ANNUAL REPORT ARCELOR 2003 - paperJam

ANNUAL REPORT ARCELOR 2003ANNUAL REPORT ARCELOR 200319, avenue de la LibertéL-2930 LuxembourgR.C. Luxembourg B 82.454www.arcelor.com

table of contents >Message from the Chairman of the Board of DirectorsMessage from the Chairman of the Management Boardp2p4> General Information p8Portrait of the Groupp10Key Figures for 2003p142003 highlights p16Corporate Governancep18Report of the Chairman of the Board of Directors onp20Corporate Governance and Internal Control ProceduresInformation regarding Capital, Market Informationp32and Financial Information Policy> Presentation of the activities of the Group p38Flat Carbon Steelsp40Long Carbon Steelsp46Stainless Steels, Alloys and Special Platesp50Distribution-Processing-Tradingp56Other activitiesP60> Business Report p62Group Consolidated Management Reportp64Risk Managementp84> Sustainable Development Report p88Implementation of the Sustainable Development policy within the Groupp90Organisation of Sustainable Development in Arcelorp94Arcelor’s Sustainable Development key performance indicatorsp95Group profitabilityp98Health & Safety and Risk Managementp99Protection of the environment and of scarce resourcesp103Dialogue with all stakeholdersp108Skills developmentp111Innovation and Qualityp113Corporate governancep116Responsible citizenshipp117Steel solutions for a better world: Arcelor’s steel solutionsp119Arcelor and the Global Compactp121> Legal Information p123General information about Arcelorp124Litigationp124Trade barriersp125> Financial Information p130Consolidated financial statements of the Arcelor groupp132Annual accounts Arcelor S.A.p192Arcelor Ordinary General Meeting on April 30, 2004: proposed resolutionsGlossarySteel production flow diagramp202p204p206ANNUAL REPORT ARCELOR 2003 1

Message from the Chairman ofthe Board of DirectorsAs the precursor of the necessary global consolidationmovement in the steel industry, Arcelor has kept itscommitments, both economic and financial – where wehave surpassed our announced objectives for synergiesand balance sheet – and to our stakeholders throughthe deployment of our Sustainable Development policy.Dear Shareholders,The 2003 financial year, which we are reviewing in thisannual report, was characterised by rising geopoliticaltensions, a new wave of financial scandals implicatingmajor economic players, and continued weak economicgrowth in Europe, in sharp contrast to the dynamism seenin other areas around the world.With respect to our business, the steel market in theEuropean Union, which represents 75% of our sales, wasnot very favourable. Steel consumption declined by nearly1% as a result of the depressed world economy and thelistless demand prevailing in the steel-using industries. Theyear 2003 again saw an increase in steel imports from thirdcountries including, paradoxically, the United States.Global crude steel production increased by 6.7% over2002, marking the sixth consecutive year of growth andreaching the record number of 964 million tonnes. Thisperformance is primarily on account of China, whose steelproduction went from 182 million tonnes in 2002 to around220 million tonnes in 2003. China alone now accounts foralmost one quarter of world steel production!It is against this background of flagging economic growth inEurope, compounded by stakeholders’ legitimate questionsconcerning corporate governance, and an acceleratingreconfiguration of the world steel market, that Arcelor hasbeen conducting its business.The judicious management of our assets allowed us toimplement strategic realignments in the Flat CarbonSteels and Stainless Steels sectors as well as disposalsof activities that were not considered part of our corebusiness.Our improved operating performance and rigorous controlof our working capital requirements and investmentexpenses allowed us to reduce our net financialdebt/equity ratio from 0.75 at the end of December 2002to 0.55 by December 31, 2003, freeing up the cashflownecessary for the growth of the Group.Our gross operating result of nearly 2.2 billion euros in 2003was clearly an improvement over 2002 (+13%) in spite ofa slight decline of 2.5% in revenues to 25.9 billion. Thisdevelopment can be attributed to our desire, from the veryoutset, to conduct a policy favouring margins over volume.Due to this conscious choice, recognised by the marketsas the “Arcelor effect”, our prices for the first time remainedstable during a downturn in the European Union, while ourexport prices suffered a slight decline attributable to theevolution of the euro/dollar exchange rate.Net result (Group share) rose to 257 million euros aftertaking into account non-recurring exceptional items of540 million euros.This result allowed us to recommend to the General Shareholders’Meeting a gross dividend of 0.40 euro per share,an increase of 5% over the previous year.Given the difficult economic context in which we operated,our performance improved satisfactorily. Our goal must beto accelerate this momentum in order to give our Groupover the long term the resources necessary for externalgrowth and a return on the capital invested by our shareholders.To improve our profitability, we must continue toslash costs and expand our products and services byanticipating the needs and demands of our customers,both locally and internationally. To do so, innovation in thebroadest sense must become our top priority. It includesall areas of the business, from R&D and the quality ofcustomer service to our managerial culture. In this way,we will transform Arcelor.2ANNUAL REPORT ARCELOR 2003

The arguments justifying the creation of Arcelorproved in 2003 to be well-foundedAs announced at the beginning of 2003, the implementationof our strategies in the Flat Carbon Steels sector will meanthe elimination of unprofitable structural overcapacities inEurope during the coming years. The coastal sites will befavoured for upstream production and downstream productionwill follow the logic of specialisation and proximity toour customers.The restructuring of the Stainless Steels sector, with UGINE& ALZ in Europe and Acesita in Brazil now forming thecore, should allow us to achieve new production standardsand overcome our weak structural points, above all withthe construction of a new steelshop upstream of the hotstrip mill in Charleroi.The implementation of these projects took place with acontinual awareness of the need for social dialogue both atthe level of the European Works Council and the bargainingentities at the local level. This is part of our long-term developmentstrategy based on the 3 Ps, “Profit, People, Planet”, towhich we have added a fourth “P”, Partners, which representsour commitment to dialogue with all stakeholders involvedin our projects – our customers, suppliers, and the communitiesin which we conduct our industrial activities. Thisstrategy is defined on the basis of eight principles that aredetailed in this report. We have laid out our Principles ofResponsibility representing the ethical and behaviouralstandards according to which we intend to conduct ouraffairs.As a result, we have made safety our first priority! While theresults of this policy are impressive and have beenachieved thanks to input from everyone involved, our goalremains “zero accidents”.We have included in the annual report a chapter on Corporategovernance and Arcelor’s Internal Control Procedures. Giventhe constant development of relevant legislation, the Board ofDirectors will remain attentive to international recommendationsand will take the appropriate measures to optimisethe performance and reputation of our Group in this area.Dear Shareholders,The year 2004 looks promising and difficult at the sametime. For one thing, Arcelor will operate in an environmentin which economic growth in Western Europe will beweaker than in the United States, Latin America or Asia.We face numerous challenges, not least of which is asignificant increase in the prices of raw materials and seafreight, together with the weakness of the American dollar.While we remain confident regarding our ability to improvethe industrial and financial performance of the Group, weare concerned about some developments in our regulatoryenvironment, especially in Europe. One example is theimplementation of the Kyoto Protocol by the Europeanauthorities. Without challenging the justification of theProtocol, we believe implementation raises legitimatequestions about Europe’s industrial policy and the ability ofits institutions to properly manage this balancing actbetween the economic imperatives on the one hand andthe need to protect the environment on the other. Europeanpolicy-making must be reassessed, and the future strategyof our Group must take into account the expansion of theEuropean Union, the migration of the growth hot spots toBrazil, Russia, India and China, and the acceleration of theoutsourcing trend.Arcelor is resting today on a healthy and solid foundation.It is now up to us to continue over time the strong resultsachieved since the birth of the Group.To continue on this road we must accelerate the processof continuous improvement and focus on the growth of allcompanies belonging to the Group by quickly realising theexpected synergies and by spreading the best corporatepractices to all areas of endeavour. This is how we will giveourselves the means to change, to seize external growthopportunities and to establish Arcelor as the definitive“benchmark” in steel.We know we can count on the unfailing commitment of ouremployees in achieving these goals, and we thank them forthat. It is our responsibility to offer them a career environmentthat opens up opportunities of personal growth that matchtheir ambitions.Joseph KinschChairman of the Board of DirectorsANNUAL REPORT ARCELOR 2003 3

Message from the Chairman ofthe Management Board: a conversation withthe CEOAre the results for 2003 in line withyour expectations?Yes, even better than projected, given the difficulteconomic environment in the European Union. In termsof safety, we were actually able to reduce the accidentrate by 40% across all our business units, but whatreally matters here is the “zero accidents” goal. Anyserious accident is intolerable, and we can reduce thenumber of serious accidents only by reducing the totalnumber of accidents, incidents and risk situations. Westill have to make a special effort when it comes to subcontractors,whose accident rate* is still too high. Wecannot accept a two-tier safety system for our Group.With 405 million euros in synergies on an annualisedbasis, we have far surpassed our goal for the year2003 and we are well on our way to reach our goalof 700 million euros per year by the end of 2006. Weare one year ahead of schedule in our goal for debtreduction and for strengthening our balance sheetstructure. The new purchasing organisation hasallowed us to achieve significant synergies thanks tothe introduction of the Total Cost of Ownership conceptin all purchasing segments, resulting in substantialsavings throughout the supply chain. This is a verypositive sign of the efficacy and speed of the mergereffects. This is also true for our sales policy of givingpriority to price over volume which, in the context ofan overall depressed economy in Europe during 2003,allowed us to maintain a satisfactory operating resultbefore exceptional items.We must perform better in terms of innovation, cost andentrepreneurial development. These are the challenges forthe transformation of Arcelor* See glossary.4ANNUAL REPORT ARCELOR 2003

You said that 2003 would be a year ofconsolidation for the Group: have yousucceeded?Arcelor is a success. After an initial consolidation phase,the organisation is now in place and we have lived up toour promises made to the European Commission in termsof the sale of assets. We also defined the strategies foreach or our businesses during the first quarter of 2003and, after discussing them with all our stakeholders,we began to implement them to the point where we soonexpect to reap the first dividends. Our customers andshareholders trust us because we keep our commitments.But we must go beyond that! This is the reasonwhy we have thoroughly reorganised our research anddevelopment organisation, putting the focus in all ourmarket segments on innovation. We also initiated areview of our supply chain in order to improve the qualityof our service and differentiate ourselves from ourcompetitors.As planned, we are deploying our Sustainable Developmentpolicy based on the eight principles mentionedearlier. In this context, we have defined the ArcelorPrinciples of Responsibility that we must now put intopractice on a daily basis. Two essential dimensions aresafety, first and foremost, as well as social dialogue.The European Works Council, set up at the very beginningof the merger, is indispensable for a concerted approachto the Group’s major strategic challenges.Is the race already won?Much remains to be done! In the Stainless Steels sector,we must continue to improve profitability by refocusingon flat products in Europe (UGINE & ALZ) and Brazil(Acesita) and by trying to find the best solutions for theother activities, be it through partnerships, sales oralliances. We are also facing significant threats thatwe must anticipate: whether this is the rapid increase inraw material prices (ore, coal, coke, scrap) or transportcosts (freight), the trend in exchange rates, or the abilityof Europe to generate growth on its own.In all cases, it is our ability to compete and, therefore,our future, that is at stake. All our teams are mobilisedfor this competitive battle, which includes ambitiousplans for efficiency savings and improvement throughoutthe Group.ANNUAL REPORT ARCELOR 2003 5

Does this mean that the Group is entering anew phase?Yes. We are preparing to embark on a new phase ofgrowth. We can now afford to do so because we havebeen able to reduce our debt level beyond theinitial goal and more rapidly than expected,thereby freeing up the resources that are necessaryfor growth. We are also gradually implementing thedivestment of non-strategic activities according to thecommitments we have undertaken. Finally, we alreadycarried out several important projects in 2003: in FlatCarbon Steels with the operational start-up of theautomotive galvanising lines in Brazil (Vega do Sul), andin Turkey in partnership with Borusan, which expand ourglobal offer of quality products for the automotiveindustry.Our partnership with Nippon Steel Corporation in thecontext of the Global Strategic Alliance assumes its fullimport here, with the formulation of a joint product listfor our major industrial customers in the automotiveindustry and our participation in the Arcelor-Baosteel-Nippon Steel joint venture for the construction of a plantnear Shanghai that will meet the growing needs of theChinese automotive industry. With regard to distributionin Central and Eastern Europe, we doubled the capacityof the steel service centre in Bytom, Poland, andinvested in a new service centre in Slovakia. Finally, withthe beams mill in Pallanzeno, Italy, and an investment inthe San Zeno steelworks, we completed a targetedacquisition that is strengthening our leadership in longcarbon products in Europe.What is the economic outlook forsteel in 2004?Signs of a recovery can be seen in Europe, but wewill have to wait for the third quarter to gauge howsolid and lasting the recovery might be. For a grouplike Arcelor, which does 75% of its business in theEuropean Union, it is clear that this exposure needsto be rebalanced. However, steel consumption in therest of the world is in good shape: certainly in China,which represented more than 25% of world consumptionin 2003 with record growth rates that are veryencouraging for the world steel business; in SouthAmerica, in India and also in Central and Eastern Europe,gross domestic product (GDP) growth is steady andmust guide our future development.What should be noted with regard to 2003 is, firstly, thecontinuing shift of the centre of gravity for steel towardeconomic regions that are more dynamic than WesternEurope and, secondly, the overall good health of thesteel industry as a whole. There were some mergers in2003 and more will follow.The consolidation of the industry is accelerating.Steel is one of the most widely traded commodities inthe world. It is a young, omnipresent product whosemultiple applications demonstrate its adaptability and itsmodernity in many areas of use. Infinitely recyclable, it isan environmental product that is perfectly adapted tothe needs of our time.In a word, the Group is in good health thanks to thecommitment and motivation of everyone involved, proofpositive that our employees believe that our products,our business and our Group have a bright future.6ANNUAL REPORT ARCELOR 2003

2004 marks the beginning of the “transformationof the Group”: what does that mean?In Western Europe, we are faced with a cost structurethat puts us at a disadvantage in some of our businesseswhen we are pitted against Russian, Ukrainian,South American and Chinese competitors. The newrules of the global game and the risks of regulatorydistortions between the different economic regions ofthe world – such as the regulations relating to thereduction of greenhouse exhaust gases or theprotectionism that is still too prevalent in world trade –will undoubtedly guide our investment decisions in thefuture.During the last two years, we have concentrated onimproving and restoring the health of our balance sheet.Starting in 2004, this will progressively enable us to takeadvantage of the growth opportunities that presentthemselves. Tomorrow, Arcelor will be an even moreglobal player than it is today: we will welcome newpartners, step up the exchange of best practices andbegin once more to conquer new markets by constantlyrejuvenating our offer of products and services.Our steel products must meet new challenges interms of safety, service, environment and aesthetics.They must become true solutions for our customerswhile at the same time furthering the SustainableDevelopment goals that we have set for ourselves andthat we will fulfil. We must continue to innovate toachieve further productivity gains and to develop steelproducts that are more environmentally friendly, strongerand lighter, and will, for example, reduce CO 2 emissionsin the automotive industry and satisfy our customersin terms of quality and service. We also have highambitions in the construction sector where steelis omnipresent and gives free rein to the imaginationand audacity of the architect. The domestic electricalappliance, packaging and engineering markets areevolving rapidly and are important markets for us whereour steel products must make a difference.We also must take advantage of the Europeanexpansion and build alliances to achieve a betterbalance for our business at the international leveland to consolidate our global leadership.The creation of Arcelor has sent a strong signal tothe markets: we are convinced that the steel businesscan be profitable and can create long-term value,for the greater benefit of our employees and all ourstakeholders, customers, shareholders and the communitieswhere our businesses are located. Arcelorwill not stop halfway. We must perform better in termsof innovation, cost and entrepreneurial development.These are the challenges for the transformation ofArcelor.What are Arcelor’s principal assets in order tosucceed in this new phase of growth?The professionalism and the unfailing motivation ofthe men and women at Arcelor who are raising highthe banner of steel. I would like to take this opportunity,on behalf of the Board and on my own behalf, to expressour heartfelt thanks for their commitment and contributionto Arcelor’s success.Guy DolléChief Executive OfficerANNUAL REPORT ARCELOR 2003 7

8ANNUAL REPORT ARCELOR 2003

PART IGeneral Informationtable of contents >Portrait of the Groupp10Key Figures for 2003p142003 highlights p16Corporate Governancep18Board of Directorsp18Management Boardp19Report of the Chairman of the Board of Directors onp20Corporate Governance and Internal Control ProceduresCorporate Governancep20Internal control proceduresp28Information regarding Capital, Market Information,p32and Financial Information PolicyInformation about the share capital of Arcelorp32Market informationp34Other securities providing access to capitalp35Information policyp36ANNUAL REPORT ARCELOR 2003 9

Portrait of the GroupArcelor was born out of the commitment of three steel makers,Aceralia, Arbed and Usinor, with a common purpose, to createa world leader with the goal of becoming a reference in the steelindustry.The creation of Arcelor, which was announced onFebruary 19, 2001, became a reality a year later, onFebruary 18, 2002, with the listing of the new Group onthe stock exchanges.The Arcelor group is active in four principal sectors: itis the world’s leading producer of flat carbon steelsand long carbon steels, one of the world leaders inthe production of stainless steels, and among the topcompanies in Europe in the Distribution-Processing-Trading sector.Employing 98,000 people in over 60 countries, Arceloris the largest steelmaker in the world with productionof 44 million tonnes of steel, and revenues in 2003 of26 billion euros. It is a leading player in all its majormarkets: automotive, construction, domestic electricalappliances, packaging and general industry.The recent history of the steel industry in Europe hasbeen characterised by the high level of consolidation ofcustomers in certain markets (automotive, packaging,domestic electrical appliances), excess productioncapacities, and the presence of a large number of steelproducers. This has generated a structural trend towardlower prices.Indeed, despite the reorganisation of the steel industry inEurope and the United States, and the restructuring andcost-cutting measures implemented in recent years, thesavings that were achieved were largely offset by thecontinued reduction in selling prices.In this context, the Arcelor group assumed its place as aglobal player in 2003. Its objective is to take advantageof economies of scale by furnishing a global productsoffer while at the same time reducing costs and financialrisks, in order to improve performance and profitabilityand create value for its shareholders, customers andemployees.The Group has set a medium-term goal of posting anaverage pre-tax return on capital employed of 15% overthe cycle, and achieving a sound financial structure.In order to implement this strategy, Arcelor proposes thefollowing goals for all its flat carbon steels, long productsand stainless steels activities:• to optimise the European industrial model to improveproductivity and competitiveness and become moreflexible to better serve customers while exploiting allpotential synergies; thus, for flat carbon steels, Arcelortook the decision in 2003 to progressively shut down theproduction of liquid pig iron in the blast furnaces at theso-called inland plants and cut the costs of the coldrollingand coating lines, initially at the Montataire andMardyck (France) plants; with regard to stainless steels,the decision was made to concentrate steel productionby building a new steelshop at Charleroi (Belgium) inimmediate proximity to the existing hot strip mill. Thissteelshop is a major strategic and structural investmentfor the stainless steels business, which will result inthe closing of the steelshop in Ardoise and Isbergues(France);• to offer the same products/services anywhere in theworld in response to demand from global customers,through better market access (expanded distributionnetwork, e-business platforms, alliances and partnerships);the decision to invest, in partnership with Japan’s NipponSteel Corporation and China’s Bao Steel, in a cold-rollingand galvanising plant for automotive products in China isa good example;10ANNUAL REPORT ARCELOR 2003

• offer a broad range of products and enrich the portfolioby taking advantage of the complementary nature of theproducts and markets in the three sectors and a wellfocusedinnovation resource; it is in this context that thetransformation of the Research function was implemented;• attract the best talent, as well as manage and developthe company’s human resources;• be an effective agent for change in the world steelindustry in order to assist our customers to grow, and toensure our growth through targeted acquisitions thatcreate value and strengthen the geographic presence ofArcelor in North and South America, Asia and Europe.These strategies have had and will have the followingconsequences:- improved operating performance based on a processof continual improvement and the exchange of “bestpractices” and technical know-how;- improved profitability, based primarily on the synergiesgenerated, while at the same time limiting investments;- lower impacts from the cyclical nature of demand throughcomplementary products and markets, thereby improvingthe stability of cashflow;- greater visibility for the Group in the capital markets andimprovement in these same markets’ perception of theGroup so that we become the investment benchmarkfor the industry.CONTINUAL IMPROVEMENT INTHE PRODUCT AND SERVICE OFFERBy combining R&D resources and by capitalising on themulti-market, multi-process and multi-product approach,the Arcelor group reinforces its advantages and strengthensthe attractiveness of steel solutions to ward offsubstitute product offers (aluminium, plastics, cement)and to develop new applications for steel, for exampleby combining long and flat products to better serve theconstruction industry.The evolution of desired functionalities such as lighterweight, safety, durability, appearance, etc. will guide thedevelopment of new products. The progressive eliminationof processing operations at customer facilities,compliance with health, safety and environmental requirements,as well as the constant quest for greater flexibilityand lower costs will guide the development of newprocesses, in particular those that enable reductionsin carbon dioxide output, or the production of vacuumdeposition coatings, as well as the development ofnew products. Each of these ongoing developmentsdriven by one of Arcelor’s companies will benefit theentire Group, thereby improving the return on strategicinvestments. These developments will proceed in closerelationship with customers’ innovation processes.By sharing research resources, the alliance with NipponSteel Corporation, now well established, has resultedin the development of new products in common for theautomotive industry.FURTHER IMPROVEMENTS INPROFITABILITYThe fact that synergies of 405 million euros were achievedby the end of 2003, versus an initial goal of 300 millioneuros, confirms the soundness of the strategy that led tothe creation of Arcelor; they represent more than half theannual gains targeted at the time of the merger for theend of 2006.Likewise, the strategy of favouring sales price increasesover volume has borne fruit as demonstrated by theimproved results despite a slight decline in volume.Finally, the substantial debt reduction achieved in 2003allowed us to strengthen the Group’s financial structureone year ahead of schedule.Corporate governance rules and the responsibilities ofmanagement were defined in such a way as to ensurerapid integration and implementation of Arcelor’s strategicambitions. Management is collectively responsible fordefining strategy, setting goals, allocating resourcesbetween the business units and pursuing industrialoptimisation. The business units have full responsibilityfor their results and the implementation of industrial andcommercial plans.The work carried out in 2003 encourages Arcelor topersist in its strategy of becoming the benchmark in theindustry, both in economic performance for the benefitof our shareholders, and in innovative products andservices for the benefit of our customers.general information > portrait of the GroupANNUAL REPORT ARCELOR 2003 11

The Arcelor/Nippon Steel Corporation (NSC) AllianceArcelor and NSC work together very closely withinthe framework of an agreement called the “GlobalStrategic Alliance”, signed between NSC and Usinoron January 22, 2001 and confirmed by Arcelor and NSCon April 22, 2002.The Alliance was created in response to a request fromcustomers of the two groups for assistance in theirglobal expansion and to accelerate improvements inperformance for the steel products offered. The twopartners are well known for their technological expertise,their innovations and their ability to offer a wide varietyof products. The Alliance thus makes it possible tooffer customers a wide range of “equivalent” high-techproducts from production sites located in the sameregion as their factories, creating more value for thecustomer thanks to the optimal utilisation of resources.The cooperation is basically technical. In other areas,even though the product lines for global customers havebeen made technically “equivalent”, the two groupsremain competitors at the sales level.This Alliance has made great progress in the automotivesector.• A joint catalogue of “equivalent” products is availablefor customers.• At the same time, licences have been exchangedbetween the two to broaden the product lines of bothcompanies.• R&D projects are being carried out for the jointdevelopment of new products, including new hightensilesheet grades.• Technical studies are being undertaken in partnershipwith manufacturers to design new vehicles, in particularto develop innovative solutions for vehicle weightreduction. For this reason, the alliance has been chosenas a partner for the Toyota project aimed at reducing theweight of some of its vehicles.• Finally, a joint venture agreement was signed onDecember 23, 2003 with Bao Steel, the largestChinese steel producer. This joint venture will producethe “equivalent” products of the alliance, notably forEuropean and Japanese manufacturers with operationsin China, in a new plant located in Shanghai.In addition to the automotive industry, the target industryof this alliance, there are other cooperation agreementsfor stainless steels and for products for the constructionindustry.12ANNUAL REPORT ARCELOR 2003

BCSArcelor in BrazilThe European construction industry uses almost 58 milliontonnes of steel annually. It is an important growth marketfor Arcelor, which derives more than a quarter of itsrevenues from the construction market.In the construction industry, steel is synonymous withefficient solutions for a vast array of applications. Be itin new construction or renovation, steel has multipleuses: structural shell, roofing, facade, partitions, floors,decoration, technical equipment, air-conditioning, heating,water supply, bridges, tunnels, highway infrastructure,construction site facilities, accessories, and more.Arcelor participates in these markets with a particularlyextensive offer, incorporating all of the products marketedby all of its sectors. This range includes all major applicationsof steel, offering solutions that are reliable,aesthetic, environmentally friendly and economicallyefficient.BCS – Building and Construction Support – is a unitdedicated to developing Arcelor solutions. BCS hasconstruction specialists who are able to handle projectsand suggest appropriate solutions to customers byfacilitating interaction between the market players andArcelor’s business units, and by sharing their experienceand solutions that have been proven, approved and putto the test throughout the world.The principal missions of BCS are carried out in closecooperation with the Group’s business units:- monitor the markets and identify projects prior to theissuing of tender invitations in regions in the core markets(Germany, Benelux countries, France, Spain, Italy);- offer and ensure the adoption of Arcelor solutions forlarge construction projects that have a representative orshowcase character in Europe;- take advantage of the comprehensive distribution andtrading network to create value chains for fragmentedmarkets, geared to the innovative solutions developed byArcelor;- make the various players in the construction industryin particular aware of and familiar with the products,solutions and services of the Arcelor group, includingby way of the Internet.Arcelor has been present in Brazil for more than 80 yearsthrough its 54.03% subsidiary Belgo-Mineira. Thiscompany, which dates back to 1921, specialises in steellong products and operates in partnership with othermanufacturers, including the Belgian group Bekaert, awiredrawing business.Since 1998, Arcelor has also held significant stakes inAcesita (27.68%*) and Companhia Siderúrgica de Tubarão,CST (29.61%*). Acesita, which Arcelor manages, is theleading producer of stainless steel in South America. CSTproduces flat carbon steel.In 2000, Arcelor launched construction on a new siteof a cold rolling and special coating plant for the automarket, Vega do Sul, in which it holds 77.88%*. This$400 million investment, which came on line in 2003, todayrepresents Arcelor’s largest international investment.Through this project, Arcelor has furnished Brazil witha new technology and has contributed to the creationof 350 direct jobs and 250 indirect jobs, the operatorsbeing trained in the Group’s European plants.Arcelor plays an active role in the development of thesteel industry in Brazil. During the last ten years, theGroup has quadrupled the revenues of Belgo-Mineiraand has made it a global benchmark for the productionand processing of wire rod, while encouraging the progressivetakeover of Acindar, an Argentine steel producer.Arcelor also restructured Acesita and led to its positionas one of the best performing stainless steel producersin the world.Finally, Arcelor is supporting the development of CSTwith the construction of a strip mill and increased liquidsteel production capacity.In 2003, all of Arcelor’s Brazilian holdings representedrevenues of 9 billion reais, 45% of which was earned fromexport, and directly employed nearly 15,000 people.general information > portrait of the Group* % of total interest (direct and indirect) in the total share capital as atDecember 31, 2003.ANNUAL REPORT ARCELOR 2003 13

Key Figures for 2003Revenues (1) Revenues by sector (1)26,59425,923Flat Carbon Steels 13,994Distribution, Processing and Trading 7,954Long Carbon Steels 4,381Stainless Steels 4,280Others 8362002* 2003Intra-group sales (5,522)EBITDA (1)Breakdown of EBITDAby sector (1)1,9782,228Flat Carbon Steels 1,365Distribution, Processing and Trading 284Long Carbon Steels 4932002* 2003Stainless Steels 23Others 58Intra-group sales 5Net result(Group share) (1)Net resultper share (euros)Net financialdebt (1)Net financial debt/equity **5,9934,46474.4%54.8%2570.54(121)(0.25)2002*20032002* 20032002* 200331.12.2002* 31.12.2003(1) Millions of euros* Pro forma, unaudited** Including minority interest and residual negative goodwill (IFRS).14ANNUAL REPORT ARCELOR 2003

Revenues by geographic sales zoneOtherEurope4.3%8.2% North AmericaEBIT (1)European Union (15)75.7%Breakdown of EBITby sector (1)4.6% South America7.2% Rest of WorldResult beforetax (1)general information > key figures780738Flat Carbon Steels 774Distribution, Processing and Trading 125Long Carbon Steels 311393557Stainless Steels (463)2002* 2003Others (14)Intra-group sales 52002* 2003Employees by sectorBreakdown of employees by geographic zoneDistribution,Processingand Trading14,957Flat CarbonSteels48,020Long CarbonSteels17,913Stainless Steels14,231Other Europe829EuropeanUnion86,610North America2,671South America7,570Rest of World584Others3,143TOTAL 98,264 (end period number of employees)ANNUAL REPORT ARCELOR 2003 15

2003 highlightsOn January 24, 2003, having been advised of theconclusions of strategic studies analysing thecompetitiveness of the production structures in Europe,the Arcelor Board of Directors defined the Group’s broadstrategic orientations and laid down the industrialinvestment policy for the Flat Carbon Steels sector.This policy will mean concentrating the liquid phaseequipment (blast furnaces, conversion steelshops) atthe more efficient coastal sites. At sites where thesemeasures will have an impact on employment, theGroup made the commitment to set up the necessaryprogrammes to assist in employee retraining and forreindustrialisation in the local labour market.On May 15, 2003, the Board of Directors was informedby the Group Management Board of the conclusionsdrawn from strategic studies in respect of the StainlessSteels sector. The Board asked Management to prepareto implement a construction project for a new steelshopupstream of the Carlam hot strip mill at Charleroi,Belgium.This project, based on maintaining current capacity,would enable the entire European flat stainless steelbusiness to attain world-class levels of competitiveness.The investment project in Charleroi amounts to 230 millioneuros and will create 400 new jobs. Commissioning isplanned for the second half of 2005, and the ratedcapacity of one million tonnes is due to be reached in2007.This project is part of the larger strategic realignmentsdesigned to optimise the industrial and economicperformance of all of the Group’s stainless steel activitiesas part of better asset portfolio management.On July 3, 2003, Arcelor finalised the purchase, throughsubsidiaries of its long products sector, of the Pallanzenorolling mill from Duferdofin and of a 49.9% share in theSan Zeno steelworks. Duferdofin, a wholly-ownedsubsidiary of the Duferco Group, retains the remaining50.1% shares in the San Zeno steelworks.The two purchases have been approved by the Europeancompetition authorities.The Pallanzeno rolling mill, located in northern Italy,produces small and medium beams and has a productioncapacity of 600,000 tonnes per year; the steelworks atSan Zeno di Naviglio, also located in Italy, near Brescia,has a capacity of 750,000 tonnes per year and suppliesblooms* to the Pallanzeno rolling mill.On July 28, 2003, Arcelor granted a technologicallicense to Tata Steel of India for the production of galvanisedsteel sheet for automobiles at its Jamshedpurplant. The agreement covers both the pure zinc galvanisingtechnologies and combined zinc/iron coatings.This agreement reinforces the cooperation initiated inApril 2002 between Arcelor, Nippon Steel Corporationand Tata Steel aimed at offering high-performance steelsolutions to the Indian automotive industry. Under thenew agreement, Arcelor is granting Tata Steel a licensefor the use of its proprietary product Extragal TM , includingthe use of the registered trademark and the necessaryknow-how. Extragal TM is a pure zinc galvanised productthat has been specially developed for the automotiveindustry.* See glossary.16ANNUAL REPORT ARCELOR 2003

On July 28, 2003, Arcelor and Bao Steel signed anagreement for the creation of a partnership for theproduction of welded blanks near Shanghai. This jointventure will benefit not only from the supply of rawmaterials by Bao Steel but also from Arcelor’s state-ofthe-arttechnology in welded blanks, and will make itpossible to offer the technological advantages of weldedblanks to car manufacturers operating in China.The use of welded blanks in automotive applications cancontribute to vehicle weight reduction, thereby reducingpetrol consumption while at the same time strengtheningpassive safety and improving road-handling characteristics.Construction work on the new plant began in 2003 andshipments to customers will start during the second halfof 2004. In its initial configuration, the plant will have anannual production capacity of 2 million units of weldedblanks.On September 19, 2003, on the occasion of theopening of the new Sollac Ambalaj facilities in Gemlik,Turkey, Arcelor and Erdemir, the number one steelproducer in Turkey, announced their intention to expandtheir cooperation in Turkey and other markets.The two groups intend to create a joint enterprise aimedat developing steel service centres outside Turkey.Arcelor and Erdemir also intend to step up their currentcooperation in the field of packaging steels by increasingErdemir’s share in Sollac Ambalaj.Furthermore, Arcelor and Erdemir plan to study opportunitiesfor creating additional synergies that would bein line with the growth plans of the two groups.In October 2002, Arcelor and Erdemir launched a jointventure in the field of packaging steels with Erdemir’sacquisition of a 25% stake in Sollac Ambalaj Celik.On December 23, 2003, Arcelor, Bao Steel and NipponSteel Corporation created an industrial and commercialjoint venture in China for steel for the automotive industry.Located in Shanghai near the upstream productionfacilities of Bao Steel, this plant will include cold rollingand galvanising facilities with an annual productioncapacity of 1.7 million tonnes of flat carbon steels mainlydestined for the automotive industry. The new facilitiesrepresent an investment of approximately $800 million.This new joint venture is part of the Global StrategicAlliance between Arcelor and Nippon Steel Corporation,giving both companies the opportunity to serve theirinternational customers, notably in the automotiveindustry, thanks to the development and offer of stateof-the-artsteel solutions. Twelve percent of the newentity will be owned by Arcelor, 38% by Nippon SteelCorporation and 50% by Bao Steel.On September 3, 2003, Arcelor confirmed its membershipin the United Nations Global Compact, therebyjoining over 1,250 enterprises from around the world.The Global Compact, launched in 2000, is meant tobetter integrate into corporate practices a fundamentalset of values relating to the Universal Declaration ofHuman Rights, international labour standards and theprotection of the environment.general information > 2003 highlightsANNUAL REPORT ARCELOR 2003 17

Corporate GovernanceBoard of Directors*• Joseph Kinsch,Chairman of the Board of Directors• José Ramón Álvarez Rendueles,Vice-Chairman of the Board of Directors• Daniel Bouton,Director, Chairman and CEO of Société Générale, Paris• John Castegnaro,Director, Employee Representative, Luxembourg• Hedwig De Koker,Director, Chairman of the Board of Vancaen PLC,Brussels• Jean-Yves Durance,Director, Chairman of the Management Board MARSHFrance, Paris• Jean-Pierre Hansen,Director, Chairman and Managing Director of Tractebel,Managing Director of SUEZ S.A., Brussels• Ulrich Hartmann,Director, Vorsitzender des Aufsichtstrats of E-ON AG,Düsseldorf• Corporación JMAC represented byRamón Hermosilla Martin,Director, Madrid• Jean Lapeyre**,Director, Employee Representative, Paris• S.A.R. le Prince Guillaume de Luxembourg,Director, Luxembourg• Daniel Melin,Director, Chairman of EMEA South EDS, Paris• Edmond Pachura,Director, Chairman of UNAS, Paris• Francisco Javier de la Riva Garriga,Director, Executive Vice-Chairman of Fertiberia S.A.,Madrid• Georges Schmit,Director, Secretary General of the Ministry of theEconomy, Luxembourg• Sergio Silva de Freitas,Director, Senior Vice-President of Banco Itaú, São Paulo• Ignacio Fernández Toxo,Director, Employee Representative, Madrid• Fernand Wagner,Director, LuxembourgSecretary of the Board of Directors• Paul Junck,General SecretaryAudit Committee• José Ramón Álvarez Rendueles,Chairman• Hedwig De Koker,Member• Jean-Yves Durance,Member• Georges Schmit,MemberNominating and Compensation Committee• Joseph Kinsch,Chairman• José Ramón Álvarez Rendueles,Member• Jean-Pierre Hansen,Member• Edmond Pachura,Member* the term of all members of the Board of Directors will expire at the AnnualGeneral Shareholders’ Meeting of 2006**resigned on August 28, 200318ANNUAL REPORT ARCELOR 2003

Management Board• Guy Dollé,Chairman and Chief Executive Officer• Jacques Chabanier,Senior Executive Vice-President Purchasing, R&D, I.T.,e-Commerce, Alliance NSC• Jean-Yves Gilet,Senior Executive Vice-President Stainless Steels• Robert Hudry (1),Senior Executive Vice-President Distribution-Processing-Trading• Roland Junck,Senior Executive Vice-President Long Carbon Steels• Paul Matthys,Senior Executive Vice-President Strategy and Planning,M&A, Synergies• Guillermo Ulacia,Senior Executive Vice-President Flat Carbon Steels• Michel Wurth,Senior Executive Vice-President Finances,Management by Objectives1 23 45 6general information > corporate governance7 81Guy Dollé5Roland Junck2Jacques Chabanier6Paul Matthys3Jean-Yves Gilet7Guillermo Ulacia4Robert Hudry8Michel Wurth(1) Robert Hudry will leave the Group after the General Shareholders Meetingof April 30, 2004. He will be replaced in his management position as head ofthe Distribution-Processing-Trading sector by Gonzalo Urguijo, who wasappointed Deputy Senior Executive Vice-President of Arcelor by the Boardof Directors at its meeting of February 18, 2004.ANNUAL REPORT ARCELOR 2003 19

Report of the Chairman of the Board of Directorson Corporate Governance and Internal ControlProceduresA. Corporate Governance1. OBJECTIVESArcelor intends to merit the confidence of investors on thebasis of:• the transparency and quality of the information issued bythe Group;• the implementation of ambitious international standardsin the matter of corporate governance;• compliance with the principles of responsibility that theGroup has set for itself.2. PRINCIPLES OF ORGANISATIONArcelor is a company incorporated in Luxembourg andgoverned by Luxembourg law, in particular the law ofAugust 10, 1915, relating to commercial companies.In a desire to optimise the management processes andmake them fully transparent to all stakeholders, theBoard of Directors and the Management Board haveestablished internal rules intended to specify the operationsof the Group and establish an appropriate balancebetween the Board of Directors and the ManagementBoard. Taking its cue from the international standardsrelating to Corporate governance, Arcelor intends tomerit the confidence of investors while at the same timefurthering the future growth of the Group in the interestof all stakeholders.3. GENERAL MEETING OFSHAREHOLDERSThe legally constituted General Meeting of the companyrepresents all shareholders. It has the most extensivepowers to direct, implement or approve all actions relatedto the operations of the company.The General Meeting of shareholders is chaired by theChairman of the Board of Directors or, in his absence,by the Vice-Chairman.The Arcelor Annual General Meeting of shareholdersis held in Luxembourg at company headquarters orat any other place in the city of Luxembourg specifiedin the notice of meeting. It is held on the last Friday ofthe month of April at 11:00 a.m.All shareholders have the right to attend the GeneralMeeting or to appoint a person of their choice as theirproxy, to speak out and exercise their voting rights incompliance with the company by-laws.No minimum number of shares is required to qualify forparticipation in the General Meeting of shareholders.Every share is entitled to one vote.To the best knowledge of Arcelor, there are no shareholderpooling agreements at company level.To attend the General Meeting in person or by proxy:- shareholders recorded in Arcelor’s stock register receiveat their domicile all documents relating to the meetingand, in particular, the notice of meeting with the agendaand the proposed resolutions as well as a form thatallows them to indicate their intention to attend theGeneral Meeting in person or by proxy;- shareholders not recorded in Arcelor’s stock registermust contact the financial intermediary holding theshares for their account.20ANNUAL REPORT ARCELOR 2003

The Annual General Meeting has a quorum irrespectiveof the number of shareholders in attendance and theshares they represent. Resolutions are passed with asimple majority of the votes validly cast by the shareholderspresent in person or represented.Arcelor undertakes to follow the corporate governanceprinciples aimed at ensuring proper information for shareholdersand market transparency.Fifteen days before the Annual General Meeting theshareholders may inspect at the registered office:- the annual financial statements and the consolidatedfinancial statement;- the list of public funds, shares, bonds and other companysecurities making up the portfolio;- the management report;- the documents issued by the auditors whose report tothe registered shareholders is mandated by law.The management report, the annual and consolidatedfinancial statement as well as the aforementioned documentsissued by the auditors are sent to the registeredshareholders at the same time as the meeting notice. Allshareholders have the right, upon presentation of thestock certificate, to receive, free of charge and fifteendays before the meeting, a copy of the items mentionedin the previous paragraph.After approving the annual statements and the consolidatedfinancial statement, the General Meeting passesby special vote a resolution granting discharge to theDirectors for the performance of their duties.Furthermore, Arcelor has decided to set up an electronicvoting system for its General Meeting.When entering the meeting room, each shareholder isgiven an easy-to-use keypad allowing him to cast hisvote on any of the resolutions submitted to the meeting.The complete results are processed immediately anddisplayed seconds after the vote on each resolution.A bailiff confirms the successful outcome of the GeneralMeeting of shareholders.4. THE BOARD OF DIRECTORS ANDITS COMMITTEES4.1. The Board of DirectorsThe Board of Directors of Arcelor is composed of18 directors, all non-executive, appointed by the GeneralMeeting of shareholders, three of whom represent theemployees.It is characterised, inter alia, by its international nature,with six different nationalities represented on the Board.If a director’s seat becomes vacant, the remainingdirectors may, by a majority of the validly cast votes,elect a director who subsequently fills this seat untilthe next General Meeting of shareholders.The Board of Directors includes a sufficient number ofindependent directors to give them a significant influenceover the decision-making process. The independentdirectors enjoy total independence from the companyand its principal shareholders, which implies that:- they do not hold an executive position within thecompany;- they must not have any relationship with membersof the Management Board that could influence theirindependent judgement;- they must not represent a shareholder who owns atleast 2% of the company’s share capital;- they do not provide any goods or services to thecompany which, in the opinion of the Board of Directors,would be likely to influence their judgement.All directors are informed that they may not trade insecurities of companies in respect of which they haveinformation that has not yet been made public.The Directors act in the best interests of the company.In case of a conflict of interest relating to a mattersubmitted for the approval of the Board of Directors,the director in question advises the Chairman of theBoard beforehand if possible. He has an obligation toinform the Board of Directors accordingly. He doesnot participate in the discussion or the vote regardingthis matter. Mention of this fact is made in the minutesof the meeting. The General Meeting is to be informedas required by law.general information > report of the chairman of the board of directorsANNUAL REPORT ARCELOR 2003 21

Role and authority of the Board of DirectorsThe Board of Directors has, within the limits of the lawsand by-laws, the most extensive powers with regard tothe administration and management of the company andwith regard to the attainment of the corporate purpose.It appoints the members and the Chairman of the ManagementBoard.Without prejudice to its legal mission, the Board ofDirectors, on the recommendation of the Chairman ofthe Management Board, sets the strategic goals andthe general management plan of the company and theGroup, approves the resources for achieving thesegoals, oversees the implementation of the generalmanagement plan and the control of the company andthe Group, and reports to the shareholders.In particular, on the recommendation of the ManagementBoard, it approves:- the annual financial statements of the company and theproposed distribution of earnings,- the consolidated financial statements of the Group,- the consolidated budget projections,- the reports to be submitted to the General Meeting ofshareholders.It approves all major investments and all strategicoperations.Working proceduresThe Board of Directors elects a Chairman from amongits members, who has the powers granted by the bylawsand those granted by the Board. He representsthe Board of Directors with third parties.He maintains ongoing contact with all important shareholdersof Arcelor in consultation with the Chairman ofthe Management Board.He chairs the meetings of the Board of Directors.Among his responsibilities, the Chairman of the Board ofDirectors must evaluate the major issues submitted bythe Management Board to the Board of Directors in orderto form his own opinion.In general, the Chairman fulfils his responsibilities in thespirit of teamwork with the Management Board and itsChairman.The Board of Directors may elect a Vice-Chairman fromamong its members who has the powers granted by theby-laws and those granted to him by the Board.The Board of Directors meets six times per year and isconvened by the Chairman. Further meetings may becalled if the affairs of the company so require.If the Chairman cannot attend, the Board is chaired bythe Vice-Chairman or the most senior Director by age.The agenda for the meetings is established by theChairman of the Board in consultation with the Chairmanof the Management Board.The Chairman and the members of the ManagementBoard participate in the meetings of the Board ofDirectors in an advisory role.Other persons may be invited by the Chairman of theBoard to participate in an advisory role in the discussionon a particular point of the agenda.The Board is assisted by a secretary appointed bythe Board of Directors upon the recommendation ofthe Chairman. The Secretary of the Board attends themeetings of the Board of Directors and helps to prepareand draft the minutes. He does not have a vote.The Board of Directors has a quorum only if a majority ofits members are present or represented. Resolutions arepassed by a simple majority of the validly cast votes.However, resolutions of the Board of Directors bearingon the issuance, within the limits of the authorisedcapital, of shares or other securities that give or mayconfer the right to shares, require a two-thirds majorityof the members present or represented. In the event ofa tie, the Chairman shall cast the deciding vote.Press releases regarding annual and consolidatedfinancial statements or decisions made by the Groupare submitted to the Board of Directors for approval,after advice from the Audit Committee.For this purpose, he maintains or develops the necessaryunderstanding of the issues, challenges, developmentsand opportunities in Arcelor’s various sectors throughperiodic consultation with the Management Board andits Chairman.22ANNUAL REPORT ARCELOR 2003

Board informationIt is the obligation of the Chairman of the Board, assistedby the Secretary of the Board of Directors, to provide theDirectors with the appropriate information in preparationfor each meeting based on the circumstances and theitems on the agenda.Confidentiality of informationDirectors and any other person called to attend the meetingsof the Board of Directors are bound by secrecy withregard to any information of a confidential nature of whichthey become aware as a result of their participation insaid meetings.This obligation of confidentiality remains in force evenafter they have left their positions.Business reportIn 2003, the Board of Directors held 8 meetings withan average length of about 3 1 /2 hours. The averageattendance level of the directors was 87%.At each meeting, the Board of Directors devoted oneagenda item to Health & Safety issues at all Groupplants.The Board of Directors devoted its first session to areview of the budget for 2003. During the next threemeetings, the Board approved the annual financialstatements for the 2002 financial year as well asthe quarterly and half-yearly statements for the 2003financial year.The Board of Directors approved a stock option planfollowing the related approval by the Arcelor OrdinaryGeneral Meeting of shareholders on April 25, 2003. Itauthorised the Management Board to subscribe a level1* ADR (American Depositary Receipts) program in theUnited States and to open a syndicated line of credit,consisting of one or more tranches for a total amountof 1.5 billion euros, with the option of increasing this to2 billion euros, for a duration of up to 5 years.The Board of Directors discussed the Group’s significantacquisitions and disposals, such as the acquisition of49.9% of the assets of the steelworks at San Zeno (Italy)and the acquisition of 100% of the beam rolling mill atPallanzeno (Italy), the industrial divestments required bythe European Commission as part of the authorisationgranted by the Commission under the ECSC (EuropeanCoal and Steel Community) Treaty for the merger betweenAceralia, Arbed and Usinor, as well as the sales of theTubes and PUM Plastiques businesses.The Board of Directors also approved a joint venturewith Baosteel and Nippon Steel Corporation for theconstruction of a cold-rolling mill in Shanghai intendedprimarily to supply galvanised plates to the Chineseautomotive industry.The Board of Directors took notice of the fact that thecompetitiveness of the Flat Carbon Steels sector canonly be achieved by implementing a strategy aimed atconcentrating the liquid phase equipment in the mostefficient plants, i.e. in the so-called coastal plants thathave the most favourable production costs. It asked theManagement Board to take all necessary measures tofocus future investments on the most competitivelocations so as to safeguard the position of the Groupas a whole.The Board of Directors approved the strategic restructuringof the Stainless Steels sector aimed at consolidatingthe sector’s activities in a core business limitedto UGINE & ALZ in Europe and Acesita in Brazil. In thiscontext, it approved the project for the construction of anew steelshop upstream of the Carlam hot strip mill(Belgium).Moreover, the Board of Directors also approved somemajor new investments, such as the installationof a carbon injection system in a blast furnace atSTAHLwerke Bremen (Germany), the installation ofa secondary dust-removal system in the SIDMARsteelworks at Ghent (Belgium), the conversion ofthe electro-zinc coating line at Mardyck (France) toa galvanising line, and the transfer of the packagingsteel line (beverage cans) from the Mardyck plant to theFlorange plant (France).The Board of Directors devoted a special meeting toGroup strategy.Finally, the Board discussed a variety of subjects relatedto the general environment of the Group, SustainableDevelopment, human resources, R&D, the macroeconomicenvironment and the steel market.general information > report of the chairman of the board of directors* see management report, “Events subsequent to close”.ANNUAL REPORT ARCELOR 2003 23

4.2. The Audit Committee andthe Appointments and RemunerationCommitteeThe Board of Directors has set up two committeespursuant to corporate governance principles.4.2.1. The Audit CommitteeMissionThe Audit Committee’s mission is to assist the Boardof Directors in its duties to monitor the company and theGroup. It also examines both the individual and consolidatedannual, half-yearly and quarterly financial statements,and reviews the accounting principles as well asthe valuation rules used by the company for preparingthe aforementioned statements.MembersThe members are as follows:• José Ramón Álvarez Rendueles, Chairman• Hedwig De Koker, member• Jean-Yves Durance, member• Georges Schmit, memberWorking proceduresThe Audit Committee is convened by the Chairman atleast twice a year. It may also meet every time that twoof its members call for a meeting.The agenda for the meetings is established by theChairman.The meetings have a quorum only if at least threemembers are present.It may involve the following in its activities and/or invitethem 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;- the external auditors;- any person whose cooperation is deemed useful.It controls the work processes of the internal audit groupand may request any document and any informationthat it deems useful or necessary for the performance ofits mission.The proceedings of the Audit Committee are recordedin the minutes drawn up by the Secretary and signedby the four members of the Audit Committee and theSecretary.Activity ReportIn 2003, the Audit Committee met 8 times. The averageattendance level of the members was 97%.During its meetings it:- analysed the proposed allocation of the negativegoodwill generated during the formation of the Arcelorgroup in February 2002;- reviewed the consolidated budget for 2003;- analysed the quarterly, half-yearly and annual statementsof the Group that contain major non-recurringitems affecting the consolidated results for 2003;- approved Arcelor’s “Business Risk Control” charterwith the understanding that the implementation will begradual and based on the specific characteristics of thesectors with, however, a methodology that is commonand unique to the Group. It should be noted that theconcept of “Business Risk Control” as defined by Arcelorcovers not only internal audit but also risk management,and that its ultimate goal is to protect the interests ofthe stakeholders and to assist the Group in achievingits objectives by providing the relevant assurances andadvice in an independent and objective manner;- discussed the work organisation and planning for 2003in the “Business Risk Control” department;- determined the status of the relations between theGroup and its auditors KPMG Audit;- studied the functioning of the “Corporate Bank”;- noted the major risks for the Group identified by theManagement Board.At the end of every meeting of the Audit Committee, theChairman presented a verbal report to the Board ofDirectors that was recorded in the minutes of the Board.24ANNUAL REPORT ARCELOR 2003

4.2.2. The Appointments and RemunerationCommitteeMissionThe primary mission of the Appointments and RemunerationCommittee is to recommend to the Board of Directorsthe remuneration policy for the members of the ManagementBoard and the appointment of new directorsand members of the Management Board. It is informedby the Chairman of the Management Board with regardto remuneration policies and remuneration packages forsenior executives of the Group.MembersThe members are as follows:• Joseph Kinsch, Chairman• José Ramón Álvarez Rendueles, member• Jean-Pierre Hansen, member• Edmond Pachura, memberWorking proceduresThe committee meets once a year. It may also meetwhenever its Chairman calls for a meeting.The meetings have a quorum only if at least threemembers are present, including the Chairman.It may involve or invite to participate in the meetings theChairman of the Management Board or any other personwhose cooperation is deemed useful.Activity ReportIn 2003, the Appointments and Remuneration Committeemet 6 times. The attendance level of its members was87.5%.During its meetings, the Appointments and RemunerationCommittee:- studied the executive remuneration scheme submittedto the Board of Directors for approval, based on threeelements: fixed remuneration, a variable componentlinked to the management by objectives process, astock option plan;- analysed the details of the stock option system forsenior executives which was approved by the GeneralMeeting of shareholders on April 25, 2003 on the recommendationof the Board of Directors;- examined a proposal for an employee shareholderplan intended to cover all employees of the Group andproposed that the Management Board be requestedto obtain the views of the European Works Council priorto any decision.At the end of every meeting of the Appointments andRemuneration Committee, its Chairman presented averbal report to the Board of Directors that was recordedin the minutes of the Board.5. THE MANAGEMENT BOARDMembersThe Chairman of the Management Board and themembers of the Management Board are appointed bythe Board of Directors on the recommendation of theAppointments and Remuneration Committee.As at December 31, 2003, the Management Boardconsisted of the following members:• Guy Dollé,Chairman of the Management Board, CEO• Jacques Chabanier,Senior Executive Vice-President Purchasing, R&D,Information Technology, e-Commerce, Alliance withNippon Steel Corporation• Jean-Yves Gilet,Senior Executive Vice-President Stainless Steels• Robert Hudry,Senior Executive Vice-President Distribution-Processing-Trading• Roland Junck,Senior Executive Vice-President Long Carbon Steels• Paul Matthys,Senior Executive Vice-President Strategy and Planning,M&A, Synergies• Guillermo Ulacia,Senior Executive Vice-President Flat Carbon Steels• Michel Wurth,Senior Executive Vice-President Finance, Managementby Objectivesgeneral information > report of the chairman of the board of directorsANNUAL REPORT ARCELOR 2003 25

AuthorityThe powers of the Management Board are defined bythe Board of Directors. By delegation of the Board ofDirectors, the Management Board has the powers to:- define and oversee the strategic objectives and generalmanagement plan of the company and the Group, to besubmitted to the Board of Directors for a decision afterconsultation with the Chairman of the Board;- define the policies and resources aimed at implementingthis strategy; all decisions other than those relatingto day-to-day management must be submitted to theBoard of Directors for approval;- implement and control decisions with oversight ofperformance and results.MissionsThe Management Board is a collegial body that sharescommon values and embodies a strong sense of groupidentity and philosophy.Within the framework of the powers delegated by theBoard of Directors, the Management Board:- is responsible for the performance of the Group and itsoperating sectors;- oversees the use made of the industrial, financial andcommercial convergence and synergies within andbetween the operating sectors;- appoints top-level management for the principalcompanies of the Group;- handles relations with the public and EU authoritiesand with the national and international professionalassociations;- is responsible for the coordination of public relationsand ensures compliance with the Group’s corporateidentity;- recommends, for the consideration of the Board ofDirectors: the annual statements of the company andthe recommendations regarding the distribution ofearnings, the consolidated financial statements of theGroup, the consolidated budget forecasts, the reports tobe submitted to the General Meeting of shareholders.Ethics guidelinesThe members of the Management Board adhere tothe highest standards in terms of business conduct andprofessionalism and assist each other in achievingthese goals.6. REMUNERATION6.1. Board of DirectorsTotal remuneration (1) in 2003:EUR 1,665,000including EUR 1,200,000 directors’ emolumentsand EUR 465,000 in directors’ fees.The Chairman of the Board participates in a stock optionplan set up by the company with 50,000 options.6.2. Management BoardThe remuneration of the Chairman and the membersof the Management Board of Arcelor is determinedby the Board of Directors upon recommendation fromthe Appointments and Remuneration Committee.Remuneration structureThe remuneration of the Chairman and the members ofthe Management Board is made up as follows:- fixed annual remuneration;- a bonus linked to performance;- stock options.The directors’ fees received by the Chairman and themembers of the Management Board for their dutieswithin Arcelor have been returned to the company.(1) Including remuneration for the members of the Board committees.26ANNUAL REPORT ARCELOR 2003

