##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K





(Mark One)

|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2010



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from              to

Commission File Number 333-150749





AGY HOLDING CORP.

(Exact name of registrant as specified in its charter)





Delaware

(State or other jurisdiction of incorporation or organization)

20-0420637

(IRS Employer Identification Number)

2556 Wagener Road

Aiken, South Carolina 29801

(Address of Principal Executive Offices) (Zip Code)

Registrants telephone number, including area code: (888) 434-0945





Securities
registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the
Act: NONE





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Exchange Act.    Yes  x    No   ̈

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  x

Indicate by check mark whether the registrant is
a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  |  ̈
|                        |  |   | 
|Non-accelerated filer   |  | x |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

The registrant is privately held. There is no trading in its common equity, and therefore an aggregate market value of common stock of
the registrant based on sales or bid and asked prices is not determinable.

The total number of shares of the
registrants common stock, par value $0.01 per share, outstanding as of March 30, 2011 was 100.

Documents
incorporated by reference: None









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AGY HOLDING CORP.

INDEX



|         |  |                                                                                                              |  |      |    | 
|-------- |  | ------------------------------------------------------------------------------------------------------------ |  | ---- | -- | 
|         |  |                                                                                                              |  | Page |   
|         |  | PART I                                                                                                       |  |      |    | 
|         |  |                                                                                                             
|Item 1.  |  | Business                                                                                                     |  |      | 1  | 
|         |  |                                                                                                             
|Item 1A. |  | Risk Factors                                                                                                 |  |      | 7  | 
|         |  |                                                                                                             
|Item 1B. |  | Unresolved Staff Comments                                                                                    |  |      | 15 | 
|         |  |                                                                                                             
|Item 2.  |  | Properties                                                                                                   |  |      | 15 | 
|         |  |                                                                                                             
|Item 3.  |  | Legal Proceedings                                                                                            |  |      | 15 | 
|         |  |                                                                                                             
|Item 4.  |  | (Reserved)                                                                                                   |  |      |    | 
|         |  |                                                                                                             
|         |  | PART II                                                                                                      |  |      |    | 
|         |  |                                                                                                             
|Item 5.  |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  |      | 16 | 
|         |  |                                                                                                             
|Item 6.  |  | Selected Financial Data                                                                                      |  |      | 16 | 
|         |  |                                                                                                             
|Item 7.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  |      | 18 | 
|         |  |                                                                                                             
|Item 7A. |  | Quantitative and Qualitative Disclosures about Market Risk                                                   |  |      | 33 | 
|         |  |                                                                                                             
|Item 8.  |  | Financial Statements                                                                                         |  |      | 34 | 
|         |  |                                                                                                             
|Item 9.  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures                        |  |      | 34 | 
|         |  |                                                                                                             
|Item 9A  |  | Controls and Procedures                                                                                      |  |      | 34 | 
|         |  |                                                                                                             
|Item 9B. |  | Other Information                                                                                            |  |      | 34 | 
|         |  |                                                                                                             
|         |  | PART III                                                                                                     |  |      |    | 
|         |  |                                                                                                             
|Item 10. |  | Directors, Executive Officers and Corporate Governance                                                       |  |      | 35 | 
|         |  |                                                                                                             
|Item 11. |  | Executive Compensation                                                                                       |  |      | 37 | 
|         |  |                                                                                                             
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  |      | 44 | 
|         |  |                                                                                                             
|Item 13. |  | Certain Relationships and Related Transactions, and Director Independence                                    |  |      | 45 | 
|         |  |                                                                                                             
|Item 14. |  | Principal Accountant Fees and Services                                                                       |  |      | 46 | 
|         |  |                                                                                                             
|         |  | PART IV                                                                                                      |  |      |    | 
|         |  |                                                                                                             
|Item 15. |  | Exhibits, Financial Statement Schedules                                                                      |  |      | 47 | 
|         |  |                                                                                                             
|         |  | Signatures                                                                                                   |  |      | 50 | 



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Forward-Looking Statements

This Annual Report on Form 10-K, including Managements Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of Part II of this Annual
Report, includes or may include forward-looking statements. All statements included herein, other than statements of historical fact, may constitute forward-looking statements. In some cases you can identify forward-looking statements by
terminology such as may, should or could. Generally, the words anticipates, believes, expects, intends, estimates, projects,
plans and similar expressions identify forward-looking statements. Although AGY Holding Corp. believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations
will prove to be correct. Important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, among others, the items discussed in Risk Factors in
Item 1A of Part I of this Annual Report, and that are otherwise described from time to time in AGYs Securities and Exchange Commission filings after this Annual Report. AGY assumes no obligation and does not intend to update these
forward-looking statements.

PART I



|ITEM 1. | BUSINESS
|------- | --------

Overview

AGY Holding Corp. is a Delaware corporation, incorporated in 2004, with its headquarters in South Carolina. AGY Holding Corp. and its
subsidiaries are referred to herein as AGY or the Company. AGY is a leading manufacturer of advanced glass fibers that are used as reinforcing materials in numerous diverse, high-value applications, including aircraft
laminates, ballistic armor, pressure vessels, roofing membranes, insect screening, architectural fabrics, and electronics. AGY is focused on serving end-markets that require glass fibers for applications with demanding performance criteria, such as
the aerospace, defense, construction, electronics, automotive, and industrial applications. We are able to leverage our flexible manufacturing capabilities to target new specialty end-use applications and to shift production rapidly to meet changing
market demand.

Beginning in 2000, a global economic downturn and inventory correction in the electronics end-market, a
migration of commodity heavy yarn production for the electronics end-market to Asia, a key customer loss in the construction end-market and a number of other factors culminated in our filing for Chapter 11 protection on December 10, 2002. We
successfully emerged from Chapter 11 protection on April 2, 2004. On April 7, 2006, our Company was acquired by KAGY Holding Company, Inc. (Holdings) pursuant to the terms of an agreement of merger dated February 23, 2006.
In the acquisition, all issued and outstanding shares of our common stock were converted into the right to receive cash. Total merger consideration was approximately $271 million (approximately $275.5 million including acquisition-related costs and
adjustments). In October 2006, we repaid all outstanding borrowings under our then-existing senior secured credit facilities as part of the refinancing of our indebtedness through our new $40 million credit facility, the issuance of $175 million in
aggregate principal amount of 11% senior second lien notes due 2014 and our cash on hand.

We have three primary manufacturing
facilities, two located in the United States and one located in China since our acquisition of a 70% interest in a foreign company on June 10, 2009. This acquisition, which is described more fully in Note 3 to the Consolidated Financial
Statements, expands AGYs manufacturing and servicing capabilities in the Asia-Pacific region relative to the electronics and industrial markets and broadens the range of products the Company offers to its global customers.

The following table summarizes our net sales by geographic region. Customer sales are attributed to geographic region based upon the
location to which the product is shipped to the external customer.



|         |  |               |       |  |      |   |       |      |  |   |       | 
|-------- |  | ------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|         |  | 2010          |       |  | 2009 |   |       | 2008 | 
|         |  | (in millions) |      
|Americas |  | $             | 107.8 |  |      | $ | 99.4  |      |  | $ | 178.6 | 
|Europe   |  |               | 33.4  |  |      |   | 21.0  |      |  |   | 27.7  | 
|Asia     |  |               | 42.5  |  |      |   | 33.5  |      |  |   | 30.2  | 
|         |  |               |       |  |      |   |       |      |  |   |       | 
|Total    |  | $             | 183.7 |  |      | $ | 153.9 |      |  | $ | 236.5 | 
|         |  |               |       |  |      |   |       |      |  |   |       | 



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Our Products

Glass Products. We are a leader in the design, development, manufacturing, and marketing of unique glass fibers used in diverse, high value applications. We produce high-quality fine
filament glass fibers, which provide customers with enhanced strength-to-weight ratios and improved fabric quality and flexibility properties. Glass fibers are differentiated from one another in three ways: (i) glass chemistry,
(ii) diameter of the filaments and (iii) sizing chemistry (a coating applied to the filament). Glass fiber is produced by passing molten glass through bushings, producing thin glass filaments, which are spooled and then twisted into fibers
or bundled into untwisted heavy weight fibers called rovings. We produce hundreds of different glass fiber types. Glass fiber types are broadly segmented into two categories: E Glass and advanced materials, including S-2 Glass.

E Glass is a natural, lustrous, white continuous fiber made of highly stable and durable glass filaments. Within E Glass, we focus on
both semi-technical and technical fibers. We differentiate between semi-technical and technical E Glass fibers based on their technical complexity and difficulty in manufacturing, and our technical fibers include filaments
with a diameter of eight microns or less and fibers with specialized and proprietary sizing compositions. As a result of their complexity, technical fibers are manufactured by only a few suppliers. We generally compete with one or two alternative
suppliers for the vast majority of our technical products. Because our technical fibers offer significant value to our customers, we are able to command a price and margin premium compared to most semi-technical E Glass fibers. We plan to continue
to produce semi-technical E Glass fibers to enable us to offer our customers a full suite of products.

S-2 Glass is a
proprietary product that is technically more complex than conventional E Glass fibers, providing it with advanced performance characteristics. Compared to other alternatives such as carbon fiber, aramid fibers and steel, S-2 Glass delivers a better
ratio of performance to cost in many applications. S-2 Glass has more than three times the percentage strain to failure of carbon fiber and performs three times better than aramid fibers in fire tests. S-2 Glass is also approximately one-third the
weight of steel.

We differentiate our S-2 Glass advanced materials from E Glass by its different glass chemistry, which
yields a proprietary product with superior performance characteristics making it suitable for applications with demanding performance criteria, such as ballistic armor, aircraft flooring and exterior skins, helicopter blades, firefighter oxygen
tanks, automotive timing belts and ceramic appliance insulation. We have demonstrated our ability to increase S-2 Glass capacity significantly through the addition of modular manufacturing platforms in multiple manufacturing sites enabling rapid
response to short-term volume opportunities. In addition, we have introduced other unique advanced material product line extensions to targeted applications that have different performance characteristics and price points within multiple end
markets, including wind energy, electronics and thermoplastics.

CFM Products. Continuous Filament Mat, or CFM, is a unique
glass fiber reinforcement product used as an input in the production of flat sheet laminates, marine parts and accessories, and other products where its strength and durability make it the most cost-effective material to use. CFM increases the
mechanical performance of products, such as stiffness and strength, as well as improves their resistance to chemicals. In CFM, AGY has a capacity of 12,000 metric tons over three manufacturing lines in Huntingdon, Pennsylvania, capable of producing
many differentiated products from 0.6 oz. to 3.0 oz. weight serving a wide variety of markets and applications, such as ladder rails, electrical insulation, heavy truck bodies and oil rig decking.

Segment Information

Since the acquisition of a 70% controlling interest in Main Union Industrial Ltd. and its subsidiary (which are collectively referred to
herein as AGY Asia) on June 10, 2009, the Company operates its business as two reportable units, each a separate operating segment: AGY US and AGY Asia. The Companys operating segments are managed separately based on
differences in their manufacturing and technology capabilities, products and services and their end-markets as well as their distinct financing agreements. For financial information with respect to our business segments, see Managements
Discussion and Analysis of Financial Condition and Results of Operations, and Note 21 to our Consolidated Financial Statements.

AGY US

The AGY
US segment includes our US manufacturing operations and sale of advanced glass fibers that are used worldwide as reinforcing materials in numerous high-value applications through AGY and its wholly owned domestic and French subsidiaries. The AGY US
segment manufactures and sells the full suite of the products described above but is heavily focused on serving end-markets that require glass fibers for applications with demanding performance criteria, such as the aerospace, defense, electronics,
construction, and industrial end-markets which represented approximately 21%, 8%, 20%, 16% and 35%, respectively, of this segments sales for the year ended December 31, 2010.

The AGY US segment serves over 250 direct customers worldwide, including most major global weavers and a diverse group of other domestic
and international commercial and industrial users of fibers. While supply chains vary by product, application and end-user, there are generally multiple links in the value chain between our fibers and corresponding end-products. Direct customers
weave our fibers into glass fiber fabric. Through our working relationships with downstream contacts, we are often able to have our fibers specified-in end products and, therefore, influence end-user demand and increase leverage with our direct
customers.



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Our direct customer relationships generally are stable and long-term. In order to qualify a
new supplier, a customer may need to modify its own weaving loom set-ups and fabric specifications and also qualify the new fiber suppliers with downstream manufacturers and original equipment manufacturers, or OEMs. Although glass fibers are
only a portion of the final end-products overall manufacturing cost, defects can be costly and can have a major impact throughout the value chain. Consequently, customers demand high-quality, reliable fibers from their suppliers, and we have
established a reputation with our customers for meeting these demands. We believe these factors have allowed us to maintain strong relationships with each of our key customers. The average length of the relationships with our top ten customers is
more than 20 years.

Depending on the end-application, we compete with glass yarn manufacturers or other composite fiber
producers worldwide. We compete in the areas of technology innovation, quality, ratio of performance to cost and customer service for our specialty advanced glass fibers and technical fibers. Our semi-technical E Glass fibers are dominated by cost,
quality and price competition.

AGY Asia

The AGY Asia segment includes the manufacturing operations of the Companys 70% controlling ownership of AGY Asia and its sale of E Glass fibers that at present are used primarily in the Asian
electronics market. Our mid-to long-term strategy for the Asia Pacific region is to take advantage of continued growth in the electronics markets, plus significant growth opportunities in several other markets such as aerospace and wind energy by
offering locally produced E Glass products based upon AGYs recognized industry leading technology.

AGY Asia serves a
smaller base of less than 20 customers, who are primarily weavers for the Asia Pacific electronics markets. Significant competitors include other global glass yarn producers primarily based in China, but such competitors are usually vertically
integrated and therefore also compete within the weaver segment of the industry supply chain. AGY is one of a limited number of independent non-integrated yarn producers in Asia, and we stress this independence as we secure supply positions with our
weaving customers.

Our AGY US and AGY Asia segments accounted for approximately 86% and 14% of our total net sales,
respectively, in 2010.

Our AGY US and AGY Asia segments accounted for approximately 65% and 35% of our total assets,
respectively, in 2010.

Summary of our End-Markets and Key Applications by Segment



|                                                                                           |  |                        |  |                  
|------------------------------------------------------------------------------------------ |  | ---------------------- |  | -----------------
|End-market and key application                                                             |  | Served Product         |  | Segment          
|Aerospace end-market                                                                       |  |                        |  |                  
|Leading edge of helicopter blades                                                          |  | S-2 Glass              |  | AGY US           
|Aircraft interior floors                                                                   |  | S-2 Glass              |  | AGY US           
|Aircraft interior panels                                                                   |  | Technical E Glass      |  | AGY US           
|                                                                                           |  |                       
|Defense end-market                                                                         |  |                        |  |                  
|Ballistic armor                                                                            |  | S-2 Glass              |  | AGY US           
|                                                                                           |  |                       
|Electronics end-market                                                                     |  |                        |  |                  
|Multi-layer printed circuit boards                                                         |  | All E Glass            |  | AGY US  AGY Asia
|Electrical insulation panels for transformers & generators                                 |  | E Glass, CFM           |  | AGY US           
|                                                                                           |  |                       
|Construction end-market                                                                    |  |                        |  |                  
|Architectural roofing/tented structures fabric                                             |  | Technical E Glass      |  | AGY US           
|Insect and pool/patio screening                                                            |  | Technical E Glass      |  | AGY US           
|Ladder rails for composite ladders                                                         |  | E Glass, CFM           |  | AGY US           
|                                                                                           |  |                       
|Industrial end-market                                                                      |  |                        |  |                  
|Pressure vessels                                                                           |  | S-2 Glass              |  | AGY US           
|Reinforcement tape                                                                         |  | Semi-Technical E Glass |  | AGY US           
|Protective gear                                                                            |  | Technical E Glass      |  | AGY US           
|PTFE coated fabrics (for example, Teflon) used in industrial and food processing equipment |  | Technical E Glass      |  | AGY US           
|Automotive high strength timing belts                                                      |  | S-2 Glass              |  | AGY US           
|High temperature application sewing thread (industrial emissions filtration bags)          |  | Technical E Glass      |  | AGY US           
|Cooling tower infrastructure                                                               |  | E Glass, CFM           |  | AGY US           



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|                                      |  |                |  |        
|------------------------------------- |  | -------------- |  | -------
|End-market and key application        |  | Served Product |  | Segment
|Automotive interior door /seat panels |  | E Glass, CFM   |  | AGY US 

Industry Overview

We supply glass fibers (i) to the global composites industry and (ii) to other applications where glass fibers, sometimes
coated, largely constitute a complete fabric system. Examples of composites applications include thermoplastic-glass fiber reinforced composites for ballistic armor, aluminum-glass fiber reinforced composites for aircraft interior and exterior
panels and specialty electronics printed circuit boards. Sales into other applications, principally in the construction and selected industrial end-markets, represented the remainder of our sales for the year ended December 31, 2010. Examples
of these applications include architectural roofing fabrics and vinyl coated yarns for window and patio screening.

Our Business Strengths

We believe that the following business strengths enable us to competitively operate our business:



| |  |  | Market leadership. We are a leading global producer of fine glass fibers for the merchant market. Many large competitors are not focused
on the niche markets in which we are a market leader due to the relative size of the opportunity and the significant technical expertise and manufacturing flexibility required to serve these markets.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Predictable and stable revenue streams. A significant portion of our sales and gross profit is related to end-products in which we were
specified-in, meaning that the customer or end-user designed its application specifically with our product in mind. Having our products specified-in to certain end-products effectively locks in future sales at the end-user level as key
inputs are rarely changed during the life cycle of a product. This allows us to more accurately forecast near-term financial performance. Additionally, the average length of our relationships with our top ten customers is more than 20 years and we
also have lengthy relationships with a substantial number of our other customers and end-users. We believe the length of these relationships provides us with a competitive advantage in continuing to service these accounts.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Diversified end-markets. Our sales are diversified among the aerospace, defense, construction, electronics, automotive and industrial
end-markets. We sell our products into numerous applications within each of our major end-markets. The diversity of our end-markets and our applications reduces our exposure to weakening demand in any individual end-market or application.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Flexible manufacturing capabilities. The size and variety of our furnaces and the diversity of our manufacturing technologies allow us
flexibility to shift production in response to changing market conditions. AGYs furnaces used to manufacture glass fibers are small relative to those of our larger competitors, which permits them to be curtailed, idled and restarted with lower
cost and in a shorter time frame, allowing for manufacturing flexibility in response to market conditions that is difficult for our competitors to replicate. In Aiken, South Carolina, our direct melt furnaces average 3,000 tons per year and our
indirect melt and specialty furnaces average 100 tons per year, whereas in China, our direct melt furnace averages 18,000 tons per year. Our competitors often have furnaces with average capacities of up to 30,000 tons per year. Recently, our
manufacturing flexibility has allowed us to support strong growth by efficiently allocating capacity for emerging applications in multiple end-markets.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Product design and development capabilities. We dedicate resources to product design and development, allowing us to create complex,
customized fibers to meet our customers and end-users specific requirements. Our technical platform includes product development strengths in glass chemistry, coating development and process innovation. Our technological expertise has
been developed by working with advanced glass fibers for over 60 years. New business development is initiated through our science and technology group, which is organized into distinct functions relating to product development, application
development and product engineering. These functions collaborate to identify high-growth end-markets and high-margin applications within those end-markets. Our partnership with key customers and end-users such as Airbus, Boeing and the U.S.
Department of Defense Army Research Labs has been an important component in our development of new applications and the improvement of existing ones.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Experienced management team. Our operations are managed by an experienced team with an average of approximately 20 years of industry
experience. Since April 2004, under the guidance of our management team, we have targeted and secured new specialty applications, refocused on the more profitable segments of our core business, expanded our manufacturing footprint in Asia, reduced
headcount and overhead, rationalized our product portfolio and increased working capital efficiencies.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our Strategy

Our key strategies include:



| |  |  | Continue to expand into new and highly profitable applications. Our growth and innovation strategy focuses on identifying applications,
which demand more technical products and are growing at higher rates than the overall end-market, for which we can provide products at attractive margins. We continue to develop products and composite
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | materials to address existing and new applications across end-markets and have identified a number of additional growth opportunities in applications such as high-output wind-turbines, dental
orthodontics, high-speed circuit boards, integrated circuit packaging, and invisible window screening. Where appropriate, we may pursue selective acquisitions to expand our product portfolio to better serve our existing applications and
end-markets and to extend into new technical and advanced materials applications and end-markets. Examples of our continued expansion into complementary markets and applications in mainstream composites markets include our purchase of the CFM
business from Owens Corning in October 2007, including marble-making assets, and our acquisition of a 70% controlling interest in AGY Asia in June 2009.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Maintain leadership in our key technical and advanced materials end-market applications. We seek to remain a market leader in our key
technical and advanced materials end-market applications. Many of our competitors are not focused on these end-markets because they concentrate on higher volume markets due to their larger scale and suitability to high volume manufacturing
infrastructure. In addition, many of our competitors direct their development resources into these same high volume markets. As a result of our flexible manufacturing infrastructure and our market focused business development, we believe we will
continue to maintain a leadership position in our key applications and end-markets we serve.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Increase specified-in opportunities. We continue to focus on opportunities in which our products are specified-in for the life cycle of
the application and in which we can become the sole supplier for these applications. In many instances, our new business development team and applications development engineers from our science and technology group work with our end-users to develop
a new application with our products specified-in. In addition, we continue to focus on remaining a single or dual supplier even when our products are not specified-in. We believe we are well positioned to remain the supplier of choice given the
uniqueness and quality of our advanced glass fibers, our flexible manufacturing capabilities and our focus on developing and maintaining customer relationships in the end-markets we serve. The collaboration between our science and technology group
and our sales force underpins our strategy of driving growth through new application development and partnership with key customers and end-users to improve existing products and technologies.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Develop new technologies and extend existing ones. We believe we are a technology leader in the production of glass fibers due to our
process engineering and product development capabilities. We conduct a research and development program aimed at developing new and improved products through our science and technology group. In addition, we partner with key customers and end-users
to improve and develop products and technologies. Our expenditures for Company sponsored research and development during the years ended December 31, 2010, 2009 and 2008 totaled approximately $3.4 million, $3.0 million, and $4.1 million,
respectively. As evidence of our process improvements and development capabilities, approximately 24% of our sales for the year ended December 31, 2010 were from new or improved products and processes we introduced in the last five years.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Continue to implement cost reduction initiatives. We continue to implement cost reduction initiatives identified by our management team
that relate to efficiency, throughput and process technology developments and manufacturing footprint optimization. Efficiency initiatives include lean manufacturing programs, managing assets to reduce lost machine time and focusing on quality
assurance. Throughput initiatives involve reducing the frequency and duration of filament breaks, minimizing retooling duration and optimizing fiber manufacturing performance. Process technology developments involve lowering energy costs and capital
intensity, reducing the need for platinum and rhodium alloys and developing the ability to quickly change glass compositions. Additionally, we have recently expanded our capacities to include producing bushings in-house, further improving our alloy
asset utilization and enhancing our product innovation capabilities.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Customers

We sell to a majority of our customers on open account after an extensive credit review and approval process. For those customers that do
not qualify for credit terms, we require cash in advance, a letter of credit, or a bank draft. We provide consigned inventory at the customers location on a limited basis.

We believe that we have a strong reputation in the marketplace not only for quality products but also for excellent customer service.
Furthermore, the proximity of our manufacturing plants in relation to many of our top customers enables same-day trucking and responsive technical service. This proximity also enables our customers to manage their inventory more efficiently. Our
three largest customers, Porcher Industries Group, Composite One LLC and Glotech Industrial Corp. accounted for approximately 18%, 7% and 6%, respectively, of our consolidated net sales for 2010. Approximately 60% of the AGY Asia segments net
sales in 2010 were generated from two customers, including one of our three largest customers and a subsidiary of AGY Asias predecessor owner; however, the shares of these customers are expected to decrease in future years as we diversify the
product lines and geographic sales of AGY Asia.



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Backlog

Backlog is not material to the Companys business taken as a whole and, on average, is less than one month of sales.

Intellectual Property

As part of the transaction when we were spun out of
Owens Corning in 1998, Owens Corning assigned to us various patents, know-how, trademarks and other business information. Owens Corning also licensed additional intellectual property assets and rights to us. Under this agreement, Owens Corning
granted us a worldwide, paid-up and royalty-free license to make, have made, use, sell, offer to sell and import glass yarn fiber products and S-2 Glass. The agreement covers the life of the licensed patents and is perpetual for know-how. In
connection with our purchase of Owens Cornings CFM business in October 2007, Owens Corning assigned and licensed to us additional intellectual property and rights related to the CFM business.

AGY aggressively manages its patent portfolio, both in terms of seeking patent protection for new technologies and also in pruning
patents that no longer have business value. We have a valuable portfolio U.S. patents and related foreign patents as well as pending U.S. and foreign applications. This portfolio covers a wide spectrum from glass composition to fiber and mat process
technology to sizing and binder chemistry to product design. Management does not believe the expiration of any of our patents will have a material impact on our operations or financial performance. In addition to patents, we also have know-how,
especially related to manufacturing extra fine denier filaments, S-2 Glass fiber products and CFM products, which we protect as trade secrets.

Science and Technology

Our science and technology (S&T) organization seeks to create products and processes that exceed customer needs by
understanding customer requirements, tailoring existing products to more rigorous end-user specifications as well as translating these customer needs into specifications for new products.

Our S&T organization is organized into three distinct functions: product and process development, applications development and
product engineering. Collaboration between these S&T functions and our sales, marketing and new business development people underpins our strategy of driving growth through new application development and partnership with key customers and
end-users.

Applications development engineers collaborate with business development and marketing specialists to understand
key trends and competitive positioning and then develop a product plan for growth in a specific application. These engineers often become the technical leaders of new product and development projects.

Once a new market opportunity is identified, the S&T team starts developing a new product that meets the specification as well as a
manufacturing process that delivers high quality at reasonable cost. Product and process engineers develop new sizings and processes for fiberizing, winding and twisting. The Company has recently upgraded laboratory and test facilities to accelerate
product and process development.

Once a new product prototype has been developed, we run customer trials to perfect the
product, troubleshoot problems on an on-going basis, and make small continuous improvements. Product engineers provide technical service to current customers, modify existing products for specific customers and help to deploy new products through
customer trials. The end result is the integration of our product into the customers manufacturing process.

Through
this process, over the last two years we have successfully introduced new products into existing as well as new applications and end-markets. In addition, we have identified a number of additional growth opportunities in applications such as
ballistic protection against new threats, high-output wind-turbines, high-speed and high performance circuit boards, and thermoplastic composite reinforcement.

Environmental Matters

We are subject to a wide range of federal, state and
local and general and industry-specific environmental, health and safety laws and regulations, including those relating to air emissions, wastewater discharges, solid and hazardous waste management and disposal and site remediation. Certain of our
operations require environmental permits or other approvals from governmental authorities, and certain of these permits and approvals are subject to expiration, denial, revocation or modification under various circumstances. We are also subject to
inspections and monitoring by government enforcement authorities.

As part of the transaction when we were spun out of Owens
Corning, Owens Corning agreed to retain all liability, if any, resulting from the presence of potentially hazardous substances at or migrating from our sites as well as all liabilities resulting from the transportation or arrangements made by Owens
Corning for the treatment, storage or disposal of hazardous substances to any off-site location prior to September 30, 1998. In addition, Owens Corning agreed to indemnify us against any losses and damages, if any, arising out of the
environmental liabilities retained by Owens Corning.



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There may be insignificant levels of asbestos in certain manufacturing facilities, however,
we do not expect to incur costs (which are undeterminable) in the foreseeable future to remediate any such asbestos.

Suppliers

The major raw materials used in the production of glass fibers are pre-melted glass marbles or a range of minerals
including silica and borates. We have historically purchased glass marbles from Owens Corning pursuant to an exclusive supply agreement, which was terminated in June 2008. We have now established a marble making process in the Aiken, SC facility to
supply a significant portion of the raw material marbles necessary to satisfy our indirect melting processes for yarn production. In addition, we have developed a secure supply agreement with an outside supplier to fulfill the remainder of our
marble demand. We believe that the cost of producing marbles in Aiken is not materially different than the cost of sourcing marbles from other sources we have identified. Silica is readily available and is provided by a number of local suppliers.
Borates are sourced from a supplier in Turkey.

We use bushings, heat-resistant trays made of platinum-rhodium alloy with
holes through which molten glass is extruded into filaments, as part of our manufacturing process. We now have bushing fabrication capabilities in our new alloy shop facility located in Aiken SC. In addition AGY US has historically used and
continues to use a single external supplier to fabricate bushings in order to protect confidentiality due to the proprietary nature of our bushing designs (although other sources of supply are available).

Natural gas and electricity are a significant portion of our cost of production due to the amount of energy needed to melt raw materials
for manufacturing into glass fibers. Energy costs represented approximately 14% of total cost of goods sold for each of the years ended December 31, 2010 and 2009.

In addition, we purchase bobbins, forming tubes and other packaging materials. These materials are reusable and are replaced if damaged during manufacturing or shipping.

Employees

As of
December 31, 2010, we employed approximately 1,093 people throughout our operations, all of which are full-time employees.

Available
Information

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to
reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available on our website athttp://www.agy.com/investor/index.htm, as soon as reasonably practicable after AGY
electronically files such reports with, or furnishes those reports to, the Securities and Exchange Commission. The public may read and copy any materials we file with the SEC at the SECs Public Reference Room at 100 F Street, NE., Washington,
DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site at http://www.sec.gov that contains reports, proxy and information
statements, and other information regarding issuers that file electronically with the SEC.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

Set forth
below and elsewhere in this Annual Report and in other documents we have filed and will file with the SEC are risks and uncertainties that could cause our actual results to differ materially from the results contemplated by the forward-looking
statements contained in this Annual Report. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect
our business, financial condition or results of operations. Any of the following risks could materially and adversely affect our business, financial condition or results of operations.

Risks Related to Our Business

We face competition from other suppliers of glass fibers, as well as from suppliers of competing products that have resources far in excess of ours, which may harm our financial performance and growth
prospects.

In the semi-technical fiber segment, we generally compete with two or more alternate suppliers for each
application. For technical fibers and continuous filament mat products, we generally compete with one to two alternate suppliers for each application. Although we are the sole supplier of S-2 Glass, we compete with companies that produce alternative
products including other high strength glasses, carbon fiber and aramid fiber products that we do not offer. In addition, today other competitors are manufacturing or developing high strength glasses in an effort to compete with S-2 Glass. We
compete principally on the basis of fiber performance, breadth of product offering, product quality, product innovation, customer service, price and availability. Many of our competitors are large, well-established companies with financial and other
resources far in excess of ours. As a result of the foregoing factors, there



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can be no assurance that we will be able to compete successfully against our competitors and we may lose customers or be forced to reduce prices, which could have a material adverse effect on our
business, financial condition, operating results and cash flows.

Most of our major competitors focus on high-volume commodity
or semi-technical products. We focus on the supply of highly technical glass fibers to specialty niche markets. Only one of our major competitors currently targets some of the same niche markets. Additional competitors may shift their focus to the
highly technical products required by these niche markets. Also, our competitors may elect to produce and supply a competing product to S-2 Glass, as the process for producing this product has been off patent since the mid-1990s. There can be
no assurance that we will be able to compete successfully against competitors that elect to move into the end-markets we currently supply and, as a result, we may lose customers or be forced to reduce prices, which could have a material adverse
effect on our business, financial condition, operating results and cash flows.

Adverse macroeconomic and business conditions, as well as
continued disruption in credit markets and government policy changes may significantly and negatively affect our revenues, profitability and financial condition.

Economic conditions in the United States and in foreign markets in which we operate could substantially affect our sales and profitability. Economic activity in the United States and throughout much of
the world has undergone a sudden, sharp economic downturn. Global credit and capital markets have experienced unprecedented volatility and disruption. Business credit and liquidity have tightened in much of the world.

Changes in governmental banking, monetary and fiscal policies to restore liquidity and increase credit availability may not be effective.
It is difficult to determine the extent of the economic and financial market problems and the many ways in which they may affect our suppliers, customers and our business in general. Continuation or further deterioration of these financial and
macroeconomic conditions could have a significant adverse effect on our business, financial condition, operating results and cash flows including as follows:



| |  |  | Some of our suppliers, customers and counterparties could face adverse liquidity issues, which could result in lower sales or in additional bad debts
for the Company or non performance by supplier;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | One or more of the financial institutions syndicated under our senior secured revolving credit facility in the US or our non-recourse financing
arrangements with the Bank of Shanghai may cease to be able to fulfill their funding obligations, which could adversely impact our liquidity;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | it may become more costly or difficult to obtain financing or refinance the Companys debt in the future;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | it may become more costly or difficult to lease a portion of our alloy metals in the future;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | the Companys assets may be impaired or subject to write down or write off.
| | - |  | ---------------------------------------------------------------------------

The recent natural disaster in Japan and its aftermath could disrupt the operations of our customers within Japan and Asia who supply the Japanese
electronics industry, which could adversely affect our business, financial condition, operating results and cash flows.

As
a global supplier we sell our products outside the United States and source goods and services and compete with other manufacturers in a number of foreign countries, including Japan. At the date of this filing we do not believe the natural disaster
in Japan has had any major disruption to our customers ongoing demand for our products in order to supply Japanese and other Asia region electronics manufacturers. The operations of one Japanese yarn manufacturer with whom we compete to supply
the Japanese electronics industry, which are located in the vicinity of the disaster, have been temporarily disrupted. We will continue to monitor this situation as it is dynamic and changing, to determine whether it will impact our business.

The cyclical and uncertain nature of the end-use markets for our products could have a material adverse effect on our business, financial
condition, operating results and cash flows.

Many of the end-markets for our products, including aerospace, defense,
electronics and construction, are cyclical and sensitive to changes in general business conditions, industry capacity, consumer preferences, technology advances and other factors and have historically experienced downturns. We have no control over
these factors and they can heavily influence our financial performance. For example, beginning in 2000, a global economic downturn and inventory correction in the electronics end-market, along with a migration of commodity heavy yarn production for
the electronics end-market to Asia contributed to our filing, under prior ownership, for Chapter 11 protection on December 10, 2002.



In addition, the demand for new commercial aircraft and aerospace refurbishment activity is cyclical and any reduction could result in
reduced sales for our commercial aerospace products and could reduce our profit margins. Approximately 21% of our AGY US sales for the year ended December 31, 2010 were derived from sales to the aerospace end-market. Reductions in demand for
commercial aircraft, or a delay in deliveries could result from many factors, including a terrorist attack similar to that which occurred on September 11, 2001 and any subsequent military response, changes in the propensity for the general
public to travel by air, the rise in the cost of aviation fuel, consolidation and liquidation of airlines and slower macroeconomic growth. A downturn in the aerospace end-market could occur at any time, and in the event of a downturn, we have no way
of knowing if, when and to what extent there might be a recovery.

Further, the production level of military equipment and
vehicles that has occurred in recent years may not be sustained. The production level of military equipment and vehicles depends upon the U.S. and other non-U.S. defense budgets and the related demand for defense and related equipment. Advanced
glass fibers may not always be the preferred reinforcement material for certain defense applications depending on threat levels and cost performance criteria. We have not been awarded certain defense contracts we had sought to obtain in 2009 and as
a result the defense end-market contribution to the AGY US sales declined from approximately 24% for the year ended December 31, 2008 to approximately 16% and 8% for the years ended December 31, 2009 and 2010, respectively.



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The U.S. government prepares its budget on an annual basis under significant cost pressures and budgetary approval can be subject to the unpredictability of the political process.

Also, delays in the initiation of construction projects and in the roll out of new or modified products by our customers may result in
reductions in sales or delays in the receipt of revenue, contributing to volatility in our quarter-to-quarter financial results.

The prices for our products may fluctuate substantially in the future, and any continued weakness in prices or downturns in market conditions could have a material adverse effect on our business,
financial condition, operating results and cash flows.

If we are unable to develop product innovations and improve our production
technology and expertise, we could lose customers or market share.

The end-markets for our products are subject to
technological change and our success may depend on our ability to adapt to such technological changes and to continue to introduce new products and applications. In some of the end-markets to which we sell our glass fiber, such as electronics,
products become obsolete rapidly. In addition, our customers may pursue alternative technology that could eliminate the need for our products. If we are unable to timely develop and introduce new products, or enhance existing products, in response
to changing market conditions or customer requirements or demands then we could lose customers or market share, which could have a material adverse effect on our business, financial condition, operating results and cash flows.

We are dependent upon continued demand from our large customers.

Sales to our three largest customers represented approximately 18%, 7% and 6%, respectively, of our consolidated net sales for the year ended December 31, 2010. Approximately 60% of the AGY
Asias segments net sales in 2010 were generated in 2010 from two customers, including one of our three largest customers and a subsidiary of AGY Asia predecessor owner; however, these customers share is expected to decrease in
future years as we diversify the product lines and geographic sales of AGY Asia. The level of purchases by our customers is often affected by events beyond their control, including general economic conditions, demand for their products, business
disruptions, disruptions in deliveries, strikes and other factors. The loss or significant reduction of orders from any of our large customers could result in us having excess capacity and reduced sales if we are unable to replace that customer. As
a result, our business, financial condition, operating results and cash flow could suffer.

The decision by an end-user to modify or
discontinue the production of an end-product that has our product specified-in could have a material adverse effect on our business, financial condition, operating results and cash flows.

A significant portion of our sales and gross profit is related to end-products in which our products are specified-in by the end-users.
The majority of these sales were to applications in the aerospace and defense end-markets. For example, E Glass and S-2 Glass are specified-in to most Boeing commercial aircraft. However, changing market conditions and related changes to
end-products may result in our products no longer being specified-in the applicable end-product. For example, in response to changing insurgent activity in Iraq and elsewhere, in the second half of 2006 the U.S. military changed the specifications
for ballistic armor for Humvees. Such decisions by end-users to modify or terminate the production of certain end-products that have our products specified-in could have a material adverse effect on our business, financial condition, operating
results and cash flows.

We have a limited ability to protect our intellectual property rights, which are important to our success.

Our success depends, in part, upon our ability to protect our proprietary technology and other intellectual property. We
rely upon a combination of trade secrets and contractual arrangements, and, to a lesser extent, patent and trademark laws to protect our intellectual property rights. The steps we take in this regard may not be adequate to prevent or deter the
duplication of our technology, and we may not be able to detect unauthorized use of our technology or take appropriate and timely steps to enforce our intellectual property rights. In addition, we cannot be certain that our processes and products do
not or will not infringe or otherwise violate the intellectual property rights of others. Infringement or other violation of intellectual property rights could cause us to incur significant costs and prevent us from selling our products and could
have a material adverse effect on our business, financial condition, operating results and cash flows.

We may be liable for damages based
on product liability claims brought against us and our customers.

The sale of our products involves the risk of product
liability claims. Certain of our products provide critical performance functions to our customers end-products. Some of our products are used in and around aerospace applications, construction sites and industrial locations, among others,
where personal injury or property damage may occur. There can be no assurance that our products will not be the subject of product liability claims or suits. In addition, if a person brings a product liability claim or suit against one of our
customers, this customer may attempt to seek a contribution from us. A successful product liability claim or series of claims against us in excess of our insurance coverage for payments for which we are not otherwise indemnified could have a
material adverse effect on our business, financial condition, operating results and cash flows.

Our business and financial performance may
be harmed by future increases in the cost of certain alloy metals and other raw materials.

Our business requires the use
of bushings as part of the manufacturing process. Bushings are trays made with a heat-resistant platinum-rhodium alloy. As of December 31, 2010, platinum and rhodium together represented the largest asset on our balance sheet.



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Based on the mix of products that we produced and the alloy metals consumed during the year ended December 31, 2010, approximately 4.1% of alloy metals were depleted in the manufacturing
process during that period. Additionally, we are currently leasing a portion of the alloy metals needed to support our manufacturing operations in the United States under a new master lease three-year agreement that we entered into with DB Energy
Trading LLC in October 2009. The agreement allows AGY to enter into leases, for up to 51,057 ounces of platinum and up to 3,308 ounces of rhodium, with terms of one to twelve months. This lease agreement includes a security interest in rhodium up to
a value that is the lesser of 35% of the leased platinum or $24.4 million. Lease costs are determined by the quantity of metal leased, multiplied by a benchmark value of the applicable precious metal and a margin above the lease rate index. The
costs of the precious metals and the related alloy lease costs are subject to market fluctuations that are beyond our control. Although we generally seek to offset the impact of rising material costs through selling price increases, future market
conditions and the terms of our contracts with customers may prevent us from passing material cost increases to our customers. In addition, we may not be able to achieve manufacturing productivity gains or other cost reductions to offset the impact
of cost increases. As a result, higher platinum and rhodium alloy costs as well as increases in the cost of other raw materials may have a material adverse effect on our business, financial condition, operating results and cash flows.

Our energy costs may be higher than we anticipated.

Energy costs, including electricity and natural gas, represented approximately 14% of our total cost of goods sold for the year ended December 31, 2010. Accurately predicting trends in energy costs
is difficult to achieve as energy costs are, to a large extent, subject to factors beyond our control, such as political conditions in oil producing regions. If future energy costs are greater than anticipated, and we are unable to offset these cost
increases with higher prices to our customers, our business, financial condition, operating results and cash flows may be materially adversely affected.

Our hedging activities to address energy price fluctuations may not be successful in offsetting increases in those costs or may reduce or eliminate the benefits of any decreases in those costs.

In order to mitigate short-term variation in our operating results due to commodity price fluctuations, we hedge a portion
of our near-term exposure to the cost of natural gas. The results of our hedging practices could be positive, neutral or negative in any period depending on price changes of the hedged exposures.

Our hedging activities are not designed to mitigate long-term commodity price fluctuations and, therefore, will not protect us from
long-term commodity price increases. In addition, in the future our hedging positions may not correlate to our actual energy costs, which would cause acceleration in the recognition of unrealized gains and losses on our hedging positions in our
operating results.

Labor disputes or increased labor costs could have a material adverse effect on our business, financial condition,
operating results and cash flows.

Production, maintenance, warehouse and shipping employees at our Aiken, South Carolina
manufacturing facility are represented by the Teamsters union. We renegotiated the current labor agreement with the Teamsters union in the second quarter of 2010, reaching a three-year agreement with a one year optional extension with our Aiken
employees, which expires on May 1, 2013. The warehouse and shipping employees at our Huntingdon, Pennsylvania manufacturing facility are represented by the UNITE union. We negotiated a two-year labor agreement with our Huntingdon employees in
2009, which expires in October 2011. We are beginning re-negotiations with the UNITE union, but there is no assurance that a positive outcome for the Company will result. Our failure to offset increases in labor costs with continued efficiency gains
and cost reduction, or any significant work stoppage in the future could have a material adverse effect on our business, financial condition, operating results and cash flows.

Our inability to obtain certain necessary raw materials and key components could disrupt the manufacture of our products.

Certain raw materials, including glass marbles and a range of minerals including silica and borates, and other key components necessary for the manufacture of our products, are obtained from a limited
group of, or occasionally single, suppliers. If we are unable to procure necessary raw materials and key components from our suppliers, we may not have readily available alternatives. As a result, our ability to manufacture products could be
disrupted, and our business, financial condition, operating results and cash flows may be materially adversely affected.

Our operations
could expose us to significant regulations and compliance expenditures as a result of environmental, health and safety laws.

Our business is subject to a wide range of federal, state and local and general and industry-specific environmental, health and safety
laws and regulations, including those relating to air emissions, wastewater discharges, solid and hazardous waste management and disposal and site remediation. Certain of our operations require environmental permits or other approvals from
governmental authorities, and certain of these permits and approvals are subject to expiration, denial, revocation or modification under various circumstances. We are also subject to inspections and monitoring by government enforcement authorities.
Our failure to comply with applicable environmental laws and regulations or permit or approval requirements could result in substantial civil or criminal fines or penalties or enforcement actions, including regulatory or judicial orders enjoining or
curtailing operations or requiring remedial or corrective measures, installation of pollution control equipment or other actions, which could have a material adverse effect on our business, financial condition, operating results and cash flows.



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In addition, as an owner and operator of real estate, we may be responsible under
environmental laws and regulations for the investigation, remediation and monitoring, as well as associated costs, expenses and third-party damages, including tort liability and natural resource damages, relating to past or present releases of
hazardous substances on or from our properties. Liability under these laws may be imposed without regard to whether we knew of or were responsible for the presence of those substances on our property, may be joint and several, meaning that the
entire liability may be imposed on each party without regard to contribution, and retroactive and may not be limited to the value of the property. In addition, we or others may discover new material environmental liabilities, including liabilities
related to third-party owned properties that we or our predecessors formerly owned or operated, or at which we or our predecessors have disposed of, or arranged for the disposal of, certain materials. We may be involved in administrative or judicial
proceedings and inquiries in the future relating to such environmental matters which could have a material adverse effect on our business, financial condition, operating results and cash flows.

New environmental laws or regulations (or changes in existing laws or regulations or their enforcement) may be enacted that require
significant expenditures by us. If the resulting expenses significantly exceed our expectations, our business, financial condition, operating results and cash flows could be materially adversely affected.

There may be insignificant levels of asbestos in certain manufacturing facilities; however, we do not expect to incur costs (which are
undeterminable) in the foreseeable future to remediate any such asbestos, which may be present in the facilities.

We are also
subject to various federal, state and local requirements concerning safety and health conditions at our manufacturing facilities. We may also be subject to material financial penalties or liabilities for noncompliance with those safety and health
requirements, as well as potential business disruption, if any of our manufacturing facilities or a portion of any manufacturing facility is required to be temporarily closed as a result of any noncompliance with those requirements.

Owens Corning may fail to comply with its indemnification and other obligations related to our spin off from Owens Corning.

As part of the transaction in which we were spun out of Owens Corning, Owens Corning agreed to retain all liability, if any, resulting
from the potential presence of hazardous substances at or migrating from our sites as well as all liabilities resulting from the transportation or arrangements made by Owens Corning for the treatment, storage or disposal of hazardous substances to
any off-site location prior to September 30, 1998. In addition, Owens Corning agreed to indemnify us against any losses and damages, if any, arising out of the environmental liabilities retained by Owens Corning.

If the potential matters for which we are entitled to receive indemnification from Owens Corning result in significant liabilities for
us, and for any reason Owens Corning and/or its affiliates are unable or unwilling to honor these indemnification obligations, we could be required to pay for these liabilities ourselves, which could have a material adverse effect on our business,
financial condition, operating results and cash flows, our ability to fund or expand our operations and our ability to repay our existing and future indebtedness.

We rely on Owens Corning for the provision of certain products and services.

We have historically entered into agreements with Owens Corning for (i) our supply of glass marbles, (ii) bushings fabrication
and (iii) technical support for our operations. Our agreements regarding technical support expired in December 2005, but we and Owens Corning have continued to operate under the terms of the expired agreement. In 2007, we entered into a 3-year
marble supply agreement with Owens Corning, which was terminated in 2008 and under which we have no further obligations. Our agreement regarding bushings fabrication, however, automatically renewed for an additional five years in December 2008,
since neither we nor Owens Corning provided written notice of non-renewal 24 months prior to its expiration. If for any reason Owens Corning is unable or unwilling to renew the bushing fabrication agreement, is unable or unwilling to honor its
obligations under this agreement (or its renewal), or this agreement (or its renewal) is terminated, we may not be able to enter into a new agreement on comparable terms, if at all. As a result, our business, financial condition, operating results
and cash flows may be materially adversely affected.

