Listing Particulars

LISTING PARTICULARS

NOT FOR GENERAL CIRCULATION IN THE UNITED STATES

Zlomrex International Finance S.A. €170,000,000 8 1⁄ 2% Senior Secured Notes due 2014 The Senior Secured Notes will be guaranteed on a senior basis by Złomrex S.A. and certain of its subsidiaries. Zlomrex International Finance S.A., a société anonyme organized under the laws of France (the “Issuer”), is offering €170,000,000 aggregate principal amount of its 8 1⁄ 2% Senior Secured Notes due 2014 (the “Notes”) which will be guaranteed by Złomrex S.A., a spólka akcyjna organized under the laws of Poland (the “Company”), and certain of the Company’s subsidiaries (collectively, the “Guarantors”) (the “Offering”). The Notes will bear interest at a rate of 8.50% per annum. Interest on the Notes will be payable on February 1 and August 1 of each year, beginning on August 1, 2007. At any time on or after February 1, 2011, the Issuer may redeem all or part of the Notes by paying a specified premium. Prior to February 1, 2011, the Issuer may also redeem all or part of the Notes if the Issuer pays a “make-whole” premium. In addition, on or before February 1, 2010, the Issuer may redeem up to 35% of the Notes with the net proceeds from one or more equity offerings. If the proposed acquisition of a 74.9% interest in voestalpine Stahlhandel GmbH (“voestalpine Stahlhandel GmbH”) by the Company (the “Austrian Acquisition”) is not consummated on or before June 30, 2007 or the share purchase agreement among the Company, Donauländische Baugesellschaft m.b.H., a wholly-owned subsidiary of voestalpine AG, and voestalpine Stahl GmbH relating to the Austrian Acquisition (the “Share Purchase Agreement”) is terminated at any time prior thereto, Notes in a principal amount of €60 million will be subject to a special mandatory redemption. The special mandatory redemption price is 101% of the aggregate principal amount of the Notes to be redeemed on the date thereof plus accrued and unpaid interest. If, as anticipated, this Offering is consummated prior to the consummation of the Austrian Acquisition, the Issuer will deposit with the escrow agent an amount of cash and cash equivalents so that the escrowed funds are sufficient to pay the special mandatory redemption price, when and if due. After the special mandatory redemption (if it were to occur), €110 million aggregate principal amount of the Notes would remain outstanding (unless otherwise redeemed or repurchased). The Notes will be senior secured obligations of the Issuer and will rank equal in right of payment with all of the Issuer’s existing and future senior indebtedness and will rank senior to all of the Issuer’s existing and future indebtedness that is subordinated in right of payment to the Notes. The Notes will be guaranteed (each, a “Guarantee”) on a senior basis by the Guarantors. Each Guarantee will rank equal in right of payment with all of the Guarantors’ existing and future unsubordinated indebtedness and will rank senior to all of the Guarantors’ existing and future indebtedness that is subordinated in right of payment to the Notes. The Notes will be secured by a first-priority pledge of the shares of capital stock of the Issuer and the Subsidiary Guarantors (as defined herein), a first-priority assignment of the on-lending of the offering proceeds from the Issuer to the Company and, upon release of the escrowed funds upon the consummation of the Austrian Acquisition, a first-priority pledge over the shares of voestalpine Stahlhandel GmbH, a first-priority assignment of the on-lending of part of the escrowed funds to voestalpine Stahlhandel GmbH and by other specified security. See “Description of the Notes — Security”. These Listing Particulars include information on the terms of the Notes and the Guarantees, including redemption and repurchase prices, covenants and transfer restrictions. See “Description of the Notes”. References in these Listing Particulars to Offering Memorandum are to the Listing Particulars. Application has been made for the Notes to be listed on the official list of the Luxembourg Stock Exchange and traded on the Euro MTF Market. We expect the Notes will be made ready for delivery in book-entry form through Euroclear and Clearstream on January 29, 2007, against payment in immediately available funds. The issue of the Notes and the execution of the Indenture and the other documents to be entered into in connection with the Offering were approved by the ordinary general meeting of the shareholders of the Issuer held on January 26, 2007 and were decided on January 26, 2007 by the board of directors of the Issuer in accordance with its articles of association, after having an independent appraiser appointed by the Tribunal de Commerce of Evry carry out a verification of the assets and liabilities (vérification de l’actif et du passif) in accordance with article L.228-39 of the Code of commerce.

Investing in the Notes involves a high degree of risk. Please see the section entitled “Risk Factors” beginning on page 19. We have not registered and will not register the Notes or the Guarantees under US federal securities laws or the securities laws of any other jurisdiction. The Notes and the Guarantees are being offered and sold in the United States only to qualified institutional buyers in reliance on Rule 144A of the US Securities Act of 1933, as amended (the “US Securities Act”) and in transactions outside the United States in accordance with Regulation S of the US Securities Act. Please see the sections entitled “Notice to Investors” and “Plan of Distribution” for additional information about eligible offerees and transfer restrictions.

Price: 100% plus accrued interest from the issue date. The date of these Listing Particulars is January 26, 2007.

OFFERING MEMORANDUM

NOT FOR GENERAL CIRCULATION IN THE UNITED STATES

Zlomrex International Finance S.A. €170,000,000 8 1⁄ 2% Senior Secured Notes due 2014 The Senior Secured Notes will be guaranteed on a senior basis by Złomrex S.A. and certain of its subsidiaries. Zlomrex International Finance S.A., a société anonyme organized under the laws of France (the “Issuer”), is offering €170,000,000 aggregate principal amount of its 8 1⁄ 2% Senior Secured Notes due 2014 (the “Notes”) which will be guaranteed by Złomrex S.A., a spólka akcyjna organized under the laws of Poland (the “Company”), and certain of the Company’s subsidiaries (collectively, the “Guarantors”) (the “Offering”). The Notes will bear interest at a rate of 8.50% per annum. Interest on the Notes will be payable on February 1 and August 1 of each year, beginning on August 1, 2007. At any time on or after February 1, 2011, the Issuer may redeem all or part of the Notes by paying a specified premium. Prior to February 1, 2011, the Issuer may also redeem all or part of the Notes if the Issuer pays a “make-whole” premium. In addition, on or before February 1, 2010, the Issuer may redeem up to 35% of the Notes with the net proceeds from one or more equity offerings. If the proposed acquisition of a 74.9% interest in voestalpine Stahlhandel GmbH (“voestalpine Stahlhandel GmbH”) by the Company (the “Austrian Acquisition”) is not consummated on or before June 30, 2007 or the share purchase agreement among the Company, Donauländische Baugesellschaft m.b.H., a wholly-owned subsidiary of voestalpine AG, and voestalpine Stahl GmbH relating to the Austrian Acquisition (the “Share Purchase Agreement”) is terminated at any time prior thereto, Notes in a principal amount of €60 million will be subject to a special mandatory redemption. The special mandatory redemption price is 101% of the aggregate principal amount of the Notes to be redeemed on the date thereof plus accrued and unpaid interest. If, as anticipated, this Offering is consummated prior to the consummation of the Austrian Acquisition, the Issuer will deposit with the escrow agent an amount of cash and cash equivalents so that the escrowed funds are sufficient to pay the special mandatory redemption price, when and if due. After the special mandatory redemption (if it were to occur), €110 million aggregate principal amount of the Notes would remain outstanding (unless otherwise redeemed or repurchased). The Notes will be senior secured obligations of the Issuer and will rank equal in right of payment with all of the Issuer’s existing and future senior indebtedness and will rank senior to all of the Issuer’s existing and future indebtedness that is subordinated in right of payment to the Notes. The Notes will be guaranteed (each, a “Guarantee”) on a senior basis by the Guarantors. Each Guarantee will rank equal in right of payment with all of the Guarantors’ existing and future unsubordinated indebtedness and will rank senior to all of the Guarantors’ existing and future indebtedness that is subordinated in right of payment to the Notes. The Notes will be secured by a first-priority pledge of the shares of capital stock of the Issuer and the Subsidiary Guarantors (as defined herein), a first-priority assignment of the on-lending of the offering proceeds from the Issuer to the Company and, upon release of the escrowed funds upon the consummation of the Austrian Acquisition, a first-priority pledge over the shares of voestalpine Stahlhandel GmbH, a first-priority assignment of the on-lending of part of the escrowed funds to voestalpine Stahlhandel GmbH and by other specified security. See “Description of the Notes — Security”. This Offering Memorandum includes information on the terms of the Notes and the Guarantees, including redemption and repurchase prices, covenants and transfer restrictions. See “Description of the Notes”. Application has been made for the Notes to be listed on the official list of the Luxembourg Stock Exchange and traded on the Euro MTF Market. We expect the Notes will be made ready for delivery in book-entry form through Euroclear and Clearstream on January 29, 2007, against payment in immediately available funds.

Investing in the Notes involves a high degree of risk. Please see the section entitled “Risk Factors” beginning on page 19. We have not registered and will not register the Notes or the Guarantees under US federal securities laws or the securities laws of any other jurisdiction. The Notes and the Guarantees are being offered and sold in the United States only to qualified institutional buyers in reliance on Rule 144A of the US Securities Act of 1933, as amended (the “US Securities Act”) and in transactions outside the United States in accordance with Regulation S of the US Securities Act. Please see the sections entitled “Notice to Investors” and “Plan of Distribution” for additional information about eligible offerees and transfer restrictions.

Price: 100% plus accrued interest from the issue date.

Deutsche Bank The date of this Offering Memorandum is January 23, 2007.

IMPORTANT INFORMATION ABOUT THIS OFFERING MEMORANDUM You should not assume that the information contained in this Offering Memorandum is accurate as of any date other than the date of this Offering Memorandum. The business, financial condition, results of operations and prospects of the Company and its subsidiaries (collectively, the “Group”) may have changed since that date. This Offering Memorandum is a document that we are providing only to prospective purchasers of the Notes. Each prospective purchaser is authorised to use this Offering Memorandum solely for the purpose of considering the purchase of the Notes described herein. You should read this Offering Memorandum before making a decision whether to purchase the Notes. This Offering Memorandum may only be used for the purposes for which it is published. You are responsible for making your own examination of the Group and your own assessment of the merits and risks of investing in the Notes. You should consult with your own advisors as needed to assist you in making your investment decision and to advise you whether you are legally permitted to purchase the Notes. By purchasing the Notes, you will be deemed to have acknowledged that: Š you have reviewed this Offering Memorandum; Š this Offering Memorandum relates only to offers and sales with respect to the Notes; Š you have had an opportunity to request all additional information that you need from us; Š Deutsche Bank AG, London Branch (the “Initial Purchaser”) is not responsible for, and is not making

any representation to you concerning, the Group’s future performance or the accuracy or completeness of this Offering Memorandum; and Š no person is authorised to give any information or to make any representation not contained in this

Offering Memorandum in connection with the issue and sale of the Notes, and any information or representation not contained herein must not be relied upon as having been authorised by or on behalf of the Issuer. Neither the Notes nor the Guarantees have been or will be registered under the US Securities Act or the securities laws of any state of the United States and may not be offered or sold within the United States or to or for the account or benefit of, US persons (as defined in Regulation S under the US Securities Act (“Regulation S”)) except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act. The Notes are being offered and sold outside the United States to non-US persons in reliance on Regulation S and within the United States to “qualified institutional buyers” (“QIBs”) in reliance on Rule 144A under the US Securities Act (“Rule 144A”). Prospective purchasers are hereby notified that the sellers of the Notes may be relying on the exemption from the provisions of Section 5 of the US Securities Act provided by Rule 144A. For a description of these and certain other restrictions on offers, sales and transfers of the Notes and the distribution of this Offering Memorandum, see the sections entitled “Plan of Distribution” and “Notice to Investors”. The Notes have not been approved or disapproved by the US Securities and Exchange Commission (the “SEC”), any state securities commission in the United States or any other US regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of this offering or the accuracy or adequacy of this Offering Memorandum. Any representation to the contrary is a criminal offence in the United States. The Notes are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the US Securities Act and applicable state securities laws pursuant to registration thereunder or exemption therefrom. You should be aware that you may be required to bear the financial risks of this investment for an indefinite period of time. This Offering Memorandum does not constitute an offer to sell or an invitation to subscribe for or purchase any of the Notes in any jurisdiction in which such offer or invitation is not authorised or to any person to whom it is unlawful to make such an offer or invitation. Laws in certain jurisdictions may restrict the distribution of this document and the offer and sale of the Notes. Persons into whose possession this Offering Memorandum or any of the Notes are delivered must inform themselves about and observe those restrictions. Each prospective purchaser of the Notes must comply with all applicable laws and regulations in force in any jurisdiction in which it purchases, offers or sells the Notes or possesses or distributes this document, and must obtain any consent, approval or permission required under any regulations in force in any jurisdiction to which it is subject or in which it purchases, offers or sells the Notes, and neither we nor the Initial Purchaser shall have any responsibility therefore. i

We have summarised certain documents and other information, but we refer you to the actual documents for a more complete understanding of what we discuss in this document. You should not consider any information in this document to be legal, business or tax advice. You should consult your own attorney, business advisor and tax advisor for legal, business and tax advice regarding an investment in the Notes. In making an investment decision, you must rely on your own examination of the business of the Issuer and the Group and the terms of this Offering and the Notes, including the merits and risks involved. We reserve the right to withdraw this Offering of the Notes at any time. We and the Initial Purchaser also reserve the right to reject any offer to purchase the Notes in whole or in part for any reason or no reason and to allot to any prospective purchaser less than the full amount of Notes sought by it. In connection with this issue, Deutsche Bank AG, London Branch or persons acting on its behalf may over-allot or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, Deutsche Bank AG, London Branch is under no obligation to do this. Such stabilizing, if commenced, may be discontinued at any time and must be brought to an end after a limited period ending no later than 30 calendar days after the date on which the Issuer receives the proceeds from this Offering of the Notes. NOTICE PURSUANT TO TREASURY CIRCULAR 230 PURSUANT TO US TREASURY DEPARTMENT CIRCULAR 230, YOU ARE ADVISED THAT THE SUMMARY HEREIN OF CERTAIN US FEDERAL INCOME TAX CONSIDERATIONS IS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON THE TAXPAYER UNDER THE US INTERNAL REVENUE CODE. IT WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE NOTES. EACH TAXPAYER SHOULD SEEK ADVICE BASED ON ITS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR. NOTICE TO POLISH INVESTORS Unless this Offering Memorandum for the Notes has been approved by either the Polish competent authority for the approval of prospectuses for the public offering of securities in Poland or the admission of securities to trading on a European Union-regulated market in Poland or the relevant competent authority in a European Union member state and Poland has received a certificate of such approval with a copy of the prospectus and translation of its summary as required under the Act on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organised Trading, and Public Companies of 29 July 2005 (Journal of Laws — Dziennik Ustaw — of 2005, No. 184 Item 1539) (the “Act on Public Offering”) the Notes may not be publicly offered in Poland or admitted to trading on a European Union-regulated market in Poland. Pursuant to Art. 3 of the Act on Public Offering, “public offering” means “communication in any form and by any means, made within the Republic of Poland and addressed to at least 100 persons, or to an unspecified addressee, which contains sufficient information on the securities to be offered and the terms and conditions of their acquisition, so as to enable an investor to decide to purchase these securities”. Each of the Issuer and Guarantors has represented that it will not admit any Notes to trading on the regulated market in Poland nor offer any Notes in Poland as part of its initial distribution in the event that any such offer would constitute a “public offering” in Poland as defined above. NOTICE TO NEW HAMPSHIRE RESIDENTS NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES, ANNOTATED, 1955, AS AMENDED (“RSA 421-B”), WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATION OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE OR CAUSE TO BE MADE TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. ii

NOTICES TO CERTAIN EUROPEAN RESIDENTS Luxembourg. The Notes may not be offered or sold to the public in the Grand Duchy of Luxembourg, directly or indirectly, and neither this Offering Memorandum nor any other circular, prospectus, form of application, advertisement, communication or other material may be distributed, or otherwise made available in or from, or published in, the Grand Duchy of Luxembourg, except for the sole purpose of the admission of the Notes to the Official List of the Luxembourg Stock Exchange and admission of the Notes for trading on the Euro MTF Market and except in circumstances which do not constitute a public offer of securities to the public. United Kingdom. This Offering Memorandum is directed solely at persons who (i) are outside the United Kingdom or (ii) have professional experience in matters relating to investments or (iii) are persons falling within Article 49(2)(a) to (d) of The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons together being referred to as “relevant persons”). This Offering Memorandum must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this Offering Memorandum relates is available only to relevant persons and will be engaged in only with relevant persons. France. This Offering Memorandum has not been prepared in the context of a public offering in France within the meaning of Article L.411-1 of the Code monétaire et financier and Title I of Book II of the Règlement Général of the Autorité des marchés financiers (the “AMF”) and therefore has not been approved by, registered or filed with the AMF. Consequently, the Notes are not being offered, directly or indirectly, to the public in France and this Offering Memorandum has not been and will not be released, issued or distributed or caused to be released, issued or distributed to the public in France or used in connection with any offer for subscription or sale of the Notes to the public in France. Offers, sales and distributions of the Notes in France will be made only to qualified investors (investisseurs qualifiés) as defined in, and in accordance with, Articles L.411-2 and D.411-1 to D.411-4 of the Code monétaire et financier, on the condition that (i) this Offering Memorandum shall not be circulated or reproduced (in whole or in part) by such qualified investors and (ii) they undertake not to transfer the Notes, directly or indirectly, to the public in France, other than in compliance with applicable laws and regulations pertaining to a public offering (and in particular Articles L.411-1, L.411-2, L.412-1 and L.621-8 of the Code monétaire et financier). Austria. No prospectus has been or will be approved and/or published pursuant to the Austrian Capital Markets Act (Kapitalmarktgesetz) as amended. Neither this document nor any other document connected therewith constitutes a prospectus according to the Austrian Capital Markets Act and neither this document nor any other document connected therewith may be distributed, passed on or disclosed to any other person in Austria, save as specifically agreed with the Initial Purchaser. No steps may be taken that would constitute a public offering of the Notes in Austria and the Offering of the Notes may not be advertised in Austria. The Initial Purchaser has represented and agreed that it will offer the Notes in Austria only in compliance with the provisions of the Austrian Capital Markets Act and all other laws and regulations in Austria applicable to the offer and sale of the Notes in Austria. Germany.

The Offering of the Notes is not a public offering in the Federal Republic of Germany.

Spain. The Notes may not be offered or sold in Spain except in accordance with the requirements of the Spanish Securities Market Law (Ley 24/1988, de 28 de Julio, del Mercado de Valores) as amended and restated and Royal Decree 291/1992 on Issues and Public Offering of Securities (Real Decreto 291/1992, de 27 de Marzo, sobre Emisiones y Ofertas Públicas de Venta de Valores) as amended and restated (“R.D. 291/92”), and subsequent legislation. This Offering Memorandum is neither verified nor registered in the administrative registries of the Comisión Nacional del Mercado de Valores, and therefore a public offer for subscription of the Notes will not be carried out in Spain. Notwithstanding that and in accordance with article 7 of R.D. 291/92, a private placement of the Notes addressed exclusively to institutional investors (as defined in Article 7.1(a) of R.D. 291/92) may be carried out in accordance with the requirements of R.D. 291/92. The Netherlands. The Notes are not, will not and may not be offered, as part of their initial distribution or at any time thereafter, other than: (a)

in The Netherlands, to persons who trade or invest in securities in the conduct of their profession or business (which include banks, stockbrokers, insurance companies, investment undertaking pension funds, other institutional investors and finance companies and treasury departments of large enterprises (“professional investors”));

(b)

in circumstances where one of the exceptions to or exemptions from the prohibition contained in article 3(1) of the Securities Transactions Supervision Act 1995 (“Wet toezichteffectenverkeer 1995”) applies; or iii

(c)

otherwise, to persons who are established, domiciled or resident (“are resident”) outside The Netherlands.

Italy. The Offering of the Notes has not been cleared by CONSOB (the Italian Securities Exchange Commission) pursuant to Italian securities legislation and, accordingly, no Notes may be offered, sold or delivered, nor may copies of this Offering Memorandum or of any other document relating to the Notes be distributed in the Republic of Italy, except (i) to qualified investors (operatori qualificati), other than natural persons, as defined in Article 31, second paragraph, of CONSOB Regulation No. 11522 of July 1, 1998, as amended, provided that such professional investors will act in their capacity and not as depositaries or nominees for other shareholders or (ii) in circumstances which are exempted from the rules on solicitation of investments pursuant to Article 100 of Legislative Decree No. 58 of February 24, 1998, as amended (the “Italian Financial Services Act”), its implementing CONSOB regulations including Article 33, first paragraph, of CONSOB Regulation No. 11971 of May 14, 1999, as amended. Any offer, sale or delivery of the Notes or distribution of copies of this Offering Memorandum or any other document relating to the Notes in the Republic of Italy under (i) or (ii) above must be (a) made by an investment firm, bank or financial intermediary permitted to conduct such activities in the Republic of Italy in accordance with the Italian Financial Services Act and Legislative Decree No. 385 of September 1, 1993 (the “Banking Act”), as amended, and the implementing guidelines of the Bank of Italy, and (b) in compliance with Article 129 of the Banking Act and the implementing guidelines of the Bank of Italy pursuant to which the issue or the offer of securities in the Republic of Italy may need to be preceded and followed by an appropriate notice to be filed with the Bank of Italy depending, inter alia, on the aggregate value of the securities issued or offered in the Republic of Italy and their characteristics, and in accordance with any other applicable laws and regulations including any relevant regulations which may be imposed by CONSOB or the Bank of Italy. In any case, the Notes cannot be offered or sold to any individuals in Italy either in the primary market or the secondary market.

iv

ENFORCEABILITY OF JUDGMENTS The Issuer is a société anonyme organized under the laws of the Republic of France, and the Company is a spółka akcyjna under the laws of the Republic of Poland. Most of our subsidiaries are limited liability companies or joint stock companies organized under the laws of the Republic of Poland, other than AB Stahl AG and Złomrex China Ltd., which are organized under the laws of Germany and Hong Kong, respectively, and voestalpine Stahlhandel GmbH, organized under the laws of Austria, and its subsidiaries if the Austrian Acquisition (as defined herein) is closed. All of the directors and executive officers of the Issuer, the Company and the Guarantors are resident outside the United States, and all or a substantial portion of the assets of such persons, the Issuer, the Company and the Guarantors are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon the Issuer, the Company, the Guarantors or such persons or to enforce against any of them in United States courts judgments obtained in United States courts including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state or territory within the United States. France Our French counsel, Orrick Rambaud Martel, has advised us that the United States and France are not party to any bilateral treaty providing for reciprocal recognition and enforcement of judgments, other than arbitral awards, rendered in civil and commercial matters. Accordingly, a judgment rendered by any US federal or state court based on civil liability, whether or not predicated solely upon US federal or state securities laws, enforceable in the United States, would not directly be recognized or enforceable in France. A party in whose favor such judgment was rendered could initiate enforcement proceedings (procédure d’exequatur) in France before the relevant civil court (Tribunal de Grande Instance) having jurisdiction. Enforcement in France of such US judgment can be obtained following adversary proceedings if the civil court is satisfied that the following conditions have been met (which conditions, under prevailing French case law, do not include a review by the French court on the merits of the foreign judgment): Š such US judgment was rendered by a court having jurisdiction over the matter in accordance with

French rules of international conflicts of jurisdiction (including, without limitation, whether the dispute is clearly connected to the United States) and the French courts did not have exclusive jurisdiction over the matter; Š the court that rendered such judgment has applied a law which would have been considered applicable

and/or appropriate under French rules of international conflicts of laws; Š such US judgment does not contravene French international public policy rules, both pertaining to the

merits (i.e. fundamental principles of French law) and to the procedure of the case; Š such US judgment is not tainted with fraud and the choice of jurisdiction is not fraudulent; and Š such US judgment does not conflict with a French judgment or a foreign judgment which has become

effective in France and there are no proceedings pending before French courts at the time enforcement of the judgment is sought and having the same or similar subject matter as such US judgment. In addition, the discovery process under actions filed in the United States could be affected by the reserves France inserted in its Act of Adherence, as amended on January 19, 1987, to the Hague Convention of March 18, 1970. Our French counsel has also advised us that according to article 14 and 15 of the French Civil Code, in the event that a party brings an action outside France against a French national (either a company or an individual), French courts will still have exclusive jurisdiction over a French national (who has French citizenship at the time the suit is filed) which could require the non-French court to refuse to adjudicate the case in question. The French national may refuse to be brought before non-French courts and require the complainant to bring his action in France. In addition, a French national may decide to bring an action before the French courts, regardless of the nationality of the defendant. However, the French national may waive its rights to refuse to be brought before a non-French court or to bring an action before a French court against a non-French defendant. Poland Our Polish counsel has advised us that the United States and Poland are not party to a treaty providing for reciprocal recognition and enforcement of judgements, other than arbitral awards, rendered in civil and commercial v

matters. Accordingly, a judgment rendered by any US federal or state court, based on civil liability, whether predicated solely upon US federal or state securities laws, enforceable in the United States, would not be directly recognized or enforceable in the Republic of Poland. We have also been advised by our Polish counsel that a foreign court judgment issued by the court of a country which is not a party to a treaty providing for reciprocal recognition and enforcement of judgments may be recognised in the Republic of Poland by a Polish court provided that: Š there is reciprocity between the Republic of Poland and the country whose court issued such

judgment; Š such judgment is final in the country whose court issued the same; Š the case does not belong to a category of matters that, pursuant to Polish law or the provisions of an

international treaty to which the Republic of Poland is a party, are restricted to the jurisdiction of Polish courts or the courts of a third state; Š neither party has been deprived of the right to defend its rights before a court or of the right to have a

proper representative before the court if the party itself was incapable of taking legal actions before the court; Š the case had not been finally decided by, or had not been brought before, the relevant Polish court

prior to the date on which the foreign court judgment became final; and Š if Polish law was applicable to the matter, the court applied Polish law or if the court applied foreign

law, such foreign law was not substantially different from Polish law in respect of such matter. Reciprocity is not required in matters which, under the laws of the Republic of Poland, belong to the exclusive jurisdiction of courts of the country whose court issued the judgment. In addition, our Polish counsel has informed us that a foreign court judgment issued by the court of a country which is not a party to a treaty providing for reciprocal recognition and enforcement of judgments may be enforceable in the territory of the Republic of Poland provided that the judgment is enforceable in the country whose court issued the judgment and all conditions referred to above are satisfied. Austria The United States and Austria are not party to any bilateral treaty providing for reciprocal recognition and enforcement of judgments, other than arbitral awards, rendered in civil and commercial matters. Accordingly, a judgment rendered by any US federal or state court based on civil liability, whether or not predicated solely upon US federal or state securities laws, enforceable in the United States, would not be recognized or enforceable in Austria. A party in whose favor such judgment was rendered could initiate enforcement proceedings in Austria before the relevant civil court having jurisdiction only after having obtained a judicial enforceability statement (Vollstreckbarkeitserklärung) rendered by an Austrian court competent under the rules of the Austrian Enforcement Act (Exekutionsordnung). However, Austrian courts will not issue such enforceability statements, as no bilateral treaty or regulation exists which authenticates the reciprocity with respect to judgments rendered by US courts.

vi

FORWARD-LOOKING STATEMENTS This Offering Memorandum includes forward-looking statements as encouraged by the US Private Securities Litigation Reform Act of 1995 regarding, among other things, our plans, strategies and prospects, both business and financial. All statements contained in this document other than historical information are forwardlooking statements. Forward-looking statements include, but are not limited to, statements that represent our beliefs concerning future operations, strategies, financial results or other developments, and contain words and phrases such as “may”, “expect”, “should”, “continue”, “could”, “plan”, “will”, “aim”, “potential” or similar expressions. Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different. Although we believe that our plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable as of the date attributable to them, we cannot assure you that we will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Important factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to: Š cyclical economic conditions affecting the construction and machine industries in Poland and Europe; Š raw material and energy price increases affecting our production costs or the supply of such raw

materials and energy being disrupted; Š other increases in our cost base including changes in the statutory minimum wage; Š increasing consolidation among our customers; Š risks related to our competitive position in our existing and new markets; Š current and future acquisitions, partnerships and joint ventures; Š government regulation; Š risks associated with our structure, the Notes, the Guarantees and our other indebtedness; Š changes in international, legal, administrative or economic conditions; and Š other factors discussed in this Offering Memorandum.

Consequently, such forward-looking statements should be regarded solely as our current plans, estimates and beliefs. We do not intend, and do not undertake any obligation to update any forward-looking statements to reflect future events or circumstances after the date of such statements. You should interpret all subsequent written or oral forward-looking statements attributable to us or to persons acting on our behalf as being qualified by the cautionary statements in this Offering Memorandum. You should review carefully the section captioned “Risk Factors” in this Offering Memorandum for a more complete discussion of the risks of an investment in the Notes. INDUSTRY AND MARKET DATA Information related to markets, market size, market share, growth rates and other industry data pertaining to our business and markets contained in this Offering Memorandum consists of estimates based on management’s knowledge of our sales and markets and our own research. This research includes private and publicly available surveys or studies conducted by, or data and reports compiled by third parties not affiliated with us. In many cases, there is no readily available external information, whether from trade associations, government bodies or other organizations, to validate market-related analyses and estimates, thus requiring us to rely on internally developed estimates based on our experience and investigation of market conditions. Where we have compiled, extracted and reproduced market or other industry data from external sources, neither the Issuer, the Company nor the Initial Purchaser has independently verified the data. While we believe these sources are reliable, we cannot assure you of the accuracy and completeness of, and take responsibility only for the extraction of such information from the source material. Similarly, while we believe our internal estimates to be reasonable, they have not been verified by independent sources, and therefore we cannot assure you of their accuracy. In addition, in some cases we have made statements in this Offering Memorandum regarding our industry and competitive position based on our experiences and our investigation of market conditions. We cannot assure you that any of these assumptions are accurate or correctly reflect our competitive position within the industry, and none of our internal surveys or information has been verified by independent sources, which may have estimates or opinions regarding industry related data information that may differ from our own.

vii

CERTAIN DEFINITIONS In this Offering Memorandum, the following terms have the following meanings: “Acquisition On-Loan” has the meaning assigned to it in “Summary — Our Corporate and Financing Structure”. “Acquisitions” means the Austrian Acquisition and the Polish Acquisitions. “Austrian Acquisition” means our acquisition of a 74.9% interest in voestalpine Stahlhandel GmbH, an indirect steel trading subsidiary of voestalpine AG, with an option to acquire a further 25.1% interest, as described in “Summary — Recent Developments — voestalpine Stahlhandel GmbH” and “The Transactions — The Austrian Acquisition” in this Offering Memorandum”. “AB Stahl” means AB Stahl AG, a subsidiary of the Company. “Audited Consolidated Financial Statements” have the meaning assigned to them in “Presentation of Financial Information”. “Bank BPH Offer” has the meaning assigned to it in “Description of Other Indebtedness”. “Bank Pekao” has the meaning assigned to it in “Description of Other Indebtedness”. “BRE Bank Offer” has the meaning assigned to it in “Description of Other Indebtedness”. “Centrostal Companies” means Centrostal, Centrostal Opole and Centrostal Górnos´la˛ski. “Centrostal Górnos´la˛ski” means Centrostal Górnos´la˛ski Sp. z o.o., a subsidiary of the Company. “Centrostal Opole” means POWH Centrostal S.A. in Opole, a subsidiary of the Company. “Centrostal” means Centrostal S.A. in Gdansk, a subsidiary of the Company. “CKM “Włókniarz”” means Cze˛stochowski Klub Motocyklowy, a joint stock company founded on October 23, 2006. “Collateral” has the meaning assigned to it in “The Offering”. “Company” means Złomrex S.A. but not its subsidiaries. “Consolidated Financial Statements” have the meaning assigned to them in “Presentation of Financial Information”. “Donauländische Baugesellschaft” means Donauländische Baugesellschaft m.b.H., a wholly-owned subsidiary of voestalpine AG, and one of the two sellers of voestalpine Stahlhandel GmbH. “EC” has the meaning assigned to it in “Business — Regulatory Environment — EC regulatory regime”. “ECSC” has the meaning assigned to it in “Business — Regulatory Environment — EC regulatory regime”. “EEA Agreement” has the meaning assigned to it in “Business — Regulatory Environment — EC regulatory regime”. “EFTA” has the meaning assigned to it in “Business — Regulatory Environment — EC Regulatory regime”. “Ferrostal Łabe˛dy” means Ferrostal Łabe˛dy Sp. z o.o., a subsidiary of the Company. “Fortis Agreement” has the meaning assigned to it in “Description of Other Indebtedness”. “Group”, “we”, “our” and “us” means the Company and its subsidiaries from time to time and “member of the Group” and “Group company” means any of the Company or its subsidiaries. “gross profit” means for purposes of segmental reporting revenues minus cost of sales, except where indicated otherwise. “Guarantee” has the meaning assigned to it in “The Offering”. “Guarantors” means the Company and certain subsidiaries of the Company identified as guarantors in “Summary — Our Corporate and Financing Structure”. “HSW-HSJ” means Huta Stalowa Wola–Huta Stali Jakos´ciowych S.A., the successor company that resulted from the merger of HSW-WB and Huta Stalowa Wola–Huta Stali Jakos´ciowych Sp. z o.o. in November 2006 and a subsidiary of the Company. viii

“HSW-WB” means Huta Stalowa Wola–Walcownia Blach Sp. z o.o., a former subsidiary of the Company. Effective November 2, 2006, HSW-WB and Huta Stalowa Wola–Huta Stali Jakos´ciowych Sp. z o.o. merged and the successor company is Huta Stalowa Wola–Huta Stali Jakos´ciowych S.A. “Indenture” has the meaning assigned to it in “The Offering”. “Intercompany Proceeds Note” has the meaning assigned to it in “Summary — Our Corporate and Financing Structure”. “IFRS” means International Financial Reporting Standards as adopted by the European Union. “Issuer” means Zlomrex International Finance S.A. “Kapitał” means Kapitał Sp. z o.o., a subsidiary of the Company. “Korba” has the meaning assigned to it in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — History”. “Mandatorily Redeemable Notes” has the meaning assigned to it in “The Offering”. “National Fund” means the National Fund for the Protection of Environment and Water Management (Narodowy Fundusz Ochrony S´rodowiska i Gospodarki Wodnej). “Nowa Jakos´c´” means Nowa Jakos´c´-Organizacja Odzysku S.A., a subsidiary of the Company. “Offering Memorandum” means this Offering Memorandum. “Other Division Companies” has the meaning assigned to it in “Summary — Our Corporate and Financing Structure”. “Parallel Debt” has the meaning assigned to it in “Risk Factors — The security over the shares of the Issuer and the Subsidiary Guarantors and, upon consummation of the Austrian Acquisition, voestalpine Stahlhandel GmbH, will not be granted directly to the holders of the Notes but rather through “parallel debt” obligations”. “Polish Acquisitions” means our acquisitions of HSW-HSJ and HSW-WB in January 2006. “Polish GAAP” means generally accepted accounting principles in Poland. “Polish Financial Supervisory Commission” means Komisja Nadzoru Finansowego. “Pro Forma Financial Information” has the meaning assigned to it in “Presentation of Financial Information”. “Principal Obligations” has the meaning assigned to it in “Risk Factors — The security over the shares of the Issuer and the Subsidiary Guarantors and, upon consummation of the Austrian Acquisition, voestalpine Stahlhandel GmbH, will not be granted directly to the holders of the Notes but rather through “parallel debt” obligations. “Refinancing” has the meaning assigned to it in “The Transactions”. “Revolving Credit Facilities” means our new up to €40 million revolving credit facilities established for working capital purposes, executed on or prior to the Issue Date. See “The Transactions — Revolving Credit Facilities” and “Description of Other Indebtedness — Revolving Credit Facilities”. “Share Pledges” has the meaning assigned to it in “The Offering”. “Share Purchase Agreement” means the share purchase agreement entered into on December 20, 2006 among the Company, Donauländische Baugesellschaft and voestalpine Stahl GmbH under which the Company agreed to acquire a 74.9% interest in voestalpine Stahlhandel GmbH with an option to acquire a further 25.1% interest. “Subsidiary Guarantors” has the meaning assigned to it in “Description of the Notes”. “Surviving Indebtedness” has the meaning assigned to it in “Summary — Our Corporate and Financing Structure”. “Szopienice” means Odlewnia Metali Szopienice Sp. z o.o., a subsidiary of the Company. “tonnes” refer to metric tonnes. “Transactions” has the meaning assigned to it in “The Transactions”. “Trustee” means The Bank of New York. ix

“US GAAP” means generally accepted accounting principles in the United States. “Unaudited Financial Statements” have the meaning assigned to them in Presentation of Financial Information”. “voestalpine Share Pledge” has the meaning assigned to it in “The Offering”. “voestalpine Stahl GmbH” means voestalpine Stahl GmbH, a subsidiary of voestalpine AG, and one of the two sellers of voestalpine Stahlhandel GmbH. “voestalpine Stahlhandel GmbH” means voestalpine Stahlhandel GmbH, a limited liability company under Austrian law, and its subsidiaries. “voestalpine AG” means the ultimate parent company of voestalpine Stahlhandel GmbH before the closing of the Austrian Acquisition. “Zbrojarnia” means Złomrex Zbrojarnia Sp. z o.o., a subsidiary of the Company. “Złomrex China” means Złomrex China Ltd., a subsidiary of the Company. “Złomrex-Finans” means Złomrex-Finans Sp. z o.o., a subsidiary of the Company. “Złomrex Pruszków” means Złomrex Pruszków Sp. z o.o., a subsidiary of the Company. “Złomrex Share Pledges” has the meaning assigned to it in “The Offering”. “ZW-WB” means Zakład Walcowniczy-Walcownia Bruzdowa Sp. z o.o., a subsidiary of the Company. “2007, 2006, 2005, 2004, 2003 and 2002” means, respectively, our fiscal year ended December 31 of the referenced year.

x

PRESENTATION OF FINANCIAL INFORMATION Our audited consolidated financial statements as of and for the years ended December 31, 2005 and 2004 and the related notes thereto, which are included elsewhere in this Offering Memorandum (the “Audited Consolidated Financial Statements”), and our unaudited consolidated financial statements as of and for the nine months ended September 30, 2006 and 2005 and the related notes thereto, which are included in this Offering Memorandum (the “Unaudited Consolidated Financial Statements”, together with the Audited Consolidated Financial Statements, the “Consolidated Financial Statements”), have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS”), which differ in significant respects from generally accepted accounting principles in the United States (“US GAAP”). The audited consolidated financial statements as of and for the year ended December 31, 2005 of our subsidiaries HSW-HSJ and HSW-WB1, both of which are included elsewhere in this Offering Memorandum, have been prepared in accordance with Polish GAAP, which differ in significant respects from IFRS and US GAAP. The audited consolidated financial statements of voestalpine Stahlhandel GmbH as of and for the fiscal year ended March 31, 2006 and the unaudited consolidated financial statements as of and for the six months ended September 30, 2006 and 2005, which are included elsewhere in this Offering Memorandum, have been prepared in accordance with IFRS. As described elsewhere in this Offering Memorandum, we signed a share purchase agreement on December 20, 2006 to acquire a 74.9% interest in voestalpine Stahlhandel GmbH, with an option to acquire a further 25.1% interest, and we anticipate that the acquisition will close during the first half of 2007. This Offering Memorandum also includes certain unaudited pro forma consolidated financial information of the Group giving effect to the Polish Acquisitions, which we completed in the first quarter of 2006, and the Austrian Acquisition, which we anticipate will close in the first half of 2007, using the purchase method of accounting and the assumptions and adjustments described in the notes accompanying that information (the “Pro Forma Financial Information”). This unaudited pro forma consolidated financial information assumes that the Acquisitions occurred on the dates specified therein. The adjustments made to reflect such Acquisitions are based on the accounting records of each such acquired company, which are recorded in Polish GAAP for HSW-HSJ and HSW-WB and which are recorded in IFRS for voestalpine Stahlhandel GmbH. For a summary of the differences between IFRS and US GAAP see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Significant Differences between IFRS and US GAAP”. Some financial information in this Offering Memorandum has been rounded and, as a result, the numerical figures shown as totals in this Offering Memorandum may vary slightly from the exact arithmetic aggregation of the figures that precede them. CURRENCY PRESENTATION In this Offering Memorandum, unless otherwise indicated, all references to the “EU” are to the European Union, all references to “Euro”, “EUR” or “€” are to the single currency of the participating member states of the European and Monetary Union of the Treaty Establishing the European Community, as amended from time to time; all references to the “United States” or the “US” are to the United States of America and all references to “US dollars”, “USD” and “US$” are to the lawful currency of the United States of America; and all references to “Poland” are to the “Republic of Poland” and all references to “PLN”, “zloty” and “Polish zloty” are to the lawful currency of the Republic of Poland. For convenience, PLN amounts translated into euros in this Offering Memorandum have been translated at the rate of PLN 3.98 = €1.00, the approximate rate of exchange prevailing as of September 30, 2006. However, these translations should not be construed as representations that the zloty amounts have been, could have been or could be converted into euros at those or any other rates.

1

Effective November 2, 2006, HSW-WB and HSW-HSJ merged. For purposes of the presentation of the information in the section “Unaudited Pro Forma Consolidated Financial Data” and in the “Index to Consolidated Financial Statements” in this Offering Memorandum, we refer to HSW-HSJ and HSW-WB to mean the two separate entities before their merger. Unless otherwise specifically indicated, all other references in this Offering Memorandum to HSW-HSJ are to the successor company resulting from the merger, Huta Stalowa Wola-Huta Stali Jakos´ciowych S.A. xi

EXCHANGE RATE DATA The following tables show, for the periods indicated, the high, low, period average and period end 11:00 A.M. (Warsaw time) buying/selling rate average of the dealer banks as published by the National Bank of Poland for the zloty (the “NBP Euro Exchange Rate”) expressed as zloty per €1.00. The NBP Euro Exchange Rate is provided solely for your convenience. No representation is made that the Euro was, could have been, or could be, converted into zloty at these rates or any other rate. For information regarding the effect of currency fluctuations on our results of operations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors — Risks Related to Our Business — Our business may be adversely affected by exchange rate fluctuations” in this Offering Memorandum. The NBP Euro Exchange Rate for January 22, 2007 was PLN 3.84 = €1.00. Zloty per Euro High

Low

Period average

Period end

4.21 4.72 4.91 4.28 4.11

3.50 3.98 4.05 3.82 3.76

3.86 4.40 4.53 4.02 3.90

4.02 4.72 4.08 3.86 3.83

Month

High

Low

Period average

Period end

September 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . October 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . November 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . January 2007 (through January 22) . . . . . . . . . . . . . . . . . . . . . . . . .

3.99 3.98 3.87 3.84 3.89

3.94 3.86 3.80 3.79 3.83

3.97 3.90 3.82 3.81 3.87

3.98 3.88 3.82 3.83 3.84

Year

2002 2003 2004 2005 2006

................................................. ................................................. ................................................. ................................................. .................................................

xii

SUMMARY This overview may not contain all the information that may be important to prospective purchasers of the Notes and, therefore, should be read in conjunction with this entire Offering Memorandum, including the more detailed information regarding our business and the financial statements and related notes included elsewhere in this Offering Memorandum. Prospective purchasers of the Notes should also carefully consider the information set forth under the heading “Risk Factors”. Certain statements made in this Offering Memorandum include forward-looking statements that also involve risks and uncertainties as described under “Forward-Looking Statements” in this Offering Memorandum. Our Business We are the largest supplier of scrap metal, the second largest seller of semi-finished steel products and the fifth largest seller of finished steel products in Poland based on volume. Our operations are fully integrated and span the entire steel production process, including one of the largest retail distribution networks in Poland and, upon the closing of our anticipated acquisition of voestalpine Stahlhandel GmbH, the leading warehousing and steel distribution company in Austria, with significant operations in Central and Eastern Europe. Our business is divided into four segments, which include: Š Scrap metal segment.

We purchased approximately 692,000 tonnes of scrap metal in 2005, of which approximately 57% was used by our semi-finished products segment and approximately 43% was sold to external customers in Poland, and we had a market share of approximately 12.5% of the scrap metal purchased in Poland in 2005;

Š Semi-finished products segment.

We sold approximately 172,000 tonnes of semi-finished steel products to external customers in 2005, of which 138,000 tonnes were sold in the Polish market, and we had a market share of approximately 28% of semi-finished steel products sold to external customers in Poland in 2005;

Š Finished products segment.

We sold approximately 220,000 tonnes of finished steel products to external customers in 2005, substantially all of which were sold in the Polish market, and we had a market share of approximately 3% of finished steel products sold to external customers in Poland in 2005 and approximately 5% in 2006 as a result of recent acquisitions; and

Š Other segment.

We sold approximately 26,000 tonnes of non-ferrous scrap and non-ferrous scrap products to external customers in 2005.

Our strong position in the scrap metal and semi-finished products segments enables us to reduce margin volatility and to secure feedstock scrap requirements for our own production facilities. This enables us to use our own sources of scrap metal supply to produce semi-finished and finished products in times of major shortages of scrap metal in the scrap metal market. Founded in 1990, we have rapidly transformed ourselves from a scrap metal trading company into a fully integrated steel producer through internal growth and acquisitions. Through a number of acquisitions over the past few years, we have increased our production capacity and increased the range of production of our semifinished and finished products. We believe that our increased production of high grade semi-finished and finished steel products, coupled with our ability to produce small batches of both of these products tailor made to our customers’ needs, have given us a competitive advantage over larger steel producers in Poland such as Mittal Steel Poland (now Arcelor Mittal) whose production facilities produce large quantities of lower grade steel. We have complemented our production capabilities with a retail distribution network in Poland for our finished products through separate acquisitions of Centrostal Górnos´la˛ski, Centrostal and Centrostal Opole in 2006, becoming one of the largest retail distribution networks in Poland. On December 20, 2006, we entered into a share purchase agreement to acquire a 74.9% interest in voestalpine Stahlhandel GmbH, the leading warehousing and steel distribution company in Austria in terms of revenue and volume with significant operations in Central and Eastern Europe, with an option to acquire a further 25.1% interest (the “Share Purchase Agreement”) (the “Austrian Acquisition”). We believe that the Austrian Acquisition will enable us to secure demand from end customers for our finished products, achieve economies of scale in our finished products segment by enabling us to reach our end customers and build an international retail distribution network to expand our geographic reach. We also believe that through the Austrian Acquisition our retail distribution network business will become one of the most important factors driving growth in our overall business in the future.

1

Despite an unexpected sharp decrease in steel prices and a general market downturn in the Polish steel industry in 2005 which caused our revenues to decline, we have generally increased our revenues over the last three years. Our total consolidated revenues for the year ended December 31, 2005 amounted to approximately PLN 976.2 million (€245.3 million), compared to approximately PLN 1,194.9 million (€300.2 million) for the year ended December 31, 2004. Our total consolidated revenues for the nine months ended September 30, 2006 amounted to PLN 1,417.0 million (€356.0 million), compared to PLN 737.7 million (€185.4 million) for the nine months ended September 30, 2005. On a pro forma basis giving effect to the Transactions, we had total consolidated revenues of PLN 2,404.2 million (€604.1 million) for the nine months ended September 30, 2006 and PLN 2,599.8 million (€653.2 million) for the year ended December 31, 2005. Our Segments and Products We organize our business into four segments: scrap metal, semi-finished products, finished products and other. Scrap Metal We are the largest supplier of scrap metal in Poland based on volume with a market share of approximately 12.5% of the scrap metal purchased in Poland in 2005. Our scrap metal segment consists of buying, processing, and selling scrap metal to our customers and for our own internal use. Our scrap metal collection network consists of 14 existing scrap metal yards situated close to our customers primarily in regions in southern Poland which have the best sources of scrap metal due to the concentration of heavy industry. An additional scrap metal yard in north eastern Poland is under construction. We also purchase scrap metal from a large number of scrap metal traders (including collection branches and industrial producers) which are serviced by our container fleet. In 2005, we obtained approximately 42% of our entire scrap metal supply from our own scrap metal collection network, with the remaining approximately 58% being purchased from scrap metal traders. This enables us to use our own sources of scrap metal supply to produce semi-finished and finished steel products in times of major shortages of scrap metal in the scrap metal market. We have a broad and stable customer base for scrap metal, including CMC Zawiercie, Celsa Huta Ostrowiec, Moravia Steel, and Mittal Steel Poland (now Arcelor Mittal) and also leverage our extensive scrap metal collection network to provide competitive pricing to our customers. We intend to establish two additional scrap metal yards in our scrap metal collection network each year, at a cost of approximately PLN 4.0 million (€1.0 million) per yard, to gain more access to sources of scrap metal supplies until we have the geographic reach to cover all potential primary scrap suppliers in Poland. Our scrap metal segment is our third largest segment in terms of revenues, accounting for approximately 19.3% and 10.9%, respectively, of our consolidated revenues and gross profit for the year ended December 31, 2005 and 11.9% and 6.6%, respectively, of our consolidated revenues and gross profit for the nine months ended September 30, 2006. Semi-Finished Products We are the second largest seller of semi-finished steel products in Poland based on volume with a market share of approximately 28% of sales to external customers in 2005 and the fifth largest producer of semi-finished steel products based on volume with a market share of approximately 4% in 2005. Our semi-finished products segment consists of buying and processing scrap metal into steel billets and selling some of those steel billets to our customers with the remainder for our own internal use. Approximately 54% of the semi-finished products produced at our steel mills and purchased by us on the market from third parties were used by our finished products business in 2005, with the remaining approximately 46% sold to customers such as Huta Łabe˛dy, Man Ferrostal, Huta Pokój S.A. and Stalexport. We offer a broad range of semi-finished products, concentrating primarily on steel square and round billets and to a much lesser extent on blooms and sheet slabs. Unlike many of our competitors, we can produce small batches of high grade, higher margin steel billets for special applications, and we have access to scrap metal, our primary raw material in the production of semi-finished products, through our scrap metal collection network. Our semi-finished products segment is our second largest segment in terms of revenues, accounting for 24.3% and 52.8%, respectively, of our consolidated revenues and gross profit for the year ended December 31, 2005 and 15.6% and 21.0%, respectively, of our consolidated revenues and gross profit for the nine months ended September 30, 2006. We expect growth in this segment as growth in the automotive and tube rolling industries in Poland and Europe continues. Finished Products We are the fifth largest producer of finished steel products in Poland with a market share of

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approximately 5% in 2005. In addition to selling products that we produce, we also buy finished products on the market and resell them to our customers. We are the fifth largest seller of finished steel products in Poland based on volume with a market share of approximately 3% of sales to external customers in 2005 and approximately 5% in 2006 as a result of recent acquisitions. We buy steel billets from our semi-finished products segment and other companies, process them into finished products and sell them to our customers. We have an extensive range of customers inside Poland, principally in the construction, machine, forging, shipbuilding, defense and mining industries, including ThyssenKrupp, Baustal, Bodeko and Stalexport. We have a highly diversified product offering which includes long products such as flat, plain and reinforced steel bars and flat products (steel sheets and strips). We have recently started offering higher margin products such as special application products for the mining industry and steel sheet products with military applications (armor jackets and steel plating for tanks). We benefit from our ability to produce a full range of products in small batches unlike our major competitors, our access to our extensive scrap metal collection network, our concentration on high grade finished steel products with high margins and our stable customer base. Our recent acquisitions of Centrostal Górnos´la˛ski, Centrostal and Centrostal Opole have provided us with a retail distribution network through which to sell our finished products directly to end customers throughout Poland. Our finished products segment is our largest segment in terms of revenues, accounting for 37.8% and 9.8%, respectively, of our consolidated revenues and gross profit for the year ended December 31, 2005 and 54.0% and 57.2%, respectively, of our consolidated revenues and gross profit for the nine months ended September 30, 2006. We expect substantial growth in this segment as growth in the construction and machine industries in Poland and Europe continues. In addition, the Austrian Acquisition will also provide us with a retail distribution network in Austria and Central and Eastern Europe through which to sell our finished products to voestalpine Stahlhandel GmbH’s customers. We believe that through the Austrian Acquisition our retail distribution network will become one of the most important factors driving growth in our overall business in the future as well as helping to reduce volatility in end product sales by selling directly to end customers. voestalpine Stahlhandel GmbH’s revenues for the fiscal year ended March 31, 2006 were €303.8 million and for the six months ended September 30, 2006 were €172.0 million. Other We buy, sell and process non-ferrous scrap into finished products, buy and sell non-ferrous products and recycle materials such as plastic foil, aluminum, paper and other products. Our products in our other segment include non-ferrous rods, strips, and ingots. Our other segment further diversifies our exposure to certain commodities. Since this segment is exposed to the commodity prices of non-ferrous products, it is not exposed to steel price volatility. In 2005, the other segment was the most profitable one, as non-ferrous metals did not decline in price as steel did. We rely on a stable customer base which primarily includes KGHM Metraco, the Hutmen Group, and Alumetal Kety. Our other segment is our fourth largest segment both in terms of revenues and gross profit, accounting for 18.7% and 26.5% of consolidated revenues and gross profit for the year ended December 31, 2005 and 18.5% and 15.1% of our consolidated revenues and gross profit for the nine months ended September 30, 2006. Competitive Strengths Strong retail distribution network. Our strong retail distribution network enables us to reach and respond to a growing number of customers. With the recent acquisitions of Centrostal Górnos´la˛ski, Centrostal and Centrostal Opole and the anticipated acquisition of voestalpine Stahlhandel GmbH headquartered in Austria, we will have created a retail distribution network for our finished products which is the largest in Austria and one of the largest in Poland and in Central and Eastern Europe. See “Business — Finished Products — Distribution — Centrostal Companies — and — voestalpine Stahlhandel GmbH” in this Offering Memorandum. Our acquisition of voestalpine Stahlhandel GmbH, the leading warehousing and steel distribution company in Austria in terms of revenue and volume with significant operations in Central and Eastern Europe, will not only increase distribution capabilities for our finished products in Austria and Central and Eastern Europe and enable us to market additional products to our growing end customer base, but we believe it will trigger growth by allowing us to interact with end customers directly and thus enable us to more quickly adjust to changes in demand and to ultimately procure more business from our customers. We believe that through the Austrian Acquisition our retail distribution business will become one of the most important factors driving growth in our overall business in the future. Vertically-integrated business. As a vertically-integrated steel producer, our exposure to external margin volatility is limited because our overall margin is comprised of three independent components (steel scrap, retail distribution and production), two of which (steel scrap and retail distribution) are relatively stable

3

throughout the steel cycle. Unlike our competitors, we can also increase the supply of scrap metal on short notice to meet increasing demand from our semi-finished and finished products segments because we have access through our own scrap metal collection network and purchases from scrap metal traders to almost twice the amount of scrap metal necessary for our steel mills to produce our semi-finished and finished products. Largest scrap metal supplier in Poland. We are the largest scrap metal supplier in Poland based on volume, having purchased approximately 692,000 tonnes of scrap metal in 2005, of which approximately 57% was used by our semi-finished and finished products segments and approximately 43% was sold to external customers in Poland. We currently have the largest scrap metal collection network in Poland with 14 existing scrap metal yards and an additional scrap metal yard in northeastern Poland is under construction. We had a market share of 12.5% of the scrap metal purchased in Poland in 2005. Our scrap metal yards are strategically located in key regions primarily in southern Poland which are in close proximity to scrap sources due to the concentration of heavy industry in that region. Our scrap metal yards are also specially equipped with modern equipment to handle large volumes of scrap metal and are close to major transportation centers to facilitate the distribution and trade of scrap metal. Due to scrap metal being a primary material for the production of our semifinished and finished steel products, our position as the largest scrap metal supplier in Poland also enables us to ensure that we can meet our own production requirements for these products, even in times of major shortages of scrap metal in the market. In addition, we believe that being the largest scrap metal supplier in Poland we have an advantage over our competitors because we have the most modern facilities to process scrap metal, as well as fleets of specialized vehicles and containers to facilitate collecting scrap and modern machinery such as shear machines to press and cut scrap, and we have a long established brand name and long-term relationship with our customers. Flexible cost structure. Our cost structure is more flexible than that of most of our competitors because we use electric arc furnace technology where scrap metal is the primary raw material accounting for approximately 90% of raw materials used as compared to blast furnaces which rely predominantly on iron ore as a raw material. Historically, scrap prices have had a close correlation to steel prices which has the effect of allowing us to pass on feedstock price increases to our customers and of reducing volatility. In addition, we have the ability to source scrap metal from our scrap metal segment, and in times of changing market conditions we can adjust quickly to changes in the market since scrap purchase prices and our steel product sales are typically set monthly. By comparison, companies using blast furnaces cannot easily negotiate lower prices of iron ore because of the concentration of iron ore producers and because contracts with iron ore producers are usually set on a yearly basis with fixed prices. In addition, electric arc furnaces require less machinery, fixed assets and employees to operate relative to blast furnaces and can be switched off immediately, without paying any additional costs. We also do not lose expensive refractory materials which are crucial to steel production in blast furnaces and are lost when blast furnaces are shut down. Variable costs accounted for 86.5% of our total costs in 2005. We believe our cost structure will become even more flexible after the Austrian Acquisition because voestalpine Stahlhandel GmbH’s retail distribution business is characterized by an even higher level of variable costs than we have had historically. Our modern production facilities produce higher quality niche products. We have the most modern production facilities in Poland which enable us to produce high grade semi-finished and finished products tailor made in small batches for our customers. Our modern steelworks at Ferrostal Łabe¸dy and HSW-HSJ, for example, can produce a full range of steel billets (classes I through VI at Ferrostal Łabe¸dy and classes I through VIII at HSW-HSJ). We are shifting our focus to concentrate even more on high grade steel (classes IV to VIII). Our rolling mills also specialize in the production of high quality niche products such as a full range of flat bars, including special application bars at ZW-WB, small diameter reinforcement bars at Ferrostal Łabe˛dy and high grade thick steel sheets at HSW-HSJ. In addition, there are a limited number of competitors in the Polish market concentrating on the production of these tailor-made products. As a result, we can earn higher margins because we can offer small batches of tailor made products to the forging, automotive and machine industries and because we have a growing number of specialty customers as a result of our expansion in the retail distribution business. Strong demand for steel. Growth in steel production is driven by increased demand for steel products by domestic and international customers. In Poland, demand for steel production has increased because of increased investments in infrastructure projects related to Poland’s accession to the European Union, general economic growth and increased demand from construction and machine building industries. The favorable outlook for our products in the region is also supported by an improvement in the manufacturing industry in Germany and Eastern Europe. Additionally, based on strong economic growth and accelerating industry consolidation, the global steel market has generally performed strongly over the past three years as has the Polish market. Global and Polish demand has also been increasing despite swings in prices. Global crude steel production increased by 6% in 2005 to approximately 1,139 million tonnes and is expected to reach approximately 1,200 million tonnes in 2006.

4

Dynamic and experienced management team. Our management team has a proven track record in managing operations under its control and turning around newly acquired underperforming assets. For example, we acquired Ferrostal Łabe˛dy in 2004 and improved efficiencies in that business to such an extent that production increased from 280,000 tonnes in 2003 to 336,000 tonnes in 2005, the utilization rate increased from 83% to 96% over that same period and sufficient cash flows were generated to repay the purchase price and outstanding debt of that business within 18 months from the date of purchase. In addition, our president and vice president have been with the Company since 1990 and have amassed significant experience in the changing dynamics of the Polish steel market during that time. Our senior management team combines extensive industry and marketing expertise with financial and management expertise. Strategy Further Develop Retail Distribution Network. We intend to develop our retail distribution network further to grow our business. Our recent acquisitions of Centrostal Górnos´la˛ski, Centrostal and Centrostal Opole form the basis of our retail distribution network in Poland. See “Business — Finished Products — Distribution — Centrostal Companies” in this Offering Memorandum. On December 20, 2006, we also entered into a share purchase agreement to acquire a 74.9% interest in voestalpine Stahlhandel GmbH, the leading warehousing and steel distribution company in Austria with significant operations in Central and Eastern Europe, with an option to acquire a further 25.1% interest, in part to benefit from and grow its retail distribution network. See “— Recent Developments — voestalpine Stahlhandel GmbH” in this section and “The Transactions — The Austrian Acquisition” and “Business — Finished Products — Distribution — voestalpine Stahlhandel GmbH” in this Offering Memorandum. We believe that with an expanded retail distribution network, we will achieve economies of scale resulting in better margins in our finished products business and build an international retail distribution network to reach and offer a wider range of finished products directly to more end customers. In addition, the retail distribution network will allow us to carry products of other steel producers which are complementary to our product portfolio. This will enable us to strengthen our relationships with a broader customer base by offering them a wider range of products. We believe that through the Austrian Acquisition our retail distribution business will become one of the most important factors driving growth in our overall business in the future. Expand Product Range to Higher Margin Niche Products. We intend to expand the range of our high grade semi-finished and finished steel products, focusing on higher margin niche products in both businesses. Specifically, we intend to increase our production of square and round billets in our semi-finished products segment which are used mainly in the forging and tube rolling industries and long products such as flat, plain and reinforcement steel bars and flat products (steel sheets and strips) in our finished products segment, which are mainly used in the automotive, machine, forging, and shipbuilding industries, all of which offer higher margins than lower grade steel products produced by our major competitors in Poland. We will also focus on producing finished products with special applications for the mining and defense industries. We believe that by expanding our product range to higher margin niche products we will not only increase our business with our current customers, but also develop new relationships with new customers. Strengthen our scrap metal business. We intend to strengthen our market share in the scrap metal segment by expanding our scrap metal collection network through the establishment of two new scrap yards per year until we have the geographic reach to cover all potential primary scrap suppliers in Poland and expanding our facilities to include more specialized vehicles, containers and machinery to more quickly process scrap. This scrap metal collection network will continue to ensure a full supply of scrap metal for the production of our semifinished and finished steel products, as well as sales of scrap metal to external customers. We believe that by strengthening our already market leading position in our scrap metal business, we will also be able to improve our access to scrap metal supplies, widen our customer base and increase synergies with our other businesses. We intend to install two scrap shredding facilities which we will use to increase the quality of our scrap metal and which will in turn materially improve our scrap margins. Expand Capabilities of Existing Assets. We intend to expand the current capabilities of our existing assets to grow our business, in particular at Ferrostal Łabe˛dy and HSW-HSJ. At Ferrostal Łabe˛dy, we are increasing our market share in higher margin specialized products such as mining by investing in additional oxygen burners for our electric arc furnaces. At HSW-HSJ, we have added a fourth work shift and made some complementary investments to increase production capacity. Grow Through Selective Acquisitions. We intend to further expand our business through selective acquisitions. As we have in the past, we will continue to review opportunities to acquire steel scrap producing and retail distribution companies which will enhance and complement our business. For example, we are currently bidding for the steel trading operations of a publicly listed Polish steel company and are exploring possibly purchasing an interest in a Polish shipyard. We are also currently exploring a number of financing options for potential selective acquisitions, including a potential initial public offering of ordinary shares of the Company.

5

Recent Developments voestalpine Stahlhandel GmbH On December 20, 2006, we agreed to acquire a 74.9% interest in voestalpine Stahlhandel GmbH from Donauländische Baugesellschaft, a wholly-owned subsidiary of voestalpine AG, and voestalpine Stahl GmbH with the remaining 25.1% subject to a put/call option to be exercised not earlier than January 1, 2009 and not later than December 31, 2010 (the “Austrian Acquisition”). The purchase price for the Austrian Acquisition will be based on an enterprise value of €99 million, plus the consolidated normalized operational net income for voestalpine Stahlhandel GmbH for a period from April 1, 2006 until December 31, 2006 which we estimate to be €8 million, for 100% of the shares of voestalpine Stahlhandel GmbH, 74.9% of which will be purchased at closing and the remaining 25.1% of which will be purchased at the time of the exercise of the put/call option, if the option is exercised. We have agreed to the assumption of certain indebtedness of voestalpine Stahlhandel GmbH and to make an equity contribution to voestalpine Stahlhandel GmbH in the overall amount of €23.2 million. This equity contribution will not impact the amount of our ownership interest. In addition, the entire profit of voestalpine Stahlhandel GmbH (excluding non-recurring and non-operating items) for the period from April 1, 2006 until December 31, 2006, plus certain dividends in the aggregate of approximately €23.3 million relating to a reorganization and the realization of reserves and the release of retained profits relating to two companies in voestalpine Stahlhandel GmbH, will be paid to voestalpine Stahl GmbH in the form of a dividend (or advance thereof). This dividend will be netted from the enterprise value. In connection with the Austrian Acquisition, we will repay all treasury obligations of voestalpine Stahlhandel GmbH through the Acquisition On-Loan. These treasury obligation repayments will be netted from the enterprise value. voestalpine Stahlhandel GmbH is the leading warehousing and steel distribution company in Austria with significant operations in Central and Eastern Europe. It has retail distribution facilities in Austria, the Czech Republic, Croatia, Poland and Romania and trade offices in Hungary, Slovakia, Slovenia and BosniaHerzegovina. voestalpine Stahlhandel GmbH serves mainly civil and mechanical engineering and building and automotive sectors and offers a full range of steel products including heavy plates, sections and thin sheets. voestalpine Stahlhandel GmbH had consolidated revenues of €303.8 million in the fiscal year ended March 31, 2006 (compared to €332.6 million in the fiscal year ended March 31, 2005) and EBITDA of €10.2 million (as calculated by voestalpine Stahlhandel GmbH) in the fiscal year ended March 31, 2006 (compared to €26.5 million in the fiscal year ended March 31, 2005). The consolidated financial results of voestalpine Stahlhandel GmbH for the periods presented do not reflect the results of certain non-consolidated subsidiaries, including voestalpine Stahlhandel Polska Sp. z o.o. (Poland), voestalpine Stahlhandel Slowakei s.r.o. (Slovakia), voestalpine Stahlhandel Budapest Kft. (Hungary), voestalpine Stahlhandel d.o.o. (Slovenia) and voestalpine ambient Stahlhandel s.r.l. (Romania). These subsidiaries were not historically consolidated in voestalpine AG’s financial statements because they were not considered material to voestalpine AG. The combined EBITDA of these subsidiaries is approximately €2 million. See “Summary Financial Information — Summary Unaudited Pro Forma Information”. voestalpine Stahlhandel GmbH’s largest market is in Austria, which voestalpine Stahlhandel GmbH estimates accounted for approximately 79.8% of its consolidated revenues in the fiscal year ended March 31, 2006 (compared to 78.9% in the fiscal year ended March 31, 2005). voestalpine Stahlhandel GmbH had on average 451 employees and an overall trade volume of approximately 455,000 tonnes in 2005. See “Business — Finished Products — Distribution — voestalpine Stahlhandel GmbH” for a more detailed discussion of voestalpine Stahlhandel GmbH’s business. We strongly believe that the Austrian Acquisition will provide us with a number of strategic areas in which to significantly grow our business. These include: Š our warehousing capacity will increase from 110,000 square meters to 232,725 square meters; Š our market and customer base will increase significantly, thus enabling us to procure additional

demand and reduce margin volatility; Š our purchasing power in the market and our negotiation position with regard to suppliers will increase

and yield significant cost savings; Š our modern storage capacity outside of Poland will increase; Š our ability to increase sourcing from low cost countries such as China, India and countries of the

former Soviet Union will be enhanced because our increased economies of scale will enable us to turnover larger volumes of steel more quickly; Š our platform for further expansion in Central and Eastern Europe will be established; Š our cross selling efforts will be enhanced by selling complementary products of voestalpine

Stahlhandel GmbH to our customers and vice versa; and

6

Š our overall exchange rate exposure will be reduced because we will purchase and sell more products

in Euro. The Austrian Acquisition, which is expected to close in the first half of 2007, remains subject to merger control approval in Austria and Bosnia-Herzegovina. The Austrian Acquisition will be funded using a portion of the proceeds from this Offering as described herein. In the event that the Issuer consummates this Offering prior to the closing date of the Austrian Acquisition, a portion of the gross proceeds of this Offering sufficient to redeem €60 million principal amount of the Notes in the event of a special mandatory redemption will be placed in escrow pending consummation of the Austrian Acquisition. Upon consummation of the Austrian Acquisition, a portion of the funds held in escrow will be released to the Company and approximately €45 million will be on-lent by the Issuer to voestalpine Stahlhandel GmbH in the form of a senior loan (the “Acquisition On-Loan”) for the purposes of repaying certain existing indebtedness of voestalpine Stahlhandel GmbH and its subsidiaries. For a more detailed description, see “The Transactions” and “Description of Other Indebtedness” in this Offering Memorandum. Planned Consolidation of Centrostal Operations The Company plans to sell its interests in Centrostal Górnos´la¸ski and Centrostal Opole to Centrostal (our 50.57%-owned steel distribution subsidiary) during the first quarter of 2007. Centrostal is currently conducting a public equity offering in Poland, the proceeds of which (estimated at approximately PLN 100 million (€25.1 million)) will be used to pay for the purchase of these two companies. The Company will use the proceeds from the sale of these two companies to increase its ownership in Centrostal. Following consummation of the public equity offering, the Company expects to hold approximately 65% of the equity interest in Centrostal. On December 29, 2006, the prospectus for Centrostal’s public equity offering was filed for approval with the Komisja Nadzoru Finansowego (the “Polish Financial Supervisory Commission”). Once approved by the Polish Financial Supervisory Commission, Centrostal can commence its public equity offering. CKM “Włókniarz” On October 23, 2006, the Company co-founded Cze˛stochowski Klub Motocyklowy “Włokniarz” S.A. (“CKM Włókniarz”), a joint stock company with a share capital of PLN 500,000 (€125,628). The Company holds 76% of the share capital of CKM Włókniarz with individual investors holding the remaining 24%. The purpose of the company is to invest in, develop and promote speedway racing. Other We are currently bidding for the steel trading operations of a publicly listed Polish steel company, and we are currently exploring the possibility of purchasing an interest in a Polish shipyard.

7

OUR CORPORATE AND FINANCING STRUCTURE The diagram below describes, in simplified form, our corporate and financing structure following (a) the consummation of this Offering and the application of the proceeds as described under “Use of Proceeds”, (b) the establishment of the new Revolving Credit Facilities, and (c) the consummation of the Austrian Acquisition. Our semi-finished products segment is conducted through our production division set out in the diagram below and our finished product segment is divided between our production division and our retail and distribution division set out in the diagram below. €35 million (equivalent) Surviving Indebtedness(2)

€40 million (equivalent) Revolving Credit Facilities(1)

Scrap Division(3)

Production Division

Other Division(4)

Złomrex S.A. Retail Distribution Division

(Semi-finished and Finished products)

Intercompany Proceeds Note (5)

100%(6)

50.57%

Zlomrex International Finance S.A. (5)(7)

Centrostal

(12)

100%

Centrostal (12) Górno l ski Odlewnia Metali Szopienice Sp. z o.o.

100.0%

Zakład WalcowniczyWalcownia Bruzdowa Sp. z o.o.

100.0%

HSW-Huta Stali Jako ciowych S.A.(11)

100.0%

€170 million 8½% Senior Secured Notes due 2014 offered hereby(7)

99.6%

Centrostal (12) Opole

Acquisition On-Loan(7)

voestalpine Stahlhandel GmbH(7) (Austria)

Neptun Stahlhandel GmbH(9) (Austria)

100.0%

74.9%

60.0%

Köllensperger Stahlhandel GmbH & Co. KG (Austria)

91.2%

Ferrostal Łab dy Sp. z o.o.

Złomrex Zbrojarnia Sp. z o.o.

100.0%

KEY Guarantor of the Notes (8)(10)

(1)

VAS-TAD Edelstahl Handels GmbH (Austria)

50.0%

100.0%

voestalpine Stahlhandel spol.s.r.o (Czech Republic)

voestalpine Stahlhandel Polska Sp.z.o.o.

100.0%

100.0%

voestalpine Stahlhandel trgovina z jeklom d.o.o. (Slovenia)

voestalpine Stahlhandel Budapest Kft. (Hungary)

100.0%

100.0%

VETING voestalpine d.o.o. (Croatia)

voestalpine Stahlhandel Slowakei s.r.o (Slovakia)

100.0%

51.0%

voestalpine ambient Stahlhandel SRL (Romania)

Austrian Acquisition

The Company will enter into one or more Revolving Credit Facilities which will provide for borrowings of up to €40 million (equivalent), none of which is expected to be drawn down upon consummation of the Austrian Acquisition. The Company has already entered into the Fortis Agreement, one of these Revolving Credit Facilities, as described in Description of Other Indebtedness. The Revolving Credit Facilities will be secured on a first-priority basis by certain inventories, trade and other receivables and certain other current assets of the Company. The Revolving Credit Facilities will not be guaranteed on the issue date of the Notes by any of the Company’s subsidiaries other than a possible pledge on their inventories. See “The Transactions — Revolving Credit Facilities”.

8

(2)

(3) (4)

(5)

(6) (7)

Upon consummation of this Offering and the application of the proceeds as described under “Use of Proceeds”, the Company and its subsidiaries (not including voestalpine Stahlhandel GmbH and its subsidiaries) will have no external indebtedness for borrowed money outstanding other than Š the Notes; Š receivables facilities providing for the factoring/securitization of the Company’s and its subsidiaries’ accounts receivable in amounts not to exceed PLN 55.5 million (€13.9 million) at any one time outstanding, of which approximately PLN 40.1 million (€10.1 million) was outstanding as of September 30, 2006; Š under loan agreements with the National Fund in an amount not to exceed PLN 27.7 million (€7.0 million) at any one time outstanding (the amount outstanding as of September 30, 2006); Š under various leasing agreements in amounts not to exceed PLN 37.6 million (€9.5 million) (the amount outstanding as of September 30, 2006); Š indebtedness of the Centrolstal Group of PLN 26.4 million (€6.6 million) of which PLN 21.2 million (€5.3 million) was outstanding as of September 30, 2006; and Š indebtedness of Kapitał and the Company under discount promissory note agreements of PLN 17 million (€4.3 million) and PLN 10 million (€2.5 million), respectively, of which a total of PLN 8.9 million (€2.2 million) was outstanding as of September 30, 2006. (the indebtedness other than the Notes in this note (2) being collectively referred to as the “Surviving Indebtedness”). See “Description of Other Indebtedness” in this Offering Memorandum. The Scrap Division includes 14 regional divisions within Złomrex S.A. and two non-material subsidiaries, Złomrex Pruszków (100% owned) and AB Stahl (Germany – 100% owned). Our Other Division is comprised of Złomrex China (China — 100% owned), Kapitał (51.0% owned), Złomrex-Finans (100% owned), Nowa Jakos´c´ (100% owned) and CKM “Włókniarz” (collectively, the “Other Division Companies”). On the issue date, Zlomrex International Finance S.A., a société anonyme organized under the laws of France, (the “Issuer”) will on-lend an amount representing up to €82.0 million of the gross proceeds from issuance of the Notes to Złomrex S.A. (the “Company”) under intercompany proceeds notes (the “Intercompany Proceeds Note(s)”), the amount necessary to redeem €60 million of the Notes in the event of a special mandatory redemption will be placed in an escrow account by the Issuer pending the consummation of the Austrian Acquisition and the remaining amount will be deposited in a secured bank account. Upon consummation of the Austrian Acquisition, the funds will be released from the escrow account and a portion of which, together with cash released from the secured bank account, will be onlent to the Company as further Intercompany Proceeds Notes and a portion of which will be on-lent to voestalpine Stahlhandel GmbH or its subsidiaries under the Acquisition On-Loan as described in note (7) below. In the event the Austrian Acquisition is not consummated, any amounts held in the escrow account in excess of the amount necessary to effect the special mandatory redemption will be on-lent to the Company, together with cash released from the secured bank account, as further Intercompany Proceeds Notes. After the special mandatory redemption (if it were to occur), €110.0 million aggregate principal amount of the Notes will remain outstanding. The percentage ownership includes a de minimis number of directors’ qualifying shares. The diagram only shows selected subsidiaries of voestalpine Stahlhandel GmbH. Upon consummation of the Austrian Acquisition, the Company will acquire a 74.9% interest in voestalpine Stahlhandel GmbH with an option to acquire a further 25.1% interest at a later date. In connection therewith, the Issuer expects to on-lend approximately €45 million to voestalpine Stahlhandel GmbH or its subsidiaries in the form of one or more senior intercompany loans (the “Acquisition On-Loan”) to repay certain existing indebtedness of voestalpine Stahlhandel GmbH and its subsidiaries. While the Issuer will be the direct beneficiary under the Acquisition On-Loan, the holders of the Notes will benefit from a first-priority assignment over the Acquisition On-Loan, as described under note (8) below. Following the consummation of the Austrian Acquisition and the Acquisition On-Loan, voestalpine Stahlhandel GmbH will also have additional working capital and other facilities providing for borrowings of up to €19 million (equivalent), of which approximately €10 million (equivalent) is expected to be outstanding as of the date of the consummation of the Austrian Acquisition. The Acquisition On-Loan will provide that, in certain circumstances, voestalpine Stahlhandel GmbH may request that the Company pay the periodic interest due under the Acquisition On-Loan to the Issuer in lieu of a payment by voestalpine Stahlhandel GmbH.

9

(8)

The Notes will be jointly and severally guaranteed by each of the guarantors specified in the diagram above on a senior basis. The Notes and the Guarantees will be secured by (a) first-priority pledges of (i) the capital shares of the Issuer and the Subsidiary Guarantors held by the Company, (ii) after consummation of the Austrian Acquisition, the capital shares of voestalpine Stahlhandel GmbH held by the Company; (iii) the balance of the bank account into which the Asset Sale Cash Collateral is deposited prior to application; and (iv) prior to being on-lent to the Company as further Intercompany Proceeds Notes, the balance of the bank account into which the unallocated offering proceeds are deposited by the Issuer; (b) a first-priority assignment of the Intercompany Proceeds Note; (c) after consummation of the Austrian Acquisition, a first-priority security interest over the Acquisition On-Loan; and (d) prior to release therefrom, a first-priority security interest in the funds held in the escrow account pursuant to the Escrow Agreement. See “Description of the Notes — Security”;

(9)

The subsidiaries of Neptun Stahlhandel GmbH are comprised of Zimmermann Stahlhandel GmbH (99.8% owned), Vereinigte Biege-Gesellschaft mbH (67% owned) and ARGE Baustahl Eisen Blasy-Neptun GmbH (50% owned), which are all Austrian companies. In addition, Neptun Stahlhandel GmbH holds a 36% equity interest in BWS Bewehrungsstahl GmbH, an Austrian company.

(10)

The Company’s subsidiaries are Polish companies unless otherwise specified.

(11)

On November 2, 2006, HSW-WB and HSW-HSJ merged.

(12)

The Company plans to sell its interests in Centrostal Górnos´la˛ski and Centrostal Opole to Centrostal (our 50.57%–owned steel distribution subsidiary) during the first quarter of 2007. Centrostal is currently conducting a public equity offering in Poland, the proceeds of which (estimated at PLN 100 million (€25.1 million)) will be used to pay for the purchase of these two companies. The Company will use the proceeds from the sale of these two companies to increase its ownership in Centrostal. Following consummation of the public equity offering, the Company expects to hold approximately 65% of the equity interests in Centrostal. On December 29, 2006, the prospectus for Centrostal’s public equity offering was filed for approval with the Polish Financial Supervisory Commission. Once approved by the Polish Financial Supervisory Commission, Centrostal can commence its public equity offering.

10

THE OFFERING The summary below describes the principal terms of the Notes. Certain of the terms and conditions described below are subject to important limitations and exceptions. The “Description of the Notes” section of this Offering Memorandum contains a more detailed description of the terms and conditions of the Notes. Issuer . . . . . . . . . . . . . . . . . . . . . . . . . Zlomrex International Finance S.A., a société anonyme organized under the laws of the Republic of France (the “Issuer”) and a wholly-owned finance subsidiary (other than directors’ qualifying shares) of Złomrex S.A., a spólka akcyjna organized under the laws of Poland (the “Company”). Notes Offered . . . . . . . . . . . . . . . . . . €170,000,000 aggregate principal amount of 8 1⁄ 2% Senior Secured Notes due 2014 (the “Notes”). Maturity Date . . . . . . . . . . . . . . . . . . February 1, 2014. Interest . . . . . . . . . . . . . . . . . . . . . . . The Notes will bear interest at a rate of 8.50% per annum. Issue Price . . . . . . . . . . . . . . . . . . . . . 100%. Interest Payment Date . . . . . . . . . . . Interest on the Notes will be payable on February 1 and August 1 of each year, beginning on August 1, 2007. Ranking . . . . . . . . . . . . . . . . . . . . . . . The Notes will be senior secured obligations of the Issuer and will rank equally in right of payment to all existing and future senior indebtedness of the Issuer. The Issuer is a special purpose vehicle that will not pursue any revenuegenerating operations of its own as long as Notes remain outstanding. On the Issue Date, the Issuer will: (1) on-lend an amount representing approximately €82 million of the gross proceeds of the issuance of the Notes to the Company under the Intercompany Proceeds Notes; (2) deposit an amount into an Escrow Account sufficient to redeem €60 million of the Notes; and (3) deposit the remaining cash amount in a designated bank account. On the Acquisition Closing Date, the Issuer will on-lend an additional amount (comprised of funds released from the Escrow Account and funds available from the designated bank account) to the Company under one or more additional Intercompany Proceeds Notes such that the aggregate principal amount of Indebtedness subject to the Intercompany Proceeds Notes and the Acquisition On-Loan will equal €170 million. In the event the Austrian Acquisition is not consummated, the amount of the Intercompany Proceeds Note will be increased to €110 million. The Issuer will depend on payments under the Intercompany Proceeds Note and the Acquisition On-Loan to make payments on the Notes, and will have no other significant assets. See “Special Mandatory Redemption” below. Guarantees . . . . . . . . . . . . . . . . . . . . The Notes will be guaranteed (each, a “Guarantee”) on a senior basis by the Company and certain of its subsidiaries (each, a “Guarantor” and collectively, the “Guarantors”). Each Guarantee will rank equally in right of payment to all existing and future senior indebtedness of the Guarantors and will rank senior to all of the Guarantors’ existing and future indebtedness that is subordinated in right of payment to the Notes. The Revolving Credit Facilities initially will not be guaranteed by any of the Company’s subsidiaries. For the nine months ended September 30, 2006, the Guarantors accounted for 89.1% of total revenues, all of the profit for the period, and 90.9% of the gross profit of the Group. Security . . . . . . . . . . . . . . . . . . . . . . . The obligations of the Issuer under the Notes and the Indenture and the Guarantors under the Notes Guarantees will be secured by:

11

Š first-priority share pledges over (a) on the Issue Date, the

Capital Shares of the Subsidiary Guarantors (the “Złomrex Share Pledges”) and the Issuer and (b), upon consummation of the Austrian Acquisition, the Capital Shares of voestalpine Stahlhandel GmbH held by the Company; Š a first-priority assignment over the Intercompany Proceeds

Note (all amounts payable under the Intercompany Proceeds Note); Š a first-priority security interest over the Acquisition On-Loan

(all amounts payable under the Acquisition On-Loan); Š prior to the release therefrom, a first-priority security interest

in the funds held in the Escrow Account and, prior to being on-lent to the Company under the Intercompany Proceeds Notes, a first-priority pledge over the bank account into which the unallocated offering proceeds are deposited by the Issuer; and Š a first-priority pledge over the balance of the bank account

into which the cash proceeds from assets sales is paid prior to application thereof in accordance with the covenant described under “Description of the Notes — Certain Covenants — Limitation on Sales of Assets and Subsidiary Shares”. The Collateral will be pledged to The Bank of New York as security agent for the exclusive benefit of the Trustee on a senior basis. Under the Indenture, only the Notes and the Guarantees, additional Notes (and the related Guarantees) and certain other indebtedness of the Group will be allowed to benefit from security over the Collateral, including the shares subject to the Share Pledges. The Guarantees will be effectively subordinated to any other existing and future secured indebtedness of the Guarantors permitted to be incurred under the Indenture to the extent of the value of the assets securing such Indebtedness unless such assets also secure the Guarantees on an equal and ratable or senior basis. In the event of a bankruptcy or insolvency, each Guarantor’s secured lenders will have a prior secured claim to any collateral of such Guarantor securing the debt owed to them. Optional Redemption . . . . . . . . . . . The Issuer may redeem all or part of the Notes on or after February 1, 2011 at the redemption prices listed in the section entitled “Description of the Notes — Optional Redemption”. The Issuer may redeem all or part of the Notes at any time prior to February 1, 2011, by paying a “make-whole” premium as described in the section entitled “Description of the Notes — Optional Redemption”. At any time prior to February 1, 2010, the Issuer may use the proceeds of specified equity offerings to redeem up to 35% of the original principal amount of the Notes at a redemption price equal to 108.5% of the principal amount thereof, plus accrued and unpaid interest and additional amounts, if any, up to the redemption date, provided that at least 65% of the aggregate principal amount of the Notes remains outstanding after the redemption. See “Description of the Notes — Optional Redemption”. Tax Redemption. The Issuer may redeem all, but not less than all, of the Notes at a redemption price of 100% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, if the Issuer or any surviving entity would become obligated to pay certain additional amounts as a result of certain changes in specified tax laws or certain other circumstances. See “Description of the Notes — Optional Tax Redemption”.

12

Additional Amounts . . . . . . . . . . . . All payments in respect of the Notes will be made without withholding or deduction for any taxes or other governmental changes, except to the extent required by law. If withholding or deduction is required by law, subject to certain exceptions, the Issuer will pay additional amounts so that the net amount you receive is no less than you would have received in the absence of such withholding or deduction. See “Description of the Notes — Payment of Additional Amounts”. Change of Control . . . . . . . . . . . . . . Upon the occurrence of a change of control at any time, you will have the right to require the Issuer to repurchase the Notes at a price equal to 101% of the principal amount thereof together with accrued and unpaid interest and certain other amounts, if any, to the date of repurchase. See “Description of the Notes — Repurchase at the Option of Holders upon a Change of Control”. Special Mandatory Redemption . . . If, as anticipated, the Issuer consummates this Offering prior to the Acquisition Closing Date, an amount of the gross proceeds of this Offering sufficient to redeem €60 million in aggregate principal amount of the Notes (the “Mandatorily Redeemable Notes”) at a special mandatory redemption price will be placed in escrow pending consummation of the Austrian Acquisition. In the event that the Austrian Acquisition is not completed on or before June 30, 2007 or the Share Purchase Agreement is terminated at any time prior thereto, the Notes will be subject to the special mandatory redemption. The special mandatory redemption price is equal to 101% of the aggregate principal amount of the Mandatorily Redeemable Notes, plus accrued and unpaid interest to the redemption date. If the Austrian Acquisition is completed on or before June 30, 2007, the escrowed funds will be released to the Issuer. After the special mandatory redemption (if it were to occur), €110.0 million aggregate principal amount of the Notes will remain outstanding (unless otherwise redeemed or repurchased). Covenants . . . . . . . . . . . . . . . . . . . . . The Indenture will, among other things, restrict the Group’s ability to: Š incur additional indebtedness; Š pay dividends on, redeem or repurchase our capital stock or make

investments; Š sell assets; Š create certain liens; Š enter into agreements that restrict the subsidiaries’ ability to pay

dividends or make other distributions to the Company or the Issuer; Š engage in transactions with affiliates; Š issue or sell capital stock of restricted subsidiaries; Š enter into sale and leaseback transactions; Š consolidate, merge or transfer all or substantially all of the

Company’s or a Guarantor’s assets; and Š engage in certain business.

In addition, the Group will provide to the Trustee and to holders and make available to investors annual and quarterly reports of the Company. These covenants are subject to important exceptions and qualifications. See “Description of the Notes — Certain Covenants”. Use of Proceeds . . . . . . . . . . . . . . . . We will use the net proceeds from this Offering to refinance certain of our outstanding indebtedness, to finance the Austrian Acquisition and pay related fees and expenses and for general corporate purposes.

13

Transfer Restrictions; Absence of a Public Market for the Notes . . . . . . The Notes have not been registered under the US Securities Act and thus are subject to restrictions on transferability and resale. The Issuer cannot assure you that a market for the Notes will develop or that, if a market develops, the market will be a liquid market. The Initial Purchaser has advised the Issuer that it currently intends to make a market in the Notes. However, the Initial Purchaser is not obligated to do so and any market making with respect to the Notes may be discontinued without notice. See “Plan of Distribution”. Listing . . . . . . . . . . . . . . . . . . . . . . . . Application has been made to admit the Notes to listing on the Official List of the Luxembourg Stock Exchange and trading on the Euro MTF Market. Trustee, Registrar, Transfer and Paying Agent . . . . . . . . . . . . . . . . . . The Bank of New York. Luxembourg Listing, Paying and Transfer Agent . . . . . . . . . . . . . . . The Bank of New York (Luxembourg) S.A. Security Agent and Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . The Bank of New York. Governing Law of the Notes, the Indenture and the Guarantees . . . . New York. Governing Law of the Security Documents . . . . . . . . . . . . . . . . . . . . Poland, France, Austria and New York.

14

SUMMARY FINANCIAL INFORMATION Summary Consolidated Historical Financial Information The following summary financial data presents the audited financial statements of the Group as of and for the years ended December 31, 2005 and 2004 and the unaudited financial statements of the Group as of and for the nine months ended September 30, 2006 and 2005 (the “Consolidated Financial Statements”). The summary financial data should be read in conjunction with the “Consolidated Financial Statements” and accompanying notes included elsewhere in this Offering Memorandum and the information set forth in “The Transactions — The Austrian Acquisition”, “Use of Proceeds”, “Selected Consolidated Financial Data and Other Information”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Description of Other Indebtedness” and “Description of the Notes”. Year ended December 31, 2004 2005 2005 (PLN millions) (€ millions)

Income statement data Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scrap metal . . . . . . . . . . . . . . . . . . . . . . . . . . Semi-finished products . . . . . . . . . . . . . . . . . Finished products . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,194.9 353.4 225.7 471.2 144.6

976.2 188.0 237.2 368.6 182.4

245.3 47.3 59.6 92.6 45.8

Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scrap metal . . . . . . . . . . . . . . . . . . . . . . . . . . Semi-finished products . . . . . . . . . . . . . . . . . Finished products . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intersegment(1) . . . . . . . . . . . . . . . . . . . . . . . .

(1,019.5) (325.0) (209.6) (436.7) (129.7) 81.5

(880.7) (177.2) (214.1) (358.5) (160.1) 29.2

(221.3) (44.5) (53.8) (90.1) (40.2) 7.3

Nine months ended September 30, 2005 2006 2006 (PLN millions) (€ millions)

737.7 136.9 180.2 292.4 128.2

1,417.0 168.5 220.7 765.2 262.7

(671.5) (1,228.6)

356.0 42.3 55.5 192.3 66.0 (308.7)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scrap metal . . . . . . . . . . . . . . . . . . . . . . . . . . Semi-finished products . . . . . . . . . . . . . . . . . Finished products . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intersegment(1) . . . . . . . . . . . . . . . . . . . . . . . .

175.4 28.4 16.1 34.5 14.9 81.5

95.5 10.7 23.2 10.1 22.3 29.2

24.0 2.7 5.8 2.5 5.6 7.3

66.2

188.4

47.3

Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution expenses . . . . . . . . . . . . . . . . . . . . . . Administrative expenses . . . . . . . . . . . . . . . . . . . . Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.8 (22.1) (36.9) (2.9)

3.5 (15.7) (40.6) (4.7)

0.9 (3.9) (10.2) (1.2)

1.6 (10.7) (29.7) (2.7)

2.7 (21.5) (52.8) (7.0)

0.7 (5.4) (13.3) (1.8)

Operating profit before financing costs . . . . . .

116.4

38.0

9.5

24.7

109.7

27.6

(17.0)

(4.3)

(13.8)

(19.9)

(5.0)

—

5.9

1.5

Net financing costs . . . . . . . . . . . . . . . . . . . . . . . . Excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired over cost . . . . . . . . . . . . . . .

101.0

—

Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax expense . . . . . . . . . . . . . . . . . . . . . . . .

208.5 (3.7)

21.0 (4.1)

5.3 (1.0)

10.9 (2.1)

95.8 (18.9)

24.1 (4.7)

Profit for the period . . . . . . . . . . . . . . . . . . . . . .

204.9

16.9

4.2

8.8

76.9

19.3

(1)

(8.9)

Represents margin on intersegment sales.

15

Year ended December 31, 2004 2005 2005 (PLN millions) (€ millions)

Selected cash flow data Net cash from operating activities . . . . . . . . . . . . . . . . . Net cash from investing activities . . . . . . . . . . . . . . . . . Net cash from financing activities . . . . . . . . . . . . . . . . .

(12.4) 54.6 6.0 (36.7) (15.7) (1.3)

Balance sheet data (at period end) Total interest-bearing debt . . . . . . . . . . . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total equity and liabilities . . . . . . . . . . . . . . . . . . . . . . .

189.3 571.0 293.2 571.0

211.0 592.4 297.4 592.4

53.3 148.8 74.8 148.8

Other financial data EBITDA(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

135.7

60.1

15.1

(1)

13.7 (9.2) (0.3)

Nine months ended September 30, 2005 2006 2006 (PLN millions) (€ millions)

30.7 (28.1) 30.7

41.3

75.9 (216.4) 141.6

19.1 (54.4) 35.6

420.9 1,138.2 748.9 1,138.2

105.8 286.0 188.2 286.0

135.3

34.0

EBITDA is defined as operating profit before financing costs and before depreciation and amortization. We have included information concerning EBITDA because certain investors use it as a measure of our ability to service our debt. EBITDA should not be considered by investors as an alternative to operating profit or profit for the period as an indicator of our performance, nor as an alternative to cash flows from operating activities, investing activities or financing activities as a measure of liquidity. EBITDA disclosed here is not comparable to EBITDA disclosed by other companies because EBITDA is not uniformly defined. The definition of EBITDA used here differs from the definition of Consolidated EBITDA used in the Indenture related to the Notes. See “Description of the Notes — Certain Definitions”. Set forth below is a reconciliation of EBITDA to operating profit before financing costs: Year ended December 31, 2004 2005 2005 (PLN millions) (€ millions)

Operating profit before financing costs . . . . . . . . . . . . . . . . 116.4 Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . 19.3

38.0 22.1

9.6 5.6

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60.1

15.1

16

135.7

Nine months ended September 30, 2005 2006 2006 (PLN millions) (€ millions)

24.7 109.7 16.6 25.6

27.6 6.4

41.3

34.0

135.3

Summary Unaudited Pro Forma Financial Information The following table is derived from the Unaudited Pro Forma Consolidated Financial Data and the Pro Forma Financial Information included elsewhere in this Offering Memorandum and reflects the estimated pro forma impact on our Consolidated Financial Statements for the year ended December 31, 2005 and the twelve months ended September 30, 2006 of the Polish Acquisitions and the Austrian Acquisition and the estimated adjusted pro forma impact of this Offering (to the extent not reflected in the Unaudited Pro Forma Consolidated Financial Data or the Pro Forma Financial Information) and the Refinancing. The unaudited pro forma income statement for the year ended December 31, 2005 and the pro forma income statement for the twelve months ended September 30, 2006 assume the Polish Acquisitions and the Austrian Acquisition occurred on the first date of the periods presented, respectively. Pro forma balance sheet data as of December 31, 2005 and September 30, 2006 were prepared based on the assumption that the acquisition occurred on January 1, 2005. The unaudited adjusted pro forma information for those periods further assumes that this Offering (to the extent not reflected in the Unaudited Pro Forma Consolidated Financial Data and the Pro Forma Financial Information) and the Refinancing occurred at the beginning of the period presented for adjusted pro forma income statement items and as of its date for adjusted pro forma balance sheet items. The adjustments made in order to present the unaudited pro forma and unaudited adjusted pro forma consolidated financial data have been made based on available information and assumptions that our management believes are reasonable. See “Risk Factors — Our pro forma financial information and our adjusted pro forma financial information presented herein may not be representative of our actual results, and our future financial condition, results of operations and cash flows may differ materially from such information”. The unaudited pro forma and unaudited adjusted pro forma consolidated financial data are for informational purposes only and do not purport to present what our results would actually have been had the Polish Acquisitions and the Transactions occurred on the dates presented, nor should they be used as the basis of projections of our results of operations or financial position for any future period. As of and for the year ended December 31, 2005 2005 (PLN millions) (€ millions)

Pro Forma Financial Data(1) Revenue (last twelve months) . . . . . . . . . . . . . . . . . . . . . . . Profit for the period (last twelve months) . . . . . . . . . . . . . . Cash and cash equivalents (at period end) . . . . . . . . . . . . . . Total debt (at period end)(2) . . . . . . . . . . . . . . . . . . . . . . . . . Total net debt (at period end)(3) . . . . . . . . . . . . . . . . . . . . . . Interest expense, net(4) (last twelve months) . . . . . . . . . . . . EBITDA(1)(5) (last twelve months) . . . . . . . . . . . . . . . . . . . . Adjusted Pro Forma Financial Data Adjusted cash and cash equivalents (at period end)(6) . . . . . Adjusted total debt (at period end)(2)(7) . . . . . . . . . . . . . . . . . Adjusted total net debt (at period end)(2) . . . . . . . . . . . . . . . Adjusted interest expense, net(3)(8) (last twelve months) . . . Ratio of adjusted total debt to EBITDA . . . . . . . . . . . . . . . . Ratio of adjusted total net debt to EBITDA . . . . . . . . . . . . . Ratio of EBITDA to adjusted interest expense, net . . . . . . .

2,599.8 44.9 35.1 785.3 750.2 54.5 147.3

Twelve month period ended September 30,(9) 2006 2006 (PLN millions) (€ millions)

653.2 11.3 8.8 197.3 188.5 13.7 37.0

3,001.9 93.3 38.6 974.5 935.9 55.2 220.7 53.3 855.0 801.7 69.2 3.87x 3.63x 3.19x

754.2 23.4 9.7 244.8 235.2 13.9 55.5 13.4 214.8 201.4 17.4 3.87x 3.63x 3.19x

(1) The consolidated financial results of voestalpine Stahlhandel GmbH and its subsidiaries for the periods presented do not the reflect results of certain non-consolidated subsidiaries, including voestalpine Stahlhandel Polska Sp.z.o.o. (Poland), voestalpine Stahlhandel Slowakei s.r.o. (Slovakia), voestalpine Stahlhandel Budapest Kft. (Hungary), voestalpine Stahlhandel d.o.o. (Slovenia) and voestalpine ambient Stahlhandel s.r.l. (Romania). EBITDA for non-consolidated subsidiaries of voestalpine Stahlhandel GmbH were approximately PLN 8.0 million (€2.0 million) for the year ended March 31, 2006 (which are not necessarily indicative of the results of future periods). (2) Total debt represents interest bearing debt. (3) Total net debt represents total debt less cash and cash equivalents. (4) Interest expense, net is interest expense after deduction of interest income. (5) EBITDA is defined as operating profit before financing costs before depreciation and amortization. We have included information concerning EBITDA because certain investors use it as a measure of our ability to service our debt. EBITDA should not be considered by investors as an alternative to operating profit or profit for the period as an indicator of our performance, nor as an alternative to cash flows from operating activities, investing activities or financing activities as a measure of liquidity. EBITDA disclosed here is not comparable to EBITDA disclosed by other companies because EBITDA is not uniformly defined. The definition of EBITDA used here differs from the definition of Consolidated EBITDA used in the Indenture related to the Notes. See “Description of the Notes — Certain Definitions”. Set forth below is a reconciliation of pro forma EBITDA to pro forma operating profit before financing costs: Year ended December 31, 2005 2005 (PLN millions) (€ millions)

Twelve month period ended September 30, 2006 2006 (PLN millions) (€ millions)

Operating profit before financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

103.6 43.7

26.0 11.0

175.9 44.8

44.2 11.3

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

147.3

37.0

220.7

55.5

17

(6) Includes PLN 14.7 million (€3.7 million) representing the unused portion of the net cash proceeds from this Offering following the consummation of the Transactions not otherwise reflected in the Pro Forma Financial Information. See “Use of Proceeds”. (7) Adjusted pro forma total debt represents the total debt of the consolidated Group (including voestalpine Stahlhandel GmbH and its subsidiaries) upon consummation of the Transactions. Based on the outstanding consolidated indebtedness of the Company voestalpine Stahlhandel GmbH as of September 30, 2006, adjusted pro forma total debt is comprised of the following indebtedness:

Notes offered hereby . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Surviving Company indebtedness (consolidated) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Surviving voestalpine Stahlhandel GmbH indebtedness (consolidated) . . . . . . . . . . . . . . . . . . . . . . . . .

Period Ended September 30, 2006 (PLN millions) (€ millions) 676.6 170.0 139.3 35.0 39.1 9.8

Adjusted pro forma total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

855.0

214.8

Set forth below is a reconciliation of pro forma total debt to adjusted pro forma debt as of September 30, 2006:

Pro forma total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustment of interest expense with respect to Polish Acquisitions(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . voestalpine Stahlhandel GmbH enterprise value(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustment of interest with respect to Austrian Acquisition(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fundable Acquisition On-Loan indebtedness(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest attributable to fundable Acquisition On-Loan indebtedness(e) . . . . . . . . . . . . . . . . . . . . . . . . . .

September 30, 2006 (PLN millions) (€ millions) 974.8 244.9 (7.0) (1.8) (394.2) (99.0) (61.7) (15.5) 138.8 34.9 17.0 4.3

Pre-merger adjusted pro forma total debt (other than the Notes offered hereby) of the Company and voestalpine Stahlhandel GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Treasury obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes offered hereby . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repayment of existing Złomrex indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

667.7 (207.4) 676.6 (281.8)

167.8 (52.1) 170.0 (70.8)

Adjusted pro forma total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

855.0

214.8

(a) (b) (c) (d) (e)

Assumes consummation of the Polish Acquisitions on January 1, 2006 rather than January 1, 2005 (as assumed in the Pro Forma Financial Information). Represents PLN 348.2 million (€87.5 million) portion of the Notes necessary to fund the Austrian Acquisition and PLN 48.0 million (€12.1 million) attributable to deferred consideration and the deferred purchase of the additional 25.1% of voestalpine Stahlhandel GmbH. Represents assumed interest payable on indebtedness referred to in note (b) comprised of PLN 57.9 (€14.5 million) attributable to the PLN 348.2 (€87.5 million) portion attributable to the Notes and the PLN 3.8 million (€1.0 million) portion attributable to the deferred purchase. Represents the portion of indebtedness to be refinanced with the Acquisition On-Loan available on January 1, 2005. Represents assumed interest on indebtedness referred to in note (d) above.

(8) Represents the interest payable for the twelve month period ended September 30, 2006 assuming an implied weighted average interest rate (which may or may not be indicative of the actual interest rate that would have been applicable during the period or representative of future results) less interest revenue of PLN 8.3 million (€2.1 million). (9) Income statement data presented assumes that Polish Acquisitions and Austrian Acquisition occurred on October 1, 2005 and balance sheet data assumes the Polish Acquisitions occurred on January 1, 2005.

18

RISK FACTORS An investment in the Notes involves a high degree of risk. Prospective investors in the Notes should carefully consider the risks described below and the other information contained in this Offering Memorandum before making a decision to invest in the Notes. Any of the following risks, individually or together, could adversely affect our business, financial condition and results of operations. Risks related to our Business Our results of operations have been materially adversely impacted in the past by declining steel prices and declining steel scrap prices, and any further local or global downturn in the steel industry leading to a decline in steel prices and steel scrap prices will adversely affect our results of operations and financial condition. Our financial success is tied directly to the price of steel and steel products, primarily in the Polish market. The price of steel and steel products is highly correlated to steel scrap prices. During the year ended December 31, 2005, declining steel prices and steel scrap prices in the Polish market and elsewhere materially adversely impacted our results of operations compared to prior periods. The steel industry is cyclical because the industries in which steel customers operate are themselves cyclical and sensitive to changes in general economic conditions. The demand for steel products is thus generally correlated to macroeconomic conditions in which steel consuming industries operate. The prices of steel products are influenced by many factors, including demand, worldwide production capacity, capacity-utilization rates, raw material costs, exchange rates, trade barriers and improvements in steel-making processes. For example, steel prices have recently been driven to a significant extent by demand in China and India while global steel production volumes reached their highest levels in the past fifty years. Since the start of 2005, these trends have moderated somewhat, and prices have declined from their peak levels. A decline in Chinese or Indian demand for imported steel could have a significant adverse effect on steel prices. Steel prices have experienced, and in the future may experience, significant fluctuations as a result of these and other factors, many of which are beyond our control. Any future decline in steel prices and a corresponding decline in steel scrap prices will adversely affect on our results of operations and financial condition. The Polish and global steel industries are highly competitive, and increasing competition could adversely affect our results of operations and financial condition. We face competition from Polish and emerging market foreign steel manufacturers. A number of our Polish competitors are undertaking modernization and expansion plans, which may make them more efficient or allow them to develop new products. We also face price-based competition from steel producers in emerging market countries. Recent consolidation in the steel industry globally has also led to the creation of several large global steel producers, including Arcelor Mittal, whose subsidiary Mittal Steel Poland (now Arcelor Mittal) has approximately 65% of the market share in Poland’s domestic steel market. These and many other large international steel companies have greater financial resources and more extensive global operations than us. Moreover, the steel industry has historically suffered from production overcapacity. Increased competition from Polish or international steel producers could result in more competitive pricing, adversely affecting our results of operations and financial condition. We breached certain financial covenants under our indebtedness in the past and received waivers from lenders for these breaches. Any additional breaches in the future under our indebtedness could materially affect our results of operations and financial condition. We breached certain financial covenants under certain of our indebtedness in the past, including, absent a waiver, for the year ended December 31, 2006. We received waivers from lenders relating to that indebtedness and these lenders, although they had the right to do so, did not accelerate the maturity of this indebtedness. Any additional breaches of financial covenants in the future under our indebtedness could materially affect our results of operations and financial condition. Our business is subject to seasonality which could materially affect our results of operations. Our revenues fluctuate significantly from one quarter to the next, depending on the number of working days and vacation periods. For example, our business volumes are generally lower in the winter months of January and February than in the spring and in the summer due to less vacations than in the fall. These fluctuations have a direct impact on our working capital, which in turn affects our net financial debt and cash flow. As a result, our results of operations may be inconsistent, varying significantly from quarter to quarter, which makes period to period comparability difficult and could materially affect our results of operations.

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The introduction of low cost imports into the Polish market by competitors may negatively effect our margins. The increasing consolidation of the global steel industry is putting pressure on our operating performance and will continue to do so. The entry of global steel producers like Arcelor Mittal into our market could force us to lower our prices and negatively impact our margins. Increased participation in the Polish steel market by large global steel producers could have a material adverse effect on our financial condition and results of operations. We have received a qualified audit opinion on our audited financial statements which could cause investors to lose confidence in the reliability of our financial statements, which in turn could result in a decrease in the liquidity or market price of the Notes. We engaged our independent auditors, KPMG Audyt Sp. z o.o. after the end of our last completed fiscal year, which ended on December 31, 2005. As a result, the independent auditors were unable to observe the counting of the physical inventories as of December 31, 2005. Furthermore, they were unable to satisfy themselves as to inventory quantities or condition as of that date by any other audit procedure. Accordingly, our independent auditors were not able to determine whether any adjustments might be necessary to the amounts shown in the financial statements for inventories, cost of sales, net earnings and retained earnings as of and for the year ended December 31, 2005, and their audit opinion in relation to the financial statements as of and for the year ended December 31, 2005 contain a qualification to that effect. While measures have been taken to independently verify inventory at period ends, to the extent the inventories on which our financial statements are derived were not accurate, our actual inventories, cost of sales, net earnings and retained earnings for those periods could differ materially from our reported results. Because our independent auditors have issued a qualified opinion, investors may lose confidence in the reliability of our financial statements, which could have a negative impact on the liquidity or market price of the Notes. Our growth strategy through acquisitions exposes us to numerous risks. Historically, we have achieved growth in part through acquisitions. Our most significant acquisitions include our purchase in 2001 of the rolling mill assets located in Zawiercie which is currently owned by ZW-WB, Ferrostal Łabe˛dy in 2004, Szopienice in 2004 and HSW-HSJ, HSW-WB, Centrostal Górnos´la˛ski, Centrostal and Centrostal Opole in 2006. For a detailed description of our significant recent acquisitions, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Summary of Major Acquisitions.” We are constantly evaluating acquisition opportunities, both horizontal, by expanding our market share, and vertical, by expanding up- and downstream activities in the value chain. Both types of acquisitions may involve geographic expansion into regions in which we currently have a more limited presence. In executing our strategy of profitable growth, we may consider targets that are comparable in size to the acquisitions we have made in the past. Such projects may pose new challenges in terms of identifying and evaluating suitable targets, financing and completing the acquisition, and integrating the acquired businesses into the Group. If we cannot successfully integrate these recently completed and future acquisitions on a timely and efficient basis, we may incur higher than expected costs and not realize all the anticipated benefits of these acquisitions. Moreover, we might fail to discover liabilities of a business, or operating or other problems, prior to completing an acquisition and we may not be able to get full indemnification due to limitations in the purchase agreement or due to the lack of funds or liquidation of the sellers. This could lead to adverse accounting and financial consequences, such as the need to make large provisions against the acquired assets or to write down acquired assets. These difficulties may adversely affect our business, financial condition and results of operations. We may not be able to secure sufficient financing to fund our acquisition strategy. We anticipate that our cash flows will not be sufficient to fund our future acquisitions. As such, obtaining sufficient outside financing is crucial to our acquisition strategy. We may not be able to secure such financing on favorable terms or at all due to the interest rate environment and limitations on our ability to enter into financing transactions imposed under the terms and conditions of the Notes and our credit facilities. If we do not obtain sufficient financing for our acquisitions, we may be restricted in our ability to acquire attractive targets, which could cause us to lose market share. Increases in our cost base may erode our profit margins. In addition to the possibility of increased costs in our raw materials, we also could face increases in other costs, including labor, regulation and energy costs. We may not be able to pass these costs on to our customers in full or on a timely basis. If we are unable to effectively pass on costs to our customers, or to implement cost reductions, increases in our cost base may adversely affect our business and erode our profit margins. 20

Strikes or other labor-related conflicts at our production facilities, in the steel industry or in certain customer industries could have an adverse effect on our financial condition and results of operations. Although we have not been subject in the past to any significant operational disruptions affecting several locations simultaneously as a result of any labor-related conflicts, we cannot ensure that such operational disruptions will not occur in the future. Labor-related conflicts at our production facilities could lead to business interruptions or supply difficulties. In addition, a significant disruption of operations in the steel industry at the suppliers’ end could lead to stoppages of production and consequently to delivery cancellations. Finally, laborrelated conflicts at the customers’ end, in particular in the construction, automotive or machine industries, could have an adverse effect on demand. Such conflicts could have an adverse effect on our financial condition and results of operations. Slow economic growth in Germany, the Czech Republic and other European countries to which we export a growing percentage of our products may adversely affect our results of operations. While we market and sell our products worldwide, some of our revenues are derived from European markets. In 2005, we exported 9.3% and 3.7% of our products to Germany and the Czech Republic, respectively. Consequently, the economic conditions in these countries have an increasing impact on our operating performance. Any weak economic performance in their economics may adversely affect our result of operations. Our business may be adversely affected by exchange rate fluctuations. Long-term trends in exchange rates may have a material impact on our business. A strong Polish zloty versus the Euro has an adverse impact on our competitive position in European markets because a substantial portion of our costs are incurred in Polish zloty, in particular for energy and personnel costs, while mostly Polish zloty sales result from product prices that are directly linked to Euro/US dollar commodity prices. A further strengthening of the Polish zloty versus the Euro would likely exacerbate these effects and may thus have a material adverse effect on our financial performance and result of operations. Environmental regulations and other obligations relating to environmental matters could subject us to liability for fines, clean-ups and other damages, require us to modify our operations increase our manufacturing and delivery costs and adversely affect our results of operations. We are subject to the requirements of Polish and European Union environmental and occupational safety and health laws and regulations. These include obligations to investigate and clean up environmental contamination in certain circumstances. Additionally, many of our sites are located on previous brownfield sites or have had neighbors that undertook operations that could cause contamination. Costs related to our compliance with environmental laws, and potential obligations with respect to contaminated sites may have a significant negative impact on our operating results. These include obligations related to sites currently or formerly owned or operated by us, or where waste from our operations was disposed. Our provisions for environmental compliance may be insufficient if the assumption underlying those provisions prove incorrect or if we are held responsible for contamination of which we are currently unaware. Consequently, compliance with these laws could result in significant capital expenditures as well as other costs and liabilities and our results of operations may be adversely affected. We rely on certain equipment to manufacture our steel products and operate our business, which if damaged due to events beyond our control, could have a material adverse effect on our results of operations and financial condition. The business of producing semi-finished and finished steel products is highly dependent on the availability and proper functioning of steel production equipment, which may be damaged or otherwise negatively affected by certain risks and hazards often outside the Group’s control. Industrial and mechanical incidents, unscheduled plant shutdowns or other processing problems may be caused by events such as technical failures, fires and other natural disasters and other unforeseen events, against which the Group does not have business interruption insurance. Any such damage to our steel production equipment could have a material adverse effect on our results of operations and financial condition. Polish tax laws are not well developed, and we may be subject to review from time to time which could result in material liabilities. Poland has a number of laws related to various taxes enforced by governmental authorities. Applicable taxes include state income taxes, value added taxes, local taxes (with respect to real estate taxation) and transfer taxes. In addition, most regulations related to these taxes have not been in force for significant periods, in 21

contrast to more developed market economies and are subject to frequent changes. As a result, implemented laws and regulations are often unclear or inconsistent. Accordingly, conflicting precedents with regard to the application and interpretation exist both among and within government ministries and local tax authorities, thus creating uncertainties and areas of potential conflict. Our tax position (including matters related to our corporate structure) is subject to possible review and stringent investigation by a number of Polish tax authorities, who exercise strict oversight and who are enabled by law to impose extremely severe (in case of revealing irregularities in tax settlements) fines, penalties and interest charges. Due to increasing awareness of the tax authorities to the transfer pricing issues, particularly the related party transactions, we may be the subject of interest to the tax authorities. If for any reason our tax position (including matters related to our corporate structure) were to be disputed by tax authorities, we could be subject to substantial tax liabilities which could materially adversely affect our results of operations. We depend on key personnel and may not be able to retain those employees or recruit additional qualified personnel. We depend to a large extent on the services of key executive officers, some of whom are our founders, including Przemysław Sztuczkowski, to manage growth, integrate new acquisitions, plan future development and manage day-to-day operations. The loss of the services of any of our key executive officers could adversely affect our business and results of operations. We also rely heavily on a highly trained workforce of sales managers and sales personnel, as well as operations and logistics, finance, accounting, business development and information technology employees. It is often difficult to locate trained personnel for these positions, particularly in Polish regional cities. Should we lose members of our trained workforce, we may be unable to replace them with other suitably qualified people and may have to invest in training unqualified persons for their positions. This may adversely affect our business and results of operations. Certain risks associated with investing in emerging markets such as Poland could materially adversely affect our results of operations. Since 1989, Poland has been undergoing transformation from a one-party state with a centrally planned economy to a pluralist democracy with a free-market orientated economy. Changes made in the course of this transformation include the privatization of certain state-owned assets, the removal of exchange controls, the modernization of the Polish banking system and the creation of a modern capital market. Poland’s accession to the European Union on May 1, 2004 has expedited these reforms, the majority of which have been beneficial for non-state owned companies like us. However, Poland is still continuing its reforms to comply with European Union standards as well as other political and economic reforms towards a pluralist democracy with a freemarket orientated economy. Any failure of the ongoing political and economic reforms of Poland could materially adversely affect our results of operations. Risks Related to Austrian Acquisition Our planned acquisition of voestalpine Stahlhandel GmbH is an important strategic initiative which presents us with significant challenges. The proceeds of this Offering will be used in part to finance our acquisition of a 74.9% interest in voestalpine Stahlhandel GmbH. The acquisition of voestalpine Stahlhandel GmbH confronts us with a number of significant challenges in integrating voestalpine Stahlhandel GmbH’s operations with our own. Our success will depend on a number of factors, including: Š our ability to successfully combine voestalpine Stahlhandel GmbH’s distribution channels with the

Group’s retail distribution structure; Š our ability to maintain relationships with voestalpine Stahlhandel GmbH’s customers and suppliers; Š our ability to integrate voestalpine Stahlhandel GmbH’s computer and information technology

systems with those of the Group; Š our ability to work co-operatively with voestalpine Stahlhandel GmbH’s employees in pursuing our

combined strategic and operational efficiency objectives; and Š our ability to implement our combined investment plans successfully on schedule and within budget.

There can be no assurance that the integration of voestalpine Stahlhandel GmbH will be successful and difficulties during integration could reduce the benefits we expect to derive from the acquisition. 22

We have not been, and until the closing of the transaction will not be, involved in the management of voestalpine Stahlhandel GmbH. As a result, our assessment of the risks and opportunities presented by the Austrian Acquisition may not be accurate, and there may be risks of which we are not aware. The description of voestalpine Stahlhandel GmbH contained in this Offering Memorandum is based solely upon the information provided to us during the acquisition process. voestalpine Stahlhandel GmbH’s operations are subject to the environmental laws and regulations applicable in Austria and other countries, and the nature of its business may give rise to potential environmental liability through spills, discharges or other releases of hazardous substances into air, soil and water. As such, we may be potentially exposed to environmental liabilities in the future. The Austrian Acquisition is also still subject to merger control approval in Austria and Bosnia — Herzegovina. There can be no assurance that the Austrian Acquisition will close as expected or that the relevant competition authorities will not impose certain obligations, such as the disposal of assets, as a condition to approving the acquisition. See “Summary — Recent Developments — voestalpine Stahlhandel GmbH” and “The Transactions — The Austrian Acquisition” and “Business — Finished Products — Distribution — voestalpine Stahlhandel GmbH”. We have entered into a two-year non-competition agreement with voestalpine Stahl GmbH, a subsidiary of voestalpine AG during which time voestalpine Stahl GmbH has agreed not to actively divert or attempt to divert (i) any current or former employees of voestalpine Stahlhandel GmbH or (ii) any business or existing customers from the voestalpine Stahlhandel GmbH, or any of the subsidiaries by directly or indirectly influencing any party that is or has been an employee or customer of voestalpine Stahlhandel GmbH or soliciting any business in any other way. If after the expiration of that two-year non-competition agreement, voestalpine Stahl GmbH decides to reenter the retail distribution business, it could materially adversely affect our results of operations and financial condition. As the parent company of voestalpine Stahlhandel GmbH, voestalpine Stahl GmbH maintained significant relationships with many of voestalpine Stahlhandel GmbH’s customers and suppliers. Any decision by voestalpine Stahl GmbH to reenter the retail distribution business after the expiration of the non-competition agreement could cause us to lose valuable customers and suppliers and could materially affect our results of operations and financial condition. Since we are only acquiring a 74.9% interest in voestalpine Stahlhandel GmbH, under Austrian law, voestalpine Stahl GmbH, the minority shareholder, will retain a control position over significant corporate events of voestalpine Stahlhandel GmbH through its 25.1% interest. Upon consummation of the Austrian Acquisition, we expect to hold a 74.9% interest in voestalpine Stahlhandel GmbH for a period of approximately two years after the Closing Date at which time we anticipate exercising an option under the Share Purchase Agreement to allow us to purchase the remaining 25.1% interest in voestalpine Stahlhandel GmbH from the minority shareholder, voestalpine Stahl GmbH. While we will be responsible for the day-to-day management of and most business decisions for voestalpine Stahlhandel GmbH during that two-year period and thereafter, under Austrian law as long as we own less than 75% in voestalpine Stahlhandel GmbH, certain major corporate events, such as certain amendments of the articles of association, the sale of the assets of voestalpine Stahlhandel GmbH as a whole in the course of the liquidation of voestalpine Stahlhandel GmbH, the merger of voestalpine Stahlhandel GmbH with a stock corporation or another limited liability company, or the agreement by voestalpine Stahlhandel GmbH to acquire assets in an amount exceeding one fifth of the nominal amount of its share capital, require the approval of 75% of the shareholders of voestalpine Stahlhandel GmbH. Therefore, we may not be able to make certain significant corporate changes in voestalpine Stahlhandel GmbH’s business during that two-year period, even if we deem such changes to be in our best interest or in the best interest of the holders of Notes, if voestalpine Stahlhandel GmbH’s minority shareholder, voestalpine Stahl GmbH, objects. Risks Related to the Notes and Our Structure The Issuer is a special purpose vehicle with no revenue generating operations of its own. The Issuer is a special purpose vehicle that was recently formed which will not pursue any revenuegenerating operations of its own as long as Notes remain outstanding. Following the Offering, the Issuer will rely on payments to it under the intercompany notes or loans from the Company and, upon consummation of the Austrian Acquisition, from voestalpine Stahlhandel GmbH, to make payments of interest and principal when due on the Notes. The Issuer will have no material assets other than (i) the intercompany notes, loans or similar arrangements (and cash held prior to on-lending) with us, (ii) the escrow account in which an amount sufficient to redeem €60 million of Notes will be held, prior to the Austrian Acquisition or special mandatory redemption, as the case may be and (iii) the Acquisition On-Loan, following the Austrian Acquisition. 23

Our substantial indebtedness may limit our cash flow available to invest in the on-going needs of our business, which could prevent us from fulfilling our obligations under the Notes. Following the consummation of the Transactions, we will have substantial debt service obligations. As of September 30, 2006, on an adjusted pro forma basis after giving effect to the Transactions, we would have had PLN 855.0 million (€214.8 million) of indebtedness. The degree to which we are leveraged could have important consequences, including: Š the impairment of our ability to obtain additional financing in the future for working capital, capital

expenditures, acquisitions, general corporate purposes or other purposes; Š a significant portion of our cash flow from operations must be dedicated to the payment of principal

and interest on our debt, which reduces the funds available for operations; Š some of our debt is, and will continue to be, in currencies other than that in which we receive revenues

or in currencies other than zloty, which may result in higher interest expense in the event of increases in the costs of foreign currency exchange; Š some of our debt is, and will continue to be, at variable rates of interest, which may result in higher

interest expense in the event of increases in interest rates; and Š our debt contains, and any refinancing of our debt likely will contain, financial and restrictive

covenants, the failure to comply with which may result in an event of default which, if not cured or waived, could have a material adverse effect on us. Our ability to generate cash depends on many factors beyond our control, and we may not be able to generate sufficient cash to service our debt. We cannot assure you that our business will generate sufficient cash flows from operations or that future borrowings will be available to us in an amount sufficient to enable us to pay our debt, including the Notes, when due or to fund our other capital requirements or any operating losses. If our future cash flows from operations and other capital recourses are insufficient to pay our obligations as they mature or fund our liquidity needs, we may be forced to: Š reduce or delay our business activities and capital expenditures; Š sell assets; Š obtain additional debt or equity capital; or Š restructure or refinance all or a portion of our debt, including the notes, on or before maturity.

