Arcelor Annual Report 2006 · 2007. 5. 24. · Sonasid in Morocco, thereby anticipating the strong...

Contents01 Portrait of the Group in 200602 Key Figures04 Chairman’s Statement06 Corporate Governance16 Internal Control Procedures18 Monthly Highlights for 200620 Information on Equity Capital of Arcelor S.A.22 Consolidated Group Management Report24 Economic Environment26 Commentary on 200630 Business Segment Review40 Own Shares41 Sustainable Development42 Outlook43 Post-balance Sheet Events 43 Additional Information About Arcelor S.A.44 Arcelor Sustainable Development Strategy48 Research and Development50 Human Resources and Skills Development52 Environment53 Health and Safety

54 FinancialandLegalInformationConsolidated Financial Statements56 Consolidated Income Statement57 Consolidated Balance Sheet59 Consolidated Statement of Cash Flows60 Consolidated Statement of Changes in Shareholders’ Equity61 Notes to the Consolidated Financial Statements124 Auditor’s Report

Annual Accounts – Arcelor S.A.126 Balance Sheet – Arcelor S.A.128 Profit and Loss Account for the year ended 31 December 2006130 Proposed Appropriation of the result for the year131 Notes to the Annual Accounts138 Auditor’s Report

Arcelor Annual Report 2006

Arcelor Annual Report 2006

Arcelor Mittal19, Avenue de la Liberté L-2930 LuxembourgR.C. Luxembourg B 82 454www.arcelormittal.com

AR06_2C_AW_COVER_Litho_ENG_05.041 1 5/4/07 14:48:56

ArcelorAnnualReport2006 01

Arcelor has continued its process of growth and consolidation throughout 2006. The company strengthened its position as global steel leader, providing high value-added steel and innovative steel solutions.

Portrait of the Group in 2006

ArcelorwascreatedinFebruary2002bycombiningthreesteelmakingcompanies,Aceralia(Spain),Arbed(Luxembourg)andUsinor(France),andoperatesworldwideinsixmainbusinesssegments:FlatCarbonSteelEurope;Asia,AfricaandCIS(AACIS);FlatCarbonSteelAmericas;LongCarbonSteel;StainlessSteel;andSteelSolutionsandServices(AM3S).

In2006,with104,000employeesinmorethan60countries,Arcelorgeneratedrevenuesof€40.6billionandproduced53.5milliontonnesofcrudesteel.

Sinceitscreation,Arcelorhasstrengtheneditspositionintheproductionandsupplyofhighvalue-addedsteelandinnovativesteelsolutionsthatmeettheincreasingrequirementsofsteelusers.TheseadvanceshelpedArcelortobecomealeadingsteelsuppliertoallitsmainmarkets.Inparticular,theGrouphasbolstereditspositionsinFlatCarbonandautomotivesteel.IthassuccessfullycapturednewsourcesofgrowthinNorthandSouthAmericaandChina.

NorthAmericaistheworld’slargestautomotivemarket,andArcelor’sacquisitioninearly2006oftheCanadiansteelmakerDofascohasstrengthenedtheGroup’sindustrialpresenceinthisregionandconfirmeditsprioritiesasindisputableleaderintheautomotivesteelmarket.Arcelor’slongcarbonsteelbusinessesgeneratestrongandsustainablemargins,andArcelorBrasil,LatinAmerica’slargeststeelcompany,combiningtheGroup’sbusinessesinBrazilandArgentinahasatotalproductioncapacityof11milliontonnesacross27sites.InEurope,Arcelorhasasolidindustrialbasefromwhichitsuppliescustomerswithhigh-qualitysteel.WiththeinaugurationinFebruary2006ofCarinoxinBelgium,Arcelorhasstrengtheneditspositioninflatstainlesssteelproduction.TheGroup’spositioninworldwidesteeldistributionisuniqueinthesteelindustrysector.

ArcelorhasenteredanewstageofgrowthandconsolidationbymergingwithMittalSteel,whichcreatedthegloballeaderinthesteelindustry.ThenewGroupiswell-positionedtoforgetheultimatephaseofconsolidationformoresustainability.

ArcelorMittalisnowtheworld’snumberonesteelcompany,with320,000employeesinmorethan60countries.ArcelorMittalistheleaderinallmajorglobalmarkets,includingautomotive,construction,householdappliancesandpackaging,withleadingR&Dandtechnology,aswellassizeablecaptivesuppliesofrawmaterialsandoutstandingdistributionnetworks.Anindustrialpresencein27European,Asian,AfricanandAmericancountriespositionsthecompanyinallthekeysteelmarkets,fromemergingtomature.ArcelorMittalwillbelookingtoexpanditsglobalreachbydevelopingapresenceinthehigh-growthChineseandIndianmarkets.

ArcelorMittal2006keyproformafinancialsshowcombinedrevenuesof€70.5billion,withacrudesteelproductionof118milliontonnes,representingaround10percentofworldsteeloutput.

Key Figures

0� ArcelorAnnualReport2006

40.6billion eurosRevenuesgeneratedbyArcelorin2006.

Chairman’s Statement

FollowingthecreationofArcelorin2002throughthemergerofAceralia,ArbedandUsinor,thenewsteelmakinggroupswiftlypositioneditselfasaleaderinthefieldsofinnovation,quality,sustainabledevelopmentandsocialdialogue.Itsfinancialresultshavecontinuallyimproved,thanksmainlytotherapidformationofsynergies,toapolicyfavouringprofitmarginsovervolumesandtotheconsolidationofitsindustrialandbalancesheetstructure.TheseadvantagesgiveArceloranenormousanduniversallyacknowledgedpotentialforgrowth.

Wishingtoremainadrivingforceintheintegrationofasteelmakingsectorthatremainedlargelyfragmentedinglobalterms,Arcelorhasdevelopednumerouscontactswithaviewtoforginglastingandvalue-creatingindustrialpartnershipsforitsshareholders.TheslowgrowthinEuropeansteelconsumptionandthedazzlingprogressofemergingnationssuchasChinaandBrazilhavenecessitatedtherapiddeploymentofanexpansionstrategyunderpinnedbyasoundfinancialapproach.

Withthegrowthinworlddemandforincreasinglyhigh-performancesteels,Arcelorhasrapidlyestablisheditselfastheleadinghigh-qualitysteelsuppliertoitsmainmarkets,namelyautomobile,constructionandhouseholdgoods.TheGroup’stechnologicaledgeoveritscompetitorshasbeenmadepossiblebysignificantinvestmentandbyteamsofengineersandtechniciansfocusedontheresearchanddevelopmentintonewproductsandintelligentsteelsolutions.

OutsideEurope,thisstrategybasedontheconsolidationoflongstandingassetswithintheGrouphasledtothecreationofArcelorBrasilandtothefullintegrationofCSTinthisnewentitythatrepresentsoneofthatcountry’smostimportantmarketcapitalisations.Atthesametime,therestructuringofAcesita,SouthAmerica’sleadingstainlesssteelproducer,ispermittingtheinitialbenefitstobereapedofanactivityinthemidstofaboom.Paralleltothis,negotiationsareunderwaywithaviewtotakingafirststepintotheChinesemarket,amarketwhich,itshouldberemembered,isnowproducingandconsumingmorethanonethirdoftheworld’ssteel.WiththeacquisitionofCanada’sDofasco,oneofthemostefficientandbestlocatedsteelmakersintheNAFTAregion,ArcelorhasdecisivelystrengtheneditsindustrialpresenceinNorthAmericaandconfirmeditspositionasundisputedleaderintheautomotivesteelsheetmarket.TheGrouphasalsodevelopeditspositioninNorthAfrica’slongcarbonproductssectorbyacquiringamajorityshareinSonasidinMorocco,therebyanticipatingthestronggrowthoftheconstructionmarketexpectedinthisregion.

Thefinancialresultsfor2006underlinetheexcellenceofthemanagementofyourcompany,whichgeneratedrevenueof€40.6billion,steelproductionof53.5milliontonnesandanafter-taxgroupshareofthenetresultof€3billion.TheprofitsfortheyearallowtheAnnualShareholders’MeetingtoproposethedistributionofagrossdividendofUS$1.30pershare(*).

Dear Shareholders, Ladies and Gentlemen,It would not be an exaggeration to say that 2006 can be regarded as an historic year for your company and for the global steel industry.


(*) US$ will be converted in Euro at the applicable rate at the dividend payment date.

Thisresulthasbeenachievedcourtesyofthefirst-ratemotivationandcommitmentofalloftheGroup’steamsofstaff,towhomIwouldliketoextendmywarmestthanks.Iurgethemtocontinueinthesamevein.

Inearly2006,globalsteelmanufacturinggroupswerereflectingstrategicallyonthesector’sconsolidationandontheneedforapresenceonthehighsteel-consumingemergingmarketssuchasChina,IndiaandBrazil.

Consequently,inJanuary2006,MittalSteelmadeabidforArcelor’ssharesandproposedajointapproachforthetwogroupswhichwouldleadtothecreationofanewglobalsteel-producingchampion.Thisresultedinanintensefive-monthperiodofanalysis,discussionandstudiesofalternativesolutions,allaimedatdefendingandpromotingtheinterestsofeveryshareholder.InJune2006,thesereflectionsandnegotiationsfinallyculminated–aftertheimplementationofajointbusinessplanandthedevelopmentofatailoredmanagementsystem–inamergeragreementbetweenequals,ofMittalSteelandArcelorbasedonbusinessvaluesandbenefitingfromwidesupportamongtheshareholders.

Justover94%ofArcelor’ssharesweretenderedintoMittalSteel’soffer,permittingworktocommenceimmediatelyonthenewentity’sformation.

Rapidly,ArcelorMittal’smanagementstructuresweredefined,theintegrationprocesswaslaunchedandsomeambitiousmanagementobjectivesweresetinordertobeabletorealisethelegalcreationofthenewentitybythesummerof2007.Theinitialgrowthtargetshavebeenachieved,suchastheacquisitionofMexico’sSicartsafinalisedinDecember2006,oragreementsfortheexploitationofironoreminesinLiberiaandmorerecentlyinSenegal,inacontinuationofthestrategyaimedatsecuringsuppliesofironoreagainstabackgroundofcontinuouslyrisingrawmaterialprices.

Asaresult,wecantodayturnourgazefirmlytowardsthefutureinordertocontinuedevelopingthelargeststeelmakingcompanyintheworld.Acompanythatviewsitselfasexemplaryintermsofthehealthandsafetyofitsemployees,thewayitisrun,productquality,customerservices,innovation,andsustainabledevelopment.Acompanyclosetoitsmulticulturalworkforceandrespectfulofallthecommunitieswithinwhichitconductsitsactivities.Acompanythatcontinuestofocusoncostreductions,courtesyoftheongoingsystematicexchangeofbestpracticesandapermanentconcernforthebestpossiblelevelofproduction.

In2006,theArcelorMittalgroupproducedover118milliontonnesofsteelandgeneratedrevenueof€70.5billion.Itdirectlyemploysmorethan320,000peopleinover60countriesandisrightlyregardedastheundisputedleaderinitscorebusinesses.TheArcelorMittalshare(tradingnameusedforMittalSteelCompanyN.V.)iscurrentlylistedonthemarketsinNewYork,Amsterdam,Paris,BrusselsandLuxembourg,andontheSpanishmarketsinBarcelona,Bilbao,MadridandValencia.

Today,inearly2007,theeconomicenvironmentremainsfavourableandthedemandforsteelproductscontinuestobedrivenbyChina’sprodigiousappetiteforsteel.ArcelorMittalisremarkablywellpositionedtotakeadvantageofthissustaineddemandandoftheopportunitiestheGroupwillhaveforexternalgrowth.Therapidprogressionofvariousinvestmentprojectsandtherealisationofseveraltakeoverstestifytothis.TheseachievementssupportouranalysisofthekeyroleofthecorporatespiritofthefoundingcompaniesofArcelorMittalandtheviewthatthetrendinglobalsteelindustryistowardsconsolidation.Intheirownwayandbydintoftheiruniquetalents,thetwocompanieshavealreadygreatlycontributedtowardsshapingthedevelopmentofthehistoryofsteelinEuropeandintheworld.Bothhavealsoplayedamajorroleintherenewedinterestofthefinancialmarketsinsteelsecurities.Unitedwithinasinglecompanythatisalreadymakingitspartnersandstaffproud,theywillcontinuetofashionthefutureofsteelmakingandtoprovidetheprofessionwithleadershiponaglobalscale.

Joseph KinschChairmanoftheBoardofDirectors

ArcelorAnnualReport2006 0�

The principles of corporate governance set out in this report are in line with international best practice.

Corporate Governance

1. ObjectivesArceloriscommittedtoadoptingbestpracticesintermsofcorporategovernanceinitsdealingswithitsshareholders.Inparticular,Arcelorensuresgoodcorporategovernancebyrigorouslyapplyingrulesconcerningtransparency,qualityofreportingandthebalanceofpowers.

Theprinciplesofcorporategovernancesetoutinthisreportareinlinewithinternationalrecommendations.Againstaconstantlychangingregulatorybackground,Arcelorhasmaintaineditseffortstoachievetransparencyandimprovethequalityofitsreportinginorderto:

• enhancemarkettransparencyandefficiency;

• protectshareholders’rightsandmakeiteasiertoexercisetheserights;

• ensurethetimelyreportingofaccurateinformationaboutsignificantissuesaffectingtheGroup.

Tomeettheexpectationsofshareholdersandinvestors,Arcelorhasasectionofitswebsite(www.arcelor.com)dedicatedentirelytocorporategovernance.Aswellasthesubjectscoveredinthisreport,thewebsitegivesregularupdatesoninformationsuchaschangestothearticlesofassociation,theshareownershipstructureandthesharecapital.

2. Principles of organisationArcelorisacompanyincorporatedinLuxembourgandgovernedbyLuxembourglaw,inparticularthelawof10August1915relatingtocommercialcompanies,subsequentlyamended.DetailedinformationonthissubjectcanbefoundinthecorporategovernancesectionoftheArcelorwebsite.

Inordertooptimisemanagementprocessesandmakethemfullytransparenttoallstakeholders,theBoardofDirectorsandtheManagementBoardhaveestablishedinternalrulesintendedtodefinetheGroup’soperatingprocedures,establishinganappropriatebalancebetweentheBoardofDirectorsandtheManagementBoard.

Arcelor undertakes to adhere to corporate governance principles aimed at ensuring proper reporting to shareholders and market transparency.


TheorganisationofArcelor’scorporategovernancehasbeenalteredinaccordancewiththeprincipleslaiddownintheMemorandumofUnderstanding,signedon25June2006byArcelorandMittalSteel,whichsealsthemergeragreementbetweenthetwogroups.ThisagreementimplementscertaincorporategovernanceprinciplesaimedatintegratingArcelorandMittalSteeloverathree-yeartransitionalperiod,whichcommencedonthedayfollowingthesigningofthementionedagreement.Duringthistransitionalperiod,anduntilthenewcompanyArcelorMittalhasbeenincorporated,thedecision-makingbodiesofthetwogroupsshallbeidentical,bothintermsoftheircompositionandtheiractivities.

3. General Meeting of Shareholders

Thecompany’sdulyformedGeneralMeetingrepresentsallshareholders.Ithasthebroadestpowerstoorder,implementandapproveallactionsrelatingtothecompany’soperations.

TheGeneralMeetingofShareholdersischairedbytheChairmanoftheBoardofDirectorsor,inhis/herabsence,byanothermemberdulydesignated.

Arcelor’sAnnualGeneralMeetingofShareholdersisheldinLuxembourg,attheheadquaters,oratanyotherplaceinthecityofLuxembourgspecifiedintheconveningnoticeofmeeting,onthelastFridayofthemonthofAprilat11.00am.

AllshareholdershavetherighttoattendtheGeneralMeetingorberepresentedbytheChairman(withorwithoutvotinginstructions)orbyanypersonoftheirchoiceastheirproxy,toaddresstheGeneralMeetingandtoexercisetheirvotingrightsincompliancewiththecompany’sarticlesofassociation.

NominimumnumberofsharesisrequiredtotakepartintheGeneralMeetingofShareholders.Everysharecarriesanentitlementtoonevote.

TheformalitiestobeobservedinordertobeabletoattendtheGeneralMeetinginpersonorbyproxyaredescribedatlengthonthewww.arcelor.comwebsite.

ToArcelor’sknowledge,noshareholderpactsexistatcompanylevel.

ToattendtheGeneralMeetinginpersonorbyproxy:

• shareholderspersonallyregisteredinArcelor’sshareregisterreceiveattheirplaceofresidencealldocumentsrelatingtotheGeneralMeetingand,inparticular,thenoticeofGeneralMeetingtogetherwiththeagendaandtheproposedresolutions,aswellasaformthatallowsthemtoindicatetheirintentiontoattendtheGeneralMeetinginpersonorbyproxy;

• shareholdersnotpersonallyregisteredinArcelor’sshareregistermustcontactthefinancialintermediarythroughwhichtheirsharesareheld.

TheAnnualGeneralMeetinghasaquorumirrespectiveofthenumberofshareholdersinattendanceandthesharestheyrepresent.Resolutionsarepassedwithasimplemajorityofthevotesvalidlycastbytheshareholderspresentinpersonorrepresented.

Arcelorundertakestoadheretothecorporategovernanceprinciplesaimedatensuringproperreportingtoshareholdersandmarkettransparency.

FifteendaysbeforetheAnnualGeneralMeeting,shareholdersmayinspectthefollowingdocumentsatthecompany’sheadoffice:

• theparentcompanyandconsolidatedfinancialstatements,aswellasthelistofdirectorsandthelistofstatutoryauditors;

• thelistofpublicfunds,shares,bondsandothercompanysecuritiesthatmakeuptheportfolio;

• themanagementreport;• documentsissuedbytheauditors,

whosereporttotheregisteredshareholdersisrequiredbylaw.

Themanagementreport,theparentcompanyandconsolidatedfinancialstatementsandtheaforementioneddocumentsissuedbytheauditorsaresenttotheregisteredshareholdersatthesametimeasthenoticeofmeeting.Allshareholdershavetheright,uponpresentationoftheirsharecertificate,toreceive,freeofchargeandfifteendaysbeforetheGeneralMeeting,acopyoftheabove-mentioneddocuments.

Afterapprovingtheparentcompanyandconsolidatedfinancialstatements,theGeneralMeetingshallholdaspecialvoteongrantingdischargetothedirectorsfortheperformanceoftheirduties.

