Arcelor's capital increase - Vernimmen

Prospectus dated 28th June, 2004 

29JUN200402263417 

a ‘‘société anonyme’’ incorporated under the laws of Luxembourg 

19, avenue de la Liberté, L-2930 Luxembourg, Grand Duchy of Luxembourg 

Prospectus for the public offer and admission to listing on the Luxembourg Stock 

Exchange of 533,145,273 bons de souscription d’actions (the ‘‘Warrants’’) exercisable 

into 106,629,054 new shares of Arcelor, and for the admission to listing on the 

Luxembourg Stock Exchange of 106,629,054 new shares of Arcelor 

Application will be made for the admission to listing of the Warrants and the new 

shares on the Premier Marché of Euronext Paris S.A., the Premier Marché of Euronext 

Brussels S.A./N.V. and the Bolsas de Valores of Madrid, Barcelona, Bilbao and Valencia 

533,145,273 Warrants will be attributed by Arcelor free of charge on 2nd July, 2004 to shareholders of 

record of Arcelor on 1st July, 2004 at a ratio of one Warrant per existing share, five Warrants entitling the 

holder thereof to subscribe one new share of Arcelor at a price of EUR 11.00 per new share from 2nd July, 

2004 to 13th July, 2004, both dates inclusive. 

The subscription rights relating to unexercised Warrants will lapse at the expiry of the exercise period 

and their holders will be entitled to the cash payment described below. Pursuant to an underwriting 

agreement, the underwriters have undertaken to subscribe a number of new shares corresponding to the 

number of new shares that would have been issued had the unexercised Warrants been exercised. 

No arrangements have been made to offer any Warrants or new shares to the public in any jurisdiction 

other than Luxembourg, France, Belgium, Spain or The Netherlands. The new shares issued pursuant to 

the underwriting agreement are expected to be offered by the underwriters in an institutional private 

placement outside the United States in reliance on Regulation S under the Securities Act of 1933, as 

amended, on or about 22nd July, 2004. The difference, if positive, between the subscription price and the 

price at which the new shares are sold in the private placement will be paid by Arcelor to holders of 

unexercised Warrants. 

Investing in the Warrants or the new shares involves certain risks. See ‘‘Risk factors’’ in section 4.17 to 

read about factors to consider before buying the Warrants or the new shares. 

Settlement and delivery of the new shares will be made on or about 27th July, 2004. Settlement of the 

payment, if any, to holders of unexercised Warrants will be made on or about 29th July, 2004. See 

Chapter 9 ‘‘Notice to Investors’’ and Chapter 10 ‘‘Plan of Distribution’’ for certain transfer and selling 

restrictions in respect of the Warrants and the new shares. 

Joint Lead Managers and Joint Bookrunners 

BNP PARIBAS 

Deutsche Bank 

Senior Co-Lead Managers 

CALYON Fortis Bank Santander Central 

Hispano Investment 

Co-Lead Managers 

BBVA Bayerische Landesbank Commerzbank Securities 

Crédit Mutuel – CIC JP Morgan KBC Securities 

Natexis Bleichroeder 

SG Corporate & Investment Banking

IMPORTANT NOTE: Arcelor is responsible for the information contained in this Prospectus. To the 

best knowledge of Arcelor, the information contained in this Prospectus is in accordance with the facts and 

does not omit anything which is likely to affect the import of such information. 

No person is authorised to give any information or to make any representation not contained in this 

Prospectus in connection with the issue of the Warrants and the New Shares (as defined below) and, if 

given or made, such information or representation must not be relied upon as having been authorised. 

Neither the delivery of this Prospectus at any time nor any sale made hereunder shall, under any 

circumstances, create any implication that there has been no change in the affairs of Arcelor or of Arcelor 

together with its direct and indirect subsidiaries (the ‘‘Group’’ or the ‘‘Arcelor Group’’) since the date 

hereof or that the information contained herein is correct as at any time subsequent to the date of this 

Prospectus. 

This Prospectus contains information relating both to the markets in which the Group operates and to 

the steel industry in general. Some of this information is taken from studies carried out by organisations 

outside the Group. 

This Prospectus does not constitute an offer to sell or the solicitation of an offer to buy the Warrants 

or the New Shares in any jurisdiction where such offer or solicitation would be prohibited. The distribution 

of this Prospectus and the offering or sale of the Warrants and the New Shares is restricted by law in 

certain jurisdictions. Persons into whose possession this Prospectus may come are required by Arcelor and 

the Underwriters (as defined below) to inform themselves about and to observe any restrictions as to the 

offering of the Warrants and the New Shares and the distribution of this Prospectus. This Prospectus may 

not be used for, or in connection with, any offer to, or solicitation by, anyone in any jurisdiction or any 

circumstances in which such offer or solicitation is not authorised or is unlawful. Neither Arcelor nor any 

of the Underwriters accepts any responsibility for any violation by any person, whether or not a prospective 

purchaser of the Warrants or the New Shares, of any of such restrictions. Other than in Luxembourg, 

France, Belgium, Spain and The Netherlands, no action has been or will be taken in any jurisdiction by 

Arcelor or the Underwriters that would permit a public offering of the Warrants or the New Shares or 

possession or distribution of an offering circular in any jurisdiction where action for that purpose would be 

required. For a further description of certain restrictions on offers and sales of the Warrants and the New 

Shares and on the distribution of this Prospectus, see Chapter 9 ‘‘Notice to Investors’’ and Chapter 10 

‘‘Plan of Distribution’’. 

This document may not be distributed by any means to persons inside France, Spain, Belgium or The 

Netherlands until the appropriate authorities of such countries have granted mutual recognition visas in 

respect of the Prospectus. 

The Warrants and the New Shares have not been and will not be registered under the U.S. Securities 

Act of 1933, as amended (the ‘‘Securities Act’’), or with any securities regulatory authority of any state or 

other jurisdiction in the United States, and may not be offered, sold, pledged or otherwise transferred 

except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of 

the Securities Act and in compliance with any applicable state securities laws. Any representation to the 

contrary is a criminal offense in the United States. The New Shares are being offered outside the United 

States in reliance on Regulation S. See Chapter 10 ‘‘Plan of Distribution’’. 

In connection with the offering, Deutsche Bank or any person acting for it, may, on behalf of the 

Underwriters, over-allot or effect transactions in the Shares or any associated security (including the 

Warrants) with a view to supporting the market price of Arcelor’s Shares at a level higher than that which 

might otherwise prevail for a limited period after the issue date. Such transactions may be effected on 

markets on which Arcelor’s Shares or the Warrants are traded, including the over-the-counter market or 

otherwise. However, there may be no obligation on Deutsche Bank or any agent of it to do this. Such 

stabilisation, if commenced, may be discontinued at any time and must be brought to an end after a limited 

period. 

The Underwriters may, in compliance with applicable laws and regulations, carry out trading for their 

own acounts on the market of the Shares and the Warrants. These interventions are likely to contribute to 

the liquidity of the market of the Shares and the Warrants. The Underwriters may also effect transactions 

in the Shares and the Warrants intended to stabilise the market of the Shares. Finally, in the event of 

significant disposals of Warrants organised by the Underwriters (including Warrants allocated to the 

Company with respect to Shares controlled or held by the Company), in order to avoid that the markets of 

the Shares and Warrants be disrupted in terms of liquidity and/or price, compared with the transactions 

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effected off-market, the Underwriters will be on the buy side on the central order book so as to preserve 

the good operation of the markets of the Shares and the Warrants and the equality among holders of 

Shares or Warrants. 

The distribution of this Prospectus and the offering and sale of the Warrants and the New Shares in 

certain jurisdictions may be restricted by law. Arcelor and the Underwriters require persons into whose 

possession this Prospectus comes to inform themselves about and to observe any such restrictions. This 

Prospectus does not constitute an offer of, or an invitation to purchase, any securities other than the 

Warrants and the New Shares, or any Warrants or New Shares in any jurisdiction in which such offer or 

invitation would be unlawful. See Chapter 9 ‘‘Notice to Investors’’. 

Notice to New Hampshire Residents 

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A 

LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED 

STATUTES (‘‘RSA’’) WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS 

EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE 

CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER 

RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE 

FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A 

TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE 

MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, 

SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY 

PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT 

WITH THE PROVISIONS OF THIS PARAGRAPH. 

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TABLE OF CONTENTS 

IMPORTANT INFORMATION ABOUT THIS PROSPECTUS ............................ ix 

DEFINITIONS .............................................................. x 

SUMMARY PRESENTATION OF THE GROUP ...................................... xiii 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS ............ xiv 

SUMMARY OF THE ALLOCATION OF THE WARRANTS AND THE PLACEMENT OF NEW 

SHARES .................................................................. 1 

CHAPTER 1 RESPONSIBILITY FOR THE CERTIFICATION OF THE ACCOUNTS ........ 4 

1.1 Responsibility for auditing the accounts of Arcelor ................... 4 

1.2 Declarations of the persons responsible for auditing the accounts of Arcelor . . 4 

CHAPTER 2 ISSUE AND LISTING OF THE WARRANTS AND THE NEW SHARES AND 

THE UNDERWRITING AND THE PLACEMENT OF NEW SHARES ........ 5 

2.1 The Warrants, the New Shares and the Placement .................... 5 

2.1.1 Allocation of Warrants ............................... 5 

2.1.2 Allocation and subscription conditions .................... 5 

2.1.3 Listing .......................................... 7 

2.1.4 Placement ....................................... 7 

2.1.5 Other information .................................. 7 

2.1.6 Maintenance of Holders’ rights ......................... 8 

2.1.7 Applicable law and jurisdiction ......................... 8 

2.2 Structure of the Transaction ................................... 8 

2.2.1 Indicative Timetable ................................ 8 

2.2.2 Information for assessment of the exercise price ............. 9 

2.2.3 Centralisation procedure .............................. 10 

2.2.4 Underwriting Agreement ............................. 11 

2.2.5 Determination of the Placement Price .................... 12 

2.3 Impact on the situation of shareholders ........................... 12 

2.3.1 Impact on a shareholder’s ownership interest in the share capital of 

Arcelor ......................................... 13 

2.3.2 Impact on shareholdings and voting rights .................. 13 

2.3.3 Impact on a shareholder’s share in consolidated net equity ...... 14 

2.4 Use of Proceeds ........................................... 15 

2.5 Share Price Information ..................................... 15 

CHAPTER 3 GENERAL INFORMATION CONCERNING ARCELOR AND ITS CAPITAL . . . 16 

3.1 General information concerning Arcelor .......................... 16 

3.1.1 Name and registered office ............................ 16 

3.1.2 Legal form ....................................... 16 

3.1.3 Date of incorporation and duration ...................... 16 

3.1.4 Object .......................................... 16 

3.1.5 Inspection of legal and financial documents—Notices to 

shareholders ...................................... 16 

3.1.6 Listing .......................................... 17 

3.1.7 Accounting year ................................... 17 

3.1.8 Allocation of profits ................................. 17 

3.1.9 Winding-up and liquidation ............................ 17 

Page 

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CHAPTER 4 

Page 

3.2 General information concerning the share capital of Arcelor and share rights . 18 

3.2.1 Issued capital (as at 31st May, 2004) ..................... 18 

3.2.2 Evolution of the share capital of Arcelor since its incorporation . . . 18 

3.2.3 Instruments giving access to the capital of Arcelor ............ 20 

3.2.4 Admission to listing ................................. 21 

3.2.5 Form and means of holding Arcelor Shares ................. 21 

3.2.6 General meetings of the shareholders ..................... 22 

3.2.7 Voting rights and participation in the general meetings of 

shareholders ...................................... 22 

3.2.8 Threshold disclosure requirement ....................... 23 

3.2.9 Compulsory offer in case a threshold of 25% is equalled or 

exceeded ........................................ 24 

3.2.10 Exceptions to the statutory obligations of declaration and of 

mandatory offer ................................... 25 

3.2.11 Amendments of the share capital ........................ 25 

3.2.12 Acquisition by Arcelor of its own Shares ................... 26 

3.3 Significant shareholdings in Arcelor .............................. 28 

3.4 Dividends ............................................... 28 

INFORMATION CONCERNING THE BUSINESS ACTIVITY OF ARCELOR 

AND OF ITS GROUP ........................................... 29 

4.1 General ................................................. 29 

4.1.1 Key figures ....................................... 29 

4.1.2 Organisation ...................................... 30 

4.2 Strategy ................................................ 31 

4.2.1 Continual improvement in the product and service offer ........ 32 

4.2.2 Further improvements in profitability ..................... 32 

4.3 Description of the main sectors ................................ 32 

4.3.1 Flat carbon steel ................................... 33 

4.3.2 Long carbon steel and wire drawing sectors ................. 36 

4.3.3 Stainless steel ..................................... 38 

4.3.4 Distribution-Transformation-Trading ...................... 43 

4.3.5 Other activities .................................... 45 

4.4 Competition .............................................. 46 

4.4.1 Flat carbon steel ................................... 47 

4.4.2 Long carbon steel .................................. 47 

4.4.3 Stainless steel ..................................... 48 

4.4.4 Distribution-Transformation-Trading ...................... 48 

4.5 Contracts ............................................... 48 

4.5.1 Purchasing contracts ................................ 48 

4.5.2 Sales contracts .................................... 49 

4.6 Raw materials and energy .................................... 49 

4.6.1 Iron ore ......................................... 49 

4.6.2 Coke and coal ..................................... 49 

4.6.3 Scrap metal ...................................... 49 

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4.6.4 Nickel, ferro-chromium and other ferrous and non-ferrous 

materials ........................................ 50 

4.6.5 Energy .......................................... 50 

4.6.6 Water .......................................... 50 

4.7 Regulations—Trade barriers ................................... 50 

4.7.1 Anti-dumping and anti-subsidy measures ................... 51 

4.7.2 Import quotas ..................................... 54 

4.8 Environment ............................................. 54 

4.8.1 Environmental regulations ............................ 54 

4.8.2 Environmental protection ............................. 55 

4.9 Intellectual property ........................................ 57 

4.10 Other commitments ........................................ 57 

4.10.1 Warranties ....................................... 57 

4.10.2 Other commitments ................................. 57 

4.11 Disputes ................................................ 57 

4.11.1 AK Steel Corporation ............................... 57 

4.12 Human resources .......................................... 58 

4.12.1 Employees ....................................... 58 

4.12.2 Employment policy ................................. 58 

4.13 Research and development (R&D) .............................. 59 

4.13.1 General R&D policy ................................ 59 

4.13.2 R&D objectives .................................... 59 

4.13.3 R&D facilities ..................................... 59 

4.13.4 Main projects ..................................... 59 

4.14 Investment ............................................... 60 

4.14.1 The Arcelor Group’s policy ............................ 60 

4.14.2 Recent and current investments ......................... 60 

4.15 Insurance ............................................... 61 

4.16 Property ................................................ 62 

4.17 Risk factors .............................................. 63 

4.17.1 Commercial and industrial environment ................... 63 

4.17.2 Environmental regulations and liability-Non-renewal of 

authorisations ..................................... 64 

4.17.3 Financial environment ............................... 65 

4.17.4 Risks related to the proposed acquisition .................. 65 

4.17.5 Risks related to the Offering ........................... 66 

CHAPTER 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS .............. 67 

5.1 2004 Outlook ............................................. 67 

5.2 Critical accounting policies .................................... 67 

5.2.1 Business combination—negative goodwill .................. 67 

5.2.2 Impairment of tangible fixed assets ...................... 68 

5.2.3 Valuation of deferred tax assets ......................... 68 

5.2.4 Provisions ........................................ 68 

5.3 Results of operations ........................................ 69 

Page 

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5.3.1 2003 versus 2002 ................................... 69 

5.3.2 First quarter 2004 versus first quarter 2003 ................. 74 

5.4 Liquidity and capital resources ................................. 77 

5.4.1 Cash flows from operating activities ...................... 78 

5.4.2 Cash flows from investing activities ...................... 78 

5.4.3 Cash flows used in financing activities and capital structure ...... 79 

5.5 Information in relation to Arcelor main subsidiaries as at 31st December, 2003 80 

CHAPTER 6 INFORMATION CONCERNING THE BOARD OF DIRECTORS AND 

MANAGEMENT BOARD OF ARCELOR ............................. 82 

6.1 Board of Directors ......................................... 82 

6.1.1 Overview ........................................ 82 

6.1.2 Composition of the Board of Directors .................... 82 

6.1.3 Role and authority of the Board of Directors ............... 83 

6.1.4 The Audit Committee and the Appointments and Remuneration 

Committee ....................................... 84 

6.2 Management Board ........................................ 85 

6.3 Officers’ and directors’ interests ................................ 86 

6.3.1 Directors’ remuneration .............................. 86 

6.3.2 Management Board ................................. 86 

6.3.3 Share options ..................................... 87 

6.3.4 Directors’ interests in Arcelor .......................... 88 

6.3.5 Transactions entered into with the directors and executives ...... 88 

6.3.6 Loans and guarantees granted in favour of directors and executives 88 

6.4 Employee profit-sharing scheme ................................ 88 

CHAPTER 7 TRANSACTION AND OTHER RECENT DEVELOPMENTS .......... 89 

7.1 Transaction in Brazil ........................................ 89 

7.1.1 Arcelor’s strategy in Brazil ............................ 89 

7.1.2 The transaction .................................... 89 

7.1.3 Rationale for the transaction and equity issue ............... 91 

7.1.4 Arcelor’s existing presence in Brazil ...................... 91 

7.1.5 Acquisition pro forma information ....................... 93 

7.2 Other Recent Developments .................................. 93 

7.2.1 IMS—International Métal Services ....................... 93 

7.2.2 Disposal of J&L Specialty Steel ......................... 93 

7.2.3 Disposal of Tubes business ............................ 93 

7.2.4 Sale of IEE ...................................... 94 

7.2.5 Sale of Aciérie de l’Atlantique .......................... 94 

7.2.6 Luxembourg long product’s units ........................ 94 

CHAPTER 8 TAXATION .................................................. 95 

8.1 Luxembourg taxation ........................................ 95 

8.1.1 Holders of Warrants ................................ 95 

8.1.2 Holders of Shares .................................. 95 

8.2 French taxation ........................................... 97 

8.2.1 Individuals holding shares as part of their private assets ........ 97 

Page 

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8.2.2 Corporate shareholders subject to corporate income tax ........ 98 

8.2.3 Taxation of Warrants ................................ 99 

8.3 Belgian taxation ........................................... 99 

8.3.1 Direct tax aspects related to the allocation of the Warrants ...... 99 

8.3.2 Direct tax aspects related to the holding of the Warrants ........ 99 

8.3.3 Direct tax aspects related to the holding of New Shares ........ 100 

8.3.4 Indirect tax aspects ................................. 101 

8.4 Spanish taxation ........................................... 102 

8.4.1 Taxation applicable to the holders of Warrants ............... 102 

8.4.2 Taxation applicable to the holders of Shares ................ 103 

8.5 Dutch taxation ............................................ 105 

8.5.1 Personal income tax ................................. 105 

8.5.2 Corporate income tax ................................ 106 

8.5.3 Gift tax and inheritance tax ............................ 106 

8.6 United States Taxation ...................................... 107 

8.6.1 US Holder of Warrants .............................. 107 

8.6.2 Information reporting and backup withholding ............... 108 

CHAPTER 9 NOTICE TO INVESTORS ........................................ 109 

CHAPTER 10 PLAN OF DISTRIBUTION ....................................... 111 

CHAPTER 11 CAPITALISATION OF THE ARCELOR GROUP ....................... 115 

GENERAL INFORMATION .................................................... 116 

APPENDIX I FINANCIAL STATEMENTS OF ARCELOR ........................... A-I-1 

APPENDIX II GLOSSARY OF STEELMAKING TERMS ............................. A-II-1 

APPENDIX III INFORMATION RELATING TO THE ASSETS, THE FINANCIAL 

STATEMENTS AND THE RESULTS OF ARCELOR, THE CST GROUP AND 

THE ACESITA GROUP ......................................... A-III-1 

APPENDIX IV FORM OF INVESTOR LETTER ................................... A-IV-1 

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(This page has been left blank intentionally.) 

viii

IMPORTANT INFORMATION ABOUT THIS PROSPECTUS 

The delivery of this Prospectus, at any time and under any circumstances, does not create any 

implication that there has been no change in the affairs of Arcelor since the date hereof or that the 

information contained herein is correct and complete in all material respects as at any time subsequent to 

this date. No person has been authorised to give any information or to make any representation other than 

those contained in the Prospectus in connection with the issue or sale of the Warrants or the New Shares 

and, if given or made, such information or representation must not be relied upon as having been 

authorised by Arcelor, by the Underwriters or by any other person. 

Purchasers of Warrants or New Shares should conduct such independent investigation and analysis 

regarding Arcelor and the Warrants and the New Shares as they deem appropriate to evaluate the merits 

and risks of an investment in the Warrants or the New Shares. No representation or warranty, express or 

implied, is made as to the accuracy or completeness of any information contained in this Prospectus, and 

nothing contained in this Prospectus is, or shall be relied upon as, a promise or representation as to the 

past or the future. In making any investment decision with respect to the Warrants or New Shares, 

investors must rely (and will be deemed to have relied) solely on their own independent examination of 

Arcelor and the terms of the offering of the Warrants or New Shares, including the merits and risks 

involved. Each person who receives this Prospectus acknowledges that such person has not relied on any 

Underwriter or any person affiliated with any Underwriter in connection with its investigation of the 

accuracy of the information contained herein or of any additional information considered by it to be 

necessary in connection with its investment decision. 

ix

DEFINITIONS 

Aceralia: 

Acesita: 

Acindar: 

ADA: 

AMF: 

AND: 

API: 

Arbed: 

Arcelor: 

BCS: 

Belgian Centralising Agent: 

Belgo Mineira: 

BGL: 

BMPS: 

BMU: 

CIK: 

Clearstream Luxembourg: 

CNMV: 

Company: 

CST: 

CVRD: 

Euroclear Bank: 

Euroclear France: 

Euronext Brussels: 

Euronext Paris: 

Exchange Facility: 

Exercise Period: 

French Centralising Agent: 

Global Centralising Agent: 

Group or Arcelor Group: 

Holder: 

IASB: 

means Aceralia Corporación Siderúrgica S.A., a sociedad anónima 

incorporated under Spanish law, which has its registered office at 

Residencia La Granda, Gozón (Asturias), Spain 

means Acesita S.A. 

means Acindar Industria Argentina de Aceros S.A. 

means Aciérie de l’Atlantique, SAS 

means the French Autorité des Marchés Financiers 

means Arcelor Trading and Distribution 

means Arcelor Packaging International 

means Arbed, a société anonyme incorporated under Luxembourg law 

which has its registered office at 19, avenue de la Liberté, 

L-2930 Luxembourg, Grand Duchy of Luxembourg 

means Arcelor, a société anonyme incorporated under Luxembourg 

law which has its registered office at 19, avenue de la Liberté, 


means Arcelor Building Construction Support 

means Fortis Banque 

means Belgo Mineira S.A. 

means Banque Générale du Luxembourg S.A. 

means BMP SIDERURGIA S.A. 

means Belgo-Mineira Uruguay S.A. 

means the Belgian clearing system 

means Clearstream Banking, société anonyme 

means the Spanish Comisión Nacional del Mercado de Valores 

means Arcelor 

means Companhia Siderúrgica de Tubarão S.A. 

means Companhia Vale Do Rio Doce 

means Euroclear Bank S.A./N.V., as operator of the Euroclear system, 

Brussels 

means Euroclear France S.A. 

means the Premier Marché of Euronext Brussels S.A./N.V. 

means the Premier Marché of Euronext Paris S.A. 

means the right for Usinor shareholders to tender their Usinor shares 

in exchange for existing or new Shares as described in section 3.2.2 

means the exercise period of the Warrants which begins on 2nd July, 

2004 and ends on 13th July, 2004, both dates inclusive 

means BNP Paribas Securities Services 


means Arcelor and its direct and indirect subsidiaries 

means a holder of Warrants 

means the International Accounting Standards Board 

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IBERCLEAR: 

IEE: 

IFRS: 

Joint Lead Managers: 

Luxembourg Centralising Agent: 

Mémorial C: 

means Sociedad de Gestión de los Sistemas de Registro, Compensación y 

Liquidación de Valores, S.A. 

means International Electronics & Engineering 

means International Financial Reporting Standards 

means BNP Paribas and Deutsche Bank AG London as Joint Lead 

Managers of the offering of the Warrants and as Joint Bookrunners of 

the Placement 


means Mémorial C, Recueil des Sociétés et Associations, Grand Duchy 

of Luxembourg 

New Shares: 

means the new shares of Arcelor that may be issued in connection 

with the offering of the Warrants and/or as a result of the subscription 

by the Underwriters of a number of new shares corresponding to the 

number of new shares that would have been issued had the 

Unexercised Warrants been exercised 

New Shares Settlement Date: means 27th July, 2004 

Placement Price: 

means the Placement price of one Remaining New Share 

OCEANE: means the OCEANE 2005 and the OCEANE 2017 

OCEANE 2005: 

OCEANE 2006: 

OCEANE 2017: 

Offering: 

Placement: 

Public Exchange Offers: 

Record Date: 

Remaining New Shares: 

Shares: 

Spanish Centralising Agent: 

Spanish Liaison Entity: 

Spanish Stock Exchanges: 

Subscription Monies: 

means the bonds of Arcelor which are convertible into and/or 

exchangeable for new or existing Arcelor shares (obligations 

convertibles et/ou échangeables en actions nouvelles ou existantes) 

3.875% due 2005 

means the bonds of Arcelor which are convertible into and/or 

exchangeable for new or existing Arcelor shares (obligations 

convertibles et/ou échangeables en actions nouvelles ou existantes) 3% 

due 2006, which are no longer outstanding 

means the bonds of Arcelor which are convertible or exchangeable 

into new or existing Arcelor shares (obligations convertibles et/ou 

échangeables en actions nouvelles ou existantes) 3% due 2017 

means the offering of the Warrants and the New Shares 

means the institutional private placement of New Shares subscribed 

by the Underwriters after expiration of the Exercise Period, pursuant 

to an underwriting agreement between Arcelor and the Underwriters 

means the three public exchange offers successfully made by Arcelor 

on Aceralia, Usinor and Arbed in 2002 

means 1st July, 2004, the record date for allocation of the Warrants 

means New Shares which correspond to the Unexercised Warrants 

means the existing shares of Arcelor and the New Shares 

means Banco Bilbao Vizcaya Argentaria, S.A. 

means Banco Bilbao Vizcaya Argentaria, S.A. (whose address is Clara 

del Rey, 26, Madrid 28002, Spain), the Spanish liaison entity, 

custodian and payment agent in charge of the duties set forth in 

Circular 6/1999, of 15th September, of IBERCLEAR 

means the Bolsas de Valores at Madrid, Barcelona, Bilbao and 

Valencia and the SIBE Interconnection Electronic System 

means the Subscription Price of the New Shares to be issued upon the 

exercise of Warrants 

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Subscription Price: 

Underwriters: 

Unexercised Warrants: 

Usinor: 

means the price for subscription of one New Share 

means BNP Paribas, Deutsche Bank AG London, CALYON, Fortis 

Bank (Nederland) N.V., Santander Central Hispano Investment, 

Banco Bilbao Vizcaya Argentaria, S.A., Bayerische Landesbank, 

Commerzbank Aktiengesellschaft, Crédit Industriel et Commercial, 

J.P. Morgan Securities Ltd., KBC Securities NV, Natexis Bleichroeder 

SA and Société Générale 

means Warrants which remain unexercised at the end of the Exercise 

Period 

means Usinor, a société anonyme incorporated under the laws of 

France which has its registered office at Immeuble ‘‘Le Pacific’’, 

11-13, cours Valmy, La Défense 7, 92070 La Défense Cedex, France 

Warrant Cash Payment: 

means the difference, if positive, between the Placement price of one 

Remaining New Share and the Subscription Price 

Warrant Cash Payment means on or about 29th July, 2004 

Settlement Date: 

Warrant Register: 

Warrants: 

means the Warrant register maintained by Banque Générale du 

Luxembourg S.A. on behalf of Arcelor 

means the bons de souscription d’actions exercisable into New Shares 

of Arcelor as described in this Prospectus 

xii

SUMMARY PRESENTATION OF THE GROUP 

Arcelor was born out of the commitment of three steel makers, Aceralia, Arbed and Usinor, to create 

a leading company in the global steel industry. 

The creation of Arcelor was announced on 19th February, 2001 and was achieved on 18th February, 

2002, with the listing of Arcelor on the Luxembourg Stock Exchange, Euronext Paris, Euronext Brussels 

and the Spanish Stock Exchanges. 

The Arcelor Group has four principal sectors: Flat Carbon Steels, Long Carbon Steels, Stainless 

Steels, and Distribution-Transformation-Trading. 

Employing 98,000 people in over 60 countries, Arcelor is the largest steelmaker in the world, with 

production of 44 million tonnes of steel, and revenues in 2003 of EUR 26 billion. It holds a leading market 

share in all its major markets: automotive, construction, domestic electrical appliances, packaging and 

general industry. 

Arcelor is the world’s leading producer of flat products, both in terms of volume and revenues, with 

total shipments of nearly 25.6 million metric tons in 2003. With 48,000 employees, this business sector had 

revenues of nearly EUR 14 billion in 2003, which is approximately 7% of the global market. The product 

portfolio covers the entire range of thin flat steels: hot-rolled coils, cold-rolled coils and coated sheets. 

These products are used in automobile production, domestic electrical appliances, packaging, 

construction, civil engineering, mechanical construction and processing. 

Arcelor is also the world’s largest producer of long products, with total shipments of nearly 

12.2 million metric tons in 2003. This business sector has nearly 18,000 employees and had revenue of 

approximately EUR 4.4 billion in 2003. It produces three categories of products: 

• commodity products (rolled long products): lightweight and medium-weight beams, merchant steels 

and concrete reinforcing bars; 

• speciality products (rolled long products): sheet piling, heavy beams, special sections and rails; and 

• drawn-wire products: steelcord, low-carbon steel and high-carbon steel. 

Rolled long products are used principally in the construction, infrastructure and capital equipment 

markets. Drawn-wire products have a number of uses: tyre manufacture (steelcord), agriculture (vine 

wires, enclosures), industry (galvanised wires for cable sheathing) and construction (fibres). 

Arcelor is one of the world leaders in the stainless steel business, both in terms of volume and 

revenues. In 2003, total shipments amounted to nearly 2.4 million metric tons. This business sector has 

close to 14,200 employees and had revenue of EUR 4.3 billion in 2003, with an approximately 14% share of 

the world market for cold-rolled products. Arcelor produces virtually the whole range of stainless and alloy 

products. 

The product portfolio is made up of the following categories: 

• flat stainless products; 

• long stainless products and alloy products; 

• precision stainless metal strips and nickel alloy flat products; and 

• special plates in stainless steels and specialty steels. 

Stainless steel products are used in four principal markets: household appliances (large electrical 

appliances and household equipment), automotive (especially in catalytic converters), construction and 

urban furniture (facades and equipment) and general industry (such as the food, chemicals and oil 

industries). 

Arcelor’s Distribution-Transformation-Trading sector develops its activities based on steel produced by 

the Group or purchased from third parties. The sector has almost 15,000 employees and had revenues of 

EUR 8.0 billion in 2003. 

The main features of Arcelor’s Distribution-Transformation-Trading business are: 

• close relations with a broad client base maintained by a large sales force; 

• an emphasis on service and logistics; 

• expertise in the downstream promotion of ‘‘Steel Solutions’’; and 

• the addition of value to marketed steel products. 

The Distribution-Transformation-Trading business is organised into six units, which carry out specific 

but complementary activities. 

xiii

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS 

This Prospectus contains forward-looking statements about Arcelor. Forward-looking statements can 

be identified by the use of forward-looking terminology, such as ‘‘believes’’, ‘‘expects’’, ‘‘may’’, ‘‘is expected 

to’’, ‘‘will’’, ‘‘will continue’’, ‘‘should’’, ‘‘would be’’, ‘‘seeks’’ or ‘‘anticipates’’ or similar expressions or the 

negative thereof or other variations thereof or comparable terminology, or by the forward-looking nature 

of discussions of strategy, plans or intentions. Although Arcelor believes its expectations are based on 

reasonable assumptions, these forward-looking statements are subject to numerous risks and uncertainties. 

Important factors that could cause actual results to differ materially from the results anticipated in the 

forward-looking statements include, among other things: 

• the cyclical nature of the steel market; 

• strong competition in the steel market; 

• disruptions in the supply of raw materials and energy; 

• Arcelor’s production in, and sales to, developing economies, and the risk that Arcelor’s activities 

may be subject to political, economic, exchange, raw material or other risks; 

• the potential for technical problems and accidents in heavy industrial production; 

• compliance with increasingly stringent environmental regulations and liability; 

• dependence on regulatory authorities for necessary grants or renewals of authorisations, permits 

and/or consents; 

• significant working capital needs and the necessity to carry out major investments; 

• interest and foreign exchange fluctuations and their impact on Arcelor’s financing, production and 

sale activities; and 

• Arcelor’s ability to integrate CST into its business and realise benefits of the integration. 

The forward-looking statements contained in this document speak only as at the date of this 

Prospectus. See also section 4.17 ‘‘Risk factors’’. 

xiv

SUMMARY OF THE ALLOCATION OF THE WARRANTS AND 

THE PLACEMENT OF NEW SHARES 

This summary is qualified by, and should be read together with, this Prospectus, in particular Chapters 2 and 9. 

Allocation of Warrants ......... 533,145,273 Warrants will be attributed free of charge on 2nd July, 

2004 to shareholders of record of Arcelor on 1st July, 2004 at a 

ratio of one Warrant per existing Share, five Warrants entitling the 

holder thereof to subscribe one New Share of Arcelor at a price of 

EUR 11.00 per New Share (the ‘‘Subscription Price’’) from 

2nd July, 2004 to 13th July, 2004 both dates inclusive (the ‘‘Exercise 

Period’’). 

The subscription rights attaching to Warrants which remain 

unexercised at the end of the Exercise Period (the ‘‘Unexercised 

Warrants’’) will lapse and the Holders of the Unexercised Warrants 

will thereupon be entitled to the Warrant Cash Payment described 

below. 

Warrants will be allocated to all the Shares held by the Arcelor 

Group. The Group does not intend to exercise such Warrants but 

intends to sell them on the market. 

Shares offered ............... The New Shares will be immediately fungible with the existing 

Shares and will entitle their holders to all dividends to be declared 

after their date of issue in respect of 2004 and subsequent financial 

years. 

Shares outstanding after the 

Offering .................. 

639,774,327 Shares (assuming exercise of all Warrants and that no 

instruments giving access to Arcelor’s share capital are converted 

into new Shares). 

Voting rights ................ Each Share carries the right to cast one vote on all matters 

submitted to a vote of Arcelor shareholders (subject to certain 

exceptions). For additional information regarding these voting 

rights, see Chapter 3 ‘‘General Information Concerning Arcelor 

and its Capital’’. 

Listing ..................... Arcelor’s Shares are listed on the Luxembourg Stock Exchange 

under the symbol ‘‘LOR’’, on Euronext Paris under the symbol 

‘‘LOR’’, on Euronext Brussels under the symbol ‘‘LORB’’, and on 

the Spanish Stock Exchanges under the symbol ‘‘LOR’’. 

Restrictions on exercise and 

purchase of Warrants and/or 

New Shares in the United 

Kingdom, Italy, the United 

States, Germany and other 

jurisdictions ............... No arrangements have been made to offer any Warrants or New 

Shares to the public in any jurisdiction other than Luxembourg, 

France, Belgium, Spain and The Netherlands. See Chapter 9 

‘‘Notice to Investors’’ and Chapter 10 ‘‘Plan of Distribution’’. 

Placement .................. 

The Underwriters have agreed to subscribe at the Subscription 

Price to the number of New Shares which correspond to the 

Unexercised Warrants (the ‘‘Remaining New Shares’’). Such 

Remaining New Shares will be sold through a private placement to 

institutional investors outside the United States (or on the market 

as described below). In addition to the payment of the Subscription 

Price of such New Shares, the Underwriters will pay to Arcelor for 

on-payment to the holders of Unexercised Warrants an amount per 

Unexercised Warrant (the ‘‘Warrant Cash Payment’’) which will be 

the difference, if positive, between the Placement price (the 

‘‘Placement Price’’) of one Remaining New Share and the 

Subscription Price, multiplied by the exercise ratio, namely by 1/5, 

as five Warrants are necessary to subscribe one New Share. If the 

1

Clearing systems identification 

numbers .................. 

Termination ................. 

Use of proceeds .............. 

Taxation .................... 

Risk factors ................. 

above determination results in a negative or nil amount, the 

Warrant Cash Payment will be zero. 

The Placement is expected to last one trading day or less and is 

expected to take place on or about 22nd July, 2004 (provided that 

such duration may be extended to no later than 26th July, 2004). 

It is expected that the Placement will be carried out through a 

book-building process as developed by market practice and that the 

Placement Price will be determined by matching the offer of 

Remaining New Shares and demand for such Remaining New 

Shares by investors in accordance with such book-building process. 

If the size of the Placement is limited, as determined by the Joint 

Lead Managers, the Remaining New Shares may, however, be sold 

on the market, the Placement Price then being the average price of 

such sales. 

The identification references for the Shares are: 

• ISIN: LU0140205948 

• Common Code: 014020594 

• CIK Code: SVM 4590.31 

• Sedol Nr.: 7281875 FR 

In the event that the Underwriting Agreement is terminated under 

the conditions described in section 2.2.4, any exercise of Warrants 

will be automatically cancelled, no New Shares will be issued and 

all subscription monies will be returned to the relevant holders, 

without interest. No payment will then be due on account of the 

Warrant Cash Payment. However, prior trading in Warrants will not 

be affected or cancelled. 

Arcelor estimates that it will receive aggregate net proceeds of 

approximately EUR 1.14 billion from the Offering, after deducting 

underwriting commissions, estimated expenses and the 1% 

Luxembourg capital duty. 

Arcelor intends to use the net proceeds of the Offering: (i) to 

finance the acquisition of the shares of CST and Acesita as 

described in section 7.1 and, in particular to satisfy the 

consideration due in respect of (a) the CST Purchase Agreement, 

(b) the CVRD-CST Put and Call Agreement, (c) the Acesita-CST 

Put and Call Agreement and (d) the Acesita Put and Call 

Agreements amounting, in aggregate, to approximately 

EUR 600 million (at an exchange rate of EUR 1/US$1.20), (ii) to 

facilitate further acquisitions which are consistent with Arcelor’s 

strategy and value criteria, (iii) to maintain a strong financial 

profile and (iv) for general corporate purposes. 

To review the material Luxembourg, French, Belgian, Spanish and 

Dutch tax consequences of owning and disposing of Shares, you 

should refer to Chapter 8 ‘‘Taxation’’. 

Potential investors in the Shares should consult their own tax 

advisors concerning the Luxembourg, French, Belgian, Spanish, 

Dutch, U.S. and other tax consequences of the purchase, ownership 

and disposal of such Shares in light of their particular situation, as 

well as any consequences arising under the laws of any other taxing 

jurisdiction. 

Prior to making an investment decision, investors should read this 

Prospectus and, in particular, consider carefully the matters 

discussed under ‘‘Risk Factors’’ in section 4.17. 

2

Indicative Timetable 

25th June 

Meeting of the Arcelor Board of Directors resolving the issue of the New Shares 

and the bonus allocation of the Warrants. 

28th June 

Announcement by Arcelor of the Brazilian acquisition (see Chapter 7 ‘‘Transaction 

and Other Recent Developments’’) and the principle of the share capital increase 

(before market opening). 

Determination of the exercise price of the Warrants. 

Approval by the Luxembourg Stock Exchange of the Prospectus and issuance of 

the Certificates of Approval by the Luxembourg Commission de Surveillance du 

Secteur Financier. 

The French Autorité des Marchés Financiers (the ‘‘AMF’’) issues a mutual 

recognition certificate in respect of the Prospectus. 

The Dutch Autoriteit Financiële Markten is provided with, and it accepts, a 

Certificate of Approval of the Luxembourg Commission de Surveillance du Secteur 

Financier. 

29th June 

Announcement by Arcelor of the terms of the share capital increase (before 

market opening). 

The Belgian Commission Bancaire, Financière et des Assurances, and the Spanish 

Comisión Nacional del Mercado de Valores (the ‘‘CNMV’’) issue mutual recognition 

registration certificates in respect of the Prospectus. 

1st July 

Record Date for allocation of the Warrants. 

Creation and allocation of the Warrants (after market closure) for value 2nd July, 

2004. 

2nd July 

Delivery of Warrants and opening of the Exercise Period. 

Listing of the Warrants on the Luxembourg Stock Exchange, Euronext Paris, 

Euronext Brussels and the Spanish Stock Exchanges. 

13th July 

Last day of the Exercise Period and of the listing of the Warrants on the 

Luxembourg Stock Exchange, Euronext Paris, Euronext Brussels and the Spanish 

Stock Exchanges. 

22nd July (indicative) Placement. 

23rd July (indicative ) Notice to Holders of Warrant Cash Payment. 

27th July 

New Share 

Settlement and delivery of the New Shares issued as a result of the exercise of the 

Settlement Date Warrants and/or the Underwriting. 

Listing of the New Shares resulting from exercise of the Warrants and/or the 

Underwriting on the Luxembourg Stock Exchange, Euronext Paris, Euronext 

Brussels and the Spanish Stock Exchanges. 

29th July (indicative ) 

Warrant Cash Payment of the Warrant Cash Payment to Holders of Unexercised Warrants. 

Payment Settlement 

Date 

The above timetable and the dates shown elsewhere in this Prospectus in respect of the allocation, 

exercise, trading and settlement of the Warrants, the subscription of Remaining New Shares by the 

Underwriters and the payment of the Warrant Cash Payment are for illustrative purposes only and may be 

subject to change as a result of events outside Arcelor’s control which may delay or affect the successful 

outcome of the transaction. Arcelor will issue a public notice in case of any change in the above timetable 

(except in case of a change in the date or duration of the Placement). 

For additional information regarding the Offering, see Chapter 9 ‘‘Notice to Investors’’ and 

Chapter 10 ‘‘Plan of Distribution’’. 

3

CHAPTER 1 RESPONSIBILITY FOR THE CERTIFICATION OF THE ACCOUNTS 

1.1 RESPONSIBILITY FOR AUDITING THE ACCOUNTS OF ARCELOR 

Independent auditors: 

KPMG Audit, société civile 

31 Allée Scheffer 

L-2520 Luxembourg, Grand Duchy of Luxembourg. 

1.2 DECLARATIONS OF THE PERSONS RESPONSIBLE FOR AUDITING THE ACCOUNTS OF 

ARCELOR 

Please refer to Appendix I ‘‘Consolidated financial statements of Arcelor’’. 

4

CHAPTER 2 ISSUE AND LISTING OF THE WARRANTS AND THE NEW SHARES 

AND THE UNDERWRITING AND THE PLACEMENT OF NEW SHARES 

2.1 THE WARRANTS, THE NEW SHARES AND THE PLACEMENT 

2.1.1 Allocation of Warrants 

2.1.1.1 Description 

Bonus allocation by Arcelor to all its shareholders of 533,145,273 warrants (bons de souscription 

d’actions) (the ‘‘Warrants’’) at a ratio of one (1) Warrant per existing Arcelor Share, five (5) Warrants 

entitling the holder thereof (each a ‘‘Holder’’) to subscribe one (1) new Share of Arcelor (each, a ‘‘New 

Share’’ and together with all other New Shares, the ‘‘New Shares’’) at the price of EUR 11.00 per New 

Share (the ‘‘Subscription Price’’). 

2.1.1.2 Issue proceeds—Capital increase 

As a result of the exercise of all Warrants, including those allocated to Shares held by Arcelor and its 

direct and indirect subsidiaries (the ‘‘Arcelor Group’’ or the ‘‘Group’’), with the exception of the 

three (3) Warrants that cannot be exercised because of the exercise ratio, the number of New Shares issued 

would be 106,629,054 and the gross issue proceeds would amount to EUR 1,172,919,594, representing a 

share capital increase of EUR 533,145,270 and an allocation to the share premium reserve of EUR 

639,774,324. In case less than all Warrants capable of being exercised are in fact exercised, the New Shares 

which correspond to such unexercised Warrants will be subscribed by the Underwriters. 

2.1.1.3 Form—Registration 

The Warrants will be issued in registered form. Warrants issued in favour of shareholders holding their 

Shares through a financial intermediary will be delivered on 1st July, 2004 to the common depository of 

Clearstream Banking, société anonyme (‘‘Clearstream Luxembourg’’) and Euroclear Bank S.A./N.V. 

(‘‘Euroclear Bank’’), who will then credit their respective participants, including the French clearing system 

Euroclear France, the Spanish Liaison Entity (which will transfer the Warrants to the Spanish clearing 

system IBERCLEAR) and the Belgian clearing system CIK. Each of Euroclear France, IBERCLEAR and 

CIK shall then be responsible for crediting its own participants for value 2nd July, 2004. Warrants issued in 

favour of shareholders directly registered in the Arcelor shareholder register will be directly registered in 

the Warrant register maintained by Banque Générale du Luxembourg S.A. (‘‘BGL’’) on behalf of Arcelor 

(the ‘‘Warrant Register’’), for value 2nd July, 2004. Investors holding their Warrants through a financial 

intermediary cannot at any time register their Warrants directly in the Warrant Register. Retail investors 

directly registered in the Warrant Register wishing to sell their Warrants on the market may either instruct 

BGL to carry out that sale on their behalf or instruct BGL to deposit their Warrants into one of the 

clearing systems mentioned above in order to be credited to the account of their financial intermediary. 

Investors should note that such request will be processed on the business day after the business day of 

receipt of such a request. 

2.1.2 Allocation and subscription conditions 

2.1.2.1 Allocation beneficiaries; allocation rate 

The Warrants will be delivered at the ratio of one (1) Warrant per existing Share and will be allocated 

for value 2nd July, 2004 for the benefit of: 

• shareholders of Arcelor whose Shares are held through a financial intermediary on 1st July, 2004, 

after the close of trading on all the markets on which the Shares are listed (the ‘‘Record Date’’) and 

• shareholders directly registered in the Arcelor shareholder register at the close of business on the 

Record Date. 

Arcelor expects that Warrants allocated in respect of Shares held through financial intermediaries 

which have been purchased on or about the Record Date and are in the process of being settled will be 

allocated to the purchaser, subject however to local market practices or agreement to the contrary between 

the seller and the purchaser. 

Holders of Usinor shares tendering their shares under the Exchange Facility for the 30th June, 2004 

exercise date under such facility, will not be shareholders of record at the Record Date and will therefore 

not be entitled to an allocation of Warrants. In the context of the transaction described in this Prospectus, 

5

Usinor shareholders exercising their rights under the Exchange Facility for the 30th June, 2004 exercise 

date will nevertheless be allocated existing Shares with the corresponding Warrants attached. 

2.1.2.2 Exercise of the Warrants 

Investors who hold their Warrants through a financial intermediary must notify their decision to 

exercise their Warrants and give their irrevocable payment instructions to such financial intermediary 

before the end of the exercise period of the Warrants which begins on 2nd July, 2004 and ends on 

13th July, 2004 both dates inclusive (the ‘‘Exercise Period’’), such period also corresponding to the Warrant 

trading period. Such financial intermediaries will be required to notify the relevant local centralising agent 

during the centralisation period (see 2.2.3 ‘‘Centralisation procedure’’ below). Investors directly registered 

in the Warrant Register must notify BGL (the ‘‘Global Centralising Agent’’) of their decision to exercise 

their Warrants no later than 13th July, 2004. Any such exercise decision will be irrevocable. 

The exercise of the Warrants will take effect on the settlement date of the New Shares, which will take 

place on 27th July, 2004 (the ‘‘New Shares Settlement Date’’). The Subscription Price of the New Shares to 

be issued upon the exercise of Warrants (the ‘‘Subscription Monies’’) must be paid in full to the order of 

the relevant local Centralising Agent by no later than 26th July, 2004 or such later date as may be agreed 

with the relevant local Centralising Agent in accordance with market practice. Failure to pay the 

Subscription Price on exercise of Warrants will cause such Warrants to be deemed unexercised. 

In the event that the Underwriting Agreement (as defined below) is terminated under the conditions 

described in section 2.2.4, any exercise of Warrants will be automatically cancelled, no New Shares will be 

issued and all Subscription Monies will be returned to the relevant Holders, without interest. No payment 

will then be due on account of the Warrant Cash Payment described below. However, prior trading in 

Warrants will not be affected or cancelled. 

2.1.2.3 Cash Payment of Unexercised Warrants 

The subscription rights attaching to Warrants which remain unexercised at the end of the Exercise 

Period (the ‘‘Unexercised Warrants’’) will lapse and the Holders of the Unexercised Warrants will 

thereupon be entitled to the Warrant Cash Payment described below. 

Under the terms of the Underwriting Agreement described below, the Underwriters have agreed to 

subscribe at the Subscription Price to the number of New Shares which correspond to the Unexercised 

Warrants (the ‘‘Remaining New Shares’’) (the ‘‘Underwriting’’). Such Remaining New Shares will be sold 

through a private placement to institutional investors outside the United States (or on the market as 

described below) (the ‘‘Placement’’). In addition to the payment of the Subscription Price of such New 

Shares, the Underwriters will pay to Arcelor for on-payment to the Holders of Unexercised Warrants an 

amount per Unexercised Warrant (the ‘‘Warrant Cash Payment’’) which will be the difference, if positive, 

between the Placement price (the ‘‘Placement Price’’) of one Remaining New Share (which will be 

determined as described below) and the Subscription Price, multiplied by the exercise ratio, namely by 

1/5, as 5 Warrants are necessary to subscribe 1 New Share. If the above determination results in a negative 

or nil amount, the Warrant Cash Payment will be zero. 

It is expected that the Placement will be carried out through a book-building process as developed by 

market practice and that the Placement Price will be determined by matching the offer of Remaining New 

Shares and demand for such Remaining New Shares by investors in accordance with such book-building 

process. If the size of the Placement is limited as determined by the Joint Lead Managers, the Remaining 

New Shares may, however, be sold on the market, the Placement Price then being the average price of such 

sales. 

The amount of the Warrant Cash Payment will be determined following completion of the Placement, 

which is currently expected to occur on or about 22nd July, 2004 (subject to the duration of the Placement 

being shortened or extended to no later than 26th July, 2004). The Warrant Cash Payment payable in 

respect of Unexercised Warrants held through financial intermediaries will be paid by the Underwriters to 

Arcelor and by Arcelor to the Global Centralising Agent in order to be credited on or about 29th July, 

2004 (the ‘‘Warrant Cash Payment Settlement Date’’) to the Holders of the Unexercised Warrants held 

through a financial intermediary. The Warrant Cash Payment payable to Holders of Unexercised Warrants 

directly registered in the Warrant Register will be paid by the Underwriters to Arcelor and by Arcelor 

directly to such Holders on or about the Warrant Cash Payment Settlement Date. 

6

2.1.3 Listing 

2.1.3.1 Listing of the Warrants 

The Warrants are, subject to their issue, admitted to listing on the Luxembourg Stock Exchange as 

from 2nd July to 13th July, 2004. Subject to their admission, which has been applied for, the Warrants will 

also be listed on the Premier Marché of Euronext Paris S.A. (‘‘Euronext Paris’’), the Premier Marché of 

Euronext Brussels S.A./N.V. (‘‘Euronext Brussels’’) and on the Bolsas de Valores of Madrid, Barcelona, 

Bilbao and Valencia and included in the ‘‘SIBE’’ Interconnection Electronic System (the ‘‘Spanish Stock 

Exchanges’’) from 2nd July to 13th July, 2004, both dates inclusive, which also corresponds to the period 

during which Holders must notify the financial intermediary through which their Warrants are held (for 

further notification to the relevant local centralising agent during the centralisation period), or, in the 

event of Warrants directly registered in the Warrant Register, the Global Centralising Agent, of their 

decision to exercise their Warrants. 

The Warrants have been allocated the following identification numbers: 

• ISIN: LU0195882385 

• Common Code (Clearstream Luxembourg/Euroclear Bank): 019588238 

2.1.3.2 Theoretical value of the Warrants 

Since the Warrants are only exercisable during a very short period, their theoretical value has been 

calculated in the same way as that of a preferential subscription right. On the basis of the closing price of 

the Share on Euronext Paris on 28th June 2004, i.e., EUR 13.71, the theoretical value of a Warrant is 

EUR 0.45. 

2.1.3.3 Listing of the New Shares 

The New Shares are admitted to listing on the Luxembourg Stock Exchange as from the New Share 

Settlement Date, i.e., 27th July, 2004, subject to their issue. All such New Shares, subject to their 

admission, which has been applied for, will be listed on Euronext Paris, Euronext Brussels and on the 

Spanish Stock Exchanges as from the New Shares Settlement Date. 

2.1.3.4 Rights attaching to the New Shares 

The New Shares will be immediately fungible with the existing Shares and will entitle their holders to 

all dividends to be declared after their date of issue in respect of the 2004 and subsequent financial years. 

2.1.4 Placement 

The Placement will be made by way of an international private placement outside the United States, 

pursuant to Regulation S of the 1933 U.S. Securities Act, as amended (the ‘‘Securities Act’’). 

The Remaining New Shares offered in the Placement will derive from the subscription by the 

Underwriters, pursuant to the Underwriting Agreement, of the New Shares corresponding to the 

Unexercised Warrants. 

The Placement is expected to last one trading day or less and is expected to take place on or about 

22nd July, 2004 (provided that such duration may be extended to no later than 26th July, 2004). 

2.1.5 Other information 

2.1.5.1 Intentions of the Company regarding Warrants allocated to Shares held by the Group 

Warrants will be allocated to all the Shares held by the Arcelor Group. The Group does not intend to 

exercise such Warrants but intends to sell them on the market. 

2.1.5.2 Percentage in capital and voting rights represented by the New Shares 

On the basis of the decision by Arcelor to sell the Warrants allocated to Shares held by the Group and 

taking into account the three Warrants which cannot be exercised given the exercise ratio, the maximum 

number of New Shares that may be issued upon exercise of the Warrants and/or as a result of the 

Underwriting is 106,629,054, representing 16.7% of Arcelor’s share capital after the share capital 

increase (1) . Taking into account the 29,149,906 Shares held by the Group as at 31st May, 2004 for which 

7

voting rights are suspended as long as they are owned by the Group, the New Shares will represent 17.5% 

of the voting rights in Arcelor after the share capital increase. (1) 

2.1.5.3 Intentions of the principal shareholders 

To the knowledge of Arcelor, none of the shareholders of Arcelor holding to its knowledge more than 

2.5% of its share capital has indicated whether it intends to directly or indirectly exercise the Warrants 

allocated to it. 

2.1.5.4 Termination of the exercise of Warrants 

The exercise of the Warrants and the issue of the underlying New Shares are contingent upon the 

Underwriting Agreement not being terminated as described in section 2.2.4 below. 

Consequently, if the Underwriting Agreement is terminated, any exercise of Warrants will be 

cancelled, the Warrants will be forfeited, no payment will be due on account of the Warrant Cash Payment, 

no New Shares will be issued and all Subscription Monies will be returned to the relevant Holders, without 

interest. However, prior trading in Warrants will not be affected or cancelled. 

In the event the Underwriting Agreement is terminated, Arcelor will notify Holders by way of a press 

release. 

2.1.6 Maintenance of Holders’ rights 

Arcelor undertakes not to carry out financial transactions requiring an adjustment to the Warrant 

Holders’ rights so long as any Warrants remain outstanding. 

2.1.7 Applicable law and jurisdiction 

The Warrants and the New Shares are governed by Luxembourg law and any dispute or suit relating to 

the Warrants, their exercise, the New Shares or the Warrant Cash Payment will be subject to the exclusive 

jurisdiction of the Luxembourg courts. 

2.2 STRUCTURE OF THE TRANSACTION 

2.2.1 Indicative Timetable 

25th June 

Meeting of the Arcelor Board of Directors resolving the issue of the New Shares 

and the bonus allocation of the Warrants. 

28th June 

Announcement by Arcelor of the Brazilian acquisition (see Chapter 7 ‘‘Transaction 

and Other Recent Developments’’) and the principle of the share capital increase 

(before market opening). 

Determination of the exercise price of the Warrants. 

Approval by the Luxembourg Stock Exchange of the Prospectus and issuance of 

the Certificates of Approval by the Luxembourg Commission de Surveillance du 

Secteur Financier. 

The French Autorité des Marchés Financiers (the ‘‘AMF’’) issues a mutual 

recognition certificate in respect of the Prospectus. 

The Dutch Autoriteit Financiële Markten is provided with, and it accepts, a 

Certificate of Approval of the Luxembourg Commission de Surveillance du Secteur 

Financier. 

29th June 

Announcement by Arcelor of the terms of the share capital increase (before 

market opening). 

The Belgian Commission Bancaire, Financière et des Assurances and the Spanish 

Comisión Nacional del Mercado de Valores (the ‘‘CNMV’’) issue mutual recognition 

registration certificates in respect of the Prospectus. 

(1) On the assumption that no OCEANE 2005 and OCEANE 2017 are converted into new Shares, the absence of exercise of stock 

options for new Shares and the absence of delivery of new Shares following the tender of Usinor shares under the Exchange 

Facility (see section 3.2.2 below). 

8

1st July 

Record Date for allocation of the Warrants. 

Creation and allocation of the Warrants (after market closure) for value 2nd July, 

2004. 

2nd July 

Delivery of Warrants and opening of the Exercise Period. 

Listing of the Warrants on the Luxembourg Stock Exchange, Euronext Paris, 

Euronext Brussels and the Spanish Stock Exchanges. 

13th July 

Last day of the Exercise Period and of the listing of the Warrants on the 

Luxembourg Stock Exchange, Euronext Paris, Euronext Brussels and the Spanish 

Stock Exchanges. 

22nd July (indicative) Placement. 

23rd July (indicative ) Notice to Holders of Warrant Cash Payment. 

27th July 

New Share Settlement Date Settlement and delivery of the New Shares issued as a 

result of the exercise of the Warrants and/or the Underwriting. 

Listing of the New Shares resulting from exercise of the Warrants and/or the 

Underwriting on the Luxembourg Stock Exchange, Euronext Paris, Euronext 

Brussels and the Spanish Stock Exchanges. 

29th July (indicative ) Warrant Cash Payment Settlement Date Payment of the Warrant Cash Payment to 

Holders of Unexercised Warrants. 

The above timetable and the dates shown elsewhere in this Prospectus in respect of the allocation, 

exercise, trading and settlement of the Warrants, the subscription of Remaining New Shares by the 

Underwriters and the payment of the Warrant Cash Payment are for illustrative purposes only and may be 

subject to change as a result of events outside Arcelor’s control which may delay or affect the successful 

outcome of the transaction. Arcelor will issue a public notice in case of any change in the above timetable 

(except in case of a change in the date or duration of the Placement). Notice to Holders will be published 

as follows: 

• in Luxembourg: in one or more newspapers with general circulation in Luxembourg, expected to 

include the Luxemburger Wort; 

• in Belgium: in one or more newspapers with general circulation in Belgium, expected to include 

l’Echo and De Tijd; 

• in France: in one or more newspapers with general circulation in France, expected to include La 

Tribune; 

• in Spain: in one or more newspapers with general circulation in Spain, expected to include 

Expansión; and 

• in The Netherlands: in one or more newspapers with general circulation in The Netherlands, 

expected to include Het Financieele Dagblad. 

2.2.2 Information for assessment of the exercise price 

In the event of the issue of 106,629,054 New Shares for a total gross amount of EUR 1,172,919,594 

(including share premium), based on an exercise price of EUR 11.00 per New Share, Arcelor’s 

consolidated net equity (Group share) as at 31st December, 2003, adjusted to take into account (i) the 

exchange, in the first quarter of 2004 (see section 3.2.3), against treasury Shares of 22,490,577 

OCEANE 2006 for EUR 325 million and (ii) the allocation of negative goodwill (EUR 694 million) from 

intangible assets and investments accounted for under the equity method and investments accounted under 

9

equity method to net equity, in accordance with IFRS 3, applied by the Group as from 1st January, 2004, 

would be as follows: 

Consolidated net equity of Arcelor (Group share) 

As at 31st December, 2003 

Adjusted to take into 

Before the share account the share 

capital increase capital increase 

Net equity (Group share) (EUR millions) (1) .................. 7,752 8,925 

Number of Shares (2) ................................... 500,886,584 607,515,638 

Net equity (Group share) per Share (EUR) (1) ................ 15.48 14.69 

(1) Adjusted as described above. 

(2) Number of Shares comprising the share capital as at 31st December, 2003, adjusted to (i) exclude Shares held at such date by 

the Group not considered in consolidated net equity in application of IFRS rules, and (ii) include the delivery of 22,490,577 

treasury Shares pursuant to exchange requests by OCEANE 2006 holders, which occurred in the first quarter of 2004 (see 

section 3.2.3). 

2.2.3 Centralisation procedure 

The following centralisation procedures will apply: 

• for Warrants held through a direct participant of Clearstream Luxembourg or Euroclear Bank, each 

of Clearstream Luxembourg and Euroclear Bank must (i) submit a global request to BGL, the local 

centralising agent in Luxembourg (in this capacity, the ‘‘Luxembourg Centralising Agent’’), no later 

than 20th July, 2004 at 4.00 p.m. (local time), (ii) deliver Warrants thus exercised no later than 

21st July, 2004 at 10:00 a.m. (local time) and (iii) make payment of the related Subscription Monies 

no later than for value 26th July, 2004 or as otherwise agreed with the local Centralising Agent; 

• for Warrants held through a direct participant of Euroclear France, each of the financial 

intermediaries that is a member of Euroclear France and has received a Warrant exercise notice 

must (i) submit a global request to BNP Paribas Securities Services, the local centralising agent in 

France (the ‘‘French Centralising Agent’’) no later than 20th July, 2004 at 4.00 p.m. (local time), 

(ii) deliver the Warrants thus exercised no later than 21st July, 2004 at 10:00 a.m. (local time) and 

(iii) make payment of the related Subscription Monies no later than for value 26th July, 2004 or as 

otherwise agreed with the local Centralising Agent; 

• for Warrants held through a direct participant of IBERCLEAR, each of the financial intermediaries 

that is a participant entity of IBERCLEAR and has received a Warrant exercise notice must 

(i) submit a global request to Banco Bilbao Vizcaya Argentaria, S.A., the local centralising agent in 

Spain (the ‘‘Spanish Centralising Agent’’), no later than 20th July, 2004 at 4.00 p.m. (local time), 

(ii) deliver the Warrants thus exercised no later than 21st July, 2004 at 10:00 a.m. (local time) and 

(iii) make payment of the related Subscription Monies no later than for value 26th July, 2004 or as 

otherwise agreed with the local Centralising Agent; and 

• for Warrants held through a direct participant of CIK, each of the intermediaries that is a member 

of CIK and has received a Warrant exercise notice must (i) submit a global request to Fortis 

Banque, the local centralising agent in Belgium (the ‘‘Belgian Centralising Agent’’), no later than 

20th July 2004 at 12:00 noon (local time), (ii) deliver the Warrants thus exercised no later than 

20th July, 2004 at 12.00 noon (local time) and (iii) make payment of the related Subscription 

Monies no later than for value 26th July, 2004 or as otherwise agreed with the local Centralising 

Agent. 

All Warrants exercise notices will be centralised by the Global Centralising Agent. Such global 

centralisation will take place on 22nd July, 2004. 

Holders of Warrants directly registered on the Warrant Register will need to return the Warrant 

exercise notice, which will be sent to them by mail and which may be obtained from the Global 

Centralising Agent, to the Global Centralising Agent by posting it no later than 13th July, 2004 and will 

need to make arrangements by that same date for the payment of the Subscription Price to the Global 

Centralising Agent for value no later than 20th July, 2004 unless otherwise agreed with the Global 

Centralising Agent. Further details will be set out in the Warrant exercise notice. 

10

The Centralising Agents are: 

• Global Centralising Agent and 

Luxembourg Centralising Agent: 

• French Centralising Agent: 

• Belgian Centralising Agent: 

• Spanish Centralising Agent: 

Banque Générale du Luxembourg S.A. 

Listing and Agency Administration 

50, avenue John F. Kennedy 

L-2951 Luxembourg 

Grand Duchy of Luxembourg 

Contact: Mariette Becker 

Tel: (+352) 4242 2996 

Fax: (+352) 4242 2887 

Email: mariette.becker@bgl.lu 

Guy Valentiny 

Tel: (+352) 4242 2356 

Fax: (+352) 4242 2887 

Email: guy.valentiny@bgl.lu 

BNP Paribas Securities Services 

Les Collines de l’Arche 

92057 La Défense Cedex 

France 

Contacts: 

Chargé d’affaires: Anthony Martin 

Tel: (+33) 1 55 77 95 55 

Email: anthony.martin@bnpparibas.com 

Montage: Géraud Haissat 

Tel: (+33) 1 55 77 88 91 

Email: géraud.haissat@bnpparibas.com 

Secteur Opérations Sur Titres: 

Frédéric Léon 

Tel: (+33) 1 40 14 02 25 

Email: frederic.leon@bnpparibas.com 

Fortis Bank 

Documentation Office Investment Banking 

Montagne du Parc 3 

B-1000 Bruxelles 

Belgium 

Contact: Bernadette Gouverneur 

Tel: (+32) 2 565 57 54 

Fax: (+32) 2 565 53 90 

Email: bernadette.gouverneur@fortisbank.com 

BBVA 

Clara del Rey no 26 

28002 Madrid 

Spain 

Contact: Fernando Martin/Marian Ojea 

Tel: (+34) 91 537 89 21/(+34) 91 374 70 07 

Fax: (+34) 91 537 87 53/(+34) 91 374 69 69 

Email: fmartin@grupobbva.com/ 

marian.ojea@grupobbva.com 

2.2.4 Underwriting Agreement 

An underwriting agreement (the ‘‘Underwriting Agreement’’) was entered into on 28th June, 2004, in 

connection with the transaction described herein pursuant to which the Underwriters have agreed to 

subscribe to the number of New Shares which correspond to the Unexercised Warrants at the Subscription 

Price. 

11

The Underwriting Agreement may be terminated by the Joint Lead Managers by notice to the 

Company at any time prior to the closing if any of the following has occurred: 

(A) since the respective dates as of which information is given in the Prospectus, any material adverse 

change or any development involving a prospective material adverse change in the financial 

condition, of the Group or the earnings, business, management, properties, assets, rights or 

operations of the Group, whether or not arising in the ordinary course of business; 

(B) any outbreak or escalation of hostilities or declaration of war or national emergency or other 

national or international calamity or crisis or change in economic or political conditions if the 

effect of such outbreak, escalation, declaration, emergency, calamity, crisis or substantial change 

on the financial markets of Luxembourg, France, Belgium, Spain or the United Kingdom would, 

in the judgment of the Joint Lead Managers, after consultation with the Company, make it 

impracticable or inadvisable to market the New Shares or to enforce or settle contracts for the 

sale of the Shares; 

(C) suspension of trading in securities generally on any of the Luxembourg Stock Exchange, Euronext 

Paris, Euronext Brussels or the Spanish Stock Exchanges, or limitation on prices (other than 

limitations on hours or numbers of days of trading) for all or substantially all securities on any 

such Exchange; 

(D) the enactment, publication, decree or other promulgation of any statute, regulation, rule or order 

of any court or other governmental authority in Luxembourg, Belgium, France, Spain, the United 

Kingdom, Germany, the United States, Brazil or Italy which in the reasonable judgment of the 

Joint Lead Managers, following consultation with the Company to the extent practicable, will 

materially and adversely affect the business or operations of the Group; 

(E) declaration of a banking moratorium for more than 1 day by Luxembourg, France, Belgium, 

Spain or the United Kingdom; 

(F) any downgrading (which shall not include placement on any watch list for possible downgrading) 

in the rating of the Company’s debt securities by any internationally recognised statistical rating 

organisation; 

(G) the suspension of trading of the Shares on any of the Luxembourg Stock Exchange, Euronext 

Paris, Euronext Brussels or the Spanish Stock Exchanges for more than 2 days; and 

(H) the taking of any action by any governmental body or agency in respect of its monetary or fiscal 

affairs which in the reasonable judgment of the Joint Lead Managers, after consultation with the 

Company, has a material adverse effect on the securities markets in Luxembourg, France, 

Belgium, or Spain and that would seriously prejudice the sale or delivery of the Remaining New 

Shares. 

In addition, the Underwriting Agreement may be terminated in case of a default by one or more 

Underwriters to subscribe for the portion of the Remaining New Shares such Underwriter(s) have 

committed to subscribe to and the aggregate number of Remaining New Shares with respect to which such 

default occurs exceeds 15% of the total number of New Shares. 

2.2.5 Determination of the Placement Price 

If a book-building process is carried out, the Placement Price will be determined on the basis of 

matching supply and demand for the Remaining New Shares based on the following market criteria: 

• the price sensitivity of requests expressed by investors; 

• the capacity of the selected investors to ensure orderly market development; 

• the order of arrival of requests from investors; and 

• the quantity requested. 

If no book-building is required and the New Shares are sold on the market, the Placement Price will 

be the average price of such sales. 

2.3 IMPACT ON THE SITUATION OF SHAREHOLDERS 

To the extent the Group will sell the Warrants to be allocated to the Shares held by it, and taking into 

account that three Warrants are unable to be exercised because of the exercise ratio, the impact on the 

12

situation of a shareholder as a result of the issue of the 106,629,054 New Shares to be issued as a result of 

the exercise of all the Warrants capable of being exercised and/or the Underwriting will be the following: 

2.3.1 Impact on a shareholder’s ownership interest in the share capital of Arcelor 

Impact on the ownership interest in the share capital of Arcelor of a shareholder holding 1% of the 

subscribed share capital before the issue of the New Shares, who has decided not to exercise the Warrants 

allocated to it, based on the number of Shares in issue as at 31st May, 2004: 

Shareholder’s ownership 

interest as a % of the 

Arcelor subscribed share 

capital 

Before the share capital increase ................................... 1% 

After the share capital increase .................................... 0.833% 

Impact on the ownership interest in the share capital of Arcelor of a shareholder holding 1% of the 

subscribed share capital before the issue of the New Shares, who has decided not to exercise the Warrants 

allocated to it, based on the number of Shares in issue as at 31st May, 2004, assuming the conversion into 

new Shares of all outstanding OCEANE 2005 and OCEANE 2017 without taking into account any 

adjustment of the conversion ratio which would result from the bonus allocation of the Warrants, and the 

delivery of new Shares to Usinor shareholders tendering all Usinor shares not yet held by the Group under 

the Exchange Facility: 

Shareholder’s ownership 

interest as a % of the 

subscribed Arcelor share 

capital 

Before dilution and share capital increase ............................. 1% 

After dilution and share capital increase .............................. 0.756% 

2.3.2 Impact on shareholdings and voting rights 

Shareholdings based on the number of Shares in issue as at 31st May, 2004, before the share capital 

increase: 

Number of 

Number of 

voting 

Shares % rights (1) % 

Luxembourg State ............................. 31,632,606 5.93 31,632,606 6.28 

Corporación JMAC BV......................... 22,076,936 4.14 22,076,936 4.38 

Walloon region (Sogepa) ........................ 20,064,144 3.76 20,064,144 3.98 

Public (2) .................................... 430,221,681 80.70 430,221,681 85.36 

Group ..................................... 29,149,906 5.47 — 0 

Total ...................................... 533,145,273 100.00 503,995,367 100.00 

(1) Each Share, except the Shares held by the Group, entitles the holder to one vote. 

(2) Estimate as at the above date. 

Shareholdings, based on the number of Shares in issue as at 31st May, 2004, after the share capital 

increase, assuming none of the three major shareholders nor the Group have subscribed to or acquired any 

New Shares: 

Number of 

Number of 

voting 





Public (2) .................................... 536,850,735 83.91 536,850,735 87.92 

Group ..................................... 29,149,906 4.56 — 0.00 

Total ...................................... 639,774,327 100.00 610,624,421 100.00 


13


Shareholdings, based on the number of Shares in issue as at 31st May, 2004, after the share capital 

increase and assuming (i) none of the three major shareholders nor the Group have subscribed to or 

acquired any New Shares, (ii) the conversion into new Shares of all outstanding OCEANE 2005 and 

OCEANE 2017 without taking into account any adjustment of the conversion ratio which would result 

from the bonus allocation of the Warrants, and (iii) the delivery of new Shares to Usinor shareholders 

tendering all Usinor shares not yet held by the Group under the Exchange Facility: 

Number of 

Number of 

voting 





Public (2) .................................... 536,850,735 76.18 536,850,735 79.46 

Group ..................................... 29,149,906 4.14 — 0.00 

Ex-holders of OCEANE 2005 and OCEANE 2017 ..... 63,684,727 9.04 63,684,727 9.43 

Ex-holders of Usinor shares ...................... 1,299,197 0.18 1,299,197 0.19 

Total ...................................... 704,758,251 100.00 675,608,345 100.00 



2.3.3 Impact on a shareholder’s share in consolidated net equity 

Impact on the share in consolidated net equity (Group share) of an Arcelor shareholder who has 

decided not to exercise the Warrants allocated to it, based on consolidated net equity (Group share) as at 

31st December, 2003 adjusted to take into account (i) the exchange, in the first quarter of 2004 (see 

section 3.2.3.), against treasury Shares of 22,490,577 OCEANE 2006 for EUR 325 million and (ii) the 

allocation of negative goodwill (EUR 694 million) from intangible assets and investments accounted under 

equity method to net equity, in accordance with IFRS 3, applied by the Group as from 1st January, 2004: 

Consolidated net equity 

Share in consolidated net 

(Group share) in Number of Shares equity (Group share) in 

EUR million (1) considered EUR (1) 

Before the share capital increase ...... 7,752 500,886,584 (2) 15.48 

After the share capital increase (3) ...... 8,925 607,515,638 14.69 

(1) As at 31st December, 2003, adjusted as described above. 


the Group not considered in consolidated net equity in application of IFRS rules, and (ii) include the delivery of 22,490,577 

treasury Shares pursuant to exchange requests by OCEANE 2006 holders, which occurred in the first quarter of 2004 (see 

section 3.2.3). 

(3) Based on gross issue proceeds. 

Impact on the share in consolidated net equity (Group share) of an Arcelor shareholder who has 

decided not to exercise the Warrants allocated to it based on consolidated net equity (Group share) as at 

31st December, 2003 adjusted to take into account (i) the exchange, in the first quarter of 2004 (see 

section 3.2.3.), against treasury Shares of 22,490,577 OCEANE 2006 for EUR 325 million and (ii) the 

allocation of negative goodwill (EUR 694 million) from intangible assets and investments accounted under 

equity method to net equity, in accordance with IFRS 3, applied by the Group as from 1st January, 2004, 

and assuming the conversion into new Shares of all outstanding OCEANE 2005 and OCEANE 2017 

without taking into account any adjustment of the conversion ratio which will result from the bonus 

allocation of the Warrants (resulting in an aggregate increase of consolidated net equity (Group share) of 

EUR 1,138 million), and the delivery of new Shares to Usinor shareholders tendering all their Usinor 

14

shares not yet held by the Group under the Exchange Facility (resulting in an increase of consolidated net 

equity (Group share) of EUR 17.8 million): 

Consolidated net equity 

Share in consolidated net 

(Group share) in Number of Shares equity (Group share) in 

EUR million (1) considered EUR (1) 

Before the share capital increase ...... 8,907 565,870,508 (2) 15.74 

After the share capital increase (3) ...... 10,080 672,499,562 14.99 

(1) As at 31st December, 2003, adjusted as described above. 


the Group not considered in consolidated net equity in application of IFRS rules, (ii) include the delivery of 22,490,577 treasury 

Shares pursuant to exchange requests by OCEANE 2006 holders, which occurred in the first quarter of 2004 (see section 3.2.3), 

(iii) include the delivery of 63,684,727 new Shares upon conversion of OCEANE 2005 and OCEANE 2017 (without taking into 

account any adjustment of the conversion ratio which will result from the bonus allocation of the Warrants) and (iv) include the 

delivery of 1,299,297 new Shares to Usinor shareholders under the Exchange Facility. 

(3) Based on gross issue proceeds. 

2.4 USE OF PROCEEDS 

It is estimated that the net cash proceeds of the Offering will be approximately EUR 1.14 billion after 

deducting underwriting commissions, estimated expenses and the 1% Luxembourg capital duty. 

Arcelor intends to use the net proceeds of the Offering: 

(i) to finance the acquisition of the shares of CST and Acesita as described in section 7.1, including 

the consideration due in respect of (a) the CST Purchase Agreement, (b) the CVRD-CST Put 

and Call Agreement, (c) the Acesita-CST Put and Call Agreement and (d) the Acesita Shares 

Put-Call Agreements, amounting, in aggregate, to approximately EUR 600 million (at an 

exchange rate of EUR 1/US$1.20), 

(ii) to finance further acquisitions which are consistent with Arcelor’s strategy and value criteria, 

(iii) to maintain a strong financial profile, and 

(iv) for general corporate purposes. 

2.5 SHARE PRICE INFORMATION 

The initial listing of the Arcelor share was on 18th February, 2002. The Share prices in euros on 

Euronext Paris S.A. over the periods indicated were as follows: 

Maximum closing Minimum closing 

Closing average share price share price 

2002* .................................... 13.26 16.60 8.40 

2003 ..................................... 10.97 13.82 7.87 

January 2004 .............................. 14.20 14.99 13.45 

February 2004 .............................. 14.64 15.26 14.11 

March 2004 ............................... 14.44 15.44 13.40 

April 2004 ................................ 14.54 15.17 13.84 

May 2004 ................................. 13.46 14.25 12.74 

June 2004** ............................... 13.46 13.91 13.10 

2004 ** .................................. 14.12 15.44 12.74 

* as from 18th February, 2002, initial listing of the Arcelor share 

** until June 28, 2004 

15

CHAPTER 3 GENERAL INFORMATION CONCERNING ARCELOR AND ITS CAPITAL 

3.1 GENERAL INFORMATION CONCERNING ARCELOR 

3.1.1 Name and registered office 

Name: Arcelor 

Registered and head office: 

19, avenue de la Liberté 


3.1.2 Legal form 

The Company is a société anonyme incorporated under the laws of Luxembourg and is registered in 

the Luxembourg register of commercial companies under number B 82.454. 

3.1.3 Date of incorporation and duration 

The Company was incorporated on 8th June, 2001 for an unlimited duration. The articles of 

association were published in the Mémorial C of 24th September, 2001 and 11th October, 2001. 

The articles of association have been amended by deeds dated 11th and 12th December, 2001 and by 

deeds dated 15th February, 2002, 18th March, 2002, 31st October, 2002, 4th February, 2003, 1st July, 2003, 

3rd October, 2003, 17th December, 2003 which have been published in the Mémorial C respectively on 

27th December, 2001, 11th March, 2002, 8th April, 2002, 25th November, 2002, 14th March, 2003, 

18th July, 2003, 28th October, 2003 and 23rd January, 2004. 

3.1.4 Object 

In accordance with article 3 of the articles of association, the object of Arcelor is the manufacturing 

and processing of, and trading in, steel, steel products and other metal products, as well as all products and 

materials involved in their manufacturing, processing and trading and all industrial and commercial 

activities directly or indirectly related to these objects, including research activities and the creation, 

acquisition, holding, exploitation and sale of patents, licences, know-how and of intellectual and industrial 

property generally. 

The Company may realise this object either directly or by the creation of companies, the acquisition, 

holding or taking of participations in any company or partnership, and the participation in any associations, 

interest groups and joint ventures. 

More generally, the object of Arcelor includes the holding of participations, in any form whatsoever, 

in any companies or partnerships and the acquisition by purchase, subscription or any other means, as well 

as the transfer by sale, exchange or otherwise, of shares, bonds, debentures, notes and other securities and 

instruments of any kind. 

It may grant assistance to affiliated companies and take any controlling and supervisory measures in 

respect of any such companies. 

It may carry out any operation or transaction, whether commercial, financial or industrial, which it 

may deem directly or indirectly necessary or useful for the fulfilment and development of its object. 

3.1.5 Inspection of legal and financial documents—Notices to shareholders 

The articles of association of Arcelor, in French and an English translation thereof, may be inspected 

at its registered office. In case of discrepancy, the French version prevails. 

The articles of association are also lodged, in French, with the registre du commerce et des sociétés of 

Luxembourg in Luxembourg, with the greffe du tribunal de commerce of Brussels, with the greffe du tribunal 

de commerce of Paris and, in Spain (together with a Spanish translation), with the CNMV, the Spanish 

Stock Exchanges and the Spanish Liaison Entity. 

Arcelor publishes consolidated and unconsolidated financial statements for each financial year, 

consolidated interim financial statements for the first six months of each financial year and quartlerly 

financial data as at the end of the first and third quarters. 

16

The annual report, the consolidated and the unconsolidated annual accounts for the year ended 

31st December, 2003 and the first quarter results for 2004, and the consolidated and unconsolidated 

annual accounts, as well as the semi-annual and quarterly financial data, published by Arcelor for 

subsequent years or periods may be inspected at its registered office, where a copy may be obtained. 

Unconsolidated annual accounts and the consolidated accounts are also lodged with the trade and 

companies’ register in Luxembourg, in Belgium with the Banque Nationale de Belgique, and in France 

with the AMF. In Spain, these documents and the semi-annual and quarterly financial data will be lodged 

with the CNMV, the Spanish Stock Exchanges and with the Spanish Liaison Entity. 