We cannot assure you that we will be able to accomplish any of these alternatives on a timely basis or on satisfactory terms, if at all. In addition, the terms of existing or future debt, including the Notes, may limit our ability to pursue any of these alternatives. Despite the level of indebtedness, we will be able to incur substantially more debt, which could further exacerbate the risks described above. We will be able to incur significant additional indebtedness in the future. Although each of the Indenture governing the Notes and the Revolving Credit Facilities contains restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. For example, the Revolving Credit Facilities will provide for revolving loan availability of up to €40 million. To the extent new debt is added to current debt levels, the substantial leverage risks described above would increase. See “Description of the Notes” and “Description of Other Indebtedness”. The terms of our indebtedness will restrict our operating flexibility. Among other things, the Indenture governing the Notes restricts the ability of the Company and its subsidiaries (including the Issuer) to: Š incur or guarantee additional indebtedness; Š pay dividends, make distributions or redeem or repurchase their securities; Š make investments; Š grant security interests or create liens on their assets;

24

Š enter into transactions with their affiliates other than on an arm’s-length basis; Š transfer or sell assets or shares in subsidiaries; Š enter into sale and leaseback transactions; Š guarantee future debt; Š impair the collateral; or Š engage in mergers or consolations.

These covenants could limit the ability of the Company to finance its future operations and capital needs and its ability to pursue acquisitions and other business activities that may be in its interest. If the Company fails to comply with any of these covenants, it will be in default under the Indenture, and the Trustee or holders of the Notes could declare the principal and accrued interest on the Notes due and payable, after any applicable cure period. These restrictions could materially adversely affect the Company’s ability to finance future operations or capital needs or engage in other business activities that may be in its best interest. See “Description of the Notes” and “Description of Other Indebtedness”. In addition, our Revolving Credit Facilities require us to maintain specified consolidated financial ratios and satisfy certain consolidated financial and operating tests. If the Company fails to meet those tests or breaches any of the restrictive covenants, the lenders under such indebtedness could declare all amounts owing thereunder to be immediately due and payable. In the event that the Austrian Acquisition is not consummated within specified dates after the closing of this Offering, or under certain other circumstances, the Mandatorily Redeemable Notes will be redeemed at 101% of their aggregate principal amount, which means that you may not obtain the return you expect on those Notes to the extent you are a holder thereof. An amount of the gross proceeds of this Offering sufficient to redeem the Mandatorily Redeemable Notes at a special mandatory redemption price will be placed in escrow pending consummation of the Austrian Acquisition. The special mandatory redemption price will equal to 101% of the aggregate principal amount of the Mandatorily Redeemable Notes, plus accrued and unpaid interest up to the date of redemption, if the Austrian Acquisition is not consummated on or before June 30, 2007 in substantially the manner provided for in the Share Purchase Agreement or the Share Purchase Agreement is terminated at any time prior thereto. The selection of the Notes for redemption will be made by the Trustee either: (1) in compliance with the requirements of the principal securities exchange, if any, on which the Notes are listed on an international exchange; or (2) if such Notes are not so listed or such exchange prescribes no method of selection, on a pro rata basis, by lot or by such other method as the Trustee shall deem fair and appropriate. See “Description of the Notes — Escrow of Proceeds; Special Mandatory Redemption”. If the Mandatorily Redeemable Notes are redeemed, you may not obtain the return you expect to receive on those Notes. In addition, after the special mandatory redemption (if it were to occur), €110 million aggregate principal amount of the Notes will remain outstanding (unless otherwise redeemed or repurchased), rather than the €170 million aggregate principal amount originally issued on the Issue Date, and thus the liquidity of the Notes may be adversely effected. You may face a foreign exchange risk by investing in the Notes. The Notes will be denominated and payable in Euro. If you are a United States investor, an investment in Notes will entail foreign exchange related risks due to among other things, possible significant changes in the value of Euros relative to US dollars because of economic, political and other factors over which we have no control. Depreciation of the Euro against the US dollar could cause a decrease in the effective yield of the Notes below their stated coupon rates and could result in a loss to you on a US dollar basis. Certain of our existing and future subsidiaries will not guarantee the Notes, and any claim by us or the holders of the Notes against such subsidiaries will be structurally subordinated to all of the claims of creditors of such subsidiaries. Certain of our existing and future subsidiaries will not guarantee the Notes. In the event of a bankruptcy, liquidation or reorganization of any of our non-guarantor subsidiaries, holders of their indebtedness and their trade creditors will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are available for distribution to the Issuer, us or any of the other Guarantors. The Notes, therefore, will be effectively junior and structurally subordinated to all debt and other liabilities of our non-guarantor subsidiaries, including liabilities owed to trade creditors. 25

We may not be able to obtain enough funds to repurchase the Notes if a change of control takes place. Upon a change of control (as defined in the Indenture governing the Notes), we may be required to purchase all or a part of the Notes then outstanding at 101% of their principal amount, plus accrued and unpaid interest and additional amounts, if any, as applicable, to the date of repurchase. If a change of control were to occur, we cannot assure you that we will have sufficient funds to pay the purchase price of the outstanding Notes, and we expect that third party financing would be required to do so. We cannot assure you that we will be able to obtain financing on favorable terms, if at all. In addition, our other indebtedness may contain restrictions on repayment requirements with respect to certain events or transactions that could constitute a change of control under the Indenture governing the Notes. The inability to purchase the tendered Notes would constitute an event of default under the Indenture governing the Notes. The change of control provisions contained in the Indenture may not protect holder of the Notes in the event of highly leveraged transactions, including reorganizations, restructurings or mergers, because these transactions may not involve a change in voting power of beneficial ownership of the magnitude required to trigger the change of control provisions. See “Description of the Notes — Change of Control”. The security over the shares of the Issuer, the Subsidiary Guarantors and, upon consummation of the Austrian Acquisition, voestalpine Stahlhandel GmbH, will not be granted directly to the holders of the Notes but rather through “parallel debt” obligations. The security over the shares of the Issuer, the Subsidiary Guarantors and, upon consummation of the Austrian Acquisition, voestalpine Stahlhandel GmbH, that will constitute security for the obligations of the Issuer and the Company, as Guarantor, under the Notes and the Indenture governing the Notes and the Guarantees and certain other collateral will not be granted directly to the holders of the Notes but will be granted only in favor of the Trustee for the Notes, as beneficiary of parallel debt obligations (the “Parallel Debt”). The Parallel Debt will be in the same amount and payable at the same time as the obligations of the Issuer and the Company, as Guarantor, under the Indenture in respect of the Notes and the Guarantee (the “Principal Obligations”). Any payment in respect of the Principal Obligations shall discharge the corresponding Parallel Debt and any payment in respect of the Parallel Debt shall discharge the corresponding Principal Obligations. As a consequence, holders of the Notes will not have direct security and will not be entitled to take enforcement action in respect of the security for the Notes, except through the Trustee for the Notes. However, as the Trustee will have, pursuant to the Parallel Debt, a claim against each of the Issuer and the Company, as Guarantor, for the full principal amount of the Notes, holders of the Notes bear some risks associated with a possible insolvency or bankruptcy of the Trustee. The Parallel Debt obligations referred to above will be contained in the Indenture, which will be governed by New York law. It should be noted that the notions of trust and trustee are defined by the Hague Convention of July 1, 1985 that France did not ratify. France has not otherwise implemented such notions in its laws and regulations. It is therefore uncertain whether French courts would enforce security subject to French law granted in favour of the Trustee. In addition, Parallel Debt structures have not yet been tested under Polish or French law, and we cannot assure you that they will eliminate or mitigate the risk of unenforceability posed by such applicable laws. If any challenge to the validity of the security interests or the Parallel Debt structure was successful, the holders of the Notes may not be able to recover any amounts under the security interest. The remedies available to enforce the share pledge by the Company over its shares in voestalpine Stahlhandel GmbH are governed by Austrian law. The security over the shares will be granted through Parallel Debt obligations and it may not be possible under Austrian law to enforce the pledge. Under Austrian law the validity and enforceability of security rights is a question of the lex situs of the respective goods and rights and the Austrian Act on International Private Law (Internationales PrivatrechtsGesetz) stipulates that the creation and the termination of a pledge is subject to the laws of the country where the pledged assets are located. The share pledge itself will only become effective when perfection has been made, which in the case of shares in a limited liability company requires a notification to the company. In the case of a merger, de-merger or any other form of reorganization, additional steps may be necessary to cover newly issued shares in voestalpine Stahlhandel GmbH then existing and/or newly acquired participations by the Company as pledgor under the share pledge agreement(s) in the share capital of voestalpine Stahlhandel GmbH or its legal successor(s). 26

The validity and enforceability of the share pledge will depend on the validity of the respective obligations that are secured by such pledge. Under Austrian law a pledge is an accessory right (akzessorisches Recht) and will therefore be subject to the same legal consequences as the secured obligation. If the secured obligation is terminated or not valid, the same applies to the pledge. The pledge can furthermore not be separated from the secured obligation, which means that it can only be held and enforced by the creditor of such secured obligations. The security granted over the shares will be granted through Parallel Debt obligations. Under Austrian law, this structure is generally effective as long as the Trustee is and will be a joint and several creditor of each and every obligation of the Issuer towards the holders of the Notes and the Trustee has its own independent right to demand performance by the Issuer of such obligations. In addition, Austrian corporate law contains strict capital maintenance rules for the protection of a company’s creditors and transactions with related parties must comply with these capital maintenance rules. Consequently, there is a risk that competent courts would hold the transactions entered into, or the security provided by, the Austrian companies invalid in whole or in part, if there is a violation of such rules. The value of the collateral securing the Notes may not be sufficient to satisfy the Issuer’s obligations or the Company’s obligations as guarantor under the Notes and such collateral may be reduced or diluted under certain circumstances. As a matter of applicable law, the security over the collateral granted to the holders of the Notes will be first ranking. In the event of foreclosure on the collateral securing indebtedness under the Notes, the proceeds from the sale of the shares of the Issuer and the Subsidiary Guarantors or the other collateral may not be sufficient to satisfy the Issuer’s obligations or the Company’s obligations, as Guarantor, under the Notes. The value of the collateral and the amount to be received upon a sale of such shares will depend upon many factors, including, among others, the ability to sell the shares of the Issuer and the Subsidiary Guarantors in an ordinary sale and the availability of buyers. In addition, the shares of the Issuer and the Subsidiary Guarantors may be illiquid and may have no readily ascertainable market value. The value of the other collateral will depend on the solvency of the debtors, the value of such accounts and the applicable laws governing the enforcement of collateral in the relevant jurisdictions. The Indenture will permit the granting of certain liens other than those in favor of the holders of the Notes on the collateral securing the Notes. To the extent that holders of other secured indebtedness or third parties enjoy liens, including statutory liens, whether or not permitted by the Indenture or the collateral, such holders or third parties may have rights and remedies with respect to the collateral that, if exercised, could reduce the proceeds available to satisfy the Issuer’s obligations or the Company’s obligations, as Guarantor, under the Notes. Moreover, if the Issuer issues additional Notes under the Indenture or other indebtedness which is permitted under the Indenture to share the collateral, holders of such additional Notes or indebtedness would benefit from the same collateral as the holders of the Notes being offered hereby, thereby diluting your ability to benefit from the liens on the shares of the Issuer and the Subsidiary Guarantors or the other collateral. The Intercreditor Agreement (to which certain future creditors will accede) provides that certain future creditors of the Issuer and the Company can effectively receive the benefit, on a pari passu basis to the holders of the Notes, of the security granted to the holders of the Notes. In addition, the Security Documents relating to the collateral securing the Notes and the Intercreditor Agreement will provide that enforcement actions with respect to the collateral and any other future indebtedness of the Issuer and the Company that is secured by the collateral may only be taken by the security agent at the instruction of creditors or representatives of such indebtedness representing at least 25% of the total indebtedness secured by the collateral securing the Notes. See “Description of the Notes — Security — General”. The remedies available to enforce the Złomrex Share Pledges are governed by Polish law. Due to the uncertainties in Polish law, it may not be possible to enforce the pledge or realize the sale proceeds in a timely manner and the proceeds of any enforcement may not be sufficient to meet your claims. The agreements relating to the registered pledge of shares in Poland to secure obligations of the Issuer under the Notes and the Guarantors under the Guarantees are governed by Polish law. Under Polish law, a pledgee can receive pledged shares only if approved by a court and any enforcement of pledges normally requires a mandatory public auction of the shares. A pledgee can however receive shares through a non-public sale of the shares or by the assumption of ownership of the shares, provided that this has been specifically set forth in a registered pledge agreement. The manner of disposal of pledged shares may also be subject to the consent of Polish and European Union antitrust authorities if it could impede effective competition and/or create or strengthen a dominant position. In addition, if certain procedures are elected to be followed under Polish law, the Security Agent may be required to maintain a special zloty account with a Polish authorized bank to receive the proceeds of any public sale, convert those proceeds into Euro and transfer them out of Poland. Only upon such conversion and transfer 27

will the sale proceeds become available to the holders of the Notes. These requirements may restrict the ability to convert the sale proceeds into Euro immediately upon their receipt in the special account and, therefore, significantly delay the repatriation of the sale proceeds. Such delay may decrease, in Euro terms, the value of the sale proceeds due to the fluctuations in the zloty to Euro exchange rate. Under Polish law, only actual creditors may take and hold security for the purposes of securing their own claims. Polish law does not envisage granting a pledge to a third party acting for the benefit of the creditor. The Trustee, which is named as a pledgee under the pledge agreements, acts in its capacity as the trustee for the benefit of the holders of Notes pursuant to the Indenture. Polish legal doctrine generally does not recognize the concept of a trust, and the outcome of the analyses of the Trustee’s legal status and its relationship with the holders of the Notes is uncertain. However, there is a possibility that if the Trustee is deemed to act under the pledge agreements for its own benefit, the pledge agreements may be found to be invalid as a matter of Polish law. On the contrary, if the Trustee is viewed by the Polish court as a representative or agent acting on behalf of the holders of Notes, the pledge agreements may be deemed concluded on behalf of the holders of the Notes. Under Polish law, a creditor’s claims secured by a pledge are satisfied from the proceeds of the public sale of the pledged property. The creditors whose claims are secured by a pledge enjoy priority in relation to unsecured creditors, but not against the creditors claiming compensation for personal injury or death, employee salaries, or severance and similar payments, provided such claims arose before the execution of the relevant pledge agreements. Enforcement costs have priority over all claims mentioned above. If the proceeds of the sale of pledged property are insufficient to fully satisfy the relevant creditor’s claim secured by a pledge, the remaining secured claims shall be satisfied together with the claims of other creditors. The first-ranking share pledge granted by the Company over the shares of the Issuer and the security granted by the Issuer with respect to the Notes may be declared null and void in case of an insolvency proceeding brought in France. The validity of the first-ranking share pledge granted by the Company over its shares of the Issuer or the security granted by the Issuer with respect to the Notes (including the assignment of the Acquisition On-Loan and the Intercompany Proceeds Note) could be challenged in a French proceeding in the event that insolvency proceedings were commenced in France against the Company or the Issuer during the 18 month period following the date on which such security interest is granted. Article L.632-1-6° of the French Commercial Code (Code de commerce) provides that any security interest granted after the date on which the underlying debt it secures was incurred (dettes antérieurement contractées) and which was determined to have been granted during the hardening period, is null and void. The hardening period (période suspecte) is a period of time the duration of which is determined by the bankruptcy judge upon the judgement recognizing that the cessation of payments of the insolvent company has occurred. The hardening period commences on the date of such judgement and extends for up to 18 months previous to the date of such judgement. Furthermore, Article L.632-2, 1st paragraph, of the French Commercial Code (Code de commerce) provides that the bankruptcy court may declare void any agreement involving a consideration (acte à titre onéreux) entered into during the hardening period if the bankrupt debtor’s contracting party knew that such debtor was insolvent (cessation des paiements). The first-ranking share pledge over the Company’s shares in the Issuer will be released and retaken in connection with the incurrence of additional indebtedness secured by such pledge permitted under the Indenture. In the event of incurrence of any additional indebtedness permitted by the Indenture to share the pledge of the Company’s shares in the Issuer, the first-ranking pledge over the Company’s shares in the Issuer will have to be released and retaken in favor of the Notes. You may be required to pay a “soulte” in the event you decide to enforce the share pledges by attribution of the shares rather than by a sale of the shares in a public auction. Under French law, a pledge over shares may be enforced at the option of the secured creditor either by a sale of the pledged shares in a public auction (the proceeds of the sale being paid to the secured creditors) or by “attribution” of the shares to the secured creditor, following which the secured creditor is the legal owner of the pledged shares. In a proceeding for attribution, a court appointed expert will determine the value of the collateral (in this case, the shares) and, if the value of the collateral exceeds the amount of the secured debt, the secured creditors may be required to pay the obligor an amount, the “soulte”, equal to the difference between the value of the shares as asserted by such expert and the amount of the secured debt. This is true regardless of the actual amount of proceeds ultimately received by the secured creditors from a subsequent sale of the collateral. 28

Fraudulent conveyance statutes under Polish law may limit your rights as a holder of the Notes to enforce the security provided by the Guarantors. The Issuer’s obligations under the Notes are guaranteed by the Guarantors, and each of the Guarantees may be subject to review under the fraudulent transfer and conveyance laws of Poland. The Guarantors will guarantee the payment of the Notes on a senior basis. The Notes and the Guarantees may be subject to claims that they should be limited, subordinated or voided in favor of existing and future creditors under Polish law. According to the Polish Civil Code, any company’s creditors may request the court to declare any legal action (e.g. the granting of a guarantee) to be ineffective in relation to such creditor if the following conditions are met: (i) such action is performed by the company to the creditor’s detriment, (ii) a third person profited therefrom and (iii) the company was aware that such action was to the creditor’s detriment and the third person knew about that or could have known acting with due diligence. Such action is considered to be detrimental to creditors if the company became insolvent or became insolvent to a greater extent than before performing the action in question. If the legal action is free of charge, the creditor may claim the legal action ineffective even though the third party did not know that the debtor acted to the creditor’s detriment. The creditor with respect to whom the company’s legal action was declared ineffective may, with priority over the creditors of the third party, vindicate the rights in property which as a result of the legal action were declared ineffective, were removed from the company’s estate or did not become a part of the estate. The measure of insolvency for purposes of fraudulent conveyance laws varies depending on the law applied. Generally, however, a guarantor would be considered insolvent if it could not pay its debts as they became due. If a court decided that any guarantee was a fraudulent conveyance and voided such guarantee, or held it unenforceable for any other reason, a holder of the Notes would cease to have any claim in respect of the guarantor and would be a creditor solely of the Issuer and the remaining guarantors. If the Issuer cannot satisfy its obligations under the Notes and if any of the Polish guarantees is found to be a fraudulent transfer or conveyance, the Issuer cannot assure holders of the Notes that it can ever repay in full the amounts outstanding under the Notes. In addition, the liability of each Guarantor under the Indenture will be limited to the amount that will result in its guarantee not constituting a fraudulent conveyance or improper distribution, and there can be no assurances as to what standard a court would apply in making a determination of the maximum liability of each Guarantor. The insolvency laws of the European Union, France and Poland may not be as favorable to you as the bankruptcy laws of the jurisdiction with which you are familiar. European Union Pursuant to Council Regulation (EC) no. 1346/2000 on insolvency proceedings (the “EU Insolvency Regulation”), the court which shall have jurisdiction to open insolvency proceedings in relation to the Issuer or any Guarantor will be the court of the Member State (other than Denmark) where the entity concerned has its “center of main interests” (as that term is used in Article 3(1) of the EU Insolvency Regulation). The determination of where the Issuer or any Guarantor has its “center of main interests” would be a question of fact on which the courts of the different EU Member States may have differing and even conflicting views. Furthermore, “center of main interests” is not a static concept and may change from time to time. Although under Article 3(1) of the EU Insolvency Regulation there is a rebuttable presumption that the Issuer or a Guarantor would have its “center of main interests” in the Member State in which it has its registered office. Preamble 13 of the EU Insolvency Regulation states that the “center of main interests” of a debtor should correspond to the place where the debtor conducts the administration of its interests on a regular basis and “is therefore ascertainable by third parties”. In that respect, factors such as the place in which the Issuer or a Guarantor holds board meetings, the place where the Issuer or a Guarantor conducts the majority of its business and the place where the large majority of the Issuer’s or a Guarantor’s creditors are established may all be relevant in the determination of the place where the Issuer or a Guarantor has its “center of main interests”. According to a recent decision of European Court of Justice (Eurofood case C. 341-04), the presumption mentioned above can be rebutted if factors which are both objective and ascertainable by third parties lead to the conclusion that the registered office may not reflect the actual “center of main interests” for the company and that the “center of main interests” of such company is actually located in another EU Member State. That could be the case particularly if a company is not carrying out any business in the territory of the Member State in which its registered office is situated. If the “center of main interests” of the Issuer or a Guarantor is and will remain located in the state in which it has its registered office, the main insolvency proceedings in respect of the Issuer or a Guarantor under the EU Insolvency Regulation would be commenced in such jurisdiction and accordingly a court in such 29

jurisdiction would be entitled to commence the types of insolvency proceedings referred to in Annex A to the EU Insolvency Regulation. Insolvency proceedings opened in one Member State under the EU Insolvency Regulation are to be recognized in other Member States (other than Denmark), although secondary proceedings may be opened in another Member State. If the “center of main interests” of a debtor is in one Member State (other than Denmark) under Article 3(2) of the EU Insolvency Regulation, the courts of another Member State (other than Denmark) may open “territorial proceedings” in the event that such debtor has an “establishment” in the territory of such other Member State. If a debtor does not have an establishment in any other Member State, no court of any other Member State shall have the ability to open territorial proceedings in respect of such debtor under the EU Insolvency Regulation. France The Issuer is incorporated in France. Subject to the provisions of Council Regulation (EC) No. 1346/2000 on insolvency proceedings mentioned above, it will be subject to French laws and proceedings affecting creditors, including Article 1244-1 of the French Civil Code (Code civil), conciliation proceedings (procédure de conciliation), safeguard proceedings (procédure de sauvegarde) and judicial reorganization or liquidation proceedings (redressement or liquidation judiciaire). The safeguard or judicial reorganization proceedings are intended to maintain the enterprise’s activities and employment. The following is a general discussion of insolvency proceedings governed by French law for information purposes only and does not address all the French law considerations that may be relevant to creditors. Grace periods Pursuant to Article 1244-1 of the French Civil Code, French courts may, in any civil proceeding involving the debtor, whether initiated by the debtor or the creditor, taking into account the debtor’s financial position and the creditor’s financial needs, defer or otherwise reschedule the payment dates or payment obligations over a maximum period of two years. In addition, pursuant to Article 1244-1, French courts may decide that any amounts, the payment date of which is thus deferred or rescheduled, will bear interest at a rate which is lower than the contractual rate (but not lower than the legal rate) or that payments made shall first be allocated to repayment of the principal. If a court order under Article 1244-1 of the French Civil Code is made, it will suspend any pending enforcement measures, and any contractual interest or penalty for late payment will not accrue or be due during the period ordered by the court. Conciliation proceedings A company may, in its sole discretion, initiate conciliation proceedings (procédure de conciliation) with respect to itself, provided it (i) is able to pay its due debts out of its available assets, or has been unable to pay its due debts out of its available assets for less than 45 days, and (ii) experiences legal, economic or financial difficulties. The competent court will appoint a conciliator (conciliateur) to help the company reach an agreement with its creditors for reducing or rescheduling its indebtedness. This agreement may be either acknowledged (constaté) by the president of the court or approved (homologué) by the court. While the acknowledgement of the agreement by the president of the court does not entail any specific consequences, the approval by the court will have the following consequences: Š creditors who provide new money or goods or services designed to ensure the continuation of the

business of the distressed company (other than shareholders providing new equity) will enjoy a priority of payment over all pre-proceeding and post-proceeding claims (other than certain postproceeding employment claims and procedural costs), in the event of subsequent safeguard proceedings, judicial reorganisation proceedings or judicial liquidation proceedings; Š in the event of subsequent judicial reorganisation proceedings or judicial liquidation proceedings, the

date of the cessation des paiements cannot be fixed by the court as of a date earlier than the date of the approval of the agreement (see below the definition of the date of the cessation des paiements); Š joint debtors and persons who have granted a cautionnement or a first demand guarantee can benefit

from the provisions of the agreement. Safeguard Proceedings A company may, in its sole discretion, initiate safeguard proceedings (procédure de sauvegarde) with respect to itself, provided it (i) is able to pay its debts as they come due out of its available assets, and (ii) experiences difficulties which it is not able to overcome and which are likely to lead to a cessation des paiements. A court-appointed administrator investigates the business of the company during an initial observation period of 6 months, renewable once and exceptionally twice, and helps the company to elaborate a draft safeguard plan (projet de plan de sauvegarde). 30

In case of large companies (with more than 150 employees or turnover greater than 20 million), two creditors’ committees (one for credit institutions having a claim against the debtor and the other for each supplier having a claim that represents more than 5% of the total amount of the claims of all the debtor’s suppliers) will then be established. These committees will be consulted on the safeguard plan drafted by the debtor’s management during the observation period. The committees must announce whether they approve or reject the safeguard plan within 30 days of its proposal. The plan must be approved by a majority vote of each committee, provided that members voting account for at least two-thirds of the outstanding claims of the creditors of each committee. If there are any bondholders, they are presented with the plan during a general meeting of bondholders held for that purpose. Following approval by the creditors’ committees and subject to verification by the court that the interests of all creditors are sufficiently safeguarded, the court will approve the plan. The safeguard plan accepted by the committees will be binding on all the members of the committees (including those who had voted against the adoption of the draft plan). With respect to creditors who are not members of the committees, or in the event no committees are established, proposals are made to each creditor individually. Judicial reorganization or liquidation proceedings Judicial reorganization or liquidation proceedings (redressement or liquidation judiciaire) may be initiated against or by a company if it cannot pay its debts as they fall due out of its available assets (i.e. it is in cessation des paiements). The company is required to petition for insolvency proceedings (or for conciliation proceedings: see above) within 45 days of falling into cessation des paiements. If it does not, de jure managers (including directors) and, as the case may be, de facto managers are subject to civil liability and may be subject to criminal sanctions. The date of cessation des paiements is deemed to be the date of the court order commencing proceedings, unless the court sets an earlier date, which may be up to 18 months before the date of the court order. The date of the cessation des paiements marks the beginning of a “suspect period” (période suspecte) pursuant to which certain transactions entered into during such period may be void or voidable. Void transactions include transactions or payments entered into during the suspect period that may constitute voluntary preferences for the benefit of some creditors to the detriment of other creditors and protective measures (mesures conservatoires). Voidable transactions include any transactions or payments made after the date of cessation des paiements, if the party dealing with the company knew that it was in a state of cessation des paiements. Transactions relating to the transfer of assets for no consideration are also voidable when realized during the six-month period prior to the beginning of the suspect period. The court order commencing the proceedings may order either the liquidation or the reorganization of the company. In the event of reorganization, an administrator appointed by the court investigates the business of the company during an initial observation period, which lasts 6 months renewable once and exceptionally twice, and makes proposals for either, (i) the reorganization of the company (by helping the debtor to elaborate a reorganization plan, which is similar to a safeguard plan; see above), (ii) the sale of the business or, (iii) the liquidation of the company. Committees of creditors may be created under the same conditions as in safeguard proceedings (see above). At any time during this observation period, the court can order the liquidation of the company. At the end of the observation period, the outcome of the proceedings is decided by the court. Status of creditors during safeguard proceedings, judicial reorganization proceedings or judicial liquidation proceedings As a general rule, creditors domiciled in France whose debts arose prior to the commencement of the proceedings must file a claim with the creditors’ representative within two months of the publication of the court order; this period is extended to four months for creditors domiciled outside France. Creditors who have not submitted their claims during the relevant period are barred from receiving distributions made in accordance with the proceedings. Employees are not subject to such limits and are preferential creditors under French law. 31

Subject to limited exceptions, from the date of the court order commencing the proceedings, the company is prohibited from paying debts outstanding prior to that date and its creditors may not pursue any legal action against the company with respect to any claim arising prior to that date. Contractual provisions such as those contained in the Indenture that would accelerate the payment of a company’s obligations upon the occurrence of (i) the opening of judicial reorganization proceedings or (ii) a state of cessation des paiements are not enforceable under French law. The opening of liquidation proceedings, however, automatically accelerates the maturity of all of the company’s obligations. The administrator may elect to terminate or continue executory contracts (contrats en cours). If the administrator chooses to continue a contract, the company must fully perform its post-petition contractual obligations. If the court adopts a safeguard plan or a reorganization plan, claims of creditors who have accepted the plan will be paid according to the plan. With respect to creditors that have not accepted the proposals made by the administrator and the company, the court can decide to reschedule the payment of their claims over a maximum period of 10 years. The court can also set a time period during which the assets that it deems necessary to the continuation of the business of the debtor may not be sold without its consent. If the court adopts a “plan of sale of the business” (plan de cession), the proceeds of the sale will be allocated for the payment of creditors, according to their ranking. If the court decides to order the judicial liquidation of the company, the court will appoint a liquidator who shall sell the assets of the company and settle the relevant debts. Poland Our Guarantors are incorporated in Poland and, as such, will be subject to the Polish laws regarding insolvency or threatened insolvency, including in particular the provisions of the Polish Civil Code regarding fraudulent conveyance or transfer (as described above) as well as the provisions of Bankruptcy and Reorganization Law of February 28, 2003 regarding the liquidation bankruptcy, composition bankruptcy and reorganization proceedings. Declaration of bankruptcy A company (and certain other entities specified in the Bankruptcy and Reorganization Law) may be declared bankrupt by the court if it is insolvent i.e. if it does not pay its mature and payable debts. A company is also considered insolvent if its liabilities exceed its assets, even if such company timely pays its debts. A motion for declaration of bankruptcy of a given debtor may be filed with the court by the debtor itself or any of its creditors. If the assets of the debtor are not sufficient to cover the costs of the bankruptcy proceedings, the motion will be rejected by the court. Under Polish law, there are two basic types of bankruptcy which may be declared by the court: liquidation bankruptcy (which is the proper bankruptcy, aiming at liquidation of the assets of the debtor and maximum possible repayment of the creditors’ claims, it ends with the liquidation of the bankrupt company) and composition bankruptcy (which in fact opens composition proceedings aiming at reaching an arrangement between the debtor and its creditors). The Polish law seems to favour the composition bankruptcy which allows the debtor to continue its business activity. In the course of the proceedings, the court may change the type of the declared bankruptcy i.e. from liquidation bankruptcy to composition bankruptcy or the other way round. According to Polish law, any contractual provisions providing for a change or termination of the legal relationship in case of a declaration of bankruptcy are null and void and such change or termination may only occur pursuant to the mandatory provisions of the Bankruptcy and Reorganization Law. After the declaration of bankruptcy, it is not possible to create any pledge, registered pledge or fiscal pledge over the assets of the bankrupt debtor or register any security interest in the relevant register, even if such security interest was created prior to the declaration of bankruptcy (subject to limited exceptions, mostly in composition bankruptcy). All creditors which intend to participate in the bankruptcy proceedings must file a submission of claim to the relevant court within the deadline specified in the declaration of bankruptcy. A claim may be submitted also at a later stage but subject to certain exceptions and ramifications. Void and voidable transactions Upon the declaration of bankruptcy (irrespective of its type), certain transactions effected by the bankrupt debtor will or may be subject to review. Certain of such transactions are considered ineffective by virtue of law and certain may be declared ineffective by the court or judge-commissioner. The provisions of the Bankruptcy and Reorganization Law concerning void and voidable transactions may affect the process of enforcement of the Guarantees or the security interest securing the Guarantees. 32

The following transactions are considered ineffective as against the bankruptcy estate by virtue of law: Š disposal of or creating an encumbrance over debtor’s assets within one year preceding the filing of the

bankruptcy motion, if effected free of charge or if the consideration (received by the debtor or third party) is unreasonably lower than the value of the disposal or encumbrance, Š securing or payment of a debt which is not yet due, if effected within two months preceding the filing

of the bankruptcy motion, Š any transactions with the dominant company, if effected within six months preceding the filing of the

bankruptcy motion. The judge-commissioner may also declare ineffective as against the bankruptcy estate the establishment of certain security interest (mortgage, pledge, registered pledge, fiscal pledge or other security in rem) over the bankrupt debtor’s assets if it secures a third party’s debt and was effected within one year preceding the filing of the bankruptcy motion, provided that the debtor has received no consideration, unreasonably low consideration or that the security interests secures a debt of a dominant company. In addition, certain transactions may be declared ineffective by the court pursuant to the provisions of the Polish Civil Code regarding the fraudulent conveyance or transfer (as described above). In such case, the relevant lawsuit must be brought by the receiver, court supervisor or the court manager—individual creditors cannot challenge the allegedly fraudulent conveyance or transfer during the bankruptcy proceedings. Composition bankruptcy Upon the declaration of composition bankruptcy, a court supervisor is appointed in order to supervise the activity of the bankrupt debtor and to approve all transactions outside of the ordinary course of business. The court may also deprive the debtor of the right to continue to manage its activities and appoint a court manager which will manage and represent the bankruptcy estate. Generally, the debts of the company which are subject to composition bankruptcy cannot be paid by the debtor or by the court manager, subject to certain exceptions. A council of creditors is appointed which advises the court manager or the court supervisor, supervises their activities and grants consents for certain actions specified in the provisions of law. The bankrupt company will be obliged to submit the arrangement proposals setting out the debt restructuring which may also include liquidation of the debtor’s assets. In general, the arrangement must be approved by the majority of all creditors in each class of creditors (having not less than 2/3 of the total amount of the claims) and by the court. The approved arrangement is binding for all creditors whose claims are covered by the arrangement pursuant to the mandatory provisions of the Bankruptcy and Reorganization Law even if they have not submitted their claims. The arrangement may be annulled by the court if it is not complied with by the debtor or it is obvious that it will not be complied with. In such case, the liquidation bankruptcy is declared. Liquidation bankruptcy Upon the declaration of liquidation bankruptcy, the bankrupt company may no longer manage its activities and its assets, with limited, specified exceptions, form a bankruptcy estate represented and managed by the receiver, supervised by the judge-commissioner and, to a certain extent, by the council of creditors. In general, upon the declaration of liquidation bankruptcy, all debts of the bankrupt debtor may be satisfied pursuant to the mandatory provisions of the Bankruptcy and Reorganization Law following the disposal of the debtor’s assets by the receiver, subject to limited exceptions. The declaration of liquidation bankruptcy accelerates all the bankrupt company’s debts which become due and payable. The receiver is obliged to liquidate the assets of the bankrupt debtor, in accordance with the provisions of the Bankruptcy and Reorganization Law and then to distribute the funds among the creditors. The Polish law provides for the following categories of claims, in the sequence reflecting the order of satisfying such claims: Š costs of the bankruptcy proceedings, premiums for retirement pension and other social insurance,

claims arising from employment, farmers’ claims arising from agreements for supply of agricultural products produced by them (for the last two years only), periodic payments due for causing an illness, inability to work, invalidism, alimonies, claims arising from the receiver’s or court manager’s actions, claims from reciprocal agreements the completion of which was demanded by the receiver or the court manager, claims arising from unjust enrichment and claims from the transactions effected upon the court supervisor’s consent ( category one claims), 33

Š taxes, other public tributes and social security premiums (if not included in category one) for the last

year preceding the declaration of bankruptcy, together with interest and enforcement costs (all those claims form category two claims), Š other claims (if not included in category four), including the interest for the last year preceding the

declaration of bankruptcy, contractual damages, costs of litigation and enforcement (category three claims), Š interest which does not belong to any of the other categories, in the sequence which reflects the

sequence of satisfaction of the principal amount, penalties and fines, donations and endowments (category four claims). Some of the claims listed above may rank higher than the claims under the Guarantees, which may decrease the chances to recover the relevant claims in case of a bankruptcy of the Guarantor. In respect of the creditors whose rights are secured with a mortgage, pledge, registered pledge, fiscal pledge or sea mortgage, their claims are satisfied separately out of the proceeds generated by the sale of the collateral. Reorganization proceedings In case it is apparent that in the near future a company (or other entity or person carrying our business activity) will become insolvent, such company may file with the relevant court a declaration on the opening of reorganization proceedings which must include a reorganization plan. The court may prohibit such opening in cases specified in the Bankruptcy and Reorganization Law. If the reorganization proceedings are validly opened: Š a court supervisor is appointed which must grant a consent to all transactions outside of the ordinary

scope of business Š the repayment of debts is suspended Š the accrual of interest on the debtor’s debts is suspended Š the possibilities of effecting a set-off by the creditors are limited (as in the case of bankruptcy) Š no enforcement or injunction proceedings may be initiated against the debtor (and the pending ones

are suspended). The reorganization plan should provide for a method of restructuring the debts of the reorganized company. The debt restructuring scheme is subject to approval by the creditors and by the court and has similar effects as the arrangement made pursuant to the composition bankruptcy for those creditors which have been notified of the meeting of creditors which approved the debt restructuring. Austria voestalpine Stahlhandel GmbH and certain of its subsidiaries are organized under the laws of Austria. The following is a general discussion of the insolvency proceedings under Austrian law. The Austrian Bankruptcy Code (Konkursordnung) provides for two situations under which insolvency proceedings can be commenced; upon the occurrence of illiquidity and upon the occurrence of overindebtedness. Illiquidity is defined as the inability to pay its debts within a reasonable time of when they are due. Overindebtedness is not defined but pursuant to legal practice it is assumed if the debtor’s accumulated losses exceed its nominal capital plus capital reserves and liquidation values. Judicial Proceedings A debtor or a creditor of a company can initiate bankruptcy proceedings by filing an application for the opening of a bankruptcy proceeding without undue delay. If the conditions for insolvency are met, the application must be filed within 60 days of the debtor becoming aware of its insolvency. If the application is unduly delayed the debtor is liable for damages incurred by its creditors and the legal representative of the debtor is personally liable for damages incurred by the insolvent company. Immediately upon the filing of an application, the court appoints a bankruptcy trustee and from this time all the debtor’s legal acts are ineffective and payments to the debtor do not effect discharge of any debts and the debtor’s assets form part of the bankruptcy estate over which the bankruptcy trustee exercise exclusive rights of administration. Generally, legal acts set prior to the date of insolvency or opening of bankruptcy proceedings as well as securities perfected prior to such time are not concerned by the opening of bankruptcy proceedings. Within a period of 90 days from the opening of bankruptcy proceedings, the exercise of rights and recovery of assets is inadmissible if this would endanger the continued operation of the debtor’s business. 34

Void and voidable transactions A legal act that unduly favors a single creditor and that is performed within the period of 60 days prior to the date of insolvency can be voided by the bankruptcy trustee, unless bankruptcy proceedings are opened later than one year after such act has occurred. In addition, acts entered into with third parties after the company becomes insolvent are voidable by the receiver provided that the third party knew or should have know that the company was insolvent and provided further that these acts are detrimental to other creditors of the company, unless bankruptcy proceedings are opened later than six months after such act has occurred. Composition proceedings Apart from the bankruptcy proceedings that aim for liquidation of the company, Austrian law provides also for the opening of composition proceedings in accordance with the Austrian Composition Code (Ausgleichsordnung), which aims for the continuation of the insolvent company. Composition proceedings do not deprive the debtor of all rights to make any disposition with respect to the debtor’s property, and do not confer the administration thereof to a receiver. The debtor is barred from performing certain legal acts or entering into some kind of transactions (e. g. alienating real estate) and all the acts are supervised by a court-appointed receiver. If a payment quota of at least 40% for all unsecured creditors can be reached, the remaining proportions of the insolvent company’s debts are deemed to be finally settled. Interest payments under the Intercompany Proceeds Notes may be subject to Polish withholding tax. In general, interest payments on borrowed funds made by a Polish entity to a non-resident are subject to Polish withholding tax rate of 20% unless the withholding tax is reduced or eliminated pursuant to the terms of an applicable tax treaty. Based on professional advice we have received, we believe that interest payments made by the Company under the Intercompany Proceeds Notes to the Issuer should not be subject to withholding tax under the terms of the double taxation treaty between Poland and France. However, there can be no assurance that such relief will be always available. If the interest payments from the Company to the Issuer under the Intercompany Proceeds Notes are subject to any withholding of Polish tax, the Company will be obliged under the Intercompany Proceeds Notes, subject to certain conditions, to increase interest payments (i.e., to pay additional amounts) as may be necessary so that the net payments received by the Issuer, and consequently, the holder of the Notes, will be no less than the amounts they could have received in the absence of such withholding. It is currently unclear whether the provision obliging the Company to increase interest payments would be permitted or whether interest payments made by the Company under the Intercompany Proceeds Notes simply will be reduced by Polish withholding tax at a rate of 20%, or such other rate as may be in force at the time of payment. In this case, the net amount of payments made by the Company to the Issuer pursuant to the Intercompany Proceeds Notes may be insufficient to the permit the Issuer to make payment in full under the Notes. Payments under the Guarantees may be subject to Polish withholding tax. In general, payments under a guarantee by a Polish entity to a non-resident entity shall be subject to Polish withholding tax at a rate of 20% to the extent such payments represent Polish source income. It is possible that the Polish tax authorities will seek to characterize payments made by the Polish guarantors as Polish source income. In such cases, the holders of Notes may seek a reduction of withholding tax under any applicable double taxation treaties between their countries of residence and Poland (one condition of relief under an applicable treaty will be the provision of a certificate of tax residence by the recipient of payment). However, there can be no assurance that such relief will be available. Double taxation treaty relief may not be available if a Polish source payment is made to a person other than the beneficial owner of the payment. As a result, payments under the Guarantees to the Trustee may be subject to Polish withholding tax, and holders of the Notes may be unable to obtain a refund of the tax withheld. If payments made by the Guarantors are subject to any withholding of Polish tax as a result of which the holders of Notes may receive payments under the Notes that are reduced by the amount of such withholding, the Guarantors are obliged, subject to certain conditions, to increase payments as may be necessary so that the net payments received by the holders of the Notes will be equal to the amounts they would have received in the absence of such withholding. It should be noted, however, that the tax gross-up provisions in the indenture may not be enforceable under Polish law. Tax might be withheld on dispositions of the Notes in Poland, reducing their value. If a non-resident holder of Notes that is a legal entity or organization sells the Notes and receives proceeds from a person who has the obligation to withhold Polish tax where such tax is due, there is a risk that 35

the part of the proceeds, if any, representing accrued interest may be subject to a 20% Polish withholding tax subject to double taxation treaty relief. There is no assurance that advance double taxation treaty relief would be granted to an individual, and obtaining a refund can involve considerable practical difficulties. The imposition or possibility of imposition of this withholding tax could adversely affect the value of the Notes. Our pro forma financial information and our adjusted pro forma financial information presented herein may not be representative of our actual results, and our future financial condition, results of operations and cash flows may differ materially from such information. This Offering Memorandum contains unaudited pro forma consolidated results of our business reflecting the Polish Acquisitions and assuming the Austrian Acquisition on a pro forma basis as of and for nine months ended September 30, 2006, the year ended December 31, 2005 and the twelve months ended September 30, 2006. This unaudited pro forma consolidated information does not necessarily reflect our consolidated financial position, results of operations and cash flows as they would have been if transactions or events described therein actually occurred on the dates specified above, nor are they indicative of our future consolidated financial condition, results of operations and cash flows. Due to limited information available it was impracticable to determine the fair values of the identifiable assets (except for inventories), liabilities and contingent liabilities of voestalpine Stahlhandel GmbH for the accounting of the anticipated business combination, which would be required under IFRS 3 Business Combinations. Therefore, it was assumed that the carrying amounts of assets, other than inventories, and liabilities presented in the balance sheet of voestalpine Stahlhandel GmbH represent their fair values. Due to the limited information available it was impracticable to adjust the valuation of inventories held by voestalpine Stahlhandel GmbH to the first in first out basis, which is a basis for inventory valuation applied by the Company. The historical consolidated financial statements of voestalpine Stahlhandel GmbH as at and for the year ended 31 December 2005 and as at and for the nine month period ended 30 September 2006 that were used in the compilation of the pro forma financial information did not include the financial statements of certain subsidiaries. The sum of total assets of subsidiaries excluded from the historical consolidated financial statements, before consolidation adjustments as at December 31, 2005 or March 31, 2006 (depending on their financial year end) and September 30, 2006 amounted to approximately €24.2 million and €43.6 million, respectively. Due to limited information available, it was impracticable to include the financial statements of these subsidiaries in the pro forma financial information. The unaudited pro forma results reflect the consummation of the Polish Acquisitions and the Austrian Acquisition but do not reflect the consummation of the Offering (except to the extent the proceeds of the Offering were assumed to be utilized to consummate the Austrian Acquisition) or the Refinancing. We have included additional adjusted pro forma financial results and other information in this Offering Memorandum that reflect the completion of the entire Offering and the Refinancing and which are based on additional assumptions with respect to the results of these transactions that we believe to be reliable. To the extent these assumptions are not accurate, our as adjusted pro forma financial results could differ materially from those we have reported. The interests of our principal shareholder may conflict with your interests. The interests of our principal shareholder, in certain circumstances, may conflict with your interests as holders of the Notes. As of the date of this Offering Memorandum, Przemysław Sztuczkowski owns all of the shares of the Company. As a result, he has and will continue to have, directly or indirectly, the power, among other things, to affect our legal and capital structure and our day-to-day operations, as well as the ability to elect and change our management and to approve any other changes to our operations. See “Related Party Transactions.” Transfer of the Notes will be subject to certain restrictions. The Issuer has not agreed to register, and does not intend to register, the Notes under the US Securities Act or any US state securities laws. You may not offer to sell the Notes, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and applicable state securities law. The Issuer has not undertaken to register the Notes or to effect any exchange offer for the Notes in the future. Furthermore, the Issuer has not registered the Notes under any other country’s securities laws. You should read the discussion under the heading “Notice to Investors” for further information about these transfer restrictions. It is your obligation to ensure that your offers and sales of Notes within the United States and other counties comply with any applicable securities laws. 36

The Notes will initially be held in book-entry form and, therefore, you must rely on the procedures of the relevant clearing system to exercise any rights or remedies. Unless and until definitive Notes are issued in exchange for book-entry interests in the Notes, owners of the book entry interests will not be considered holders of the Notes. Instead, the common depository, or its nominee, will be deemed the sole holder of the Notes. There may not be an active trading market for the Notes in which case your ability to sell the Notes may be limited. There is no existing market for the Notes. We have made an application to list the Notes on the Official List of the Luxembourg Stock Exchange and to trade them on the Euro MTF Market in accordance with the rules of that exchange but cannot guarantee the liquidity of any market that may develop for the Notes, your ability to sell the Notes or the price at which you may be able to sell the Notes. Liquidity and future trading prices of the Notes will depend on many factors, including, among other things, prevailing interest rates, results of operations and the market for similar securities. The Initial Purchaser has informed us that it intends to make a market in the Notes after completing this offering. It is not, however, obligated to do so. Any market-making that is commenced may be halted at any time. In addition, changes in the overall market for high yield securities and changes in our financial performance in the markets in which we operate may adversely affect the liquidity of any trading market in the Notes that does develop and any market price quoted for the Notes. As a result, we cannot ensure that an active trading market will actually develop for the Notes. Historically, the markets for non-investment grade debt such as the Notes have been subject to disruptions that have caused substantial volatility in their prices. Any market for the Notes may be subject to similar disruptions. Any disruptions may affect any liquidity and trading of the Notes independently of our financial performance and prospects and may have an adverse effect on the holders of the Notes. Foreign judgments may not be enforceable against us. Although the Indenture and certain other agreements in connection with the Offering will require the Issuer and the Guarantors to submit to the jurisdiction of the courts of the State of New York for claims and causes of action brought by any party thereto against us, our presence or the presence of the Guarantors outside the United States may limit legal recourse against them. We are incorporated in France and our subsidiaries are incorporated under a number of jurisdictions, including Poland, France, and Germany. All of the directors and executive officers of the Issuer and the Guarantors named in this Offering Memorandum are residents outside of the United States. All of our assets and the assets of the Guarantors and the assets of their respective officers and directors are currently located outside the United States. As a result, holders of the Notes may not be able to effect service of process within the United States on us or any Guarantor or any of our or their respective officers and directors. Similarly, the holders of the Notes may not be able to obtain or enforce New York court judgments against us or the Guarantors or any of our or their respective officers and directors.

37

THE TRANSACTIONS This Offering, the Refinancing, the establishment of the Revolving Credit Facilities, the Austrian Acquisition and the related transactions are referred to in this Offering Memorandum as the “Transactions”. See “Use of Proceeds”, “Capitalization” and “Description of Other Indebtedness”. The Refinancing Upon consummation of this Offering and the application of the proceeds as described under “Use of Proceeds”, the Company and its subsidiaries (not including voestalpine Stahlhandel GmbH and its subsidiaries) will have no external indebtedness for borrowed money outstanding other than: Š the Notes; Š receivables facilities providing for the factoring/securitization of the Company’s and its

subsidiaries’ accounts receivable in amounts not to exceed PLN 55.5 million (€13.9 million) at any one time outstanding, of which approximately PLN 40.1 million (€10.1 million) was outstanding as of September 30, 2006; Š under loan agreements with the National Fund in an amount not to exceed PLN 27.7 million (€7.0

million) at any one time outstanding (the amount outstanding as of September 30, 2006), (e) under various leasing agreements in amounts not to exceed PLN 37.6 million (€9.5 million) (the amount outstanding as of September 30, 2006); Š indebtedness of the Centrolstal Group of PLN 26.4 million (€6.6 million) of which PLN 21.2

million (€5.3 million) was outstanding as of September 30, 2006; and Š and indebtedness of Kapitał and the Company under discount promissory note agreements of PLN

17 million (€4.3 million) and PLN 10 million (€2.5 million), respectively, of which PLN 8.9 million (€2.2 million) was outstanding as of September 30, 2006. (the indebtedness above other than the Notes being collectively referred to as the “Surviving Indebtedness”). See “Description of Other Indebtedness” in this Offering Memorandum. The aggregate existing indebtedness of the Group to be repaid in connection with the Refinancing outstanding as of September 30, 2006 (a total of approximately €71.8 million) includes: Š the repayment of existing bank debt of the Company in an aggregate amount of PLN 274.0 million

(€68.8 million); Š the repayment of existing bank debt of Ferrostal Łabe˛dy in an aggregate amount of PLN

10.6 million (€2.7 million); Š the repayment of existing bank debt of Szopienice in an aggregate amount of PLN 0.8 million

(€0.2 million); Š the repayment of existing bank debt of HSW-HSJ in an aggregate amount of PLN 0.3 million

(€0.07 million); and Š accrued interest.

Revolving Credit Facilities We will enter into revolving credit facilities with certain Polish banks in an estimated aggregate amount of up to €40.0 million. We have entered into an agreement with Fortis Bank Polska S.A. (the “Fortis Agreement”) and have offers from BRE Bank S.A. (the “BRE Bank Offer”) and Bank BPH S.A. (the “Bank BPH Offer”) providing binding commitments for an aggregate of amount of borrowings of approximately €60 million. Under the Fortis Agreement, PLN 76.6 million (€19.2 million) will be made available under a credit facility with an interest rate of 0.8% over WIBOR. The Fortis Agreement contains financial covenants including a net debt to EBITDA ratio of no higher than 3.5 (with the first test of compliance on and for the period ended September 30, 2007), EBITDA to interest ratio not less than 2 to 1 (or the level of such ratio in the Indenture which is 2.25 to 1), a solvency ratio no lower than 20% in 2007 and 25% in 2008 and a security package consisting of an assignment of receivables of the Company of PLN 30 million (€7.5 million) per month and a pledge of inventories of the Company of PLN 50.0 million (€12.6 million). Under the BRE Bank Offer, PLN 72.2 million (€18.1 million) would be made available under a credit facility with an interest rate of 0.95% over WIBOR. The BRE Bank Offer contains financial covenants including 38

a current liquidity ratio of no lower than 1, a net profit margin of not lower than 2%, revenues of the Company being no lower than PLN 100.0 million (€25.1 million) on a monthly basis and a security package consisting of an assignment of receivables of the Company and HSW-HSJ of PLN 39.0 million (€9.8 million), a pledge of inventories of the Company and HSW-HSJ of PLN 52 million (€13.1 million), and a secured cash deposit on bills of exchange of PLN 6.3 million (€1.6 million). Under the Bank BPH Offer, PLN 80.0 million (€20.1 million) would be made available under a credit facility with an interest rate of 0.9% over WIBOR. The Bank BPH Offer has no financial covenants but contains a security package consisting of an assignment of receivables of the Company of PLN 64.0 million (€16.1 million) and a pledge of inventories of the Company of PLN 64.0 million (€16.1 million). See “Description of Other Indebtedness”. Escrow of Proceeds Pending closing of the Austrian Acquisition, a portion of the gross proceeds of this Offering sufficient to redeem €60.0 million principal amount of the Notes will be placed in escrow pending consummation of the Austrian Acquisition. In the event that the Austrian Acquisition is not completed on or prior to June 30, 2007 in substantially the manner provided for in the Share Purchase Agreement, or the Share Purchase Agreement is terminated at any time prior thereto, the Notes will be subject to a special mandatory redemption. See “Description of the Notes — Escrow of Proceeds; Special Mandatory Redemption”. If the Austrian Acquisition is completed on or before June 30, 2007 in substantially the manner provided for in the Share Purchase Agreement, the escrowed funds will be released to us for application as described under “Description of Notes — The Intercompany Proceeds Note” and “— The Acquisition On-Loan”. The Austrian Acquisition On December 20, 2006, we agreed to acquire a 74.9% interest in voestalpine Stahlhandel GmbH from Donauländische Baugesellschaft, a wholly-owned subsidiary of voestalpine AG, and voestalpine Stahl GmbH with the remaining 25.1% subject to a put/call option to be exercised not earlier than January 1, 2009 and not later than December 31, 2010 (the “Austrian Acquisition”). The purchase price for the Austrian Acquisition will be based on an enterprise value of €99 million, plus the consolidated normalized operational net income for voestalpine Stahlhandel GmbH for a period from April 1, 2006 until December 31, 2006 which we estimate to be €8 million, for 100% of the shares of voestalpine Stahlhandel GmbH, 74.9% of which will be purchased at closing and the remaining 25.1% of which will be purchased at the time of the exercise of the put/call option, if the option is exercised. We have agreed to the assumption of certain indebtedness of voestalpine Stahlhandel GmbH and to make an equity contribution to voestalpine Stahlhandel GmbH in the overall amount of €23.2 million. This equity contribution will not impact the amount of our ownership interest. In addition, the entire profit of voestalpine Stahlhandel GmbH (excluding non-recurring and non-operating items) for the period from April 1, 2006 until December 31, 2006, plus certain dividends in the aggregate of approximately €23.3 million relating to a reorganization and the realization of reserves and the release of retained profits relating to two companies in voestalpine Stahlhandel GmbH, will be paid to voestalpine Stahl GmbH in the form of a dividend (or advance thereof). This dividend will be netted from the enterprise value. In connection with the Austrian Acquisition, we will repay all treasury obligations of voestalpine Stahlhandel GmbH through the Acquisition On-Loan. These treasury obligation repayments will be netted from the enterprise value. voestalpine Stahlhandel GmbH is the leading warehousing and steel distribution company in Austria with significant operations in Central and Eastern Europe. It has retail distribution facilities in Austria, the Czech Republic, Croatia, Poland and Romania and trade offices in Hungary, Slovakia, Slovenia and BosniaHerzegovina. voestalpine Stahlhandel GmbH serves mainly civil and mechanical engineering and building and automotive sectors and offers a full range of steel products including heavy plates, sections and thin sheets. voestalpine Stahlhandel GmbH had consolidated revenues of €303.8 million in the fiscal year ended March 31, 2006 (compared to €332.6 million in the fiscal year ended March 31, 2005) and EBITDA of €10.2 million (as calculated by voestalpine Stahlhandel GmbH) in the fiscal year ended March 31, 2006 (compared to €26.5 million in the fiscal year ended March 31, 2005). The consolidated financial results of voestalpine Stahlhandel GmbH for the periods presented do not reflect the results of certain non-consolidated subsidiaries, including voestalpine Stahlhandel Polska Sp. z o.o. (Poland), voestalpine Stahlhandel Slowakei s.r.o. (Slovakia), voestalpine Stahlhandel Budapest Kft. (Hungary), voestalpine Stahlhandel d.o.o. (Slovenia) and voestalpine ambient Stalhandel s.r.l. (Romania). These subsidiaries were not historically consolidated in voestalpine AG’s financial statements because they were not considered material to voestalpine AG. The combined EBITDA of these subsidiaries is approximately €2 million. See “Summary Financial Information — Summary Unaudited Pro Forma Consolidated Information”. voestalpine Stahlhandel GmbH’s largest market is in Austria, which 39

voestalpine Stahlhandel GmbH estimates accounted for approximately 79.8% of its consolidated revenues in the fiscal year ended March 31, 2006 (compared to 78.9% in the fiscal year ended March 31, 2005). voestalpine Stahlhandel GmbH had on average 451 employees and an overall trade volume of approximately 455,000 tonnes in 2005. See “Business — Finished Products — Distribution — voestalpine Stahlhandel GmbH” for a more detailed discussion of voestalpine Stahlhandel GmbH’s business. We strongly believe that the Austrian Acquisition will provide us with a number of strategic areas in which to significantly grow our business. These include: Š our warehousing capacity will increase from 110,000 square meters to 232,725 square meters; Š our market and customer base will increase significantly, thus enabling us to procure additional

demand and reduce margin volatility; Š our purchasing power in the market and our negotiation position with regard to suppliers will increase

and yield significant cost savings; Š our modern storage capacity outside of Poland will increase; Š our ability to increase sourcing from low cost countries such as China, India and countries of the

former Soviet Union will be enhanced because our increased economies of scales will enable us to turnover larger volumes of steel more quickly; Š our platform for further expansion in Central and Eastern Europe will be established; Š our cross selling efforts will be enhanced by selling complementary products of voestalpine

Stahlhandel GmbH to our customers and vice versa; and Š our overall exchange rate exposure will be reduced because we will purchase and sell more products

in Euro. The Austrian Acquisition, which is expected to close in the first half of 2007, remains subject to merger control approval in Austria and Bosnia-Herzegovina. The Austrian Acquisition will be funded using a portion of the proceeds from this Offering as described herein.

40

USE OF PROCEEDS The gross proceeds from this Offering of the Notes will be €170.0 million. On the closing date, after the payment of related fees and expenses, we will use a portion of the net proceeds from this Offering of the Notes to complete the Refinancing. Upon consummation of the Austrian Acquisition, we will use the remaining portion of the net proceeds from this Offering to finance the Austrian Acquisition and pay related fees and expenses and for general corporate purposes. Source and Uses of Funds The following table illustrates the estimated sources and uses of funds from this Offering of the Notes, the Refinancing, the establishment of the Revolving Credit Facilities and the consummation of the Austrian Acquisition. Actual amounts will vary from estimated amounts depending on several factors, including purchase price adjustments at closing and differences in our cash balances at the closing of the Austrian Acquisition. Sources of Funds(1)

Uses of Funds(1) (€ millions)

The Notes offered hereby . . . . . . . . . . . . . . . Revolving Credit Facilities(2)(3) . . . . . . . . . . .

Total sources of funds . . . . . . . . . . . . . . . . . (1) (2)

(3)

(4)

170.0 0.0

170.0

(€ millions)

Cash(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repayment of the existing facilities and other indebtedness (other than Surviving Indebtedness)(4) . . . . . . . . . . Funding of the Austrian Acquisition (including repayment of certain indebtedness of the voestalpine Stahlhandel GmbH) . . . . . . . . . . . . . . . Payment of fees and expenses . . . . . . . . .

87.0 8.5

Total uses of funds . . . . . . . . . . . . . . . . .

170.0

3.7

70.8

The Austrian Acquisition closing is expected to occur in the first quarter of 2007. This table reflects forward-looking estimates. Total availability under the Revolving Credit Facilities is expected to be €40.0 million, none of which is expected to be drawn down upon consummation of the Austrian Acquisition. The Company has already entered into the Fortis Agreement, one of these Revolving Credit Facilities. See “The Transactions— Revolving Credit Facilities” and “Description of Other Indebtedness”. To the extent the repayment of the existing facilities or the funding of the Austrian Acquisition exceed the estimated amounts, available cash (including other cash on hand) will be reduced by the corresponding amount of the required additional payment or amounts will be drawn under the Revolving Credit Facilities. Based on our outstanding indebtedness as of September 30, 2006. Excludes accrued and unpaid interest through the repayment date.

Escrow of Proceeds Pending closing of the Austrian Acquisition, a portion of the gross proceeds of this Offering sufficient to redeem €60 million principal amount of the Notes will be placed in escrow pending consummation of the Austrian Acquisition. In the event that the Austrian Acquisition is not completed on or prior to June 30, 2007 in substantially the manner provided for in the Share Purchase Agreement, or the Share Purchase Agreement is terminated at any time prior thereto, the Notes will be subject to a special mandatory redemption. See “Description of the Notes — Escrow of Proceeds; Special Mandatory Redemption”. If the Austrian Acquisition is completed on or before June 30, 2007 in substantially the manner provided for in the Share Purchase Agreement, the escrowed funds will be released to us.

41

CAPITALIZATION The following table sets forth on a consolidated basis under IFRS our capitalization as of September 30, 2006 on an actual basis and as adjusted to reflect the Transactions as if those events had occurred as of September 30, 2006. You should read this table in conjunction with the information contained elsewhere in this Offering Memorandum under the headings, “Use of Proceeds”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Description of Other Indebtedness”, and “Description of the Notes” and the “Unaudited Pro Forma Consolidated Financial Data” and “Consolidated Financial Statements” and accompanying notes thereto included elsewhere in this Offering Memorandum. As of September 30, 2006 Actual As Adjusted (PLN (€ (PLN (€ millions) millions) millions) millions)

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27.6

6.9

53.3

13.4

Debt: Notes offered hereby(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Revolving Credit Facilities(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest-bearing loans and borrowings(1)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . Bank Overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— — 380.0 41.0 0.2

— — 95.5 10.3 0.1

676.6 0.0 178.4 — 0.2

170.0 0.0 44.8 — 0.1

Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

421.2

105.8

855.2

214.8

...............................................

389.3

97.8

389.3

97.8

Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

810.5

203.6

1244.5

312.7

Total

equity(4)

(1)

Prior to the consummation of the Austrian Acquisition, a portion of the proceeds necessary to redeem €60.0 million principal amount of the Notes in the case of a special mandatory redemption will be placed in escrow. Upon consummation of the Austrian Acquisition, these funds will be released from escrow and a portion of these funds will be on-lent to voestalpine Stahlhandel GmbH to be used to refund certain outstanding indebtedness of voestalpine Stahlhandel GmbH and its subsidiaries, which will become subsidiaries of the Company upon consummation of the Austrian Acquisition.

(2)

We will enter into Revolving Credit Facilities providing for up to €40 million of borrowings. We expect that no amounts under the Revolving Credit Facilities will be outstanding upon consummation of the Transactions. The Company has already entered into the Fortis Agreement, one of these Revolving Credit Facilities. See “The Transactions — Revolving Credit Facilities” and “Description of Other Indebtedness”.

(3)

Includes an estimated €9.8 million additional indebtedness of voestalpine Stahlhandel GmbH and its subsidiaries that will remain outstanding following the consummation of the Austrian Acquisition. Does not reflect PLN 10 million (€2.5 million) of additional indebtedness available to Kapitał under discount promissory note agreements, none of which was drawn down as of September 30, 2006.

(4)

Includes a minority interest of PLN 35.0 million (€8.8 million).

Other than as disclosed herein, there has been no significant change in our capitalization since September 30, 2006.

42

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA The following unaudited pro forma consolidated financial data of the Company presents pro forma income statement data for the nine and twelve months ended September 30, 2006 and for the year ended December 31, 2005 and pro forma balance sheet data as of the periods then ended which shows the estimated pro forma impact on our Consolidated Financial Statements of the Polish Acquisitions and the Austrian Acquisition. The adjustments made in order to present the unaudited pro forma consolidated interim financial data have been made based on available information and assumptions that our management believes are reasonable. The unaudited pro forma consolidated financial data are for informational purposes only and do not purport to present what our results would actually have been had the Polish Acquisitions and the Austrian Acquisition occurred on the dates presented, nor should they be used as the basis of projections of our results of operations or financial position for any future period. The unaudited pro forma consolidated financial data should be read in conjunction with the “Consolidated Financial Statements”, the “Pro Forma Financial Information” and accompanying notes included elsewhere in this Offering Memorandum and the information set forth in “The Transactions”, “Use of Proceeds”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Description of Other Indebtedness” and “Description of the Notes”.

43

Unaudited Pro Forma Consolidated Interim Income Statement and Balance Sheet Data as of and for the nine months ended September 30, 2006 1.01.200630.9.2006 Złomrex Group Historical

1.01.20061.01.200630.09.2006 31.01.2006 Total historical HSW-HSJ without voestalpine Pro Forma (3) Historical Stahlhandel(1) Adjustments(2)

1.01.200630.09.2006 1.01.2006voestalpine 30.09.2006 Stahlhandel Pro Forma Pro Forma Historical Adjustments Total

Income statement data Revenue . . . . . . . . . . . . . .

1,417.0

29.7

1,446.7

(7.5)

965.0

—

2,404.2

Cost of revenue . . . . . . . .

(1,228.6)

(25.2)

(1,253.7)

13.0

(838.5)

—

(2,079.2)

Gross profit . . . . . . . . . . .

188.4

4.5

192.9

5.5

126.5

—

324.9

Other income . . . . . . . . . . Distribution expenses . . . . Administrative expenses . . . . . . . . . . . . Other expenses . . . . . . . . .

2.7 (21.6)

— (.1)

2.7 (21.7)

— —

11.5 (71.5)

— —

14.1 (93.2)

(52.8) (7.0)

(.7) (.3)

(53.4) (7.3)

(.01) —

(19.3) (4.0)

— —

(72.7) (11.2)

Operating profit before financing costs(4) . . . . .

109.7

3.5

113.2

5.5

43.2

—

161.9

Financial income . . . . . . .

5.3

.05

5.4

—

3.6

—

9.0

Financial expenses . . . . . .

(25.2)

(.05)

(25.3)

—

(6.8)

(34.4)

(66.5)

Net financing costs . . . . .

(19.9)

( — )

(19.9)

—

(3.1)

(34.4)

(57.5)

Share of profit of associates . . . . . . . . . . .

—

—

—

—

2.2

—

2.3

Excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired over cost . . . . Profit before tax . . . . . . .

5.9 95.8

— 3.5

5.9 99.2

— 5.5

— 42.3

— (34.4)

5.9 112.6

Income tax expense . . . . .

(18.9)

(1.1)

(20.0)

(.9)

(11.0)

6.3

(25.6)

Profit for the period attributable to: . . . . . .

76.9

2.4

79.2

4.6

31.3

(28.1)

87.0

Equity holders of the parent . . . . . . . . . . . . . . Minority interest . . . . . . .

75.1 1.7

2.4 —

77.5 1.7

4.6 —

27.7 3.6

(28.1) —

81.6 5.4

44

30.09.2006 30.9.2006 30.09.2006 30.09.2006 voestalpine Złomrex Group HSW-HSJ HSW-WB Pro Forma Stahlhandel Pro Forma Pro Forma Historical Historical(3)(5) Historical(1)(5) Adjustments Historical Adjustments Total

Balance sheet data Assets Total non-current assets . . . . . . Total current assets . . . . . . . . . .

514.1 624.1

— —

— —

(1.6) 20.1

171.4 443.7

69.3 73.7

753.2 1,161.6

Total assets . . . . . . . . . . . . . . . .

1,138.2

—

—

18.4

615.1

143.0

1,914.7

Total equity attributable to equity holders of the parent . . . . . . . . . . . . . . . . . .

354.3

—

—

11.5

143.3

(159.3)

Minority interest . . . . . . . . . . . .

35

—

—

—

18.5

Total equity . . . . . . . . . . . . . . .

389.3

—

—

11.5

161.9

(157.1)

405.5

Liabilities Total non-current liabilities . . . Total current liabilities . . . . . . .

191.1 557.8

— —

— —

— 7.0

63.0 390.2

394.2 (94.1)

648.4 860.9

Total liabilities . . . . . . . . . . . . .

748.9

—

—

7.0

453.2

300.1

1,509.2

Total equity and liabilities . . .

1,138.2

—

—

18.4

615.1

143.0

1,914.7

Equity

2.2

349.8 55.7

(1)

Effective November 2, 2006, HSW-WB and HSW-HSJ merged. For purposes of the presentation of the unaudited pro forma consolidated financial data in this section, we refer to HSW-WB and HSW-HSJ separately to take into account the pro forma effect as of January 1, 2005 of the Company’s acquisitions of these companies on January 6, 2006 and January 27, 2006, respectively. Unless otherwise specifically indicated, references in this Offering Memorandum to HSW-HSJ shall include HSW-WB.

(2)

The acquisition of HSW-HSJ and HSW-WB occurred on January 27, 2006 and January 6, 2006, respectively, and the historical financial data for those acquisitions only reflect results from HSW-HSJ and HSW-WB from January 1, 2006 through the date of such acquisition.

(3)

Adjusted to ensure presentation of financial information consistent with IFRS.

(4)

Depreciation and amortization charges included in pro forma operating costs amounted to PLN 35.4 million (€8.9 million).

(5)

The acquisition of HSW-HSJ and HSW-WB occurred on January 27, 2006 and January 6, 2006, respectively and therefore the balance sheet date for these two entities is reflected in the Złomrex Group Historical as at September 30, 2006.

45

Unaudited Pro Forma Consolidated Income Statement Data for the Twelve Months ended September 30, 2006 1.10.20051.10.20051.10.20051.10.200530.09.2006 1.10.200530.09.2006 31.01.2006 31.12.2005 voestalpine 30.09.2006 Złomrex Group HSW-HSJ HSW-WB Pro Forma Stahlhandel Pro Forma Pro Forma Historical Historical(2) Historical(1)(2) Adjustments Historical Adjustments Total

Income statement data Revenue . . . . . . . . . . . . . . .

1,655.5

113.0

23.4

(34.8)

1,244.7

Cost of revenue . . . . . . . . .

(1,437.9)

(95.8)

(21.1)

34.9

(1,088.5)

.2

— (4.2) (4.2)

13.6 (94.8) (26.3) (3.9)

— — — —

(2,612.5)

Gross profit . . . . . . . . . . . .

217.6

17.2

2.3

Other operating income . . . . Distribution expenses . . . . . Administrative expenses . . . Other expenses . . . . . . . . . .

4.5 (26.5) (63.7) (9.0)

.9 (.6) (3.6) (3.0)

.1 (.1) (.8) (.6)

Operating profit before financing costs . . . . . . . .

123.0

10.9

1.0

.3

44.9

(4.2)

175.9

Financial income . . . . . . . . . Financial expenses . . . . . . . .

6.6 (29.7)

.9 (.8)

.1 (.1)

— (3.6)

5.3 (8.8)

— (34.7)

12.9 (77.7)

Net financing costs . . . . . . .

(23.1)

.07

.04

(3.6)

(3.5)

(34.7)

(64.8)

Share of profit of associates . . . . . . . . . . . . .

—

—

—

—

1.9

—

1.9

Excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired over cost . . . . . . . . . . . . . . . . .

5.9

—

—

—

—

—

5.9

Profit before tax . . . . . . . . .

105.8

10.9

1.0

(3.4)

43.2

(38.8)

118.8

Income tax expense . . . . . . .

(20.9)

(1.7)

.1

.6

(11.2)

7.3

(25.5)

Profit for the period attributable to: . . . . . . . .

85.0

9.2

1.1

(2.7)

32.2

(31.5)

93.3

Equitable holders of the parent . . . . . . . . . . . . . . . . Minority interest . . . . . . . . .

83.0 2.0

9.2

1.1

(2.7)

—

—

28.0 4.2

(31.5)

—

87.1 6.2

— — .1 —

156.3

3,001.9

—

389.3 19.2 (122.0) (94.2) (16.5)

(1)

Effective November 2, 2006, HSW-WB and HSW-HSJ merged. For purposes of the presentation of the unaudited pro forma consolidated financial data in this section, we refer to HSW-WB and HSW-HSJ separately to take into account the pro forma effect as of January 1, 2005 of the Company’s acquisitions of these companies on January 6, 2006 and January 27, 2006, respectively. Unless otherwise specifically indicated, references in this Offering Memorandum to HSW-HSJ shall include HSW-WB.

(2)

Adjusted to ensure presentation of financial information consistent with IFRS.

46

Unaudited Pro Forma Consolidated Income Statement Data for the Year Ended December 31, 2005 Pro Forma Adjustments

2005 voestalpine Stahlhandel Historical

Pro Forma Adjustments

2005 Pro Forma Total

98.1

(80.1)

1,254.3

—

2,599.8

(298.4)

(85.9)

81.0

(1,091.9)

(17.5)

(2,293.5)

95.5

52.8

12.2

3.5

.9

.2

(15.7)

(2.3)

(.3)

(40.6) (4.7)

(11.7) (5.2)

(2.5) (.8)

Operating profit before financing costs(3) . . . . . . . .

38.0

34.5

Financial income . . . . . . . .

3.8

Financial expenses . . . . . . Net financing costs . . . . . . . . . .

2005 Złomrex Group Historical

2005 HSW-HSJ Historical(2)

2005 HSW-WB Historical(1)(2)

TotalIncome statement data Revenue . . . . . . . .

976.2

351.2

Cost of revenue . .

(880.7)

Gross profit . . . . . Other income . . . . . Distribution expenses . . . . . . Administrative expenses . . . . . . Other expenses . . .

.9

162.4

(17.5)

306.3

(.02)

11.8

—

16.3

(102.2)

—

(120.5)

2.8 .02

(30.4) (5.3)

— —

(82.5) (15.9)

8.7

3.7

36.2

(17.5)

103.6

2.5

.7

(.07)

6.8

23.1

36.7

(20.9)

(2.5)

(.7)

(10.9)

(9.9)

(28.4)

(73.2)

(17.0)

—

(.05)

(10.9)

(3.1)

(5.4)

(36.5)

(.3)

—

Share of profit of associates . . . . . . Profit before tax . . . . . . . . . . .

—

—

—

—

21.0

34.5

8.7

(7.3)

32.8

(22.9)

66.8

Income tax expense . . . . . . .

(4.1)

(6.8)

(1.7)

1.4

(15.9)

5.1

(22.0)

Profit for the period . . . . . . . .

16.9

27.7

7.0

(5.9)

16.9

(17.8)

44.9

Equity holders of the parent . . . . . . Minority interest . .

15.3 1.6

27.7 —

7.0 —

(5.9) —

14.1 2.8

(17.8) —

40.5 4.4

—

(.3)

(1)

Effective November 2, 2006, HSW-WB and HSW-HSJ merged. For purposes of the presentation of the unaudited pro forma consolidated financial data in this section, we refer to HSW-WB and HSW-HSJ separately to take into account the pro forma effect as of January 1, 2005 of the Company’s acquisitions of these companies on January 27, 2006 and January 6, 2006, respectively. Unless otherwise specifically indicated, references in this Offering Memorandum to HSW-HSJ shall include HSW-WB.

(2)

Adjusted to ensure presentation of financial information consistent with IFRS.

(3)

Depreciation and amortization charges included in pro forma operating costs amounted to PLN 43.7 million (€11.0 million).

47

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis is derived from and should be read in conjunction with the Audited Consolidated Financial Statements and the notes thereto and the Unaudited Consolidated Financial Statements appearing elsewhere in this Offering Memorandum. The Company’s Consolidated Financial Statements have been prepared in accordance with IFRS. Overview We are the largest supplier of scrap metal, the second largest seller of semi-finished steel products and the fifth largest seller of finished steel products in Poland based on volume. Our operations are fully integrated and span the entire steel production process, including one of the largest retail distribution networks in Poland and, upon the closing of our anticipated acquisition of voestalpine Stahlhandel GmbH, the leading warehousing and steel distribution company in Austria with significant operations in Central and Eastern Europe. Our business is divided into four segments, which include: Š Scrap metal segment.

We purchased approximately 692,000 tonnes of scrap metal in 2005, of which approximately 57% was used by our semi-finished products segment and approximately 43% was sold to external customers in Poland, and we had a market share of approximately 12.5% of the scrap metal purchased in Poland in 2005;

Š Semi-finished products segment.

We sold approximately 172,000 tonnes of semi-finished steel products to external customers in 2005 of which 138,000 tonnes were sold in the Polish market, and we had a market share of approximately 28% of semi-finished steel products sold to external customers in Poland in 2005;

Š Finished products segment.

We sold approximately 220,000 tonnes of finished steel products to external customers in 2005 substantially all of which were sold in the Polish market, and we had a market share of approximately 3% of finished steel products sold to external customers in Poland in 2005 and approximately 5% in 2006 as a result of recent acquisitions; and

Š Other segment.

We sold approximately 26,000 tonnes of non-ferrous scrap and non-ferrous scrap products to external customers in 2005.

Our strong position in our scrap metal and semi-finished products businesses enables us to reduce margin volatility and to secure feedstock scrap requirements for our own production facilities. This enables us to use our own sources of scrap metal supply to produce semi-finished and finished products in times of major shortages of scrap metal in the scrap metal market. Business Structure Segments Our business is divided into four main segments: Š Scrap Metal — this segment includes the buying, processing, refining and selling of scrap metal to the

Group’s customers. Š Semi-Finished Products — this segment includes the buying and processing of scrap metal into steel

billets and the sale of these steel billets to the Group’s customers. Š Finished Products — this segment includes (i) the buying and processing of scrap metal into billets

which are in turn processed into finished products and sold to the Group’s customers, (ii) the buying of steel billets from third parties and processing them into finished products and selling them to the Group’s customers and (iii) the buying of finished products and the sale of those products to the Group’s customers. Š Other — this segment includes among others (i) the buying of non-ferrous scrap and selling it to the

Group’s customers, (ii) the processing of non-ferrous scrap into finished products and the sale of those non-ferrous products to the Group’s customers, (iii) the buying and selling of non-ferrous products and (iv) recycling materials, including plastic foils, paper and other products. Intersegment Sales We are a vertically-integrated steel company. We believe that the prices at which products are sold between segments are generally based on those at which they could be sold to unrelated third parties. These transactions are eliminated as intercompany transactions for purposes of our consolidated financial statements. 48

Recent Developments voestalpine Stahlhandel GmbH On December 20, 2006, we agreed to acquire a 74.9% interest in voestalpine Stahlhandel GmbH from Donauländische Baugesellschaft, a wholly-owned subsidiary of voestalpine AG, and voestalpine Stahl GmbH with the remaining 25.1% subject to a put/call option to be exercised not earlier than January 1, 2009 and not later than December 31, 2010 (the “Austrian Acquisition”). The purchase price for the Austrian Acquisition will be based on an enterprise value of €99 million, plus the consolidated normalized operational net income for voestalpine Stahlhandel GmbH for a period from April 1, 2006 until December 31, 2006 which we estimate to be €8 million, for 100% of the shares of voestalpine Stahlhandel GmbH, 74.9% of which will be purchased at closing and the remaining 25.1% of which will purchased for at the time of the exercise of the put/call option, if the option is exercised. We have agreed to the assumption of certain indebtedness of voestalpine Stahlhandel GmbH and to make an equity contribution to voestalpine Stahlhandel GmbH in the overall amount of €23.2 million. This equity contribution will not impact the amount of our ownership interest. In addition, the entire profit of voestalpine Stahlhandel GmbH (excluding non-recurring and non-operating items) for the period from April 1, 2006 until December 31, 2006, plus certain dividends in the aggregate of approximately €23.3 million relating to a reorganization and the realization of reserves and the release of retained profits relating to two companies in voestalpine Stahlhandel GmbH, will be paid to voestalpine Stahl GmbH in the form of a dividend (or advance thereof). This dividend will be netted from the enterprise value. In connection with the Austrian Acquisition, we will repay all treasury obligations of voestalpine Stahlhandel GmbH through the Acquisition OnLoan. These treasury obligation repayments will be netted from the enterprise value. voestalpine Stahlhandel GmbH is the leading warehousing and steel distribution company in Austria with significant operations in Central and Eastern Europe. It has retail distribution facilities in Austria, the Czech Republic, Croatia, Poland and Romania and trade offices in Hungary, Slovakia, Slovenia and BosniaHerzegovina. voestalpine Stahlhandel GmbH serves mainly civil and mechanical engineering and building and automotive sectors and offers a full range of steel products including heavy plates, sections and thin sheets. voestalpine Stahlhandel GmbH had consolidated revenues of €303.8 million in the fiscal year ended March 31, 2006 (compared to €332.6 million in the fiscal year ended March 31, 2005) and EBITDA of €10.2 million (as calculated by voestalpine Stahlhandel GmbH) in the fiscal year ended March 31, 2006 (compared to €26.5 million in the fiscal year ended March 31, 2005). The consolidated financial results of voestalpine Stahlhandel GmbH for the periods presented do not reflect the results of certain non-consolidated subsidiaries, including voestalpine Stahlhandel Polska Sp. z o.o. (Poland), voestalpine Stahlhandel Slowakei s.r.o. (Slovakia), voestalpine Stahlhandel Budapest Kft. (Hungary), voestalpine Stahlhandel d.o.o. (Slovenia) and voestalpine ambient Stahlhandel s.r.l. (Romania). These subsidiaries were not historically consolidated in voestalpine AG’s financial statements because they were not considered material to voestalpine AG. The combined EBITDA of these subsidiaries is approximately €2 million. See “Summary Financial Information — Summary Unaudited Pro Forma Consolidated Information”. voestalpine Stahlhandel GmbH’s largest market is in Austria, which voestalpine Stahlhandel GmbH estimates accounted for approximately 79.8% of its consolidated revenues in the fiscal year ended March 31, 2006 (compared to 78.9% in the fiscal year ended March 31, 2005). voestalpine Stahlhandel GmbH had on average 451 employees and an overall trade volume of approximately 455,000 tonnes in 2005. See “Business — Finished Products — Distribution — voestalpine Stahlhandel GmbH” for a more detailed discussion of voestalpine Stahlhandel GmbH’s business. We strongly believe that the Austrian Acquisition will provide us with a number of strategic areas in which to significantly grow our business. These include: Š our warehousing capacity will increase from 110,000 square meters to 232,725 square meters; Š our market and customer base will increase significantly, thus enabling us to procure additional Š Š Š

Š Š Š

demand and reduce margin volatility; our purchasing power in the market and our negotiation position with regard to suppliers will increase and yield significant cost savings; our modern storage capacity outside of Poland will increase; our ability to increase sourcing from low cost countries such as China, India and countries of the former Soviet Union will be enhanced because our increased economies of scales will enable us to turnover larger volumes of steel more quickly; our platform for further expansion in Central and Eastern Europe will be established; our cross selling efforts will be enhanced by selling complementary products of voestalpine Stahlhandel GmbH to our customers and vice versa; and our overall exchange rate exposure will be reduced because we will purchase and sell more products in Euro. 49

The Austrian Acquisition, which is expected to close in the first quarter of 2007, remains subject to merger control approval in Austria and Bosnia-Herzegovina. The Austrian Acquisition will be funded using a portion of the proceeds from this Offering as described herein. voestalpine Stahlhandel GmbH and a number of its subsidiaries have changed their fiscal year from March 31 to December 31. However, some of voestalpine Stahlhandel GmbH’s subsidiaries (i.e. Köllensperger Stahlhandel GmbH, Vereinigte Biege-Gesellschaft m.b.H., ARGE Baustahl Eisen Blasy-Neptun GmbH and BWS Bewehrungsstahl GmbH) still have their fiscal year ending on March 31. These different fiscal years may create problems in the creation of our consolidated financial statements. Planned Consolidation of Centrostal Operations The Company plans to sell its interests in Centrostal Górnos´la¸ski and Centrostal Opole to Centrostal (our 50.57%-owned steel distributions subsidiary) during the first quarter of 2007. Centrostal is currently conducting a public equity offering in Poland, the proceeds of which (estimated at approximately PLN 100 million (€25.1 million)) will be used partly to pay for the purchase of these two companies. The Company will use the proceeds from the sale of these two companies to increase its ownership percentage in Centrostal. Following consummation of the public equity offering, the Company expects to hold approximately 65% of the equity interest in Centrostal. On December 29, 2006, the prospectus for Centrostal’s public equity offering was filed for approval with the Polish Financial Supervisory Commission. Once approved by the Polish Financial Supervisory Commission, Centrostal can commence its public equity offering. History We were formed as a sole proprietorship under the corporate name Przedsie¸biorstwo Obrotu Surowcami Wtornymi “Złomrex” by Przemysław Sztuczkowski in 1990, primarily as a company trading in non-ferrous scrap metal. We began to trade steel scrap in 1994, steel products in 1996, and we began to process our own materials in 1997. In 2001, we began producing steel products after purchasing the assets of ZW-WB’s rolling mill operations in Zawiercie. ZW-WB continued to operate the rolling mill based on a cooperation agreement with us. In 1998, Mr. Przemysław Sztuczkowski purchased all of the shares in Korba Sp. z o.o (“Korba”). In 2002, Korba changed its corporate name to Złomrex Sp. z o.o. In 2003, Mr. Sztuczkowski made an in-kind contribution of the Founding Company to Złomrex Sp. z o.o. In 2004, we purchased Ferrostal Łabe˛dy, which specializes in producing semi-finished products in the form of steel billets and finished steel products and changed our corporate form from a limited liability company to a joint stock company. In 2004, we acquired Szopienice to launch the production of semi-finished products made from non-ferrous metals. In addition, the Company established Nowa Jakos´c´, which recycles waste materials. In 2006, we purchased HSW-HSJ, a leading Polish producer of quality (high alloy) steel and long hot-rolled products (bars) made from carbon steel and high alloy steel, together with HSW-WB, which specializes in producing hot-rolled sheets from carbon steel, high alloy steel and special purpose steel. On November 2, 2006, HSW-WB and HSW-HSJ merged into one company, HSW-HSJ. We recently purchased a steel product distribution network consisting of Centrostal Górnos´la˛ski, Centrostal and Centrostal Opole to expand the retail distribution of our finished products throughout Poland and intend to acquire a 74.9% interest in voestalpine Stahlhandel GmbH, with an option to acquire a further 25.1% interest, to have access to its retail distribution network in Austria and Central and Eastern Europe. See “Summary — Recent Developments — voestalpine Stahlhandel GmbH ” and “The Transactions — The Austrian Acquisition” and “Business — Finished Products — Distribution — voestalpine Stahlhandel GmbH” in this Offering Memorandum. Summary of Major Acquisitions We have sought to develop a vertically integrated steel business through the purchase of undervalued assets that we believe offer significant upside potential, particularly as we implement improvements in working practices and operational methods. The following is a summary of the terms of our major acquisitions over the last three years. Major acquisitions since 2003 Š Ferrostal Łabe˛dy.

On February 19, 2004, we purchased 82.6% of the shares of Ferrostal Łabe˛dy from Stalexport S.A. for a purchase price of PLN 18.1 million (€4.5 million). On May 5, 2004, we purchased an additional 8.84% shares of Ferrostal Łabe˛dy for an additional PLN 1.9 million (€0.5 million). Ferrostal Łabe˛dy is a manufacturing plant located in Gliwice consisting of two divisions: (i) steelworks with a current production capacity of 400,000 tonnes of steel per year and (ii) a rolling mill with a capacity of approximately 100,000 tonnes of finished products per year. 50

Š Szopienice.

On July 30, 2004, we purchased 100% of the share capital of Szopienice for a purchase price of PLN 440,000 (€110,553). Szopienice is a foundry located in Katowice which manufactures finished products and semi-finished products from non-ferrous scrap metal.

Š ZW-WB.

On January 13, 2005, we purchased 100% of the share capital of ZW-WB for a purchase price of PLN 5,000 (€1,256). ZW-WB is a manufacturing plant located in Zawiercie with a maximum capacity of 180,000 tonnes of steel per year in the form of finished products. Before we acquired the share capital of ZW-WB, ZW-WB was responsible for carrying out the production process at the rolling mill facility in Zawiercie, which belonged at that time to the Company.

Š HSW-WB.

On January 6, 2006, we purchased 100% of the share capital of HSW-WB for a purchase price of PLN 33.0 million (€8.3 million). HSW-WB is located in Stalowa Wola and consists of one rolling mill with a production capacity of approximately 100,000 tonnes of steel plates a year. In November 2006, HSW-WB and HSW-HSJ merged.

Š HSW-HSJ.

On January 27, 2006, we purchased 100% of the share capital of HSW-HSJ for PLN 160.0 million (€40.2 million). HSW-HSJ is located in Stalowa Wola and consists of (i) steelworks with a maximum production capacity of approximately 250,000 tonnes of steel per year and (ii) a rolling mill with a production capacity of approximately 142,000 tonnes of steel rods and bars per year.

Š Centrostal Górnos´la¸ski.

On February 21, 2006, we founded Centrostal Górnos´la¸ski with a share capital of PLN 50,000 (€12,563). On March 7, 2006, we purchased Centrostal Górnos´la¸ski Przedsie¸biorstwo Panstwowe Obrotu Wyrobami Hutniczymi from the Polish state treasury for a purchase price of PLN 56.0 million (€14.1 million) and made an in-kind contribution on that same day of the purchased company. Centrostal Górnos´la¸ski is a leader in retail sales of metallurgical products in the S´la¸skie Voivodship.

Š Centrostal.

Between March and September 2006, through various transactions, we purchased 50.57% of the shares of Centrostal S.A. (“Centrostal”) for a purchase price of PLN 11.6 million (€2.9 million). Centrostal is a leader in retail sales of metallurgical products in the Pomorskie Voivodship. Its core business is the wholesale trade of metallurgical products, both Polish-made and imported, as well as steel processing.

Š Centrostal Opole.

On July 4, 2006, we purchased 81.68% of the share capital of Centrostal Opole from Jerzy Rybczynski and Agencja Centrostal S.A. Following a series of transactions, we have obtained control of Centrostal Opole with a shareholding of 99.6%. The total purchase price for the series of transactions for a 99.6% shareholding was PLN 3.0 million (€0.8 million). Centrostal Opole is a local retail seller of metallurgical products in Opole.

Factors Affecting Results of Operations Our results of operations depend on the performance of end user industries, such as the construction, machine, tube rolling, forging and ball bearing, shipping and defense industries. These sectors represent the main industries which use our semi-finished steel products and finished steel products. Strong economic performance in these industries translates into higher demand for steel products. As a result, the number of units produced by these end-user industries served by us does have a significant impact on our business and results of operations. Seasonality Our sales, profits and net financial debt have fluctuated significantly from one quarter to the next, depending on the number of working days and vacation periods. We therefore assume that quarterly results will continue to fluctuate significantly. For example, our business volumes are generally lower in the winter months of January and February than in the spring. We have also found that business slows in the summer due to vacations, increases again in the fall, and then tends to drop off again towards the end of the year because our customers tend to minimize their inventories, at least when prices are stable. These fluctuations have a direct impact on our use of working capital and therefore also on net financial debt and our cash flow. Working capital requirements are generally the highest in the second and third quarters of the year, which is reflected in net financial debt. In the final quarter of the year, less working capital is required and net financial debt decreases accordingly. These seasonal effects can cause differences in revenue and earnings among the various quarters of any financial year, which means the individual quarters should not be directly compared with each other or be multiplied to predict annual results. Prices of raw materials and energy we use Steel scrap is the primary material for the production of steel in our electrical arc furnaces and is a main component in our semi-finished product business. Scrap prices decreased in 2005 after an increase in 2004. 51

Starting in the second half of 2005, scrap prices increased until the middle of 2006 and have since remained relatively stable. Prices for alloys we use are also subject to strong fluctuations. To some extent, we are able to pass the effect of such fluctuations in scrap prices and alloys on to customers in the form of higher prices. We also consume substantial amounts of energy, primarily in the form of electricity, and to a lesser extent in the form of natural gas. Funds granted by the European Union The use of funds granted by the European Union, a considerable part of which will be allocated to the development of infrastructure, has triggered and will continue to trigger economic growth in the Polish steel industry. The more EU funds are invested in Poland, the more construction will take place, thus increasing demand for steel. Continuous cost cutting We develop and implement continuous initiatives to cut costs and increase productivity, both at the our production facilities and our distribution companies. The effects of these initiatives are reviewed on a quarterly basis. Effect of currency fluctuations and long-term exchange rate trends Long-term trends in exchange rates may have a material impact on our business. A strong Polish zloty versus the Euro has an adverse impact on our competitive position in European markets because a substantial portion of our costs are incurred in Polish zloty, in particular for energy and personnel costs, while mostly Polish zloty sales result from product prices that are directly linked to Euro/US dollar commodity prices. A further strengthening of the Polish zloty versus the Euro would likely exacerbate these effects and may thus have a material adverse effect on our financial performance and result of operations. Effect of capital expenditures and working capital commitments Our business is heavily dependent on plant and machinery for the production and distribution of semifinished and finished steel products. Investment to maintain and expand production facilities is accordingly an important priority and has a significant effect on our results of operations and financial condition. Our total capital expenditures were approximately PLN 32.5 million (€8.2 million) in 2005, compared to PLN 28.3 million (€7.1 million) in 2004. In 2004 investment expense exceeded depreciation, which amounted to PLN 18.6 million (€4.7 million) in 2004, whereas in 2005 depreciation showed an increase to PLN 21.3 million (€5.4 million). For a further discussion of past and planned investment projects, please see “— Liquidity and Capital Resources — Net Cash from Investing Activities.” Our business is also relatively capital-intensive and requires a significant commitment of working capital. See “— Liquidity and Capital Resources.” Inventory management Inventory management is a key determinant of cash flow and profitability in the steel business. The shorter the period between procurement and shipment, the less capital is tied up in inventory and the faster profits can be generated. We maintain our inventories in a network of distribution centers that are operated as warehouse facilities and at production facilities. The structural configuration of these storage locations is driven by local demand. Inventories at all locations are monitored on a daily basis both to optimize inventory flow and to identify slow moving products. We believe that our longstanding relationship with suppliers and customers and the acquisition of retail distribution companies provide a sound basis for reliably predicting future requirements. This makes it possible to achieve rapid inventory turnover of products carried, which in turn results in costefficient warehousing logistics and reduced inventory risks. The payment cycle (the number of days that merchandise is warehoused plus the number of days until payment is received from the customer, minus the number of days between delivery by and payment to the producer) currently amounts to approximately 59 days based on September 30, 2006 figures, and we strive to reduce it further without causing any negative impact on sales.

52

Result of Operations Year ended December 31, 2004 2005 2005 (PLN millions) (€ millions)

Income statement data Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scrap metal . . . . . . . . . . . . . . . . . . . . . . . . . . Semi-finished products . . . . . . . . . . . . . . . . . Finished products . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,194.9 353.4 225.7 471.2 144.6

976.2 188.0 237.2 368.6 182.4

245.3 47.3 59.6 92.6 45.8

Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scrap metal . . . . . . . . . . . . . . . . . . . . . . . . . . Semi-finished products . . . . . . . . . . . . . . . . . Finished products . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intersegment(1) . . . . . . . . . . . . . . . . . . . . . . . .

(1,019.5) (325.0) (209.6) (436.7) (129.7) 81.5

(880.7) (177.2) (214.1) (358.5) (160.1) 29.2

(221.3) (44.5) (53.8) (90.1) (40.2) 7.3

Nine months ended September 30, 2005 2006 2006 (PLN millions) (€ millions)

737.7 136.9 180.2 292.4 128.2

1,417.0 168.5 220.7 765.2 262.7

(671.5) (1,228.6)

356.0 42.3 55.5 192.3 66.0 (308.7)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scrap metal . . . . . . . . . . . . . . . . . . . . . . . . . . Semi-finished products . . . . . . . . . . . . . . . . . Finished products . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intersegment(1) . . . . . . . . . . . . . . . . . . . . . . . .

175.4 28.4 16.1 34.5 14.9 81.5

95.5 10.7 23.2 10.1 22.3 29.2

24.0 2.7 5.8 2.5 5.6 7.3

66.2

188.4

47.3

Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution expenses . . . . . . . . . . . . . . . . . . . . . . Administrative expenses . . . . . . . . . . . . . . . . . . . . Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating profit before financing costs . . . . . .

2.8 (22.1) (36.9) (2.9) 116.4

3.5 (15.7) (40.6) (4.7) 38.0

0.9 (3.9) (10.2) (1.2) 9.5

1.6 (10.7) (29.7) (2.7) 24.7

2.7 (21.5) (52.8) (7.0) 109.7

0.7 (5.4) (13.3) (1.7) 27.6

Net financing costs . . . . . . . . . . . . . . . . . . . . . . . . Excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired over cost . . . . . . . . . . . . . . .

(8.9)

(17.0)

(4.3)

(13.8)

(19.9)

(5.0)

101.0

—

—

5.9

1.5

Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . Profit for the period . . . . . . . . . . . . . . . . . . . . . .

208.5 (3.7) 204.9

21.0 (4.1) 16.9

10.9 (2.1) 8.8

95.8 (18.9) 76.9

24.1 (4.7) 19.3

5.3 (1.0) 4.2

(1) Represents margin on intersegment sales. Key income statement items Revenue Revenue consists of sales of products, merchandise and services to third party customers. Cost of Sales Cost of revenue consists of direct expenses related to the products, merchandise and services sold. Gross Profit For the purposes of the following discussion, gross profit consists of the difference between external revenue and external cost of sales. Other income Other operating income consists of the release of unused provisions, compensation and fines received, discovered inventory surpluses, indemnities, prescribed payables, returned court fees and net gain on the disposal of property, plant and equipment. Distribution expenses Distribution expenses consist primarily of sales-related transport costs and salaries of sales people. Administrative expenses Administrative expenses consist primarily of management salaries (excluding sales persons), depreciation of non-production buildings and equipment, security and insurance services. 53

Operating profit before financing costs Operating profit before financing costs consists of gross profit after other operating items, distribution expenses and administrative expenses. Net financing costs Net financing costs consist of interest payable on borrowings calculated using the effective interest rate method, interest receivable on funds invested, foreign exchange gains and losses and gains and losses on hedging instruments that are recognized in the income statement. Income tax expenses Income tax expenses consist of current year and deferred tax expenses. Nine Months Ended September 30, 2006 Compared with Nine Months Ended September 30, 2005 Revenue Group. Consolidated revenue for our Group for the nine months ended September 30, 2006 amounted to PLN 1,417.0 million (€356.0 million), a 92.1% increase from PLN 737.7 million (€185.4 million) for the nine months ended September 30, 2005. This increase was primarily due to an increase in the sales volumes in our finished products segment, as well as to a lesser extent an increase in sales volumes in our scrap metal, semifinished products and other segments. In addition, this increase was partly due to an increase in unit prices for products in all of our segments. Scrap metal. Revenue in our scrap metal segment for the nine months ended September 30, 2006 amounted to PLN 168.5 million (€42.3 million), a 23.1% increase from PLN 136.9 million (€34.4 million) for the nine months ended September 30, 2005. This increase was primarily due to an increase in the sales volumes in our scrap metal segment, as well as to a lesser extent an increase in unit prices of our scrap metal. Semi-finished products. Revenue in our semi-finished products segment for the nine months ended September 30, 2006 amounted to PLN 220.7 million (€55.5 million), a 22.5% increase from PLN 180.2 million (€45.3 million) for the nine months ended September 30, 2005. This increase was primarily due to an increase in the sales volumes in our semi-finished products segment, as well as to a lesser extent an increase in unit prices of our semi-finished products. Finished products. Revenue in our finished products segment for the nine months ended September 30, 2006 amounted to PLN 765.2 million (€192.3 million), a 161.7% increase from PLN 292.4 million (€73.5 million) for the nine months ended September 30, 2005. This increase was primarily due to an increase in the sales volumes in our finished products segment, as well as to a lesser extent an increase in unit prices of our finished products. Other. Revenue in our other segment for the nine months ended September 30, 2006 amounted to PLN 262.7 million (€66.0 million), a 104.8% increase from PLN 128.2 million (€32.2 million) for the nine months ended September 30, 2005. This increase was primarily due to an increase in the sales volumes in our other segment, as well as to a lesser extent an increase in unit prices of products in our other segment. Cost of Sales Group. Consolidated cost of sales for our Group for the nine months ended September 30, 2006 amounted to PLN 1,228.6 million (€308.7 million), a 83.0% increase from PLN 671.5 million (€168.7 million) for the nine months ended September 30, 2005. This increase was primarily due to an increase in sales volumes and unit prices of products in all of our segments. Gross Profit Group. Consolidated gross profit for our Group for the nine months ended September 30, 2006 amounted to PLN 188.4 million (€47.3 million), a 184.6% increase from PLN 66.2 million (€16.6 million) for the nine months ended September 30, 2005. Our gross profit margin increased to 13.3% for the nine months ended September 30, 2006 from 9.0% for the nine months ended September 30, 2005. The primary reason for the increase was an increase in the sales volumes in our finished products segment, as well as to a lesser extent an increase in sales volumes in our scrap metal, semi-finished products and other segments. In addition, this increase was partly due to an increase in unit prices for products in all of our segments. 54

Other income Other income for the nine months ended September 30, 2006 amounted to PLN 2.7 million (€0.7 million), a 68.8% increase from PLN 1.6 million (€0.4 million) for the nine months ended September 30, 2005. This increase was primarily due to the acquisition of HSW-HSJ and the consolidation of the newly acquired companies in 2006 into the Group. Distribution expenses Distribution expenses for the nine months ended September 30, 2006 amounted to PLN 21.5 million (€5.4 million), a 100.9% increase from PLN 10.7 million (€2.7 million) for the nine months ended September 30, 2005. This increase was primarily due to the consolidation of the newly acquired companies in 2006 into the Group. Administrative expenses Administrative expenses for the nine months ended September 30, 2006 amounted to PLN 52.8 million (€13.3 million), a 77.8% increase from PLN 29.7 million (€7.5 million) for the nine months ended September 30, 2005. This increase was primarily due to the consolidation of the newly acquired companies in 2006 into the Group, especially HSW-HSJ. Operating profit before financing costs Operating profit before financing costs for the nine months ended September 30, 2006 amounted to PLN 109.7 million (€27.6 million), a 344.1% increase from PLN 24.7 million (€6.2 million) for the nine months ended September 30, 2005. This increase was primarily due to the consolidation of the newly acquired companies in 2006 into the Group, especially HSW-HSJ. Net financing costs Net financing costs for the nine months ended September 30, 2006 amounted to PLN 19.9 million (€5.0 million), a 43.5% increase from PLN 13.8 million (€3.5 million) for the nine months ended September 30, 2005. This increase was primarily due to an increase in the total net indebtedness of the Group. Excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired over cost Excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired over cost for the nine months ended September 30, 2006 amounted to PLN 5.9 million (€1.5 million). There was no excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired over cost for the nine months ended September 30, 2005. The amount for the nine months ended September 30, 2006 was primarily due to the acquisition of Centrostal. Income tax expense Income tax expense for the nine months ended September 30, 2006 amounted to PLN 18.9 million (€4.7 million), a 800% increase from PLN 2.1 million (€0.5 million) for the nine months ended September 30, 2005. This increase was primarily due to increased profits in all of our segments. Profit for the period Profit for the period for the nine months ended September 30, 2006 amounted to PLN 76.9 million (€19.3 million), a 773.9% increase from PLN 8.8 million (€2.2 million) for the nine months ended September 30, 2005. This increase was primarily due to increased profits in all of our segments. Year Ended December 31, 2005 Compared with Year Ended December 31, 2004 Revenue Group. Consolidated revenue for our Group for the year ended December 31, 2005 amounted to PLN 976.2 million (€245.3 million), a 18.3% decrease from PLN 1.2 billion (€301.5 million) for the year ended December 31, 2004. This decrease was primarily due to a decrease in steel prices, which lead to a decrease in scrap metal prices, semi-finished product and finished product prices, an economic downturn in the Polish steel industry, and the consolidation of Ferrostal Łabe˛dy into the Group in 2005 for a full year as compared to 2004 where the first two months of sales to Ferrostal Łabe˛dy were regarded as sales to external customers. 55

Scrap metal. Revenue in our scrap metal segment for the year ended December 31, 2005 amounted to PLN 188.0 million (€47.3 million), a 46.8% decrease from PLN 353.4 million (€88.8 million) for the year ended December 31, 2004. This decrease was primarily due to a decrease in scrap metal prices and a 4.8% decrease in volumes of scrap metal purchased. In addition, because the Company used approximately 123,000 tonnes more of scrap metal to produce semi-finished products in 2005 than in 2004, this led to a decrease in sales of scrap metal to external customers by 47% from 2004 to 2005. Semi-finished products. Revenue in our semi-finished products segment for the year ended December 31, 2005 amounted to PLN 237.2 million (€59.6 million), a 5.1% increase from PLN 225.7 million (€56.7 million) for the year ended December 31, 2004. This increase was entirely due to an increase in prices for semi-finished products. Finished products. Revenue in our finished products segment for the year ended December 31, 2005 amounted to PLN 368.6 million (€92.6 million), a 21.8% decrease from PLN 471.2 million (€118.4 million) for the year ended December 31, 2004. This decrease was primarily due to a decrease in prices for finished products and partly due to an economic downturn in the Polish steel industry, which reduced demand for finished products. Other. Revenue in our other segment for the year ended December 31, 2005 amounted to PLN 182.4 million (€45.8 million), a 26.1% increase from PLN 144.6 million (€36.3 million) for the year ended December 31, 2004. This increase was primarily due to an increase in the sales volumes of other products and partly due to an increase in the prices of other products. Cost of sales Group. Consolidated cost of sales for our Group for the year ended December 31, 2005 amounted to PLN 880.7 million (€221.3 million), a 11.9% decrease from PLN 1.0 billion (€251.3 million) for the year ended December 31, 2004. This decrease was primarily due to a decrease in sales volumes and a decrease in steel prices. Scrap metal. Cost of sales in our scrap metal segment for the year ended December 31, 2005 amounted to PLN 177.2 million (€44.5 million), a 45.5% decrease from PLN 325.0 million (€81.7 million) for the year ended December 31, 2004. This decrease was primarily due to a decrease in sales volumes of scrap metal and a decrease in scrap metal prices. Semi-finished products. Cost of sales in our semi-finished products segment for the year ended December 31, 2005 amounted to PLN 214.1 million (€53.8 million), a 2.1% increase from PLN 209.6 million (€52.7 million) for the year ended December 31, 2004. This increase was primarily due to an increase in the sales volumes of semi-finished products. Finished products. Cost of sales in our finished products segment for the year ended December 31, 2005 amounted to PLN 358.5 million (€90.1 million), a 17.9% decrease from PLN 436.7 million (€109.7 million) for the year ended December 31, 2004. This decrease was primarily due to a decrease in prices of new materials necessary to produce finished products such as scrap metal, ferro alloys and refractory materials and a 6.6% decrease in sales volumes of finished products. Other. Cost of sales for our other business for the year ended December 31, 2005 amounted to PLN 160.1 million (€40.2 million), a 23.4% increase from PLN 129.7 million (€32.6 million) for the year ended December 31, 2004. This increase was primarily due to an increase in the sales volumes of other products. Gross Profit Group. Consolidated gross profit for our Group for the year ended December 31, 2005 amounted to PLN 95.5 million (€24.0 million), a 45.6% decrease from PLN 175.4 million (€44.1 million) for the year ended December 31, 2004. Our gross profit margin decreased to 9.8% for the year ended December 31, 2005 from 14.7% for the year ended December 31, 2004. The primary reason for the decrease in the gross profit margin was a decrease in steel prices and the economic downturn in the Polish steel industry. Scrap metal. Gross profit in our scrap metal segment for the year ended December 31, 2005 amounted to PLN 10.7 million (€2.7 million), a 62.3% decrease from PLN 28.4 million (€7.1 million) for the year ended December 31, 2004. Our gross profit margin decreased to 5.7% for the year ended December 31, 2005 from 8.0% for the year ended December 31, 2004. The primary reason for the decrease in the gross profit margin was the decrease in the sales volumes of scrap metal and the decrease of scrap metal prices. 56

Semi-finished products. Gross profit in our semi-finished products segment for the year ended December 31, 2005 amounted to PLN 23.2 million (€5.8 million), a 44.1% increase from PLN 16.1 million (€4.0 million) for the year ended December 31, 2004. Our gross profit margin increased to 9.8% for the year ended December 31, 2005 from 7.1% for the year ended December 31, 2004. The primary reason for the increase in the gross profit margin was the shift towards producing higher grade steel products. Finished products. Gross profit in our finished products segment for the year ended December 31, 2005 amounted to PLN 10.1 million (€2.5 million), a 70.7% decrease from PLN 34.5 million (€8.7 million) for the year ended December 31, 2004. Our gross profit margin decreased to 2.7% for the year ended December 31, 2005 from 7.3% for the year ended December 31, 2004. The primary reason for the decrease in the gross profit margin was the decrease in the price of finished products as a result of excess product inventories in the market during 2005. Other. Gross profit in our other segment for the year ended December 31, 2005 amounted to PLN 22.3 million (€5.6 million), a 49.7% increase from PLN 14.9 million (€3.7 million) for the year ended December 31, 2004. Our gross profit margin increased to 12.2% for the year ended December 31, 2005 from 10.3% for the year ended December 31, 2004. The primary reason for the increase in the gross profit margin was the increase in sales volumes and an increase in the price of other products. Other income Other income for the year ended December 31, 2005 amounted to PLN 3.5 million (€0.9 million), a 25.0% increase from PLN 2.8 million (€0.7 million) for the year ended December 31, 2004. Distribution expenses Distribution expenses for the year ended December 31, 2005 amounted to PLN 15.7 million (€3.9 million), a 29.0% decrease from PLN 22.1 million (€5.6 million) for the year ended December 31, 2004. This decrease was primarily due to a decrease in sales volumes of scrap metal and finished products. Administrative expenses Administrative expenses for the year ended December 31, 2005 amounted to PLN 40.6 million (€10.2 million), a 10.0% increase from PLN 36.9 million (€9.3 million) for the year ended December 31, 2004. This increase was primarily due to the full consolidation of Ferrostal Łabe˛dy and Szopienice in 2005 as compared to their partial consolidation in 2004 and increased costs for employee salaries and other related costs. Operating profit before financing costs Operating profit before financing costs for the year ended December 31, 2005 amounted to PLN 38.0 million (€9.5 million), a 67.4% decrease from PLN 116.4 million (€29.2 million) for the year ended December 31, 2004. This decrease was primarily due to a general decrease in profits in all of our segments, which was partially offset by increases in profits in the semi-finished product and other segments. Net financing costs Net financing costs for the year ended December 31, 2005 amounted to PLN 17.0 million (€4.3 million), a 91.0% increase from PLN 8.9 million (€2.2 million) for the year ended December 31, 2004. This increase was primarily due to increased indebtedness of the Company. Excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired over cost There was no excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired over cost for the year ended December 31, 2005 compared to PLN 101.0 million (€25.4 million) for the year ended December 31, 2004. Income tax expense Income tax expense for the year ended December 31, 2005 amounted to PLN 4.1 million (€1.1 million), a 10.8% increase from PLN 3.7 million (€0.9 million) for the year ended December 31, 2004. Profit for the period Profit for the year ended December 31, 2005 amounted to PLN 16.9 million (€4.2 million), a 91.8% decrease from PLN 204.9 million (€51.5 million) for the year ended December 31, 2004. This decrease was primarily due to the fact of the excess of the net fair value of the acquirer’s identifiable assets, liabilities and contingent liabilities over the cost recognition of PLN 101 million (€25.4 million) in the 2004 audited consolidated financial statements and the general decrease in gross profits as discussed above. 57

Liquidity and Capital Resources Historically, our capital requirements have been funded primarily through a combination of cash generated from operations and borrowings under credit facilities made available by third parties. Statement of Cash Flows The following table sets out the principal components of our cash flows for the years ended December 31, 2004 and 2005 for the nine month periods ended September 30, 2005 and 2006. Year ended December 31, 2004 2005 2005 (€ (PLN millions) millions) (audited)

Net cash from/(used in) operating activities . . . . . . . . . . . . . . Net cash from/(used in) investing activities . . . . . . . . . . . . . . . Net cash from/(used in) financing activities . . . . . . . . . . . . . .