4. The Board of Directors and its Committees

4.1.TheBoardofDirectors

TheBoardofDirectorsismadeupofeighteendirectorsappointedbytheAnnualGeneralMeetingofShareholders,threeofwhomareemployeerepresentatives.Amongotherthings,theBoardofDirectorsischaracterisedbyitsinternationalnatureasitcomprisessixdifferentnationalities.

Ifadirector’spositionbecomesvacant,theremainingdirectorsmay,byamajorityofthevalidlycastvotes,electadirectorwhoshalltemporarilyfillthispositionuntilthenextGeneralMeetingofShareholders.

Thedirectorsactinthesocialinterestsofthecompany.

ShouldaconflictofinterestarisewithregardtoanoperationsubmittedfortheapprovaloftheBoardofDirectors,thedirectorconcernedmustinformtheChairmanoftheBoardinadvance,insofarasthisispossible.He/ShemustalsoinformtheBoardofDirectors.He/Sheshallnottakepartinthediscussionorvoteonthisoperation.Anysuchconflictofinterestisrecordedintheminutesofthemeeting.

TheGeneralMeetingofShareholdersisinformedofsuchconflictsofinterestinaccordancewiththelaw.

TheBoardofDirectorsincludesasufficientnumberofindependentdirectorstogivethemasignificantinfluenceoverthedecision-makingprocesses.Theindependentdirectorsareindependentfromthecompanyanditsprincipalshareholders,whichmeansthat:

• theydonotholdanexecutivepositionwithinthecompany;

• theydonothaveanyfamilyrelationshipwithmembersoftheManagementBoardthatcouldinfluencetheirindependentjudgment;

• theydonotrepresentashareholderwhoownsatleast2%ofthecompany’ssharecapital;

• theydonotprovidetothecompanyanygoodsorservicesthat,intheopinionoftheBoardofDirectors,wouldbelikelytoinfluencetheirjudgment.

Composition

ThecompositionofArcelorS.A.’sBoardofDirectorschangedduringthecourseoftheyear,whichmustbedividedintotwoseparateperiodswiththepivotaldatebeingthesigningoftheMemorandumofUnderstandingon25June2006.TheMemorandumofUnderstandingstipulatesthatthetwocompanies,ArcelorS.A.andMittalSteelCompanyN.V.,shallhenceforthbeadministeredbythesamenumberofdirectors–i.e.eighteen–sixofwhomrepresentArcelorandMittalSteelrespectively,threeofwhomrepresentthemajorshareholders1,and,finally,threeofwhomrepresentthesalariedpersonnel.Mr.JosephKinsch,thecurrentChairmanofArcelor’sBoardofDirectors,became“Chairman”ofArcelorand“President”oftheBoardofDirectorsofMittalSteel.Sothatthis“mirror”organisationisperfectlyobserved,Mr.LakshmiN.Mittalisstill“Chairman”ofMittalSteelandhasbecomethe“President”ofArcelor’sBoardofDirectors.

1 i.e. the State of Luxembourg, Corporación JMAC and Carlo Tassara.


Corporate GovernanceThe Board of Directors includes a sufficient number of independent directors to give them a significant influence over the decision-making processes.

N.B.:Onlymandatesatlistedcompaniesarestated Dateofbirth Nationality Endoftermofoffice(AGM)

Joseph Kinsch 2May1933 Luxembourg 2006ChairmanoftheBoardofDirectors,Luxembourg

José Ramón Álvarez Rendueles 17June1940 Spanish 2006Vice-ChairmanoftheBoardofDirectors,Madrid,SpainDirectorGestavisiónTelecincoS.A.

HRH Prince Guillaume of Luxembourg 1May1963 Luxembourg 2006Luxembourg

John Castegnaro 3November1944 Luxembourg 2006HonoraryChairmanofOGB-L,Luxembourg

Jean-Yves Durance 28July1942 French 2006ChiefExecutiveOfficerofMARSH,Paris,France

Noël Forgeard 8December1946 French 2009ChairmanandCEOofEADS,Toulouse,France

Jean-Pierre Hansen 25April1948 Belgium 2006Vice-ChairmanoftheExecutiveBoardofSuez,Brussels,BelgiumDirectorAbgarDistrigazElectrabelFluxys

Ulrich Hartmann 7August1938 German 2006ChairmanoftheSupervisoryBoard,E-ONAG,Dusseldorf,GermanySupervisoryBoardMemberIKBIndustriebankAG(Chairman)MünchenerRückversicherungsgeselleschaftAGDeutscheLufthansaAGDirectorHenkelKgaA

Corporación JMAC B.V - - 2006RepresentedbyRamónHermosilla

Hedwig De Koker 28December1955 Belgium 2006ChairmanoftheBoardofDirectorsofVanderVekenVastgoedPLC,Brussels,BelgiumDirectorAccentisN.V.

Manuel Fernández López 8June1947 Spanish 2006Secretary-GeneraloftheMetal,ConstrucciónyAfinesdeUGTunion,FederaciónEstatal(M.C.A.-U.G.T.),Madrid,Spain

Michel Marti 6July1947 French 2009 FormersecretaryoftheCFDTunion,Broye,France

Daniel Melin 29May1944 French 2006Chairman(EMEASouth),EDS,Paris,France

Edmond Pachura 31January1934 French 2006Chairman,UNAS,Paris,France

Francisco Javier de la Riva Garriga 28August1945 Spanish 2006ExecutiveVice-President,FertiberiaS.A.,Madrid,Spain

Sergio Silva de Freitas 16January1943 Brazilian 2006SeniorVice-President,BancoItaùS.A.,SaoPaulo,Brazil

Georges Schmit 19April1953 Luxembourg 2006PrincipalGovernmentAdvisor,LuxembourgDirectorS.E.S.GlobalS.A.ARESS.A.

Fernand Wagner 24February1938 Luxembourg 2006 FormerCEOofARBED,Luxembourg

At 1 January 2006, Arcelor’s Board of Directors comprised the following members:


i. At1January2006

AttheAnnualGeneralMeetingheldon28April2006,thefollowingdirectorswerereappointed(termofofficeinbrackets):Mr.UlrichHartmann(2years),Mr.JosephKinsch(2years),Mr.EdmondPachura(2years),Mr.FernandWagner(2years),Mr.HedwigDeKoker(3years),Mr.Jean-PierreHansen(3years),Mr.DanielMelin(3years),Mr.SergioSilvadeFreitas(3years),Mr.JohnCastegnaro(4years),Mr.ManuelFernándezLópez(4years),Mr.FranciscoJavierdelaRivaGarriga(4years),Mr.JoséRamónAlvarezRendueles(4years),CorporaciónJMACB.V.(representedbyMr.AntoineSpillman)(5years),Mr.Jean-YvesDurance(5years),HRHPrinceGuillaumedeLuxembourg(5years),Mr.GeorgesSchmit(5years).

ThereappointmentofMr.NoëlForgeardandMr.MichelMarti,whowereappointedtotheBoardofDirectorsattheAnnualGeneralMeetingof30April2004,andwhosetermofofficeendsin2009,wasnotputtothevote.

AtthemeetingoftheBoardofDirectorsheldfollowingtheAnnualGeneralMeetingof28April2006,JosephKinschandRamónAlvarezRendueleswerereappointedasthePresidentandVice-Presidentrespectively.

ii.At31December2006

ThecompositionofArcelor’sBoardofDirectorswasadjustedduringthefourthquarterof2006inordertointegratetheprincipleslaiddownintheMemorandumofUnderstandingsignedbyArcelorS.A.andMittalSteelCompanyN.V.on25June2006.

Atitsmeetingon10October2006,Arcelor’sBoardofDirectorsacknowledgedtheresignationsofthefollowingdirectors:Mr.HedwigDeKoker,Mr.FranciscodelaRivaGarriga,Mr.Jean-YvesDurrance,Mr.NoëlForgeard,Mr.UlrichHartmann,Mr.DanielMelinandMr.FernandWagner.

Atthesamemeeting,theBoardofDirectorsdecidedtoco-optthefollowingpersonsasdirectors:Mr.LakshmiN.Mittal,Mrs.VanishaMittal,Mr.WilburRoss,Mr.LewisKaden,Mr.FrançoisPinault,Mr.NarayananVaghulandMr.RomainZaleski.

TheSecretaryoftheBoardofDirectorsisMr.HenkScheffer,Arcelor’s“CompanySecretary”,whoisDutch.

6 Mr. Wilbur L. Ross replaces Mr. Daniel Melin

7 Mr. Narayanan Vaghul replaces Mr. Hedwig De Koker

8 Mr. Romain Zaleski replaces Mr. Ulrich Hartman

As at 31 December 2006, the eighteen members of Arcelor’s Board of Directors are currently the following, subject to their approval by the Annual General Meeting of Shareholders:

Dateofbirth Nationality Endoftermofoffice(AGM)

Joseph Kinsch 2May1933 Luxembourg 2008ChairmanoftheBoardofDirectors

Lakshmi N. Mittal2 15June1950 Indian 2011PresidentoftheBoardofDirectors

Vanisha Mittal Bhatia3 23August1980 Indian 2010

HRH Prince Guillaume of Luxembourg 1May1963 Luxembourg 2011

José Ramón Álvarez Rendueles 17June1940 Spanish 2010

John Castegnaro 3November1944 Luxembourg 2010

Jean-Pierre Hansen 25April1948 Belgian 2009

Corporación JMAC B.V - - 2011RepresentedbyAntoineSpillmann

Lewis Kaden4 24March1942 American 2008

Manuel Fernandez Lopez 8June1947 Spanish 2010

Michel Marti 6July1947 French 2009

Edmond Pachura 31January1934 French 2008

François Pinault5 21August1936 French 2009

Wilbur L. Ross6 28November1937 American 2009

Georges Schmit 19April1953 Luxembourg 2011

Sergio Silva de Freitas 16January1943 Brazilian 2009

Narayanan Vaghul7 4August1936 Indian 2009

Romain Zaleski8 7February1933 French 2008

2 Mr. Lakshmi N. Mittal replaces Mr. Jean-Yves Durance

3 Mrs. Vanisha Mittal Bhatia replaces Mr. Francisco de la Riva Garriga

4 Mr. Lewis Kaden replaces Mr. Fernand Wagner

5 Mr. François Pinault replaces Mr. Noël Forgeard



Role and powers of the Board of Directors

Withinthelimitslaiddownbylawandthearticlesofassociation,theBoardofDirectorshasthebroadestpowerstoadministerandmanagetheCompanyandachieveitscorporatepurpose.

TheBoardofDirectorsappointsthemembersoftheManagementBoardandtheChiefExecutiveOfficer.

Withoutprejudicetothedutiesitisrequiredbylawtoperform,theBoardofDirectors,ontheproposaloftheChiefExecutiveOfficer,drawsupthegeneralbusinessplanfortheparentcompanyandtheGroup,approvestheallocationofresourcesforachievingitsobjectivesandtheGroup’sstrategy,overseestheimplementationofthegeneralbusinessplan,overseestheoperationoftheparentcompanyandGroup,andreportstoshareholders.

OntheproposaloftheManagementBoard,itdrawsupinparticular:

• theparentcompany’sfinancialstatementsandtheproposedappropriationofearnings;

• theconsolidatedGroup financialstatements;• theconsolidatedbudgetestimates;• thereportstobesubmittedtothe

GeneralMeetingofShareholders.

Itapprovesallmajorinvestmentsandallstrategicoperations.

Operating procedures

TheBoardofDirectorselectsaChairmanfromamongitsmembers.TheChairman’spowersarethoselaiddownbythearticlesofassociationandthosegiventohim/herbytheBoard.He/SherepresentstheBoardofDirectorswithrespecttotheoutsideworld.He/ShechairsthemeetingsoftheBoardofDirectors.

TheChairmanmaintainsanongoingcontactwithallmajorArcelorshareholdersinconjunctionwiththeChiefExecutiveOfficer.

Amonghis/herresponsibilities,theChairmanoftheBoardofDirectorsmustevaluatethemajorissuessubmittedbytheManagementBoardtotheBoardofDirectorsinordertoformhis/herownopinion.Tothisend,he/shemaintainsordevelopsthenecessaryknowledgeandunderstandingoftheissues,challenges,developmentsandopportunitiesinArcelor’svarioussectorsthroughperiodicconsultationwiththeManagementBoardandtheCEO.

TheBoardofDirectorsmeetsseventimesayears,andmeetingsareconvenedbytheChairman.Additionalmeetingsmaybeconvenediftheinterestsofthecompanysorequire.

IftheChairmancannotattend,theBoardischairedbythe“President”orthemostseniordirectorbyage.

TheagendaforthemeetingsisestablishedbytheChairmanoftheBoardofDirectorsinconsultationwiththeCEO.

TheBoardofDirectorsisassistedbyaSecretaryappointedbytheBoardofDirectors.TheSecretaryoftheBoardattendsthemeetingsoftheBoardofDirectors,helpstopreparethemeetingsandwritestheminutes.He/Shedoesnothaveavote.

Information provided to the Board of Directors

ItisthedutyoftheChairman,assistedbytheSecretaryoftheBoardofDirectors,toprovidethedirectorswiththeappropriateinformationpriortoeachmeeting,accordingtothecircumstancesandtheitemsontheagenda.

TheChairmanoftheBoardofDirectorsensuresthatthedirectorsareprovidedwiththemaininformationregardingtheGroup,particularlyfinancialanalysisreportsandpressreleases.

Insider information and operations affecting Arcelor shares

Atthebeginningofeachyear,thedirectorsareinformedoftherulesconcerninginsidertradingandthe“blackout”periodsduringwhichtheymustnotundertakeanytransactionsinArcelorshares.

Since2005,AMF,theFrenchmarketssupervisoryauthority,hasbeeninformedabouttransactionsinArcelorsharescarriedoutbydirectorsandmembersoftheManagementBoardwhentheirvalueexceeds€5,000percalendaryear.

Confidentiality of information

DirectorsandanyotherpersoncalledtoattendthemeetingsoftheBoardofDirectorsareboundbysecrecyregardinganyinformationofaconfidentialnatureofwhichtheybecomeawareasaresultoftheirattendanceatsaidmeetings.

Thisdutyofconfidentialityremainsinforceevenaftertheyhavelefttheirpositions.

Activity report

In2006,theBoardofDirectorsheldsevenordinarymeetingsandfifteenextraordinarymeetings.TheaverageattendancerateoftheDirectorswas87%.

Ateachofthe“ordinary”meetings,theBoardofDirectorsdevotedoneitemonitsagendatoHealthandSafetyonalltheGroup’ssitesbyanalysingthefrequencyandseverityrateofaccidentsandseriousaccidents.

TheBoardofDirectorsdevoteditsfirstmeetingtoexaminingthebudgetfor2006.Itdrewuptheannualfinancialstatementsfor2005,aswellasthequarterlyandhalf-yearlyfinancialstatementsfor2006atthreeothermeetings.TheDirectorswerealsoinformedoftheblackoutperiodsfortransactionsinArcelorsharesin2006.TheBoardapprovedthestock-optionplanfor2006.

continued

10 ArcelorAnnualReport2006

ThemajorpartoftheBoard’sactivityin2006wasdevotedtodiscussionsandguidelinesonstrategyfollowingtheoffermadebyMittalSteelon27January2006,andtotheexaminationofthisofferandthesuccessiveamendedoffers.Theseanalysesfinallyledtothesigningofanagreementthatresultedinanamicablepartnershipbetweenthetwogroups.Atitsextraordinarymeetings,othervalue-creatingproposedindustrialandfinancialpartnershipswerealsoexamined.

Inadditiontotheseworksofanexceptionalnature,theBoardofDirectorsdiscussedthemajorGroupacquisitionsanddisposals.Italsoapprovedmajorinvestments.

TheBoardofDirectorsdiscussedvarioussubjectsrelatingtotheGroup’sgeneraloperatingenvironment,sustainabledevelopment,theconsequencesoftheintroductioninEuropeofasystemfortradinggreenhousegasemissionpermits,humanresources,R&D,themacro-economicenvironmentandthesteelmarket.

4.2. The Audit Committee and the Appointments and Remuneration CommitteeInlinewithcorporategovernanceprinciples,theBoardofDirectorshastwocommittees.

4.2.1. The Audit CommitteeMission

ThemissionoftheAuditCommitteeistoassisttheBoardofDirectorsinitsroleascontrollerofthecompanyandtheGroup.Italsoexaminestheyearly,half-yearlyandquarterlyfinancialstatementsfortheparentcompanyandtheGroup,andcommentsonaccountingprinciplesandrulesandonthevaluationrulesusedbythecompanywhencompilingthesefinancialstatements.

ItalsoexaminestheinternalcontrolproceduresrelatingtotheGroup’sfinancing,ManagementControl,andtheprocessingofaccountingandfinancialinformation.

ThemissionandthecompositionoftheAuditCommitteehavealsobeenaffectedbythesigningoftheMemorandumofUnderstandingwithMittalSteelandtheyhavebeenadjustedinordertocomplywiththeprovisionsofthisagreement.TheAuditCommitteenowcomprisesfourmembersappointedfromamongtheindependentdirectorsanditoperatesinaccordancewithinternalrulesreportedonthewww.arcelor.comwebsite.

Composition

i. At1January2006,theAuditCommitteecomprisedthefollowingmembers:

• JoséRamónÁlvarezRendueles,Chairman

• HedwigDeKoker,member• Jean-YvesDurance,member• GeorgesSchmit,member

ii.AsaresultofthechangeinthecompositionoftheBoardofDirectorsinOctober2006,followingtheresignationsofcertainmembersoftheBoardofDirectors,at31December2006theAuditCommitteecomprisedthefollowingmembers:

• NarayananVaghul,Chairman• JoséRamónÁlvarezRendueles,

member• EdmondPachura,member• WilburRoss,member

TheSecretaryoftheAuditCommitteeisArvindChopra,whoistheheadofinternalaudit.


AuditCommitteemeetingsareconvenedbytheChairmanatleastfourtimesayear,ormoreifnecessary.Asimprovementsincommunicationsandtransparencyareanimportantpartofitsmission,theAuditCommitteeshallmeetatleastonceayearwiththemembersoftheManagementBoard,theHeadofInternalAuditandtheexternalauditorsinordertodiscussanymatterswhich,intheopinionoftheAuditCommittee,requireaseparatemeeting.

TheagendaofmeetingsisdrawnupbyitsChairman.

