Social Responsibility

Employee training, health and safety, support for sports and the arts are the traditional priorities of Severstal’s corporate culture.

Multifaceted care of people is a competitive advantage of Severstal, allowing it to attract the best staff resources, develop relations with customers, contractors and the government, as well as providing humanitarian assistance.

The Company is actively reshaping its social policy inherited from the Soviet era to ensure its compliance with international standards of corporate social responsibility. Severstal regards corporate social responsibility as a voluntary contribution to the sustainable economic development of society for the purpose of improving the quality of people’s life. The scale and social significance of the management solutions taken compel the Company to be highly responsible in its activities. In this way, the aim of the Company is to respect the interests of all key players concerned in the Company’s activities, namely: customers, local communities in the areas of the Company’s operation, employees, shareholders, and authorities of different levels.

Russia is the platform for the Company’s most active social policy, as the major steel and mining assets are located in its territory and the majority of the Company’s employees work here, as well. According to the results of 2006, Severstal became a winner of the 6th All-Russia Social Responsibility Awards. The award committee noted such social projects realized by the Company as a personnel health program, leisure organization program, meals catering program, the program for maternity support, as well as a system of compensations and benefits, and one of the most recent programs—a program for improvement of housing conditions of the plant workers.

According to the rating of corporate social responsibility developed by AccountAbility, the leading international organization that rates corporate social responsibility, Severstal is the 4th among the 40 largest Russian companies.

Today, social responsibility of Severstal lies within the following fields: health protection and improvement of living standards of the company employees and their family members, sponsorship of cultural and sport events, charity work.

In 2006 the Company allocated $50.8 million towards social programs and charity.

Pensions

In 2004, the Severstal Group’s contribution to state pension funds was US$70.5 million compared with US$57.4 million for the year ended December 31, 2003. These payments are made as part of the statutory employer’s contribution to standard social security taxes.

The Severstal Group also finances two voluntary retirement benefit schemes for its employees. One of these schemes operates through NRPF StalFund (formerly NRPF Sheksna-Gefest) and the other is structured as a charitable organization, to which no new members were admitted after January 1, 2002.

The Severstal Group’s net unfunded liability for such voluntary retirement benefits as shown in its IFRS consolidated financial statements increased to US$98.6 million at December 31, 2004 from US$31.8 million at December 31, 2003. Pension liabilities of Severstal North America employees comprised US$31 million. The remaining increase was primarily driven by the change of future rate of benefit increase from 0.0% to 6.2% per annum for Russia-based employees and by the change in expected return on plan assets from 17.0% to 8.1% per annum.