(12.4) 54.6 6.0 (36.7) (15.7) (1.3)

13.7 (9.2) (0.3)

Nine months ended September 30, 2005 2006 2006 (€ (PLN millions) millions) (unaudited)

30.7 75.9 (28.1) (216.4) 30.7 141.6

19.1 (54.4) 35.6

Net cash from operating activities Nine months ended September 30, 2006 Net cash from operating activities amounted to PLN 75.9 million (€19.1 million) for the nine months ended September 30, 2006, a 147.2% increase from PLN 30.7 million (€7.7 million) for the nine months ended September 30, 2005. Increased profits in all of our segments attributed to this increase in net cash from operating activities. This was partly offset by higher working capital requirements in 2006 as a result of our new acquisitions and better market conditions. Year ended December 31, 2005 Net cash from operating activities amounted to PLN 54.6 million (€13.7 million) for the year ended December 31, 2005, a PLN 67.0 million (€16.8 million) increase from net cash used in operating activities of PLN 12.4 million (€3.1 million) for the year ended December 31, 2004. This increase was primarily caused by lower sales which was reflected in lower working capital requirements in 2005 caused by a general economic downturn in the Polish steel industry. Net cash used in investing activities Nine months ended September 30, 2006 Net cash used in investing activities amounted to PLN 216.4 million (€54.4 million) for the nine months ended September 30, 2006, a PLN 188.3 million (€47.3 million) increase from net cash used in investing activities of PLN 28.1 million (€7.1 million) for the nine months ended September 30, 2005. This increase was primarily caused by acquisitions of new companies in 2006. Year ended December 31, 2005 Net cash used in investing activities amounted to PLN 36.7 million (€9.2 million) for the year ended December 31, 2005, a PLN 42.7 million (€10.7 million) increase from net cash from investing activities of PLN 6.0 million (€1.5 million) for the year ended December 31, 2004. This increase was primarily caused by the payment of the purchase price for Ferrostal Łabe˛dy in 2005 and other investments in fixed assets. Net cash from financing activities Nine months ended September 30, 2006 Net cash from financing activities amounted to PLN 141.6 million (€35.6 million) for the nine months ended September 30, 2006, a 361.2% increase from PLN 30.7 million (€7.7 million) for the nine months ended September 30, 2005. This increase was primarily due to new loans and increased borrowings in 2006 to finance acquisitions of new companies, especially HSW-HSJ. Year ended December 31, 2005 Net cash used in financing activities amounted to PLN 1.3 million (€0.3 million) for the year ended December 31, 2005, a PLN 14.4 million (€3.6 million) decrease from net cash used in financing activities of PLN 15.7 million (€3.9 million) for the year ended December 31, 2004. This decrease was primarily due to increased borrowings in 2005. 58

Capital Expenditure Our business is capital intensive and requires significant capital expenditures, primarily with respect to property, plant and equipment. The amounts presented below related to additions in property, plant and equipment other than through business combinations. In 2004, our total capital expenditure was PLN 28.3 million (€7.1 million). This included PLN 3.9 million (€1.0 million) for property, PLN 14.3 million (€3.6 million) for equipment and machinery, PLN 8.7 million (€2.2 million) for vehicles, and PLN 1.4 million (€0.4 million) for other (including assets under construction). In 2005, our total capital expenditure was PLN 32.5 million (€8.2 million). This included PLN 1.6 million (€0.4 million) for property, PLN 14.3 million (€3.6 million) for equipment and machinery, PLN 7.7 million (€1.9 million) for vehicles, and PLN 8.9 million (€2.2 million) for other (including assets under construction). For the first nine months ended September 30, 2006, our total capital expenditure was PLN 31.9 (€8.0 million). This included PLN 3.9 million (€1.0 million) for property, PLN 24.4 million (€6.1 million) for equipment and machinery, PLN 2.8 million (€0.7 million) for vehicles, and PLN 3.5 million (€0.9 million) for other. Off-balance sheet arrangements We have not removed any obligations from our balance sheet or created off-balance sheet obligations in off-balance sheet transactions. There are no other obligations and risks which were not reflected in the consolidated financial statements or listed in the notes to the consolidated financial statements. There are no material contingent liabilities. Future Liquidity, Commitments and Financing Arrangements Upon consummation of the Offering and the application of the proceeds as described under “Use of Proceeds”, all of the existing external indebtedness of the Company and its subsidiaries will be repaid (the “Refinancing”), other than: Š the Notes; Š receivables facilities providing for the factoring/securitization of the Company’s and its subsidiaries’

accounts receivable in amounts not to exceed PLN 55.5 million (€13.9 million) at any one time outstanding, of which approximately PLN 40.1 million (€10.1 million) is outstanding as of September 30, 2006; Š under loan agreements with the National Fund in an amount not to exceed PLN 27.7 million

(€7.0 million) at any one time outstanding (amount outstanding as of September 30, 2006); Š under various leasing agreements in amounts not to exceed PLN 37.6 million (€9.5 million) (the

amount outstanding as of September 30, 2006); Š indebtedness of the Centrolstal Group of PLN 26.4 million (€6.6 million), of which PLN 21.2 million

(€5.3 million) was outstanding as of September 30, 2006); and Š indebtedness of Kapitał and the Company under discount promissory note agreements of

PLN 17 million (€4.3 million) and PLN 10 million (€2.5 million), respectively, of which PLN 8.9 million (€2.2 million) was outstanding as of September 30, 2006. In addition, upon consummation of the Austrian Acquisition, we expect further external indebtedness of voestalpine Stahlhandel GmbH in an amount of approximately €10 million. For a more detailed description of this indebtedness, see “Description of Other Indebtedness” in this Offering Memorandum. We believe that cash generated from operations, together with proceeds from this Offering, current or future credit facilities and other financing arrangements, including equity offerings, will be sufficient to meet our liquidity needs for the foreseeable future. However, our ability to pay interest on the Notes and to satisfy our other debt obligations depends in part upon our future financial and operating performance and upon our ability to renew or refinance borrowings or to raise additional equity capital. Prevailing economic conditions and financial, business and other factors, many of which are beyond our control, will affect our ability to make these payments. While we believe that cash flow from operations will provide an adequate source of long-term liquidity, a significant drop in operating cash flow resulting from adverse economic conditions, competition or 59

other uncertainties beyond our control would increase the need for alternative sources of liquidity. If we are unable to generate sufficient cash flow to meet our debt service obligations, we will have to pursue one or more alternatives, such as: Š reducing or delaying capital expenditures; Š refinancing debt; Š selling assets; or Š raising equity capital

We cannot assure you that any of these alternatives could be accomplished on satisfactory terms, if at all, or that such alternatives would yield sufficient funds for us to meet our obligations under the Notes or our other senior obligations. We have breached certain financials covenants under certain of our indebtedness in the past, including, absent a waiver, for the year ended December 31, 2006. We received waivers from lenders relating to that indebtedness and these lenders, although they had the right to do so, did not accelerate the maturity of this indebtedness. Any additional breaches of financial covenants in the future under our indebtedness could materially affect our results of operations and financial condition. We also consider from time to time raising funds through the issuance, by the Company or one of its subsidiaries, of equity securities. For example, the Company currently plans to sell its interests in Centrostal Górnoslas´ki and Centrostal Opole to Centrostal (currently and, upon consummation of the sale, a direct subsidiary of the Company) during the first quarter of 2007. Centrostal is currently conducting a public equity offering in Poland, the proceeds of which (estimated at approximately PLN 100 million (€25.1 million) will be used to pay for the purchase of these two companies. The Company will use the proceeds from the sale of these two companies to increase its ownership in Centrostal. Following the consummation of the public equity offering, the Company expects to hold approximately 65% of the equity interests in Centrostal. On December 29, 2006, the prospectus for Centrostal’s public equity offering was filed for approval with the Polish Financial Supervisory Commission. Once approved by the Polish Financial Supervisory Commission, Centrostal can commence its public equity offering. In addition, our strategy for growth contemplates that a significant portion of our future growth will be achieved through acquisitions of related and complementary businesses. We intend to fund acquisitions through a variety of sources, including by raising additional debt (including additional Notes) or using cash generated through our operations or through the issuance of equity securities, including a potential initial public offering of ordinary shares of the Company. The covenants contained in our Revolving Credit Facilities and the Indenture governing the Notes contain a number of restrictions on our ability to incur additional debt, which could limit our ability to realize our strategy. Further, our Share Purchase Agreement and related arrangements in connection with our agreement to acquire a 74.9% interest in voestalpine Stahlhandel GmbH includes a put/call option with respect to the remaining 25.1% interest to be exercised not earlier than two years after the closing of the Austrian Acquisition and not later than December 31, 2010. We anticipate funding the remaining acquisition price through one or more of the financing alternatives described above. Quantitative and Qualitative Disclosures about Market Risk The nature of our business exposes our operations, financial results and cash flow to a number of risks, including those discussed below. Any of these risks could harm our assets, financial condition and earnings. Credit risk Our exposure to credit risks relates primarily to our holdings of cash and cash equivalents and receivables. We have minimum credit risk with regard to our cash and cash equivalents because we place them in financial institutions with high credit ratings. Our credit risk related to receivables is also limited because our customer base is wide and thus the concentration of credit risk is insignificant. In addition, our receivables are insured by the Austrian insurance company, COFACE, and the German insurance company, Euler Hermes. We currently do not believe that we have any significant concentration of credit risk exposure. Foreign currency exchange risk Our presentation currency is the Polish zloty. Because we generally have a significant amount of revenues in Euro, fluctuations in the exchange rate between the Polish zloty and the Euro (including the recent appreciation of the Polish zloty against the Euro) may have a growing impact on our gross profits. We attempt to manage our exposure to these foreign currency fluctuations through the use of forward exchange contracts. 60

Continuing volatility in the exchange rate between the Polish zloty and the Euro could adversely affect our results of operations. Interest rate risk Currently, we are exposed to market risks for changes in interest rates through a portion of our debt instruments. Our loans under some of our outstanding credit facilities bear interest at variable rates and changes in interest rates affect the interest payments on such loans. To hedge against interest rate risks on our bank loans, we have entered into derivative financial instruments such as interest swap transactions which expire between 2008 and 2010. Following the Offering and the application of the proceeds as described herein, our interest rate risk will decline as we will have less exposure to floating rate interest debt. Critical accounting policies The presentation and analysis of the results of operations, financial position and net assets of the Company are based on the consolidated financial statements of the Company for the years ended December 31, 2004 and 2005 and the interim condensed consolidated financial statements of the Company for the nine-month period ended September 30, 2006. The underlying financial statements were prepared in accordance with IFRS. The preparation of financial statements in conformity with IFRS requires that the Management Board of the Company makes judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, equity and liabilities, income and expenses with respect to the Group. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances and the results of which form a basis for professional judgment on carrying values of assets and liabilities that are not readily apparent from other sources. The actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. The accounting methods and policies presented below required estimates and assumptions by the management due to the inherently uncertain nature of the facts involved and for which changes in the underlying facts may significantly affect the results shown in the consolidated financial statements. Further information is provided in the notes to the consolidated financial statements appearing in the Financial Section of this Offering Memorandum. Property, plant and equipment Items of property, plant and equipment are stated at cost or deemed cost less accumulated depreciation and impairment losses. The cost includes the purchase price of the assets (i.e. the amount due to a seller less deductible VAT and excise tax), taxes and charges (in case of import) and costs directly related to the purchase and completion of the asset, so that it can be available for use, including the transport, loading, unloading and storing costs. Rebates, discounts and other similar reductions decrease the cost. The construction cost of property, plant and equipment or assets under construction includes total cost incurred by the entity in the period of their construction, assembly, adjustment and modernization till the date of their transfer to use (or up to the balance sheet date, if the asset was not transferred to use before this date), including non-deductible VAT and excise tax. The construction cost also includes preliminary estimates of the cost of dismantling and removing the components of tangible fixed assets and the restoration cost. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. The Group recognizes in the carrying amount of an item of property, plant and equipment, the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the Group and the cost can be measured reliably. All other expenditures are recognized in the income statement as an expense as incurred. 61

Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each component of property, plant and equipment, considering residual values. The useful life of an asset depends on various factors, including legal, regulatory, structural, economic and other considerations. The effect of these factors on the useful life of an asset is uncertain and requires management to estimate the period over which an asset is to be depreciated. Land is not depreciated. Property, plant and equipment that meet the criteria of finance leases are capitalized in the financial statements of the lessee at the lower of fair value or the minimum lease payments. The corresponding payment obligations in connection with future lease payments are carried as liabilities. Goodwill All business combinations, excluding the businesses which are under common control, are accounted for by applying the purchase method. In respect of business acquisitions that have occurred after 1 January 2004, goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. In respect of acquisitions prior to this date, goodwill represents the amount recorded under previous GAAP. The classification and accounting treatment of business combinations that occurred prior to 1 January 2004 has not been reconsidered in preparing the Group’s opening IFRS balance sheet at 1 January 2004. Subsequent to initial recognition, goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortized but is tested annually for impairment. In respect of associates, the carrying amount of goodwill is included in the carrying amount of the investment in the associate. The excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities over cost arising on an acquisition is recognized directly in the income statement. Inventories Inventories are stated at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses. The cost of inventories is determined based on the first in, first out principle. The costs include expenditure incurred in acquiring the inventories. In the case of finished goods and work in progress, costs include an appropriate share of overheads based on normal operating capacity. Trade and other receivables Trade and other receivables are non-derivative financial assets and financial assets not quoted in an active market with fixed or determinable payments. They are initially recognized at fair value and are subsequently measured at amortized cost less impairment losses. Impairment The carrying amount of the Group’s assets, other than inventories and deferred tax assets is reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the assets recoverable amount is estimated. For goodwill and intangible assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date. An impairment loss is recognized whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses recognized in respect of a cash-generating unit (or a group of units) are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or a group of units) and then, to reduce the carrying amount of the other assets in the unit (or a group of units) on a pro rata basis. Impairment losses are recognized in the income statement. 62

When a decline in the fair value of an available-for-sale financial asset has been recognized directly in equity and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized directly in equity is recognized in the income statement even though the financial asset has not been derecognized. The amount of the cumulative loss that is recognized in the income statement is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognized in the income statement. Calculation of recoverable amount The recoverable amount of the Group’s investments in held to maturity securities and receivables carried at amortized cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate. Short-term receivables are not discounted. The recoverable amount of other assets is the greater of their net selling price and value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset which does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Reversal of impairment An impairment loss in respect of a held-to-maturity security or receivable carried at amortized cost is reversed through the income statement if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognized. An impairment loss in respect of an investment in an equity instrument classified as available for sale is not reversed. If the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in the income statement, the impairment loss shall be reversed, with the amount of the reversal recognized in the income statement. An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. Employee benefits Defined benefits plan — retirement awards The Group recognises provisions for retirement and pension benefits (employee benefits) based on the actuarial valuation as at the balance sheet date prepared by an independent actuary. The basis for the calculation of the provisions for the employee benefits is set by the Group’s internal regulations, the Collective Labour Agreement for the Group’s employees and the legal regulations in force. Provisions for employee benefits are determined with the use of actuary techniques and assumptions in conformity with the requirements of IFRS and in particular IAS 19 ‘Employee Benefits’. Provisions are measured on the basis of the present value of the Group’s future obligations with regard to employee benefits. Provisions are calculated using an individual method, separately for each employee. The basis for the calculation of the provision for an employee is the projected amount of the benefit that the Group commits to pay pursuant to the regulations described above. The projected amount of the benefit is calculated till it is vested with an employee, considering the projected amount of the basis of the benefit, projected increase in the benefit and the length of service of a given employee. The calculated amount is discounted actuarially to the balance sheet date. Trade and other payables Trade and other payables are stated at cost. Current liabilities are not discounted. 63

Revenue Goods sold and services rendered Revenue from the sale of goods is recognized in the income statement when the significant risks and rewards of ownership have been transferred to the buyer. Revenue from services rendered is recognized in the income statement in proportion to the stage of completion of the transaction at the balance sheet date. The stage of completion is assessed by reference to surveys of work performed. No revenue is recognized if there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods, or continuing management involvement with the goods. Rental income Rental income from investment property is recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income. Costs Research and development costs Research and development costs are recognized in the income statement as incurred. Development costs are recognized as intangible assets when the criteria set out in IAS 38 “Intangible assets” are met and when it is probable that the future economic benefits will flow to the Group. Operating lease payments Payments made under operating leases are recognized in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognized in the income statement as an integral part of the total lease expense. Finance lease payments Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Net financing costs and revenues Net financing costs comprise interest payable on borrowings calculated using the effective interest rate method, interest receivable on funds invested, dividend income, foreign exchange gains and losses, and gains and losses on hedging instruments that are recognized in the income statement. Interest income is recognized in the income statement as it accrues, using the effective interest method. Dividend income is recognized in the income statement on the date the entity’s right to receive payments is established. The interest expense component of finance lease payments is recognized in the income statement using the effective interest rate method. Financial instruments Financial instruments are classified in the following categories: held-to-maturity financial assets, financial assets measured at fair value through the income statement, available-for-sale financial assets, loans and receivables. Management determines the classification of its investments at initial recognition and re-evaluates this classification at each reporting date. Acquisition and sale of financial assets is recognized at the transaction date. Financial assets are recognized initially at fair value, including transaction costs. Held-to-maturity financial assets Held-to-maturity financial assets include assets with fixed or determinable payments and fixed maturities that the Group has the positive intention and ability to hold to maturity. These are valued at amortized cost calculated using the effective interest rate method. Assets in this category are recognized as non-current assets, if the realization date exceeds 12 months from the balance sheet date. 64

Financial assets measured at fair value through income statement Financial assets acquired for the purpose of generating a profit from short-term price fluctuations are classified as financial assets measured at fair value through income statement. They are valued at fair value, without transaction costs, and considering the market value as at balance sheets date. Changes in fair value are recognized in the income statement. Assets in this category are classified as current assets, if the management of the Group has the positive intention to realize them within 12 months of the balance sheet date. Available-for-sale financial assets All other financial assets that are not loans or receivables are classified as available-for-sale financial assets. Available-for-sale financial assets are valued at fair value without transaction costs, considering the market value as at balance sheet date. If the financial assets are not listed on a stock exchange and if there are no alternative ways to verify their fair value, available-for-sale financial assets are valued at costs less any impairment loss. Gains or losses, except for impairment losses, calculated as the difference between the fair value and the cost, net of deferred tax, if there is a market price established by the regulated market or for which the fair value may be established in a reliable way, are recognized directly in equity. A decline in the value of the available-forsale financial assets resulting from impairment loss is recognized in the income statement account as a financial cost. Loans and receivables Loans and receivables are valued amortized cost. Summary of Significant Differences between IFRS and US GAAP There are significant differences between IFRS and US GAAP. The consolidated financial statements contained herein differ from those that would be prepared had any of the consolidated financial statements presented in this Offering Memorandum been prepared based upon US GAAP. There can be no assurance that a presentation of financial statements under US GAAP or a reconciliation to US GAAP would not identify material quantitative differences as well as disclosures and presentation differences between our consolidated financial statements as prepared in accordance with IFRS and such financial statements as prepared on the basis of US GAAP. Potential investors should consult their own professional advisors for an understanding of the differences between US GAAP and IFRS, and how those differences might affect the available financial information. Business Combinations Excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired over cost Under US GAAP, any excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired over cost has to be allocated on a pro-rata basis to all acquired assets other than all current assets, all financial assets (other than equity investments), assets to be disposed of by sale, prepaid assets relating to pensions, and deferred taxes. Any remaining excess of the interest in the net fair of identifiable assets, liabilities and contingent liabilities acquired over cost is recognized as an extraordinary gain in the income statement. Under IFRS, when the purchase price allocation results in excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired over cost, the acquirer must reassess the identification and measurement of the acquired assets, liabilities and contingent liabilities. Any excess that remains is recognized immediately in the income statement. Contingent Liabilities Both under US GAAP and IFRS contingent liabilities are included in the allocation of the purchase price, however in US GAAP they should be probable and measurable, while IFRS only has the measurable criteria. 65

Minority Interest Under US GAAP, minority interest is generally measured as the minority’s proportion of the preacquisition historical book value of the identifiable net assets acquired. Under IFRS, minority interest is measured as the minority’s proportion of the net fair value of the identifiable net assets acquired. Under US GAAP, minority interest is presented separately in the financial statements. Under IFRS, minority interest is presented as a component of equity. Step Acquisitions Under US GAAP, revaluation of previous interests in the acquirer’s net assets in step acquisitions is not allowed. Under IFRS, the revaluation of previous interests at fair value at each acquisition date is required. Impairment Test Both under US GAAP and IFRS, goodwill is reviewed for impairment, at least annually or whenever events or changes in circumstances indicate that the recoverability of the carrying amount must be assessed. Under US GAAP, an impairment test is two-tier. And an impairment test using discounted cash flows is performed, only if the asset fails a recoverability test performed on the basis of undiscounted cash flows. An impairment loss is calculated by comparing the asset’s carrying amount to its fair value. Under IFRS, if an indicator for impairment is identified, an impairment test is performed using discounted cash flows. Therefore, an impairment loss could be recognized earlier under IFRS. Under US GAAP, reversal of impairment is not allowed. Under IFRS, impairment losses may reverse, due to changed circumstances, except for an impairment loss for goodwill. Consolidation Subsidiaries Under US GAAP, the usual condition for consolidating a financial interest is ownership of a majority voting interest and as a general rule, ownership, either directly or indirectly, of over 50% of the outstanding voting shares constitutes control. Under IFRS, consolidation of subsidiaries is required over which a parent company exercises control. Control is considered as being exercised in cases where a parent is in a position to manage the subsidiary’s financial and operating policies with a view to benefiting from its business. Special Purpose Entities Under US GAAP, certain variable interest entities are to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. Under IFRS, consolidation of special purpose entities (SPEs) is required where the substance of the relationship indicates that an entity controls the SPE. Income Taxes Although the general approach under US GAAP and IFRS is similar, there are a number of differences. Differences amongst others relate to deferred tax on goodwill, deferred tax on investments in subsidiaries, post acquisition recognition of acquiree’s tax losses and recognition of previously unrecognized tax losses. Under US GAAP, the use of substantively enacted tax rates is prohibited. Under IFRS, deferred tax is calculated using the tax rates and tax laws that have been enacted or substantively enacted. 66

Inventories Under US GAAP, when the cost of inventories is no longer recoverable, inventories are to be written down to their current replacement cost, which should not exceed their net realizable value. Under IFRS, inventories should be written down to their net realizable value, which is the estimated selling price in the ordinary course of business less the costs of completion and sales costs. Under US GAAP, an impairment loss may not be reversed once it has been recognized. Under IFRS, the reversal of a previous impairment of inventory if it is no longer appropriate is required. Under US GAAP, the LIFO (last in-first out) method is permitted, whereas under IFRS it is prohibited. Financial Instruments Classification and Measurement Under US GAAP and IFRS, provisions on classification and measurement of financial instruments are similar, except that under US GAAP there is no option to designate any financial asset on initial recognition as at fair value through the income statement: only items that qualify as trading would be classified as at fair value through the income statement. Under US GAAP, debt securities must be classified according to management’s intent to hold the security in one of the following categories: trading, held-to-maturity, or available-for-sale. Equity securities are classified as either trading or available for sale. Under IFRS, measurement of financial assets depends on their classification in one of the following categories: held-to-maturity investments; loans and receivables; financial assets at fair value through the income statement and available-for-sale financial assets. Hybrid Financing Under US GAAP, an issuer is required to classify a financial instrument that is within its scope as a liability (or asset in some circumstances) when the financial instrument embodies an obligation of the issuer. Under IFRS, an instrument is classified as equity when it does not contain an obligation to transfer economic resources. An entity recognizes separately the components of a financial instrument that (a) creates a financial liability of the entity and (b) grants an option to the holder of the instrument to convert it into an equity instrument of the entity. Derivatives and Hedging US GAAP and IFRS guidelines for hedging activities are generally similar. Both require that derivatives be initially recorded at fair value on the balance sheet as either financial assets or liabilities. Both also require that derivatives be subsequently measured at fair value regardless of any hedging relationship that might exist. US GAAP and IFRS permit special accounting treatment for financial and derivative instruments that are designated as hedged items or as hedging instruments if certain criteria are met (hedge accounting). However, there are differences between the standards as to which transactions will qualify for hedge accounting and as to how some of the hedge accounting provisions are applied. US GAAP allows, assuming stringent conditions are met, a short-cut method that assumes perfect effectiveness for certain hedging relationships involving interest rate swaps. This exemption from performing quantitative retrospective effectiveness tests is not allowed under IFRS. Intangible Assets Under US GAAP, general research and development costs that are not covered by separate standards are expensed as they are incurred. Under IFRS, the costs of research must be expensed as they are incurred. When the technical and economic feasibility of a project can be demonstrated, and further prescribed conditions are satisfied, the costs of the development of the project must be capitalized. Provisions Asset Retirement Obligations Under US GAAP, the provision is built up in cash flow layers with each layer discounted using the discount rate at the date that the layer was created. Re-measurement of the entire obligation using current discount rates is not permitted. Under IFRS, if there is a change in the discount rate the entire provision must be recalculated using the current discount rate. 67

INDUSTRY OVERVIEW The following information includes extracts from publicly available information, data and statistics and has been extracted from official sources and other sources the Company and the Guarantors believe to be reliable. Each of the Issuer and the Guarantors accepts responsibility for accurately reproducing such information, data and statistics and as far as each of the Issuer and the Guarantor is aware no facts have been omitted which would render such information misleading, but each of the Issuer and the Guarantors accepts no further responsibility in respect of such information, data and statistics. Such information, data and statistics may be approximations or use rounded numbers. Steel Industry Global Overview Steel is one of the most important, multi-functional and adaptable materials in use today, and is generally considered to be a backbone of industrial development. Steel is highly versatile, as it is hot and cold formable, weldable, hard and recyclable. The industries in which steel is used include construction, transportation (including railways) and engineering. Steel is also used in the production of power lines, pipelines, white goods and containers. The steel industry is affected by a combination of factors, including periods of economic growth or recession, worldwide production capacity and the existence of, and fluctuations in, steel imports and protective trade measures. Steel prices respond to supply and demand and fluctuate in response to general and industryspecific economic conditions. Globally, steel prices have increased significantly since the end of 2003 despite short-term fluctuations in Europe, including Poland, reflecting strong demand, particularly in China. The steel industry operates predominantly on a regional basis as a result of the high cost of transporting steel. For example, the top five producers in each of the EU and Asia control more than 65% of their respective regional markets. However, despite the limitations associated with transportation costs, as well as the restrictive effects of protective tariffs, duties and quotas, global imports and exports have generally increased in the last decade as production has shifted towards low-cost production regions such as China, Brazil and Southeast Asia. For the first six months of 2006, China was the largest single producer of steel in the world, producing approximately 198.8 million tonnes of crude steel, or 33.5% of world steel production, as well as the largest consumer of steel, consuming 176.5 million tonnes of finished steel. World steel production in 2005 increased by 6.6% from 2004, to 1,139 million tonnes and reached 593.8 million tonnes in the first half of 2006, an 8.2% increase compared to the same period in 2005, according to the International Iron and Steel Institute (the “IISI”). The following graph sets forth crude steel production data for 1999 through 2005: World crude steel production 1999

2000 2001 2002 2003 2004 (million metric tonnes of crude steel)

Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . North America (excluding US) . . . . . . . . . . . . . . . . . . . . Central and South America . . . . . . . . . . . . . . . . . . . . . . . Middle East and Africa . . . . . . . . . . . . . . . . . . . . . . . . . . China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Asia and Oceania (excluding China and Japan) . . . . . . . . World total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

198 87 97 33 35 23 124 94 100 789

210 98 102 34 39 25 127 106 106 848

205 100 90 30 37 27 151 103 108 850

208 101 92 31 41 28 182 108 113 904

214 106 94 32 43 30 222 111 118 970

226 113 100 34 46 31 280 113 125 1,069

Annual change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.5%

7.4%

0.3%

6.3%

7.3% 10.2%

2005

220 113 95 33 45 33 356 112 131 1,139 6.6%

Source: IISI While production in Europe, Japan and the United States remains significant, steel producers in those regions have increasingly focused on rolling of semi-finished products as developed markets are currently seeing a shift in demand from “commodity steel” to “high value added steel”. The term “commodity steel” refers to low grade steel used primarily for construction. The largest commodity steel producers have emerged in Asia as the majority of the consumption of commodity steel is in this region as well as in other emerging markets. The term “high value-added steel” refers to high-grade steel with improved strength and durability and used primarily by the automotive, aerospace and railway industries. Prices and margins tend to be higher for high value-added steel than for commodity steel. 68

Steel consumption has historically been focused in the EU, Japan and the United States. However, in recent years, steel consumption in emerging markets, and in particular China, has increased significantly due to the economic modernization processes which are taking place in these regions. Major drivers are large infrastructure projects, the auto industry, investments and shipbuilding. The following table sets forth estimated crude steel consumption data for 1999 through 2005. World crude steel consumption 1999

2000 2001 2002 2003 2004 (million metric tonnes of crude steel)

Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . North America (excluding US) . . . . . . . . . . . . . . . . . . . . Central and South America . . . . . . . . . . . . . . . . . . . . . . . Middle East and Africa . . . . . . . . . . . . . . . . . . . . . . . . . . China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Asia and Oceania (excluding China and Japan) . . . . . . . . World total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

189 29 128 39 26 34 136 71 131 785

203 39 133 43 30 38 138 80 140 845

199 42 114 39 31 44 171 75 140 855

196 39 118 40 29 49 206 74 154 905

203 47 106 40 29 54 259 76 158 972

216 50 124 44 34 57 297 81 171 1,073

Annual change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.3%

7.6%

1.2%

5.8%

7.4% 10.4%

2005

210 51 113 43 34 63 350 83 177 1,126 4.9%

Source: IISI Despite producing significant quantities of steel, the United States is a net importer of steel, while Japan, Russia and currently China are net exporters of steel. The major traded steel products worldwide include semifinished products, hot and cold-rolled sheets and coils, steel tubes and fittings, galvanized sheet, wire rod and angles and sections. The strategy and product mix of steel producers generally varies between producers in industrial countries and producers in emerging markets. Historically, commodity steel producers in industrialized countries had limited export markets due to the high cost of transporting steel relative to the low value of commodity steel grades. In the second half of the twentieth century, producers in emerging markets began to compete with steel producers in industrialized countries as they took advantage of the lower manufacturing costs in their countries to offset high transportation costs. In response, producers in Western Europe and Japan invested heavily in new technology and capacity to produce high value-added steel grades in order to differentiate their product portfolio and protect their margins by reducing their exposure to commodity steel prices. However, these similar and simultaneous investments resulted in production overcapacity and put pricing pressures on value-added segments. At the same time, the growth and consolidation of both steel consumers and raw material suppliers has weakened the bargaining power of steel producers and put further pressure on margins. Steel producers have responded with a phase of industry consolidation. In 2002, Usinor, Arbed and Aceralia in Europe merged to form Arcelor, and Kawasaki Steel and NKK in Japan merged to form JFE. In 2002, Nucor acquired the assets of Birmingham Steel. International Steel Group (“ISG”) also acquired the assets of Acme, LTV and Bethlehem Steel in the United States. In late 2004, Ispat International N.V. and LNM Holdings N.V., which comprised the LNM Group, merged to form Mittal Steel and in early 2005 Mittal Steel merged with ISG, forming the world’s largest steel company. In November 2005 Arcelor made a bid for Dofasco, which was challenged by ThyssenKrupp. Arcelor emerged as the winner of the auction and acquired Dofasco in early 2006. During the same period, Mittal Steel extended an offer for Arcelor, which was rejected by the Board of Arcelor several times before both companies agreed on the terms of a merger that took place in mid-2006. This move created Arcelor Mittal, the world’s largest steel player and the first steel producer with production capacity exceeding 100 million tonnes per year (approximately 10% of current global steel production). In a continuing wave of consolidation in October 2006, Tata Steel and Corus announced a recommended acquisition of Corus. Tata Steel increased its offer by approximately 10% in early December facing a potential competing bid from the Brazilian CSN. Its offer was challenged shortly thereafter by a higher bid from CSN. The takeover battle is expected to be resolved in the first quarter of 2007. Consolidation has enabled steel companies to lower their production costs and allowed for more stringent supply-side discipline, including through selective capacity closures. In 1999, the top five steel producers accounted for 14.9% of world steel production. Their share has increased to 19.9% in 2005. However, despite the 69

recent consolidation, the global steel market remains highly fragmented. In 2005, the 20 largest steel producers accounted for approximately 39.4% of total global steel production, which is a relatively low percentage as compared to other industries such as iron ore and automobile manufacturing where the top five producers hold 88.3% and 63.4%, respectively. Overview of the Production Process There are two primary production methods used in the steel industry: Mini mills (electric arc furnace) and integrated (oxygen blast furnace). The following is a brief summary of these processes. Oxygen & Electric Arc Furnace Steel-Making

Source: UK Steel Association At an integrated facility, crude steel produced is roughly 20% scrap and 80% pig iron. A tonne of pig iron is manufactured from approximately 1.5 tonnes of iron ore, which is a mix of fine, lump and pellets and 0.8 tonnes of metallurgical or coking coal. These are processed through stages that may include a coke battery, a blast furnace (output is pig iron) and an oxygen blast furnace (output is liquid steel) – making for a capitalintensive operation. These materials represent the largest percentage of total costs at 45%, followed by labor at nearly 30%. An integrated facility can self-generate a meaningful amount of its energy requirement, therefore reducing some of its exposure to higher energy costs. The alternative model is mini-mills, which use an electric arc furnace and instead use scrap as their primary raw material. Electric arc furnaces produce steel by applying heat generated by electricity arcing between graphite electrodes and a metal bath to melt primarily scrap steel. The technology has also been around for decades, but its percentage of overall steel production has increased during recent decades. Its growth has been fueled by lower upfront capital/fixed costs and lower raw material costs. These operations tend to be much smaller with production of a few hundred thousand tonnes per year, and are heavy users of externally supplied energy. Historically, these producers have mainly competed within the long products market.

70

Finished products generally fit in one of two categories, flat or long products, with flats accounting for slightly more than 50% of the global industry. Š Flat products include: (1) plates which can range in thickness from 0.5-8 inches and are used in

various applications such as construction and shipbuilding; and (2) flat rolled products which are thinner than 0.5 inches are used in consumer goods such as appliances, external automotive panels and food containers/cans. Intermediate Product Casting

Flat products from Slab

Source: American Iron and Steel Institute

Source: American Iron and Steel Institute

Š Long products include wire rod, reinforced bar (rebar), merchant bar and structural/beam products

with end-markets including transportation (rails) and construction (framing support and roadways). Long products from Billets

Long products from Blooms

Source: American Iron and Steel Institute

Source: American Iron and Steel Institute

The Polish Steel Industry Poland is the largest steel producer among the EU 2004 accession countries with crude steel production of 8.4 million tonnes in 2005. Following the strong production cycle in 2004 in which crude steel production increased by 16.5% over 2003, the Polish steel industry experienced a substantial decline in production of crude steel in 2005 driven by an overall economic downturn and high imports, largely as a result of a strong zloty and major maintenance work in Mittal Steel Poland (now Arcelor Mittal). Poland produced 6.2 million tonnes of rolled products in 2005, operating at approximately 85% of installed capacity. In 2005, 37% of all rolled products were flat products and 63% were long products. The business and financial performance of the steel sector in 2005 was good, yet after a record-breaking 2004, the returns reported in 2005 were low in comparison. After-tax profits were more than 5 times lower than those reported in 2004. This was to some extent mitigated by lower operating costs and margins remained positive. Overall, Poland is a net importer of steel products, mainly exporting low grade semi-finished products and importing high grade finished products such as coils, sheets and tubes. In 2005, steel exports from Poland were 3.9 million tonnes and steel imports were 4.8 million tonnes. Poland is generally considered to be among the lowest-cost steel-producing regions, largely due to relatively low labor and energy costs. Polish steel producers tend to focus on vertical integration, which ensures that they have access to a stable supply of certain raw materials, particularly coking coal, iron ore and scrap. The share of open-hearth furnaces in total steel production in Poland decreased from 2.0% in 2001 to 0% in 2005, and the share of electric arc furnaces increased from 31.9% to 40.9% during the same period. 71

Steel Producers In Poland, there is a high concentration of the steel industry with the top four companies accounting for almost 90% of total steel production of which less than 5% is sold as semi-finished products. The following table provides information on the domestic sales of semi-finished products to third parties in Poland by producer in 2005 and each producer’s main product type:

Mittal Steel Poland (now Arcelor Mittal) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Złomrex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Celsa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SemiFinished Products sold to third Parties (thousand tonnes)

Market share

310 138 25 25 498

62 28 5 5 100

Main product type

(%)

semi-finished semi-finished semi-finished semi-finished

Source: Company estimates

The following is an overview of our principal Polish competitors. Mittal Steel Poland (now Arcelor Mittal). Mittal Steel Poland (now Arcelor Mittal) is the largest integrated steelmaker in Poland with an annual crude steel production capacity of 6.5 million tonnes and an approximately 65% market share in the Polish steel market. Headquartered in Katowice, Mittal Steel Poland (now Arcelor Mittal) consists of four plants located in Da¸browa, Kraków, Sosnowiec and Swie¸tochłowice. The company manufactures both flat and long products for industries such as construction, automotive, household appliances, transportation, mining and steel constructions. There is a wide range of products, including railway and tram rails, sections, rolled products, construction mats, various types of wire, strip, hot rolled and cold rolled sheets, mining sections and sheet piles. In 2005, Mittal Steel Poland (now Arcelor Mittal) was a primary exporter of steel to markets in Europe, Latin America, and the Middle East and the Americas. Celsa. Celsa produces primarily rebars, plain bars, flat bars, hexagonals, angles and forged products for ship building and machine industries. They use electronic arc furnace technology, producing about one million tonnes of steel per year. Celsa’s primary steel production plant is located in Ostrowiec Swie¸tokrzyski. Celsa obtains significant quantities of its raw materials from affiliated entities. The majority of Celsa’s products are sold in Poland. CMC. CMC produces primarily billets wire rods and different types of bars, including rebars. CMC’s production facilities are located in Zawiercie. They use electronic arc furnace technology, producing about one million tonnes of steel per year. In 2005, CMC exported primarily to Germany and the United States. Huta Cze¸stochowa. Huta Cze¸stochowa produces flat products only. It has a production capacity of approximately 700,000 tonnes of steel per year. Huta Warszawa. Huta Warszawa produces primary quality long products. It has a production capacity of approximately 500,000 tonnes of steel per year, primarily for the forging, automotive and machine industries. Polish market Import market Polish steel production decreased from 2004 to 2005 as a result a major renovation of one of Mittal Steel’s Polish production facilities of the general economic decline during this period and the consequent reduced demand from the primary steel product consumers, the construction, machine and tube rolling industries as well as the appreciation of the zloty. Consumption of rolled steel products in Poland has increased since 2001 to 8.1 million tonnes in 2005. The key reasons behind the growth in consumption are the general economic growth, EU accession and the increased demand from the construction and machine building industries. Imported steel comprised only 52.2% of total steel consumed in 2005, the highest figure ever registered according to the Polish Steel Association. Poland is a net importer of steel products, with imports consisting primarily of high value-added steel products such as coils, sheets and tubes. Export market Europe, Latin America and the Middle East are the primary export destinations for Poland steel producers. Germany is the largest steel importer of Polish steel products. In 2005, Polish producers exported 3.9 million tonnes of rolled products, of which semi-finished products accounted for 32.4%, long products for 49.4% and flat products for 13.4%. Accession of Poland in 2004 to the EU has also improved export market opportunities. 72

BUSINESS Overview We are the largest supplier of scrap metal, the second largest seller of semi-finished steel products, and the fifth largest seller of finished steel products in Poland based on volume. Our operations are fully integrated and span the entire steel production process, including one of the largest retail distribution networks in Poland and, upon the closing of our anticipated acquisition of voestalpine Stahlhandel GmbH, the leading warehousing and steel distribution company in Austria with significant operations in Central and Eastern Europe. Our business is divided into four segments, which include: Š Scrap metal segment.

We purchased approximately 692,000 tonnes of scrap metal in 2005, of which approximately 57% was used by our semi-finished products segment and approximately 43% was sold to external customers in Poland, and we had a market share of approximately 12.5% of the scrap metal purchased in Poland in 2005;

Š Semi-finished products segment.

We sold approximately 172,000 tonnes of semi-finished steel products to external customers in 2005, of which 138,000 tonnes were sold in the Polish market, and we had a market share of approximately 28% of semi-finished steel products sold to external customers in Poland in 2005;

Š Finished products segment.

We sold approximately 220,000 tonnes of finished steel products to external customers in 2005, substantially all of which were sold in the Polish market, and we had a market share of approximately 3% of finished steel products sold to external customers in Poland in 2005, and approximately 5% in 2006 as a result of recent acquisitions; and

Š Other segment.

We sold approximately 26,000 tonnes of non-ferrous scrap and non-ferrous scrap products to external customers in 2005.

Our strong position in the scrap metal and semi-finished products segments enables us to reduce margin volatility and to secure feedstock scrap requirements for our own production facilities. This enables us to use our own sources of scrap metal supply to produce semi-finished and finished products in times of major shortages of scrap metal in the scrap metal market. Founded in 1990, we have rapidly transformed ourselves from a scrap metal trading company into a fully integrated steel producer through internal growth and acquisitions. Through a number of acquisitions over the past few years, we have increased our production capacity and increased the range of production of our semifinished and finished products. We believe that our increased production of high grade semi-finished and finished steel products, coupled with our ability to produce small batches of both of these products tailor made to our customers’ needs, have given us a competitive advantage over larger steel producers in Poland such as Mittal Steel Poland (now Arcelor Mittal) whose production facilities produce large quantities of lower grade steel. We have complemented our production capabilities with a retail distribution network in Poland for our finished products through separate acquisitions of Centrostal Górnos´la˛ski, Centrostal and Centrostal Opole in 2006, becoming one of the largest retail distribution networks in Poland. On December 20, 2006, we entered into a share purchase agreement to acquire a 74.9% interest voestalpine Stahlhandel GmbH, the leading warehousing and steel distribution company in Austria in terms of revenue and volume with significant operations in Central and Eastern Europe with an option to acquire a further 25.1% interest (the “Share Purchase Agreement”) (the “Austrian Acquisition”). We believe that the Austrian Acquisition will enable us to secure demand from end customers for our finished products, achieve economies of scale in our finished products’ segment by enabling us to reach our end customers and build an international retail distribution network to expand our geographic reach. We also believe that through the Austrian Acquisition our retail distribution network business will become one of the most important factors driving growth in our overall business in the future. Despite an unexpected sharp decrease in steel prices and a general market downturn in the Polish steel industry in 2005 which caused our revenues to decline, we have generally increased our revenues over the last three years. Our total consolidated revenues for the year ended December 31, 2005 amounted to approximately PLN 976.2 million (€245.3 million), compared to approximately PLN 1,194.9 million (€300.2 million) for the year ended December 31, 2004. Our total consolidated revenues for the nine months ended September 30, 2006 amounted to PLN 1,417.0 million (€356.0 million), compared to PLN 737.7 million (€185.4 million) for the nine months ended September 30, 2005. On a pro forma basis giving effect to the Transactions, we had total consolidated revenues of PLN 2,404.2 million (€604.1 million) for the nine months ended September 30, 2006. and PLN 2,599.8 million (€653.2 million) for the year ended December 31, 2005. History We were formed as a sole proprietorship under the corporate name Przedsie¸biorstwo Obrotu Surowcami Wtornymi “Złomrex” by Przemysław Sztuczkowski in 1990, primarily as a company trading in non-ferrous scrap 73

metal. We began to trade steel scrap in 1994, steel products in 1996, and we began to process our own materials in 1997. In 2001 we began producing steel products after purchasing the assets of ZW-WB’s rolling mill operations in Zawiercie. ZW-WB continued to operate the rolling mill based on a cooperation agreement with us. In 1998, Mr. Przemyslaw Sztuczkowski purchased all of the shares in Korba Sp. z o.o (“Korba”). In 2002, Korba changed its corporate name to Złomrex Sp. z o.o. In 2003, Mr. Sztuczkowski made an in-kind contribution of his sole proprietorship to Złomrex Sp. z o.o. In 2004, we purchased Ferrostal Łabe¸dy, which specializes in producing semi-finished products in the form of steel billets and finished steel products and changed our corporate form from a limited liability company to a joint stock company. In 2004, we acquired Szopienice to launch the production of semi-finished products made from non-ferrous metals. In addition, the Company established Nowa Jakos´c´, which recycles waste materials. In 2006, we purchased HSW-HSJ, a leading Polish producer of quality (high alloy) steel and long hot-rolled products (bars) made from carbon steel and high alloy steel, together with HSW-WB, which specializes in producing hot-rolled sheets from carbon steel, high alloy steel and special purpose steel. On November 2, 2006, HSW-WB and HSW-HSJ merged into one company, HSW-HSJ. We recently purchased a steel product distribution network consisting of Centrostal Górnos´las¸ki, Centrostal and Centrostal Opole to expand the distribution of our finished products throughout Poland and intend to acquire a 74.9% interest in voestalpine Stahlhandel GmbH, with a further option to acquire a 25.1% interest, to have access to its retail distribution network in Austria and Central and Eastern Europe. See “The Transactions — The Austrian Acquisition” and “Business — Finished Products — Distribution — voestalpine Stahlhandel GmbH” in this Offering Memorandum. Our Segments and Products We organize our business into four business segments: scrap metal, semi-finished products, finished products, and other. Scrap Metal We are the largest supplier of scrap metal in Poland with a market share of approximately 12.5% of the scrap metal purchased in Poland in 2005. Our scrap metal segment consists of buying, processing, and selling scrap metal to our customers and for our own internal use. Our scrap metal collection network consists of 14 scrap metal yards situated close to our customers primarily in regions in southern Poland which have the best sources of scrap metal due to the concentration of heavy industry. We are currently building another scrap metal yard in northeastern Poland. We also purchase scrap metal from a large number of scrap metal traders (including collection branches and industrial producers) which are serviced by our container fleet. In 2005, we obtained approximately 42% of our entire scrap metal supply from our own scrap metal collection network, with the remaining approximately 58% being purchased from scrap metal traders. This enables us to use our own sources of scrap metal supply to produce semi-finished and finished steel products in times of major shortages of scrap metal in the scrap metal market. We have a broad and stable customer base for scrap metal, including CMC Zawiercie, Celsa Huta Ostrowiec, Moravia Steel and Mittal Steel Poland (now Arcelor Mittal) and also leverage our extensive scrap metal collection network to provide competitive pricing to our customers. We intend to establish each year two additional scrap metal yards in our scrap metal collection network, at a cost of approximately PLN 4.0 million (€1.0 million) per yard, to gain more access to sources of scrap metal supplies until we have the geographic reach to cover all potential primary scrap suppliers in Poland. Our scrap metal segment is our third largest segment in terms of revenues, accounting for approximately 19.3% and 10.9%, respectively, of our consolidated revenues and gross profit for the year ended December 31, 2005 and 11.9% and 6.6%, respectively, of our consolidated revenues and gross profit for the nine months ended September 30, 2006. Semi-Finished Products We are the second largest seller of semi-finished steel products in Poland based on volume with a market share of approximately 28% of sales to external customers in 2005 and the fifth largest producer of semi-finished steel products based on volume with a market share of approximately 4% in 2005. Our semi-finished products segment consists of buying and processing scrap metal into steel billets and selling some of those steel billets to our customers with the remainder for our own internal use. Approximately 54% of the semi-finished products produced at our steel mills and purchased by us on the market from third parties were used by our finished products business in 2005, with the remaining approximately 46% sold to customers such as Huta Łabe˛dy, Man Ferrostal, Huta Pokój S.A. and Stalexport. We offer a broad range of semi-finished products, concentrating primarily on steel square and round billets and to a much lesser extent on blooms and sheet slabs. Unlike many of our competitors, we can produce small batches of high grade, higher margin steel billets for special applications, and we have access to scrap metal, our primary raw material in the production of semi-finished products, through our scrap metal collection network. Our semi-finished products segment is our second largest segment in terms of revenues, accounting for 24.3% and 52.8%, respectively, of our consolidated revenues and gross profit for the year ended December 31, 2005 74

and 15.6% and 21.0%, respectively, of our consolidated revenues and gross profit for the nine months ended September 30, 2006. We expect growth in this segment as growth in the automotive and tube rolling industries in Poland and Europe continues. Finished Products We are also the fifth largest producer of finished steel products in Poland with a market share of approximately 5% in 2005. In addition to selling products that we produce, we also buy finished products on the market and resell them to our customers. We are the fifth largest seller of finished steel products in Poland based on volume with a market share of approximately 3% of sales to external customers in 2005 and approximately 5% in 2006 as a result of recent acquisitions. We buy steel billets from our semi-finished products segment and other companies, process them into finished products and sell them to our customers. We have an extensive range of customers inside Poland, principally in the construction, machine, forging, shipbuilding, defense and mining industries, including ThyssenKrupp, Baustal, Bodeko and Stalexport. We have a highly diversified product offering which includes long products such as flat, plain and reinforced steel bars and flat products (also known as steel sheets and strips). We have recently started offering higher margin products such as special application products for the mining industry and steel sheet products with military applications (armor jackets and steel plating for tanks). We benefit from our ability to produce a full range of products in small batches unlike our major competitors, our access to our extensive scrap metal collection network, our concentration on high grade finished steel products with high margins and our stable customer base. Our recent acquisitions of Centrostal Górnos´la˛ski, Centrostal and Centrostal Opole have provided us with a retail distribution network through which to sell our finished products directly to end customers throughout Poland. Our finished products segment is our largest segment in terms of revenues, accounting for 37.8% and 9.8%, respectively, of our consolidated revenues and gross profit for the year ended December 31, 2005 and 54.0% and 57.2%, respectively, of our consolidated revenues and gross profit for the nine months ended September 30, 2006. We expect substantial growth in this segment as growth in the construction and machine industries in Poland and Europe continues. In addition, the Austrian Acquisition will also provide us with a retail distribution network in Austria and Central and Eastern Europe through which to sell our finished products to voestalpine Stahlhandel GmbH’s customers. We believe that through the Austrian Acquisition our retail distribution networks will become one of the most important factors driving growth in our overall business in the future as well as helping to reduce volatility in end product sales by selling directly to end customers. voestalpine Stahlhandel GmbH’s revenues for the fiscal year ended March 31, 2006 were €303.8 million and for the six months ended September 30, 2006 were €172.0 million. Other We buy, sell and process non-ferrous scrap into finished products, buy and sell non-ferrous products and recycle materials such as plastic foil, aluminum, paper and other products. Our products in our other business include non-ferrous rods, strips, and ingots. Our other segment further diversifies our exposure to certain commodities. Since this segment is exposed to the commodity prices of non-ferrous products, it is not exposed to steel price volatility. In 2005, the other segment was the most profitable one, as non-ferrous metals did not decline in price as steel did. We rely on a stable customer base which primarily includes KGHM Metraco, the Hutmen group and Alumetal Kety. Our other segment is our fourth largest segment both in terms of revenues and gross profit, accounting for 18.7% and 26.5% of consolidated revenues and gross profit for the year ended December 31, 2005 and 18.5% and 15.1% of our consolidated revenues and gross profit for the nine months ended September 30, 2006. Competitive Strengths Strong retail distribution network. Our strong retail distribution network enables us to reach and respond to a growing number of customers. With the recent acquisitions of Centrostal Górnos´la˛ski, Centrostal and Centrostal Opole and the anticipated acquisition of voestalpine Stahlhandel GmbH headquartered in Austria, we will have created a retail distribution network for our finished products which is the largest in Austria one of the largest in Poland and in Central and Eastern Europe. See “Business — Finished Products — Distribution — Centrostal Companies — and — voestalpine Stahlhandel GmbH” in this Offering Memorandum. Our acquisition of voestalpine Stahlhandel GmbH, the leading warehousing and steel distribution company in Austria in terms of revenue and volume with significant operations in Central and Eastern Europe will not only will increase distribution capabilities for our finished products in Austria and Central and Eastern Europe and enable us to market additional products to our growing end customer base, but we believe it will trigger growth by 75

allowing us to interact with end customers directly and thus enabling us to more quickly adjust to changes in demand and to ultimately procure more business from our customers. We believe that through the Austrian Acquisition our retail distribution business will become one of the most important factors driving growth in our overall business in the future. Vertically-integrated business. As a vertically-integrated steel producer, our exposure to external margin volatility is limited because our overall margin is comprised of three independent components (steel scrap, retail distribution and production), two of which (steel scrap and retail distribution) are relatively stable throughout the steel cycle. Unlike our competitors, we can also increase the supply of scrap metal on short notice to meet increasing demand from our semi-finished and finished products’ segments because we have access through our own scrap metal collection network and purchases from scrap metal traders to almost twice the amount of scrap metal necessary for our steel mills to produce our semi-finished and finished products. Largest scrap metal supplier in Poland. We are the largest scrap metal supplier in Poland based on volume, having purchased approximately 692,000 tonnes of scrap metal in 2005, of which approximately 57% was used by our semi-finished and finished products segment and approximately 43% was sold to external customers in Poland. We currently have the largest scrap metal collection network in Poland with 14 existing scrap metal yards and an additional scrap metal yard in northeastern Poland is under construction. We had a market share of 12.5% of the scrap metal purchased in Poland in 2005. Our scrap metal yards are strategically located in key regions primarily in southern Poland which are in close proximity to scrap sources due to the concentration of heavy industry in that region. Our scrap metal yards are also specially equipped with modern equipment to handle large volumes of scrap metal and are close to major transportation centers to facilitate the distribution and trade of scrap metal. Due to scrap metal being a primary material for the production of our semifinished and finished steel products, our position as the largest scrap metal supplier in Poland also enables us to ensure that we can meet our own production requirements for these products, even in times of major shortages of scrap metal in the market. In addition, we believe that being the largest scrap metal supplier in Poland we have an advantage over our competitors because we have the most modern facilities to process scrap metal, as well as fleets of specialized vehicles and containers to facilitate collecting scrap and modern machinery such as shear machines to press and cut scrap, and we have a long established brand name and long-term relationship with our customers. Flexible cost structure. Our cost structure is more flexible than that of most of our competitors because we use electric arc furnace technology where scrap metal is the primary raw material accounting for approximately 90% of raw materials used as compared to blast furnaces which rely predominantly on iron ore as a raw material. Historically, scrap prices have had a close correlation to steel prices which has the effect of allowing us to pass on feedstock price increases to our customers and of reducing margin volatility. In addition, we have the ability to source scrap metal from our scrap metal segment, and in times of changing market conditions, we can adjust quickly to changes in the market since scrap purchase prices and our steel product sales are typically set monthly. By comparison, companies using blast furnaces cannot easily negotiate lower prices of iron ore because of the concentration of iron ore producers and because contracts with iron ore producers are usually set on a yearly basis with fixed prices. In addition, electric arc furnaces require less machinery, fixed assets and employees to operate relative to blast furnaces and can be switched off immediately, without paying any additional costs. We also do not lose expensive refractory materials which are crucial to steel production in blast furnaces and are lost when blast furnaces are shut down. Variable costs accounted for 86.5% of our total costs in 2005. We believe our cost structure will become even more flexible after the Austrian Acquisition because voestalpine Stahlhandel GmbH’s retail distribution business is characterized by an even higher level of variable costs. Our modern production facilities produce higher quality niche products. We have the most modern production facilities in Poland which enable us to produce high grade semi-finished and finished products tailor made in small batches for our customers. Our modern steelworks at Ferrostal Łabe˛dy and HSW-HSJ, for example, can produce a full range of steel billets (classes I through VI at Ferrostal Łabe¸dy and classes I through VIII at HSW-HSJ). We are shifting our focus to concentrate even more on high grade steel (classes IV to VIII). Our rolling mills also specialize in the production of high quality niche products such as a full range of flat bars, including special application bars at ZW-WB, small diameter reinforcement bars at Ferrostal Łabe˛dy and high grade thick steel sheets at HSW-HSJ. In addition, there are a limited number of competitors in the Polish market concentrating on the production of these tailor-made products. As a result, we can earn higher margins because we can offer small batches of tailor-made products to the forging, automotive and machine industries and because we have a growing number of specialty customers as a result of our expansion in the retail distribution business. Strong demand for steel. Growth in steel production is driven by increased demand for steel products by domestic and international customers. In Poland, demand for steel production has increased because of increased investments in infrastructure projects related to Poland’s accession to the European Union, general economic growth and increased demand from construction and machine building industries. The favorable 76

outlook for our products in the region is also supported by an improvement in the manufacturing industry in Germany and Eastern Europe. Additionally, based on strong economic growth and accelerating industry consolidation, the global steel market has generally performed strongly over the past three years as has the Polish market. Global and Polish demand has also been increasing despite swings in prices. Global crude steel production increased by 6.6% in 2005 to approximately 1,139 million tonnes and is expected to reach approximately 1,200 million tonnes in 2006. Dynamic and experienced management team. Our management team has a proven track record in managing operations under its control and turning around newly acquired underperforming assets. For example, we acquired Ferrostal Łabe˛dy in 2004 and improved efficiencies in that business to such an extent that production increased from 280,000 tonnes in 2003 to 336,000 tonnes in 2005, the utilization rate increased from 83% to 96% over that same period and sufficient cash flows were generated to repay the purchase price and outstanding debt of that business within 18 months from the date of purchase. In addition, our president and vice president have been with the Company since 1990 and amassed significant experience in the changing dynamics of the Polish steel market during that time. Our senior management team combines extensive industry and marketing expertise with financial and management expertise. Strategy Further Develop Retail Distribution Network. We intend to develop our retail distribution network further to grow our business. Our recent acquisitions of Centrostal Górnos´la˛ski, Centrostal and Centrostal Opole form the basis of our retail distribution network in Poland. See “Business — Finished Products — Distribution — Centrostal Companies” in this Offering Memorandum. On December 20, 2006, we entered into a share purchase agreement to acquire a 74.9% interest in voestalpine Stahlhandel GmbH, the leading warehousing and steel distribution company in Austria with significant operations in Central and Eastern Europe, with an option to acquire a further 25.1% interest, in part benefit from and grow its retail distribution network. See “Summary — Recent Developments — voestalpine Stahlhandel GmbH” and “The Transactions — The Austrian Acquisition” and “Business — Finished Products — Distribution — voestalpine Stahlhandel GmbH” in this Offering Memorandum. We believe that with an expanded retail distribution network, we will achieve economies of scale resulting in better margins in our finished products business and build an international retail distribution network to reach and offer a wider range of finished products directly to more end customers. In addition, the retail distribution network will allow us to carry products of other steel producers which are complementary to our product portfolio. This will enable us to strengthen our relationships with a broader customer base by offering them a wider range of products. We believe that through the Austrian Acquisition our retail distribution business will become one of the most important factors driving growth in our overall business in the future. Expand Product Range to Higher Margin Niche Products. We intend to expand the range of our high grade semi-finished and finished steel products, focusing on higher margin niche products in both segments. Specifically, we intend to increase our production of square and round billets in our semi-finished products segment which are used mainly in the forging and tube rolling industries and long products such as flat, plain and reinforcement steel bars and flat products (steel sheets and strips) in our finished products segment, which are mainly used in the automotive, machine, forging, and shipping industries, all of which offer higher margins than lower grade steel products produced by our major competitors in Poland. We will also focus on producing finished products with special applications for the mining and defense industries. We believe that by expanding our product range to higher margin niche products we will not only increase our business with our current customers, but also develop new relationships with new customers. Strengthen our scrap metal business. We intend to strengthen our market share in scrap metal segment by expanding our scrap metal collection network through the establishment of two new scrap yards per year until we have the geographic reach to cover all potential primary scrap suppliers in Poland and expanding our facilities to include more specialized vehicles, containers and machinery to more quickly process scrap. This scrap metal collection network will continue to ensure a full supply of scrap metal for the production of our semi-finished and finished steel products, as well as sales of scrap metal to external customers. We believe that by strengthening our already market leading position in our scrap metal business, we will also be able to improve our access to scrap metal supplies, widen our customer base and increase synergies with our other businesses. We intend to install two scrap shredding facilities which we will use to increase the quality of our scrap metal and which will in turn materially improve our scrap margins. Expand Capabilities of Existing Assets. We intend to expand the current capabilities of our existing assets to grow our business, in particular at Ferrostal Łabe˛dy and HSW-HSJ. At Ferrostal Łabe˛dy, we are increasing our market share in higher margin specialized products such as mining by investing in additional oxygen burners for our electric arc furnaces. At HSW-HSJ, we have added a fourth work shift and made some complementary investments to increase production capacity. 77

Grow Through Selective Acquisitions. We intend to further expand our business through selective acquisitions. As we have in the past, we will continue to review opportunities to acquire steel scrap producing and retail distribution companies which will enhance and complement our business. For example, we are currently bidding for the steel trade operations of a publicly listed Polish steel company and are exploring possibly purchasing an interest in a Polish shipyard. We are also currently exploring a number of financing options for potential selective acquisitions, including a potential initial public offering of ordinary shares of the Company. Our Segments and Products We organize our business into four segments. Scrap metal, semi-finished products, finished products and other. Our finished products segment accounted for 38% of our consolidated revenues for the year ended December 31, 2005, with our semi-finished products business accounting for 24%, our scrap metal business for 19% and our other business segment for 19%. A description of our products and services, suppliers, customers and markets, distribution facilities, primary materials, competitors, and strategy of each of our business segments is set forth below. Overview of Segments

Scrap processing and trading

Semi-Finished Product production and trading

Finished Product production and trading & Retail distribution

Scrap Metal Segment General With PLN 168.5 million (€42.3 million) in revenue from external customers for the first nine months ended September 30, 2006, our scrap metal segment is our third largest segment, contributing 11.9% of our total consolidated revenues. We are the largest supplier of scrap metal in Poland with a market share of 12.5%, with steel scrap accounting for 90% of our scrap metal production. Steel scrap is also an integral raw material in our steel production process. For the first nine months ended September 30, 2006, we sold 236,607 tonnes of scrap metal. Nine months ended September 30, 2006 (PLN millions) (€ millions)

Revenue from external customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

168.5 11.2 12.2

42.3 2.8 3.1

Products and Services In general, our scrap metal business operates by collecting scrap metal and selling it back to the market or using it in the production of our semi-finished products. Compared to our other segments, our scrap metal business is a lower margin segment, but it is strategically important because it serves as the main supplier of primary material to our semi-finished and finished products business. We purchase, process, refine, sell and trade scrap metal. We purchase primarily two types of scrap metal, feedstock scrap and non-feedstock scrap. Feedstock scrap has the appropriate qualities in terms of size, mass and the degree of impurity to be directly fed into the furnace to produce semi-finished steel products. Because non-feedstock scrap does not meet at least one of these parameters, we process non-feedstock scrap into feedstock scrap through the use of specialized machinery, including so-called punch shears. We place containers close to sources of scrap metal and transport the containers to our scrap metal yards with our own trucking fleet. We store scrap metal which we purchase from third party suppliers and which we process in our own scrap yards in our scrap metal warehouses until we sell it to our customers or use it in our own production facilities to produce semi-finished and finished steel products. Approximately 50% of the scrap metal is feedstock scrap and is transported directly by our third party suppliers to our customers or our production facilities. Because we collect and trade nearly twice the capacity of our own production facilities, we are also able to offer competitive pricing to our customers by leveraging our scrap metal collection network. Our scrap metal suppliers also include primary sources of this raw material which are comprised of industrial plants and scrap collection points which serve as collection points to which industrial scrap collectors can bring their scrap metal. 78

Suppliers We do not generally enter into contracts with our scrap metal suppliers. We normally submit a purchase order to a scrap supplier with the order amount specified in the purchase order and receive a confirmation from the scrap metal supplier confirming the details of the purchase order. However, we enter into contracts with forging plants to purchase industrial scrap from forging plants and anticipate growing this business in the future because of the high quality of industrial scrap from forging plants. We also participate in tenders for outdated production plants which are dismantled and sold as scrap metal. We have a diversified supplier base, with the top supplier accounting for only 4%, and the top five suppliers accounting for a combined 13% of total scrap metal supply. The table below shows a breakdown of our leading sources in our scrap metal segment in 2005 based on volume. Leading Suppliers in Scrap Metal Segment Volume (in thousands of tonnes)

Suppliers

Percentage total

Huta Łabe˛dy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PPH Noan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . KEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Olmet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sigra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

30.5 18.1 14.6 13.5 12.9 602.0

4.4% 2.6% 2.1% 2.0% 1.9% 87.1%

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

691.6

100%

Customers and Markets The most important external customers in our scrap metal segment are steel plants, which account for most of our total revenues. We have a diversified external customer base, with our top two customers accounting for 15.2% each, and the top five customer accounting for 55.6% of total customer sales. The table below shows a breakdown of our leading external customers in our scrap metal segment in 2005 based on volume. Leading External Customers in Scrap Metal Segment Volume (in thousands of tonnes)

Customers

Percentage total

CMC Zawiercie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Celsa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Moravia Steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mittal Steel Poland (now Arcelor Mittal) . . . . . . . . . . . . . . . . . . . . . . . . . . . Riva Stahl . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

45.8 44.1 33.2 23.9 21.6 129.3

15.4% 14.8% 11.1% 8.0% 7.2% 43.4%

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

297.9

100%

The principal geographical markets for customers in our scrap metal segment are in southern Poland, Germany and Czech Republic. The following table shows the geographic distribution of total revenue to our customers in our scrap metal segment in 2005. Geographic Distribution of Total Revenue

Market

Revenue for the year ended December 31, 2005 PLN Percentage millions € millions of total

Poland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Czech Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

115.3 40.4 32.2 0.1

29.0 10.2 8.1 0.0

61.3% 21.5% 17.1% 0.1%

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

188.0

47.8

100%

79

We also channel approximately half of the scrap metal we purchase as a raw material to our semi-finished products segment, which is not included in scrap metal revenues. Distribution Facilities We are the largest provider of scrap metal with the most extensive scrap metal collection network in Poland consisting of 14 existing scrap metal yards in Poland. Our scrap metal yards are located primarily near major sources of scrap metal and major transportation sites and are equipped with specialized equipment to efficiently process scrap. We are currently building another scrap metal yard in Olsztyn in northeastern Poland.

Z omrex Scrap Collection Network in Poland

Z omrex S.A. head office Scrap Metal Branches Additional scrap metal yard under construction

Source: Company Our scrap metal branches are located in Wrocław, S´widnica, Opole, Sosnowiec, Rybnik, Warsaw, Łódz´, Lublin, Szczecin, Kielce, Kraków, S´widwin, Gorzów, Wielkopolski and Poznan´ and our new branch under construction in Olsztyn. We intend to expand the number of our scrap metal yards by establishing two additional scrap metal yards each year, initially concentrating on western Poland (with eastern German steelworks as our main customers) and northern Poland until we have the geographic reach to cover all potential primary scrap suppliers in Poland. The scrap yard in Warsaw is the largest, accounting for a substantial part of our scrap metal business volume in tonnes. The remaining scrap yards are similar in size and operate in industrial parts of Poland. Total capital expenditures of our scrap metal business amounted to PLN 7.6 million (€1.9 million) in 2005, which represented 35.5% of our Group’s total capital expenditures in 2005, compared to PLN 20.8 million (€5.2 million) in 2004. Significant capital expenditures over the last two years included the purchase of four metal shears at a total expenditure of PLN 13.0 million (€3.3 million), industrial loaders and special purpose vehicles at a total expenditure of PLN 13.3 million (€3.3 million), and containers, electronic scales and property at a total expenditure of PLN 7.6 million (€1.9 million). The largest ongoing investment in our scrap metal business is the expansion of our scrap metal yard network. We intend to install two scrap shredding facilities which we will use to increase the quality of our scrap metal and which will in turn materially improve our scrap margins. Competition We are the leading supplier of scrap metal in Poland based on volume. The market for our scrap metal business is centered primarily in southern Poland and is characterized by a significant number of scrap metal suppliers. Our principal competitors are Centrozłom Wrocław, BSK Return, Kem, Stena Poland, Scholz and Tom. We believe that there are significant barriers to enter this market because competitors need to establish an extensive network of scrap metal branches before making a significant impact on the market. 80

Semi-Finished Products Segment General With PLN 220.7 million (€55.5 million) in revenue from external customers for the first nine months ended September 30, 2006, our semi-finished products segment is our second largest segment, contributing 15.6% of our total consolidated revenues. We are the second largest seller of semi-finished steel products in Poland with a market share of approximately 28% of semi-finished steel products sold to external customers in Poland and the fifth largest producer of semi-finished products with a market share of approximately 4% in 2005. For the first nine months ended September 30, 2006, we sold 150,800 tonnes of semi-finished products. Nine months ended September 30, 2006 (PLN millions) (€ millions)

Revenue from external customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

220.7 12.4 16.9

55.5 3.1 4.2

Products and Services We produce a full range of semi-finished products, concentrating primarily on square and round billets and to a much lesser extent on blooms and slabs. We focus in particular on producing small batches of higher grades of square and round billets tailor-made for our customers, which sets us apart from our competitors. These products are less seasonal than basic grade steel and enjoy more stable demand from the forging and tube rolling industries. There are a total of 8 different grades of billets according to Polish classification standards. Low grade billets, such as grades I and II, are used for basic applications in the construction industry. Higher grade billets are used for special use and special products such as extruded and rolled profiles for the automotive industry. Złomrex has a strong position in this niche area of high grade billets. This protects the business from larger producers such as Mittal Steel Poland (now Arcelor Mittal) who focus on large scale production of lower grade billets. We produce the following semi-finished products at our production facilities in Ferrostal Łabe˛dy and HSW-HSJ: Ferrostal Łabe˛dy Round/Square Billets We focus primarily on the production of round and square steel billets with steel grades between classes I through VI. We produce square billets with diameters of 100, 120, 140, 160 and 165x140 millimeters and round billets with diameters of 170 millimeters at our steelworks in Ferrostal Łabe˛dy. Square and round billets are produced on continuous casting machines and further processed by forging, rolling or extrusion. Products made from these billets are principally used by the automotive tube rolling, forging and machine industries and as a primary raw material to produce finished products for our finished products business. HSW-HSJ We produce primarily blooms (270 x 320 mm) and slabs (130-180 x 800 mm) in steel grades between classes I through VIII. Blooms are semi-finished products used for further rolling into billets or directly into finished round products. Slabs are semi-finished products used to produce sheets which are used primarily in the construction, machine and defence industries. Our blooms and slabs are produced mainly in higher steel grades between classes IV and VIII. These products are the most profitable of the Company with the highest margins and lowest volatility. Suppliers We use scrap metal purchased through our scrap metal collection network as the principal raw material to produce our semi-finished products. We source scrap from third parties by submitting purchase orders for scrap metal and receive confirmation from the scrap metal traders regarding the details of our purchase order. We then place collection containers close to their locations and transport the containers with our own trucking fleet to one of our scrap yards in our extensive scrap metal collection network. This scrap is then transported to our steelworks at either Ferrostal Łabe˛dy or HSW-HSJ for processing into semi-finished products in electric arc furnaces and then are used in continuous casting machines which cast liquid steel into billets, slabs and blooms. Approximately 57% of the scrap metal we purchased and distributed in 2005 was used by our semifinished products segment and approximately 43% was sold to external customers in Poland. 81

Two suppliers collectively account for approximately 48% of our external supply of raw materials for our semi-finished products business. However, this does not have a substantial effect on our business because we rely on external sourcing for only a small portion of our supplies. Our top five suppliers account for 84% of the external supply of raw materials for our billets. The table below shows a breakdown of our leading suppliers in our semi-finished products segment in 2005 based on volume. Leading Suppliers in Semi-Finished Products Segment Volume (in thousands of tonnes)

Suppliers

Percentage total

Alta, a.s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Belkap Steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Celsa Huta Ostrowiec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Man Ferrostal AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Promet Slovakia, s.r.o . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.8 8.1 5.7 5.2 3.7 5.9

27.4% 20.6% 14.4% 13.1% 9.5% 15.0%

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

39.4

100%

Customers and Markets The most important external customers in our semi-finished products segment are in the mining, forging, and tube rolling industries, which account for almost all of our total revenues in this segment. The table below shows a breakdown of our leading external customers in our semi-finished products segment in 2005 based on volume. Leading External Customers in Semi-Finished Products Segment Volume (in thousands of tonnes)

Customers

Percentage total

Huta “Łabe˛dy” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Man Ferrostaal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Huta Pokój S.A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stalexport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mittal Steel Poland (now Arcelor Mittal) . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

74.8 32.5 21.7 12.7 5.1 25.0

43.5% 18.9% 12.7% 7.4% 3.0% 14.5%

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

171.8

100%

Although our customer base is not highly diversified with one customer accounting for 44% of total revenues in this segment, we believe that this concentration in one customer is mitigated by the fact that this customer is a small rolling mill whose plant lies close to Ferrostal Łabe˛dy and is highly dependent on our products. The principal geographical markets for our semi-finished products are Poland and Germany. The following table shows the geographic distribution of total revenue in our semi-finished products segment in 2005. Geographic Distribution of Total Revenue Revenue for year ended December 31, 2005 Percentage PLN millions € millions of total

Market

Poland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

189.9 37.0 10.4

48.7 9.3 2.6

80.0% 19.8% 0.2%

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

237.3

59.6

100%

In Poland and Western Europe, we sell products in our semi-finished segment directly to customers who come to our production facilities to pick up their orders. Customers in Germany are shipped their products by rail. For certain customers, we have implemented business on-line order processing in our semi-finished products segment, which also provides up-to-date information on inventory and delivery periods. We also supply steel billets as primary material to our own finished products business. 82

Production Facilities and Process Our semi-finished products division has two manufacturing facilities, one at Ferrostal Łabe˛dy and the other at HSW-HSJ. Our steelworks at Ferrostal Łabe˛dy are among the most modern steelworks in Poland, having been completed in 1997. Ferrostal Łabe˛dy has a production capacity which was recently increased to 400,000 tonnes per year and produce a wide range of billets (classes I to VI). The majority of steel billets produced at Ferrostal Łabe¸dy are high grade billets. Our other steelworks at HSW-HSJ, which were modernized in 1995, produce small batches of higher grade billets tailor made for certain customers. For the first nine months ended September 30, 2006, approximately 70% of our semi-finished products were produced at Ferrostal Łabe˛dy with the remaining 30% produced at HSW-HSJ. The facilities at Ferrostal Łabe˛dy and HSW-HSJ use electric arc furnaces. The advantage of electric arc furnaces is that because scrap metal accounts for approximately 90% of the raw materials used in electric arc furnaces compared to 25% in blast furnaces, we are able to maintain a flexible cost base and ensure availability of feedstock through our significant supplies of scrap metal. Electric arc furnaces also require less machinery, fixed assets and employees to operate and can be switched off immediately during an economic downturn. Total capital expenditures of our semi-finished products business amounted to PLN 10.3 million (€2.6 million) in 2005 and PLN 1.7 million (€0.4 million) in 2004. Significant investments over the last two years were the modernization of the electric arc furnaces at a total expenditure of PLN 7.5 million ( €1.9 million), modernization of ceiling hoists at a total expenditure of PLN 4.2 million (€1.1 million) and PLN 1.4 million (€0.4 million) for research and development. We also continue to invest in the modernization of our facilities in an effort to increase efficiency. Overall, we believe that our recent investments in this business will further allow us to produce small batches of high quality semi-finished products to meet the growing demand for these products in the automotive and tube rolling industries. Primary Materials Scrap metal is the primary raw material used to produce steel billets. In addition, ferro-alloys are required in the production process. We purchase the scrap metal primarily from our scrap metal business and ferro alloys and refractory materials from a number of suppliers on the market. Competition The market for semi-finished products is global in nature and is dominated by a small number of significant producers. Our principal competitors in the Polish market include Polish subsidiaries of global steel companies such as Mittal Steel Poland (now Arcelor Mittal), CMC and Celsa, with Mittal Steel Poland (now Arcelor Mittal) accounting for approximately 65% of the entire semi-finished product market. We are currently the fifth largest producer of semi-finished products in Poland with a market share of 4%. We believe that our strong market position is derived from our ability to produce a wide range of steel billets for special applications, including higher grades in small batches which have higher margins than the lower grade steel produced mainly by our principal competitors. We distinguish ourselves from our main competitor Mittal Steel Poland (now Arcelor Mittal) because it produces large quantities of low grade steel billets and may not be able to cost efficiently change its production structure to compete with us in the market. Finished Products General With PLN 765.2 million (€192.3 million) in revenue from external customers for the nine months ended September 30, 2006, our finished products segment is our largest segment, contributing 54.0% of our total consolidated revenues. We are the fifth largest producer of finished steel products in Poland and the fourth largest producer of long steel products in Poland. For the nine months ended September 30, 2006, we sold 361,915 tonnes of finished products. Nine months ended September 30, 2006 (PLN millions) (€ millions)

Revenue from external customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

765.2 107.8 1.9

192.3 23.7 0.5

Products and Services Our four rolling mills produce long and flat steel products. Long products are produced at our rolling mills at ZW-WB and Ferrostal Łabe˛dy while long products and flat products are produced at HSW-HSJ. Long steel products Long steel products is the term used for steel products that are formed from billets, blooms or ingots. They are produced in diverse grades, dimensions and are used in a multitude of areas. Long steel products are primarily used by the construction, machine, shipbuilding, forging, pipe, ball bearing, defense and mining industries. We produce the following long steel products at the following plants: ZW-WB Š flat bars (full range) round and square bars with a capacity of 180,000 ton per year. These are general

application products used primarily by the shipbuilding, mining and automotive industries. Ferrostal Łabe˛dy Š hot rolled products such as reinforced and plain bars (focus on small diameters) with a capacity of

96,000 tonnes per year. These are primarily used by the construction industry. HSW-HSJ Š rolled billets (80/100/120 sq.), which are primarily used by forging and automotive industries; and Š round bars, (55 to 120 mm in diameter), including peeled bars up to 115 mm in diameter with a

capacity of 142,000 tonnes per year. These are primarily used by the forging and machine industries. Flat steel products Flat steel products is the term used for steel products that are produced from slabs and formed into a strips or sheet by means of various rolling procedures while hot or cold. A flat product that has a width of over 600 millimeters is usually classified as a sheet. Flat steel products are primarily used by automotive and consumer goods industries and to a lesser extent by the construction, shipbuilding, machine and defense industries (such as armor sheets and armor plating for tanks). We produce thick sheets with a capacity of 100,000 ton per year in sizes 10-30 x 2000 x 6000 mm at our HSW-HSJ plant. In addition, we purchase 20,000 tonnes of mainly thick sheets per year for trading to provide our customers with a broader range of products. We have begun importing cold, hot and galvanized sheets from China. Suppliers We use steel billets produced by our semi-finished products business as the primary source of raw materials to produce our finished products. We also purchase steel billets from third party suppliers to produce our finished products. Steel billets purchased from third party suppliers are shipped to ZW-WB. We enter into short-term contracts with our steel billet suppliers as we receive most of our external steel billet supplies principally from the Ukraine and Belarus. These contracts include standard provisions such as price, time of delivery, quantity and other standard terms. Our finished products are mainly categorized in four different groups: reinforced bars; round bars; flat bars; and sheets. Typically, higher grade products benefit from higher margin and lower price volatility than lower grade products. Reinforced bars have the highest margin volatility, whereas sheets have the highest margin and lowest price volatility. Through our acquisitions, we have been shifting more towards the higher margin, lower price volatility products. We also purchase finished products from a number of suppliers which we then resell to our customers. We enter into short-term contracts with these suppliers under which we purchase these finished steel products. We typically buy and sell in short-term bulk contracts and on-sell their products to large end-customers primarily in Poland. We have a diversified supplier base, with the leading supplier accounting for 29% and the top five suppliers accounting for 66% of our supplies. 84

The table below shows a breakdown of our leading suppliers for our finished products segment in 2005 based on volume. Leading Suppliers in Finished Products Segment Volume (in thousands of tonnes)

Suppliers

Huta Pokój S.A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Huta Stali Cze˛stochowa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stalexport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Alta, a.s. Eur . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Huta Łabe˛dy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.3 3.6 3.0 2.1 1.9 9.7 28.6

Percentage total

29.0% 12.6% 10.5% 7.2% 6.6% 34.1% 100%

Customers and Markets The most important customers in our finished products segment are in the construction, industrial, mining and shipbuilding industries. Our finished products business is highly diversified, and no individual customer accounts for more than 6.4% of total sales. The table below shows a breakdown of our leading external customers in 2005 based on volume. Leading External Customers in Finished Products Segment Volume (in thousands of tonnes)

Customers

Baustal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stalexport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Serwis Polska Stal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thyssenkrupp Energostal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bodeko . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14.1 11.1 10.3 9.3 9.2 166.2 220.2

Percentage total

6.4% 5.0% 4.7% 4.2% 4.2% 75.5% 100%

The principal market for our finished products segment is Poland. The following table shows the geographic distribution in our finished products segment’s total revenue in 2005. Geographic Distribution of Total Revenue

Market

Revenue for year ended December 31, 2005 PLN Percentage millions € millions of total

Poland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Slovakia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hungary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

354.5 3.2 3.1 2.5 5.3 368.6

89.1 0.8 0.8 0.6 1.3 92.6

96.2% 0.9% 0.8% 0.8% 1.4% 100.0%

Production Facilities and Process Our finished products segment has six rolling lines located in Poland: three in ZW-WB, one in Ferrostal Łabe˛dy and two in HSW-HSJ. The facilities in ZW-WB are the largest, accounting for a substantial part of our finished products business production volume in tonnes, followed by HSW-HSJ, which also makes a major contribution to total volumes and then by Ferrostal Łabe˛dy. All of these facilities rely on electric arc furnaces. The advantage of 85

electric arc furnaces is that because scrap metal accounts for approximately 90% of the raw materials used in electric arc furnaces compared to 25% in basic oxygen furnaces, we are able to maintain a flexible cost base and ensure availability of feedstock through our significant supplies of scrap metal. Electric arc furnaces also require less machinery, fixed assets and employees to operate and can be switched off immediately during an economic downturn. Total capital expenditures of our finished products business amounted to PLN 1.5 million (€0.4 million) in 2005 and PLN 1.1 million (€0.3 million) in 2004. Significant investments over the last two years were modernization of the furnaces used in the rolling mills for finishing the semi-finished products. We also continue to invest in the modernization of rolling equipment in an effort to increase quality and efficiency of production. Distribution — Centrostal Companies We purchased the Centrostal Companies in 2006 to start our retail distribution network for finished products in Poland and have become one of the largest retail distributers of finished products as a result of these acquisitions. We distribute all of our finished products through the retail distribution network of the Centrostal Companies to our end customers, and we also distribute a wide range of products for a number of other Polish steel producers through this retail distribution network. The primary end-user customers of the Centrostal Companies are the automotive, tube rolling, forging, ball bearing and defense industries. The Centrostal Companies are active primarily in southern Poland and do not conduct business outside of Poland. Their main competitors are the three other Centrostal companies that were previously owned by the Polish government and were recently sold to our competitors in Poland. Distribution — voestalpine Stahlhandel GmbH General On December 20, 2006, we entered into a share purchase agreement to acquire a 74.9% interest in voestalpine Stahlhandel GmbH, a leading warehousing and steel distribution company in Austria with significant retail distribution facilities in Central and Eastern Europe, with an option to acquire a further 25.1% interest, including the Czech Republic, Croatia, Poland and Romania and trade offices in Hungary, Slovakia, Slovenia and Bosnia–Herzegovina. voestalpine Stahlhandel GmbH had consolidated revenues of €303.8 million in the fiscal year ended March 31, 2006 (compared to €332.6 million in the fiscal year ended March 31, 2005) and EBITDA of €10.2 million in the fiscal year ended March 31, 2006 (compared to €26.5 million in the fiscal year ended March 31, 2005). The consolidated financial results of voestalpine Stahlhandel GmbH and its subsidiaries for the periods presented do not reflect the results of certain non-consolidated subsidiaries, including voestalpine Stahlhandel Polska Sp. z o.o. (Poland), voestalpine Stahlhandel Slowakei s.r.o. (Slovakia), voestalpine Stahlhandel Budapest Kft. (Hungary), voestalpine Stahlhandel d.o.o. (Slovenia) and voestalpine ambient Stahlhandel s.r.l. (Romania). These subsidiaries were not historically consolidated in voestalpine AG’s financial statements because they were not considered material to voestalpine AG. The combined EBITDA of these subsidiaries is approximately €2 million. See “Summary Financial Information — Summary Unaudited Pro Forma Financial Information”. voestalpine Stahlhandel GmbH’s largest market is in Austria, which voestalpine Stahlhandel GmbH estimates accounted for approximately 79.8% of its consolidated revenues in the fiscal year ended March 31, 2006 (compared to 78.9% in the fiscal year ended March 31, 2005). In 2005, voestalpine Stahlhandel GmbH had on average 451 employees and an overall trade volume of approximately 455,000 tonnes. voestalpine Stahlhandel GmbH’s primary end-user markets are the civil and mechanical engineering and construction and automotive industries. The main business of voestalpine Stahlhandel GmbH is comprised of the sale and distribution of heavy plates, sections and thin sheets through its subsidiaries in Austria, the Czech Republic, Croatia, Poland and Romania and its four trade offices in Hungary, Slovakia, Slovenia and Bosnia–Herzegovina. voestalpine Stahlhandel GmbH is active throughout Austria, the Czech Republic and Croatia. In Poland, its business activities are concentrated in the southern part of the country and in Romania in the western part. At present, Slovenia, Hungary and Bosnia-Herzegovina are served by sales offices and products are delivered from the closest warehouses.

86

Czech Republic

Austria –

Poland

Czech Republic Slovakia

Slovenia

–

(1)

–

Graz

–

Vienna

–

–

Klagenfurt

–

Salzburg

–

Innsbruck

(1)

Pardubice Vyskov

(1)

(1)

Poland

(1)

– Gliwice Slovakia –

(1)

Nitra

Hungary

Bosnia – Herzegovina

–

–

Budapest

Sarajevo

Slovenia

Romania

–

–

Maribor

Sibiu

(1)

Croatia

Hungary

Austria

(1)

Linz

Romania

Croatia

–

Varazdin

–

Osijek

–

Zagreb

(1)

(1)

Warehouse

Bosnia – Herzegovina Z omrex SA head office

Voestalpine retail network

Centrostal retail network

The revenues of voestalpine Stahlhandel GmbH for the fiscal year ended March 31, 2006 can be broken down into product groups as follows: Product

Rod and section steel bars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reinforced steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Circular steel tubes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Light-weight section steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Flat products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stainless steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(€ millions)

(1,000 tonnes)

54.3 61.0 10.1 35.0 159.8 21.8 342.0

88.0 114.9 9.6 38.4 228.7 7.6 487.16

Approximately 50% of the finished products are purchased from companies belonging to the group of voestalpine AG. The second largest supplier is Arcelor Mittal. voestalpine Stahlhandel GmbH offers a full range of services to its customers, including material testing of the steel products, pre-processing of flat and long steel products, on-site technical consulting, quality assurance and documentation. voestalpine Stahlhandel GmbH has a regional distribution network centred around warehouses to meet the needs of its customers in those regions, a sales team for each region consisting of specialists in the particular products for that particular region or industry, specific employees dedicated to service particular clients and specific individuals responsible for national products and product deployment. voestalpine Stahlhandel GmbH’s primary warehousing facilities are located in Linz and Graz in Austria (total storage space 31,440 square meters). Its Austrian subsidiaries have 4 warehouse locations with a total storage space of 50,260 square meters and its subsidiaries in Romania, Poland, Croatia, and the Czech Republic operate 5 warehouses with a total storage capacity of 41,025 square meters. voestalpine Stahlhandel GmbH’s ten largest customers contributed approximately 21.9% to voestalpine Stahlhandel GmbH’s revenues in 2005. We believe the Austrian Acquisition will enable us to supply a full range of finished steels products in our finished products business directly to end customers through voestalpine Stahlhandel GmbH’s retail distribution network. Our intention is to leverage voestalpine Stahlhandel GmbH’s retail distribution network to distribute both the Company’s and voestalpine Stahlhandel GmbH’s finished products directly to end customers and to enter markets in which the Company has not been active in the past. Primary Materials Steel scrap is the main raw material (about 90%) used in production of steel billets, blooms and slabs. Other additives are iron concentrates in different forms, different ferro-alloys and other metals depending on the steel grade actually produced. We use our own semi-finished products as well as semi-finished products from other suppliers, mainly from Belarus, Russia or Ukraine to produce finished products. 87

Competition The market for finished products is global in nature and is dominated by a small amount of significant producers. Our principal competitors include Mittal Steel Poland (now Arcelor Mittal), CMC Zawiercie, CELSA Huta Ostrowiec, Arcelor Huta Warszawa and others, with Mittal Steel Poland (now Arcelor Mittal) accounting for approximately 65% of the entire market. We are currently the fifth largest producer of semi-finished products in Poland with a market share of 4%. We believe that our strong market position is derived from our ability to produce high grade finished products for special applications in small batches which have higher margins than lower grade steel produced by our principal competitors. We distinguish ourselves in this regard from Mittal Steel Poland (now Arcelor Mittal) because it produces large quantities of low grade steel billets and cannot cost efficiently change its production structure to compete with us in the market for high grade finished steel products. Other General With PLN 262.6 million (€66.0 million) of revenue for the first nine months ended September 30, 2006, our other segment is our smallest segment, contributing 18.5% of our total consolidated revenues. For the first nine months ended September 30, 2006, we sold approximately 8,400 tonnes of non-ferrous products. Other Products Our other business consists of four principal sub divisions: (i) the buying and selling of non-ferrous scrap to our customers, (ii) the processing of non-ferrous scrap into finished products and selling those products to our customers, (iii) the buying and selling of non-ferrous products and (iv) recycling materials, including plastic foils, paper and other products. Our non-ferrous foundry Szopienice is based in the Katowice area and manufactures finished products and semi-finished products composed of non-ferrous metal alloys. Its product range includes solid rods, hollow rods and steel sections of bronze and brass, rolled Zinc anodes, cast Zinc alloys, Zinc and aluminum primary alloys. Non-ferrous products are primarily traded through the Company’s trade office in Wrocław. Its main trading partners are KGHM Metraco, the Hutmen group, Alumetal Kety, Nicromet, Orzeł Biały, Huta Cynku and Miasteczko S´la¸skie. The buyers for non-ferrous metal products are cable and steel industries, packaging manufacturers, plumbing fitting makers, foundries and construction industry plants. Nowa Jakos´c´ is a recycling company focusing on recycling paper (80% of business), plastics (15% of business) and other waste materials such as glass (5% of business). EU regulations require companies which produce certain types of recyclable waste to pay a product fee based on the treatment and recycling of that waste. Nowa Jakos´c´ enters into arrangements with those companies to collect and treat such recyclable waste on their behalf. Nowa Jakos´c´ is currently expanding its warehouse facilities based on the Company’s network of scrap yard branches and has its own vehicle fleet, reloading facilities and machinery. Production Facilities and Process We buy non-ferrous scrap through the same scrap metal collection network through which we buy scrap metal. This enables us to capitalize on our existing scrap metal collection network. We use non-ferrous scrap and process it into non-ferrous products at the same production facilities as we use for steel processing. We also buy our non-ferrous products from our suppliers. We recycle materials such as paper, plastic and other waste materials. Intellectual Property Rights We currently do not hold any patents and do not use any licenses other than for office software, including accounting and bookkeeping applications. We hold rights to one trademark registered with the Polish patent office. The registered trademark is the Company’s logo. The “Złomrex” trademark was registered on July 3, 1995 and its registration has since been extended until April 6, 2013. Employees/Industrial Relations As of September 30, 2006, we had approximately 2,500 employees. We have not experienced any work stoppages or strikes. 88

Regulatory Environment EC regulatory regime The EU steel industry is regulated by the rules of the European Community as set out in the Treaty Establishing the European Community (“EC”), as amended (the “Treaty of Rome”), and by the European Economic Area Agreement (“EEA Agreement”). The Treaty of Rome now also incorporates the rules for the majority of steel products that have previously been covered by the Treaty of Paris, establishing the European Coal and Steel Community (“ECSC”), which ceased to have effect on July 23, 2002. The European Commission is responsible for implementing the objectives of the Treaty of Rome while the European Free Trade Association (“EFTA”) Surveillance Authority is responsible for monitoring, together with the European Commission, the fulfillment of obligations under the EEA Agreement. State aid Both the Treaty of Rome and the EEA Agreement in general prohibit state aid that distorts or threatens to distort competition in the EU and the EEA respectively. Following the expiration of the Treaty of Paris, the generally rigorous EC/EEA rules on state aid also apply to the steel sector. Anti-dumping and countervailing measures that were adopted under the old ECSC rules that were still in force on July 23, 2002 remain in force. The European Commission has stated its position that rescue aid and restructuring aid for firms in difficulty in the steel sector are not compatible with the Common Market, whereas, aid to cover payments payable by steel firms to workers made redundant or accepting early retirement as well as aid to steel firms which permanently cease production of steel products may under certain circumstances be approved. Also state aid for research and development and state aid for environmental protection may under certain circumstances be held compatible with the Common Market. The European Commission has stated that in the future regional aid for the steel industry will be held incompatible with the Common Market. Antitrust The Treaty of Rome and the EEA Agreement contain provisions prohibiting anti-competitive practices and agreements which relate, inter alia, to the fixing or determination of prices, the restriction or control of production or the sharing of markets subject, in certain cases, to block exemptions. In addition, both instruments contain provisions prohibiting the abuse of a dominant market position. In addition to the competition rules of the Treaty of Rome and the EEA Agreement, the Company’s operations are subject to Polish competition laws. The Polish Antitrust Law prohibits anticompetitive practices and agreements and abuse of a dominant market position. The laws of other jurisdictions in which the Group operates also contain restrictions on anti-competitive practices and agreements and abuse of a dominant market position. Trade associations and other voluntary arrangements For historic reasons related to the need to restructure the European steel industry, there has been close co-operation among steel companies, the European Commission and national governments within the European steel industry. European steel producers individually and through trade associations have played an important part in conjunction with both the European Commission and governments in the process of attempting to resolve problems of excess capacity, its causes and its consequences. The Company is also member of trade associations, including the Scrap Metal Chamber of Commerce, the Steel Chamber of Commerce and the Chamber of Steel Traders in Poland, and industry groups with respect to the sale, promotion and marketing, and technical development of steel products. Facilities and Properties The majority of real property used for production purposes is owned or held in perpetual usufruct. A perpetual usufruct right is established on the land owned by the State Treasury or a community for a period of 99 years (with some exceptions) and in practice is similar to the ownership. A perpetual usufructor of land is the owner of building located on such land. A few of the premises are used or leased under lease agreements. 89

The table below includes information about real property which is important for the operations of the companies from Złomrex group. Location

Principal use

Złomrex Poraj (ul. Zielona 26) . . . . . . . . . . . . . . . . . . . . . warehouses, offices Katowice Szopienice (ul. Ks. Majora Karola Woz´niaka 24) . . . . . . . . . . . . . . . . . . . . . . . . . production sites, offices Kraków (ul. Mierzeja Wis´lana 10) . . . . . . . . . . . warehouses, offices Lublin (ul. Mełgiewska 7-9) . . . . . . . . . . . . . . . . warehouses Łódz´ (ul. Rymanowska 4) . . . . . . . . . . . . . . . . . warehouses, offices Opole (ul. Magazynowa 2) . . . . . . . . . . . . . . . . . warehouses, offices Poznan´ (ul. Dziadoszan´ska 10) . . . . . . . . . . . . . warehouses, offices Pruszków (ul. Błon´ska 8) . . . . . . . . . . . . . . . . . . warehouses, offices Sosnowiec (ul. Piotrkowska 23) . . . . . . . . . . . . . warehouses, storage yard Szczecin (ul. Andrzeja Struga 73) . . . . . . . . . . . warehouses, offices S´widwin (ul. Batalionów Chłopskich) . . . . . . . . warehouses, offices Zdzieszowice (ul. Filarskiego 37) . . . . . . . . . . . warehouses, offices Olsztyn, Lubelska 23 . . . . . . . . . . . . . . . . . . . . . storage yard offices Ferrostal Łabe˛dy Gliwice-Łabe˛dy (ul. Zawadzkiego 45) . . . . . . . . Gliwice-Łabe˛dy (ul. Zawadzkiego 26) . . . . . . . . Pyskowice-Dzierz˙no . . . . . . . . . . . . . . . . . . . . . . Leszno . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

main production site office building production site storage yard warehouses, offices

HSW-HSJ Stalowa Wola (ul. Kwiatkowskiego 1) . . . . . . .

production site, warehouses, storage yard Stalowa Wola (ul. Kwiatkowskiego 1) . . . . . . . production site Centrostal Gdan´sk-Kokoszki (ul. Budowlanych 42) . . . . . .

warehouses, offices Branch in Słupsk (ul. Poznan´ska 1a) . . . . . . . . . warehouses, offices Branch in Elbla˛g (ul. De˛bowa 1c) . . . . . . . . . . . warehouses, offices Branch in Olsztyn (ul. Lubelska 32c) . . . . . . . . . warehouses, offices Branch in Kwidzyn´ (ul. Z˙wirowa 4) . . . . . . . . . warehouses, offices

Legal title

Size (m²)

ownership

18,283

perpetual usufruct ownership perpetual usufruct perpetual usufruct perpetual usufruct ownership perpetual usufruct ownership perpetual usufruct perpetual usufruct perpetual usufruct perpetual usufruct perpetual usufruct, ownership ownership perpetual usufruct ownership

14,092

perpetual usufruct ownership perpetual usufruct perpetual usufruct ownership

117,735 1,361 31,057 8,547

perpetual usufruct

159,710

perpetual usufruct

26,114

perpetual usufruct, ownership perpetual usufruct perpetual usufruct perpetual usufruct perpetual usufruct

66,011 24,300 11,245 20,102 14,835 4,331

perpetual usufruct, ownership

27,153

perpetual usufruct

122,678

19,778 19,975 7,561 1,541 6,734 429 20,980 42,901 26,995 19,506 8,880 270 2,146 6,733

Centrostal Opole Opole (ul. Wspólna 7) . . . . . . . . . . . . . . . . . . . .

warehouses, offices

Centrostal Górnos´la˛ski Katowice (ul. Stalowa 2) . . . . . . . . . . . . . . . . . .

warehouses, storage yard, offices Branch in Brzeg (ul. Cegielniana 9) . . . . . . . . . . warehouses offices Branch in Strzelce Opolskie (ul. Gogolin´ska 2) . . . . . . . . . . . . . . . . . . . . . . . . . warehouses offices Branch in Warka (ul. Puławskiego 39) . . . . . . . warehouses offices Branch in Z˙ychlin (ul. Narutowicza 72) . . . . . . . warehouses ZW-WB Zawiercie (ul. Okólna 10) . . . . . . . . . . . . . . . . .

production site

90

lease

2,260 464

lease

lease

1,468 122.80 4,320 22 2,418

perpetual usufruct

62,556

lease

Insurance We have one global insurance policy composed of numerous global coverage and individual asset coverage policies all held with Hestia S.A. which provides insurance for all of our industrial assets. We maintain obligatory group insurance policies required by Polish law. Legal Proceedings We have been and continue to be the subject of legal and arbitration proceedings and adjudications from time to time. Neither we nor any of our subsidiaries are the subject of any governmental, legal or arbitration proceedings (including any proceedings which are pending or threatened of which we are aware), during the previous 12 months which may have or have had in the recent past, significant effects on our financial position or results of operations. Environmental Matters Our operations are subject to numerous environmental laws and regulations with respect to the protection of the environment in the countries in which we have production facilities or properties. Examples include laws and regulations regarding air emissions, discharges to land and water and the handling, transportation and storage of waste and other hazardous materials. The number of these laws and regulations have increased in recent years, because of the introduction of the Environmental Protection Law of April 27, 2001 and the Act on Waste Disposal of April 27, 2001 in Poland and the introduction of similar laws in countries in which we conduct business. These laws have also become more stringent in the past years and have been more strictly interpreted by authorities. We anticipate that this trend will continue in the future. In Poland we are generally required to obtain and have obtained permits and licenses for industrial operations which cause emissions, discharges or waste. Such permits and licenses generally establish limitations and standards on the operations that we have to comply with. In addition, we are required to periodically renew permits and licenses issued for a limited period. Upon renewal, the permits and licenses often contain more stringent limitations and standards, which can require significant capital expenditure prior to their expiration. We monitor compliance with applicable environmental laws and regulations and the requirements of our permits and licenses at each of our businesses through representatives responsible for environmental protection and waste disposal. These representations are in frequent contact with the relevant authorities and cooperate with such authorities in monitoring the compliance with environmental laws, regulations, licenses and permits as well as in the development of new standards or limitations. To the best of our knowledge, all of our companies are in compliance with current material environmental laws and regulations. In certain cases where it has been determined that we have exceeded or not complied with the limitations and standards or more stringent limitations have been issued, we implement measures requested by regulatory authorities and make investments to achieve compliance. We make ongoing investments, if necessary, to improve our environmental standards. Our policy is to comply with applicable laws and to proactively use superior environmental technology. This applies both to new plants as well as to the adaptation of current plants and includes, for example, the installation of new filters, the construction of installations for neutralizing contaminated materials and the installation of independent water circles. Improvements are implemented in coordination with the responsible authorities.

91

MANAGEMENT The following tables set forth the name, age and position of the members of the executive board (Zarza˛d), the supervisory board (Rada Nadzorcza) and of the senior management of the Group. The business address of our members of the executive and supervisory boards and senior management is ul. Zielona 26, 42-360 Poraj. Our website is www.zlomrex.pl and the information on our website is not part of this Offering Memorandum. Executive Board Current members of our executive board are: Name

Age

Initial appointment to executive board

Przemysław Sztuczkowski . . . . . . . . . . . . . . . . . . Przemysław Andrzej Grzesiak . . . . . . . . . . . . . . . Krzysztof Walarowski . . . . . . . . . . . . . . . . . . . . . .

40 41 50

June 14, 2004 June 14, 2004 June 14, 2004

End of 1 current term

Position

June 30, 2007 June 30, 2007 June 30, 2007

President of the Board Vice president Member of the Board

Przemysław Sztuczkowski is president of our executive board. He established Przedsie˛biorstwo “Wiedza i Praca” (formerly Przedsie˛biorstwo Obrotu Surowcami Wtórnymi “Złomrex”), the predecessor of the Company which specialized in scrap metal trading, in 1990. Mr. Sztuczkowski has also been the vice president of the executive board of Złomrex-Finans since 2003. Mr. Sztuczkowski is also a supervisory board member of Ferrostal Łabedy, Centrostal Górnos´la˛ski, Nowa Jakos´c´ and Złomrex Pruszków. He is also a member of the executive board of “Armaton” Sp. z o.o. and a member of the board of the “Zda˛z˙yc´ na czas” foundation. Mr. Sztuczkowski is a graduate of a post-secondary school in tourism services (Pomaturalne Studium Obsługi Ruchu Turystycznego). Przemysław Andrzej Grzesiak is vice president of our executive board. He has worked at Złomrex since 1990. He is a member of the executive boards of Złomrex-Finans and Ferrostal Łabe¸dy. He is also a supervisory board member of Centrostal Górnos´la˛ski, Szopienice, Nowa Jakos´c´ and Złomrex Pruszków. Mr. Grzesiak is also a member of the board of the “Zda˛z˙yc´ na czas” foundation. He is a graduate of the Cze˛stochowa Technical University, the Faculty of Metallurgy, where he majored in thermal power engineering and industrial furnace construction. Krzysztof Walarowski is a member of our executive board. Prior to joining the Company in 2004, Mr. Walarowski was president of the executive board and chief executive officer of Nordkalk Sp z o.o. where he was responsible for the company’s restructuring and sales. During this time he was also president of the executive board of Nordkalk Miedzianka S.A. From 1999 to 2000, he was an executive board member and sales director at Huta Ostrowiec S.A. in Ostrowiec S´wie˛tokrzyski where he was co-responsible for the company’s restructuring program and sales. Previously, he was a member of the executive board and sales director at Impexmetal S.A., where he was responsible for coordinating and supervising the group’s trading operations, establishing and supervising of the restructuring program, as well as sales. Mr. Walarowski is also chairman of the supervisory boards of HSW-HSJ, Centrostal, Centrostal Opole and Centrostal Górnos´la˛ski, Ferrostal Łabe¸dy and also of Zbrojarnia. He is a graduate of the Warsaw School of Economics, International Trade Faculty. Senior Management Current members of our senior management are: Name

Age

Date of employment

Term of employment

Krzysztof Zoła . . . . . . . . . . . . . . . . . . . . . . . Waldemar Marek . . . . . . . . . . . . . . . . . . . . .

34 45

2002 1999

no fixed term no fixed term

Zenon Tomalak . . . . . . . . . . . . . . . . . . . . . .

51

1999

no fixed term

Dominik Barszcz . . . . . . . . . . . . . . . . . . . . . Andrzej Sankowski . . . . . . . . . . . . . . . . . . . Marek Lewandowski . . . . . . . . . . . . . . . . . .

30 67 58

2000 2004 2006

no fixed term no fixed term no fixed term

Position

Chief Financial Officer Director, Trade Office in Wrocław Director, Trade Office in Wrocław Chief Accountant Marketing Director Chief Security Officer

Krzysztof Zoła is our chief financial officer. In 2002, he joined Złomrex as a member of the executive board responsible for finance and became our chief financial officer. From 1996 to 2002, he was a credit analyst 1

The annual shareholders’ meeting of the Company must take place no later than June 30, 2007 at which time it will be decided whether to extend the employment terms of the individual members of the executive board. The Company expects that all terms of employment of the executive board members will be extended. 92

and member of the credit committee at Kredyt Bank, S.A., Cze˛stochowa branch. He also founded Kapitał, which is a subsidiary of the Group. Mr. Zoła is the president of the executive boards of Kapitał and Złomrex Pruszkow. He is also a member of the supervisory board of HSW-HSJ. In addition, Mr. Zoła is a supervisory board member of Centrostal Górnos´la˛ski, Zbrojarnia, Centrostal Opole and AB Stahl. He is a graduate of the Faculty of Management and Marketing of the Cze˛stochowa Technical University. Waldemar Marek is a director of our trade office in Wrocław. Mr. Marek is in charge of coordination of procurement and sales of non-ferrous scrap raw materials and vice chairman of the supervisory board of Szopienice. He worked previously at Hutmen S.A. in Wrocław where he was head engineer responsible for raw materials. Mr. Marek holds a Master of Science in Engineering degree from the Higher School of Engineering in Zielona Góra, with postgraduate studies at the Wrocław School of Economics. Zenon Tomalak is a director of our trade office in Wrocław. Mr. Tomalak coordinates the procurement of scrap and non-ferrous metals and is member of the supervisory board of Szopienice. He was previously with Hutmen S.A. Wrocław as chief trade and marketing specialist. Mr. Tomalak holds a Master of Science and Engineering degree from Kraków’s Mining and Metallurgy Academy. Dominik Barszcz is our chief accountant, a position he has held since 2006. Mr. Barszcz joined Złomrex in 2000, first as an accounting specialist from 2000 to 2002, and he then served as deputy head accountant from 2002 to 2006. He graduated from the School of Economics in 2000 in Katowice. Andrzej Sankowski is our marketing director. From 1996 to 1997, he worked as a specialist for Impexmetal S.A. From 1997 to 2001, he headed the New Launches and Profile Bars Sales Bureau at Huta Zawiercie S.A. In 2002 he worked as an expert adviser in Stalexport S.A. and from 2002 to 2004 he served as Head of Bars Sales Bureau at CMC Zawiercie S.A. Mr. Sankowski graduated from the Technical University in Cze˛stochowa in 1961, with the degree of Master of Science in Engineering. He also completed postgraduate studies in the field of chipless forming at the Metallurgical Department of Cze˛stochowa Technical University. Marek Lewandowski is our chief security officer. From 1993 to 2001, he was deputy to the Parliament of the Republic of Poland (Sejm) and a member of its Justice Committee and Administration and Internal Affairs Committee. From 2001 to 2005, he was department director at the Ministry of Internal Affairs and Administration. Mr. Lewandowski completed university-level education at the Internal Affairs Academy in Warsaw at the law and administration faculty and post-graduate studies in philosophy. Supervisory Board The current members of the supervisory board are: Initial appointment to supervisory board

End of current term

Name

Age

Hubert Andrzej Janiszewski . . . . . . . . . . .

62

June 14, 2004

December 31, 2007

Piotr Jerzy Freyberg . . . . . . . . . . . . . . . . .

64

June 15, 2004

December 31, 2007

Jerzy Jan Kak . . . . . . . . . . . . . . . . . . . . . .

53

June 14, 2004

December 31, 2007

Marek Rocki . . . . . . . . . . . . . . . . . . . . . . .

53

December 3, 2004

December 31, 2007

Zbigniew Łapin´ski . . . . . . . . . . . . . . . . . .

39

May 16, 2005

December 31, 2007

Position

Chairman of the supervisory board Member of the supervisory board Member of the supervisory board Member of the supervisory board Member of the supervisory board

Hubert Andrzej Janiszewski is chairman of our supervisory board. From 1999 to 2002, he was a member of the executive board of Deutsche Bank Polska S.A and a managing director at Deutsche Bank AG in London. From 1998 to 1999, he was a manager director at Bankers Trust Co. in London and from 1992 to 1998 he was president of the executive board of HSBC Financial Services. He is currently the chairman of the supervisory boards of DB Securities S.A. and Elstar Oils S.A., deputy chairman of the supervisory boards of Deutsche Bank PBC S.A. and PGF S.A. and a member of the supervisory boards of Deutsche Bank Polska S.A., MCI Management S.A. and Polmos Lublin S.A. He was also a member of the supervisory boards of Netia S.A., Unimil S.A. He received a masters degree in economics from the Prague University of Economics and the Warsaw School of Economics and a doctorate in economics from the Warsaw University of Technology. 93

Piotr Jerzy Freyberg is a member of our supervisory board. He is currently chief executive officer of 3M Poland Sp. z o.o., a position he has held since 1992. From 1986 to 1991, he worked at the Ministry of Foreign Economic Cooperation in Poland during which he served as Poland’s permanent representative at GATT. He is not a member of any other supervisory boards. Mr. Freyberg received a masters of economics from the International Trade Faculty at the Warsaw School of Economics and a doctorate in economics. Jerzy Jan Kak is a member of our supervisory board. He is currently president of the executive board and chief executive officer at Elektrownia Polaniec S.A., a position he has held since 2002. From 2000 to 2002, he was president and chief executive officer of Huta Szkla Ujs´cie Sp. z o.o. He is not a member of any other supervisory boards. Mr. Kak received a masters degree in economics from the Faculty of Economics of Production at the Poznan´ University of Economics. Marek Rocki is a member of our supervisory board. He is currently rector of the Warsaw School of Economics, a position he had held since 1999. Mr. Rocki has also held a number of other positions at the Warsaw School of Economics, including dean of diplomatic studies and professor of information technology. Mr. Rocki is a member of the supervisory boards of Bank Millenium, HOOP S.A. and Febryka Mebli Forte S.A. Mr. Rocki received a masters degree in economics from the Faculty of Finance and Statistics of the Warsaw School of Economics and a doctorate in economics from this university. Zbigniew Łapin´ski is a member of our supervisory board. Zbigniew Łapin´ski has a master of science in economy degree from the Foreign Trade Faculty of the Warsaw School of Economics. From 1996 to 2001 he was an equity exchange analyst at Creditanstalt Securities and Deutsche Bank. From 2001 to 2004 he held a position of deputy chief financial officer at Netia S.A., later becoming a member of the management board and chief financial officer. Since 2004 Mr. Łapin´ski is a member of supervisory boards of S´niez˙ka S.A. and Unimil S.A. Executive Compensation Executive Board Each member of our executive board has a management contract with Złomrex under which each member is compensated based on a fixed salary. The salary of one executive board member may not exceed a certain percentage of the Company’s gross profit for the relevant period. In addition, one member of the executive board is entitled to an annual bonus of 1% of the net profit of the Group’s consolidated audit financial statement paid in the following fiscal year. For the year ended December 31, 2005, the aggregate compensation paid to the members of the executive board was PLN 4.0 million (€1.0 million). In 2004 and 2005, members of the executive board did not receive any additional compensation or other benefits as a result of their positions in executive boards or supervisory boards of the Company’s subsidiaries. Senior Management Members of our senior management are compensated on the basis of a fixed salary plus a bonus which is based upon a percentage of salary, payable upon the achievement of certain profit targets. Supervisory Board Each member of the supervisory board receives a fixed annual compensation determined at the shareholders’ meeting. In addition, the shareholders’ meeting specifies the amount of remuneration for the supervisory board members delegated to perform the individual supervision. For the year ended December 31, 2005, the aggregate compensation paid to members of the supervisory board of the Company was PLN 313,000 (€78,643.2). Interest of Executive Board and Supervisory Board in Unusual Business Transactions and Outstanding Loans to Members of Executive Board We are not aware of any interests of the members of the executive board and supervisory board in unusual business transactions with the Company. We have one outstanding loan to Mr. Przemysław Sztuczkowski conducting business activity as Przedsie¸biorstwo Obrotu Surowcami Wtórnymi “Złomrex” dated June 13, 2004 for PLN 6.5 million (€1.6 million). The repayment date is July 31, 2008. The loan is to be repaid in 45 monthly installments of 94

PLN 100,000 (€25,126) each. The balance outstanding as of September 30, 2006 amounts to PLN 4.7 million (€1.2 million). The annual interest rate is 8%. The Company has taken security in relation to the outstanding amount of this loan over fees originating from a management services agreement between Mr. Sztuczkowski and the Company, dated April 30, 2004 and a services agreement between Mr. Sztuczkowski and the Company dated January 2, 2003. Management/Employee Stock Option Plans We do not currently have any management or employee stock option or incentive plans for our management or our employees. Corporate Governance We have a three-tier management structure, consisting of an executive board, supervisory board and a shareholders’ meeting. Day-to-day management of the Company is vested in the executive board, which represents the Company externally. The Company is represented by the president of the executive board acting individually, the vice president acting individually, two executive board members acting jointly or one executive board member acting jointly with the proxy holder (prokurent). Executive board resolutions are passed by an absolute majority vote. The president of the executive board has the casting vote. The supervisory board is vested with the authority to supervise the business of the Company. Although the supervisory board does not actively manage the Company, the Company’s articles of association together with the supervisory board’s rules of procedure, require the consent of the supervisory board before the executive board takes certain actions. In particular, the Supervisory Board has the following authority to: Š appoint and remove members of the executive board; Š review the Company’s financial statements, Directors’ Report on the Company’s business activities

and the Executive Board’s recommendations on the distribution of profits and the coverage of losses; Š select the chartered auditor for the Company; Š determine the rules governing executive board compensation; Š approve the rules of procedure of the executive board and Company rules of organization; Š consent to the Company’s purchase and disposal of real estate for a price exceeding PLN 500,000

(€125,628); and Š approve the Company’s financial plan prepared by the executive board.

The supervisory board’s resolutions are passed by absolute majority vote. The president of the supervisory board has a casting vote. The shareholders’ meeting approves financial statements and appoints and dismisses the supervisory board members. The shareholders’ meeting also decides on the sale of the Company’s businesses. As a general rule, resolutions are passed by an absolute majority vote.

95

PRINCIPAL SHAREHOLDERS The table below stets forth certain information regarding the ownership of the Company as of September 15, 2006 according to the Company’s excerpt from the register of entrepreneurs. Number of Shares

Shareholder

Percentage of Shares

Przemysław Sztuczkowski . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

47,691,000

100%

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

47,691,000

100%

96

RELATED PARTY TRANSACTIONS In the course of our ordinary business activities, we or members of our executive board have entered into agreements with or render services to related parties.We believe that all transactions with affiliated companies and persons including companies with which our management board or supervisory board members are affiliated are negotiated and conducted on a basis equivalent to those that would have been achievable on an arm’s length basis, and that the terms of these transactions are comparable to those currently contracted with unrelated thirdparty suppliers, manufacturers and service providers. Set forth below is summary of material transactions between or among us and related parties: Transactions between Group Companies and Executive Board Members Š Under a management services agreement dated April 30, 2004, Przemysław Sztuczkowski agreed to

provide administrative and management services to Złomrex. The quarterly agreed remuneration for Mr. Sztuczkowski is PLN 450,000 (€113,065.3). However, this remuneration is limited to no more than 10% of Złomrex’s gross income for the relevant period. As of September 30, 2006, there was no outstanding balance under this agreement. Š Under a management services agreement dated April 30, 2004, Przemysław Grzesiak agreed to

provide administrative and management services to Złomrex. The monthly gross remuneration is PLN 150,000 (€37,688.4). As of September 30, 2006, there was no outstanding balance under this agreement. Š Under a loan agreement dated June 13, 2004, Złomrex granted to Przemysław Sztuczkowski

conducting business activity as Przedsie˛biorstwo Obrotu Surowcami Wtórnymi “Złomrex” (currently Przedsie˛biorstwo “Wiedza i Praca”) a loan in the amount of PLN 6.5 million (€1.6 million). The annual interest rate is 8.0%. The loan is to be repaid by July 31, 2008 in 45 monthly installments of PLN 100,000 (€25,125.6) each. As of September 30, 2006, the outstanding balance was PLN 4.7 million (€1.2 million). Š Under a management services agreement between Ferrostal Łabe¸dy and PRYMKO Krzysztof

Walarowski on January 26, 2004, Mr. Walarowski agreed to provide management training and advisory services to Ferrostal Łabe¸dy. Mr. Walarowski is paid PLN 240,000 (€60,302) annually for these services. This management services agreement expires on January 26, 2009.1 As of September 30, 2006, the outstanding balance was PLN 24,400 (€6,130). Š Under a management services agreement between ZW-WB and PRYMKO Krzysztof Walarowski on

January 26, 2004, Mr. Walarowski agreed to provide management training and advisory services to ZW-WB. Mr. Walarowski is paid PLN 240,000 (€60,301) annually for these services. This management services agreement expires on January 26, 2009.1 As of September 30, 2006, the outstanding balance was PLN 24,400 (€6,131). Š In 2002 and 2003, Złomrex granted Armaton Polska Sp. z o.o. with its registered office in Opole

(“Armaton”) four loans for a total amount of PLN 810,000 (€203,517) to be repaid by December 31, 2012 or December 31, 2013. The interest rate is 0.9% monthly. Armaton is controlled by Przemysław Sztuczkowski. According to an oral representation from Złomrex, Armaton is in the process of being liquidated. Under Polish law, Armaton can be only liquidated if it repays all loans. As of September 30, 2006, the outstanding balance was PLN 410,000 (€103,015). Intercompany Transactions within the Group Š Złomrex and Ferrostal Łabe¸dy entered into a finance leasing agreement dated December 31, 2004.

Under the agreement Złomrex gave Ferrostal Łabe¸dy production equipment for use in Gliwice with a total value of PLN 28.0 million (€7.0 million) for 96 months, until December 2012. The monthly installment is 1.36% and the total amount of lease installments is 140.48% (PLN 39.3 million (€9.9 million)). As of September 30, 2006, the outstanding balance was PLN 23.8 million (€6.0 million). Š HSW-HSJ and HSJ-WB entered in 2006 into agreements with Kapitał under which Kapitał discounts

promissory notes owned by HSW-HSJ and HSW-WB and issued by HSW-HSJ’s and HSW-WB’s debtors. The promissory notes in question are used by the debtors of HSW-HSJ and HSW-WB to 1

In addition to the above two management services agreements, Mr. Walarowski provides additional training services to management of both Ferrostal Łabe¸dy and ZW-WB for approximately PLN 100,000 (€25,125) annually which are not covered by these agreements. As of September 30, 2006, there was no outstanding balance under this agreement. 97

settle their obligations resulting from agreements on sale of goods delivered by HSW-HSJ and HSW-WB. The total maximum financial engagement of Kapitał resulting from acquiring the promissory notes cannot exceed PLN 2.0 million (€0.5 million) for HSW-HSJ and PLN 6.0 million (€1.5 million) for HSJ-WB. As of September 30, 2006, the outstanding balance was PLN 920,915 (€231,386) Š According to an agreement entered into between Złomrex and ZW-WB on March 1, 2005, ZW-WB

may provide rolling services exclusively to Złomrex. Consideration paid by Złomrex to ZW-WB is calculated based on the total of ZW-WB’s production costs plus a 12% margin. As of September 30, 2006, there was no outstanding balance under this agreement. Š Under a loan agreement dated November 15, 2006, HSW-HSJ S.A. granted Złomrex S.A. a loan in the

amount of PLN 5 million (€1.3 million). The loan bears interest at a rate of 6-month WIBOR plus a margin of 1% per annum. As security, Złomrex issued a blank promissory note. The amount of the loan must be repaid by January 15, 2007. Š Under a loan agreement dated August 8, 2005, Złomrex granted Nowa Jakos´c´ a loan in the total

amount of PLN 3.9 million (€1.0 million). The loan bears interest at a rate of one-month WIBOR plus a margin of 2% per annum. There are no financial covenants in this loan agreement nor does the Złomrex or any of its subsidiaries provide any security under this agreement. The loan is granted for an indefinite period of time. Both parties have the right to terminate the agreement upon one month’s prior notice. As of September 30, 2006, PLN 1.5 million (€376,884) had been drawn down. Š According to two additional loan agreements, Złomrex also granted Złomrex-Finans and Złomrex-

Zbrojarnia loans totalling PLN 210,000 (€50,000). There are no financial covenants in this loan agreement nor does the Company or any of its subsidiaries provide any security under this agreement. Š According to an agreement between Złomrex S.A. and Ferrostal Łabe¸dy dated January 1, 2005,

Ferrostal Łabe¸dy will process scrap metal supplied by Złomrex. Consideration paid by Złomrex to Ferrostal Łabe¸dy is calculated based on the total of Ferrostal’s production costs plus a 12% margin.

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SUBSIDIARIES The following provides a description of our subsidiaries including voestalpine Stahlhandel GmbH and its subsidiaries upon consummation of the Austrian Acquisition. The Company’s Subsidiaries Zlomrex International Finance S.A. Zlomrex International Finance S.A., the Issuer of the Notes, is a société anonyme organized under the laws of France. Zlomrex International Finance S.A. was incorporated on October 23, 2006 with the Registry of Commerce of Evry under number 492 535 737 under the corporate name Złomrex France S.A. and its registered office is at 48, boulevard de Coquibus, BP-97, 91003 Evry. Zlomrex International Finance S.A.’s share capital amounts to €225,000. On January 6, 2007, a general meeting of the shareholders approved changing the corporate name of the Issuer from Złomrex France S.A. to Zlomrex International Finance S.A. Ferrostal Łabe˛dy Ferrostal Łabe˛dy is a manufacturing plant located in Gliwice. It consists of two divisions (i) steelworks with a production capacity of 400,000 tonnes of steel per year and (ii) a rolling mill with a production capacity of approximately 100,000 tonnes of finished products. The steelworks manufacture rectangular billets (165 x 140 mm), square billets (with sizes of 100, 120, 140, 160 mm) and round billets (170 mm diameter) made of carbon steel, specialty steel and part-alloy steel. The rolling mill manufactures smooth rods plain and reinforced bars (with diameters of 8 to 16 mm). Production is conducted exclusively based on processing orders at the steelworks using feedstock scrap provided by the Company and at the rolling mill using the steel billets manufactured by the steelworks. Ferrostal Łabe˛dy has been consolidated within the Group since March 2004. ZW-WB ZW-WB is a manufacturing plant located in Zawiercie with a maximum production capacity of 180,000 tonnes per year. It manufactures products exclusively to the Company’s orders using raw materials supplied by the Company. The manufacturing plant rolls/mills steel billets into finished products. ZW-WB produces flat bars and round and square bars made of carbon and special steels. The Company is the main material supplier of raw materials for ZW-WB. ZW-WB has been consolidated within the Group since January 2005. Szopienice Szopienice is based in Katowice and manufactures finished products and semi-finished products composed of non-ferrous metal alloys. Its product range includes solid rods, hollow rods and steel sections of bronze and brass, rolled Zinc anodes, cast Zinc alloys, Zinc and aluminum primary alloys. Szopienice has been consolidated within the Group since August 2004. Nowa Jakos´c´ Nowa Jakos´c´ is a recycling organization focusing on recycling paper (80% of business), plastics (15% of business) and other waste materials such as glass (5% of business). EU regulations require companies which produce certain types of recyclable waste to pay a product fee based on the treatment and recycling of that waste. Nowa Jakos´c´ enters into arrangements with those companies to collect and treat such recyclable waste on behalf of the companies. It is currently expanding its warehouse facilities based on the Company’s network of scrap branches and has its own vehicle fleet, reloading facilities and machinery. It was founded in 2004. Nowa Jakos´c´ has been consolidated within the Group since July 2004. Złomrex-Finans Złomrex-Finans engages in debt collection, compensation payments and claims trading. Złomrex-Finans’ activities were suspended in 2003 and it is in the process of being wound up. HSW-HSJ HSW-HSJ is located in Stalowa Wola and consists of two divisions: (i) steelworks with a production capacity of approximately 250,000 tonnes of steel per year and (ii) two rolling mills with a production capacity of approximately 242,000 tonnes of billets/bars per year. The steelworks manufactures slabs (dimensions 130/800, 180/800) and blooms (270/300 mm) made of specialty and alloy steel. HSW-HSJ’s rolling mill 99

produces square billets (with sides of 80 to 120 mm), round bars (diameters of 55 to 120 mm) and peeled bars (diameter of 55 to 115 mm). As of result of its merger with HSW-WB in November 2006, HSW-HSJ now manufactures steel plates (10-30 mm thick, 800 to 2000 mm wide and up to 6 meters long) made of a full range of steel types. HSW-HSJ has been consolidated within the Group since February 2006. Centrostal Górnos´la˛ski Centrostal Górnos´la˛ski is a leader in retail sales of metallurgical products in the Sla¸skie Voivodship. It sells products through a network of five warehouses in Katowice, Brzeg, Strzelce Opolskie, Warka and Z˙ychlin. Centrostal Górnos´la˛ski has been consolidated within the Group since March 2006. Centrostal Centrostal is a leader in retail sales of metallurgical products in the Pomorskie Voivodship. Centrostal is composed of a central warehouse located in the Company’s registered office in Gdansk and local branches located in Słupsk, Olsztyn, Warsaw and Elbla˛g. Centrostal’s product range with regard to metallurgical products includes in particular sheets, pipes and tubes, rods, band, hot-rolled sections, cold-bent sections, stainless and acid-proof steel products, as well as aluminum and copper products. Centrostal offers a full range of wholesale-related services connected with the packaging and processing of metallurgical products, including cutting hot-rolled sheet and sections, cutting cold-rolled sheet from reels to designated size, manufacturing cold-bent bands and sections and construction reinforcements. Centrostal is listed on the Warsaw Stock Exchange. Centrostal has been consolidated within the Group since August 2006. Centrostal Opole Centrostal Opole is a local retail seller, operating a warehouse of metallurgical products in Opole. Centrostal Opole has been consolidated within the Group since July 2006. Złomrex China Złomrex China is engaged in international trade in steel products and raw materials for metallurgical products. The Company plans to import via Złomrex China up to 100,000 tonnes of steel products including hot, cold and galvanized sheets as well as other products such as electrodes, refractory materials and ferrol alloys. Złomrex China has been consolidated within the Group since March 2006. Kapitał Kapitał has operated in the financial services market since 1999. It provides billing discount and factoring services. Kapitał has been consolidated within the Group since January 2006. AB Stahl AB Stahl trades in steel scrap throughout Germany. AB Stahl has been consolidated within the Group since August 2006. Złomrex Pruszków Złomrex Pruszków was founded in March 2003 to construct a scrap shredder line using European Union aid funds. Złomrex Pruszków has not been consolidated within the Group. Złomrex Zbrojarnia Złomrex Zbrojarnia joined the Group in May 2006. Zbrojarnia is a service center producing prefabricated, customized construction industry elements from concrete steel for use in the construction of foundations, floors, heads and other building components. Zbrojarnia has been consolidated within the Group since May 2006. 100

CKM “Włókniarz” Cze˛stochowski Klub Motocyklowy “Włókniarz” S.A. was founded on October 23, 2006. The company’s purpose is to invest in, develop and promote speedway racing. Subsidiaries of voestalpine Stahlhandel GmbH voestalpine Stahlhandel GmbH voestalpine Stahlhandel GmbH, headquartered in Linz, Austria, is the leading warehousing and steel distribution company in Austria and one of the leading warehousing and steel distribution companies in Central and Eastern Europe. voestalpine Stahlhandel GmbH serves as holding company for a number of subsidiaries in Eastern Europe and as warehousing steel distributor for the Austrian market (with the exception of certain key clients of voestalpine Stahl GmbH — its former main shareholder). voestalpine Stahlhandel GmbH maintains warehouses at several locations in Austria (Linz, Graz, Vienna and Innsbruck). The product range available at warehouses includes steel bars and sections, heavy plates and thin sheets, light-gauge open and closed profiles, circular tubes, stainless structural steels, non-ferrous metals (aluminium) and welding fillers. voestalpine Stahlhandel GmbH and certain of its subsidiaries are expected to be consolidated within the Group as of the closing of the Austrian Acquisition. Selected subsidiaries of voestalpine Stahlhandel GmbH include: Neptun Stahlhandel GmbH Neptun Stahlhandel GmbH (“Neptun”), headquartered in Vienna, is together with its subsidiaries the leading reinforcement steel trader in Austria. Neptun has subsidiaries in Linz, Graz and Klagenfurt. Its product range comprises, besides reinforcement steel, iron and steel wire, industry, forest and lift cables, cable accessories and chains. The Neptun group has a total warehouse surface of 34,055 sqm. Köllensperger Stahlhandel GmbH & Co. KG Köllensperger Stahlhandel GmbH & Co. KG (“Köllensperger”) is the market leading steel distributor in Tyrol, Austria with a total warehouse surface of 11,200 sqm. voestalpine Stahlhandel GmbH owns 60% of the share capital. The other shares are owned by the Köllensperger family. Köllensperger sells rod and section steel bars, cut plates and corrugated iron, zinced cut plates and cold-coated coils, perforated sheets, hollow-section steel and stop pipes. VASTAD Edelstahl Handels GmbH VASTAD Edelstahl Handels GmbH is a 50% joint venture with TAD Group with access to Italian producers. The product range comprises flat and long products, shaped parts, welding materials for stainless steel and TIG welded pipes and fittings. The company has 5,005 sqm. of total warehouse surface. voestalpine Stahlhandel spol. s.r.o. voestalpine Stahlhandel spol. s.r.o., is the largest foreign steel trader in the Czech Republic with its own pre-processing facilities for long and flat products. The company was founded in 1992. It sells high quality plates, hot and cold-rolled hollow-sections, wide-flanged beams, quarto plates and long products and operates a total warehouse surface of 24,090 sqm. voestalpine Stahlhandel Polska Sp. z.o.o. voestalpine Stahlhandel Polska Sp. z o.o. distributes cold-rolled hollow-sections, wide-flanged beams, heavy plate and special qualities of Alform, Durostat. The warehouse capacity of currently 4,500 sqm. will be significantly expanded in the next business year. voestalpine Stahlhandel Budapest Kft. voestalpine Stahlhandel Budapest Kft., Budapest, distributes a wide product range including beams (IPE, INP, UNP), wide-flanged beams, cold-rolled HS, concrete reinforcing steel and alloyed and high-alloyed plates. The company currently has no warehouse. A new warehouse is planned for the location Györ. Such warehouse shall also be used for distrubuting products to southern Austria. 101

VETING voestalpine d.o.o. VETING voestalpine d.o.o. in Croatia trades concrete reinforcing steel, wire, hot and cold-rolled plates and zinced plates and operates a total warehouse surface of 4,880 sqm. The company was acquired in 2000. voestalpine ambient Stahlhandel srl voestalpine ambient Stahlhandel srl, Romania, is 51%-owned by voestalpine Stahlhandel GmbH and 49% by a local individual. The warehouse in Sibiu (6,700 sqm) has been in use since August 2006. The company plans pre-processing facilities for long and flat products. voestalpine Stahlhandel trgovina zjeklom d.o.o. (Slovenia) voestalpine Stahlhandel d.o.o. distributes steel products in Slovenia and has no warehousing operations. voestalpine Stahlhandel Slowakei s.r.o. voestalpine Stahlhandel Slowakei s.r.o. distributes steel products in Slovakia and has no warehousing operations.