TheAuditCommitteehasatitsdisposaltheInternalAuditworkscheduleanditcanrequestanydocumentandanyinformationitdeemsusefulornecessaryforfulfillingitsmission.

TheworkoftheAuditCommitteeisdocumentedinminutesdrawnupbytheSecretaryandsignedbythefourmembersoftheAuditCommitteeanditsSecretary.

Activity Report

TheAuditCommitteemetsixtimesin2006.AllitsmembersattendedeachmeetingoftheAuditCommittee.

Atthesemeetings,theAuditCommitteeinparticular:

• analysedthefinancialstatementsfor2005,includingtheprincipalnon-recurringitemsthataffectedtheconsolidatedincomeforthatyear,aswellasthequarterlyandhalf-yearlyfinancialstatementsfor2006;

• examinedtheconsolidatedbudgetfor2006.

TheAuditCommitteealsoproposedspecificblackoutperiodstotheBoardofDirectorsrelatingtothepublicationofresultsduring2006.

ItalsoreviewedthefinancingactivitiesoftheArcelorGroupcarriedoutviaArcelorFinanceandArcelorTreasury,aswellastheGroup’sinsurancepolicy.TheAuditCommitteealsopaidparticularattentiontothehedgingofthecurrencyriskrelatingtopurchasesofcoal,coke,oreandtransportation,andtotheaccountingtreatmentofgreenhousegasemissionrights.

Italsoexaminedthe2006programmeoftheBusinessRiskControlunitalongwithadetailedreportbythisunitrelating,inparticular,totheGroup’sriskmapping,whichliststhemajorrisksidentifiedwithinArcelor.Italsoexaminedasummaryoftheauditreportsproducedin2005,includingrecommendationsonoptimisingtheinternalcontrolprocedures.

AttheendofeachAuditCommitteemeeting,itsChairmangaveanoralreporttotheBoardofDirectors,whichwasincludedintheminutesoftheBoardmeeting.


In accordance with the Memorandum of Understanding signed on 25 June 2006 by Arcelor and Mittal Steel, the Management Board was reorganised.


Position Dateofbirth Nationality

Guy Dollé PresidentoftheManagementBoard,CEO 31October1942 French

Michel Wurth Vice-PresidentoftheManagementBoard 17April1954 Luxembourg

Roland Junck MemberoftheManagementBoard 10November1955 Luxembourg

Gonzalo Urquijo MemberoftheManagementBoardandCFO 17September1961 Spanish

At 1 January 2006, the Management Board comprised the following members:

Position Dateofbirth Nationality

Lakshmi N. Mittal PresidentoftheManagementBoard,CEO 15June1950 Indian

Roland Junck MemberoftheManagementBoard 10November1955 Luxembourg

Aditya Mittal MemberoftheManagementBoardandCFO 22January1976 Indian

Malay Mukherjee MemberoftheManagementBoard 26January1948 Indian

Gonzalo Urquijo MemberoftheManagementBoard 17September1961 Spanish

Michel Wurth MemberoftheManagementBoard 17April1954 Luxembourg

As at 5 November 2006, Arcelor’s Management Board comprises the following members:

Position

Lakshmi N. Mittal PresidentoftheManagementBoard,CEO

Aditya Mittal CFO,M&A,MemberoftheManagementBoardinchargeofFlatProductsforNorthAmerica

Roland Junck MemberoftheManagementBoardinchargeofChina,InternationalAffairs,SustainedGrowth,Continuous ImprovementandCommercialCoordination

Malay Mukherjee MemberoftheManagementBoardinchargeofAsia,AfricaandtheCIS,MiningandStainlessSteels

Gonzalo Urquijo MemberoftheManagementBoardinchargeofLongProductsandAM3S

Michel Wurth MemberoftheManagementBoardinchargeofFlatProductsforEurope,Automotive, PlatesandResearchandDevelopment

Each member of the Management Board has the following responsibilities:


4.2.2. The Appointments and Remuneration CommitteeMission

TheprincipalmissionoftheAppointmentsandRemunerationCommitteeistosubmitproposalstotheBoardofDirectorsontheremunerationoftheManagementBoardmembers,andontheappointmentofnewdirectorsandManagementBoardmembers.ItisalsokeptinformedbytheChiefExecutiveOfficeroftheGroup’sremunerationpolicyforitstopmanagers.

Itsmissionanditscomposition,alongwithitsname,werechangedinordertoadopttheprincipleslaiddownintheMemorandumofUnderstanding.ThisCommitteeisnowcalledthe“Appointments,RemunerationandCorporateGovernanceCommittee”,anditcomprisesfourindependentdirectors.The“Appointments,RemunerationandCorporateGovernanceCommittee”operatesinaccordancewithinternalrulesreportedonthewww.arcelor.comwebsite.Itsresponsibilitieshavebeenextendedtomattersrelatingmorespecificallytocorporategovernance,i.e.developingandregulatingtheprinciplesofgovernancerelatingtothecompany.

Composition

i. At1January2006,theAppointmentsandRemunerationCommitteecomprisedthefollowingmembers:

• JosephKinsch,Chairman• JoséRamónÁlvarezRendueles,member• Jean-PierreHansen,member• EdmondPachura,member

ii. AsaresultofachangeinthecompositionoftheBoardofDirectorsinOctober2006,followingtheresignationsofcertainmembersoftheBoardofDirectors,at31December2006theAppointments,RemunerationandCorporateGovernanceCommitteecomprisedthefollowingmembers:

• LewisKaden,Chairman• JosephKinsch,member• Jean-PierreHansen,member• SergioSilvadeFreitas,member


TheAppointments,RemunerationandCorporateGovernanceCommitteemeetsthreetimesayear.ItcanworkincollaborationwiththeChiefExecutiveOfficer,theHeadofHumanResources,oranyotherpersonwhosecontributionitconsidersuseful.

Activity Report

In2006,theAppointments,RemunerationandCorporateGovernanceCommitteemeteighttimes,andallitsmembersattendedeachmeeting.

Atthesemeetings,theAppointments,RemunerationandCorporateGovernanceCommittee,amongotherthings:

• drewupproposalsfortheBoardofDirectorsontheremunerationoftheManagementBoardmembers,intermsofbothfixedsalaryandbonuses,andstockoptions;

• submittedaproposaltotheBoardofDirectorsonthefeetobepaidtothemembersoftheBoardofDirectorsfor2005,which,havingbeenapprovedbytheBoardofDirectors,wasratifiedbytheGeneralMeetingofShareholderson28April2006;

• monitoredtheclassificationoftheBoardofDirectorsmembersaccordingtotheindependencecriteriaadoptedbythecompany;

• adaptedthestock-optionspayment,subjecttoapprovalbytheBoardofDirectors;

• gaveanopiniononthecompositionofthecompany’snewManagementBoard.

AttheendofeachmeetingoftheAppointmentsandRemunerationCommittee,itsChairmangaveanoralreporttotheBoardofDirectors,whichwasincludedintheminutesoftheBoardmeeting.

5. The Management BoardComposition

TheChiefExecutiveOfficerandthemembersoftheManagementBoardareappointedbytheBoardofDirectors,ontheproposaloftheAppointments,RemunerationandCorporateGovernanceCommittee.

On25September2006,inaccordancewiththeMemorandumofUnderstandingsignedon25June2006byArcelorandMittalSteel,theManagementBoardwasreorganised,withtheresultthat,followingconsultationswiththeAppointments,RemunerationandCorporateGovernanceCommittee,threenewmemberswereappointedtotheManagementBoard:

• Mr.AdityaMittal,MemberoftheManagementBoardinchargeofmergersandacquisitionsandFlatProductsforAmerica,andCFO;

• Mr.MalayMukherjee,MemberoftheManagementBoardinchargeofAsia,AfricaandtheCIS,StainlessSteelsandMining;

• Mr.DavinderChugh,MemberoftheManagementBoardinchargeofsharedservices.

Mr.RolandJunckwasappointedChairmanoftheManagementBoard.

On5November2006,asMr.RolandJunckhadresignedasChairmanoftheManagementBoard,theBoardofDirectorsunanimouslyappointedMr.LakshmiN.MittalasthenewChairmanoftheManagementBoardinhisplace.Moreover,Mr.DavinderChughretainedhisoperationaldutiesbutlefthispositionasaMemberoftheManagementBoardinordertocomplywiththecompositionoftheManagementBoardlaiddownintheMemorandumofUnderstanding.

Powers

ThepowersoftheManagementBoardarelaiddownbytheBoardofDirectors.BasedonadelegationofpowersbytheBoardofDirectors,theManagementBoardhasthefollowingpowers:

• thelayingdownandmonitoringofthestrategicobjectivesandgeneralbusinessplanoftheparentcompanyandGroup,tobesubmittedtotheBoardofDirectorsforapprovalafterconsultationwiththeChairmanoftheBoardofDirectors;

• thelayingdownofthepoliciesandresourcesfortheimplementationofthisstrategy,withdecisionsotherthanthoserelatingtoordinarymanagementbeingsubmittedtotheBoardofDirectorsforapproval;

• theenforcementandcontrolofdecisionsandthemonitoringofperformanceandresults.

Code of conduct

ThemembersoftheManagementBoardadheretothestrictestethicalandprofessionalstandardsandassistoneanotherinachievingtheobjectivesset.


continued


Furthermore, allocation of stock options for the 2006 plan is broken down in the table below:

Grossannualremuneration Grossannualbonus Numberofstock ineuros ineuros optionsgranted

Guy Dollé (*) 525,000 562,500 50,000

Other members (**) 1,330,000 1,280,000 120,000

Amounts allocated to the Management Board for 2006

Totalnumber Strikeprice Exerciseperiod ofoptionsgranted

Guy Dollé (*) 50,000 34.43 from1July2009to30June2013

Other members (**) 120,000

(*) 9 months. (**) Comprising of M. Wurth, R. Junck and G. Urquijo.


6. Remuneration6.1. Board of Directors and CommitteesRemuneration principles for the Board of Directors and the Committees

Eachyear,withtheapprovaloftheAnnualShareholdersMeeting,theBoardofDirectorsisallocatedalumpsumoftheamountspaidbywayofadividendtotheshareholders.Thissum–whichconstitutesthedirectors’fees–maynotbelessthan€1millionormorethan€2million.Ifthedividenddistributionisinsufficient,someorallofthe€1millionisallocatedtoexpenses.

Thissumisdividedupbetweenthememberssothateachdirectorreceivesoneshare,theformerVice-ChairmanreceivesoneandahalfsharesandtheChairmantwoshares.

Furthermore,theBoardofDirectorsisallocatedalumpsumof€36,000foreachofitsmeetingstopayattendancefees.Thissumisallocatedtoexpenses.

ThespecificremunerationofthemembersoftheAuditCommitteeandtheAppointments,RemunerationandCorporateGovernanceCommitteeisasfollows:

• €3,000permemberpermeeting;• €4,500permeetingfortheChairman

oftheCommitteeinquestion.

Thesepaymentsareallocatedtoexpenses.

Amounts allocated for 2006

TotalRemuneration9for2006:

€2,501,500

• Ofwhich€1,600,000astheaggregateBoardfees(subjecttoapprovaloftheGeneralMeetingofShareholders);

• and€901,500asattendancefees.

TheChairmanoftheBoardofDirectorsdidnotparticipateinthecompany’s2006stock-optionplan.

6.2. Management BoardTheremunerationpaidtotheChairmanandthemembersofArcelor’sManagementBoardissetbytheBoardofDirectorsfollowingaproposalmadebytheAppointments,RemunerationandCorporateGovernanceCommittee.

Principles of remuneration

TheremunerationpaidtotheChairmanandthemembersoftheManagementBoardconsistsof:

• afixedannualsalary;• aperformance-relatedbonus;• stockoptions.

Alltheattendancefeesanddirectors’feespaidtotheChairmanandthemembersoftheManagementBoardinrespectofArcelormandateshavebeenpaidbacktothecompany.

Fixed annual salary

Upto31December2005,fixedannualsalariesweredeterminedonanetbasisaftersocialsecuritychargesandstandardisedtaxes,inordertotakeintoaccountthecountriesinwhichthemembersoftheManagementBoardoperatedandresided.

Asof1January2006,fixedannualsalariesaredeterminedonagrossbasis.

Bonus

ThebonuspaidtotheChairmanandthemembersoftheManagementBoardisdistributedaccordingtothefollowingrules:

• athirdfromtheearningsfortheyearaccordingtothefinancialindicatorsROCE(ReturnonCapitalEmployed)andFCF(FreeCashFlow),paidincash;

• athirdfromtheearningsfortheyearaccordingtothefinancialindicatorsROCEandFCF,convertedintoArcelorsharesattheaveragesharepriceduringthe30calendardayspriortotheAnnualShareholdersMeeting10;

• athirdfromthemovingaverageoftheearningsforthecurrentyearandthetwopreviousyears,accordingtotheROCEandFCFindicators.

Themaximumamountofthebonus,beforeapplyingtheindividualperformancecoefficientof0.8–1.2,is75%ofthenetannualsalary.

Stock-options

TheChairmanandthemembersoftheManagementBoardparticipatedinthe5-yearstock-optionplanapprovedbytheGeneralMeetingofShareholdersof25April2003,whichwasintroducedbytheBoardofDirectorson15May2003.ThenumberofoptionsgrantedeachyearisdecidedonbytheBoardofDirectors.

TheemploymentcontractsofthesixnewmembersoftheManagementBoardhavebeenmodifiedwitheffectfrom1August2006,sothattheyareconsistentwithnewresponsibilities.

7. Dual-signature principleArcelorhasadoptedadual-signaturesystemforpurposesoflegalrepresentation.WithoutprejudicetothepowerofrepresentationgrantedtotheBoardofDirectorsbylaw,theCompanyisonlycommittedtothirdpartiesthroughthejointsignatureoftwoauthorisedrepresentatives.AllauthorisedrepresentativesareappointedbytheBoardofDirectorswhichalsodeterminesthescopeoftheirpowers.

8. External auditorInaccordancewithLuxembourgcommercialcompanylaw,consolidatedandparentcompanyfinancialstatementsmustbecertifiedbyanexternalauditorwhoexaminestheaccounts,themethodsusedtocompilethemandtheGroup’sinternalcontrolprocedures.

Followinganopeninvitationtotender,theGeneralMeetingofShareholdersof26April2002–ontheproposaloftheBoardofDirectors–appointedKPMGAuditasArcelor’sexternalauditorforatermexpiringontheoccasionoftheGeneralMeetingofShareholdersthatvotedonthe2004financialstatements.

OntheproposaloftheBoardofDirectors,theGeneralMeetingofShareholdersof29April2005extendedKPMGAudit’smandatetoauditthefinancialstatementsoftheArcelorcompanyandtheconsolidatedfinancialstatementsoftheArcelorGroupuntiltheAnnualGeneralMeetingofShareholdersthatvotesonthe2005financialstatements.

OntheproposaloftheBoardofDirectors,theGeneralMeetingofShareholdersof28April2006extendedKPMGAudit’smandatetoauditthefinancialstatementsoftheArcelorcompanyandtheconsolidatedfinancialstatementsoftheArcelorGroupuntiltheAnnualGeneralMeetingofShareholdersthatvotesonthe2006and2007financialstatements.

ThefeespaidbytheGrouptotheexternalauditorandthemembersofitsnetworkamountedto€19.6million.Thenon-auditservicesprovidedbyKPMGaccountedfor€3.3million.

9 Including that paid to members of the Board of Directors.

10 These shares must be held for at least 4 years.


Internal control is an integral part of the Arcelor Group’s corporate governance strategy. This report draws, as a framework reference, on the internal control system published in May 2006 by the market-wide working group set up in January 2005 by the AMF (the French Financial Market Authorities).

Internal Control Procedures

1. Definition of internal controlInternalcontrolisanintegralpartoftheArcelorGroup’scorporategovernancestrategy.

Thepurposeofinternalcontrolistoensure:

• compliancewithlaws,regulations,internalrulesandcontracts;

• theenforcementofinstructionsandguidelineslaiddownbytheArcelorGroup’sManagementBoard;

• theprotectionandpreservationoftheGroup’sassets;

• optimalcontroloverthesectorsandcompanieswithintheGroup;

• thereliabilityandintegrityoftheaccountingsystemandoffinancialandoperationalinformation;

• theachievementandoptimisationoftheArcelorgroup’sobjectives;

• thepreventionandmanagementofrisksthatmightpreventtheachievementoftheseobjectives.

Asaresult,internalcontroldeterminesthefulfilmentoftheArcelorgroup’sobjectivesintermsofperformanceandprofitability.

2. Internal control structureTheArcelorgroup’sinternalcontrolappliestoallthecompanieswhichmakeuptheGroup.However,thebasicprinciplesareadaptedtothecharacteristicsofthevarioussubsidiaries.

3. The internal control components3.1. OrganisationTheArcelorgroup’sorganisationisbasedontheprincipleofsubsidiarity.TheManagementBoardformalisesandcommunicatesitsvisionforthecompanyandoverseesitsimplementation.ItisassistedbytheCorporatedepartmentsinitsstrategy,managementandgovernancefunctions.

TheresponsibilityfordevisingandimplementinginternalcontrolsystemsandproceduresrestswiththeManagementBoard,asdelegatedbytheBoardofDirectors.Furthermore,theadaptation,enforcementandmonitoringoftheseinternalcontrolproceduresaretheresponsibilityofthebusinessentities.

ThevariousCorporatedepartmentsdrawuptherules,internaldirectivesandtheproceduresfortheirrespectiveareasandupdatethemregularly.

3.2. CirculationBesideshardcopies,theseinstructionsarecirculatedbythevariousdepartmentsviatheArcelorgroup’sintranetbysendingnotificationtothevariousemployeesinquestion,andthisappliestoallthecompanieswithintheArcelorgroup.

3.3. Inventory of risksInadditiontotheprogrammesfordrawingupaninventoryofrisks,aspartoftheobligationsimposedbylawsuchas,forexample,theenforcementoftheSEVESCOdirective,thesecuringofcertifications,suchasOHSAS18001,engineeringauditsoffiresafetyandtheriskofmachinerybreakdown,andalltheothervoluntarymeasuresadopted,theBusinessRiskControlunitisresponsiblefordevelopinganEnterpriseRiskManagement-typeprocessthatisintegratedintotheorganisationandexecutedbyoperationalmanagement.

