<Page>


                     U.S. 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, 2004

                                       or

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

              For the transition period from _________ to _________

                                 METALLURG, INC.
             (Exact name of Registrant as specified in its charter)

                Delaware                                    13-1661467
         (State of organization)                         (I.R.S. Employer
                                                       Identification No.)
      1140 Avenue of the Americas
        New York, New York 10036                          (212) 835-0200
(Address of principal executive offices)         (Registrant's telephone number,
                                                       including area code)

        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 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 [ ] No [X]*

     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 an accelerated filer (as
defined in Exchange Act Rule 12b-2).

                                 Yes [ ] No [X]

     There are no equity securities of Metallurg, Inc. held by non-affiliates.

     Shares outstanding at March 30, 2005: 5,000,000 shares of common stock, par
value $.01 per share.

*    The registrant is not subject to the filing requirements of Section 13 or
     15(d) of the Securities Exchange Act of 1934. The registrant is a voluntary
     filer.

                       Documents Incorporated By Reference

                                      None.





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                                     PART I

Items 1 and 2. Business and Properties.

     The following discussion should be read in conjunction with Metallurg's
Consolidated Financial Statements and the related notes thereto included
elsewhere in this report.

Overview

     Metallurg, Inc., a Delaware corporation, together with its majority-owned
subsidiaries (collectively, "Metallurg") is a leading international producer and
seller of high-quality specialty metals, alloys and metallic chemicals, which
are essential to the production of high-performance aluminum and titanium
alloys, specialty steel, superalloys and certain non-metallic materials for
various applications in the aerospace, power supply, automotive, petrochemical
processing and telecommunications industries. Metallurg sells approximately 50
different product groups to over 1,500 customers worldwide (primarily in North
America and Europe).

     The Metallurg group was founded in 1911 with the construction of a vanadium
alloy and chemical producing plant in Nuremberg, Germany. In subsequent years,
Metallurg's customer base grew throughout Europe and, in 1938, Metallurg added
its first subsidiary in the U.K. During the 1950's, Metallurg began operations
in the U.S. and, during the 1980's, added production operations in Brazil.
Metallurg established a worldwide sales network that sold products manufactured
by Metallurg as well as products manufactured by third parties. Metallurg, Inc.
was incorporated as a New York holding company in 1947 and reincorporated as a
Delaware corporation in 1997. In 2002, Metallurg sold all of its ownership
interests in manufacturing facilities in Nuremberg, Germany, as well as several
sales offices in Europe. In 2003, Metallurg sold all of its ownership interests
in its Weisweiler, Germany manufacturing facility and its Turkish chrome ore
mines. In 2004, Metallurg sold all of its interests in its South African sales
office. See "Note 2. Discontinued Operations" to Metallurg's Consolidated
Financial Statements.

     Metallurg operates in one significant industry segment, the manufacture and
sale of performance-enhancing additives mainly for the metallurgical industry.
Metallurg is organized into three reportable segments centered around its major
production facilities in the U.K., the U.S. and Brazil. In addition to its own
products, Metallurg distributes products manufactured by third parties. The
table below sets forth, for the periods indicated, information concerning
revenue from Metallurg's three reportable segments, as described below:

                               Revenue by Segment
                                  (In millions)

<TABLE>
<CAPTION>
                                  Year Ended December 31,
                                 ------------------------
                                  2004     2003     2002
                                 ------   ------   ------
<S>                              <C>      <C>      <C>
Segments
LSM ..........................   $199.4   $168.2   $161.0
SMC ..........................    143.5     98.7     92.1
CIF ..........................     47.2     33.2     32.9
Other ........................     18.7     29.9     41.2
Intersegment eliminations ....    (56.7)   (46.7)   (49.4)
                                 ------   ------   ------
   Total revenue .............   $352.1   $283.3   $277.8
                                 ======   ======   ======
</TABLE>


                                       1





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     London & Scandinavian Metallurgical Co Limited and its subsidiaries
(collectively, "LSM") - This unit consists mainly of three production facilities
in the U.K. that manufacture and sell aluminum alloy grain refiners and alloying
tablets for the aluminum industry, chromium metal and ferrotitanium and other
specialty ferroalloys for the steel and superalloy industries and aluminum
powder for various metal powder-consuming industries. As a result of continuing
weakness in operating performance, LSM commenced a restructuring program in the
second half of 2003. LSM discontinued its metal catalyst business in the fourth
quarter of 2003 and closed its Norwegian production facility in August 2004. See
"Note 4. Restructuring and Asset Impairment Charges" to Metallurg's Consolidated
Financial Statements.

     Shieldalloy Metallurgical Corporation ("SMC") - This unit consists of two
production facilities in the U.S. The Ohio plant manufactures and sells
ferrovanadium and vanadium-based chemicals used mostly in the steel and
petrochemical industries. The New Jersey plant manufactures and sells alloying
tablets for the aluminum industry and metal powders for the welding industry.

     Companhia Industrial Fluminense ("CIF") - This unit consists mainly of two
production facilities in Brazil. The Sao Joao del Rei plant manufactures and
sells aluminum alloy grain refiners and alloying tablets for the aluminum
industry and metal oxides used in the telecommunications, superalloy and
specialty metal industries. The Nazareno mine extracts and concentrates ores
containing tantalum and niobium that are processed, along with other raw
materials, into metal oxides at the Sao Joao del Rei plant.

     In addition to manufacturing operations, LSM and SMC import and distribute
complementary products manufactured by affiliates and third parties.

     Corporate-related items and results of subsidiaries not meeting the
quantitative thresholds prescribed by applicable accounting rules for
determining reportable segments are included in "Other". Metallurg does not
allocate general corporate overhead expenses to operating segments.

Products and Markets

     For the year ended December 31, 2004, 36% of Metallurg's sales were made to
the iron and steel industry, 34% were made to the aluminum industry, 16% were
made to the superalloy and titanium alloy industries and the remaining 14% were
made to other industries, none of which was individually significant for
reporting purposes. No single customer accounted for more than 10% of
Metallurg's sales for the year ended December 31, 2004.

     Based on customer location, for the year ended December 31, 2004, 43% of
Metallurg's sales were made in North America, 35% in Europe, 13% in Asia, 7% in
South America and 2% in Africa and Australia.

     The following table sets forth the revenue of product groups most
significant to Metallurg's operations:

                           Significant Product Groups
                              (Dollars in millions)

<TABLE>
<CAPTION>
                                          Year Ended December 31,
                           -----------------------------------------------------
                                 2004               2003               2002
                           ----------------   ----------------   ---------------
                            Revenue     %      Revenue     %     Revenue     %
                           --------   -----   --------   -----   -------   -----
<S>                         <C>       <C>     <C>        <C>      <C>      <C>
Name of Product Group
Aluminum ...............    $152.8     43.4    $139.1     49.1    $129.5    46.6
Vanadium ...............      50.1     14.2      19.8      7.0      16.7     6.0
Chromium ...............      45.9     13.0      40.7     14.4      42.6    15.3
Titanium ...............      36.5     10.4      19.2      6.8      16.6     6.0
Niobium ................      17.7      5.0      17.5      6.2      21.0     7.6
Powders ................      13.8      3.9      14.3      5.0      11.4     4.1
Tantalum ...............       8.8      2.5       7.9      2.8      13.9     5.0
                            ------    -----    ------    -----    ------   -----
                             325.6     92.4     258.5     91.3     251.7    90.6
Other ..................      26.5      7.6      24.8      8.7      26.1     9.4
                            ------    -----    ------    -----    ------   -----
   Total revenue .......    $352.1    100.0    $283.3    100.0    $277.8   100.0
                            ======    =====    ======    =====    ======   =====
</TABLE>


                                        2





<Page>


     Aluminum Industry; Aluminum Master Alloys and Compacted Products -
Metallurg manufactures a series of aluminum-based alloys and compacted additives
supplied to the aluminum industry to enhance productivity in aluminum plants and
to introduce various specific properties into aluminum products for use in many
sectors, including automotive and transport, aerospace, power transmission,
construction and consumer durables. Metallurg sells to major aluminum producers
throughout the world, including Alcan Aluminium Limited, Alcoa Inc., Pechiney
S.A., Norsk Hydro ASA, Rio Tinto plc and Sumitomo Corporation. The aluminum
industry is cyclical. Consumption of aluminum products fluctuates with demand
from the industry sectors listed above, as well as competition between aluminum
and other metals and materials, such as plastics and glass.

     Iron and Steel Industry; Specialty Ferroalloys - Metallurg manufactures and
sells specialty ferroalloys for use in the iron and steel industry. Metallurg's
principal specialty ferroalloy products are ferrovanadium and ferrotitanium. It
also markets ferroboron, ferrosilicon, ferromanganese, ferrochrome and
ferroniobium produced by others. These products are used by iron and steel
producers to increase temperature and corrosion resistance and improve
mechanical properties and strength-to-weight ratios. Ferroalloys are essential
additives to many iron and steel products used in a wide variety of industries,
such as the aerospace, automotive, energy and construction industries.
Metallurg's iron and steel industry customers include Affival, Inc., Ametek,
Inc., Corus Group plc, Nucor Corporation, Steel Dynamics, Inc., ThyssenKrupp
Steel AG and United States Steel Corporation. The iron and steel industry is
cyclical, with iron and steel consumption depending greatly on demand for
durable goods, such as automobiles, construction materials, machinery,
appliances and miscellaneous manufactured products. Recently, worldwide demand
for steel has risen, as has demand for ferrovanadium as a steel additive.

     Superalloy and Titanium Alloy Industries; Specialty Metals and Alloys -
Metallurg manufactures and sells a series of specialty metals and alloys which
are essential to achieving elevated temperature strength and oxidation
resistance in nickel-based superalloys and titanium alloys for aerospace, power
generation, and oil and petrochemical applications. Its principal products
include various chromium-based materials, niobium and vanadium alloys.
Metallurg's customers include Allegheny Technologies Incorporated, Carpenter
Technology Corporation, Titanium Metals Corporation, RTI International Metals
and the Eramet Group. The superalloy and titanium alloy industries are cyclical.
Consumption of these products fluctuates with demand from the aerospace, power
generation, oil field and petrochemical sectors.

     Other Industries and Products - In addition to the product lines described
above, Metallurg manufactures and distributes a number of products used outside
of the aluminum, steel, superalloy, and titanium alloy industries. These
products include: tantalum, which is sold to electronics, telecommunications and
tool manufacturers; vanadium chemicals for use in the synthetic rubber and
ceramics industries; polishing powders used by the glass polishing industry; and
metal powders used in the manufacture of rocket fuel, automotive paints, and
chemical and metallurgical products. These products generally are higher-margin
and technically sophisticated.

     Metallurg's financial performance fluctuates with the general economic
cycle, as well as cycles in the markets for Metallurg's products, which could
have a material adverse effect on Metallurg's business, financial condition and
results of operations. In addition, many of Metallurg's products are
internationally traded, with prices that are significantly affected by worldwide
supply and demand.

     Foreign Operations and Currency Fluctuations - Metallurg has substantial
operations outside the U.S. See "Note 3. Segments" to Metallurg's Consolidated
Financial Statements for sales and long-lived assets by geographical area.
Approximately 80% of Metallurg's employees were outside the U.S. Foreign
operations are subject to certain risks that can materially affect the sales,
profits, cash flows and financial position of Metallurg, including taxes on
distributions or deemed distributions to Metallurg, Inc. or any U.S. subsidiary,
currency exchange rate fluctuations, limitations on repatriation of funds,
maintenance of minimum capital requirements, and import and export controls. In
general, Metallurg's cost of sales for products manufactured in certain foreign
locations can be impacted by changes in the rate of exchange of the respective
local currencies of those locations relative to the U.S. dollar and other
currencies in which it sells. While Metallurg engages in hedging transactions to
reduce certain of the risks of currency rate fluctuations, there can be no
assurances regarding the overall effectiveness or adequacy of Metallurg's
hedging activities.


                                       3





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Manufacturing Processes

     Metallurg's manufacturing processes involve melting, refining, casting,
crushing, sizing, blending and packaging operations, which vary from product to
product. For example, in the manufacture of ferrovanadium, SMC's Cambridge, Ohio
plant consumes vanadium-containing raw materials, predominantly spent catalysts
and residues from petrochemical refineries and ashes and residues from electric
utilities burning fuel oil. The raw materials are melted and reductants are
added to refine the chemistry of the production batch. The batch is poured into
casting molds to form ingots, which are cooled and then crushed, sized, blended
and packaged. In general, the manufacture of aluminum master alloys also follows
similar principles using aluminum and other additives; however, these master
alloys are generally cast as small ingots or processed into a solid rod form for
delivery to the customer. The manufacture of briquettes and tablets involves the
grinding and blending of raw materials, the compression of these materials into
a compacted form and packaging for delivery to the customer. More sophisticated
production routes are used for highly specialized products, which can require
chemical processing or the use of a variety of other equipment.

Facilities and Operations

     Metallurg operates its corporate headquarters from a leased office in New
York and owns all of the production facilities listed below except for the
Minworth plant, which is leased.

     Production Facilities - The following table sets forth, for each of
Metallurg's producing subsidiaries, the location of its facilities and the key
products manufactured by such subsidiary:

<TABLE>
<CAPTION>
Manufacturing Subsidiary   Location                           Key Products
------------------------   --------                           ------------
<S>                        <C>                                <C>
LSM                        Rotherham, U.K. (Plant)            Aluminum Alloying Tablets
                                                              Aluminum Master Alloys
                                                              Chromium Metal
                                                              Ferroboron
                                                              Ferrotitanium
                                                              Glass Polishing Powders
                                                              Metal Powders
                                                              Nickel Boron
                           Holyhead, U.K. (Plant)             Atomized Aluminum Powder
                           Minworth, U.K. (Plant)             Granulated Aluminum

SMC                        Cambridge, Ohio (Plant)            Ferrovanadium
                                                              Vanadium Chemicals
                           Newfield, New Jersey (Plant)       Aluminum Alloying Tablets and Briquettes
                                                              Metal Powders

CIF                        Sao Joao del Rei, Brazil (Plant)   Aluminum Alloying Tablets
                                                              Aluminum Master Alloys
                                                              Niobium Oxide
                                                              Tantalum Oxide
                           Nazareno, Brazil (Mine)            Tantalum and Niobium Ore
</TABLE>

     Administrative Office - SMC has administrative personnel in a leased office
in Swedesboro, New Jersey.

     Sales Offices - Metallurg has sales personnel at its production facilities
and at its separate representative offices in Brazil, Japan and Mexico.

Raw Materials

     Metallurg produces a wide variety of products for sale to a number of
different metals industries and there is no single raw material that makes up
the basis of Metallurg's entire production.

     For the production of chromium metal, LSM purchases chromium oxide from the
major global producers. This product also requires large quantities of aluminum
powder, substantially produced internally.


                                       4





<Page>


     Metallurg's aluminum processing plants in the U.K. and Brazil buy
approximately 35,000 tons of virgin aluminum per year from producers worldwide,
while important alloying chemicals are sourced from several different suppliers
around the world.

     Titanium scrap is sourced in significant quantities for the production of
ferrotitanium and other titanium-containing products from countries active in
the aerospace industry, such as the U.S., the Commonwealth of Independent States
("CIS") and the U.K.

     Vanadium pentoxide in various forms is the raw material for Metallurg's
production of ferrovanadium and vanadium chemicals. For ferrovanadium
production, Metallurg purchases vanadium-containing spent catalysts and residues
from petrochemical refineries and ashes and residues from electric utilities
burning fuel oil. Metallurg currently obtains a majority of these raw materials
from only a few sources. See "Limited Sources for Raw Materials." Vanadium
chemicals are produced from commercially pure vanadium pentoxide, which is
purchased on the open market.

     Metallurg also utilizes many other raw materials such as strontium, nickel,
boron chemicals, mischmetal, manganese and chrome silicide in the manufacture of
its broad product range, which are purchased as required from producers or
traders. Coinciding with general sales terms, most purchases are made on a spot
basis at market prices to minimize the risk of exposure to market fluctuations.

     Limited Sources for Raw Materials - Certain of Metallurg, Inc.'s
subsidiaries are dependent on third parties for raw material supplies. SMC's
production unit in Cambridge, Ohio currently obtains a majority of its raw
materials requirements for the manufacture of ferrovanadium from only a few
sources. Although alternative sources of ferrovanadium raw materials exist,
there can be no assurance that Metallurg would be able to obtain adequate
supplies of such materials on acceptable terms, or at all, from other sources.
Titanium and boron chemicals for the manufacture of sophisticated aluminum
master alloys are sourced from long-time suppliers who, in certain instances,
also supply competitive producers with these raw materials. Although these and
other raw materials are generally priced with reference to related market
prices, any increase in demand could cause raw material costs to rise. To the
extent Metallurg is unable to recover its increased costs, operating results
would be adversely affected.

Competition

     The metals industry is highly competitive on a worldwide basis. Competition
is primarily based on price, quality and timely delivery. Price competition
remains strong as a result of excess capacity in certain products. In addition,
export sales from the CIS and China of metals and alloys produced in excess of
local demand can severely hurt prices in Europe and the U.S., which can
negatively impact the price of some of Metallurg's products. New entrants may
also increase competition in the metals industry, which could materially
adversely affect Metallurg. An increase in the use of substitutes for metal
alloys also could have a material adverse effect on the financial condition and
operations of Metallurg. Although facing competition in each of its markets,
Metallurg does not believe that any single competitor competes in all of its
products or markets.

     Aluminum Industry - Competition is international because of the relatively
small number of master alloy and alloying tablet manufacturers and the worldwide
operations of the aluminum industry. In most markets, Metallurg faces
competition to varying degrees from KBM Affilips B.V., KBAlloys, Inc. (and its
U.K. subsidiary, Anglo Blackwells, Ltd.), Aleastur (Asturiana de Aleaciones,
S.A.), the Eramet Group and Hoesch-Metallurgie GmbH.

     Iron and Steel Industry - In North America, products manufactured by
Strategic Minerals Corporation, Treibacher Industrie AG, Highveld Steel and
Vanadium Corporation Limited, Xstrata AG and certain CIS and Chinese sources
compete with Metallurg's ferrovanadium products, while several U.S., U.K. and
Russian companies compete worldwide with Metallurg's ferrotitanium products.

     Superalloy and Titanium Alloy Industries - Metallurg has competition in
chromium metal from Delachaux S.A., certain Chinese and CIS sources and, to a
limited extent, the Eramet Group. Strategic Minerals Corporation and Reading
Alloys, Inc. compete internationally with Metallurg in vanadium aluminum.
Reading Alloys, Inc. also competes in sophisticated alloys for the superalloy
industry, as do CBMM-Cia Brasileira de Metalurgia e Mineracao, Cabot Corporation
and H.C. Starck GmbH & Co. KG in certain products.


                                       5





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Employees

     As of December 31, 2004, Metallurg employed approximately 800 people
worldwide. Labor unions represent approximately 50% of Metallurg's employees.
Unions represent employees at six locations in the U.S., the U.K., and Brazil.
SMC's collective bargaining agreement with the United Steelworkers of America
(USW, Local 4836-02), which covers 67 employees at the Cambridge, Ohio plant,
was renewed for three years on April 14, 2004. SMC's collective bargaining
agreement with the United Automobile, Aerospace and Agricultural Implement
Workers of America (UAW, Local 2327), which covers 26 employees at the Newfield,
New Jersey plant was renewed for four years on May 24, 2004. The collective
bargaining agreements covering Metallurg's union employees at its foreign
subsidiaries are generally renewable on an annual basis. Metallurg's
relationships with its unions are managed at the local level and are considered
by management to be satisfactory.

Anti-Dumping Duties

     In response to dumping by the former Soviet Union, Metallurg sought and
obtained anti-dumping orders against Russia for imports of ferrovanadium into
the U.S. Since July 1995, the Department of Commerce has imposed incremental
anti-dumping duties, which currently range from 10.1% to 108%, on imports of
Russian ferrovanadium and nitrided vanadium into the U.S. These duties are in
addition to the normal duty of 4.2% that applies to ferrovanadium imports. A
"sunset review" of the anti-dumping duty order was conducted by the
International Trade Commission and the Department of Commerce and was favorably
concluded in May 2001. As a result, the order will remain in effect until at
least April 2006 when the next "sunset review" is initiated.

     On November 26, 2001, in response to a surge in imports of ferrovanadium
from South Africa and China, the Ferroalloys Association Vanadium Committee,
representing Metallurg and other U.S. producers, filed a petition seeking the
imposition of anti-dumping duty orders covering imports from those countries. In
response to the petition, the Commerce Department initiated investigations and
the International Trade Commission unanimously determined that there was a
reasonable indication that the U.S. industry was materially injured by reason of
imports from these two countries. The final antidumping investigations were
favorably concluded during the fourth quarter of 2002 and resulted in duties
ranging from 12.97% to 116%, in addition to the 4.2% normal tariff, being
imposed on imports from these two countries.

     Anti-dumping duty rates are subject to annual review by the Department of
Commerce. Metallurg had revenues of $38.4 million from sales of ferrovanadium
produced by Metallurg and sold in the U.S. for the year ended December 31, 2004.
If the anti-dumping duties are not maintained at or near their current levels,
Metallurg may be materially adversely affected.

Environmental Matters

     Metallurg's alloy manufacturing operations in Cambridge, Ohio and Newfield,
New Jersey are subject to various federal, state and local environmental, safety
and health laws and regulations, including those relating to air and water
quality, and solid and hazardous wastes. Metallurg's foreign manufacturing
operations are subject to analogous environmental laws and regulations.
Metallurg is faced with a number of environmental issues, which have largely
resulted from environmental cleanup requirements, particularly in the areas of
solid waste and hazardous waste removal. There can be no assurance that the
current environmental requirements will not result in future liabilities and
obligations, including future liability for disposal or contamination at both
domestic and foreign facilities. There is also the possibility that changes to
applicable environmental laws and regulations might result in future liabilities
and obligations for Metallurg, including those related to contamination at
Metallurg's facilities. These potential liabilities might also be material to
Metallurg's business operations, financial condition or cash flow.

     Metallurg maintains environmental and industrial safety and health
compliance programs at its plants and believes that its manufacturing operations
are in general compliance with all applicable safety, health and environmental
laws.


                                       6





<Page>


     SMC is addressing certain environmental conditions at the Cambridge, Ohio
plant pursuant to a judicial consent order entered into with the State of Ohio
in 1997. SMC submitted to the Nuclear Regulatory Commission ("NRC") in July 1999
a plan for decommissioning slag piles at the Cambridge facility. Such plan
contemplates capping the slag piles on-site, an alternative that the Ohio
Environmental Protection Agency ("OEPA") has approved. Before the NRC completed
its review of the plan, the NRC delegated its regulatory authority over the site
to the Ohio Department of Health ("ODH") in August 1999. The ODH is now the
governmental entity responsible for overseeing the decommissioning of the slag
piles. SMC has been engaged for some time in discussions with the ODH and the
OEPA with respect to such decommissioning plan and related alternatives. At
December 31, 2004, liabilities, net of trust funds, of $6.0 million were
outstanding from provisions made in prior periods for the estimated future costs
associated with the decommissioning of NRC (now ODH) regulated materials and the
remediation of sediments at the Cambridge site. SMC finalized remediation plans
with respect to these areas with the OEPA and ODH during 2003 and commenced work
in accordance with such plans. Significant remediation activities involving the
removal of contaminated sediments and capping of one of the two slag piles
occurred in 2004. Limited remediation activities are anticipated for 2005. SMC
expects to spend the amount reserved for outstanding liabilities over the next 4
years.

     In August 2002, SMC filed a decommissioning plan for its Newfield facility
with the NRC. At the same time, SMC requested an amendment to the authorized use
of the Newfield facility, as permitted by the NRC, to "storage only pending
decommissioning". While the Newfield facility will continue to operate, SMC does
not intend to resume any previously licensed activities and expects to commence
decommissioning activities upon approval of the plan by the NRC. At December 31,
2004, liabilities, net of trust funds, of $15.1 million were outstanding for the
estimated future costs associated with the decommissioning of NRC regulated
materials and the remediation of groundwater (as to which SMC is exploring
alternative treatment approaches), soil and sediments at the Newfield site. SMC
expects to spend the amount reserved over the next 15 years or sooner if an
acceptable alternative approach for the remediation of groundwater is identified
and approved by the interested regulatory authorities.

     There can be no assurance that SMC will not incur additional expenses
related to the environmental projects at the Cambridge and Newfield sites.

     Liabilities for known environmental matters and Metallurg's related
accounting policies are summarized in "Note 12. Environmental Liabilities" and
"Note 1. Business and Summary of Significant Accounting Policies - Environmental
Remediation Costs and Recoveries" to Metallurg's Consolidated Financial
Statements. See also "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Financial Resources -
Environmental Remediation Costs."

Item 3. Legal Proceedings.

     Metallurg, Inc. and certain of its subsidiaries are parties from time to
time to legal proceedings relating to their operations. The ultimate legal and
financial liability of Metallurg in respect of all legal proceedings in which it
is involved at any given time cannot be estimated with any certainty. However,
based upon examination of such matters and consultation with counsel, management
currently believes that the ultimate outcome of these contingencies, net of
liabilities already accrued in Metallurg's Consolidated Balance Sheet, will not
have a material adverse effect on Metallurg's consolidated financial position,
although the resolution in any reporting period of one or more of these matters
could have a significant impact on Metallurg's results of operations and/or cash
flows for that period. For discussion of specific environmental matters, see
"Items 1 and 2. Business and Properties - Environmental Matters."

Item 4. Submission of Matters to a Vote of Security Holders.

     There were no matters submitted to a vote of security holders during the
fourth quarter of the year ended December 31, 2004.


                                       7





<Page>


                                     PART II

Item 5. Market for Metallurg's Common Equity and Related Stockholder Matters.

     There is no public trading market for Metallurg, Inc.'s equity securities,
all of which are owned by its parent company, Metallurg Holdings, Inc.
("Metallurg Holdings"). Metallurg Holdings is owned by a group of investors led
by Safeguard International Fund, L.P. ("Safeguard International").

     On November 20, 1998, the Board of Directors of Metallurg, Inc. (the
"Board") adopted the Metallurg, Inc. 1998 Equity Compensation Plan (the "ECP").
Under the ECP, 500,000 shares of common stock are authorized for stock awards
and stock options. Pursuant to the ECP, from 1998 through 2004, the Board has
awarded to eligible executives and non-employee Board members options to
purchase an aggregate of 195,000 shares of common stock, net of cancellations
and forfeitures, at an exercise price of $30.00 per share. Such options have a
term of ten years and vest in most cases 20% on the date of grant and 20% on
each of the first four anniversaries of the date of grant.