• Fixed annual remunerationFixed annual remuneration is determined on a net basisafter social security charges and standardised taxesin order to take into consideration the countries in whichthe CEO and Senior Executive Vice Presidents dobusiness and reside.• BonusThe bonus of the Chairman and the members of theManagement Board is determined according to thefollowing guidelines:- one half of the bonus is linked to the return on capitalemployed and the free cashflow for the financial year;- the other half of the bonus is linked to the movingaverage of the same indicators over the previous threeyears.An individual coefficient is then applied in order toaccount for the degree to which each Director hasreached his individual targets. The coefficient appliedis between 0.8 and 1.2.The maximum amount of the bonus before applyingthe individual coefficient is 50% of the net annualremuneration.• Stock optionsThe Chairman and the members of the ManagementBoard benefit from a 5-year stock option plan approvedby the general meeting of shareholders on April 25, 2003and enacted by the Board of Directors on May 15, 2003.The number of options granted each year is decidedby the Board of Directors. The first allocation took placein 2003.The remuneration received by the Management Boardin 2003 was as follows:Gross annual Gross annual Stock optionsremuneration bonus ** 2003EUR EUR EURGuy Dollé 592,500 190,000 50,000Other members (7)* 2,955,000 524,000 280,0007. AUDITORIn accordance with the Luxembourg law on commercialcompanies, the consolidated financial statements andthe individual company statements are certified by anauditing firm that examines the accounts, the method ofpreparation and the Internal Control Procedures.Following an open bidding process, on the recommendationof the Board of Directors, the General Meetingof shareholders held on April 26, 2002 appointed theauditing firm KPMG Audit as auditor for Arcelor. Its termwill expire at the General Meeting of shareholders thatwill vote on the accounts for the 2004 financial year.8. DUAL-SIGNATURE PRINCIPLEThe company has opted for the dual-signature principlein matters of company representation. Notwithstandingthe representation authority conferred by law on theBoard of Directors, the company is liable toward thirdparties only with the joint signature of two holdersof power of signature. All holders of power of signatureare designated by the Board of Directors, which alsodetermines the extent of such power.general information > report of the chairman of the board of directors*Messrs. J. Chabanier, J.Y. Gilet, R. Hudry, R. Junck, P. Matthys, G. Ulacia, M. Wurth.**This is the 2003 bonus linked to the results in the 2003 financial year. The bonus for 2003 linked to the moving average of the previous three years will bepaid in 2004 (average 2002, 2003, 2004). Given the recent creation of Arcelor, this formula was chosen for the first few years.ANNUAL REPORT ARCELOR 2003 27

B. Internal Control Procedures1. GOALSInternal control is an integral part of the corporategovernance strategy of the Arcelor group.The Internal Control Procedures involve assisting themanagement of the Group in identifying and managingrisks by putting at its disposal a reference tool for riskmanagement and by verifying compliance with this tool.The purpose of internal control is to ensure:• compliance with all laws, regulations, standards,internal rules, contracts;• the protection and preservation of the Group’s assets;• the exercise of optimal control over the sectors andcompanies within the Group;• the reliability and integrity of the accounting system andthe financial and operational information;• the implementation and optimisation of the objectives;• the prevention and management of risks that mightprevent implementation of the objectives.2. ORGANISATIONAL PRINCIPLESThe organisation of the Arcelor Group is characterisedby the principle of subsidiarity. The Management Boardformalises and communicates its vision for the companyand oversees its implementation. It is assisted byCorporate in its strategy, management and governancefunctions.The elements of this vision include Arcelor’s Principles ofResponsibility. Drawn up by several Group executive andtop-level management teams, they have been confirmedby the Management Board and widely distributed tomid-level executives and managers. This distribution willbe extended to all Group employees during 2004.In accordance with the principles laid out above, theresponsibility for the design and implementation of aninternal control mechanism and procedures rests withthe Management Board as delegated by the Board ofDirectors. In addition, the organisation, application andmonitoring of these Internal Control Procedures and,therefore, risk management, are the responsibility of theoperating sectors.Since the general approach of the Arcelor group in thematter of internal controls is based on the risk managementprocess, the Group devised a specific actionplan in this area. This action plan is characterised by theimplementation of a continuous process, the “BusinessRisk Control (BRC)” process, the purpose of which is toassist the various persons responsible for operations atall levels of the Group to progressively adopt the bestinternal control practices to deal with the risks thatthreaten the business for which they are responsible. Inoutline, the BRC process can be described as a seriesof activities designed to:- periodically identify the level of risk inherent in thevarious business activities in cooperation with theoperating sectors, taking into consideration theexisting internal control mechanism (internal controlmapping);- design, together with the Group’s specialists, thehomogeneous manual of best practices for the internalmanagement of the risks inherent in the various processes(internal control engineering);- make the manuals available to the operating personnelfor them to internalise (internal control distribution);- periodically verify, independently, compliance with themanuals by the operating personnel (internal controlreview);- provide an independent opinion to management andthe Audit Committee of the Board of Directors regardingthe overall level of internal control given the risks inherentin the various activities (internal control communication).28ANNUAL REPORT ARCELOR 2003

3. INTERNAL CONTROL OPERATINGPROCEDURESRegarding the specific operation of the Arcelor groupinternal control mechanism, it should be noted thatthe various corporate departments have defined a setof rules, internal directives, and procedural methodscovering in particular the areas of finance, accounting,management control, fiscal control, legal, human relations,health and safety, environment, communications, internalaudit and risk management, which are implementedthroughout all sectors and companies of the Group, andare regularly updated.One example is the internal control and risk managementsystem for the following processes:3.1. Legal internal control proceduresThe control performed by the Arcelor Legal Departmentover the activities of Arcelor and its subsidiaries is derivedfrom the Group’s general organisational principles and,in particular, from the definition of the general mission ofthe legal function at Arcelor.In order to optimise coverage of the legal risks andcontribute to the growth of the Group, the internal controlsystem implemented by the Legal Department includesthe following procedures:- all major contracts creating liability for companies withinthe Group must be approved by the Legal Department;- in the event of a new dispute or the risk of a dispute,Group companies must refer the matter to the LegalDepartment, which will determine the strategy to befollowed in each case;- more specifically, the Legal Department will reviewany ongoing disputes exceeding 500,000 euros in alitigation report that is updated every 6 months;- any use of legal subcontracting (lawyers, outsidecounsel) must be communicated in advance to theLegal Department which will advise on the appropriatenessand the modalities of such use;- legislative or regulatory developments that could haverepercussions on the activities of the Group are constantlyreviewed by the Legal Department, which will take theappropriate measures if necessary;- a team dedicated to monitoring the Group’s subsidiariesand holdings carries out a review of the legal documentationit receives with regard to corporate law and the structureof the operations, and corrects any anomalies detected.3.2. Internal control procedures forGroup financingThe allocation of financial resources within the Arcelorgroup is carried out under the control of a FinancingCommittee composed of:- the Senior Executive Vice-President Finance (CFO);- the heads of Finance, Management Control, Mergers& Acquisitions and Group Operations;- representatives of the sectors on a case-by-case basis.The role of this Financing Committee, clearly defined inthe internal procedures approved by the ManagementBoard and submitted to the Audit Committee of the Boardof Directors, is to:- allocate financial resources to Group companies and todetermine the terms and conditions thereof;- review the balance sheet structure of the companies;- approve the financial operations decided by the sectorsand business units.The Financing Committee met 15 times during 2003and approved the allocation of EUR 3.5 billion in capitalresources, long-term loans or short-term lines of credit.Every lending or borrowing operation is subject to awritten contract. Any utilisation of short-term lines ofcredit with Arcelor Treasury SNC is continually computermonitored.All financial operations are systematically subject to anAFO – Authorisation for Financial Operation.The decision-making level is defined in the proceduresand every decision is included in the monthly financialreporting.general information > report of the chairman of the board of directorsANNUAL REPORT ARCELOR 2003 29

3.3. Internal control procedures governingthe preparation and processing ofaccounting and financial informationThe consolidated quarterly financial information is producedby the Accounting Department on the basis of a generalcalendar that takes into account the requirements of themarkets on which the Group is listed (target date) andthe process of internal validation and approval within theGroup (Management Board, Audit Committee, Board ofDirectors, General Meeting of shareholders).The tracking and processing of the accounting informationcollected from the consolidated entities is organised onthe basis of a division of labour between the local entitiesthat are responsible for the reporting package, includingall restatements to ensure conformity with the Group’saccounting standards, and the Accounting Departmentwhich handles the review and ensures that all informationis included in the consolidated accounts.In this respect, since mid-2003 the local entities haveattested to their assumption of responsibility in respectof the completion of the reporting packages for eachquarterly closing in compliance with the Group’s accountingguidelines and procedures by means of a letter ofdeclaration sent to the Senior Executive Vice-PresidentFinance.The Group has chosen a single, centralised informationsystem that is common to all accounting and managementcontrol departments for the preparation of the consolidatedquarterly information and the monthly reporting indicators.This software package is used by most large Europeangroups. It allows for integrated, standardised, securedand totally automated data reporting and processing.The consolidated quarterly reporting is prepared withina consistent procedural framework that includes thereference documents made available throughout theGroup (GRCM – the Reporting and ConsolidationManual detailing all of the Group’s accounting andvaluation rules; the Information System User’s Manual)and annual training programmes designed for the localentities.To complement this general process, the ManagementBoard decided in 2003 to set up a Group AccountingCompliance team located within the AccountingDepartment, whose objective is to define and developa standardised, secure accounting environment for theconsolidated financial statements. To this end, the GroupAccounting Compliance team has established a networkof expertise (local experts) whose role is to roll outthe communication and application of the accountingpolicies adopted by the Group. This network will be infull operation by 2004.The Accounting Department cooperates fully, in all itsfunctions, with the many other internal departments.Some work is recurring as part of periodic crossreporting (with the departments of Management Control,Taxation, Legal, Treasury and Human Resources) orperiodic based on current projects, for example with theMergers and Acquisitions Department.The Group’s consolidated financial statements aresubject to a six-monthly review by the outside auditorsin compliance with Luxembourg law and market regulationsin force in the countries where Arcelor is listedfor trading.30ANNUAL REPORT ARCELOR 2003

3.4. Internal control procedures forManagement ControlThe work of Group Management Control is guided by itsmain objectives, namely:- the collection, analysis and explanation of the resultsachieved, compared with the objectives set for both theArcelor group and its principal components;- forecasts for short and medium-term developments;- recommendations for corrective actions.As discussed above, the Group has chosen a single,centralised information system so that the ManagementControl Department prepares its reports from the samedatabase as is used for the consolidation reporting. Theactions taken by Management Control are documented,in particular through the implementation of the followingprocedures:- procedure for preparing and approving the annual budget;- procedure for monthly reporting, including analysis ofvariances and calculation of efficiency savings;- procedure for quarterly forecasts;- procedure for monitoring the working capital requirement;- procedure for authorising industrial investments.4. EVALUATION OF INTERNAL CONTROLPROCEDURESThe evaluation of the relevance of and compliance withthe Internal Control Procedures is carried out by the“Business Risk Control (BRC)” function.The BRC’s mission is to provide independent and objectiveassistance to the operating personnel in reducing risksthrough internal control. In this context, it evaluatesthe relevance and effectiveness of risk management todetermine whether the controls instituted by managementand the operating personnel provide reasonableassurance that the objectives of the Group will be met.The mission and the modalities of the BRC process havebeen formalised in the BRC charter that includes theGroup’s entire organisation. It has been approved by theManagement Board and the Audit Committee of theBoard of Directors and is based on compliance with theInternational Standards for the Professional Practice ofInternal Auditing and the Code of Ethics issued by theInstitute of Internal Auditors (IIA).The implementation of the BRC process is based onthe application of a unique methodology and policy thatare applied to the entire Group, and its activity is carriedout on the basis of an annual BRC plan approved bythe Management Board and submitted to the AuditCommittee of the Board of Directors, both of which alsomonitor implementation.The Group BRC department is responsible to theManagement Board and the Audit Committee of theBoard of Directors for the entire process. It reportsdirectly to the Chairman of the Management Board andis assisted in its tasks by four BRC managers in theoperating sectors with whom it has a very strongfunctional link.general information > report of the chairman of the board of directorsANNUAL REPORT ARCELOR 2003 31

Information regarding capital, market information,and financial information policyInformation about the share capital of ArcelorAuthorised capitalThe authorised capital, including the issued share capital,amounts to 5,000,000,000 euros. The unsubscribedportion of the authorised capital may be issued by theexercise of conversion or subscription rights alreadygranted by Arcelor.Change in share capitalArcelor was incorporated on June 8, 2001 with a sharecapital of 32,250 euros.On February 15, 2002, Arcelor issued 516,215,823 newshares in exchange for the shares of Aceralia, Arbed andUsinor stock tendered during the initial Public Offers ofExchange for these companies and in consideration forthe 1,561,668 shares of Arbed stock tendered by StaalVlaanderen N.V.In compliance with the applicable regulations, Arcelorsubsequently reopened the offer for Arbed in Luxembourgand Belgium, and the offer for Usinor in France, with theterms of the offer remaining unchanged.On March 18, 2002, Arcelor issued 12,138,238 additionalnew shares in exchange for the Arbed and Usinor sharestendered during the reopening of the Public Offers ofExchange for Arbed and Usinor shares, and in considerationfor the 297,354 Aceralia shares tendered by ArbedEspaña BV.258,985 new shares in exchange for 258,985 Usinorshares; on July 9, 2003, 102,685 new shares in exchangefor 102,685 Usinor shares; and on October 9, 2003,208,534 new shares in exchange for 208,534 Usinorshares.On December 31, 2003, the subscribed share capital ofArcelor amounted to 2,665,203,980 euros and consistedof 533,040,796 shares without indication of a nominalvalue, all fully paid up.In order to optimise the balance sheet structure andreduce the cost of its debt, Arcelor decided to redeemthe 3% O.C.E.A.N.E. bonds maturing January 1, 2006ahead of schedule, as the conditions for implementingthis redemption had been met. At the end of December2003, these O.C.E.A.N.E. bonds represented 350 millioneuros of debt. The O.C.E.A.N.E. holders had the right toexchange bonds against shares until March 11, 2004(included), served in this case by delivering existingtreasury shares, carrying beneficial rights from January 1,2004.At the end of this offer, which increased the consolidatedequity capital of the Group, 22,490,577 O.C.E.A.N.E.bonds, representing 81.05% of the initial issue, wereexchanged for shares.On August 5, 2002, Arcelor issued 3,351,776 newshares in exchange for the Usinor shares tenderedduring the Public Offer of Withdrawal by Exchange forall Usinor shares still in circulation. Subsequently,the Usinor shareholders were able to exercise theirexchange options. In this context, on August 22, 2002,Arcelor issued 414,939 new shares in considerationfor 414,939 Usinor shares; on November 6, 2002,239,183 new shares in exchange for 239,183 Usinorshares; on January 9, 2003, 104,183 new shares inexchange for 104,193 Usinor shares; on April 9, 200332ANNUAL REPORT ARCELOR 2003

Date Number of shares Capital operationsJune 8, 2001 25,800 Creation of Newco, later ArcelorDecember 11, 2001 6,450 Review of the book value bythe Extraordinary General Meeting of shareholdersFebruary 15, 2002 499,434,342 Public offer of exchange for Aceralia, Arbed andUsinor sharesFebruary 15, 2002 516,222,273 Tender of Arbed shares held by Staal Vlaanderen NVMarch 18, 2002 528,360,511 Reopening of the POE for Arbed and Usinor andtender of Aceralia shares by Arbed España BVAugust 5, 2002 531,712,287 Public offer of withdrawal by exchange for Usinor sharesAugust 22, 2002 532,127,226 Contribution of Usinor sharesNovember 6, 2002 532,366,409 Contribution of Usinor sharesJanuary 9, 2003 532,470,592 Contribution of Usinor sharesApril 9, 2003 532,729,577 Contribution of Usinor sharesgeneral information > information about the share capital of ArcelorJuly 9, 2003 532,832,262 Contribution of Usinor sharesOctober 9, 2003 533,040,796 Contribution of Usinor sharesShare capital distributionTo the best knowledge of the Board of Directors, theprincipal shareholders as at December 31, 2003 were:Shareholder %Luxembourg State 5.9%ARISTRAIN 4.1%Walloon region (SOGEPA) 3.8%Employees 2.6%Flemish region (Staal Vlaanderen) 2.4%EDF 1.7%BGL+BGL IP 0.8%Others (*) 78.7%TOTAL 100.0%* including treasury sharesANNUAL REPORT ARCELOR 2003 33

Market informationListingArcelor shares are listed on the Luxembourg StockExchange, on the Premier Marché of Euronext Brussels,on the Premier Marché of Euronext Paris and on thestock exchanges of Madrid, Barcelona, Bilbao andValencia.IndicesArcelor entered the CAC 40 index on November 21,2003, enhancing the visibility and actractivity of thestock for investors and shareholders. Arcelor is also partof the Euronext 100, the FTSEurofirst 80, IBEX 35,LuxX and SBF 120 indices and the socially responsibleFTSE4Good Europe index.Share price evolutionThe initial listing of the Arcelor share was on February 18, 2002. The share prices in euros on Euronext Paris S.A. overthe past 18 months fluctuated as follows:Closing Maximum Minimum Average daily Average dailyaverage closing share closing share volume (number share capitalprice price of shares traded) tradedin EUR thousandsSeptember 2002 11.33 12.50 10.00 1,836,594 21,057October 2002 10.45 11.50 8.40 2,236,569 22,978November 2002 11.63 13.20 10.90 1,790,975 20,737December 2002 12.18 13.21 11.65 1,524,645 18,731January 2003 11.66 12.50 9.80 1,886,828 21,671February 2003 9.54 10.52 8.28 1,658,212 15,690March 2003 8.60 9.22 7.87 1,930,490 16,556April 2003 9.19 10.24 8.00 2,984,678 27,455May 2003 9.65 10.35 9.03 2,014,710 19,548June 2003 9.95 10.43 9.35 1,822,062 18,125July 2003 11.44 12.02 10.04 2,922,214 33,172August 2003 11.71 12.40 11.20 2,284,478 27,034September 2003 11.76 12.48 10.44 2,577,381 30,109October 2003 11.44 12.27 10.29 2,668,723 30,386November 2003 13.01 13.70 12.13 4,427,826 58,180December 2003 13.46 13.82 13.06 2,608,444 35,092January 2004 14.20 14.99 13.45 3,097,831 44,138February 2004 14.64 15.26 14.11 3,854,355 56,71034ANNUAL REPORT ARCELOR 2003

Share price evolution between February 18, 2002 and February 27, 2004Index 100=February 18, 20021251007550ArcelorCAC 40MSCI Metalsand MiningEurostoxx5002/02 04/02 06/02 08/02 10/02 12/02 02/03 04/03 06/03 08/03 10/03 12/03 02/04general information > market informationOther securities providing access to capitalMarket for Arcelor securities – evolution of the trading prices of Arcelor bonds (O.C.E.A.N.E.)Average quarterly trading price (in euros) O.C.E.A.N.E. 2005 O.C.E.A.N.E. 2006 O.C.E.A.N.E. 2017June - August 2002 20.18 14.87 18.66September - November 2002 20.06 14.13 18.30December 2002 - February 2003 20.15 13.57 18.97March - May 2003 20.03 13.97 18.74June - August 2003 20.52 14.57 19.63September - November 2003 20.71 14.95 19.95December 2003 - February 2004 20.60 15.06 20.61ANNUAL REPORT ARCELOR 2003 35

Information policyArcelor intends to provide clear, regular, transparentand even-handed information to all individual andinstitutional shareholders.To meet this objective and adapt this information tothe needs of all parties, Arcelor has developed anactive communications policy through a multitude ofinformation media: meetings with shareholders, lettersto shareholders, meetings with institutional investorsand financial analysts, teleconferences, developmentof an Internet site www.arcelor.com, etc.On November 6, 2003, Arcelor received the Prize forFinancial Information, a prize awarded annually by Ujjef(Union des journalistes des journaux d’entreprise deFrance). Under the patronage of the French Prime Minister,Ujjef recognised Arcelor for the quality of its financial andeconomic reporting, for the educational dimension of theinformation provided and for the clarity of its 2002 annualreport.In its desire to provide quality financial information Arcelorparticipates in the NextPrime segment of Euronext. TheNextPrime segment brings together all listed companiesof the traditional industries that choose to make a specialeffort in terms of financial information.Arcelor thus joins a circle of companies that wish toincrease their visibility with investors by undertakingto respect the supplementary guidelines for financialinformation.In this way, Arcelor demonstrates its willingness to serveas an example in terms of financial transparency in linewith the best international standards.Institutional investorsArcelor is developing ongoing relationships with financialanalysts and European and international investors.Teleconferences with analysts are organised whenresults are published. Meetings with investors are alsoorganised throughout the year.In 2003, Arcelor management met with over 350 investorsin Europe, North America and Asia.Coverage of Arcelor by brokerage institutions has resultedin 144 publications about the company.Individual shareholdersIn order to have direct contact with individual shareholders,Arcelor participates to financial exhibitions andorganises shareholders meetings. In 2003, Arcelorparticipated in 6 exhibitions and organised two shareholdermeetings that brought together almost 2,000individual shareholders who had the opportunity to talkpersonally with Guy Dollé, Chairman of the ManagementBoard of Arcelor, and Michel Wurth, Senior ExecutiveVice-President Finance, Management by Objectives.Financial information calendarApril 30, 2004General Meeting of shareholdersMay 10, 2004 First-quarter results for 2004July 29, 2004 Half-year results for 2004November 15, 2004 Third-quarter results for 2004Person in charge of investor information:Martine Hue, Senior Vice President, Head of InvestorRelationsTel: 00 352 47 92 24 14Fax: 00 352 47 92 24 49Telephone numbers for shareholders:Toll-free number: 00 800 4792 4792Spain: 00 34 902 152 153France : 00 33 (0) 1 41 25 98 98Internet : www.arcelor.comE-mail : investor.relations@arcelor.com36ANNUAL REPORT ARCELOR 2003

ANNUAL REPORT ARCELOR 2003 37general information > information policy


PART IIPresentation ofthe activities of the Grouptable of contents >Flat Carbon SteelsLong Carbon SteelsStainless Steels, Alloys and Special PlatesDistribution-Processing-TradingOther activitiesp40p46p50p56p60ANNUAL REPORT ARCELOR 2003 39

table of contents >Flat Carbon Steels1. Strategy p412. Organisation of the sector p413. The sector’s products and markets p423.1 Automotive p423.2 The General Industry division p423.3 Packaging steels p444. Research & Development Policy p4540ANNUAL REPORT ARCELOR 2003

Flat Carbon Steels1. STRATEGYBased principally upon an integrated industrial system(producing steel products from iron ore), Arcelor’s Flat CarbonSteels sector is the leading supplier of flat carbon steels tothe automotive, domestic electrical appliance, packaging,general and construction industries.The strategy of the Flat Carbon Steels sector is basedon the optimisation of the cost-customer ratio, theobjective being to increase the value for customerswithin the context of cost control. On the financial level,this policy resulted in 2003 in the adoption of strategiesthat define the optimal industrial configuration to beattained. At the same time, the segmented marketapproach was reinforced by adapting the commercialstructure and setting up appropriate logistics chains foreach market segment.Also, in a desire to maintain margins, the Group hasgiven priority to price over volume, thereby enhancingthe quality of its products and services.This overall strategy is supported by an ambitiousresearch and development policy. In order to better meetcustomer expectations, the Flat Carbon Steels sectorconcentrated its R&D activity on three multidisciplinaryresearch centres focusing on the major markets: automotive,general industry and packaging. A fourth centrefocuses on the optimisation of industrial processes.A fifth centre specialising in the applications of artificialintelligence to the steel industry should be establishedsoon in Spain.In respect of environmental matters, the Flat CarbonSteels sector pursues an active policy of plant certification.By the end of 2003, 91% of the sector’s plantswere ISO 14001 certified. Significant investment hasbeen devoted to reducing air pollutants at the variousproduction sites.2. ORGANISATION OF THE SECTORThe Flat Carbon Steels sector optimises its results atsector level, but is structured into six business units froman industrial point of view. Five reflect the geographicorganisation of the production centres: the North businessunit operates in Germany and the Flemish Regionof Belgium; the Wallonia business unit covers theWallonian Region of Belgium; the Centre business unitcovers the northern and eastern part of France; theSouth business unit covers the southern part of France,Italy and Spain; the Brazil business unit covers thesector’s activities in that country. The sixth business unit,Arcelor Packaging International (API), is dedicated to thepackaging industry.activities of the Group > flat carbon steelsThe Flat Carbon Steels strategy also reflects the majorvectors of sustainable development implemented byArcelor. Safety is therefore a priority issue for the sector.Important measures have been taken to reduce thenumber of accidents involving employees of the sectoras well as subcontractor personnel, and a reliabilityprogramme has been developed in order to optimise theproduction process with regard to personal safety.The strategies defined by Arcelor’s Board of Directorsin January 2003 emphasise the concentration of thesector’s future investments in European blast furnaceupgrades (upstream manufacturing process facilities)on the best-performing sites, i.e. the coastal sites, whileat the same time reaffirming the need to have efficient“downstream” facilities in proximity to customers.ANNUAL REPORT ARCELOR 2003 41

Within this context, and in order to assist the Group’scustomers with their international growth plans and tobe able to supply them anywhere in the world withidentical products meeting the same standards ofquality irrespective of the country, industrial partnershipshave been developed, notably with Tata Steelin India, Bao Steel and Nippon Steel Corporation inChina, Severstal in Russia, Borcelik in Turkey, Dofascoin Canada as well as Gestamp and Magnetto in Europeand South America.At the commercial level, Arcelor’s Flat Carbon Steelssector is organised into two divisions. The first specialisesin the automotive industry, while the second is dedicatedto general industrial customers. These two teams usea common network of sales offices located in more than20 countries.Within the General Industry division, sales are organisedby segments: distribution, domestic electrical appliances,construction and general industry, with metal processingand the primary processing industry.3. THE SECTOR’S PRODUCT ANDMARKETS3.1. AutomotiveThe Flat Carbon Steels sector offers the automotiveindustry a complete range of products and services:coils, coated products, finished products, formed andwelded blanks, but also technical assistance and adviceduring the vehicle design stage and when the steel isprocessed. Arcelor Auto handles the distribution. ArcelorAuto has a worldwide presence in order to meet theglobalised demand of carmakers and first-tier subcontractors.Arcelor Auto operates primarily as an interfacebetween entities of the Arcelor group and their customers(notably in Europe and Brazil), but also with certain Arcelorjoint venture subsidiaries (Borcelik in Turkey, Severgalin Russia, and Dosol in Canada).Arcelor Auto works closely with carmakers, starting atthe vehicle design stage. Resident engineers are placedat the disposal of the carmakers at their design centres.Technical support engineers assist in the developmentand manufacturing phases in order to facilitate theprocessing of the steel. Arcelor Auto also defines andpursues an extensive product research and developmentprogramme so that it can continually put forwardnew solutions that are both economical and efficient.Arcelor Auto has a 14% share of the world market, witha very strong position in Europe. Its market share outsideEurope varies from 3 to 15%, depending upon geographicregion, with substantial opportunities for growth.3.2. The General Industry divisionConstructionIn the construction market, the Flat Carbon Steels sectoroffers its customers all the advantages of an internationalplayer: a large number of production and processingplants, a broad range of products, extensive experiencein high added value products (prepainted plates, highyield steels). While continuing to concentrate on the roofing/cladding segment and interior fit-out, in cooperation withArcelor BCS (Building and Construction Support) it isdeveloping new lines of activity (garage doors, lightingcolumns, swimming pools, etc.) and new niche productssuch as skin plates (plastic film coatings) or very thickgalvanised plates.DistributionThe first objective for the Distribution segment in 2002and 2003 was to stabilise the order book, standardisesales terms, and optimise the product/customer mixto improve the return on capital employed. For strategiccustomers, who use both full-width and processedproducts, a special cooperation procedure was set upbetween the Flat Carbon Steels sector and the Distribution-Processing-Tradingsector, for the joint handlingof all services to the customers concerned.42ANNUAL REPORT ARCELOR 2003

Domestic electrical appliancesThe range of steels for domestic electrical appliancescovers all appliance casing structure parts. A newapproach combining commercial and technical knowhowmakes it possible to better meet the needs ofEuropean domestic electrical appliance manufacturerswith a complete range of products: steel for enamelling,metallic-coated steel, and high-gloss prepainted steel.Engineering, industrial packagingThe new organisation of the engineering/industrialpackaging segment within the sector is designed toimprove customer service. The segment has been dividedinto sub-segments that take into account the specificnature of the products: radiators, barrels, industrialshelving, tanks, gas bottles, etc.The Flat Carbon Steels sector offers industrial customersa broad range of products from very high yield steels forcranes, off-road construction equipment and road trailerswith very high buckling properties, through qualities forheat treatment, and oil industry applications. Dependingon the applications, these steel products can be supplieduncoated or with metallic or organic coatings. For electricmotors, the sector has readied itself to meet the demandfor steel grades for the manufacture of electric motorswith low energy consumption and starter-alternators thatwill be installed in vehicles of the future.Geographic markets of the General IndustrydivisionThe European Union (EU15) is the primary market for theGeneral Industry division of the Flat Carbon Steelssector, which has a market share of around 30%. Thegoal is to stabilise that position in terms of both volumeand price.The enlarged Europe of 25 countries represents apromising market with anticipated growth in the newEuropean countries of about 6 to 8%. Arcelor wishesto strengthen its presence in Central and Eastern Europeancountries, both at the industrial and commerciallevel.In North America, following the protective measurestaken by the USA, the volume transacted by the sectordeclined by about 50% compared to 2001. The normalisationof trade relations with this market should enableArcelor to return to the levels of 2000-2001, of aboutone million tonnes per year.As a counterbalance to the American effect, the Grouphas taken full advantage of the growth of the Chinesemarket, albeit with lower profitability due to the dollar’sfall against the euro. Commercial relations with China willbe pursued only at acceptable levels of profitability.activities of the Group > flat carbon steelsANNUAL REPORT ARCELOR 2003 43

3.3. Packaging steelsThe packaging steels business is handled by ArcelorPackaging International (API), a dedicated businessunit. API is the world leader in steels for the packagingindustry in terms of both volume (11% share of theworld market) and the technological sophistication ofits applications.API is number one in Europe with 37% market share(representing 85% of its production) and benefits fromgood distribution of production and sales throughoutthe continent.API supplies packaging manufacturers with steelproducts 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: beverage cans, shapedcans, 2 and 3-piece cans, caps and crown corks, topsand easy-open tops, aerosols, industrial cans anddecorative packaging.2003 was marked by the disruption in the beverage canmarket with the introduction in Germany of a depositon non-reusable packaging. The beverage can marketcontinued to grow in the other European countries,particularly in Spain and the countries of Eastern Europe.Steel consumption in the other steel packaging segmentswas varied: an increase in aerosols and closureapplications, a decline in industrial applications, andstability in food products.API was able to maintain its market share in Europe inthe context of a complex situation for the industry as awhole.API has three production centres. Two service centreslocated in Italy and Turkey and a varnishing (printing)unit complete the organisation.The production sites have developed specific know-how.The expansion of API resulted in splitting the productionfor the major applications between North and South withthe aim of optimising logistics, while niche productionwas concentrated in a single specialised plant.In 2003, Arcelor commissioned a new wide line for steelfor beverage cans at Avilés that will make it possible tosupport the growth of this market in Southern Europe.In a mature market threatened by competing materials,the strategy of Arcelor Packaging International is toincrease its own profitability as well as the profitabilityof the segment by defending its position and, togetherwith its customers, promoting the use of steel forpackaging by launching new products on the market.API is listening to the needs of the players throughoutthe entire supply chain, including designers, bottlers,brands and distributors.The new generations of packaging steels resulting fromArcelor innovations should also contribute to increaseduse.A new continuous annealing line rapid-cooling process,commissioned in 2002, is an additional step in packagingweight reduction for easy-open top applications.Steel products with super deep-drawing qualities willallow the development of new applications primarilythrough the reduction in the number of deep-drawingpasses (e.g. small 2-piece formats, for fish cans).New developments in co-extrusion (deposition of a PETor PP film on one or both faces) will soon allow us tooffer pre-coated steels.API is also heavily involved in food safety and recyclingissues. In fact, steel has a number of advantages inthese two areas and API has opted to reinforce itsleadership position by adopting a proactive stancewith regard to national and European regulations.44ANNUAL REPORT ARCELOR 2003

4. RESEARCH AND DEVELOPMENTPOLICYThe emphasis in the automotive field has been placedon technical and scientific support to carmakers for theincorporation into new vehicles and the processing ofvery high-tensile grades developed by Arcelor. Thesenew grades permit significant weight savings andimproved vehicle safety. In new vehicles, the use rate ofnew steels can attain 50%. The development of newgrades with increasingly high performance levels isactively pursued to meet carmakers’ expectations interms of weight reduction.The Group is also pursuing its developments in coatedproducts for the vehicle body, a field in which it enjoystechnological leadership.The emphasis in domestic electrical appliances andgeneral industry has been on the development of new,more easily processed products, for example throughbetter deep drawing properties, and contributing tosustainable development from the customers’ viewpoint(for example the development of surface treatmentsenabling the elimination of the solvent cleaning stageprior to enamelling).Major development work was conducted to producenew solutions for the Construction market, which aredue to be used in industrial applications. Developmentwork also focused on prototypes that demonstrate theperformance of the various constructional systems forenergy-efficient buildings, such as ventilated doubleroofs.The renewal of the product line for packaging continuedin 2003, both in grades offering new mechanical performanceand in coatings, and particularly by expandingthe range of steel products with elevated mechanicalproperties and high ductility. These steels enable packagingweight reduction, while offering increased ease ofprocessing.Moreover, a new range of high-ductile steel productswas designed for applications in which steel is currentlylittle-used.Various developments are under way in ManufacturingOperations to strengthen the sector’s position in thesemarkets:• development of a manufacturing process for a newrange of steels for beverage cans that optimises theindustrial processes, while offering new possibilitiesfor reducing thickness;• development of metallurgical models and in-line sensorsthat predict the properties of these products onthe line, generating cost reductions and better productallocation.activities of the Group > flat carbon steelsANNUAL REPORT ARCELOR 2003 45

table of contents >Long Carbon Steels1. Strategy p472. Organisation of the sector p473. The sector’s products and markets p483.1 Rolled products p483.2 Drawn-wire products p483.3 The construction market p494. Research & Development Policy p4946ANNUAL REPORT ARCELOR 2003

Long Carbon Steels1. STRATEGYThe Long Carbon Steels sector of Arcelor produces and markets abroad range of carbon steel products: beams, concrete reinforcingbars, merchant steels, wire rod, sheet piling, rails for publictransport, rails for gantry cranes, special sections, semi-finishedproducts and drawn-wire products.The sector ranks first worldwide in the production of beams,sections and sheet piling, and is among the leading players inconcrete reinforcing bars, wire rod and special sections.As a full service provider with an integrated logisticssystem, with a strong presence in Western Europe andSouth America and a wide network of sales and tradingoffices in Europe, Arcelor’s Long Carbon Steels sectoris pursuing a strong growth strategy in all its markets,backed by the quality of its products, cost control andadherence to delivery schedules.In Western Europe, the implementation of a sales policydesigned to increase profitability and meet customerneeds by offering a broad range of services willstrengthen the position of this sector in its markets.In other European countries, the sector is deploying aresponsible growth policy, while in export markets it is ina position to take full advantage of the opportunities thatarise. In the Americas, the strategy of the Long CarbonSteel sector is based on targeted investments tostrengthen its cost leadership position, an efficientdistribution network in Latin America, and on the exportof niche products.2. ORGANISATION OF THE SECTORGiven the specific technical and commercial propertiesof the different product families and the desire to acceleratethe transfer of best practices among comparableplants, in 2003 the Long Carbon Steel sector reorganisedits business in Europe into separate businessunits:- one business unit combines merchant steels, concretereinforcing bars, wire rod and semi-finished products,- one business unit manages the beams business,- one business unit combines the sheet piling, rail andspecial sections activities.In each of these three dedicated units, commercial andindustrial activities are grouped under a single authority.The Drawn-Wire Products and Americas business units,which already operate on the principle of one combinedcommercial and industrial authority, complete the sector.activities of the Group > long carbon steelsIn drawn-wire products, the steelcord unit is following therelocation of its principal Western European customersinto Central and Eastern Europe by increasing thecapacity of its plant in Hungary. It continues to growsteadily in Asia through its plants in Korea and Chinaoperated in partnership with Kiswire. The Low CarbonSteel unit is pursuing its strategy of growth in high valueaddedproducts and niche products.ANNUAL REPORT ARCELOR 2003 47

3. THE SECTOR’S PRODUCTS ANDMARKETSRolled long products are used principally in theconstruction, infrastructure and capital equipmentmarkets. Drawn-wire products have a number of uses:tyre manufacture (steelcord), agriculture (vine wires,enclosures), industry (galvanised wires for cablesheathing) and construction (fibres). The long anddrawn-wire products market is buoyant, albeit verycompetitive, linked to the emergence in the constructionmarket of new environmental, aesthetic, architecturaland economic requirements.3.1. Rolled productsThese products accounted for 76% of the sector’sshipments in 2003. This family of products includeslightweight and medium-weight beams, merchantsteels and concrete reinforcing bars. The market iseither local or regional in the broad sense, dependingon the products. The Long Carbon Steel sector has astrong presence through a powerful sales network inboth key and export markets. The principal geographicmarkets for the European plants are France, the Beneluxcountries, Germany and the Iberian peninsula. Outputof commodity products from the South American plantsis primarily destined for the domestic markets.The rolled long products manufactured in the Europeanplants of the Long Carbon Steel sector are marketedin Europe through the Arcelor Long Commercial S.A.distribution network.In export markets, Arcelor Long Commercial has entrustedthe sale of its products to the Arcelor International salesteams and to its preferred partners.3.2. Drawn-wire productsThe technical products for global customers includewire rod for special applications, particularly steelcordupstream and drawn steelcord downstream. The sectoroffers its technical know-how to customers in a spiritof partnership to meet their specific needs. The drawnwirebusiness has its own sales organisations for eachof its three activities – steelcord, low-carbon steel andhigh-carbon steel.The Americas business unit has a sales organisationthat is integrated with its operating activities.The significant stake in Acindar in Argentina (productionof wire rod, tubes, drawn wire and bar products) strengthensthe industrial and commercial position of LongCarbon Steels in South America.The speciality products consist of sheet piling, heavybeams, special sections and rails. These high addedvalueproducts are marketed worldwide, backed by areliable logistics system and competent technical/commercial teams at local, regional and internationallevels. The Long Carbon Steels policy in these marketsis to maintain its technological lead in processes andto anticipate customer needs through continuous innovationand product development.48ANNUAL REPORT ARCELOR 2003

3.3. The construction marketSynergies have been developed between the ArcelorLong Carbon Steels sector and the Flat Carbon Steelssector to facilitate the combined use of hot-rolled sectionsand cold-rolled sections for the construction business,for example for multi-storey structures employing beamsand composite formwork for floor slabs.This cooperation is coordinated by Arcelor BuildingConstruction Support (BCS) with the aim of increasingthe use of steels in the construction business. Thishorizontal organisation coordinated the activities of theLong Carbon Steels sector and Arcelor Constructionto produce the innovative “globalfloor” solution thatoptimises flooring composed of steel pans and joists.This constructional solution is a move towards a holisticsolution requested by general contractors and isgenerating keen interest, resulting in additional salesof rolled cellular beams.4. RESEARCH AND DEVELOPMENTPOLICYInnovation is a key component of the strategy adoptedby the Long Carbon Steel sector. Its R&D activities coverboth manufacturing processes and product development,with special attention to product applications.With respect to manufacturing processes, R&D initiatestechnical improvements in production, including environmentalaspects, and develops new processes andoperating methods; the goal is to cut costs, increaseperformance, reduce the environmental impact andenhance the flexibility of the facilities.At the product development level, the R&D activitiesfocus on improving quality, developing new types of steeland steel products, identifying new applications, findingsolutions for customer problems and promoting the useof steel over substitute products.The effectiveness and expertise of the R&D activities areenhanced by cooperation with universities and researchinstitutes as well as by participation, together with othersteel producers, in European Union research projects.activities of the Group > long carbon steelsANNUAL REPORT ARCELOR 2003 49

table of contents >Stainless Steels, Alloys and Special Plates1. Strategy p512. Organisation of the sector p513. The sector’s products and markets p513.1 Stainless steel flat products p513.2 Stainless steel long products p533.3 Precision-rolled products p543.4 Special plates p553.5 Stainless steel tubes p554. Research & Development Policy p5550ANNUAL REPORT ARCELOR 2003

Stainless Steels, Alloys and Special Plates1. STRATEGYThe Stainless Steels sector includes the operations related to themanufacture and sale of stainless steel and nickel alloy products.Present in the world’s major markets, this sector has initiated aprocess to refocus on its core business.Arcelor is present in the global stainless steel market witha complete range of products (hot- and cold-rolled coils,precision-rolled products and long products in stainlesssteels and alloys, heavy plates and small welded tubes).Because of the great variety of products manufacturedand marketed, including a large proportion of flat products,the Arcelor Stainless Steels sector is a major supplier tothe automotive, domestic electrical appliance, generaland construction industries. By virtue of the configurationof its industrial facilities and its sales network, the StainlessSteels sector is able to assist its large customers in theirinternational expansion.2. ORGANISATION OF SECTORThe Stainless Steels sector comprises five major activities:• Stainless flat products;• Long stainless and alloy products;• Stainless steel tubes;• Precision stainless metal strips and nickel alloy flatproducts;• Special plates in stainless steels and specialty steels.All export sales of the Stainless Flat Products BusinessUnits outside their principal markets are handled byArcelor Stainless International.activities of the Group > stainless steels, alloys and special platesThe global stainless steel market currently stands at17 million tonnes per year. The market is cyclical andvery competitive, with a steady decline in sales pricesof between 2 and 3% per year.In this context, Arcelor has adopted a strategy totransform its Stainless Steels activities based on apolicy of investments, industrial reconfiguration andthe development of partnerships to allow each businessin the sector to adapt to its own special circumstancesand challenges.This policy was specifically reaffirmed in 2003 with thestated objective to make Arcelor’s flat stainless steelsa global benchmark for customer service, innovationand competitiveness, primarily through its UGINE & ALZbusiness unit.3. THE SECTOR’S PRODUCTS ANDMARKETS3.1. Stainless steel flat productsWith 6,000 employees and revenue of over 2 billioneuros, UGINE & ALZ, which specialises in stainlesssteel flat products, is the main business unit of theStainless sector. The company is one of the leaders inthe European market with a market share of more than25% and very high-performance products, notably itsbright-annealing lines at Gueugnon (France) and Genk(Belgium) dedicated to specialty markets, its LC2Icontinuous integrated cold-rolling line, at Isbergues(France), and its facilities at Genk (Belgium) for thick orextra-wide products.ANNUAL REPORT ARCELOR 200351

The distribution of the UGINE & ALZ operations over fiveplants generates substantial fixed and logistics costs. Asa result, Arcelor decided to reconfigure the UGINE & ALZsteelshops by concentrating production near the Carlamhot strip mill in Belgium. In May 2003, the Arcelor Boardof Directors approved the construction of a steelshopwith a capacity of one million tonnes upstream of thismill.This project, known as Carinox, will make it possible toachieve the objectives of competitiveness and customersatisfaction, and to partake in the growth in the stainlessmarkets.The planning schedule for this 230 million euro investmentprovides for commissioning by the end of 2005and ramping up of production until the rated capacityis reached in 2007.The doubling of the capacity of Genk steelshop in 2002and the new Charleroi steelshop directly connected tothe hot-rolling mill will also ensure an optimal industrialconfiguration.The industrial reconfiguration project means the closure,in the first half of 2004, of the Ardoise plant, whoselocation does not permit it to be competitive.The increased capacities at the Genk and Carlamsteelshops will also require the shutdown of theIsbergues (France) steelshop.Stainless steel flat products marketThe consumption of flat stainless steels has grown bymore than 6% per year for twenty years. In 2003, themarket represented 14 million tonnes. Growth in the useof stainless steel varies by country depending on thelevel of industrialisation. The strong demand in Asiancountries (China, India), which is geared more toconsumer goods, favours a strong increase in theconsumption of flat cold-rolled stainless steel in thisregion, while in Europe and the United States the growthrate in flat stainless steel is more a function ofsubstitution for other materials.The level of consolidation of stainless steel producers,particularly flat products producers, is the secondcharacteristic of this business. The five leading worldproducers account for 60% of world production of flatproducts. Arcelor’s global market share in stainless steelflat products is around 16%.Its production know-how and expertise gives Arcelor aworld leadership position in markets that have hightechnical requirements, with products such as brightannealedsteels for the domestic electrical appliancemarkets, ferritic grades for the automotive market, orwide plates primarily for the boilermaking and fabricationmarkets. Partnership relationships with major customersalso constitute acknowledged benefits offered by Arcelor.Faced with steep raw materials price increases,particularly for nickel in 2003, the policy of Arcelor’sStainless Steels sector is to improve competitivenessthrough specialisation of its production equipment,technical dialogue between plants, and the launch ofnew differentiated products offering customers additionaluse value. A major programme was initiated to developlow-nickel grades. UGINE & ALZ continues to pursue itspolicy for the development of nickel-free ferritic grades.52ANNUAL REPORT ARCELOR 2003

Domestic electrical appliance marketUGINE & ALZ is the preferred supplier for the majormanufacturers of large domestic electrical appliances,with 35% of stainless steel supplies to this market.To meet customer expectations, UGINE & ALZ isdeveloping new stainless steel grades that offer,for example, a new surface finish for the kitchen:a homogeneous and reproducible etched surface,a surface with multi-directional patterns that is retainedafter forming and affords design flexibility and freedom.In the cutlery segment, UGINE & ALZ perfected astainless steel grade offering high-performance,particularly in terms of hardness, to satisfy therequirements of this market.Automotive marketThe automotive market represents 20% of the revenuesof the Stainless Steels sector, with 14% in the exhaustmarket alone. Combining the properties of corrosionresistance,mechanical strength and shock absorption,increasing use is being made of stainless steels instructural components, safety-critical parts and fueltanks, making it possible to reduce the weight of thevehicle structure, offering potential reductions in fuelconsumption.A number of development projects carried out in partnershipwith customers have been launched in the exhaustpipe market in order to meet expectations in respect ofcompetitiveness.General industry marketThe general industry market is one of the leading marketsfor stainless steel in terms of volume. The food andpharmaceutical, heating, transport and process industriesare major customers in this segment.In the field of heating, UGINE & ALZ is accelerating thedevelopment of ferritic stainless steel grades as asubstitute for other materials (enamelled steel),particularly for hot-water cylinders and condensingboilers.In transportation, UGINE & ALZ is developing, inpartnership with its customers, grades that meet theneed for lighter products, primarily for containers.Due to its “cleanability” properties, stainless steel isin increasing demand for highly sensitive applicationsin terms of hygiene and health (hospitals, industrialkitchens, etc.).The construction marketStainless steel continues to grow in the constructionmarket, in addition to developments for roofing (coatedand uncoated) and cladding.Sales network and service centresIn Europe, UGINE & ALZ relies on a network of eightservice centres in seven countries and a network of salesoffices in all European countries.Arcelor Stainless International (ASI) markets the flatproducts of all business units outside their domesticmarket and long products in certain regions. ASI strengthenedits organisation in 2003 with the establishmentof three new facilities: a service centre in Vietnam, therevamping of the service centre in the USA, and theconstruction of a service centre dedicated to hot-rolledproducts in Malaysia.ASI has a presence in about forty countries with servicecentres in Australia, China, the United States, Turkey andVietnam.In Bytom, Poland, the Distribution-Processing-Tradingsector and the Stainless Steels sector have broughttogether their respective service centres under acommon roof in order to develop the local market underthe best conditions.3.2. Stainless steel long productsUgitech, born of the merger between Ugine SavoieImphy S.A. and Sprint Métal S.A. in December 2003, isan integrated unit dedicated to upstream long products(steelshop, rolling mill), to downstream processingactivities (bar finishing, wiredrawing) and to distribution.Faced for several years with a deep erosion of marginsin a European market with fragmented supply and weakgrowth, Ugitech embarked on a commercial, administrativeand logistics restructuring programme. Thisadaptation plan aimed at improving financial performancealso resulted in industrial restructuring: the rod milland finishing shops at Imphy (Nièvre, France) are nowdedicated to alloy products.activities of the Group > stainless steels, alloys and special platesANNUAL REPORT ARCELOR 2003 53

The adaptation plan – industrial restructuring, organisationalsimplification – which was initiated at the end of 2003, isa response to this demand for better performance.Ugitech has a large integrated distribution network withsix European subsidiaries, an American subsidiary and aglobal network of agents and partners.Arcelor Stainless International (ASI) also handles themarketing of long products in certain regions to completethe organisation.In alloys, the Imphy Alloys commercial organisation istailored to the needs of a market that is now global. It isbased above all on a strong presence and partnershipsin the Far East where a growing number of user marketsare concentrated.Stainless steel long products marketsClosely linked to industrial investment and capital goods,the European market for stainless steel long productshas suffered the effects of the stagnation in industrialproduction. However, with a market share of over 14%in the European Union and sales up 42% in Central andEastern Europe, Ugitech’s position has improved.On the other hand, exchange rate movements led to adecrease in shipments to the North American and Asianmarkets. In 2003, the expanded Europe representedmore than 80% of this unit’s sales.Ugitech’s stainless steel long products are maintainingtheir leadership position for improved machinabilityproducts. Soaring nickel prices are also stimulating thedevelopment of grades destined for the fastener market.In the field of civil engineering structures, stainlessreinforcing bars are valued highly in construction projectsthat require high corrosion-resistance. A new productline is under development for this very high-potentialmarket in which Ugitech has the means to differentiateitself.3.3. Precision-rolled productsThe “precision-rolled” businesses, which until 2003were grouped within Imphy Ugine Précision (IUP),have been formed into two companies tailored to thespecific nature of the two product lines. The manufactureof stainless steel products handled by IUP is nowconcentrated at the Pont de Roide plant (France). Alloyproduction at Imphy and Firminy has been merged intoa new company “Imphy Alloys S.A.” established inDecember 2003. The products of these two companiesare intended for the visual display market (shadowmasks for television sets for example), electronics(integrated circuit boards) and automotive industry(engine gaskets).Nickel alloy marketsThe growth of user markets in Asia was confirmed in2003, the result not only of transfers of production butalso of growth in certain segments. A marked recoverywas experienced in sales of alloys to the electronicsindustry and 2003 was an exceptional year for thecryogenics market. Despite the growth in flat screensales, the manufacture of cathode-ray tubes continuesto grow slightly because of an increase in consumptionin Asia, notably in China.In high-nickel content alloys (35 to 80%), Arcelor hasa presence primarily in the ultra-thin strip markets (flatand thin products, Imphy Alloys), but also in rod andwire (Ugitech).Faced with a trend toward outsourcing by its customers,Imphy Alloys is redeploying its worldwide industrial andcommercial assets in order to retain its market share.Mécagis, a subsidiary of Imphy Alloys, transferred part ofits production to Imhua Special Metal in China. ImphyAlloys’ sales in Asia now account for 40% of revenues,compared with 35% in 2002.In 2003, Imphy Alloys reaffirmed its position in tanksfor gas carriers and it is taking advantage of the growthof new civil aeronautics programmes to increase salesof alloys for composite materials moulds.54ANNUAL REPORT ARCELOR 2003

3.4. Special platesThe Industeel business unit is among the world’s topproducers of special fabrications, and abrasion-resistantsteels for moulds and tools. Based in Charleroi, IndusteelBelgium specialises in the production of stainlesssteel plates and specialty carbon steel plates. In France,the Creusot, Châteauneuf and Saint-Chamond plantsspecialise in the production of plate, forging ingots,castings and shells. Industeel was involved in theconstruction of the first Chinese-built duplex steelchemical tanker.After the sale of Creusot Forge Industrie and its stake inCreusot Métal, Industeel continued to restructure toemerge as a federation of autonomous companiesfocused on their core businesses. Within the frameworkof this process, the Creusot plate mill and finishing shopsare implementing, with a leaner and more responsiveorganisation, a corporate project that should allow areturn to their former performance level and ensure theirfuture.Industeel has a worldwide network of sales officesand also enjoys the support of the Arcelor StainlessInternational network.3.5. Stainless steel tubesIn order to simplify its fragmented industrial organisation,the Stainless steel tubes division transferred to Franceall production that was previously handled by theMeusienne plants in Italy and Matthey in Great Britain(perforated tubes) in order to achieve critical size.In stainless steel tubes, size of installations is a decisiveadvantage.The stainless steel tubes business unit is active in thedecoration and corrosion markets through its Meusiennecompany based in Ancerville, and in the automotiveexhaust market with Matthey and its subsidiariesbased in Switzerland, France, Great Britain and theUnited States.4. RESEARCH AND DEVELOPMENTPOLICYStainless steels offer corrosion-resistant properties thatguarantee use over time, while offering a broad range ofusage properties. This range runs from highly formablesteels that allow deep drawing or energy absorptionproviding a high level of safety in the event of impact,to very hard materials that can be used under extremeconditions.Thanks to an active and forward-looking research policy,the Stainless Steels sector has developed a line ofproducts that are less dependent on nickel. UGINE & ALZis positioned as the specialist in ferritic steels thatresist corrosion by virtue of chromium and molybdenumadditions. These ferritic steels are particularly suitedto meet the expectations of automotive exhaust manufacturersas well as general industry (heating, containers,etc.). UGINE & ALZ is also working to develop gradeswith high thermal performance for exhaust manifolds.In addition to the development of more economical steels,R&D effort has focused on developing surfaces with newaesthetic qualities, which have applications in domesticelectrical appliances and in local authority infrastructurein particular.Industeel and Ugitech specialise in the production ofduplex-type steels with very low nickel content, and withelevated mechanical properties and high corrosionresistance.Industeel, which is very active in the general industrymarket with its thicker plates (10-30 mm), has developedan entire range of bi-phase specialty products known as“duplex”, which combine elevated mechanical propertiesand high corrosion-resistance with a very low nickelcontent.activities of the Group > stainless steels, alloys and special platesANNUAL REPORT ARCELOR 2003 55

table of contents >Distribution-Processing-Trading1. Strategy p572. Organisation of the sector p583. The sector’s products and markets p583.1 Arcelor Trading and Distribution (AND) p583.2 Arcelor Steel Service Centres (ASSC) p583.3 Arcelor Construction p593.4 Arcelor PUM Processing p593.5 Arcelor International p593.6 Arcelor Projects p5956ANNUAL REPORT ARCELOR 2003