Notices to shareholders will be published in Luxembourg in one or more of the major daily 

Luxembourg newspapers. Notices to shareholders shall also be published in one or more Belgian, Spanish 

and French newspapers of national circulation (see also section 3.2.6 ‘‘General meetings of the 

shareholders’’). 

3.1.6 Listing 

The existing Shares of Arcelor are listed on the Luxembourg Stock Exchange, Euronext Brussels, 

Euronext Paris and the Spanish Stock Exchanges. 

3.1.7 Accounting year 

The accounting year begins on 1st January of each year and ends on 31st December of the same year. 

3.1.8 Allocation of profits 

Luxembourg law and the articles of association provide that 5% of the annual net profits of Arcelor 

shall be allocated to the reserve required by law. This allocation shall cease to be required once such 

reserve shall have reached 10% of the subscribed capital of Arcelor. This allocation will again be required 

if for any reason the legal reserve falls below that threshold. 

The general meeting of the shareholders, upon proposal of the Board of Directors, shall determine 

how the remainder of the annual net profits shall be allocated: 

• a global amount shall be allocated to the Board of Directors as directors’ emoluments. This amount 

may not be less than EUR 1,000,000 (if profits are not sufficient, that amount shall be treated 

wholly or in part as expenses); and 

• the balance shall be distributed in the form of dividends to the shareholders, allocated to reserves or 

carried forward. 

Subject to the conditions laid down by law, Arcelor may, upon decision of the Board of Directors, 

distribute interim dividends if it appears that, on the basis of an accounting statement, it has sufficient own 

funds available for distribution. The interim dividends may not exceed the profit made since the end of the 

last accounting year increased by any profits carried forward and distributable reserves (including 

distributable share issue premiums) and decreased by losses made since the end of the last accounting year, 

any carried forward losses and any sums which have to be allocated to reserve pursuant to legal 

requirements or the articles of association. 

Dividends will be distributed to shareholders in proportion of the number of Shares held. 

Dividends payable on Shares of Arcelor directly registered in the register of Shares shall be directly 

paid to the persons in the name of which the Shares are registered. As long as a shareholder holds his 

Shares in Arcelor through the intermediary of a securities settlement system or a participant in such 

system, he will receive his dividends through such system or such participant and in order to receive that 

dividend will have to comply with the rules of that system. 

Any dividends not claimed within five years after payment thereof will be time-barred and will revert 

to Arcelor. 

3.1.9 Winding-up and liquidation 

In case of liquidation of Arcelor, the net assets of Arcelor shall be distributed to the shareholders in 

proportion of the number of Shares they hold. 

17

3.2 GENERAL INFORMATION CONCERNING THE SHARE CAPITAL OF ARCELOR AND 

SHARE RIGHTS 

3.2.1 Issued capital (as at 31st May, 2004) 

Amount of issued capital .......................................... EUR 2,665,726,365 

Number of issued Shares .......................................... 533,145,273 

Amount of non-issued authorised capital .............................. EUR 2,334,273,635 

Number of non-issued authorised Shares .............................. 466,854,727 

Number of non-issued authorised Shares necessary for conversion of 

OCEANE 2005 and OCEANE 2017 (1) .............................. 63,684,727 

Number of non-issued authorised Shares necessary for the exercise of share 

options granted by Arcelor (2) ..................................... 1,300,000 

Number of non-issued authorised Shares necessary for the exercise of share 

options granted by Usinor, exchangeable into Shares (2) .................. 3,292,900 

Number of non-issued authorised Shares necessary for exchange against Usinor 

shares (3) .................................................... 1,299,197 

Balance of non-issued authorised Shares available (prior to exercise of Warrants) . 397,277,903 

Number of Shares to be issued on exercise of the Warrants ................. 106,629,054 

Balance of non-issued authorised Shares available after exercise of Warrants .... 290,648,849 

(1) Assuming full conversion against new Shares and before giving effect to the adjustment which will result from the issue of the 

Warrants. 

(2) Assuming that all share options are exercised and exchanged against new Shares and before giving effect to any adjustment, if 

any, from the issue of the Warrants. 

(3) Assuming tender of all Usinor shares not held by the Group and exchange against new Shares. 

All issued Shares are fully paid. 

3.2.2 Evolution of the share capital of Arcelor since its incorporation 

Arcelor was incorporated on 8th June, 2001 with an issued share capital of EUR 32,250. 

Since its incorporation, the share capital of Arcelor was first increased as a result of the Public 

Exchange Offers, the acquisition of the minority shareholding in Sidmar and the contribution of additional 

Aceralia shares by Arbed España B.V. as described below: 

• on 15th February, 2002, Arcelor issued 516,215,823 new Shares in satisfaction of the Aceralia, 

Arbed and Usinor shares tendered to the initial Public Exchange Offers on those companies and as 

consideration for the contribution by Staal Vlaanderen N.V. of 1,561,668 Arbed shares; 

• in compliance with applicable provisions, Arcelor subsequently re-opened the offer on Arbed in 

Luxembourg and Belgium and the offer on Usinor in France, with the terms of the offers remaining 

unchanged; and 

• on 18th March, 2002, Arcelor issued a further 12,138,238 new Shares in satisfaction of the Arbed 

and Usinor shares tendered to the re-opening of the Public Exchange Offers on Arbed and Usinor 

and in consideration for the contribution by Arbed España B.V. of 297,354 Aceralia shares. 

At the completion of the Public Exchange Offers and the ancillary transactions mentioned above, 

Arcelor issued a total of 528,354,061 Arcelor Shares. Taking into account the 6,450 pre-existing Shares, the 

total number of issued Shares on 18th March, 2002 was 528,360,511, representing a subscribed share 

capital of EUR 2,641,802,555. 

On 5th August, 2002, Arcelor issued 3,351,776 new Shares in exchange for the Usinor shares tendered 

during the Public Offer of Withdrawal by Exchange for all Usinor shares still in circulation. 

The terms of the above Public Offer of Withdrawal by Exchange provide that Usinor shareholders 

who did not tender during such offer, are entitled during a period of 10 years ending 23rd February, 2013 

to tender their Usinor shares in exchange for existing and/or new Shares at an exchange ratio of one 

(1) Usinor share for one (1) Share. This exchange ratio will not be adjusted as a result of the issue of the 

Warrants. This exchange entitlement will lapse on the opening day of a further public offer of withdrawal 

followed by a squeeze out initiated by Arcelor on the Usinor shares or in case Usinor is merged into or 

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with one or more companies or is subject to a division. In this context, on each of the dates set out below, 

Arcelor issued the shares set out below against an equal number of Usinor shares tendered in exchange: 

Date 

Number of new Shares issued 

against tender of 

an equal number of 

Usinor shares 

22nd August, 2002 .................................. 414,939 

6th November, 2002 ................................. 239,183 

9th January, 2003 ................................... 104,183 

9th April, 2003 ..................................... 258,985 

9th July, 2003 ..................................... 102,685 

9th October, 2003 .................................. 208,534 

9th April, 2004 ..................................... 104,477 

On 31st May, 2004, the subscribed share capital of Arcelor amounted to EUR 2,665,726,365 and 

consisted of 533,145,273 Shares without nominal value and all fully paid-up. The share premium 

recognised in the accounts amounted to EUR 4,796,089,948. 

The table below summarises the evolution of the share capital: 

Number of Shares 

Date (compounded) Capital operations 

8th June, 2001 ....... 25,800 Creation of Newco Steel, renamed Arcelor 

11th December, 2001 . . 6,450 Change of the accounting par value per share to EUR 5 by 

the extraordinary general meeting of shareholders 

15th February, 2002 . . . 499,434,342 Public Exchange Offer on Aceralia, Arbed and Usinor 

15th February, 2002 . . . 516,222,273 Contribution of Arbed shares held by Staal 

Vlaanderen N.V. 

18th March, 2002 ..... 528,360,511 Re-opening of the Public Exchange Offer on Arbed and 

Usinor and contribution of Aceralia shares by Arbed 

España B.V. 

5th August, 2002 ...... 531,712,287 Public Offer of Withdrawal by Exchange for Usinor shares 

22nd August, 2002 .... 532,127,226 Tender of Usinor shares 

6th November, 2002 . . . 532,366,409 Tender of Usinor shares 

9th January, 2003 ..... 532,470,592 Tender of Usinor shares 

9th April, 2003 ....... 532,729,577 Tender of Usinor shares 

9th July, 2003 ........ 532,832,262 Tender of Usinor shares 

9th October, 2003 ..... 533,040,796 Tender of Usinor shares 

9th April, 2004 ....... 533,145,273 Tender of Usinor shares 

No further Shares or instruments giving access to the share capital of Arcelor have been issued since 

9th April, 2004 except for the Warrants. 

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3.2.3 Instruments giving access to the capital of Arcelor 

General 

The instruments issued by Arcelor which give access to its capital and the number of existing Shares or 

new Shares for which these instruments can be exercised are set out in the table below: 

Number of new or 

existing Shares to be 

Number Conversion ratio delivered upon 

Instrument outstanding (1) Instrument/Share (2) exercise (2) 

OCEANE 2005 ........................... 24,723,689 1/1 24,723,689 

OCEANE 2017 ........................... 38,961,038 1/1 38,961,038 

Share options granted by Arcelor and Usinor ..... 4,592,900 1/1 4,592,900 

Exchange Facility ......................... 1,299,197 1/1 1,299,197 

Warrants ............................... 533,145,273 5/1 106,629,054 

Total .................................. N/A N/A 176,205,878 

(1) As at 31th May, 2004 except for the Warrants. The next exercise date in respect of the Exchange Facility, OCEANE 2005 and 

OCEANE 2017 is on 30th June, 2004. 

(2) For OCEANE 2005, OCEANE 2017 and the Share options, prior to the adjustment, if any, as a result of the issue of the 

Warrants. 

In February 2004, as part of the process to optimise its balance sheet and reduce the cost of its debt, 

Arcelor decided to make an early redemption of its OCEANE 2006 due 1st January, 2006, of which 

27,747,370 were outstanding on 31st December, 2003. The early redemption date was 22nd March, 2004. 

Following the announcement of this early redemption, 22,490,577 OCEANE 2006, or 81.05% of the 

initial issue, were exchanged against 22,490,577 treasury shares. 

The remaining 5,256,793 OCEANE 2006 were redeemed on 22nd March, 2004 at a unit price of 

EUR 13.89112 (including accrued coupon interest since 1st January, 2004). 

Since their issuance, no OCEANE 2005 or OCEANE 2017 have been exercised. 

The rights of Usinor shareholders to tender their Usinor shares in exchange for existing or new Shares 

is described in section 3.2.2. 

Adjustment of the conversion/exchange ratio of the OCEANE 

The issue of the Warrants shall give rise to an adjustment of the conversion/exchange ratio of the 

OCEANE 2005 and 2017. The terms and conditions of the OCEANE 2005 and 2017 provide that in the 

event of a financial transaction conferring a preferential right of subscription, the new conversion/exchange 

ratio will be determined by multiplying the conversion/exchange ratio in effect prior to the relevant 

transaction (currently 1/1) by the following formula: 

Share price ex-subscription right plus the price of the subscription right 

Share price ex-subscription right 

For the purpose of calculating this formula, the prices of the Share ex-subscription right and of the 

subscription right will be determined on the basis of the average of the closing prices with respect to the 

OCEANE 2017 and the average of the opening prices with respect to the OCEANE 2005 quoted on 

Euronext Paris falling in the subscription period during which the Share ex-subscription right and the 

subscription right are quoted simultaneously (from 2nd to 13th July, 2004 both dates inclusive). 

Share option plans 

The general shareholders’ meeting of Arcelor held on 25th April, 2003 authorised the Board of 

Directors of Arcelor to grant, in one or more instances, to the benefit of the employees and/or members of 

governing or supervisory corporate bodies of Arcelor or of those companies of which it is the parent 

pursuant to article 309(1) of the Luxembourg law on commercial companies, options giving the right, at 

the discretion of Arcelor, either (i) to the subscription of new Shares in Arcelor to be issued within the 

authorised capital provided for in articles 5.2. and 5.5. of the articles of association or (ii) to the purchase 

20

of existing Shares of Arcelor. The duration of such options will be determined so that they cannot be 

exercised after the end of the seventh year following their grant. 

The total number of options which can be granted cannot give the right to subscribe or acquire a 

number of Shares in excess of 2% (two per cent.) of the number of Shares in issue on 25th April, 2003 (i.e., 

a maximum of 10,654,591 Shares). The acquisition or subscription price of the Shares will be determined 

by the Board of Directors at the time such options are allocated and cannot be less than the average of the 

stock exchange price of the Shares during a reference period preceding the decision of allocation and 

determined in compliance with applicable regulations. 

The Board of Directors has the powers to implement the authorisation, including, in particular, the 

power to withdraw the preferential subscription right of existing shareholders, to determine all the terms 

and conditions of the options, to draw up the list or categories of beneficiaries, all in compliance with the 

law and article 5.5. of the articles of association. 

Within the framework of the authorisation granted on 25th April, 2003, Arcelor has enacted a share 

option plan with a duration of five years. 

As at 31st May, 2004, 1,300,000 share options had been allocated to 73 beneficiaries, subject to 

adjustment, if any. 

As at 31st December, 2002, Usinor had two share option plans in place. The first plan, established on 

21st November, 1997 covers 1,374,000 Usinor shares attributable to 295 beneficiaries. The second plan, 

established on 7th March, 2000 covers 2,380,000 Usinor shares attributable to 460 beneficiaries, subject to 

adjustment, if any. 

The beneficiaries of these Usinor share option plans have the option of converting their Usinor shares 

into Shares. 

Outstanding options as at 31st May, 2004 were as follows: 

Exercise Period Exercise price (EUR) Number of options 

21st November, 2002 to 21st November, 2004 ............... 13.92 1,112,000 

7th April, 2003 to 7th April, 2008 ........................ 15.24 2,180,900 

1st July, 2006 to 30th June, 2010 ......................... 9.94 1,300,000 

Total ............................................. N/A 4,592,900 

3.2.4 Admission to listing 

The existing Shares of Arcelor are admitted to listing on the Luxembourg Stock Exchange, Euronext 

Brussels, Euronext Paris and the Spanish Stock Exchanges. 

The listing on the Luxembourg Stock Exchange, Euronext Paris and Euronext Brussels of any new 

Shares to be issued as a result of future conversions of the OCEANE has been approved, subject to their 

issuance, and application for listing on the Spanish Stock Exchanges will be made. The New Shares to be 

issued by Arcelor upon exercise of the Warrants and as a result of the underwriting are admitted to listing 

on the Luxembourg Stock Exchange, subject to their issue. The New Shares, subject to their admission, 

which has been applied for, will be listed on Euronext Paris, Euronext Brussels and on the Spanish Stock 

Exchanges as from the New Shares Settlement Date. 

Stock Exchange Trading 

Settlement (delivery and payment) of transactions on the stock exchanges where Shares are listed will 

be effected through a settlement system recognised by the stock exchange in question. 

In order to be able to trade their Shares on one of the stock exchanges where the Shares are quoted, 

shareholders directly registered in Arcelor’s share register must therefore deposit them first into one of the 

settlement systems. 

3.2.5 Form and means of holding Arcelor Shares 

All of the Shares are in registered form. They are all of the same class, without nominal value. 

Shareholders may hold them, either by being directly entered into the Share register kept in Luxembourg 

by or on behalf of Arcelor, or by the Shares being held in book entry form with a bank or professional 

21

securities depositary or other qualified financial intermediary, which will hold them through a securities 

settlement system, either directly as a participant of such system or indirectly through such a participant. 

3.2.6 General meetings of the shareholders 

Every shareholder has the right to attend general meetings of shareholders in person or by appointing 

a person of his choice as his proxy. The annual general meetings of shareholders shall be held at the 

registered office of Arcelor or at such other place in the city of Luxembourg as may be specified in the 

notice of the meeting, on the last Friday of the month of April in each year at 11 a.m. If such day is not a 

bank business day in Luxembourg, the annual general meeting shall be held at the first preceding bank 

business day. Other general shareholders’ meetings may be held at the dates, times and places specified in 

the notices of meeting. 

The decision to convene a general meeting of the shareholders belongs to the Board of Directors. 

Moreover, the shareholders’ meeting must be convened by the Board of Directors at the request of 

shareholders representing at least twenty percent (20%) of the share capital in which case the meeting 

must be held within the month following such request. 

Subject to what is stated in the last paragraph of this section 3.2.6, the general meeting of the 

shareholders shall be convened in accordance with Luxembourg law by notices published twice, with a 

minimum interval of eight (8) days, and at least eight (8) days before the meeting in one or several 

Luxembourg newspapers and in the Mémorial C. 

The convening notices for the ordinary and extraordinary meetings shall also be published in one or 

more Belgian, Spanish and French newspapers of national circulation. 

In Belgium, the notice shall be communicated to the market authority of Euronext Brussels and to a 

press agency established in Belgium or to an electronic transmission system with a large circulation 

approved by the market authority of Euronext Brussels. In Spain, the notice shall be communicated to the 

CNMV and to the Spanish Stock Exchanges. In France, the notice shall be lodged at the AMF at the latest 

on the day of its publication. 

Subject to what is stated in the last paragraph of this section 3.2.6, all shareholders registered in the 

register of shares shall be convened in accordance with Luxembourg law, by ordinary mail, at least eight 

(8) days prior to the general shareholders’ meeting. 

The resolutions of the ordinary general shareholders’ meeting are adopted by a simple majority of the 

votes validly expressed by the shareholders present or represented. 

Save for the change of nationality of Arcelor and the increase of the commitments of the 

shareholders, which require the unanimous consent of the shareholders and holders of notes and bonds, 

the extraordinary general meeting of the shareholders may resolve to amend the articles of association 

provided shareholders representing at least half of the share capital are present or represented and 

provided the amendment is adopted at a majority of two-thirds ( 2 ⁄3) of the votes validly expressed by the 

shareholders present or represented. If the shareholders present or represented do not represent at least 

half ( 1 ⁄2) of the share capital, a new meeting with the same agenda may be convened by the Board of 

Directors. In such case, the convening notices shall be published in at least two (2) Luxembourg 

newspapers and the Mémorial C, with a minimum interval of fifteen (15) days, and at least fifteen (15) days 

before the meeting. Such notices shall also be published in one or more French, Spanish and Belgian 

newspapers and in accordance with applicable stock exchange regulations. The second meeting shall validly 

deliberate regardless of the proportion of the capital represented. The resolutions will not be adopted 

unless carried by at least two-thirds ( 2 ⁄3) of the votes validly expressed by the shareholders present or 

represented. 

3.2.7 Voting rights and participation in the general meetings of shareholders 

Each Share is entitled to one vote. 

The Company only recognises one owner per Share. 

Each shareholder has the right to attend the general meetings of shareholders in person or by 

appointing another person as his proxy, to speak at such meeting and to exercise his voting rights subject to 

the provisions of the articles of association of Arcelor. There is no requirement of a minimum number of 

Shares to be held in order to participate in the general meetings of shareholders. 

22

The Company does not apply a system of vote by correspondence. 

Holders of registered Shares registered in the Share register five (5) business days prior to the 

meeting are admitted without other formality to such meeting. 

Proxy forms must be lodged at the places and with the persons designated by the Board of Directors at 

least five (5) business days prior to the date of the meeting. 

In accordance with Luxembourg law, shareholders holding their Shares through a clearing system may 

attend and vote at general meetings of the shareholders of Arcelor by presenting at the place and at the 

latest on the date preceding the fifth (5th) business day prior to the date of the meeting (unless Arcelor 

sets a shorter time-limit) as specified in the convening notice, a certificate indicating, inter alia, the number 

of Shares held. 

Such certificate may be obtained as follows: 

• by shareholders holding their Shares through Clearstream Luxembourg or Euroclear Bank, from 

the bank, professional security depositary or the financial institution with which the Shares are held 

in an account; 

• by shareholders holding their Shares through the intermediary of Euroclear France, from the 

custodian of such Shares; and 

• for shareholders holding their Shares with a participant entity of IBERCLEAR, the certificado de 

legitimación must be issued by the participant entity with which the shares are being held in an 

account. 

The Shares which are the object of such a certificate must be blocked until after the holding of the 

meeting and may be transferred only after the holding of such meeting; such blocking must be confirmed 

in, or will result from, such certificate. 

Subject to the internal rules of the relevant clearing system, shareholders may also give instructions as 

to how to exercise their vote to the bank, the professional securities depositary, the financial institution or 

the custodian or the participant entity of IBERCLEAR with which their Shares are held. 

In such case, the Shares shall also be blocked until after, and may only be transferred after, the 

holding of such meeting. 

The Board of Directors will adopt any other regulations and procedures concerning the provision of 

access cards and proxy forms so as to allow shareholders to exercise their voting rights. 

3.2.8 Threshold disclosure requirement 

In accordance with the Luxembourg law of 4th December, 1992 regarding the information to be 

published when a major holding in a listed company is acquired or disposed of (the ‘‘Law of 1992’’), in case 

a natural or legal entity governed by public or private law acquires or disposes of a holding in Arcelor and 

where following such acquisition or disposal, the proportion of voting rights held by that person or legal 

entity reaches or exceeds one of the thresholds of ten percent (10%), twenty percent (20%), one-third ( 1 ⁄3), 

fifty percent (50%) and two-thirds ( 2 ⁄3) of the total voting rights existing when the situation giving rise to 

the declaration occurs, or falls below said thresholds, such person or entity shall notify Arcelor and at the 

same time the Commission de Surveillance du Secteur Financier of Luxembourg, within seven (7) calendar 

days, of the proportion of voting rights it holds following such acquisition or disposal. 

‘‘Acquiring a holding’’ means not only the purchase of a holding but also the acquisition by any other 

means as more fully described in the Law of 1992. 

In order to determine whether a person is required to make a declaration pursuant to the Law of 

1992, the law (in its articles 7 and 8) assimilates the voting rights held by such person to the voting rights 

held by certain other persons, including where there are links of control between such person or where 

they act in concert. 

If Arcelor receives such a declaration, it must in turn disclose it to the public in each of the Member 

States in which its Shares are officially listed on a stock exchange as soon as possible but not later than nine 

(9) calendar days after the receipt of the declaration. 

As long as the required information has not been declared and published pursuant to the Law of 1992, 

the exercise of the voting rights attached to the Shares concerned is suspended. 

23

Moreover, the articles of association provide in article 7 that the provisions of the Law of 1992 shall 

also apply, after having taken into account the provisions of articles 7 and 8 of such law, to (i) each 

acquisition or disposal of Shares resulting in a holding exceeding or falling below the threshold of two and 

one-half percent (2.5%) of the voting rights in Arcelor; (ii) each acquisition or disposal of Shares resulting 

in a holding exceeding or falling below the level of five percent (5%) of the voting rights in Arcelor; and 

(iii) once a holding has exceeded five percent (5%) of the voting rights in Arcelor, each acquisition or 

disposal of Shares resulting in such holding exceeding or falling below successive thresholds of one percent 

(1%) of the voting rights in Arcelor. 

Furthermore, the articles of association provide that any person who, in application of article 1 of the 

Law of 1992, must notify the holding of Shares carrying ten percent (10%) or more of the voting rights in 

Arcelor, shall promptly inform Arcelor, by registered letter with acknowledgement of receipt, of its 

intention to (i) acquire or dispose of Shares in Arcelor in the following twelve months, (ii) seek to obtain 

control of Arcelor or (iii) seek to appoint a person to the Board of Directors of Arcelor. 

In case of non-compliance with the obligations of declaration set out in the articles of association and 

described above, the articles of association provide that the voting rights attached to the Shares concerned 

will be suspended. 

The articles of association provide for certain exceptions to the threshold disclosure requirements 

provided in the articles of association, which are described in section 3.2.10 ‘‘Exceptions to the statutory 

obligations of declaration and of mandatory offer’’. 

3.2.9 Compulsory offer in case a threshold of 25% is equalled or exceeded 

The articles of association provide that any person who must notify Arcelor of an acquisition of Shares 

as a result of which such person, taking into consideration the provisions of articles 7 and 8 of the Law of 

1992, holds a quarter or more of the total voting rights in Arcelor, shall be obliged to make, or cause 

another person to make, an unconditional public cash offer to all shareholders to acquire all of their 

Shares and to all holders of securities conferring the right to acquire Shares of Arcelor, such as 

transferable securities or other financial instruments, allowing their holder to obtain Shares in Arcelor, 

irrespective of whether those securities are issued by Arcelor or by entities controlled or established by 

Arcelor or by members of its Group or not, at a price payable in cash, in each jurisdiction where the Shares 

of Arcelor are listed, as well as in each jurisdiction where Arcelor has made a public offer of its Shares; 

each such public offer must comply with all legal or regulatory requirements applicable to public offers in 

the relevant jurisdiction. In each case, the price must be appropriate and fair and, in order to guarantee an 

equal treatment of all shareholders and all holders of securities conferring the right to acquire Shares of 

Arcelor, such public offers must be made at an identical price which must be justified by a report drawn up 

by a first-ranking professional institution appointed by Arcelor and whose fees and costs shall be advanced 

by the person subject to the obligation described in the present section. 

The foregoing obligation to make an unconditional cash offer shall not apply where the acquisition of 

Shares by the person making such notification has received the prior authorisation of the shareholders of 

Arcelor by a resolution of the general meeting of the shareholders adopted in the manner required to 

amend the articles of association including, but without limitation, in the case of a merger or a contribution 

in kind against the issue of Shares. 

If the public offer described above has not been made within a period of two (2) months after notification 

to Arcelor of the increase of shareholding entitling the shareholder to a quarter or more of the voting rights, or 

after the notification by Arcelor to the shareholder of its knowledge of the realisation of such an increase, or if 

Arcelor is notified that the competent authority in a jurisdiction in which the Shares are listed (or in a 

jurisdiction where Arcelor has made a public offer of its Shares) has determined that the public offer has been 

made in breach of legal or regulatory requirements applicable to public offers in that jurisdiction, then starting 

from the day of expiry of the above-mentioned period of two (2) months or from the date on which Arcelor has 

been notified of the relevant authority’s determination, the right to attend and to vote at general meetings of 

the shareholders and the right to receive dividends shall be suspended in respect of those Shares held by that 

person which give that person more than a quarter of the voting rights in Arcelor. 

A shareholder whose voting rights exceed one quarter ( 1 ⁄4) of the voting rights in Arcelor and who 

requires the convening of a general meeting of the shareholders pursuant to article 70 of the Luxembourg 

law on commercial companies shall, in order to be able to vote at the meeting, have proceeded to a final 

24

and irrevocable public offer as described above prior to that general meeting. Failing this, the voting rights 

attached to the Shares exceeding one quarter ( 1 ⁄4) of the voting rights in Arcelor will be suspended. 

If, at the date of the annual general meeting, a shareholder has more than a quarter ( 1 ⁄4) of the voting 

rights in Arcelor, his voting rights shall be suspended in relation to such percentage of voting rights as gives 

the shareholder more than one quarter ( 1 ⁄4) of the voting rights in Arcelor except where the shareholder 

concerned undertakes in writing not to vote the Shares exceeding one quarter ( 1 ⁄4) of the voting rights or, if 

the shareholder has proceeded definitely and irrevocably to the public offer as described in this section. 

3.2.10 Exceptions to the statutory obligations of declaration and of mandatory offer 

The provisions of the articles of association providing the obligations of declaration described in 

section 3.2.8 ‘‘Threshold disclosure requirement’’ and those providing for a mandatory offer described in 

section 3.2.9 ‘‘Compulsory offer in case a threshold of 25% is equalled or exceeded’’ do not apply (without 

prejudice however to any legal obligations): 

• to Arcelor itself, for the Shares which it may hold directly or indirectly; 

• to the Depositaries in such capacity, it being specified that these provisions will apply to the persons 

holding their Shares through such a Depositary and to Shares held by such a Depositary for the 

account of persons who did not comply with the obligations set out in the articles of association and 

described in sections 3.2.8 ‘‘Threshold disclosure requirement’’ and 3.2.9 ‘‘Compulsory offer in case 

a threshold of 25% is equalled or exceeded’’. The term ‘‘Depositary’’ is defined in article 6.3 of the 

articles of association of Arcelor as being a securities’ settlement system or the operator of such a 

system or a professional securities’ depositary or any other depositary; 

• to any transfer and to any issue of Shares by Arcelor in the context of a merger or a similar 

operation or the acquisition by Arcelor of any other company or business; and 

• to the acquisition of Shares resulting from a public offer to acquire all the Shares of Arcelor. 

3.2.11 Amendments of the share capital 

The share capital of Arcelor may be increased or reduced by a resolution of an extraordinary general 

meeting of the shareholders deciding in the manner required for the amendment of the articles of association. 

Under Luxembourg law and the articles of association, each shareholder has a preferential 

subscription right in case of an issue of new Shares against a contribution in cash. That preferential 

subscription right shall be proportional to the capital held by such shareholder. 

The general meeting of the shareholders, deciding in the manner required for the amendment of the 

articles of association, may limit or suspend such preferential subscription rights or authorise the Board of 

Directors to do so in the context of the authorisation given to the Board of Directors by the general 

meeting of the shareholders to increase the capital within the limits of the authorised capital. 

There is no preferential subscription right in case of capital increase by contribution in kind. 

The capital of Arcelor may also be increased by resolution of the Board of Directors adopted by a 

majority of two-thirds ( 2 ⁄3) of the directors present or represented and pursuant to an authorisation given 

by the general meeting of the shareholders in the manner required for the amendment of the articles of 

association. This authorisation is contained in the articles of association of Arcelor and may only be given 

for a maximum duration of five (5) years after the publication in the Mémorial C of the deed amending the 

articles of association. Such authorisation may be renewed by an extraordinary general meeting. 

The general meeting of the shareholders held on 11th December, 2001 established an authorised 

capital (including the subscribed capital) of EUR 5,000,000,000 represented by 1,000,000,000 Shares and 

gave to the Board of Directors the authorisation to increase the share capital of Arcelor until the 

subscribed capital reaches the amount of the authorised capital. Such increase of capital may be made by 

contributions in cash or in kind, as well as by incorporation of reserves, of issue premiums or of carried 

forward profits, with or without the issue of new Shares, or as a result of the issue and the exercise of 

subordinated or non-subordinated bonds which are convertible, repayable or exchangeable into new 

Shares or carrying subscription rights for new Shares or through the issue of any other security or 

instrument giving the right to acquire new Shares. That meeting has also authorised the Board of Directors 

of Arcelor to limit or to suspend the preferential subscription right. The authorisations mentioned above 

are valid for a period which will end on 10th December, 2006, unless they are renewed. 

25

The subscribed share capital of Arcelor may be reduced by the extraordinary general meeting deciding in 

the manner required for the amendment of the articles of association, subject to applicable legal provisions. 

3.2.12 Acquisition by Arcelor of its own Shares 

The Company may acquire its own Shares in accordance with the conditions established by 

Luxembourg law and which are essentially as follows: 

• the acquisition must be authorised by the decision of a general meeting of the shareholders of 

Arcelor which shall determine the terms and conditions of the acquisition and in particular, the 

maximum number of Shares to be acquired, the duration of the period for which the authorisation 

is given, which may not exceed eighteen (18) months, and, in case of acquisition for value, the 

maximum and minimum consideration; 

• the Shares held by Arcelor, as well as the Shares held by any other company of the type set out in 

article 1 of EEC directive 68/151 and in which Arcelor directly holds the majority of the voting 

rights or on which it may directly exercise a dominant influence, may not, together, represent more 

than ten percent (10%) of the subscribed share capital of Arcelor; 

• the acquisitions by Arcelor of its own Shares may not have the effect of reducing the net assets 

below the aggregate of the subscribed share capital and the reserves which may not be distributed 

under law or the articles of association; and 

• only fully paid-up Shares may be acquired by Arcelor. 

Where the acquisition of Arcelor’s own Shares is necessary in order to prevent serious and imminent 

harm to Arcelor, the authorisation of the shareholders’ meeting is not required. In such a case, the next 

general meeting of shareholders must be informed by the Board of Directors of the reasons for and the 

purpose of the acquisition made, the number and the accounting par value of the Shares acquired, the 

proportion of the subscribed capital which they represent and the consideration paid for them. 

Where the Shares are acquired for distribution thereof to the employees of Arcelor, the authorisation 

of the shareholders’ meeting is not required. The Shares which are acquired to be distributed to the 

employees must be distributed at the latest within one (1) year from the date of acquisition. 

The Shares acquired by Arcelor in breach of the rules mentioned above must be disposed of within a 

period of one (1) year from the date of their acquisition or be cancelled. The Company may then proceed 

to a reduction of the subscribed share capital for the corresponding amount. 

As long as the Shares are held by or for the account of Arcelor, they will not carry any voting rights 

and if these Shares are included among the assets shown in the balance sheet, a non-distributable reserve 

of the same amount must be created on the liability side. 

In certain conditions provided by the law, the acquisition or the holding of Shares of Arcelor by other 

companies in the Group being of a type referred to in article 1 of the EEC directive 68/151 will be 

considered as an acquisition by Arcelor itself. 

The general meeting of the shareholders of Arcelor held on 30th April, 2004 replacing the 

authorisations given 25th April, 2003 has authorised the Board of Directors to acquire Shares or to cause 

them to be acquired by other companies of the Group as referred to in article 49bis of the law on 

commercial companies. That authorisation is valid for eighteen (18) months (until 30th October, 2005 or 

until the date of its renewal by a general shareholders’ meeting) and allows the Board of Directors to 

acquire a maximum of ten percent (10%) of the subscribed share capital. Such Shares may be acquired for 

a price ranging from EUR 5 to EUR 25 per Share. 

The authorisation of the general shareholders’ meeting is intended to allow: 

1. stabilisation of the market price of the Shares through on-market sales and purchases by way of 

systematic intervention to counteract the prevailing market tendency; 

2. allotment of Shares to holders of bonds which are convertible or exchangeable into Shares 

(OCEANE) already issued and to holders of securities giving the right to receive Shares, in case 

they exercise their right to receive Shares; 

26

3. allotment or transfer of Shares to employees or members of the management of the Group under 

a profit sharing plan, employee shareholder schemes, or share option plans in favour of 

employees or non-employees or Company savings plans; 

4. delivery of Shares in exchange or payment in the context of external growth transactions and in 

connection with the exercise of the exchange right granted to holders of Usinor shares; 

5. optimisation of the management of the Company’s finances and balance sheet, including by the 

cancellation of its own shares, subject in the latter case to a subsequent authorisation by the 

general meeting of shareholders; and 

6. the keeping, exchange, assignment, contribution or transfer of Shares acquired in accordance 

with applicable laws and regulations. 

Purchase, assignment, exchange, contribution and transfer transactions can be carried out by any 

on-market or over-the-counter transactions, including through the use of financial derivative instruments. The 

portion of capital acquired or transferred as a block of shares can comprise the entire programme. Shares may 

also be acquired during a public tender or a public share exchange offer made by a third party on the shares of 

the Company. 

The Board of Directors has in turn delegated authority to the Management Board to purchase up to 

two percent (2%) of Arcelor’s issued share capital representing 10,662,905 Shares. This delegation is in 

addition to Shares held within the Group as a result of the Public Exchange Offers. As at the date of this 

Prospectus, the authorisation given by the shareholders meeting held on 30th April, 2004 has not been 

used, save for two transactions resulting in the net acquisition of 46,000 Shares. 

As at 31st May, 2004, Arcelor held no Shares directly but the Group held 29,149,906 (5.48%) of the 

issued Shares for which voting rights are suspended as long as they are owned by the Group. Only 5.13% 

are counted towards the ten percent (10%) limit referred to above. 

During the 2003 financial year, the Group executed the following transactions in relation to its own Shares: 

Intra-group transfers 

• 9,988,470 Shares transferred from Aceralia Internacional B.V. to Arbed; 

• 1,613 Shares transferred from Aceralia to Arbed; and 

• 3,870 Shares transferred from TrefilArbed Bissen S.A. to Arbed. 

Acquisitions 

• 511,715 Shares over-the-counter by Arbed; and 

• 6,000,000 Shares reacquired by Arbed on the expiry of a short-term securities loan concluded with a 

third party in 2002. 

Sales 

• 511,715 Shares sold over-the-counter by Arbed; and 

• 22,443 Shares transferred by Usinor to Sogepa as the Usinor 2001 dividend paid in form of Shares. 

The Group thus purchased 6,511,715 of its own Shares during 2003, representing a total book value of 

EUR 32,558,575 or 1.22% of the capital subscribed as at 31st December, 2003. 

The exchange value of the existing Shares purchased by the Group was in a range between EUR 8.33 

and EUR 14.86, and the average weighted price was EUR 14.37. 

The purchases on the over-the-counter market were made to stabilise the market price of the Shares. 

The Group sold 534,158 of its own Shares during the 2003 financial year, representing a total book 

value of EUR 2,670,790 or 0.10% of the capital subscribed as at 31st December 2003. 

These Shares were sold for an exchange value ranging from EUR 9.43 to EUR 14, and the average 

weighted value was EUR 10.17. 

The sales on the over-the-counter market were made to stabilise the market price of the Shares. 

27

In January 2004, Arcelor delivered 61,830 of its Shares in exchange for 61,830 Usinor shares. 

In March 2004, 22,490,577 Shares were used to meet requests for the delivery of Shares from holders 

of OCEANE 2006. 

As at 31st December, 2002, 31st December, 2003 and 31st May, 2004, the Shares held by the Group 

were held as follows: 

31st December, 

31st May, 

Own Shares 2004 2003 2002 

Arbed ........................................... 27,310,010 30,260,403 14,266,450 

Aceralia Internacional B.V. ............................ — — 9,988,470 

Usinor .......................................... 48,085 103,885 126,328 

Sidmar N.V. ...................................... 1,791,811 24,280,501 24,280,501 

Aceralia ......................................... — — 1,613 

TrefilArbed Bissen S.A. .............................. — — 3,870 

Total ............................................ 29,149,906 54,644,789 48,667,232 

3.3 SIGNIFICANT SHAREHOLDINGS IN ARCELOR 

The following table sets forth individual shareholdings above 2.5% (excluding Shares held by the 

Group) of which Arcelor is aware as at 24th May, 2004 and the related voting rights on the basis of existing 

voting rights as at 31st May, 2004. 

Percentage 

of Shares 

Name of shareholders outstanding of voting rights 

Luxembourg State ........................................... 5.93% 6.28% 

Corporación JMAC B.V. ...................................... 4.14% 4.38% 

Walloon region (Sogepa) ...................................... 3.76% 3.98% 

As far as Arcelor is aware at the date hereof, no shareholders have, alone or pursuant to a 

shareholders’ agreement, either de facto or in law control of Arcelor. 

3.4 DIVIDENDS 

It is Arcelor’s intention to distribute on average over the cycle 30% of its consolidated net profit. 

The table below shows the gross dividends paid by Arcelor in respect of the 2003 and 2002 financial 

years. 

2002 ............................................................... EUR 0.38 

2003 ............................................................... EUR 0.40 

Given its incorporation on 8th June, 2001 and that its activities in 2001 were limited to prepare the 

Public Exchange Offers which closed in 2002, Arcelor did not pay a dividend in respect of its 2001 financial 

year. The following dividends were paid by Aceralia, Arbed and Usinor to their respective shareholders for 

the 2001 financial year prior to the closing of the Public Exchange Offers. 

On 21st November, 2001, the board of directors of Aceralia approved the distribution of an interim 

dividend of a gross amount of EUR 0.54 per share for the financial year 2001 which was paid on 

2nd January, 2002. 

On 5th December, 2001, the board of directors of Arbed approved the distribution of an interim 

dividend of a gross amount of EUR 3.50 per share for the financial year 2001 which was payable with effect 

from 4th January, 2002. 

On 21st November, 2001, the board of directors of Usinor approved a draft resolution proposing to 

the general meeting of the shareholders the distribution of an extraordinary dividend of EUR 0.40 per 

share together with a EUR 0.20 tax credit (avoir fiscal). The general meeting of Usinor approved such 

dividend on 16th January, 2002 and the dividend was paid on 17th January, 2002. 

28

CHAPTER 4 INFORMATION CONCERNING THE BUSINESS ACTIVITY OF ARCELOR 

AND OF ITS GROUP 

4.1 GENERAL 

Arcelor was born out of the commitment of three steel makers, Aceralia, Arbed and Usinor, to create 

a leading company in the global steel industry. 

The creation of Arcelor was announced on 19th February, 2001, and was achieved on 18th February, 

2002, with the listing of Arcelor on the Luxembourg Stock Exchange, Euronext Paris, Euronext Brussels 

and the Spanish Stock Exchanges. 

The Arcelor Group has four principal sectors: Flat Carbon Steels, Long Carbon Steels, Stainless 

Steels, and Distribution-Transformation-Trading. 

Employing 98,000 people in over 60 countries, Arcelor is the largest steelmaker in the world with 

production of 44 million tonnes of steel and revenues in 2003 of EUR 26 billion in 2003. It holds a leading 

market share in all its major markets: automotive, construction, domestic electrical appliances, packaging 

and general industry. 

4.1.1 Key figures 

The consolidated revenues, the consolidated gross operating result and the consolidated operating 

result of the Arcelor Group, for each business sector, for the last two financial years, after elimination of 

intra-group sales, are set forth in the table below. 

In order to show homogenous and comparable information, 2002 comparative information is shown 

on a pro forma basis. According to International Financial Reporting Standards IFRS, the business 

combination between Aceralia, Arbed and Usinor has been accounted for using the purchase method of 

accounting, with Usinor as acquiring entity. Based on this principle, the Group consolidated income 

statement for the year ended 31st December, 2002 includes two months of operations of the Usinor group 

and ten months of operations of the Arcelor Group. Figures for 2003 are based on twelve months of 

operations of the Arcelor Group. 

2003 2002 pro forma (unaudited) 

Gross 

Gross 

Operating Operating Operating Operating 

(EUR million) Revenues Result % Result % Revenues Result % Result % 

Flat Carbon Steel ......... 13,994 1,365 9.8 774 5.5 13,222 925 7.0 216 1.6 

Long Carbon Steel ........ 4,381 493 11.3 311 7.1 4,256 613 14.4 430 10.1 

Stainless, Alloys & Specialty 

Plates ................ 4,280 23 0.5 (463) (10.8) 4,248 200 4.7 45 1.1 

Distribution-Transformation- 

Trading ............... 7954 284 3.6 125 1.6 9,444 319 3.4 209 2.2 

Others ................. 836 58 n.a. (14) n.a. 910 (79) n.a. (120) n.a. 

Intra-Group ............. (5,522) 5 n.a. 5 n.a. (5,486) 0 n.a. 0 n.a. 

Total .................. 25,923 2,228 8.6 738 2.8 26,594 1,978 7.4 780 2.9 

The table below shows the consolidated revenues of the Arcelor Group by geographical region for the 

last two financial years. Sales to Europe (15-member EU) are made in euros and in the other currencies of 

the European Union. Sales to other countries (North America, South America and the rest of the world) 

are mainly made in U.S. dollars and Brazilian reals. 

2002 

Pro forma 

Consolidated revenues (EUR million) 2003 % (unaudited) % 

Europe (15-Member EU) ................................ 19,628 75.7 19,901 74.9 

North America (including Mexico) ......................... 2,127 8.2 3,145 11.8 

South America ........................................ 1,193 4.6 1,358 5.1 

Rest of world ......................................... 2,975 11.5 2,190 8.2 

Total ............................................... 25,923 100 26,594 100 

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At the end of 2003, the Arcelor Group comprised approximately 98,000 people worldwide, located as 

set out in the tables below, showing distribution by region and business sector. 

Number of employees of the Arcelor Group at the end of the year 

2002 

Pro forma 

2003 (unaudited) 

Geographical region 

Germany ...................................................... 10,215 10,397 

Belgium ...................................................... 16,221 18,135 

Spain ........................................................ 15,820 15,764 

France ....................................................... 34,129 37,626 

Luxembourg ................................................... 6,326 6,600 

Other (EU-15) ................................................. 3,899 3,995 

Europe (15-Member EU) Total ...................................... 86,610 92,517 

North America ................................................. 2,671 3,019 

South America ................................................. 7,570 7,325 

Rest of world .................................................. 1,413 1,380 

Total ......................................................... 98,264 104,241 

Number of employees of the Arcelor Group at the end of the year 

2002 

Pro forma 

2003 (unaudited) 

Sector 

Flat carbon steel ................................................ 48,020 49,194 

Long carbon steel ............................................... 17,913 17,765 

Stainless steel .................................................. 14,231 15,063 

Distribution-Transformation-Trading .................................. 14,957 18,956 

Other activities and central services .................................. 3,143 3,263 

Total ......................................................... 98,264 104,241 

4.1.2 Organisation 

The Group is split into three levels with regards to management organisation: 

• at the level of the parent company of the Group, the Management Board and the corporate centre 

(i.e., operational management units and central sources); 

• business sectors; and 

• operational units within each business sector. 

The Management Board, a body acting by collective decision, comprises eight members, including its 

chairman. Four members of the Management Board are each responsible for an operational management 

unit and the other four members are each responsible for a business sector. Operational management units 

principally comprise purchasing, finance, strategic orientation and planning, research and development, 

human resources and technology and information. 

The Management Board and the corporate departments manage the orientation of the Group 

according to four main strategic perspectives: strategic orientations, progress management, human 

resources, co-ordination and integration. They are responsible for defining and monitoring the strategic 

orientations and the management plan of the Arcelor Group, co-ordinating the sectors’ common projects, 

managing financial resources on a centralised basis, implementing synergies and providing other services. 

At the level of the Group, each business sector is responsible for its own results (with particular 

attention to its operating results, return on capital employed and working capital requirements), 

30

implementation of the Group’s strategy, as defined by the Management Board, personnel management 

and synergies between operational units. 

The operational units conduct the Group’s industrial and commercial operations and are also 

responsible for their operating results and return on capital employed. 

At the end of May 2004, the main operational units, which cover either a geographical region or a 

range of products and services, are set out in the table below. 

Distribution- 

Transformation- 

Other 

Flat carbon steel Long carbon steel Stainless steel Trading activities 

Northern Europe Sections UGINE & ALZ Arcelor Trading & Paul Wurth 

(Europe) 

Distribution 

Wallonia Beams Ugitech Arcelor Steel Circuit Foil 

Services Centre 

Centre Europe Sheet piling, rail Precision-rolled Arcelor DHS Group 

and special sections products (IUP + Construction 

Imphy Alloys S.A.) 

Southern Europe Special Plates Arcelor PUM IEE 

(Industeel) 

Processing 

Arcelor Packaging Stainless steel tubes Arcelor 

International ‘‘API’’ 

International 

Brazil Acesita (Brazil) Arcelor Projects 

4.2 STRATEGY 

The recent history of the steel industry in Europe has been characterised by the high level of 

consolidation of customers in certain markets (automotive, packaging, domestic electrical appliances), 

excess production capacities, and the presence of a large number of steel producers. This has generated a 

structural trend toward lower prices. 

In addition, the savings achieved from the reorganisation of the steel industry in Europe and the 

United States, and the industry-wide restructuring and cost-cutting measures implemented in recent years, 

were largely offset by the continued reduction in selling prices. 

In this context, the Arcelor Group assumed its place as a global player in 2003, reinforcing its 

worldwide presence in its major markets. Its objective is to take advantage of economies of scale by 

furnishing a global products offer while reducing costs and financial risks, in order to improve performance 

and profitability and create value for its shareholders, customers and employees. 

The Group has set a medium-term goal of posting an average pre-tax return on capital employed of 

15% over the cycle, and achieving a sound financial structure. 

In order to implement this strategy, Arcelor has the following goals for all its flat carbon steels, long 

products and stainless steels activities: 

• to optimise the European industrial model to improve productivity and competitiveness and 

become more flexible to better serve customers while exploiting all potential synergies; thus, for flat 

carbon steels, Arcelor decided in 2003 to progressively shut down the production of liquid pig iron 

in the blast furnaces at its inland plants and cut the costs of its cold-rolling and coating lines, initially 

at the Montataire and Mardyck (France) plants; with regard to stainless steels, the decision was 

made to concentrate steel production by building a new steelshop at Charleroi (Belgium) in 

immediate proximity to the existing hot strip mill. This steelshop is a major strategic and structural 

investment for the stainless steels business, which will result in the closing of the steelshop in 

Ardoise and Isbergues (France); 

• to offer the same products/services anywhere in the world in response to demand from global 

customers through better market access (expanded distribution network, e-business platforms, 

alliances and partnerships); for example, Arcelor decided in 2003 to invest, in partnership with 

31

Japan’s Nippon Steel Corporation and China’s Bao Steel, in a cold-rolling and galvanising plant for 

automotive products in China; 

• to offer a broad range of products and to enrich the product portfolio by taking advantage of the 

complementary nature of the products and markets in the three sectors and a well-focused 

innovation resource; it is in this context that the transformation of the Research function was 

implemented; 

• to favour sales price increases over volume increases; 

• to attract the best talent, as well as manage and develop the Company’s human resources; and 

• to be an effective agent for change in the world steel industry in order to facilitate customer growth, 

and to ensure Arcelor’s growth through targeted acquisitions that create value and strengthen the 

geographic presence of Arcelor in North and South America, Asia and Europe. 

In addition, Arcelor is focusing on its core business in its Distribution-Transformation-Trading Sector. 

These strategies have had and are expected to continue to have the following consequences: 

• improved operating performance based on a process of continual improvement and the exchange of 

‘‘best practices’’ and technical know-how within the Group; 

• improved profitability, based primarily on the synergies generated by Arcelor’s creation, while at 

the same time limiting capital expenditures; 

• lower impacts from the cyclical nature of demand through complementary products and markets, 

thereby improving the stability of cashflow; and 

• greater visibility for the Group in the capital markets and improvement in these same markets of 

the perception of the Group, with the intention that Arcelor become the investment benchmark for 

the industry. 

4.2.1 Continual improvement in the product and service offer 

By combining R&D resources and by capitalising on the multi-market, multi-process and multiproduct 

approach, the Arcelor Group reinforces its advantages and strengthens the attractiveness of steel 

solutions to ward off substitute product offers (aluminium, plastics, cement) and to develop new 

applications for steel, for example, by combining long and flat products to better serve the construction 

industry. 

The evolution of desired functionalities, such as lighter weight, safety, durability and appearance, will 

guide the development of new products. The progressive elimination of processing operations at customer 

facilities, compliance with health, safety and environmental requirements, and the constant goals of greater 

flexibility and lower costs will guide the development of new processes, in particular those that allow for 

reductions in carbon dioxide output, or the production of vacuum deposition coatings, as well as the 

development of new products. Each of these ongoing developments, driven by one of Arcelor’s companies, 

is expected to benefit the entire Group, thereby improving the return on strategic investments. These 

developments should proceed in close relationship with customers’ innovation processes. 

By sharing research resources, the alliance with Nippon Steel Corporation, now well established, has 

resulted in the joint development of new products for the automotive industry. 

4.2.2 Further improvements in profitability 

Synergies of EUR 405 million were achieved by the end of 2003, versus an initial goal of 

EUR 300 million. The synergies achieved in 2003 represent more than half the annual gains targeted at the 

time of the merger for the end of 2006. 

Likewise, the strategy of favouring sales price increases over volume has been successful for the 

Group, as demonstrated by its improved results despite a slight decline in volume. 

4.3 DESCRIPTION OF THE MAIN SECTORS 

The production of steel in the four business sectors is based on two principal types of production 

processes: (i) the traditional integrated process, which uses a blast furnace to transform iron ore into steel, 

and (ii) the use of electric arc furnaces to produce steel from scrap metal (approximately one-fourth of 

32

total production). Whereas flat carbon steel is produced using mainly the integrated steelmaking process, 

long carbon steel and stainless steel are produced using essentially the electric arc furnace process. 

Even if the high fixed charges which are inherent to the integrated steelmaking process make it more 

sensitive to fluctuations in macro-economic conditions, this process remains the most efficient for the 

production of high quality steel and is particularly efficient for high levels of production. The electric arc 

furnace process proves more flexible and production can be adjusted more quickly to reflect demand, due 

to less capital investment and manpower being required. 

4.3.1 Flat carbon steel 

Based principally upon an integrated industrial system (producing steel products from iron ore), 

Arcelor’s Flat Carbon Steels sector is the leading supplier of flat carbon steels to the automotive, domestic 

electrical appliance, packaging, general and construction industries. 

2002 

Pro forma 

Flat carbon steels 2003 (unaudited) 2002 

(EUR million) 

Revenues ............................................... 13,994 13,222 12,312 

Change (1) ............................................... 5.8% — — 

Gross operating result ...................................... 1,365 925 909 

% of revenues ........................................... 9.8% 7.0% 7.4% 

Shipments (in kilo tons) .................................... 25,593 27,563 25,785 

(1) Change from 2002 is pro forma (unaudited). 

4.3.1.1 Strategy 

The strategy of the Flat Carbon Steels sector is based on the objective of increasing value for 

customers within the context of cost control. On the financial level, this policy resulted in 2003 in the 

adoption of strategies that define the optimal industrial configuration to be attained: for flat carbon steels, 

Arcelor decided in 2003 to progressively shut down the production of liquid pig iron in the blast furnaces at 

its inland plants and cut the costs of its cold-rolling and coating lines, initially at the Montataire and 

Mardyck (France) plants. At the same time, the segmented market approach was reinforced by adapting 

the commercial structure and setting up appropriate logistics chains for each market segment. 

Also, in order to maintain margins, the Group has given priority to price over volume, thereby 

choosing to focus on the quality of its products and services. 

This strategy is supported by an ambitious research and development policy. In order to better meet 

customer expectations, the Flat Carbon Steels sector concentrated its R&D activity on three 

multidisciplinary research centres focusing on the major markets: automotive, general industry and 

packaging. A fourth centre focuses on the optimisation of industrial processes. A fifth centre specialising in 

applications of artificial intelligence for the steel industry should be established soon in Spain. 

The Flat Carbon Steels strategy also reflects Arcelor’s goal of sustained improvement in health, safety 

and environmental matters. Safety is therefore a priority issue for the sector. Significant measures have 

been taken to reduce the number of accidents involving employees of the sector, as well as subcontractor 

personnel, and a reliability programme has been developed in order to optimise the production process 

with regard to personal safety. 

In respect of environmental matters, the Flat Carbon Steels sector pursues an active policy of plant 

certification. By the end of 2003, 91% of the sector’s plants were ISO 14001 certified. Significant 

investment has been devoted to reducing air pollutants at the various production sites. 

4.3.1.2 Organisation of the sector 

The Flat Carbon Steels sector optimises its results at sector level, but is structured into six business 

units from an industrial point of view. Five reflect the geographic organisation of the production centres: 

the North business unit operates in Germany and the Flemish region of Belgium; the Wallonia business 

unit covers the Wallonian region of Belgium; the Centre business unit covers the northern and eastern part 

of France; the South business unit covers the southern part of France, Italy and Spain; and the Brazil 

33

usiness unit covers the sector’s activities in that country. The sixth business unit, Arcelor Packaging 

International (‘‘API’’), is dedicated to the packaging industry. 

The strategies defined by Arcelor’s Board of Directors in January 2003 emphasise the concentration 

of the sector’s future investments in European blast furnace upgrades (upstream manufacturing process 

facilities) at its best-performing sites, i.e., the coastal sites, while at the same time reaffirming the need to 

have efficient ‘‘downstream’’ facilities in proximity to customers. 

Within this context, and in order to assist the Group’s customers with their international growth plans 

and to be able to supply them anywhere in the world with identical products meeting the same standards of 

quality irrespective of the country, industrial partnerships have been developed, in particular, with Tata 

Steel in India, Bao Steel and Nippon Steel Corporation in China, Severstal in Russia, Borcelik in Turkey 

and Dofasco in Canada, as well as with Gestamp and Magnetto in Europe and South America. 

At the commercial level, Arcelor’s Flat Carbon Steels sector is organised into two divisions. The first 

specialises in the automotive industry, while the second is dedicated to general industrial customers. These 

two teams use a common network of sales offices located in more than 20 countries. 

Within the General Industry division, sales are organised by segments: distribution, domestic electrical 

appliances, construction and industry, including metal processing and primary processing. 

4.3.1.3 The sector’s products and market 

4.3.1.3.1 Automotive 

The Flat Carbon Steels sector offers the automotive industry a complete range of products and 

services: coils, coated products, finished products, formed and welded blanks, as well as technical 

assistance and advice during the vehicle design stages and when the steel is processed. Arcelor Auto 

handles the distribution. Arcelor Auto has a worldwide presence in order to meet the globalised demand of 

carmakers and first-tier subcontractors. Arcelor Auto operates primarily as an interface between entities of 

the Arcelor Group and their customers (in particular, in Europe and Brazil), but also with certain Arcelor 

joint venture entities (such as Borcelik in Turkey, Severgal in Russia, and Dosol in Canada). 

Arcelor Auto has a 14% share of the world market, with a very strong position in Europe. Its market 

share outside Europe varies from 3% to 15%, depending upon geographic region, with substantial 

opportunities for growth. 

4.3.1.3.2 The General Industry division 

4.3.1.3.2.1 Construction 

In the construction market, the Flat Carbon Steels sector offers its customers the advantages of an 

international company: a large number of production and processing plants, a broad range of products, 

extensive experience in high added-value products (such as prepainted plates and high yield steels). While 

continuing to concentrate on the roofing/cladding segment and interior fit-out, in cooperation with Arcelor 

BCS (Building and Construction Support), the sector is developing new lines of activity (e.g., garage doors, 

lighting columns and swimming pools) and new niche products (e.g., skin plates and very thick galvanised 

plates). 

4.3.1.3.2.2 Distribution 

In 2002 and 2003, the Distribution segment stabilised the order book, standardised sales terms, and 

optimised the product/customer mix to improve the return on capital employed. For strategic customers, 

who use both full-width and processed products, a special cooperation procedure was set up between the 

Flat Carbon Steels sector and the Distribution-Transformation-Trading sector, for the joint handling of all 

services to the customers concerned. 

4.3.1.3.2.3 Domestic electrical appliances 

The range of steels for domestic electrical appliances covers all appliance casing structure parts. 

Cooperation between the sales force and technical staff makes it possible to better meet the needs of 

European domestic electrical appliance manufacturers with a complete range of products: steel for 

enamelling, metallic-coated steel, and high-gloss prepainted steel. 

34

4.3.1.3.2.4 Industry 

The Flat Carbon Steels sector offers industrial customers a broad range of products from very 

high-yield steels for cranes, off-road construction equipment and road trailers with very high buckling 

properties, through qualities for heat treatment, and oil industry applications. Depending on the 

applications, these steel products can be supplied uncoated or with metallic or organic coatings. For 

electric motors, the sector has readied itself to meet the demand for steel grades for the manufacture of 

electric motors with low energy consumption and starter-alternators for future generations of vehicles. 

The new organisation of the engineering, industrial packaging segment within the sector is designed to 

improve customer service. The segment has been divided into sub-segments that take into account the 

specific nature of the products: radiators, barrels, industrial shelving, tanks, gas bottles, etc. 

4.3.1.3.2.5 Geographic markets of the General Industry division 

The European Union (EU-15) is the primary market for the General Industry division of the Flat 

Carbon Steels sector, which has a market share of around 30%. The goal is to stabilise that position in 

terms of both volume and price. 

The enlarged Europe of 25 countries represents a promising market with anticipated growth in the 

new European countries of about 6% to 8%. Arcelor wishes to strengthen its presence in Central and 

Eastern European countries, both at the industrial and commercial levels. 

In North America, following protective measures taken by the United States, the volume transacted 

by the sector in 2003 declined by about 50% compared to 2001. The normalisation of trade relations with 

this market should enable Arcelor to return to the levels of 2000-2001 of about one million tonnes per 

year. 

As a counterbalance to the American effect, the Group has taken full advantage of the growth of the 

Chinese market, albeit with lower profitability due to the U.S. dollar’s fall against the euro. Commercial 

relations with China will be pursued only at acceptable levels of profitability. 

4.3.1.3.3 Packaging steels 

The packaging steels business is handled by API, a dedicated business unit. API is the world leader in 

steels for the packaging industry in terms of both volume (11% share of the world market) and the 

technological sophistication of its applications. 

API is number one in Europe with a 37% market share (representing 85% of its production in 2003) 

and benefits from wide distribution of production and sales throughout the continent. 

API supplies packaging manufacturers with steel products tailored to their various markets: food 

products (50% of the European consumption of packaging steels), beverages, cosmetics, paints and 

industrial products. The applications are many, and include, for example, beverage cans, shaped cans, 2- 

and 3-piece cans, caps and crown corks, tops and easy-open tops, aerosols, industrial cans and decorative 

packaging. 

The beverage can market was disrupted in 2003 with the introduction in Germany of a deposit on 

non-reusable packaging. The beverage can market continued to grow in the other European countries, 

particularly in Spain and the countries of Eastern Europe. Steel consumption in the other steel packaging 

segments was varied: an increase in aerosols and closure applications, a decline in industrial applications, 

and stability in food products. 

API was able to maintain its market share in Europe in the context of a complex situation for the 

industry as a whole. 

API has three production centres, two service centres located in Italy and Turkey and a varnishing 

(printing) unit. 

In a mature market threatened by competing materials, the strategy of Arcelor Packaging 

International is to enhance its own profitability, as well as the profitability of the activity, by defending its 

position and, together with its customers, promoting the use of steel for packaging by launching new 

products on the market. 

35

The new generations of packaging steels resulting from Arcelor innovations should also contribute to 

increased use. For example, steel products with super deep-drawing qualities (allowing for the creation of 

complex forms) should allow for the development of new applications primarily through the reduction in 

the number of deep-drawing passes (e.g., small 2-piece formats, for fish cans), and new developments in 

co-extrusion (deposition of a PET or PP film on one or both faces) should allow API to offer pre-coated 

steels. 

4.3.1.4 Research & development policy 

The emphasis in the automotive field has been placed on technical and scientific support to carmakers 

for the processing of and incorporation into new vehicles of very high-tensile grades developed by Arcelor. 

These new grades permit significant weight savings and improved vehicle safety. In new vehicles, the use 

rate of new steels can attain 50%. The development of new grades with increasingly high performance 

levels is actively being pursued in order to meet carmakers’ expectations in terms of weight reduction. 

The Group is also pursuing its developments in coated products for the vehicle body, a field in which 

it is a technological leader. 

The emphasis in domestic electrical appliances and general industry is on the development of new, 

more easily processed products, for example, through better deep-drawing properties, and on contributing 

to sustainable development from the customers’ viewpoint (for example, the development of surface 

treatments enabling the elimination of the solvent cleaning stage prior to enamelling). 

Major development work is being conducted to produce new solutions for the construction market, 

which are to be used in industrial applications. Development work is also focused on prototypes that 

demonstrate the performance of various constructional systems for energy-efficient buildings, such as 

ventilated double roofs. 

The renewal of the product line for packaging continues, both in grades offering new mechanical 

performance and in coatings, and, in particular, by expanding the range of steel products with elevated 

mechanical properties and high ductility. These steels enable packaging weight reduction, while offering 

increased ease of processing. 

Moreover, a new range of high-ductile steel products was designed for applications in which steel is 

currently little used. 

Various developments are under way in manufacturing operations to strengthen the sector’s position 

in these markets: 

• development of a manufacturing process for a new range of steels for beverage cans that optimises 

the industrial processes, while offering new possibilities for reducing thickness; and 

• development of metallurgical models and in-line sensors that predict the properties of these 

products on the line, generating cost reductions and better product allocation. 

4.3.2 Long carbon steel and wire drawing sectors 

The Long Carbon Steels sector of Arcelor produces and markets a broad range of carbon steel 

products: beams, concrete reinforcing bars, merchant steels, wire rod, sheet piling, rails for public 

transport, rails for gantry cranes, special sections, semi-finished products and drawn-wire products. 

The sector ranks first in market share by volume worldwide in the production of beams, sections and 

sheet piling, and is among the leading players in concrete reinforcing bars, wire rod and special sections. 

2002 

Pro forma 

Long Carbon Steels 2003 (unaudited) 2002 

(EUR million) 

Revenues ............................................... 4,381 4,256 3,605 

Change (1) ............................................... 2.9% — — 

Gross operating result ...................................... 493 613 484 

% of revenues ........................................... 11.3% 14.4% 13.4% 

Shipments (in kilo tons) .................................... 12,221 11,930 10,104 

(1) Change from 2002 is pro forma (unaudited) 

36


Arcelor’s Long Carbon Steels sector is a full service provider with a strong presence in Western 

Europe and South America and a wide network of sales and trading offices in Europe. The sector is 

pursuing a reinforcement and/or growth strategy in all its markets by focusing on the quality of its 

products, cost control and adherence to delivery schedules. 

In Western Europe, for commodity and specialty products, the implementation of a sales policy in 

2003 designed to increase profitability and meet customer needs by offering a broad range of services 

should strengthen the position of this sector in its markets. 

In other European countries, the sector is deploying a responsible growth policy, while in export 

markets it is in a position to take advantage of the opportunities that arise. In the Americas, the strategy of 

the Long Carbon Steel sector is based on targeted investments to strengthen its cost leadership position, an 

efficient distribution network in Latin America and the export of niche products. 

In drawn-wire products, the steelcord unit is following the relocation of its principal Western 

European customers into Central and Eastern Europe by increasing the capacity of its plant in Hungary. It 

continues to grow steadily in Asia through its plants in Korea and China (which are operated in 

partnership with Kiswire). The Low Carbon Steel unit is pursuing its strategy of growth in high valueadded 

products and niche products. 


Given the specific technical and commercial properties of the different product families and the desire 

to accelerate the transfer of best practices among comparable plants, in 2003, the Long Carbon Steel 

sector reorganised its business in Europe into separate business units: 

• one business unit combines merchant steels, concrete reinforcing bars, wire rod and semi-finished 

products; 

• one business unit manages the beams business; and 

• one business unit combines the sheet piling, rail and special sections activities. 

In each of these three dedicated units, commercial and industrial activities are grouped under a single 

authority. The Drawn-Wire Products and Americas business units, which already operate on the principle 

of one combined commercial and industrial authority, complete the sector. 

4.3.2.3 The sector’s products and markets 

Rolled long products are used principally in the construction, infrastructure and capital equipment 

markets. Drawn-wire products have a number of uses: tyre manufacture (steelcord), agriculture (vine 

wires, enclosures), industry (galvanised wires for cable sheathing) and construction (fibres). The long and 

drawn-wire products market is very competitive, driven by the emergence in the construction market of 

new environmental, aesthetic, architectural and economic requirements. 

4.3.2.3.1 Rolled products 

These products accounted for 76% of the sector’s shipments in 2003. This family of products includes 

lightweight and medium-weight beams, merchant steels and concrete reinforcing bars. The market is either 

local or regional, depending on the products. The Long Carbon Steel sector has a strong presence in both 

key and export markets through a well-developed sales network. The key geographic markets for the 

European plants are France, the Benelux countries, Germany and the Iberian peninsula. Output of 

commodity products from the South American plants is primarily destined for the respective national 

markets. 

The speciality products consist of sheet piling, heavy beams, special sections and rails. These high 

added-value products are marketed worldwide, backed by an integrated logistics system and technical/ 

commercial teams at local, regional and international levels. The Long Carbon Steels policy in these 

markets is to maintain its technological lead in processes and to anticipate customer needs through 

continuous innovation and product development. 

37

The rolled long products manufactured in the European plants of the Long Carbon Steel sector are 

marketed in Europe through the Arcelor Long Commercial S.A. distribution network. In export markets, 

the sector’s products are sold by Arcelor International sales teams and to its preferred partners. 

4.3.2.3.2 Drawn-wire products 

The technical products for global customers include wire rod for special applications, particularly 

steelcord upstream and drawn steelcord downstream. The sector offers its technical know-how to 

customers to meet their specific needs. The drawn-wire business has its own sales organisations for each of 

its three activities: steelcord, low-carbon steel and high-carbon steel. 

The Americas business unit has a sales organisation that is integrated with its operating activities. The 

significant stake in Acindar in Argentina (production of wire rod, tubes, drawn wire and bar products) 

strengthens the industrial and commercial position of Long Carbon Steels in South America. 

4.3.2.3.3 The construction market 

Synergies have been developed between the Arcelor Long Carbon Steels sector and the Flat Carbon 

Steels sector to facilitate the combined use of hot-rolled sections and cold-rolled sections for the 

construction business, for example, for multi-storey structures employing beams and composite formwork 

for floor slabs. 

This cooperation is coordinated by Arcelor Building Construction Support (‘‘BCS’’) with the aim of 

increasing the use of steels in the construction business. This organisation coordinated the activities of the 

Long Carbon Steels sector and Arcelor Construction in 2003 to produce the innovative ‘‘globalfloor’’ 

solution that optimises flooring composed of steel pans and joists. This construction solution is a move 

towards a holistic solution requested by general contractors. 

4.3.2.4 Research and development (R&D) policy 

Innovation is a key component of the strategy adopted by the Long Carbon Steel sector. Its R&D 

activities cover both manufacturing processes and product development, with special attention to product 

applications. 

With respect to manufacturing processes, R&D initiates technical improvements in production, 

including environmental aspects, and develops new processes and operating methods; the goal is to cut 

costs, increase performance, reduce environmental impact and enhance the flexibility of the facilities. 

At the product development level, the R&D activities focus on improving quality, developing new 

types of steel and steel products, identifying new applications, finding solutions for customer problems and 

promoting the use of steel over substitute products. 

The effectiveness and expertise of the R&D activities are enhanced by cooperation with universities 

and research institutes, as well as by participation, together with other steel producers, in European Union 

research projects. 

4.3.3 Stainless steel 

The Stainless Steels sector includes the operations related to the manufacture and sale of stainless 

steel and nickel alloy products. Present in the world’s major markets, this sector has initiated a process to 

refocus on its core flat stainless steels business. 

2002 

Pro forma 

Stainless steels 2003 (unaudited) 2002 

(EUR million) 

Revenues ................................................. 4,280 4,248 4,097 

Change (1) ................................................. 0.8% — — 

Gross operating result ....................................... 23 200 197 

% of turnover ............................................. 0.5% 4.7% 4.8% 

Shipments (in kilo tons) ...................................... 2,409 2,413 2,316 

(1) Change from 2002 pro forma (unaudited) 

38


Arcelor is present in the global stainless steel market with a complete range of products (hot- and 

cold-rolled coils, precision-rolled products and long products in stainless steels and alloys, heavy plates and 

small welded tubes). 

Because of the great variety of products manufactured and marketed, including a large proportion of 

flat products, the Arcelor Stainless Steels sector is a major supplier to the automotive, domestic electrical 

appliance, general and construction industries. By virtue of the configuration of its industrial facilities and 

its sales network, the Stainless Steels sector is able to assist its large customers in their international 

expansion. 

The global stainless steel market in 2003 was at 17 million tonnes per year. The market is cyclical and 

very competitive, with a steady decline in sales prices of between 2% and 3% per year for the past several 

years. 

In this context, Arcelor adopted a strategy in 2003 to transform its Stainless Steels activities based on a 

policy of investments, industrial reconfiguration and the development of partnerships to allow each 

business in the sector to adapt to its own special circumstances and challenges. See Chapter 7 ‘‘Transaction 

and Other Recent Developments’’. 

This policy was specifically reaffirmed in 2003 with the stated objective to make Arcelor’s flat stainless 

steels a global benchmark for customer service, innovation and competitiveness, primarily through its 

UGINE & ALZ business unit. 

4.3.3.2 Organisation of sector 

The Stainless Steels sector comprises five major product areas: 

• stainless flat products; 

• long stainless and alloy products; 

• stainless steel tubes; 

• precision stainless metal strips and nickel alloy flat products; and 

• special plates in stainless steels and specialty steels. 

All export sales of the Stainless Flat Products Business Units outside their principal markets are 

handled by Arcelor Stainless International (‘‘ASI’’). 


4.3.3.3.1 Stainless steel flat products 

With 6,000 employees and revenue of over EUR 2 billion in 2003, UGINE & ALZ, which specialises 

in stainless steel flat products, is the main business unit of the Stainless Steels sector. The company is one 

of the leaders in the European market with a market share of more than 25% and high-performance 

products, notably its bright-annealing lines at Gueugnon (France) and Genk (Belgium) dedicated to 

specialty markets, its LC2I continuous integrated cold-rolling line at Isbergues (France), and its facilities at 

Genk (Belgium) for thick or extra-wide products. 

The distribution of the UGINE & ALZ operations over five plants generates substantial fixed and 

logistics costs. As a result, Arcelor decided to reconfigure the UGINE & ALZ steelshops by concentrating 

production near the Carlam hot strip mill in Belgium. In May 2003, the Arcelor Board of Directors 

approved the construction of a steelshop with a capacity of one million tonnes upstream of this mill. 

The planning schedule for this EUR 230 million investment provides for commissioning by the end of 

2005 and ramping up of production until the rated capacity is reached in 2007. The doubling of the 

capacity of Genk steelshop in 2002 and the new Charleroi steelshop directly connected to the hot-rolling 

mill should also ensure an optimal industrial configuration. 

The industrial reconfiguration project would include the closure, expected for 2004, of the Ardoise 

plant, whose location does not permit it to be competitive. The increased capacities at the Genk and 

Carlam steelshops will also require the shutdown of the Isbergues (France) steelshop. 

39

4.3.3.3.1.1 Stainless steel flat products market 

The consumption of flat stainless steels has grown by more than 6% per year for twenty years. In 2003, 

the market represented 14 million tonnes. Growth in the use of stainless steel varies by country depending 

on the level of industrialisation. The strong demand in Asian countries (principally China and India), 

which is geared more to consumer goods, favours a strong increase in the consumption of principally flat 

cold-rolled stainless steel in this region, while in Europe and the United States the growth rate in flat 

stainless steel is more a function of substitution for other materials. 

The level of consolidation of stainless steel producers, particularly flat products producers, is the 

second characteristic of this business. The five leading world producers account for 60% of world 

production of flat products. Arcelor’s global market share in stainless steel flat products was approximately 

16% in 2003. 

Its production know-how and expertise gives Arcelor a world leadership position in markets that have 

high technical requirements, with products such as bright-annealed steels for the domestic electrical 

appliance markets, ferritic grades for the automotive market, or wide plates primarily for the boilermaking 

and fabrication markets. Arcelor also enters into partnerships with major customers to help satisfy their 

particular technical requirements. 

Faced with steep raw materials price increases, particularly for nickel in 2003, the policy of Arcelor’s 

Stainless Steels sector is to improve competitiveness through specialisation of its production equipment, 

technical dialogue between plants, and the launch of new differentiated products offering customers 

additional use value. A major programme was initiated to develop low-nickel grades. UGINE & ALZ 

continues to pursue its policy for the development of nickel-free ferritic grades. 

4.3.3.3.1.2 Domestic electrical appliance market 

UGINE & ALZ is a principal supplier for the major manufacturers of large domestic electrical 

appliances, with 35% of stainless steel supplies to this market. 

To meet customer expectations, UGINE & ALZ is developing new stainless steel grades that offer 

new product features. For example, UGINE & ALZ is developing a new surface finish for the kitchen with 

a homogeneous and reproducible etched surface, which allows multi-directional patterns to be retained 

after forming, and affords greater design flexibility. 

In the cutlery segment, UGINE & ALZ developed a stainless steel grade offering high-performance, 

particularly in terms of hardness, to satisfy the requirements of this market. 

4.3.3.3.1.3 Automotive market 

The automotive market represents 20% of the revenues of the Stainless Steels sector, with 14% in the 

exhaust market alone. Combining the properties of corrosion-resistance, mechanical strength and shock 

absorption, increasing use is being made of stainless steels in structural components, safety-critical parts 

and fuel tanks, making it possible to reduce the weight of the vehicle structure and thereby offering 

potential reductions in fuel consumption. 

A number of development projects carried out in partnership with customers have been launched in 

the exhaust pipe market in order to meet expectations in respect of competitiveness. 

4.3.3.3.1.4 General industry market 

The general industry market is one of the leading markets for stainless steel in terms of volume. The 

food and pharmaceutical, heating, transport and process industries are major customers in this segment. 

In the field of heating, UGINE & ALZ is accelerating the development of ferritic stainless steel 

grades as a substitute for other materials (enamelled steel), particularly for hot-water cylinders and 

condensing boilers. 

In transportation, UGINE & ALZ is developing, in partnership with its customers, grades that meet 

the need for lighter products, primarily for containers. Due to its ‘‘cleanability’’ properties, stainless steel is 

in increasing demand for highly sensitive applications in terms of hygiene and health, such as in hospitals 

and industrial kitchens. 

40

4.3.3.3.1.5 The construction market 

The stainless steel sector continues to grow in the construction market, particularly in the areas of 

roofing (coated and uncoated) and cladding. 

4.3.3.3.1.6 Sales network and service centres 

In Europe, UGINE & ALZ relies on a network of eight service centres in seven countries and a 

network of sales offices in all European countries. 

ASI markets the flat products of all business units outside their domestic market and long products in 

certain regions. ASI strengthened its organisation in 2003 with the establishment of three new facilities: a 

service centre in Vietnam, the revamping of the service centre in the United States, and the construction of 

a service centre dedicated to hot-rolled products in Malaysia. 

ASI has a presence in about 40 countries, with service centres in Australia, China, the United States, 

Turkey and Vietnam. 

In Bytom, Poland, the Distribution-Transformation-Trading sector and the Stainless Steels sector have 

established a shared service centre in order to better develop the local market. 

4.3.3.3.2 Stainless steel long products 

Ugitech, born of the merger between Ugine Savoie Imphy S.A. and Sprint Métal S.A. in 

December 2003, is an integrated unit dedicated to upstream stainless steel long products (steelshop, rolling 

mill), downstream processing activities (bar finishing, wiredrawing) and distribution. Faced for several 

years with a deep erosion of margins in a European market with fragmented supply and weak growth, 

Ugitech embarked on a commercial, administrative and logistics restructuring programme in 2003. This 

adaptation plan aimed at improving financial performance and also resulted in industrial restructuring: the 

rod mill and finishing shops at Imphy (Nièvre, France) have been dedicated to alloy products. 

Ugitech has a large integrated distribution network with six European subsidiaries, an American 

subsidiary and a global network of agents and partners. 

ASI also handles the marketing of stainless steel long products in certain regions to complete the 

organisation. 

In alloys, the Imphy Alloys commercial organisation is tailored to the needs of the global steel alloys 

market. It is based above all on a strong presence and partnerships in the Far East, where a growing 

number of user markets are concentrated. 

4.3.3.3.2.1 Stainless steel long products markets 

Closely linked to industrial investment and capital goods, the European market for stainless steel long 

products has suffered the effects of the stagnation in industrial production. However, with a market share 

of over 14% in the EU-15 in 2003 and sales up 42% in 2003 compared to 2002 in Central and Eastern 

Europe, Ugitech’s position has improved. On the other hand, exchange rate movements led to a decrease 

in shipments to the North American and Asian markets. In 2003, the expanded Europe (EU-24) 

represented more than 80% of this unit’s sales. 

Ugitech’s stainless steel long products are maintaining their leadership position for improved 

machinability products. Soaring nickel prices are also stimulating the development of grades destined for 

the fastener market. 

In the field of civil engineering structures, stainless reinforcing bars are valued highly in construction 

projects that require high corrosion-resistance. A new product line is under development for this 

high-potential market for which Ugitech believes it has the means to differentiate itself. 

4.3.3.3.3 Precision-rolled products 

The ‘‘precision-rolled’’ businesses, which until 2003 were grouped within Imphy Ugine Précision 

(IUP), have been formed into two companies tailored to the specific nature of the two product lines. The 

manufacture of stainless steel products handled by IUP is now concentrated at the Pont de Roide plant 

(France). Alloy production at Imphy and Firminy has been merged into a new company, Imphy Alloys 

S.A., established in December 2003. The products of these two companies are intended for the visual 

41

display market (shadow masks for television sets, for example), electronics (integrated circuit boards) and 

automotive industry (engine gaskets). 

4.3.3.3.3.1 Nickel alloy markets 

The growth of user markets in Asia was confirmed in 2003, the result not only of transfers of 

production but also of growth in certain segments. A marked recovery was experienced in sales of alloys to 

the electronics industry and 2003 was a strong year for the cryogenics market. Despite the growth in flat 

screen sales in developed countries, the manufacture of cathode-ray tubes continues to grow slightly 

because of an increase in consumption in Asia, notably in China. 

In high-nickel content alloys (35% to 80%), Arcelor has a presence primarily in the ultra-thin strip 

markets (flat and thin products, Imphy Alloys), but also in rod and wire (Ugitech). 

Faced with a trend toward outsourcing by its customers, Imphy Alloys is redeploying its worldwide 

industrial and commercial assets in order to retain its market share. Mécagis, a subsidiary of Imphy Alloys, 

transferred part of its production to Imhua Special Metal in China. Imphy Alloys’ sales in Asia accounted 

for 40% of revenues in 2003, compared with 35% in 2002. 

In 2003, Imphy Alloys maintained its market share in tanks for gas carriers and benefitted from the 

growth of new civil aeronautics programmes, which resulted in increased sales of alloys for composite 

materials moulds. 

4.3.3.3.4 Special plates 

The Industeel business unit is among the world’s top producers of special fabrications, and abrasionresistant 

steels for moulds and tools. Based in Charleroi, Industeel Belgium specialises in the production of 

stainless steel plates and specialty carbon steel plates. In France, the Creusot, Châteauneuf and Saint- 

Chamond plants specialise in the production of plate, forging ingots, castings and shells. Industeel was 

involved in the construction of the first Chinese-built duplex steel chemical tanker. 