     Metallurg, Inc. did not issue any securities during 2004.

     Metallurg has not paid cash dividends in the last two years. Metallurg,
Inc. is currently prohibited under Delaware law from paying dividends because
its total liabilities exceeded its total assets at December 31, 2004. In
addition, Metallurg, Inc. is restricted in the amount of dividends payable to
its shareholder as a result of the indenture for its 11% Senior Notes due 2007
(the "Senior Notes"). Under the terms of the indenture, Metallurg, Inc. is
limited in its ability to make restricted payments, as defined and including,
among other things, minority investments in subsidiaries and dividend payments,
to a formula based on the cumulative net income since November 1, 1997 and
certain specified allowances. Under the terms of the formula, Metallurg, Inc.
was permitted to make restricted payments in the amount of $858,000 as of
December 31, 2004.

     In January 2005, Metallurg Holdings did not have sufficient cash on hand to
make the interest payment due on its 12 3/4% Senior Discount Notes due 2008 (the
"Senior Discount Notes"). Therefore, Metallurg, Inc. loaned its parent $744,000,
a restricted payment under the terms of its indenture, to pay interest on the
Senior Discount Notes held by non-related parties. As a result of this
transaction, Metallurg, Inc.'s ability to make restricted payments is limited
to $114,000.

     In addition to the above restrictions under the Senior Note indenture,
Metallurg, Inc.'s financing agreement with MHR Institutional Partners II LP
("MHR") limits the payment of dividends and other payments to Metallurg
Holdings. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Financial Resources" and
"Note 8. Borrowings" to Metallurg's Consolidated Financial Statements.

     Metallurg, Inc. is a holding company with limited operations of its own.
Substantially all of Metallurg, Inc.'s operating income is generated by its
subsidiaries. As a result, Metallurg, Inc. will rely upon distributions or
advances from its subsidiaries to provide the funds necessary to meet its debt
service obligations. LSM's working capital facility limits its ability to pay
dividends to an amount up to 100% of its annual net income.


                                       8





<Page>


Item 6. Selected Financial Data.

     The following table presents selected consolidated historical financial
data of Metallurg as of and for the fiscal years ended December 31, 2000, 2001,
2002, 2003 and 2004. Earnings per share data is not presented since Metallurg is
a wholly-owned subsidiary of Metallurg Holdings.

     Effective December 31, 2000, Metallurg, Inc. changed from a fiscal year
ending January 31 to a calendar year. As a result, the year ended December 31,
2000 includes 11 months of consolidated results for Metallurg, Inc., the parent
holding company and, consistent with historical reporting practice, the 12
months ended December 31, 2000 of results for its operating subsidiaries.

     Information as of and for the years ended December 31, 2000 and 2001 is
derived from the audited consolidated financial statements of Metallurg.
Information as of and for the years ended December 31, 2002, 2003 and 2004 is
derived from the audited consolidated financial statements of Metallurg,
included elsewhere herein.

      The information in this table should be read in conjunction with "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements of Metallurg, and related
notes thereto, included in "Item 8. Financial Statements and Supplementary
Data."

                             SELECTED FINANCIAL DATA
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                   Year Ended
                                    ------------------------------------------------------------------------
                                    December 31,   December 31,   December 31,   December 31,   December 31,
                                        2000           2001           2002           2003           2004
                                    ------------   ------------   ------------   ------------   ------------
<S>                                   <C>            <C>            <C>            <C>            <C>
Statement of Operations Data:
Total revenue ...................     $361,285       $336,704       $277,781       $283,349       $352,111
Gross profit ....................       46,924         43,834         23,066         21,979         47,480
Operating income (loss) (a) .....       16,387         14,614         (7,917)       (19,561)        12,076
Net income (loss) ...............       10,087            922        (19,814)       (30,750)        (5,894)
</TABLE>

<TABLE>
<CAPTION>
                                    December 31,   December 31,   December 31,   December 31,   December 31,
                                        2000           2001           2002           2003           2004
                                    ------------   ------------   ------------   ------------   ------------
<S>                                   <C>            <C>            <C>            <C>            <C>
Balance Sheet Data:
Total assets ....................     $224,589       $212,816       $222,049       $199,453       $218,566
Total debt ......................      117,783        120,793        125,052        128,337        153,454
</TABLE>

(a)  Includes:

     o    environmental expense recoveries of $750, $631 and $3,000 for the
          years ended December 31, 2000, 2001 and 2002, respectively (See "Note
          12. Environmental Liabilities" to Metallurg's Consolidated Financial
          Statements); and

     o    restructuring and asset impairment charges of $3,510, $10,895 and $736
          for the years ended December 31, 2002, 2003 and 2004, respectively
          (See "Note 4. Restructuring and Asset Impairment Charges" to
          Metallurg's Consolidated Financial Statements).


                                       9





<Page>


Item 7. Management's Discussion and Analysis of Financial Condition and Results
     of Operations.

     The following discussion should be read in conjunction with Metallurg's
consolidated financial statements and the related notes thereto included
elsewhere in this report.

Forward-Looking Statements

     Certain matters discussed under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in this
Annual Report on Form 10-K may constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements may be identified by the use of words such as "plan", "expect",
"believe", "should", "could", "anticipate", "intend" and other expressions that
indicate future events or trends. All statements that address expectations or
projections about the future, including statements about Metallurg's strategy
for growth, product development, market position, expenditures and financial
results, are forward-looking statements and as such may involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance and achievements of Metallurg to be materially different
from future results, performance or achievements expressed or implied by such
forward-looking statements.

     Factors that may cause Metallurg's results to be materially different
include:

     o    The cyclical nature of Metallurg's business.

     o    Metallurg's dependence on foreign customers. Metallurg operates
          throughout the world and derives a significant amount of its revenues
          from outside of the U.S.

     o    The impact of changes of the prices of raw materials and our products.

     o    The impact of changes in foreign exchange rates and foreign trade
          regulations on Metallurg's competitive standing. Revenues and earnings
          from outside the U.S. could be materially affected by exchange rate
          fluctuations.

     o    The ability to complete a refinancing of the financing agreement with
          MHR on favorable terms, if at all.

     o    The ability to meet debt service requirements.

     o    The availability of raw materials.

     o    The impact of worldwide competition.

     o    The economic strength of Metallurg's markets generally and
          particularly the strength of the demand for aluminum, iron, steel,
          superalloys and titanium alloys in those markets.

     o    The impact of changes in the business of our end users.

     o    The impact of changes in technology and methods of marketing.

     o    The accuracy of Metallurg's estimates of the costs of environmental
          remediation.

     o    The extension or expiration of existing anti-dumping duties.

     o    The performance of world financial markets and its effect on the
          pension expense of Metallurg's defined benefit plans.

     o    The possible disruption of business or increases in the cost of doing
          business resulting from terrorist activities or global conflicts.

     Metallurg undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.


                                       10





<Page>


Overview

     Metallurg is a leading international producer and seller of high-quality
specialty metals and metal alloys that are essential to the production of
high-performance aluminum and titanium alloys, carbon and specialty steels,
superalloys and certain non-metallic materials for various applications in the
aerospace, power supply, automotive, petrochemical processing, capital equipment
and construction industries. Metallurg operates production facilities in the
U.K., the U.S. and Brazil. Metallurg's products are primarily sold to one of
three major market sectors: the aluminum industry, the steel industry and the
superalloy industry.

     Overall operating conditions in each of these sectors have been challenging
over the past few years with significant pressure on prices caused by increased
competition, lower overall demand from customers and lackluster economic
conditions worldwide. These difficult business conditions persisted throughout
most of 2003. Improvement in demand began in the fourth quarter of 2003 and
continued to improve throughout 2004 due to an improved economic environment in
Europe and the Americas and changes in consumption patterns in China.
Additionally, a declining U.S. dollar caused prices for some of our products to
rise as foreign competitors increased prices to offset the negative effect of
the declining U.S. dollar. While we cannot predict demand or prices in the
markets we serve, this discussion presents a general overview of each of our
major market sectors.

     Demand from the aluminum market continued to rebound from the low levels
experienced early in 2003, coinciding with increased global economic activity.
On the supply side, there still exists a significant amount of excess, as well
as idle, capacity in the industry. While prices for aluminum continued to
increase in 2004, our main products - aluminum master alloys and compacted
products - continue to be subject to pricing pressure, primarily due to
overcapacity. Continuing consolidation in the aluminum industry also has
contributed to the pressure on prices for our products. These same conditions
have continued throughout 2004, as the industry still faces overcapacity and
significant price competition. During 2004, Metallurg announced the closure of
its master alloy facility in Norway to reduce excess capacity in the industry.
The closure of the Norway plant was completed by the end of the third quarter.
Customers will continue to be served from our facilities in the U.K. and Brazil.
As a result of this closure and higher demand within the aluminum industry,
pricing for our products have shown some improvement. Metallurg continues to
seek higher prices for its major products and to implement cost reduction
initiatives to enhance operating performance.

     The domestic steel industry continues to operate at moderately high levels
of production. Industry fundamentals for the steel sector have significantly
improved from the difficult conditions seen over the prior years, particularly
as a result of the consolidation of a number of producers within the industry
and the weak U.S. dollar. During 2003, fundamentals in the ferrovanadium market
changed as a major producer closed operations due to very low price levels and
other factors. Due to a shortage of raw materials, Metallurg was forced to
significantly cut production rates at its processing facility in Ohio, adding to
a reduction of ferrovanadium units in North America. Also, a labor strike at
this facility during the fourth quarter of 2003 and the first quarter of 2004
impacted overall production rates. Demand for ferrovanadium has improved during
2004, driven by increasing world steel production and increasing use of
specialty steels containing ferrovanadium in Chinese construction applications.
The global supply/demand outlook for ferrovanadium has changed over the last few
years, with Asia becoming a net importer of material instead of a net exporter.
As a result, prices for ferrovanadium have increased in 2003 and were
significantly higher in 2004. In the first quarter of 2004, we were successful
in securing a significant long-term source of raw materials to lower production
costs and enhance profitability. In April 2004, the labor strike affecting the
ferrovanadium production facility in Cambridge, Ohio was settled with the
ratification of a new three-year contract. The effects of securing new long-term
raw materials arrangements, settling the labor strike and increased demand and
pricing for ferrovanadium have improved profitability throughout 2004. During
the fourth quarter of 2004, market prices have moved significantly higher. We
expect demand for ferrovanadium to remain strong and prices to remain well above
long-term historical trend levels throughout 2005. Because prices under our
principal raw materials supply contracts for our ferrovanadium production
operations are referenced to historical market prices for vanadium, based on
these price trends, we expect the cost of our raw materials to increase in 2006.

     The superalloy industry is rebounding from low production levels over the
past few years. This increase in activity is driven by higher military spending,
increased applications for energy related projects and improving commercial
airliner production build rates. Throughout 2004, prices for titanium have
increased significantly due to higher demand and supply shortages. We expect
these strong market fundamentals to continue into 2005.

     On August 13, 2004, Metallurg entered into a new financing agreement to
replace the existing facility with Fleet National Bank. Metallurg believes that
the new financing agreement, along with anticipated improved operations after
recent restructuring efforts, will provide adequate liquidity for Metallurg to
meet its obligations as they come due over the next year.


                                       11





<Page>


     During 2003 and throughout 2004, Metallurg restructured its businesses.
Metallurg took action to reduce costs at LSM through employee terminations and
discontinuing unprofitable businesses, and in North America by consolidating
sales offices. In September 2003, Metallurg sold all of its interests in its
German facility engaged in the manufacture of low carbon ferrochrome, and its
Turkish chrome ore mines. In March 2004, Metallurg sold its South African sales
office. See "Note 2. Discontinued Operations" to Metallurg's Consolidated
Financial Statements.

Financial Statement Presentation

     Total revenue represents the selling price of our products plus certain
shipping charges less applicable provisions for discounts and allowances. Gross
profit represents total revenue less cost of sales, which include direct
material and manufacturing costs, manufacturing depreciation and delivery costs.
Selling, General and Administrative Expenses ("SG&A") includes all non-product
related operating expenses. Operating income (loss) represents gross profit less
SG&A and restructuring charges.

Results of Operations

<TABLE>
<CAPTION>
                                                                                  Intersegment
(In thousands)                            LSM        SMC       CIF       Other    Eliminations   Consolidated
                                       --------   --------   -------   --------   ------------   ------------
<S>                                    <C>        <C>        <C>       <C>          <C>            <C>
Year Ended December 31, 2004
Total revenue ......................   $199,449   $143,465   $47,240   $ 18,677     $(56,720)      $352,111
Gross profit .......................     21,287     19,178     5,191      2,411         (587)        47,480
SG&A ...............................     12,932      9,851     3,084      8,801           --         34,668
Restructuring charges ..............        746         --        --        (10)          --            736
Operating income (loss) ............      7,609      9,327     2,107     (6,380)        (587)        12,076
Interest expense, net ..............     (1,602)    (1,580)   (1,272)   (10,653)          --        (15,107)
Income tax provision (benefit) .....      1,927      1,876      (565)    (1,119)          --          2,119
Net income (loss) ..................      4,160      5,871     1,846      7,577      (25,348)        (5,894)

Year Ended December 31, 2003
Total revenue ......................   $168,216   $ 98,742   $33,196   $ 29,880     $(46,685)      $283,349
Gross profit .......................     14,072      2,483     2,182      3,365         (123)        21,979
SG&A ...............................     14,440      7,526     1,989      6,690           --         30,645
Restructuring and asset
   impairment charges ..............     10,358         --        --        537           --         10,895
Operating (loss) income ............    (10,726)    (5,043)      193     (3,862)        (123)       (19,561)
Interest expense, net ..............     (1,473)      (462)     (847)   (10,296)          --        (13,078)
Income tax (benefit) provision .....       (235)    (2,358)       22      2,304           --           (267)
Net loss ...........................    (11,906)    (3,147)     (676)   (51,354)      36,333        (30,750)

Year Ended December 31, 2002
Total revenue ......................   $160,978   $ 92,053   $32,869   $ 41,150     $(49,269)      $277,781
Gross profit .......................     12,606      1,078     2,960      4,809        1,613         23,066
SG&A ...............................     11,620      9,234     1,590      8,029           --         30,473
Environmental expense recoveries ...         --     (3,000)       --         --           --         (3,000)
Restructuring and asset
   impairment charges ..............      1,068        453        --      1,989           --          3,510
Operating (loss) income ............        (82)    (5,609)    1,370     (5,209)       1,613         (7,917)
Interest expense, net ..............     (1,509)      (368)     (745)   (10,751)          --        (13,373)
Income tax provision (benefit) .....        868     (2,026)      173      1,820           --            835
Net (loss) income ..................     (2,452)    (3,951)      452    (17,828)       3,965        (19,814)
</TABLE>


                                       12





<Page>


Year Ended December 31, 2004 Compared to the Year Ended December 31, 2003

Total Revenue

     Consolidated total revenue increased by $68.8 million (24%) for the year
ended December 31, 2004.

     LSM revenue for the year ended December 31, 2004 was $31.2 million (19%)
higher than the year ended December 31, 2003. Sales of aluminum master alloys
and compacted products increased by $1.7 million as a result of a 17% increase
in sales prices despite a 12% decrease in sales volume. Sales of aluminum powder
rose by $2.9 million, due to product mix, which resulted in a higher average
selling price. Sales of ferrotitanium were $18.2 million higher, due to a 104%
increase in average unit selling prices. Sales of metal powders decreased by
$1.8 million as a result of a decrease in sales volume. Sales of chrome products
were higher by $6.5 million due to a 17% increase in sales volume and a 5%
increase in sales price. The remaining increase in revenues of $3.7 million
relates to other products.

     SMC revenue for the year ended December 31, 2004 was $44.7 million (45%)
higher than the year ended December 31, 2003. Sales of aluminum products
increased by $8.3 million, due to a 19% increase in average selling prices and a
5% increase in volume. Sales of vanadium products, produced in SMC's Ohio plant,
increased by $30.3 million as a result of a 111% increase in average selling
prices and a 28% increase in sales volume. The remaining increase in revenues of
$6.1 million relates to other products.

     CIF revenue for the year ended December 31, 2004 was $14.0 million (42%)
higher than the year ended December 31, 2003. Sales of aluminum master alloys
increased by $9.0 million, primarily as a result of a 30% increase in shipments.
Sales of niobium products increased by $4.0 million, due to a 176% increase in
sales volume despite a small decrease in average selling prices.

Gross Profit

     Consolidated gross profit increased to $47.5 million (13.5% of total
revenue) for the year ended December 31, 2004 from $22.0 million (7.8% of total
revenue) for the year ended December 31, 2003.

     LSM gross profit was $7.2 million (51%) higher than the year ended December
31, 2003. Gross profits from nearly all products increased during the year as
higher selling prices offset higher unit costs.

     SMC gross profit was $16.7 million (672%) higher than the year ended
December 31, 2003. Gross profit from vanadium products increased dramatically as
stronger demand and tighter supply drove up average unit selling prices.

     CIF gross profit was $3.0 million (138%) higher than the year ended
December 31, 2003 due to higher sales volume for aluminum and higher selling
prices for tantulum products offset by higher costs.

SG&A

     SG&A was $34.7 million for the year ended December 31, 2004 versus $30.6
million for the year ended December 31, 2003. The increase was principally due
to higher professional fees and ongoing bank charges associated with the new
financing agreement and costs related to terminations of sales agencies and
certain subsidiary managers. For the year ended December 31, 2004, SG&A
represented 9.8% of total revenue compared to 10.8% for the year ended
December 31, 2003.

Restructuring and Asset Impairment Charges, Net

     In 2004, LSM completed its restructuring, which began in 2003, and recorded
a restructuring charge of $746,000 consisting of (i) severance costs of $316,000
for 15 employees in the U.K. and (ii) severance costs of $430,000 for 28
employees after the closure of its aluminum production facility in Norway. Of
this amount, $113,000 is still unpaid as of December 31, 2004.

     In 2003, in a continuing effort to improve Metallurg's competitive position
and to reduce costs, Metallurg continued restructuring its operations at its
worldwide locations. LSM recorded $3,652,000 of severance costs for 62 employees
and asset impairment charges of $6,706,000 relating to its metal catalyst
business and its aluminum production facilities in Norway. Metallurg's Canadian
subsidiary recognized a restructuring charge of $417,000 for severance costs of
seven employees as its sales and administrative functions were consolidated into
the New Jersey operations of SMC. In addition, Metallurg transferred certain
sales and administrative functions for tantalum and niobium products from its
headquarters location to its production facilities in Brazil and recorded
severance costs of $120,000 for two employees. All restructuring charges
incurred during 2003 have been paid as of December 31, 2004 with the exception
of a $10,000 over-accrual that was reversed in 2004.


                                       13





<Page>


     See "Note 4. Restructuring and Asset Impairment Charges" to Metallurg's
Consolidated Financial Statements.

Operating (Loss) Income

     There was operating income of $12.1 million for the year ended December 31,
2004 compared to an operating loss of $19.6 million for the year ended December
31, 2003, due to the improvement in gross profit and reduction in restructuring
and asset impairment charges, discussed above.

Interest Expense, Net

     Interest expense, net, was as follows (in thousands):

<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                                         -----------------------
                                                             2004       2003
                                                           --------   --------
<S>                                                        <C>        <C>
Interest income ......................................     $  1,430   $    971
Interest expense .....................................      (16,537)   (14,049)
                                                           --------   --------
   Interest expense, net .............................     $(15,107)  $(13,078)
                                                           ========   ========
</TABLE>

     The increase in net interest expense is principally due to: (i) interest on
additional long-term debt; (ii) amortization on deferred issuance costs related
to the additional long-term debt offset by (iii) interest income on a federal
tax refund.

Income Tax Provision (Benefit)

     Income tax provision (benefit) was as follows (in thousands):

<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                                         -----------------------
                                                              2004     2003
                                                             ------   -----
<S>                                                          <C>      <C>
Total current ........................................       $1,603   $(175)
Total deferred .......................................          516     (92)
                                                             ------   -----
   Income tax provision (benefit) ....................       $2,119   $(267)
                                                             ======   =====
</TABLE>

     See "Note 10. Income Taxes" to Metallurg's Consolidated Financial
Statements for additional information about our effective tax rate and deferred
tax assets.

Net Loss

     Metallurg had a net loss of $5.9 million for the year ended December 31,
2004 compared to a net loss of $30.8 million for the year ended December 31,
2003 due primarily to improving operating results discussed above. Net losses
also included income from discontinued operations of $0.3 million and $1.4
million, net for the years ended December 31, 2004 and 2003, respectively, and
loss on sale of discontinued operations of $1.2 million for the year ended
December 31, 2004. The discontinued operations related to the operations and
sale of Metallurg's former South African sales office. See "Note 2. Discontinued
Operations" to Metallurg's Consolidated Financial Statements.

Year Ended December 31, 2003 Compared to the Year Ended December 31, 2002

Total Revenue

     Consolidated total revenue increased by $5.6 million (2%) in the year ended
December 31, 2003.

     LSM revenue was $7.2 million (4%) higher than the year ended December 31,
2002. Sales of aluminum master alloys and compacted products increased by $3.7
million, primarily as a result of a 4% increase in sales volume. Sales of
aluminum powder rose by $0.4 million, due to product mix, which resulted in a
higher average selling price. Sales of ferrotitanium were $2.4 million higher,
due to a 20% increase in average unit selling prices, despite a 4% decrease in
sales volumes. Sales of metal powders rose by $2.4 million as a result of
increases in both sales volume and average selling prices. Sales of chrome
products were lower by $1.9 million due to a 9% decrease in sales volume.


                                       14





<Page>


     SMC revenue was $6.7 million (7%) higher than the year ended December 31,
2002. Sales of compacted aluminum products increased by $4.9 million, despite a
drop in average selling prices, as a result of an increase of 47% in shipments.
Sales of vanadium products, produced in SMC's Ohio plant, increased by $3.0
million as a result of increased average selling prices, despite a drop in sales
volume due to lack of raw materials. Sales of niobium products fell by $3.3
million, primarily as a result of a drop in shipments of ferroniobium to the
steel industry. Sales of chrome products were higher by $3.0 million due to an
11% increase in sales volume.

     CIF revenue was $0.3 million (1%) higher than the year ended December 31,
2002. Sales of aluminum master alloys increased by $1.2 million, primarily as a
result of a 5% increase in selling prices. Sales of tantalum and niobium
products decreased by $1.1 million, due to a drop in demand and lower selling
prices.

     Revenue from operations included in "Other" declined by $11.3 million in
the year ended December 31, 2003, primarily due to a drop in demand and selling
prices of tantalum products.

Gross Profit

     Consolidated gross profit decreased to $22.0 million (7.8% of total
revenue) for the year ended December 31, 2003 from $23.1 million (8.3% of total
revenue) for the year ended December 31, 2002.

     LSM gross profit was $1.5 million (12%) higher than the year ended December
31, 2002. Gross profits from chrome products increased by $1.7 million as a
result of the improved product costs. Gross profits from aluminum master alloys,
compacted aluminum products and aluminum powder decreased by $0.5 million.
Higher unit costs, resulting from price competition and oversupply in the
industry, offset increased volumes.

     SMC gross profit was $1.4 million (130%) higher than the year ended
December 31, 2002. Gross profit from aluminum products rose by $2.0 million, due
to increased shipments and lower costs resulting from the restructuring of
operations during 2002. Gross profit from chrome products rose by $0.8 million,
due to improved volume and selling prices, particularly from lower grade
products sold to the steel industry. Gross profit from vanadium products
decreased by $1.3 million, as average costs rose faster than an increase in
average selling prices.

     CIF gross profit was $0.8 million (26%) below the year ended December 31,
2002 due to higher unit costs on aluminum products.

     Gross profit from operations included in "Other" was $1.4 million (30%)
below the year ended December 31, 2002 due primarily to decreased margins on
tantalum products resulting from a decline in selling prices.

Selling, General and Administrative Expenses

     SG&A was virtually unchanged at $30.6 million for the year ended December
31, 2003 versus $30.5 million for the year ended December 31, 2002. For the year
ended December 31, 2003, SG&A represented 10.8% of total revenue compared to
11.0% for the year ended December 31, 2002.

Restructuring and Asset Impairment Charges, Net

     As a result of continuing weakness in operating performance, particularly
in its metal catalyst and aluminum businesses, LSM implemented a restructuring
plan in September 2003 designed to streamline production, improve productivity
and reduce costs. Due to a significant deterioration in its metal catalyst
business, LSM determined that certain of its plant assets were impaired because
recovery of the net book values from projected future undiscounted cash flows
could no longer be expected. In the third quarter of 2003, LSM recognized a $2.2
million non-cash impairment loss, which reduced the carrying value of these
assets to zero. Plant operations ceased in the fourth quarter of 2003, and the
plant assets were abandoned.

     As a result of continuing losses in its aluminum business due to aggressive
price competition and industry wide over-capacity, LSM determined that its plant
assets in Norway were similarly impaired. In the fourth quarter of 2003, LSM
recognized a non-cash impairment loss of approximately $4.5 million for
impairments of fixed assets and goodwill related to these operations. In 2004,
LSM announced that it would close down the Norwegian plant. In the fourth
quarter of 2003, LSM also accrued severance costs of approximately $3.7 million
relating to workforce reductions of 62 employees at its Rotherham, U.K.
location.


                                       15





<Page>


     In a continuing effort to improve Metallurg's competitive position and to
reduce costs, a plan was implemented in the third quarter of 2003 to consolidate
sales and administrative functions performed by Metallurg's Canadian operations
into the New Jersey operations of SMC. As a result of this plan, Metallurg
recognized a pre-tax restructuring charge of $0.4 million, for severance costs
of seven employees. Activities of the Canadian entity are expected to cease
completely in the first quarter of 2004. Also in 2003, Metallurg transferred
certain sales and administrative functions for tantalum and niobium products
from its headquarters location to its production facilities in Brazil. As a
result, severance costs of $0.1 million for two employees were recorded at
December 31, 2003.

     During 2002, Metallurg carried out a restructuring program intended to
reduce the cost structure at corporate headquarters, LSM and SMC. The
restructuring plan included the discontinuation of certain production
activities, the termination of employees and the write-down of redundant plant
and equipment. A charge of $3.5 million was incurred in the year ended December
31, 2002, primarily for severance costs of 64 terminated employees.