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DESCRIPTION OF OTHER INDEBTEDNESS The following is a description of our material indebtedness. The description does not purport to be complete and is qualified in its entirety by reference to the agreements which set forth the principal terms and conditions. As of September 30, 2006, we had PLN 420.9 million (€105.8 million) of outstanding interest bearing debts. We will use a portion of the proceeds of this Offering to pay off all of our outstanding interest bearing indebtedness except for our factoring agreements with GMAC Commercial Finance Sp. z o.o., ING Commercial Finance S.A. and BRE Bank S.A. agreements, our outstanding loan agreements with the National Fund and our obligations under various leasing agreements and discount promissory note agreements and certain bank indebtedness of Centrostal and Centrostal Górnos´la˛ski, each as described below. In addition, we will enter into one or more Revolving Credit Facilities described below prior to, or after, the consummation of this Offering. See “Use of Proceeds”. Revolving Credit Facilities We will enter into one or more revolving credit facilities with certain Polish banks in an estimated aggregate amount of up to €40 million. We have entered into an agreement with Fortis Bank Polska S.A. (the “Fortis Agreement”) and have offers from BRE Bank S.A. (the “BRE Bank Offer”) and Bank BPH S.A. (the “Bank BPH Offer”) providing binding commitments for an aggregate amount of borrowings of approximately €60.0 million. Under the Fortis Agreement, PLN 76.6 million (€19.2 million) will be made available under a credit facility with an interest rate of 0.8% over WIBOR. The Fortis Agreement contains financial covenants including a net debt to EBITDA ratio of no higher than 3.5 (with the first test of compliance on and for the period ended September 30, 2007), EBITDA to interest ratio not less than 2 to 1 (or the level of such ratio in the Indenture which is 2.25 to 1), a solvency ratio no lower than 20% in 2007 and 25% in 2008 and a security package consisting of an assignment of receivables of the Company of PLN 30.0 million (€7.5 million) per month and a pledge of inventories of the Company of PLN 50 million (€12.6 million). Under the BRE Bank Offer, PLN 72.2 million (€18.1 million) would be made available under a credit facility with an interest rate of 1.1% over WIBOR. The BRE Bank Offer contains financial covenants including a current liquidity ratio of no lower than 1, a net profit margin of not lower than 2%, revenues of the Company being no lower than PLN 100.0 million (€25.1 million) on a monthly basis and a security package consisting of an assignment of receivables of the Company of PLN 39.0 million (€9.8 million), a pledge of inventories of the Company of PLN 52 million (€13.1 million), and a secured cash deposit on bills of exchange of PLN 6.3 million (€1.6 million). Under the Bank BPH Offer, PLN 80.0 million (€20.1 million) would be made available under a credit facility with an interest rate of 0.9% over WIBOR. The Bank BPH Offer has no financial covenants but contains a security package consisting of an assignment of receivables of the Company of PLN 64.0 million (€16.1 million) and a pledge of inventories of the Company of PLN 64.0 million (€16.1 million). Factoring Agreements We have entered into factoring agreements with GMAC Commercial Finance Sp. z o.o., ING Commercial Finance S.A. and Pekao Factoring Sp. z o.o. The purpose of the factoring agreements is to improve our cash flow by selling our accounts receivables to factoring companies in exchange for cash. Our factoring agreements do not contain any restrictive covenants. GMAC Factoring Agreement On August 23, 2004, we entered into a PLN 22.5 million (€5.7 million) factoring agreement with GMAC Commercial Finance Sp. z o.o. (“GMAC Commercial Finance”) (the “GMAC Factoring Agreement”). As of September 30, 2006, PLN 13.4 million (€3.4 million) had been drawn down under the GMAC Factoring Agreement. The GMAC Factoring Agreement bears interest at a one-month WIBOR rate plus a margin ranging from 1.4% to 2.0% per annum and includes a factoring commission ranging from 0.2% to 0.3%. Under the terms of the GMAC Factoring Agreement, the principal amount under the GMAC Factoring Agreement will be repaid by August 31, 2007. Security As security for the GMAC Factoring Agreement, we have issued a blank promissory note to GMAC Commercial Finance for any unpaid obligations under the GMAC Factoring Agreement and granted a power of attorney to GMAC Commercial Finance to our bank accounts for this purpose. 103

ING Factoring Agreement On December 4, 2002, we entered into a PLN 35.0 million (€8.8 million) factoring agreement with ING Commercial Finance S.A. (“ING Commercial Finance”) (the “ING Factoring Agreement”). As of September 30, 2006, PLN 23.3 million (€5.9 million) had been drawn down under the ING Factoring Agreement. The ING Factoring Agreement bears interest at a one-month WIBOR or EURIBOR rate plus a margin of 2.5% per annum and includes a factoring commission ranging from 0.27% to 0.9%. The ING Factoring Agreement has an unlimited duration. Security As security for the ING Factoring Agreement, we have issued a blank promissory note to ING Commercial Finance for any unpaid obligations under the ING Factoring Agreement and pledged our inventories in Poznan´, Gorzów Wielkopolski, Katowice, Ruda S´la˛ska, Gliwice and Legnica in an aggregate amount not to exceed PLN 12.0 million (€3.0 million). Pekao Factoring Agreement On June 22, 2005, Ferrostal Łabe˛dy entered into a PLN 4 million (€1.0 million) Factoring Agreement with Pekao Factoring Sp. z o.o (the “Pekao Factoring Agreement”). As of September 30, 2006, PLN 3.4 million (€0.85 million) had been drawn down under the Pekao Factoring Agreement. The Pekao Factoring Agreement bears interest at a one-month WIBOR rate plus a margin of 1.4% per annum. The Pekao Factoring Agreement has an unlimited duration. Security As security for the Pekao Factoring Agreement, Ferrostal Łabe˛dy issued a promissory note. The promissory note is guaranteed by the Company. In addition, the Company has issued a power of attorney to Pekao for the account of Ferrostal Łabe˛dy maintained at Pekao’s branch in Gliwice. NFOS´ Facilities Some of our subsidiaries are parties to the following loan agreements with the National Fund. Assignment Agreement As a result of an inter-company debt assignment agreement between Huta Łabe˛dy S.A. and Elstal Łabe˛dy Sp. z o.o. on May 14, 2002 and a merger between Elstal Łabe˛dy Sp. z o.o. and Ferrostal Sp. z o.o. in 2003, Ferrostal Łabe˛dy became a party to a PLN 35.0 million (€8.8 million) loan agreement with the National Fund (the “Assignment Agreement”). Proceeds from the Assignment Agreement were used to finance investments in fixed assets in our subsidiaries and to improve environmental standards at those facilities. As of September 30, 2006, PLN 23.3 million (€5.9 million) had been drawn down under the Assignment Agreement. The Assignment Agreement bears interest at 50% of the Rediscount National Bank of Poland base rate. Under the terms of the Assignment Agreement, the principal amount under the Assignment Agreement must be repaid by December 31, 2010. The Assignment Agreement does not contain any restrictive covenants. HSW Loan Agreement On April 20, 2006, HSW-HSJ entered into a PLN 3.7 million (€0.9 million) loan agreement with the National Fund. Proceeds from the HSW Loan Agreement were used to finance investments in fixed assets at HSW-HSJ and to improve environmental standards at HSW-HSJ. As of September 30, 2006, PLN 3.7 million (€0.9 million) had been drawn down under the HSW Loan Agreement. The HSW Loan Agreement bears interest at 80% of the Rediscount National Bank of Poland base rate but not less than 3.8% per year. Interest is repaid monthly. Under the terms of the HSW Loan Agreement, the principal amount of the HSW Loan Agreement must be repaid by June 30, 2011. The HSW Loan Agreement does not contain any restrictive covenants. Security and Guarantees As security for the HSW Loan Agreement, HSW-HSJ has pledged eleven pieces of moveable equipment, assigned various rights under insurance policies and issued a promissory note guaranteed by us up to an amount of PLN 3 million (€0.8 million). 104

HSW-WB Loan Agreement On August 18, 2005, HSW-WB entered into a PLN 694,650 (€174,535) loan agreement with the National Fund. Proceeds from the HSW-WB Loan Agreement were used to finance investments in fixed assets at HSW-WB and to improve environmental standards at HSW-WB. As of September 30, 2006, PLN 612,650 (€153,932) had been drawn down under the HSW-WB Loan Agreement. The HSW-WB Loan Agreement bears interest at 70% of the Rediscount National Bank of Poland base rate but not less than 4% per year. Interest is repaid quarterly. Under the terms of the HSW-WB Loan Agreement, the principal amount of the HSW-WB Loan Agreement must be repaid by June 30, 2011. The HSW-WB Loan Agreement does not contain any restrictive covenants. Security and Guarantees The HSW-WB Loan Agreement is guaranteed by BRE Bank S.A. in an amount up to PLN 216,900 (€54,497). As security for its guarantee, HSW-WB has granted BRE Bank S.A. a pledge over certain equipment used for its business activity and a cash deposit in an initial amount of PLN 458,000 (€115,075). Leasing Agreements We have entered into a number of leasing agreements for equipment and vehicles totalling PLN 37.6 million (€9.4 million) as of September 30, 2006. We have guaranteed certain leasing agreements of our subsidiaries Ferrostal Łabe˛dy and Nowa Jakos´c´ and Złomrex Zborjarnia. Promissory Note Agreements GMAC Commercial Finance Sp. z o.o. On March 22, 2006 and August 10, 2006, respectively, we entered a PLN 8.0 million (€2.0 million) promissory note discount agreement which was reduced to PLN 7.0 million (€1.8 million) and a PLN 3.0 million (€0.8 million) promissory note discount agreement with GMAC Commercial Finance. The purpose of these agreements is to finance promissory notes we receive from our customers in order to permit our customers to extend the repayment of their outstanding trade liabilities with us. The discount interest rate of the March 22, 2006 agreement and August 10, 2006 agreement, respectively, is WIBOR plus 2% and WIBOR plus 1.5% and 2%. As of September 30, 2006, we had drawn down PLN 6.3 million (€1.6 million) and PLN 1.7 million (€0.4 million) under the March 22, 2006 and August 10, 2006 agreements, respectively. There are no financial covenants in either agreement and neither the Company nor any of its subsidiaries provide any security under these agreements. The March 22, 2006 agreement and August 10, 2006 agreement terminate on March 31, 2007 and August 31, 2007, respectively. Centrostal Credit Agreements Centrostal Bank Pekao Credit Agreement I On November 10, 1998, we entered into a PLN 14.2 million (€3.6 million) credit agreement with Bank Polska Kasa Opieki S.A. (“Bank Pekao”). The purpose of this agreement is for general working capital purposes. The loan bears interest at a one-month WIBOR rate plus a margin of 1.5% per annum. As of September 30, 2006, we had drawn down PLN 14.2 million (€3.6 million) under this agreement. This agreement terminates on January 31, 2007. Security As security for this agreement, we pledged certain real estate and inventories (the value of the inventories totaled PLN 14.0 million (€3.5 million)). Bank Pekao Credit Agreement II On December 22, 1998, we entered into a PLN 7.6 million (€1.9 million) credit agreement with Bank Pekao. The purpose of this agreement is for general working capital purposes. The loan bears interest at a onemonth WIBOR rate plus a margin of 1.8% per annum. As of September 30, 2006, we had drawn down PLN (4.9) million (€1.2 million) under this agreement. This agreement terminates on December 31, 2008. 105

Security As security for this agreement, we pledged inventories totalling PLN 15.0 million (€3.8 million). Bank Pekao Credit Agreement III On November 24, 2005, we entered into a PLN 5.0 million (€1.3 million) credit agreement with Bank Pekao. The purpose of this agreement is for general working capital purposes. The loan bears interest at a onemonth WIBOR rate plus a margin of 3.4% per annum. As of September 30, 2006, we had drawn down PLN (1.8) million (€0.5 million) under this agreement. This agreement terminates on January 30, 2008. Security As security for this agreement, we assigned receivables and insurance policies. Powszechna Kasa Oszcze¸dnos´ci Bank Polski S.A. Credit Agreement IV On January 2, 2004, we entered into a PLN 650,000 (€163,317) credit agreement for the purpose of financing the purchase of cutting and bending machinery. This agreement expires on December 31, 2008. As of September 30, 2006, we had drawn down PLN 0.3 million (€0.1 million). Volkswagen Bank Polska S.A. In June and October 2006, we entered into two credit agreements with Volkswagen Bank Polska S.A. (“Volkswagen”) for PLN 34,400 (€8,643) with interest rates of 8.6% and 8.8%, respectively, for the purchase of two automobiles. As security, the Company assigned to Volkswagen its ownership right in the automobiles. We and our subsidiaries may from time to time enter into similar facilities. Centrostal Górnos´la˛ski On April 26, 2006, we entered into a PLN 2.0 million (€0.5 million) overdraft facility.

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DESCRIPTION OF THE NOTES Złomrex International Finance S.A. (the “Issuer”) will issue the Notes under the indenture to be dated as of January 29, 2007 (the “Indenture”) among, inter alia, the Issuer, Złomrex Spółka Akcyjna (the “Company”), the Subsidiary Guarantors (as defined below) and The Bank of New York, as trustee (the “Trustee”). You will find definitions of certain capitalized terms used in this “Description of the Notes” section under the heading “— Certain Definitions”. For purposes of this “Description of the Notes” section, references to the “Issuer” refer only to the Issuer and not to the Company or the Issuer’s or the Company’s subsidiaries, and references to the “Company” refer only to the Company and not to its subsidiaries. This “Description of the Notes” is intended to be a summary of the material provisions of the Notes, the Indenture and the Security Documents contained therein. However, the Indenture and the Security Documents, and not this summary, define your rights as Holders, and therefore you should refer to the Indenture and the Security Documents for complete descriptions of the obligations of the Issuer, the Company and the Subsidiary Guarantors, and your rights. Copies of the Indenture and the Security Documents are available free of charge upon request from the Issuer and, for so long as the Notes are listed on the Luxembourg Stock Exchange and traded on the Euro MTF Market of the Luxembourg Stock Exchange (the “Euro MTF Market”), upon request to the Paying Agent in Luxembourg. The registered holder of a Note will be treated as its owner for all purposes. Only registered holders will have rights under the Indenture and the Security Documents, including, without limitation, with respect to enforcement and the pursuit of other remedies. The Notes have not been registered under the Securities Act and are subject to certain transfer restrictions. General The Notes.

The Notes will:

Š be senior obligations of the Issuer; Š be unconditionally guaranteed on a senior basis by the Company and each of the Subsidiary

Guarantors (see “— Notes Guarantees” below); Š be secured by first-ranking security interests in the Collateral (see “— Security” below); Š rank equally in right of payment with any Senior Indebtedness of the Issuer and rank senior in right of

payment to any existing and future Subordinated Indebtedness of the Issuer; Š mature on February 1, 2014; Š be represented by one or more registered Notes in global form (“Global Notes”), but in certain

circumstances may be represented by Notes in definitive form (“Definitive Notes”). See “Book-Entry, Delivery and Form”; and Š be issued in minimum denominations of €50,000 and in integral multiples of €1,000 thereof.

Interest.

Interest on the Notes will:

Š accrue at the rate of 8.50% per annum; Š accrue from the date of original issuance or, if interest has already been paid, from the date it was

most recently paid; Š be payable in cash semi-annually in arrears on February 1 and August 1, commencing on August 1,

2007; Š be payable to the Holder of that Note on the January 15 and July 15 immediately preceding the related

interest payment date; and Š be computed on the basis of a 360-day year comprised of twelve 30-day months.

The Indenture is unlimited in aggregate principal amount, but the issuance in this offering of Notes is limited to €170.0 million. We may issue an unlimited principal amount of additional notes having identical terms and conditions to the Notes that are the subject of this offering (the “Additional Notes”), including the benefit of Collateral and the Notes Guarantees. We will only be permitted to issue Additional Notes if at the time of such issuance we are in compliance with the covenants contained in the Indenture (including the covenant described below under “Certain Covenants — Limitation on Indebtedness”) and if such Additional Notes and the previously outstanding Notes constitute the same issue for U.S. federal income tax purposes. The Notes issued in 107

this offering and, if issued, any Additional Notes, will be treated as a single class for all purposes under the Indenture, including with respect to waivers, amendments, redemptions and offers to purchase. Unless the context otherwise requires, in this “Description of the Notes” section, references to the Notes include the Notes and any Additional Notes that are issued. When issued, the Notes will be a new issue of securities with no established trading market. No assurance can be given as to the liquidity of the trading market for the Notes. Application has been made to have the Notes admitted to the Official List of the Luxembourg Stock Exchange and admitted for trading on the Euro MTF Market, but there can be no assurance that such application will be approved or granted. Notes Guarantees General On the Issue Date, all Subsidiaries of the Company will be Restricted Subsidiaries. Under the circumstances described below under the definition of “Unrestricted Subsidiaries”, the Company will be permitted to designate certain of its Subsidiaries as “Unrestricted Subsidiaries”. Generally, Unrestricted Subsidiaries will not be subject to any of the restrictive covenants in the Indenture. In addition, (a) on and after the Issue Date, (i) the Company and (ii) Odlewnia Metali Szopienice Sp. z o.o, Zakład Walcowniczy-Walcownia Bruzdowa Sp. z o.o., HSW-Huta-Stali Jakos´ciowych S.A., Ferrostal Łabe¸dy Sp. z o.o. and Złomrex Zbrojarnia Sp. z o.o. and (b) any person who in the future executes a supplemental indenture under which such person agrees to be bound by the terms of the Indenture as a Subsidiary Guarantor (including in accordance with the covenant described below under the section entitled “— Certain Covenants — Future Subsidiary Guarantors; Future Share Pledges”) will guarantee the Issuer’s obligations under the Notes (the “Notes Guarantees”) (Persons described in (a) and (b) are referred to herein as the “Guarantors” and subsidiaries described (a)(ii) and (b) are referred to herein as the “Subsidiary Guarantors”). The Guarantors will unconditionally guarantee the Issuer’s obligations under the Indenture and the Notes on a joint and several basis. Each Notes Guarantee will be a senior obligation of the relevant Guarantor ranking (i) equally in right of payment to any existing or future Guarantor Senior Indebtedness of the relevant Guarantor, including, in the case of the Company, the Intercompany Proceeds Note, and (ii) senior in right of payment to all existing and future Guarantor Subordinated Indebtedness of the relevant Guarantor. The Notes and Notes Guarantees will be secured by first-ranking security interests on the Collateral. Under certain circumstances, the Company, the Issuer and the Subsidiary Guarantors will be permitted to secure additional Indebtedness (including Additional Notes) with all or a portion of the Collateral. The obligations of each Guarantor under its Notes Guarantee will be limited under relevant laws applicable to such Guarantor (including laws relating to corporate benefit, capital preservation, financial assistance, fraudulent conveyance and transfers or transactions under value) and the granting of such Notes Guarantees will be limited to the maximum amount payable such that such Notes Guarantees shall not constitute a fraudulent conveyance, fraudulent transfer, voidable preference, a transaction under value or unlawful financial assistance or otherwise cause the Guarantor to be insolvent or in breach of applicable capital preservation rules under relevant law or such Notes Guarantee to be void, unenforceable or ultra vires or cause the directors or members of the supervisory board or analogous board or body of such Subsidiary Guarantor to be in breach of, or liable under, applicable corporate or commercial law for providing such Notes Guarantee. See “Risk Factors — Fraudulent conveyance statutes under Polish law may limit your rights as a holder of the Notes to enforce the security provided by the guarantors”. As of and for the nine months ended September 30, 2006, the initial Guarantors accounted for 89.1% of total revenues, all of the profit for the period and 90.9% of the gross profit of the Company and its Subsidiaries. Upon completion of the Austrian Acquisition, the members of the Target Group will not become Guarantors of the Notes, although they will become Restricted Subsidiaries of the Company and will be subject to the covenants and other limitations described in this “Description of the Notes” and the Target will be subject to the terms of the Acquisition On-Loan. Release of the Guarantees A Subsidiary Guarantor will be automatically and unconditionally released (and its Subsidiary Guarantee shall thereupon terminate and be discharged and be of no further force and effect): (1)

upon the full and final payment and performance of all obligations of the Issuer under the Indenture and the Notes; 108

(2)

in accordance with the Security Documents (as in effect on the Issue Date or as amended, supplemented or otherwise modified after the Issue Date to the extent such amendment, supplement or modification is permitted under the Indenture) upon the occurrence of an enforcement action taken on behalf of the Noteholders thereunder; (3) in connection with any sale or disposition of such Subsidiary Guarantor (whether by merger, consolidation, the sale of all of its capital shares or the sale of all or substantially all of its assets (other than by way of lease)), which, at the time of such sale or distribution, is made in accordance with the provisions of the covenant described under “Certain Covenants — Limitation on Sales of Assets and Subsidiary Shares” and, if applicable, the covenant described under “— Merger and Consolidation”; (4) upon legal or covenant defeasance as described below under “— Defeasance” or upon satisfaction and discharge of the Issuer’s obligations under the Indenture as described below under “— Satisfaction and Discharge”; or (5) in the event the Subsidiary Guarantor is designated as an Unrestricted Subsidiary in compliance with the terms of the Indenture. If a Subsidiary Guarantor is released from its obligations under a Subsidiary Guarantee at a time when the Notes are listed on the Luxembourg Stock Exchange and traded on the Euro MTF Market, and the rules of such stock exchange so require, the Issuer will notify the Luxembourg Stock Exchange of such release. At the request and expense of the Issuer, the Company or any Subsidiary of the Company, the Trustee will execute and deliver any document reasonably requested to evidence such release and discharge. A Subsidiary Guarantor may consolidate with or merge into or sell its assets to the Issuer, the Company or another Subsidiary Guarantor or may consolidate with or merge into or sell its assets to other Persons upon the terms and conditions set forth in the Indenture. See “— Certain Covenants — Merger and Consolidation”. The Intercompany Proceeds Note On the Issue Date, the Issuer will: (1) on-lend an amount representing approximately €82 million of the gross proceeds of the issuance of the Notes to the Company under the Intercompany Proceeds Notes; (2) deposit an amount into an Escrow Account sufficient to redeem €60 million of the Notes upon the occurrence of a Special Mandatory Redemption (see “Escrow of Proceeds; Special Mandatory Redemption”); and (3) deposit the remaining cash amount (the “Unallocated Issuer Funds”) in a designated bank account (the “Issuer Proceeds Bank Account”). On the Acquisition Closing Date, the Issuer will on-lend an additional amount (comprised of funds released from the Escrow Account and funds available from the Issuer Proceeds Bank Account) to the Company under one or more further Intercompany Proceeds Notes (referred to collectively with the initial Intercompany Proceeds Notes as the “Intercompany Proceeds Note” or “Intercompany Proceeds Notes”) such that the aggregate principal amount of Indebtedness subject to the Intercompany Proceeds Note and the Acquisition On-Loan (as described below) will equal €170 million. In the event the Austrian Acquisition is not consummated, the amount of the Intercompany Proceeds Note will be increased to €110 million. Interest will accrue on the Intercompany Proceeds Note at a rate at least equal to the interest rate payable on the Notes, with such adjustments as may be agreed between the parties or necessary to match any additional amounts due thereunder or any default or special interest payable with respect to the Notes and to comply with applicable law. The Intercompany Proceeds Note is repayable at the same time as the repayment in full or in part of amounts due under the Notes, whether at maturity, on early redemption or mandatory repurchase or upon acceleration. As described below under “— Security”, the obligations of the Issuer under the Notes will be secured by a first-priority assignment of the Intercompany Proceeds Note. In the event that Additional Notes or debt securities of the Issuer substantially identical to the Notes and Notes Guarantees are issued by the Issuer, the Issuer may loan an amount equal to the gross proceeds of such issuance to the Company or one or more of its Restricted Subsidiaries under an Additional Intercompany Proceeds Note, which shall also be subject to a firstpriority assignment. Unless the context otherwise requires, in this “Description of the Notes” section, the term “Intercompany Proceeds Note” will include any Additional Intercompany Proceeds Note. The Acquisition On-Loan Under the Acquisition On-Loan, on or prior to the Acquisition Closing Date, the Issuer will loan amounts released from the Escrow Account as described below under “— Escrow of Proceeds; Special Mandatory Redemption” in an amount necessary to repay the outstanding shareholder (and related) Indebtedness of the Target Group (estimated to be approximately €45 million but subject to adjustment as provided in the Acquisition Agreement) under one or more loans to Target and/or members of the Target Group (referred to collectively as the “Acquisition On-Loan”). Interest will accrue (and be deemed to accrue since the Issue Date) on the Acquisition On-Loan at a rate at least equal to the interest rate payable on the Notes, with such 109

adjustments as may be agreed between the parties or necessary to match any additional amounts due thereunder or any default or special interest payable with respect to the Notes and to comply with applicable law. The Acquisition On-Loan is repayable: (1)

at the same time as the repayment in full or in part of amounts due under the Notes (divided pro rata with the Intercompany Proceeds Note), whether at maturity, on early redemption or mandatory repurchase or upon acceleration: or

(2)

in connection with any sale or disposition of the Target (whether by merger, consolidation, the sale of all of its capital shares or the sale of all or substantially all of its assets (other than by way of lease)) which, at the time of such sale or disposition, is made in accordance with the provisions of the covenant described under “Certain Covenants — Limitation on Sales of Assets and Subsidiary Shares” and, if applicable, the covenant described under “— Merger and Consolidation”; provided, at the time of any such sale or disposition, any amounts outstanding under the Acquisition On-Loan are refinanced to become obligations under the Intercompany Proceeds Note.

While the Issuer will be the direct beneficiary of the Acquisition On-Loan, the holders of the Notes will benefit from a first-priority security interest over the Acquisition On-Loan. The Acquisition On-Loan will be guaranteed by the Company on a senior basis. To the extent the direct obligor under any portion of the Acquisition On-Loan is not the Target, the Target will guarantee such portion of the Acquisition On-Loan on a senior basis. In addition the Acquisition On-Loan will provide that, in certain circumstances, the Target may request that the Company pay the periodic interest due under the Acquisition On-Loan to the Issuer in Lieu of payment by voestalpine Stahlhandel GmbH. Security General The obligations of the Issuer under the Notes and the Indenture and the Guarantors under the Notes Guarantees will be secured by the following assets of the Company and its Restricted Subsidiaries (the “Collateral”): (1)

first-priority share pledges (the “Share Pledges”) over (a) on the Issue Date, the Capital Shares of the Issuer held by the Company and the Capital Shares of the Subsidiary Guarantors held by the Company, (b) upon consummation of the Austrian Acquisition, the Capital Shares of the Target held directly or indirectly by the Company (but not the Capital Shares of Subsidiaries of the Target) and (c) in all other cases, in compliance with the “— Certain Covenants — Future Subsidiary Guarantors; Future Share Pledges”;

(2)

a first-priority assignment over the Intercompany Proceeds Note (all amounts payable under the Intercompany Proceeds Note);

(3)

upon consummation of the Austrian Acquisition, a first-priority security interest over the Acquisition On-Loan (all amounts payable under the Acquisition On-Loan);

(4)

(a) prior to the release therefrom, a first-priority security interest in the funds held in the Escrow Account and (b) prior to the on-lending of the Unallocated Issuer Funds to the Company under the Intercompany Proceeds Note, a first-priority pledge over the Issuer Proceeds Bank Account; and

(5)

a first-priority pledge over the balance of the bank account into which the Asset Sale Cash Collateral is paid prior to application thereof in accordance with the covenant described under “Certain Covenants — Limitation on Sales of Assets and Subsidiary Shares”.

Subject to certain conditions, the assets constituting the Collateral (other than, in certain cases, the Intercompany Proceeds Note and the Acquisition On-Loan) may be pledged on a first-priority or junior ranking basis to secure Indebtedness other than the Notes and the Guarantees. The Collateral will be pledged to The Bank of New York, as Collateral Agent and/or as Security Agent for the benefit of the Trustee and the Holders of the Notes on a senior basis. Under the Indenture, only the Notes and the Guarantees, additional Notes (and the related Guarantees) and certain other Indebtedness of the Issuer and the Guarantors will be allowed to benefit from security over the Collateral, including the shares subject to the Share Pledges. The Issuer will enter into an intercreditor agreement (the “Intercreditor Agreement”) with the Company, the Trustee and the Collateral Agent which will effectively provide that all Additional Notes and other debt securities or Credit Facilities (and Hedging Obligations relating to the Notes and any of the foregoing) that, subject to the terms of the Indenture, are secured by the Collateral, will share in the Collateral (to the extent permitted in the definition of Permitted Collateral Liens) on an equal basis (or in the case of security interests junior to the security interests granted to the Notes and Notes Guarantees, on a junior basis); provided, that enforcement of remedies against the Collateral under the Intercreditor Agreement and the Security Documents may only be taken by the Collateral 110

Agent on the instruction of noteholders, creditors or their representatives representing at least 25% of the total Indebtedness (other than Indebtedness with respect to Hedging Obligations referred to above) secured by the Collateral and held by senior creditors, and the Collateral Agent under the Intercreditor Agreement and the Security Documents shall be directed by noteholders, creditors or their representatives representing such percentage. The Notes Guarantees will be effectively subordinated to any other existing and future secured Indebtedness of the Guarantors permitted to be Incurred under the Indenture to the extent of the value of the assets securing such Indebtedness unless such assets also secure the Notes Guarantees on an equal and ratable or senior basis. In the event of a bankruptcy or insolvency, each Guarantor’s secured lenders will have a prior secured claim to any collateral of such Guarantor securing the debt owed to them. Release of Collateral Liens on Collateral securing the Notes and the Notes Guarantees will be automatically and unconditionally released: (1)

upon the full and final payment and performance of all obligations of the Issuer under the Indenture and the Notes;

(2)

in accordance with the Security Documents and/or the Intercreditor Agreement (as in effect on the Issue date or as amended, supplemented or otherwise modified after the Issue Date to the extent such amendment, supplement or modification is permitted under the Indenture) upon the occurrence of an enforcement action taken on behalf of the Noteholders thereunder;

(3)

upon an asset sale which, at the time the Collateral is transferred, is made in accordance with the provisions of the covenant described under the caption “— Certain Covenants — Limitation on Sales of Assets and Subsidiary Shares”;

(4)

upon legal or covenant defeasance as described below under “— Defeasance” or upon satisfaction and discharge of the Issuer’s obligations under the Indenture as described below under “— Satisfaction and Discharge”;

(5)

if the Collateral is an asset of a Subsidiary Guarantor (or one of its Subsidiaries) that is to be designated as an Unrestricted Subsidiary, upon designation of the Subsidiary Guarantor as an Unrestricted Subsidiary in compliance with the terms of the Indenture;

(6)

if the Collateral is shares of a Subsidiary, upon a consolidation, merger or sale, conveyance or transfer of all or substantially all of the assets of such Subsidiary in accordance with the terms of the Indenture; and

(7)

if the Collateral is a Share Pledge of the Capital Shares of a Subsidiary Guarantor, upon the release of the Subsidiary Guarantee of such Subsidiary Guarantor as described under the section entitled “— Notes Guarantees — Release of Guarantees”.

Redemption The Notes will not be redeemable at the option of the Issuer prior to February 1, 2011, except as described in the section entitled “— Redemption for Taxation Reasons”, “Escrow of Proceeds; Special Mandatory Redemption” and hereunder. The Issuer may redeem the Notes at its option, in whole or in part, at the following redemption prices (expressed as percentages of the principal amount thereof), plus accrued and unpaid interest and Additional Amounts (as defined below), if any, to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the twelve-month period commencing on February 1 of the years set out below: Year

Percentage

2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

104.250% 102.125% 100.000%

At any time prior to February 1, 2011, the Notes may also be redeemed in whole or in part, at the Issuer’s option at a price equal to 100% of the principal amount thereof plus the Applicable Premium as of, and accrued but unpaid interest and Additional Amounts, if any, to, the date of redemption or purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date). At any time, or from time to time, on or prior to February 1, 2010, the Issuer may, at its option, use the Net Cash Proceeds of one or more Public Equity Offerings to redeem up to 35% of the principal amount of the Notes issued under the Indenture (including the principal amount of any Additional Notes) at a redemption price of 108.5% of the principal amount thereof plus accrued and unpaid interest thereon and Additional Amounts, if 111

any, to the date of redemption (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); provided that: (1)

at least 65% of the principal amount of Notes (which includes Additional Notes, if any) issued under the Indenture and not previously redeemed pursuant to the covenant described under “Escrow of Proceeds; Special Mandatory Redemption” remains outstanding immediately after any such redemption; and

(2)

the Issuer makes such redemption not more than 90 days after the consummation of any such Public Equity Offering.

All such redemptions or purchases may be made upon not less than 30 nor more than 60 days’ notice prior to the date of redemption in accordance with the provisions set forth under the section entitled “— Notices”. Selection and Notice of Redemption In the event that the Issuer chooses to redeem less than all of the Notes, selection of the Notes for redemption will be made by the Trustee either: (1)

in compliance with the requirements of the principal securities exchange, if any, on which the Notes are listed; or

(2)

if such Notes are not so listed or such exchange prescribes no method of selection, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate.

No Notes of a principal amount of €50,000 or less shall be redeemed in part. If a partial redemption is made with the proceeds of an Public Equity Offering, the Trustee will select the Notes only on a pro rata basis or on as near to a pro rata basis as is practicable. Notice of redemption will be mailed by first-class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. If any Note is to be redeemed in part only, then the notice of redemption that relates to such Note must state the portion of the principal amount thereof to be redeemed. A new Note in a principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the date of redemption, interest will cease to accrue on Notes or portions thereof called for redemption as long as the Issuer has deposited with the Paying Agent funds in satisfaction of the applicable redemption price. The Trustee will not be liable for selections made by it pursuant to this paragraph. At least 30 days but not more than 60 days before a redemption date, the Issuer will give notice of such redemption in accordance with the procedures described under “— Notices.” For so long as the Notes are listed on the Luxembourg Stock Exchange and traded on the Euro MTF Market and the rules of such stock exchange shall so require, the Issuer will notify the Luxembourg Stock Exchange of any such notice. Withholding Taxes All payments made by the Issuer, the Guarantors or a successor of any of the foregoing (each, a “Payor”) under, or with respect to, the Notes or the Notes Guarantees will be made free and clear of and without withholding or deduction for, or on account of, any present or future taxes, duties, levies, fees, assessments or governmental charges of whatever nature (including penalties, interest and other liabilities related thereto) (collectively, “Taxes”) imposed, levied, collected or assessed by or on behalf of (1) any jurisdiction in which the Payor is organized, resident or engaged in business, or any political subdivision or governmental authority thereof or therein having the power to tax; or (2) any jurisdiction from or through which payment on the Notes or such Notes Guarantee is made, or any political subdivision or governmental authority thereof or therein having the power to tax (each of the preceding clauses (1) and (2), a “Relevant Taxing Jurisdiction”) unless the withholding or deduction of such Taxes is then required by law. If any deduction or withholding for, or on account of, any Taxes of any Relevant Taxing Jurisdiction will at any time be required from any payments made with respect to the Notes or under any Notes Guarantees, including payments of principal, redemption price, interest or premium, if any, the Payor will increase such payments by such additional amounts (the “Additional Amounts”) as may be necessary in order that the net amounts received in respect of such payments by each Holder and beneficial owner of the Notes or the Trustee, as the case may be, after such withholding or deduction (including any such deduction or withholding from such Additional Amounts), will not be less than the amounts which would have been received in respect of such payments in the absence of such withholding or deduction; provided, however, that no such Additional Amounts will be payable with respect to: (a)

any Taxes that would not have been so imposed but for the existence of any present or former connection between the Holder or beneficial owner of such Note and the Relevant Taxing 112

Jurisdiction imposing such Taxes (other than the mere ownership or holding of such Note or Notes Guarantee or enforcement of rights under the Note, Indenture or Notes Guarantee or the receipt of payments in respect thereof); (b)

any Taxes that would not have been so imposed if the Holder had made a declaration of non-residence, any other claim or filing for exemption to which it is entitled or provide a tax residency certificate (provided that (x) such declaration of non-residence, other claim or filing for exemption or tax residency certificate is required by the applicable law of the Relevant Taxing Jurisdiction as a precondition to exemption from the requirement to deduct or withhold all or a part of any such Taxes and (y) at least 30 days prior to the first payment date with respect to which such declaration of non-residence, other claim or filing for exemption or tax residency certificate is required under the applicable law of the Relevant Taxing Jurisdiction, the relevant Holder at that time has been notified (in accordance with the procedures set forth in the Indenture) by the Payor or any other person through whom payment may be made that a declaration of non-residence, other claim or filing for exemption or tax residency certificate is required to be made or provided);

(c)

any Note presented for payment (where presentation is required) more than 30 days after the relevant payment is first made available for payment to the Holder (except to the extent that the Holder would have been entitled to Additional Amounts had the Note been presented during such 30-day period);

(d)

any Taxes that are payable otherwise than by deduction or withholding from a payment of the principal of, premium, if any, or interest on the Notes or Notes Guarantee;

(e)

any estate, inheritance, gift, sale, excise, transfer, personal property or similar tax, assessment or other governmental charge; or

(f)

any withholding or deduction imposed on a payment to an individual and required to be made pursuant to the European Union Savings Tax Directive (2003/48/EC) or related arrangements with third countries or associated territories on the taxation of savings income, or any law implementing or complying with, or introduced to conform to, such directive or related arrangements (the “EU Savings Tax Directive”).

Also, such Additional Amounts will also not be payable with respect to any payment of principal of (or premium, if any, on) or interest on such Note to any Holder who is a fiduciary or partnership or any person other than the sole beneficial owner of such payment, to the extent that a beneficiary or settlor with respect to such fiduciary, a member of such a partnership or the beneficial owner of such payment would not have been entitled to the Additional Amounts had such beneficiary, settlor, member or beneficial owner been the actual Holder of such Note. The Payor will, upon written request of each Holder of Notes (subject to the exclusions set forth in paragraphs (a), (b), (c), (d), (e) and (f) of this section, and provided that reasonable supporting documentation is provided) reimburse each such Holder for the amount of any such Taxes levied or imposed by a Taxing Jurisdiction and paid by such Holder as a result of payments made under or with respect to the Notes. Any payment pursuant to this section shall be an Additional Amount. The Payor will (a) make any required withholding or deduction and (b) remit the full amount deducted or withheld to the Relevant Taxing Jurisdiction in accordance with applicable law. The Payor will use all reasonable efforts to obtain certified copies of tax receipts evidencing the payment of any Taxes so deducted or withheld from each Relevant Taxing Jurisdiction imposing such Taxes and will provide such certified copies to each Holder. The Payor will attach to each certified copy a certificate stating (x) that the amount of withholding Taxes evidenced by the certified copy was paid in connection with payments in respect of the principal amount of Notes then outstanding and (y) the amount of such withholding Taxes paid per €1,000 principal amount of the Notes. Upon request, copies of such documentation will be supplied by the Payor to the Trustee, the Holder, or if the Notes are then listed on the Luxembourg Stock Exchange and traded on the Euro MTF Market, the Paying Agent. At least 30 days prior to each date on which any payment under or with respect to the Notes or Notes Guarantee is due and payable (unless such obligation to pay Additional Amounts arises shortly before or after the 30th day prior to such date, in which case it shall be promptly thereafter), if the Payor will be obligated to pay Additional Amounts with respect to such payment, the Payor will deliver to the Trustee an Officers’ Certificate stating the fact that such Additional Amounts will be payable, the amounts so payable and will set forth such other information necessary to enable the Trustee to pay such Additional Amounts to Holders on the payment date. Each such Officers’ Certificate may be relied upon by the Trustee until receipt of a further Officers’ Certificate addressing such matters. 113

The Indenture will further provide that, if the Payor conducts business in any jurisdiction (an “Additional Taxing Jurisdiction”) other than a Relevant Taxing Jurisdiction and, as a result, is required by the law of such Additional Taxing Jurisdiction to deduct or withhold any amount on account of taxes imposed by such Additional Taxing Jurisdiction from payments under the Notes, which would not have been required to be so deducted or withheld but for such conduct of business in such Additional Taxing Jurisdiction, the Additional Amounts provision described above shall be considered to apply to such holders as if references in such provision to “Taxes” included taxes imposed by way of deduction or withholding by any such Additional Taxing Jurisdiction (or any political subdivision thereof or taxing authority therein). Wherever in the Indenture, the Notes or any Notes Guarantee are mentioned, in any context, (1) the payment of principal, (2) redemption prices or purchase prices in connection with a redemption or purchase of the Notes or a Notes Guarantee, (3) interest or (4) any other amount payable on or with respect to any of the Notes or the Notes Guarantees, such reference shall be deemed to include payment of Additional Amounts as described under this heading to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof. The Payor will pay any present or future stamp, court or documentary taxes, or any other excise or property taxes, charges or similar levies which arise in any jurisdiction from the creation, issuance, execution, enforcement, delivery or registration of any Notes or any other document or instrument referred to therein (other than a transfer of the Notes), or the receipt of any payments with respect to the Notes, including interest and penalties with respect thereto, imposed by or in any Relevant Taxing Jurisdiction in respect of the execution, issue, enforcement or delivery of the Notes or any other document or instrument referred to thereunder. The foregoing obligations will survive any termination, defeasance or discharge of the Indenture and will apply mutatis mutandis to any jurisdiction in which any (1) successor Person to a Payor is organized or resident for tax purposes or (2) Subsidiary of the Company which becomes a Subsidiary Guarantor after the date of the Indenture is organized or resident for tax purposes, or, in each case, any political subdivision or taxing authority or agency thereof or therein. Redemption for Taxation Reasons The Notes may be redeemed, at the option of the Issuer, in whole but not in part, upon giving not less than 30 nor more than 60 days’ notice to each Holder of the Notes with a copy to the Trustee (which notice will be irrevocable), at a price equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon, if any, to the redemption date, together with all Additional Amounts, if any, which otherwise would be payable if as a result of any amendment to, or change in, the laws or treaties (or any regulations or rulings promulgated thereunder) of a Relevant Taxing Jurisdiction affecting taxation; or any amendment to or change in an official interpretation or application regarding such laws, treaties, regulations or rulings, including a holding, judgment or order by a court of competent jurisdiction which becomes effective on or after the date hereof (a “Change in Tax Law”) the Issuer, with respect to the Notes, or a Guarantor, with respect to a Notes Guarantee, is, or on the next interest payment date in respect of the Notes, would be, required to pay Additional Amounts in respect of any Note pursuant to the terms and conditions thereof which obligation cannot be avoided by the taking of reasonable measures available to it (including making payment through a paying agent in another jurisdiction); provided, however, that (a) no such notice of redemption may be given earlier than 90 days prior to the earliest date on which the Issuer or Guarantor, as the case may be, would be obligated to pay such Additional Amounts were a payment in respect of the Notes or a Notes Guarantee then due and payable and (b) at the time such notice is given, such obligation to pay such Additional Amounts remains in effect. In the case of any jurisdiction that is a Relevant Taxing Jurisdiction on the Issue Date, the applicable Change in Tax Law must become effective on or after the date of this Offering Memorandum. In the case of a jurisdiction that becomes a Relevant Taxing Jurisdiction after the Issue Date, the applicable Change in Tax Law must become effective after the date that such jurisdiction becomes a Relevant Taxing Jurisdiction. Prior to the giving of any notice of redemption pursuant to this provision, the Issuer will deliver to the Trustee (a) an Officers’ Certificate stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred and (b) an Opinion of Counsel, such opinion being reasonably acceptable to the Trustee, qualified under the laws of the Relevant Taxing Jurisdiction to the effect that the conditions precedent to the right of the Issuer to redeem have occurred. Such notice, once delivered to the Trustee, will be irrevocable. Escrow of Proceeds; Special Mandatory Redemption Under the terms of an escrow agreement (the “Escrow Agreement”) to be entered into on the Issue Date between the Issuer and The Bank of New York, as escrow agent (the “Escrow Agent”), the Issuer will deposit in an escrow account (the “Escrow Account”) established with the Escrow Agent an amount (the “Escrowed 114

Funds”) sufficient to redeem €60 million aggregate principal amount of the Notes (the “Mandatorily Redeemable Notes”) at a redemption price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest thereon from and including the Issue Date through the Special Mandatory Redemption Date (as defined below). The Mandatorily Redeemable Notes will be subject to a special mandatory redemption (the “Special Mandatory Redemption”) in the event the Austrian Acquisition is not consummated on or prior to June 30, 2007 (the “Special Mandatory Redemption Trigger Date”) or the Acquisition Agreement is terminated at any time prior thereto (either of such events a “Special Mandatory Redemption Event”). The Issuer will cause the notice of the Special Mandatory Redemption to be delivered to the Escrow Agent and to each Holder of Notes no later than the fifth Business Day following the Special Mandatory Redemption Event and will redeem the Mandatorily Redeemable Notes no later than ten Business Days following the date of such notice of redemption (such date, the “Special Mandatory Redemption Date”). The selection of the Notes for redemption will be made by the Trustee either: (1) in compliance with the requirements of the principal securities exchange, if any, on which the Notes are listed; or (2) if such Notes are not so listed or such exchange prescribes no method of selection, on a pro rata basis, by lot or by such other method as the Trustee shall deem fair and appropriate. The Company will only be entitled to direct the Escrow Agent to release the escrowed funds in accordance with the Escrow Agreement. Pursuant to the Escrow Agreement, the Escrow Agent will release the escrowed funds upon satisfaction of the following condition: the presentation by the Company of an Officers’ Certificate certifying that (i) all conditions precedent to consummation of the Austrian Acquisition have been satisfied or waived (except for conditions which by their nature are to be satisfied at closing or substantially contemporaneously with the closing), (ii) the Austrian Acquisition will be consummated within 24 hours in substantially the manner described in the Acquisition Agreement, as amended or modified, provided such amendments or modifications are not, in the aggregate, materially adverse to the Holders of the Notes after giving effect to the Austrian Acquisition (determined in good faith by the Supervisory Board of the Company), on or prior to the Special Mandatory Redemption Trigger Date and (iii) the Austrian Acquisition will result in the ownership by the Company of 74.9% of the Capital Shares of the Target. Following the release of the escrowed funds, such funds proceeds, will be applied by the Issuer, pursuant to the Acquisition On-Loan, to repay outstanding shareholder (and related) Indebtedness of the Target Group (currently estimated to be approximately €45 million), which will fluctuate until the Acquisition Closing Date, with the remainder provided to the Company pursuant to the Intercompany Proceeds Note. As promptly as practicable and in any event prior to the 10th Business Day following the Acquisition Closing Date, the Company will pledge on a first priority basis the Capital Shares of Target held directly or indirectly by the Company and grant a first priority security interest over the Acquisition On-Loan. Prior to the disbursement of the escrowed funds, the Notes will be secured by a firstpriority lien over the escrowed funds. As long as the escrowed funds are deposited with the Escrow Agent, they will be invested by the Escrow Agent at the instruction of the Company in cash or Cash Equivalents. If the Escrow Agent receives a notice of Special Mandatory Redemption pursuant to the terms of the Notes, the Escrow Agent will convert into cash all escrowed funds then held by it not later than the last Business Day prior to the Special Mandatory Redemption Date and transmit an amount of such funds sufficient to pay the redemption price, plus accrued and unpaid interest, for the Mandatory Redeemable Notes to the Trustee on such date. Concurrently with such release to the Trustee, the Escrow Agent will release any excess of escrowed funds over the mandatory redemption price plus accrued and unpaid interest to the date of redemption to the Issuer, and the Issuer will be permitted to use such funds at its discretion (to the extent permitted by the Indenture). Sinking Fund The Notes will not be entitled to the benefit of any sinking fund. Change of Control Upon the occurrence of a Change of Control, each Holder will have the right to require the Issuer to repurchase all or a portion (equal to €50,000 or an integral multiple thereof) of such Holder’s Notes at a purchase price in cash equal to 101% of the principal amount of the Notes plus accrued and unpaid interest to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date) pursuant to the offer described below and in accordance with the other procedures set out in the Indenture. No later than the date that is 30 days after any Change of Control, the Issuer will mail a notice (the “Change of Control Offer”) to each Holder, with a copy to the Trustee, (1)

stating that a Change of Control has occurred and that such Holder has the right to require the Issuer to purchase such Holder’s Notes at a purchase price in cash equal to 101% of the principal 115

amount of such Notes plus accrued and unpaid interest to the date of purchase (subject to the right of holders of record on a record date to receive interest on the relevant interest payment date) (the “Change of Control Payment”); (2)

stating the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed) (the “Change of Control Payment Date”);

(3)

describing the circumstances and relevant facts regarding the transaction or transactions that constitute the Change of Control; and

(4)

describing the procedures determined by the Issuer, consistent with the Indenture, that a Holder must follow in order to have its Notes repurchased.

On the Change of Control Payment Date, the Issuer will, to the extent lawful: (1)

accept for payment all Notes properly tendered and not withdrawn pursuant to the Change of Control Offer;

(2)

deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes so tendered; and

(3)

deliver or cause to be delivered to the Trustee an Officer’s Certificate stating the Notes or portions of Notes being purchased by the Issuer in the Change of Control Offer.

On or promptly after the Change of Control Payment Date, the Issuer will, to the extent lawful: (1)

deliver, or cause to be delivered, to the principal Paying Agent the Global Notes in order to reflect thereon the portion of such Notes or portions thereof that have been tendered to and purchased by the Issuer; and

(2)

deliver, or cause to be delivered, to the relevant Register for cancellation all Definitive Notes accepted for purchase by the Issuer.

If any Definitive Notes have been issued, the Paying Agent will promptly mail to each Holder of Definitive Notes so tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder of Definitive Notes a new Note equal in principal amount to the unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a principal amount that is at least €50,000 and an integral multiple of €1,000 thereof. The Change of Control provisions described above will be applicable whether or not any other provisions of the Indenture are applicable. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders to require that the Issuer repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction. The existence of a Holder’s right to require the Issuer to repurchase such Holder’s Notes upon the occurrence of a Change of Control may deter a third party from seeking to acquire the Company or its Subsidiaries in a transaction that would constitute a Change of Control or make such an acquisition more difficult. The Issuer will not be required to make a Change of Control Offer upon a Change of Control if (1) a third party makes the Change of Control Offer in the manner, at the times or otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Issuer and purchases all Notes validly tendered and not withdrawn under such Change of Control offer or (2) notice of redemption has been given as described under “Optional Redemption”. A Change of Control Offer may be made in advance of a Change of Control (and will satisfy the Issuer’s obligation to make such an offer upon such Change of Control) if a definitive agreement is in place at the time of the making of the Change of Control Offer that would, upon consummation, result in a Change of Control, and such Change of Control Offer is otherwise made by the Issuer or such third party in compliance with the provisions of this covenant. The Issuer’s ability to repurchase Notes issued by it pursuant to a Change of Control Offer may be limited by a number of factors. The occurrence of certain of the events that constitute a Change of Control could require a mandatory prepayment of Indebtedness under the Revolving Credit Facilities. In addition, certain existing and future Indebtedness of the Company or its Subsidiaries contain or may contain prohibitions on the occurrence of certain events that would constitute a Change of Control or require such Indebtedness to be repurchased or repaid upon a Change of Control. Moreover, the exercise by the Holders of their right to require the Issuer to repurchase the Notes could cause a default under, or require a repurchase of, such Indebtedness, even if the Change of Control itself does not, due to the financial effect of such repurchase on the Issuer. Finally, the Issuer’s ability to pay cash to the Holders upon a repurchase may be limited by the Issuer’s then existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make any required repurchases. 116

Even if sufficient funds were otherwise available, the terms of the Company’s other Indebtedness may prohibit the Issuer’s prepayment of the Notes or any payment by the Issuer or restrict the ability of the Company or its Subsidiaries to fund any such payments before the scheduled maturity of the Notes. Consequently, if the Company is not able to prepay or cause to be prepaid the Indebtedness outstanding under the Revolving Credit Facilities (to the extent containing such restrictions) and any other Indebtedness containing similar restrictions or obtain requisite waivers or consents, the Issuer may be unable to fulfill its repurchase obligations if Holders exercise their repurchase rights following a Change of Control, resulting in a default under the Indenture. The definition of “Change of Control” includes a disposition of all or substantially all of the property and assets of the Company and its Restricted Subsidiaries taken as a whole to specified other Persons. There is no precise established definition of the phrase “substantially all” under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve a disposition of “all or substantially all” of the property or assets of a Person. As a result, it may be unclear as to whether a Change of Control has occurred and whether a Holder may require the Issuer to make an offer to repurchase the Notes as described above. The provisions of the Indenture relating to the Issuer’s obligation to make an offer to repurchase the Notes as a result of a Change of Control may be waived or modified with the written consent of Holders of a majority in outstanding principal amount of the Notes. The Issuer will give notice of the commencement and results of the Change of Control Offer in accordance with the procedures described under “— Notices.” In addition, the Issuer will comply with the requirements of any securities laws and regulations to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Change of Control Offer, including Rule 14e-1 under the Exchange Act, and any other applicable securities laws or regulations. To the extent that the provisions of any securities or other applicable laws or regulations conflict with the “Change of Control” provisions of the Indenture, the Issuer shall comply with the applicable laws and regulations and shall not be deemed to have breached its obligations under the “Change of Control” provisions of the Indenture by virtue thereof. Certain Covenants Limitation on Indebtedness The Company will not, and will not permit any of its Restricted Subsidiaries to, Incur any Indebtedness (including Acquired Indebtedness); provided, however, the Company may Incur Indebtedness (including Acquired Indebtedness) and the Issuer may issue Additional Notes (or debt securities substantially identical to the Notes (other than with respect to interest, maturity and redemption provisions)) and the Subsidiary Guarantors or Finance Subsidiaries may Incur Indebtedness (including Acquired Indebtedness) if on the date of the Incurrence of such Indebtedness, after giving effect thereto on a pro forma basis, no Default or Event of Default has occurred or is continuing and the Consolidated Fixed Charge Coverage Ratio of the Company would have been greater than 2.25 to 1.0. The first paragraph of this covenant will not prohibit the Incurrence of the following Indebtedness: (1)

Indebtedness of the Company or any Restricted Subsidiary (other than the Issuer) Incurred pursuant to Credit Facilities (and any “parallel debt” or similar obligations created under the Credit Facilities or the security documents related thereto) in an aggregate principal amount at any time outstanding not to exceed €40 million, less the amount of any permanent repayments of such Indebtedness made with Net Available Cash from Asset Dispositions in accordance with the provisions of “— Limitation on Sales of Assets and Subsidiary Shares”;

(2)

other than in the case of an Incurrence of Indebtedness by the Issuer or a Finance Subsidiary, (i) Indebtedness of the Company owing to and held by any Restricted Subsidiary or (ii) Indebtedness of a Restricted Subsidiary owing to and held by the Company or any Restricted Subsidiary; provided, however, that: (a)

(i) any subsequent issuance or transfer of Capital Shares or any other event which results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary of the Company and (ii) any sale or other transfer of any such Indebtedness to a Person other than the Company or a Restricted Subsidiary of the Company, shall be deemed, in each case, to constitute an Incurrence of such Indebtedness by the obligor thereon;

(b)

if the Company or a Subsidiary Guarantor is the obligor on such Indebtedness and the Company or a Subsidiary Guarantor is not an obligee on such Indebtedness, such 117

Indebtedness (other than Indebtedness of the Company under the Intercompany Proceeds Note and Indebtedness of the Target under the Acquisition On-Loan and Indebtedness owed to the Issuer or a Finance Subsidiary under a similar on-lending of proceeds from a debt financing) is expressly subordinated in right of payment to the prior payment in full of all obligations then due of the Company or such Subsidiary Guarantor, as the case may be, with respect to the Notes Guarantee; and (c)

any Indebtedness of the Company or a Subsidiary Guarantor to a Restricted Subsidiary that is not a Guarantor is unsecured;

(3)

Indebtedness represented by (a) the Notes (other than any Additional Notes) (and any “parallel debt” obligations created under the Indenture or the Security Documents) and (b) any Notes Guarantees (and any “parallel debt” obligations created under the Security Documents);

(4)

any Indebtedness outstanding on the Issue Date (including, in the case of existing factoring arrangements and the Company’s promissory note program, the amount of undrawn commitments available thereunder as of the Issue Date) other than (x) Indebtedness referred to in clauses (1), (2), (7), (8), (9), (10), (11), (12), (13), (14), (15), (16) and (17) of this “— Limitation on Indebtedness” covenant and (y) Indebtedness repaid or refinanced with the proceeds of, or simultaneous with, the offering of the Notes;

(5)

Acquired Indebtedness of a Restricted Subsidiary; provided, however, that at the time of such acquisition and after giving pro forma effect thereto, the Company would have been able to Incur €1.00 of additional Indebtedness pursuant to the first paragraph of this covenant;

(6)

any Refinancing Indebtedness Incurred in respect of any Indebtedness described in clauses (3), (4) (other than Indebtedness excluded under subclauses (x) and (y)) or (5) or this clause (6) or Incurred pursuant to the first paragraph of this covenant;

(7)

Hedging Obligations entered into for bona fide hedging purposes and not for speculative purposes (as to which a determination in good faith by the Supervisory Board or the Management Board of the Company shall be conclusive);

(8)

other than in the case of an Incurrence of Indebtedness by the Issuer or a Finance Subsidiary, Purchase Money Indebtedness and Indebtedness represented by Capitalized Lease Obligations in an aggregate outstanding principal amount which, when taken together with the principal amount of all other Indebtedness Incurred pursuant to this clause (8) and then outstanding, will not exceed at any time €10 million;

(9)

other than in the case of an Incurrence of Indebtedness by the Issuer or a Finance Subsidiary, Indebtedness Incurred in respect of (a) workers’ compensation claims, self-insurance obligations, performance, surety and similar bonds and completion guarantees and warranties provided by the Company or a Restricted Subsidiary Incurred in the ordinary course of business and (b) letters of credit, bankers’ acceptances, bills of exchange or other similar instruments or obligations issued or relating to liabilities or obligations Incurred in the ordinary course of business;

(10)

other than in the case of an Incurrence of Indebtedness by the Issuer or a Finance Subsidiary, Indebtedness arising from agreements of the Company or a Restricted Subsidiary providing for indemnification, adjustment of purchase price, earn-out or similar obligations, in each case, Incurred or assumed in connection with the acquisition or disposition of any business, assets or Capital Shares of a Restricted Subsidiary of the Company; provided that (A) the maximum liability of the Company and its Restricted Subsidiaries in respect of all such Indebtedness shall at no time exceed the gross proceeds, including the Fair Market Value of non-cash proceeds (measured at the time received and without giving effect to any subsequent changes in value), actually received by the Company and its Restricted Subsidiaries in connection with a disposition and (B) in the case of acquisitions, (x) such Indebtedness is not reflected on the balance sheet of the Company or a Restricted Subsidiary (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet shall not be deemed to be reflected on the balance sheet for purposes of this clause (B)) and (y) on the date of the relevant agreement in respect of such acquisition under which the obligation to incur such Indebtedness arises, the Company would have been able to incur €1.00 of additional Indebtedness pursuant to the first paragraph of this covenant; 118

(11)

(12)

(13)

(14)

(15)

(16)

(17)

(18) (19)

other than in the case of an Incurrence of Indebtedness by the Issuer or a Finance Subsidiary, Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within five Business Days of Incurrence; (a) Guarantees by the Company or any Subsidiary Guarantor of Indebtedness of the Company, the Issuer or any Subsidiary Guarantor otherwise permitted to be Incurred under the Indenture; provided, that if the Indebtedness being Guaranteed is subordinated in right of payment to the Notes or a Notes Guarantee, then such Guarantee shall be subordinated to the same or greater extent as the Indebtedness Guaranteed; (b) Guarantees by any Restricted Subsidiary of the Company that is not a Subsidiary Guarantor otherwise permitted to be Incurred under the Indenture; and (c) Additional Notes Guarantees by the Guarantors of Additional Notes (or Guarantees by the Guarantors of debt securities of the Issuer substantially identical to the Notes (other than with respect to interest, maturity and redemption provisions)) otherwise permitted to be Incurred under the Indenture; Indebtedness constituting reimbursement obligations with respect to bank or insurance company bonds or guarantees and VAT guarantees issued in the ordinary course of business; provided, however, that, upon valid demand being made under such reimbursement obligations, such demands are satisfied within 90 days of the date of such demand; other than in the case of an Incurrence of Indebtedness by the Issuer or a Finance Subsidiary Indebtedness owed on a short-term basis to banks or other financial institutions Incurred in the ordinary course of business of the Company and its Restricted Subsidiaries maintained with such banks or financial institutions and which arises in connection with ordinary banking arrangements to manage cash balances of the Company and its Restricted Subsidiaries; Indebtedness of Target and its Subsidiaries outstanding on the Acquisition Closing Date to the extent that in the aggregate, such Indebtedness either (x) is subsequently repaid and refinanced with the proceeds of the Acquisition On-Loan or otherwise repaid substantially simultaneously with the closing of the Austrian Acquisition or (y) to the extent not so repaid and refinanced, when taken together with the principal amount of all other Indebtedness Incurred pursuant to this clause (15(y)) and then outstanding, will not exceed at any time €20.0 million; Indebtedness of Centrolstal and its Subsidiaries which, when taken together with the principal amount of all other such Indebtedness Incurred pursuant to this clause (16) and then outstanding, will not exceed at any time €20.0 million; Indebtedness of Kapital Sp. z o.o. and its Subsidiaries which, when taken together with the principal amount of all other such Indebtedness Incurred pursuant to this clause (17) and then outstanding, will not exceed at any time €5.0 million; customer deposits and advance payments received in the ordinary course of business from customers for goods purchased in the ordinary course of business; deferred purchase obligations (including with respect to the remaining minority interest) arising in connection with the Austrian Acquisition to the extent required to the classified by the Company as Indebtedness (but not the Incurrence of Indebtedness to satisfy such obligations); and

(20)

other than in the case of an Incurrence of Indebtedness by the Issuer or a Finance Subsidiary, additional Indebtedness of the Company and its Restricted Subsidiaries in an aggregate outstanding principal amount which, when taken together with the principal amount of all other Indebtedness Incurred pursuant to this clause (20) and then outstanding, will not exceed €7.5 million. For purposes of determining compliance with, and the outstanding principal amount of any particular Indebtedness Incurred pursuant to and in compliance with, this covenant: (1) in the event that Indebtedness meets the criteria of more than one of the types of Indebtedness described in the first and second paragraphs of this covenant, the Company, in its sole discretion, will classify such item of Indebtedness on the date of Incurrence in any manner which complies with this covenant, will only be required to include the amount and type of such Indebtedness in one of such clauses and may reclassify from time to time all or any portion of such Indebtedness in any manner that then complies with this covenant; (2) all Indebtedness outstanding on the date of the Indenture under the Revolving Credit Facilities shall be deemed initially Incurred on the Issue Date under clause (1) of the second paragraph of this covenant and not the first paragraph or clause (4) of the second paragraph of this covenant; 119

(3)

Guarantees of, or obligations in respect of letters of credit relating to, Indebtedness which is otherwise included in the determination of a particular amount of Indebtedness shall not be included;

(4)

if obligations in respect of letters of credit are Incurred pursuant to the Revolving Credit Facilities and are being treated as Incurred pursuant to clause (1) of the second paragraph above and the letters of credit relate to other Indebtedness, then such other Indebtedness shall not be included; and

(5)

the principal amount of any Disqualified Capital Shares, or Preferred Shares of a Restricted Subsidiary, will be equal to the greater of the maximum mandatory redemption or repurchase price (not including, in either case, any redemption or repurchase premium) or the liquidation preference thereof.

For the avoidance of doubt, the Company is permitted to divide and classify at any time and from time to time an item of Indebtedness in more than one of the clauses set forth in the second paragraph or the first paragraph of this covenant in any manner that then complies with this covenant. In each case above, debt permitted to be incurred also is permitted to include any “parallel debt” or similar obligations created in respect thereof. Accrual of interest, accrual of dividends, the accretion of accreted value, the accretion or amortization of original issue discount, the payment of interest in the form of additional Indebtedness and the payment of dividends in the form of additional shares of Preferred Shares or Disqualified Capital Shares will not be deemed to be an Incurrence of Indebtedness for purposes of this covenant. For purposes of this covenant, the amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof in the case of any Indebtedness issued with original issue discount and (ii) the principal amount or liquidation preference thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness. In addition, if at any time an Unrestricted Subsidiary becomes a Restricted Subsidiary, any Indebtedness of such Subsidiary shall be deemed to be Incurred by a Restricted Subsidiary as of such date (and, if such Indebtedness is not permitted to be Incurred as of such date under this “Limitation on Indebtedness” covenant, the Issuer shall be in Default of this covenant). For purposes of determining compliance with any euro-denominated restriction on the Incurrence of Indebtedness, the euro-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was Incurred, in the case of term Indebtedness, or first committed, in the case of revolving credit Indebtedness; provided that if such Indebtedness is Incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable euro-dominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such euro-dominated restriction shall be deemed not to have been exceeded so long as the principal amount in such foreign currency of such refinancing Indebtedness does not exceed the principal amount in such foreign currency of such Indebtedness being refinanced. Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that the Company and its Restricted Subsidiaries may Incur pursuant to this covenant shall not be deemed to be exceeded solely as a result of fluctuations in the exchange rate of currencies. The principal amount of any Indebtedness Incurred to refinance other Indebtedness, if Incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such Refinancing Indebtedness is denominated that is in effect on the date of such refinancing. Limitation on Restricted Payments The Company will not, and will not permit any of its Restricted Subsidiaries, directly or indirectly, to: (1)

(2)

declare or pay any dividend or make any distribution on or in respect of its Capital Shares (including any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) except: (a)

dividends or distributions payable in Qualified Capital Shares of the Company; and

(b)

dividends or distributions payable to the Company or a Restricted Subsidiary of the Company (and in the case of any such dividends payable by a Restricted Subsidiary of the Company that is not a Wholly Owned Subsidiary, to the holders of Capital Shares (other than Disqualified Capital Shares) (or owners of an equivalent interest in the case of a Restricted Subsidiary that is an entity other than a corporation) on a pro rata basis);

purchase, redeem, defease or otherwise acquire or retire for value, directly or indirectly, any Capital Shares of the Company or of any direct or indirect parent of the Company held by Persons other than the Company or a Restricted Subsidiary of the Company (other than in exchange for Qualified Capital Shares of the Company); 120

(3)

make any principal payment on, or purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment, any Subordinated Indebtedness of the Issuer or any Guarantor Subordinated Indebtedness of a Guarantor (other than the purchase, repurchase, defeasance, redemption, prepayment or other acquisition or retirement for value of such Indebtedness (a) purchased in anticipation of or in lieu of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of such purchase, repurchase, defeasance or other acquisition or (b) between or among the Company and any of its Restricted Subsidiaries); or

(4)

make any Restricted Investment in any Person;

(any such dividend, distribution, purchase, redemption, repurchase, defeasance, other acquisition or retirement or Restricted Investment referred to the clauses (1) through (4) are referred to herein as a “Restricted Payment”), if at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (1)

a Default or an Event of Default shall have occurred and be continuing or would occur as a result of such Restricted Payment; or

(2)

the Company is not able to incur at least €1.00 of additional Indebtedness in compliance with the first paragraph under the “— Limitation on Indebtedness” covenant after giving effect, on a pro forma basis, to such Restricted Payment; or

(3)

the aggregate amount of such Restricted Payments (including the proposed Restricted Payment) made subsequent to the Issue Date (the amount expended for such purposes, if other than in cash, being the Fair Market Value of such property) shall exceed the sum of (without duplication): (a)

50% of the Consolidated Net Income for the period (treated as one accounting period) from the beginning of the first fiscal quarter commencing after the date of the Indenture to the end of the most recent fiscal quarter ending prior to the date of such Restricted Payment for which financial statements are available (or, in case such Consolidated Net Income is a deficit, minus 100% of such deficit); plus

(b)

100% of the aggregate Net Cash Proceeds received by the Company from the issue or sale of its Qualified Capital Shares or other capital contributions subsequent to the Issue Date (other than Net Cash Proceeds received from an issuance or sale of such Capital Shares to a Subsidiary of the Company or an employee share ownership plan, option plan or similar trust to the extent in each case such sale is funded or guaranteed by the Company or any Restricted Subsidiary of the Company); plus

(c)

the amount by which Indebtedness of the Company or a Restricted Subsidiary is reduced on the Company’s balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the Issue Date of any Indebtedness of the Company or a Restricted Subsidiary (whether issued before or after the Issue Date) convertible or exchangeable for Qualified Capital Shares of the Company (less the amount of any cash, or the Fair Market Value of any other property, distributed by the Company upon such conversion or exchange, and increased, without duplication, by the amount of such cash or property received by the Company or a Restricted Subsidiary upon such conversion or exchange); plus

(d)

the amount equal to the net reduction in Restricted Investments made by the Company or any of its Restricted Subsidiaries in any Person resulting from: (i)

repurchases or redemptions of such Restricted Investments by such Person, proceeds realized upon the sale of such Restricted Investment to an unaffiliated purchaser, repayments of loans or advances or other transfers of assets (including by way of dividend or distribution) by such Person to the Company or any Restricted Subsidiary; or

(ii)

the redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the definition of “Investment”) not to exceed, in the case of any Unrestricted Subsidiary, the amount of Investments previously made by the Company or any Restricted Subsidiary in such Unrestricted Subsidiary,

which amount in each case under this clause (d) was included in the calculation of the amount of Restricted Payments; provided, however, that such amounts included under this clause (d) will be excluded from Consolidated Net Income for purposes of this paragraph. 121

The provisions of the preceding paragraph will not prohibit: (1)

any purchase, repurchase, redemption, defeasance or other acquisition or retirement of Capital Shares (including Disqualified Capital Shares) of the Company or Subordinated Indebtedness of the Issuer or Guarantor Subordinated Indebtedness of a Guarantor made by exchange for, or out of the proceeds of the sale of, Qualified Capital Shares of the Company (other than Qualified Capital Shares issued or sold to a Subsidiary or an employee share ownership plan or similar trust to the extent in each case such sale is funded or guaranteed by the Company, the Issuer or any Restricted Subsidiary of the Company), which sale occurs substantially concurrently with, or to the extent declared at the time of sale for such purpose, within 60 days of, such purchase, repurchase, redemption, defeasance or other acquisition or retirement; provided, however, that (a) such purchase, repurchase, redemption, defeasance, acquisition or retirement will be excluded in subsequent calculations of the amount of Restricted Payments and (b) the Net Cash Proceeds from such sale of Qualified Capital Shares will be excluded from clause (3)(b) of the preceding paragraph;

(2)

any purchase, repurchase, redemption, defeasance or other acquisition or retirement of Subordinated Indebtedness of the Issuer or Guarantor Subordinated Indebtedness of a Guarantor made by exchange for, or out of the proceeds of the sale of, Indebtedness that is permitted to be Incurred pursuant to the covenant described under “— Limitation on Indebtedness” and that in each case constitutes either (a) Refinancing Indebtedness or (b) Subordinated Indebtedness or Guarantor Subordinated Indebtedness Incurred pursuant to the first paragraph of the covenant described under “— Limitation on Indebtedness”, which sale occurs substantially concurrently with, or to the extent declared at the time of sale for such purpose, within 60 days of, such purchase, repurchase, redemption, defeasance or other acquisition or retirement; provided, however, that such purchase, repurchase, redemption, defeasance, acquisition or retirement will be excluded in subsequent calculations of the amount of Restricted Payments;

(3)

any purchase, repurchase, redemption, defeasance or other acquisition or retirement of Disqualified Capital Shares of the Company or a Restricted Subsidiary made by exchange for or out of the proceeds of the sale of Disqualified Capital Shares of the Company or a Restricted Subsidiary, as the case may be, that, in each case, is permitted to be Incurred pursuant to the covenant described under “— Limitation on Indebtedness” and that in each case constitutes either (a) Refinancing Indebtedness or (b) Subordinated Indebtedness or Guarantor Subordinated Indebtedness Incurred pursuant to the first paragraph of the covenant described under “— Limitation on Indebtedness”, which sale occurs substantially concurrently with, or to the extent declared at the time of sale for such purpose, within 60 days of, such purchase, repurchase, redemption, defeasance or other acquisition or retirement; provided, however, that such purchase, repurchase, redemption, defeasance, acquisition or retirement will be excluded in subsequent calculations of the amount of Restricted Payments;

(4)

so long as no Event of Default has occurred and is continuing, the purchase, repurchase, redemption or other acquisition, cancellation or retirement for value of Capital Shares of the Company or any Restricted Subsidiary of the Company or any direct or indirect Parent Company held by any existing or former employees or management of the Company or any Subsidiary of the Company or their assigns, estates or heirs, in each case in connection with the repurchase provisions under employee share option or share purchase agreements or other agreements to compensate management employees; provided that such purchases, repurchases, redemptions or other acquisitions pursuant to this clause will not exceed €0.5 million in the aggregate during any calendar year (with any unused amounts available to be used in the succeeding 24 months); provided, further, that the amount of any such purchase, repurchase, redemption or other acquisition will be included in subsequent calculations of the amount of Restricted Payments;

(5)

repurchases of Capital Shares deemed to occur upon the exercise of share options, warrants or other convertible securities if such Capital Shares represents a portion of the exercise price thereof; provided, however, that such repurchases will be excluded from subsequent calculations of the amount of Restricted Payments;

(6)

the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of any Subordinated Indebtedness of the Company (i) at a purchase price not greater than 101% of the principal amount of such Subordinated Indebtedness in the event of a Change of Control (plus accrued and unpaid interest thereon) or (ii) at a purchase price not greater than 100% of the principal amount thereof in accordance with provisions similar to those provided in the 122

“— Limitation on Sales of Assets and Subsidiary Shares” covenant; provided that, prior to or simultaneously with such purchase, repurchase, redemption, defeasance or other acquisition or retirement, the Issuer has made the Change of Control Offer or Asset Disposition Offer, as applicable, as provided in such covenant with respect to the Notes and has completed the repurchase or redemption of all Notes validly tendered for payment and not withdrawn in connection with such Change of Control Offer or Asset Disposition Offer, as the case may be; and provided, further, that such purchase, redemption or other acquisition will be excluded from subsequent calculations of the amount of Restricted Payments; (7)

dividends or distributions or redemption payments paid by the Company within 60 days after the date of declaration of dividend or distribution or of the giving of the redemption notice, as the case may be, if a at such date of declaration or notice such dividend would have complied with this covenant; provided, however, that such payment (without duplication of the relevant dividend) will be included in subsequent calculations of the amount of Restricted Payments;

(8)

so long as no Default or Event of Default has occurred and is continuing, the declaration and payments and dividends on Disqualified Capital Shares issued pursuant to the covenant described under “— Limitations on Indebtedness”; provided, however, that such dividends will be excluded in subsequent calculations of the amount of Restricted Payments;

(9)

cash payments in lieu of the issuance of fractional shares in connection with stock dividends, splits or combinations, the exercise of warrants, options or other securities convertible into or exchangeable for Capital Shares of the Company; provided, however, that any such cash payment shall not be for the purpose of evading the limitation of the covenant described under this subheading (as determined in good faith by the Supervisory Board of the Company); provided, further, that such payments will be included in subsequent calculations of the amount of Restricted Payments;

(10)

a Restricted Payment of up to the amount required by the Acquisition Agreement to be advanced by Target as an advanced payment for the dividend for the business year 2006, on or prior to the consummation of the Austrian Acquisition, consisting of a dividend by Target set-off against the amount of any such advanced payment; provided that the amount of such Restricted Payment will be excluded from the calculations of the amount of Restricted Payments; and

(11)

Restricted Payments in an aggregate amount which, when taken together with all other Restricted Payments made pursuant to this clause (11) and then outstanding, will not exceed €5.0 million; provided that the amount of such Restricted Payments will be included in calculations of the amount of Restricted Payments.

The amount of all Restricted Payments (other than cash) shall be the Fair Market Value on the date of such Restricted Payment of the asset(s) or securities proposed to be paid, transferred or issued by the Company, the Issuer or such Restricted Subsidiary, as the case may be, pursuant to such Restricted Payment. The Fair Market Value of any cash Restricted Payment shall be its face amount and any non-cash Restricted Payment shall be conclusively established at the time such Restricted Payment is made by the determination of the Supervisory Board of the Company acting in good faith. Limitation on Liens The Company and the Issuer will not, and the Company will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur or suffer to exist any Lien (other than Permitted Liens) upon any of its property or assets (including Capital Shares), whether owned on the date of the Indenture or thereafter acquired, securing any Indebtedness of the Company or any of its Restricted Subsidiaries, unless contemporaneously therewith effective provision is made to secure the Indebtedness due under the Indenture and the Notes or, in respect of Liens on any Restricted Subsidiary’s property or assets, any Subsidiary Guarantee of such Restricted Subsidiary, equally and ratably with (or prior to in the case of Liens with respect to Subordinated Obligations or Guarantor Subordinated Obligations, as the case may be) the Indebtedness secured by such Lien for so long as such Indebtedness is so secured. Any Lien created for the benefit of the Holders of the Notes pursuant to the preceding sentence shall provide by its terms that such Lien shall be automatically and unconditionally released and discharged upon (i) the release and discharge of the initial Lien (and any subsequent Lien which would have constituted an initial Lien), (ii) the full, final and irrevocable payment of all amounts payable by the Issuer, the Company and the Guarantors under the Notes, the Intercompany Proceeds Note, the Indenture and the Guarantees or (iii) legal defeasance or satisfaction and discharge of the Notes as provided under “— Defeasance” and “— Satisfaction and Discharge”, respectively. 123

Impairment of Security Interest The Company and the Issuer will not, and the Company will not permit any of its Restricted Subsidiaries to, take or knowingly or negligently omit to take, any action which action or omission would reasonably be expected to have the result of materially impairing the security interest with respect to the Collateral for the benefit of the Trustee and the Holders of the Notes (it being understood that the Incurrence of Liens permitted by this covenant (including any release and re-taking of a security interest in connection therewith) shall under no circumstances be deemed to materially impair such security interest), and the Company and the Issuer will not, and the Company will not permit any of its Restricted Subsidiaries to, grant to any Person other than the Trustee for the benefit of the Trustee and the holders of the Notes, any interest whatsoever in any of the Collateral, except for Permitted Collateral Liens; provided, however, that any security relating to the Collateral may be amended, extended, renewed, restated, supplemented or otherwise modified or replaced to (a) allow for the release of all or a part thereof as described under “Release of Collateral”, or (b) if contemporaneously with any such action, the Issuer delivers to the Trustee either (1) a solvency opinion, in form and substance reasonably satisfactory to the Trustee, from a Qualified Financial Advisor confirming the solvency of the Company and its Subsidiaries, taken as a whole, after giving effect to any transactions related to such amendment, extension, renewal, restatement, supplement, modification or replacement, or (2) an Opinion of Counsel, in form and substance reasonably satisfactory to the Trustee, confirming that, after giving effect to any transactions related to such amendment, extension, renewal, restatement, supplement, modification or replacement, the Lien or Liens created under the Security so amended, extended, renewed, restated, supplemented, modified or replaced are valid Liens not otherwise subject to any limitation, imperfection or new hardening period, in equity or at law, that such Lien or Liens were not otherwise subject to, immediately prior to such amendment, extension, renewal, restatement, supplement, modification or replacement. In the event that the Issuer complies with the requirements of this covenant, the Trustee shall (subject to customary protections and indemnifications) consent to any such amendment, extension, renewal, restatement, supplement, modification or replacement without the need for instructions from holders of the Notes. Future Subsidiary Guarantors; Future Share Pledges The Company: (1)

will cause any Significant Subsidiary that is not a Guarantor (including any member of the Target Group) that, directly or indirectly, by way of the pledge of any intercompany note or otherwise, assumes, Guarantees or in any other manner becomes liable with respect to any third-party interest bearing Indebtedness for borrowed money of any Guarantor, the Issuer or any Finance Subsidiary to (i) execute and deliver to the Trustee a supplemental indenture pursuant to which such Significant Subsidiary will, to the maximum extent permitted by law, Guarantee payment of the Notes on the same terms and conditions as those set forth in the Indenture and (ii) to the maximum extent permitted by law, waive and not in any manner whatsoever claim or take the benefit or advantage of any rights of reimbursement, indemnity or subrogation or any other rights against the Company or a Restricted Subsidiary as a result of any payment by such Significant Subsidiary under its Notes Guarantee; and

(2)

following the consummation of any acquisition (other than the Austrian Acquisition) subsequent to the Issue Date in which all or a portion of the assets acquired in such acquisition are held by a newly formed or newly acquired Significant Subsidiary of the Company or a Restricted Subsidiary (a “First Tier Acquired Company”), will or will cause the direct parent of such First Tier Acquired Company to execute and deliver to the Collateral Agent a share pledge pursuant to which the Company or such direct parent will, to the maximum extent permitted by law, pledge the Capital Shares of such First Tier Acquired Company held by the Company or such direct parent on a first-priority basis on the same terms and conditions as the Share Pledges, and such share pledge will constitute a “Share Pledge” for purposes of the Indenture and the applicable Security Documents;

provided, however, that no Restricted Subsidiary described in (1) or (2) above will be required to become a Guarantor (and neither the Company nor any direct parent of a First Tier Acquired Company will be required to grant a Share Pledge of the Capital Shares of such Person) to the extent and for so long as a consequence of the Incurrence of such Guarantee or Share Pledge would be reasonably likely to result in any violation of applicable law that cannot be avoided or otherwise prevented through measures reasonably available to the Company, such Significant Subsidiary or such direct parent, any liability for the officers, directors or shareholders of such Significant Subsidiary or such Direct Parent or any current or future cost, expense, liability or obligation (including any tax) other than out-of-pocket expenses and other expenses incurred in connection with any governmental or regulatory filings. 124

Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary of the Company to: (1) pay dividends or make any other distributions on or in respect of its Capital Shares or pay any Indebtedness or other obligations owed to the Company, the Issuer or any Restricted Subsidiary of which it is a Subsidiary; (2) pay Indebtedness owed to or make loans or advances to the Company, the Issuer or any Restricted Subsidiary of which it is a Subsidiary; or (3) transfer any of its property or assets to the Company, the Issuer or any Restricted Subsidiary of which it is a Subsidiary; provided that (x) the priority of any Preferred Shares in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on Common Shares and (y) the subordination of (including but not limited to, the application of any standstill requirements to) loans or advances made to the Company or the Issuer by a Restricted Subsidiary to other Indebtedness Incurred by the Company, the Issuer or any Restricted Subsidiary, shall not be deemed to constitute such an encumbrance or restriction. The preceding provisions will not prohibit: (1) any encumbrance or restriction pursuant to an agreement or instrument in effect at or entered into on the date of the Indenture or the Acquisition Closing Date or otherwise in connection with the Transactions, including, without limitation, the Revolving Credit Facilities and the Security Documents as in effect on such date; (2) any encumbrance or restriction pursuant to an agreement or other instrument of or relating to a Person or asset acquired by the Company or any Restricted Subsidiary in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than such assets or Person, or the property or assets of the Person, so acquired; (3) any encumbrance or restriction that amends, extends, renews, refinances, modifies, restates, supplements, refunds or replaces any encumbrance or restriction referred to in clause (1), (2) or (11) of this paragraph or this clause (3); provided, however, that the encumbrances and restrictions contained in any such amendment, extension, renewal, refinancing, modification, restatement, supplement, refunding or replacement are not materially more restrictive with respect to dividend or other payment restrictions than existed prior thereto; (4) any encumbrance or restriction: (a) that restricts in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease, license or similar contract, or the assignment or transfer of any such lease, license or other contract; (b) contained in mortgages, pledges or other security agreements permitted under the Indenture and the Security Documents securing Indebtedness of the Company or a Restricted Subsidiary to the extent such encumbrances or restrictions restrict the transfer of the property subject to such mortgages, pledges or other security agreements; or (c) pursuant to customary provisions restricting dispositions of real property interests set forth in any reciprocal easement agreements of the Company or any Restricted Subsidiary; (5) any encumbrance or restriction with respect to Purchase Money Obligations and Capitalized Lease Obligations permitted under the Indenture, in each case that impose encumbrances or restrictions of the nature described in clause (3) of the first paragraph of this covenant on the property so acquired; (6) any encumbrance or restriction contained in a joint venture agreement or asset or stock sale agreement (including any escrow agreement related thereto) entered into in good faith to the extent such encumbrances or restrictions restrict the transfer of the property, or is an encumbrance or restriction with respect to assets, subject to such joint venture agreement or asset or stock sale agreement (including any escrow agreement related thereto), or any encumbrances or restrictions in a customer or supplier agreement entered into in the ordinary course of business (to the extent that, in the case of a joint venture agreement, the encumbrance or restriction is not materially more disadvantageous to the Holders of the Notes than is customary in comparable agreements and will not materially affect the ability of the Issuer to make payments of the principal, interest and Additional Amounts when they become due and payable, in each case determined in good faith by the Supervisory Board of the Company); 125

(7) (8) (9) (10)

(11) (12)

net worth provisions in leases and other agreements entered into by the Company or any Restricted Subsidiary in the ordinary course of business; restrictions on the transfer of assets subject to any Lien permitted under the Indenture; encumbrances or restrictions arising or existing by reason of applicable law or any applicable rule, regulation or order or required by any regulatory authorities; any agreement or instrument relating to Indebtedness of the Company or a Restricted Subsidiary permitted to be incurred after the Issue Date under the covenant entitled “— Limitation on Indebtedness” if the encumbrances or restrictions contained in the relevant agreement, taken as a whole, are not materially more disadvantageous to the Holders of the Notes than is customary in comparable financings or agreements (for which a determination in good faith by the Supervisory of the Company shall be conclusive) and either (a) the Company’s Supervisory Board has determined in good faith that such encumbrance or restriction will not materially affect the Issuer’s ability to make payments of principal, interest and Additional Amounts on the Notes when they become due and payable or (b) such encumbrance or restriction applies only if a Default occurs in respect of a payment or financial covenant relating to such Indebtedness; any encumbrances or restrictions with respect to the Indenture, the Notes, any Notes Guarantee or the Security Documents; or (a) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; (b) customary provisions contained in licenses of intellectual property and other similar agreements entered into in the ordinary course of business; and (c) contracts entered into in the ordinary course of business, not related to Indebtedness, that do not, individually or in the aggregate, detract from the value of property or assets of the Company or any Restricted Subsidiary in any manner material to the Company or such Restricted Subsidiary.

Limitation on Sales of Assets and Subsidiary Shares The Company will not, and will not permit any of its Restricted Subsidiaries to, make any Asset Disposition unless: (1) the Company or a Restricted Subsidiary, as the case may be, receives consideration at least equal to the Fair Market Value (such Fair Market Value to be determined on the date of contractually agreeing to such Asset Disposition), as determined in good faith by a responsible officer of the Company or, in the case of Capital Shares, property or assets having an aggregate value in excess of €2.0 million, the Supervisory Board of the Company (including as to the value of all non-cash consideration), of the property, shares and assets subject to such Asset Disposition; (2) at least 75% of the consideration from such Asset Disposition received by the Company or a Restricted Subsidiary, as the case may be, is in the form of cash or Cash Equivalents; and (3) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company or a Restricted Subsidiary, as the case may be: (a) first, to the extent the Company or any Restricted Subsidiary, as the case may be, elects (or is required by the terms of any Indebtedness) to prepay, repay, redeem or purchase Indebtedness (other than (i) any Disqualified Capital Shares or Subordinated Indebtedness of the Company or Guarantor Subordinated Indebtedness of a Guarantor or Preferred Shares of a Guarantor and (ii) Indebtedness owed to the Issuer or an Affiliate of the Issuer); provided, that the Issuer or the relevant Restricted Subsidiary will permanently reduce such Indebtedness and will cause the related commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased; and (b) second, to the extent of the balance of such Net Available Cash after application in accordance with clause (a), to the extent the Company or such Restricted Subsidiary elects, to invest in or purchase Replacement Assets within 365 days from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; provided that the Company or such Restricted Subsidiary shall be deemed to have applied Net Available Cash in accordance with this clause (3)(b) within such 365-day period if, within such 365-day period, it has entered into a binding agreement to invest such Net Available Cash and continues to use all reasonable efforts to so apply such Net Available Cash as soon as practicable thereafter, and that upon any abandonment or termination of such agreement after such 365-day period, the Net Available Cash not applied will constitute Excess Proceeds; 126

provided, that pending the final application of any such Net Available Cash in accordance with clauses (a) and (b) above, the Company and its Restricted Subsidiaries (1) will, in the case of an Asset Disposition involving Collateral, place all cash received in connection with such Asset Disposition (“Asset Sale Cash Collateral”) in a designated bank account or accounts pending application of such cash in accordance with this covenant over which the Notes and the Notes Guarantees will be granted a first-priority security interest and (2) may, in the case of an Asset Disposition not involving Collateral, temporarily reduce Indebtedness or otherwise invest such Net Available Cash in any manner not prohibited by the Indenture. Any Net Available Cash from Asset Dispositions that is not applied or invested as provided in the preceding paragraph will be deemed to constitute “Excess Proceeds”. On the 366th day after an Asset Disposition, if the aggregate amount of Excess Proceeds exceeds €10.0 million, the Issuer will be required to make an offer (“Asset Disposition Offer”) to (a) all Holders and (b) to the extent required by the terms of other Pari Passu Indebtedness (“Other Asset Disposition Indebtedness”) that require the Issuer or Company to make an offer to purchase Other Asset Disposition Indebtedness with the proceeds from any Asset Disposition, to all holders of Other Asset Disposition Indebtedness to purchase the maximum principal amount of Notes and any Other Asset Disposition Indebtedness to which the Asset Disposition Offer applies that may be purchased in an amount equal to the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount of the Notes and Other Asset Disposition Indebtedness (or, in the event such Other Asset Disposition Indebtedness was issued with significant original issue discount, an amount equal to 100% of the accreted value thereof) plus accrued and unpaid interest, and premium and Additional Amounts, if any, to the date of purchase, in accordance with the procedures set forth in the Indenture or the agreements governing Other Asset Disposition Indebtedness, as applicable, which in the case of the Notes will be in a principal amount of €50,000 or an integral multiple of €1,000 thereof. To the extent that the aggregate amount of Notes and Other Asset Disposition Indebtedness so validly tendered and not properly withdrawn pursuant to an Asset Disposition Offer is less than the Excess Proceeds, the Company may use any remaining Excess Proceeds for any purpose not otherwise prohibited by any other covenant contained in the Indenture. If the aggregate principal amount of Notes surrendered by Holders thereof and Other Asset Disposition Indebtedness surrendered by holders or lenders, collectively, exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and Other Asset Disposition Indebtedness to be purchased on a pro rata basis on the basis of the aggregate principal amount of tendered Notes and Other Asset Disposition Indebtedness (or, in the event such Other Asset Disposition Indebtedness was issued with significant original issue discount, an amount equal to 100% of the accreted value thereof). In connection with any such prepayment, repayment, redemption or purchase of Other Asset Disposition Indebtedness, the Company or the relevant Subsidiary Guarantor will retire such Indebtedness and will cause the related commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. Upon completion of such Asset Disposition Offer, the amount of Excess Proceeds shall be reset at zero. The Asset Disposition Offer will remain open for a period of 20 Business Days following its commencement, except to the extent that a longer period is required by applicable law (the “Asset Disposition Offer Period”). No later than five Business Days after the termination of the Asset Disposition Offer Period (the “Asset Disposition Purchase Date”), the Issuer will purchase the principal amount of Notes and Other Asset Disposition Indebtedness required to be purchased pursuant to this covenant (the “Asset Disposition Offer Amount”) or, if less than the Asset Disposition Offer Amount has been so validly tendered, all Notes and Other Asset Disposition Indebtedness validly tendered in response to the Asset Disposition Offer. If the Asset Disposition Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest will be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest will be payable to Holders who tender Notes pursuant to the Asset Disposition Offer. On or before the Asset Disposition Purchase Date, the Issuer will, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Asset Disposition Offer Amount of Notes and Other Asset Disposition Indebtedness or portions of Notes and Other Asset Disposition Indebtedness so validly tendered and not properly withdrawn pursuant to the Asset Disposition Offer, or if less than the amount of the Asset Disposition Offer has been validly tendered and not properly withdrawn, all Notes and Other Asset Disposition Indebtedness so validly tendered and not properly withdrawn, in each case in integral multiples of €50,000 (or in the case of Other Asset Disposition Indebtedness, such multiples as required thereby). The Issuer will deliver to the Trustee an Officers’ Certificate stating that such Notes or portions thereof were accepted for payment by the Issuer in accordance with the terms of this covenant. The Issuer or the Paying Agent, as the case may be, will promptly mail or deliver to each tendering Holder of Notes an amount equal to the purchase price of the Notes or Other Asset Disposition Indebtedness so validly tendered and not properly withdrawn by such holder or lender, as the case may be, and accepted by the Issuer for purchase, and the Issuer will promptly issue a new Note, and the Trustee, upon delivery of an Officers’ Certificate from the Issuer will authenticate and mail or 127

deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered; provided that each such new Note will be in a principal amount of €50,000 and an integral multiple of €1,000 thereof. Any Note not so accepted will be promptly mailed or delivered by the Issuer to the Holder thereof. The Issuer will give notice of the commencement and results of the Asset Disposition Offer in accordance with the procedures described under “— Notices.” For the purposes of this covenant, the following will be deemed to be cash: (1) the full and unconditional release of each of the Company, the Issuer and the Restricted Subsidiary, as the case may be, from the repayment of, or all liability on, Indebtedness in connection with such Asset Disposition (in which case the Issuer, the Company or the Restricted Subsidiary will, without further action, be deemed to have applied such deemed cash to Indebtedness in accordance with clause 3(a) of the first paragraph above); and (2) securities, notes or other obligations received by the Company or any Restricted Subsidiary of the Company that are converted no later than 90 days following the receipt thereof by the Company or such Restricted Subsidiary into cash or Cash Equivalents. The Issuer will comply with the requirements of any securities laws or regulations in connection with the repurchase of Notes pursuant to an Asset Disposition Offer, including, without limitation, Rule 14e-1 under the Exchange Act and any other applicable securities laws and regulations. To the extent that the provisions of any securities or other applicable laws or regulations conflict with provisions of this covenant, the Issuer will comply with the applicable laws and regulations and will not be deemed to have breached its obligations under the “Limitation on Sales of Assets and Subsidiary Shares” provision of the Indenture by virtue of any conflict. The Company will not be required to make an Asset Disposition Offer if a third party makes the Asset Disposition Offer in the manner, at the times and otherwise in compliance with the requirements described in the Indenture applicable to the Asset Disposition Offer and purchases the Asset Disposition Offer Amount of all Notes and Pari Passu Indebtedness validly tendered and not withdrawn in response to the Asset Disposition Offer. The ability of the Issuer to repurchase Notes in an Asset Disposition Offer may be limited by a number of factors, including that the Revolving Credit Facilities or other Indebtedness may not at such time require prepayment in amounts sufficient to fund the Company’s obligations in connection with the Asset Disposition Offer, and the ability of the Company to pay cash to the Holders of the Notes upon an Asset Disposition Offer may be limited by its then existing financial resources. There can be no assurance that sufficient funds will be available to the Company when necessary to make any necessary repurchases. Limitations on Transactions with Affiliates The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or conduct any transaction or a series of related transactions (including the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any Affiliate of the Company (an “Affiliate Transaction”) unless: (1) the terms of such Affiliate Transaction are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could reasonably be expected to be obtained in a comparable transaction at the time of such transaction in arm’s-length dealings with a Person who is not such an Affiliate; (2) in the event such Affiliate Transaction involves an aggregate consideration in excess of €5.0 million, a majority of the members of the Supervisory Board of the Company who are disinterested with respect to such Affiliate Transaction have determined in good faith that the criteria set forth in clause (1) are satisfied and have otherwise approved the relevant Affiliate Transaction; and (3) in the event such Affiliate Transaction involves an aggregate consideration in excess of €10.0 million, the Company shall have received a written opinion from a Qualified Financial Advisor that such Affiliate Transaction either is fair, from a financial point of view, to the Company and the Restricted Subsidiaries or is not less materially favorable to the Company and its Restricted Subsidiaries than could reasonably have been expected to be obtained in a comparable transaction at such time on an arm’s-length basis from a Person that is not an Affiliate. The preceding paragraph will not apply to: (1) any Restricted Payment (other than a Permitted Investment) permitted to be made pursuant to the covenant described under “— Limitation on Restricted Payments”; (2) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment agreements and other compensation arrangements, options to purchase Capital Shares of the Company, restricted share plans, long-term incentive 128

(3)

(4) (5) (6)

(7) (8)

(9) (10)

(11)

plans, share appreciation rights plans, participation plans or similar employee benefits plans and/ or indemnity provided on behalf of directors, officers, consultants and employees approved by the Supervisory Board of the Company; loans or advances to employees, officers or directors or members of the Supervisory Board of the Company or any Restricted Subsidiary but in any event not to exceed €1 million in the aggregate outstanding at any one time with respect to all loans or advances made since the Issue Date; any transaction between the Company and its Restricted Subsidiary or between Restricted Subsidiaries; Guarantees issued by the Company or a Restricted Subsidiary in accordance with “— Limitation on Indebtedness”; the performance of obligations of the Company or any Restricted Subsidiary under the terms of any agreement to which the Company or any Restricted Subsidiary is a party on the Issue Date, as these agreements may be amended, modified, supplemented, extended or renewed from time to time; provided, however, that any future amendment, modification, supplement, extension or renewal entered into after the Issue Date will (a) comply with clauses (1) and (2) of the first paragraph of this “— Limitation on Transactions with Affiliates” covenant and (b) be permitted to the extent that its terms, taken as a whole, are not more materially disadvantageous to the Holders than the terms of the agreements in effect on the Issue Date; transactions with joint ventures entered into in the ordinary course of business; transactions with or for the benefit of a Person (other than an Unrestricted Subsidiary of the Company) that is an Affiliate of the Company solely because the Company owns, directly or indirectly through a Restricted Subsidiary, an equity interest in, or controls, such Person; the Transactions; the performance of obligations by the Company or a Restricted Subsidiary under the terms of any agreements existing on the Acquisition Closing Date, as these agreements may be amended, modified, supplemented, extended or renewed from time to time; provided, however, that any future amendment, modification, supplement, extension or renewal entered into after the Acquisition Date will (a) comply with clauses (1) and (2) of the first paragraph of this “— Limitation on Transactions with Affiliates” covenant and (b) be permitted to the extent that its terms, taken as a whole, are not more materially disadvantageous to the Holders than the terms of those agreements in effect on the Acquisition Closing Date; and any issuance of Capital Shares (other than Disqualified Capital Shares) of the Company.

Limitation on Layering The Company will not, and the Company will not permit the Issuer or any Subsidiary Guarantor to, Incur any Indebtedness if such Indebtedness is contractually subordinate or junior in ranking in any respect to any Senior Indebtedness of the Company or such Guarantor unless such Indebtedness is contractually subordinated in right of payment to the Notes or the applicable Notes Guarantee. Unsecured Indebtedness is not deemed to be subordinate or junior to secured Indebtedness merely because it is unsecured and Indebtedness that is not Guaranteed by a particular Person is not deemed to be subordinate or junior to Indebtedness that is so Guaranteed merely because it is not so Guaranteed. For the avoidance of doubt, junior liens, second liens and other contractual arrangements that provide for priorities among holders of the same or different issues of Indebtedness with respect to any collateral or the proceeds of collateral or tranching of Indebtedness under Credit Facilities shall not constitute subordination in right of payment. Reports The Company will provide to the Trustee and the Holders and make available to potential investors: (1) within 120 days after the end of the Company’s fiscal year, annual reports of the Company containing: (a) information with a level of detail that is substantially comparable to the sections in this Offering Memorandum entitled “Selected Consolidated Financial Data and Other Information”, “Business”, “Management”, “Related Party Transactions” and “Description of Other Indebtedness”; (b) the Company’s and the Issuer’s audited consolidated (i) balance sheets as of the end of the three most recent fiscal years (or such shorter period as the Issuer has been in existence) and (ii) income statements and statements of cash flow for the three most recent fiscal years (or such shorter period as the Issuer has been in existence), in each case prepared in accordance with IFRS and including complete footnotes to such financial statements (including a footnote or other applicable disclosure with respect to guarantor and non-guarantor subsidiaries) and the report of the independent auditors on the financial statements; (c) an operating and 129

financial review of the three most recent fiscal years for the Company and its Restricted Subsidiaries, including a discussion of (i) the financial condition and results of operations of the Company on a consolidated basis and any material changes between such two fiscal years and (ii) any material developments in the business of the Company and its Restricted Subsidiaries; and (d) pro forma income statement and balance sheet information of the Company, together with explanatory footnotes, for any Change of Control or material acquisitions, dispositions or recapitalizations that have occurred since the beginning of the most recently completed fiscal year, unless pro forma information has been provided in a previous report pursuant to paragraph (2)(c) below; (2)

within 60 days after the end of each day of the first three fiscal quarters in each fiscal year of the Company, quarterly reports containing: (a) the Company’s and the Issuer’s unaudited condensed consolidated (i) balance sheet as of the end of such quarter and (ii) statements of income and cash flow for the quarterly and year to date periods ending on the most recent balance sheet date, and the comparable prior year periods (in the case of the Issuer, if it was in existence in such prior year period), in each case prepared in accordance with IFRS; (b) an operating and financial review of such periods for the Company and its Restricted Subsidiaries including a discussion of (i) the financial condition and results of operations of the Company on a consolidated basis and material changes between the current period and the period of the prior year and (ii) any material developments in the business of the Company and its Restricted Subsidiaries; (c) pro forma income statement and balance sheet information of the Company, together with explanatory footnotes, for any Change of Control or material acquisitions, dispositions or recapitalizations that have occurred since the beginning of the most recently completed fiscal quarter; and

(3)

promptly from time to time after the occurrence of any of the events listed in (a) to (f) of this clause (3) information with respect to (a) any change in the independent accountants of the Company or any of its Significant Subsidiaries, (b) resignation of any member of the Supervisory Board or the Management Board of either the Issuer or of the Company, (c) any material acquisition or disposal, (d) any material event that the Company or any Restricted Subsidiary announces publicly and (e) any information that the Issuer is required to make publicly available under the requirements of the Euro MTF Market or the Luxembourg Stock Exchange.

If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries and any such Unrestricted Subsidiary or group of Unrestricted Subsidiaries constitute Significant Subsidiaries of the Company, then the annual and quarterly information required by the first two clauses of this covenant shall include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, of the financial condition and results of operations of the Company and the Restricted Subsidiaries separate from the financial condition and results of operations of such Unrestricted Subsidiaries of the Company. In addition, so long as the Notes remain outstanding and during any period during which the Issuer is not subject to Section 13 or 15(d) of the Exchange Act nor exempt therefrom pursuant to Rule 12g3-2(b), the Issuer shall furnish to the Holders and to prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. All financial statement information required under this covenant shall be prepared on a consistent basis in accordance with IFRS. In addition, all financial statement information and all reports required under this covenant shall be presented in the English language. Contemporaneously with the provision of each report discussed above, the Company will also (a) file a press release through the newswire service of Bloomberg, or, if Bloomberg does not then operate, any similar agency, (b) post such report on the Company’s website and (c), for so long as the Notes are listed on the Luxembourg Stock Exchange and traded on Euro MTF Market and the rules of such stock exchange shall so require, make the above information available through the offices of the Paying Agent in Luxembourg. Limitation on Unrestricted Subsidiaries The Company may designate after the date of the Indenture any Subsidiary (other than a Guarantor) as an “Unrestricted Subsidiary” under the Indenture (a “Designation”) only if: (a)

no Default shall have occurred and be continuing at the time of or after giving effect to such Designation;

(b)

either (i) the Subsidiary to be so designated has total assets of €1,000 or less or (ii) the Company would be permitted to make an Investment at the time of Designation (assuming the effectiveness 130

of such Designation) pursuant to the first paragraph of “— Limitation on Restricted Payments” above in an amount (the “Designation Amount”) equal to the greater of (1) the net book value of the Company’s interest in such Subsidiary calculated in accordance with IFRS or (2) the Fair Market Value of the Company’s interest in such Subsidiary; (c)

such Unrestricted Subsidiary does not own any Capital Shares of the Issuer, the Company or any Restricted Subsidiary of the Company which is not simultaneously being designated an Unrestricted Subsidiary; and

(d)

immediately prior to the time of such designation, no Capital Shares of such Subsidiary are the subject of a Share Pledge.

In the event of any such Designation, the Company will be deemed to have made an Investment constituting a Restricted Payment pursuant to the covenant “— Limitation on Restricted Payments” for all purposes of the Indenture in the Designation Amount. The Indenture will also provide that the Company will not and will not cause or permit any Restricted Subsidiary to at any time (a) provide a guarantee of, or similar credit support for, or subject any of its property or assets (other than the Capital Shares of any Unrestricted Subsidiary) to the satisfaction of, any Indebtedness of any Unrestricted Subsidiary (including any undertaking, agreement or instrument evidencing such Indebtedness) or (b) be directly or indirectly liable for any Indebtedness of any Unrestricted Subsidiary, except to the extent permitted under the covenant “— Limitation on Indebtedness”. For purposes of the foregoing, the Designation of a Subsidiary of the Company as an Unrestricted Subsidiary shall be deemed to be the Designation of all of the Subsidiaries of such Subsidiary as Unrestricted Subsidiaries. The Company may redesignate an Unrestricted Subsidiary as a Restricted Subsidiary (a “Redesignation”) if: (a)

no Default or Event of Default shall have occurred and be continuing at the time of and after giving effect to such Redesignation;

(b)

all Liens and Indebtedness of such Unrestricted Subsidiary outstanding immediately following such Redesignation would, if incurred at such time, have been permitted to be incurred for all purposes of the Indenture; and

(c)

unless such redesignated Subsidiary shall not have any Indebtedness outstanding (other than Indebtedness that would be permitted under the second paragraph of the covenants “— Limitation on Indebtedness”), immediately after giving effect to such proposed Redesignation, and after giving pro forma effect to the incurrence of any such Indebtedness of such redesignated Subsidiary as if such Indebtedness was incurred on the date of the Redesignation, the Company could incur €1.00 of additional Indebtedness (other than Indebtedness that would be permitted under the second paragraph of the covenants “— Limitation on Indebtedness”) pursuant to the covenant described under “— Limitation on Indebtedness”.

All Designations and Redesignations must be evidenced by a resolution of the Supervisory Board of the Company delivered to the Trustee certifying compliance with the foregoing provisions. Merger and Consolidation The Company will not and will not permit the Issuer to, in a single transaction or through a series of related transactions, consolidate or otherwise combine with or merge with or into, or convey, transfer or lease all or substantially all its assets to (“merge”), any Person; provided that the Issuer or the Company may merge with another Person if: (1)

the resulting, surviving or transferee Person (the “Successor”) will be a Person organized and existing under the laws of any European Union member state which was such a member on the date of the Indenture or any State of the United States or the District of Columbia and the Successor (if not the Company or the Issuer, as the case may be) will expressly assume by supplemental indenture and any other relevant supplemental security document required under the Security Documents, executed and delivered to the Trustee and the Collateral Agent, in form reasonably satisfactory to the Trustee and the Collateral Agent, all the obligations of the Company or the Issuer, as the case may be, under the Notes, the Company’s Guarantee of the Notes, the Indenture and the Security Documents, as applicable, and the Indenture, the Notes, the Company’s Guarantee of the Notes and the Security Documents shall remain in full force and effect as so supplemented (and any Notes Guarantees will be confirmed as applying to such Successor’s obligations (in the case of an Issuer merger)); 131

(2)

immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing;

(3)

immediately after giving effect to such transaction on a pro forma basis (on the assumption that the transaction occurred on the first day of the four-quarter period for which financial statements are available ending immediately prior to the consummation of such transaction with the appropriate adjustments with respect to the transaction), the Successor (or the Company in the case of an Issuer merger) would be able to Incur at least an additional €1.00 of Indebtedness pursuant to the first paragraph of the covenant described under “— Limitation on Indebtedness”;

(4)

the Company or the Issuer, as the case may be, shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each to the effect that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture;

(5)

in the case of a consolidation, merger, conveyance, transfer or lease of the Issuer with another Person, the Company shall have used its reasonable best efforts to deliver to the Trustee an Opinion of Counsel of recognized standing with respect to income tax matters in the jurisdiction in which the Issuer is organized, resident for tax purposes or engaged in business, in both cases (a) and (b) to the effect that Holders or beneficial owners of the Notes will not recognize income, gain or loss for U.S. federal income or for French or Polish tax purposes as a result of such consolidation, merger, conveyance, transfer or lease and will be subject to U.S. federal income and French and Polish tax on the same amounts and in the same manner and at the same times as would have been the case if such consolidation, merger, conveyance, transfer or lease had not occurred.

For purposes of this covenant, the sale, lease, conveyance, assignment, transfer, or other disposition of all or substantially all of the assets of one or more Restricted Subsidiaries, which assets, if held by the Company instead of such Subsidiaries, would constitute all or substantially all of the assets of the Company on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the assets of the Company. The Successor (if other than the Company or the Issuer, as the case may be) will succeed to, and be substituted for, and may exercise every right and power of, the Company or the Issuer, as the case may be, under the Indenture, the Notes, the Company’s Guarantee of the Notes, the Intercompany Proceeds Note, the Acquisition On-Loan, and the Security Documents (and other relevant agreements hereunder), and, upon such substitution, the predecessor Person shall be released, but, in the case of a lease of all or substantially all its assets, the predecessor company will not be released from its obligations under the Indenture, the Company’s Guarantee of the Notes or the Notes, as applicable. Notwithstanding the preceding clause (3) (which does not apply to transactions referred to in this sentence), (x) any Restricted Subsidiary that is not a Subsidiary Guarantor (other than the Issuer) may consolidate or otherwise combine with, merge into or transfer all or part of its properties and assets to any Guarantor and (y) the Company or the Issuer may merge with an Affiliate of the Company primarily for the purpose of reincorporating in another jurisdiction to receive a tax benefit, provided, inter alia, that the provisions of clause (5) are complied with. In addition, the Company will not permit any Subsidiary Guarantor to merge with any Person (other than the Company or any Subsidiary Guarantor) unless: (1)

the resulting, surviving or transferee Person is organized and existing under the laws of any European Union member state which was such a member on the date of the Indenture, any State of the United States or the District of Columbia and such Person (if not the Subsidiary Guarantor) will expressly assume, by supplemental indenture and supplemental security documents, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all the obligations of such Subsidiary Guarantor under the applicable Notes Guarantee, the Security Documents and the Indenture and such Notes Guarantee, the Indenture and the Security Documents shall remain in full force and effect as so supplemented (and any Notes Guarantees will be confirmed as applying to such Person’s obligations);

(2)

immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and

(3)

the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each to the effect that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture. 132

Although there is a limited body of case law interpreting the phrase “substantially all”, there is no precise established definition of such phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve “all or substantially all” of the property or assets of a Person. The Issuer will publish a notice upon the occurrence of any of the events described above in accordance with the provisions of the Indenture described under “— Notices” and, for so long as the Notes are listed on the Luxembourg Stock Exchange and traded on the Euro MTF Market, and the rules of such stock exchange so require, the Issuer will notify the Luxembourg Stock Exchange of any of the events described above. Limitations on the Issuer Notwithstanding anything contained in the Indenture to the contrary, the Issuer will not, and the Company will not permit the Issuer to, engage in any business activity or undertake any other activity, except any activity (a) relating to the offering, sale or issuance of the Notes and the Additional Notes (or debt securities of the Issuer substantially identical to the Notes and Notes Guarantees (other than in respect of interest, maturity and redemption provisions)), the Incurrence of Indebtedness represented by the Notes and the Additional Notes (or debt securities of the Issuer substantially identical to the Notes and Notes Guarantees (other than in respect of interest, maturity and redemption provisions)), lending or otherwise advancing the proceeds thereof to the Company or any Restricted Subsidiary and any other activities in connection therewith, (b) undertaken with the purpose of fulfilling any other obligations under the Notes, the Additional Notes, such Indebtedness, the Security Documents or the Indenture, (c) directly related or reasonably incidental to the establishment and/or maintenance of the Issuer’s corporate existence or (d) related to Permitted Collateral Liens. The Issuer will not, and the Company will not permit the Issuer to, (a) Incur any Indebtedness other than the Indebtedness represented by the Notes and, subject to compliance with the covenant described under the caption “— Limitation on Indebtedness”, Additional Notes (or debt securities of the Issuer substantially identical to the Notes and Notes Guarantees (other than in respect of interest, maturity and redemption provisions)), or any Indebtedness comprised of Permitted Collateral Liens (b) issue any Capital Shares other than the issuance of its ordinary shares to the Company (or directors’ qualifying shares or an immaterial amount of shares required to be owned by other persons pursuant to applicable law) or (c) own any Capital Shares of any other Person or create, own or suffer to exist any Subsidiary, direct or indirect, of the Issuer. The Issuer will not, and the Company will not permit the Issuer to, create, Incur, assume or suffer to exist any Lien in respect of borrowed money of any kind against or upon any of its property or assets, or any proceeds therefrom, except for Liens to secure the payment or performance of the Notes or any Additional Notes (or debt securities of the Issuer substantially identical to the Notes and Notes Guarantees (other than in respect of interest, maturity and redemption provisions)) and Permitted Collateral Liens. The Issuer shall, and the Company shall cause the Issuer to, at all times remain a Wholly Owned Restricted Subsidiary of the Company. For so long as any Notes are outstanding, the Company will not commence or take any action to facilitate a winding-up, liquidation or other analogous proceeding in respect of the Issuer (except as permitted by the covenant described under “Merger and Consolidation”). Limitations on Sale and Leaseback Transactions The Company will not, and will not permit any of its Restricted Subsidiaries to, enter into any Sale and Leaseback Transaction with respect to any property unless: (1)

the Company or the Restricted Subsidiary would be entitled to: (a)

Incur Indebtedness in an amount equal to the Attributable Indebtedness with respect to the sale and leaseback transaction under the “— Limitation on Indebtedness” covenant; and

(b)

create a Lien on such property securing such Attributable Indebtedness without equally and ratably securing the Notes pursuant to the “— Limitation on Liens” covenant;

(2)

the gross cash proceeds of that Sale and Leaseback Transaction are at least equal to the Fair Market Value of the property that is the subject of the Sale and Leaseback Transaction; and

(3)

the transfer of such property is permitted by, and the Company applies, or causes to be applied, the proceeds of the transaction in compliance with, the “— Limitation on Sales of Assets and Subsidiary Shares” covenant. 133

Limitation on Lines of Business The Company will not, and will not permit its Restricted Subsidiaries to, engage in any business which is not a Permitted Business. Payments for Consent The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture, the Notes or any Notes Guarantee unless such consideration is offered to be paid and is paid to all Holders that consent, waive or agree to amend in the time frame set out in the solicitation documents relating to such consent, waiver or agreement. Listing The Issuer will use its commercially reasonable efforts to initially list and maintain the listing of the Notes on the Luxembourg Stock Exchange and to have the Notes traded on and have them continue to trade on the Euro MTF Market or another international securities exchange for as long as the Notes are outstanding. Events of Default The following events are defined in the Indenture as “Events of Default”. (1)

the failure to pay interest or Additional Amounts on any Notes when the same becomes due and payable and the default continues for a period of 30 days;

(2)

the failure to pay the principal (or premium, if any) on any Notes at their Stated Maturity, upon optional redemption, upon required purchase or otherwise;

(3)

a default in the observance or performance of any covenant or agreement contained in the Indenture by the Issuer or any Guarantor which default continues for a period of 60 days after the Issuer receives written notice (other than under clauses (1) or (2)) specifying the default from the Trustee or the Holders of at least 25% of the outstanding principal amount of the Notes (except in the case of a default with respect to the “— Certain Covenants — Merger and Consolidation” covenant, which will constitute an Event of Default without such notice requirement and without such passage of time requirement);

(4)

the failure to pay at final maturity (giving effect to any applicable grace periods and any extensions thereof) the stated principal amount of any Indebtedness of the Company or any Restricted Subsidiary (“payment default”), or the acceleration of the final stated maturity of any such Indebtedness (which acceleration is not rescinded, annulled or otherwise cured within five days of receipt by the Company or such Restricted Subsidiary of notice of any such acceleration) (the “cross acceleration provision”) if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final stated maturity or which has been accelerated (in each case with respect to which the five day period described above has elapsed), aggregates €10.0 million or more at any time;

(5)

one or more judgments (other than judgments covered in full by insurance policies issued by reputable and creditworthy insurance companies) in an aggregate amount in excess of €10.0 million shall have been rendered against the Company or any of its Restricted Subsidiaries and such judgments remain undischarged, unpaid or unstayed for a period of ten days after such judgment or judgments become final and non-appealable (the “judgment default” provision);

(6)

certain events of bankruptcy affecting the Company, the Issuer or any Significant Subsidiary (or any group of Restricted Subsidiaries that taken together (as of the date of the Company’s most recently available financial statements) would constitute a Significant Subsidiary) (the “bankruptcy provision”);

(7)

any Notes Guarantee of the Company or a Significant Subsidiary ceases to be in full force and effect or any Notes Guarantee of the Company or a Significant Subsidiary is declared to be null and void and unenforceable or any Notes Guarantee of the Company of a Significant Subsidiary is found to be invalid or any such Guarantor denies its liability under its Notes Guarantee (other than by reason of release of a Guarantor in accordance with the terms of the Indenture); and

(8)

any Security Document shall cease to be in full force and effect (other than in accordance with their respective terms or the terms of the Indenture), or cease to be effective in all material respects to grant to the Collateral Agent a perfected Lien on the Collateral with the priority purported to be created thereby (the “security documents provision”). 134

If an Event of Default (other than an Event of Default specified in clause (6) above with respect to the Company or the Issuer) shall occur and be continuing, the Trustee or the Holders of at least 25% in principal amount of outstanding Notes may declare the principal of and accrued interest on all the Notes to be due and payable by notice in writing to the Issuer and the Trustee specifying the respective Event of Default and that it is a “notice of acceleration” (the “Acceleration Notice”), and the same shall become immediately due and payable. If an Event of Default specified in clause (6) above with respect to the Company, the Issuer or a Significant Subsidiary occurs and is continuing, then all unpaid principal of, and premium and Additional Amounts, if any, and accrued and unpaid interest on all of the outstanding Notes shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Indenture will provide that, at any time after a declaration of acceleration with respect to the Notes as described in the preceding paragraph, the Holders of a majority in principal amount of the Notes may rescind and cancel such declaration and its consequences: (1)

if the rescission would not conflict with any judgment or decree;

(2)

if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration;

(3)

to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid;

(4)

if the Issuer has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances; and

(5)

in the event of the cure or waiver of an Event of Default of the type described in clause (6) of the description above of Events of Default, the Trustee shall have received an Officers’ Certificate and an Opinion of Counsel that such Event of Default has been cured or waived.