After the sale of Creusot Forge Industrie and its stake in Creusot Métal in 2003, Industeel continued 

to restructure to emerge as a federation of autonomous companies focused on their core businesses. 

Within the framework of this process, the Creusot plate mill and finishing shops are implementing a 

corporate project that should allow a return to their former performance level. 

Industeel has a worldwide network of sales offices and relies upon the support of the ASI network. 

4.3.3.3.5 Stainless steel tubes 

In order to simplify its fragmented industrial organisation, the Stainless steel tubes business unit 

transferred to France all production that was previously handled by the Meusienne plants in Italy and 

Matthey in Great Britain (perforated tubes) in order to achieve critical size, which is an important element 

of stainless steel tubes production. 

The stainless steel tubes business unit is active in the decoration and corrosion markets through its 

Meusienne company based in Ancerville, and in the automotive exhaust market with Matthey and its 

subsidiaries based in Switzerland, France, Great Britain and the United States. 

4.3.3.4 Research and development policy 

Stainless steels offer corrosion-resistant properties that guarantee use over time, while offering a 

broad range of usage properties. This range runs from highly formable steels that allow deep-drawing or 

energy absorption providing a high level of safety in the event of impact, to very hard materials that can be 

used under extreme conditions. 

The Stainless Steels sector has developed a line of products that are less dependent on nickel. 

UGINE & ALZ is a specialist in ferritic steels that resist corrosion by virtue of chromium and 

molybdenum additions. These ferritic steels are particularly suited to meet the expectations of automotive 

exhaust manufacturers, as well as general industry (e.g., heating and containers). UGINE & ALZ is also 

working to develop grades with high thermal performance for exhaust manifolds. 

42

In addition to the development of more economical steels, R&D effort has focused on developing 

surfaces with new aesthetic qualities, which have applications in domestic electrical appliances and in local 

authority infrastructure in particular. 

Industeel and Ugitech specialise in the production of duplex-type steels with very low nickel content, 

elevated mechanical properties and high corrosion-resistance. 

4.3.4 Distribution-Transformation-Trading 

The businesses comprising the Distribution-Transformation-Trading (‘‘DTT’’) sector have important 

partnerships with a number of customers in the automotive, construction, domestic electrical appliances, 

public works, civil engineering, offshore structures and general industry markets. 

2002 

Pro forma 

Distribution-Transformation-Trading 2003 (unaudited) 2002 

(EUR million) 

Revenues ................................................. 7,954 9,444 8,780 

Change (1) ................................................. (15.8)% — — 

Gross operating result ....................................... 284 319 294 

% of revenues ............................................. 3.6% 3.4% 3.3% 

(1) Change from 2002 pro forma (unaudited). 


The DTT sector represents a major activity for Arcelor and is an essential link between the industrial 

steel users and steel production. 

The DTT sector meets the complex needs of multinationals, as well as the needs of the local artisan, 

due to a range of standard products, as well as holistic and customised solutions. 

DTT has almost 15,000 employees worldwide and had revenues of EUR 8.0 billion in 2003. 

Rather than products, DTT offers high added-value ‘‘steel solutions’’. Thus, almost 75% of the 

volumes purchased from other Arcelor sectors by DTT are processed or finished before being sold. 

The DTT sector’s core business is in Europe, with a strong presence in Germany, the Benelux 

countries, Spain, France and Great Britain. 

Since the sector’s markets are essentially regional, DTT has formed a network of more than 750 

facilities around the world. As a result, almost 75% of its customers are less than 300 kilometres from a 

DTT facility, where they find the entire Arcelor Group product range available. 

On the basis of these unique features, the DTT sector implemented a new organisational structure in 

2003, enabling rationalisation in Western Europe by reducing the number and ranking, of warehouses 

based on customer proximity and type, and optimising of logistics and structural costs. DTT is focused on 

sustained business growth in Central and Eastern Europe in support of its customers, and on a growing 

and innovative product line centred on high value-added specialty products, partnerships with customers, 

and the sale of solutions that involve customers’ upstream manufacturing processes, particularly in sheet 

metalworking. 


In 2003, the sector focused on integrating and streamlining its operations. DTT thus engaged in an 

active process to streamline its portfolio of companies, primarily through the disposal of non-core activities 

(including, for example, PUM Plastiques). 

The sector is now organised into six business units, each carrying out specific but complementary 

activities. 

This new organisation improved the logistics of the sector’s businesses and, in particular, their 

commercial efficiency, and simplified the central functions. 

43


4.3.4.3.1 Arcelor Trading and Distribution: 

Arcelor Trading and Distribution (‘‘AND’’) is a world leader in steel distribution with 200 facilities 

spread over 30 countries, distributing over 4 million tonnes of steel products per year. 

AND comprises companies that handle steel trading and warehousing. These are multi-specialist 

businesses offering an extensive range of products: sheets and plates, beams, tubes, merchant rolled 

products, stainless steel and aluminium flat and long products, technical products and special steels, as well 

as concrete reinforcement products. The customer base includes multinationals, as well as private 

individuals. 

AND also offers a range of ‘‘customised’’ products (such as manufactured semi-finished products, 

structural frames for buildings and crane and wind-turbine structures) at its downstream finishing service 

centres and downstream partnerships (such as with John Deere, Potain, Snecma, Hermanussen, etc.) 

In 2003, AND continued to expand its European network with the formation and the acquisition of 

several companies: 

• establishment of Arcelor Profil, Plaques et Découpes, Arcelor Distributie in Romania and a 

coordination centre for Eastern Europe in Slovakia; and 

• acquisition of the Guille and Ferrometalli companies to complete AND’s plate and profiling 

activity, Krisper d.o.o. in Slovenia and Ravené Schäfer (DEAG POSSEHL) in Germany. 

4.3.4.3.2 Arcelor Steel Service Centres 

Arcelor Steel Service Centres (‘‘ASSC’’) supplies the finished flat carbon steel market. It has over 

5000 industrial customers in 18 countries, which are served by 44 plants offering a complete range of 

finishing products. 

ASSC finishes products to the dimensions requested by customers in ready-to-use quantities. These 

include hot- and cold-rolled products, metallic- and organic-coated slit strip, sheet, blanks and specific 

components or sub-assemblies produced by sheet metalworking. 

ASSC also provides a full line of services, such as: 

• a holistic product offer backed by the range and quality of Arcelor products; 

• technical expertise and product quality follow-up; and 

• appropriate logistics. 

In 2003, ASSC began to expand its range downstream through various customer partnerships with 

automotive suppliers and domestic electrical appliance manufacturers in particular. 

Several ISO 14001 certifications were either attained or confirmed in 2003, with quality certifications 

now covering a large portion of the operation. 

4.3.4.3.3 Arcelor Construction 

Arcelor Construction is the European leader in the market for metal products for the envelope, 

secondary framework and structure of industrial and agricultural buildings (cladding, sections, flooring, 

roofing, insulating sandwich panels). Arcelor Construction operates in 27 countries through 50 companies. 

Arcelor Construction sold 553 thousand tonnes of sections and 14.5 million square metres of panels in 

2003. 

Arcelor Construction has integrated upstream facilities with a rolling mill, galvanising and prepainting 

line that give it flexibility in meeting the needs of its customers in the construction industry (structural 

metalworkers, cladding and roofing specialists, and generalist and specialist stockholders). 

Arcelor Construction is developing new products and concepts, notably steel facade elements, 

fire-resistant products and extended spans (in partnership with Long Carbon Steels). 

44

4.3.4.3.4 Arcelor PUM Processing 

Arcelor PUM Processing was established in early 2003 based on the heavy processing equipment of 

the Reims plant: a continuous pickling process, a cold-rolling process (4-high reversing mill), annealing in a 

hydrogen atmosphere and a skin-pass installation. 

Arcelor PUM Processing produces pickled, cold-drawn, cold-rolled and galvanised coils. This unit of 

approximately 350 people serves the other DTT business units. All Arcelor PUM Processing facilities 

obtained renewal of their ISO 14001 certification in 2003. 

4.3.4.3.5 Arcelor International 

Arcelor International is the Group’s commercial organisation for the following activities: 

• the marketing and sale of the products of the Flat Carbon Steels and Long Carbon Steels sectors in 

export markets; complementing the specific organisations of these two sectors in their markets; and 

• trading of steel products, i.e., purchase from third parties and resale to customers within the 

framework of a full service offer that extends from logistics to financing to technical support. 

The unit is also active in the supply of finished or semi-finished products from other sectors of the 

Group and international monitoring of commercial developments. 

Arcelor International has positioned itself as a ‘‘differentiated’’, high added-value network with 

approximately 300 employees worldwide in a network of 41 regional offices. 

In 2003, Arcelor International contributed its Considar subsidiaries to a joint venture named Traxys 

with Belgium’s Umicore Group and its commercial subsidiary Sogem. Traxys is active in distributing, 

marketing and trading non-ferrous metals, their ores and concentrates and ferro-alloys. Traxys has over 

20 offices around the globe. Its assets and management are divided equally between Arcelor and Umicore. 

4.3.4.3.6 Arcelor Projects 

Arcelor Projects specialises in providing customised and optimised steel solutions for the construction 

of large civil engineering, public works and offshore structures projects, such as port facilities, underground 

car parks and tunnels. For example, Arcelor Projects is providing foundation structures for the 

reconstruction work at ‘‘Ground Zero’’ in New York. Arcelor Projects has four service companies based in 

Europe, North and Central America and Asia. The solutions it offers consist of a wide range of products— 

sheet piling, H-piles and pipe piling, girders, tubes, heavy plates—and high value-added services, including 

design, assembly, finishing, technical support and logistics. 

Arcelor Projects consists of two operating entities: 

• ‘‘Foundation Solutions’’, which offers products and services for port development, underground car 

parks, etc.; and 

• ‘‘International Projects’’, which supplies high-tech steel structures provided as a package with 

logistical support and specialised documentation, for example, for offshore structures. 

4.3.5 Other activities 

The ‘‘Other Activities’’ sector comprises support activities and several industrial companies, primarily 

Paul Wurth, Circuit Foil and International Electronics & Engineering. 

4.3.5.1 Paul Wurth 

The Paul Wurth company is an international player in the field of plant and equipment engineering 

for the steel and non-ferrous metals industries. The company is also active in managing large civil and 

industrial projects in the construction sector and the development of new technologies for the protection 

of the environment in industry. 

Based in Luxembourg, Paul Wurth has subsidiaries and branches in Belgium, Germany, Spain, the 

Czech Republic, Russia, and Asia (India, China, Korea, Taiwan), Latin America (Brazil, Chile, Mexico) 

and North America (United States and Canada), as well as South Africa, plus a network of licensees and 

agents. As at 1st January, 2004, Paul Wurth employed approximately 765 people. 

45

In the blast furnace segment, Paul Wurth benefited from the sustained growth of investments in the 

steel industry in China in 2003, a country that has become the leading market for the Paul Wurth group 

with 30% of all new orders. A company producing cooling systems for blast furnaces was established in 

Luoyang in 2003 in conjunction with a local copper producer. 

Paul Wurth also established itself in the Russian market in 2003 with two major orders for the relining 

of blast furnaces and with the formation of an engineering company in Kovrov with a local minority 

partner. 

TMT Tapping Measuring Technology, a company specialising in taphole and measurement probe 

technologies, formed in partnership with the German company Dango & Dienenthal Maschinenbau, 

posted a strong first year of activity, taking in substantial new orders. 

In the field of steelshops and continuous casting, Paul Wurth successfully commissioned its oscillating 

mould process for an American customer in 2003. In the non-ferrous metals segment, the company is 

working on an order for a hydrometallurgy application involving a handling system for copper refining 

electrodes. 

In the area of civil engineering project control and management, Paul Wurth is participating in the 

coordination of the new building projects for the European Community Courts of Justice and the 

European Investment Bank. 

In the field of research and development, Paul Wurth worked in 2003 to develop the first industrial 

application of the PRIMUS technology to recycle the dust from electric furnaces. Studies and tests 

relating to other applications of the PRIMUS process, such as the recycling of waste products in 

integrated steel plants and hot metal production from iron ore, are being conducted in 2004. 

4.3.5.2 International Electronics & Engineering 

International Electronics & Engineering (‘‘IEE’’) is a company specialising in the design and 

manufacture of sensors for the automotive industry. The company is a world leader in terms of market 

share for seat-occupant detection sensors. In 2003, more than 3.8 million vehicles were equipped with an 

IEE system. The company is pursuing multiple research and development projects, notably a 3D camera, 

electroluminescent lamps and pedestrian protection systems for incorporation into the vehicle cockpit. 

IEE has two plants in Luxembourg and two development centres in the United States and Korea. In 

2003, the company had revenues of EUR 70.7 million. Arcelor signed a memorandum of understanding for 

the sale of IEE in June 2004. See section 7.2.4 ‘‘Sale of IEE’’. 

4.3.5.3 Circuit Foil 

Circuit Foil specialises in the production of ultra-thin copper foils with a thickness of 3 to 400 microns 

used in the manufacture of printed circuits. Circuit Foil is among the five largest manufacturers in the 

world. The company has two plants, one in Luxembourg and one in Canada. By the end of 2003, Circuit 

Foil employed approximately 360 people worldwide. 

The over-capacity crisis that hit the electronics sector from 2001 was only partially diminished at the 

end of 2003, and sales prices remained under great pressure during the year. As a result, Circuit Foil 

initiated a financial restructuring that led to a significant reduction in the group’s debt and to the 

acquisition of 23.07% of its capital by Société Générale de Financement du Québec. 

As a result of initiatives launched in 2002, Circuit Foil was able in 2003 to increase its market share in 

Asia, particularly in China, and to increase its total output by 28% over 2002. An ambitious programme to 

improve productivity and cut costs was launched last year and resulted in a marked improvement by the 

end of the year. 

4.4 COMPETITION 

The Arcelor Group’s markets are highly competitive. Its markets are characterised by a fragmentation 

of offer (the ten leading steel producers represent approximately 27% of worldwide production), chronic 

over-capacity, production costs which vary considerably throughout the world and globalisation of major 

customers. Its markets are also characterised by powerful and experienced competitors, with new 

competitors appearing in emerging markets, as well as the development of substitute products. 

46

Competition is based primarily on production costs, the quality of the products, their added value, the 

range of products and services offered, sales prices, reputation, experience and technological innovation. 

The chart below shows the world’s ten leading producers of crude steel based on the volume of crude 

steel produced in 2003 (in millions of metric tons). 

50 

40 

30 

20 

10 

0 

Arcelor 

LNM 

Group 

Nippon 

Steel 

JFE 

Posco 

Shanghai 

Baosteel 

Corus 

Group 

US Steel 

Thyssen 

Krupp 

Nucor 

28JUN200410292070 

Source: International Iron and Steel Institute. 

4.4.1 Flat carbon steel 

The Arcelor Group is the world’s leading producer of flat carbon steel. 

The flat carbon products of the Group are primarily in competition with those of other steel producers 

in Western Europe, such as Corus, Rautaruukki, Ilva (Riva group), Salzgitter, SSAB, Thyssen Krupp Stahl 

and VA Stahl, as well as those of U.S. and Asian producers. The Group also increasingly faces competition 

from certain producers in Central and Eastern Europe. This strong competition also manifests itself 

through sale prices, which increasingly reflect the worldwide market. See section 4.7 ‘‘Regulations—Trade 

barriers’’. 

In this sector, strategic alliances, such as that with Nippon Steel Corporation enable the Group to 

improve its competitiveness by providing a global offer, particularly in the automotive market. 

Thanks to regular supply to its customers of products of consistently high quality, the Group is 

resisting the increasing competition from certain producers in Central and Eastern Europe, as well as 

Asian producers practising world market sale prices. In addition, the Group benefits from a solid presence 

in Europe. It also believes that its extensive range of flat carbon steels (in respect of types of product and 

format) and the quality of related services (such as locally situated finishing and distribution centres and 

assistance in design) are solid bases for maintaining its position as the market leader. 

4.4.2 Long carbon steel 

The Arcelor Group is the leading producer worldwide of long carbon steels. 

Following restructuring in this sector, the number of producers in Europe has fallen significantly 

during the last ten years. 

The Arcelor Group is a leader in the production of heavy beams, competing with Corus, Kawasaki 

Steel, Nippon Steel Corporation and Salzgitter in this global market. 

As regards other long products, the Arcelor Group’s markets are more regional. The main 

competitors in Europe are, for example, Celsa, Corus, Duferco, Duferdofin, Ispat, Riva group, Saarstahl, 

Salzgitter, certain producers in Central and Eastern Europe and Gerdau in Brazil. In the United States, 

the main competitors are local producers, such as Chaparral and Nucor. 

47

In the wire drawing sector, the Arcelor Group, with its partner Kiswire, is the second-largest 

independent steelcord producer in the world for the tyre industry. In this sector, the main competitors are 

the worldwide leader, Bekaert, and Sodetal, Tokusen and Tokio Rope. In South America, through the joint 

venture between Belgo-Mineira and Bekaert, the Arcelor Group is the leader both in steelcord, wire and 

high- and low-carbon steel. 

The extension of the alliance signed with Nippon Steel Corporation to include long products would 

allow the Group to apply technological changes more frequently. 

4.4.3 Stainless steel 

The Arcelor Group is one of the leaders worldwide in this sector. 

Given the level of prices for stainless steel and the smaller proportion of transport costs in the price, 

the market is largely global. The main competitors of the Arcelor Group are European, such as Acerinox, 

Avesta Polarit and Thyssen Krupp Stahl, but also Aichi (long products), Daido (long products), Kawasaki 

(flat products), Nippon Steel Corporation (flat and long products), Sumitomo (flat and long products) in 

Japan, Inchon (flat products) and Posco (flat and long products) in Korea, Yieh United (flat products) in 

Taiwan, Tisco (flat products) in India, Chinasteel in China and Allegheny (flat products), AK Steel (flat 

products), North American Stainless (flat products) and Carpenter Technology (long products) in the 

United States. 

With the complementary nature of its product ranges and with its extensive worldwide distribution 

and service centre network, the Arcelor Group intends to focus on its privileged markets: cutlery, 

household appliances, automobile exhaust pipes and construction. In order to offer its customers efficient 

technical assistance for optimisation of stainless steel solutions, the Group has considerable capacity to 

develop new products. Its direct contact with the end customers is one of the Group’s major competitive 

advantages. 

4.4.4 Distribution-Transformation-Trading 

As a general rule, the markets for the Distribution-Transformation-Trading sector are regional, 

whereas the markets for the other sectors are mostly global. 

The Group’s main competitors in processing are Arregui, Barcelonesa-Hiemesa, Corus, Hiansa, 

Isocab, Kingspan, Mannesmann, Marcegaglia, Metecno, Salzgitter, SIT and Thyssen Krupp Stahl. 

In addition, in the construction sector, solutions offered by other materials are in direct competition 

with those offered by the Distribution-Transformation-Trading sector. The same applies for the packaging 

market, which has high competition from plastics, glass and aluminium. The Group’s main competitors in 

this market are Corus in Great Britain and the Benelux countries, Thyssen Krupp Stahl in Germany, and 

Riva group in Greece and Italy. 

The Group’s main competitors in the distribution and trading businesses are Alfonso Gallardo, Balli, 

Cargill, Corus, Descours et Cabaud, Duferco, Ispat, Ros Casares, Salzgitter, Samsung and Thyssen Krupp 

Stahl. 

The Group considers that because a significant part of its production is distributed through its own 

sales network, it would not be affected by concentration in the distribution sector. 

DTT believes its complete range of products, large number of sites and modern finishing tools 

comprise significant competitive advantages. 

4.5 CONTRACTS 

4.5.1 Purchasing contracts 

The main purchasing contracts are generally entered into for a term of one year (raw materials, 

transport, maintenance), except for the purchase of scrap metal, which are usually spot or very short-term 

contracts. Contracts relating to energy (excluding coal) requirements are often longer and have terms of 

five to ten years. Ferro-alloys purchase contracts are usually three-month contracts. Other purchasing 

contracts are for varying terms. Purchases are effected primarily in euros and U.S. dollars. 

48

Purchasing contracts (except raw materials) are usually renewed by tacit agreement between the 

parties upon expiry. In the event of early termination of such a contract, notice of between three and six 

months must generally be given. 

4.5.2 Sales contracts 

Generally, steel product sales contracts have a term of one or more years, or are concluded at spot 

price and spot quantities. Since more than 70% of the Arcelor Group’s turnover is generated in the 

European market, sales contracts are generally denominated in euros. Sales in U.S. dollars and in Brazilian 

real represent a relatively small percentage of total turnover. 

Contracts having a term of one or more years represent approximately one-third of annual turnover in 

the flat carbon steel sector and a small proportion of annual turnover in the stainless steel sector. In long 

carbon steels, the contracts are spot contracts, except for specific products, such as rails or wires used for 

reinforcing tyres, for which the contracts are annual. 

Within the scope of long-term partnerships set up by the Group with certain of its major customers, 

particularly to develop new products together, contracts with terms of one or more years are becoming the 

norm, particularly in the automotive, packaging and household appliance sectors. 

The Arcelor Group’s renowned know-how, particularly in the automotive sector, constitutes a positive 

asset to make these contracts more generalised. 

4.6 RAW MATERIALS AND ENERGY 

The Arcelor Group’s steelmaking activities use principally iron ore, coal, coke and scrap metal for 

both the traditional blast furnace steel production process and the electric steelmaking process. These 

materials represent approximately 60% of the Arcelor Group’s operating costs. The Group has stable 

relationships with the suppliers of these raw materials, none of which represents more than 25% of the 

Group’s total raw materials and energy purchased. Nickel and other ferrous and non-ferrous metals, 

including ferro and silico manganese alloys and zinc, are also used. See section 4.17.1.3 ‘‘Raw material and 

energy consuming industry’’. 

Raw materials and energy are paid for in euros. The other main currencies used are the U.S. dollar 

and the pound sterling. The Group’s general policy includes exchange risk hedging. See section 4.17.3.2 

‘‘Exchange rate fluctuations’’. 

4.6.1 Iron ore 

The Arcelor Group uses approximately 40 million metric tons of iron ore per year (42 million in 

2003). The Group purchases iron ore mainly from mining companies in Brazil, Sweden, Australia, 

Mauritania, Venezuela and Canada. 

There has recently been a trend of concentration among iron ore producers. The main suppliers are 

Companhia Vale Do Rio Doce (‘‘CVRD’’), SNIM, CVG, Sesagoa and Hispanobras (a joint venture 

company owned by CVRD and Aceralia). 

Most contracts are denominated in U.S. dollars or follow fluctuations of that currency. 

4.6.2 Coke and coal 

The Arcelor Group purchases approximately 20 million metric tons of coal and coke per year from 

supply sources principally in Australia, the United States, Canada, South America and Russia. 

This market is very concentrated, with just a few major suppliers in the world. The main suppliers are 

BHP Billiton and Xstrata. 

Most contracts are denominated in U.S. dollars or follow fluctuations of that currency. 

4.6.3 Scrap metal 

As the Arcelor Group produces long steel products and stainless steel, it is a heavy consumer of scrap 

metal and purchases approximately 13 million metric tons per year, sourced mainly from the European 

Union, Russia and the Baltic countries. 

The market is not very concentrated. The main suppliers are CFF and Boole. 

49

Purchasing contracts are generally entered into at spot prices and quantities, and denominated, for 

the most part, in euros, but also in U.S. dollars and in pounds sterling. 

4.6.4 Nickel, ferro-chromium and other ferrous and non-ferrous materials 

Nickel is purchased mainly from suppliers in Australia, Canada, Colombia, New Caledonia, Brazil, the 

Dominican Republic and Russia. A large portion of the Group’s nickel requirements are also met directly 

through recycling scrap stainless steel. 

Generally, nickel prices have a significant impact on prices of stainless steel which usually comprise a 

basic price and an additional component, which varies with changes in the price of nickel. 

The Arcelor Group’s steelmaking activities also require various ferrous and non-ferrous materials, 

such as zinc, ferro-chromium, titanium, vanadium, ferro-manganese or silico-manganese. 

The Arcelor Group purchases approximately 0.75 million metric tons per year of ferrous metals. 

The Group meets its needs for this type of product through a limited number of worldwide suppliers, 

the main suppliers being Norimet and Glencore. 

4.6.5 Energy 

The Arcelor Group is a major consumer of electricity, gas and oxygen. 

The Group consumes annually approximately 50 TWh of electricity and gas. 

The main suppliers of electricity are EDF and Electrabel; the main suppliers of gas are GDF and 

Distrigaz. 

The opening up of the electricity and gas markets in the European Union, and the major role the 

Arcelor Group is playing because of its size allows Arcelor to negotiate better terms for purchasing energy. 

4.6.6 Water 

The Group has its own water catchments at most of its sites. 

4.7 REGULATIONS—TRADE BARRIERS 

Trade liberalisation has led to the creation of national trade protection instruments to control 

international trade. Adopted internationally through the GATT agreements, the first of which dates from 

1994, the main instruments of trade protection are the anti-dumping and anti-subsidy laws (countervailing 

duty), the safeguard clauses and voluntary export restraint agreements. 

The last few years have been characterised by a broad deployment of trade protection, particularly 

anti-dumping and anti-subsidy legislation adopted by a large number of countries. This background trend 

has been intensified by the opening of an inquiry into the safeguard clause initiated in June 2001 by the 

United States, as described below. 

The safeguard measures permit a country to protect a domestic industry if a product is imported in 

increased quantities and causes or threatens to cause serious harm to the industry concerned; however, 

they are not meant to combat so-called unfair trading practices. 

Anti-dumping duties are designed to eliminate trading practices that consist in selling a product in a 

foreign market at a lower price than the price charged on the domestic market. They are equal to the 

difference between the selling price on the domestic market and the selling price in the export market. 

Anti-subsidy duties are intended to cancel the effect of the advantages that result from direct or 

indirect subsidies for imported products. 

50

4.7.1 Anti-dumping and anti-subsidy measures 

4.7.1.1 Defensive actions 

4.7.1.1.1 United States 

4.7.1.1.1.1 Flat carbon steel 

Certain flat carbon steel products made by Arcelor are subject to anti-dumping and anti-subsidy 

duties in the United States. The products in question are as follows: 

Plates and heavy plates: In 2000, the United States instituted anti-dumping duties of 10.41% and 

anti-subsidy duties on imports from France (Usinor Group). The anti-subsidy duties were revoked by the 

U.S. Department of Commerce (‘‘DoC’’) in November 2003 as being incompatible with the rules of the 

World Trade Organisation. The anti-dumping duties are subject to yearly review. Also, every 5 years the 

DoC and the International Trade Commission (‘‘ITC’’) must undertake a sunset review to determine 

whether the revocation of the anti-dumping duties and anti-subsidy duties would lead to a continuation or 

resurgence in dumping. This five-year review will take place in 2005. 

Since 1993, the anti-dumping and anti-subsidy duties have also been applied to imports from Belgium 

and Spain. Thus, Cockerill Sambre is subject to anti-dumping duties of 6.75% and anti-subsidy duties of 

23.15%. Imports of the Aceralia sub-group custom heavy plate are subject to anti-dumping duties of 

105.61% and anti-subsidy duties of 36.86%. The five-year review (sunset review) in this case is also 

scheduled for 2005. 

Cold-rolled flat products with anticorrosion coating: Anti-dumping duties of 29.41% and anti-subsidy 

duties of 15.13% have been imposed on imports, particularly from France. The five-year review (sunset 

review) in this case is also scheduled for 2005. 

Cold-rolled flat products: In 2001, an anti-dumping and anti-subsidy inquiry was conducted by the 

U.S. authorities against the importation of these products originating in 20 countries: Argentina, Australia, 

Belgium, Brazil, China, France, Germany, India, Japan, Korea, The Netherlands, New Zealand, Russia, 

South Africa, Spain, Sweden, Taiwan, Thailand, Turkey and Venezuela. The ITC finally decided that the 

U.S. steel industry had not suffered any harm from these imports. It therefore ended the inquiry. This 

decision was the subject of an appeal filed before the U.S. Court of International Trade (‘‘CIT’’) by certain 

U.S. steel producers. This appeal is still pending. If the decision of the ITC is revoked, anti-dumping duties 

will be imposed on imports of cold-rolled products from the countries listed above. Imports into the 

United States from certain Arcelor subsidiaries could, therefore, be affected by new anti-dumping and 

anti-subsidy duties. 

4.7.1.1.1.2 Long carbon steels 

In 2002, the DoC decided to impose anti-dumping duties on the importation of certain long products 

originating from Luxembourg, Germany and Spain. However, the ITC specified that the U.S. steel industry 

had not suffered any harm from imports from these countries. Consequently, the anti-dumping inquiry 

opened in June 2001 was terminated. This decision was also appealed to the CIT by certain U.S. steel 

producers. This appeal is still pending. If the decision of the ITC is revoked, anti-dumping duties will be 

imposed on the importation of certain carbon steel long products from Luxembourg, Germany and Spain. 

Imports to the United States from certain Arcelor subsidiaries could, therefore, be affected by new 

anti-dumping and anti-subsidy duties. 

4.7.1.1.1.3 Stainless steel 

Certain stainless steel products made by Arcelor are subject to anti-dumping duties and anti-subsidy 

duties in the United States. The products affected are as follows: 

Stainless steel flat products originating from France: The anti-dumping duties are currently set at 

2.93%. The anti-subsidy duties were revoked by the DoC in November 2003 as being incompatible with the 

rules of the World Trade Organisation. Exports of flat stainless steel products have been exonerated from 

paying anti-subsidy duties since that date. 

51

Stainless steel long products originating from France: Imports into the United States of stainless steel 

rod and wire originating from France are subject to anti-dumping duties of 7.19%. The five-year review 

(sunset review) is scheduled for 2005. 

Stainless steel bars: In 2001, the DoC and the ITC opened an inquiry into the importation of stainless 

steel bars originating from France and Italy. The DoC calculated a de minimis anti-dumping duty rate for 

imports from Italy (Trafilerie Bedini), meaning that no anti-dumping duty is assessed on the importation of 

these products into the United States. On the other hand, the DoC assessed an anti-dumping duty rate of 

3.90% on imports from France (Ugine Savoie-Imphy). 

Stainless steel heavy coils: Imports originating from Belgium are currently subject to an anti-dumping 

duty of 3% and an anti-subsidy duty of 1.78%. However, a ruling by the CIT will reduce this rate to 0.97% 

in the near future. The five-year review procedure (sunset review) is scheduled for 2004. 

4.7.1.1.2 Brazil 

In May 2000, the Brazilian government imposed an anti-dumping duty of 30.9% against Ugine on 

imports of flat stainless cold-rolled steel products less than 3 mm thick. 

4.7.1.1.3 Canada 

Following a decision taken by the Canadian authorities in 1994, anti-dumping duties of 80.2% are in 

force on the importation of certain hot-rolled carbon steel heavy plates and certain corrosion-resistant 

alloy steel plates originating from Spain (Aceralia). The Canadian authorities rescinded the injury finding 

for steel plates originating from Ukraine, Korea, Spain and Italy effective 17th May, 2004. 

In 1999, anti-dumping duties of 11.8% were imposed on imports of hot-rolled carbon steel flat 

products originating from France (Usinor). In 2000, these anti-dumping duties were replaced by a fixed 

minimum price at which Arcelor must sell its products in Canada. In 2003, the Usinor sub-group was 

successful in obtaining an exclusion for ‘‘Solbor 30MnB5’’ from the products affected by the anti-dumping 

duties. These measures should be reviewed by July 2004. 

In 1999, anti-dumping duties of 7% were imposed on imports of cold-rolled carbon steel flat products 

originating from Belgium (Sidmar). In 2000, these anti-dumping duties were replaced by a fixed minimum 

price at which the Group must sell its products in Canada. These measures should be reviewed by 

August 2004. 

Since 1994, anti-dumping duties of 60.8% have been imposed on the importation of certain corrosionresistant 

flat products originating from Germany (Stahlwerke Bremen). These measures should be 

reviewed by July 2004. 

4.7.1.2 Trade retaliation: European Union 

a) Certain cold-rolled flat stainless steel from the United States 

In September 2003, the European Commission imposed provisional anti-dumping duties on imports 

from the United States of certain cold-rolled flat stainless steels (20.6% on imports from AK Steel 

Corporation, 25% on imports from other companies). In March 2004, following a petition from 

EUROFER (an organisation of European steels producers), the European Commission ended this 

anti-dumping retaliation. 

b) Certain hot-rolled flat carbon steels from Egypt, Hungary, Iran, Libya, Slovakia and Turkey 

In March 2003, the Council voted against a proposal from the European Commission to impose 

anti-dumping duties on imports of certain hot-rolled flat carbon steels from Egypt, Hungary, Iran, Libya, 

Slovakia and Turkey. 

4.7.1.3 Safeguard clause 

4.7.1.3.1 United States: wire rod 

Imports of most types of wire rod originating from all producing countries (with the exception of 

Canada and Mexico) are subject to a maximum quota. In 2001, the quota for the member states of the 

European Union was set at 419,948 tonnes. 

52

4.7.1.3.2 United States: certain types of steel 

On 4th December, 2003, the President of the United States lifted the duties that he had imposed in 

March 2002 on certain types of flat products, specifically on plates, heavy plates, concrete reinforcing bars, 

hot-rolled products, cold-rolled products, coated products, tin-plated steel, hot-rolled bars, cold-rolled 

bars, certain tubes, certain accessories made of carbon and alloy steels, stainless steel bars, stainless steel 

wire rod and alloy tool steels. These duties were initially set at 30% for carbon steel flat products, 15% for 

tubes, concrete reinforcing bars and stainless steel bars, and 8% for wire rod. In March 2003, these duties 

were reduced to 24%, 12%, 10% and 7% respectively. Imports of plates were subject to a quota of 

4.9 million tonnes for 2002 and 5.35 million tonnes for 2003. 

The safeguard measures provide for the possibility of negotiating individual exclusions by product. 

Arcelor and its subsidiaries manufacture many products that the U.S. steel industry does not offer. In 2002 

and 2003, Arcelor was successful in negotiating with the U.S. administration more than 75 exclusions for 

the Group’s products. 

4.7.1.3.3 Europe 

In December 2003, the European Commission eliminated the tariff quotas applicable to certain steel 

products (hot-rolled rolls, hot-rolled sheet, hot-rolled strip, hot-rolled flat products, cold-rolled sheet, pipe 

fittings, flanges). 

This decision was taken following the decision by the U.S. administration to eliminate its own 

safeguard measures against imports to the United States of certain steel products. 

4.7.1.3.4 Canada: carbon and alloy steel flat products, certain long and alloy steel products 

In October 2003, the Canadian Government decided not to introduce safeguard measures on imports 

of foreign steel products. 

4.7.1.3.5 China 

Following the decision taken by the U.S. administration with respect to safeguard clauses, the Chinese 

authorities decided in May 2002 to investigate 11 categories of steel products. The introduction of 

safeguard measures in the form of quotas was decided for a period of three years. Temporary measures 

were implemented in 2002 covering nine categories and 17 sub-categories of products. Definitive measures 

were adopted for only five products. After the termination of the safeguard measures in the United States 

and in Europe at the beginning of December 2003, all such measures were lifted on 26th December, 2003. 

4.7.1.3.6 Poland 

In March 2003, the Polish Government decided to introduce safeguard measures on eight products for 

a period of two years (from March 2003 to March 2005). The products affected by these quotas are 

non-alloy cold-rolled, hot-rolled and galvanised flat products, non-alloy flat products with an organic 

coating, alloy electrical steel flat products, non-alloy hot-rolled bars, welded tubes and weldless tubes. 

4.7.1.3.7 Hungary 

In April 2003, the Hungarian Government decided to introduce safeguard measures on seven 

products. These measures are effective for a period of two years commencing April 2003. The products 

affected by these quotas are non-alloy cold-rolled and hot-rolled flat products, as well as certain long 

products and tubes. 

4.7.1.3.8 Organisation for Economic Cooperation and Development (‘‘OECD’’) 

In 2003, discussions within the OECD continued among the principal steel producers in order to 

formulate the elements of an agreement intended to reduce or eliminate steel industry subsidies. Major 

differences still remain on a number of items. The participants are working to reach an international 

agreement on subsidies by September 2004. 

4.7.1.3.9 World Trade Organisation (‘‘WTO’’) 

The arbitration board of the WTO has set up a commission to study the introduction by the United 

States of safeguard measures on certain steel products. According to the rules governing the WTO, it was 

53

decided that the U.S. safeguard measures concerning certain products were incompatible with the Uruguay 

Round Agreements. This decision was confirmed in December 2003 by the appeals board of the WTO. 

The United States accepted the decision and recommendations of the WTO to put a stop to the ‘‘illegal’’ 

safeguard measures. 

4.7.2 Import quotas 

On the basis of the Partnership and Cooperation Agreements between the European Union and 

Russia, Ukraine and Kazakhstan, imports of most steel products from these three countries are subject to 

quotas (bilaterally agreed quotas on steel imports from Russia and Kazakhstan, and unilaterally imposed 

quotas on steel imports from Ukraine). 

In 2004, these quotas will be adjusted to take into consideration the European Union expansion which 

occurred on 1st May, 2004. At the end of 2004, the quota regime will expire, unless extended by quotas 

negotiated by the European Union and the three countries involved. 

Transitional measures have been taken toward eventual complete liberalisation of the steel market 

with these countries in compliance with regulations governing competition, state subsidy and 

environmental protection; in particular, they authorise the financial and technical assistance required for 

the restructuring of their steel industries. 

4.8 ENVIRONMENT 

4.8.1 Environmental regulations 

Steelmaking activities require large quantities of raw materials and energy and are therefore subject to 

environmental regulations. 

In the countries in which it operates, and in particular in Europe, Brazil and the United States, the 

Group must comply with various regulations relating, in particular, to the handling of major accidents, the 

disposal of waste water and industrial waste, air and water pollution and the protection of sites. National 

norms concerning emissions vary considerably from one country or region to another. 

In addition, the Group pays tax on polluting activities, such as the taxe générale sur les activités 

polluantes-TGAP introduced in France on 1st January, 1999. 

Since a large part of the Group’s steel production is situated in the European Union, the Group must 

comply with European regulations (and, in particular, the Seveso II Directive, the IPPC-Integrated 

Pollution Prevention and Control Directive and the Environmental Impact Assessment Directive) and 

implementing legislation. 

The Group considers that it is in all material respects in compliance with all applicable regulations in 

the various countries and regions where it is present and that it will continue to be so for the foreseeable 

future. 

The Group’s industrial sites are subject to authorisation procedures set by national authorities. The 

Group considers that it holds the authorisations required for its operations and does not anticipate that it 

will face any particular difficulties when applying for the renewal of such authorisations or for new 

authorisations. 

Within the framework of EUROFER and together with other European steel producers, Arcelor has 

actively participated in the discussions on the proposed European directive regarding the allocation and 

trading of greenhouse gas emission rights pursuant to the Kyoto Protocol. Despite these improvements, the 

final version of this directive still poses many problems for the steel industry. It will distort competition not 

only between materials (certain materials would be exempted by the directive in the short-term), but also 

between European steel producers and, in particular, with regard to companies producing steel in 

countries that refused to ratify Kyoto (the United States and Russia in particular). Accordingly, the Arcelor 

Group lodged an appeal with the European Court of Justice on 15th January, 2004. At the same time, the 

Group negotiated, on a country-by-country basis, improved emission rights that not only safeguard the 

production needs at each facility but also contribute, through voluntary commitments, to the national plans 

to reduce greenhouse gases. 

The Group operates, through Belgo-Mineira, the Andrade mine in Brazil. 

54

In certain countries, when mining sites are not operated, national authorities may, relying on 

applicable legislation, require the former operator to take all measures necessary to restore the sites to the 

state they were in prior to the commencement of the activity (especially where the sites have been 

contaminated). 

During the summer of 1997, Arbed ceased all mining activity in France. Within the scope of the 

measures, which the French authorities can impose when a site of this type is closed down, the ‘‘Préfet’’ 

ordered Arbed to take a certain number of measures relating to the monitoring of ground stability and the 

drinking water supply system, and to pump out the pit water until 30th November, 2002. Appeals were 

made against these orders and negotiations followed with the French authorities. Provisions have been 

made in the accounts to cover such risks. The French authorities ordered that an expert prepare a report 

on how long the pumping of the pit water should last. Following the conclusions of such report, the 

‘‘Préfet’’ ordered Arbed to continue the pumping work until 30th November, 2004. To the extent the 

continuation of the pumping after 30th November, 2002 is due to reasons for which Arbed does not bear 

responsibility, the French authorities are willing to share the costs of pumping out the water. 

The French mining code was recently amended by law n o 99-245 of 30th March, 1999, which increased 

the obligations of former operators relating to the monitoring, prevention and management of risks, which 

may continue after the closure of the mines, as well as the indemnification for damage caused by 

subsidence. These new provisions are applicable to procedures relating to the cessation of works at the 

date of entry into force of the law. 

The Group is not aware of the existence of any litigation or threat of litigation relating to 

environmental matters which could have a significant negative impact on the Group’s financial situation. 

However, because of its past and current activities, the Group is exposed to risks which may give rise to its 

environmental liability, the consequences of which cannot be evaluated. 

4.8.2 Environmental protection 

Environmental protection forms an integral part of the Group’s strategy and growth policy and covers 

all aspects of its activities. 

In addition to recurring environmental operational charges, the Group has authorised, for the 

protection of the environment, the equivalent of approximately EUR 30 million of total investment in 

2003. 

The Arcelor Group’s environmental policy is based on the principle of the preservation of a 

long-lasting balance between the environment, health and safety, and the economy. 

Continuous progress in environmental protection matters will be implemented in particular by aiming 

to achieve: 

• compliance with all legal and regulatory requirements; 

• ISO 14001 certification for all major production facilities by the end of 2004; 

• significant contribution to reduction of greenhouse gases (CO 2 , etc.); 

• reduction of pollutant emissions and environmental nuisances (water, dust, SO 2 , NOx, etc.); 

• reduction of water consumption/raw material extraction (ore, etc.) and improvement of energy 

efficiency; and 

• promoting and encouraging recycling wherever possible. 

4.8.2.1 Environmental charter 

In its desire to promote environmental excellence within its various entities, the Arcelor Group drew 

up an environmental charter in 2003. This charter places emphasis on minimising the environmental 

impact and nuisance generated by the production facilities, developing environmentally friendly products, 

and promoting transparency and environmental awareness. 

4.8.2.2 High degree of ISO 14001 certification for the Environmental Management System 

Arcelor’s environmental team set a goal in 2002 to obtain ISO 14001 certification for all of the 

Group’s major production and processing plants by the end of 2004. This objective was almost achieved by 

55

the end of 2003, as by this date 96% of the Group’s employees worked at an ISO 14001 certified location. 

77% of plants are now certified, including all the major production plants of the Flat Carbon Steel, Long 

Carbon Steel, Stainless Steel and Distribution-Transformation-Trading sectors. The remaining 23% are 

essentially small service units. 

4.8.2.3 Significant efforts to fight CO 2 emissions 

Without waiting for adoption of the Kyoto Protocol, the Arcelor Group has pursued projects to 

improve the iron ore-based steelmaking process in order to reduce CO 2 emissions. Due to these important 

efforts, the emission reductions largely exceeded the global goals set by the political authorities. For 

example, Arcelor reduced its CO 2 emissions by 18% in absolute value and by 23% per ton of raw steel 

between 1990 and 2002, while Europe, within the framework of the Kyoto Protocol, committed to reduce 

its emissions by 8% between 1990 and 2008. 

In France, since 1990, Arcelor Group (including Usinor for the period prior to formation of Arcelor) 

has undertaken a number of initiatives that have reduced CO 2 emissions. CO 2 emissions were reduced by 

46 million tonnes for the period 1990—2002, while the production of crude steel actually increased by 

approximately 13% and specific CO 2 emissions (emissions per ton of steel produced) declined by 

approximately 22%. 

In Luxembourg, the changeover from the blast furnace process to the electric furnace process enabled 

a 92% reduction in CO 2 emissions between 1990 and 2002. 

The control of greenhouse gas emissions is thus a key commitment for the Group in all countries in 

which it operates. In France, Arcelor signed voluntary CO 2 reduction agreements for the periods 

2003-2004 and 2005-2007. A similar approach was pursued in other European countries where the Arcelor 

Group has large steel production facilities. In Belgium, Sidmar and ALZ, together with other large 

industrial energy users, undertook to make the production plants energy efficient by 2012 and to reach 

levels of performance that are equal to the best practices in this area. This benchmarking of best practices 

will be carried out by a special commission that includes the Flemish Government, the industry itself and 

an independent oversight entity. Improving energy efficiency should result in a reduction of specific CO 2 

emissions. 

The future of the steel industry will depend on its ability to upgrade its processes, particularly the 

process of producing iron from ore, in order to significantly reduce CO 2 emissions and meet society’s 

expectations by 2030-2050. At the end of 2001, Arcelor took the initiative to launch studies for a project to 

develop new technologies (ULCOS, ultra-low CO 2 steelmaking process) in cooperation with four other 

steel groups (Nippon Steel, ThyssenKrupp Stahl, Corus and Posco). This project is coordinated by the 

International Iron and Steel Institute (IISI) and is based on regional initiatives. In Europe, Arcelor is 

leading the project, which will evaluate all possible techniques, such as the recycling of gases within the 

blast furnace and the use of hydrogen, biomass, and technologies for separating and storing CO 2 in suitable 

geological structures. The project is part of a multidisciplinary research platform co-financed by the 

innovation programmes of the European Commission at the initiative of Commissioner Philippe Busquin. 

4.8.2.4 Implementation of a monitoring plan 

In order to standardise the environmental parameters monitored by the various Arcelor sites and the 

frequency of measurement, a monitoring plan was set up for all Arcelor sectors. This plan defines the air 

and water parameters that need to be measured for each production facility. To optimise the collection and 

tracking of the environmental performance indicators, Arcelor has installed a single environmental 

information system that promotes both quarterly reporting and the identification of best practices within 

the Group. 

4.8.2.5 Recovery of by-products 

By-products, although often classified in regulations as waste, are managed by Arcelor as products, 

using a rigorous system of quality management, and are already recovered at a rate close to 95%. They are 

used in the manufacture of products as diverse as cement and concrete, fertilisers and agricultural 

additives, roads, dykes, mineral wool for insulation, glass, ceramics, pigments, magnets, plastics, such as 

polystyrene, electrodes for the aluminium industry or electric steelmaking, and cosmetics. Some are simply 

recycled by Arcelor into hot metal or steel. Arcelor has set up a new organisation in 2002 and 2003 to 

stimulate synergies and intensify the sharing of the best practices for by-product management by all its 

production units. 

56

A plan for reducing non-recovered residues has been developed by the production sites that exceed 

50 kg/t in non-reused residues. 

4.9 INTELLECTUAL PROPERTY 

The Arcelor Group has internationally recognised know-how and a broad portfolio of patents. The 

Group also files applications for trademarks when it believes it appropriate to protect particular 

trademarks. 

The Group has an intellectual property team which is responsible for the systematic protection of its 

know-how and technology. 

Notwithstanding the above, the Arcelor Group considers that its activities are not materially 

dependent on patents, trademarks, licences or other intellectual property rights owned by it or third 

parties. 

4.10 OTHER COMMITMENTS 

4.10.1 Warranties 

In connection with the various asset transfers effected within Aceralia, Arbed and Usinor groups over 

the past few years, warranties that were common in the context of such transactions were granted for 

limited periods of time and limited amounts. See Note 19 of the Group consolidated financial statements 

as at 31st December, 2003. 

As at today’s date no claims have been made under these warranties, which could significantly affect 

the Group’s financial situation. 

4.10.2 Other commitments 

4.10.2.1 Eko Stahl 

The investment undertakings given by Cockerill-Sambre to the Treuhandanstalt when it purchased Eko 

Stahl in December 1994 have been complied with. 

There is a job retention undertaking, valid until the end of 2004, which has been fully complied with to 

date. 

4.11 DISPUTES 

The Group is currently involved in a number of litigation and arbitration proceedings within the scope 

of the ordinary course of its businesses. 

Arcelor considers that the Group has made sufficient provisions to cover litigation risks and is not 

aware, subject to what is indicated below, of any exceptional facts or litigation or threats of litigation, which 

may have, or have recently had, a significant impact on the Group’s activity or financial situation. 

The litigation described below is considered significant litigation for the Arcelor Group. 

4.11.1 AK Steel Corporation 

The Arcelor Group, through its subsidiaries Sollac S.A. and Ugine S.A., attempted in the 1990s to 

penetrate the North American market with an aluminised stainless steel product manufactured according 

to a U.S. patent it held and intended for the manufacture of exhaust pipes for the automotive industry. In 

1998, AK Steel Corporation and Armco Inc. sued Sollac S.A. and Ugine S.A. before the United States 

District Court for the Southern District of Ohio for patent infringement. 

In 2002, the United States District Court for the Southern District of Ohio rendered a decision in 

favour of Sollac S.A. and Ugine S.A., the judges having decided that the patents used by the Arcelor 

subsidiaries were not only valid, but did not in any way infringe on the patents of AK Steel or Armco Inc. 

The lawsuit brought by these two companies was dismissed. AK Steel appealed the decision to the United 

States Court of Appeals for the Sixth Circuit. 

In 2000 Sollac S.A. and Ugine S.A., joined in 2002 by Arcelor and its subsidiaries Usinor Stainless 

Steel and Hague Steel Corporation, filed an antitrust action with the United States District Court for the 

Southern District of Ohio against AK Steel. 

57

In 2002, AK Steel filed a lawsuit against Usinor for dumping based on the Antidumping Act of 1916. 

Finally, following the favourable decision handed down by the United States District Court for the 

Southern District of Ohio in 2002, the parties to the action agreed in 2003 to terminate all actions in 

progress between AK Steel and the respective subsidiaries of Arcelor in consideration for the payment of 

$4 million to Usinor by AK Steel. 

4.12 HUMAN RESOURCES 

4.12.1 Employees 

Information on the number of employees in the Group and their geographic and business sector 

distribution is set out in section 4.1 of this Prospectus. 

4.12.2 Employment policy 

The management of Human Resources at Arcelor is based on two key principles: subsidiarity (act 

locally wherever possible; act globally where necessary) and effectiveness (human resource management is 

structured to contribute to the overall performance of the company, both economic and social). 

The relevance and effectiveness of the human resource management policy are measured both by the 

operational managers and by specific tools, such as the social surveys established in both Europe and 

Brazil. 

4.12.2.1 Dialogue with employees 

4.12.2.1.1 European Works Council 

Arcelor believes that social dialogue at the highest level is a key element for success. Thus, the Group 

decided to create an information and consultation office at the transnational level that includes employee 

representatives, as well as management. Thus, Arcelor’s European Works Council was established in 

May 2002, only a few weeks after the creation of the Group. Its primary mission is to foster corporate 

dialogue based on openness, truth and a forward-looking attitude in order to strengthen the solidarity and 

cohesion needed by Arcelor to meet the challenges it faces. 

Four consultation and information processes were launched in 2003, followed by opinions on the 

major restructuring and divestment projects of the Group. These processes reflect the Group’s aim of 

ensuring complete understanding and proper preparation of the assistance measures required as part of 

Arcelor’s socially responsible restructuring policy. 

4.12.2.1.2 Dialogue at all production sites 

In a desire to respect the local social traditions, Arcelor is conducting local dialogue with employee 

representatives at business unit and plant levels. This dialogue acquires special importance during 

industrial changes. Since the Group’s strategic decisions will produce several major changes in respect of 

employment, this dialogue has been intensified in line with local legislation and specific local requirements. 

The objective in each case has been to provide assistance to all employees affected by the necessary 

industrial changes. 

4.12.2.2 Development of expertise 

Innovative managerial training courses at Arcelor University combine face-to-face knowledge 

acquisition and the use of distance learning tools to complete projects in real time, in the field, with 

quantified economic objectives. Arcelor University offers the resources to develop the managerial and 

technical skills of managers and technicians at Arcelor. In 2003, 700 managerial employees participated in 

various training programmes. 

4.12.2.3 Remuneration 

The remuneration policy is designed to reward performance, as well as the competence, of line staff. 

For managers, this policy is aligned with the Management by Objectives (‘‘MBO’’) project, which involves 

all of the Group’s top-level managers. In the MBO programme, managerial personnel are evaluated with 

respect to financial performance, but also based on criteria relating to occupational safety, environmental 

protection and the level of satisfaction of their team members. 

58

4.13 RESEARCH AND DEVELOPMENT (R&D) 

4.13.1 General R&D policy 

The Arcelor Group has an active R&D policy focused on using and further developing technical 

knowledge to continue to differentiate itself by providing products and services, which meet its customers’ 

current and future needs. 

The alliance with Nippon Steel Corporation should enable the Arcelor Group to benefit from a 

sharing of the R&D activities in terms of customer-demand response and cost sharing. 

4.13.2 R&D objectives 

The objectives are aimed at: 

• developing know-how across the Group’s sectors in partnership with customers; 

• transferring best practices; 

• fostering continuous improvement; 

• leveraging synergies to enhance research and development efficiency; 

• developing programs in line with the strategic priorities of business sectors and Arcelor’s 

sustainable development strategy; 

• broadening access to external sources of research funding; 

• participating in joint industry studies on a non-competitive basis; 

• partnering with universities and research institutes; and 

• entering into public-private joint ventures. 

4.13.3 R&D facilities 

In 2003, the Arcelor R&D expenditure was approximately EUR 142 million compared to 

EUR 153 million in 2002. The reduction in 2003 expenditure compared to 2002 expenditure is due to the 

synergies generated by the merger and to improvements in productivity. 

The Flat Carbon Sector came out of the merger with eleven research and development laboratories 

and took the decision to consolidate their activities into four Research Centres. The new organisation is in 

place; the related transfers are under way. Three multi-disciplinary centres are focused on the major 

markets: Automobile, Industry and Packaging. The fourth centre is devoted to optimising industrial 

processes. The R&D portfolio is now largely defined and managed at Sector and Business Unit levels, 

which ensures that objectives and research projects are developed in line with the industrial and sales 

strategy over all Arcelor markets. 

The Group is presently able to offer the same range of innovative products and services anywhere in 

the world to meet the demand of its global customers. In achieving its objectives, the Group relies on 

research into continuous improvements to its products and services offer, on a multi-market, multi-process 

and multi-product approach, and on outside cooperation programmes, such as the Alliance with Nippon 

Steel. In addition, a European Steel technology platform has been formed with Arcelor’s partners and will 

be launched in 2004. 

4.13.4 Main projects 

Arcelor estimates that 38% of all research effort goes into the protection of environment, either 

directly through the reduction in energy consumption, raw materials and waste products, especially 

greenhouse gases, and through the development of products that comply with future environmental 

standards, or indirectly by developing products that meet the sustainable development needs of Arcelor’s 

customers, such as very high strength- steels that increase the safety of automobiles and, because they are 

lighter, contribute to the reduction of CO 2 emissions per vehicle, and steel products with functionalities 

that allow customers to eliminate certain process operations (for example, steel with organic coating). 

At the product level, R&D has been involved in a number of applications for steel solutions. 

59

In the automotive area, the Group’s focus has been placed on customer support to facilitate the use of 

very high strength steels developed by Arcelor. These new specialties enable significant weight reduction, 

thereby contributing to a direct reduction in pollutant exhaust emissions and they also enable enhanced 

passenger safety in these vehicles. In domestic electrical appliances and general industry, Arcelor’s 

emphasis is on the development of green products and products that facilitate processing which, by virtue 

of their surface treatment for example, offer the Group’s customers the ability to eliminate the degreasing 

operation prior to enamelling. As far as the building and construction market is concerned, research work 

focused on the production of prototypes to demonstrate the performance of various structural systems for 

‘‘energy efficient’’ buildings, such as ventilated double roofs, and on weight reduction in products, such as 

beams and sheet piling. With regard to packaging, Arcelor continues to revamp its offer through the 

expansion of the new range of steels with improved mechanical properties and high ductility, making it 

possible to decrease the thickness and thus the weight of the packaging, while offering enhanced 

processing characteristics. 

At the process level, R&D efforts are focused on the optimisation of production facilities, with 

activities aimed at reducing pollutant emissions (CO 2 , SO 2 , dust collection) and at improving energy yield 

and consumption. 

4.14 INVESTMENT 

4.14.1 The Arcelor Group’s policy 

The Board of Directors defines the investment policy and authorises the strategic investments 

proposed, planned and executed by the Management Board, the other investments being decided at the 

level of the business sectors and the operational units. 

In taking these investment decisions, the Group rigorously applies investment criteria designed to 

attain profit targets set for the Group. 

4.14.2 Recent and current investments 

The table below shows, for each business sector, for the last two financial years, the investments in 

tangible assets made by the Arcelor Group. 

Investments in tangible assets 2003 2002 

Pro forma 

unaudited 

(EUR in million) 

Sector 

Flat Carbon Steel ................................................. 714 757 

Long Carbon Steel ................................................ 290 243 

Stainless Steel .................................................... 188 177 

Distribution-Transformation-Trading .................................... 81 164 

Other activities ................................................... 20 36 

TOTAL ......................................................... 1,293 1,377 

The table below shows, for the last two financial years financial investments made by the Arcelor 

Group. 

Financial 

Year 

investments 

(EUR, in millions) 

2003 ............................................................ 540 

2002 pro forma (unaudited) ........................................... 602 

Group capital expenditure amounted to EUR 1,293 million in 2003. 

Capital expenditure in the Flat Carbon Steels sector amounted to EUR 714 million at the end of 

December 2003. This was primarily for the relining of blast furnace A at Sidmar (Belgium) and an increase 

in the hot-phase capacity at Sidmar (Belgium) and Sollac Atlantique (France), expenditures to increase the 

capacity of the pickling line at the ACB mini-mill (Spain), the new tinning line at Avilés (Spain), research 

expenditure in connection with the vacuum plasma coating line at Cockerill-Sambre (Belgium), the 

60

construction of the cold-rolled and galvanised steel coil processing unit at Vega do Sul in Brazil and 

investments to improve quality. 

The companies of the Long Carbon Steels sector invested EUR 290 million to start construction of 

the new medium beams mill in Luxembourg and to carry out the modernisation and expansion of existing 

facilities, notably those at Piracicaba in Brazil for bar production. Investments in Spain primarily 

concerned the expansion of the rolling mill at Azpeítia. Expenditures to increase worker safety and the 

protection of the environment complete the investments made by the sector. 

Capital expenditure recorded during 2003 for the Stainless Steels sector amounted to EUR 188 

million and covered essentially the completion of the modernisation work in the UGINE & ALZ steelshop 

at Genk in Belgium to increase capacity to 1.1 million tonnes, the installation of a tension levelling line at 

the UGINE & ALZ plant at Genk to improve the quality of thick cold-rolled products, a tension levelling 

line at the UGINE & ALZ plant in Gueugnon (France) to improve the quality of thin cold-rolled products, 

a new pickling bath on the line at the UGINE & ALZ plant in Gueugnon, dust removal equipment on the 

electric furnaces at the UGITECH plant at Ugine (France) and, finally, the first outlays for the new 

electric steelshop (CARINOX) that is being installed upstream of the Carlam hot strip mill in Châtelet 

(Belgium). 

The Distribution-Transformation-Trading sector accounted for EUR 81 million in various investment 

and the other businesses of the Group had EUR 20 million of capital expenditures in 2003. 

Arcelor purchased the rolling mill at Pallanzeno and a 49.9% interest in the San Zeno steelworks from 

Duferdofin, through subsidiaries of its Long Carbon Steels sector. Duferdofin, a wholly owned subsidiary 

of the Duferco Group, holds the remaining 50.1% of the San Zeno steelworks. The rolling mill at 

Pallanzeno, located in Northern Italy, produces small and medium beams and has a production capacity of 

600,000 tonnes per year; the San Zeno di Naviglio steelworks, also located in Italy, near Brescia, has a 

capacity of 750,000 tonnes per year and supplies blooms to the rolling mill at Pallanzeno. 

4.15 INSURANCE 

It is Arcelor’s policy to contract worldwide insurance to cover catastrophic risks for the Group with 

insurers having the highest liquidity rating, and local coverage for those risks that must be covered by law. 

The amounts of the insurance coverage are a function of the financial risks as defined by the various 

disaster scenarios and the products offered by the insurance market. 

With regard to property damage and consequential operating losses, the Group is: 

• conducting, through outside entities, engineering audits regarding fire protection and equipment 

breakdown risks for all facilities for which the insured value exceeds EUR 50 million, with 75% of 

such facilities having been audited in 2003; 

• studying major loss scenarios, estimating the potential consequences for people, the environment 

and the facilities; 

• strengthening the resources available to limit the likely occurrence of such catastrophic losses and 

their consequences; 

• formalising the recovery resources existing within the Group to limit consequential operating losses; 

and 

• transferring the residual catastrophic risks to the insurance market, for the portion exceeding 

EUR 20 million per event, with insured amounts being in line with industry practices and the 

insurance products available on the market. 

With respect to civil liability, and because the maximum financial risk cannot be estimated empirically, 

the amounts insured are in line with the products available on the market and the insurance coverage 

purchased by industrial groups of comparable size and activity. In order to reduce its liability risk, the 

Group is implementing in-house training to raise awareness and educate everyone involved. 

In terms of product shipment, when a customer entrusts the Group with organising product shipment, 

the vessels used must: 

• be classified by a classification society that is a member of the International Association of 

Classification Societies (IACS); 

61

• be covered by a ‘‘P&I Club’’ (Mutual Protection and Indemnity Association) having the highest 

liquidity rating; 

• possess an International Safety Management (ISM) certificate valid for the duration of the voyage; 

and 

• be less than 20 years old. 

Two additional criteria are applied if Arcelor charters the vessel: 

• knowledge of the results of the most recent inspections performed by port authorities; and 

• awareness of the existence or non-existence of a major event affecting the vessel during the last 

12 months. 

The full insured amount corresponds to the maximum potential risk per event (to the extent it can be 

reasonably estimated). 

With regard to all insurable risks, the Group gives preference to self-insurance for low frequency risks 

that each entity can cover. This results in a deductible tailored to the financial resources of each entity for 

better awareness of risk prevention by all participants. 

Self-insurance with recourse to the reinsurance market is used for medium-frequency risks in order to 

optimise and smooth insurance costs at Group level. The risk exposure is limited through the protection 

provided by the reinsurance market. 

Arcelor’s policy for the protection of its industrial installations, highlighted by the decision to allocate 

EUR 17.4 million over 2004 (in addition to the regular accident prevention investment budgets of the 

entities), for the purpose of improving the safety of its facilities has been welcomed by the insurance 

market. Accordingly, the Group benefitted from a substantial discount on its premiums for 2004 for 

damage and consequential operating loss cover. 

4.16 PROPERTY 

The Arcelor Group has an industrial and commercial presence throughout the world at several 

hundred sites. Virtually all of the production sites and rolling sites are owned by the Group. 

The assets of the Arcelor Group can be divided into two categories: land and buildings. 

The very nature of the Group’s activities, most of which are in the European Union, requires many 

sites where the various stages of production, processing and finishing of steel products can be carried out. 

The Group has significant areas of land which are not used for production and which it intends to 

designate for development where such land is not strategic to its operations. 

The Group owns numerous buildings throughout the world, most of which are in Europe. 

Arcelor’s main steel-manufacturing facilities in 2003 

Flat Carbon Steels 

North Operational Unit ............ 

Wallonia Operational Unit .......... 

South Operational Unit ............. 

Central Operational Unit ........... 

Bremen, Eisenhüttenstadt (Germany) 

Gent (Belgium) 

Liège (Belgium) 

Fos-sur-Mer (France) 

Avilés, Gijón, Viscaya (Spain) 

Dunkerque, Florange (France) 

62

Long Carbon Steels 

Solutions Operational Unit .......... 

Sections Operational Unit ........... 

Bars and Rods Operational Unit ...... 

Americas Operational Unit .......... 

Stainless Steels 

UGINE & ALZ .................. 

Ugitech ........................ 

IUP........................... 

Industeel ....................... 

Acesita* ........................ 

Belval (Luxembourg) 

Veriña (Spain) 

Differdange (Luxembourg) 

Bergara, Olaberria (Spain) 

Thüringen (Germany) 

San Zeno, Pallanzeno (Italy) 

Schifflange (Luxembourg) 

Azpeitia, Getafe, Zaragoza, Zumárraga (Spain) 

Monlevade, Vitória, Piracicaba, Juiz de Fora (Brazil) 

Genk (Belgium) 

Isbergues, l’Ardoise (France) 

Ugine (France) 

Imphy (France) 

Charleroi (Belgium) 

Châteauneuf (France) 

Timoteo (Brazil) 

* Results reflected in the Group’s 2003 audited consolidated financial statements using the equity method. 

4.17 RISK FACTORS 

An investment in the New Shares involves a high degree of risk. Potential investors should carefully 

consider the following risks, together with other information provided to them in this Prospectus, in 

deciding whether to invest in the New Shares. The occurrence of any of the events discussed below could 

harm the Arcelor Group. If these events occur, the trading prices of the New Shares could decline, and 

potential investors may lose all or part of their investment. Additional risks not currently known to Arcelor 

or that Arcelor now deems immaterial may also harm the Arcelor Group and affect their investment. 

This Prospectus contains ‘‘forward-looking’’ statements that involve risks and uncertainties. Arcelor’s 

actual results may differ significantly from the results discussed in such forward-looking statements. 

Factors that might cause such differences include those discussed below. See ‘‘Cautionary Statement 

Regarding Forward-Looking Statements’’. 

4.17.1 Commercial and industrial environment 

4.17.1.1 Cyclical nature of the steel market 

The steel market has traditionally shown cyclical trends resulting, in particular, from the influence of 

macro-economic conditions on demand for steel products and the recurrent imbalance between steel 

production and demand. 

The turnover, margins and results of the Arcelor Group are closely linked to these factors and may 

vary significantly from year to year. 

Any forecast in relation to market growth or its evolution must be reviewed in the light of changing 

economic conditions which can affect or delay expected improvements. 

4.17.1.2 Strong competition in the steel market 

The steel market is highly competitive. Steel producers are also in competition with producers of 

substitute materials, particularly in the automotive, construction and packaging industries. 

Intensity of competition and cyclical steel markets result in significant variations in economic 

performance which may lead to a decrease in profits and even to losses, which would materially affect the 

steelmaking industry as a whole, including the Arcelor Group. 

63

4.17.1.3 Raw material and energy consuming industry 

Steel production activities consume raw materials, such as iron ore, coal, coke, scrap metal, nickel, 

ferro-manganese and silico-manganese alloys and zinc. The Group maintains diversity in its sources of 

supply, where possible, and, save for electricity and natural gas, keeps stocks sufficient to minimise the 

impact of potential disruptions in supply. 

Raw materials and energy constitute major items of expenditure for the Arcelor Group. 

A significant increase in the price of raw materials and energy could have a material adverse effect on 

the Arcelor Group’s results if any hedging financial instruments used prove to be insufficient or if these 

price increases cannot be passed on to customers. 

4.17.1.4 Activities in emerging countries 

The Arcelor Group has activities throughout the world. Risks associated with operating activities in 

emerging countries can include non-payment or slower payment of invoices, nationalisation, social, 

political or economic instability, greater exchange risk and restrictions on repatriation of currency. The 

Arcelor Group may not be able to insure or cover these risks. Furthermore, it may prove difficult, even 

impossible, to obtain financing in countries rated below ‘‘investment grade’’ by rating agencies. The 

Arcelor Group may encounter difficulties in operating in such countries, which could materially affect its 

results. See note 25 of the notes to the consolidated financial statements as at and for the year ended 

31st December, 2003. 

4.17.1.5 Heavy industry 

The Arcelor Group operates in an industrial environment where most of its movable assets may be 

affected by technical problems or accidents which may lead to the interruption of its operations and have a 

material negative impact on production. 

4.17.2 Environmental regulations and liability-Non-renewal of authorisations 

4.17.2.1 Compliance with regulations-Environmental liability 

In the different countries where the Arcelor Group operates, particularly in Europe, Brazil and the 

United States, steel production activities must comply with environmental regulations which are diverse, 

subject to change and extensive. 

These regulations relate, in particular, to the control of major accidents, the elimination of waste 

water, the elimination of hazardous solid industrial waste, atmospheric and water pollution and protection 

of the sites. 

The Arcelor Group’s activities could, in the future, be subject to stricter regulations, requiring 

expenditure in order to comply with such regulations or the payment of taxes which could materially 

adversely affect the Group’s results, if this expenditure or such taxes could not be quickly reflected in 

customer prices. 

There are potential liabilities for the Arcelor Group as a result of its past activities that, should they 

result in bodily harm or damage to property, could materially adversely affect Arcelor’s results. 

In addition, regulatory authorities and courts may force the Group to carry out investigations or to 

restore sites, or may impose restrictions on its activities or temporarily or permanently close its 

installations, which could materially adversely affect the Group’s results. 

4.17.2.2 Authorisations 

In order to carry on its activities, the Arcelor Group must obtain, renew or modify various 

authorisations, permits and/or consents. In certain countries, procedures for obtaining these authorisations 

from regulatory authorities are often long and complex and there can be no assurance that the 

authorisation requested will be granted, renewed or modified, which could materially adversely affect the 

relevant activities of the Group. 

64

4.17.3 Financial environment 

4.17.3.1 Investment requirements and significant working capital 

Free cash flow generated by heavy industries, such as the steel industry can be significantly affected by 

the necessity to carry out major investments; in addition, these industries require large amounts of working 

capital. 

The Group may not be able to generate, raise or borrow sufficient funds for capital expenditures or 

working capital, which could have a material adverse effect on its business and results of operations. 

4.17.3.2 Exchange rate fluctuations 

Steel companies have noted over the last few years that their businesses and share prices are sensitive 

to the exchange rate fluctuations between the U.S. dollar and the euro. For example, any appreciation of 

the euro would reduce costs of a certain number of raw materials, but could reduce the competitiveness of 

exporting European steelmakers and facilitate imports into Europe. 

In addition, to the extent that the Arcelor Group pays in a currency and obtains payment of its 

products and services in another currency, its profit margins may be affected by exchange rate fluctuations. 

The Group’s general policy is to hedge this type of risk either by making the currencies of its sales 

correspond with those of its expenditures, or by hedging contracts. See Note 25 of the Group consolidated 

financial statements as at 31st December, 2003. 

In addition, the choice of the currency used to evaluate the assets in a currency other than the euro 

can have a significant impact on the balance sheet. 

4.17.3.3 Interest rate fluctuations 

In view of the structure of the Group’s indebtedness, part of which is subject to floating interest rates, 

the annual financial charges are partly linked to changes in interest rates. In particular, variation of 

short-term interest rates has a considerable impact on financial charges. See Note 25 of the Group 

consolidated financial statements as at 31st December, 2003. 

4.17.4 Risks related to the proposed acquisition 

4.17.4.1 Benefits from the integration of Arcelor’s operations with those of CST may not be achieved to the 

extent or within the time period that is currently anticipated, which could materially reduce or delay 

the realisation of increased revenues, earnings, cost savings and operational benefits. 

Following the acquisition of CST as described in section 7.1, Arcelor currently intends, to the extent 

possible, to integrate its operations with those of CST. Arcelor’s goal in integrating these operations is to 

increase revenues and earnings and achieve cost savings through synergies, and enhanced growth 

opportunities. In so doing, Arcelor may encounter substantial difficulties or delays integrating its 

operations with CST’s operations and fail to achieve the increased synergies and cost savings and, 

therefore, the revenues and earnings it expects, and could incur substantial costs as a result of, among 

other things: 

• loss of key employees; 

• possible inconsistencies in standards, controls, procedures and policies, business cultures and 

compensation structures between Arcelor and CST and the need to implement, integrate and 

harmonise various business-specific operating procedures and systems, as well as company-wide 

financial, accounting, information and other systems; 

• the diversion of management’s attention from day-to-day business as a result of the need to deal 

with integration issues; 

• external factors, such as the ability to obtain and maintain the necessary governmental 

authorizations, licences and approvals, that are not directly under management’s control; and 

• higher than anticipated restructuring and integration costs. 

For these reasons, Arcelor may fail to successfully complete the necessary integration of Arcelor and 

CST or realise any of the anticipated benefits of the integration of Arcelor and CST, which could have a 

material adverse effect on the Group’s business and its results of operations. 

65

4.17.5 Risks related to the Offering 

4.17.5.1 The market price of the Shares may fluctuate and may decline below the Subscription Price. 

The market price of the Shares at the time of the Offering may not be indicative of the market price 

for the Shares after the Offering is complete. The market price of Arcelor’s Shares has experienced 

significant volatility in the past, and may continue to fluctuate widely, depending upon many factors 

beyond Arcelor’s control, including: 

• market expectation of Arcelor’s performance; and 

• investor perception of the success and impact of the Offering and the proposed acquisition 

described in this Prospectus. 

As a result of these or other factors, the Shares may trade at prices significantly below their market 

price at the commencement of the Offering. No assurance can be given that the public trading market 

price of the Shares will not decline below the exercise price. Should that occur after prospective investors 

exercise their Warrants, which exercise cannot be revoked or modified, prospective investors will suffer an 

immediate unrealised loss as a result. Moreover, no assurance can be given that following the exercise of 

Warrants, investors will be able to sell their Shares at a price equal to or greater than the Subscription 

Price. 

4.17.5.2 No assurance can be given that a trading market will develop for the Warrants and, if a market 

does develop, the Warrants may be subject to greater volatility than the Shares. 

Arcelor intends to set a trading period for the Warrants on the Luxembourg Stock Exchange, 

Euronext Paris, Euronext Brussels and the Spanish Stock Exchanges from 2nd July, 2004 until 13th July, 

2004, both dates inclusive. Arcelor does not intend to apply for the Warrants to be traded on any other 

exchange. No assurance can be given, however, that an active trading market in those Warrants will 

develop during that period. Additionally, because the trading price of the Warrants depends on the trading 

price of the Shares, the existing volatility of Arcelor’s Shares, as described above in section 4.17.5.1 ‘‘The 

market price of the Shares may fluctuate and may decline below the Subscription Price’’ will magnify the 

volatility of the Warrants. 

4.17.5.3 If the Offering is discontinued or there is a substantial decline in the market price of the Shares, 

the Warrants may become worthless. 

The New Shares are being subscribed for by the Underwriters pursuant to an underwriting agreement, 

which, as is customary, may be terminated under certain circumstances. If the Offering does not proceed, 

the Warrants will become worthless. Accordingly, investors who have acquired Warrants in the secondary 

market will suffer a loss, as trades relating to Warrants will not be unwound in the event the Offering is 

terminated. In addition, a significant decline in the market price of the Shares may have a material adverse 

effect on the value of the Warrants. 

4.17.5.4 If shareholders do not exercise their Warrants, their percentage ownership of Arcelor’s Shares will 

be diluted. 

The Offering is designed to enable the Arcelor Group to raise capital in a manner that gives the 

opportunity to its eligible shareholders to subscribe for the New Shares pro rata to their shareholding at 

the Record Date, subject to applicable securities laws. The Underwriters have agreed, subject to certain 

conditions, to subscribe for, or to procure subscribers for, the number of shares equal to the number of 

New Shares that are not subscribed for during the Exercise Period. To the extent that shareholders do not 

exercise their Warrants, their proportionate ownership and voting interest in Arcelor will be reduced. Even 

if shareholders elect to sell their Warrants, or if shareholders decide to hold their Warrants through the 

end of the Exercise Period and are entitled to receive any Warrant Cash Payment, the consideration they 

receive, if any, may not be sufficient to fully compensate them for the dilution of their percentage 

ownership of the Shares that may be caused as a result of the Offering. 

66

CHAPTER 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS 

The following discussion of operating and financial review and prospects should be read in conjunction 

with the Group consolidated financial statements as at and for the year ended and three-month period ended 

31st December, 2003 and 31st March, 2004, respectively. The Group consolidated financial statements have 

been prepared in accordance with the International Financial Reporting Standards (‘‘IFRS’’) applicable at 

such dates. See Note 2 of the Group Financial Statements as at 31st December, 2003, included in Appendix I of 

this Prospectus for a discussion of significant accounting policies. 

This discussion includes forward-looking statements based on assumptions about Arcelor’s future business. 

Arcelor’s actual results could differ materially from those contained in the forward-looking statements. 

5.1 2004 OUTLOOK 

The steel market is highly influenced by global economic changes. Steel prices are cyclical in nature, 

following changes in macroeconomic conditions. 

Recovery in production in steel-consuming industries initiated at the end of 2003 is expected to 

continue in 2004. However, tensions perceived in 2003 and the beginning of 2004 in the raw material and 

sea freight sectors are likely to persist. 

The apparent global consumption of steel is expected to continue to grow, supported by the U.S. 

recovery, and should remain steady at a high level, despite a potential slowdown in Chinese consumption 

over the next few months. The volatility of certain spot prices would be considered as a technical 

adjustment. 

In this context, Arcelor is focusing on its principal markets—Europe and Brazil—in order to serve its 

customers, and is progressively passing through the price increases for raw materials to its quarterly and 

spot sales prices, which still remain lower than international prices. Inventories of finished products are 

expected to remain at a low level in Europe. 

The Group sustained satisfactory operating performances in the second quarter of 2004 that should be 

reflected in its consolidated results. Group margins and financial structure are therefore expected to 

continue to improve. 

After a successful year of consolidation and integration in 2003, including further strategic 

restructuring and rationalisation in the Flat Carbon Steels and Stainless Steels sectors, 2004 should be a 

year of change for Arcelor. With a strong financial structure (see section 5.4 ‘‘Liquidity and capital 

resources’’ below), the Group should now be in a position to extend its strategy to further international 

expansion. This has already begun and will continue over the next few years in line with the commitments 

made at the time of the creation of the Group in 2002. 

5.2 CRITICAL ACCOUNTING POLICIES 

Significant accounting policies are set out in Note 2 of the Group consolidated financial statements as 

at 31st December, 2003. Group accounting policies that involve highly variable and subjective estimates or 

assumptions and that have a material impact on reported Group financial information and operating 

performance, as well as on the comparability of such financial information over different reporting periods, 

are described below. 

5.2.1 Business combination—negative goodwill 

Until 31st December, 2003, a negative difference between the cost of an acquisition and the interest in 

the fair value of identifiable assets and liabilities acquired was accounted for as negative goodwill and 

recognised as a negative asset. This negative goodwill was recognised as income as follows: 

• to the extent that negative goodwill was related to identifiable future losses or expenses that were 

identified in the acquirer’s plan and could be measured reliably, negative goodwill was recognised as 

income when the future losses or expenses were recognised (EUR 358 million recognised in 2003 

and EUR 182 million in 2002); and 

• to the extent that negative goodwill was not related to identifiable future losses or expenses, it was 

recognized on a systematic basis over the weighted average residual useful lives of the identifiable 

acquired depreciable assets (EUR 111 million recognised in 2003 and EUR 103 million in 2002). 

67

As encouraged by the IASB, Arcelor opted for the early adoption of IFRS 3, ‘‘Business 

Combinations’’, as at 1st January, 2004 and consequently of IAS 36 asnd IAS 38 as revised in 2004. In 

accordance with this new standard: 

• the total negative goodwill of EUR 694 (EUR 676 million on subsidiaries and EUR 18 million on 

equity accounted investments) million existing at 1st January, 2004 was transferred to equity; and 

• any negative goodwill arising from acquisitions for which the agreement date is on or after 

1st January, 2004 is directly recognised as income (none in the first quarter of 2004). 

5.2.2 Impairment of tangible fixed assets 

Tangible fixed assets are tested for impairment at each periodic closing date. An impairment loss is 

recognised when the carrying amount of an asset exceeds its recoverable amount. The recoverable amount 

of an asset is the higher of the net selling price (if any) and its value in use. Value in use is the present value 

of estimated future cash flows (based on internal business planning process) expected to arise from the 

continuing use of an asset and from its disposal at the end of its life. 

Impairment losses of EUR 448 million were recognised in 2003 and EUR 185 million in 2002. These 

impairment losses mainly resulted from the Group’s restructuring and rationalization measures initiated in 

2002. They are included in the line ‘‘Depreciation and amortization expenses’’ of the consolidated income 

statement. 

5.2.3 Valuation of deferred tax assets 

Deferred tax assets are recorded up to the amount of probable utilisation, which is assessed taking 

into account future taxable income and ongoing prudent and feasible tax planning strategies. Forecasts 

reported in the internal business planning process are used to determine the amounts of tax assets to be 

recognised. If the forecasts cannot be met or if it is determined that tax assets cannot be used in part or in 

full in the future, a value adjustment is charged to the income statement. 

In 2002, a EUR 290 million adjusting charge was recognised as a result of the Group’s restructuring 

and rationalization measures. It was included in the line ‘‘Taxation’’ of the consolidated income statement. 

5.2.4 Provisions 

Provisions are recognised when: 

• there is a present obligation (legal or constructive) as a result of a past event; 

• it is probable that an outflow of resources embodying economic benefits will be required to settle 

the obligation; and 

• a reliable estimate can be made of the amount of the obligation. 

In 2002 and 2003, the Group recognised significant provisions for restructuring in the Flat Carbon and 

Stainless Steels sectors, including social plans. They are included in the line ‘‘other operating charges’’ in 

the consolidated income statement. Potential additional commitments in respect of the Group’s strategic 

orientations may not be reflected in the consolidated accounts as at 31st December, 2003 or 31st March, 

2004, if they do not meet the above three criteria at the closing date. 