Distribution-Processing-Trading1. STRATEGYThe businesses comprising the Distribution-Processing-Trading(DTT) sector are first-tier partners for a number of customers inthe automotive, construction, domestic electrical appliances, publicworks, civil engineering, offshore structures, and general industrymarkets.The Distribution-Processing-Trading sector representsa major activity for Arcelor and is an essential linkbetween the worlds of industrial steel users and ofsteel production.The DTT sector meets the complex needs of multinationalsas well as the needs of the local artisan thanksto a range of standard products as well as holistic andcustomised solutions.DTT has almost 15,000 employees worldwide andrevenues in the order of 8 billion euros.The DTT businesses stand out because of their highadded value. In fact, rather than products, DTT offers“steel solutions”. Thus, almost 75% of the volumespurchased from other Arcelor sectors are processed orfinished before being sold. Operating in very competitivemarkets, DTT creates value by implementing holisticsolutions that include design and technical support.The sector’s core business is in Europe, with a strongpresence in Germany, the Benelux countries, Spain,France and Great Britain. In addition, the DTT sector is ahigh-performance commercial resource for marketsoutside Europe.Since the sector’s markets are essentially regional, DTThas formed a dense network of more than 750 facilitiesaround the world. As a result of this network, almost75% of its customers are less than 300 kilometres froma DTT facility, where they find the entire Arcelor groupproduct range ready and available.On the basis of these unique features, the DTT sectorimplemented a new organisational structure, enablingrationalisation in Western Europe in order to realise thesynergies that had been identified, such as the reductionand ranking of the number of warehouses based oncustomer proximity and type, optimisation of logistics,and a reduction in structural costs.The development of DTT is based on sustainedbusiness growth in Central and Eastern Europe insupport of its customers, and on a growing andinnovative product line focused on the search for highvalue-added specialty products, partnerships withcustomers, and the sale of solutions that includeassuming responsibility for customers’ upstreammanufacturing processes, particularly in sheetmetalworking.In line with Arcelor’s policy, the DTT sector is placingSustainable Development at the heart of its strategy. Dueits lean production structures, DTT is concentrating itsefforts on safety, health and human factors.2003 saw a notable improvement in safety followingthree years during which the sector’s accident frequencyrate had steadily declined at an annual rate of 15%.These results testify to the progress achieved in terms ofrespect for employees and work safety.DTT is implementing a human resources policy thatallows all employees to work in an environment wheretheir talents, experience and know-how are valued,where initiative is encouraged, and where the sense ofresponsibility is developed.activities of the Group > distribution-processing-tradingANNUAL REPORT ARCELOR 2003 57

2. ORGANISATION OF THE SECTORThe year was dedicated to integrating and streamliningthe sector’s operations. DTT thus engaged in an activeprocess to streamline its portfolio of companies, primarilythrough the disposal of non-core activities.The sector is now organised into six business units, eachcarrying out their specific but complementary activities.This new organisation improved the logistics of the sector’sbusinesses and in particular their commercial efficiency,and simplified the central functions.3. THE SECTOR’S PRODUCTS ANDMARKETS3.1. Arcelor Trading and Distribution (AND)AND is a world leader in steel distribution with200 facilities spread over 30 countries, distributingover 4 million tonnes of steel products per year.AND comprises companies that handle steel tradingand warehousing. These are multi-specialist businessesoffering an extensive range of products: sheets andplates, beams, tubes, merchant rolled products,stainless steel and aluminium flat and long products,technical products and special steels as well as concretereinforcement products. The customer base includesmultinationals as well as private individuals.It also offers a range of “customised” products thanks tothe downstream finishing service centres (manufacturedsemi-finished products, structural frames for buildings,crane and wind-turbine structures, etc.) and downstreampartnerships (examples of partner enterprises: JohnDeere, Potain, Snecma, Hermanussen, etc.).3.2. Arcelor Steel Service Centres (ASSC)ASSC is Arcelor’s preferred vector in the finished flatcarbon steel market with over 5,000 industrial customersin 18 countries, served by 44 plants offering a completerange of finishing products.The Steel Service Centres finish products to thedimensions requested by customers in ready-to-usequantities; for example: hot- and cold-rolled products,metallic- or organic-coated slit strip, sheet, blanks,specific components or sub-assemblies produced bysheet metalworking.They also provide a full line of services such as:- a holistic product offer backed by the range and qualityof Arcelor products,- technical expertise, innovative offers and product qualityfollow-up,- appropriate logistics.In 2003, ASSC began to expand its range downstreamthrough various customer partnerships with automotivesuppliers and domestic electrical appliance manufacturersin particular.Finally, several ISO 14001 certifications were eitherattained or confirmed, with quality certifications nowcovering a large portion of the operation.In 2003, AND continued to expand its European networkwith the formation and the acquisition of severalcompanies:- establishment of Arcelor Profil, Plaques et Découpes,Arcelor Distributie in Rumania and a coordination centrefor Eastern Europe in Slovakia;- acquisition of the Guille and Ferrometalli companiesto complete the plate and profiling activity, Krisper d.o.o.in Slovenia and Ravené Schäfer (DEAG POSSEHL) inGermany.58ANNUAL REPORT ARCELOR 2003

3.3. Arcelor ConstructionArcelor Construction is the European leader in themarket for metal products for the envelope, secondaryframework and structure of industrial and agriculturalbuildings (cladding, sections, flooring, roofing, insulatingsandwich panels) and operates in 27 countries through50 companies. Its business represents 553 thousandtonnes of sections and 14.5 million square metres ofpanels sold in 2003.Arcelor Construction has integrated upstream facilitieswith a rolling mill, galvanising and prepainting linethat give it great flexibility in meeting the needs of itscustomers in the construction industry (structural metalworkers,cladding and roofing specialists, generalist andspecialist stockholders).Arcelor Construction is developing new products andconcepts, notably steel facade elements, fire resistance,extended spans in partnership with Long Carbon Steelsand, in general, the contribution made to sustainabledevelopment through the energy savings achieved withsteel construction solutions.3.4. Arcelor PUM ProcessingArcelor PUM Processing was established in early 2003based on the heavy processing equipment of the Reimsplant: a continuous pickling process, a cold-rollingprocess (4-high reversing mill), annealing in a hydrogenatmosphere and a skin-pass installation.Arcelor PUM Processing produces pickled, cold-drawn,cold-rolled and galvanised coils.This unit of 350 people serves the other DTT businessunits.All Arcelor PUM Processing facilities obtained renewalof their ISO 14001 certification in 2003.3.5. Arcelor InternationalArcelor International is the Group’s commercial organisationfor the following activities:- the marketing and sale of the products of the FlatCarbon Steels and Long Carbon Steels sectors inexport markets, complementing the specific organisationsof these two sectors in their markets;- trading of steel products, i.e. purchase from thirdparties and resale to customers within the frameworkof a full service offer that extends from logistics tofinancing to technical support.The unit is also active in the supply of finished or semifinishedproducts from other sectors of the Group andinternational monitoring of commercial developments.Arcelor International has positioned itself as a “differentiated”,high added-value network with 300 employeesworldwide in a network of 41 regional offices.In 2003, Arcelor International contributed its Considarsubsidiaries to a joint venture named Traxys withBelgium’s Umicore Group and its commercial subsidiarySogem. Traxys is active in distributing, marketing andtrading non-ferrous metals, their ores and concentrates,as well as ferro-alloys. In these areas, Traxys is a worldclassplayer with over 20 offices around the globe. Theassets and management of Traxys are divided equallybetween Arcelor and Umicore.3.6. Arcelor ProjectsArcelor Projects specialises in providing customisedand optimised steel solutions for the construction oflarge civil engineering, public works and offshorestructures projects such as port facilities, undergroundcar parks and tunnels: thus, Arcelor Projects is providingfoundation structures for the reconstruction work at“Ground Zero” in New York. Arcelor Projects calls uponthe services of four companies based in Europe, Northand Central America, and Asia. The solutions it offersconsist 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 andservices for port development, underground car parks,etc.- “International Projects”, which supplies high-tech steelstructures provided as a package with logistical supportand specialised documentation, for example for offshorestructures.activities of the Group > distribution-processing-tradingANNUAL REPORT ARCELOR 2003 59

Other ActivitiesThe “Other Activities” sector comprises support activitiesand several industrial companies, primarily Paul Wurth,Circuit Foil and IEE.Paul WurthThe Paul Wurth company is an international player inthe field of plant and equipment engineering for the steeland non-ferrous metals industries. The company is alsoactive in managing large civil and industrial projects in theconstruction sector and has for several years beendeveloping new technologies for the protection of theenvironment in industry.Based in Luxembourg, Paul Wurth has subsidiariesand branches in Belgium, Germany, Spain, the CzechRepublic and Russia, but also in Asia (India, China,Korea, Taiwan), in Latin America (Brazil, Chile, Mexico)and North America (United States and Canada) as wellas South Africa, plus a network of licensees and agents.As at January 1, 2004, Paul Wurth employed 765 people,220 of whom in its international facilities.In the blast furnace segment, Paul Wurth benefited fromthe sustained growth of investments in the steel industryin China, a country that has become the leading marketfor the Paul Wurth group with 30% of all new orders. Acompany producing cooling systems for blast furnaceswas established in Luoyang in conjunction with a localcopper producer.Paul Wurth also established itself in the Russian marketwith two major orders for the relining of blast furnacesand with the formation of an engineering companyin Kovrov with a local minority partner.TMT Tapping Measuring Technology, a companyspecialising in taphole and measurement probetechnologies, formed in partnership with the Germancompany Dango & Dienenthal Maschinenbau, postedan excellent first year of activity, taking in substantialnew orders.In the field of steelshops and continuous casting,Paul Wurth successfully commissioned its oscillatingmould process for an American customer, while inthe non-ferrous metals segment the group is working onan order for a hydrometallurgy application involving ahandling system for copper refining electrodes.In the area of civil engineering project control and management,Paul Wurth is participating in the coordination ofthe new building projects for the European CommunityCourts of Justice and the European Investment Bank.In the field of research and development, Paul Wurthworked to develop the first industrial application of thePRIMUS ® technology to recycle the dust from electricfurnaces. Studies and tests relating to other applicationsof the PRIMUS ® process, such as the recycling of wasteproducts in integrated steel plants or hot metal productionfrom iron ore will be conducted in 2004.60ANNUAL REPORT ARCELOR 2003

IEEIEE (International Electronics & Engineering) is a companyspecialising in the design and manufacture of sensors forthe automotive industry. The company is a world leaderin the market for seat-occupant detection sensors.In 2003, more than 3.8 million vehicles were equippedwith an IEE system. The company is pursuing multipleresearch and development projects, notably a 3D camera,electroluminescent lamps and pedestrian protectionsystems for incorporation into the vehicle cockpit.IEE has two plants in Luxembourg and two developmentcentres in the United States and Korea.The company achieved a revenue of 70.7 million eurosin 2003. The company’s operating income continued togrow to 3.5 million euros. A number of contracts weresigned with large European, American and Asian vehiclemanufacturers, heralding rapid growth of the companyin the coming years.Circuit FoilCircuit Foil specialises in the production of ultra-thincopper foils with a thickness of 3 to 400 microns used inthe manufacture of printed circuits.Circuit Foil is among the five largest manufacturers in theworld. The company has two plants, one in Luxembourgand one in Canada. By the end of 2003, Circuit Foilemployed 360 people worldwide.The over-capacity crisis that hit the electronics sectorfrom 2001 was only partially diminished at the end of2003, and sales prices remained under great pressure.As a result, Circuit Foil initiated a financial restructuringthat led to a significant reduction in the group’s debt andto the acquisition of 23.07% of its capital by SociétéGénérale de Financement du Québec.As a result of initiatives launched in 2002, Circuit Foilwas able to increase its market share in Asia, particularlyin China, and to increase its total output by 28% over2002. An ambitious programme to improve productivityand cut costs was launched last year and resulted in amarked improvement by the end of the year.activities of the Group > other activitiesANNUAL REPORT ARCELOR 2003 61


PART IIIBusiness reporttable of contents >Group Consolidated Management ReportEconomic environmentGroup Consolidated resultsBusiness by sectorResearch and Development activitiesIndustrial InvestmentsDisposalsOwn sharesOutlookEvents after closingAdditional Information about Arcelor S.A.Risk ManagementGeneral legal risks associated with the activities of the Arcelor groupIndustrial and environmental risksMarket risks (liquidity risk, interest rate risk, exchange rate risk,risk on securities held)Supplies - Dependency risksInsurance and risk coveragep64p64p67p72p78p79p79p80p81p82p83p84p84p84p85p85p86ANNUAL REPORT ARCELOR 2003 63

Group Consolidated Management ReportECONOMIC ENVIRONMENTThe rebound in worldwide industrial production forecastat the beginning of 2003 did not materialise, except inthe countries of Asia, Eastern Europe, the Near Eastand the Middle East. In the United States, where grossdomestic product (GDP) growth was actually relativelystrong, industrial production stagnated further after twoyears of decline.Continuing uncertainties in the Middle East continuedto weigh heavily on the geopolitical climate. In terms ofthe economy, international relations suffered from aparticularly difficult period of trade negotiations withinthe framework of the World Trade Organization (WTO).Since last autumn, however, economic recovery hascontinued with fairly strong growth in the United States,along with steady economic growth in Asia and thecountries of Eastern Europe. According to estimatesmade by economic forecasting institutes, the worldeconomy posted GDP growth of 2.4% in 2003,surpassing the rate of 1.8% achieved in 2002. Thisrecovery has been very patchy, depending on thegeographic location and industrial sector, and ischaracterised by the continuing existence of unusedproduction capacity or weak job creation. 2003 wasalso a year of extreme volatility in exchange rates,resulting in the historic high reached by the euro againstthe dollar in early January 2004.In Asia, the strength of the Chinese economy is fuellinggrowth across the region. GDP growth in the countriesof Asia slowed somewhat in the third quarter to 2.6%,but growth in industrial production remained generallyquite strong (5.2%). Industrial production increased inthe third quarter over the same quarter in 2002 by16.6% in China, 6.6% in Taiwan, 3.6% in South Korea,9.3% in Thailand, 6.0% in India, and 4.5% in thePhilippines, but only 1.4% in Japan. The Chineseeconomy accelerated even further in the fourth quarter(up 9.9% year-on-year), bringing GDP growth to 9.1%for 2003.In the United States, GDP in the fourth quarter grew by4.0% on an annualised quarterly basis. Growth for thefull year 2003 stood at 3.1%. Industrial productionstarted to climb again in the second half, exerting apositive, if still modest, influence on employment. Thegood news is that the consumer and manufacturingconfidence indices are still trending upward and that arecovery is expected for investments. In Canada and inMexico, GDP increased only slightly or even stagnated.Industrial production, which is very dependent on theUnited States, has been in decline for several months.In the euro zone, the drop in the consumer and manufacturingconfidence indices came to a halt and a slightupturn has been recorded since July 2003. However,the appreciation of the euro, the level of unemployment,the slow pace of structural reforms, together withbudgetary constraints, make a strong recovery of theEuropean economy in the short term doubtful. GDP inthe third quarter remained stable year-on-year andshowed only a slight increase of 0.3%, after the 0.2%increase recorded for the second quarter. Industrialproduction, on the other hand, declined 0.2% year-onyear.The German economy entered a recession in2003 with a 0.1% decline in GDP from a year earlier,primarily the result of a decline in German exports to theUnited States.The economies of the Central and Eastern Europecountries (CEEC) continued to grow in the third quarterof 2003. Poland recorded year-on-year growth of 3.9%in GDP in the third quarter and a strong increase of7.6% in industrial production over the first nine monthsof the year. This dynamic growth is also reflected in theeconomies of the other CEEC countries. The same istrue for Russia where GDP grew by 7% during the firsthalf of the year and industrial production climbed by6.8% during the first ten months. Growth in Ukrainewas even stronger, with industrial production growing by15.7% over the first ten months of 2003.Economic growth in South America differed greatlybetween countries. Argentina experienced stronggrowth, with GDP rising 7.6% in the second quarterafter dropping 4.4% in 2001 and declining 10.9% in2002.64ANNUAL REPORT ARCELOR 2003

In October, industrial production increased by 17.2%year-on-year. Brazil recorded stagnation of industrialproduction during the first nine months (up 0.1%), butin September industrial production rose 4.2% year-onyear,representing the first positive development sinceMarch 2003. Between January and September, GDPdeclined by 0.3%. GDP growth for all of Central andSouth America was a paltry 1.3% in 2003.Trends in the steel sectorIn 2003, business in the steel-using sectors of theEuropean Union (EU15) was in recession. In terms ofnumbers of vehicles, automobile production declined by1.4% compared to 2002. The construction, engineeringand metalworking sectors remained stable. Productionin the domestic electrical appliance, mechanical andtubes sectors declined noticeably by 4%, 2% and 6%respectively.Changes in production in the steel-using sectorsof the European Union (EU15)(UE15)annual change in % 2002 2003 (*)Automobile (1.8%) (1.4%)Construction 1.0% 0.0%Steel construction (1.7%) 0.0%Engineering (2.8%) (2%)Metalworking (1.8%) 0.0%Small appliances (1.3%) (4%)Tubes (3.7%) (6%)(*) Estimates(Sources: Economic forecasting institutes, Eurofer, Arcelor)Changes in apparent consumption byproduct in the European Union (EU15)annual change in % 2002 2003 (*)Hot-rolled coils (0.2%) (1.2%)Cold-rolled sheet (5.3%) (5.0%)Coated sheet 5.7% (2.0%)Quarto plate (excluding (5.4%) (0.6%)tubes and wide flats)Beams (2.2%) (0.5%)Sheet piling (4.7%) 9.0%Wire rod 2.3% 2.1%Concrete reinforcing bars 6.6% 4.1%Merchant steel 1.8% 4.8%(*) Estimates(Sources: Economic forecasting institutes, Eurofer, Arcelor)Actual steel consumption in 2003 in the EuropeanUnion (EU15) declined by around 0.4%, while specificconsumption was slightly up.Apparent consumption for “total of finished products”declined 0.4% from a year ago with a decrease of 2.3%for flat products and an increase of 2.5% for longproducts. Inventories of steel products held by steelusers at end 2003 were slightly below the levels thatare normal for flat products, generating a positivecontribution by inventories to apparent consumption in2004. The situation for long products was the reverse.Imports of finished steel products increased by 8.3%over the period from January to November. Imports offlat products increased by 2.8% while imports of longproducts rose by 19.3%, with particularly strong pressureon light long products. Exports of finished steel productsincreased by 13.4%. In 2003, the European Union wasa net exporter of 1.5 million tonnes of finished steelproducts.business report > group consolidated management reportSteel prices in the European Union (EU15) rose in thefirst half of 2003 in euro terms but subsequently cameunder limited downward pressure, especially in SouthernEurope, under the influence of rising imports from othercountries, while export prices recorded a sharp dropas a result of the depreciation of the dollar.ANNUAL REPORT ARCELOR 2003 65

Trends in global crude steel production2001 2002 2003 (*) ChangeIn millions of tonnes 2003/2002World (**) 850.3 903.1 963.6 6.7%Western Europe 175.1 176.9 179.7 1.6%including: EU (15) 158.5 158.7 159.7 0.7%Central and Eastern Europe 29.4 30.0 31.6 5.5%Former USSR 100.1 101.6 108.0 6.3%including: Russia 59.0 59.8 62.7 4.9%North and Central America 119.9 123.0 123.0 0.0%including: United States 90.1 91.6 90.4 (1.3%)South America 37.4 40.9 42.7 4.6%including: Brazil 26.7 29.6 31.2 5.2%Asia 353.8 394.2 440.6 11.8%including: China 150.9 181.7 220.1 21.1%Japan 102.9 107.7 110.5 2.6%Other countries 34.4 36.6 38.0 3.8%(*) Estimates by IISI, January 2004(**) World=63 countries representing 98% of global crude steel productionGlobal crude steel production, according to estimatesmade by the International Iron and Steel Institute (IISI),increased for the sixth consecutive year, rising by 6.7%in 2003 to a record 963.6 million tonnes. An increase wasrecorded in all regions of the globe with the exception ofNorth and Central America, where the production levelremained unchanged from last year, and the UnitedStates, where production fell 1.3%. Without China,which accounts for more than one fifth of world production,the growth in production would have been 2.4%.Crude steel production increased by 11.8% in the Asiancountries as a whole, fuelled by China, which exceededby 21.1% its production record set the previous year.India increased its production by 10.3%, while Japan,after a rise of 4.7% in 2002, saw a further increase of2.6% in 2003.Western Europe, the second largest steel producer inthe world, saw its production rise by 1.6%, including a0.7% increase for the European Union (EU15). Productionin Central and Eastern European countries rose by5.5%, reflecting the dynamic economic activity of thatregion. Production in the countries of the former USSRrose to 108 million tonnes, representing a year-on-yearincrease of 6.3%. Russia and the Ukraine increased theirproduction by 4.9% and 8.4% respectively.The countries of South America increased their year-onyearproduction by 4.6%. Argentina saw an increasein crude steel production of 15.5% compared to 2002,and Brazil, the largest producer in that part of the world,raised its production to 31.2 million tonnes, a 5.2%increase.66ANNUAL REPORT ARCELOR 2003

GROUP CONSOLIDATED RESULTSThe Arcelor group was the result of a merger of Aceralia,Arbed and Usinor that came into effect on February 28,2002. In compliance with the International FinancialReporting Standards (IFRS), this merger operation wasaccounted by using the acquisition method. Usinor isidentified as the buyer.Under this principle, the Group’s profit and loss accountfor the 2002 financial year includes 2 months of tradingfor the Usinor group and 10 months of trading forthe Arcelor group. The results for 2003 correspond to12 months of actual trading for Arcelor.The results for 2002 are presented on a proforma basisso as to provide homogeneous and comparable financialinformation.The Arcelor group’s consolidated financial statementsfor the financial year ending December 31, 2003 wereprepared in accordance with IFRS internationalaccounting standards current on that date. As noted inthe appendix to the consolidated financial statements,the standards were partially modified by the IASB inDecember 2003 (thirteen amended standards werepublished, effective year-end 2003) and they willcontinue to be so, specifically in view of the 2005deadline set by the European Union.Arcelor has adopted a proactive approach in order toanticipate these changes in progress and adapt itsaccounting policies accordingly if applicable.Nevertheless, some uncertainties remain in the currentstate of definition and implementation of the standards.One of the greatest uncertainties for Arcelor, as well asfor all European industrial groups, involves the applicationof the revised IAS 39 standard, and specifically whetheror not foreign exchange hedges applied on a blanketbasis through centralised management mechanisms(“macro-hedges”) are recognized.Arcelor regrets the inconsistent nature of the internationalaccounting benchmark, which has the effect of changingthe comparability and legibility of its consolidated financialstatements over time, and is actively participating, bothnationally and internationally, in advisory groups to promotechanges in the IFRS standards.To ensure optimal transparency and legibility of thefinancial statements, changes in the Group’s accountingpolicies and the impacts caused by the various changesmentioned above will be detailed and clarified in thenotes to the annual consolidated financial statements, aswell as in Arcelor’s quarterly (and half-yearly, respectively)consolidated information, as applicable.As at December 31, 2003, the consolidated net result(Group share) amounted to 257 million euros.For its second financial year, the Arcelor group showeda clear improvement in results despite a difficulteconomic environment in Europe. This performancewas accompanied by a 1.5 billion euros reduction innet financial debt, allowing the Group to achieve itsbalance sheet restructuring objectives and opening upnew prospects for growth.This very positive performance, which marks the completionof the Group’s consolidation phase, is based on thefollowing factors:- synergies of 405 million euros, 100 million ahead of thecommitments made during the merger;- a policy of stable margins in spite of the cyclical natureof steel consumption and its negative effect on productionand shipments by the Group;- investments or joint ventures in growth markets –Eastern Europe, Turkey, China and Brazil.The formulation and progressive implementation ofthe strategic orientations for the Flat Carbon Steelsand Stainless Steels sectors resulted in significantnon-recurring charges (543 million euros in respect ofoperating income, net of gains or losses on disposals),which must be taken into account to fully asses thefinancial performance of the Group in 2003.business report > group consolidated management reportANNUAL REPORT ARCELOR 2003 67

Financial highlights for the GroupIn million of euros2003 2002 2002Proforma(unaudited)Revenues 25,923 26,594 24,533Change (1) (2.5%) - -Gross operating result 2,228 1,978 1,811Operating result (OR) 738 780 680Net result (Group share) 257 (121) (186)Net result per share (in euros) 0.54 (0.25) (0.38)(1) Change from 2002 proforma (unaudited)The Group had consolidated revenues of 25,923 millioneuros in 2003 compared with 26,594 million in 2002*, adecline of 2.5% (a 0.6% decline at comparable consolidation).The financial year was characterised by a risein steel prices that was only partly dampened by thevolume reductions made during the year, and by a currencyeffect due to the appreciation of the euro.The consolidated gross operating result posted bythe Group, amounting to 2,228 million euros in 2003compared with 1,978 million in 2002*, includes (75) millionin non-recurring items (essentially restructuringcosts net of capital gains from the sale of PUM Plastiques).The effect of cost cutting, synergies from themerger, and the recovery of steel prices by and largeoffset the impact of the business slowdown and thedecline in volume – mainly in flat carbon products.The consolidated operating result posted by theGroup, standing at 738 million euros in 2003 comparedwith 780 million in 2002, included (543) million euros innon-recurring charges; the Group reflected in its booksthe strategies announced during the first half of 2003 forthe Flat Carbon Steels sector and particularly for theStainless Steels, Alloys and Specialty Plates sector.After net financial charges of 321 million euros, a positivecontribution from the associated companies of 140 million,a tax charge of 141 million, and taking into account159 million in minority interests, consolidated net result(Group share) was 257 million euros compared with aloss of 121 million for the 2002 financial year*.Changes in Net Financial DebtSubstantially surpassing its goals and undertakings, theGroup reduced its net financial debt by more than 1.5 billioneuros in the 2003 financial year (4,464 million euros as atDecember 31, 2003 compared with 5,993 million as atDecember 31, 2002*). Cash generation accelerated substantiallyover the second part of the year. The programmeto reduce working capital requirements instituted shortlyafter the merger has borne fruit and the special attentiongiven to inventory reduction has paid off. The Group alsopursued a policy to control investment costs whilecollecting the proceeds from the sale of PUM Plastiquesat the end of 2003. The financial structure of the Groupis, therefore, significantly reinforced and the net financialdebt/equity ratio is now close to the 0.5 target set for2004.* Figures for 2002 proforma (unaudited)68ANNUAL REPORT ARCELOR 2003

Net financial debt / Equity ratioIn million of euros2003 2002 2002Proforma(unaudited)Interest-bearing liabilities (long-term) 4,871 4,594 4,594Interest-bearing liabilities (short-term) 1,551 3,821 3,821Net financing linked to securitisation - (1,097) (1,097)Cash and cash equivalents (1,890) (1,239) (1,239)Revaluation of financial instruments (68) (86) (86)(short-term & long-term)Net financial debt 4,464 5,993 5,993Shareholders’ equity (Group share) 6,733 6,768 6,732Minority interests 730 663 661Total equity 7,463 7,431 7,393Net negative goodwill 676 627 627Equity 8,139 8,058 8,020Net financial debt / Equity 0.55 0.75 0.75business report > group consolidated management reportBreakdown of Working capital requirementIn million of euros2003 2002 and2002 Proforma(unaudited)Inventories 5,497 6,091Customers 3,253 4,320Other debtors 1,378 1,333Other liabilities (long-term) (163) (205)Suppliers (4,348) (4,111)Other creditors (2,194) (2,023)Net financing linked to securitisation - (1,097)Revaluation of financial instruments (short-term) - (1)Working capital requirement 3,423 4,307ANNUAL REPORT ARCELOR 2003 69

Return on capital employed (ROCE) before taxesIn million of euros2003 2002Proforma(unaudited)Operating result 738 780Share in the results of associated companies 140 77(after taxes)Tax adjustment on the share in the results of 75 41associated companiesIncome from equity interests 29 27Charges related to securitisation (6) (73)(Total I) 976 852Capital employedNon-current assets 12,590 12,891Net negative goodwill 676 627Deferred taxes (assets) (1,436) (1,517)Revaluation of financial instruments (long-term) (68) (85)Working capital requirement 3,423 4,307Accruals * (3,729) (3,330)Total capital employed (Total II) 11,456 12,893Return on capital employed (I/II) (ROCE) 8.5% 6.6%* Accruals: deferred taxes not included70ANNUAL REPORT ARCELOR 2003

Revenues by geographic sales areaCountry 2003 % 2002 %UnauditedProformaEuropean Union (15) 19,628 75.7% 19,901 74.9%Other european countries 1,104 4.3% 988 3.7%Canada 269 1.0% 293 1.1%Mexico 160 0.6% 124 0.5%U.S.A. 1,699 6.6% 2,851 10.7%Total North America 2,127 8.2% 3,268 12.3%Brazil 904 3.5 % 959 3.6%Other 290 1.1 % 275 1.0%Total South America 1,193 4.6 % 1,234 4.6%China 582 2.2% 181 0.7%Other 1,289 5.0% 1,021 3.8%Total other countries 1,871 7.2% 1,202 4.5%As at the end of December 2003, the Arcelor groupmade 75.7% of its sales in the European Union (EU15)versus 74.9% in 2002*, 8.2% in North America (includingMexico) versus 12.3% in 2002*, 4.6% in South America(unchanged), and 11.5% in the rest of the world comparedwith 8.2% in 2002*.Work forceAt the end of December 2003, the fully consolidatedcompanies of the Group employed 98,264 peoplecompared with 104,434 employees at the end ofDecember 2002.business report > group consolidated management reportThis change in the geographic distribution of revenuesreflects the effects of the euro/dollar exchange rate, thesafeguard clauses and weakness of industrial activityin the United States as well as the significant growthof industrial production in China during 2003.Sales in the European Union (EU15) amounted to19,627 million euros, which includes 4,990 millionin France, 4,260 million in Germany, 3,892 million inSpain and 2,324 million in Italy.* Numbers for 2002 are proforma (unaudited)ANNUAL REPORT ARCELOR 2003 71

BUSINESS BY SECTORFlat Carbon SteelsIn million of euros2003 2002 2002Proforma(unaudited)Revenues 13,994 13,222 12,312Change (1) 5.8% - -Gross operating result 1,365 925 909% of revenues 9.8% 7.0% 7.4%Shipments (in kT) 25,593 27,563 25,785(1) Change from 2002 is proforma (unaudited)Standing at 13,994 million euros at December 31,2003 versus 13,222 million as at December 31, 2002*,revenues in the Flat Carbon Steels sector increased by5.8%, remaining unchanged on a comparable basis,the increase of selling prices being offset by a significantdecrease of shipments.This voluntary reduction in the level of shipments, initiatedat the end of the first half of the year in order to adjustthe Group’s supply to a listless European demand, onlypartially impacted gross operating result.At 1,365 million euros as at December 31, 2003 versus925 million as at December 31, 2002*, gross operatingresult recorded a year-on-year improvement of more than45%, even after taking into account the (64) million eurosin non-recurring items (versus +41 million in 2002*). Theincrease in average sales prices (+2% for packagingcustomers, +5% for automotive customers, +12% forgeneral industry customers) more than offset the effectsof reductions in output, while the weakness of the dollaragainst the euro completely offset the increase in thecost of raw materials.At 25.6 million tonnes in 2003 versus 27.6 million tonnesin 2002*, total shipments in the Flat Carbon Steels sectordeclined by 7% as a result of the sale of certain assetsas required by the European Commission, but thischange primarily reflected the implementation of aprofitable commercial policy focused more on marginsthan on market share.In the automotive sector, despite a decline in the Europeanmarket of 1.4% in 2003, Arcelor saw a slightincrease in shipments. Volumes declined in generalindustry and the construction business. In spite of thepressure on prices and imports from other countries,Arcelor was able to implement an active pricing policy.The financial performance in 2003 for steel productsfor the packaging industry was in line with the resultsobtained in 2002*. The growth expected from a risein sale prices and from steady efficiency savings was,however, negatively affected by the drop in the beveragecan business in Germany and the fall of the dollar,which had an adverse effect on exports.2003 operating result amounted to 774 million eurosversus 216 million for the 2002* financial year andincludes (84) million euros in non-recurring items (versus(144) million in 2002*) related to the implementation ofthe strategies announced in January 2003.* Numbers for 2002 are proforma (unaudited)72ANNUAL REPORT ARCELOR 2003

Long Carbon SteelsIn million of eurosAt 4,381 million euros as at December 31, 2003 versus4,256 million for the 2002* financial year, revenues forthe Long Carbon Steels sector increased by 2.9% (2.2%on a comparable basis). In the context of the generallyweak demand in Europe, its position as market leaderallowed the sector to hold on to its sales positions. Itwas also able to take advantage of strong non-Europeanmarkets, even though the rise in the value of the euroblunted the effect of the price increases seen in SouthAmerica and in worldwide exports.At 493 million euros versus 613 million in 2002*, grossoperating result declined by almost 20%. However,at over 11%, the sector’s gross operating marginremained satisfactory, despite the significant increase inthe cost of scrap and the impact of the depreciation ofthe Brazilian real on the contribution made by Belgo-Mineira in Brazil, excellent as it was.Operating result amounted to 311 million euros in 2003versus 430 million in 2002*.As a result of the significant increase in scrap prices, theLong Carbon Steels sector made every effort to pass therepeated raw material price increases through to salesprices by introducing in November a “scrap surcharge”linked automatically to scrap price movements inEurope.2003 2002 2002Proforma(unaudited)Revenues 4,381 4,256 3,605Change (1) 2.9% - -Gross operating result 493 613 484% of revenues 11.3% 14.4% 13.4%Shipments (in kT) 12,221 11,930 10,104(1) Change from 2002 is proforma (unaudited)Shipments increased by 2.4% in 2003 to 12.2 milliontonnes compared with 11.9 million tonnes in 2002*.In terms of sales and marketing, trends in the sectordiffered depending on the products and the markets.In the beams market, 2003 saw a further erosion ofapparent demand in Europe, particularly in the EuropeanUnion (EU15), where it decreased by about 7%compared to 2002*. Economic activity in the IberianPeninsula slowed down in the course of the year, notablyin Portugal. Arcelor shipments in that area suffered adecline from the previous financial year as a result ofincreased competition due to the creation of additionalcapacities in Spain. Arcelor chalked up solid growth inthe other countries of the European Union and continuedits growth policy in the countries of Central and EasternEurope. Worldwide export shipments outside NorthAmerica increased substantially in 2003 as a resultof the economic recovery recorded, mainly in Asia,fuelled above all by strong growth in China and also theMiddle East. Sales in the United States, despite somepositive economic signals, were noticeably down fromthe previous year as a result of the commissioning ofadditional capacity and the desire on the part of localproducers to limit imports.business report > group consolidated management report* Numbers for 2002 are proforma (unaudited)ANNUAL REPORT ARCELOR 2003 73

Even though shipments in 2003 in the area of sheetpiling were below those of 2002*, total sales of hotrolledand cold-rolled sheet piling were satisfactory.Sales in the European Union grew amid fierce competitionwhile demand remained unchanged from 2002*.Shipments also rose in the countries of Central andEastern Europe, partially offsetting the loss of volumein the United States.In terms of prices, greater competition in Europe and thenegative impact on exports of the declining US currencybrought about a decline in average global sales prices.In the wire rod markets, the scrap cost increase waslargely offset by the increase in sales prices during thefirst half of 2003, while increased competition and theerosion of the markets led to a decline in margins duringthe second half for products with low added value.Sales of concrete reinforcing bars were satisfactory inNorthern Europe, but demand declined toward the endof the year for seasonal reasons. Our sales policyfocused on maintaining margins by emphasising pricepolicy over volume.In Southern Europe, the high demand recorded in 2002*continued in 2003, and our sales approach was designedto maintain margins in the face of increases in scrap costs.The second half saw demand level off, which, combinedwith reduced export opportunities due to exchange ratemovements, led to a more competitive climate.In drawn-wire products, the demand for steelcordwas satisfactory, while the demand for low-carbon steelremained stable at a relatively low level. This was alsotrue for high-carbon products, which, however, showedsigns of a recovery during the second half of the year.Sales of rails for gantry cranes reached record highsdespite increased competition, thanks to the comprehensiverange and the cutting-edge products offered. Salesof special steel sections performed well in 2003 in termsof volume. However, prices were somewhat lower thanexpected following the readjustment of the product mixduring the year and because of the unfavourable impactof currency movements.* Numbers for 2002 are proforma (unaudited)74ANNUAL REPORT ARCELOR 2003

Stainless Steels, Alloys and Special PlatesIn million of eurosAt 4,280 million euros as at December 31, 2003 versus4,248 million for the 2002* financial year, revenuesin the Stainless Steels, Alloys and Specialty Platessector increased by 0.8% but decreased by 1.4% oncomparable consolidation. This change reflects boththe increase in total sales prices, which are a directconsequence of the strong increase in the price of nickel,and the smaller contribution from subsidiaries sellingin American dollars.At 23 million euros for the 2003 financial year versus200 million in 2002*, gross operating result fell sharply.The pressure on base prices (excluding alloy surcharges)in Europe and the United States, the smaller margins onexports because of the weak dollar and the “hole” inEuropean demand during the third quarter weighedheavily on the profitability of the sector. Gross operatingresult for 2003 also included (156) million euros inrestructuring provisions in all business units of the sector.The operating loss of (463) million euros in 2003 versusincome of 45 million in 2002* included (479) million eurosin non-recurring items, and reflected primarily the writedownof assets for J&L, a subsidiary of the Group in theUnited States.Shipments held steady in volume at 2.4 million tonnes.2003 2002 2002Proforma(unaudited)Revenues 4,280 4,248 4,097Change (1) 0.8% - -Gross operating result 23 200 197% of revenues 0.5% 4.7% 4.8%Shipments (in kT) 2,409 2,413 2,316(1) Change from 2002 proforma (unaudited)Aside from the less than favourable economic situation,the year was characterised by a slow but steady appreciationof the euro against the dollar and a sharpincrease in the price of nickel. Although apparent activityin Europe seemed relatively sustained during the firstquarter, it clearly slowed by mid-year. After a particularlyunfavourable third quarter in 2003, well below the normalsummer slowdown, demand started to rise by the endof the year, in part sustained by a speculative attitudewith regard to prices but also confirming prospects fora business recovery in 2004, driven by relatively lowinventory levels.Nickel prices, a key factor in demand, rose steadily in2003. The price more than doubled from $7,100 pertonne to $16,650 per tonne by the end of the year, withthe month of December alone accounting for more thanhalf of the increase.Driven by the expected higher demand in China underconditions of tight supplies, this development can alsobe explained by the speculative behaviour of certaininvestment funds for which the base metals serve asa sort of “safe haven” in response to declining stockperformance. Future trends in nickel, pending negotiationsin progress with certain producers, will be a majorfactor in the year to come.business report > group consolidated management report* Numbers for 2002 are proforma (unaudited)ANNUAL REPORT ARCELOR 2003 75

From a financial standpoint, and excluding any exceptionalitems, trends in these three factors directly affectedperformance. Efficiency savings proved insufficient tooffset the substantially deteriorated market conditions,in terms of both demand and prices. The appreciationof the euro relative to the dollar adversely affectedcompetitiveness not only in domestic markets but alsoin export markets. Sales prices retreated in mostmarkets within a climate of weak demand and greatercompetition, with the increases in alloy surcharges(+85% in Europe for the year) contributing to the erosionof margins by the end of the year.Apparent consumption in stainless steel flat productsended up 6% on a worldwide basis over 2002*,essentially fuelled by Asia (approximately +10%), whilethe European and American markets advanced onlybetween 1.5 and 2%.In Europe, demand was normal for the first few monthsand then suffered a setback during the second and thirdquarters. The year-end order books of the principalEuropean producers point to a recovery in 2004, thusconfirming the signs of a recovery recorded in the lastquarter. In a climate of weak demand and strongcompetition, base prices eroded steadily (down 10% inDecember on a year-to-year basis). After the low pointreached in the fourth quarter, and in spite of the currentlevels of the alloy surcharge, base prices are againtrending up for 2004.Business in the United States recovered steadily aftera relatively pessimistic start for the year, but industry didnot feel the first positive effects of the recovery until theend of the year. Prices were under pressure anddeteriorated further from their already weak level, tofinally stabilise only in the third quarter. Helped by thewithdrawal of certain operators, producers have alreadyannounced significant price increases for 2004.The Asian markets, where firm demand at the beginningof the year was greatly disrupted by the effects of SARS,recovered during the second half. This improvement,linked partially to the need to replenish stocks, wasaccompanied by an increase in prices in the fourthquarter tied to the increase in nickel prices, which iscontinuing into 2004.With the exception of some weakness at mid-year,the economic climate in Brazil was relatively favourable.At the end of the year, the business was able to takeadvantage of the interest rate cuts and the incentivesintroduced by the Government to stimulate consumption.Base prices remained stable overall in dollar termsin spite of the further appreciation of the real relative tothe dollar.After a difficult year, 2004 is off to a more promising start.The firming-up of demand, linked in part to speculativeprocurement, also reflects the prospect of a real recoveryfuelled by low inventories.In long products, the weakness of the dollar improvedthe competitiveness of Asian producers and maintainedstrong pressure on prices. In a context of stagnatingconsumption, the aggressive behaviour on the part ofEuropean competitors and imports translated into a verylow level of orders and prices. Base price levels have yetto recover, in spite of a slight recovery and the increasein nickel prices at the end of the year.In an economic climate unfavourable to major investments,the demand for specialty plates was weak.This climate, like the unfavourable euro/dollar parity andprice increases in alloys as well as scrap, lockedIndusteel into a negative price squeeze and contributedto a decline in performance.From an industrial standpoint, the operation of mostproduction facilities was adapted to the apparentconsumption level. After a pronounced slowdown inthe second and third quarters in response to particularlyweak demand and the summer business slowdown,production rates returned to more normal levels in thefourth quarter, reflecting a business improvement for thebeginning of 2004. Production volumes of crude steel forthe year showed a decline of 4% from the averagerecorded for 2002*.The competitiveness of production equipment wasenhanced by the commissioning of a new electricfurnace at Genk and the modernisation of an annealingand pickling line at Gueugnon.2003 also witnessed:- the shutdown of perforated tube production at Mattheyin England;- the production shutdown of stainless steel tube plantsin Italy;- the sale of the foundry (CFI) and of a stake in the Creusotsteelworks to the France Essor Group;- the start-up of construction work by UGINE & ALZ forthe new steelshop, upstream of the Carlam strip mill(Belgium).* Numbers for 2002 are proforma (unaudited)76ANNUAL REPORT ARCELOR 2003

Distribution-Processing-TradingIn million of euros2003 2002 2002Proforma(unaudited)Revenues 7,954 9,444 8,780Change (1) (15.8%) - -Gross operating result 284 319 294% of revenues 3.6% 3.4% 3.3%(1) Change from 2002 proforma (unaudited)At 7,954 million euros in 2003 versus 9,444 million in2002*, revenues in the Distribution-Processing-Tradingsector suffered a decline of 16% due in part to thechange in consolidation, notably the transfer of thepackaging business to the Flat Carbon Steels sector.At comparable consolidation, revenues decreased by4.2% even though the volume sold remained virtuallyunchanged (-1%). International business transactedthrough Arcelor International and Arcelor Projectsremained steady even though the weakness of the dollarlessened the financial impact. The other companies ofthe sector posted a decrease in volumes as a result oftheir desire to give priority to price over volume in orderto pass on upstream price increases to the end user tothe extent possible. However, the price increases appliedto customers were insufficient to cover the increasesin upstream prices, which had a noticeable impact onmargins.The two effects combined, namely lower volume andsqueezed margins, heavily affected the performanceof the sector. Thus, gross operating result in 2003came to 284 million euros versus 319 million in 2002*and includes +112 million in non-recurring items,essentially related to the sale of PUM Plastiques inthe fourth quarter.Operating result, at 124 million euros versus 209 millionthe year before, includes +32 million euros in nonrecurringitems, including (71) million in charges linkedto the restructuring of the Tubes business, which wasput up for sale.business report > group consolidated management report* Numbers for 2002 are proforma (unaudited)ANNUAL REPORT ARCELOR 2003 77

The Trading and Distribution business posted a 12%decline in sales volumes in 2003 compared to 2002*,but also a noticeable sales price increase, particularlyin general industry trading, with priority given to pricesand margins. In terms of business organisation, 2003was a transition year with a restructuring of the Europeannetwork with plant openings and closures, and theacquisition of new companies.The Steel Service Centres (SSC) business alsosuffered a decline in volume during 2003 in the contextof higher prices. The year was used to rationalise geographiclocations and organisational structures in orderto take advantage of the synergies achieved by thecreation of Arcelor. Two major investment decisions weretaken in this context: the twofold expansion of UsinorStal Serwis in Poland (start-up 2004) and the creation ofa large SSC near Bratislava in Slovakia (start-up 2005).The Construction business showed a slight improvementin sales prices, but it was insufficient at the revenuelevel to offset the reduction in sales volume. The declinein demand and the price situation necessitated theclosing of the Kreuztal profiling plant (Germany) andsubstantial cutbacks at the plant in Strasbourg (France).The cost of these restructuring activities weighed heavilyon results of the business. These restructuring activitieswill be continued in 2004.Investments continued at the same levels, however, withthe commissioning in Belgium of a mineral wool panelline in partnership with Isover (Saint-Gobain Group), thecommissioning in Great Britain of a discontinuous highqualitypanel line, and the completion of the upstreamindustrial facility with the construction of a pickling line atthe Contrisson plant (France) that is scheduled to comeon line in the third quarter of 2004.Arcelor International experienced strong growth inbusiness volume that is not reflected in terms of revenuesbecause of the weakness of the dollar against the euro.Thanks to a strong presence of long standing in Chinawith offices in Beijing, Shanghai and Hong Kong, backedby the Singapore platform, sales to Asia in conjunctionwith those to North Africa, the Near and Middle East morethan offset the decline in sales to the United States.RESEARCH AND DEVELOPMENTACTIVITIESArcelor continued to reorganise R&D activities by concentratingits research efforts in proximity to the Group’sproduction units and customers.The Group is now able to offer the same innovativerange of products/services anywhere in the world tomeet the demand of its global customers. To achieve itsgoals the Group relies on research to continuouslyimprove the range of products and services as wellas on a multi-market, multi-process and multi-productapproach.Arcelor also set up a Scientific Council composed ofinternationally recognised experts in their fields. Thetask of the Council is to give the Group ManagementBoard independent advice on the organisation ofresearch, the fields of expertise that are necessaryfor Arcelor, an evaluation of Arcelor’s position, identificationof technological developments and theirimpact on the company’s products and processes(see page 113 and following pages).The Arcelor PUM Processing business, establishedat the beginning of 2003 to produce pickled, hardened,cold-rolled and galvanised coils, suffered a slight declinecompared with the corresponding activity of the Groupin 2002*. In order to maintain the competitiveness of thebusiness, a major investment programme was approvedthat includes the renovation and upgrading of heavyequipment in 2003 and 2004.* Numbers for 2002 are proforma (unaudited)78ANNUAL REPORT ARCELOR 2003

INDUSTRIAL INVESTMENTSGroup capital expenditure amounted to 1,293 millioneuros in 2003.Capital expenditure in the Flat Carbon Steels sectoramounted to 714 million euros at the end of December2003. This was primarily intended for the relining of blastfurnace A at Sidmar (Belgium) and an increase in thehot-phase capacity at Sidmar (Belgium) and SollacAtlantique (France), expenditures to increase the capacityof the pickling line at the ACB mini-mill (Spain), the newtinning line at Avilés (Spain), research expenditure inconnection with the vacuum plasma coating line atCockerill-Sambre (Belgium), the construction of the coldrolledand galvanised steel coil processing unit at Vegado Sul in Brazil and investments to improve quality.The companies of the Long Carbon Steels sector invested290 million euros to start construction of the new mediumbeams mill in Luxembourg, to carry out the modernisationand expansion of existing facilities, notably those atPiracicaba in Brazil for bar production. Investments inSpain primarily concerned the expansion of the rollingmill at Azpeítia. Elsewhere expenditures to increaseworker safety and the protection of the environmentcomplete the investments made by the sector.Capital expenditure recorded during 2003 for the StainlessSteels sector amounted to 188 million euros andcovered essentially the completion of the modernisationwork in the UGINE & ALZ steelshop at Genk in Belgiumto increase capacity to 1.1 million tonnes, the installationof a tension levelling line at the UGINE & ALZ plant atGenk to improve the quality of thick cold-rolled products,a tension levelling line at the UGINE & ALZ plant inGueugnon (France) to improve the quality of thin coldrolledproducts, a new pickling bath on the line at theUGINE & ALZ plant in Gueugnon, dust removal equipmenton the electric furnaces at the Ugitech plant atUgine (France) and, finally, the first outlays for the newelectric steelshop (Carinox) that is being installed upstreamof the Carlam hot strip mill in Châtelet (Belgium).The Distribution-Processing-Trading sector accountedfor 81 million euros in various investment expensesagainst 20 million euros for the other businesses of theGroup.Arcelor purchased the rolling mill at Pallanzeno and a49.9% interest in the San Zeno steelworks from Duferdofin,through subsidiaries of its Long Carbon Steels sector.Duferdofin, a wholly-owned subsidiary of the DufercoGroup, holds the remaining 50.1% of the San Zenosteelworks.The rolling mill at Pallanzeno, located in Northern Italy,produces small and medium beams and has a productioncapacity of 600,000 tonnes per year; the San Zenodi Naviglio steelworks, also located in Italy, near Brescia,has a capacity of 750,000 tonnes per year and suppliesblooms to the rolling mill at Pallanzeno.DISPOSALSOn November 21, 2001, the European Commissionauthorised the merger plans pursued by Aceralia, Arbedand Usinor subject to the sale of a certain number ofsteel producing and distribution companies. The sales ofthe companies in question that were not implementedduring 2002 were carried out in 2003 in compliance withthe commitments given to the European Commission.As a result, the Arcelor group made the following disposalsin 2003:- on March 31, 2003, the sale of its 75.5% interest in theGalmed hot-dip galvanising lines in Spain to Thyssen-Krupp Stahl, co-shareholder;- in April 2003, the sale to Duferco of the French companiesBeautor and Sorral (Strasbourg), specialising incold rolling, electro-galvanising and hot-dip galvanising;- in March and April 2003, the sale to three buyers of allplants and subsidiaries of the French company Cofrafer,specialising in slitting, flame cutting and distribution;- in June 2003, the sale of the 50% held in the coldrollingand galvanising company Lusosider in Portugalto the Corus Group, co-shareholder;business report > group consolidated management reportANNUAL REPORT ARCELOR 2003 79

- in September 2003, the sale of the Laminoir de Dudelangegalvanising line in Luxembourg to the Dugal companyowned by Messrs. Viellevoye and Servais;- in October 2003, the sale of the 66.67% interest in theSegal galvanising unit located in Belgium to the Corusgroup, co-shareholder;- in December 2003, the sale to the majority shareholderof the 39.93% stake in the Italian company Finarvedi.As a reminder, the 49% interest in the Spanish companyBamesa was sold in September 2002.Additionally, the Arcelor group sold to the Point.P company(a subsidiary of the Saint-Gobain Group) itsplastics business (PUM Plastiques group, specialisingin the distribution of plastic products for the constructionand public works markets).Lastly, at the end of December, Finnish steel producerRautaruuki purchased Dikema Stal AS, Arcelor’sNorwegian subsidiary specialising in metal productprefabrication.OWN SHARESThe Ordinary General shareholders’ Meeting held onApril 25, 2003, replacing a similar authorisation datedDecember 11, 2001, authorised the Board of Directors,in accordance with the conditions established by theLuxembourg law regarding commercial companies(“the law”), to acquire the company’s own shares or tohave the shares acquired by other companies of theGroup as provided for in Article 49a of the law. Thisauthorisation is valid for 18 months (until October 25,2004), unless renewed before said deadline, and permitsthe acquisition of Arcelor shares provided that thenumber of shares at no time exceeds the limit of 10% ofthe subscribed capital as provided for by Articles 49-2and 49a of the law, within a price range of from 5 eurosto 25 euros per share. A resolution will be submitted tothe Ordinary General shareholders’ Meeting to be heldon April 30, 2004 to replace the authorisation of April 25,2003 with a new authorisation.Arcelor S.A. did not directly acquire or hold own sharesin 2003.As at December 31, 2003, the Arcelor group held54,644,789 of its own shares, representing 10.25% ofthe total number of shares issued at a book value of273,223,945 euros. Of these 54,644,789 shares, only30,364,288 (i.e. those held by the direct subsidiariesArbed and Usinor) should be included in the aforementionedlimit of 10%; the voting rights were suspended onall 54,644,789 shares.During the 2003 financial year, the Group executed thefollowing transactions in relation to its own shares.Intra-group transfers• 9,988,470 shares transferred from Aceralia InternacionalB.V. to Arbed;• 1,613 shares transferred from Aceralia CorporaciónSiderúrgica, S.A. to Arbed;• 3,870 shares transferred from TrefilArbed Bissen S.A.to Arbed.Acquisitions• 511,715 shares over the counter by Arbed;• 6,000,000 shares reacquired by Arbed on the expiry ofa short-term securities loan concluded with a third partyin 2002.Sales• 511,715 shares sold over the counter by Arbed;• 22,443 shares transferred by Usinor to Sogepa as theUsinor 2001 dividend paid in form of shares.Own shares Dec. 31, 2003 Dec. 31, 2002Arbed S.A. 30,260,403 14,266,450Aceralia Internacional B.V. 0 9,988,470Usinor S.A. 103,885 126,328Sidmar N.V. 24,280,501 24,280,501Aceralia S.A. 0 1,613TrefilArbed Bissen S.A. 0 3,870TOTAL 54,644,789 48,667,23280ANNUAL REPORT ARCELOR 2003

The Group thus purchased 6,511,715 of its own sharesduring 2003, representing a total book value of32,558,575 euros or 1.22% of the capital subscribedas at December 31, 2003.The exchange value of the own shares purchasedby the Group was in a range between 8.33 euros and14.86 euros, and the average weighted price was14.37 euros.The purchases on the over-the-counter market weremade to stabilize the market price of the company’sshares.The Group sold 534,158 of its own shares during the2003 financial year, representing a total book value of2,670,790 euros or 0.10% of the capital subscribedas at December 31, 2003.The own shares were sold for an exchange valueranging from 9.43 euros to 14 euros, and the averageweighted value was 10.17 euros.The sales on the over-the-counter market were madeto stabilize the market price of the company’s shares.In March 2004, 22,490,570 own shares were used tomeet requests for the distribution of Arcelor sharesfrom holders of O.C.E.A.N.E. 2006.OUTLOOKBased on various forecasts, the recovery of the worldeconomy should generate GDP growth of about 3.7% in2004.Worldwide industrial production could grow this year by4.2% compared with 2.2% in 2003.The United States will be one of the engines of globalgrowth with an increase in GDP of 4.7%.Following stability in 2003, industrial production isexpected to increase by 4.5%. GDP growth in Canadaand Mexico could reach 3.6% and 2.9% respectively.GDP in Central and South America is expected to increaseby 3.7% while industrial production is expectedto rise 4.7%.In the CEEC and Russia, the strong economy is expectedto continue in 2004 and growth in GDP comparable to2003 is expected for all these countries.In Asia, the vigour of the Chinese economy will fuelgrowth in the region and beyond.The Japanese economy is expected to grow by 2.4%,driven mainly by exports. Industrial production, whichis heavily influenced by strong exports to other Asiancountries, is expected to grow by 2.2%. GDP growth inthe other Asian countries is expected to amount to6.4%, and industrial production is expected to increaseby 11%.The recovery in Western Europe is expected to be lessvigorous. After growth of 0.8% in 2003, GDP, which isdriven mainly by exports, is expected to grow 2% in2004. Industrial production is expected to increase by2.3%, but the appreciation of the euro against the dollarcould slow the economic recovery.Production in the steel-consuming industries is expectedto continue the recovery begun at the end of 2003. Theautomobile market is expected to remain unchanged.Engineering activity is expected to grow by 2% due tothe expected resurgence in investments. The constructionindustry is expected to grow by 0.7% thanks to thevitality of southern Europe, while Germany will continueto negatively impact growth in this sector. The metalworkingindustry is expected to grow by 1.5%.Despite economic growth rates that vary between theregions of the world, the steel industry should be able totake advantage of the economic recovery in 2004, andthe apparent global consumption of steel, excludingChina, should grow by between 3% and 4%.Apparent consumption of steel in the European Union(EU15) is expected to grow by 3% and to be accompaniedby an increase in inventories held by end users,traders and service centres, with real consumption risingby 1.3%. Importation of steel products from othercountries is expected to decrease following the recentappearance of bottlenecks in transport capacity and thereduced global availability of rich ores and coke.Apparent steel consumption in all Eastern Europeancountries (CEEC and CIS) is expected to increaseby 4%. It is expected to grow by about 6% in NorthAmerica after three years of steep declines, withinventories still at record lows. In Central and SouthAmerica, the strong recovery forecast for industrialproduction (+4.7%) should result in a 7% increasein apparent steel consumption.In China, driven by continued growth, steel consumptionshould increase in the order of 13% in 2004. The growthin demand for steel in Japan is expected to be about0.5% versus 4% in the other Asian countries.business report > group consolidated management reportANNUAL REPORT ARCELOR 2003 81