Thisprocesscovers:

• theidentificationoffutureeventsthatmayhaveanimpactonArcelor’sobjectives;

• theassessmentofrisksandtheresultingopportunities;

• decisionsregardingriskcontrolmeasurestobeadoptedinordertomaintainthedesiredlevelofrisk;

• theregularmonitoringofthesystem.

Atthebusinessunitlevel,theBRChas,since2002,setupaseriesofinitiativestoassistlinemanagersinriskmanagement,principallybyinitiatingtheriskmappingofbusinessunits.Majorriskmapsaredrawnup,basedmainlyonreportingthroughworkshops,individualinterviewsandself-assessments.Theseriskmapsareusedtodetermineactionplansandschedules,beforebeingdiscussedandapprovedbythemanagementbodiesofthebusinessunitinquestion,andareusedasthebasisfortheGroup’sriskmap.

3.4. Internal control relating to the processing of financial and accounting informationFollowingthedecisiontomergewithMittalSteelCompanyN.V.,theArcelorgroupwillbesubjecttotheAmerican“SarbanesOxleyAct”in2007.TheGroup’scomplianceproject,managedbythefinancialreportingdepartment,waslaunchedinSeptember2006.

3.5. Monitoring and regular examination of the internal control activitiesTheBusinessRiskControlunitevaluatestherelevanceoftheinternalcontrolproceduresandcompliancewiththeseprocedures.


TheinternalauditactivityiscarriedoutaccordingtoasingleannualGroupAuditPlan,whichisdrawnupontheresponsibilityoftheheadoftheBusinessRiskControlunitonthebasisofaprocedurethat,interalia,takesthefollowingfactorsintoaccount:

• theanalysisandconclusionsofriskmappingresults;

• theanalysisofkeyperformanceindicators;

• theresultsofpreviousinternalaudits;• requestsfromtheGroup’s

ManagementBoardandtheheadsofthebusinessunits;

• theexperienceoftheinternalauditors;• theidentificationofspecificneedsvia

interviewswithstaffandlinemanagers.

TheAuditPlanaimstocovertheinternalcontroloftheGroup’smainprocessesoverathree-yearperiod.

TheproposedannualAuditPlanissubmittedforapprovaltotheManagementBoardandtheBoardofDirectors’AuditCommittee.

Auditscarriedoutduringtheyeararebased,inprinciple,ontheinitialannualauditplan.However,thisplanisreviewedandmodifiedwiththeapprovaloftheManagementBoardandtheAuditCommitteeinthelightofauditresults,specificrequests(adhocand/oremergencyaudits),orriskassessmentchanges.

Auditsgiverisetoreportswhicharesenttotheauditedentitiesandtheirmanagers.Theaimoftherecommendationscontainedthereinistoimproveriskmanagementbyproposingthebestinternalcontrolpracticesand,therefore,bycreatingaddedvalue.

Therearevarioustypesofaudits:

• auditsofentities:evaluationoftheinternalcontrolofthelargestrisksandthemostexposedprocesses;

• auditsofprocesses:evaluationoftheinternalcontrolofthemainrisksidentified;

• adhocaudits:speciallyrequestedbymanagementand/oremergencyaudits;

• follow-upaudits:auditingtheimplementationofpreviousauditrecommendations.

Auditsmaybecarriedoutatdifferentlevels:Group,regionorbusinessunitlevel.

TheBRCunitreportsonaquarterlybasistotheAuditCommitteeoftheBoardofDirectorsontheprogressmadeandthemainproblemsencountered.

TheheadoftheBRCunitreportstotheAuditCommitteeonthemajordiscrepanciesdiscoveredduringinternalaudits,ontheresourcesimplementedbytheBRCunit,andontheprogressoftheAuditPlanduringmeetingsoftheAuditCommitteedevotedtoreviewingtheBRC’sactivities.

Attheendof2006,itwasannouncedthattheBRCunitwastobeamalgamatedwiththeInternalAssuranceunitofMittalSteelCompanyN.V.

3.6. Internal control limitsAswelldevisedandappliedasitis,internalcontrolcannot,however,beconsideredtoprovideabsoluteguaranteesastotheattainmentofthecompany’sobjectives.


2006 has been the year of worldwide growth and consolidation for Arcelor. Innovation, leadership skills and Sustainable Development have been widely recognised.

Monthly Highlights for 2006

January 2006ArcelorsellsitssteelservicecentreFlachformStahllocatedinSchwerte(Ruhr,Germany)toGermansteelmakerSalzgitter.Withthisoperation,ArcelorSSC(ArcelorSteelServiceCentre)optimisesitscapacityintheregion.ThecurrentproductionatFlachformwillgraduallybemovedtootherexistingArcelorSSCsinGermany.ThetotaloutputofprocessedflatproductsfortheGermanmarketwillremainunchanged.

DofascoandArcelorsignanagreementforArcelortomakearevisedall-cashoffertoacquireallofDofasco’soutstandingcommonsharesinasupported,all-cashtransactionfortotalconsiderationofapproximatelyC$5.6billion(€4.126billion),orC$71.00percommonshare.Dofasco’sBoardofDirectorsunanimouslyrecommendsArcelor’soffertoDofasco’sshareholders.

MittalSteellaunchesanoffertotheshareholdersofArcelortocreatetheworld’sfirst100milliontonnesteelproducer.TheoffervalueseachArcelorshareat€28.21incash,oratanequityvalueof€18.6billiononafullydilutedbasis.Arcelor’sBoardofDirectorsrejectstheofferasinitiallyannounced.

Forthesecondyearinarow,ArcelorislistedintheGlobal100listoftheworld’s100mostsustainablecorporations.ThislistwaslaunchedforthefirsttimeduringtheWorldEconomicForuminDavoson28January2005.

February 2006Arcelorreceivesaninaugural“BestofEuropeanBusiness”award,sincetheGroupisoneoftheninemostcompetitivecompaniesdoingbusinessinEurope.Thecompanyespeciallyoutperformedinleadershipskillsandinnovativecapabilities.

Carinox,thenewstainlessplantinCharleroi(Belgium),isinaugurated.Yearlyproductioncapacityisaround1milliontonnesofsteel.

Arceloracquiresa38.41%stakeinLaiwuSteelCorporation,inChina.Thisacquisitionisalignedwiththelong-termgrowthstrategyandshouldcreatemultiplesynergies.ItisakeyoperationalplatformtobetterserveChineseclients.LaiwuSteelCorporationisChina’slargestproducerofsectionsandbeams,andwillbenefitfromthetechnologyandinnovationleadership,powerfulsourcingandextensiveglobalcommercialnetworkofArcelortofurtherboostitsoperationalexcellence.ThepartnershipisstillawaitingapprovalwiththeBeijingauthorities.

March 2006AfterthesignatureofthesupportagreementbetweenDofascoandArcelorinJanuary2006,98.5%ofDofasco’scommonsharesaredepositedtoArcelor’soffer.ArcelorthereforeacquirestheremainingDofascocommonsharesbymeansofastatutorycompulsoryacquisitionprocedure.

Arcelor’sfirstworldwideHealthandSafetydayisheldon29March.Theaimistoreinforcepreventiononaglobalscale.700ArcelorsitesaremobilisedforthisspecialdayinordertofocusonstrongimprovementsinHealthandSafety.

April 2006Anewstructurecalled“StrategicSteelStichting”issettoensuretheintegrationofDofascowithinArcelor.ArcelortransfersitssharesinDofascotothisindependentDutchfoundationandretainsfullcontroloverDofasco,includingdecision-makingpowerandalleconomicinterestrelatedtotheCanadiansteelmaker,withtheexceptionofanydecisiontosellDofasco.

InstallationsofIUPJindalMetals&Alloysareinaugurated.Inparticular,anewlycreatedjointventureiscreatedandbasedinNewDelhi(India).Itscommonknow-howwillservecustomers.Thisinvestmentofabout€14millionshouldhaveacapacityofaround1,500tonnespermonth.

Thenewjointgalvanizingline“Severgal”isinauguratedbyArcelorandSeverstalinCherepovets(Russia).Thisjointventureissettoproducehigh-endcoatedsteelfortheRussianautomotivemarket.

ArcelorandMitsuisetupajointservicecentreinSouthAfrica,mainlytargetingtheautomotiveindustry,calledAMSASteelServiceCentrePtyLtdandlocatedintheDurbanarea.Operationsaretostartinthesecondquarterof2007andthenewcompanyshouldprocess120,000tonnesofslitproducts,rectangularandshapedblanksperyear.Throughthiscooperation,customerswillbenefitfromthecombinedexperienceandbestpracticesofArcelorandMitsuiintheprocessinganddistributionofsteel.


May 2006ArcelorincreasesitsstakesinAcesitato57.3%.Followingthisacquisition,Arcelorholdsdirectlyorindirectly95%ofthecommonsharesand38.1%ofthepreferredsharesofAcesita.

Arcelorcontributestothefirstanti-seismicschoolbuildinginIzmit(Turkey),whereaschoolbuildinghadbeendestroyedbyanearthquakein1999.Thisschool,sponsoredbyArcelor,hasbeenrealisedbytheEuropeanConventionforConstructionalSteelwork(ECCS)andtheTurkishConstructionalSteelworkAssociation(TUCSA).

June 2006Arceloremployeesbecomeshareholdersofthecompany.Followingaprogrammelaunchedin12countries,calledAESOPE,around50%ofArcelor’semployeesinthesecountriessubscribed.

Arcelorrewardsinnovationwithinitsteams.Indeed,thefirst2006prizeisawardedtoARCEOprojectsinWallonia,focusedonplasmavacuumcoatingsofsteelproducts.

Arcelor’sBoardofDirectorsunanimouslyrecommendstheimprovedMittalSteeloffer.TheMittalSteelofferhasbeensignificantlyimprovedcomparedtotheinitialofferon27January,andconsistsofamergerproposalbywayofmixedshareandcashofferthatwillbefollowedbythemergerofMittalSteelwithArcelor.ThecombinedGroup,domiciledandheadquarteredinLuxembourg,willbenamedArcelorMittal.

Demonstratingthecommitmenttoextendmarketsindevelopingnations,astrategicpartnershipbetweentheArcelorMittalGroupandSNI(SociétéNationaled’Investissement)isconcludedconcerningthedevelopmentofSonasid.ThisconsolidatesanddevelopsthepositionofSonasidintheMoroccanmarket,allowingthecompanytobenefitfromthetransferofArcelorMittal’stechnologiesandskillsinthelongcarbonsteelproductsector.

July 2006ArcelorandBamesa(Spain)setupasteelcentreinRomania,locatedintheTopoloveniregion.Itwillsupplyhigh-qualitysteelforspecificapplicationsintheautomotiveanddomesticappliancesindustries.Featuringleading-edgetechnology,theSSCwillhaveanannualproductioncapacityof300,000tonnes.ItwillenablegrowthopportunitiesinCentralandEasternEuropeanmarkets.

August 2006ArcelorMittalparticipatesinBorçelik’sinvestmentforathirdgalvanizinglineinTurkey.ThismakesBorçelikthelargestandmostmodernproducerofgalvanizedsteelinTurkey,andwillincreasetheexposureofArcelorMittaltotheTurkishmarketforhighadded-valuesteelproducts.

FollowingtheexpirationofMittalSteel’sofferforArcelorsecuritieson13July2006,inBelgium,France,Luxembourg,SpainandtheUnitedStates,93.7%ofArcelorsharesweretendered.

October 2006Furtherstrengtheningitspositionintheglobalautomotivemarket,ArcelorMittalcombinesitslaserweldingactivitywithNobleInternational,NorthAmerica’slargestproduceroflaser-weldedsteelproducts.

AfterthedecisionoftheComissãodeValoresMobiliáriosonSeptember25,ArcelorMittalannouncesthefilingofarequestforregistrationwithrespecttoapublicofferforallremainingoutstandingsharesinArcelorBrasilthatarenotyetownedbyArcelororanyotheraffiliateofArcelorMittal.

December 2006ArcelorMittalsellstheThüringenlongcarbonsteelplanttoGrupoAlfonsoGallardoforanenterprisevalueof€591million,aspartofMittalSteel’scommitmentstotheEuropeanCommission,resultingfromthemergerwithArcelor.

ArcelorMittalandtheGovernmentofLiberiaconcludethereviewoftheMiningDevelopmentAgreement.Withthisagreement,whichgivesaccesstoanironoremineyielding15milliontonnesayear,theLiberianGovernmentandArcelorMittalwillbepartnersinjumpstartingeconomicrecoveryanddevelopmentforLiberia.The€800millioninvestmentwillbringaround3,500directjobsand15,000to20,000indirectjobs.

ArcelorMittalsellstheItalianlongcarbonsteelproductionTravieProfilatidiPallanzenoandSanZenoAcciaitoDufercofor€117million,aspartofMittalSteel’scommitmenttotheEuropeanCommission.

ArcelorMittalacquiresSicartsa,theleadingMexicanlongsteelproducer.Sicartsaisafullyintegratedproduceroflongsteelwithanannualproductioncapacityofabout2.7milliontonnes,andwithproductionfacilitiesinMexicoandTexas.ThiscombinationofSicartsawithMittalSteelLázaroCárdenasleadstothecreationofMexico’slargeststeelproducerwithanannualcapacityof6.7milliontonnes.

ArcelorMittalsignsaMemorandumofUnderstandingforthegreenfieldprojectinOrissa,India.TheaimistosetupsteelmakingoperationsintheKeonijharDistrict.Theintegratedsteelplantshouldhaveatotalannualcapacityof12milliontonnes.Thiswillincludecaptiveminingfacilities,captivepowersupply,watersupplyinfrastructureandotherfacilitiesincludingsettinguptownshipsforemployees.

ThefirstslabinthenewcontinuouscasterinDabrovahasbeenproducedandrepresentsakeystepofthesuccessfulrestructuringofArcelorMittalPoland.Otherprojectshadbeenachievedearlier,suchasthereliningofablastfurnaceinSeptember2006,thecommissioningofthenewcolourcoatinglineinHutaFlorina.Thestart-upofanewhotstripmillinKrakowisforeseeninthefirsthalfof2007.

Recent EventsArcelorMittalsignedvariousagreementswiththestateofSenegalinWestAfrica,todevelopironoreminingintheFalemeregionofSouthEastSenegal.Withanexpectedinvestmentofapproximately€1.75billion,theprojectwillencompassthedevelopmentofthemine,thebuildingofanewportnearDakarandthedevelopmentofabout750kmofrailinfrastructure.Themineshouldstartproductionin2011.


Stock market informationFollowingtheofferofMittalSteelonArcelor,MittalSteelownsaround94%ofArcelor’sshares.

Arcelorshares,whicharestillonthemarket,arelistedonthestockexchangesofLuxembourg,EuronextBrussels,EuronextParis,aswellasontheSpanishstockexchangesofMadrid,Barcelona,BilbaoandValencia.

Therule-144AADR(AmericanDepositaryReceipt)programme,operationalintheUSA,withBankofNewYorkascustodianbank,endedon27November2006.

Information on Equity Capital of Arcelor S.A.

Ownershipstructure Numberofsecurities %ofcapital %ofvotingrightsFreefloat 539,933,861 84.39% 87.09%Treasurystock11 19,771,296 3.09% 0.00%Luxembourgstate 35,967,997 5.62% 5.80%J.M.A.C.B.V.(Aristrain) 22,730,890 3.55% 3.67%Walloniaregion 15,351,973 2.40% 2.48%Flandersregion 0 0.00% 0.00%Employees 6,018,310 0.94% 1.0%

Total 639,774,327 100% 100%

Average Highest Lowest Averagedaily Averagedaily closingprice closingprice closingprice tradingvolume tradingvolume (shares) (thousandsofeuros)

September2005 18.54 19.46 17.79 4,018,695 74,512October2005 19.12 19.93 18.25 4,785,108 91,505November2005 20.25 20.64 19.76 4,085,483 82,742December2005 20.94 21.27 20.55 2,638,738 55,266January2006 22.61 29.75 20.86 8,289,584 187,431February2006 30.12 31.31 29.23 6,590,458 198,478March2006 31.89 33.05 31.09 5,110,348 162,967April2006 33.24 34.11 32.50 4,573,077 151,989May2006 33.91 35.76 32.00 9,599,303 325,499June2006 34.66 37.80 32.10 10,148,209 351,686July2006 38.89 43.00 35.29 5,793,457 225,321August2006 40.83 42.00 40.50 1,259,704 51,439September2006 40.62 40.99 40.45 189,565 7,700October2006 41.60 43.55 40.60 273,434 11,375November2006 42.97 43.76 42.56 210,670 9,053December2006 43.29 43.77 43.01 92,627 4,009January2007 44.02 46.05 43.05 153,555 6,759February2007 49.17 52.65 46.75 445,290 21,896

Ownership Structure (Position at 31/12/2005)

Ownershipstructure Numberofsecurities %ofcapital %ofvotingrightsMittalSteel 631,226,643 94.24% 94.26%Freefloat 38,429,505 5.74% 5.74%Treasurystock11 157,260 0.02%

Total 669,813,408 100% 100%

Ownership Structure (Position at 31/12/2006)

Share Price Performance

11 Luxembourg commercial company law states that only shares owned by the company itself and by direct subsidiaries should be taken into account in calculating compliance with the 10% limit on ownership of the company’s own capital. Own shares held by indirect subsidiaries are not taken into account in this calculation. Voting rights on shares held as treasury stock are suspended.

�0 ArcelorAnnualReport2006

IndexesThegraphshowsArcelorsharepriceperformancefrom1stSeptember2005toFebruary2007.On27January2006,Arcelor’ssharesrosesignificantlyfollowingtheannouncementofapublictenderofferbyMittalSteelforArcelor’sshares.MittalSteel’sofferwasrecommendedbyArcelorBoardofDirectorson25June2006.

Other securities providing access to capitalOn14November2006,ArcelorannouncedtheearlyredemptionofArcelor’s3%2017bondsconvertibleand/orexchangeableintonewand/orexistingArcelorshares(the“O.C.E.A.N.E.”),sincethenumberofoutstandingO.C.E.A.N.E.islessthan10%oftheoriginalnumberofO.C.E.A.N.E.issued.Thisearlyredemptionwascompletedon15December2006inaccordancewiththetermsandconditionsoftheO.C.E.A.N.E.setforthintheprospectusapprovedbytheLuxembourgCommissiondeSurveillanceduSecteurFinancieron28June2002,atapriceincashequaltotheprincipalamountoftheO.C.E.A.N.E.plustheinterestamountingto€0.27055perO.C.E.A.N.E.,remainingtobepaidbetweenthelastinterestpaymentdateandtheactualearlyredemptiondateof15December2006.