68

5.3 RESULTS OF OPERATIONS 

Three months ended 

Year ended 31st December, 

31st March, 

2002 

pro forma (2) 2004 2003 

2003 (unaudited) 2002 (unaudited) (unaudited) 

(EUR million) 

Revenue ........................... 25,923 26,594 24,533 6,899 6,852 

Total operating costs ................... (23,695) (24,616) (22,722) (6,203) (6,211) 

Gross operating result (1) ................ 2,228 1,978 1,811 696 641 

Depreciation and amortisation expenses .... (1,601) (1,302) (1,234) (287) (279) 

Operating profit (before amortisation of 

goodwill) ......................... 627 676 577 409 362 

Amortisation of goodwill ............... 111 104 103 — 22 

Operating result ...................... 738 780 680 409 384 

Net financing costs .................... (321) (464) (434) (92) (63) 

Share of profits in companies accounted for 

using the equity method .............. 140 77 102 78 38 

Result before tax ..................... 557 393 348 395 359 

Taxation ............................ (141) (461) (488) (110) (129) 

Result after tax ...................... 416 (68) (140) 285 230 

Minority interests ..................... (159) (53) (46) (51) (38) 

Consolidated net result, group share ....... 257 (121) (186) 234 192 

(1) Gross operating result consists of operating result before amortisation and depreciation charges that are included in the lines 

‘‘Depreciation and amortisation expenses’’ and ‘‘Amortisation of goodwill’’. 

(2) See section 5.3.1 below. 

5.3.1 2003 versus 2002 

The Arcelor Group was created on the merger of Aceralia, Arbed and Usinor, effective on 

28th February, 2002. This merger was accounted for under the acquisition method, Usinor being identified 

as the acquiring entity in accordance with IFRS standards. 

Under this principle, the income statement of the Group comprised, for the financial year 2002, two 

months’ activity of Usinor stand-alone and ten months’ activity of Arcelor. The comparative analysis that 

follows is based on pro forma figures for the financial year 2002 (i.e., full year activity of Arcelor) in order 

to provide homogenous and comparable information. 

In addition, from time to time in the following discussion, variations are also presented ‘‘on a 

comparable basis’’ using the most recent year (or period) scope of consolidated subsidiaries as a reference 

since variations of financial information may fully or partially result from acquisitions or sales of 

subsidiaries conducted during the year or period. 

5.3.1.1 General 

In 2003, the Group showed a substantial improvement in results (net profit of EUR 257 million 

compared with a loss of EUR 121 million in the previous year) despite a difficult economic environment in 

Europe. This performance was supported by a EUR 1.5 billion reduction in consolidated net financial 

debt, allowing the Group to achieve its balance sheet restructuring objectives and opening up new 

prospects for growth. 

These positive results, which mark the completion of the Group’s consolidation phase, were due in 

part to the following: 

• synergies of EUR 405 million, EUR 105 million higher than the goals announced during the 

merger; 

• a policy of focusing on maintaining stable margins in spite of the cyclical nature of steel 

consumption and the related negative effect on production and shipments by the Group; and 

• investments and joint ventures in growth markets—Eastern Europe, Turkey, China and Brazil. 

69

The financial performance of the Group should also be assessed in light of the progressive 

implementation of strategic goals for the Flat Carbon and Stainless Steels sectors. This implementation 

significantly impacted the consolidated results in 2003 with total of non-recurring net charges of 

EUR 543 million included in Group operating income. 

The Group’s 2003 consolidated revenues of EUR 25,923 million (compared with EUR 26,594 million 

in 2002) showed a decline of 2.5% (a 0.6% decline on a comparable basis). The financial year was 

characterised by a rise in steel prices that was partly offset by volume reductions and by the impact of the 

appreciation of the euro against the U.S. dollar. 

As at the end of December 2003, 75.7% of Group sales were made in the European Union (EU-15) 

compared with 74.8% in 2002, 8.2% in North America (including Mexico) compared with 11.8% in 2002, 

4.6% in South America compared with 5.1% in 2002, and 11.5% in the rest of the world compared with 

8.3% in 2002. 

This change in the geographical distribution of revenues reflected the effects of the euro/U.S. dollar 

exchange rate, the safeguard clauses and weakness of industrial activity in the United States, as well as the 

significant growth of industrial production in China during 2003. 

Sales in the European Union (EU-15) amounted to EUR 19,628 million in 2003 compared to 

EUR 19,901 million in 2002. Sales in 2003 included EUR 4,990 million in France, EUR 4,260 million in 

Germany, EUR 3,892 million in Spain and EUR 2,324 million in Italy. 

The Group consolidated gross operating result of EUR 2,228 million in 2003 (compared with 

EUR 1,978 million in 2002) comprised a EUR 75 million non-recurring net charge (mainly restructuring 

costs net of capital gains from the sale of the company PUM Plastiques). Flat carbon products, in 

particular, benefited from the effects of cost cutting, synergies from the merger and recovery of steel prices 

that, largely, offset the impact of the business slowdown and decline in volumes. 

The Group consolidated operating result of EUR 738 million in 2003 (compared with 

EUR 780 million in 2002) comprised a EUR 543 million non-recurring charge. This charge resulted from 

the implementation of the strategic restructuring measures announced in the first semester of 2003, partly 

for the Flat Carbon Steels sector, and more critically for the Stainless Steels sector. 

After a net financial charge of EUR 321 million, a positive contribution from companies accounted 

for using the equity method of EUR 140 million, a taxation charge of EUR 141 million, and taking into 

account minority interests of EUR 159 million, the consolidated income statement showed a net profit 

(Group share) of EUR 257 million compared with a net loss of EUR 121 million in the previous year. 

Consolidated results of operations are presented below by sector of the Group: Flat Carbon Steels; 

Long Carbon Steels; Stainless Steels; and Distribution—Transformation—Trading. 

5.3.1.2 Flat Carbon Steels 

Standing at EUR 13,994 million at 31st December, 2003 compared with EUR 13,222 million at 

December 31, 2002, revenues in the Flat Carbon Steels sector increased by 5.8%, remaining unchanged on 

a comparable basis, the increase in selling prices being offset by a significant decrease in shipments. 

This voluntary reduction in the level of shipments, initiated at the end of the first half of the year in 

order to adjust the Group’s supply to low European demand, only partially impacted gross operating 

profit. 

At EUR 1,365 million for 2003 compared with EUR 925 million for 2002, gross operating result 

recorded a year-to-year improvement of more than 45% even after taking into account the EUR 64 million 

in non-recurring charges (compared with EUR 41 million in non recurring income in 2002). The increase 

in average sales price (+2% for packaging customers, +5% for automotive customers, +12% for general 

industry customers) more than offset the effects of reductions in output, while the weakness of the U.S. 

dollar against the euro completely absorbed the increase in the cost of raw materials. 

Operating result for 2003 amounted to EUR 774 million compared with EUR 216 million for 2002 

and included EUR 84 million of non-recurring charges (compared with EUR 144 million in 2002) related 

to the implementation of the strategies announced in January 2003, as described in section 4.2 ‘‘Strategy’’. 

At 25.6 million tonnes in 2003 compared with 27.2 million tonnes in 2002, total shipments in the Flat 

Carbon Steels sector declined by 6%. This decline partly resulted from the sale of certain assets as required 

70

y the European Commission, but more fundamentally reflected the implementation of a profitable 

commercial policy focused more on margins than on market share. 

In the automotive sector, despite a decline in the European market of 1.4% in 2003, Arcelor saw a 

slight increase in shipments. Conversely, volumes declined in general industry and the construction 

business. Overall, despite the pressure on prices and the imports from other countries, Arcelor was able to 

implement an active pricing policy. 

The financial performance in 2003 of steel products for the packaging industry was in line with the 

results achieved in 2002. The growth resulting from a rise in sales prices and from steady efficiency savings 

was, however, negatively affected by the drop in the beverage can businesses in Germany and the fall of the 

U.S. dollar, which had an adverse effect on exports. 

5.3.1.3 Long Carbon Steels 

At EUR 4,381 million for 2003 compared with EUR 4,256 million for the 2002 financial year, 

revenues for the Long Carbon Steels sector increased by 2.9% (2.2% on a comparable basis). Despite a 

globally weak demand in Europe, the long carbon steels sector was able to maintain its market share as a 

market leader. It was also able to take advantage of strong non-European markets, even though the 

appreciation of the euro against the U.S. dollar offset the impact of the price increases in South America 

and increases in worldwide exports. 

Gross operating result declined from EUR 613 million in 2002 to EUR 493 million in 2003. The 

sector’s gross operating margin satisfactorily remained over 11%, however (as compared to 14.4% in 2002 

on a comparable basis), despite a significant increase in the cost of scrap and the impact of the 

depreciation of the Brazilian real on the contribution of Belgo Mineira in Brazil. 

Operating result amounted to EUR 311 million in 2003 compared with EUR 430 million in 2002. 

The Long Carbon Steels sector, in order to pass through the significant and continuous increase in 

prices of raw materials (scrap) to sales prices, introduced in November a ‘‘scrap surcharge’’ automatically 

linked to scrap price movements in Europe. 

Shipments increased by 2.4% from 11.9 million tonnes in 2002 to 12.2 million tonnes in 2003. 

Trends of sales and marketing differed within the sector, depending on products and markets. 

In the beams market, 2003 saw a further erosion of apparent consumption in Europe, particularly in 

the European Union (EU-15), where the apparent consumption decreased by about 7% compared with 

2002. Economic activity in the Iberian peninsula slowed over the course of the year, notably in Portugal. 

Arcelor shipments in the Iberian peninsula suffered a decline as a result of increased competition due to 

the creation of additional capacities in Spain. Arcelor recorded solid growth in the other countries of the 

European Union and continued its growth policy in the countries of Central and Eastern Europe. 

Worldwide exports shipments outside North America increased substantially in 2003 as a result of the 

economic recovery (in Asia in particular), mainly fuelled by strong growth in China and the Middle East. 

Sales in the United States, despite some positive economic signals, were noticeably down compared with 

the previous year as a result of the commissioning of additional capacity and the willingness of local 

producers to limit imports. 

Even though shipments in 2003 in the area of sheet piling were below those of 2002, total sales of 

hot-rolled and cold-rolled sheet pilings were satisfactory. Sales in the European Union grew amid fiercer 

competition while demand remained unchanged from 2002. Shipments also rose in the countries of Central 

and Eastern Europe, partially offsetting the loss of volume in the United States. 

In terms of prices, greater competition in Europe and the negative impact on exports of the declining 

U.S. dollar led to overall lower average sales prices. 

In the wire rod markets, the increase of scrap cost was largely offset by the increase in sales prices 

during the first half of 2003, while increased competition and erosion of markets led, for low added-value 

products, to a decline in margins during the second half of the year. 

Despite increasing competition, sales of rails for gantry cranes broke the record in 2003 due to a 

comprehensive range of cutting-edge products. Sales of special steel sections performed well in 2003 in 

terms of volume. However, prices were somewhat lower than expected as a result of the readjustment in 

product mix during the year and due to the negative impact of foreign currency movements. 

71

Sales of concrete reinforcing bars were satisfactory in Northern Europe, but demand declined toward 

the end of the year as a result of seasonal variations. Arcelor’s sales policy focused on maintaining margins 

by prioritising price policy over volumes. 

In Southern Europe, the high level of demand recorded in 2002 continued in 2003 and Arcelor’s sales 

approach aimed to maintain margins in the face of increased scrap costs. The second half of the year saw 

demand level off, which, combined with reduced exports opportunities due to exchange rate movements, 

led to a more competitive climate. 

In drawn wire products, demand for steelcord was satisfactory, while demand for low-carbon steel 

remained stable at a relatively low level. This was also true for high-carbon products that, however, showed 

signs of recovery during the second half of the year. 

5.3.1.4 Stainless Steels 

At EUR 4,280 million for 2003 compared with EUR 4,248 million for 2002, revenues in the Stainless 

Steels sector increased by 0.8% (a decrease of 1.4% on a comparable basis). This change reflected both the 

rise in total sales prices, as a direct consequence of the strong increase in the price of nickel, and the lower 

contribution of revenues of subsidiaries selling in U.S. dollars. 

At EUR 23 million for 2003 compared with EUR 200 million for 2002, gross operating result fell 

sharply. Pressure on base prices (excluding alloy surcharges) in Europe and in the United States, lower 

margins on exports because of the weak U.S. dollar and the ‘‘hole’’ in European demand during the third 

quarter heavily impacted the profitability of the sector. Gross operating profit for 2003 also included 

EUR 156 million of overall restructuring charges incurred as a part of restructuring and rationalisation 

measures in all operating units of the sector. 

The operating loss of EUR 463 million in 2003, as compared with a profit of EUR 45 million in 2002, 

included EUR 479 million of non-recurring charges and primarily reflected the write-down of assets of 

J&L, a Group U.S. subsidiary. 

Shipments held steady in volume at 2.4 million tonnes. 

Beyond the global unfavourable economic environment, 2003 was characterised by a slow but steady 

appreciation of the euro against the U.S. dollar and by a sharp increase in the price of nickel. Although 

apparent activity in Europe was relatively sustained during the first quarter, it slowed notably by mid-year. 

The third quarter of 2003 was highly unfavourable, with activity far below the normal summer slowdown. 

Demand started to rise again by the end of the year, in part because of a speculative attitude with regard to 

prices but also confirming prospects for a business recovery in 2004, driven by relatively low inventory 

levels. 

Nickel price, a key factor in demand, rose steadily in 2003. The price more than doubled from $7,100 

per tonne to $16,650 per tonne by the end of the year, with the month of December alone accounting for 

more than half of the increase. Driven by expected higher demand in China in a tight supply environment, 

this increase in the price of nickel can also be explained by speculative behaviours of certain investment 

funds using base metals as a sort of ‘‘safe haven’’ face to declining stock performance. Future trends in 

nickel, pending of negotiations in progress with certain producers, will be a major factor in 2004. 

From a financial perspective, and excluding any exceptional items, trends in the following factors 

directly affected performance. Efficiency savings proved insufficient to offset substantially deteriorated 

market conditions, both in terms of demand and prices. The appreciation of the euro against the U.S. 

dollar adversely affected competitiveness not only in domestic markets but also in export markets. Sales 

prices retreated in most markets within a climate of weak demand and greater competition, with increases 

in alloy surcharges (+85% in Europe for the year) contributing to the erosion of margins by the end of the 

year. 

Apparent consumption in stainless steel flat products increased 6% on a worldwide basis compared 

with 2003, mainly fuelled by Asia (approximately +10%), while the European and American markets 

increased only between 1.5 and 2%. 

In Europe, demand was normal for the first few months of 2003, then suffered a setback during the 

second and third quarters. The year-end order books of the main European producers pointed to a 

recovery in 2004, thus confirming the signs evidenced in the last quarter. In a climate of weak demand and 

strong competition, base prices eroded steadily (down 10% in December on a year-to-year basis). After the 

72

low point reached in the fourth quarter and despite the levels of alloy surcharges, base prices began 

increasing at the end of the year. 

Business in the United States recovered steadily after a relatively pessimistic start for the year, but 

industry only benefited from the first positive effects of the recovery by the end of the year. Prices were 

under pressure and deteriorated further from their already weak level, to finally stabilise in the third 

quarter. Helped by the withdrawal of certain operators, producers had already implemented significant 

price increases for 2004. 

The Asian markets, where firm demand at the beginning of the year was greatly disrupted by the 

effects of SARS, recovered during the second half. This improvement, linked partially to the need of 

rebuilding stocks, was accompanied by an increase in prices during the fourth quarter linked to the 

increase in nickel prices, which had continued in 2004. 

Excepting some low points at mid-year, the economic climate in Brazil was relatively favourable. At 

the end of the year, the business was able to take advantage of the interest rate cuts and of the incentives 

introduced by the government to stimulate consumption. Base prices remained stable overall in U.S. dollar 

terms despite the further appreciation of the real against the U.S. dollar. 

After a difficult year, 2004 began auspiciously. Stronger demand linked in part to speculative 

procurement has reflected a genuine recovery driven by the low level of inventories. 

In long products, the weakness of the U.S. dollar in 2003 improved the competitiveness of Asian 

producers and maintained strong pressure on prices. In a climate of stagnating consumption, strong 

competition from European competitors and imports translated into a very low level of orders and prices. 

Base price levels have still to recover despite a slight increase and a rise in nickel prices at the end of the 

year. 

In an economic climate that did not favour major investments, demand for specialty plates was weak. 

Combined with the unfavourable euro/U.S. dollar exchange rate and price increases in alloys, as well as 

scrap, it locked Industeel into a negative price squeeze and contributed to a decline in performance. 

From an industrial perspective, operations of most steel facilities were adapted to the apparent 

consumption level. After a pronounced slowdown during the second and third quarters in response to 

particularly weak demand and to the summer business slowdown, production rates returned to more 

normal levels in the fourth quarter, reflecting business improvement for the beginning of 2004. Yearly 

production volumes of crude steel showed a decline of 4% compared with the average recorded in 2002. 

The commissioning of a new electric furnace in Genk and the modernisation of an annealing and pickling 

line at Gueugnon enhanced the competitiveness of production equipment. 

2003 also witnessed: 

• the shutdown of perforated tube production at Matthey in England; 

• the shutdown of stainless steel tube plants in Italy; 

• the sale of the foundry (CFI) and of a stake in the Creusot steelworks to the France Essor Group; 

and 

• the start-up of construction work by UGINE & ALZ of the new steelshop, upstream of the Carlam 

strip mill (Belgium). 

5.3.1.5 Distribution—Transformation—Trading 

At EUR 7,954 million in 2003 compared with EUR 9,444 million in 2002, revenues in the 

Distribution—Transformation—Trading sector suffered a decline of 16% partly due to the consolidation 

scope reclassification (transfer of the packaging business to the Flat Carbon Steels sector). On a 

comparable basis, revenues decreased by 4.2% even though the volume sold remained almost unchanged 

(1%). International business transacted through Arcelor International and Arcelor Projects remained 

steady, although the weakness of the U.S. dollar partly offset the financial impact. Other companies of the 

sector experienced a decrease in volume, due to a policy for prioritising prices over volumes in order to 

pass through upstream price increases to end users to the extent possible. However, price increases applied 

to end users were insufficient to offset the increases in upstream prices, which had a noticeable impact on 

margins. 

73

The two effects combined (lower volume and squeezed margins) heavily affected the performance of 

the sector. Gross operating result in 2003 amounted to EUR 284 million compared with EUR 319 million 

in 2002 and included a EUR 112 million non-recurring profit mainly related to the sale of the company 

PUM Plastiques in the fourth quarter. 

Operating profit, at EUR 124 million compared with EUR 209 million the year before, included 

EUR 32 million in non-recurring net charges, of which a EUR 71 million charge related to the 

restructuring of the Tubes business put up for sale. 

The Trade and Distribution business posted a 12% decline in sales volume in 2003 compared with 

2002. However, it experienced a noticeable sales price increase, particularly in general industry trading, as 

a result of priority being given to prices and margins. In terms of business organisation, 2003 was a 

transition year with a restructuring of the European network through plant openings and closures, and the 

acquisition of new companies. 

The Arcelor Steel Services Centres (‘‘ASSC’’) business also suffered a decline in volume during 2003 

in the context of higher prices. Geographic locations and organisational structures were rationalised over 

the course of the year in order to take advantage of the synergies achieved by the creation of Arcelor. Two 

major investment decisions were taken in this context: the twofold expansion of Usinor Stahl Service in 

Poland (start-up 2004) and the creation of a large ASSC near Bratislava in Slovakia (start-up expected for 

2005). 

The Construction business showed a slight improvement in sales prices, which was more than offset, 

however, by a reduction in sales volumes. The decline in demand and the price situation led to the closing 

of the Kreuztal profiling plant (Germany) and substantial cutbacks at the plant in Strasbourg (France). 

The cost of these restructuring activities had a significant impact on the results of the business. These 

restructuring activities will continue in 2004. 

Investments remained steady despite the commissioning in Belgium of a mineral wool panel line in 

partnership with Isover (Saint Gobain Group), the commissioning in Great Britain of a discontinuous 

high-quality panel line and the completion of the upstream industrial facility with the construction of a 

pickling line at the Contrisson plant (France) that is scheduled to come in line in the third quarter of 2004. 

The Arcelor Pump Processing business, established at the beginning of 2003 to produce pickled, 

hardened, cold rolled and galvanised coils, recorded a slight decline in business compared with the 

corresponding activity of the Group in 2002. In order to maintain the competitiveness of the business, a 

major investment program was approved for the renovation and upgrading of heavy equipment in 2003 and 

2004. 

Arcelor International experienced strong growth in business volumes that was not reflected in terms 

of revenues because of the depreciated U.S. dollar. Due to a strong and long-standing presence in China 

with offices in Beijing, Shanghai and Hong Kong, backed by a Singapore logistics support platform, sales to 

Asia in conjunction with those to North Africa, Near and Middle East, more than offset the decline in sales 

to the United States. 

5.3.2 First quarter 2004 versus first quarter 2003 


The Group’s consolidated revenues for the first quarter of 2004 amounted to EUR 6,899 million 

compared with EUR 6,852 million for the same period in 2003, representing an increase of 0.7% (+3.5% 

on a comparable basis). This growth resulted from an increase in shipments (+3%), in particular, for long 

products, and from an increase in prices. This growth was mitigated by the sale of several Group entities, 

notably Thainox. 

The Group consolidated gross operating result amounted to EUR 696 million for the first quarter of 

2004 compared with EUR 641 million in the first quarter of 2003. The combined effect of the Group’s 

hedging strategy, the execution of long-term supply agreements and the mechanism of scrap surcharge 

implemented in the last quarter of 2003 almost fully offset the increase in raw material prices. 

The Group’s consolidated operating result was EUR 409 million for the first quarter of 2004 

compared with EUR 384 million for the first quarter of 2003, a margin of 5.9% compared with a 5.6% 

margin for the same period in the previous year. In the first quarter of 2004, the Group’s consolidated 

operating result no longer included the amortisation of the negative goodwill (amounting to 

+EUR 22 million for the first quarter of 2003). 

74

After a financial charge of EUR 92 million, a positive contribution of EUR 78 million from the share 

of results of associated companies and a taxation charge of EUR 110 million, the consolidated net result 

(Group share) increased by 22% from EUR 192 million in the first quarter of 2003 to EUR 234 million in 

the first quarter of 2004. 

5.3.2.2 Flat Carbon Steels sector 

The first quarter of 2004 was characterised by a significant increase in the price of raw materials and 

by the strong appreciation of the euro against the U.S. dollar. 

At EUR 3,650 million in the first quarter of 2004 compared with EUR 3,727 million in the first 

quarter of 2003, revenues for the Flat Carbon Steel sector experienced a slight decline of 2.1% (1.7% on 

a comparable basis). Average selling prices to general industry, although higher in the fourth quarter of 

2003, did not meet the levels achieved in the first quarter of 2003. Conversely, prices for the majority of 

products for the automotive and packaging industries showed a slight increase. Deliveries to these 

industries remained stable on a period-to-period basis, with the strongest performances generated by the 

automotive sector. 

The gross operating result of EUR 400 million compared with EUR 428 million for the first quarter 

2003 reflected the increase in cost of components and included a EUR 18 million non-recurring 

restructuring charge. Most of the impact of the increase in the cost of raw materials should continue to be 

experienced as from the third quarter of 2004, and steel prices for industrial users are expected to continue 

to increase significantly in an overall environment of possible supply shortage. 

The first quarter of 2004 was also characterised by good operating performance and satisfactory 

efficiency savings. 

Operating result amounted to EUR 254 million for the first quarter of 2004 compared with 

EUR 289 million for the first quarter of 2003, with a margin of 7.0% compared to 7.8% in the previous 

year. 

Arcelor FCS faced a strong demand in the industrial sector, leading Arcelor to decide to prioritise 

European and traditional customers. Worldwide export volumes also substantially decreased compared to 

the fourth quarter of 2003. 

The European automotive industry suffered a decline of 1.1% compared to the first quarter in 2003. 

As a consequence, direct shipments from Arcelor Auto decreased slightly (0.8% on a comparable basis). 

Vega Do Sul S.A. (Brazil) and Borcelik (Turkey) started sales operations in 2004. 

Shipments in the packaging area remained stable: the decline in shipments to large customers in 

Europe was offset by an increase in shipments to medium-size European customers and by an increase in 

exports. Sales prices, in particular, export prices, were higher than those observed in the first quarter of 

2003. 

5.3.2.3 Long Carbon Steels 

Sustained demand supported most of the products in the Long Carbon Steels sector and led to an 

increase in the average sales prices that more than offset the increase in the cost of raw materials (scraps) 

and led to a rise in revenue of approximately 8% and in gross operating result of more than 30% compared 

with the first quarter of 2003. Changes in prices varied, however, depending on the products. Beams prices 

increased while machine wire and concrete-reinforcing bars prices increased only slightly and prices for 

rails, sheet pilings and wire-drawn products decreased. 

Compared to 31st March, 2003, revenues for the sector as at 31st March, 2004 increased by 21.2% 

(+17.7% on a comparable basis) from EUR 1,046 million to EUR 1,268 million. This increase reflected 

the growth of sales prices, closely linked to both the implementation of a scrap surcharge and to higher 

volumes sold. At 3.289 million tonnes sold during the first quarter of 2004 compared with 2.944 million 

tonnes in the first quarter of 2003, total shipment of the Long Carbon Steels sector increased by 11.7%, 

also boosted by the commissioning of the rolling mill in Pallanzeno (Italy) in July 2003. 

Price increases and higher volumes sold, supported by efficiency savings, allowed gross operating 

result for European business to meet the level of the first quarter of 2003, despite an average price increase 

of scrap of approximately 30% in one year. For the whole sector, the gross operating result of the first 

quarter of 2004 amounted to EUR 134 million compared with EUR 126 million for the same period in the 

75

previous year. The 10.6% margins observed in the first quarter 2004 were back to satisfactory levels after a 

difficult year-end 2003. 

Operating result amounted to EUR 90 million for the first quarter of 2004 compared with 

EUR 84 million for the first quarter of 2003. 

The Beams market was again dynamic in Spain and Portugal while demand remained stable in 

Northern Europe. For worldwide exports, the sector opted for a strategy of selective sales with priority 

given to more profitable markets. 

Shipments in the sheet pilings sector benefited from reduced pressure on prices. Rails and heavy 

beams demand remained stable. The Wiredrawn segment steadily improved. 

5.3.2.4 Stainless Steels 

At EUR 1,208 million for the first quarter of 2004, compared with EUR 1,137 million for the first 

quarter of 2003, revenues of the Stainless Steels sector increased by 6.2% (+7.2% on a comparable basis). 

This increase resulted from overall higher sales prices that offset a slight decline in volume (3%), as well 

as a significant depreciation of the U.S. dollar against the euro. 

Revenues for the first quarter of 2004 increased by 15% compared with the fourth quarter 2003, 

reflecting higher volumes, as apparent consumption increased and a normal cyclical slowdown in business 

occurred toward the end of the year. It also reflected an overall increase in sales prices due partially to a 

moderate increase in base prices and, to a greater extent, to the significant rise in the price of the nickel 

and alloys in general. 

Gross operating result, at EUR 51 million for the first quarter of 2004 compared with EUR 56 million 

for the first quarter of 2003 (EUR 54 million on a comparable basis), slightly declined. Saving efficiencies 

achieved in the first quarter and increase in sales prices offset only slightly the substantial increase in raw 

material prices (alloys and scrap). 

In a climate of a recovering apparent consumption, the first quarter of 2004 was characterised by high 

or increasing prices for raw materials, as well as by a relative stabilisation of the euro/U.S. dollar exchange 

rate. 

The price of nickel, after a sharp increase at the end of 2003, decreased in the first quarter of 2004 but 

still remained 75% higher than in first quarter of 2003. The price of certain other alloys, such as chromium 

and molybdenum alloys, which are normally less speculative (as well as the price of scrap), experienced 

similar changes, all driven by anticipations of an increase in Chinese demand. 

The recovery of the global economy, already perceptible during the last quarter of 2003, was 

confirmed at the beginning of 2004. The recovery materialised in a sustained demand, but also in the 

expectation of an increase of the alloy surcharge. Associated with tight supply conditions due to cyclical 

reduction in production capacity, it favoured an increase in base prices. This increase, however, only 

partially offset the negative impact of the increase in the raw material (mainly scrap) prices. 

Competitiveness stopped deteriorating and in some markets even improved following the stabilisation and 

subsequent limited appreciation of the U.S. dollar against the euro over the first three months of 2004. 

In the first quarter of 2004, flat products evolved in a more favourable context than at the end of the 

previous year: 

• Demand in Europe stabilised at a satisfactory level, supported by a slight decrease in supplies at 

mid-quarter and by expectations of additional alloy surcharges. Following the increase in base 

prices, certain European producers announced that they would pass through scrap price increases 

to sales prices. 

• The United States confirmed the economic recovery observed at the end of 2003. After a tense 

market climate at the beginning of the quarter due to the withdrawal of some competitors, market 

balance stabilised. Demand showed a positive trend despite a slight decline. A new series of 

increases in base prices was announced after those implemented at the beginning of the year. U.S. 

producers announced that they would apply a scrap surcharge to sales prices in order to pass 

through the continuous increase in scrap prices. 

• Demand in the Asian market remained firm, driven by Chinese consumption. Overall prices 

remained at a satisfactory level in Asia, although in China the continuing increase in sales prices 

76

from the beginning of the year slowed because some customers, short of funds, privileged shortterm 

supply to their end users by making use of their inventories. 

• The favourable outlook in Brazil for the automotive industry, home appliance and industrial 

markets supported a continuous increase in prices. 

Demand for long products increased in all areas, driven by the business recovery in the United States. 

The stabilisation of the euro/U.S. dollar exchange rate, associated with increases in prices and volumes, 

contributed to restore revenue levels. 

After a difficult year in 2003, the specialty plates segment began to recover as a result of new 

significant industrial projects. 

5.3.2.5 Distribution-Transformation-Trading 

At EUR 1,972 million for the first quarter of 2004, compared with EUR 2,104 million for the first 

quarter of 2003, revenues of the Distribution-Transformation-Trading (‘‘DTT’’) sector declined by 6.3% 

(but increased by 4.9% on a comparable basis). Shipments went back to the level of the first quarter of 

2003 after some substantial adjustments in the second half of last year. In a tight steel market, the increase 

in prices of raw materials and sea freight led to a significant rise in sales prices despite a stable actual 

consumption, allowing stabilised and even improved margins in all the activities of the sector. 

Gross operating result, as well as operating result, substantially increased from EUR 58 million and 

EUR 39 million for the first quarter of 2003, respectively, to EUR 92 million and EUR 54 million, 

respectively, for the first quarter of 2004. Results started improving in February and accelerated in March 

in almost all the operating units of the sector. This resulted from the traditional mismatching between the 

value of the inventories sold and the actual proceeds of the sales. 

Volumes slightly declined by approximately 1% for AND in the first quarter of 2004 compared to the 

first quarter of 2003, in the context of a significant increase in prices. This trend of reduction in volumes 

reversed in March 2004 with a clear rise in shipments. 

Conversely, volumes increased substantially for the ASSC in the first quarter of 2004. Sales prices 

remained stable on a period-to-period basis, due to long-term contracts with customers. Prices are 

expected to progressively increase over 2004. 

In the construction sector, shipments rose by approximately 3% in the first quarter of 2004 compared 

with the first quarter of 2003, while average sales prices declined, primarily as a result of the change in the 

product mix; the market remained relatively stable. 

Shipments and sales prices improved substantially in the tubes sector. 

Arcelor Projects benefited from a significant increase in business, which, however, proved insufficient 

to offset the negative impact of the depreciated U.S. dollar on revenues. 

Operations of Arcelor International, after steady growth in 2003, slowed in line with the overall 

slowdown of the market. Revenues for Arcelor International also suffered from the appreciation of the 

euro against the U.S. dollar. 

5.4 LIQUIDITY AND CAPITAL RESOURCES 

In 2003 and in the first quarter of 2004, the Group reduced drastically its net financial debt: 

• by more than 1.5 billion in 2003 (EUR 4,464 million as at 31st December, 2003 compared with 

EUR 5,993 million as at 31st December, 2002); and 

• by a further EUR 437 million in the first quarter of 2004, leading to a debt/equity ratio (including 

minority interests) of 0.46 as at 31st March, 2004 (0.75 as at 31st December, 2002 and 0.55 as at 

31st December, 2003). 

As at 31st December, 2003, long-term interest-bearing liabilities amounted to EUR 4,871 million, 

compared to EUR 4,594 million as at 31st December, 2002, and mainly included convertible debenture 

loans of EUR 1,488 million, non-convertible debenture loans of EUR 1,914 million and amounts owed to 

credit institutions of EUR 1,268 million. 

77

As at 31st December, 2003, short-term interest-bearing liabilities amounted to EUR 1,551 million, 

compared to EUR 3,821 million as at 31st December, 2002. This decrease of EUR 1,097 million was due to 

the termination of securitisation programs and the establishment of a receivables sale program. 

Cash generation substantially accelerated over the second half of 2003 and in the first quarter of 2004 

as a result of: 

• a successful sustained programme to reduce working capital requirements, with special focus on 

inventory monitoring; and 

• a policy to control investment expenditure and to divest from non-core businesses. 

The Group also strengthened its financial structure through an ongoing policy to attract capital 

resources and to optimise the liquidity of the Arcelor stocks in the capital markets. 

The Group’s cash and cash equivalents amounted to EUR 1,890 million as at 31st December, 2003, as 

compared to EUR 1,239 million as at 31st December, 2002. 

5.4.1 Cash flows from operating activities 

Cash flows from operating activities amounted to EUR 2,502 million for 2003 compared with 

EUR 1,800 million for 2002. This increase mainly resulted from the effect of the decrease of 

EUR 641 million in 2003 in working capital requirements (compared with a decrease of EUR 377 million 

in 2002). The improvement in operating cash flows was maintained in the first quarter of 2004 

(EUR 434 million compared with EUR 285 million in the first quarter of 2003) and reflected a continuous 

decrease in working capital requirements and, in particular, inventories. This resulted in a significant drop 

in indebtedness. 

5.4.2 Cash flows from investing activities 

Net cash used in investing activities in 2003 amounted to EUR 1,109 million compared with 

EUR 1,714 million in the previous year. This decrease resulted from: 

• controlled investment expenditures (outflows reduced from 1,415 in 2002 to 1,327 in 2003); 

investments were primarily made in the Flat Carbon Steels sector (EUR 734 million as at 

31st December, 2003). In 2003, investments included the construction of a cold-rolled and 

galvanised steel coil processing unit at Vega do Sul S.A. in Brazil; and 

• divestiture from non-core businesses (inflow from sales of equipment and sales of subsidiaries 

amounted to EUR 112 million and EUR 273 million, respectively, in 2003 compared with 

EUR 42 million and EUR 48 million, respectively, in 2002). In compliance with the commitments 

given to the European Commission at the time of the merger, in 2003 Arcelor divested a certain 

number of steel producing and distribution companies. Additionally, the Arcelor Group sold to the 

Saint Gobain Group its plastic business (the PUM Plastiques group, which specialised in the 

distribution of plastic products for the construction and public works market). 

Net cash used in investing activities in the first quarter of 2004 amounted to EUR 141 million and 

comprised the inflows from the sale of Thainox Steel Ltd plant, located in Rayong and consisting of two 

cold-rolling lines complemented by one bright annealing line, one annealing and pickling line and one 

slitting line. Under the terms of the sale agreement, Arcelor will continue to benefit from a multi-year 

agreement for the supply of Thainox’s materials at market prices. 

Arcelor also announced the following disposals which are expected to be completed in the second half 

of 2004: 

• On 11th February, 2004, Arcelor signed an agreement with Bagoeta S.L, majority shareholder of 

CONDUCCIONES Y DERIVADOS S.A. (‘‘Condesa’’), for the purpose of selling its tube business. 

The transaction has been completed. In 2003, the tube business of the Arcelor Group shipped over 

1.2 million tonnes of steel for a turnover of EUR 587 million. 

• On 17th February, 2004, Arcelor announced that its subsidiary J&L Specialty Steel, LLC signed an 

agreement to sell most of its assets to a wholly owned subsidiary of Allegheny Technologies 

Incorporated. The transaction has been completed. J&L Specialty Steel is a major player in the area 

of flat stainless steel products. The company is headquartered in Pennsylvania with plants in 

Midland, Pennsylvania, and Louisville, Ohio. J&L is a wholly owned subsidiary of Arcelor. 

78

• On 22nd June, 2004, Arcelor sold its wholly owned subsidiary Aciérie de l’Atlantique, SAS (‘‘ADA’’) 

to Siderúrgica Añón, S.A. for EUR 77 million. ADA is a French company based in Bayonne 

(France) and is equipped with an electric arc furnace and a continuous casting facility. The entity 

(223 employees) shipped over 770,000 tonnes of steel in 2003 for a turnover of EUR 185 million. 

Arcelor also announced, on 27th April, 2004, the acquisition of the Corus’ sheet pilings business in 

Great Britain. Arcelor is a world leader in the area of sheet pilings, which are used mainly in public works. 

5.4.3 Cash flows used in financing activities and capital structure 

Net cash used in financing activities in 2003 amounted to EUR 686 million compared with 

EUR 1,021 million in 2002. This decrease mainly resulted from a decrease in interest-bearing liabilities 

over 2003. 

In the first quarter of 2004, net cash used in financing activities increased to EUR 304 million as at 

31st March, 2004 to EUR 132 million as at 31st March, 2003. This increase was partly due to the early 

redemption of the OCEANE 2006. 81.05% of the initial issue was converted and redeemed using Arcelor 

treasury shares, strengthening the consolidated equity of the Group. 

On 15th March, 2004, Arcelor implemented a level 1 American Depository Receipts (‘‘ADR’’) 

program in order to improve the liquidity of Arcelor shares and their distribution with American investors. 

79

5.5 INFORMATION IN RELATION TO ARCELOR MAIN SUBSIDIARIES AND ASSOCIATES AS AT 31ST DECEMBER, 2003 

The list reproduced below does not include all companies in the Arcelor Group. The table is intended to present information on the more significant companies 

(or sub-groups). In principle, these companies or sub-groups contribute significantly to consolidated revenues or are significant from an operational point of view or 

represent at least 10% of consolidated net equity. 

Dividend 

% of Consolidation % of Result of Total net received by 

Name of the company Registered Office Sector of activity shareholding method consolidation Currency Capital(1) Reserves(1) the year(1) equity(1) Arcelor(2) 

80 

Sollac Atlantique S.A. ............... Puteaux (F) Flat carbon steel 100.00 Full 99.24 EUR 91 195 86 372 — 

Sollac Lorraine S.A. ................ Puteaux (F) Flat carbon steel 100.00 Full 99.24 EUR 55 143 35 233 — 

Sollac Méditerranée S.A. ............. Puteaux (F) Flat carbon steel 100.00 Full 99.24 EUR 69 120 25 214 — 

Companhia Siderúrgica de Tubarão (CST) S.A. . Serra (BRA) Flat carbon steel 28.02 Equity method 29.38 USD 1,989 (246) 326 2,069 — 

Vega do Sul S.A. .................. São Francisco (BRA) Flat carbon steel 77.88 Full 77.79 USD 244 (78) (33) 133 — 

Sidmar N.V. ..................... Gent (B) Flat carbon steel 99.54 Full 99.27 EUR 293 677 (89) 881 — 

Cockerill Sambre S.A. ............... Seraing (B) Flat carbon steel 100.00 Full 99.24 EUR 658 908 (143) 1,423 — 

Eko Stahl GmbH .................. Eisenhüttenstadt (D) Flat carbon steel 100.00 Full 99.14 EUR 178 290 53 521 — 

Aceralia Planos subgroup ............. Gozón (E) Flat carbon steel 95.03 Full 95.03 EUR 751 1,801 55 2,607 59 

ProfilArbed S.A. .................. Esch s/Alzette (L) Long carbon steel 100.00 Full 99.73 EUR 348 75 (28) 395 — 

Stahlwerk Thüringen GmbH ........... Unterwellenborn (D) Long carbon steel 100.00 Full 99.73 EUR 10 57 0 67 — 

Travi e Profilati di Pallenzeno Spa ........ Pallanzeno (I) Long carbon steel 100.00 Full 99.73 EUR 20 19 (2) 37 — 

Aceralia Perfiles subgroup ............. Madrid (E) Long carbon steel 100.00 Full 95.03 EUR 258 111 15 384 — 

Aceralia Redondos subgroup ........... Azpeita (E) Long carbon steel 100.00 Full 95.03 EUR 176 78 29 283 — 

Belgo-Mineira subgroup .............. Belo Horizonte (BRA) Long carbon steel 54.03 Full 52.97 EUR 1,017 (316) 201 902 — 

Ugine & ALZ Belgium N.V. ........... Genk (B) Stainless steel 100.00 Full 99.27 EUR 214 (72) 3 145 — 

Ugine & ALZ France S.A. ............ Puteaux (F) Stainless steel 100.00 Full 99.24 EUR 355 (38) (64) 253 — 

Acesita S.A. ..................... Belo Horizonte (BRA) Stainless steel 27.68 Equity method 27.47 USD 1,004 (663) (13) 328 — 

Ugitech S.A. .................... Ugine (F) Stainless steel 100.00 Full 99.24 EUR 176 (22) (101) 53 — 

Imphy Ugine Précision S.A. ............ Puteaux (F) Stainless steel 100.00 Full 99.24 EUR 109 (92) (14) 3 — 

Aceralia Transformados subgroup ........ Pamplona (E) Distribution-Transformation-Trading 100.00 Full 94.92 EUR 51 132 5 188 — 

Arcelor International S.A. ............. Luxembourg (L) Distribution-Transformation-Trading 100.00 Full 98.44 EUR 22 39 12 73 — 

Arbed Americas subgroup ............. New York (USA) Distribution-Transformation-Trading 100.00 Full 98.54 USD 6 (4) 2 4 — 

Skyline Steel subgroup ............... Parsippany (USA) Distribution-Transformation-Trading 100.00 Full 98.54 USD 0 61 19 80 — 

PUM Service Acier ................ Reims (F) Distribution-Transformation-Trading 99.98 Full 99.22 EUR 67 203 119 389 — 

Laminados Velasco subgroup ........... Basauri (E) Distribution-Transformation-Trading 80.00 Full 76.03 EUR 15 85 5 105 — 

ARCELOR ..................... Luxembourg (L) Holding 100.00 Full 100.00 EUR 2,665 7,050 493 10,208 — 

Arbed ........................ Luxembourg (L) Holding 99.73 Full 99.73 EUR 581 1,339 (13) 1,907 60 

Usinor. ........................ Puteaux (F) Holding 99.24 Full 99.24 EUR 769 953 (539) 1,192 210 

Arcelor Center Brussels .............. Gent (B) Holding 100.00 Full 91.33 EUR 1,570 56 73 1,699 1 

(1) Figures are presented for Arcelor Group subsidiaries (or subgroups), expressed in millions of the reporting currency, in accordance with IFRS accounting principles. Situation as at 31st December, 2003. 

(2) Dividends paid by direct Arcelor subsidiaries to Arcelor during 2003. 

For accounts receivables and payables by Arcelor to its subsidiaries, please refer to Notes 5 and 10 of the audited unconsolidated 2003 financial statements 

included in Appendix I of this Prospectus.

Accounts receivables and payables by Arcelor from and to its subsidiaries (> EUR 1 million): 

Accounts receivables: 

Amount as at 31 st December, 2003 

Subsidiary 

(Figure in EUR million) 

Arbed .................................... 1,052.0 

Sidmar ................................... 2.6 

Aceralia .................................. 3.4 

Usinor ................................... 2.0 

Cockerill Sambre ............................ 3.7 

Arbed Americas ............................ 1.4 

Arcelor International ......................... 2.4 

Arcelor Négoce Distribution ................... 2.8 

Sirus SSC ................................. 2.4 

Ugine&Alz France .......................... 1.5 

Sollac Atlantique ............................ 1.5 

Sollac Méditerranée.......................... 1.7 

La Magona ................................ 1.6 

Others (< 1 million) ......................... 10.3 

Total ..................................... 1,089.3 

Accounts payable: 

Amount as at 31 st December, 2003 

Subsidiary 

(Figure in EUR million) 

Arbed .................................... 2.2 

Usinor ................................... 11.4 

Sidmar ................................... 1.3 

Arcelor Finance ............................ 3.8 

Others (< 1 million) ......................... 1.9 

Total ..................................... 20.6 

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CHAPTER 6 INFORMATION CONCERNING THE BOARD OF DIRECTORS AND 

MANAGEMENT BOARD OF ARCELOR 

6.1 BOARD OF DIRECTORS 

6.1.1 Overview 

The Board of Directors has the widest administrative and management powers in Arcelor. All powers 

which are not expressly reserved, by law or the articles of association, to the general meeting of the 

shareholders are within the competence of the Board of Directors. 

The articles of association provide that the Board of Directors is composed of a minimum of three 

directors. Directors need not be shareholders of Arcelor. 

The directors are elected by the shareholders at the annual general meeting of the shareholders or at 

any other shareholders’ general meeting for a period which ends at the close of the fifth annual general 

meeting following the date of their appointment. 

A director may be removed from office at any time for any reason whatsoever by the shareholders in 

general meeting. 

In the event that the seat of a director becomes vacant, the remaining directors may, by a majority of 

votes validly cast, elect a Director who will temporarily exercise the functions of director until the next 

general meeting of the shareholders. 

The Board of Directors appoints from amongst its members one or several chairmen and may choose 

one or several vice-chairmen. 

The Board of Directors may delegate its powers with respect to the day-to-day management of 

Arcelor’s business and to the representation of Arcelor for the purposes of conducting such business, to 

one or several managing directors, officers or other agents, who may together constitute a management 

board deliberating pursuant to the rules determined by the Board of Directors. The Board of Directors 

may also delegate special powers and confer special duties on any other person. 

6.1.2 Composition of the Board of Directors 

Mr. Joseph Kinsch, Chairman of the Board of Directors; 

Mr. José Ramón Álvarez Rendueles, Vice-Chairman of the Board of Directors; 

Mr. John Castegnaro, Director, Employee Representative, Luxembourg; 

Mr. Hedwig de Koker, Director, Chairman of the Board of Vancaen PLC, Brussels; 

Mr. Jean-Yves Durance, Director, Chairman of the Management Board MARSH France, Paris; 

Mr. Noël Forgeard, Director, President and CEO of Airbus, Paris; 

Mr. Jean-Pierre Hansen, Director, Chairman and Managing Director of Tractebel S.A., Managing 

Director of SUEZ S.A., Brussels; 

Mr. Ulrich Hartmann, Director, Vorsitzender des Aufsichtsrats of E-ON AG, Düsseldorf; 

Corporación JMAC B.V., Director, represented by Mr. Ramón Hermosilla Martín, Madrid; 

HRH Prince Guillaume of Luxembourg, Director, Luxembourg; 

Mr. Michel Marti, Director, Employee Representative, Paris; 

Mr. Daniel Melin, Director, Chairman of EMEA South EDS, Paris; 

Mr. Edmond Pachura, Director, Chairman of UNAS, Paris; 

Mr. Francisco Javier de la Riva Garriga, Director, Executive Vice-Chairman of Fertiberia S.A., 

Madrid; 

Mr. Georges Schmit, Director, Secretary General of the Ministry of the Economy, Luxembourg; 

Mr. Sergio Silva de Freitas, Director, Senior Vice-President of Banco Itaú, Sao Paulo; 

Mr. Ignacio Fernández Toxo, Director, Employee Representative, Madrid; and 

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Mr. Fernand Wagner, Director, Luxembourg. 

The board members can be contacted at Arcelor’s registered office. 

Mr. Paul Junck, Secretary General, is acting as Secretary of the Board of Directors. 

The Board of Directors of Arcelor is composed of 18 directors, all non-executive, appointed by the 

general meeting of shareholders, three of whom represent the employees. 

It is characterised, inter alia, by its international nature, with six different nationalities represented on 

the Board. 

The Board of Directors includes a sufficient number of independent directors to give them a 

significant influence over the decision-making process. The independent directors enjoy total 

independence from the Company and its principal shareholders, which implies that: 

• they do not hold an executive position within the Company; 

• they must not have any relationship with members of the Management Board that could influence 

their independent judgement; 

• they must not represent a shareholder who owns at least 2% of the Company’s share capital; and 

• they do not provide any goods or services to the Company which, in the opinion of the Board of 

Directors, would be likely to influence their judgement. 

The directors are required to act in the best interests of the Company. In case of a conflict of interest 

relating to a matter submitted for the approval of the Board of Directors, the director in question advises 

the Chairman of the Board in advance if possible. The conflicted director must inform the Board of 

Directors accordingly and may not participate in the discussion or the vote regarding the relevant matter. 

Mention of this fact is made in the minutes of the relevant board meeting. The general meeting of 

shareholders must be informed thereon as required by law. 

6.1.3 Role and authority of the Board of Directors 

6.1.3.1 Corporate Governance 

Arcelor intends to merit the confidence of investors on the basis of transparency and the quality of 

information issued by the Group, the implementation of ambitious international corporate governance 

standards and compliance with the principles of responsibility adopted by the Group. 

6.1.3.2 Role and authority of the Board of Directors 

The Board of Directors has, within the limits provided by law and the articles of association of the 

Company, the most extensive powers to administrate and manage the Company and to achieve its 

corporate purpose. 

The Board of Directors appoints the members and the Chairman of the Management Board. 

Without prejudice to its legal duties, the Board of Directors, on the proposal of the chairman of the 

Management Board, determines the strategic objectives and the business plan of Arcelor and the Group, 

adopts the means to achieve these objectives, supervises the implementation of the business plan and the 

monitoring of Arcelor and the Group and reports to the shareholders. The Board of Directors approves 

any significant investment and all strategic operations. 

In particular, on the recommendation of the Management Board, the Board of Directors approves the 

annual financial statements of the Company and the proposed distribution of earnings, the consolidated 

financial statements of the Group, the consolidated budget projections and the reports to be submitted to 

the general meeting of shareholders. 

6.1.3.3 Working procedures 

The Board of Directors elects a Chairman from among its members, who chairs the meetings of the 

Board of Directors. The Chairman represents the Board of Directors vis-à-vis third parties. 

The Chairman liaises with all important shareholders of Arcelor in consultation with the Chairman of 

the Management Board. 

83

Among his responsibilities, the Chairman of the Board of Directors evaluates all the major issues 

submitted by the Management Board to the Board of Directors in order to form his own opinion. For this 

purpose, the Chairman maintains or develops the necessary knowledge and understanding of the issues, 

challenges, developments and opportunities in Arcelor’s various sectors through periodic consultation with 

the Management Board and its Chairman. The Chairman fulfils his responsibilities in a spirit of teamwork 

with the Management Board and its Chairman. 

The Board of Directors may elect a Vice-Chairman from among its members. 

The Board of Directors meets at least six times per year. It is convened by the Chairman. Further 

meetings may be called if the affairs of the Company so require. 

If the Chairman cannot attend, the Board is chaired by the Vice-Chairman or the most senior director 

by age. 

The agenda for each meeting is established by the Chairman of the Board in consultation with the 

Chairman of the Management Board. 

The Chairman and the members of the Management Board participate in the meetings of the Board 

of Directors in an advisory role. Other persons may be invited by the Chairman of the Board to participate 

in an advisory role in the discussion on a particular point of the agenda. 

The Board is assisted by a Secretary appointed by the Board of Directors upon the recommendation 

of the Chairman. The Secretary of the Board attends the meetings of the Board of Directors and helps to 

prepare them and draft the minutes. He does not have a vote. 

The Board of Directors has a quorum only if a majority of its members are present or represented. 

Resolutions are passed by a simple majority of the validly cast votes. In the event of a tie, the Chairman 

shall cast the deciding vote. However, resolutions of the Board of Directors concerning the issuance, within 

the limits of the authorised capital, of shares or other instruments that give or may confer a right to shares, 

require a two-thirds majority of the members present or represented. 

Press releases regarding the unconsolidated and the consolidated financial statements of Arcelor or 

major decisions of the Group are submitted to the Board of Directors for approval, with a report from the 

Audit Committee. 

The Board of Directors has set up an Audit Committee and an Appointments and Remuneration 

Committee. 

6.1.4 The Audit Committee and the Appointments and Remuneration Committee 

The Board of Directors has set up two committees pursuant to corporate governance principles. 

6.1.4.1 Audit Committee 

The Audit Committee’s mission is to assist the Board of Directors in its duties to monitor the 

Company and the Group. It also examines both the unconsolidated and consolidated annual, half-yearly 

and quarterly financial statements, and reviews the accounting principles as well as the valuation rules used 

by the Company for preparing the aforementioned statements. 

The Audit Committee is chaired by Mr. José Ramón Álvarez Rendueles. Messrs. Hedwig De Koker, 

Jean-Yves Durance and Georges Schmit are members. 

The Audit Committee is convened by the Chairman at least twice a year. It may also meet every time 

that two of its members call for a meeting. The agenda for each meeting is established by the Chairman. 

A meeting has a quorum only if at least three members are present. 

The Audit Committee may involve the following persons in its activities and/or invite them to 

participate in meetings: 

• the Chairman of the Board of Directors; 

• the Chairman of the Management Board; 

• the Senior Executive Vice-President, Finance; 

• the head of accounting and the head of internal audit; 

84

• the external auditors; and 

• any person whose cooperation it deems useful. 

The Audit Committee controls the work processes of the Group internal audit and may request any 

document and any information that it deems useful or necessary for the performance of its mission. 

6.1.4.2 Appointments and Remuneration Committee 

The primary mission of the Appointments and Remuneration Committee is to recommend to the 

Board of Directors the remuneration policy for the members of the Management Board and the 

appointment of new directors and members of the Management Board. It is informed by the Chairman of 

the Management Board with regard to remuneration policies and remuneration packages for senior 

executives of the Group. 

The Chairman of the Appointments and Remuneration Committee is Mr. Joseph Kinsch. 

Messrs. José Ramón Álvarez Rendueles, Mr. Jean-Pierre Hansen and Mr. Edmond Pachura are members. 

The committee meets at least once a year. It may also meet whenever its Chairman calls for a meeting. 

A meeting has a quorum only if at least three members are present, including the Chairman. 

The committee may involve or invite to its meetings the Chairman of the Management Board or any 

other person whose cooperation it deems useful. 

6.2 MANAGEMENT BOARD 

6.2.1.1 Members 

The Chairman of the Management Board and the members of the Management Board are appointed 

by the Board of Directors on the recommendation of the Appointments and Remuneration Committee. 

The Management Board consists of the following individuals: 

Mr. Guy Dollé, Chief Executive Officer and Chairman of the Management Board; 

Mr. Jacques Chabanier, Senior Executive Vice-President—Purchasing, R&D, Information 

Technologies, e-Commerce, Nippon Steel Corporation Alliance; 

Mr. Jean-Yves Gilet, Senior Executive Vice-President—Stainless Steels; 

Mr. Gonzalo Urquijo, Deputy Senior Executive Vice-President—Distribution-Transformation-Trading; 

Mr. Roland Junck, Senior Executive Vice-President—Long Carbon Steels; 

Mr. Paul Matthys, Senior Executive Vice-President—Strategic Orientation and Planning, Mergers and 

Acquisitions, Synergies; 

Mr. Guillermo Ulacia Arnaiz, Senior Executive Vice-President—Flat Carbon Steels; and 

Mr. Michel Wurth, Senior Executive Vice-President—Finance, Management by Objectives. 

6.2.1.2 Authority 

The powers of the Management Board are defined by the Board of Directors. The Board of Directors 

has delegated the day-to-day management powers of Arcelor to the Management Board. The Management 

Board also has the powers to: 

• define and oversee the strategic objectives and general management plan of the Company and the 

Group, to be submitted to the Board of Directors for decision after consultation with the Chairman 

of the Board; 

• define the policies and resources aimed at implementing this strategy; all decisions other than those 

relating to day-to-day management must be submitted to the Board of Directors for approval; and 

• implement and control decisions with oversight of performance and results. 

85

6.2.1.3 Mission 

The Management Board is a collegial body which shares common values and embodies the Group’s 

identity and philosophy. 

Within the powers delegated by the Board of Directors, the Management Board: 

• is responsible for the performance of the Group and its operating sectors; 

• oversees the use made of the industrial, financial and commercial convergence and synergies within 

and between the operating sectors; 

• appoints top-level management for the principal companies of the Group; 

• handles relations with national and EU authorities and with national and international professional 

associations; 

• is responsible for the coordination of public relations and ensures compliance with the Group’s 

corporate identity; and 

• submits, for the consideration of the Board of Directors, the annual financial statements of the 

Company and a recommendation regarding the allocation of results, the consolidated financial 

statements of the Group, the consolidated budget forecasts and the reports to be submitted to the 

general meeting of shareholders. 

6.2.1.4 Ethics guidelines 

The members of the Management Board adhere to the highest standards in terms of business conduct 

and professionalism and assist each other in achieving these goals. 

6.3 OFFICERS’ AND DIRECTORS’ INTERESTS 

6.3.1 Directors’ remuneration 

The remuneration paid to the members of the Board of Directors for their duties shall be determined 

by the annual general meeting of the shareholders, and will be deducted from the net profit of Arcelor 

after allocation to the legal reserve fund (réserve légale) (see section 3.1.8 ‘‘Allocation of profits’’). This 

amount may be no less than EUR 1 million and no more than EUR 2 million. The general meeting of the 

shareholders can also allocate a fixed remuneration and attendance fees to the directors, which will be 

charged to expenses. 

The Board of Directors can decide to allot additional remuneration to the directors responsible for 

special duties or assignments. This remuneration is also charged to expenses. 

The total remuneration paid by the Company to its directors in respect of 2003 (including 

remuneration for the members of the board committees) amounted to EUR 1,665,000, of which 

EUR 1,200,000 represented remuneration and EUR 465,000 attendance fees. 

The Chairman of the Board participates in a share option plan set up by the Company and has been 

allocated 50,000 options in respect of 2003. For details on the share option plan, see section 3.2.3 

‘‘Instruments giving access to the capital of Arcelor’’ above. 

No share options have been granted to the other directors of the Company. 

6.3.2 Management Board 


The remuneration of the Chairman and the members of the Management Board of Arcelor is 

determined by the Board of Directors upon recommendation from the Appointments and Remuneration 

Committee. 

The remuneration of the Chairman and the members of the Management Board is made by a fixed 

annual remuneration, a bonus linked to performance and share options. 

All directors’ and attendance fees received by the Chairman and the members of the Management 

Board for their directorships within or on account of the Group have been repaid to the Company. 

86

6.3.2.2 Fixed annual remuneration 

The fixed annual remuneration is determined on a net basis after social security charges and 

standardised taxes in order to take into consideration the countries in which the members of the 

Management Board conduct their activities. 

6.3.2.3 Bonus 

The bonus of the Chairman and the members of the Management Board is determined according to 

the following guidelines: 

• the maximum amount of the bonus of a member of the Management Board before applying the 

applicable multiplier referred to below is 50% of the net annual remuneration of such member; 

• one half of such maximum bonus is linked to the return on capital employed and the free cashflow 

for the financial year; and 

• the other half of such maximum bonus is linked to the moving average of the same indicators over 

the previous three years. 

An individual multiplier is then applied in order to account for the degree to which each member of 

the Management Board has reached his individual targets. The applied multipliers range between 0.8 

and 1.2. 

6.3.2.4 Stock options 

The Chairman and the members of the Management Board benefit from a 5-year stock option plan 

approved by the general meeting of shareholders on 25th April, 2003 and enacted by the Board of 

Directors on 15th May, 2003 (see section 6.3.3 ‘‘Share options’’). 

The number of options granted each year and the beneficiaries are decided by the Board of Directors. 

The first allocation took place in 2003. 

6.3.2.5 2003 Remuneration 

The remuneration received by the Management Board in 2003 was as follows: 

Gross annual Gross annual 

remuneration bonus (1) Stock options 2003 

(EUR) 

Guy Dollé ................................... 592,500 190,000 50,000 

Other members (1)(2) ............................. 2,955,000 524,000 280,000 

Total ....................................... 3,547,500 714,000 330,000 

(1) This is the part of the 2003 bonus linked to the return on capital employed and the free cashflow of the 2003 financial year. The 

other part of the bonus for 2003 linked to the moving average of these indicators will be paid in 2005 and will be based on the 

average of 2002, 2003 and 2004. Given the recent creation of Arcelor, this formula was chosen for the bonus due for 2003 and 

2004. 

(2) Messrs. J. Chabanier, J.Y. Gilet, R. Hudry, R. Junck, P. Matthys, G. Ulacia and M. Wurth. Mr. Hudry left the Group on 30th 

April, 2004. 

6.3.3 Share options 

The general shareholders’ meeting of Arcelor held on 25th April, 2003 authorised the Board of 

Directors of Arcelor to grant, in one or more instances, to the benefit of the employees and/or members of 

governing or supervisory corporate bodies of Arcelor or of those companies of which it is the parent, 

pursuant to article 309(1) of the Luxembourg law on commercial companies, options giving the right, at 

the discretion of Arcelor, either (i) to the subscription of new Shares in Arcelor to be issued within the 

authorised capital provided for in articles 5.2. and 5.5. of the articles of association or (ii) to the purchase 

of existing Shares. The duration of such options will be so determined that they cannot be exercised after 

the end of the seventh year following their grant. 

The total number of options which can be granted cannot give the right to subscribe for or acquire a 

number of Shares in excess of 2% (two per cent.) of the number of Shares in issue on 25th April, 2003 (i.e., 

87

a maximum of 10,654,591 Shares). The acquisition or subscription price of the Shares will be determined 

by the Board of Directors at the time such options are allocated and cannot be less than the average of the 

stock exchange price of the Shares during a reference period preceding the decision of allocation and 

determined in compliance with applicable regulations. 

Information on the Group’s share option plan is set out in section 3.2.3 ‘‘Instruments giving access to 

the capital of Arcelor’’. 

6.3.4 Directors’ interests in Arcelor 

The directors and the members of the Management Board of Arcelor hold a total of 22,202,138 (1) 

Shares in Arcelor. 

As at 31 May 2004, 380,000 share options have been granted to members of the Board of Directors 

and of the Management Board of Arcelor. 

6.3.5 Transactions entered into with the directors and executives 

None of the directors or members of the Management Board of Arcelor has been involved in any 

transaction carried out by Arcelor outside of the ordinary course of its business during the current and the 

previous financial years. 

6.3.6 Loans and guarantees granted in favour of directors and executives 

None of the directors of Arcelor and no member of the general management of Arcelor have been 

granted a loan from Arcelor and Arcelor has not granted any guarantee in their favour. 

6.4 EMPLOYEE PROFIT-SHARING SCHEME 

At present there is no employee profit-sharing scheme. Arcelor does, however, envisage implementing 

an employee profit-sharing scheme over the next few years. 

Aceralia and Arbed do not have any employee profit-sharing or share ownership scheme. 

With respect to Usinor, the general meeting of shareholders held on 30th May, 2000 authorised the 

Board of Directors to increase the share capital by the issue of new Usinor shares reserved exclusively for 

the employees of the Usinor group, either through direct share ownership or through a mutual fund (fonds 

commun de placement) or through another structure or entity (e.g., through a company savings scheme 

(plan d’épargne d’entreprise)). Pursuant to this authorisation, which is valid for a period of five years, 

7,296,616 new Usinor shares of EUR 9.77 each, i.e., a total subscription value of EUR 71,287,938.32, have 

been issued. It is not intended to use this authorisation for future share issues in Usinor. The scheme to 

which this authorisation relates will be reviewed as part of the Arcelor Group’s strategy. 

In addition, Usinor has issued Usinor stock options for certain members of its management. 

(1) This figure contains the participation of Corporación JMAC B.V., member of the Board of Directors of Arcelor (See section 3.3 

‘‘Significant Shareholdings in Arcelor’’). 

88

CHAPTER 7 

TRANSACTION AND OTHER RECENT DEVELOPMENTS 

7.1 TRANSACTION IN BRAZIL 

7.1.1 Arcelor’s Strategy in Brazil 

Arcelor’s interests in Brazil represent a core part of its strategy to remain globally competitive and to 

deploy its capital where it can produce high-quality products, manage costs efficiently, continue to serve its 

chosen global sector customers with value creation and create value for shareholders. 

Arcelor currently has direct and indirect interests in three listed entities in Brazil: 

• 27.7% interest in Acesita S.A (‘‘Acesita’’) (represented by the ownership of 38.9% of the ordinary 

voting shares and 22.0% of the preferred non-voting shares); 

• 28.0% interest in Companhia Siderurgica de Tubarão S.A. (‘‘CST’’) (represented, directly and 

indirectly, excluding indirect interest through Acesita by the ownership of 24.9% of the ordinary 

voting shares and 30.0% of the preferred non-voting shares); and 

• 54.0% interest in Belgo Mineira S.A. (‘‘Belgo Mineira’’) (represented by 60.6% of the ordinary 

voting shares and 46.0% of the preferred non-voting shares). 

Arcelor also has a 75% interest in an unlisted entity, Vega do Sul S.A. (‘‘Vega do Sul’’), represented by 

75% of the shares of the company which are all ordinary voting shares, the remaining shares being owned 

by CST. 

Acesita is a stainless steel producer with dominant domestic Brazilian market positions. Belgo Mineira 

is a wire rod and carbon steel long products manufacturer with strong domestic Brazilian and Latin 

American market positions and a competitive export position in wire rod. CST is one of the world’s largest 

and lowest cost slab producers, focusing on the international export market, which has recently moved into 

producing Hot Rolled Coil. All operations are highly cost competitive compared to both domestic and 

international competitors. Vega do Sul is a recently commissioned cold rolled coil and galvanising plant 

focused on serving the Brazilian automotive industry. 

Arcelor has a long established presence in, and commitment to, Brazil. Arcelor (through one of its 

predecessor companies, Arbed) first invested in Belgo Mineira in 1920, whilst its investments in Acesita 

and CST (through another of Arcelor’s predecessor companies, Usinor) first occurred in 1998. Through 

voting control individually in the case of Belgo Mineira and Vega and shared in the case of CST and 

Acesita, board and other management participations, Arcelor plays a significant role in determining the 

strategic, operating and financial policies of all the above companies. 

In accordance with IFRS, Arcelor fully consolidates Belgo Mineira and Vega dol Sul, and equity 

accounts for Acesita and CST. 

7.1.2 The Transaction 

7.1.2.1 Acquisition of CST shares 

Arcelor and CVRD have entered into certain agreements pursuant to which: 

• Arcelor has agreed to purchase from CVRD, directly and indirectly, 869,045,672 common shares 

which are not subject to the CST Shareholders’ Agreement, representing 4.42% of the voting 

capital, and 9,381,163,397 preferred shares of CST, representing 29.96% of the non-voting capital, 

and other rights relating to the acquisition of common shares of CST which are the object of the call 

option granted by Acesita to CVRD referred to below, pursuant to the terms and conditions of the 

asset purchase agreement (the ‘‘Purchase Agreement’’). The transfer of such assets is expected to 

occur on 15 September, 2004. This transaction is subject to conditions precedent consistent with a 

transaction of this nature, including inter alia approval by relevant anti-trust authorities; 

• Arcelor and CVRD have agreed to anticipate the call option of Arcelor and put option of CVRD, 

granted in March 2003, relating to the purchase and sale of 4,034,524,170 common shares of CST 

held by CVRD and which are subject to the CST Shareholders’ Agreement, representing 20.51% of 

the voting capital (‘‘CVRD-CST Put and Call Agreement’’), and which may be exercised upon the 

satisfaction of a number of conditions precedent consistent with transactions of its nature; and 

89

• CVRD has agreed to transfer to Arcelor its rights and obligations under certain agreements entered 

into between Acesita, CVRD and Arcelor, pursuant to which Acesita agreed to transfer, upon the 

satisfaction of certain conditions precedent, to CVRD, 1,460,138,708 common shares that Acesita 

holds indirectly in CST, representing 7.42% of the voting capital, and which are subject to the CST 

Shareholders’ Agreement (the ‘‘Acesita-CST Put and Call Agreement’’, and together with the 

CVRD-CST Put and Call Agreement, the ‘‘Put and Call Agreements’’). 

The Put and Call Agreements are subject to the satisfaction of conditions precedent consistent with 

transactions of that nature. The options are exercisable upon the earlier of (i) the termination of the CST 

Shareholders’ Agreement, (ii) the acquisition by Arcelor of all the ordinary shares subject to the CST 

Shareholders’ Agreement (other than those held by Acesita and CVRD) or (iii) the granting of waivers, in 

a form satisfactory to Arcelor, in respect of certain pre-emptive rights of all parties to the CST 

Shareholders’ Agreement. 

On 21 May, 2004, in accordance with a provision of the CST Shareholders’ Agreement, Aços Planos 

do Sul S.A., a subsidiary of Acesita, notified all other parties to the CST Shareholders’ Agreement that it 

does not wish to renew the existing CST Shareholders’ Agreement upon the expiration thereof on 25 May, 

2005. Such notification could have been delivered, up to 25 May 2004, by any of the parties to the CST 

Shareholders’ Agreement. Accordingly, the current CST Shareholders’ Agreement will terminate on 

25 May 2005. 

Arcelor shall pay CVRD US$415,133,467.29, in cash, for the total number of shares of CST and the 

rights to be purchased under the Purchase Agreement. 

Arcelor shall pay CVRD US$163,398,228.89, in cash, for the total number of shares of CST to be 

purchased pursuant to the exercise of its call option under the CVRD-CST Put and Call Agreement plus 

interest thereon at the rate of LIBOR plus 1.50% per annum less dividends paid on such shares until the 

exercise of such option. 

On the date hereof, Arcelor holds, directly and indirectly, 4,903,569,842 CST common shares, 

representing 24.93% of the voting capital, and 9,381,163,397 CST preferred shares, representing 29.96% of 

the non-voting capital. The current shareholding of Arcelor is equal to 14,284,733,239 shares, representing 

28.02% CST’s total share capital. 

Following the acquisition of CST common shares indirectly held by Acesita, pursuant to a call option 

agreement granted by Acesita to Arcelor (through one of its predecessor companies, Usinor) in March, 

2003, as announced at that time to the market, and after the implementation of the Transaction, Arcelor 

shall hold directly or indirectly, 12,727,417,100 CST common shares, representing 64.72% of the voting 

capital, and 18,762,326,794 CST preferred shares, representing 59.92% of the non-voting capital, making a 

total of 31,489,743,894 shares, which represents 61.77% of the share capital of CST. Following these 

transactions, Arcelor shall become the sole controlling shareholder of CST. 

If Arcelor decides it is appropriate to do so and subject to reaching an agreement with certain other 

controlling shareholder(s) of CST, similar agreement(s) may be entered into between Arcelor and certain 

other controlling shareholder(s) of CST possibly resulting in the acquisition of other ordinary voting shares 

of CST. 

7.1.2.2 Acesita 

On March 2003, Arcelor and certain other controlling shareholders of Acesita have entered into 

certain put-call agreements (the ‘‘Acesita Shares Put-Call Agreements’’) which gives Arcelor the right to 

buy, and certain other controlling shareholders’ of Acesita the right to sell 24.67% of the ordinary voting 

shares of Acesita and are exercisable after the acquisition of Acesita’s 50.10% interest in APS (which is the 

legal owner of 29.64% of the ordinary voting shares of CST), but not later than 31st December 2005. The 

exercise price of the shares under the Acesita Shares Put-Call Agreements is to be determined by the midpoint 

of two independent valuations conducted on behalf of each of Arcelor and the other parties to the 

Acesita Put-Call Agreements, and is to be settled in cash. 

The exercise of the Acesita Shares Put-Call Agreements would result in Arcelor holding 63.61% of 

the ordinary voting shares of Acesita and, in accordance with IFRS and subject to the termination of the 

Acesita shareholders’ agreement on 31st December 2005, in Arcelor fully controlling and consolidating 

Acesita. 

90

If Arcelor decides it is appropriate to do so and subject to reaching an agreement with the other 

parties to the Acesita Put-Call Agreements, such Acesita Put-Call Agreements may be accelerated. Arcelor 

may also consider the acquisition of other Acesita shares from the same and / or other controlling 

shareholder(s) of Acesita. 

Based on the current stock market value, the value of the Acesita ordinary shares held by the 

controlling shareholders of Acesita (other than Arcelor through its Brazilian subsidiary Usipar) is 

approximately US$71 million. 

7.1.3 Rationale for the Transaction and Equity Issue 

Arcelor expects that the transaction in Brazil and the Offering will provide it with the following 

benefits: 

• earnings, EBITDA margin and ROCE accretive; 

• reinforce its position as the world leader in steel making; 

• enhanced overall scale by adding 5mtpa crude making steel capacity. Pro forma capacity lifted from 

43mtpa to 48mtpa with future growth potential due to already decided investment (see below); 

• increased ownership of high-quality, low-cost production assets; 

• reconfirm Arcelor’s position in and commitment to Brazil, one of the world’s most attractive 

regions in which to produce steel with additional synergies among the Group Brazilian entities; 

• provide an expansion in Arcelor’s sustainable, high-quality, cost-competitive production platform 

with low-risk, near-term growth; 

• CST is an asset with an established operating track record and product, and high-quality 

management—and is one of the world’s largest and lowest, cost producers of slab; 

• in addition, there is a well defined 2.5mtpa brownfield expansion plan due to be commissioned by 

2006; 

• CST has successfully commissioned a brand new hot strip mill of 2.0mt capacity, with, in the future, 

a capacity increase potential with marginal capex; 

• as an existing shareholder, Arcelor is intimately familiar with both the existing facility and proposed 

expansion; 

• result in a significant increase in pro forma consolidated EBITDA (increase of 25.1%, to 

EUR 2.8 billion pro forma 2003, and increase of 25.4%, to EUR 873 million pro forma first quarter 

2004); and 

• the transaction combined with the Offering results in Group net debt/equity ratio decreasing to 

48.4% pro forma 31 December 2003 (compared to 54.8% for the same period), and decreasing to 

41.5% pro forma 31 March 2004 (compared to 46.4% for the same period)). This provides the 

Group with the financial flexibility to pursue other value creative investment opportunities which 

are consistent with its strategy should they be identified. 

7.1.4 Arcelor’s existing presence in Brazil 

Arcelor currently has significant shareholdings in three listed steel producers in Brazil, being Acesita, 

Belgo Mineira and CST. In addition, Arcelor holds a majority shareholding in the Vega do Sul galvanising 

project. 

7.1.4.1 Acesita 

Acesita is the only integrated producer of flat and long stainless and silicon steel producer in Latin 

America with market share of over 90% in Brazil. The company is headquartered in Belo Horizonte with 

its main steel making facility located in Timóteo, Minas Gerais. In 2003, the company produced 850kt of 

stainless steel. 

Acesita is a totally integrated, low-cost stainless steel producer with operations spanning the value 

chain from pig iron production, produced at its two blast furnaces, through to an increasing focus on high 

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value-added products. The company also benefits from an established distribution and logistics network to 

serve its markets. 

Acesita enjoys significant brand recognition in both the export (representing over 50.0% of sales 

volume in 2003) and domestic markets. The company primarily serves the automotive, consumer durables, 

construction and automotive sectors. 

Acesita is a publicly listed company in Brazil with a current market capitalisation of approximately 

US$578 million. In 2003, and in accordance with Brazilian GAAP, the company reported sales and 

EBITDA of approximately US$741 million and US$162 million (EBITDA margin 21.8%), respectively. 

7.1.4.2 Belgo Mineira 

Belgo Mineira is an integrated long carbon steel and wire rod producer. The company is Brazil’s 

largest wire rod producer and Brazil’s second largest long products producer. Belgo Mineira has annual 

production of approximately 4.8mt of carbon steel. 

Belgo Mineira covers 70% of its iron ore requirements through ownership and operation of the 

Andrade Mine, which is adjacent to Belgo Mineira’s Monlevade steel works. Belgo Mineira is considering 

the completion of an agreement relating to this asset with the aim of creating value for Belgo Mineira 

given the low utilisation of the Adrade Mine compared to its potential. 

Belgo Mineira produces steel at six main sites in Brazil: the Monlevade, Juiz de Fora and Itauna mills 

and the Sabara plant in Minas Gerais, Piracicaba (Sao Paulo) and Vitoria (Espirito Santo). Belgo Mineira 

enjoys strong brand recognition in the construction sector which represents the main market for its 

products. 

Belgo Mineira is a publicly listed company in Brazil with a current market capitalisation of 

US$1.4 billion. In 2003, and in accordance with IFRS, the company reported sales and EBITDA of 

approximately US$1,079m and US$333m (EBITDA margin 31%), respectively. 

Arcelor currently holds 60.6% of the ordinary voting shares and 46.0% of the preferred non voting 

shares in Belgo Mineira. Belgo Mineira is a subsidiary of Arcelor. 

7.1.4.2.1 Increase in participation in Acindar 

On 7th May, 2004, Arcelor’s subsidiary, Belgo-Mineira Uruguay S.A. (‘‘BMU’’), converted into shares 

its negotiable convertible bond issued in May 2001 by Acindar Industria Argentina de Aceros S.A. 

(‘‘Acindar’’), Argentina’s largest long carbon steel manufacturer, and (ii) exercised its purchase option on 

all ordinary class A and B shares belonging to the Acevedo Group. 

The shares subject to the option and those issued by the conversion of the negotiable convertible bond 

will be transferred to another subsidiary of Arcelor, BMP SIDERURGIA S.A (‘‘BMPS’’). BMPS will 

therefore hold 326,097,815 ordinary Class A and B shares of Acindar, representing nearly 66% of the share 

capital of the company, including the shares already held, thereby consolidating Acindar into the Belgo 

group. 

The additional price due at the exercise of the option is US$14,500,000, payable in three annual equal 

and successive payments, the first being due in 2009 with interest accruing from the end of 2005 based on 

LIBOR. 

7.1.4.3 CST 

CST is a world leader in the carbon steel custom slab market with an approximately 20% global 

market share. CST is one of the world’s lowest cost producers of carbon steel. In 2003, the company 

produced 4.8mt of finished slab (capacity 5.0mtpa) and has installed capacity to produce up to 2.0 mt of 

hot rolled coil. CST is planning to commission a third blast furnace by 2006 which will result total slab 

capacity being lifted to approximately 7.5mtpa. The capital cost for this expansion is estimated to be 

approximately US$658 million. 

CST is located in the Grande Vitória region of Espírito Santo state in South Eastern Brazil with its 

main facility being located in Serra. CST is located adjacent to the Praia Mole port and is also well served 

by an extensive rail and road network. 

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CST’s location greatly facilitates the company’s export capabilities. CST exports approximately 90% of 

its production to a variety of customers in order to serve end markets including the automobile, appliances, 

shipbuilding, oil pipeline, civil engineering and construction sectors. 

CST is a publicly listed company in Brazil with a current market capitalisation of US$1.4 billion. In 

2003 in accordance with IFRS, the company reported sales and EBITDA of approximately 

US$1,284 million and US$448 million (EBITDA margin 35%), respectively. 

7.1.4.4 Vega do Sul 

Located in São Francisco do Sul in the State of Santa Catarina (south of Brazil), Vega do Sul is a steel 

galvanising plant serving the Brazilian automotive industry. The plant commenced operations on 27th July, 

2003 following a total investment of US$456 million, and was officially inaugurated on 27th April, 2004. 

The company is jointly owned by Arcelor (75.0%) and CST (25.0%). Total production for 2004 is estimated 

at 420kt moving up to its current installed capacity of 880ktpa by 2005. Capacity may be further increased 

up to a potential 1.2mtpa in the near future. 

7.1.5 Acquisition Pro Forma Information 

Appendix III sets forth certain information relating to the assets, the financial statements and the 

results of Arcelor, CST and Acesita. 

7.2 OTHER RECENT DEVELOPMENTS 

7.2.1 IMS-International Métal Services 

On 1st June, 2004, the investment fund Chequers Capital made an offer to the Arcelor Group, subject 

to a certain number of conditions (notably obtaining of the authorisation of the relevant anti-trust 

authorities), with a view to acquiring 36% of the share capital held by the Arcelor Group, through Produits 

d’Usines Métallurgiques (‘‘PUM’’), of IMS-International Métal Services (‘‘IMS’’) for a price of EUR 5 per 

share. 

Under this offer, Chequers Capital also proposed to the Arcelor Group to take a minority stake, for a 

total amount of EUR 9 million, in the share capital of the acquisition vehicle to be set up and controlled by 

Chequers Capital. Furthermore, Chequers Capital has offered Arcelor to subscribe to bonds with share 

warrants attached to be issued by the acquisition vehicle for a total amount of EUR 9 million. 

On the basis of the terms set out in the offer, the Arcelor Group started exclusive negotiations with 

Chequers Capital with a view to reaching an agreement which could only be entered into after the 

implementation of the applicable notice procedures to the corporate bodies and the representatives of the 

personnel of the Arcelor Group. 

7.2.2 Disposal of J&L Specialty Steel 

On 2nd June, 2004, Arcelor announced the completion of the sale of substantially all of the assets of 

its wholly-owned subsidiary J&L Specialty Steel, LLC to a division of ATI and Allegheny Ludlum 

Corporation on 1st June, 2004 in accordance with the terms of an agreement signed between the 

companies on 17th February, 2004. 

7.2.3 Disposal of Tubes business 

On 3rd June, 2004, Arcelor and Bagoeta, SL, majority shareholder of Conducciones y Derivas, S.A. 

(‘‘Condesa’’), completed the sale relating to the Tubes business of the Arcelor Group. The companies have 

obtained the approval of the relevant anti-trust authorities. 