We have incurred net losses and filed for Chapter 11 protection under prior ownership
in the past, have a limited history of profitability and may incur net losses in the future.

Beginning in 2000, a global
economic downturn and inventory correction in the electronics end-market, a migration of commodity heavy yarn production for the electronics end-market to Asia, a key customer loss in the construction end-market and a number of other factors
culminated in our filing for Chapter 11 protection on December 10, 2002. Since our emergence from Chapter 11 protection on April 2, 2004, a new management team has repositioned us as a supplier of highly technical fibers to specialty
high-margin applications.

As a result of a global economic downturn, which was prevalent through 2009, lower inventory levels
held by several of our customers, and the conclusion of some defense programs, we experienced in 2009 a sharp decline in sales and in profitability resulting in the write off of the goodwill associated with our AGY US segment.

We cannot assure you that we will operate profitably in the future. In addition, we may experience significant quarter-to-quarter
variations in operating results and cash flows.



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If we are unable to successfully identify acquisitions and/or to integrate newly acquired businesses into
our operations on a timely basis, our business, financial condition, operating results and cash flows could be materially adversely affected.

We may seek to identify and complete acquisitions that meet our strategic and financial return criteria. However, there can be no assurance that we will be able to locate suitable candidates or acquire
them on acceptable terms or, because of limitations imposed by the agreements governing our indebtedness, that we will be able to finance future acquisitions. Integrating newly acquired businesses into our operations involve special risks,
including, without limitation, the potential assumption of unanticipated liabilities and contingencies, difficulty in assimilating the operations and personnel of the acquired businesses, disruption of our existing business, dissipation of our
limited management resources and impairment of relationships with employees and customers of the acquired business as a result of changes in ownership and management. While we believe that strategic acquisitions can improve our competitiveness and
profitability, these activities could have a material adverse effect on our business, financial condition, operating results and cash flows.

If we are unable to successfully implement our cost reduction initiatives, our business, financial condition, operating results and cash flows could
be materially adversely affected.

We are focused on cost reduction initiatives that relate to the optimization of our
manufacturing footprint, as well as efficiency, throughput and process technology developments. Efficiency initiatives include managing assets to reduce lost machine time and focusing on quality assurance. Throughput initiatives involve reducing the
frequency and duration of filament breaks, minimizing retooling duration and optimizing fiber manufacturing performance. Process technology developments involve lowering energy costs and capital intensity, reducing the need for platinum and rhodium
alloy and developing the ability to quickly change glass compositions. We may be unable to successfully implement our cost reduction initiatives within expected time frames, which could have a material adverse effect on our business, financial
condition, operating results and cash flows.

Our operations require substantial capital, leading to high levels of fixed costs that will
be incurred regardless of our level of business activity.

Our businesses are capital intensive, and regularly require
capital expenditures to expand operations, maintain equipment, increase operating efficiency and comply with environmental laws, leading to high fixed costs, including depreciation expense. We are limited in our ability to reduce fixed costs quickly
in response to reduced demand for our products and these fixed costs may not be fully absorbed, resulting in higher average unit costs and lower gross margins if we are not able to offset this higher unit cost with price increases. Alternatively, we
may be limited in our ability to quickly respond to unanticipated increased demand for our products, which could result in an inability to satisfy demand for our products and loss of market share.

A significant disruption or disaster at one of our three manufacturing facilities could have a material adverse effect on our business, financial
condition, operating results and cash flows.

We own and operate three manufacturing facilities located in Aiken, South
Carolina, Huntingdon, Pennsylvania and Shanghai, China. Each facility contains complex and sophisticated machines that are used in the respective manufacturing processes. Each manufacturing process could be affected by operational problems that
could impair our production capability. Disruptions or shut downs at our facilities could be caused by:



| |  |  | maintenance outages, to conduct maintenance activities that cannot be performed safely during operations;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | prolonged power failures or reductions, including the effect of lightning strikes on our electrical supply;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | breakdown, failure or substandard performance of a significant portion of our equipment;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | noncompliance with material environmental requirements or permits;
| | - |  | ------------------------------------------------------------------



| |  |  | disruptions in the transportation infrastructure, including railroad tracks, bridges, tunnels or roads; or
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | other operational problems.
| | - |  | ---------------------------

We are dependent upon the continued safe operation of these manufacturing facilities. Physical damage at any facility, such as damage caused by fires, floods, earthquakes or other catastrophic disasters,
may also disrupt the manufacturing process and/or cause a facility shut down. Such damage may not be covered by, or may be in excess of, our industry standard insurance coverage. Any prolonged or permanent disruption in operations at our facilities
could cause significant lost production, which would have a material adverse effect on our business, financial condition, operating results and cash flows.

Exposure to interest rate and foreign currency exchange rate volatility could increase our financing costs.

We require both short-term and long-term financing to fund our operations, including capital expenditures. Changes in the capital markets or our credit rating could affect the cost or availability of
financing. In addition, we are exposed to changes in interest rates with respect to floating rate debt and in determining the interest rate of any new debt issues. Changes in the capital markets or prevailing interest rates can increase or decrease
the cost or availability of financing. In addition, because the sales of our AGY Asia subsidiary are denominated primarily in the U.S. dollar, while its costs are primarily denominated in local currency, the Chinese



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renminbi (RMB), and because a significant percentage of our sales, approximately 41% for the year ended December 31, 2010, are to customers in foreign countries, we may be
adversely affected by unfavorable fluctuations in foreign currency exchange rates.

We conduct a significant amount of our sales activities
outside of the U.S., which subjects us to additional business risks that may cause our profitability to decline.

Because
we operate and sell our products in a number of foreign countries, we are subject to risks associated with doing business internationally.Sales outside of the United States accounted for approximately 41% of our total sales for the year
ended December 31, 2010, and will continue to account for a material portion of our sales for the foreseeable future. We may continue to pursue international growth opportunities, which could increase our exposure to risks associated with
international sales and operations.

Our international operations are, and will continue to be subject to numerous risks, including:



| |  |  | unfavorable fluctuations in foreign currency exchange rates;
| | - |  | ------------------------------------------------------------



| |  |  | adverse changes in foreign tax, legal and regulatory requirements;
| | - |  | ------------------------------------------------------------------



| |  |  | trade protection measures and import or export licensing requirements;
| | - |  | ----------------------------------------------------------------------



| |  |  | difficulty in protecting intellectual property;
| | - |  | -----------------------------------------------



| |  |  | differing labor regulations;
| | - |  | ----------------------------



| |  |  | difficulty of enforcing agreements and collecting receivables through some foreign legal systems;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | foreign customers may have longer payment cycles than customers in the U.S.;
| | - |  | ----------------------------------------------------------------------------



| |  |  | political and economic instability; or
| | - |  | --------------------------------------



| |  |  | acts of hostility, terror or war.
| | - |  | ---------------------------------

Any one of the above could have a material adverse effect on our business, financial condition, operating results and cash flows.

Our business may suffer if we are unable to attract and retain key personnel.

We depend on the members of our senior management team and other key personnel. These employees have industry experience and relationships that we rely on to successfully implement our business plan. The
loss of the services of our senior management team and other key personnel or the lack of success in attracting and retaining new and/or replacement management personnel could have a material adverse effect on our business, financial condition,
operating results and cash flows.

Our Sponsor controls us and may have conflicts of interest with other holders of our securities.

On April 7, 2006, all of the outstanding stock of AGY was acquired by Holdings, which we refer to in this Annual
Report as the Acquisition. Investment funds associated with Kohlberg & Company, L.L.C. (our Sponsor), control us through their ownership of substantially all of the equity of Holdings. As a result, our Sponsor, which controls
substantially all of the voting power of Holdings, is able to control the voting power with respect to all matters and has significant influence on our overall operations and strategy. The interests of Holdings, our Sponsor or any of their
affiliates may not in all cases coincide with the interests of other holders of our securities, including our 11% senior second lien notes due 2014 (the Notes). To the extent that conflicts of interest arise, Holdings, our Sponsor or any
of their affiliates may resolve those conflicts in a manner adverse to us or to other holders of our securities. For example, our Sponsor and its affiliates could cause us to make acquisitions that increase the amount of the indebtedness that is
secured or sell revenue-generating assets, impairing our ability to make payments under our securities. Additionally, our Sponsor and its affiliates are in the business of making investments in companies and may from time to time acquire and hold
interests in businesses that compete directly or indirectly with us. Accordingly, our Sponsor and its affiliates may also pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities
may not be available to us. In addition, our Sponsor and its affiliates may have an interest in pursuing acquisitions, divestitures and other transactions that, in their judgment, could enhance their equity investment, even though such transactions
might involve risks to other holders of our securities.



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Our significant indebtedness and the restrictive covenants under the indenture governing our Notes could
affect our financial health and may limit our ability to expand or pursue our business strategy.

We have a significant
amount of debt. At December 31, 2010, excluding the indebtedness related to AGY Asia, which is non recourse to AGY or any other domestic subsidiary of AGY, our total debt was $190.0 million (consisting of $18.0 million of senior secured
borrowings and $172.0 million of the Notes) and we had approximately $17.1 million of additional secured borrowing capacity under our senior secured revolving credit facility for our North America operations. Our level of indebtedness could:



| |  |  | make it more difficult for us to satisfy our obligations with respect to the Notes;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | increase our vulnerability to general adverse economic and industry conditions;
| | - |  | -------------------------------------------------------------------------------



| |  |  | require us to dedicate a significant portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our
cash flow to fund working capital, capital expenditures, research and development efforts and other general corporate purposes;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | place us at a competitive disadvantage compared to our competitors that have less debt; and
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | limit our ability to borrow additional funds.
| | - |  | ---------------------------------------------

In addition, the indenture governing our Notes contains restrictive covenants that limit our ability to engage in activities that may be in our long-term best interests. Our failure to comply with those
covenants could result in an event of default, which, if not cured or waived, could result in the acceleration of all of our debts. The covenants restrict our ability to take certain actions to some extent, including our ability to:



| |  |  | incur additional indebtedness;
| | - |  | ------------------------------



| |  |  | pay dividends and make distributions in respect of our capital stock;
| | - |  | ---------------------------------------------------------------------



| |  |  | repurchase our capital stock;
| | - |  | -----------------------------



| |  |  | make investments;
| | - |  | -----------------



| |  |  | create or permit restrictions on the ability of our restricted subsidiaries to pay dividends or make other distributions to us;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | engage in transactions with shareholders and affiliates;
| | - |  | --------------------------------------------------------



| |  |  | create or permit certain liens;
| | - |  | -------------------------------



| |  |  | use the proceeds from sales of assets and subsidiary stock;
| | - |  | -----------------------------------------------------------



| |  |  | sell or otherwise dispose of assets; and
| | - |  | ----------------------------------------



| |  |  | engage in mergers and acquisitions.
| | - |  | -----------------------------------

There can be no assurance that our leverage and such restrictions will not adversely affect our ability to finance our future operations or capital needs or to engage in other business activities. In
addition, our ability to pay principal and interest on our indebtedness and to satisfy our other debt obligations will depend upon our future operating performance, which will be affected by prevailing economic conditions and financial, business and
other factors, certain of which are beyond our control.

We may be unable to refinance our working capital loan for our Asian subsidiary.

The working capital loan in the aggregate amount of approximately $12.0 million that AGY Asia entered into in June 2010
matures in June 2011. If AGY Asia is unable to obtain an extension of the commitment or refinance the loan prior to maturity, or if the commitment amount of any refinancing should be decreased, AGY Asias ability to finance its current
operations and meet its short-term and long-term obligations could be adversely affected.

We may be unable to finance the consideration to
be paid pursuant to the put/call agreement for the 30% noncontrolling interest in AGY Asia, which would trigger an event of default under our financing agreements.

In connection with the acquisition of a 70% controlling interest in AGY Asia, we entered into an option agreement with Grace which expires in December 2013 pursuant to which Grace granted us a call
option, and we granted Grace a put option, in respect of the 30% interest held by Grace in AGY Asia. Grace can exercise the put option after the one-year anniversary of the execution of the AGY Asia acquisition on June 10, 2009 at a stipulated
multiple of earnings before interest, taxes, depreciation and amortization.

We believe that either the call option or the put
option may be exercised in 2011 or 2012, and we intend, but cannot guarantee that we will be able, to finance the consideration to be paid pursuant to this agreement through our revolving credit agreement financing, the sale of additional equity to
our Sponsor or through other sources of capital.



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If AGY were to default in satisfying the put obligation it would be an event of default under AGYs
senior secured revolving credit agreement. Further, if the option is exercised on or before June 30, 2012, or after June 30, 2012, we are required pursuant to the revolving credit agreement to have excess availability under the revolver of
at least $10.0 million and $8.75 million, respectively, for 60 days prior to consummation of the put option and to meet a fixed charge coverage ratio of 0.5:1.0 and of 1.0:1.0, respectively, in order to fund the option purchase price. Failure to
consummate the put obligation as required, or failure to have sufficient excess availability or meet the fixed charge coverage ratio at consummation of the put option would trigger an event of default under the revolving credit agreement. An event
of default, if not cured or waived, under our revolving credit facility could result in the acceleration of all of our debt thereunder. Additionally, since there are cross-default provisions in our Notes indenture and our Deutsche Bank alloy lease
agreement, such failure could trigger defaults under those agreements, as well. There can be no assurance that we will meet the revolving credit agreement requirements to finance the obligation or that our Sponsor will contribute additional equity,
or that we will be able to raise additional capital to enable us to consummate the put obligation.



|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

Not
applicable.



|ITEM 2. | PROPERTIES
|------- | ----------

We are headquartered in
Aiken, South Carolina and have three primary manufacturing facilities in two states within the U.S. and one in China. The following table outlines the location, type of facility and business segment of our administrative and manufacturing
facilities, along with whether we own or lease each, as of December 31, 2010:



|                                                                    |  |            |  |               |  |              |  |                
|------------------------------------------------------------------- |  | ---------- |  | ------------- |  | ------------ |  | ---------------
|Name and Type of Facility                                           |  | City       |  | State/Country |  | Owned/Leased |  | BusinessSegment
|U.S.
Aiken worldwide corporate headquarters and manufacturing plant |  | Aiken      |  | SC            |  | Owned        |  | AGY US         
|Huntingdon manufacturing plant                                      |  | Huntingdon |  | PA            |  | Owned        |  | AGY US         
|                                                                    |  |            |  |              
|Foreign
Lyon sales office                                           |  | Lyon       |  | France        |  | Leased       |  | AGY US         
|Shanghai, administrative office and manufacturing plant             |  | Shanghai   |  | China         |  | Owned        |  | AGY Asia       
|Hong Kong administrative and sales office                           |  | Hong Kong  |  | China         |  | Leased       |  | AGY Asia       

All owned property in the U.S. is
subject to a security interest under our AGY US senior secured revolving credit agreement and our Notes. The owned property in Shanghai is subject to a security interest under our AGY Asia term loan agreement. We believe that our existing properties
are in good condition and are suitable for the conduct of our business.



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

We are
subject to various claims and legal actions that arise in the ordinary course of our business. We do not believe that we are currently party to any proceeding that, if determined adversely, would have a material adverse effect on our financial
condition, results of operations or cash flows.



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PART II



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------

Not applicable.



|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------

The following table sets forth certain selected historical condensed consolidated financial information derived from our audited financial
statements for the five-year period ended December 31, 2010 at the dates and for the periods indicated. Financial information prior to the April 7, 2006 Acquisition is labeled as Predecessor and financial information as of
April 7, 2006 and subsequent thereto is labeled as Successor.

The selected historical financial information
should be read in conjunction with Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations and our Consolidated Financial Statements and the accompanying notes thereto included in
Item 8, Financial Statements and Supplementary Data, which are included elsewhere in this Annual Report on Form 10-K. Historical results are not necessarily indicative of results to be expected for future periods. All amounts are
presented in thousands.



|                                                                    |  |                               |         |   |                                 |   |         |                            |  |   |                            |   |  |                            |         |   |                            |   |          |   |  |   |         |  
|------------------------------------------------------------------- |  | ----------------------------- | ------- | - | ------------------------------- | - | ------- | -------------------------- |  | - | -------------------------- | - |  | -------------------------- | ------- | - | -------------------------- | - | -------- | - |  | - | ------- | -
|                                                                    |  | AGY Holding Corp.             |        
|                                                                    |  | PREDECESSOR                   |         |   | SUCCESSOR                       |  
|                                                                    |  | January 1,2006 toApril 6,2006 |         |   | April 7,2006
toDecember 31,2006 |   |         | YearEndedDecember 
31,2007 |  |   | YearEndedDecember 
31,2008 |   |  | YearEndedDecember 
31,2009 |         |   | YearEndedDecember 
31,2010 |  
|Statement of operations data:                                       |  |                               |         |   |                                 |   |         |                            |  |   |                            |   |  |                            |         |   |                            |   |          |   |  |   |         |  
|Net sales                                                           |  | $                             | 45,796  |   |                                 | $ | 124,755 |                            |  | $ | 184,371                    |   |  | $                          | 236,487 |   |                            | $ | 153,852  |   |  | $ | 183,674 |  
|Cost of goods sold                                                  |  |                               | 39,217  |   |                                 |   | 102,734 |                            |  |   | 146,468                    |   |  |                            | 190,154 |   |                            |   | 156,512  |   |  |   | 168,932 |  
|                                                                    |  |                               |         |   |                                 |   |         |                            |  |   |                            |   |  |                            |         |   |                            |   |          |   |  |   |         |  
|Gross profit (loss)                                                 |  |                               | 6,579   |   |                                 |   | 22,021  |                            |  |   | 37,903                     |   |  |                            | 46,333  |   |                            |   | (2,660   | ) |  |   | 14,742  |  
|Selling, general and administrative expenses                        |  |                               | 24,196  |   |                                 |   | 9,202   |                            |  |   | 17,439                     |   |  |                            | 20,237  |   |                            |   | 15,963   |   |  |   | 15,823  |  
|Restructuring charges                                               |  |                               |        |   |                                 |   |        |                            |  |   |                           |   |  |                            |        |   |                            |   | 789      |   |  |   | 2,658   |  
|Amortization of intangible assets                                   |  |                               | 511     |   |                                 |   | 1,509   |                            |  |   | 1,676                      |   |  |                            | 1,858   |   |                            |   | 1,003    |   |  |   | 1,003   |  
|Goodwill impairment charge                                          |  |                               |        |   |                                 |   |        |                            |  |   |                           |   |  |                            |        |   |                            |   | 84,992   |   |  |   |        |  
|Other operating income (expense), net                               |  |                               | 8       |   |                                 |   | 1,996   |                            |  |   | 204                        |   |  |                            | 208     |   |                            |   | (791     | ) |  |   | 6,415   |  
|                                                                    |  |                               |         |   |                                 |   |         |                            |  |   |                            |   |  |                            |         |   |                            |   |          |   |  |   |         |  
|Operating (loss) income                                             |  |                               | (18,120 | ) |                                 |   | 13,306  |                            |  |   | 18,992                     |   |  |                            | 24,446  |   |                            |   | (106,198 | ) |  |   | 1,673   |  
|Other income (expense), net                                         |  |                               | 193     |   |                                 |   | (16     | )                          |  |   | 151                        |   |  |                            | 79      |   |                            |   | 328      |   |  |   | 186     |  
|Interest expense                                                    |  |                               | (2,266  | ) |                                 |   | (13,569 | )                          |  |   | (20,119                    | ) |  |                            | (23,086 | ) |                            |   | (22,235  | ) |  |   | (22,782 | )
|Gain on bargain purchase                                            |  |                               |        |   |                                 |   |        |                            |  |   |                           |   |  |                            |        |   |                            |   | 20,376   |   |  |   |        |  
|(Loss) gain on early extinguishment of debt                         |  |                               |        |   |                                 |   | (5,702  | )                          |  |   |                           |   |  |                            |        |   |                            |   | 1,138    |   |  |   |        |  
|                                                                    |  |                               |         |   |                                 |   |         |                            |  |   |                            |   |  |                            |         |   |                            |   |          |   |  |   |         |  
|(Loss) income from continuing operations before income taxes        |  |                               | (20,193 | ) |                                 |   | (5,981  | )                          |  |   | (976                       | ) |  |                            | 1,439   |   |                            |   | (106,591 | ) |  |   | (20,923 | )
|Income tax (benefit) expense                                        |  |                               | (7,584  | ) |                                 |   | (2,413  | )                          |  |   | (334                       | ) |  |                            | 1,269   |   |                            |   | (13,079  | ) |  |   | (6,346  | )
|                                                                    |  |                               |         |   |                                 |   |         |                            |  |   |                            |   |  |                            |         |   |                            |   |          |   |  |   |         |  
|Net (loss) income                                                   |  |                               | (12,609 | ) |                                 |   | (3,568  | )                          |  |   | (642                       | ) |  |                            | 170     |   |                            |   | (93,512  | ) |  |   | (14,577 | )
|Less: Net loss (income) attributable to the noncontrolling interest |  |                               |        |   |                                 |   |        |                            |  |   |                           |   |  |                            |        |   |                            |   | 1,119    |   |  |   | (1,545  | )
|                                                                    |  |                               |         |   |                                 |   |         |                            |  |   |                            |   |  |                            |         |   |                            |   |          |   |  |   |         |  
|Net (loss) income attributable to AGY Holding Corp.                 |  | $                             | (12,609 | ) |                                 | $ | (3,568  | )                          |  | $ | (642                       | ) |  | $                          | 170     |   |                            | $ | (92,393  | ) |  | $ | (16,122 | )
|                                                                    |  |                               |         |   |                                 |   |         |                            |  |   |                            |   |  |                            |         |   |                            |   |          |   |  |   |         |  



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|                                                          |  |                               |         |   |                                 |   |          |                            |  |   |                            |   |  |                            |         |   |                            |   |         |   |  |   |         |  
|--------------------------------------------------------- |  | ----------------------------- | ------- | - | ------------------------------- | - | -------- | -------------------------- |  | - | -------------------------- | - |  | -------------------------- | ------- | - | -------------------------- | - | ------- | - |  | - | ------- | -
|                                                          |  | PREDECESSOR                   |         |   | SUCCESSOR                       |  
|                                                          |  | January 1,2006 toApril 6,2006 |         |   | April 7,2006
toDecember 31,2006 |   |          | YearEndedDecember 
31,2007 |  |   | YearEndedDecember 
31,2008 |   |  | YearEndedDecember 
31,2009 |         |   | YearEndedDecember 
31,2010 |  
|Balance sheet data (at period end):                       |  |                               |         |   |                                 |   |          |                            |  |   |                            |   |  |                            |         |   |                            |   |         |   |  |   |         |  
|Working capital (1)                                       |  | $                             | 31,169  |   |                                 | $ | 34,476   |                            |  | $ | 34,535                     |   |  | $                          | 36,921  |   |                            | $ | 15,274  |   |  | $ | 14,924  |  
|Property, plant and equipment, and alloy metals, net      |  |                               | 90,678  |   |                                 |   | 163,419  |                            |  |   | 163,054                    |   |  |                            | 178,880 |   |                            |   | 249,096 |   |  |   | 220,338 |  
|Cash and cash equivalents                                 |  |                               | 3,833   |   |                                 |   | 1,580    |                            |  |   | 5,204                      |   |  |                            | 4,760   |   |                            |   | 3,439   |   |  |   | 3,132   |  
|Total assets                                              |  |                               | 167,546 |   |                                 |   | 336,220  |                            |  |   | 342,150                    |   |  |                            | 355,487 |   |                            |   | 330,866 |   |  |   | 298,687 |  
|Total debt, including capital leases                      |  |                               | 89,322  |   |                                 |   | 177,190  |                            |  |   | 176,246                    |   |  |                            | 191,400 |   |                            |   | 232,469 |   |  |   | 233,205 |  
|Shareholders equity                                      |  |                               | 39,281  |   |                                 |   | 95,373   |                            |  |   | 96,040                     |   |  |                            | 98,305  |   |                            |   | 25,511  |   |  |   | 21,916  |  
|Other financial data:                                     |  |                               |         |   |                                 |   |          |                            |  |   |                            |   |  |                            |         |   |                            |   |         |   |  |   |         |  
|Cash interest expense                                     |  |                               | 2,100   |   |                                 |   | 9,380    |                            |  |   | 20,645                     |   |  |                            | 22,357  |   |                            |   | 21,381  |   |  |   | 22,085  |  
|Depreciation and amortization                             |  |                               | 3,139   |   |                                 |   | 13,132   |                            |  |   | 12,634                     |   |  |                            | 12,702  |   |                            |   | 13,611  |   |  |   | 19,649  |  
|Alloy depletion, net of recoveries                        |  |                               | 996     |   |                                 |   | 4,601    |                            |  |   | 6,960                      |   |  |                            | 12,373  |   |                            |   | 6,733   |   |  |   | 8,103   |  
|Capital expenditures, net (2)                             |  |                               | 1,487   |   |                                 |   | 8,199    |                            |  |   | 14,092                     |   |  |                            | 39,272  |   |                            |   | (2,590  | ) |  |   | (4,308  | )
|Cash flows provided by (used in) operating activities     |  |                               | 3,643   |   |                                 |   | 23,554   |                            |  |   | 25,964                     |   |  |                            | 22,575  |   |                            |   | (11,146 | ) |  |   | (4,145  | )
|Cash flows (used in) investing activities (3)             |  |                               | (1,487  | ) |                                 |   | (283,753 | )                          |  |   | (21,347                    | ) |  |                            | (38,092 | ) |                            |   | (2,507  | ) |  |   | 4,308   |  
|Cash flows (used in) provided by financing activities (4) |  |                               | (976    | ) |                                 |   | 261,640  |                            |  |   | (988                       | ) |  |                            | 15,054  |   |                            |   | 12,283  |   |  |   | (388    | )
|Ratio of (deficiency in) earnings to fixed charges (5)    |  |                               |        |   |                                 |   | 0.6x     |                            |  |   | 1.0x                       |   |  |                            | 1.1x    |   |                            |   |        |   |  |   | 0.1x    |  



|(1) | We define working capital as our current assets (excluding unrestricted cash) minus our current liabilities, which includes the current portion of long-term debt and
accrued interest thereon.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Capital expenditures are presented net of proceeds of sales of assets, which were $1,326, $15,939 and $14,146 for the years ended December 31, 2008, 2009 and 2010,
respectively and related primarily to excess alloy sales.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Investing activities include in 2009 a $18,200 payment for the 70% controlling interest in AGY Asia, net of cash acquired, which was funded by a $20,000 capital
contribution from the Companys equity sponsor recorded in financing activities.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Financing activities in 2009 include a $20,000 capital contribution from the Companys equity sponsor to fund the acquisition of the 70% controlling interest in
AGY Asia in part offset by the $1.8 million cash outflow for the repurchase of $3.0 million of Notes, a $2.8 million increase in AGY US revolver borrowings and a $8.7 million decrease in AGY Asia borrowings since the acquisition.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | The deficiency for the period from January 1, 2006 to April 6, 2006 was $20,193. The deficiency for the period from April 7, 2006 to December 31,
2006 was $5,981. The deficiency for the years ended December 31, 2009 and 2010 was $106,591 and $20,923, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|------- | --------------------------------------------------------------------------------------

You should read the following discussion of our financial condition and results of operations with Selected Financial Data
and the audited historical Consolidated Financial Statements and related notes included elsewhere in this Annual Report. This discussion contains forward-looking statements about our markets, the demand for our products and services and our future
results. We based these statements on assumptions that we consider reasonable. Actual results may differ materially from those suggested by our forward-looking statements for various reasons including those discussed in the Risk Factors
and Cautionary Note Regarding Forward-Looking Statements sections of this Annual Report. Those sections expressly qualify all subsequent oral and written forward-looking statements attributable to us or persons acting on our behalf. We
do not have any intention or obligation to update forward-looking statements included in this Annual Report.

OVERVIEW

We are a leading manufacturer of advanced glass fibers that are used as reinforcing materials in numerous diverse high-value applications,
including aircraft laminates, ballistic armor, pressure vessels, roofing membranes, insect screening, architectural fabrics and specialty electronics. We are focused on serving end-markets that require glass fibers for applications with demanding
performance criteria, such as the aerospace, defense, construction, electronics, automotive and industrial end-markets.

Since
the acquisition of AGY Asia on June 10, 2009 as discussed further below, the Company has two reportable segments, each a separate operating segment. The AGY US segment includes the U.S. manufacturing operations and its sale of advanced glass
fibers that are used worldwide as reinforcing materials in numerous high-value applications and end-markets through AGY, its wholly owned domestic and French subsidiaries. The AGY Asia segment includes the manufacturing operations of the
Companys 70% controlling ownership of AGY Hong Kong Limited and its sale of advanced glass fibers that are used primarily in the Asian electronics markets. The Companys operating segments are managed separately based on differences in
their manufacturing and technology capabilities, products and services and their end-markets as well as their distinct financing agreements.

We believe we are making progress in connection with our strategies to improve operating efficiency, to expand our product offerings, our markets, and our customer base and to effectively manage our
liquidity. We believe that the acquisition of AGY Asia contributes to the geographic expansion of our key businesses and the optimization of our manufacturing footprint and will accelerate growth in certain of our key end-markets. However, in the
current economic environment, we have seen modest increases in demand in some of our key end-markets but we do not anticipate a rapid return to pre-recession demand levels. Additionally, the timing of several open defense related program awards is
uncertain at this time. As a result of these uncertainties, we continue to focus on the further optimization of our manufacturing footprint and other cost reduction initiatives, free cash flow generation and maintaining adequate liquidity necessary
for our operations.

AGY Holding Corp. is a Delaware corporation and is a wholly-owned subsidiary of KAGY Holding Company,
Inc. (Holdings). Holdings acquired all of our outstanding stock in April 2006 (the Acquisition). Our principal executive office is located at 2556 Wagener Road, Aiken, South Carolina 29801 and our telephone number is
(888) 434-0945. Our website address is http://www.agy.com.

Basis of Presentation

The accompanying financial data has been prepared by us pursuant to the rules and regulations of the U.S. Securities and Exchange
Commission (SEC) and is in conformity with U.S. generally accepted accounting principles (GAAP). Our fiscal year end is December 31. Unless otherwise stated, all years and dates refer to our fiscal year.

Management is responsible for the fair presentation of the accompanying Consolidated Financial Statements, prepared in accordance with
GAAP, and has full responsibility for their integrity and accuracy. In the opinion of management, the accompanying Consolidated Financial Statements contain all adjustments necessary to present fairly our consolidated balance sheet, statement of
operations, statement of cash flows and statement of changes in shareholders equity for all periods presented.

Impact of the
Acquisition as of April 7, 2006

On April 7, 2006, our Company was acquired by Holdings pursuant to the terms of
an agreement of merger dated February 23, 2006 (the Acquisition). In the Acquisition, all issued and outstanding shares of our common stock were converted into the right to receive cash. Total merger consideration was approximately
$271 million (approximately $275.5 million including acquisition related costs and adjustments).

As a result of the
Acquisition, Holdings was required to apply purchase accounting to its financial statements. As a result, Holdings allocated the purchase price to the assets acquired and liabilities assumed based on their estimated fair values at the date of the
acquisition. Accordingly, our assets and liabilities have been recorded at their fair value as of April 7, 2006. All of the purchase accounting adjustments at Holdings have been pushed down to the financial statements of the Company. The excess
of the total purchase price over the fair value of our tangible and identifiable intangible assets of approximately $85 million was allocated to goodwill, which was written off during 2009 as a result of lower than expected operating profit and cash
flows and short-to-mid-term



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business outlook associated with the global economic environment, which triggered the reassessment of the recoverability of this goodwill. We also increased our aggregate outstanding
indebtedness. Accordingly, interest expense is significantly higher in successor periods following the Acquisition than in predecessor periods prior to the Acquisition.

2007 Continuous Filament Mat Business Combination

In October 2007, the
Company acquired the North American Continuous Filament Mat business (CFM) of Owens Corning North America (OC) for an initial price of approximately $7.3 million (including acquisition-related costs of $0.8 million). The
acquired assets included certain inventories and equipment located in AGYs Huntingdon, PA facility and marble furnace assets located in Anderson, SC. Subsequently, under the terms of the acquisition agreement, OC paid AGY $2.3 million in July
2008 as a result of the termination of the Anderson, SC land and building lease and of AGY vacating the premises in June 2008. The amount paid to the Company by OC reduced the CFM acquisition cost, first eliminating the goodwill and then reducing
the value of the acquired property, plant, and equipment.

The CFM business is operated and managed as part of the AGY US
segment.

2009 Chinese Business Combination

On June 10, 2009, pursuant to the terms of the Sale and Purchase Agreement dated March 12, 2009, by and among AGY Cayman, Grace Technology Investment Co., Ltd., and Grace THW Holding Limited
(together, Grace), AGY Cayman, a company incorporated in the Cayman Islands and a wholly-owned subsidiary of the Company, completed its acquisition of 70% of the outstanding shares of Main Union Industrial Ltd. (renamed AGY Hong Kong
Ltd.), a company incorporated in the Peoples Republic of China (PRC or China) and previously a wholly-owned subsidiary of Grace Technology Investment Co., Ltd., a company incorporated in the British Virgin Islands and a
wholly-owned subsidiary of Grace THW Holding Limited. AGY Hong Kong Ltd. owns 100% controlling interest in Shanghai Grace Technology Co., Ltd. (renamed AGY Shanghai Technology Co., Ltd.), a company incorporated in China, which is also a glassfiber
yarns manufacturer. The acquired business is operated and managed as part of the AGY Asia segment and expands AGYs geographic, manufacturing, and servicing capabilities in the Asia-Pacific region relative to the electronics and industrial
end-markets.

The Company paid $20 million in cash for a 70% controlling interest in Main Union Industrial Ltd. and its
subsidiaries (AGY Asia) and financed this consideration through the investment of additional equity by the Companys private equity sponsors.

The details of this business combination, accounted for under the purchase method of accounting, the allocation of the purchase price that resulted in the recognition of a $20.4 million of gain on bargain
purchase and the impact of AGY Asia, which has been included in our Consolidated Financial Statements since its June 10, 2009 acquisition, and the related put/call option agreement in respect of the 30% noncontrolling interest are presented in
Note 3 to the accompanying Consolidated Financial Statements for the year ended December 31, 2010.

CRITICAL ACCOUNTING POLICIES

Our Consolidated Financial Statements have been prepared in accordance with GAAP. In preparing our financial statements,
we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses included in the financial statements. Estimates are based on historical experience and other information then currently
available, the results of which form the basis of such estimates. While we believe our estimation processes are reasonable, actual results could differ from our estimates. The following describes the estimates considered most critical to our
operating performance and involve the most subjective and complex assumptions and assessments.

Revenue
recognition. We recognize revenue when title and risk of loss pass to the customer. Most of our revenues are recognized upon shipment to customers or upon usage notification for customers on consignment. Provisions for discounts and rebates
to customers, returns and other adjustments are provided in the same period that the related sales are recorded and are based on historical experience, current conditions and contractual obligations, as applicable. We perform ongoing credit
evaluations of our customers financial condition and establish an allowance for losses on trade receivables based upon factors surrounding the credit risk of specific customers, historical trends and other information.

Alloy metals. Alloy metals are the primary component of the heat-resistant, glass-forming bushings in our glass-melting
furnaces. Molten glass is passed through the bushings to form glass filaments. In addition, alloy metals are an integral part of our installed glass-melting furnaces and therefore are classified as property, plant and equipment on the balance sheet.
During the manufacturing process, a small portion of the alloy metal is physically consumed. The portion of the alloy metal physically consumed is measured at the time a bushing is reconditioned and is charged to income. This expense is recorded net
of the metal that is recovered periodically after some special treatment. The amount of metal loss and the service life of the bushings are dependent upon a number of factors, including the type of furnace and the product being produced. Our alloy
depletion expense net of the recoveries is disclosed in Selected Financial Data and as a component of Cost of Good Sold in the Consolidated Financial Statements.



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Goodwill and intangible assets with indefinite lives. We account for goodwill
and other intangible assets in accordance with the provisions of ASC 350, Intangibles  Goodwill and Others. Goodwill and intangible assets with indefinite lives are not amortized, but instead are subject to annual impairment testing
conducted each year as of October 31. The goodwill asset impairment test involves comparing the fair value of a reporting unit to its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, a second step comparing
the implied fair value of the reporting units goodwill to the carrying amount of that goodwill is required to measure the potential goodwill impairment loss. Interim tests may be required if an event occurs or circumstances change that would
more likely than not reduce the fair value of a reporting unit below its carrying amount. As defined in ASC 350-20-35, a reporting unit is an operating segment, or one level below an operating segment. Until our Chinese business combination in June
2009, we determined that we operated as one operating segment and one reporting unit. Since our Chinese business combination in June 2009, we determined that our Company operates as two reportable units consisting of AGY US and AGY Asia, each a
separate operating segment, as discussed in the Segment Information footnote to the Consolidated Financial Statements. As there are no reporting units below the operating segment level, the reportable units are the level at which the Company tests
for goodwill impairment.

All of our goodwill and other intangible assets with indefinite lives relate to AGY US, and
accordingly, the test for impairment is based on the fair value of the AGY US reporting unit. To determine the estimated fair value of the reportable segment, the Company, with the assistance of a third-party specialist, uses both a market valuation
and income valuation approach. The market valuation approach uses prices and other relevant information generated by market transactions involving comparable businesses. The income valuation approach uses valuation techniques such as discounted
future cash flows analysis. Specific assumptions are updated at the date of each test to consider current industry and Company-specific performance and risk factors from the perspective of a market participant. While the Company believes it has made
reasonable estimates and assumptions to calculate the fair value of the reporting unit, it is possible a material change could occur.

As discussed in Note 7 to the accompanying Consolidated Financial Statements for the year ended December 31, 2010, the Company performed its impairment testing of goodwill during the second and
fourth quarters of 2009. The Company concluded with the assistance of independent third-party valuation specialists that the goodwill associated with the AGY US segment was fully impaired as of October 31, 2009 and we recognized non-cash,
pre-tax goodwill impairment charges of $44,466 and $40,526, respectively, in the second and fourth quarters of 2009, classified as a charge against loss from operations.

Our intangibles with indefinite lives (trademarks) are subject to at least annual impairment testing, which compares their fair value
with their carrying amount. The results of these assessments did not indicate any impairment to these intangible assets for the years presented. As of December 31, 2010 the fair value of the trademarks exceeded their carrying value by 18%.

We continually monitor and evaluate current business performance and our business outlook in determining whether there are
events or circumstances requiring us to re-evaluate intangible assets with indefinite lives for impairment. Significant changes in demand levels within the Companys respective markets, changes in production costs including raw materials, metal
alloy, energy and direct labor, may have a material impact on the results of future valuations, and if adverse, could cause us to recognize additional impairment.

Impairment of long-lived assets, including definite-lived intangible assets.Pursuant to ASC 360-10, we evaluate our long-lived assets, including our tangible assets consisting of property
plant, and equipment, and alloy metals (which are an integral part of our installed glass-melting furnaces) and our definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that its carrying amount may
not be recoverable. A significant decrease in the spot market price of alloy precious metals is one of the factors we consider in determining the need to test this asset group for recoverability. However, we also take into account that the market
price of the precious metals may be volatile over short periods of time. Accordingly, changes in the market price of alloy precious metals may not trigger impairment assessment because such changes may not significantly impact future cash flows
expected from the use of the alloy metals on an ongoing basis.

An impairment loss is recognized when estimated undiscounted
future cash flows expected to result from the use of the asset, plus net proceeds expected from the disposition of the asset (if any), are less than the related assets carrying amount. Estimating future cash flows requires us to make judgments
regarding future economic conditions, product demand, and pricing. Although we believe our estimates are appropriate, significant differences in the actual performance of the asset or group of assets may materially affect the Companys asset
values and results of operations.

As a result of the first step of the annual goodwill impairment evaluation on
October 31, 2009 for the AGY US reporting segment, we tested for impairment the remaining long-lived assets of this reporting segment. Based on our analysis, the total estimated cash flows of the long-lived assets group exceeded substantially
its carrying value, and no impairment charge was recognized in 2009.

Income taxes. We account for income taxes
under the asset and liability method approach established by ASC 740, Income Taxes. Deferred income tax assets and liabilities reflect tax net operating loss and credit carry-forwards and the tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting and income tax purposes. Deferred tax assets require a valuation allowance when it is more likely than not, based on the evaluation of positive and negative evidence, that some
portion of the deferred tax assets may not be realized. When events and circumstances so dictate, we evaluate whether our deferred tax assets are realizable and the need for a valuation allowance considering objective evidence such as reversal
of our existing



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deferred tax liabilities, and forecasts of future taxable income. Accounting standards require that uncertain tax positions be sustainable under regulatory review by tax authorities assumed
to have all relevant information. We recognize the largest amount of benefit that is more likely than not realizable upon settlement with tax authorities.

We consider our foreign earnings in AGY Europe SARL and in AGY Asia to be permanently invested and, accordingly, we did not provide for U.S. income taxes on the undistributed earnings of our foreign
subsidiaries.

Pension and Other Postretirement benefits.As discussed in Note 13 to the accompanying
Consolidated Financial Statements for the year ended December 31, 2010, we have a reimbursement obligation to OC under OCs defined benefit pension plan covering certain of our employees. We also have a postretirement benefit plan that
covers substantially all of our domestic employees. Accounting for pensions and other postretirement benefits involves estimating the cost of benefits to be provided well into the future and attributing that cost over the time period each employee
works. To accomplish this, we make extensive use of assumptions about discount rates, inflation, mortality, turnover and medical costs.



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RESULTS OF OPERATIONS

The following tables illustrate our results of operations in dollars and as a percentage of net sales for the years ended December 31, 2010, 2009 and 2008 (dollars in thousands):



|                                                                |  |                         |          |   |      |   |          |      |  |   |          |  
|--------------------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                |  | Year Ended December 31, |         
|                                                                |  | 2010                    |          |   | 2009 |   |          | 2008 | 
|Net Sales                                                       |  |                         |          |   |      |   |          |      |  |   |          |  
|AGY US                                                          |  | $                       | 158,501  |   |      | $ | 141,058  |      |  | $ | 236,487  |  
|AGY Asia                                                        |  |                         | 28,159   |   |      |   | 12,983   |      |  |   |         |  
|                                                                |  |                         |          |   |      |   |          |      |  |   |          |  
|                                                                |  |                         | 186,660  |   |      |   | 154,041  |      |  |   | 236,487  |  
|Intersegment sales                                              |  |                         | (2,986   | ) |      |   | (189     | )    |  |   |         |  
|                                                                |  |                         |          |   |      |   |          |      |  |   |          |  
|Total Net sales                                                 |  |                         | 183,674  |   |      |   | 153,852  |      |  |   | 236,487  |  
|Cost of goods sold                                              |  |                         | (168,932 | ) |      |   | (156,512 | )    |  |   | (190,154 | )
|                                                                |  |                         |          |   |      |   |          |      |  |   |          |  
|Gross profit (loss)                                             |  |                         | 14,742   |   |      |   | (2,660   | )    |  |   | 46,333   |  
|Selling, general and administrative expenses                    |  |                         | (15,823  | ) |      |   | (15,963  | )    |  |   | (20,237  | )
|Restructuring charges ring charges                              |  |                         | (2,658   | ) |      |   | (789     | )    |  |   |         |  
|Amortization of intangible assets                               |  |                         | (1,003   | ) |      |   | (1,003   | )    |  |   | (1,858   | )
|Goodwill impairment charge                                      |  |                         |         |   |      |   | 84,992   |      |  |   |         |  
|Other operating income (expense), net                           |  |                         | 6,415    |   |      |   | (791     | )    |  |   | 208      |  
|                                                                |  |                         |          |   |      |   |          |      |  |   |          |  
|Income (loss) from the operations                               |  |                         | 1,673    |   |      |   | (106,198 | )    |  |   | 24,446   |  
|Gain on bargain purchase                                        |  |                         |         |   |      |   | 20,376   |      |  |   |         |  
|Other non-operating income, net                                 |  |                         | 186      |   |      |   | 1,466    |      |  |   | 79       |  
|Interest expense                                                |  |                         | (22,782  | ) |      |   | (22,235  | )    |  |   | (23,086  | )
|                                                                |  |                         |          |   |      |   |          |      |  |   |          |  
|(Loss) income before income taxes                               |  |                         | (20,923  | ) |      |   | (106,591 | )    |  |   | 1,439    |  
|Income tax benefit (expense)                                    |  |                         | 6,346    |   |      |   | 13,079   |      |  |   | (1,269   | )
|                                                                |  |                         |          |   |      |   |          |      |  |   |          |  
|Net (loss) income                                               |  |                         | (14,577  | ) |      |   | (93,512  | )    |  |   | 170      |  
|Less: Net (income) loss attributable to noncontrolling interest |  |                         | (1,545   | ) |      |   | 1,119    |      |  |   |         |  
|                                                                |  |                         |          |   |      |   |          |      |  |   |          |  
|Net (loss) income attributable to AGY Holding Corp.             |  | $                       | (16,122  | ) |      | $ | (92,393  | )    |  | $ | 170      |  
|                                                                |  |                         |          |   |      |   |          |      |  |   |          |  
|Net Sales                                                       |  |                         |          |   |      |   |          |      |  |   |          |  
|AGY US                                                          |  |                         | 86.3     | % |      |   | 91.7     | %    |  |   | 100.0    | %
|AGY Asia                                                        |  |                         | 15.3     |   |      |   | 8.4      |      |  |   |         |  
|                                                                |  |                         |          |   |      |   |          |      |  |   |          |  
|                                                                |  |                         | 101.6    |   |      |   | 100.1    |      |  |   | 100.0    |  
|Intersegment sales                                              |  |                         | (1.6     | ) |      |   | (0.1     | )    |  |   |         |  
|                                                                |  |                         |          |   |      |   |          |      |  |   |          |  
|Total Net sales                                                 |  |                         | 100.0    |   |      |   | 100.0    |      |  |   | 100.0    |  
|Cost of goods sold                                              |  |                         | (92.0    | ) |      |   | (101.7   | )    |  |   | (80.4    | )
|                                                                |  |                         |          |   |      |   |          |      |  |   |          |  
|Gross profit                                                    |  |                         | 8.0      |   |      |   | (1.7     | )    |  |   | 19.6     |  
|Selling, general and administrative expenses                    |  |                         | (8.6     | ) |      |   | (10.4    | )    |  |   | (8.6     | )
|Restructuring charges                                           |  |                         | (1.4     | ) |      |   | (0.5     | )    |  |   |         |  
|Amortization of intangible assets                               |  |                         | (0.6     | ) |      |   | (0.7     | )    |  |   | (0.8     | )
|Goodwill impairment charge                                      |  |                         |         |   |      |   | (55.2    | )    |  |   |         |  
|Other operating income (expense), net                           |  |                         | 3.5      |   |      |   | (0.5     | )    |  |   | 0.1      |  
|                                                                |  |                         |          |   |      |   |          |      |  |   |          |  
|Income (loss) from the operations                               |  |                         | 0.9      |   |      |   | (69.0    | )    |  |   | 10.3     |  
|Gain on bargain purchase                                        |  |                         |         |   |      |   | 13.2     |      |  |   |         |  
|Other non-operating income, net                                 |  |                         | 0.1      |   |      |   | 1.0      |      |  |   | 0.1      |  
|Interest expense                                                |  |                         | (12.4    | ) |      |   | (14.5    | )    |  |   | (9.8     | )
|                                                                |  |                         |          |   |      |   |          |      |  |   |          |  
|(Loss) income before income taxes                               |  |                         | (11.4    | ) |      |   | (69.3    | )    |  |   | 0.6      |  
|Income tax benefit                                              |  |                         | 3.4      |   |      |   | 8.5      |      |  |   | (0.5     | )
|                                                                |  |                         |          |   |      |   |          |      |  |   |          |  
|Net (loss) income                                               |  |                         | (8.0     | ) |      |   | (60.8    | )    |  |   | 0.1      |  
|Less: Net (income) loss attributable to noncontrolling interest |  |                         | (0.8     | ) |      |   | 0.7      |      |  |   |         |  
|                                                                |  |                         |          |   |      |   |          |      |  |   |          |  
|Net (loss) income attributable to AGY Holding Corp.             |  |                         | (8.8     | ) |      |   | (60.1    | )    |  |   | 0.1      |  
|                                                                |  |                         |          |   |      |   |          |      |  |   |          |  

As further discussed below, we use EBITDA and Adjusted EBITDA, which are non-GAAP financial measures, to measure our
financial performance.