     See "Note 4. Restructuring and Asset Impairment Charges" to Metallurg's
Consolidated Financial Statements.

Operating (Loss) Income

     There was an operating loss of $19.6 million for the year ended
December 31, 2003 compared to an operating loss of $7.9 million for the year
ended December 31, 2002, due primarily to the restructuring and asset impairment
charges, discussed above. In addition, SMC recognized an environmental expense
recovery of $3.0 million for the year ended December 31, 2002.

Interest Expense, Net

     Interest expense, net, was as follows (in thousands):

<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                                         -----------------------
                                                             2003       2002
                                                           --------   --------
<S>                                                        <C>        <C>
Interest income ......................................     $    971   $    604
Interest expense .....................................      (14,049)   (13,977)
                                                           --------   --------
   Interest expense, net .............................     $(13,078)  $(13,373)
                                                           ========   ========
</TABLE>

Income Tax (Benefit) Provision

     Income tax (benefit) provision was as follows (in thousands):

<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                                         -----------------------
                                                               2003    2002
                                                              -----    ----
<S>                                                           <C>      <C>
Total current.........................................        $(175)   $519
Total deferred........................................          (92)    316
                                                              -----    ----
   Income tax (benefit) provision.....................        $(267)   $835
                                                              =====    ====
</TABLE>

     See "Note 10. Income Taxes" to Metallurg's Consolidated Financial
Statements.

Net Loss

     Metallurg had a net loss of $30.8 million for the year ended December 31,
2003 compared to a net loss of $19.8 million for the year ended December 31,
2002 due primarily to operating results and the restructuring and asset
impairment charges discussed above. Net losses also included income from
discontinued operations of $1.4 million and $2.3 million, net for the years
ended December 31, 2003 and 2002, respectively. See "Note 2. Discontinued
Operations" to Metallurg's Consolidated Financial Statements.


                                       16





<Page>


Liquidity and Financial Resources

General

     Metallurg's sources of liquidity include cash and cash equivalents and
amounts available under credit facilities. At December 31, 2004, Metallurg had
$23.1 million in cash and cash equivalents and working capital of $83.1 million
as compared to $18.2 million and $65.8 million, respectively, at December 31,
2003.

     Metallurg Holdings currently does not have sufficient cash on hand to make
the interest payments due on the Senior Discount Notes. As all of Metallurg,
Inc.'s outstanding common stock has been pledged as collateral for Metallurg
Holdings' obligations under the Senior Discount Notes, if Metallurg Holdings
were unable to make interest payments when due, it could lead to a foreclosure
on its assets, principally the equity of Metallurg, Inc. Such foreclosure would
create a default in accordance with the indenture terms of the Senior Notes and
result in an acceleration of $100 million of Senior Note indebtedness. In order
to meet the January 15, 2005 interest payment on the Senior Discount Notes,
Metallurg, Inc. loaned Metallurg Holdings approximately $0.7 million to make the
interest payment to non-related parties. Metallurg Holdings' next interest
payment to non-related parties is due July 15, 2005 in the amount of $1.5
million. In March 2005, Metallurg Holdings received a letter of support from
Safeguard International assuring support to Metallurg Holdings in meeting its
cash flow needs through at least May 2006.

Cash Flow Information

     Cash Flows from Operating Activities - Cash used in operating activities
was $17.2 million for the year ended December 31, 2004, compared to $17.1
million for the year ended December 31, 2003. Although our net loss in 2004 was
$24.9 million less than it was in 2003, our use of cash in operations was
largely unchanged. This is primarily because of an increase in
components of working capital of $15.9 million, due to increased revenues and
operating activity in 2004, coupled with a $10.2 million decrease in non-cash
restructuring and asset impairment charges.

     Cash Flows from Investing Activities - Net cash provided by investing
activities was $3.9 million for the year ended December 31, 2004, compared to
net cash used in investing activities of $1.9 million for the year ended
December 31, 2003. Capital expenditures were approximately $3.0 million in both
years. In 2004, the sale of the South African sales office was partially offset
by a loan provided to the buyer of that sales office. In 2003, Metallurg
received a repayment of $1.0 million on a loan made to a former German
subsidiary.

     Cash Flows from Financing Activities - Cash provided by financing
activities was $17.8 million for the year ended December 31, 2004, compared to
$12.4 million for the year ended December 31, 2003. In 2004, Metallurg received
$23.0 million from the proceeds of new borrowings (including $8.0 million from
related parties) and was required to pay deferred financing fees of $4.5 million
to obtain the new borrowings. Cash proceeds of $10.0 million in 2003 from the
sales of certain businesses to members of a common controlled group were
recorded as capital contributions in accordance with prescribed accounting
principles.

Credit Facilities and Other Financing Arrangements

     Senior Notes - In November 1997, Metallurg, Inc. issued its Senior Notes.
Interest is payable semi-annually. The Senior Notes are redeemable at the option
of Metallurg, Inc., in whole or in part, and are fully and unconditionally
guaranteed by the U.S. subsidiaries of Metallurg, Inc. on a senior unsecured
basis. The Senior Note indenture contains limitations on, among other things,
the ability of Metallurg to incur indebtedness and enter into certain mergers,
consolidations or asset sales. In addition, under the terms of the indenture,
Metallurg, Inc. is limited in its ability to make restricted payments, as
defined and including, among other things, minority investments in subsidiaries
and dividend payments, to a formula based on the cumulative net income since
November 1, 1997 and certain specified allowances. As a result of this
limitation, Metallurg, Inc. was permitted to make restricted payments in the
amount of $858,000 as of December 31, 2004. In January 2005, Metallurg, Inc.
loaned Metallurg Holdings, its parent company, $744,000 to pay interest on
Metallurg Holdings' Senior Discount Notes held by non-related parties. This
restricted payment was necessary, as Metallurg Holdings did not have sufficient
cash on hand to make its required interest payments and reduced Metallurg,
Inc.'s ability to make restricted payments to $114,000.


                                       17





<Page>


     MHR Credit Facility - On August 13, 2004, Metallurg refinanced its
revolving credit facility with Fleet National Bank into a new financing
agreement with MHR maturing on August 31, 2007. This financing agreement, as
amended, provides Metallurg, Inc. with a $15 million term loan for working
capital and a $21 million letter of credit facility. It allows for $15 million
of the letter of credit facility to be converted to a term loan with the
proceeds being used by SMC to settle certain environmental remediation
obligations at its Newfield facility. Transaction costs of $4.5 million were
capitalized and are being amortized over the term of the agreement. Interest
accrues on outstanding balances at a rate of 20% per annum of which one-half is
paid monthly in arrears and one-half is paid-in-kind by being added to the
outstanding principal balance on a monthly basis. In addition, Metallurg pays
MHR a monthly letter of credit commitment fee of 4% per annum on all outstanding
letters of credit, a facility maintenance fee of $620,000 on December 31, 2004
and $310,000 on each June 30th and December 31st thereafter, and a monthly
monitoring fee of $40,000 in 2004, $30,000 in 2005 and $20,000 thereafter.
Mandatory quarterly repayments begin on October 1, 2005 in the amount of $1.0
million, and voluntary repayments may be made after July 31, 2005 along with
prepayment penalties. The financing agreement is fully collateralized by all of
the assets of Metallurg, Inc. and SMC (the "Borrowers"), fully guaranteed by
Metallurg Holdings Corporation, Metallurg International Resources, LLC and
Metallurg Services Inc. (the "MHR Guarantors") and partially guaranteed by
Metallurg, Inc.'s major subsidiaries in the U.K. and Brazil. The financing
agreement also requires Metallurg to maintain a minimum borrowing base and
achieve minimum Consolidated EBITDA, as defined. Metallurg anticipates that it
will seek to refinance this agreement on more favorable terms provided its
operating results continue to improve and such financing is available. The total
amount outstanding under this agreement is $15.5 million in loans and $20.8
million in letters of credit at December 31, 2004.

     LSM Revolving Credit Facilities - LSM has revolving credit facilities with
Barclays Bank plc ("Barclays"), expiring in June 2007, and HSBC Bank plc
("HSBC"), expiring in July 2009. These facilities provide LSM with up to
'L'5.5 million ($10.6 million) of borrowings, 'L'40.3 million ($77.3
million) of foreign exchange contracts and options and 'L'4.0 million ($7.7
million) for other ancillary banking arrangements, including bank guarantees.
Borrowings under these facilities are collateralized by the assets of LSM and
are repayable on demand. Outstanding loans under these facilities bear interest
at each bank's base rate plus 1.0% to 1.75%. At December 31, 2004, there were
'L'0.5 million ($0.9 million) of borrowings outstanding under these
facilities at an interest rate of 3.45% and included in short-term debt on the
consolidated balance sheet. In January 2005, these revolving credit facilities
were amended to denominate them in U.S. dollars on similar terms and conditions.

     LSM Term Loans - LSM also has two term loans with Barclays and HSBC. The
loan with Barclays is for 'L'6.0 million ($11.5 million) for a term of three
years and bears interest at 3-month LIBOR plus 1.75%. Quarterly repayments of
'L'0.2 million ($0.4 million) began in June 2004. The loan with HSBC is for
'L'6.0 million ($11.5 million) for a term of five years and bears interest
at 3-month LIBOR plus 1.65%. Quarterly repayments of 'L'0.2 million ($0.4
million) began in July 2004. These term loan facilities are collateralized by
the assets of LSM and require LSM to comply with various covenants, including
the maintenance of minimum tangible net worth and interest coverage. In January
2005, these loans were amended to denominate them in U.S. dollars on similar
terms and conditions.

     Other - CIF maintains short-term secured and unsecured borrowing
arrangements with various banks totaling $11.7 million. Borrowings under these
arrangements aggregated $7.1 million at December 31, 2004 at a weighted-average
interest rate of 8.4%.


                                       18





<Page>


Contractual Cash Obligations

     As described in Notes 8 and 14 to Metallurg's Consolidated Financial
Statements at December 31, 2004, Metallurg is obligated to make future payments
under various contracts, such as debt and lease agreements. Significant
contractual cash obligations of Metallurg are as follows (in millions):

<TABLE>
<CAPTION>
                                                              Payments Due By Period
                                               ----------------------------------------------------
                                                        Less than                            After
                                                Total     1 year    1-3 years   3-5 years   5 years
                                               ------   ---------   ---------   ---------   -------
<S>                                            <C>        <C>         <C>         <C>         <C>
Contractual Cash Obligations:
   Long-term debt (a) ......................   $137.1     $  3.8      $127.0      $ 6.3        --
   Fixed interest on long-term debt ........     40.8       14.0        26.2        0.6        --
   Non-cancelable operating leases .........      1.2        0.4         0.6        0.2        --
   Committed purchase obligations (b) ......    159.6       81.3        66.4       11.9        --
   Pension plan contributions (c) ..........      6.6        6.6          --         --        --
                                               ------     ------      ------      -----       ---
      Total contractual cash obligations ...   $345.3     $106.1      $220.2      $19.0        --
                                               ======     ======      ======      =====       ===
</TABLE>

----------
(a)  Includes MHR debt interest paid-in-kind and added to principal but does not
     include approximately $3.8 million of future interest not yet accrued but
     payable in 1-3 years based on current borrowing levels.

(b)  Represents purchase orders on hand at December 31, 2004, primarily for the
     purchase of inventory in the normal course of business.

(c)  Only included in first period. Information is not available for subsequent
     periods.

Capital Expenditures

     Metallurg invested $3.1 million in capital projects during the year ended
December 31, 2004. Metallurg's capital expenditures include projects related to
improving Metallurg's operations, productivity improvements, replacement
projects and ongoing environmental requirements (which are in addition to
expenditures discussed in "Environmental Remediation Costs" below). Capital
expenditures are projected to increase to approximately $5.3 million for the
year ended December 31, 2005, including $2.8 million of capital investments
which Metallurg believes will result in decreased costs of production, improved
efficiency and expanded production capacities. The remaining capital
expenditures planned are primarily for replacement and repairs of existing
facilities. Although Metallurg has projected these items for the year ended
December 31, 2005, Metallurg has not committed purchases to vendors for all of
these projects, as some projects remain contingent on final approvals and other
conditions and the actual timing of expenditures may extend into 2006. Metallurg
believes that these projects will be funded through existing and future
internally generated cash and credit lines.

Environmental Remediation Costs

     American Institute of Certified Public Accountants' Statement of Position
96-1, "Environmental Remediation Liabilities," states that losses associated
with environmental remediation obligations are accrued when such losses are
deemed probable and reasonably estimable. Such accruals generally are recognized
no later than the completion of the remedial feasibility study and are adjusted
as further information develops or circumstances change. Costs of future
expenditures for environmental remediation obligations are generally not
discounted to their present value. During the year ended December 31, 2004,
Metallurg spent $4.5 million for environmental remediation.

     In 1997, SMC entered into settlement agreements with various environmental
regulatory authorities with regard to all of the significant environmental
remediation liabilities of which it is aware. Pursuant to these agreements, SMC
has agreed to perform environmental remediation, which, as of December 31, 2004,
had an estimated net cost of completion of $21.1 million, net of trust funds of
$4.0 million. Of this amount, Metallurg expects to spend $1.9 million in 2005
(excluding the potential settlement by SMC of certain environmental remediation
obligations at its Newfield facility), $3.3 million in 2006 and $1.3 million in
2007. These amounts have been accrued for in prior years and are reflected in
Metallurg's balance sheet liabilities. See "Note 12. Environmental Liabilities"
to Metallurg's Consolidated Financial Statements.

     SMC is exploring the settlement of certain non-radiological environmental
remediation obligations at its Newfield, New Jersey facility by contracting with
an environmental services company to assume such obligations and implement
alternative treatment technologies. In the event that such a transaction is
successfully negotiated on terms acceptable to the relevant regulatory
authorities, SMC would be required to make payments of up to $17 million over
the next two years. Financing for such a transaction has been arranged with the
environmental services company and under the terms of the MHR debt facilities.
See "Note 8. Borrowings - MHR Debt" to Metallurg's Consolidated Financial
Statements.


                                       19





<Page>


     While its remediation obligations and other environmental costs, in the
aggregate, will reduce its liquidity, Metallurg believes its cash balances, cash
from operations and cash available under its credit facilities are sufficient to
fund its current and anticipated future requirements for environmental
expenditures.

Related Party Transactions

     On August 12, 2004, Metallurg, Inc. sold all of its previously acquired
Senior Discount Notes of Metallurg Holdings and related accrued interest to
Metallurg Holdings for $10,000. Metallurg, Inc. had recorded these items as due
from parent company in its consolidated balance sheet. For accounting purposes
only, the difference between the amount recorded as due from parent company and
the amount received from Metallurg Holdings was recorded as a deemed dividend to
Metallurg Holdings. Due to the retained deficit in Metallurg, this dividend was
recorded as a reduction in additional paid-in-capital.

     Accounts receivable and payable balances between Metallurg and affiliates
of Safeguard International are shown as related party balances on Metallurg's
Consolidated Balance Sheets.

     A note receivable from the German subsidiary sold in December 2002 is shown
as notes receivable - related party on Metallurg's Consolidated Balance Sheets.
This note accrues interest at a rate of 10% per annum. Principal and interest
payments are due from 2006 through 2010 and may be repaid prior to maturity
under certain circumstances.

     Safeguard International, for its own account and the accounts of others,
and SCP Private Equity Partners, L.P., another shareholder of Metallurg
Holdings, provided an $8 million subordinated loan so that SMC could complete
the purchase of vanadium-containing raw materials for its Cambridge, Ohio plant
under a five-year supply contract. The loan, as amended, is collateralized by a
second lien on all of the assets of the Borrowers and MHR Guarantors. Interest
on the loan at 8% per annum is paid-in-kind and added to the principal balance.
The total amount of this loan outstanding is $8.3 million at December 31, 2004
and is shown as long-term debt - related parties on Metallurg's Consolidated
Balance Sheets.

     Through December 2003, Metallurg, Inc. charged its parent company,
Metallurg Holdings, $12,000 per quarter for administrative services performed.
Metallurg, Inc. also charges Metallurg Holdings for invoices paid on their
behalf. The outstanding balance due from Metallurg Holdings at December 31, 2004
was $80,000.

     Dr. Schimmelbusch and Mr. Spector are managing directors of the management
company for Safeguard International, the majority owner of Metallurg Holdings,
and in these positions receive compensation from this management company.

Critical Accounting Estimates

     The preparation of financial statements in accordance with accounting
principles generally accepted in the U.S. require management to make judgments,
estimates and assumptions regarding uncertainties that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities, and the reported amounts of revenues and expenses. In applying
Metallurg's significant accounting policies, as more fully discussed in "Note 1.
Business and Summary of Significant Accounting Policies" to Metallurg's
Consolidated Financial Statements, management uses its judgment to determine the
appropriate assumptions to be used in the determination of certain estimates.
Those estimates are based on historical experience, terms of existing contracts,
observances of trends in the industry, information provided by Metallurg's
customers and information available from other outside sources, as appropriate.
Estimates and assumptions about future events and their effects cannot be
perceived with certainty and accordingly, these estimates may change as new
events occur, as more experience is acquired, as additional information is
obtained and as Metallurg's operating environment changes. Metallurg deems the
following estimates and accounting policies to be critical:

Inventories

     Metallurg's inventory is a significant component of current assets and is
stated at the lower of cost or market. Metallurg regularly estimates the net
realizable value of inventories on hand and adjusts the carrying amounts of
these inventories as necessary. Significant or unanticipated changes to market
values of these items could impact the amount and timing of any such adjustments
that may be required. Such provisions were not significant in the periods
presented.


                                       20





<Page>


Income Taxes

     Metallurg accounts for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes",
which requires that deferred tax assets and liabilities be recognized using
enacted tax rates for the effect of temporary differences between the book and
tax bases of recorded assets and liabilities. SFAS No. 109 also requires that
deferred tax assets be reduced by a valuation allowance if it is more likely
than not that some portion or all of the deferred tax asset will not be
realized.

     Metallurg evaluates quarterly the realizability of its deferred tax assets
by assessing its valuation allowance and by adjusting the amount of such
allowance, if necessary. The factors used to assess the likelihood of
realization are Metallurg's forecast of future taxable income and available tax
planning strategies that could be implemented to realize the net deferred tax
assets. Metallurg has used tax-planning strategies to realize net deferred tax
assets in order to avoid the potential loss of future tax benefits. Failure to
achieve forecasted taxable income might affect the ultimate realization of the
net deferred tax assets. Factors that may affect Metallurg's ability to achieve
sufficient forecasted taxable income include, but are not limited to, the
following: a decline in sales or margins, increased competition or loss of
market share. In addition, Metallurg operates within multiple taxing
jurisdictions and is subject to audit in these jurisdictions. These audits can
involve complex issues, which may require an extended period of time to resolve.
In management's opinion, adequate provisions for income taxes and valuation
allowances against deferred taxes have been made for all years.

Environmental Remediation Costs

     Losses associated with environmental remediation obligations are accrued
when such losses are deemed probable and reasonably estimable. Such accruals
generally are recognized no later than the completion of the remedial
feasibility study and are adjusted as further information develops or
circumstances change. Significant judgment is required in developing assumptions
and estimating costs to be incurred for environmental remediation activities due
to, among other factors, the complexity of environmental regulations and
remediation technologies. Metallurg enters into agreements (e.g., administrative
orders, consent decrees) that generally cover many years. Management must assess
the type of technology to be used to accomplish the remediation as well as the
continually evolving regulatory environment in evaluating costs associated with
these sites. These factors are considered in management's estimates of the
timing and amount of any future costs that may be necessary for remedial
actions. Given the level of judgments and estimation as described above, it is
likely that materially different amounts could be recorded if different
assumptions were used or if underlying circumstances were to change (e.g., a
significant change in environmental standards).

Long-Lived Asset Impairment

     Metallurg's recent history includes years with unprofitable results and
negative cash flows. This history of losses is an indication that the carrying
amounts of Metallurg's long-lived assets might not be recoverable from future
cash flows. Metallurg periodically evaluates its long-lived assets by comparing
estimated future undiscounted cash flows using the particular cash flow
assumptions that are considered most likely to occur. Significant judgment is
required to estimate future cash flows, including the impact of future prices,
production and shipment levels, cost reduction initiatives, prices of inputs
like raw materials and energy and future capital requirements. Management uses
its best judgment to assess these factors. In 2003, Metallurg concluded that
certain assets in LSM were impaired as the net carrying value of applicable net
assets exceeded the related undiscounted cash flows. See "Note 4. Restructuring
and Asset Impairment Charges" to Metallurg's Consolidated Financial Statements.

Pensions

     Metallurg maintains defined benefit plans for its employees in the U.S. and
the U.K. Several statistical and other factors that attempt to anticipate future
events are used in calculating the expense and liability related to the plans.
These factors include assumptions about the discount rate, expected return on
plan assets and rate of future compensation increases as determined by
Metallurg, within certain guidelines. In addition, Metallurg's actuarial
consultants also use subjective factors such as employee turnover and mortality
rates to estimate these factors.

     U.S. Plans - The rate used to discount future estimated liabilities is
determined considering the rates available at year-end on long-term, high
quality corporate bonds that could be used to settle the obligations of the
plan. A change in the discount rate of 1/4 of 1% would change the 2004 pension
liability by approximately $0.7 million and change the 2005 net periodic pension
expense by approximately $0.1 million. The long-term rate of return is estimated
by considering historical returns and expected returns on current and projected
asset allocations. A change in the assumption for the long-term rate of return
on plan assets of 1/4 of 1% would not materially impact net periodic pension
expense in 2005.


                                       21





<Page>


     Non-U.S. Plans - The rate used to discount future estimated liabilities is
determined considering the rates available at year-end on long-term, high
quality corporate bonds that could be used to settle the obligations of the
plan. A change in the discount rate of 1/4 of 1% would change the 2004 pension
liability by approximately $5.7 million and change the 2005 net periodic pension
expense by approximately $0.6 million. The long-term rate of return is estimated
by considering historical returns and expected returns on current and projected
asset allocations. A change in the assumption for the long-term rate of return
on plan assets of 1/4 of 1% would change the 2005 net periodic pension expense
by approximately $0.2 million.

     The combination of negative actual investment returns and declining
interest rates in 2002 had a negative impact on Metallurg's pension plan
liabilities and the fair value of plan assets. Where the accumulated benefit
obligation exceeded the fair value of plan assets, Metallurg was required to
record an adjustment to the pension liability, called a "minimum pension
liability adjustment", with a charge to Accumulated Other Comprehensive Loss in
Shareholder's Equity. In 2002, Metallurg recorded a net charge of $18.9 million
to shareholder's equity. In both 2003 and 2004, stronger than expected asset
returns more than offset higher accumulated benefit obligations resulting from
declines in the discount rate. Accordingly, Metallurg credited shareholder's
equity by $5.9 million and $2.1 million in 2003 and 2004, respectively, for the
decline in the minimum pension liability, net of deferred tax in both years. The
changes in the minimum pension liability have no current impact on Metallurg's
net income, liquidity or cash flows.

     Based upon the current underfunded status of the plans and the actuarial
assumptions being used for 2004, Metallurg expects to make cash contributions in
2005 to the pension plans of approximately $0.3 million and $6.3 million in the
U.S. and the U.K., respectively. We expect to make these cash contributions out
of operating cash flow.

Recent Accounting Pronouncement

     In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment."
This statement revises SFAS No. 123, "Accounting for Stock-Based Compensation",
and requires companies to expense the value of employee stock options and
similar awards. Metallurg is required to adopt this standard for awards granted
beginning January 1, 2006.

Effects of Inflation

     Inflation has not had a significant effect on Metallurg's operations.
However, there can be no assurance that inflation will not have a material
effect on Metallurg's operations in the future. Metallurg is subject to price
fluctuations in its raw materials and products. These fluctuations have affected
and will continue to affect Metallurg's results of operations. See "Results of
Operations."

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

     Metallurg is exposed to fluctuations in foreign currency exchange rates,
interest rates and certain commodity prices. Derivative instruments used to
manage these exposures involve little complexity and are not used for
speculative purposes. The counterparties of these instruments are diversified
financial institutions. Metallurg monitors the concentration risk to limit its
counterparty exposure.

     Foreign Currency Exposures - Metallurg actively manages foreign currency
exposures that are associated with foreign currency purchases and sales and
other assets and liabilities created in the normal course of business at the
operating unit level. Metallurg uses forward contracts to mitigate exposures
that cannot be naturally offset within an operating unit. See "Note 9. Financial
Instruments" to Metallurg's Consolidated Financial Statements.

      Interest Rate Exposures - Metallurg has exposure to interest rate risk
from its short-term and certain long-term debt. While the rates on Metallurg's
long-term debt are generally fixed, LSM has outstanding balances on its term
loans of 'L'11.2 million ($21.4 million) at variable rates. See "Note 8.
Borrowings" to Metallurg's Consolidated Financial Statements.

     Commodity Price Exposures - Metallurg is exposed to volatility in the
prices of raw materials used in some of its products and uses forward contracts
to manage some of those exposures. Where Metallurg does not take physical
delivery of the raw material under the forward contract, gains and losses on
these derivatives are recognized currently in earnings.


                                       22





<Page>


Item 8. Financial Statements and Supplementary Data.

     The following audited consolidated financial statements of Metallurg, Inc.
and its consolidated subsidiaries are presented herein pursuant to the
requirements of Item 8 on the pages indicated below:

<TABLE>
<CAPTION>
AUDITED FINANCIAL STATEMENTS:                                               Page
                                                                           -----
<S>                                                                        <C>
Report of Independent Registered Public Accounting Firm.................      24
Statements of Consolidated Operations and Comprehensive Income (Loss)
   for the Years Ended December 31, 2004, 2003 and 2002.................      25
Consolidated Balance Sheets at December 31, 2004 and 2003...............      26
Statements of Consolidated Cash Flows for the Years Ended
   December 31, 2004, 2003 and 2002.....................................      27
Notes to Consolidated Financial Statements for the Years Ended
   December 31, 2004, 2003 and 2002.....................................   28-56
Selected Quarterly Financial Data (Unaudited) for the Years Ended
   December 31, 2004 and 2003...........................................      57

AUDITED FINANCIAL STATEMENT SCHEDULE:
Schedule II - Valuation and Qualifying Accounts and Reserves............      58
</TABLE>


                                       23





<Page>


            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of Metallurg, Inc.