The Holders of a majority in principal amount of the Notes may waive any existing Default or Event of Default under the Indenture, and its consequences, except a default in the payment of the principal of or interest on any Notes. Subject to the provisions of the Indenture relating to the duties of the Trustee, the Trustee is under no obligation to exercise any of its rights or powers under the Indenture at the request, order or direction of any of the Holders, unless such Holders have indemnified or secured the Trustee to its reasonable satisfaction. Subject to the provisions of the Indenture and applicable law, the Holders of a majority in principal amount of the outstanding Notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. Under the Indenture, the Company is required to provide an Officers’ Certificate to the Trustee promptly and in any event within 10 Business Days after any officer of either the Company or the Issuer obtains knowledge of any Default or Event of Default (provided that such officers shall provide such certification at least annually, and upon the reasonable request of the Trustee, whether or not they know of any Default or Event of Default) that has occurred and, if applicable, describe such Default or Event of Default and the status thereof. Defeasance The Issuer at any time may terminate all its obligations and those of the Guarantors under the Notes and the Indenture (“legal defeasance”), except for certain obligations, including those respecting the defeasance trust and obligations to register the transfer or exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain a registrar and paying agent in respect of the Notes. The Issuer at any time may terminate its obligations and those of the Guarantors under covenants described under “— Certain Covenants” (other than “— Certain Covenants — Merger and Consolidation”), the operation of the cross-default upon a payment default, cross acceleration provisions, the bankruptcy provisions with respect to Significant Subsidiaries, the judgment default provision described under “Events of Default” above and the limitations contained in clause (3) under “— Certain Covenants — Merger and Consolidation” above (“covenant defeasance”). The Issuer may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Issuer exercises its legal defeasance option, payment of the Notes may not be accelerated because of an Event of Default with respect to the Notes. If the Issuer exercises its covenant defeasance option, payment of the Notes may not be accelerated because of an Event of Default specified in 135

clause (3), (4), (5), (6) (with respect only to Significant Subsidiaries), (7) or (8) under “Events of Default” above or because of the failure of the Issuer to comply with clause (3) under the first paragraph or clause (2) of the fifth paragraph of “— Certain Covenants — Merger and Consolidation” above. In order to exercise either defeasance option, the Issuer must irrevocably deposit in trust (the “defeasance trust”) with the Trustee cash in euros or European Government Obligations or a combination thereof for the payment of principal, premium, if any, and interest on the Notes to redemption or maturity, as the case may be, and must comply with certain other conditions, including delivery to the Trustee of: (1)

an Opinion of Counsel of recognized standing with respect to U.S. federal income tax matters to the effect that Holders or beneficial owners of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such deposit and defeasance and will be subject to U.S. federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred (and in the case of legal defeasance only, such Opinion of Counsel must be based on a ruling of the U.S. Internal Revenue Service or a change in applicable U.S. federal income tax law) reasonably acceptable in form and substance by the Trustee;

(2)

an Opinion of Counsel of recognized standing with respect to income tax matters in the jurisdiction in which the Issuer is organized, resident for tax purposes or engaged in business, to the effect that the Holders or beneficial owners of the outstanding Notes of the relevant series will not recognize income, gain or loss for income tax purposes in such jurisdiction as a result of such defeasance and will be subject to income tax in such jurisdiction on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred reasonably acceptable in form and substance by the Trustee;

(3)

an Officers’ Certificate stating that the deposit was not made by the Issuer with the intent of defeating, hindering, delaying, defrauding or preferring any creditors of the Issuer, the Company or any Subsidiary Guarantor;

(4)

an Officers’ Certificate and an Opinion of Counsel (which Opinion of Counsel may be subject to customary assumptions and exclusions) reasonably acceptable in form and substance by the Trustee, each stating that all conditions precedent provided for or relating to legal defeasance or covenant defeasance, as the case may be, have been complied with; and

(5)

an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute or is exempt from registration, or is qualified as, a regulated investment company under the U.S. Investment Company Act of 1940.

Satisfaction and Discharge The Indenture will be discharged and will cease to be of further effect (except as to surviving rights or registration of transfer or exchange of the Notes, as expressly provided for in the Indenture) as to all outstanding Notes when (1)

(2)

either: (a)

all the Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust) have been delivered to the Trustee for cancellation; or

(b)

all Notes not theretofore delivered to the Trustee for cancellation (1) have become due and payable or (2) will become due and payable within one year, or are to be called for redemption within one year, under arrangements reasonably satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuer, and the Issuer has irrevocably deposited or caused to be deposited with the Trustee funds in euro or European Government obligations or a combination thereof in an amount sufficient to pay and discharge the entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the Notes to the date of maturity or redemption, as the case may be, together with irrevocable instructions from the Issuer directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be;

the Issuer has paid all other sums payable under the Indenture by the Issuer; and 136

(3)

the Issuer has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel acceptable in form and substance to the Trustee stating that all conditions precedent under the Indenture relating to the satisfaction and discharge of the Indenture have been complied with.

Amendments and Waivers Subject to certain exceptions, the Indenture, the Notes, the Notes Guarantees, the Security Documents (and any intercreditor agreement entered into in accordance with the terms of the Indenture), the Escrow Agreement, the Intercompany Proceeds Note and the Acquisition On-Loan may be amended or supplemented with the consent of the Holders of a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes) and, subject to certain exceptions, any past default or compliance with any provisions may be waived with the consent of the Holders of a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes). However, without the consent of each Holder of an outstanding Note, no amendment may, among other things: (1)

reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;

(2)

reduce the stated rate of or extend the stated time for payment of interest on any Note;

(3)

reduce the principal of or extend the Stated Maturity of any Note;

(4)

reduce the premium payable upon the redemption or repurchase of any Note or change the time at which any Note may be redeemed or repurchased as described above under “— Optional Redemption”, “— Redemption for Changes in Withholding Taxes”, “— Change of Control”;

(5)

modify or change in any material respect the obligation of the Issuer to make and consummate a Change of Control Offer in respect of a Change of Control that has occurred or make and consummate an Asset Disposition Offer with respect to any Asset Disposition that has been made;

(6)

make any Notes payable in a currency other than that stated in the Notes;

(7)

make any changes in the provisions of the Indenture entitling each Holder to receive payment of, premium, if any, principal of or interest on such Holder’s Notes on or after the due dates therefor or to impair the right of any Holder to institute suit for the enforcement of any payment on or with respect to such Holder’s Notes;

(8)

make any change in the amendment or waiver provisions of the Indenture which require each Holder’s consent;

(9)

make any change in the provisions of the Indenture described under “Withholding Taxes” that adversely affects the rights of any Holder of such Notes in any material respect or amends the terms of such Notes in a way that would result in a loss of an exemption from any of the Taxes described thereunder or an exemption from any obligation to withhold or deduct Taxes so described thereunder unless the Payor agrees to pay Additional Amounts, if any, in respect thereof;

(10)

make any change in the provisions of the Indenture or any Security Document (or intercreditor agreement) affecting the ranking of the Notes or any Notes Guarantee in a manner adverse to the Holders in any material respect;

(11)

release the Liens on the Collateral except as permitted by the Indenture and the Security Documents; or

(12)

release any Guarantor from any of its obligations (or modify such obligations in any manner adverse to the Holders in any material respect) under any Notes Guarantee or the Indenture, as applicable, except in accordance with the terms of the Indenture.

Notwithstanding the foregoing, without the consent of any Holder, the Issuer, the Company, the Subsidiary Guarantors and the Trustee or (in the case of the Security Documents) the Security Agent and/or the Collateral Agent, together, may amend the Indenture, the Notes, the Notes Guarantees, the Security Documents (and any intercreditor agreement entered into in accordance with the terms of the Indenture), the Escrow Agreement, the Intercompany Proceeds Note and the Acquisition On-Loan to: (1)

cure any ambiguity, omission, defect or inconsistency;

(2)

provide for the assumption by a successor corporation of the obligations of the Issuer, the Company or any Subsidiary Guarantor under the Indenture, the Notes, the Security Documents, any intercreditor agreement, the Escrow Agreement, the Intercompany Proceeds Note and the Acquisition On-Loan or the Notes Guarantees (and other relevant agreements); 137

(3)

provide for uncertificated Notes in addition to or in place of certificated Notes;

(4)

add Guarantees with respect to the Notes;

(5)

secure or further secure the Notes or any Notes Guarantees;

(6)

add to the covenants of the Issuer, the Company or any Guarantor for the benefit of the Holders or surrender any right or power conferred upon the Issuer, the Company or any Subsidiary Guarantor;

(7)

make any change that does not adversely affect the rights of any Holder;

(8)

provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture as of the Issue Date and to make such changes as may be required to the Security Documents (and any intercreditor agreement) to accommodate and implement such issuance of Additional Notes;

(9)

conform the text of the Indenture, the Notes, the Notes Guarantees, the Security Documents (and any intercreditor agreement), the Escrow Agreement, the Intercompany Proceeds Note or the Acquisition On-Loan to any provision of this Description of the Notes section to the extent that such provision in this “Description of the Notes” section was intended to be a verbatim or substantially verbatim recitation of a provision of the Indenture, the Notes, the Notes Guarantees, the Security Documents (and any intercreditor agreement), the Escrow Agreement, the Intercompany Proceeds Note or the Acquisition On-Loan; or

(10)

evidence and provide for the acceptance and appointment under the Indenture of a successor Trustee pursuant to the requirement thereof.

The consent of the Holders is not necessary under the Indenture to approve the particular form of any proposed amendment, supplement or waiver. It is sufficient if such consent approves the substance of the proposed amendment, supplement or waiver. A consent to any amendment, supplement or waiver under the Indenture by any Holder of Notes given in connection with a tender of such Holder’s Notes will not be rendered invalid by such tender. In determining whether the Holders of the requisite principal amount of Notes have given any request, demand, authorization, consent, vote or waiver in connection with the Indenture and the Notes, Notes owned by the Issuer or any Affiliate of the Issuer shall be disregarded and deemed not to be outstanding for these purposes, except that in determining whether the Trustee shall be protected in relying upon such request, demand, authorization, consent, vote or waiver, only Notes which the Trustee knows to be so owned shall be so disregarded. The Issuer will publish a notice of any material amendment, supplement or waiver in accordance with the provisions of the Indenture described under “— Notices”, and for so long as the Notes are listed on the Luxembourg Stock Exchange and traded on the Euro MTF Market and the rules of such exchange so require, the Issuer will notify the Luxembourg Stock Exchange of any such amendment, supplement and waiver. Governing Law The Indenture, the Notes and the Notes Guarantees will be governed by, and construed in accordance with, the laws of the State of New York. The Security Documents will be governed by the laws of various relevant jurisdictions including New York, Poland, France and Austria. Concerning the Trustee The Bank of New York is to be appointed as Trustee under the Indenture. The Indenture provides that, except during the continuance of an Event of Default, the Trustee will perform only such duties as are set forth specifically in the Indenture. During the existence of an Event of Default, the Trustee will exercise such of the rights and powers vested in it under the Indenture and use the same degree of care that a prudent Person would use in conducting its own affairs. The Indenture imposes certain limitations on the rights of the Trustee, should it become a creditor of the Issuer, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; provided, however, that if it acquires any conflicting interest it must either eliminate such conflict or resign. The Indenture sets out the terms under which the Trustee may retire or be removed, and replaced. Any removal or resignation of the Trustee shall not become effective until the acceptance of appointment by the successor Trustee. The Indenture provides for the indemnification of the Trustee in connection with its actions under the Indenture. 138

Form of Notes The Notes will be represented initially by a global note in registered form (the “Global Note”). Unless Definitive Notes (as defined below) are issued, the principal amount of the Global Note will at all times equal the outstanding principal amount of the Notes represented thereby. The Global Note will be deposited on the Issue Date with The Bank of New York, as common depositary (the “Common Depositary”) for the Euroclear System (“Euroclear”) and for Clearstream. Interests in the Global Note will be shown on, and transfers thereof will be effected only through, records maintained in book-entry form by Euroclear and Clearstream. Such beneficial interests in the Notes are referred to as “Book-Entry Interests.” Holders of Book-Entry Interests will be entitled to receive Definitive Notes in registered form (“Definitive Notes”) in exchange for their holdings of Book-Entry Interests only in the limited circumstances set forth in “Book-Entry, Delivery and Form — Definitive Notes.” Title to the Definitive Notes will pass upon registration of transfer in accordance with the provisions of the Indenture. In no event will Definitive Notes in bearer form be issued. Payments on the Notes Principal of, premium, if any, Additional Amounts, if any, and interest on the Global Note will be payable, and the Global Note may be exchanged or transferred, at the corporate trust office or agency of the Trustee in London, England, except that, at the option of the Issuer, payment of interest may be made by check mailed to the address of the Holders of the Notes as such address appears in the Note register. Payment of principal of, premium, if any, Additional Amounts, if any, and interest on Notes in global form registered in the name of or held by the Common Depositary or its nominee will be made in immediately available funds to the Common Depositary or its nominee, as the case may be, as the registered holder of such Global Note. Upon the issuance of Definitive Notes, and for so long as the Notes are listed on the Luxembourg Stock Exchange and traded on the Euro MTF market and the rules of the Luxembourg Stock Exchange so require, Holders of the Notes will be able to receive principal and interest on the Notes at the Luxembourg office of such paying agent, subject to the right of the Issuer to mail payments in accordance with the terms of the Indenture. The Issuer will pay interest on the Notes to Persons who are registered Holders at the close of business on the record date immediately preceding the interest payment date for such interest. Such Holders must surrender the Notes to a Paying Agent to collect principal payments. Global Clearance and Settlement Under Book-Entry System Initial settlement for the Notes will be made in euros. Book-Entry Interests owned through Euroclear or Clearstream accounts will follow the settlement procedures applicable to conventional eurobonds in registered form. Book-Entry Interests will be credited to the securities custody accounts of Euroclear and Clearstream holders on the Business Day following the settlement date against payment for value on the settlement date. The Book-Entry Interests will trade through participants of Euroclear or Clearstream and will settle in same day funds. Since the purchase determined the place of delivery, it is important to establish at the time of trading of any Book-Entry Interests where both the purchaser’s and seller’s accounts are located to ensure that settlement can be made on the desired value date. Concerning the Paying Agent and Registrar The Trustee will initially act as Paying Agent and Registrar for the Notes. The Issuer may change the Paying Agent or Registrar for the Notes without prior notice to the Holders of the Notes, and the Company or any of its subsidiaries may act as Paying Agent or Registrar for the Notes; provided that, if Definitive Notes are issued, and for so long as the Notes are listed on the Luxembourg Stock Exchange and traded on the Euro MTF market and the rules of the Luxembourg Stock Exchange so require, the Issuer will appoint a Luxembourg paying agent reasonably acceptable to the Trustee, as an additional paying agent for the Notes. In the event that a Paying Agent is replaced, the Issuer will provide prior notice thereof in accordance with the procedures described under “— Notices.” As long as the Notes remain outstanding, the Issuer also agrees that it will ensure that it maintains a paying agent for the Notes in a member state of the European Union that is not obliged to withhold or deduct tax pursuant to the EU Savings Tax Directive or any law implementing or complying with, or introduced in order to conform to the EU Savings Tax Directive. 139

Transfer and Exchange A Holder of Notes may transfer or exchange Notes in accordance with the Indenture which shall provide that, upon the issuance of definitive Notes, and for so long as the Notes are listed on the Luxembourg Stock Exchange and traded on the Euro MTF market and the rules of the Luxembourg Stock Exchange so require, Holders of Notes will be able to transfer Definitive Notes in Luxembourg at an office of such transfer agent. The Registrar and the Trustee for the Notes may require a Holder of a Note, among other things, to furnish appropriate endorsements and transfer documents, and the Issuer may require such holder to pay any taxes and fees required by law or permitted by the Indenture. The Issuer is not required to transfer or exchange any Note selected for redemption. Also, the Issuer is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. The registered Holder of a Note will be treated as the owner of it for all purposes. No service charge will be made for any registration of transfer or exchange of Notes, but the Issuer may require payment of a sum sufficient to cover any transfer tax or other similar governmental charge payable in connection therewith. The Notes in global form may be transferred only to a successor of the Common Depositary. In case of a partial transfer of a Definitive Note, a Holder will receive new Notes through the transfer agent. Book-Entry Interests will be subject to certain restrictions on transfer and certification requirements as described under “Notice to Investors.” All transfers of Book-Entry Interests between participants in Euroclear or participants in Clearstream will be effected by Euroclear or Clearstream pursuant to customary procedures and subject to the applicable rules and procedures established by Euroclear or Clearstream and their respective participants. See “Book-Entry, Delivery and Form.” Notes issued as Definitive Notes in registered form may be transferred, in whole or in part, in denominations of €50,000 in principal amount or integral multiples of €1,000 in excess thereof to persons who take delivery thereof in the form of definitive Notes in registered form. In connection with any such transfer, the Indenture will require the transferor to, among other things, furnish appropriate endorsements and transfer documents, furnish information regarding the Euroclear or Clearstream account of the transferee, furnish certain certificates and pay any taxes, duties and governmental charges in connection with such transfer. Notwithstanding the foregoing, the Issuer is not required to register the transfer of any Definitive Note in registered form: (1)

for a period of 15 calendar days prior to any date fixed for the redemption of the Notes;

(2)

for a period of 15 calendar days immediately prior to the date fixed for selection of Notes to be redeemed in part;

(3)

for a payment period of 15 calendar days prior to the record date with respect to any interest payment date; or

(4)

that the registered holder of Notes has tendered (and not withdrawn) for repurchase in connection with a Change of Control Offer or an Asset Disposition Offer.

Currency Indemnity and Calculation of Euro-denominated Restrictions The euro is the sole currency of account and payment for all sums payable by the Issuer and the Guarantors under or in connection with the Notes, the Notes Guarantees and the Indenture, including damages. Any amount received or recovered in a currency other than euro, whether as a result of, or the enforcement of, a judgment or order of a court of any jurisdiction, in the winding-up or dissolution of the Issuer or a Guarantor or otherwise, by any Holder or by the Trustee in respect of any sum expressed to be due to it from the Issuer or a Guarantor will only constitute a discharge of the Issuer or such Guarantor to the extent of the euro amount which the recipient is able to purchase with the amount so received or recovered in that other currency on the date of that receipt or recovery (or, if it is not practicable to make that purchase on that date, on the first date on which it is practicable to do so). If that euro amount is less than the euro amount expressed to be due to the recipient under any Note or the Trustee, the Issuer and each Guarantor will indemnify them against any loss sustained by such recipient as a result. In any event, the Issuer and each Guarantor will indemnify the recipient against the cost of making any such purchase. For the purposes of this currency indemnity provision, it will be sufficient for the Holder or the Trustee to certify in a satisfactory manner (indicating the sources of information used) that it would have suffered a loss had an actual purchase of euro been made with the amount so received in that other currency on the date of receipt or recovery (or, if a purchase of euro on such date had not been practicable, on the first date on which it 140

would have been practicable, it being required that the need for a change of date be certified in the manner mentioned above). These indemnities constitute a separate and independent obligation from the Issuer’s and each Guarantor’s other obligations, will give rise to a separate and independent cause of action, will apply irrespective of any indulgence granted by any Holder or the Trustee and will continue in full force and effect despite any other judgment, order, claim or proof for a liquidated amount in respect of any sum due under any Note, any Notes Guarantee or to the Trustee. Except as otherwise specifically set out herein, for purposes of determining compliance with any eurodenominated restriction herein, the euro-equivalent amount for purposes hereof that is denominated in a non-euro currency shall be calculated based on the relevant currency exchange rate in effect on the date such non-euro amount is incurred or made, as the case may be. No Personal Liability of Members of the Supervisory Board or Analogous Board or Body, Officers, Employees and Shareholders No director or member of the supervisory board or analogous board or body, and no officer, employee, incorporator or shareholder of the Issuer, the Company or any Subsidiary Guarantor shall have any liability for any obligations of the Issuer, the Company or the Subsidiary Guarantors under the Notes, the Notes Guarantees, the Indenture or the Security Documents or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the U.S. federal securities laws or French Law, and it is the view of the U.S. Securities and Exchange Commission that such a waiver is against public policy. Consent to Jurisdiction and Service In relation to any legal action or proceedings arising out of or in connection with the Indenture and the Notes, the Issuer, the Company and each Subsidiary Guarantor will in the Indenture irrevocably submit to the jurisdiction of the federal and state courts in the Borough of Manhattan in the City of New York, County and State of New York, United States of America. Enforceability of Judgments Because the assets of the Issuer and the Guarantors are primarily outside the United States, any judgment obtained in the United States against the Issuer or any Guarantor, including judgments with respect to the payment of principal, interest, Additional Amounts or premium and any redemption price and any purchase price with respect to the Notes or the Notes Guarantees, may not be collectable within the United States. Notices Notices regarding the Notes will be sent to a leading newspaper having general circulation in London (which is expected to be The Financial Times), through the newswire service of Bloomberg (or if Bloomberg does not then operate, any similar agency) and, for as long as the Notes are listed on the Luxembourg Stock Exchange and traded on the Euro MTF Market, by publication in a daily newspaper published in Luxembourg (which is expected to be the d’Wort) or by publication on the website of the Luxembourg Stock Exchange (www.bourse.lu). Additionally, in the event the Notes are in the form of Definitive Notes, notices will be sent, by first-class mail, with a copy to the Trustee, to each Holder at such Holder’s address as it appears on the registration books of the registrar. If and so long as such Notes are listed on the Luxembourg Stock Exchange and traded on the Euro MTF Market or on any other securities exchange, notices will also be given in accordance with any applicable requirements of such securities exchange. If and so long as any Notes are represented by one or more Global Notes, notices will be delivered to such clearing agency for communication to the owners of such Book-Entry Interests. Notices given by publication will be deemed given on the first date on which publication is made and notices given by first-class mail, postage prepaid, will be deemed given five calendar days after mailing. Prescription Claims against the Issuer for payment of principal, interest and additional amounts, if any, on the Notes will become void unless presentment is made (where so required herein) within, in the case of principal and additional amounts, if any, a period of ten years or, in the case of interest, a period of five years, in each case from the applicable original payment date therefor. 141

Certain Definitions “Acquired Indebtedness” means Indebtedness: (1)

of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary;

(2)

assumed in connection with the acquisition of assets from a Person; or

(3)

of a Person at the time such Person merges with or into or consolidates with the Company or any Restricted Subsidiary,

which, in the case of clause (2) and (3) above, is not Incurred by such Person in connection with or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such acquisition. Acquired Indebtedness shall be deemed to have been Incurred, with respect to clause (1) of the preceding sentence, on the date such Person becomes a Restricted Subsidiary and, with respect to clause (2) of the preceding sentence, on the date of consummation of such acquisition of assets and, with respect to clause (3) of the preceding sentence, on the date of the relevant merger or consolidation. “Acquisition Closing Date” means the date upon which the Austrian Acquisition is consummated. “Acquisition Costs” means all reasonable costs, fees and expenses (and taxes thereon) and all capital, stamp, documentary, registration or other taxes incurred by or on behalf of the Company or its subsidiaries in connection with the Austrian Acquisition. “Acquisition Agreement” means the share purchase agreement entered into on December 20, 2006 among the Company, Donauländische Baugesellschaft m.b.H. and voestalpine Stahl GmbH, as amended from time to time. “Additional Intercompany Proceeds Note” means any note representing the on-lending of, or a loan of, the gross proceeds of any Additional Notes (or debt securities of the Issuer substantially identical to the Notes and the Notes Guarantees (other than with respect to interest, maturity and redemption provisions)). “Additional Notes Guarantees” means Guarantees by the Guarantors of Additional Notes that are permitted to be Incurred under the Indenture. “Affiliate” means, with respect to any specified Person, any other Person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative of the foregoing. “Applicable Premium” means, with respect to any Note on any redemption date, the greater of (a) one percent of the principal amount of the Note and (b) the excess of (x) the present value at such redemption date of the redemption price of such Note at February 1, 2011, plus all required interest payments that would otherwise be due to be paid on such Note during the period between the redemption date and February 1, 2011 excluding accrued but unpaid interest, computed using a discount rate equal to the Bund Rate at such redemption date plus 50 basis points, over (y) the principal amount of such Note. “Asset Acquisition” means: (1)

an Investment by the Company or any Restricted Subsidiary of the Company in any other Person pursuant to which such Person shall become a Restricted Subsidiary of the Company or any Restricted Subsidiary of the Company, or shall be merged with or into the Company or any Restricted Subsidiary of the Company; or

(2)

the acquisition by the Company or any Restricted Subsidiary of the Company of the assets of any Person (other than a Restricted Subsidiary of the Company) which constitute all or substantially all of the assets of such Person or comprises any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business.

“Asset Disposition” means any direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or other transfer for value, or series of related sales, issuances, conveyances, transfers, leases, assignments or any other transfers, by the Company or any of its Restricted Subsidiaries, including any Sale and Leaseback Transaction and any disposition by means of a merger, consolidation or similar transaction (each referred to for purposes of this definition as a “disposition”) of: (1)

any Capital Shares of any Restricted Subsidiary of the Company (other than directors’ qualifying shares or shares required by law to be held by a Person other than the Company or a Restricted Subsidiary); or 142

(2)

any other property or assets of the Company or any Restricted Subsidiary of the Company other than in the ordinary course of business.

Notwithstanding the preceding, the following items shall not be deemed to be Asset Dispositions: (1)

a disposition between or among the Company and its Restricted Subsidiaries;

(2)

the disposition of cash or Cash Equivalents;

(3)

a disposition of inventory;

(4)

a disposition of obsolete or worn out equipment or equipment that is no longer useful in the conduct of the business of the Company and its Restricted Subsidiaries and that is disposed of by the Company and its Restricted Subsidiaries in the ordinary course of business;

(5)

transactions by the Company and its Restricted Subsidiaries permitted under “— Certain Covenants — Merger and Consolidation” or a transaction that constitutes a Change of Control;

(6)

an issuance of Capital Shares by a Restricted Subsidiary of the Company to the Company or to a Restricted Subsidiary of the Company;

(7)

any Restricted Payment (or Asset Disposition that would constitute a Restricted Payment but for exclusions from the definition thereof) that is permitted to be made, and is made, under the covenant described above under “— Certain Covenants — Limitation on Restricted Payments” or that constitutes a Permitted Investment;

(8)

dispositions by the Company and its Restricted Subsidiaries of assets in a single transaction or series of related transactions with an aggregate Fair Market Value of less than €2.0 million;

(9)

dispositions constituting an Incurrence of a Permitted Lien (but not the sale or other disposition of the property subject to such Lien);

(10)

dispositions by the Company and its Restricted Subsidiaries of receivables in connection with the compromise, settlement or collection thereof or in bankruptcy or similar proceedings and exclusive of factoring or similar arrangements;

(11)

the licensing or sublicensing of intellectual property or other intangibles and licenses, leases or subleases of other property;

(12)

foreclosure, condemnation or similar action with respect to any property or other assets;

(13)

a disposition pursuant to the terms of a binding agreement in effect on the Issue Date (or in effect at the time a Person becomes a Restricted Subsidiary, provided that such agreement was not entered into in contemplation of such Person becoming a Restricted Subsidiary);

(14)

a disposition of shares of Centrostal pursuant to a public offering, to the extent that the Company’s direct or indirect ownership interest in Centrostal after such sale is greater than 50% of the outstanding capital shares; and

(15)

sales of accounts receivable and related assets that constitute Permitted Factoring.

“Attributable Indebtedness” in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in the sale and leaseback transaction including any period for which the lease has been extended or may, at the option of the lessor, be extended. The present value shall be calculated using a discount rate equal to the rate of interest implicit in the transaction, determined in accordance with IFRS. “Austrian Acquisition” means the purchase by the Company of 74.9% of the Capital Shares of the Target pursuant to the terms of the Acquisition Agreement. “Average Life” means, as of the date of determination, with respect to any Indebtedness or Preferred Shares, the quotient obtained by dividing (1) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or scheduled redemption or similar payment with respect to such Preferred Shares multiplied by the amount of such payment by (2) the sum of all such payments. “Board Resolution” means, with respect to any Person, a resolution certified by the company secretary or an assistant company secretary of such Person to have been duly adopted by the Supervisory Board or the Management Board, as applicable, or an analogous body of such Person and to be in full force and effect on the date of such certification. 143

“Bund Rate” means the yield to maturity at the time of computation of direct obligations of the Federal Republic of Germany (Bunds or Bundesanleihen) with a constant maturity (as officially compiled and published in the most recent financial statistics that have become publicly available at least two Business Days (but not more than five Business Days) prior to the redemption date (or, if such financial statistics are not so published or available, any publicly available source of similar market data selected by the Issuer in good faith)) most nearly equal to the period from the redemption date to February 1, 2011; provided, however, that if the period from the redemption date to February 1, 2011 is not equal to the constant maturity of a direct obligation of the Federal Republic of Germany for which a weekly average yield is given, the Bund Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of direct obligations of the Federal Republic of Germany for which such yields are given, except that if the period from such redemption date to February 1, 2011 is less than one year, the weekly average yield on actually traded direct obligations of the Federal Republic of Germany adjusted to a constant maturity of one year shall be used. “Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in New York, London, Warsaw, Paris or Luxembourg are authorized or required by law to close or a day on which the corporate trust office of the Trustee is closed for business. “Capital Shares” of any Person means any and all shares, stock, interests, rights to purchase, warrants, options, participation or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Shares, but excluding any debt securities convertible into such equity. “Capitalized Lease Obligation” means, with respect to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under IFRS and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with IFRS. “Cash Equivalents” means: (1)

debt securities denominated in euro, pounds sterling or U.S. dollars, as applicable, to be issued or directly and fully guaranteed or insured by the government of a Participating Member State as of the Issue Date, the U.K. or the U.S., as applicable, where the debt securities have not more than 24 months to final maturity from the date of acquisition and are not convertible into any other form of security;

(2)

debt securities denominated in euro, pounds sterling or U.S. dollars which have not more than twelve months to final maturity from the date of acquisition, are not convertible into any other form of security, are rated at least P-1 by Moody’s or A-1 by Standard & Poor’s (or if such ratings categories are changed, substantially equivalent categories) and are not issued or guaranteed by the Company or any of its Subsidiaries;

(3)

commercial paper denominated in euro, pounds sterling or U.S. dollars maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of P-1 from Moody’s and A-1 from Standard & Poor’s (or if such ratings categories are changed, substantially equivalent categories);

(4)

any cash deposit or certificates of deposit denominated in euro, pounds sterling or U.S. dollars having (with respect to certificates of deposit) not more than twelve months to maturity issued by or held with a bank or financial institution incorporated or having a branch in a Participating Member State (on the Issue Date) in the United Kingdom or the United States, provided that the bank is rated at least P-1 by Moody’s or A-1 by Standard & Poor’s;

(5)

repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (1) above entered into with any bank or financial institution meeting the qualifications specified in clause (4) above; and

(6)

investments in money market funds which invest substantially all their assets in securities of the types described in clauses (1) through (5) above.

“Change of Control” means the occurrence of one or more of the following events: (1)

prior to the consummation of a Public Equity Offering, Permitted Holders cease to beneficially own (as defined in Rules 13d-3 and 13d-5 of the Exchange Act), directly or indirectly more than 50.1% of the total voting power of the Voting Shares of the Company (or its successor by merger, consolidation or purchase of all or substantially all of its assets); 144

(2)

following the consummation of a Public Equity Offering, (a) any “person” or “group” of related persons (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that such person or group shall be deemed to have “beneficial ownership” of all shares that any such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 35.0% of the total voting power of the Voting Shares of the Company (or its successor by merger, consolidation or purchase of all or substantially all of its assets), and (b) the Permitted Holders “beneficially own” (as defined in Rules 13d-3 and 13d-5 of the Exchange Act), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Shares of the Company (or its successor by merger, consolidation or purchase of all or substantially all of its assets);

(3)

during any period of two consecutive years, individuals who at the beginning of such period constituted the Supervisory Board of the Company (together with any new members of such Supervisory Board whose election to such board or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the members of the Supervisory Board then still in office who were either directors at the beginning of such period of whose election or nomination for election was previously so approved), cease for any reason to constitute a majority of such members of such board then in office;

(4)

the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the property or assets of the Company and its Restricted Subsidiaries taken as a whole to any “person” or “group” of related persons (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) other than to one or more Permitted Holders; or

(5)

the adoption by the shareholders of the Company of a plan or proposal for the liquidation or dissolution of the Company.

“Centrostal” mean Centrostal S.A., and any successor in interest thereto. “Collateral Agent” means The Bank of New York, as collateral agent acting on behalf of the Holders of Notes under the Security Documents. “Commission” means the U.S. Securities and Exchange Commission. “Commodity Hedging Agreements” means in respect of a Person any commodity purchase contract, commodity futures or forward contract, commodities option contract or other similar contract (including commodities derivative agreements or arrangements), to which such Person is a party or a beneficiary. “Consolidated EBITDA” for any period means, without duplication, the Consolidated Net Income for such period, (x) plus the following to the extent deducted in calculating such Consolidated Net Income: (1)

Consolidated Interest Expense;

(2)

Consolidated Income Taxes;

(3)

consolidated depreciation expense;

(4)

consolidated amortization expense or impairment charges recorded in accordance with IFRS; and

(5)

other non-cash charges reducing Consolidated Net Income (excluding any such non-cash charge to the extent it represents an accrual of or reserve for cash charges in any future period or amortization of a prepaid cash expense that was paid in a prior period not included in the calculation),

(y) less any non-cash items increasing Consolidated Net Income for such period. Notwithstanding the preceding sentence, clauses (2) through (5) relating to amounts of a Restricted Subsidiary of a Person will be added to Consolidated Net Income to compute Consolidated EBITDA of such Person only to the extent (and in the same proportion) that the net income (loss) of such Restricted Subsidiary 145

was included in calculating the Consolidated Net Income of such Person and, to the extent the amounts set forth in clauses (2) through (5) are in excess of those necessary to offset a net loss of such Restricted Subsidiary or if such Restricted Subsidiary has net income for such period included in Consolidated Net Income, only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Restricted Subsidiary or its shareholders. “Consolidated Fixed Charge Coverage Ratio” means, with respect to any Person, the ratio of Consolidated EBITDA of such Person during the period of the four full fiscal quarters (the “Four Quarter Period”) ending prior to the date of the transaction giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio for which financial statements are available (the “Transaction Date”) to Consolidated Fixed Charges of such Person for the Four Quarter Period. In addition to and without limitation of the foregoing, for purposes of this definition, “Consolidated EBITDA” and “Consolidated Fixed Charges” shall be calculated after giving effect on a pro forma basis for the period of such calculation to: (1)

the Incurrence or repayment of any Indebtedness of such Person or any of its Restricted Subsidiaries (and the application of the proceeds thereof) giving rise to the need to make such calculation and any Incurrence or repayment of other Indebtedness (and the application of the proceeds thereof), other than the Incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to working capital facilities, occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such Incurrence or repayment, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four Quarter Period; and

(2)

any asset sales or other dispositions or Asset Acquisitions (including, with out limitation, any Asset Acquisition giving rise to the need to make such calculation) as a result of such Person or one of its Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) Incurring, assuming or otherwise being liable for Acquired Indebtedness and also including any Consolidated EBITDA attributable to the assets which are the subject of the Asset Acquisition or asset sale or other disposition during the Four Quarter Period) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such asset sale or other disposition or Asset Acquisition (including the Incurrence, assumption or liability for any such Acquired Indebtedness) occurred on the first day of the Four Quarter Period. If such Person or any of its Restricted Subsidiaries directly or indirectly Guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the Incurrence of such Guaranteed Indebtedness as if such Person or any Restricted Subsidiary of such Person had directly Incurred or otherwise assumed such Guaranteed Indebtedness.

Furthermore, in calculating “Consolidated Fixed Charges” for purposes of determining the denominator (but not the numerator) of this “Consolidated Fixed Charge Coverage Ratio:” (1)

interest on outstanding Indebtedness determined on a fluctuating or floating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; and

(2)

notwithstanding clause (1) above, interest on Indebtedness determined on a fluctuating or floating basis, to the extent such interest is covered by agreements relating to Interest Swap Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements.

For the purposes of this definition, whenever pro forma effect is to be given to any Asset Acquisition, the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting officer of the Company. In addition, any such pro forma calculation may include adjustments to reflect operating expense reductions from any acquisition or merger, which are considered in the good faith judgment of the Company as probable to be realized, as set out in an officers certificate. If any Indebtedness is Incurred pursuant to a revolving credit facility, the amount outstanding on the date of such calculations will be computed based on (i) the average daily balance of such Indebtedness during such Four Quarter Period or (ii) if such facility was created after the end of such Four Quarter Period, the average daily balance of such Indebtedness during the period from the date of creation of such facility to the date of calculation. 146

“Consolidated Fixed Charges” means, with respect to any Person for any period, the sum, without duplication, of: (1)

Consolidated Interest Expense; plus

(2)

the product of: (a)

the amount of all dividend payments on any series of Preferred Shares of such Person and, to the extent permitted under the Indenture, its Restricted Subsidiaries (other than dividends paid in Qualified Capital Shares and other than dividends paid by a Restricted Subsidiary of such Person to such Person or to a Restricted Subsidiary of such Person) paid, accrued or scheduled to be paid or accrued during such period; and

(b)

a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated income tax rate of such Person, expressed as a decimal (as estimated in good faith by the principal financial officer of the Company).

“Consolidated Income Taxes” means, with respect to any Person for any period, taxes imposed upon such Person or other payments required to be made by such Person by any governmental authority which taxes or other payments are calculated by reference to the income or profits of such Person or such Person and the Restricted Subsidiaries (to the extent such income or profits were included in computing Consolidated Net Income for such period), regardless of whether such taxes or payments are required to be remitted to any governmental authority. “Consolidated Interest Expense” means, for any period, the total interest expense of the Company and the Restricted Subsidiaries on a consolidated basis, whether paid or accrued, plus, to the extent not included in such interest expense: (1)

interest expense attributable to Capitalized Lease Obligations and the interest portion of rent expense associated with Attributable Indebtedness in respect of the relevant lease giving rise thereto, determined as if such lease were a capitalized lease in accordance with IFRS and the interest component of any deferred payment obligations;

(2)

amortization of debt discount and debt issuance cost;

(3)

non-cash interest expense;

(4)

commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing;

(5)

interest actually paid by the Company or any such Restricted Subsidiary under any Guarantee of Indebtedness or other obligation of any other Person;

(6)

net costs associated with Hedging Obligations (including amortization of fees);

(7)

the consolidated interest expense of the Company and the Restricted Subsidiaries that was capitalized during such period;

(8)

all dividends paid or payable, in cash, Cash Equivalents or Indebtedness or accrued during such period on any series of Disqualified Shares of the Company or on Preferred Shares of the Restricted Subsidiaries payable to a party other than the Company or a Wholly Owned Subsidiary;

(9)

the cash contributions to any employee share ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any other Person in connection with Indebtedness Incurred by such plan or trust;

(10)

any fees or charges attributable to Permitted Factoring; and

(11)

interest Incurred in connection with Investments in discontinued operations.

“Consolidated Net Income” means, for any period, the net income (loss) of the Company and the Restricted Subsidiaries on a consolidated basis determined in accordance with IFRS; provided, however, that there will not be included in such Consolidated Net Income: (1)

any net income (loss) of any Person (other than the Company) if such Person is not a Restricted Subsidiary, except that: (a)

subject to the limitations contained in clauses (4), (5) and (6) below, the Company’s equity in the net income of any such Person for such period will be included in such Consolidated 147

Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary (or, in respect of any other distribution, to the extent actually converted into cash) as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (2) below); and (b)

the Company’s equity in a net loss of any such Person (other than an Unrestricted Subsidiary) for such period will be included in determining such Consolidated Net Income to the extent such loss has been funded with cash from the Company or a Restricted Subsidiary;

(2)

any net income (loss) of any Person acquired by the Company or a Subsidiary of the Company in a pooling of interests transaction for any period prior to the date of such acquisition;

(3)

any net income of any Restricted Subsidiary if such Subsidiary is subject to restrictions (other than Permitted Restrictions), directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that: (a)

subject to the limitations contained in clauses (4) and (5) below, the Company’s equity in the net income of any such Restricted Subsidiary for such period will be included in such Consolidated Net Income up to the aggregate amount of cash that is actually distributed or could have been distributed (without double counting) by such Restricted Subsidiary during such period to the Company or another Restricted Subsidiary as a dividend (subject, in the case of a dividend to another Restricted Subsidiary, to the limitation contained in this clause); and

(b)

the Company’s equity in a net loss of any such Restricted Subsidiary for such period will be included in determining such Consolidated Net Income;

(4)

any gain (loss) realized upon the sale or other disposition of any property, plant or equipment of the Company or its consolidated Restricted Subsidiaries (including pursuant to any Sale and Leaseback Transaction) which is not sold or otherwise disposed of in the ordinary course of business and treated as such under IFRS and any gain (loss) realized upon the sale or other disposition of any Capital Shares of any Person;

(5)

any extraordinary gain or loss; and

(6)

the cumulative effect of a change in accounting principles.

“Credit Facilities” means one or more debt facilities (including, without limitation, debt facilities made available under, or in accordance with, the Revolving Credit Facilities Agreements) or commercial paper facilities, agreements, credit facility documentation, indentures or trust deeds, note purchase agreements or arrangements with banks, insurance companies or other institutional lenders or investors providing for revolving credit loans, term loans, receivables financing (including through the sale or factoring of receivables to such lenders or to special purpose entities formed to borrow from or issue securities to such lenders against such receivables), letters of credit or other forms of guarantees and assurances, bonds, notes, debentures or other indebtedness, including overdrafts, in each case, as amended, restated, modified, supplemented, renewed, refunded, replaced (whether upon or after termination or otherwise), refinanced, increased or extended in whole or in part from time to time, and whether or not with the original arranging agent, administrative agent and lenders or another arranging or administrative agent or agents or other banks or other institutional lenders or investors and whether provided under the original Revolving Credit Facilities or one or more other credit agreements or financing agreements (without limitation as to amount outstanding or committed, or the maturity, terms, conditions, covenants, or other provisions thereof or parties thereto) and in each case including all agreements, instruments and documents executed and delivered pursuant to or in connection with the foregoing (including any notes and letters of credit issued pursuant thereto and any guarantee and collateral agreement, patent and trademark security agreement, mortgages or letter of credit applications and other Guarantees, pledges, agreements, security agreements and collateral documents). “Currency Agreement” means in respect of a Person any foreign exchange contract, currency swap agreement or other similar agreement or arrangement intended to protect the Company or any Subsidiary of the Company against fluctuations in currency values. “Default” means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be, an Event of Default. 148

“Disqualified Capital Shares” means, with respect to any Person, any Capital Shares which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder) or upon the happening of any event: (1)

matures or is mandatorily redeemable (other than redeemable only for Capital Shares of such Person which is not itself Disqualified Capital Shares) pursuant to a sinking fund obligation or otherwise;

(2)

is convertible or exchangeable at the option of the holder for Indebtedness or Disqualified Capital Shares; or

(3)

is mandatorily redeemable or must be purchased upon the occurrence of certain events or otherwise, in whole or in part,

in each case on or prior to the 91st day after the Stated Maturity of the Notes; provided, however, that any Capital Shares that would not constitute Disqualified Capital Shares but for provisions thereof giving holders thereof the right to require such Person to purchase or redeem such Capital Shares upon the occurrence of an “asset sale” or a “change of control” occurring prior to the 91st day after the Stated Maturity of the Notes shall not constitute Disqualified Capital Shares if: (x)

the “asset sale” or “change of control” provisions applicable to such Capital Shares are not more favorable to the holders of such Capital Shares in any material respect than the terms applicable to the Notes; and

(y)

any such requirement only becomes operative after compliance with such comparable provisions applicable to the Notes, including the purchase of any Note tendered pursuant thereto.

The amount of any Disqualified Capital Shares that does not have a fixed redemption, repayment or repurchase price will be calculated in accordance with the terms of such Disqualified Capital Shares as if the Disqualified Capital Shares were redeemed, repaid or repurchased on the relevant date on which the amount of such Disqualified Capital is to be determined pursuant to the Indenture; provided, however, that if such Disqualified Capital Shares could not be required to be redeemed, repaid or repurchased at the time of such determination, the redemption, repayment or repurchase price will be the book value of such Disqualified Capital Shares as reflected in the most recent financial statements of such Person. “European Government Obligations” means any security that is (1) a direct obligation of Ireland, Belgium, the Netherlands, France, Germany or any other country that is a member of the European Monetary Union on the Issue Date, for the payment of which the fall faith and credit of such country is pledged or (2) an obligation of a person controlled or supervised by and acting as an agent or instrumentality of any such country the payment of which is unconditionally guaranteed as a full faith and credit obligation by such country, which, in each case under the preceding clause (1) or (2), is not callable or redeemable at the option of the issuer thereof. “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto. “Fair Market Value” means, with respect to any asset or property, the price which could be negotiated in an arm’s-length, free, market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value shall be determined by the Supervisory Board of the Company acting reasonably and in good faith and shall be evidenced by a Board Resolution of the Supervisory Board of the Company; provided that such determination shall be based on an opinion or appraisal issued by an accounting, appraisal or investment banking firm of international standing if such Fair Market Value is estimated in good faith by the Supervisory Board of the Company to exceed €20 million. “Finance Subsidiary” means a Wholly Owned Restricted Subsidiary of the Company (other than the Issuer) established principally for the purpose of, and engaged principally in the business of issuing debt securities or incurring other Indebtedness that is guaranteed by the Company and loaning the proceeds thereof to the Company or another Restricted Subsidiary of the Company and other related and ancillary activities. “Group” means the Company and its Subsidiaries, including the Issuer. “Guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person: (1)

to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreement to 149

keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise); or (2)

entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part);

provided, however, that the term “Guarantee” will not include endorsements for collection or deposit in the ordinary course of business or undertaking, in connection with Permitted Factoring arrangements. The term “Guarantee” used as a verb has a corresponding meaning. “Guarantor Senior Indebtedness” means, with respect to a Guarantor, Senior Indebtedness of such Guarantor. “Guarantor Subordinated Indebtedness” means, with respect to a Guarantor, any Indebtedness of such Guarantor (whether outstanding on the Issue Date or thereafter Incurred) which is expressly subordinate in right of payment to the obligations of such Guarantor under its Guarantee of the Notes pursuant to a written agreement. “Guarantors” means the Company and the Subsidiary Guarantors. “Hedging Obligations” of any Person means the obligations of such Person pursuant to any Interest Rate Agreement, Currency Agreement or Commodity Hedging Agreement. “Holder” or “Noteholder” means the registered holder of any Note. “IFRS” means the International Financial Reporting Standards as adopted by the European Union, consistently applied, in effect as of the Issue Date. “Incur” means to issue, create, assume, enter into any guarantee of, incur or otherwise become liable for, directly or indirectly, and the terms “Incurred” and “Incurrence” shall have correlative meanings. “Indebtedness” means, with respect to any Person on any date of determination (without duplication): (1)

the principal of indebtedness of such Person for borrowed money, excluding any trade payables and other accrued current liabilities arising in the ordinary course of business;

(2)

the principal of obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;

(3)

the principal component of all obligations of such Person in respect of letters of credit, performance and surety bonds, bankers’ acceptances or other similar instruments (including reimbursement obligations with respect thereto except to the extent such reimbursement obligation relates to a trade payable and such payable and such obligation is satisfied within 30 days of Incurrence);

(4)

the principal component of all obligations of such Person to pay the deferred and unpaid purchase price of property, all conditional sales obligations and all obligations under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business that are not overdue by 120 days or more or are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted);

(5)

Capitalized Lease Obligations and all Attributable Indebtedness of such Person;

(6)

the principal component or liquidation preference of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Capital Shares or, with respect to any Subsidiary, any Preferred Shares;

(7)

the principal component of all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of such Indebtedness will be the lesser of (a) the Fair Market Value of such asset at such date of determination and (b) the amount of such Indebtedness of such other Persons;

(8)

the principal component of Indebtedness of other Persons to the extent Guaranteed by such Person; and

(9)

to the extent not otherwise included in this definition, net obligations of such Person under Currency Agreements, Interest Rate Agreements or Commodity Hedging Agreement (the amount of any such obligations to be equal at any time to the termination value of such agreement or arrangement giving rise to such obligation that would be payable by such Person at such time). 150

The amount of Indebtedness of any Person at any date will be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. The amount of Indebtedness issued or sold at a discount of any Person at any date will be the accreted value at such date. For the avoidance of doubt, obligations arising in respect of operating leases (determined in accordance with IFRS) are not Indebtedness. “Intercompany Proceeds Note” means, collectively, (a) the notes representing the on-loan of a specified portion of the gross proceeds of the Notes and (b) any Additional Intercompany Proceeds Note from the Issuer to the Company or any Restricted Subsidiary of the gross proceeds from the issuance of Additional Notes (or debt securities of the Issuer substantially identical to the Notes and the Notes Guarantees (other than with respect to interest, maturity and redemption provisions)) permitted by the Indenture and, in each case, any related agreement and all notes directly or indirectly replacing or refinancing such notes or any portion thereof. “Interest Rate Agreement” means with respect to any Person any interest rate protection agreement, interest rate future agreement, interest rate option agreement, interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedge agreement or other similar agreement or arrangement as to which such Person is party or a beneficiary. “Investment” means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of any direct or indirect loan or other extension of credit (including, without limitation, a guarantee or similar arrangement), advances or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Shares, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any other Person and all other items that are or would be classified as investments on a balance sheet prepared in accordance with IFRS. “Investment” shall exclude extensions of trade credit by the Company and its Restricted Subsidiaries on commercially reasonable terms in accordance with normal trade practices of the Company or such Restricted Subsidiary, as the case may be. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Capital Shares of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of the Capital Shares of such Restricted Subsidiary not sold or disposed of. The acquisition by the Company or any Restricted Subsidiary of a Person that holds an Investment in a third Person will be deemed to be an Investment by the Company or such Restricted Subsidiary in such third Person at such time. Except as otherwise provided for herein, the amount of an Investment shall be its Fair Market Value at the time the Investment is made and without giving effect to subsequent changes in value. “Issue Date” means the date of original issuance of the Notes. “Lien” means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to grant any security interest). “Management Board” means the management board of the Issuer or Company, as applicable, an analogous board or body, or any committee thereof duly authorized to act on behalf of such board. “Moody’s” means Moody’s Investors Service, Inc. or any of its successors or assigns that is a Nationally Recognized Statistical Rating Organization. “Nationally Recognized Statistical Rating Organization” means a nationally recognized statistical rating organization within the meaning of Rule 436 under the Securities Act. “Net Available Cash” from an Asset Disposition means cash payments received (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and net proceeds from the sale or other disposition of any securities received as consideration, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Disposition or received in any other non-cash form) therefrom, in each case net of: (1)

all legal, accounting and investment banking fees and expenses, title and recording tax expenses, commissions and other fees and expenses Incurred, and all federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under IFRS (after taking into account any available tax credits or deductions and any tax sharing agreements), as a consequence of such Asset Disposition; 151

(2)

all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be repaid out of the proceeds from such Asset Disposition;

(3)

all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition; and

(4)

the deduction of appropriate amounts to be provided by the seller as a reserve, in accordance with IFRS, against any liabilities associated with the assets disposed of in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition.

“Net Cash Proceeds” with respect to any issuance or sale of Capital Shares, means the cash proceeds of such issuance or sale net of legal fees, accountants’ fees, underwriters’ or placement agents’ fees, listing fees, discounts or commissions and brokerage, consultant and other fees and charges actually Incurred in connection with such issuance or sale and net of taxes paid or payable as a result of such issuance or sale (after taking into account any available tax credit or deductions and any tax sharing arrangements). “Notes Guarantee” means a Guarantee by the Company or a Subsidiary Guarantor of the Issuer’s obligations with respect to the Notes and under the Indenture. “Officer” means, with respect to any Person, the Chairman, the Chief Executive Officer, any managing director or advisory board member, any director or the Secretary, or if there are no officers, the reasonable equivalents, of that Person. “Officers’ Certificate” means a certificate signed by two Officers. “Opinion of Counsel” means a written opinion, in form and substance reasonably satisfactory to the Trustee, from legal counsel who is reasonably acceptable to the Trustee and may be employees of the Company or any Subsidiary thereof. “Parent Company” means any Person (other than a natural person) of which the Company is or becomes a direct or indirect Subsidiary after the Issue Date. “Pari Passu Indebtedness” means any Indebtedness of the Issuer, the Company or any Subsidiary Guarantor that ranks pari passu in right of payment with the Notes or the Notes Guarantee of such Guarantor, as applicable. “Participating Member State” means each state so described in any European Monetary Union legislation. “Paying Agent” means any Person authorized by the Issuer to pay the principal of (and premium and Additional Amounts, if any), or interest on any Notes on behalf of the Issuer. “Permitted Business” means (1) any business in which the Company and its Restricted Subsidiaries are engaged in on the Issue Date, any business in which the Target Group is engaged on the Acquisition Closing Date or any business activity that is a reasonable extension, development or expansion thereof or ancillary or complementary to any such business or (2) any business which is not otherwise material to the Company and its Restricted Subsidiaries, taken as a whole; provided, any Investment by the Company or any Restricted Subsidiary subject to this clause (2) shall be made under, and in compliance with, clause (19) of the definition of Permitted Investments. “Permitted Collateral Liens” means: (1)

Liens securing the Notes (other than Additional Notes) and the Note Guarantees thereof (and any Hedging Obligations with respect thereto);

(2)

Liens securing Indebtedness incurred in compliance with the first paragraph of the “— Limitation on Indebtedness” covenant (a) on any Collateral securing any Additional Notes and Notes Guarantees thereof or debt securities of the Issuer substantially identical (other than with respect to interest, maturity and redemption provisions) to the Notes and the Notes Guarantees or (b) on any Share Pledge securing any Credit Facilities or debt securities of any Guarantor or Finance Subsidiary (and any guarantee thereof) to the extent the terms, conditions and covenants of any such Credit Facility or debt securities (other than with respect to interest, maturity and redemption provisions) are substantially similar to the terms, conditions and covenants governing the Notes and the Notes Guarantees; provided, in each case that such Lien either ranks either equally or junior to all other Liens on such Collateral securing Indebtedness of the Issuer ranking equally to the Notes (or any Guarantee thereof) and any Hedging Obligations with respect to such Indebtedness; and 152

(3)

statutory Liens arising by operation of law.

“Permitted Factoring” means the factoring of accounts receivable by the Company on a non-recourse basis and otherwise on terms not materially less favorable, taken as a whole, to the Holders as those in effect on the Issue Date under working capital facilities or available to the Company or a Restricted Subsidiary (other than the Issuer or a Finance Subsidiary) in the ordinary course of business. “Permitted Holder” means (i) Przemyslaw Sztuczkowski (ii) any spouse or immediate family member of Przemyslaw Sztuczkowski, (iii) any direct descendant of any Person described in clauses (i) of (ii), (iv) any trust created for the benefit of Przemyslaw Sztuczkowski or any Person described in the preceding three clauses or any estate, executor, administrator, committee or beneficiaries of any of the foregoing or (v) any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, shareholders, partners, members or Persons holding at least a majority interest therein. “Permitted Investment” means an Investment: (1)

in a Restricted Subsidiary or a Person which will, upon the making of such Investment, become a Restricted Subsidiary;

(2)

in the Company;

(3)

in another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Restricted Subsidiary;

(4)

in cash and Cash Equivalents;

(5)

in receivables owing to the Company or any Restricted Subsidiary created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances;

(6)

in payroll, travel and similar advances to cover matters that are made in the ordinary course of business;

(7)

in loans or advances to employees not in excess of €100,000 at any one time outstanding and made in compliance with applicable laws;

(8)

in Capital Shares, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments or Liens or security interests, or settlements of litigation, arbitration or other disputes, or pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of a debtor;

(9)

made as a result of the receipt of non-cash consideration from (i) an Asset Disposition that was made pursuant to and in compliance with “— Certain Covenants — Limitation on Sales of Assets and Subsidiary Shares” or (ii) any other disposition of property or assets or the issuance or sale of Equity Interests not constituting an Asset Disposition;

(10)

in existence on the Issue Date (or in respect of which a binding commitment to make such Investment exists on the Issue Date), and any extension, modification or renewal of such Investments or commitments, but only to the extent such extension, modification or renewal does not involve additional advances, contributions or other Investments (or in the case of commitments, increase the amount committed), other than as a result of the accrual or accretion of interest or original issue discount or the issuance by such investee of pay-in-kind securities, in each case, pursuant to the terms of such Investment or commitment);

(11)

in Currency Agreements, Interest Rate Agreements, Commodity Hedging Agreements and related Hedging Obligations, which transactions or obligations are Incurred in compliance with “— Certain Covenants — Limitation on Indebtedness”;

(12)

in Guarantees permitted to be Incurred in accordance with “— Certain Covenants — Limitation on Indebtedness”;

(13)

acquired by the Company or any Restricted Subsidiary in exchange for the issuance of Qualified Capital Shares of the Company; 153

(14)

any Investment to the extent such Investment consists of prepaid expenses, negotiable instruments held for collection and lease, utility and workers’ compensation, performance and other similar deposits made in the ordinary course of business by the Company or any of its Restricted Subsidiaries;

(15)

any Investment held by a Person that becomes a Restricted Subsidiary, provided that such Investment was not acquired in contemplation of the acquisition of such Person (or in respect of which a binding commitment to make such Investment exists on the date such Person becomes a Restricted Subsidiary) and any extension, modification or renewal of such Investment or commitment, but only to the extent such extension, modification or renewal does not involve additional advances, contributions or other Investments (or in the case of a commitment, increase the amount committed), other than as a result of the accrual or accretion of interest or original issue discount or the issuance by such investee of pay-in-kind securities, in each case, pursuant to the terms of such Investment or commitment;

(16)

any Investment consisting of deposits made in connection with self-insurance;

(17)

any Investment represented by Hedging Obligations;

(18)

any Investment made in connection with the Transactions; and

(19)

which, when taken together with all other Investments pursuant to this clause (19) and then outstanding, will not exceed 2.0% of the total assets of the Company and its Restricted Subsidiaries (determine on a consolidated basis in accordance with IFRS).

“Permitted Liens” means, with respect to the Company and its Restricted Subsidiaries: (1)

Liens securing Indebtedness and other obligations under Credit Facilities to the extent such Indebtedness is permitted under clause (1) of the second paragraph under the “— Certain Covenants — Limitation on Indebtedness” covenant; provided that any such Lien is limited to all or part of the current assets (determined in accordance with IFRS and other than Asset Sale Cash Collateral) of the Company or a Restricted Subsidiary;

(2)

Liens for taxes, assessments or governmental charges or claims either (a) not delinquent or thereafter can be paid without penalty or (b) contested in good faith by appropriate proceedings and as to which the Company or its Restricted Subsidiaries shall have set aside on its books such reserves as may be required pursuant to IFRS;

(3)

statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business;

(4)

Liens incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money);

(5)

judgment Liens not giving rise to an Event of Default so long as such Lien is adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired;

(6)

easements, rights-of-way, zoning restrictions and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries;

(7)

any interest or title of a lessor under any Capitalized Lease Obligation; provided that such Liens do not extend to any property or assets which is not leased property subject to such Capitalized Lease Obligation;

(8)

Liens securing Purchase Money Indebtedness incurred or in the ordinary course of business; provided, however, that (a) such Purchase Money Indebtedness shall not exceed the purchase price or other cost of such property or equipment and shall not be secured by any property or equipment of the Company or any Restricted Subsidiary of the Company other than the property and 154

equipment so acquired and (b) the Lien securing such Purchase Money Indebtedness shall be created within 90 days of such acquisition; (9)

Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

(10)

Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof;

(11)

Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or warranty requirements of the Company or any of its Restricted Subsidiaries, including rights of offset and set-off;

(12)

Liens securing Hedging Obligations so long as the related Indebtedness is, and is permitted to be under the Indenture, secured by a Lien on the same property securing such Hedging Obligation;

(13)

other than with respect to the Austrian Acquisition, Liens on property or shares of stock of a Person (other than shares of stock of a First Tier Acquired Company) and its Subsidiaries at the time such Person becomes a Restricted Subsidiary of the Company; provided that such Liens either (i) existed on or prior to the time such Person became a Restricted Subsidiary or (ii) are created or Incurred in connection with, or in contemplation of, such other Person becoming such a Restricted Subsidiary; provided, further, that such Liens may not extend to any other property owned by the Company or any other Restricted Subsidiary;

(14)

Liens on property at the time the Company or a Restricted Subsidiary acquired the property, including any acquisition by means of a merger or consolidation with or into the Company or any Restricted Subsidiary; provided that such Liens are not created or Incurred in connection with, or in contemplation of, such acquisition; provided, further, that such Liens may not extend to any other property other than property affixed or appurtenant thereto;

(15)

Liens on assets of a Restricted Subsidiary of the Company that is not a Guarantor to secure Indebtedness of such Restricted Subsidiary that is otherwise permitted under the Indenture;

(16)

leases, subleases, licenses and sublicenses granted to others that do not materially interfere with the ordinary cause of business of the Company and its Restricted Subsidiaries;

(17)

banker’s Liens, rights of setoff and similar Liens with respect to cash and Cash Equivalents on deposit in one or more bank accounts in the ordinary course of business;

(18)

Liens arising from U.S. Uniform Commercial Code financing statement filings (or similar filings in other applicable jurisdictions) regarding operating leases entered into by the Company and the Restricted Subsidiaries in the ordinary course of business;

(19)

Liens existing on the Issue Date and not otherwise referred to in this definition (not including any Lien with respect to Indebtedness repaid or refinanced with the proceeds of, or simultaneously with, the offering of the Notes unless any such Lien is terminated following the Issue Date and only remain in existence following the Issue Date pending the making of a governmental, regulatory or similar application; provided that such Liens are terminated within 30 days after the Issue Date or the Company or a Restricted Subsidiary is taking appropriate actions in good faith to achieve the termination of such Lien as promptly as practicable);

(20)

Liens on the assets of the Target and its Subsidiaries existing on the Acquisition Closing Date and not otherwise referred to in this definition, provided, the Indebtedness which is the subject of such Lien is otherwise permitted under the Indenture;

(21)

Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of custom duties in connection with the importation of goods;

(22)

Liens securing Refinancing Indebtedness Incurred to refinance Indebtedness that was previously so secured (other than Refinancing Indebtedness incurred in connection with the Transactions); provided that any such Lien is limited to all or part of the same property or assets that secured the Indebtedness being refinanced;

(23)

Liens on the funds or securities deposited for the purpose of defeasing or redeeming any Indebtedness on or prior to its maturity date, to the extent such defeasance or redemption is permitted under the Indenture; 155

(24)

Liens created for the benefit of (or to secure) the Notes or any Notes Guarantee (including any Liens granted on the Collateral pursuant to the Security Documents);

(25)

Permitted Collateral Liens;

(26)

Liens created for the benefit of the Company or the Issuer over the assets of the Target Group to secure the Target’s obligations under the Acquisition On-Loan;

(27)

Liens securing the Indebtedness incurred under intercompany loans or notes to the Company or a Restricted Subsidiary of the proceeds from the incurrence of Indebtedness by a Finance Subsidiary to the extent the underlying Indebtedness is otherwise permitted to be incurred under the Indenture;

(28)

Liens securing: (a)

Indebtedness (including committed but unallocated portions) permitted to be incurred under clause (15) of the second paragraph under the “— Certain Covenants — Limitation on Indebtedness” covenant; provided any such Liens are limited to assets or property of the Target and its Restricted Subsidiaries;

(b)

Indebtedness (including committed but unallocated portions) permitted to be incurred under clause (16) of the second paragraph under the “— Certain Covenants — Limitation on Indebtedness” covenant; provided any such Liens are limited to assets or property of the Centrostal and its Restricted Subsidiaries;

(c)

Indebtedness (including committed but unallocated portions) permitted to be incurred under clause (17) of the second paragraph under the “— Certain Covenants — Limitation on Indebtedness” covenant; provided any such Liens are limited to assets or property of the Kapital Sp. z o.o. and its Restricted Subsidiaries; and

(d)

Indebtedness (including committed but unallocated portions) permitted to be incurred under clause (20) of the second paragraph under the “— Certain Covenants — Limitation on Indebtedness” covenant;

(29)

Liens securing the escrowed funds deposited in accordance with the Escrow Agreement or any similar escrow agreement established in connection with the pre-funding of an acquisition; and

(30)

Liens granted to the Trustee for its compensation and indemnities pursuant to the Indenture.

“Permitted Restrictions” means any restriction, direct or indirect, on the ability of a Restricted Subsidiary to pay dividends or make any other payment or distribution which is described in paragraphs (1), (2), (3), (10) or (11) of the covenant described under “Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries”. “Person” means an individual, partnership, corporation, limited liability company, unincorporated organization, joint-stock company, trust or joint venture, or a governmental agency or political subdivision thereof. “Public Equity Offering” means any public offering of Capital Shares of the Company that is either underwritten or made pursuant to a prospectus approved by either the Polish competent authority or the relevant competent authority in a European Union member state whereby the Company receives gross proceeds of not less than €20 million (equivalent). “Preferred Shares” of any Person means any Capital Shares of such Person that have preferential rights to any other Capital Shares of such Person with respect to dividends or redemption or upon liquidation. “Purchase Money Indebtedness” means Indebtedness, including mortgage financing, of the Company and its Restricted Subsidiaries incurred in the normal course of business for the purpose of financing all or any part of the purchase price, or the cost of installation, construction, addition to or improvement, of property or equipment. “Qualified Capital Shares” means any Capital Shares that are not Disqualified Capital Shares. “Qualified Financial Advisor” means an accounting, appraisal or investment banking or consulting firm of international standing that is, in the reasonable judgment of the Supervisory Board of the Company, qualified to perform the tasks for which such firm has been engaged and independent with respect to the Company and its Affiliates. “Refinance” means, in respect of any security or Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, discharge, defease or retire, or to issue a security or Indebtedness in exchange or replacement for, such security or Indebtedness in whole or in part. “Refinanced” and “Refinancing” shall have correlative meanings. 156

“Refinancing Indebtedness” means Indebtedness that is Incurred to Refinance any Indebtedness, including Indebtedness that Refinances Refinancing Indebtedness; provided, however, that: (1)

(a) if the Stated Maturity of the Indebtedness being Refinanced is earlier than the Stated Maturity of the Notes, the Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced or (b) if the Stated Maturity of the Indebtedness being Refinanced is later than the Stated Maturity of the Notes, the Refinancing Indebtedness has a Stated Maturity later than the Stated Maturity of the Notes;

(2)

the Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being Refinanced;

(3)

such Refinancing Indebtedness is Incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the sum of the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding of the Indebtedness being Refinanced (plus, without duplication, any additional Indebtedness Incurred to pay interest or premiums required by the instruments governing such existing Indebtedness and fees and expenses Incurred in connection therewith); and

(4)

if the Indebtedness being Refinanced is subordinated in right of payment to the Notes or a Guarantor’s Notes Guarantee, such Refinancing Indebtedness is subordinated in right of payment to the Notes or such Notes Guarantee at least to the same extent as such Indebtedness being Refinanced.

provided, further, however, that Refinancing Indebtedness shall not include (A) Indebtedness of the Company or a Subsidiary of the Company that Refinances Indebtedness of the Issuer, (B) Indebtedness of a Guarantor that Refinances Indebtedness of a non-Guarantor Restricted Subsidiary or (C) Indebtedness of the Issuer, the Company or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary. “Replacement Assets” means properties and assets, including Capital Shares and investments in joint ventures to the extent permitted by the covenant described under “Certain Covenants — Limitation on Restricted Payments”) that are or will be used or useful in the business of the Company and its Restricted Subsidiaries as existing on the Issue Date or in a Permitted Business. “Responsible Officer” means any officer within the Corporate Trust Administration group of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. “Restricted Investment” means an Investment other than a Permitted Investment. “Restricted Subsidiary” of any Person means any Subsidiary of such Person which at the time of determination is not an Unrestricted Subsidiary; unless otherwise expressly stated, a “Restricted Subsidiary” will be interpreted to mean a Restricted Subsidiary of the Company and will include the Issuer. “Revolving Credit Facilities” means the revolving credit facilities under one or more revolving credit facility agreements (the “Revolving Credit Facilities Agreements”), and entered into by, inter alia, the Company and the other financial institutions party thereto, as lenders, together with the related documents thereto, including, without limitation, any guarantee agreements and security documents, and, in each case, as such documentation, in whole or in part, may be amended, renewed, extended, substituted, refinanced, restructured, replaced (whether upon or after termination or otherwise), supplemented or otherwise modified from time to time under one or more Credit Facilities (without limitation as to amount, outstanding or committed, or the maturity, terms, conditions, covenants or other provisions thereof or parties thereto) (including, without limitation, any successive renewals, extensions, substitutions, refinancings, restructurings, replacements, supplementations or other modifications of the foregoing). “Sale and Leaseback Transaction” means any direct or indirect arrangement with any Person or to which any such Person is a party, providing for the leasing to the Company or a Restricted Subsidiary of any property, whether owned by the Company or any Restricted Subsidiary at the Issue Date or later acquired, which has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person from whom funds have been or are to be advanced by such Person on the security of such Property. “Securities Act” means the U.S. Securities Act of 1933, as amended, or any successor statute or statutes thereto. 157

“Security Documents” means, collectively, all security agreements, mortgages, deeds of trust, pledges (including the Share Pledges), collateral assignments and other agreements or instruments evidencing or creating any security in favor of the Collateral Agent or any Holders of the Notes in any or all of the Collateral, in each case as amended from time to time in accordance with their terms and the terms of the Indenture. “Senior Indebtedness” means, with respect to any Person, all obligations of such Person, whether outstanding on the Issue Date or thereafter created, incurred or assumed, without duplication, consisting of principal of and premium, if any, accrued and unpaid interest on, and fees and other amounts relating to, all Indebtedness of such Person, including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to such Person, regardless of whether post-filing interest is allowed in such proceeding. Notwithstanding anything to the contrary in the preceding paragraph, Senior Indebtedness will not include: (1)

any Indebtedness Incurred in violation of the Indenture;

(2)

any obligations of such Person to its Subsidiaries or other Affiliates;

(3)

any liability for national, local, or other taxes owed or owing by such Person;

(4)

any accounts payable or other liability to trade creditors arising in the ordinary course of business (including Guarantees thereof or instruments evidencing such liabilities);

(5)

any Indebtedness, Guarantee or obligation of such Person that is expressly subordinate or junior in right of payment to any other Indebtedness, Guarantee or obligation or obligation of such Person, including, without limitation, any Subordinated Indebtedness or Guarantor Subordinated Indebtedness, as the case may be; or

(6)

any Capital Shares.

“Significant Subsidiary” means a Restricted Subsidiary of the Company that, together with its Subsidiaries: (a)

for the Company’s most recent fiscal year, accounted for more than 10% of the consolidated revenues of the Company and its Restricted Subsidiaries; or

(b)

as of the end of such fiscal year, was the owner of more than 10% of the consolidated assets of the Company and its Restricted Subsidiaries, all as set forth on Company’s most recently available consolidated financial statements for such fiscal year; or

(c)

was organized or acquired after the beginning of such fiscal year and would have been a Significant Subsidiary if it had been owned during the entire fiscal year or is a “significant subsidiary” as defined in Rule 1-02 of Regulation S-X under the Securities Act as in effect on the Issue Date.

“Standard & Poor’s” means Standard & Poor’s Investors Ratings Services or any of its successors or assigns that is a Nationally Recognized Statistical Rating Organization. “Stated Maturity” means, when used with respect to any Note or any installment of interest thereon, the date specified in such Note as the fixed date on which the principal of such Note or such installment of interest, respectively, is due and payable, and, when used with respect to any other indebtedness, means the date specified in the instrument governing such indebtedness as the fixed date on which the principal of such indebtedness, or any installment of interest thereon, is due and payable. “Subordinated Indebtedness” means any Indebtedness of the Issuer (whether outstanding on the date of the Indenture or thereafter Incurred) which is subordinate or junior in right of payment to the Notes pursuant to a written agreement. “Subsidiary”, with respect to any Person, means: (1)

any corporation of which the outstanding Capital Shares having at least a majority of the votes entitled to be cast in the election of directors or members of the supervisory board or analogous board or body under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person; or

(2)

any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person. 158

“Subsidiary Guarantors” means (i) on and after the Issue Date, Odlewnia Metali Szopienice Sp. z o.o., Zaklad Walcowniczy-Walcownia Bruzdowa Sp. z o.o., HSW-Huta Stali Jakosciowych S.A., Ferrostal Łabe¸dy Sp. z o.o. and Złomrex Zbrojarnia Sp. z o.o. and (ii) any person who in the future executes a supplemental indenture in which such person agrees to be bound by the terms of the Indenture as a Subsidiary Guarantor. “Supervisory Board” means the supervisory board of the Issuer or Company, as applicable, or an analogous board or body or any committee thereof duly authorized to act on behalf of such board. “Target” means voestalpine Stahlhandel GmbH, and any successor in interest thereto. “Target Group” means the Target and its Subsidiaries from time to time. “Transactions” means, collectively, any or all of the following: (1)

the entry into of the Indenture, the Notes and the Security Documents, the carrying out of the transactions contemplated thereby and the incurrence of Indebtedness thereunder and the other transactions contemplated thereby;

(2)

the entry into of the Revolving Credit Facilities Agreements, the incurrence of Indebtedness thereunder and the other transactions contemplated thereby;

(3)

the completion of the Austrian Acquisition and all direct or indirect related distributions or payments of the purchase price in respect of the Capital Shares acquired in the Austrian Acquisition;

(4)

the repayment of certain existing Indebtedness of the Target Group with the proceeds of the Acquisition On-Loan, as contemplated by this Offering Memorandum; and

(5)

all transactions and performance of obligations relating to any of the foregoing (including, without limitation, payment of fees and expenses related to any of the foregoing, including, without limitation, Acquisition Costs).

“Unrestricted Subsidiary” of any Person means: (1)

any Subsidiary of such Person that at the time of determination shall be or continue to be designated an Unrestricted Subsidiary by the Supervisory Board (or analogous board or body) of such Person in the manner provided below; and

(2)

any Subsidiary of an Unrestricted Subsidiary.

The Supervisory Board (or analogous board or body) of the Company may designate any Subsidiary, including any newly acquired or newly formed Subsidiary, to be an Unrestricted Subsidiary unless that Subsidiary owns any Capital Shares of, or owns or holds any Lien on any of the property of, any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated. Notwithstanding the foregoing: (1)

the Company must certify to the Trustee that this designation complies with the “— Certain Covenants — Limitation on Restricted Payments”; and

(2)

each Subsidiary to be so designated and each of its Subsidiaries has not at the time of designation, and does not thereafter, Incur any Indebtedness pursuant to which the lender has recourse to any assets of the Company or any of its Restricted Subsidiaries.

The Supervisory Board (or analogous board or body) of the Company may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if: (1)

immediately after giving effect to this designation, the Company can incur at least €1.00 of additional Indebtedness, other than Permitted Indebtedness, in compliance with the “— Certain Covenants — Limitation on Indebtedness”; and

(2)

immediately before and immediately after giving effect to this designation, no Default or Event of Default shall have occurred and be continuing.

Any designation by the Supervisory Board (or analogous board or body) shall be evidenced by promptly filing with the Trustee a copy of the Board Resolution giving effect to the designation and an Officers’ Certificate certifying that the designation complied with the foregoing provisions. “Voting Shares” means any class or classes of Capital Shares pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the supervisory board, board of directors, managers or trustees (or Persons performing similar functions) of any Person (irrespective of 159

whether or not, at the time, shares or stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency). “Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing (1) the then outstanding aggregate principal amount of such Indebtedness into (2) the sum of the total of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment. “Wholly Owned Restricted Subsidiary” of any Person means any Wholly Owned Subsidiary of such Person which at the time of determination is a Restricted Subsidiary of such Person. “Wholly Owned Subsidiary” of any Person means any Subsidiary of such Person of which all the outstanding Capital Shares (other than directors’ qualifying shares or an immaterial amount of shares required to be owned by other Persons pursuant to applicable law) are owned by such Person or any Wholly Owned Subsidiary of such Person.

160

BOOK-ENTRY, DELIVERY AND FORM Notes sold to qualified institutional buyers in reliance on Rule 144A under the US Securities Act will initially be represented by global notes in registered form without interest coupons attached (the “Rule 144A Global Notes”). Notes sold to non-US persons outside the United States in reliance on Regulation S under the US Securities Act will initially be represented by global notes in registered form without interest coupons attached (the “Regulation S Global Notes” and, together with the Rule 144A Global-Note, the “Global Notes”). The Global Notes will be deposited with a common depositary, and registered in the name of the nominee of the common depositary for the accounts of Euroclear and Clearstream. Ownership of interests in the Rule 144A Global Notes (the “Restricted Book-Entry Interests”) and ownership of interests in the Regulation S Global Notes (the “Unrestricted Book-Entry Interests” and, together with, the Restricted Book-Entry Interests, the “Book-Entry Interests”) will be limited to persons that have accounts with Euroclear and/or Clearstream or persons that hold interests through such participants. Euroclear and Clearstream will hold interests in the Global Notes on behalf of their participants through customers’ securities accounts in their respective names on the books of their respective depositaries. Except under the limited circumstances described below, Notes will not be issued in definitive form. Book-Entry Interests will be shown on, and transfers thereof will be effected only through, records maintained by Euroclear and Clearstream and their participants. The laws of some jurisdictions, including some states of the United States, may require that certain purchasers of securities take physical delivery of those securities in definitive form. The foregoing limitations may impair your ability to own, transfer or pledge BookEntry Interests. In addition, while the Notes are in global form, holders of Book-Entry Interests will not be considered the owners or “holders” of Notes for any purpose. So long as the Notes are held in global form, Euroclear and/or Clearstream, as applicable, or their respective nominees, will be considered the sole holder(s) of the Global Notes for all purposes under the Indenture. In addition, participants must rely on the procedures of Euroclear and Clearstream and indirect participants must rely on the procedures of the participants through which they own Book-Entry Interests to transfer their interests or to exercise any rights of holders of Notes under the Indenture. Neither the Group nor the Trustee will have any responsibility or be liable for any aspect of the records relating to the Book-Entry Interests. Redemption of the Global Notes In the event any Global Note (or any portion thereof) is redeemed, Euroclear and/or Clearstream, as applicable, will redeem an equal amount of the Book-Entry Interests in such Global Note from the amount received by it in respect of the redemption of such Global Note. The redemption price payable in connection with the redemption of such Book-Entry Interests will be equal to the amount received by Euroclear and Clearstream, as applicable, in connection with the redemption of such Global Note (or any portion thereof). We understand that, under the existing practices of Euroclear and Clearstream, if fewer than all of the Notes are to be redeemed at any time, Euroclear and Clearstream will credit their respective participants’ accounts on a proportionate basis (with adjustments to prevent fractions) or on such other basis as they deem fair and appropriate; provided, however, that no Book-Entry Interest of €50,000 principal amount or less may be redeemed in part. Payments on Global Notes Payments of any amounts owing in respect of the Global Notes (including principal, premium, if any, interest and Additional Amounts, if any) will be made by the Issuer to the common depositary or its nominee for Euroclear and Clearstream. The common depositary or its nominee will distribute such payments to participants in accordance with their procedures. Payments of all such amounts will be made without deduction or withholding for or on account of any present or future taxes, duties, assessments or governmental charges of whatever nature except as may be required by law. If any such deduction or withholding is required to be made by any applicable law or regulation or otherwise as described under “Description of the Notes — Withholding Taxes” then, to the extent described under “Description of the Notes — Withholding Taxes”, such Additional Amounts will be paid as may be necessary in order that the net amounts received by any holder of the Global Notes or owner of Book-Entry Interests after such deduction or withholding will equal the net amounts that such holder or owner would have otherwise received in respect of such Global Note or Book-Entry Interest, as the case may be, absent such withholding or deduction. We expect that payments by participants to owners of BookEntry Interests held through those participants will be governed by standing customer instructions and customary practices. Under the terms of the Indenture, we and the Trustee will treat the registered holder of the Global Notes (i.e., Euroclear or Clearstream (or their respective nominees)) as the owner thereof for the purpose of 161

receiving payments and for all other purposes. Consequently, none of us, the Trustee or any of our or the Trustee’s agents has or will have any responsibility or liability for: (1)

any aspect of the records of Euroclear or Clearstream or of any participant or indirect participant relating to or payments made on account of a Book-Entry Interest, for any such payments made by Euroclear or Clearstream or any participant or indirect participant or for maintaining, supervising or reviewing the records of Euroclear or Clearstream or any participant or indirect participant relating to or payments made on account of a Book-Entry Interest;

(2)

Euroclear or Clearstream or any participant or indirect participant; or

(3)

the records of the common depositary.

Currency of Payment for the Global Notes The principal of, premium, if any, and interest on, and all other amounts payable in respect of, the Global Notes will be paid to holders of interests in such Notes through Euroclear or Clearstream in euro. Action by Owners of Book-Entry Interests Euroclear and Clearstream have advised us that they will take any action permitted to be taken by a holder of Notes (including the presentation of Notes for exchange as described above) only at the direction of one or more participants to whose account the Book-Entry Interests in the Global Notes are credited and only in respect of such portion of the aggregate principal amount of Notes as to which such participant or participants has or have given such direction. Euroclear and Clearstream will not exercise any discretion in the granting of consents, waivers or the taking of any other action in respect of the Global Notes. However, if there is an Event of Default under the Notes, Euroclear and Clearstream reserve the right to exchange the Global Notes for definitive registered Notes (“Definitive Registered Notes”) in certificated form, and to distribute such Definitive Registered Notes to its participants. Transfers Transfers between participants in Euroclear and Clearstream will be effected in accordance with Euroclear’s and Clearstream’s rules and will be settled in immediately available funds. If a holder of Notes requires physical delivery of Definitive Registered Notes for any reason, including to sell Notes to persons in states which require physical delivery of such securities or to pledge such securities, such holder of Notes must transfer its interest in the Global Notes in accordance with the normal procedures of Euroclear and Clearstream and in accordance with the procedures set forth in the Indenture. The Global Notes will bear a legend to the effect set forth in “Notice to Investors”. Book-Entry Interests in the Global Notes will be subject to the restrictions on transfers and certification requirements discussed under “Notice to Investors”. Transfer of Restricted Book-Entry Interests to persons wishing to take delivery of Restricted Book-Entry Interests will at all times be subject to such transfer restrictions. Restricted Book-Entry Interests may be transferred to a person who takes delivery in the form of any Unrestricted Book-Entry Interest only upon delivery by the transferor of a written certification (in the form provided in the relevant Indenture) to the effect that such transfer is being made in accordance with Regulation S or Rule 144 (if available) under the US Securities Act. Prior to 40 days after the date of initial issuance of the Notes, ownership of Unrestricted Book-Entry Interests will be limited to persons that have accounts with Euroclear or Clearstream or persons who hold interests through Euroclear or Clearstream, and any sale or transfer of such interest to US persons shall not be permitted during such period unless such resale or transfer is made pursuant to Rule 144A. Unrestricted Book-Entry Interests may be transferred to a person who takes delivery in the form of Restricted Book-Entry Interests only upon delivery by the transferor of a written certification (in the form provided in the relevant Indenture) to the effect that such transfer is being made to a person who the transferor reasonably believes is a “qualified institutional buyer” within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A or otherwise in accordance with the transfer restrictions described under “Notice to Investors” and in accordance with any applicable securities laws of any other jurisdiction. Any Book-Entry Interest in one of the Global Notes that is transferred to a person who takes delivery in the form of a Book-Entry Interest in the other Global Note will, upon transfer, cease to be a Book-Entry Interest in the first mentioned Global Note and become a Book-Entry Interest in such other Global Note, and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to BookEntry Interests in such other Global Note for as long as it remains such a Book-Entry Interest. 162

Definitive Registered Notes Under the terms of the Indenture, owners of the Book-Entry Interests will receive Definitive Registered Notes only: (1)

if either Euroclear or Clearstream notifies us that it is unwilling or unable to continue to act and a successor is not appointed by the Issuer within 120 days;

(2)

if Euroclear or Clearstream so requests following an Event of Default under the Indenture;

(3)

at any time if we, in our sole discretion, determine that all the Global Notes should be exchanged for Definitive Registered Notes; or

(4)

if we are required under the terms of the Indenture to exchange all or part of a Global Note for Definitive Registered Notes, including upon an Event of Default under Indenture.

Information Concerning Euroclear and Clearstream We understand as follows with respect to Euroclear and Clearstream: All Book-Entry Interests will be subject to the operations and procedures of Euroclear and Clearstream, as applicable. The following summaries of those operations and procedures are provided solely for the convenience of investors. The operations and procedures of each settlement system are controlled by that respective settlement system and may be changed at any time. Neither the Issuer nor the Initial Purchaser is responsible for those operations or procedures. Euroclear and Clearstream hold securities for participating organizations and facilitate the clearance and settlement of securities transactions between their respective participants through electronic book-entry changes in accounts of such participants. Euroclear and Clearstream provide to their participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Euroclear and Clearstream interface with domestic securities markets. Euroclear and Clearstream participants are financial institutions such as underwriters, securities brokers and dealers, banks, trust companies and certain other organisations. Indirect access to Euroclear or Clearstream is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodian relationship with Euroclear or Clearstream participants, either directly or indirectly. Because Euroclear and Clearstream can only act on behalf of participants, who in turn act on behalf of indirect participants and certain banks, the ability of an owner of a beneficial interest to pledge such interest to persons or entities that do not participate in the Euroclear or Clearstream systems, or otherwise take actions in respect of such interest, may be limited by the lack of a definitive certificate for that interest. The laws of some jurisdictions require that certain persons take physical delivery of securities in definitive form. Consequently, the ability to transfer beneficial interests to such persons may be limited. In addition, owners of beneficial interests through Euroclear or Clearstream systems will receive distributions attributable to the 144A Global Notes only through Euroclear or Clearstream participants. Trustee’s Powers In considering the interests of the holders of the Notes, while title to the Notes is registered in the name of a nominee for a clearing system, the Trustee may have regard to, and rely on, any information provided to it by that clearing system as to the identity (either individually or by category) of its accountholders with entitlements to Notes and may consider such interests as if such accountholders were the holders of the Notes. Enforcement For the purposes of enforcement of the provisions of the Indenture against the Trustee, the persons named in a certificate of the holder of the Notes in respect of which a Global Note is issued shall be recognized as the beneficiaries of the trusts set out in the Indenture to the extent of the principal amounts of their interests in the Notes set out in the certificate of the holder, as if they were themselves the holders of Notes in such principal amounts.

163

PLAN OF DISTRIBUTION The Issuer, the Guarantors and the Initial Purchaser will enter into a purchase agreement (the “Purchase Agreement”), dated January 23, 2007 with respect to the Notes. The Initial Purchaser will agree to purchase, and the Issuer will agree to sell, all of the Notes pursuant to the terms of the Purchase Agreement. The Purchase Agreement provides that the obligations of the Initial Purchaser to purchase and accept delivery of the Notes offered hereby are subject to certain conditions precedent. The Initial Purchaser is obligated to purchase and accept delivery of all the Notes if any are purchased. The purchase price for the Notes will be the initial offering price set forth on the cover page of this Offering Memorandum less an Initial Purchaser’s discount. The Initial Purchaser proposes to offer the Notes at the initial offering price. After the Notes are released for sale, the Initial Purchaser may change the offering price and other selling terms. The Notes and the Guarantees have not been and will not be registered under the US Securities Act. The Initial Purchaser has agreed that it will only offer or sell the Notes (1) outside the United States to non-US persons in offshore transactions in reliance on Regulation S and (2) in the United States to qualified institutional buyers in reliance on Rule 144A. The terms used above have the meanings given to them by Regulation S and Rule 144A. In connection with the sales outside the United States, the Initial Purchaser has agreed that it will not offer, sell or deliver the Notes to, or for the account or benefit of, US persons (1) as part of the initial distribution at any time or (2) otherwise until 40 days after the later of the commencement of this offering or the date the Notes were originally issued. The Initial Purchaser will send to each dealer to whom it sells such Notes during such 40-day period a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States by a dealer or to, or for the account or benefit of, US persons. In addition, with respect to Notes initially sold pursuant to Regulation S, until 40 days after the commencement of the offering of the Notes, an offer or sale of such Notes within the United States by a dealer that is not participating in the offering of the Notes may violate the registration requirements of the US Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A or pursuant to another exemption from registration under the US Securities Act. Persons who purchase Notes from the Initial Purchaser may be required to pay stamp duty, taxes and other charges in accordance with the laws and practice of the country of purchase in addition to the offering price set forth on the cover page hereof. In connection with the offering of the Notes, the Initial Purchaser or its affiliates may purchase and sell Notes in the open market. These transactions may include short sales, over-allotments, stabilizing transactions and purchases to cover positions created by short sales or over-allotments. Short sales involve the sale by the Initial Purchaser or its affiliates of a greater number of Notes than they are required to purchase in the offering of the Notes. Stabilizing transactions consist of certain bids or purchases made for the purpose of preventing or retarding a decline in the market price of the Notes while the offering of the Notes is in progress. These activities by the Initial Purchaser or its affiliates may stabilise, maintain or otherwise affect the market price of the Notes. As a result, the price of the Notes may be higher than the price that otherwise might exist in the open market. There is no obligation on the Initial Purchaser or its affiliates to conduct these activities. If these activities are commenced, they may be discontinued by the Initial Purchaser or its affiliates at any time. These transactions may be effected in the over-the-counter market or otherwise. The Initial Purchaser expects to make offers and sales both inside and outside the United States through its selling agents. Any offers and sales in the United States will be conducted by broker-dealers registered with the US Securities and Exchange Commission. The Initial Purchaser has also agreed that (a)(i) it is a qualified investor (with the meaning of section 86(7) of the Financial Services and Markets Act 2000) (the “FSMA”) and (ii) it has not offered or sold and will not offer to sell any Notes except to persons who are qualified investors or otherwise in circumstances which do not require a prospectus to be made available to the public in the United Kingdom within the meaning of section 85(1) of the FSMA; (b) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of the Notes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer or the Guarantors; and (c) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom. 164

The Initial Purchaser has acknowledged that this Offering Memorandum has not been prepared in the context of a public offering in France within the meaning of Article L.411-1 of the Code monétaire et financier and Title I of Book II of the Règlement Général of the Autorité des marchés financiers (the “AMF) and therefore has not been approved by, or registered or filed with the AMF. Consequently, the Initial Purchaser has represented and agreed that this Offering Memorandum or any other offering material relating to the Notes has not been and will not be released, issued or distributed or caused to be released, issued or distributed to the public in France or used in connection with any offer for subscription or sale of notes to the public in France other than to qualified investors as defined below. The Initial Purchaser has also acknowledged that the Notes being denominated in Euro, are deemed to be issued outside the Republic of France and, accordingly, has represented and agreed that (i) it has not offered or sold and will not offer or sell, directly or indirectly, the Notes to the public in the Republic of France (an appel public à l’épargne as defined in Article L.411-1 of the French Code monétaire et financier) and (ii) offers and sales of Notes in the Republic of France and will be made only to qualified investors (investisseurs qualifies) and defined in Articles L.411-2 and D.411-1 to D.411-4 of the French Code monétaire et financier in compliance with applicable laws and regulations. No action has been taken in any jurisdiction, including the United States, by us or the Initial Purchaser that would permit a public offering of the Notes or the possession, circulation or distribution of this Offering Memorandum or any other material relating to us, the Group or the Notes in any jurisdiction where action for the purpose is required. Accordingly, the Notes may not be offered or sold, directly or indirectly, and neither this Offering Memorandum nor any other offering material or advertisements in connection with the Notes may be distributed or published, in or from any country or jurisdiction, except in compliance with any applicable rules and regulations of any such country or jurisdiction. This Offering Memorandum does not constitute an offer to purchase or a solicitation of an offer to sell in any jurisdiction where such offer or solicitation would be unlawful. Persons into whose possession this Offering Memorandum comes are advised to inform themselves about and to observe any restrictions relating to the offering of the Notes, the distribution of this Offering Memorandum and resales of the Notes. Please see the section entitled “Notice to Investors”. The Issuer and the Guarantors have agreed to indemnify the Initial Purchaser against certain liabilities, including liabilities under the US Securities Act. The Issuer will pay the Initial Purchaser a commission and pay certain fees and expenses relating to the offering of the Notes. Delivery of the Notes will be made against payment therefor on or about the fourth business day following the date of pricing of the Notes (such settlement being referred to as “T+4”). Under Rule 15(c)6-1 under the Exchange Act, trades in the secondary market generally are required to settle in three business days unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the Notes on the date of pricing or the next succeeding business day will be required, by virtue of the fact that the Notes will initially settle in T+4, to specify an alternate settlement cycle at the time of such trade to prevent failed settlement. Purchasers of the Notes who wish to trade the Notes on the date of pricing or the next succeeding business day should consult their own advisors. The Initial Purchaser and its affiliates have from time to time performed certain investment banking and/ or other financial services for us, our affiliates or our former affiliates for which they received customary fees and reimbursement of expenses. The Initial Purchaser and its affiliates may in the future provide investment banking or other financial services to us or our affiliates for which they will receive customary fees.

165

NOTICE TO INVESTORS You are advised to consult legal counsel prior to making any offer, resale, pledge or other transfer of any of the Notes offered hereby. The Issuer has not registered and will not register the Notes or the Guarantees under the US Securities Act and, therefore, the Notes may not be offered or sold within the United States or to, or for the account or benefit of, US persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act. Accordingly, the Issuer is offering and selling the Notes to the Initial Purchaser for re-offer and resale only: Š in the United States to “qualified institutional buyers”, commonly referred to as “QIBs”, as defined in

Rule 144A in compliance with Rule 144A; and Š in offers and sales that occur outside the United States to foreign purchasers, (i.e., purchasers who are

not US persons). The term “foreign purchasers” includes dealers or other professional fiduciaries in the United States acting on a discretionary basis for foreign beneficial owners, other than an estate or trust, in offshore transactions meeting the requirements of Rule 903 of Regulation S. We use the terms “offshore transaction”, “US person” and “United States” with the meanings given to them in Regulation S. If you purchase Notes, you will be deemed to have represented and agreed as follows: (1)

You understand and acknowledge that the Notes and the Guarantees have not been registered under the US Securities Act or any other applicable state securities laws and that the Notes are being offered for resale in transactions not requiring registration under the US Securities Act or any other state securities laws, including sales pursuant to Rule 144A, and, unless so registered, may not be offered, sold or otherwise transferred except in compliance with the registration requirements of the US Securities Act or any other applicable state securities laws, pursuant to an exemption therefrom, or in a transaction not subject thereto, and in each case in compliance with the conditions for transfer set forth in paragraph (4) below.

(2)

You are not our “affiliate” (as defined in Rule 144A), you are not acting on our behalf and you are either: (a)

a QIB and are aware that any sale of these Notes to you will be made in reliance on Rule 144A and such acquisition will be for your own account or for the account of another QIB; or

(b)

not a “US person” as defined in Regulation S or purchasing for the account or benefit of a US person (other than a distributor) and you are not purchasing Notes in an offshore transaction in accordance with Regulation S.

(3)

You acknowledge that none of the Issuer, the Guarantors, or the Initial Purchaser or any person representing any of them has made any representation to you with respect to the Group or the offer or sale of any of the Notes, other than the information contained in this Offering Memorandum, which Offering Memorandum has been delivered to you and upon which you are relying in making your investment decision with respect to the Notes. You acknowledge that none of the Initial Purchaser or any person representing the Initial Purchaser makes any representation or warranty as to the accuracy or completeness of this Offering Memorandum. You have had access to such financial and other information concerning the Group and the Notes as you deemed necessary in connection with your decision to purchase any of the Notes, including an opportunity to ask questions of, and request information from, the Issuer and the Initial Purchaser.

(4)

You are purchasing these Notes for your own account, or for one or more investor accounts for which you are acting as a fiduciary or agent, in each case for investment, and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the US Securities Act, subject to any requirement of law that the disposition of your property or the property of such investor account or accounts be at all times within your or their control and subject to your or their ability to resell these Notes pursuant to Rule 144A, Regulation S or any other available exemption from registration available under the US Securities Act. You agree on your own behalf and on behalf of any investor account for which you are purchasing these Notes, and each subsequent holder of these Notes by its acceptance thereof will agree, to offer, sell or otherwise transfer such Notes prior to (x) the date which is two years (or such shorter period of time as permitted by Rule 144(k) under the US Securities Act or any successor provision thereunder) after the later of the 166

date of the original issue of these Notes and the last date on which we or any of our affiliates were the owner of such Notes (or any predecessor thereto) or (y) such later date, if any, as may be required by applicable law (the “Resale Restriction Termination Date”) only: (a)

to us;

(b)

pursuant to a registration statement which has been declared effective under the US Securities Act;

(c)

for so long as these Notes are eligible for resale pursuant to Rule 144A, to a person you reasonably believe is a QIB that purchases for its own account or for the account of a QIB to whom you give notice that the transfer is being made in reliance on Rule 144A;

(d)

pursuant to offers and sales to non-US persons occurring outside the United States within the meaning of Regulation S; or

(e)

pursuant to any other available exemption from the registration requirements of the US Securities Act;

subject in each of the foregoing cases to any requirements of law that the disposition of your property or the property of your investor account or accounts be at all times within your or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. You acknowledge that we, the Trustee, and the Registrar reserve the right prior to any offer, sale or other transfer pursuant to clause (d) prior to the end of the 40-day distribution compliance period within the meaning of Regulation S or pursuant to clause (e) above prior to the Resale Restriction Termination Date of the Notes to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to us, the Trustee, and the Registrar. Each purchaser acknowledges that each Note will contain a legend substantially in the following form: “THIS NOTE HAS NOT BEEN REGISTERED UNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE “US SECURITIES ACT”), OR OTHER SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE US SECURITIES ACT. THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE US SECURITIES ACT) OR (B) IT IS NOT A US PERSON AND IS ACQUIRING THIS NOTE IN AN “OFFSHORE TRANSACTION” PURSUANT TO RULE 904 OF REGULATION S UNDER THE US SECURITIES ACT, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE US SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS NOTE) OR THE LAST DAY ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WERE THE OWNERS OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW (THE “RESALE RESTRICTION TERMINATION DATE”), OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE US SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE US SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE US SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE US SECURITIES ACT, (D) PURSUANT TO OFFERS AND SALES TO NON-US PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE US SECURITIES ACT OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE US SECURITIES ACT, AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE ISSUER, THE TRUSTEE AND THE REGISTRAR SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) PRIOR TO THE END OF THE 40-DAY 167

DISTRIBUTION COMPLIANCE PERIOD WITHIN THE MEANING OF REGULATION S UNDER THE US SECURITIES ACT OR PURSUANT TO CLAUSE (E) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE TO REQUIRE THAT AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO THE ISSUER, THE TRUSTEE AND THE REGISTRAR IS COMPLETED AND DELIVERED BY THE TRANSFEROR. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION”, “UNITED STATES” AND “US PERSON” HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE US SECURITIES ACT.” THE FAILURE TO PROVIDE THE ISSUER, THE TRUSTEE AND ANY PAYING AGENT WITH THE APPLICABLE US FEDERAL INCOME TAX CERTIFICATIONS (GENERALLY, A US INTERNAL REVENUE SERVICE FORM W-9 (OR SUCCESSOR APPLICABLE FORM) IN THE CASE OF A PERSON THAT IS A “UNITED STATES PERSON” WITHIN THE MEANING OF SECTION 7701(A)(30) OF THE CODE OR AN APPLICABLE US INTERNAL REVENUE SERVICE FORM W-8 (OR SUCCESSOR APPLICABLE FORM) IN THE CASE OF A PERSON THAT IS NOT A “UNITED STATES PERSON” WITHIN THE MEANING OF SECTION 7701(A)(30) OF THE CODE) MAY RESULT IN US FEDERAL BACKUP WITHHOLDING FROM PAYMENTS TO THE HOLDER IN RESPECT OF THE NOTES REPRESENTED BY THIS CERTIFICATE”. If you purchase Notes, you will also be deemed to acknowledge that the foregoing restrictions apply to holders of beneficial interests in these Notes as well as to holders of these Notes. (5)

You acknowledge that the Registrar will not be required to accept for registration of transfer any Notes acquired by you, except upon presentation of evidence satisfactory to us and the Registrar that the restrictions set forth herein have been complied with.

(6)

You acknowledge that: (a)

the Issuer, the Initial Purchaser and others will rely upon the truth and accuracy of your acknowledgments, representations and agreements set forth herein and you agree that, if any of your acknowledgments, representations or agreements herein cease to be accurate and complete, you will notify us and the Initial Purchaser promptly in writing; and

(b)

if you are acquiring any Notes as a fiduciary or agent for one or more investor accounts, you represent with respect to each such account that: (i)

you have sole investment discretion; and

(ii)

you have full power to make, and make, the foregoing acknowledgments, representations and agreements.

(7)

You agree that you will give to each person to whom you transfer these Notes notice of any restrictions on the transfer of the Notes.

(8)

If you are a purchaser in a sale that occurs outside the United States within the meaning of Regulation S, you acknowledge that until the expiration of the “distribution compliance period” (as defined below), you shall not make any offer or sale of these Notes to a US person or for the account or benefit of a US person within the meaning of Rule 902 under the US Securities Act. The “distribution compliance period” means the 40-day period following the issue date for the Notes.

(9)

You understand that no action has been taken in any jurisdiction (including the United States) by the Issuer or the Initial Purchaser that would permit a public offering of the Notes or the possession, circulation or distribution of this Offering Memorandum or any other material relating to the Issuer or the Notes in any jurisdiction where action for such purpose is required. Consequently, any transfer of the Notes will be subject to the selling restrictions set forth under “Plan of Distribution”.

ERISA Each acquirer and subsequent transferee of a Note or any interest therein will be deemed to have represented and warranted that (a) either (i) it is not, and it is not acting on behalf of, an employee benefit plan as defined in Section 3(3) of the United States Employee Retirement Income Security Act of 1974, as amended (“ERISA”) that is subject to the provisions of Part 4 of Subtitle B of Title I of ERISA, a plan to which Section 4975 of the United States Internal Revenue Code of 1986, as amended (“Code”) applies, or any entity whose underlying assets include “plan assets”, As a result of such an employee benefit plan’s or plan’s 168

investment in the entity, each a “Benefit Plan Investor”, or a governmental, church or non-US plan which is subject to any federal, state, local or non-US or other laws or regulations that are substantially similar to the fiduciary responsibility and prohibited transaction provisions of Section 406 of ERISA or Section 4975 of the Code (“Similar Law”), and no portion of the assets used by such acquirer or transferee to acquire and hold the Notes or any interest therein constitutes assets of any such Benefit Plan Investor or such plan, or (ii) the acquisition, holding and/or disposition of the Notes or any interest therein by such acquirer or transferee does not and will not constitute a non-exempt prohibited transaction under Section 406 or ERISA or Section 4975 of the Code and, in the case of a governmental, church or non-US plan, otherwise result in a violation under any Similar Law; and (b) it agrees not to sell or otherwise transfer the Notes or any interest therein otherwise than to an acquirer or transferee that is deemed to make these same representations, warranties and agreements with respect to its acquisition, holding and disposition of the Notes.

169

TAX CONSIDERATIONS United States Federal Income Tax Considerations for US Holders PURSUANT TO US TREASURY DEPARTMENT CIRCULAR 230, YOU ARE ADVISED THAT THE FOLLOWING SUMMARY OF CERTAIN US FEDERAL INCOME TAX CONSIDERATIONS IS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON THE TAXPAYER UNDER THE US INTERNAL REVENUE CODE. IT WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE NOTES. EACH TAXPAYER SHOULD SEEK ADVICE BASED ON ITS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR. The following discussion is a summary of certain material US federal income tax consequences of the purchase, ownership and disposition of Notes by a US holder (defined below), but does not purport to be a complete analysis of all potential tax considerations relevant to a decision to purchase Notes. This summary is based upon the US Internal Revenue Code of 1986, as amended (the “Code”), final, temporary and proposed US Treasury regulations issued thereunder, and judicial and administrative interpretations thereof, each as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. This discussion does not address all of the US federal income tax consequences that may be relevant to a US holder in light of such holder’s particular circumstances or to US holders subject to special rules, such as certain financial institutions, US expatriates (including certain former citizens or “green-card” holders), insurance companies, dealers in securities or currencies, traders in securities, US holders whose functional currency is not the US dollar, US holders that are tax residents or domiciled in Poland, France or Luxembourg, tax-exempt organizations, regulated investment companies, grantor trusts, real estate investment trusts, partnerships or other pass-through entities, persons liable for alternative minimum tax, and persons holding the Notes as part of a “straddle”, “hedge”, “conversion transaction” or other integrated transaction. In addition, this summary does not discuss any state, local, or non-US tax considerations, or any US federal tax considerations other than income tax considerations (for example, US federal estate or gift tax considerations). This discussion is limited to US holders who purchase Notes for cash in this offering at their “issue price” (the first price at which a substantial part of the Notes are sold to the public, excluding sales to bond houses, brokers or similar persons or organizations acting in their capacity as underwriters, placement agents or wholesalers) and who hold the Notes as capital assets within the meaning of section 1221 of the Code. For purposes of this discussion, a “US holder” is a beneficial owner of a Note that is, for US federal income tax purposes: (i) an individual who is a citizen or resident of the United States; (ii) a corporation or any entity taxable as a corporation created or organized in the United States or under the laws of the United States, any state thereof or the District of Columbia; (iii) any estate the income of which is subject to US federal income taxation regardless of its source; or (iv) any trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or if a valid election is in place to treat the trust as a United States person. If a partnership (including any entity treated as a partnership for US federal income tax purposes) holds the Notes, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. A holder that is a partnership, and partners in such partnership, should consult their own tax advisors regarding the tax consequences of the purchase, ownership and disposition of the Notes. Prospective purchasers of the Notes should consult their own tax advisors concerning the tax consequences of the purchase, ownership and disposition of the Notes in light of their particular circumstances, including the application of the US federal income tax considerations discussed below, as well as the application of state, local, foreign and other tax laws. Characterization of the Notes; Passive Foreign Investment Company Treatment This summary is based upon the assumption that the Notes will be characterized as indebtedness of the Issuer for US federal income tax purposes. Prospective purchasers should recognize, however, that, because the determination is highly factual, there is uncertainty regarding the appropriate US federal income tax characterization of the Notes, and no rulings have been or will be sought from the Internal Revenue Service (“IRS”) on this matter. To the extent we are required to take a position regarding the classification of the Notes for US federal income tax purposes, we intend to treat the Notes as indebtedness for US federal income tax purposes. It is possible that the IRS might contend that the Notes should be treated not as indebtedness but as equity of the Issuer, or as indebtedness or equity of the Company, in which case the US federal income tax consequences to US holders of Notes could be different from those described herein. If the Notes are recharacterized as equity for US federal income tax purposes, a US holder may be deemed to own stock in a passive foreign investment company (“PFIC”). In that case, a US holder could be 170

subject to adverse US federal income tax consequences, including, without limitation, being required to pay an interest charge together with tax calculated at maximum ordinary rates on gain recognized on a disposition of a Note or on certain increased interest payments with respect to a Note. US holders will not be able to make a Qualified Electing Fund election with respect to the Issuer because the Issuer does not intend to comply with certain accounting, record-keeping and reporting requirements that would allow US holders to make such an election. There can be no assurance that US holders will be able to file a PFIC Mark-to-Market election with respect to the Issuer because shares in the Issuer may not be treated as “regularly traded” on a “qualified exchange” for purposes of that election. Prospective purchasers of the Notes are urged to consult their own tax advisors regarding these and other potential tax consequences in the event the Notes are recharacterized for US federal income tax purposes. Payments of Interest It is anticipated that the Notes will be issued at par or at a discount that is “de minimis” for US federal income tax purposes. Assuming that is the case, subject to the discussions below under “— Additional Payments”, payments of stated interest on the Notes generally will be taxable to a US holder as ordinary income at the time such payments are received or accrued, in accordance with the US holder’s method of tax accounting. A US holder that holds Notes and uses the cash method of accounting for US federal income tax purposes and that receives a payment of stated interest on those Notes will be required to include in ordinary income the US dollar value of the euro interest payment (determined based on the spot exchange rate on the date such payment is received) regardless of whether the payment is in fact converted to US dollars. Generally, a cash method US holder will not recognize exchange gain or loss with respect to the receipt of such payment, but may have exchange gain or loss attributable to the actual disposition of the euros so received. A US holder that holds Notes and uses the accrual method of accounting for US federal income tax purposes will be required to include in income the US dollar value of the amount of interest income in euros that has accrued with respect to a Note during an accrual period. The US dollar value of such accrued interest will be determined by translating such interest at the average rate of exchange for the accrual period or, with respect to an accrual period that spans two taxable years, at the average rate for the partial period within the taxable year. A US holder may elect, however, to translate such accrued interest using the spot rate of exchange on the last day of the accrual period or, with respect to an accrual period that spans two taxable years, using the spot rate of exchange on the last day of the taxable year. If the last day of an accrual period is within five business days of the date of receipt of the accrued interest, a US holder may translate such interest using the spot rate of exchange on the date of receipt. The above election, if made, also will apply to other obligations held by the US holder and may not be changed without the consent of the IRS. A US holder that uses the accrual method of accounting for US federal income tax purposes will recognize exchange gain or loss with respect to accrued interest on the date such interest is received. The amount of exchange gain or loss recognized will equal the difference, if any, between (i) the US dollar value of the euro payment received (determined on the date such payment is received) in respect of such accrual period; and (ii) the US dollar value of interest income that has accrued during such accrual period (as determined above). This gain or loss generally will constitute ordinary income or loss and be treated as US source income or loss, respectively. A US holder that uses the accrual method may have additional exchange gain or loss upon the disposition of the euros it receives. Additional Payments Certain debt instruments that provide for contingent payments are subject to special rules under US Treasury regulations relating to “contingent payment debt instruments” (the “CPDI regulations”). In certain circumstances (see, for example, “Description of the Notes — Redemption”, “Description of the Notes — Withholding Taxes”, “Description of the Notes — Escrow of Proceeds; Special Mandatory Redemption”, and “Description of the Notes — Change of Control”), the Issuer or a Guarantor may be obligated to make payments on the Notes in excess of stated principal and interest. Under the CPDI regulations, the possibility of an additional payment on a Note may be disregarded for purposes of determining the timing and amount of interest or original issue discount income to be recognized by a US holder in respect of such Note if the likelihood of the payment, as of the date the Notes are issued, is remote or the amount of potential payments is incidental or certain other exceptions apply. We do not intend to treat eventual additional payments on the Notes as contingent payments under the CPDI regulations. It is possible, however, that the IRS may take a different position regarding the possibility of such additional payments, in which case, if the position of the IRS were sustained, the timing, amount and character of income recognized with respect to a Note may be different than described herein and a holder may be required to recognize income in excess of stated interest on the Note and may be required to treat as interest income all or a portion of any gain recognized on the disposition of a Note. This summary assumes that the IRS will not take a different position, or, if it takes a 171

different position, that such position will not be sustained. Prospective purchasers should consult their own tax advisors as to the tax considerations that relate to the possibility of additional payments. Foreign Taxes and Foreign Tax Credit For taxable years beginning on or before December 31, 2006, interest income earned by a US holder on a Note generally will constitute foreign source income and generally will be considered “passive” income or, in the case of certain US holders, “financial services” income (and will constitute “high withholding tax interest” if the interest is subject to withholding at a rate of 5% or more), which are treated separately from other types of income in computing the foreign tax credit allowable to US holders under US federal income tax laws. For taxable years beginning after December 31, 2006, interest income on a Note generally will constitute “passive category income” or, in the case of certain US holders, “general category income”. Gain or loss on the sale, exchange, retirement or other taxable disposition of a Note (including foreign currency gain or loss) generally will be treated as US source income or loss for foreign tax credit purposes. Should any foreign tax be withheld from payments to a US holder on a Note, the gross amount withheld (including any amounts withheld with respect to any Additional Amounts paid to a US holder) will be included in the holder’s income at the time such amount is received or accrued in accordance with the holder’s method of tax accounting. Foreign withholding tax paid at the rate applicable to a US holder would, subject to limitations and conditions, be treated as foreign income tax eligible for credit against the holder’s US federal income tax liability or, at the holder’s election, eligible for deduction in computing taxable income. US holders should consult their tax advisors regarding the creditability or deductibility of any withholding taxes. Any Additional Amounts paid generally should constitute foreign source income to a US holder and should be translated into the US dollar value by the US holder in accordance with the rules governing interest as described above. Sale, Exchange, Redemption or Other Disposition of Notes Generally, upon the sale, exchange, redemption or other taxable disposition of a Note, a US holder will recognize taxable gain or loss equal to the difference between (i) the amount realized on the sale, exchange, redemption or other taxable disposition (less any amount attributable to accrued but unpaid interest, which will be taxable as interest income to the extent not previously included in income); and (ii) the US holder’s adjusted tax basis in the Note. If a US holder receives foreign currency on such a sale, exchange, redemption or other taxable disposition, the amount realized generally will be based on the US dollar value of the foreign currency determined on (i) the date of receipt of payment in the case of a cash basis US holder and (ii) on the date of the disposition in the case of an accrual basis US holder. In the case of a Note that is traded on an established securities market, a cash basis US holder and, if it so elects, an accrual basis US holder, will determine the US dollar value of the amount realized by translating the foreign currency to US dollars at the spot rate on the settlement date of the sale or other disposition. If the US dollar value of the foreign currency taken into account by a US holder in determining its amount realized differs from the US dollar value of such foreign currency when received, the US holder will have exchange gain or loss. Such gain or loss will be ordinary income or loss and generally will be treated as US source income or loss. The US holder may have additional exchange gain or loss upon the disposition of such foreign currency. A US holder’s adjusted tax basis in a Note generally will equal the cost of such Note to such US holder. If a US holder uses foreign currency to purchase a Note, the cost of the Note will be the US dollar value of the foreign currency purchase price on the date of purchase. In the case of a Note that is traded on an established securities market, a cash basis US holder, and, if it so elects, an accrual basis US holder, will determine the US dollar value of the cost of such Notes by translating the amount paid at the spot rate on the settlement date of the purchase. The conversion of US dollars to a foreign currency and the immediate use of that currency to purchase a Note generally will not result in taxable gain or loss for a US holder. The special election available to accrual basis US holders in regard to the purchase and sale of Notes traded on an established securities market, which is discussed in the two preceding paragraphs, must be applied consistently by a US holder to all debt instruments from year to year and cannot be changed without the consent of the IRS. Gain or loss recognized by a US holder upon disposition of a Note generally will be US source gain or loss and, except as discussed below with respect to exchange gain or loss, generally will be capital gain or loss and will be long-term capital gain or loss if at the time of the sale, exchange, redemption or other taxable disposition the Note has been held by such US holder for more than one year. Long-term capital gain recognized by a non-corporate US holder generally will be subject to taxation at a reduced rate. The deductibility of capital losses is subject to limitation. 172

Foreign Currency Exchange Gain or Loss Gain or loss recognized upon the sale, exchange, redemption or other taxable disposition of a Note that is attributable to fluctuations in currency exchange rates will be ordinary income or loss and generally will be treated as US source income or as an offset to US source income, respectively. Gain or loss attributable to fluctuations in exchange rates generally will equal the difference between (i) the US dollar value of the euro principal amount (plus any unamortized bond premium remaining at the time payment is received or the Note is disposed of) of the Note determined on the date payment is received with respect to the sale, exchange, redemption or other taxable disposition of the Note, and (ii) the US dollar value of the euro principal amount (plus any unamortized bond premium remaining at the time payment is received or the Note is disposed of) of the Note, determined on the date the US holder acquired such Note. In addition, upon the sale, exchange, retirement or other taxable disposition of a Note, an accrual method US holder may realize exchange gain or loss attributable to amounts received in respect of accrued and unpaid interest. Any such exchange gain or loss with respect to accrued interest will be determined in the same manner as discussed under “— Payments of Interest”. However, upon a sale, exchange, retirement or other taxable disposition of a Note, a US holder will realize exchange gain or loss with respect to principal and accrued interest only to the extent of the total gain or loss realized on the disposition. Prospective investors should consult their own tax advisors with respect to the treatment of exchange gains and losses. Tax Return Disclosure Requirement Treasury regulations that apply to “reportable transactions” require the reporting of certain transactions to the IRS based on any of several indicia, including the recognition of foreign currency and certain other losses in excess of a threshold amount. US holders are advised to consult their tax advisors regarding these rules, including any requirement to file IRS Form 8886 (Reportable Transaction Disclosure Statement). Information Reporting and Backup Withholding In general, a US holder may be subject to US federal backup withholding tax at the applicable rate (currently 28%) with respect to payments on the Notes and the proceeds of a sale or other disposition of the Notes that are made in the United States or through certain US-related financial intermediaries, if the US holder fails to provide its taxpayer identification number to the paying agent and to comply with certain certification procedures or otherwise establish an exemption from backup withholding. In addition, such payments to, and the proceeds of a sale or other disposition by, a US holder that is not a US corporation or other exempt entity may be subject to information reporting requirements. Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a US holder will be allowed as a credit against the holder’s US federal income tax liability and may entitle such US holder to a refund, provided the required information is furnished to the IRS in a timely manner. A payment to a non-US holder made within the United States or by a US payor or US middleman generally will not be subject to US information reporting or backup withholding tax if the applicable holder has submitted a certification of non-US status. THE ABOVE DISCUSSION IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSEQUENCES RELATING TO THE OWNERSHIP OF THE NOTES. PROSPECTIVE PURCHASERS OF THE NOTES SHOULD CONSULT THEIR OWN TAX ADVISERS CONCERNING THE TAX CONSEQUENCES OF THEIR PARTICULAR SITUATIONS. Polish taxation General tax information The following discussion is a summary of material Polish income tax and transfer tax consequences of the purchase, ownership and disposition of the Notes by Polish residents and in some aspects also foreign residents, but does not purport to be a complete analysis of all potential tax considerations relevant to a decision to purchase the Notes. Potential purchasers of the Notes are recommended to seek advice from a tax or legal advisor. The information below is subject to the additional reservation that it is based exclusively on the laws in force on January 4, 2007. Tax treatment of income related to holding of the Notes Polish tax residents Residents other than individuals Interest and discounts on bonds obtained by entities with their registered office and/or management in the Republic of Poland, and which are incorporated entities, capital companies in the process of incorporation, or any 173

other unincorporated organization (other than civil law partnerships, general partnerships, professional partnerships, limited liability partnerships and partnerships limited by shares), shall be taxed under the Corporate Income Tax (“CIT”) Act together with all other income earned by the taxpayer in a given tax year, and shall be subject to the basic tax rate of 19%. The CIT Act contains some specific rules of taxation of interest, e.g. interest is not recognized as income as long as it is not received, even if due. Individuals Pursuant to Art. 30a of the Polish Individuals Income Tax (“PIT”) Act, a flat 19% tax rate is applied to income earned from interest and/or discounts on securities, regardless of the territory in which it has been generated. The income is not reduced by the cost of generating such income. Income taxed pursuant to Art. 30a of the PIT Act is not amalgamated with other income taxable pursuant to general rules, which is subject to the progressive tax rates referred to in Art. 27 of the PIT Act. Payment of tax by individuals As a rule, pursuant to Art. 41 Section 4 of the PIT Act, tax on income taxed in accordance with Art. 30a of the PIT Act is collected by a tax remitter, i.e. a natural person, legal person or a non-corporate organization that pays or makes available to the taxpayer money or pecuniary values earned as income taxed at a flat-rate tax. The tax remitter is responsible for calculating, collecting and paying the tax withheld. The taxpayer shall not disclose the tax collected pursuant to the above in its annual tax return. However, income generated in relation to holding the Notes should be considered as income generated abroad, as it is paid by the Issuer, which has its registered office outside Poland. As to income taxed pursuant to Art. 30a of the PIT Act generated abroad, unlike income generated in Poland, the tax is disclosed by the taxpayers in their annual tax returns (Art. 30a Section 11 of the PIT Act). This view is corroborated in Art. 45 Section 3 b of the PIT Act, which requires that such income should be disclosed in the taxpayer’s annual tax return, unless income tax is collected by a tax remitter. It appears that a situation in which income is generated abroad is a situation in which the tax remitter will not withhold tax (or foreign residents would need to act as tax remitters). Therefore, the regulations described seem to be intended to impose the obligation to pay the tax directly on the taxpayer, without the intermediary of the tax remitter. However, we are familiar with an interpretation of the certain local tax offices that if the income generated abroad is paid to the taxpayer through intermediation of a Polish entity, e.g. a Polish broker, this Polish intermediary should withhold tax as a tax remitter. According to this interpretation, only if there is no intermediary in Poland, the tax is accounted for directly by the taxpayer. If this interpretation prevails there will be an obligation to withhold the tax by the Polish intermediaries participating in the payments of interest from the Notes. With respect to income generated on holding the Notes, taxpayers may be required to pay advances over the course of the tax year. This results from the provisions of Art. 40 of the PIT Act, referred to here as “the advance tax payment rules”. Under these rules, if the taxpayers referred to in Arts. 31, 33, 34, and 35 of the same Act (including mainly taxpayers earning their income from employment or pensions) also obtain other income from which tax remitters are not required to remit applicable advances for income tax, in such event the taxpayers are required to pay tax advances in respect of such income in accordance with the rules set forth in Art. 44 Section 3a of the PIT Act. Under the advance tax payment rules, monthly tax advances shall be made at the rate of 19% for any month in which income is earned by the 20th day of the month following the month in which the tax is due, and, in respect of December, within the deadline applicable to the filing of annual income tax returns. However, the relevance and the scope of the advance tax payment rules are not entirely clear; therefore, it is recommended that advice be sought from a tax or legal advisor. It is additionally worth noting that, apart from advance tax payment rules described herein, no other regulations exist that might potentially require the purchasers of the Notes to personally make advance payments on income tax payable in respect of income earned by the holders of the Polish Notes. Taxation of income earned in relation to transfer of the Notes in the secondary market Polish tax residents Residents other than individuals Income earned from the transfer of the Notes by entities with their registered office and/or management in Poland and which are incorporated entities, capital companies in the process of incorporation, or any other unincorporated organization (other than civil law partnerships, general partnerships, professional partnerships, limited liability partnerships and partnerships limited by shares) shall be taxed according to general tax rules under the CIT Act. In particular, such income, together with all other income earned by the taxpayer in a given tax year, shall be subject to the basic tax rate of 19% under Art. 19 Section 1 of the CIT Act. 174

Individuals The PIT Act (Art. 30b) provides for a flat 19% rate being applied to income earned from the transfer of the Notes, wherever such income has been generated. However, Art. 30b shall not apply if a transfer of the Notes is effected as part of business activities operated by the taxpayer. Calculation of income and payment of tax by individuals The revenue amount to be used in calculating the income amount shall be the value of the Notes expressed as the price in the agreement decreased by the costs incurred in relation to the transfer of the Notes against consideration. Expenses related to the acquisition of the Notes shall be treated as costs of gaining the revenue and shall be deducted from the revenue amount. In the case of individuals whose income from a transfer of the Notes shall be subject to a flat-rate tax of 19%, the income amount shall be calculated as the difference between the revenue amount obtained (being the aggregate value of the Notes according to the respective agreement decreased by the costs incurred in relation to the transfer), and the tax deductible costs, meaning the expenses incurred in relation to acquiring the Notes. However, it should be noted that in the event of a substantial difference between the value expressed as the price stated in an agreement regarding a transfer of the Notes against consideration, and the market value of such Notes, the tax authorities may raise objections concerning such price. A taxpayer shall be required to file a separate income tax return at the end of a given tax year in order to account for the income obtained from the transfer of securities against consideration, and to calculate the tax due thereon (it is worth noting that revenue means revenue which is due and payable to such taxpayer, even if the amount has not actually been received, which may have an impact on income calculation). However, the tax remitter shall not be required to collect tax or to remit tax advances against income tax in the course of the fiscal year. Foreign residents Foreign holders of the Notes (i.e. entities that do not have their registered office (management) in Poland or individuals without domicile in Poland) will be subject to tax obligations in Poland regarding a transfer of the Notes solely in respect of income earned in Poland (Art. 3 Section 2a of the PIT Act and Art. 3 Section 2 of the CIT Act). As an example, income from sales of the Notes on the Polish regulated market) will be treated as income earned in Poland. However, apart from Polish domestic legislation, the tax regulations applicable to foreign residents will follow from the respective double taxation treaties entered into by Poland. Double taxation treaties typically stipulate that gains from the sale of securities may be taxed solely in the country in which the seller has its domicile or registered office (or the place where its management is conducted). Transfer tax (tax on civil law transactions) Transfer tax (tax on civil law transactions) applies to the sale or exchange of securities, if the rights attached to the securities are to be performed in Poland, or if the securities are performed outside Poland, but the agreement evidencing the sale or exchange is concluded in Poland and the purchaser is a Polish resident. The rate of this tax is 1% of the market value of the Notes. In certain situations, the tax authorities may adjust the taxable base. The tax should be paid within 14 days after the transaction is concluded. Withholding tax on payments under the Guarantees Polish withholding tax will apply to payments by the Guarantors under the Guarantees of principal or interest in respect of the Notes. The amount of withholding tax will depend on the tax residency of the holders of the Notes and the tax qualification of payments by the Guarantors as determined by the Polish tax authorities. French taxation The Notes being issued in euros by a French legal entity are deemed to be issued outside the Republic of France for the purposes of Article 131 quater. Interest and other revenues with respect to the Notes paid to non-French residents benefit therefore from exemption from the withholding tax provided for in Article 125 A III of the French General Tax Code. A Noteholder will not be subject to French taxes on capital gains with respect to any gains realized on the disposal of the Notes provided that such Noteholder is neither domiciled in the Republic of France nor deemed to be resident, established or carrying on an activity in the Republic of France for French tax purposes. EU savings directive Under EC Council Directive 2003/48/EC (“the Directive”) regarding the taxation of savings income, each Member State is required since 1st July 2005, to provide to the tax authorities of another Member State details of 175

payments of interest or other similar income within the meaning of the Directive (i.e. interests, products, premiums or other debt income) paid by a person within its jurisdiction to, or collected by such a person for, an individual resident in that other Member State. For these purposes, the term “paying agent” is widely defined and includes in particular any economic operator who is responsible for making interest payments, within the meaning of the Directive, for the immediate benefit of individuals. However, for a transitional period, certain Member States (Austria, Belgium and Luxembourg) may instead of disclosing this information apply a withholding system in relation to such payments deducting tax on interest on other similar incomes at rates rising over time to 35%. The rate of such withholding tax equals 15% during the first three years, 20% during the subsequent three years and 35% until the end of the transitional period. Such transitional period will end at the end of the first full fiscal year following the later of (i) the date of entry into force of an agreement between the European Community, following a unanimous decision of the European Council, and the last of several jurisdictions (Switzerland, Liechtenstein, San Marino, Monaco and Andorra), providing for the exchange of information upon request as defined in the above mentioned OECD Model Agreement on Exchange of Information on Tax Matters released on 18th April 2002 with respect to interest payments within the meaning of the Directive, in addition to the simultaneous application by those same jurisdictions of a withholding tax on such payments at the rates defined for the corresponding periods and (ii) the date on which the European Council unanimously agrees that the United States of America is committed to exchange of information upon request as defined in the above mentioned OECD Model Agreement with respect to interest payments within the meaning of the Directive. Since 1st July 2005 a number of non-EU countries, and certain dependant or associated territories of certain Member States have agreed to adopt similar measures (either exchange of information or transitional withholding) in relation to payments made by a person within its jurisdiction to, or collected by such a person for an individual resident in a Member State. The directive was implemented into French law under Article 242 ter of the French General Tax Code) which imposes on paying agents based in France an obligation to report to the French tax authorities certain information with respect to interest payments made to the beneficial owner and a detailed list of the different categories of interest paid to that beneficial owner. These reporting obligations, as described under sections 49 I ter to 49 I sexies of Schedule III to the French Tax Code, entered into force with respect to interest payments made on or after 1st July 2005, but paying agents were required to identify the beneficial owners of such payments as from 1st January 2004.

