparability of the ReportThis Report includes information on the MMK Group’s operation results and is therefore comparable to thereports of OJSC MMK and the MMK Group for previous periods.Material Changes in the ReportThis Report does not contain any material changes compared to the information provided in previous reports,nor any changes in relation to previous periods in terms of the content, scope or measurement of OJSC MMK’sresults.V. Rashnikov, President of LLC MMK Managing CompanyM. Zhemchueva, Chief Accountant, OJSC MMKSteel & Style , 10 MMK ANNUAL REPORT 107