In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of
Metallurg, Inc., (a wholly-owned subsidiary of Metallurg Holdings, Inc.) and its
subsidiaries ("Metallurg" or "Company") at December 31, 2004 and December 31,
2003, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2004 in conformity with accounting
principles generally accepted in the United States of America. In addition, the
financial statement schedule listed in the accompanying index presents fairly,
in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and the financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and the financial statement schedule based on our audits.
We conducted our audits of these statements and financial statement schedule 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.

As more fully described in Note 1 to the consolidated financial statements,
Metallurg's parent company, Metallurg Holdings, Inc. ("Metallurg Holdings") does
not have sufficient cash on hand to make the interest payments due on its senior
discount notes. Metallurg Holdings has received a letter of support from its
majority owner assuring support to Metallurg Holdings in meeting its cash flow
needs through at least May 31, 2006.


PricewaterhouseCoopers LLP
New York, New York
March 8, 2005


                                       24





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

      STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                                         ------------------------------
                                                                           2004       2003       2002
                                                                         --------   --------   --------
<S>                                                                      <C>        <C>        <C>
Sales ................................................................   $351,763   $282,802   $277,146
Commission income ....................................................        348        547        635
                                                                         --------   --------   --------
   Total revenue .....................................................    352,111    283,349    277,781
Cost of sales ........................................................    304,631    261,370    254,715
                                                                         --------   --------   --------
   Gross profit ......................................................     47,480     21,979     23,066
                                                                         --------   --------   --------
Selling, general and administrative expenses .........................     34,668     30,645     30,473
Environmental expense recovery .......................................         --         --     (3,000)
Restructuring and asset impairment charges ...........................        736     10,895      3,510
                                                                         --------   --------   --------
   Total operating expenses ..........................................     35,404     41,540     30,983
                                                                         --------   --------   --------
   Operating income (loss) ...........................................     12,076    (19,561)    (7,917)

Other:
   Other income, net .................................................        134        222         74
   Interest income ...................................................      1,430        971        604
   Interest expense ..................................................    (16,537)   (14,049)   (13,977)
                                                                         --------   --------   --------
      Loss before income tax provision (benefit), minority interest
         and discontinued operations .................................     (2,897)   (32,417)   (21,216)
Income tax provision (benefit) .......................................      2,119       (267)       835
                                                                         --------   --------   --------
   Loss before minority interest and discontinued
      operations .....................................................     (5,016)   (32,150)   (22,051)
Minority interest ....................................................        (54)       (17)       (84)
                                                                         --------   --------   --------
   Loss from continuing operations ...................................     (5,070)   (32,167)   (22,135)
Discontinued  operations (net of tax provision of $171, $697 and $997
   in 2004, 2003 and 2002, respectively) .............................        338      1,417      2,321
Loss on sale of discontinued operations ..............................     (1,162)        --         --
                                                                         --------   --------   --------
         Net loss ....................................................     (5,894)   (30,750)   (19,814)
Other comprehensive income (loss):
   Foreign currency translation adjustment ...........................      6,334      6,400      6,486
   Minimum pension liability adjustment, net of tax ..................      2,149      5,927    (18,876)
   Deferred gain (loss) on derivatives, net ..........................        196       (292)      (183)
                                                                         --------   --------   --------
      Comprehensive income (loss) ....................................   $  2,785   $(18,715)  $(32,387)
                                                                         ========   ========   ========
</TABLE>

                See notes to consolidated financial statements.


                                       25





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                             December 31,
                                                                         -------------------
                                                                           2004       2003
                                                                         --------   --------
<S>                                                                      <C>        <C>
ASSETS
Current Assets:
   Cash and cash equivalents .........................................   $ 23,061   $ 18,238
   Accounts receivable, less allowance for doubtful
      accounts ($1,967 in 2004 and $2,112 in 2003) ...................     45,885     37,738
   Accounts receivable - related parties .............................        139        102
   Inventories .......................................................     62,551     44,457
   Prepaid expenses and other current assets .........................     12,432      7,987
   Discontinued operations - current assets ..........................         --     14,738
                                                                         --------   --------

         Total current assets ........................................    144,068    123,260
Investments in affiliates ............................................      2,112      1,870
Property, plant and equipment, net ...................................     52,502     54,324
Notes receivable - related party .....................................      7,280      6,608
Other assets .........................................................     12,604     11,443
Discontinued operations - noncurrent assets ..........................         --      1,948
                                                                         --------   --------
         Total .......................................................   $218,566   $199,453
                                                                         ========   ========

LIABILITIES AND SHAREHOLDER'S DEFICIT
Current Liabilities:
   Short-term debt ...................................................   $  8,060   $  5,791
   Current portion of long-term debt .................................      3,810      2,524
   Accounts payable ..................................................     32,203     23,785
   Accounts payable - related parties ................................        161      1,976
   Accrued expenses ..................................................     12,998     10,237
   Current portion of environmental liabilities ......................      1,938      2,993
   Taxes payable .....................................................      1,845        339
   Discontinued operations - current liabilities .....................         --      9,843
                                                                         --------   --------
         Total current liabilities ...................................     61,015     57,488
                                                                         --------   --------
Long-term Liabilities:
   Long-term debt ....................................................    133,258    120,022
   Long-term debt - related parties ..................................      8,326         --
   Accrued pension liabilities .......................................     24,523     29,543
   Environmental liabilities, net ....................................     19,202     22,678
   Other liabilities .................................................      2,041      1,000
   Discontinued operations - noncurrent liabilities ..................         --        218
                                                                         --------   --------
         Total long-term liabilities .................................    187,350    173,461
                                                                         --------   --------
         Total liabilities ...........................................    248,365    230,949
                                                                         --------   --------
Commitments and Contingencies ........................................
Minority Interest ....................................................        652        256
                                                                         --------   --------
Shareholder's Deficit:
   Common stock - par value $.01 per share, authorized 10,000,000
      shares, issued and outstanding 5,000,000 shares ................         50         50
   Due from parent company ...........................................     (1,494)   (21,715)
   Additional paid-in capital ........................................     45,619     67,324
   Accumulated other comprehensive loss ..............................    (16,968)   (25,647)
   Accumulated deficit ...............................................    (57,658)   (51,764)
                                                                         --------   --------
         Total shareholder's deficit .................................    (30,451)   (31,752)
                                                                         --------   --------
         Total .......................................................   $218,566   $199,453
                                                                         ========   ========
</TABLE>

                 See notes to consolidated financial statements.
                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES


                                       26





<Page>


                      STATEMENTS OF CONSOLIDATED CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                                         ------------------------------
                                                                           2004       2003       2002
                                                                         --------   --------   --------
<S>                                                                      <C>        <C>        <C>
Cash Flows from Operating Activities:
Net loss .............................................................   $ (5,894)  $(30,750)  $(19,814)
Adjustments to reconcile net loss to net cash (used in)
   provided by operating activities:
   Depreciation and amortization .....................................      7,937      8,205      7,525
   Deferred income taxes .............................................        516        (92)       316
   Interest expense paid-in-kind .....................................        792         --         --
   Restructuring and asset impairment charges ........................        736     10,895      3,510
   Loss on sale of discontinued operations ...........................      1,162         --         --
Changes in operating assets and liabilities:
   (Increase) decrease in accounts receivable ........................     (5,907)     4,245      3,936
   (Increase) decrease in inventories ................................    (16,560)     7,755     12,545
   (Increase) decrease in other current assets .......................     (1,225)      (107)     3,902
   Increase (decrease) in accounts payable and accrued expenses ......      7,809    (10,213)      (576)
   Restructuring payments ............................................     (2,420)    (3,953)    (1,786)
   Environmental payments ............................................     (4,511)    (2,438)    (2,734)
   Other assets and liabilities, net .................................      1,095        981        380
Discontinued operations - operating activities .......................       (719)    (1,652)       221
                                                                         --------   --------   --------
         Net cash (used in) provided by operating activities .........    (17,189)   (17,124)     7,425
                                                                         --------   --------   --------
Cash Flows from Investing Activities:
Additions to property, plant and equipment ...........................     (3,055)    (2,889)   (10,619)
Proceeds from sale of discontinued operation .........................      8,255         --         --
Repayment from (loan to) former subsidiary ...........................         --      1,000     (3,000)
Loan to buyer of discontinued operation ..............................     (1,370)        --         --
Other, net ...........................................................         20        179         89
Discontinued operations - investing activities .......................         33       (222)      (464)
                                                                         --------   --------   --------
         Net cash provided by (used in) investing activities .........      3,883     (1,932)   (13,994)
                                                                         --------   --------   --------
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt .............................     23,000        151        176
Repayment of long-term debt ..........................................     (2,709)      (265)      (204)
Net borrowing of short-term debt .....................................      2,399      1,295      1,918
Payment for deferred financing fees ..................................     (4,516)        --         --
Capital contributions ................................................         --     10,000      7,117
Loan to parent company ...............................................     (1,484)        --         --
Discontinued operations - financing activities .......................      1,139      1,185     (1,510)
                                                                         --------   --------   --------
         Net cash provided by financing activities ...................     17,829     12,366      7,497
                                                                         --------   --------   --------

Effects of exchange rate changes on cash and cash equivalents ........        300        677        675
                                                                         --------   --------   --------
Net increase (decrease) in cash and cash equivalents .................      4,823     (6,013)     1,603
Cash and cash equivalents - beginning of period ......................     18,238     24,251     22,648
                                                                         --------   --------   --------
Cash and cash equivalents - end of period ............................   $ 23,061   $ 18,238   $ 24,251
                                                                         ========   ========   ========
Supplemental Cash Flow Information:
Cash (received) paid for income taxes ................................   $   (111)  $  1,806   $    434
                                                                         ========   ========   ========
Cash paid for interest ...............................................   $ 14,327   $ 13,590   $ 13,607
                                                                         ========   ========   ========
</TABLE>

                See notes to consolidated financial statements.


                                       27





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Business and Summary of Significant Accounting Policies

     Metallurg, Inc., a Delaware corporation, together with its majority-owned
subsidiaries (collectively, "Metallurg") manufactures and sells high-quality
specialty metals, alloys and metallic chemicals which are essential to the
production of high-performance aluminum and titanium alloys, superalloys, steel
and certain non-metallic materials for various applications in the aerospace,
power supply, automotive, petrochemical processing and telecommunications
industries. Metallurg sells over 50 different product groups to over 1,500
customers worldwide (primarily in North America and Europe).

     Basis of Presentation and Consolidation - The consolidated financial
statements include the accounts of Metallurg, Inc. and its majority-owned
subsidiaries. Investments in companies where Metallurg has greater than 50%
ownership interests are fully consolidated, with the equity owned by the
respective partners shown as minority interest on the balance sheet and their
portion of net income or loss shown separately in the statement of operations.
All material intercompany transactions and balances have been eliminated in
consolidation.

     On March 8, 2004, Metallurg completed the sale of its South African sales
office to a group of investors, including local management. Accordingly, the
operating results for this entity have been reported as discontinued operations
for all periods presented. See "Note 2. Discontinued Operations".

     Metallurg is a wholly-owned subsidiary of Metallurg Holdings, Inc.
("Metallurg Holdings") since the acquisition date of July 13, 1998. The
financial statements do not reflect the pushdown of purchase accounting
adjustments recorded by Metallurg Holdings.

     Metallurg Holdings currently does not have sufficient cash on hand to make
the interest payments due on its 12 3/4% Senior Discount Notes due 2008 (the
"Senior Discount Notes"). As all of Metallurg, Inc.'s outstanding common stock
has been pledged as collateral for Metallurg Holdings' obligations under the
Senior Discount Notes, if Metallurg Holdings were unable to make interest
payments when due, it could lead to a foreclosure on its assets, principally the
equity of Metallurg, Inc. Such foreclosure would create a default in accordance
with the indenture terms of Metallurg, Inc.'s 11% Senior Notes due 2007 (the
"Senior Notes") and result in an acceleration of $100 million of Senior Note
indebtedness. In order for Metallurg Holdings to meet the January 15, 2005
interest payment on the Senior Discount Notes, Metallurg, Inc. loaned Metallurg
Holdings approximately $0.7 million to make the interest payment to non-related
parties. Metallurg Holdings' next interest payment to non-related parties is due
July 15, 2005 in the amount of $1.5 million. In March 2005, Metallurg Holdings
received a letter of support from its majority owner, Safeguard International
Fund L.P. ("Safeguard International"), assuring support to Metallurg Holdings in
meeting its cash flow needs through at least May 31, 2006.

     Accounting Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the U.S. 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 financial statements. They may also affect the reported amount
of revenues and expenses during the reporting period. Significant estimates
include, but are not limited to, allowances for doubtful accounts, inventories,
environmental remediation costs, restructuring and asset impairment charges,
deferred income tax asset valuation allowances, pension plan obligations and
contingent liabilities. Actual results could differ from those estimates.

     Foreign Currency Translation - For foreign operations with functional
currencies other than the U.S. dollar, asset and liability accounts are
translated at current exchange rates; income and expenses are translated using
weighted-average exchange rates. Resulting translation adjustments are reported
in a separate component of shareholder's deficit. Translation adjustments for
operations in highly inflationary economies and exchange gains and losses on
transactions are included in earnings, and amounted to (losses) gains of
$(287,000), $22,000 and $(1,106,000) for the years ended December 31, 2004, 2003
and 2002, respectively.

     Cash and Cash Equivalents - Metallurg presents all highly liquid
instruments, maturing within 30 days or less when purchased, as cash
equivalents.


                                       28





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

1.   Business and Summary of Significant Accounting Policies - (Continued)

     Accounts receivable and allowance for doubtful accounts - Trade accounts
receivable are recorded at the invoiced amount and do not bear interest.
Metallurg provides an allowance for doubtful accounts for known and estimated
potential losses arising from sales to customers based on a periodic review of
these accounts. Account balances are charged off against the allowance when it
is probable the receivable will not be recovered.

     Inventories - Inventories are stated at the lower of cost or market, cost
being determined using principally the average cost and specific identification
methods. Metallurg estimates the net realizable value of its inventories at
least quarterly and adjusts the carrying amount of these inventories, as
necessary.

     Investments in Affiliates - Investments in affiliates in which Metallurg
has a 20% to 50% ownership interest and exercises significant management
influence are accounted for in accordance with the equity method. Where
management does not exercise significant influence and where Metallurg has less
than a 20% interest, the investment is carried at cost.

     Property and Depreciation - Depreciation is computed using principally the
straight-line method over the estimated useful lives of the assets. Major
renewals and improvements are capitalized, while maintenance and repairs are
expensed when incurred. Upon sale or retirement, the costs and related
accumulated depreciation are eliminated from the respective accounts and any
resulting gain or loss is included in income.

     Recoverability of Long-Lived Assets - Metallurg annually, or sooner if
circumstances warrant, evaluates the carrying value of long-lived assets to be
held and used, including goodwill and other intangible assets, when events and
circumstances warrant such a review. The carrying value of a long-lived asset is
considered impaired when the anticipated undiscounted cash flows from such asset
are separately identifiable and are less than its carrying value. In that event,
a loss is recognized based on the amount by which the carrying value exceeds the
fair market value of the long-lived asset. Fair market value is determined
primarily using the anticipated cash flows discounted at a rate commensurate
with the risk involved. Losses on long-lived assets to be disposed of are
determined in a similar manner, except that fair market values are reduced for
the cost to dispose.

     Discontinued Operations - At the time that management formally commits to a
plan to divest of a business, such business is classified as discontinued
operations. The balance sheet amounts and income statement results are
reclassified from their historical presentation to assets and liabilities of
discontinued operations on the Consolidated Balance Sheet and to discontinued
operations in the Statement of Consolidated Operations for all periods
presented.

     Revenue Recognition - Revenue is recognized when the earnings process is
complete and the risks and rewards of ownership have transferred to the
customer. In certain instances, Metallurg arranges sales for which the supplier
invoices the customer directly. In such cases, Metallurg receives commission
income, in its role as agent, which is recognized when the supplier passes title
to the customer. Metallurg assumes no significant credit or other risk with such
transactions.

     Environmental Remediation Costs and Recoveries - Losses associated with
environmental remediation obligations are accrued when such losses are deemed
probable and reasonably estimable. Such accruals generally are recognized no
later than the completion of the remedial feasibility study and are adjusted as
further information develops or circumstances change. Costs of future
expenditures for environmental remediation obligations are not discounted to
their present value. Environmental expense recoveries are generally recognized
in income upon final settlement with Metallurg's insurance carriers.

     Income Taxes - Deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis of
Metallurg's assets and liabilities. Metallurg does not provide for U.S. federal
income taxes on the accumulated earnings considered permanently reinvested in
certain of its foreign subsidiaries, which approximated $21.8 million at
December 31, 2004. These earnings have been invested in facilities and other
assets of Metallurg and have been subject to substantial foreign income taxes,
which may or could offset a major portion of any tax liability resulting from
their remittance and inclusion in U.S. taxable income. Accordingly, Metallurg
does not provide for U.S. income taxes on foreign currency translation
adjustments related to these foreign subsidiaries.


                                       29





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

1.   Business and Summary of Significant Accounting Policies - (Continued)

     Retirement Plans - Metallurg maintains defined benefit plans for its
employees in the U.S. and the U.K. Several statistical and other factors,
including assumptions about the discount rate, expected return on plan assets,
rate of future compensation increases, employee turnover and mortality rates,
are used in calculating the expense and liability related to the plans. The rate
to discount future estimated liabilities is determined considering the rates
available at year-end on long-term, high quality corporate bonds that could be
used to settle the obligations of the plans. The long-term rate of return is
estimated considering historical returns and expected returns on current and
projected asset allocations. A liability is recognized on the balance sheet for
each pension plan where the fair value of the assets of that pension plan is
less than the accumulated benefit obligation. This liability is called a
"minimum pension liability" and is recorded by a charge to Accumulated Other
Comprehensive Loss in Shareholder's Deficit.

     Stock-Based Compensation - Metallurg has a stock-based compensation plan,
which is described in "Note 11. Shareholder's (Deficit) Equity". Metallurg
accounts for this plan using the intrinsic value method in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations. Accordingly, no compensation cost is
reflected in net income as all options granted under this plan had an exercise
price at least equal to the estimated market value of the underlying common
stock on the date of grant. The following table illustrates the effect on net
income if Metallurg had applied the fair value measurement and recognition
methods prescribed by Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation", to record expense for stock
option compensation (in thousands):

<TABLE>
<CAPTION>
                                                          Year Ended December 31,
                                                       -----------------------------
                                                         2004      2003       2002
                                                       -------   --------   --------
<S>                                                    <C>       <C>        <C>
Net loss, as reported ..............................   $(5,894)  $(30,750)  $(19,814)
Less: compensation  expense for option  awards
   determined  by the fair value  based  method,
   net of related tax effects ......................        41         39        263
                                                       -------   --------   --------
      Pro forma net loss ...........................   $(5,935)  $(30,789)  $(20,077)
                                                       =======   ========   ========
</TABLE>

     Derivative Instruments and Hedging Activities - Metallurg uses derivative
instruments, primarily forward contracts, to manage certain foreign currency,
interest rate and commodity price exposures. Derivative instruments are viewed
as risk management tools by Metallurg and are not used for trading or
speculative purposes. Derivative instruments are recorded on the balance sheet
at fair value. Changes in derivatives used to hedge foreign-currency-denominated
balance sheet items are reported directly in earnings along with offsetting
gains and losses on the items being hedged. Derivatives used to hedge forecasted
cash flows associated with foreign currency commitments or forecasted commodity
purchases are accounted for as cash flow hedges. Gains and losses on derivatives
designated as cash flow hedges are recorded in other comprehensive income and
reclassified to earnings in a manner that matches the timing of the earnings
impact of the hedged transactions. The ineffective portion of all hedges, if
any, and gains and losses on foreign currency transactions not designated as
hedges are recognized currently in income.

     Recent Accounting Pronouncement - In December 2004, the FASB issued SFAS
No. 123R, "Share-Based Payment." This statement revises SFAS No. 123,
"Accounting for Stock-Based Compensation", and requires companies to expense the
value of employee stock options and similar awards. Metallurg is required to
adopt this standard for awards granted beginning January 1, 2006.

     Earnings Per Share - Earnings per share is not presented since Metallurg,
Inc. is a wholly-owned subsidiary of Metallurg Holdings.

     Reclassifications - Certain prior year amounts have been reclassified to
conform to the current year presentation.


                                       30





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

2.   Discontinued Operations

     On March 8, 2004, Metallurg completed the sale of its South African sales
office to a group of investors, including local management, for a total purchase
price of $9,100,000 and recorded a loss of $1,162,000. In connection with the
sale, Metallurg accepted a note receivable for $1,370,000 from the buyers, to be
repaid in three equal installments plus interest at LIBOR plus 1% over two
years. The consolidated financial statements have been restated to reflect the
discontinued operation for all periods presented. The following table summarizes
certain financial information related to these discontinued operations prior to
the sale (in thousands):

<TABLE>
<CAPTION>
                                                        Year Ended December 31,
                                                      --------------------------
                                                       2004      2003      2002
                                                      ------   -------   -------
<S>                                                   <C>      <C>       <C>
Results of operations:
Total revenue .....................................   $9,140   $56,262   $43,119
Income before income tax provision ................      509     1,903     3,337
</TABLE>

<TABLE>
<CAPTION>
                                                      December 31,
                                                          2003
                                                      ------------
<S>                                                      <C>
Significant assets and liabilities:
Accounts receivable, net ..........................      $ 7,122
Inventories .......................................        7,231
Property, plant and equipment, net ................        1,352
Other assets ......................................          981
                                                         -------
   Total assets ...................................       16,686
                                                         -------

Short-term debt ...................................        2,686
Accounts payable ..................................        5,583
Accrued expenses ..................................        1,440
Other liabilities .................................          352
                                                         -------
   Total liabilities ..............................       10,061
                                                         -------
   Net assets .....................................      $ 6,625
                                                         =======
</TABLE>

3.   Segments and Related Information

     Metallurg operates in one significant industry segment, the manufacture and
sale of performance-enhancing additives mainly for the metallurgical industry.
Metallurg is organized into three reportable segments centered around its major
production facilities in the U.K., the U.S. and Brazil. In addition to its own
products, Metallurg distributes complementary products manufactured by third
parties.

Reportable Segments

     London & Scandinavian Metallurgical Co Limited and its subsidiaries
(collectively, "LSM") - This unit consists mainly of three production facilities
in the U.K. that manufacture and sell aluminum alloy grain refiners and alloying
tablets for the aluminum industry, chromium metal and ferrotitanium and other
specialty ferroalloys for the steel and superalloy industries and aluminum
powder for various metal powder-consuming industries. As a result of continuing
weakness in operating performance, LSM commenced a restructuring program in the
second half of 2003. As described in Note 4, LSM discontinued its metal catalyst
business in the fourth quarter of 2003 and closed its Norwegian production
facility in August 2004.


                                       31





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

3.   Segments and Related Information - (Continued)

     Shieldalloy Metallurgical Corporation ("SMC") - This unit consists of two
production facilities in the U.S. The Ohio plant manufactures and sells
ferrovanadium and vanadium-based chemicals used mostly in the steel and
petrochemical industries. The New Jersey plant manufactures and sells alloying
tablets for the aluminum industry and metal powders for the welding industry.

     Companhia Industrial Fluminense ("CIF") - This unit consists mainly of two
production facilities in Brazil. The Sao Joao del Rei plant manufactures and
sells aluminum alloy grain refiners and alloying tablets for the aluminum
industry and metal oxides used in the telecommunications, superalloy and
specialty metal industries. The Nazareno mine extracts and concentrates ores
containing tantalum and niobium that are processed, along with other raw
materials, into metal oxides at the Sao Joao del Rei plant.

     In addition to their manufacturing operations, LSM and SMC import and
distribute complementary products manufactured by affiliates and third parties.

     Summarized financial information concerning Metallurg's reportable segments
is shown in the following table (in thousands). Each segment records direct
expenses related to its employees and operations. The "Other" column includes
corporate-related items and results of subsidiaries not meeting the quantitative
thresholds as prescribed by applicable accounting rules for determining
reportable segments. Metallurg does not allocate general corporate overhead
expenses to operating segments. The accounting policies of the segments are the
same as those described in "Note 1. Summary of Significant Accounting Policies".
Transactions among segments are established based on negotiation among the
parties.