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EBITDA and Adjusted EBITDA (which are defined below) are reconciled from net income (loss) determined under
GAAP as follows (dollars in thousands):



|                                                                    |  |                         |         |   |      |   |         |      |  |   |        |  
|------------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------ | -
|                                                                    |  | Year Ended December 31, |        
|                                                                    |  | 2010                    |         |   | 2009 |   |         | 2008 | 
|Statement of operations data:                                       |  |                         |         |   |      |   |         |      |  |   |        |  
|Net (loss) income                                                   |  | $                       | (14,577 | ) |      | $ | (93,512 | )    |  | $ | 170    |  
|Interest expense                                                    |  |                         | 22,782  |   |      |   | 22,235  |      |  |   | 23,086 |  
|Income tax (benefit) expense                                        |  |                         | (6,346  | ) |      |   | (13,079 | )    |  |   | 1,269  |  
|Depreciation and amortization                                       |  |                         | 19,649  |   |      |   | 13,611  |      |  |   | 12,702 |  
|                                                                    |  |                         |         |   |      |   |         |      |  |   |        |  
|EBITDA                                                              |  | $                       | 21,508  |   |      | $ | (70,745 | )    |  | $ | 37,227 |  
|                                                                    |  |                         |         |   |      |   |         |      |  |   |        |  
|                                                                    | 
|                                                                    |  | Year Ended December 31, |        
|                                                                    |  | 2010                    |         |   | 2009 |   |         | 2008 | 
|EBITDA                                                              |  | $                       | 21,508  |   |      | $ | (70,745 | )    |  | $ | 37,227 |  
|Adjustments to EBITDA:                                              |  |                         |         |   |      |   |         |      |  |   |        |  
|Alloy depletion charge, net (a)                                     |  |                         | 8,103   |   |      |   | 6,733   |      |  |   | 12,373 |  
|Non-cash compensation charges (b)                                   |  |                         | 43      |   |      |   | 415     |      |  |   | 1,627  |  
|Acquisition- related costs expensed in accordance with ASC 805 (c)  |  |                         |        |   |      |   | 2,544   |      |  |   |       |  
|Gain on early extinguishment of debt (d)                            |  |                         |        |   |      |   | (1,138  | )    |  |   |       |  
|Restructuring charges (e)                                           |  |                         | 2,658   |   |      |   | 789     |      |  |   |       |  
|Cost associated with the exit of the Anderson facility (f)          |  |                         |        |   |      |   |        |      |  |   | 640    |  
|Management fees (g)                                                 |  |                         | 750     |   |      |   | 750     |      |  |   | 750    |  
|Goodwill impairment charge (h)                                      |  |                         |        |   |      |   | 84,992  |      |  |   |       |  
|Gain on bargain purchase (i)                                        |  |                         |        |   |      |   | (20,376 | )    |  |   |       |  
|Gain from contract termination (j)                                  |  |                         | (6,276  | ) |      |   |        |      |  |   |       |  
|Loss (gain) on disposition of assets and others (k)                 |  |                         | 258     |   |      |   | (1,191  | )    |  |   | (816   | )
|                                                                    |  |                         |         |   |      |   |         |      |  |   |        |  
|Adjusted EBITDA                                                     |  |                         | 27,044  |   |      |   | 2,773   |      |  |   | 51,801 |  
|Less: Adjusted EBITDA attributable to the noncontrolling interest   |  |                         | (2,171  | ) |      |   | (317    | )    |  |   |       |  
|                                                                    |  |                         |         |   |      |   |         |      |  |   |        |  
|Adjusted EBITDA attributable to AGY Holding Corp                    |  | $                       | 24,873  |   |      | $ | 2,456   |      |  | $ | 51,801 |  
|                                                                    |  |                         |         |   |      |   |         |      |  |   |        |  
|                                                                    | 
|                                                                    |  | Year Ended December 31, |        
|                                                                    |  | 2010                    |         |   | 2009 |   |         | 2008 | 
|Adjusted EBITDA attributable to AGY Holding Corp. segment breakdown |  |                         |         |   |      |   |         |      |  |   |        |  
|AGY US and Corporate                                                |  |                         | 19,808  |   |      |   | 1,716   |      |  |   | 51,801 |  
|AGY Asia                                                            |  |                         | 5,065   |   |      |   | 740     |      |  |   |       |  
|                                                                    |  |                         |         |   |      |   |         |      |  |   |        |  
|                                                                    |  | $                       | 24,873  |   |      | $ | 2,456   |      |  | $ | 51,801 |  
|                                                                    |  |                         |         |   |      |   |         |      |  |   |        |  



|(a) | We purchase or lease alloy metals that are used in our manufacturing process. During the manufacturing process a small portion of the alloy metal is physically
consumed. When the metal is actually consumed we recognize a non-cash charge. This expense is recorded net of the amount of metal that can be recovered after some specific treatment and net of charges associated which such recovery treatment.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | Reflects the non-cash compensation expenses related to awards under Holdings 2006 Stock Option Plan and Holdings Restricted Stock granted to certain members
of management.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | Reflects the elimination of the transactional costs associated with AGY Asia business combination that was consummated on June 10, 2009. Costs incurred and
deferred at December 31, 2008 of $1,098 were expensed in 2009 as a result of adopting the provisions of ASC 805; the remainder of $1,627 constitutes incremental acquisition-related costs incurred and expensed in 2009.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|(d) | Reflects the elimination of the net gain on early extinguishment of debt associated with the $3,000 (face value) 11% senior second lien notes due 2014 (the
Notes) repurchase made by the Company in February 2009.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(e) | Reflects the elimination of the restructuring charges associated with reductions in our salaried workforce in 2009 and primarily to the relocation of some manufacturing
equipment in 2010 to reduce our cost structure, streamline processes and optimize the AGY US manufacturing footprint.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(f) | Reflects the elimination of the costs associated with the termination of the Anderson land and building lease and manufacturing services agreements that continued to be
incurred from the date of the premature failure of the Anderson furnace to June 30, 2008 without economic benefit for the Company.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(g) | Reflects the elimination of the annual management fee payable to our Sponsor, Kohlberg & Company, LLC, pursuant to the management agreement entered into
in connection with the Acquisition.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(h) | Reflects the elimination of the charges associated with the impairment of the goodwill related to the AGY US segment, which was recognized in 2009.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------

|(i) | Reflects the elimination of the gain on bargain purchase associated with AGY Asia business combination.
|--- | -------------------------------------------------------------------------------------------------------

|(j) | Reflects the elimination of the gain from contract termination associated with the termination for breaches of covenants of a supply agreement entered into by AGY Asia
in 2009 at the time of the acquisition.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(k) | Reflects primarily the elimination of the gain (loss) recorded versus historical book value on the sale or exchange of some non-operating assets.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------

EBITDA is defined as earnings before interest, taxes, depreciation and amortization. EBITDA is a measure used
by management to measure operating performance. EBITDA is not a recognized term under GAAP and does not purport to be an alternative (a) to net income as a measure of operating performance or (b) to cash flows from operating activities as
a measure of liquidity. Additionally, EBITDA is not intended to be a measure of free cash flow available for managements discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt
service requirements. Management believes EBITDA is helpful in highlighting trends because EBITDA excludes the results of decisions that are outside the control of operating management and can differ significantly from company to company depending
on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate and capital investments. In addition, management believes that EBITDA provides more comparability between our historical results and our
recent results that reflect purchase accounting and changes in our capital structure. Management compensates for the limitations of using non-GAAP financial measures by using them to supplement GAAP results to provide a more complete understanding
of the factors and trends affecting the business than GAAP results alone. Because not all companies use identical calculations, these presentations of EBITDA may not be comparable to other similarly titled measures of other companies.

Adjusted EBITDA is a non-GAAP financial measure which is defined as EBITDA further adjusted to exclude unusual items and other
adjustments permitted in calculating covenant compliance and calculated in the same manner as Consolidated Cash Flow under the indenture governing our Notes, which is used by management in calculating our fixed charge coverage ratio
under the indenture governing our Notes. We believe that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA is appropriate to provide additional information to investors.

Year ended December 31, 2010 compared to year ended December 31, 2009

Net sales. Net sales increased $29.8 million, or 19.3%, to $183.7 million for the year ended December 31, 2010, compared to $153.9 million during the comparable
period of 2009. AGY Asia, which was acquired in June 2009, contributed $12.4 million of additional revenue (after accounting for the elimination of $2.8 million of increased intercompany sales) of which approximately $3.6 million is due to the
stronger Asian electronics demand and favorable pricing in 2010. The remaining $17.4 million, or 12.4%, net increase in sales generated by AGY US for the year ended December 31, 2010, compared to the same period of 2009 was primarily due to
$22.9 million of higher sales volumes, while an unfavorable product mix and competitive pricing pressures accounted for a decrease in sales of $5.5 million. We experienced increased demand in all the markets that we serve except defense. These
increases resulted primarily from the return to more normal historical inventory levels for several of our customers. Market and global economic conditions stabilized and steadily improved over the bottom experienced during the second quarter of
2009. Aerospace sales increased by $8.6 million compared to the year ended December 31, 2009 and returned to 2008 average demand levels, reflecting increases in both aircraft retrofit and new build activity and some inventory restocking in the
supply chain in early 2010. The electronics, industrial and construction market revenues of the U.S operating segment increased approximately $0.8 million, $14.3 million and $3.5 million, respectively, compared to the same period in 2009. Defense
revenue decreased $9.8 million during the year ended December 31, 2010, compared to the same period of 2009 as the result of the conclusion of the Mine Resistant Ambush Protected (MRAP) program during the first quarter of 2009 and
competitive pricing pressures.



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Gross profit/ loss. We reported a consolidated gross profit of $14.7 million, or 8% of
net sales for the year ended December 31, 2010, compared to a negative gross margin of $2.7 million for the year ended December 31, 2009. While AGY Asia contributed $4.6 million of the improvement, our AGY US segment drove the remaining
increase in profitability of $12.8 million for the year ended December 31, 2010. The profitability of our AGY US segment benefited from $9.1 million of margin on increased sales but was negatively impacted $4.0 million from competitive pricing
pressure in certain markets. Additionally, the AGY US segment results were positively impacted in 2010 by improved manufacturing efficiencies, cost reduction initiatives and higher absorption of overhead costs, partially offset by $4.1 million of
accelerated depreciation related to the optimization of our U.S. manufacturing footprint. In 2009, the AGY US segment results were negatively impacted by expenses associated with managements decision to curtail production capacity and lower
inventory levels in order to improve liquidity.

Selling, general and administrative expenses.Selling, general and
administrative costs decreased $0.2 million from $16.0 million for the year ended December 31, 2009 to $15.8 million for the year ended December 31, 2010. The $1.0 million of incremental expenses associated with the AGY Asia acquisition in
2010 compared to 2009 were offset by $1.2 million of lower expenses for our AGY US operating segment including a reduction in salaried workforce during 2009 and lower stock compensation charges during 2010. Selling, general and administrative costs
decreased from 10.4% of net sales for the year ended December 31, 2009 to 8.6% of net sales for the year ended December 31, 2010.

Restructuring charges. In conjunction with additional actions taken in 2010 to further optimize the AGY US manufacturing footprint and
improve profitability, we recorded $2.7 million in restructuring charges in the year ended December 31, 2010 that related primarily to the relocation of manufacturing equipment. For the year ended December 31, 2009, we recorded $0.8
million in restructuring charges in the AGY US segment, primarily related to severance and outplacement costs for headcount reductions in connection with our structural cost-reduction initiatives. See further disclosures in Note 8 to the
accompanying Consolidated Financial Statements for the year ended December 31, 2010.

Other operating income.During the
year ended December 31, 2010, other operating income of $6.4 million consisted primarily of a $6.3 million gain from the termination by AGY Asia, for breaches of covenants, of a supply agreement entered into in 2009 at the time of the
acquisition. During the year ended December 31, 2009, other operating expense of $0.8 million was primarily due to $2.6 million of AGY Asia acquisition-related costs, including $1.1 million of costs incurred and deferred at December 31,
2008 that were subsequently expensed on January 1, 2009 as a result of adopting ASC 805. These costs were partially offset by a $1.2 million gain recognized on the sale of alloy metals in 2009.

Goodwill impairment charge.During 2009, the Company concluded that all goodwill was fully impaired and recognized non-cash, pre-tax
goodwill impairment charges of $85.0 million, classified in loss from operations. See further disclosures in Note 7 to the Consolidated Financial Statements for the year ended December 31, 2009 in our Annual Report on Form 10-K for
the year ended December 31, 2009 (our 2009 Form 10-K).

Gain on bargain purchase. Management concluded, with
the assistance of an independent third-party valuation specialist, that the fair value of the acquired assets exceeded the liabilities assumed associated with the AGY Asia acquisition, and that a bargain purchase of approximately $20.4 million
resulted at the June 10, 2009 acquisition date. See further disclosures in Note 3 to the accompanying Consolidated Financial Statements for the year ended December 31, 2010.

Other non-operating income.During the year ended December 31, 2010, other non-operating income of $0.15 million was not significant.
During the year ended December 31, 2009, other non-operating income of $1.5 million consisted primarily of the net $1.1 million gain on the early extinguishment of debt associated with the purchase of $3 million (face value) of our Notes.

Interest expense. Interest expense increased $0.6 million from $22.2 million for the year ended December 31, 2009 to
$22.8 million for the year ended December 31, 2010. The increase was primarily due to incremental interest expense associated with the AGY Asia acquisition.

Income tax benefit (expense). Income tax benefit decreased $6.8 million from $13.1 million tax benefit for the year ended December 31, 2009 to a $6.3 million tax benefit for the
year ended December 31, 2010. During the year ended December 31, 2010, our effective tax rate was a benefit of 30.3%. This rate varied from the statutory rate of 34% due primarily to establishment of valuation allowance during 2010 for
domestic deferred tax assets, which are not more-likely-than-not to be realized. Other notable effects were the change in foreign valuation allowance, losses on domestic and foreign subsidiaries with no tax benefit, and foreign rate differential,
which benefits were partially offset by state taxes. Generally, the Company can recognize deferred tax assets for the losses incurred until such time that the aggregate deferred tax assets exceed aggregate deferred tax liabilities that do not relate
to assets with an indefinite useful life. During the year ended December 31, 2009, our effective tax rate was a benefit of 12.3%. This rate varied from the statutory rate of 34% due primarily to the goodwill impairment charge not deductible for
tax, a nontaxable gain in connection with the bargain purchase related to the AGY Asia acquisition, and transactional costs associated with the AGY Asia acquisition that were expensed during 2009 but not deductible for tax, which benefits were
partially offset by state taxes.

Net income (loss).As a result of the aforementioned factors including primarily
restructuring and accelerated depreciation charges for the AGY US segment and a gain on contract termination related to AGY Asia in 2010 and significant non-recurring non cash net charges (goodwill impairment charge; gain on bargain purchase) in
2009, we reported a net loss attributable to AGY of $16.1 million for the year ended December 31, 2010, compared to a net loss of $92.4 million for the year ended December 31, 2009. The net loss



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attributable to the 30% noncontrolling interest in AGY Asia from the acquisition date in June 2009 to December 31, 2009 was $1.1 million compared to net income of $1.5 million for the year
ended December 31, 2010.

Year ended December 31, 2009 compared to year ended December 31, 2008

Net sales. Net sales decreased $82.6 million, or 35%, to $153.9 million for year ended December 31, 2009, compared to $236.5
million during the comparable period of 2008. This decrease is primarily due to lower demand across all business segments resulting from the global economic downturn and lower inventory levels held by several of our customers, partly offset by the
impact of AGY Asia, which contributed $13.0 million of incremental revenue since the acquisition date on June 10, 2009. The 40.4% decrease in revenue generated by our AGY US operating segment was primarily due to $82.6 million of lower volumes,
while an unfavorable product mix accounted for $12.9 million of the decrease in year-over-year revenue. The electronics, construction and industrial market revenues of the U.S operating segment were down approximately $17.8 million, $14.0 million,
and $20.6 million, respectively, compared to the same period in 2008, as a result of soft market conditions. Aerospace sales decreased by $9.3 million compared to the year ended December 31, 2008 reflecting softer demand, lower inventory levels
in the supply chain, and decreased aircraft retrofit activity. Defense revenue decreased $33.8 million in the year ended December 31, 2009, compared to the same period of 2008 as the result of the conclusion of the MRAP program during the first
quarter of 2009.

Gross profit/ loss. We reported a consolidated gross loss of $2.7 million for the year ended
December 31, 2009, compared to a gross profit of $46.3 million for the year ended December 31, 2008. The gross loss reported for the year ended December 31, 2009 was driven largely by our AGY US operating segment, which was negatively
impacted by $35.8 million of lost margin on lower sales and a $7.0 million impact associated with an unfavorable product mix associated with lower shipments to defense and aerospace markets. Additionally, the AGY US segment results were negatively
impacted by approximately $15.3 million of expenses including the under-absorption of overhead costs and lower manufacturing efficiencies associated with managements decision to curtail production capacity and lower inventory levels. These
negative variances were partially offset by $8.4 million of cost reduction initiatives including the curtailment of discretionary spending, primary workforce furloughs and salaried headcount reductions.

Selling, general and administrative expenses. Selling, general and administrative costs decreased from $20.2 million during the year
ended December 31, 2008 to $16.0 million during the year ended December 31, 2009. This decrease reflects (i) $5.8 million of lower expenses for our AGY US operating segment including a reduction in the salaried workforce, a $2.0
million lower variable compensation expense as no bonuses were paid for 2009, and lower discretionary spending, partially offset by (ii) $1.6 million of incremental expenses associated with AGY Asia since the acquisition on June 10, 2009.
As a result of the decrease in revenue, selling, general and administrative costs increased from 8.6% of net sales for the year ended December 31, 2008 to 10.4% of net sales for the year ended December 31, 2009.

Restructuring charges. For the year ended December 31, 2009, we recognized $0.8 million in restructuring charges in the AGY US
segment, primarily related to severance and outplacement costs for headcount reductions in connection with our structural cost-reduction initiatives.

Amortization of intangible assets. Amortization of other intangible assets decreased $0.9 million to $1.0 million during the year ended December 31, 2009, when compared to the year
ended December 31, 2008. This decrease was primarily attributable to the expiration of a non-compete covenant on December 31, 2008.

Goodwill impairment charge.Lower than expected operating profit and cash flows and short-to-mid-term business outlook associated with the
global economic environment triggered management to reassess in 2009 the recoverability of the goodwill associated with the purchase of AGY by Holdings in April 2006. Accordingly, the Company concluded that the goodwill was fully impaired and
recognized a non-cash, pre-tax goodwill impairment charge of $85.0 million, classified in loss from operations in 2009. See further disclosures in Note 7 to the accompanying Consolidated Financial Statements for the year ended
December 31, 2009.

Gain on bargain purchase. Management concluded, with the assistance of an independent third-party
valuation specialist, that the fair value of the acquired assets exceeded the liabilities assumed associated with the AGY Asia acquisition, and that a bargain purchase of approximately $20.4 million resulted at the June 10, 2009 acquisition
date. The Company recognized the gain as a component of non-operating income for the year ended December 31, 2009. See further disclosures in Note 3 to the accompanying Consolidated Financial Statements for the year ended December 31,
2009.

Other non-operating income.During the year ended December 31, 2009, other non-operating income of $1.5 million
consisted primarily of the net $1.1 million gain on the early extinguishment of debt associated with the purchase of $3 million (face value) of our Notes. During the year ended December 31, 2008, other non-operating expense was non significant.

Interest expense. Interest expense decreased $0.9 million from $23.1 million for the year ended December 31, 2008 to
$22.2 million for the year ended December 31, 2009. The decrease was primarily due to (i) $2.2 million of non-recurring fees and expenses incurred in 2008 related to bondholders consent solicitation for our Metal Consignment Facility
amendment and the Companys S-4 Registration Statement, (ii) a $0.3 million reduction in interest expense on our Notes as a result of the $3 million (face value) Notes extinguishment in 2009 partially offset by (iii) $1.7 million of
incremental interest expense associated with AGY Asia since the acquisition date on June 10, 2009.



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Income tax benefit (expense). Income tax benefit increased $14.4 million from $1.3
million tax expense for the year ended December 31, 2008 to a $13.1 million tax benefit for the year ended December 31, 2009 due to the higher pre-tax loss recognized in 2009. In addition, the effective tax rate decreased from 88.2% for
the year ended December 31, 2008 to 12.3% for the year ended December 31, 2009 primarily as a result of (i) the $85.0 million goodwill impairment charge recognized in 2009 that is not tax deductible, (ii) the $20.4 million gain
on bargain purchase associated with the AGY Asia acquisition recognized in 2009, which is not recognized as taxable income, and (iii) the non-recurring change in the rate for deferred taxes and the non-recurring adjustments of prior-year items
that primarily explained the 2008 effective tax rate.

Net income (loss).As a result of the aforementioned factors, we
reported a net loss attributable to AGY of $92.4 million for the year ended December 31, 2009, compared to net income of $0.2 million for the year ended December 31, 2008. The net loss attributable to the 30% noncontrolling interest in AGY
Asia from the acquisition date in June 2009 to December 31, 2009 was $1.1 million.

LIQUIDITY AND CAPITAL RESOURCES

AGY Holding Corp. and its Domestic Subsidiaries Liquidity

In 2010 our principal sources of domestic liquidity were borrowings under our financing arrangements, proceeds from monetization of our excess alloy metals and our cash on hand. Our domestic need for
liquidity will arise primarily from interest payments on the outstanding $172.0 million principal amount of our Notes, interest and principal payments on our senior secured revolving credit facility (Credit Facility), the funding of
capital expenditures, alloy metals, strategic initiatives, normal recurring operating expenses and working capital requirements and the financing of the consideration to be paid pursuant to the put/call agreement for our 30% noncontrolling interest
in AGY Asia not owed by us.

As of December 31, 2010, we had total liquidity of $17.7 million, consisting of $0.6 million
in unrestricted cash and approximately $17.1 million of borrowing availability under the Credit Facility.

On March 8,
2011, we consummated an amendment to our revolving credit facility (Amended Credit Facility), which provides for an expanded facility of $50 million compared to the previous commitment of $40 million. The facility matures on the earlier
of March 8, 2015 or August 15, 2014 if our Notes are not refinanced prior to that date. As of the closing date, the Company had issued letters of credit totaling $2.4 million and had cash borrowings of $24.8 million outstanding under the
Amended Credit Facility and had total undrawn availability of $21.1 million.

There are no mandatory payments of principal on
the Amended Credit Facility and on the Notes scheduled prior to their earliest maturity in August 2014 and November 2014, respectively.

AGY Asias Liquidity

Since acquisition, AGY Asias sources of liquidity have been borrowings under approximately $53.5 million of non-recourse financing arrangements with the Bank of Shanghai (AGY Asia Credit
Facility), which consists of a $12.0 million one-year working capital loan that matures in June 2011 and a $41.5 million five-year term loan that matures in June 2014. AGY Asias need for liquidity will arise primarily from interest and
principal payments on the AGY Asia Credit Facility and the funding of capital expenditures, alloy metals, strategic initiatives, normal recurring operating expenses and working capital requirements. There are semi-annual mandatory payments of
principal on the term loan borrowings, the amounts of which depend on the borrowings outstanding. At December 31, 2010, the mandatory payments of principal were approximately $8.3 million in 2011, $10.2 million in 2012, $10.7 million in 2013
and $4.2 million in 2014, respectively.

At December 31, 2010, AGY Asia had total liquidity of $7.6 million, consisting
of $2.6 million of unrestricted cash and approximately $5.0 million of borrowing availability under the AGY Asia Credit Facility.

Summary

Based
upon our current and anticipated levels of operations, we believe, but cannot guarantee, that our cash flows from operations together with availability under our credit facilities for the US and the Asia segments, will be adequate to meet our
liquidity needs for the next twelve months and the foreseeable future. However, this forward-looking statement is subject to risks and uncertainties. See Forward-Looking Statements and Item 1A. Risk Factors.

Working Capital

We
define working capital as total current assets, excluding unrestricted cash, less total current liabilities, including short-term borrowings and current portion of long-term debt. Working capital was $15.0 million and $15.3 million on
December 31, 2010 and December 31, 2009, respectively. The $0.3 million decrease relates primarily to a $2.8 million decrease in the working capital of AGY Asia due to increases in short-term borrowings and current maturities partly
reduced by a decrease in accrued liabilities stemming primarily from the termination of a supply agreement for breaches of covenants by the counterparty. This decrease was



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partially offset by a $2.4 million increase in the working capital of the AGY US operating unit, driven primarily by a $2.7 million decrease in accrued liabilities from the settlement and payment
of previously disputed property tax liabilities.

Contractual Obligations

In the ordinary course of business, the Company enters into contractual obligations to make cash payments to third parties. The
Companys known contractual obligations as of December 31, 2010 were as follows (in thousands):



|                                                          |  |                       |         |  |                 |   |        |           |  |   |           |  |  |                  |         |  |  |   |   | 
|--------------------------------------------------------- |  | --------------------- | ------- |  | --------------- | - | ------ | --------- |  | - | --------- |  |  | ---------------- | ------- |  |  | - | - | 
|                                                          |  | Payment due by period |        
|                                                          |  | Total                 |         |  | Less than1 year |   |        | 1-3 years |  |   | 4-5 years |  |  | More than5 years |        
|Short-term and long-term debt obligations                 |  | $                     | 233,205 |  |                 | $ | 36,182 |           |  | $ | 20,871    |  |  | $                | 176,152 |  |  | $ |  | 
|Operating lease obligations (1)                           |  |                       | 4,901   |  |                 |   | 1,114  |           |  |   | 2,132     |  |  |                  | 1,655   |  |  |   |  | 
|Unconditional purchase obligations (2)                    |  |                       | 1,052   |  |                 |   | 1,052  |           |  |   |          |  |  |                  |        |  |  |   |  | 
|Alloy lease obligations (3)                               |  |                       | 2,290   |  |                 |   | 2,290  |           |  |   |          |  |  |                  |        |  |  |   |  | 
|Interest on short-term and long-term debt obligations (4) |  |                       | 78,037  |  |                 |   | 21,419 |           |  |   | 39,979    |  |  |                  | 16,639  |  |  |   |  | 
|Letters of credit                                         |  |                       | 2,401   |  |                 |   | 2,401  |           |  |   |          |  |  |                  |        |  |  |   |  | 
|                                                          |  |                       |         |  |                 |   |        |           |  |   |           |  |  |                  |         |  |  |   |   | 
|Total                                                     |  | $                     | 321,885 |  |                 | $ | 64,458 |           |  | $ | 62,981    |  |  | $                | 194,446 |  |  | $ |  | 
|                                                          |  |                       |         |  |                 |   |        |           |  |   |           |  |  |                  |         |  |  |   |   | 



|(1) | Includes those leases, which have non-cancellable terms in excess of one year.
|--- | ------------------------------------------------------------------------------

|(2) | Purchase obligations are commitments to suppliers to purchase goods or services, and include take-or-pay arrangements, capital expenditures, and contractual commitments
to purchase equipment. We did not include ordinary course of business purchase orders in this amount as the majority of such purchase orders may be canceled and are reflected in historical operating cash flow trends. We do not believe such purchase
orders will adversely affect our liquidity position.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes future minimum rentals of leased alloy metals.
|--- | -------------------------------------------------------

|(4) | Interest on variable rate debt is calculated using the weighted-average interest rate in effect as of December 31, 2010 for all future periods.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------

The table also does not include future estimated benefits payments for pension and other post-retirement benefit obligations
and the put obligation related to the noncontrolling interest in AGY Asia, which are included in Notes 13 and 20, respectively, to the 2010 Consolidated Financial Statements.

Year ended December 31, 2010 compared to year ended December 31, 2009

Cash
flows from operating activities

Cash used by operating activities was $4.1 million for the year ended December 31,
2010, compared to cash used by operating activities of $11.1 million for the year ended December 31, 2009. The $7.0 million decrease in cash used by operating activities during the year ended December 31, 2010 as compared to the prior year
is attributed to a $23.5 million reduction in net loss (as adjusted for non-cash items) during the comparable periods. This loss reduction was offset in part by a global $16.5 million decrease of operating cash provided by working capital, primarily
from a $14.3 million reduction in cash provided by inventory reductions and a $3.6 million increase in cash used by the change in accounts payable.

Cash flows from investing activities

Cash provided by investing activities
was $4.3 million for the year ended December 31, 2010, compared to cash used in investing activities of $2.5 million for the year ended December 31, 2009. The $6.8 million increase was primarily due to (i) $9.8 million of capital
expenditures for the year ended December 31, 2010 compared to $13.3 million for 2009, (ii) the sale of $14.1 million of alloy metals for the year ended December 31, 2010 compared to $15.9 million for the year ended December 31,
2009, (iii) a nonrecurring $13.1 million decrease in restricted cash in 2009 associated with the refinancing of AGY Asia in July 2009, and (iv) the $18.2 million payment for the majority interest of AGY Asia, net of cash acquired, in June
2009.

Cash flows from financing activities

Cash used in financing activities was $0.4 million for the year ended December 31, 2010, compared to $12.3 million provided for the year ended December 31, 2009. The $12.7 million decrease was
attributable to the AGY Asia investment in 2009 consisting of a $20.0 million equity infusion by Kohlberg & Company, LLC to fund the acquisition, partly offset by a $12.3 million shareholder loan repayment, which were not recurring in 2010,
as well as a $4.2 million decrease in US revolver borrowings and a $2.6 million decrease in AGY Asia bank loans. These were partly offset by the $1.8 million cash outflow for the repurchase of $3.0 million of Notes (face value) in the year ended
December 31, 2009 that was not recurring in the comparable period of 2010.



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Year ended December 31, 2009 compared to year ended December 31, 2008

Cash flows from operating activities

Cash used by operating activities was $11.1 million for the year ended December 31, 2009, compared to cash provided by operating activities of $22.6 million for the year ended December 31, 2008.
The $33.7 million decrease in operating cash flow during the year ended December 31, 2009 as compared to the prior year was driven largely by the $21.7 million loss (as adjusted for non-cash items) recognized during the period compared to the
$28.0 million income (as adjusted for non-cash items) recognized during the year ended December 31, 2008. This $49.8 million decrease on a year-over-year basis was partially offset by a global $10.6 million reduction in operating working
capital as compared to a $5.5 million increase the prior year. The working capital reduction was primarily comprised of a $12.8 million decrease in inventories resulting from lower volumes and working capital initiatives compared to the prior
years inventory build of $7.6 million; a $0.9 million increase in trade accounts receivable primarily from the acquisition of AGY Asia compared to a $2.7 million increase the prior year; a $1.6 million increase in trade accounts payable
compared to a $2.2 million increase the prior year; and a $4.4 million reduction in accrued liabilities primarily from payments of variable compensation in early 2009, as compared to a $1.1 million increase the prior year.

Cash flows from investing activities

Cash used in investing activities was $2.5 million for the year ended December 31, 2009, compared to $38.1 million for the year ended December 31, 2008. The $35.6 million decrease was primarily
due to (i) the purchase of $28.7 million of alloy metals for the year ended December 31, 2008, compared to the sale of $15.9 million of alloy metals for the year ended December 31, 2009 and (ii) a $13.1 million decrease in
restricted cash primarily associated with the refinancing of AGY Asia in July 2009, partly offset by (iii) the $18.2 million payment for the majority interest of AGY Asia, net of cash acquired, in June 2009.

Cash flows from financing activities

Cash provided by financing activities was $12.3 million for the year ended December 31, 2009, compared to $15.1 million for the year ended December 31, 2008. The decrease was due primarily to
(i) the $1.8 million cash outflow for the repurchase of $3.0 million of Notes (face value) in the first quarter of 2009, (ii) the $8.7 million decrease in AGY Asia borrowings since the acquisition on June 10, 2009, and (iii) a
$13.6 million decrease in AGY US revolver borrowings for the year ended December 31, 2009 compared to the same period of 2008, offset by a $20.0 million equity infusion by Kohlberg & Company, LLC to fund the AGY Asia acquisition.

Indebtedness

AGY US

On March 8, 2011, the Company entered into an amended senior secured loan and security agreement facility Credit
Facility that provides for an expanded credit facility of up to $50.0 million (the Amended Credit Facility). The Amended Credit Facility matures on the earlier of March 8, 2015 or 90 days prior to the maturity date of the Notes and
includes a $20.0 million sub-limit for the issuance of letters of credit and a $5.0 million sub-limit for swing line loans. The borrowing base for the Amended Credit Facility is equal to the sum of: (i) an advance rate against eligible accounts
receivable of up to 85%, plus (ii) the lesser of (A) 65% of the book value of eligible inventory (valued at the lower of cost or market) and (B) 85% of the net orderly liquidation value for eligible inventory, plus (iii) up to
$40.0 million of eligible alloy inventory, minus (iv) 100% of mark-to-market risk on certain interest hedging arrangements, minus (v) a reserve of $7.5 million, and minus (vi) other reserves as the lender may determine in its
permitted discretion.

The interest rate for borrowings is LIBOR plus 3.0% or Base Rate plus 2.0% through June 1, 2011
and then may be adjusted downward to LIBOR plus 2.5% or Base Rate plus 1.5%, depending on our fixed charge coverage ratio. In addition, there are customary commitment and letter of credit fees under the Amended Credit Facility.

All obligations under the Amended Credit Facility are guaranteed by Holdings. The Companys obligations under the Amended Credit
Facility are secured, subject to permitted liens and other agreed upon exceptions, by a first-priority security interest in substantially all of the Companys assets.

Proceeds from the revolving loan were used to repay all amounts, and terminate all commitments outstanding under our previous $40 million Credit Facility and to pay fees and expenses in connection with
the refinancing. The Amended Credit Facility contains customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers and
consolidations, dividends and other payments in respect to capital stock, transactions with affiliates, and optional payments and modifications of subordinated and other debt instruments. In addition, the agreement contains a springing
financial maintenance covenant, which would not be effective until a default or an event of default occurs, or unless the availability under the facility were to fall below the greater of $6.25 million and 12.5% of the Borrowing Base (as
defined) as of the last day of any fiscal month. The Company does not currently anticipate that the springing financial maintenance covenant will become effective.



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The agreement governing the Amended Credit Facility permits the lenders to accelerate
payment of the outstanding principal and accrued and unpaid interest and/or to terminate their commitment to lend any additional amounts upon certain events of default, including but not limited to failure to pay principal or interest or other
amounts when due, breach of certain covenants or representations including breach of the springing covenant, cross-defaults to certain other agreements and indebtedness in excess of specified amounts, a change of control, or default under our
obligation of the AGY Asia option exercise.

As of the closing date of March 8, 2011, the Company had issued letters of
credit totaling $2.4 million and had cash borrowings of $24.8 million leaving total undrawn availability of $21.1 million.

At
December 31, 2010, under our previous $40 million Credit Facility, the Company had issued $2.4 million of standby letters of credit and had cash borrowings of $18.0 million leaving total undrawn availability after giving effect to the borrowing
base of $17.1 million.

In connection with our refinancing on October 25, 2006, we issued $175.0 million aggregate
principal amount of 11% senior second lien notes (Old Notes) to an initial purchaser, which were subsequently resold to qualified institutional buyers and non-U.S. persons in reliance upon Rule 144A and Regulation S under the Securities
Act of 1933, as amended. We consummated an exchange offer of the Old Notes in June 2008. Interest on the Notes is payable semi-annually on May 15 and November 15 of each year. Our obligations under the Notes are fully and unconditionally
guaranteed, jointly and severally, on a second-priority basis, by each of our existing and future domestic subsidiaries, other than immaterial subsidiaries, that guarantee our indebtedness, including our new Credit Facility, or the indebtedness of
any our restricted subsidiaries. The indenture does not allow us to pay dividends or distributions on our outstanding capital stock (including to our parent) and limits or restricts our ability to incur additional debt, repurchase securities, make
certain prohibited investments, create liens, transfer or sell assets, enter into transactions with affiliates, issue or sell stock of a subsidiary or merge or consolidate. The indenture permits the trustee or the holders of 25% or more of the Notes
to accelerate payment of the outstanding principal and accrued and unpaid interest upon certain events of default, including failure to make required payments of principal and interest when due, uncured violations of the material covenants under the
indenture or if lenders accelerate payment of the outstanding principal and accrued unpaid interest due to an event of default with respect to at least $15.0 million of our other debt, such as our Credit Facility.

The indenture does not contain any financial maintenance covenants.

In February 2009, we repurchased $3.0 million face amount of Notes for $1.8 million plus accrued interest and commission, resulting in a
net gain on extinguishment of debt of approximately $1.1 million (net of deferred financing fees written off), classified as other non-operating income.

As of December 31, 2010, the estimated fair value of the Notes was $155.5 million compared to a recorded book value of $172 million.

AGY Asia

The bank debt of $39.0 million assumed in the acquisition of AGY Asia was
refinanced as discussed below. On July 10, 2009, AGY Asia entered into a financing arrangement with the Bank of Shanghai (AGY Asia Credit Facility). On June 8, 2010, a portion of the USD loan commitment was exchanged for RMB
commitment. The arrangement now consists of a five-year term loan in the aggregate amount of approximately $41.6 million (consisting of a loan denominated in local currency of RMB 222.2 million, or approximately $33.6 million converted at an
exchange rate of RMB 6.62 to 1 US dollar, and a US-dollar-denominated loan of $8 million), a one-year working capital loan in the aggregate amount of approximately $12 million (consisting of a local currency loan of RMB 59.5 million, or
approximately $9 million converted at an exchange rate of RMB 6.62 to 1 US dollar -the prevailing exchange rate as of December 31, 2010-, and a US-dollar-denominated loan of $3 million), and a one-year letter of credit facility in the amount of
$2 million. As discussed above, proceeds from the loans were used principally to repay the $37.6 million outstanding at the time of the refinancing under AGY Asias prior credit agreements.

The term loan is secured by AGY Asias building, alloy metals and equipment and bears interest annually at the rate of either the five-year lending
rate as published by the Peoples Bank of China, plus a margin, or six-month LIBOR plus 3.0%. Term loan borrowings may be made in both local currency and US dollars, up to certain limits. At December 31, 2010 and 2009, AGY Asia had
approximately $33.4 million and $35.6 million borrowings outstanding under the term loan, respectively, consisting of a local currency loan of RMB 183.5 million and RMB 195 million, respectively, or approximately $27.7 million and $28.7
million, respectively, converted at the period-end exchange rate, and a US-dollar-denominated loan of $5.7 million and $7 million, respectively. The weighted average interest rate for cash borrowings outstanding as of December 31, 2010, was
6.0%.

The working capital loan facility is secured by existing and future equipment and assets acquired by AGY Shanghai and bears interest
annually at the rate of either the one-year lending rate as published by the Peoples Bank of China, or three-month LIBOR plus 3.0%. Working capital loan borrowings may be made in both local currency and US Dollars, up to certain limits.



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At December 31, 2010 and 2009, the Company had approximately $9.9 million and $5.7 million borrowings,
respectively, outstanding under the working capital loan consisting of a local currency loan of RMB 52.3 million and RMB 25 million, respectively, or approximately $7.9 million and $3.7 million, respectively, converted at the period-end
exchange rate, and a US-dollar-denominated loan of $2 million at the end of each period. The weighted average interest rate for cash borrowings outstanding as of December 31, 2010, was 5.5%.

The letter of credit facility is a one-year facility for the issuance of documentary letters of credit up to a maximum term of 120 days. A 15% deposit is
required upon issuance with the balance due upon settlement of the underlying obligation.

The loan agreements contain customary
representations and warranties and customary affirmative and negative covenants, including, among other things, interest coverage, restrictions on indebtedness, liens, investments, mergers and consolidations, dividends and other payments in respect
to capital stock, and transactions with affiliates. The loan agreements also include customary events of default, including a default upon a change of control. AGY Shanghai was in compliance with all such covenants at December 31, 2010 and
2009.

All amounts borrowed under the AGY Asia Credit Facility are non-recourse to AGY Holding Corp. or any other domestic subsidiary of AGY
Holding Corp.

Other Balance Sheet Items

Net Property, Plant and Equipment and Alloy Metals. Net property, plant and equipment and alloy metals decreased $28.8 million from December 31, 2009 to December 31, 2010,
primarily due to $26.7 million of depreciation and alloy metals depletion expenses and the sale of $14.5 million of excess alloy metals at book value for proceeds of $14.1 million. We made $9.1 million of capital expenditures, including accrued
construction in progress, and AGY Asia acquired $0.7 million of alloy metals and had $2.6 million of currency translation and other adjustments.

Off-Balance Sheet Resources and Obligations

Alloy Metal Leases

We lease under short term operating leases (generally with lease terms from six to twelve months) a significant portion of the alloy
metals needed to support our manufacturing operations. For each of the years ended December 31, 2010 and 2009, total lease costs of alloy metals were approximately $3.6 million, and were classified as a component of cost of goods sold. Our
lease expense is dependent on several factors, including the amount of alloy leased, market spot rates for the alloy and associated lease rates. Market spot rates are subject to daily fluctuation and this fluctuation could result in material changes
to our alloy lease expense.

In 2010 and 2009, we leased alloy metals under the following agreements:

Metal Consignment Facility

From August 2005 to October 2009, we had a consignment agreement with The Bank of Nova Scotia, as assignee of Bank of America, N.A., to lease platinum, one of the alloy metals used in our manufacturing
operations. Effective October 7, 2009, we terminated the Metal Consignment Facility with Bank of Nova Scotia and entered into a new master lease agreement with Deutsche Bank as discussed below.

Deutsche Bank New Master Lease Agreement

In October 2008, we entered into a new master lease agreement (the Master Agreement) with DB Energy Trading LLC (DB) for the purpose of leasing precious metals necessary for the
operations of our CFM business. The Master Lease Agreement described the lease terms and conditions enabling us to lease up to 19,057 ounces of platinum and 3,308 ounces of rhodium. The Master Lease Agreement had a three-year term and allowed us to
enter into leases of alloy metals with terms of one to twelve months. Lease costs were determined by the quantity of metal leased, multiplied by a benchmark value of the applicable precious metal and a margin above the lease rate index based on
DBs daily precious metal rates. The Master Lease Agreement contained customary events of default, including, without limitation, nonpayment of lease payments, inaccuracy of representations and warranties in any material respect and certain
cross-default provisions.

In connection with the termination of the Metal Consignment Facility with Bank of Nova Scotia on
October 7, 2009, the Master Lease Agreement with DB was also terminated and we entered into a new master lease agreement (the New Master Lease Agreement) with DB. The New Master Lease Agreement has a three-year term and allows AGY
to enter into leases of alloy metals, up to 51,057 ounces of platinum and up to 3,308 ounces of rhodium, with terms of one to twelve months. Lease costs are determined by the quantity of metal leased, multiplied by a benchmark value of the
applicable precious metal and a margin above the lease rate index based on DBs daily precious metal rates. The New Master Lease Agreement is secured by a security interest in rhodium up to a value that is the lesser of 35% of the leased
platinum or $24.4 million. The New Master Lease Agreement contains customary events of default, including, without limitation, nonpayment of lease payments, inaccuracy of representations and warranties in any material



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respect and a cross-default provision with any credit facility or leasing facility greater than $0.5 million, including the Credit Facility and the Notes. There are no financial maintenance
covenants included in the New Master Lease Agreement.

At December 31, 2010, we leased approximately 39,100 ounces of
platinum and 2,200 ounces of rhodium under the New Master Lease Agreement, with a total notional value of approximately $68.3 million. All of the leases outstanding at December 31, 2010 had initial terms of six to twelve months, maturing no
later than December 12, 2011 with future minimum rentals of approximately $2.3 million until maturity in 2011.

Commitments and
Contingencies

We are not a party to any significant litigation or claims, other than routine matters incidental to the
operation of the Company. We do not expect that the outcome of any pending claims will have a material adverse effect on the Companys financial position, results of operations or cash flows. There may be insignificant levels of asbestos in
certain manufacturing facilities; however, we do not expect to incur costs (which are undeterminable) in the foreseeable future to remediate any such asbestos. Accordingly, we did not record a conditional asset retirement obligation related to such
asbestos remediation because we do not have sufficient information to estimate the fair value of the asset retirement obligation in accordance with the guidance of ASC 410.

In addition to the alloy metal leases discussed above, we also lease manufacturing and other equipment and property under operating leases. Total rent expense for the year ended December 31, 2010 and
2009 was approximately $1.6 million and $2.0 million, respectively.

The following summarizes the future minimum lease
payments for each of the next five years and the total thereafter (in millions):



|                          |  |   |     | 
|------------------------- |  | - | --- | 
|Years Ending December 31, |  |   |    
|2011                      |  | $ | 1.1 | 
|2012                      |  |   | 1.1 | 
|2013                      |  |   | 1.1 | 
|2014                      |  |   | 1.0 | 
|2015                      |  |   | 0.6 | 
|                          |  |   |     | 
|                          |  | $ | 4.9 | 
|                          |  |   |     | 

The Company is obligated to make purchases of marbles of approximately $1.1 million from foreign suppliers
in 2011.



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RECENTLY ISSUED ACCOUNTING STANDARDS

In October 2009, the FASB issued new authoritative guidance regarding Revenue Recognition (Topic 605): Multiple-Deliverable Revenue
Arrangements  a Consensus of the FASB Emerging Issues Task Force, which amends ASC 605. This update establishes a selling price hierarchy, whereby vendor-specific objective evidence (VSOE), if available, should be
utilized. If VSOE is not available, then third party evidence should be utilized; if third party evidence is not available, then an entity should use the estimated selling price for the good or service. This update eliminates the residual method and
requires allocation at the inception of the contractual arrangement and additional disclosures surrounding multiple-deliverable revenue arrangements. This update is effective for the Company beginning January 1, 2011 and can be applied
prospectively or retrospectively. The Company adopted the new guidance prospectively on January 1, 2011 and does not expect the adoption of this update will have a material impact on the Companys results of operations, cash flows, or
financial position.