Arcelor sold to Bagoeta, SL 100% of the share capital of Arcelor Tubes, S.A., Alessio Tubi, SpA, 

Exma, S.A. and Aceralia Tubos, SL, as well as 5% of the share capital of Industube (the remaining 5% of 

the share capital of Industube has been sold to the other partners of the company) and 30% of the share 

capital of Condesa. The total price of the deal amounts to EUR 58.7 million. With regard to the remaining 

18.84% stake of Condesa owned by the Arcelor Group, the parties have mutually granted put and call 

options. 

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7.2.4 Sale of IEE 

In June, 2004, an exclusivity agreement has been signed with an investor for the sale of IEE, a 

company specialising in electronic sensor devices. 

7.2.5 Sale of Aciérie de l’Atlantique 

On 22nd June, 2004, Arcelor sold its wholly-owned subsidiary Aciérie de l’Atlantique, SAS (‘‘ADA’’) 

to Siderúrgica Añón S.A. for EUR 77 million. ADA is a French company based in Bayonne (France) 

equiped with an electric arc furnace and a continuous casting facility. The entity (223 employees) shipped 

over 770,000 tonnes of steel in 2003 for a turnover of EUR 185 million. 

7.2.6 Luxembourg long products’ units 

On 25th June, 2004, the Board of Directors approved a EUR 122 million investment over the 

2004-2006 period in the Luxembourg long products’ units as part of the plan to improve the performance 

at the Luxembourg sites. In this context, the cold rolling mill of the Laminoir de Dudelange will be 

progressively phased out by the end of 2005. 

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CHAPTER 8 TAXATION 

The information set out below is a summary only of Luxembourg, French, Belgian, Spanish, Dutch 

and US tax laws in effect on the date hereof and which may change from time to time. Because this 

summary does not address all tax considerations under Luxembourg, French, Belgian, Spanish, Dutch and 

US or other laws, prospective investors should consult their professional advisers as to the tax 

consequences of the allocation, purchase, ownership, sale or exercise of Warrants and the subscription, 

purchase, ownership and sale of Shares, including, in particular, the effect of tax laws of other jurisdictions. 

8.1 LUXEMBOURG TAXATION 

8.1.1 Holders of Warrants 

The description set out below describes the Luxembourg tax consequences applicable to Luxembourg 

residents and non-residents as a result of the allocation to them of Warrants and the sale or exercise of the 

Warrants. 

Investors should note that this description does not address all possible tax issues which may be of 

relevance to them. The description, in particular, does not cover the Luxembourg tax consequences which will be 

applicable to individual investors holding alone or together with certain other persons a shareholding in Arcelor 

of more than 10%, nor the tax consequences applicable to Luxembourg permanent establishments of foreign 

investors to which the Warrants would be connected. 

Under Luxembourg tax laws currently in effect, the issue and allocation of the Warrants to 

shareholders does not constitute taxable income for resident and non-resident shareholders. However, the 

sales price of Warrants sold may constitute taxable income for shareholders resident in Luxembourg, if 

they hold Arcelor Shares as a business asset. 

The profit on the sale of Warrants made by any resident natural person or capital company who has 

purchased such Warrants on the market will be taxable in Luxembourg. 

The profit made by any non-resident person on the sale of Warrants allocated to or purchased by such 

person on the market will not be taxable in Luxembourg. 

The exercise of Warrants by any resident or non-resident holder and the resulting subscription of New 

Shares will not give rise to taxation in Luxembourg, irrespective of whether their holder purchased such 

Warrants on the market or was allotted such Warrants upon their issue. 

No registration tax or similar duty will be due by a holder of Warrants in connection with the issue, 

acquisition, disposal or exercise of his Warrants or the issue of the New Shares. 

8.1.2 Holders of Shares 

The description set out below describes the Luxembourg tax consequences for residents and non-residents 

of Luxembourg holding Shares. 

Investors should note that this description does not address all possible tax issues which may be of 

relevance for investors intending to hold Shares. The description, in particular, does not cover the Luxembourg 

tax consequences which will be applicable to individual investors holding alone or together with certain other 

persons a shareholding in Arcelor of more than 10%, nor the tax consequences applicable to Luxembourg 

permanent establishments of foreign investors to which the Arcelor Shares would be connected. 

8.1.2.1 Tax regime applicable to capital gains realised upon the disposal of Arcelor Shares 

8.1.2.1.1 Residents 

8.1.2.1.1.1 Individual investors 

The capital gains realised by an individual person upon the disposal of Arcelor Shares will not be 

subject to taxation unless the disposal of the Shares precedes the acquisition thereof or occurs within the 

six months which follow their acquisition or where the Shares are part of such investor’s net business 

assets. 

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8.1.2.1.1.2 Corporates (sociétés de capitaux) 

Capital gains realised upon the disposal of Arcelor Shares by a resident capital company which is 

subject to corporate income tax will in principle be fully taxable. However, the capital gains realised by 

resident capital companies subject to corporate income tax will be exempted in case of a participation held 

directly, or indirectly through a transparent vehicle, representing at least 10% of the share capital of 

Arcelor or the acquisition price of which was at an amount of at least EUR 6 million, provided that at the 

time of disposal of the securities, the seller has held or commits to hold the participation during an 

uninterrupted period of at least twelve months and provided that during that period the percentage or the 

value of the non-disposed of participation represents not less than 10% of the share capital of Arcelor or 

an acquisition price of EUR 6 million. The scope of the capital gains exemption can be limited in the cases 

provided by the grand-ducal regulation of 21st December, 2001 executing article 166, paragraph 9 L.I.R. 

8.1.2.1.2 Non-residents 

A non-resident natural person or capital company which does not have a permanent establishment in 

Luxembourg to which the Arcelor Shares are connected will not be subject to Luxembourg tax on capital 

gains realised upon the disposal of those Shares. 

8.1.2.2 Dividends 

8.1.2.2.1 Withholding tax 

Under Luxembourg law currently in force, dividends paid by Arcelor are subject to a withholding tax 

of 20% of the gross dividend. The rate of the withholding tax can be reduced, even to 0%, pursuant to the 

double tax avoidance treaty existing between Luxembourg and the country of residence of the relevant 

shareholder. Insofar as the double tax avoidance treaties entered into with Belgium and Spain are 

concerned, reference is made to sections 8.3 and 8.4 below. 

No withholding tax applies if the dividends are paid to a company which is resident of a Member State 

of the European Union and is referred to by article 2 of the Council Directive of 23rd July, 1990 

concerning the common fiscal regime applicable to parent and subsidiary companies of different member 

states (90/435/EEC) provided that at the date of payment, the beneficiary holds or commits to hold directly 

or through a tax transparent vehicle, during an uninterrupted period of twelve months at least, a minimum 

participation of 10% in the capital of Arcelor or a participation the acquisition price of which is at least 

EUR 1,200,000. 

8.1.2.2.2 Residents 

With the exception of resident capital companies which fall under the substantial participation regime 

described in the foregoing paragraph, Luxembourg resident individual persons and capital companies 

subject to corporate income tax must include the dividends paid on their Arcelor Shares in their taxable 

income, 50% of the amount of such dividends being exempted from tax. 

8.1.2.3 Net assets tax 

Luxembourg resident individual persons and capital companies subject to corporate income tax must 

include the Arcelor Shares held on the 1st January of each year in their net assets for the purposes of net 

assets tax. Resident capital companies which fall under the substantial participation regime are, subject to 

certain conditions, exempted from net assets tax on such participation. 

8.1.2.4 Holding companies subject to the law of 31st July, 1929 and undertakings for collective investment 

Dividends paid to holding companies subject to the law of 31st July, 1929 (‘‘1929 holding companies’’) 

and to undertakings for collective investment are subject to withholding tax at a rate of 20% on the gross 

dividend. Capital gains realised by 1929 holding companies and Luxembourg undertakings for collective 

investment upon the disposal of Arcelor Shares, as well as the net amount of the dividend after operation 

of the withholding tax are not subject to any Luxembourg tax. 

The New Shares qualify for investment by Luxembourg undertakings for collective investment 

pursuant to article 129c L.I.R. (loi Rau funds). 

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8.1.2.5 Registration taxes 

No registration tax or similar tax will be payable by a shareholder upon the disposal of Shares by sale 

or exchange. 

8.2 FRENCH TAXATION 

In accordance with French legislation, the following sections outline the main provisions of the tax 

regime likely to apply to individuals or legal entities holding Company Shares and Warrants and who are 

domiciled or resident in France for tax purposes. 

French Finance Law for 2004 has significantly reformed the French taxation of dividends from French 

and certain non-French corporations, such as the Company, for dividends paid as at 1st January, 2005. 

Certain details as to this reform remain to be clarified by the French tax authorities. Therefore, the 

information below reflects the reform as currently described by the French tax authorities and investors are 

urged to consult with their tax counsels as to the subsequent specifications to be provided by the French tax 

authorities. 

Investors are urged to consult with their usual tax advisers in order to verify the tax system that applies 

to their specific case. 

In particular, it not clear at this stage whether the rebates and tax credits apply to the gross or the net 

dividends, neither how the Luxembourg withholding tax is credited against French tax on such dividends. 

Also, please note that distributions from Arcelor will not carry any avoir fiscal credit. 

8.2.1 Individuals holding shares as part of their private assets 


Gross dividends distributed by Arcelor will be subject to French income tax on a progressive scale and 

the Luxembourg withholding tax (which under the double tax avoidance treaty between Luxembourg and 

France can, subject to certain conditions and filing requirements, be reduced to 15% of the gross dividend 

paid) should be creditable against the French tax on the dividends. However, as at 1st January, 2005, only 

50% of the amount of dividends distributed by Arcelor will be subject to income tax. 

An annual rebate of EUR 2,440 for married couples subject to joint tax, as well as for partners subject 

to joint tax as of the taxation of income for the third year after the conclusion of a formal civil partnership 

agreement, as defined in Article 515-1 of the French Civil Code, and of EUR 1,220 for people who are 

single, widowed, divorced or married and taxed separately will apply to distributions from Arcelor in 2004 

and 2005. 

Furthermore, dividends distributed as at 1st January, 2005 will be entitled to a tax credit equal to 50% 

of the amount of dividends received before rebates, capped at EUR 115 per year for taxpayers who are 

single, divorced, widowed or married and taxed separately, and EUR 230 for married taxpayers who are 

taxed jointly, as well as for partners subject to joint tax as at the taxation of income for the third year after 

the conclusion of a formal civil partnership agreement, as defined in Article 515-1 of the French Civil 

Code. Any excess tax credit over the income tax can be refunded. 

Dividends distributed by Arcelor will also be subject to: 

• 7.5% generalised social levy (Contribution Sociale Généralisée or CSG), of which 5.1% is deductible 

from the income tax base for the following year; 

• 2% social security contribution, non-deductible from the income tax base; and 

• 0.5% tax to finance social security repayments (Contribution au Remboursement de la Dette Sociale 

or CRDS), non-deductible from the income tax base. 

8.2.1.2 Capital gains (Article 150-0 A of the French General Tax Code) 

Pursuant to Article 150-0 A of the French General Tax Code, capital gains realised by individuals on 

the sale or disposal of their Shares or Warrants will be subject to tax as of the first euro at the proportional 

income tax rate of 16% if the total amount of disposals of transferable securities and other rights or 

securities stipulated in Article 150-0 A of the General Tax Code (excluding exempt disposals of securities 

97

held in connection with a share savings scheme) carried out over the calendar year exceeds a threshold 

currently set at EUR 15,000 per household for tax purposes. 

Under the same condition relative to the annual amount of disposals of transferable securities, capital 

gains are also subject to: 

• 7.5% generalised social levy (Contribution Sociale Généralisée or CSG); 

• 2% social security contribution; and 

• 0.5% tax to finance social security repayments (Contribution au Remboursement de la Dette Sociale 

or CRDS). 

Any capital losses may be deducted from capital gains of the same type generated in the year in which 

the disposal takes place or the following ten years, provided that the aforementioned disposal threshold 

has been passed in the year in which the capital losses are generated. 

8.2.1.3 Wealth tax 

Shares and Warrants held by individuals in connection with their private assets will be included in the 

base for their taxable assets, where relevant, for wealth tax. 

8.2.2 Corporate shareholders subject to corporate income tax 


8.2.2.1.1 Legal entities without parent company status in France 

French corporations that own less than 5% of the Company’s capital will not benefit from the parent 

company status for the application of the regime provided for in Articles 145 and 216 of the French 

General Tax Code. 

Gross dividends received by these companies are generally taxed at the standard corporate income tax 

rate, which is currently equal to 33 1 ⁄3%, and are also subject to the additional contribution of 3% 

(Article 235 ter ZA of the French General Tax Code) and, where relevant, the social security contribution 

of 3.3% (Article 235 ter ZC of the French General Tax Code), which is applied to the amount of corporate 

income tax exceeding EUR 763,000 per twelve-month period but benefit from a tax credit corresponding 

to the withholding tax levied in Luxembourg (which under the double tax avoidance treaty between 

Luxembourg and France can, subject to certain conditions and filing requirements, be of a maximum of 

15% of the gross dividend paid). 

In accordance with the conditions set forth in Articles 219-I-b and 235 ter ZC of the French General 

Tax Code, certain legal entities may be entitled to a reduction in their corporate income tax rate to 15% 

and an exemption from the 3.3% social security contribution. 

8.2.2.1.2 Companies with parent company status in France 

Pursuant to the provisions of Articles 145 and 216 of the French General Tax Code, corporations 

owning at least 5% of the Company’s capital may, under certain conditions and subject to timely election, 

be entitled to benefit from the regime for parent companies and subsidiaries, by virtue of which dividends 

received by the parent company are not subject to corporate income tax, with the exception of a 

percentage of these dividends that is representative of the costs and expenses borne by this company. This 

percentage is equal to 5% of the amount of the said dividends but may not exceed the total costs and 

expenses of any kind booked by the parent company for each tax period during the financial year in 

question. 

8.2.2.2 Capital Gains 

Capital gains generated in connection with the sale or disposal of Company Shares and Warrants will 

generally be taxed at the ordinary corporate income tax rate, currently of 33 1 ⁄3%, and will also be subject to 

the additional contribution of 3% (Article 235 ter ZA of the French General Tax Code) and, where 

relevant, the social security contribution of 3.3% on earnings, which is applied to the amount of corporate 

income tax exceeding EUR 763,000 per twelve-month period (Article 235 ter ZC of the French General 

Tax Code). 

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Nevertheless, pursuant to the provisions of Article 219-I-a ter of the French General Tax Code, net 

gains generated on the sale or disposal of shares held for more than two years that are classified as equity 

interests in the accounts of the holder of Shares, or are equivalent to equity interests for tax purposes, are 

eligible for the long-term capital gains tax rate currently set at 19% (or, as the case may be 15% up to 

EUR 38,120 per 12-month period, for companies fulfilling the conditions set forth above), plus the 

additional contribution of 3% and, where relevant, the social security levy on profits of 3.3% as mentioned 

previously, subject to compliance with the condition for allocation to and maintenance of the special 

reserve for long-term capital gains. 

Long-term capital losses may be offset against long capital gains generated the same year or, one of 

the following ten years. 

The long-term capital gain regime will not apply to the sale of Warrants. 

8.2.3 Taxation of Warrants 

The allocation and exercise of the Warrants would be not taxable for French holders. Their disposal 

would be subject to capital gains tax as described above. Any amount paid by Arcelor to non-exercised 

Warrant holders would be taxable in France. 

8.3 BELGIAN TAXATION 

The following is a summary of the Belgian federal income tax consequences of the ownership of Warrants 

and/or Shares. 

This summary does not purport to address all material tax consequences of the ownership of Warrants 

and/or Shares, and does not take into account the specific circumstances of any particular investors, some of 

which may be subject to special rules, or the tax laws of any country other than Belgium. In particular, the 

summary deals only with investors that hold, or will hold, the Warrants and/or Shares as capital assets and does 

not address the tax treatment of investors that are subject to special rules, such as banks, insurance companies, 

collective investment undertakings, dealers in securities or currencies, persons that hold, or will hold the 

Warrants and/or the Shares as a position in a straddle, repurchase transaction, conversion transaction, synthetic 

security or other integrated financial transaction. This summary does not cover the situation of Belgian 

non-residents, and more particularly, Belgian non-residents having an establishment in Belgium. 

The summary is based on laws, treaties and regulatory interpretations in effect in Belgium on the date 

hereof, all of which are subject to change, including changes that could have retroactive effect. 

Investors should consult their own advisers regarding the tax consequences of the ownership of the 

Warrants and/or Shares in light of their particular circumstances, including the effect of any state, local or other 

national laws. 

For the purposes hereof, a ‘‘Resident Private Individual’’ is a private individual subject in Belgium to 

personal income tax, a ‘‘Resident Company’’ is a legal entity subject to corporate income tax in Belgium, and a 

‘‘Resident Legal Entity’’ is a legal entity subject to income tax on legal entities in Belgium. 

8.3.1 Direct tax aspects related to the allocation of the Warrants 

The issue of the Warrants and their allocation to all the shareholders of Arcelor for no consideration 

and in proportion to their respective participation in the Company should not create any taxable income 

for the shareholders who are Resident Private Individuals, Resident Companies and Resident Legal 

Entities. 

8.3.2 Direct tax aspects related to the holding of the Warrants 

Resident Private Individuals are, in principle, not subject to personal income tax on the capital gains 

realised upon the sale, exchange, exercise or any other transaction with the Warrants, unless the capital 

gains realised result from speculative transactions or transactions outside the scope of the normal 

management of one’s private estate. The capital losses are not tax deductible. 

Resident Legal Entities are, in principle, not subject to income tax on the capital gains realised upon 

the sale, exchange, exercise or any other transaction with the Warrants. The capital losses are not tax 

deductible. 

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Resident Companies are subject to corporate income tax on the capital gains realised upon the sale, 

exchange or any other transaction with the Warrants. The capital losses are, in principle, tax deductible. 

Upon the exercise of the Warrants, the Resident Companies cannot deduct the exercise price of the 

Warrants, but should, in principle, report the exercise price of the Warrants, plus the purchase price paid 

for the Warrants, as purchase price of the New Shares acquired. 

8.3.3 Direct tax aspects related to the holding of New Shares 


8.3.3.1.1 Withholding tax 

The Luxembourg withholding tax on dividends mentioned in section 8.1.2.2.1 ‘‘Withholding tax’’ is 

reduced to 15% for dividends paid to Resident Private Individuals, Resident Legal Entities or Resident 

Companies, in accordance with article 10 of the treaty for the avoidance of double taxation entered into 

between Belgium and Luxembourg (the ‘‘Treaty’’). This rate may be reduced to 10% if the beneficiary of 

the dividends is a company (save for certain company types) having held a direct shareholding interest 

since the beginning of the financial year in the share capital of Arcelor of at least 25% or which has been 

acquired for a value of at least EUR 6,197,338.12. This rate may be reduced to 0% for such a beneficiary, if 

the conditions provided for in the Parent-Subsidiary Directive (European Directive No. 90/435 of 

23rd July, 1990) are met. 

In addition and as a general rule, a 25% Belgian withholding tax (the ‘‘withholding tax’’) is applied to 

the net amount (after deduction of any Luxembourg withholding tax) of dividends paid or allocated to the 

New Shares through an intermediary established in Belgium. Benefits allocated to New Shares in any form 

whatsoever and in any respect whatsoever are also treated as dividends subject to the withholding tax, after 

deduction of any Luxembourg withholding tax. 

Exemption from withholding tax may be obtained for dividends paid or allocated to Resident 

Companies provided that certain formalities are complied with. 

Amounts distributed by a corporation for the redemption of its own shares in excess of the portion of 

paid-in fiscal capital represented by the redeemed Shares are in principle subject to a withholding tax of 

10%, unless such redemption is carried out on a stock exchange and subject to certain conditions. Amounts 

distributed by a corporation over and above the paid-in fiscal capital as a result of its liquidation are in 

principle subject to a withholding tax of 10%. 

8.3.3.1.2 Resident Private Individuals 

For Resident Private Individuals who purchase and hold Shares as a private investment, the deduction 

of the withholding tax, as the case may be, exonerates them, in principle, fully from personal income tax. 

Holders of the Shares who receive dividends outside of Belgium without deduction of withholding tax 

in Belgium are however under an obligation to declare the dividends in their personal income tax returns, 

and will be taxed on this income at, in principle, 25% plus communal surcharges. 

For Resident Private Individuals who purchase the Shares as a professional activity, the dividends 

(after deduction of the Luxembourg withholding tax, if any) must be declared and are taxed at the 

progressive personal income tax rates applicable to professional income (increased with communal 

surcharges). The withholding tax can in principle be offset against the amount of personal income tax and 

is reimbursed to the extent that it exceeds the effective amount of personal income tax to be paid if, in 

principle, the two following conditions are met: the taxpayer must have full legal ownership to the Shares 

at the time of allocation or payment of the dividends and the distribution of the dividends must not have 

led to a reduction in the value of the Shares or a capital loss on the Shares. 

8.3.3.1.3 Resident Companies 

The dividends received must be declared and are taxed at the rate of corporate income tax, in 

principle, 33.99%. 

The withholding tax, if any, may in principle be offset against corporate income tax, and any excess 

may be reimbursed to the extent that it exceeds the effective amount of corporate income tax to be paid 

and if, in principle, the two following conditions are met: the taxpayer must have full title to the Shares at 

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the time of allocation or payment of the dividends, and the distribution of the dividends must not have led 

to a reduction in the value of the Shares or a capital loss on the Shares. 

Resident Companies may deduct from their taxable income up to 95% of gross dividends received 

(other than from certain disallowed expenses) if, on the date the dividends are made available for payment 

or attributed (i) they held at least 10% of the share capital of Arcelor or a participation with an acquisition 

value of at least EUR 1,200,000, (ii) with full legal ownership of the Shares, (iii) the Shares qualify as fixed 

financial assets under Belgian GAAP and (iv) they held or will hold the Shares for an uninterrupted period 

of at least one year. Condition (i) does not apply to dividends received by Belgian credit institutions, 

insurance companies and stock exchange companies. Conditions (i), (ii), (iii) and (iv) do not apply to 

dividends received by Belgian qualifying collective investment companies. 

The 95% dividend received deduction is however subject to the conditions of taxation of the income 

distributed, provided under article 203 of the Belgian Income Tax Code. The exemption depends on a 

factual determination made upon each distribution and thus may be subject to change. 

8.3.3.1.4 Resident Legal Entities 

For Resident Legal Entities, the withholding tax on dividends constitutes, in principle, the final tax. If 

the withholding tax has not been withheld, the beneficiary of the dividends must declare and pay the 

withholding tax itself to the Belgian Treasury. 

8.3.3.2 Capital gains and capital losses 

8.3.3.2.1 Resident Private Individuals 

For Resident Private Individuals who hold Shares as a private investment, capital gains on any sale 

thereof are in principle not taxable, and the losses are not deductible. 

By way of exception, speculative capital gains or capital gains generated outside of normal 

management of a private estate are subject to a tax of 33% (to be increased with communal surcharges). 

Losses arising from such transactions are deductible from income from similar transactions. 

Resident Private Individuals who hold Shares as part of their profession are taxable, at the progressive 

personal income tax rates applicable to professional income, on all capital gains made on the sale of the 

Shares (to be increased with communal surcharges). The losses suffered on the latter are, in principle, 

deductible from professional income. 

8.3.3.2.2 Resident Companies 

Resident Companies are in principle not subject to corporate income tax on capital gains upon the 

disposal of the New Shares, if the dividends which may be allocated by Arcelor meet the requirement for 

the 95% exemption on dividends received. However, the conditions pertaining to the size, full legal 

ownership, accounting characterization and holding period of the participation for the dividend received 

deduction are not applicable. 

In principle, losses on Shares incurred by Resident Companies are not deductible. 

8.3.3.2.3 Resident Legal Entities 

Capital gains made by Resident Legal Entities upon the disposal of Shares are, in principle, not 

subject to Belgian capital gains tax. Capital losses on Shares are not deductible. 

8.3.4 Indirect tax aspects 

8.3.4.1 Tax on stock exchange transactions 

A stock market tax is levied on the delivery through a professional intermediary established in 

Belgium to the subscriber of newly issued Warrants or New Shares at the rate of 0.35% of the purchase 

price, with a maximum of EUR 250 per transaction, per party. Investors that purchase Warrants or New 

Shares from persons that have subscribed for Warrants or New Shares in their own name and for their own 

account are subject to the usual 0.17% tax rate. 

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A stock market tax is levied on the purchase and the sale, and on any other acquisition and transfer 

for consideration in Belgium, of existing Warrants or New Shares through a professional intermediary. The 

usual tax rate is 0.17% of the purchase price, with a maximum of EUR 250 per transaction, per party. 

No stock market tax is payable by: 

• professional intermediaries described in Article 2 of the Law of 6th April, 1995 acting for their own 

account; 

• insurance companies described in Article 2, §1 of the Law of 9th July, 1975 acting for their own 

account; 

• pension funds described in Article 2, §3, 6th of the Law of 9th July, 1975 acting for their own 

account; or 

• collective investment institutions described in the Law of 4th December, 1990 acting for their own 

account. 

8.3.4.2 Inheritance tax and gift tax 

An inheritance tax is paid on the market value of the Warrants or New Shares forming a part of the 

estate of a Belgian resident. 

Gifts of Warrants or New Shares in Belgium are subject to gift tax, unless the gift is made by way of a 

purely physical delivery or otherwise without written evidence of the gift being submitted to the Belgian 

Tax Administration. However, estate taxes on donated Warrants or New Shares are avoided only if a 

person can demonstrate that the gift occurred more than three years preceding the death of the grantor. 

8.4 SPANISH TAXATION 

This section is a summary of the tax regime that is likely to apply under Spanish law to investors who 

are private individuals or legal entities resident in the Kingdom of Spain (respectively ‘‘individuals’’ and 

‘‘legal entities’’) participating in the Offering and who hold Shares or Warrants. 

Individuals and Legal Entities will be deemed resident in Spain for tax purposes according to the 

provisions of, respectively, Section 9 of Royal Legislative Decree 3/2004, dated 5th March, on Personal 

Income Tax Law (hereinafter referred to as ‘‘Personal Income Tax Law’’) and Section 8 of Royal Legislative 

Decree 4/2004, dated 5th March, 2004, on Corporation Tax Law (hereinafter referred to as ‘‘Corporation Tax 

Law’’), without prejudice to the provisions of the Convention for the avoidance of double taxation entered 

into force between the Kingdom of Spain and the Grand Duchy of Luxembourg, dated 3rd June, 1986, (the 

‘‘Treaty’’) and/or other convention for the avoidance of double taxation that may be applicable. 

8.4.1 Taxation applicable to the holders of Warrants 

This is a description of the Spanish tax consequences applicable to residents in Spain as a result of the 

allocation to them of Warrants and the sale or exercise of the Warrants. 

Investors should note that this description does not address all possible tax consequences which may 

be of relevance for investors intending to hold Warrants. The description does in particular not cover the 

Spanish tax consequences which will be applicable to individual investors holding alone or together with 

certain other persons a shareholding in Arcelor of more than 5%, nor the tax consequences applicable to 

Spain permanent establishments of foreign investors to which the Arcelor New Shares would be connected. 

8.4.1.1 Issue and allocation 

The issue of the Warrants and their allocation to all the shareholders of Arcelor, in exchange of no 

compensation and in proportion to their respective participation in the Company, should not create any 

taxable income at the level of the shareholders who are resident in Spain. 

8.4.1.2 Sale of warrants 

8.4.1.2.1 Individual investors 

The sale of Warrants will give rise to a capital gain or loss computed as the difference between the 

acquisition value of the Warrants and their transfer value. 

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Taking into account that Warrants are listed on several stock exchanges included in EC Council 

Directive 93/22, of 10th May, 1993, the transfer value of the Warrants shall be computed as either their 

quoted price in the date of the transfer, or the agreed transfer price, if it is higher than the quoted price. 

Both acquisition and transfer value shall be increased or decreased, respectively, in all connected expenses 

and taxes. 

Capital gains will be included in the general portion of the basis of assessment (‘‘Base imponible 

general’’) and subject to taxation, in accordance with the general rules applicable to this type of income, at 

progressive rates ranging from 15% to 45%. 

Capital losses will be generally offset against capital gains and other income included in the general 

portion of the basis of assessment according to the provisions of Section 39 of Personal Income Tax. 

8.4.1.2.2 Legal entities 

The capital gains or losses resultant from the sale of the Warrants by legal entities constitute ordinary 

income taxable at the normal rate of corporation tax, in accordance with Sections 10 et seq. of the 

Corporation Tax Law. 

8.4.1.3 Exercise of Warrants 

The exercise of Warrants by any Spanish resident individual or legal entity holder of Warrants, and the 

subsequent subscription of New Shares, will not give rise to taxation in Spain, irrespective of whether their 

holder purchased such Warrants on the market or was allotted such Warrants upon their issue. 

For the purposes of future transactions, the New Shares subscribed upon exercise of the Warrants will 

be granted an acquisition cost equivalent to the acquisition cost of the exercised Warrants (if any) plus the 

Subscription Price of the New Shares. 


No registration tax or similar duty will be due by a holder of Warrants in connection with the issue, 

allocation, acquisition, disposal or exercise of his Warrants. 

8.4.2 Taxation applicable to the holders of Shares 

This section contains a description of the Spanish tax consequences for residents of Spain holding 

New Shares. 

Investors should note that this description does not address all possible tax consequences which may 

be of relevance for investors intending to hold New Shares. The description does in particular not cover 

the Spanish tax consequences which will be applicable to individual investors holding alone or together 

with certain other persons a shareholding in Arcelor of more than 5%, nor the tax consequences applicable 

to Spain permanent establishments of foreign investors to which the Arcelor Shares would be connected. 

8.4.2.1 Tax regime applicable to capital gains or losses realised upon the disposal of Arcelor New Shares 


Transfers of shares made by individual income tax payers, whether for good consideration or, in the 

cases laid down in Personal Income Tax Act, without consideration, as well as the other variations in net 

worth covered by Section 31 of the Individual Income Tax Act, will give rise to capital gains or losses 

quantified at the difference between the cost of the shares and the transfer value, which will be determined 

(i) at their quoted price on the date on which the said transfer takes place, or (ii) at the agreed price when 

higher than the said quoted price. Both cost price and transfer value will be increased or reduced 

respectively by the expenses and taxes inherent therein 

These capital gains or losses will be included in the basis of assessment and subject to taxation, in 

accordance with the general rules applicable to this type of income. The following needs to be specified: 

a) When an investor owns similar securities (‘‘homogéneos’’) acquired at different dates, those firstly 

acquired will be deemed transferred. 

b) In accordance with Sections 31.5 et seq. of the Personal Income Tax Law, the capital losses 

deriving from transfers of listed shares on an official secondary securities market, as defined in 

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the Council Directive 93/22/ECC, of 10th May, 1993, and acquired within the two months 

preceding or following said disposal, will not be taken into account for the purposes of computing 

the basis of assessment. 

c) In general, the capital gains on the disposal of New Shares acquired more than one year prior to 

the date of disposal will be included in the special portion of taxable income and taxed at a 

special flat rate of 15%. 

d) In the event that the New Shares disposed of were acquired less than one year prior to disposal, 

the capital gains on the disposal is included in the calculation of the general portion of the taxable 

income and will be taxed at progressive rates ranging from 15% to 45%. 


The profit or loss deriving from transfers, with or without consideration, of New Shares or any other 

variation in net worth relating thereto, will be included in taxable income of Corporation Tax payers, in 

accordance with Sections 10 et seq. of the Corporation Tax Law. 

8.4.2.2 Tax regime of dividends distributed by Arcelor 


Pursuant to Section 23 of the Personal Income Tax Law, any income from the property, entitlement to 

use or beneficial ownership of the Arcelor Shares and, in particular, dividends, will be taxable as ‘‘securities 

income’’. 

In accordance with Section 10 of the Treaty, a withholding tax at a maximum rate of 15% will be 

applied to dividends paid by a Luxembourg company to an Individual resident in Spain who properly 

attests his right to Treaty coverage. 

For the purposes of Personal Income Tax, the net dividends distributed by Arcelor are grossed up by 

the amount of the Luxembourg withholding tax. Administration and depositary costs (except for portfolio 

management costs) can be deducted in order to assess the tax base. This income is included in the general 

portion of the tax base and is taxed at a progressive rate of taxation of between 15% and 45% (which is the 

sum of the rates fixed by the Spanish State and those fixed by the autonomous regions). 

Pursuant to the Treaty, the amount of withholding tax effectively deducted in Luxembourg constitutes 

a tax credit in Spain, which may be offset against the Personal Income Tax liability, but cannot exceed the 

amount of Personal Income Tax applied to taxable dividends in Luxembourg. 

If the New Shares are deposited with individuals and legal entities resident in Spain, or with 

individuals and legal entities not resident in Spain who exercise an activity through a permanent 

establishment, or where such individuals and legal entities not resident in Spain are acting as paying 

agents, a Spanish withholding tax will be deducted by way of Personal Income Tax at a rate of 15%, except 

for those cases where a tax prepayment has been previously withheld in Spain on this same income. 

Individuals who are resident in Spain may deduct this tax withheld from the amount due in respect of 

Personal Income Tax. If the tax withheld exceeds the amount of Personal Income tax due, individuals may 

request to be refunded of this excess amount. 


Legal Entities resident in Spain subject to corporation tax must include in their tax base the gross 

amount of dividends (i.e., the amount grossed up with the Luxembourg withholding tax) or share of profits 

received, after deduction of the costs related to their shareholding, in accordance with Sections 10 et seq. of 

Corporation Tax Law. 

The dividends distributed by the Company to a corporation taxpayer resident in Spain are subject to a 

Luxembourg withholding tax at a rate of 15% pursuant to Section 10 of the Treaty. The 15% rate may be 

reduced to 5% if the company resident in Spain holds at least 25% of the capital of the Company and the 

Spanish company has held this interest for a period of at least one year prior to the date of distribution of 

the dividends. In certain circumstances, no withholding tax is applied if the conditions set out in the EC 

Council Directive 90/435 of 23 July, 1990 are fulfilled. 

In accordance with the Treaty, the Luxembourg withholding tax constitutes a tax credit in Spain, which 

may not exceed the amount of Corporation tax applied to dividends that are taxable in Luxembourg. 

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The tax credit is offset against the corporation tax corresponding to all income from Luxembourg, 

except for income from permanent establishments located in Luxembourg. The tax credits, which are not 

offset because of insufficient tax, may be offset in respect of the ten years following the financial year in 

which they were recorded. 

If the New Shares are deposited with individuals or legal entities resident in Spain, or with individuals 

or legal entities not resident in Spain but which exercise an activity in Spain through a permanent 

establishment, or where such individuals and legal entities not resident in Spain are acting as paying 

agents, a Spanish 15% withholding tax deducted by way of corporation tax will be applied, except if a tax 

prepayment has been withheld in Spain on this income. Legal entities resident in Spain can offset this 

withholding tax against corporation tax due. If the withholding tax exceeds the corporation tax due, Legal 

Entities may request reimbursement of the excess amount. 

8.4.2.3 Wealth Tax 

Individual investors residing in Spanish territory in accordance with the provisions of Section 9 of the 

Personal Income Tax Law are subject to Wealth tax on their total net worth at 31st December in each year, 

irrespective of the location of their property or where rights can be exercised. Law No. 19/1991 of 6th June, 

1991 provides that, beyond an exempt threshold of EUR 108,182.18, a progressive tax rate of marginal 

rates ranging between 0.2% and 2.5% is applied. 

The shares of companies which are traded within an official Spanish stock exchange and which are 

held by Individuals as part of their personal estate will be computed at the average market value during the 

fourth quarter of each year. The Ministry of Finance publishes this average list price annually. 

8.4.2.4 Inheritance and Gift Tax 

Transfers of shares without consideration (on death or by way of gift) in favour of individuals resident 

in Spain are subject to Inheritance and Wealth Tax in accordance with law No. 29/1987 of 18th December, 

1987, with the taxpayer being the transferee of the shares. The applicable tax rate will, depending on the 

general tax scale and certain circumstances of the transferee, vary from 0% to 81.6%. 

In the event of a transfer for no consideration to a legal entity subject to corporation tax, the income 

generated will be taxed in accordance with the rules applicable for corporation tax, inheritance and gift tax 

not being applicable. 


The acquisition and subsequent transfer of the shares, as the case may be, will be exempt from Capital 

Transfer Tax and Stamp Duty (‘‘Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos 

Documentados’’) and Value Added Tax, on the terms and subject to the exceptions laid down by 

Section 108 of the Securities Exchange Act, 24/1988, of 28th July, and related provisions of legislation 

regulating the said taxes. 

8.5 DUTCH TAXATION 

The description set out below describes the Dutch tax consequences applicable to residents and deemed 

residents of The Netherlands as a result of (i) the allocation to them of Warrants and the sale or exercise of the 

Warrants and (ii) acquisition, holding or disposition of Shares. 

Investors should note that this description does not address all possible Dutch tax issues which may be of 

relevance to them and prospective investors should therefore consult their own tax adviser about the potential 

tax effects of the allocation, purchase, ownership, sale or exercise of Warrants and the subscription, purchase, 

ownership and sale of Shares. 

8.5.1 Personal income tax 

The issue and allocation as such of Warrants to individual persons who are a resident or deemed 

resident of The Netherlands is not subject to personal income tax. 

105

Individual persons who are residents or deemed residents of The Netherlands and are holders of 

Warrants or Shares will be taxed on a deemed income from savings and investments (sparen en beleggen) 

unless: 

• such Warrants and Shares are attributable to a trade or business carried on by such shareholder, or 

• such Warrants and Shares form part of a substantial interest (aanmerkelijk belang), or 

• the income derived from and the gains realised upon the disposal, transfer or alienation of such 

Warrants or Shares qualifies as taxable income from one or more activities which do not generate 

taxable profit or taxable wages (belastbaar resultaat uit overige werkzaamheden). 

Generally speaking under Dutch law, a shareholder has a substantial interest in Arcelor if such 

shareholder, alone or together with his or her partner or certain other related persons, directly or 

indirectly, holds (i) an interest of 5% or more of the total issued capital of Arcelor or of 5% or more of the 

issued capital of a certain class of shares of Arcelor, (ii) rights to acquire, directly or indirectly, such 

interest, or (iii) certain profit sharing rights in Arcelor. 

The deemed income from savings and investments amounts to 4% of the average value of the holder’s 

net assets in the relevant fiscal year (including Warrants and Shares) and is taxed at a flat rate of 30%. 

Income derived from the Shares and capital gains realised from the sale or exchange of Warrants and 

Shares by an individual person who is a resident or deemed resident of The Netherlands and who holds a 

substantial interest or a deemed substantial interest in Arcelor are generally subject to income tax at a rate 

of 25% on a net basis. 

Income derived from and the gains realised upon the disposal, transfer or alienation of Warrants and 

Shares by an individual person who is a resident or deemed resident of The Netherlands are subject to tax 

on a net income basis at the progressive income tax rates, if: 

• such Warrants or Shares are attributable to a trade or business carried on by the individual holder, 

or 

• the income derived from and the gains realised upon the disposal, transfer or alienation of the 

Warrants or Shares qualifies as taxable income from one or more activities which do not generate 

taxable profit or taxable wages (belastbaar resultaat uit overige werkzaamheden). 

The exercise as such of Warrants by an individual person who is a resident or deemed resident of the 

Netherlands is not subject to personal income tax. 

8.5.2 Corporate income tax 

The allocation as such of Warrants to a corporate resident or deemed resident of The Netherlands is 

not subject to corporate income tax. 

Income derived from and the gains realised upon the disposal, transfer or alienation of Warrants or 

Shares by a corporate shareholder that resides or is deemed to reside in The Netherlands are subject to 

The Netherlands corporation tax on a net basis, if Warrants or Shares are (deemed) attributable to a trade 

or business carried on (or deemed to be carried on) by the holder, unless the shareholding qualifies for the 

participation exemption (deelnemingsvrijstelling). If Warrants or Shares are held by a qualifying pension 

fund, income derived from and the gains realised upon the disposal, transfer or alienation of Warrants or 

Shares are exempt from The Netherlands corporate income tax. 

The exercise as such of the Warrants by a corporate resident or deemed resident of The Netherlands is 

not subject to corporate income tax. 

8.5.3 Gift tax and inheritance tax 

The Netherlands gift tax or inheritance tax will be due with respect to a gift or inheritance of Warrants 

or Shares from a person who resides, or is deemed to reside, in The Netherlands at the time of the gift or 

at the time of his or her death. The Netherlands tax will also be due in the case of a gift by an individual 

who at the time of the gift is neither resident nor a deemed resident of The Netherlands, if such individual 

dies within 180 days after the date of the gift while being resident or deemed resident in The Netherlands. 

A Dutch national is also deemed to have been resident in The Netherlands if he or she was a resident in 

The Netherlands at any time during the 10 years preceding the date of the gift or the date of his or her 

death. For gift tax purposes, each person (regardless of nationality) is deemed to be a Dutch resident if he 

106

or she was a resident in The Netherlands at any time during the 12 months preceding the date of the gift. 

The 10-year and 12-months resident rules may be modified by a treaty. 

8.6 UNITED STATES TAXATION 

8.6.1 US Holders of Warrants 

The following is a general summary of certain material US federal income tax consequences to US 

holders of the receipt, exercise and disposition of the Warrants. The statements of US tax laws set forth 

below are based on the relevant laws and practice in force as of the date hereof, including the Internal 

Revenue Code of 1986, as amended (the ‘‘Code’’), Treasury regulations promulgated thereunder, rulings, 

judicial decisions, administrative pronouncements, all of which may be subject to change or changes in 

interpretation of US law or practice occurring after the date hereof, possibly with retroactive effect. 

As used herein, the term ‘‘US holder’’ means a beneficial owner of Shares or Warrants who (a) owns 

(directly, indirectly or by attribution) less than 10% of our share capital or voting stock; (b) is (i) a citizen 

or individual resident of the United States for US federal income tax purposes, (ii) a corporation (or other 

entity taxable as a corporation for US tax purposes) created or organised in or under the laws of the 

United States or any state thereof (including the District of Columbia), (iii) an estate the income of which 

is subject to US federal income taxation regardless of its source, or (iv) a trust, if a court within the United 

States is able to exercise primary supervision over the administration of the trust, and if one or more US 

persons have the authority to control all substantial decisions of the trust; and (c) holds the Shares and 

Warrants as capital assets. 

If a partnership (or any entity treated as a partnership for US tax purposes) holds Shares, the tax 

treatment of a partner generally will depend upon the status of the partner and the activities of the 

partnership. If a US holder is a partner in a partnership that holds Shares and receives Warrants, the 

holder is urged to consult its own tax adviser regarding the specific tax consequences of the receipt, 

exercise and disposition of the Warrants. 

This summary may not apply to a US holder or may not completely describe the tax consequences 

applicable to a US holder. For example, special rules may apply to certain holders and this summary is not 

exhaustive of all possible tax considerations (such as those applicable to US expatriates, holders subject to 

the US federal alternative minimum tax, non-US persons, insurance companies, tax-exempt entities, banks, 

financial institutions, regulated investment companies, securities broker-dealers, traders in securities that 

elect to apply a mark-to-market method of accounting, persons holding Shares as part of a straddle, 

hedging or conversion transaction, persons who acquired their Shares pursuant to the exercise of employee 

stock options or otherwise as compensation or persons whose functional currency is not the US dollar. 

Those special rules are not discussed in this offering. In addition, this summary does not discuss any tax 

rules other than the US federal income tax rules. 

The information provided herein does not constitute tax advice. US holders are urged to consult their own 

tax advisers regarding the specific French, US federal, state and local tax consequences of the receipt, 

exercise and disposition of the Warrants pursuant to the offering. 

8.6.1.1 Taxation of Warrants 

We are unable to determine with certainty until the end of the exercise period whether the 

distribution of Warrants and any resulting adjustment of the conversion ratio of our outstanding OCEANE 

2005 and 2017, respectively, would result in an increase in the proportionate interest of the holders of our 

Shares relative to the interest of holders of OCEANEs. We currently anticipate that the receipt of 

Warrants by a US holder pursuant to the offering should be treated as a taxable distribution. The 

consequences of the distribution being taxable for US purposes are discussed below under section 8.6.1.1.1 

‘‘Taxable distribution’’. This characterization is not binding on the US Internal Revenue Service (the 

‘‘IRS’’), and no ruling will be sought from the IRS regarding this, or any other, aspect of the US federal tax 

consequences of the distribution of the Warrants. Consequently, there can be no assurance that the IRS 

might not challenge our conclusions. 

If the distribution of the Warrants were treated as a tax-free transaction, the US federal income tax 

considerations applicable to a US holder on the receipt, exercise or disposition of the Warrants would 

differ from the considerations described under section 8.6.1.1.1 ‘‘Taxable distribution’’ below, and any such 

differences could be material to a US holder. See the discussion of tax-free treatment contained under 

section 8.6.1.1.2 ‘‘Alternative tax treatment of Warrants’’ below. 

107

US holders are urged to consult their own tax advisers as to the proper characterization of the distribution 

of the Warrants for US federal income tax purposes and as to the availability of the reduced US tax rate 

applicable to certain dividends in light of their own particular circumstances. 

8.6.1.1.1 Taxable distribution 

If the distribution is treated as a taxable transaction under section 305 of the Code, the receipt of the 

Warrants will be taxable to a US holder as foreign source dividend income (as we anticipate that we will 

have sufficient current or accumulated earnings and profits as determined for US federal income tax 

purposes). The amount includible in income by the US holder will equal the fair market value of the 

Warrants on the date of distribution. (For this purpose, fair market value generally will be based on the 

average of the highest and lowest trading values of the Warrants on the date of distribution). 

A US holder will obtain a tax basis in the Warrants equal to their fair market value on the date of 

distribution. The taxable distribution of Warrants will not affect the tax basis of the US holder in its Shares 

with respect to which the Warrants were distributed. A US holder’s holding period for the Warrants will 

begin on the date of acquisition. 

A US holder will recognize no gain or loss upon the exercise of Warrants. The basis of Shares acquired 

by exercising Warrants will equal the sum of the Subscription Price of the Shares and the tax basis in the 

Warrants. The holding period for the Shares so acquired will begin on the date the Warrants are exercised. 

Any sale of Warrants by a US holder, including a sale by the depositary bank on behalf of a US holder 

or a payment to a holder for Warrants that are deemed to be exercised, will result in the recognition of 

capital gain or loss in an amount equal to the difference between the amount realized on the sale and the 

holder’s tax basis in the Warrants. 

8.6.1.1.2 Alternative tax treatment of Warrants 

In the event that the distribution of the Warrants were to qualify as a tax-free transaction under 

section 305 of the Code, the following is a summary of the US federal income tax consequences to US 

holders. 

If the fair market value of Warrants on the date of their tax-free distribution equals or exceeds 15% of 

the fair market value of the Shares in respect of which the Warrants are distributed, then a US holder’s tax 

basis in its Shares must be allocated between the Shares and the Warrants in proportion to their relative 

fair market values. On the other hand, if the fair market value of the Warrants on the date of their tax-free 

distribution is less than 15% of the fair market value of the Shares in respect of which the Warrants are 

distributed, the US holder will have a zero basis in the Warrants. In addition, the holder’s tax basis in its 

Shares will not change by reason of the distribution, unless the holder makes an affirmative irrevocable 

election (in a statement attached to its federal tax return for the taxable year in which the Warrants are 

received) to allocate to the Warrants a portion of the holder’s basis in the Shares with respect to which the 

Warrants are distributed in the manner described above. US holders should consult their own tax advisers 

regarding the advisability of and procedures for making such an election. 

The holding period of Warrants received in a tax-free transaction will include the holding period of 

the Shares to which the Warrants are attributable. 

Upon exercise of the Warrants, a US holder will not recognize any gain or loss. The holder will have a 

tax basis in each new Share acquired upon exercise equal to the sum of the subscription price and the tax 

basis (as described above), if any, in the exercised Warrants. The holding period for the Shares so acquired 

will begin on the date the holder exercises the Warrants. 

A US holder generally will recognize capital gain or loss if the holder (or the depositary bank on its 

behalf) sells or otherwise disposes of Warrants based on the difference between the amount realized and 

the holder’s tax basis in the Warrants (if any) as determined above. Any capital gain or loss will be US 

source, and will be treated as long-term capital gain or loss if the holding period for the Warrants (which 

includes the holding period for the Shares to which such Warrants are attributable) exceeds one year. If the 

US holder is an individual, any long-term capital gain generally will be subject to US federal income 

taxation at preferential rates. The deductibility of capital losses is subject to significant limitations. 

8.6.2 Information reporting and backup withholding 

Dividend distributions made to a holder and proceeds from the sale of Warrants may be subject to 

information reporting to the IRS and backup withholding at a current rate of 28%. Backup withholding 

will not apply to a holder who furnishes a correct taxpayer identification number or certificate of foreign 

status and makes any other required certification, or who is otherwise exempt from backup withholding. 

US persons who are required to establish their exempt status generally must provide a duly completed IRS 

Form W-9 (Request for Taxpayer Identification Number and Certification). Backup withholding is not an 

additional tax. Amounts withheld as backup withholding may be credited against a US holder’s federal 

income tax liability. A US holder may obtain a refund of any excess amounts withheld under the backup 

withholding rules by timely filing the appropriate claim for refund with the IRS and furnishing any 

required information. 

108

CHAPTER 9 NOTICE TO INVESTORS 

United Kingdom 

This Prospectus and any other offering material in relation to the Warrants and the New Shares is 

directed only at persons who (i) are outside the United Kingdom; (ii) have professional experience in 

matters relating to investments; (iii) are persons falling within Article 49(2)(a) to (d) (‘‘high net worth 

companies, unincorporated associations, etc.’’) of the Financial Services and Markets Act 2000 (Financial 

Promotion) Order 2001; or (iv) are persons to whom an invitation or inducement to engage in investment 

activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection 

with the issue and sale of any Warrants or New Shares may otherwise lawfully be communicated or caused 

to be communicated (all such persons together being referred to as ‘‘relevant persons’’). This Prospectus 

and any other offering material in relation to the Warrants and the New Shares is directed only at relevant 

persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or 

investment activity to which this Prospectus and any other offering material in relation to the Warrants or 

the New Shares relates is available only to relevant persons and will be engaged in only with relevant 

persons. 

Arcelor has not authorized any offer of the Warrants or the New Shares to the public in the United 

Kingdom within the meaning of the POS Regulations. The Warrants and New Shares will be offered in the 

United Kingdom only to persons whose ordinary activities involve them in acquiring, holding, managing or 

disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in 

circumstances which have not resulted and will not result in an offer to the public in the United Kingdom 

within the meaning of the POS Regulations. 

Italy 

Applicable Italian law restricts the distribution of this Prospectus or any other document relating to 

the Warrants and the New Shares and the offering of Warrants and the New Shares in the Republic of 

Italy. Except for persons who qualify as professional investors (as defined in Article 31, second paragraph, 

CONSOB Regulation no. 11522 of July 1998, as amended) acting for their own accounts and not as 

depositories or nominees for other shareholders, the offering of Warrants or the New Shares is not 

intended to be directed at Italian residents and is not being made, directly or indirectly, in or into, and may 

not be accepted from within, the Italian jurisdiction. 

United States 

Neither the Warrants nor the New Shares have been or will be registered under the Securities Act, or 

with any securities regulatory authority of any state or other jurisdiction in the United States, and may not 

be offered, sold, pledged or otherwise transferred except pursuant to an exemption from, or in a 

transaction not subject to, the registration requirements of the Securities Act and in compliance with any 

applicable state securities laws. Any representation to the contrary is a criminal offense in the United 

States. 

The New Shares subscribed by the Underwriters are being offered outside the United States in 

reliance on Regulation S. 

Prospective investors may not exercise their Warrants in the United States, unless they certify that 

they are a ‘‘qualified institutional buyer’’ within the meaning of Rule 144A under the Securities Act. By 

making such a certification, prospective investors will be agreeing not to resell the New Shares that they 

purchase in the United States except in transactions exempt from or not subject to the registration 

requirements of the Securities Act, and not to deposit those shares in Arcelor’s American Depositary 

Receipt facility, unless (subject to the terms of the deposit agreement with respect to such depositary 

facility) such New Shares would then be eligible for sale pursuant to Rule 144(k) under the Securities Act 

or have been registered pursuant to an effective registration statement under the Securities Act. 

The Bank of New York, as depositary under Arcelor’s American Depositary Receipt facility, will, to 

the extent practicable, sell the Warrants relating to the American Depositary New Shares that it holds, and 

remit the proceeds of such sales to the holders of the related American Depositary Receipts. Holders of 

Arcelor’s American Depositary Receipts must withdraw the underlying Shares from the facility prior to the 

end of the exercise period in order to exercise the related Warrants (if they have the right to exercise the 

rights in accordance with the restrictions described above). 

109

From the date on which the new Shares are delivered until the 40th day thereafter (which is currently 

expected to be 5th September, 2004), the Bank of New York, as depositary for our American Depositary 

Receipt facility, will not accept deposits of any of Arcelor’s Shares in the depositary facility unless the 

shareholder certifies that the Shares were not acquired in this Offering. 

Any envelope containing a subcription form and post-marked from the United States will not be 

accepted unless it contains a duly executed investor letter. 

The Subscription Price paid in respect of subscription forms that do not meet the foregoing criteria 

will be returned without interest. 

Germany 

No securities sales prospectus has been filed with or approved by the Federal Financial Supervisory 

Authority (Bundesanstalt für Finanzdienstleistungsaufsicht) in relation to the New Shares. Accordingly, the 

New Shares may be sold in the Federal Republic of Germany only in accordance with any of the 

exemptions provided in the Securities Sales Prospectus Act (Wertpapier-Verkaufsprospektgesetz). Therefore, 

this Prospectus and any other offering material in relation to the New Shares is directed only at persons 

who on a professional or commercial basis purchase or sell securities for their own account or for the 

account of a third party. 

110

CHAPTER 10 PLAN OF DISTRIBUTION 

Pursuant to an underwriting agreement dated 28th June, 2004, entered into with Arcelor (the 

‘‘Underwriting Agreement’’), the Underwriters named below have agreed to subscribe for such number of 

Remaining New Shares, and to procure purchasers for such Remaining New Shares. The subscription 

rights attaching to the Unexercised Warrants will, upon the expiration of the Exercise Period on 13th July, 

2004, automatically lapse and Arcelor will issue such number of New Shares that is equal to the number of 

Remaining New Shares. 

Under the terms of the Underwriting Agreement, each Underwriter has agreed, severally and not 

jointly, subject to the satisfaction of certain conditions, to subscribe for, at the Subscription Price of 

EUR 11.00 per Remaining New Share, such percentage of the aggregate number of Remaining New 

Shares as is indicated below opposite the name of such Underwriter. 

Underwriting 

Underwriters 

commitment 

(in %) 

Joint Lead Managers 

BNP Paribas ......................................................... 32.5 

Deutsche Bank AG London .............................................. 32.5 

Senior Co-Lead Managers 

CALYON ........................................................... 9.0 

Fortis Bank (Nederland) N.V. ............................................ 9.0 

Santander Central Hispano Investment ...................................... 9.0 

Co-Lead Managers 

Banco Bilbao Vizcaya Argentaria, S.A. ...................................... 1.0 

Bayerische Landesbank ................................................. 1.0 

Commerzbank Aktiengesellschaft .......................................... 1.0 

Crédit Industriel et Commercial ........................................... 1.0 

J.P. Morgan Securities Ltd. .............................................. 1.0 

KBC Securities NV .................................................... 1.0 

Natexis Bleichroeder SA ................................................ 1.0 

Société Générale ...................................................... 1.0 

Total .............................................................. 100.0% 

In addition, the Underwriters have agreed to procure purchasers for the Remaining New Shares. For 

further information on the Placement, see Chapter 2 ‘‘Issue and Listing of the Warrants and the New 

Shares and the Underwriting and the Placement of New Shares’’. 

In consideration of the agreement by the Underwriters to subscribe and pay for the Remaining New 

Shares as provided above, Arcelor has agreed to pay (i) a management commission of 0.50% of the 

aggregate gross proceeds of the Offering to the Joint Lead Managers, (ii) an underwriting commission of 

1.25% of the aggregate gross proceeds of the Offering to the Underwriters, and (iii) a selling commission 

of 0.75% in respect of the Remaining New Shares (subject to a cap) to the Joint Lead Managers and the 

Senior Co-Lead Managers. In addition, Arcelor may pay, at its discretion, a success fee of 0.15% of the 

aggregate gross proceeds of the Offering to the Joint Lead Managers and the Senior Co-Lead Managers. 

Arcelor has undertaken that during a period expiring 180 calendar days after the closing date of the 

Offering it will not, without the prior written consent of the Joint Lead Managers, subject to certain limited 

exceptions (including the issue of new Shares or delivery of existing Shares for holders of instruments 

giving access to its capital, as disclosed in this prospectus), issue, offer, sell, contract to sell, grant any 

option to purchase or otherwise dispose of, any interest in any Shares (or any securities convertible into or 

exchangeable for Shares) or deposit any Shares (or any securities convertible into or exchangeable for 

Shares) in any depositary receipt facility. 

The Underwriting Agreement entitles the Company and the Joint Lead Managers, on behalf of the 

Underwriters, to terminate it in certain circumstances prior to payment being made to Arcelor. Arcelor has 

agreed to indemnify the Underwriters against certain liabilities. In addition, Arcelor has agreed to 

reimburse the Underwriters for certain of their expenses in connection with the Offering. 

In connection with the Offering, Deutsche Bank or any person acting for it may, on behalf of the 

Underwriters, over-allot or effect transactions in the Shares or any associated security (including the 

111

Warrants) with a view to supporting the market price of the Shares at a level higher than those which might 

otherwise prevail. Such transactions may be effected on markets on which the Shares or the Warrants are 

traded, including the over-the-counter market or otherwise. However, there may be no obligations on 

Deutsche Bank or any agent of it to do this. Such stabilisation, if commenced, may be discontinued at any 

time and must be brought to an end after a limited period. 

The Underwriters may, in compliance with applicable laws and regulations, carry out trading for their 

own accounts on the market of the Warrants and the Shares. These interventions are likely to contribute to 

the liquidity of the market of the Shares and the Warrants. The Underwriters may also effect transactions 

in the Shares and the Warrants intended to stabilise the market of the Shares. Finally, in the event of 

significant disposals of Warrants organised by the Underwriters (including Warrants allocated to the 

Company with respect to Shares controlled or held by the Company), in order to avoid that the markets of 

the Warrants and the Shares be disrupted in terms of liquidity and/or price, compared with the transaction 

effected off-market, the Underwriters will be on the buy side on the central order book so as to preserve 

the good operation of the markets of the Warrants and the Shares and the equality among holders of 

Shares or Warrants. 

Some of the Underwriters, directly or through their affiliates, engage in transactions with, and 

perform services for, Arcelor in the ordinary course of business and have provided, and may from time to 

time in the future provide, commercial and investment banking and general financing services for Arcelor 

and its affiliates for which they have in the past received and may in the future receive, customary 

compensation. 

Selling Restrictions in respect of the Placement 

General 

Each Underwriter, severally and not jointly, has represented, warranted and agreed that (i) it will 

offer or sell the New Shares only in compliance with the laws and regulations in force in the country where 

it makes such an offer or sale, (ii) it will comply with the offer or sales restrictions set forth in the 

underwriting agreement and in this Prospectus applicable to the relevant country, and (iii) it has not used 

or circulated and will not use or circulate certain offering documents, including this Prospectus, in any 

country where any such use or circulation would contravene applicable laws or regulations or would 

require a filing with, or the prior authorization, of a competent authority of such country. Each 

Underwriter has also acknowledged to Arcelor and the Joint Lead Managers that no offering document, 

including this Prospectus, has been filed or registered so as to allow any public offer or their circulation to 

that effect, other than in Luxembourg, France, Belgium, Spain and The Netherlands. 

United Kingdom 

Each Underwriter has severally and not jointly, represented, warranted and agreed with Arcelor that: 

• it has not offered or sold, and, prior to the expiry of a period of six months from the closing date, 

will not offer or sell any New Shares or Warrants to persons in the United Kingdom except to 

persons whose ordinary activities involve them in acquiring, holding, managing or disposing of 

investments (as principal or agent) for the purposes of their businesses or otherwise in 

circumstances which have not resulted and will not result in an offer to the public in the United 

Kingdom within the meaning of the POS Regulators; 

• it has only communicated or caused to be communicated, and will only communicate or cause to be 

communicated any invitation or inducement to engage in investment activity (within the meaning of 

Section 21 of the Financial Services and Markets Act 2000 (the ‘‘FSMA’’)) received by it in 

connection with the issue or sale of any Warrants or New Shares in circumstances in which 

Section 21(1) of the FSMA does not apply to Arcelor; and 

• it has complied and will comply with all of the provisions of the FSMA applicable to anything done 

by it in relation to the New Shares in, from or otherwise involving the United Kingdom. 

United States 

Each Underwriter understands that the Warrants and the New Shares have not been and will not be 

registered under the Securities Act and the Warrants and the New Shares may not be offered or sold within 

the United States or to, or for the account or benefit of, U.S. Persons. Each Underwriter represents, 

112

warrants and agrees that it has offered and sold the New Shares, and will offer and sell the New Shares 

only outside the United States in accordance with Rule 903 of Regulation S under the Securities Act. 

Accordingly, each Underwriter further represents, warrants and agrees that neither it, nor any of its 

affiliates nor any person acting on its or their behalf has engaged or will engage in any directed selling 

efforts with respect to the Warrants and the New Shares, and that it and they have complied and will 

comply with the offering restrictions requirements of Regulation S under the Securities Act. 

Germany 

Each Underwriter has confirmed that it is aware of the fact that no public offering of the New Shares 

is being conducted in Germany and that no sales Prospectus (Verkaufsprospekt) under the German 

Securities Sales Prospectus Act (Wertpapier-Verkaufsprospektgesetz, the ‘‘Sales Prospectus Act’’) has been, 

or will be, published with respect to the New Shares. Each Underwriter has agreed that it will offer and sell 

the New Shares in Germany only in compliance with the Sales Prospectus Act, and, in particular, based on 

an exemption from the sales Prospectus requirement under the Sales Prospectus Act. 

Italy 

Each Underwriter has confirmed that it is aware of the fact that no public offering of the New Shares 

is being conducted in the Republic of Italy, and agrees not to offer or sell the New Shares or distribute 

copies of this Prospectus or any other document relating to the New Shares, except to professional 

investors (investitori professionali) (as defined in Article 31, paragraph 2 of CONSOB Regulation No. 11522 

of July 1, 1998, as amended), provided that such professional investors will act for their own account and 

not as depositories or nominees for other investors. 

Netherlands 

Each Underwriter represents, warrants and undertakes that: 

(i) it will not offer, sell, transfer or deliver any Warrants or Remaining New Shares in The 

Netherlands, directly or indirectly, before (A) a certificate of the Luxembourg Commission de 

Surveillance du Secteur Financier, confirming its approval of the Prospectus and that the 

Prospectus has been prepared in accordance with article 8 or 12 of EU Prospectus Directive 

89/298EEC, has been filed with the Dutch Authority for the Financial Markets (Autoriteit 

Financiële Markten, the ‘‘AFM’’) and (B) the Prospectus has been made generally available at the 

Company’s offices in Luxembourg; 

(ii) each announcement made by it of, and each document used by it for, any offer or forthcoming 

offer of the Warrants or the Remaining New Shares (i) has stated and will state where and when 

the Prospectus will be or has been made generally available, and (ii) if made before the 

Prospectus has been made generally available, has been or will be submitted to the AFM before 

the Prospectus is made generally available at the Company’s offices in Luxembourg; and 

(iii) if after the date of the Prospectus new relevant facts occur or are discovered, it will only distribute 

copies of the Prospectus with the supplemental information required to be included in the 

Prospectus pursuant to section 6 or the 1995 Decree on the supervision of the securities trade 

(Besluit toezicht effectenverkeer 1995). 

Each Underwriter represents, warrants and undertakes that it will not offer, sell, transfer or deliver 

any Warrants or Remaining New Shares in The Netherlands other than to banks, pension funds, insurance 

companies, securities firms, investment institutions, central governments, large international and 

supranational organizations and other comparable entities, including, among others, treasuries and finance 

companies of large companies or enterprises, who or that do trade or invest in securities in the conduct of 

their profession or trade for their own account. Each Underwriter acknowledges that individuals or legal 

entities who or that do not trade or invest in securities in the conduct of their profession or trade may not 

acquire the Warrants or the Remaining New Shares and that a selling restriction to that effect must be 

included in any materials with which an offer of the Warrant or the Remaining New Shares is made or an 

offer or forthcoming offer of the Warrants or the Remaining New Shares is announced. 

Belgium 

The Remaining New Shares have not been and will not be publicly offered in Belgium. In Belgium, 

the placement of the Remaining New Shares will be exclusively conducted under applicable private 

113

placement exemptions and therefore has not been, and will not be, notified to, and any offering document 

relating to the Remaining New Shares has not been, and will not be approved by, the Belgian Banking, 

Finance and Insurance Commission (Commission bancaire, financière et des assurances / Commissie voor het 

Bank-, Financie- en Assurantiewezen). Accordingly, the placement of the Remaining New Shares may not 

be advertised in Belgium and each of the Underwriters represents, warrants and agrees that it has not 

offered, sold or resold, transferred or delivered, and will not offer, sell, resell transfer or deliver, the 

Remaining New shares, and that it has not distributed, and will not distribute, any offering document 

relating to the Remaining New Shares, and that it has not distributed and will not distribute any offering 

document relating to the Remaining New Shares, directly or indirectly, to any individual or legal entity in 

Belgium other than (i) investors required to invest a minimum of EUR 250,000 (per investor and per 

transaction) or (ii) institutional investors, as defined in Article 3, 2 of the Belgian Royal Decree of 

7th July, 1999 on the public nature of financial transactions, acting for their own account. 

114

CHAPTER 11 CAPITALISATION OF THE ARCELOR GROUP 

The following table sets forth Arcelor’s historical consolidated capitalisation as at 31st March, 2004, 

and as adjusted to reflect the issuance of 106,629,054 New Shares after deducting estimated commissions, 

expenses and taxes of approximately EUR 40 million. This information has been prepared in accordance 

with IFRS. Prospective investors should read this table in conjunction with the Group’s consolidated 

financial statements included in Appendix I of this Prospectus. 

As at 31st March, 2004, 

As at 31st March, 2004 as adjusted 

(EUR million) 

Current liabilities: 

Trade payables ................................. 4,483 4,483 

Interest-bearing liabilities .......................... 2,068 2,068 

Other current liabilities ........................... 2,704 2,704 

Total current liabilities .......................... 9,255 9,255 

Non-current liabilities: (1) 

Interest-bearing liabilities .......................... 3,922 3,922 

Other non-current liabilities ........................ 3,833 3,833 

Total non-current liabilities ...................... 7,755 7,755 

Shareholders’ equity: 

Issued capital (2) ................................. 2,665 3,198 

Share premium ................................. 4,795 5,395 

Other consolidation reserves ....................... 1,073 1,073 

Profit (loss) for the period ......................... 234 234 

Foreign currency translation adjustment ............... (284) (284) 

Own shares .................................... (426) (426) 

Total shareholders’ equity ........................ 8,057 9,190 

Total capitalisation .............................. 25,067 26,200 

(1) Includes employee benefits and other long-term liabilities. 

(2) Corresponding to the number of Shares comprising the share capital as at 31st March, 2004, adjusted to exclude Shares held at 

such date by the Group, not considered in consolidated net equity in application of IFRS rules, i.e., 501,447,486 Shares, adjusted 

to 608,076,540 for this Offering. 

115

GENERAL INFORMATION 

1) The issue of the Warrants and of the New Shares has been authorised and approved by the Board of 

Directors of Arcelor at a meeting held on 25th June, 2004 on the basis of the authorised share capital 

approved by the shareholders of Arcelor at an extraordinary general meeting held on 11th December, 

2001. In order to allow for the issue of the Warrants and the issue of the New Shares on exercise of the 

Warrants and/or pursuant to the underwriting, the Board of Directors, on the basis of the 

authorisation contained in the articles of association and the authorisation granted by the 

extraordinary general meeting held on 11th December, 2001, resolved to withdraw the preferential 

subscription rights of the existing shareholders of Arcelor. 

2) The Warrants and the New Shares have been admitted to listing on the Luxembourg Stock Exchange. 

Banque Générale du Luxembourg, S.A. is acting as the listing agent for the Warrants and the New 

Shares. A notice légale (legal notice) relating to the issuance and the listing of the Warrants and the 

New Shares and the consolidated articles of association of Arcelor will be registered prior to the 

beginning of the Offering and the listing with the Registre de Commerce et des Sociétés in and of 

Luxembourg, where such documents may be obtained upon request. 

3) Since 31st December, 2003, the date of Arcelor’s latest audited consolidated and unconsolidated 

financial statements included herein, there has been no material adverse change in the financial 

condition of Arcelor and its subsidiaries considered as one enterprise except as otherwise disclosed 

herein. 

4) Arcelor’s consolidated and unconsolidated financial statements for each financial year, its 

consolidated interim financial statements for the first 6 months of each financial year and its quarterly 

financial data as at the end of the first and third quarters are available at the offices of the Listing 

Agent for the Shares, Banque Générale du Luxembourg, S.A., 50, avenue J. F. Kennedy, 

L-2951 Luxembourg at which a copy of the consolidated articles of association of Arcelor may also be 

inspected. 

5) The current paying agents for the Shares are: 

• in the Grand Duchy of Luxembourg, the principal paying agent, Banque Générale du Luxembourg 

S.A., 50, avenue J. F. Kennedy, L-2951 Luxembourg, 

• in Belgium, Fortis Banque, 3, Montagne du Parc, B-1000 Brussels, 

• in Spain, the Spanish Liaison Entity, 

• in France, BNP Paribas Securities Services, Les Collines de l’Arche, 92057 La Défense Cedex. 

6) The identification references for the Shares are: 

• ISIN: LU0140205948 


• CIK Code: SVM 4590.31 

• Sedol Nr.: 7281875 FR 

7) The Warrants have been accepted for clearance through Clearstream Luxembourg and Euroclear 

Bank. 

The identification references for the Warrants are: 

• ISIN: LU0195882385 


8) Enforcement of Foreign Judgments and Service of Process 

Arcelor is a société anonyme, a public company limited by shares, organised under the laws of 

Luxembourg. None of the members of its board are U.S. residents, and a substantial portion of its 

assets and the assets of such persons are and will be located outside the United States. As a result, 

investors may not be able to effect service of process within the United States upon such persons or to 

enforce against them or Arcelor judgments of U.S. courts predicated upon the civil liability provisions 

of the U.S. securities laws. Arcelor has been advised by its counsel, Elvinger, Hoss & Prussen, that the 

United States and Luxembourg do not have a treaty providing for reciprocal recognition and 

116

enforcement of judgments. In addition, if an original action is brought in Luxembourg, predicated 

solely upon the U.S. securities laws, Luxembourg Courts may not recognise that they have the 

requisite jurisdiction to grant the remedies sought under such laws. Actions for enforcement of 

judgments of U.S. courts, rendered against Arcelor or any Luxembourg directors, would require such 

company or persons to waive their right under Article 15 of the Luxembourg Civil Code to be sued in 

Luxembourg only. Arcelor believes that none of these persons has waived this right with respect to 

actions predicated solely upon U.S. securities laws. 

117

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APPENDIX I 

FINANCIAL STATEMENTS OF ARCELOR 

Page 

Consolidated Financial Statements of 

Arcelor Group, for the Year Ended 31st December, 2003 

Consolidated Income Statement ........................................... A-I-3 

Consolidated Balance Sheet ............................................. A-I-4 

Consolidated Cash Flow Statement ........................................ A-I-5 

Consolidated Statement Of Changes In Shareholders’ Equity ...................... A-I-6 

Notes to the Consolidated Financial Statements ............................... A-I-7 

Note 1: General ................................................ A-I-7 

Note 2: Accounting policies ........................................ A-I-7 

Note 3: Changes in consolidation scope ............................... A-I-19 

Note 4: Intangible assets .......................................... A-I-22 

Note 5: Property, plant and equipment ................................ A-I-24 

Note 6: Investments in companies accounted for using the equity method ....... A-I-25 

Note 7: Other investments ......................................... A-I-27 

Note 8: Receivables and other financial assets ........................... A-I-27 

Note 9: Inventories .............................................. A-I-28 

Note 10: Trade receivables .......................................... A-I-28 

Note 11: Other amounts receivable ................................... A-I-29 

Note 12: Cash and cash equivalents ................................... A-I-29 

Note 13: Equity .................................................. A-I-29 

Note 14: Earnings per share ......................................... A-I-31 

Note 15: Minority interests ......................................... A-I-32 

Note 16: Interest-bearing liabilities .................................... A-I-32 

Note 17: Employee benefits ......................................... A-I-35 

Note 18: Provisions for contract termination indemnities .................... A-I-40 

Note 19: Other provisions .......................................... A-I-42 

Note 20: Other amounts payable ..................................... A-I-43 

Note 21: Staff costs ............................................... A-I-43 

Note 22: Net financing result ........................................ A-I-44 

Note 23: Taxation ................................................ A-I-44 

Note 24: Related party disclosures .................................... A-I-46 

Note 25: Derivative financial instruments ............................... A-I-47 

Note 26: Commitments given and received .............................. A-I-50 

Note 27: Segment reporting ......................................... A-I-51 

Note 28: Events after the balance sheet date ............................. A-I-55 

Note 29: Reconciliation of the of the Arcelor Group financial statements prepared 

in accord with Luxembourg GAAP with the financial statements 

prepared in accord with IFRS ............................... A-I-56 

Note 30: Simplified group organisation chart ............................. A-I-57 

Note 31: Listing of group companies .................................. A-I-58 

Auditor’s Report ...................................................... A-I-71 

Unconsolidated Annual Accounts of Arcelor for the year ended December 31, 2003 ..... A-I-72 

Balance Sheet as at December 31, 2003 ..................................... A-I-72 

Income Statement from January 1, to December 31, 2003 ........................ A-I-74 

Appropriation of the profit for the year ..................................... A-I-75 

A-I-1

Notes to the Unconsolidated Annual Accounts: 

Note 1: General ................................................ A-I-76 

Note 2: Accounting policies ........................................ A-I-76 

Note 3: Statement of tangible fixed assets .............................. A-I-77 

Note 4: Statement of financial assets .................................. A-I-78 

Note 5: Residual term of debtors .................................... A-I-78 

Note 6: Accruals and deferred income ................................ A-I-79 

Note 7: Capital and reserves ....................................... A-I-79 

Note 8: Provisions for liabilities and charges ............................ A-I-79 

Note 9: Financial debt ............................................ A-I-80 

Note 10: Residual terms of creditors ................................... A-I-81 

Note 11: Off-balance sheet items ..................................... A-I-81 

Note 12: Financial result ........................................... A-I-81 

Note 13: Staff ................................................... A-I-81 

Note 14: Directors’ remuneration ..................................... A-I-82 

Note 15: Stock option plan ......................................... A-I-82 

Note 16: Other information ......................................... A-I-82 

Note 17: Events after the balance sheet date ............................. A-I-82 

Auditor’s Report ...................................................... A-I-83 

Consolidated Financial Statements of 

the Arcelor Group, for the Three Months Ended 31st March, 2004 

Consolidated Balance Sheet ............................................. A-I-84 

Consolidated Income Statement (Quarterly evolution) .......................... A-I-86 

Consolidated Cash Flow Statement ........................................ A-I-87 

Consolidated Statement Of Changes In Shareholders’ Equity ...................... A-I-88 

Page 

A-I-2

Consolidated Financial Statements of Arcelor Group 

CONSOLIDATED INCOME STATEMENT 

2002 

Proforma 

In EUR million, for the year ended 31 December 2003 (unaudited) 2002 

REVENUE (Note 27) .................................... 25,923 26,594 24,533 

Other operating income .................................. 729 472 433 

Own work capitalised ................................... (255) (77) (25) 

Cost of sales .......................................... (12,095) (13,072) (11,974) 

Other external expenses .................................. (6,307) (6,346) (5,962) 

Staff costs (Note 21) .................................... (5,071) (5,063) (4,699) 

Depreciation and amortisation expenses ...................... (1,601) (1,302) (1,234) 

Depreciation and amortisation of goodwill .................... 111 104 103 

Other operating expenses ................................ (696) (530) (495) 

OPERATING RESULT .................................. 738 780 680 

Net financing costs (Note 22) .............................. (321) (464) (434) 

Share of profits in companies accounted for using the equity method . 140 77 102 

RESULT BEFORE TAX ................................. 557 393 348 

Taxation (Note 23) ..................................... (141) (461) (488) 

RESULT AFTER TAX .................................. 416 (68) (140) 

Minority interests ...................................... (159) (53) (46) 

NET RESULT—GROUP SHARE ........................... 257 (121) (186) 

Earnings per share in EUR (Note 14) 

—basic .............................................. 0.54 (0.25) (0.38) 

—diluted ............................................ 0.54 (0.25) (0.38) 

The accompanying notes form an integral part of these consolidated financial statements. 

A-I-3


CONSOLIDATED BALANCE SHEET 

In EUR million, as at 31 December 2003 2002 

ASSETS 

NON-CURRENT ASSETS 

Intangible assets (Note 4) ............................................ (551) (950) 

Property, plant and equipment (Note 5) ................................. 8,947 9,268 

Investments accounted for using the equity method (Note 6) .................. 1,758 1,780 

Other investments (Note 7) ........................................... 307 466 

Receivables and other financial assets (Note 8) ............................ 693 766 

Deferred tax assets (Note 23) ......................................... 1,436 1,523 

TOTAL NON-CURRENT ASSETS ..................................... 12,590 12,853 

CURRENT ASSETS 

Inventories (Note 9) ................................................ 5,497 6,091 

Trade receivables (Note 10) .......................................... 3,253 4,320 

Other receivables (Note 11) .......................................... 1,378 1,333 

Cash and cash equivalents (Note 12) .................................... 1,890 1,239 

TOTAL CURRENT ASSETS .......................................... 12,018 12,983 

TOTAL ASSETS .................................................. 24,608 25,836 

EQUITY AND LIABILITIES 

EQUITY 

Subscribed capital .................................................. 2,665 2,662 

Share premium ................................................... 4,795 4,791 

Consolidated reserves ............................................... (419) (484) 

Translation reserve ................................................. (308) (237) 

TOTAL SHAREHOLDERS’ EQUITY (Note 13) ............................ 6,733 6,732 

MINORITY INTERESTS (Note 15) ..................................... 730 661 

NON-CURRENT LIABILITIES 

Interest-bearing liabilities (Note 16) .................................... 4,871 4,594 

Employee benefits (Note 17) .......................................... 1,733 1,597 

Provisions for indemnities on breach of contracts of employment (Note 18) ........ 718 574 

Other long-term provisions (Note 19) ................................... 983 849 

Deferred tax liabilities (Note 23) ....................................... 289 359 

Other liabilities ................................................... 163 205 

TOTAL NON-CURRENT LIABILITIES .................................. 8,757 8,178 

CURRENT LIABILITIES 

Trade payables .................................................... 4,348 4,111 

Interest-bearing liabilities (Note 16) .................................... 1,551 3,821 

Other amounts payable (Note 20) ...................................... 2,194 2,023 

Provisions for indemnities on breach of contracts of employment (Note 18) ........ 82 120 

Other provisions (Note 19) ........................................... 213 190 

TOTAL CURRENT LIABILITIES ...................................... 8,388 10,265 

TOTAL SHAREHOLDERS’ EQUITY, MINORITY INTERESTS AND LIABILITIES . 24,608 25,836 


A-I-4


CONSOLIDATED CASH FLOW STATEMENT 

2002 

Proforma 

In EUR million, for the year ended 31 December 2003 (unaudited) 2002 

OPERATING ACTIVITIES 

Result after tax .......................................... 416 (68) (140) 

Profit of companies accounted for using the equity method, net of 

dividends ............................................ (48) (32) (61) 

Amortisation and depreciation of tangible and intangible assets ....... 1,490 1,198 1,234 

Net movement in provisions ................................ 85 (16) (53) 

Profit on disposal of assets ................................. (14) (23) (23) 

Dividends received ....................................... 29 27 29 

Changes in working capital ................................. 641 377 523 

Other items ............................................ (97) 337 437 

CASH FLOWS FROM OPERATING ACTIVITIES (*) ............... 2,502 1,800 1,946 

INVESTING ACTIVITIES 

Acquisitions of tangible and intangible assets .................... (1,327) (1,415) (1,312) 

Acquisition of Arbed/Aceralia, net of cash acquired ............... — — 1,035 

Acquisitions of other subsidiaries, net of cash acquired (Note 3) ...... (37) (30) (30) 

Acquisitions of financial assets ............................... (540) (602) (405) 

Disposal of tangible and intangible assets ....................... 112 42 37 

Disposal of subsidiaries, net of cash disposed of (Note 3) ........... 273 48 48 

Disposal of financial assets ................................. 410 243 36 

CASH FLOWS FROM INVESTING ACTIVITIES ................. (1,109) (1,714) (591) 

FINANCING ACTIVITIES 

Proceeds from the issue of share capital ........................ 85 35 33 

Dividends paid .......................................... (218) (192) (167) 

Proceeds from borrowings .................................. 1,891 3,035 2,464 

Repayment of borrowings .................................. (2,444) (3,899) (3,581) 

CASH FLOWS FROM FINANCING ACTIVITIES ................ (686) (1,021) (1,251) 

Effect of exchange rate fluctuations on cash held ................. (56) (3) 10 

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS . 651 (938) 114 

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE 

YEAR .............................................. 1,239 2,177 1,125 

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR . 1,890 1,239 1,239 

(*) Including taxes paid in an amount of EUR 29 million (2002: EUR 82 million) and net interest paid in an amount of EUR 

261 million (2002: EUR 387 million). 