Investor Relations Contacts

+352 4792 2414 [email protected]

2005 2006Highestprice(€) 21.27 43.77Lowestprice(€) 15.12 20.86Averageduringtheperiod(€) 17.97 36.22Period-endshareprice(€) 20.95 43.10Period-endnumberofshares 639,774,327 669,813,408Period-endmarketcapitalisation(€m) 11,497 28,869Averagedailytradingvolumeduringtheperiod(shares) 4,137,036 4,328,890Earningpershare(€) 6.26 4.71

Annual share price information 2005–2006

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ArcelorAnnualReport2006 �1

Consolidated Group Management Report

�� ArcelorAnnualReport2006

Arcelor has continued its process of growth and consolidation throughout 2006. The company strengthened its position as the global leader in the steel industry. With the growth in world demand for increasingly high-performance steels, Arcelor has established itself as the leading high-quality steel supplier, offering innovative steel solutions, to its main markets, namely automobile, construction and household goods.



TheglobaleconomyrecordedstrongGDPgrowthin2006,at3.9%inrealterms;overtheprecedingdecade,thiswasbetteredonlyin2000and2004.ThisstrongperformancewasduetoarecoveryinEuroareagrowthafterfiveyearsofstubbornlyslowgrowthandacontinuationoftheboomtimesinemergingmarkets.TheUSbegantoslowdowninthesecondhalfof2006asmonetarypolicytighteningtookeffect,yetGDPgrowthat4%remainedstrong.

Highoilpricescontinuedtobenefitthemajoroil-exportingcountriesoftheCommonwealthofIndependentStates(CIS)andtheMiddleEast,whilehighcommoditypricessupportedgrowthinbothAfricaandLatinAmerica.EasternEuropebenefitedfromtherecoveryintheEuroareathroughincreasedexports;ChinaandIndiacontinuedtounderpinstrongGDPgrowthinemergingAsiaofaround7.5%in2006.

2006wasalsoayearofstrongmanufacturingoutput,withglobalgrowthof4.5%,thebestsince2000,buoyedbyincreasedinvestmentandglobaltrade.Outputhasbeenparticularlystronginthematureeconomies.Germanysawa6%growthinindustrialproduction,anddoubledigitgrowthwasrecordedinthelargereasternEuropeancountries.Chinaledtheworld,withmanufacturinggrowtharound20%in2006.

Globalmonetarytighteningbegantowardstheendof2006,inresponsetohistoricallyhighgloballiquidityandapick-upininflation.However,averaging3.2%intheUSand2.1%intheEU,inflationcontinuedtoberelativelysubduedinpartduetoemergingAsianeconomiescontinuingtoexertdownwardpressureonpricesandconsumergoodsinparticular.

ThedollaraveragedUS$1.26:€1in2006weigheddownbyconcernsovertheUScurrentaccountdeficit.Towardstheendoftheyear,theUSdollarhadfallentoalowofUS$1.33:€1astheUSledtheglobalslowdownandinterestratedifferentialsmovedagainstthecurrency.

In2006,worldcrudesteelproductiontotalledabout1,240milliontonnes,anincreaseof8.6%comparedto2005.Regionaltrendscontrastedsharply;

mostofthisgrowthcamefromChinesesteelmakers,whichincreasedproductionby17.7%to419milliontonnes.Asaresult,Chinaaccountedfor33.7%oftheworldtotalproductionasopposedto31%in2005.Asiaproducesmorethanhalfoftheworld’ssteel(53.7%).

In2006,worldsteeldemandwasstrongindevelopingcountries.Steeldemandwassupportedbystrongeconomicgrowth,continuousgrowthincapitalspendingandarisingreplenishmentofstocksintheUSandEuropeanmarkets.

Businessconditionshavebeenmoresupportiveofinvestment.Capitalspending(+6%year-on-yearonagloballevel)hasbeenamajorengineofworldgrowth,largelyowingtogrowthindevelopingcountries.Highrawmaterialandenergyrevenueshavealloweddevelopingeconomies,beinglargesuppliersofthesecommodities,tofinancelargeinfrastructureprojects,commercialbuildingsandindustrialdevelopment.CapitalspendinggrowthinCISreached8.9%,13%inChina,7.8%inIndiaand9.7%inLatinAmerica.

Therehasbeenaclearaccelerationofapparentsteelconsumptionin2006inallmainregions.Investmentgrowthhasprovidedaboostforthemanufacturingsector.Thisupsurgeinactivity,strongerordersandhigherconfidenceintheindustry(inmatureeconomies)havesupportedrobuststeeldemandduring2006.

Fromtheperspectiveofthesteelusingindustries,theyear2006hasbeenverysolid.Steeldemandhasbeendrivenbydemandinmachinery,metalgoodsandtransportequipment.Furthermore,therisingstrengthofbuildingandinfrastructureinvestmenthastranslatedintohighdemandforconstructionsteels.Withtheworldeconomygrowing,allsteelconsumingsectorshavegrownsignificantly,albeitatdifferentratesindifferentregions.

ImportcompetitionhasdramaticallyincreasedintheUSandEuropeanmarkets.InEU25,theimportpenetrationratio(Imports/Marketsupply)reacheditshighestlevelinQ3-2006(over19%).Thisisduetoamassiveincreaseinimports–upbyabout50%–muchofitcomingfromChina.

IntheUS,importshavehistoricallyplayedalargerrolethanintheEU.Finishedsteelimports(33mt)wereasstrongasthosefromAsia,withChineseimportsrisinganimpressive133%tobecomethe2ndlargestimporterafterCanada.

In2006,thesteelindustryexperiencedtheinitialeffectsofconsolidation.Moredisciplinehascontributedtoastrongreductioninsupplythankstoapro-activeproductioncutbyamoreconsolidatedindustryintheUSandinEurope.TheamplitudeofthesteelstockcycleintheUSandEU15islookinglessdramaticcomparedwiththehugeoverstockingof2004andthesharpdestockingof2005.Anumberoffactorsarecontributingtothis:

• RobustglobalGDPandindustrial productiongrowthenvironment;• Growingsteeldemandinmaturemarkets aswellasboomingemergingcountries;• Increasinguseofadvancedtechnologies insteelproducts;• Moreservicesprovidedtotheclients (distributionnetwork/just-in-time deliveries,R&D,specificsteelsolutions);• Greaterwidespreaduseof annualcontractswithinherently lesspricevariation;• Moredisciplineduetosteel marketconsolidation (productioncutswhennecessary).

Economic Environment A strong global economy drives growth in the steel business, as the industry moves towards greater consolidation.

Economic Environment

ArcelorAnnualReport2006 ��

In 2006, world steel demand was strong in developing countries. Steel demand was supported by strong economic growth, continuous growth in capital spending and a rising replenishment of stocks in the US and European markets.


Arcelorhascontinueditsprocessofgrowthandconsolidationthroughout2006.Thecompanystrengtheneditspositionasthegloballeaderinthesteelindustry.Inthecontextofrisingworlddemandforincreasinglyhigh-performancesteels,Arcelorhasestablisheditselfastheleadinghigh-qualitysteelsupplier,offeringinnovativesteelsolutionstoitsmainmarkets,namelyautomobile,constructionandhouseholdgoods.

Inparticular,theGrouphasbolstereditspositionsinflatcarbonandautomotivesteel.In2006,thesectorexperiencedhighlevelsofactivity,whichgaveroomforapositivepriceevolutionthroughouttheyear.StrongdemandforsteelalsocamefromEasternEurope.MajorinvestmentscommissionedinEurope,includedadaptationofproductioncapacities,reorganisationofproductionlinesreducingproductioncostsaswellasimprovementsofproductionflowsincreasingproductivity.

TheGrouphassuccessfullycapturednewsourcesofgrowthinNorthandSouthAmericaandChina.AfterthefullintegrationofBrazil’sCSTin2005,thecompany’sexpansionprojectto7.5milliontonneswaslaunchedduringtheyear.Designoutputcapacitywillbereachedduring2007.Theprojectalsoincludesalargecokecomplex,anewblastfurnace,newsteelmakingandcontinuouscastingcapacityaswellasimprovementsininfrastructure.

FurtherinvestmentsareplannedtoexpanddownstreamcapacityinBrazil,includinghotstripmillcapacity,finishingandcoatingcapacityatVegadoSul.Withtheacquisitioninearly2006oftheCanadiansteelmakerDofasco,oneofthemostefficientandbestlocatedsteelmakersintheNAFTAregion,ArcelorhasdecisivelystrengtheneditsindustrialpresenceinNorthAmericaandconfirmsitspositionasundisputedleaderintheautomotivesteelsheetmarket.

Arcelor’slongsteelproductssegmentoffersthebroadestproductmixinthemarketplace.InEurope,thesectorhasasolidindustrialbasefromwhichitsuppliescustomerswithhigh-qualitysteel.SalesfromArcelorLongCarbonsteelactivityincreasedin2006.Profitsgrewonthebackofexpandedvolumesandhigherprices.TogetherwithArcelorBrasil,LatinAmerica’slargeststeelcompany,combiningtheGroup’sbusinessesinBrazilandArgentina,thesectorgeneratedstrongandsustainablemarginsin2006.

InNorthAfrica,ArcelordevelopeditspositionbyacquiringamajorityshareinSonasidinMorocco,thusanticipatingthestronggrowthoftheconstructionmarketexpectedinthisregion.InalignmentwiththeGroup’slong-termgrowthstrategy,Arceloracquireda38.41%stakeinLaiwuSteelCorporation,China’slargestproducerofsectionsandbeams.ThroughArcelor’soperationalexcellence,Laiwuwillbenefitfromtechnologyandinnovation,ofpowerfulsourcingandfromArcelor’sextensiveglobalcommercialnetwork.ThispartnershipisstilltobeapprovedbytheBeijingauthorities.

IntheWire-drawingsector,theGroupwillpursueitsstrategyofconsolidationthathasstartedinEuropeandfocusongrowthinAsia,withprojectsthatreinforceitspositionasaglobalsolutionproviderwithsuperiorR&Dandinnovation.

Recoveryindemandforstainlesssteelwasextremelystrongin2006,withworldwideconsumptionrisingstronglydespiteasurgingnickelprice.DemandwasparticularlyfirminEurope,theUSandBrazil,whichledtopricerisesoverthefirstninemonthsoftheyear.Supplyremainedtight,despiteastrongriseinChineseoutput.InFebruary2006,ArcelorinauguratedCarinox,thenewsteelworksatCharleroi,Belgium.

Thenewstainlesssteelplant,whichrepresentsaninvestmentofatotalof€241million,hasaproductioncapacityof1milliontonnesperyear.InBrazil,bothdemandandbasepriceincreasedinthedomesticmarket,duetogrowingindustrialactivityandverygoodmarketconditions.Thankstothehighlevelsinconsumption,Acesitawasabletoraiseitsmarketshareinitshomemarkets.InIndia,ArcelorStainless,inauguratedinIndia,theinstallationsofIUPJindalMetals&AlloysLtd,ajoint-venturecompanybetweenJindalSawLimitedandArcelor’sownedsubsidiaryIUP(ImphyUginePrecision).Thisnewplant,withworksatBahadurgarh,Haryana,India,hasacapacityofaround1,500tonnespermonthandisdedicatedtoprecisionrollingofstainlesssteelandalloystrips.TherapidgrowthoftheIndianmarketmakesthisanimportantmilestoneforArcelor’sstainlessactivities.

ForAM3S,marketconditionswerefavourableinmostofitsmarketsin2006,withtheexceptionofSouthernEurope,whichsufferedincreasedpenetrationbyAsianimportsinthesecondhalfoftheyear.Arcelor’spositioninworldwidesteeldistributionisuniqueinthesteelindustry.Itsoperationsspanaworldwidenetworkofdistributioncentres,steelservicecentres,constructionandfoundationsolutionsforinfrastructureprojects.Asacustomer-focusedorganisation,thedistributionandtransformationsectorisorganisedthroughitsstockholdingnetworktofosteravailabilityandshortleadtimedeliveriestoallitsclients.Itdeliverstoallmarkets:automotiveandmechanicalindustries,constructionandcivilworks,andstockists.

Manyinitiativestakenin2006ledtoimprovetheGroup’spositioninitsmarketsthroughcustomer-focusedbrandingandorganisation.Capitalexpenditureofover€100millionwasexpendedongrowthprojects,onproductivityandsafetymeasures.InvestmentswerechoseninaccordancewiththeGroup’sstrategytoanticipatecustomerdevelopmentsandtocreategrowthopportunities.

The different activities are presented in accordance with the way the business is managed internally by Arcelor Mittal. The comparative figures for 2005 have been restated accordingly.

Commentary on 2006

AM3SacquiredthemajorityofDevillersandlifteditsstakeintheAllianceMetalGroup.SteelServiceCentres,previouslyoperatedbytheFlatCarbonbusinessinGermanyandItaly,wereintegrated.AsixthservicecentrewasacquiredinCasablanca,Morocco.

Revenue and EarningsConsolidated Group revenues were€40,611millionin2006,upfrom€32,611millionin2005,anincreaseof24.5%or14.5%atcomparablescope.Themainscopeinclusionsduringtheyearwere:Dofasco(10months,+€2.9billion),Acesitawhichwasfullyconsolidatedfor12monthsin2006(3monthsonlyin2005:+€0.9billion)andSonasid(7months,+€0.3billion).ThemainscopeexitswereUgitech(-€0.3billion),theSpanishLongCarbonSteelentitiestogetherknownas“Corrugados”(-€0.4billion)andvariousdisposalswithinAM3S(totaleffect:-€0.4billion).Also,year-on-year,shipmentsincreased20.9%or10.4%atcomparablescope.

Group consolidated EBITDAwas€5,903millionin2006,upfrom€5,682million,anincreaseof3.9%.Theaforementionedacquisitionsanddisposaladdedanet€0.4billiontoEBITDArelativeto2005.Renewedincreasesinrawmaterialcosts(ironcore,cokingcoal,zincetc.)werethemaindriversofthe1.9%reductioninEBITDAmarginatcomparablescope.

Group consolidated EBITwas€4,454millionin2006,upfrom€4,417millionin2005,anincreaseof0.8%.

Netfinancingcostsamountedto€696millionin2006,upfrom€254millionin2005.Thisincludesaone-timebreak-upfeeof€140millionpayabletoSeverstalaswellasa€295millionchargerelatingtotherestatementtofairvalueoftheequityconversionoptionoftheO.C.E.A.N.E.2017debentureloan.

Equityincomeamountedto€363million,upfrom€317millionin2005.ThelossofequityincomeduetothefullconsolidationofAcesitain2006wasoffsetbyanincreasedcontributionfromDHS.


Group key figuresIn million euros 2006 2005(*)Revenue 40,611 32,611EBITDA 5,903 5,682EBIT 4,454 4,417NetProfit 3,007 3,873Earningspershare(ineuros) 4.71 6.31

(*) restated


Afterataxchargeof€462millionandminorityinterestof€652million,consolidatednetprofitwas€3,007million,downfrom€3,873millionin2005.

Thetaxchargeof€462milliongivesaneffectivetaxrateof11.2%.Thecurrenttaxchargeof€605millionwasreducedbydeferredtaxincomeof€143million.ThisdeferredtaxincomeresultedfromtheusageoftaxlossesassessedannuallyonthebasisofthepositiveoutlookincludedintheGroup’sbusinessplan,inaccordancewithIFRS.

Net DebtTheGroup’snetdebtincreasedby€3,453millionin2006,from€1,257millionat31December2005to€4,710mat31December2006.

ThisincreasewasmainlycausedbyfinancingrequirementsarisingfromtheacquisitionsofDofascoandSonasidandasignificantyear-on-yearincreaseindividendpayment,OperatingCashFlowandCapexbothhavingdisplayedsmalleryear-on-yearmovements.

Gearing(netdebtasaproportionofshareholders’equityincludingminorityinterests)was21%at31December2006against7%ayearearlier.Thisislowerthanthecycle-averagetargetof35-50%.

Capital expenditureArcelor’scapitalexpenditurewas€2,269millionin2006,anincreaseof12%relativeto2005.

CapitalexpenditureinFlat Carbon Steelstotalled€1,541million.Thereof€646millionwasspentinSouthAmericain2006including€243millionforthenewSOLcokingplant.CoqueriaTuberãoisownedbyCST(62%),BelgoMineira(73%)andSunCoal&CokeCompany(1%).TheinvestmentsinCSTfor€394millionincludetheexpendituresfortheextensionofitssteelplanttoreachanannualproductionof7.5million.

ThetotalspentinFranceof€390millionincludes€234millionspentinArcelorAtlantiqueandLorraineforthereliningoftheBlastfurnaceNr3,therevampingandtransformationofthefirstcontinuouscastinglineandtherebuildofanewRH(vacuumtreatment)amongstothers.TheinvestmentsinArcelorMéditerrannéeof€140millionwereprincipallyspentforthereliningoftheBlastfurnaceNr1andtheinjectionofPulverizedCoal.

InSpain,thecapitalexpenditureamountsto€102millionresultingmainlyfromsmallerinvestmentsaimingtomaintainthefacilitiesortoreducecosts.

InLong Carbon Steel,capitalinvestmentsamountto€452million.Thereof€267millionwasspentinEuropeand€185millioninSouthAmerica.

InLuxembourg,€96millionwasspent,ofwhich€20millionresultsfromtherevampingoftheGreymillinDifferdangeandthemodernisationoftherollingmillinRodange.

InSpaintheZaragozaplantmovetooutsidethecityledtocapitalexpendituresofalmost€63million.ForthenewRebarandmerchantmillinPolandabout€20millionwasexpended.

InBrazil,€82millionwasspentbyBelgoforamanysmallcostsavingsandmaintenanceprojects.€19millionwasspentonmaintainingtheeucalyptusforests.AcindarinArgentinaspent€56millionmainlyonitsexpansionproject.

CapexinStainless and Alloyswas€147million.In2006,about€56millionwasspentontheCarinoxprojectduringitsramp-upphase.TheincreaseofcapacityofelectricalsteelinAcesitaandmaintenanceoftheeucalyptustreesconstitutethemajorpartof€59millionspentin2006inBrazil.

In2006,AM3SCapitalexpenditureamountedto€96million.ThenewEuropeanlogisticscentre,situatedinLuxembourgcomprising17hallsforlongproductsrepresents€18millionin2006.ForaninvestmentinanewsheetpilecoldrollingmillinMalaysiaabout€5millionwasspent.