QUARTERLY FINANCIAL DATA (Unaudited)

Quarterly financial data for the years ended December 31, 2010 and 2009 were (in thousands):



|                                                    |  |              |        |   |               |   |         |              |  |   |               |   |  |   |         |  
|--------------------------------------------------- |  | ------------ | ------ | - | ------------- | - | ------- | ------------ |  | - | ------------- | - |  | - | ------- | -
|                                                    |  | FirstQuarter |        |   | SecondQuarter |   |         | ThirdQuarter |  |   | FourthQuarter |  
|2010                                                |  |              |        |   |               |   |         |              |  |   |               |   |  |   |         |  
|Net sales                                           |  | $            | 45,573 |   |               | $ | 49,308  |              |  | $ | 45,565        |   |  | $ | 43,228  |  
|Gross profit                                        |  |              | 4,608  |   |               |   | 2,584   |              |  |   | 2,940         |   |  |   | 4,610   |  
|Net (loss) income                                   |  |              | (5,065 | ) |               |   | (5,868  | )            |  |   | (6,709        | ) |  |   | 3,065   |  
|Net income (loss) attributable to AGY Holding Corp. |  | $            | (4,780 | ) |               | $ | (5,728  | )            |  | $ | (6,728        | ) |  | $ | 1,114   |  
|2009                                                |  |              |        |   |               |   |         |              |  |   |               |   |  |   |         |  
|Net sales                                           |  | $            | 39,614 |   |               | $ | 32,826  |              |  | $ | 41,738        |   |  | $ | 39,674  |  
|Gross profit (loss)                                 |  |              | 6,995  |   |               |   | (7,695  | )            |  |   | (2,135        | ) |  |   | 175     |  
|Net loss                                            |  |              | (2,677 | ) |               |   | (32,692 | )            |  |   | (7,747        | ) |  |   | (50,396 | )
|Net loss attributable to AGY Holding Corp.          |  | $            | (2,677 | ) |               | $ | (32,495 | )            |  | $ | (7,518        | ) |  | $ | (49,703 | )



|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------

Interest rate risk

We are subject to interest rate risk in connection with
our short- and long-term debt. Our principal interest rate exposures relate to the AGY US $50 million senior secured revolving credit facility and our AGY Asia credit facility. Assuming the AGY US revolver is fully drawn, each 100 basis point change
in interest rates would result in approximately a $0.5 million change in annual interest expense on our revolving credit facility. Assuming the AGY Asia credit facility is fully drawn, each 100 basis point change in interest rates would result in
approximately a $0.5 million change in annual interest expense for AGY Asia.

Natural gas commodity risk and platinum/rhodium risk

Due to the nature of our manufacturing operations, we are exposed to risks due to changes in natural gas commodity prices.
We may utilize derivative financial instruments in order to reduce the variability of the cash flows associated with our forecasted purchases of natural gas. In addition, because we use bushings made with a platinum-rhodium alloy as part of our
manufacturing process and lease a significant portion of the bushings, we are exposed to risks due to changes in the prices of platinum and rhodium.

At December 31, 2010, we had existing contracts for physical delivery of natural gas at our Aiken, SC and Huntingdon, PA facilities that fix the commodity cost of natural gas for approximately 73
percent of our 2011 requirements for the estimated natural gas purchases of the AGY US operating segment. We also entered into fixed-price electricity contracts for our Huntingdon, PA facility to cover approximately 95% of our 2011 requirements.
Although these contracts are considered derivative instruments, they meet the normal purchases exclusion contained in ASC 815, and are therefore exempted from the related accounting requirements.

Foreign exchange risk

We are subject to inherent risks attributed to operating in a global economy. For AGY US, all of the debt and most of our costs are
denominated in U.S. dollars. Approximately 4% percent of our sales are denominated in currencies other than the U.S. dollar. Although our level of foreign currency exposure is limited, we may utilize derivative financial instruments to manage
foreign currency exchange rate risks.



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Approximately 20% of the debt of our subsidiary, AGY Asia, is denominated in U.S. dollars,
with the balance denominated in Chinese RMB. In addition, approximately 87% of the sales of AGY Asia are denominated in U.S. dollars, while approximately 76% of its costs are denominated in Chinese RMB.

At December 31, 2010, we had no foreign currency hedging agreements in effect.

We may be exposed to credit loss in the event of non-performance by the other party to derivative financial instruments. We mitigate this
risk by entering into agreements directly with counterparties that meet our credit standards and that we expect to fully satisfy their contractual obligations. We view derivative financial instruments purely as a risk management tool and, therefore,
do not use them for speculative trading purposes.

Impact of Inflation and Economic Trends

Historically, inflation has not had a material effect on our results of operations, as we have been able to offset most of the impact of
inflation through price increases for our products. However, we cannot guarantee that we will be able to offset any future price increases in energy, commodities and precious metals through price increases to our customers.



|ITEM 8. | FINANCIAL STATEMENTS
|------- | --------------------

The
information required by Item 8 is contained on pages F-1 to F-43 of this Annual Report on Form 10-K under Consolidated Financial Statements. The Reports of Independent Registered Public Accounting Firm are contained on
page F-2 and page F-3 of this Annual Report on Form 10-K under the captions Report of Independent Registered Public Accounting Firm.



|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------

Not applicable.



|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

(a) Evaluation of disclosure controls and procedures.

As of the end of the period covered by this Annual Report, the Companys Principal Executive Officer and Principal Financial Officer
have conducted an evaluation regarding the effectiveness of the Companys disclosure controls and procedures. Based on their evaluation, the Companys Principal Executive Officer and Principal Financial Officer have concluded that the
Companys disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is (i) recorded, processed,
summarized and reported within the time periods specified in the applicable Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Companys management, including the Companys Principal
Executive Officer and the Companys Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting.

There have been no changes in internal control over financial reporting that occurred during the last fiscal quarter that have materially
affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.

(c) Managements report on internal control over financial reporting.

The Companys management is responsible for establishing and maintaining adequate internal control over financial reporting. The
Companys internal control over financial reporting is a process designed under the supervision of its principal executive officer and principal financial officer to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of the Companys financial statements for external purposes in accordance with generally accepted accounting principles.

As of December 31, 2010, the Companys management conducted an assessment of the effectiveness of the internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under
the Securities Exchange Act of 1934 (the Exchange Act) based on the framework in Internal Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this
assessment, management concluded that the Companys internal control over financial reporting (as so defined under the Exchange Act) was effective as of December 31, 2010. Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.



|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

Not applicable.



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PART III



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------

All of our directors serve until a successor is duly elected and qualified or until the earlier of his death, resignation or removal. Our executive officers are appointed and serve at the discretion of
our board of directors. There are no family relationships between any of our directors or executive officers.

The following
table sets forth information with respect to our executive officers and directors:



|                      |  |     |  |                                                           
|--------------------- |  | --- |  | ----------------------------------------------------------
|Name                  |  | Age |  | Position                                                  
|Douglas J. Mattscheck |  | 55  |  | Chief Executive Officer, President and Director           
|C. Steven Smoot       |  | 58  |  | Chief Financial Officer (since June 1, 2010)              
|Jeffrey J. Davis      |  | 48  |  | President and Chief Operating Officer (until May 28, 2010)
|Catherine A. Cuisson  |  | 45  |  | Vice President, Finance and Corporate Controller          
|Dennie Rexroad        |  | 51  |  | Vice President of Operations                              
|Drew Walker           |  | 46  |  | Vice President of Sales and Marketing                     
|Christopher Lacovara  |  | 46  |  | Director and Chairman of the Board of Directors           
|Samuel P. Frieder     |  | 46  |  | Director                                                  
|Seth H. Hollander     |  | 34  |  | Director                                                  

The following biographies
describe the business experience of our executive officers and directors:

Douglas J. Mattscheck, Chief Executive
Officer, President and Director. Mr. Mattscheck has served as our Chief Executive Officer and as a director since April 2004. He was also appointed President in May 2010 upon the resignation of our former President and Chief
Operating Officer. Prior to joining AGY, he served for seven years as President of St. Gobain Technical Fabrics. From 1989 to 1996, Mr. Mattscheck served as Senior Vice President of Surface Protection Industries, a high-end architectural paint
and coatings business. From 1987 to 1989, Mr. Mattscheck managed an architectural products business for H.B. Fuller Company, a manufacturer of specialty chemicals. From 1982 to 1987, he held several positions for Schlegel Corp., including
managing a construction products manufacturing business. Mr. Mattscheck holds a Bachelor of Science degree in Mechanical Engineering from Villanova University and a Masters of Business Administration from the University of Rochester. As a
result of these and other professional experiences, Mr. Mattscheck possesses particular knowledge and experience in the glass fiber industry, in developing globally specialty businesses, and technical knowledge that strengthen the Boards
collective qualifications, skills and experience.

C. Steven Smoot, Chief Financial Officer. Mr. Smoot has
served as our Chief Financial Officer since June 2010. Prior to joining AGY, Mr. Smoot served as Executive Vice President and Chief Financial Officer of Family Health International, a global non-profit research and public health services
organization from 2005 to 2009. From 2001 to 2004, Mr. Smoot served in various financial positions at Reichhold Chemicals, Incorporated, a global resins manufacturing company and subsidiary of DaiNippon Ink and Chemical, including as its Senior
Vice President, Chief Financial Officer and Chief Information Officer. Previously Mr. Smoot held numerous financial positions within Owens Corning Composites, Building Materials and International Operations. Mr. Smoot holds a Masters of
Business Administration from the University of Tennessee and a Bachelors of Science degree in Business Administration from Wake Forest University.

Jeffrey J. Davis, President and Chief Operating Officer. Mr. Davis served as our Chief Operating Officer and President from September 2007 and October 2008, respectively until his
resignation in May 2010. Mr. Davis joined AGY after a 21-year career at the General Electric Company, where most recently he was General Manager of the GE Sealants and Adhesives business unit. Mr. Davis prior experiences at GE span a
variety of functional roles and GE businesses, including VP of Global Sales and Marketing at GE Quartz & Advanced Ceramics, Global Crystalline Polymers Business Leader at GE Plastics, Halogen Product General Manager at GE Lighting, Plant
Manager at GE Control Products and Senior Audit Manager for GEs Corporate Audit Staff. Mr. Davis holds a Masters of Business Administration from the University of Florida and a Bachelors of Science in Electrical Engineering from the
Florida Institute of Technology.

Catherine A. Cuisson, Vice President, Finance and Corporate
Controller. Ms. Cuisson has served as our Vice President of Finance and Corporate Controller since July 2007. Previously, she served as our Chief Financial Officer from 1999 until assuming her new position with the Company.
Ms. Cuisson was transferred to the U.S. by Porcher Industries, our former majority owner, to organize and manage the financial operations of the newly formed joint venture with Owens Corning. Before joining us in early 1999, Ms. Cuisson
served as the Consolidation Manager and Corporate Controller of Porcher Industries, a textile weaver, for four years. Prior to joining Porcher Industries in late 1994, Ms. Cuisson was an Audit Manager for PricewaterhouseCoopers in Lyon, France
from 1987 to 1994. Ms. Cuisson has been a French equivalent Certified Public Accountant since 1993. She obtained a Masters of Accounting and a Masters of Business Administration upon graduating from the Institut Commercial de Nancy, France.



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Dennie Rexroad, Vice President of Operations. Mr. Rexroad joined us in
January 2005 as Vice President of Operations after serving for three years as Vice President of Operations for The Cooley Group, a manufacturer of high performance engineered laminates and coated fabrics. Prior to working with The Cooley Group,
Mr. Rexroad was the Plant Manager for Toray Plastics Polyolefin Operation for three years. From 1997 to 2000, he was the Director of Manufacturing for Toray Plastics polyester resin and film plants. Prior to joining Toray in 1992,
Mr. Rexroad had a ten-year career with ICI Americas, which included an international assignment as Commissioning and Training Manager for the polyester films division at a greenfield site in Ibaraki, Japan. Mr. Rexroad holds a Bachelor of
Science in Mechanical Engineering from Virginia Tech.

Drew Walker, Vice President of Sales and Marketing.
Mr. Walker joined us in January 2005 as Vice President of Sales and Marketing. He has 18 years of experience in marketing consumer brands and business-to-business industrial products in various international commercial roles. Before joining us
in January 2005, Mr. Walker served as Global Sales Director for SAPPI (South Africa Paper & Pulp Industries) High Performance Release Paper Division for the synthetic fabrics and decorative laminates markets for two years. Prior to
joining SAPPI, he held several worldwide sales and marketing roles with Victrex plc, a manufacturer of high performance materials in the form of Thermoplastic PEEK (Polyetheretherketone) for the aerospace, automotive, semiconductor, medical and
industrial markets based in Blackpool, England. Mr. Walker was educated at Sheffield University, England, receiving a Bachelor of Arts Honors Degree in Industrial Product Design.

Christopher Lacovara, Director. Mr. Lacovara is the Chairman of the Board of Directors and a member of our
compensation committee. He has been a member of our Board of Directors since April 7, 2006. Mr. Lacovara is a Partner of Kohlberg & Company, L.L.C., which he joined in 1988. From 1987 to 1988 he was an associate in the Mergers and
Acquisitions Department at Lazard Frères & Co. Prior to that, he was an analyst in the Corporate Finance Department of Goldman, Sachs & Co. He is a member of the board of directors of Bauer Hockey, Centerplate, Inc., Chronos
Life Group, Concrete Technologies Worldwide, Inc., Inc. Katy Industries, Inc., KCOF Holdings LLC., Kohlberg Capital Corporation, Niagara Corporation, Pittsburgh Glass Works LLC., SVP Holdings, Ltd. and Trico Products Corporation. In addition,
Mr. Lacovara was a member of the board of directors of Schawk, Inc. from January 31, 2005 to February 1, 2007, Stanadyne Corporation from August 2004 to February 14, 2011, and Hoffmaster Group, Inc from October 2007 to
February 28, 2011. Mr. Lacovara received an A.B. from Harvard College, a B.E.E.S. from Hofstra University and an M.S. from Columbia University. As a result of these professional experiences, Mr. Lacovara possesses particular knowledge
and experience in corporate finance, corporate governance, strategic planning, business evaluation and oversight and financial analysis that strengthen the Boards collective qualifications, skills and experience.

Samuel P. Frieder, Director. Mr. Frieder is a director and a member of our audit committee. He has been a member of
our board of directors since April 7, 2006. Mr. Frieder is the Managing Partner of Kohlberg & Company, LLC, which he joined in 1989. From 1988 to 1989 he was a Senior Associate in the Capital Funding Group at Security Pacific
Business Credit. Prior to that, he was a Senior Real Estate Analyst at Manufacturers Hanover Trust Company. He is a member of the board of directors of Bauer Hockey, BioScrip, Inc., Centerplate, Inc., Central Parking Corporation, Chronos Life Group,
Concrete Technologies Worldwide, Inc., The Hoffmaster Group, Inc., Katy Industries, Inc., Kellermeyer Building Services, LLC, Kohlberg Capital Corporation, Niagara Corporation, Nielsen & Bainbridge, Inc., Packaging Dynamics Corporation,
Phillips Plastics Corporation, Pittsburgh Glass Works LLC., Stanadyne Corporation, SVP Holdings, Ltd., Thomas Nelson, Inc., and Trico Products Corporation. Mr. Frieder received an A.B. from Harvard College. As a result of these professional
experiences, Mr. Frieder possesses particular knowledge and experience in corporate finance, corporate governance, corporate and business development, business evaluation and oversight and financial analysis that strengthen the Boards
collective qualifications, skills and experience.

Seth H. Hollander, Director. Mr. Hollander is a director
and a member of our compensation committee and our audit committee. He has been a member of our Board of Directors since April 7, 2006. Mr. Hollander is a Partner of Kohlberg & Company, L.L.C., which he joined in 2001. Prior to
joining Kohlberg, Mr. Hollander was Financial Analyst at Bear, Stearns & Co., Inc. in their Leveraged Finance Group. He is a member of the board of directors of Centerplate, Inc., Central Parking Corporation, Concrete Technologies
Worldwide, Inc., The Hoffmaster Group, Kellermeyer Building Services, LLC, Nielsen & Bainbridge, Inc., Packaging Dynamics and Stanadyne Corporation, Inc. Mr. Hollander received a B.B.A. from the University of Michigan, Ann Arbor. As a
result of these professional experiences, Mr. Hollander possesses particular knowledge and experience in corporate finance, accounting, strategic planning, business evaluation and oversight and financial analysis that strengthen the
Boards collective qualifications, skills and experience.

As a group, the directors associated with our Sponsor possess
experience in owning and managing enterprises like the Company and are familiar with corporate finance, strategic business planning activities and issues involving stakeholders more generally.

Corporate Governance

Our Board of Directors manages our business and affairs. Under a stockholders agreement among investment funds associated with our
Sponsor and certain members of our management as part of the Acquisition, investment funds associated with our Sponsor are entitled to designate the members of our Board of Directors.



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Code of Conduct

We currently maintain a written Code of Conduct that provides a statement regarding the Companys expectations as to the legal and ethical nature of conduct of the Companys directors, officers,
employees and agents while acting on behalf of AGY. A copy of the Code of Business Ethics and Business Conduct is posted on our web site athttp://www.agy.com/investor/index.htm.

Section 16(a) Beneficial Ownership Reporting Compliance

There is no
established public trading market for our common stock. We are a wholly-owned subsidiary of Holdings, which holds all of our outstanding common stock. Holdings is a privately-held corporation.

Audit Committee

The
audit committee selects our independent auditors and reviews the independence of such auditors, approves the scope of the annual audit activities of the independent auditors, approves the audit fee payable to the independent auditors and reviews
such audit results with the independent auditors. The audit committee is currently composed of Seth H. Hollander and Samuel P. Frieder. Seth H. Hollander serves as our audit committee financial expert as defined in Item 407(d)(5) of
Regulation S-K.



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

Compensation
Discussion and Analysis

For purposes of this discussion, our officers are defined as senior level executives of the
Company responsible for developing and leading the execution of our strategies. We refer to our Chief Executive Officer, our Chief Financial Officer and our next four highly compensated executives of the Company as our named executive
officers.

Objectives of Our Compensation Program

The Compensation Committee of our Board of Directors (the committee) seeks to use compensation to attract and retain qualified officers, to offer our officers incentives to continually improve
both their personal and overall company performance, and to align the interests of our officers and our stockholders.

The
committee sets targeted in-service compensation for our officers at or near the market median. This policy covers base salaries as well as the incentive awards that officers will receive if we meet annual business goals. Under this policy, if our
performance exceeds our goals, our officers earn incentive awards above the median, resulting in total compensation in excess of the median. However, if we fail to meet our business goals, incentive compensation levels and, as a result, total
compensation levels, would fall below the market median.

The committee generally believes target performance
levels should be ones that represent significant performance improvements, and be levels that we will not easily achieve.

The
committee has a general policy of making variable compensation a significant component of each officers total compensation. The term variable compensation refers to amounts that vary in amount depending on performance 
poor performance leads to little or no awards while superior performance leads to superior awards. Variable compensation generally consists of a combination of annual cash bonus opportunities and equity-based compensation. The policy of making
variable compensation a significant portion of our officers total compensation is intended to implement a culture in which the officers know that their pay, to a large extent, depends on our performance and to reward superior Company
performance.

The committee has a general policy of using compensation to more closely align managements interests with
those of our shareholders. In an effort to achieve this, we systematically include some form of equity grant, or potential equity grant, as part of our compensation program at the time an officers employment commences. When we refer to equity
grants in this report, we refer to grants of equity awards of Holdings. If our officers own shares of our common stock with values that are significant to them, we believe they will be more likely to act to maximize longer-term shareholder value
instead of short-term gain. Officers currently have stock options that will become more valuable if the performance of the Company improves on a year over year basis and certain options will only vest if we meet specified performance targets. In
addition, the committee seeks to provide an incentive for officers to remain with the Company by imposing time vesting requirements on the options.

Finally, the committee aims to provide a package of non-cash benefits which are consistent with benefits provided by others in the industry and which are not tied to performance.

Elements of Compensation

Compensation for officers generally consists of cash compensation, including base salary and, as appropriate, bonus awards, equity
participation, and various non-cash perquisites and benefits, though in 2009 and 2010, the committee and the Board did not approve any plan with respect to cash bonus awards or opportunities for management because of the Companys forecasted
financial



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performance. The committee attempts to offer each officer a mix of fixed compensation, such as base salary, and variable compensation, such as bonus opportunity and equity based compensation,
which strikes an appropriate balance between offering each officer a predictable level of baseline compensation and a personal incentive to improve company performance.

Base Salary

We pay each of our officers a base salary, which is
intended to give each of them a steady cash flow during the course of the year that is not contingent on short-term variation in our performance. For 2008, the committee sought to set each officers base salary at or near the market median. No
salary adjustments were made in 2009 for our officers given the financial performance of the Company and because of required cost reductions initiatives. Merit increases were made in 2010 based on achievement of individual performance targets. The
committee believes that paying competitive base salaries is required in order to attract and retain qualified officers.

Bonus
Opportunity

Payment of annual bonuses to our officers depends entirely on our corporate performance, though in certain
instances the committee may modify the payment to reflect personal performance. The committee typically provides each officer with a bonus opportunity each year in an effort to give each officer a personal financial incentive to help us reach annual
business goals, however, in 2009 and 2010, no bonus opportunities were provided to the officers because of the Companys forecasted financial performance.

Long-Term Incentives

The committee provided stock options for the
named executive officers at the time of their commencement of service. These options vest based on a schedule that includes length of service and also achievement of selected adjusted EBITDA targets. In deciding how many options to grant a
particular officer, the committee considers the responsibilities of such persons position and his or her tenure with the Company.

The committee believes that offering equity-based compensation is required in order to attract and retain qualified officers, to offer a personal incentive for them to improve company performance and
align the interests of our officers with our stockholders.

Perquisites and Other In-Service Benefits

Certain named executive officers are provided vehicles based on company guidelines and the Company pays for the related expenses. The CEO
is provided a country club membership and supplemental life insurance policy that are paid by the Company.

Our officers also
receive the following benefits, which we provide to all salaried employees as compensation for their services to us:



| |  |  | Group health, dental and life insurance, part of which we pay for;
| | - |  | ------------------------------------------------------------------



| |  |  | Optional term, life and accidental death and disability and long-term disability insurance, the cost of which the employee pays;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | We sponsor a 401(k) plan, under which each participant can defer into his 401(k) plan account a portion of his plan-eligible compensation, generally
base salary, up to the annual limit set by the IRS and can then direct how his account will be invested. We match each participants deferrals under this plan, on a monthly basis at a rate of 50% up to the first 6% of compensation contributed
by the participant. Our matching contributions are vested based on a three-year vesting schedule. In addition, the Company may elect to make a discretionary contribution to an individuals 401(k) based on the Companys achievement of
certain financial metrics.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The committee believes that offering competitive benefits is required in order to attract and
retain qualified officers and employees.

Change-In-Control Arrangements

In a situation involving a change in control of our Company, our officers would likely face a far greater risk of termination than the
average salaried employee. To attract qualified individuals who could have other job alternatives that may appear to them to be less risky absent these arrangements, and to provide these individuals with an incentive to stay with us in the event of
an actual or potential change in control, we have a severance plan in which our executive officers participate. We view this as an important part of a competitive compensation package.



The severance plan provides for the individual to continue
employment for a specified period after a change in control, with the same responsibilities and authorities and generally the same benefits and compensation as he had immediately prior to the change in control (including average annual increases).
The term change in control is defined in the severance plan to include various corporate transactions resulting in a change in ownership in the Company and would also include the election of a majority of the board of directors not
nominated by the incumbent board of directors. If we or our successor were to terminate the individuals employment during the one hundred and eighty (180) days prior to, or twelve months (12) following, a change of control or sale
for



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reasons other than cause, or the individual voluntarily terminated his employment for a good reason (in each case as defined in the agreements) during that same period, he
would be entitled to certain payments and other benefits.

Severance Policy

We have severance policies under which we provide other severance benefits to our officers. Specific details about these policies are
described more fully below under Potential Payments Upon Termination or Change of Control.We maintain these severance policies because we believe that they are consistent with market compensation packages for officers and
therefore an important component of a competitive compensation package.

Compensation Program Design and Tools

The Compensation Committee has used a number of tools in designing the compensation program for our officers and assessing practices
within the industry, including corporate guidelines regarding compensation, studies of internal pay fairness, external market guidelines and benchmarks, and long-term compensation histories and tax and accounting rules

Compensation Committee Report

The following report of the Compensation Committee is included in accordance with the rules and regulations of the Securities and Exchange Commission. It is not incorporated by reference into any of our
registration statements under the Securities Act of 1933, as amended.

Compensation Committee Report

The Committee has reviewed and discussed the Compensation Discussion and Analysis (CD&A) with management. Based upon the review and
discussions, the Committee recommended to the Board of Directors, and the Board approved, that the CD&A be included in the Form 10-K for the year ended December 31, 2010.

Respectfully submitted on March 24, 2011 by the members of the Compensation Committee of the Board of Directors:

Christopher Lacovara

Seth H. Hollander

Summary Compensation Table

The following table sets forth for certain compensation information for our named executive officers:



|                                                          |  |      |      |  |           |         |         |               |   |     |                    |  |  |                      |         |  |                                             |         |         |                                       |   |   |          |  |   |        |        |  |   |         |           | 
|--------------------------------------------------------- |  | ---- | ---- |  | --------- | ------- | ------- | ------------- | - | --- | ------------------ |  |  | -------------------- | ------- |  | ------------------------------------------- | ------- | ------- | ------------------------------------- | - | - | -------- |  | - | ------ | ------ |  | - | ------- | --------- | 
|Name and Principal Position                               |  | Year |      |  | Salary($) |         |         | Bonus($) (10) |   |     | StockAwards($) (1) |  |  | OptionsAwards($) (2) |         |  | Non-EquityIncentive PlanCompensation($) (3) |         |         | All OtherCompensation($) (4)(5)(6)(7) |   |   | Total($) | 
|Douglas MattscheckChief Executive Officer and President   |  |      | 2008 |  |           | $       | 342,537 |               |   |     |                   |  |  | $                    | 500,000 |  |                                             | $       | 553,333 |                                       |   | $ | 344,078  |  |   | $      | 16,262 |  |   | $       | 1,756,210 | 
|                                                          |  | 2009 |      |  | $         | 345,050 |         |               |   |    |                    |  |  |                     |         |  | $                                           | 276,667 |         |                                       | $ |  |          |  | $ | 11,432 |        |  | $ | 633,149 |          
|                                                          |  |      | 2010 |  |           | $       | 352,814 |               |   |     |                   |  |  |                      |        |  |                                             | $       |        |                                       |   | $ |         |  |   | $      | 35,548 |  |   | $       | 388,362   | 
|C.Steven SmootChief Financial Officer (7)                 |  |      | 2010 |  |           | $       | 131,250 |               |   |     |                   |  |  |                      |        |  |                                             | $       |        |                                       |   | $ |         |  |   | $      | 4,404  |  |   | $       | 135,654   | 
|Catherine CuissonVice President, Corporate Controller (8) |  |      | 2008 |  |           | $       | 182,463 |               |   |     |                   |  |  |                      |        |  |                                             | $       | 276,667 |                                       |   | $ | 111,794  |  |   | $      | 14,319 |  |   | $       | 585,243   | 
|                                                          |  | 2009 |      |  | $         | 183,801 |         |               | $ | 376 |                    |  |  |                     |         |  | $                                           | 138,333 |         |                                       | $ |  |          |  | $ | 10,941 |        |  | $ | 333,451 |          
|                                                          |  |      | 2010 |  |           | $       | 187,936 |               |   | $   | 10,000             |  |  |                      |        |  |                                             | $       |        |                                       |   | $ |         |  |   | $      | 6,137  |  |   | $       | 204,073   | 
|Dennie RexroadVice President, Operations                  |  |      | 2008 |  |           | $       | 197,882 |               |   |     |                   |  |  |                      |        |  |                                             | $       | 166,000 |                                       |   | $ | 120,055  |  |   | $      | 7,543  |  |   | $       | 491,480   | 
|                                                          |  | 2009 |      |  | $         | 198,953 |         |               | $ | 376 |                    |  |  |                     |         |  | $                                           | 83,000  |         |                                       | $ |  |          |  | $ | 7,493  |        |  | $ | 289,822 |          
|                                                          |  |      | 2010 |  |           | $       | 203,430 |               |   | $   |                   |  |  |                      |        |  |                                             | $       |        |                                       |   | $ |         |  |   | $      | 10,757 |  |   | $       | 214,187   | 



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|                                               |  |      |      |  |           |         |         |               |   |     |                    |  |  |                      |   |  |                                             |        |         |                                       |   |   |          |  |   |       |        |  |   |         |         | 
|---------------------------------------------- |  | ---- | ---- |  | --------- | ------- | ------- | ------------- | - | --- | ------------------ |  |  | -------------------- | - |  | ------------------------------------------- | ------ | ------- | ------------------------------------- | - | - | -------- |  | - | ----- | ------ |  | - | ------- | ------- | 
|Name and Principal Position                    |  | Year |      |  | Salary($) |         |         | Bonus($) (10) |   |     | StockAwards($) (1) |  |  | OptionsAwards($) (2) |   |  | Non-EquityIncentive
PlanCompensation($) (3) |        |         | All
OtherCompensation($) (4)(5)(6)(7) |   |   | Total($) | 
|Drew WalkerVice President, Sales and Marketing |  |      | 2008 |  |           | $       | 190,337 |               |   |     |                   |  |  |                      |  |  |                                             | $      | 166,000 |                                       |   | $ | 153,545  |  |   | $     | 10,335 |  |   | $       | 520,217 | 
|                                               |  | 2009 |      |  | $         | 195,000 |         |               | $ | 376 |                    |  |  |                     |   |  | $                                           | 83,000 |         |                                       | $ |  |          |  | $ | 7,370 |        |  | $ | 285,746 |        
|                                               |  |      | 2010 |  |           | $       | 199,387 |               |   | $   |                   |  |  |                      |  |  |                                             | $      |        |                                       |   | $ |         |  |   | $     | 9,115  |  |   | $       | 208,502 | 
|Jeffrey DavisPresident and COO (9)             |  |      | 2008 |  |           | $       | 269,067 |               |   |     |                   |  |  |                      |  |  |                                             | $      | 159,167 |                                       |   | $ | 222,836  |  |   | $     | 8,992  |  |   | $       | 660,062 | 
|                                               |  | 2009 |      |  | $         | 290,000 |         |               | $ | 376 |                    |  |  |                     |   |  | $                                           | 79,583 |         |                                       | $ |  |          |  | $ | 7,051 |        |  | $ | 377,010 |        
|                                               |  |      | 2010 |  |           | $       | 126,410 |               |   | $   |                   |  |  |                      |  |  |                                             | $      |        |                                       |   | $ |         |  |   | $     | 7,098  |  |   | $       | 133,508 | 



|(1) | The value of the stock awards was calculated using the option price of $10.00 per share, which is the exercise price on options that were granted contemporaneously with
the restricted stock.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | In 2008, both performance based and time based options vested for the participants. The value of the options awards was calculated based on the value of the option as
of the grant date, multiplied by the number of shares awarded. In 2009 and 2010, only time-based options vested for the participants. The value of the options awards was calculated based on the value of the option as of the grant date, multiplied by
the number of shares awarded.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Non-equity incentive compensation for 2008 was based on the achievement of certain financial performance goals. Additionally, in 2008 participants were also awarded a
contribution to the 401(k) based on the achievement of financial performance goals. No non-equity incentive compensation was earned or recognized in 2009 and 2010, as the financial performance goals were not achieved in 2009 and in 2010.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Other compensation for fiscal year 2008 includes the following: (a) Mr. Mattscheck: $7,750 in 401(k) company match, $6,757 in car allowance, and $1,755 in a
company paid supplemental life insurance policy; (b) Ms. Cuisson: $5,243 in 401(k) company match, $8,698 in car allowance, and $378 in taxable life insurance; (c) Mr. Rexroad: $5,936 in 401(k) company match, $984 in a car
allowance, and $623 in taxable life insurance; (d) Mr. Walker: $5,710 in 401(k) company match, $4,228 in car allowance, and $397 in taxable life insurance; and (e) Mr. Davis: $5,829 in 401(k) company match, $2,280 in car
allowance, and $883 in taxable life insurance.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Other compensation for fiscal year 2009 includes the following: (a) Mr. Mattscheck: $4,997 in 401(k) company match and $3,210 in taxable life, $3,225 in car
allowance and company paid supplemental life insurance policy; (b) Ms. Cuisson: $3,435 in 401(k) company match, $7,125 in car allowance and $382 in taxable life insurance; (c) Mr. Rexroad: $3,718 in 401(k) company match, $2,815
in car allowance and $960 in taxable life insurance; (d) Mr. Walker: $3,644 in 401(k) company match, $3,115 in car allowance and $612 in taxable life insurance; and (e) Mr. Davis: $4,694 in 401(k) company match, $1,403 in car
allowance and $954 in taxable life insurance.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Other compensation for fiscal year 2010 includes the following: (a) Mr. Mattscheck: $8,250 in 401(k) company match, $3,385 in taxable life, $10,483 in car
allowance, $1,730 in a company paid supplemental life insurance policy, and $11,700 in country club membership dues reimbursement for the years 2008, 2009 and 2010; (b) Mr. Smoot: $3,200 in car allowance and $1,204 in taxable life
insurance; (c) Ms. Cuisson: $5,550 in 401(k) company match and $587 in taxable life insurance; (d) Mr. Rexroad: $6,103 in 401(k) company match, $3,669 in car allowance and $985 in taxable life insurance; (e) Mr. Walker:
$5,982 in 401(k) company match, $2,505 in car allowance and $628 in taxable life insurance; and (f) Mr. Davis: $3,792 in 401(k) and $3,306 in estimated car allowance.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Mr. Smoots 2010 compensation information is based on his start date of June 1, 2010.
|--- | -------------------------------------------------------------------------------------

|(8) | Ms. Cuisson served as our Chief Financial Officer from November 1, 1998 to July 30, 2007.
|--- | -----------------------------------------------------------------------------------------

|(9) | Mr. Davis 2010 compensation information is based on his termination date of May 28, 2010. Other compensation for fiscal year 2010 also includes $3,306,
which takes into account the full value of a car allowance provided to Mr. Davis in 2010, as at the time of the filing of this report, the percentage of personal versus professional usage of the vehicle by Mr. Davis was not available. All
the vested unexercised options awards were forfeited at Mr. Daviss termination date.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | Represents in 2009 nominal year-end payments to all salaried employees, other than the Companys chief executive officer. In 2010 Ms. Cuisson received a
special bonus in consideration of her increased responsibilities before the hiring of Mr. Smoot.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Grants of Plan-Based
Awards

Mr. Smoot was granted on his hire date in June 2010 options for 70,000 shares of common stock with a fair
value of $2.36 for each option. There were no other grants of any plan-based awards to the other named executive officers in the year ended December 31, 2010.



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Outstanding Equity Awards at Fiscal Year-End

The following table provides information concerning unexercised options and stock awards for each named executive officer outstanding as
of December 31, 2010. All option and stock awards are granted with respect to the common stock of KAGY Holding Company, Inc., our parent company.



|                      |  |                                                                |         |  |                                                                  |  |         |                        |  |   |                      |  |  |  |            | 
|--------------------- |  | -------------------------------------------------------------- | ------- |  | ---------------------------------------------------------------- |  | ------- | ---------------------- |  | - | -------------------- |  |  |  | ---------- | 
|                      |  | Option Awards                                                  |        
|Name                  |  | Number ofSecuritiesUnderlyingUnexercisedOptions
(#)Exercisable |         |  | Number ofSecuritiesUnderlyingUnexercisedOptions (#)Unexercisable |  |         | OptionExercisePrice($) |  |   | OptionExpirationDate | 
|Douglas Mattscheck(1) |  |                                                                | 266,667 |  |                                                                  |  | 133,333 |                        |  | $ | 10.00                |  |  |  | April 2016 | 
|Catherine Cuisson(1)  |  |                                                                | 133,333 |  |                                                                  |  | 66,667  |                        |  | $ | 10.00                |  |  |  | April 2016 | 
|Dennie Rexroad(1)     |  |                                                                | 80,000  |  |                                                                  |  | 40,000  |                        |  | $ | 10.00                |  |  |  | April 2016 | 
|Drew Walker(1)        |  |                                                                | 80,000  |  |                                                                  |  | 40,000  |                        |  | $ | 10.00                |  |  |  | April 2016 | 
|C.Steven Smoot (2)    |  |                                                                |        |  |                                                                  |  | 70,000  |                        |  | $ | 6.55                 |  |  |  | April 2016 | 



|(1) | The unexercised options unexercisable represent performance-based stock options that vest upon a change of control or at the sole discretion of the Board of Directors.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes 35,000 time-based stock options that have a three-year vesting schedule in equal annual installments beginning on the first anniversary of employment, or June
2011, and acceleration in the event of change of control. The remaining represents performance-based stock options that vest upon a change of control or at the sole discretion of the Board of Directors.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Option Exercises and Stock Vested

No options were exercised by the named executive officers in 2010, and no restricted stock awards vested in 2010.

Potential Payments Upon Termination or Change of Control

Pursuant to the
terms of the applicable agreements and plans, set forth below is a description of the potential payments the named executive officers would receive if their employment was terminated.

Termination by the Company without Cause or by the Officer for Good Reason. If we terminate a named executive officers employment without cause, or if the officer terminates his or her
employment for good reason, then:



| |  |  | the Company will pay the officer (i) a cash severance amount equal to twelve (12) months base salary in effect at the time of termination, to
be paid in twelve (12) equal monthly installments; and (ii) an amount equal to the greater of (i) a pro rata portion of the annual bonus earned through the date of termination, or (ii) 30% of the maximum annual bonus, to be paid
in twelve (12) equal monthly installments;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Company will provide for continued coverage under health and dental benefits, at the Companys expense, for a period ending on the earlier of
(i) twelve months from the date of termination, or (ii) the date comparable coverage is obtained from a successor employer;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | all unvested options are forfeited.
| | - |  | -----------------------------------

Termination Preceding or Following a Change in Control or Sale of Business Transaction. If a named executive officers employment is terminated involuntarily or for good cause one
hundred and eighty (180) days prior to or twelve months (12) following a change of control or sale of the business, then:



| |  |  | the Company will pay the officer (i) a cash severance amount equal to twenty-four (24) months base salary in effect at the time of
termination, to be paid in twenty-four (24) equal monthly installments; and (ii) an amount equal to the greater of (i) a pro rata portion of the annual bonus earned through the date of termination, or (ii) 30% of the maximum
annual bonus, to be paid in twenty-four (24) equal monthly installments;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Company will provide for continued coverage under health and dental benefits, at the Companys expense, for a period ending on the earlier of
(i) twenty-four (24) months from the date of termination, or (ii) the date comparable coverage is obtained from a successor employer;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | All unvested options, performance or time based, granted to the officer immediately vest.
| | - |  | -----------------------------------------------------------------------------------------

Termination by the Company for Cause or by the Officer without Good Reason. If the Company terminates a named executive officers
employment for cause or the officer terminates employment without good reason, then:



| |  |  | the Company is not obligated to pay the officer any form of compensation other than amount of base salary earned through the date of termination; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | all unexercised options are forfeited.
| | - |  | --------------------------------------

Disability or Death. If a named executive officers employment is terminated due to his or her disability or death, then:



| |  |  | the Company will pay the officer (or his or her beneficiary in the event of death) (i) a lump sum cash payment of all accrued compensation and
(ii) an amount equal to the greater of (i) a pro rata portion of the annual bonus earned through the date of termination, or (ii) 30% of the maximum annual bonus, to be paid in twelve (12) equal monthly installments.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In order to receive any of the above-described severance benefits, a named executive officer is required to
execute a release of all claims against the Company and must comply with the terms of the applicable agreement or plan pursuant to which such benefits are made available to such named executive officer.

The tables below reflect the amount of compensation payable to each of the named executive officers in the event of termination of such
officers employment. The amounts shown assume that such termination was effective as of December 31, 2010, and thus includes amounts earned through such time and are estimates of the amounts which would be paid out to the officer upon his
or her termination. The actual amounts to be paid, if any, can only be determined at the time of such officers separation from the Company.

Potential Termination Payments and Benefits for Termination Without Cause or for Good Reason



|                   |  |             |         |  |                    |   |         |                        |  |  |                             |  |  |                               |  |  |           |   |        |  |  |   |         | 
|------------------ |  | ----------- | ------- |  | ------------------ | - | ------- | ---------------------- |  |  | --------------------------- |  |  | ----------------------------- |  |  | --------- | - | ------ |  |  | - | ------- | 
|Name               |  | Base Salary |         |  | BonusPayment($)(1) |   |         | Value ofStockOption($) |  |  | RestrictedStockAwards($)(2) |  |  | Benefits andPerquisites($)(3) |  |  | Total ($) |  
|Douglas Mattscheck |  | $           | 355,401 |  |                    | $ | 106,620 |                        |  |  |                             |  |  |                               |  |  |           | $ | 18,237 |  |  | $ | 480,258 | 
|C.Steven Smoot     |  | $           | 225,000 |  |                    | $ | 54,000  |                        |  |  |                             |  |  |                               |  |  |           | $ | 12,158 |  |  | $ | 291,158 | 
|Catherine Cuisson  |  | $           | 189,315 |  |                    | $ | 34,076  |                        |  |  |                             |  |  |                               |  |  |           | $ | 6,079  |  |  | $ | 229,470 | 
|Dennie Rexroad     |  | $           | 204,922 |  |                    | $ | 36,886  |                        |  |  |                             |  |  |                               |  |  |           | $ | 18,237 |  |  | $ | 260,045 | 
|Drew Walker        |  | $           | 200,850 |  |                    | $ | 48,204  |                        |  |  |                             |  |  |                               |  |  |           | $ | 18,237 |  |  | $ | 267,291 | 



|(1) | Bonus payment is calculated as 30% of the maximum payment under the non-equity incentive plan awards. The officer would be entitled to a pro rata portion of the annual
bonus earned through the date of termination, if such amount were higher. No restricted stock was outstanding as of the reporting date.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | No restricted stock was outstanding as of the reporting date.
|--- | -------------------------------------------------------------

|(3) | The Company is required to provide continued coverage under health and dental benefits, at its expense, for a period ending on the earlier of (i) twelve months
from the date of termination, or (ii) the date comparable coverage is obtained from a successor employer. The cost was calculated by multiplying the Companys monthly COBRA rate by the maximum number of months for which benefits would be
provided.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Potential Termination Payments and Benefits for Termination as a Result of Change of Control or Sale of the
Business Transaction



|                   |  |             |         |  |                    |   |         |                        |  |  |                             |  |  |                               |  |  |           |   |        |  |  |   |         | 
|------------------ |  | ----------- | ------- |  | ------------------ | - | ------- | ---------------------- |  |  | --------------------------- |  |  | ----------------------------- |  |  | --------- | - | ------ |  |  | - | ------- | 
|Name               |  | Base Salary |         |  | BonusPayment($)(1) |   |         | Value ofStockOption($) |  |  | RestrictedStockAwards($)(2) |  |  | Benefits andPerquisites($)(3) |  |  | Total ($) |  
|Douglas Mattscheck |  | $           | 710,802 |  |                    | $ | 106,620 |                        |  |  |                             |  |  |                               |  |  |           | $ | 36,474 |  |  | $ | 853,896 | 
|C.Steven Smoot     |  | $           | 450,000 |  |                    | $ | 54,000  |                        |  |  |                             |  |  |                               |  |  |           | $ | 24,316 |  |  | $ | 528,316 | 
|Catherine Cuisson  |  | $           | 378,630 |  |                    | $ | 34,076  |                        |  |  |                             |  |  |                               |  |  |           | $ | 12,158 |  |  | $ | 424,864 | 
|Dennie Rexroad     |  | $           | 409,844 |  |                    | $ | 36,886  |                        |  |  |                             |  |  |                               |  |  |           | $ | 36,474 |  |  | $ | 483,204 | 
|Drew Walker        |  | $           | 401,700 |  |                    | $ | 48,204  |                        |  |  |                             |  |  |                               |  |  |           | $ | 36,474 |  |  | $ | 486,378 | 



|(1) | Bonus payment is calculated as 30% of the maximum payment under the non-equity incentive plan awards. The officer would be entitled to a pro rata portion of the annual
bonus earned through the date of termination, if such amount were higher.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | No restricted stock was outstanding as of the reporting date.
|--- | -------------------------------------------------------------



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|(3) | The Company is required to provide continued coverage under health and dental benefits, at its expense, for a period ending on the earlier of (i) twenty-four
months from the date of termination, or (ii) the date comparable coverage is obtained from a successor employer. The cost was calculated by multiplying the Companys monthly COBRA rate by the maximum number of months for which benefits
would be provided.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Potential Termination Payments and Benefits for Termination As a Result of Death or Disability



|                   |  |             |  |  |                    |   |         |                        |  |  |                             |  |  |                            |  |  |           |  |  |  |  |   |         | 
|------------------ |  | ----------- |  |  | ------------------ | - | ------- | ---------------------- |  |  | --------------------------- |  |  | -------------------------- |  |  | --------- |  |  |  |  | - | ------- | 
|Name               |  | Base Salary |  |  | BonusPayment($)(1) |   |         | Value ofStockOption($) |  |  | RestrictedStockAwards($)(2) |  |  | Benefits andPerquisites($) |  |  | Total ($) | 
|Douglas Mattscheck |  |             |  |  |                    | $ | 106,620 |                        |  |  |                             |  |  |                            |  |  |           |  |  |  |  | $ | 106,620 | 
|C.Steven Smoot     |  |             |  |  |                    | $ | 54,000  |                        |  |  |                             |  |  |                            |  |  |           |  |  |  |  | $ | 54,000  | 
|Catherine Cuisson  |  |             |  |  |                    | $ | 34,076  |                        |  |  |                             |  |  |                            |  |  |           |  |  |  |  | $ | 34,076  | 
|Dennie Rexroad     |  |             |  |  |                    | $ | 36,886  |                        |  |  |                             |  |  |                            |  |  |           |  |  |  |  | $ | 36,886  | 
|Drew Walker        |  |             |  |  |                    | $ | 48,204  |                        |  |  |                             |  |  |                            |  |  |           |  |  |  |  | $ | 48,204  | 



|(1) | Bonus payment is calculated as 30% of the maximum payment under the non-equity incentive plan awards. The officer would be entitled to a pro rata portion of the annual
bonus earned through the date of termination, if such amount were higher.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | No restricted stock was outstanding as of the reporting date.
|--- | -------------------------------------------------------------

Director Compensation

Our Board of Directors did not receive direct
compensation from the Company relative to their participation on our Board for the year ended December 31, 2010.



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|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------

Beneficial Ownership

All
of the outstanding shares of our issued and outstanding common stock are held by Holdings. The table below presents information regarding beneficial ownership of the equity securities of Holdings as of March 30, 2011 by each person who is known
by us to beneficially own more than 5% of the equity securities of Holdings, by each of our directors, by each of our executive officers, and by all of our directors and executive officers as a group.

As of March 30, 2011, Holdings had 11,483,915 shares of common stock outstanding. The number of shares of common stock outstanding
used in calculating the percentage for each listed person includes the shares of common stock underlying options beneficially owned by that person that are exercisable within 60 days following March 30, 2011. Notwithstanding the beneficial
ownership of common stock presented below, various stockholder agreements govern the stockholders exercise of their voting rights with respect to the election of directors and certain other material events. The parties to these stockholders
agreements have agreed to vote their shares to elect the board of directors as set forth therein. See Certain Relationships and Related Party Transactions.