<TABLE>
<CAPTION>
                                                                                   Intersegment   Consolidated
                                           LSM        SMC       CIF       Other    Eliminations      Totals
                                        --------   --------   -------   --------   ------------   ------------
<S>                                     <C>        <C>        <C>       <C>         <C>             <C>
Year Ended December 31, 2004

Revenue from external customers .....   $167,730   $139,919   $35,751   $  8,711                    $352,111
Intergroup revenue ..................     31,719      3,546    11,489      9,966    $ (56,720)            --
Restructuring and asset
   impairment charges ...............        746         --        --        (10)          --            736
Interest income .....................        100        266        48      4,602       (3,586)         1,430
Interest expense ....................      1,702      1,846     1,320     15,255       (3,586)        16,537
Depreciation and amortization .......      3,582      1,810     1,449      1,096           --          7,937
Income tax provision (benefit) ......      1,927      1,876      (565)    (1,119)          --          2,119
Net income (loss) ...................      4,160      5,871     1,846      7,577      (25,348)        (5,894)
Assets ..............................     94,663     84,646    30,963    209,617     (201,323)       218,566
Capital expenditures ................      1,453        565       953         84           --          3,055
</TABLE>


                                       32





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

3.   Segments and Related Information - (Continued)

<TABLE>
<CAPTION>
                                                                                  Intersegment   Consolidated
                                           LSM       SMC       CIF       Other    Eliminations      Totals
                                        --------   -------   -------   --------   ------------   ------------
<S>                                     <C>        <C>       <C>       <C>         <C>             <C>
Year Ended December 31, 2003

Revenue from external customers .....   $142,653   $95,475   $18,092   $ 27,129                    $283,349
Intergroup revenue ..................     25,563     3,267    15,104      2,751    $ (46,685)            --
Restructuring and asset
   impairment charges ...............     10,358        --        --        537           --         10,895
Interest income .....................        215       967        41      3,787       (4,039)           971
Interest expense ....................      1,688     1,429       888     14,083       (4,039)        14,049
Depreciation and amortization .......      4,566     1,748     1,298        593           --          8,205
Income tax (benefit) provision ......       (235)   (2,358)       22      2,304           --           (267)
Net loss ............................    (11,906)   (3,147)     (676)   (51,354)      36,333        (30,750)
Assets ..............................     88,933    82,628    21,339    212,598     (206,045)       199,453
Capital expenditures ................      1,171       731       942         45           --          2,889

Year Ended December 31, 2002

Revenue from external customers .....   $133,962   $86,698   $18,342   $ 38,779                    $277,781
Intergroup revenue ..................     27,016     5,355    14,527      2,371    $ (49,269)            --
Environmental expense recoveries ....         --    (3,000)       --         --           --         (3,000)
Restructuring and asset
   impairment charges ...............      1,068       453        --      1,989           --          3,510
Interest income .....................        200       981        37      3,928       (4,542)           604
Interest expense ....................      1,709     1,349       782     14,679       (4,542)        13,977
Depreciation and amortization .......      4,368     1,598     1,053        506           --          7,525
Income tax provision (benefit) ......        868    (2,026)      173      1,820           --            835
Net (loss) income ...................     (2,452)   (3,951)      452    (17,828)       3,965        (19,814)
Assets ..............................    102,588    79,058    22,388    227,679     (209,664)       222,049
Capital expenditures ................      2,168     5,366     3,057         28           --         10,619
</TABLE>

     Metallurg sells its products in over 50 countries. The following table
presents revenue by country based on the location of the user of the product (in
thousands):

<TABLE>
<CAPTION>
                                            Year Ended December 31,
                                        ------------------------------
                                          2004       2003       2002
                                        --------   --------   --------
<S>                                     <C>        <C>        <C>
U.S. ................................   $135,552   $100,517   $ 97,083
U.K .................................     30,208     28,532     25,110
Germany .............................     27,196     20,128     24,571
Japan ...............................     19,553     16,342     12,631
Brazil ..............................     18,370     11,941     12,968
France ..............................     18,276     12,127     11,922
Canada ..............................      8,990     15,863     18,222
Other ...............................     93,618     77,352     74,639
Commission income ...................        348        547        635
                                        --------   --------   --------
   Total revenue ....................   $352,111   $283,349   $277,781
                                        ========   ========   ========
</TABLE>


                                       33





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

3.   Segments and Related Information - (Continued)

     The following table presents property, plant and equipment by country based
on the location of the assets (in thousands):

<TABLE>
<CAPTION>
                                                                  December 31,
                                                               -----------------
                                                                 2004      2003
                                                               -------   -------
<S>                                                            <C>       <C>
U.K ........................................................   $22,482   $22,881
U.S ........................................................    19,566    21,835
Brazil .....................................................     9,204     8,614
Other ......................................................     1,250       994
                                                               -------   -------
   Total ...................................................   $52,502   $54,324
                                                               =======   =======
</TABLE>

4.   Restructuring and Asset Impairment Charges

     Details of Metallurg's restructuring and asset impairment charges are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                Provision          Utilization Through 2004    Balance at
                                         -----------------------   ------------------------   December 31,
                                         2004     2003     2002         Cash    Non-cash          2004
                                         ----   -------   ------      -------   --------      ------------
<S>                                      <C>    <C>       <C>         <C>       <C>               <C>
LSM:
Severance and other employee costs ...   $746   $ 3,652   $1,068      $(5,272)  $   (81)          $113
Write-down of plant and equipment ....     --     6,706       --           --    (6,706)            --
                                         ----   -------   ------      -------   -------           ----
                                          746    10,358    1,068       (5,272)   (6,787)           113
                                         ----   -------   ------      -------   -------           ----
SMC:
Severance and other employee costs ...     --        --      350         (350)       --             --
Write-down of plant and equipment ....     --        --      103           --      (103)            --
                                         ----   -------   ------      -------   -------           ----
                                           --        --      453         (350)     (103)            --
                                         ----   -------   ------      -------   -------           ----
OTHER:
Severance and other employee costs ...    (10)      537    1,989       (2,516)       --             --
                                         ----   -------   ------      -------   -------           ----
   Total .............................   $736   $10,895   $3,510      $(8,138)  $(6,890)          $113
                                         ====   =======   ======      =======   =======           ====
</TABLE>

2004 -

     LSM completed its restructuring, which began in 2003, and recorded a
restructuring charge of $746,000 consisting of (i) severance costs of $316,000
for 15 employees in the U.K. and (ii) severance costs of $430,000 for 28
employees after the closure of its aluminum production facility in Norway. Of
this amount, $113,000 is still unpaid as of December 31, 2004.


                                       34





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

4.   Restructuring and Asset Impairment Charges - (Continued)

2003 -

     In a continuing effort to improve Metallurg's competitive position and to
reduce costs, Metallurg continued restructuring its operations at its worldwide
locations. LSM recorded $3,652,000 of severance costs for 62 employees and asset
impairment charges of $6,706,000 relating to its metal catalyst business and its
aluminum production facilities in Norway. Metallurg's Canadian subsidiary
recognized a restructuring charge of $417,000 for severance costs of seven
employees as its sales and administrative functions were consolidated into the
New Jersey operations of SMC. In addition, Metallurg transferred certain sales
and administrative functions for tantalum and niobium products from its
headquarters location to its production facilities in Brazil and recorded
severance costs of $120,000 for two employees. All restructuring charges
incurred during 2003 have been paid as of December 31, 2004 with the exception
of a $10,000 over-accrual that was reversed in 2004.

2002 -

     During 2002, Metallurg carried out a restructuring program intended to
reduce the cost structure at LSM, SMC and corporate headquarters. LSM recorded a
restructuring charge of $1,068,000 for severance costs of 29 employees who were
terminated and paid during the year. SMC recorded a restructuring charge of
$453,000, of which $350,000 was for severance costs of 26 employees terminated
during the year. SMC also recorded a charge of $103,000 for the write-down of
property and equipment no longer used in operations. Metallurg, Inc. recorded a
restructuring charge of $1,989,000 for severance costs of nine employees
terminated during the year at its headquarters location. Under the terms of
certain executive employment and severance agreements, the severance was to be
paid over a period of up to 18 months. All restructuring charges incurred during
2002 have been paid as of December 31, 2004.

5.   Inventories

     Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                  December 31,
                                                               -----------------
                                                                 2004      2003
                                                               -------   -------
<S>                                                            <C>       <C>
Raw materials ..............................................   $19,973   $ 8,855
Work in process ............................................       787       467
Finished goods .............................................    40,474    33,762
Other ......................................................     1,317     1,373
                                                               -------   -------
   Total ...................................................   $62,551   $44,457
                                                               =======   =======
</TABLE>

6.   Property, Plant and Equipment

     The major classes of property, plant and equipment are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                     December 31,
                                                  ------------------   Estimated
                                                    2004       2003      Lives
                                                  --------   -------   ---------
<S>                                               <C>        <C>          <C>
Land ..........................................   $  1,818   $ 1,262
Buildings and leasehold improvements ..........     20,695    20,325      5-30
Machinery .....................................     71,682    71,181      3-12
Office furniture and equipment ................      4,612     4,809      3-10
Transportation equipment ......................      1,682     1,742      4-5
Construction in progress ......................      1,172       398
                                                  --------   -------
   Total ......................................    101,661    99,717
Less: accumulated depreciation ................     49,159    45,393
                                                  --------   -------
   Property, plant and equipment, net .........   $ 52,502   $54,324
                                                  ========   =======
</TABLE>

     Depreciation expense related to property, plant and equipment was
$6,939,000, $7,627,000 and $6,920,000 for the years ended December 31, 2004,
2003 and 2002, respectively.


                                       35





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

7.   Retirement Plans

Metallurg, Inc. and Domestic Subsidiaries

     Metallurg, Inc. and its domestic subsidiaries have tax qualified,
noncontributory defined benefit pension plans covering substantially all
salaried and certain hourly paid employees. The plans generally provide benefit
payments using a formula based on an employee's compensation and length of
service. These plans are funded in amounts equal to the minimum funding
requirements of the Employee Retirement Income Security Act. Metallurg, Inc.'s
best estimate of the expected contributions into these plans for 2005 is
$325,000. Substantially all plan assets are invested in cash and short-term
investments or listed stocks and bonds. Metallurg, Inc. also maintains tax
qualified defined contribution plans covering substantially all of the salaried
employees of Metallurg, Inc. and its domestic subsidiaries. All contributions,
including a portion that represents a company match, are made in cash into
mutual fund accounts in accordance with the participants' investment elections.

Foreign Subsidiaries

     LSM's defined benefit pension plans cover all eligible employees in the
U.K. Substantially all plan assets are invested in listed stocks and bonds.
Benefits under these plans are based on years of service and the employee's
compensation. Benefits are paid either from plan assets or, in certain
instances, directly by LSM. LSM's best estimate of the expected contributions in
2005 is $6,289,000. Metallurg's other foreign subsidiaries have retirement plans
that cover certain eligible employees.

     Net pension cost consisted of the following for the years ended December
31, 2004, 2003 and 2002, respectively (in thousands):

<TABLE>
<CAPTION>
                                                          U.S. Plans                  Non-U.S. Plans
                                                   Year Ended December 31,       Year Ended December 31,
                                                 ---------------------------   ---------------------------
                                                   2004      2003      2002      2004      2003      2002
                                                 -------   -------   -------   -------   -------   -------
<S>                                              <C>       <C>       <C>       <C>       <C>       <C>
Components of net periodic benefit cost:
   Service cost ..............................   $   490   $   420   $   479   $ 2,668   $ 2,434   $ 2,156
   Interest cost .............................     1,318     1,367     1,410     6,102     5,546     4,842
   Expected return on plan assets ............    (1,393)   (1,216)   (1,480)   (6,106)   (4,707)   (5,159)
   Recognized prior service cost .............       271       359         8        --        --        --
   Recognized actuarial  loss ................        12        12         4     2,340     2,773     1,111
                                                 -------   -------   -------   -------   -------   -------
                                                     698       942       421     5,004     6,046     2,950
   Cost of other defined benefit plans .......        --        --        --        --       (46)       46
   Cost of defined contribution plans
      (net of forfeitures) ...................       137       141       196        --        --        --
                                                 -------   -------   -------   -------   -------   -------
      Total retirement plan expense
         recognized in the Statements of
         Consolidated Operations .............   $   835   $ 1,083   $   617   $ 5,004   $ 6,000   $ 2,996
                                                 =======   =======   =======   =======   =======   =======
Weighted average assumptions to determine
   net periodic benefit cost:
   Discount rate .............................      6.00%     6.75%     7.25%     5.50%     5.52%     5.52%
   Long-term rate of return on plan assets ...      9.00%     9.00%     9.00%     7.79%     7.76%     7.71%
   Long-term rate of compensation
      increase ...............................      4.00%     4.00%     4.00%     4.25%     4.25%     3.76%
</TABLE>


                                       36





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

7.   Retirement Plans - (Continued)

     The following table summarizes the changes in benefit obligation and
changes in plan assets for Metallurg's principle defined benefit plans (in
thousands).

<TABLE>
<CAPTION>
                                                                      U.S. Plans              Non-U.S. Plans
                                                               Year Ended December 31,   Year Ended December 31,
                                                               -----------------------   -----------------------
                                                                    2004      2003           2004       2003
                                                                  -------   -------        --------   --------
<S>                                                               <C>       <C>            <C>        <C>
Change in benefit obligation:
   Benefit obligation at beginning of year .................      $23,314   $21,742        $111,853   $100,373
   Service cost ............................................          490       420           3,009      2,754
   Interest cost ...........................................        1,318     1,367           6,102      5,546
   Actuarial (gain) loss ...................................          (37)    1,157             115     (2,234)
   Benefits paid ...........................................       (1,319)   (1,372)         (8,219)    (5,085)
   Amendments ..............................................           --        --             625         --
   Foreign currency translation adjustment .................           --        --           8,883     10,499
                                                                  -------   -------        --------   --------
      Benefit obligation at end of year ....................       23,766    23,314         122,368    111,853
                                                                  -------   -------        --------   --------

Change in plan assets:
   Fair value of plan assets at beginning of year ..........       15,903    14,090          77,608     60,518
   Actual return on plan assets ............................        1,613     2,918           8,714      9,751
   Employer and employee contributions .....................          727       267           6,452      5,299
   Benefits paid ...........................................       (1,319)   (1,372)         (8,219)    (5,085)
   Foreign currency translation adjustment .................           --        --           6,436      7,125
                                                                  -------   -------        --------   --------
      Fair value of plan assets at end of year .............       16,924    15,903          90,991     77,608
                                                                  -------   -------        --------   --------

Funded status ..............................................       (6,842)   (7,411)        (31,377)   (34,245)
Unrecognized net loss ......................................        4,682     5,203          44,105     44,422
Unrecognized prior service cost ............................           87       100              40         41
                                                                  -------   -------        --------   --------
   (Accrued) prepaid pension cost - principle benefit
      plans ................................................       (2,073)   (2,108)         12,768     10,218
   Accrued pension cost - other plans ......................           --        --             (35)       (35)
                                                                  -------   -------        --------   --------
      Total (accrued) prepaid pension cost recognized in
         the Consolidated Balance Sheets ...................      $(2,073)  $(2,108)       $ 12,733   $ 10,183
                                                                  =======   =======        ========   ========
Amounts recognized in the Consolidated Balance
   Sheets are as follows:
      Other assets:
         Prepaid pension asset .............................                               $  1,512   $  1,053
         Intangible asset ..................................      $    87   $   100              --         --
      Accrued pension liabilities ..........................       (5,802)   (6,290)        (18,721)   (23,253)
      Minimum pension liability ............................        3,642     4,082          29,942     32,383
                                                                  -------   -------        --------   --------
         Net amount recognized .............................      $(2,073)  $(2,108)       $ 12,733   $ 10,183
                                                                  =======   =======        ========   ========

Decrease in minimum liability included in other
   comprehensive income ....................................          440       922           1,709      5,005

Weighted average assumptions used to determine benefit
   obligations:
Discount rate ..............................................         5.75%     6.00%           5.50%      5.50%
Long-term rate of compensation increase ....................         4.00%     4.00%           4.25%      4.25%
</TABLE>


                                       37





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

7.    Retirement Plans - (Continued)

     The following table summarizes the fair value of plan assets, by major
category, and the actual and weighted average target allocation percentages of
total plan assets as of December 31, 2004 and 2003, respectively (dollars in
thousands):

<TABLE>
<CAPTION>
                               U.S. Plans                                 Non-U.S. Plans
                              December 31,                                 December 31,
               ------------------------------------------   ------------------------------------------
                    2004            2003                         2004            2003
               -------------   -------------     Target     -------------   -------------     Target
                 Fair            Fair          Allocation     Fair            Fair          Allocation
                Value     %     Value     %         %        Value     %     Value     %         %
               -------   ---   -------   ---   ----------   -------   ---   -------   ---   ----------
<S>            <C>       <C>   <C>       <C>       <C>      <C>       <C>   <C>       <C>       <C>
Equity .....   $10,468    62   $ 9,904    62        60      $66,277    73   $52,573    68        75
Debt .......     6,428    38     5,973    38        40       23,189    25    22,132    28        20
Other ......        28    --        26    --        --        1,525     2     2,903     4         5
               -------   ---   -------   ---       ---      -------   ---   -------   ---       ---
   Total ...   $16,924   100   $15,903   100       100      $90,991   100   $77,608   100       100
               =======   ===   =======   ===       ===      =======   ===   =======   ===       ===
</TABLE>

     Metallurg's investment strategy is to achieve long-term capital
appreciation, while reducing risk through diversification in order to meet the
obligations of the plans. The expected return on plan assets assumption,
reviewed annually, reflects the average rate of earnings expected on the funds
invested using weighted average historical returns of approximately 12% for
equities and approximately 6% for debt. In 2005, the expected return on plan
assets is 9.00% for the U.S. plans and approximately 7.79% for the non-U.S.
plans.

     The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for pension benefit plans with accumulated benefit
obligations in excess of plan assets as of December 31, 2004 and 2003 were as
follows (in thousands):

<TABLE>
<CAPTION>
                                         U.S. Plans         Non-U.S. Plans
                                        December 31,         December 31,
                                     -----------------   -------------------
                                       2004      2003      2004       2003
                                     -------   -------   --------   --------
<S>                                  <C>       <C>       <C>        <C>
Projected benefit obligation .....   $23,766   $23,314   $115,565   $103,459
Accumulated benefit obligation ...    22,726    22,193    102,139     91,440
Fair value of plan assets ........    16,924    15,903     83,493     68,851
</TABLE>

     The expected benefit payments during the next ten years are as follows (in
thousands):

<TABLE>
<CAPTION>
                  U.S. Plans   Non-U.S. Plans
                  ----------   --------------
<S>                 <C>            <C>
December 31,
2005 ..........     $1,354         $ 3,655
2006 ..........      1,348           3,684
2007 ..........      1,374           3,725
2008 ..........      1,425           3,774
2009 ..........      1,466           3,929
2010 - 2014 ...      8,591          21,539
</TABLE>


                                       38





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

8.    Borrowings

      Long-term debt consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                                 December 31,
                                                             -------------------
                                                               2004       2003
                                                             --------   --------
<S>                                                          <C>        <C>
Metallurg, Inc.:
   Senior Notes ..........................................   $100,000   $100,000
   MHR Debt ..............................................     15,466         --

Foreign subsidiaries:
   LSM ...................................................     21,411     22,357
   CIF ...................................................        191        189
                                                             --------   --------
      Subtotal ...........................................    137,068    122,546
Less: amounts due within one year ........................      3,810      2,524
                                                             --------   --------
      Total long-term debt ...............................   $133,258   $120,022
                                                             ========   ========
</TABLE>

Metallurg, Inc. and Domestic Subsidiaries

     Senior Notes - In November 1997, Metallurg, Inc. issued its Senior Notes.
Interest is payable semi-annually. The Senior Notes are redeemable at the option
of Metallurg, Inc., in whole or in part, and are fully and unconditionally
guaranteed by the U.S. subsidiaries of Metallurg, Inc. on a senior unsecured
basis.

     The Senior Note indenture contains limitations on, among other things, the
ability of Metallurg to incur indebtedness and enter into certain mergers,
consolidations or asset sales. In addition, under the terms of the indenture,
Metallurg, Inc. is limited in its ability to make restricted payments, as
defined and including, among other things, minority investments in subsidiaries
and dividend payments, to a formula based on the cumulative net income since
November 1, 1997 and certain specified allowances. As a result of this
limitation, Metallurg, Inc. was permitted to make restricted payments in the
amount of $858,000 as of December 31, 2004. In January 2005, Metallurg, Inc.
loaned Metallurg Holdings, its parent company, $744,000 to pay interest on
Metallurg Holdings' Senior Discount Notes held by non-related parties. This
restricted payment was necessary, as Metallurg Holdings did not have sufficient
cash on hand to make its required interest payments and reduced Metallurg,
Inc.'s ability to make restricted payments to $114,000.

     MHR Debt - On August 13, 2004, Metallurg, Inc. entered into a financing
agreement maturing on August 31, 2007 with MHR Institutional Partners II LP, as
agent ("MHR"). The financing agreement, described below, replaced the existing
facility with Fleet National Bank that would have otherwise expired on October
29, 2004. The financing agreement also requires Metallurg to maintain a minimum
borrowing base and achieve minimum Consolidated EBITDA, as defined.


                                       39





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

8.   Borrowings - (Continued)

     This financing agreement, as amended, provided Metallurg, Inc. with a $15
million term loan for working capital and a $21 million letter of credit
facility. It allows for $15 million of the letter of credit facility to be
converted to a term loan with the proceeds being used by SMC to settle certain
environmental remediation obligations at its Newfield facility. Transaction
costs of $4.5 million were capitalized and are being amortized over the term of
the agreement. Interest accrues on outstanding balances at a rate of 20% per
annum of which one-half is paid in cash monthly in arrears and one-half is
paid-in-kind by being added to the outstanding principal balances on a monthly
basis. In addition, Metallurg pays MHR a monthly letter of credit commitment fee
of 4% per annum on all outstanding letters of credit, a facility maintenance fee
of $620,000 on December 31, 2004 and $310,000 on each June 30th and December
31st thereafter, and a monthly monitoring fee of $40,000 in 2004, $30,000 in
2005 and $20,000 thereafter. Mandatory quarterly repayments begin on October 1,
2005 in the amount of $1,000,000 and voluntary repayments may be made after July
31, 2005 along with prepayment penalties. The financing agreement is fully
collateralized by all of the assets of Metallurg, Inc. and SMC (the
"Borrowers"), fully guaranteed by Metallurg Holdings Corporation, Metallurg
International Resources, LLC and Metallurg Services Inc. (the "MHR Guarantors")
and partially guaranteed by Metallurg, Inc.'s major subsidiaries in the U.K. and
Brazil. The total amount outstanding under this agreement is $15,466,000 in
loans and $20,755,000 in letters of credit at December 31, 2004.

     Related Parties - Safeguard International, for its own account and the
accounts of others, and SCP Private Equity Partners, L.P., another shareholder
of Metallurg Holdings, provided an $8 million subordinated loan so that SMC
could complete the purchase of vanadium-containing raw materials for its
Cambridge, Ohio plant under a five-year supply contract. The loan, as amended,
is collateralized by a second lien on all of the assets of the Borrowers and MHR
Guarantors. Interest on the loan at 8% per annum is paid-in-kind and added to
the principal balance. The total amount of this loan outstanding is $8,326,000
at December 31, 2004. Principal repayments of this loan are prohibited until all
MHR debt has been repaid.

Foreign Subsidiaries

     LSM Revolving Credit Facilities - LSM has revolving credit facilities with
Barclays Bank plc ("Barclays") and HSBC Bank plc ("HSBC"). At December 31, 2004,
these facilities provide LSM with up to 'L'5,500,000 ($10,552,000) of
borrowings, 'L'40,300,000 ($77,316,000) of foreign exchange contracts and
options and 'L'4,000,000 ($7,674,000) for other ancillary banking
arrangements, including bank guarantees. Borrowings under these facilities are
collateralized by the assets of LSM and are repayable on demand. Outstanding
loans under these facilities bear interest at each bank's base rate plus 1.0% to
1.75%. At December 31, 2004, there were 'L'477,000 ($915,000) of borrowings
outstanding under these facilities at an interest rate of 3.45% and included in
short-term debt on the consolidated balance sheet. In January 2005, these
revolving credit facilities were amended to denominate them in U.S. dollars on
similar terms and conditions.

     LSM Term Loans - LSM also has two term loans with Barclays and HSBC. The
loan with Barclays is for 'L'6,000,000 ($11,511,000) for a term of three
years and bears interest at 3-month LIBOR plus 1.75%. Quarterly repayments are
required in the amount of 'L'150,000 ($288,000). The outstanding balance for
this loan was 'L'5,550,000 ($10,648,000) at an interest rate of 6.65% at
December 31, 2004. The loan with HSBC is for 'L'6,000,000 ($11,511,000) for
a term of five years and bears interest at 3-month LIBOR plus 1.65%. Quarterly
repayments are required in the amount of 'L'195,000 ($374,000). The
outstanding balance for this loan was 'L'5,610,000 ($10,763,000) at an
interest rate of 6.40% at December 31, 2004. These term loan facilities are
collateralized by the assets of LSM and require LSM to comply with various
covenants, including the maintenance of minimum tangible net worth and interest
coverage. In January 2005, these loans were amended to denominate them in U.S.
dollars on similar terms and conditions.

     Other - CIF maintains short-term secured and unsecured borrowing
arrangements with various banks totaling $11,689,000. Borrowings under these
arrangements are included in short-term debt on the consolidated balance sheet
and aggregated $7,145,000 at December 31, 2004 at a weighted-average interest
rate of 8.4%.

     Interest expense totaled $16,537,000, $14,049,000 and $13,977,000 for the
years ended December 31, 2004, 2003 and 2002, respectively.


                                       40





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

8.   Borrowings - (Continued)

     The scheduled maturities of long-term debt during the next five years are
as follows (in thousands):

<TABLE>
<CAPTION>
December 31,
------------
<S>                                                                     <C>
2005.................................................................   $  3,810
2006.................................................................      6,677
2007.................................................................    120,308
2008.................................................................      1,496
2009.................................................................      4,777
Thereafter...........................................................         --
                                                                        --------
   Total.............................................................   $137,068
                                                                        ========
</TABLE>

9.   Financial Instruments

     The carrying amounts and fair values of financial instruments are as
follows (in thousands):

<TABLE>
<CAPTION>
                                         December 31, 2004    December 31, 2003
                                        ------------------   ------------------
                                        Carrying     Fair    Carrying     Fair
                                         Amount     Value     Amount     Value
                                        --------   -------   --------   -------
<S>                                     <C>        <C>       <C>        <C>
Financial assets and liabilities:
   Cash and cash equivalents ........   $ 23,061   $23,061   $ 18,238   $18,238
   Investments in affiliates ........      2,112     2,112      1,870     1,870
   Short-term debt ..................      8,060     8,060      5,791     5,791
   Senior Notes .....................    100,000    90,000    100,000    56,000
   Other long-term debt .............     37,068    37,068     22,546    22,546
</TABLE>

<TABLE>
<CAPTION>
                                        Notional   Market   Notional   Market
                                         Amount     Value    Amount     Value
                                        --------   ------   --------   ------
<S>                                      <C>       <C>       <C>       <C>
Derivative instruments:
Forward exchange contracts:
   Sales ............................    $23,899   $(631)    $23,932   $ 602
   Purchases (a) ....................         --      --       6,944    (650)
Commodity price contracts:
   Sales ............................        127     (13)        681     (44)
   Purchases ........................      8,482     750       4,731     893
</TABLE>

(a)  Includes notional amounts of $3,853 and market values of $(557) at December
     31, 2003 relating to discontinued operations.

     The carrying amount of cash and cash equivalents and short-term debt
approximates fair value due to their liquidity and short-term maturities. All
investments purchased with maturities of three months or less are considered
cash equivalents. Fair values of investments in affiliates are not readily
available. The fair value of Metallurg, Inc.'s Senior Notes is based on quoted
market prices. Metallurg's other long-term debt includes floating-rate debt, the
carrying amount of which approximates fair value.

     Metallurg does not use financial instruments for trading or other
speculative purposes. Metallurg does not hedge the net investment in its
subsidiaries.


                                       41





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

9.   Financial Instruments - (Continued)

     Metallurg enters into foreign exchange contracts in the regular course of
business to manage exposure against fluctuations on sales and raw material
purchase transactions denominated in currencies other than the functional
currencies of its businesses. The contracts mature at the anticipated cash
requirement date, generally within 12 months, and are predominantly denominated
in U.S. Dollars and Euros. The counterparties to these contractual arrangements
are a diverse group of major financial institutions with which Metallurg also
has other financial relationships. Metallurg is exposed to credit risk generally
limited to unrealized gains in such contracts in the event of non-performance by
counterparties of those financial instruments, but it does not expect any
counterparties to fail to meet their obligations given their high credit
ratings. The notional values provide an indication of the extent of Metallurg's
involvement in such instruments but do not represent its exposure to market
risk, which is essentially limited to risk related to currency rate movements.
The estimated fair value of foreign exchange contracts is based on estimated
amounts at which they could be settled based on market exchange rates and
include all foreign exchange contracts regardless of hedge designation.