IntheUSA,Skylinespent€6milliononbuildinganewplantforproducinglargefoundationtubes.

CapexinArcelor’sOther activitiestotalled€33million.

Investmentsinimprovingquality,enhancingstaffsafety,environmentalprotection,aswellasdevelopmentandadaptingequipments,werealsomadeacrosstheGroup.

Acquisition of intangible fixed assets:Expenditureofintangiblefixedassetsin2006totalled€29million,consistingmainlyofpurchasesoflicences,patentsandsimilarrights.

Revenues by geographic zoneRevenuesinSouthAmericafellslightly.RevenuesinNorthAmericaaccountedfor15%ofthetotalrevenuesin2006,asopposedwith9%in2005.TheacquisitionofDofascohelpedboostrevenuesinNorthAmerica.

WorkforceTheGrouphad103,935employeesat31December2006asopposedto97,695attheendofDecember2005.

TheacquisitionofDofascoinMarch2006byArcelorledtoanincreaseinthenumberofemployeesby11,516personsintheFlatCarbonAmericassegment.ThesegmentwiththelargernumberofemployeesisFlatCarbonEurope,representing38%ofthetotalnumberofemployeesworkinginArcelor.

Arcelor’sNorthAmericaworkforcenowaccountsfor12%oftheGroup’sheadcount.

continued

Commentary on 2006


Capital expenditure by segment (***)In million euros 2006 2005 % of totalFlatCarbonSteels 1,541 1,391 68%LongCarbonSteels 452 334 20%StainlessSteelsandAlloys 147 180 6%AM3S 96 86 4%Otherbusinesses 33 49 1%TOTAL 2,269 2,040 100%

Capital expenditure by geographic zone (***)In million euros 2006Belgium 172France 485Spain 255Brazil 836Luxembourg 133Germany 51Other 337TOTAL 2,269

Breakdown of consolidated workforce by sectorHeadcount 2006 2005 ChangeFlatCarbonAmericas 16,366 4,790 +11,576FlatCarbonEurope 39,970 44,413 -4,443LongCarbonAmericasandEurope 21,148 20,248 +900Africa,Asia,CIS 906 - +906Stainless 11,790 13,908 -2,118ArcelorSteelSolutionsandServices(AM3S) 10,559 11,207 -648Otheractivities 3,196 3,129 +67TOTAL 103,935 97,695 +6,240

Breakdown of consolidated workforce by geographic zoneHeadcount 2006 % 2005 %EuropeanUnion(EU25) 69,335 67 76,221 78NorthAmerica(****) 12,346 12 1,118 1SouthAmerica 20,920 20 20,018 21Other 1,334 1 338 0TOTAL 103,935 100 97,695 100

(*) Restated. (**) Including minority interests. (***) Excl. intangible fixed assets. (****) Including Mexico.

Breakdown of revenues by geographic zone In million euros 2006 % 2005 (*) %EuropeanUnion(EU25) 25,936 64 23,228 71NorthAmerica(****) 5,958 15 2,955 9SouthAmerica 5,111 12 3,530 11Other 3,606 9 2,898 9TOTAL 40,611 100 32,611 100

Net debt and gearingIn million euros 2006 2005 (*) Shareholders’equity(**) 22,086 17,430Netdebt 4,710 1,391Netdebt/shareholders’equity 21% 8%

Arcelor’s crude steel production increased from 46.7 million tonnes in 2005 to 53.5 million tonnes in 2006. During the same period, Arcelor generated revenues of €40.6 billion, and an after tax group share of the net result of €3 billion. The company recorded capital expenditure of €2.3 billion, compared with €2.1 billion in 2005.

Business Segment Review

53.5million tonnesCrudesteelproductionforArcelorin2006.

TheperformanceofactivitiesstatedandtherelatedfinancialfiguresareforArcelorstandalone–exceptwhenmentionedotherwise.


Fromastructuralpointofview,thefirstpriorityin2006wastosetupauniquecommercialorganisation,applyingacommoncommercialpolicyacrossallofEurope.Thiswasachievedtowardstheendoftheyear.Asafirststep,separateorganisationscontinuetoexistinWesternandEasternEuropewithintensiveexchangesbetweentheminordertoaligntheoperationalperformancesacrossthevariousplants.

Flat Carbon Steel EuropeGeneral market conditions

In2006,mostmarketparticipants,especiallyinSouthernEurope,facedstrongpressurefromthenewChinesecapacity.Thispredominantlygenerateda“waitandsee”behaviouramongststeelbuyersduringthewholeperiod.Thehighlevelofactivitygaveroomforpositivepriceevolutionthroughout2006.StrongdemandforsteelalsocamefromEasternEurope.

Rawmaterialpricesincreasedsteadily,especiallyforironoreandzinc.Incoatedproducts,Arcelorhastransferredtheboomingpriceofzinctothemarketthankstopricelistcorrections.

Intheautomotiveindustry,theEuropeanlightvehiclemarketshowedcontinuousgrowth,(+1.2%in2006),whichcamemostlyfromEasternEurope.ThehouseholdappliancesmarketshowedanoverallactivityincreaseinEurope,withstrongdynamismparticularlyinEasternEurope.Theconstructionmarketgrewabout6%acrossEuropeandtheheavyplatesmarketalsoexperiencedstronggrowth,drivenbywindpowerapplicationsinWesternEuropeandbyconstructioninEasternEuropeandTurkey.Steelforpackagingapplicationsremainedadifficultmarket.Thedemandforhighgradeelectricalsteel–powergenerationapplications–increasedfollowingthegrowthofautomotiveandappliances.AnimportantoutletforEuropeansteelproductcontinuestobethedistributionmarket.Thismarket,aswellasthemetalprocessingmarket,wasthemostaffectedbytheincreaseofimports.

Arcelor Performance in 2006

InWesternEurope,Arcelor’sflatsteelproductionandtotalshipmentsincreasedsignificantly,eventhoughvolumeswerecutintentionallyduringthesecondandthirdquartersinordertoadjustsupplytoanegativeapparentconsumptiontrend.

Shipmentvolumein2006(26.1milliontonnes)increasedsubstantially,comparedwith2005(23.9milliontonnes).Allfinishedproductsvolumes,exceptpackaging,werehigherin2006.DuetothehighdemandoftheEuropeanmarket,businessexporthasbeenreducedtotheminimum.Deliveryofindustryandautomotiveproductstoexportcountriesamountedto4.7%in2006,andremainedstableineachquarter.In2005,exportdeliveriestotalled1.5milliontonnes,or6.8%.Long-termcontractsversusquarterlycontractsremainedstable.

Despiteahigherslabsproductionof27.3milliontonnesin2006(+1.2milliontonnesversus2005),theflatcarbonmarketinWesternEuropesupplycouldnotentirelysatisfymarketdemand,duetoaslabsproductionbottleneck.Thislackofmetalresourcewaspartlycompensatedbyinventoryreductions,aswellasbythepurchasingofexternalslabsandhotrolledcoils.

Thecostofenergyincreasedby33%in2006,duetopriceandvolumeincreases.Drivenmorebypriceincreases(forzinc,coalforcokeandironorefines)thanbyvolumes,costofrawmaterialsincreased.Fixedcostsincreasedslightly,mainlyduetoinflationeffects.

Revenuesincreasedaround15%in2006,atcomparablescopewith2005,butduetocostincreases,EBITDAdroppedincomparisontothepreviousyear.Arcelor’stotalcapitalexpenditureinWesternEuropereachedthesamelevelsas2005.

Main operational developments in 2006

TheFlatWestEuropeanproductionsystemisorganisedintoupstreamanddownstreamsegments.Theupstreamsegmentsupplieshotrolledcoiltothedownstreamsegmentwithitscold-rolling,galvanizingandelectro-galvanizing,organiccoatingandtin-platinglines.

FlatCarbonWesternEuropesafetyresultsareexcellentwithafrequencyrateof1.6andaseverityrateof0.16in2006.

Majorinvestmentscommissionedin2006include:

• thereliningoftwoblastfurnaces,inAviles(Spain)

andDunkerque(France);• thecouplingofthepicklingand

coldrollinglinesinMardyck(France)andLiège(Belgium),leadingtoreducedproductioncosts;

• therevampingofacontinuouscasterinDunkerqueattheendoftheyear;

• inFos(France),thecokeplantextensionandinstallationofanewgrinderforPCIandaheavycoileratthehotsteelmill;

• inLiège,theinstallationofanewentrylaserwelderatthepicklinglineno.2,includingafullelectricalrevamping.

Inordertoadaptproductionflows,packagingactivityofMardyck(France)wastransferredtootherpackaginglocationsinEurope,thusoptimisingthesupplychainforcoldrollingandannealingactivitiesbetweenMardyckandMontataire,aspartoftheformerArcelorApolloPlan.ThecoldrollingreversiblemillinBremenwasclosed,whereasthecontinuouscoldrollingmillhasbeenenlarged.

Inthefieldofautomotiveproducts,aMemorandumofUnderstandingwasconcludedwithNobleInternationalCompanyandwillleadtothedivestmentofTailoredBlankactivities.TheArcelorMittalGroupwillkeep40%ofthefuturecompany.

Flat Carbon SteelThe merger of Arcelor and Mittal Steel led to the creation of the business area called “Flat Europe”, by far the largest flat steel producer in Europe, with operations that range from West (Spain) to East (Romania), and covering the flat carbon steel product portfolio in all major countries and markets.



Flat Carbon Steel continued


In2006,severalinitiativeswerelaunchedtoaccelerateprogress,maintainhighcompetitivenessandprepareforfuturesocialandindustrialtrends.IncludedintheseinitiativesistheOTIFprogramme(On-Time-In-Full).Considerableeffortwasdedicatedtotheimprovementofserviceperformanceandon-timedeliverytoclients.Thegoalssetfor2007areevenmoreambitious.

Structuralcost-cuttingprogrammes,improvingproductivityandgeneratingcostreductions,werelaunchedinseveralplants,suchasARCOinAviles(Spain)andZUGinEisenhüttenstadt(Germany).TheFITprogrammeintheBremenplantwassuccessfullycompletedin2006,providingsignificantcostsbenefits.TheFosplantinFrancelaunchedtheACCELproject,andDunkerquestartedtheDK2012projecttoimprovetheirrespectivepositionintermsofcostbenchmarking.

Besidetheseprojectsaimingatpositioningcoststothebest-in-class,allplantswereinvolvedinambitiousmanagementgainsactivitiesatallproductionlevels,generating€359millionsavingsin2006.

TPM(TotalProductiveMaintenance)remainsthemainpillarofthecompany’scontinuousimprovementsystem.AGORAcommunities,nowwellestablished,haveledtothecreationofavibrantnetworkofexperts,exchangingbestpracticesonaveryfrequentbasis.

Throughout2006,demandforplateproductswasextremelyrobustinallmajorsegments,andavailablecapacitywasfullyutilised.

Majorinvestmentsrealisedin2006weretargetedatincreasingthecapacityofhighqualityplates.InGijón,anewAGCwasinstalled.WithArcelorMittal,significantsynergiescanbeachievedthroughleveragingcommonR&Dactivities,benchmarkingoperationsandsellingallspecialproductsthroughauniqueworldwidenetwork.

Flat Carbon Americas InBrazil,amorefavourablepoliticalenvironmentandastrongercommitmenttoinfrastructureinvestmentspushedannualsteelconsumptiongrowthtowardsthe5%level.CSTandVegadoSularealreadyleadingsupplierstosophisticatedSouthAmericanend-users,suchastheautomotivesector,withampleopportunitytoexpandcapacitytomeetgrowingregionaldemand.

During2006,theBrazilianoperationsenjoyedstrongandstablemarkets.ArcelorBrasilachievedrecordoutputwithatotalannualflatsteelproductionincreaseto5.2milliontonnes–up18%ascomparedto2005.Lowerproductionin2005wasmainlyduetoanincident,whichhadoccurredattheCST’sblastfurnace,inthe1sthalfof2005.

Highersalesrevenuesweredrivenbyflatsteelshipments,mainlytohomemarkets.Despiterelativestability,priceshadhighvariancesduringthequarterswithstrongfluctuationsinthedifferentcountries.

OperationalcostsonsalespertonneintheFlatCarbonAmericassegmentwerehigherfortheyearunderreviewduetorawmaterialpriceincreasesforironore,coal,coke,ferroalloys,amongothers.Thiswasalliedtohighermaintenancecosts,whichwereoffsetbyhigherproductivityandmanagementgains,aswellasbylowerfixedcosts,thankstohigherproductionandshipmentsduringtheyear.

ThestartupoftheCST’sexpansionprojectfor7.5milliontonneswaspostponeduntilthesecondquarter2007.TheprojectwillprovideCSTwithalarge,environmentallybenigncokecomplex,anewblastfurnace,newsteelmakingandcontinuouscastingcapacityandancillaryimprovementsininfrastructure.

RelatedinvestmentsareplannedtoexpanddownstreamcapacityinBrazil,boostinghotstripmillcapacity,whilealsosubstantiallyincreasingfinishingandcoatingcapacityatVegadoSul.

InLatinAmerica,thestronglocaldemandforCST’sproductsexperiencedin2006isexpectedtocontinuein2007,withconsumptionlikelytorisefurther.Themarketforslabsisexpectedtomaintainitsmomentum.

DofascoDofasco,theCanadianmarketleaderintermsofqualityandvalue-added,representsamajorcomponentinFlatCarbonAmericasportfolio.AsaresultofMittalSteel’sconsentdecreewiththeUSDepartmentofJustice(followingthemergerwithArcelor),Dofascooperatedunderahold-separatearrangementfromAugust2006.Integrationnowofferstheopportunitytocapturesubstantialsynergies,particularlybetweentheCanadianandUSoperations.ThiswillenabletheCanadianoperationstostrengthentheirpositioninvalue-addedmarketswhilealsodealingwithcostpressuresgeneratedbyastrongCanadiandollar.



ThemainmarketistheEU,and2006witnessedstrongeconomicgrowth,especiallyintheconstructionindustry,leadingtohigherdemandforproducts.Duetogoodinfrastructureactivities,sellingpriceshaveincreasedsubstantiallyforbeamsandmerchantbars.Theincreaseinscrappriceswerepassedontothecustomersaspricesinmajormarketscoupledwithascrapsurcharge.

Europeanshipmentsofsheetpilesandrailswerestrong.SignificantinvestmentsarebeingmadeintheEuropeanrailwayinfrastructure,whichhasbeenlackinginthelast10years.Demandforbeams,wirerodandbarswasalsostrong.Highqualitywirerodsandbarsforautomotiveandengineeringindustryhavemaintainedstableprices.

InEurope,salesfromArcelorLongCarbonsteelactivityandEBITDAincreasedin2006.Profitsgrewonthebackofexpandedvolumesandhigherprices,partlyoffsetbyincreasesinscrapandotherinputprices.Thebusinessincreaseditsresultsthankstostrongsalespricesandtotheapplicationofthescrapsurchargepolicy,allowingsalespricestoatleastfollowthescrappriceevolution.

Excludingthenon-recurrentresultsonthegainofthesaleofCorrugadosin2005,EBITDAforArcelorLongCarbonsteelactivitiesinEuropewasevenhighercomparedto2005.Thiswasmainlydrivenbypositivevolumeeffectwithhighermarginsoverfactorcosts,managementgainsthroughimprovementsinproductivityandreductionsinenergyconsumption.

In2006,scrapcostsforEuropehaveonaverageconsiderablyincreased,comparedto2005.

Sections

EconomicactivitycontinuedtodevelopinmostpartsoftheworldandmorespecificallyinAsia.

ArcelorCommercialSectionsisactiveonaworldwidebasisthroughitsownEuropeansalesagenciesandreliesontheArcelorInternationalnetworkforexportbusiness.

Comparedto2005,shipmentsincreasedby14%.Attheendof2005,stockvolumesinmostEuropeancountrieshadreturnedtonormallevelsandrealconsumptionhadpickedupsincethestartoftheyear,continuingatastrongpacethroughout2006.Thesituationwascomparableinallmajorexportmarkets,whereprojectactivityexperiencedparticularlyhighgrowth(NorthAmericaandtheMiddleEast).

ArcelorMittalsalespolicyandnetworkintegrationstartedimmediatelyafterthemergerinthesecondhalfof2006,resultingina“onefacetothecustomer”salesorganisation.

Rebars

2006beganwithlowstocksonthecustomerside,butwithpricesnotfarabovecostlevel.Worldwiderebarconsumptionremainedgoodthroughouttheyear.Duringsecondhalfof2006,rebardemandinEU5dropped,duetohighpricesandincreasingimportvolumesaddingfurtherpressureonthesalesprices.

Wire Rods

Wirerodsmarketexperiencedrecoveryindemand.Thisrecoverywasstrongerduringthefirsthalfoftheyear,slowingdownslightlyduringthesecondhalfof2006.

Sheet Piles

Thesheetpilesmarketwasgoodin2006.Comparedto2005,resultshavestronglyincreasedduemainlytoincreaseinsales,despitepricepressureinallmarkets.NumerousprojectsareindiscussionandfurtherbookingprospectsforEuropeandforexportmarketsremaingood.

Merchant Bars

AllEuropeanmerchantbarsproducersregisteredstrongerbookingsduringthesecondhalfof2006.ImportscomingfromTurkeyandChinaarestillaffectingEuropeancoremarkets.

Rails

Marketdynamicsinrailsarepositive.2006resultsturnedouttobehigherthanthoseof2005duetosalesandpriceincreases.

Outlook

InEurope,thereiscontinuingstrongdemandinmanymarketsectors.Inrailsandspecialprofiles,priceshavestrengthenedandtheoutlookisgood.Therearegoodlevelsofactivityinsheetpilesandsections,andafirminginpricesforrebar.TherearesignsthatwirerodmeshpriceshavebottomedoutfollowingfallssinceOctober2006.

Long Carbon SteelThe Long Products new division of Arcelor Mittal operates in Europe, CIS, Asia, Africa and in America, enjoying a particularly strong footprint in the growing markets of Eastern Europe and South America. It offers the broadest product mix in the market place. Production consists of blooms and billets, bars and rebars, wire rod and wire products, beams, angles, channels, sheet piles and rails.



Long Carbon Steel continued


Long Carbon South AmericaPerformance in 2006

GDPgrowthinBrazilisexpectedtobearound3.7%for2006,averytimidgrowthcomparedtootherdevelopingcountries.Thecivilconstructionsectorhadabetterperformancewithagrowthrateofover5%,ensuringagooddemandforlongproducts.