A-I-5


CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY 

Subscribed Share Subscribed Share Other Foreign Shareholders’ Minority 

capital premium capital premium Own consolidated currency equity interests 

Arcelor Arcelor Usinor Usinor shares reserves translation (Note 13) (Note 15) Total 

(In EUR million) 

31 December 2001 ..... — — 768 745 — 2,558 72 4,143 58 4,201 

Profit and loss 

Profit for the year 2002 . . (186) (186) 46 (140) 

Foreign exchange 

differences ......... (309) (309) (297) (606) 

Distributions and 

transactions with 

shareholders 

Business combination of 

Usinor, Arbed and 

Aceralia .......... 2,642 4,755 (768) (745) (892) (1,938) 3,054 865 3,919 

Additional minority 

interests in Usinor .... (100) (100) 100 — 

Dividends paid ....... (98) (98) (36) (134) 

Increase in share capital . 20 36 56 56 

Utilisation of and profit 

on the sale of own 

shares ........... 147 (37) 110 (1) 109 

Convertible bonds ..... 62 62 1 63 

Purchase of minority 

interests .......... (75) (75) 

31 December 2002 ..... 2,662 4,791 — — (745) 261 (237) 6,732 661 7,393 

Profit and loss 

Profit for the year 2003 . . 257 257 159 416 

Foreign exchange 

differences ......... (71) (71) 28 (43) 

Distributions and 

transactions with 

shareholders 

Dividends paid ....... (181) (181) (37) (218) 

Increase in share capital . 3 4 7 7 

Purchase of minority 

interests .......... (87) (87) 

Other movements ..... (6) (5) (11) 6 (5) 

31 December 2003 ..... 2,665 4,795 — — (751) 332 (308) 6,733 730 7,463 

The accompanying notes form an integral part of these consolidated financial statements 

A-I-6

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

INTRODUCTION 

The consolidated financial statements of the Areclor group for the year ended December 31, 2003 are 

prepared in accordance with International Financial Reporting Standards (‘‘IFRS’’) applicable at that 

date. These standards were partially adopted by the International Accounting Standards Board (‘‘IASB’’) 

in December 2003 (thirteen modified standards were published with effect after the balance sheet date) 

and will continue as such, in the context of the deadline of 2005 set by the European Union. 

Arcelor has adopted a proactive approach in order to anticipate, and, where required, adapt its 

accounting policies depending on developments. 

NOTE 1—GENERAL 

Arcelor S.A. was incorporated under Luxembourg Law on June 8, 2001 in the context of the project of 

the business combination of Aceralia, Arbed and Usinor. This business combination was completed on 

February 28, 2002. 

In accord with the requirements of International Financial Reporting Standards (formerly known as 

International Accounting Standards), and specifically under IAS 22, the business combination between 

Aceralia, Arbed and Usinor (the acquiring entity) was accounted for using the purchase method of 

accounting. 

The consolidated financial statements as at December 31, 2003 present the financial position of the 

Company and its subsidiaries (hereafter ‘‘the Group’’), as well as the interests of the Group in its 

associated companies and its interests in jointly controlled entities. 

The Board of Directors authorised the publication of the December 31, 2003 financial statements on 

February 18, 2004. These financial statements will not be final until approved at the annual general 

meeting of shareholders. 

The consolidated financial statements have been prepared in accordance with IFRS. This implies that 

the Group makes certain estimates and assumptions which have an impact on the assets and liabilities, the 

income statement for the period and the notes to the financial statements. Changes in facts and 

circumstances may lead the Group to change these estimates. 

NOTE 2—ACCOUNTING POLICIES 

1) Statement of compliance 

The consolidated financial statements have been prepared in accordance with International Financial 

Reporting Standards as adopted by the IASB and the interpretations of those standards published by the 

International Financial Reporting Interpretations Committee (‘‘IFRIC’’). 

The Group applied IFRS for the first time for the year ended December 31, 2002. 

Adjustments resulting both from the move from French GAAP, as applied by Usinor, to IFRS and the 

application of the new accounting policies of the Arcelor Group, are shown in shareholders’ equity in the 

opening balance sheet as at December 31, 2000. This has been done in order to show the retroactive 

application of IFRS in accordance with the interpretation of the Standing Interpretation Committee 

(‘‘SIC’’), specifically SIC 8. 

The consolidated financial statements have been prepared in accordance with the requirements of 

section XVI of the Luxembourg Law of August 10, 1915 on commercial companies, with the specific 

exception of the accounting and valuation of financial instruments following the adoption, in 2001, of IAS 

39. Moreover, the presentation of the consolidated balance sheet and income statement is different from 

that required by Luxembourg Law. In the opinion of the Directors, the presentation chosen more 

appropriately reflects the Group’s financial situation. 

Note 29 sets out a reconciliation between the net profit and shareholders’ equity of the Group for the 

year ended December 31, 2003 as detailed in these IFRS financial statements and the amounts which 

would have been published had Luxembourg legal and regulatory requirements been followed. 

A-I-7

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

NOTE 2—ACCOUNTING POLICIES (Continued) 

2) Presentation of consolidated financial statements 

The consolidated financial statements are prepared in euro (‘‘EUR’’), rounded to the nearest million. 

The consolidated financial statements of the Group are prepared on the basis of the historical cost 

convention with the exception of the following assets and liabilities which are stated at their fair values: 

derivative financial instruments, investments held for trading and investments available for sale. Hedged 

assets and liabilities are stated at their fair value in respect of the risks hedged. 

Assets intended to be disposed of or consumed during the Group’s normal course of operations, assets 

held with a view to being sold in the twelve months following the year-end date as well as cash and cash 

equivalents are considered current. All other assets are considered non-current.Liabilities falling due 

during the Group’s normal course of operations, or in the twelve months following the year-end date, are 

considered current. All other liabilities are considered non-current. 

In order to show homogenous and comparable information, 2002 comparative information includes 

an unaudited pro forma consolidated income statement and an unaudited pro-forma consolidated cash 

flow statement, both for the year ended December 31, 2002. 

Moreover, notes 21 and 22, in respect of staff costs and the net financial result respectively, also 

include a pro forma unaudited comparative as at December 31, 2002. 

The proforma consolidated accounts as at 31 December 2002 are distinct from the consolidated 

accounts prepared in accordance with IFRS for two reasons. 

First, the results of the entities of the Aceralia and Arbed groups realised between 1 January and 

28 February 2002 are included in the consolidated results of the Group, but are excluded from the 

consolidated accounts as prepared in accordance with IFRS, where these results are only included from 

1 March 2002 onwards. 

Secondly, the allocation of negative goodwill is included in the pro-forma consolidated accounts for 

the entire year ending December 31, 2002, whereas it is included in the IFRS consolidated accounts from 

March 1, 2002 only. 

In order to more clearly reflect the social commitments of the Group, provisions made in the context 

of restructuring plans (which may or may not translate into early retirement schemes at a later date) as well 

as early retirement schemes linked to collective agreements signed by certain categories of employees are, 

in the current year, presented in the balance sheet under the caption, ‘‘Provisions for contract termination 

indemnities’’ and detailed in Note 18. The comparative information as at December 31, 2002 has been 

modified accordingly. 

3) Consolidation principles 

Subsidiaries 

Subsidiaries are companies controlled by the Group. Control exists when the Group has direct or 

indirect control over the financial and operating policies of a company so as to obtain benefits derived 

from its activities. Control is generally assumed where the Group holds more than half of a company’s 

voting rights. 

The financial statements of the significant subsidiaries are included in the consolidated financial 

statements from the date when control commences until the date when control ends. 

Investments in non-significant subsidiaries are recorded as non-current assets at their fair value. Gains 

and losses resulting from this valuation procedure are recorded in the income statement. 

Associated companies 

Associated companies are companies in which the Group retains a significant influence, but not 

control, over the financial and operating policies. Significant influence is generally assumed when the 

Group holds at least 20% or more of the voting rights. 

A-I-8



The financial statements of associated companies are included in the consolidated financial 

statements using the equity method, according to which the Group records its share of the net assets of the 

associate company in the Group balance sheet from the date when significant influence commences until 

the date when significant influence ends. 

Jointly controlled entities 

Jointly controlled entities are companies in which the Group holds joint control over the activities 

under a contractual arrangement. 

The financial statements of jointly controlled entities are included in the consolidated financial 

statements using the equity method, according to which the Group records its share in the net assets of the 

jointly controlled entity in its balance sheet from the date when joint control commences until the date 

when joint control ends. 

Transactions eliminated through consolidation 

Intra-group balances and transactions as well as unrealised gains resulting from intra-group 

transactions are eliminated in the preparation of the consolidated financial statements. Unrealised losses 

resulting from intra-group transactions are only eliminated to the extent that there is no indication of 

possible impairment. 

Unrealised gains resulting from transactions with associated companies and jointly controlled entities 

are eliminated to the extent of the Group’s interest in such companies or entities, against the investment 

amount of the associated company or jointly controlled entity. Unrealised losses are only eliminated to the 

extent that there is no indication of possible impairment. 

A listing of the main subsidiaries and the companies accounted for using the equity method is shown 

in Note 30 to the consolidated financial statements. A complete listing of Group companies as at 

December 31, 2003 has been submitted to the ‘‘Greffe du tribunal d’arrondissement’’ of Luxembourg. 

4) Business combinations—goodwill 

Any difference between the cost of an acquisition and the acquirer’s interest in the fair value of the 

identifiable assets and liabilities acquired is accounted for as goodwill, or negative goodwill, and is 

reported as an asset. 

Minority interests are recorded using their share of the fair value of the acquired net assets. 

Goodwill is amortised over its estimated useful life using the straight-line method. Estimated useful 

lives are 5 years for downstream activities (processing and distribution) and 10 years for upstream activities 

(blast furnaces, steel production and rolling mills). 

Negative goodwill is accounted for as income in accord with the following principles: 

• when negative goodwill is related to identifiable future losses or expenses that are identified in the 

acquirer’s plan, and can be measured reliably, negative goodwill is recorded as income when the 

future losses or expenses are incurred; 

• when negative goodwill cannot be related to identifiable future losses or expenses, negative goodwill 

is recorded as income on the basis of the weighted average residual useful life of the acquired 

depreciable / amortisable assets; and 

• negative goodwill in excess of the fair value of non-monetary assets acquired is recorded 

immediately in the income statement. 

A-I-9



5) Foreign currency translation 

Transactions in foreign currencies 

Transactions denominated in foreign currencies are converted into EUR at the foreign exchange rate 

ruling at the date of the transaction. 

Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are 

converted at the foreign exchange rate ruling at that date. Foreign exchange differences arising on 

conversion are recorded in the income statement. 

Non-monetary assets and liabilities denominated in foreign currencies, recorded at historical cost, are 

converted at the foreign exchange rate ruling at the date of the transaction. 

Financial statements denominated in foreign currencies 

Assets and liabilities denominated in foreign currencies, including goodwill and fair value adjustments 

arising on consolidation, are converted into EUR at the foreign exchange rate ruling at the balance sheet 

date. Revenues and expenses of foreign currency operations are converted into EUR at the average rate of 

exchange for the period. Foreign exchange differences arising on conversion are recorded directly in 

shareholders’ equity. 

6) Intangible assets 

Research and development 

Expenditure on research activities, undertaken with a view to acquiring new scientific or technical 

knowledge and understanding, is recognised in the income statement as an expense when it is incurred. 

Expenditure on development activities, where research findings are applied to the development or 

design for the production of new or substantially improved products and processes, is capitalised if the 

product or process is technically and commercially feasible and the Group has sufficient resources to 

complete the development programme. 

The expenditure capitalised includes the cost of materials, direct labour costs and an appropriate 

proportion of overheads. 

Capitalised development expenditure is stated at cost less accumulated amortisation and impairment 

losses. 

Other development expenditure is recognised in the income statement when incurred. 

Other intangible assets 

Other intangible assets acquired by the Group are stated at cost less accumulated amortisation (see 

below) and possible impairment losses. Expenditure on internally generated goodwill is recognised in the 

income statement when incurred. 

Intangible assets other than goodwill primarily include the cost of technology and licences purchased 

from third parties. These intangible assets are amortised on a straight-line basis over a maximum period of 

five years. 

Subsequent expenditure 

Subsequent expenditure on intangible assets is capitalised only when it increases the future economic 

benefits of the specific asset to which it relates and when this cost can be measured and attributed to the 

asset in a reliable manner. All other expenditure is recognised immediately as an expense when incurred. 

Amortisation 

Amortisation is recognised as an expense on a straight-line basis over the estimated useful lives of 

intangible assets. 

A-I-10



The estimated useful lives applied are as follows: 

• Patents and trademarks: 5 years 

• Capitalised development costs: 5 years 

7) Property, plant and equipment 

Items of property, plant and equipment are stated at cost less accumulated depreciation and possible 

impairment losses. The cost of an asset created by the Group includes the cost of materials, direct labour 

costs and an appropriate proportion of overheads. Borrowing costs on loans used to finance the 

construction of property, plant and equipment are capitalised as part of the cost of the asset until such time 

that the asset is ready for its intended use. 

Property, plant and equipment are subsequently stated at cost less accumulated depreciation less any 

impairment losses. 

Where an item of property, plant and equipment comprises major components having different useful 

lives, they are accounted for as separate items. 

The cost of the periodic re-lining of blast furnaces is capitalised and depreciated over the expected 

production period. 

Maintenance and repair costs are recognised as expenses in the period in which they are incurred. 

Government grants that compensate the Group for the acquisition of property, plant and equipment 

are deducted from the carrying amount of the related asset and credited to the income statement on a 

straight-line basis over the expected useful life of the related asset. 

Subsequent expenditure 

Expenditure incurred in replacing or renewing components of some items of property, plant and 

equipment are accounted for as the acquisition of a separate asset and the replaced asset is written off. 

Other subsequent expenditure on property, plant and equipment is only recognised as an asset when 

the expenditure improves the condition of the asset beyond its originally assessed standard of performance. 

All other subsequent expenditure is recognised in the income statement as an expense in the period in 

which it is incurred. 

Depreciation 

Depreciation is accounted for as an expense on a straight-line basis over the estimated useful lives of 

items of property, plant and equipment. Land is not depreciated. 

Property, plant and equipment acquired before January 1, 2001 are depreciated over their useful lives, 

which range from 12 to 20 years for buildings and industrial installations and from 5 to 12 years for other 

property, plant and equipment. 

A-I-11



For other property, plant and equipment the estimated useful lives are as follows: 

Long products and 

stainless 

Electric Arc Hot-rolling 

Flat products Furnace mills 

Industrial buildings .................................. 25 years 25 years 

Technical installations and machinery 

Hot phase: new capital expenditure ....................... 25 years 15 years 25 years 

Hot phase: renovation ................................ 15 years 10 years 15 years 

Cold phase: new capital expenditure ...................... 18 years — 18 years 

Cold phase: renovation ................................ 12 years — 15 years 

Cold phase: downstream ............................... 12 years — 12 years 

Other ............................................ 

5 to 20 years 

Leases 

Where the Group is a lessee 

Leases where the Group assumes substantially all the risks and rewards of ownership are classified as 

finance leases. Property, plant and equipment acquired by way of finance leases are stated at an amount 

equal to the lower of the fair value and the present value of the minimum lease payments at the inception 

of the lease. Each lease payment is broken down between the finance charges and the repayment of the 

lease liability. The finance charge is spread over the life of the lease so as to achieve a constant rate of 

interest on the remaining balance of the liability. 

The depreciation policy of capitalised leased assets is similar to that applied to owned property, plant 

and equipment. If there is no reasonable certainty that the lessee will obtain ownership at the end of the 

lease term, the asset is depreciated over the shorter of its estimated useful life and the lease term. 

Where a significant portion of the risks and rewards of ownership are retained by the lessor, the 

associated lease contracts are classified as operating leases. Payments made under operating leases are 

recognised as an expense in the income statement of the period. 

8) Impairment of assets 

The carrying amounts of the Group’s assets, other than inventories, deferred tax assets and assets 

arising from employee benefits, are reviewed at each balance sheet date to determine whether there is any 

indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. For 

intangible assets that are not yet available for use, their recoverable amount is estimated at each balance 

sheet date. 

An impairment loss is recognised whenever the carrying amount of an asset or the cash-generating 

unit to which it belongs exceeds its recoverable amount. Impairment losses are recognised as an expense in 

the income statement. 

Calculation of recoverable amount 

The recoverable amount of an asset is the higher of its net selling price and its value in use. In 

assessing its value in use, the estimated future cash flows are discounted to their present value using a 

pre-tax discount rate that reflects current market assessments of the time value of money and the risks 

specific to the asset. For an asset that does not generate cash inflows largely independent of those from 

other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs. 

The recoverable amount of investments in held-to-maturity securities and receivables is calculated as 

the present value of the expected future cash flows, discounted at the original effective interest rate 

inherent in the asset. 

Cash flows on short-term receivables are not discounted. 

A-I-12



Reversal of an impairment loss 

An impairment loss recognised in prior years is reversed if, and only if, there has been a change in the 

estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. 

However, the increased carrying amount of an asset due to a reversal of an impairment loss should not 

exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no 

impairment loss been recognised for the asset in prior years. 

An impairment loss recognised for goodwill is not reversed unless the impairment loss was caused by a 

specific external event of an exceptional nature that is not expected to recur, and subsequent external 

events have reversed the effect of that event. 

9) Investments in debt and equity securities 

Investments held for trading are classified as current assets and are stated at fair value, with any 

resulting gain or loss being recognised in the income statement. 

Investments with a fixed maturity date above one year and where the Group has the positive intent 

and the ability to hold the investment through to maturity, are included in non-current assets and are 

stated at amortised cost. The latter is determined using the original effective interest rate inherent in the 

investment less impairment losses. 

Other investments held by the Group are classified as being available-for-sale and are stated at fair 

value, with any resulting gain or loss being recognised in the income statement. 

The fair value of investments held for trading and investments available-for-sale are taken as the 

quoted bid price at the balance sheet date. For unquoted securities, discounted cash flow techniques are 

used. 

10) Trade and other receivables 

Trade and other receivables are stated at cost less provisions for irrecoverable amounts. 

11) Inventories 

Construction work in progress 

Construction work in progress is stated at contract cost increased by the related profit recognised to 

date less progress billings. Cost includes all expenditure directly related to the project and an allocation of 

fixed and variable overheads incurred in the Group’s contract activities. 

Other inventories 

Raw materials and supplies are stated at the lower of cost (using either the average cost method or the 

first in first out method) or net realisable value. Finished goods and work-in-progress are stated at the 

lower of production cost or net realisable value. 

Production cost includes direct raw material and labour costs and a portion of overhead costs, 

excluding general and administrative expenses. The market value of raw materials and other inventories is 

based on the net realisable value, including a provision for obsolescence or slow-moving items where 

appropriate. 

12) Cash and cash equivalents 

Cash and cash equivalents include cash and short-term investments with a maturity of less than three 

months from the acquisition date. 

Short-term investments are valued at market value at the end of each period. 

A-I-13



13) Equity 

Repurchase of share capital 

When share capital is repurchased, the amount of consideration paid, including all attributable costs, 

is recognised as a change in equity. Repurchased / treasury shares are deducted from total shareholders’ 

equity under the caption ‘‘Treasury shares’’ until they are cancelled. 

Dividends 

Dividends are recognised as a liability in the period in which they are approved by the General 

Meeting. 

14) Convertible debenture loans 

Debenture loans convertible into share capital at the option of the holder, where the number of shares 

issued does not change with fluctuations in their fair value, are accounted for as compound financial 

instruments, net of attributable transaction costs. The equity component of the convertible debenture 

loans is calculated as the excess of the issue proceeds over the present value of the future interest and 

principal payments, discounted at the prevailing market rate for a similar liability that does not have an 

associated equity component. The interest expense recognised in the income statement is calculated using 

the effective interest rate method. 

15) Interest-bearing borrowings 

Interest-bearing borrowings are recorded at initial cost, less direct attributable transaction costs. They 

are then recorded at amortised cost with any difference between the amortised cost and the redemption 

value being recognised in the income statement over the period of the borrowings on an effective interest 

rate basis. 

16) Employee benefits 

Types of pension plans 

Defined contribution plans: 

Defined contribution plans are those plans in respect of which the Group pays fixed contributions into 

an external life assurance or pension fund for certain categories of employees. Contributions are paid in 

return for services rendered by the employees during the period. They are expensed as they are incurred in 

line with the treatment applied to wages and salaries. No provisions are established in respect of defined 

contribution plans, as they do not generate future commitments for the Group. 

Within the Group, defined contribution plans exclusively relate to pension plans. They are, primarily, 

additional pension plans that serve to complement local legal pension schemes in respect of which the 

Group pays contributions to social organisations and which are accounted for in the same manner as 

salaries and wages. 

Defined benefit plans: 

Defined benefit plans are schemes that provide guaranteed benefits to certain categories of 

employees, either by way of contractual obligations or through a collective agreement. This guaranteed 

benefit represents a future commitment for the Group and, as such, a liability is calculated. The provision 

is calculated by estimating the benefits accumulated by employees in return for services rendered during 

the period and during prior periods. 

Benefits are discounted in order to determine the present value of the future obligation resulting from 

this type of plan. They are shown in the balance sheet after the deduction of the fair value of the assets that 

serve to cover them. 

A-I-14



The discount rate applied is the yield, at the balance sheet date, on AAA credit rated bonds that have 

maturity dates similar to the terms of the Group’s pension obligations. Aqualified actuary performs the 

underlying calculations annually, using the projected unit credit method. 

When the terms and conditions of a plan change, the portion of the increased benefit relating to past 

services by the employees is calculated as an expense in the income statement on a straight-line basis over 

the average period until the benefits become vested. To the extent that the benefits vest immediately, the 

expense is immediately recognised in the income statement. 

In calculating the Group’s obligation in respect of a plan, to the extent that any unrecognised actuarial 

gain or loss exceeds ten percent of the greater of the present value of the defined benefit obligation and 

the fair value of plan assets, it is recognised in the income statement over the expected average remaining 

working lives of the employees participating in the plan (‘‘corridor policy’’). Otherwise, the actuarial gain 

or loss is not taken into consideration. 

Where the calculation results in a benefit to the Group, the recognised asset is limited to the net total 

of any unrecognised actuarial losses and past service costs and the present value of any future refunds from 

the plan or reductions in future contributions to the plan. 

Within the Group, defined benefit plans relate to complementary retirement schemes, departure 

indemnities, work medals and health insurance arrangements. 

Nature of commitments of defined benefit plans 

Complementary retirement schemes 

Such schemes are provided in addition to the legal minimum pension in respect of which Group 

companies contribute directly into social organisations and which are accounted for in the same manner as 

salaries and wages. 

Departure indemnities 

Departure indemnities are normally associated with collective agreements with employees under 

which indemnities are paid upon normal retirement as well as upon voluntary or involuntary retirement. 

Work medals 

Work medal programmes are sometimes established under agreements at individual company level. 

These arrangements represent long-term service award programmes made to employees with certain levels 

of seniority with their employers. 

Health insurance 

Health insurance schemes relate exclusively to the American subsidiaries of the Group (‘‘post 

retirement medical care’’). For European entities, health insurance is in place by way of obligatory 

contributions into state health insurance schemes. These contributions are accounted for in the same 

manner as wages and salaries. 

Assets covering commitments relating to defined benefit plans 

The commitments in respect of certain retirement plans are wholly, or in part, covered by life 

assurance policies or pension funds, depending on the regulations in place in the country in which the 

benefits are awarded (the concept of a ‘‘funded obligation’’). 

Externalised commitments are evaluated by external specialists. 

Remuneration by way of shares or share options 

Arcelor S.A. has a share option plan in place as at December 31, 2003. Moreover, options on Usinor 

shares have been allocated to certain Directors and employees of Usinor. 

A-I-15



Options were issued at the market price at the date of issue and may be exercised at that price. No 

cost linked with these awards has been accounted for in the income statement. When options are exercised 

the cash received less transaction costs are credited to subscribed capital and share premium. 

17) Provisions for contract termination benefits 

The Group recognises an obligation for termination benefits when it is demonstrably committed 

either to terminating an employee’s contract before the normal retirement date or to encouraging 

voluntary redundancy. Such termination benefits do not bring future economic benefits (serices rendered 

by employees) to the Group and are immediately recognised in the income statement. 

Within the Group, provisions for termination benefits fall into one of two categories: 

Social provisions in the context of restructuring plans 

Provisions are recorded when the Group has announced to the entirety of the affected employees or 

their representatives a social plan that is detailed and formalised in accordance with the requirements of 

IAS 37. Such social plans either translate into redundancy or early retirement measures. 

Benefits are calculated as a function of the approximate number of people for whose employment 

contracts will be terminated. If such benefits are claimable more than twelve months after the end of the 

period, they are discounted using an interest rate, which corresponds to that of AAA credit rated bonds 

that have maturity dates approximating the terms of the Group’s obligations. 

Early retirement plans 

Within the Group, early retirement plans primarily correspond to the practical implementation of 

social plans. Such early retirement plans are considered effective when the affected employees have been 

formally informed and when liabilities have been determined using an appropriate actuarial calculation. 

Early retirement plans can also be linked to collective agreements signed with certain categories of 

employees. 

Liabilities in respect of both of the above scenarios are calculated on the basis of the effective number 

of employees likely to take early retirement, in accordance with IAS 19. An independent actuary performs 

the calculation annually. Liabilities are discounted using an interest rate, which corresponds to that of 

AAA credit rated bonds that have maturity dates approximating the terms of the Group’s obligations. 

18) Provisions 

A provision is accounted for when the Group has a present obligation as a result of a past event (legal 

or constructive), whose amount can be reliably estimated, and when it is probable that an outflow of 

economic resources will be required to settle the obligation. 

Technical warranties 

A provision for technical warranties is recognised when the underlying products or services are sold. 

The provision is based on historic warranty data and a weighting of all possible outcomes against their 

associated probabilities. 

Restructuring 

A provision for restructuring is accounted for when the Group has approved a detailed formal 

restructuring plan and has raised a valid expectation that it will carry out the restructuring by commencing 

the implementation of the plan or announcing publicly its main features. 

A-I-16



Environment 

The Group estimates provisions related to environmental issues on a case-by-case basis, taking into 

account applicable legal requirements. A best estimate based on the available information, is calculated, 

providing that the available information indicates that a loss is probable and can be reasonably estimated. 

Onerous contracts 

A provision for onerous contracts is recognised when the expected economic benefits to be received 

by the Group under a contract are lower than the unavoidable costs of meeting the associated obligations. 

19) Trade and other payables 

Trade and other payables are stated at cost. 

20) Deferred taxes 

Deferred taxes are calculated for each taxable entity using the balance sheet liability method on 

temporary differences arising between the tax bases of assets and liabilities, as determined in accordance 

with the tax rules in force in the countries in which the Group conducts its operations, and their carrying 

amounts in the financial statements. Deferred tax assets and liabilities are measured at the tax rates that 

are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates 

that have been enacted or substantively enacted at the balance sheet date. 

Assets and liabilities are netted in respect of taxes levied by the same tax authorities and if local tax 

authorities approve this treatment. 

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be 

available against which they can be utilised. Therefore, taking into account the cyclical nature of the 

business, deferred tax assets may be recognised by companies that have incurred tax losses in previous 

periods. 

21) Revenue recognition, interest and dividend income 

Sales of goods and services 

Revenue from the sale of goods is recognised in the income statement when the significant risks and 

rewards of ownership have been transferred to the buyer. Revenue from services rendered is recognised in 

the income statement in proportion to the stage of completion of the related transaction at the balance 

sheet date. The stage of completion is assessed according to the work performed. No revenue is recognised 

if there are significant uncertainties regarding the recovery of the amount due, associated costs or the 

possible return of goods. 

Construction contracts 

As soon as the outcome of a construction contract can be estimated with reliability, contract revenue 

and expenses are recognised in the income statement in proportion to the stage of completion of the 

contract. The stage of completion is assessed according to the work performed. 

Expected losses on a contract are recognised immediately upon recognition in the income statement. 

Interest and dividend income 

Interest income is recognised in the income statement on a prorata basis, taking into account the 

effective yield rate. 

Dividend income is recognised in the income statement on the date the General Meeting approves the 

dividend payment. 

A-I-17



22) Financial risk management 

Derivative financial instruments 

The Group uses derivative financial instruments, interest rate swaps and forward foreign exchange 

contracts to hedge its exposure to risks relating to foreign exchange, interest rates and raw material prices 

and arising from operating, financing and investment activities. 

Derivative financial instruments are initially recognised at cost and are subsequently restated at their 

fair value. Unrealised gains or losses are recognised depending on the nature of the item being hedged. 

The fair value of interest rate swaps is the estimated amount that the Group would receive or pay to 

terminate the swap at the balance sheet date, taking into account current interest rates and the current 

creditworthiness of the swap counter-party. 

The fair value of forward foreign exchange contracts is their quoted market price at the balance sheet 

date, being the present value of the quoted forward price or forward rate. 

Hedge of cash flows 

When a derivative financial instrument hedges the variation in cash flows of a firm commitment or a 

forecast transaction, the effective part of any resultant gain or loss on the derivative financial instrument is 

recognised directly in equity. 

When the firm commitment or forecast transaction results in the recognition of an asset or a liability, 

the cumulative gain or loss is removed from equity and enters into the initial measurement of the 

acquisition cost or other carrying amount of the asset or liability. 

The ineffective part of any gain or loss is recognised in the income statement. Any gain or loss arising 

from the time value of the derivative financial instrument is recognised in the income statement. 

When a hedging instrument expires, is sold, terminated or exercised the accumulated unrealised profit 

or loss on the hedging instrument is maintained in equity for as long as the expected transaction does not 

occur and is recognised in accordance with the above policy when the transaction occurs. If the hedged 

transaction is no longer probable, the cumulative net gain or loss, which had been recognised in equity, is 

reported immediately in the income statement. 

Hedge of fair value 

Where a derivative financial instrument hedges the variability in fair value of a recognised receivable 

or payable, any resulting gain or loss on the hedging instrument is recognised in the income statement. The 

gain or loss attributable to the hedged risk adjusts the accounting value of the hedged element and is 

recognised directly in the income statement. 

The fair value of the hedged items, in respect of the risk being hedged, is their carrying amount at the 

balance sheet date translated to EUR at the foreign exchange rate ruling at that date. 

Hedge of net investment in foreign operation 

Where a foreign currency liability hedges a net investment in a foreign operation, foreign exchange 

differences arising on translation of the liability to EUR are recognised directly in equity. Where the 

hedging instrument is a derivative, any gain or loss on the hedging instrument relating to the effective 

portion of the hedge is recognised in equity; the gain or loss relating to the ineffective portion is recognised 

immediately in the income statement. 

Where the hedging ability of an instrument is not demonstrated, the related profit or the loss is 

recognised in the income statement. 

A-I-18



23) Segment reporting 

A segment is a distinguishable component of the Group that is engaged either in providing products 

or services (business segment), or in providing products or services within a particular economic 

environment (geographical segment), which is subject to risks and rewards that are different from those of 

other segments. 

The Group’s primary segments are defined as the ‘‘business segments’ and the secondary are the 

‘‘geographical segments’’. 

Segment assets are operational assets used by the sector in the context of its operating activities. They 

include attributable goodwill, intangible assets and property, plant and equipment, as well as current assets 

used in the operating activities of the sector. They do not include deferred tax assets, other investments or 

receivables and other non-current financial assets. Such assets are shown under the caption ‘‘unallocated 

assets’. 

Sector liabilities are liabilities resulting from the activities of a sector, which can either be directly 

attributed to the sector or can be attributed to it reasonably. They include current and non-current 

liabilities but exclude financial debt and deferred tax liabilities. Such liabilities are shown under the caption 

‘‘unallocated liabilities’’. 

NOTE 3—CHANGES IN CONSOLIDATION SCOPE 

As at December 31, 2003, the scope of consolidation of the Arcelor Group includes, in addition to 

Arcelor S.A., 442 fully consolidated companies (December 31, 2002: 474). Furthermore, the Group 

accounts for 227 companies using the equity method (December 31, 2002: 168). The increase in the 

number of companies accounted for under the equity method is explained by the fact that, as at 

December 31, 2003, the Group accounts separately for companies which were included in sub-groups as at 

December 31, 2002. 

The major changes in the consolidation scope since December 31, 2002 are as follows: 

Acquisitions: 

Further to the purchase of the rolling mill of Pallanzeno (production of small and medium beams) 

from the Duferco group and the purchase of a participation of 49.9% in the steel works of San Zeno, Travi 

e Profilati di Pallanzano SpA (Italy, long carbon steel) is fully consolidated and San Zeno Acciai—Duferco 

SpA (Italy, long carbon steel) is accounted for using the equity method from July, 1 2003. 

Disposals: 

In accordance with the engagements taken with the European Commission, the Group has completed 

the following disposals during the year (given that the 49% holding in the Spanish company Bamesa had 

been disposed of in September 2002): 

• disposal of the 75.5% participation in the wet galvanisation production line of Galmed (Spain, flat 

carbon steel) to the ThyssenKrupp Stahl group on March 31, 2003; 

• disposal of Beautor (Belgium, flat carbon steel) and Sorral (France, flat carbon steel), which 

specialise in cold milling, electro-zincing and wet galvanisation, to the Duferco group in April 2003; 

• disposal, in March and April 2003, of all of the sites and subsidiaries of Cofrafer (France, 

distribution, processing and trading) specialised in splitting, oxycutting and distribution; 

• disposal, in June 2003, of the 50% holding in Lusosider (Portugal, flat carbon steel), a company 

specialised in cold milling and galvanisation, to the Corus group; 

• disposal in September 2003 of the galvanisation production line of Laminoir de Dudelange 

(Luxembourg, flat carbon steel) to Dugal; 

A-I-19


NOTE 3—CHANGES IN CONSOLIDATION SCOPE (Continued) 

• disposal in October 2003 of the holding of 66.67% in the galvanisation unit of Segal (Belgium, flat 

carbon steel) to the Corus group; and 

• disposal in December 2003 to the majority shareholder of the 39.93% holding in Finarvedi (Italy, 

flat carbon steel). 

Moreover, the Arcelor Group has disposed of its plastics activity (PUM Plastics group—France, 

distribution, processing and trading) to Point.P (subsidiary of the Saint-Gobain group). PUM Plastics, with 

turnover of EUR 234 million, specialises in the distribution of plastics products to the construction and 

public works sectors. 

Finally, in December 2003, the Finnish steel operator Rautaruukki purchased Dikema Stal AS 

(Norway, distribution, processing and trading) which specialises in the pre-fabrication of metal products 

and the operation of steel service centres. 

Other changes: 

BMP Siderurgica S.A. (Brazil, long carbon steel) has been fully consolidated since April 1, 2003. The 

company, formerly known as Mendes Júnior Siderurgia SA, has become a subsidiary of the Group through 

Belgo-Mineira Participação Indústria e Comércio, which holds 99% of its share capital. Since June 2003, 

BMP Siderurgica S.A. operates on the Juiz de Fora site, thus terminating the lease between Belgo-Mineira 

Participação Indústria e Comércio and the Mendes Júnior group. 

The Group has also increased its participation in Companhia Siderurgica de Tubarao (CST) in Brazil 

(Brazil, flat carbon steel). The holding increased from 24.4% on December 31, 2002 to 29.4% on 

December 31, 2003, primarily due to the disposal to the Group and to CVRD of the participation of 

Acesita (Brazil, stainless steel) in Aços Planos do Sul (Brazil, flat carbon steel). 

The following companies, from the distribution, processing and trading sector have been fully 

consolidated for the first time in 2003: 

• Arcelor Dystrybucja Polska SP.Z.O.O. (Poland); 

• Arcelor Distribucia Slovensko SRO (Slovakia); 

• Arcelor Acelkereskedelmi KFT en (Hungary); and 

• Arcelor Distribuce-CZ SRO (Czech Republic). 

In the stainless steel sector, the following companies were fully consolidated for the first time in 2003: 

• Trefilados Inoxydables de Mexico (Mexico); 

• TEVI-Trafilerie e Viterie Italiane S.R.L et Alinox S.R.L. (Italy); 

• Ugitech UK Ltd (United Kingdom); 

• Ugine-Savoie Iberica S.A. (Spain); 

• Ugine-Savoie Suisse S.A. (Switzerland); 

• Ugine & ALZ S.A. (France); and 

• Longtain Aciers Spéciaux et Inoxydables-Longtain Inox (Belgium). 

In the context of the restructuring of the Group’s activities, the following events also took place: 

• Absorption by Usinor S.A. of Valinter, Auxidev, Indus, Sideco and Société Industrielle de Souvigny 

(France, other activities); 

• Absorption of Bruyères Acier Service by Cisatol (France, distribution, processing and trading); 

• Absorption of Sprint Métal by Ugitech (France, stainless steels); 

• Absorption of Rostfrei Coil Center Beteiligung GmbH by RCC GmbH (Germany, stainless steels); 

A-I-20



• Absorption of Profilarbed Distribution France SAS by Arcelor Profil (France, distribution, 

processing and trading); and 

• Liquidation of Sidinvest (Belgium, other activities) and Financieringmaatschappij Dikema B.V. 

(Netherlands, distribution, processing and trading). 

Finally, the Traxys group (Luxembourg, distribution, processing and trading), which is under joint 

control between the Arcelor Group and Umicore arising from the contribution by the Group of 

Considar Inc. and Considar Europe S.A. and operating in the trading of iron alloys has been accounted for 

under the equity method since the third quarter of 2003. 

The fair value of the net assets acquired is presented below. It corresponds to the acquisition of Travi 

e Profilati di Pallanzano SPA and San Zeno Acciai—Duferco SPA, as well as the full consolidation of BMP 

Siderurgica S.A. 

2003 2002 

In EUR million 

Intangible assets .................................................. — 1 

Tangible assets ................................................... 157 4 

Holdings in companies accounted for under the equity method ................ 10 29 

Other participations ............................................... — — 

Debtors and financial assets (commercials and others) ....................... 6 6 

Inventories ...................................................... — 2 

Cash and cash equivalents ........................................... 4 — 

Net deferred tax assets / liabilities ..................................... 43 — 

Interest-bearing loans .............................................. (3) (9) 

Provisions for pensions and similar benefits .............................. (3) — 

Other provisions .................................................. (1) (2) 

Creditors (suppliers and others) ....................................... (6) (4) 

Minority interests ................................................. — 1 

Fair value of acquired assets ......................................... 207 28 

Net goodwill recorded .............................................. (30) 3 

Total acquisition cost ............................................... 177 31 

Cash and cash equivalents acquired .................................... 4 — 

Amounts paid during prior periods .................................... (115) — 

To be paid in subsequent periods ...................................... (17) (1) 

Outflow resulting from the acquisition .................................. (41) (30) 

A-I-21



The fair value of the net assets disposed of is shown below: 

2003 2002 


Tangible assets ..................................................... 120 44 

Holdings in companies accounted for under the equity method .................. 97 45 

Other participations ................................................. 2 21 

Debtors and financial assets (commercials and others) ........................ 162 (6) 

Inventories ....................................................... 186 77 

Cash and cash equivalents ............................................ 19 19 

Net deferred tax assets / liabilities ....................................... (3) (2) 

Interest-bearing loans ................................................ (149) (40) 

Provisions for pensions and similar benefits ................................ (5) (2) 

Other provisions ................................................... (7) (34) 

Creditors (suppliers and others) ........................................ (160) (118) 

Minority interests ................................................... (23) (5) 

Fair value of assets disposed of ......................................... 239 (1) 

Write-back of net goodwill recorded ..................................... (13) (41) 

Disposal price ..................................................... 339 67 

Profit on disposal ................................................... 113 25 

Cash and cash equivalents disposed of .................................... (11) (19) 

Repayment of debt towards companies disposed of .......................... (13) — 

To be received in subsequent periods ..................................... (31) — 

Inflow resulting from the disposal ....................................... 284 48 

NOTE 4—INTANGIBLE ASSETS 

Concessions, 

Goodwill on patents, licences 

acquisition and similar rights Other Total 


Gross opening balance ........................... (1,041) 216 235 (590) 

Acquisitions ................................... (30) 33 1 4 

Disposals ..................................... 23 (3) (3) 17 

Change in consolidation scope ..................... (50) — — (50) 

Foreign exchange differences ...................... 3 (2) 1 2 

Other ....................................... 329 (5) (6) 318 

Gross closing balance ............................ (766) 239 228 (299) 

Opening cumulative amortisation ................... (5) (144) (211) (360) 

Acquisitions/disposals ............................ (10) 2 — (8) 

Amortisation charge ............................. 111 (38) — 73 

Foreign exchange differences ...................... — 1 — 1 

Other ....................................... 25 4 13 42 

Closing accumulated amortisation ................... 121 (175) (198) (252) 

Opening net book value .......................... (1,046) 72 24 (950) 

Closing net book value ........................... (645) 64 30 (551) 

A-I-22


NOTE 4—INTANGIBLE ASSETS (Continued) 

4.1—POSITIVE GOODWILL ON ACQUISITION 

Analysis of positive goodwill on acquisition 2003 (in EUR million) 

Net value 

Net positive goodwill on acquisition Net value 2002 Acquisition Appropriation Other 2003 

Sollac/S3P .......................... 9 — (1) — 8 

Avis Steel .......................... 2 — — (1) 1 

ProfilARBED Distribution France ........ 4 — — (4) — 

Arcelor Profil ....................... — — (1) 4 3 

Galtec ............................. 5 — (2) — 3 

Weha Edelstahl ...................... 3 — (1) — 2 

CFA .............................. — 13 (3) — 10 

Haironville Portugal ................... — 2 — — 2 

Trefilados Mexico ..................... — 2 — — 2 

Total .............................. 23 17 (8) (1) 31 

Analysis of positive goodwill on acquisition 2002 (in EUR million) 

Net value 

Net positive goodwill on acquisition Net value 2001 Acquisition Appropriation 2002 

Sollac/S3P ............................... 10 — (1) 9 

Avis Steel ................................ 2 — — 2 

ProfilARBED Distribution France .............. — 5 (1) 4 

Galtec .................................. — 6 (1) 5 

Weha Edelstahl ........................... — 3 — 3 

Total ................................... 12 14 (3) 23 

4.2—NEGATIVE GOODWILL ON ACQUISITION 

Analysis of negative goodwill on acquisition 2003 (in EUR million) 

Net value 

Net negative goodwill on acquisition Net value 2002 Acquisition Appropriation Disposal Other 2003 

La Magona ........................ 12 — (2) — — 10 

Cockerill Sambre .................... 673 — (103) (13) (61) 496 

Arbed/Aceralia ..................... 362 — (5) — (283) 74 

APSL ............................ — 43 (3) — — 40 

BMP Siderurgica .................... — 30 (2) — — 28 

Investissements Technologies ........... — 17 (3) — — 14 

Alinox ........................... — 3 (1) — — 2 

Other ............................ 22 4 — — (14) 12 

Total ............................ 1,069 97 (119) (13) (358) 676 

The ‘‘Other’’ caption includes an amount of EUR 330 million recognised in the income statement 

further to the identification of restructuring expenses relating to the merger of Aceralia, Arbed and Usinor 

on February 28, 2002. 

A-I-23


NOTE 4—INTANGIBLE ASSETS (Continued) 

Analysis of negative goodwill on acquisition 2002 (in EUR million) 

Net value 

Net negative goodwill on acquisition Net value 2001 Acquisition Appropriation Other 2002 

La Magona ......................... 14 — (2) — 12 

Cockerill Sambre ..................... 905 — (116) (116) 673 

Arbed / Aceralia ..................... — 432 (4) (66) 362 

Other ............................. — 26 (4) — 22 

Total ............................. 919 458 (126) (182) 1,069 

Net goodwill on companies accounted for using the equity method is disclosed under the caption 

‘‘Investments accounted for using the equity method’’. 

NOTE 5—PROPERTY, PLANT AND EQUIPMENT 

Prepayments and 

Land 

fixed assets 

and Plant and under 

buildings machinery construction Other Total 


Gross opening balance .................... 3,139 12,200 757 589 16,685 

Acquisitions ........................... 53 303 869 68 1,293 

Disposals ............................. (154) (270) (4) (49) (477) 

Change in consolidation scope .............. 48 243 5 5 301 

Foreign exchange differences ............... (46) (180) (22) (10) (258) 

Other ................................ 112 634 (825) 100 21 

Gross closing balance .................... 3,152 12,930 780 703 17,565 

Opening cumulative depreciation ............ (866) (6,193) — (358) (7,417) 

Depreciation charge ...................... (109) (882) — (73) (1,064) 

Impairment charge ...................... (87) (340) (16) (5) (448) 

Disposals ............................. 34 183 — 29 246 

Change in consolidation scope .............. (8) (139) — (3) (150) 

Foreign exchange differences ............... 21 116 1 6 144 

Other ................................ (28) 126 — (27) 71 

Closing accumulated depreciation ............ (1,043) (7,129) (15) (431) (8,618) 

Opening net book value ................... 2,273 6,007 757 231 9,268 

Closing net book value .................... 2,109 5,801 765 272 8,947 

At December 31, 2003 the gross value of capitalised finance leases is EUR 101 million (2002: EUR 

112 million) and the net value is EUR 49 million (2002: EUR 48 million). 

The impairment charges include EUR 323 million in respect of the stainless steel sector, including 

J&L Specialty Steel—the Group’s US stainless steel manufacturing operation. 

Tangible fixed assets with a carrying value of EUR 60 million have been pledged as guarantees against 

financial debt (2002: EUR 231 million). 

A-I-24


NOTE 6—INVESTMENTS IN COMPANIES ACCOUNTED FOR USING THE EQUITY METHOD 

Value accounted for 

using the equity 

method Net goodwill Total 


Balance as at December 31 2002 ....................... 1,702 78 1,780 

Acquisitions ...................................... 32 — 32 

Disposals ........................................ (97) (19) (116) 

Profit for the year .................................. 145 (5) 140 

Dividends paid .................................... (92) — (92) 

Changes in the consolidation percentage .................. 112 19 131 

Foreign exchange differences .......................... (106) (13) (119) 

Increase in capital .................................. 23 — 23 

Other ........................................... (8) (13) (21) 

Balance as at December 31, 2003 ....................... 1,711 47 1,758 

The net value of quoted companies accounted for under the equity method is EUR 579 million as at 

December 31, 2003 (2002: EUR 529 million). The market value of these companies amounts to EUR 

654 million as at December 31, 2003 (2002: EUR 288 million). 

The net value of unquoted companies accounted for under the equity method is EUR 1 179 million as 

at December 31, 2003 (2002: EUR 1 251 million) which is not significantly different from the market value. 

A-I-25



(Continued) 

The primary investments in associated companies and jointly controlled entities are as follows: 

Total assets 

Total assets 

as at 

as at 

% Holding at December 31, % Holding at December 31, 

2003 year-end 2003 2002 year-end 2002 


ASSOCIATED COMPANIES 

Flat carbon steel 

CST (Brazil) ........................... 29.6% 424 24.6% 386 

Gonsider (Spain) ....................... — — 42.9% 222 

Holding Gonvarri SRL (Spain) ............. 58.8% 60 — — 

Gonvarri Industrial (Spain) ................ 59.8% 181 — — 

Gestamp (Spain) ........................ 35.0% 109 35.0% 101 

CLN (Italy) ........................... 35.0% 68 35.0% 66 

Finarverdi (Italy) ....................... — — 39.9% 52 

Borcelik (Turkey) ....................... 40.3% 50 40.3% 52 

Carsid (Belgium) ....................... 40.0% 16 40.0% 23 

Cia Hisparo-Brasileira de Pelatizaçao (Brazil) . . . 49.1% 12 49.1% 11 

Stainless steel 

Acesita (Brazil) ........................ 27.7% 111 27.7% 98 

Distribution, processing and trading 

Condesa (Spain) ........................ 48.8% 53 48.8% 50 

IMS (France) .......................... 36.0% 44 36.0% 45 

Traxys S.A. (Luxembourg) ................. 50.0% 22 — — 

Alfonso Gallardo (Spain) ................. — — 30.0% 11 

Hierros y Aplanaciones (Spain) ............. 15.0% 11 15.0% 10 

Long carbon steel 

LME (France) ......................... 34.0% 17 34.0% 14 

Société National de Sidérurgie (Morocco) ..... 8.5% 12 8.5% 11 

Sam Zeno Acciai-Duferco (Italy) ............ 49.9% 9 — — 

Other activities 

Groupe Atic (France) .................... 45.1% 19 45.1% 18 

Soteg (Luxembourg) ..................... 20.0% 13 20.0% 12 

JOINTLY CONTROLLED ENTITIES 

Flat carbon steel 

Lusosider (Portugal) ..................... — — 50.0% 30 

Long carbon steel 

TrefilARBED Kiswire (Korea) .............. 50.0% 74 50.0% 77 

Other activities 

DHS Group (Germany) .................. 51.3% 361 51.3% 381 

Various companies and jointly controlled entities — 92 — 110 

TOTAL .............................. 1,758 1,780 

The Gonvarri sub-group, which consists of the holding company Gonvarri SRL and of the sub-group 

Gonvarri Industrial is accounted for under the equity method considering the Group does not hold control 

of the holding company Gonsider SL. 

As at December 31, 2002, this sub-group was accounted for under the equity method via the Gonsider 

Group, which included the same companies. 

A-I-26



(Continued) 

The main elements of goodwill relating to companies accounted for using the equity method are as 

follows: 

Net amount 2003 Net amount 2002 


Acesita .............................................. 48 63 

CST................................................. 16 — 

Finaverdi ............................................. — 19 

DHS Group ........................................... (10) — 

Gestamp ............................................. — 7 

Carsid ............................................... (8) (12) 

Other ............................................... 1 1 

Total ................................................ 47 78 

NOTE 7—OTHER INVESTMENTS 

The main items comprising investments and other securities (not consolidated) comprise: 

Net value 2003 Net value 2002 


Shares in affiliated companies ................................. 126 196 

Investment securities ....................................... 71 78 

Other investment securities ................................... 110 192 

Total ................................................... 307 466 

The reduction in the value of shares in affiliated companies in primarily due to value adjustments 

recorded in the year. 

The decrease in other financial fixed assets is principally due to the decrease of EUR 103 million 

relating to the full consolidation of BMP Siderurgica S.A. (Brazil, long carbon steel), formerly known as 

Mendes Junior. 

NOTE 8—RECEIVABLES AND OTHER FINANCIAL ASSETS 

Receivables associated with investments, loans and other financial assets: 

2003 2002 

In EUR 

million 

Acesita ............................................................. — 55 

Acindar ............................................................. 121 95 

Carsid .............................................................. 89 110 

Forcast International ................................................... 7 8 

Duferco ............................................................. 17 — 

ThyssenKrupp Stahl .................................................... 13 — 

Sodisid—loans granted .................................................. 11 21 

Sodisid—securitisation .................................................. 30 26 

Revaluation of interest rate and exchange rate hedge instruments ................... 68 86 

Guarantee deposit ..................................................... 142 217 

Hedging of pension funds and similar benefits ................................. 10 5 

Other .............................................................. 185 143 

Total ............................................................... 693 766 

A-I-27


NOTE 9—INVENTORIES 

Inventories are detailed below, distinguishing between those held at historic cost and those valued at 

net realisable value. As at December 31, 2003, inventories are valued as follows: 

Inventories 

held at net 

Inventories held realisable 

at historic cost value Total 


Raw materials and stocks ............................... 629 1,365 1,994 

Work in progress ..................................... 607 750 1,357 

Finished goods ....................................... 471 1,177 1,648 

Contracts in progress .................................. 95 — 95 

Spares ............................................. 93 293 386 

Advances and prepayments on orders ....................... 17 — 17 

Total .............................................. 1,912 3,585 5,497 

As at December 31, 2002, inventories are valued as follows: 

Inventories 

held at net 

Inventories held realisable 

at historic cost value Total 


Raw materials and stocks ................................ 554 1,896 2,450 

Work in progress ...................................... 976 486 1,462 

Finished goods ....................................... 604 1,229 1,833 

Contracts in progress ................................... 85 — 85 

Spare parts .......................................... 13 232 245 

Advances and prepayments on orders ....................... 16 — 16 

Total .............................................. 2,248 3,843 6,091 

Impairments recorded to value inventories at their net realisable value amounted to EUR 531 million 

as at December 31, 2003 (2002: EUR 610 million). 

NOTE 10—TRADE RECEIVABLES 

2003 2002 


Gross amount ..................................................... 3,431 4,460 

Impairment ....................................................... (178) (140) 

Total ............................................................ 3,253 4,320 

‘‘Trade receivables’’ as at December 31, 2002 include an amount of EUR 1 097 million in respect of 

secured receivables. In accordance with IAS 39, these receivables were not accounted for as disposals and 

were therefore held on the balance sheet. The corresponding entry on the financing side was disclosed 

under the liability heading ‘‘Interest bearing liabilities (short-term)’’. 

In addition, the Group has concluded a sales contract on certain receivables with a third party. This 

contract replaces all securitisation arrangements that existed at December 31, 2002. The Group does not 

retain the associated credit risk on these receivables; the third party involved assume the significant risks 

and benefits related to the transferred receivables. The Group maintains the interest rate risk for a period 

of three months after transferring the receivables and ensures the recoverability of the funds on behalf of 

the third party. The corresponding remuneration receivable (or the forfeit payable), as defined by the 

underlying sale and purchase contract, depends on the recoverability of the receivables. The value of 

transferred receivables amounts to EUR 1 459 million as at December 31, 2003 (2002: EUR 498 million). 

A-I-28


NOTE 11—OTHER AMOUNTS RECEIVABLE 

2003 2002 


Taxation recoverable ................................................ 444 449 

Revaluation of foreign currency hedging instruments (IAS 39) .................. 16 29 

Revaluation of raw material hedging instruments (IAS 39) ..................... 50 3 

Other receivables ................................................... 868 852 

Total ............................................................ 1,378 1,333 

NOTE 12—CASH AND CASH EQUIVALENTS 

2003 2002 


Marketable securities—gross .......................................... 1,024 228 

Cash at banks and in hand ........................................... 687 782 

Short term deposits ................................................. 179 229 

Total ........................................................... 1,890 1,239 

NOTE 13—EQUITY 

13.1 ISSUED CAPITAL AND SHARE PREMIUM 

At the conclusion of the Public Exchange Offers in February 2002, 118,792 739 Aceralia shares 

(representing 95.03%), 11,559,672 Arbed shares (representing 99.45%) and 245,697,269 Usinor shares 

(representing 97.58%) were converted into 528,354,061 Arcelor shares. These shares were added to the 

6,450 existing shares issued on the incorporation of Arcelor S.A. on June 8, 2001. 

The contribution of shares in Arcelor S.A. was determined based on a EUR 14 value per share for a 

total amount of EUR 7,397 million. This contribution was recorded as EUR 2,642 million issued capital 

and EUR 4 755 million as share premium. 

In the context of the public share for share offer by Arcelor S.A. on July 9, 2002 for the Usinor shares, 

3,351,776 Arcelor S.A. shares were issued in exchange for Usinor shares on 31 December 2002. Moreover, 

after the de-listing of the Usinor shares from the primary market on Euronext Paris and within the 

framework of the public exchange offer of Usinor shares, 654,122 Arcelor S.A. shares were issued in 2002 

and a further 674,387 shares were issued in 2003. Subsequent to these purchases Arcelor S.A. holds 

99.24% of Usinor’s issued shares. 

As at December 31, 2003, subscribed capital comprises of 533,040,796 ordinary shares, fully paid up 

with a nominal value of EUR 2,665,203,980. The share premium amounts to EUR 4,795,105,775. 

Authorised share capital, including subscribed share capital, amounts to EUR 5 billion. 

The number of shares in circulation is as follows: 

Number of shares 

(thousands) 

December 31, 2001 (Usinor) ........................................... 251,776 

Initial capital from Newco ............................................ 6 

Capital increase—contribution to Arcelor ................................. 282,657 

Unconverted Usinor shares ........................................... (2,073) 

December 31, 2002 (Arcelor) .......................................... 532,366 

Capital increase .................................................... 675 

December 31, 2003 .................................................. 533,041 

A-I-29


NOTE 13—EQUITY (Continued) 

13.2 EXCHANGE DIFFERENCES 

The movement on foreign exchange differences of EUR -71 million (2002: EUR 309 million) is 

primarily due to the depreciation of the US dollar relative to the euro. 

13.3 SHARE OPTION PLAN 

As at June 30, 2003, Arcelor S.A. established a share option plan. 1,300,000 share options were made 

to 73 beneficiaries. 

Furthermore, the beneficiaries of the Usinor share option plans have the option of converting their 

Usinor shares into Arcelor shares. 

As at December 31, 2002, Usinor S.A. had two share option plans in place. 

• The first plan, established on November 21, 1997 covers 1,374,000 shares attributable to 295 

beneficiaries. 

• The second plan, established on March 7, 2000 covers 2,380,000 shares attributable to 460 

beneficiaries. 

The plan established on December 11, 1995 covering 757,000 shares attributable to 66 beneficiaries 

expired on December 10, 2002. On the expiry of this plan options over 628,000 shares were exercised and 

129,000 lapsed. 

The movement in the number of share options during the period was as follows: 

Number of share options 2003 2002 

Options at the beginning of year ..................................... 3,465,400 4,139,900 

Options issued during year ......................................... 1,300,000 — 

Options exercised during year ....................................... — (539,000) 

Options lapsed during year ......................................... (85,900) (135,500) 

Options at the end of year ......................................... 4,679,500 3,465,400 

Outstanding options as at December 31, 2003: 

Exercise price Number 

Maturity date (in EUR) of options 

November 21, 2002 to November 21, 2004 .......................... 13.92 1,198,600 

April 7, 2003 to April 7, 2008 ................................... 15.24 2,180,900 

July 1, 2006 to June 30, 2010 .................................... 9.94 1,300,000 

Total ..................................................... 4,679,500 

A-I-30


NOTE 13—EQUITY (Continued) 

13.4 OWN SHARES 

Number of shares Value 

(in EUR million) 

December 31, 2001 ...................................... — — 

Purchases linked to the business combination .................. 68,420,405 958 

Other acquisitions ...................................... 214,990 3 

Disposals ............................................. (13,968,163) (205) 

December 31, 2002 * ..................................... 54,667,232 756 

Acquisitions ........................................... 511,715 4 

Disposals ............................................. (534,158) (4) 

December 31, 2003 ...................................... 54,644,789 756 

* 6,000,000 shares were the subject of short term loans to third parties. 

13.5 DIVIDENDS 

The Board of Directors will propose a gross dividend of EUR 0.40 per share for the year to 

December 31, 2003. This dividend will be paid on May 24, 2004. These financial statements, prepared 

before the appropriation of profits do not include provision for the dividend, which is subject to 

shareholder approval at the Annual General Meeting on April 30, 2004. 

NOTE 14—EARNINGS PER SHARE 

The basic earnings per share is calculated by dividing the net profit (Group share) by the weighted 

average number of shares in circulation during the period, excluding the average number of ordinary 

shares purchased and held by the Group. 

2002 

Proforma 

2003 (unaudited) 2002 

Net profit/(loss)—Group share in EUR million .......... 257 (121) (186) 

Weighted average number of shares in issue ............. 478,278,668 485,279,429 485,279,429 

Earnings/(loss) per share—in EUR ................... 0.54 (0.25) (0.38) 

The diluted earnings per share is calculated by taking the financial instruments giving access to the 

share capital of the consolidating company, whether they are issued by the Company itself or by one of its 

subsidiaries. The dilution is calculated, instrument-by-instrument, taking into account the conditions 

existing at the balance sheet date and excluding anti-diluting instruments. Furthermore, the net profit is 

adjusted so as to eliminate the financing charge, net of tax, corresponding to the diluting instruments. 

When funds are collected in the context of the exercise of rights (subscription coupons and options) 

they are first attributed to the purchase of shares at market price if this is above the exercise price of the 

right. 

A-I-31


NOTE 14—EARNINGS PER SHARE (Continued) 

In both cases, funds are taken into account on a prorata basis in the issuing year of diluting 

instruments and on the first day of the financial years to follow. 

2002 

Proforma 


Net profit/(loss) used for the calculation of diluted earnings 

per share—in EUR million ....................... 257 (121) (186) 

Weighted average number of shares in issue, used for the 

calculation of diluted earnings per share .............. 478,278,668 485,279,429 485,279,429 

Diluted earnings per share in EUR * .................. 0.54 (0.25) (0.38) 

* Diluted earnings per share are equivalent to basic earnings per share. Bonds with an option to convert and/or exchange into new 

or existing shares (O.C.E.A.N.E.) and having an anti-diluting effect have not been considered in the calculation of diluted 

earnings in accordance with the requirements of IFRS. 

NOTE 15—MINORITY INTERESTS 

In the year ended December 31, 2003 minority interests increased by EUR 69 million, notably due to 

the inclusion of the result of the minority interests in 2003 (EUR 159 million). This increase has been 

partially offset by dividend payments to minority interests (EUR 37 million) and consolidation scope 

adjustments of EUR 87 million. 

In the year ended December 31, 2002, minority interests increased by EUR 603 million, primarily due 

to the Arbed/ Aceralia acquisition (EUR 865 million). In addition, the variation included a reduction of 

1.39% in minority interests in Usinor following the public share for share offer and an increase in foreign 

exchange differences (EUR -297 million) due to the depreciation of the Brazilian Real against the euro in 

the Brazilian Belgo Mineira sub-group. 

NOTE 16—INTEREST-BEARING LIABILITIES 

2003 2002 


Convertible debenture loans ........................................... 1,488 1,495 

Non-convertible debenture loans ........................................ 1,914 1,170 

Subordinated loans repayable by shares ................................... — 250 

Amounts owed to credit institutions ..................................... 1,268 1,335 

Amounts owed on fixed assets held under finance leases ...................... 35 40 

Fair value of interest rate hedge instruments ............................... 3 81 

Borrowings and other financial debt ..................................... 163 223 

Long term borrowings ............................................... 4,871 4,594 

Short term element of debenture loans ................................... 57 56 

Amounts owed to credit institutions ..................................... 220 580 

Commercial paper .................................................. 619 909 

Current bank borrowings ............................................. 215 493 

Net financing linked to securitisation programmes * .......................... — 1,097 

Subordinated loans repayable by shares ................................... — 189 

Amounts owed on fixed assets held under finance leases ...................... 5 11 

Accrued interest payable ............................................. 110 96 

Borrowings and other financial debt ..................................... 325 390 

Short term borrowings ............................................... 1,551 3,821 

* This financing is no longer applicable as at December 31, 2003 as a result of the termination of the securitisation programmes 

and the establishment of the receivables sale programme, as referred to at Note 10 above. 

A-I-32


NOTE 16—INTEREST-BEARING LIABILITIES (Continued) 

16.1 CONVERTIBLE DEBENTURE LOANS 

In December 1998 Usinor issued 29 761 904 bonds with an option to convert and/or exchange into 

new or existing shares (O.C.E.A.N.E.) for EUR 12.81 with a maturity date of January 1, 2006. The bonds 

can be repurchased or redeemed in advance, at the discretion of the issuer, and are convertible or 

exchangeable at the rate of one share for one bond. If not converted the bonds are redeemable at maturity 

for EUR 14.20. 

On February 18, 2000 Usinor issued 25 000 000 bonds with an option to convert and/or exchange into 

new or existing shares (O.C.E.A.N.E.) for EUR 19.87 with a maturity date of January 1, 2005. The bonds 

can be repurchased or redeemed in advance, at the discretion of the issuer, and are convertible or 

exchangeable at the rate of one share for one bond. If not converted, the bonds are redeemable at maturity 

for EUR 19.87. 

On the conclusion of the Public Exchange Offers 24 680 648 ‘‘O.C.E.A.N.E. Usinor 2005’’ 

(representing 98.72%) and 27 720 876 ‘‘O.C.E.A.N.E. Usinor 2006’’ (representing 97.01%) were converted 

into Arcelor O.C.E.A.N.E. debentures. 

In June 2002, Arcelor issued convertible bonds for a nominal amount of EUR 750 million represented 

by 38 961 038 bonds. The maturity date is 2017 with an annual interest rate of 3%. 

In the period following the Public Exchange Offers, ‘‘Arbed 3.25% senior convertible note 2004’’ 

bonds were converted into 8 775 712 Arcelor shares. The remaining non-converted bonds were redeemed 

in advance on April 27, 2002. 

Convertible debenture loans are disclosed in the balance sheet as follows (excluding interest payable): 

2003 2002 


Nominal value of convertible bonds ...................................... 1,633 1,640 

Share capital element, net of deferred tax ................................. (101) (101) 

Deferred tax liability ................................................ (44) (44) 

Liability element included in the balance sheet ............................. 1,488 1,495 

16.2 SUBORDINATED LOANS REDEEMABLE BY SHARES 

In December 1998, Auxidev (a holding company 100% owned by Indus since September 15, 2003, 

itself a 100% subsidiary of Usinor since September 16, 2003) issued EUR 259 million in subordinated loan 

notes redeemable by preference shares (TSAR) with a maturity date of December 31, 2003. 

On December 22, 2000, Valinter (a holding company 100% owned by Indus since September 15, 2003, 

itself a 100% subsidiary of Usinor since September 16, 2003) issued EUR 250 million subordinated loan 

notes redeemable by preference shares (TSAR) with a maturity date of December 31, 2005. 

Both loans were repaid early on June 30, 2003. 

16.3 BREAKDOWN BY CURRENCY (excluding short term debt) 

2003 % 2002 % 


EUR ................................................... 4,162 85 3,897 85 

USD.................................................... 530 11 539 12 

Other ................................................... 179 4 158 3 

Total .................................................... 4,871 100 4,594 100 

A-I-33



16.4 BREAKDOWN BY MATURITY (excluding short term debt) 

2003 2002 


2004 ............................................................ — 385 

2005 ............................................................ 917 1,131 

2006 ............................................................ 1,055 960 

2007 ............................................................ 331 333 

2008 ............................................................ 834 — 

After more than 5 years .............................................. 1,734 1,785 

Total ............................................................ 4,871 4,594 

16.5 INTEREST RATES 

a) Long-term debts 

Interest on variable interest debt is mainly linked to EURIBOR and LIBOR rates. 

2003 2002 


Fixed rate ........................................................ 2,171 2,833 

Variable rate ...................................................... 2,700 1,761 

Total ............................................................ 4,871 4,594 

b) Hedging instruments: for the financial year 2003 the net result relating to hedging instruments is a loss 

of EUR 18 million (2002: loss of EUR 24 million). 

16.6 DETAIL OF MAIN INDIVIDUAL LONG-TERM LOANS 

2003 2002 


Arcelor Finance 

Debenture loan 5.375% 1998/2006 ....................................... 62 — 

Debenture loan 6.385% (USD 120 million) 2003/2015 ......................... 97 — 

3-month debenture loan 2003/2006 ....................................... 100 — 

Debenture loan 6% 2000/2005 .......................................... 102 — 

Debenture loan 5.125% 2003/2010 ....................................... 598 — 

Debenture loan 6.125% 2001/2008 ....................................... 636 600 

3-month EURIBOR loan 2002/2006 ...................................... 18 37 

3-month EURIBOR loan 2001/2009 ...................................... 127 — 





Loan 6.4% 2001/2011 ................................................ 48 — 

Issue of transferable securities .......................................... 80 — 

Loan 4.06% 2003/2008 ............................................... 28 — 

Other loans ....................................................... 72 — 

Sub Total ......................................................... 2,220 637 

Arcelor 

Convertible debenture loan 3.875% 2000/2005 .............................. 487 483 

Convertible debenture loan 3% 1998/2006 ................................. 350 330 

Convertible debenture loan 3% 2002/2017 ................................. 651 646 

A-I-34



2003 2002 


Usinor 

3-month EURIBOR loan 2001/2007 ...................................... — 150 

Subordinated loan notes redeemable by preference shares—3-month EURIBOR loan 

2000/2005 (Valinter) ................................................ — 250 

Convertible debenture loan 3.875% 2000/2005 .............................. — 10 

Convertible debenture loan 3% 1998/2006 ................................. — 26 

Debenture loan 7.25% (USD 300 million) 1996/2006 .......................... 258 286 

Arbed 

Debenture loan 6% 2000/2005 .......................................... — 104 

Debenture loan 5.375% 1998/2006 ....................................... — 62 

EURIBOR loan 2000/2007 ............................................ 40 40 

3-month EURIBOR loan 2002/2007 ...................................... — 50 


Loan 4.75% 2000/2006 ............................................... — 23 

3-month EURIBOR loan 2001/2011 (AIS Finance) ........................... 125 120 

Aceralia 


Sidmar Finance 

Debenture loan 5.75% 1997/2004 ........................................ — 50 

Belgo Mineira 

LIBOR loan 1998/2013 (USD 66 million)—Guilman .......................... — 63 

Loan 10% 2001/2004 (USD 30 million)—BMU.............................. — 29 

Loan 10% 2001/2004 (USD 30 million)—BMU.............................. — 29 

TJLP loan 1998/2010 (BRL 97 million)—BMP .............................. 25 26 

IGPM loan 2003/2011 (BRL 83 million)—BMPS............................. 19 — 

LIBOR loan 2003/2006 (BRL 65 million)—Belgo Mineira ...................... 17 — 

Loan IGPM 2003/2017 (BRL 28 million)—BMPS............................ 7 — 

Vega do Sul 

LIBOR loan 2002/2014 (USD 50 million) .................................. 40 — 

LIBOR loan 2002/2012 (USD 83 million) .................................. 66 — 

TJLP loan 2002/2010 (BRL 179 million) ................................... 49 — 

Cockerill Sambre 

EURIBOR loan 1997/2005 (BEF 1 billion) ................................. — 12 

Other loans ....................................................... 347 1,020 

Total ............................................................ 4,871 4,594 

NOTE 17—EMPLOYEE BENEFITS 

17.1 NATURE OF COMMITMENTS 

The majority of the companies included in the Arcelor Group consolidation scope are European 

entities. According to the laws and regulations in effect in these countries additional benefits can be 

granted to staff. 

Where these benefits granted to staff result in a future obligation for the Group a provision is 

calculated on the basis of an actuarial valuation method. The Group uses independent actuaries to 

calculate the amounts of these commitments. Moreover, an independent firm is responsible for the 

coordination and supervision of all these actuarial calculations for the Group. 

A-I-35


NOTE 17—EMPLOYEE BENEFITS (Continued) 

In the majority of the countries in which the Group operates there is no requirement to cover 

retirement or medical obligations by entering into contracts with external assurance companies or pension 

funds except for Belgium, Spain and the United States where such hedging is compulsory (‘‘funded 

obligations’’). 

These legal requirements primarily affect Sidmar in Belgium and J&L Specialty Steel in the United 

States (retirement and additional medical coverage). Some other subsidiary companies (primarily Usinor 

S.A. in France) have also elected to cover, partly or completely, their retirement obligations through 

contracts with assurance companies. Independent actuaries evaluate these external policies. 

The difference between the current value of such commitments and that of the external insurance 

policies designed to cover such commitments (EUR 283 million in total, including all benefits) represents 

the net liability of the Group in respect of such benefits. This does not represent an overall funding 

shortfall but rather, in almost all cases, financing options entered into by the subsidiaries. 

17.2 FINANCIAL INFORMATION 

17.2.1 Details of provisions by type of commitment 

Pre-retirement plans have been reclassified to the balance sheet caption ‘‘Provisions for contract 

termination indemnities’’ (Note 18). 

Provisions for pensions and other benefits are broken down as follows: 

2003 2002 


Additional pension plans .............................................. 1,218 1,128 

Leaving indemnities ................................................. 391 377 

Early retirement plans ................................................ 75 49 

Work medals ...................................................... 49 43 

Total provision for pension plans and similar benefits ......................... 1,733 1,597 

Charges for the year in respect of all of these additional benefits granted to staff (including the 

interest charge linked to the discounting of commitments) are disclosed under the caption ‘‘Staff costs’’ in 

the income statement, as detailed in Note 21. 

A-I-36



17.2.2 Additional pension plans 

United 

France Belgium Germany Luxembourg States Other Total 

2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 


Financial assets 

Opening balance .......... 27 25 257 14 7 7 — — 76 89 88 51 455 186 

Changes in consolidation scope — — — 219 — — — — — 11 — 41 — 271 

Investment return recorded . . . (7) 2 16 9 — — — — 11 (10) 5 2 25 3 

Additional contributions ..... — — 31 24 — — 1 — 3 8 6 5 41 37 

Benefits paid out ......... (1) — (10) (9) — — — — (9) (9) (6) (3) (26) (21) 

Acquisitions/disposals/ 

liquidations ........... — — — — — — — — — — (16) — (16) — 

Exchange differences ....... — — — — — — — — (13) (13) (6) (8) (19) (21) 

Closing balance .......... 19 27 294 257 7 7 1 — 68 76 71 88 460 455 

Balance sheet provisions 

Actuarial value of liabilities 

covered by financial assets . . 137 120 309 256 7 7 2 — 136 128 75 89 666 600 

Fair value of financial assets . . (19) (27) (294) (257) (7) (7) (1) — (68) (76) (71) (88) (460) (455) 

Sub-total .............. 118 93 15 (1) — — 1 — 68 52 4 1 206 145 

Net asset situation resulting 

from financial assets covering 

commitments .......... — — — — 1 — — — — — 8 — 9 — 

Actuarial value of liabilities not 

covered by financial assets . . 519 543 21 19 337 307 177 152 6 11 6 5 1,067 1,037 

Unrealised actuarial (gains)/ 

losses ............... 6 (32) (17) 6 (7) — (21) — (1) (28) (11) 1 (51) (53) 

Unrealised cost of changes in 

pension scheme type ...... — — — — (9) — (3) — — (1) — — (12) (1) 

Balance sheet provision ..... 643 604 19 24 322 307 154 152 73 34 7 7 1,218 1,128 

Breakdown of charge for the 

period 

Cost of past services ....... 41 45 10 11 4 3 7 2 3 3 7 17 72 81 

Interest charge ........... 45 46 16 14 17 8 10 7 9 9 6 4 103 88 

Discounted return on assets . . (2) (1) (15) (12) — — — — (6) (8) (5) (5) (28) (26) 

Realised actuarial (gains)/losses 

during the period ........ (3) 3 — — — — — — 47 — — — 44 3 

Amortisation of cost of changes 

in pension scheme type or 

retroactive benefits paid . . . — — 12 — 1 1 2 1 — 5 (7) — 8 7 

Reductions and liquidations . . . (1) — — — — — — — — — — — (1) — 

Charge for the period ...... 80 93 23 13 22 12 19 10 53 9 1 16 198 153 

Movements in balance sheet 

provision 

Opening provision ......... 604 535 24 21 307 22 152 — 34 34 7 — 1,128 612 

Changes in consolidation scope (3) 7 — 19 — 294 — 151 — 5 — 6 (3) 482 

Exchange differences ....... — — — — — — — — (11) (5) (1) (1) (12) (6) 

Net asset situation resulting 

from financial assets covering 

commitments .......... — — — — 1 — — — — — 8 — 9 — 

Disbursements ........... — — 3 — 16 — — — — — — — 19 — 

(38) (31) (31) (29) (24) (21) (17) (9) (3) (9) (8) (14) (121) (113) 

Charge for the period ...... 80 93 23 13 22 12 19 10 53 9 1 16 198 153 

Closing provision ......... 643 604 19 24 322 307 154 152 73 34 7 7 1,218 1,128 

A-I-37



United 

France Belgium Germany Luxembourg States Other Total 

2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 


Main actuarial assumptions 

Discount rate ............ 5,75% 5,75% 5,75% 5,75% 5,75% 5,75% 5,75% 5,75% 6,07% 6,75% — — — — 

Rate of return on financial 

assets ............... 5,75% 5,75% 5,75% 5,75% 4,00% 5,75% 4,00% 5,75% 9,07% 9,00% — — — — 

Average rate of salary increase . 3,00% 3,00% 3,00% 3,00% 2,54% 3,00% 2,71% 3,00% 3,18% 3,00% — — — — 

Inflation rate ............ 2,00% 2,00% 2,00% 2,00% 2,00% 2,00% 2,00% 2,00% 2,00% 2,00% — — — — 

Defined contribution schemes 

Contributions during the period . — — 9 9 — 2 — — 2 1 — — 11 12 

17.2.3 Leaving indemnities 

France Other Total 

2003 2002 2003 2002 2003 2002 



Opening balance ................................... 13 13 — — 13 13 

Changes in consolidation scope ........................ — — — — — — 

Investment return recorded ........................... (1) — — — (1) — 

Additional contributions .............................. — — — — — — 

Benefits paid out ................................... — — — — — — 

Acquisitions / disposals .............................. — — — — — — 

Exchange differences ................................ — — — — — — 

CLOSING BALANCE ............................... 12 13 — — 12 13 


Actuarial value of liabilities covered by financial assets ....... 15 21 — — 15 21 

Fair value of financial assets ........................... (12) (13) — — (12) (13) 

Sub-total ......................................... 3 8 — — 3 8 

Actuarial value of liabilities not covered by financial assets ..... 260 253 35 30 295 283 

Unrealised actuarial (gains) / losses ..................... 94 86 (1) — 93 86 

Unrealised cost of changes in pension scheme type .......... — — — — — — 

BALANCE SHEET PROVISION ....................... 357 347 34 30 391 377 

Breakdown of charge for the period 

Cost of past services ................................ 11 11 2 5 13 16 

Interest charge .................................... 17 15 1 — 18 15 

Discounted return on assets ........................... — — — — — — 

Realised actuarial (gains) / losses during the period .......... (6) (6) — — (6) (6) 

Amortisation of cost of changes in pension scheme type or 

retroactive benefits paid ............................ — — — — — — 

Reductions and lquidations ............................ (2) — — — (2) — 

CHARGE FOR THE PERIOD ......................... 20 20 3 5 23 25 

Movements in balance sheet provision 

Opening provision .................................. 347 337 30 29 377 366 

Changes in consolidation scope ........................ — — 4 — 4 — 

Exchange differences ................................ — — — — — — 

Disbursements ..................................... (10) (10) (3) (4) (13) (14) 

Charge for the period ............................... 20 20 3 5 23 25 

CLOSING PROVISION .............................. 357 347 34 30 391 377 

A-I-38



France Other Total 

2003 2002 2003 2002 2003 2002 



Discount rate ..................................... 5.75% 5.75% — — — — 

Rate of return on financial assets ....................... 5.75% 5.75% — — — — 

Average rate of salary increase ......................... 3.00% 3.00% — — — — 

Inflation rate ...................................... 2.00% 2.00% — — — — 

17.2.4 Other Belefits (Medical insurance, work medals) 

United 

France States Other Total 

2003 2002 2003 2002 2003 2002 2003 2002 



Opening balance ......................... — — 5 8 — — 5 8 

Changes in consolidation scope ............... — — — — — — — — 

Investment return recorded ................. — — 2 (2) — — 2 (2) 

Additional contributions .................... — — — 4 — — — 4 

Benefits paid out ......................... — — — (5) — — — (5) 

Acquisitions / disposals ..................... — — — — — — — — 

Exchange differences ...................... — — (1) — — — (1) — 

CLOSING BALANCE ..................... — — 6 5 — — 6 5 


Actuarial value of liabilities covered by financial 

assets ................................ — — 80 59 — — 80 59 

Fair value of financial assets ................. — — (6) (5) — — (6) (5) 

Sub-total ............................... — — 74 54 — — 74 54 

Actuarial value of liabilities not covered by 

financial assets ......................... 36 44 2 2 12 2 50 48 

Unrealised actuarial (gains) / losses ............ — (2) 1 (6) — — 1 (8) 

Unrealised cost of changes in pension scheme type . — — (1) (2) — — (1) (2) 

BALANCE SHEET PROVISION .............. 36 42 76 48 12 2 124 92 


Cost of past services ....................... 1 2 2 4 — 2 3 8 

Interest charge ........................... 2 2 4 4 1 — 7 6 

Discounted return on assets ................. — — — (1) — — — (1) 

Realised actuarial (gains) / losses during the period . (1) — 38 — — — 37 — 

Amortisation of cost of changes in pension scheme 

type or retroactive benefits paid ............ — — — (17) — — — (17) 

Reductions and liquidations ................. — — — — — — — — 

CHARGE FOR THE PERIOD ............... 2 4 44 (10) 1 2 47 (4) 

Movements in balance sheet provision 

Opening provision ........................ 42 43 48 72 2 — 92 115 

Changes in consolidation scope ............... (1) 4 — — — (1) (1) 3 

Exchange differences ...................... — — (12) (10) — — (12) (10) 

Reclassification of provisions ................ — — — — 10 — 10 — 

Disbursements ........................... (7) (9) (4) (4) (1) 1 (12) (12) 

Charge for the period ..................... 2 4 44 (10) 1 2 47 (4) 

CLOSING PROVISION .................... 36 42 76 48 12 2 124 92 

A-I-39



United 

France States Other Total 

2003 2002 2003 2002 2003 2002 2003 2002 



Discount rate ............................ 5.75% 5.75% 6.01% 6.75% — — — — 

Rate of return on financial assets ............. 5.75% 5.75% 9.00% 9.00% — — — — 

Average rate of salary increase ............... 3.00% 3.00% 3.03% 3.00% — — — — 

Inflation rate ............................ 2.00% 2.00% 2.00% 2.00% — — — — 

NOTE 18—PROVISIONS FOR CONTRACT TERMINATION INDEMNITIES 

Provisions for contract termination indemnities reflect social commitments the Group has made in the 

context of its restructuring plans as announced in the year (which may or may not subsequently become 

early retirement plans) or early retirement plans linked to collective agreements signed with certain 

categories of employees. 