     Metallurg is exposed to volatility in the prices of raw materials used in
some of its products and uses forward contracts to manage some of these
exposures. As the hedging documentation requirements are not currently being
met, gains and losses on these derivatives are recognized currently in earnings.
The estimated fair value of the forward contracts is based on estimated amounts
at which they could be settled based on market prices and include all forward
contracts regardless of hedge designation.

10.  Income Taxes

     For financial reporting purposes, (loss) income before income tax provision
(benefit), minority interest and discontinued operations includes the following
components (in thousands):

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                                  -----------------------------
                                                    2004      2003       2002
                                                  -------   --------   --------
<S>                                               <C>       <C>        <C>
U.S. ..........................................   $(9,744)  $(18,902)  $(19,612)
Foreign .......................................     6,847    (13,515)    (1,604)
                                                  -------   --------   --------
   Total ......................................   $(2,897)  $(32,417)  $(21,216)
                                                  =======   ========   ========
</TABLE>

     The reconciliation of income tax from continuing operations computed at the
U.S. federal statutory tax rate to Metallurg's effective tax rate is as follows
(dollars in thousands):

<TABLE>
<CAPTION>
                                                                 Year Ended December 31,
                                                ---------------------------------------------------------
                                                       2004                2003                2002
                                                -----------------   -----------------   -----------------
                                                   Tax                 Tax                 Tax
                                                Provision           (Benefit)           Provision
                                                (Benefit)     %     Provision     %     (Benefit)     %
                                                ---------   -----   ---------   -----   ---------   -----
<S>                                              <C>        <C>     <C>         <C>      <C>        <C>
Income tax benefit at statutory rate ........    $(1,014)    35.0   $(11,346)    35.0    $(7,426)    35.0
State and local income taxes, net
   of federal income tax effect .............         77     (2.7)        13     (0.1)        21     (0.1)
Effect of net change of foreign valuation
   allowance and differences between U.S. ...
   and foreign rates ........................     (1,374)    47.5      4,475    (13.8)     1,587     (7.5)
Foreign dividends ...........................      2,690    (92.9)     2,326     (7.2)     1,266     (6.0)
Changes in domestic valuation allowance .....      1,627    (56.1)     4,209    (12.9)     5,185    (24.4)
Permanent and other differences .............        113     (3.9)        56     (0.2)       202     (1.0)
                                                 --------   -----   ---------   -----    -------    -----
      Total .................................    $ 2,119    (73.1)  $   (267)     0.8    $   835     (4.0)
                                                 ========   =====   =========   =====    =======    =====
</TABLE>


                                       42





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

10.  Income Taxes - (Continued)

     The income tax provision (benefit) represents the following (in thousands):

<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                                         -----------------------
                                                          2004     2003    2002
                                                         ------   -----   -----
<S>                                                      <C>      <C>     <C>
Current:
   U.S. federal ......................................   $   (3)  $ (68)  $(231)
   U.S. state and local ..............................      119      19      32
   Foreign ...........................................    1,487    (126)    718
                                                         ------   -----   -----
      Total current ..................................    1,603    (175)    519
                                                         ------   -----   -----
Deferred:
   U.S. federal and state ............................      953      --       8
   Foreign ...........................................     (437)    (92)    308
                                                         ------   -----   -----
      Total deferred .................................      516     (92)    316
                                                         ------   -----   -----
      Total income tax provision (benefit) ...........   $2,119   $(267)  $ 835
                                                         ======   =====   =====
</TABLE>

     U.S. federal income tax refunds receivable of $243,000 at December 31, 2003
consisted of carryback claims related to environmental expenses and have been
collected during 2004. These receivables were reflected in prepaid expenses in
the accompanying Consolidated Balance Sheets.

     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes. Significant components of
Metallurg's deferred tax assets and liabilities are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                December 31,
                                                            -------------------
                                                              2004       2003
                                                            --------   --------
<S>                                                         <C>        <C>
Deferred Tax Assets:
   NOL and other credit carryforwards ...................   $ 22,895   $ 19,948
   Retirement benefits ..................................      6,514      7,846
   Environmental liabilities ............................      5,767      8,977
   Other accruals and reserves ..........................        922      1,594
   Fixed assets .........................................        151        156
   Inventories ..........................................         20        353
   Other ................................................        405        119
                                                            --------   --------
Total deferred tax assets ...............................     36,674     38,993
Deferred tax asset valuation allowance ..................    (24,699)   (27,137)
                                                            --------   --------
                                                              11,975     11,856
                                                            --------   --------
Deferred Tax Liabilities:
   Fixed assets .........................................     (5,329)    (3,716)
   Other ................................................     (3,159)    (2,919)
                                                            --------   --------
Total deferred tax liabilities ..........................     (8,488)    (6,635)
                                                            --------   --------
Net deferred tax asset ..................................   $  3,487   $  5,221
                                                            ========   ========
</TABLE>

     At December 31, 2004, Metallurg has net operating loss carryforwards
relating to domestic operations of $59,424,000 (of which $3,300,000 is subject
to certain limitations relative to utilization), which expire through 2024, and
alternative minimum tax credit carryforwards of $1,271,000, which can be carried
forward indefinitely. Metallurg, Inc.'s consolidated foreign subsidiaries have
income tax loss carryforwards aggregating $2,410,000, a substantial portion of
which relates to Brazilian operations, which do not expire. Due to significant
uncertainties surrounding the realization of certain loss carryforwards, the
related deferred tax assets have been substantially provided for in the
valuation allowance at December 31, 2004. Net deferred tax assets that are not
fully valued are mainly for LSM in the amount of $1,802,000 and for CIF in the
amount of $1,539,000.


                                       43





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

10.  Income Taxes - (Continued)

     The American Jobs Creation Act (the "AJCA"), which was signed into law on
October 22, 2004, created a special one-time 85% tax deduction for certain
repatriated foreign earnings that are reinvested in qualifying domestic
activities, as defined in the AJCA. Metallurg may elect to apply this provision
to qualifying earnings repatriations in the year ending December 31, 2005.
Metallurg is in the process of evaluating the effects of the repatriation
provision and expects to complete its evaluation after its assessment of
clarifying guidance published by Congress or the Treasury Department. The
maximum amount Metallurg is eligible to repatriate under the AJCA is
approximately $44,700,000. The estimated tax provision that would be required on
this amount would be approximately $2,400,000. If any amount is repatriated, it
would likely be less than the maximum, with a proportional reduction in the
estimated provision for income taxes.

11.  Shareholder's (Deficit) Equity

<TABLE>
<CAPTION>
                                                                                      Accumulated                   Total
                                              Common Stock    Due from   Additional      Other                   Shareholder's
                                           -----------------   Parent      Paid-In   Comprehensive  Accumulated     Equity
                                             Shares   Amount  Company     Capital        Loss        Deficit      (Deficit)
                                           ---------  ------  --------   ----------  -------------  -----------  -------------
                                                                   (in thousands, except share amounts)
<S>                                        <C>          <C>   <C>        <C>           <C>           <C>            <C>
Balance at December 31, 2001 ............  5,000,000    $50   $(19,714)  $ 49,446      $(25,109)     $ (1,200)      $  3,473
   Net loss .............................         --     --         --         --            --       (19,814)       (19,814)
   Change in translation adjustment .....         --     --         --         --         6,486            --          6,486
   Minimum pension liability
      adjustment (net of deferred tax
      benefit of $6,342) ................         --     --         --         --       (18,876)           --        (18,876)
   Deferred loss on derivatives, net ....         --     --         --         --          (183)           --           (183)
   Capital contributions ................         --     --     (2,001)     9,118            --            --          7,117
   Deferred tax effects of fresh-start
      adjustments .......................         --     --         --         11            --            --             11
   Fresh-start adjustment for the tax
      benefits of environmental
      carryback claims ..................         --     --         --     (1,251)           --            --         (1,251)
                                           ---------    ---   --------   --------      --------      --------       --------
Balance at December 31, 2002 ............  5,000,000     50    (21,715)    57,324       (37,682)      (21,014)       (23,037)
   Net loss .............................         --     --         --         --            --       (30,750)       (30,750)
   Change in translation adjustment .....         --     --         --         --         6,400            --          6,400
   Minimum pension liability adjustment
      (net of deferred tax provision
      of $2,146) ........................         --     --         --         --         5,927            --          5,927
   Deferred loss on derivatives, net ....         --     --         --         --          (292)           --           (292)
   Capital contributions ................         --     --         --     10,000            --            --         10,000
                                           ---------    ---   --------   --------      --------      --------       --------
Balance at December 31, 2003 ............  5,000,000     50    (21,715)    67,324       (25,647)      (51,764)       (31,752)
   Net loss .............................         --     --         --         --            --        (5,894)        (5,894)
   Change in translation adjustment .....         --     --         --         --         6,334            --          6,334
   Minimum pension liability adjustment
      (net of deferred tax provision
      of $732) ..........................         --     --         --         --         2,149            --          2,149
   Deferred gain on derivatives, net ....         --     --         --         --           196            --            196
   Deemed dividend from sale of
     Senior Discount Notes ..............         --     --     21,715    (21,705)           --            --             10
   Loan to parent company ...............         --     --     (1,494)        --            --            --         (1,494)
                                           ---------    ---   --------   --------      --------      --------       --------
Balance at December 31, 2004 ............  5,000,000    $50   $ (1,494)  $ 45,619      $(16,968)     $(57,658)      $(30,451)
                                           =========    ===   ========   ========      ========      ========       ========
</TABLE>


                                       44





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

11.  Shareholder's (Deficit) Equity - (Continued)

     Due from Parent Company - In January 2004, Metallurg, Inc. loaned its
parent company, Metallurg Holdings, $1,494,000 in order for Metallurg Holdings
to meet its interest obligations due on its Senior Discount Notes.

     On August 12, 2004, Metallurg, Inc. sold all of its previously acquired
Senior Discount Notes of Metallurg Holdings and related accrued interest to
Metallurg Holdings for $10,000. Metallurg, Inc. had recorded these items as due
from parent company in its consolidated balance sheet. For accounting purposes
only, the difference between the amount recorded as due from parent company and
the amount received from Metallurg Holdings was recorded as a deemed dividend to
Metallurg Holdings. Due to the accumulated deficit in Metallurg, this dividend
was recorded as a reduction in additional paid-in-capital.

     Accumulated Other Comprehensive Loss - The components of accumulated other
comprehensive loss are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                December 31,
                                                            -------------------
                                                              2004       2003
                                                            --------   --------
<S>                                                         <C>        <C>
Foreign currency translation adjustment .................   $  8,033   $  1,699
Minimum pension liability adjustment, net ...............    (24,602)   (26,751)
Deferred loss on derivatives ............................       (399)      (595)
                                                            --------   --------
                                                            $(16,968)  $(25,647)
                                                            ========   ========
</TABLE>

     Stock Compensation Plan - On November 20, 1998, 500,000 shares of common
stock were made available for stock awards and stock options under the 1998
Equity Compensation Plan (the "ECP"). Options issued have a term of ten years
and vest, in most cases, 20% on the date of grant and 20% on each of the first
four anniversaries of the date of grant. The weighted-average remaining life of
options outstanding at December 31, 2004 was 4.55 years.

     Stock option transactions under the ECP are summarized as follows:

<TABLE>
<CAPTION>
                                                   Number of
                                                     Shares
                                                   ---------
<S>                                                <C>
Balance at December 31, 2001 ...................    472,500
   Canceled or forfeited .......................    (72,500)
                                                   --------
Balance at December 31, 2002 ...................    400,000
   Canceled or forfeited .......................   (185,000)
                                                   --------
Balance at December 31, 2003 ...................    215,000
   Canceled or forfeited .......................    (20,000)
                                                   --------
Balance at December 31, 2004 ...................    195,000
                                                   ========

Shares reserved for future options .............    305,000

Stock options exercisable at:
   December 31, 2002 ...........................    355,750
   December 31, 2003 ...........................    194,250
   December 31, 2004 ...........................    184,625
</TABLE>


                                       45





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

12.  Environmental Liabilities

      Metallurg's manufacturing operations in Cambridge, Ohio; Newfield, New
Jersey; and Sao Joao del Rei, Brazil are subject to environmental laws and
regulations for which Metallurg has incurred environmental liabilities. These
liabilities are primarily related to the investigation and remediation of
contamination resulting from historic operations.

      Total environmental liabilities consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                      December 31,
                                                   -----------------
                                                     2004      2003
                                                   -------   -------
<S>                                                <C>       <C>
U.S.:
   SMC - Ohio ..................................   $ 8,020   $10,085
   SMC - New Jersey ............................    17,077    19,330
                                                   -------   -------
                                                    25,097    29,415
Foreign ........................................        38       121
                                                   -------   -------
   Total environmental liabilities .............    25,135    29,536
   Less: trust funds ...........................     3,995     3,865
                                                   -------   -------
Net environmental liabilities ..................    21,140    25,671
   Less: current portion .......................     1,938     2,993
                                                   -------   -------
      Environmental liabilities ................   $19,202   $22,678
                                                   =======   =======
</TABLE>

     SMC and Cyprus Foote Mineral Company ("Cyprus Foote"), the former owner of
the Cambridge site, entered into a consent order with the State of Ohio in
December 1996. SMC and Cyprus Foote agreed in the consent order to conduct
remediation and decommissioning activities at the Cambridge site. Additionally,
SMC and Cyprus Foote agreed to enhance, restore and preserve certain wetlands in
the vicinity of the Cambridge site. Pursuant to the consent order, SMC and
Cyprus Foote are jointly and severally liable to the State of Ohio in respect of
these obligations. However, SMC has agreed with Cyprus Foote that it shall
perform and be liable for the performance of these remedial obligations.
Therefore, SMC has accrued its best estimate of associated costs that it expects
to substantially disburse over the next 4 years.

     With respect to the financial assurance obligations to the State of Ohio,
Cyprus Foote has agreed to provide a substantial portion of the financial
assurance required by the State of Ohio. SMC, in addition to agreeing to provide
the balance thereof, has purchased an annuity contract which will provide for
future payments into the trust fund to cover certain of the estimated operation
and maintenance costs over approximately the next 100 years.

     Historic manufacturing processes at both Cambridge and Newfield have
resulted in on-site slag piles containing naturally occurring radioactivity. At
the Cambridge site, SMC plans to decommission and to cap the slag piles on-site.
In August 2002, SMC filed a decommissioning plan for its Newfield facility with
the U.S. Nuclear Regulatory Commission (the "NRC"). At the same time SMC
requested an amendment to the authorized use of the Newfield facility, as
permitted by the NRC, to "storage only pending decommissioning". Financial
assurance for implementation and ongoing maintenance of such decommissioning
plans is partially assured by cash funds held in trust, letters of credit and an
annuity contract.

     SMC entered into administrative consent orders with the New Jersey
Department of Environmental Protection under which SMC must conduct remediation
activities at the Newfield facility. These obligations include the closure of
wastewater lagoons, the decontamination of groundwater, soil remediation,
surface water and sediment clean up, wetlands restoration and related operation
and maintenance activities. SMC accrued its best estimate of the associated
costs with respect to remedial activities at the site, which it expects to
disburse over the next 15 years. At December 31, 2004, outstanding letters of
credit issued as financial assurances in favor of various environmental agencies
totaled $19,069,000. These letters of credit were issued under the MHR financing
agreement. See "Note 8. Borrowings".


                                       46





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

12.  Environmental Liabilities - (Continued)

     CIF has accrued environmental liabilities in the amounts of $38,000 and
$121,000 at December 31, 2004 and 2003, respectively, to cover reclamation costs
of closed mine sites.

     In 2002, SMC recognized environmental expense recoveries of $3,000,000 upon
settlement with an insurance company relating to coverage for certain
environmental claims stemming from the 1960's and forward. These claims relate
mostly to the historical costs of remedial activities at SMC's Newfield, New
Jersey site.

13.  Commitments and Contingencies

     In addition to environmental matters, which are discussed in Note 12,
Metallurg defends, from time to time, various claims and legal actions arising
in the normal course of business. Management believes, based on the advice of
counsel, that the outcome of such matters will not have a material adverse
effect on Metallurg's consolidated financial position, results of operations or
cash flows. There can be no assurance, however, that existing or future
litigation will not result in an adverse judgment against Metallurg that could
have a material adverse effect on Metallurg's future results of operations or
cash flows.

     At December 31, 2004, Metallurg Holdings has a note payable due August 31,
2007 in the amount of $1,859,000. Interest, at 20% per annum, and fees relating
to this note are paid-in-kind and added to the principal balance. Metallurg,
Inc. has guaranteed the repayment of this note, which, including paid-in-kind
interest and fees, will have a balance of $4,669,000 at August 31, 2007.
Metallurg, Inc. has not recorded a liability related to this guarantee.

14.  Leases

     Metallurg leases office space, facilities and equipment. The leases
generally provide that Metallurg pays the tax, insurance and maintenance
expenses related to the leased assets. At December 31, 2004, future minimum
lease payments required under non-cancelable operating leases having remaining
lease terms in excess of one year are as follows (in thousands):

<TABLE>
<CAPTION>
December 31,
------------
<S>              <C>
2005 .........   $  372
2006 .........      343
2007 .........      249
2008 .........      204
2009 .........       65
Thereafter ...       --
                 ------
   Total .....   $1,233
                 ======
</TABLE>

     Rent expense under operating leases was $878,000, $1,197,000 and $1,162,000
for the years ended December 31, 2004, 2003 and 2002, respectively.


                                       47





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

15.  Supplemental Guarantor Information

     In November 1997, Metallurg, Inc. issued $100 million principal amount of
its 11% Senior Notes due 2007. Under the terms of the Senior Notes, SMC,
Metallurg Holdings Corporation, Metallurg Services, Inc., Metallurg
International Resources, LLC and MIR (China), Inc. (collectively, the "Senior
Note Guarantors"), wholly-owned subsidiaries of Metallurg, Inc., have fully and
unconditionally guaranteed on a joint and several basis Metallurg, Inc.'s
obligations to pay principal, premium and interest relative to the Senior Notes.
Management has determined that separate, full financial statements of the Senior
Note Guarantors would not be material to potential investors and, accordingly,
such financial statements are not provided. Supplemental financial information
of the Guarantors is presented below.

                 Condensed Consolidating Statement of Operations
                          Year Ended December 31, 2004
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                      Combined        Combined
                                                                      Guarantor    Non-Guarantor
                                                  Metallurg, Inc.   Subsidiaries    Subsidiaries   Eliminations   Consolidated
                                                  ---------------   ------------   -------------   ------------   ------------
<S>                                                   <C>             <C>            <C>             <C>            <C>
Total revenue .................................                       $147,899       $258,158        $(53,946)      $352,111
                                                                      --------       --------        --------       --------
Operating costs and expenses:
   Cost of sales ..............................                        128,261        229,729        (53,359)        304,631
   Selling, general and administrative
      expenses ................................       $  7,318           9,903         17,447              --         34,668
   Restructuring charges, net .................             --              --            736              --            736
                                                      --------        --------       --------        --------       --------
      Total operating costs and expenses ......          7,318         138,164        247,912         (53,359)       340,035
                                                      --------        --------       --------        --------       --------
      Operating (loss) income .................         (7,318)          9,735         10,246            (587)        12,076
Other:
   Other (loss) income, net ...................           (446)             --            580              --            134
   Interest expense, net ......................        (11,047)            (81)        (3,979)             --        (15,107)
   Equity in earnings of subsidiaries .........         10,565           7,852          6,344         (24,761)            --
                                                      --------        --------       --------        --------       --------
      (Loss) income before income tax
         (benefit) provision, minority interest
         and discontinued operations ..........         (8,246)         17,506         13,191         (25,348)        (2,897)
Income tax (benefit) provision ................         (2,382)          3,479          1,022              --          2,119
                                                      --------        --------       --------        --------       --------
      (Loss) income before minority interest
         and discontinued operations ..........         (5,864)         14,027         12,169         (25,348)        (5,016)
Minority interest .............................             --              --            (54)             --            (54)
                                                      --------        --------       --------        --------       --------
      (Loss) income from continuing
         operations ...........................         (5,864)         14,027         12,115         (25,348)        (5,070)
Discontinued operations .......................            (30)         (3,577)         2,783              --           (824)
                                                      --------        --------       --------        --------       --------
      Net (loss) income .......................       $ (5,894)       $ 10,450       $ 14,898        $(25,348)      $ (5,894)
                                                      ========        ========       ========        ========       ========
</TABLE>


                                       48





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

15.  Supplemental Guarantor Information - (Continued)

           Condensed Consolidating Balance Sheet at December 31, 2004
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                 Combined        Combined
                                                  Metallurg,     Guarantor    Non-Guarantor
                                                     Inc.      Subsidiaries    Subsidiaries   Eliminations   Consolidated
                                                  ----------   ------------   -------------   ------------   ------------
<S>                                                <C>           <C>             <C>            <C>            <C>
ASSETS
Current Assets:
   Cash and cash equivalents ..................    $ 19,384      $   1,498       $  2,179                      $ 23,061
   Accounts receivable, net ...................      22,169         20,357         45,934       $ (42,436)       46,024
   Inventories ................................          --         31,708         31,611            (768)       62,551
   Prepaid expenses and other current assets...       2,372          5,850         11,095          (6,885)       12,432
                                                   --------      ---------       --------       ---------      --------
      Total current assets ....................      43,925         59,413         90,819         (50,089)      144,068
Investments - intergroup ......................      58,161         11,199         41,058        (110,418)           --
Property, plant and equipment, net ............         128         19,438         32,936              --        52,502
Other assets ..................................      12,635         39,885          9,732         (40,256)       21,996
                                                   --------      ---------       --------       ---------      --------
      Total ...................................    $114,849      $ 129,935       $174,545       $(200,763)     $218,566
                                                   ========      =========       ========       =========      ========

LIABILITIES AND SHAREHOLDER'S (DEFICIT)
   EQUITY
Current Liabilities:
   Short-term debt and current portion of
      long-term debt ..........................    $  1,000                      $ 10,870                      $ 11,870
   Accounts payable ...........................       4,939      $ 41,525          28,336       $ (42,436)       32,364
   Accrued expenses ...........................       3,151         4,479           5,368              --        12,998
   Other current liabilities ..................          --         8,785           1,883          (6,885)        3,783
                                                   --------      --------        --------       ---------      --------
      Total current liabilities ...............       9,090        54,789          46,457         (49,321)       61,015
                                                   --------      --------        --------       ---------      --------
Long-term Liabilities:
   Long-term debt .............................     122,792            --          18,792              --       141,584
   Accrued pension liabilities ................       5,118           684          18,721              --        24,523
   Environmental liabilities, net .............          --        19,202              --              --        19,202
   Other liabilities ..........................       8,300            --          33,997         (40,256)        2,041
                                                   --------      --------        --------       ---------      --------
      Total long-term liabilities .............     136,210        19,886          71,510         (40,256)      187,350
                                                   --------      --------        --------       ---------      --------
      Total liabilities .......................     145,300        74,675         117,967         (89,577)      248,365
                                                   --------      --------        --------       ---------      --------
Minority interest .............................          --            --             652              --           652
Shareholder's (Deficit) Equity:
   Common stock ...............................          50         1,217         109,133        (110,350)           50
   Due from parent company ....................      (1,494)           --              --              --        (1,494)
   Additional paid-in capital .................      45,619       127,457           7,076        (134,533)       45,619
   Accumulated other comprehensive loss .......     (16,968)      (13,883)        (25,064)         38,947       (16,968)
   Accumulated deficit ........................     (57,658)      (59,531)        (35,219)         94,750       (57,658)
                                                   --------      --------        --------       ---------      --------
      Total shareholder's (deficit) equity ....     (30,451)       55,260          55,926        (111,186)      (30,451)
                                                   --------      --------        --------       ---------      --------
      Total ...................................    $114,849      $129,935        $174,545       $(200,763)     $218,566
                                                   ========      ========        ========       =========      ========
</TABLE>


                                       49





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

15.  Supplemental Guarantor Information - (Continued)

                 Condensed Consolidating Statement of Cash Flows
                          Year Ended December 31, 2004
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                      Combined        Combined
                                                                      Guarantor    Non-Guarantor
                                                  Metallurg, Inc.   Subsidiaries    Subsidiaries   Consolidated
                                                  ---------------   ------------   -------------   ------------
<S>                                                  <C>              <C>             <C>            <C>
Cash Flows from Operating Activities ..........      $(16,146)        $ 3,816         $(4,859)       $(17,189)
                                                     --------         -------         -------        --------
Cash Flows from Investing Activities:
Additions to property, plant and equipment ....           (80)           (565)         (2,410)         (3,055)
Other, net ....................................            --              --           6,938           6,938
                                                     --------         -------         -------        --------
   Net cash (used in) provided by investing
      activities ..............................           (80)           (565)          4,528           3,883
                                                     --------         -------         -------        --------
Cash Flows from Financing Activities:
Intergroup (repayments) borrowings ............        (4,492)         13,477          (8,985)             --
Repayment (borrowings) of long-term debt ......        23,000              --          (2,709)         20,291
Net short-term borrowings .....................            --              --           2,399           2,399
Payment for deferred financing fees ...........        (3,068)         (1,000)           (448)         (4,516)
Intergroup dividends received (paid) ..........         8,000          (7,730)           (270)             --
Other, net ....................................         5,761          (7,245)          1,139            (345)
                                                     --------         -------         -------        --------
   Net cash provided by (used in)
      financing activities ....................        29,201          (2,498)         (8,874)         17,829
                                                     --------         -------         -------        --------
Effects of exchange rate changes on
   cash and cash equivalents ..................            --              --             300             300
                                                     --------         -------         -------        --------
Net increase (decrease) in cash and cash
   equivalents ................................        12,975             753          (8,905)          4,823
Cash and cash equivalents -
   beginning of period ........................         6,409             745          11,084          18,238
                                                     --------         -------         -------        --------
Cash and cash equivalents -
   end of period ..............................      $ 19,384         $ 1,498         $ 2,179        $ 23,061
                                                     ========         =======         =======        ========
</TABLE>