LongCarbonactivitywascharacterisedbyhighershipmentsintheexportmarket,withlowermargins.Volumesreachedrecordhighs,withcrudesteelproductionreaching4.9milliontonnes,theGroupalltimerecord,and7%higherthan2005.Productionofrolledproductsreached4.8milliontonnes,alsoarecordand11%higherthan2005.ProductionwasdrivenbystrongdemandinthedomesticmarketsofBrazilandArgentina,especiallyfromthecivilconstructionsector.Othersectorssuchasindustrial,automotiveandagriculturealsodemonstratedahealthylevelofdemand.ThenewentitiesacquiredinCostaRicaadded190,000tonnes.

AnotherrecordwasthevolumeofexportsfromBrazil,whichreached1.5milliontonnes.AsaresultofthestrongdemandinthedomesticmarketinArgentina,Acindarsalesinthedomesticmarketincreasedsubstantially.

ResultsoftheLongCarbonSteelactivitywereaffectedbyapricecostsqueezeandlowersellingprices.EBITDAwashigherduetoalargervolumeofshipments,betterpriceswhenmeasuredindollarterms,managementgains,andtootherfactorsthatincludethenon-recurrentimpactofthesaleofAcindar’stubebusiness.

Outlook

InSouthAmericathedomesticmarketdemandremainsgenerallystrong.Acindarhasimplementedapriceincreasethatwilltakefulleffectfromthesecondquarterof2007.

Wire DrawingArcelorisagloballeaderforwiredrawing,andoffersadiversifiedrangeofproducts.OurstrategyistopursuetheconsolidationthathasstartedinEuropeandtogrowinAsia,focusingonprojectsthatreinforceourpositionasaglobalsolutionproviderwithsuperiorR&Dandinnovationcapability.


Pricepressuresledmanyofthewiredrawingoperationstoprioritisemarginsovervolumein2006.DemandforsteelcordcontinuedtoshiftfrombothWesternEuropeandNorthAmericatoCentralEuropeandAsiawheretireproductionexpands.

Concretereinforcementfibersbenefitedin2006fromthehighlevelofactivityinconstruction.MarketpricesforPVCcoatedfencewerelowerthaninthepreviousyearbecauseofChineseimportsandseverecompetitioninthedo-it-yourselfsector.Demandonindustrialwiresremainedgood,thoughthepricescouldsuffersignificantcuts.

EBITDAwasimpactedbyrawmaterialspriceincreases,mostlyzincforLowCarbon.

In2006,WireDrawingactivityinSouthAmericapursueditsgrowth,facinghowevermoreimportsfromAsia.

Outlook

Whiledemandremainsgood,theshort-termoutlookisforcontinuedmarginpressure.


Stainless Steel Arcelor, now Arcelor Mittal, is a world leader in Stainless steel and Nickel alloys.


General Market Conditions

In2006,therewasamarkedrecoveryindemandforstainlesssteel,withworldwideconsumptionrisingby9.6%,despiteasurgingnickelprice.DemandwasespeciallyfirminEurope,theUSandBrazil,andpricesroseoverthefirstthreequartersoftheyear.Supplywastight,despitea40%riseinChineseoutputwhichincreasedtheself-sufficiencyofChinafrom60%to70%.

InEurope,demandgrowthratesin2006wereparticularlystrong.Drivenbyhealthyend-userdemand,re-stockingandsupplyconstraints,Europeanbasepricesincreasedalmostonamonth-by-monthbasis,hittingthehighestlevelsofrecentyears.

Theendoftheyearrecordedaslow-downinactivitiesandanincreaseofimportsfromAsia,benefitingfromanincreasingpricegapbetweenAsiaandEuropeandgrowingnewproductioncapacityinChina.

InBrazil,bothdemandandbasepriceincreasedinthedomesticmarket,thankstothegrowthofBrazilianindustrialactivityandverygoodmarketconditions.ThankstothehighlevelsinBrazilianconsumption,Acesitawasabletoraiseitsmarketshareinitshomemarkets,andwithdrawprogressivelyfromthehighestcompetitiveareasinAsiaandtheMiddleEast.

IntheUS,stainlesssteeldemandremainedatagoodlevelontheyearaverage.Basepricecontinuedtoriseuntilmid-2006,butthenbuyingandre-stockingactivitiessloweddowntowardstheyear’send.

InAsia,demandgrew,butataslowerpacethaninEuropeandtheUS.Pricesincreased,supportedbyrisingdemandandhighnickelprices.StainlesssteeloutputinChinaisexpandingrapidly.

Whilere-stockingsloweddowntowardstheendoftheyear,basepricesforstainlesssteelhitnewall-timehighs.TheEuropeanpriceofextraalloysrosebymorethan40%onthepreviousyear.Thepriceofnickelreachedits2006recordhighinDecemberwithpricesover€27,800pertonneandwasonaverage€7,500pertonnehigherincomparisonto2005.


WhileCarinox(Belgium)wasexperiencingsomedifficultiesraisingoutputinthenewmeltshopduringthefirsthalfoftheyear,outputwasnearingcapacitybyendoftheyear,thankstotheGroup’sinternalresourceexpertise.TheAcesita(Brazil)andGenk(Belgium)plantsoperatedataverygoodperformancelevel.Globally,activitiesbenefitedfromtheeffectofhighervolumesandimprovedsalesmix.

Totalshipmentsrosefrom1.6milliontonnesto2.2milliontonnes.Thisrepresentsagrowthof38%,takingintoaccounttheacquisitionofanincreasedshareholdinginAcesita(3monthsofconsolidationin2005vs.12monthsin2006)andthedisposalofUgitechmid-June06.Onthesamebasisrevenuesof€5.4billionrepresenteda32%increaseonthepreviousyear.EBITDAincreasedto€745million,ontheincreaseof€572million.

Thisexceptionalimprovementinresultsisexplainedbyapositivepricesqueeze,efficiencygainsandhighervolumes,whichoffsetthesubstantialnegativeimpactofrawmaterialscostsduetohighnickelprices.

Outlook

Whilerawmaterialpricesevenbroke2006’srecordsinearly2007,theincreaseofimportswillputhighpressureonstainlesssteelprices.Strongdemandatthestartof2007islikelytobetemperedbyincreasingsupplygrowthintheUS,WesternEuropeandAsiaastheyearprogresses.


Arcelor Mittal Steel Solutions and Services (AM3S) AM3S – formerly A3S at Arcelor – is a comprehensive group of joined Arcelor and Mittal businesses, marketing standard and processed steel and offering steel solutions worldwide.


TheoperationsofAM3Sspanaworldwidenetworkofdistributioncentres,steelservicecentres,constructionandfoundationsolutionsforinfrastructureprojects.AM3Soperatesover500facilitiesin32countriesandhasanoutstandingdistributionnetwork,basedonthephilosophyofstayingclosetoits200,000customers.Itoffersafullportfolioofflatandlongproducts,tubesandstainlesssteel,addingvaluethroughfurtherprocessingandthroughtheprovisionoftechnical,engineeringandconsultancysupport.AM3SalsomanagesthesalesnetworkfortheArcelorMittalGroup’sworldwideexports.

Anentirelycustomerfocusedorganisation,AM3Sisorganisedthroughitsstockholdingnetworktofosteravailabilityandshortleadtimedeliveriestoallitsclients,aswellasthroughitsprocessingoperationstosatisfykeycustomers’needsforallsteelusage.

AM3Sdeliverstoallmarkets:automotiveandmechanicalindustries,constructionandcivilworks,andstockists.

AM3SisorganisedintofiveOperationalUnits,accordingtotheirspecialty:

• Arcelor Mittal Distribution (AMD): Aregionalnetworkabletosupplysmallcustomerslocallyandtomeetthecomplexneedsofindustrialkeyaccounts.Theproductsrangeincludesavailablecommoditiesofflat,long,andtubes,smalllotsinstock,globalsolutionandtailor-madeofferings.

More than 200 distribution centres in over 30 countries; 5,000 employees

• Arcelor Mittal Steel Service Centres (AMSSC): ThemajorunitofArcelorMittalintheflatcarbonsteelprocessingandlogisticsforautomotiveandindustrialmarkets.Tailor-madeofferingsincludeshapedandpunchedblanks,ontimedeliveries,ready-to-usedimensionsandquantities.

44 plants in 9 countries; 3,700 employees

• Arcelor Mittal Construction (AMC): Abletoofferlightsteel-basedsolutionsofprofilesandsandwichpanels,forcladding,roofingandfloors,andbuildingsolutionsforcontemporaryarchitecture.AMCisabeaconofinnovationandprogressforconstructionapplications,andalsoprovidestechnicalsupportandassistanceforprojects.

52 manufacturing sites in 25 European, American, Asian and African countries; 3,000 employees.

• Arcelor Mittal Foundation Solutions (AMFS): Designsandsuppliessolutionsforlargeinfrastructureprojects,likepiledfoundations,marineworks,waterfrontstructures,landfillandwastedisposal;pipeandsheetpilemanufacturing.AMFSispresentinEurope,NAFTAcountriesthroughSkyline,andAsiathroughOrientalSheetPiling(OSP).

Manufacturing plants in the Netherlands and USA; 400 employees

• Arcelor Mittal International (AMI): SalesnetworkforArcelorMittalexportswithaworldwidepresence,throughanetworkofmorethan50officeson5continents.

350 employees

TheAM3SambitionistooptimiseitsefficiencythroughaclosepartnershipwiththeGroup’sFlatandLongBusinessUnits,particularlyinthefieldsofproductofferingandsupplychain.

Innovation in products and services

Manyinitiativesweretakenin2006toimprovethepositionofAM3Sinitsmarketsthroughcustomerfocusedbrandingandorganisation.

ArcelorMittalConstructionhasdivideditsproductrangeintothreedifferentbrands,eachfocusedonspecificcustomerormarketexpectations.

• ARCLADisthebranddedicatedtostandardcladdingprofilesandpanelsforconstruction.ThefocusoftheACLADofferisonshortleadtimes,on-timedeliveriesandcompetitivepricingforthelargeststandardproductrange.

• ARVALisdedicatedtoarchitectandengineeringfirmsandtheirmanydiversifiedrequirements.Allcolour,shapeorsteelqualitycladdingisdevelopedintheARVALproductrange.2006sawthedevelopmentoftheCofradal®concept,afloorinsteelforbuildings,allowingfasterconstructionleadtimesandanarchitecturalbreakthrough.

• ARMAT isfocusedonresidentialhouses.Offeringrooftiles,wallpanelsinsteel,andreinforceddoors,ARMATiscreatingafullproductrangeofsteelproducts.


In 2006, AM3S capital expenditure amounted to €96 million, expended on growth projects, on productivity and safety measures. Investments were chosen in accordance with the AM3S strategy to anticipate customer developments and to create growth opportunities.


Arcelor Mittal Steel Solutions and Services (AM3S) continued


ArcelorMittalDistributionhascreatedaneworganisationcalledTOP(TotalOfferProvider)aimedatofferingacompleterangeofproductsandservicesforitskeycustomers.FollowingtheacquisitionofDevillersandAllianceMetal,TOPisnowabletoextendthisglobalofferinCentralEuropeandChinaandserveitscustomerswithdelocalisedstrategies.

ArcelorMittalServiceCentreshasinitiatedthesametypeofsegmentedorganisation.Forgeneralindustrymarkets,aregionalorganisationhasbeensetup,withthemergerofallSSCswithineachcountryandthecreationofaregionallyintegratedsalesnetworkandcentralisedsupplychain.Fortheautomotiveindustry,SSCisdevelopingitsblankingactivitythroughnewcapacityinGermanyandSlovakia.

Expansion moves

In2006,AM3SextendeditsreachthroughacquisitionsandtheintegrationofassetsfromotherpartsoftheGroup.InFrance,ArcelorMittalDistributionacquiredthemajorityofDevillersandlifteditsstakeintheAllianceMetalGroupto66%.TheseacquisitionsformthecoreoftheTOPoperation,toservecustomersinthemachinetool,yellowgoodsandothermanufacturingindustries.

ArcelorMittalSteelServiceCentresintegratedfiveservicescentresinGermanyandItalypreviouslyoperatedbytheFlatCarbonbusiness.Itacquiredasixth,inCasablanca,Morocco.DownstreamactivitieswereexpandedwiththeacquisitionofMobileverinItalyandthesigningofanewpartnershipwithMitsuiinSouthAfrica.

ArcelorMittalConstructionacquiredaSwedishcompany,Rydab,whichprovidessteelsolutionsforhouses,andraiseditsholdinginPerfilor,itsBrazilianprofilingcompany,to51%.

ArcelorMittalConstructionexpandeditsnetworkwithnewfacilitiesinPoland,Slovakia,andSpain.ConstructionofanewservicecentrewasstartedinSlovakia.TheFoundationSolutionsbusinessestablishedanewpipemillintheUS,throughSkyline,andanewsheetpilecoldrollingmillinMalaysia,throughOrientalSheetPiling.Asaresult,ArcelorMittalisnowproducingsheetpilesinAsiaandisactivelydevelopingsteelfoundationssolutionsintheregion.


WiththeexceptionofSouthernEurope,whichsufferedincreasedpenetrationbyAsianimportsinthesecondhalfoftheyear,marketconditionswerefavourableinmostoftheAM3Smarketsin2006.Shipmentsincreasedto14.3milliontonnes,comparedwith13.7milliontonnesin2005.AM3Sachievedin2006anEBITDAof€384million(2005:€328million)andoperationalresultsof€316(2005:€254million).

Synergiesof€115millionexpectedfromthemergerofArcelorandMittalSteelwillmainlybegeneratedfromvolumegrowthinCentralandEasternEurope,throughthepartnershipofMittalSteelmillsandArcelorServiceCentresandDistributionnetwork.

Theinternationalnetworksofbothcompanieshavebeenintegratedtoformasingletradingunit,ArcelorMittalInternational(AMI).Asaresult,AMInowhassalesofficesinallcontinentswithoperatinghubsinDubai,Luxembourg,SingaporeandChicago.Restructuringwillbefullyachievedmid-2007.Thegoalistotriplesellingvolumesin2007,ofbothspecialtyandcommodityproducts.

In2006,AM3Scapitalexpenditureamountedto€96million,expendedongrowthprojects,onproductivityandsafetymeasures.InvestmentswerechoseninaccordancewiththeAM3Sstrategytoanticipatecustomer’sdevelopmentandtocreategrowthopportunities.

Outlook

TheAM3Sstrategywillfocusonextendingtherangeofservicestoanticipatecustomerdevelopments,targetingmorevalue-addedproductsandseedingitsbusinessmodeloutsideitscoreregions.Aboveall,itwillcontinuetoworktobuildcustomerloyaltythroughreliabilityandspeedofsupply,awillingnesstoinnovate,andthedeliveryofglobalsteelsolutions.


Paul WurthPaulWurthisanengineeringcompanyofferingacomprehensiverangeoftechnologicalsolutions,mainlyintheprimaryphaseofiron-making.

In2006,therewasamarkedupturninPaulWurth’sactivities,itsorderbookreachingarecord€720.5millionfortheentity,up49%on2005.ThecompaniescontrolledbyPaulWurthS.A.reportedsalesof€341.6millionin2006(up17%on2005).

Thistrendreflectstheauspiciousincreaseincapitalexpenditureinthesteelmakingindustrytheworldover.However,thecompany’simprovedperformanceisalsotheconsequenceofearlierstrategicdecisionsbackedbyArcelor,suchasthedevelopmentofaninternationalnetworkofsubsidiaries,thetransferofitsmanufacturingactivitiesandtheacquisitionoftargetedentities,whichwereharmoniouslyintegratedintothePaulWurthgroup.

PaulWurth’sspecialisationinblastfurnaceshasenabledittobecometheworldleaderinthismarket.Awardedtwokeyordersfortheconstructionofthreecompleteblastfurnacefacilitiesbyanestablishedsteelmakerin2006,PaulWurthhasthusconfirmeditsabilitytotransformitselffromamodestsupplierofspecialisedequipmentintoarecognisedplayercapableoftakingonlarge-scaleprojects.

Anotherkeycommercialsuccessoftheyearwasthefirst-timesaleofaPrimus®recyclingplanttoaclientinTaiwannotassociatedwithPaulWurth.Thisinnovativetechnology,developedbyPaulWurthandimplementedonanindustrialscaleforthefirsttimebyPrimorec,recyclesallironandsteelmakingresiduesandrecoversvaluablemetalliccontent.

Alongsideitsoperatingactivities,PaulWurthpursueditsResearchandDevelopmentprogrammetopreserveitstechnologicalleadinitsrangeofproducts.

Circuit FoilCircuitFoil’sbusinessin2006wasmarkedbyasharpincreaseindemandontheonehand,andbyescalatingpricesofrawmaterialsontheother.Thepriceofcopperhaspracticallydoubledoverthelasttwoyears.AfterpeakingatUS$8,800inMay2006,pricesfellbacktoaroundUS$6,200pertonneattheyear’send.Thankstosustaineddemand,thisriseinthemarketwasreflectedinamuchhigheraveragesellingpricein2006thanin2005.

SinceCircuitFoilexportsthree-quartersofitsoutputinthedollarzonetotheUnitedStatesandAsia,theweakdollarweighedheavilyontheGroup’sfinancialperformanceandcompetitiveness,moreparticularlyinAsia.

Theindustry-wideconsolidationtrendfolloweditscourse.2006sawacompetitorclosedownitsplantintheUnitedStatesandanalliancebetweenrolling-millcustomersandprintedcircuitmanufacturers,whilefavourablemarketconditionsfuelledincreasesincapacitydownstream.

Thisyearshouldseesatisfactorygrowthinthesector,albeitnotashighasin2006.

IndusteelTheIndusteelGroupproducesspecialisedstainlessandalloyplateswhichcanreachveryheavyweights.Italsoprovidesitsclientswithkitstobeassembledintotanks,toothedracksforjackuprigs,chemicaltankers,protectionkitsandhotformedelements.

In2006,Industeelpursueditspartnershipstrategybyprovidingnicheproductstoitsdifferentmarketswhicharetheenergysector(petrol,gas,nuclear,hydraulic),petrochemicalindustry,de-pollution(FGD),desalination,automotiveindustry,protectionandminingindustry.

Industeelproduced377,000tonnesofspecialisedplatesin2006,atsimilarlevelstothoseofpreviousyears.Italsodelivered75,000tonnesofspecialgradeslabsandingots.