Except as described in the agreements mentioned above or as otherwise indicated in a footnote, each of the beneficial owners listed has, to our knowledge, sole voting and investment power with respect to
the indicated shares of common stock. Unless otherwise indicated in a footnote, the address for each individual listed below is c/o AGY Holding Corp., 2556 Wagener Road, Aiken, South Carolina, 29801.



|                                                             |  |                       |            |  |                        |  |       |  
|------------------------------------------------------------ |  | --------------------- | ---------- |  | ---------------------- |  | ----- | -
|Name and Address                                             |  | Shares ofCommon Stock |            |  | Percent ofCommon Stock | 
|Investment funds associated with Kohlberg & Company, LLC (1) |  |                       | 10,944,915 |  |                        |  | 89.68 | %
|Douglas Mattscheck (2)                                       |  |                       | 466,667    |  |                        |  | 3.82  | %
|C. Steven Smoot (7)                                          |  |                       |           |  |                        |  |      |  
|Catherine Cuisson (3)                                        |  |                       | 153,333    |  |                        |  | 1.26  | %
|Dennie Rexroad (4)                                           |  |                       | 101,000    |  |                        |  |       | *
|Drew Walker (5)                                              |  |                       | 101,000    |  |                        |  |       | *
|Christopher Lacovara (6)                                     |  |                       |           |  |                        |  |      |  
|Samuel Frieder (6)                                           |  |                       |           |  |                        |  |      |  
|Seth Hollander (6)                                           |  |                       |           |  |                        |  |      |  
|All directors and executive officers as a group (10 people)  |  |                       | 1,009,000  |  |                        |  | 8.27  | %



|* | indicates less than 1% of common stock
|- | --------------------------------------

|(1) | Includes 5,776,453 shares owned by Kohlberg Investors V, LP (Kohlberg V), 4,201,138 shares owned by Kohlberg TE Investors V, LP (Kohlberg TE V),
477,421 shares owned by Kohlberg Partners V (Partners V), 386,937 shares owned by Kohlberg Offshore Investors V, LP (Offshore V) and 102,966 shares owned by KOCO Investors V, LP (KOCO V). Kohlberg Management V,
LLC is the general partner of each of Kohlberg V, Kohlberg TE V, Partners V, Offshore V and KOCO V and is affiliated with Kohlberg & Company, LLC. The address of each of the entities described in this footnote (1) is 111 Radio Circle
Mount Kisco, NY 10549.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes 266,667 shares, which Mr. Mattscheck has the right to acquire within 60 days of March 30, 2011 by exercising stock options.
|--- | ------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes 133,333 shares, which Ms. Cuisson has the right to acquire within 60 days of March 30, 2011 by exercising stock options.
|--- | ---------------------------------------------------------------------------------------------------------------------------------

|(4) | Includes 80,000 shares, which Mr. Rexroad has the right to acquire within 60 days of March 30, 2011 by exercising stock options.
|--- | --------------------------------------------------------------------------------------------------------------------------------

|(5) | Includes 80,000 shares, which Mr. Walker has the right to acquire within 60 days of March 30, 2011 by exercising stock options.
|--- | -------------------------------------------------------------------------------------------------------------------------------

|(6) | Christopher Lacovara, Samuel Frieder, and Seth Hollander each own membership interests in Kohlberg Management V, L.L.C., which is the general partner of the various
investment funds that own shares as described in footnote (1) above.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | No stock options granted to Mr. Smoot have vested yet.
|--- | ------------------------------------------------------



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Securities Authorized for Issuance Under Equity Compensation Plans

The following table summarizes the securities authorized for issuance as of December 31, 2010 under our KAGY 2006 Stock Option Plan,
the number of shares of our common stock issuable upon the exercise of outstanding options, the weighted average exercise price of such options and the number of additional shares of our common stock still authorized for issuance under such plans.
The KAGY Stock Option Plan has been approved by our shareholders.



|                            |  |                                                                                          |           |  |                                                                          |   |      |                                                                                                                                      |  |  |         | 
|--------------------------- |  | ---------------------------------------------------------------------------------------- | --------- |  | ------------------------------------------------------------------------ | - | ---- | ------------------------------------------------------------------------------------------------------------------------------------ |  |  | ------- | 
|                            |  | (a)                                                                                      |           |  | (b)                                                                      |   |      | (c)                                                                                                                                  | 
|                            |  | Number of securities tobe issued upon exerciseof outstanding
options,warrants and rights |           |  | Weighted-averageexercise price ofoutstanding options,warrants and
rights |   |      | Number of securitiesremaining available forfuture issuanceunder equitycompensationplans (excluding securitiesreflected in column (a) | 
|KAGY 2006 Stock Option Plan |  |                                                                                          | 1,150,000 |  |                                                                          | $ | 4.04 |                                                                                                                                      |  |  | 185,000 | 



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|-------- | -------------------------------------------------------------------------

Pursuant to our Conflicts of Interest Policy, our executive officers and certain other employees who have, or whose immediate family members have, any financial interest in an entity that engages in
business with the Company or competes with the Company are required to report to us this financial interest. If the Company considers the financial interest to be in conflict with the Companys best interests, the Company may require
divestiture of the interest. However, under the Companys bylaws, a contract or transaction between the Company and one or more of its directors or officers, or between the Company and any other corporation, partnership, association, or other
organization in which one or more of the Companys directors or officers are directors or officers, or have a financial interest will not be voidable solely because of such relationship or interest if (i) the Board is aware of such
relationship or interest and a majority of the disinterested directors approves the contract or transaction in good faith, (ii) the stockholders entitled to vote on the contract or transaction are aware of such relationship or interest and
approve the contract or transaction in good faith or (iii) the contract or transaction is fair as to the Company as of the time it is authorized, approved or ratified, by the Board, a committee or the stockholders.

Stockholders Agreement

We have entered into a stockholders agreement with Holdings and the stockholders of Holdings, including investment funds associated with
our Sponsor and certain members of our management. Future stockholders may also be required to become parties to the agreement. The stockholders agreement contains agreements among the parties with respect to the election of our directors and the
directors of Holdings, restrictions on the issuance of shares (including certain participation rights), restrictions on the transfer of shares (including tag-along rights, drag-along rights and a right of first offer) and other special corporate
governance provisions (including the right of our Sponsor and its affiliates to approve various corporate actions).

Registration Rights
Agreement

We have entered into a registration rights agreement with Holdings and the stockholders of Holdings, including
investment funds associated with our Sponsor and certain members of our management. The registration rights agreement contains customary demand and piggyback registration rights. The agreement also requires Holdings and us to indemnify each holder
of registrable securities and certain of their affiliates from liability arising from any violation of the securities laws by Holdings or us or any material misstatements or omissions made by Holdings or us in connection with a public offering.

Management Agreement

We have entered into a management agreement with Holdings and our Sponsor pursuant to which our Sponsor will provide management and other advisory services to us. In consideration for ongoing management
and other advisory services, the management agreement requires us to pay our Sponsor an annual management fee of $750,000 and to reimburse our Sponsor for out-of-pocket expenses incurred in connection with its services. The management agreement also
provides that our Sponsor will receive transaction fees in connection with certain subsequent financings and acquisition transactions. The management agreement includes customary indemnification provisions in favor of our Sponsor and its affiliates.

Director Independence

AGY Holding Corp. is a privately held corporation. None of our directors meets the standards for independent directors of a national stock exchange.



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|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES
|-------- | --------------------------------------

PricewaterhouseCoopers LLP, and its affiliates (PWC), and Deloitte & Touche LLP, and its affiliates (Deloitte), the Companys independent registered public accounting
firm and principal accountant for the fiscal years ended December 31, 2010 and December 31, 2009, respectively, billed the fees set forth below (in thousands).



|                       |  |                             |         |  |                             |   |         | 
|---------------------- |  | --------------------------- | ------- |  | --------------------------- | - | ------- | 
|                       |  | Year
EndedDecember 31, 2010 |         |  | Year
EndedDecember 31, 2009 |  
|PWC                    |  |                             |         |  |                             |   |         | 
|Audit Fees (1)         |  | $                           | 475,000 |  |                             | $ | 372,000 | 
|Audit-Related Fees (2) |  |                             |        |  |                             |   |        | 
|Tax Fees (3)           |  | $                           | 29,452  |  |                             | $ | 39,640  | 
|All Other Fees (5)     |  |                             |        |  |                             |   |        | 
|                       |  |                             |         |  |                             |   |         | 
|Total Fees             |  | $                           | 504,452 |  |                             | $ | 411,640 | 
|Deloitte               |  |                             |         |  |                             |   |         | 
|Audit Fees (1)         |  | $                           | 29,725  |  |                             | $ | 427,142 | 
|Audit-Related Fees (2) |  |                             |        |  |                             |   | 79,850  | 
|Tax Fees (4)           |  |                             | 153,240 |  |                             |   | 98,343  | 
|All Other Fees (5)     |  |                             |        |  |                             |   |        | 
|                       |  |                             |         |  |                             |   |         | 
|Total Fees             |  | $                           | 182,965 |  |                             | $ | 605,335 | 



|(1) | Audit Fees billed in the fiscal years ended December 31, 2009 and 2010 represented fees billed by the Companys independent registered public accounting firm
and principal accountant for the following services: the audit of the Companys annual financial statements, reviews of the Companys quarterly financial statements, and other services normally provided in connection with statutory and
regulatory filings.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The Company did not incur any Audit-Related Fees in the fiscal year ended December 31, 2010. In 2009, audit-related fees billed by Deloitte represented
fees related to services rendered for the implementation of Sarbanes-Oxley initiated by the Company and to the review of the Companys correspondence with the SEC.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Tax fees billed in 2009 and 2010 represent fees for the tax services related to some individual 2008 tax return and other tax filings assistance preparation performed
prior to the engagement of PWC as the Companys independent registered public accounting firm and principal accountant.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Tax Fees billed for 2009 and 2010 represent primarily fees for the tax services related to the federal and state tax filings.
|--- | -----------------------------------------------------------------------------------------------------------------------------

|(5) | The Company did not incur any All Other Fees in the fiscal years ended December 31, 2009 and 2010 with its principal independent registered accounting
firm.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

The audit committee was formed on July 20, 2006. The audit committee approves all engagements of the
independent registered public accounting firm in advance, including approval of related fees.



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PART IV



|ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|-------- | ---------------------------------------



|(a) | Financial Statements
|--- | --------------------

The
financial statements are filed as part of this Annual Report on Form 10-K under Item 8  Financial Statements.



|(b) | Financial Statement Schedules
|--- | -----------------------------

Financial statement schedules have been omitted because they are either not required, not applicable, or the information is presented in the Consolidated Financial Statements and the notes thereto in
Item 8 above.



|(c) | Exhibits
|--- | --------



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                    
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                        
|3.1         |  | Restated Certificate of Incorporation of AGY Holding Corp. (incorporated by reference to Exhibit 3.1 of Form S-4 (File No. 333-150749) filed May 8, 2008)                                                                                                                                                                                                                                                                          
|            | 
|3.2         |  | By-laws of AGY Holding Corp. (incorporated by reference to Exhibit 3.2 of Form S-4 (File No. 333-150749) filed May 8, 2008)                                                                                                                                                                                                                                                                                                        
|            | 
|3.3         |  | Certificate of Formation of AGY Aiken LLC (incorporated by reference to Exhibit 3.3 of Form S-4 (File No. 333-150749) filed May 8, 2008)                                                                                                                                                                                                                                                                                           
|            | 
|3.4         |  | Limited Liability Company Agreement of AGY Aiken LLC (incorporated by reference to Exhibit 3.4 of Form S-4 (File No. 333-150749) filed May 8, 2008)                                                                                                                                                                                                                                                                                
|            | 
|3.5         |  | Certificate of Formation of AGY Huntingdon LLC (incorporated by reference to Exhibit 3.5 of Form S-4 (File No. 333-150749) filed May 8, 2008)                                                                                                                                                                                                                                                                                      
|            | 
|3.6         |  | Limited Liability Company Agreement of AGY Huntingdon LLC (incorporated by reference to Exhibit 3.6 of Form S-4 (File No. 333-150749) filed May 8, 2008)                                                                                                                                                                                                                                                                           
|            | 
|4.1         |  | Indenture, dated as of October 25, 2006 among AGY Holding Corp., AGY Aiken LLC, AGY Huntingdon LLC, and U.S. Bank National Association, as trustee (incorporated by reference to
Exhibit 4.1 of Form S-4 (File No. 333-150749) filed May 8, 2008)                                                                                                                                                                                  
|            | 
|4.2         |  | First Supplemental Indenture dated as of March 28, 2008 by and among AGY Holding Corp., AGY Aiken LLC, AGY Huntingdon LLC, and U.S. Bank National Association, as trustee
(incorporated by reference to Exhibit 4.2 of Form S-4 (File No. 333-150749) filed May 8, 2008)                                                                                                                                                           
|            | 
|4.3         |  | Registration Rights Agreement dated as of October 25, 2006 by and among AGY Holding Corp., AGY Aiken LLC, AGY Huntingdon LLC and UBS Securities LLC (incorporated by reference to
Exhibit 4.3 of Form S-4 (File No. 333-150749) filed May 8, 2008)                                                                                                                                                                                 
|            | 
|4.4         |  | Form of 11% Senior Second Lien Notes due 2014 (incorporated by reference to Exhibit 4.4 of Form S-4 (File No. 333-150749) filed May 8, 2008)                                                                                                                                                                                                                                                                                       
|            | 
|4.5         |  | Security Agreement dated as of October 25, 2006 among AGY Holding Corp., AGY Aiken LLC, AGY Huntingdon LLC, and U.S. Bank National Association, as collateral agent (incorporated by
reference to Exhibit 4.5 of Form S-4 (File No. 333-150749) filed May 8, 2008)                                                                                                                                                                 
|            | 
|4.6         |  | Shareholders Agreement dated June 10, 2009 by and among Grace Technology Investment Co., Ltd., AGY (Cayman) and Main Union Industrial Ltd. (incorporated by reference to
Exhibit 10.5 of Form 10-Q (File No. 333-150749) filed August 19, 2009)                                                                                                                                                                                   
|            | 
|4.7         |  | Amended and Restated Loan and Security Agreement dated as of March 8, 2011, among AGY Holding Corp., AGY Aiken LLC, AGY Huntingdon LLC, as borrowers, the Lenders party thereto
from time to time, Bank of America, N.A., a national banking association, as Administrative Agent and UBS Securities LLC, as Documentation Agent (incorporated by reference to Exhibit 10.1 of Form 8-K (File No. 335-150749) filed March 14,
2011)



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|      |  |                                                                                                                                                                                                                                                                                                                                                                       
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.12  |  | Intercreditor Agreement dated as of October 25, 2006 among AGY Holding Corp., AGY Aiken LLC, AGY Huntingdon LLC, KAGY Holding Company, Inc., UBS AG, Stamford Branch, collateral
agent, and U.S. Bank National Association, as trustee and noteholder collateral agent (incorporated by reference to Exhibit 10.8 of Form S-4 (File No. 333-150749) filed May 8, 2008)
|      | 
|4.13  |  | Form of Stockholders Agreement dated as of April 7, 2006 by and among KAGY Holding Company, Inc., AGY Holding Corp., as successor by merger to KAGY Acquisition Corp., and certain
stockholders of KAGY Holdings Corp. party thereto (incorporated by reference to Exhibit 10.16 of Form S-4 (File No. 333-150749) filed May 8, 2008)                                 
|      | 
|4.14  |  | Reaffirmation of Intercreditor Agreement dated as of March 8, 2011 among AGY Holding Corp., AGY Aiken LLC, AGY Huntingdon LLC, KAGY Holding Company, Inc., U.S. Bank National
Association, as trustee and noteholder collateral agent and Bank of America, N.A., as administrative agent                                                                             
|      | 
|10.1  |  | Management Agreement dated as of April 7, 2006 by and among KAGY Holding Company, Inc., AGY Holding Corp., as successor by merger to KAGY Acquisition Corp., and Kohlberg &
Company, LLC (incorporated by reference to Exhibit 10.15 of Form S-4 (File No. 333-150749) filed May 8, 2008)                                                                             
|      | 
|10.2  |  | Amended and Restated Employment Agreement dated effective as of April 7, 2006 by and between KAGY Holding Company, Inc., AGY Holding Corp. and Douglas J. Mattscheck (incorporated by
reference to Exhibit 10.18 of Form S-4 (File No. 333-150749) filed May 8, 2008)*                                                                                                
|      | 
|10.3  |  | Employment Agreement dated effective as of April 7, 2006 by and between KAGY Holding Company, Inc., AGY Holding Corp. and Catherine Cuisson (incorporated by reference to Exhibit
10.20 of Form S-4 (File No. 333-150749) filed May 8, 2008)*                                                                                                                         
|      | 
|10.4  |  | Employment Offer Letter dated as of December 8, 2004 between AGY Holding Corp. and Dennis Rexroad (incorporated by reference to Exhibit 10.21 of Form S-4 (File No. 333-150749) filed
May 8, 2008)*                                                                                                                                                                   
|      | 
|10.5  |  | First Amendment to Employment Offer Letter dated effective as of April 7, 2006 by and between KAGY Holding Company, Inc., AGY Holding Corp. and Dennis Rexroad (incorporated by
reference to Exhibit 10.22 of Form S-4 (File No. 333-150749) filed May 8, 2008)*                                                                                                      
|      | 
|10.6  |  | Employment Offer Letter dated as of December 10, 2004 between AGY Holding Corp. and Drew Walker (incorporated by reference to Exhibit 10.23 of Form S-4 (File No. 333-150749) filed
May 8, 2008)*                                                                                                                                                                     
|      | 
|10.7  |  | First Amendment to Employment Offer Letter dated effective as of April 7, 2006 by and between KAGY Holding Company, Inc., AGY Holding Corp. and Drew Walker (incorporated by
reference to Exhibit 10.24 of Form S-4 (File No. 333-150749) filed May 8, 2008)*                                                                                                         
|      | 
|10.8  |  | Employment Offer Letter dated as of June 7, 2007 by and between KAGY Holdings, Inc. and Jeffrey J. Davis (incorporated by reference to Exhibit 10.25 of Form S-4 (File No.
333-150749) filed May 8, 2008)*                                                                                                                                                            
|      | 
|10.9  |  | KAGY Holding Company, Inc. Severance Plan adopted as of April 7, 2006 (incorporated by reference to Exhibit 10.26 of Form S-4 (File No. 333-150749) filed May 8,
2008)*                                                                                                                                                                                               
|      | 
|10.10 |  | KAGY Holding Company, Inc. 2006 Stock Option Plan (incorporated by reference to Exhibit 10.27 of Form S-4 (File No. 333-150749) filed May 8, 2008)*                                                                                                                                                                                                                   
|      | 
|10.11 |  | Form of Stock Option Grant under the KAGY Holding Company, Inc. 2006 Stock Option Plan (incorporated by reference to Exhibit 10.28 of Form S-4 (File No. 333-150749) filed May 8,
2008)*                                                                                                                                                                              



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|      |  |                                                                                                                                                                                                                                                                                                                                                                                            
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.12 |  | Amended and Restated Supply Agreement, dated as of May 1, 2006, between Nouveau Verre Holdings LLC, Porcher Industries, S.A., BGF Industries, Inc., Chavanoz S.A., Shanghai
 Porcher Industries, Sovoutri S.A., Fothergill P.L.C., The Other Affiliates of Porcher, and AGY Holdings Corp (incorporated by reference to Exhibit 10.29 of Form S-4 (File No. 333-150749) filed May 8, 2008)
|      | 
|10.13 |  | Amended and Restated Alloy Services Agreement, dated as of September 16, 2003, by and between Advanced Glassfiber Yarns LLC and Owens Corning (incorporated by reference to Exhibit
10.30 of Form S-4 (File No. 333-150749) filed May 8, 2008)                                                                                                                                             
|      | 
|10.14 |  | Amendment No. 1 to Amended and Restated Alloy Services Agreement, dated as of November 26, 2006, by and between AGY Holding Corp., as successor-in-interest to Advanced Glassfiber
Yarns LLC, and Owens Corning (incorporated by reference to Exhibit 10.31 of Form S-4 (File No. 333-150749) filed May 8, 2008)                                                                           
|      | 
|10.15 |  | Amendment No. 2 to Amended and Restated Alloy Services Agreement, dated as of October 26, 2007, by and between AGY Holding Corp., as successor-in-interest to Advanced Glassfiber
Yarns LLC, and Owens Corning (incorporated by reference to Exhibit 10.32 of Form S-4 (File No. 333-150749) filed May 8, 2008)                                                                            
|      | 
|10.16 |  | Sale and Purchase Agreement by and among Grace Technology Investment Co., Ltd., Grace THW Holding Limited, and AGY (Cayman) dated as of March 12, 2009 (incorporated by reference to
Exhibit 10.34 of Form 10-K (File No. 333-150749) filed March 25, 2009)                                                                                                                                
|      | 
|10.17 |  | Framework Agreement by and among Grace THW Holding Limited, Grace Technology Investment Co., Ltd., AGY Holding Corp., AGY (Cayman), Main Union Industrial Ltd., and Shanghai Grace
Technology Co., Ltd., dated as of March 12, 2009 (incorporated by reference to Exhibit 10.35 of Form 10-K (File No. 333-150749) filed March 25, 2009)                                                   
|      | 
|10.18 |  | Option Agreement dated June 10, 2009 by and among Grace Technology Investment Co., Ltd., AGY (Cayman) and Main Union Industrial Ltd. (incorporated by reference to Exhibit 10.5 of
Form 10-Q (File No. 333-150749) filed August 19, 2009) **                                                                                                                                               
|      | 
|10.19 |  | Master Lease Agreement dated September 28, 2009 by and between DB Energy Trading LLC and AGY Holding Corp. (incorporated by reference to Exhibit 10.1 of Form 10-Q (File No.
333-150749) filed November 13, 2009) **                                                                                                                                                                       
|      | 
|10.20 |  | Employment offer letter dated as of May 4, 2010 between KAGY Holdings, Inc. and C. Steven Smoot (incorporated by reference to Exhibit 10.2 of Form 10-Q (File 333-150749) filed
August 16, 2010)*                                                                                                                                                                                          
|      | 
|12.1  |  | Statements re: Computations of Ratios                                                                                                                                                                                                                                                                                                                                                     
|      | 
|14.1  |  | Code of Business Ethics and Business Conduct (incorporated by reference to exhibit 14.1 of Form 10-K (File No. 333-150749) filed March 25, 2009)                                                                                                                                                                                                                                           
|      | 
|16.1  |  | Letter dated January 26, 2010 from Deloitte & Touche LLP (incorporated by reference to Exhibit 16.1 of Form 8-K (File No. 333-150749) filed January 26, 2010)                                                                                                                                                                                                                              
|      | 
|21.1  |  | Subsidiaries of the Company                                                                                                                                                                                                                                                                                                                                                               
|      | 
|31.1  |  | Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer                                                                                                                                                                                                                                                                                                                     
|      | 
|31.2  |  | Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer and Principal Accounting Officer                                                                                                                                                                                                                                                                                    
|      | 
|32.1  |  | Section 1350 Certification of Principal Executive Officer                                                                                                                                                                                                                                                                                                                                 
|      | 
|32.2  |  | Section 1350 Certification of Principal Financial Officer and Principal Accounting Officer                                                                                                                                                                                                                                                                                                



|* | Management contract.
|- | --------------------

| | Filed herewith.
|- | ---------------

|** | This exhibit was filed separately with the Securities and Exchange Commission pursuant to an application for confidential treatment. The confidential portions have been
omitted and have been marked with an asterisk.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



-49-



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Aiken, State of South Carolina, on the 31stday of March, 2011.



AGY HOLDING CORP.
(Registrant)By:

/S/    DOUGLAS J.
MATTSCHECKDouglas J. MattscheckChief Executive Officer and President


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the date indicated below.



|                             |  |                                                 |  |               
|---------------------------- |  | ----------------------------------------------- |  | --------------
|Signature                    |  | Title                                           |  | Date          
|                             |  |                                                
|/S/    DOUGLAS J.
MATTSCHECK |  | Chief Executive Officer, President and Director |  | March 31, 2011
|Douglas J. Mattscheck        |  | (Principal Executive Officer)                   |  |               
|                             |  |                                                
|/S/    C. STEVEN
SMOOT       |  | Chief Financial Officer                         |  | March 31, 2011
|C. Steven Smoot              |  | (Principal Financial and Accounting Officer)    |  |               
|                             |  |                                                
|/S/    CHRISTOPHER
LACOVARA  |  | Director                                        |  | March 31, 2011
|Christopher Lacovara         |  |                                                 |  |               
|                             |  |                                                
|/S/    SAMUEL P.
FRIEDER     |  | Director                                        |  | March 31, 2011
|Samuel P. Frieder            |  |                                                 |  |               
|                             |  |                                                
|/S/    SETH H.
HOLLANDER     |  | Director                                        |  | March 31, 2011
|Seth H. Hollander            |  |                                                 |  |               



-50-



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##### Table of Contents

AGY HOLDING CORP. AND SUBSIDIARIES

Index to Financial Statements



|                                                                                                                                                                        |  |      |     | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                                                                        |  | Page |    
|                                                                                                                                                                        | 
|Report of Independent Registered Public Accounting Firm with respect to the Consolidated Financial Statements
 as of and for the Years Ended December 31, 2010 and 2009 |  |      | F-2 | 
|                                                                                                                                                                        | 
|Report of Independent Registered Public Accounting Firm with respect to the Consolidated Financial Statements
 for the Year ended December 31, 2008                     |  |      | F-3 | 
|                                                                                                                                                                        | 
|Consolidated Financial Statements as of December 31, 2010 and 2009 and for the Years Ended December 31, 2010, 2009 and
2008:                                            |  |      |     | 
|                                                                                                                                                                        | 
|     Balance Sheets                                                                                                                                                    |  |      | F-4 | 
|                                                                                                                                                                        | 
|     Statements of Operations                                                                                                                                          |  |      | F-5 | 
|                                                                                                                                                                        | 
|     Statements of Changes in Shareholders Equity                                                                                                                     |  |      | F-6 | 
|                                                                                                                                                                        | 
|     Statements of Cash Flows                                                                                                                                          |  |      | F-7 | 
|                                                                                                                                                                        | 
|     Notes to the Consolidated Financial Statements                                                                                                                    |  |      | F-9 | 



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of

AGY Holding Corp. and Subsidiaries

Aiken, SC

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the
financial position of AGY Holding Corp. and its subsidiaries at December 31, 2010 and 2009, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the
United States of America. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements
in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, assessing the accounting principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers
LLP

Charlotte, North Carolina

March 30, 2011



F-2



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of

AGY Holding Corp. and Subsidiaries

Aiken, South
Carolina

We have audited the accompanying consolidated statements of operations, changes in shareholders equity, and cash flows of AGY
Holding Corp. and subsidiaries (the Company) for the year ended December 31, 2008. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, 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.

In our opinion, such consolidated financial statements present fairly, in all material respects, the
results of the Companys operations and its cash flows for the year ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

Greenville, South Carolina

March 20, 2009



F-3



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##### Table of Contents

AGY Holding Corp. And Subsidiaries

Consolidated Balance Sheets

As of
December 31, 2010 and 2009

(Dollars in thousands except per share amounts)





|                                                                                                                                 |  |      |          |   |      |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | ------- | -
|                                                                                                                                 |  | 2010 |          |   | 2009 |  
|Assets                                                                                                                           |  |      |          |   |      |   |         |  
|Current assets:                                                                                                                  |  |      |          |   |      |   |         |  
|Cash                                                                                                                             |  | $    | 3,132    |   |      | $ | 3,439   |  
|Trade accounts receivables, less allowances of $3,123 and $2,558 at December 31, 2010 and 2009, respectively                     |  |      | 17,965   |   |      |   | 18,682  |  
|Inventories, net                                                                                                                 |  |      | 31,260   |   |      |   | 29,734  |  
|Deferred tax assets                                                                                                              |  |      | 4,984    |   |      |   | 6,382   |  
|Other current assets                                                                                                             |  |      | 1,997    |   |      |   | 2,560   |  
|                                                                                                                                 |  |      |          |   |      |   |         |  
|Total current assets                                                                                                             |  |      | 59,338   |   |      |   | 60,797  |  
|Property, plant and equipment, and alloy metals, net                                                                             |  |      | 220,338  |   |      |   | 249,096 |  
|Intangible assets, net                                                                                                           |  |      | 17,953   |   |      |   | 19,667  |  
|Other assets                                                                                                                     |  |      | 1,058    |   |      |   | 1,306   |  
|                                                                                                                                 |  |      |          |   |      |   |         |  
|TOTAL                                                                                                                            |  | $    | 298,687  |   |      | $ | 330,866 |  
|                                                                                                                                 |  |      |          |   |      |   |         |  
|Liabilities, Obligation Under Put/Call for Noncontrolling Interest and Shareholders Equity                                      |  |      |          |   |      |   |         |  
|Current liabilities:                                                                                                             |  |      |          |   |      |   |         |  
|Accounts payable                                                                                                                 |  | $    | 11,730   |   |      | $ | 13,718  |  
|Accrued liabilities                                                                                                              |  |      | 11,320   |   |      |   | 17,563  |  
|Short-term borrowings                                                                                                            |  |      | 9,890    |   |      |   | 5,661   |  
|Current portion of long-term debt                                                                                                |  |      | 8,342    |   |      |   | 5,142   |  
|                                                                                                                                 |  |      |          |   |      |   |         |  
|Total current liabilities                                                                                                        |  |      | 41,282   |   |      |   | 42,084  |  
|Long-term debt                                                                                                                   |  |      | 214,973  |   |      |   | 221,666 |  
|Pension and other employee benefit plans                                                                                         |  |      | 10,123   |   |      |   | 12,052  |  
|Other liabilities                                                                                                                |  |      |         |   |      |   | 4,465   |  
|Deferred tax liabilities                                                                                                         |  |      | 6,992    |   |      |   | 13,768  |  
|                                                                                                                                 |  |      |          |   |      |   |         |  
|Total liabilities                                                                                                                |  |      | 273,370  |   |      |   | 294,035 |  
|                                                                                                                                 |  |      |          |   |      |   |         |  
|Commitments and contingencies                                                                                                    |  |      |          |   |      |   |         |  
|Obligation under put/call for noncontrolling interest                                                                            |  |      | 3,401    |   |      |   | 11,320  |  
|                                                                                                                                 |  |      |          |   |      |   |         |  
|Shareholders equity:                                                                                                            |  |      |          |   |      |   |         |  
|Common stock, $.01 par value per share; 1,000 shares authorized; 100 shares issued and outstanding at December 31, 2010 and
2009 |  |      |         |   |      |   |        |  
|Additional paid-in capital                                                                                                       |  |      | 122,187  |   |      |   | 122,144 |  
|Accumulated deficit                                                                                                              |  |      | (112,562 | ) |      |   | (96,440 | )
|Accumulated other comprehensive income (deficit)                                                                                 |  |      | 2,529    |   |      |   | (193    | )
|                                                                                                                                 |  |      |          |   |      |   |         |  
|Total AGY Holding Corp. shareholders equity                                                                                     |  |      | 12,154   |   |      |   | 25,511  |  
|Noncontrolling interest                                                                                                          |  |      | 9,762    |   |      |   |        |  
|                                                                                                                                 |  |      |          |   |      |   |         |  
|Total shareholders equity                                                                                                       |  |      | 21,916   |   |      |   | 25,511  |  
|                                                                                                                                 |  |      |          |   |      |   |         |  
|TOTAL                                                                                                                            |  | $    | 298,687  |   |      | $ | 330,866 |  
|                                                                                                                                 |  |      |          |   |      |   |         |  

The accompanying notes are an integral part of the consolidated financial statements.



F- 4



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##### Table of Contents

AGY Holding Corp. And Subsidiaries

Consolidated Statements of Operations

For the Years Ended December 31, 2010, 2009 and 2008

(Dollars in thousands)





|                                                                    |  |      |         |   |      |   |          |      |  |   |         |  
|------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | -------- | ---- |  | - | ------- | -
|                                                                    |  | 2010 |         |   | 2009 |   |          | 2008 | 
|Net sales                                                           |  | $    | 183,674 |   |      | $ | 153,852  |      |  | $ | 236,487 |  
|Cost of goods sold                                                  |  |      | 168,932 |   |      |   | 156,512  |      |  |   | 190,154 |  
|                                                                    |  |      |         |   |      |   |          |      |  |   |         |  
|Gross profit (loss)                                                 |  |      | 14,742  |   |      |   | (2,660   | )    |  |   | 46,333  |  
|Selling, general and administrative expenses                        |  |      | (15,823 | ) |      |   | (15,963  | )    |  |   | (20,237 | )
|Restructuring charges                                               |  |      | (2,658  | ) |      |   | (789     | )    |  |   |        |  
|Amortization of intangible assets                                   |  |      | (1,003  | ) |      |   | (1,003   | )    |  |   | (1,858  | )
|Goodwill impairment charge                                          |  |      |        |   |      |   | (84,992  | )    |  |   |        |  
|Other operating income (expense)                                    |  |      | 6,415   |   |      |   | (791     | )    |  |   | 208     |  
|                                                                    |  |      |         |   |      |   |          |      |  |   |         |  
|Income (loss) from operations                                       |  |      | 1,673   |   |      |   | (106,198 | )    |  |   | 24,446  |  
|Other (expense) income:                                             |  |      |         |   |      |   |          |      |  |   |         |  
|Interest expense                                                    |  |      | (22,782 | ) |      |   | (22,235  | )    |  |   | (23,086 | )
|Gain on bargain purchase                                            |  |      |        |   |      |   | 20,376   |      |  |   |        |  
|Other income, net                                                   |  |      | 186     |   |      |   | 1,466    |      |  |   | 79      |  
|                                                                    |  |      |         |   |      |   |          |      |  |   |         |  
|(Loss) income before income tax (expense) benefit                   |  |      | (20,923 | ) |      |   | (106,591 | )    |  |   | 1,439   |  
|Income tax benefit (expense)                                        |  |      | 6,346   |   |      |   | 13,079   |      |  |   | (1,269  | )
|                                                                    |  |      |         |   |      |   |          |      |  |   |         |  
|Net (loss) income                                                   |  |      | (14,577 | ) |      |   | (93,512  | )    |  |   | 170     |  
|Less: net (income) loss attributable to the noncontrolling interest |  |      | (1,545  | ) |      |   | 1,119    |      |  |   |        |  
|                                                                    |  |      |         |   |      |   |          |      |  |   |         |  
|Net (loss) income attributable to AGY Holding Corp.                 |  | $    | (16,122 | ) |      | $ | (92,393  | )    |  | $ | 170     |  
|                                                                    |  |      |         |   |      |   |          |      |  |   |         |  

The accompanying notes are an integral part of the consolidated financial statements.



F- 5



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##### Table of Contents

AGY Holding Corp. And Subsidiaries

Consolidated Statements of Changes in Shareholders Equity

For the Years Ended December 31, 2010, 2009 and 2008

(Dollars in thousands)





|                                                                    |  |              |   |  |                          |   |         |                    |  |   |                                               |   |  |                                |       |   |                          |   |         |   |  |   |         |  
|------------------------------------------------------------------- |  | ------------ | - |  | ------------------------ | - | ------- | ------------------ |  | - | --------------------------------------------- | - |  | ------------------------------ | ----- | - | ------------------------ | - | ------- | - |  | - | ------- | -
|                                                                    |  | Common Stock |   |  | AdditionalPaid-InCapital |   |         | AccumulatedDeficit |  |   | AccumulatedOtherComprehensiveIncome (Deficit) |   |  | NoncontrollingInterest (NCI) |       |   | TotalShareholdersEquity |  
|BALANCE  December 31, 2007                                         |  | $            |  |  |                          | $ | 100,102 |                    |  | $ | (4,217                                        | ) |  | $                              | 155   |   |                          | $ |        |   |  | $ | 96,040  |  
|                                                                    |  |              |   |  |                          |   |         |                    |  |   |                                               |   |  |                                |       |   |                          |   |         |   |  |   |         |  
|Comprehensive income:                                               |  |              |   |  |                          |   |         |                    |  |   |                                               |   |  |                                |       |   |                          |   |         |   |  |   |         |  
|Net income                                                          |  |              |  |  |                          |   |        |                    |  |   | 170                                           |   |  |                                |      |   |                          |   |        |   |  |   | 170     |  
|Foreign currency translation adjustment                             |  |              |  |  |                          |   |        |                    |  |   |                                              |   |  |                                | 20    |   |                          |   |        |   |  |   | 20      |  
|Pension and other postretirement benefit plans  net of tax of $282 |  |              |  |  |                          |   |        |                    |  |   |                                              |   |  |                                | 448   |   |                          |   |        |   |  |   | 448     |  
|                                                                    |  |              |   |  |                          |   |         |                    |  |   |                                               |   |  |                                |       |   |                          |   |         |   |  |   |         |  
|Total comprehensive income                                          |  |              |  |  |                          |   |        |                    |  |   | 170                                           |   |  |                                | 468   |   |                          |   |        |   |  |   | 638     |  
|                                                                    |  |              |   |  |                          |   |         |                    |  |   |                                               |   |  |                                |       |   |                          |   |         |   |  |   |         |  
|Stock compensation                                                  |  |              |  |  |                          |   | 1,627   |                    |  |   |                                              |   |  |                                |      |   |                          |   |        |   |  |   | 1,627   |  
|                                                                    |  |              |   |  |                          |   |         |                    |  |   |                                               |   |  |                                |       |   |                          |   |         |   |  |   |         |  
|BALANCE  December 31, 2008                                         |  |              |  |  |                          |   | 101,729 |                    |  |   | (4,047                                        | ) |  |                                | 623   |   |                          |   |        |   |  |   | 98,305  |  
|                                                                    |  |              |   |  |                          |   |         |                    |  |   |                                               |   |  |                                |       |   |                          |   |         |   |  |   |         |  
|Comprehensive loss:                                                 |  |              |   |  |                          |   |         |                    |  |   |                                               |   |  |                                |       |   |                          |   |         |   |  |   |         |  
|Net loss                                                            |  |              |  |  |                          |   |        |                    |  |   | (92,393                                       | ) |  |                                |      |   |                          |   |        |   |  |   | (92,393 | )
|Foreign currency translation adjustment                             |  |              |  |  |                          |   |        |                    |  |   |                                              |   |  |                                | 14    |   |                          |   |        |   |  |   | 14      |  
|Pension and other postretirement benefit plans  net of tax of $508 |  |              |  |  |                          |   |        |                    |  |   |                                              |   |  |                                | (830  | ) |                          |   |        |   |  |   | (830    | )
|                                                                    |  |              |   |  |                          |   |         |                    |  |   |                                               |   |  |                                |       |   |                          |   |         |   |  |   |         |  
|Total comprehensive loss                                            |  |              |  |  |                          |   |        |                    |  |   | (92,393                                       | ) |  |                                | (816  | ) |                          |   |        |   |  |   | (93,209 | )
|                                                                    |  |              |   |  |                          |   |         |                    |  |   |                                               |   |  |                                |       |   |                          |   |         |   |  |   |         |  
|Capital contribution                                                |  |              |  |  |                          |   | 20,000  |                    |  |   |                                              |   |  |                                |      |   |                          |   |        |   |  |   | 20,000  |  
|Stock compensation                                                  |  |              |  |  |                          |   | 415     |                    |  |   |                                              |   |  |                                |      |   |                          |   |        |   |  |   | 415     |  
|Fair value of NCI at acquisition date of consolidated subsidiary    |  |              |  |  |                          |   |        |                    |  |   |                                              |   |  |                                |      |   |                          |   | 12,431  |   |  |   |        |  
|Effect of obligation under put/call for NCI                         |  |              |  |  |                          |   |        |                    |  |   |                                              |   |  |                                |      |   |                          |   | (12,431 | ) |  |   |        |  
|                                                                    |  |              |   |  |                          |   |         |                    |  |   |                                               |   |  |                                |       |   |                          |   |         |   |  |   |         |  
|BALANCE  December 31, 2009                                         |  |              |  |  |                          |   | 122,144 |                    |  |   | (96,440                                       | ) |  |                                | (193  | ) |                          |   |        |   |  |   | 25,511  |  
|                                                                    |  |              |   |  |                          |   |         |                    |  |   |                                               |   |  |                                |       |   |                          |   |         |   |  |   |         |  
|Comprehensive loss:                                                 |  |              |   |  |                          |   |         |                    |  |   |                                               |   |  |                                |       |   |                          |   |         |   |  |   |         |  
|Net loss                                                            |  |              |  |  |                          |   |        |                    |  |   | (16,122                                       | ) |  |                                |      |   |                          |   | 1,545   |   |  |   | (14,577 | )
|Foreign currency translation adjustment                             |  |              |  |  |                          |   |        |                    |  |   |                                              |   |  |                                | 1,296 |   |                          |   | 297     |   |  |   | 1,593   |  
|Pension and other postretirement benefit plans  net of tax of $843 |  |              |  |  |                          |   |        |                    |  |   |                                              |   |  |                                | 1,426 |   |                          |   |        |   |  |   | 1,426   |  
|                                                                    |  |              |   |  |                          |   |         |                    |  |   |                                               |   |  |                                |       |   |                          |   |         |   |  |   |         |  
|Total comprehensive loss                                            |  |              |  |  |                          |   |        |                    |  |   | (16,122                                       | ) |  |                                | 2,722 |   |                          |   | 1,842   |   |  |   | (11,558 | )
|                                                                    |  |              |   |  |                          |   |         |                    |  |   |                                               |   |  |                                |       |   |                          |   |         |   |  |   |         |  
|Stock compensation                                                  |  |              |  |  |                          |   | 43      |                    |  |   |                                              |   |  |                                |      |   |                          |   |        |   |  |   | 43      |  
|Effect of obligation under put/call for NCI                         |  |              |  |  |                          |   |        |                    |  |   |                                              |   |  |                                |      |   |                          |   | 7,920   |   |  |   | 7,920   |  
|                                                                    |  |              |   |  |                          |   |         |                    |  |   |                                               |   |  |                                |       |   |                          |   |         |   |  |   |         |  
|BALANCE  December 31, 2010                                         |  | $            |  |  |                          | $ | 122,187 |                    |  | $ | (112,562                                      | ) |  | $                              | 2,529 |   |                          | $ | 9,762   |   |  | $ | 21,916  |  
|                                                                    |  |              |   |  |                          |   |         |                    |  |   |                                               |   |  |                                |       |   |                          |   |         |   |  |   |         |  

The accompanying notes are an integral part of the consolidated financial statements.



F- 6



---

##### Table of Contents

AGY Holding Corp. And Subsidiaries

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2010, 2009 and 2008

(Dollars in thousands)





|                                                                                                   |  |      |         |   |      |   |         |      |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                   |  | 2010 |         |   | 2009 |   |         | 2008 | 
|Cash flows from operating activities:                                                              |  |      |         |   |      |   |         |      |  |   |         |  
|Net (loss) income                                                                                  |  | $    | (14,577 | ) |      | $ | (93,512 | )    |  | $ | 170     |  
|Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: |  |      |         |   |      |   |         |      |  |   |         |  
|Goodwill impairment charge                                                                         |  |      |        |   |      |   | 84,992  |      |  |   |        |  
|Effect of adopting ASC 805 for acquisition-related costs                                           |  |      |        |   |      |   | 1,098   |      |  |   |        |  
|Gain on bargain purchase for majority interest business acquisition                                |  |      |        |   |      |   | (20,376 | )    |  |   |        |  
|Gain from contract termination                                                                     |  |      | (6,276  | ) |      |   |        |      |  |   |        |  
|Depreciation                                                                                       |  |      | 18,646  |   |      |   | 12,608  |      |  |   | 10,844  |  
|Alloy metals depletion, net                                                                        |  |      | 8,103   |   |      |   | 6,733   |      |  |   | 12,373  |  
|Amortization of debt issuance costs                                                                |  |      | 711     |   |      |   | 713     |      |  |   | 723     |  
|Amortization of intangibles with definite lives                                                    |  |      | 1,003   |   |      |   | 1,003   |      |  |   | 1,858   |  
|Loss (gain) on sale, disposal of assets or exchange of property and equipment and alloy metals     |  |      | 331     |   |      |   | (1,178  | )    |  |   | (635    | )
|Gain on early extinguishment of debt                                                               |  |      |        |   |      |   | (1,138  | )    |  |   |        |  
|Stock compensation                                                                                 |  |      | 43      |   |      |   | 415     |      |  |   | 1,627   |  
|Deferred income tax (benefit) expense                                                              |  |      | (6,086  | ) |      |   | (13,107 | )    |  |   | 1,068   |  
|Changes in assets and liabilities (net of assets acquired):                                        |  |      |         |   |      |   |         |      |  |   |         |  
|Trade accounts receivable                                                                          |  |      | 717     |   |      |   | 870     |      |  |   | 2,694   |  
|Inventories                                                                                        |  |      | (1,526  | ) |      |   | 12,759  |      |  |   | (7,565  | )
|Other assets                                                                                       |  |      | 767     |   |      |   | (26     | )    |  |   | 406     |  
|Accounts payable                                                                                   |  |      | (1,957  | ) |      |   | 1,614   |      |  |   | (2,226  | )
|Accrued and other liabilities                                                                      |  |      | (4,386  | ) |      |   | (4,411  | )    |  |   | 1,123   |  
|Pension and other employee benefit plans                                                           |  |      | 342     |   |      |   | (203    | )    |  |   | 115     |  
|                                                                                                   |  |      |         |   |      |   |         |      |  |   |         |  
|Net cash (used in) provided by operating activities                                                |  |      | (4,145  | ) |      |   | (11,146 | )    |  |   | 22,575  |  
|                                                                                                   |  |      |         |   |      |   |         |      |  |   |         |  
|Cash flows from investing activities:                                                              |  |      |         |   |      |   |         |      |  |   |         |  
|Purchases of property and equipment and alloy metals                                               |  |      | (9,838  | ) |      |   | (13,349 | )    |  |   | (40,598 | )
|Reimbursement of acquisition of Continuous Filament Mat (CFM) business                           |  |      |        |   |      |   |        |      |  |   | 2,300   |  
|Proceeds from the sale of property and equipment and alloy metals                                  |  |      | 14,146  |   |      |   | 15,939  |      |  |   | 1,326   |  
|Decrease (increase) in restricted cash                                                             |  |      |        |   |      |   | 13,056  |      |  |   | (22     | )
|Payment for majority interest business acquisition, net of cash acquired                           |  |      |        |   |      |   | (18,153 | )    |  |   |        |  
|Other investing activities                                                                         |  |      |        |   |      |   |        |      |  |   | (1,098  | )
|                                                                                                   |  |      |         |   |      |   |         |      |  |   |         |  
|Net cash provided by (used in) investing activities                                                |  |      | 4,308   |   |      |   | (2,507  | )    |  |   | (38,092 | )
|                                                                                                   |  |      |         |   |      |   |         |      |  |   |         |  
|Cash flows from financing activities:                                                              |  |      |         |   |      |   |         |      |  |   |         |  
|Proceeds from Revolving Credit Facility borrowings                                                 |  |      | 71,900  |   |      |   | 67,400  |      |  |   | 94,200  |  
|Payments of Revolving Credit Facility borrowings                                                   |  |      | (73,200 | ) |      |   | (64,550 | )    |  |   | (77,800 | )
|Purchases of Senior Secured Notes                                                                  |  |      |        |   |      |   | (1,793  | )    |  |   |        |  
|Proceeds from AGY Asia Credit Facility borrowings                                                  |  |      | 6,225   |   |      |   | 3,635   |      |  |   |        |  
|Payments on AGY Asia Credit Facility borrowings                                                    |  |      | (5,213  | ) |      |   |        |      |  |   |        |  
|Payment on Shanghai Grace Fabric Corporation loan                                                  |  |      |        |   |      |   | (12,309 | )    |  |   |        |  
|Payments on capital leases                                                                         |  |      |        |   |      |   |        |      |  |   | (1,246  | )
|Capital contribution                                                                               |  |      |        |   |      |   | 20,000  |      |  |   |        |  
|Debt issuance costs and other                                                                      |  |      | (100    | ) |      |   | (100    | )    |  |   | (100    | )
|                                                                                                   |  |      |         |   |      |   |         |      |  |   |         |  
|Net cash (used in) provided by financing activities                                                |  |      | (388    | ) |      |   | 12,283  |      |  |   | 15,054  |  
|                                                                                                   |  |      |         |   |      |   |         |      |  |   |         |  
|Effect of exchange rate changes on cash                                                            |  |      | (82     | ) |      |   | 49      |      |  |   | 19      |  
|                                                                                                   |  |      |         |   |      |   |         |      |  |   |         |  
|Net decrease in cash                                                                               |  |      | (307    | ) |      |   | (1,321  | )    |  |   | (444    | )
|Cash, beginning of year                                                                            |  |      | 3,439   |   |      |   | 4,760   |      |  |   | 5,204   |  
|                                                                                                   |  |      |         |   |      |   |         |      |  |   |         |  
|Cash, end of year                                                                                  |  | $    | 3,132   |   |      | $ | 3,439   |      |  | $ | 4,760   |  
|                                                                                                   |  |      |         |   |      |   |         |      |  |   |         |  



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AGY Holding Corp. And Subsidiaries

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2010, 2009
and 2008

(Dollars in thousands)





|                                                                    |  |      |        |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                    |  | 2010 |        |   | 2009 |   |        | 2008 | 
|Supplemental disclosures of cash flow information:                  |  |      |        |   |      |   |        |      |  |   |        |  
|Cash paid for interest                                              |  | $    | 22,085 |   |      | $ | 21,381 |      |  | $ | 22,357 |  
|                                                                    |  |      |        |   |      |   |        |      |  |   |        |  
|Cash paid for income taxes                                          |  | $    | 143    |   |      | $ | 146    |      |  | $ | 488    |  
|                                                                    |  |      |        |   |      |   |        |      |  |   |        |  
|Supplemental disclosures of noncash financing/investing activities: |  |      |        |   |      |   |        |      |  |   |        |  
|(Decrease) increase in minimum pension liability adjustment         |  | $    | (40    | ) |      | $ | 526    |      |  | $ | (187   | )
|                                                                    |  |      |        |   |      |   |        |      |  |   |        |  
|Construction in-progress included in accounts payable               |  | $    | 627    |   |      | $ | 844    |      |  | $ | 1,486  |  
|                                                                    |  |      |        |   |      |   |        |      |  |   |        |  

The accompanying notes are an integral part of the consolidated financial statements.