                                       50





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

15.  Supplemental Guarantor Information - (Continued)

                 Condensed Consolidating Statement of Operations
                          Year Ended December 31, 2003
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                   Combined       Combined
                                                                   Guarantor    Non-Guarantor
                                               Metallurg, Inc.   Subsidiaries    Subsidiaries   Eliminations   Consolidated
                                               ---------------   ------------   -------------   ------------   ------------
<S>                                               <C>              <C>            <C>             <C>            <C>
Total revenue ..............................                       $109,603       $213,115        $(39,369)      $283,349
                                                                   --------       --------        --------       --------
Operating costs and expenses:
   Cost of sales ...........................                        106,595        194,021         (39,246)       261,370
   Selling, general and administrative
      expenses .............................      $  4,199            8,219         18,227              --         30,645
   Restructuring charges, net ..............            --              120         10,775              --         10,895
                                                  --------         --------       --------        --------       --------
      Total operating costs and expenses ...         4,199          114,934        223,023         (39,246)       302,910
                                                  --------         --------       --------        --------       --------
     Operating loss ........................        (4,199)          (5,331)        (9,908)           (123)       (19,561)
Other:
   Other income, net .......................            --               --            222              --            222
   Interest (expense) income, net ..........       (10,336)           1,087         (3,829)             --        (13,078)
   Equity in losses of subsidiaries ........       (13,138)         (12,153)       (11,165)         36,456             --
                                                  --------         --------       --------        --------       --------
      Loss before income tax provision .....
      (benefit), minority interest and
      discontinued operations ..............       (27,673)         (16,397)       (24,680)         36,333        (32,417)
Income tax provision (benefit) .............         3,077           (3,089)          (255)             --           (267)
                                                  --------         --------       --------        --------       --------
   Loss before minority interest and
      discontinued operations ..............       (30,750)         (13,308)       (24,425)         36,333        (32,150)
Minority interest ..........................            --               --            (17)             --            (17)
                                                  --------         --------       --------        --------       --------
   Loss from continuing operations .........       (30,750)         (13,308)       (24,442)         36,333        (32,167)
Discontinued operations ....................            --               --          1,417              --          1,417
                                                  --------         --------       --------        --------       --------
   Net loss ................................      $(30,750)        $(13,308)      $(23,025)       $ 36,333       $(30,750)
                                                  ========         ========       ========        ========       ========
</TABLE>


                                       51





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

15.  Supplemental Guarantor Information - (Continued)

           Condensed Consolidating Balance Sheet at December 31, 2003
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                        Combined       Combined
                                                                        Guarantor    Non-Guarantor
                                                    Metallurg, Inc.   Subsidiaries    Subsidiaries   Eliminations   Consolidated
                                                    ---------------   ------------   -------------   ------------   ------------
<S>                                                    <C>              <C>            <C>            <C>             <C>
ASSETS
Current Assets:
   Cash and cash equivalents ....................      $  6,409         $    745       $ 11,084                       $ 18,238
   Accounts receivable, net .....................        32,573           18,721         34,024       $ (47,478)        37,840
   Inventories ..................................            --           21,344         23,294            (181)        44,457
   Prepaid expenses and other current assets ....         1,392            3,175          6,462          (3,042)         7,987
   Discontinued operations - current assets .....            --               --         14,738              --         14,738
                                                       --------         --------       --------       ---------       --------
      Total current assets ......................        40,374           43,985         89,602         (50,701)       123,260
Investments - intergroup ........................        52,566             (975)        36,886         (88,477)            --
Property, plant and equipment, net ..............           339           21,496         32,489              --         54,324
Other assets ....................................        10,833           64,875          9,287         (65,074)        19,921
Discontinued operations - noncurrent assets .....            --               --          1,948              --          1,948
                                                       --------         --------       --------       ---------       --------
      Total .....................................      $104,112         $129,381       $170,212       $(204,252)      $199,453
                                                       ========         ========       ========       =========       ========

LIABILITIES AND SHAREHOLDER'S (DEFICIT)
   EQUITY
Current Liabilities:
   Short-term debt and current portion of
      long-term debt ............................                                      $  8,315                       $  8,315
   Accounts payable .............................      $  2,971         $ 46,908         23,355       $ (47,473)        25,761
   Accrued expenses .............................         1,789            6,504          4,937              --         13,230
   Other current liabilities ....................            --            2,949            432          (3,042)           339
   Discontinued operations-current
      liabilities ...............................            --               --          9,843              --          9,843
                                                       --------         --------       --------       ---------       --------
      Total current liabilities .................         4,760           56,361         46,882         (50,515)        57,488
                                                       --------         --------       --------       ---------       --------
Long-term Liabilities:
   Long-term debt ...............................       100,000               --         20,022              --        120,022
   Accrued pension liabilities ..................         5,628              662         23,253              --         29,543
   Environmental liabilities, net ...............            --           22,578            100              --         22,678
   Other liabilities ............................        25,476               --         40,603         (65,079)         1,000
   Discontinued operations - noncurrent
      liabilities ...............................            --               --            218              --            218
                                                       --------         --------       --------       ---------       --------
      Total long-term liabilities ...............       131,104           23,240         84,196         (65,079)       173,461
                                                       --------         --------       --------       ---------       --------
      Total liabilities .........................       135,864           79,601        131,078        (115,594)       230,949
                                                       --------         --------       --------       ---------       --------
Minority interest ...............................            --               --            256              --            256

Shareholder's (Deficit) Equity:
   Common stock .................................            50            1,217        109,139        (110,356)            50
   Due from parent company ......................       (21,715)              --             --              --        (21,715)
   Additional paid-in capital ...................        67,324          127,457          7,076        (134,533)        67,324
   Accumulated other comprehensive loss .........       (25,647)         (22,158)       (41,047)         63,205        (25,647)
   Accumulated deficit ..........................       (51,764)         (56,736)       (36,290)         93,026        (51,764)
                                                       --------         --------       --------       ---------       --------
      Total shareholder's (deficit) equity ......       (31,752)          49,780         38,878         (88,658)       (31,752)
                                                       --------         --------       --------       ---------       --------
      Total .....................................      $104,112         $129,381       $170,212       $(204,252)      $199,453
                                                       ========         ========       ========       =========       ========
</TABLE>


                                       52





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

15.  Supplemental Guarantor Information - (Continued)

                 Condensed Consolidating Statement of Cash Flows
                          Year Ended December 31, 2003
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                       Combined        Combined
                                                                       Guarantor    Non-Guarantor
                                                   Metallurg, Inc.   Subsidiaries    Subsidiaries   Consolidated
                                                   ---------------   ------------   -------------   ------------
<S>                                                   <C>              <C>             <C>            <C>
Cash Flows from Operating Activities ...........      $(15,137)        $ (5,217)       $ 3,230        $(17,124)
                                                      --------         --------        -------        --------

Cash Flows from Investing Activities:
Additions to property, plant and equipment .....           (44)            (731)        (2,114)         (2,889)
Repayment of loan to former subsidiary .........         1,000               --             --           1,000
Other, net .....................................           151               --           (194)            (43)
                                                      --------         --------        -------        --------
   Net cash  provided by (used in) investing
      activities ...............................         1,107             (731)        (2,308)         (1,932)
                                                      --------         --------        -------        --------

Cash Flows from Financing Activities:
Intergroup (repayments) borrowings .............        (7,413)           9,937         (2,524)             --
Repayment of long-term debt ....................            --               --           (114)           (114)
Net short-term borrowings ......................            --               --          1,295           1,295
Capital contributions ..........................           450            9,550             --          10,000
Intergroup dividends received (paid) ...........        14,100          (13,848)          (252)             --
Other, net .....................................            --               --          1,185           1,185
                                                      --------         --------        -------        --------
   Net cash provided by (used in)
      financing activities .....................         7,137            5,639           (410)         12,366
                                                      --------         --------        -------        --------
Effects of exchange rate changes on
   cash and cash equivalents ...................            --               --            677             677
                                                      --------         --------        -------        --------
Net (decrease) increase in cash and cash
   equivalents .................................        (6,893)            (309)         1,189          (6,013)
Cash and cash equivalents -
   beginning of period .........................        13,302            1,054          9,895          24,251
                                                      --------         --------        -------        --------
Cash and cash equivalents -
   end of period ...............................      $  6,409         $    745        $11,084        $ 18,238
                                                      ========         ========        =======        ========
</TABLE>


                                       53





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

15.  Supplemental Guarantor Information - (Continued)

                 Condensed Consolidating Statement of Operations
                          Year Ended December 31, 2002
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                     Combined        Combined
                                                                     Guarantor    Non-Guarantor
                                                 Metallurg, Inc.   Subsidiaries    Subsidiaries   Eliminations   Consolidated
                                                 ---------------   ------------   -------------   ------------   ------------
<S>                                                 <C>              <C>            <C>             <C>            <C>
Total revenue ................................                       $109,833       $207,238        $(39,290)      $277,781
                                                                     --------       --------        --------       --------
Operating costs and expenses:
   Cost of sales .............................                        106,992        188,626         (40,903)       254,715
   Selling, general and administrative
      expenses ...............................      $  5,260           10,141         15,072              --         30,473
   Environmental expense recoveries ..........            --           (3,000)            --              --         (3,000)
   Restructuring charges, net ................         1,989              453          1,068              --          3,510
                                                    --------         --------       --------        --------       --------
      Total operating costs and expenses .....         7,249          114,586        204,766         (40,903)       285,698
                                                    --------         --------       --------        --------       --------
      Operating (loss) income ................        (7,249)          (4,753)         2,472           1,613         (7,917)
Other:
   Other (expense) income, net ...............            --              (17)            91              --             74
   Interest (expense) income, net ............       (10,850)           1,644         (4,167)             --        (13,373)
   Equity in (losses) earnings of
      subsidiaries ...........................        (3,673)           1,000            321           2,352             --
                                                    --------         --------       --------        --------       --------
      Loss before income tax (benefit)
         provision, minority interest and
         discontinued operations .............       (21,772)          (2,126)        (1,283)          3,965        (21,216)
Income tax (benefit) provision ...............        (1,958)           1,864            929              --            835
                                                    --------         --------       --------        --------       --------
      Loss before minority interest and
         discontinued operations .............       (19,814)          (3,990)        (2,212)          3,965        (22,051)
Minority interest ............................            --               --            (84)             --            (84)
                                                    --------         --------       --------        --------       --------
      Loss from continuing operations ........       (19,814)          (3,990)        (2,296)          3,965        (22,135)
Discontinued operations ......................            --               --          2,321              --          2,321
                                                    --------         --------       --------        --------       --------
      Net (loss) income ......................      $(19,814)        $ (3,990)      $     25        $  3,965       $(19,814)
                                                    ========         ========       ========        ========       ========
</TABLE>


                                       54





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

15.  Supplemental Guarantor Information - (Continued)

                 Condensed Consolidating Statement of Cash Flows
                          Year Ended December 31, 2002
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                     Combined        Combined
                                                                     Guarantor    Non-Guarantor
                                                 Metallurg, Inc.   Subsidiaries    Subsidiaries   Consolidated
                                                 ---------------   ------------   -------------   ------------
<S>                                                 <C>              <C>             <C>            <C>
Cash Flows from Operating Activities .........      $(15,260)        $10,039         $12,646        $  7,425
                                                    --------         -------         -------        --------

Cash Flows from Investing Activities:
Additions to property, plant and equipment ...           (16)         (5,369)         (5,234)        (10,619)
(Loan to) repayment from former subsidiary ...        (7,000)          4,000              --          (3,000)
Other, net ...................................            63               2            (440)           (375)
                                                    --------         -------         -------        --------
   Net cash used in investing activities .....        (6,953)         (1,367)         (5,674)        (13,994)
                                                    --------         -------         -------        --------

Cash Flows from Financing Activities:
Intergroup borrowings (repayments) ...........         6,430          (5,891)           (539)             --
Repayment of long-term debt ..................            --              --             (28)            (28)
Net short-term borrowings ....................            --              --           1,918           1,918
Capital contributions ........................           163           6,954              --           7,117
Intergroup dividends received (paid) .........        10,401          (9,954)           (447)             --
Other, net ...................................            --              --          (1,510)         (1,510)
                                                    --------         -------         -------        --------
   Net cash provided by (used in)
      financing activities ...................        16,994          (8,891)           (606)          7,497
                                                    --------         -------         -------        --------

Effects of exchange rate changes on
   cash and cash equivalents .................            --              --             675             675
                                                    --------         -------         -------        --------

Net (decrease) increase in cash and cash
   equivalents ...............................        (5,219)           (219)          7,041           1,603

Cash and cash equivalents -
   beginning of period .......................        18,521           1,273           2,854          22,648
                                                    --------         -------         -------        --------

Cash and cash equivalents -
   end of period .............................      $ 13,302         $ 1,054         $ 9,895        $ 24,251
                                                    ========         =======         =======        ========
</TABLE>


                                       55





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

16.  Related Party Transactions

     On August 12, 2004, Metallurg, Inc. sold all of its previously acquired
Senior Discount Notes of Metallurg Holdings and related accrued interest to
Metallurg Holdings for $10,000. Metallurg, Inc. had recorded these items as due
from parent company in its consolidated balance sheet. For accounting purposes
only, the difference between the amount recorded as due from parent company and
the amount received from Metallurg Holdings was recorded as a deemed dividend to
Metallurg Holdings. Due to the retained deficit in Metallurg, this dividend was
recorded as a reduction in additional paid-in-capital.

     Accounts receivable and payable balances between Metallurg and affiliates
of Safeguard International are shown as related party balances on Metallurg's
Consolidated Balance Sheets.

     A note receivable from the German subsidiary sold in 2002 is shown as a
related party balance on Metallurg's Consolidated Balance Sheet. This note is
subordinated and accrues interest at a rate of 10% per annum. Principal and
interest payments are due from 2006 through 2010 and may be repaid prior to
maturity under certain circumstances.

     Metallurg has a note payable to related parties as described in Note 8.

     Through December 2003, Metallurg, Inc. charged its parent company,
Metallurg Holdings, $12,000 per quarter for administrative services performed.
Metallurg, Inc. also charges Metallurg Holdings for invoices paid on their
behalf. The outstanding balance due from Metallurg Holdings at December 31, 2004
was $80,000.

     Effective July 1, 2000, an Advisory Agreement between Safeguard
International Management, L.L.C. ("Safeguard LLC") and Metallurg, Inc. was
amended, whereby Metallurg, Inc. was to pay $15,000 per month to Safeguard LLC
for certain advisory and other services. Under this Agreement, Metallurg paid
$150,000 in 2002. Effective October 31, 2002, this advisory agreement was
terminated and two members of Safeguard LLC, Dr. Heinz C. Schimmelbusch and Mr.
Arthur R. Spector, were employed by Metallurg, Inc. on November 11, 2002 as
Chief Executive Officer and Executive Vice Chairman, respectively. See "Item 10.
Directors and Executive Officers of Metallurg, Inc.".

     Dr. Schimmelbusch and Mr. Spector are managing directors of Safeguard LLC,
which is the management company for Safeguard International, the majority owner
of Metallurg Holdings, and in these positions receive compensation from this
entity.

17.  Subsequent Events

     On January 14, 2005, Metallurg, Inc. loaned Metallurg Holdings, its parent
company, $744,000 in order for Metallurg Holdings to make the interest payment
on its Senior Discount Notes to non-related parties. This loan will be
classified as Due from Parent in Metallurg, Inc.'s shareholder's deficit.


                                       56





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

                        SELECTED QUARTERLY FINANCIAL DATA
                                   (Unaudited)
                                 (In thousands)

<TABLE>
<CAPTION>
                                   First     Second    Third     Fourth
                                  Quarter   Quarter   Quarter   Quarter     Year
                                  -------   -------   -------   -------   --------
<S>                               <C>       <C>       <C>       <C>       <C>
Year Ended December 31, 2004
Sales..........................   $75,419   $88,041   $88,848   $99,455   $351,763
Gross profit...................     7,316    11,408    12,469    16,287     47,480
Net (loss) income (a)..........    (3,499)   (1,455)   (2,130)    1,190     (5,894)
</TABLE>


<TABLE>
<CAPTION>
                                   First     Second    Third     Fourth
                                  Quarter   Quarter   Quarter   Quarter     Year
                                  -------   -------   -------   -------   --------
<S>                               <C>       <C>       <C>       <C>       <C>
Year Ended December 31, 2003
Sales..........................   $69,991   $70,970   $68,375   $73,466   $282,802
Gross profit...................     7,505     6,500     4,271     3,703     21,979
Net loss (b)...................    (3,049)   (4,004)   (7,813)  (15,884)   (30,750)
</TABLE>

----------
(a)  Includes restructuring charges of $97, $500, $129 and $10 in each of the
     quarters, respectively.

(b)  Includes restructuring and asset impairment charges of $2,659 and $8,236 in
     the third and fourth quarters, respectively.


                                       57





<Page>


                  METALLURG, INC. AND CONSOLIDATED SUBSIDIARIES

          SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                       Deductions
                                                                ------------------------
                                      Balance at   Charged to   Uncollectable              Balance at
                                      Beginning    Costs and       Accounts                    End
                                      of Period     Expenses     Written Off    Other(a)    of Period
                                      ----------   ----------   -------------   --------   ----------
<S>                                     <C>           <C>           <C>           <C>        <C>
Year Ended December 31, 2002
   Accounts receivable allowance
      for doubtful accounts........     $1,205        $813          $(515)        $ 48       $1,551

Year Ended December 31, 2003
   Accounts receivable allowance
      for doubtful accounts........     $1,551        $631          $(131)        $ 61       $2,112

Year Ended December 31, 2004
   Accounts receivable allowance
      for doubtful accounts........     $2,112        $289          $(588)        $154       $1,967
</TABLE>

----------
(a)  Foreign currency translation adjustments.


                                       58





<Page>


Item 9. Changes in and Disagreements with Accountants on Accounting and
     Financial Disclosure.

     None.

Item 9a. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

     Metallurg's Chief Executive Officer and Chief Financial Officer carried out
an evaluation of the effectiveness of the design and operation of Metallurg's
disclosure controls and procedures. Based upon their evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that, as of the end of
the period covered by this report, Metallurg's disclosure controls and
procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934 (the "Exchange Act")) were adequate and effective and
designed to ensure that material information relating to Metallurg (including
its consolidated subsidiaries) required to be disclosed by Metallurg in the
reports it files under the Exchange Act is recorded, processed, summarized and
reported within the required time periods.

Changes in Internal Control over Financial Reporting

     In connection with the evaluation by Metallurg's Chief Executive Officer
and Chief Financial Officer of changes in internal control over financial
reporting that occurred during Metallurg's last fiscal quarter, no change in
Metallurg's internal control over financial reporting was identified that has
materially affected, or is reasonably likely to materially affect, Metallurg's
internal control over financial reporting.

                                    PART III

Item 10. Directors and Executive Officers of Metallurg, Inc.

     The following table sets forth certain information with respect to the
individuals who are the directors and executive officers of Metallurg, Inc.:

<TABLE>
<CAPTION>
Name                        Age   Position
----                        ---   --------
<S>                          <C>  <C>
Heinz C. Schimmelbusch...    60   Chairman of the Board, Director and Chief Executive Officer
Arthur R. Spector........    64   Vice Chairman of the Board, Director and Executive Vice Chairman
Eric E. Jackson..........    52   President and Chief Operating Officer
Barry C. Nuss............    51   Senior Vice President and Chief Financial Officer
Michael J. Emmi..........    63   Director
Nils A. Kindwall.........    81   Director
Samuel A. Plum...........    60   Director
Michael D. Winfield......    66   Director
Charles H. Entrekin......    56   Director, LSM
</TABLE>

     Each director of Metallurg, Inc. holds office until the next annual meeting
of the stockholder of Metallurg, Inc. or until his successor has been elected
and qualified. Officers of Metallurg, Inc. are selected by the Board of
Directors and serve at the discretion of the Board of Directors.

     Heinz C. Schimmelbusch - Dr. Heinz C. Schimmelbusch was appointed Chief
Executive Officer of Metallurg, Inc. in November 2002. He has been Chairman of
the Board and a Director of Metallurg, Inc., as well as President, Chief
Executive Officer and a Director of Metallurg Holdings, Inc. (Metallurg, Inc.'s
parent company), since July 1998. He is a Managing Director of the general
partner, and founder, of Safeguard International Fund, L.P., a private equity
fund investing in North America and Europe; and Chairman and CEO of Allied
Resource Corporation, a global technology and engineering group, both located in
Wayne, Pennsylvania. He is also Chairman and CEO of Timminco Limited, Toronto,
Canada. He serves as Chairman of the Board of Directors of the following
companies: In the U.S. - Puralube, Inc. in Wayne, Pennsylvania; In Germany - ALD
Vacuum Technologies AG in Hanau; Pfalz-Flugzengwerke AG in Speyer; and Sudamin
Holdings S.A. in Brussels. He is also a Director of Millstream II Acquisition
Corporation. He is a member of the Board of Directors of MMC Norilsk Nickel,
Moscow, Russia. Dr. Schimmelbusch received his graduate degree (with
distinction) and his doctorate (magna cum laude) from the University of
Tubingen, Germany.

                                       59





<Page>


     Arthur R. Spector - Mr. Spector was elected Vice Chairman of the Board and
as Executive Vice Chairman of Metallurg, Inc. in November 2002. He has been a
Director of Metallurg, Inc. and Metallurg Holdings, Inc. since July 1998 and has
been Executive Vice President of Metallurg Holdings, Inc. since July 1998 and
Treasurer since August 2000. He is a Managing Director of the general partner
and of the management company of Safeguard International Fund, L.P. From January
1997 to March 1998, Mr. Spector served as Managing Director of TL Ventures LLC,
a venture capital company. He is also President, Chief Executive Officer and a
Director of Millstream II Acquisition Corporation. Mr. Spector has also served
as Chairman of various public companies, including Casino & Credit Services,
Inc., Abraham Lincoln Federal Savings Bank and State National Bank of Maryland.
Mr. Spector serves as a Director of Docucorp International, a document
automation company and NationsHealth, Inc., a healthcare services company. Mr.
Spector holds a B.S. degree in economics from the Wharton School of the
University of Pennsylvania and a J.D. from the University of Pennsylvania Law
School.

     Eric E. Jackson - Mr. Jackson was appointed President and Chief Operating
Officer of Metallurg, Inc. in November 2002 after having served as Senior Vice
President of Metallurg, Inc. since August 1998. He also serves as an officer and
director of certain subsidiaries of Metallurg, Inc. Mr. Jackson was Senior Vice
President and then President of Shieldalloy from September 1996 and retains the
position of President currently. From 1993 to 1995, he was Assistant Director at
Phibro, a division of Salomon, Inc., where he directed trading and distribution
operations. Prior thereto, he was a Vice President at Louis Dreyfus Corporation
from 1989 to 1993, where he managed trading and soft physical commodities
operations. From 1979 to 1989, Mr. Jackson served in various capacities at
Cargill Incorporated in Canada and the United States. Mr. Jackson received a
B.S. degree in economics and an M.B.A. from the University of Saskatchewan.

     Barry C. Nuss - Mr. Nuss joined Metallurg, Inc. as Financial Controller in
1983, was appointed Vice President, Finance of Shieldalloy in 1988, then became
Vice President, Finance and Chief Financial Officer of Metallurg, Inc. in 1994,
and assumed his current position as Senior Vice President and Chief Financial
Officer in November 2002. He also serves as an officer and director of various
subsidiaries of Metallurg, Inc. He was previously employed as an auditor at
Deloitte Haskins & Sells (now known as Deloitte & Touche LLP) from 1976 to 1981
and as a Financial Analyst at Cabot Mineral Resources from 1981 to 1983. Mr.
Nuss is a Certified Public Accountant and has a B.S. degree in accounting from
Fairleigh Dickinson University.

     Charles H. Entrekin - Dr. Entrekin served as Managing Director of LSM from
June 2003 to December 2004 and continues to serve as a director on LSM's Board
of Directors. He is currently Senior Advisor for Safeguard International Fund,
L.P., and Executive Vice President of Timminco Limited. Prior to joining LSM, he
worked for Titanium Metals Corporation, as Executive Vice President, Commercial
from 2000 to 2002 and as President, North American Operations from 1999 to 2000.
From 1997 to 1999, Dr. Entrekin was President of Titanium Hearth Technologies.
Dr. Entrekin has a B.S. degree in metallurgy and materials science from Lehigh
University, an M.B.A. from the University of Delaware and an M.S. and Ph.D.
degrees in materials engineering from Drexel University.

     Michael J. Emmi - Mr. Emmi was elected a Director of Metallurg, Inc. in
February 2001. In April 2002, Mr. Emmi founded and became Chief Executive
Officer of IPR International, a provider of data backup and recovery services.
He retired as Chairman and Chief Executive Officer of Systems & Computer
Technology Corp. (SCT), a provider of industry-focused technology solutions, in
January 2002. Mr. Emmi joined SCT from General Electric in May 1985, after 18
years in the information services industry. He is a current board member of
Education Management Corporation, CDI Corporation and Eastern Technology
Council. Mr. Emmi has a B.S. degree in business management from the State
University of New York, Albany.


                                       60





<Page>


     Nils A. Kindwall - Mr. Kindwall was elected a Director of Metallurg, Inc.
in August 1998. He is the retired Vice Chairman of Freeport McMoRan, Inc. At
Freeport, he was one of the founders of Freeport Indonesia, a producer of copper
and gold. He has been involved in the financing of varied projects within the
mining industry. He is also a former member of Chemical Bank's Advisory Board
and a former Director of Inmet Mining Corporation, Northfield Minerals and John
Wiley & Sons (publishers). He is currently a Director of Allied Resource
Corporation. Mr. Kindwall received his B.A. from Princeton University and an
M.B.A. from the Columbia University Graduate School of Business.

     Samuel A. Plum - Mr. Plum was elected to serve as a Director of Metallurg,
Inc. in November 1998 and as a Director of Metallurg Holdings in October 1998.
He has been a Managing General Partner of the general partner of SCP Private
Equity Partners, L.P. since its commencement in August 1996 and was an employee
of Safeguard Scientifics, Inc. from 1993 to 1996. From February 1989 to January
1993, Mr. Plum served as President of Charterhouse, Inc. and Charterhouse North
American Securities, Inc., the U.S. investment banking and broker-dealer
divisions of Charterhouse PLC, a merchant bank located in the U.K. From 1973 to
1989, he served in various capacities, including Managing Director and partner,
at the investment banking divisions of Paine Webber Inc. and Blyth Eastman
Dillon & Co., Inc., respectively. Mr. Plum is also a Director of Mobility
Technologies, Inc., PacWest Telecomm, Inc., Index Stock Photography, Inc.,
Pentech Financial Services, Inc. and the Philadelphia Zoological Society. Past
directorships include Tishman Holdings Corporation, Icon CMT Corp., Vortex Sound
Communications, Inc., Quaker Fabrics Corporation and the National Audubon
Society, the latter two as Chairman. Mr. Plum holds a B.A. degree in history
from Harvard University and an M.B.A. degree from the Harvard Graduate School of
Business Administration.