Early 

Social retirement 

provisions plans Total 


Opening balance .......................................... 330 364 694 

Increase in provision ....................................... 64 70 134 

Utilisation and reversal ..................................... (69) (106) (175) 

Transfer of amounts previously booked to negative goodwill .......... 148 19 167 

Reclassifications (social plans transformed into early retirement plans 

during the year) ......................................... (184) 184 — 

Other reclassifications, changes in consolidation scope and foreign 

exchange variations ...................................... (20) — (20) 

Closing balance .......................................... 269 531 800 

Charges for the period relating to social provisions are recorded in ‘‘Other operating charges’’ in the 

income statement. Charges for the period relating to early retirement plans are recorded in ‘‘Staff costs’ in 

the income statement as detailed in Note 21. 

18.1 SOCIAL PROVISIONS 

Social provisions at the year-end include estimated indemnities under the following restructuring 

plans: 

• Flat carbon steel sector (EUR 148 million); 

• Stainless steel sector (EUR 44 million), social provisions relating to the closure of the Creusot and 

Ardoise sites and to the restructuring of Ugitech S.A.; and 

• Distribution, processing and trading sector (EUR 10 million). 

The restructuring plan of Eko Stahl as initiated in 2003 (EUR 11 million) was immediately 

implemented by means of early retirement plans. The charge and corresponding provision are thus directly 

included under ‘‘early retirements’’. 

The Delta plan for operations in the Walloon region (EUR 162 million) and the FIT plan in Germany 

(EUR 58 million), initiated in 2002, have been partially implemented in the form of early retirement plans 

during the year. 

A-I-40


NOTE 18—PROVISIONS FOR CONTRACT TERMINATION INDEMNITIES (Continued) 

18.2 EARLY RETIREMENT PLANS 

An actuary reviews early retirement plans, which are either part of restructuring measures or 

collective agreements. The main assumptions and the movements during the year are summarised in the 

following table: 

Belgium Germany Luxembourg Other Total 

2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 


Balance sheet provision 

Actuarial value of commitments .... 399 245 62 46 17 33 46 37 524 361 

Unrecognised actuarial gains / losses 2 3 (4) — 8 — 1 — 7 3 

Balance sheet provision .......... 401 248 58 46 25 33 47 37 531 364 


Cost of past services ............ 5 13 7 22 1 1 9 10 22 46 

Interest charge ................ 15 12 2 2 1 — 2 2 20 16 

Actuarial gains / losses recognised 

during the period ............. — — (2) — — — — — (2) — 

Amortisation of cost of changes in 

pension scheme type or retroactive 

benefits paid ................ 19 — 11 — — — — — 30 — 

Charge for the period ........... 39 25 18 24 2 1 11 12 70 62 

Movements in balance sheet 

provision 

Opening provision .............. 248 142 46 10 33 — 37 — 364 152 

Changes in consolidation scope .... — 132 — 15 — 34 — 26 — 207 

Exchange differences ............ — — — — — — — — — 

Transfer of amounts previously 

recorded under negative goodwill . 19 — — — — — — — 19 — 

Reclassification (social plans 

transformed into early retirement 

plans during the year) ......... 175 — 6 — — — 3 — 184 — 

Disbursements ................. (80) (51) (12) (3) (10) (2) (4) (1) (106) (57) 

Charge for the period ........... 39 25 18 24 2 1 11 12 70 62 

Closing provision .............. 401 248 58 46 25 33 47 37 531 364 


Discount rate ................. 5,75% 5,75% 5,75% 5,75% 5,75% 5,75% — — — — 

Average rate of salary increase ..... 2,31% 3,00% 1,53% 3,00% 3,00% 3,00% — — — — 

Inflation rate .................. 2,00% 2,00% 2,00% 2,00% 2,00% 2,00% — — — — 

A-I-41


NOTE 19—OTHER PROVISIONS 

Restructuring Commercial Environmental Other 

costs risks risks risks Total 


Opening balance ........................... 51 92 195 701 1,039 

Increase in provisions ....................... 53 47 23 220 343 

Utilisation and reversal ...................... (38) (44) (24) (206) (312) 

Transfer of amounts previously booked in negative 

goodwill ............................... 20 — 54 — 74 

Reclassifications, changes in consolidation scope and 

exchange differences ...................... 19 (12) 1 44 52 

Total provisions ........................... 105 83 249 759 1,196 

2003 2002 


Other long term provisions ............................................ 983 849 

Other short term provisions ........................................... 213 190 

Total other provisions ............................................... 1,196 1,039 

19.1 PROVISIONS FOR RESTRUCTURING 

Provisions recorded under this heading do not include social commitments which are separately 

disclosed under ‘‘Provisions for contract termination indemnities’’ detailed at Note 18. 

Provisions for restructuring comprise provisions established in respect of charges for the restoration of 

sites currently under restructuring. 

By sector, restructuring provisions are analysed as follows: 

• Flat carbon steel EUR 47 million 

• Stainless steel EUR 32 million 

• Other 

EUR 26 million 

19.2 COMMERCIAL RISKS 

Commercial risks primarily include litigation with customers, bad debts, losses on contracts and 

termination losses as well as guarantees and other items. 

19.3 ENVIRONMENTAL RISKS 

Provisions for environmental risks, analysed by geographic zones, are as follows: 

2003 2002 


Germany ......................................................... 2 4 

Belgium ......................................................... 142 91 

France ........................................................... 71 71 

Luxembourg ...................................................... 33 28 

Other ........................................................... 1 1 

Total ............................................................ 249 195 

A-I-42


NOTE 19—OTHER PROVISIONS (Continued) 

19.4 OTHER RISKS 

Other provisions cover, amongst others, the following risks: 

2003 2002 


Litigation ........................................................ 63 23 

Social risks ....................................................... 24 95 

Tax risks ......................................................... 149 163 

Other risks ....................................................... 523 420 

Total other risks ................................................... 759 701 

NOTE 20—OTHER AMOUNTS PAYABLE 

2003 2002 


Fixed asset suppliers ................................................. 222 248 

Prepayments on orders ............................................... 188 166 

Revaluation of foreign currency hedging instruments .......................... 25 27 

Tax and social security ................................................ 1,348 1,235 

Dividends payable ................................................... 4 24 

Other creditors ..................................................... 298 233 

Deferred income .................................................... 109 90 

Total ............................................................ 2,194 2,023 

NOTE 21—STAFF COSTS 

2002 pro 

forma 



Wages and salaries ......................................... 3,395 3,500 3,243 

Social charges ............................................. 1,095 1,086 1,020 

Contributions to defined contribution pension schemes ............... 11 12 12 

Charges for the year in respect of additional employee benefits giving rise 

to provisions ............................................ 338 254 236 

Employee profit-sharing scheme ................................ 69 37 32 

Other ................................................... 163 174 156 

Total staff costs ............................................ 5,071 5,063 4,699 

A-I-43


NOTE 22—NET FINANCING RESULT 

2002 pro 

forma 



Interest income ............................................. 192 243 185 

Interest charges ............................................. (408) (527) (527) 

Dividends received ........................................... 29 27 27 

Gains on foreign exchange ..................................... 751 710 710 

Losses on foreign exchange ..................................... (749) (695) (695) 

Charges linked to securitisation programmes* ....................... (7) (73) (73) 

Fair value revaluation of financial instruments ....................... 26 (6) (6) 

Impairment of financial assets ................................... (43) (83) (83) 

Losses on the disposal of financial assets ........................... (27) (28) (28) 

Other .................................................... (85) (32) 56 

Total ..................................................... (321) (464) (434) 

* This financing is no longer applicable as at December 31, 2003 as a result of the termination of the securitisation programmes 

and the establishment of the receivables sale programme, as referred to at Note 10 above. 

NOTE 23—TAXATION 

TAX CHARGE 

Tax analysis: 

2003 2002 


Current tax ........................................................ (46) (124) 

Deferred tax ....................................................... (95) (364) 

Total taxation ...................................................... (141) (488) 

Reconciliation between the tax charge and the result before tax: 

2003 2002 


Net profit ......................................................... 257 (186) 

Minority interests .................................................... 159 46 

Net profit from companies accounted for using the equity method ................ (140) (102) 

Tax charge ......................................................... 141 488 

Profit before tax .................................................... 417 246 

Theoretical tax charge (30.96% in 2003, 33.74% in 2002) ....................... (129) (83) 

Reconciliation: 

Permanent differences ................................................ 26 (74) 

Operations taxed at reduced rates ........................................ 1 34 

Variations in tax rates ................................................. 1 (77) 

Adjustment of deferred tax assets recognised in previous periods ................. (42) (290) 

Tax credits and other taxes ............................................. 2 2 

Effective tax charge .................................................. (141) (488) 

A-I-44


NOTE 23—TAXATION (Continued) 

Permanent differences are primarily due to the following: 

2003 2002 


Impairment of property, plant and equipment ............................... (94) (62) 

Goodwill and surplus amortisation ....................................... 34 35 

Profit on disposal exempt from tax ....................................... 43 — 

Other charges and income, not deductible/not taxable ......................... 43 (47) 

Total ............................................................. 26 (74) 

DEFERRED TAX 

The movement in the balance sheet provision for deferred tax liabilities is analysed as follows: 

2003 2002 


Balance as at January 1 ............................................... 359 102 

Expense/(revenue) for the period ........................................ 21 (1) 

Arbed/Aceralia acquisition ............................................. — 150 

Impact of fluctuations in exchange rates and reclassifications .................... (96) 64 

Other variations (1) .................................................... 5 44 

Balance as at December 31 ............................................. 289 359 

(1) Deferred tax is booked directly to equity. 

The movement in the balance sheet asset for deferred tax assets is analysed as follows: 

2003 2002 


Balance as at January 1 .............................................. 1,523 1,396 

Expense/(revenue) for the period ....................................... (32) (75) 

Deferred tax asset adjustments relating to prior periods ....................... (42) (290) 

Arbed/Aceralia acquisition ............................................ — 396 

Impact of movements in exchange rates, consolidation scope and reclassifications .... (13) 74 

Other variations (1) .................................................. — 22 

Balance as at December 31 ............................................ 1,436 1,523 

(1) Deferred tax is booked directly to equity. 

A-I-45


NOTE 23—TAXATION (Continued) 

Origin of the deferred tax assets and liabilities: 

Assets Liabilities Net 

2003 2002 2003 2002 2003 2002 


Intangible assets ................................... 6 6 (1) — 5 6 

Property, plant and equipment ......................... 326 391 (422) (385) (96) 6 

Inventories ....................................... 134 161 (13) (11) 121 150 

Financial instruments ............................... 2 — (40) (42) (38) (42) 

Other assets ...................................... 99 64 (65) (125) 34 (61) 

Provisions: ....................................... 660 640 (161) (137) 499 503 

—of which pensions ................................. 267 306 (5) (6) 262 300 

—of which other social provisions ....................... 160 155 (17) (12) 143 143 

—of which other provisions ............................ 233 179 (139) (119) 94 60 

Other liabilities .................................... 131 228 (122) (140) 9 88 

Tax losses brought forward ........................... 613 514 — — 613 514 

Deferred tax assets/(liabilities) ........................ 1,971 2,004 (824) (840) 1,147 1,164 

Deferred tax assets ................................. 1,436 1,523 

Deferred tax liabilities .............................. (289) (359) 

Net balance ...................................... 1,147 1,164 

As at December 31, 2003, the Group’s brought forward tax losses have the following maturities: 

2003 2002 


2003 ............................................................ — 41 

2004 ............................................................ 114 25 

2005 ............................................................ 15 9 

2006 ............................................................ 21 240 

2007 ............................................................ 108 — 

2007 and beyond ................................................... — 1,009 

2008 and beyond ................................................... 721 — 

No maturity date ................................................... 4,708 3,320 

Total ............................................................ 5,687 4,644 

Other tax credits (long-term depreciation) ................................. 1,590 697 

Deferred tax assets not recognised by the Group apply to the following elements as at December 31, 2003: 

Recognised Unrecognised 

Gross Total deferred deferred deferred 

amount tax assets tax assets tax assets 


Tax losses brought forward ..................... 5,687 1,961 613 1,348 

Other tax credits (long term losses) ............... 1,590 546 — 546 

Property, plant and equipment ................... 2,217 791 326 465 

Other ..................................... 3,253 1,125 1,032 93 

Total potential deferred tax assets not recognised ..... 4,423 1,971 2,452 

NOTE 24—RELATED PARTY DISCLOSURES 

The consolidated financial statements include transactions carried out by the Group in the normal 

course of business with its non-consolidated entities and entities accounted for using the equity method. 

Transactions are recorded at market prices. 

A-I-46


NOTE 24—RELATED PARTY DISCLOSURES (Continued) 

24.1 LOANS AND GUARANTEES GIVEN 

2003 2002 


Loans (including short-term loans) to non-consolidated companies ................ 256 309 

Guarantees granted to non-consolidated companies ........................... 115 24 

24.2 PURCHASES AND SALES OF GOODS AND SERVICES 

2003 2002 


Sales ............................................................. 684 744 

Purchases ......................................................... 409 458 

24.3 REMUNERATION OF MEMBERS OF MANAGEMENT 

The remuneration of members of Management is allocated as follows: 

2003 2002 


Board of Directors and General Management .............................. 5.9 5.3 

Additional detail on remuneration is provided in the chapter on Corporate Governance of the annual 

report. 

NOTE 25—DERIVATIVE FINANCIAL INSTRUMENTS 

The Group uses derivative financial instruments to hedge its exposure to fluctuations in interest rates, 

exchange rates and the price of raw materials. The Group manages the counter party risk associated with 

these instruments by centralising its commitments and by applying procedures which specify, for each type 

of transaction, risk limits and/or the characteristics of the counter party. The Group does not generally 

grant to or require from its counterparties guarantees over the risks incurred. 

Risks associated with exchange rates, interest rates and the price of base metals of all Group 

companies are subject to centralised management at parent company level. The main exceptions to this 

rule are the North and South American group companies. These companies manage their market risks in 

consultation with the parent company. 

Interest rate risk: 

The Group uses several types of instruments for the management of interest rate risk in order to 

optimise its financial expenses, to hedge exchange risk related to loans in foreign currencies and to manage 

the split between fixed and variable rate loans. 

Interest rate exchange contracts (‘‘swaps’’) allow the Group to borrow long-term at variable rates and 

to swap the rate of this debt either from the start or during the period of the loan. The Group and its 

counter party exchange, at predefined intervals, the difference between the agreed fixed rate and the 

variable rate, calculated on the basis of the notional amount of the swap. 

Similarly, swaps may be used for the exchange of one foreign currency against another, within the 

framework of exchange risk management, or for the exchange of variable rates against other variable rates. 

FRAs (‘‘forward rate agreements’’) and futures contracts on interest rates are primarily used by the 

Group to hedge the rates paid on loans and variable rate financial instruments or, in particular cases, on 

existing or future loans. Similarly, futures contracts are used by the Group to hedge the difference in rates 

between two currencies in particular cases and within the framework of exchange risk management. These 

contracts are either commitments to buy (or sell) a financial instrument at a future date and at an agreed 

price, or to receive (or pay) at a future date the difference between two given rates. Certain instruments 

A-I-47


NOTE 25—DERIVATIVE FINANCIAL INSTRUMENTS (Continued) 

can be settled in cash, others can be settled through the delivery of the underlying asset or in cash. The 

Group will generally only commit itself to highly liquid term contracts, such as EURIBOR or Eurodollar 

futures. 

Where applicable, initial and daily margin calls on term contracts are paid or collected in cash. 

Futures contracts carry a low credit risk since exchanges are made through a clearing-house. FRAs are 

generally only entered into with major banking institutions. 

In addition, the Group may buy (or sell) options on interest rates, caps (ceiling rates) or collars within 

the framework of its hedging strategy on loans and variable rate financial instruments. Rate options give 

the right to the buyer, upon payment of a premium, and at a given date or during a given period, to buy (or 

sell) from the seller of the option a financial instrument at an agreed price and/or to receive (or pay) the 

difference between two given rates or prices. 

Interest rate derivatives used by the Group to cover variations in the value of fixed rate loans are 

qualified as fair value hedges according to IAS 39. These derivatives are revalued at the balance sheet date 

and have an impact on the net profit or loss. This impact is neutralised by a similar revaluation of the 

hedged part of the associated loans. 

Other interest rate derivatives do not qualify as hedging instruments according to IAS 39. 

As at December 31, 2003, a gross variation of EUR (2.5) million was recorded. (2002: EUR 

(0.1) million). 

All gains and losses on settled hedging instruments are accounted for in the income statement. As at 

December 31, 2003, a net loss of EUR 18 million was recorded (2002: EUR (23) million). 

Exchange rate risk: 

The Group uses forward purchases and sales of foreign currency and other derivatives to hedge 

foreign currency transactions of the majority of its subsidiaries. The common practice of the Group is to 

invoice clients in their own currency. 

The Group also uses these instruments at consolidation level to hedge debt recorded in foreign 

currency or the balance sheet risk incurred on certain assets. The general policy of the Group is to hedge 

exchange risk on transactions completely. However, as an exception to this general policy, for certain 

currencies and for risks and amounts that are clearly identified and authorised by management, the Group 

may either hedge in anticipation or not hedge transactional risks. 

With regard to exchange risk on debt, the Group policy is that each entity borrows in its own currency. 

There may be exceptions to this policy at Group level, within the framework of arbitrage between the 

relative levels of interest rate and the exchange risk, or in an attempt to hedge a balance sheet risk on one 

or more identified assets. 

Not all derivatives used by the Group to hedge its exchange risks qualify as hedging instruments 

according to IAS 39 to the extent that they are managed in an overall manner. 

As at December 31, 2003, the reporting of these derivatives at market value in the balance sheet led to 

a loss of EUR 8.5 million (2002: EUR (1) million). 

Raw material risk: 

The Group uses financial instruments (forward purchases, options and swaps on commodities) in 

order to reduce the volatility risk of certain raw materials. The Group is exposed to risks on raw materials 

both via the purchase of its own raw materials and via sales contracts. 

The Group manages its risk on raw materials in an overall fashion. Derivatives on raw materials used 

by the Group are therefore not qualified as effective hedging instruments according to IAS 39. 

A-I-48



As at December 31, 2003, the reporting of these derivatives at market value in the balance sheet led to 

a loss of EUR 49.6 million (2002: EUR (1) million). 

Trading risk: 

If there are open positions and limited levels of profit or loss as well as defined maturity dates, the 

Group carries out trading operations on the basis of the risks associated with interest rates, exchange rates 

and raw material prices. Open positions on these transactions are not significant with regard to the volume 

of hedging operations dealt or the general rate risk. In this respect, the types of instruments and the 

currencies that may be used, as well as the maximum risk exposure are determined at management level. 

Such risks are monitored on a daily basis. In 2003 and in 2002 the net profit or loss on trading operations 

was not significant to the Group’s results. 

The portfolio of financial instruments as at December 31, 2003 is as follows: 

Notional Market 

2003 

Residual maturity 

Average 

amount value



The portfolio of financial instruments as at December 31, 2002 is as follows: 

Notional Market 

2002 

Residual maturity 

Average 

amount value


NOTE 26—COMMITMENTS GIVEN AND RECEIVED (Continued) 

26.1 COMMITMENTS GIVEN 

2003 2002 


Guarantees on third-party loans ......................................... 779 212 

Discounted bills (not yet at maturity) ..................................... 33 23 

Liabilities guaranteed by assets .......................................... 65 441 

Sub-total of commitments on loans (utilisation) ............................. 877 676 

Commitments to buy or dispose of fixed assets .............................. 380 323 

Other commitments given ............................................. 366 328 

Total commitments given .............................................. 1,623 1,327 

26.2 COMMITMENTS RECEIVED 

2003 2002 


Endorsements and guarantees received from non-consolidated companies ........... 138 120 

Other commitments received ........................................... 134 255 

Total commitments received ............................................ 272 375 

As at December 31, 2003, Arcelor Finance S.C.A. has available credit lines, given by financial 

institutions totalling EUR 4 631 million. 

Arcelor Finance S.C.A. has issued letters of comfort via Arcelor S.A. in order to allow group 

companies that are not consolidated or accounted for under the equity method, to obtain credit lines with 

financial institutions. These credit lines total EUR 9 million. 

NOTE 27—SEGMENT REPORTING 

In accordance with both Group management and internal reporting guidelines, segment reporting 

information is disclosed by both business activity and by geographic zones. 

A-I-51


NOTE 27—SEGMENT REPORTING (Continued) 

27.1 BREAKDOWN BY ACTIVITY 

Sales between activities are calculated at market price. The operating result is shown after 

eliminations. 

2003 

Flat Long Processing 

carbon carbon Stainless and Other 

steel steel steel distribution activities Eliminations Total 

(Figures in EUR million, except for the number of employees) 

Income statement 

Revenue ........................ 13,994 4,381 4,280 7,954 836 (5,522) 25,923 

Inter-sector sales .................. (3,352) (767) (121) (732) (550) 5,522 — 

Total ........................... 10,642 3,614 4,159 7,222 286 — 25,923 

Gross operating profit .............. 1,365 493 23 284 58 5 2,228 

Depreciation ..................... (656) (182 (486) (201) (76) — (1,601) 

Including non-recurring reductions in 

value ....................... (20) (10) (323) (78) (35) — (466) 


goodwill) ...................... 709 311 (463) 83 (18) 5 627 

Amortisation of goodwill ............ 65 — — 42 4 — 111 


value ....................... — — — (2) — — (2) 

Operating profit ................... 774 311 (463) 125 (14) 5 738 

Share in the profit of companies 

accounted for using the equity method . 125 25 (26) 7 9 — 140 

Balance sheet 

Segment assets .................... 11,701 3,631 2,990 3,698 4,829 (6,404) 20,445 

Property, plant and equipment ........ 5,379 1,768 1,009 604 187 — 8,947 

Investments in companies accounted for 

using the equity method ........... 967 147 111 133 400 — 1,758 

Unallocated assets ................. — — — — — — 2 405 

Total consolidated assets ............ 12,668 3,778 3,101 3,831 5,229 (6,404) 24,608 

Segment liabilities ................. 6,032 1,355 1,629 1,875 1,796 (2,253) 10,434 

Unallocated liabilities ............... — — — — — — 6,711 

Total consolidated liabilities .......... 6,032 1,355 1,629 1,875 1,796 (2,253) 17,145 

Acquisitions of tangible and intangible 

fixed assets ..................... 727 293 194 83 30 — 1,327 

Other information 

Number of employees (average) ....... 48,510 18,115 14,598 15,129 3,160 — 99,512 

A-I-52



2002 






Revenue ....................... 12,312 3,605 4,097 8,780 880 (5,141) 24,533 

Inter-sector sales ................. (3,437) (670) (108) (331) (595) 5,141 — 

Total .......................... 8,875 2,935 3,989 8,449 285 — 24,533 

Gross operating profit ............. 909 484 197 294 (73) — 1,811 

Depreciation .................... (747) (153) (151) (144) (39) — (1,234) 


value ....................... (185) — — — — — (185) 


goodwill) ..................... 162 331 46 150 (112) — 577 

Amortisation of goodwill ........... 68 (3) (6) 42 2 — 103 

Operating profit .................. 230 328 40 192 (110) — 680 


accounted for using the equity 

method ...................... 28 29 21 7 17 — 102 

Balance sheet 

Segment assets ................... 12,183 3,396 3,330 4,495 4,226 (6,300) 21,330 

Property, plant and equipment ....... 5,248 1,553 1,300 928 239 — 9,268 


using the equity method .......... 1,008 146 101 111 414 — 1,780 

Unallocated assets ................ — — — — — — 2,726 

Total consolidated assets ........... 13,191 3,542 3,431 4,606 4,640 (6,300) 25,836 

Segment liabilities ................ 5,353 1,200 1,408 (2,033) (1,014) (1,339) 9,669 

Unallocated liabilities .............. — — — — — — 8,774 

Total consolidated liabilities ......... 5,353 1,200 1,408 2,033 1,014 (1,339) 18,443 


fixed assets .................... 734 211 173 162 32 — 1,312 


Number of employees (average) ...... 50,035 17,953 15,041 19,289 3,238 — 105,556 

A-I-53



2002 Proforma (unaudited) 






Revenue ....................... 13,222 4,256 4,248 9,444 910 (5,486) 26,594 

Inter-sector sales ................. (3,600) (778) (120) (379) (609) 5,486 — 

Total .......................... 9,622 3,478 4,128 9,065 301 — 26,594 

Gross operating profit ............. 925 613 200 319 (79) — 1,978 

Depreciation .................... (777) (183) (149) (151) (42) — (1,302) 


value ....................... (185) — — — — — (185) 


goodwill) ..................... 148 430 51 168 (121) — 676 

Amortisation of goodwill ........... 68 — (6) 41 1 — 104 

Operating profit .................. 216 430 45 209 (120) — 780 


accounted for using the equity 

method ...................... 24 7 21 7 18 — 77 

Balance sheet 

Segment assets ................... 12,213 3,401 3,338 4,495 4,228 (6,300) 21,375 

Property, plant and equipment ....... 5,278 1,558 1,308 928 240 — 9,312 


using the equity method .......... 1,008 146 101 111 414 — 1,780 

Unallocated assets ................ — — — — — — 2,719 

Total consolidated assets ........... 13,221 3,547 3,439 4,606 4,642 (6,300) 25,874 

Segment liabilities ................ 5,353 1,200 1,408 2,033 1,014 (1,339) 9,669 

Unallocated liabilities .............. — — — — — — 8,774 

Total consolidated liabilities ......... 5,353 1,200 1,408 2,033 1,014 (1,339) 18,443 


fixed assets .................... 782 245 181 168 39 — 1,415 


Number of employees (average) ...... 50,035 17,953 15,041 19,289 3,238 — 105,556 

27.2 GEOGRAPHICAL BREAKDOWN 

2003 

European North South 

Union America * America Other Total 

(Figures in EUR million, except for the number of 

employees) 

Revenue ................................... 19,628 2,127 1,193 2,975 25,923 

Segment assets ............................... 17,933 648 1,409 455 20,445 

Property, plant and equipment ................... 7,819 91 890 147 8,947 

Gross operating result ......................... 1,945 (69) 290 62 2,228 

Operating result .............................. 828 (350) 229 31 738 

Acquisition of property, plant and equipment, and 

intangible assets ............................ 1,085 29 194 19 1,327 

Number of employees (average) .................. 87,699 2,707 7,671 1,435 99,512 

A-I-54



2002 




employees) 

Revenue .................................. 18,359 2,901 1,253 2,020 24,533 

Segment assets .............................. 18,388 1,318 1,237 387 21,330 

Property, plant and equipment .................. 7,989 382 727 170 9,268 

Gross operating result ......................... 1,480 50 251 30 1,811 

Operating result ............................. 483 2 182 13 680 


intangible assets ........................... 1,049 28 231 4 1,312 

Number of employees (average) ................. 93,632 3,111 7,437 1,376 105,556 

2002 Pro-forma (unaudited) 




employees) 

Revenue .................................. 19,901 3,145 1,358 2,190 26,594 

Segment assets .............................. 18,490 1,318 1,237 330 21,375 

Property, plant and equipment .................. 8,045 382 727 158 9,312 

Gross operating result ......................... 1,558 59 331 30 1,978 

Operating result ............................. 513 7 247 13 780 


intangible assets ........................... 1,133 36 242 4 1,415 

Number of employees (average) ................. 93,632 3,111 7,437 1,376 105,556 

* North America, including Mexico. 

NOTE 28—EVENTS AFTER THE BALANCE SHEET DATE 

The Annual General Meeting of Aceralia shareholders of January 8, 2004 decided to proceed to a 

public offering of own shares at a price of EUR 17 per share, payable in cash. The offer price was 

confirmed on January 20, 2004 by the ‘‘Comision Naciónal del Mercado de Valores (CNMV)’’, the Spanish 

market’s supervisory body. The public offering was launched on January 22, 2004, for a period of one 

month. The offer covered 6,207,261 Aceralia shares, which is equivalent to 4.97% of the capital. 

At the end of the offer, 5,006,342 shares were acquired by Aceralia, which represents a success rate of 

80.65%. The breakdown of the Aceralia capital is thus as follows: Arcelor (95.03%), own shares (4.01%) 

and other minority shareholders (0.96%). 

Given that voting rights on own shares (totalling 1 200,919 shares) are suspended, the percentage of 

control retained by Arcelor (which owns 117,792 739 of a total of 119,993,658 shares) is 99.00%. Shares 

were delisted from the Spanish stock market on March 2, 2004. Aceralia intends to allow minority 

shareholders who did not participate in the public offering to sell their shares on an individual basis. 

In the context of the strengthening of the Group balance sheet and the reduction in the costs of 

servicing debt, Arcelor has determined to proceed with the redemption of the O.C.E.A.N.E. 3% 

instruments maturing on January 1, 2006 since the conditions for reimbursement are fulfilled. These 

O.C.E.A.N.E. instruments represent EUR 350 million at the end of December 2003. 

O.C.E.A.N.E. holders had the option, until March, 11 2004 (included), to exercise their rights to 

convert their bonds into shares. The resulting share requirement would be met by making available shares 

that are currently held by the Group, with retroactive effect to January 1, 2004. At the end of this offer, 

which serves to reinforce the consolidated own funds of the Group, 22 490,577 O.C.E.A.N.E., i.e. 81.05% 

of the original issue, were exchanged against shares. 

A-I-55


NOTE 28—EVENTS AFTER THE BALANCE SHEET DATE (Continued) 

The Arcelor Group signed an agreement with Bagoeta S.L., the majority shareholder of Conducciones 

y Derivados S.A., with a view to a disposal of the Group’s tubes business. The transaction cannot be 

finalised until approved by the relevant competition authorities as well as the finalisation of the associated 

legal documentation. 

Furthermore, the Group has announced its intention to sell a major part of its American subsidiary 

J&L Specialty Steel LLC to Allegheny Technologies. The transaction could be finalised by May 3, 2004, 

subject to a new agreement being signed with the workers unions and to the approval of Allegheny’s 

creditors and the relevant competition authorities. 

On March 15, 2004, the Group put into place a programme of Level I American Depositary Receipts 

(‘‘ADRs’’), in order to improve the liquidity of Arcelor’s shares and increase their distribution amongst 

nonqualified American investors. ADRs are certificates issued by a depositary bank, representing shares in 

a non-American company (American Depositary Shares, ‘‘ADSs’’). They confer voting rights as well as the 

right to dividend receipts to their holders. They give American investors access to Arcelor’s shares by 

means of the ‘‘Over the Counter’’ market, on which ADRs are freely tradable. 

Finally, on March 19, 2004, the Group announced the disposal of the entirety of its participation 

(96%) in the share capital of Thainox Steel Ltd. in Thailand. 

NOTE 29—RECONCILIATION OF THE ARCELOR GROUP FINANCIAL STATEMENTS 

PREPARED IN ACCORD WITH LUXEMBOURG GAAP WITH THE FINANCIAL STATEMENTS 

PREPARED IN ACCORD WITH IFRS 

2003 2002 


Net situation (Group share) according to Luxembourg GAAP .................. 7,321 7,362 

Own shares ....................................................... (751) (745) 

Result on own shares ................................................ 17 17 

Accounting for convertible bonds ....................................... 101 101 

Financial instruments ................................................ 45 (3) 

Net situation (Group share) according to Arcelor GAAP ...................... 6,733 6,732 

2003 2002 


Net situation (Group share) according to Luxembourg GAAP .................. 232 (197) 

Result on own shares ................................................ — 17 

Financial instruments ................................................ 25 (6) 

Net situation (Group share) according to Arcelor GAAP ...................... 257 (186) 

A-I-56


NOTE 30—SIMPLIFIED GROUP ORGANISATION CHART 

ARCELOR 

Sollac Atlantique (F) 

100,00% (99,24) 

SIDMAR (B) 

99,54% (99,27) 

ACERALIA Corp. Siderugica (E) 

95,03% (95,03) 

ProfilARBED (L) 

100,00% (99,73) 

Ugine & ALZ Belgium (B) 

100,00% (99,27) 

ARBED (L) 

99,73% (99,73) 

Sollac Lorraine (F) 

100,00% (99,24) 

STAHLwerke Bremen (D) 

69,67% (69,16) 

Aceralia Transformados (E) 

100,00% (94,92) 

Stahlwerk Thüringen (D) 

100,00% (99,73) 

Ugine & ALZ France (F) 

100,00% (99,24) 

Usinor (F) 

99,24% (99,24) 

Sollac Mediterranée (F) 

100,00% (99,24) 

Cockerill Sambre (B) 

100,00% (99,24) 

Aceralia Compacta Bizkaia (E) 

77,71% (73,85) 

Travi e Profilati (I) 

100,00% (99,73) 

J&L Speciality Steel (USA) 

100,00% (98,54) 

Arcelor Center Brussels (B) 

100,00% (91,33) 

CST (BR) 

29,61% (29,38) 

Eko Stahl (D) 

100,00% (99,14) 

ACERLAIA Perfiles (E) 

100,00% (95,03) Subgroup 

Acesita (BR) 

27,68% (27,47) 

Arcelor Finance (L) 

100,00% (99,73) 

Vega do Sul (BR) 

77,88% (77,79) 

ACERLAIA Redondos (E) 

100,00% (95,03) Subgroup 

Thainox Steel (T) 

96,11% (95,38) 

Arcelor International (L) 

100,00% (98,44) 

54,03% 

(52,97) 

CSBM (BR) 

Subgroup 

Ugitech (F) 

100,00% (99,24) 

Arcelor USA Holding (USA) 

100,00% (98,54) 

Imphy Ugine Précision (F) 

100,00% (99,24) 

PUM Service Acier (F) 

99,98% (99,22) 

Laminados Velasco (E) 

80,00% (76,03) Subgroup 

Flat carbon steel Long carbon steel Stainless steel Distribution - processing - 

trading 

+ 

28JUN200402253261 

Other activites 

A complete listing of Group companies as at December 31, 2003 has been submitted to the ‘‘Greffe du 

tribunal d’arrondissement’’ of Luxembourg. 

A-I-57


NOTE 31—LISTING OF GROUP COMPANIES 

Consolidation scope 

Situation at 31 December 2003 

442 companies fully consolidated (in addition to Arcelor SA) 

227 companies consolidated under the equity method, 

Flat Carbon Steel | Long Carbon Steel | Stainless Steel | Distribution, 

Processing and Trading | Other Activities 

Percentage of 

Company Consolidation method Country capital held 

Control (%) 

Flat Carbon Steel sector 

Aceralia Planos 

Subgroup comprising the following companies: 

* Aceralia Corporación Siderúrgica SA, Gozón . . Full consolidation Spain 95.034191 

* Acería Compacta de Bizkaia SA, Sestao ...... Full consolidation Spain 77.714286 

* ACB, Acr Decapado AIE, Sestao ........... Full consolidation Spain 100.000000 

* Aceralia Construcciones SL, Sestao ......... Full consolidation Spain 100.000000 

* Arcelor España SA, Madrid ............... Full consolidation Spain 100.000000 

* Arcelor FCS Commercial Iberica SL, Madrid . . Full consolidation Spain 100.000000 

* Cia Hispano-Brasileira de Pelotização SA, 

Vitoria ............................ Equity method Brazil 49.111101 

* Ensilectric SA, Avilés ................... Equity method Spain 40.000000 

* Ferramentas e Accessorios Industriais Lda, 

Agueda ............................ Equity method Portugal 39.999864 

* Instituto Técnico de la Estructura del Acero 

SL, San Sebastian .................... Equity method Spain 69.750000 

* Metalúrgica Asturiana SA, Mieres .......... Full consolidation Spain 100.000000 

* Recuperaciones Medioambientales Ind. SA, 

Sestao ............................. Equity method Spain 52.000772 

* Recuperaciones Férricas Integrales SA, Sestao . Equity method Spain 100.000000 

* Refeinsa Cataluña SL, Castellbisbal ......... Equity method Spain 100.000000 

* Samper Refeinsa Galicia SL, Vigo .......... Equity method Spain 50.000000 

* Tetraçero SA, Gijón .................... Full consolidation Spain 100.000000 

Aceros URS SA, Viladecans ................ Equity method Spain 45.024739 

Aços Planos do Sul SA, Belo Horizonte ........ Equity method Brazil 48.906896 

Amitor SA, Barcelona .................... Full consolidation Spain 100.000000 

APSL Arcelor Participacões SA, São Paulo ..... Full consolidation Brazil 100.000000 

APSL ONPN Participacões, Belo Horizonte ..... Equity method Brazil 50.000000 

Arcelor Aços Planos Brasil Ltda, São Paulo ..... Full consolidation Brazil 100.000000 

Arcelor Auto SA, Puteaux .................. Full consolidation France 99.957314 

Arcelor FCS Commercial France SA, Paris ..... Full consolidation France 99.958333 

Arcelor FCS Commercial Deutschland GmbH, 

Cologne ............................. Full consolidation Germany 100.000000 

Arcelor FCS Commercial Luxembourg SA, 

Dudelange ........................... Full consolidation Luxembourg 100.000000 

Arcelor FCS Commercial SA, Luxembourg ..... Full consolidation Luxembourg 100.000000 

Arcelor FCS Commercial Italia Srl, Milano ..... Full consolidation Italy 100.000000 

Arcelor Packaging International SA, Puteaux .... Full consolidation France 99.999768 

Arcelor Packaging International España SL, 

Gozón .............................. Full consolidation Spain 100.000000 

Arcelor Packaging International Italia Srl, 

Canossa ............................. Full consolidation Italy 100.000000 

Arcelor Sagunto SL, Madrid ................ Full consolidation Spain 99.999999 

Borcelik SA, Istanbul ..................... Equity method Turkey 40.466215 

A-I-58


NOTE 31—LISTING OF GROUP COMPANIES (Continued) 

Percentage of 


Control (%) 

Bregal Bremer Galvanisierungs-GmbH, Bremen . . Full consolidation Germany 75.050000 

BRE.M.A Warmwalz Gmbh & Co KG, Bremen . . Full consolidation Germany 90.000000 

Carsid SA, Marcinelle ..................... Equity method Belgium 40.000000 

Coils Lamiere Nastri Spa, Caselette, Subgroup 

comprising 29 companies ................. Equity method Italy 35.000000 

Cockerill Mécanique Prestations SA, Seraing .... Full consolidation Belgium 100.000000 

Cockerill Sambre SA, Seraing ............... Full consolidation Belgium 100.000000 

Comercial de Hojalata y Metales SA, San Adrian . Equity method Spain 22.999561 

Companhia Siderúrgica de Tubarão SA, Serra . . . Equity method Brazil 6.019382 

Cortes y Aplanados Siderúrgicos SA, Barcelona . . Full consolidation Spain 100.000000 

Daval SA, Puteaux ....................... Full consolidation France 99.996000 

Decosteel NV, Geel ...................... Full consolidation Belgium 100.000000 

Decosteel 2 NV, Ghent .................... Full consolidation Belgium 100.000000 

Dermach SA, Barcelona ................... Full consolidation Spain 100.000000 

EKO Feinblechhandel GmbH, Eisenhüttenstadt . . Full consolidation Germany 100.000000 

EKO Recycling GmbH, Eisenhüttenstadt ....... Full consolidation Germany 100.000000 

EKO Stahl GmbH, Eisenhüttenstadt .......... Full consolidation Germany 100.000000 

EKO Transport GmbH, Eisenhüttenstadt ....... Full consolidation Germany 100.000000 

Eurogal SA, Flemalle ..................... Full consolidation Belgium 100.000000 

Ewald Giebel-Luxemburg GmbH, Dudelange .... Equity method Luxembourg 33.333333 

FBH EKO Feinblechhandel GmbH, Burbach .... Full consolidation Germany 100.000000 

Galtec NV, Ghent ........................ Full consolidation Belgium 100.000000 

Galvalange Sàrl, Dudelange ................ Full consolidation Luxembourg 100.000000 

Gestamp Automocion SL, Abadiano, Subgroup 

comprising 58 companies ................. Equity method Spain 34.999989 

Gonsider SL, Madrid ..................... Equity method Spain 42.871384 

Gonvarri Industrial SA, Madrid, Subgroup 

comprising 16 companies ................. Equity method Spain 29.850431 

Groupement de l’Industrie Sidérurgique SA, 

Puteaux ............................. Full consolidation France 99.999908 

Hierros y Aplanaciones SA, Corvera .......... Equity method Spain 15.001999 

Holding Gonvarri Srl, Bilbao ................ Equity method Spain 30.000000 

IRSID SA, Puteaux ...................... Full consolidation France 99.779149 

La Magona 


* La Magona d’Italia Spa, Firenze ........... Full consolidation Italy 99.791940 

* Centro Acciai Rivestiti Srl, Piombino ........ Full consolidation Italy 100.000000 

* Magona International SA, Luxembourg ...... Full consolidation Luxembourg 99.990000 

* Societa Mezzi Portuali Piombino Spa, Piombino Equity method Italy 50.000000 

* Tubisud Srl, Luogosano .................. Full consolidation Italy 55.000000 

Laminoir de Dudelange SA, Dudelange ........ Full consolidation Luxembourg 100.000000 

OCAS NV, Zelzate ....................... Full consolidation Belgium 100.000000 

R. Bourgeois SA, Besançon................. Equity method France 29.996667 

Recherche et Développement du Groupe 

Cockerill Sambre Scrl, Liège .............. Full consolidation Belgium 96.000000 

Sidgal ESV, Ghent ....................... Full consolidation Belgium 100.000000 

Siderúrgica del Mediterráneo SA, Puerto Sagunto Full consolidation Spain 100.000000 

Sidmar NV, Ghent ....................... Full consolidation Belgium 99.542813 

Sidstahl NV, Ghent ....................... Full consolidation Belgium 100.000000 

Sikel NV, Genk ......................... Full consolidation Belgium 100.000000 

Solblank France SA, Uckange ............... Full consolidation France 51.481081 

A-I-59



Percentage of 


Control (%) 

Solcan Fininvest 


* Solcan Fininvest Inc, Westmount ........... Full consolidation Canada 100.000000 

* Dosol Galva Inc, Hamilton ............... Equity method Canada 20.000000 

Sollac Ambalaj Celigi SA, Levent-Istanbul ...... Full consolidation Turkey 74.999931 

Sollac Atlantique SA, Puteaux ............... Full consolidation France 99.999900 

Sollac Lorraine SA, Puteaux ................ Full consolidation France 99.999832 

Sollac Méditerranée SA, Puteaux ............. Full consolidation France 99.999867 

Solvi SA, Puteaux ........................ Full consolidation France 100.000000 

Stahlhandel Burg GmbH, Burg .............. Full consolidation Germany 100.000000 

Stahlwerke Bremen GmbH, Bremen .......... Full consolidation Germany 69.668370 

Taylormeter S.A., Zaragoza ................. Full consolidation Spain 100.000000 

Tailor Steel NV, Genk ..................... Full consolidation Belgium 100.000000 

Tailor Steel America Llc, Holt ............... Full consolidation United States 70.602704 

Tailor Steel GmbH & Co KG, Bremen ........ Full consolidation Germany 100.000000 

Tailor Steel Investment Llc, New York ......... Full consolidation United States 100.000000 

Tailored Blank GmbH, Eisenhüttenstadt ....... Full consolidation Germany 100.000000 

Tailored Blank Genk NV, Genk .............. Full consolidation Belgium 100.000000 

Tailored Blank Zaragoza SA, Zaragoza ........ Full consolidation Spain 100.000000 

Tailored Blanks SA, Liège.................. Full consolidation Belgium 100.000000 

Toleries Delloye-Matthieu SA, Marchin ........ Full consolidation Belgium 99.743421 

Vega do Sul SA, São Francisco .............. Full consolidation Brazil 68.852457 

Long Carbon Steel sector 

Aceralia Perfiles 


* Aceralia Perfiles Bergara SA, Bergara ....... Full consolidation Spain 100.000000 

* Aceralia LC Torino Srl, Torino ............. Full consolidation Italy 100.000000 

* Aceralia Perfiles SL, Madrid .............. Full consolidation Spain 100.000000 

* Aceralia Perfiles Madrid SL, Madrid ........ Full consolidation Spain 100.000000 

* Aceralia Perfiles Olaberria SL, Olaberria ..... Full consolidation Spain 100.000000 

* Aceralia Perfiles U.K. Ltd, Rayleigh ......... Full consolidation United Kingdom 100.000000 

* Aceralia Perfiles Zaragoza SA, Zaragoza ..... Full consolidation Spain 100.000000 

* Arcelor LC Bordeaux SA, Merignac ......... Full consolidation France 97.800000 

* Aristrain Hispano Trade GmbH, Düsseldorf . . . Full consolidation Germany 100.000000 

* Consignaciones Asturianas SA, Gijón........ Equity method Spain 50.000000 

* Fercome Trading SL, Valencia ............. Full consolidation Spain 100.000000 

* Ilsacer 2000 SL, Zaragoza ................ Equity method Spain 50.000000 

* Kramer & Sons Trading Co, Detroit MI ...... Equity method United Kingdom 50.000000 

* Servicios Complementarios del Norte SL, 

Bilbao ............................. Equity method Spain 49.000000 

* Sobrinos De Manuel Cámara SA, Renteria .... Equity method Spain 50.000000 

* Sociedad Auxiliar del Puerto de Pasajes SA, 

Renteria ........................... Equity method Spain 50.000000 

* Triturados Férricos SL, Madrid ............ Equity method Spain 33.300000 

Aceralia Redondos 


* Aceralia Redondos Azpeitia SL, Azpeitia ..... Full consolidation Spain 100.000000 

* Aceralia Redondos Comercial SA, Azpeitia . . . Full consolidation Spain 100.000000 

* Aceralia Redondos Getafe SL, Getafe ....... Full consolidation Spain 100.000000 

* Aceralia Redondos Lasao SA, Azpeitia ....... Full consolidation Spain 100.000000 

A-I-60



Percentage of 


Control (%) 

* Aceralia Redondos Zumárraga SA, Zumárraga . Full consolidation Spain 100.000000 

*Aciérie de l’Atlantique SA, Boucau ......... Full consolidation France 100.000000 

* Arcelor Barras Comercial SL, Azpeitia ....... Full consolidation Spain 100.000000 

* Société Nationale de Sidérurgie SA, Al 

Hoceima ........................... Equity method Morocco 8.500000 

Acindar Industria Argentina de Aceros SA, 

Buenos Aires, Subgroup comprising 13 

companies ........................... Equity method Argentina 21.635885 

Arbed-Finanz Deutschland GmbH, Saarbrücken . . Full consolidation Germany 99.000000 

Arcelor Long Commercial SA, Esch s/Alzette .... Full consolidation Luxembourg 100.000000 

Arcelor Long Commercial Deutschland GmbH, 

Cologne ............................. Full consolidation Germany 100.000000 

Arcelor Rails, Piles & Special Sections Sàrl, Esch 

s/Alzette ............................. Full consolidation Luxembourg 100.000000 

Ares SA, Rodange ....................... Full consolidation Luxembourg 80.760303 

Armasteel SA, Wavre ..................... Full consolidation Belgium 100.000000 

ASBM Sàrl, Luxembourg .................. Full consolidation Luxembourg 100.000000 

Belgo-Mineira 


* Companhia Siderúrgica Belgo-Mineira SA, Belo 

Horizonte .......................... Full consolidation Brazil 60.599059 

* Belgo Bekaert Arames SA, Contagem ....... Full consolidation Brazil 54.871282 

* Belgo-Mineira Participacão Indústria e 

Comércio SA, Juiz de Fora .............. Full consolidation Brazil 99.999999 

* Belgo-Mineira Uruguay SA, Montevideo ..... Full consolidation Uruguay 100.000000 

* BelgoPar Ltda, Belo Horizonte ............ Full consolidation Brazil 33.355571 

* Bemex International Ltd, Hamilton ......... Full consolidation Bermuda 100.000000 

* BMB Belgo-Mineira Bekaert Artefatos de 

Arame Ltda, Vespasiano ............... Full consolidation Brazil 55.499970 

* BMF Belgo-Mineira Fomento Mercantil Ltda, 

Belo Horizonte ...................... Full consolidation Brazil 100.000000 

* BMP Siderúrgia SA, Juiz de Fora ........... Full consolidation Brazil 75.791484 

* CAF Santa Bárbara Ltda, Belo Horizonte .... Full consolidation Brazil 100.000000 

* CIMAF Cabos SA, São Paulo ............. Equity method Brazil 50.000000 

* Jossan SA, Feira de Santana .............. Full consolidation Brazil 99.994789 

* Procables SA, Lima ..................... Equity method Peru 47.739239 

* Productos de Acero SA, Santiago ........... Equity method Chilli 50.000000 

* Usina Hidrelétrica Guilman-Amorim SA, Belo 

Horizonte .......................... Equity method Brazil 51.000000 

* Wire Rope Industries SA, Montreal ......... Equity method Canada 50.000000 

Emesa Trefilería SA, Arteixo ................ Full consolidation Spain 100.000000 

Estate Wire Ltd, Sheffield .................. Full consolidation United Kingdom 100.000000 

Europrofil France SA, Paris ................ Full consolidation France 99.990000 

Industrias Gálycas SA, Vitoria ............... Full consolidation Spain 100.000000 

LME Laminés Marchands Européens SA, Trith 

Saint Léger, Subgroup comprising 3 companies . Equity method France 33.999260 

MecanArbed Dommeldange Sàrl, Luxembourg . . . Full consolidation Luxembourg 100.000000 

Newco Sàrl, Luxembourg .................. Full consolidation Luxembourg 100.000000 

Newco Sàrl & Cie Secs, Luxembourg .......... Full consolidation Luxembourg 100.000000 

ProfilArbed SA, Esch s/Alzette .............. Full consolidation Luxembourg 100.000000 

Redalsa SA, Valladolid .................... Equity method Spain 26.000000 

A-I-61



Percentage of 


Control (%) 

San Zeno Acciai Duferco Spa, San Zeno Naviglio Equity method Italy 49.900001 

Socabel (Groupe Arbed) Senc, Luxembourg ..... Full consolidation Luxembourg 100.000000 

Socadi (Groupe Arbed) Senc, Luxembourg ..... Full consolidation Luxembourg 100.000000 

Société du Train Universel de Longwy SA, 

Herserange ........................... Full consolidation France 99.999994 

Stahlwerk Thüringen GmbH, Unterwellenborn . . . Full consolidation Germany 100.000000 

Travi e Profilati di Pallanzeno Spa, Pallanzeno . . . Full consolidation Italy 100.000000 

TrefilArbed Arkansas Inc, Pine Bluff .......... Full consolidation United States 99.999999 

TrefilArbed Bettembourg SA, Dudelange ....... Full consolidation Luxembourg 100.000000 

TrefilArbed Bissen SA, Bissen ............... Full consolidation Luxembourg 100.000000 

TrefilArbed Cheb Sro, Jesenice u Chebu ....... Full consolidation Czech Republic 80.000000 

TrefilArbed Korea Co Ltd, Yangsan ........... Equity method Korea 50.000000 

TrefilArbed Stahlcord Austria AG, Fürstenfeld . . . Full consolidation Austria 96.502722 

TrefilArbed Stahlcord Gyártó Kft, Szentgotthard . Full consolidation Hungary 100.000000 

Stainless Steel sector 

Acesita SA, Belo Horizonte ................ Equity method Brazil 38.938281 

AL-Fin NV, Genk ....................... Full consolidation Belgium 100.000000 

Alinox Srl, Aosta ........................ Full consolidation Italy 100.000000 

Arcelor Stainless International SA, Puteaux ..... Full consolidation France 99.997648 

Haven Genk NV, Genk .................... Full consolidation Belgium 50.000000 

Horst Zaabel GmbH, Garbsen .............. Full consolidation Germany 100.000000 

Imphy Alloys 


* Imphy Alloys Nevada Inc, New York ........ Full consolidation United States 100.000000 

* Hood and Company Inc, Hamburg .......... Full consolidation United States 100.000000 

* IAI Holding Inc, New York ............... Full consolidation United States 100.000000 

* MetalImphy Alloys Corp, Collegeville ........ Full consolidation United States 100.000000 

* Rahns Speciality Metals Inc, Collegeville ..... Full consolidation United States 100.000000 

Imphy Ugine Précision SA, Puteaux ........... Full consolidation France 99.999916 

Industeel Belgium 


* Industeel Belgium SA, Charleroi ........... Full consolidation Belgium 100.000000 

* Aval Metal Center SA, Charleroi ........... Full consolidation Belgium 100.000000 

* Charleroi Déroulage SA, Charleroi ......... Full consolidation Belgium 100.000000 

Industeel France 


* Industeel France SA, Puteaux ............. Full consolidation France 99.999400 

* Industeel Creusot SAS, Puteaux ............ Full consolidation France 100.000000 

* Creusot Métal SA, Puteaux ............... Full consolidation France 74.999167 

J&L 


* J&L Speciality Steel Inc, Coraopolis ......... Full consolidation United States 100.000000 

* J&L Speciality Steel International Sales Corp, 

Christiansted ........................ Full consolidation United States 100.000000 

* Midland Terminal Company Corp, Midland . . . Full consolidation United States 100.000000 

La Meusienne Italia Srl, Milano ............. Full consolidation Italy 100.000000 

Longtain Aciers Spéciaux et Inoxydables SA, 

Strepy-Bracquegnies .................... Full consolidation Belgium 97.967211 

Matthey et Cie SA, Apples ................. Full consolidation Switzerland 100.000000 

Matthey France SAS, Ancerville ............. Full consolidation France 100.000000 

A-I-62



Percentage of 


Control (%) 

Matthey Holding SA, Fribourg .............. Full consolidation Switzerland 100.000000 

Matthey US Inc, Detroit ................... Full consolidation United States 100.000000 

Mecagis SA, Puteaux ..................... Full consolidation France 100.000000 

RCC GmbH, Erkrath ..................... Full consolidation Germany 100.000000 

Société Carolorégienne de Laminage SA, Couillet Full consolidation Belgium 100.000000 

Société Meusienne de Constructions Mécaniques 

SA, Ancerville ......................... Full consolidation France 99.910716 

Société Savoisienne de Métaux SA, Annecy ..... Full consolidation France 100.000000 

Sprint Metal Edelstahlziehereien GmbH, Hemer . Full consolidation Germany 100.000000 

Staalcentrum Limburg NV, Genk ............. Full consolidation Belgium 100.000000 

Sunbrite NV, Genk ....................... Full consolidation Belgium 100.000000 

Techalloy Company Inc, Mahwah ............. Full consolidation United States 100.000000 

Thainox Steel Ltd, Rayong ................. Full consolidation Thailand 96.110011 

Trafilerie Bedini Srl, Peschiera Borromeo ....... Full consolidation Italy 100.000000 

Trafilerie e Viterie Italiane Srl, Ponte dell’Ollio . . Full consolidation Italy 99.920000 

Trefilados Inoxidables de Mexico SA, Huamantla . Full consolidation Mexico 100.000000 

Ugine & Alz SA, Puteaux .................. Full consolidation France 99.851852 

Ugine & Alz Belgium NV, Genk ............. Full consolidation Belgium 100.000000 

Ugine & Alz France SA, Puteaux ............ Full consolidation France 99.999978 

Ugine & Alz France Service SA, Gonesse ...... Full consolidation France 100.000000 

Ugine & Alz Iberica SA, Viladecans .......... Full consolidation Spain 99.999480 

Ugine & Alz Italia Srl, Milano .............. Full consolidation Italy 100.000000 

Ugine & Alz Luxembourg SA, Rodange ........ Full consolidation Luxembourg 100.000000 

Ugine Savoie Italia Srl, Peschiera Borromeo .... Full consolidation Italy 100.000000 

Ugine Savoie Rostfrei GmbH, Renningen ...... Full consolidation Germany 100.000000 

Ugine Stainless 


* Ugine Stainless & Alloys Inc, Colmar ........ Full consolidation United States 100.000000 

* Ugine Stainless & Alloys—N.J. Inc, Colmar . . . Full consolidation United States 100.000000 

Uginox Sanayi ve Ticaret AS, Gebze Kocaeli .... Full consolidation Turkey 65.000000 

Ugitech SA, Ugine ....................... Full consolidation France 99.999948 

Ugitech Iberica SA, Barcelona .............. Full consolidation Spain 100.000000 

Ugitech Suisse SA, Belivard ................ Full consolidation Switzerland 99.998519 

Ugitech UK Ltd, Birmingham ............... Full consolidation United Kingdom 99.999960 

Usi Holding Inc. Corp, Carson City ........... Full consolidation United States 100.000000 

Usinor Empreendimentos e Participacões Ltda, 

São Paulo ............................ Full consolidation Brazil 100.000000 

Weha Edelstahl GmbH, Ratingen ............ Full consolidation Germany 100.000000 

Distribution, Processing and Trading sector 

Aceralia Construcción Obras Srl, Berrioplano .... Full consolidation Spain 100.000000 

Aceralia Constructalia SL, Pamplona .......... Full consolidation Spain 100.000000 

Aceralia Distribucíon 


* Aceralia Distribucíon SL, Madrid ........... Full consolidation Spain 100.000000 

* Lusitana de Distribuçao Siderúrgica Lda, 

Ribatejo ........................... Equity method Portugal 100.000000 

* Perfiles Especiales SA, Pamplona ........... Equity method Spain 100.000000 

Aceralia Transformados 


* Aceralia Transformados SA, Pamplona ....... Full consolidation Spain 100.000000 

A-I-63



Percentage of 


Control (%) 

* Aceralia Color Acero SL, Pamplona ......... Full consolidation Spain 100.000000 

* ACH Paneles AIE, Azuqueca de Henares ..... Equity method Spain 40.000000 

Aceralia Tubos 


* Aceralia Tubos SL, Lesaka ................ Full consolidation Spain 100.000000 

* Aceralia Rotec SL, Vera de Bidasoa ......... Equity method Spain 100.000000 

Alessio Tubi Spa, Torino ................... Full consolidation Italy 100.000000 

Arbed Americas 


* Arbed Americas Llc, New York ............ Full consolidation United States 100.000000 

* Arbed Americas Atlantic Spc, in liquidation, 

Wilmington ......................... Full consolidation United States 100.000000 

* Arcelor International Mexico SA, Queretaro . . . Equity method Mexico 100.000000 

* Arcelor Tradind USA Llc, New York ........ Full consolidation United States 100.000000 

* JBF Commercial Corp, in liquidation, New 

York.............................. Full consolidation United States 100.000000 

* TrefilArbed Inc, in liquidation, New York ..... Full consolidation United States 100.000000 

Arcelor Acelkereskedelmi Kft, Kecskemet ...... Full consolidation Hungary 99.800000 

Arcelor Bauteile GmbH, Kreuztal-Eichen ...... Full consolidation Germany 100.000000 

Arcelor Construcción España SL, Berrioplano . . . Full consolidation Spain 100.000000 

Arcelor Construction France SA, Haironville .... Full consolidation France 99.999215 

Arcelor Distribuce-CZ Sro, Prague ........... Full consolidation Tchèquie 100.000000 

Arcelor Distribúcia Slovensko Sro, Kosice ...... Full consolidation Slovakia 100.000000 

Arcelor Dystrybucja Polska Spzoo, Katowice .... Full consolidation Poland 100.000000 

Arcelor Grundstücksverwaltung Neckarsulm 

GmbH, Neckarsulm .................... Full consolidation Germany 100.000000 

Arcelor Grundstücksverwaltung Thüringen 

GmbH, Ratingen ....................... Full consolidation Germany 100.000000 

Arcelor International SA, Luxembourg ........ Full consolidation Luxembourg 100.000000 

Arcelor International America 


* Arcelor International America Llc, New York . . Full consolidation United States 100.000000 

* Norsteel Corp, New York ................ Full consolidation United States 100.000000 

Arcelor International Canada Inc, Westmount . . . Full consolidation Canada 100.000000 

Arcelor International Export SA, Luxembourg . . . Full consolidation Luxembourg 100.000000 

Arcelor International Singapore 


* Arcelor International Singapore Ltd, Singapore Full consolidation Singapore 100.000000 

* Arcelor International Malaysia Sdn, Bhd. Kuala 

Lumpur ............................ Full consolidation Malaysia 100.000000 

Arcelor Négoce Distribution SAS, Reims ....... Full consolidation France 100.000000 

Arcelor Profil SA, Yutz .................... Full consolidation France 99.900000 

Arcelor Projects Pte Ltd, Singapore ........... Full consolidation Singapore 90.000000 

Arcelor Projects Sàrl, Luxembourg ........... Full consolidation Luxembourg 100.000000 

Arcelor Stahlhandel GmbH, Ratingen ......... Full consolidation Germany 100.000000 

Arcelor Stahlhandel Holding GmbH, Ratingen . . . Full consolidation Germany 100.000000 

Arcelor Trading Antwerp SA, Antwerp ........ Full consolidation Belgium 99.900000 

Arcelor Tubes SA, Aubervilliers .............. Full consolidation France 99.999397 

Ask Mac Gowan Ltd, Halesowen ............ Full consolidation United Kingdom 65.500204 

Asturiana de Perfiles SA, Langreo ............ Full consolidation Spain 60.000000 

Avis Steel UK, Manchester ................. Full consolidation United Kingdom 67.500000 

A-I-64



Percentage of 


Control (%) 

Baechler SA, Thionville ................... Full consolidation France 100.000000 

Berton Sicard Produits Métallurgiques SA, 

Avignon ............................. Full consolidation France 100.000000 

Chaillous SA, Nantes ..................... Full consolidation France 100.000000 

Cima SA, Bertrichamps ................... Full consolidation France 100.000000 

Cisatol SA, Montataire .................... Full consolidation France 99.999603 

Cockerill Stahl Service GmbH, Essen ......... Full consolidation Germany 100.000000 

Cofrastra SA, Fribourg .................... Full consolidation Switzerland 100.000000 

Color Profil NV, Geel ..................... Full consolidation Belgium 100.000000 

Comptoir Métallurgique du Littoral SA, Nice .... Full consolidation France 100.000000 

Comptoir pour l’entreprise et le matériel 

d’entreprise Suchail SA, Saint Etienne ....... Full consolidation France 49.984615 

Conducciones y Derivados SA, Vitoria-Gasteiz, 

Subgroup comprising 6 companies .......... Equity method Spain 48.836344 

Contisteel 


* Contisteel (Holdings) Ltd, Andover ......... Full consolidation United Kingdom 100.000000 

* Contisteel (Southern) Ltd, Andover ......... Full consolidation United Kingdom 100.000000 

* Contisteel Ltd, Andover ................. Full consolidation United Kingdom 100.000000 

Delta Zinc SA, Saint Jorioz ................ Full consolidation France 100.000000 

Deville SA, Saint Bonnet le Château .......... Full consolidation France 49.984615 

Dikema & Chabot Holding BV, Rotterdam ..... Full consolidation The Netherlands 100.000000 

Dikema Staal Nederland BV, Rotterdam ....... Full consolidation The Netherlands 100.000000 

Dikema Top BV, Rotterdam ................ Full consolidation The Netherlands 100.000000 

Disteel SA, Machelen ..................... Full consolidation Belgium 100.000000 

Disteel Cold SA, Machelen ................. Full consolidation Belgium 100.000000 

e-Arbed Distribution SA, Esch s/Alzette ........ Full consolidation Luxembourg 100.000000 

Europese Staal Prefabricatie NV, Geel ......... Full consolidation Belgium 99.999911 

Etablissement Alfred André SA, Harfleur ...... Full consolidation France 100.000000 

Etablissements Jean Letierce et Cie, Bolbec ..... Full consolidation France 100.000000 

Etilam SA, Saint Dizier ................... Full consolidation France 99.388667 

Eucosider Commercial SA, Pétange ........... Full consolidation Luxembourg 100.000000 

Eurinter France SA, Reims ................. Full consolidation France 100.000000 

Eurinter Svenska AB, Karlstad .............. Full consolidation Sweden 100.000000 

Europerfil SA, Barcelona .................. Equity method Spain 50.000000 

Exma SA, Yutz .......................... Full consolidation France 99.994495 

Fermatec SA, Nîmes...................... Full consolidation France 100.000000 

Ferrometalli-SAFEM Spa, Milano ............ Full consolidation Italy 96.446073 

Ferrometalli-SAFEM Commerciale Spa, Milano . . Full consolidation Italy 100.000000 

Flachform Stahl GmbH, Schwerte ............ Full consolidation Germany 100.000000 

Forges Profil SA, Kirchdorf ................. Equity method Switzerland 25.000000 

Fratelli Canessa Srl, Moncalieri .............. Full consolidation Italy 50.999889 

Guillot SA, Poitiers ...................... Full consolidation France 49.840000 

Haironville Austria GmbH, Neuhofen ......... Full consolidation Austria 99.997500 

Haironville Bohemia Sàrl, Ceske Budejovice .... Full consolidation Czech Republic 99.000000 

Haironville Danmark AS, Rodovre ........... Full consolidation Denmark 100.000000 

Haironville Guyane SAS, Cayenne ............ Full consolidation French Guyana 100.000000 

Haironville Hungaria Kft, Budapest ........... Full consolidation Hungary 100.000000 

Haironville Metal Profil SA, Herstal .......... Full consolidation Belgium 100.000000 

Haironville Norge AS, Vestby ............... Full consolidation Norway 100.000000 

Haironville Polska Spzoo, Poznan ............ Full consolidation Poland 100.000000 

A-I-65



Percentage of 


Control (%) 

Haironville Portugal SA, Cartaxo ............. Full consolidation Portugal 99.988462 

Haironville Slovensko Sro, Bratislava .......... Full consolidation Slovakia 100.000000 

Haironville Sverige AB, Karlstad ............. Full consolidation Sweden 100.000000 

Haironville UK Ltd, St Helens .............. Full consolidation United Kingdom 100.000000 

Haironville Tac Ltd, St Helens .............. Full consolidation United Kingdom 100.000000 

IMS International Métal Service SA, Neuilly, 

Subgroup comprising 20 companies ......... Equity method France 36.050354 

J & F Steel Llc, Burns Harbor .............. Full consolidation United States 100.000000 

Jean Guille SA, Thionville ................. Full consolidation France 49.997500 

JH Group SCI, Yutz ...................... Full consolidation France 99.999999 

Kempes & Koolen Bouwsystemen BV, Tiel ...... Full consolidation The Netherlands 100.000000 

Konti Steel Hellas SA, Magnissia ............ Full consolidation Greece 100.000000 

Laminados Velasco 


* Laminados Velasco SL, Basauri ............ Full consolidation Spain 80.002547 

* Arcelor Distribución Valencia SA, Valencia .... Full consolidation Spain 100.000000 

* Arcelor Distribución Vigo SA, Porriño....... Full consolidation Spain 100.000000 

* Auxiliar Laminadora Alavesa SA, Olaeta ..... Full consolidation Spain 100.000000 

* Calibrados Pradera SA, Miravalles .......... Equity method Spain 50.000000 

*Cántabra de Laminados Velasco SA, Santander Full consolidation Spain 100.000000 

* Castellana de Laminados Velasco SA, Burgos . . Full consolidation Spain 100.000000 

* Elaborados y Construcción SA, Getafe ....... Full consolidation Spain 100.000000 

* Ferronía SA, Andoain ................... Full consolidation Spain 100.000000 

* Grupo Velasco Desarrollo SL, Basauri ....... Full consolidation Spain 100.000000 

* Industrias Zarra SA, Galdacano ............ Equity method Spain 25.000000 

* Laminados Canarias SA, Telde ............. Full consolidation Spain 100.000000 

* Laminados Comavesa SA, Getafe ........... Full consolidation Spain 100.000000 

* Laminados Gonvelsa SL, Llanera ........... Full consolidation Spain 50.000000 

* Laminados Siderúrgicos Arbizu SA, Arbizu .... Full consolidation Spain 100.000000 

* Laminados Siderúrgicos Duero SA, Aranda de 

Duero ............................. Full consolidation Spain 90.000000 

* Laminados Siderúrgicos La Coruña SA, Arteixo Full consolidation Spain 100.000000 

* Laminados Siderúrgicos Miranda SA, Miranda 

de Ebro ........................... Full consolidation Spain 100.000000 

* Laminados Siderúrgicos Murcia SA, San Ginés . Full consolidation Spain 100.000000 

* Laminados Siderúrgicos Orense SA, San 

Ciprian de Viñas ..................... Full consolidation Spain 90.000000 

* Laminados Siderúrgicos Sampol SL, Palma de 

Mallorca ........................... Full consolidation Spain 75.049900 

* Laminados Siderúrgicos Sevilla SA, Alcalá de 

Guadaira ........................... Full consolidation Spain 100.000000 

* Laminados Siderúrgicos Toledo SA, Villaluenga 

de la Sagra ......................... Full consolidation Spain 55.000000 

* Laminados Siderúrgicos Valladolid SA, 

Valladolid .......................... Full consolidation Spain 100.000000 

* Laminados Siderúrgicos Vitoria SA, Vitoria . . . Full consolidation Spain 100.000000 

* SA Productos Empresas Metalúrgicas, 

Salvatierra .......................... Full consolidation Spain 100.000000 

* Servicio del Acero SA, Basauri ............ Full consolidation Spain 100.000000 

* Tremad SA, Icazteguieta ................. Full consolidation Spain 90.000000 

* Tubos y Decapados SA, Basauri ............ Full consolidation Spain 100.000000 

A-I-66



Percentage of 


Control (%) 

Longtain SA, Manage ..................... Full consolidation Belgium 99.990568 

Laserflash SA, Eupen ..................... Full consolidation Belgium 100.000000 

Lille Aciers SA, Lomme ................... Full consolidation France 100.000000 

Megaço Jma Comercio Siderúrgico Ltda, Palmela Equity method Portugal 38.666500 

Mirouze Novacier SA, Toulouse ............. Full consolidation France 100.000000 

Monteferro Stahl Service GmbH, Leichlingen . . . Full consolidation Germany 100.000000 

Mosacier SA, Liège ...................... Full consolidation Belgium 100.000000 

Oxyflash SA, Melle ....................... Full consolidation Belgium 100.000000 

PAB Bazeilles SA, Douzy .................. Full consolidation France 99.998383 

PAB Sud SA, Hagetmau ................... Full consolidation France 100.000000 

Panneaux Frigorifiques Français SA, Val d’Ize . . . Full consolidation France 100.000000 

Parements Métalliques d’Architecture SA, Cerons Full consolidation France 100.000000 

Perry Willenhall Steel Service Centres Ltd, 

Willenhall ............................ Full consolidation United Kingdom 100.000000 

Prekon Spzoo, Starachowice ................ Full consolidation Poland 100.000000 

Produits d’Usines Métallurgiques PUM-Station 

Service Acier SA, Reims ................. Full consolidation France 99.975443 

Produits Métallurgiques de l’Orléanais SAS, Ingre Full consolidation France 49.986667 

Produits Métallurgiques des Ardennes SA, 

Donchery ............................ Full consolidation France 100.000000 

Produits Métallurgiques du Sud-Ouest SA, 

Langon .............................. Full consolidation France 100.000000 

Produits Sidérurgiques de la Moselle SA, Yutz . . . Full consolidation France 100.000000 

Profil du Futur SA, Horbourg wihr ........... Full consolidation France 100.000000 

Profilage de la Guadeloupe SA, Baie Mahault . . . Full consolidation France 100.000000 

Profilage de la Réunion SA, Le Port .......... Full consolidation France 94.203612 

ProfilArbed Distribution SA, Esch s/Alzette ..... Full consolidation Luxembourg 100.000000 

ProfilArbed Distribution Exploitation Luxembourg 

SA, Differdange ....................... Full consolidation Luxembourg 100.000000 

ProfilArbed Distribution Luxembourg SA, Pétange Full consolidation Luxembourg 100.000000 

ProfilArbed Staalhandel 


* ProfilArbed Staalhandel BV, Born .......... Full consolidation The Netherlands 100.000000 

* ABC BV, Nijmegen ..................... Full consolidation The Netherlands 100.000000 

* Arbed Damwand België NV, Overpelt ....... Full consolidation Belgium 100.000000 

* Arbed Damwand Nederland BV, Moerdijk .... Full consolidation The Netherlands 100.000000 

* Betonijzer Buigcentrale Limburg BV, Born .... Full consolidation The Netherlands 100.000000 

* Borotrans Born BV, Born ................ Full consolidation The Netherlands 100.000000 

* Bouwstaal Nederland BV, Born ............ Full consolidation The Netherlands 100.000000 

* Calimco BV, Born ...................... Full consolidation The Netherlands 100.000000 

* Cogeaf NV, Schoten .................... Full consolidation Belgium 95.933333 

* Demanet-Cassart Aciers SA, Seneffe ........ Full consolidation Belgium 100.000000 

* Kielco Nederland BV, Born ............... Full consolidation The Netherlands 100.000000 

* Leduc Trading NV, Schoten ............... Full consolidation Belgium 100.000000 

* Limbustaal BV, Meersen ................. Full consolidation The Netherlands 100.000000 

* Lommaert Walserijprodukten BV, Born ...... Full consolidation The Netherlands 100.000000 

* Lommaert/Montan Wapeningsstaal BV, 

Nijmegen .......................... Full consolidation The Netherlands 100.000000 

* Montan Staal BV, The Hague ............. Full consolidation The Netherlands 100.000000 

* M-Soft NV, Overpelt .................... Full consolidation Belgium 100.000000 

* ProfilArbed Distribution België NV, Overpelt . . Full consolidation Belgium 100.000000 

A-I-67



Percentage of 


Control (%) 

* ProfilArbed Staalhandel Nederland BV, Born . . Full consolidation The Netherlands 100.000000 

* Steelexpress NV, Schoten ................. Full consolidation Belgium 100.000000 

Profilsteel SA, Bouffioulx .................. Full consolidation Belgium 100.000000 

PUM Paris-Normandie SA, Bonneuil sur Marne . . Full consolidation France 100.000000 

Robert Smith Steels Ltd, Mersyside ........... Full consolidation United Kingdom 100.000000 

SA Lardier et Compagnie, Blois ............. Full consolidation France 100.000000 

SAR Stahlservice GmbH, Neuwied ........... Full consolidation Germany 100.000000 

Savoie Métal SA, Saint Jorioz ............... Full consolidation France 100.000000 

SCI du 1 & 3 place de la Belgique, Reims ...... Full consolidation France 100.000000 

Sidmar-Stahlwerke Bremen-SSC NV, Ghent ..... Full consolidation Belgium 100.000000 

Sirus SSC, Saint Ouen l’Aumone............. Full consolidation France 100.000000 

Skyline Steel 


* Skyline Steel Corp, Parsippany ............. Full consolidation United States 100.000000 

* Arkansas Steel Processing Inc, Armoral ...... Full consolidation United States 100.000000 

* Arkansas Steel Processing Inc, Bessemer ..... Full consolidation United States 100.000000 

* Associated Pile and Fitting Corp, Clifton ..... Full consolidation United States 100.000000 

* Casteel Inc, Belpre ..................... Full consolidation United States 100.000000 

* Midwest Steel & Tube Inc, Chicago ......... Full consolidation United States 100.000000 

* PA Pipe Inc, Camp Hill .................. Full consolidation United States 100.000000 

* Skyline (Php) Canada Ltd, St Bruno ........ Full consolidation Canada 100.000000 

SLPM SA, Saint Ouen l’Aumone ............. Full consolidation France 100.000000 

Société Belge d’Oxycoupage SA, Liège ........ Full consolidation Belgium 100.000000 

Société de transports de produits d’usines 

Métallurgiques SA, Reims ................ Full consolidation France 100.000000 

Société Industrielle Métallurgique et d’entreprise 

SA, La Chapelle Saint Luc ............... Full consolidation France 100.000000 

SODIF Srl, Milano ....................... Full consolidation Italy 100.000000 

Sotracier SA, Pontcharra ................... Full consolidation France 99.997500 

SPS Altensteig Stahl-Service-Center GmbH, 

Altensteig Waldorf ..................... Full consolidation Germany 100.000000 

SPS Lichtenstein Stahl-Service-Center GmbH, 

Lichtentein Sachsen .................... Full consolidation Germany 100.000000 

SPS Südband Stahl-Service-Center GmbH, 


SRW Schwarzwälder Röhrenwerk GmbH, 


SRW-SPS Verwaltungs GmbH, Altensteig Waldorf Full consolidation Germany 100.000000 

Station Service Acier Lopez SAS, Valence ...... Full consolidation France 100.000000 

Südband Stahl-Service GmbH, Ludwigshafen .... Full consolidation Germany 100.000000 

Traxys SA, Bertrange ..................... Equity method Luxembourg 50.000000 

UCI SA, Fleurus ........................ Full consolidation Belgium 70.000000 

USB Unterwellenborner Schneidbetrieb GmbH, 

Saalfeld ............................. Full consolidation Germany 100.000000 

Usinor Stal Serwis Spzoo, Bytom ............. Full consolidation Poland 100.000000 

Vikam Praha AS, Prague .................. Full consolidation Czech Republic 100.000000 

Wannifroid SA, Onnaing ................... Full consolidation France 99.981818 

Welbeck Steel Service Centre Ltd, Barking ..... Full consolidation United Kingdom 100.000000 

Other Activities sector 

Arcelor SA, Luxembourg .................. 

Luxembourg 

A-I-68



Percentage of 


Control (%) 

Aceralia Internacional BV, Amsterdam ......... Full consolidation The Netherlands 100.000000 

Aceralia Steel Trading BV, Amsterdam ......... Full consolidation The Netherlands 100.000000 

AIS Finance (Groupe Arbed) Snc, Luxembourg . . Full consolidation Luxembourg 100.000000 

Allard Gieterij NV, Ghent .................. Full consolidation Belgium 50.000000 

Ancofer Stahlhandel GmbH, Mülheim ......... Equity method Germany 51.250000 

Arbed SA, Luxembourg ................... Full consolidation Luxembourg 99.728897 

Arbed Investments SA, Luxembourg .......... Full consolidation Luxembourg 100.000000 

Arbed Investment Services SA, Luxembourg .... Full consolidation Luxembourg 100.000000 

Arcelor Center Brussels NV, Ghent ........... Full consolidation Belgium 83.159861 

Arcelor Finance and Services Belgium SA, 

Brussels ............................. Full consolidation Belgium 100.000000 

Arcelor Finance Sca, Luxembourg ............ Full consolidation Luxembourg 100.000000 

Arcelor Finanziara Srl, Piombino ............. Full consolidation Italy 100.000000 

Arcelor Purchasing SAS, Puteaux ............ Full consolidation France 100.000000 

Arcelor Treasury Snc, Puteaux ............... Full consolidation France 100.000000 

Arcelor USA Holding Inc, New York .......... Full consolidation United States 100.000000 

Aster SA, Puteaux ....................... Full consolidation France 99.999983 

Aster Finances SA, Puteaux ................ Full consolidation France 100.000000 

Atic Services SA, Paris, Subgroup comprising 12 

companies ........................... Equity method France 45.074323 

Bail Industrie SA, Hayange ................. Full consolidation France 99.999647 

Belsid Llc, Wilmington .................... Full consolidation United States 100.000000 

Berg Steel Pipe Corp, Panama City ........... Equity method United States 51.250000 

CFL Canada Investment Inc, Granby .......... Full consolidation Canada 100.000000 

Circuit Foil America Secs, Granby ............ Full consolidation Canada 100.000000 

Circuit Foil Luxembourg Sàrl, Wiltz ........... Full consolidation Luxembourg 76.910010 

Circuit Foil Service SA, Weidingen/Wiltz ....... Equity method Luxembourg 49.000000 

Cockerill Forges and Ringmill SA, Seraing ...... Full consolidation Belgium 100.000000 

Cockerill Sambre Stahl GmbH, Düsseldorf ...... Full consolidation Germany 100.000000 

DAF Group NV, Ghent ................... Full consolidation Belgium 50.000000 

DHS-Dillinger Hütte Saarstahl AG, Dillingen . . . Equity method Germany 51.250000 

Esperbras SL, Olaberria ................... Full consolidation Spain 100.000000 

Europipe GmbH, Ratingen ................. Equity method Germany 51.250000 

Europipe France SA, Grande Synthe .......... Equity method France 51.250000 

Finindus NV, Brussels ..................... Full consolidation Belgium 50.000000 

Foil Coatings Luxembourg—FCL Gie, Wiltz .... Equity method Luxembourg 100.000000 

Frecolux SA, Luxembourg .................. Full consolidation Luxembourg 99.999915 

G.Fer Snc, Puteaux ....................... Full consolidation France 100.000000 

G.T.S. Industries SA, Grande Synthe .......... Equity method France 99.999922 

Groupement Immobilier Scrl, Brussels ......... Full consolidation Belgium 100.000000 

IEE International Electronics & Engineering SA, 

Echternach, Subgroup comprising 2 companies . Equity method Luxembourg 28.184282 

Immobilière Schlassgoart (Groupe Arbed) Senc, 

Luxembourg .......................... Full consolidation Luxembourg 100.000000 

Imphy SA, Puteaux ....................... Full consolidation France 99.999702 

Investar Sàrl, Luxembourg ................. Equity method Luxembourg 50.000000 

Investissement Technologie Inc, Montreal ...... Full consolidation Canada 100.000000 

Paul Wurth Inc, Canonsburg ................ Full consolidation United States 48.008364 

Paul Wurth Ltd, Burlington ................. Full consolidation Canada 48.008364 

Paul Wurth SA, Luxembourg ................ Full consolidation Luxembourg 48.008364 

Paul Wurth do Brasil Ltda, Belo Horizonte ..... Full consolidation Brazil 48.008364 

A-I-69



Percentage of 


Control (%) 

Persebras SL, Olaberria ................... Full consolidation Spain 100.000000 

Rogesa GmbH, Dillingen .................. Equity method Germany 51.250000 

S3P SA, Puteaux ........................ Full consolidation France 99.999936 

SA Forges et Aciéries de Dilling, Dillingen ..... Equity method Germany 97.128851 

Saarlux Stahl GmbH, Stuttgart .............. Equity method Germany 100.000000 

Seridev SA, Puteaux ...................... Full consolidation France 99.400000 

Sidarfin NV, Ghent ....................... Full consolidation Belgium 99.999979 

Sidarsteel NV, Ghent ..................... Full consolidation Belgium 100.000000 

Sidmar Finance (Groupe Arbed) SA, Luxembourg Full consolidation Luxembourg 100.000000 

Sodisid SA, Courbevoie ................... Full consolidation France 99.998800 

Sofinus SA, Puteaux ...................... Full consolidation France 99.999856 

Sogepass SA, Hayange .................... Full consolidation France 99.999745 

Sollac Verwaltung GmbH, Stuttgart ........... Full consolidation Germany 100.000000 

Somef SA, Liège ........................ Full consolidation Belgium 100.000000 

SOTEG Société de Transport de Gaz SA, 

Luxembourg .......................... Equity method Luxembourg 20.000000 

SOTEL SC, Esch s/Alzette ................. Full consolidation Luxembourg 75.000000 

SOTEL Réseau et Cie Secs, Esch s/Alzette ..... Full consolidation Luxembourg 100.000000 

Tixis Systems SAS, Puteaux ................. Full consolidation France 100.000000 

Tixis Systems Belgium SA, Flemalle ........... Full consolidation Belgium 100.000000 

Tixis Technologies SAS, Puteaux ............. Full consolidation France 100.000000 

Tixis Technologies Belgium SA, Flemalle ....... Full consolidation Belgium 100.000000 

Usinor SA, Puteaux ...................... Full consolidation France 99.442181 

Usinor Achats SA, Puteaux ................. Full consolidation France 100.000000 

Usinor Belgium SA, Seraing ................ Full consolidation Belgium 100.000000 

Usinor Imports & Trading SA, Puteaux ........ Full consolidation France 100.000000 

Usinor USA 


* Usinor USA Holding Corp, Wilmington ...... Full consolidation United States 100.000000 

* Arcelor Stainless Processing Llc, Troy ........ Full consolidation United States 100.000000 

* Usinor Llc, New York ................... Full consolidation United States 100.000000 

* Usinor Industeel (USA) Inc, Wilmington ..... Full consolidation United States 100.000000 

Vertriebsgellschaft Dillinger Hütte GmbH, 

Dillingen ............................ Equity method Germany 51.250000 

A-I-70

28JUN200402304359 

Audit 

31, Allée Scheffer Téléphone +352 22 51 51 1 Internet www.kpmg.lu 

L-2520 Luxembourg Fax + 352 22 51 71 E-mail audit@kpmg.lu 

To the Shareholders of Arcelor S.A. 