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AGY HOLDING CORP. AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008

(Dollars in thousands, unless otherwise noted)



|1. | OVERVIEW AND BASIS OF PRESENTATION
|-- | ----------------------------------

Overview As used in this Form 10-K and in these notes, the terms AGY, the Company, we, us,
our mean AGY Holding Corp and subsidiary companies.

AGY Holding Corp. is a Delaware corporation with its headquarters in South
Carolina. KAGY Holding Company, Inc. (Holdings) is the sole shareholder. AGY Holding Corp. and its subsidiaries (collectively, AGY or the Company) is a leading manufacturer of advanced glass fibers that are used
as reinforcing materials in numerous diverse high-value applications, including aircraft laminates, ballistic armor, pressure vessels, roofing membranes, insect screening, architectural fabrics, and specialty electronics. AGY is focused on serving
end-markets that require glass fibers for applications with demanding performance criteria, such as the aerospace, defense, construction, electronics, automotive, and industrial end-markets.

As discussed in Note 3, on June 10, 2009, the Company acquired a 70% interest in a foreign company, whose results of operations since the acquisition date are included in the accompanying
consolidated financial statements. Currently the Company has two manufacturing facilities located in the United States and one in the Peoples Republic of China (PRC or China) and operates as two reportable segments
(each a single operating segment) consisting of AGY US manufacturing operations (AGY US) and AGYs Asian manufacturing operations (AGY Asia).

Basis of Consolidation and Presentation  The accompanying financial statements and related notes present and discuss our consolidated financial position as of December 31, 2010 and
2009, and the consolidated results of our operations, cash flows, and changes in shareholders equity for the years ended December 31, 2010, 2009 and 2008. The business is conducted through AGY Holding Corp., its two wholly owned domestic
subsidiaries AGY Aiken LLC and AGY Huntingdon LLC and its wholly owned foreign subsidiaries, AGY Europe SARL (France) and AGY Cayman LLC (Cayman Islands). AGY Cayman LLC (Cayman Islands) is the holding company of the 70% controlling ownership in AGY
Hong Kong Ltd. (former Main Union Industrial Ltd.) and its subsidiaries (which are collectively referred to herein as AGY Asia) since June 10, 2009. All significant intercompany accounts and transactions have been eliminated in
consolidation.



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------

Cash  The Company considers cash on hand, cash deposited in financial institutions, and money market accounts with maturities of less
than 90 days at date of purchase to be cash and cash equivalents. These are stated at cost, which approximates market value. At December 31, 2010 and 2009, the Company had no cash equivalents.

Revenue Recognition  Revenues are recognized when title and risk of loss pass to the customer. Most of the Companys revenues are
recognized upon shipment to customers or upon usage notification for customers on consignment. Provisions for discounts and rebates to customers, returns and other adjustments are provided in the same period that the related sales are recorded and
are based on historical experience, current conditions and contractual obligations, as applicable.

Inventories
net  Inventories are stated at the lower of cost or market. Cost includes material, labor, and overhead, and is determined using the first-in, first-out method, except for certain packaging materials valued on an average-cost
method. Inventories are stated net of estimated reserves for excess, obsolete, and lower of cost or market adjustments.

Property, Plant,
and Equipment and Alloy Metals  Property, plant, and equipment are recorded at cost or when acquired as part of a business combination, at their estimated fair market value pursuant to the purchase accounting guidance in Accounting
Standards Codification (ASC) 805, Business Combinations. Depreciation is computed by the straight-line method over the estimated useful lives of the respective



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assets. Depreciation on leasehold improvements is based on the lesser of the terms of the respective leases or the estimated economic life of the assets. Substantially all depreciation expense is
included in cost of goods sold. Improvements are capitalized, while repair and maintenance costs are expensed as incurred.

The estimated
useful lives of property, plant, and equipment are as follows:



|                                     |  |  |             | 
|------------------------------------ |  |  | ----------- | 
|Buildings and leasehold improvements |  |  | 1040 years | 
|Machinery and equipment              |  |  | 715 years  | 

Glass-melting furnaces periodically
require substantial rebuilding. The time period between rebuilds varies depending upon the utilization of the furnace. The Company capitalizes the cost to rebuild glass-melting furnaces. Such costs are capitalized when incurred and depreciated on a
straight-line basis over the estimated useful lives of the rebuilt furnaces, which is approximately 14 years.

Alloy metals are the primary
component of the heat-resistant, glass-forming bushings in the Companys glass-melting furnaces. Molten glass is passed through the bushings to form glass filaments. In addition, alloy metals are an integral part of the Companys installed
glass-melting furnaces and therefore, are classified as property, plant, and equipment.

During the manufacturing process, a small portion of
the alloy metal is physically consumed. The portion of the alloy metals physically consumed is measured at the time a bushing is reconditioned and is charged to income. The amount of metal loss and the service life of the bushings are dependent upon
a number of factors, including the type of furnace and the products being produced. Generally, bushings are reconditioned between 1 and 9 months, with reconditioning charges incurred monthly.

Alloy metal additions are recorded at cost, or at fair value if acquired in a business combination, and alloy metal loss is recognized based on weighted-average historical cost per type of alloy metal.

Significant Customers and Concentration of Credit Risk  Two customers accounted for approximately 19% and 14%,
respectively, of the Companys gross consolidated accounts receivable as of December 31, 2010, compared to 29% and 11%, respectively, as of December 31, 2009. Sales to the two largest customers represented approximately 18% and 7% of
the Companys total sales, respectively, for the year ended December 31, 2010, compared to 17% and 11%, respectively, of total sales for the year ended December 31, 2009. The Company generally does not require collateral from
customers and provides a reserve for uncollectible accounts based on customers credit history, aging of the receivables, and past due delinquency status.

The Company invests its unrestricted cash and cash equivalents in money market and other interest-bearing accounts. The Companys primary objective is to ensure capital preservation of its invested
funds. Regularly during the year, the Company maintains unrestricted cash and cash equivalents in accounts with various financial institutions in excess of the amount insured by the Federal Deposit Insurance Corporation.

Stock-Based Compensation  The Company applies the provisions of ASC 718, Compensation  Stock Compensation, regarding
accounting for Share-Based Payment, which requires companies to recognize in the consolidated statement of operations the grant-date fair value of stock awards issued to employees and directors.

Foreign Currency Translation  The assets and liabilities of the international subsidiaries whose functional currency is a foreign
currency are translated into U.S. dollars at the period-end spot exchange rate. Cumulative currency translation adjustments are included in accumulated other comprehensive income (loss) in the shareholders equity section of the
consolidated balance sheets. Income and expenses in foreign currencies are translated at the average exchange rates prevailing during each year. Gains and losses from foreign currency transactions were not material for the years ended
December 31, 2010, 2009 and 2008.

Use of Estimates  The preparation of the consolidated financial statements in
conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Companys most significant estimates include assessment of intangible and tangible assets for
impairment, estimates used in determining pension and postretirement medical obligations, estimates used in determining stock-based compensation, and the determination of the sales discounts and rebates allowance as well as the valuation allowance
on deferred tax assets. Actual results could differ from those estimates.



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Goodwill and Intangible Assets  The Company accounts for goodwill and other intangible
assets in accordance with the provisions of ASC 350, Intangibles  Goodwill and Others. Goodwill and intangible assets with indefinite lives are not amortized, but instead are subject to annual impairment testing conducted each year as
of October 31. The goodwill asset impairment test involves comparing the fair value of a reporting unit to its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, a second step comparing the implied fair value of
the reporting units goodwill to the carrying amount of that goodwill is required to measure the potential goodwill impairment loss. Interim tests may be required if an event occurs or circumstances change that would more likely than not reduce
the fair value of a reporting unit below its carrying amount.

As defined in ASC 350-20-35, a reporting unit is an operating segment, or one
level below an operating segment. Since the Companys Asian business combination in June 2009, the Company determined that it operates as two reportable units consisting of AGY US and AGY Asia, each a separate operating segment, as discussed in
the Segment Information footnote. As there are no reporting units below the operating segment level, the reportable units are the level at which the Company tests for goodwill impairment.

All of the Companys goodwill and other intangible assets with indefinite lives relate to AGY US, and accordingly, the Companys test for impairment is based on the fair value of the AGY US
reporting unit.

As discussed in Note 7 and Note 19, management concluded that as of October 31, 2009, the goodwill associated with the
AGY US reporting segment was fully impaired. As a result, the Company recognized a non-cash pre-tax goodwill impairment charge of approximately $85.0 million, classified as a loss from operations for the year ended December 31,
2009.

Other intangible assets are recorded at cost, or when acquired as part of a business combination, at their estimated fair value. These
assets relate only to the AGY US reporting segment and include customer relationships, process technology, non-compete covenant, deferred financing fees and trademarks as discussed in Note 6. The Companys process technology consists of several
patents that relate to the design, application or manufacturing for key products, and its estimated life is based on the average legal life of the patents and the Companys estimated economic life of the processes. Intangibles with indefinite
lives (trademarks) are subject to at least annual impairment testing, which compares the fair value of the intangible asset with its carrying amount. The results of these assessments did not indicate any impairment to these intangible assets for the
years presented. As of December 31, 2010 and 2009, the fair value of the trademarks exceeded their carrying value by 18% and 6%, respectively.

Impairment of Long-Lived Assets  Pursuant to ASC 360-10, the Company evaluates its long-lived assets, including its tangible assets consisting of property plant, and equipment, and alloy
metals (which are an integral part of the Companys installed glass-melting furnaces) and its definite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.
A significant decrease in the spot market price of alloy precious metals is one of the factors considered by management in determining the need to test this asset group for recoverability. However, management also takes into account that the market
price of the precious metals may be volatile over short periods of time. Accordingly, changes in the market price of alloy precious metals may not trigger impairment assessment because such changes may not significantly impact future cash flows
expected from the use of the alloy metals on an ongoing basis.

An impairment loss is recognized when estimated undiscounted future cash flows
expected to result from the use of the asset, plus net proceeds expected from the disposition of the asset (if any), are less than the related assets carrying amount. Estimating future cash flows requires the Company to make judgments
regarding future economic conditions, product demand, and pricing. Although the Company believes its estimates are appropriate, significant differences in the actual performance of the asset or group of assets may materially affect the
Companys asset values and results of operations.

As a result of the first step of the annual goodwill impairment on October 31,
2009 for the AGY US reporting segment, management tested for impairment the long-lived assets of this reporting segment. Based on the analysis performed by management, the total recoverable cash flows of the long-lived assets group substantially
exceeded its carrying value. No impairment charge was recognized.

Derivative Instruments  The Company is exposed to market
risk, such as fluctuations in foreign currency exchange rates, commodity prices, and interest rates. To manage the volatility relating to these exposures that are not offset within its operations, the Company enters into various derivative
transactions pursuant to its risk management policies. The Company does not hold or issue derivative financial instruments for trading or speculative purposes.



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The Companys only derivative financial instruments at December 31, 2010 and 2009 were forward
contracts to purchase natural gas used in the manufacturing operations.

Cost of Goods Sold  Cost of Goods Sold includes all
costs of manufacturing, including direct manufacturing labor and fringe benefits, direct material, direct energy, and direct repairs and maintenance. In addition, Cost of Goods Sold includes indirect manufacturing expenses such as expenses of
manufacturing support labor, indirect energy and consumable supplies, as well as inbound and outbound freight, duties, inspection, quality and distribution activities. The Company includes inbound freight charges, purchasing and receiving costs,
inspection costs, internal transfer costs and other costs of its distribution network in Cost of Goods Sold.

Selling, General and
Administrative expenses  Selling, General and Administrative expenses include salaries, wages, travel, outside services and supplies of the Management, Sales and Marketing, and Science and Technology functions, which are unrelated to
the manufacturing processes.

Income Taxes  The Company accounts for income taxes using the asset and liability method
approach under ASC 740,Income Taxes,. Deferred income tax assets and liabilities reflect tax net operating loss and credit carryforwards and the tax effects of temporary differences between the carrying amounts of assets and liabilities for
financial reporting and income tax purposes. Deferred tax assets require a valuation allowance when it is more likely than not, based on the evaluation of positive and negative evidence, that some portion of the deferred tax assets may not be
realized. The realization of deferred tax assets is dependent upon the timing and magnitude of future taxable income prior to the expiration of the deferred tax assets attributes. On an on-going basis, the Company evaluates whether its
deferred tax assets are realizable and the need for a valuation allowance considering objective evidence such as reversal of the Companys existing deferred tax liabilities, and forecasts of future taxable income. The provisions of ASC 740
require that uncertain tax positions be sustainable under regulatory review by tax authorities assumed to have all relevant information at a more-likely-than-not level. The Company recognizes the largest benefit that will more likely than not be
realized upon settlement based upon its technical merits.

The Company considers its foreign earnings in AGY Europe SARL and in AGY Asia to be
permanently invested and accordingly, the Company did not provide U.S. income taxes on the undistributed earnings of AGY Europe SARL and AGY Asia.

Environmental Costs  Environmental expenditures relating to current operations are expensed or capitalized as appropriate. Expenditures relating to existing conditions caused by past
operations, that have no significant future economic benefit, are expensed. Liabilities for remediation costs are recorded when they are probable and reasonably estimable, generally no later than the completion of feasibility studies or the Company
commitment to a plan of action. Expenditures that prevent or mitigate environmental contamination that is yet to occur are capitalized. The Company currently has not recorded any significant provision or reserves for environmental liabilities.

Conditional Asset Retirement Obligations  The Company accounts for conditional asset retirement obligations in accordance
with the provisions of ASC 410, Accounting for Conditional Asset Retirement Obligations, which requires that any legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a
future event that may not be within the Companys control be recognized as a liability at the fair value of the conditional asset retirement obligation, if the fair value of the liability can be reasonably estimated. However, sufficient
information may not be available to reasonably estimate the fair value of an asset retirement obligation. See Note 22 for additional discussion regarding conditional asset retirement obligations.

Fair Value of Financial Instruments  The fair value of financial instruments in the accompanying consolidated financial statements
approximates the carrying value, unless otherwise disclosed.

Adoption of New Accounting Standards  In June 2009, the
FASB issued revised authoritative guidance that amends the consolidation guidance applicable to variable interest entities. The amendments will change the overall consolidation analysis under previously issued guidance. The revised
guidance was effective as of the beginning of the first fiscal year that begins after November 15, 2009. The Company adopted the new guidance on January 1, 2010. As the consolidation of variable entities does not apply to the Company,
this adoption did not materially affect the Companys results of operations, cash flows, or financial position.



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In June 2009, the FASB issued ASC 860, Accounting for Transfers of Financial Assets. ASC 860 requires
additional disclosures about the transfer and derecognition of financial assets, eliminates the concept of qualifying special-purpose entities, creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale,
clarifies other sale-accounting criteria, and changes the initial measurement of a transferors interest in transferred financial assets. ASC 860 is effective for fiscal years beginning after November 15, 2009. The adoption of ASC 860
on January 1, 2010 did not materially affect the Companys results of operations, cash flows, or financial position.

In August
2009, the Financial Accounting Standards Board (FASB) issued new authoritative guidance for ASC 820, Fair Value Measurements and Disclosures. The new guidance provides clarification that in circumstances in which a quoted price in
an active market for the identical liability is not available, an entity is required to measure fair value utilizing one or more of the following techniques: (1) a valuation technique that uses quoted prices for identical or similar liabilities
when traded as assets; or (2) another valuation technique that is consistent with the principles of ASC 820, such as a present value technique or market approach. The Company adopted the new guidance in the third quarter of 2009 and this
adoption did not materially affect the Companys results of operations, cash flows, or financial position.

In June 2009, the FASB issued
ASC 105 (formerly Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles  a replacement of FASB Statement No. 162). ASC 105 establishes the FASB
Accounting Standards Codification (Codification) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with
GAAP. All guidance contained in the Codification carries an equal level of authority. On the effective date of ASC 105, the Codification supersedes all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC
accounting literature not included in the Codification became non-authoritative. ASC 105 was effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of the Codification in the third
quarter of 2009 did not have an effect on the Companys results of operations, cash flows, or financial position. However, because the Codification completely replaces existing standards, it did affect the way GAAP is referenced within the
consolidated financial statements and accounting policies.

In May 2009, the FASB issued ASC 855 (formerly Statement of Financial
Accounting Standards (SFAS) No. 165, Subsequent Events), which established principles and requirements for subsequent events. The statement details the period after the balance sheet date during which the Company should
evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which the Company should recognize events or transactions occurring after the balance sheet date in its
financial statements and the required disclosures for such events. Under the requirements of ASC 855, which the Company adopted for the quarter ended June 30, 2009, subsequent events have been evaluated.

In April 2009, the FASB issued three staff positions (FSPs) intended to provide additional guidance and enhanced disclosures for fair value
measurements and impairment of debt securities. The first, which amended ASC 825 (formerly FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments), requires that publicly traded companies make the same
disclosures about the fair value of financial instruments for interim reporting periods as are required in annual financial statements. The second, which amended ASC 320 (formerly FSP FAS 115-2 and FAS 124-2, Recognition and
Presentation of Other-Than-Temporary Impairments), provides guidance on how to determine whether an available-for-sale, or held-to-maturity, security is other-than-temporarily-impaired, and requires the impairment to be split between
(i) its credit loss (the difference between the discounted cash flows expected to be collected and the amortized cost basis of the security), which is reported in earnings, and (ii) impairment from other factors, which is reported in other
comprehensive income. The third, which amended ASC 820 (formerly FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not
Orderly), provides guidance to help determine whether a market is inactive, and to determine whether transactions in that market are not orderly. These amendments were effective for interim and annual reporting periods ending after June 15,
2009. There was no impact from the adoption of the provisions of these FSPs on the Companys results of operations, cash flows, or financial position.

Effective January 1, 2009, the Company adopted the provisions of ASC 805 (formerly FSP FAS No. 141 (revised 2007), Business Combinations (SFAS No. 141(R)), which became
effective on a prospective basis for all business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Among other things, ASC 805 requires that
all acquisition-related costs be expensed as incurred. At December 31, 2008, under the prior guidance



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of SFAS No. 141(R), the Company had deferred $1,098 of acquisition-related costs associated with its proposed acquisition of a majority interest in a Chinese company. In adopting this new
accounting standard, the Company expensed (classified as other operating expense in the statement of operations for the year ended December 31, 2009) the $1,098 of acquisition-related costs incurred and deferred at December 31,
2008. The Company also expensed $1,627 of incremental advisory, legal and accounting fees that it incurred during the year ended December 31, 2009 in connection with this transaction. The previously described business combination was
consummated on June 10, 2009, and as discussed in Note 3, the Company applied the other provisions of ASC 805 to the accounting for this acquisition.

On January 1, 2009, the Company adopted ASC 810 (formerly SFAS No. 160, Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51), which establishes
accounting and reporting standards that require the noncontrolling interest to be identified, labeled, and presented in the consolidated balance sheet within equity, but separate from the parents equity. ASC 810 also requires that the amount
of consolidated net income attributable to the parent and to the noncontrolling interest be identified and presented on the face of the consolidated statement of operations. The initial adoption of ASC 810 had no impact on the Companys results
of operations, cash flows or financial position, as all its subsidiaries were wholly owned on January 1, 2009. The previously described business combination consummated on June 10, 2009, included the obligation under a put/call for the
noncontrolling interest classified between liabilities and stockholders equity on the consolidated balance sheet and separately presented the net loss attributable to the NCI in the statement of operations.

On January 1, 2009, the Company adopted ASC 815 (formerly SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities
 an amendment of FASB Statement No. 133), which requires enhanced disclosures about an entitys derivative and hedging activities. ASC 815 does not change the accounting for derivative instruments. See Note 16 to the consolidated
financial statements for the enhanced disclosures required by ASC 815.

Effective January 1, 2008, the Company adopted ASC 820, Fair
Value Measurements and Disclosures(formerly FASB Statement No. 157, Fair Value Measurements), for financial assets and liabilities. The initial adoption of ASC 820 did not impact the Companys results of operations, cash flows,
or financial position. In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, Effective Date of FASB Statement No.157, which allowed companies to defer the adoption of SFAS No. 157 for all nonfinancial assets and
nonfinancial liabilities, except those items that are recognized or disclosed at fair value on an annual or more frequently recurring basis, until years beginning after November 15, 2008. In accordance with this interpretation, on
January 1, 2009, the Company adopted the provisions of ASC 820 related to our nonfinancial assets and liabilities. As discussed in Notes 7 and 19, the Company recorded a goodwill impairment charge in the year ended December 31, 2009, and
has included the additional disclosures required by ASC 820.

Recently Issued Accounting StandardsIn October 2009,
the FASB issued new authoritative guidance regarding Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements  a Consensus of the FASB Emerging Issues Task Force, which amends ASC 605. This update establishes a
selling price hierarchy, whereby vendor-specific objective evidence (VSOE), if available, should be utilized. If VSOE is not available, then third party evidence should be utilized; if third party evidence is not available, then an
entity should use the estimated selling price for the good or service. This update eliminates the residual method and requires allocation at the inception of the contractual arrangement and additional disclosures surrounding multiple-deliverable
revenue arrangements. This update is effective for the company beginning January 1, 2011 and can be applied prospectively or retrospectively. The company adopted the new guidance prospectively on January 1, 2011 and does not expect the
adoption of this update will have a material impact on the Companys results of operations, cash flows, or financial position.



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|3. | BUSINESS COMBINATION AND ANDERSON CONTRACT TERMINATION COSTS
|-- | ------------------------------------------------------------

2009 Chinese Business Combination

On June 10, 2009, pursuant to the terms of
the Sale and Purchase Agreement dated March 12, 2009 (the AGY Asia Purchase Agreement), by and among AGY Cayman, Grace Technology Investment Co., Ltd., and Grace THW Holding Limited (together, Grace), AGY Cayman, a
company incorporated in the Cayman Islands and a wholly-owned subsidiary of the Company, completed its acquisition of 70% of the outstanding shares of Main Union Industrial Ltd. (renamed AGY Hong Kong Ltd.), a company incorporated in Hong Kong and a
previously wholly-owned subsidiary of Grace Technology Investment Co., Ltd., a company incorporated in the British Virgin Islands and previously a wholly-owned subsidiary of Grace THW Holding Limited. AGY Hong Kong Ltd. owns 100% controlling
interest in Shanghai Grace Technology Co., Ltd (renamed AGY Shanghai Technology Co., Ltd. (AGY Shanghai)), a company incorporated in China, which is also a glassfiber yarns manufacturer. This acquisition expands AGYs geographic,
manufacturing, and servicing capabilities in the Asia-Pacific region relative to the electronics and industrial end-markets.

In connection
with the execution of the AGY Asia Purchase Agreement, the parties entered into several other agreements, including: (1) an option agreement, pursuant to which Grace granted AGY Cayman a call option, and AGY Cayman granted Grace a put option,
in respect of the 30% interest held by Grace in AGY Hong Kong Ltd., (2) a supply agreement, pursuant to which Grace will purchase certain fiberglass yarn products from AGY, which will have an initial term through December 31, 2013,
(3) an intellectual property license agreement pursuant to which AGY Holding Corp. grants to AGY Hong Kong Ltd. a non exclusive, royalty-free, non-transferable know-how and trademarks license for the production and the sale of certain products
for specific territories, and (4) a technical service agreement pursuant to which AGY provides certain technical and manufacturing support services to AGY Shanghai.

The Company paid $20 million in cash for a 70% controlling interest in Main Union Industrial Ltd. and its subsidiaries (which is collectively referred to as AGY Asia and is also the
Companys second operating segment) and financed this consideration through additional capital contributions from the Companys private equity sponsors. As noted previously, the Company entered into an option agreement that grants the
Company the right to purchase the remaining 30% ownership at a stipulated multiple of earnings before interest, taxes, depreciation and amortization if certain financial parameters are achieved and grants Grace the right to put their remaining 30%
ownership to the Company after the one year anniversary of the execution of the AGY Asia Purchase Agreement at a stipulated multiple of earnings before interest, taxes, depreciation and amortization. The call / put option expires on
December 31, 2013. Management believes that either the call option or the put option may be exercised in 2011 or 2012, and the Company intends to finance the consideration to be paid pursuant to the agreement through the sale of additional
equity to its private equity sponsor, or other sources of capital.

Fair Value Determination and Allocation of Consideration Transferred

As noted above, the Company paid $20,000 in cash and assumed $39.0 million of debt of the acquired business for a total purchase price of
approximately $71,398, assuming a 100% controlling interest. The acquisition is being accounted for under the purchase method of accounting and AGY Asia is included in the Companys consolidated financial statements from the June 10, 2009
acquisition date. The preliminary allocation of purchase price to the fair value of the acquired assets less liabilities assumed, indicated that a bargain purchase might result. In the second quarter of 2009, however, management was not able to
complete a comprehensive review of the fair value of the assets acquired and liabilities assumed in a manner deemed adequate to recognize the bargain purchase gain at that time. During the fourth quarter of 2009, with the assistance of an
independent third-party valuation specialist, management reassessed the fair value of all the assets acquired and all the liabilities assumed and concluded that a bargain purchase gain of approximately $20,376 resulted at the acquisition date.
Accordingly, the Company recognized the gain as a component of non-operating income for the year ended December 31, 2009. Management believes that the Company was able to negotiate a bargain purchase price as a result of the then prevailing
economic environment and its access to the liquidity necessary to complete the acquisition.



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Following is a summary of the estimates of the fair value of the acquired assets less assumed liabilities at
the acquisition date:

Net assets acquired and liabilities assumed (in millions):



|                                               |  |   |      |  
|---------------------------------------------- |  | - | ---- | -
|Cash and restricted cash                       |  | $ | 2.8  |  
|Trade accounts receivables (i)                 |  |   | 5.5  |  
|Inventories                                    |  |   | 2.5  |  
|Other currents assets                          |  |   | 1.5  |  
|Property, plant and equipment and alloy metals |  |   | 91.6 |  
|Other assets                                   |  |   | 1.4  |  
|Current liabilities                            |  |   | (7.6 | )
|Other noncurrent liabilities                   |  |   | (5.9 | )
|                                               |  |   |      |  
|Total net assets                               |  | $ | 91.8 |  
|                                               |  |   |      |  



|(i) | The fair value of the trade receivables at the acquisition date represents the gross contractual amounts receivable less an $84 reserve to account for the best estimate
at the acquisition date of the contractual cash flows not expected to be collected.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The previously described put and call
options are redemption features which result in the classification of the noncontrolling interest as temporary equity in the accompanying consolidated balance sheet at December 31, 2009, presented between total liabilities and
shareholders equity. The fair value of the noncontrolling interest at the acquisition date of approximately $12,431 was determined by management with the assistance of an independent third-party valuation specialist. The determination of the
fair value of the noncontrolling interest included consideration of the purchase price paid by the Company for its 70% interest and the estimated fair value of the put and call options between the parties discounted to present value using an
industry weighted average cost of capital.

Acquisition-related Costs

At December 31, 2008, under the prior guidance of SFAS No. 141, the Company had deferred $1,098 of acquisition-related costs associated with the Chinese business combination. In adopting the new
accounting standard ASC 805 on January 1, 2009, the Company wrote-off (classified as other operating expense in the statement of operations for the year ended December 31, 2009) the $1,098 of acquisition-related costs incurred
and deferred at December 31, 2008. During the year ended December 31, 2009, the Company also expensed $1,627 of incremental advisory, legal and accounting fees that were incurred in 2009 in connection with the acquisition.

AGY Asia Results of Operations

The
following table presents the amount of net sales, loss from operations and net loss of AGY Asia included in the Companys consolidated statements of operations from the date of the acquisition for the year ended December 31, 2009
(excluding the $20,376 recognized as the bargain purchase gain):



|                     |  |   |        |  
|-------------------- |  | - | ------ | -
|Net sales            |  | $ | 12,983 |  
|Loss from operations |  |   | (2,307 | )
|Net loss             |  |   | (3,731 | )



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Pro Forma Results

The following table presents the estimated unaudited pro forma consolidated results as if the business combination occurred as of January 1, 2009. The pro forma information is presented for
informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place as of January 1, 2009:



|                              |  |                            |          |  
|----------------------------- |  | -------------------------- | -------- | -
|                              |  | Year EndedDecember 31,2009 |         
|Net sales                     |  | $                          | 162,397  |  
|(Loss) income from operations |  |                            | (108,210 | )
|Net loss (i)                  |  |                            | (96,589  | )



|(i) | The net loss includes $20,376 of bargain purchase gain that resulted at the acquisition date and that was recognized as a component of non-operating income.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

Continuous Filament Mat business acquisition

In October 2007, the Company acquired the North American Continuous Filament Mat business of Owens Corning North America (OC) for an initial price of approximately $7,300 (including
acquisition-related costs of $772).

Under the terms of the acquisition agreement, OC paid the Company $2,300 in July 2008 as a result of the
Companys termination of the Anderson, SC land and building lease and of its vacating of the premises in June 2008. The amount paid by OC to the Company reduced the CFM acquisition cost, first eliminating the goodwill of $653 and then reducing
the value of the acquired property, plant, and equipment by $1,647.



|4. | INVENTORIES  NET
|-- | -----------------

Inventories, net
of reserves for excess and obsolete inventory and write-downs to lower of cost or market of $1,829 and $2,618 as of December 31, 2010 and 2009, respectively, consist of the following:



|                                   |  |                  |        |  |                  |   |        | 
|---------------------------------- |  | ---------------- | ------ |  | ---------------- | - | ------ | 
|                                   |  | December 31,2010 |        |  | December 31,2009 |  
|Finished goods and work in process |  | $                | 21,323 |  |                  | $ | 20,544 | 
|Materials and supplies             |  |                  | 9,937  |  |                  |   | 9,190  | 
|                                   |  |                  |        |  |                  |   |        | 
|                                   |  | $                | 31,260 |  |                  | $ | 29,734 | 
|                                   |  |                  |        |  |                  |   |        | 



|5. | PROPERTY, PLANT, AND EQUIPMENT AND ALLOY METALS
|-- | -----------------------------------------------

Property, plant and equipment and alloy metals consist of the following:



|                                     |  |                  |         |   |                  |   |         |  
|------------------------------------ |  | ---------------- | ------- | - | ---------------- | - | ------- | -
|                                     |  | December 31,2010 |         |   | December 31,2009 |  
|Land and land use rights             |  | $                | 11,893  |   |                  | $ | 11,561  |  
|Buildings and leasehold improvements |  |                  | 38,169  |   |                  |   | 37,492  |  
|Machinery and equipment              |  |                  | 146,341 |   |                  |   | 131,596 |  
|Alloy metals (net of depletion)      |  |                  | 86,279  |   |                  |   | 107,601 |  
|                                     |  |                  |         |   |                  |   |         |  
|                                     |  |                  | 282,682 |   |                  |   | 288,250 |  
|Less  Accumulated depreciation      |  |                  | (64,400 | ) |                  |   | (45,525 | )
|                                     |  |                  |         |   |                  |   |         |  
|                                     |  |                  | 218,282 |   |                  |   | 242,725 |  
|Construction in-progress             |  |                  | 2,056   |   |                  |   | 6,371   |  
|                                     |  |                  |         |   |                  |   |         |  
|                                     |  | $                | 220,338 |   |                  | $ | 249,096 |  
|                                     |  |                  |         |   |                  |   |         |  

As discussed in Note 3, property, plant and equipment acquired in the Chinese business combination were recorded at their
estimated fair market value at the acquisition date of $91,611 (including $10,700 of land



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##### Table of Contents

use rights, $20,750 of buildings and leasehold improvements, $49,323 of machinery and equipment and construction-in-progress, and $10,838 of alloy metals).

As discussed in Note 8, the Company recognized $4,114 of accelerated depreciation related to its North American manufacturing footprint optimization in
2010.

In 2010 and 2009, the Company sold alloy metals for net proceeds of $14,146 and $15,939, respectively, and recognized a loss of $331
and a gain of $1,178, respectively, classified as other operating income.

Depreciation expense was $18,646, $12,608 and $10,844
in 2010, 2009 and 2008, respectively. Depletion of alloy metals was $8,103, $6,733 and $12,373 (net of recoveries and excluding expense to process such recoveries), in 2010, 2009 and 2008, respectively.



|6. | INTANGIBLE ASSETS
|-- | -----------------

Intangible assets
subject to amortization and trademarks, which are not amortized, consist of the following:



|                                           |  |                  |        |   |                  |   |        |                       |  |  |              | 
|------------------------------------------ |  | ---------------- | ------ | - | ---------------- | - | ------ | --------------------- |  |  | ------------ | 
|                                           |  | December 31,2010 |        |   | December 31,2009 |   |        | EstimatedUseful Lives | 
|Intangible assets subject to amortization: |  |                  |        |   |                  |   |        |                       |  |  |              | 
|Customer relationships                     |  | $                | 4,800  |   |                  | $ | 4,800  |                       |  |  | 11 years     | 
|Process technology                         |  |                  | 10,200 |   |                  |   | 10,200 |                       |  |  | 18 years     | 
|Deferred financing fees                    |  |                  | 5,075  |   |                  |   | 5,075  |                       |  |  | 5 to 8 years | 
|                                           |  |                  |        |   |                  |   |        |                       |  |  |              | 
|                                           |  |                  | 20,075 |   |                  |   | 20,075 |                       |  |  |              | 
|Less  Accumulated amortization            |  |                  | (7,735 | ) |                  |   | (6,021 | )                     |  |  |              | 
|                                           |  |                  |        |   |                  |   |        |                       |  |  |              | 
|                                           |  |                  | 12,340 |   |                  |   | 14,054 |                       |  |  |              | 
|Trademarks  not amortized                 |  |                  | 5,613  |   |                  |   | 5,613  |                       |  |  |              | 
|                                           |  |                  |        |   |                  |   |        |                       |  |  |              | 
|Net intangible assets                      |  | $                | 17,953 |   |                  | $ | 19,667 |                       |  |  |              | 
|                                           |  |                  |        |   |                  |   |        |                       |  |  |              | 

Deferred financing fees are amortized by the straight-line method, which approximates the effective interest
method.

During the first quarter of 2009, the Company purchased $3,000 (face amount) of its 11% senior secured second lien notes
(Notes) (see Note 10). The allocable portion of debt issuance costs related to these Notes of $70 was netted against the gain on the repurchase of the Notes in other non-operating income.

The Companys process technology consists of several patents that relate to the design, application or manufacturing for key products, and its
estimated useful life is based on the average legal life of the patents and the Companys estimated economic life of the processes.

Estimated future amortization expense for the intangible assets subject to amortization for each of the next five years and the amount thereafter is as
follows:



|                         |  |   |        | 
|------------------------ |  | - | ------ | 
|Years Ending December 31 |  |   |       
|2011                     |  | $ | 1,678  | 
|2012                     |  |   | 1,500  | 
|2013                     |  |   | 1,500  | 
|2014                     |  |   | 1,417  | 
|2015                     |  |   | 1,003  | 
|Thereafter               |  |   | 5,242  | 
|                         |  |   |        | 
|                         |  | $ | 12,340 | 
|                         |  |   |        | 



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##### Table of Contents

|7. | GOODWILL
|-- | --------

Changes in the carrying amount
of goodwill for the years ended December 31, 2008, 2009 and 2010, all related to the AGY US segment, are as follows:



|                                                                              |  |   |         |  
|----------------------------------------------------------------------------- |  | - | ------- | -
|Balance  January 1, 2008                                                     |  |   |         |  
|Goodwill                                                                      |  | $ | 85,457  |  
|Adjustment of CFM acquisition price reducing the associated goodwill (Note 3) |  |   | (654    | )
|Adjustment related to deferred tax                                            |  |   | 189     |  
|                                                                              |  |   |         |  
|Balance  December 31, 2008                                                   |  |   |         |  
|Goodwill                                                                      |  |   | 84,992  |  
|Impairment losses                                                             |  |   | (84,992 | )
|                                                                              |  |   |         |  
|Balance  December 31, 2009 and 2010                                          |  | $ |        |  
|                                                                              |  |   |         |  

The Company performed its impairment testing of goodwill during the second and fourth quarters of 2009. The Company
recognized non-cash, pre-tax goodwill impairment charges of $44,466 and $40,526, respectively in the second and fourth quarters of 2009, classified as a charge against loss from operations.



|8. | RESTRUCTURING ACTIONS
|-- | ---------------------

2010 Cost
Reduction Actions

As part of the Companys continuing review and improvement of its cost structure, actions were taken in 2010 to
further optimize the AGY US segment manufacturing footprint. The Company is downsizing and flexing certain underutilized manufacturing facilities in the U.S. to improve profitability and better adjust its production capacity to projected future
worldwide market demand. In conjunction with these actions, during 2010, the Company recorded charges of $6,772, of which $2,658 is related primarily to the relocation of certain manufacturing equipment and is included in Restructuring
charges and $4,114 is related to accelerated depreciation expense and is included in Cost of goods sold. Most of the cash costs related to these actions were incurred and paid during the same period.

The following table summarizes the status of unpaid liabilities from the Companys 2010 restructuring initiatives:



|                                |  |                       |       |   |                                     |   |        |        |  |   |       |   |  |   |        |  
|------------------------------- |  | --------------------- | ----- | - | ----------------------------------- | - | ------ | ------ |  | - | ----- | - |  | - | ------ | -
|                                |  | EmployeeRelated Costs |       |   | Relocation ofManufacturingEquipment |   |        | Others |  |   | Total |  
|Balance as of January 1, 2010   |  | $                     |      |   |                                     | $ |       |        |  | $ |      |   |  | $ |       |  
|Restructuring costs incurred    |  |                       | 1,030 |   |                                     |   | 1,209  |        |  |   | 419   |   |  |   | 2,658  |  
|Payments                        |  |                       | (791  | ) |                                     |   | (1,209 | )      |  |   | (419  | ) |  |   | (2,419 | )
|                                |  |                       |       |   |                                     |   |        |        |  |   |       |   |  |   |        |  
|Balance as of December 31, 2010 |  | $                     | 239   |   |                                     | $ |       |        |  | $ |      |   |  | $ | 239    |  
|                                |  |                       |       |   |                                     |   |        |        |  |   |       |   |  |   |        |  

The Company continues to evaluate its global manufacturing footprint to ensure the optimization of its production capacity
and its overhead cost structure. As a result of this evaluation, similar activities could result in additional cash payments and accelerated depreciation expense. The Company believes that the $239 balance will be paid in 2011.

2009 Restructuring Actions

During the twelve months ended December 31, 2009, the Company recorded $789 in restructuring charges that related primarily to severance and
outplacement costs for the salaried positions that the Company eliminated within the AGY US segment. These 2009 cost reduction actions and their payment were completed in 2010.



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##### Table of Contents

|9. | ACCRUED LIABILITIES
|-- | -------------------

Accrued liabilities
consist of the following:



|                                                       |  |                  |        |  |                  |   |        | 
|------------------------------------------------------ |  | ---------------- | ------ |  | ---------------- | - | ------ | 
|                                                       |  | December 31,2010 |        |  | December 31,2009 |  
|Vacation                                               |  | $                | 1,925  |  |                  | $ | 2,057  | 
|Real and personal property taxes                       |  |                  | 2,774  |  |                  |   | 5,382  | 
|Payroll and benefits                                   |  |                  | 1,525  |  |                  |   | 1,302  | 
|Interest                                               |  |                  | 2,465  |  |                  |   | 2,470  | 
|AGY Asia supply agreement                              |  |                  |       |  |                  |   | 3,810  | 
|Current portion of pension and other employee benefits |  |                  | 1,041  |  |                  |   | 1,012  | 
|Accrued non refundable PRC value added tax             |  |                  | 873    |  |                  |   | 937    | 
|Other                                                  |  |                  | 717    |  |                  |   | 593    | 
|                                                       |  |                  |        |  |                  |   |        | 
|Total accrued liabilities                              |  | $                | 11,320 |  |                  | $ | 17,563 | 
|                                                       |  |                  |        |  |                  |   |        | 

In August 2009, the United Bankruptcy Court approved the stipulation of final settlement for disputed real and personal
property tax claims resulting from the Company, under prior ownership, emerging from bankruptcy in 2004. As a result of the approved settlement for the years 2002 to 2004, the Company recognized a net gain of approximately $415 in the third quarter
of 2009, classified in cost of goods sold, and $1,239 of restricted cash in escrow for such disputed taxes was simultaneously released.

In
November 2010, the Company terminated a supply agreement entered into by AGY Asia in 2009 at the time of the acquisition. The termination resulted from multiple uncured breaches of material obligations and responsibilities by the counterparty in
relation to this agreement. As a result of the termination of this agreement, the remaining balance of the Companys obligation for incentive payment accrued to date was reversed and the Company recorded a $6,276 gain from contract termination,
classified as other operating income.



|10. | DEBT
|--- | ----

Principal amounts of indebtedness
outstanding under the Companys financing arrangements consist of the following:



|                                         |  |                  |         |  |                  |   |         | 
|---------------------------------------- |  | ---------------- | ------- |  | ---------------- | - | ------- | 
|                                         |  | December 31,2010 |         |  | December 31,2009 |  
|Senior secured notes                     |  | $                | 172,000 |  |                  | $ | 172,000 | 
|Senior secured revolving credit facility |  |                  | 17,950  |  |                  |   | 19,250  | 
|AGY Asia credit facility  non-recourse  |  |                  | 43,255  |  |                  |   | 41,219  | 
|                                         |  |                  |         |  |                  |   |         | 
|Total debt                               |  |                  | 233,205 |  |                  |   | 232,469 | 
|Less  Current portion AGY Asia          |  |                  | 18,232  |  |                  |   | 10,803  | 
|                                         |  |                  |         |  |                  |   |         | 
|Total long-term debt                     |  | $                | 214,973 |  |                  | $ | 221,666 | 
|                                         |  |                  |         |  |                  |   |         | 

Senior Secured Revolving Credit Facility

The Companys $40,000 Senior Secured Revolving Credit Facility (Credit Facility) was scheduled to mature in October 2011 and included a $20,000 sub-limit for the issuance of letters of
credit and a $5,000 sub-limit for swing line loans. As discussed in Note 25, on March 8, 2011, the Company entered into an amended senior secured loan and security agreement facility Credit Facility that provides for a credit facility of up to
$50,000 (the Amended Credit Facility) and matures on the earlier of March 8, 2015 or 90 days prior to the maturity date of the Notes. The Amended Credit Facility includes a $20,000 sub-limit for the issuance of letters of credit and
a $5,000 sub-limit for swing line loans. The terms and conditions of the Amended Credit Facility are similar to the superseded facility, and described in Note 25.



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##### Table of Contents

At December 31, 2010 and 2009, the Company had $17,950 and $19,250 of borrowings, respectively,
outstanding under the Credit Facility. The weighted average interest rate for cash borrowings outstanding as of December 31, 2010, was 2.1%. At December 31, 2010 and 2009, the Company also issued approximately $2,401 and $2,293,
respectively, of standby letters of credit primarily for collateral required for utilities, fixed-rate natural gas purchases and workers compensation obligations. Borrowing availability after giving effect to the borrowing base at
December 31, 2010 and 2009 was approximately $17,100 and $18,450, respectively.

The Credit Facility does not contain any financial
maintenance covenants. Under certain events of default and other conditions, including failure to pay indebtedness under the Notes, payment of the outstanding principal and interest could be accelerated.

The Credit Facility contains customary representations and warranties and customary affirmative and negative covenants, including, among other things,
restrictions on indebtedness, liens, investments, mergers and consolidations, dividends and other payments in respect to capital stock, transactions with affiliates, and optional payments and modifications of subordinated and other debt instruments.
The Credit Facility also includes customary events of default, including a default upon a change of control. The Company was in compliance with all such covenants at December 31, 2010 and 2009.

Senior Secured Notes

On
October 25, 2006, the Company issued $175,000 aggregate principal amount of 11% senior secured second lien notes (Old Notes) due in 2014 to an initial purchaser, which were subsequently resold to qualified institutional buyers and
non-U.S. persons in reliance upon Rule 144A and Regulation S under the Securities Act of 1933, as amended. On May 8, 2008, the Company filed with the United States Securities and Exchange Commission (SEC) a registration statement on
Form S-4 under the Securities Act of 1933 to exchange all of the Old Notes for the 11% senior secured second lien exchange notes (Notes); such exchange was fully consummated and closed on July 11, 2008.