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LEGAL MATTERS Certain legal matters in connection with the offering of the Notes will be passed upon for us by Dewey Ballantine LLP, as to matters of US federal, New York and Polish law, certain legal matters relating to French law will be passed upon for us by Orrick Rambaud Martel and certain legal matters relating to Austrian law by Wolf Theiss. Certain legal matters in connection with the offering of the Notes will be passed upon for the Initial Purchaser by White & Case LLP as to matters of US federal, New York, Polish and French law and by Binder Grösswang as to matters of Austrian law. INDEPENDENT REPORTING AUDITORS Our consolidated financial statements for the years ended December 31, 2005 and 2004, prepared in accordance with IFRS included in this Offering Memorandum, have been reported on by KPMG Audit Sp. z o.o., independent auditors, as stated in their reports appearing herein. The consolidated financial statements of voestalpine Stahlhandel GmbH for the fiscal year ended March 31, 2006, prepared in accordance with IFRS and included in this Offering Memorandum, have been reported on by Grant Thornton, independent auditors, as stated in their report appearing herein. The financial statements of Huta Stalowa Wola–Huta Stali Jakos´ciowych Sp. z o.o. and Huta Stalowa Wola–Walcownia Blach Sp. z o.o. for the year ended December 31, 2005, prepared in accordance with Polish GAAP and included in this Offering Memorandum, have been reported on by Doradca, independent auditors, as stated in their reports appearing herein. WHERE YOU CAN FIND MORE INFORMATION Each purchaser of the notes from the Initial Purchaser will be furnished with a copy of this Offering Memorandum and any related amendments or supplements to this Offering Memorandum. Each person receiving this Offering Memorandum and any related amendments or supplements to the Offering Memorandum acknowledges that: (1)

such person has been afforded an opportunity to request from us, and to review and has received all additional information considered by it to be necessary to verify the accuracy and completeness of the information herein;

(2)

such person has not relied on the initial purchaser or any person affiliated with the initial purchaser in connection with its investigation of the accuracy of such information or its investment decision; and

(3)

except as provided pursuant to (1) above, no person has been authorized to give any information or to make any representation concerning the notes offered hereby other than those contained herein and, if given or made, such other information or representations should not be relied upon as having been authorized by us or the Initial Purchaser.

For so long as any of the notes are “restricted securities” within the meaning of Rule 144(a)(3) under the US Securities Act, we will, during any period in which we are neither subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, nor exempt from the reporting requirements under Rule 12g3-2(b) of the Exchange Act, provide to the holder or beneficial owner of such restricted securities or to any prospective purchaser of such restricted securities designated by such holder or beneficial owner, in each case upon the written request of such holder, beneficial owner or prospective purchaser, the information required to be provided by Rule 144A(d)(4) under the US Securities Act. We are not currently subject to the periodic reporting and other information requirements of the Exchange Act. However, pursuant to the Indenture governing the Notes and so long as the Notes are outstanding, we will furnish periodic information to holders of the Notes. See “Description of the Notes—Certain Covenants— Reports to Holders”.

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LISTING AND GENERAL INFORMATION Listing Application has been made to the Luxembourg Stock Exchange for the Notes to be listed on to the Official List of the Luxembourg Stock Exchange and traded on the Euro MTF Market. Luxembourg listing information Copies of the following documents will be available free of charge during usual business hours at the principal executive offices of the Issuer, as well as at the registered offices of the Luxembourg Paying Agent for so long as the Notes are listed on the Official List of the Luxembourg Stock Exchange and traded on the Euro MTF market: (i)

the statuts (by-laws) of the Issuer;

(ii)

the by-laws of the Company;

(iii)

the financial statements included in this Offering Memorandum;

(iv)

the most recent financial statements of the Issuer, the Company and each Subsidiary Guarantor;

(v)

any interim financial statements or accounts of the Issuer, to the extent available;

(vi)

the following documents: (a)

the Indenture governing the Notes; and

(b)

the Share Pledges;

(vii)

the Purchase Agreement relating to the Notes; and

(viii)

the incorporation documents of the Subsidiary Guarantors.

In connection with the issuance of the Notes, the Issuer will prepare unaudited quarterly financial statements starting with the quarter ending March 31, 2007. The Issuer will thereafter publish quarterly and annual financial statements and make them available to the public. For so long as the Notes are listed on the Official List of the Luxembourg Stock Exchange and traded on the Euro MTF market, the Issuer will notify the Luxembourg Stock Exchange in the event of a change in the Luxembourg Paying Agent or Transfer Agent for the Notes. The Issuer has appointed The Bank of New York (Luxembourg) S.A. as Luxembourg Paying Agent and The Bank of New York as Principal Paying Agent to make payments on, and transfers of, the Notes. The Issuer reserves the right to vary such appointment. The Issuer and the Company each accept responsibility for the information contained in this Offering Memorandum. To the best of our knowledge, except as otherwise noted, the information contained in this Offering Memorandum is in accordance with the facts and does not omit anything likely to affect the import of such information. This Offering Memorandum may only be used for the purposes for which it has been published. Clearing Information The Notes have been accepted for clearance and settlement through Euroclear and Clearstream. The Notes have been accorded the following common codes and international securities identification numbers (ISINs): Š for the Notes sold pursuant to Regulation S the common code is 028339399 and the ISIN is

XS0283393998; Š for the Notes sold pursuant to Rule 144A the common code is 028339453 and the ISIN is

XS0283394533; Legal Information The Issuer was incorporated as a société anonyme incorporated under the laws of the Republic of France. The Issuer’s legal and commercial name is Zlomrex International Finance S.A. Its executive office is registered at 48, boulevard des Coquibus, BP-97, 91003 Evry, France, and it is registered with the Registre du commerce et des sociétés of Evry under number 492 535 737. It is a wholly-owned (other than a small number of directors’ qualifying shares) subsidiary of the Company. The amount of the issued share capital of the Issuer is €225,000. There is one class of shares – 225,000 ordinary shares with a nominal value of €1 per share. The share capital has been paid in full. 178

The Issuer has three directors (members of the board): Mr Przemysław Sztuczkowski (also chairman (président du conseil d’administration) and managing director (directeur général)), Mr. Przemysław Grzesiak and Mr. Krzysztof Walarowski. The Issuer anticipates also appointing three additional directors in the future: Mr. Krzysztof Zoła, Mrs. Barbara Grzesiak and Mrs. Anita Sztuczkowska. The Company was originally incorporated on June 14, 2004. The Company is organized under the Republic of Poland. The Company’s legal and commercial name is Złomrex S.A. The Company is registered with the Registry of Commerce and Companies of Cze˛stochowa under number 0000211496. Its registered office is located at Poraj, ul. Zielona 26. The Company’s telephone number is +48 (34) 3160125. According to an excerpt from the register of entrepreneurs dated January 2, 2007, Złomrex S.A.’s total share capital is PLN 47,691,000 and is divided into 47,691,000 ordinary bearer shares with a nominal value of PLN 1.00 per share (47,690,000 non-preferred Series A Shares and 1,000 non-preferred Series B Shares). The share capital has been paid in full. Mr. Przemysław Sztuczkowski is the sole shareholder of Złomrex.

179

Subsidiary Guarantor Information The following table set forth a list of the Subsidiary Guarantors, each of which is wholly owned, their respective name, date of incorporation, address of registered office, company number and primary activities: Address of Registered Office

Company Number

Name

Date of Incorporation

Odlewnia Metali Szopienice Sp. z o.o. . . . . . . . . . . . . . . . . . .

January 23, 2002

Katowice, ul. Ks. Majora Karola Woz´niaka 24

0000082395

Manufactures finished products and semi-finished products composed of non-ferrous metal alloys.

March 19, 2002

Zawiercie, ul. Okólna 10

0000098737

Manufactures plant rolls/mills steel billets into finished products; production of smooth rods and plain and reinforced bars made of carbon steel.

HSW-Huta Stali Jakos´ciowych S.A. . . . . . . . . . .

November 2, 2006

Stalowa Wola ul. Kwiatkowskiego 1

0000266647

Produces quality (high alloy) steel and long hot-rolled products (bars) made from carbon steel and high alloy steel as well as hot-rolled sheets from carbon steel, high alloy steel and special purpose steel.

Ferrostal Łabe˛dy Sp. z o.o. . .

July 29, 1993

Gliwice, ul. Zawadzkiego 26

0000086806

Produces semifinished products in the form of steel billets and finished steel products.

Złomrex Zbrojarnia Sp. z o.o. ..........................

July 19, 2006

Zawiercie, ul. Okólna 10

0000260710

Service center for production of prefabricated, customized construction industry elements from concrete steel for use in the construction of foundations, floors, heads and other building components.

Złomrex S.A. . . . . . . . . . . . . . .

June 14, 2004

Poraj, ul. Zielona 26

0000211496

Produces metallurgical products, including round and square bars; non-ferrous products; and various steel products.

Zakład Walcowniczy — Walcownia Bruzdowa Sp. z o.o. . . . . . . . . . . . . . . . . . .

180

Primary Activities

Odlewnia Metali Szopienice Sp. z o.o. Odlewnia Metali Szopienice Sp. z o.o. is a Polish limited liability company incorporated under Polish law under the KRS registration number 0000082395. As of December 2006, it had a share capital of PLN 50,000.00 divided into 100 shares. The company’s registered office is Katowice, ul. Ks. Majora Karola Woz´niaka 24. There are two members of the Management Board: Henryk Składaniec — President of the Management Board and Radosław Kirsz — Vice - President of the Management Board. The company is represented by the President of the Management Board acting individually, two members of the Management Board acting jointly or one member of the Management Board acting jointly with a holder of a proxy. The company primarily manufactures finished products and semi-finished products composed of non-ferrous metal alloys. Zakład Walcowniczy — Walcownia Bruzdowa Sp. z o.o. Zakład Walcowniczy — Walcownia Bruzdowa Sp. z o.o. is a Polish limited liability company incorporated under the Polish law under the KRS registration number 0000098737. As of December 2006, it had a share capital of PLN 9,550,000.00 divided into 19,100 shares. The company’s registered office is Zawiercie, ul. Okólna 10. There are two members of the Management Board: Krzysztof Liwoch — President of the Management Board and Dorota Pas´ — member of the Management Board. The company is represented by the President of the Management Board acting individually. The company primarily manufactures plant rolls/mills steel billets into finished products, produces smooth rods and plain and reinforced bars made of carbon steel. HSW-Huta Stali Jakos´ciowych S.A. HSW-Huta Stali Jakos´ciowych S.A. is Polish joint-stock company organized under Polish law under the KRS registration number 0000266647. As of December 2006, it had a share capital of PLN 137,376,700.00 divided into 137,376,700 shares. The company’s registered office is 37-450 Stalowa Wola, ul. Kwiatkowskiego 1. There are 3 members of the Management Board: Wincenty Likus, Wojciech Maj, Andrzej Je¸druch. The company is represented by two members of the Management Board. The company primarily produces quality (high alloy) steel and long hot-rolled products (bars) made from carbon steel and high allow steel as well as hot-rolled sheets from carbon steel, high alloy steel and special purpose steel. Ferrostal Łabe˛dy Sp. z o.o. Ferrostal Łabe˛dy Sp. z o.o. is a Polish limited liability company incorporated under the Polish law, under the KRS registration number 0000086806. As of December 2006, it had a share capital of PLN 177,760,000.00. The company’s registered office is Gliwice, ul. Zawadzkiego 26. There are three members of the Management Board: Henryk Odoj — President of the Management Board, Krystian Gunia — member of the Management Board and Ryszard Giemza — Vice-President of the Management Board. The company is represented by either two members of the Management Board acting jointly or one member of the Management Board acting jointly with a holder of a proxy. The company primarily produces semi-finished products in the form of steel billets and finished steel products. Złomrex Zbrojarnia Sp. z o.o. Złomrex Zbrojarnia Sp. z o.o. is a Polish limited liability company incorporated under the Polish law, under the KRS registration number 0000260710. As of December 2006, it had a share capital of PLN 50,000.00 divided into 50 shares. The company’s registered office is in Zawiercie, ul. Okólna 10. There is one member of the Management Board: Adam Kuziorowicz — President of the Management Board. The company is represented by the President or Vice-President of the Management Board acting individually or a member of the Management Board acting jointly with another member of the Management Board or with a holder of a proxy. The company is a service centre for production of prefabricated, customized construction industry elements from concrete steel for use in the construction of foundations, floors, heads and other building components. Złomrex S.A. Złomrex S.A is a joint-stock company incorporated under the Polish law under the KRS registration number 000211496. As of December 2006, it had a share capital of PLN 47 691 000,00 divided into 47691000 shares with the nominal value of PLN 1. The company’s registered office is in Poraj, ul. Zlielona 26. There are three members of the Management Board: Przemysław Sztuczkowski — the President; Przemysław Grzesiak — the Vice-President; Krzystof Walarowski — the member of the Management Board. The company is represented either by the President or the Vice-President of the Management Board individually, the member of the Management Board acting jointly with a holder of proxy or two members of the Management Board acting jointly. The company primarily produces wide range of metallurgical products, including plain and reinforced bars, rounds roll bars, square and flat bars as well as non-ferrous products. 181

Non-guarantor subsidiaries The non-guarantor subsidiaries account for approximately 11% of the revenues, approximately 9% of the gross profit and none of the net profit of the Group. Auditors The Issuer anticipates preparing financial statements starting with the year ending December 31, 2006. The consolidated financial statements of the Company and its subsidiaries as of and for the year ended December 31, 2005 and 2004 included in this Offering Memorandum have been audited by KPMG Audit Sp. z o.o., the statutory auditors of the Company, as stated in their report appearing herein. Because the Issuer was registered on October 23, 2006, no financial statements for the year ended December 31, 2005 in respect of the Issuer are available. Corporate Authorization The issue of the Notes and the execution of the Indenture and the other documents to be entered into in connection with the Offering are to be approved by the ordinary general meeting of the shareholders of the Issuer to be held on January 26, 2007 and are to be decided on January 26, 2007 by the board of directors of the Issuer in accordance with its articles of association, after having an independent appraiser appointed by the Tribunal de Commerce of Evry carry out a verification of the assets and liabilities (vérification de l’actif et du passif) in accordance with article L.228-39 of the Code of commerce. No Material Adverse Change Except as disclosed in this Offering Memorandum, there has been no material adverse change in the Issuer’s financial position or prospects since October 23, 2006 or the Company’s financial position or prospects since September 30, 2006. Litigation Except as disclosed in this Offering Memorandum, neither the Issuer, the Company nor any of the Subsidiary Guarantors is involved in, and have no knowledge of any threatened litigation, administrative proceedings or arbitration which would have a material adverse impact on its results of operations or financial condition.

182

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Złomrex S.A.

Page

Unaudited Interim Condensed Consolidated Financial Statements for the nine months ended 30 September 2006 Condensed consolidated interim income statement for the nine months ended 30 September 2006 . . . . . . Condensed consolidated interim balance sheet as at 30 September 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . Condensed consolidated interim statement of cash flows for the nine months ended 30 September 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Condensed consolidated interim statement of changes in equity for the nine months ended 30 September 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Explanatory notes to the condensed consolidated interim financial statements . . . . . . . . . . . . . . . . . . . . . . Audited Consolidated Financial Statements for years ended 31 December 2005 and 2004 Report of the Independent Auditor with respect to the Consolidated Financial Statements for the year ended 31 December 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Special Report of the Independent Auditor with respect to the Consolidated Financial Statements for the year ended 31 December 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated income statements for the years ended 31 December 2005 and 2004 . . . . . . . . . . . . . . . . . . . Consolidated balance sheets as at 31 December 2005 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidated statements of cash flows for the years ended 31 December 2005 and 2004 . . . . . . . . . . . . . . Consolidated statements of changes in equity for the years ended 31 December 2005 and 2004 . . . . . . . . Explanatory notes to the consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pro Forma Financial Information for the year ended 31 December 2005 and for the nine months ended 30 September 2006 Assurance Report on Pro Forma Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pro forma financial information as at and for the year ended 31 December 2005 . . . . . . . . . . . . . . . . . . . . Pro forma financial information as at and for the nine month period ended 30 September 2006 . . . . . . . . .

F-3 F-4 F-5 F-6 F-7

F-18 F-19 F-20 F-21 F-22 F-23 F-24

F-61 F-63 F-68 F-71

Pro Forma Income Statement for the twelve months ended 30 September 2006 . . . . . . . . . . . . . . . . . F-75 voestalpine Stahlhandel GmbH Unaudited Interim Consolidated Financial Statements for the six months ended 30 September 2006 Condensed consolidated interim income statement for the six months ended 30 September 2006 . . . . . . . F-77 Consolidated interim balance sheet as at 30 September 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-78 Consolidated interim statement of cash flow for the six months ended 30 September 2006 . . . . . . . . . . . . F-79 Consolidated interim statement of changes in equity for the six months ended 30 September 2006 . . . . . . F-80 Interim key figures as of and for the six months ended 30 September 2006 . . . . . . . . . . . . . . . . . . . . . . . . F-81 Notes to the consolidated financial statements for the six months ended 30 September 2006 . . . . . . . . . . . F-82 Audited Consolidated Financial Statements for the year ended 31 March 2006 Independent Accountant’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-90 Consolidated income statement for the years ended 31 March 2006 and 2005 . . . . . . . . . . . . . . . . . . . . . . F-91 Consolidated balance sheet as at 31 March 2006 and 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-92 Consolidated statements of cash flow for the year ended 31 March 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . F-93 Consolidated statements of change in equity for the year ended 31 March 2006 . . . . . . . . . . . . . . . . . . . . . F-94 Key figures as of and for the years ended 31 March 2006 and 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-95 Notes to the consolidated financial statements for the six months ended 31 March 2006 and 2005 . . . . . . F-96 Unaudited Summary Financial Statements for the nine months ended 30 September 2006 and the twelve months ended 31 December 2005 Consolidated summary of income statement for the nine months ended 30 September 2006 and the twelve months ended 31 December 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-113 Consolidated summary balance sheet as at 30 September 2005, 31 December 2005 and 30 September 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-114 HSW — Huta Stali Jakos´ciowych Sp. z o.o. Audited Financial Statements for the year ended 31 December 2005 Report of Independent Auditor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-117 Report supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 . . . . . . . . . . . . . . . F-119 HSW — Walcownia Blach Spółka z o.o. Audited Financial Statements for the year ended 31 December 2005 Report of Independent Auditor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-144 Report supplementing the opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 . . . . . . . . . . . . . . . . . . . . F-146 F-1

Unaudited Interim Condensed Consolidated Financial Statements for the nine months ended 30 September 2006 of Złomrex S.A.

F-2

ZŁOMREX S.A. For the nine months ended 30 September 2006 CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT in PLN thousand

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note

2006 (unaudited)

2005 (unaudited)

5

1 416 970 (1 228 584)

737 696 (671 457)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

188 386

66 239

Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2 662 (21 545) (52 763) (6 992)

1 645 (10 702) (29 709) (2 728)

Operating profit before financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

109 748

24 745

Financial income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 332 (25 219)

2 584 (16 415)

Net financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(19 887)

(13 831)

Excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired over cost . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 894

—

Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

95 755

10 914

(18 887)

(2 131)

Profit for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

76 868

8 783

Attributable to: Equity holders of the parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

75 129 1 739

7 480 1 303

Profit for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

76 868

8 783

Basic earnings per share (PLN) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.58

0.16

Diluted earnings per share (PLN) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.58

0.16

Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

The condensed consolidated interim income statement should be read in conjunction with the explanatory notes constituting part of the condensed consolidated interim financial statements F-3

ZŁOMREX S.A. As at 30 September 2006 CONDENSED CONSOLIDATED INTERIM BALANCE SHEET in PLN thousand

Note

Assets Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid perpetual usufruct of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

31 December 2005

443 671 28 668 1 978 1 787 3 173 27 104 7 768

269 011 19 953 603 3 508 2 473 11 959 10 845

Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

514 149

318 352

Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

255 780 4 476 329 361 27 576 6 874

103 632 1 976 153 798 14 623 —

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

624 067

274 029

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 138 216

592 381

Equity Issued share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

47 691 95 621 210 994

47 691 86 995 144 473

Total equity attributable to equity holders of the parent . . . . . . . . . . . .

354 306

279 159

Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34 982

15 821

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

389 288

294 980

142 793 10 407 36 314 1 614

52 653 1 432 — 606

191 128

54 691

40 958 237 187 248 2 765 2 322 988 271 577 1 755

29 141 129 194 1 320 184 1 065 708 80 793 305

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

557 800

242 710

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

748 928

297 401

Total equity and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 138 216

592 381

Liabilities Interest-bearing loans and borrowings . . . . . . . . . . . . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred government grants and other deferred income . . . . . . . . . . . .

10 11

30 September 2006 (unaudited)

7

12

Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest-bearing loans and borrowings . . . . . . . . . . . . . . . . . . . . . . . . . Other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred government grants and other deferred income . . . . . . . . . . . .

12

The condensed consolidated interim balance sheet should be read in conjunction with the explanatory notes constituting part of the condensed consolidated interim financial statements F-4

ZŁOMREX S.A. For the nine months ended 30 September 2006 CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS in PLN thousand

Note

Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment losses and valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . Foreign exchange (gains)/losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net gain on disposal of property, plant and equipment . . . . . . . . . . . . . . . . Interest and dividends, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in deferred government grants and other deferred income . . . . . . . Change in emission rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired over cost . . . . . . . . . . . . . . . . . . . . . . Other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2006 (unaudited)

2005 (unaudited)

95 755

10 914

24 279 1 298 83 512 (246) 16 882 (63 760) (63 853) 79 911 190 1 602 2 458 4 209

16 035 588 1 408 (823) (307) 11 248 (28 995) 28 186 (4 557) (954) (154) 1 094 —

(5 894) (742)

68

Cash generated from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

92 684 (16 751)

33 751 (3 096)

Net cash from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

75 933

30 655

Cash flows from investing activities Proceeds from sale of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . Interest received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in loans granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition of subsidiary, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepayment for perpetual usufruct of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition of other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

761 2 635 (402) (192 267) (20 599) (70) (6 394) (60)

876 2 334 496 (14 436) (15 653) (439) (1 314) —

Net cash from investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(216 396)

(28 136)

Cash flows from financing activities Receipt of interest-bearing loans and borrowings . . . . . . . . . . . . . . . . . . . . . . . . Receipts/(payments) in relation to derivative financial instruments . . . . . . . . . . Payment of finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

168 036 (208) (6 377) (19 852)

52 184 342 (6 711) (15 146)

Net cash from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

141 599

30 669

Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents net of bank overdraft, at 1 January . . . . . . . . . . . . . .

1 136 (14 518)

33 188 (31 117)

Cash and cash equivalents net of bank overdraft, at 30 September . . . . . . .

(13 382)

2 071

The condensed consolidated interim statement of cash flows should be read in conjunction with the explanatory notes constituting part of the condensed consolidated interim financial statements F-5

ZŁOMREX S.A. CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY Attributable to equity holders of the parent Issued Retained capital Reserves earnings Total

Minority interest

Total equity

Equity as at 1 January 2005 . . . . . . . . . . . . . . . Transfer of profit . . . . . . . . . . . . . . . . . . . . . . . . . Shares issued to the minority shareholders of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . Profit for the period . . . . . . . . . . . . . . . . . . . . . . .

47 691 —

13 829 73 166

13 965 —

277 820 —

— —

— —

— 7 480

— 7 480

291 1 303

291 8 783

Equity as at 30 September 2005 (unaudited) . .

47 691

86 995

136 649

271 335

15 559

286 894

Equity as at 1 January 2006 . . . . . . . . . . . . . . . Transfer of profit . . . . . . . . . . . . . . . . . . . . . . . . . Minority interest at subsidiaries’ acquisition date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Profit for the period . . . . . . . . . . . . . . . . . . . . . . .

47 691 —

86 995 8 608

144 473 279 159 (8 608) —

15 821 —

294 980 —

— — —

— 18 —

— — 75 129

— 18 75 129

17 422 — 1 739

17 422 18 76 868

Equity as at 30 September 2006 (unaudited) . .

47 691

95 621

210 994

354 306

34 982

389 288

in PLN thousand

202 335 263 855 (73 166) —

The condensed consolidated interim statement of changes in equity should be read in conjunction with the explanatory notes constituting part of the condensed consolidated interim financial statements F-6

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 1. Reporting entity Złomrex S.A. (the “Company”) is a company domiciled in Poland. The condensed consolidated interim financial statements of the Company as at and for the nine months ended 30 September 2006 comprise the Company and its subsidiaries (together referred to as the “Group”). The basic information about the subsidiaries, that comprise the Group as at 30 September 2006, is presented in the table below. Name of the entity

Seat of entity

Odlewnia Metali Szopienice Sp. z o.o.

Katowice, Poland

ZW — Walcownia Bruzdowa Sp. z o.o.

Zawiercie, Poland

Core activities

Manufacture of nonferrous metal alloy products Manufacture of metal products

Ownership interest and voting rights

Date of obtaining control

100.0%

31 July 2004

100.0%

13 January 2005

Gliwice, Poland

Manufacture of metal products

91.2%

19 February 2004

Poraj, Poland

Financial services

100.0%

16 September 2003

Poraj, Poland

Purchasing, packaging, reselling of paper and plastic waste for further production

100.0%

13 June 2004

Stalowa Wola, Poland Stalowa Wola, Poland

Manufacture of metal products Manufacture of metal products

100.0%

27 January 2006

100.0%

27 January 2006

Katowice, Poland

Trade in metal products

100.0%

7 March 2006

Cze˛stochowa, Poland

Financial services

51.0%

4 January 2006

Hong Kong, China

Trade in metal products

100.0%

1 March 2006

Pruszków, Poland

Purchasing and processing of iron scrap

100.0%

29 March 2006

Zawiercie, Poland

Processing of metal products and production of construction metal products

100.0%

15 May 2006

Opole, Poland

Trade in metal products

94.0%

4 July 2006

Germany

Trade in metal products

100.00%

3 August 2006

Centrostal Gdan´sk S.A.

Gdan´sk, Poland

Trade in metal products

50.44%

7 August 2006

Steelco Sp. z o.o.

Gdan´sk, Poland

Holding company

100%

7 August 2006

Ferrostal Łabe˛dy Sp. z o.o. ZŁomrex — Finans Sp. z o.o. Nowa Jakos´c´ — Organizacja Odzysku S.A. HSW Huta Stali Jakos´ciowych Sp. z o.o. HSW Walcownia Blach Sp. z o.o. Centrostal Górnos´la˛ski Sp. z o.o. Kapitał Sp. z o.o. Złomrex China Limited Złomrex Pruszków Sp. z o.o. Złomrex Zbrojarnia Sp. z o.o.

Centrostal Opole S.A. AB Stahl AG

2. Statement of compliance The condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting as adopted by the European Union. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2005. F-7

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED) 2. Statement of compliance (continued) These condensed consolidated interim financial statements were approved by the Board of Directors on 15 December 2006. 3. Significant accounting policies The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2005, prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“EU IFRS”) 4. Estimates The preparation of interim financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, equity and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances and the results of which form a basis for professional judgment on carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those applicable to the consolidated financial statements as at and for the year ended 31 December 2005. 5. Segment reporting The Group comprises the following main business segments: 1

Scrap Metal — this segment includes the buying, processing, refining and selling of scrap metal to the Group´s customers.

2

Semi-Finished Products — this segment includes the buying and processing of scrap metal into steel billets and the sale of these steel billets to the Group´s customers.

3

Finished Products — this segment includes (i) the buying and processing of scrap metal into billets which are in turn processed into finished products and sold to the Group´s customers, (ii) the buying of steel billets from third parties and processing them into finished products and selling them to the Group´s customers and (iii) the buying of finished products and the sale of those products to the Group´s customers.

4

Other — this includes among others (i) the buying of non-ferrous scrap and selling it to the Group’s customers, (ii) the processing of non-ferrous scrap into finished products and the sale of those non-ferrous products to the Group´s customers, (iii) the buying and selling of non-ferrous products and (iv) recycling materials, including plastic foils, paper and other products.

F-8

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED) 5. Segment reporting (continued) For the nine months ended 30 September Scrap Metal 2006 2005

Revenue from external customers . . . . . . . . . . . Segment result . . . . . . . . . . . . . . . . . . . . . . . . . .

168 467 11 044

136 854 8 352

Semi-Finished Products 2006 2005

220 692 11 986

180 242 14 224

Finished Products 2006 2005

765 161 87 556

292 353 3 458

Other 2006

2005

262 650 25 446

128 247 10 583

Consolidated 2006 2005

1 416 970 136 032

737 696 36 617

Unallocated income/expense . . . . . . . . . . . . . . .

(26 248)

(11 872)

Operating profit before financing costs . . . . . . .

109 748

24 745

F-9

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED) 6. Seasonality of operations The Group’s Finished Products segment is subject to slight seasonal fluctuations as a result of weather conditions. In particular, the sales to construction companies are impacted negatively by winter weather conditions, which occur primarily from November to February. For the 12 months ended 30 September 2006 the Group generated revenue of PLN 1 655 510 thousand (12 months ended 30 September 2005: PLN 1 031 521 thousand). 7. Assets held for sale The prepaid perpetual usufruct of land and buildings of Centrostal Górnos´la˛ski Sp. z o.o (previously Przedsie˛biorstwo Pan´stwowe Centrostal Górnos´la˛ski) acquired in a business combination during March 2006 as well as land, buildings and machines of Centrostal Gdan´sk S.A. located in Kwidzyn´ are presented as assets held for sale following the commitment of the Group’s management to a plan to sell these facilities. Efforts to sell these assets have commenced and a sale is expected within one year from the acquisition. 8. Acquisitions of subsidiaries Acquisition of HSW Huta Stali Jakos´ciowych Sp. z o.o. and HSW Walcownia Blach Sp. z o.o. On 27 January 2006, the Group acquired 100% of the shares in HSW Huta Stali Jakos´ciowych Sp. z o.o. and HSW Walcownia Blach Sp. z o.o. for PLN 193 000 thousand, including PLN 130 000 thousand paid in cash on acquisition and PLN 63 000 thousand payable in cash with deferred payment terms i.e. in instalments from January 2006 to January 2011. The fair value of this consideration was estimated at the acquisition date at PLN 185 710 thousand (including the tax impact of PLN 1 710 thousand). Legal and other fees directly related to the acquisition amounted to PLN 1 853 thousand. The business acquired comprises manufacturing and processing of high quality metal products. The acquisition covered two separate legal entities which were acquired within the scope of the same transaction. The effect of the acquisition was accounted for as related businesses. For the period from the acquisition date to 30 September 2006, the subsidiaries contributed a net profit of PLN 26 714 thousand to the consolidated net result for the period ended 30 September 2006. The acquisition described in the preceding paragraph had the following effect on the Group’s assets and liabilities. Recognised values

Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest-bearing loans and borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net identifiable assets and liabilities (100% of net assets acquired) . . . . . . . Total fair value of consideration* including: . . . . . . . . . . . . . . . . . . . . . . . . .

126 173 9 748 543 3 810 37 761 65 721 4 933 (2 196) (9 939) (1 081) (47 910) 187 563 187 563

Consideration paid, satisfied in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consideration payable in the next periods . . . . . . . . . . . . . . . . . . . . . . . . . . .

139 803 47 760

Cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash outflow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * Include legal fees and other fees amounting to PLN 1 853 thousand. F-10

(4 933) 134 870

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED) 8. Acquisitions of subsidiaries (continued) As a result of the acquisition, the Group recognised PLN 1 252 thousand as an intangible asset related to major customer contracts and the related customer relationship. Acquisition of Przedsie˛biorstwo Pan´stwowe Centrostal Górnos´la˛ski On 7 March 2006, the Group acquired all of the shares in Centrostal Górnos´la˛ski Sp. z o.o. for PLN 56,000 thousand satisfied in cash. Legal and other fees directly related to the acquisition amounted to PLN 422 thousand. The acquired company’s activities comprise trade in metal products. For the period since the acquisition date to 30 September 2006, the subsidiary contributed a net profit of PLN 2 309 thousand to the consolidated net result for the period ended 30 September 2006. The acquisition described in the preceding paragraph had the following effect on the Group’s assets and liabilities. Recognised values

Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net identifiable assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25 069 59 55 28 899 18 238 9 198 (25 519) 55 999

% of net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100%

Goodwill on acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

423

Consideration paid, satisfied in cash* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

56 422

Cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9 198)

Net cash outflow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

47 224

* Include legal fees and other fees amounting to PLN 422 thousand. Acquisition of Centrostal Opole S.A. Following a series of transactions, the Group obtained control of Centrostal Opole S.A. with a shareholding of 94.0%. The value of the transactions amounted to PLN 2 920 thousand. The company’s activities comprise trade in metal products. For the period since the acquisition date to 30 September 2006, the subsidiary contributed a net profit of PLN 968 thousand to the consolidated net result for the period ended 30 September 2006.

F-11

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED) 8. Acquisitions of subsidiaries (continued) The acquisition described in the preceding paragraph had the following effect on the Group’s assets and liabilities. Recognised values

Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 138 1 719 839 56 (3 270) (1 102)

Net identifiable assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 380

% of net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

93.96%

Net identifiable assets and liabilities acquired . . . . . . . . . . . . . . . . . . . . . . . .

3 177

Excess of the interest in the net fair value of identifiable assets and liabilities over cost of acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

257

Consideration paid, satisfied in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2 920

Cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash outflow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(56) 2 864

As the statutory financial statements of HSW Huta Stali Jakos´ciowych Sp. z o.o., HSW Walcownia Blach Sp. z o.o., Przedsie˛biorstwo Pan´stwowe Centrostal Górnos´la˛ski and Centrostal Opole S.A. were not prepared in accordance with EU IFRS, it was impracticable to determine the carrying amounts of the assets and liabilities of those companies immediately prior to the acquisition in accordance with EU IFRS. Acquisition of Centrostal Gdan´sk S.A. On 7 August 2006, following a series of shares acquisitions (50.44% in total), the Group obtained control of Centrostal Gdan´sk S.A. The value of the transactions amounted to PLN 11 526 thousand satisfied in cash. Legal and other fees directly related to the acquisition amounted to PLN 68 thousand. The acquired company activities comprise trade in metal products. For the period since the acquisition date to 30 September 2006, the subsidiary contributed a net profit of PLN 916 thousand to the consolidated net result for the period ended 30 September 2006.

F-12

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED) 8. Acquisitions of subsidiaries (continued) The acquisition described in the preceding paragraph had the following effect on the Group’s assets and liabilities. Pre-acquisition carrying amounts

Fair value adjustments

Recognised values

Property, plant and equipment . . . . . . . . Intangible assets . . . . . . . . . . . . . . . . . . . Investment property . . . . . . . . . . . . . . . . Other investment . . . . . . . . . . . . . . . . . . Other receivables . . . . . . . . . . . . . . . . . . Prepaid perpetual legal rights . . . . . . . . . Deferred tax asset . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . Assets held for sale . . . . . . . . . . . . . . . . Interest bearing payables . . . . . . . . . . . . Deferred tax provision . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . .

14 268 998 497 81 2 095 905 390 19 932 25 953 3 713 795 (21 208) (274) (15) (23 235)

5 241 — — — 194 5 075 — 927 — — — — (2 170) — —

19 509 998 497 81 2 289 5 980 390 20 859 25 953 3 713 795 (21 208) (2 444) (15) (23 235)

Net identifiable assets and liabilities . . .

24 895

9 267

34 162

% of net assets acquired . . . . . . . . . . . . .

50.4%

Net identifiable assets and liabilities acquired . . . . . . . . . . . . . . . . . . . . . . .

12 547

17 231

Excess of the interest in the net fair value of identifiable assets and liabilities over cost of acquisition . . .

5 637

Consideration paid in cash* . . . . . . . . . .

11 594

Cash acquired . . . . . . . . . . . . . . . . . . . . .

(3 713)

Net cash outflow . . . . . . . . . . . . . . . . . .

7 881

* Includes legal fees and other fees amounting to PLN 68 thousand. Other acquisitions During January 2006, the Group acquired 51% of the shares in Kapitał Sp. z o.o. for PLN 401 thousand satisfied in cash. The company’s activities include mainly financial and advisory services. As a result of the acquisition, goodwill of PLN 96 thousand was recognised. For the period from the acquisition date to 30 September 2006 the subsidiary contributed a net profit of PLN 181 thousand to the consolidated net result for the period ended 30 September 2006. During March 2006, the Group established Złomrex China Limited by contribution in cash of PLN 1 thousand for 100% of the shares in this entity. The scope of activity of Złomrex China Limited includes trade in metal products. For the period since incorporation to 30 September 2006 the subsidiary contributed a net loss of PLN 1 269 thousand to the consolidated net result for the period ended 30 September 2006. During March 2006, the Group established ZŁomrex — Pruszków Sp. z o.o. by contribution in cash of PLN 50 thousand for 100% of the shares in this entity. The scope of activity of Złomrex — Pruszków Sp. z o.o. includes purchasing and processing of iron scrap. Till the end of September 2006 the entity had not started its operating activity. During May 2006, the Group established Złomrex Zbrojarnia Sp. z o.o. by contribution in cash of PLN 50 thousand for 100% of shares in this entity. The scope of activity of Złomrex Zbrojarnia Sp. z o.o. includes F-13

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED) 8. Acquisitions of subsidiaries (continued) processing of metal products and production of construction metal products. For the period since incorporation to 30 September 2006 the subsidiary incurred a net loss of PLN 228 thousand. If all of the above presented acquisitions had occurred on 1 January 2006, the management estimates that the consolidated revenue would have been PLN 1 536 403 thousand and the consolidated profit for the nine months ended 30 September 2006 would have been PLN 70 635 thousand. 9. Income tax expense The Group’s consolidated effective tax rate for the nine months ended 30 September 2006 was 19.6% (for the nine months ended 30 September 2005: 19.5%). 10. Property, plant and equipment Acquisitions and disposals During the nine months ended 30 September 2006, the Group acquired property, plant and equipment at a cost of PLN 208 833 thousand (nine months ended 30 September 2005: PLN 22 935 thousand), including property, plant and equipment acquired through business combinations (see note 8) of PLN 176 903 thousand (nine months ended 30 September 2005: PLN 1 003 thousand). Assets with a net book value of PLN 515 thousand were disposed of during the nine months ended 30 September 2006 (nine months ended 30 September 2005: PLN 569 thousand), resulting in a gain on disposal of PLN 246 thousand (nine months ended 30 September 2005: gain of PLN 307 thousand). Capital commitments The capital commitments, resulting from the contracts signed as at 30 September 2006, were related mainly to the modernisation of the steelworks equipment and the implementation of a uniform computer system within the Group. With respect to these contracts, as at 30 September 2006 the Group is committed to incur capital expenditures of PLN 11 519 thousand (30 September 2005: PLN 3 546 thousand). These commitments are expected to be settled in the following year. 11. Goodwill The Group performed its annual impairment testing of goodwill at the end of 2005. As a result of this testing the recoverable amount of all cash generating units exceeded the carrying amount of the units including goodwill. The following business segments have significant carrying amounts of goodwill: Nine months ended 30 September 2006 2005

Scrap metal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Semi-Finished Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finished Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8 488 887 5 175

8 488 887 4 751

14 550

14 126

Other units without significant goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

96

—

Total goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14 646

14 126

During the nine months ended 30 September 2006 the Company recognised goodwill of PLN 423 thousand resulted from the acquisition of Przedsie˛biorstwo Pan´stwowe Centrostal Górnos´la˛ski S.A. (allocated to finished products unit) and PLN 96 thousand resulted from the acquisition of Kapitał Sp. z o.o. The Group has not made a detailed impairment calculation as at 30 September 2006 due to the lack of indications of impairment since the end of 2005, when the last annual impairment testing of goodwill was performed. F-14

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED) 12. Interest-bearing loans and borrowings The increase in interest bearing borrowings is mainly a result of a new loan of PLN 120 000 thousand drawn at the beginning of 2006 to finance the acquisition of HSW Huta Stali Jakos´ciowych Sp. z o.o. and HSW Walcownia Blach Sp. z o.o. According to the aforementioned loan agreement, Złomrex S.A. is obliged to meet certain financial covenants until the loan repayment date. In a case of non-compliance, the lenders (Bank Handlowy w Warszawie S.A., Bank Polska Kasa Opieki S.A. and Bank BPH S.A.) (“the Banks”) may request immediate repayment of the loan. As at 30 September 2006 and for the period ended 30 September 2006, some of these covenants were not met. However, based on the representation obtained from the Banks by the Management of the Company, the lenders waived their rights to request immediate repayment of the loan. 13. Contingencies, guarantees and other commitments Commitments resulting from the share acquisition agreements Based on the agreements for the share acquisition in HSW Huta Stali Jakos´ciowych Sp. z o.o. and HSW Walcownia Blach Sp. z o.o. the Company is obliged to make capital expenditures of PLN 55 960 thousand until 31 December 2008. If the Company does not fulfil its commitments, it will be subject to a penalty amounting to 100% of the difference between the actual expenditures and the value of the commitment. The Company is also obliged to continue the activities of the acquired entities without admitting to the liquidation or sale of the entities for 5 years, subject to the stipulated penalty of PLN 40 000 thousand, as well as not to decrease the share capital subject to the stipulated penalty amounting to 100% of such decrease. Other Š Bill of exchange guarantee in favour of Huta Łabe˛dy S.A. up to PLN 2.1 million. Š Contractual commitment to purchase advisory services of PLN 520 thousand from “Prymko”

Krzysztof Walarowski in future periods. Š Employee claims for benefits of PLN 70 thousand.

14. Related parties Transactions and balances with companies controlled by the parent Company’s Management Board members Transaction value for nine months ended 30 September 2006 30 September 2005

Balance outstanding 30 September 2006 31 December 2005

PRYMKO Krzysztof Walarowski Purchased services . . . . . . . . . . . . Trade and other payables . . . . . . .

296 —

503 —

— —

— 24

Przedsie˛biorstwo Wiedza i Praca Sales of goods and services . . . . . Interest on loans granted . . . . . . . Purchased services . . . . . . . . . . . . Loans granted . . . . . . . . . . . . . . . . Trade and other receivables . . . . .

27 181 1 560 — —

13 238 2 241 — —

— — — 4 746 14

— — — 3 776 130

Armaton Polska Sp. z o.o. Sales of services . . . . . . . . . . . . . . Interest on loans granted . . . . . . . Loans granted . . . . . . . . . . . . . . . . Trade and other receivables . . . . .

1 35 — —

10 62 — —

* net of impairment loss amounting to PLN 328 thousand

F-15

— — 384* —

— — 535* 1

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONTINUED) 14. Related parties (continued) Transactions with the members of the Management and Supervisory Boards The remuneration of the Management and Supervisory Boards members was as follows: Nine months ended 30 September 30 September 2006 2005

Management Board of the parent Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supervisory Board of the parent Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management Boards of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supervisory Boards of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 012 239 2 756* 134*

2 268 249 1 121 69

6 141

3 707

* The remuneration relates to the period from obtaining control of subsidiaries. Additionally, one of the parent Company’s Management Board members is entitled to an annual bonus amounting to 1% of the Group’s consolidated net profit, towards which a provision of PLN 500 thousand was recognised in the income statement. 15. Subsequent events On 17 October 2006, the Extraordinary Shareholders’ Meeting of Złomrex S.A. resolved to transfer PLN 20,000 thousand from reserve capital to reserve capital for dividend payment. During October 2006, the Group established Złomrex Finance International, with its seat in France, by contribution in cash of PLN 893 thousand for 100% of the shares in this entity. On 13 December 2006, the Supervisory Board of Złomrex S.A. made decision on payment of an interim dividend for 2006 of PLN 10 000 thousand.

F-16

Audited Consolidated Financial Statements for years ended 31 December 2005 and 2004 of Złomrex S.A.

F-17

ZŁOMREX S.A. Report of the Independent Auditor to the shareholders of Złomrex S.A. We have audited the accompanying consolidated balance sheet of Złomrex S.A. (“the Company”) and its subsidiaries (“the Group”) as of 31 December 2005 and the related consolidated income statement, consolidated statement of changes in the shareholders’ equity and consolidated statement of cash flows for the year then ended. These consolidated financial statements are responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. Except as described in the following paragraph, we conducted our audit in accordance with International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. We did not observe the counting of the physical inventories as of 31 December 2005, because that date was prior to the time we were engaged as auditors for the Group. We were unable to satisfy ourselves as to inventory quantities or condition as at 31 December 2005 by other audit procedures. Accordingly, we were not able to determine whether any adjustments might be necessary to the amounts shown in the consolidated financial statements as at and for the year ended 31 December 2005 for inventories, cost of sales, income taxes, net earnings and retained earnings. In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary to inventories, cost of sales, income taxes, net earnings and retained earnings, shown in the consolidated financial statements as of 31 December 2005 and for the year then ended, had we been able to satisfy ourselves as to physical inventory quantities or condition as at 31 December 2005, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of 31 December 2005, the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.

KPMG Audyt Sp. z o.o. Warsaw, Poland 17 November 2006

F-18

ZŁOMREX S.A. Special Purpose Report of the Independent Auditor on the Consolidated Transitional IFRS Financial Statements To the Management Board of Złomrex S.A. We have audited the accompanying consolidated transitional IFRS balance sheet of Złomrex S.A. (“the Company”) and its subsidiaries (“the Group”) as of 31 December 2004, the related consolidated transitional IFRS statements of income, changes in equity and cash flows for the year then ended (“the consolidated transitional IFRS financial statements”). These consolidated transitional IFRS financial statements are the responsibility of the Company's management. They have been prepared as part of the Company’s conversion to International Financial Reporting Standards as adopted by the European Union (“EU IFRSs”). Our responsibility is to express an opinion on these consolidated transitional IFRS financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated transitional IFRS financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated transitional IFRS financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated transitional IFRS financial statements. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the accompanying consolidated transitional IFRS financial statements as at 31 December 2004 have been prepared, in all material respects, in accordance with the basis set out in Note 1 and Note 30, which describes how EU IFRSs have been applied under IFRS 1, including the assumptions management has made about the standards and interpretations effective and the policies adopted, when management prepares its first complete set of IFRS financial statements as at 31 December 2005. Without qualifying our opinion, we draw attention to the fact that the Company has prepared the consolidated transitional IFRS financial statements as at 31 December 2004 to establish the financial position, results of operations and cash flows of the Group necessary to provide the comparative financial information to be included in the Group's first complete set of IFRS financial statements as at 31 December 2005. The consolidated transitional IFRS financial statements do not themselves include comparative financial information for the prior period.

KPMG Audyt Sp. z o.o. Warsaw, Poland 17 November 2006

F-19

ZŁOMREX S.A. For the years ended 31 December 2005 and 2004 CONSOLIDATED INCOME STATEMENTS in PLN thousand

Note

2005

2004

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

976 236 (880 748)

1 194 898 (1 019 468)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

95 488

175 430

3 531 (15 691) (40 598) (4 725)

2 772 (22 083) (36 866) (2 861)

Operating profit before financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

38 005

116 392

Financial income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 815 (20 852)

8 761 (17 647)

(17 037)

(8 886)

Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

5

Net financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

Excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired over cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8

—

101 036

20 968

208 542

(4 098)

(3 659)

Profit for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16 870

204 883

Attributable to: Equity holders of the parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15 304 1 566

201 963 2 920

Profit for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16 870

204 883

Basic earnings per share (PLN) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19

0.32

4.23

Diluted earnings per share (PLN) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19

0.32

4.23

The consolidated income statements should be read in conjunction with the explanatory notes constituting part of the consolidated financial statements F-20

ZŁOMREX S.A. As at 31 December 2005 and 2004 CONSOLIDATED BALANCE SHEETS in PLN thousand

Note

2005

2004

10 11 12 13

269 011 19 953 603 3 508 2 473 11 959 10 845

258 188 15 040 603 3 800 1 778 10 364 13 687

318 352

303 460

103 632 1 976 153 798 14 623

112 465 1 361 149 267 4 442

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

274 029

267 535

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

592 381

570 995

47 691 86 995 144 473

47 691 13 829 202 335

Total equity attributable to equity holders of the parent . . . . . . . . . . . . . . . . .

279 159

263 855

Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15 821

13 965

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

294 980

277 820

52 653 1 432 — 606

63 033 1 616 14 265

54 691

64 928

29 141 129 194 1 320 184 1 065 708 80 793 305

35 559 90 711 — 358 4 320 954 96 275 70

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

242 710

228 247

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

297 401

293 175

Total equity and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

592 381

570 995

Assets Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid perpetual usufruct of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Equity Issued share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liabilities Interest-bearing loans and borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred government grants and other deferred income . . . . . . . . . . . . . . . . .

15 13 16 17

18

20 21

Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest-bearing loans and borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred government grants and other deferred income . . . . . . . . . . . . . . . . .

20 21 9 22 23

The consolidated balance sheets should be read in conjunction with the explanatory notes constituting part of the consolidated financial statements F-21

ZŁOMREX S.A. For the years ended 31 December 2005 and 2004 CONSOLIDATED STATEMENTS OF CASH FLOWS in PLN thousand

Note

2005

2004

20 968

208 542

10 11

21 306 806 1 453 (1 094) (337) 14 108 (1 865) 22 378 (17 849) (246) (358) 576

18 648 691 11 044 (3 624) (174) 11 162 (8 272) (67 914) (66 075) 954 (522) 335

3

— (701)

(101 036) (1 673)

59 145 (4 500)

2 086 (14 494)

Net cash from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

54 645

(12 408)

Cash flows from investing activities Proceeds from sale of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . Interest received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repayment of loans granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition of subsidiary, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisition of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid perpetual legal rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest-bearing loans granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

873 3 406 1 258 (20 409) (18 283) (1 820) (1 371) (403)

282 3 040 16 069 (60) (10 023) (67) (124) (3 100)

(36 749)

6 017

23 716 2 354 (8 538) (18 829)

3 749 1 035 (7 944) (12 528)

Net cash from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1 297)

(15 688)

Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents net of bank overdraft, at 1 January . . . . . . . . . . . . . . . .

16 599 (31 117)

(22 079) (9 038)

(14 518)

(31 117)

Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment losses and valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . Foreign exchange gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net gain on disposal of property, plant and equipment . . . . . . . . . . . . . . . . . Interest and dividends, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in deferred government grants and other deferred income . . . . . . . . Excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired over cost . . . . . . . . . . . . . . . . . . . . . . . . Other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash generated from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8

3 10 11

Net cash from investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash flows from financing activities Receipt of interest-bearing loans and borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from derivative financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . Payment of finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash and cash equivalents net of bank overdraft, at 31 December . . . . . . . . .

20 20

17

The consolidated statements of cash flows should be read in conjunction with the explanatory notes constituting part of the consolidated financial statements F-22

ZŁOMREX S.A. For the years ended 31 December 2005 and 2004 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

in PLN thousand

Attributable to equity holders of the parent Issued share Retained capital Reserves earnings Total

Equity as at 1 January 2004 . . . . . . . . . .

47 691

338

Transfer of profit . . . . . . . . . . . . . . . . . . . . Minority interest at the subsidiaries’ acquisition date . . . . . . . . . . . . . . . . . . . . Net profit for the period . . . . . . . . . . . . . . .

—

13 491

— —

— —

Equity as at 31 December 2004 . . . . . . . .

47 691

Transfer of profit . . . . . . . . . . . . . . . . . . . .

13 863

Minority interest

Total equity

61 892

—

61 892

—

—

—

— — 201 963 201 963

11 045 2 920

11 045 204 883

13 829

202 335

263 855

13 965

277 820

—

73 166

(73 166)

—

—

—

Shares issued to the minority shareholders of subsidiaries . . . . . . . . . . . . . . . . . . . . . Net profit for the period . . . . . . . . . . . . . . .

— —

— —

— 15 304

— 15 304

290 1 566

290 16 870

Equity as at 31 December 2005 . . . . . . . .

47 691

86 995

144 473

279 159

15 821

294 980

(13 491)

The consolidated statements of changes in equity should be read in conjunction with the explanatory notes constituting part of the consolidated financial statements F-23

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Group overview and description of the significant accounting policies a) Background Złomrex S.A. (“Złomrex”, “the Company”, “the parent Company”) with its seat in Poraj, Poland, is the parent Company of the Group. The Company was established as a result of the transformation of a limited liability company Złomrex Sp. z o.o. into a joint-stock company Złomrex S.A. on 29 June 2004. The Company is the largest supplier of scrap metal and one of the major producers of finished steel products in Poland with fully integrated operations spanning the entire steel production process. The Company’s activities include primarily: providing of scrap with the most extensive network of scrap metal branches, processing of scrap metal into steel billets and non-ferrous scrap into finished goods, and production of highquality finished steel products. The consolidated financial statements as at and for the year ended 31 December 2005 comprise the parent Company and its subsidiaries (“the Group”). The basic information about the subsidiaries, that comprise the Group as at 31 December 2005, is presented in the table below. Name of the entity

Seat of entity

Odlewnia Metali Szopienice Sp. z o.o.

Katowice, Poland

ZW — Walcownia Bruzdowa Sp. z o.o.

Zawiercie, Poland

Ferrostal Łabe˛dy Sp. z o.o. Złomrex — Finans Sp. z o.o. Nowa Jakos´c´ — Organizacja Odzysku S.A.

Core activities

Manufacture of nonferrous metal alloy products Manufacture of metal products

Ownership interest and voting rights

Date of obtaining control

100.0%

31 July 2004

100.0%

13 January 2005

Gliwice, Poland

Manufacture of metal products

91.2%

19 February 2004

Poraj, Poland

Financial services

100.0%

16 September 2003

Poraj, Poland

Purchasing, packaging, reselling of paper and plastic waste for further production

100.0%

13 June 2004

b) Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS EU”). These consolidated financial statements were approved by the Board of Directors on 17 November 2006. These financial statements are the first financial statements of the Group which are prepared in accordance with IFRS EU and to the preparation of which IFRS 1 First-time Adoption of IFRS (“IFRS 1”) was applied. An explanation of changes resulting from the first-time adoption of IFRS EU and a description of restatements of comparative periods is presented in Note 30. IFRS EU contain all International Accounting Standards, International Financial Reporting Standards as well as related Interpretations except for the below listed Standards and Interpretations which are awaiting approval of the European Union as well as those Standards and Interpretations which have been approved by the European Union but are not yet effective. The Group did not use the option of early adopting of new Standards and Interpretations which have been published and approved by the European Union and which will come into effect after the balance sheet date. Moreover, at the balance sheet date the Group had not completed the process of assessing the impact of the new standards and interpretations, which will come into effect after the balance sheet date, on the consolidated financial statements of the Group for the period in which they will be applied for the first time.

F-24

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1. Group overview and description of the significant accounting policies (continued) Standards and Interpretations

Effective date

Amendments to IAS 39 Financial instruments: Recognition and Measurement and to IFRS 4 Financial guarantee contracts.

1 January 2006

The amendment requires that the financial guarantees that are not insurance contracts be measured at fair value in the moment of their initial recognition. Amendments to IAS 19 Employee Benefits — Actuarial Gains and Losses, Group Plan and Disclosures (including the resulting amendments to IAS 1, IAS 24 and IFRS 1).

1 January 2006

The amendment includes an option for actuarial gains and losses to be recognized in full in equity as they arise. Financial Instruments: Recognition and Measurement — Cash Flow Hedge Accounting of Forecast Intragroup Transactions.

1 January 2006

The amendment allows the currency risk related to highly probable intragroup transaction to qualify as a hedge item provided that certain criteria are met. Amendment to IAS 39 Financial instruments: Recognition and Measurement: — Measurement at fair value (including the resulting amendments to IAS 32 and IFRS 1).

1 January 2006

The amendment restricts classification of financial instruments as valued “at fair value through profit and loss account”. Amendment to IAS 1 Equity Disclosures.

1 January 2006

As a result of the amendment to IFRS 7 (see below), the Standard will introduce extended disclosure in relation to the Group’s equity. Amendment to IAS 21 The Effects of Changes in Foreign Exchange — Net investment in a Foreign Operation.

1 January 2006

The interpretation clarifies in which circumstances a loan may be recognized as part of net investment in a foreign operation and in which currency this loan should be denominated. IFRIC 4 Determining whether an Arrangement contains a Lease (including the amendments to IFRS 1).

1 January 2006

The interpretation requires the recognition of certain agreements as a lease even if they are not legally classified as a lease. IFRIC 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds (including the resulting amendments to IAS39).

1 January 2006

IFRIC 8 Scope of IFRS 2

1 May 2006*

The interpretation clarifies that IFRS 2 Share-based payments applies to transactions where an entity makes share-based payments and in return receives inadequate low or nil consideration. IFRIC 9 Reassessment of Embedded Derivatives

1 June 2006 *

The interpretation clarifies that the embedded derivatives are accounted for when an entity becomes a party to the contract and that subsequent reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash flows resulting from the contract. IFRS 7 Financial Instruments: Disclosures

1 January 2007

The standard requires extended disclosure of information with regard to the financial instruments of the Group. It replaces IAS 30 “Disclosures in the Financial Statements of Banks and Similar Financial Institutions” and refers to all entities preparing their financial statements in accordance with IFRS.

F-25

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1. Group overview and description of the significant accounting policies (continued) Standards and Interpretations

Effective date

IFRIC 10 Interim Financial Reporting and Impairment The interpretation prohibits the reversal of an impairment loss recognised in a previous interim period in respect of goodwill, an investment in an equity instrument or a financial asset measured at cost.

1 November 2006*

IFRIC 11 IFRS 2 — Group and Treasury Share Transactions The interpretation clarifies that share based payment transactions in which an entity receives services as consideration for its own equity instruments shall be accounted for as equity settled. The interpretation clarifies also the accounting for share based payments arrangements that involve two or more entities within the same Group.

1 March 2007*

* Not yet endorsed by the EU c) Basis of preparation of the consolidated financial statements The financial statements are presented in Polish zloty, being the functional currency and presentation currency of the parent Company, rounded to the nearest thousand, unless otherwise stated. The financial statements have been prepared on the historical cost basis with the exception of financial instruments classified as available for sale, financial instruments measured at fair value through profit or loss and some property, plant and equipment valued at deemed cost. The preparation of financial statements in conformity with IFRS EU requires that the Management Board of the parent Company makes judgments, estimates and assumptions that affect the application of policies and reported amounts of assets, equity and liabilities, income and expenses with respect to the Group. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances and the results of which form a basis for professional judgment on carrying values of assets and liabilities that are not readily apparent from other sources. The actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Professional judgments and estimates made by the Management Board of the parent Company while applying IFRS EU that have a significant effect on the financial statements are discussed in note 29. The accounting principles set out below have been applied consistently to all periods presented in the financial statements and in preparation of the IFRS EU opening balances as at 1 January 2004 for the purpose of transition to IFRS EU. d) Basis of consolidation (i) Subsidiaries Subsidiaries are entities controlled by the parent Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. (ii) Associates Associates are those entities for which the Group has significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the Group’s share of the total recognized gains and losses of associates on an equity accounted basis, from the date that significant influence commences until the date that F-26

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1. Group overview and description of the significant accounting policies (continued) significant influence ceases. When the Group’s share of losses exceeds its interest in an associate, the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of an associate. (iii) Transactions eliminated on consolidation Intragroup balances, and any unrealized gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with associates are eliminated to the extent of the Group’s interest in the entity. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment. e) Foreign currencies Transactions in foreign currencies are translated into Polish zloty at the foreign exchange rate ruling at the date of the transaction: Š applied by the bank whose services the entity uses — in case of foreign currency purchase or sale

transactions; Š average National Bank of Poland (“NBP”) rate, unless another exchange rate was established in

customs or other binding documents — for other transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into the Polish currency at an average NBP rate at that date. Foreign exchange differences arising on translation are recognized in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using NBP average exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to the Polish zloty at the NBP average exchange rate ruling at the date the fair value was determined. f) Property, plant and equipment (i) Owned assets Items of property, plant and equipment are stated at cost or deemed cost less accumulated depreciation and impairment losses. The cost includes the purchase price of the assets (i.e. the amount due to a seller less deductible VAT and excise tax), taxes and charges (in case of import) and costs directly related to the purchase and completion of the asset, so that it can be available for use, including the transport, loading, unloading and storing costs. Rebates, discounts and other similar reductions decrease the cost. The construction cost of property, plant and equipment or assets under construction includes total cost incurred by the entity in the period of their construction, assembly, adjustment and modernization till the date of their transfer to use (or up to the balance sheet date, if the asset was not transferred to use before this date), including non-deductible VAT and excise tax. The construction cost also includes preliminary estimates of the cost of dismantling and removing the components of tangible fixed assets and the restoration cost. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. (ii) Subsequent expenditures The Group recognizes in the carrying amount of an item of property, plant and equipment, the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the Group and the cost can be measured reliably. All other expenditures are recognized in the income statement as an expense as incurred.

F-27

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1. Group overview and description of the significant accounting policies (continued) (iii) Depreciation Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of each component of property, plant and equipment, considering residual values. Land is not depreciated. The estimated useful lives are as follows: Š Š Š Š

Buildings Machinery and equipment Vehicles Fixtures and fittings

from 10 to 40 years from 2 to 28 years from 5 to 22 years from 1 to 3 years

The useful lives, depreciation methods and residual values are reassessed annually. g) Intangible assets (i) Goodwill All business combinations, excluding the businesses which are under common control, are accounted for by applying the purchase method. In respect of business acquisitions that have occurred after 1 January 2004, goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. In respect of acquisitions prior to this date, goodwill represents the amount recorded under previous GAAP. The classification and accounting treatment of business combinations that occurred prior to 1 January 2004 has not been reconsidered in preparing the Group’s opening IFRS balance sheet at 1 January 2004 (see note 30). Subsequent to initial recognition, goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is no longer amortized but is tested annually for impairment (see point l Impairment, below). In respect of associates, the carrying amount of goodwill is included in the carrying amount of the investment in the associate. The excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities over cost arising on an acquisition is recognized directly in profit or loss. (ii) Research and development Expenditures on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in the income statement as an expense as incurred. Expenditures on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, are capitalized if the product or process is technically feasible, economically justified and the Group has sufficient resources to complete development. The capitalized expenditures include: the cost of materials, direct labour and an appropriate proportion of overheads. Other development expenditures are recognized in the income statement as incurred. Capitalized development expenditures are recognized as intangible assets at cost less accumulated amortization (see below) and impairment losses (see point l below). (iii) Emission rights Emission rights received from the government are measured at cost less impairment losses (see point l below). The cost in case of emission rights which were acquired in a business combination is their fair value. The liability arising in an emission rights scheme from producing pollution are measured based on the carrying amount of allowances held to the extent that the Group holds sufficient allowances to satisfy its current obligations. (iv) Other intangible assets Other intangible assets that are acquired by the Group are stated at cost less accumulated amortization (see below) and impairment losses (see point l below). Expenditures on internally generated goodwill and brands are recognized in the income statement as expense as incurred. F-28

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1. Group overview and description of the significant accounting policies (continued) (v) Subsequent expenditures Subsequent expenditures on capitalized intangible assets are capitalized only when they increase the future economic benefits embodied in the specific asset to which it relates. All other expenditures are recognized in the income statement as incurred. (vi) Amortization Amortization is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Goodwill and intangible assets with an indefinite useful life are systematically tested for impairment at each balance sheet date. Other intangible assets are amortized from the date they are available for use. The estimated useful lives are as follows: Š Capitalized development costs Š Other

5 years 2 years

h) Investments (i) Investment in debt and equity instruments Financial instruments held for trading are classified as financial instruments at fair value through the profit or loss. Any resultant gains and losses are recognized in the income statement. Where the Group has the positive intent and ability to hold bonds to maturity, they are stated at amortized cost less impairment losses (see point l below). (ii) Investment property Investment properties are properties which are held either to earn rental income or for capital appreciation or for both. Investment properties are stated at fair value. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. Any gain or loss arising from a change in fair value is recognised in the income statement. Rental income from investment property is accounted for as described in accounting policies. When an item of property, plant and equipment is transferred to investment property following a change in its use, any differences arising at the date of transfer between the carrying amount of the item immediately prior to transfer and its fair value is recognised directly in equity if it is a gain. Upon disposal of the item the gain is transferred to retained earnings. Any loss arising in this manner is recognised immediately in the income statement. If an investment property becomes owner-occupied, it is reclassified as property, fixtures and fittings and its fair value at the date of reclassification becomes its cost for accounting purposes of subsequent recording. When the Group begins to redevelop an existing investment property for continued future use as investment property, the property remains an investment property, which is measured based on the fair value model, and is not reclassified as property, plant and equipment during the redevelopment. A property interest under an operating lease is classified and accounted for as an investment property on a property-by-property basis when the Group holds it to earn rentals or for capital appreciation or both. Any such property interest under an operating lease classified as an investment property is carried at fair value. Lease payments are accounted for as described in accounting policies. i) Trade and other receivables Trade and other receivables are non-derivative financial assets and financial assets not quoted in an active market with fixed or determinable payments. They are initially recognized at fair value and are subsequently measured at amortized cost less impairment losses (see point l below). F-29

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1. Group overview and description of the significant accounting policies (continued) j) Inventories Inventories are stated at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses. The cost of inventories is determined based on the first in, first out principle. The costs include expenditure incurred in acquiring the inventories. In the case of finished goods and work in progress, costs include an appropriate share of overheads based on normal operating capacity. k) Cash and cash equivalents Cash and cash equivalents comprise cash balances and short-term bank deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. l) Impairment The carrying amount of the Group’s assets, other than inventories (see point j) and deferred tax assets (see point v), is reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the assets recoverable amount is estimated (see point l (i)). For goodwill and intangible assets that have an indefinite useful life and intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date. An impairment loss is recognized whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses recognized in respect of a cash-generating unit (or a group of units) are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or a group of units) and then, to reduce the carrying amount of the other assets in the unit (or a group of units) on a pro rata basis. Impairment losses are recognized in the income statement. When a decline in the fair value of an available-for-sale financial asset has been recognized directly in equity and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized directly in equity is recognized in the income statement even though the financial asset has not been derecognized. The amount of the cumulative loss that is recognized in the income statement is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognized in the income statement. (i) Calculation of recoverable amount The recoverable amount of the Group’s investments in held to maturity securities and receivables carried at amortized cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate. Short-term receivables are not discounted. The recoverable amount of other assets is the greater of their net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset which does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. (ii) Reversal of impairment An impairment loss in respect of a held-to-maturity security or receivable carried at amortized cost is reversed through profit or loss if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognized. An impairment loss in respect of an investment in an equity instrument classified as available for sale is not reversed. If the fair value of a debt instrument classified as available-for-sale increases and the increase can F-30

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1. Group overview and description of the significant accounting policies (continued) be objectively related to an event occurring after the impairment loss was recognized in the income statement, the impairment loss shall be reversed, with the amount of the reversal recognized in the income statement. An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. m) Equity (i) Issued share capital The share capital of the parent Company constitutes the share capital of the Group. (ii) Dividends Dividends are recognized as a liability in the period in which they are declared. n) Interest bearing loans and borrowings Interest–bearing loans and borrowings are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortized cost with any difference between cost and redemption value being recognized in the income statement over the period of the borrowings on an effective interest basis. o) Employee benefits (i) Defined benefits plan — retirement awards The Group recognises provisions for retirement and pension benefits (employee benefits) based on the actuarial valuation as at the balance sheet date prepared by an independent actuary. The basis for the calculation of the provisions for the employee benefits is set by the Group’s internal regulations, the Collective Labour Agreement for the Group’s employees and the legal regulations in force. Provisions for employee benefits are determined with the use of actuary techniques and assumptions in conformity with the requirements of IFRS EU and in particular IAS 19 ‘Employee Benefits’. Provisions are measured on the basis of the present value of the Group’s future obligations with regard to employee benefits. Provisions are calculated using an individual method, separately for each employee. The basis for the calculation of the provision for an employee is the projected amount of the benefit that the Group commits to pay pursuant to the regulations described above. The projected amount of the benefit is calculated till it is vested with an employee, considering the projected amount of the basis of the benefit, projected increase in the benefit and the length of service of a given employee. The calculated amount is discounted actuarially to the balance sheet date. p) Provisions A provision is recognized in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risk specific to the liability. q) Trade and other payables Trade and other payables are stated at cost. Current liabilities are not discounted. F-31

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1. Group overview and description of the significant accounting policies (continued) r) Deferred government grants and other deferred income Government grants are recognised in the balance sheet at fair value initially as deferred income when there is reasonable certainty that they will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognised as revenue in the income statement on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are recognised in the income statement as other income on a systematic basis over the useful life of the asset. s) Revenue (i) Goods sold and services rendered Revenue from the sale of goods is recognized in the income statement when the significant risks and rewards of ownership have been transferred to the buyer. Revenue from services rendered is recognized in the income statement in proportion to the stage of completion of the transaction at the balance sheet date. The stage of completion is assessed by reference to surveys of work performed. No revenue is recognized if there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods, or continuing management involvement with the goods. (ii) Rental income Rental income from investment property is recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income. t) Costs (i) Research and development costs Research and development costs are recognized in the income statement as incurred. Development costs are recognized as intangible assets when the criteria set out in IAS 38 “Intangible assets” are met and when it is probable that the future economic benefits will flow to the Group (see point g (ii)). (ii) Operating lease payments Payments made under operating leases are recognized in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognized in the income statement as an integral part of the total lease expense. (iii) Finance lease payments Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. (iv) Net financing costs and revenues Net financing costs comprise interest payable on borrowings calculated using the effective interest rate method, interest receivable on funds invested, dividend income, foreign exchange gains and losses, and gains and losses on hedging instruments that are recognized in the income statement. Interest income is recognized in the income statement as it accrues, using the effective interest method. Dividend income is recognized in the income statement on the date the entity’s right to receive payments is established. The interest expense component of finance lease payments is recognized in the income statement using the effective interest rate method. u) Financial instruments (i) Financial instruments Financial instruments are classified in the following categories: held-to-maturity financial assets, financial assets measured at fair value through profit or loss, available-for-sale financial assets, loans and F-32

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1. Group overview and description of the significant accounting policies (continued) receivables. Management determines the classification of its investments at initial recognition and re-evaluates this classification at each reporting date. Acquisition and sale of financial assets is recognized at the transaction date. Financial assets are recognized initially at fair value, including transaction costs. Held-to-maturity financial assets Held-to-maturity financial assets include assets with fixed or determinable payments and fixed maturities that the Group has the positive intention and ability to hold to maturity. Held-to-maturity financial assets are valued at amortized cost calculated using the effective interest rate method. Assets in this category are recognized as non-current assets, if the realization date exceeds 12 months from the balance sheet date. Financial assets measured at fair value through profit or loss Financial assets acquired for the purpose of generating a profit from short-term price fluctuations are classified as financial assets measured at fair value through profit or loss. They are valued at fair value, without transaction costs, and considering the market value as at balance sheet date. Changes in fair value are recognized in the income statement. Assets in this category are classified as current assets, if the management of the Group has the positive intention to realize them within 12 months of the balance sheet date. Available-for-sale financial assets All other financial assets that are not loans or receivables are classified as available-for-sale financial assets. Available-for-sale financial assets are valued at fair value without transaction costs, considering the market value as at balance sheet date. If the financial assets are not listed on a stock exchange and if there are no alternative ways to verify their fair value, available-for-sale financial assets are valued at costs less any impairment loss. Gains or losses, except for impairment losses, calculated as the difference between the fair value and the cost, net of deferred tax, if there is a market price established by the regulated market or for which the fair value may be established in a reliable way, are recognized directly in equity. A decline in the value of the available-for-sale financial assets resulting from impairment loss is recognized in the profit and loss account as a financial cost. Loans and receivables Loans and receivables are valued at amortized cost. (ii) Derivative financial instruments The Group uses derivative financial instruments to hedge its exposure to foreign exchange risk arising from operational, financing and investment activities. Derivative financial instruments that do not qualify for hedge accounting are accounted for as trading instruments. Derivative financial instruments are recognized initially at cost. Subsequent to initial recognition, derivatives are valued at fair value. The gains or losses on remeasurement to fair value are recognized immediately in the income statement. The fair value of forward exchange contracts is the quoted market price at the balance sheet date, being the present value of the forward quoted price.

F-33

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 1. Group overview and description of the significant accounting policies (continued) v) Income tax Corporate income tax, as presented in the profit and loss account, comprises current and deferred tax. Income tax is recognized in the income statement except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. Current tax is the expected tax payable on the taxable income for the year and any adjustment to tax payable in respect of previous years. Deferred tax is calculated using the balance sheet liability method, based on temporary differences between the carrying amounts of assets and liabilities for accounting purposes and the amounts used for tax purposes. The following temporary differences are not included in the calculation of deferred tax: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they are not likely to reverse in the foreseeable future. The amount of deferred tax recognized in the balance sheet is based on the expectation as to the realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. A deferred tax asset is reduced to the extent that it is no longer probable that the related tax benefit will be realized. Additional income tax that arise on distribution of dividends is recognized at the same time when the liability to pay the dividend is recognized. 2. Segment reporting Business segments Primary segment information is presented in respect of the Group’s business. Business segments are based on the Group’s management and internal reporting structure. Inter-segment pricing in 2004 was determined based on the arm’s length conditions. In 2005, the prices of scrap in the inter-segment transactions were determined based on the purchase prices of scrap on no-loss, no-gain basis. The inter-segment pricing of semi-finished products was based were established based on costs plus 12% margin. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly income-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses. Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period. The Group comprises the following main business segments: 1

Scrap Metal — this segment includes the buying, processing, refining and selling of scrap metal to the Group’s customers.

2

Semi-Finished Products — this segment includes the buying and processing of scrap metal into steel billets and the sale of these steel billets to the Group’s customers.

3

Finished Products — this segment includes (i) the buying and processing of scrap metal into billets which are in turn processed into finished products and sold to the Group’s customers, (ii) the buying of steel billets from third parties and processing them into finished products and selling them to the Group’s customers and (iii) the buying of finished products and the sale of those products to the Group’s customers.

4

Other — this segment includes among others (i) the buying of non-ferrous scrap and selling it to the Group’s customers, (ii) the processing of non-ferrous scrap into finished products and the sale of those non-ferrous products to the Group’s customers, (iii) the buying and selling of non-ferrous products and (iv) recycling materials, including plastic foils, paper and other products. F-34

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. Segment reporting (continued) Geographical segments In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. The Group is not able to split the capital expenditures into geographical segments as the same fixed assets are used for the production of goods dedicated for both segments. Business segments Scrap Metal 2005 2004

Semi-Finished Products 2005 2004

Finished Products 2005 2004

Other 2005

2004

F-35

Revenue from external customers . . . . . . . . . . . . . . . . . Inter-segment revenue . . . . . . . . .

187 987 244 822

353 409 236 222

237 261 397 630

225 689 476 887

368 601 35 165

471 173 127 807

182 387 19 905

144 627 14 642

Total revenue . . . . . . . . . . . . . . . .

432 809

589 631

634 891

702 576

403 776

598 980

202 292

159 269

Cost of sales to external customers . . . . . . . . . . . . . . . . . Inter-segment cost of sales . . . . . .

(177 236) (245 172)

(324 958) (199 075)

(214 061) (370 437)

(209 608) (436 617)

(358 495) (35 905)

(436 704) (123 942)

(160 149) (16 815)

(129 662) (14 460)

Total cost of sales . . . . . . . . . . . . .

(422 408)

(524 033)

(584 498)

(646 225)

(394 400)

(560 646)

(176 964)

(144 122)

Eliminations 2005 2004

Consolidated 2005 2004

(697 522)

(855 558)

976 246

1 194 898

697 522

855 558

(880 748)

(1 019 468)

—

—

—

1 771

(575)

—

—

(31 988)

(32 642)

—

—

65 281

142 788

Unallocated income/expenses . . . .

(27 276)

(26 396)

Operating profit . . . . . . . . . . . . . .

38 005

116 392

Net financing costs . . . . . . . . . . . . Excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired over cost . . . Income tax expense . . . . . . . . . . .

(17 037)

(8 886)

— (4 098)

101 036 (3 659)

Profit for the period . . . . . . . . . . .

16 870

204 883

Other income . . . . . . . . . . . . . . . . Distribution and administrative expenses . . . . . . . . . . . . . . . . . .

1 285

—

16

—

470

—

—

(16 752)

(25 380)

(4 870)

(4 058)

(6 324)

(2 629)

(4 042)

Segment result . . . . . . . . . . . . . . .

(5 066)

40 218

45 539

52 293

3 522

35 705

21 286

14 572

—

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. Segment reporting (continued) Semi-Finished Products 2005 2004

Scrap Metal 2005 2004

Segment assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unallocated assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

42 035

91 759

260 832

Finished Products 2005 2004

253 655

124 395

Other

123 700

2005

2004

43 609

29 261

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Segment liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unallocated liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11 159

19 921

26 861

20 772

25 726

22 442

10 151

6 633

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated 2005 2004

470 871 121 510

498 375 72 620

592 381

570 995

73 897 223 504

69 768 223 407

297 401

293 175

F-36

Capital expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7 630

20 767

10 346

1 657

1 455

1 130

1 971

951

21 402

24 505

Major non-cash items: Excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired over cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

—

—

90 026

—

10 003

—

1 007

—

101 036

Depreciation/amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8 532)

(7 914)

(10 676)

(8 949)

(1 531)

(1 435)

(1 106)

(678)

(21 845)

(18 976)

Impairment losses and valuation allowances . . . . . . . . . . . . .

(810)

(1 728)

(99)

(790)

(297)

(7 758)

(121)

(31)

(1 327)

(10 276)

Total unallocated major non-cash items . . . . . . . . . . . . . . . . .

(393)

(1 131)

Total major non-cash items . . . . . . . . . . . . . . . . . . . . . . . . . . .

(23 565)

70 653

Geographical segments Poland

Other countries 2005 2004

Unallocated 2005 2004

Consolidated 2005 2004

2005

2004

Revenue from external customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

823 189

965 163

153 047

229 735

—

—

976 236

1 194 898

Segment assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

101 223

100 996

21 303

13 030

469 885

456 969

592 381

570 995

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. Acquisitions of subsidiaries Acquisition of Zakład Walcowniczy “Walcownia Bruzdowa” Sp. z o.o. On 13 January 2005, the Group acquired all the shares in Zakład Walcowniczy “Walcownia Bruzdowa” Sp. z o.o. for PLN 5 thousand, satisfied in cash. The company is engaged in processing of metal products for the parent entity. For the period since the acquisition date to 31 December 2005, the subsidiary contributed a net loss of PLN 4,665 thousand to the consolidated net result for the year. Effect of acquisition: The acquisition described in the preceding paragraph had the following effect on the Group’s assets and liabilities. Fair value of the acquiree’s net assets at the acquisition date Recognised values

Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,003 14,233 4,150 330 (23,610)

Net identifiable assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3,894)

% of net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill on acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consideration paid, satisfied in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100% 3,899 (5)

Cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

330

Cash acquired following the acquisition of a subsidiary, net of cash paid . . . .

325

Goodwill has arisen on the acquisition of Zakład Walcowniczy “Walcownia Bruzdowa” Sp. z o.o. and comprises production and technological know-how that did not meet the criteria for recognition as a separate intangible asset at the date of acquisition. Acquisition of “Odlewnia Metali Szopienice” Sp. z o.o. On 31 July 2004, the Group acquired all the shares in “Odlewnia Metali Szopienice” Sp. z o.o. for PLN 440 thousand, satisfied in cash. The company deals with manufacturing of non-ferrous metal alloys products. For the period since the acquisition date to 31 December 2004 and for 2005, the subsidiary contributed net profit of PLN 287 thousand and PLN 1,677 thousand to the consolidated net results respectively. Effect of acquisition: The acquisition described in the preceding paragraph had the following effect on the Group’s assets and liabilities.

F-37

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. Acquisitions of subsidiaries (continued) Fair value of the acquiree’s net assets at the acquisition date Recognised values

Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest bearing payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

92 52 2,643 2,792 204 (1,200) (266) (2,865)

Net identifiable assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,452

% of net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Excess of the interest in the net fair value of identifiable assets and liabilities over cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100% 1,008

Consideration paid, satisfied in cash* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(444) 204

Cash outflow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(240)

* Include legal fees and other fees amounting to PLN 4 thousand. After reassessment of the identification and measurement of the acquiree’s identifiable assets, liabilities and contingent liabilities and the measurement of the cost of the acquisition, the excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over cost was recognised immediately in the consolidated net result of the Group for 2004. Acquisition of “Ferrostal Łabe˛dy” Sp. z o.o. On 19 February 2004, the Group acquired 82.6% of the shares in “Ferrostal Łabe˛dy” Sp. z o.o. for PLN 18,069 thousand including PLN 500 thousand paid in cash and PLN 17,569 thousand payable in cash with deferred payment terms i.e. in instalments from March 2005 to December 2005. Legal and other fees directly connected with the acquisition amounted to PLN 788 thousand. On 5 May 2004, the Group acquired an additional 8.84% of the shares in “Ferrostal Łabe˛dy” Sp. z o.o. for PLN 1,932 thousand payable in cash with deferred payment terms i.e. in instalments from March 2005 to December 2005. Legal and other fees directly connected with the acquisition amounted to PLN 20 thousand. As the payable for the shares is an interest bearing liability, the fair value of this deferred consideration approximates its nominal value. For the period since the acquisition date to 31 December 2004 and for 2005, the subsidiary contributed a net profit of PLN 19,193 thousand and PLN 17,108 thousand to the consolidated net results respectively. Effect of acquisition: The acquisition described in the preceding paragraph had the following effect on the Group’s assets and liabilities.

F-38

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. Acquisitions of subsidiaries (continued) Fair value of the acquiree’s net assets at the acquisition date Acquisition of shares as at 19 February 2004 Recognised values

Acquisition of shares as at 5 May 2004 Recognised values

Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid perpetual legal rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest bearing payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

210,528 4,286 4,074 608 — 19,822 25,455 1,488 (61,265) (1,545) (2,230) (67,273) (2 159)

209,048 4,297 3,973 608 — 23,921 26,886 1,138 (81,410) (3,160) (2,210) (44,479) (3,099)

Net identifiable assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . .

131,789

135,513

% of net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

82,60%

8,84%

Net identifiable assets and liabilities acquired . . . . . . . . . . . . . . . .

108,858

11,979

Excess of the interest in the net fair value of identifiable assets and liabilities over cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

90,001

10,027

Fair value of consideration* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(18,857)

(1,952)

Total fair value of consideration (19 February and 5 May 2004), including: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(20,809)

Consideration paid in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,308)

Consideration payable in next periods . . . . . . . . . . . . . . . . . . . . . .

(19,501)

Cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,488

Cash acquired following the acquisition of a subsidiary, net of cash paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

180

* Include legal fees and other fees amounting to PLN 788 thousand as at 19 February 2004 and PLN 20 thousand as at 5 May 2004. After reassessment of the identification and measurement of the acquiree’s identifiable assets, liabilities and contingent liabilities and the measurement of the cost of the acquisition, the excess of acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over cost was recognised immediately in the consolidated net result of the Group for 2004. If all of the acquisitions that took place in 2004 had occurred on 1 January 2004, management estimates that consolidated revenue would have been PLN 1,209,174 thousand and consolidated profit for 2004 would have been PLN 204,234 thousand. As the financial statements of Zakład Walcowniczy “Walcownia Bruzdowa” Sp. z o.o., Odlewnia Metali Szopienice Sp. z o.o. and Ferrostal Łabe˛dy Sp. z o.o. were not maintained in accordance with IFRS, it was impracticable to determine the carrying amounts of the assets and liabilities of those companies immediately prior to the acquisition in accordance with IFRS. Other acquisitions: On 15 June 2004, the Group established Nowa Jakos´c´ — Organizacja Odzysku S.A. by contribution in cash of PLN 900 thousand for 90% of the shares in this entity. The scope of activity of Nowa Jakos´c´ — Organizacja Odzysku S.A. includes purchasing, packaging and reselling of paper and plastic waste for further F-39

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. Acquisitions of subsidiaries (continued) production. For the period since incorporation to 31 December 2004 the subsidiary contributed a net loss of PLN 124 thousand to the consolidated net result for the year. In January 2005, the Group acquired 10% of the shares of Nowa Jakos´c´ — Organizacja Odzysku S.A. for PLN 101 thousand satisfied in cash, increasing its investment in this entity to 100% of its share capital. For 2005 the subsidiary contributed a net loss of PLN 1,435 thousand to the consolidated net result for the year. In January 2005, the Group acquired 94.8% of the shares in Złomrex Finans Sp. z o.o. for PLN 159 thousand satisfied in cash, increasing its investment in this entity to 100% of the share capital. The company’s scope of activity includes mainly financial and advisory services. For the period since the acquisition date to 31 December 2005 the subsidiary’s net loss amounted to PLN 32 thousand. 4. Other income Release of unused accruals for other costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Compensations and penalties received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Surpluses in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Insurance indemnities losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forgiven liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reimbursed of cost of court proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net gain on disposal of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2005

2004

426 425 1 489 96 108 107 337 543

1 209 448 19 463 75 150 116 292

3 531

2 772

2005

2004

5. Other expenses

Bad debt expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment of property, plant and equipment under construction . . . . . . . . . . . . . . . . . . Other accrued costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost related to listing of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventory shortages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Costs of court proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contractual penalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Donations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(126) (639) (855) (965) (243) (286) (207) (847) (557)

(409) — — (794) (247) (315) (491) (54) (551)

(4 725)

(2 861)

2005

2004

(29 130) (6 692) (54) (791)

(20 497) (4 641) 377 190

(36 667)

(24 571)

6. Personnel expenses Wages and salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Compulsory social security contributions and other benefits . . . . . . . . . . . . . . . . . . . . . . Decrease/(increase) in liability for retirement awards . . . . . . . . . . . . . . . . . . . . . . . . . . . Decrease/(increase) in liabilities related to unused holiday leave . . . . . . . . . . . . . . . . . .

F-40

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 7. Net financing costs 2005

2004

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net foreign exchange gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Forgiven financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investments: Net gain on disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net gain on remeasurement of financial instruments at fair value through profit or loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2 743 — 210

3 844 1 811 1 879

461

1 039

269 132

119 69

Financial income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 815

8 761

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank fees and commissions (settled using the effective interest rate method) . . . . . . . . . Net foreign exchange loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment loss on other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(16 851) (1 962) (1 546) — (493)

(15 006) (2 153) — (328) (160)

Financial expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(20 852)

(17 647)

Net financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(17 037)

(8 886)

8. Income tax expense Recognised in the income statement 2005

2004

Current tax expense Current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1 245)

(18 814)

Deferred tax expense Origination and reversal of temporary differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2 853)

15 155

Total income tax expense in the income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4 098)

(3 659)

Reconciliation of effective tax rate 2005

2005

2004

2004

Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100%

20 968

100%

208 542

Income tax using the domestic corporation tax rate . . . . . . . . . Non-deductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax exempt revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effect of tax losses previously not recognised . . . . . . . . . . . . .

(19.0)% (1.8)% 1.3% —

(3 984) (390) 276 —

(19.0)% (0.0)% 11.4% 5.8%

(39 623) (126) 23 963 12 127

(19.5)%

(4 098)

(1.8)%

(3 659)

Tax exempt revenues in 2004 relate to excess of interest in the net fair value of identifiable assets and liabilities over cost of the acquisition (refer to note 3) 9. Current tax assets and liabilities The current tax payable of PLN 1,065 thousand (2004: PLN 4,320 thousand) represents the amount due to the tax authorities with regard to the income tax liabilities for the current and prior year less prepayments.

F-41

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. Property, plant and equipment Land

Buildings

Plant and equipment

Vehicles

Fixtures and fittings

Under construction

Total

Cost Balance at 1 January 2004 . . . . . . . . Acquisitions through business combinations . . . . . . . . . . . . . . . . . Other acquisitions . . . . . . . . . . . . . . . Transfer from fixed assets under construction . . . . . . . . . . . . . . . . . . Disposals . . . . . . . . . . . . . . . . . . . . . .

488

7 889

23 712

11 885

433

—

44 407

165 —

57 353 —

151 320 9 878

123 8 372

1 265 —

559 10 055

210 785 28 305

62 —

3 795 —

1 377 (626)

(9 980) —

Balance at 31 December 2004 . . . . .

715

69 037

189 150

20 477

2 449

634

282 462

Balance at 1 January 2005 . . . . . . . . Acquisitions through business combinations . . . . . . . . . . . . . . . . . Other acquisitions . . . . . . . . . . . . . . . Transfer from fixed assets under construction . . . . . . . . . . . . . . . . . . Disposals . . . . . . . . . . . . . . . . . . . . . .

715

69 037

189 150

20 477

2 449

634

282 462

— —

— —

— 6 534

12 7 192

— 293

991 18 505

1 003 32 524

82 (62)

(9 987) —

— (1 686)

Balance at 31 December 2005 . . . . .

742

70 455

202 608

27 593

Depreciation and impairment losses Balance at 1 January 2004 . . . . . . . . Depreciation charge for the year . . . . Disposals . . . . . . . . . . . . . . . . . . . . . .

— — —

(574) (2 488) —

(3 490) (11 995) 108

(2 220) (3 651) 36

(112) (514) 626

— — —

(6 396) (18 648) 770

Balance at 31 December 2004 . . . . .

—

(3 062)

(15 377)

(5 835)

—

—

(24 274)

Balance at 1 January 2005 . . . . . . . . Depreciation charge for the year . . . . Impairment losses . . . . . . . . . . . . . . . Disposals . . . . . . . . . . . . . . . . . . . . . .

— — — —

(3 062) (3 073) — 34

(15 377) (13 285) — 613

(5 835) (4 759) — 236

— (189) — 44

— — (639) —

(24 274) (21 306) (639) 927

Balance at 31 December 2005 . . . . .

—

(6 101)

(28 049)

(10 358)

(145)

(639)

(45 292)

Carrying amounts At 1 January 2004 . . . . . . . . . . . . . . .

488

7 315

20 222

9 665

321

—

38 011

At 31 December 2004 . . . . . . . . . . . .

715

65 975

173 773

14 642

2 449

634

258 188

At 1 January 2005 . . . . . . . . . . . . . . .

715

65 975

173 773

14 642

2 449

634

258 188

At 31 December 2005 . . . . . . . . . . . .

742

64 354

174 559

17 235

2 617

9 504

269 011

27 —

1 590 (172)

4 420 (180)

7 805 (881)

326 (229)

483 (571)

2 762

10 143

— (1 035)

314 303

Leased plant and machinery The Group leases certain production equipment and vehicles under a number of finance lease agreements. At the end of each of the leases the Group has the option to purchase the equipment at a beneficial price. At 31 December 2005, the net carrying amount of leased plant and machinery was PLN 34,230 thousand (2004: PLN 30,885 thousand). The leased equipment secures lease obligations (see note 20). Collaterals At 31 December 2005, property, plant and equipment with a carrying value of PLN 159,879 thousand (2004: PLN 174,455 thousand) were provided as collateral for bank loans and overdrafts. Property, plant and equipment under construction The major investment presented as fixed assets under construction at 31 December 2005 relates to the modernisation of a furnace aimed at a reduction in energy consumption and decreasing waste gas production. Total expenses capitalised on this project at 31 December 2005 amounted to PLN 6.1 million. Impairment loss During 2005 the Group recognised impairment losses of PLN 639 thousand related to abandoned projects under construction. F-42

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11. Intangible assets Goodwill

Development costs

Software and other

Total

Cost Balance at 1 January 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions through business combinations . . . . . . . . . . . . Other acquisitions — internally developed . . . . . . . . . . . . .

11 259 — —

— 5 067 —

277 162 67

11 536 5 229 67

Balance at 31 December 2004 . . . . . . . . . . . . . . . . . . . . . . .

11 259

5 067

506

16 832

Balance at 1 January 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions through business combinations . . . . . . . . . . . . Other acquisitions — internally developed . . . . . . . . . . . . . Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11 259 3 899 — —

5 067 — 1 617 —

506 — 203 (171)

16 832 3 899 1 820 (171)

Balance at 31 December 2005 . . . . . . . . . . . . . . . . . . . . . . .

15 158

6 684

538

22 380

Amortisation and impairment losses Balance at 1 January 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . Amortisation for the year . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1 032) —

— (505)

(69) (186)

(1 101) (691)

Balance at 31 December 2004 . . . . . . . . . . . . . . . . . . . . . . .

(1 032)

(505)

(255)

(1 792)

Balance at 1 January 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . Amortisation for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1 032) — —

(505) (624) —

(255) (182) 171

(1 792) (806) 171

Balance at 31 December 2005 . . . . . . . . . . . . . . . . . . . . . . .

(1 032)

(1 129)

(266)

(2 427)

Carrying amounts At 1 January 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10 227

—

208

10 435

At 31 December 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10 227

4 562

251

15 040

At 1 January 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10 227

4 562

251

15 040

At 31 December 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14 126

5 555

272

19 953

Amortisation and impairment charge The amortisation and impairment charge is recognised in the following line items in the income statement:

Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Administration expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2005

2004

(764) (11) (31)

(646) (11) (34)

(806)

(691)

2005

2004

8,488 887 4,751

8,488 887 852

14,126

10,227

Impairment tests for cash-generating units containing goodwill The following units have significant carrying amounts of goodwill:

Scrap metal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Semi-Finished Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finished Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-43

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11. Intangible assets (continued) The scrap metal unit represents the activity of the Group connected with the purchase and re-sale of scrap metals and is primarily associated with the previous operations of POSW Złomrex — a business acquired by the Group in 2003. The acquisition resulted in generation of goodwill of PLN 11,259 thousand (net value at 31 December 2004 and 31 December 2005) including PLN 8,488 thousand allocated to the scrap metal unit. The recoverable amount of the scrap metal unit is based on the value in use calculations. Those calculations use cash flow projections based on actual operating results and the five-year business plan. Cash flows for a further 5 -year period are extrapolated based on the cash flows from the fifth year of projection and represent the remaining useful life of tangible fixed assets of this unit. A pre-tax discount rate of 10% per cent has been used in discounting the projected cash flows. The recoverable amount of the unit calculated on the basis of the above test is higher than its carrying amount including goodwill associated with this unit. The semi-finished products unit represents the activity of the Group connected with the purchase and processing of scrap metal into steel billets. This unit mainly represents the operations of Ferrostal Łabe˛dy Sp. z o.o. — the subsidiary acquired in 2004. The goodwill allocated to this unit represents the portion of goodwill associated with the acquisition of POSW Złomrex which reflects the benefits obtained by the semi finished products unit as a result of the POSW Złomrex acquisition. The recoverable amount of the semi-finished products unit is based on the value in use calculations. Those calculations use cash flow projections based on actual operating results and the five-year business plan. Cash flows for a further 15-year period are extrapolated based on the cash flows from the fifth year of projection and represent the remaining useful life of the tangible fixed assets of this unit. A pre-tax discount rate of 10% per cent has been used in discounting the projected cash flows. The recoverable amount of the unit calculated on the basis of the above test is higher than its carrying amount including goodwill associated with this unit. The finished products unit represents the activity of the Group connected with the purchase and processing of scrap metal into steel billets which are subsequently re-processed into steel rods and steel sheets. This unit represents the operations of two subsidiaries: Ferrostal Łabe˛dy Sp. z o.o. acquired in 2004 and Zakłady Walcownicze “Walcownia Bruzdowa” Sp. z o.o. acquired in 2005. The goodwill allocated to this unit mainly represents goodwill recognised on acquisition of Zakłady Walcownicze “Walcownia Bruzdowa” Sp. z o.o. of PLN 3,899 thousand and the portion of goodwill associated with the acquisition of POSW Złomrex which reflects the benefits obtained by the finished products unit as a result of the POSW Złomrex acquisition. The recoverable amount of the finished products unit is based on the value in use calculations. Those calculations use cash flow projections based on actual operating results and the five-year business plan. Cash flows for a further 15-year period are extrapolated based on the cash flows from the fifth year of projection and represent the remaining useful life of the tangible fixed assets of this unit. A pre-tax discount rate of 10% per cent has been used in discounting the projected cash flows. The recoverable amount of the unit calculated on the basis of the above test is higher than its carrying amount including goodwill associated with this unit. 12. Investment property 2005

2004

Balance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acquisitions through business combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

603 — —

— 608 (5)

Balance at 31 December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

603

603

F-44

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 13. Other investments Non-current investments Loans granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepayment for shares acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current investments Loans granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2005

2004

2 349 974 185

3 773 — 27

3 508

3 800

1 769 207

1 200 161

1 976

1 361

An impairment loss amounting to PLN 328 thousand in respect of non-current loans granted was recognised in 2004 due to financial difficulties of the borrower. 14. Deferred tax assets and liabilities Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Assets

Property, plant and equipment . . . . . . . . . . . . . . . . Investment property . . . . . . . . . . . . . . . . . . . . . . . . Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . . . . . . . Interest bearing loans and borrowings . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred government grants . . . . . . . . . . . . . . . . . . Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax value of loss carry-forwards recognised . . . . .

Liabilities 2005 2004

2005

2004

1 100 75 62 395 72 4 609 500 173 135 2 501 12 15 882

— 75 62 2 023 122 4 950 402 — 181 599 371 18 748

Net 2005

Tax assets/(liabilities) . . . . . . . . . . . . . . . . . . . . . . . 25 516 27 533 (14 671) (13 846) Set off of tax assets/liabilities . . . . . . . . . . . . . . . . . (14 671) (13 846) 14 671 13 846 Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . .

10 845

2004

(14 006) (12 851) (12 906) (12 851) — — 75 75 (79) (59) (17) 3 — — 395 2 023 (90) (172) (18) (50) (472) (760) 4 137 4 190 — — 500 402 — — 173 — — — 135 181 (2) — 2 499 599 (22) (4) (10) 367 — — 15 882 18 748

13 687

—

—

10 845 —

13 687 —

—

—

Movement in temporary differences during the year

Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest bearing loans and borrowings . . . . . . . . . . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax value of loss carry-forwards expected to be utilised . . . . . . . . .

Balance 1 Jan 04

Recognised in income

Recognised in business combinations

Balance 31 Dec 04

(3 687) — (21) — (128) 3 745 — — 89 — 23

(1 530) 75 24 2 023 78 1 259 402 181 510 6 12 127

(7 634) — — — — (814) — — — 361 6 598

(12 851) 75 3 2 023 (50) 4 190 402 181 599 367 18 748

15 155

(1 489)

13 687

21 F-45

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 14. Deferred tax assets and liabilities (continued)

Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest-bearing loans and borrowings . . . . . . . . . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred government grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax value of loss carry-forwards expected to be utilised . . . . . . . .

Balance 1 Jan 05

Recognised in income

Recognised in business combinations

Balance 31 Dec 05

(12 851) 75 3 2 023 (50) 4 190 402 — 181 599 367 18 748

(55) — (20) (1 628) 32 (53) 98 173 (46) 1 900 (388) (2 866)

— — — — — — — — — — 11 —

(12 906) 75 (17) 395 (18) 4 137 500 173 135 2 499 (10) 15 882

13 687

(2 853)

11

10 845

Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following items: Tax losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2005

2004

1,435

131

The tax losses are related to subsidiary — Nowa Jakos´c´ — Organizacja Odzysku S.A. The tax losses expire in 2009 (PLN 131 thousand) and 2010 (PLN 1,304 thousand). Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the subsidiary can utilise the benefits therefrom. 15. Inventories 2005

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Semi-finished goods and work in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Merchandise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2004

23 744 4 597 50 498 24 793

29 216 343 15 910 66 996

103 632

112 465

Inventories are presented net of allowances amounting to PLN 1,807 thousand (2004: PLN 10,649 thousands). Allowances related mainly to merchandises and finished goods with the net realisable value below cost. The write-down and reversal are included in cost of sales. As at 31 December 2005, inventories with a carrying value of PLN 84,476 thousand (2004: PLN 67,250 thousand) were subject to pledges as collateral for bank loans and overdrafts. 16. Trade and other receivables Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bills of exchange receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statutory receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other receivables and prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2005

2004

122 526 7 360 13 078 10 834

114 026 11 706 17 169 6 366

153 798

149 267

Trade receivables are presented net of allowances for doubtful debts amounting to PLN 7,344 thousand (2004: PLN 9,870 thousand). The allowances were recognised due to expected difficulties with the collection of amounts due. F-46

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 16. Trade and other receivables (continued) At 31 December 2005, receivables with a carrying value of PLN 20,000 thousand (2004: PLN 56,400 thousand) were provided as collateral for bank loans and overdrafts. At 31 December 2005, other receivables and prepayments include prepayments of PLN 1,470 thousand (2004: PLN 482 thousand) relating to fixed assets under construction. At 31 December 2005, other receivables and prepayments include prepayments of PLN 2,276 thousand (2004: PLN 1,544 thousand) relating to future deliveries of inventories. 17. Cash and cash equivalents 2005

2004

Cash in bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash in hand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Short-term bank deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 619 504 10 500

3 075 367 1 000

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bank overdrafts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14 623 (29 141)

4 442 (35 559)

Cash and cash equivalents in the statement of cash flows . . . . . . . . . . . . . . . . . . . . . . . .

(14 518)

(31 117)

At 31 December 2005, a bank deposit of PLN 500 thousand (2004: nil) was provided as collateral for a bank loan. 18. Capital and reserves Issued share capital At 31 December 2005, the parent Company’s share capital comprised 47,691,000 ordinary shares (2004: 47,691,000) with a nominal value of PLN 1 each. At 31 December 2005 and 31 December 2004, the parent Company was wholly-owned by Mr. Przemysław Sztuczkowski. 19. Earnings per share Basic earnings per share The calculation of basic earnings per share at 31 December 2005 was based on the profit attributable to ordinary shareholders of PLN 15,304 thousand (2004: PLN 201,963 thousand) and a weighted average number of ordinary shares outstanding during the year ended 31 December 2005 of 47,691,000 (2004: 47,691,000). As at 31 December 2005 and 31 December 2004 there were no factors that would result in dilution of earnings per share.

F-47

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 20. Interest-bearing loans and borrowings This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings. For more information about the Group’s exposure to interest rate and foreign currency risk, see note 24. 2005

Non-current liabilities Secured bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current liabilities Current portion of secured bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current portion of finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Factoring liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2004

27 911 22 097 2 645

40 615 19 773 2 645

52 653

63 033

91 750 8 682 28 730 32

64 590 6 619 18 783 719

129 194

90 711

Repayment schedule of secured bank loans and other borrowings

Secured bank loans . . . . . . . . . . . . . . . . . . . . . . Other borrowings . . . . . . . . . . . . . . . . . . . . . . .

Total

Less than one year

Between one and three years

Between three and five years

More than five years

119 661 2 677

91 750 32

17 193 2 645

10 718 —

— —

122 338

91 782

19 838

10 718

—

Finance lease liabilities Finance lease liabilities are payable as follows:

Less than one year . . . . . . . . . . . . . . . . . . . Between one and five years . . . . . . . . . . . .

Minimum lease payments 2005

Principal 2005

Minimum lease payments 2004

Interest 2005

Interest 2004

Principal 2004

9 834 23 444

1 152 1 347

8 682 22 097

7 855 21 344

1 236 1 571

6 619 19 773

33 278

2 499

30 779

29 199

2 807

26 392

There are no contingent rentals payable under the terms of the lease agreements. 21. Employee benefits 2005

2004

Liability for retirement awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 616

1 974

Total employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 616

1 974

Balance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee benefits in acquired entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions raised during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions utilised during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions released during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 974 — 137 (412) (83)

— 2 496 199 (145) (576)

Balance at 31 December 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 616

1 974

F-48

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 21. Employee benefits (continued) The expense is recognised in the following line items in the income statement: Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2005

2004

(137) 83

280 97

(54)

377

22. Provisions 2005

2004

Balance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions in acquired entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions raised during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions utilised during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions released during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

954 — 678 (498) (426)

— 2 159 4 — (1 209)

Balance at 31 December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

708

954

Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

708

954

The provisions, among others include penalties of PLN 350 thousand for excessive emission of polluting gases. These are under dispute with the authorities. 23. Trade and other payables Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statutory payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bills of exchange payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payables in relation to acquisition of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other non-trade payables and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2005

2004

73 405 2 501 — — 4 887

67 443 2 027 3 750 20 752 2 303

80 793

96 275

24. Financial instruments Exposure to credit, interest rate and currency risks arises in the normal course of the Group’s business. Credit risk Financial instruments that potentially subject the Group to concentrations of credit risk consist principally of cash and cash equivalents and receivables. The Group places its cash and cash equivalents in financial institutions with high credit ratings. The credit risk related to receivables is limited as the Group’s customer base is wide, thus the concentration of credit risk is insignificant. At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. Foreign currency risk The Group is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in a currency other than the Polish zloty. The currency giving rise to this risk is primarily the euro. In relation to significant transactions denominated in foreign currency the Group uses forward exchange contracts to hedge its foreign currency risk. As at 31 December 2005, the exposure to foreign currency cash flow risk was not hedged.

F-49

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 24. Financial instruments (continued) Interest rate risk In managing interest rate risk the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings. Over the longer-term, however, permanent changes in interest rates would have an impact on consolidated earnings. The Group uses derivative financial instruments to hedge its exposure to interest rate risk arising from operational, financing and investment activities. The net fair value of interest swaps as at 31 December 2005 was PLN 207 thousand (2004: PLN 119 thousand) comprising of assets of PLN 207 thousand (2004: PLN 119 thousand). These amounts were recognised as fair value derivatives. At 31 December 2005, it is estimated that a general increase of one percentage point in interest rates would decrease the Group’s profit before tax by approximately PLN 2,017 thousand (2004: PLN 1,484 thousand). Fair values The following are details of the fair values of the financial instruments for which it is practicable to estimate such value: Š Cash and cash equivalents, short-term bank deposits and short-term bank loans. The carrying amounts

approximate fair value because of the short term nature of these instruments. Š Trade and other receivables, bills of exchange, trade and other payables and accrued liabilities. The

carrying amounts approximate fair value because of the short-term nature of these instruments. Š Interest bearing loans and borrowings. The carrying amounts approximate fair value due to the

variable nature of the related interest rates.

F-50

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 24. Financial instruments (continued) Effective interest rates and repricing analysis In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at the balance sheet date and the periods in which they reprice. Effective interest rate

2005 Less than 1 year 1 769 1 366 — 403

1-2 years 1 200 1 200 — —

2-5 years 700 700 — —

More than 5 years 449 — 449 —

F-51

Loans granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PLN fixed rate loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PLN fixed rate loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PLN fixed rate loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.00% 11.00% 5.00%

Total 4 118 3 266 449 403

Cash and cash equivalents: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash in bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PLN short-term bank deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PLN short-term bank deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

~0.21% 3.59% 4.1%

14 119 3 619 500 10 000

14 119 3 619 500 10 000

— — — —

— — — —

— — — —

5.35% 5.50% 5.60% 5.80% 6.10% 4.49%

119 661 5 962 34 859 38 002 15 028 22 548 3 262

119 661 5 962 34 859 38 002 15 028 22 548 3 262

— — — — — — —

— — — — — — —

— — — — — — —

Secured bank loans: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PLN floating rate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PLN floating rate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PLN floating rate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PLN floating rate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PLN floating rate loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EUR floating rate loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CHF floating rate loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Effective interest rate 8.00% 11.00%

~0.14% 4.6%

7.31% 7.46% 7.64% 7.86% 8.16% 5.65% 4.20%

Total 4 973 4 300 673 —

2004 Less than 1 year 1 200 1 200 — —

1-2 years 1 200 1 200 — —

2-5 years 1 900 1 900 — —

More than 5 years 673 — 673 —

4 075 3 075 1 000 —

3 985 2 985 1 000 —

— — — —

— — — —

— — — —

105 205 24 858 20 000 17 880 17 967 22 872 77 1 551

105 205 24 858 20 000 17 880 17 967 22 872 77 1 551

— — — — — — — —

— — — — — — — —

— — — — — — — —

Factoring liabilities: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PLN floating rate factoring liabilities . . . . . . . . . . . . . . . . . . . . . . . PLN floating rate factoring liabilities . . . . . . . . . . . . . . . . . . . . . . . PLN floating rate factoring liabilities . . . . . . . . . . . . . . . . . . . . . . . PLN floating rate factoring liabilities . . . . . . . . . . . . . . . . . . . . . . .

5.60% 6.35% 6.60% 7.10%

28 730 3 423 1 840 7 180 16 287

28 730 3 423 1 840 7 180 16 287

— — — — —

— — — — —

— — — — —

8.16% 8.41% 8.66% 9.16%

18 783 3 454 4 818 4 121 6 390

18 783 3 454 4 818 4 121 6 390

— — — — —

— — — — —

— — — — —

Finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CHF fixed rate finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . CHF fixed rate finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . CHF fixed rate finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . CHF fixed rate finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . CHF fixed rate finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . EUR fixed rate finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . PLN fixed rate finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . PLN fixed rate finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . PLN fixed rate finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . Other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.43%-3.66% 3.66%-4.91% 4.91%-6.17% 6.17%-6.80% 12.68%-13.35% 17.46%-18.16% 10.03%-10.69% 12.68%-13.35% 17.46%-18.16% 4.85%

30 779 16 387 7 851 5 869 67 45 441 48 45 26 2 677

8 682 3 721 2 846 1 770 67 45 142 20 45 26 32

15 571 7 747 4 171 3 340 — — 299 14 — — —

6 526 4 919 834 759 — — — 14 — — 2 645

— — — — — — — — — — —

2.43%-3.66% 3.66%-4.91% 4.91%-6.17% 6.17%-6.80% 12.68%-13.35% 17.46%-18.16% 12.68%-13.35% 17.46%-18.16% 38.48%-39.29% 6.89%

26 392 6 738 10 572 7 748 112 203 581 32 62 344 3 364

6 619 1 458 2 803 1 682 34 109 127 32 30 344 719

12 491 3 006 5 714 3 259 78 94 308 — 32 — —

7 282 2 274 2 055 2 807 — — 146 — — — 2 645

— — — — — — — — — — —

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 25. Capital commitments During 2004, the Group entered into a contract to purchase services relating to the modernisation of the furnace. With respect to this contract, as at 31 December 2005 the Group was committed to incur capital expenditures of EUR 284 thousand (2004: EUR 855 thousand). This commitment is expected to be settled in the following financial year. 26. Contingencies, guarantees and other commitments The Group has following contingent liabilities, guarantees and other commitments: Contingencies Š Employees claims for benefits of PLN 188 thousand.

