The Mechel OAO (Mechel) ADR price declined significantly on 28 July 2008, following tax evasion allegations from the Russian Prime Minister, which added to the on going allegations of coal-price fixing. The price of the ADR, which fell steeply on 24 July 2008 following the Prime Minister’s criticism about the company’s pricing policies, rebounded on 25 July 2008, after the company agreed to cooperate with the government to address domestic coal prices. Although there is no clear visibility on the outcome of this investigation, we continue to see upside potential from current levels over our investment horizon. Therefore, we temporarily maintain our BUY rating for the ADR. The Russian stock trades in US dollars; therefore, we do not anticipate any currency impact over our investment horizon. Based on our fundamental outlook, we maintain our BUY rating.

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