Azovstal To Consolidate Its Trading House.

According to the agenda of the company’s EGM scheduled for May 19, 2006, the shareholders will consider the joining of a closely held Trading House Azovstal to the steel mill Azovstal (AZST: HOLD). The trading house is 95.94%-owned by System Capital Management (SCM) which is also a controlling shareholder for Azovstal. SCM directly or through its affiliated companies holds a 97.66% stake in Azovstal. The trading house owns a 44.84% stake in Azovstal. According to the agenda of the EGM, the consolidation of the trading company with the steel mill will be carried out through a share swap. Concorde Capital: The par values of both AZST’s and the trading house’s shares are equal to USD 0.05 (UAH 0.25), and we believe that the share exchange will be completed at a one-to-one ratio based on the par values. This is common practice in Ukraine and Azovstal has already integrated a coke plant, Markokhim, into its structure through a par value based share exchange. This can be done either through an additional share issue, with the new shares being exchanged for the shares of the trading company, or if Azovstal’s SCM-related shareholders (excluding the trading house) who hold ~55% in Azovstal will exchange their stake in the company for the shares of the trading house. The trading house’s charter fund is approximately equal to 54% of Azovstal’s charter fund, which enables this kind of swap without an additional share issue. In any case, we do not expect SCM’s actions to have an adverse effect on minority shareholders, as SCM is committed to increasing transparency and the improvement of its corporate governance practices. The previous consolidation of Markokhim, which was designed in way that did not hurt minorities supports our belief that minorities can expect fair treatment in this case as well. LOOK for our ANB later today.