The Notes are identical in all respects to the Old Notes except:



| |  |  | the Notes are registered under the Securities Act;
| | - |  | --------------------------------------------------



| |  |  | the Notes are not entitled to any registration rights which were applicable to the Old Notes under the registration rights agreement; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the liquidated damages provisions of the registration rights agreement are no longer applicable.
| | - |  | ------------------------------------------------------------------------------------------------

Interest on the Notes is payable semi-annually on May 15 and November 15 of each year beginning May 15, 2007. The Companys
obligations under the Notes are fully and unconditionally guaranteed, jointly and severally, on a second-priority basis, by each of its existing and future domestic subsidiaries, other than immaterial subsidiaries, that guarantee the indebtedness of
the Company, including the Credit Facility, or the indebtedness of any restricted subsidiaries.

In February 2009, the Company repurchased
$3,000 face amount of Notes for $1,792 plus accrued interest of $92 and commission of $8, resulting in a net gain on extinguishment of debt of $1,138 (net of $70 of deferred financing fees written off), classified as other non-operating
income.

As of December 31, 2010 and 2009, the estimated fair value of the Notes was $155,455 and $140,610, respectively, compared
to a recorded book value of $172,000 for both periods. The fair value of the Notes is estimated on the basis of quoted market prices; however, trading in these securities is limited and may not reflect fair value. The fair value is subject to
fluctuations based on, among other things, the Companys performance, its credit rating and changes in interest rates for debt securities with similar terms.

The indenture governing the Notes contains a Fixed Charge Coverage Ratio (calculated based on Consolidated Cash Flow (as defined)), which is used to determine our ability to make restricted
payments, incur additional indebtedness, issue preferred stock and enter into mergers or consolidations or sales of substantially all assets. The indenture does not allow us to pay dividends or distributions on our outstanding capital stock
(including to our parent) and limits or restricts our ability to incur debt, repurchase securities, make certain prohibited investments, create liens, transfer or sell assets, enter into transactions with affiliates, issue or sell stock of a
subsidiary or merge or consolidate. The indenture does not contain any financial maintenance covenants.

Under certain events of default,
including defaults under the Credit Facility, payment of the outstanding principal and interest could be accelerated.



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##### Table of Contents

AGY Asia Credit Facility- Non-recourse

The bank debt of $38,967 assumed in the acquisition of AGY Asia was refinanced as discussed below. On July 10, 2009, AGY Asia entered into a
financing arrangement with the Bank of Shanghai (AGY Asia Credit Facility). On June 8, 2010, a portion of the USD loan commitment was exchanged for RMB commitment under both the project loan and the working capital loan. The
arrangement now consists of a five-year term loan in the aggregate amount of approximately $41,600 (consisting of a loan denominated in local currency of RMB 222,200, or approximately $33,600 converted at an exchange rate of RMB 6.62 to 1 U.S.
dollar, the prevailing exchange rate as of December 31, 2010 and a U.S.-dollar-denominated loan of $8,000), a one-year working capital loan in the aggregate amount of approximately $12,000 (consisting of a local currency loan of RMB 59,500, or
approximately $9,000 converted at an exchange rate of RMB 6.62 to 1 U.S. dollar, and a U.S.-dollar-denominated loan of $3,000), and a one-year letter of credit facility in the amount of $2,000. As discussed above, proceeds from the loans were used
principally to repay the $37,568 outstanding at the time of the refinancing under AGY Asias prior credit agreements.

The term loan is
secured by AGY Asias building, alloy metals and equipment and bears interest annually at the rate of either the five-year lending rate as published by the Peoples Bank of China, plus a margin, or six-month LIBOR plus 3.0%. Term loan
borrowings may be made in both local currency and US dollars, up to certain limits. At December 31, 2010 and 2009, AGY Asia had approximately $33,365 and $35,558 borrowings outstanding under the term loan, respectively, consisting of a local
currency loan of RMB 183,500 and RMB 195,000, respectively, or approximately $27,708 and $28,715, respectively, converted at the period-end exchange rate, and a U.S.-dollar-denominated loan of $5,657 and $7,000, respectively.The weighted
average interest rate for cash borrowings outstanding as of December 31, 2010, was 6.0%.

The working capital loan facility is secured by
existing and future equipment and assets acquired by AGY Asia and bears interest annually at the rate of either the one-year lending rate as published by the Peoples Bank of China, or three-month LIBOR plus 3.0%. Working capital loan
borrowings may be made in both local currency and US Dollars, up to certain limits.

At December 31, 2010 and 2009, the Company had
approximately $9,890 and $5,661 borrowings, respectively, outstanding under the working capital loan consisting of a local currency loan of RMB 52,250 and RMB 25,000, respectively, or approximately $7,890 and $3,661, respectively converted at the
period-end exchange rate, and a U.S.-dollar-denominated loan of $2,000 at the end of each period. The weighted average interest rate for cash borrowings outstanding as of December 31, 2010, was 5.5%.

The letter of credit facility is a one-year facility for the issuance of documentary letters of credit up to a maximum term of 120 days. A 15% deposit is
required upon issuance with the balance due upon settlement of the underlying obligation.

The loan agreements contain customary
representations and warranties and customary affirmative and negative covenants, including, among other things, interest coverage, restrictions on indebtedness, liens, investments, mergers and consolidations, dividends and other payments in respect
to capital stock, and transactions with affiliates. The loan agreements also include customary events of default, including a default upon a change of control. AGY Asia was in compliance with all such covenants at December 31, 2010 and 2009.

All amounts borrowed under the AGY Asia Credit Facility are non-recourse to AGY Holding Corp. or any other domestic subsidiary of AGY Holding
Corp.

Shanghai Grace Fabric Corporation Loan

Prior to the acquisition date, AGY Shanghai entered into a working capital unsecured loan with Shanghai Grace Fabric Corporation, a predecessor sister company. The approximately $12,400 outstanding under
this loan at the acquisition date and at June 30, 2009 was repaid in full in July 2009, using, in part, restricted cash for such repayment. There is no such financing agreement in place since the refinancing on July 10, 2009.



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##### Table of Contents

Maturities of Long-Term Debt

Maturities of long-term debt at December 31, 2010 consist of the following after giving effect to the Amended Credit Facility that the Company entered into in March 2011 for its domestic subsidiaries
that matures on the earlier of March 8, 2015 or 90 days prior to the maturity date of the Notes as discussed in Note 25:



|     |  |               |         |  |                      |   |        |       |  |   |         | 
|---- |  | ------------- | ------- |  | -------------------- | - | ------ | ----- |  | - | ------- | 
|     |  | North America |         |  | China
Non- recourse |   |        | Total | 
|2011 |  | $             |        |  |                      | $ |       |       |  | $ |        | 
|2012 |  |               |        |  |                      |   | 10,154 |       |  |   | 10,154  | 
|2013 |  |               |        |  |                      |   | 10,717 |       |  |   | 10,717  | 
|2014 |  |               | 189,950 |  |                      |   | 4,152  |       |  |   | 194,102 | 
|     |  |               |         |  |                      |   |        |       |  |   |         | 
|     |  | $             | 189,950 |  |                      | $ | 25,023 |       |  | $ | 214,973 | 
|     |  |               |         |  |                      |   |        |       |  |   |         | 



|11. | TRANSACTIONS WITH RELATED PARTIES
|--- | ---------------------------------

The
Company has a management agreement with the principal shareholder of Holdings pursuant to which this party provides management and other advisory services to the Company. The management agreement requires AGY to pay this party an annual management
fee of $750 and to reimburse this party for out-of-pocket expenses incurred in connection with its services. The management agreement also provides that this party will receive transaction fees in connection with certain subsequent financings and
acquisition transactions. The management agreement includes customary indemnification provisions in favor of this party and its affiliates. In each of the three years ended December 31, 2010 this related party was paid $750, classified as a
component of selling, general and administrative expenses.



|12. | CAPITAL STOCK AND EQUITY
|--- | ------------------------

The authorized
capital consists of a total of 1,000 shares of common stock with a par value of $0.01 per share. All 100 outstanding shares of the Company have been owned by Holdings since the Acquisition on April 7, 2006. The holder of each share has the
right to one vote for each share of common stock held and no shareholder has special voting rights other than those afforded all shareholders generally under Delaware law. Shareholders share ratably, based on the number of shares held, in any and
all dividends the Company may declare. As discussed in Note 10, the payment of dividends is restricted by the Credit Facility and no dividends were paid in any of the three years ended December 2010.



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##### Table of Contents

13. EMPLOYEES BENEFITS

Pension and other Postretirement Benefits

Pension BenefitsPrior to 1998, the hourly and salaried employees of AGY participated in defined benefit plans maintained by OC, a predecessor owner of the Company. Under the plans, early retirement pension subsidies were generally based on an employees
pay and number of years of service. In September 1998, as part of a predecessor owners acquisition of AGY from OC, all employees of OC who transferred to AGY as of October 1, 1998, became eligible to receive the same early retirement
pension subsidy offered by OC, which created a pension obligation for AGY. The accrued pension benefit was frozen as of October 1, 1998, and remains a liability of OC. Upon retirement from the Company, participants are entitled to begin
receiving benefits from OC, recognizing service with OC and the Company for retirement eligibility purposes. Accordingly, the Company is obligated to reimburse OC for the value of the early retirement subsidy, which is based on the difference
between (a) and (b) at the time of the employees early retirement:



| | (a) | Present value of the October 1, 1998, frozen benefit available immediately based on the normal form of payment and applicable early retirement factors
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | Present value of the October 1, 1998, frozen benefit deferred to age 65
| | --- | -----------------------------------------------------------------------

Both present values are determined on the then-applicable General Agreement on Tariffs and Trade (GATT) basis. Employees who terminate before early retirement eligibility (defined under the OC plan as age
55 with 10 years of service) or work until normal retirement (defined under the OC plan as age 65) represent no liability to the Company.

The Companys obligation to OC is unfunded.

During 2010 and 2009, the plan incurred settlement charges of $146 and $1,083, respectively, in accordance with ASC 715 as a result of higher benefits payments than projected. Of these total settlements,
the Company recorded $146 and $220 as charges to earnings in 2010 and 2009, respectively, with the remainder recorded as a deferred loss in Other Comprehensive Income.

Other Postretirement Benefits  The Company has health care and life insurance benefit plans for certain domestic retired employees and their dependents. The health care plan is unfunded
and pays either (1) stated percentages of covered medically necessary expenses, after subtracting payments by Medicare or other providers and after stated deductibles have been met, or (2) fixed amounts of medical expense
reimbursement. Currently, the retiree medical plans have the following terms: (a) eligibility requirement at age 62; (b) a $3,500 cap on the amount the Company will contribute annually toward pre-Medicare retiree medical expenses, with
retiree contributions adjusted annually; and (c) provides a post-Medicare spending account at levels of $0 to $1,500, depending on years of service. Approximately 50 retirees, under an election they were permitted during AGYs bankruptcy
under predecessor ownership, elected COBRA, and such retirees are required to pay the monthly COBRA contribution in effect at the date of election and as adjusted each year.

The Company continues to reserve the right to change or eliminate these benefit plans subject to the terms of collective bargaining agreements, if applicable.

Certain retirees who retired between October 1, 1998, and December 31, 1999, participate in the retiree medical program of OC. Such employees
became eligible to participate in the health care plans upon retirement if they had accumulated 10 years of service after age 45. Some of the plans were contributory, with some retiree contributions adjusted annually. OC reserved the right to change
or eliminate these benefit plans subject to the terms of collective bargaining agreements. The predecessor owner of AGY assumed the liability for these health care and life insurance benefits on September 30, 1998. As a result, the Company
reimburses OC for actual expenses incurred for these certain retirees.



F- 24



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##### Table of Contents

The following tables set forth the accumulated benefit obligation as of December 31, 2010 and 2009, and
the changes in projected benefit obligations and plan assets of the Companys pension and other postretirement plans as of and for the years ended December 31, 2010 and 2009.



|                                                  |  |                 |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------- |  | --------------- | ------ | - | ---------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                  |  | PensionBenefits |        |   | Other
PostretirementBenefits |  
|                                                  |  | 2010            |        |   | 2009                         |   |        | 2010 |  |   | 2009   |  
|Accumulated benefit obligation  end of year      |  | $               | (4,637 | ) |                              | $ | (4,923 | )    |  | $ |       |   |  | $ |       |  
|                                                  |  |                 |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|Change in projected benefit obligation:           |  |                 |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|Projected benefit obligations  beginning of year |  | $               | 4,923  |   |                              | $ | 4,852  |      |  | $ | 8,141  |   |  | $ | 7,120  |  
|Service cost                                      |  |                 |       |   |                              |   |       |      |  |   | 448    |   |  |   | 448    |  
|Interest cost                                     |  |                 | 209    |   |                              |   | 273    |      |  |   | 435    |   |  |   | 435    |  
|Actuarial loss (gain)                             |  |                 | 126    |   |                              |   | 276    |      |  |   | (2,216 | ) |  |   | 492    |  
|Settlement                                        |  |                 |       |   |                              |   | 780    |      |  |   |       |   |  |   |       |  
|Plan participants contributions                  |  |                 |       |   |                              |   |       |      |  |   | 327    |   |  |   | 382    |  
|Actual distributions                              |  |                 | (621   | ) |                              |   | (1,258 | )    |  |   | (608   | ) |  |   | (736   | )
|                                                  |  |                 |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|Projected benefit obligation  end of year        |  |                 | 4,637  |   |                              |   | 4,923  |      |  |   | 6,527  |   |  |   | 8,141  |  
|                                                  |  |                 |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|Change in plan assets (unfunded):                 |  |                 |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|Actual employer contributions                     |  |                 | 621    |   |                              |   | 1,258  |      |  |   | 281    |   |  |   | 354    |  
|Plan participants contributions                  |  |                 |       |   |                              |   |       |      |  |   | 327    |   |  |   | 382    |  
|Actual distributions                              |  |                 | (621   | ) |                              |   | (1,258 | )    |  |   | (608   | ) |  |   | (736   | )
|                                                  |  |                 |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|Fair value of plan assets  end of year           |  |                 |       |   |                              |   |       |      |  |   |       |   |  |   |       |  
|                                                  |  |                 |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|Funded status  end of year                       |  | $               | (4,637 | ) |                              | $ | (4,923 | )    |  | $ | (6,527 | ) |  | $ | (8,141 | )
|                                                  |  |                 |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|(Accrued) benefit cost:                           |  |                 |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|(Accrued) benefit cost  beginning of year        |  | $               | (4,060 | ) |                              | $ | (4,825 | )    |  | $ | (8,429 | ) |  | $ | (7,910 | )
|Effect of settlement                              |  |                 | (146   | ) |                              |   | (220   | )    |  |   |       |   |  |   |       |  
|Net periodic cost                                 |  |                 | (253   | ) |                              |   | (273   | )    |  |   | (872   | ) |  |   | (873   | )
|Actual employer contributions                     |  |                 | 621    |   |                              |   | 1,258  |      |  |   | 281    |   |  |   | 354    |  
|                                                  |  |                 |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|(Accrued) benefit cost  end of year              |  | $               | (3,838 | ) |                              | $ | (4,060 | )    |  | $ | (9,020 | ) |  | $ | (8,429 | )
|                                                  |  |                 |        |   |                              |   |        |      |  |   |        |   |  |   |        |  

The net actuarial loss (gain) recognized in accumulated other comprehensive income (pre-tax) consists of the following at
December 31, 2010, 2009, and 2008:



|                          |  |                 |     |  |                              |   |     |      |  |   |      |  |  |      |        |   |      |   |      |   |  |   |      |  
|------------------------- |  | --------------- | --- |  | ---------------------------- | - | --- | ---- |  | - | ---- |  |  | ---- | ------ | - | ---- | - | ---- | - |  | - | ---- | -
|                          |  | PensionBenefits |     |  | Other
PostretirementBenefits |  
|                          |  | 2010            |     |  | 2009                         |   |     | 2008 |  |   | 2010 |  |  | 2009 |        |   | 2008 |  
|Net actuarial loss (gain) |  | $               | 799 |  |                              | $ | 863 |      |  | $ | 27   |  |  | $    | (2,493 | ) |      | $ | (288 | ) |  | $ | (790 | )
|                          |  |                 |     |  |                              |   |     |      |  |   |      |  |  |      |        |   |      |   |      |   |  |   |      |  

The pension benefit obligation and other postretirement benefits are recognized in the consolidated balance sheets at
December 31, 2010 and 2009 as follows:



|                                                      |  |                 |       |  |                               |   |       |      |  |   |       |  |  |   |       | 
|----------------------------------------------------- |  | --------------- | ----- |  | ----------------------------- | - | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                                                      |  | PensionBenefits |       |  | Other 
PostretirementBenefits |  
|                                                      |  | 2010            |       |  | 2009                          |   |       | 2010 |  |   | 2009  | 
|Accrued liabilities - current                         |  | $               | 643   |  |                               | $ | 544   |      |  | $ | 398   |  |  | $ | 468   | 
|Pension and other employee benefit plans - noncurrent |  |                 | 3,994 |  |                               |   | 4,379 |      |  |   | 6,129 |  |  |   | 7,673 | 
|                                                      |  |                 |       |  |                               |   |       |      |  |   |       |  |  |   |       | 
|Total                                                 |  | $               | 4,637 |  |                               | $ | 4,923 |      |  | $ | 6,527 |  |  | $ | 8,141 | 
|                                                      |  |                 |       |  |                               |   |       |      |  |   |       |  |  |   |       | 



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##### Table of Contents

Net periodic benefit costs for the Companys pension and postretirement plans for 2010, 2009, and 2008
were as follows:



|                                                                                                                                           |  |                 |     |   |                              |   |       |      |  |   |      |   |  |      |        |   |      |   |       |   |  |   |      |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------- | --- | - | ---------------------------- | - | ----- | ---- |  | - | ---- | - |  | ---- | ------ | - | ---- | - | ----- | - |  | - | ---- | -
|                                                                                                                                           |  | PensionBenefits |     |   | Other
PostretirementBenefits |  
|                                                                                                                                           |  | 2010            |     |   | 2009                         |   |       | 2008 |  |   | 2010 |   |  | 2009 |        |   | 2008 |  
|Net periodic benefit cost:                                                                                                                 |  |                 |     |   |                              |   |       |      |  |   |      |   |  |      |        |   |      |   |       |   |  |   |      |  
|Service cost                                                                                                                               |  | $               |    |   |                              | $ |      |      |  | $ |     |   |  | $    | 448    |   |      | $ | 448   |   |  | $ | 421  |  
|Amortization of net (gain)                                                                                                                 |  |                 | 44  |   |                              |   |      |      |  |   |     |   |  |      | (11    | ) |      |   | (11   | ) |  |   |     |  
|Effect of Settlement                                                                                                                       |  |                 | 146 |   |                              |   | 220   |      |  |   |     |   |  |      |       |   |      |   |      |   |  |   |     |  
|Interest cost                                                                                                                              |  |                 | 209 |   |                              |   | 273   |      |  |   | 294  |   |  |      | 435    |   |      |   | 435   |   |  |   | 418  |  
|                                                                                                                                           |  |                 |     |   |                              |   |       |      |  |   |      |   |  |      |        |   |      |   |       |   |  |   |      |  
|Net periodic benefit cost                                                                                                                  |  |                 | 399 |   |                              |   | 493   |      |  |   | 294  |   |  |      | 872    |   |      |   | 872   |   |  |   | 839  |  
|                                                                                                                                           |  |                 |     |   |                              |   |       |      |  |   |      |   |  |      |        |   |      |   |       |   |  |   |      |  
|Other changes in plan assets and benefit obligations recognized in other comprehensive income:                                             |  |                 |     |   |                              |   |       |      |  |   |      |   |  |      |        |   |      |   |       |   |  |   |      |  
|Net actuarial (gain) loss                                                                                                                  |  |                 | (64 | ) |                              |   | 834   |      |  |   | (300 | ) |  |      | (2,205 | ) |      |   | 502   |   |  |   | (430 | )
|                                                                                                                                           |  |                 |     |   |                              |   |       |      |  |   |      |   |  |      |        |   |      |   |       |   |  |   |      |  
|                                                                                                                                           |  |                 | (64 | ) |                              |   | 834   |      |  |   | (300 | ) |  |      | (2,205 | ) |      |   | 502   |   |  |   | (430 | )
|                                                                                                                                           |  |                 |     |   |                              |   |       |      |  |   |      |   |  |      |        |   |      |   |       |   |  |   |      |  
|Other changes in plan assets and benefit obligations recognized in net periodic benefit cost and other comprehensive income,
(deficit) net |  | $               | 335 |   |                              | $ | 1,327 |      |  | $ | (6   | ) |  | $    | (1,333 | ) |      | $ | 1,374 |   |  | $ | 409  |  
|                                                                                                                                           |  |                 |     |   |                              |   |       |      |  |   |      |   |  |      |        |   |      |   |       |   |  |   |      |  

The estimated net (gain) loss and prior service cost that will be amortized from accumulated other comprehensive income into
net periodic benefit cost over the next fiscal year are $(235).

Assumptions used to estimate the actuarial present value of benefit
obligations and the net periodic benefit costs for 2010, 2009, and 2008 were as follows:



|                                                                        |  |                 |      |   |                               |  |      |      |  |  |      |   |  |      |      |   |      |  |      |   |  |  |      |  
|----------------------------------------------------------------------- |  | --------------- | ---- | - | ----------------------------- |  | ---- | ---- |  |  | ---- | - |  | ---- | ---- | - | ---- |  | ---- | - |  |  | ---- | -
|                                                                        |  | PensionBenefits |      |   | Other 
PostretirementBenefits | 
|                                                                        |  | 2010            |      |   | 2009                          |  |      | 2008 |  |  | 2010 |   |  | 2009 |      |   | 2008 | 
|Discount rate used to measure obligation  end of year                  |  |                 | 3.65 | % |                               |  | 4.49 | %    |  |  | 6.00 | % |  |      | 5.20 | % |      |  | 5.68 | % |  |  | 6.30 | %
|Discount rate used to determine period benefit cost  beginning of year |  |                 | 4.49 | % |                               |  | 6.00 | %    |  |  | 5.70 | % |  |      | 5.68 | % |      |  | 6.30 | % |  |  | 6.30 | %
|Expected long-term rate of return on assets                             |  |                 | N/A  |   |                               |  | N/A  |      |  |  | N/A  |   |  |      | N/A  |   |      |  | N/A  |   |  |  | N/A  |  
|Rate of increase in compensation levels                                 |  |                 | N/A  |   |                               |  | N/A  |      |  |  | N/A  |   |  |      | N/A  |   |      |  | N/A  |   |  |  | N/A  |  

The discount rate reflects the
current rate at which the pension and other postretirement liabilities could be effectively settled at the end of the year. The discount rate was determined by matching the Companys expected benefit payments, taking into account the
plans demographics, to payments from a stream of corporate AA or higher bonds.



|                                                   |  |      |      |   |      |  |      |      |  |  |      |  
|-------------------------------------------------- |  | ---- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                                                   |  | 2010 |      |   | 2009 |  |      | 2008 | 
|Assumed health care cost trend rates  end of year |  |      |      |   |      |  |      |      |  |  |      |  
|Health care cost trend rate assumed for next year  |  |      | 8.0  | % |      |  | 9.0  | %    |  |  | 10.0 | %
|Ultimate trend rate assumed for future years       |  |      | 5.0  | % |      |  | 5.0  | %    |  |  | 5.0  | %
|Year that the rate reaches the ultimate trend rate |  |      | 2013 |   |      |  | 2013 |      |  |  | 2013 |  

A one percentage point change in the
assumed health care cost trend rate would have an insignificant impact on the other postretirement benefits obligation at December 31, 2010 and 2009.



F- 26



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##### Table of Contents

Future estimated annual benefit payments (and 2011 contributions) for pension and other postretirement
benefit obligations are as follows:



|                          |  |                 |       |  |                             |   |       | 
|------------------------- |  | --------------- | ----- |  | --------------------------- | - | ----- | 
|Years Ending December 31, |  | PensionBenefits |       |  | OtherPostretirementBenefits |  
|2011                      |  | $               | 643   |  |                             | $ | 398   | 
|2012                      |  |                 | 630   |  |                             |   | 386   | 
|2013                      |  |                 | 636   |  |                             |   | 363   | 
|2014                      |  |                 | 587   |  |                             |   | 372   | 
|2015                      |  |                 | 501   |  |                             |   | 394   | 
|Thereafter                |  |                 | 1,755 |  |                             |   | 2,187 | 
|                          |  |                 |       |  |                             |   |       | 
|                          |  | $               | 4,752 |  |                             | $ | 4,100 | 
|                          |  |                 |       |  |                             |   |       | 

Defined Contribution Plan

The Company has a defined contribution 401(k) plan that allows qualifying employees to contribute up to 30% of their annual pretax or after-tax compensation subject to Internal Revenue Service (IRS)
limitations. Effective January 1, 2007, AGY may provide a voluntary matching employer contribution of 50% on up to 6% of each participants before-tax salary deferral. In addition, AGY may make an employer contribution to the plan based on
the Companys annual financial performance. For the years ended December 31, 2010, 2009 and 2008, the Company contributed or accrued $645, $550, and $1,146 respectively.



|14. | STOCK BASED COMPENSATION
|--- | ------------------------

The
Companys stock-based compensation includes Holdings stock options and restricted stock. Total stock-based compensation was approximately $43, $415 and $1,627 in 2010, 2009 and 2008, respectively.

Stock Options  On April 7, 2006, Holdings adopted the 2006 stock option plan that provides that up to 1,335,000 shares of
Holdings common stock are reserved for issuance under this plan, pursuant to the exercise of options under this plan, all contingent upon continuous employment through the date of vesting. Holdings had 11,483,915 shares of common stock
outstanding as of December 31, 2010. Of these stock options, 50% vest over a three-year period from the grant date. The remaining 50% vest based on the Company achieving annual or cumulative financial targets over a three-year period from the
grant date. These options expire in 2016, or 10 years from the first grants date. As of December 31, 2010, the Company exceeded one of the three-year plan financial targets, which triggered the vesting of one-third of the performance-based
stock options granted in 2006. Up to their expiration date, the remainder of the performance-based stock options can vest upon a change of control or at the sole discretion of the Board of Directors.

The Company accounts for the options under the provisions of ASC 718, which requires an entity to measure the cost of employee services received in
exchange for an award of equity instruments based on the grant-date fair value of the award. The grant-date fair value is to be estimated using option-pricing models adjusted for the unique characteristics of those instruments. In calculating the
impact for options and restricted stock units granted, the Company has estimated the fair value of each option grant by using the Black-Scholes option-pricing model and the vesting probability of these stock awards. This model derives the fair value
of stock options based on certain assumptions related to expected stock price volatility, expected option life, risk-free interest rate, and dividend yield. The Companys estimated volatility is based on the historical volatility of publicly
traded companies in the same industry. The Companys expected option life is based upon the average of the vesting term and the life of the options. The risk-free interest rate is based upon the U.S. Treasury yield curve appropriate to the term
of the Companys stock option awards. The estimated dividend rate is zero and no forfeiture rate was applied. Assumptions will be evaluated and revised, as necessary, to reflect market conditions and experience for new options granted.



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The fair value of each grant was calculated with the following weighted-average assumptions:



|                                 |  |      |      |   |      |  |     |      |  |  |     | 
|-------------------------------- |  | ---- | ---- | - | ---- |  | --- | ---- |  |  | --- | 
|Year of Grant                    |  | 2010 |      |   | 2009 |  |     | 2008 | 
|Risk-free interest rate          |  |      | 1.78 | % |      |  | N/A |      |  |  | N/A | 
|Expected life of option in years |  |      | 4.4  |   |      |  | N/A |      |  |  | N/A | 
|Expected dividend yield          |  |      |     |   |      |  | N/A |      |  |  | N/A | 
|Expected volatility              |  |      | 41   | % |      |  | N/A |      |  |  | N/A | 

The weighted-average fair value of
options outstanding was $4.04 and $4.12 per share at December 31, 2010 and 2009, respectively. Based on the fair value of the stock options, the stock-based compensation was $43, $415 and $1,492 in 2010, 2009 and 2008, respectively. The
remaining unrecognized compensation at December 31, 2010 is estimated at $67 and is expected to be recognized as expense over the next three years.

A summary of Holdings stock options outstanding and exercisable and activity for 2008, 2009 and 2010 is summarized below:



|                                               |  |                   |           |   |                                                     |  |     | 
|---------------------------------------------- |  | ----------------- | --------- | - | --------------------------------------------------- |  | --- | 
|                                               |  | Number of Options |           |   | Weighted-AverageRemainingContractual Life(In Years) | 
|Outstanding  January 1, 2008                  |  |                   | 1,310,000 |   |                                                     |  | 8.5 | 
|Granted                                        |  |                   |          |   |                                                     |  |     | 
|Exercised                                      |  |                   |          |   |                                                     |  |     | 
|Forfeited/Expired                              |  |                   |          |   |                                                     |  |     | 
|                                               |  |                   |           |   |                                                     |  |     | 
|Outstanding  December 31, 2008                |  |                   | 1,310,000 |   |                                                     |  | 7.5 | 
|                                               |  |                   |           |   |                                                     |  |     | 
|Granted                                        |  |                   |          |   |                                                     |  |     | 
|Exercised                                      |  |                   |          |   |                                                     |  |     | 
|Forfeited/Expired                              |  |                   | (105,000  | ) |                                                     |  |     | 
|                                               |  |                   |           |   |                                                     |  |     | 
|Outstanding  December 31, 2009                |  |                   | 1,205,000 |   |                                                     |  | 6.4 | 
|                                               |  |                   |           |   |                                                     |  |     | 
|Granted                                        |  |                   | 70,000    |   |                                                     |  |     | 
|Exercised                                      |  |                   |          |   |                                                     |  |     | 
|Forfeited/Expired                              |  |                   | (125,000  | ) |                                                     |  |     | 
|                                               |  |                   |           |   |                                                     |  |     | 
|Outstanding  December 31, 2010                |  |                   | 1,150,000 |   |                                                     |  | 5.4 | 
|                                               |  |                   |           |   |                                                     |  |     | 
|Vested or expected to vest  December 31, 2010 |  |                   | 790,000   |   |                                                     |  | 5.4 | 
|                                               |  |                   |           |   |                                                     |  |     | 
|Exercisable  December 31, 2010                |  |                   | 720,000   |   |                                                     |  | 5.4 | 
|                                               |  |                   |           |   |                                                     |  |     | 

Restricted Stock Units  On April 7, 2006, Holdings also granted 100,000 restricted stock units
(RSU) pursuant to the terms of an executive employment agreement. These RSUs vested 50% on both April 7, 2007, and April 8, 2008, and were subject to certain forfeiture conditions.

The stock-based compensation cost related to RSUs was $0, $0 and $135 for 2010, 2009 and 2008, respectively. There is no remaining unrecognized
compensation expense for the RSUs at December 31, 2010.



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|15. | COMPREHENSIVE INCOME (DEFICIT)
|--- | ------------------------------

The
following table presents comprehensive income (deficit), which represents net income (loss) and other gains and losses affecting shareholders equity that are not reflected in the Companys consolidated statements of operations:



|                                                                                       |  |                                  |         |   |      |   |         |      |  |   |     | 
|-------------------------------------------------------------------------------------- |  | -------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | --- | 
|                                                                                       |  | Twelve Months Ended
December 31, |        
|                                                                                       |  | 2010                             |         |   | 2009 |   |         | 2008 | 
|Net (loss) income attributable to AGY Holding Corp.                                    |  | $                                | (16,122 | ) |      | $ | (92,393 | )    |  | $ | 170 | 
|Foreign currency translation adjustments                                               |  |                                  | 1,296   |   |      |   | 14      |      |  |   | 20  | 
|Pension and other postretirement benefit adjustments                                   |  |                                  | 1,426   |   |      |   | (830    | )    |  |   | 448 | 
|                                                                                       |  |                                  |         |   |      |   |         |      |  |   |     | 
|Comprehensive (deficit) income attributable to AGY Holding Corp.                       |  | $                                | (13,400 | ) |      | $ | (93,209 | )    |  | $ | 638 | 
|                                                                                       |  |                                  |         |   |      |   |         |      |  |   |     | 
|Net income (loss) attributable to noncontrolling interest                              |  | $                                | 1,545   |   |      | $ | (1,119  | )    |  | $ |    | 
|Foreign currency translation adjustments                                               |  |                                  | 297     |   |      |   | 8       |      |  |   |    | 
|                                                                                       |  |                                  |         |   |      |   |         |      |  |   |     | 
|Comprehensive income (deficit) attributable to noncontrolling interest                 |  | $                                | 1,842   |   |      | $ | (1,111  | )    |  | $ |    | 
|                                                                                       |  |                                  |         |   |      |   |         |      |  |   |     | 
|Net (loss) income                                                                      |  | $                                | (14,577 | ) |      | $ | (93,512 | )    |  | $ | 170 | 
|Foreign currency translation adjustments                                               |  |                                  | 1,593   |   |      |   | 22      |      |  |   | 20  | 
|Pension and other postretirement benefit adjustments                                   |  |                                  | 1,426   |   |      |   | (830    | )    |  |   | 448 | 
|                                                                                       |  |                                  |         |   |      |   |         |      |  |   |     | 
|Comprehensive (loss) income, including portion attributable to noncontrolling interest |  | $                                | (11,558 | ) |      | $ | (94,320 | )    |  | $ | 638 | 
|                                                                                       |  |                                  |         |   |      |   |         |      |  |   |     | 



|16. | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
|--- | ---------------------------------------------

The Company from time to time enters into fixed-price agreements for the energy requirements of its AGY US segment to reduce the variability of the cash flows associated with forecasted purchases of
natural gas. Although these contracts are considered derivatives instruments, they typically meet the normal purchases exclusion contained in ASC 815 and are therefore exempted from the related accounting requirements. At December 31, 2010, the
Company had existing contracts for physical delivery of natural gas at its Aiken, SC facility and at its Huntingdon, PA facility that fix the commodity cost of natural gas for approximately 70% and 90%, respectively, of its estimated natural gas
purchase requirements in the next twelve months.

At December 31, 2010, the Company also had existing contracts for physical delivery of
electricity at its Huntingdon, PA facility that fix the commodity cost of approximately 95% of its estimated electricity purchase requirements in the next twelve months.

The Company also uses, on occasion, foreign currency derivatives to manage the risk associated with fluctuations in foreign exchange rates. At December 31, 2010 and 2009, respectively the Company had
no foreign currency hedging agreements in effect.



|17. | INCOME TAXES
|--- | ------------

The income tax expense
(benefit) for the years ended December 31, 2010, 2009 and 2008, consists of the following:



|        |  |         |      |   |          |   |        |       |  |   |         |   |  |          |    |  |       |   |         |         |  |   |          |   |  |       |     |  |  |   |       |  |  |   |       | 
|------- |  | ------- | ---- | - | -------- | - | ------ | ----- |  | - | ------- | - |  | -------- | -- |  | ----- | - | ------- | ------- |  | - | -------- | - |  | ----- | --- |  |  | - | ----- |  |  | - | ----- | 
|        |  | 2010    |      |   | 2009     |   |        | 2008  | 
|        |  | Current |      |   | Deferred |   |        | Total |  |   | Current |   |  | Deferred |    |  | Total |   |         | Current |  |   | Deferred |   |  | Total |    
|Federal |  | $       | (415 | ) |          | $ | (5,636 | )     |  | $ | (6,051  | ) |  | $        |   |  |       | $ | (12,055 | )       |  | $ | (12,055  | ) |  | $     |    |  |  | $ | 421   |  |  | $ | 421   | 
|State   |  |         | 105  |   |          |   | (450   | )     |  |   | (345    | ) |  |          | 28 |  |       |   | (1,052  | )       |  |   | (1,024   | ) |  |       | 201 |  |  |   | 613   |  |  |   | 814   | 
|Foreign |  |         | 50   |   |          |   |       |       |  |   | 50      |   |  |          |   |  |       |   |        |         |  |   |         |   |  |       |    |  |  |   | 34    |  |  |   | 34    | 
|        |  |         |      |   |          |   |        |       |  |   |         |   |  |          |    |  |       |   |         |         |  |   |          |   |  |       |     |  |  |   |       |  |  |   |       | 
|        |  | $       | (260 | ) |          | $ | (6,086 | )     |  | $ | (6,346  | ) |  | $        | 28 |  |       | $ | (13,107 | )       |  | $ | (13,079  | ) |  | $     | 201 |  |  | $ | 1,068 |  |  | $ | 1,269 | 
|        |  |         |      |   |          |   |        |       |  |   |         |   |  |          |    |  |       |   |         |         |  |   |          |   |  |       |     |  |  |   |       |  |  |   |       | 



F- 29



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The differences between the effective tax rate used in the consolidated statements of income and the
expected tax rate (computed by applying the U.S. federal corporate tax rate of 34% to income before income taxes) are as follows:



|                                                   |  |      |         |   |      |   |          |      |  |   |       |  
|-------------------------------------------------- |  | ---- | ------- | - | ---- | - | -------- | ---- |  | - | ----- | -
|                                                   |  | 2010 |         |   | 2009 |   |          | 2008 | 
|Income (loss) before income tax (expense) benefit: |  |      |         |   |      |   |          |      |  |   |       |  
|- Domestic                                         |  | $    | (26,294 | ) |      | $ | (102,892 | )    |  | $ | 1,116 |  
|- Foreign                                          |  |      | 5,371   |   |      |   | (3,699   | )    |  |   | 323   |  
|                                                   |  |      |         |   |      |   |          |      |  |   |       |  
|                                                   |  | $    | (20,923 | ) |      | $ | (106,591 | )    |  | $ | 1,439 |  
|                                                   |  |      |         |   |      |   |          |      |  |   |       |  
|Computed expected tax provision (benefit)          |  | $    | (7,114  | ) |      | $ | (36,243  | )    |  | $ | 489   |  
|State taxes  net of federal benefit               |  |      | 69      |   |      |   | (1,071   | )    |  |   | 68    |  
|Nondeductible items                                |  |      | 25      |   |      |   | 959      |      |  |   | 42    |  
|Change in valuation allowance                      |  |      | 1,545   |   |      |   | 722      |      |  |   | (74   | )
|Change in rate for deferred taxes                  |  |      |        |   |      |   |         |      |  |   | 435   |  
|Bargain purchase gain                              |  |      |        |   |      |   | (6,928   | )    |  |   |      |  
|Impairment of goodwill                             |  |      |        |   |      |   | 28,897   |      |  |   |      |  
|Foreign rate differential                          |  |      | (469    | ) |      |   | 538      |      |  |   | (2    | )
|Domestic net operating loss carryforward           |  |      | (281    | ) |      |   |         |      |  |   |      |  
|ASC 740- 10 Reserve Release                        |  |      | (133    | ) |      |   |         |      |  |   |      |  
|Other                                              |  |      | 12      |   |      |   | 47       |      |  |   | 311   |  
|                                                   |  |      |         |   |      |   |          |      |  |   |       |  
|Income tax (benefit) expense                       |  | $    | (6,346  | ) |      | $ | (13,079  | )    |  | $ | 1,269 |  
|                                                   |  |      |         |   |      |   |          |      |  |   |       |  

The tax effect of temporary differences, which give rise to deferred tax assets (liabilities) are as follows at
December 31, 2010 and 2009:



|                                                                             |  |      |         |   |      |   |         |  
|---------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                             |  | 2010 |         |   | 2009 |  
|Gross deferred tax assets:                                                   |  |      |         |   |      |   |         |  
|Domestic net operating loss carryforward                                     |  | $    | 25,295  |   |      | $ | 25,237  |  
|Pension and other employee benefit plans, including stock-based compensation |  |      | 6,552   |   |      |   | 6,452   |  
|Accrued liabilities                                                          |  |      | 3,962   |   |      |   | 4,889   |  
|Foreign net operating loss carryforward                                      |  |      | 5,624   |   |      |   | 3,236   |  
|Other                                                                        |  |      | 59      |   |      |   | 331     |  
|                                                                             |  |      |         |   |      |   |         |  
|Gross deferred tax assets                                                    |  |      | 41,492  |   |      |   | 40,145  |  
|Less valuation allowance                                                     |  |      | (3,773  | ) |      |   | (862    | )
|                                                                             |  |      |         |   |      |   |         |  
|Gross deferred tax assets  net of valuation allowance                       |  |      | 37,719  |   |      |   | 39,283  |  
|                                                                             |  |      |         |   |      |   |         |  
|Gross deferred tax liabilities:                                              |  |      |         |   |      |   |         |  
|Property, plant, and equipment                                               |  |      | (34,074 | ) |      |   | (41,631 | )
|Intangible assets                                                            |  |      | (5,653  | ) |      |   | (5,038  | )
|                                                                             |  |      |         |   |      |   |         |  
|Gross deferred tax liabilities                                               |  |      | (39,727 | ) |      |   | (46,669 | )
|                                                                             |  |      |         |   |      |   |         |  
|Net deferred tax liabilities                                                 |  | $    | (2,008  | ) |      | $ | (7,386  | )
|                                                                             |  |      |         |   |      |   |         |  

The net deferred tax liabilities are recognized as follows in the consolidated balance sheets at December 31, 2010 and
2009:



|                                    |  |      |        |   |      |   |         |  
|----------------------------------- |  | ---- | ------ | - | ---- | - | ------- | -
|                                    |  | 2010 |        |   | 2009 |  
|Current deferred tax assets         |  | $    | 4,984  |   |      | $ | 6,382   |  
|Noncurrent deferred tax liabilities |  |      | (6,992 | ) |      |   | (13,768 | )
|                                    |  |      |        |   |      |   |         |  
|Net deferred tax liabilities        |  | $    | (2,008 | ) |      | $ | (7,386  | )
|                                    |  |      |        |   |      |   |         |  



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##### Table of Contents

The Company has determined that, at present, it is more likely than not that its foreign net operating loss
(NOL) carryforward will not be realized. Therefore, a valuation allowance has been provided to reduce the carrying amount of the NOL carryforward to zero at December 31, 2010. The Company recorded during 2010 a valuation allowance
for domestic deferred tax assets, which are not more-likely-than-not to be realized and do not relate to assets with indefinite useful life. Generally, the Company can recognize deferred tax assets for the losses incurred until such time that the
aggregate deferred tax assets exceed aggregate deferred tax liabilities that do not relate to assets with an indefinite useful life.

At
December 31, 2010, the Company had domestic federal NOL carryforwards of approximately $69,733 and state NOL carryforwards of approximately $39,501 that will begin expiring in 2026. Also at December 31, 2010, the Company had foreign NOL
carryforwards of approximately $22,495 that begin expiring in 2013.

Uncertain Tax Positions  The Company follows ASC 740.
The total amount of unrecognized tax benefits, excluding the impact of interest and penalties, as of December 31, 2010 and 2009, was $262 and $886, respectively, of which approximately $6 would impact the effective rate for both years if
recognized. In accordance with its accounting policy, the Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. During 2010 and 2009, accrued interest and penalties were minimal. The
Companys consolidated balance sheet as of December 31, 2010 includes interest and penalties of $2 and $2 respectively.

The
following table summarizes the activity related to the Companys unrecognized tax benefits, excluding interest and penalties:



|                                                                     |  |   |      |  
|-------------------------------------------------------------------- |  | - | ---- | -
|Balance as of January 1, 2008                                        |  | $ | 409  |  
|Additions based on tax positions related to the current year         |  |   | 2    |  
|Additions for tax positions of prior years                           |  |   | 1    |  
|Reductions for tax positions of prior years                          |  |   | (6   | )
|Expiration of the statute of limitations for the assessment of taxes |  |   |     |  
|                                                                     |  |   |      |  
|Balance as of December 31, 2008                                      |  |   | 406  |  
|                                                                     |  |   |      |  
|Additions for tax positions of prior years                           |  |   | 480  |  
|                                                                     |  |   |      |  
|Balance as of December 31, 2009                                      |  |   | 886  |  
|                                                                     |  |   |      |  
|Reductions for tax positions of prior years                          |  |   | (498 | )
|Expiration of the statute of limitations for the assessment of taxes |  |   | (126 | )
|                                                                     |  |   |      |  
|Balance as of December 31, 2010                                      |  | $ | 262  |  
|                                                                     |  |   |      |  

The Company does not anticipate the balance of gross unrecognized tax benefits at December 31, 2010, to significantly
change during the next 12 months.

As of December 31, 2010, the Company is subject to U.S. federal income tax examinations for the
tax years 2008 through 2010; In addition, the Company is subject to state and local income tax examinations for the tax years 2007 through 2009. The Company concluded a U.S. federal income tax examination during 2010 for the year ended
December 31, 2007, which resulted in no adjustments.



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|18. | ALLOY METAL LEASES
|--- | ------------------

The Company leases
under short-term operating leases (generally with lease terms from six to twelve months) a significant portion of the alloy metals needed to support our manufacturing operations. During the years ended December 31, 2010, 2009 and 2008, total
lease costs of alloy metals were approximately $3,648, $3,595 and $7,620, respectively, and were classified as a component of cost of goods sold.

The Company has leased alloy metals under the following three agreements during 2010, 2009 and 2008:

Metal Consignment Facility From August 2005 to October 2009, AGY had a consignment agreement in place with Bank of Nova Scotia, as assignee of Bank of America, N.A., which was assignee of
Fleet Precious Metals Inc., to lease platinum, one of the alloy metals used in our manufacturing operations. At December 31, 2008, we leased 28,800 ounces of platinum under the facility, with a notional value of approximately $25,900 as
calculated under the facility. Unused availability at December 31, 2008, was approximately 3,200 ounces of platinum with a notional value of $43,700. At December 31, 2008, there were no outstanding letters of credit securing the agreement.
Effective October 7, 2009, the Company terminated the Metal Consignment Facility with Bank of Nova Scotia and entered into a new master lease agreement with Deutsche Bank as discussed below.

Owens Corning Master Lease Agreement  In October 2007, as part of the CFM acquisition, the Company entered into a master lease agreement
with OC to lease up to approximately 19,800 ounces of platinum and 3,400 ounces of rhodium, exclusively for use in the Huntingdon, PA CFM and Anderson, SC manufacturing operations. Effective October 24, 2008, the Company terminated the OC
master lease agreement.

Deutsche Bank New Master Lease Agreement Simultaneously with the termination of the OC master lease
agreement in October 2008, the Company entered into a new master lease agreement (the Master Lease Agreement) with DB Energy Trading LLC (DB) for the purpose of leasing precious metals. The Master Lease Agreement described
the lease terms and conditions enabling AGY to lease up to 19,057 ounces of platinum and 3,308 ounces of rhodium. The Master Lease Agreement had a three-year term and allows AGY to enter into leases of alloy metals with terms of one to twelve
months. Lease costs were determined by the quantity of metal leased, multiplied by a benchmark value of the applicable precious metal and a margin above the lease rate index based on DBs daily precious metal rates.

At December 31, 2008, the Company leased approximately 19,050 ounces of platinum and 3,300 ounces of rhodium under the Master Lease Agreement, with
a notional value of approximately $21,800.