Guarantees Guarantee in favour of HSW Walcownia Blach Sp. z o.o. up to PLN 681 thousand. Bill of exchange guarantee in favour of Huta Łabe˛dy S.A. up to PLN 2.1 million. Other commitments Š Conditional contract to purchase shares in HSW Huta Stali Jakos´ciowych Sp. z o.o. concluded with

HSW Zakład Metalurgiczny Sp. z o.o. amounting to PLN 160 million. The realisation of suspension clauses commenced on 27 January 2006. Š Conditional contract to purchase shares in HSW Walcownia Blach Sp. z o.o. concluded with HSW

Zakład Metalurgiczny Sp. z o.o. amounting to PLN 33 million. The realisation of suspension clauses commenced on 6 January 2006. Š Contractual commitment to purchase advisory services of PLN 700 thousand from “Prymko”

Krzysztof Walarowski in future periods. 27. Related parties Identity of related parties The Group has a related party relationship with the companies controlled by the parent Company’s Management Board members and with the members of the Management and Supervisory Boards of the Group entities. Transactions and balances with the companies controlled by the parent Company’s Management Board members 2005

2004

PRYMKO Purchased services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

847 24

351 —

Przedsie˛biorstwo Wiedza i Praca Sales of goods and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest on loans granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchased services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fixed assets purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loans granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17 305 2 855 — 3 266 53

18 243 6 493 26 4 300 —

Armaton Polska Sp. z o.o. Sales of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest on loans granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loans granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * net of impairment loss amounting to PLN 328 thousand F-52

14 77 449* 1

14 88 673* 1

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 27. Related parties (continued) Przedsie˛biorstwo Wiedza i Praca and Armaton Polska Sp. z o.o. represent companies wholly-owned by Mr. Przemysław Sztuczkowski, the parent Company’s sole-shareholder and the President of the Management Board. The main scope of co-operation with Wiedza i Praca is related to purchase of administration, management, cleaning, security and other services by the Group. The loan granted to Przedsie˛biorstwo Wiedza i Praca is subject to a fixed 8% interest rate and the principal is to be repaid in monthly installments of PLN 100 thousand. The loan granted to Armaton Polska Sp. z o.o. is subject to fixed 10,8% interest rate and the principal is to be repaid until 2012. The impairment write-off of PLN 328 thousand recognised as at 31 December 2005 is a result of the management assessment as to the financial condition of the borrower taking into consideration the planned liquidation of this entity in the future. PRYMKO is wholly-owned by Mr. Krzysztof Walarowski, the parent Company’s Management Board member. The main scope of co-operation with this entity is related to the purchase of consulting services by the Group. Transactions with the members of the Management and Supervisory Boards The remuneration of the Management and Supervisory Boards members was as follows: 2005

Management Board of the parent Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supervisory Board of the parent Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management Boards of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supervisory Boards of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2004

3 954 313 1 592 103

3 779 110 798* 104*

5 962

4 791

* The remuneration relates to the period starting from obtaining control of subsidiaries. Additionally, one of the parent Company’s Management Board members is entitled to an annual bonus amounting to 1% of the Group’s consolidated net profit, towards which a provision of PLN 150 thousand was recognised in the income statement. 28. Subsequent events Acquisition of HSW Huta Stali Jakos´ciowych Sp. z o.o. and HSW Walcownia Blach Sp. z o.o. In January 2006, the Group acquired all of the shares in HSW Huta Stali Jakos´ciowych Sp. z o.o. and HSW Walcownia Blach Sp. z o.o. for PLN 193,000 thousand, including PLN 130,000 thousand paid in cash on acquisition and PLN 63,000 thousand payable in cash with deferred payment terms i.e. in instalments from January 2006 to January 2011. Legal and other fees directly connected with the acquisition amounted to PLN 1,853 thousand. The business acquired is involved in manufacturing and processing of high quality metal products. The acquisition covered two separate legal entities which were acquired within the scope of the same transaction. The effect of acquisition was accounted for as related businesses. The payable for the shares is an interest-free liability and the fair value of this consideration was estimated at the acquisition date at PLN 185,710 thousand (including the deferred tax impact of PLN 1,710 thousand). Effect of acquisition: The acquisition described in the preceding paragraph had the following effect on the Group’s assets and liabilities.

F-53

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 28. Subsequent events (continued) Acquiree’s net assets at the acquisition date Recognised values

Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest-bearing loans and borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net identifiable assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

126,173 9,748 543 3,810 37,761 65,721 4,933 (2,196) (9,939) (1,081) (47,910) 187,563

% of net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100%

Goodwill on acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Total fair value of consideration* including: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(187,563)

Consideration paid, satisfied in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(136,653)

Consideration payable in the next periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(50,910)

Cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,933

Cash outflow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(131,720)

* Include legal fees and other fees amounting to PLN 1,853 thousand. In order to finance the acquisition of HSW Huta Stali Jakos´ciowych Sp. z o.o. and HSW Walcownia Blach Sp. z o.o. the Group has drawn a loan of PLN 120,000 thousand. The loan facility was arranged in 2005 with a consortium of three banks including Bank Przemysłowo Handlowy S.A., Bank Polska Kasa Opieki S.A. and Bank Handlowy w Warszawie S.A. Acquisition of Przedsie˛biorstwo Pan´stwowe Centrostal Górnos´la˛ski In March 2006, the Group acquired all of the shares in Przedsie˛biorstwo Pan´stwowe Centrostal Górnos´la˛ski for PLN 56,000 thousand satisfied in cash. Legal and other fees directly connected with the acquisition amounted to PLN 422 thousand. The company acquired is involved in trading in metal products. Effect of acquisition: The acquisition described in the preceding paragraph had the following effect on the Group’s assets and liabilities.

F-54

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 28. Subsequent events (continued) Acquiree’s net assets at the acquisition date Recognised values

Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Government grants and deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net identifiable assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25,069 59 55 28,899 18,238 9,198 (25,519) — 55,999

% of net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100%

Goodwill on acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

423

Consideration paid, satisfied in cash* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(56,422)

Cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9,198

Cash outflow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(47,224)

* Include legal fees and other fees amounting to PLN 422 thousand. As the financial statements of HSW Huta Stali Jakos´ciowych Sp. z o.o., HSW Walcownia Blach Sp. z o.o. and Przedsie˛biorstwo Pan´stwowe Centrostal Górnos´la˛ski were not maintained in accordance with IFRS, it was impracticable to determine the carrying amounts of the assets and liabilities of those companies immediately prior to the acquisition in accordance with IFRS. Other acquisitions: On 7 August 2006, following a series of shares acquisitions (50.44% in total), including the acquisition of SteelCo Sp. z o.o., which holds the shares in Centrostal Gdan´sk S.A., the parent Company obtained control of Centrostal Gdan´sk S.A. The value of the transactions amounted to PLN 10.5 million. Centrostal Gdan´sk S.A. is involved in trading in metal products. SteelCo Sp. z o.o. does not conduct any business activities. As at the date of this reporting, the Group has not established the fair value of the net identifiable assets and liabilities and contingent liabilities acquired. As the financial statements of Centrostal Gdan´sk S.A. were not maintained in accordance with IFRS, it was impracticable to determine the carrying amounts of the assets and liabilities of those companies immediately prior to the acquisition in accordance with IFRS. Following a series of transactions, the Parent Company obtained control of Centrostal Opole S.A. with a shareholding of 94.0%. The value of the transactions amounted to PLN 2.8 million. The company acquired deals with trading of metal products. As at the date of this reporting, the Group has not established the fair value of the net identifiable assets and liabilities and contingent liabilities acquired. As the financial statements of Centrostal Opole S.A. were not maintained in accordance with IFRS, it was impracticable to determine the carrying amounts of the assets and liabilities of this company immediately prior to the acquisition in accordance with IFRS. On 4 January 2006, the Group acquired 51% of the shares in Kapitał Sp. z o.o. for PLN 401 thousand satisfied in cash. The company’s scope of activity includes mainly financial and advisory services. As a result of the acquisition, goodwill of PLN 96 thousand was recognised. On 1 March 2006, the Group established Złomrex China Limited by contribution in cash of PLN 1 thousand for 100% of the shares in this entity. The scope of activity of Złomrex China Limited includes trading in metal products. On 29 March 2006, the Group established Złomrex — Pruszków Sp. z o.o. by contribution in cash of PLN 50 thousand for 100% of the shares in this entity. The scope of activity of Złomrex — Pruszków Sp. z o.o. includes purchasing and processing of iron scrap. F-55

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 28. Subsequent events (continued) On 15 May 2006, the Group established Złomrex Zbrojarnia Sp. z o.o. by contribution in cash of PLN 50 thousand for 100% of the shares in this entity. The scope of activity of Złomrex Zbrojarnia Sp. z o.o. includes processing of metal products and production of metal products for construction. On 3 August 2006, the Group established AB Stahl AG. by contribution in cash of EUR 50 thousand for 100% of the shares in this entity with the purpose of trading in iron scrap in Germany. Until the date of this reporting the entity was not registered and did not conduct any activities. 29. Accounting estimates and judgements Employee benefits Liabilities for retirement payments were calculated by an independent actuary based on following assumptions: 2005

2004

5.0% 1%

5.8% 2%

Discount rate as at 31 December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Future salary increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For significant assumptions and estimates applied for impairment tests for cash-generating units containing goodwill please refer to note 11. 30. Explanation of transition to IFRS As stated in note 1(b), these are the Group’s first consolidated financial statements prepared in accordance with IFRS EU. The accounting policies set out in note 1 have been applied in preparation of the consolidated financial statements for the financial year ended 31 December 2005, the comparative information presented in these financial statements for the year ended 31 December 2004 and in the preparation of the opening balance at 1 January 2004 in accordance with the IFRS EU (the Group’s date of transition). In preparing its opening IFRS balance sheet, the Group has adjusted amounts reported in the previous financial statements which were prepared in accordance with the Polish accounting principles. The explanation of the impact of the transition to IFRS EU from the former accounting principles on the Group’s financial statements, profitability and cash flows is set out in the following tables and the notes that accompany the tables. Reconciliation of equity PAS* Note

Assets Property, plant and equipment . . . . . . . . . . Intangible assets . . . . . . . . . . . . . . . . . . . . . Investment property . . . . . . . . . . . . . . . . . . Other investments . . . . . . . . . . . . . . . . . . . Other receivables . . . . . . . . . . . . . . . . . . . . Prepaid perpetual usufruct of land . . . . . . . Deferred tax assets . . . . . . . . . . . . . . . . . . .

a, b c, d e d a g

44 160 10 436 — 939 1 774 — 230

Effects of transition to IFRS EU 1 January 2004

IFRS EU

Effects of transition to IFRS PAS* IFRS EU EU 31 December 2004

(6 149) — — — — 6 149 (209)

38 011 269 034 10 436 10 918 — 603 939 4 711 1 774 3 274 6 149 — 21 22 584

(10 846) 4 122 — (911) (1 496) 10 364 (8 897)

258 188 15 040 603 3 800 1 778 10 364 13 687

Total non-current assets . . . . . . . . . . . . .

57 539

(209)

57 330 311 124

(7 664)

303 460

Inventories . . . . . . . . . . . . . . . . . . . . . . . . . h Other investments . . . . . . . . . . . . . . . . . . . e Income tax receivable . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . b, d, e, h, i, j Cash and cash equivalents . . . . . . . . . . . . . e, j, k

39 612 17 357 397 94 925 12 812

(7 219) — — 17 432 (10 631)

32 393 114 009 17 357 1 319 397 — 112 357 137 378 2 181 16 304

(1 544) 42 — 11 889 (11 862)

112 465 1 361 — 149 267 4 442

Total current assets . . . . . . . . . . . . . . . . .

165 103

(418)

164 685 269 010

(1 475)

267 535

Total assets . . . . . . . . . . . . . . . . . . . . . . . .

222 642

(627)

222 015 580 134

(9 139)

570 995

F-56

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 30. Explanation of transition to IFRS (continued)

Note

Effects of transition to IFRS PAS* IFRS EU EU 1 January 2004

Effects of transition to IFRS PAS* IFRS EU EU 31 December 2004

Equity Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c, e, f, l

47 691 338 13 863

— — —

47 691 47 691 338 13 829 13 863 104 501

— — 97 834

47 691 13 829 202 335

Total equity attributable to equity holders of the parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

61 892 —

— —

61 892 166 021 — 13 600

97 834 365

263 855 13 965

61 892

—

61 892 179 621

98 199

277 820

l

—

—

—

93 868

(93 868)

—

f

15 418 — —

— — —

15 418 — —

66 606 1 616 14

(3 573) — —

63 033 1 616 14

— —

265 8 133

— (8 133)

265 —

15 418

76 634

(11 706)

64 928

11 219 — 65 430 127 954 — 502 — 4 320 68 056 96 211 — 954

35 559 (37 243) (144) — 64 —

35 559 90 711 358 4 320 96 275 954

e, f

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Negative goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities Interest-bearing loans and borrowings . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred government grants and other deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax provision . . . . . . . . . . . . . . . . . . . . . . . . . .

f, g

Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest-bearing loans and borrowings . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred government grants and other deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

m e, f, i n e, k

— 209

— (209)

15 627

(209)

— 11 219 76 956 (11 526) 37 (37) — — 68 130 (74) — — —

—

—

70

—

70

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . .

145 123

(418) 144 705 230 011

(1 764)

228 247

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

160 750

(627) 160 123 306 645

(13 470)

293 175

Total equity and liabilities . . . . . . . . . . . . . . . . . . . . . .

222 642

(627) 222 015 580 134

(9 139)

570 995

F-57

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 30. Explanation of transition to IFRS (continued) Reconciliation of profit for 2004 Note

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

p e, p c, e, l

Operating profit before financing costs . . . . . . . . . . . . . . . . . . . Financial income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

e e, f

Net financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired over cost . . . . . . .

l, f

Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

IFRS EU

e, o 1 414 971 (220 073) 1 194 898 e, o, p (1 227 694) 208 226 (1 019 468)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PAS*

Effect of transition to IFRS EU

e, f

187 277

(11 847)

175 430

2 772 (39 337) (21 000) (14 283)

— 17 254 (15 866) 11 422

2 772 (22 083) (36 866) (2 861)

115 429

963

116 392

8 760 (17 392)

1 (255)

8 761 (17 647)

(8 632)

(254)

(8 886)

3 994

97 042

101 036

110 791

97 751

208 542

(3 710)

51

(3 659)

Profit for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

107 081

97 802

204 883

Attributable to: Equity holders of the parent . . . . . . . . . . . . . . . . . . . . . . . . . . Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

104 129 2 952

97 834 (32)

201 963 2 920

Profit for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

107 081

97 802

204 883

Basic earnings per share (PLN) . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.18

2.05

4.23

Diluted earnings per share (PLN) . . . . . . . . . . . . . . . . . . . . . . . . .

2.18

2.05

4.23

* – figures include the effect of change in the accounting policy regarding the valuation of finished goods according to FIFO method PAS — Polish Accounting Act dated 29 September 1994 Explanations to the reconciliation of equity as at 1 January and 31 December 2004 and the profit for 2004 Effects of transition to IFRS EU (a) Presentation of perpetual usufruct of land — the adjustment relates to prepaid perpetual usufruct of land which under PAS was presented within property, plant and equipment. Under IFRS UE it is presented under a separate caption in the balance sheet. (b) Presentation of prepayments for fixed assets — the adjustment relates to prepayments for property, plant and equipment which under PAS were presented within property, plant and equipment and under IFRS UE under trade and other receivables. (c) Reversal of goodwill amortization of PLN 1,126 thousand — in accordance with IFRS UE, goodwill recognised as at the date of transition into IFRS UE is not amortized but instead is tested for impairment. Consequently, the amortization of goodwill recognised in the financial statements under PAS for 2004 was reversed. (d) Presentation of development costs — according to IFRS UE, development costs are recognised as intangibles assets and under PAS they are recognised within trade and other receivables. F-58

ZŁOMREX S.A. (in PLN thousand, unless stated otherwise) EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 30. Explanation of transition to IFRS (continued) (e) Consolidation of Nowa Jakos´c´ — Organizacja Odzysku S.A., previously excluded from consolidation due to insignificant influence on the financial statements. (f) Valuation of low-interest loan received by Ferrostal Łabe˛dy Sp. z o.o. (subsidiary) from a government institution — under PAS, loans were recognised at nominal value, while according to IFRS UE interest-bearing borrowings are stated at amortized cost with any difference between cost and redemption value being recognized in the income statement over the period of the borrowings on an effective interest basis. (g) Set-off of deferred tax assets and liability — according to IFRS UE, deferred tax assets and deferred tax liability should be offset if the entity has a legally enforceable right to offset current tax liabilities and assets, and the deferred tax liabilities and assets relate to income taxes levied by the same tax authority. (h) Presentation of prepayments for inventory — the adjustment is related to prepayments for inventory which under IFRS UE are recognised within trade and other receivables. (i) Valuation of loans and borrowings at amortised cost — under PAS, loans were recognised at nominal value while according to IFRS UE, loans are financial liabilities which, at the date of initial recognition, should be measured at fair value and subsequently at amortised cost using the effective interest rate. (j) Elimination of social fund which is not controlled by the entity. (k) Presentation of bills of exchange receivable which were classified as cash equivalents under PAS. (l) Recognition in the income statement of the excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities over cost, arising on the acquisition of subsidiaries. According to PAS this excess should be presented as a separate element of equity and liabilities and recognised as income, firstly in the periods the acquiring entity anticipates to incur losses and costs due to the business combination and the remaining amount of the excess proportionally over the period being the weighted average economic useful life of property, plant and equipment acquired in the business combination. Under IFRS UE this excess after additional re-assessment of measurement and recognition of assets, liabilities and contingent liabilities should be recognised as income in the period the business combination occured. (m) Separate presentation of bank overdrafts. (n) Presentation of unused holiday leave accruals. (o) De-recognition of revenues (and corresponding cost of sales) from the sales of semi-finished products to ZW — Walcownia Bruzdowa Sp. z o.o. that were repurchased after processing. The adjustment is due to the fact that the substance of these transactions was processing services. (p) Presentation changes in order to ensure the consistency in the classification of costs (reclassification between cost of sales, distribution expenses and administration expenses for 2004). Explanation of material adjustments to the statement of cash flows for 2004 Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management were classified as financing cash flows under the previous accounting principles and are reclassified as cash and cash equivalents under IFRS EU. There are no other material differences between the cash flow statement presented under IFRS EU and the cash flow statement presented under previous accounting principles.

F-59

Pro Forma Financial Information for the year ended 31 December 2005 and for the nine months ended 30 September 2006 of Złomrex S.A.

F-60

Assurance Report on Pro Forma Financial Information To the Management Board of Złomrex S.A. We report on the pro forma financial information, which has been compiled on the basis described in the Note 1 “Introduction”. The pro forma financial information has been prepared, for illustrative purposes only, to provide information about how the acquisitions of HSW-Huta Stali Jakos´ciowych Sp. z o.o. and HSWWalcownia Blach Sp. z o.o., which were completed during the first quarter of 2006, and the anticipated acquisition of the voestalpine Stahlhandel GmbH Group to be completed during the first quarter of 2007 might have affected the consolidated balance sheets of the Company and its subsidiaries (“the Group”) as at 31 December 2005 and 30 September 2006 and consolidated income statements for the year ended 31 December 2005 and for the nine month period ended 30 September 2006 presented on the basis of the accounting policies of the Group. Because of its nature, the pro forma financial information addresses a hypothetical situation and therefore does not represent the Company’s actual financial position or results had the transaction or event occurred at the beginning of the reporting periods. It is management’s responsibility to compile the pro forma financial information in accordance with the requirements of European Commission Regulation 2004-809 (“ the EU Regulation”) and the Committee of European Securities Regulator’s (“CESR”) Level 3 guidance. It is our responsibility to express an opinion required by Annex II item 7 of the EU Regulation, as to the proper compilation of the pro forma financial information. In providing this opinion we are not updating or refreshing any reports or opinions previously made by us or any other auditor on any financial information used in the compilation of the pro forma financial information, nor do we accept responsibility for our reports or opinions beyond that owed to those to whom those reports or opinions were addressed at the dates of their issue. Except as discussed in the paragraphs below, we performed our work in accordance with International Standard on Assurance Engagements 3000, Assurance engagements other than audits or reviews of historical financial information. The work that we performed for the purpose of making this report, which involved no independent examination of any of the underlying financial information, including their adjustment to the Company’s accounting policies nor of the pro forma assumptions stated in the pro forma notes consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the pro forma financial information with the management of the Company. We planned and performed our work so as to obtain all the information and explanations we considered necessary in order to provide us with reasonable assurance that the pro forma financial information has been properly compiled on the basis stated and that such basis is consistent with the accounting policies of the Group. Due to limited information available it was impracticable to determine the fair values of the identifiable assets (except for inventories), liabilities and contingent liabilities of the voestalpine Stahlhandel GmbH Group for the accounting for the anticipated business combination, which would be required under IFRS 3 Business Combinations. Therefore, it was assumed that the carrying amounts of assets, other than inventories, and liabilities presented in the balance sheet of the voestalpine Stahlhandel GmbH Group represent their fair values. We were not able to determine the impact of this matter on the pro forma financial information. Due to the limited information available it was impracticable to adjust the valuation of inventories held by the voestalpine Stahlhandel GmbH Group which is made using weighted average cost principle to the first in first out basis, which is a basis for inventory valuation applied by the Złomrex Group. We were unable to determine the impact of this matter on the pro forma financial information. The historical consolidated financial statements of the voestalpine Stahlhandel GmbH Group as at and for the year ended 31 December 2005 and as at and for the nine month period ended 30 September 2006 that were used in the compilation of the pro forma financial information did not include the financial statements of all subsidiaries. The sum of total assets of subsidiaries accounted at cost in the historical consolidated financial statements, before consolidation adjustments as at 31 December 2005 or 31 March 2006 (depending on their financial year end) and 30 September 2006, amounted to approximately Euro 24.2 million and Euro 43.6 million, respectively. Due to limited information available, it was impracticable to include the financial statements of these subsidiaries in the pro forma financial information. We were unable to determine the impact of this matter on the pro forma financial information. F-61

In our opinion, except for the effect of such adjustments, if any, as might have been determined to be necessary had sufficient information been available in order to estimate fair value adjustments to the carrying amounts of assets, other than inventories, and liabilities of the voestalpine Stahlhandel GmbH Group, the adjustment to the valuation of inventories held by the voestalpine Stahlhandel GmbH Group to the first in first out basis, and the adjustment to include the financial statements of those subsidiaries that were accounted at cost in the historical consolidated financial statements of the voestalpine Stahlhandel GmbH Group, the pro forma financial information has been properly compiled on the basis stated; and that basis is consistent with the accounting policies of the Company as described in the notes to the consolidated financial statements of the Company for period ended 31 December 2005. This report is required by Annex II item 7 of the EU Regulation and is given for the purpose of complying with that Regulation and for no other purpose. KPMG Audyt Sp. z o.o. Warsaw, 13 January 2007

F-62

ZŁOMREX S.A. Pro Forma Financial Information 1. Introduction 1.1 Background The Transaction On 27 January 2006, Złomrex Group (“the Group”) acquired 100% of shares in HSW Huta Stali Jakos´ciowych Sp. z o.o. (“HSW HSJ”) and HSW Walcownia Blach Sp. z o.o. (“HSW WB”) for PLN 193,000 thousand, including PLN 130,000 thousand paid in cash at the acquisition date and PLN 63,000 thousand payable in cash in instalments from January 2006 to January 2011 (“the Transaction”). The fair value of the consideration was estimated at the acquisition date at PLN 185,710 thousand (including the deferred tax impact of PLN 1,710 thousand). Legal and other fees directly attributable to the acquisition amounted to PLN 1,853 thousand. The Transaction covered two separate legal entities. The effect of the acquisition was accounted for as one business combination. The Transaction had the following effect on the Group’s assets and liabilities at the acquisition date. Recognised values

Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest-bearing loans and borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

126,173 9,748 543 3,810 37,761 65,721 4,933 (2,196) (9,939) (1,081) (47,910)

Net identifiable assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

187,563

% of net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100%

Total fair value of consideration* including: . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(187,563)

Consideration paid, satisfied in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consideration payable in the next periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(131,853) (55,710)

* Include legal fees and other fees amounting to PLN 1,853 thousand. As a result of the acquisition, the Group recognised PLN 1,252 thousand as an intangible asset related to major customer contracts and the related customer relationship. The probable Transaction On 20 December 2006, the Group concluded a share purchase agreement of 100% shares in voestalpine Stahlhandel GmbH Group that is anticipated to be effective in the first quarter of 2007 (“the probable Transaction”). The transfer of 74.9% share in voestalpine Stahlhandel GmbH Group is anticipated in the first quarter of 2007 (“expected acquisition date”) while the transfer of the remaining part of 25.1% will be made at the exercise date of put/call option set in the period between 1 January 2009 and 31 December 2010. The Management assumed the realisation of the option. The fair value of consideration was estimated at Euro 54,350 thousand (PLN 216,497 thousand) including Euro 11,785 thousand (PLN 46,946 thousand) to be paid in cash at the expected acquisition date, Euro 11,960 thousand (PLN 47,643 thousand) representing deferred payment (Euro 6,000 thousand payable as at 31 March 2009 and Euro 5,960 thousand payable at the exercise date of the put/call option) and payment of dividends from profits for the period ended 31 December 2006 and from retained profits of Euro 30,124 thousand in total (PLN 119,993 thousand). Additionally, in accordance with the share purchase agreement the Group is obliged to repay net debt to voestalpine AG estimated at Euro 44,500 thousand as at the expected acquisition date. Legal and other fees directly attributable to the acquisition amounted to Euro 481 thousand (PLN 1,915 thousand). F-63

ZŁOMREX S.A. Pro Forma Financial Information (continued) 1. Introduction (continued) The probable Transaction is expected to have the following effect on the Group’s assets and liabilities. Recognised values(***)

Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other short term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest-bearing loans and borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

143,803 4,026 19,342 465 221,892 208,032 17,451 11,434 (18,532) (246,495) (29,515) (7,143) (8,604) (5,494) (156,361)

Net identifiable assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

154,301

% of net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

**

***

100%

Total fair value of consideration** including: . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(216,497)

Consideration to be paid, to be satisfied in cash . . . . . . . . . . . . . . . . . . . . . . . . . . Consideration payable in the next periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill*** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(168,854) (47,643) 62,196

include payment of dividends from profits for the period ended 31 December 2006 and from retained profits of Euro 30,124 thousand in total (PLN 119,993 thousand) as well as legal fees and other fees amounting to PLN 1,915 thousand. presented calculation in PLN was based on the EUR/PLN exchange rate as at 30 September 2006.

The pro forma financial information has been prepared to illustrate the effect of the Transaction and the probable Transaction on the balance sheet and income statement of the Group as at and for the year ended 31 December 2005 and as at and for the nine month period ended 30 September 2006 as if the Transaction and the probable Transaction had occurred on 31 December 2004. The pro forma financial information has been prepared for illustrative purposes only and cannot give a true picture of the results of operations and financial position which would have been reported had the Transaction and the probable Transaction in fact occurred on the above date. This memorandum contains all the relevant information available to the management and the Directors of Złomrex S.A. which is significant to an understanding of the pro forma financial information. The pro forma financial information set out in this memorandum is the sole responsibility of the management and the Directors of Złomrex S.A. and was authorised by the Directors on 13 January 2007. 1.2 Basis of preparation The pro forma financial information has been prepared on the following basis: Pro forma balance sheet and income statement The pro forma balance sheet as at 31 December 2005 and income statement for the year then ended are derived from the historical consolidated financial statements of Złomrex S.A. as of and for the year ended 31 December 2005 prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS EU”) which were audited by KPMG Audyt Sp. z o.o., historical financial statements of HSW Huta Stali Jakos´ciowych Sp. z o.o. and HSW Walcownia Blach Sp. z o.o. as at and for the year ended F-64

ZŁOMREX S.A. Pro Forma Financial Information (continued) 1. Introduction (continued) 31 December 2005 prepared in accordance with the Act of 29 September 1994 on Accounting, which were audited by Doradca Zespół Doradców Finansowo-Ksie˛gowych Sp. z o.o. and historical consolidated financial statements of voestalpine Stahlhandel GmbH Group as at and for the year ended 31 December 2005 prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS EU”) which were reviewed by Grant Thornton Wirtschaftsprufungs- und Steuerberatungs- GmbH. The pro forma balance sheet as at 30 September 2006 and income statement for the nine month period then ended are derived from the historical consolidated financial statements of Złomrex S.A. as of and for the nine month period ended 30 September 2006 prepared in accordance with International Financial Reporting Standard for interim financial reporting as adopted by the European Union (“IFRS EU”) which were reviewed by KPMG Audyt Sp. z o.o., historical income statement of HSW Huta Stali Jakos´ciowych Sp. z o.o. for the one month period ended 31 January 2006 prepared in accordance with the Act of 29 September 1994 on Accounting and historical consolidated financial statements of voestalpine Stahlhandel GmbH Group as at and for the nine month period ended 30 September 2006 prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS EU”) which were reviewed by Grant Thornton Wirtschaftsprufungsund Steuerberatungs- GmbH. For the purpose of the pro forma financial information, the historical financial statements of HSW Huta Stali Jakos´ciowych Sp. z o.o. and HSW Walcownia Blach Sp. z o.o. as at and for the year ended 31 December 2005 and income statement of HSW Huta Stali Jakos´ciowych Sp. z o.o. for the one month ended 31 January 2006 were adjusted to ensure the presentation of financial information consistent with IFRS EU, i.e. accounting policies adopted by the Group in preparation of its consolidated financial statements. The explanation of pro forma adjustments is discussed in Section 1.3, ‘Significant assumptions’ below. Accounting policies Except for issues described below the accounting polices adopted in preparation of the pro forma financial information, which are consistent with those adopted by the Group in the preparation of its financial statements, are detailed in the audited consolidated financial statements of Złomrex S.A. as at and for the year ended 31 December 2005. Due to limited information available it was impracticable to determine the fair values of the identifiable assets (except for inventories), liabilities and contingent liabilities of voestalpine Stahlhandel GmbH Group for the accounting of business combination. Therefore it was assumed that carrying amounts of assets and liabilities (except for inventories) presented in the balance sheet of voestalpine Stahlhandel GmbH Group represent their fair values. Due to limited information available it was impracticable to adjust valuation of inventories held by voestalpine Stahlhandel GmbH Group to FIFO, which is a basis for inventories valuation in ZŁomrex Group. The historical consolidated financial statements of voestalpine Stahlhandel GmbH Group as at and for the year ended 31 December 2005 and as at and for the nine month period ended 30 September 2006 that were used in the preparation of the pro forma financial information did not include financial statements of certain subsidiaries. The sum of total assets of these subsidiaries as at 31 December 2005 or 31 March 2006 (depending on their fiscal year end) and 30 September 2006 (before consolidation adjustments) amounted to approximately Euro 24.2 million and Euro 43.6 million, respectively. Due to limited information available, it was impracticable to include financial statements of these subsidiaries in the pro forma financial information. 1.3 Significant assumptions The following significant assumptions and adjustments were made for the purpose of preparation of the pro forma financial information: 1

Total equity of HSW HSJ and HSW WB at the date of the Transaction and total equity of voestalpine Stahlhandel GmbH Group at the date of the probable Transaction (pre-acquisition equity) was eliminated. F-65

ZŁOMREX S.A. Pro Forma Financial Information (continued) 1. Introduction (continued) 2

For HSW HSJ and HSW WB the difference between the estimated fair value of the net assets acquired at 31 December 2004 and the fair value of the net assets actually acquired was recorded as an adjustment to retained earnings. Similarly, the difference between the discounted value of deferred consideration at 31 December 2004 and actual discounted value of deferred consideration at the acquisition date was recorded as an adjustment to retained earnings.

3

For anticipated acquisition of voestalpine Stahlhandel GmbH Group, the Management assumed the realisation of the share purchase option (described in section 1.1 above). Therefore 100% control was assumed over the voestalpine Stahlhandel GmbH Group.

4

The goodwill arising on the anticipated acquisition of voestalpine Stahlhandel GmbH Group was calculated using book values of the net assets of voestalpine Stahlhandel GmbH Group as of 30 September 2006 (except for inventories described in point 16). Due to limited information it was impracticable to determine the fair values of the identifiable assets (except for inventories), liabilities and contingent liabilities of voestalpine Stahlhandel GmbH Group as of this date, therefore it was assumed that carrying amounts of assets and liabilities (except for inventories) presented in the balance sheet of voestalpine Stahlhandel GmbH Group as of 30 September 2006 represent their fair values. The difference between book value of net assets as of 31 December 2004 and the values adopted for calculation of goodwill was recorded as an adjustment to retained earnings.

5

Prepayments for acquisition of shares in HSW HSJ and HSW WB which were presented as “Other investments” in the Group’s historical financial statements were eliminated in the pro forma financial information.

6

It was assumed that cash consideration for the acquisition of HSW HSJ and HSW WB was financed with interest bearing loan. Additional interest expense from 1 January 2005 to 31 January 2006 was calculated based on the terms and conditions of the loan agreements actually utilised in the Transaction.

7

It was assumed that cash consideration for the acquisition of voestalpine Stahlhandel GmbH Group and repayment of loans to the companies of voestalpine AG Group at the expected acquisition date was financed with the issuance of the Notes in the amount of Euro 87 million. Additional interest expense from 1 January to 31 December 2005 and from 1 January to 30 September 2006 was calculated based on the anticipated nominal interest rate of Notes of 9% adjusted by transactional costs to the effective interest rate of 9.6%.

8

It was assumed that total loans to voestalpine AG Group were repaid as at 31 December 2004 and there were no other borrowings from voestalpine AG Group during 2005 and the nine month period ended 30 September 2006. Total interest actually paid to voestalpine AG Group were eliminated in the pro forma financial information. The excess of inflows from Notes issuance drawn for the purpose of the repayment of loans to voestalpine AG Group outstanding as at the expected acquisition date, over actual net debt to voestalpine AG Group during 2005 or nine months ended 30 September 2006 was assumed to be utilised for payment of financial liabilities of Złomrex Group. Savings were calculated based on the actual terms and conditions of the loans utilised by the Group.

9

Deferred consideration for the acquisition of HSW HSJ, HSW WB and voestalpine Stahlhandel GmbH Group was stated at 1 January 2005 at its present value at this date. Subsequent to initial recognition, deferred consideration was stated at amortized cost with any difference between cost and redemption value being recognized in the pro forma income statement over the term of the borrowing on an effective interest rate basis.

10

It was assumed that the contribution of intangible assets and property, plant and equipment to HSW HSJ and HSW WB by their previous shareholders with corresponding increase in share capital, which in fact occurred in November 2005, had occurred prior to 31 December 2004.

11

As result, the rental and licence fees for the period January-November 2005 which related to the contributed assets (as discussed above) to HSW HSJ and HSW WB in November 2005 were eliminated from the income statement. Instead, depreciation and amortisation related to these F-66

ZŁOMREX S.A. Pro Forma Financial Information (continued) 1. Introduction (continued) assets were charged for the period from 1 January 2005 to 30 November 2005. The rental and licence fees paid were recorded as prepayments made to third party. 12

Other intangible assets resulting from the Transaction include major customer contracts and the related customer relationship. These assets were recorded at 1 January 2005 in the pro forma financial information based on estimated fair value at this date and were amortised on a straightline basis over their estimated useful life.

13

The intangible assets representing CO2 emission rights recognised on acquisition of HSW HSJ and HSW WB were recorded at 1 January 2005 in the pro forma financial information based on the fair value established at the acquisition date of HSW HSJ and HSW WB.

14

Property, plant and equipment of HSW HSJ and HSW WB were recorded at 1 January 2005 in the pro forma financial information based on the fair value determined at the acquisition date and adjusted for events of 2005 and nine month period ended 30 September 2006. They were depreciated in 2005 on a consistent basis with the Group’s current depreciation policy.

15

Prepaid perpetual usufruct of land disclosed by HSW HSJ and HSW WB was recorded at 1 January 2005 in the pro forma financial information based on the fair value determined at the acquisition date and adjusted for events of 2005 and nine month period ended 30 September 2006.

16

Inventories of finished goods and merchandise were recorded at 1 January 2005 in the pro forma financial information at their fair value representing selling prices less the costs to complete, including the costs of disposal and a reasonable profit margin for the selling effort. Similarly, inventories of work-in-progress were recorded at selling prices less the costs to complete, including the cost of disposal and a reasonable profit margin for the selling effort.

17

Due to limited information available it was impracticable to adjust valuation of inventories held by voestalpine Stahlhandel GmbH Group to FIFO, which is a basis for inventories valuation in Złomrex Group.

18

Employee benefits which were guaranteed to the employees of HSW HSJ and HSW WB on the acquisition date were recorded at 1 January 2005 in the pro forma financial information at the value actually granted and were disclosed as current liabilities at 31 December 2005.

19

Intragroup balances, and any unrealized gains and losses or income and expenses arising from intragroup transactions were eliminated in preparing the pro forma financial information.

20

Dividends which were distributed by HSW HSJ, HSW WB and voestalpine Stahlhandel GmbH Group to their previous shareholders in 2005 and in the nine month period ended 30 September 2006 were recorded as prepayments made to third party.

21

The deferred tax impact relating to proforma adjustments, where applicable, was calculated based on the current income tax rate of 19% enacted in Poland, except for the temporary differences that shall be realized by voestalpine Stahlhandel GmbH Group which were calculated based on the current income tax rate binding under the Austrian tax law of 25%.

F-67

ZŁOMREX S.A. 2. Pro Forma Financial Information as at and for the year ended 31 December 2005 2.1. Pro Forma Income Statement For the year ended 31 December 2005 Unaudited (A)

in PLN thousand

(B)

(C)

(D=A+B+C) (E) 2005 Total historical without 2005 2005 2005 Voestalpine Pro forma Złomrex Group HSW HSJ HSW WB Stahlhandel adjustments historical historical* historical*

F-68

Revenue . . . . . . . . . . . . . . . . . . . Cost of sales . . . . . . . . . . . . . . . .

976 236 (880 748)

351 211 (298 431)

98 087 (85 887)

1 425 534 (1 265 066)

Gross profit . . . . . . . . . . . . . . . .

95 488

52 780

12 200

160 468

902

Other income . . . . . . . . . . . . . . . Distribution expenses . . . . . . . . . Administrative expenses . . . . . . Other expenses . . . . . . . . . . . . . .

3 531 (15 691) (40 598) (4 725)

903 (2 270) (11 699) (5 199)

153 (347) (2 539) (761)

4 587 (18 308) (54 836) (10 685)

(23) — 2 770 23

Operating profit before financing costs ** . . . . . . . . .

38 005

34 515

8 706

81 226

3 672

Financial income . . . . . . . . . . . . Financial expenses . . . . . . . . . . .

3 815 (20 852)

2 464 (2 465)

679 (724)

6 958 (24 041)

(70) (10 867)

Net financing costs *** . . . . . . .

(17 037)

(1)

(45)

(17 083)

(10 937)

—

—

(80 063) 80 965

Share of profit of associates . . . .

—

—

Profit before tax . . . . . . . . . . . .

20 968

34 514

8 661

64 143

(7 265)

Income tax expense . . . . . . . . . .

(4 098)

(6 801)

(1 664)

(12 563)

1 381

Profit for the period . . . . . . . . .

16 870

27 713

6 997

51 580

Attributable to: Equity holders of the parent . . . . Minority interest . . . . . . . . . . . . .

15 304 1 566

27 713 —

6 997 —

Profit for the period . . . . . . . . .

16 870

27 713

6 997

Assumption (Note) 11, 14, 15, 19

19 11, 12 19

19 6, 9, 19

—

(F=D+E) G (H=F+G) (I) (J=H+I) 2005 2005 Pro forma 2005 Total with 2005 without Voestalpine Voestalpine Pro forma with Voestalpine Stahlhandel Stahlhandel Pro forma Assumption Voestalpine Stahlhandel historical historical adjustments (Note) Stahlhandel 1 345 471 (1 184 101)

1 254 327 (1 091 917)

2 599 798 (2 276 018)

— (17 489)

161 370

162 410

323 780

4 564 (18 308) (52 066) (10 662)

11 758 (102 217) (30 446) (5 275)

16 322 (120 525) (82 512) (15 937)

84 898

36 230

121 128

(17 489)

6 888 (34 908)

6 789 (9 888)

13 677 (44 796)

23 055 (28 446)

(28 020)

(3 099)

(31 119)

(5 391)

(314)

(314)

—

16

(17 489)

2 599 798 (2 293 507) 306 291

— — — —

16 322 (120 525) (82 512) (15 937) 103 639 7, 9 7, 8, 9

36 732 (73 242) (36 510)

—

(314)

56 878

32 817

89 695

(22 880)

(11 182)

(15 903)

(27 085)

5 126

(5 884)

45 696

16 914

62 610

(17 754)

44 856

50 014 1 566

(5 884) —

44 130 1 566

14 101 2 813

58 231 4 379

(17 754) —

40 477 4 379

51 580

(5 884)

45 696

16 914

62 610

(17 754)

44 856

* — adjusted to ensure the presentation of financial information consistent with IFRS EU ** — depreciation and amortisation charges included in pro forma operating costs amounted to PLN 43.7 million. ***—include interest income of PLN 11.9 million and interest expense of PLN 66.4 million.

21

66 815 21

(21 959)

ZŁOMREX S.A. 2. Pro Forma Financial Information as at and for the year ended 31 December 2005 (continued) 2.2. Pro Forma Balance Sheet As at 31 December 2005 Unaudited (A) 2005 Złomrex Group historical

(B)

(C)

(D=A+B+C)

(E)

2005 HSW HSJ historical*

2005 HSW WB historical*

2005 Total

Pro forma adjustments

Assumption (Note)

Assets Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . 269 011 Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 953 Investment property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 603 Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 508 Other financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 473 Prepaid perpetual usufruct of land . . . . . . . . . . . . . . . . . . . 11 959 Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 845

120 362 1 354 — — — — 1 270 2 096

22 860 453 — 543 — — 188 560

412 233 21 760 603 4 051 — 2 473 13 417 13 501

(20 506) 8 006 — (972) — — 1 370 (932)

10, 11, 14 10, 12, 13

Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . 318 352

125 082

24 604

468 038

(13 034)

Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 632 Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 976 Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . — Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . 153 798 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . 14 623

26 707 — 310 46 524 2 661

5 520 — — 14 270 1 810

135 859 1 976 310 214 592 19 094

105 — — 13 524 —

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274 029

76 202

21 600

371 831

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 592 381

201 284

46 204

839 869

Equity Issued share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 691 Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 995 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 473

116 895 13 380 27 712

20 481 5 777 6 997

185 067 106 152 179 182

in PLN thousand

F-69

Foreign exchange translation differences . . . . . . . . . . . . .

(F=D+E) 2005 Total without Voestalpine Stahlhandel

(G) 2005 Voestalpine Stahlhandel historical

391 727 29 766 603 3 079 — 2 473 14 787 12 569

139 806 1 224 — — 16 624 — — 3 609

— 60 265 — — — — — 753

455 004

161 263

61 018

135 964 1 976 310 228 116 19 094

157 709 17 296 — 136 808 16 393

— 37 575 — 20 726 (421)

13 629

385 460

328 206

57 880

771 546

595

840 464

489 469

118 898

1 448 831

(137 376) 1, 10 (19 157) 1, 10 (29 887) 1, 2, 6, 19, 11, 12, 16, 18, 20, 21 —

47 691 86 995 149 295

20 762 18 466 91 493

5

15

16

11, 19, 20

(6 840)

Pro forma adjustments

(I=F+G+H)

Assumption (Note)

4

21

Total pro forma

531 533 91 255 603 3 079 16 624 2 473 14 787 16 931 677 285

17 7 20 20

293 673 56 847 310 385 650 35 066

(20 762) 1 (18 466) 1 (102 727) 1, 4, 7, 8, 9, 16, 20, 21 (3 604)

47 691 86 995 138 061

262 303 32 603

—

—

—

—

Total equity attributable to equity holders of the parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279 159 Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 821

157 987 —

33 255 —

470 401 15 821

(186 420) —

283 981 15 821

123 881 16 782

(145 559) —

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294 980

157 987

33 255

486 222

(186 420)

299 802

140 663

(145 559)

*—adjusted to ensure the presentation of financial information consistent with IFRS EU

—

(H)

3 3

(10 444)

294 906

ZŁOMREX S.A. 2. Pro Forma Financial Information as at and for the year ended 31 December 2005 (continued) 2.2. Pro Forma Balance Sheet (continued) As at 31 December 2005 Unaudited (A) 2005 Złomrex Group historical

(B)

(C)

(D=A+B+C)

(E)

2005 HSW HSJ historical*

2005 HSW WB historical*

2005 Total

Pro forma adjustments

Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest-bearing loans and borrowings . . . . . . . . . . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions for liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred government grants and other deferred income . . . . . . . . . .

52 653 1 432 — — — 606

— 7 165 — — — —

613 1 836 — — — —

53 266 10 433 — — — 606

99 900 — 44 345 — — —

Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

54 691

7 165

2 449

64 305

144 245

Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 141 Interest-bearing loans and borrowings . . . . . . . . . . . . . . . . . . . . . . . 129 194 Other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 320 Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184 Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 065 Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 708 Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 793 Deferred government grants and other deferred income . . . . . . . . . . 305

1 495 — — 2 308 — 188 32 141 —

— — — 198 — 402 9 900 —

30 636 129 194 1 320 2 690 1 065 1 298 122 834 305

— 27 072 — — — — 15 698 —

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242 710

36 132

10 500

289 342

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297 401

43 297

12 949

353 647

Total equity and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 592 381

201 284

46 204

839 869

595

in PLN thousand

F-70

*—adjusted to ensure the presentation of financial information consistent with IFRS EU

Assumption (Note)

6

(F=D+E) 2005 Total without Voestalpine Stahlhandel

(G) 2005 Voestalpine Stahlhandel historical

(H)

(I=F+G+H)

Pro forma adjustments

Assumption (Note)

7

Total pro forma

153 166 10 433 44 345 — — 606

11 888 25 988 — 1 637 6 214 —

381 967 — — — — —

208 550

45 727

381 967

30 636 156 266 1 320 2 690 1 065 1 298 138 532 305

— 168 878 — — 6 427 5 404 122 370 —

(10 087) (107 423) — — — — — —

42 770

332 112

303 079

(117 510)

187 015

540 662

348 806

264 457

1 153 925

840 464

489 469

118 898

1 448 831

2

6

2, 9, 18, 19

547 021 36 421 44 345 1 637 6 214 606 636 244

8 8, 9

20 549 217 721 1 320 2 690 7 492 6 702 260 902 305 517 681

ZŁOMREX S.A. 3. Pro Forma Financial Information as at and for nine month period ended 30 September 2006 3.1. Pro Forma Income Statement For nine month period ended 30 September 2006 Unaudited (A)

(B)

in PLN thousand

1.01.200630.09.2006 Złomrex Group historical

1.01.200631.01.2006 HSW HSJ historical*

(C=A+B) 1.01.200630.09.2006 Total historical without Voestalpine Stahlhandel

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 416 970 (1 228 584)

29 682 (25 150)

1 446 652 (1 253 734)

F

(G=E+F)

Pro forma adjustments

Assumption (Note)

1.10.200530.09.2006 Pro forma without Voestalpine Stahlhandel

1.01.200630.09.2006 Voestalpine Stahlhandel historical

1.01.200630.09.2006 Total with Voestalpine Stahlhandel historical

(7 488) 13 002

19 16, 19

1 439 164 (1 240 732)

964 997 (838 506)

2 404 161 (2 079 238)

F-71

188 386

Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution expenses . . . . . . . . . . . . . . . . . . . . . . . . . . Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2 662 (21 545) (52 763) (6 992)

Operating profit before financing costs** . . . . . . . .

109 748

Financial income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 332 (25 219)

45 (47)

5 377 (25 266)

— —

Net financing costs*** . . . . . . . . . . . . . . . . . . . . . . . .

(19 887)

(2)

(19 889)

—

2 (147) (682) (259) 3 446

192 918

(E=C+D)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Share of profit of associates . . . . . . . . . . . . . . . . . . . . . Excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired over cost . . . . . . . . . . . . . . . . . . .

4 532

(D)

2 664 (21 692) (53 445) (7 251) 113 194

5 514 — — (10) —

12

5 504

(H)

(I=G+H)

Pro forma adjustments

1.01.200630.09.2006 Pro forma with Voestalpine Stahlhandel

Assumption (Note)

— —

2 404 161 (2 079 238)

198 432

126 491

324 923

—

324 923

2 664 (21 692) (53 455) (7 251)

11 477 (71 464) (19 292) (3 992)

14 141 (93 156) (72 747) (11 243)

— — — —

14 141 (93 156) (72 747) (11 243)

118 698

43 220

161 918

—

161 918

5 377 (25 266)

3 616 (6 761)

8 993 (32 027)

— (34 441)

(19 889)

(3 145)

(23 034)

(34 441)

7, 8, 9

8 993 (66 468) (57 475)

—

—

—

—

—

2 264

2 264

—

2 264

5 894

—

5 894

—

5 894

—

5 894

—

5 894

5 504

104 703

42 339

147 042

(34 441)

(20 881)

(11 023)

(31 904)

6 301

Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

95 755

3 444

99 199

Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(18 887)

(1 079)

(19 966)

Profit for the period Attributable to:

76 868

2 365

79 233

4 589

83 822

31 316

115 138

(28 140)

86 998

Equity holders of the parent . . . . . . . . . . . . . . . . . . . . . Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

75 129 1 739

2 365 —

77 494 1 739

4 589 —

82 083 1 739

27 689 3 627

109 772 5 366

(28 140) —

81 632 5 366

Profit for the period . . . . . . . . . . . . . . . . . . . . . . . . . .

76 868

2 365

79 233

4 589

83 822

31 316

115 138

(28 140)

86 998

(915)

* — adjusted to ensure the presentation of financial information consistent with IFRS EU ** — depreciation and amortisation charges included in pro forma operating costs amounted to PLN 35.4 million ***—include interests income of PLN 4.5 million and interest expense of PLN 46.9 million

21

112 601 21

(25 603)

ZŁOMREX S.A. 3. Pro Forma Financial Information as at and for nine month period ended 30 September 2006 (continued) 3.2. Pro Forma Balance Sheet As at 30 September 2006 Unaudited

in PLN thousand

(A) 2006 Złomrex Group historical

(B) Pro forma adjustments

F-72

Assets Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid perpetual usufruct of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

443.671 28.668 1.978 1.787 — 3.173 27.104 7.768

— (10) — — — — — (1.643)

Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

514.149

(1.653)

Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

255.780 4.476 329.361 27.576 6.874

— — 20.090 — —

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

624.067

20.090

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.138.216

Equity Issued share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Assumptions (Note)

(C=A+B) 2006 Total without Voestalpine Stahlhandel

(E) Pro forma adjustments

(F=C+D+E) Assumptions (Note)

Total pro forma

143.799 4.027 — 4.705 14.639 — — 4.238

— 62.196 — —

512.496

171.408

69.251

255.780 4.476 349.451 27.576 6.874

206.795 17.452 208.033 11.433 —

— 38.779 35.349 (421) —

644.157

443.713

73.707

1.161.577

18.437

1.156.653

615.121

142.958

1.914.732

47.691 95.621 210.994

— — 11.465

47.691 95.621 222.459

20.762 18.466 106.218

(20.762) (18.466) (118.399)

Foreign exchange translation differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

—

—

Total equity attributable to equity holders of the parent . . . . . . . . . . . . . . . . Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

354.306 34.982

11.465 —

365.771 34.982

143.349 18.532

(159.300) 2.159

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

389.288

11.465

400.753

161.881

(157.141)

* — adjusted to ensure the presentation of financial information consistent with IFRS EU

12

21

11

2, 6, 11, 12, 14, 16, 21

443.671 28.658 1.978 1.787 — 3.173 27.104 6.125

(D) 2006 voestalpine Stahlhandel historical

(2.097)

— — 7.055

4

21

587.470 94.881 1.978 6.492 14.639 3.173 27.104 17.418 753.155

17 7 20 20

1 1 1, 4, 7, 8, 9, 16, 20, 21

(1.673)

462.575 60.707 592.833 38.588 6.874

47.691 95.621 210.278 (3.770)

3 3, 20

349.820 55.673 405.493

ZŁOMREX S.A. 3. Pro Forma Financial Information as at and for nine month period ended 30 September 2006 (continued) 3.2. Pro Forma Balance Sheet (continued) As at 30 September 2006 Unaudited

in PLN thousand

(A) 2006 Złomrex Group historical

(B) Pro forma adjustments

Assumptions (Note)

(C=A+B) 2006 Total without Voestalpine Stahlhandel

(D) 2006 voestalpine Stahlhandel historical

(E)

(F=C+D+E)

Pro forma adjustments

Assumptions (Note)

7

Total pro forma

Liabilities

F-73

Interest-bearing loans and borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions for liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred government grants and other deferred income . . . . . . . . . . . . . . . . . . . . . . . . . .

142.793 10.407 36.314 — — 1.614

— — — — — —

142.793 10.407 36.314 — — 1.614

25.554 29.515 — 825 7.142 —

394.208 — — — — —

Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

191.128

—

191.128

63.036

394.208

Bank overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest-bearing loans and borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred government grants and other deferred income . . . . . . . . . . . . . . . . . . . . . . . . . .

40.958 237.187 248 2.765 2.322 988 271.577 1.755

— 6.972 — — — — — —

40.958 244.159 248 2.765 2.322 988 271.577 1.755

— 220.941 — — 8.604 4.669 155.990 —

(4.572) (89.537) — — — — — —

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

557.800

6.972

564.772

390.204

(94.109)

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

748.928

6.972

755.900

453.240

300.099

1.509.239

Total equity and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.138.216

18.437

1.156.653

615.121

142.958

1.914.732

* — adjusted to ensure the presentation of financial information consistent with IFRS EU

6

562.555 39.922 36.314 825 7.142 1.614 648.372

8 8, 9

36.386 375.563 248 2.765 10.926 5.657 427.567 1.755 860.867

Pro Forma Income Statement for the twelve months ended 30 September 2006 of Złomrex S.A.

F-74

ZŁOMREX S.A. Pro Forma Financial Information as at and for twelve month period ended 30 September 2006 (continued) Pro Forma Income Statement For the 12 months ended 30 September 2006 (B)

(C)

(D=A+B+C)

in PLN thousand

(A) 1.10.200530.09.2006 Złomrex Group historical

1.10.200531.01.2006 HSW HSJ historical*

1.10.200531.12.2005 HSW WB historical*

1.10.200530.09.2006 Total

Pro forma adjustments

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 655 510 (1 437 875)

112 953 (95 781)

23 422 (21 131)

1 791 885 (1 554 787)

(34 760) 34 912

2 291

F-75

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

217 635

17 172

Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 548 (26 534) (63 652) (8 989)

856 (567) (3 618) (2 976)

Operating profit before financing costs . . . . . . . . . . . . . . . . .

123 008

10 867

Financial income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 563 (29 656)

885 (811)

Net financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(23 093)

(E)

(F=D+E) 1.10.200530.09.2006 Pro forma without VA

(G)

(H=F+G)

1.10.200530.09.2006 VA historical

1.10.200530.09.2006 Total with VA

1 757 125 1 244 734 3 001 859 (1 519 875) (1 088 481) (2 608 356)

(I)

(J=H+I)

Pro forma adjustments

1.10.200530.09.2006 Pro forma with VA

— (4 168) (4 168)

3 001 859 (2 612 524)

237 098

152

237 250

156 253

393 503

129 (85) (749) (613)

5 533 (27 186) (68 019) (12 578)

— — 119 —

5 533 (27 186) (67 900) (12 578)

13 636 (94 766) (26 274) (3 941)

19 169 (121 952) (94 174) (16 519)

973

134 848

271

135 119

44 908

180 027

(4 168)

175 859

139 (103)

7 587 (30 570)

— (3 635)

7 587 (34 205)

5 276 (8 802)

12 863 (43 007)

— (34 664)

12 863 (77 671)

74

36

(22 983)

(3 635)

(26 618)

(3 526)

(30 144)

(34 664)

(64 808)

— — — —

389 335 19 169 (121 952) (94 174) (16 519)

Share of profit of associates . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

—

—

—

—

—

1 861

1 861

—

1 861

Excess of the interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired over cost . . . . .

5 894

—

—

5 894

—

5 894

—

5 894

—

5 894

Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

105 809

10 941

1 009

117 759

114 395

43 243

157 638

Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(20 854)

(1 729)

(21 831)

(11 031)

Profit for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

84 955

9 212

1 122

95 289

(2 725)

92 564

32 212

Attributable to: Equity holders of the parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

82 953 2 002

9 212 —

1 122 —

93 287 2 002

(2 725) —

90 562 2 002

28 013 4 199

Profit for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

84 955

9 212

1 122

95 289

(2 725)

92 564

32 212

* — adjusted to ensure the presentation of financial information consistent with IFRS EU

113

(22 470)

(3 364) 639

(38 832)

118 806

(32 862)

7 338

(25 524)

124 776

(31 494)

93 282

118 575 6 201

(31 494) —

87 081 6 201

124 776

(31 494)

93 282

Unaudited Interim Consolidated Financial Statements for the six months ended 30 September 2006 of voestalpine Stahlhandel GmbH

F-76

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements for the six-month period ended September 30, 2006 Income Statement in Cost of Sales Format (IFRS) in 1.000

Income Statement in Cost of Sales Format (IFRS)

HBI 2006.09 ACTUAL

SALES . . . . . . . . . . . . . . .

178.490,2

IAS/IFRS Adj. 2006.09 ACTUAL

CONSOLIDATED CONSOLIDATED IFRS IFRS 2006.09 2005.09 ACTUAL ACTUAL

IFRS 2006.09 ACTUAL

CONSOLIDATION 2006.09 ACTUAL

178.490,2

-6.441,3

172.048,9

158.121,7

Cost of Sales . . . . . . . . . . -154.196,4

-59,9 -154.256,3

6.388,5

-147.867,9

-139.571,5

GROSS MARGIN . . . . .

24.293,8

-59,9

24.233,9

-52,9

24.181,0

18.550,1

1.157,5 -12.423,8 -3.728,8

6,3 0,0 160,9

1.163,8 -12.423,8 -3.567,9

-43,4 0,0 52,9

1.120,4 -12.423,8 -3.515,0

1.897,7 -11.888,4 -3.516,3

-615,9

345,8

-270,1

36,4

-233,7

-347,2

8.682,8

453,1

9.135,9

-7,0

9.128,9

4.695,9

113,2 0,0 469,5 -156,6 -1.298,6 161,2

113,2 312,9 -1.137,3

465,4 -26,8 26,8

578,6 286,1 -1.110,5

284,7 374,3 -926,3

Other operating income . . . . . . . . . . . . . Distribution Costs . . . . . . Administration Costs . . . . Other operating expenses . . . . . . . . . . . . EARNINGS BEF. INTEREST & TAXES . . . . . . . . . . . . Result from shares . . . . . . Interest income . . . . . . . . . Interest payments . . . . . . . Income shares and loans . . . . . . . . . . . . . . . Other financial result . . . .

0,0

1,5 0,0

0,0 3,4

1,5 3,4

0,0 0,0

1,5 3,4

26,3 9,6

FINANCIAL RESULT . . . . . . . . . . .

-714,3

8,0

-706,3

465,4

-240,9

-231,3

EARNINGS BEFORE TAX (EBT) . . . . . . . . .

7.968,5

461,2

8.429,6

458,4

8.888,0

4.464,6

Extraordinary result . . . . . Income tax expense . . . . .

0,0 0,0 -1.449,4 -565,6

0,0 -2.014,9

0,0 0,0

0,0 -2.014,9

0,0 -65,8

PROFIT/LOSS FOR THE PERIOD . . . . . . .

6.519,1 -104,4

6.414,7

458,4

6.873,1

4.398,8

0,0

-773,4

-773,4

-580,3

thereof Profit/Loss due to third parties . . . . . . . . .

0,0

0,0

F-77

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements as of September 30, 2006 Balance Sheet (IFRS) in 1.000

Balance Sheet (IFRS)

CONSOL- CONSOL- CONSOLIAS/IFRS CONSOL- IDATED IDATED IDATED HBI Adj. IFRS IDATION IFRS IFRS IFRS 2006.09 2006.09 2006.09 2006.09 2006.09 2005.09 2004.09 ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL

Property, plants and equipment . . . . . Investment properties . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . Other intangible assets . . . . . . . . . . . . AT EQUITY INVESTMENT . . . . . . Other financial assets non-current . . . Deferred tax assets . . . . . . . . . . . . . . . NON-CURRENT ASSETS . . . . . . .

36.078,5 21,1 36.099,6 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 1.010,6 0,0 1.010,6 0,0 0,0 0,0 0,0 1.180,9 12.642,1 294,8 12.936,9 -9.262,2 0,0 1.064,2 1.064,2 0,0 49.731,2 1.380,1 51.111,3 -8.081,3

Inventories . . . . . . . . . . . . . . . . . . . . . 51.846,1 Trade receivables . . . . . . . . . . . . 49.834,2 Other receivables . . . . . . . . . . . . 3.829,6 Trade and other receivables . . . . . . . . 53.663,8 Current tax assets . . . . . . . . . . . . . . . . 296,0 Financial assets current . . . . . . . . . . . 4.287,6 Cash and cash equivalents . . . . . . . . . 2.870,3 CURRENT ASSETS . . . . . . . . . . . . 112.963,7

46,2 97,7 -496,2 -398,5 0,0 0,0 0,0 -352,3

36.099,6 36.102,4 40.083,2 0,0 0,0 0,0 0,0 0,0 0,0 1.010,6 334,0 607,5 1.180,9 756,7 584,2 3.674,7 3.658,3 3.679,2 1.064,2 944,4 3.054,2 43.030,0 41.795,8 48.008,3

51.892,3 20,9 51.913,2 49.931,9 -969,3 48.962,5 3.333,4 -72,3 3.261,1 53.265,3 -1.041,6 52.223,7 296,0 -296,0 0,0 4.287,6 93,1 4.380,7 2.870,3 0,0 2.870,3 112.611,5 -1.223,6 111.387,8

44.345,8 41.740,7 3.517,9 45.258,6 17,4 1.648,5 2.235,4 93.505,8

49.212,4 41.964,0 1.990,6 43.954,6 0,0 0,0 1.908,8 95.075,9

TOTAL ASSETS . . . . . . . . . . . . . . . 162.694,9 1.027,8 163.722,8 -9.304,9 154.417,9 135.301,6 143.084,2 EQUITY . . . . . . . . . . . . . . . . . . . . . .

48.851,7 -1.118,8 47.732,9 -7.094,6

Financial liabilities non-current . . . . . Provisions and other employee obligations . . . . . . . . . . . . . . . Other long-term provisions . . . . Deferred tax liabilities . . . . . . . . Provisions non-current . . . . . . . . . . . . NON-CURRENT LIABILITIES . .

6.415,4

0,0

6.415,4

0,0

7.409,4 0,0 7.409,4 207,4 0,0 207,4 127,0 1.666,1 1.793,1 7.743,9 1.666,0 9.409,9 14.159,3 1.666,0 15.825,3

0,0 0,0 0,0 0,0 0,0

Financial liabilities current . . . . . . . . Provisions current . . . . . . . . . . . . . . . Tax liabilities current . . . . . . . . . . . . . Trade liabilities . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . Trade and other liabilities . . . . . . . . . CURRENT LIABILITIES . . . . . . .

55.382,7 1.171,9 1.967,7 34.737,7 6.423,9 41.161,6 99.684,0

0,0 55.382,7 81,1 0,0 1.171,9 0,0 488,3 2.456,0 -296,0 -7,7 34.730,0 -1.101,7 6.423,9 -893,8 -7,7 41.153,9 -1.995,4 480,6 100.164,6 -2.210,4

40.638,3 36.038,7 34.220,2 6.415,4

3.284,7

4.841,7

7.409,4 6.613,8 7.686,2 207,4 420,9 42,6 1.793,1 1.621,6 2.152,9 9.409,9 8.656,3 9.881,7 15.825,3 11.941,0 14.723,4 55.463,8 1.171,9 2.160,0 33.628,4 5.530,1 39.158,5 97.954,2

41.297,4 1.532,3 1.652,4 31.650,4 11.189,4 42.839,8 87.321,9

46.689,1 3.253,6 43,4 31.144,4 13.010,0 44.154,4 94.140,5

TOTAL EQUITY AND LIABILITIES . . . . . . . . . . . . . . . . 162.694,9 1.027,8 163.722,8 -9.304,9 154.417,9 135.301,6 143.084,2

F-78

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements for the six-month period ended September 30, 2006 (Continued) Cash Flow (IFRS) in 1.000

F-79

Cash Flow (IFRS)

HBI 2006.09 ACTUAL

IAS/IFRS Adj. 2006.09 ACTUAL

IFRS 2006.09 ACTUAL

CONSOLIDATION 2006.09 ACTUAL

KFIAS015 KFIAS020 KFIAS030 KFIAS040 KFIAS041 KFIAS045 KFIAS060 KFIAS080 KFIAS090 KFIAS120 KFIAS125 KFIAS176 KFIAS150 KFIAS155 KFIAS160 KFIAS180 KFIAS174 KFIAS215 KFIAS175 KFIAS155H KFIAS177 KFIAS230 KFIAS179 KFIAS190 KFIAS200 KFIAS190 KFIAS178 KFIAS173 KFIAS220

6.519,1 1.448,6 53,3 -250,6 0,0 0,0 -28,0 -14.822,2 -7.079,8 -1.675,1 0,0 0,0 28,0 521,5 -1.125,7 -3.565,1 0,0 0,0 0,0 13.618,1 0,0 0,0 10.053,0 1.847,5 1.038,2 1.847,5 -72,0 56,6 2.870,3

-104,4 -3,4 0,0 0,0 78,2 0,0 0,0 1.022,0 992,4 0,0 0,0 0,0 0,0 0,0 0,0 -991,6 0,0 0,0 0,0 0,0 0,0 0,0 -991,6 0,8 0,0 0,8 0,7 -1,5 0,0

6.414,7 1.445,2 53,3 -250,6 78,2 0,0 -28,0 -13.800,3 -6.087,5 -1.675,1 0,0 0,0 28,0 521,5 -1.125,7 -4.556,7 0,0 0,0 0,0 13.618,1 0,0 0,0 9.061,4 1.848,3 1.038,2 1.848,3 -71,3 55,1 2.870,3

458,4 0,0 0,0 0,0 0,0 -478,0 0,0 -1.167,2 -1.186,9 0,0 0,0 0,0 0,0 -196,7 -196,7 1.958,1 -586,1 0,0 0,0 10,4 0,0 0,0 1.382,5 -1,1 0,0 -1,1 1,7 -0,6 0,0

NET INC./LOSS AFTER TAX INCL. MINORITY . . . . . . . . . . . . . . . . . . . . Deprec./Appreciat. to fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Book value of asset sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) long provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other non-cash income/expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from the sales of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operative cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expense to investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change scope of consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from the sales of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes of receivables from financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash flow from investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Own shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital increase/ shareholder contribut. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in financial credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfers/Reorganisation equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other changes Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash flow financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liquidity opening values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Currency differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Currency differences Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liquidity closing values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CONSOLIDATED IFRS 2006.09 ACTUAL

6.873,1 1.445,2 53,3 -250,6 78,2 -478,0 -28,0 -14.967,5 -7.274,3 -1.675,1 0,0 0,0 28,0 324,8 -1.322,4 -2.598,6 -586,1 0,0 0,0 13.628,5 0,0 0,0 10.443,9 1.847,2 1.038,2 1.847,2 -69,6 54,5 2.870,3 -0,0000001

Other adjustments Prev. Period ACTUAL

0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

CONSOLIDATED IFRS 2006.09 ACTUAL

6.873,1 1.445,2 53,3 -250,6 78,2 -478,0 -28,0 -14.967,5 -7.274,3 -1.675,1 0,0 0,0 28,0 324,8 -1.322,4 -2.598,6 -586,1 0,0 0,0 13.628,5 0,0 0,0 10.443,9 1.847,2 1.038,2 1.847,2 -69,6 54,5 2.870,3 -0,0000001

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements as of September 30, 2006 and for the six-month period then ended Equity development (IFRS) in 1.000 Steel Trade Group 2006.09 — ACTUAL Equity (Group)

Minorities

Equity

Opening Balance (consolidated) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

32.419,5

4.475,8

36.895,3

Net loss/Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividend distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Currency conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hedge Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corr. Adjustment Hedge Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Social capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Correction Adjustment Social Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adj.m. item for IC balance consol. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . First consolidation/End consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . capital increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acturial Gain/Loss Severance Paym. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.099,7 -2.598,6 65,4 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

773,4 -586,1 -10,8 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

6.873,1 -3.184,6 54,5 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

Closing Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35.986,0

4.652,3

40.638,3

Check . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0,0

0,0

0,0

F-80

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements as of September 30, 2006 and for the six-month period then ended Key Figures (IFRS) in 1.000 2006.09 ACTUAL

2005.09 ACTUAL

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

172.048,9

158.121,7

EBIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9.128,9

4.695,9

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.577,5

6.367,0

Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

61.762,0

44.164,5

Investment (including shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.641,6

1.377,7

Operative cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

-7.274,3

14.887,0

Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

-2.598,6

-1.093,2

Net financial debt (closing value) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

52.109,2

39.638,7

Key Figures (IFRS)

OM (operating margin) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,3%

3,0%

Sales/Capital employed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,7

1,9

ROCE (Return on capital employed) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9,2%

5,6%

WC in % of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35,9%

27,9%

Gearing ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

128,2%

110,0%

F-81

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements as of September 30, 2006 and for the six-month periods then ended (continued) Interim report First Half 2006/2007 1 April 2006-30 September 2006 of voestalpine Stahlhandel GmbH voestalpine Stahlhandels Group key figures 1 H 2006/07 01.04.-30.09.2006

1 H 2005/06 01.04.-30.09.2005

Change in %

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBITDA-margin (in %) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBIT-margin (in %) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Profit for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

172,0 10,6 6,1 9,1 5,3 8,9 6,9

158,1 6,4 4,0 4,7 3,0 4,5 4,4

8,8 66,1 94,4

Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net financial debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net financial debt in % of equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,6 1,4 40,6 52,1 128,2

1,4 1,7 36,0 39,6 110,0

19,2 -13,3 12,8 31,5 16,6

Employees excl. Apprentices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital Employed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

453 98,8

441 83,7

2,7 18,0

(in Mio. EUR)

99,1 56,2

Highlights as of 30 September 2006: Š About the same excellent operating result as in 2004/05, which was a boom year Š Sales increased by 8.8%, while operating result rose by 94.4% compared to the first half of 2005/06 Š Significant improvement of the operating result for voestalpine Stahlhandel GmbH and voestalpine

Spol. S.r.o. compared to the previous year Š Better operating results for Köllensperger Stahlhandel and Veting compared to the previous year Š Neptun Stahlhandel fell slightly below the figures for the previous year Š Continued stable development of prices and quantities Š Profit margins and quantities in the Stahlhandels Group over budget

Verbal explanation of the semi-annual result in the voestalpine Stahlhandels Group: Š Revenue increased by 8.8% from EUR 158.1 million to EUR 172.0 million. Š EBITDA (earnings before interest, taxes, depreciation, and amortisation) rose by 66.1% from EUR

6.4 million to EUR 10.6 million. The EBITDA margin was 6.1% compared to 4.0%. Š EBIT (profit from operations) reached EUR 9.1 million, corresponding to an increase of 94.4% (EUR

4.7 million). Thus, the EBIT margin improved from 3.0% to 5.3%. Š The result after taxes (profit for the period) rose from EUR 4.4 million to EUR 6.9 million. Š The increase of the acquisition prices and, associated with that, of the sales prices in general, as well

as, in particular, the continuing excellent level of demand for steel products have contributed to a substantial improvement of the operating result in the Stahlhandels Group. Š The operating result improved in comparison to the previous year for all companies with the exception

of Neptun Stahlhandel. The Group’s EBIT margin as of 30 September 2006 came to 5.3%. Details about: voestalpine Stahlhandel GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Neptun . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Köllensperger Stahlhandel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . voestalpine Spol. S.r.o . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . veting d.o.o. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-82

3.8% 2.2% 14.2% 8.5% 5.5%

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements as of September 30, 2006 and for the six-month periods then ended (continued) Š Compared to the same period of the previous year, the supply quantities were up. During the period

under review, the Stahlhandels Group sold 250,000 tonnes. Compared to the previous year, this means an increase of 6.3%. Š We would like to highlight the fact that the favorable development of our subsidiary in the Czech

Republic, where the sales of the hot-rolled hollow sections were expanded across the entire Stahlhandels Group. The first half of the current business year was characterized by a good level of demand at increasing procurement prices. Especially during the second quarter, the positive market situation resulted in a very good operating result. Toward the end of the second quarter, there was a definite trend toward a division of the market according to products. In the sector of beams and non-ferrous alloys, there continues to be a high demand at good price levels, while the market for the other product groups appears to be cooling. The development of the gross earnings is also very gratifying, and the budget was surpassed by 36.2%. Details about voestalpine Stahlhandel GmbH 1 H 2006/07 01.04.-30.09.2006

1 H 2005/06 01.04.-30.09.2005

Change in %

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBITDA-margin (in %) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBIT-margin (in %) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

99,8 4,3 4,4 3,8 3,8

92,6 2,2 2,4 1,6 1,8

7,8 95,3 81,2 130,9 114,2

Employees (excl. Apprentices) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

201

210

-4,3

1 H 2006/07 01.04.-30.09.2006

1 H 2005/06 01.04.-30.09.2005

Change in %

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBITDA-margin (in %) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBIT-margin (in %) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13,5 2,1 15,6 1,9 14,2

12,4 1,6 13,2 1,5 11,7

9,2 28,6 17,8 32,2 21,1

Employees (excl. Apprentices) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

44

44

0,0

(in Mio. EUR)

Details about Köllensperger Stahlhandel (in Mio. EUR)

During the period under review, the economic environment developed favorably and showed a very satisfactory trend that should be continuing, at least until the end of the year. The customers in Tyrol have a full backlog of orders and some have work scheduled beyond the winter period. The availability of materials was enabled by timely procurement of inventory — in particular of flat rolled products — and led to a growing number of orders. The increase in acquisition prices could be passed on to customers. During the current year, another competitor (ÖAG Kontinentale) entered the market and is moving very aggressively. Details about Neptun Stahlhandel 1 H 2006/07 01.04.-30.09.2006

1 H 2005/06 01.04.-30.09.2005

Change in %

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBITDA-margin (in %) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBIT-margin (in %) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27,9 0,7 2,4 0,6 2,2

24,1 0,8 3,4 0,8 3,2

15,6 -18,3 -29,3 -19,0 -29,9

Employees (excl. Apprentices) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

49

51

-4

(in Mio. EUR)

F-83

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements as of September 30, 2006 and for the six-month periods then ended (continued) The anticipated positive development of the sales quantities is being sustained. As of 30 September 2006, sales are at 47,725 tonnes, that is, 14.7% above the budget. The average increase of the purchase prices for reinforcing material, matting, and rods has been more than EUR 170.00 per ton. Since October, the prices for matting and rods have been stable to slightly falling. The sales prices are under pressure because of competition, and the higher price for replacements is being largely ignored. The price situation is unsatisfactory in the entire sales sector. We continue to see aggressive competition in the steel industry and in project-related business for cut and bent material and the market is harshly competitive; the current market situation and the delivery of orders placed in the spring of 2006 are placing significant pressure on the margin. Despite the difficult market situation, a positive result was generated. Details about Veting voestalpine d.o.o. 1 H 2006/07 01.04.-30.09.2006

1 H 2005/06 01.04.-30.09.2005

Change in %

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBITDA-margin (in %) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBIT-margin (in %) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,2 0,7 6,5 0,6 5,5

11,7 0,5 4,6 0,5 3,9

-12,8 22,5 40,4 23,1 41,2

Employees (excl. Apprentices) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

41

38

7,9

(in Mio. EUR)

Demand is higher than anticipated. However, the shortage of certain materials is noticeable. Gradually, the customers’ liquidity situation and payment performance is improving. Seen cumulatively, 52% of sales were flat products and 48% of sales were long products, whereby in September, the flat products generated 68% of sales. 17.5% of sales were derived from export, by direct deliveries to Bosnian customers. Of the total volume, the share of track sales declined from 18.2% in the comparable period of the previous year to 6.2%. We expect that business will drop because of the approaching winter months. Price reductions have been announced for cold-rolled and galvanized plates. Sarajevo has had higher gross earnings (13.5%) and EBIT margins (8.3%), however, the liquidity on the Bosnian market is lower than in Croatia. Details about voestalpine Stahlhandel spol.s.r.o. (in Mio. EUR)

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBITDA-margin (in %) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBIT-margin (in %) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employees (excl. Apprentices) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 H 2006/07 01.04.-30.09.2006

1 H 2005/06 01.04.-30.09.2005

Change in %

27,0 2,8 10,4 2,3 8,5 118

19,8 1,1 5,7 0,7 3,3 98

36,2 150,1 83,7 249,2 156,5 20,4

During the first half of the business year, the results were similar to the 2004/05 business year. Both the figures of the previous year and the budget were surpassed. Overall, the development here is very positive. The main warehouse in Vyskov (near Brno) stores the largest inventory of hot-rolled hollow sections of all the bordering Central and Eastern European countries. The focus of this company is solely on storing inventory and pre-processing. F-84

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements as of September 30, 2006 and for the six-month periods then ended (continued) Acquisitions/Investments Currently, negotiations are ongoing regarding the acquisition of the remaining shares (40%) of Veting voestalpine d.o.o. The acquisition of these shares should be completed by December. During the first half of 2006/07, the investments of the voestalpine Stahlhandels Group came to EUR 1.6 million. Details about investments as of 30 September 2006: voestalpine Stahlhandel GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Neptun . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Köllensperger Stahlhandel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . voestalpine Spol. S.r.o . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . veting d.o.o. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

EUR 0.40 million EUR 0.01 million EUR 0.14 million EUR 0.92 million EUR 0.17 million

The investments at voestalpine Stahlhandel GmbH were primarily for the new ERP system Microsoft Navision. At the subsidiary voestalpine Spol. s.r.o., the major part of the investments were for the Amada cutter, the Kaltenbach saw, including cranes and longitudinal machine in Vyskov. For the remaining companies, the investments were solely for replacements. Outlook voestalpine Stahlhandels Group As opposed to the first two quarters, the third quarter will be less robust. The procurement prices (with the exception of beams and non-ferrous alloys) will decline by about EUR 20.00 to 30.00/ton and the market prices will go down at the same rate. In accordance with the season, demand will continue to remain at a good level. We anticipate the sales figures to be as budgeted; the gross earnings will be above budget despite the slightly yielding prices. The focus of the marketing measures will continue to be on selective customer support.

F-85

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements as of September 30, 2006 and for the six-month periods then ended (continued) Financial data as of 30 September 2006 according to International Financial Reporting Standards (IFRS) (in millions of euros)

09/30/2006

ASSETS A. Non-Current Assets Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments in associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

09/30/2005

36,1 0,0 1,0 1,2 3,6 1,1

36,1 0,0 0,3 0,8 3,7 0,9

43,0

41,8

51,9 56,2 0,4 2,9

44,3 46,9 0,0 2,2

111,4

93,5

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

154,4

135,3

EQUITY AND LIABILITIES A. Equity Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings and other reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,1 4,5 26,4

5,1 4,5 22,2

Equity attributable to equity holders of the parent . . . . . . . . . . . . . . . . . . . . . . . . . Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36,0 4,7

31,8 4,2

40,6

36,0

7,4 0,2 1,8 6,4

6,6 0,4 1,6 3,3

15,8

11,9

1,7 55,5 40,8

1,6 41,3 44,5

98,0

87,3

154,4

135,3

B. Current Assets Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B. Non-Current Liabilities Pensions and other employee obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C. Current Liabilities Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TOTAL EQUITY AND LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-86

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements as of September 30, 2006 and for the six-month periods then ended (continued) Consolidated income statement (in millions of euros)

1/4-30/9/2006

1/4-30/9/2005

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

172,0 -147,9

158,1 -139,6

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

24,2

18,6

Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,1 -12,4 -3,5 -0,2

1,9 -11,9 -3,5 -0,3

Profit from operations (EBIT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9,1

4,7

Share of profit of associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0,5 0,4 -1,1

0,2 0,5 -0,9

Profit before tax (EBT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,9

4,5

Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

-2,0

-0,1

Profit for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,9

4,4

Consolidated cash flow statement (in millions of euros)

1/4-30/9/2006

1/4-30/9/2005

Operating activities Profit for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6,9 0,8 -15,0

4,4 -1,0 11,5

Cash flows from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash flows from investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash flows from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net decrease/increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .

-7,3 -1,3 10,4 1,8

14,9 4,9 -19,7 0,2

Changes in Equity (in millions of euros)

1/4-30/9/2006

1/4-30/9/2005

Equity at April 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Profit for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36,9 6,9 -3,2 0,1

38,4 4,4 -1,9 0,1 -5,0

Equity at September 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

40,6

36,0

Appended information pursuant to IAS 34 IAS 34.16 a)

The annual financial statement was prepared in accordance with the principles of proper accounting and the general standards so as to provide as exact a presentation as possible of the Company’s assets and liabilities, financial standing, and earnings. When preparing the annual financial statement, the principle of completeness was complied with. The valuation assumed the continuation of the operation of the company. The accounting and valuation principles were the same as the ones used for the annual financial statement as of 31 March 2006. F-87

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements as of September 30, 2006 and for the six-month periods then ended (continued) b)

Generally, in the steel industry, the first half of the year is stronger compared to the second half. Especially in the building industry (Neptun), lower sales figures can be expected during the winter months. The first half of the year was characterized by an increase in prices in all the major product groups.

c-e)

does not apply

IAS 34.16 f)

As of 30 September 2006, voestalpine Stahlhandel GmbH paid the amount of EUR 1.5 million (paid in accordance with the HGB accounting rules) to voestalpine Stahl GmbH. (EUR 0.0 million EUR as of 30 September 2005)

g)

Segments

In thousands of euros

Austria 30.09.2006

Czech Republic 30.09.2006

Croatia 30.09.2006

Total Group 30.09.2006

External revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Segment assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

136.758,9 93.520,0 551,6

25.057,4 42.335,8 915,5

10.232,7 18.562,1 174,5

172.048,9 154.417,9 1.641,6

h)

The only major effect after the balance sheet date is the planned acquisition of the remaining shares of Veting (40%). This process should be completed by the end of December.

i)

During the period under review, there were no company mergers and no changes in the consolidated companies.

j)

There were no changes in the contingent debts and the contingent claims as of the last balance sheet date.

IAS 34.17 a-c)

does not apply

d)

The investments at voestalpine Stahlhandel GmbH were primarily for the new ERP system Microsoft Navision. At the subsidiary voestalpine Spol.s.r.o., the major part of the investments were for the Amada cutter, the Kaltenbach saw, including cranes and longitudinal machine in Vyskov. For the remaining companies, the investments were solely for replacements. No major property, plant and equipment were disposed of.

e-j)

does not apply

Executive Management

Johannes Kasticky

Jürgen Glück

Linz, November 2006

F-88

Audited Consolidated Financial Statements for the year ended 31 March 2006 of voestalpine Stahlhandel GmbH

F-89

Auditor’s report in accordance with Article 274 HGB (Austrian Commercial Code): We have audited the accompanying consolidated financial statements of voestalpine Stahlhandel GmbH Group, Linz, for the fiscal year from April 1st, 2005 to March 31st, 2006 as parts of the consolidated financial statements of voestalpine AG Group, Linz, for the same period. The company’s management is responsible for the preparation and the content of the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to state whether the management report (“Lagebericht”) for the group is in accordance with the consolidated financial statements. The audit of the different financial statements which form part of the consolidated financial statements of the voestalpine Stahlhandel Group has been performed by other auditors, only the audit of the consolidation work was part of our duty. Our audit result for these financial statements is entirely based on the certification we received from the other auditors. We conducted our audit in accordance with laws and regulations applicable in Austria and Austrian Standards on Auditing and also taking into account the International Standards on Auditing (ISA). Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. In determining the audit procedures we considered our knowledge of business, the economic and legal environment of the Group as well as expected occurrence of errors. An audit involves procedures to obtain evidence about amounts and other disclosures in the consolidated financial statements predominantly on a sample basis. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis of our opinion. Our audit did not give rise to any objections. In our opinion, which is based on the results of our audit, the consolidated financial statements are in accordance with legal requirements and present fairly, in all material respects, the financial position of the voestalpine Stahlhandel Group as of March 31st, 2006, and of the results of its operations and its cash flows for the fiscal year from April 1st, 2005, to March 31st, 2006, in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. The management report for the group is in accordance with the consolidated financial statements. Vienna, May 16th, 2006 Grant Thornton Wirtschaftsprüfungs- und Steuerberatungs-GmbH Univ. Doz. Dr. Walter Platzer Dr. Franz Schiessel Auditor and Tax Consultant

F-90

VOESTALPINE STAHLHANDEL GMBH Income statement 31.03.2006 in cost of sales format In TEUR

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes

31.03.2006

31.03.2005

1

303.817,8 -269.563,0

332.641,4 -275.766,2 56.875,2 3.356,1 -26.544,9 -9.212,5 -1599,6

Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Distribution costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Administration costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

34.254,8 4.257,6 -23.655,6 -6707,8 -1.119,0

Profit from operations (EBIT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share of profit of associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 5 6

7.030,1 216,8 1.406,5 -2.038,1

22.874,2 11,9 1.733,1 -3.282,6

Earnings before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

6.615,3 -866,6

21.336,6 -7.055,1

5.748,7 878,9

14.281,5 1.520,6

Profit for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereof profit/loss due to third parties . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-91

2

VOESTALPINE STAHLHANDEL GMBH Balance sheet 31.03.2006 In TEUR Notes

31.03.2006

31.03.2005

36.107,7 851,8 702,9 3.704,9 1.059,4

41.990,7 545,1 538,0 3.950,8 905,8

42.426,7

47.930,4

45.083,1 40.136,9 4.571,5 1.038,2

51.133,3 45.367,8 777,3 2.068,2

90.829,7

99.346,6

133.256,4

147.277,0

5.087,0 4.527,3 22.805,2 4.475,8

5.087,0 4.527,3 24.368,4 4.380,1

15

36.895,3

38.362,8

16 17 11 18

7.660,0 208,9 1.708,9 2.275,9

7.194,4 421,6 2.204,2 3.711,5

11.853,7

13.531,7

1.513,8 45.569,9 37.423,7

3.038,6 53.766,7 38.577,1

84.507,4

95.382,4

133.256,4

147.277,0

Assets A. Non-current assets Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments in associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments in other financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deffered tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B. Current assets Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments in other financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8 9 10 10 11

12 13 14

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity and liabilities Equity Issued capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-current liabilities Pensions and other employee obligations . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deffered tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current liabilities Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total equity and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-92

17 18 19

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements for the year ended 31 March 2006 Cash Flow (IFRS) in 1.000

F-93

Cash Flow (IFRS)

HBI 2006.03 ACTUAL

IAS/IFRS Adj. 2006.03 ACTUAL

IFRS 2006.03 ACTUAL

CONSOLIDATION 2006.03 ACTUAL

KFIAS015 KFIAS020 KFIAS030 KFIAS040 KFIAS041 KFIAS045 KFIAS060 KFIAS080 KFIAS090 KFIAS120 KFIAS125 KFIAS176 KFIAS150 KFIAS155 KFIAS160 KFIAS180 KFIAS174 KFIAS215 KFIAS175 KFIAS155H KFIAS177 KFIAS230 KFIAS179 KFIAS190 KFIAS200 KFIAS190 KFIAS178 KFIAS173 KFIAS220

4.855,9 2.854,6 6.333,5 248,7 73,5 0,0 -7.662,8 9.763,0 16.466,3 -3.529,1 0,0 0,0 7.662,8 -3.139,5 994,3 -2.830,6 0,0 0,0 0,0 -10.658,8 -4.993,8 0,0 -18.483,2 -1.022,7 2.068,2 -1.022,7 -434,2 426,8 1.038,2

2.370,8 29,1 17,1 -1.444,7 -296,0 0,0 300,2 120,2 1.096,7 0,0 0,0 0,0 -300,2 5,6 -294,6 -1.093,3 0,0 0,0 0,0 0,0 293,8 0,0 -799,5 2,6 0,0 2,6 0,1 -2,7 0,0

7.226,6 2.883,7 6.350,6 -1.196,0 -222,5 0,0 -7.362,6 9.883,2 17.563,0 -3.529,1 0,0 0,0 7.362,6 -3.133,9 699,7 -3.923,9 0,0 0,0 0,0 -10.658,8 -4.700,0 0,0 -19.282,7 -1.020,0 2.068,2 -1.020,0 -434,2 424,1 1.038,2

-1.478,0 344,1 0,0 15,1 -84,8 -230,2 0,0 -395,5 -1.829,3 0,0 0,0 7,3 0,0 -207,6 -200,3 2.830,6 -759,0 0,0 0,0 0,0 -7,3 0,0 2.064,4 34,8 0,0 34,8 -21,8 -12,9 0,0

NET INC./LOSS AFTER TAX INCL. MINORITY . . . . . . . . . . . . . . . . . . . . Deprec./Appreciat. to fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Book value of asset sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase (decrease) long provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other non-cash income/expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from the sales of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operative cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expense to investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change scope of consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increase minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from the sales of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes of receiveables from financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash flow from investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Own shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital increase/shareholder contribut. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in financial credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfers/Reorganisation equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other changes Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash flow financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liquidity opening values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Currency differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Currency differences Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liquidity closing values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CONSOLIDATED IFRS 2006.03 ACTUAL

Other adjustments Prev. Period ACTUAL

CONSOLIDATED IFRS 2006.03 ACTUAL

5.748,6 3.227,8 6.350,6 -1.180,8 -307,3 -230,2 -7.362,6 9.487,7 15.733,7 -3.529,1 0,0 7,3 7.362,6 -3.341,5 499,4 -1.093,2 -759,0 0,0 0,0 -10.658,8 -4.707,3 0,0 -17.218,3 -985,3 2.068,2 -985,3 -456,0 411,2 1.038,2 0,0000000

0,0 0,0 -5.966,1 1.291,2 0,0 -942,9 6.909,0 -4.294,0 -3.002,8 0,0 5.211,8 -7,3 -6.909,0 0,0 -1.704,5 0,0 0,0 0,0 0,0 0,0 4.707,3 0,0 4.707,3 0,0 0,0 0,0 0,0 0,0 0,0 0,0000000

5.748,6 3.227,8 384,5 110,4 -307,3 -1.173,1 -453,6 5.193,7 12.730,9 -3.529,1 5.211,8 0,0 453,6 -3.341,5 -1.205,1 -1.093,2 -759,0 0,0 0,0 -10.658,8 0,0 0,0 -12.511,0 -985,3 2.068,2 -985,3 -456,0 411,2 1.038,2 0,0000000

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements for the year ended 31 March 2006 Equity development (IFRS) in 1.000 2006.03 — ACTUAL Equity (Group)

Minorities

Equity

Opening Balanced (consolidated) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

33.982,7

4.380,1

38.362,8

Net loss/Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividend distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Currency conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hedge Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corr. Adjustment Hedge Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Social capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Correction Adjustment Social Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adj.m. item for IC balances consol. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . First consolidation/End consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . capital increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acturial Gain/Loss Severance Paym. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.869,7 -1.093,2 397,5 0,0 0,0 0,0 -1.025,7 8,4 -7,3 0,0 -12,5 -4.700,0

878,9 -759,0 13,7 0,0 0,0 0,0 -45,3 0,0 7,3 0,0 0,0 0,0

5.748,6 -1.852,2 411,2 0,0 0,0 0,0 -1.071,0 8,4 0,0 0,0 -12,5 -4.700,0

Closing Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

32.419,5

4.475,8

36.895,3

Check . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0,0

0,0

0,0

F-94

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements for the year ended 31 March 2006 Key Figures (IFRS) in 1.000 2006.03 ACTUAL

Key Figures (IFRS)

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment (including shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operative cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net financial debt (closing value) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OM (operating margin) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sales/Capital employed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ROCE (Return on capital employed) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . WC in % of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gearing ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-95

303.817,8 7.030,1 10.209,0 46.700,7 3.496,6 12.730,9 -1.093,2 39.859,6 2,3% 3,6 8,4% 15,4% 108,0%

2005.03 ACTUAL

332.641,4 22.874,2 26.528,4 55.470,5 6.097,5 10.370,7 -1.002,4 53.249,1 6,9% 3,2 22,2% 16,7% 138,8%

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements for the year ended 31 March 2006 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2005/06 A. General information and nature of operations The principal activities of voestalpine Stahlhandel GmbH (VASTH) and its subsidiaries (hereinafter referred to as the “Group”) is the trade of materials made from steel. voestalpine Stahlhandel GmbH is the Group’s ultimate parent company which prepares consolidated financial statements. It is incorporated and domiciled in Linz, Austria. The address of voestalpine Stahlhandel GmbH registered office is Lunzerstrasse 105, 4020 Linz, Austria. VASTH Group is part of the voestalpine AG Group. The consolidated financial statements for the year ended March 31, 2006 (including the comparatives for the year ended March 31, 2005) have been prepared in accordance with International Financial Reporting Standards (IFRS) as published by the International Accounting Standard Board (IASB) and adopted by the European Union. The Group applies IAS 19.93A retrospectively. The figures for the prior year have been adjusted accordingly. The consolidated financial statements are presented in euros (functional currency of the parent company). The consolidated income statement is prepared based on the cost-of-sales procedure. In 2005/06 VASTH outsourced its business activities of “Grobblech-Anarbeitung” to voestalpine Anarbeitung GmbH, a subsidiary of voestalpine Stahl GmbH. Therefore, comparability of the figures 2005/06 to 2004/05 is limited. B. Summary of accounting policies Consolidation methods The financial statements of all subsidiaries are prepared in accordance with standard accounting practices and valuation methods. For entities consolidated using the equity method, local reporting and valuation methods are maintained if the relevant amounts are immaterial. Where subsidiaries are consolidated for the first time, the assets and liabilities and contingent liabilities are assessed at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognized as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired is credited to profit and loss in the period of acquisition. Hidden reserves or charges attributable to minority shareholders are also disclosed. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Foreign currency translation In accordance with IAS 21, the annual financial statements of foreign companies included in the consolidated financial statements are translated into euros using the functional currency method. The relevant national currency is the functional currency in all cases since these entities operate independently from a financial, economic and organizational perspective. Assets and liabilities have been translated into Euros at the closing rate at the balance sheet date. Income and expenses have been converted into Euros at the average rates over the reporting period. Equity items are valued at historical exchange rates. Goodwill from acquisitions of foreign entities has been calculated in Euros following initial consolidation. Any currency translation differences have been directly charged or credited to the currency translation reserve in equity. In the separate financial statements of the consolidated entities, foreign currency transactions are translated into the functional currency of the individual entity using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of remaining balances at year-end exchange rates are recognized in the consolidated income statement. Estimates The preparation of consolidated financial statements in conformity with IFRS requires estimates and assumptions that affect the reported amounts of assets and liabilities, and/or income and expenses. Actual results may differ from these estimates. Estimates are made with the intention of adhering to the “true and fair view” principle. F-96

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements for the year ended 31 March 2006 The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised. Recognition of revenues and expenses Revenues arising from the provision of goods and services are realized when all major risks and opportunities arising from the delivered object have been transferred to the buyer. Operating expenses are recognized when a service is rendered or a delivery is received, or at the point such liability is incurred. Borrowing costs All borrowing costs are expensed as incurred. Property, plant and equipment Property, plant and equipment are stated at acquisition cost or manufacturing cost less accumulated depreciation and any impairment losses. The cost of self-constructed assets includes the cost of materials, direct labor and an appropriate proportion of production overheads. Costs of borrowing are recognized in the consolidated income statement in the period in which they are incurred. Depreciation is charged on a straight-line basis over the estimated useful lives. Land is not depreciated. The estimated useful lives are as follows: Š Š Š

Buildings Plant and equipment Fixtures and fittings

2.0% – 5.0% 10.0% – 25.0% 10.0% – 25.0%

Investment property is recognized at depreciated cost. Leasing Leases are classified as finance leases when these are viewed commercially as asset purchases with longterm finance. All other leases are classified as operating leases. Rentals payable under operating leases are recognized as expenses in the consolidated income statement. Assets held under finance leases are initially recognized as assets of the Group at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the consolidated balance sheet as a finance lease obligation. Assets held under finance leases are depreciated over their expected useful lives on the same basis as comparable acquired assets or, where shorter, over the term of the relevant lease. The Group does not act as a lessor. Goodwill All corporate acquisitions are accounted for by applying the purchase method. There is no goodwill. Therefore, none is capitalized. Other intangible assets Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized as an expense as incurred. In accordance with IAS 38.57, development expenditure is capitalized if the relevant criteria are met. Expenditure on internally generated goodwill and brands is immediately recognized as an expense as incurred. Other intangible assets that are acquired by the Group are stated at cost less accumulated scheduled and unscheduled amortization. Amortization is charged to the income statement on a straight-line basis over the estimated useful lives of the asset (3 to 5 years). Impairment testing of goodwill, other intangible assets and property, plant and equipment Individual assets or cash-generating units that include goodwill and other intangible assets with an indefinite useful life are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. F-97

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements for the year ended 31 March 2006 For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). In particular, goodwill is allocated to those cashgenerating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which the management controls the related cash flows. An impairment loss is recognized for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of net selling price and the value in use. Impairment losses recognized in respect of cash-generating units, to which the goodwill has been allocated, reduce the carrying amount of goodwill initially. Any remaining impairment loss reduces pro rata the carrying amount of the assets in the cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognized may no longer exist. Investments in associates The results and assets and liabilities of associates (entities controlled by voestalpine Stahlhandel GmbH (and their subsidiaries) and companies over which significant influence is exercised), which are not of minor importance, are incorporated in the consolidated financial statements using the equity method. Other financial assets Investments in subsidiaries and associates, which are not incorporated in these consolidated financial statements using the full, proportionate or equity consolidation method, are reported under “Other financial assets” at acquisition cost or their lower market value. Securities are stated at acquisition cost or at fair value and serve mainly to cover severance payments and pensions. Taxation Income tax expense represents the sum of the tax currently payable and of my deferred tax. The tax currently payable is based on the taxable profit of the year and is calculated using tax rates that have been enacted at the balance sheet date. In accordance with IAS 12, all temporary valuation and reporting differences between tax values and consolidated financial statements are included in the deferred taxes. Deferred tax assets on losses carried forward are capitalized to the extent that they will be reversed within a foreseeable period. The calculation of deferred taxes is based on the respective local tax rates. Fixed future tax rates are also taken into account for deferred values. Inventories Inventories are stated at the lower of the cost and net realizable value. Net realizable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. Where inventories are comparable, costs are determined by the weighted average method or similar methods. Costs include directly attributable expenses and all proportionate cost of materials and production overheads, based on normal capacity usage. Interest charges and selling and administrative expenses are not capitalized. Trade and other receivables Trade and other receivables are stated at nominal value. Individually identifiable risks are reflected in credit insurances. Non-interest or low-interest-bearing receivables with in a remaining term in excess of one year are recorded at a discounted present value. Accruals are reported under other receivables and other liabilities. Cash and cash equivalents Cash and cash equivalents include cash at banks, cash on hand and checks and are recognized at fair value. Pensions and other employee obligations Employee benefits include provisions for severance payments, pensions and long-service bonuses and are recognized according to IAS 19 using the projected-unit-credit-method. F-98

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements for the year ended 31 March 2006 Employees of Austrian group companies, who began their employment before January 1, 2003, receive a one-off severance payment, if their employment is terminated by the employer or if they retire. The payment is dependent on the number of years of service and the relevant salary or wages at the time the employment ceases. For employment beginning after December 31, 2002, this obligation has been converted into a contribution-oriented system. These payments to external pensions funds are recognized as expenses. Within the Group (especially in Austria) there are defined contribution and defined benefit pension plans. Defined contribution plans carry no future obligation after the payment of premiums. Defined benefit plans guarantee the employee a specific retirement benefit, which is based on a certain percentage of there salary or wage depending on years of service or on a valorized fixed amount per year of service. Defined benefit plans are stated in the financial statements of the respective entities until the contractual date when the pensions become irrevocable. After that date the pensions are covered by the pension fund. The Group applies IAS 19.93A retrospectively. Actuarial gains and losses affecting provisions for severance payments and pensions are recognized in the year in which they occur outside profit or loss. The previous year has been adjusted accordingly. Actuarial gains and losses affecting long-service bonuses are recognized in the consolidated income statement as incurred. The valuation of employee benefits is based on the following parameters: Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . % Salary/Wage increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . % Pension increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . % Retirement age women/men . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Years Life expectancy tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2005/06

2004/05

4.5 3.0 2.5 max. 60/65 Heubeck 1998

5.5 3.0 2.5 60/65 Heubeck 1998

Interest expenses related to employee benefits are included in the “finance costs” in the consolidated income statement. Other provisions Other provisions are stated at the amount which reflects the most probable value based on a reliable estimate, when the Group has a present obligation as a result of a past event, where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting. Liabilities Liabilities are stated at their nominal value or their redemption value. Financial instruments Liquidity risk — Financing The liquidity risk indicates the ability to raise funds at any time in order to clear liabilities. The essential instrument for controlling the liquidity risk is a precise financial plan, which, ensuing from the operative companies, is submitted quarterly directly to the Group treasury of voestalpine AG. A tool developed by the Group for long-term financial planning locates any financing gaps. The funding requirements and bank credit lines are determined from the consolidated results. Financing of operating funds is carried out by the voestalpine AG-Group treasury. A central clearing system implements a daily intra-group financial equalization adjustment. Companies with liquidity surpluses put the funds indirectly at the disposal of companies with liquidity requirements. The excess liquidity is placed with the principal banks by the Group treasury. In this way a decrease in the volume of borrowings and an optimization of the net interest income is achieved. The sources of financing are selected on the basis of the principle of bank independence. Financial relationships currently exist with about 11 different domestic and foreign banks. Credit risk Credit risk describes losses which can occur through non-fulfillment of contractual obligations of individual partners. The credit risks of the underlying transactions are kept low by precise management of receivables. Roughly 70% of the underlying transactions are hedged through credit insurance. In addition, there are bank securities (guarantees, letters of credit). F-99

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements for the year ended 31 March 2006 Currency risk As the subsidiaries of voestalpine Stahlhandel group act on local markets, there are no material currency risks. Interest rate risk The items on the assets side are mainly invested in the securities funds V47. There are three sub-funds, which are contained in two umbrella funds, one of which is used to cover severance pay and pension obligations. In valuing securities, the fair value option is used and is allocated to the category “available for sale” in the balance sheet. Financial risk management — Corporate Finance-Organization Financial risk management is centrally organized by voestalpine AG pursuant to guideline competence, strategy determination and goal definition. The existing rules cover targets, principles, responsibilities and competences for both the voestalpine AG Group treasury and the individual companies. In addition, they treat the topics of pooling, money market, credit and securities management, foreign exchange, interest and liquidity risk. The voestalpine AG Group treasury, acting as a service center, is responsible for implementation. Three different departments are responsible for the conclusion of contracts, the processing of transactions and the recording of entries, which guarantees a six-eyes principle. The guidelines and observance thereof, as well as the whole business process, are audited annually by an additional external auditor. Up to 90 % of the non current assets are financed by shareholder equity. The equity ratio has been stable at approximately 27 % for the last years. It is part of our corporate policy to keep a constant watch on financial risks, to quantify them and to hedge against them, where it is wise to do so. Our willingness to accept risk tends to be low. Risks posing a threat to the continued existence of the companies have to be hedged and going concerns have to be hedged. In other respects, the strategy aims to reduce fluctuations of cash flow and income. C. Companies included in the consolidation The scope of consolidation (see appendix to the notes “Group companies”) is established in accordance with IFRS. In addition to the financial statements of voestalpine Stahlhandel GmbH , the consolidated financial statements also incorporate the financial statements of entities controlled by voestalpine Stahlhandel GmbH (and their subsidiaries) and companies over which significant influence is exercised (associates). Subsidiaries are entities controlled by the Group. Control exists when the Group has the direct or indirect potential to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Associates are those entities over which the Group has significant influence without having control over the financial and operating policies. The consolidated financial statements include these entities using the equity method of consolidation, from the date that significant influence commences until the date that significant influence ceases. The Group’s investments in associates are reported in the appendix to the notes “Group companies”. The following table shows the values (100%) for associates consolidated in the financial statements by the equity method of consolidation: VASTAD+Zimmermann (TEUR)

31.03.06

31.03.05

Non current asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

859,3 7.344,9

989,1 7.530,5

8.204,2

8.519,6

907,7 507,8 6.788,7

563,4 379,3 7.576,9

8.204,2

8.519,6

27.659,5 393,4

22.421,8 89,5

Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non current liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Profit of the Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

There were no changes to companies included in the consolidation during the reporting year. F-100

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements for the year ended 31 March 2006 D. Notes and other remarks 1. Segment reporting voestalpine Stahlhandel-group is one cash generating unit, therefore only a geographical segmentation on figures is reported based on the site of the companies, which are primarily active on the local markets. In thousands of euros

Austria 2005/06 2004/05

Czech Republic 2005/06 2004/05

Croatia 2005/06 2004/05

Total Group 2005/06 2004/05

External revenue . . . . 242.591,5 262.575,3 39.718,2 46.247,0 21.508,2 23.819,1 303.817,8 332.641,4 Segment assets . . . . . . 83.504,5 103.073,8 36.794,9 30.840,3 12.957,0 13.363,0 133.256,5 147.277,1 Investments . . . . . . . . 1.025,1 2.099,4 2.187,9 3.531,8 283,6 466,2 3.496,6 6.097,5 2. Other operating income TSD EUR

2005/06

2004/05

Net gain on disposal of property plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.012,0 Release of unused provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369,4 Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.876,2

1.504,0 -68,5 1.920,6

4.257,6

3.356,1

2005/06

2004/05

165,0 0,0 0,0 954,0

230,0 0,0 0,0 1.369,6

1.119,0

1.599,6

3. Other operating expenses TSD EUR

Taxes and other income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Impairment loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Losses on disposal of property plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4. Share of profit of associates In thousands of euros

2005/06

2004/05

Income from associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenses from associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

282,1 -65,3

77,2 -65,3

216,8

11,9

Income from associates attributable to VASTAD, ZIMMERMANN 5. Finance income TSD EUR

Income from investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . of which from affiliated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from other long term securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . of which from affiliated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . of which from affiliated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from disposals and remeasurement of investments in fair value . . . . . . . . . . . . . . . . . .

2005/06

2004/05

377,7 191,6 97,3 0,0 914,9 61,5 16,6

362,0 272,0 118,2 50,0 1.234,6 4,0 18,3

1.406,5

1.733,1

6. Finance costs TSD EUR

2005/06

2004/05

Expenses from investments net loss on remeasurement of investments of fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . expenses from participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0,0 0,0 0,0

0,0 610,0 0,0

Other interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . of which from affiliated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0,0 2.038,1 517,8

610,0 2.672,6 638,7

2.038,1

3.282,6

F-101

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements for the year ended 31 March 2006 7. Income taxes Income taxes include income taxes paid and owed by Group companies as well as deferred taxes. TSD EUR

2005/06

2004/05

Current tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.160,0 -293,4

2.669,4 4.385,7

866,6

7.055,1

8. Property, plant and equipment The carrying amount of property, plant and equipment for the periods presented in the consolidated financial statements as at March 31,2006 are reconciled as follows: Advance payments and plant under construction

Land and buildings

Plant and equipment

Fixtures and fittings

Gross carrying amount . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depreciation and impairment . . . . . . . .

50.626,2 -18.799,0

22.861,0 -15.290,5

4.850,6 -3.607,3

186,7 0,0

78.524,5 -37.696,7

Carrying amount as of April 1, 2004 . . . . . . . . . . . . .

31.827,2

7.570,5

1.243,4

186,7

40.827,8

Gross carrying amount . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depreciation and impairment . . . . . . . .

51.499,4 -18.149,7

20.904,1 -13.977,4

4.917,2 -3.705,2

502,4 0,0

77.823,1 -35.832,4

Carrying amount as of March 31, 2005 . . . . . . . . . . .

33.349,7

6.926,7

1.212,0

502,4

41.990,7

Gross carrying amount . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depreciation and impairment . . . . . . . .

42.669,4 -14.010,6

15.530,1 -9.842,2

3.930,6 -2.464,1

294,5 0,0

62.424,6 -26.316,9

Carrying amount as of March 31, 2006 . . . . . . . . .

28.658,8

5.687,9

1.466,5

294,5

36.107,7

Carrying amount as of April 1, 2004 . . . . . . . . . . . . . Changes through business combinations . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net exchange differences . . . . . . . . . . . . . . . . . . . . . .

31.827,2 0,0 117,7 2.405,4 -2.424,9 649,2 775,1

7.570,5 0,0 695,6 385,2 -3.321,5 1.313,1 283,7

1.243,4 0,0 562,0 100,5 -688,5 -98,0 92,6

186,7 0,0 3.414,2 -3.113,2 -5,4 0,0 20,0

40.827,8 0,0 4.789,5 -222,1 -6.440,3 1.864,3 1.171,4

Carrying amount as of March 31, 2005 . . . . . . . . . . . Changes through business combinations . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net exchange differences . . . . . . . . . . . . . . . . . . . . . .

33.349,7 -8.876,5 0,0 214,1 -675,1 4.139,1 507,6

6.926,7 -6.454,2 55,1 1.816,0 -1.012,6 4.135,2 221,8

1.212,0 -396,7 742,5 77,7 -1.472,0 1.241,2 61,9

502,4 0,0 1.918,5 -2.143,7 0,0 0,0 17,3

41.990,7 -15.727,4 2.716,1 -35,9 -3.159,7 9.515,5 808,6

Carrying amount as of March 31, 2006 . . . . . . . . .

28.658,8

5.687,9

1.466,5

294,5

36.107,7

In thousands of euros

Total

“Changes through business combinations” are due to outsourcing activities of “Grobblech-Anarbeitung”. At March 31, 2006 no restrictions on title to property, plant and equipment amounted. (March 31, 2005: EUR 0 million). There are obligations existing under operating lease agreements relating to property, plant and equipment not stated in the consolidated balance sheet. These obligations are payable as follows: TSD EUR

2005/06

2004/05

Less than one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Between one and five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . More than five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

566,0 1.732,0 1.682,0

852,0 4.191,0 720,0

3.980,0

5.763,0

F-102

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements for the year ended 31 March 2006 9. Other intangible assets Patents and trademarks

In thousands of euros

Advanced payments

Total

Gross carrying amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depreciation and amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.637,6 -2.124,1

6,7 0,0

2.644,3 -2.124,1

Carrying amount as of April 1, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

513,6

6,7

520,3

Gross carrying amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depreciation and amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.392,3 -1.847,2

0,0 0,0

2.392,3 -1.847,2

Carrying amount as of March 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

545,1

0,0

545,1

Gross carrying amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depreciation and amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . .

687,1 -423,4

588,1 0,0

1.275,3 -423,4

Carrying amount as of March 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

263,7

588,1

851,8

The carrying amounts of other intangible assets for the periods presented in the consolidated financial statements as of March 31, 2006, are reconciled as follows: Patents and trademarks

In thousands of euros

Advanced payments

Total

Carrying amount as of April 1, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes through business combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net exchange differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

513,6 0,0 -179,7 219,0 -25,1 0,0 17,3

6,7 0,0 0,0 0,0 -6,7 0,0 0,0

520,3 0,0 -179,7 219,0 -31,8 0,0 17,3

Carrying amount as of March 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes through business combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net exchange differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

545,1 -160,9 -167,0 36,0 0,0 0,0 10,5

0,0 0,0 588,1 0,0 0,0 0,0 0,0

545,1 -160,9 421,1 36,0 0,0 0,0 10,5

Carrying amount as of March 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

263,7

588,1

851,8

“Changes through business combinations” are due to outsourcing activities of “Grobblech-Anarbeitung”. 10. Investments in associates and other financial assets (non-current) In thousands of euros

InvestAffiliated ments in Other companies associates investments Securities

Gross carrying amount . . . . . . . . . . . . . . . . . . 2.154,5 Accumulated depreciation and impairment . . . . . . . . . . . . . . . . . . . . . . . . . -1.971,3

Advance payments

Total

0,0

6.553,4

0,0

0,0

-2.756,5

Loans

708,6

643,0

-130,6

-554,5

183,2

578,0

88,5

1.947,2 1.000,0

0,0

3.796,9

Gross carrying amount . . . . . . . . . . . . . . . . . . 3.356,5 Accumulated depreciation and impairment . . . . . . . . . . . . . . . . . . . . . . . . . -2.581,3

733,9

643,0

1.864,6 1.300,0

0,0

7.898,0

-195,9

-554,5

0,0

0,0

-3.409,3

775,2

538,0

88,5

1.787,0 1.300,0

0,0

4.488,7

Gross carrying amount . . . . . . . . . . . . . . . . . . 3.551,9 Accumulated depreciation and impairment . . . . . . . . . . . . . . . . . . . . . . . . . -2.581,3

964,1

643,0

1.518,4 1.170,0

0,0

7.847,4

-261,2

-554,5

0,0

0,0

-3.439,8

702,9

88,5

1.475,7 1.170,0

0,0

4.407,7

Carrying amount as of April 1, 2004 . . . . . . .

Carrying amount as of March 31, 2005 . . . . .

Carrying amount as of March 31, 2006 . . .

970,6

F-103

2.047,3 1.000,0 -100,1

-77,6

-42,8

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements for the year ended 31 March 2006 Loans are composed as follows: TSD EUR

Loans to affiliated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loans to associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loans to other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

In thousands of euros

InvestAffiliated ments in Other companies associates investments Securities

31.03.2006

31.03.2005

1.170,0 0,0 0,0 0,0

1.300,0 0,0 0,0 0,0

1.170,0

1.300,0

Loans

Advance payments

Total

Carrying amount as of April 1, 2004 . . . . . . . 183,2 Changes through business combinations . . . . 0,0 Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.203,0 Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0,0 Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2,7 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . -610,0 Remeasurement at fair value . . . . . . . . . . . . . . 0,0 Net exchange differences . . . . . . . . . . . . . . . . 1,7

578,0 0,0 11,9 0,0 -51,9 0,0 0,0 0,0

88,5 0,0 0,0 0,0 0,0 0,0 0,0 0,0

1.947,3 1.000,0 0,0 0,0 0,0 300,0 0,0 0,0 -172,8 0,0 0,0 0,0 12,6 0,0 0,0 0,0

0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

3.797,0 0,0 1.514,9 0,0 -227,4 -610,0 12,6 1,7

Carrying amount as of March 31, 2005 . . . . . Changes through business combinations . . . . Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . Remeasurement at fair value . . . . . . . . . . . . . . Net exchange differences . . . . . . . . . . . . . . . .

775,2 0,0 192,4 0,0 0,0 0,0 0,0 3,0

538,0 0,0 216,8 0,0 -51,9 0,0 0,0 0,0

88,5 0,0 0,0 0,0 0,0 0,0 0,0 0,0

1.787,0 1.300,0 -302,6 0,0 0,0 0,0 0,0 0,0 -25,3 -130,0 0,0 0,0 16,5 0,0 0,0 0,0

0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

4.488,8 -302,6 409,2 0,0 -207,2 0,0 16,5 3,0

Carrying amount as of March 31, 2006 . . .

970,6

702,9

88,5

1.475,7 1.170,0

0,0

4.407,7

“Changes through business combinations” are due to outsourcing activities of “Grobblech-Anarbeitung”. 11. Deferred tax assets and liabilities In accordance with IAS 12.39 deferred taxes on differences resulting from investments in subsidiaries were not recognized. Temporary differences between tax values and consolidated financial statements are attributable to the following: Assets 31.03.2006 31.03.2005

In thousands of euros

Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consolidation: Intercompany elimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Revalued assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Corporate tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liabilities 31.03.2006 31.03.2005

1.751,1 4,8 3.141,3 0,0

1.879,0 153,0 2.079,0 405,0

1.061,4 106,0 6.327,9 0,0

772,2 326,0 8.332,8 0,0

4.897,2

4.516,0

7.495,3

9.431,0

0,0 0,0 0,0

0,0 0,0 0,0

0,0 0,0 0,0

0,0 278,8 0,0

4.897,2 4.516,0 7.495,3 9.709,8 25,0% 25,0% 25,0% 25,0%

Deferred tax assets/liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Netting out of deferred tax assets/liabilities to the same tax authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.224,3

1.129,0

1.873,8

2.427,5

-164,9

-223,3

-164,9

-223,3

Net deferred tax assets/liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.059,4

905,8

1.708,9

2.204,2

F-104

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements for the year ended 31 March 2006 12. Inventories In thousands of euros

03/31/2006

03/31/2005

Raw materials and consumables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Work in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Merchandise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . As yet unbillable services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

31,8 0,0 0,0 45.012,8 0,0 38,5

48,1 0,0 0,0 50.911,9 0,0 173,3

45.083,1

51.133,3

13. Trade and other receivables TSD EUR

31.03.2006

of which over one year

31.05.2005

of which over one year

Trade receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Receivable from affiliated companies . . . . . . . . . . . . . . . . . . . . Receivable from other investments . . . . . . . . . . . . . . . . . . . . . . Other trade and other asset . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36.750,2 1.623,7 13,6 1.749,4

6,0 0,0 0,0 0,0

40.756,9 2.017,4 160,8 2.432,7

6,4 0,0 0,0 0,0

40.136,9

6,0

45.367,8

6,4

14. Cash and cash equivalents TSD EUR

31.03.2006

31.05.2005

1.038,2

2.068,2

TSD EUR

31.03.2006

31.05.2005

equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36.895,3

38.362,8

Cash on hand, cash at banks, checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15. Equity

Minority interest Minority interest as of March 31, 2006 results from minority shares in the equity of Veting voestalpine d.o.o. and Köllensperger Stahlhandel GmbH & Co KG. TSD EUR

31.03.2006

31.05.2005

4.475,8

4.380,1

minory interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16. Pensions and other employee obligations In thousands of euros

2005/06

2004/05

Provisions for severance payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions for pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provisions for long-service bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.011,7 1.194,6 1.453,7

4.837,0 1.154,8 1.202,6

7.660,0

7.194,4

The calculation of the provisions for pensions was based on an expected interest rate of 6.0% applied to the plan assets. The actual interest rate was 12.5 %.

F-105

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements for the year ended 31 March 2006 17. Provisions

In thousands of euros

Non-current provisions Other personnel expenses . . . . . . . . . Warranties . . . . . . . . . . . . . . . . . . . . . Other non-current provisions . . . . . .

Changes through Balance business Net as of combi- exchange 04/01/2005 nations differences

28,6 119,9 273,1

Use

Balance as of Reversal Addition Transfers 03/31/2006

0,0 0,0 0,0

0,0 1,1 2,8

0,0 0,0 0,0 -60,7 0,0 -156,1

0,0 0,0 0,0

-28,6 0,0 28,6

0,0 60,4 148,5

421,6 0,0 Current provisions Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 29,7 0,0 Vacations . . . . . . . . . . . . . . . . . . . . . 475,5 -151,5 Other personnel expenses . . . . . . . . . 2.252,9 -357,5 Warranties . . . . . . . . . . . . . . . . . . . . . 0,0 0,0 Anticipated losses . . . . . . . . . . . . . . . 14,4 0,0 Other current provisions . . . . . . . . . . 266,1 0,0

4,0

0,0 -216,7

0,0

0,0

208,9

0,0 0,0 0,0 0,0 0,0 0,0

-23,9 -1,5 -324,0 0,0 -1.777,1 -118,3 0,0 0,0 -14,4 0,0 -237,2 -16,1

34,0 405,7 778,6 0,0 0,0 278,4

0,0 0,0 0,0 0,0 0,0 0,0

38,3 405,7 778,6 0,0 0,0 291,2

3.038,6 -509,0

0,0

-2.376,6 -135,9 1.496,7

0,0

1.513,8

3.460,2 -509,0

4,0

-2.376,6 -352,6 1.496,7

0,0

1.722,7

“Changes through business combinations” are due to outsourcing activities of “Grobblech-Anarbeitung”. 18. Financial liabilities TSD EUR

Up to one year 31.03.2006 31.03.2005

Over one year 31.03.2006 31.03.2005

Bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities from finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities from affiliated companies . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities from other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . Other payables and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .

17.356,0 3,8 28.210,2 0,0 0,0

15.156,1 0,0 38.360,8 0,0 249,8

2.275,9 0,0 0 0,0 0,0

3.711,5 0,0 0,0 0,0 0,0

45.569,9

53.766,7

2.275,9

3.711,5

TSD EUR

31.03.2006

31.03.2005

Preypayments received on orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilites from bill payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities from affiliated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities from other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current tax liabilites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other payables and other liabilites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0,0 20.372,1 0,0 10.331,6 374,4 1.797,6 4.548,0

0,0 20.010,0 0,0 10.617,8 412,1 1.202,7 6.334,4

37.423,7

38.577,1

31.03.2006

31.03.2005

0,0 0,0 0,0

30,6 0,0 2.538,5

0,0

2.569,1

19. Trade and other payables

20. Contingent liabilities TSD EUR

Obligations from bills payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other contingent liabilites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21. Related parties and corporate bodies and employees Business relations between the Group and non-consolidated subsidiaries as well as companies consolidated at equity are dealt with at arm’s length. The impact on the Group’s financial position, financial performance and cash flows of the non-consolidation of the companies is not significant. F-106

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements for the year ended 31 March 2006 Employee information Total personnel expenses are classified as follows: In thousands of euros

Wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenses for severance payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenses for pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenses for statutory benefits and payroll-based contributions . . . . . . . . . . . . . . . . . . . . . Other social expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2005/06

2004/05

2.502,6 10.571,4 329,9 55,3 3.199,3 315,4

3.555,6 12.616,5 369,1 -89,2 4.176,2 396,9

-16.973,9

-21.025,1

Total number of employees: Balance sheet date 2005/06 2004/05

Laborers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Salaried employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Apprentices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Average 2005/06 2004/05

154 297 18

171 319 25

146 296 18

179 326 25

469

515

460

530

22. Significant events after the balance sheet date There were no significant events after the balance sheet date. 23. Dividend The financial statements of voestalpine Stahlhandel GmbH GmbH as of March 31, 2006, are the basis for the dividend. These financial statements report a balance sheet profit of EUR 5.8 million (HGB). The Management Board will therefore recommend a dividend payable to voestalpine Stahl GmbH of EUR 1.5 million (2004/05: EUR 0) Linz, May 17, 2006

Jürgen Glück

Johannes Kasticky

Appendix to the notes: Group companies

F-107

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements for the year ended 31 March 2006 Appendix share in %

consolidation Group companies voestalpine Stahlhandel-group

shares held by

KV

Köllensperger Stahlhandel GmbH & Co KG AUT

KV

NEPTUN STAHLHANDEL GmbH

AUT 100,000% voestalpine Stahlhandel GmbH

KV

voestalpine Stahlhandel spol.s.r.o.

CZE 100,000% voestalpine Stahlhandel GmbH

KV

voestalpine Stahlhandel GmbH

AUT 100,000% voestalpine Stahl GmbH

KV

Veting voestalpine d.o.o.

HRV

60,000% voestalpine Stahlhandel GmbH

KE

VAS — TAD Edelstahl Handels GmbH

AUT

50,000% voestalpine Stahlhandel GmbH

KE

zimmermann STAHLHANDEL GmbH

AUT

99,800% NEPTUN STAHLHANDEL GmbH

KO

ARGE Baustahl Eisen Blasy-Neptun GmbH AUT

50,000% NEPTUN STAHLHANDEL GmbH

KO

Vereinigte Biege-Gesellschaft m.b.H.

AUT

67,000% NEPTUN STAHLHANDEL GmbH

KO

BWS BEWEHRUNGSSTAHL GmbH

AUT

36,000% NEPTUN STAHLHANDEL GmbH

KO

Köllensperger Stahlhandel GmbH

AUT

60,000% voestalpine Stahlhandel GmbH

KO

voestalpine Stahlhandel Polska Sp. z o.o.

POL 100,000% voestalpine Stahlhandel GmbH

KO

VOEST-ALPINE GmbH München

DEU 100,000% voestalpine Stahlhandel GmbH

KO

voestalpine ambient Stahlhandel S.R.L.

ROM 50,939% voestalpine Stahlhandel GmbH

KO

voestalpine Stahlhandel Slowakei s.r.o.

SVK 100,000% voestalpine Stahlhandel GmbH

KO

voestalpine Stahlhandel d.o.o.

SVN 100,000% voestalpine Stahlhandel GmbH

KO

voestalpine Stahlhandel Budapest Kft.

HUN 100,000% voestalpine Stahlhandel GmbH

KO

Veting voestalpine Stahlhandel d.o.o.

BIH

KO

VETING-VOEST ALPINE STAHLHANDEL GRUPA Za proizvodnju i trgovinu metalima d.o.o. in Liquidation

HRV

K0...no consolidation

KE...at equity

60,000% voestalpine Stahlhandel GmbH

100,000% Veting voestalpine d.o.o. 60,000% voestalpine Stahlhandel GmbH

KV...fully consolidated

F-108

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements for the year ended 31 March 2006 STATUS REPORT VOESTALPINE STAHLHANDELS GROUP 31 MARCH 2006 1. Economic environment Š Development of the economy and the market

The growth rates in Austria for 2005 for those equipment and construction investments that were relevant for the steel trade reached an average of 0.9% (source: HIS). Because the trend for investments was poor, steel consumption in Austria was at the same low level as 2004. By the end of the 2005 calendar year, investments recovered slightly, and that recovery was mirrored in the increased sales figures of voestalpine Stahlhandel GmbH. The Austrian subsidiaries, Köllensperger Stahlhandel GmbH & Co KG and Neptun Stahlhandel GmbH, showed an analogous development, particularly in the warehousing business. The sales of the Eastern European subsidiaries, Veting voestalpine d.o.o. and voestalpine Stahlhandel spol. s.r.o., declined slightly. However, by the end of the year, these two companies were experiencing a marked upturn in demand on the local markets. During the previous business year, there were no major consolidations in the Austrian steel trade. Rumors about a possible taker of Eberhardt, steel trader in Graz, by another Graz-based steel trader (Kovac) cannot be assessed at the moment. Š Raw materials and energy

The first quarters of the business year were characterized by falling prices for steel products. This development was the result of how the market had overheated in 2004 because of the “China factor.” Since the end of the business year, one can see a trend reversal in the raw materials sector; for example, the price for scrap metal increased between November 2005 and March 2006 by about 20%. One can assume that the prices for raw materials will keep climbing until the fall of 2006. 2. Business performance and status The entire past business year was characterized by a continuation of the price/quantity war in those markets where the Stahlhandels Group is present. The reason is the overall decline of the quantities on the Austrian and Eastern European steel market. As a result of this cutthroat competition, the profit margin came under massive pressure and was below the budgeted figures throughout the entire business year. The margin situation is similarly difficult both in Austria and abroad. Currently, a trend reversal is not in sight. Therefore, it was particularly important to implement the measures to improve the operating result that had been initiated during the past business year (for example, introduction of the trade collective agreement at voestalpine Stahlhandel GmbH). In the sector of transport logistics, voestalpine Stahlhandel GmbH and Neptun Stahlhandel GmbH switched from Logserv to Gebrüder Weiss. At voestalpine Stahlhandel GmbH, EUR 43,000.00 were realized from the sale of non-essential assets. Š Development of revenue according to industries, regions, etc.

The largest sales were in the steel and machine construction sectors, the building and the building supply industry, and in the automotive sector. The percentage of exports in the Stahlhandels Group is about 15%. Š Key figures Š Key performance indicators Š Š Š Š

EBIT and EBIT margin EBITDA and EBITDA margin EBT Net income

EUR 7,030,000 margin 2.3% EUR10,210,200 margin 3.4% EUR 6,620,000 EUR 5,750,000

Š Key figures for asset and capital structure Š Equity ratio

27.7% F-109

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements for the year ended 31 March 2006 3. Risk management The voestalpine Stahlhandels Group sees systematic risk management as an integral component of its business processes and its operational procedures, in other words, a core management responsibility. voestalpine Stahlhandel GmbH implemented a risk management system in 2001. The risk management system identifies and evaluates potential risks and, using this as a basis, appropriate measures to respond to and resolve risks are selected and implemented. Along the same lines as the risk management system that exists at voestalpine Stahlhandel GmbH, equivalent systems have been implemented at the fully consolidated companies (Köllensperger Stahlhandel GmbH & Co KG in 2001, Neptun Stahlhandel GmbH in 2002, Veting voestalpine d.o.o. in 2002, and at voestalpine Stahlhandel spol.s.r.o. in 2001). Appropriate measures have been developed for identified risks. The measures developed were directed at lowering the extent of damage and/or reducing the probability of an occurrence. Operational risk management is based on a revolving process, which is run through at least once a year and which enables early identification of potential risks. The identified risks must fulfill the following criteria: “describable,” “ratable,” and “controllable.” General, market, personnel, operational, environmental, and IT risks are documented, among others. Š Liquidity risk

An essential instrument to manage liquidity risk is precise financial planning that is prepared quarterly on a revolving basis and that is binding for the entire Stahlhandels Group. Š Credit risk

The credit risk of underlying transactions is largely covered by credit insurance (ÖKV) and security deposits through banks (guarantees, letters of credit). In the Eastern European companies, this process is currently being set up. 4. Investments In the past business year, the largest investment was the implementation of the new ERP system, Microsoft Navision, with an estimated preliminary amount of EUR 600,000 at voestalpine Stahlhandel GmbH. Additional investments were made, in particular at our subsidiary voestalpine Stahlhandel spol.s.r.o. in Vyskov, primarily associated with the warehouse including equipment in the amount of EUR 2.19 million. 5. Organization Competition that is increasingly predatory has led to a change in the organizational structure at voestalpine Stahlhandel GmbH in order to adapt to the changed market situation. The focus was placed on product-oriented sales. In addition, the operating procedures were made leaner by merging staff units or not replacing staff. In the subsidiaries, there has been no change in the organizational structure in this regard. 6. Employees As of the end of the 2005/06 business year, the voestalpine Stahlhandels Group had 451 employees (excluding apprentices). Compared to the previous year (490), this corresponds to a reduction by 39 employees. voestalpine Stahlhandel GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Köllensperger Stahlhandel GmbH & Co KG . . . . . . . . . . . . . . . . . . . . . . . voestalpine Stahlhandel spol.s.r.o. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Veting voestalpine d.o.o. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Neptun Stahlhandel GmbH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

202 46 111 41 51

The reduction of the number of employees at voestalpine Stahlhandel GmbH has resulted largely from divesting the GBS activities to voestalpine Anarbeitung GmbH and from adjusting the organizational structure to the changed market environment. During the 2005/06 business year, the implementation of the “LIFE” program at voestalpine Stahlhandel GmbH made progress. F-110

VOESTALPINE STAHLHANDEL GMBH Consolidated Financial Statements for the year ended 31 March 2006 The general goal of the “LIFE” program is to continue to improve the company’s attractiveness as an employer and to counteract the critical demographic development on the labor market that is anticipated for the near future. The main objective is to adapt the working hours, work processes, and the workplaces to the individual life phases of the employees, in order to ensure an even more productive collaboration of all the generations working within the company. These activities are being accelerated in the current business year, whereby the focus is on the older employees, a group that is increasingly gaining importance. During the 2005/06 business year, there was an increase in work-related accidents in the voestalpine Stahlhandels Group (+ 24%). There was a total of 21 work-related accidents. 7. Environment Not relevant for the companies in the Stahlhandels Group. 8. Research & Development As trading companies, the companies in the voestalpine Stahlhandels Group do not conduct any research and development. 9. Major events after the balance sheet date There were no major events after the balance sheet date. 10. Quality management systems The implemented QM system that has been certified in accordance with the ISO 9001:2000 norm of the voestalpine Stahlhandels Group contains current corporate policy, corporate goals and standards, as well as the organizational structure. The QM system regulates the processes and responsibilities, among other things, so that the customer requirements (products and services) can be optimally implemented. The quality policies place the customer in the center of the business processes. 11. Outlook Currently, there are clear signs that in the coming business year the steel prices will develop similarly to 2004/05, which was a boom year. This development applies to the entire Stahlhandels Group. All of the well-known steel manufacturers have announced steel price increases — some of which are massive. The predicted increases, however, are not the result of demand, but of the changed supply streams of the plants. The implementation of the expected price increases and the communication with our clients will be a tough job this year. However, we are convinced that this will be successful because of the close and long-term relationships with our customers. Additionally, we need to optimize inventory management and to keep a close eye on the company’s debtors because of the rising steel prices.

Executive Management

Johannes Kasticky

Jürgen Glück

Linz, May 2006

F-111

Unaudited Summary Financial Statements for the nine months ended 30 September 2006 and the twelve months ended 31 December 2005 of voestalpine Stahlhandel GmbH

F-112

VOESTALPINE STAHLHANDEL GMBH Income statement (COS) Values in 1.000 EUR

ACTUAL 2005.09 9 months

ACTUAL 2005.12 12 months

ACTUAL 2006.09 9 months

SALES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

240.376,0

311.765,8

246.355,3

Material expenses (COS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -205.667,5 Personnel expenses (COS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1.177,3 Regular Deprec. (COS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -577,3 Other operating expenses (COS) . . . . . . . . . . . . . . . . . . . . . . . . . . . -180,6

-268.784,7 -1.504,7 -696,2 -412,7

-211.423,9 -1.372,6 -316,5 -950,7

Cost of Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

-207.602,7

-271.398,3

-214.063,7

GROSS MARGIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

32.773,3

40.367,4

32.291,6

Gross margin (Gross margin as % of sales) . . . . . . . . . . . . . . . . . . Other Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13,6% 2.372,3

12,9% 2.922,6

13,1% 2.930,0

Material expenses (DC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Personnel expenses (DC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Regular Deprec. (DC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other operating expenses (DC) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

-547,9 -9.626,2 -1.450,4 -7.834,5

-627,8 -12.578,6 -1.905,2 -10.294,6

-265,4 -8.787,3 -1.375,9 -7.815,3

Distribution Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

-19.459,1

-25.406,2

-18.243,9

Material expenses (AC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Personnel expenses (AC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Regular Depr. (AC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other operating expenses (AC) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

-69,3 -3.479,0 -629,3 -1.608,4

-94,0 -4.469,4 -778,2 -2.225,7

-46,9 -2.951,2 -504,4 -1.422,8

Administration Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

-5.786,0

-7.567,3

-4.925,2

Material expenses (others) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Personnel expenses (others) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Regular Deprec. (others) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other operating expenses (others) . . . . . . . . . . . . . . . . . . . . . . . . . .

-15,1 0,0 -40,1 -1.269,4

-17,9 0,0 -49,3 -1.244,1

-7,8 0,0 -27,9 -983,0

Other expenses (others) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

-1.324,6

-1.311,2

-1.018,7

Income from associated comp. (core business) . . . . . . . . . . . . . . . .

0,0

0,0

0,0

EARNINGS BEFORE INTEREST AND TAX (EBIT) . . . . . . .

8.575,9

9.005,2

11.033,7

Interest revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Result from part.a.integr.comp.settlem. . . . . . . . . . . . . . . . . . . . . . Result from securities and finan.asset . . . . . . . . . . . . . . . . . . . . . . .

1.264,5 -1.784,5 -152,2 23,0

1.670,8 -2.281,3 -254,5 16,5

492,9 -1.725,6 990,7 16,9

FINANCIAL RESULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

-649,3

-848,6

-225,1

EARNINGS BEFORE TAXES . . . . . . . . . . . . . . . . . . . . . . . . . .

7.926,7

8.156,7

10.808,6

EXTRAORDINARY RESULT . . . . . . . . . . . . . . . . . . . . . . . . . .

0,0

0,0

0,0

Taxes on income and earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

-2.487,9 -1.463,0

-2.507,3 -1.445,3

-2.497,5 -316,6

Tax expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

-3.950,9

-3.952,6

-2.814,1

TAX RATE (Tax exp.as % of Earn.bef.taxes) . . . . . . . . . . . . . . . . .

-49,8%

-48,5%

-26,0%

PROFIT FOR THE PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.975,8

4.204,1

7.994,5

thereof profit/loss due to third parties . . . . . . . . . . . . . . . . . . . . . .

-553,4

-699,2

-926,1

F-113

VOESTALPINE STAHLHANDEL GMBH Balance sheet ACTUAL 2005.09 9 months

ASSETS (Values in 1.000 EUR)

ACTUAL 2005.12 12 months

ACTUAL 2006.09 9 months

PROPERTY, PLANT AND EQUIPMENT . . . . . . . . . . . . . . . . . . . . . INVESTMENT PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . GOODWILL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OTHER INTANGIBLE ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AT EQUITY INVESTMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HOLDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LOANS NON-CURRENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RECEIVABLES — F&C NON-CURRENT . . . . . . . . . . . . . . . . Other long term financial investments . . . . . . . . . . . . . . . . . . . . . Payments on account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other Receivables - from financing>1 year . . . . . . . . . . . . . . . . . Securities for severance payment held as financial assets . . . . . . OTHER FINANCIAL ASSETS NON-CURRENT . . . . . . . . . . . . . . . DEFERRED TAX ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36.102,4 0,0 0,0 334,0 756,7 863,3 1.300,0 0,0 0,0 0,0 0,0 1.495,0 3.658,3 944,4

36.220,7 0,0 0,0 316,8 654,4 865,2 1.300,0 0,0 0,0 0,0 0,0 1.487,6 3.652,8 934,8

36.099,6 0,0 0,0 1.010,6 1.180,9 1.155,6 1.040,0 0,0 0,0 0,0 0,0 1.479,1 3.674,7 1.064,2

NON-CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

41.795,8

41.779,5

43.030,0

INVENTORIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RECEIVABLES TRADE — THIRD PARTIES . . . . . . . . . RECEIVABLES FROM AFFILIATED COMPANIES . . . . REC. F. COMP. IN WHICH SHARES ARE HELD . . . . . . Receivables POC-Method . . . . . . . . . . . . . . . . . . . . . . . . . . . TRADE RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RECEIVABLES DERIVATIVES . . . . . . . . . . . . . . . . . . . . RECEIVABLES FROM ASSET DISPOSALS . . . . . . . . . . RECEIVABLES FROM PROFIT POOLS & DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RECEIVABLES OTHER . . . . . . . . . . . . . . . . . . . . . . . . . . . OTHER RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TRADE AND OTHER RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . CURRENT TAX ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LOANS CURRENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RECEIVABLES F&C CURRENT . . . . . . . . . . . . . . . . . . . . . . . . OTHER SECURITIES AND SHARES . . . . . . . . . . . . . . . . . . . . FINANCIAL ASSETS CURRENT . . . . . . . . . . . . . . . . . . . . . . . . . . . CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . .

44.345,8 39.409,7 2.093,6 237,4 0,0 41.740,7 0,0 0,0

40.859,0 31.837,3 852,2 1,5 0,0 32.690,9 0,0 0,0

51.913,0 46.969,9 1.992,6 0,0 0,0 48.962,5 0,0 0,0

52,2 3.465,7 3.517,9 45.258,6 17,4 0,0 1.648,5 0,0 1.648,5 2.235,4

39,2 2.714,2 2.753,4 35.444,3 0,0 0,0 4.480,7 0,0 4.480,7 4.247,3

0,0 3.261,1 3.261,1 52.223,7 0,0 0,0 3.966,1 414,6 4.380,7 2.870,3

CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

93.505,8

85.031,4

111.387,8

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

135.301,6

126.810,9

154.417,9

F-114

VOESTALPINE STAHLHANDEL GMBH Balance Sheet EQUITY AND LIABILITIES (Values in 1.000 EUR)

ACTUAL 2005.09 9 months

EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36.038,7

36.443,3

40.638,3

LIABILITIES TO BANKS NON-CURRENT . . . . . . . . . . . . . . . . . . . BONDS > 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LIABILITIES F&C NON-CURRENT . . . . . . . . . . . . . . . . . . . . . . . . . OTHER FINANCIAL LIABILITIES NC . . . . . . . . . . . . . . . . . . . . . . . FINANCIAL LIABILITIES NON-CURRENT . . . . . . . . . . . . . . . . . . . . . . PROVISIONS FOR EMPLOYEE BENEFIT COSTS . . . . . . . . . . . . . OTHER LONG-TERM PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . DEFERRED TAX LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PROVISIONS NON-CURRENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.284,7 0,0 0,0 0,0 3.284,7 6.613,8 420,9 1.621,6 8.656,3

3.080,0 0,0 0,0 0,0 3.080,0 6.732,8 424,3 1.609,7 8.766,7

1.687,4 0,0 4.728,0 0,0 6.415,4 7.409,4 207,4 1.793,1 9.409,9

NON-CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11.941,0

11.846,8

15.825,3

LIABILITIES TRADE- THIRD PARTIES . . . . . . . . . . . . . . . . . LIABILITIES FROM AFFILIATED COMPANIES — T . . . . . . LIAB. F. COMP. IN WHICH SHARES ARE HELD — T . . . . . TRADE LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LIABILITIES DERIVATIVES . . . . . . . . . . . . . . . . . . . . . . . . . . . LIABILITIES FROM INVESTMENTS . . . . . . . . . . . . . . . . . . . . LIABILITIES FROM PROFIT POOLS & DIVIDENDS . . . . . . LIABILITIES OTHER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TRADE AND OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LIABILITIES TO BANKS CURRENT . . . . . . . . . . . . . . . . . . . . . . . . BONDS < 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LIABILITIES F&C CURRENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OTHER FINANCIAL LIAB. CURRENT . . . . . . . . . . . . . . . . . . . . . . FINANCIAL LIABILITIES CURRENT . . . . . . . . . . . . . . . . . . . . . . . . . . . PROVISIONS CURRENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TAX LIABILITIES CURRENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PUBLIC SUBSIDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

22.685,0 8.953,1 12,3 31.650,4 0,0 149,1 435,5 10.604,8 11.189,4 42.839,8 16.069,8 0,0 25.062,5 165,2 41.297,4 1.532,3 1.652,4 0,0

15.658,6 7.620,8 23,1 23.302,5 0,0 149,1 0,0 8.252,6 8.401,7 31.704,2 17.703,0 0,0 25.883,1 166,3 43.752,4 1.399,6 1.664,7 0,0

23.975,3 9.646,4 6,7 33.628,4 0,0 115,6 0,0 5.414,5 5.530,1 39.158,5 8.134,6 0,0 47.282,0 47,3 55.463,8 1.171,9 2.160,0 0,0

CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

87.321,9

78.520,9

97.954,2

TOTAL EQUITY AND LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . .

135.301,6

126.810,9

154.417,9

F-115

ACTUAL 2005.12 12 months

ACTUAL 2006.09 9 months

Audited Financial Statements for the year ended 31 December 2005 of HSW-Huta Stali Jakos´ciowych Sp. z o.o.

F-116

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. INDEPENDENT AUDITOR’S OPINION For the Supervisory Board of HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola. We have audited the attached financial statements of HSW — Huta Stali Jakos´ciowych Spółka z o.o. with its registered seat in Stalowa Wola at ul. Kwiatkowskiego 1, 37-450 Stalowa Wola, including: 1)

introduction to the financial statements,

2)

balance sheet prepared as at 31 December 2005, reporting total assets and liabilities of PLN 201,317,107.15

3)

profit and loss account for the period from 1 January 2005 to 31 December 2005, reporting net profit of PLN 27,712,517.35

4)

statement of changes in equity in the period from 1 January 2005 to 31 December 2005, reporting an increase in equity by PLN 140,098,344.58

5)

statement of cash flows in the period from 1 January 2005 to 31 December 2005, reporting an increase of cash by PLN 1,267,471.13

6)

additional information and explanations.

It is the responsibility of the Management Board of the Company to prepare these financial statements. Our task was to audit the financial statements and express an opinion concerning their consistency, adequacy and clarity as well as the adequacy of the books of accounts on the basis of which these financial statements were prepared. Our audit of the financial statements was performed in accordance with the following provisions: 1)

Chapter 7 of the Act of 29 September 1994 on Accounting (uniform text Dziennik Ustaw of 2002 No. 76, item 694, with subsequent amendments),

2)

auditing standards adopted by the National Board of Certified Auditors in Poland,

3)

International Financial Audit Standards in matters not regulated in the provisions specified above.

The audit of the financial statements was planned and performed so as to obtain a viable and sufficient basis on which to express a reliable opinion. In particular, the audit comprised verifying the adequacy of the accounting policies applied by the Company and material estimates, checking — largely on a test basis — the accounting records and evidence relating to the amounts and information reported in the financial statements, and the overall evaluation of the financial statements. We believe that the audit has given us sufficient basis to express a reliable opinion. It is our view that the audited financial statements, including numerical data and narrative: a)

present in a reliable and transparent manner all information significant for the assessment of the asset structure and financial standing of the Company as at 31 December 2005 as well as its financial performance in the financial year from 1 January 2005 to 31 December 2005,

b)

was prepared, in all material aspects, in accordance with the accounting policies laid down under the above Act, based on accurately maintained books of accounts,

c)

comply with the legal regulations and the provisions of the Company’s Articles of Incorporation affecting the substance of the financial statements.

F-117

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. The information disclosed in the report on the Company’s operations is complete within the meaning of Article. 49, paragraph 2 of the Act on Accounting, and the information contained therein, derived from the financial statements, is consistent with them. Expert Auditor

DORADCA Zespół Doradców Finansowo-Ksie˛gowych Sp. z o.o. GRUPA FINANS-SERVIS 20-011 Lublin Al.J.Piłsudskiego 1a Reg. No. 232 President of the Management Board Stefan Czerwin´ski, M.Sc. Reg. No. 9449/7400

Alina Dziuba Reg. No. 5577/793

Vice-President of the Management Board Graz˙yna Kutnik. M.Sc. Reg. No. 5691/802 Lublin, 27 February 2006

Corporate seal of the authorised entity

F-118

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 Contents A.

Introductory Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Audited Company Identification Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Information on Entity Authorised to Audit Financial Statements for 2005 . . . . . . . . . . . . . . . . . III. Information on Financial Statements for the Period Preceding the Audited Year . . . . . . . . . . . . IV. Information Identifying Audited Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V. Statement of the independent expert auditor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-120 F-120 F-121 F-121 F-122 F-122

B.

Review of Assets and Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-124

C.

Evaluation of the Reliability of the Accounting System Used and Associated Internal Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Reliability of Accounting System Used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Balance Sheet Assets and Liabilities Stocktaking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-138 F-138 F-138

D.

Information on Audited Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Reliability and Integrity of Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Balance sheet assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Balance sheet liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Discussion on Selected Balance Sheet Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Tangible fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Short-term receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Provisions for liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Short-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Deferred Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Reliability and Integrity of Profit and Loss Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Reliability and Integrity of Supplementary Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V. Integrity of Cash Flow Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VI. Integrity of Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII. Reliability and Integrity of Report on Company Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-138 F-138 F-138 F-139 F-139 F-139 F-139 F-140 F-140 F-140 F-140 F-140 F-141 F-141 F-141 F-142 F-142

E.

Summary of Audit Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-142

F-119

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) A. Introductory Information I. Audited Company Identification Data 1. Name and seat of the Company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola, ul. Kwiatkowskiego 1, 37-450 Stalowa Wola. The Company operates under the Articles of Incorporation drawn up in the form of a Notarial Deed on 27 January 2004, Rep. A No. 280/2004. The Company was established for the time indeterminate. 2. Registration in the National Court Register Entry Number: 0000195945 Entry date: 19 February 2004 Name and seat of the Court: Local Court in Rzeszów, Twelfth Economic Division of the National Court Register. 3. Company’s identification numbers NIP: 865-23-72-944 (VAT Registration number) REGON: 831368290 (statistical number) 4. Objects of the Company’s Activity During the audited period the Company conducted its business activity in line with objects laid down under the Company’s Articles of Incorporation and the entry in the National Court Register. The object of activity included in the main: Š production of cast iron and steel as well as steel alloys, Š other preliminary work on cast iron and steel, production of heavy bars, rods, and cold drawn profiles, Š metalworking and metal coating, production of mechanical tools, Š technical studies and analyses, machining of metal elements.

5. Equity 5.1. The Company’s share capital disclosed in the balance sheet as at 31 December 2005 amounted to PLN 157,987,835.64 and included: — — — —

initial capital reserve capital other reserve capital net profit

PLN 116,895,700.00 PLN 4,459,872.76 PLN 8,919,745.53 PLN 27,712,517.35

5.2. Pursuant to the Company’s Articles of Incorporation and the entry in the National Court Register, the Company’s share capital amounts to PLN 116,895,700.00 and it is divided into 100 shares at PLN 1,168,957.00 each. During the accounting year 2005 the nominal value per share increased from PLN 500.00 to 1,168,957.00. This increase was covered by non-cash contribution in the form of assets (real estate, intangible assets, know-how, and machines and equipment) made by HSW-Zakład Metalurgiczny Spółka z o.o. (metallurgical establishment) valued at 116,845,700.00 5.3. The sole owner of the equity as at 31 December 2005 was HSW — Zakład Metalurgiczny Spółka z o.o. in Stalowa Wola which sold all its shares to ZŁOMREX SA, a company seated in Poraj, on 27 January 2006. F-120

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) A. Introductory Information (Continued) 6. Information on Entities Associated with the Audited Entity 6.1. The audited Company is not a dominant entity for other entities (i.e. a major investor). 6.2. The audited Company was a dependent company as at 31 December 2005 with respect to HSW — Zakład Metalurgiczny Spółka z o.o. The Company is a member of a Group of Companies with Huta Stalowa Wola SA (steelworks) in Stalowa Wola as its dominant entity 7. Head of the Entity The Company’s Board of Management performs the function is the Head of the Entity. As at 27 February 2006 the composition of the Management Board was as follows: —

Mr Wincenty Likus

—

President of the Management Board,

—

Mr Wojciech Maj

—

Member of the Management Board,

—

Mr Andrzej Je˛druch

—

Member of the Management Board.

II. Information on Entity Authorised to Audit Financial Statements for 2005 1. Name and seat of the entity authorised to audit financial statements DORADCA Zespół Doradców Finansowo-Ksie˛gowych Spółka z o.o. GRUPA FINANS-SERVIS Al. J. Piłsudskiego 1a 20-011 Lublin DORADCA Spółka z o.o. is registered on the list of entities authorised to audit financial statements kept by the National Board of Certified Auditors, entry No. 232. 2. Selection of the entity to audit financial statements Resolution No. 13/II/2005 of the Supervisory Board Date of adoption: 28 November 2005 3. Auditing team conducting the audit of financial statements Pursuant to the Agreement No. 176/LU/2005 of 30 November 2005 concluded with the Company’s Management Board, the audit of the financial statements was performed in the seat of the Company during the period from 6 January 2006 to 27 February 2006 on an on-and-off basis. The audit of financial statements was conducted on behalf of the auditing entity by Alina Dziuba, Expert Auditor, Reg. No. 5577/793. 4. Declaration of impartiality and independence of the auditing entity The entity auditing the financial statements and the auditor performing the audit meet the requirements of impartiality and independence set forth under the Act on Accounting. III. Information on Financial Statements for the Period Preceding the Audited Year 1. Information on the entity auditing financial statements The financial statements for the previous accounting period from 19 February 2004 to 31 December 2004 were audited by DORADCA Zespół Doradców Finansowo-Ksie˛gowych Spółka z o.o. GRUPA FINANSSERVIS in Lublin. 2. Type of opinion issued No qualifications were raised in the opinion issued. F-121

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) A. Introductory Information (Continued) 3. Approval of financial statements Body of approving authority: Ordinary General Meeting of Shareholders of HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola Resolution No. 7/2005 Date of adoption: 22 June 2005 4. Manner of distributing profit for the previous accounting year Body of approving authority: Ordinary General Meeting of Shareholders of HSW — Huta Stali Jakos´ciowych Spółka z o.o. Resolution No. 8/2005 Date of adoption: 22 June 2005 The net profit totalling PLN 17,839,491.06 for the previous accounting year was allocated for the following: a) reserve capital b) supplementary capital c) dividend for the Shareholder

PLN 8,919,745.53 PLN 4,459,872.76 PLN 4,459,872.77

The said distribution was properly entered in the books of accounts for the audited period. 5. Information on the filing and announcing of the approved financial statements for the previous accounting period The approved financial statements for the period preceding the audited period were: a) filed along with the other documents with the Local Court in Rzeszów, Twelfth Commercial Division of the National Court Register on 7 July 2005 pursuant to the provisions of Article 69 of the Act on Accounting, b) pursuant to the provisions of Article 70 of the Act on Accounting, they were published in Monitor Polski B No. 1789, item 12533 on 22 November 2005, c) filed in the Fiscal Office on 28 June 2005 under the provisions of Article 27 of the Act of 15 February 1992 on Corporate Income Tax. IV. Information Identifying Audited Financial Statements 1. The audited financial statements for the period from 1 January 2005 to 31 December 2005 include: a)

introduction to the financial statements,

b)

balance sheet prepared as at 31 December 2005, reporting total assets and liabilities and equity of PLN 201,317,107.15

c)

profit and loss account (calculation variant) for the period from 1 January 2005 to 31 December 2005, reporting net profit of PLN 27,712,517.35

d)

statement of changes in equity,

e)

statement of cash flows, reporting an increase in net cash during the audited period by PLN 1,267,471.14

f)

additional information and explanations.

2. Pursuant to the provisions of Article 49 of the Act of 29 September 1994 on Accounting, the Head of the Company drew up a report on its operations during the period from 1 January 2005 to 31 December 2005. V. Statement of the independent expert auditor 1. It is the responsibility of the Company’s Management Board to prepare these financial statements in a proper, reliable and reasonable manner, which has been duly confirmed. F-122

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) A. Introductory Information (Continued) In the declaration submitted, the Management Board of the Company confirmed that, to the best of their knowledge and belief, the information disclosed to us was true and reliable, and it covered all events that might have an effect on the financial statements. The Board made accounting books and other required documents available to us and provided us with explanations necessary to issue our opinion. The Management Board of the Company submitted a declaration of 27 February 2006 confirming Š the completeness of the accounting records in the accounting books, Š the disclosure in the financial statements of any contingency liabilities, Š the disclosure in the financial statements of any material economic events that occurred before the

date of the declaration. 2. It was not the purpose of the audit to detect and explain events liable to prosecution or irregularities which could potentially arise outside of the accounting system. 3. It was not the purpose of the audit to determine the correctness of prices applied in dealings between affiliated entities. B. Review of Assets and Financial Position The audit covered financial statements comprising the balance sheet, profit and loss account, cash flow statement, and economic ratios for the analysed and for the period from 19 February 2004 as for the previous years. For the purpose of the audit the statements have been modified as follows: 1)

the balance sheet Š the contents has been limited to the absolute minimum of information specified in the groups

(fixed assets, working capital, equity and liabilities) and sub-groups, Š the amount of equity has been determined after the exclusion of the part of net profit allocated

for payment as dividend, Š liabilities and provisions for liabilities are divided into long and short-term liabilities: Š long-term liabilities include provision in respect of deferred income tax, long-term

provisions for employee benefits and similar, Š short-term liabilities include short-term provisions for employee benefits and similar, other

short-term provisions, and short-term liabilities, 2)

the profit and loss account: Š inclusion of additional information concerning the results broken down into separate types of

business activity, Š extension of information to include net profit adjusted for the disbursement of the dividend

(disclosed in the net profit/loss item in the balance sheet liabilities, Š elimination of heavily analytical items.

The analysis was performed in current prices, since inflation rates remain fairly stable. Analysis of Balance Sheet and Financial Liquidity and Solvency Ratios The comparative variant of balance sheet data and basic economic and financial ratios are presented in Tables 1 and 2. HSW — Huta Stali Jakos´ciowych Spółka z o.o. with its registered seat in Stalowa Wola was established by way of separation from another entity and registration in the National Court Register on 19 February 2004. A F-123

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) steady development of the Company’s activity is duly reflected in the rising trend of its economic potential throughout the audited period and clearly confirmed in the balance sheet total. As at 31 December 2005 the balance sheet total amounted to PLN 201,317.1 thousand, i.e. up by 154.46% compared to the level at the end of 2004. This growing tendency in the Company’s economic potential was the result of the contribution of its sole shareholder in 2005, i.e. HSW — Zakład Metalurgiczny Spółka z o.o. in the form of assets including real property, intangible assets, know-how, machines and equipment for the total of PLN 116,895.7 thousand. This event translated directly into an increase of the most significant items of fixed assets. In current assets changes reported referred to stock — up by 8.36%, short-term receivables — down by 7.29%, and cash — an increase by 90.92% relative to the level as at 31 December 2004. Consequently, the structure of the Company’s equity underwent certain changes. The immobility of assets ratio went up by 58.81 percentage points as compared to the level as at the end of 2004 totalling 62.08%. This ratio can be safely considered as typical of production enterprises. The year 2005 saw a clear domination of equity in the structure of the Company’s liabilities. As at the balance sheet date it accounted for 78.48% of the total financing sources. Their increased value by PLN 144,558 thousand results from increased initial capital and a rise in the level of profit generated for 2005. Following the distribution of net profit for 2004, the Company established a reserve capital totalling PLN 4,459.8 thousand and supplementary capital of PLN 8,919.7 thousand earmarked for the modernisation of the Company’s assets. The profits generated during the last two years allow the Company to execute the approved modernisation tasks. In the structure of liabilities and provisions, short-term items were dominant. The share of external financing was down during the audited period to 21.52% of the total liabilities. In nominal values liabilities and provisions were down by PLN 22.358 thousand, mainly as a result of the repayment of accounts payable. During the audited period, long-term foreign capitals included provisions only. In 2005, following the establishment of provisions for employee benefits and similar, their value increased by 11.35% relative to the level at the end of 2004. The fixed capital growth rate (equity and long-term external capital) was higher compared to the growth of liabilities, which translated into an increase of the durability of the financing structure by 56.91 percentage point to the level of 82.05% as at the balance sheet date. The aforementioned trends resulted in changes in the assets and financial position of the Company. The fixed assets to equity ratio in 2005 amounted to 126.41%, and the balance sheet “golden” principle was up to 132.17%. Financial liquidity ratios, general and quick liquidity ratio I increased to the levels considered as optimal. Quick liquidity II ratio totalled 0.074, which indicates that the Company can settle 7.4% of its current liabilities without any delay. Stock turn, receivables and liabilities ratios were also up relative to those obtained in 2004. In terms of financial liquidity management, this is not a favourable phenomenon. The stock turn ratio as at the end of 2005 was 30 days, i.e. 16 days longer as compared to that at the end of 2004. The collection period in 2005 was 49 days, i.e. 24 days longer than that in 2004, and the payment period in 2005 was 44 days. It follows that the Company offers a trade credit to buyers for a period longer than it receives from its suppliers. In the two periods compared, the balance of the working capital was positive. In 2005, this balance was higher by 132.37% than the comparable level as at the end of 2004.

F-124

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Table 1. Balance sheets for years 2003, 2004, and 2005 Description 1

31 Dec. 2003 Amount As % of total 2 3

31 Dec. 2004 Amount As % of total 4 5

F-125

ASSETS A. Fixed Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Tangible fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Long-term receivables IV. Long-term investments V. Long-term prepayments and accrued income . . . . . . . . . . . . . . . . . . . . . . . . . B. Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Short-term receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . incl.: accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . incl.: cash and other cash assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Short-term prepayments and accrued income . . . . . . . . . . . . . . . . . . . . . . . . .

1 804 529,00 76 524 458,72 24 754 223,17 50 373 020,35 49 334 832,84 1 393 988,69 1 393 988,69 3 226,51

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LIABILITIES A. Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Share (initial) capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Outstanding contribution to share capital III. Own shares IV. Supplementary capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V. Revaluation capital VI. Other reserve capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII. Profit (loss) carry forward VIII. Net profit (loss) incl. dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B. Liabilities and provisions against liabilities . . . . . . . . . . . . . . . . . . . . . . . . I. Provisions and long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . incl.: credit facilities and loans II. Provisions and short-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . incl.: credit facilities and loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2 592 332,18 3 166,73 784 636,45

31 Dec. 2005 Amount As % of total 6 7

3,28% 124 982 118,11 0,00% 1 221 169,13 0,99% 121 632 257,98

Change (previous year =100%) 2005/2004 8 9

62,08% 0,61% 60,42%

4821,22% 38562,46% 15501,73%

2 128 691,00 76 334 989,04 26 822 802,60 46 703 079,67 46 200 899,96 2 661 459,82 2 661 459,82 147 646,95

1,06% 37,92% 13,32% 23,20% 22,95% 1,32% 1,32% 0,07%

117,96% 99,75% 108,36% 92,71% 93,65% 190,92% 190,92% 4576,06%

79 116 790,90

100,00% 201 317 107,15

100,00%

254,46%

13 429 618,29 50 000,00

16,97% 157 987 835,64 0,06% 116 895 700,00

78,48% 58,07%

1176,41% 233791,40%

4 459 872,76

2,22%

8 919 745,53

4,43%

2,28% 96,72% 31,29% 63,67% 62,36% 1,76% 1,76% 0,00%

13 379 618,29 65 687 172,61 6 463 720,38

16,91% 83,03% 8,17%

27 712 517,35 43 329 271,51 7 197 494,81

13,77% 21,52% 3,58%

207,12% 65,96% 111,35%

59 223 452,23

74,86% 60,48%

17,95% 0,74% 13,68%

61,01%

47 848 074,17

36 131 776,70 1 495 385,17 27 540 868,91

100,00% 201 317 107,15

100,00%

254,46%

79 116 790,90

57,56%

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Table 2. Key balance sheet amounts and economic ratios No.

Ratio

Formula (formula adopted)

Year 2003

Ratio (amount) for: 19.02-31.12.2004 Year 2005

Ratio (amount) change 04-03 05-03 05-04 Change (previous year.=100%)

Key balance sheet amounts 1 2

Net assets (entity’s book value) . . . . . . . . . . . . . . . . . Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-126

4

Current ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

Quick current ratio I . . . . . . . . . . . . . . . . . . . . . . . . . .

6

Quick current ratio II . . . . . . . . . . . . . . . . . . . . . . . . .

7 8 9

Equity ⳮ dividend Equity + provisions and long-term liabilities Fixed capital ⳮ fixed assets Static financial liquidity ratios Current assets Current liabilities Liquid current assets Current liabilities Short-term investments Current liabilities

Collection and stock turn ratios Total stock (average) x 360 Stock-turn — in days . . . . . . . . . . . . . . . . . . . . . . . . . Cost of operating activity Accounts receivable (average) x 360 Collection period — in days . . . . . . . . . . . . . . . . . . . . Income from sales Accounts payable (average) x 360 Payment period — in days . . . . . . . . . . . . . . . . . . . . . Cost of operating activity ⳮ depreciation

13 429 618,29

157 987 835,64

1176,41%

19 893 338,67 17 301 006,49

165 185 330,45 40 203 212,34

830,35% 232,37%

1,29

2,11

1,29

2,11

0,82

0,87

1,37

0,87

1,37

0,49

0,024

0,074

0,024

0,074

0,050

14

30

14

30

16

25

49

25

49

24

27

44

27

44

17

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) No.

10 11 12 F-127

13

Ratio

Formula (formula adopted)

Solvency and equity-capital ratios Total liabilities Debt to equity ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets Equity Equity to total assets ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total assets Equity to fixed assets ratio Equity (assets utilisation ratio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fixed assets Self-financing of current assets Current (utilisation of foreign capital ratio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . liabilities

14

“Golden” principle ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15

Durability of financial structure ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16

Immobility of funds ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Current assets Fixed capital Fixed assets Fixed capital Total liabilities Fixed assets Total assets

Year 2003

Ratio (amount) for: 19.02-31.12.2004 Year 2005

Ratio (amount) change 04-03 05-03 05-04 Change (previous year.=100%)

83,03%

21,52%

83,03

21,52

-61,50

16,97%

78,48%

16,97

78,48

61,50

518,05%

126,41%

518,05

126,41

-391,64

77,39%

47,33%

77,39

47,33

-30,06

767,39%

132,17%

767,39

132,17

-635,22

25,14%

82,05%

25,14

82,05

56,91

3,28%

62,08%

3,28

62,08

58,81

Note! Additional information 1 Equity = Share CapitalⳮDividend; Total Liabilities = Liabilities and Provisions against Liabilities 2 Accounts receivable and payable over 12 months carried forward to respective long-term receivables and accounts payable; Liquid Current Assets = Current AssetsⳮStockⳮShort-term Prepayments and Accrued Income 3 Long-term liabilities = Long-term: provisions, liabilities, Prepayments and Accrued Income, Accounts Payable with maturity over 12 months 4 Current Liabilities = Short-term: Provisions, Liabilities, Accruals and Deferred Income after eliminating Accounts Payable with Maturity over 12 months + Dividend 5 Earnings on Sales = Net Sales of Products + Net Sales of Merchandise and Materials; t — Income Tax Rate

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Structure of Assets 31 Dec. 2004 Fixed Assets

31 Dec. 2005

Current assets

3% 38% 97% 62%

F-128 Structure of Current Assets Stock Short-term receivables Short-term investments Short-term prepayments and accrued income 3% 0%

2% 32%

66%

35%

62%

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Structure of Liabilities and Equity

31 Dec. 2005

31 Dec. 2004 Equity Liabilities and provisions for liabilities 22% 23% 78% 77%

F-129 Structure of External Funding Provisions for liabilities Long-term liabilities Short-term liabilities Accruals and deferred income 14% 22%

86%

78%

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Structure and changes of items determining financial result, profitability and efficient utilisation of resources Table 3 presents a comparison of profit and loss accounts. The cost structure and changes broken down by type is presented in Table 4. Profitability and efficient use of resources ratios are presented in Table 5. During the audited period income from sale was the main source of the Company’s earnings accounting for 99.05% of the total earnings in 2005. This marks an increase by 13.62% relative to the previous year. Financial gains in respect of interest at 0.69% of the total earnings is the second largest source. The remaining operating income accounts for 0.25% of the total earnings. The structures of costs and earnings are similar. The costs of products sold and the value of goods and services sold accounted for 93.24% of the costs incurred in 2005. As in the case of earnings, the costs were up by 12.19% relative to the level at the end of 2004. Operating expenses account for 1.62% of the total costs followed by financial expenses at 0.77% of the total. The specific character of the Company’s activity in 2005 is reflected in the breakdown of costs by type. In 2005 the consumption of materials and energy accounted for 77.64% of the total costs incurred. The other major cost items refer to outsourced services at 10.45% and payroll at 8.02%. The total cost breakdown in 2005 as compared to 10 months inn 2004 totalled 10.58%. In November 2005 the Company received its basic assets in the form of contribution; thus depreciation costs account for a mere 0.36% of the total costs incurred. A parallel increase in earnings from sale by PLN 42,095.5 thousand and the matching costs — an increase by PLN 32,423.4 thousand, led to an increase in gross profit from sale for 2005 up to PLN 52.779.7 thousand. During the audited period profit was higher by 22.44% than that disclosed as at 31 December 2004. Taking into consideration the cost of sales and general management, the profit from sale grew by 21.34% relative to the previous year. The losses on the remaining operating and financial activity led to a situation where gross profit for 2005 amounted to PLN 34,513.9 thousand, i.e. higher than that reported in the previous year by 55.61%. Net profit increase by 107.12% (after taking the dividend into account). Improved results and changes in the structure of assets of the Company were also reflected in changes in profitability indicators. The profitability ratio measured as profit from sale amounted to 11.05%, and return on equity totalled 17.54%. These ratios indicate that the Company’s activity was profitable. A comparison of these ratios in the previous year is not possible, since in 2004 the Company operated without any assets, with little participation of its equity. The rise of fixed assets as at the balance sheet date translated into return on assets on the level of 5.51, and the return on total assets at 2.50. A rise in earnings from sale translated, in turn, into an increased average efficiency of the Company’s employees. In 2005, PLN 421.6 thousand fell per employee, i.e. up by 12.94% relative to the previous accounting period.

F-130

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Table 3. Profit and Loss Accounts

— By Function

Description 1

A.

B. F-131

C. D. E. F. G. H. I. J. K. L. M. N. O. P. R.

Total income and profit . . . . . . . . . . . . . . . . . . . . . . . . . . Total costs and losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income from sale of products, goods, and materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Net income from sale of products . . . . . . . . . . . . . . II. Net income from sale of goods and materials . . . . Cost of products, goods, and materials sold . . . . . . . . . . . . I. Cost of manufacturing products sold . . . . . . . . . . . II. Value of goods and materials sold . . . . . . . . . . . . . Profit (loss) on sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General management costs . . . . . . . . . . . . . . . . . . . . . . . . . Profit (loss) on sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . Other operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Result on other operating activity . . . . . . . . . . . . . . . . . . . Profit (loss) on operating activity . . . . . . . . . . . . . . . . . . Financial income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Result on financial activity . . . . . . . . . . . . . . . . . . . . . . . . Profit (loss) on economic activity . . . . . . . . . . . . . . . . . . Result on extraordinary events . . . . . . . . . . . . . . . . . . . . . . Gross profit (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other mandatory reductions of profit . . . . . . . . . . . . . . . . . Net profit (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . incl.: dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net profit (loss) incl.dividend . . . . . . . . . . . . . . . . . . . . .

Year 2003 Amount As % of total 2 3

x

x

x x

x x x x x x x x x

19.02-31.12.2004 Amount As % of total 4 5

Year 2005 Amount As % of total 6 7

Change (previous year =100%) 2005/2004 8 9

310 237 205,14 288 057 526,08

100,00% 100,00%

354 578 445,42 320 064 547,07

100,00% 100,00%

114,29% 111,11%

309 115 657,59 302 440 031,23 6 675 626,36 266 007 986,72 259 304 172,47 6 703 814,25 43 107 670,87 2 037 042,74 9 085 335,74 31 985 292,39 201 735,86 9 173 071,07 -8 971 335,21 23 013 957,18 919 811,69 1 754 089,81 -834 278,12 22 179 679,06

99,64% 97,49% 2,15% 92,35% 90,02% 2,33%

351 211 167,20 350 694 045,56 517 121,64 298 431 466,44 298 036 762,93 394 703,51 52 779 700,76 2 269 850,85 11 699 242,94 38 810 606,97 903 386,68 5 199 012,95 -4 295 626,27 34 514 980,70 2 463 891,54 2 464 973,89 -1 082,35 34 513 898,35

99,05% 98,90% 0,15% 93,24% 93,12% 0,12%

113,62% 115,95% 7,75% 112,19% 114,94% 5,89% 122,44% 111,43% 128,77% 121,34% 447,81% 56,68% 47,88% 149,97% 267,87% 140,53% 0,13% 155,61%

22 179 679,06 4 340 188,00 17 839 491,06 4 459 872,77 13 379 618,29

x 0,71% 3,15% x 0,07% 3,18% x x 0,30% 0,61% x x x x x x x x x

34 513 898,35 6 801 381,00 27 712 517,35 27 712 517,35

x 0,71% 3,66% x 0,25% 1,62% x x 0,69% 0,77% x x x x x x x x x

155,61% 156,71% 155,34% 207,12%

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Table 4. Structure and changes in costs by type Description 1 2 3 4 5 6 7

1 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Materials and energy consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outsourced services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taxes and charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Social insurance and other benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other costs by nature of expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year 2003 Amount As % of total 2 3

19.02-31.12.2004 Amount As % of total 4 5 217 361,96 0,07% 239 939 796,52 81,43% 26 689 418,50 9,06% 513 534,14 0,17% 18 711 752,93 6,35% 5 599 758,58 1,90% 2 981 328,48 1,01%

Year 2005 Amount As % of total 6 7 1 164 148,62 0,36% 252 981 512,43 77,64% 34 062 821,24 10,45% 1 308 279,65 0,40% 26 115 426,87 8,02% 6 895 790,69 2,12% 3 290 290,49 1,01%

294 652 951,11

325 818 269,99

100,00%

Change (previous year =100%) 2005/2004 8 9 535,58% 105,44% 127,63% 254,76% 139,57% 123,14% 110,36%

100,00%

110,58%

F-132

Table 5. Profitability and utilisation of resources ratios No.

Ratio

1

Return on sales by net profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

Return on sales by profit from sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

Return on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

Return on equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

Return on capital employed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6

Gearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

Total assets stock turn (productivity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8

Fixed assets stock turn (productivity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

Employee productivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Formula (formula adopted) Profitability ratios Net profit Revenue from sales Profit from sales Revenue from sales Net profit Total assets Net profit + interest x (1ⳮt) Total liabilities Net profit Equity Return on share capital ⳮ Return on equity Utilisation of resources (activity) ratios Revenue from sales Total assets ⳮ average Revenue from sales Fixed assets ⳮ average Revenue from sales Average employment level

Year 2003

For 19.02-31.12.2004

Year 2005

Ratio change 04-03 05-03 05-04

5,77%

7,89%

2,12

10,35%

11,05%

0,70

22,55%

13,77%

-8,78

23,16%

14,11%

-9,05

132,84%

17,54%

-115,30

109,67

3,43

-106,24

7,81

2,50

7,81

2,50

-5,31

238,48

5,51

238,48

5,51

-232,98

373 328,09

421 622,05

112,94%

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Change in Total Revenues and Costs

Breakdown of Costs

Total income and profit Total costs and losses

Depreciation 400 000 000,00

Materials and energy consumption

350 000 000,00 Outsourced services 300 000 000,00 Taxes and charges 250 000 000,00 Remuneration 200 000 000,00 Social insurance and other benefits 150 000 000,00 Other costs by nature of expenses

100 000 000,00 50 000 000,00

F-133

0,00 Year 2003

19.02-31.12.2004

Year 2005

Year 2004 6%

2% 1%

9%

82% Result on sales Result on operating activity Result on economic activity Gross result Net result

Change in Financial results

40 000 000,00

Year 2005 35 000 000,00 0%

30 000 000,00

8%

2% 1%

10%

[PLN]

25 000 000,00 20 000 000,00 15 000 000,00 79%

10 000 000,00 5 000 000,00 0,00 Year 2003

19.02-31.12.2004

Year 2005

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Profitability Ratios 140.00% 120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% Year 2003

19.02-31.12.2004

F-134

Return on equity

Return on total assets

Year 2005

Return on capital employed

Liquidity Ratios 2.50

2.00

1.50

1.00

0.50

0.00 Year 2003

19.02-31.12.2004

Current ratio

Year 2005

Quick current ratio I

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Cash flow analysis and financial liquidity ratios Table 6 presents the synthesis of cash flows whereas Table 7 shows selected financial liquidity ratios. The cash flow structure did not undergo significant changes relative to the previous year. Operating activity continued to remain the main source of cash in the Company. This was evidenced in the value of capacity for generating net cash on operating activity which reached the level of 97.45% compared to 87.32% for the previous year. The total value of cash flows from operating activity increased during the audited period over five-fold. The share of profit in generating operating cash flow is a positive feature of business. The outlays on fixed assets and the disbursement of the dividend from the profit generated in 2004 led to negative cash flow from investment and financial operations. The cash self-sufficiency for the audited period totalled 97.83%, i.e. down by 240.65 percentage point relative to that reported in the previous year. Cash flows generated from operating activity were sufficient in 2005 to cover investment and financial outlays. The cash efficiency on sales which totalled 0.62% as at the end of 2004 was up to 2.92% as at the balance sheet date for the audited period.

F-135

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Table 6. Cash Flow Statements Description A. I. II.

F-136

1 Cash flow from operating activity Net profit (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments, total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Profit (loss) due to exchange rate differences 3. Interest and participation in profits (dividends) 4. Profit (loss) on investment activity 5. Change in provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Change in inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Change in liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. Change in short-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. Change in accruals and deferred income . . . . . . . . . . . . . . . . . . . . . . . . . 10. Other adjustments

III.

Net cash flow on operating activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B. I.

Cash flow on investment activity Income 1. Sale of intangible assets and tangible fixed assets 2. Other income Expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Purchase of intangible assets and tangible fixed assets . . . . . . . . . . . . . . 2. Other expenses

II.

Year 2003 Amount As % of total 2 3

x

19.02-31.12.2004 Amount As % of total 4 5

Year 2005 Amount As % of total 6 7

Change (previous year=100%) 2005/2004 8 9

17 839 491,06 -15 931 958,20 217 361,96

935,21% -835,21% 11,39%

27 712 517,35 -17 416 000,96 1 164 148,62

269,14% -169,14% 11,31%

155,34% 109,31% 535,58%

7 303 839,42 -24 754 223,17 -50 373 020,35 51 983 410,09 -309 326,15

382,89% -1297,71% -2640,74% 2725,16% -16,22%

811 680,57 -2 068 579,43 3 669 940,68 -20 604 695,94 -388 495,46

7,88% -20,09% 35,64% -200,11% -3,77%

11,11% 8,36% -7,29% -39,64% 125,59%

1 907 532,86

100,00%

10 296 516,39

100,00%

539,78%

-563 544,17 -563 544,17

100,00% 100,00%

-6 064 557,66 -6 064 557,66

100,00% 100,00%

1076,15% 1076,15%

III.

Net cash flow on investment activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

C. I. II.

Cash flow on financial activity Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Credit facilities and loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Dividends and other payments towards owners . . . . . . . . . . . . . . . . . . . . 2. Repayment of credits and loans 3. Interest 4. Other expenses

-563 544,17

x

III.

Net cash flow on financial activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

x

50 000,00

x

-2 964 487,60

x

-5928,98%

D.

Total net cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Balance change of cash resources)

x

1 393 988,69

x

1 267 471,13

x

90,92%

50 000,00

100,00%

50 000,00

100,00%

-6 064 557,66

x

1 495 385,17 1 495 385,17

100,00% 100,00%

-4 459 872,77 -4 459 872,77

100,00% 100,00%

1076,15% 2990,77%

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Table 7. Financial liquidity change ratios Formula (adopted formula)

F-137

Ratio

1.

Capacity to generate net cash on operating activity ratio . . . . . . . . . . . . .

cash flow on operating activity cash flow on operating activity + stock and financial gains

97,45%

2.

Net profit to net cash flow on operating activity ratio . . . . . . . . . . . . . . . . . . . . .

net profit cash flow on operating activity

3.

Cash availability ratio . . . . . . . . . . . . . . . .

cash flow on operating activity repayment of liabilities with interest + disbursement of dividend + goodwill expenses and tangible fixed assets

4.

Cash efficiency on sales ratio . . . . . . . . . .

cash flow on operating activity revenue from sales + other operating income

Year 2003

For 19.02-31.12.2004

No.

Change Year 2005

97,45

87,32

-10,13

935,21%

269,14% 935,21

269,14

-666,07

338,49%

97,83% 338,49

97,83

-240,65

2,92

2,31

0,62%

87,32%

05-04

2,92%

0,62

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Summary In short, the financial standing of the Company is stable. Contrary to 2004, at the end of 2005 the Company had its own production assets. The Company’s standing with respect to static and dynamic financial liquidity was good. The general level of debt, largely due to accounts payable, is marginal. The activity conducted by the Company is profitable, and the profit generated in 2004 was in the main designated for selffinancing of the Company’s operations. The efficiency of the Company’s employees continued to rise steadily and the cash flows generated from its operating activity allowed for the coverage of the Company’s investment and financial outlays. Assessment of the entity’s continued activity in the year following the audited period without significant changes effected. The audit of financial statements including the financial standing of the Company revealed no threats to the Company’s continued activity in the year following the audited period due to intended or enforced suspension of the existing activity (or material restrictions thereof). C. Evaluation of the Reliability of the Accounting System Used and Associated Internal Control I. Reliability of Accounting System Used The Company keeps accounting books and prepares financial statements on the basis of current accounting documents describing the adopted accounting system, as referred to in Article 10 of the Act on Accounting of 29 September 1994, including the Corporate Chart of Accounts approved by the Management of the Company. In the audited period the Company did not make any changes to its accounting system. The audit of financial statements did not reveal any irregularities in the accounting books which, if not removed, could have a material effect on the audited financial statements, including: Š the justification of the continuity of the adopted accounting policy, Š correctness of the opening balance on the basis of the approved balance sheet for the previous year, Š completeness and clarity of business operations duly confirmed by accounting documents issued in

line with the statutory requirements, Š reliability, correctness and conformity of data reported in the financial statements with accounting

book records, Š correctness of the transfer of data from reconciled accounting books to individual components of the

financial statements Š adequacy of archiving and safeguarding accounting books and accounting records as well as approved

financial statements. II. Balance Sheet Assets and Liabilities Stocktaking The audit confirmed that the Company performed the stocktaking of its assets and liabilities in compliance with the principles and dates specified in Article 26 of the Act on Accounting. The certified auditors participated in the stocktaking of semi-finished products, work in progress, and fixed assets as observers. Their observation confirmed that the stocktaking procedure was properly conducted. The stocktaking results were correctly documented and the stocktaking variances were properly reported in the accounting books .for the audited period. D. Information on Audited Financial Statements I. Reliability and Integrity of Balance Sheet 1. Balance sheet assets The values of individual items of assets as disclosed in the balance sheet constitute the Company’s assets of properly assessed value capable of generating economic gains. Their value was presented in the balance sheet F-138

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) D. Information on Audited Financial Statements (continued) in prices resulting from the principles of accounting adopted and presented in the introduction to the financial statements and adjusted by depreciation and revaluation deductions (or write-offs). 2. Balance sheet liabilities The values of individual items of liabilities presented in the financial statements constitute sources of financing the Company’s assets. The value of individual groups of liabilities is presented as a breakdown into equity and external capital. The evaluation of the above was performed in line with the principles of accounting: Š equity — at nominal value, Š provisions — at a value reasonably assessed, Š liabilities — at amounts payable.

According to the declaration of the Company’s Management Board, there are no disputes or litigation against the Company save those disclosed in the accounting books and reported in the balance sheet as “other short-term provisions”. The balance sheet prepared as at 31 December 2005 contains information which complies with the requirements laid down in the Act on Accounting. Individual items in the balance sheet result from accounting records, and they were properly classified and presented. The audit, conducted to a large extent on a test basis, confirmed the reliability of data presented in the balance sheet. II. Discussion on Selected Balance Sheet Items 1. Tangible fixed assets totalled PLN 121,632,257.98 In the balance sheet tangible fixed assets are reported net of accumulated depreciation. Fixed assets were covered by physical stocktaking and were assessed in terms of their business use. The documentation on receipts and disposal of fixed assets is correct; relevant entries are reported in adequate reporting periods. The Company depreciates its fixed assets by spreading their initial value over the agreed scheduled depreciation period in compliance with the accounting policy. Depreciation allowances are calculated on a straight-line basis. Off-balance sheet records contain outsourced fixed assets used by the Company under lease agreements at PLN 1,621,843.30. Fixed assets under construction as at the balance sheet date refer mainly to costs incurred on the modernisation of the existing assets totalling PLN 317,272.64. 2. Stock During the accounting year the stock of materials, goods, work in progress and finished products were subject to physical count. As at the balance sheet date, the structure of stock is as follows: — — — — —

materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . work in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . finished products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PLN 3,193,953.11 PLN 18,245,498.54 PLN 5,201,799.62 PLN 65,820.59 PLN 115,730.74

11.92% 68.02% 19.39% 0.24% 0.43%

The evaluation of stock was performed in line with the principles laid down in the accounting policy and described in the introduction to the financial statements. F-139

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) D. Information on Audited Financial Statements (continued) The evaluation of stock was performed with due consideration and conservative estimates, which led to an increase in revaluation deductions of semi-finished products and work in progress by PLN 6,081.34. 3. Short-term receivables Accounts receivable constitute 22.9% of the Company’s assets as at 31 December 2005. 37,146,231.97 worth of accounts receivable reported in the balance sheet (i.e. 80.4%) was paid by 20 February 2006. The existence of accounts receivable over 1 year overdue was not confirmed. Accounts receivable were subject to stocktaking by way of balance sheet reconciliation Accounts receivable were confirmed as at 30 October 2005. Accounts receivable were evaluated as falling due with due consideration and conservative estimates, i.e. after taking into account revaluation deductions created on the basis of risk attributed to each account receivable. 4. Equity 4.1. Share capital of PLN 116,895,700.00 complies with the provisions of the Company’s Articles of Incorporation and entries in the Register of Entrepreneurs of the National Court Register. 4.2. Reserve capital totalling PLN 4,459,872.76 was established in compliance with Resolution No. 8/2005 adopted at the Ordinary General Meeting of Shareholders of 22 June 2005 from net profit generated for 2004. 4.3. Other reserve capital totalling PLN 8,919,745.53 was established in 2005 in compliance with Resolution No. 8/2005 adopted at the Ordinary General Meeting of Shareholders of 22 June 2005 from net profit generated for 2004. 4.4. Net profit of the accounting year of PLN 27,712,517.35 is in compliance with that disclosed in the profit and loss account. 5. Provisions for liabilities On the basis of calculations performed by an actuary, the Company established as at 31 December 2005 a provision for possible future employee benefits in respect of jubilee awards and retirement payments in the amount of PLN 7,905,164.79 and other liabilities, including benefits payable under the Steelworker’s Charter totalling PLN 1,756,099.54. 6. Short-term liabilities 6.1. As at the balance sheet date, accounts payable totalled PLN 27,540,868.91, of which PLN 25,222,774.60 was paid by 20 February 2006 as scheduled. Overdue accounts payable did not occur. Generally speaking, during the audited period payments were effected in a timely manner. As at the balance sheet date the Company assessed interest on overdue trade settlements in the amount of PLN 83,921.55. 6.2. The short-term liabilities in respect of loans included a balance of a bank loan on the current account, which falls due in 2006; said loan was granted to the Company by BRE BANK SA, Branch Office in Katowicach for the total of PLN 1,495,385.17. The liabilities towards the said bank were confirmed in writing as at the balance sheet date. The bank loan was assessed in amounts due. During the accounting year the repayments of the loan was effected from financial earnings in compliance with the contract concluded. 7. Deferred Income Tax 7.1. Long-term prepayments amount to PLN 2,128,691.00 and constitute assets in respect of deferred income tax, calculated on negative temporary differences in corporate income tax. The biggest items which in F-140

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) D. Information on Audited Financial Statements (continued) future will constitute a cost in respect of income tax, and which as at the balance sheet date were not reflected in the gross result, referred to: Š provisions for employee benefits, Š provisions for future liabilities, Š unrealised negative foreign exchange differences on liabilities, Š depreciation of slow moving stock resulting from their assessment as at the balance sheet date.

7.2. Provision in respect of deferred income tax of PLN 32,772.00 was determined in line with the requirements laid down in the Act on Accounting on positive temporary differences in corporate income tax and comprised as at the balance sheet date: Š unrealised positive foreign exchange differences on receivables, Š other.

III. Reliability and Integrity of Profit and Loss Account The profit and loss account was prepared by function in compliance with the principles of the accounting system and with due consideration for the provisions of Article 47 of the Act on Accounting. The Company disclosed revenues, costs, profits and losses as well as taxes and mandatory charges on the financial result separately in the profit and loss account for the current and previous financial years. The audited profit and loss account for the period from 1 January 2005 to 31 December 2005, shows earnings from the sale of products, goods and materials demonstrating the costs of operating activity in a calculation variant and specifying the cost of product manufacturing, value of goods and materials sold (at purchase prices), costs of sale (including trading costs), and costs of general management. The gross financial result in the profit and loss account prepared for the period from 1 January 2005 to 31 December 2005 comprises the total amounts of three groups of revenues and costs: — — —

result on sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PLN 38,810,606.97 result on other operating activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PLN 4,295,626.27 result on financial activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PLN 1,082.35

The financial result disclosed in the profit and loss account — net profit of PLN 27,712,517.35 is reported in the same amount in the balance sheet — item A.VIII relating to equity “net profit (loss)”. The financial result disclosed in the profit and loss account as a comparison of revenues and costs, was correctly recognised with due consideration for the principles of accounting, i.e. accruals basis, commensurability of costs and revenues, and completeness and caution. Revenues and costs were correctly classified and recorded under relevant items of the profit and loss account on the basis of accounting documents maintained and closed as at year end. IV. Reliability and Integrity of Supplementary Report The Supplementary Report to the financial statements includes introduction to the financial statements, additional information and explanations (notes). The Supplementary Report contains information required under the provisions of Article 48 of the Act on Accounting, and the data disclosed are in line with the data reported in the balance sheet and in the profit and loss account. V. Integrity of Cash Flow Statement The cash flow statement was drawn up in line with the Company’s accounting policies on an indirect method basis. The information disclosed in the cash flow statement is consistent with the balance sheet and profit and loss account data, statement of changes in equity and supplementary report as well as with the Company’s accounting records. Individual cash flows have been classified under relevant items of the statement. F-141

HSW — HUTA STALI JAKOS´CIOWYCH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Huta Stali Jakos´ciowych Spółka z o.o. in Stalowa Wola for 2005 (Continued) D. Information on Audited Financial Statements (continued) The cash flow statement indicates that: — — —

cash at beginning of the audited period totalled . . . . . . . . . . . . . . . . . . . . PLN 1,393,988.69 increase in 2005 totalled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PLN 1,267,471.13 cash at the end of the audited period amounted to . . . . . . . . . . . . . . . . . . PLN 2,661,459.82

VI. Integrity of Statement of Changes in Equity The Company has prepared this item of the financial statements in line with the provisions of Article 48a, paragraph 1, point 1 of the Act of Accounting. The data disclosed in the statement of changes in the Company’s equity are in compliance with the balance sheet and with the profit and loss account. The statement indicates that in the audited period equity increased by PLN 140,098,344.58. VII. Reliability and Integrity of Report on Company Operations The Management Board of the Company attached to the financial statements a report on the Company’s operations in the audited period, i.e. from 1 January 2005 to 31 December 2005. The report disclosures comply with the requirements of Article 49, paragraph 2 of the Act on Accounting. E. Summary of Audit Findings In the examination of books of accounts and individual items of the financial statements, including the items affecting the level of fiscal settlements with the budget, audited samples were used on the basis of which conclusions on the correctness of the audited items were drawn. During the audit of the Company’s financial statements we did not notice any irregularities that might have a material effect on the correctness of information disclosed herein. During the audit we did not notice any facts indicating the occurrence of a breach of law that might have an effect on the financial statements. During the audit, we received a written confirmation from the Board of Management that during the accounting year no violations of the law occurred. The Auditor’s Opinion, constituting a separate document, presents the summary findings of the audit. The following Report consists of 35 pages numbered consecutively. Each page has been signed by the expert auditor. President of the Management Board Stefan Czerwin´ski, M.Sc. Reg. No. 9449/7400

Alina Dziuba Reg. No. 5577/793

Vice-President of the Management Board Graz˙yna Kutnik. M.Sc. Reg. No. 5691/802

Lublin, 27 February 2006 F-142

Audited Financial Statements for the year ended 31 December 2005 of HSW-Walcownia Blach Spółka z o.o.

F-143

HSW — WALCOWNIA BLACH SP. Z O.O. INDEPENDENT AUDITOR’S OPINION For the General Meeting of Shareholders and the Supervisory Board of HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola. We have audited the attached financial statements of HSW — Walcownia Blach Spółka z o.o. with its registered seat in Stalowa Wola at ul. Kwiatkowskiego 1, 37-450 Stalowa Wola, including: 1)

introduction to the financial statements,

2)

balance sheet prepared as at 31 December 2005, reporting total assets and liabilities of PLN 46,205,599.62

3)

profit and loss account for the period from 1 January 2005 to 31 December 2005, reporting net profit of PLN 6,997,630.47

4)

statement of changes in equity in the period from 1 January 2005 to 31 December 2005, reporting an increase in equity by PLN 27,428,630.47

5)

statement of cash flows in the period from 1 January 2005 to 31 December 2005, reporting an increase of cash by PLN 68,577.10

6)

additional information and explanations.

It is the responsibility of the Management Board of the Company to prepare these financial statements. Our task was to audit the financial statements and express an opinion concerning their consistency, adequacy and clarity as well as the adequacy of the books of accounts on the basis of which these financial statements were prepared. Our audit of the financial statements was performed in accordance with the following provisions: 1)

Chapter 7 of the Act of 29 September 1994 on Accounting (uniform text Dziennik Ustaw of 2002 No. 76, item 694, with subsequent amendments),

2)

auditing standards adopted by the National Board of Certified Auditors in Poland,

3)

International Financial Audit Standards in matters not regulated in the provisions specified above.

The audit of the financial statements was planned and performed so as to obtain a viable and sufficient basis on which to express a reliable opinion. In particular, the audit comprised verifying the adequacy of the accounting policies applied by the Company and material estimates, checking — largely on a test basis — the accounting records and evidence relating to the amounts and information reported in the financial statements, and the overall evaluation of the financial statements. We believe that the audit has given us sufficient basis to express a reliable opinion. It is our view that the audited financial statements, including numerical data and narrative: a)

present in a reliable and transparent manner all information significant for the assessment of the asset structure and financial standing of the Company as at 31 December 2005 as well as its financial performance in the financial year from 1 January 2005 to 31 December 2005,

b)

was prepared, in all material aspects, in accordance with the accounting policies laid down under the above Act, based on accurately maintained books of accounts,

c)

comply with the legal regulations and the provisions of the Company’s Articles of Association affecting the substance of the financial statements.

F-144

HSW — WALCOWNIA BLACH SP. Z O.O. The information disclosed in the report on the Company’s operations is complete within the meaning of Article. 49, paragraph 2 of the Act on Accounting, and the information contained therein, derived from the financial statements, is consistent with them. DORADCA Zespół Doradców Finansowo-Ksie˛gowych Sp. z o.o. GRUPA FINANS-SERVIS 20-011 Lublin Al.J.Piłsudskiego 1a Reg. No. 232

Expert Auditor

President of the Management Board Stefan Czerwin´ski, M.Sc. Reg. No. 9449/7400

Anna Perzyk Reg. No. 8294/885

Vice-President of the Management Board Graz˙yna Kutnik. M.Sc. Reg. No. 5691/802 Lublin, 4 March 2006

Corporate seal of the authorised entity

F-145

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 Contents A.

B. C.

D.

E.

Introductory Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Audited Company Identification Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Information on Entity Authorised to Audit Financial Statements for 2005 . . . . . . . . . . . . . . . . . III. Information on Financial Statements for the Period Preceding the Audited Year . . . . . . . . . . . IV. Information Identifying Audited Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V. Statement of the independent expert auditor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Review of Assets and Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Evaluation of the Reliability of the Accounting System Used and Associated Internal Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Reliability of Accounting System Used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Balance Sheet Assets and Liabilities Stocktaking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information on Audited Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Reliability and Integrity of Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Balance sheet assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Balance sheet liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Discussion on Selected Balance Sheet Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Tangible fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Short-term receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Provisions for liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Short-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. Deferred Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Reliability and Integrity of Profit and Loss Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Reliability and Integrity of Supplementary Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V. Integrity of Cash Flow Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VI. Integrity of Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII. Reliability and Integrity of Report on Company Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary of Audit Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-146

F-147 F-147 F-148 F-148 F-149 F-150 F-150 F-165 F-165 F-165 F-165 F-165 F-165 F-166 F-166 F-166 F-166 F-167 F-167 F-167 F-167 F-167 F-168 F-168 F-168 F-169 F-169 F-169 F-169

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) A. Introductory Information I. Audited Company Identification Data 1. Name and seat of the Company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola, ul. Kwiatkowskiego 1, 37-450 Stalowa Wola. The Company operates under the Articles of Association drawn up in the form of a Notarial Deed on 27 January 2004, Rep. A No. 275/2004. The Company was established for the time indeterminate. 2. Registration in the National Court Register Entry Number: 0000195919 Entry date: 18 February 2004 Name and seat of the Court: Local Court in Rzeszów, Twelfth Economic Division of the National Court Register. 3. Company’s identification numbers NIP: 865-23-72-950 (VAT Registration number) REGON: 831368283 (statistical number) 4. Objects of the Company’s Activity During the audited period the Company conducted its business activity in line with objects laid down under the Company’s Articles of Association and the entry in the National Court Register. The object of activity included in the main: Š production of cast iron and steel as well as steel alloys, Š other preliminary work on cast iron and steel and production of steel alloys, Š metalworking and metal coating, Š production of mechanical tools, Š technical studies and analyses, Š management of metal waste and scrap metal.

5. Equity 5.1. The Company’s share capital disclosed in the balance sheet as at 31 December 2005 amounted to PLN 33,255,881.11 and included: — — — —

initial capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . reserve capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . other reserve capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . net profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PLN 20,481,000.00 PLN 2,282,600.64 PLN 3,494,650.00 PLN 6,997,630.47

5.2. Pursuant to the Company’s Articles of Association and the entry in the National Court Register, the Company’s share capital amounts to PLN 20,481,000.00 and it is divided into 100 shares at PLN 204,810.00 each. During the accounting year 2005 the share capital increased by PLN 20,431,000.00 in respect of an increase of the share capital by the shareholders of HSW — Zakład Metalurgiczny Spółka z o.o. in Stalowa Wola. This increase was covered by non-cash contribution in the form of assets (fixed assets and intangible assets). As of 27 January 2006, 100% of the shares in the Company were taken over by ZŁOMREX SA. F-147

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) A. Introductory Information (continued) 5.3. HSW — Zakład Metalurgiczny Spółka z o.o., is the sole owner of the company — during the audited period it had 100% of the Company’s shares. During the audited period the structure of ownership remained unchanged. 6. Information on Entities Associated with the Audited Entity 6.1. The audited Company is a member of a Group of Companies with Huta Stalowa Wola Spółka Akcyjna steelworks, a joint stock company as the dominant entity. 7. Head of the Entity The Company’s Board of Management performs the function is the Head of the Entity. As at 4 March 2006 the composition of the Management Board was as follows: — Mr Bogdan Burdzy

— President of the Management Board

— Mr Andrzej Je˛druch

— Member of the Management Board

During the audited period the composition of the Management Board was the following: — Mr Wincenty Likus

— President of the Management Board

— Mr Bogdan Burdzy

— Member of the Management Board

II. Information on Entity Authorised to Audit Financial Statements for 2005 1. Name and seat of the entity authorised to audit financial statements DORADCA Zespół Doradców Finansowo-Ksie˛gowych Spółka z o.o. GRUPA FINANS-SERVIS Al. J. Piłsudskiego 1a 20-011 Lublin DORADCA Spółka z o.o. is registered on the list of entities authorised to audit financial statements kept by the National Board of Certified Auditors, entry No. 232. 2. Selection of the entity to audit financial statements Resolution No. 33/7/II/2005 of the Supervisory Board Date of adoption: 29 November 2005 3. Auditing team conducting the audit of financial statements Pursuant to the Agreement No. 184/LU/2005 of 8 December 2005 concluded with the Company’s Management Board, the audit of the financial statements was performed in the seat of the Company during the period from 27 February 2006 to 4 March 2006. The audit of financial statements was conducted on behalf of the auditing entity by Anna Perzyk, Expert Auditor, Reg. No. 8294/885. 4. Declaration of impartiality and independence of the auditing entity The entity auditing the financial statements and the auditor performing the audit meet the requirements of impartiality and independence set forth under the Act on Accounting. III. Information on Financial Statements for the Period Preceding the Audited Year 1. Information on the entity auditing financial statements The financial statements for the previous accounting period from 18 February 2004 to 31 December 2004 were audited by DORADCA Zespół Doradców Finansowo-Ksie˛gowych Spółka z o.o. GRUPA FINANSSERVIS in Lublin. F-148

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) A. Introductory Information (continued) 2. Type of opinion issued No reservations were raised in the opinion issued. 3. Approval of financial statements Body of approving authority: Ordinary Meeting of Shareholders of Body of approving authority: Ordinary Meeting of Shareholders of HSW — Walcownia Blach Spółka z o.o. Resolution No. 03/Z/2005 Date of adoption: 6 June 2005 4. Manner of distributing profit for the previous accounting year Body of approving authority: Ordinary Meeting of Shareholders of HSW — Walcownia Blach Spółka z o.o. Resolution No. 04/Z/2005 Date of adoption: 6 June 2005 The net profit totalling PLN 5,777,250.64 for the previous accounting year was designated as follows: a) b)

reserve capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . supplementary capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PLN 2,282,600.64 PLN 3,494,650.00

The said distribution was properly entered in the books of accounts for the audited period. 5. Information on the filing and announcing of the approved financial statements for the previous accounting period The approved financial statements for the period preceding the audited period were: a)

filed along with the other documents with the Local Court in Rzeszów, Twelfth Commercial Division of the National Court Register on 20 July 2005 pursuant to the provisions of Article 69 of the Act on Accounting,

b)

pursuant to the provisions of Article 70 of the Act on Accounting, they were published in Monitor Polski B on 9 September 2005,

c)

filed in the Fiscal Office on 15 June 2005 under the provisions of Article 27 of the Act of 15 February 1992 on Corporate Income Tax.

IV. Information Identifying Audited Financial Statements 1. The audited financial statements for the period from 1 January 2005 to 31 December 2005 include: a)

introduction to the financial statements,

b)

balance sheet prepared as at 31 December 2005, reporting total assets and liabilities of PLN 46,205,599.62

c)

profit and loss account (by function) for the period from 1 January 2005 to 31 December 2005, reporting net profit of PLN 6,997,630.47

d)

statement of changes in equity,

e)

statement of cash flows, reporting an increase in net cash during the audited period by PLN 68,577.10

f)

additional information and explanations.

2. Pursuant to the provisions of Article 49 of the Act of 29 September 1994 on Accounting, the Head of the Company drew up a report on its operations during the period from 1 January 2005 to 31 December 2005. F-149

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) A. Introductory Information (continued) V. Statement of the independent expert auditor 1. It is the responsibility of the Company’s Management Board to prepare these financial statements in a proper, reliable and reasonable manner, which has been duly confirmed. In the declaration submitted, the Management Board of the Company confirmed that, to the best of their knowledge and belief, the information disclosed to us was true and reliable, and it covered all events that might have an effect on the financial statements. The Board made accounting books and other required documents available to us and provided us with explanations necessary to issue our opinion. The Management Board of the Company submitted a declaration of 4 March 2006 confirming Š the completeness of the accounting records in the accounting books, Š the disclosure in the financial statements of any contingency liabilities, Š the disclosure in the financial statements of any material economic events that occurred before the

date of the declaration. 2. It was not the purpose of the audit to detect and explain events liable to prosecution or irregularities which could potentially arise outside of the accounting system. 3. It was not the purpose of the audit to determine the correctness of prices applied in dealings between affiliated entities. B. Review of Assets and Financial Position The audit covered financial statements comprising the balance sheet, profit and loss account, cash flow statement, and economic ratios for the analysed and previous years. For the purpose of the audit the statements have been modified as follows: 1)

the balance sheet Š the contents has been limited to the absolute minimum of information specified in the groups

(fixed assets, working capital, equity and liabilities) and sub-groups, Š liabilities and provisions for liabilities are divided into long and short-term liabilities: Š long-term liabilities include provision in respect of deferred income tax, long-term

provisions for employee benefits and similar, and long-term liabilities, Š short-term liabilities include short-term provisions for employee benefits and similar, other

short-term provisions, and short-term liabilities, 2)

the profit and loss account: Š inclusion of additional information concerning the results broken down into separate types

of business activity, Š elimination of heavily analytical items.

The analysis was performed in current prices, since inflation rates remain fairly stable. Analysis of Balance Sheet and Financial Liquidity and Solvency Ratios The comparative variant of balance sheet data and basic economic and financial ratios are presented in Tables 1 and 2. As at the end of 2005 the balance sheet total increase relative to the level as at 31 December 204 by 129.33%, mainly due to increased initial capital by PLN 20,431.0 thousand effected through a non-ash contribution in the form of fixed assets and intangible assets. The biggest increase in the Company’s current assets, i.e. by 50.75%, is reported in short-term receivables, including accounts receivable. F-150

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) In terms of sources of finance, a significant increase by 53.08% is reported in provisions and long-term liabilities, mainly in respect of the loan taken. These changes had an effect on the structure of the Company’s assets. As at the end of 2005, the immobility of assets ratio was up by 50.0% relative to the level as at 31 December 2004, i.e. up to 53.15%; the share of current assets was down from 96.90% as at 31 December 2004 to 46.85% as at 31 December 2005. The year 2005 saw a clear domination of equity in the structure of the Company’s liabilities. During the audited period their value was up by 470.70% reaching 71.97% of the total financing sources. The main item in the Company’s equity as at the end of 2005 was its share capital (44.33%). The structure of liabilities and provisions, short-term items were dominant. Their value was down in the audited period by 17.46% reaching 22.72% of total liabilities. Among long-term foreign capital was a loan taken with WFOS´iGW Voivodship Environmental Protection and Water Management Fund and long-term provisions for employee benefits. Besides the increase in the initial capital effected by the shareholder in the form of fixed assets contributed thereto, the growth rate was attributed to the profit generated in 2005, which other than the amount designated for the disbursement of the dividend is treated as the Company’s equity. These changes translated into an increase of the durability of the financing structure by 40.4 percentage point to the level of 77.28%. During the audited period the Company duly observed the principle of covering its fixed assets with capital and its partial employment in the financing of current assets. This trend is evidenced in the balance sheet “golden” principle which as at 31 December 2005 amounted to 145.40%. Financial liquidity was up in all analytical indicators which were close to levels considered as optimal. The stock turn, collection, and payment ratios cannot be compared with the previous accounting year, since it did not cover 12 calendar months of the Company’s activity.

F-151

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Table 1. Balance sheets for years 2004 and 2005 Description 1

31 Dec. 2003 Amount As % of total 2 3

31 Dec. 2004 Amount As % of total 4 5

31 Dec. 2005 Amount As % of total 6 7

Change (previous year =100%) 2003/2002 2004/2003 8 9

ASSETS

F-152

A. I. II. III. IV. V. B. I. II.

Fixed Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tangible fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term receivables Long-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term prepayments and accrued income . . . . . . . . . . . . . Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Short-term receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . incl.: accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . incl.: cash and other cash assets . . . . . . . . . . . . . . . . . . . . . . . IV. Short-term prepayments and accrued income . . . . . . . . . . . . . Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A. Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Share (initial) capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Outstanding contribution to share capital III. Own shares IV. Supplementary capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V. Revaluation capital VI. Other reserve capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII. Profit (loss) carry forward VIII. Net profit (loss) incl. dividend . . . . . . . . . . . . . . . . . . . . . . . . B. Liabilities and provisions against liabilities . . . . . . . . . . . . I. Provisions and long-term liabilities . . . . . . . . . . . . . . . . . . . . . incl.: credit facilities and loans . . . . . . . . . . . . . . . . . . . . . . . . II. Provisions and short-term liabilities . . . . . . . . . . . . . . . . . . . . incl.: credit facilities and loans . . . . . . . . . . . . . . . . . . . . . . . . accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total equity and liabilities . . . . . . . . . . . . . . . . . .

625,198.51

3.10%

211,144.51

1.05%

414,054.00 2.06% 19,522,746.54 96.90% 7,874,951.77 39.09% 9,904,108.05 49.16% 9,285,503.53 46.09% 1,741,228.21 8.64% 1,741,228.21 8.64% 2,458.51 0.01% 20,147,945.05 100.00% EQUITY AND LIABILITIES 5,827,250.64 50,000.00

28.92% 0.25%

5,777,250.64 14,320,694.41 1,600,630.25

28.67% 71.08% 7.94%

12,720,064.16

63.13%

11,264,263.90 55.91% 20,147,945.05 100.00%

24,557,883.58 404,880.78 23,048,388.80

53.15% 0.88% 49.88%

10915.93%

543,000.00 1.18% 561,614.00 1.22% 21,647,716.04 46.85% 5,520,365.53 11.95% 14,258,803.32 30.86% 13,997,696.61 30.29% 1,809,805.31 3.92% 1,809,805.31 3.92% 58,741.88 0.13% 46,205,599.62 100.00%

135.64% 110.88% 70.10% 143.97% 150.75% 103.94% 103.94% 2389.33% 229.33%

33,255,881.11 20,481,000.00

71.97% 44.33%

2,282,600.64

4.94%

3,494,650.00

7.56%

6,997,630.47 15.14% 12,949,718.51 28.03% 2,450,233.38 5.30% 612,650.00 1.33% 10,499,485.13 22.72% 88,468.79 0.19% 8,116,744.80 17.57% 46,205,599.62 100.00%

3928.01%

570.70% 40962.00%

121.12% 90.43% 153.08% 82.54% 72.06% 229.33%

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Table 2. Key balance sheet amounts and economic ratios No.

Ratio

Formula (formula adopted)

Year 2003

Ratio (amount) for: 18.02 - 31.12.2004 Year 2005

Ratio (amount) change 03-02 04-02 05-04 Change (previous year.=100%)

Key balance sheet amounts 1 Net assets (entity’s book value) . . . . . . . . . . . . . . . . . . . . . . 2 Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-153

4 Current ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Quick current ratio I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Quick current ratio II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7 Stock-turn — in days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Collection period — in days . . . . . . . . . . . . . . . . . . . . . . . . 9 Payment period — in days . . . . . . . . . . . . . . . . . . . . . . . . . .

Equity ⳮ dividend Equity + provisions and long-term liabilities Fixed capital ⳮ fixed assets Static financial liquidity ratios Current assets Current liabilities Liquid current assets Current liabilities Short-term investments Current liabilities Collection and stock turn ratios Total stock (average) x 360 Cost of operating activity Accounts receivable (average) x 360 Income from sales Accounts payable (average) x 360 Cost of operating activity ⳮ depreciation

5,827,250.64 7,427,880.89

33,255,881.11 35,706,114.49

570.70% 480.70%

6,802,682.38

11,148,230.91

163.88%

1.53

2.06

0.53

0.92

1.53

0.61

0.137

0.172

0.035

15

27

12

16

43

27

22

39

17

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) No.

Ratio

Ratio (amount) for: Formula (formula adopted)

10 Debt to equity ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Equity to total assets ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-154

12 Equity to fixed assets ratio (assets utilisation ratio) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Self-financing of current assets (utilisation of foreign capital ratio) . . . . . . . . . . . . . . . . . . . . . . . 14 “Golden” principle ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Durability of financial structure ratio . . . . . . . . . . . . . . . . . . . . . . . 16 Immobility of funds ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Solvency and equity-capital ratios Total liabilities Total assets Equity Total assets Equity Fixed assets Current liabilities Current assets Fixed capital Fixed assets Fixed capital Total liabilities Fixed assets Total assets

Year 2003

18.02 - 31.12.2004

Ratio (amount) change Year 2005

03-02 04-02 05-04 Change (previous year.=100%)

71.08%

28.03%

-43.05

28.92%

71.97%

43.05

932.06%

135.42%

-796.65

65.16%

48.50%

-16.65

1188.08%

145.40%

-1042.69

36.87%

77.28%

40.41

3.10%

53.15%

50.05

Note! Additional information 1 Equity = Share Capital ⳮ Dividend; Total Liabilities = Liabilities and Provisions against Liabilities 2 Accounts receivable and payable over 12 months carried forward to respective long-term receivables and accounts payable; Liquid Current Assets = Current Assets ⳮ Stock ⳮ Short-term Prepayments and Accrued Income 3 Long-term liabilities = Long-term: provisions, liabilities, Prepayments and Accrued Income, Accounts Payable with maturity over 12 months 4 Current Liabilities = Short-term:Provisions, Liabilities, Accruals and Deferred Income after eliminating Accounts Payable with Maturity over 12 months + Dividend 5 Earnings on Sales = Net Sales of Products + Net Sales of Merchandise and Materials; t ⳮ Income Tax Rate

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Structure of Assets 31 Dec. 2004 Fixed Assets

31 Dec. 2005

Current assets 3%

47%

F-155

97%

53%

Structure of Current Assets Stock Short-term receivables Short-term investments Short-term prepayments and accrued income 8% 9%

0% 26%

40%

51% 66%

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Structure of Liabilities and Equity 31 Dec. 2004

31 Dec. 2005

Equity Liabilities and provisions for liabilities

29%

28%

71%

72%

F-156 Structure of External Funding Provisions for liabilities Long-term liabilities Short-term liabilities Accruals and deferred income 15% 19%

5%

85%

76%

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Structure and changes of items determining financial result, profitability and efficient utilisation of resources Table 3 presents a comparison of profit and loss accounts. The cost structure and changes broken down by type is presented in Table 4. Profitability and efficient use of resources ratios are presented in Table 5. During the audited period income from sale was the main source of the Company’s earnings accounting for 99.16% of the total earnings in 2005. In terms of change, the years presented in the analysis cannot be compared, since the previous accounting years covers a period of 10 months only. The structures of costs and earnings are similar. The costs of products sold and the value of goods and services sold accounted for 98.35% of the costs incurred in 2005. As in the case of earnings, costs cannot be compared with those incurred during the previous accounting year. During the audited period, the Company’s profit from sales totalled PLN 9,314.4 thousand, down by 2.22% relative to the previous year. The profit from sales adjusted by negative results on other operating activity (PLN — 608.0 thousand) and financial activity (PLN — 45.5 thousand) as well as mandatory charges on the financial result in the form of income tax yields net profit totalling PLN 6,997.6 thousand. The specific character of the Company’s activity in 2005 is reflected in the breakdown of costs by type. In 2005, 84.81% of the total costs incurred was attributed to the consumption of materials and energy. The other major cost items refer to payroll (7.02%) and outsourced services (5.06%). An improved net result and a decrease in the result on sales were reflected in changes in profitability indicators. The profitability ratio measured as profit from sale was down in 2005 by 1.07 percentage point reaching the level of 9.50%. Apart from the profitability of sales measured by net profit, the remaining indicators were down.

F-157

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Table 3. Profit and Loss Accounts Description 1

A.

B. F-158

C. D. E. F. G. H. I. J. K. L. M. N. O. P. R.

Total income and profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total costs and losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income from sale of products, goods, and mater . . . . . . . I. Net income from sale of products . . . . . . . . . . . . . . . . II. Net income from sale of goods and materials . . . . . . . Cost of products, goods, and materials sold . . . . . . . . . . . . . . I. Cost of manufacturing products sold . . . . . . . . . . . . . II. Value of goods and materials sold . . . . . . . . . . . . . . . Profit (loss) on sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General management costs . . . . . . . . . . . . . . . . . . . . . . . . . . . Profit (loss) on sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Result on other operating activity . . . . . . . . . . . . . . . . . . . . . Profit (loss) on operating activity . . . . . . . . . . . . . . . . . . . . Financial income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Result on financial activity . . . . . . . . . . . . . . . . . . . . . . . . . . Profit (loss) on economic activity . . . . . . . . . . . . . . . . . . . . . Result on extraordinary events . . . . . . . . . . . . . . . . . . . . . . . . Gross profit (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other mandatory reductions of profit . . . . . . . . . . . . . . . . . . . Net profit (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . incl.: dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net profit (loss) incl. dividend . . . . . . . . . . . . . . . . . . . . . . .

— By Function Year 2003 Amount As % of total 2 3

x

x

x x

x x x x x x x x x

18.02 - 31.12.2004 Amount As % of total 4 5

90,305,136.82 83,095,500.18 90,120,488.38 86,001,641.10 4,118,847.28 78,528,751.27 74,520,829.00 4,007,922.27 11,591,737.11 283,232.03 1,782,170.80 9,526,334.28 19,386.82 2,092,271.43 -2,072,884.61 7,453,449.67 165,261.62 409,074.65 -243,813.03 7,209,636.64 7,209,636.64 1,432,386.00 5,777,250.64 5,777,250.64

100.00% 100.00% 99.80% 95.23% 4.56% 94.50% 89.68% 4.82% x 0.34% 2.14% x 0.02% 2.52% x x 0.18% 0.49% x x x x x x x x x

Year 2005 Amount As % of total 6 7

98,919,684.61 90,258,718.14 98,087,546.22 93,878,258.09 4,209,288.13 85,886,945.17 81,593,915.03 4,293,030.14 12,200,601.05 347,415.21 2,538,771.20 9,314,414.64 152,934.10 760,903.82 -607,969.72 8,706,444.92 679,204.29 724,682.74 -45,478.45 8,660,966.47 8,660,966.47 1,663,336.00 6,997,630.47 6,997,630.47

100.00% 100.00% 99.16% 94.90% 4.26% 95.16% 90.40% 4.76% x 0.38% 2.81% x 0.15% 0.84% x x 0.69% 0.80% x x x x x x x x x

Change (previous year =100%) 2003/2002 2005/2004 8 9

109.54% 108.62% 108.84% 109.16% 102.20% 109.37% 109.49% 107.11% 105.25% 122.66% 142.45% 97.78% 788.86% 36.37% 29.33% 116.81% 410.99% 177.15% 18.65% 120.13% 120.13% 116.12% 121.12% 121.12%

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Table 4. Structure and changes in costs by type Description 1 2 3 4 5 6 7

1 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Materials and energy consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Outsourced services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Taxes and charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Social insurance and other benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other costs by nature of expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year 2003 Amount As % of total 2 3

18.02 - 31.12.2004 Amount As % of total 4 5 59,868.14 0.07% 75,027,425.72 88.27% 3,446,322.46 4.05% 102,733.96 0.12% 4,527,316.40 5.33% 1,371,762.23 1.61% 462,039.02 0.54%

Year 2005 Amount As% of total 6 7 271,231.28 0.31% 74,436,782.67 84.81% 4,440,181.91 5.06% 301,594.86 0.34% 6,157,768.84 7.02% 1,670,829.90 1.90% 491,366.13 0.56%

84,997,467.93

87,769,755.59

100.00%

Change (previous year =100%) 2003/2002 2005/2004 8 9 453.05% 99.21% 128.84% 293.57% 136.01% 121.80% 106.35%

100.00%

103.26%

F-159

Table 5. Profitability and utilisation of resources ratios No.

Ratio

1

Return on sales by net profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

Return on sales by profit from sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

Return on assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

Return on equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

Return on capital employed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6

Gearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

Total assets stock turn (productivity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8

Fixed assets stock turn (productivity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

Employee productivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Formula (formula adopted) Profitability ratios Net profit Revenue from sales Profit from sales Revenue from sales Net profit Total assets Net profit + interest x (1-t) Total liabilities Net profit Equity Return on share capital Return on equity Utilisation of resources (activity) ratios Revenue from sales Total assets – average Revenue from sales Fixed assets – average Revenue from sales Average employment level

Year 2003

For 18.02 - 31.12.2004

Year 2005

Ratio change 03-02 04-02 05-04

6.41%

7.13%

0.72

10.57%

9.50%

-1.07

28.67%

15.14%

-13.53

29.02%

15.39%

-13.63

99.14%

21.04%

-78.10

70.12

5.65

-64.47

8.95

2.96

-5.99

288.29

7.79

-280.50

437,478.10

478,475.84

109.37%

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Breakdown of Costs Change in Total Revenues and Costs

Total income and profit Total costs and losses

Depreciation Materials and energy consumption

100,000,000.00 90,000,000.00

Outsourced services

80,000,000.00 Taxes and charges 70,000,000.00 60,000,000.00

Remuneration

50,000,000.00

Social insurance and other benefits

40,000,000.00

20,000,000.00 10,000,000.00 0.00 Year 2003

18.02 - 31.12.2004

Year 2005

4%

5%

2% 1%

18.02-31.12.2004

Result on sales Result on operating activity Result on economic activity Gross result Net result

Change in Financial results

10,000,000.00 9,000,000.00 8,000,000.00

88%

7,000,000.00 6,000,000.00 [PLN]

F-160

Other costs by nature of expenses 30,000,000.00

Year 2005

5,000,000.00

7%

2% 1%

5% 0%

4,000,000.00 3,000,000.00 2,000,000.00 1,000,000.00 0.00 Year 2003

18.02 - 31.12.2004

Year 2005 85%

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Profitability Ratios 120.00% 100.00% 80.00% 60.00% 40.00% 20.00%

F-161

0.00% Year 2003

18.02 - 31.12.2004

Return on equity

Return on total assets

Year 2005

Return on capital employed

Liquidity Ratios 2.50

2.00

1.50

1.00

0.50

0.00 Year 2003

18.02 - 31.12.2004

Current ratio

Year 2005

Quick current ratio I

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Cash flow analysis and financial liquidity ratios Table 6 presents the synthesis of cash flows. Table 7 shows selected financial liquidity ratios. The cash flow structure did not undergo significant changes relative to the previous year. Operating activity continued to remain the main source of cash in the Company. This was evidenced in the value of capacity for generating net cash on operating activity which reached the level of 78.58% during the audited period. The total value of cash flows from operating activity at PLN 2,548.1 thousand increased by 37.21% relative to the previous year. The biggest adjustments to the net profit referred to receivables and liabilities. The biggest cost item in the audited period referred to investment outlays. Cash comes mainly from net profit and from loans. The funds received were used to finance investments in tangible and financial fixed assets. During the audited year total net cash flows were positive, though significantly lower than in the previous year. Cash flow generated on operating and financial activity was sufficient to cover all investment outlays. The cash efficiency on sales which totalled 2.59%, up by 0.53 percentage point relative to the previous year.

F-162

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Table 6. Cash Flow Statements Description A. I. II.

F-163

1 Cash flow from operating activity Net profit (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments, total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Profit (loss) due to exchange rate differences 3. Interest and participation in profits (dividends) 4. Profit (loss) on investment activity 5. Change in provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Change in inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Change in liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. Change in short-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. Change in accruals and deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. Other adjustments

Year 2003 Amount As % of total 2 3

18.02 - 31.12.2004 Amount As % of total 4 5

Year 2005 Amount As % of total 6 7

Change (previous year=100%) 2003/2002 2005/2004 8 z

5,777,250.64 -3,920,124.50 59,868.14

311.09% -211.09% 3.22%

6,997,630.47 -4,449,518.99 271,231.28

274.62% -174.62% 10.64%

121.12% 113.50% 453.05%

1,726,319.08 -7,874,951.77 -9,904,108.05 12,107,236.37 -34,488.27

92.96% -424.04% -533.30% 651.93% -1.86%

309,324.10 2,354,586.24 -4,354,695.27 -2,852,575.52 -183,314.12 5,924.30

12.14% 92.41% -170.90% -111.95% -7.19% 0.23%

17.92% -29.90% 43.97% -23.56% 531.53%

III.

Net cash flow on operating activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,857,126.14

100.00%

2,548,111.48

100.00%

137.21%

B. I.

Cash flow on investment activity Income 1. Sale of intangible assets and tangible fixed assets 2. Other income Expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Purchase of intangible assets and tangible fixed assets fixed assets . . . . . . 2. Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

-165,897.93 -63,239.50 -102,658.43

100.00% 38.12% 61.88%

-2,631,184.38 -2,631,184.38

100.00% 100.00%

1586.03% 4160.67%

II.

III.

Net cash flow on investment activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

C. I.

III.

Cash flow on financial activity Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Credit facilities and loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Dividends and other payments towards owners 2. Repayment of credits and loans 3. Interest 4. Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash flow on financial activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

x

50,000.00

D.

Total net cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

x

1,741,228.21

II.

(Balance change of cash resources)

x

-165,897.93

x

50,000.00

100.00%

50,000.00

100.00%

-2,631,184.38

x

694,650.00 694,650.00

100.00% 100.00%

-543,000.00

100.00%

x

-543,000.00 151,650.00

100.00% x

x

68,577.10

x

1586.03% 1389.30%

303.30% 3.94%

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Table 7. Financial liquidity change ratios No.

Ratio

Formula (adopted formula)

Year 2003

For 18.02 - 31.12.2004

Year 2005

03-02

Change 04-02

05-04

F-164

1.

Capacity to generate net cash on operating activity ratio . . . . . . . . . . . . .

cash flow on operating activity cash flow on operating activity + stock and financial gains

97.38%

78.58%

97.38

78.58

-18.80

2.

Net profit to net cash flow on operating activity ratio . . . . . . . . . . . . . . . . . . . . .

net profit cash flow on operating activity

311.09%

274.62%

311.09

274.62

-36.47

3.

Cash availability ratio . . . . . . . . . . . . . . . .

cash flow on operating activity repayment of liabilities with interest + disbursement of dividend + goodwill expenses and tangible fixed assets

2936.66%

80.28% 2936.66

80.28

-2856.38

4.

Cash efficiency on sales ratio . . . . . . . . . .

cash flow on operating activity revenue from sales + other operating income

2.59

0.53

2.06%

2.59%

2.06

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) B. Review of Assets and Financial Position (continued) Summary In short, the financial standing of the Company is stable. During the audited period the Company’s equity and capital structure was reasonable, which translated into favourable financial liquidity indicators. The general level of debt is marginal. The activity conducted by the Company is profitable, and the profit generated is designated to increase the self-financing of the Company’s operations. However, continued dependence on one supplier may in future be a serious concern with respect to the deliveries of the basic raw material for production. Assessment of the entity’s continued activity in the year following the audited period without significant changes effected. The audit of financial statements including the financial standing of the Company revealed no threats to the Company’s continued activity in the year following the audited period due to intended or enforced suspension of the existing activity (or material restrictions thereof). C. Evaluation of the Reliability of the Accounting System Used and Associated Internal Control I. Reliability of Accounting System Used The Company keeps accounting books and prepares financial statements on the basis of current accounting documents describing the adopted accounting system, as referred to in Article 10 of the Act on Accounting of 29 September 1994, including the Corporate Chart of Accounts approved by the Management Board of the Company. In the audited period the Company did not make any changes to its accounting system. The audit of financial statements did not reveal any irregularities in the accounting books which, if not removed, could have a material effect on the audited financial statements, including: Š the justification of the continuity of the adopted accounting policy, Š correctness of the opening balance on the basis of the approved balance sheet for the previous year, Š completeness and clarity of business operations duly confirmed by accounting documents issued in

line with the statutory requirements, Š reliability, correctness and conformity of data reported in the financial statements with accounting

book records, Š correctness of the transfer of data from reconciled accounting books to individual components of the

financial statements, Š adequacy of archiving and safeguarding accounting books and accounting records as well as approved

financial statements. II. Balance Sheet Assets and Liabilities Stocktaking The audit confirmed that the Company performed the stocktaking of its assets and liabilities in compliance with the principles and dates specified in Article 26 of the Act on Accounting. The stocktaking results were correctly documented and the stocktaking variances were properly reported in the accounting books for the audited period. D. Information on Audited Financial Statements I. Reliability and Integrity of Balance Sheet 1. Balance sheet assets The values of individual items of assets as disclosed in the balance sheet constitute the Company’s assets of properly assessed value capable of generating economic gains. Their value was presented in the balance sheet in prices resulting from the principles of accounting adopted and presented in the introduction to the financial statements and adjusted by depreciation and revaluation deductions (or write-offs). F-165

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) D. Information on Audited Financial Statements (continued) 2. Balance sheet liabilities The values of individual items of liabilities presented in the financial statements constitute sources of financing the Company’s assets. The value of individual groups of liabilities is presented as a breakdown into equity and external capital. The evaluation of the above was performed in line with the principles of accounting: Š equity — at nominal value, Š provisions — at a value reasonably assessed, Š liabilities — at amounts payable.

According to the declaration of the Company’s Management Board, there are no disputes or litigation against the Company. The balance sheet prepared as at 31 December 2005 contains information which complies with the requirements laid down in the Act on Accounting. Individual items in the balance sheet result from accounting records, and they were properly classified and presented. The audit, conducted to a large extent on a test basis, confirmed the reliability of data presented in the balance sheet. II. Discussion on Selected Balance Sheet Items 1. Tangible fixed assets totalled PLN 23,048,388.80 In the balance sheet tangible fixed assets are reported net of accumulated depreciation. The documentation on receipts and disposal of fixed assets is correct; relevant entries are reported in adequate reporting periods. The Company depreciates its fixed assets by spreading their initial value over the agreed scheduled depreciation period in compliance with the accounting policy. Depreciation allowances are calculated on a straight-line basis. Fixed assets constitute collateral in the form of a lien for the total of PLN 458,891.66 in respect of the loan taken. Off-balance sheet records contain outsourced fixed assets used by the Company under operating lease agreements at PLN 54,032.79. Fixed assets under construction as at the balance sheet date refer mainly to costs incurred on purchasing: — — —

overburn remover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . overhead travelling crane (with a control panel) . . . . . . . . . . . . . . . . . . . insulation and stucco finish of the office building . . . . . . . . . . . . . . . . .

PLN 845,457.44 PLN 32,786.88 PLN 40,700.00

2. Stock During the accounting year the stock of materials, goods, work in progress and finished products were subject to physical count. As at the balance sheet date, the structure of stock is as follows: — — —

materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PLN 1,431,207.98 semi-finished products and work in progress . . . . . . . . . . . . . PLN 4,048,897.27 goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PLN 40,260.28

25.93% 73.34% 0.73%

The evaluation of stock was performed in line with the principles laid down in the accounting policy and described in the introduction to the financial statements. The evaluation of stock was performed with due consideration and conservative estimates, which led to an increase in revaluation deductions of semi-finished products by PLN 3,085.74. F-166

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) D. Information on Audited Financial Statements (continued) Stock (materials, finished products, and goods) totalling PLN 1,150,000.00 was covered in transfer of ownership contracts as collateral for the credit facility granted by the bank on 21 January 2006. 3. Short-term receivables Accounts receivable, the major item in the current assets, constitute 30.29% of the Company’s assets as at 31 December 2005. PLN 10,976,873.65 (i.e. 74.56%) with of accounts receivable was paid by the audit date, i.e. 1 March 2006. Accounts receivable over 1 year overdue totalled PLN 240,742.63. Accounts receivable were subject to stocktaking by way of balance reconciliation. By the audit date (1 March 2006) PLN 3,686,210.00 in respect of accounts receivable was confirmed. Accounts receivable were evaluated as falling due with due consideration and conservative estimates, i.e. after taking into account revaluation deductions created on the basis of risk attributed to each account receivable. 4. Equity 4.1. Share capital of PLN 20,481,000.00 complies with the provisions of the Company’s Articles of Association and entries in the Register of Entrepreneurs of the National Court Register, entry No. 0000195919. During the accounting year the amount of the share capital increased by PLN 20,431,000.00 in respect of the contribution effected by HSW — Zakład Metalurgiczny Spółka z o.o. This increase was effected by a non-cash contribution in the form of fixed assets and intangible assets. 4.2. Reserve capital (established in compliance with the Articles) totalled PLN 2,282,600.64. 4.3. Other reserve capital (from the distribution of profit for 2004) totalled PLN 3,494,650.00. 4.4. Net profit of the accounting year of PLN 6,997,630.47 is in compliance with that disclosed in the profit and loss account. 5. Provisions for liabilities On the basis of calculations performed by an actuary, the Company established as at 31 December 2005 a provision for possible future employee benefits in respect of jubilee awards and retirement payments in the amount of PLN 2,033,604.18. 6. Long-term liabilities Long-term liabilities, as presented in the Company’s balance sheet, comprise long-term liabilities (falling due over 12 months from the balance sheet date) in respect of the loan agreement concluded with WFOS´iGW for the amount of PLN 612,650.00 with a view to financing the modernisation of the pusher furnace. The last instalment falls due on 30 June 2011. Long-term liabilities were confirmed by the creditor and assessed in amounts due, i.e. jointly with the interest due as at the balance sheet date. The interest for the loan period was calculated by the balance sheet date and reported in financial costs therein. 7. Short-term liabilities 7.1. As at the balance sheet date, accounts payable totalled PLN 8,116,744.80, of which 100% fell due. Generally speaking, during the audited period payments were effected in a timely manner. The audit did not confirm the need to assess penalty interest for payments in arrears. PLN 8,116,744.80 in respect of accounts payable was paid by the audit date, i.e. on 2 March 2006. 7.2. The short-term liabilities in respect of loans included a balance of a bank loan on the current account, which falls due in 2006; said loan was granted to the Company by WFOS´iGW in the amount of PLN 88,468.79. F-167

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) D. Information on Audited Financial Statements (continued) The liabilities towards the said bank were confirmed in writing as at the balance sheet date. The bank loan was assessed in amounts due, i.e. together with the interest due as at the balance sheet date. In line with the due dates specified in the loan contract, the payment of the first instalment of PLN 82,000.00 is scheduled by 30 June 2006. 8. Deferred Income Tax 8.1. Long-term prepayments amount to PLN 561,614.00 and constitute assets in respect of deferred income tax, calculated on negative temporary differences in corporate income tax. The biggest items which in future will constitute a cost in respect of income tax, and which as at the balance sheet date were not reflected in the gross result, referred to: Š provisions for employee benefits, Š provisions for future liabilities, Š deductions revaluating assets in respect of accounts receivable.

8.2. Provision in respect of deferred income tax of PLN 2,039.00 was determined in line with the requirements laid down in the Act on Accounting on positive temporary differences in corporate income tax and comprised as at the balance sheet date: Š assessed but not paid interest on bank deposits, Š unrealised positive foreign exchange differences on receivables.

III. Reliability and Integrity of Profit and Loss Account The profit and loss account was prepared in a comparative variant incompliance with the principles of the accounting system and with due consideration for the provisions of Article 47 of the Act on Accounting. The Company disclosed revenues, costs, profits and losses as well as taxes and mandatory charges on the financial result separately in the profit and loss account for the current and previous financial years. The audited profit and loss account for the period from 1 January 2005 to 31 December 2005, shows earnings from the sale of products, goods and materials demonstrating the costs of operating activity in a calculation variant and specifying the cost of product manufacturing, value of goods and materials sold (at purchase prices), costs of sale (including trading costs), and costs of general management. The gross financial result in the profit and loss account prepared for the period from 1 January 2005 to 31 December 2005 comprises the total amounts of three groups of revenues and costs: — — —

result on sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . result on other operating activity . . . . . . . . . . . . . . . . . . . . . . . . . . . result on financial activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PLN 9,314,414.64 PLN — 607,969.72 PLN — 45,478.45

The financial result disclosed in the profit and loss account — net profit of PLN 6,997,630.47 is reported in the same amount in the balance sheet — item A. VIII relating to equity “net profit (loss)”. The financial result disclosed in the profit and loss account as a comparison of revenues and costs, was correctly recognised with due consideration for the principles of accounting, i.e. accruals basis, commensurability of costs and revenues, and completeness and caution. Revenues and costs were correctly classified and recorded under relevant items of the profit and loss account on the basis of accounting documents maintained and closed as at year end. IV. Reliability and Integrity of Supplementary Report The Supplementary Report to the financial statements includes introduction to the financial statements, additional information and explanations (notes). The Supplementary Report contains information required under the provisions of Article 48 of the Act on Accounting, and the data disclosed are in line with the data reported in the balance sheet and in the profit and loss account. F-168

HSW — WALCOWNIA BLACH SP. Z O.O. REPORT supplementing the Opinion on the Audit of the Financial Statements of a limited liability company HSW — Walcownia Blach Spółka z o.o. in Stalowa Wola for 2005 (Continued) D. Information on Audited Financial Statements (continued) V. Integrity of Cash Flow Statement The cash flow statement was drawn up in line with the Company’s accounting policies on an indirect method basis. The information disclosed in the cash flow statement is consistent with the balance sheet and profit and loss account data, statement of changes in equity and supplementary report as well as with the Company’s accounting records. Individual cash flows have been classified under relevant items of the statement. The cash flow statement indicates that: — — —

cash at beginning of the audited period was . . . . . . . . . . . . . . . . . . . increase in 2005 totalled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cash at the end of the audited period amounted to . . . . . . . . . . . . . .

PLN 1,741,228.21 PLN 68,577.10 PLN 1,809,805.31

VI. Integrity of Statement of Changes in Equity The Company has prepared this item of the financial statements in line with the provisions of Article 48a, paragraph 1, point 1 of the Act of Accounting. The data disclosed in the statement of changes in the Company’s equity are in compliance with the balance sheet and with the profit and loss account. The statement indicates that in the audited period equity increased by PLN 27,428,630.47. VII. Reliability and Integrity of Report on Company Operations The Management Board of the Company attached to the financial statements a report on the Company’s operations in the audited period, i.e. from 1 January 2005 to 31 December 2005. The report disclosures comply with the requirements of Article 49, paragraph 2 of the Act on Accounting. E. Summary of Audit Findings In the examination of books of accounts and individual items of the financial statements, including the items affecting the level of fiscal settlements with the budget, audited samples were used on the basis of which conclusions on the correctness of the audited items were drawn. During the audit of the Company’s financial statements we did not notice any irregularities that might have a material effect on the correctness of information disclosed herein. During the audit we did not notice any facts indicating the occurrence of a breach of law that might have an effect on the financial statements. During the audit, we received a written confirmation from the Board of Management that during the accounting year no violations of the law occurred. The Auditor’s Opinion, constituting a separate document, presents the summary findings of the audit. The following Report consists of 33 pages numbered consecutively. Each page has been signed by the expert auditor. President of the Management Board Stefan Czerwin´ski, M.Sc. Reg. No. 9449/7400

Anna Perzyk Reg. No. 8294/885

Vice-President of the Management Board Graz˙yna Kutnik. M.Sc. Reg. No. 5691/802

Lublin, 4 March 2006 F-169

REGISTERED OFFICE OF THE ISSUER AND THE COMPANY

Zlomrex International Finance S.A. 48, boulevard des Coquibus BP 97 9 1003 Evry Cedex France

Złomrex S.A. 42-360 Poraj ul. Zielona 26 Poland

REGISTERED OFFICES OF THE GUARANTORS

Złomrex S.A. 42-360 Poraj ul. Zielona 26 Poland

Zakład Walcowniczy Walcownia Bruzdowa Sp. z o.o. 42-400 Zawiercie ul. Okólna 10 Poland

Złomrex Zbrojarnia Sp. z o.o. 42-400 Zawiercie ul. Okólna 10 Poland

HSW-Huta Stali Jakos´ciowych S.A. 37-450 Stalowa Wola ul. Kwiatkowskiego 1 Poland

Ferrostal Łabe˛dy Sp. z o.o. 44-109 Gliwice ul. Zawadzkiego 26 Poland

Odlewnia Metali Szopienice Sp. z o.o. 40-389 Katowice ul. Ks. Majora Karola Woz´niaka 24 Poland

LEGAL ADVISORS TO THE ISSUER AND THE COMPANY As to US, Polish, French and Austrian law

Dewey Ballantine LLP 1301 Avenue of the Americas New York, New York 10019-6092 United States

Dewey Ballantine Grzesiak Spótka Komandytowa Warsaw Stock Exchange Building ul. Ksia˛z´e˛ca 4 00-498 Warsaw Poland

Orrick Rambaud Martel 25, Boulevard de l’Amiral Bruix 75782 Paris Cedex 16 France

Wolf Theiss Schubetring 6 1010 Vienna Austria

LEGAL ADVISORS TO THE INITIAL PURCHASER As to US, Polish, French and Austrian law

White & Case LLP 5 Old Broad Street London EC2N 1DW United Kingdom

White & Case W. Danilowicz, W. Jurcewicz Wspólnicy-Kancelaria Prawna Sp.k. ul. Marszalkowska 142 00-061 Warsaw Poland

White & Case LLP Auocats au Barreau de Paris Toque Générale: J002, 11, Boulevard de la Madeleine 75001 Paris France

Binder Grösswang Sterngasse 13 1010 Vienna Austria

INDEPENDENT AUDITORS TO THE COMPANY

KPMG Audyt Sp. z o.o. ul. Chłodna 51, XVIp. 00-867 Warszawa Poland TRUSTEE, PAYING AGENT, AND TRANSFER AGENT

The Bank of New York One Canada Square London E14 5AL United Kingdom

INITIAL AUDITORS TO THE ISSUER

KPMG SA Immeuble le Palatin 3 Cours du Triangle 92939 LA DEFENSE Cedex

Révision Gestion Audit 98, rue Barrault 75013 Paris France

France LUXEMBOURG TRANSFER AGENT, LUXEMBOURG PAYING AGENT AND LUXEMBOURG LISTING AGENT

The Bank of New York (Luxembourg) S.A. Aerogolf Center 1A, Hoehenholf L-1736 Senningerberg Grand Duchy of Luxembourg

REGISTRAR

LEGAL ADVISOR TO THE TRUSTEE

The Bank of New York One Wall Street New York, New York 10286 United States

As to US law Ashurst Broadwalk House 5 Appold Street London EC2A 2HA United Kingdom

We have not authorized any dealer, salesperson or other person to give any information or represent anything to you other than the information contained in this Offering Memorandum. You must not rely on unauthorized information or representations.

OFFERING MEMORANDUM

This Offering Memorandum does not offer to sell or ask for offers to buy any of the securities in any jurisdiction where it is unlawful, where the person making the offer is not qualified to do so, or to any person who cannot legally be offered the securities. The information in this Offering Memorandum is current only as of the date on cover page, and may change after that date. For any time after the cover date of this Offering Memorandum, we do not represent that our affairs or the affairs of the Group are the same as described or that the information in this Offering Memorandum is correct — nor do we imply those things by delivering this Offering Memorandum or selling securities to you.

€170,000,000

Zlomrex International Finance S.A.

TABLE OF CONTENTS Page

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unaudited Pro Forma Consolidated Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management’s Discussion and Analysis of Financial Condition and Results of Operations . . Industry Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . Related Party Transactions . . . . . . . . . . . . . . . . . . . . Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Description of Other Indebtedness . . . . . . . . . . . . . . Description of the Notes . . . . . . . . . . . . . . . . . . . . . . Book-Entry, Delivery and Form . . . . . . . . . . . . . . . . Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . Notice to Investors . . . . . . . . . . . . . . . . . . . . . . . . . . Tax Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Independent Reporting Auditors . . . . . . . . . . . . . . . . Where You Can Find More Information . . . . . . . . . . Listing and General Information . . . . . . . . . . . . . . . . Index to Consolidated Financial Statements . . . . . .

1 19 38 41 42 43 48 68 73 92 96 97 99 103 107 161 164 166 170 177 177 177 178 F-1

8 1⁄ 2% Senior Secured Notes due 2014 Guaranteed on a senior basis by Złomrex S.A. and certain of its subsidiaries

Deutsche Bank

January 23, 2007