The market tightness provoked by this unusual situationwill result in the immediate future in price increases forraw materials (iron ore, coal, coke and scrap) and for seafreight due to the scarcity of supply. This fact, coupledwith a low inventory level and with better growth prospectsfor users in Europe, has already led to price increaseannouncements by some European steelmakers. Theseincreases are expected to continue over the year.After a year of consolidation and integration, 2004 will bea year of change for Arcelor. With a strong financialstructure, the Group should now be able to extend itsstrategic thinking to areas other than restructuring. Thishas already begun and will continue over the next fewyears under the commitments made at the time of itscreation. Arcelor can also look forward to further internationalexpansion.EVENTS AFTER CLOSINGOn February 17, 2004, Arcelor announced that itssubsidiary J&L Specialty Steel, LLC has signed anagreement to sell most of its assets to a wholly-ownedsubsidiary of Allegheny Technologies Incorporated.The transaction, which should be finalised in May 2004,is subject to the completion of due diligence and apositive outcome of the collective bargaining negotiationswith USWA (United Steelworkers of America)both at Allegheny and at J&L. It is also subject to theapproval of the preferred creditors of Allegheny Technologiesand the oversight authorities.Even though the finalisation of this transaction is subjectto several conditions, the parties are actively working forthe success of the operation.J&L Specialty Steel is a major player in the area of flatproducts made of stainless steel.The company is headquartered in Coraopolis, Pennsylvania,with plants in Midland, Pennsylvania, and Louisville, Ohio.J&L is a wholly-owned subsidiary of Arcelor.On February 11, 2004, Arcelor signed an agreement withBagoeta S.L, a majority shareholder in Conducciones yDerivados S.A. (Condesa) for the purpose of selling itstubes business.The finalisation of the transaction is subject to the approvalof the respective competition oversight authorities andthe conclusion of agreements with the financial institutionsfinancing the operation.The scope of this sale covers:- 100% of the capital of Arcelor Tubes, S.A., of AlessioTubi, Spa, of Exma S.A. and of Aceralia Tubos SL.;- 10% of the capital of Industube, subject to the rights offirst refusal of the other shareholders; and- 30% of the capital of Condesa. The remaining 18.84%of the capital of Condesa held by the Arcelor group iscovered by put and call option contracts.In 2003 the tubes business of the Arcelor group shippedover 1.2 million tonnes of steel for turnover of 587 millioneuros.Condesa is a major European player in the tube market.In February, as part of the process to optimise the balancesheet position and reduce the cost of its debt, Arcelordecided to redeem early the 3% O.C.E.A.N.E. maturingon January 1, 2006, effective March 22, 2004, as theconditions for this redemption had been met. TheseO.C.E.A.N.E. represented 350 million euros of debt at theend of December 2003.Following the announcement of this early redemption,requests to exercise the right to the allocation of shareswere received in respect of 22,490,577 O.C.E.A.N.E.bonds, or 81.05% of the initial issue, which were servedby the supply of 22,490,577 shares from Group treasuryshares, thus strengthening the consolidated equity of theGroup.The remaining O.C.E.A.N.E. 2006 bonds in respect ofwhich no request for share allocation had been received(5,256,273) were redeemed on March 22, 2004 at a unitprice of 13.89112 euros (including accrued couponinterest since January 1, 2004).On March 15, 2004, Arcelor implemented a level 1American Depositary Receipts (“ADR”) programin order to improve the liquidity of the Arcelor share andits distribution with American investors. ADRs arecertificates issued by a depositary bank, representingshares of a non-American company (American DepositaryShares, ADS).82ANNUAL REPORT ARCELOR 2003

They give voting rights and dividend rights to the owner.They offer American investors access to Arcelor sharesthrough the over-the-counter market on which the ADRsare freely negotiable in the United States.On March 19, 2004, Arcelor announced the sale of itsentire stake (96%) in Thainox. Thainox Steel Ltd, locatedin Rayong (100 km from Bangkok) was formed in 1991.The plant consists of two cold-rolling lines complementedby one bright annealing line, one annealing andpickling line, and one slitting line.Under the terms of the sale agreement, Arcelor willcontinue to benefit from a multi-year agreement for thesupply of the majority of Thainox’s materials at marketprices. In addition, Thainox will be able to benefit fromthe services of the Arcelor Stainless Steels sales networkfor its export sales and will have access to the expertiseof the Arcelor group under a technical assistanceagreement.ADDITIONAL INFORMATION ABOUTARCELOR S.A.Arcelor S.A., the parent company of the Arcelor group,continued in 2003 to manage its portfolio of holdings.Thus, 2003 was marked by acquisitions in the coordinationcentres, Arcelor Center Brussels and ArcelorFinance and Services Belgium.The 2005 Usinor O.C.E.A.N.E. and 2006 UsinorO.C.E.A.N.E. were redeemed by Usinor in November2003.The company ended the 2003 financial year with a profitof 506 million euros, primarily from revenues from itsholdings.The general meeting of shareholders will be asked toapprove the distribution of a gross dividend of 0.40 pershare for 2003, compared with 0.38 euro per share forthe previous year.business report > group consolidated management reportANNUAL REPORT ARCELOR 2003 83

Risk ManagementGeneral legal risks associated withthe activities of the Arcelor groupThe Group is not exposed to legal risks of a generalnature due to its steel operations.The Group’s production facilities have all mandatoryoperating permits granted by the regulatory authorities.The conditions of supply for the products manufacturedand marketed by the Arcelor group are subject tocommercial negotiation. These conditions of supply mayspecify that the courts of the country in which the buyerresides have jurisdiction in case of litigation. Also, theinstability of the court system or the regulations in certaincountries in which the Arcelor group has a presence(primarily through joint ventures) may create a generallegal risk that could expose the company to risk in theexecution of its business activities. However, the Grouphas decentralised legal resources in the main countriesof operation outside Europe (Brazil, United States). Incountries where it is not economically feasible to havesuch in-house legal resources, the Group uses wellknownlaw firms with an international reputation.The Arcelor group may have occasion to assert its rightsand safeguard its interests within the framework ofits business activities, notably within the framework oftechnical and commercial disputes (in this matter seethe chapters on “Litigation”, “Trade Barriers” and “Antidumpingand anti-subsidy measures” on page 124 andthe following pages).The usual legal risks associated with the conduct of thebusiness activities and operations of the Group are monitoredby the Group’s Legal Department. This departmentis itself subject to internal control procedures by internalaudit services (see the governance and internal controlreport on page 20 and the following pages).It should be noted that identified legal risks have beenprovisioned within the various Arcelor group subsidiariesconcerned pursuant to the applicable accountingstandards.The Arcelor group no longer has any ore or coal miningfacilities in Europe.Industrial and environmental risksThe various production stages forsteel productsLiquid steel is produced from ore (hot metal route) or fromscrap (electric furnace route). Liquid steel is then solidifiedby casting in a continuous casting machine. The output issemi-finished products: bars with rectangular (slabs) orsquare (blooms or billets) cross section that are thefeedstock for the final product form. Finally, the feedstockis converted into finished products by rolling, with someundergoing heat treatment. More than half of the hot-rolledsheet is subsequently cold-rolled and eventually coatedwith anti-corrosion protection.Nature of the risksIn the various steel production facilities such as thecoking plants, sintering plants, blast furnaces, electricfurnaces, etc. accidental fires and explosions constitutethe major operating risks.These risks result among other things from the productionof gas (in the coking plant and the blast furnace), fromthe combustibility of the coal used and from contactbetween cooling water and the molten metal.In the hot- and cold-rolling mills and the coating facilities,the electrical equipment and the reheating furnaces arethe main sources of fires. Lubricants and hydraulic fluidsare considered flammable.Steel production requires the use of scrap, whether in thecourse of the conversion of hot metal into steel in a converteror directly in an electric furnace. Arcelor protectsitself against the risk of charging radioactive scrap intothe furnace by means of rigorous internal inspection.84ANNUAL REPORT ARCELOR 2003

The steelmaking business has environmental risksassociated with gas and dust emissions into the air,as well as the production of waste products that cannotbe reused.Risk evaluation in terms of impact and likelihoodIndustrial safety and the protection of the environmentare strategic challenges for the Arcelor group. Each plantestablishes its own clear policy in compliance with locallegislation and based on the policy of the Group. Thispolicy incorporates all the organisational and materialguidelines designed to prevent industrial accidents orincidents and to limit any consequences for persons andproperty.General objectives and management responsibilitiesare defined in writing. Specific action plans based on thedifference between practice and established goals aredefined.Industrial and environmental risks are analysed from thedesign stage and precautionary measures are taken incompliance with Arcelor’s “Loss prevention guide”.Internal and external audits are carried out in the plantsat a frequency determined in relation to their risk exposure.The audits are the subject of reports on risk evaluationand precautionary measures in respect of humans andproperty.Procedures established to monitor andmeasure these risksSince the creation of Arcelor, a dedicated organisationwas established with the formation of an industrial safetycommittee within the Health & Safety department. Thiscommittee is composed of Business Unit representativesfor industrial safety and engineering. Its mission is toformulate and recommend guidelines to the ManagementBoard. It has issued the “Arcelor Loss PreventionGuide” reference manual aimed at measuring andensuring a level of industrial safety that is consistent onall Group sites, as well as a network of industrial safetyspecialists responsible for day-to-day management,conformance of the facilities and compliance with theguidelines.An investment plan with recommendations of a materialnature is under way, based on an order of priority, withmonitoring by the industrial safety committee of Arcelor’sHealth & Safety department.The Group’s commitment to control environmental risksis reflected in its undertaking in respect of the protectionof the environment (see page 103 and the following pages).Market risks (liquidity risk, interest rate risk,exchange rate risk, risk on securities held)See Note 25 to the consolidated financial statements(page 168).Supplies – Dependency risksRaw materialsIron ore purchases amounted to 42 million tonnes,coming mainly from Brazil, but also from Mauritania,Australia, Sweden and Canada.Coal, amounting to 16 million tonnes, was purchasedprimarily in Australia, the United States, Canada, SouthAmerica and Russia.Arcelor obtained supplies of 320,000 tonnes of zinc,350,000 tonnes of chromium and 83,000 tonnes ofnickel.EnergyArcelor’s energy needs (almost 50 TWh in total for naturalgas and electricity) make it one of the major players in theEuropean markets. Arcelor’s in-house production ofelectricity covers one-third of its needs.In a context of growing price volatility, Arcelor, by virtue ofits European potential, continued to develop close longtermrelationships with suppliers that have been identifiedas the most competitive. This increased visibility allows theGroup to carry through its industrial restructuring while atthe same time greatly limiting its energy risks.The Group also continues to reduce its electric power riskby improving the recovery rate of its steelmaking off-gasesboth at Dunkerque (France) and Avilés (Spain), wherecurrent projects are proceeding according to plan.These projects strengthen the energy efficiency of itsprocesses and contribute to its sustained growth.business report > risk managementANNUAL REPORT ARCELOR 2003 85

Group purchasing performanceIn addition to the synergies still to be achieved, andclosely related to trends in the supplier markets, theadditional leverage gained particularly from partnershipsand new supply sources is designed to consolidatevalue creation and help achieve the ambitious goalsestablished for 2006.The efficiency of the process is based on:- the internationalisation and specialisation of buyers intheir markets;- the potential for planning and innovation on the part ofthe buyers and suppliers for the benefit of the end user;- control over the operational implementation of thecontracts;- optimisation of activities and responsibilities amongthe various players involved in the process;- the deployment of e-purchasing;- performance benchmarking for suppliers.The goals for 2004 detail these various approaches in astructured development plan that is translated intopersonal goals and objectives so as to ensure that theresults will be achieved.Insurance and risk coverageIt is Arcelor’s policy to contract worldwide insurance tocover catastrophic risks for the Group with insurershaving the highest liquidity rating, and local coverage forthose risks that must be covered by law. The amountsof the insurance coverage are a function of the financialrisks as defined by the various disaster scenarios andthe products offered by the insurance market.With regard to property damage and consequentialoperating losses, the Group is:- conducting, through outside entities, engineering auditsregarding fire protection and equipment breakdownrisks for all facilities for which the insured value exceeds50 million euros. 75% of the facilities in question wereaudited in 2003;- studying major loss scenarios, estimating the potentialconsequences for people, the environment and the facilities;- strengthening the resources available to limit the likelyoccurrence of such catastrophic losses and their consequences;- formalising the recovery resources existing withinthe Group to limit consequential operating losses;- transferring the residual catastrophic risks to theinsurance market, for the portion exceeding 20 millioneuros per event; insured amounts are in line with industrypractices and the insurance products available on themarket.With respect to civil liability, and because the maximumfinancial risk cannot be estimated empirically, theamounts insured are in line with the products available onthe market and the insurance coverage purchased byindustrial groups of comparable size and activity. In orderto reduce its liability risk, the Group is implementing inhousetraining to raise awareness and educate everyoneinvolved.In terms of product shipment, when a customer entruststhe Group with organising product shipment, the vesselsto be used must meet the following criteria:- classified by a classification society that is a member ofthe International Association of Classification Societies(IACS);- covered by a “P&I Club” (Mutual Protection and IndemnityAssociation) having the highest liquidity rating;- an International Safety Management (ISM) certificatevalid for the duration of the voyage;- less than 20 years old.Two additional criteria are applied if Arcelor charters thevessel:- knowledge of the results of the most recent inspectionsperformed by port authorities;- awareness of the existence or non-existence of a majorevent affecting the vessel during the last 12 months.The full insured amount corresponds to the maximumpotential risk per event.With regard to all insurable risks, the Group gives preferenceto self-insurance for low frequency risks that eachentity can cover. This results in an excess tailored to thefinancial resources of each entity for better awareness ofrisk prevention by all participants.Self-insurance with recourse to the reinsurance marketis used for medium-frequency risks in order to optimiseand smooth insurance costs at Group level. The riskexposure is limited through the protection provided bythe reinsurance market.Arcelor’s policy for the protection of its industrial installations,highlighted by the decision to allocate anadditional 17.4 million euros over the next 12 months, inaddition to the regular accident prevention investmentbudgets of the entities, to improving the safety of itsfacilities has been welcomed by the insurance market,which is giving the Group a substantial discount on thepremiums to be paid in 2004 for damage and consequentialoperating loss cover.86ANNUAL REPORT ARCELOR 2003

ANNUAL REPORT ARCELOR 2003 87business report > risk management


PART IVSustainable Developmentreporttable of contents >Implementation of the Sustainable Development policywithin the GroupOrganisation of Sustainable Development in ArcelorArcelor’s Sustainable Development KeyPerformance IndicatorsGroup profitabilityHealth & safety and risk managementProtection of the environment and of scarce resourcesDialogue with all stakeholdersSkills developmentInnovation and QualityCorporate governanceResponsible citizenshipSteel solutions for a better world: Arcelor’s steel solutionsArcelor and the Global Compactp90p94p95p98p99p103p108p111p113p116p117p119p121ANNUAL REPORT ARCELOR 2003 89

Implementation of the Sustainable Developmentpolicy within the GroupThese 4 dimensions rest on eight priority principles:EmployeesShareholdersPEOPLEPROFITArcelorFinancialInstitutionsPLANETCommunities-NGOsClients &SuppliersPARTNERSNeighbours-ResidentsAfter Arcelor defined its Sustainable Development policyin 2002, the year 2003 saw the full implementation ofthat strategy and its internalisation by the mid-level andtop-level executives of the Group. Arcelor’s efforts,which are an extension of the numerous initiatives takenby the founding entities, are aimed at transforming theGroup. Efficiency, cost leadership, customer serviceand a corporate spirit at all levels are the themes for2004.Arcelor’s Sustainable Development strategy buildson the classic definition of the Bruntland report (1987):“development that meets the needs of the presentwithout compromising the ability of future generationsto meet their own needs” and is based on the 4 Ps(see diagram above): Profit, because without it there isno development; People, because it is the men andwomen of the company who make the company;Planet, because the preservation of the environment isa priority for any responsible company; and Partners,because it is the balanced fulfilment of the expectationsof all partners that ensures Arcelor’s success.1. Grow profitably by producing and marketing steelproducts.2. Manage risk and safety, including the safety ofour products and the health of our employees.3. Protect the environment and preserve scarceresources.4. Open dialogue with all stakeholders.5. Skills development around common values of qualityand efficiency.6. Innovate to create value and support SustainableDevelopment.7. Strictly comply with existing corporate governancerules.8. Responsible citizenship.For each of these principles, specific indicators havebeen defined in close cooperation with the appropriatedepartments of Arcelor.In 2003, the Management Board defined Arcelor’sPrinciples of Responsibility, which set out the visionand ethical standards of the Group. These Principlesdefine Arcelor’s commitment to its employees,customers, shareholders, bankers, suppliers andother stakeholders. They also include Arcelor’scommitments to society and integrate, among otherelements, compliance with the Principles of the UnitedNations Global Compact (see page 121).90ANNUAL REPORT ARCELOR 2003

At the end of 2003, a special campaign was launchedto inform and increase the awareness of Arcelor’s98,000 employees in respect of SustainableDevelopment issues. An educational handbookwas distributed throughout the Group for the purposeof mobilising all employees to apply the conceptsof Sustainable Development within their areas ofresponsibility.Three projects, explained in detail in the followingpages, deserve to be highlighted because they illustratewell Arcelor’s ambitions in the area of SustainableDevelopment:1. After the unsatisfactory performance in 2002 in thearea of safety at work, the Arcelor Management Boardlaunched a comprehensive campaign for all Groupemployees to increase their awareness of the absolutenecessity to reduce the number of work-related accidents,their frequency and their severity. Regular ManagementBoard visits to the production plants made both executivesand employees aware of the great importance of safetyat Arcelor. A convention on the topic of safety at workwas initiated within the European Works Council andwas held in Bilbao (Spain) at the beginning of February2004. Arcelor’s performance improved in 2003, evenif more still needs to be done to reach “zero accidents”.The average frequency rate dropped from 9.0 to 5.5and the severity rate from 0.44 to 0.38.2. The announcement of the Group’s strategic orientationsin 2003 implied a cutback in jobs at several Arcelorproduction sites in Europe. At the time the announcementswere made, Arcelor’s management clearly indicated itswillingness to assume the social and environmentalconsequences of its strategic decisions. In concreteterms, Arcelor made a commitment to set up assistanceprogrammes to outplace personnel of these sites andreindustrialise the affected labour market.3. At the environmental level, Arcelor has not waitedfor the ratification of the Kyoto Protocol to makecommitments to reduce the production of greenhousegases. Since 1990, Arcelor has reduced its productionof CO 2 in Europe by 18% in absolute terms and by23% in relative terms, exceeding the average reductionof 8% by 2010 to which the countries of the EUcommitted. Furthermore, Arcelor also launched a vastresearch programme to produce steel with minimumCO 2 emissions.This project, undertaken in cooperation with other steelindustry participants, received the support of theEuropean Commission.However, the Management of Arcelor had to sound thealarm with the political authorities concerning theeconomic and social consequences of implementingthe Kyoto Protocol in Europe alone.Arcelor’s Sustainable Development initiatives earnedrecognition from several outside sources in 2003and early 2004. We mention three: the U.S. ratingsagency Innovest gave Arcelor an “AAA” rating for itsSustainable Development policy; the Institut Belgo-Luxembourgeois des Réviseurs d’Entreprise (Belgo-Luxembourg Auditors’ Association) awarded Arcelorits 2003 prize for the “best annual report on SustainableDevelopment”; and Arcelor entered the FTSE4 Goodsocially responsible index on March 22, 2004. Theseawards encourage Arcelor’s management to vigorouslypursue an ambitious strategy of SustainableDevelopment supported by all employees of the Group.Several projects are currently receiving special attentionfrom the Sustainable Development team: firstly, theimplementation throughout Arcelor of quantifiable andmeasurable key performance indicators to provideeffective guidance for the progress of the Group; andsecondly, the development of a purchasing policythat fully integrates the obligations of Arcelor’s suppliersto Sustainable Development.In 2004, the Management of the Group will make everyeffort to ensure that the 98,000 Arcelor employees arefully aware of the Group’s Sustainable Developmentcommitment based on the theme “Arcelor, steelsolutions for a better world”. The Group’s goal is a truetransformation of its corporate culture.sustainable development > implementation of the policyANNUAL REPORT ARCELOR 2003 91

Arcelor’s principles Principal achievements in 2003 Targets1. Group profitability• Improvement in return on capitalemployed (ROCE):8.5% versus 6.6%• Substantial reduction of debt• Synergy objectives exceededin 2003• 15% ROCE over the cycle• Further reduction in debt toobtain a ratio of less than 50%• 700 M€/year by the end of 20062. Health & safety• Significant improvement in safetyduring 2003• Safety convention set up withthe European works council• Identification of the major riskswith action plans for all processesof the Group’s business model• Identification of the major risks atCorporate level and operationalunits level• Zero accidents. Zero fatalities• Accident frequency rate targetbelow 5.0 in 2004• Identification of the major risksat sites level3. Environmental protection• Major production units areISO 14001 certified• Stabilisation of CO 2 emissions• Significant reduction in waterpollution• Recovery of 95% of by-products• 100% of the Group’s majorfacilities ISO 14001 certified• 25% reduction from 1990 CO 2emission levels in Europe by 2012• Recovery of 98% of by-products4. Open dialogue withall stakeholders• Social dialogue within theEuropean Works Council• Major satisfaction surveyamong managers• Open days at all majorproduction sites• Permanent dialogue with allstakeholders of the Group• Follow-up on the results of themanager satisfaction survey92ANNUAL REPORT ARCELOR 2003

Arcelor’s principles Principal achievements in 2003 Targets5. Skills development6. Innovation and Quality• Launch of Arcelor University (700middle managers trained in 2003)• Launch of 360° evaluation tools• Implementation of enhancedtraining plans as part of siterestructuring• Establishment of Arcelor’sScientific Council• Launch of the ULCOS project(Ultra Low CO 2 SteelmakingProcess)• Concentration of researchresources and research centrespecialisation by market(Flat Carbon Steels)• Preparation of the Europeansteel platform with our partners• Development of distancelearning tools• Extension of the 360° toolsto all sectors• Continued pursuit of enhancedtraining plans• Increase research synergieswith customers• Reduce result delivery time,retaining the same effectivenessand reducing costs• Increase the Group’s customersatisfaction ratingssustainable development > implementation of the policy7. Corporate governance• Approval and distribution ofthe Principles of Responsibility• Improved disclosure on theboards member’s remuneration• Compliance with the moststringent international principlesof corporate governance8. Corporate citizenship• Assistance plans for allrestructuring projects• Support for humanitarian,cultural, sports and solidarityprojects in all regions in whichthe Group is present• Strengthen social ties in thecountries in which the Groupis presentANNUAL REPORT ARCELOR 2003 93

Organisation of Sustainable Development in ArcelorSustainable Development is a key element contributingto the integration of the various entities into Arcelor’scorporate culture. It is an innovative way to help thesectors share the same operating tools and principles.Sustainable Development stimulates the exchange ofbest practices throughout the Group and the deploymentof the highest corporate, environmental and socialstandards throughout Arcelor’s various businesses. Inthis process, Sustainable Development contributes tovalue creation. Better process efficiency, reduced socialand environmental risks, and a better image andreputation, all contribute to reinforce Arcelor’s positionas the leader in its industry.The eight principles of Arcelor’ SustainableDevelopment strategyFor the record, eight Sustainable Development principleswere defined in 2002. They were not modified in 2003:1. Group performance,2. health & safety and risk management,3. protection of the environment and the preservation ofscarce resources,4. open dialogue with all stakeholders,5. skills development,6. innovation and quality,7. corporate governance,8. responsible citizenship.Measuring the progress madeMeasurable and quantifiable progress indicators foreach of the eight principles of Arcelor’ SustainableDevelopment strategy have been applied throughoutthe Group. These indicators are true management tools.They are a reflection of the progress already achievedand are part of the evaluation system for seniorexecutives and managers of the Group.These indicators were upgraded in 2004 in terms ofboth quality and quantity.Who is involved in Sustainable Development?Sustainable Development is directed by a steeringcommittee (Management Board) and led by aSustainable Development Directorate. This departmentworks in close collaboration with the Directorates ofFinance, Investor Relations, Synergies, Environment,Health and Safety, Business Risk Control, HumanResources, Innovation and Research, Purchasing andCommunications inter alia.Contribution to the integration processA working group composed of 8 members of theManagement Board and 32 senior executives of theGroup directed four major projects related to theintegration of the Group: Principles of Responsibility,Exchange of Best Practices, Deployment of SustainableDevelopment and Executive Training. New progressgoals were added during the annual ExecutiveConvention in 2003 (300 participants) and implementedduring the second half of 2003.For 2004, three initiatives were launched on the themeof Transformation to improve cost effectiveness andleadership, customer satisfaction and a corporate spirit.Employee awareness of SustainableDevelopmentA handbook on Sustainable Development, printed in aportable format, was distributed to all Group employees– managers, staff and operatives – because it is theresponsibility of everyone to work for safety, theprotection of the environment, the sharing of knowledgeand respect for the ethics of the Group.In addition, Campus Manager training (ArcelorUniversity), Group sector and function-orientedconventions, the intranet, internal newsletters, andManagement Board plant visits are all vehiclesto increase Group employees’ awareness of theambitions and commitments to promote SustainableDevelopment.94ANNUAL REPORT ARCELOR 2003

Arcelor’s Sustainable DevelopmentKey Performance IndicatorsThe table below summarises the Sustainable Development performance indicators that have been institutedthroughout the Group. They are based on the Global Reporting Initiative (GRI) and industry benchmarks.The indicators apply to the entire Arcelor group, except where specifically noted.indicators 2002 2003Principle 1 - Sustainable and profitable growth (page 98)Debt Gearing (%) 74.4 54.8Management gains Synergies (€M compared with 2001) 190 405Principle 2 - Health & safety management and risk management (page 99)Safety Number of fatal accidents, Arcelor employees 11 5Safety Number of fatal accidents, contractors 13 6Safety Accident frequency rate at Group level 9 5.5Safety Accident severity rate at Group level 0.44 0.38Product safety Number of steel safety data sheets 393 431Product safety Number of by-product safety data sheets 31 63Risk Management Level of identification and control of the Corporate Corporate +major risks (top-down approach)operating unitsRisk Management Scope of the risk management function 17 of All 25 processesthe 25 processesin the Arcelorbusiness modelsustainable development > Arcelor sustainable developmentPrinciple 3 - Commitments in respect of the environmentand the preservation of scarce resources (page 103)Environmental Percentage of employees working in 80 96management system an ISO 14001 certified environmentEnvironmental Percentage of ISO 14001 61 77management system certified production sitesAir pollution Ducted dust (kg/t steel) 0.26 0.25Air pollution SO 2 emissions (kg/t steel) 1.11 1.09Air pollution NO x emissions (kg/t steel) 1.22 1.25Air pollution CO 2 emissions (t/t steel) 1.50 1.51Water Measured water consumption (inflow) 6.6 6.6Water Water discharge (m 3 /t steel) (outflow) 4.4 4.5Water quality COD (kg/t steel) 238 190Water quality Suspended matters in water (kg/t steel) 149 116Waste Unrecovered waste (kg/t steel) 55.8 59.4ANNUAL REPORT ARCELOR 2003 95

indicators 2002 2003Principle 4 - Open and responsible dialogue with all stakeholders (page 108)Dialogue Percentage of employees having access to 100 100a dialogue/consultation/representation/expression of grievances structureDialogue Establishment of programmes for meetings Yes Yeswith stakeholders and NGOs at the majorproduction plantsDialogue Percentage of major plants holding open days 100 100Manager satisfaction Implementation of a manager satisfaction survey No Yesin the course of the yearStakeholder satisfaction Implementation of customer Yes, by sector Yes, by sectorsatisfaction surveysStakeholder satisfaction Implementation of image/reputation surveys Yes Yesin the vicinity of the major production plantsPrinciple 5 - Skills development around common values of quality and efficiency (page 111)Multicultural group Number of nationalities in the workforce 35 40Multicultural group Total workforce as of December 31 104,241 98,264Employment Percentage of employees working Not consolidated 2.7%under a temporary contractEmployment Average seniority of employees (years) 22 21.5Employment Average age of employees (years) Not consolidated 44.8Employment Percentage of women in executive positions 7 8.2Employment Percentage of women 10 10in the total Group workforceEmployment Percentage of disabled persons 4.2 4.2in the total Group workforceEmployment Percentage of employees with 12 12flexible working hoursTraining and mobility Training (number of hours per employee 30.6 39.6per year)Remuneration Percentage of the workforce having 50 58.6a financial interest in the company’s resultsRemuneration Percentage of the workforce undergoing 35 37.6a yearly performance evaluation (interview etc.)Remuneration Percentage of managers undergoing 77 82a yearly performance evaluation96ANNUAL REPORT ARCELOR 2003

indicators 2002 2003Principle 6 - Innovation for value creation and support of Sustainable Development (page 113)Innovation Arcelor gross research expenditure (€M) 153 142Innovation Global research efforts by Arcelor +partners in joint projects (€M) - 194Innovation Proportion of R&D devoted to the environment (%) - 38Principle 7 - Corporate governance (page 116)Corporate governance Number of meetings of Board of Directors 5 8Corporate governance Average attendance of members atBoard meetings (%) 90.6 87Corporate governance Number of Audit Committee meetings 5 8Corporate governance Average attendance of members of 100 97Audit Committee (%)Corporate governance Number of Appointments and 4 6Remuneration Committee meetingsCorporate governance Average attendance of members at 100 87.5Appointments and RemunerationCommittee meetings (%)Corporate governance Independent Board members 9 out of 15 9 out of 15+ 3 employee + 3 employeerepresentatives representativesCorporate governance Number of nationalities represented 6 6on the Boardsustainable development > Arcelor sustainable developmentPrinciple 8 - Responsible citizenship (page 117)Restructuring/employment Percentage of sites benefiting from redeployment 100 100plans in case of closures or cutbacks (%)Restructuring/employment Percentage of partnerships with local authorities 100 100for the repair of the economic and socialfabric in case of site closures (%)Support for Budget for supporting/sponsoring 8 8social projectssocial projects (€M)ANNUAL REPORT ARCELOR 2003 97

Group profitabilityObjectives• Average pre-tax return on capital employed (ROCE)of 15 percent over the cycle- Structural improvement of profitability- Strict control of investment- Reduction in working capital requirement• Debt reduction- Gearing below 50 percent on average over the cycle• Achieve ambitious gains from synergies- 300 € million/year at end 2003- 700 € million/year at end 2006Improve financial performanceProfitability is one of the vectors of Arcelor’s strategy.Indeed, without financial performance, Arcelor cannotimplement its Sustainable Development. This vectorincludes profitability (ROCE), debt reduction, efficiencysavings and synergy targets.Arcelor’s results in 2003 grew significantly in spiteof the difficult economic environment in Europe. Thisperformance went hand in hand with a net debtreduction of 1.5 billion euros, enabling the Group toachieve its objectives and opening up new growthopportunities. This positive development is based onsynergies of 405 million euros, more than 100 millioneuros above target, a policy of stable margins, andinvestments and joint investments in several emergingmarkets.98ANNUAL REPORT ARCELOR 2003

Health & safety and risk managementObjectives• Prevention and control of major risks- Full implementation of Seveso directives- Absolute safety of plants, processes and products• Significant reduction in the frequency and severity ofworkplace accidents- Zero serious accidents/fatal accidents- LTA frequency (lost-time accidents per million hoursworked) < 5- Accident severity rate (number of workdays lost toaccidents per thousand hours worked) < 0.30• Total safety of products in useSignificant improvement in safety resultsThe year 2003 saw a significant improvement in theGroup’s safety indicators. The frequency rate ofaccidents dropped nearly 40% between 2002 (9)and 2003 (5.5) and the severity rate dropped to 0.38(down 13% from 2002). After a difficult year in 2002with regard to fatal accidents (11 Arcelor employeesand 13 subcontractor employees), a very significantdrop occurred in 2003 (5 Arcelor employees and6 subcontractor employees). However, this number offatalities is still too high and efforts are underwayto drastically reduce this number in 2004. The goalremains “zero accidents”, which has already beenachieved in many Group companies.“Safety Thursdays” to mobilise all employeesWithin the framework of the health and safety policy, theManagement Board decided to visit the plants as oftenas possible to show support for existing or new safetymeasures.By going into the field, the Management Board intendsto reinforce the principles of Arcelor’s health and safetypolicy, support ongoing activities, and contribute to thepromotion of the best practices in this area.In 2003, the Management Board systematised thesemeasures with “Safety Thursdays” and visited aboutfifteen plants of the Flat Carbon Steels, Long CarbonSteels, Stainless Steels and Distribution-Processing-Trading sectors, located in Belgium, France, Luxembourg,Brazil, Germany and Italy.During his visits, Guy Dollé insisted on the exchange ofinformation and methods as well as on the transfer ofbest practices within Arcelor.The GESIM challenge in FranceIn June 2003, 22 departments or units within Arcelorreceived a safety award at the annual award ceremonyorganised in France by the Steel and Mining IndustriesAssociation (GESIM). This ceremony was theculmination for 33 steel industry teams of a year ofwork aimed at reducing occupational accidents in theirplants.One of the success factors of the challenge is theinvolvement of all members of the candidate teamand the various players at the plants: operators,management and members of the Health and SafetyCommittee (CHSCT). The methods used by each teamare thus definitely participatory, with working groupsbeing established for each action. This teamworkencourages the emergence of new ideas to promotesafety, with the accent in 2003 on prevention andthe responsibility that each person has individually andnot just as a team.While this French challenge does not yet have anyimitators in Europe, an Italian team from Arcelor didparticipate in the 2003 competition.sustainable development > Group profitability/health & safetyANNUAL REPORT ARCELOR 2003 99

Arcelor Health and Safety policyArcelor promotes the Sustainable Development of steelwithin the scope of the Group’s broader responsibilitiesas an exemplary corporate citizen. Arcelor’s Health andSafety policy reflects this approach and is an integralpart of the long-term development of the enterprise.This policy aims to promote the well-being of all partners:• The well-being of people who are involved in Arcelor’sactivities is a key factor in the sustainable performanceand successful growth of the enterprise;• The well-being of people requires active preventionin the areas of industrial and health risks, against thebackdrop of increasingly acute perception of exposureto risks;• The well-being of people requires efficient controlover organizations and materials in order to limit theimpact of an accident or incident.This concern applies not only to Arcelor personnel,but also to service providers who work at Arcelorsites, to people who live near the Group’s facilities, toemployees of customers who use Arcelor products,and to end users.Arcelor is committed to being a benchmark in the areasof workplace health and safety.This commitment is expressed through twoconcrete principles:• Safety is an integral part of everyone’s work, includingboth organizational aspects and execution.• No other factors can take priority over the imperativesof safety.• Safety is first and foremost the responsibility ofmanagement, but it also requires the active involvementof all personnel. The shared objective is the reductionof the risks of incidents, accidents and illness, withinthe scope of a commitment to achieving continuousprogress.To achieve this objective, Arcelor has defined thefollowing concrete commitments:1. Identify, evaluate, eliminate or minimize industrialand health risks by involving all participants duringplanning and implementation phases;2. Make available to all the means and resourcesnecessary for carrying out tasks safely and mandateall levels of management to comply;3. Hold all employees accountable for their own safety,the safety of their colleagues and the safety of thecompany’s facilities;4. Give all employees or service providers the right todemand respect of safety procedures and to warnthe hierarchy at all levels; insist that management createa work environment that allows everyone to exercisethis right;5. Emphasize safe behavior and enhance the personalcommitment of everyone to respect health and safetyrules and regulations; every Arcelor employee has abasic responsibility to ensure a safe and healthy workplace;6. Provide training to increase knowledge of installations,processes and procedures;7. Develop a partnership with customers regardingtoxicology and eco-toxicology;8. Ensure that all related internal and external communicationsare open and free;9. Be exemplary with respect to legal and regulatoryobligations.Guy Dollé,CEO Arcelor group100ANNUAL REPORT ARCELOR 2003

Safety CharterWhen it was created in 2002, Arcelor adopted a SafetyCharter to be applied throughout the Group. It coversthe following four areas: Health, Safety, IndustrialSafety and Product Safety, i.e. it concerns not only theemployees of the Group but also the service providersat the various plants, the people residing near ourfacilities, the employees of the customers who useArcelor products and the consumers.Arcelor Contractors Safety Award forthe Heckett Multiserv GroupOn September 18, 2003, Guy Dollé presented Geoff Butler,CEO of the Heckett Multiserv Group, one of the mainsuppliers of industrial services to Arcelor, with the first“Arcelor co-contractors’ Health and Safety award”. Thisnew prize will now be awarded every year to recognisethe results of the best Arcelor contractor in that area.In fact, Arcelor has decided to have a single safetypolicy that applies both to Arcelor’s own personnel andto the personnel of subcontractors because the latterrepresent about 25% of the workforce in the plants, butunfortunately make up too great a proportion of seriousor fatal accident victims. This first Arcelor Health andSafety award is an integral part of the Group’s SustainableDevelopment policy, of which safety is one of the priorityvectors, and of the desire of Arcelor’s purchasingdepartment to integrate safety into its purchasing policy,in particular in the form of a “co-contractor safety mark”.Arcelor joins ICSIIn June 2003, Arcelor joined Total, Airbus and EDF infounding the Institute for an Industrial Safety Culture(ICSI). The ICSI works to develop and promote a cultureof industrial safety at all levels to be shared with electedofficials, local communities and associations. Improvingthe safety culture should, in the medium term, make itpossible to expand the dialogue between “plant andcity”, both within the existing advisory bodies and withinthe Local Information and Coordination Committees(CLIC) that will be established around high-risk industrialplants under the French law of July 2003 relating to theprevention of technological and natural risks and todamage repair. To carry out its mission, the ICSI actsprimarily through research into the technical, social andhuman aspects and by educating those involved withindustrial safety and increasing society’s awareness ofthese issues.sustainable development > health & safetyANNUAL REPORT ARCELOR 2003 101

Safety certificationsSeveral Arcelor locations around the world haveselected the issue of safety certification to complementtheir search for industrial excellence, which is achievednot only at the level of the maintenance and use of theproduction lines and the design of new processes andproducts, but also at the level of employee safety. Thiscertification approach complements the commitmentsto safety made by the Group Management Boardand the European Works Council. Examples of safetycertifications obtained in 2003 include: Eurogal (Liège,Belgium) OHSAS 18001, Juiz de Fora (Belgo Mineira,Brazil) BS 8800, Vega Do Sul (Brazil) OHSAS 18001,Etxebarri (Vizcaya, Spain) OHSAS 18001.Bilbao Health & Safety ConventionThe Health and Safety Convention held in Bilbaoon February 3 and 4, 2004 under the sponsorship ofthe European Works Council (EWC) brought togetherabout 250 people representing the employees andmanagers of the Group as well as experts of theEuropean Agency for Safety and Health at Work,suppliers and customers. This first joint meeting ledto the formulation of a series of recommendationsaimed at strengthening occupational health and safety.The future programmes adopted include:1. preparation of a Health Charter as part of the“Panhealth Policy”, modelled on the Arcelor SafetyCharter established at the time of the Arcelor merger,2. continued joint dialogue on safety, in the form of amonitoring body under the auspices of the EWC,3. continue and intensify safety training efforts for allplayers, including managers, with the support of ArcelorUniversity.Deployment of the Risk ManagementapproachIn 2002, Arcelor’s Risk Management concentrated onestablishing an initial top-down mapping of Arcelor’srisks on the basis of interviews with members of theGroup’s Management Board and with those responsiblefor cross-disciplinary functions. An additional stepwas taken in 2003 because the major risks are nowidentified both at Group level and at Business Unit level.Actions plans have been defined and implemented foreach of these levels.The themes covered were:1. prevention of occupational illness,2. prevention strategies in respect of major industrialrisks,3. safety training policies,4. the company and co-contractors: what preventionpolicies?5. implementation of the European directive on riskassessment.102ANNUAL REPORT ARCELOR 2003

Protection of the environmentand of scarce resourcesObjectives• Compliance with all legal and regulatory requirements• ISO 14001 certification for all production facilities byend 2004• Significant contribution to reduction of greenhousegases (CO 2 , etc.)• Reduction of pollutant emissions and environmentalnuisances (water, dust, S0 2 , NO X , etc.)• Reduction of water consumption/raw material extraction(ore, etc.) and improvement of energy efficiency• Promoting and encouraging recycling wherever possibleImprovements in environmental performanceArcelor continued its efforts promoting respect for theenvironment and recorded improvements in generalenvironmental performance in 2003 compared to 2002.Very high degree of ISO 14001 certification forthe Environmental Management SystemMindful of respect for the environment and in order toencourage the adoption of a continuous improvementapproach in this area, Arcelor’s environmental team seta goal to obtain ISO 14001 certification for all of theGroup’s production and processing plants by the end of2004. This objective was almost achieved by the end of2003, as by this date 96% of the Group’s employeesworked at an ISO 14001 certified location. 77% of plantsare now certified, including all the major productionplants of the FCS, LCS, Stainless and DTT sectors. Theremaining 23% are essentially small service units.sustainable development > protection of the environmentEnvironmental CharterIn its desire to promote environmental excellence withinits various entities, the Arcelor group drew up anEnvironmental Charter. This charter places emphasison minimising the environmental impact and nuisancegenerated by the production facilities, developingenvironmentally friendly products, and promotingtransparency and environmental awareness.ANNUAL REPORT ARCELOR 2003 103

Arcelor Environmental PolicyArcelor’s mission is to develop, produce and sell steelin its various forms and grades, processed steelproducts and associated products for the benefitof its customers whilst respecting the environment,by exploiting and creating value through its intrinsicproperties.Steel is the material of choice for environmentalprotection. Not only it is environmental-friendly butalso outperforms other materials because it is readilyrecycled.Environmental excellence is promoted by the followingprinciples, which are to be incorporated into all theGroup’s activities and assured by means of an environmentalmanagement system:1. Sustainable development, providing a long-termbalance between the environment, the economy andsocial well-being;2. Continuous improvement in environmental performance,including a permanent concern for the surroundingsand a maximum prevention of disturbances;3. Development, improvement and application of productionmethods whose environmental impact is as lowas is reasonably possible;4. Development and manufacturing of products whichfocus on environmental performance during their useand subsequent recycling, in close collaboration withcustomers and suppliers;5. Efficient use of natural resources and energy;6. Commitment of each individual in the organization,and management in particular, to environmentallyfriendlyproduction and compliance with legislation andArcelor’s commitments;7. Development of environmental awareness throughinformation and training;8. Transparent and open communication with all stakeholdersconcerned.Luxembourg, February 18, 2002Guy Dollé,CEO Arcelor group104ANNUAL REPORT ARCELOR 2003

Significant efforts to fight CO 2 emissionsWithout waiting for Kyoto, the Arcelor group has formany years pursued projects to improve the iron orebasedsteelmaking process in order to reduce CO 2emissions. Thanks to these important efforts, theemission reductions largely exceeded the global goalsset by the political authorities. For example, Arcelorreduced its CO 2 emissions by 18% in absolute valueand by 23% per ton of raw steel between 1990 and2002, while Europe, within the framework of the KyotoProtocol, committed to reduce its emissions by 8%between 1990 and 2008.Within the framework of Eurofer and together with otherEuropean steel producers, Arcelor has activelyparticipated in the discussions on the proposedEuropean directive regarding the allocation and tradingof greenhouse gas emission rights pursuant to theKyoto Protocol. Despite these improvements, the finalversion of this directive still poses many problemsfor the steel industry. It will distort competition notonly between materials (certain materials would beexempted by the directive in the short term), but alsobetween European steel producers and, in particular,with regard to companies producing steel in countriesthat refused to ratify Kyoto (USA and Russia inparticular). This is the reason the Arcelor group decidedto lodge an appeal with the European Court of Justiceon January 15, 2004. At the same time, the Groupnegotiated, on a country-by-country basis, improvedemission rights that permit not only safeguard theproduction needs at each facility but also contribute,through voluntary commitments, to the national plansto reduce greenhouse gases.Thus in France, since 1990, Usinor/Arcelor group hasundertaken a number of initiatives that have reducedCO 2 emissions and that can be qualified as veryfarsighted actions. The actual numbers, as wellas any future use thereof, form part of the currentrecommendations issued by AERES (Association ofCompanies for the Reduction of Greenhouse Gases).Evaluated in accordance with these principles, CO 2emissions amounted to 46 million tonnes for the period1990-2002, while the production of crude steel actuallyincreased by about 13% and specific CO 2 emissions(emissions per ton of steel produced) declined 22%.In Luxembourg, the changeover from the blast furnaceprocess to the electric furnace process enabled a92% reduction in CO 2 emissions between 1990 and2002.The control of greenhouse gas emissions is thus a keycommitment for the Group in all countries in which itoperates. In France, Arcelor signed voluntary CO 2reduction agreements for the periods 2003-2004 and2005-2007. A similar approach was pursued in otherEuropean countries where the Arcelor group has largesteel production facilities. In Belgium, Sidmar and ALZ,together with other large industrial energy users,undertook to make the production plants energyefficient by 2012 and to reach levels of performancethat are equal to the best practices in this area.This benchmarking of best practices will be carried outby a special commission that includes the FlemishGovernment, the industry itself, and an independentoversight entity. Improving energy efficiency will result ina reduction of specific CO 2 emissions.The future of the steel industry will depend on its abilityto upgrade its processes, particularly the process ofproducing iron from ore, in order to significantly reduceCO 2 emissions and meet society’s expectations by2030-2050. At the end of 2001, Arcelor took theinitiative to launch studies for an ambitious project todevelop breakthrough technologies (ULCOS, ultra-lowCO 2 steelmaking process) in cooperation with four othersteel groups (Nippon Steel, ThyssenKrupp Stahl, Corusand Posco). This project is coordinated by theInternational Iron and Steel Institute (IISI) and is basedon regional initiatives. In Europe, Arcelor is leading theULCOS project (Ultra Low CO 2 Steelmaking) which willevaluate all possible techniques such as the recycling ofgases within the blast furnace, the use of hydrogen,biomass, and technologies for separating and storingCO 2 in suitable geological structures.The ULCOS programme is part of a multidisciplinaryresearch platform co-financed by the innovationprogrammes of the European Commission on theinitiative of Commissioner Philippe Busquin.sustainable development > protection of the environmentANNUAL REPORT ARCELOR 2003 105

Implementation of a monitoring planIn order to standardise the environmental parametersmonitored by the various Arcelor sites and thefrequency of measurement, a monitoring plan was setup for all Arcelor sectors. This plan defines the air andwater parameters that need to be measured for eachproduction facility.To optimise the collection and tracking of theenvironmental performance indicators, Arcelor hasinstalled a single environmental information systemthat promotes both quarterly reporting and theidentification of best practices within the Group.The results for 2003 have been estimated on the basisof data provided by the integrated plants, which makeup the dominant portion of the total results of the Groupand account for more than 90% of the dust, SO 2 , NO xand CO 2 emissions and 80% of discharges into thewater. The performances for the other plants areestimated by extrapolating the results for 2002.Air pollution has remained unchanged for both ducteddust and acid emissions, with nitrous oxides evenshowing a slight increase. These results show thedifficulty of achieving additional reductions in emissionsafter a decade of progress that saw a decrease insulphur oxide emissions of about 60%.Recovery of by-productsBy-products, although often classified in regulationsas waste, are managed by Arcelor as products, usinga rigorous system of quality management, and arealready recovered at a rate close to 95%. They areused in the manufacture of products as diverse ascement and concrete, fertilisers and agriculturaladditives, roads, dykes, mineral wool for insulation,glass, ceramics, pigments, magnets, plastics such aspolystyrene, electrodes for the aluminium industryor electric steelmaking, and cosmetics. Some aresimply recycled by Arcelor into hot metal or steel.Arcelor has set up a new organisation to stimulatesynergies and intensify the sharing of the best practicesfor by-product management by all its production units.Finally, a plan for reducing non-recovered residues hasbeen developed by the production sites that exceed50 kg/t in non-reused residues. The project to reducenon-recovered residues includes a definition of theresidues and the current development of a uniquethesaurus covering residues for all entities of the Group.106ANNUAL REPORT ARCELOR 2003

PRIMUS ® pilot projectLaunched in February 2003, this process developedby Paul Wurth in cooperation with ProfilARBED, is anew promising process for complete waste recycling(electric furnace dust and oily sludge). It allows therecycling of iron and non-ferrous metals such as zinc inan economical and environmentally friendly way.This process is designed to treat all by-products thathave a certain concentration of metals in order to recyclethem within their respective production lines.The process takes place in a stacked furnace in whichcoal is used as a reducing agent and energy source. Itwas designed to reduce, in the first stage, the ironoxides and extract the heavy metals contained in theby-products in order to recycle them in the steelproduction and, in the second stage, to melt the ironwith inert materials for the production of hot metal andslag. This process does not generate any wasteproducts.Examples of environmentalinvestments in 2003- Spain: biological treatment station to treat waste waterfrom the coking plants at Avilés and Gijón.- France: increase in the dust removal capacity of theFos sinter plant main chimney.- Belgium: secondary dust removal in the converters atSidmar and dust removal at the furnace discharge endin the coking plant at Seraing.- Brazil: installation of a new dust removal system in theelectric furnace at Belgo Mineira Piracicaba.- Germany: replacement of the electro-filter for secondarydust removal by a bag filter in the StahlWerke Bremensinter plant. The StahlWerke Bremen cold-rolling millchanged its pickling to hydrochloric acid pickling withacid regeneration.Environmental awardsIn December 2003, Sidmar (Belgium) received an awardfrom the Institut Belgo-Luxembourgeois des Réviseursd’Entreprise (Belgo-Luxembourg Auditors’ Association)for the best environmental report.sustainable development > protection of the environmentANNUAL REPORT ARCELOR 2003 107

Dialogue with all stakeholdersObjectivesEstablishment of close, transparent dialogue at all levelsof the Group• Employee representatives on Board of Directors• European Works Council and local committees• Annual conference of Group managers• Dialogue between all line managers and their teamsat least once per month• Individual interviews for all staff (target: 100 percentcoverage by 2005)• Exchange of information with external partners• Regular exchanges with a range of constituencies(government, local committees, NGOs, etc.)Progress achieved in the dialogue withall stakeholdersThe importance of the dialogue with all of Arcelor’sstakeholders is expressed by the “4P” approach toSustainable Development: along with the trio of “People-Planet-Profit”, Arcelor has added the P for “Partnership”to show the importance given to a permanent andconstructive exchange of ideas with all of the Group’sstakeholders. Several initiatives were taken in 2003to strengthen this dialogue.Dialogue with employeesEuropean Works CouncilArcelor believes that social dialogue at the highestlevel is a key element for success. Thus, the Groupdecided to create an information and consultationoffice at the transnational level that includes employeerepresentatives as well as Management. Thus, Arcelor’sEuropean Works Council was born in May 2002, only afew weeks after the creation of the Group. Its primarymission is to establish corporate dialogue based onopenness, truth and a forward-looking attitude in orderto strengthen the solidarity and cohesion needed byArcelor to meet the new challenges for the Group.To help them to fully exercise their role as a forcefor consultation and cooperation, the members of theEuropean Works Council underwent two days ofspecial training in the areas of comparative labour lawand intercultural management. Four consultation andinformation processes were launched in 2003, followedby opinions on the major restructuring and divestmentprojects in the Group. These processes are based on anoverall strategy to ensure complete understanding andproper preparation of the assistance measures requiredas part of our socially responsible restructuring policy.Five joint working groups (managers and employeerepresentatives) worked on questions of health andsafety during 2003 (prevention of occupational illnesses;organisation of prevention of major industrial risks;policies on safety training implemented by the Europeandirective on risk evaluation; subcontractors and preventionpolicies) and prepared the health and safety conventionheld in Bilbao in February 2004 (see Health & safety andrisk management on page 99).On February 13, 2003 the Commission of the EuropeanUnion declared before the European Parliament thatthe agreement setting up Arcelor’s European WorksCouncil was “considered by many as ahead of its timeand very effective”. The EWC has launched a processto evaluate its operations that will be completed inmid-2004, and is intended to improve its efficacy.Dialogue at all production sitesIn a desire to respect the local social traditions, Arceloris conducting local dialogue with employee representativesat business unit and plant levels. This dialogue acquiresspecial importance during industrial changes. Since theGroup’s strategic decisions will produce several majorchanges in respect of employment, this dialogue hasbeen intensified in line with local legislation and specificlocal requirements. The objective in each case has beento provide assistance to all employees affected by thenecessary industrial changes.108ANNUAL REPORT ARCELOR 2003

Employee satisfaction surveyIn October 2003, Arcelor launched an extensivesatisfaction survey of middle management in the Group.5,044 people were interviewed in Europe.The results reveal overwhelming identification withArcelor’s strategy (97% of the managers think thatthe merger was necessary and 91% of the managersremain optimistic about Arcelor’s future). The resultsgenerally confirm the success of the integration process(work motivation is very strong, around 89%). Thissurvey also highlighted certain points in the area ofmanagement, leadership and interpersonal communicationthat deserve special attention. The executivesconcerned with these questions will follow up on thisissue in 2004.This survey will be expanded, repeated every two years,and supplemented by more specific surveys in eachsector or region.Customer dialogueOn the basis of the characteristics of the businessesand markets, Arcelor maintains preferred-customerrelationships with its customers to create for them a“win-win” situation. Listening to customers and theirconcerns in particular allowed Arcelor to concentrate itsresearch efforts on providing steel solutions that trulymeet their expectations. Product recycling, energysavings and the protection of the environment amongothers were specifically integrated into the work of thesales and research teams.With this in mind, on January 20, 2004 Arcelor broughttogether 250 of its most important customers inthe Cité des Sciences in Paris as part of the CLIMAXtrade show. In addition to the traditional themes ofsuch a show, the issue of Sustainable Developmentwas extensively covered with Mr J. M. Jancovici, aninternational expert.Dialogue with local communitiesArcelor plants are intensifying contacts with the localcommunities adjacent to the sites, both to solve anypossible environmental nuisance and to make themaware of the initiatives undertaken to reduce suchproblems.Open-door policyArcelor plants frequently host visitors during specialopen days, whether people from the local community,employees’ families, or schoolchildren from nearbyschools. The Sollac Méditerranée plant in Fos-sur-Merhosted more than 10,000 visitors in 2003. Thesemeetings, which encourage the exchange of viewswith site management, also allow Arcelor to makethe public aware of global issues such as respect forthe environment and safety.For this purpose, some Arcelor plants are beginning toestablish Sustainable Development spaces.Neighbourhood surveyAll Arcelor plants serve as spokespersons forSustainable Development on behalf of the Group.Their involvement in the local community is of primeimportance and is based on good neighbourly relations.The plants manage their contacts with the surroundingpopulation, meeting their needs and engaging in adialogue about how best to reduce any environmentalnuisance. In addition to image surveys conductedby almost all Group plants, some plants partner withother companies in their industrial complex to organiseexchanges of ideas with neighbours and localcommunities (for example, the Aceralia Gijón andAvilés plants in Spain in partnership with DuPont).Acesita earns the “Minas Ecologia 2003” prizeawarded by an independent NGO for environmentaleducation projects.The environmental NGO based in Minas Gerais,“Associação Mineira de Defesa do Meio Ambiente”(AMDA) awarded Acesita its “Prémio Minas Ecologia2003” prize in the “Environmental Education” category,thus recognising the company’s efforts to raisethe awareness of environmental issues among thepopulation of Timóteo, where the Acesita plant islocated, and the surrounding “Steel Valley” region.sustainable development > dialogue with all stakeholdersANNUAL REPORT ARCELOR 2003 109