Société Anonyme 

Luxembourg 

AUDITOR’S REPORTS 

We have audited the consolidated financial statements of Arcelor S.A. and its subsidiaries (the 

‘‘Group’’) for the years ending 31 December 2003 and 31 December 2002 and we issued our audit reports 

on such financial statements on 19 March 2004 and on 4 April 2003 respectively. We reported as follows. 

We have audited the consolidated balance sheet of Arcelor S.A. and its subsidiaries (the ‘‘Group’’) as 

at 31 December 2003 and 31 December 2002 and the related consolidated statements of income, changes 

in equity and cash flows for the years then ended, as reproduced at pages A-I-3 to A-I-70, and we have read 

the related consolidated management reports. 

These consolidated financial statements and the consolidated management reports are the 

responsibility of the Board of Directors of Arcelor S.A.. Our responsibility is to express an opinion on 

these consolidated financial statements, based on our audits, and to check the consistency of the 

consolidated management reports with them. 

We conducted our audits in accordance with International Standards on Auditing. Those standards 

require that we plan and perform our audits 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. An audit also includes assessing the 

accounting principles used and significant estimates made by the Board of Directors, as well as evaluating 

the overall financial statements presentation. We believe that our audits provide a reasonable basis for our 

opinions. 

Based on our opinions of 19 March 2004 and 4 April 2003, the consolidated financial statements of 

Arcelor S.A., as reproduced at pages A-I-3 to A-I-70, give a true and fair view of the financial position of 

the Group as at 31 December 2003 and at 31 December 2002, and of the results of its operations and its 

cash flows for the years then ended, in accordance with International Financial Reporting Standards 

(‘‘IFRS’’). 

For comparative purposes, the Group has included pro forma consolidated financial information 

within its consolidated financial statements in relation to the year ended 31 December 2002. We have not 

audited or reviewed this pro forma consolidated financial information and, accordingly, do not express an 

opinion on such financial information. 

The consolidated management reports are in accordance with the consolidated financial statements. 

Luxembourg, 28 June 2004 

KPMG Audit 

Réviseurs d’Entreprises 

Eric Damotte 

Member Firm KPMG International a Swiss association 

KPMG Audit 

Société Civile 

31, Allée Scheffer 

L-2520 Luxembourg T.VA. LU13772441 

28JUN200402592928

Unconsolidated Annual Accounts of Arcelor 

BALANCE SHEET 

ASSETS 

December 31, December 31, 

2003 2002 


C. FIXED ASSETS ....................................... 8,612 9,052 

II. Tangible fixed assets (Note 3) ............................. 5 4 

1. Land and buildings .................................. 3 2 

3. Other fixtures, fittings, tools and equipment ................ 2 2 

4. Payments on account and assets in the course of construction . . . — p.m. 

III. Financial assets (Note 4) ................................. 8,607 9,048 

1. Shares in affiliated undertakings ........................ 8,607 8,201 

2. Loans to affiliated undertakings ......................... — 847 

5. Financial assets ..................................... p.m. — 

D. CURRENT ASSETS .................................... 1,092 337 

II. Debtors (Note 5) ....................................... 1,092 330 

1. Trade debtors ...................................... p.m. p.m. 

2. Amounts owed by affiliated undertakings .................. 1,089 329 

3. Amounts owed by affiliated undertakings in which the Company 

has a participating interest ............................ p.m. p.m. 

4. Other debtors ...................................... 3 1 

IV. Cash at bank and in hand ................................ p.m. 7 

E. PREPAYMENTS (Note 6) ................................ 26 34 

TOTAL ASSETS ............................................ 9,730 9,423 

The accompanying notes form an integral part of these annual accounts. 

A-I-72


BALANCE SHEET 

LIABILITIES 


2003 2002 


A. CAPITAL AND RESERVES (Note 7) ......................... 7,516 7,453 

I. Subscribed capital ....................................... 2,665 2,662 

II. Share premium account .................................. 4,795 4,791 

IV. Reserves .............................................. 13 p.m. 

1. Legal reserve 13 p.m. 

V. Retained profits ........................................ 43 — 

B PROVISIONS FOR LIABILITIES AND CHARGES (Note 8) ........ 11 p.m. 

2. Provisions for pensions and similar obligations .............. 1 p.m. 

3. Other provisions .................................... 10 — 

C. CREDITORS (Notes 9 and 10) ............................. 1,697 1,710 

1a. Convertible debenture loans ........................... 1,665 1,665 

2. Amounts owed to credit institutions ...................... p.m. p.m. 

5. Trade creditors ..................................... 7 2 

7. Amounts owed to affiliated undertakings .................. 20 40 

8. Amounts owed to undertakings in which the Company has a 

participating interest ................................. p.m. p.m. 

9. Other creditors: 

—of which tax and social security EUR 1m (2002: p.m.) ....... 5 3 

E. PROFIT FOR THE FINANCIAL YEAR ....................... 506 260 

TOTAL CAPITAL AND RESERVES AND LIABILITIES ............... 9,730 9,423 


A-I-73


INCOME STATEMENT FROM JANUARY 1 TO DECEMBER 31, 2003 


2003 2002 


I. SALES AND SERVICES ................................. 84 65 

4. Other operating income ............................. 84 65 

II. COST OF SALES AND SERVICES ......................... 118 71 

6. Staff costs 

a) Wages and salaries .............................. 22 9 

b) Social security cost .............................. 5 2 

—including early retirement, anticipated retirement and 

pensions of EUR 3m (2002: EUR 1m) 

7. a) Depreciation and other amounts written off tangible and 

intangible fixed assets ............................ 1 p.m. 

8. Other operating charges ............................. 90 60 

—including non income-related taxes of EUR 10m (2002: 

p.m.) 

III. OPERATING RESULT (I II) ........................... (34) (6) 

IV. INTEREST INCOME (Note 12) ........................... 606 320 

9. Income from participating interests ..................... 558 269 

—including from affiliated undertakings EUR 558m (2002: 

EUR 269) 

10. Investment income from other investments and from long term 

loans ........................................... 42 39 

—including from affiliated undertakings EUR 42m (2002: 

EUR 39m) 

11. Other interest receivable and similar income .............. 6 12 

—including from affiliated undertakings EUR 6m (2002: EUR 

12m) 

V. INTEREST CHARGES (Note 12) .......................... 66 54 

13. Interest payable and similar charges .................... 66 54 

—including charges in respect of affiliated undertakings EUR 

4m (2002: p.m.) 

VI. 

PROFIT ON ORDINARY ACTIVITIES BEFORE TAX 

(III + IV V) ....................................... 506 260 

VII. TAXES ............................................. p.m. — 

16. a) Taxes on income ................................ p.m. — 

VIII. PROFIT FOR THE FINANCIAL YEAR (VI VIII) ............ 506 260 


A-I-74


APPROPRIATION OF THE PROFIT FOR THE YEAR 


2003 2002 

In EUR 

in EUR 

million 

Result for the financial year ................................. 505,931,497.56 260 

Result brought forward ..................................... 43,325,059.69 — 

Result for distribution ..................................... 549,256,557.25 260 

Transfer to the legal reserve ................................. 25,296,574.88 13 

Transfer to other reserves ................................... — — 

Board of Directors remuneration ............................. 1,200,000.00 1 

Dividend of EUR 0.40 for the 2003 financial year paid on 533,040,796 

shares ............................................... 213,216,318.40 (*) — 

Dividend of EUR 0.38 for the 2002 financial year paid on 532,470,592 

shares (**) ............................................. — 203 

RESULT TO BE CARRIED FORWARD ........................ 309,543,663.97 43 

(*) The final amount of dividends distributed may be below the amount indicated following Arcelor’s decision to use existing Group 

shares to meet the share requirement resulting from the conversation of the O.C.E.A.N.E. 2006, shares which do not carry the 

right to a dividend relating to the year 2003. 

(**) Equivalent to the total shares in issue on December 31, 2002 (532,366,409) and those issued on January 9, 2003 (104,183). 


A-I-75

NOTES TO THE UNCONSOLIDATED ANNUAL ACCOUNTS OF ARCELOR 

NOTE 1—GENERAL 

Arcelor S.A. was incorporated under Luxembourg Law on June 8, 2001 for an unlimited period in the 

context of the business combination of the Aceralia, Arbed and Usinor groups that was completed on 

February 28, 2002. 

The registered office of the Company is in Luxembourg City and the Company is registered at the 

Register of Trade and Commerce of Luxembourg under the number B 82.454. 

The accounting period starts on January 1 and ends on December 31 each year. 

The Company publishes consolidated accounts in accordance with the requirements of Luxembourg 

laws and regulations. 

NOTE 2—ACCOUNTING POLICIES 

The annual accounts are prepared in euro (‘‘EUR’’) and in accordance with Luxembourg laws and 

regulations and generally accepted accounting principles. 

Tangible fixed assets 

Tangible fixed assets are recorded in the balance sheet at cost, including ancillary costs, or at 

production cost. Depreciation is calculated on a straight-line basis. 

Intangible fixed assets 

Investments are recorded in the balance sheet at acquisition cost, plus ancillary costs. 

At the end of each accounting period, all investments are subject to an impairment review. Where a 

permanent diminution in value is recognised this diminution is recorded in the income statement as a value 

adjustment. The reversal of a value adjustment is recorded to the extent that the factors, which caused the 

initial recording of the value adjustment, have ceased to exist. 

Debts and other loans receivable are recorded in the balance sheet at their nominal value. At the end 

of each accounting period specific value adjustments are recorded on debts that appear to be partly or 

wholly irrecoverable. 

Debtors 

Debtors are recorded in the balance sheet at their nominal value. At the end of each accounting 

period specific value adjustments are recorded on debts that appear to be partly or wholly irrecoverable. 

Provisions for liabilities and charges 

Provisions are made for liabilities and charges where the crystallisation of a liability is considered 

probable, based on past or current events, in line with legal requirements. 

Provisions for pensions and similar obligations: the Company participates in the financing of an 

incremental retirement scheme (defined benefit scheme) for the benefit of employees made available by 

Arbed S.A.. Commitments arising out of this scheme are covered by appropriate provisions. 

The Company’s own employees, who are not made available to other companies, are covered by a 

defined contribution scheme. The Company pays contributions in respect of this scheme to an assurance 

provider. This scheme does not give rise to a commitment and annual contributions are taken to the profit 

and loss account, following the same treatment as that adopted for wages and salaries. 

Creditors 

Creditors are recorded in the balance sheet at their nominal value. Convertible debenture loans are 

disclosed at their issue value, increased by the interest to be capitalised on 31 December of each 

accounting year. 

A-I-76



Translation of foreign currency items 

Where applicable, items expressed in foreign currency are valued as follows: 

Tangible fixed assets, creditors due after more than one year and off-balance sheet commitments 

are translated at historic exchange rates. Unrealised losses incurred as a result of this policy are 

recorded in the profit and loss account for the period. 

Other balance sheet items are translated at the year-end exchange rates and related foreign 

exchange differences are recorded in the profit and loss account for the period. 

NOTE 3—STATEMENT OF TANGIBLE FIXED ASSETS 

Payments 

on account 

and assets 

Land Other fixtures, in the 

and fittings, tools course of 

Acquisition cost buildings and equipment construction Total 


Opening balance .............................. 2 2 p.m. 4 

Acquisitions during the period .................... 1 1 — 2 

Disposals and transfers during the period ............ — — (p.m.) (p.m.) 

Closing balance .............................. 3 3 — 6 

Payments 

on account 

and tangible 

assets in 

Land Other fixtures, the course 

and fittings, tools of 

Value adjustments buildings and equipment construction Total 


Opening balance .............................. (p.m.) (p.m.) — (p.m.) 

Charge for the period .......................... (p.m.) (1) — (1) 

Closing balance .............................. (p.m.) (1) — (1) 

Opening net book value ......................... 2 2 — 4 

Closing net book value ......................... 3 2 — 5 

A-I-77


NOTE 4—STATEMENT OF FINANCIAL ASSETS 

Shares in Loans to 

affiliated affiliated Financial fixed 

Acquisition cost undertakings undertakings assets Total 


Opening balance ....................... 8,201 847 — 9,048 

Acquisitions during the period ............. 406 — p.m. 406 

Disposals during the period ............... — (847) — (847) 

Closing balance ........................ 8,607 — p.m. 8,607 

Shares in Loans to 

affiliated affiliated Financial fixed 

Value adjustments undertakings undertakings assets Total 


Opening balance ....................... — — — — 

Charge for the period ................... — — — — 

Closing balance ........................ — — — — 

Opening net book value .................. 8,201 847 — 9,048 

Closing net book value .................. 8,607 — p.m. 8,607 

The principal holdings as at 31 December 2003 are listed below: 

Shareholders’ 

Percentage 

equity 

of capital 

(including 

Name and registered office held (%) Profit for 2003 profit for 2003) 


Arbed S.A., Luxembourg (Grand Duchy of Luxembourg) .... 99.73% 25 1,833 

Aceralia Corporación Siderúrgica SA, Gozon (Spain) ....... 95.03% 48 2,217 

Arcelor Center Brussels NV, Gent (Belgium) ............. 56.91% 74 1,700 

Arcelor Finance and Services Belgium SA, Brussels (Belgium) . 17.86% 47 1,243 

Usinor S.A., Puteaux (France) ........................ 99.24% 175 1,771 

The increase in shareholdings is mainly due to intra-group acquisitions of Arcelor Finance and 

Services Belgium S.A. (EUR 215 million) and Arcelor Center Brussels NV (EUR 181 million) as well as 

Usinor S.A. (EUR 7 million) following the exchanges made in the context of the conversion option granted 

to Usinor shareholders (see also Note 7). 

The decrease in receivables from affiliated undertakings results from the buy-back, in November 2003, 

of O.C.E.A.N.E. Usinor 2005 (EUR 491 million) and O.C.E.A.N.E. Usinor 2006 (EUR 356 million). 

NOTE 5—RESIDUAL TERM OF DEBTORS 

31 December 2003 31 December 2002 

Up to 1 year 1 to 5 years Total Up to 1 year 1 to 5 years Total 

In EUR Million 

Trade debtors ........................ p.m. — p.m. p.m. — p.m. 

Amounts owed by affiliated undertakings ..... 1,089 — 1,089 319 10 329 

Amounts owed by undertakings in which the 

Company has a participating interest ...... p.m. — p.m. p.m. — p.m. 

Other debtors ........................ 3 — 3 1 — 1 

Total ............................... 1,092 — 1,092 320 10 330 

A-I-78


NOTE 5—RESIDUAL TERM OF DEBTORS (Continued) 

Items covered by several headings 

Amounts owed by affiliated undertakings, as well as amounts owed by undertakings in which the 

Company has a participating interest, include trade receivables of EUR 37 million. Similarly, amounts 

owed by affiliated undertakings on current accounts amount to EUR 1,052 million. 

NOTE 6—ACCRUALS AND DEFERRED INCOME 

Amounts included under ‘‘Accruals and deferred income’’ represent the unamortised share premium 

and issue costs of the O.C.E.A.N.E. Arcelor 2017 debentures described in Note 9. 

NOTE 7—CAPITAL AND RESERVES 

Share capital, share premium and legal reserve 

As at December 31, 2003, the subscribed share capital is made up of 533,040,796 ordinary shares, fully 

paid up and amounting to EUR 2,665,203,980. Share premium amounts to EUR 4,795,105,774. 

The authorised capital, including subscribed capital, amounts to EUR 5 billion. 

To the knowledge of the Board of Directors, the following parties hold the Company’s share capital: 

As at December 31 2003 

Other shareholders (*) ....................................................... 78.7% 

Luxembourg State ......................................................... 5.9% 

J.M.A.C. B.V. Aristrain ..................................................... 4.1% 

Région Wallonne (Sogepa) ................................................... 3.8% 

Employees .............................................................. 2.6% 

Région Flamande (Staal Vlaanderen) ........................................... 2.4% 

EDF................................................................... 1.7% 

BGL et BGL IP .......................................................... 0.8% 

Total .................................................................. 100.0% 

(*) includes shares held under self-control. 

As at December 31, 2002, subscribed and fully paid share capital was made up of 532,366,409 shares. 

674,387 Arcelor shares were issued in 2003 within the framework of the public exchange offer of the 

Usinor shareholders, after the delisting of the Usinor shares from Euronext Paris in 2002. 

In accordance with Luxembourg legal requirements, the Company must appropriate annually at least 

5% of its net profits to a legal reserve up to a maximum of 10% of the subscribed share capital. The legal 

reserve is not available for distribution. 

NOTE 8—PROVISIONS FOR LIABILITIES AND CHARGES 

Pensions 

and 

similar Other 

obligations provisions Total 


Opening balance ......................................... p.m. — p.m. 

Allocation .............................................. 1 10 11 

Utilisation .............................................. (p.m.) — (p.m.) 

TOTAL PROVISIONS ..................................... 1 10 11 

A-I-79


NOTE 8—PROVISIONS FOR LIABILITIES AND CHARGES (Continued) 

Pension commitments 

By virtue of an agreement governing the provision of staff by Arbed to Arcelor, the obligations in 

relation to additional retirement benefits available to Arbed staff have been specifically provided for. The 

Company’s share of the allocation for the year is determined by applying the actuarial financing rate to the 

total salary of all Arbed staff made available to Arcelor. An independent actuary calculates this rate. 

For Arcelor staff not made available by Arbed, a defined contribution plan is in place. The Company 

makes annual contributions to an assurance provider in respect of this plan. The plan does not give rise to 

commitments and the annual contributions are recorded in the profit and loss account following the same 

treatment as that adopted for wages and salaries. 

Other provisions 

Other provisions are linked to certain German tax consequences resulting from the creation of the 

Arcelor Group. 

NOTE 9—FINANCIAL DEBT 

Convertible debenture loans 

• At the end of the public exchange offers made in 2002 on bonds which are convertible into and/or 

exchangeable for new or existing shares in Usinor (‘‘O.C.E.A.N.E.’’), 24,723,689 Usinor 2005 

O.C.E.A.N.E. and 27,747,470 Usinor 2006 O.C.E.A.N.E. were converted into Arcelor securities of 

the same type. The financing conditions of Arcelor 2005 O.C.E.A.N.E. and Arcelor 2006 

O.C.E.A.N.E. are identical to those of Usinor O.C.E.A.N.E. 

Arcelor 2005 O.C.E.A.N.E. were issued at EUR 19.87 with a maturity date of January 1, 2005 and 

with an annual interest rate of 3.875%. They are convertible or exchangeable at the rate of one 

bond for one share. In the absence of anticipated conversion or amortisation, these bonds are 

repayable at maturity for a par value of EUR 19.87. 

Arcelor 2006 O.C.E.A.N.E. were issued at EUR 12.81 with a maturity date of January 1, 2006 and 

with an annual interest rate of 3%. They are convertible or exchangeable at the rate of one bond for 

one share. In the absence of anticipated conversion or amortisation, these bonds are repayable at 

maturity for 110.905% of par value, i.e. EUR 14.20 (see Note 17 on the anticipated reimbursement 

in March 2004). 

In 2002, 100 O.C.E.A.N.E. ARCELOR 2006 were converted into Arcelor shares by using own 

shares. 

• In June 2002, Arcelor issued 38,961,038 O.C.E.A.N.E. bonds for a nominal amount of EUR 

750 million. 

These O.C.E.A.N.E. ARCELOR 2017 were issued at EUR 19.25 with a maturity date of June 27, 

2017 and with an annual interest rate of 3%. They are convertible or exchangeable at the rate of 

one bond for one share. In the absence of anticipated conversion or amortisation, these bonds are 

repayable at maturity for a par value of EUR 19.25. 

There were no movements on the above during the year. 

A-I-80


NOTE 10—RESIDUAL TERM OF CREDITORS 

31 December 2003 31 December 2002 

Up to 1 1 to 5 5 years or Up to 1 5 years or 

year years more Total year 1 to 5 years more Total 


Convertible debenture loans ......... 30 885 750 1,665 30 885 750 1,665 

Amounts owed to credit institutions . . . p.m. — — p.m. p.m. — — p.m. 

Trade creditors ................... 7 — — 7 2 — — 2 

Amounts owed to affiliated 

undertakings ................... 20 — — 20 40 — — 40 

Amounts owed undertakings in which 

the Company has a participating 

interest ...................... p.m. — — p.m. p.m. — — p.m. 

Other creditors .................. 5 — — 5 3 — — 3 

TOTAL ........................ 62 885 750 1,697 75 885 750 1,710 

The Company has not granted any security in respect of the above amounts. 

Items covered by several headings 

Amounts owed to affiliated undertakings and amounts owed to undertakings in which the Company 

has a participating interest include trade creditors amounting to EUR 21 million. 

NOTE 11—OFF-BALANCE SHEET ITEMS 

Guarantees given 

2003 2002 

In EUR 

million 

Guarantees issued on debts .............................................. 238 20 

Other commitments .................................................... 1 — 

TOTAL ............................................................. 239 20 

NOTE 12—FINANCIAL RESULT 

2003 2002 

In EUR 

million 

Dividends received ..................................................... 558 269 

Interest and similar charges .............................................. (18) (3) 

Variations in value adjustments on investments ................................ — — 

TOTAL ............................................................. 540 266 

Income from investments primarily comprises dividends received from Arbed, Usinor, Aceralia and 

Arcelor Center Brussels. 

NOTE 13—STAFF 

Average number of employees 2003 2002 

Employees ........................................................... 170 60 

Workers ............................................................ — — 

TOTAL ............................................................. 170 60 

A-I-81


NOTE 14—DIRECTORS’ REMUNERATION 

Members of the Board of Directors, the Audit Committee and the Nominations and Remunerations 

Committee were paid a total of EUR 1.7 million in the year to December 31, 2003. 

NOTE 15—STOCK OPTION PLAN 

In 2003, the Company created an international stock option plan. In this context, the Company 

granted 1,300,000 options on June 30, 2003, giving the right to subscribe to or purchase shares in the 

Company to 73 beneficiaries. 

The exercise price is fixed at EUR 9.94. 

The exercise period is different depending on the country in question and has a maximum duration of 

4 years. It starts on July 1, 2006 and finishes on June 30, 2010. 

NOTE 16—OTHER INFORMATION 

The Company is jointly and severally liable for the following entities: 

• Arcelor Finance SCA, Luxembourg (Luxembourg) 

• Arcelor Treasury SNC, Puteaux (France) 

NOTE 17—EVENTS AFTER THE BALANCE SHEET DATE 

Anticipated reimbursement of O.C.E.A.N.E. 3% 2006: 

In the context of the strengthening of the Group balance sheet and the reduction of the costs of 

servicing debt, Arcelor has determined to proceed to the anticipated reimbursement of the O.C.E.A.N.E. 

3% maturing on January 1, 2006. 

O.C.E.A.N.E. holders had the option, until and including March 11, 2004, to exercise their rights to 

convert their bonds into shares. The resulting share requirement was met by making available shares that 

were held by the Group, with retroactive effect to January 1, 2004. At the end of this offer, which serves to 

reinforce the consolidated own funds of the Group, 22,490,577 O.C.E.A.N.E., i.e. 81.05% of the original 

issue, were exchanged for shares. 

A-I-82

28JUN200402304359 

Audit 

31, Allée Scheffer Téléphone +352 22 51 51 1 Internet www.kpmg.lu 

L-2520 Luxembourg Fax + 352 22 51 71 E-mail audit@kpmg.lu 

To the Shareholders of Arcelor S.A. 

Société Anonyme 

Luxembourg 

AUDITOR’S REPORTS 

We have audited the annual accounts of Arcelor S.A. for the years ending 31 December 2003 and 31 

December 2002 and we issued our audit reports on such annual accounts on 19 March 2004 and on 4 April 

2003 respectively. We reported as follows. 

Following our appointment by the General Meeting of the Shareholders dated 26 April 2002, we have 

audited the accompanying annual accounts of Arcelor S.A. for the years ended 31 December 2003 and 31 

December 2002, and we have read the related management reports. These annual accounts and the 

management reports are the responsibility of the Board of Directors of Arcelor S.A.. Our responsibility is 

to express an opinion on these annual accounts based on our audits and to check the consistency of the 

management reports with them. 

We conducted our audits in accordance with International Standards on Auditing. Those standards 

require that we plan and perform our audits to obtain reasonable assurance about whether the annual 

accounts are free of material misstatement. An audit includes examining, on a test basis, evidence 

supporting the amounts and disclosures in the annual accounts. An audit also includes assessing the 

accounting principles used and significant estimates made by the Board of Directors, as well as evaluating 

the overall annual accounts presentation. We believe that our audits provide a reasonable basis for our 

opinions. 

Based on our opinions of 19 March 2004 and 4 April 2003, the annual accounts, as reproduced at 

pages A-I-72 to A-I-82, give, in conformity with Luxembourg legal and regulatory requirements, a true and 

fair view of the financial position of Arcelor S.A. as at 31 December 2003 and at 31 December 2002 and of 

the results of its operations for the years then ended. 

The management reports are in accordance with the annual accounts. 


KPMG Audit 


Eric Damotte 

Member Firm KPMG International a Swiss association 

KPMG Audit 

Société Civile 


L-2520 Luxembourg T.VA. LU13772441 

28JUN200402592928

Consolidated, financial statements of Arcelor Group 


ASSETS 

31 Dec. 31 March 31 Dec. 31 March 

2002 2003 2003 2004 Change 

(Unaudited) 

(Unaudited) 

1 2 3 4 3 / 4 


NON CURRENT ASSETS .................. 12,853 12,729 12,590 13,296 706 

—Intangible assets ....................... (950) (924) (551) 119 670 

—Property plant & equipment ............... 9,268 9,225 8,947 8,786 (161) 

—Investments under equity method ............ 1,780 1,778 1,758 1,870 112 

—Other investments ...................... 466 471 307 401 94 

—Receivables & other financial assets .......... 766 756 693 741 48 

—Deferred tax assets ...................... 1,523 1,423 1,436 1,379 (57) 

CURRENT ASSETS ....................... 12,983 12,759 12,018 12,396 378 

—Inventories ........................... 6,091 6,164 5,497 5,519 22 

—Trade receivables ....................... 4,320 4,072 3,253 3,806 553 

—Other receivables ....................... 1,333 1,440 1,378 1,203 (175) 

—Cash & Cash equivalents ................. 1,239 1,083 1,890 1,868 (22) 

TOTAL ASSETS ......................... 25,836 25,488 24,608 25,692 1,084 

A-I-84

EQUITY AND LIABILITIES 

Consolidated, financial statements of Arcelor Group (Continued) 


31 Dec. 31 March 31 Dec. 31 March 

2002 2003 2003 2004 Change 

(Unaudited) 

(Unaudited) 

1 2 3 4 3 / 4 


SHAREHOLDERS’EQUITY ................ 7,393 7,587 7,463 8,682 1,219 

—Group share .......................... 6,732 6,898 6,733 8,057 1,324 

—Minority interests ....................... 661 689 730 625 (105) 

NON CURRENT LIABILITIES .............. 8,178 8,029 8,757 7,755 (1,002) 

—Interest bearing liabilities ................. 4,594 4,532 4,871 3,922 (949) 

—Employee benefits ...................... 1,597 1,597 1,733 1,747 14 

—Termination benefits ..................... 574 574 718 721 3 

—Provisions ............................ 849 822 983 978 (5) 

—Deferred tax liabilities .................... 359 338 289 287 (2) 

—Others .............................. 205 166 163 100 (63) 

CURRENT LIABILITIES ................... 10,265 9,872 8,388 9,255 867 

—Trade payables ........................ 4,111 4,443 4,348 4,483 135 

—Interest bearing liabilities ................. 3,821 2,829 1,551 2,068 517 

—Other amounts payables .................. 2,023 2,252 2,194 2,449 255 

—Termination benefits ..................... 120 120 82 82 0 

—Provisions ............................ 190 228 213 173 (40) 

TOTAL SHAREHOLDERS’EQUITY & 

LIABILITIES .......................... 25,836 25,488 24,608 25,692 1,084 

A-I-85


CONSOLIDATED INCOME STATEMENT (Quarterly evolution) 

1 st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter. Total 1 st Quarter 

2003 2003 2003 2003 2003 2004 

(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) 


REVENUE ...................... 6,852 6,730 5,869 6,472 25,923 6,899 

GROSS OPERATING INCOME 

(EBITDA) ..................... 641 635 416 536 2,228 696 

Depreciation and amortisation expenses . (279) (301) (283) (738) (1,601) (287) 

Depreciation and amortisation of 

goodwill ...................... 22 27 36 26 111 0 

OPERATING RESULT (EBIT) ........ 384 361 169 (176) 738 409 

Net financing costs ................ (63) (111) (35) (112) (321) (92) 

Share of profits in companies accounted 

for using the equity method ........ 38 12 40 50 140 78 

RESULT BEFORE TAX ............. 359 262 174 (238) 557 395 

Taxation ........................ (129) (58) (33) 79 (141) (110) 

RESULT AFTER TAX .............. 230 204 141 (159) 416 285 

Minority Interests ................. (38) (38) (40) (43) (159) (51) 

NET RESULT—GROUP SHARE ...... 192 166 101 (202) 257 234 

A-I-86


CONSOLIDATED CASH FLOW STATEMENT 

Dec. 31, March 31, March 31, 

2003 2003 2004 

(Unaudited) (Unaudited) 

(12 months) (3 months) (3 months) 


Operating activites 

Net result (Group share) ............................. 257 192 234 

Minority interests ................................... 159 38 51 

Profit of companies accounted for using the equity method, net of 

dividends ....................................... (48) (27) (77) 

Amortisation and depreciation .......................... 1,490 257 287 

Other items ....................................... 3 62 44 

Changes in working capital (decrease = +) ................ 641 (237) (105) 

CASH FLOWS FROM OPERATING ACTIVITIES ............ 2,502 285 434 

Investing activities 

Acquisitions of tangible and intangible assets ................ (1,327) (263) (256) 

Other items ....................................... 218 (30) 115 

CASH FLOWS FROM INVESTING ACTIVITIES ............ (1,109) (293) (141) 

Proceeds from the issue of share capital ................... 85 3 8 

Dividends paid .................................... (218) (4) (23) 

Net servicing of borrowing ............................. (553) (131) (204) 

Acquisition of 4% minority shares in Aceralia ............... — — (85) 

CASH FLOWS FROM FINANCING ACTIVITIES ............ (686) (132) (304) 

Effect of exchange rate fluctuations on cash held ............. (56) (16) (11) 

NET INCREASE / (DECREASE) IN CASH AND CASH 

EQUIVALENTS .................................... 651 (156) (22) 

Cash and cash equivalents at the beginning of the period ......... 1,239 1,239 1,890 

Cash and cash equivalents at the end of the period .............. 1,890 1,083 1,868 

A-I-87


CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY 

Dec. 31, Appropriation First 1 st Quarter March 31, 

2003 2003 and Own Capital application result and 2004 

Total transfer shares increase IFRS 3 Others exchange diff. Total 

In EUR million (unaudited) 

(IFRS) 

GROUP SHARE 

I. Issued capital ........ 2,665 — — — — — — 2,665 

II. Share premium ...... 4,795 — — — — — — 4,795 

III. Own shares ......... (751) — 325 — — — — (426) 

IV. Other consolidation 

reserves .......... 75 257 — — 753 (12) — 1,073 

V. Foreign currency 

translation reserves . . (308) — — — — — 24 (284) 

VI. Profit (loss) for the 

period ........... 257 (257) — — — — 234 234 

TOTAL Capital and reserves 

(Group share) ........... 6,733 0 325 0 753 (12) 258 8,057 

Scope 

Dec. 31, Appropriation Own Variat & 1 st Quarter March 31, 

2003 2003 and Shares Capital Other IFRS result and 2004 

Total transfer Capital increase adjustments exchange diff Total 

In EUR million (unaudited) 

(IFRS) 

MINORITY INTERESTS 

I. Capital and reserves ....... 816 138 — — (155) — 799 

II. Own shares ............. (5) — — — — — (5) 

III. Foreign currency translation . (240) — — — — 20 (220) 

IV. Profit (loss) for the period . . 159 (159) — — — 51 51 

TOTAL Capital and reserves 

(Minority interests) ........... 730 (21) 0 0 (155) 71 625 

A-I-88

APPENDIX II 

GLOSSARY OF STEELMAKING TERMS 

Annealing—The heat treatment process by which steel products are reheated to a suitable 

temperature in order to remove stresses resulting from previous processing and to soften them and/or 

improve their machinability and cold forming properties. 

Apparent consumption—The sum of net industry shipments within a given country or geographical 

region plus imports to, and less exports from, that country or region. 

Austenitic—A term used to describe stainless steel which contains chromium and nickel. Austenitic 

steel has excellent corrosion resistance, typically good formability and increased strength. It is the most 

common type of stainless steel. Because of its high nickel content, the raw material costs for austenitic 

steels are higher than for ferritic steels. End products include cooking utensils and construction materials. 

Billet—A semi-finished steel product with a square cross section up to 155mm 155mm. This 

product is either rolled or continuously cast and is further processed by rolling to produce finished 

products like wire rod, merchant bars and other sections. The range of semi-finished products above 

155mm 155mm are called blooms. 

Blank—Steel sheet of high dimensional precision, in simple or complex form, sometimes multithickness, 

constituting principally automobile body parts. 

Blast furnace—A furnace used in integrated steelmaking in which coke and iron ore react together 

under a hot air flow to form liquid hot metal, also called pig iron. 

Bloom—See ‘‘Billet’’. 

Carbon steel—A type of steel generally having no specified minimum quantity of any alloying element 

and containing only an incidental amount of any element other than carbon, silicon, manganese, copper, 

sulphur and phosphorus. 

Coated steel—Steel sheet coated through a heat process or through electrolysis with a layer of substance 

to protect the base metal (substrate) against corrosion. The most commonly used material is zinc, which 

can be applied either using the heat process (hot-dip galvanising) or using electrolysis (electro-galvanising). 

An organic coating (paint, plastic) can also be deposited on the layer of zinc. The zinc-coated steel is often 

referred to as ‘‘galvanised steel’’. 

Coke—A fuel obtained by pyrolysis of coal in coke ovens and used as a reducing agent of iron ore in 

the blast furnace. 

Cold-rolling mill—Equipment that reduces the thickness or gauge of flat steel products by rolling the 

metal between alloy steel cylinders at room temperature. Several roll passes are generally necessary to 

reduce the steel gradually to the desired thickness. 

Continuous casting—The process pursuant to which molten steel is transformed into semi-finished 

products, such as billets, blooms and slabs. The molten steel is poured at a steady rate from a ladle to a 

bottomless mould. As the molten steel enters the water-cooled mould, a shell quickly forms at the mould 

wall. When the steel bar exits the mould, this solidified shell must be thick enough to maintain the liquid 

core as the product totally solidifies. The continuously cast steel is then cut into required lengths. 

Electric arc furnace—A furnace for scrap-based steelmaking. Once the furnace is charged and covered, 

graphite electrodes are lowered through holes in the roof. The electric arc travelling between the 

electrodes and the metallic charge creates intense heat, which melts the scrap. Alloying elements can be 

added during the process. 

Electrical sheets—These sheets are produced from steel alloyed with silicon (up to 3.5%) and are used 

in the manufacture of alternators, transformers and motors. Grain oriented electrical sheets have a high 

silicon content and are used for the manufacture of large transformers. Non-oriented products are used in 

electric motors and small transformers. 

Ferritic—Stainless steel which contains straight chromium. This type of stainless steel cannot be 

hardened by heat treatment and can be only moderately hardened by cold working. Ferritics are magnetic, 

have good ductility and are resistant to corrosion and oxidation. Ferritic stainless steels are less susceptible 

to stress and cracking problems but are less resistant to corrosion and are generally less expensive to 

produce than austenitic stainless steel because they do not contain nickel. End products are household and 

A-II-1

electrical appliances and automobile industry products, such as exhaust systems, containers and 

exchangers. 

Flat steel products—A type that is produced by rolls with smooth surfaces and ranges of dimension, 

varying in thickness. The two major flat steel product categories are thin flat products (between 1mm and 

10mm in thickness) and plates (between 10mm and 200mm in thickness and used for large welded pipes, 

ship building, construction, major works and boilers). 

Hot-rolling mill—Equipment on which solidified steel preheated to a high temperature is continuously 

rolled between rotating cylinders. Different types of finished products require different types of rolling mill 

equipment. 

Ingot—An intermediate product made by pouring molten steel into moulds of given dimensions. In 

further processing steps in different hot rolling mills, the ingots are transformed first to simple shape 

semi-finished products like billets, blooms or slabs before being transformed by hot rolling in a finishing 

mill. Ingot casting is now largely replaced by continuous casting. 

Integrated steelmaking—The process of making steel out of coke and iron ore, which are processed in a 

blast furnace to make liquid metal called pig iron. The pig iron is then converted to molten steel in basic 

oxygen converters and subsequently transformed into various semi-finished products. 

Ladle furnace—A furnace used for refining hot metal between the converter or electric arc furnaces 

and casting. 

Laser-welded blanks—Pre-assembly of bodywork parts by splicing blanks using laser beams. Thanks to 

this technique, sheets of varying thickness, composition or surface treatment can be joined together. The 

spliced blanks can be stamped as one part to obtain bodywork parts, making cars lighter, because each part 

is at its optimal thickness. 

Long products—Long products are used in all industrial sectors, particularly in the construction and 

engineering industries. The Group is active in the different segments, which are heavy long products, light 

long products and wire-drawn products. 

Mini-mill—Mill producing steel using electric arc furnaces recycling and transforming scrap metal. 

Pickling—The process in which the surface of the steel is cleaned with acid to remove scale, rust and 

dirt—such process being preparation for further processing, such as cold rolling, galvanising or polishing. 

Real consumption—For any country or region, apparent consumption for such country or region 

adjusted for inventory changes or stockists and end users. 

Refining stand—A stage in the process of making crude steel, during which the crude steel is further 

refined (i.e., most residual impurities are removed) and additions of other metals may be made before it is 

cast (see also ‘‘Ladle furnace’’). 

Semi-finished products—Steel products, such as billet, blooms and slabs. These products can be made 

by direct continuous casting of hot steel or by pouring the liquid steel into ingots, which are then hot rolled 

into semi-finished products. 

Semi-products—See semi-finished products. 

Slab—A semi-finished steel product obtained by rolling ingots on a rolling mill or processed through a 

continuous caster and cut into various lengths. The slab has a rectangular cross section and is used as a 

starting material in the production process of flat products, i.e., hot rolled coils. 

Stainless steel—Stainless steels are distinguished from carbon steel by their content of chromium and, 

in certain cases, nickel. Adding chromium to carbon steel makes it more rust- and stain-resistant, and 

adding nickel to chromium stainless steel enhances the mechanical properties of the steel. The resistance 

of stainless steel to many corrosive factors, such as exposure to water, air, acid and alkalis, is provided by a 

transparent protective chromium oxide film that forms on its exterior. Stainless steels are manufactured in 

different types of grade, but all types contain at least 10% chromium, along with other elements added to 

develop specific properties. Depending on the quantity of the various elements present in a stainless steel 

alloy, it will have a metallurgical structure that is characteristic of one of three basic stainless steel 

groups—martenistic, ferritic or austenitic. 

Steel sections—Any steel product that is neither round, nor square, nor flat. 

A-II-2

Steel service centre—A steel distribution centre in which different steel products are warehoused in a 

variety of grades, forms, sizes and may be further customised to specific order by splitting, cut-to-length 

and in-house packaging. 

Strip—Flat steel coil products, with widths of less than 600mm for hot rolled products and less than 

500mm for cold rolled products. 

A-II-3


Appendix III 

INFORMATION RELATING TO THE ASSETS, THE FINANCIAL STATEMENTS AND THE 

RESULTS OF ARCELOR, THE CST GROUP AND THE ACESITA GROUP 

This Appendix includes the following financial information: 

• General accounting principles of Arcelor in accordance with IFRS 

• A reconciliation between the net assets of the CST group and the Acesita group prepared in 

accordance with local accounting policies and those prepared for the purpose of drawing up the 

consolidated financial statements of Arcelor as at 31 December 2003; and a reconciliation between 

the net result of the CST group and the Acesita group prepared in accordance with local accounting 

policies and those prepared for the purpose of drawing up the consolidated financial statements of 

Arcelor for the financial year ended 31 December 2003. This information is set out at paragraph 2 

following. 

• Arcelor’s unaudited pro forma consolidated financial information, incorporating the CST group 

and the Acesita group including a pro forma consolidated balance sheet as at 31 December 2003, a 

pro forma consolidated profit and loss account for the year ended 31 December 2003 and a pro 

forma consolidated cash flow statement for the year ended 31 December 2003. This information is 

set out in section 3 following. 

The following information is set out in Appendix I to this Prospectus. 

• Accounting policies adopted by Arcelor in accordance with International Financial Reporting 

Standards (‘‘IFRS’’). These accounting policies are detailed in Appendix I (Note 2). 

• The consolidated balance sheet, profit and loss account and cash flow statement of Arcelor, 

prepared in accordance with IFRS, for the financial year ended 31 December 2003, including the 

notes to the consolidated financial statements. 

• The unconsolidated balance sheet, profit and loss account of Arcelor prepared in accordance with 

Luxembourg laws and regulations and generally accepted accounting principles for the financial 

year ended 31 December 2003 including the notes to the unconsolidated financial statements. 

• The synthetic consolidated balance sheet, profit and loss account and cash flow statement of 

Arcelor, prepared in accordance with IFRS, for the three months period ended 31 March 2004. 

A-III-1

1. General accounting principles of Arcelor 

INTRODUCTION 

The consolidated financial statements of the Arcelor Group for the year ended 31 December, 2003 

are prepared in accordance with International Financial Reporting Standards (‘‘IFRS’’) applicable at that 

date. 

GENERAL 

Arcelor was incorporated under Luxembourg Law on 8 June, 2001 in the context of the project of the 

business combination of Aceralia, Arbed and Usinor. This business combination was accounted for as 

being completed on 28 February 2002. 

In accord with the requirements of International Financial Reporting Standards (formerly known as 

International Accounting Standards), and specifically under IAS 22, the business combination between 

Aceralia, Arbed and Usinor was accounted for using the purchase method of accounting with Usinor being 

the acquiring entity. 

The consolidated financial statements as at 31 December, 2003 present the financial position of the 

Company and its subsidiaries, as well as the interests of the Group in its associated companies and its 

interests in jointly controlled entities. 

The Board of Directors authorised the publication of the 31 December, 2003 financial statements on 

18 February, 2004. These financial statements were approved at the annual general meeting of 

shareholders on 30 April, 2004. 

ACCOUNTING POLICIES 

The consolidated financial statements have been prepared in accordance with International Financial 

Reporting Standards as adopted by the IASB and the interpretations of those standards published by the 

International Financial Reporting Interpretations Committee (‘‘IFRIC’’). 

The detailed accounting policies applied by Arcelor as at 31 December 2003 in its consolidated 

financial statements are set out in Appendix I. 

Early adoption of IFRS 3 on business combinations: 

As a result of the early adoption of IFRS 3 as of 1 January, 2004, negative goodwill presented as a 

negative intangible asset and included in the carrying amount of the equity account investment was 

transferred to shareholders’ equity (see below in paragraph 3 of this Appendix III). 

As a consequence Arcelor will no longer amortise negative goodwill as recognised prior to 

31 December 2003 through the profit and loss account. 

Negative goodwill arising from business combinations and holding of equity stakes in entities 

accounted for under the equity method occurring after 1 January, 2004 will be processed directly to the 

profit and loss account. 

Positive goodwill will be presented as an intangible asset and will not be amortized through the profit 

and loss account but will be subject to annual impairment testing. 

2. Reconciliation of CST’s and Acesita’s financial information prepared in accordance with local 

accounting policies and CST’s and Acesita’s financial information prepared for the purpose of 

drawing up Arcelor’s consolidated financial statements 

2.1. Reconciliation of the financial information of CST prepared in accordance with local accounting 

principles with the financial information required for the purpose of drawing up Arcelor’s 

consolidated financial statements. 

A-III-2

2.1.1. Reconciliation of shareholders’ equity and net income between BRGAAP and basis for Arcelor’s 

consolidation as at December 31, 2003: 

USD EUR 

million million Reference 

Shareholders’ equity under BRGAAP ........................ 1,954 1,547 

(EUR 1 = USD 1,2630 closing rate) 

Foreign currency translation ............................... 1.188 682 2.1.2.1 

Revaluation of fixed assets ................................ (732) (579) 2.1.2.2 

Property, plant and equipment ............................. (163) (130) 2.1.2.3 

Others .............................................. (155) 106 

Deferred taxes ........................................ (349) (276) 2.1.2.4 

Shareholders’ equity under Arcelor GAAP .................... 1,743 1,350 

Net income under BRGAAP ............................... 294 260 

(EUR 1 = USD 1,1311 average rate) 

Foreign currency translation ............................... (90) (80) 2.1.2.1 

Revaluation of fixed assets ................................ (65) (58) 2.1.2.2 

Property, plant and equipment ............................. 32 29 2.1.2.3 

Others .............................................. 41 36 

Deferred taxes ........................................ 114 101 2.1.2.4 

Net income under Arcelor GAAP ........................... 326 288 

Total shareholders’ equity under Arcelor GAAP ................ 2,069 1,638 

2.1.2 Summary of the differences between CST’s accounting policies and basis for consolidation as at 

31 December 2003 by Arcelor 

2.1.2.1. Foreign currency translation 

CST transacts its business in Brazilian Reais (BRL) and has selected the USD as its measurement and 

reporting currency. CST’s management consider that the USD better reflects the economic substance of 

the underlying events and circumstances of the CST group’s operations, on the basis of the following: 

a) a substantial portion of the CST group’s sales are destined for export; 

b) the sales price of the CST group’s products is denominated in USD; 

c) a high level of the CST group’s financing is denominated in USD; 

d) a high level of the CST group’s costs are denominated in USD. 

The financial statements of Arcelor are presented in accordance with IAS 21 ‘‘The effects of changes 

in Foreign Exchange Rates’’ as interpreted by SIC19. 

2.1.2.2. Revaluation of fixed assets 

The carrying value of certain assets has been re-valued in CST’s consolidated accounts. Arcelor does 

not apply the IAS 16 alternative method. This restatement has been processed in order to reflect Arcelor’s 

accounting policies. 

2.1.2.3. Property plant and equipment 

As of 1 October 1998, Usinor acquired an equity stake in CST. In the context of preparing Arcelor’s 

consolidated financial statements this equity investment was accounted for to reflect it’s fair value at the 

date of acquisition. For the purpose of the preparation of the unaudited pro forma consolidated financial 

data the 1998 fair value adjustment has been allocated to property, plant and equipment. 

A-III-3

CST’s depreciation charges have been computed on a units-of-production basis, except for the 

shipping terminal that is depreciated on a straight-line basis. Based on estimated production levels, 

depreciation is being charged over useful economic lives of the assets as follows: 

—Buildings 

25 years 

—Installations 

20 years 

—Shipping terminal 29 to 35 years 

—Equipment 

20 years 

—Vehicles 

7 years 

These useful lives have been amended to reflect Arcelor’s estimated useful lives as detailed in 

Arcelor’s accounting policies set out in Appendix I, Note 2 to the consolidated financial statements. 

2.1.2.4. Deferred taxes 

The effect of adjustments made to reflect the requirements of IFRS, as well as differences between 

the tax basis of assets and liabilities and the amounts included in the statutory accounting records, 

prepared in accordance with accounting practices adopted in Brazil, have been recognized as temporary 

differences for the purpose of recording deferred income taxes. Deferred tax assets are recognized when it 

is probable that sufficient future taxable profits will be generated to enable the realization of such deferred 

tax assets. 

2.2. Reconciliation of the financial information of ACESITA prepared in accordance with local 

accounting principles with the financial information required for the purpose of drawing up 

Arcelor’s consolidated financial statements 

2.2.1. Reconciliation of shareholders’ equity and net income between BRGAAP and basis for Arcelor’s 

consolidation as at December 31, 2003: 

USD EUR 

million million Reference 

Shareholders’ equity under BRGAAP ........................ 280 222 

(EUR 1 = USD 1,2630 closing rate) 

Foreign currency translation ............................... 86 70 2.2.2.1 


Others .............................................. 10 8 


Shareholders’ equity under Arcelor GAAP .................... 341 272 

Net income under BRGAAP ............................... 60 53 

(EUR 1 = USD 1,1311 average rate) 

Foreign currency translation ............................... (99) (87) 2.2.2.1 


IAS 39 .............................................. 53 47 2.2.2.3 

Others .............................................. (28) (26) 


Net income under Arcelor GAAP ........................... (13) (12) 

Total shareholders’ equity under Arcelor GAAP ................ 328 260 

2.2.2 Summary of the differences between ACESITA’s accounting policies and basis for consolidation 

as at 31 December 2003 by Arcelor 

2.2.2.1 Basis of translation and exchange effects 

Acesita adopts the USD as its measurement currency to translate its financial statements into USD 

when reporting to Arcelor under IFRS. The decision to use the USD was reconsidered in 2002 by the 

management of Acesita. In 2003, no economic facts and circumstances have arisen to indicate the need to 

reconsider the appropriateness of the use of the USD as the measurement (functional) currency. 

The financial statements of Arcelor are presented in accordance with IAS 21 ‘‘The effects of changes 

in foreign exchange rates’’ as interpreted by SIC19. 

A-III-4

2.2.2.2. Property plant and equipment 

As of 1 October 1998, Usinor acquired an equity stake in Acesita. In the context of preparing 

Arcelor’s consolidated financial statements this equity investment was accounted for to reflect it’s fair 

value at the date of acquisition. For the purpose of the preparation of the unaudited pro forma 

consolidated financial data, the 1998 fair value adjustment has been allocated to property, plant and 

equipment. 

2.2.2.3. Swap transactions 

Since 1999, Acesita has entered into transactions involving derivative instruments to reduce its local 

book and cash flow exposures to exchange devaluation from its USD denominated debt. These 

transactions comprise currency swaps between USD exchange rate variations as compared to interest rates 

based on CDI, Brazilian inter-bank floating interest rates. These swap transactions do not qualify as hedge 

treatment under IAS 39. 

2.2.2.4. Deferred taxes 

The effect of adjustments made to reflect the requirements of IFRS, as well as differences between 

the tax basis of assets and liabilities and the amounts included in the statutory accounting records, 

prepared in accordance with accounting practices adopted in Brazil, have been recognized as temporary 

differences for the purpose of recording deferred income taxes. Deferred tax assets are recognized when it 

is probable that sufficient future taxable profits will be generated to enable the realization of such deferred 

tax assets. 

3. Arcelor’s unaudited pro forma financial information 

3.1. General framework in respect of the unaudited pro forma financial information 

The unaudited consolidated pro forma financial information set out hereafter includes the profit and 

loss account, the balance sheet and the cash flow statement of Arcelor (collectively called the ‘‘Unaudited 

Consolidated Pro Forma Financial Data’’). The Unaudited Consolidated Pro Forma Financial Data is the 

combination of the audited financial information of Arcelor and the unaudited pro forma financial 

information of CST and Acesita and shows, on a pro forma basis, the effects of the acquisition of the 

control of CST and Acesita by Arcelor. 

The unaudited consolidated pro forma profit and loss account has been prepared on the assumption 

that the business combination was effective on 1 January 2003. The unaudited pro forma balance sheet has 

been prepared on the basis that the business combination took place as at 31 December 2003 for the 

calculation of goodwill. The unaudited consolidated pro forma cash flow statement has been prepared on 

the basis that the business combination took place on 1 January 2003. 

The goodwill, arising from the acquisition of CST and Acesita and calculated under the purchase 

method, has not been adjusted on the basis of a fair value analysis of the identifiable acquired assets, 

liabilities and contingent liabilities. The necessary adjustments will be taken into consideration in 

accordance with IFRS 3 at the acquisition dates, being the dates when control over CST and Acesita 

effectively passes to Arcelor. 

The fair values used for the preparation of the Unaudited Consolidated Pro Forma Financial Data 

are: 

• CST: acquisition price as detailed in section 7.1.2.1. 

• Acesita: closing price (25/06 BOVESPA): USD 0.72 per 1.000 shares (the acquisition price not being 

defined yet, to be calculated by two first-tier financial institutions based on valuation methods and 

practices commonly used in Brazil). 

The Unaudited Consolidated Pro Forma Financial Data has been prepared on the basis of the 

following financial data: 

• The audited consolidated accounts of Arcelor for the year ended 31 December 2003 prepared in 

accordance with International Financial Reporting Standards (IFRS). 

• The audited consolidated financial statements of CST and Acesita for the year 31 December 2003 

prepared in accordance with accounting principles applicable in Brazil, and in accordance with 

IFRS for CST. 

A-III-5

• The unaudited reconciliation of the financial information of CST and Acesita between local 

principles and the financial data as required to draw up Arcelor’s consolidated financial statements 

as described in section 2 of this appendix. 

• The pro forma adjustments as described in section 3 of this Appendix. 

The following assumptions have been taken for the preparation of the Unaudited Consolidated Pro 

Forma Financial Data: 

• CST 

The acquisition of CST, via the steps as outlined at section 7.1.2.1 of this Prospectus, are completed. 

• Acesita 

The Unaudited Consolidated Pro Forma Financial Data assumes that the call and put options have 

been effectively exercised as described at section 7.1.2.2 of this Prospectus. 

• Capital increase 

See section 2.1.1 for detailed information. 

The purpose of the Unaudited Consolidated Pro Forma Financial Data is to present the effects of the 

business combination on the historical accounting and financial information at the indicated dates. This is 

not necessarily representative of the financial situation and performance that could have been achieved 

had the transaction been achieved at these dates. Such data does not intend to provide an indication of the 

financial situation, the results of the activities or the cash flows of Arcelor at a future specific date or 

period. The Unaudited Pro Forma Consolidated Financial Data should be read in the context of the 

comments in this section 3, and with the audited consolidated accounts in Appendix I and the unaudited 

reconciliation of the shareholders’ equities and net results of CST and Acesita to the Arcelor basis of 

consolidation. 

3.2. Unaudited Pro Forma Consolidated Financial Data 

3.2.1. Introduction 

The Unaudited Consolidated Pro Forma Financial Data of Arcelor comprises the following: 

• Unaudited pro forma consolidated balance sheet as at 31 December 2003. 

• Unaudited pro forma consolidated profit and loss account for the year ended 31 December 2003. 

• Unaudited pro forma consolidated cash flow statement for the year ended 31 December 2003. 

A-III-6

3.2.2. Unaudited pro forma consolidated balance sheet as of 31 December 2003 

ASSETS 

Capital 

increase 

and 

purchase of 

ARCELOR CST/Acesita Pro Forma ARCELOR 

2003 shares CST ACESITA Adjustments Pro Forma 

In millions of euro 

NON CURRENT ASSETS ....... 13,284 606 2,270 574 (1,122) 15,612 

—Intangible assets * ............ 125 8 19 152 

—Property plant & equipment ..... 8,947 2,234 495 11,676 

—Investments under equity method * 1,776 (535) 1,241 

—Other investments ........... 307 606 (606) 307 

—Receivables & other fin. assets ... 693 28 79 800 

—Deferred tax assets ........... 1,436 1,436 

CURRENT ASSETS ............ 12,018 548 404 444 (9) 13,405 

—Inventories ................ 5,497 110 112 5,719 

—Trade receivables ............ 3,253 141 157 (9) 3,542 

—Other receivables ............ 1,378 50 1,428 

—Cash & cash equivalents ....... 1,890 548 103 175 2,716 

TOTAL ASSETS ............... 25,302 1,154 2,674 1,018 (1,131) 29,017 

* as regards ‘‘intangible assets’’ and ‘‘investments under equity method’’ as at 2003 for the Arcelor Group, the negative goodwill 

(EUR 694 million) has been allocated to Net equity in accordance with IFRS 3 as applied by the Group as from January 1 2004. 

LIABILITIES 

Capital 

increase 

and 

purchase of 

ARCELOR CST/Acesita Pro Forma ARCELOR 

2003 shares CST ACESITA Adjustments Pro Forma 


SHAREHOLDERS’ EQUITY ...... 8,157 1,154 1,638 260 (1,122) 10,087 

—Group share* .............. 7,427 1,154 1,638 260 (1,902) 8,577 

—Minority interests ............ 730 780 1,510 

NON CURRENT LIABILITIES .... 8,757 699 364 9,820 

—Interest bearing liabilities ....... 4,871 395 319 5,585 

—Employee benefits ........... 1,733 34 1,767 

—Termination benefits .......... 718 718 

—Provisions ................. 983 31 42 1,056 

—Deferred tax liabilities ......... 289 238 2 529 

—Others ................... 163 1 1 165 

CURRENT LIABILITIES ......... 8,388 337 394 (9) 9,110 

—Trade payables .............. 4,348 30 51 (9) 4,420 

—Interest bearing liabilities ....... 1,551 209 324 2,084 

—Other amounts payables ....... 2,194 98 19 2,311 

—Termination benefits .......... 82 82 

—Provisions ................. 213 213 

TOTAL SHAREHOLDERS’ EQUITY 

& 

LIABILITIES ................. 25,302 1,154 2,674 1,018 (1,131) 29,017 

* as regards ‘‘intangible assets’’ and ‘‘investments under equity method’’ as at 2003 for the Arcelor Group, the negative goodwill 

(EUR 694 million) has been allocated to Net equity in accordance with IFRS 3 as applied by the Group as from January 1 2004. 

A-III-7

3.2.3. Unaudited pro forma consolidated profit and loss account for the year ended 31 December 2003 

PROFIT AND LOSS ACCOUNT 

ARCELOR CST ACESITA Consolidation ARCELOR 

2003 2003 2003 Adjustments Pro Forma 

in millions of euro 

REVENUE ........................... 25,923 1,135 694 (57) 27,695 

GROSS OPERATING RESULT ............ 2,228 403 158 2,789 

Depreciation and amortisation* ............ (1,601) (139) (51) (1,791) 

OPERATING RESULT .................. 627 264 107 998 

Net financing costs ..................... (321) (44) (119) 21 (463) 

Share of profits in companies accounted for 

using the equity method ................ 145 (65) 80 

RESULT BEFORE TAX .................. 451 220 (12) (44) 615 

Income tax expense ..................... (141) 68 (73) 

RESULT AFTER TAX ................... 310 288 (12) (44) 542 

Minority interests ...................... (159) (103) (262) 

NET RESULT—GROUP SHARE ........... 151 288 (12) (147) 280 

* amortisation of goodwill (EUR 106 million) for the year ended 31 December 2003 has been eliminated in accordance with 

IFRS 3. 

3.2.4. Unaudited pro forma consolidated cash flow statement for the year ended 31 December 2003 

ARCELOR Pro Forma ARCELOR 

2003 CST ACESITA adjustments Pro Forma 

in millions of euro 

Operating activities ...................... 1,861 342 50 21 2,274 

—Net Result (Group share) .............. 151 288 (12) (147) 280 

—Minority interests .................... 159 103 262 

—Profit of companies accounted for using the 

equity method, net of dividends .......... (53) 65 12 

—Amortisation and depreciation* .......... 1,601 139 51 1,791 

—Other items ........................ 3 (85) 11 (71) 

Changes in working capital (Increase = -) ..... 641 30 (30) 641 

I. Cash Flows from operating activities ......... 2,502 372 20 21 2,915 

Investing activities 

—Acquisitions of tangible and intangible assets . (1,327) (86) (16) (1,429) 

—Other items ........................ 218 (19) 135 334 

II. Cash Flows from investing activities ........ (1,109) (105) 119 (1,095) 

Proceeds from the issue of share capital ...... 85 527 612 

Dividends paid ......................... (218) (218) 

Net servicing of borrowing ................ (553) (238) 9 (782) 

III. Cash Flows from financing activities ....... (686) (238) 9 527 (388) 

IV. Effect of exchange rate fluctuations on cash 

held ................................ (56) (25) (24) (105) 

Net increase / (Decrease) in cash and cash 

equivalents ............................ 651 4 124 548 1,327 

Cash and cash equivalents at the beginning of the 

period ............................... 1,239 99 51 1,389 

Cash and cash equivalents at the end of the period .. 1,890 103 175 548 2,716 

* amortisation of goodwill (EUR 106 million) for the year ended 31 December 2003 has been eliminated in accordance with 

IFRS 3. 

3.3. Description of the principal pro forma adjustments 

3.3.1 Capital increase and purchase of the CST and Acesita shares 

Of the net proceeds raised by Arcelor, estimated at EUR 1,133 million (after deduction of costs 

estimated to EUR 40 million), EUR 606 million will be applied in the purchase of additional shares in CST 

A-III-8

and in Acesita leaving a net amount of available cash to the group of EUR 527 million. Subsequent to 

these investments both CST and Acesita will be fully consolidated in Arcelor’s consolidated financial 

statements. The pro forma balance sheet includes EUR 21 million interest received, as recorded in the pro 

forma profit and loss account, giving gross proceeds of EUR 1,154 million and available cash of EUR 548 

million. 

3.3.2. Description of the main pro forma consolidation adjustments to the Balance sheet 

Consolidation of CST 

This pro forma adjustment reflects the elimination of the equity stake in CST that is currently 

accounted for using the equity method in Arcelor’s consolidated financial statements, as well as the 

additional CST shares being acquired in the context of the transaction. 

Following the completion of the transaction the minority interests in CST will total 38.2%, with the 

Arcelor group controlling 64.7% of the voting shares. 

Consolidation of Acesita 

This pro forma adjustment reflects the elimination of the equity stake in Acesita that is currently 

accounted for using the equity method in Arcelor’s consolidated financial statements, as well as the 

additional Acesita shares being acquired in the context of the agreements. 

Following the completion of the proposed transaction the minority interests in Acesita will total 

59.2%, with the Arcelor group controlling 78.2% of the voting shares. 

Goodwill 

The EUR 19 million goodwill resulting from the acquisition by Arcelor of CST and Acesita has been 

calculated as detailed at Section 3.1. 

Elimination of intra-group balances 

Adjustments have been processed in order to eliminate intra-group balances between the Arcelor, 

CST and Acesita groups. 

3.3.3. Description of the main pro forma adjustments to the profit and loss account 

Elimination of intra-group transactions 

The EUR 57 million revenue adjustments has been processed in order to eliminate the intra-group 

transactions between the Arcelor, CST and Acesita groups. 

Share of profit in companies accounted for using the equity method 

The EUR 65 million adjustment in respect of ‘‘Share of profit in companies accounted for using the 

equity method’’ reflects the elimination of the equity contribution of CST and Acesita as recorded in the 

2003 consolidated financial statements of Arcelor. 

Net financing costs 

The EUR 21 million adjustment reflects savings in interest that will be secured from the application of 

the EUR 527 million available cash raised in the reduction of the group’s indebtedness. This available cash 

balance represents the net proceeds of the capital increase, of EUR 1,133 million, less the incremental 

investments in CST and in Acesita in a total amount of EUR 606 million. 

Minority interests 

The adjustment in respect of ‘‘Minority interests’’ of EUR 103 million reflects the partial 

appropriation of the results of CST and of Acesita to the continuing minority shareholders following the 

completion of the proposed transactions. 

3.3.4. Cash Flow Statement 

The EUR 527 million in the column ‘‘Pro forma adjustments’’ represents the net proceeds of the 

capital increase, of EUR 1,133 million, less the incremental investments in CST and in Acesita in a total 

amount of EUR 606 million and the EUR 21 million adjustment reflects savings in interest that will be 

secured from the application of the available cash raised in the reduction of the group’s indebtedness 

A-III-9

3.4 Auditors agreed upon procedure 

28JUN200402304359 

For the attention of the Board of Directors of 

Arcelor S.A. 

AGREED UPON PROCEDURES REPORT ON THE UNAUDITED CONSOLIDATED PRO 

FORMA FINANCIAL DATA PREPARED FOR THE PUBLIC OFFER AND ADMISSION TO 

LISTING ON THE LUXEMBOURG STOCK EXCHANGE OF THE ‘‘BONS DE SOUSCRIPTION 

D’ACTIONS’’ (THE ‘‘WARRANTS’’) EXERCISABLE INTO NEW SHARES OF ARCELOR AND 

FOR THE ADMISSION FOR LISTING ON THE LUXEMBOURG STOCK EXCHANGE OF THE 

NEW SHARES OF ARCELOR. 

Following your request, and in the context of generally accepted professional standards applicable in 

Luxembourg, we have undertaken certain agreed upon procedures as described hereafter on the 

Unaudited Consolidated Pro Forma Profit and Loss Account of Arcelor for the year ended 31 

December 2003, on the Unaudited Consolidated Pro Forma Balance Sheet of Arcelor as at 31 

December 2003 and on the Unaudited Consolidated Pro Forma Cash Flow Statement of Arcelor for the 

year ended 31 December 2003 (collectively the ‘‘Unaudited Consolidated Pro Forma Financial Data’’), as 

presented in Appendix III paragraph 3.2 of the prospectus for the public offer and admission to listing on 

the Luxembourg Stock Exchange of the ‘‘bons de souscription d’actions’’ (‘‘the Warrants’’), exercisable 

into new shares of Arcelor and for the admission for listing on the Luxembourg stock exchange of the new 

shares of Arcelor. 

The Unaudited Consolidated Pro Forma Financial Data has been prepared under the responsibility of 

the Board of Directors of Arcelor from the following information: 

1. The audited consolidated accounts of Arcelor, Companhia Siderúrgica de Tubarão and Acesita as 

at 31 December 2003 

• The audited consolidated accounts of Arcelor for the year ended 31 December 2003 prepared in 

accordance with International Financial Reporting Standards (‘‘IFRS’’). 

The consolidated accounts of Arcelor have been subject, from KPMG Audit, Luxembourg, to an 

audit in accordance with International Standards on Auditing. These standards require due 

diligence work to be carried out to ensure that there is a reasonable assurance that these accounts 

do not contain significant misstatements. This audit has led KPMG Audit, Luxembourg, to provide, 

on 19 March 2004, an unqualified opinion on these consolidated accounts. 

• The audited consolidated accounts of Companhia Siderúrgica de Tubarão (‘‘CST’’) for the years 

ended 31 December 2003 prepared in accordance with Brazilian Accounting Practice as well as in 

accordance with IFRS. 

The consolidated accounts of CST prepared in accordance with Brazilian Accounting Practice (before 

conversion to USD and then to EUR) have been subject, from PricewaterhouseCoopers, Brazil, to an 

audit in accordance with Brazilian Auditing Standards. The consolidated accounts of CST prepared in 

accordance with IFRS (before conversion to EUR) have been subject, from PricewaterhouseCoopers, 

Brazil, to an audit in accordance with International Standards in Auditing. These standards require due 

diligence work to be carried out to ensure that there is a reasonable assurance that these accounts do not 

contain significant misstatements. These audits have led PricewaterhouseCoopers, Brazil, to provide, on 13 

February 2004, an unqualified opinion on these consolidated accounts. 

• The audited consolidated accounts of Acesita for the year ended 31 December 2003 prepared in 

accordance with Brazilian accounting practice 

The consolidated accounts of Acesita (before conversion to USD and then to EUR) have been 

subject, from Deloitte Touche Tohmatsu, Brazil, to an audit in accordance with Brazilian Auditing 

Standards. These standards require due diligence work to be carried out to ensure that there is a 

reasonable assurance that these accounts do not contain significant misstatements. This audit has led 

A-III-10

Deloitte Touche Tohmatsu, Brazil, to provide, on 16 February 2004 (and on 19 March 2004 in respect of 

subsequent events), an unqualified opinion on these consolidated accounts. 

2. The unaudited restatements carried out on the net consolidated shareholders’ equity and the net 

consolidated results of CST and Acesita prepared in accordance with local accounting standards so that 

they are consistent with the accounting policies adopted by the Board of Directors of Arcelor in 

accordance with IFRS 

• Restatements have been made on the net consolidated shareholders’ equity positions as at 31 

December 2003 and the net consolidated results for the year ended 31 December 2003 of CST and 

Acesita 

These restatements, reproduced in paragraphs 2.1 and 2.2 of Appendix III for CST and Acesita 

respectively, have not been reviewed nor audited by the independent auditors of CST and Acesita, nor 

have they been audited or reviewed by ourselves. 

The Unaudited Consolidated Pro Forma Financial Data aims to translate the effects on historical 

financial data of a given transaction or event at a date prior to the actual or the reasonably envisaged 

occurrence of the event. It may not however, necessarily reflect the financial position or performance that 

could have been considered had the transaction or event occurred at a date prior to the actual or envisaged 

date. 

The following agreed upon procedures have been undertaken: 

• Agreed upon procedures undertaken on the restatements for CST and Acesita: 

Verification that the net consolidated shareholders’ equity positions as at 31 December 2003 and 

the net consolidated results for the year ended 31 December 2003 of CST and Acesita are in line 

with the basis for including the equity investments of Arcelor in CST and Acesita in its 

consolidated accounts for the year ended 31 December 2003 under the equity method. 

• Agreed upon procedures undertaken on the Unaudited Consolidated Pro Forma Financial Data: 

Obtaining an understanding of the assumptions and accounting policies, in accordance with 

IFRS, as used for the preparation of the Unaudited Consolidated Pro Forma Financial Data as 

described in paragraph 3.1 of Appendix III. 

Our procedures were based on the understanding of the financial data and other information made 

available to us by the management of Arcelor and were aimed at assessing its global consistency, 

reasonableness and relevance. 

Based on our procedures, we report our findings below: 

• The net consolidated shareholders’ equity positions as at 31 December 2003 and the net 

consolidated results for the year ended 31 December 2003 of CST and Acesita are in line with the 

basis for including the equity investments of Arcelor in CST and Acesita in its consolidated 

accounts for the year ended 31 December 2003 under the equity method. 

• The assumptions and accounting policies used for the preparation of the Unaudited Consolidated 

Pro Forma Financial Data are in accordance with the accounting policies and the basis for 

preparing Arcelor’s consolidated accounts for the year ended 31 December 2003 except with regard 

to the accounting treatment of negative goodwill which follows accounting policies applied by 

Arcelor as from 1 January 2004 as described in paragraph 1 of Appendix III. 

• The Unaudited Consolidated Pro Forma Financial Data appears to be generally consistent, 

reasonable and relevant, in the context of the pro forma assumptions described in paragraph 3.1 of 

Appendix III. 

The agreed upon procedures described above are neither an audit nor a review in accordance with 

generally accepted auditing standards adopted on an international level such as defined by the 

International Standards on auditing (ISA) and therefore we express no opinion on the Unaudited 

Consolidated Pro Forma Financial Data. 

This report has been prepared in the context of generally accepted professional standards applicable 

in Luxembourg in connection with the public offer and the admission to listing on the Luxembourg stock 

exchange of the Warrants, exercisable into new shares of Arcelor and in connection with the admission to 

listing on the Luxembourg Stock Exchange of the new shares of Arcelor, and in connection with the public 

A-III-11

offer in Belgium, France, Spain and the Netherlands and the admission to listing on the Premier Marché of 

Euronext Paris S.A., the Premier Marché of Euronext Brussels S.A./N.V. and the Spanish Stock Exchanges 

of the Warrants and the admission to listing on the Premier Marché of Euronext Paris S.A., the Premier 

Marché of Euronext Brussels S.A./N.V. and the Spanish Stock Exchanges of the new shares. It cannot be 

used for any other purpose. 


KPMG Audit 


Eric Damotte 

A-III-12

3.5 Unaudited pro forma key financial figures 31 March 2004 

Unaudited Unaudited Unaudited 

Pro Forma Quarter 1 Pro Forma 

2003 2004 1 Q 04 Variation 

1 2 3 3 - 2 


Turnover ..................................... 27,695 6,899 7,377 478 

EBITDA ...................................... 2,789 696 873 177 

Ebitda margin ................................. 10.1% 10.1% 11.8% 37.0% 

Profit after tax ................................. 542 285 362 77 

Minority interests ............................... (262) (51) (96) (45) 

Net Profit for the period .......................... 280 234 266 32 

Cash Flow .................................... 2,274 539 696 157 

Changes in WCR (Increase = ) ................... 641 (105) (150) (45) 

Cash Flows from operating activities ................. 2,915 434 546 112 

Cash Flows from investing activities .................. (1,095) (151) (173) (22) 

Free Cash Flow ................................ 1,820 283 373 90 

Fixed assets ................................... 14,108 11,822 14,108 2,286 

Working capital requirements ...................... 3,793 3,496 3,969 473 

Total ........................................ 17,901 15,318 18,077 2,759 

Net Equity .................................... 10,087 8,682 10,674 1,992 

—Group’s share ................................ 8,577 8,057 9,298 1,241 

Provisions .................................... 2,929 2,609 2,970 361 

Net Financial Debt .............................. 4,885 4,027 4,433 406 

Gearing ...................................... 48.4% 46.4% 41.5% 

Net Financial Debt/EBITDA ....................... 1.8 1.4 1.3 

A-III-13


APPENDIX IV 

Form of Investor Letter for U.S. shareholders (1) 

Arcelor 




cc. Global Centralising Agent 


Listing & Agency Administration 

50, avenue J. F. Kennedy, 

L-2951 Luxembourg, 


[You must send a copy of this letter to the financial intermediary through which your Warrants (as defined 

below) are held. Accordingly please insert here the name, address and contact details of the relevant financial 

intermediary.] 

Dear Sirs, 

In connection with our proposal subscription for new shares (the ‘‘New Shares’’) of Arcelor (the 

‘‘Company’’), we hereby certify and agree as follows: 

(A) The undersigned is a qualified institutional buyer within the meaning of Rule 144A under the U.S. 

Securities Act of 1933, as amended (the ‘‘Securities Act’’). 

OR 

(B) The undersigned is a broker-dealer acting as agent on behalf of its customer and has confirmed that 

its customer is a qualified institutional buyer within the meaning of Rule 144A under the Securities 

Act. 

In connection with our proposed exercise of any warrants (the ‘‘Warrants’’) and/or subscription for the 

New Shares, we hereby further represent, acknowledge and agree that: 

(1) Neither the Warrants nor the New Shares have been, nor will they be, registered under the 

Securities Act, and, therefore, (i) the Warrants are not being extended to shareholders of the 

Company within the United States, except under limited circumstances designed to avoid an 

offering that would require registration under the Securities Act, and (ii) the New Shares are 

being acquired by us in a transaction that is exempt from the registration requirements of the 

Securities Act. 

(2) Upon exercise of the Warrants we will be acquiring the New Shares for our own account as 

principal or for one or more accounts as to which we exercise sole investment discretion 

(‘‘discretionary accounts’’) and not with a view to or for resale or any distribution or other 

disposition or fractionalization hereof, in whole or in part, in the United States. 

(3) We have received and read a copy of the Company’s Prospectus dated 28th June, 2004 and have 

had access to such additional financial and other information, if any, regarding the Company, the 

New Shares and the Warrants as we have requested in connection with our investment decision to 

subscribe for the New Shares. We have also had the opportunity to ask questions of, and to 

receive answers from, representatives of the Company regarding its affairs and the terms of the 

New Shares and the Warrants. 

(4) We are, and each discretionary account for which we are subscribing shares is, a corporation, 

partnership or other entity having such knowledge and experience in financial and business 

matters as to be capable of evaluating the merits and risks of our investment decision to subscribe 

for New Shares. 

(5) We agree that if we wish to dispose of or exchange any of the Warrants we may acquire, we will 

not offer, sell or deliver any of such Warrants, directly or indirectly, unless such offer or sale is 

(1) Holders who hold Shares must sign and return to their financial intermediary and the Company, with a copy to Banque Générale 

du Luxembourg S.A., a letter in the form set forth in this Appendix. 

A-IV-1

made in a transaction outside the United States in accordance with Rule 903 or 904 or 

Regulation S under the Securities Act. 

(6) We agree that if, at some future time, we wish to dispose of or exchange any of the New Shares 

we may acquire, we will not offer, sell or deliver any of such New Shares, directly or indirectly, 

unless the offer and sale is made (i) outside the United States in accordance with Rule 903 or 904 

of Regulation S under the Securities Act or (ii) pursuant to an effective registration statement 

under the Securities Act. We further agree not to deposit any of the New Shares we may acquire 

into any unrestricted American Depositary Receipt facility established or maintained by a 

depositary bank (including the unrestricted American Depositary Receipt facility maintained by 

the Bank of New York as depositary), unless such New Shares have been registered pursuant to 

an effective registration statement under the Securities Act. 

(7) If we are a broker-dealer acting as agent on behalf of its customer, we have authority to make, 

and do make, the statements set forth in this letter on behalf of our customer. 

(8) We undertake promptly, and in any event prior to any attempted exercise of the Warrants, to 

inform the Company if, at any time prior to 13th July, 2004, any of the foregoing statements 

ceases to be true. 

As used in this letter, ‘‘United States’’ shall have the meaning set out in Regulation S under the 

Securities Act. 

We understand that this letter is required in connection with the laws of the United States. The 

Company is entitled to rely on this letter and we irrevocably authorize the Company to produce this letter 

or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with 

respect to the matters covered thereby. 

The undersigned understands that timing may not permit the delivery of the Warrants into 

Luxembourg in a timely manner in order to enable such Warrants to be timely exercised. The Company 

shall not be liable for failure of the undersigned or any other person or entity to be able to receive or act 

upon the Warrants. 

Very truly yours 

[NAME OF CERTIFYING ENTITY] 

By: 

/s/ NAME GOES HERE 

Title: 

A-IV-2




Registered Office of Arcelor 

Arcelor 




Legal Advisers to Arcelor 

Elvinger, Hoss & Prussen 

2, Place Winston Churchill 



Shearman & Sterling LLP 

114, avenue des Champs-Elysées 

75008 Paris 

France 

Cuatrecasas 

Velázquez, 63 

28001 Madrid 

Spain 

Linklaters De Bandt 

Rue Brederode 13 

1000 Brussels 

Belgium 

Houthoff Buruma 

Parnassusweg 126 

1076 AT Amsterdam 

The Netherlands 

Legal Advisers to the Underwriters 

Cleary, Gottlieb, Steen & Hamilton 

City Place House 

55 Basinghall St. 

London EC2V 5EH 

England 

Auditors 

KPMG Audit 




Global and Luxembourg Warrants Centralising Agent 


50, avenue J. F. Kennedy 



French Warrants Centralising Agent 

BNP Paribas Securities Services 

Les Collines de l’Arche 

92057 La Défense Cedex 

Belgian Warrants Centralising Agent 

Fortis Banque, 

3, Montagne du Parc 

B-1000 Brussels 

Belgium 

Spanish Warrants Centralising Agent 

Banco Bilbao Vizcaya Argentaria, S.A. 

Clara del Rey, 26 

Madrid 28002 

Spain

Merrill France sarl, Paris 

04PRS1065 

29JUN200402263417

Arcelor's capital increase - Vernimmen

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