In connection with the termination of the Metal Consignment Facility with Bank of Nova Scotia on
October 7, 2009, the Master Lease Agreement was also terminated and the Company entered into a new master lease agreement (the New Master Lease Agreement) with DB. The New Master Lease Agreement has a three-year term and allows AGY
to enter into leases of alloy metals, up to 51,057 ounces of platinum and up to 3,308 ounces of rhodium, with terms of one to twelve months. Lease costs are determined by the quantity of metal leased, multiplied by a benchmark value of the
applicable precious metal and a margin above the lease rate index based on DBs daily precious metal rates. The New Master Lease Agreement is secured by a security interest in rhodium up to a value that is the lesser of 35% of the leased
platinum or $24,400. The New Master Lease Agreement contains customary events of default, including, without limitation, nonpayment of lease payments, inaccuracy of representations and warranties in any material respect and a cross-default provision
with any credit facility or leasing facility greater than $500, including the Credit Facility and the Notes. There are no financial maintenance covenants included in the New Master Lease Agreement.

At December 31, 2010, the Company leased approximately 39,100 ounces of platinum and 2,200 ounces of rhodium under the New Master Lease Agreement,
with a notional value of approximately $63,400 and $4,900, respectively. All of the leases outstanding at December 31, 2010 had initial terms of six to twelve months, maturing no later than December 12, 2011 (with future minimum rentals of
approximately $2,290 until maturity in December 2011).



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##### Table of Contents

|19. | FAIR VALUE MEASUREMENTS
|--- | -----------------------

The Company
utilized the valuation hierarchy provided in ASC 820-10 to determine the fair value of assets measured on a non-recurring basis in periods subsequent to the initial adoption of ASC 820-10:



| |  |  | Level 1: Observable inputs such as quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.
The fair value hierarchy gives the highest priority to Level 1 inputs.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly based on inputs not quoted on
active markets, but corroborated by market data.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and
minimize the use of unobservable inputs to the extent possible.

At December 31, 2010, there were no assets or liabilities required to be
measured at fair value in periods subsequent to their initial recognition.

At December 31, 2009, assets or liabilities measured at fair
value in periods subsequent to their initial recognition only include the AGY US segment goodwill, which was partially impaired as of June 30, 2009 and was tested for annual impairment during the fourth quarter of 2009. The valuation
methodologies used to determine fair value, with the assistance of a third party valuation specialist, were:



| |  |  | Market approach: The market approach uses prices and other relevant information generated by market transactions involving identical or comparable
assets or liabilities (including a business).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Income approach: The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present
amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts and significant assumptions used include projected cash flows, discount rate and terminal business value that are
primarily the Companys own data.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Since there were unobservable inputs, management concluded that this was a Level 3
fair value measurement.

In accordance with the provisions of ASC 350-20, the goodwill of the AGY US segment with a carrying amount of
approximately $84,992 as of December 31, 2008 was written off as of December 31, 2009 through impairment charges in earnings for $44,466 in the second quarter of 2009 and $40,526 in the fourth quarter of 2009.



|20. | NONCONTROLLING INTEREST
|--- | -----------------------

As discussed in
Note 3, on June 10, 2009 the Company purchased a 70% controlling interest in AGY Asia. The 30% noncontrolling interest (NCI) was recorded at the acquisition date at a fair value of $12,431, which was derived from an option
agreement, pursuant to which the Company has the right to purchase the remaining 30% NCI at a stipulated multiple of earnings before interest, taxes, depreciation and amortization if certain financial performances are achieved. Grace has the right
to put their remaining 30% ownership to the Company after the one-year anniversary of the execution of the AGY Asia Purchase Agreement at a stipulated multiple of earnings before interest, taxes, depreciation and amortization. The put option became
exercisable upon the first anniversary of the completion date of the AGY Asia acquisition, June 10, 2010, and will expire on December 31, 2013.

The Company assessed the option agreement under the guidance of ASC 815 and ASC 480-10 and considered it was not a freestanding financial instrument but a redeemable equity interest, which is not solely
within the control of the Company. Therefore, at the acquisition date, the fair value of the redeemable portion of the NCI was reclassified as temporary, or mezzanine, equity presented in the accompanying consolidated balance sheet between total
liabilities and shareholders equity.

At December 31, 2010 and 2009, the Company recorded the attribution of the NCI net income
(loss) and other comprehensive income (loss) and performed a subsequent measurement of the probable redemption amount. As the present value of the probable redemption price was below the initial carrying value of the NCI and as the redemption was
still probable, the Company concluded that the mezzanine classification



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was still appropriate as of December 31, 2009. As of December 31, 2010 the equity instrument became redeemable but remains below its initial carrying value. Therefore, only the
redemption amount assessed as of December 31, 2010 is classified in mezzanine equity and any NCI above this amount is presented in permanent equity.

Changes in noncontrolling interest during the year ended December 31, 2009 and 2010 are set forth below:



|                                                          |  |                 |        |   |                 |   |       |          |  |   |        |  
|--------------------------------------------------------- |  | --------------- | ------ | - | --------------- | - | ----- | -------- |  | - | ------ | -
|                                                          |  | MezzanineEquity |        |   | PermanentEquity |   |       | TotalNCI | 
|Balance as of January 1, 2009                             |  | $               |       |   |                 | $ |      |          |  | $ |       |  
|Noncontrolling interest in AGY Asia on June 10, 2009      |  |                 | 12,431 |   |                 |   |      |          |  |   | 12,431 |  
|Net (loss) attributable to NCI  AGY Asia                 |  |                 | (1,119 | ) |                 |   |      |          |  |   | (1,119 | )
|Other comprehensive income attributable to NCI  AGY Asia |  |                 | 8      |   |                 |   |      |          |  |   | 8      |  
|                                                          |  |                 |        |   |                 |   |       |          |  |   |        |  
|Balance as of December 31, 2009                           |  |                 | 11,320 |   |                 |   |      |          |  |   | 11,320 |  
|                                                          |  |                 |        |   |                 |   |       |          |  |   |        |  
|Net income attributable to NCI  AGY Asia                 |  |                 | 1,486  |   |                 |   |      |          |  |   | 1,486  |  
|Other comprehensive income attributable to NCI  AGY Asia |  |                 | 297    |   |                 |   |      |          |  |   | 297    |  
|Adjustment to NCI Redemption amount assessment            |  |                 | (9,702 | ) |                 |   | 9,702 |          |  |   |       |  
|                                                          |  |                 |        |   |                 |   |       |          |  |   |        |  
|Balance as December 31, 2010                              |  | $               | 3,401  |   |                 | $ | 9,702 |          |  | $ | 13,103 |  
|                                                          |  |                 |        |   |                 |   |       |          |  |   |        |  



|21. | VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
|--- | ----------------------------------------------



|                                     |  |                               |       |  |                             |  |       |            |  |  |                    |   |  |                             |        |      |                         |  |       |  |  |   |       | 
|------------------------------------ |  | ----------------------------- | ----- |  | --------------------------- |  | ----- | ---------- |  |  | ------------------ | - |  | --------------------------- | ------ | ---- | ----------------------- |  | ----- |  |  | - | ----- | 
|For the Year Ended December 31, 2009 |  | Balance 
atBeginningof Period |       |  | Charged toCosts
andExpenses |  |       | Write-offs |  |  | Deductions/
Other  |   |  | AcquisitionsandDivestitures |        |      | Balance at Endof
Period | 
|Allowance for Trade Receivables      |  | $                             | 3,604 |  |                             |  | 8,778 | (1)        |  |  | (50                | ) |  |                             | (9,858 | )(2) |                         |  | 84    |  |  | $ | 2,558 | 
|Allowance for inventories            |  | $                             | 1,482 |  |                             |  | (987  | )          |  |  |                   |   |  |                             |       |      |                         |  | 2,123 |  |  | $ | 2,618 | 
|Tax valuation allowance              |  | $                             | 34    |  |                             |  | 722   |            |  |  |                   |   |  |                             |       |      |                         |  | 106   |  |  | $ | 862   | 
|                                     |  |                               |       |  |                             | 
|For the Year Ended December 31, 2010 |  | Balance atBeginningof Period  |       |  | Charged toCosts
andExpenses |  |       | Write-offs |  |  | Deductions/ Others |   |  | AcquisitionsandDivestitures |        |      | Balance at Endof Period | 
|Allowance for Trade Receivables      |  | $                             | 2,558 |  |                             |  | 9,086 | (1)        |  |  |                   |   |  |                             | (8,520 | )(2) |                         |  |      |  |  | $ | 3,124 | 
|Allowance for inventories            |  | $                             | 2,618 |  |                             |  |      |            |  |  |                   |   |  |                             | (789   | )    |                         |  |      |  |  | $ | 1,829 | 
|Tax valuation allowance              |  | $                             | 862   |  |                             |  | 1,545 |            |  |  |                   |   |  |                             | 1,366  |      |                         |  |      |  |  | $ | 3,773 | 



|(1) | Includes rebates accrued to sales.
|--- | ----------------------------------

|(2) | Includes rebates paid to customers
|--- | ----------------------------------



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|22. | COMMITMENTS AND CONTINGENCIES
|--- | -----------------------------

The
Company is not a party to any significant litigation or claims, other than routine matters incidental to the operation of the Company. The Company does not expect that the outcome of any pending claims will have a material adverse effect on the
Companys consolidated financial position, results of operations, or cash flows.

There may be insignificant levels of asbestos in
certain manufacturing facilities, however, the Company does not expect to incur costs (which are undeterminable) in the foreseeable future to remediate any such asbestos, which may be present in the facilities. Accordingly, management did not record
a conditional asset retirement obligation related to such asbestos remediation because, in accordance with the guidance of ASC 410, the Company does not have sufficient information to estimate the fair value of the asset retirement obligation.

In addition to the alloy metal leases discussed in Note 18, the Company also leases manufacturing and other equipment and property under
operating leases. Total rent expense for the years ended December 31, 2010, 2009 and 2008, was approximately $1,630, $1,970 and $1,350, respectively. The following summarizes the future minimum lease payments for each of the next five years and
the total thereafter:



|                         |  |   |       | 
|------------------------ |  | - | ----- | 
|Years EndingDecember 31, |  |   |      
|2011                     |  | $ | 1,114 | 
|2012                     |  |   | 1,069 | 
|2013                     |  |   | 1,063 | 
|2014                     |  |   | 1,059 | 
|2015                     |  |   | 596   | 
|                         |  |   |       | 
|                         |  | $ | 4,901 | 
|                         |  |   |       | 

The Company is obligated to make minimum purchases of marbles from OC of approximately $1,050 in 2011.



|23. | SEGMENT INFORMATION
|--- | -------------------

Since the
acquisition of AGY Asia on June 10, 2009 as discussed in Note 3, the Company has two reportable segments, each a separate operating segment. The AGY US segment includes the US manufacturing operations and its sale of advanced glass fibers that
are used worldwide as reinforcing materials in numerous high-value applications and end-markets through AGY Holding Corp., its wholly owned domestic and French subsidiaries. The AGY Asia segment includes the manufacturing operations of the
Companys 70% controlling ownership of AGY Hong Kong Limited and its sale of advanced glass fibers that are used primarily in the Asian electronics markets. The Companys operating segments are managed separately based on differences in
their manufacturing and technology capabilities, products and services and their end-markets as well as their distinct financing agreements. The financial results for the Companys operating segments are prepared using a management approach,
which is consistent with the basis and manner in which the Company internally segregates financial information for the purpose of making internal operating decisions. The Company evaluates the performance of its operating segments based on
operating profit. Corporate and certain other expenses are not allocated to the operating segments, except to the extent that the expense can be directly attributable to the operating segment.



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Because the Company operated as one business segment until June 10, 2009 as discussed above, the
operating results by business segment and other financial data are only presented below for the years ended December 31, 2010 and 2009:

Twelve Months Ended December 31, 2010



|                                                     |  |        |         |  |          |   |         |                        |  |   |        |   |  |   |         | 
|---------------------------------------------------- |  | ------ | ------- |  | -------- | - | ------- | ---------------------- |  | - | ------ | - |  | - | ------- | 
|                                                     |  | AGY US |         |  | AGY Asia |   |         | Corporate andOther (1) |  |   | Total  |  
|Total net sales                                      |  | $      | 158,501 |  |          | $ | 28,159  |                        |  | $ | (2,986 | ) |  | $ | 183,674 | 
|Income (loss) from operations (1)                    |  |        | 2,093   |  |          |   | 1,167   |                        |  |   | (1,587 | ) |  |   | 1,673   | 
|Depreciation and amortization                        |  |        | 10,012  |  |          |   | 5,523   |                        |  |   | 4,114  |   |  |   | 19,649  | 
|Alloy metals depletion, net                          |  |        | 7,633   |  |          |   | 470     |                        |  |   |       |   |  |   | 8,103   | 
|Property, plant and equipment, and alloy metals, net |  |        | 130,679 |  |          |   | 89,659  |                        |  |   |       |   |  |   | 220,338 | 
|Carrying amount of intangible assets                 |  |        | 17,953  |  |          |   |        |                        |  |   |       |   |  |   | 17,953  | 
|Total assets                                         |  |        | 193,516 |  |          |   | 105,171 |                        |  |   |       |   |  |   | 298,687 | 



|(1) | Operating loss for the year ended December 31, 2010 within the corporate and other segment includes primarily, $2,658 of restructuring expense and $4,114 of
accelerated depreciation expense (discussed in Note 8), stock compensation expense, the $750 management fees payable to the Companys sponsor, $331of loss recorded on the sale of assets partially offset by the $6,276 gain from contract
termination (discussed in Note 9).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Twelve Months Ended December 31, 2009



|                                                     |  |        |         |   |          |   |         |                        |  |   |         |   |  |   |          |  
|---------------------------------------------------- |  | ------ | ------- | - | -------- | - | ------- | ---------------------- |  | - | ------- | - |  | - | -------- | -
|                                                     |  | AGY US |         |   | AGY Asia |   |         | Corporate andOther (2) |  |   | Total   |  
|Total net sales                                      |  | $      | 141,058 |   |          | $ | 12,983  |                        |  | $ | (189    | ) |  | $ | 153,852  |  
|Loss from operations (1)                             |  |        | (15,411 | ) |          |   | (2,487  | )                      |  |   | (88,300 | ) |  |   | (106,198 | )
|Depreciation and amortization                        |  |        | 10,637  |   |          |   | 2,974   |                        |  |   |        |   |  |   | 13,611   |  
|Alloy metals depletion, net                          |  |        | 6,475   |   |          |   | 258     |                        |  |   |        |   |  |   | 6,733    |  
|Property, plant and equipment, and alloy metals, net |  |        | 159,466 |   |          |   | 89,630  |                        |  |   |        |   |  |   | 249,096  |  
|Carrying amount of intangible assets                 |  |        | 19,667  |   |          |   |        |                        |  |   |        |   |  |   | 19,667   |  
|Total assets                                         |  |        | 227,083 |   |          |   | 103,783 |                        |  |   |        |   |  |   | 330,866  |  



|(2) | Operating loss for the twelve months ended December 31, 2009 within the corporate and other segment includes primarily, $84,992 of goodwill impairment charge
related to the AGY US segment (discussed in Note 7), $2,725 of acquisition-related costs (discussed in Note 3), $789 of restructuring expense (discussed in Note 8), stock compensation expense and the management fees payable to the Companys
sponsor, partially offset by the gain recorded on the sale of assets.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|24. | CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
|--- | --------------------------------------------

As described in Note 10, an aggregate of $172,000 of the Notes remain outstanding as of December 31, 2010. The Notes are guaranteed, fully, unconditionally and jointly and severally, by each of AGY
Holding Corp.s existing and future wholly-owned domestic subsidiaries, other than immaterial subsidiaries (collectively, the Combined Guarantor Subsidiaries).

For the purpose of the following footnote:



| |  |  | AGY Holding Corp. is referred to as Parent;
| | - |  | ---------------------------------------------



| |  |  | The Combined Guarantor Subsidiaries represent all subsidiaries other than the Combined Nonguarantor subsidiaries defined below; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Combined Nonguarantor Subsidiaries as of December 31, 2010 include only the subsidiaries forming AGY Asia: AGY Cayman LLC, AGY
Hong Kong Ltd and AGY Shanghai.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

All the Parents subsidiaries were domestic guarantors of the Notes through
June 10, 2009, when the Company acquired the entities comprising AGY Asia, which became the only Nonguarantor subsidiaries. The following supplemental condensed consolidating financial information is presented on the equity method and reflects
the Parents separate accounts, the accounts of the Combined Guarantor Subsidiaries, the accounts of the Nonguarantor Subsidiaries, the consolidating adjustments and eliminations and the total consolidated accounts for the dates and periods
indicated. The required condensed consolidating information for periods prior to the year ended December 31, 2009 is not presented as such information is not deemed material to the consolidated financial statements.

Condensed Consolidating Balance Sheet



|                                                                                            |  |                         |         |   |                               |   |         |                                  |  |   |              |   |  |              |          |   |  |   |         | 
|------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ----------------------------- | - | ------- | -------------------------------- |  | - | ------------ | - |  | ------------ | -------- | - |  | - | ------- | 
|                                                                                            |  | As of December 31, 2010 |        
|                                                                                            |  | Parent                  |         |   | CombinedGuarantorSubsidiaries |   |         | CombinedNonguarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|ASSETS                                                                                      |  |                         |         |   |                               |   |         |                                  |  |   |              |   |  |              |          |   |  |   |         | 
|Total current assets                                                                        |  | $                       | 1,859   |   |                               | $ | 42,769  |                                  |  | $ | 14,710       |   |  | $            |         |   |  | $ | 59,338  | 
|Due from (to) affiliates                                                                    |  |                         | (31,584 | ) |                               |   | 33,309  |                                  |  |   | (1,725       | ) |  |              |         |   |  |   |        | 
|Property, plant and equipment, net                                                          |  |                         | 76,672  |   |                               |   | 54,007  |                                  |  |   | 89,659       |   |  |              |         |   |  |   | 220,338 | 
|Intangible assets, net                                                                      |  |                         | 2,083   |   |                               |   | 15,870  |                                  |  |   |             |   |  |              |         |   |  |   | 17,953  | 
|Investment in unconsolidated entities                                                       |  |                         | 159,404 |   |                               |   |        |                                  |  |   |             |   |  |              | (159,404 | ) |  |   |        | 
|Other assets                                                                                |  |                         | 35      |   |                               |   | 221     |                                  |  |   | 802          |   |  |              |         |   |  |   | 1,058   | 
|                                                                                            |  |                         |         |   |                               |   |         |                                  |  |   |              |   |  |              |          |   |  |   |         | 
|Total                                                                                       |  | $                       | 208,469 |   |                               | $ | 146,176 |                                  |  | $ | 103,446      |   |  | $            | (159,404 | ) |  | $ | 298,687 | 
|                                                                                            |  |                         |         |   |                               |   |         |                                  |  |   |              |   |  |              |          |   |  |   |         | 
|LIABILITIES, OBLIGATION UNDER PUT/CALL FOR NONCONTROLLING INTEREST AND SHAREHOLDERS EQUITY |  |                         |         |   |                               |   |         |                                  |  |   |              |   |  |              |          |   |  |   |         | 
|Total current liabilities                                                                   |  | $                       | 6,365   |   |                               | $ | 12,914  |                                  |  | $ | 22,003       |   |  | $            |         |   |  | $ | 41,282  | 
|Long-term debt                                                                              |  |                         | 189,950 |   |                               |   |        |                                  |  |   | 25,023       |   |  |              |         |   |  |   | 214,973 | 
|Other long-term liabilities                                                                 |  |                         |        |   |                               |   | 16,734  |                                  |  |   | 381          |   |  |              |         |   |  |   | 17,115  | 
|Obligation under put/call for noncontrolling interest                                       |  |                         |        |   |                               |   |        |                                  |  |   | 3,401        |   |  |              |         |   |  |   | 3,401   | 
|Parents shareholders equity                                                               |  |                         | 12,154  |   |                               |   | 116,528 |                                  |  |   | 42,876       |   |  |              | (159,404 | ) |  |   | 12,154  | 
|Noncontrolling interest equity                                                              |  |                         |        |   |                               |   |        |                                  |  |   | 9,762        |   |  |              |         |   |  |   | 9,762   | 
|                                                                                            |  |                         |         |   |                               |   |         |                                  |  |   |              |   |  |              |          |   |  |   |         | 
|Total                                                                                       |  | $                       | 208,469 |   |                               | $ | 146,176 |                                  |  | $ | 103,446      |   |  | $            | (159,404 | ) |  | $ | 298,687 | 
|                                                                                            |  |                         |         |   |                               |   |         |                                  |  |   |              |   |  |              |          |   |  |   |         | 



F- 37



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##### Table of Contents

Condensed Consolidating Statements of Operations



|                                                                    |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ----------------------------- | - | ------- | -------------------------------- |  | - | ------------ | - |  | ------------ | ------ | - |  | - | ------- | -
|                                                                    |  | Year Ended December 31, 2010 |        
|                                                                    |  | Parent                       |         |   | CombinedGuarantorSubsidiaries |   |         | CombinedNonguarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |       
|Net sales                                                           |  | $                            |        |   |                               | $ | 158,501 |                                  |  | $ | 28,159       |   |  | $            | (2,986 | ) |  | $ | 183,674 |  
|Cost of goods sold                                                  |  |                              |        |   |                               |   | 147,669 |                                  |  |   | 24,249       |   |  |              | (2,986 | ) |  |   | 168,932 |  
|                                                                    |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|Gross profit                                                        |  |                              |        |   |                               |   | 10,832  |                                  |  |   | 3,910        |   |  |              |       |   |  |   | 14,742  |  
|                                                                    |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|Selling, general and administrative expenses                        |  |                              | (793    | ) |                               |   | (12,434 | )                                |  |   | (2,743       | ) |  |              | 147    |   |  |   | (15,823 | )
|Restructuring charges                                               |  |                              |        |   |                               |   | (2,658  | )                                |  |   |             |   |  |              |       |   |  |   | (2,658  | )
|Amortization of intangible assets                                   |  |                              |        |   |                               |   | (1,003  | )                                |  |   |             |   |  |              |       |   |  |   | (1,003  | )
|Other operating (expense) income                                    |  |                              | (331    | ) |                               |   | 617     |                                  |  |   | 6,276        |   |  |              | (147   | ) |  |   | 6,415   |  
|                                                                    |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|Income (loss) from operations                                       |  |                              | (1,124  | ) |                               |   | (4,646  | )                                |  |   | 7,443        |   |  |              |       |   |  |   | 1,673   |  
|                                                                    |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|Interest expense                                                    |  |                              | (20,374 | ) |                               |   |        |                                  |  |   | (2,408       | ) |  |              |       |   |  |   | (22,782 | )
|Equity earnings (losses) in consolidated entities                   |  |                              | 1,689   |   |                               |   |        |                                  |  |   |             |   |  |              | (1,689 | ) |  |   |        |  
|Other income (expense), net                                         |  |                              |        |   |                               |   | 71      |                                  |  |   | 115          |   |  |              |       |   |  |   | 186     |  
|                                                                    |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|(Loss) income before income tax benefit                             |  |                              | (19,809 | ) |                               |   | (4,575  | )                                |  |   | 5,150        |   |  |              | (1,689 | ) |  |   | (20,923 | )
|Income tax benefit                                                  |  |                              | 5,232   |   |                               |   | 1,114   |                                  |  |   |             |   |  |              |       |   |  |   | 6,346   |  
|                                                                    |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|Net (loss) income                                                   |  |                              | (14,577 | ) |                               |   | (3,461  | )                                |  |   | 5,150        |   |  |              | (1,689 | ) |  |   | (14,577 | )
|                                                                    |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|Less: Net (income) loss attributable to the noncontrolling interest |  |                              | (1,545  | ) |                               |   |        |                                  |  |   | (1,545       | ) |  |              | 1,545  |   |  |   | (1,545  | )
|                                                                    |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|Net (loss) income attributable to AGY Holding Corp.                 |  | $                            | (16,122 | ) |                               | $ | (3,461  | )                                |  | $ | 3,605        |   |  | $            | (144   | ) |  | $ | (16,122 | )
|                                                                    |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |        |   |  |   |         |  



F- 38



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##### Table of Contents

Condensed Consolidating Statements of Cash Flows



|                                                                                                   |  |                              |         |   |                               |   |        |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ----------------------------- | - | ------ | -------------------------------- |  | - | ------------ | - |  | ------------ | ------ | - |  | - | ------- | -
|                                                                                                   |  | Year Ended December 31, 2010 |        
|                                                                                                   |  | Parent                       |         |   | CombinedGuarantorSubsidiaries |   |        | CombinedNonguarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |       
|Cash flows from operating activities:                                                              |  |                              |         |   |                               |   |        |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|Net (loss) income                                                                                  |  | $                            | (14,577 | ) |                               | $ | (3,461 | )                                |  | $ | 5,150        |   |  | $            | (1,689 | ) |  |   | (14,577 | )
|Equity (earnings) losses in unconsolidated entities                                                |  |                              | (1,689  | ) |                               |   |       |                                  |  |   |             |   |  |              | 1,689  |   |  |   |        |  
|Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |  |                              |         |   |                               |   |        |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|Gain from contract termination                                                                     |  |                              |        |   |                               |   |       |                                  |  |   | (6,276       | ) |  |              |       |   |  |   | (6,276  | )
|Depreciation, alloy metals depletion and amortization                                              |  |                              | 711     |   |                               |   | 21,759 |                                  |  |   | 5,993        |   |  |              |       |   |  |   | 28,463  |  
|Loss on sale, disposal of assets or exchange of property and equipment and alloy metals            |  |                              | 331     |   |                               |   |       |                                  |  |   |             |   |  |              |       |   |  |   | 331     |  
|Stock compensation                                                                                 |  |                              | 43      |   |                               |   |       |                                  |  |   |             |   |  |              |       |   |  |   | 43      |  
|Deferred income tax benefit                                                                        |  |                              | (5,232  | ) |                               |   | (854   | )                                |  |   |             |   |  |              |       |   |  |   | (6,086  | )
|Change in assets and liabilities                                                                   |  |                              | 2,504   |   |                               |   | (4,778 | )                                |  |   | (3,769       | ) |  |              |       |   |  |   | (6,043  | )
|Parents loans and advances                                                                         |  |                              | 4,945   |   |                               |   | (6,190 | )                                |  |   | 1,245        |   |  |              |       |   |  |   |        |  
|                                                                                                   |  |                              |         |   |                               |   |        |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|Net cash (used in) provided by operating activities                                                |  |                              | (12,964 | ) |                               |   | 6,476  |                                  |  |   | 2,343        |   |  |              |       |   |  |   | (4,145  | )
|                                                                                                   |  |                              |         |   |                               |   |        |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|Cash flows from investing activities:                                                              |  |                              |         |   |                               |   |        |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|Purchase of property, plant and equipment and alloy metals                                         |  |                              |        |   |                               |   | (6,476 | )                                |  |   | (3,362       | ) |  |              |       |   |  |   | (9,838  | )
|Proceeds from the sale of property and equipment and alloy metals                                  |  |                              | 14,146  |   |                               |   |       |                                  |  |   |             |   |  |              |       |   |  |   | 14,146  |  
|                                                                                                   |  |                              |         |   |                               |   |        |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|Net cash provided by (used in) investing activities                                                |  |                              | 14,146  |   |                               |   | (6,476 | )                                |  |   | (3,362       | ) |  |              |       |   |  |   | 4,308   |  
|                                                                                                   |  |                              |         |   |                               |   |        |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|Cash flows from financing activities:                                                              |  |                              |         |   |                               |   |        |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|Net (payments) proceeds (of) from Revolving Credit Facility                                        |  |                              | (1,300  | ) |                               |   |       |                                  |  |   |             |   |  |              |       |   |  |   | (1,300  | )
|Net proceeds (payments) from (of) Asia Credit Facility                                             |  |                              |        |   |                               |   |       |                                  |  |   | 1,012        |   |  |              |       |   |  |   | 1,012   |  
|Debt issuances and others                                                                          |  |                              | (100    | ) |                               |   |       |                                  |  |   |             |   |  |              |       |   |  |   | (100    | )
|                                                                                                   |  |                              |         |   |                               |   |        |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|Net cash (used in) provided by financing activities                                                |  |                              | (1,400  | ) |                               |   |       |                                  |  |   | 1,012        |   |  |              |       |   |  |   | (388    | )
|                                                                                                   |  |                              |         |   |                               |   |        |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|Effect of exchange rate changes on cash                                                            |  |                              |        |   |                               |   |       |                                  |  |   | (82          | ) |  |              |       |   |  |   | (82     | )
|                                                                                                   |  |                              |         |   |                               |   |        |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|Net decrease in cash                                                                               |  |                              | (218    | ) |                               |   |       |                                  |  |   | (89          | ) |  |              |       |   |  |   | (307    | )
|                                                                                                   |  |                              |         |   |                               |   |        |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|Cash, beginning of year                                                                            |  |                              | 783     |   |                               |   |       |                                  |  |   | 2,656        |   |  |              |       |   |  |   | 3,439   |  
|                                                                                                   |  |                              |         |   |                               |   |        |                                  |  |   |              |   |  |              |        |   |  |   |         |  
|Cash, end of year                                                                                  |  | $                            | 565     |   |                               | $ |       |                                  |  | $ | 2,567        |   |  | $            |       |   |  | $ | 3,132   |  
|                                                                                                   |  |                              |         |   |                               |   |        |                                  |  |   |              |   |  |              |        |   |  |   |         |  



F- 39



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##### Table of Contents

Condensed Consolidating Balance Sheet



|                                                                                            |  |                         |         |   |                               |   |         |                                  |  |   |              |   |  |              |          |   |  |   |         | 
|------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ----------------------------- | - | ------- | -------------------------------- |  | - | ------------ | - |  | ------------ | -------- | - |  | - | ------- | 
|                                                                                            |  | As of December 31, 2009 |        
|                                                                                            |  | Parent                  |         |   | CombinedGuarantorSubsidiaries |   |         | CombinedNonguarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |         
|ASSETS                                                                                      |  |                         |         |   |                               |   |         |                                  |  |   |              |   |  |              |          |   |  |   |         | 
|Total current assets                                                                        |  | $                       | 1,059   |   |                               | $ | 46,650  |                                  |  | $ | 13,088       |   |  | $            |         |   |  | $ | 60,797  | 
|Due from (to) affiliates                                                                    |  |                         | (19,415 | ) |                               |   | 20,429  |                                  |  |   | (724         | ) |  |              | (290     | ) |  |   |        | 
|Property, plant and equipment, net                                                          |  |                         | 98,566  |   |                               |   | 60,900  |                                  |  |   | 89,630       |   |  |              |         |   |  |   | 249,096 | 
|Intangible assets, net                                                                      |  |                         | 2,794   |   |                               |   | 16,873  |                                  |  |   |             |   |  |              |         |   |  |   | 19,667  | 
|Investment in unconsolidated entities                                                       |  |                         | 140,545 |   |                               |   |        |                                  |  |   |             |   |  |              | (140,545 | ) |  |   |        | 
|Other assets                                                                                |  |                         | 20      |   |                               |   | 222     |                                  |  |   | 1,064        |   |  |              |         |   |  |   | 1,306   | 
|                                                                                            |  |                         |         |   |                               |   |         |                                  |  |   |              |   |  |              |          |   |  |   |         | 
|Total                                                                                       |  | $                       | 223,569 |   |                               | $ | 145,074 |                                  |  | $ | 103,058      |   |  | $            | (140,835 | ) |  | $ | 330,866 | 
|                                                                                            |  |                         |         |   |                               |   |         |                                  |  |   |              |   |  |              |          |   |  |   |         | 
|LIABILITIES, OBLIGATION UNDER PUT/CALL FOR NONCONTROLLING INTEREST AND SHAREHOLDERS EQUITY |  |                         |         |   |                               |   |         |                                  |  |   |              |   |  |              |          |   |  |   |         | 
|Total current liabilities                                                                   |  | $                       | 6,808   |   |                               | $ | 16,695  |                                  |  | $ | 18,581       |   |  | $            |         |   |  | $ | 42,084  | 
|Long-term debt                                                                              |  |                         | 191,250 |   |                               |   |        |                                  |  |   | 30,416       |   |  |              |         |   |  |   | 221,666 | 
|Other long-term liabilities                                                                 |  |                         |        |   |                               |   | 25,319  |                                  |  |   | 4,966        |   |  |              |         |   |  |   | 30,285  | 
|Obligation under put/call for noncontrolling interest                                       |  |                         |        |   |                               |   |        |                                  |  |   | 11,320       |   |  |              |         |   |  |   | 11,320  | 
|Parents shareholders equity                                                               |  |                         | 25,511  |   |                               |   | 103,060 |                                  |  |   | 37,775       |   |  |              | (140,835 | ) |  |   | 25,511  | 
|                                                                                            |  |                         |         |   |                               |   |         |                                  |  |   |              |   |  |              |          |   |  |   |         | 
|Total                                                                                       |  | $                       | 223,569 |   |                               | $ | 145,074 |                                  |  | $ | 103,058      |   |  | $            | (140,835 | ) |  | $ | 330,866 | 
|                                                                                            |  |                         |         |   |                               |   |         |                                  |  |   |              |   |  |              |          |   |  |   |         | 



F- 40



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##### Table of Contents

Condensed Consolidating Statements of Operations



|                                                                    |  |                              |          |   |                               |   |          |                                  |  |   |              |   |  |              |        |   |  |   |          |  
|------------------------------------------------------------------- |  | ---------------------------- | -------- | - | ----------------------------- | - | -------- | -------------------------------- |  | - | ------------ | - |  | ------------ | ------ | - |  | - | -------- | -
|                                                                    |  | Year Ended December 31, 2009 |         
|                                                                    |  | Parent                       |          |   | CombinedGuarantorSubsidiaries |   |          | CombinedNonguarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |       
|Net sales                                                           |  | $                            |         |   |                               | $ | 141,058  |                                  |  | $ | 12,983       |   |  | $            | (189   | ) |  | $ | 153,852  |  
|Cost of goods sold                                                  |  |                              |         |   |                               |   | 143,078  |                                  |  |   | 13,627       |   |  |              | (193   | ) |  |   | 156,512  |  
|                                                                    |  |                              |          |   |                               |   |          |                                  |  |   |              |   |  |              |        |   |  |   |          |  
|Gross (loss) profit                                                 |  |                              |         |   |                               |   | (2,020   | )                                |  |   | (644         | ) |  |              | 4      |   |  |   | (2,660   | )
|                                                                    |  |                              |          |   |                               |   |          |                                  |  |   |              |   |  |              |        |   |  |   |          |  
|Selling, general and administrative expenses                        |  |                              | (1,165   | ) |                               |   | (13,211  | )                                |  |   | (1,663       | ) |  |              | 76     |   |  |   | (15,963  | )
|Restructuring charges                                               |  |                              |         |   |                               |   | (789     | )                                |  |   |             |   |  |              |       |   |  |   | (789     | )
|Amortization of intangible assets                                   |  |                              |         |   |                               |   | (1,003   | )                                |  |   |             |   |  |              |       |   |  |   | (1,003   | )
|Goodwill impairment charge                                          |  |                              |         |   |                               |   | (84,992  | )                                |  |   |             |   |  |              |       |   |  |   | (84,992  | )
|Other operating income (expense)                                    |  |                              | 1,190    |   |                               |   | 847      |                                  |  |   | (2,748       | ) |  |              | (80    | ) |  |   | (791     | )
|                                                                    |  |                              |          |   |                               |   |          |                                  |  |   |              |   |  |              |        |   |  |   |          |  
|Income (loss) from operations                                       |  |                              | 25       |   |                               |   | (101,168 | )                                |  |   | (5,055       | ) |  |              |       |   |  |   | (106,198 | )
|                                                                    |  |                              |          |   |                               |   |          |                                  |  |   |              |   |  |              |        |   |  |   |          |  
|Interest expense                                                    |  |                              | (20,499  | ) |                               |   |         |                                  |  |   | (1,736       | ) |  |              |       |   |  |   | (22,235  | )
|Equity (losses) earnings in unconsolidated entities                 |  |                              | (81,524  | ) |                               |   |         |                                  |  |   |             |   |  |              | 81,524 |   |  |   |         |  
|Gain on bargain purchase                                            |  |                              |         |   |                               |   |         |                                  |  |   | 20,376       |   |  |              |       |   |  |   | 20,376   |  
|Other income, net                                                   |  |                              | 1,138    |   |                               |   | 15       |                                  |  |   | 313          |   |  |              |       |   |  |   | 1,466    |  
|                                                                    |  |                              |          |   |                               |   |          |                                  |  |   |              |   |  |              |        |   |  |   |          |  
|(Loss) income before income tax benefit                             |  |                              | (100,860 | ) |                               |   | (101,153 | )                                |  |   | 13,898       |   |  |              | 81,524 |   |  |   | (106,591 | )
|Income tax benefit                                                  |  |                              | 7,348    |   |                               |   | 5,731    |                                  |  |   |             |   |  |              |       |   |  |   | 13,079   |  
|                                                                    |  |                              |          |   |                               |   |          |                                  |  |   |              |   |  |              |        |   |  |   |          |  
|Net (loss) income                                                   |  |                              | (93,512  | ) |                               |   | (95,422  | )                                |  |   | 13,898       |   |  |              | 81,524 |   |  |   | (93,512  | )
|                                                                    |  |                              |          |   |                               |   |          |                                  |  |   |              |   |  |              |        |   |  |   |          |  
|Less: Net loss (income) attributable to the noncontrolling interest |  |                              | 1,119    |   |                               |   |         |                                  |  |   | 1,119        |   |  |              | (1,119 | ) |  |   | 1,119    |  
|                                                                    |  |                              |          |   |                               |   |          |                                  |  |   |              |   |  |              |        |   |  |   |          |  
|Net (loss) income attributable to AGY Holding Corp.                 |  | $                            | (92,393  | ) |                               | $ | (95,422  | )                                |  | $ | 15,017       |   |  | $            | 80,405 |   |  | $ | (92,393  | )
|                                                                    |  |                              |          |   |                               |   |          |                                  |  |   |              |   |  |              |        |   |  |   |          |  



F- 41



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##### Table of Contents

Condensed Consolidating Statements of Cash Flows



|                                                                                                   |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |         |   |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ----------------------------- | - | ------- | -------------------------------- |  | - | ------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|                                                                                                   |  | Year Ended December 31, 2009 |        
|                                                                                                   |  | Parent                       |         |   | CombinedGuarantorSubsidiaries |   |         | CombinedNonguarantorSubsidiaries |  |   | Eliminations |   |  | Consolidated |        
|Cash flows from operating activities:                                                              |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |         |   |  |   |         |  
|Net (loss) income                                                                                  |  | $                            | (93,512 | ) |                               | $ | (95,422 | )                                |  | $ | 13,898       |   |  | $            | 81,524  |   |  | $ | (93,512 | )
|Equity (earnings) losses in unconsolidated entities                                                |  |                              | 81,524  |   |                               |   |        |                                  |  |   |             |   |  |              | (81,524 | ) |  |   |        |  
|Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |         |   |  |   |         |  
|Goodwill impairment charge                                                                         |  |                              |        |   |                               |   | 84,992  |                                  |  |   |             |   |  |              |        |   |  |   | 84,992  |  
|Effect of adopting ASC 805 for acquisition-related costs                                           |  |                              | 1,098   |   |                               |   |        |                                  |  |   |             |   |  |              |        |   |  |   | 1,098   |  
|Gain on bargain purchase for majority interest business acquisition                                |  |                              |        |   |                               |   |        |                                  |  |   | (20,376      | ) |  |              |        |   |  |   | (20,376 | )
|Depreciation, alloy metals depletion and amortization                                              |  |                              | 713     |   |                               |   | 17,112  |                                  |  |   | 3,232        |   |  |              |        |   |  |   | 21,057  |  
|Gain on sale, disposal of assets or exchange of property and equipment and alloy metals            |  |                              | (1,190  | ) |                               |   | 12      |                                  |  |   |             |   |  |              |        |   |  |   | (1,178  | )
|Gain on early extinguishment of debt                                                               |  |                              | (1,138  | ) |                               |   |        |                                  |  |   |             |   |  |              |        |   |  |   | (1,138  | )
|Stock compensation                                                                                 |  |                              | 415     |   |                               |   |        |                                  |  |   |             |   |  |              |        |   |  |   | 415     |  
|Deferred income tax (benefit) expense                                                              |  |                              | (7,348  | ) |                               |   | (5,759  | )                                |  |   |             |   |  |              |        |   |  |   | (13,107 | )
|Change in assets and liabilities                                                                   |  |                              | 5,119   |   |                               |   | 6,121   |                                  |  |   | (637         | ) |  |              |        |   |  |   | 10,603  |  
|Parents loans and advances                                                                         |  |                              | (6,551  | ) |                               |   | 3,803   |                                  |  |   | 2,748        |   |  |              |        |   |  |   |        |  
|                                                                                                   |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |         |   |  |   |         |  
|Net cash (used in) provided by operating activities                                                |  |                              | (20,870 | ) |                               |   | 10,859  |                                  |  |   | (1,135       | ) |  |              |        |   |  |   | (11,146 | )
|                                                                                                   |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |         |   |  |   |         |  
|Cash flows from investing activities:                                                              |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |         |   |  |   |         |  
|Purchase of property, plant and equipment and alloy metals                                         |  |                              |        |   |                               |   | (12,098 | )                                |  |   | (1,251       | ) |  |              |        |   |  |   | (13,349 | )
|Proceeds from the sale of property and equipment and alloy metals                                  |  |                              | 15,939  |   |                               |   |        |                                  |  |   |             |   |  |              |        |   |  |   | 15,939  |  
|(Increase) decrease in restricted cash                                                             |  |                              |        |   |                               |   | 1,239   |                                  |  |   | 11,817       |   |  |              |        |   |  |   | 13,056  |  
|Payment for majority interest business acquisition, net of cash acquired                           |  |                              | (20,000 | ) |                               |   |        |                                  |  |   |              |   |  |              | 1,847   |   |  |   | (18,153 | )
|                                                                                                   |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |         |   |  |   |         |  
|Net cash (used in) provided by investing activities                                                |  |                              | (4,061  | ) |                               |   | (10,859 | )                                |  |   | 10,566       |   |  |              | 1,847   |   |  |   | (2,507  | )
|                                                                                                   |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |         |   |  |   |         |  
|Cash flows from financing activities:                                                              |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |         |   |  |   |         |  
|Net proceeds (payments) from (of) Revolving Credit Facility                                        |  |                              | 2,850   |   |                               |   |        |                                  |  |   |             |   |  |              |        |   |  |   | 2,850   |  
|Purchases of Senior Secured Notes                                                                  |  |                              | (1,793  | ) |                               |   |        |                                  |  |   |             |   |  |              |        |   |  |   | (1,793  | )
|Net proceeds (payments) from (of) Asia Credit Facility                                             |  |                              |        |   |                               |   |        |                                  |  |   | 3,635        |   |  |              |        |   |  |   | 3,635   |  
|Payment on Shanghai Grace Fabrication Corporation loan                                             |  |                              |        |   |                               |   |        |                                  |  |   | (12,309      | ) |  |              |        |   |  |   | (12,309 | )
|Capital contribution                                                                               |  |                              | 20,000  |   |                               |   |        |                                  |  |   |             |   |  |              |        |   |  |   | 20,000  |  
|Debt issuances and others                                                                          |  |                              | (100    | ) |                               |   |        |                                  |  |   |             |   |  |              |        |   |  |   | (100    | )
|                                                                                                   |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |         |   |  |   |         |  
|Net cash provided by (used in) financing activities                                                |  |                              | 20,957  |   |                               |   |        |                                  |  |   | (8,674       | ) |  |              |        |   |  |   | 12,283  |  
|                                                                                                   |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |         |   |  |   |         |  
|Effect of exchange rate changes on cash                                                            |  |                              | (3      | ) |                               |   |        |                                  |  |   | 52           |   |  |              |        |   |  |   | 49      |  
|                                                                                                   |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |         |   |  |   |         |  
|Net (decrease) increase in cash                                                                    |  |                              | (3,977  | ) |                               |   |        |                                  |  |   | 809          |   |  |              | 1,847   |   |  |   | (1,321  | )
|                                                                                                   |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |         |   |  |   |         |  
|Cash, beginning of year                                                                            |  |                              | 4,760   |   |                               |   |        |                                  |  |   | 1,847        |   |  |              | (1,847  | ) |  |   | 4,760   |  
|                                                                                                   |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |         |   |  |   |         |  
|Cash, end of year                                                                                  |  | $                            | 783     |   |                               | $ |        |                                  |  | $ | 2,656        |   |  | $            |        |   |  | $ | 3,439   |  
|                                                                                                   |  |                              |         |   |                               |   |         |                                  |  |   |              |   |  |              |         |   |  |   |         |  



F- 42



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##### Table of Contents

|25. | SUBSEQUENT EVENTS
|--- | -----------------

On March 8, 2011,
the Company entered into an amended senior secured loan and security agreement that provides for a credit facility of up to $50,000 (the Amended Credit Facility). The Amended Credit Facility matures on the earlier of March 8, 2015
or 90 days prior to the maturity date of the Notes and includes a $20,000 sub-limit for the issuance of letters of credit and a $5,000 sub-limit for swing line loans. The borrowing base for the Amended Credit Facility is equal to the sum of:
(i) an advance rate against eligible accounts receivable of up to 85%, plus (ii) the lesser of (A) 65% of the book value of eligible inventory (valued at the lower of cost or market) and (B) 85% of the net orderly liquidation
value for eligible inventory, plus (iii) up to $40,000 of eligible alloy inventory, minus (iv) 100% of mark-to-market risk on certain interest hedging arrangements, minus (v) a reserve of $7,500, and minus (vi) other reserves as
the lender may determine in its permitted discretion.

The interest rate for borrowings is LIBOR plus 3.0% or Base Rate plus 2.0% through
June 1, 2011 and then may be adjusted downward to LIBOR plus 2.5% or Base Rate plus 1.5%, depending on our fixed charge coverage ratio. In addition, there are customary commitment and letter of credit fees under the Amended Credit Facility.

All obligations under the Amended Credit Facility are guaranteed by Holdings. The Companys obligations under the Amended Credit
Facility are secured, subject to permitted liens and other agreed upon exceptions, by a first-priority security interest in substantially all of the Companys assets.

Proceeds from the revolving loan were used to repay all amounts, and terminate all commitments outstanding under our Credit Facility and to pay fees and expenses in connection with the refinancing. We
incurred approximately $800 in issuance costs, which will be expensed over the life of the Amended Credit Facility.

Under the Amended Credit
Facility, the Company and its subsidiaries are required on a consolidated basis, excluding AGY Asia, to satisfy certain financial performance criteria. Specifically, if any revolving credit facility commitments are outstanding and after the
occurrence of (a) a default or event of default or (b) excess availability being less than $6,250 as of the last day of the most recent fiscal month ended, the Company must maintain a fixed charge coverage ratio of at least 1.0 to 1.0 for
each period of four fiscal quarters ended during, or on the last day of the fiscal quarter immediately before the events listed in (a) and (b) above.

The Amended Credit Facility contains customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens,
investments, mergers and consolidations, dividends and other payments in respect to capital stock, transactions with affiliates, and optional payments and modifications of subordinated and other debt instruments. The Amended Credit Facility also
includes customary events of default, including a default upon a change of control. Under certain events of default and other conditions, including failure to pay indebtedness under the Notes, payment of the outstanding principal and interest could
be accelerated.

As of the closing date of March 8, 2011, the Company had issued letters of credit totaling $2,400 and had cash
borrowings of $24,800 leaving total undrawn availability of $21,100.



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