Dialogue with societyArcelor participated in the preparation of theLuxembourg Sustainable Development CharterIn 2003, Arcelor, the largest industrial group inLuxembourg and also the leading employer in thecountry, was closely associated with the preparationof the National Sustainable Development Charterdrawn up on the initiative of the Union of LuxembourgEnterprises. This charter falls within the scope of theNational Sustainable Development Plan (PNDD)adopted by the Governing Council in April 1999 andconfirmed by the current Government. The PNDD isaimed at guiding the executive branch in implementingthe synergies of the three driving forces of SustainableDevelopment: economic efficiency, social solidarity,and environmental protection.Arcelor promotes Sustainable DevelopmentArcelor participated throughout 2003 in various workgroups and taskforces at the industry, national andinternational level in order to progress the issue ofSustainable Development: IISI (International Ironand Steel Institute), EU-Japan Centre for IndustrialCooperation, AFEP (Association française des entreprisesprivées), Entreprise & Environnement and MEDEFin France, Agoria in Belgium etc.Made of SteelWithin the framework of the European Made of Steelcampaign (www.made-of-steel.com), Arcelor supportednumerous educational events, stressing such notions asrespect for the environment, recycling and the durabilityof steel as well as safety. This multi-media campaign(press media, television spots, roadshows) reacheda very large proportion of the public in Belgium, Spain,France, Germany, Austria and Luxembourg.110ANNUAL REPORT ARCELOR 2003

Skills developmentObjectives• To support employee development programs- Two days of training per year for every employee- Training to foster multi-skilling and versatility- Training/development of managers and supervisors(Arcelor University)• To build on shared core values (delivering quality tocustomers; efficiency and profitability; partnership,dialogue and openness; respect for people and theenvironment; ethical approach to business)• To develop a fundamentally people-centered andefficient approach to relationships within the business(fewer levels of management, teamwork, quality circles,etc.)Human Resources at ArcelorThe management of Human Resources at Arcelor isbased on two key principles: subsidiarity (act locallywherever possible; act globally where necessary)and effectiveness (Human Resource managementis structured to contribute to the overall performanceof the company, both economic and social).Human Resource management operates withinthe framework defined by the company’s Principlesof Responsibility; it is monitored through local andglobal indicators, a selection of which is presentedon page 96. The relevance and effectiveness of theHuman Resource management policy are measuredboth by the operational managers and by specifictools such as the social surveys established in bothEurope (see dialogue with all stakeholders on page 108)and Brazil.sustainable development > skills developmentANNUAL REPORT ARCELOR 2003 111

Development of individual interviewsThe Group Human Resource policy conducted byArcelor companies matches skills and positions withinthe Group. This requires an extensive dialogue betweenmanagers and their team members, and the developmentof individual interviews, which become an importantopportunity to assess past performance, define futureobjectives in line with the objectives of the unit, and todiscuss the professional future of the employee. In2003, the Group initiated the first 360° evaluationprogrammes, which will be extended to all Arcelordivisions in 2004.The individual meeting assumes its full importancewithin a policy of forward management of jobs andskills conducted at all levels and for all employees.This forward planning is a necessary requirementfor controlled management of current and futurerestructurings.Development of expertiseInnovative managerial training courses at ArcelorUniversity combine face-to-face knowledge acquisitionand the use of distance learning tools to completeprojects in real time, in the field, with quantifiedeconomic objectives. Arcelor University offers theresources to develop the managerial and technicalskills of managers and technicians at Arcelor: thus, in2003, 700 managerial employees participated in varioustraining programmes. In order to improve continuouslythe quality of the training offered, every session isevaluated by the participants and their superiors.The process of identifying and grooming high achieversamong middle management is conducted in theBusiness Units and the Sectors, while special effortshave been made to improve the leadership skills ofall Arcelor managers. These skills are necessary todeal with current changes, but also to improve theorganisational flexibility of all components of thecompany (plants, of course, but also sales forces andback-office functions).RemunerationThe remuneration policy is designed to reward performanceas well as the competence of line staff. Formanagers, this policy is aligned with the Managementby Objectives project, which involves all of the Group’stop-level managers. In the MBO programme, managerialpersonnel are henceforth evaluated with respect tofinancial performance, but also based on criteria relatingto results obtained in terms of occupational safety,environmental protection and the level of satisfaction oftheir team members. Compensation is only one aspectof a global compensation and benefits policy.Sharing best practicesThe sharing of best practices is one of the requirementsfor Arcelor’s overall performance. The networking ofmanagers through shared training and the conduct ofshared projects is an effective response. Internationalmobility, in particular short stays (3 to 6 months) forpractical projects gives the Group’s managers theopportunity to develop an operational network and toincrease the exchange of best practices for the betterintegration of Arcelor.Belgo Mineira is among the “Hundred bestenterprises to work for”, according to a surveycarried out in South America by ExameBelgo Mineira, the Brazilian subsidiary of Arcelor, hasbeen congratulated on its results in the area ofremuneration policies, professional development,work-life balance, the quality of work climate andenvironment, as well as for its civic actions for thefamilies of its employees and the local communitiesnear its plants.112ANNUAL REPORT ARCELOR 2003

Innovation and QualityObjectives• Develop know-how across the Group- Product enhancement in partnership with customers- Transfer of best practices- Continuous improvement plans• Leveraging of synergies to enhance research anddevelopment efficiency• Development of programs in line with the strategicpriorities of business sectors and Arcelor’s sustainabledevelopment strategy• Broader access to external sources of researchfunding- Joint industry studies on a non-competitive basis- Partnerships with universities and research institutes- Public-private joint venturesR&D developmentThe Flat Carbon Sector came out of the merger witheleven research and development laboratories andtook the decision to consolidate their activities into fourResearch Centres. The new organisation is in place; therelated transfers are under way. Three multi-disciplinarycentres are focused on the major markets: Automobile,Industry and Packaging. The fourth centre is devoted tooptimising industrial processes. The R&D portfolio isnow largely defined and managed at Sector andBusiness Unit levels, which ensures that objectivesand research projects are developed in line with theindustrial and sales strategy over all Arcelor markets.A European Steel technology platform has been formedwith Arcelor’s partners and will be launched in 2004.The Group is now able to offer the same range ofinnovative products and services anywhere in the worldto meet the demand of its global customers. To achievethese objectives, the Group relies on research intocontinuous improvements to its products and servicesoffer, on a multi-market, multi-process and multi-productapproach, and on outside cooperation programmessuch as the Alliance with Nippon Steel. Finally, Arcelorhas adopted a new signature, “Steel solutions for abetter world”, which is testimony to the Group’s desireto continually innovate and offer new steel applicationsthat benefit both the environment and the safety andwell-being of users (see “Steel solutions for a betterworld: Arcelor’s steel solutions” on page 119).The reduction in 2003/2002 expenditure is due to thesynergies generated by the merger and to improvementsin productivity. The expenses of the local laboratoriesproviding technical product support to the plants arenot accounted for as of 2003; the 2002 figure has beenrestated. These expenses are approximately 10 millioneuros.Arcelor has set up a new Scientific CouncilThe mission of this Scientific Council, composed of internationalexperts recognised in their fields, is to give theGroup’s Management an independent opinion on thefollowing:- R&D programmes and the organisation of research;- the areas of scientific expertise required by Arcelorand Arcelor’s positioning in these areas;- scientific and technological developments and themajor consequences for Arcelor’s products and processes.The Advisory Board meets five times a year and deliversan opinion on major issues, such as the optimisation ofArcelor’s expertise in surfaces, the problem of “green”products, projects to cut CO 2 emissions, and others.sustainable development > innovation and qualityANNUAL REPORT ARCELOR 2003 113

Scientific CouncilChairman:• Marcel Crochet, Rector of the Université Catholiquede Louvain la Neuve (UCL) (Belgium).Members:• Professor Pedro Albertos, Universidad Politécnicade Valencia (Spain).• Professor Paul Van Houtte, Katholieke UniversiteitLeuven (KUL) (Belgium).• Professor Otto-Diedrich Hennemann, FraunhoferInstitut in Bremen (Germany).• Professor Michel Rappaz, École PolytechniqueFédérale de Lausanne (Switzerland).• Professor Yves Brechet, Institut NationalPolytechnique de Grenoble (France).• Germain Sanz, former Director of R&D at Arcelor,Vice-President of the Académie des Technologies(France).• Jef Roos, former Deputy Senior Executive Vice-President of Arcelor’s stainless steel sector, Professoremeritus of the Katholieke Universiteit Leuven (KUL)(Belgium).Also participating in the Advisory Board meetings are:• Jerôme Granboulan, Director of Innovation at Arcelor.• François Mudry, Global Strategic Alliance with NipponSteel, Tokyo, Secretary of the Arcelor Scientific Council.• Jean-Hubert Schmitt, expert in metallurgy, deputy tothe above.A Group innovation policy that promotessafety and benefits the environmentWe estimate that 38% of all research effort goes intothe protection of environment, either directly through thereduction in energy consumption, raw materials andwaste products, especially greenhouse gases, andthrough the development of products that complywith future environmental standards; or indirectlyby developing products that meet the SustainableDevelopment needs of our customers, such as veryhigh strength steels that increase the safety ofautomobiles and, because they are lighter, contributeto the reduction of CO 2 emissions per vehicle, and steelproducts with functionalities that allow customersto eliminate certain process operations (for example,steel with organic coating).114ANNUAL REPORT ARCELOR 2003

At the product level, R&D has been involved in anumber of applications for steel solutions.In the automotive area, the accent has been placed oncustomer support to facilitate the use of very highstrength steels developed by Arcelor. These newspecialties enable significant weight reduction, therebycontributing to a direct reduction in pollutant exhaustemissions and they also enable enhanced passengersafety in these vehicles.In domestic electrical appliances and generalindustry, Arcelor put the emphasis on the developmentof green products and products that facilitateprocessing which, by virtue of their surface treatmentfor example, offer the Group’s customers the abilityto eliminate the degreasing operation prior to enamelling.As far as the building and construction market isconcerned, research work focused on the productionof prototypes to demonstrate the performance ofvarious structural systems for “energy efficient”buildings, such as ventilated double roofs, and onweight reduction in products such as beams, sheetpiling etc.Finally, with regard to packaging, Arcelor continued torevamp its offer in 2003 through the expansion of thenew range of steels with high mechanical propertiesand high ductility, making it possible to decreasethe thickness and thus the weight of the packaging,while offering enhanced processing characteristics.The ability to recycle steel indefinitely is also anadvantage that has been emphasised in all theseapplications.At the process level, R&D efforts involved the optimisationof the production facilities with activities aimed atreducing pollutant emissions (CO 2 , VOC, dustcollection) and at improving energy yield andconsumption.Total quality and TQMAll Arcelor plants are under total quality managementand are ISO 9001 certified. Quality is part of everydaylife in every plant, through the setting of goals in AnnualDevelopment Plans (ADP) (such as customersatisfaction, compliance with production schedules,etc.). Quality control is participative and depends oneveryone’s involvement and internalisation of the qualitymethods. In spite of the very high level of quality,Arcelor continues to introduce new methods, therebystimulating its continuous improvement programme.TPM/JIPM is the method adopted by the Arcelor groupto promote industrial excellence in terms of reliability,customer satisfaction and safety. This method is fully inline with Arcelor’s desire to integrate a dynamic ofSustainable Development: TPM creates a sense ofbelonging and social cohesion within organisations, itensures regularity of service and better quality forcustomers, it improves yields, reduces logistics andmaintenance costs and minimises the impact of theproduction process on the environment.On May 15 and 16, 2003, 220 participants fromGermany, Italy, Spain, Luxembourg, Belgium andFrance attended the 8 th Convention for IndustrialExcellence in Fos-sur-Mer (France). The conventionwas an opportunity to share the experiences of themost advanced plants and to establish strong tiesbetween Arcelor’s sectors and plants.Quality management and continuous progress werealso highlighted during numerous events heldthroughout the Arcelor group. For example, the4 th Qualitatis event, held on September 20, 2003,the celebration of continuous improvement by theFlat Carbon Sector’s Wallonia Business Unit, wasan opportunity to welcome over 4,500 visitors,introducing them to the Group’s customers by meansof 4 dedicated stands, and to award several prizesfor team projects, notably in the area of customersatisfaction and quality.sustainable development > innovation and qualityANNUAL REPORT ARCELOR 2003 115

Corporate governanceObjectives• Establishment of management bodies to promotetransparency and professionalism- Audit Committee- Appointments and Compensation Committee• Clear definition of principles of legal representationfor undertakings by the Group and its business units(mandatory two-signature system, up-to-date table ofauthorized signatories for parent company/businessunit undertakings, legal stamp for all contracts, etc.)• Compliance with international corporate governancerecommendationsArcelor and the corporate governanceprinciplesIn its desire to comply with the principles of goodcorporate governance, Arcelor is continuing its effortsto make its published information more transparentand improve its quality. The Group is now including in itsannual report a report entitled “Corporate Governanceand Internal Control Procedures Report by the Chairmanof the Board of Directors” (see page 20). Informationprovided about the members of the Board of Directorsand the remuneration of the Chairman and theManagement Board is now more detailed, includinga substantial chapter devoted to internal controlprocedures.116ANNUAL REPORT ARCELOR 2003

Responsible citizenshipObjectives• Fostering of a climate of respect for the Group’s developingmulticultural nature- Respect for the cultures of individual countries- Encouragement of active involvement in social projects• Development of retraining programs and industrialredevelopment of sites following plant closures• Deployment of targeted support and sponsorshipprograms at local, national and international level• Enabling access to plants as part of a commitment totransparencyPrincipal achievements in 2003In 2003, Arcelor reinforced its approach as a goodcorporate citizen in various areas. The Principles ofResponsibility have been adopted for the entire Groupand widely distributed among the 98,000 employees.The announcement of industrial transfers wasaccompanied by very clear commitments to takeresponsible social and environmental measures.Arcelor signed off on the nine Principles of the UnitedNations Global Compact and encouraged its businesspartners to do likewise (see page 121).Restructuring measuresThe implementation of the strategic orientations of theGroup following the creation of Arcelor involves industrialchanges in several plants in order to be better able tomeet the needs of the market and to ensure profitabilityfor the medium term. In the tradition of Arcelor’s founders,the announcement of these industrial changes wasaccompanied by an in-depth dialogue with the organisationsrepresenting the employees, the politicalauthorities and all other affected bodies. Arcelor’scommitment to make these changes concurrently withsocially and environmentally responsible remedialactions was clearly stated at all times. A social plan wasnegotiated at each plant with the representatives ofthe employees, and Arcelor undertook to assist in thereindustrialisation of the affected area. Arcelor has madeuse of specialist expertise in this field, for exampleSODIE in France and Belgium for the social aspectsor BAIL Industrie for managing the real estate andenvironmental aspects.sustainable development > corporate governance – responsible citizenshipANNUAL REPORT ARCELOR 2003 117

SponsorshipEvery year, the various entities of the Arcelor groupspend more than 8 million euros on sponsorship. Thesemulti-facetted initiatives, in which the employees managethe project, involve cultural, educational, sports orhumanitarian sponsorship. Every plant manages its ownsponsorships and community involvement for improvedperformance and commitment.At Group level, Arcelor renewed the support that Usinorhad provided to the France Greffe de Moëlle bonemarrow transplant association since 1987.The France Greffe de Moëlle association, the LuxembourgRed Cross, the Belgo and Acesita foundations in Brazilor Prince of Asturias in Spain, the Festival des Flandres,the Luxembourg Philharmonic Orchestra and severalsports clubs are only some of the beneficiaries of thesupport provided by Arcelor or its entities. By theiractions and the strong commitment on the part of theiremployees, the companies of the Group bear testimonyto their involvement in community affairs.Vega do Sul (Brazil) receives the “Expressão deEcologia” (Ecological Expression) awardOn November 25, 2003, Vega do Sul received the11 th Expressão de Ecologia award in the EnvironmentalEducation – Private Enterprise category, with thepresentation of the case study: “Vega do Sul’s concernfor the environment begins in school”. The prizewinningwork recounts the 3 scholastic contests held since 2001at all schools in the community of São Francisco do Sulon different environmental themes: “Not everythingis waste”, “We will protect the environment”, and in2003 “Water, the future in our hands”. The 2003 contestincluded the participation of 29 schools and thepresentation of 61 essays. The Expressão de Ecologiaprize also recognised the launch by Vega do Sul ofa professional short course on the environment for50 teachers of 3 neighbouring communities close to thesite (São Francisco do Sul, Araquari and Barra do Sul)and the agreement signed with Casa Familiar do Marfor the operation of the Vega nursery plantation andthe replanting of vegetation at the company’s NaturalHabitat Preserve.118ANNUAL REPORT ARCELOR 2003

Steel solutions for a better world:Arcelor’s steel solutionsArcelor steel is a product that does its share forSustainable Development: Steel solutions for abetter world.Steel solutions…Offering “steel solutions” means developing a set ofservices complementary to our products to better meetthe expectations of our customers with whom we workas partners in a true win-win relationship.…For a better worldThe environmental impact of the steel solutions that weoffer to our customers is under our control (recyclability,durability, weight reduction, robustness). The same goesfor the production methods implemented by the variousentities of the Group. The way we operate must alsoguarantee our economic survival and the quality workingconditions enjoyed by our employees. By promotingsteel, Arcelor’s goal is also to improve living conditionsworldwide. Steel, because of its qualities of strengthand versatility, offers a more pleasant living environmentand improves everyday safety.Steel is the most recycled material in the world.Recovered steel can be recycled indefinitely.Steel solutions in constructionSteel lends buildings aesthetic appeal and versatility:it makes it possible to:• dimension slender supporting elements, thus increasingthe usable floor area of the building;• design flexible, boldly innovative and exceptionalstructures.Steel solutions for the automotive industrySteel is the most widely used material in the automotiveindustry (flat steels represent 40% of the weight ofthe vehicle and 98% of the body in white). It exhibitssignificantly improved properties in terms of safety,respect for the environment (because it can be recycled)and physical and plastic properties.Safety: The increasingly rigorous crash test standardsrequire a spectacular increase in the energy absorbed.To rise to the challenge, stronger materials are needed.Steel now exceeds tensile strengths in the order of100kg/ mm 2 . Very high-tensile steel products todayrepresent more than 30% of the steel in the body-inwhite.Arcelor contributes daily to improved vehiclesafety; the very high yield or very high strength steelsoffered by the Group are recognised by vehiclemanufacturers as contributing actively to the moststringent “crash test” peformances.sustainable development > steel solutions for a better worldSteel does not emit any hazardous volatile or allergenicsubstances. Construction steel does not have its ownelectrical or magnetic fields. The impact of steel beamson magnetic fields in a building is insignificant as faras any dangerous effects on humans or animals areconcerned.Steel offers strong added value in terms of respect forthe environment; it makes it possible to:• reduce the quantity of construction materials and freightvolumes thanks to the structural weight reductions;• reduce construction time by the use of prefabrication;• reduce building site waste by virtue of “dry” assembly;• design for disassembly and reuse of structuralcomponents;• recycle and extract materials from the waste chain.Environment: Steel production requires less energythan that of any other material. The properties of steelare such that it is a non-toxic metal that can be recycledeasily and indefinitely by virtue of its magnetic properties.The increased use of very high strength steel and ofnew generations of steel enables weight reduction in thebody-in-white of between 25 and 50%.Cost: Steel is the material with the best cost/performance ratio. At an average price of 0.50 euro/kgit is possible to achieve substantial weight reductions(up to 30%) at equivalent cost, while the weightreduction solutions offered by other materials generateadditional costs in the order of 3.00 euros per kilogramof weight saved.ANNUAL REPORT ARCELOR 2003 119

Durability: Manufacturers are now able to offerwarranties of up to 30 years thanks to the coatedsteel products currently available on the market.Currently the customary warranty is 12 years.Steel is constantly evolving: Nearly 30 qualitiesof different steel products can be specified for a bodyin white depending on the desired performance. 60%of the steel products on the market today did not exist5 years ago.Steel solutions in packagingSafety: Steel packaging offers excellent protectionfor the products it contains, be they canned products,beverages, baby milk powder, coffee… or any otherproduct. Its strength makes it an indispensablepackaging for any type of product, its robustnessallows it to absorb shocks, its imperviousness tolight, gas and micro-organisms prevents any kind ofdegradation of the contents for a long period of time,and finally its durability makes it completely safe forconsumers.Steel solutions in household appliancesSteel products, aside from their intrinsic qualities interms of cost reduction in the finished product, theiraesthetic and acoustic properties, their ease of useand energy savings, are also environmentally friendly.The European WEEE directives, which will come intoforce in 2006 and concern the recycling of electronicand electrical devices, constitute a tremendousopportunity for promoting the economic and ecologicalinterests of steel use in the design of householdappliances thanks to the ability to recycle steel materialindefinitely.Environment: The magnetic properties of steelfacilitate recycling whatever the processing of usedpackaging: selective sorting, composting, incineration.Cans have become significantly lighter in the last tenyears, representing a reduction in material at the source.Finally, steel can be and is recycled to become a newsteel product.120ANNUAL REPORT ARCELOR 2003

Arcelor and the Global CompactOn September 3, 2003, Guy Dollé, Chairman of theArcelor Management Board, confirmed to Kofi Annan,Secretary General of the UN, Arcelor’s adherence tothe United Nations Global Compact, thereby joiningmore than 1,250 companies worldwide who have alsosubscribed to it.The Global Compact (www.unglobalcompact.org),launched in 2000 by the UN Secretary General, isintended to ensure that a set of fundamental valuesrelating to the Universal Declaration of Human Rights,international labour standards and the protection of theenvironment play a larger role in corporate practices.Companies that adhere to the Compact undertake toindividually apply the 9 principles of the Global Compact(see frame) and promote its diffusion to their variousstakeholders.Human RightsPrinciple 1: Businesses should support and respect the protection of internationally proclaimed human rightswithin their sphere of influence; andPrinciple 2: make sure that they are not complicit in human rights abuses.Labour StandardsPrinciple 3: Businesses should uphold the freedom of association and the effective recognition of the right tocollective bargaining;Principle 4: the elimination of all forms of forced and compulsory labour;Principle 5: the effective abolition of child labour; andPrinciple 6: eliminate discrimination in respect of employment and occupation.sustainable development > global compactEnvironmentPrinciple 7: Businesses should support a precautionary approach to environmental challenges;Principle 8: undertake initiatives to promote greater environmental responsibility; andPrinciple 9: encourage the development and diffusion of environmentally friendly technologies.Belgo Mineira in Brazil and Usinor in France hadalready in the past voiced their support for this initiativetaken by Kofi Annan and the United Nations. WithArcelor’s membership, it is up to each Arcelor employeeto share and reflect these concerns in all activitiesand throughout the entire Group.Arcelor’s Sustainable Development strategy, approvedby the Group’s Management, is fully in accordancewith the 9 principles of the Global Compact. ArcelorSustainable Development eight principles indicateArcelor’s desire to ensure the coherence of oureconomic (Profit), social (People) and environmental(Planet) strategies for the better good of our Partners.Another dimension of the commitment to the GlobalCompact is the promotion of these principles to thepartners of companies that have subscribed to it. TheArcelor purchasing department has incorporated aseries of basic conditions that the Group will in futureimpose on its suppliers with regard to respect forhuman rights, labour standards and environmentalprotection. The “Sustainable Purchasing” programmeis designed to evaluate suppliers through a scorecardshowing compliance with each and every commitmentand value propounded by Arcelor.By adhering to the Global Compact of the UnitedNations, the Arcelor group is entering into a new phase.The group intends not only to reaffirm its internationalposition as a world leader of its industry, but also toposition itself as a good corporate citizen aware of itsresponsibility toward current and future generations.It intends to contribute to Sustainable Developmentwithin the framework of its activities and society, byimplementing the Group’s new signature: “Arcelor: steelsolutions for a better world”.ANNUAL REPORT ARCELOR 2003 121


PART VLegal Informationtable of contents >General information about ArcelorLitigationTrade barriesp124p124p125ANNUAL REPORT ARCELOR 2003 123

GENERAL INFORMATION ABOUTARCELORCorporate name and headquartersCorporate name: ArcelorCorporate offices and principal establishment:19, avenue de la Liberté, L-2930, LuxembourgGrand Duchy of LuxembourgLegal formArcelor S.A. is a “Societé Anonyme” incorporatedunder Luxembourg Law. Arcelor is registered at theLuxembourg Registrar of Trade and Commerce underthe number B 82454.Incorporation date and durationArcelor was incorporated on June 8, 2001 for an unlimitedperiod.Company objectiveThe main objective of the Company is the manufacture,processing and distribution of steel, steel products andall other metal products, as well as all products andmaterials used in their manufacture, processing and distribution,and in all industrial and commercial activities directlyor indirectly linked to these products; including researchand the creation, acquisition, holding, use and sale ofpatents, trademarks, know-how and, more generally, intellectualand industrial property rights.Consultation of legal documentsrelating to the issuerThe statutes of Arcelor are available for consultation atthe Company headquarters, and at the LuxembourgRegistrar of Trade and Commerce, the Trade Registrarof Brussels, the Trade Registrar of Paris, and in Spain atthe Comisión Nacional de los Mercados de Valores(CNMV), the Spanish Stock Exchange and the SpanishLiaison Entity.The financial statements, the non-consolidated financialstatements and the semi-annual and quarterly financialstatements published by the Company are available forconsultation at the Company headquaters, where acopy may be obtained. The non-consolidated financialstatements and the consolidated financial statements aralso available at the Luxembourg Registrar of Trade andCommerce, in Belgium at the National Bank of Belgiumand in France at the Autorité des marchés financiers(AMF – Financial Markets Authority).In Spain, these documents, as well as the half-yearly andquarterly financial data, are filed with the CNMV and theSpanish stock markets and with the Spanish liaisonentity.Financial yearThe financial year has a duration of 12 months. It beginson January 1 and ends on December 31 of the sameyear.LITIGATIONArcelor’s Legal Department is preparing a litigation reportshowing all legal litigations that are in progress for whichthe amounts at stake exceed 500,000 euros (“litigationreport”), to be updated on a regular basis. The litigationsdescribed below are considered significant litigation forthe Arcelor group.AK Steel CorporationThe Arcelor group, through its subsidiaries Sollac S.A.and Ugine S.A., attempted in the 1990’s to penetratethe North American market with an aluminised stainlesssteel product manufactured according to its Americanpatent and intended for the manufacture of exhaustpipes for the automotive industry. In 1998, AK SteelCorporation and Armco Inc. sued Sollac S.A. and UgineS.A. before the Federal Court of Ohio (United States) forpatent infringement.In 2002, the Federal Court of Ohio rendered a decisionin favour of Sollac S.A. and Ugine S.A., the judgeshaving decided that the patents used by the Arcelorsubsidiaries were not only valid, but did not in any wayinfringe on the patents of AK Steel or Armco Inc. Thelawsuit brought by these two companies was dismissed.AK Steel appealed the decision with the Federal AppealsCourt of Ohio.In 2000 Sollac S.A. and Ugine S.A., joined in 2002 byArcelor S.A. and its subsidiaries Usinor Stainless Steeland Hague Steel Corporation, filed an antitrust actionwith the Federal Court of Ohio against AK Steel.In 2002, AK Steel filed a lawsuit against Usinor fordumping based on the Antidumping Act of 1916.124ANNUAL REPORT ARCELOR 2003

Finally, following the favourable decision handed downby the Federal Court of Ohio in 2002, the parties to theaction negotiated, and then signed a transactionalagreement in 2003 terminating all actions in progressbetween AK Steel and the respective subsidiaries ofArcelor in consideration for the payment of USD 4 millionto Usinor by AK Steel.TRADE BARRIERSTrade liberalisation has led to the creation of national tradeprotection instruments to control international trade.Adopted internationally through the GATT agreements,the first of which dates from 1994, the main instrumentsof trade protection are the anti-dumping and anti-subsidylaws (countervailing duty), the safeguard clauses andvoluntary export restraint agreements.The last few years have been characterised by a broaddeployment of trade protection, particularly anti-dumpingand anti-subsidy legislation adopted by a large numberof countries. This background trend has been intensifiedby the opening of an inquiry into the safeguard clauseinitiated in June 2001 by the United States.The safeguard measures permit a country to protect adomestic industry if a product is imported in increasedquantities and causes or threatens to cause seriousharm to the industry concerned; however, they are notmeant to combat so-called unfair trading practices.Anti-dumping duties are designed to eliminate tradingpractices that consist in selling a product in a foreignmarket at a lower price than the price charged on thedomestic market. They are equal to the differencebetween the selling price on the domestic market andthe selling price in the export market.Anti-subsidy duties are intended to cancel the effect of theadvantages that result from direct or indirect subsidiesfor imported products.Anti-dumping and anti-subsidy measuresDefensive actions(1) UNITED STATESFlat carbon steelsCertain flat carbon steel products made by Arcelor aresubject to anti-dumping and anti-subsidy duties in theUnited States. The products in question are as follows:> Plates and heavy plates: In 2000, the United Statesinstituted anti-dumping duties of 10.41% and antisubsidyduties on imports from France (Usinor group).The anti-subsidy duties were revoked by the U.S.Department of Commerce (“DoC”) in November 2003 asbeing incompatible with the rules of the World TradeOrganisation. The anti-dumping duties are subject toyearly review. Also, every 5 years the DoC and theInternational Trade Commission (“ITC”) must undertakea sunset review to determine whether the revocation ofthe anti-dumping duties and anti-subsidy duties wouldlead to a continuation or resurgence in dumping. Thisfive-year review will take place in 2005.Since 1993, the anti-dumping and anti-subsidy dutieshave also been applied to imports from Belgium andSpain. Thus, Cockerill Sambre is subject to anti-dumpingduties of 6.75% and anti-subsidy duties of 23.15%.Imports of Aceralia group custom heavy plate are subjectto anti-dumping duties of 105.61% and anti-subsidyduties of 36.86%. The five-year review (sunset review)in this case is also due in 2005.> Cold-rolled flat products with anticorrosion coating:anti-dumping duties of 29.41% and anti-subsidy dutiesof 15.13% have been imposed on imports, particularlyfrom France. The five-year review (sunset review) in thiscase is also scheduled in 2005.legal informationANNUAL REPORT ARCELOR 2003 125

Cold-rolled flat products: In 2001, an anti-dumpingand anti-subsidy inquiry was conducted by the U.S.authorities against the importation of these productsoriginating in 20 countries: Argentina, Australia, Belgium,Brazil, China, France, Germany, India, Japan, Korea,Netherlands, New Zealand, Russia, South Africa, Spain,Sweden, Taiwan, Thailand, Turkey and Venezuela. TheITC finally decided that the U.S. steel industry had notsuffered any harm from these imports. It therefore endedthe inquiry. This decision was the subject of an appealfiled before the U.S. Court of International Trade (“CIT”)by certain U.S. steel producers. This appeal is stillpending. If the decision of the ITC is revoked, antidumpingduties will be imposed on imports of cold-rolledproducts from the countries listed above. Imports intothe U.S.A. from certain Arcelor subsidiaries could,therefore, be affected by new anti-dumping and antisubsidyduties.Long carbon steelsIn 2002, the DoC decided to impose anti-dumpingduties on the importation of certain long products originatingfrom Luxembourg, Germany and Spain.However, the ITC specified that the U.S. steel industryhad not suffered any harm from imports from thesecountries. Consequently, the anti-dumping inquiryopened in June 2001 was terminated. This decisionwas also appealed to the CIT by certain U.S. steelproducers. This appeal is still pending.If the decision of the ITC is revoked, anti-dumping dutieswill be imposed on the importation of certain carbonsteel long products from Luxembourg, Germany andSpain.Imports to the U.S.A. from certain Arcelor subsidiariescould, therefore, be affected by new anti-dumping andanti-subsidy duties.Stainless steelsCertain stainless steel products made by Arcelor aresubject to anti-dumping duties and anti-subsidy duties inthe 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%. Theanti-subsidy duties were revoked by the DoC inNovember 2003 as being incompatible with the rules ofthe World Trade Organisation. Exports of flat stainlesssteel products have been exonerated from paying antisubsidyduties since that date.> Stainless steel long products originating from France:imports into the United States of stainless steel rod andwire originating from France are subject to anti-dumpingduties of 7.19%. The five-year review (sunset review) willtake place in 2005.> Stainless steel bars: in 2001, the DoC and the ITCopened an inquiry into the importation of stainlesssteel bars originating from France and Italy. The DoCcalculated a de minimis anti-dumping duty rate forimports from Italy (Trafilerie Bedini), meaning that noanti-dumping duty is assessed on the importation ofthese products into the United States. On the otherhand, the DoC assessed an anti-dumping duty rate of3.90% on imports from France (Ugine Savoie-Imphy).> Stainless steel heavy coils: imports originatingfrom Belgium are currently subject to an anti-dumpingduty 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 (sunsetreview) is scheduled in 2004.126ANNUAL REPORT ARCELOR 2003

(2) BRAZILIn May 2000, the Brazilian Government imposed an antidumpingduty of 30.9% against Ugine on imports of flatstainless cold-rolled steel products less than 3 mm thick.(3) CANADAFollowing a decision taken by the Canadian authoritiesin 1994, anti-dumping duties of 80.2% are in force onthe importation of certain hot-rolled carbon steel heavyplates and certain corrosion-resistant alloy steel platesoriginating from Spain (Aceralia). These measures willbe reviewed by May 2004.In 1999, anti-dumping duties of 11.8% were imposedon imports of hot-rolled carbon steel flat productsoriginating from France (Usinor). In 2000, these antidumpingduties were replaced by a fixed minimumprice at which Arcelor must sell its products in Canada.In 2003, Usinor was successful in obtaining an exclusionfor “Solbor 30MnB5” from the products affectedby the anti-dumping duties. These measures will bereviewed by July 2004.In 1999, anti-dumping duties of 7% were imposedon imports of cold-rolled carbon steel flat productsoriginating from Belgium (Sidmar).In 2000, these anti-dumping duties were replaced bya fixed minimum price at which Arcelor must sell itsproducts in Canada. These measures will be reviewedby August 2004.Since 1994, anti-dumping duties of 60.8% have beenimposed on the importation of certain corrosion-resistantflat products originating from Germany (StahlwerkeBremen). These measures will be reviewed by July 2004.Trade retaliation: European Uniona) Cold-rolled flat stainless steel from the U.S.A.In September 2003, the European Commission imposedprovisional anti-dumping duties on imports from theUnited States of certain cold-rolled flat stainless steels(20.6% on imports from AK Steel Corporation, 25% onimports from other companies). In March 2004, followinga petition from Eurofer, the European Commission endedthis anti-dumping retaliation.b) Hot-rolled flat carbon steels from Egypt,Hungary, Iran, Libya, Slovakia and TurkeyIn March 2003, the Council voted against a proposalfrom the European Commission to impose anti-dumpingduties on imports of certain hot-rolled flat carbon steelsfrom Egypt, Hungary, Iran, Libya, Slovakia and Turkey.legal informationANNUAL REPORT ARCELOR 2003 127

Safeguard clause• United States: wire rodImports of most types of wire rod originating from allproducing countries (with the exception of Canada andMexico) are subject to a maximum quota. In 2001, thequota for the member states of the European Union wasset at 419,948 tonnes.• United States: certain types of steelOn December 4, 2003, the President of the UnitedStates lifted the duties that he had imposed in March2002 on certain types of flat products, specifically onplates, heavy plates, concrete reinforcing bars, hot-rolledproducts, cold-rolled products, coated products, tinplatedsteel, hot-rolled bars, cold-rolled bars, certaintubes, certain accessories made of carbon and alloysteels, stainless steel bars, stainless steel wire rod andalloy tool steels. These duties were initially set at 30%for carbon steel flat products, 15% for tubes, concretereinforcing bars and stainless steel bars, and 8% for wirerod. In March 2003, these duties were reduced to 24,12, 10 and 7% respectively. Imports of plates weresubject to a quota of 4.9 million tonnes for the first yearand 5.35 million tonnes for the second year.The safeguard measures provide for the possibility ofnegotiating individual exclusions by product. Arcelor andits subsidiaries manufacture many products that the U.S.steel industry does not offer. In 2002 and 2003, Arcelorwas successful in negotiating with the U.S. administrationmore than 75 exclusions for the company’sproducts.• EuropeIn December 2003, the European Commission eliminatedthe tariff quotas applicable to certain steelproducts (hot-rolled rolls, hot-rolled sheet, hot-rolledstrip, hot-rolled flat products, cold-rolled sheet, pipefittings, flanges).This decision was taken following the decision by theAmerican administration to eliminate its own safeguardmeasures against imports to the U.S.A. of certain steelproducts.• Canada: carbon and alloy steel flat products,certain long and alloy steel productsIn October 2003, the Canadian Government decidednot to introduce safeguard measures on imports offoreign steel products.• ChinaFollowing the decision taken by the Government of theUnited States within the context of “Section 201”, theChinese authorities decided in May 2002 to investigate11 categories of steel products. The introduction ofsafeguard measures in the form of quotas was decidedfor a period of 3 years. Temporary measures wereimplemented in 2002 covering 9 categories and 17 subcategoriesof products. Definitive measures wereadopted for only 5 products. After the termination of thesafeguard measures in the U.S.A. and in Europe at thebeginning of the month of December 2003, all suchmeasures were lifted on December 26, 2003.• PolandIn March 2003, the Polish Government decided to introducesafeguard measures on 8 products for a periodof 2 years (from March 2003 to March 2005). Theproducts affected by these quotas are: non-alloy coldrolled,hot-rolled and galvanised flat products, nonalloyflat products with an organic coating, alloy electricalsteel flat products, non-alloy hot-rolled bars, weldedtubes and weldless tubes.• HungaryIn April 2003, the Hungarian Government decided tointroduce safeguard measures on 7 products. Thesemeasures are effective for a period of 2 yearscommencing April 2003. The products affected by thesequotas are: non-alloy cold-rolled and hot-rolled flatproducts as well as certain long products and tubes.• OECD (Organisation for Economic Cooperationand Development)In 2003, discussions within the OECD continued amongthe principal steel producers in order to formulate theelements of an agreement intended to reduce oreliminate steel industry subsidies. Major differencesstill remain on a number of items. The participantsare working to reach an international agreement onsubsidies by September 2004.128ANNUAL REPORT ARCELOR 2003

• WTO (World Trade Organisation)The arbitration board of the WTO has set up a commissionto study the introduction by the United Statesof safeguard measures on certain steel products.According to the rules governing the WTO, it wasdecided that the U.S. safeguard measures concerningcertain products were incompatible with the UruguayRound Agreements. This decision was confirmed inDecember 2003 by the appeals board of the WTO.The United States accepted the decision and recommendationsof the WTO to put a stop to the “illegal”safeguard measures.Import quotasOn the basis of the Partnership and Cooperation Agreementsbetween the European Union and Russia, Ukraineand Kazakhstan, imports of most steel products fromthese three countries are subject to quotas (bilateralquotas on steel imports from Russia and Kazakhstan,and unilateral quotas on Ukrainian steel imports).In 2004, these quotas will be adjusted to take intoconsideration the European Union expansion (May 1,2004). At the end of 2004, the quota regime will expire,unless extended by quotas negotiated by the EuropeanUnion and the three countries involved.legal informationTransitional measures have been taken to pave the wayfor eventual complete liberalisation of the steel marketwith these countries in compliance with regulationsgoverning competition, state subsidy and environmentalprotection; in particular, they authorise the financial andtechnical assistance required for the restructuring of theirsteel industries.ANNUAL REPORT ARCELOR 2003 129


PART VIFinancial Informationtable of contents > Consolidated financial statements of the Arcelor group p132Consolidated income statementp132Consolidated balance sheetp133Consolidated cash flow statementp134Consolidated statement of changes in shareholders’ equityp135Notes to the consolidated financial statementsp136Unqualified auditor’s reportp190Annual accounts Arcelor S.A.p192Balance sheet as at December 31, 2003p193Income statement from January 1 to December 31, 2003p194Appropriation of the result for the yearp194Notes to the annual accountsp195Unqualified auditor’s reportp201This document is a free translation in English of a French original document: theArcelor group 2003 Consolidated Financial Statements. This document has beenprepared for information only and should not be relied upon for any other purpose. Inthe event of any ambiguity between this document and the French original version,the latter shall prevail.ANNUAL REPORT ARCELOR 2003 131

Consolidated financial statementsof the Arcelor groupCONSOLIDATED INCOME STATEMENTIn EUR million, for the year ended December 31 2003 2002 2002Pro forma(unaudited)REVENUE (Note 27) 25,923 26,594 24,533Other operating income 729 472 433Own 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 103Other operating expenses (696) (530) (495)OPERATING RESULT 738 780 680Net financing costs (Note 22) (321) (464) (434)Share of profits in companies accounted for using the equity method 140 77 102RESULT BEFORE TAX 557 393 348Taxation (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.132ANNUAL REPORT ARCELOR 2003

CONSOLIDATED BALANCE SHEETASSETS 2003 2002In EUR million, as at December 31Non-current assetsIntangible assets (Note 4) (551) (950)Property, plant and equipment (Note 5) 8,947 9,268Investments accounted for using the equity method (Note 6) 1,758 1,780Other investments (Note 7) 307 466Receivables and other financial assets (Note 8) 693 766Deferred tax assets (Note 23) 1,436 1,523TOTAL NON-CURRENT ASSETS 12,590 12,853Current assetsInventories (Note 9) 5,497 6,091Trade receivables (Note 10) 3,253 4,320Other receivables (Note 11) 1,378 1,333Cash and cash equivalents (Note 12) 1,890 1,239TOTAL CURRENT ASSETS 12,018 12,983TOTAL ASSETS 24,608 25,836EQUITY AND LIABILITIES 2003 2002In EUR million, as at December 31Shareholders’ equitySubscribed capital 2,665 2,662Share premium 4,795 4,791Consolidated reserves (419) (484)Translation reserve (308) (237)TOTAL SHAREHOLDERS’ EQUITY (Note 13) 6,733 6,732MINORITY INTERESTS (Note 15) 730 661Non-current liabilitiesInterest-bearing liabilities (Note 16) 4,871 4,594Employee benefits (Note 17) 1,733 1,597Provisions for contract termination indemnities (Note 18) 718 574Other long-term provisions (Note 19) 983 849Deferred tax liabilities (Note 23) 289 359Other liabilities 163 205TOTAL NON-CURRENT LIABILITIES 8,757 8,178Current liabilitiesTrade payables 4,348 4,111Interest-bearing liabilities (Note 16) 1,551 3,821Other amounts payable (Note 20) 2,194 2,023Provisions for contract termination indemnities (Note 18) 82 120Other provisions (Note 19) 213 190TOTAL CURRENT LIABILITIES 8,388 10,265TOTAL SHAREHOLDERS’ EQUITY, MINORITY INTERESTS AND LIABILITIES 24,608 25,836financial information > consolidated financial statementsThe accompanying notes form an integral part of these consolidated financial statements.ANNUAL REPORT ARCELOR 2003 133

CONSOLIDATED CASH FLOW STATEMENTIn EUR million, for the year ended December 31 2003 2002 2002Pro forma(unaudited)Operating activitiesResult 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 1,234Net movement in provisions 85 (16) (53)Profit on disposal of assets (14) (23) (23)Dividends received 29 27 29Changes in working capital 641 377 523Other items (97) 337 437CASH FLOWS FROM OPERATING ACTIVITIES (*) 2,502 1,800 1,946Investing activitiesAcquisitions of tangible and intangible assets (1,327) (1,415) (1,312)Acquisition of Arbed / Aceralia, net of cash acquired - - 1,035Acquisitions 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 37Disposal of subsidiaries, net of cash disposed of (Note 3) 273 48 48Disposal of financial assets 410 243 36CASH FLOWS FROM INVESTING ACTIVITIES (1,109) (1,714) (591)Financing activitiesProceeds from the issue of share capital 85 35 33Dividends paid (218) (192) (167)Proceeds from borrowings 1,891 3,035 2,464Repayment 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) 10NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 651 (938) 114CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 1,239 2,177 1,125CASH 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).The accompanying notes form an integral part of these consolidated financial statements.134ANNUAL REPORT ARCELOR 2003

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYIn EUR million Subscribed Share Subscribed Share Own Other Foreign Shareholders’ Minority Totalcapital premium capital premium shares consolidated currency equity interestsArcelor Arcelor Usinor Usinor reserves translation (Note 13) (Note 15)DECEMBER 31, 2001 - - 768 745 - 2,558 72 4,143 58 4,201Profit and lossProfit for the year 2002 - - - - - (186) - (186) 46 (140)Foreign exchange differences - - - - - - (309) (309) (297) (606)Distributions and transactionswith shareholdersBusiness combination of Usinor,Arbed and Aceralia 2,642 4,755 (768) (745) (892) (1,938) - 3,054 865 3,919Additional minorityinterests in Usinor - - - - - (100) - (100) 100 -Dividends paid - - - - - (98) - (98) (36) (134)Increase in share capital 20 36 - - - - - 56 - 56Utilisation of and profiton the sale of own shares - - - - 147 (37) - 110 (1) 109Convertible bonds - - - - - 62 - 62 1 63Purchase of minority interests - - - - - - - - (75) (75)DECEMBER 31, 2002 2,662 4,791 - - (745) 261 (237) 6,732 661 7,393Profit and lossProfit for the year 2003 - - - - - 257 - 257 159 416Foreign exchange differences - - - - - - (71) (71) 28 (43)Distributions and transactionswith shareholdersDividends paid - - - - - (181) - (181) (37) (218)Increase in share capital 3 4 - - - - - 7 - 7Purchase of minority interests - - - - - - - - (87) (87)Other movements - - - - (6) (5) - (11) 6 (5)DECEMBER 31, 2003 2,665 4,795 - - (751) 332 (308) 6,733 730 7,463financial information > consolidated financial statementsThe accompanying notes form an integral part of these consolidated financial statements.ANNUAL REPORT ARCELOR 2003 135

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAmounts in EUR million, unless indicated otherwise.Note 1 :Note 2 :Note 3 :Note 4 :Note 5 :Note 6 :Note 7 :Note 8 :Note 9 :GeneralAccounting policiesChanges in consolidation scopeIntangible assetsProperty, plant and equipmentInvestments in companies accountedfor using the equity methodOther investmentsReceivables and other financial assetsInventoriesNote 17 : Employee benefitsNote 18 : Provisions for contract terminationindemnitiesNote 19 : Other provisionsNote 20 : Other amounts payableNote 21 : Staff costsNote 22 : Net financial resultNote 23 : TaxationNote 24 : Related party disclosuresNote 25 : Derivative financial instrumentsNote 10 : Trade receivablesNote 11 : Other amounts receivableNote 12 : Cash and cash equivalentsNote 13 : EquityNote 14 : Earnings per shareNote 15 : Minority interestsNote 16 : Interest-bearing liabilitiesNote 26 : Commitments given and receivedNote 27 : Segment reportingNote 28 : Events after the balance sheet dateNote 29 : Reconciliation of the Arcelor groupfinancial statements prepared in accordwith Luxembourg GAAP with the financialstatements prepared in accord with IFRSNote 30 : Simplified Group organisation chartNote 31 : Listing of Group companies136ANNUAL REPORT ARCELOR 2003

INTRODUCTIONThe consolidated financial statements of the Arcelorgroup for the year ended December 31, 2003 areprepared in accordance with International FinancialReporting Standards (“IFRS”) applicable at that date.These standards were partially adopted by theInternational Accounting Standards Board (“IASB”)in December 2003 (thirteen modified standards werepublished with effect after the balance sheet date)and will continue as such, in the context of the deadlineof 2005 set by the European Union.Arcelor has adopted a proactive approach in order toanticipate, and, where required, adapt its accountingpolicies depending on developments.NOTE 1 – GENERALArcelor S.A. was incorporated under Luxembourg Lawon June 8, 2001 in the context of the project of thebusiness combination of Aceralia, Arbed and Usinor.This business combination was completed onFebruary 28, 2002.In accord with the requirements of International FinancialReporting Standards (formerly known as InternationalAccounting Standards), and specifically under IAS 22,the business combination between Aceralia, Arbed andUsinor (the acquiring entity) was accounted for using thepurchase method of accounting.The consolidated financial statements as at December 31,2003 present the financial position of the Company andits subsidiaries (hereafter “the Group”), as well as theinterests of the Group in its associated companies andits interests in jointly controlled entities.The Board of Directors authorised the publication of theDecember 31, 2003 financial statements on February 18,2004. These financial statements will not be final untilapproved at the annual general meeting of shareholders.The consolidated financial statements have beenprepared in accordance with IFRS. This implies that theGroup makes certain estimates and assumptions whichhave an impact on the assets and liabilities, the incomestatement for the period and the notes to the financialstatements. Changes in facts and circumstances maylead the Group to change these estimates.NOTE 2 – ACCOUNTING POLICIES1) Statement of complianceThe consolidated financial statements have beenprepared in accordance with International FinancialReporting Standards as adopted by the IASB and theinterpretations of those standards published by theInternational Financial Reporting InterpretationsCommittee (“IFRIC”).The Group applied IFRS for the first time for the yearended December 31, 2002. Adjustments resulting bothfrom the move from French GAAP, as applied by Usinor,to IFRS and the application of the new accountingpolicies 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 theretroactive application of IFRS in accordance with theinterpretation of the Standing Interpretation Committee(“SIC”), specifically SIC 8.The consolidated financial statements have beenprepared in accordance with the requirements of sectionXVI of the Luxembourg Law of August 10, 1915 oncommercial companies, with the specific exception ofthe accounting and valuation of financial instrumentsfollowing the adoption, in 2001, of IAS 39. Moreover, thepresentation of the consolidated balance sheet andincome statement is different from that required byLuxembourg Law. In the opinion of the Directors, thepresentation chosen more appropriately reflects theGroup’s financial situation.Note 29 sets out a reconciliation between the net profitand shareholders’ equity of the Group for the yearended December 31, 2003 as detailed in these IFRSfinancial statements and the amounts which would havebeen published had Luxembourg legal and regulatoryrequirements been followed.2) Presentation of consolidated financialstatementsThe consolidated financial statements are prepared ineuro (“EUR”), rounded to the nearest million.The consolidated financial statements of the Groupare prepared on the basis of the historical costconvention with the exception of the following assetsand liabilities which are stated at their fair values:derivative financial instruments, investments held fortrading and investments available for sale. Hedgedassets and liabilities are stated at their fair value inrespect of the risks hedged.financial information > consolidated financial statementsANNUAL REPORT ARCELOR 2003 137

Assets intended to be disposed of or consumed duringthe Group’s normal course of operations, assets heldwith a view to being sold in the twelve months followingthe year-end date as well as cash and cash equivalentsare considered current. All other assets are considerednon-current. Liabilities falling due during the Group’snormal course of operations, or in the twelve monthsfollowing the year-end date, are considered current. Allother liabilities are considered non-current.In order to show homogenous and comparable information,2002 comparative information includes an unaudited proforma consolidated income statement and an unauditedpro forma consolidated cash flow statement, both for theyear ended December 31, 2002.Moreover, Notes 21 and 22, in respect of staff costs andthe net financial result respectively, also include a pro formaunaudited comparative as at December 31, 2002.The pro forma consolidated accounts as at December 31,2002 are distinct from the consolidated accounts preparedin accordance with IFRS for two reasons.First, the results of the entities of the Aceralia and Arbedgroups realised between January 1 and February 28,2002 are included in the consolidated results of theGroup, but are excluded from the consolidated accountsas prepared in accordance with IFRS, where theseresults are only included from March 1, 2002 onwards.Secondly, the allocation of negative goodwill is includedin the pro forma consolidated accounts for the entireyear ending December 31, 2002, whereas it is included inthe IFRS consolidated accounts from March 1, 2002 only.In order to more clearly reflect the social commitmentsof the Group, provisions made in the context ofrestructuring plans (which may or may not translate intoearly retirement schemes at a later date) as well as earlyretirement schemes linked to collective agreementssigned by certain categories of employees are, inthe current year, presented in the balance sheet underthe caption, “Provisions for contract terminationindemnities” and detailed in Note 18. The comparativeinformation as at December 31, 2002 has been modifiedaccordingly.3) Consolidation principlesSubsidiariesSubsidiaries are companies controlled by the Group.Control exists when the Group has direct or indirectcontrol over the financial and operating policies of acompany so as to obtain benefits derived from itsactivities. Control is generally assumed where the Groupholds more than half of a company’s voting rights.The financial statements of the significant subsidiaries areincluded in the consolidated financial statements from thedate when control commences until the date whencontrol ends.Investments in non-significant subsidiaries are recordedas non-current assets at their fair value. Gains and lossesresulting from this valuation procedure are recorded in theincome statement.Associated companiesAssociated companies are companies in which theGroup retains a significant influence, but not control,over the financial and operating policies. Significantinfluence is generally assumed when the Group holds atleast 20% or more of the voting rights.The financial statements of associated companies areincluded in the consolidated financial statements usingthe equity method, according to which the Group recordsits share in the net assets of the associate company inthe Group balance sheet from the date when significantinfluence commences until the date when significantinfluence ends.Jointly controlled entitiesJointly controlled entities are companies in which theGroup holds joint control over the activities under acontractual arrangement.The financial statements of jointly controlled entities areincluded in the consolidated financial statements usingthe equity method, according to which the Grouprecords its share in the net assets of the jointly controlledentity in its balance sheet from the date when jointcontrol commences until the date when joint controlends.Transactions eliminated through consolidationIntra-group balances and transactions as well asunrealised gains resulting from intra-group transactionsare eliminated in the preparation of the consolidatedfinancial statements. Unrealised losses resulting fromintra-group transactions are only eliminated to the extentthat there is no indication of possible impairment.Unrealised gains resulting from transactions withassociated companies and jointly controlled entities areeliminated to the extent of the Group’s interest in suchcompanies or entities, against the investment amount ofthe associated company or jointly controlled entity.Unrealised losses are only eliminated to the extent thatthere is no indication of possible impairment.A listing of the main subsidiaries and the companiesaccounted for using the equity method is shown in Note 31to the consolidated financial statements. A complete138ANNUAL REPORT ARCELOR 2003

listing of Group companies as at December 31, 2003has been submitted to the “Greffe du tribunal d’arrondissement”of Luxembourg.4) Business combinations - goodwillAny difference between the cost of an acquisition andthe acquirer’s interest in the fair value of the identifiableassets 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 thefair value of the acquired net assets.Goodwill is amortised over its estimated useful life usingthe straight-line method. Estimated useful lives are 5 yearsfor downstream activities (processing and distribution)and 10 years for upstream activities (blast furnaces, steelproduction and rolling mills).Negative goodwill is accounted for as income in accordwith the following principles:• when negative goodwill is related to identifiable futurelosses or expenses that are identified in the acquirer’splan, and can be measured reliably, negative goodwill isreleased as income up to these amounts;• when negative goodwill cannot be related to identifiablefuture losses or expenses, negative goodwill is recordedas income on the basis of the weighted average residualuseful life of the acquired depreciable/amortisableassets; and• negative goodwill in excess of the fair value of nonmonetaryassets acquired is recorded immediately in theincome statement.5) Foreign currency translationTransactions in foreign currenciesTransactions denominated in foreign currencies areconverted into EUR at the foreign exchange rate rulingat the date of the transaction.Monetary assets and liabilities denominated in foreigncurrencies at the balance sheet date are converted atthe foreign exchange rate ruling at that date. Foreignexchange differences arising on conversion are recordedin the income statement.Non-monetary assets and liabilities denominated inforeign currencies, recorded at historical cost, areconverted at the foreign exchange rate ruling at the dateof the transaction.Financial statements denominated in foreigncurrenciesAssets and liabilities denominated in foreign currencies,including goodwill and fair value adjustments arisingon consolidation, are converted into EUR at the foreignexchange rate ruling at the balance sheet date. Revenuesand expenses of foreign currency operations are convertedinto EUR at the average rate of exchange for the period.Foreign exchange differences arising on conversion arerecorded directly in shareholders’ equity.6) Intangible assetsResearch and developmentExpenditure on research activities, undertaken with aview to acquiring new scientific or technical knowledgeand understanding, is recognised in the income statementas an expense when it is incurred.Expenditure on development activities, where researchfindings are applied to the development or design for theproduction of new or substantially improved productsand processes, is capitalised if the product or processis technically and commercially feasible and the Grouphas sufficient resources to complete the developmentprogramme.The expenditure capitalised includes the cost of materials,direct labour costs and an appropriate proportion ofoverheads.Capitalised development expenditure is stated at costless accumulated amortisation and impairment losses.Other development expenditure is recognised in theincome statement when incurred.Other intangible assetsOther intangible assets acquired by the Group arestated at cost less accumulated amortisation andpossible impairment losses. Expenditure on internallygenerated goodwill is recognised in the incomestatement when incurred.Intangible assets other than goodwill primarily includethe cost of technology and licences purchased fromthird parties. These intangible assets are amortisedon a straight-line basis over a maximum period offive years.Subsequent expenditureSubsequent expenditure on intangible assets iscapitalised only when it increases the future economicbenefits of the specific asset to which it relates andwhen this cost can be measured and attributed to theasset in a reliable manner. All other expenditure isrecognised immediately as an expense when incurred.financial information > consolidated financial statementsANNUAL REPORT ARCELOR 2003 139