     Michael D. Winfield - Michael D. Winfield was elected a Director of
Metallurg, Inc. on November 9, 2001. He began his career with UOP LLC, a leading
international supplier of technology, products and services to the oil refining,
petrochemical and gas processing industries, in 1962. He retired as President
and Chief Executive Officer of UOP in 2001 and continues to serve on its Board
of Managers and as a Senior Advisor following his retirement. He is Chairman of
Landauer Corp., a radiation dosimetry measurement and services company. He has
professional affiliations with a number of industry and international trade
organizations. Mr. Winfield earned a B.S. in chemical engineering from Ohio
State University, where he is a Distinguished Alumnus and a member of the
College of Engineering's Advisory Committee, and an M.B.A. from the University
of Chicago.

     The Board of Directors has a compensation committee and an audit committee,
on which Dr. Schimmelbusch, Mr. Spector and Mr. Winfield; and Messrs. Spector,
Kindwall and Plum; respectively, serve.

Senior Financial Officer Code of Ethics

     Metallurg has a written Code of Business Conduct (the "Code") that applies
to all of our directors, officers and employees (including our Chief Executive
Officer, Chief Financial Officer, Controller and persons performing similar
functions) and has posted the Code on Metallurg's website. If Metallurg changes
the Code in any material respect or waives any provision of the Code for the
Chief Executive Officer, Chief Financial Officer and Controller, Metallurg
intends to provide the public with notice of any such change or waiver by
publishing an appropriate description of such event on its corporate website at
www.metallurg.com. Metallurg does not currently expect to make any such waivers.

Audit Committee Financial Expert

     The Board of Directors of Metallurg, Inc. has determined that each of Mr.
Spector, Chairman of the Audit Committee, and Audit Committee members Mr.
Kindwall and Mr. Plum, is an audit committee financial expert as defined by Item
401(h) of Regulation S-K of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Messrs. Kindwall and Plum are also independent within the
meaning of Item 7(d)(3)(iv) of Schedule 14A of the Exchange Act.


                                       61





<Page>


Item 11. Executive Compensation.

     The following table sets forth the compensation earned by Metallurg, Inc.'s
Chief Executive Officers and the four other most highly compensated executive
officers (collectively, the "Named Officers") during the calendar years 2002,
2003 and 2004, for services rendered in all capacities to Metallurg, Inc. during
each of those periods. The compensation information is presented on a calendar
year basis.

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                                            Long-Term Compensation
                                                                          -------------------------
                                                    Annual Compensation   Securities
                                                    -------------------   Underlying     All Other
                                                      Salary     Bonus      Options    Compensation
Name and Principal Position                  Year      ($)      ($)(b)        (#)           ($)
---------------------------                  ----   ---------   -------   ----------   ------------
<S>                                          <C>    <C>         <C>           <C>        <C>
Heinz C. Schimmelbusch ...................   2004   525,000     498,750       --         2,376(c)
   Chairman of the Board, Director and       2003   525,000          --       --         1,548
   Chief Executive Officer                   2002    74,038(a)       --       --            --

Arthur R. Spector ........................   2004   475,000     451,250       --         2,376(c)
   Vice Chairman of the Board, Director      2003   475,000          --       --         2,376
   and Executive Vice Chairman               2002    66,987(a)       --       --            --

Eric E. Jackson...........................   2004   360,000     342,000       --         7,328(c)
   President and Chief Operating             2003   360,000          --       --         6,828
   Officer                                   2002   323,000     120,000       --         6,040

Barry C. Nuss.............................   2004   300,000     285,000       --         7,328(c)
   Senior Vice President and Chief           2003   300,000          --       --         6,828
   Financial Officer                         2002   266,000     100,000       --         6,040

Charles H. Entrekin.......................   2004   250,000     179,600       --         8,048(c)
   Managing Director, LSM                    2003   145,838(d)       --       --         6,483
</TABLE>

----------
(a)  Dr. Schimmelbusch and Mr. Spector were elected to their positions as Chief
     Executive Officer and Executive Vice Chairman, respectively, effective
     November 8, 2002.

(b)  Bonuses with respect to 2002 were reported above on that line, but were
     paid in 2003. No bonuses were accrued with respect to 2003. Bonuses with
     respect to 2004 were reported above on that line, but were paid in 2005.

(c)  These amounts consist of (i) matching contributions by Metallurg under its
     401(k) Plan ($6,500, paid in 2005) with respect to Mr. Jackson, Mr. Nuss
     and Dr. Entrekin; plus (ii) term life insurance premiums of $2,376, $2,376,
     $828, $828 and $1,548 with respect to Dr. Schimmelbusch, Mr. Spector, Mr.
     Jackson, Mr. Nuss and Dr. Entrekin, respectively.

(d)  Dr. Entrekin was appointed to his position effective June 1, 2003 at an
     annual base salary of $250,000.

Option Grants In the Last Fiscal Year

     There were no grants of options made during fiscal 2004 to the Named
Officers.


                                       62





<Page>


Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values

     The following table provides information on the number of stock options
held by the Named Officers at fiscal year-end. Values of unexercised outstanding
options are not provided since Metallurg, Inc.'s equity securities are not
traded. No options were exercised in 2004.

<TABLE>
<CAPTION>
                                Number of Securities
                               Underlying Unexercised
                                     Options at
                                 December 31, 2004
Named Officer                Exercisable/Unexercisable
-------------                -------------------------
<S>                                  <C>
Heinz C. Schimmelbusch ...           25,000/--
Arthur R. Spector ........           15,000/--
Eric E. Jackson...........           35,000/--
Barry C. Nuss.............           25,000/--
Charles H. Entrekin.......               --
</TABLE>

Stock Compensation Plans

     On November 20, 1998, the Board of Directors of Metallurg, Inc. (the
"Board") adopted the 1998 Equity Compensation Plan ("ECP") to provide (i)
designated employees of Metallurg, Inc. and its subsidiaries, (ii) certain
advisors who perform services for Metallurg, and (iii) non-employee members of
the Board with the opportunity to receive grants of incentive stock options,
non-qualified stock options, stock appreciation rights, restricted stock and
performance units. Metallurg believes that the ECP will encourage the
participants to contribute materially to the growth of Metallurg and will align
the economic interests of the participants with those of its shareholder. As of
December 31, 2004, the number of authorized shares of common stock of Metallurg
("Company Stock") was 10,000,000 shares, of which 5,000,000 are outstanding.
Subject to certain adjustments specified in the ECP, the aggregate number of
shares of Company Stock that may be issued or transferred under the ECP is
500,000 shares.

     Pursuant to the ECP, between 1998 and December 31, 2004, the Board has
awarded aggregate options (net of cancellations and forfeitures) to purchase up
to 195,000 shares of Company Stock at an exercise price of $30.00 per share.
Each member of the Board received options to purchase 15,000 shares, except that
Dr. Schimmelbusch received options to purchase 25,000 shares. Messrs. Jackson
and Nuss received stock options in the amounts of 35,000 and 25,000,
respectively. The options have a term of 10 years and vest as follows: 20% on
the date of the grant and 20% on each of the first four anniversaries of the
date of grant. During 2004, an aggregate of 20,000 options terminated without
exercise and became available again for grant under the ECP.

Pension Plan

     The Pension Plan of Metallurg, Inc., effective as of January 1, 1989, as
amended (the "Pension Plan"), covers substantially all of Metallurg, Inc. and
Shieldalloy's U.S. salaried employees. The Pension Plan is maintained as a
tax-qualified defined benefit plan, which covers most officers and salaried
employees on a non-contributory basis. Such employees generally become eligible
to receive a vested retirement benefit under such plan after completion of five
years of service. Benefits under the Pension Plan are generally based upon the
number of years of service credit, up to 30 years, the final average
compensation (base salary only) of each individual employee, and a percentage of
such employee's eligible earnings. Final average compensation is calculated
using the highest 60 consecutive calendar months of compensation during the last
120 months prior to the date of retirement or termination of employment. Normal
retirement is age 65.


                                       63





<Page>


     The following table shows the estimated annual retirement benefits payable
at age 65 under the Pension Plan assuming current regulatory limitations on
covered compensation to participating employees, including the Named Officers,
in the remuneration and years of service classifications indicated. Metallurg,
Inc. does not currently have a supplemental executive retirement plan.

<TABLE>
<CAPTION>
                                                  Years of Service
                                    -------------------------------------------
Remuneration                          10       15       20       25        30
------------                        ------   ------   ------   ------   -------
<S>                                 <C>      <C>      <C>      <C>      <C>
$100,000 ........................   15,992   23,987   31,983   39,979    47,985
$125,000 ........................   20,742   31,112   41,483   51,854    62,225
$150,000 ........................   25,492   38,237   50,983   63,729    76,475
$175,000 ........................   30,242   45,362   60,483   75,604    90,725
$200,000 ........................   34,992   52,487   69,983   87,479   104,975
</TABLE>

     The respective years of service credited for pension purposes as of
December 31, 2004 and the estimated years of service at age 65 for each of the
Named Officers are as follows:

<TABLE>
<CAPTION>
                                         Completed             Completed
                                    Years of Service at   Years of Service at
Named Officer                        December 31, 2004     Normal Retirement
-------------                       -------------------   -------------------
<S>                                          <C>                   <C>
Heinz C. Schimmelbusch ..........             2                     7
Arthur R. Spector ...............             2                     3
Eric E. Jackson .................             8                    20
Barry C. Nuss ...................            21                    30
Charles H. Entrekin .............             1                    10
</TABLE>

Compensation of Directors

     Non-executive directors of Metallurg, Inc. receive an annual retainer of
$10,000 and a fee of $1,000 for each Board meeting attended. The Board meets
each quarter and may act by unanimous written consent or call special meetings
between regularly scheduled meetings, as necessary. The Chairman of the
Compensation Committee and the Chairman of the Audit Committee each receives an
additional $1,000 for each committee meeting attended. Additional compensation
may be paid to directors in connection with special assignments, as determined
by the Compensation Committee. In November 1998, each non-executive director was
awarded 15,000 stock options, except for the Chairman of the Board, Dr.
Schimmelbusch, who was awarded 25,000 stock options. During 2001, Messrs. Emmi
and Winfield, upon being elected Directors, were each awarded 15,000 stock
options. The options have ten year terms, vest 20% on date of grant and 20% on
each of the first four anniversaries of the date of grant, and have an exercise
price of $30.00 per share.

Executive Employment Agreements and Termination of Employment Arrangements

     Metallurg, Inc. entered into employment agreements with the following Named
Officers (individually, an "Executive"): Heinz C. Schimmelbusch and Arthur R.
Spector, effective November 11, 2002; Eric E. Jackson and Barry C. Nuss,
effective August 10, 1998; and Charles H. Entrekin effective June 1, 2003. Each
agreement (with the exception of the agreement with Dr. Entrekin, which has an
initial term of one year and was terminated by mutual agreement effective
December 31, 2004) is for an initial term of two years and automatically renews
for successive one-year periods unless the Executive or Metallurg notifies the
other in writing at least ninety days prior to the next scheduled expiration
date that the term will not be extended. Each Executive has agreed not to
compete against Metallurg during the employment term and for a period of twelve
to eighteen months thereafter, depending on certain circumstances.

     Each Executive receives an annual base salary equal to his annual base
salary in effect on the date of the agreement, which may be increased by the
Board of Directors. Each Executive is entitled to participate in the employee
benefit plans generally made available to Metallurg's senior-level executives.
Pursuant to the executive employment agreements, the base salaries set forth
therein (subject to annual increases) are $525,000 for Dr. Schimmelbusch,
$475,000 for Mr. Spector, $280,000 for Mr. Jackson, $240,000 for Mr. Nuss and
$250,000 for Dr. Entrekin.


                                       64





<Page>


     The agreements contain customary provisions concerning termination of
employment by Metallurg with and without cause, by the Executive with and
without "good reason" (as defined therein), and as a result of death or
disability. Depending upon the basis for termination, severance may be paid for
a period up to 18 months after termination or not at all. Bonuses may be paid,
at the discretion of the Chief Executive Officer (or in consultation with the
Compensation Committee, in the case of Dr. Schimmelbusch and Mr. Spector), but
no formal bonus plan has been adopted.

     Effective November 8, 2002, Mr. Ewart's employment as President of
Metallurg, Inc. ended. In agreement with the Board and under terms of his
employment agreement, Mr. Ewart was entitled to receive additional salary
payments of $718,897, payable through May 8, 2004, and payments in lieu of other
employee benefits of approximately $42,650, payable through January 2005.

     Effective June 21, 2002, the employment of Ms. Ellen T. Harmon and Mr.
Dennis P. Kelly, formerly Vice President and General Counsel, and Vice
President, Group Strategic Planning of Metallurg, Inc., respectively, were
terminated. Under terms of her agreement, Ms. Harmon received her full annual
salary of $251,000 and payments in lieu of employee benefits of $4,501 in 2002.
In addition, she received additional salary payments of $244,564, payable
through December 21, 2003, and payments in lieu of employee benefits of
approximately $17,653, payable through January 2004. Under terms of his
agreement, Mr. Kelly received his full annual salary of $237,000 in 2002. In
addition, he received additional salary payments of $230,923, payable through
December 21, 2003, and payment in lieu of employee benefits of approximately
$16,514, payable through January 2004.

Compensation Committee Interlocks and Insider Participation

     None

Item 12. Security Ownership of Certain Beneficial Owners and Management.

     All of the issued and outstanding voting securities of Metallurg, Inc. are
owned by Metallurg Holdings, Inc., located at Building 400, 435 Devon Park
Drive, Wayne, PA 19087, whose voting securities are owned (to the extent of 5%
or more) by Safeguard International Fund, L.P. and SCP Private Equity Partners,
L.P. An aggregate (net of cancellations and forfeitures) of 160,000 option
shares of Metallurg, Inc. stock has been issued to executive officers and
directors and 35,000 option shares have been issued to other employees of
Metallurg (see "Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values" and "Stock Compensation Plans" for details), none of
which has been exercised.

<TABLE>
<CAPTION>
                                         Number of Securities
                                           to be Issued upon      Weighted-Average    Number of Securities
                                              Exercise of        Exercise Price of     Remaining Available
                                          Outstanding Options   Outstanding Options    for Future issuance
                                         --------------------   -------------------   --------------------
<S>                                             <C>                    <C>                   <C>
Equity compensation plans approved
   by security holders (a) ...........          195,000                $30.00                305,000
Equity compensation plans not
   approved by security holders ......             None                  None                   None
</TABLE>

----------
(a)  On November 20, 1998, the Board adopted the ECP. Options issuable under the
     ECP have a term of ten years and vest in most cases 20% on the date of
     grant and 20% on each of the first four anniversaries of the date of the
     grant. The ECP is Metallurg's only equity compensation plan.

Item 13. Certain Relationships and Related Transactions.

     See the discussion under "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Related Party Transactions" for
details of certain related party transactions occurring in 2004.


                                       65





<Page>


Item 14. Principal Accounting Fees and Services.

     Audit Fees - Aggregate fees, including out-of-pocket expenses, for
professional services rendered by PricewaterhouseCoopers LLP ("PwC") in
connection with (i) the audit of Metallurg's consolidated financial statements
as of and for the year ended December 31, 2004, including statutory audits of
the financial statements of Metallurg's affiliates and (ii) the reviews of
Metallurg's unaudited condensed consolidated interim financial statements as of
September 30, 2004, June 30, 2004, and March 31, 2004 were $575,000. Aggregate
fees for these services for the year ended December 31, 2003 were $567,000.

     Audit-Related Fees - Aggregate fees, including out-of-pocket expenses, for
professional services rendered by PwC for audit-related services for the year
ended December 31, 2004 were $154,000. There were no aggregate fees for these
services for the year ended December 31, 2003.

     Tax Fees - Aggregate fees, including out-of-pocket expenses, for
professional services rendered by PwC in connection with tax compliance and
advice and preparation of employee expatriate tax returns for the year ended
December 31, 2004 were $52,000. Aggregate fees for these services for the year
ended December 31, 2003 were $59,000.

     All Other Fees - There were no fees for miscellaneous professional services
in the years ended December 31, 2004 and 2003.

     Pre-Approval Policies - The Audit Committee's policy is to pre-approve all
audit and permissible non-audit services provided by the independent auditors.
These services may include audit services, audit-related services, tax services
and other services. Pre-approval is detailed as to the particular service or
category of service and is subject to a specific budget. The Audit Committee
requires the independent auditors and management to report on the actual fees
charged for each category of service at Audit Committee meetings throughout the
year. During the year, circumstances may arise when it may become necessary to
engage the independent auditors for additional services not contemplated in the
original pre-approval. In those instances, the Audit Committee requires specific
pre-approval before engaging the independent auditors. All fiscal year 2004
audit and non-audit services provided by the independent auditors were
pre-approved.


                                       66





<Page>


                                     PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)  Documents filed as part of this report:

     (1)  A list of the financial statements filed as part of this report
          appears on page 23.

     (2)  The financial statement schedule, required to be filed as part of this
          report, appears on page 58.

     (3)  The following exhibits are filed as part of this report:

<TABLE>
<CAPTION>
Exhibit
 Number                             Description of Exhibit
-------                             ----------------------
<S>       <C>
3.1       Certificate of Incorporation of Metallurg, Inc. (incorporated herein
          by reference to Exhibit T3A.3 to the Form T-3 filed by Metallurg, Inc.
          with the Securities and Exchange Commission on March 21, 1997 (File
          No. 022-22265)).

3.2       Certificate of Amendment to Certificate of Incorporation of Metallurg,
          Inc., filed in the State of Delaware on November 30, 1998
          (incorporated herein by reference to Exhibit 3.2 to Metallurg, Inc.'s
          Annual Report on Form 10-K filed with the Securities and Exchange
          Commission on April 30, 1999 (File No. 333-42141)).

3.3       By-laws of Metallurg, Inc., as amended February 16, 2001 (incorporated
          herein by reference to Exhibit 3.3 to Metallurg, Inc.'s Annual Report
          on Form 10-K filed with the Securities and Exchange Commission on
          March 28, 2001 (file No. 333-42141)).

4.1       Indenture, dated as of November 25, 1997, by and among Metallurg,
          Inc., the Guarantors and IBJ Schroder Bank & Trust Company
          (incorporated herein by reference to Exhibit S44.1 to the Form S-4
          Registration Statement filed by Metallurg, Inc. with the Securities
          and Exchange Commission on December 30, 1997 (File No. 333-42141)).

4.2       Form of 11% Series A Senior Notes due 2007, dated as of November 25,
          1997 (incorporated herein by reference to Exhibit S44.2 to the Form
          S-4 Registration Statement filed by Metallurg, Inc. with the
          Securities and Exchange Commission on December 30, 1997 (File No.
          333-42141)).

4.3       Form of 11% Series B Senior Notes due 2007, dated as of November 25,
          1997 (incorporated herein by reference to Exhibit S44.3 to the Form
          S-4 Registration Statement filed by Metallurg, Inc. with the
          Securities and Exchange Commission on December 30, 1997 (File No.
          333-42141)).

4.4       Registration Agreement, dated as of November 20, 1997, by and among
          Metallurg, Inc., the Guarantors and the Initial Purchasers
          (incorporated herein by reference to Exhibit S44.4 to the form S-4
          Registration Statement filed by Metallurg, Inc. with the Securities
          and Exchange Commission on December 30, 1997 and Amendments No. 1
          through 4 thereto, filed through March 13, 1998 (File No. 333-42141)).

10.1      Financing Agreement, dated as of August 13, 2004, by and among
          Metallurg, Inc. and Shieldalloy Metallurgical Corporation, as A
          Borrowers, Metallurg Holdings, Inc., as B Borrower, each subsidiary
          listed therein, as A Guarantors, Metallurg, Inc., as B Guarantor, the
          financial institutions from time to time party hereto, as lenders, MHR
          Institutional Partners II LP, as collateral agent and as
          administrative agent (incorporated herein by reference to Exhibit 10.1
          to Metallurg, Inc.'s Quarterly Report on Form 10-Q filed with the
          Securities and Exchange Commission on November 10, 2004 (File No.
          333-42141)).

10.2      First Amendment to Financing Agreement, dated as of November 10, 2004,
          by and among Metallurg, Inc. and Shieldalloy Metallurgical
          Corporation, as A Borrowers, Metallurg Holdings, Inc., as B Borrower,
          each subsidiary listed therein, as A Guarantors, Metallurg, Inc., as B
          Guarantor, the financial institutions from time to time party hereto,
          as lenders, MHR Institutional Partners II LP, as collateral agent and
          as administrative agent.
</TABLE>


                                       67





<Page>


<TABLE>
<CAPTION>
Exhibit
 Number                             Description of Exhibit
-------                             ----------------------
<S>       <C>
10.3      Settlement Agreement dated December 27, 1996 between Metallurg, Inc.,
          Shieldalloy Metallurgical Corporation, the Environmental Protection
          Agency, the Department of the Interior, the Nuclear Regulatory
          Commission and the New Jersey Department of Environmental Protection
          (incorporated herein by reference to Exhibit S410.5 to the Form S-4
          Registration Statement filed by Metallurg, Inc. with the Securities
          and Exchange Commission on December 30, 1997 (File No. 333-42141)).

10.4      Permanent Injunction Consent Order dated December 23, 1996 between the
          State of Ohio, Shieldalloy Metallurgical Corporation and Cyprus Foote
          Mineral Company (incorporated herein by reference to Exhibit S410.6 to
          the Form S-4 Registration Statement filed by Metallurg, Inc. with the
          Securities Exchange Commission on December 30, 1997 (File No.
          333-42141)).

10.5      Merger Agreement, dated June 15, 1998, among Metallurg, Inc.,
          Metallurg Holdings and Metallurg Acquisition Corp. (incorporated
          herein by reference to Exhibit 2 to Current Report on Form 8-K filed
          by Metallurg, Inc. with the Securities and Exchange Commission on June
          16, 1998 (File No. 333-42141)).

10.6      1998 Equity Compensation Plan of Metallurg, Inc. (incorporated herein
          by reference to Exhibit 10.11 to Metallurg, Inc.'s Annual Report on
          Form 10-K filed with the Securities and Exchange Commission on April
          30, 1999 (File No. 333-42141)).

10.7      Employment Agreements dated November 19, 1998 and November 20, 1998 by
          and between Metallurg, Inc. and each of Eric E. Jackson and Barry C.
          Nuss, respectively (incorporated herein by reference to Exhibit 10.14
          to Metallurg, Inc.'s Annual Report on Form 10-K filed with the
          Securities and Exchange Commission on April 30, 1999 (File No.
          333-42141)).

10.8      Employment Agreements dated November 11, 2002, by and between
          Metallurg, Inc. and each of Heinz C. Schimmelbusch and Arthur R.
          Spector (incorporated herein by reference to Exhibit 10.13 to
          Metallurg, Inc.'s Annual Report on Form 10-K filed with the Securities
          and Exchange Commission on March 27, 2003 (File No. 333-42141)).

10.9      Employment Agreement dated June 1, 2003, by and between Metallurg,
          Inc. and Charles H. Entrekin (incorporated herein by reference to
          Exhibit 10.13 to Metallurg, Inc.'s Annual Report on Form 10-K filed
          with the Securities and Exchange Commission on June 16, 2004 (File No.
          333-42141)).

10.10     Advisory Agreement, dated as of July 1, 2000, by and between
          Metallurg, Inc. and Safeguard International Management LLC
          (incorporated herein by reference to Exhibit 10.17 to Metallurg,
          Inc.'s Quarterly Report on Form 10-Q filed with the Securities and
          Exchange Commission on September 13, 2000 (File No. 333-42141)).

10.11     Intercompany Tax Allocation Agreement, dated July 13, 1998, by and
          among Metallurg Holdings, Inc., Metallurg, Inc. and various
          subsidiaries thereof (incorporated herein by reference to Exhibit
          10.17 to Metallurg, Inc.'s Annual Report on Form 10-K filed with the
          Securities and Exchange Commission on April 30, 1999 (File No.
          333-42141)).

21.1      Subsidiaries of Metallurg, Inc.

31.1      Certification of Chief Executive Officer pursuant to Section 302 of
          the Sarbanes-Oxley Act of 2002.

31.2      Certification of Chief Financial Officer pursuant to Section 302 of
          the Sarbanes-Oxley Act of 2002.
</TABLE>



                                       68





<Page>


                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the undersigned registrant has duly caused this report to
be signed on its behalf by the undersigned, thereto duly authorized as of the
30th day of March 2005.

                                        METALLURG, INC.


                                        By: /s/ Barry C. Nuss
                                            ------------------------------------
                                            Barry C. Nuss
                                            Senior Vice President and
                                               Chief Financial Officer

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

<TABLE>
<CAPTION>
         Signature                                  Title(s)                             Date
         ---------                                  --------                             ----
<S>                           <C>                                                   <C>


/s/ HEINZ C. SCHIMMELBUSCH    Chairman, Director and Chief Executive Officer        March 30, 2005
---------------------------
Heinz C. Schimmelbusch


/s/ ARTHUR R. SPECTOR         Vice Chairman, Director and Executive Vice Chairman   March 30, 2005
---------------------------
Arthur R. Spector


/s/ ERIC E. JACKSON           President and Chief Operating Officer                 March 30, 2005
---------------------------
Eric E. Jackson


/s/ BARRY C. NUSS             Senior Vice President and Chief Financial Officer     March 30, 2005
---------------------------
Barry C. Nuss


/s/ MICHAEL J. EMMI           Director                                              March 30, 2005
---------------------------
Michael J. Emmi


/s/ NILS A. KINDWALL          Director                                              March 30, 2005
---------------------------
Nils A. Kindwall


/s/ SAMUEL A. PLUM            Director                                              March 30, 2005
---------------------------
Samuel A. Plum


/s/ MICHAEL D. WINFIELD       Director                                              March 30, 2005
---------------------------
Michael D. Winfield
</TABLE>


                                       69





                           STATEMENT OF DIFFERENCES

The British pound sterling sign shall be expressed as....................    'L'