AmortisationAmortisation is recognised as an expense on a straight-linebasis over the estimated useful lives of intangible assets.The estimated useful lives applied are as follows:• Patents and trademarks: 5 years• Capitalised development costs: 5 years7) Property, plant and equipmentItems of property, plant and equipment are stated atcost less accumulated depreciation and possibleimpairment losses. The cost of an asset created by theGroup includes the cost of materials, direct labour costsand an appropriate proportion of overheads. Borrowingcosts on loans used to finance the construction ofproperty, plant and equipment are capitalised as part ofthe cost of the asset until such time that the asset isready for its intended use.Property, plant and equipment are subsequently statedat cost less accumulated depreciation less any impairmentlosses.Where an item of property, plant and equipment comprisesmajor components having different useful lives, they areaccounted for as separate items.The cost of the periodic re-lining of blast furnaces iscapitalised and depreciated over the expectedproduction period.Maintenance and repair costs are recognised asexpenses in the period in which they are incurred.Government grants that compensate the Group for theacquisition of property, plant and equipment arededucted from the carrying amount of the related assetand credited to the income statement on a straight-linebasis over the expected useful life of the related asset.Subsequent expenditureExpenditure incurred in replacing or renewing componentsof some items of property, plant and equipmentare accounted for as the acquisition of a separate assetand the replaced asset is written off.Other subsequent expenditure on property, plant andequipment is only recognised as an asset when theexpenditure improves the condition of the asset beyondits originally assessed standard of performance.All other subsequent expenditure is recognised in theincome statement as an expense in the period in whichit is incurred.DepreciationDepreciation is accounted for as an expense on astraight-line basis over the estimated useful lives ofitems of property, plant and equipment. Land is notdepreciated. Property, plant and equipment acquiredbefore January 1, 2001 are depreciated over their usefullives, which range from 12 to 20 years for buildings andindustrial installations and from 5 to 12 years for otherproperty, plant and equipment.For other property, plant and equipment the estimateduseful lives are as follows:Flat products Long products and stainlessElectric Arc Hot-rollingfurnace millsIndustrial buildings 25 years 25 yearsTechnical installationsand machineryHot phase:new capital expenditure 25 years 15 years 25 yearsHot phase: renovation 15 years 10 years 15 yearsCold phase:new capital expenditure 18 years 18 yearsCold phase: renovation 12 years 15 yearsCold phase: downstream 12 years 12 yearsOther5 – 20 yearsLeasesWhere the Group is a lesseeLeases where the Group assumes substantially all therisks and rewards of ownership are classified as financeleases. Property, plant and equipment acquired by wayof finance leases are stated at an amount equal to thelower of the fair value and the present value of theminimum lease payments at the inception of the lease.Each lease payment is broken down between thefinance charges and the repayment of the lease liability.The finance charge is spread over the life of the leaseso as to achieve a constant rate of interest on theremaining balance of the liability.The depreciation policy of capitalised leased assets issimilar to that applied to owned property, plant andequipment. If there is no reasonable certainty that thelessee will obtain ownership at the end of the leaseterm, the asset is depreciated over the shorter of itsestimated useful life and the lease term.Where a significant portion of the risks and rewards ofownership are retained by the lessor, the associatedlease contracts are classified as operating leases.Payments made under operating leases arerecognised as an expense in the income statement ofthe period.140ANNUAL REPORT ARCELOR 2003

8) Impairment of assetsThe carrying amounts of the Group’s assets, other thaninventories, deferred tax assets and assets arising fromemployee benefits, are reviewed at each balance sheetdate to determine whether there is any indication ofimpairment. If any such indication exists, the asset’srecoverable amount is estimated. For intangible assetsthat are not yet available for use, their recoverableamount is estimated at each balance sheet date.An impairment loss is recognised whenever the carryingamount of an asset or the cash-generating unit to which itbelongs exceeds its recoverable amount. Impairment lossesare recognised as an expense in the income statement.Calculation of recoverable amountThe recoverable amount of an asset is the higher of itsnet selling price and its value in use. In assessing itsvalue in use, the estimated future cash flows arediscounted to their present value using a pre-taxdiscount rate that reflects current market assessmentsof the time value of money and the risks specific to theasset. For an asset that does not generate cash inflowslargely independent of those from other assets, therecoverable amount is determined for the cash-generatingunit to which the asset belongs.The recoverable amount of investments in held-to-maturitysecurities and receivables is calculated as the presentvalue of the expected future cash flows, discounted at theoriginal effective interest rate inherent in the asset.Cash flows on short-term receivables are not discounted.Reversal of an impairment lossAn impairment loss recognised in prior years is reversedif, and only if, there has been a change in the estimatesused to determine the asset’s recoverable amount sincethe last impairment loss was recognised. However, theincreased carrying amount of an asset due to a reversalof an impairment loss should not exceed the carryingamount that would have been determined (net ofamortisation or depreciation) had no impairment lossbeen recognised for the asset in prior years.An impairment loss recognised for goodwill is notreversed unless the impairment loss was caused by aspecific external event of an exceptional nature that isnot expected to recur, and subsequent external eventshave reversed the effect of that event.9) Investments in debt and equity securitiesInvestments held for trading are classified as currentassets and are stated at fair value, with any resulting gainor loss being recognised in the income statement.Investments with a fixed maturity date above one yearand where the Group has the positive intent and the abilityto hold the investment through to maturity, are included innon-current assets and are stated at amortised cost. Thelatter is determined using the original effective interest rateinherent in the investment less impairment losses.Other investments held by the Group are classified asbeing available-for-sale and are stated at fair value, withany resulting gain or loss being recognised in the incomestatement.The fair value of investments held for trading andinvestments available-for-sale are taken as the quotedbid price at the balance sheet date. For unquotedsecurities, discounted cash flow techniques are used.10) Trade and other receivablesTrade and other receivables are stated at cost lessprovisions for irrecoverable amounts.11) InventoriesConstruction work in progressConstruction work in progress is stated at contract costincreased by the related profit recognised to date lessprogress billings. Cost includes all expenditure directlyrelated to the project and an allocation of fixed andvariable overheads incurred in the Group’s contractactivities.Other inventoriesRaw materials and supplies are stated at the lower ofcost (using either the average cost method or the first infirst out method) or net realisable value. Finished goodsand work-in-progress are stated at the lower of productioncost or net realisable value.Production cost includes direct raw material and labourcosts and a portion of overhead costs, excludinggeneral and administrative expenses. The market valueof raw materials and other inventories is based on thenet realisable value, including a provision for obsolescenceor slow-moving items where appropriate.12) Cash and cash equivalentsCash and cash equivalents include cash and short-terminvestments with a maturity of less than three monthsfrom the acquisition date.Short-term investments are valued at market value atthe end of each period.financial information > consolidated financial statementsANNUAL REPORT ARCELOR 2003 141

13) EquityRepurchase of share capitalWhen share capital is repurchased, the amount ofconsideration paid, including all attributable costs, isrecognised as a change in equity. Repurchased/treasury shares are deducted from total shareholders’equity under the caption “Treasury shares” until they arecancelled or disposed of.DividendsDividends are recognised as a liability in the period inwhich they are approved by the General Meeting.14) Convertible debenture loansDebenture loans convertible into share capital at theoption of the holder, where the number of shares issueddoes not change with fluctuations in their fair value, areaccounted for as compound financial instruments, net ofattributable transaction costs. The equity component ofthe convertible debenture loans is calculated as theexcess of the issue proceeds over the present value ofthe future interest and principal payments, discounted atthe prevailing market rate for a similar liability that doesnot have an associated equity component. The interestexpense recognised in the income statement iscalculated using the effective interest rate method.15) Interest-bearing borrowingsInterest-bearing borrowings are recorded at initial cost,less direct attributable transaction costs. They are thenrecorded at amortised cost with any difference betweenthe amortised cost and the redemption value beingrecognised in the income statement over the period ofthe borrowings on an effective interest rate basis.16) Employee benefitsTypes of pension plans> Defined contribution plansDefined contribution plans are those plans in respect ofwhich the Group pays fixed contributions into anexternal life assurance or pension fund for certaincategories of employees. Contributions are paid in returnfor services rendered by the employees during theperiod. They are expensed as they are incurred in linewith the treatment applied to wages and salaries. Noprovisions are established in respect of definedcontribution plans, as they do not generate futurecommitments for the Group.Within the Group, defined contribution plans exclusivelyrelate to pension plans. They are, primarily, additionalpension plans that serve to complement local legalpension schemes in respect of which the Group payscontributions to social organisations and which areaccounted for in the same manner as salaries and wages.> Defined benefit plansDefined benefit plans are schemes that provideguaranteed benefits to certain categories of employees,either by way of contractual obligations or through acollective agreement. This guaranteed benefit representsa future commitment for the Group and, as such, aliability is calculated. The provision is calculated byestimating the benefits accumulated by employees inreturn for services rendered during the period and duringprior periods.Benefits are discounted in order to determine thepresent value of the future obligation resulting from thistype of plan. They are shown in the balance sheet afterthe deduction of the fair value of the assets that serve tocover them.The discount rate applied is the yield, at the balancesheet date, on AAA credit rated bonds that havematurity dates similar to the terms of the Group’spension obligations. A qualified actuary performs theunderlying calculations annually, using the projected unitcredit method.When the terms and conditions of a plan change, theportion of the increased benefit relating to past servicesby the employees is calculated as an expense in theincome statement on a straight-line basis over theaverage period until the benefits become vested. To theextent that the benefits vest immediately, the expense isimmediately 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 lossexceeds ten percent of the greater of the present valueof the defined benefit obligation and the fair value of planassets, it is recognised in the income statement over theexpected average remaining working lives of the employeesparticipating in the plan (“corridor policy”). Otherwise, theactuarial 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 anyunrecognised actuarial losses and past service costsand the present value of any future refunds from the planor reductions in future contributions to the plan.142ANNUAL REPORT ARCELOR 2003

Within the Group, defined benefit plans relate to complementaryretirement schemes, departure indemnities,work medals and health insurance arrangements.Nature of commitments of defined benefit plans> Complementary retirement schemesSuch schemes are provided in addition to the legalminimum pension in respect of which Group companiescontribute directly into social organisations and whichare accounted for in the same manner as salaries andwages.> Departure indemnitiesDeparture indemnities are normally associated withcollective agreements with employees under whichindemnities are paid upon normal retirement as well asupon voluntary or involuntary retirement.> Work medalsWork medal programmes are sometimes establishedunder agreements at individual company level. Thesearrangements represent long-term service awardprogrammes made to employees with certain levels ofseniority with their employers.> Health insuranceHealth insurance schemes relate exclusively to theAmerican subsidiaries of the Group (“post retirementmedical care”). For European entities, health insuranceis in place by way of obligatory contributions intostate health insurance schemes. These contributionsare accounted for in the same manner as wages andsalaries.Assets covering commitments relating to definedbenefit plansThe commitments in respect of certain retirement plansare wholly, or in part, covered by life assurance policiesor pension funds, depending on the regulations in placein the country in which the benefits are awarded (theconcept of a “funded obligation”).Externalised commitments are evaluated by externalspecialists.Remuneration by way of shares or share optionsArcelor S.A. has a share option plan in place as atDecember 31, 2003. Moreover, options on Usinorshares have been allocated to certain Directors andemployees of Usinor.Options were issued at the market price at the dateof issue and may be exercised at that price. No costlinked with these awards has been accounted for in theincome statement. When options are exercised thecash received less transaction costs are credited tosubscribed capital and share premium.17) Provisions for contract termination benefitsThe Group recognises an obligation for terminationbenefits when it is demonstrably committed either toterminating an employee’s contract before the normalretirement date or to encouraging voluntary redundancy.Such termination benefits do not bring future economicbenefits (services rendered by employees) to the Groupand are immediately recognised in the income statement.Within the Group, provisions for termination benefits fallinto one of two categories:Social provisions in the context of restructuringplansProvisions are recorded when the Group has announcedto the entirety of the affected employees or their representativesa social plan that is detailed and formalised inaccordance with the requirements of IAS 37. Suchsocial plans either translate into redundancy or earlyretirement measures.Benefits are calculated as a function of the approximatenumber of people for whose employment contracts willbe terminated. If such benefits are claimable more thantwelve months after the end of the period, they arediscounted using an interest rate, which corresponds tothat of AAA credit rated bonds that have maturity datesapproximating the terms of the Group’s obligations.Early retirement plansWithin the Group, early retirement plans primarilycorrespond to the practical implementation of socialplans. Such early retirement plans are consideredeffective when the affected employees have beenformally informed and when liabilities have beendetermined using an appropriate actuarial calculation.Early retirement plans can also be linked to collectiveagreements signed with certain categories of employees.Liabilities in respect of both of the above scenarios arecalculated on the basis of the effective number ofemployees likely to take early retirement, in accordancewith IAS 19. An independent actuary performs thecalculation annually. Liabilities are discounted using aninterest rate, which corresponds to that of AAA creditrated bonds that have maturity dates approximating theterms of the Group’s obligations.financial information > consolidated financial statementsANNUAL REPORT ARCELOR 2003 143

18) Other provisionsA provision is accounted for when the Group has apresent obligation as a result of a past event (legal orconstructive), whose amount can be reliably estimated,and when it is probable that an outflow of economicresources will be required to settle the obligation.Technical warrantiesA provision for technical warranties is recognisedwhen the underlying products or services are sold. Theprovision is based on historic warranty data and aweighting of all possible outcomes against theirassociated probabilities.RestructuringA provision for restructuring is accounted for when theGroup has approved a detailed formal restructuring planand has raised a valid expectation that it will carry outthe restructuring by commencing the implementation ofthe plan or announcing publicly its main features.EnvironmentThe Group estimates provisions related to environmentalissues on a case-by-case basis, taking into accountapplicable legal requirements. A best estimate based onthe available information, is calculated, providing that theavailable information indicates that a loss is probableand can be reasonably estimated.Onerous contractsA provision for onerous contracts is recognised whenthe expected economic benefits to be received by theGroup under a contract are lower than the unavoidablecosts of meeting the associated obligations.19) Trade and other payablesTrade and other payables are stated at cost.20) Deferred taxesDeferred taxes are calculated for each taxable entityusing the balance sheet liability method on temporarydifferences arising between the tax bases of assets andliabilities, as determined in accordance with the tax rulesin force in the countries in which the Group conducts itsoperations, and their carrying amounts in the financialstatements. Deferred tax assets and liabilities aremeasured at the tax rates that are expected to apply inthe period when the asset is realised or the liability issettled, based on tax rates that have been enacted orsubstantively enacted at the balance sheet date.Assets and liabilities are netted in respect of taxes leviedby the same tax authorities and if local tax authoritiesapprove this treatment.Deferred tax assets are recognised to the extent that itis probable that future taxable profits will be availableagainst which they can be utilised. Therefore, taking intoaccount the cyclical nature of the business, deferred taxassets may be recognised by companies that haveincurred tax losses in previous periods.21) Revenue recognition, interest and dividendincomeSales of goods and servicesRevenue from the sale of goods is recognised in theincome statement when the significant risks and rewardsof ownership have been transferred to the buyer. Revenuefrom services rendered is recognised in the incomestatement in proportion to the stage of completion of therelated transaction at the balance sheet date. The stage ofcompletion is assessed according to the work performed.No revenue is recognised if there are significantuncertainties regarding the recovery of the amount due,associated costs or the possible return of goods.Construction contractsAs soon as the outcome of a construction contract can beestimated with reliability, contract revenue and expensesare recognised in the income statement in proportion tothe stage of completion of the contract. The stage ofcompletion is assessed according to the work performed.Expected losses on a contract are recognised immediatelyupon recognition in the income statement.Interest and dividend incomeInterest income is recognised in the income statement ona pro rata basis, taking into account the effective yield rate.Dividend income is recognised in the income statement onthe date the General Meeting approves the dividendpayment.22) Financial risk managementDerivative financial instrumentsThe Group uses derivative financial instruments, interestrate swaps and forward foreign exchange contracts tohedge its exposure to risks relating to foreign exchange,interest rates and raw material prices and arising fromoperating, financing and investment activities.Derivative financial instruments are initially recognised atcost and are subsequently restated at their fair value.Unrealised gains or losses are recognised depending onthe nature of the item being hedged.144ANNUAL REPORT ARCELOR 2003

The fair value of interest rate swaps is the estimatedamount that the Group would receive or pay to terminatethe swap at the balance sheet date, taking into accountcurrent interest rates and the current creditworthiness ofthe swap counter-party.The fair value of forward foreign exchange contracts istheir quoted market price at the balance sheet date,being the present value of the quoted forward price orforward rate.Cash flow hedgesWhen a derivative financial instrument hedges thevariation in cash flows of a firm commitment or aforecast transaction, the effective part of any resultantgain or loss on the derivative financial instrument isrecognised directly in equity.When the firm commitment or forecast transactionresults in the recognition of an asset or a liability, thecumulative gain or loss is removed from equity andenters into the initial measurement of the acquisition costor other carrying amount of the asset or liability.The ineffective part of any gain or loss is recognised inthe income statement. Any gain or loss arising from thetime value of the derivative financial instrument isrecognised in the income statement.When a hedging instrument expires, is sold, terminatedor exercised the accumulated unrealised profit or loss onthe hedging instrument is maintained in equity for aslong as the expected transaction does not occur and isrecognised in accordance with the above policy whenthe transaction occurs. If the hedged transaction is nolonger probable, the cumulative net gain or loss, whichhad been recognised in equity, is reported immediatelyin the income statement.Fair value hedgesWhere a derivative financial instrument hedges thevariability in fair value of a recognised receivable orpayable, any resulting gain or loss on the hedginginstrument is recognised in the income statement. Thegain or loss attributable to the hedged risk adjusts theaccounting value of the hedged element and isrecognised directly in the income statement.The fair value of the hedged items, in respect of the riskbeing hedged, is their carrying amount at the balancesheet date translated to EUR at the foreign exchangerate ruling at that date.Hedge of net investment in a foreign operationWhere a foreign currency liability hedges a netinvestment in a foreign operation, foreign exchangedifferences arising on translation of the liability to EURare recognised directly in equity. Where the hedginginstrument is a derivative, any gain or loss on thehedging instrument relating to the effective portion of thehedge is recognised in equity; the gain or loss relating tothe ineffective portion is recognised immediately in theincome statement.Where the hedging ability of an instrument is notdemonstrated, the related profit or the loss is recognisedin the income statement.23) Segment reportingA segment is a distinguishable component of the Groupthat is engaged either in providing products or services(business segment), or in providing products or serviceswithin a particular economic environment (geographicalsegment), which is subject to risks and rewards that aredifferent 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 bythe sector in the context of its operating activities.They include attributable goodwill, intangible assetsand property, plant and equipment, as well as currentassets used in the operating activities of the sector.They do not include deferred tax assets, otherinvestments or receivables and other non-currentfinancial assets. Such assets are shown under thecaption “unallocated assets”.Sector liabilities are liabilities resulting from theactivities of a sector, which can either be directlyattributed to the sector or can be attributed to itreasonably. They include current and non-currentliabilities but exclude financial debt and deferredtax liabilities. Such liabilities are shown under thecaption “unallocated liabilities”.NOTE 3 – CHANGES IN CONSOLIDATIONSCOPEAs at December 31, 2003, the scope of consolidation ofthe Arcelor group includes, in addition to Arcelor S.A.,442 fully consolidated companies (December 31, 2002:474). Furthermore, the Group accounts for 227companies using the equity method (December 31,2002: 168). The increase in the number of companiesaccounted for under the equity method is explained bythe fact that, as at December 31, 2003, the Groupaccounts separately for companies which were includedin sub-groups as at December 31, 2002.financial information > consolidated financial statementsANNUAL REPORT ARCELOR 2003 145

The major changes in the consolidation scope sinceDecember 31, 2002 are as follows:Acquisitions:Further to the purchase of the rolling mill of Pallanzeno(production of small and medium beams) from theDuferco group and the purchase of a participation of49.9% in the steel works of San Zeno, Travi e Profilati diPallanzano SpA (Italy, long carbon steel) is fullyconsolidated and San Zeno Acciai - Duferco SpA (Italy,long carbon steel) is accounted for using the equitymethod from July 1, 2003.Disposals:In accordance with the engagements taken with theEuropean Commission, the Group has completed thefollowing disposals during the year (given that the 49%holding in the Spanish company Bamesa had beendisposed of in September 2002):• disposal of the 75.5% participation in the wetgalvanisation production line of Galmed (Spain, flatcarbon steel) to the ThyssenKrupp Stahl group onMarch 31, 2003;• disposal of Beautor (Belgium, flat carbon steel) andSorral (France, flat carbon steel), which specialise in coldmilling, electro-zincing and wet galvanisation, to theDuferco group in April 2003;• disposal, in March and April 2003, of all of the sitesand 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 coldmilling and galvanisation, to the Corus group;• disposal in September 2003 of the galvanisationproduction line of Laminoir de Dudelange (Luxembourg,flat carbon steel) to Dugal;• disposal in October 2003 of the holding of 66.67% inthe galvanisation unit of Segal (Belgium, flat carbon steel)to the Corus group; and• disposal in December 2003 to the majority shareholderof the 39.93% holding in Finarvedi (Italy, flat carbonsteel).Moreover, the Arcelor group has disposed of its plasticsactivity (PUM Plastics group - France, distribution,processing and trading) to Point.P (subsidiary of theSaint-Gobain group). PUM Plastics, with turnover ofEUR 234 million, specialises in the distribution of plasticsproducts to the construction and public works sectors.Finally, in December 2003, the Finnish steel operatorRautaruukki purchased Dikema Stal AS (Norway,distribution, processing and trading) which specialises inthe pre-fabrication of metal products and the operationof steel service centres.Other changes:BMP Siderurgica S.A. (Brazil, long carbon steel) has beenfully consolidated since April 1, 2003. The company,formerly known as Mendes Júnior Siderurgia S.A., hasbecome a subsidiary of the Group through Belgo-MineiraParticipação Indústria e Comércio, which holds 99% of itsshare capital. Since June 2003, BMP Siderurgica S.A.operates on the Juiz de Fora site, thus terminating thelease between Belgo-Mineira Participação Indústria eComércio and the Mendes Júnior group.The Group has also increased its participation inCompanhia Siderurgica de Tubarao (CST) in Brazil(Brazil, flat carbon steel). The holding increasedfrom 24.4% on December 31, 2002 to 29.4% onDecember 31, 2003, primarily due to the disposal tothe 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, processingand trading sector have been fully consolidated for thefirst 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 companieswere 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, otheractivities);• Absorption of Bruyères Acier Service by Cisatol (France,distribution, processing and trading);• Absorption of Sprint Métal by Ugitech (France, stainlesssteels);146ANNUAL REPORT ARCELOR 2003

• Absorption of Rostfrei Coil Center Beteiligung GmbH byRCC GmbH (Germany, stainless steels);• Absorption of Profilarbed Distribution France SAS byArcelor Profil (France, distribution, processing and trading);and• Liquidation of Sidinvest (Belgium, other activities) andFinancieringmaatschappij Dikema B.V. (Netherlands,distribution, processing and trading).The fair value of the net assets acquired is presentedbelow. It corresponds to the acquisition of Travi eProfilati di Pallanzano SPA and San Zeno Acciai –Duferco SPA, as well as the full consolidation of BMPSiderurgica S.A.In EUR million 2003 2002Intangible assets - 1Tangible assets 157 4Holdings in companies accountedfor using the equity method 10 29Debtors and financial assets(commercials and others) 6 6Inventories - 2Cash 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 - 1Fair value of acquired assets 207 28Net goodwill recorded (30) 3Total acquisition cost 177 31Cash and cash equivalents acquired 4 -Amounts paidduring prior periods (115) -To be paid in subsequent periods (17) (1)Outflow resulting from the acquisition (41) (30)Finally, the Traxys group (Luxembourg, distribution,processing and trading), which is under joint controlbetween the Arcelor Group and Umicore arising fromthe contribution by the Group of Considar Inc. andConsidar Europe S.A. and operating in the trading ofiron alloys has been accounted for under the equitymethod since the third quarter of 2003.The fair value of the net assets disposed of is shownbelow:In EUR million 2003 2002Tangible assets 120 44Holdings in companies accountedfor using the equity method 97 45Other participations 2 21Debtors and financial assets(commercials and others) 162 (6)Inventories 186 77Cash and cash equivalents 19 19Net 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 67Profit on disposal 113 25Cash and cash equivalents disposed of (11) (19)Repayment of debt towardscompanies disposed of (13) -To be received in subsequent periods (31) -Inflow resulting from the disposal 284 48financial information > consolidated financial statementsANNUAL REPORT ARCELOR 2003 147

NOTE 4 – INTANGIBLE ASSETSGoodwill Concessions, Other Totalon acquisition patents, licencesIn EUR millionand similar rightsGross opening balance (1,041) 216 235 (590)Acquisitions (30) 33 1 4Disposals 23 (3) (3) 17Change in consolidation scope (50) - - (50)Foreign exchange differences 3 (2) 1 2Other 329 (5) (6) 318Gross closing balance (766) 239 228 (299)Opening cumulative amortisation (5) (144) (211) (360)Acquisitions / disposals (10) 2 - (8)Amortisation charge 111 (38) - 73Foreign exchange differences - 1 - 1Other 25 4 13 42Closing accumulated amortisation 121 (175) (198) (252)Opening net book value (1,046) 72 24 (950)Closing net book value (645) 64 30 (551)148ANNUAL REPORT ARCELOR 2003

4.1 – Positive goodwill on acquisitionAnalysis of positive goodwill on acquisition 2003:In EUR million Net value 2002 Acquisition Appropriation Other Net value 2003Sollac / S3P 9 - (1) - 8Avis Steel 2 - - (1) 1ProfilARBED Distribution France 4 - - (4) -Arcelor Profil - - (1) 4 3Galtec 5 - (2) - 3Weha Edelstahl 3 - (1) - 2CFA - 13 (3) - 10Haironville Portugal - 2 - - 2Trefilados Mexico - 2 - - 2TOTAL 23 17 (8) (1) 31Analysis of positive goodwill on acquisition 2002:In EUR million Net value 2001 Acquisition Appropriation Net value 2002Sollac / S3P 10 - (1) 9Avis Steel 2 - - 2ProfilARBED Distribution France - 5 (1) 4Galtec - 6 (1) 5Weha Edelstahl - 3 - 3TOTAL 12 14 (3) 23financial information > consolidated financial statements4.2 – Negative goodwill on acquisitionAnalysis of negative goodwill on acquisition 2003:In EUR million Net value 2002 Acquisition Appropriation Disposal Other Net value 2003La Magona 12 - (2) - - 10Cockerill Sambre 673 - (103) (13) (61) 496Arbed / Aceralia 362 - (5) - (283) 74APSL - 43 (3) - - 40BMP Siderurgica S.A. - 30 (2) - - 28Investissements Technologies - 17 (3) - - 14Alinox - 3 (1) - - 2Other 22 4 - - (14) 12TOTAL 1,069 97 (119) (13) (358) 676The “Other” caption includes an amount of EUR 330 million recognised in the income statement further to theidentification of restructuring expenses relating to the merger of Aceralia, Arbed and Usinor on February 28, 2002.Analysis of negative goodwill on acquisition 2002:In EUR million Net value 2001 Acquisition Appropriation Other Net value 2002La Magona 14 - (2) - 12Cockerill Sambre 905 - (116) (116) 673Arbed / Aceralia - 432 (4) (66) 362Other - 26 (4) - 22TOTAL 919 458 (126) (182) 1,069Net goodwill on companies accounted for using the equity method is disclosed under the caption “Investmentsaccounted for using the equity method”.ANNUAL REPORT ARCELOR 2003 149

NOTE 5 – PROPERTY, PLANT AND EQUIPMENTLand and Plant and Prepayments and fixed Other TotalIn EUR million buildings machinery assets under constructionGross opening balance 3,139 12,200 757 589 16,685Acquisitions 53 303 869 68 1,293Disposals (154) (270) (4) (49) (477)Change in consolidation scope 48 243 5 5 301Foreign exchange differences (46) (180) (22) (10) (258)Other 112 634 (825) 100 21Gross closing balance 3,152 12,930 780 703 17,565Opening 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 246Change in consolidation scope (8) (139) - (3) (150)Foreign exchange differences 21 116 1 6 144Other (28) 126 - (27) 71Closing accumulated depreciation (1,043) (7,129) (15) (431) (8,618)Opening net book value 2,273 6,007 757 231 9,268Closing net book value 2,109 5,801 765 272 8,947At December 31, 2003 the gross value of capitalised finance leases is EUR 101 million (2002: EUR 112 million) andthe 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).NOTE 6 – INVESTMENTS IN COMPANIES ACCOUNTED FOR USING THE EQUITY METHODIn EUR million Value accounted for using the equity method Net goodwill TotalBALANCE AS AT DECEMBER 31, 2002 1,702 78 1,780Acquisitions 32 - 32Disposals (97) (19) (116)Profit for the year 145 (5) 140Dividends paid (92) - (92)Changes in the consolidation percentage 112 19 131Foreign exchange differences (106) (13) (119)Increase in capital 23 - 23Other (8) (13) (21)BALANCE AS AT DECEMBER 31, 2003 1,711 47 1,758The 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 atDecember 31, 2003 (2002: EUR 288 million).The net value of unquoted companies accounted for under the equity method is EUR 1,179 million as atDecember 31, 2003 (2002: EUR 1,251 million) which is not significantly different from their market value.150ANNUAL REPORT ARCELOR 2003

The primary investments in associated companies and jointly controlled entities are as follows:In EUR million % Holding Total assets as % Holding Total assets asat 2003 year-end at December 31, 2003 at 2002 year-end at December 31, 2002ASSOCIATED COMPANIESFlat Carbon SteelCST (Brazil) 29.6% 424 24.6% 386Gonsider (Spain) - - 42.9% 222Holding Gonvarri SRL (Spain) 58.8% 60 - -Gonvarri Industrial (Spain) 59.8% 181 - -Gestamp (Spain) 35.0% 109 35.0% 101CLN (Italy) 35.0% 68 35.0% 66Finarvedi (Italy) - - 39.9% 52Borcelik (Turkey) 40.3% 50 40.3% 52Carsid (Belgium) 40.0% 16 40.0% 23Cia Hispano-Brasileira de Pelotização (Brazil) 49.1% 12 49.1% 11Stainless SteelAcesita (Brazil) 27.7% 111 27.7% 98Distribution-Processing-TradingCondesa (Spain) 48.8% 53 48.8% 50IMS (France) 36.0% 44 36.0% 45Traxys S.A. (Luxembourg) 50.0% 22 - -Alfonso Gallardo (Spain) - - 30.0% 11Hierros y Aplanaciones (Spain) 15.0% 11 15.0% 10Long Carbon SteelLME (France) 34.0% 17 34.0% 14Société Nationale de Sidérurgie (Morocco) 8.5% 12 8.5% 11San Zeno Acciai–Duferco (Italy) 49.9% 9 - -Other activitiesGroupe Atic (France) 45.1% 19 45.1% 18Soteg (Luxembourg) 20.0% 13 20.0% 12JOINTLY CONTROLLED ENTITIESFlat Carbon SteelLusosider (Portugal) - - 50.0% 30Long Carbon SteelTrefilARBED Kiswire (Korea) 50.0% 74 50.0% 77Other activitiesEnsemble DHS (Germany) 51.3% 361 51.3% 381Various companies and jointly controlled entities - 92 - 110TOTAL 1,758 1,780financial information > consolidated financial statementsThe Gonvarri sub-group, which consists of the holding company Gonvarri SRL and of the sub-group GonvarriIndustrial is accounted for under the equity method considering the Group does not hold control of the holdingcompany Gonsider SL. As at December 31, 2002, this sub-group was accounted for under the equity method viathe Gonsider Group, which included the same companies.The main elements of goodwill relating to companies accounted for using the equity method are as follows:In EUR million Net amount 2003 Net amount 2002Acesita 48 63CST 16 -Finarvedi - 19DHS Group (10) -Gestamp - 7Carsid (8) (12)Other 1 1TOTAL 47 78ANNUAL REPORT ARCELOR 2003 151

NOTE 7 – OTHER INVESTMENTSThe main items comprising investments and other securities (not consolidated) comprise:In EUR million Net value 2003 Net value 2002Shares in affiliated companies 126 196Investment securities 71 78Other investment securities 110 192TOTAL 307 466The reduction in the value of shares in affiliated companies is 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 fullconsolidation of BMP Siderurgica S.A. (Brazil, long carbon steel), formerly known as Mendes Junior.NOTE 8 – RECEIVABLES AND OTHER FINANCIAL ASSETSReceivables associated with investments, loans and other financial assets:In EUR million 2003 2002Acesita - 55Acindar 121 95Carsid 89 110Forcast international 7 8Duferco 17 -ThyssenKrupp Stahl 13 -Sodisid - loans granted 11 21Sodisid - securitisation 30 26Revaluation of interest rate and exchange rate hedge instruments 68 86Guarantee deposit 142 217Hedging of pension funds and similar benefits 10 5Other 185 143TOTAL 693 766NOTE 9 – INVENTORIESInventories are detailed below, distinguishing between those held at historic cost and those valued at net realisablevalue.As at December 31, 2003, inventories are valued as follows:Inventories held Inventories held TotalIn EUR million at historic cost at net realisable valueRaw materials and stocks 629 1,365 1,994Work in progress 607 750 1,357Finished goods 471 1,177 1,648Contracts in progress 95 - 95Spares 93 293 386Advances and prepayments on orders 17 - 17TOTAL 1,912 3,585 5,497152ANNUAL REPORT ARCELOR 2003

As at December 31, 2002, inventories are valued as follows:Inventories held Inventories held TotalIn EUR million at historic cost at net realisable valueRaw materials and stocks 554 1,896 2,450Work in progress 976 486 1,462Finished goods 604 1,229 1,833Contracts in progress 85 - 85Spare parts 13 232 245Advances and prepayments on orders 16 - 16TOTAL 2,248 3,843 6,091Impairments recorded to value inventories at their net realisable value amounted to EUR 531 million as atDecember 31, 2003 (2002: EUR 610 million).NOTE 10 – TRADE RECEIVABLESIn EUR million 2003 2002Gross amount 3,431 4,460Impairment (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 securedreceivables. In accordance with IAS 39, these receivables were not accounted for as disposals and were thereforeheld 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 allsecuritisation arrangements that existed at December 31, 2002. The Group does not retain the associated credit risk onthese 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 ensuresthe recoverability of the funds on behalf of the third party. The corresponding remuneration receivable (or the forfeitpayable), 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).financial information > consolidated financial statementsNOTE 11 – OTHER AMOUNTS RECEIVABLEIn EUR million 2003 2002Taxation recoverable 444 449Revaluation of foreign currency hedging instruments 16 29Revaluation of raw material hedging instruments 50 3Other receivables 868 852TOTAL 1,378 1,333NOTE 12 – CASH AND CASH EQUIVALENTSIn EUR million 2003 2002Marketable securities - gross 1,024 228Cash at banks and in hand 687 782Short term deposits 179 229TOTAL 1,890 1,239ANNUAL REPORT ARCELOR 2003 153

NOTE 13 – EQUITY13.1 Issued capital and share premiumAt the conclusion of the Public Exchange Offers in February2002, 118,792,739 Aceralia shares (representing95.03%), 11,559,672 Arbed shares (representing99.45%) and 245,697,269 Usinor shares (representing97.58%) were converted into 528,354,061 Arcelorshares. These shares were added to the 6,450 existingshares issued on the incorporation of Arcelor S.A. onJune 8, 2001.The contribution of shares in Arcelor S.A. was determinedbased on a EUR 14 value per share for a totalamount of EUR 7,397 million. This contribution wasrecorded as EUR 2,642 million issued capital and EUR4,755 million as share premium.In the context of the public share for share offer byArcelor S.A. on July 9, 2002 for the Usinor shares,3,351,776 Arcelor S.A. shares were issued in exchangefor Usinor shares on December 31, 2002. Moreover,after the de-listing of the Usinor shares from the primarymarket on Euronext Paris and within the framework ofthe public exchange offer of Usinor shares, 654,122Arcelor S.A. shares were issued in 2002 and a further674,387 shares were issued in 2003.Subsequent to these purchases Arcelor S.A. holds99.24% of Usinor’s issued shares.As at December 31, 2003, subscribed capital comprisesof 533,040,796 ordinary shares, fully paid up with anominal value of EUR 2,665,203,980. The share premiumamounts to EUR 4,795,105,775.Authorised share capital, including subscribed sharecapital, amounts to EUR 5 billion.The number of shares in circulation is as follows:13.2 Exchange differencesThe movement on foreign exchange differences of EUR-71 million (2002: EUR -309 million) is primarily due tothe depreciation of the US dollar relative to the euro.13.3 Share option planAs at June 30, 2003, Arcelor S.A. established a shareoption plan. 1,300,000 share options were made to73 beneficiaries.Furthermore, the beneficiaries of the Usinor share optionplans have the option of converting their Usinor sharesinto Arcelor shares.As at December 31, 2002, Usinor S.A. had two shareoption plans in place.The first plan, established on November 21, 1997 covers1,374,000 shares attributable to 295 beneficiaries.The second plan, established on March 7, 2000 covers2,380,000 shares attributable to 460 beneficiaries.The plan established on December 11, 1995 covering757 000 shares attributable to 66 beneficiaries expiredon December 10, 2002. On the expiry of this plan optionsover 628,000 shares were exercised and 129,000lapsed.The movement in the number of share options duringthe period was as follows:(Number of share options) 2003 2002Options at the beginning of year 3,465,400 4,139,900Options 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 3,465,400Outstanding options as at December 31, 2003:Number of shares (thousands)DECEMBER 31, 2001 (USINOR) 251,776Initial capital from Newco 6Capital increase - contribution to Arcelor 282,657Unconverted Usinor shares (2,073)DECEMBER 31, 2002 (ARCELOR) 532,366Capital increase 675DECEMBER 31, 2003 533,041Maturity date Exercise price (in EUR) Number of optionsNovember 21, 2002 to November 21, 2004 13,92 1,198,600April 7, 2003 to April 7, 2008 15,24 2,180,900July 1, 2006 to June 30, 2010 9,94 1,300,000TOTAL 4,679,500154ANNUAL REPORT ARCELOR 2003

13.4 Own shares13.5 DividendsIn EUR million Number of shares ValueDECEMBER 31, 2001 - -Purchases linkedto the business combination 68,420,405 958Other acquisitions 214,990 3Disposals (13,968,163) (205)DECEMBER 31, 2002 * 54,667,232 756Acquisitions 511,715 4Disposals (534,158) (4)DECEMBER 31, 2003 54,644,789 756* 6,000,000 shares were the subject of short term loans to third parties.NOTE 14 – EARNINGS PER SHAREThe Board of Directors will propose a gross dividend ofEUR 0.40 per share for the year to December 31, 2003.This dividend will be paid on May 24, 2004. Thesefinancial statements, prepared before the appropriation ofprofits do not include provision for the dividend, which issubject to shareholder approval at the Annual GeneralMeeting on April 30, 2004.The basic earnings per share is calculated by dividing the net profit (Group share) by the weighted average numberof shares in circulation during the period, excluding the average number of ordinary shares purchased and held bythe Group.2003 2002 pro forma 2002Net profit/(loss) - Group share in EUR million 257 (121) (186)Weighted average number of shares in issue 478,278,668 485,279,429 485,279,429Earnings/(loss) per share - in EUR 0.54 (0.25) (0.38)financial information > consolidated financial statementsThe diluted earnings per share is calculated by taking the financial instruments giving access to the share capital ofthe consolidating company, whether they are issued by the Company itself or by one of its subsidiaries. The dilutionis calculated, instrument-by-instrument, taking into account the conditions existing at the balance sheet date andexcluding 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 firstattributed to the purchase of shares at market price if this is above the exercise price of the right.In both cases, funds are taken into account on a pro rata basis in the issuing year of diluting instruments and on thefirst day of the financial years to follow.2003 2002 pro forma 2002Net profit/(loss) used for the calculation of diluted earnings per share(in EUR million) 257 (121) (186)Weighted average number of shares in issueused for the calculation of diluted earnings per share 478,278,668 485,279,429 485,279,429Diluted 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 requirementsof IFRS.ANNUAL REPORT ARCELOR 2003 155

NOTE 15 – MINORITY INTERESTSIn the year ended December 31, 2003 minority interests increased by EUR 69 million, notably due to the inclusionof the result of the minority interests in 2003 (EUR 159 million). This increase has been partially offset by dividendpayments to minority interests (EUR 37 million) and consolidation scope adjustments (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 inUsinor 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 LIABILITIESIn EUR million 2003 2002Convertible debenture loans 1,488 1,495Non-convertible debenture loans 1,914 1,170Subordinated loans repayable by shares - 250Amounts owed to credit institutions 1,268 1,335Amounts owed on fixed assets held under finance leases 35 40Fair value of interest rate hedge instruments 3 81Borrowings and other financial debt 163 223LONG TERM BORROWINGS 4,871 4,594Short term element of debenture loans 57 56Amounts owed to credit institutions 220 580Commercial paper 619 909Current bank borrowings 215 493Net financing linked to securitisation programmes * - 1,097Subordinated loans repayable by shares - 189Amounts owed on fixed assets held under finance leases 5 11Accrued interest payable 110 96Borrowings and other financial debt 325 390SHORT 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 establishmentof the receivables sale programme, as referred to at Note 10 above.16.1 Convertible debenture loansIn December 1998 Usinor issued 29,761,904 bondswith an option to convert and/or exchange into new orexisting shares (O.C.E.A.N.E.) for EUR 12.81 with amaturity date of January 1, 2006. The bonds can berepurchased or redeemed in advance, at the discretionof the issuer, and are convertible or exchangeable at therate of one share for one bond. If not converted thebonds are redeemable at maturity for EUR 14.20.On February 18, 2000 Usinor issued 25,000,000 bondswith an option to convert and/or exchange into new orexisting shares (O.C.E.A.N.E.) for EUR 19.87 with amaturity date of January 1, 2005. The bonds can berepurchased or redeemed in advance, at the discretionof the issuer, and are convertible or exchangeable at therate of one share for one bond. If not converted, thebonds are redeemable at maturity for EUR 19.87.On the conclusion of the Public Exchange Offers24,680,648 “O.C.E.A.N.E. Usinor 2005” (representing98.72%) and 27,720,876 “O.C.E.A.N.E. Usinor 2006”(representing 97.01%) were converted into ArcelorO.C.E.A.N.E. debentures.In June 2002, Arcelor issued convertible bonds fora nominal amount of EUR 750 million represented by38,961,038 bonds. The maturity date is 2017 with anannual interest rate of 3%.156ANNUAL REPORT ARCELOR 2003

In the period following the Public Exchange Offers,“Arbed 3.25% senior convertible note 2004” bonds wereconverted into 8,775,712 Arcelor shares. The remainingnon-converted bonds were redeemed in advance onApril 27, 2002.Convertible debenture loans are disclosed in the balancesheet as follows (excluding interest payable):In EUR million 2003 2002Nominal value of convertible bonds 1,633 1,640Share capital element, net of deferred tax (101) (101)Deferred tax liability (44) (44)Liability element includedin the balance sheet 1,488 1,49516.3 Breakdown by currency (excluding short term debt)16.2 Subordinated loans redeemable by sharesIn December 1998, Auxidev (a holding company 100%owned by Indus since September 15, 2003, itself a100% subsidiary of Usinor since September 16, 2003)issued EUR 259 million in subordinated loan notesredeemable by preference shares (TSAR) with a maturitydate of December 31, 2003.On December 22, 2000, Valinter (a holding company100% owned by Indus since 15 September 2003, itselfa 100% subsidiary of Usinor since 16 September 2003)issued EUR 250 million subordinated loan notesredeemable by preference shares (TSAR) with a maturitydate of December 31, 2005.Both loans were repaid early on June 30, 2003.In EUR million 2003 % 2002 %EUR 4,162 85 3,897 85USD 530 11 539 12Other 179 4 158 3TOTAL 4,871 100 4,594 100financial information > consolidated financial statements16.4 Breakdown by maturity (excluding short term debt)In EUR million 2003 20022004 - 3852005 917 1,1312006 1,055 9602007 331 3332008 834 -After more than 5 years 1,734 1,785TOTAL 4,871 4,59416.5 Interest ratesa) Long-term debtsInterest on variable interest debt is mainly linked to EURIBOR and LIBOR rates.In EUR million 2003 2002Total taux fixe 2,171 2,833Total taux variable 2,700 1,761TOTAL 4,871 4,594b) Hedging instrumentsFor the financial year 2003 the net result relating to hedging instruments is a loss of EUR 18 million (2002: loss ofEUR 24 million).ANNUAL REPORT ARCELOR 2003 157

16.6 Detail of main individual long-term loansIn EUR million 2003 2002Arcelor FinanceDebenture 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 6003-month EURIBOR loan 2002 / 2006 18 373-month EURIBOR loan 2001 / 2009 127 -3-month EURIBOR loan 2001 / 2007 150 -3-month EURIBOR loan 2003 / 2007 22 -3-month EURIBOR loan 2003 / 2007 25 -3-month EURIBOR loan 2003 / 2005 55 -Loan 6.4% 2001 / 2011 48 -Issue of transferable securities 80 -Loan 4.06% 2003 / 2008 28 -Other loans 72 -SUB TOTAL 2,220 637ArcelorConvertible debenture loan 3.875% 2000 / 2005 487 483Convertible debenture loan 3% 1998 / 2006 350 330Convertible debenture loan 3% 2002 / 2017 651 646Usinor3-month EURIBOR loan 2001 / 2007 - 150Subordinated loan notes redeemable by preference shares -3-month EURIBOR loan 2000 / 2005 (Valinter) - 250Convertible debenture loan 3.875% 2000 / 2005 - 10Convertible debenture loan 3% 1998 / 2006 - 26Debenture loan 7.25% (USD 300 million) 1996 / 2006 258 286ArbedDebenture loan 6% 2000 / 2005 - 104Debenture loan 5.375% 1998 / 2006 - 62EURIBOR loan 2000 / 2007 40 403-month EURIBOR loan 2002 / 2007 - 503-month EURIBOR loan 2000 / 2006 70 48Loan 4.75% 2000 / 2006 - 233-month EURIBOR loan 2001 / 2011 (AIS Finance) 125 120Aceralia3-month EURIBOR loan 2000 / 2013 100 100Sidmar FinanceDebenture loan 5.75% 1997 / 2004 - 50Belgo MineiraLIBOR loan 1998 / 2013 (USD 66 million) - Guilman - 63Loan 10% 2001 / 2004 (USD 30 million) - BMU - 29Loan 10% 2001 / 2004 (USD 30 million) - BMU - 29TJLP loan 1998 / 2010 (BRL 97 million) - BMP 25 26IGPM 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 -158ANNUAL REPORT ARCELOR 2003

16.6 Detail of main individual long-term loans (continued)In EUR million 2003 2002Vega do SulLIBOR loan 2002 / 2014 (USD 50 million) 40 -LIBOR loan 2002 / 2012 (USD 83 million) 66 -TJLP loan 2002 / 2010 (BRL 179 million) 49 -Cockerill SambreEURIBOR loan 1997 / 2005 (BEF 1 billion) - 12Other loans 347 1,020TOTAL 4,871 4,594NOTE 17 – EMPLOYEE BENEFITS17.1 Nature of commitmentsThe majority of the companies included in the Arcelorgroup consolidation scope are European entities.According to the laws and regulations in effect in thesecountries additional benefits can be granted to staff.Where these benefits granted to staff result in a futureobligation for the Group a provision is calculated on thebasis of an actuarial valuation method. The Group usesindependent actuaries to calculate the amounts of thesecommitments. Moreover, an independent firm isresponsible for the coordination and supervision of allthese actuarial calculations for the Group.In the majority of the countries in which the Group operatesthere is no requirement to cover retirement or medicalobligations by entering into contracts with externalassurance companies or pension funds except forBelgium, Spain and the United States where suchhedging is compulsory (“funded obligations”).These legal requirements primarily affect Sidmar inBelgium and J&L Specialty Steel in the United States(retirement and additional medical coverage). Someother subsidiary companies (primarily Usinor S.A. inFrance) have also elected to cover, partly or completely,their retirement obligations through contracts withassurance companies. Independent actuaries evaluatethese external policies.The difference between the current value of suchcommitments and that of the external insurance policiesdesigned to cover such commitments (EUR 283 millionin total, including all benefits) represents the net liabilityof the Group in respect of such benefits. This does notrepresent an overall funding shortfall but rather, in almostall cases, financing options entered into by thesubsidiaries.17.2 Financial information17.2.1 Details of provisions by type ofcommitmentPre-retirement plans have been reclassified to thebalance sheet caption “Provisions for contract terminationindemnities” (note 18).Provisions for pensions and other benefits are brokendown as follows:In EUR million 2003 2002Additional pension plans 1,218 1,128Leaving indemnities 391 377Early retirement plans 75 49Work medals 49 43TOTAL PROVISION FOR PENSIONPLANS AND SIMILAR BENEFITS 1,733 1,597Charges for the year in respect of all of these additionalbenefits granted to staff (including the interest chargelinked to the discounting of commitments) are disclosedunder the caption “Staff costs” in the income statement,as detailed in Note 21.financial information > consolidated financial statementsANNUAL REPORT ARCELOR 2003 159

17.2.2 Additional pension plansFrance Belgium Germany Luxembourg United States Other TotalIn EUR million 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002Financial assetsOpening balance 27 25 257 14 7 7 - - 76 89 88 51 455 186Changes in consolidation scope - - - 219 - - - - - 11 - 41 - 271Investment return recorded (7) 2 16 9 - - - - 11 (10) 5 2 25 3Additional contributions - - 31 24 - - 1 - 3 8 6 5 41 37Benefits 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 455Balance sheet provisionsActuarial value of liabilitiescovered by financial assets 137 120 309 256 7 7 2 - 136 128 75 89 666 600Fair 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 145Net asset situation resultingfrom financial assets coveringcommitments - - - - 1 - - - - - 8 - 9 -Actuarial value of liabilitiesnot covered by financial assets 519 543 21 19 337 307 177 152 6 11 6 5 1,066 1,037Unrealised actuarial (gains) /losses 6 (32) (17) 6 (7) - (21) - (1) (28) (11) 1 (51) (53)Unrealised cost of changesin 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 1,128Breakdown of charge for the periodCost of past services 41 45 10 11 4 3 7 2 3 3 7 17 72 81Interest charge 45 46 16 14 17 8 10 7 9 9 6 4 103 88Discounted return on assets (2) (1) (15) (12) - - - - (6) (8) (5) (5) (28) (26)Realised actuarial (gains) /losses during the period (3) 3 - - - - - 47 - - - 44 3Amortisation of cost of changesin pension scheme typeor retroactive benefits paid - - 12 - 1 1 2 1 - 5 (7) - 8 7Reductions and liquidations (1) - - - - - - - - - - - (1) -CHARGE FOR THE PERIOD 80 93 23 13 22 12 19 10 53 9 1 16 198 153Movements in balance sheet provisionOpening provision 604 535 24 21 307 22 152 - 34 34 7 - 1,128 612Changes in consolidation scope (3) 7 - 19 - 294 - 151 - 5 - 6 (3) 482Exchange differences - - - - - - - - (11) (5) (1) (1) (12) (6)Net asset situation resultingfrom financial assets coveringcommitments - - - - 1 - - - - - 8 - 9 -Reclassification of provisions - - 3 - 16 - - - - - - - 19 -Disbursements (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 153CLOSING PROVISION 643 604 19 24 322 307 154 152 73 34 7 7 1,218 1,128160ANNUAL REPORT ARCELOR 2003

17.2.2 Additional pension plans (continued)France Belgium Germany Luxembourg United States Other TotalIn EUR million 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002Main actuarial assumptionsDiscount rate 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 6.07% 6.75% - - - -Rate of returnon financial assets 5.75% 5.75% 5.75% 5.75% 4.00% 5.75% 4.00% 5.75% 9.07% 9.00% - - - -Average rateof 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 schemesContributions during the period - - 9 9 - 2 - - 2 1 - - 11 1217.2.3 Leaving indemnitiesFrance Other TotalIn EUR million 2003 2002 2003 2002 2003 2002Financial assetsOpening balance 13 13 - - 13 13Changes in consolidation scope - - - - - -Investment return recorded (1) - - - (1) -Additional contributions - - - - - -Benefits paid out - - - - - -Acquisitions / disposals - - - - - -Exchange differences - - - - - -CLOSING BALANCE 12 13 - - 12 13financial information > consolidated financial statementsBalance sheet provisionsActuarial value of liabilitiescovered by financial assets 15 21 - - 15 21Fair value of financial assets (12) (13) - - (12) (13)Sub-total 3 8 - - 3 8Actuarial value of liabilitiesnot covered by financial assets 260 253 35 30 295 283Unrealised actuarial (gains) / losses 94 86 (1) - 93 86Unrealised cost of changes in pension scheme type - - - - - -BALANCE SHEET PROVISION 357 347 34 30 391 377Breakdown of charge for the periodCost of past services 11 11 2 5 13 16Interest charge 17 15 1 - 18 15Discounted return on assets - - - - - -Realised actuarial (gains) / losses during the period (6) (6) - - (6) (6)Amortisation of cost of changesin pension scheme type or retroactive benefits paid - - - - - -Reductions and lquidations (2) - - - (2) -CHARGE FOR THE PERIOD 20 20 3 5 23 25ANNUAL REPORT ARCELOR 2003 161

17.2.3 Leaving indemnities (continued)France Other TotalIn EUR million 2003 2002 2003 2002 2003 2002Movements in balance sheet provisionOpening provision 347 337 30 29 377 366Changes in consolidation scope - - 4 - 4 -Exchange differences - - - - - -Disbursements (10) (10) (3) (4) (13) (14)Charge for the period 20 20 3 5 23 25CLOSING PROVISION 357 347 34 30 391 377Main actuarial assumptionsDiscount 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 benefits (medical insurance, work medals)France United States Other TotalIn EUR million 2003 2002 2003 2002 2003 2002 2003 2002Financial assetsOpening balance - - 5 8 - - 5 8Changes in consolidation scope - - - - - - - -Investment return recorded - - 2 (2) - - 2 (2)Additional contributions - - - 4 - - - 4Benefits paid out - - - (5) - - - (5)Acquisitions / disposals - - - - - - - -Exchange differences - - (1) - - - (1) -CLOSING BALANCE - - 6 5 - - 6 5Balance sheet provisionsActuarial value of liabilitiescovered by financial assets - - 80 59 - - 80 59Fair value of financial assets - - (6) (5) - - (6) (5)Sub-total - - 74 54 - - 74 54Actuarial value of liabilitiesnot covered by financial assets 36 44 2 2 12 2 50 48Unrealised 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 92Breakdown of charge for the periodCost of past services 1 2 2 4 - 2 3 8Interest charge 2 2 4 4 1 - 7 6Discounted return on assets - - - (1) - - - (1)Realised actuarial (gains) / losses during the period (1) - 38 - - - 37 -Amortisation of cost of changesin pension scheme type or retroactive benefits paid - - - (17) - - - (17)Reductions and lquidations - - - - - - - -CHARGE FOR THE PERIOD 2 4 44 (10) 1 2 47 (4)162ANNUAL REPORT ARCELOR 2003

17.2.4 Other benefits (medical insurance, work medals) (continued)France United States Other TotalIn EUR million 2003 2002 2003 2002 2003 2002 2003 2002Movements in balance sheet provisionOpening provision 42 43 48 72 2 - 92 115Changes in consolidation scope (1) 4 - - - (1) (1) 3Exchange 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 92Main actuarial assumptionsDiscount 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 INDEMNITIESProvisions for contract termination indemnities reflect social commitments the Group has made in the context of itsrestructuring 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.financial information > consolidated financial statementsIn EUR million Social provisions Early retirement plans TotalOpening balance 330 364 694Increase in provision 64 70 134Utilisation and reversal (69) (106) (175)Transfer of amounts previously booked to negative goodwill 148 19 167Reclassifications (social plans transformed into early retirement plans during the year) (184) 184 0Other reclassifications, changes in consolidation scope and foreign exchange variations (20) - (20)CLOSING BALANCE 269 531 800Charges for the period relating to social provisions are recorded in “Other operating charges” in the incomestatement. Charges for the period relating to early retirement plans are recorded in “Staff costs” in the incomestatement as detailed in Note 21.18.1 Social provisionsSocial provisions at the year-end include estimatedindemnities under the following restructuring plans:• Flat carbon steel sector (EUR 148 million);• Stainless steel sector (EUR 44 million), socialprovisions relating to the closure of the Creusot andArdoise sites and to the restructuring of Ugitech S.A.;and• Distribution, processing and trading sector (EUR 10million).The restructuring plan of Eko Stahl as initiated in 2003(EUR 11 million) was immediately implemented bymeans of early retirement plans. The charge andcorresponding provision are thus directly included under“early retirements”.The Delta plan for operations in the Walloon region (EUR162 million) and the FIT plan in Germany (EUR 58 million),initiated in 2002, have been partially implemented in theform of early retirement plans during the year.ANNUAL REPORT ARCELOR 2003 163

18.2 Early retirement plansAn 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 TotalIn EUR million 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002Balance sheet provisionActuarial value of commitments 399 245 62 46 17 33 46 37 524 361Unrecognised actuarial gains / losses 2 3 (4) - 8 - 1 - 7 3BALANCE SHEET PROVISION 401 248 58 46 25 33 47 37 531 364Breakdown of charge for the periodCost of past services 5 13 7 22 1 1 9 10 22 46Interest charge 15 12 2 2 1 - 2 2 20 16Actuarial gains / losses recognised during the period - - -2 - - - - - (2) -Amortisation of cost of changes in pensionscheme type or retroactive benefits paid 19 - 11 - - - - - 30 -CHARGE FOR THE PERIOD 39 25 18 24 2 1 11 12 70 62Movements in balance sheet provisionOpening provision 248 142 46 10 33 - 37 - 364 152Changes in consolidation scope - 132 - 15 - 34 - 26 - 207Exchange differences - - - - - - - - -Transfer of amounts previously recordedunder negative goodwill 19 - - - - - - - 19 -Reclassification (social plans transformedinto 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 62CLOSING PROVISION 401 248 58 46 25 33 47 37 531 364Main actuarial assumptionsDiscount 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% - - - -NOTE 19 – OTHER PROVISIONSRestructuring Commercial Environmental Other TotalIn EUR million costs risks risks risksOpening balance 51 92 195 701 1,039Increase in provisions 53 47 23 220 343Utilisation and reversal (38) (44) (24) (206) (312)Transfer of amounts previously booked in negative goodwill 20 54 74Reclassifications, changes in consolidation scopeand exchange differences 19 (12) 1 44 52TOTAL PROVISIONS 105 83 249 759 1,196In EUR million 2003 2002Other long term provisions 983 849Other short term provisions 213 190TOTAL OTHER PROVISIONS 1,196 1,039164ANNUAL REPORT ARCELOR 2003

19.1 Provisions for restructuringProvisions recorded under this heading do not includesocial commitments which are separately disclosedunder “Provisions for contract termination indemnities”detailed at Note 18.Provisions for restructuring comprise provisions establishedin respect of charges for the restoration of sites currentlyunder restructuring.By sector, restructuring provisions are analysed asfollows:• Flat Carbon Steel: EUR 47 million• Stainless Steel: EUR 32 million• Other: EUR 26 million19.2 Commercial risksCommercial risks primarily include litigation withcustomers, bad debts, losses on contracts andtermination losses as well as guarantees and otheritems.19.3 Environmental risksProvisions for environmental risks, analysed by geographiczones, are as follows:In EUR million 2003 2002Germany 2 4Belgium 142 91France 71 71Luxembourg 33 28Other 1 1TOTAL 249 19519.4 Other risksOther provisions cover, amongst others, the followingrisks:In EUR million 2003 2002Litigation 63 23Social risks 24 95Tax risks 149 163Other risks 523 420TOTAL 759 701financial information > consolidated financial statementsNOTE 20 – OTHER AMOUNTS PAYABLEIn EUR million 2003 2002Fixed asset suppliers 222 248Prepayments on orders 188 166Revaluation of foreign currency hedging instruments 25 27Tax and social security 1,348 1,235Dividends payable 4 24Other creditors 298 233Deferred income 109 90TOTAL 2,194 2,023NOTE 21 – STAFF COSTSIn EUR million2003 2002 pro forma 2002(unaudited)Wages and salaries 3,395 3,500 3,243Social charges 1,095 1,086 1,020Contributions to defined contribution pension schemes 11 12 12Charges for the year in respect of additional employeebenefits giving rise to provisions 338 254 236Employee profit-sharing scheme 69 37 32Other 163 174 156TOTAL STAFF COSTS 5,071 5,063 4,699ANNUAL REPORT ARCELOR 2003 165

NOTE 22 – NET FINANCING RESULTIn EUR million2003 2002 Pro forma 2002(unaudited)Interest income 192 243 185Interest charges (408) (527) (527)Dividends received 29 27 27Gains on foreign exchange 751 710 710Losses 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) 56TOTAL (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 establishmentof the receivables sale programme, as referred to at note 10 above.NOTE 23 – TAXATIONTax chargeTax analysis:In EUR million 2003 2002Current tax (46) (124)Deferred tax (95) (364)TOTAL TAXATION (141) (488)Reconciliation between the tax charge and the resultbefore tax:In EUR million 2003 2002Net profit 257 (186)Minority interests 159 46Net profit from companies accountedfor using the equity method (140) (102)Tax charge 141 488PROFIT BEFORE TAX 417 246Theoretical tax charge(30.96% in 2003, 33.74% in 2002) (129) (83)Reconciliation:Permanent differences 26 (74)Operations taxed at reduced rates 1 34Variations in tax rates 1 (77)Adjustment of deferred tax assetsrecognised in previous periods (42) (290)Tax credits and other taxes 2 2EFFECTIVE TAX CHARGE (141) (488)Permanent differences are primarily due to the following:In EUR million 2003 2002Impairment of property, plant and equipment (94) (62)Goodwill and surplus amortisation 34 35Profit on disposal exempt from tax 43 -Other charges and income,not deductible / not taxable 43 (47)TOTAL 26 (74)Deferred taxThe movement in the balance sheet provision for deferredtax liabilities is analysed as follows:In EUR million 2003 2002Balance as at January 1 359 102Expense / (revenue) for the period 21 (1)Arbed / Aceralia acquisition - 150Impact of fluctuations in exchange ratesand reclassifications (96) 64Other variations (1) 5 44BALANCE AS AT DECEMBER 31 289 359(1)Deferred tax is booked directly to equity.The movement in the balance sheet asset for deferredtax assets is analysed as follows:In EUR million 2003 2002Balance as at January 1 1,523 1,396Expense / (revenue) for the period (32) (75)Deferred tax asset adjustmentsrelating to prior periods (42) (290)Arbed / Aceralia acquisition - 396Impact of movements in exchange rates,consolidation scope and reclassifications (13) 74Other variations (1) - 22BALANCE AS AT DECEMBER 31 1,436 1,523(1)Deferred tax is booked directly to equity.166ANNUAL REPORT ARCELOR 2003

Origin of the deferred tax assets and liabilities:Assets Liabilities NetIn EUR million 2003 2002 2003 2002 2003 2002Intangible assets 6 6 (1) - 5 6Property, plant and equipment 326 391 (422) (385) (96) 6Inventories 134 161 (13) (11) 121 150Financial instruments 2 - (40) (42) (38) (42)Other assets 99 64 (65) (125) 34 (61)Provisions: 660 640 (161) (137) 499 503of which pensions 267 306 (5) (6) 262 300of which other social provisions 160 155 (17) (12) 143 143of which other provisions 233 179 (139) (119) 94 60Other liabilities 131 228 (122) (140) 9 88Tax losses brought forward 613 514 - - 613 514DEFERRED TAX ASSETS / (LIABILITIES) 1,971 2,004 (824) (840) 1,147 1,164Deferred tax assets 1,436 1,523Deferred tax liabilities (289) (359)NET BALANCE 1,147 1,164As at December 31, 2003, the Group’s brought forward tax losses have the following maturities:In EUR million 2003 20022003 412004 114 252005 15 92006 21 2402007 108 -2007 and beyond 1,0092008 and beyond 721 -No maturity date 4,708 3,320TOTAL 5,687 4,644Other tax credits (long-term depreciation) 1,590 697financial information > consolidated financial statementsDeferred tax assets not recognised by the Group apply to the following elements as at December 31, 2003:Gross Total deferred Recognised deferred UnrecognisedIn EUR million amount tax assets tax assets deferred tax assetsTax losses brought forward 5,687 1,961 613 1,348Other tax credits (long term losses) 1,590 546 - 546Property, plant and equipment 2,217 791 326 465Other 3,253 1,125 1,032 93TOTAL 4,423 1,971 2,452ANNUAL REPORT ARCELOR 2003 167

NOTE 24 – RELATED PARTY DISCLOSURESThe consolidated financial statements include transactions carried out by the Group in the normalcourse of business with its non-consolidated entities and entities accounted for using the equitymethod. Transactions are recorded at market prices.24.1 Loans and guarantees givenIn EUR million 2003 2002Loans (including short-term loans) to non-consolidated companies 256 309Guarantees granted to non-consolidated companies 115 2424.2 Purchases and sales of goods and servicesIn EUR million 2003 2002Sales 684 744Purchases 409 45824.3 Remuneration of members of managementIn EUR million 2003 2002Board of Directors and General Management 5.9 5.3Additional detail on remuneration is provided in the chapter on Corporate Governance of theannual report.NOTE 25 – DERIVATIVE FINANCIALINSTRUMENTSThe Group uses derivative financial instruments to hedgeits exposure to fluctuations in interest rates, exchangerates and the price of raw materials. The Group managesthe counter party risk associated with these instrumentsby centralising its commitments and by applyingprocedures 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 itscounter parties guarantees over the risks incurred.Risks associated with exchange rates, interest rates andthe price of base metals of all Group companies are subjectto centralised management at parent company level. Themain exceptions to this rule are the North and SouthAmerican group companies. These companies managetheir market risks in consultation with the parent company.Interest rate riskThe Group uses several types of instruments for themanagement of interest rate risk in order to optimise itsfinancial expenses, to hedge exchange risk related toloans in foreign currencies and to manage the splitbetween fixed and variable rate loans.Interest rate exchange contracts (“swaps”) allow theGroup to borrow long-term at variable rates and to swapthe rate of this debt either from the start or during theperiod of the loan. The Group and its counter partyexchange, at predefined intervals, the difference betweenthe agreed fixed rate and the variable rate, calculated onthe basis of the notional amount of the swap.Similarly, swaps may be used for the exchange of oneforeign currency against another, within the frameworkof exchange risk management, or for the exchange ofvariable rates against other variable rates.FRAs (“forward rate agreements”) and futures contractson interest rates are primarily used by the Group tohedge the rates paid on loans and variable rate financialinstruments or, in particular cases, on existing or futureloans. Similarly, futures contracts are used by the Groupto hedge the difference in rates between two currenciesin particular cases and within the framework ofexchange risk management. These contracts are eithercommitments to buy (or sell) a financial instrument at afuture date and at an agreed price, or to receive (or pay)at a future date the difference between two given rates.Certain instruments can be settled in cash, others can168ANNUAL REPORT ARCELOR 2003

e settled through the delivery of the underlying asset orin cash. The Group will generally only commit itself tohighly liquid term contracts, such as EURIBOR orEurodollar futures.Where applicable, initial and daily margin calls on termcontracts are paid or collected in cash. Futures contractscarry a low credit risk since exchanges are madethrough a clearing-house. FRAs are generally onlyentered into with major banking institutions.In addition, the Group may buy (or sell) options oninterest rates, caps (ceiling rates) or collars within theframework of its hedging strategy on loans and variablerate financial instruments. Rate options give the right tothe buyer, upon payment of a premium, and at a givendate or during a given period, to buy (or sell) from theseller of the option a financial instrument at an agreedprice and/or to receive (or pay) the difference betweentwo given rates or prices.Interest rate derivatives used by the Group to covervariations in the value of fixed rate loans are qualified asfair value hedges according to IAS 39. These derivativesare revalued at the balance sheet date and have animpact on the net profit or loss. This impact is neutralisedby a similar revaluation of the hedged part of theassociated loans.Other interest rate derivatives do not qualify as hedginginstruments 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 instrumentsare accounted for in the income statement. As atDecember 31, 2003, a net loss of EUR 18 million wasrecorded (2002: EUR -23 million).Exchange rate riskThe Group uses forward purchases and sales of foreigncurrency and other derivatives to hedge foreign currencytransactions of the majority of its subsidiaries. Thecommon practice of the Group is to invoice clients in theirown currency.The Group also uses these instruments at consolidationlevel to hedge debt recorded in foreign currency or thebalance sheet risk incurred on certain assets. The generalpolicy of the Group is to hedge exchange risk ontransactions completely. However, as an exception to thisgeneral policy, for certain currencies and for risks andamounts that are clearly identified and authorised bymanagement, the Group may either hedge in anticipationor not hedge transactional risks.With regard to exchange risk on debt, the Group policyis that each entity borrows in its own currency. There maybe exceptions to this policy at Group level, within theframework of arbitrage between the relative levels ofinterest rate and the exchange risk, or in an attempt tohedge a balance sheet risk on one or more identifiedassets.Not all derivatives used by the Group to hedge itsexchange risks qualify as hedging instruments accordingto IAS 39 to the extent that they are managed in anoverall manner.As at December 31, 2003, the reporting of thesederivatives at market value in the balance sheet led toa loss of EUR 8.5 million (2002: EUR –1 million).Raw material riskThe Group uses financial instruments (forward purchases,options and swaps on commodities) in order to reducethe volatility risk of certain raw materials. The Group isexposed to risks on raw materials both via the purchaseof its own raw materials and via sales contracts.The Group manages its risk on raw materials in anoverall fashion. Derivatives on raw materials used by theGroup are therefore not qualified as effective hedginginstruments according to IAS 39.As at December 31, 2003, the reporting of thesederivatives at market value in the balance sheet led toa loss of EUR 49.6 million (2002: EUR –1 million).Trading riskIf there are open positions and limited levels of profit orloss as well as defined maturity dates, the Group carriesout trading operations on the basis of the risks associatedwith interest rates, exchange rates and raw materialprices. Open positions on these transactions are notsignificant with regard to the volume of hedging operationsdealt or the general rate risk. In this respect, the types ofinstruments and the currencies that may be used, as wellas the maximum risk exposure are determined at managementlevel. Such risks are monitored on a daily basis. In2003 and in 2002 the net profit or loss on tradingoperations was not significant to the Group’s results.financial information > consolidated financial statementsANNUAL REPORT ARCELOR 2003 169

The portfolio of financial instruments as at December 31, 2003 is as follows:2003In EUR million Notional Market Residual maturity Averageamount value < 1 year 1 - 5 years > 5 years rate (1)INTEREST RATE INSTRUMENTSInterest rate and currency swapsFixed rate borrowings 10 1 10 - - 7.71%Fixed rate lendings 11 - 11 - - 6.75%Variable / Variable - - - - - -Interest rate swaps - Fixed rate borrowingsEUR 54 2 4 50 - 4.19%Foreign currency 238 (1) - 238 - 2.74%Interest rate swaps - Fixed rate loansEUR 1,529 45 229 700 600 4.66%USD 333 21 - 238 95 5.51%Other currencies - - - - - -Interest rate swaps - Variable/ Variable 120 1 32 88 2.46%Swaptions - Purchases - - - - - -Swaptions - Sales - - - - - -FRA contracts - Purchases 500 - 500 - - 2.68%FRA contracts - Sales 400 - 400 - - 2.86%Cap purchases 100 - 100 - - 4.50%Cap sales 50 - 50 - - 4.50%Floor purchases - - - - - -Floor sales - - - - - -Barrier swaps - - - - - -EXCHANGE RATE INSTRUMENTSForward purchase of foreign currency 570 (61) 566 4 - -Forward sale of foreign currency 619 95 619 - - -Exchange options - Purchases 45 - 45 - - -Exchange options - Sales - - - - - -RAW MATERIALSTerm contracts - Sales 34 (5) 33 1 - -Term contracts - Purchases 215 53 200 15 - -Swaps using raw materials pricing index - - - - - -Options - Sales - - - - - -Options - Purchases - - - - - -(1)Average fixed rates are determined on the basis of the euro and foreign currency rates. Variable rates are generally based on EURIBOR or LIBOR.170ANNUAL REPORT ARCELOR 2003

The portfolio of financial instruments as at December 31, 2002 is as follows:2002In EUR million Notional Market Residual maturity Averageamount value < 1 year 1 - 5 years > 5 years rate (1)INTEREST RATE INSTRUMENTSInterest rate and currency swapsFixed rate borrowings 33 - 22 11 - 5.88%Fixed rate lendings - - - - - -Variable / Variable 11 - - 11 - 3.20%Interest rate swaps - Fixed rate borrowingsEUR 187 1 83 104 - 3.99%Foreign currency 29 - - 29 - 6.69%Interest rate swaps - Fixed rate loansEUR 1,111 57 110 401 600 5.18%USD 286 29 - 286 - 5.70%Interest rate swaps - Variable / Variable 299 2 251 48 - 2.85%Swaptions - Purchases 50 - 50 - - 5.20%Swaptions - Sales 50 - 50 - - 5.20%FRA contracts - Purchases 160 - 160 - - 3.86%FRA contracts - Sales 50 - 50 - - 4.79%Cap purchases 339 - 91 248 - 4.64%Cap sales 50 - - 50 - 4.50%Floor purchases 137 - 137 - - 4.19%Floor sales 77 - 77 - - 4.00%Barrier swaps - - - - - -EXCHANGE RATE INSTRUMENTSForward purchase of foreign currency 325 (31) 315 10 - -Forward sale of foreign currency 928 38 928 - - -Exchange options - Purchases - - - - - -Exchange options - Sales - - - - - -RAW MATERIALSTerm contracts - Sales 10 - 10 - - -Term contracts - Purchases 187 (7) 160 27 - -Swaps using raw materials pricing index - - - - - -Options - Sales - - - - - -Options - Purchases - - - - - -financial information > consolidated financial statements(1)Average fixed rates are determined on the basis of the euro and foreign currency rates. Variable rates are generally based on EURIBOR or LIBOR.ANNUAL REPORT ARCELOR 2003 171

NOTE 26 – COMMITMENTS GIVEN AND RECEIVEDCommitments detailed in this note do not include the commitments detailed at Note 25.26.1 Commitments givenIn EUR million 2003 2002Guarantees on third-party loans 779 212Discounted bills (not yet at maturity) 33 23Liabilities guaranteed by assets 65 441SUB-TOTAL OF COMMITMENTS ON LOANS (UTILISATION) 877 676Commitments to buy or dispose of fixed assets 380 323Other commitments given 366 328TOTAL COMMITMENTS GIVEN 1,623 1,32726.2 Commitments receivedIn EUR million 2003 2002Endorsements and guarantees received from non-consolidated companies 138 120Other commitments received 134 255TOTAL COMMITMENTS RECEIVED 272 375As at December 31, 2003, Arcelor Finance S.C.A. has available credit lines, given by financialinstitutions totalling EUR 4,631 million.Arcelor Finance S.C.A. has issued letters of comfort via Arcelor S.A. in order to allow groupcompanies that are not consolidated or accounted for under the equity method, to obtain creditlines with financial institutions. These credit lines total EUR 9 million.172ANNUAL REPORT ARCELOR 2003

NOTE 27 – SEGMENT REPORTINGIn accordance with both Group management and internal reporting guidelines, segment reporting informationis disclosed by both business activity and by geographic zones.27.1 Breakdown by activitySales between activities are calculated at market price. The operating result is shown after eliminations.2003 Flat Long Stainless Distribution, Other Eliminations Total(Figures in EUR million,Carbon Carbon Steel Processing, activitiesexcept for the number of employees) Steel Steel TradingINCOME STATEMENTRevenue 13,994 4,381 4,280 7,954 836 (5,522) 25,923Inter-sector sales (3,352) (767) (121) (732) (550) 5,522 -TOTAL 10,642 3,614 4,159 7,222 286 - 25,923Gross operating profit 1,365 493 23 284 58 5 2,228Depreciation (656) (182) (486) (201) (76) - (1,601)Including non-recurring reductions in value (20) (10) (323) (78) (35) - (466)Operating profit(before amortisation of goodwill) 709 311 (463) 83 (18) 5 627Amortisation of goodwill 65 - - 42 4 - 111Including non-recurring reductions in value - - - (2) - - (2)Operating profit 774 311 (463) 125 (14) 5 738Share in the profit of companiesaccounted for using the equity method 125 25 (26) 7 9 140BALANCE SHEETSegment assets 11,701 3,631 2,990 3,698 4,829 (6,404) 20,445Property, plant and equipment 5,379 1,768 1,009 604 187 - 8,947Investments in companies accountedfor using the equity method 967 147 111 133 400 - 1,758Unallocated assets - - - - - - 2,405TOTAL CONSOLIDATED ASSETS 12,668 3,778 3,101 3,831 5,229 (6,404) 24,608Segment liabilities 6,032 1,355 1,629 1,875 1,796 (2,253) 10,434Unallocated liabilities - - - - - - 6,711TOTAL CONSOLIDATED LIABILITIES 6,032 1,355 1,629 1,875 1,796 (2,253) 17,145Acquisitions of tangible and intangiblefixed assets 727 293 194 83 30 - 1,327OTHER INFORMATIONNumber of employees (average) 48,510 18,115 14,598 15,129 3,160 - 99,512financial information > consolidated financial statementsANNUAL REPORT ARCELOR 2003 173

27.1 Breakdown by activity (continued)2002 Flat Long Stainless Distribution, Other Eliminations Total(Figures in EUR million,Carbon Carbon Steel Processing, activitiesexcept for the number of employees) Steel Steel TradingINCOME STATEMENTRevenue 12,312 3,605 4,097 8,780 880 (5,141) 24,533Inter-sector sales (3,437) (670) (108) (331) (595) 5,141 -TOTAL 8,875 2,935 3,989 8,449 285 - 24,533Gross operating profit 909 484 197 294 (73) - 1,811Depreciation (747) (153) (151) (144) (39) - (1,234)Including non-recurring reductions in value (185) - - - - - (185)Operating profit(before amortisation of goodwill) 162 331 46 150 (112) - 577Amortisation of goodwill 68 (3) (6) 42 2 - 103Operating profit 230 328 40 192 (110) - 680Share in the profit of companiesaccounted for using the equity method 28 29 21 7 17 - 102BALANCE SHEETSegment assets 12,183 3,396 3,330 4,495 4,226 (6,300) 21,330Property, plant and equipment 5,248 1,553 1,300 928 239 - 9,268Investments in companies accountedfor using the equity method 1,008 146 101 111 414 - 1,780Unallocated assets - - - - - - 2,726TOTAL CONSOLIDATED ASSETS 13,191 3,542 3,431 4,606 4,640 (6,300) 25,836Segment liabilities 5,353 1,200 1,408 2,033 1,014 (1,339) 9,669Unallocated liabilities - - - - - - 8,774TOTAL CONSOLIDATED LIABILITIES 5,353 1,200 1,408 2,033 1,014 (1,339) 18,443Acquisitions of tangible and intangiblefixed assets 734 211 173 162 32 - 1,312OTHER INFORMATIONNumber of employees (average) 50,035 17,953 15,041 19,289 3,238 - 105,556174ANNUAL REPORT ARCELOR 2003

27.1 Breakdown by activity (continued)2002 pro forma (unaudited) Flat Long Stainless Distribution, Other Eliminations Total(Figures in EUR million,Carbon Carbon Steel Processing, activitiesexcept for the number of employees) Steel Steel TradingINCOME STATEMENTRevenue 13,222 4,256 4,248 9,444 910 (5,486) 26,594Inter-sector sales (3,600) (778) (120) (379) (609) 5,486 -TOTAL 9,622 3,478 4,128 9,065 301 - 26,594Gross operating profit 925 613 200 319 (79) - 1,978Depreciation (777) (183) (149) (151) (42) - (1,302)Of which non-recurring reductions in value (185) - - - - - (185)Operating profit(before amortisation of goodwill) 148 430 51 168 (121) - 676Amortisation of goodwill 68 (6) 41 1 - 104Operating profit 216 430 45 209 (120) - 780Share in the profit of companiesaccounted for using the equity method 24 7 21 7 18 - 77BALANCE SHEETSegment assets 12,213 3,401 3,338 4,495 4,228 (6,300) 21,375Property, plant and equipment 5,278 1,558 1,308 928 240 - 9,312Investments in companies accountedfor using the equity method 1,008 146 101 111 414 - 1,780Unallocated assets - - - - - - 2,719TOTAL CONSOLIDATED ASSETS 13,221 3,547 3,439 4,606 4,642 (6,300) 25,874Segment liabilities 5,353 1,200 1,408 2,033 1,014 (1,339) 9,669Unallocated liabilities - - - - - - 8,774TOTAL CONSOLIDATED LIABILITIES 5,353 1,200 1,408 2,033 1,014 (1,339) 18,443Acquisitions of tangible and intangiblefixed assets 782 245 181 168 39 - 1,415OTHER INFORMATIONNumber of employees (average) 50,035 17,953 15,041 19,289 3,238 - 105,556financial information > consolidated financial statementsANNUAL REPORT ARCELOR 2003 175

27.2 Geographical breakdown(Figures in EUR million, except for the number of employees)2003 European Union North America * South America Other TotalRevenue 19,628 2,127 1,193 2,975 25,923Segment assets 17,933 648 1,409 455 20,445Property, plant and equipment 7,819 91 890 147 8,947Gross operating result 1,945 (69) 290 62 2,228Operating result 828 (350) 229 31 738Acquisition of property, plant and equipment,and intangible assets 1,085 29 194 19 1,327Number of employees (average) 87,699 2,707 7,671 1,435 99,5122002 European Union North America * South America Other TotalRevenue 18,359 2,901 1,253 2,020 24,533Segment assets 18,388 1,318 1,237 387 21,330Property, plant and equipment 7,989 382 727 170 9,268Gross operating result 1,480 50 251 30 1,811Operating result 483 2 182 13 680Acquisition of property, plant and equipment,and intangible assets 1,049 28 231 4 1,312Number of employees (average) 93,632 3,111 7,437 1,376 105,5562002 pro forma (non audité) European Union North America * South America Other TotalRevenue 19,901 3,145 1,358 2,190 26,594Segment assets 18,490 1,318 1,237 330 21,375Property, plant and equipment 8,045 382 727 158 9,312Gross operating result 1,558 59 331 30 1,978Operating result 513 7 247 13 780Acquisition of property, plant and equipment,and intangible assets 1,133 36 242 4 1,415Number of employees (average) 93,632 3,111 7,437 1,376 105,556* North America, including Mexico.176ANNUAL REPORT ARCELOR 2003

NOTE 28 – EVENTS AFTER THE BALANCE SHEET DATEThe Annual General Meeting of Aceralia shareholders ofJanuary 8, 2004 decided to proceed to a public offeringof own shares at a price of EUR 17 per share, payablein 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. Thepublic offering was launched on January 22, 2004, for aperiod of one month. The offer covered 6,207,261 Aceraliashares, which is equivalent to 4.97% of the capital.At the end of the offer, 5,006,342 shares were acquiredby 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 minorityshareholders (0.96%).Given that voting rights on own shares (totalling1,200,919 shares) are suspended, the percentageof control retained by Arcelor (which owns 117,792,739of a total of 119,993,658 shares) is 99.00%. Shareswere delisted from the Spanish stock market on March 2,2004. Aceralia intends to allow minority shareholderswho did not participate in the public offering to sell theirshares on an individual basis.In the context of the strengthening of the Group balancesheet and the reduction in the costs of servicing debt,Arcelor has determined to proceed with the redemptionof the O.C.E.A.N.E. 3% instruments maturing onJanuary 1, 2006 since the conditions for reimbursementare fulfilled. These O.C.E.A.N.E. instruments representEUR 350 million at the end of December 2003.O.C.E.A.N.E. holders had the option, until and includingMarch 11, 2004, to exercise their rights to convert theirbonds into shares. The resulting share requirement wasmet by making available shares that were held by theGroup, with retroactive effect to January 1, 2004. At theend of this offer, which serves to reinforce theconsolidated own funds of the Group, 22,490,577O.C.E.A.N.E., i.e. 81.05% of the original issue, wereexchanged for shares.The Arcelor group signed an agreement with BagoetaS.L., the majority shareholder of Conducciones yDerivados S.A., with a view to a disposal of the Group’stubes business. The transaction cannot be finalised untilapproved by the relevant competition authorities as wellas the finalisation of the associated legal documentation.Furthermore, the Group has announced its intention tosell a major part of its American subsidiary J&L SpecialtySteel LLC to Allegheny Technologies. The transactioncould be finalised by May 3, 2004, subject to a newagreement being signed with the workers unions and tothe approval of Allegheny’s creditors and the relevantcompetition authorities.On March 15, 2004, the Group put into place aprogramme of Level I American Depositary Receipts(“ADRs”), in order to improve the liquidity of Arcelor’sshares and increase their distribution amongst nonqualifiedAmerican investors. ADRs are certificatesissued by a depositary bank, representing shares in anon-American company (American Depositary Shares,“ADSs”). They confer voting rights as well as the right todividend receipts to their holders. They give Americaninvestors access to Arcelor’s shares by means of the“Over the Counter” market, on which ADRs are freelytradable.Finally, on March 19, 2004, the Group announced thedisposal of the entirety of its participation (96%) in theshare capital of Thainox Steel Ltd. in Thailand.financial information > consolidated financial statementsANNUAL REPORT ARCELOR 2003 177

NOTE 29 – RECONCILIATION OF THE ARCELOR GROUP FINANCIAL STATEMENTSPREPARED IN ACCORD WITH LUXEMBOURG GAAP WITH THE FINANCIAL STATEMENTSPREPARED IN ACCORD WITH IFRSIn EUR million 2003 2002Net situation (Group share) according to Luxembourg GAAP 7,321 7,362Own shares (751) (745)Result on own shares 17 17Accounting for convertible bonds 101 101Financial instruments 45 (3)Net situation (Group share) according to Arcelor GAAP 6,733 6,732In EUR million 2003 2002Net income (Group share) according to Luxembourg GAAP 232 (197)Result on own shares - 17Financial instruments 25 (6)Net income (Group share) according to Arcelor GAAP 257 (186)NOTE 30 – SIMPLIFIED GROUP ORGANISATION CHARTSituation as at December 31, 2003ARCELORSollac AtlantiqueFrance100.00% (99.24) *Sollac LorraineFrance100.00% (99.24)Sollac MéditerranéeFrance100.00% (99.24)CSTBrazil29.61% (29.38)Vega do SulBrazil77.88% (77.79)SIDMARBelgium99.54% (99.27)STAHLwerke BremenGermany69.67% (69.16)Cockerill SambreBelgium100.00% (99.24)Eko StahlGermany100.00% (99.14)ACERALIACorp. SiderùrgicaSpain95.03% (95.03)AceraliaTransformadosSpain100.00% (94.92)Acería CompactaBizkaiaSpain77.71% (73.85)ProfilARBEDLuxembourg100.00% (99.73)Stahlwerk ThüringenGermany100.00% (99.73)Travi e ProfilatiItaly100.00% (99.73)ACERALIA PerfilesSpain100.00% (95.03)SubgroupACERALIA RedondosSpain100.00% (95.03)SubgroupCSBMBrazil54.03% (52.97)SubgroupUgine&ALZ BelgiumBelgium100.00% (99.27)Ugine&ALZ FranceFrance100.00% (99.24)J&L Speciality SteelUnited States100.00% (98.54)AcesitaBrazil27.68% (27.47)Thainox SteelThaïland96.11% (95.38)UgitechFrance100.00% (99.24)Imphy UginePrécisionFrance100.00% (99.24)ARBEDLuxembourg99.73% (99.73)UsinorFrance99.24% (99.24)Arcelor CenterBrusselsBelgium100.00% (91.33)Arcelor FinanceLuxembourg100.00% (99.73)Arcelor InternationalLuxembourg100.00% (98.44)Arcelor USA HoldingUnited States100.00% (98.44)PUM Service AcierFrance99.98% (99.22)Laminados VelascoSpain80.00% (76.03)SubgroupFlat Carbon Steel Long Carbon Steel Stainless Steel Distribution-Processing-Trading+ Other activities* Percentages of shareholdings as at December 31, 2003 in % & Consolidation rates in ( ).A complete listing of Group companies has been submitted to the “Greffe du tribunal d’arrondissement”of Luxembourg.178ANNUAL REPORT ARCELOR 2003

NOTE 31 – LISTING OF GROUP COMPANIESCONSOLIDATION SCOPE AS AT DECEMBER 31, 2003442 companies fully consolidated (in addition to Arcelor S.A.)227 companies consolidated using the equity methodCompany name Consolidation Country Percentagemethodof capital heldcontrol (%)FLAT CARBON STEEL SECTORAceralia Planos subgroup, comprising the following companiesACERALIA Corporación Siderúrgica S.A., Gozón Full consolidation Spain 95.034191Acería Compacta de Bizkaia S.A., Sestao Full consolidation Spain 77.714286Acb, Acr Decapado AIE, Sestao Full consolidation Spain 100.000000Aceralia Construcciones SL, Sestao Full consolidation Spain 100.000000Arcelor España S.A., Madrid Full consolidation Spain 100.000000Arcelor FCS Commercial Iberica SL, Madrid Full consolidation Spain 100.000000Cia Hispano-Brasileira de Pelotizacao S.A., Vitoria Equity method Brazil 49.111101Ensilectric S.A., Avilés Equity method Spain 40.000000Ferramentas e Accessorios Industriais Lda, Agueda Equity method Portugal 39.999864Instituto Técnico de la Estructura del Acero SL, San Sebastian Equity method Spain 69.750000Metalúrgica Asturiana S.A., Mieres Full consolidation Spain 100.000000Recuperaciones Medioambientales Ind.S.A., Sestao Equity method Spain 52.000772Recuperaciones Férricas Integrales S.A., Sestao Equity method Spain 100.000000Refeinsa Cataluña SL, Castellbisbal Equity method Spain 100.000000Samper Refeinsa Galicia SL, Vigo Equity method Spain 50.000000Tetracero S.A., Gijón Full consolidation Spain 100.000000Aceros URS S.A., Viladecans Equity method Spain 45.024739Acos Planos do Sul S.A., Belo Horizonte Equity method Brazil 48.906896Amitor S.A., Barcelona Full consolidation Spain 100.000000Apsl Arcelor Participacoes S.A., Sao Paulo Full consolidation Brazil 100.000000Apsl ONPN Participacoes S.A., Belo Horizonte Equity method Brazil 50.000000Arcelor Acos Planos Brasil Ltda, Sao Paulo Full consolidation Brazil 100.000000Arcelor Auto S.A., Puteaux Full consolidation France 99.957314Arcelor FCS Commercial France S.A., Paris Full consolidation France 99.958333Arcelor FCS Commercial Deutschland GmbH, Köln Full consolidation Germany 100.000000Arcelor FCS Commercial Luxembourg S.A., Dudelange Full consolidation Luxembourg 100.000000Arcelor FCS Commercial S.A., Luxembourg Full consolidation Luxembourg 100.000000Arcelor FCS Commercial Italia Srl, Milan Full consolidation Italy 100.000000Arcelor Packaging International S.A., Puteaux Full consolidation France 99.999768Arcelor Packaging International España SL, Gozón Full consolidation Spain 100.000000Arcelor Packaging International Italia Srl, Canossa Full consolidation Italy 100.000000Arcelor Sagunto SL, Madrid Full consolidation Spain 99.999999Borcelik S.A., Istanbul Equity method Turkey 40.466215Bregal Bremer Galvanisierungs-GmbH, Bremen Full consolidation Germany 75.050000Bre.M.A Warmwalz Gmbh & Co KG, Bremen Full consolidation Germany 90.000000Carsid S.A., Marcinelle Equity method Belgium 40.000000Coils Lamiere Nastri Spa, Caselette, subgroup, comprising 29 companies Equity method Italy 35.000000Cockerill Mécanique Prestations S.A., Seraing Full consolidation Belgium 100.000000Cockerill Sambre S.A., Seraing Full consolidation Belgium 100.000000Comercial de Hojalata y Metales S.A., San Adrian Equity method Spain 22.999561Companhia Siderúrgica de Tubarão S.A., Serra Equity method Brazil 6.019382Cortes y Aplanados Siderúrgicos S.A., Barcelona Full consolidation Spain 100.000000Daval S.A., Puteaux Full consolidation France 99.996000financial information > consolidated financial statementsANNUAL REPORT ARCELOR 2003 179

Company name Consolidation Country Percentagemethodof capital heldcontrol (%)Decosteel NV, Geel Full consolidation Belgium 100.000000Decosteel 2 NV, Gent Full consolidation Belgium 100.000000Dermach S.A., Barcelona Full consolidation Spain 100.000000Eko Feinblechhandel GmbH, Eisenhüttenstadt Full consolidation Germany 100.000000Eko Recycling GmbH, Eisenhüttenstadt Full consolidation Germany 100.000000Eko Stahl GmbH, Eisenhüttenstadt Full consolidation Germany 100.000000Eko Transport GmbH, Eisenhüttenstadt Full consolidation Germany 100.000000Eurogal S.A., Flemalle Full consolidation Belgium 100.000000Ewald Giebel-Luxemburg GmbH, Dudelange Equity method Luxembourg 33.333333Fbh Eko Feinblechhandel GmbH, Burbach Full consolidation Germany 100.000000Galtec NV, Gent Full consolidation Belgium 100.000000Galvalange Sàrl, Dudelange Full consolidation Luxembourg 100.000000Gestamp Automocion SL, Abadiano, subgroup, comprising 58 companies Equity method Spain 34.999989Gonsider SL, Madrid Equity method Spain 42.871384Gonvarri Industrial S.A., Madrid, subgroup, comprising 16 companies Equity method Spain 29.850431Groupement de l’Industrie Sidérurgique S.A., Puteaux Full consolidation France 99.999908Hierros y Aplanaciones S.A., Corvera Equity method Spain 15.001999Holding Gonvarri Srl, Bilbao Equity method Spain 30.000000Irsid S.A., Puteaux Full consolidation France 99.779149La Magona subgroup, comprising the following companies:La Magona d’Italia Spa, Firenze Full consolidation Italy 99.791940Centro Acciai Rivestiti Srl, Piombino Full consolidation Italy 100.000000Magona International S.A., Luxembourg Full consolidation Luxembourg 99.990000Societa Mezzi Portuali Piombino Spa, Piombino Equity method Italy 50.000000Tubisud Srl, Luogosano Full consolidation Italy 55.000000Laminoir de Dudelange S.A., Dudelange Full consolidation Luxembourg 100.000000Ocas NV, Zelzate Full consolidation Belgium 100.000000R.Bourgeois S.A., Besançon Equity method France 29.996667Recherche et Développement du Groupe Cockerill Sambre Scrl, Liège Full consolidation Belgium 96.000000Sidgal ESV, Gent Full consolidation Belgium 100.000000Siderúrgica del Mediterráneo S.A., Puerto Sagunto Full consolidation Spain 100.000000Sidmar NV, Gent Full consolidation Belgium 99.542813Sidstahl NV, Gent Full consolidation Belgium 100.000000Sikel NV, Genk Full consolidation Belgium 100.000000Solblank France S.A., Uckange Full consolidation France 51.481081Solcan Fininvest subgroup, comprising the following companies:Solcan Fininvest Inc., Westmount Full consolidation Canada 100.000000Dosol Galva Inc., Hamilton Equity method Canada 20.000000Sollac Ambalaj Celigi S.A., Levent-Istanbul Full consolidation Turkey 74.999931Sollac Atlantique S.A., Puteaux Full consolidation France 99.999900Sollac Lorraine S.A., Puteaux Full consolidation France 99.999832Sollac Méditerranée S.A., Puteaux Full consolidation France 99.999867Solvi S.A., Puteaux Full consolidation France 100.000000Stahlhandel Burg GmbH, Burg Full consolidation Germany 100.000000Stahlwerke Bremen GmbH, Bremen Full consolidation Germany 69.668370Taylormetal S.A., Zaragoza Full consolidation Spain 100.000000Tailor Steel NV, Genk Full consolidation Belgium 100.000000Tailor Steel America Llc, Holt Full consolidation United States 70.602704Tailor Steel GmbH & Co KG, Bremen Full consolidation Germany 100.000000Tailor Steel Investment Llc, New York Full consolidation United States 100.000000Tailored Blank GmbH, Eisenhüttenstadt Full consolidation Germany 100.000000180ANNUAL REPORT ARCELOR 2003

Company name Consolidation Country Percentagemethodof capital heldcontrol (%)Tailored Blanks Genk S.A., Genk Full consolidation Belgium 100.000000Tailored Blanks Zaragoza S.A., Zaragoza Full consolidation Spain 100.000000Tailored Blanks S.A., Liège Full consolidation Belgium 100.000000Toleries Delloye-Matthieu S.A., Marchin Full consolidation Belgium 99.743421Vega do Sul S.A., Sao Francisco Full consolidation Brazil 68.852457LONG CARBON STEEL SECTORAceralia Perfiles subgroup, comprising the following companies:Aceralia Perfiles Bergara S.A., Bergara Full consolidation Spain 100.000000Aceralia LC Torino Srl, Torino Full consolidation Italy 100.000000Aceralia Perfiles SL, Madrid Full consolidation Spain 100.000000Aceralia Perfiles Madrid SL. Madrid Full consolidation Spain 100.000000Aceralia Perfiles Olaberria SL. Olaberria Full consolidation Spain 100.000000Aceralia Perfiles U.K. Ltd. Rayleigh Full consolidation United Kingdom 100.000000Aceralia Perfiles Zaragoza S.A. Zaragoza Full consolidation Spain 100.000000Arcelor LC Bordeaux S.A., Mérignac Full consolidation France 97.800000Aristrain Hispano Trade GmbH, Düsseldorf Full consolidation Germany 100.000000Consignaciones Asturianas S.A., Gijón Equity method Spain 50.000000Fercome Trading SL, Valencia Full consolidation Spain 100.000000Ilsacer 2000 SL, Zaragoza Equity method Spain 50.000000Kramer & Sons Trading Co, Detroit MI Equity method United Kingdom 50.000000Servicios Complementarios del Norte SL. Bilbao Equity method Spain 49.000000Sobrinos De Manuel Cámara S.A. Renteria Equity method Spain 50.000000Sociedad Auxiliar del Puerto de Pasajes S.A. Renteria Equity method Spain 50.000000Triturados Férricos SL, Madrid Equity method Spain 33.300000Aceralia Redondos subgroup, comprising the following companies:Aceralia Redondos Azpeitia SL, Azpeitia Full consolidation Spain 100.000000Aceralia Redondos Comercial S.A., Azpeitia Full consolidation Spain 100.000000Aceralia Redondos Getafe SL, Getafe Full consolidation Spain 100.000000Aceralia Redondos Lasao S.A., Azpeitia Full consolidation Spain 100.000000Aceralia Redondos Zumárraga S.A. Zumárraga Full consolidation Spain 100.000000Aciérie de l'Atlantique S.A., Boucau Full consolidation France 100.000000Arcelor Barras Comercial SL, Azpeitia Full consolidation Spain 100.000000Société Nationale de Sidérurgie S.A., Al Hoceima Equity method Morocco 8.500000Acindar Industria Argentina de Aceros S.A., Buenos Aires. subgroup, comprising 13 companies Equity method Argentina 21.635885Arbed-Finanz Deutschland GmbH. Saarbrücken Full consolidation Germany 99.000000Arcelor Long Commercial S.A.. Esch s/Alzette Full consolidation Luxembourg 100.000000Arcelor Long Commercial Deutschland GmbH, Köln Full consolidation Germany 100.000000Arcelor Rails, Piles & Special Sections Sàrl. Esch s/Alzette Full consolidation Luxembourg 100.000000Ares S.A. Rodange Full consolidation Luxembourg 80.760303Armasteel S.A. Wavre Full consolidation Belgium 100.000000Asbm Sàrl. Luxembourg Full consolidation Luxembourg 100.000000Belgo-Mineira subgroup, comprising the following companies:Companhia Siderúrgica Belgo-Mineira S.A. Belo Horizonte Full consolidation Brazil 60.599059Belgo Bekaert Arames S.A. Contagem Full consolidation Brazil 54.871282Belgo-Mineira Participacão Indústria e Comércio S.A., Juiz de Fora Full consolidation Brazil 99.999999Belgo-Mineira Uruguay S.A., Montevideo Full consolidation Uruguay 100.000000BelgoPar Ltda, Belo Horizonte Full consolidation Brazil 33.355571Bemex International Ltd, Hamilton Full consolidation Bermuda 100.000000Bmb Belgo-Mineira Bekaert Artefatos de Arame Ltda, Vespasiano Full consolidation Brazil 55.499970Bmf Belgo-Mineira Fomento Mercantil Ltda, Belo Horizonte Full consolidation Brazil 100.000000financial information > consolidated financial statementsANNUAL REPORT ARCELOR 2003 181

Company name Consolidation Country Percentagemethodof capital heldcontrol (%)Bmp Siderúrgia S.A., Juiz de Fora Full consolidation Brazil 75.791484Caf Santa Bárbara Ltda, Belo Horizonte Full consolidation Brazil 100.000000Cimaf Cabos S.A., Sao Paulo Equity method Brazil 50.000000Jossan S.A., Feira de Santana Full consolidation Brazil 99.994789Procables S.A., Lima Equity method Peru 47.739239Productos de Acero S.A.. Santiago Equity method Chili 50.000000Usina Hidrelétrica Guilman-Amorim S.A., Belo Horizonte Equity method Brazil 51.000000Wire Rope Industries S.A., Montréal Equity method Canada 50.000000Emesa Trefilería S.A., Arteixo Full consolidation Spain 100.000000Estate Wire Ltd, Sheffield Full consolidation United Kingdom 100.000000Europrofil France S.A., Paris Full consolidation France 99.990000Industrias Gálycas S.A., Vitoria Full consolidation Spain 100.000000LME Laminés Marchands Européens S.A., Trith Saint Léger, subgroup, comprising 13 companies Equity method France 33.999260MecanArbed Dommeldange Sàrl, Luxembourg Full consolidation Luxembourg 100.000000Newco Sàrl, Luxembourg Full consolidation Luxembourg 100.000000Newco Sàrl & Cie Secs, Luxembourg Full consolidation Luxembourg 100.000000ProfilArbed S.A., Esch s/Alzette Full consolidation Luxembourg 100.000000Redalsa S.A., Valladolid Equity method Spain 26.000000San zeno acciai - Duferco Spa, San Zeno Naviglio Equity method Italy 49.900001Socabel (Groupe Arbed) Senc, Luxembourg Full consolidation Luxembourg 100.000000Socadi (Groupe Arbed) Senc, Luxembourg Full consolidation Luxembourg 100.000000Société du Train Universel de Longwy S.A., Herserange Full consolidation France 99.999994Stahlwerk Thüringen GmbH, Unterwellenborn Full consolidation Germany 100.000000Travi e Profilati di Pallanzeno Spa, Pallanzeno Full consolidation Italy 100.000000TrefilArbed Arkansas Inc, Pine Bluff Full consolidation United States 99.999999TrefilArbed Bettembourg S.A., Dudelange Full consolidation Luxembourg 100.000000TrefilArbed Bissen S.A., Bissen Full consolidation Luxembourg 100.000000TrefilArbed Cheb Sro, Jesenice u Chebu Full consolidation Czech Republic 80.000000TrefilArbed Korea Co Ltd. Yangsan Equity method Korea 50.000000TrefilArbed Stahlcord Austria AG, Fürstenfeld Full consolidation Austria 96.502722TrefilArbed Stahlcord Gyártó Kft, Szentgotthard Full consolidation Hungary 100.000000STAINLESS STEEL SECTORAcesita S.A., Belo Horizonte Equity method Brazil 38.938281AL-Fin NV, Genk Full consolidation Belgium 100.000000Alinox Srl, Aosta Full consolidation Italy 100.000000Arcelor Stainless International S.A., Puteaux Full consolidation France 99.997648Haven Genk NV, Genk Full consolidation Belgium 50.000000Horst Zaabel GmbH, Garbsen Full consolidation Germany 100.000000Imphy Alloys subgroup, comprising the following companies:Imphy Alloys Nevada Inc., New York Full consolidation United States 100.000000Hood and Company Inc., Hamburg Full consolidation United States 100.000000IAI Holding Inc., New York Full consolidation United States 100.000000Metalimphy Alloys Corp, Collegeville Full consolidation United States 100.000000Rahns Speciality Metals Inc., Collegeville Full consolidation United States 100.000000Imphy Ugine Précision S.A., Puteaux Full consolidation France 99.999916Industeel Belgium subgroup, comprising the following companies:Industeel Belgium S.A., Charleroi Full consolidation Belgium 100.000000Aval Metal Center S.A., Charleroi Full consolidation Belgium 100.000000Charleroi Déroulage S.A., Charleroi Full consolidation Belgium 100.000000182ANNUAL REPORT ARCELOR 2003

Company name Consolidation Country Percentagemethodof capital heldcontrol (%)Industeel France subgroup, comprising the following companies:Industeel France S.A., Puteaux Full consolidation France 99.999400Industeel Creusot Sas, Puteaux Full consolidation France 100.000000Creusot Métal S.A., Puteaux Full consolidation France 74.999167J&L subgroup, comprising the following companies:J&L Speciality Steel Inc., Coraopolis Full consolidation United States 100.000000J&L Speciality Steel International Sales Corp, Christiansted Full consolidation United States 100.000000Midland Terminal Company Corp, Midland Full consolidation United States 100.000000La Meusienne Italia Srl, Milan Full consolidation Italy 100.000000Longtain Aciers Spéciaux et Inoxydables S.A., Strepy-Bracquegnies Full consolidation Belgium 97.967211Matthey et Cie S.A., Apples Full consolidation Switzerland 100.000000Matthey France Sas, Ancerville Full consolidation France 100.000000Matthey Holding S.A., Fribourg Full consolidation Switzerland 100.000000Matthey US Inc., Detroit Full consolidation United States 100.000000Mecagis S.A., Puteaux Full consolidation France 100.000000RCC GmbH, Erkrath Full consolidation Germany 100.000000Société Carolorégienne de Laminage S.A., Couillet Full consolidation Belgium 100.000000Société Meusienne de Constructions Mécaniques S.A., Ancerville Full consolidation France 99.910716Société Savoisienne de Métaux S.A., Annecy Full consolidation France 100.000000Sprint Metal Edelstahlziehereien GmbH, Hemer Full consolidation Germany 100.000000Staalcentrum Limburg NV, Genk Full consolidation Belgium 100.000000Sunbrite NV, Genk Full consolidation Belgium 100.000000Techalloy Company Inc., Mahwah Full consolidation United States 100.000000Thainox Steel Ltd, Rayong Full consolidation Thailand 96.110011Trafilerie Bedini Srl, Peschiera Borromeo Full consolidation Italy 100.000000Trafilerie e Viterie Italiane Srl, Ponte dell’Ollio Full consolidation Italy 99.920000Trefilados Inoxidables de Mexico S.A., Huamantla Full consolidation Mexico 100.000000Ugine & Alz S.A.. Puteaux Full consolidation France 99.851852Ugine & Alz Belgium NV. Genk Full consolidation Belgium 100.000000Ugine & Alz France S.A. Puteaux Full consolidation France 99.999978Ugine & Alz France Service S.A. Gonesse Full consolidation France 100.000000Ugine & Alz Iberica S.A., Viladecans Full consolidation Spain 99.999480Ugine & Alz Italia Srl, Milano Full consolidation Italy 100.000000Ugine & Alz Luxembourg S.A., Rodange Full consolidation Luxembourg 100.000000Ugine France Service S.A., Gonesse Full consolidation France 100.000000Ugine Iberica S.A., Viladecans Full consolidation Spain 99.999480Ugine Savoie Iberica S.A., Barcelona Full consolidation Spain 100.000000Ugine Savoie Imphy S.A., Ugine Full consolidation France 99.999948Ugine Savoie Italia Srl, Peschiera Borromeo Full consolidation Italy 100.000000Ugine Savoie Rostfrei GmbH, Renningen Full consolidation Germany 100.000000Ugine Savoie Suisse S.A., Belivard Full consolidation Switzerland 99.998519Ugine Savoie UK Ltd, Birmingham Full consolidation United Kingdom 99.999960Ugine Stainless subgroup, comprising the following companies:Ugine Stainless & Alloys Inc., Colmar Full consolidation United States 100.000000Ugine Stainless & Alloys – N.J. Inc., Colmar Full consolidation United States 100.000000Uginox Sanayi ve Ticaret AS, Gebze Kocaeli Full consolidation Turkey 65.000000Ugitech S.A., Ugine Full consolidation France 99.999948Ugitech Iberica S.A., Barcelona Full consolidation Spain 100.000000Ugitech Suisse S.A., Belivard Full consolidation Switzerland 99.998519Ugitech UK Ltd, Birmingham Full consolidation United Kingdom 99.999960Usi Holding Inc.Corp, Carson City Full consolidation United States 100.000000financial information > consolidated financial statementsANNUAL REPORT ARCELOR 2003 183

Company name Consolidation Country Percentagemethodof capital heldcontrol (%)Usinor Empreendimentos e Participacoes Ltda, Sao Paulo Full consolidation Brazil 100.000000Weha Edelstahl GmbH, Ratingen Full consolidation Germany 100.000000DISTRIBUTION, PROCESSING AND TRADING SECTORAceralia Construcción Obras Srl, Berrioplano Full consolidation Spain 100.000000Aceralia Constructalia SL, Pamplona Full consolidation Spain 100.000000Aceralia Distribucíon subgroup, comprising the following companies:Aceralia Distribucíon SL, Madrid Full consolidation Spain 100.000000Lusitana de Distribuçao Siderúrgica Lda, Ribatejo Equity method Portugal 100.000000Perfiles Especiales S.A., Pamplona Equity method Spain 100.000000Aceralia Transformados subgroup, comprising the following companies:Aceralia Transformados S.A., Pamplona Full consolidation Spain 100.000000Aceralia Color Acero SL, Pamplona Full consolidation Spain 100.000000Ach Paneles AIE, Azuqueca de Henares Equity method Spain 40.000000Aceralia Tubos subgroup, comprising the following companies:Aceralia Tubos SL, Lesaka Full consolidation Spain 100.000000Aceralia Rotec SL, Vera de Bidasoa Equity method Spain 100.000000Alessio Tubi Spa, Torino Full consolidation Italy 100.000000Arbed Americas subgroup, comprising the following companies:Arbed Americas Llc, New York Full consolidation United States 100.000000Arbed Americas Atlantic Spc, en liquidation, Wilmington Full consolidation United States 100.000000Arcelor International Mexico S.A., Queretaro Equity method Mexico 100.000000Arcelor Tradind USA Llc, New York Full consolidation United States 100.000000JBF Commercial Corp, en liquidation, New York Full consolidation United States 100.000000TrefilArbed Inc., en liquidation, New York Full consolidation United States 100.000000Arcelor Acelkereskedelmi Kft, Kecskemet Full consolidation Hungary 99.800000Arcelor Bauteile GmbH, Kreuztal-Eichen Full consolidation Germany 100.000000Arcelor Construcción España SL, Berrioplano Full consolidation Spain 100.000000Arcelor Construction France S.A., Haironville Full consolidation France 99.999215Arcelor Distribuce-CZ Sro, Praha Full consolidation Czech Republic 100.000000Arcelor Distribúcia Slovensko Sro, Kosice Full consolidation Slovakia 100.000000Arcelor Dystrybucja Polska Spzoo, Katowice Full consolidation Poland 100.000000Arcelor Grundstücksverwaltung Neckarsulm GmbH, Neckarsulm Full consolidation Germany 100.000000Arcelor Grundstücksverwaltung Thüringen GmbH, Ratingen Full consolidation Germany 100.000000Arcelor International S.A., Luxembourg Full consolidation Luxembourg 100.000000Arcelor International America subgroup, comprising the following companies:Arcelor International America Llc, New York Full consolidation United States 100.000000Norsteel Corp, New York Full consolidation United States 100.000000Arcelor International Canada Inc., Westmount Full consolidation Canada 100.000000Arcelor International Export S.A., Luxembourg Full consolidation Luxembourg 100.000000Arcelor International Singapore subgroup, comprising the following companies:Arcelor International Singapore Ltd, Singapore Full consolidation Singapore 100.000000Arcelor International Malaysia Sdn. Bhd., Kuala Lumpur Full consolidation Malaysia 100.000000Arcelor Négoce Distribution Sas, Reims Full consolidation France 100.000000Arcelor Profil S.A., Yutz Full consolidation France 99.900000Arcelor Projects Pte Ltd, Singapore Full consolidation Singapore 90.000000Arcelor Projects Sàrl, Luxembourg Full consolidation Luxembourg 100.000000Arcelor Stahlhandel GmbH, Ratingen Full consolidation Germany 100.000000Arcelor Stahlhandel Holding GmbH, Ratingen Full consolidation Germany 100.000000Arcelor Trading Antwerp S.A., Antwerpen Full consolidation Belgium 99.900000Arcelor Tubes S.A., Aubervilliers Full consolidation France 99.999397184ANNUAL REPORT ARCELOR 2003

Company name Consolidation Country Percentagemethodof capital heldcontrol (%)Ask Mac Gowan Ltd, Halesowen Full consolidation United Kingdom 65.500204Asturiana de Perfiles S.A., Langreo Full consolidation Spain 60.000000Avis Steel UK, Manchester Full consolidation United Kingdom 67.500000Baechler S.A., Thionville Full consolidation France 100.000000Berton Sicard Produits Métallurgiques S.A., Avignon Full consolidation France 100.000000Chaillous S.A., Nantes Full consolidation France 100.000000Cima S.A., Bertrichamps Full consolidation France 100.000000Cisatol S.A., Montataire Full consolidation France 99.999603Cockerill Stahl Service GmbH, Essen Full consolidation Germany 100.000000Cofrastra S.A., Fribourg Full consolidation Switzerland 100.000000Color Profil NV, Geel Full consolidation Belgium 100.000000Comptoir Métallurgique du Littoral S.A., Nice Full consolidation France 100.000000Comptoir pour l’entreprise et le matériel d’entreprise Suchail SA, Saint Etienne Full consolidation France 49.984615Conducciones y Derivados S.A., Vitoria-Gasteiz, subgroup, comprising 6 companies Equity method Spain 48.836344Contisteel subgroup, comprising the following companies:Contisteel (Holdings) Ltd, Andover Full consolidation United Kingdom 100.000000Contisteel (Southern) Ltd, Andover Full consolidation United Kingdom 100.000000Contisteel Ltd, Andover Full consolidation United Kingdom 100.000000Delta Zinc S.A., Saint Jorioz Full consolidation France 100.000000Deville S.A., Saint Bonnet le Château Full consolidation France 49.984615Dikema & Chabot Holding BV, Rotterdam Full consolidation the Netherlands 100.000000Dikema Staal Nederland BV, Rotterdam Full consolidation the Netherlands 100.000000Dikema Top BV, Rotterdam Full consolidation the Netherlands 100.000000Disteel S.A., Machelen Full consolidation Belgium 100.000000Disteel Cold S.A., Machelen Full consolidation Belgium 100.000000e-Arbed Distribution S.A., Esch s/Alzette Full consolidation Luxembourg 100.000000Europese Staal Prefabricatie NV, Geel Full consolidation Belgium 99.999911Etablissement Alfred André S.A., Harfleur Full consolidation France 100.000000Etablissements Jean Letierce et Cie, Bolbec Full consolidation France 100.000000Etilam S.A., Saint Dizier Full consolidation France 99.388667Eucosider Commercial S.A., Pétange Full consolidation Luxembourg 100.000000Eurinter France S.A., Reims Full consolidation France 100.000000Eurinter Svenska AB, Karlstad Full consolidation Sweden 100.000000Europerfil S.A., Barcelona Equity method Spain 50.000000Exma S.A. Yutz Full consolidation France 99.994495Fermatec S.A., Nîmes Full consolidation France 100.000000Ferrometalli-Safem Spa, Milano Full consolidation Italy 96.446073Ferrometalli-Safem Commerciale Spa, Milano Full consolidation Italy 100.000000Flachform Stahl GmbH, Schwerte Full consolidation Germany 100.000000Forges Profil S.A., Kirchdorf Equity method Switzerland 25.000000Fratelli Canessa Srl, Moncalieri Full consolidation Italy 50.999889Guillot S.A., Poitiers Full consolidation France 49.840000Haironville Austria GmbH, Neuhofen Full consolidation Austria 99.997500Haironville Bohemia Sàrl, Ceske Budejovice Full consolidation Czech Republic 99.000000Haironville Danmark AS, Rodovre Full consolidation Denmark 100.000000Haironville Guyane Sas, Cayenne Full consolidation French Guyana 100.000000Haironville Hungaria Kft, Budapest Full consolidation Hungary 100.000000Haironville Metal Profil S.A., Herstal Full consolidation Belgium 100.000000Haironville Norge AS, Vestby Full consolidation Norway 100.000000Haironville Polska Spzoo, Poznan Full consolidation Poland 100.000000Haironville Portugal S.A., Cartaxo Full consolidation Portugal 99.988462financial information > consolidated financial statementsANNUAL REPORT ARCELOR 2003 185

Company name Consolidation Country Percentagemethodof capital heldcontrol (%)Haironville Slovensko Sro, Bratislava Full consolidation Slovakia 100.000000Haironville Sverige AB, Karlstad Full consolidation Sweden 100.000000Haironville UK Ltd, St Helens Full consolidation United Kingdom 100.000000Haironville Tac Ltd, St Helens Full consolidation United Kingdom 100.000000IMS International Métal Service S.A., Neuilly, subgroup, comprising 20 companies Equity method France 36.050354J & F Steel Llc, Burns Harbor Full consolidation United States 100.000000Jean Guille S.A., Thionville Full consolidation France 49.997500Jh Group Sci, Yutz Full consolidation France 99.999999Kempes & Koolen Bouwsystemen BV, Tiel Full consolidation the Netherlands 100.000000Konti Steel Hellas S.A., Magnissia Full consolidation Greece 100.000000Laminados Velasco subgroup, comprising the following companies:Laminados Velasco SL, Basauri Full consolidation Spain 80.002547Arcelor Distribución Valencia S.A., Valencia Full consolidation Spain 100.000000Arcelor Distribución Vigo S.A., Porriño Full consolidation Spain 100.000000Auxiliar Laminadora Alavesa S.A., Olaeta Full consolidation Spain 100.000000Calibrados Pradera S.A., Miravalles Equity method Spain 50.000000Cántabra de Laminados Velasco S.A., Santander Full consolidation Spain 100.000000Castellana de Laminados Velasco S.A., Burgos Full consolidation Spain 100.000000Elaborados y Construcción S.A., Getafe Full consolidation Spain 100.000000Ferronía S.A., Andoain Full consolidation Spain 100.000000Grupo Velasco Desarrollo SL, Basauri Full consolidation Spain 100.000000Industrias Zarra S.A., Galdacano Equity method Spain 25.000000Laminados Canarias S.A., Telde Full consolidation Spain 100.000000Laminados Comavesa S.A., Getafe Full consolidation Spain 100.000000Laminados Gonvelsa SL, Llanera Full consolidation Spain 50.000000Laminados Siderúrgicos Arbizu S.A., Arbizu Full consolidation Spain 100.000000Laminados Siderúrgicos Duero S.A., Aranda de Duero Full consolidation Spain 90.000000Laminados Siderúrgicos La Coruña S.A. Arteixo Full consolidation Spain 100.000000Laminados Siderúrgicos Miranda S.A. Miranda de Ebro Full consolidation Spain 100.000000Laminados Siderúrgicos Murcia S.A. San Ginés Full consolidation Spain 100.000000Laminados Siderúrgicos Orense S.A., San Ciprian de Viñas Full consolidation Spain 90.000000Laminados Siderúrgicos Sampol SL, Palma de Mallorca Full consolidation Spain 75.049900Laminados Siderúrgicos Sevilla S.A., Alcalá de Guadaira Full consolidation Spain 100.000000Laminados Siderúrgicos Toledo S.A., Villaluenga de la Sagra Full consolidation Spain 55.000000Laminados Siderúrgicos Valladolid S.A., Valladolid Full consolidation Spain 100.000000Laminados Siderúrgicos Vitoria S.A., Vitoria Full consolidation Spain 100.000000SA Productos Empresas Metalúrgicas, Salvatierra Full consolidation Spain 100.000000Servicio del Acero S.A., Basauri Full consolidation Spain 100.000000Tremad S.A., Icazteguieta Full consolidation Spain 90.000000Tubos y Decapados S.A., Basauri Full consolidation Spain 100.000000Longtain S.A., Manage Full consolidation Belgium 99.990568Laserflash S.A., Eupen Full consolidation Belgium 100.000000Lille Aciers S.A., Lomme Full consolidation France 100.000000Megaço Jma Comercio Siderúrgico Ltda, Palmela Equity method Portugal 38.666500Mirouze Novacier S.A., Toulouse Full consolidation France 100.000000Monteferro Stahl Service GmbH, Leichlingen Full consolidation Germany 100.000000Mosacier S.A., Liège Full consolidation Belgium 100.000000Oxyflash S.A., Melle Full consolidation Belgium 100.000000Pab Bazeilles S.A., Douzy Full consolidation France 99.998383Pab Sud S.A., Hagetmau Full consolidation France 100.000000Panneaux Frigorifiques Français S.A., Val d’Ize Full consolidation France 100.000000186ANNUAL REPORT ARCELOR 2003

Company name Consolidation Country Percentagemethodof capital heldcontrol (%)Parements Métalliques d’Architecture S.A., Cerons Full consolidation France 100.000000Perry Willenhall Steel Service Centres Ltd, Willenhall Full consolidation United Kingdom 100.000000Prekon Spzoo, Starachowice Full consolidation Poland 100.000000Produits d’Usines Métallurgiques Pum-Station Service Acier SA, Reims Full consolidation France 99.975443Produits Métallurgiques de l’Orléanais Sas, Ingre Full consolidation France 49.986667Produits Métallurgiques des Ardennes S.A., Donchery Full consolidation France 100.000000Produits Métallurgiques du Sud-Ouest S.A., Langon Full consolidation France 100.000000Produits Sidérurgiques de la Moselle S.A., Yutz Full consolidation France 100.000000Profil du Futur S.A., Horbourg wihr Full consolidation France 100.000000Profilage de la Guadeloupe S.A., Baie Mahault Full consolidation France 100.000000Profilage de la Réunion S.A., Le Port Full consolidation France 94.203612ProfilArbed Distribution S.A., Esch s/Alzette Full consolidation Luxembourg 100.000000ProfilArbed Distribution Exploitation Luxembourg S.A., Differdange Full consolidation Luxembourg 100.000000ProfilArbed Distribution Luxembourg S.A., Pétange Full consolidation Luxembourg 100.000000ProfilArbed Staalhandel subgroup, comprising the following companies:ProfilArbed Staalhandel BV, Born Full consolidation the Netherlands 100.000000Abc BV, Nijmegen Full consolidation the Netherlands 100.000000Arbed Damwand België NV, Overpelt Full consolidation Belgium 100.000000Arbed Damwand Nederland BV, Moerdijk Full consolidation the Netherlands 100.000000Betonijzer Buigcentrale Limburg BV, Born Full consolidation the Netherlands 100.000000Borotrans Born BV, Born Full consolidation the Netherlands 100.000000Bouwstaal Nederland BV, Born Full consolidation the Netherlands 100.000000Calimco BV, Born Full consolidation the Netherlands 100.000000Cogeaf NV, Schoten Full consolidation Belgium 95.933333Demanet-Cassart Aciers S.A., Seneffe Full consolidation Belgium 100.000000Kielco Nederland BV, Born Full consolidation the Netherlands 100.000000Leduc Trading NV, Schoten Full consolidation Belgium 100.000000Limbustaal BV, Meersen Full consolidation the Netherlands 100.000000Lommaert Walserijprodukten BV, Born Full consolidation the Netherlands 100.000000Lommaert/Montan Wapeningsstaal BV, Nijmegen Full consolidation the Netherlands 100.000000Montan Staal BV, Den Haag Full consolidation the Netherlands 100.000000M-Soft NV, Overpelt Full consolidation Belgium 100.000000ProfilArbed Distribution België NV, Overpelt Full consolidation Belgium 100.000000ProfilArbed Staalhandel Nederland BV, Born Full consolidation the Netherlands 100.000000Steelexpress NV, Schoten Full consolidation Belgium 100.000000Profilsteel S.A., Bouffioulx Full consolidation Belgium 100.000000Pum Paris-Normandie S.A., Bonneuil sur Marne Full consolidation France 100.000000Robert Smith Steels Ltd, Mersyside Full consolidation United Kingdom 100.000000SA Lardier et compagnie, Blois Full consolidation France 100.000000Sar Stahlservice GmbH, Neuwied Full consolidation Germany 100.000000Savoie Métal S.A., Saint Jorioz Full consolidation France 100.000000SCI du 1 & 3 place de la Belgique, Reims Full consolidation France 100.000000Sidmar-Stahlwerke Bremen-SSC NV, Gent Full consolidation Belgium 100.000000Sirus Ssc, Saint Ouen l'Aumone Full consolidation France 100.000000Skyline Steel subgroup, comprising the following companies:Skyline Steel Corp, Parsippany Full consolidation United States 100.000000Arkansas Steel Processing Inc., Armoral Full consolidation United States 100.000000Arkansas Steel Processing Inc., Bessemer Full consolidation United States 100.000000Associated Pile and Fitting Corp, Clifton Full consolidation United States 100.000000Casteel Inc., Belpre Full consolidation United States 100.000000Midwest Steel & Tube Inc., Chicago Full consolidation United States 100.000000financial information > consolidated financial statementsANNUAL REPORT ARCELOR 2003 187

Company name Consolidation Country Percentagemethodof capital heldcontrol (%)PA Pipe Inc., Camp Hill Full consolidation United States 100.000000Skyline (Php) Canada Ltd, St Bruno Full consolidation Canada 100.000000Slpm SA, Saint Ouen l’Aumone Full consolidation France 100.000000Société Belge d’Oxycoupage S.A., Liège Full consolidation Belgium 100.000000Société de transports de produits d’usines Métallurgiques SA, Reims Full consolidation France 100.000000Société Industrielle Métallurgique et d’entreprise SA, La Chapelle Saint Luc Full consolidation France 100.000000Sodif Srl, Milano Full consolidation Italy 100.000000Sotracier S.A., Pontcharra Full consolidation France 99.997500Sps Altensteig Stahl-Service-Center GmbH, Altensteig Waldorf Full consolidation Germany 100.000000Sps Lichtenstein Stahl-Service-Center GmbH, Lichtentein Sachsen Full consolidation Germany 100.000000Sps Südband Stahl-Service-Center GmbH, Altensteig Waldorf Full consolidation Germany 100.000000Srw Schwarzwälder Röhrenwerk GmbH, Altensteig Waldorf Full consolidation Germany 100.000000Srw-Sps Verwaltungs GmbH, Altensteig Waldorf Full consolidation Germany 100.000000Station Service Acier Lopez Sas, Valence Full consolidation France 100.000000Südband Stahl-Service GmbH, Ludwigshafen Full consolidation Germany 100.000000Traxys S.A., Bertrange Equity method Luxembourg 50.000000Uci S.A., Fleurus Full consolidation Belgium 70.000000Usb Unterwellenborner Schneidbetrieb GmbH, Saalfeld Full consolidation Germany 100.000000Usinor Stal Serwis Spzoo, Bytom Full consolidation Poland 100.000000Vikam Praha AS, Praha Full consolidation Czech Republic 100.000000Wannifroid S.A., Onnaing Full consolidation France 99.981818Welbeck Steel Service Centre Ltd, Barking Full consolidation United Kingdom 100.000000OTHER ACTIVITIES SECTORARCELOR S.A., LuxembourgLuxembourgAceralia Internacional BV, Amsterdam Full consolidation the Netherlands 100.000000Aceralia Steel Trading BV, Amsterdam Full consolidation the Netherlands 100.000000Ais Finance (Groupe Arbed) Snc, Luxembourg Full consolidation Luxembourg 100.000000Allard Gieterij NV, Gent Full consolidation Belgium 50.000000Ancofer Stahlhandel GmbH, Mülheim Equity method Germany 51.250000ARBED S.A., Luxembourg Full consolidation Luxembourg 99.728897Arbed Investments S.A. Luxembourg Full consolidation Luxembourg 100.000000Arbed Investment Services S.A. Luxembourg Full consolidation Luxembourg 100.000000Arcelor Center Brussels NV. Gent Full consolidation Belgium 83.159861Arcelor Finance and Services Belgium S.A., Bruxelles Full consolidation Belgium 100.000000Arcelor Finance Sca, Luxembourg Full consolidation Luxembourg 100.000000Arcelor Finanziara Srl, Piombino Full consolidation Italy 100.000000Arcelor Purchasing Sas, Puteaux Full consolidation France 100.000000Arcelor Treasury Snc, Puteaux Full consolidation France 100.000000Arcelor USA Holding Inc., New York Full consolidation United States 100.000000Aster S.A., Puteaux Full consolidation France 99.999983Aster Finances S.A., Puteaux Full consolidation France 100.000000Atic Services S.A., Paris, subgroup, comprising 12 companies Equity method France 45.074323Bail Industrie S.A., Hayange Full consolidation France 99.999647Belsid Llc, Wilmington Full consolidation United States 100.000000Berg Steel Pipe Corp, Panama City Equity method United States 51.250000Cfl Canada Investment Inc., Granby Full consolidation Canada 100.000000Circuit Foil America Secs, Granby Full consolidation Canada 100.000000Circuit Foil Luxembourg Sàrl, Wiltz Full consolidation Luxembourg 76.910010Circuit Foil Service S.A., Weidingen/Wiltz Equity method Luxembourg 49.000000Cockerill Forges and Ringmill S.A., Seraing Full consolidation Belgium 100.000000188ANNUAL REPORT ARCELOR 2003

Company name Consolidation Country Percentagemethodof capital heldcontrol (%)Cockerill Sambre Stahl GmbH, Düsseldorf Full consolidation Germany 100.000000Daf Group NV, Gent Full consolidation Belgium 50.000000Dhs-Dillinger Hütte Saarstahl AG, Dillingen Equity method Germany 51.250000Esperbras SL, Olaberria Full consolidation Spain 100.000000Europipe GmbH, Ratingen Equity method Germany 51.250000Europipe France S.A., Grande Synthe Equity method France 51.250000Finindus NV, Bruxelles Full consolidation Belgium 50.000000Foil Coatings Luxembourg - FCL Gie, Wiltz Equity method Luxembourg 100.000000Frecolux S.A., Luxembourg Full consolidation Luxembourg 99.999915G.Fer Snc, Puteaux Full consolidation France 100.000000G.T.S. industries S.A., Grande Synthe Equity method France 99.999922Groupement Immobilier Scrl, Bruxelles Full consolidation Belgium 100.000000IEE International Electronics & Engineering S.A., Echternach, subgroup, comprising 2 companies Equity method Luxembourg 28.184282Immobilière Schlassgoart (Groupe Arbed) Senc, Luxembourg Full consolidation Luxembourg 100.000000Imphy S.A., Puteaux Full consolidation France 99.999702InvestAR Sàrl, Luxembourg Equity method Luxembourg 50.000000Investissement Technologie Inc, Montréal Full consolidation Canada 100.000000Paul Wurth Inc., Canonsburg Full consolidation United States 48.008364Paul Wurth Ltd, Burlington Full consolidation Canada 48.008364Paul Wurth S.A., Luxembourg Full consolidation Luxembourg 48.008364Paul Wurth do Brasil Ltda, Belo Horizonte Full consolidation Brazil 48.008364Persebras SL, Olaberria Full consolidation Spain 100.000000Rogesa GmbH, Dillingen Equity method Germany 51.250000S3P S.A., Puteaux Full consolidation France 99.999936S.A. Forges et Aciéries de Dilling, Dillingen Equity method Germany 97.128851Saarlux Stahl GmbH, Stuttgart Equity method Germany 100.000000Seridev S.A., Puteaux Full consolidation France 99.400000Sidarfin NV, Gent Full consolidation Belgium 99.999979Sidarsteel NV, Gent Full consolidation Belgium 100.000000Sidmar Finance (Groupe Arbed) S.A., Luxembourg Full consolidation Luxembourg 100.000000Sodisid S.A., Courbevoie Full consolidation France 99.998800Sofinus S.A., Puteaux Full consolidation France 99.999856Sogepass S.A., Hayange Full consolidation France 99.999745Sollac Verwaltung GmbH, Stuttgart Full consolidation Germany 100.000000Somef S.A., Liège Full consolidation Belgium 100.000000Soteg Société de Transport de Gaz S.A., Luxembourg Equity method Luxembourg 20.000000Sotel SC, Esch s/Alzette Full consolidation Luxembourg 75.000000Sotel Réseau et Cie Secs, Esch s/Alzette Full consolidation Luxembourg 100.000000Tixis Sytems Sas, Puteaux Full consolidation France 100.000000Tixis Systems Belgium S.A., Flemalle Full consolidation Belgium 100.000000Tixis Technologies Sas, Puteaux Full consolidation France 100.000000Tixis Technologies Belgium S.A., Flemalle Full consolidation Belgium 100.000000USINOR S.A., Puteaux Full consolidation France 99.442181Usinor Achats S.A., Puteaux Full consolidation France 100.000000Usinor Belgium S.A., Seraing Full consolidation Belgium 100.000000Usinor Imports & Trading S.A., Puteaux Full consolidation France 100.000000Usinor USA subgroup, comprising the following companies:Usinor USA Holding Corp, Wilmington Full consolidation United States 100.000000Arcelor Stainless Processing Llc, Troy Full consolidation United States 100.000000Usinor Llc, New York Full consolidation United States 100.000000Usinor Industeel (USA) Inc., Wilmington Full consolidation United States 100.000000Vertriebsgellschaft Dillinger Hütte GmbH, Dillingen Equity method Germany 51.250000financial information > consolidated financial statementsANNUAL REPORT ARCELOR 2003 189

Audit31, Allée Scheffer Telephone +352 22 51 51 1 Internet www.kpmg.luL-2520 Luxembourg Telefax +352 22 51 71 E-mail audit@kpmg.luTo the Shareholders of Arcelor S.A.Société AnonymeLuxembourgUNQUALIFIED AUDITOR’S REPORTWe have audited the consolidated balance sheet of Arcelor S.A. and its subsidiaries (the “Group”) as at December 31, 2003and the related consolidated statements of income, cash flows and changes in equity for the year then ended, as set out onpages 132 to 189, and we have read the related consolidated management report. These consolidated financial statementsand the consolidated management report are the responsibility of the Board of Directors of Arcelor S.A.. Our responsibility is toexpress an opinion on these consolidated financial statements, based on our audit, and to check the consistency of theconsolidated management report with them.We conducted our audit in accordance with International Standards on Auditing. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principles used and significant estimates made by the Board of Directors, aswell as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for ouropinion.In our opinion, the consolidated financial statements of Arcelor S.A., as set out on pages 132 to 189, give a true and fair viewof the financial position of the Group as at December 31, 2003, and of the results of its operations and its cash flows for theyear then ended, in accordance with International Financial Reporting Standards (“IFRS”).For comparative purposes, the Group has included, as set out on pages 132 to 189, pro forma consolidated financialinformation for the year ended December 31, 2002. We have not audited or reviewed this pro forma consolidated financialinformation and, accordingly, do not express an opinion on such financial information.The consolidated management report is in accordance with the consolidated financial statements.Luxembourg, March 19, 2004KPMG AuditRéviseurs d’EntreprisesEric DamotteKPMG AuditSociété Civile31, Allée SchefferMember Firm KPMG International a Swiss association L-2520 Luxembourg T.VA. LU13772441190ANNUAL REPORT ARCELOR 2003

ANNUAL REPORT ARCELOR 2003 191financial information > consolidated financial statements

Annual accounts Arcelor S.A.ANNUAL ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 2003 WITH THE AUDITOR’SREPORT THEREONThis document is a free translation in English of a French original document: the Arcelor S.A. 2003 Annual accounts.This document has been prepared for information only and should not be relied upon for any other purpose. In theevent of any ambiguity between this document and the French original version, the latter shall prevail.• BALANCE SHEET AS AT DECEMBER 31, 2003• INCOME STATEMENT FROMJANUARY 1 TO DECEMBER 31, 2003• APPROPRIATION OF THE RESULT FOR THE YEAR• NOTES TO THE ANNUAL ACCOUNTSNote 1 : General Note 10 : Residual term of creditorsNote 2 : Accounting policies Note 11 : Off-balance sheet itemsNote 3 : Statement of tangible fixed assets Note 12 : Financial resultNote 4 : Statement of financial assets Note 13 : StaffNote 5 : Residual term of debtors Note 14 : Directors’ remunerationNote 6 : Accruals and deferred income Note 15 : Stock option planNote 7 : Capital and reserves Note 16 : Other informationNote 8 : Provisions for liabilities and charges Note 17 : Events after the balance sheet dateNote 9 :Financial debt• AUDITOR’S REPORT192ANNUAL REPORT ARCELOR 2003

BALANCE SHEETASSETS December 31, December 31,In EUR million 2003 2002C. FIXED ASSETS 8,612 9,052II. Tangible fixed assets (Note 3) 5 41. Land and buildings 3 23. Other fixtures, fittings, tools and equipment 2 24. Payments on account and assets in the course of construction - p.m.III. Financial assets (Note 4) 8,607 9,0481. Shares in affiliated undertakings 8,607 8,2012. Loans to affiliated undertakings - 8475. Financial assets p.m. -D. CURRENT ASSETS 1,092 337II. Debtors (Note 5) 1,092 3301. Trade debtors p.m. p.m.2. Amounts owed by affiliated undertakings 1,089 3293. Amounts owed by affiliated undertakingsin which the Company has a participating interest p.m. p.m.4. Other debtors 3 1IV. Cash at bank and in hand p.m. 7E. PREPAYMENTS (Note 6) 26 34TOTAL ASSETS 9,730 9,423financial information > annual accountsLIABILITIES December 31, December 31,In EUR million 2003 2002A. CAPITAL AND RESERVES (Note 7) 7,516 7,453I. Subscribed capital 2,665 2,662II. Share premium account 4,795 4,791IV. 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 1,7101 a. Convertible debenture loans 1,665 1,6652. Amounts owed to credit institutions p.m. p.m.5. Trade creditors 7 27. Amounts owed to affiliated undertakings 20 408. Amounts owed to undertakings in which the Company has a participating interest p.m. p.m.9. Other creditors 5 3- of which tax and social security EUR 1m (2002: p.m.)E. PROFIT FOR THE FINANCIAL YEAR 506 260TOTAL CAPITAL AND RESERVES AND LIABILITIES 9,730 9,423The accompanying notes form an integral part of these annual accounts.ANNUAL REPORT ARCELOR 2003 193

INCOME STATEMENT FROM JANUARY 1 TO DECEMBER 31, 2003December 31, December 31,In EUR million 2003 2002I. SALES AND SERVICES 84 654. Other operating income 84 65II. COST OF SALES AND SERVICES 118 716. Staff costsa) Wages and salaries 22 9b) Social security cost 5 2- including early retirement, anticipated retirementand 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 3209. Income from participating interests 558 269- including from affiliated undertakings EUR 558m (2002: EUR 269m)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 5413. 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 260VII. TAXES p.m. -16. a) Taxes on income p.m. -VIII. PROFIT FOR THE FINANCIAL YEAR (VI-VII) 506 260The accompanying notes form an integral part of these annual accounts.APPROPRIATION OF THE PROFIT FOR THE YEARDecember 31, December 31,2003 2002in EURin EUR millionResult for the financial year 505,931,497.56 260Result brought forward 43,325,059.69 -Result for distribution 549,256,557.25 260Transfer to the legal reserve 25,296,574.88 13Transfer to other reserves - -Board of Directors remuneration 1,200,000.00 1Dividend 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 2003 financial year paid on 532,470,592 shares (**) - 203RESULT 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 theshare requirement resulting from the conversion 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).194ANNUAL REPORT ARCELOR 2003

Notes to the annual accountsNOTE 1 – GENERALArcelor S.A. was incorporated under Luxembourg Lawon June 8, 2001 for an unlimited period in the context ofthe business combination of the Aceralia, Arbed andUsinor groups that was completed on February 28,2002.The registered office of the Company is in LuxembourgCity and the Company is registered at the Register ofTrade and Commerce of Luxembourg under the numberB 82.454.The accounting period starts on January 1 and ends onDecember 31 each year.The Company publishes consolidated accounts inaccordance with the requirements of Luxembourg lawsand regulations.NOTE 2 – ACCOUNTING POLICIESThe annual accounts are prepared in euro (“EUR”) andin accordance with Luxembourg laws and regulationsand generally accepted accounting principles.Tangible fixed assetsTangible fixed assets are recorded in the balance sheetat cost, including ancillary costs, or at production cost.Depreciation is calculated on a straight-line basis.Intangible fixed assetsInvestments are recorded in the balance sheet atacquisition cost, plus ancillary costs.At the end of each accounting period, all investmentsare subject to an impairment review. Where a permanentdiminution in value is recognised this diminution isrecorded in the income statement as a value adjustment.The reversal of a value adjustment is recorded to theextent that the factors, which caused the initial recordingof the value adjustment, have ceased to exist.Debts and other loans receivable are recorded in thebalance sheet at their nominal value. At the end of eachaccounting period specific value adjustments arerecorded on debts that appear to be partly or whollyirrecoverable.DebtorsDebtors are recorded in the balance sheet at theirnominal value.At the end of each accounting period specific valueadjustments are recorded on debts that appear to bepartly or wholly irrecoverable.Provisions for liabilities and chargesProvisions are made for liabilities and charges where thecrystallisation of a liability is considered probable, basedon past or current events, in line with legal requirements.> Provisions for pensions and similar obligations:The Company participates in the financing of an incrementalretirement scheme (defined benefit scheme) for thebenefit of employees made available by Arbed S.A.Commitments arising out of this scheme are covered byappropriate provisions.The Company’s own employees, who are not madeavailable to other companies, are covered by a definedcontribution scheme. The Company pays contributionsin respect of this scheme to an assurance provider. Thisscheme does not give rise to a commitment and annualcontributions are taken to the profit and loss account,following the same treatment as that adopted for wagesand salaries.CreditorsCreditors are recorded in the balance sheet at theirnominal value. Convertible debenture loans are disclosedat their issue value, increased by the interest to becapitalised on December 31 of each accounting year.Translation of foreign currency itemsWhere applicable, items expressed in foreign currencyare valued as follows:Tangible fixed assets, creditors due after more than oneyear and off-balance sheet commitments are translatedat historic exchange rates. Unrealised losses incurred asa result of this policy are recorded in the profit and lossaccount for the period.Other balance sheet items are translated at the year-endexchange rates and related foreign exchange differencesare recorded in the profit and loss account for the period.financial information > annual accountsANNUAL REPORT ARCELOR 2003 195

NOTE 3 – STATEMENT OF TANGIBLE FIXED ASSETSAcquisition cost Land and Other fixtures, fittings, Payments on account and assets TotalIn EUR million buildings tools and equipment in the course of constructionOpening balance 2 2 p.m. 4Acquisitions during the period 1 1 - 2Disposals and transfers during the period - - (p.m.) (p.m.)Closing balance 3 3 - 6Value adjustments Land and Other fixtures, fittings, Payments on account and tangible TotalIn EUR million buildings tools and equipment assets in the course of constructionOpening 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 - 4Closing net book value 3 2 - 5NOTE 4 – STATEMENT OF FINANCIAL ASSETSAcquisition cost Shares in affiliated Loans to affiliated Financial TotalIn EUR million undertakings undertakings fixed assetsOpening balance 8,201 847 - 9,048Acquisitions during the period 406 - p.m. 406Disposals during the period - (847) - (847)Closing balance 8,607 - p.m. 8,607Value adjustments Shares in affiliated Loans to affiliated Financial TotalIn EUR million undertakings undertakings fixed assetsOpening balance - - - -Charge for the period - - - -Closing balance - - - -Opening net book value 8,201 847 - 9,048Closing net book value 8,607 - p.m. 8,607The principal holdings as at December 31, 2003 are listed below:Name and registered office Percentage of capital held Profit for 2003 Shareholders’ equityIn EUR million % (including profit for 2003)Arbed S.A., Luxembourg (Grand Duchy of Luxembourg) 99.73 25 1,833Aceralia Corporación Siderúrgica SA, Gozon (Spain) 95.03 48 2,217Arcelor Center Brussels NV, Gent (Belgium) 56.91 74 1,700Arcelor Finance and Services Belgium SA, Brussels (Belgium) 17.86 47 1,243Usinor S.A., Puteaux (France) 99.24 175 1,771196ANNUAL REPORT ARCELOR 2003

The increase in shareholdings is mainly due to intragroupacquisitions of Arcelor Finance and ServicesBelgium S.A. (EUR 215 million) and Arcelor CenterBrussels NV (EUR 181 million) as well as Usinor S.A.(EUR 7 million) following the exchanges made in thecontext of the conversion option granted to Usinorshareholders (see also Note 7).The decrease in receivables from affiliated undertakingsresults from the buy-back, in November 2003, ofO.C.E.A.N.E. Usinor 2005 (EUR 491 million) andO.C.E.A.N.E. Usinor 2006 (EUR 356 million).NOTE 5 – RESIDUAL TERM OF DEBTORSDecember 31, 2003 December 31, 2002In EUR million Up to 1 year 1 to 5 years Total Up to 1 year 1 to 5 years TotalTrade debtors p.m. - p.m. p.m. - p.m.Amounts owed by affiliated undertakings 1,089 - 1,089 319 10 329Amounts owed by undertakings in whichthe Company has a participating interest p.m. - p.m. p.m. - p.m.Other debtors 3 3 1 - 1TOTAL 1,092 - 1,092 320 10 330Items covered by several headingsAmounts owed by affiliated undertakings, as well asamounts owed by undertakings in which the Companyhas a participating interest, include trade receivables ofEUR 37 million. Similarly, amounts owed by affiliatedundertakings on current accounts amount to EUR 1,052million.NOTE 6 – ACCRUALS AND DEFERREDINCOMEAmounts included under “Accruals and deferred income”represent the unamortised share premium and issuecosts of the O.C.E.A.N.E. Arcelor 2017 debenturesdescribed in Note 9.NOTE 7 – CAPITAL AND RESERVESShare capital, share premium and legal reserveAs at December 31, 2003, the subscribed share capitalis made up of 533,040,796 ordinary shares, fully paid upand amounting to EUR 2,665,203,980. Share premiumamounts 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 followingparties hold the Company’s share capital:AS AT DECEMBER 31 2003Other 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 paidshare capital was made up of 532,366,409 shares.674,387 Arcelor shares were issued in 2003 within theframework of the public exchange offer of the Usinorshareholders, after the delisting of the Usinor sharesfrom Euronext Paris in 2002.In accordance with Luxembourg legal requirements, theCompany must appropriate annually at least 5% of itsnet profits to a legal reserve up to a maximum of 10% ofthe subscribed share capital. The legal reserve is notavailable for distribution.financial information > annual accountsANNUAL REPORT ARCELOR 2003 197

NOTE 8 – PROVISIONS FOR LIABILITIES AND CHARGESPensions and Other TotalIn EUR million similar obligations provisionsOpening balance p.m. - p.m.Allocation 1 10 11Utilisation (p.m.) - (p.m.)TOTAL PROVISIONS 1 10 11Pension commitmentsBy virtue of an agreement governing the provision ofstaff by Arbed to Arcelor, the obligations in relation toadditional retirement benefits available to Arbed staffhave been specifically provided for. The Company’sshare of the allocation for the year is determined byapplying the actuarial financing rate to the total salary ofall Arbed staff made available to Arcelor. An independentactuary calculates this rate.For Arcelor staff not made available by Arbed, a definedcontribution plan is in place. The Company makesannual contributions to an assurance provider in respectof this plan. The plan does not give rise to commitmentsand the annual contributions are recorded in the profitand loss account following the same treatment as thatadopted for wages and salaries.Other provisionsOther provisions are linked to certain German taxconsequences resulting from the creation of the Arcelorgroup.NOTE 9 – FINANCIAL DEBTConvertible debenture loans• At the end of the public exchange offers made in 2002on bonds which are convertible into and/or exchangeablefor new or existing shares in Usinor (“O.C.E.A.N.E.”),24,723,689 Usinor 2005 O.C.E.A.N.E. and 27,747,470Usinor 2006 O.C.E.A.N.E. were converted into Arcelorsecurities of the same type. The financing conditions ofArcelor 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 19.87with a maturity date of January 1, 2005 and with anannual interest rate of 3.875%. They are convertible orexchangeable at the rate of one bond for one share. Inthe absence of anticipated conversion or amortisation,these bonds are repayable at maturity for a par value ofEUR 19.87.Arcelor 2006 O.C.E.A.N.E. were issued at EUR 12.81with a maturity date of January 1, 2006 and with anannual interest rate of 3%. They are convertible orexchangeable 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% ofpar value, i.e. EUR 14.20 (see Note 17 on the anticipatedreimbursement in March 2004).In 2002, 100 O.C.E.A.N.E. ARCELOR 2006 were convertedinto 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 atEUR 19.25 with a maturity date of 27 June 2017 andwith an annual interest rate of 3%. They are convertibleor 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 ofEUR 19.25.There were no movements on the above during the year.198ANNUAL REPORT ARCELOR 2003

NOTE 10 – RESIDUAL TERM OF CREDITORSDecember 31, 2003 December 31, 2002Up to 1 1 to 5 5 years Total Up to 1 1 to 5 5 years TotalIn EUR million year years or more year years or moreConvertible debenture loans 30 885 750 1,665 30 885 750 1,665Amounts owed to credit institutions p.m. - - p.m. p.m. - - p.m.Trade creditors 7 - - 7 2 - - 2Amounts owed to affiliated undertakings 20 - - 20 40 - - 40Amounts owed undertakings in whichthe Company has a participating interest p.m. - - p.m. p.m. - - p.m.Other creditors 5 - - 5 3 - - 3TOTAL 62 885 750 1,697 75 885 750 1,710The Company has not granted any security in respect of the above amounts.> Items covered by several headingsAmounts owed to affiliated undertakings and amounts owed to undertakings in which the Company has aparticipating interest include trade creditors amounting to EUR 21 million.NOTE 11 – OFF-BALANCE SHEET ITEMSGuarantees givenfinancial information > annual accountsIn EUR million 2003 2002Guarantees issued on debts 238 20Other commitments 1 -TOTAL 239 20NOTE 12 – FINANCIAL RESULTIn EUR million 2003 2002Dividends received 558 269Interest and similar charges (18) (3)Variations in value adjustments on investments - -TOTAL 540 266Income from investments primarily comprises dividends received from Arbed, Usinor Aceralia andArcelor Center Brussels.NOTE 13 – STAFFAverage number of employees 2003 2002Employees 170 60Workers - -TOTAL 170 60ANNUAL REPORT ARCELOR 2003 199

NOTE 14 – DIRECTORS’ REMUNERATIONMembers of the Board of Directors, the Audit Committee and the Nominations and RemunerationsCommittee were paid a total of EUR 1.7 million in the year to December 31, 2003.NOTE 15 – STOCK OPTION PLANIn 2003, the Company created an international stock option plan. In this context, the Companygranted 1,300,000 options on June 30, 2003, giving the right to subscribe to or purchase sharesin 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 durationof 4 years. It starts on July 1, 2006 and finishes on June 30, 2010.NOTE 16 – OTHER INFORMATIONThe 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 DATEAnticipated 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 ofservicing debt, Arcelor has determined to proceed to the anticipated reimbursement of theO.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 rightsto convert their bonds into shares. The resulting share requirement was met by making availableshares that were held by the Group, with retroactive effect to January 1, 2004. At the end of thisoffer, which serves to reinforce the consolidated own funds of the Group, 22,490,577O.C.E.A.N.E., i.e. 81.05% of the original issue, were exchanged for shares.200ANNUAL REPORT ARCELOR 2003

Audit31, Allée Scheffer Telephone +352 22 51 51 1 Internet www.kpmg.luL-2520 Luxembourg Telefax +352 22 51 71 E-mail audit@kpmg.luTo the Shareholders of Arcelor S.A.Société AnonymeLuxembourgUNQUALIFIED AUDITOR’S REPORTFollowing our appointment by the General Meeting of the Shareholders dated April 26, 2002, we have audited theaccompanying annual accounts of Arcelor S.A. for the year ended December 31, 2003, and we have read the relatedmanagement report. These annual accounts and the management report are the responsibility of the Board of Directorsof Arcelor S.A.. Our responsibility is to express an opinion on these annual accounts based on our audit and to check theconsistency of the management report with them.financial information > annual accountsWe conducted our audit in accordance with International Standards on Auditing. Those standards require that we plan andperform the audit 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 audit provides a reasonable basis forour opinion.In our opinion, the attached annual accounts give, in conformity with Luxembourg legal and regulatory requirements, a trueand fair view of the financial position of Arcelor S.A. as at December 31, 2003 and of the results of its operations for theyear then ended.The management report is in accordance with the annual accounts.Luxembourg, March 19, 2004KPMG AuditRéviseurs d’EntreprisesEric DamotteKPMG AuditSociété Civile31, Allée SchefferMember Firm KPMG International a Swiss association L-2520 Luxembourg T.VA. LU13772441ANNUAL REPORT ARCELOR 2003 201

Arcelor Ordinary General Meeting on April 30, 2004PROPOSED RESOLUTIONS1. Approval of the annual accounts forthe 2003 financial yearProposed resolution (first resolution)The General Meeting, after having taken notice ofthe management report of the Board of Directors andthe opinion of the independent auditor, approves allthe elements of the annual accounts for the 2003financial year which show a total profit for Arcelor S.A.of EUR 505,931,497.56.2. Approval of the consolidated accounts forthe 2003 financial yearProposed resolution (second resolution)The General Meeting, after having taken notice of themanagement report of the Board of Directors and theopinion of the independent auditor, approves all theelements of the consolidated accounts for the 2003financial year.3. Allocation of results and determination ofdirectors’ emoluments and of the dividendProposed resolution (third resolution)The General Meeting, upon the proposal of the Board ofDirectors, resolves to allocate the results of the financialyear as follows:EURResults of the financial year 505,931,497.56Carry forward 43,325,059.69Distributable results 549,256,557.25Allocation to the legal reserve 25,296,574.88Allocation to other reserves -Directors’ emoluments 1,200,000.00Gross dividend of EUR 0.40on 553,040,796 shares 213,216,318.40 (*)Carry forward 309,543,663.974. Discharge of the directorsProposed resolution (fourth resolution)The General Meeting resolves to give discharge to thedirectors for the 2003 financial year.5. Resignation of two directors andappointment of two new directorsProposed resolution (fifth resolution)The General Meeting acknowledges the resignationof Mr Jean Lapeyre which took place on August 28,2003 and the resignation of Mr Daniel Bouton effectiveon April 30, 2004.The General Meeting appoints as new managersMr Michel Marti and Mr Noël Forgeard, for a fullmandate, so that their mandates will expire at theAnnual General Meeting to be held in 2009.6. Renewal of the authorisation of the Board ofDirectors of the Company and of the corporatebodies of other companies in the Group toacquire shares in the CompanyProposed resolution (sixth resolution)The General Meeting, after having acknowledgedthe content of the information notice provided tothe public, authorises the Board of Directors of theCompany, with full power of substitution, as well asthe corporate bodies of other companies of the Groupreferred to in article 49bis of the Luxembourg law oncommercial companies (the “Law”) to acquire sharesof the Company in accordance with the conditionsprovided by the Law.The gross dividend per share of EUR 0.40 will be paidon May 24, 2004.(*) The aggregate amount of dividends distributed can actually be less than the indicated amount as a result of Arcelor’s decision to satisfy the requests for the allocationof shares in relation with the O.C.E.A.N.E. 2006 with existing shares held by the Group which do not giveright to the dividend relating to the 2003 financial year.202ANNUAL REPORT ARCELOR 2003

Such authorisation is intended to allow:a. stabilisation of the market price of the Company’sshares through on-market sales and purchases by wayof systematic intervention to counteract the prevailingmarket tendency;b. allotment of shares to holders of bonds which areconvertible or exchangeable into shares (O.C.E.A.N.E.)already issued and to holders of securities givingthe right to receive shares, in case they exercise theirright to receive shares;c. allotment or transfer of shares to employees ormembers of the management of the Group under aprofit sharing plan, employee shareholder schemes,or share option plans in favour of employees or nonemployeesor Company savings plans;d. delivery of shares in exchange or payment in thecontext of external growth transactions and in connectionwith the exercise of the exchange right granted toholders of Usinor shares;e. optimisation of the management of the Company’sfinances and balance sheet, including by the cancellationof its own shares, subject in the latter case to asubsequent authorisation by the General Meeting ofshareholders;f. the keeping, exchange, assignment, contribution ortransfer of shares acquired in accordance with applicablelaws and regulations.Purchase, assignment, exchange, contribution andtransfer transactions can be carried out by any onmarketor over-the-counter transactions, includingthrough the use of financial derivative instruments.The portion of capital acquired or transferred as ablock of shares can comprise the entire programme.Shares may also be acquired during a public tenderor a public share exchange offer made by a third partyon the shares of the Company.The authorisation is valid for a period ending on theearlier of the date which is 18 (eighteen) months after thedate of this General meeting or the date of its renewalby a General Meeting. As from this Meeting it replacesthe authorisation given by the Ordinary General Meetingof April 25, 2003.The maximum number of shares that may be acquired isthe maximum allowed by the Law so that the accountingpar value of Arcelor shares held by the Company (and,if applicable, by other companies of the Group referredto in article 49bis of the Law) may not, at any time,exceed 10% of the Company’s subscribed capital.The consideration for the purchase of the shares mustnot be less than five (5) Euro nor more than twenty-five(25) Euro per share. In case of an increase of capitalby incorporation of reserves or share premium and theallocation of bonus shares as well as in case of a sharesplit or share consolidation, the pre-mentioned minimumand maximum consideration will be adjusted by multiplyingeach figure by the ratio between the number ofshares representing the capital before the transactionand such number after the transaction.The entire amount used in relation with the share repurchaseprogramme must in no event exceed Arcelor’sdistributable shareholders’ equity.The consideration in case of a transfer of the sharesmust not be less than five (5) Euro.All powers are delegated to the Board of Directors, withfull power of substitution, for the purpose of implementingthis authorisation.7. Appointment of an independent auditor toreview the annual and the consolidatedaccounts for the 2005 financial yearProposed resolution (seventh resolution)The General Meeting resolves to appoint KPMG Audit,société civile, as independent auditor to review theaccounts of Arcelor, société anonyme, and the consolidatedaccounts of the Arcelor group for the financialyear 2005.ANNUAL REPORT ARCELOR 2003 203

GlossaryAnnealing:The heat treatment process by which steel productsare reheated to a suitable temperature in order toremove stresses resulting from previous processingand to soften them and/or improve their machinabilityand cold forming properties.Apparent consumption:The sum of net industry shipments within a given country.Billet:A semi-finished steel product with a square cross sectionup to 155 mm x 155 mm. This product is either rolled orcontinuously cast and is further processed by rolling toproduce finished products like wire rod, merchant barsand other sections. The range of semi-finished productsabove 155 mm x 155 mm are called blooms.Blank:Steel sheet of high dimensional precision, in simple orcomplex form, sometimes multi-thickness, constitutingprincipally automobile body parts.Blast furnace:A furnace used in integrated steelmaking in which cokeand iron ore react together under a hot air flow to formliquid hot metal, also called pig iron.Bloom:See Billet.Carbon steel:A type of steel generally having no specified minimumquantity of any alloying element and containing only anincidental amount of any element other than carbon,silicon, manganese, copper, sulphur and phosphorus.Coated steel:Steel sheet coated through a heat process or throughelectrolysis with a layer of substance to protect the basemetal (substrate) against corrosion.The most commonly used material is zinc which can beapplied either using the heat process (hot-dip galvanising)or using electrolysis (electro-galvanising).An organic coating (paint, plastic) can also be depositedon the layer of zinc. The zinc-coated steel is often referredto as “galvanised steel”.Electric arc furnace:A furnace for scrap-based steelmaking. Once thefurnace is charged and covered, graphite electrodesare lowered through holes in the roof. The electric arctravelling between the electrodes and the metalliccharge creates intense heat which melts the scrap.Alloying elements can be added during the process.Hot and cold rolling mill:• Hot-rolling mill: Equipment on which solidified steelpreheated to a high temperature is continuously rolledbetween rotating cylinders. Different types of finishedproducts require different types of rolling mill equipment.• Cold rolling mill: Equipment that reduces the thicknessor gauge of flat steel products by rolling the metalbetween alloy steel cylinders at room temperature.Several roll passes are generally necessary to reducethe steel gradually to the desired thickness.Lost-time accident (LTA) frequency:The number of LTAs per million hours worked.204ANNUAL REPORT ARCELOR 2003

Real consumption:For any country or region, apparent consumption forsuch country or region adjusted for inventory changesor stockists and end users.Refining stand:A stage in the process of making crude steel, duringwhich the crude steel is further refined (i.e., most residualimpurities are removed) and additions of other metalsmay be made before it is cast.Semi-finished products:Steel products such as billet, blooms and slabs. Theseproducts can be made by direct continuous casting ofhot steel or by pouring the liquid steel into ingots, whichare then hot rolled into semi-finished products.Stainless steel:Stainless steels are distinguished from carbon steel bytheir content of chromium and, in certain cases, nickel.Adding chromium to carbon steel makes it more rustand stain-resistant, and adding nickel to chromiumstainless steel enhances the mechanical properties ofthe steel. The resistance of stainless steel to manycorrosive factors, such as exposure to water, air, acidand alkalis, is provided by a transparent protectivechromium oxide film that forms on its exterior. Stainlesssteels are manufactured in different types of grade, butall types contain at least 10% chromium, along withother elements added to develop specific properties.Depending on the quantity of the various elementspresent in a stainless steel alloy, it will have a metallurgicalstructure that is characteristic of one of threebasic stainless steel groups – martenistic, ferritic oraustenitic.Sinter plant:A plant in which iron ore is crushed, homogenised andmixed with limestone and coke breeze and then cooked(“sintered”) to form sinter which is the main ferrouscomponent of blast furnace burden.Slab:A semi-finished steel product obtained by rolling lingotson a rolling mill or processed through a continuous casterand cut into various lengths.The slab has a rectangular cross section and is usedas a starting material in the production process of flatproducts, i.e., hot rolled coils.Strip:Flat steel coil products, with widths of less than 600 mmfor hot rolled products and less than 500 mm for coldrolled products.Thin strip continuous casting:Casting technology that takes liquid steel and castsit into solid strip in one step, thereby eliminating theneed for a continuous slab caster and hot trip mill.Workplace accident severity rate:Number of workdays lost to accidents per thousandhours worked.Slag:A by-product, containing inert materials of the burden,produced during the melting process of blast furnaceand steelmaking operations.ANNUAL REPORT ARCELOR 2003205

How steel is made?a 3-stage processIRONOREASmelting ProcessSINTERING PLANTSINTEREDORECOALCOKE OVENCOKEBLAST FURNACEA’Electric Process1Development of liquid steelSCRAPOXYGEN CONVERTERCRUDE STEELADDITIVESCRUDE STEELELECTRIC ARC FURNACEVACCUMO2ARREFINING UNIT(ladle furnace)GRADEDLIQUID STEEL206ANNUAL REPORT ARCELOR 2003

Four de réchauffhauffageageFour de r chauffage800ßC 1200ßCADDITIVESVACCUMO2ARREFINING UNIT(ladle furnace)GRADEDLIQUID STEEL2Moulding semi-finished productsCONTINUOUS CASTING OFFLAT PRODUCTSSLABBEAMBLANKCONTINUOUS CASTING OFLONG PRODUCTS3From blanks to finished products800˚C à 1200˚CHOT ROLLING OFFLAT PRODUCTSSHEETBEAMSHEET PILEHOT ROLLING OFLONG PRODUCTSANNUAL REPORT ARCELOR 2003 207

Arcelor’s main steel-manufacturingfacilities in 2003Flat Carbon SteelsNorth Operational UnitWallonia Operational UnitSouth Operational UnitCentral Operational UnitBremen, Eisenhüttenstadt (Germany)Gent (Belgium)Liège (Belgium)Fos-sur-Mer (France)Avilés, Gijón, Viscaya (Spain)Dunkerque, Florange (France)Long Carbon SteelsSolutions Operational UnitSections Operational UnitBars and Rods Operational UnitAmericas Operational UnitBelval (Luxembourg)Veriña (Spain)Differdange (Luxembourg)Bergara, Olaberria (Spain)Thüringen (Germany)San Zeno, Pallanzeno (Italy)Schifflange (Luxembourg)Azpeitia, Getafe, Zaragoza, Zumárraga (Spain)Bayonne (France)Monlevade, Vitória, Piracicaba, Juiz de Fora (Brazil)Stainless SteelsUGINE & ALZJ&LUgitechIUPIndusteelAcesita*Genk (Belgium)Isbergues, l’Ardoise (France)Pittsburgh (United States)Ugine (France)Imphy (France)Charleroi (Belgium)Châteauneuf (France)Timoteo (Brazil)*Company consolidated in the Group’s accounts using the equity method.208ANNUAL REPORT ARCELOR 2003

NOTESANNUAL REPORT ARCELOR 2003 209

NOTES210ANNUAL REPORT ARCELOR 2003

ANNUAL REPORT ARCELOR 2003 211xxxxxxxxxxxxxxxxxxx

Concept and realization133, avenue des Champs Élysées75380 Paris cedex 08, FranceTel. + 33 1 44 43 71 00Fax + 33 1 44 43 79 15PrinterZ.I. Am Bann3372 LeudelangeLuxembourgPhoto creditsArcelor photo library,Studio Pons, J. Hébinger,©Michel Zavagno/Blitz Agency - 2004Arcelor thanks all the employees who haveparticipated in the photomontageto illustrate this document.This document has been printed on TCFpaper (Total Chlore Free).This document is a translation from theoriginal French which will prevail in case ofinconsistency.19, avenue de la LibertéL-2930 Luxembourgwww.arcelor.comCorporate CommunicationsTel. +352 4792 2360Investor RelationsTel. +352 4792 241400 800 4792 4792France:+33 141 25 98 98Spain:+34 902 152 153

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