Inaddition,theGroupmanagedtoextenditsworldwidesalesnetwork(morethan50%ofitssalesaredeliveredoutsideofEurope)andhasconsolidateditspositionasworldleaderincertainspecialties,suchascryogenicsteelplates,specialstainlesssteelandextra-heavyplates.

ItseffortsinR&Dallowedittodevelopnewgradesofstainlessandmoldsteel.

In2006,IndusteelinvestedmorethanUS$30million,improvingitstoolsandequipment,inordertofollowmarketevolutions.SalesamountedtoUS$1,443million,increasingby15%,andEBITDAreachedUS$245million,risingby60%comparedto2005.

Other activities



TheOrdinaryGeneralMeetingofShareholdersheldon29April2005authorisedtheBoardofDirectors,inaccordancewiththeconditionsestablishedbytheLuxembourglawregardingcommercialcompanies(“theLaw”),toacquirethecompany’sownsharesortohavethesharesacquiredbyothercompaniesoftheGroupasprovidedforinArticle49-2oftheLaw.

Own Shares

Thisauthorisationreplacedasimilarauthorisationdated30April2004.The29April2005authorisationisvalidfor18months,unlessrenewedbeforeexpiry.ItallowsArcelortopurchaseitsownsharesatpricesofbetween€10and€30pershare,providedthatthecompanyatnotimeholdssharesequaltomorethan10%ofitscapitalasdeterminedbyarticles49-2and49bisoftheLaw.

On28April2006,theOrdinaryGeneralMeetingofShareholdershasrenewedthisauthorisationtotheBoardofDirectorsforanewperiodof18monthsandforamaximumpurchasepriceof€55pershare.

On27April2007,aproposalwillbemadetotheOrdinaryGeneralMeetingofShareholderstorenewtheauthorisationgivenon28April2006withspecifictermsandconditions.

At31December2006,ArcelorSAdirectlyowned118,621ofitsownshares.

At31December2006,theArcelorgroupheld157,260ofitsownshares,representing0.02%ofthetotalnumberofsharesinissueandbookvalueof€786,300.Votingrightsaresuspendedonallthe157,260sharesownedbytheGroup.

Duringthe2006financialyear,theGroupexecutedthefollowingtransactionsinrelationtoitsownshares:

Purchases•113,155sharespurchasedaspart

ofthestockoptionsplanofArcelorFranceatanaveragepriceof€40.54.

•2,069,529sharespurchasedintheframeofliquiditycontractsatanaveragepriceof€29.46.

Sales•2,798,320sharesdeliveredbyArcelor

S.A.toemployees,aspartoftheA.E.S.O.P.E.shareownershipplanofwhich2,198,865subscribedat€25.30and599,455deliveredforfree.

•4,495,683sharesdeliveredaspartofthestockoptionplansofwhich969,950deliveredbyArcelorFranceS.A.atapriceof€15.24and3,525,733deliveredbyArcelorS.A.atpricesrangingbetween€9.67and€17.17.

•11,954,087sharesdeliveredbyArcelorS.A.followingtheconversionofconvertiblebondsO.C.E.A.N.E.2017.

Consequently,theGroupacquired2,069,529ownsharesin2006representingtotalbookvalueof10,347,645and0.3%ofitssubscribedcapitalat31December2006.Italsosold21,683,565ownsharesin2006,representingtotalbookvalueof108,417,825and3.2%ofitssubscribedcapitalat31December2006.Overall,therefore,itsoldanet19,614,036ownshares,representingbookvalueof€98,070,180and2.93%ofitssubscribedcapitalasof31December2006.


Sales 31/12/2005 31/12/2006 ChangeArcelorLuxembourgSA 17,142,996 - -17,142,996ArcelorFranceSA 583,001 38,639 -544,362ArcelorSteelBelgiumNV 1,791,811 - -1,791,811ArcelorSA 253,488 118,621 -134,867TOTAL 19,771,296 157,260 -19,614,036


ArcelorrespectshighstandardsinSustainableDevelopmentandiscommittedtoresponsiblepracticeinenvironmentandenergyuse.SustainableDevelopmentisguidedbytheGroupManagementBoardandimplementedbyaSustainableDevelopmentDivision.

Sustainable Development

Climatechange,CO2emissionsandotherenvironmentalimpactsofindustrialactivityareglobalissues.ArcelorresearchisgearedspecificallytowardstheGroup’senvironmentalpolicy:reducedconsumptionofenergyandrawmaterials,lesspollutingdischargesfromplantsanddevelopmentofproductsthatcomplywithfutureenvironmentalstandards.

In2006,theGroupcontinuedtoimplementitsenvironmentalpolicy;almostalloperationsareaccreditedISO14001andArceloriscommittedtoachieving100%certificationtoallproductionfacilities.

Arceloristakingpartinvariousprojectsregardingenvironmentalissues,includingtheULCOS(UltraLowCO2Steelmaking)projectamongstothers.ItaimsatdrasticallyreducingCO2emissions,andothergreenhousegases.

Withregardstoinnovation,thecompanyisattheforefrontofindustrythankstoaprogrammeofR&D,includingthirteenmajorresearchcentresinEurope,USandCanada,andthanksto1,200researchers.

ArcelorismemberoftheEuropeanSteelTechnologyPlatform,createdin2004.Thisplatformisfocusedonidentifyingwaystoboostresearchandinnovationanddevelopingnewandcleanerprocessingmethods.

ArceloriscommittedtoHealthandSafety,whichisapriorityatalltimes.Indeed,HealthandSafetydayswereorganisedon29March2006andon6March2007,inordertoincreaseawarenessamongstallemployees.

Forthesecondyearinarow,ArcelorwaslistedintheGlobal100MostSustainableCompanyintheWorld,inFebruary2006.


Outlook

ThelatestIISIShortRangeOutlookfinalisedonFriday2Marchforecastsaslowingofglobalsteeldemandgrowthfrom8.5%in2006to5.9%in2007,butreboundingto6.1%in2008.Asia,frombeingtheweakestregionintermsofApparentSteelUse(ASU)growthin2006becomesthestrongestthisyearwithChineseconsumptionrising13%asinventoriesarere-stocked.WorldgrowthexcludingChinawillfalltoonly2.5%thisyear,downsignificantlyfromover8%in2006butanimprovementonthe0.4%declinerecordedinthe2005downturn.

Afteranalmost12%increasein2006,theUSapparentsteeluseisexpectedtofallby4.4%in2007ashighsteelservicecentrestocksandweakdemandforcecutsininventoriesinthefirsthalfoftheyear.SteeldemandinMexicowillcontinuetorisethisyear,whiledemandinCanadaisexpectedtofollowtheUSanddeclineby3%in2007.

DespiteaverystrongASUgrowthofover11%intheEU27lastyear,theforecastisforcontinuedexpansionof1.5%in2007withEU15demandestimatedtogrowby0.7%giventhestrengthofEUmanufacturingovertheshort-term.

GrowthinAsianASUisexpectedtoacceleratein2007aftergrowingbelowtheglobalaveragein2006aslowgrowthinJapanandfallingdemandinThailand,SingaporeandIndonesiameantASUgrewbyonly6.2%acrosstheregion.However,inallthreecountries,ASUgrowthisforecasttoreboundthisyear,coupledwithacceleratingmarketsupplyinbothChinaandIndiagrowthinASUof9.3%isanticipated.

Apparent Steel Use, IISI Spring 07 Forecast

2006 2007 2008 mntonnes %Change mntonnes %Change mntonnes %ChangeEU15 156 10.2% 157 0.7% 159 1.3%EU27 185 11.2% 187 1.5% 191 1.9%Russia 36 18.4% 39 7.1% 42 7.5%CIS 48 12.9% 51 6.1% 54 6.0%US 120 11.7% 114 -4.4% 119 3.8%NAFTA 155 11.1% 150 -3.1% 157 4.3%Brazil 19 10.2% 20 6.5% 21 6.9%SouthAmerica 36 11.7% 38 6.1% 40 6.0%Africa 22 9.7% 23 6.9% 25 7.8%MiddleEast 37 10.3% 40 9.1% 44 8.4%China 356 9.0% 403 13.0% 443 10.0%India 43 9.9% 48 10.2% 53 11.2%Japan 79 1.3% 80 1.3% 80 0.1%Asia 595 6.2% 650 9.3% 700 7.6%World(*) 1113 8.5% 1179 5.9% 1251 6.1%WorldexChina 757 8.3% 776 2.5% 808 4.1%

(*) Includes Other Europe and Oceania not tabulated

ArcelorS.A.,acompanyincorporatedunderLuxembourglaw,istheparentcompanyoftheArcelorGroup.Arcelorgeneratedearningsof3,964millioneuros.

TheGeneralMeetingofShareholderstobeheldon27April2007willbeaskedtoapprovethedistributionofagrossdividendof €1.00persharewithrespectto2006,comparedwith €1.20persharefor2005.

Incaseofchangeofcontrolormergerfollowingatakeoverbid,thecompanyhasundertakentoretaincertainofitsemployeesforaspecificperiodoftimedependingontheirpositionintheGroup,exceptincaseofgrossnegligence.NeitherofsuchemployeesisamemberoftheBoardofDirectorsoroftheGroupManagementBoard.

Thecompanyhasinteraliaundertakennottochangetheposition,thefunctionsorthescopeofresponsibilityoftheemployeesconcerned,withouttheirprioragreement.

Incasewithintheapplicableperiodandfollowingachangeofcontrol,thecompanybreachestheseundertakingsortherelevantemployeeresigns,hewillbeentitledtoaglobalandfixedindemnitypayment.

Themaximumamountofthecompany’sobligationshereunderistwentymillioneuros.


Post-balance Sheet Events

On26January2006,MittalSteelandThyssenKruppAGenteredintoletteragreementwhichprovidedthatifMittalSteelwassuccessfulinitstenderofferforArcelorandwasabletoexertmanagementcontrol“withtheabilitytosellDofasco,”MittalSteelwouldcauseArcelortosellDofascotoThyssenKrupp.

DuringMarchandApril2006,Arceloracquired100%ofthesharesofDofasco.On3April2006,Arcelortransferred89%ofthesharesofDofascototheStrategicSteelStichting(“S3”),anindependentDutchfoundation,therebyremovingArcelor’sabilitytosellorotherwisedisposeofsuchshareswithoutS3’sconsent.

On25June2006,MittalSteelandArceloragreedtothetermsofarecommendedoffer,pursuanttowhichMittalSteelhasacquiredapproximately94%ofthesharecapitalofArcelor.

On1August2006,theU.S.DepartmentofJustice(the“DOJ”)requiredwithaconsentdecreethedivestitureofDofascoor,ifMittalSteelwereunabletosellDofasco,thedivestitureofeitherMittalSteel’sSparrowsPointFacilityinMarylandorMittalSteel’sWeirtonfacilityinWestVirginia.TheconsentdecreeprovidedthattheDOJinitssolediscretionwouldchoosewhichplantwouldbesold.ItwasstipulatedthatDofascowouldbemaintainedasaseparatebusiness,independentoftheotherbusinesses

ofMittalSteelandArcelor,untilDofascowasdivestedortheDOJmadeitsselectionofthealternativeplanttobedivested.

Aftertheconsentdecreewasfiledincourt,theBoardsofbothMittalSteelandArcelorrequestedthedirectorsofS3todissolvethefoundationinordertoallowthesaleofDofasco.On10November2006,however,S3’sdirectorsunanimouslydecidednottodissolvethefoundationandtoretaintheDofascoshares,therebycontinuingtopreventtheirsale.

On22December2006,ThyssenKruppinitiatedsummarylegalproceedingsagainstMittalSteelintheDistrictCourtinRotterdamallegingthatMittalSteelhadbreachedtheletteragreementbyfailingtocauseArcelortoinitiatelitigationagainstS3toforceS3totransfertheDofascosharestoArcelorsoastopermittheirsaletoThyssenKrupp.On23January2007,theDistrictCourtinRotterdamdeniedThyssenKrupp’spetitionforanorder.

On20February2007,theDOJinformedMittalSteelthattheDOJhasselectedtheSparrowsPointsteelmilllocatednearBaltimore,MarylandfordivestitureundertheconsentdecreefiledbytheDOJinAugust2006.Accordingtothedecree,anysuchdivestituremusttakeplacewithinninetydaysfrom20February2007,subjecttopossibleextensionsbytheDepartmentofJustice.

On25September2006,theComissãodeValoresMobiliários(the“CVM”),theBraziliansecuritiesregulator,ruledthat,asaresultofMittalSteel’sacquisitionofArcelor,MittalSteelwasrequiredtocarryoutapublicoffertoacquirealltheoutstandingsharesinArcelorBrasilnotownedbyArcelororanyotheraffiliateofMittalSteel.ArcelorBrasilisamajorityownedsubsidiaryofArcelor.

On26October2006,MittalSteelfiledwiththeCVMarequestforregistrationwithrespecttosuchanoffer,andfiledanamendedrequeston11January2007.AspertheamendedrequestforregistrationfiledbyMittalSteel,thevaluetobeofferedperArcelorBrasilshareis€12.12(whichmaybeacceptedintheformofcashoramixtureofcashandshares,attheoptionoftheholder),foratotalvalueofapproximately€2.6billionforallArcelorBrasilshares.

On12February2007,theCVMissuedaletterstatingthat,accordingtotheCVM’sinterpretationoftheapplicablerules,thevalueMittalSteelshouldofferperArcelorBrasilshareshouldbe€4.57incashand0.3942ArcelorMittalcommonshares,subjecttoanumberofadjustments.

Additional Information About Arcelor S.A.

Arcelorhasdevelopedeightpriorityareasofactionsbasedonthe4Ps:

1.Profitablegrowththroughproducingandmarketingsteelproducts;

2.Managementofriskandsafety,includingthesafetyofproductsandemployeeshealth;

3.Protectionoftheenvironmentandpreservationofscarceresources;

4.Opendialoguewithallpartners;5.Skillsdevelopmentaroundcommon

valuesofqualityandefficiency;6.Innovationtocreatevalueand

supportsustainabledevelopment;7.Strictcompliancewithcorporate

governancerules;8.Responsiblecitizenship.

DuringthemergerbetweenArcelorandMittalSteelthatledtothecreationofArcelorMittal,thesustainabledevelopmentandsocialmodelofArcelorwasmaintainedbythenewGroup’sManagementBoardandhasbeenappliedtothewholeportfolio.

Arcelor’s commitments Arcelor’ssustainabledevelopmentapproachisbasedonvariouscommitmentsandcharters,whichdefinetheGroup’smissionsandvaluesandthoseofitsentities,alongwiththeobligationsofeachemployee.Arcelorappliessustainabledevelopmentstandardsinallcountriesinwhichitoperates.

2002• DefinitionoftheArcelor

EnvironmentalPolicy•AdoptionoftheArcelorHealth andSafetycharter

2003• SignatureoftheUnitedNations GlobalCompact• AdoptionoftheArcelorPrinciples ofResponsibility,basedonthe UnitedNationsGlobalCompact•UpdateofArcelor’sGeneralPurchasing

TermsandConditions,withtheinclusionofclausesconcerningthecomplianceofGroupsuppliersandsubcontractorswiththeUnitedNationsGlobalCompactandArcelor’ssustainabledevelopmentprinciples

2004•DefinitionofthePanhealthPolicy

2005•AdoptionoftheArcelorCodeofEthics•SignatureofaWorldwideAgreement

onPrinciplesofCorporateSocialResponsibilitywiththeInternationalMetalworkers’Federation(IMF)andtheEuropeanMetalworkers’Federation(EMF),coveringArcelor’ssocialandsustainabledevelopmentprinciples

•SignatureofastrategicpartnershipinChinawiththeUnitedNationsDevelopmentProgramme(UNDP)topromoteenergyefficiencyandenvironmentalprotection.

Giving sustainable development responsibility to all staffGivingeachArceloremployeeresponsibilityforsustainabledevelopmentiscentraltothepolicyadoptedbyArcelor’sManagementBoard.Sustainabledevelopmentmustenableemployeesworldwidetoapplybestpracticeintheeconomic,employee-relations,environmentalandsocialfields,andenableGroupentitiestosharethesameproceduresandstandards.

SustainabledevelopmentisguidedbytheGroup’sManagementBoardandimplementedbyaSustainableDevelopmentDivision.ThisDivisionworksinclosecollaborationwithallGroupfunctionsanddepartments,includingtheGroupManagementBoard,Finance,InvestorRelations,Environment,HealthandSafety,BusinessRiskControl,HumanResources,InnovationandResearch,Procurement,Communication,GeneralSecretariat,LegalandEthics.Theaimofthiscollaborationistomakesustainabledevelopmentanintegralpartoftheorganisation,informationsystems,behaviourandobjectivesofeachArcelorunit.

Eachyear,quantitativeandqualitativetargetsaresetbytheManagementBoardforeachcomponentoftheGroupsustainabledevelopmentstrategy,andprogressismonitoredbyscorecards.

Toincreasetheawarenessandinvolvementofallstaff,thereisastrongemphasisonsustainabledevelopmentinthetrainingprovidedbyArcelorUniversity,intheGroup’ssectorandtradeconventions,ontheintranet,ininternalnewsletters,andintheprogrammeofsitevisitsbytheManagementBoard.


Arcelor and the United Nations Global CompactArcelorjoined2,500companiesaroundtheworldbysigningtheUnitedNationsGlobalCompactinSeptember2003.

TheGlobalCompact(www.unglobalcompact.org)waslaunchedin2000bytheUNSecretary-General.ItaimstoincorporateasetoffundamentalvaluesrelatingtotheUniversalDeclarationofHumanRights,internationallabourstandards,environmentalprotectionandthefightagainstcorruptedbusinesspractices.

SignatorycompaniescommitindividuallytoapplyingtheGlobalCompact’stenprinciplesandtopromotingtheirdiffusionamongallstakeholders.

Human rights

Principle1:Businessshouldsupportandrespecttheprotectionofinternationallyproclaimedhumanrights;and

Principle2:Makesurethattheyarenotcomplicitinhumanrightsabuses.

Labour standards

Principle3:Businessshouldupholdthefreedomofassociationandtheeffectiverecognitionoftherighttocollectivebargaining;

Principle4:Theeliminationofallformsofforcedandcompulsorylabour;

Principle5:Theeffectiveabolitionofchildlabour;and

Principle6:Theeliminationofdiscriminationinrespectofemploymentandoccupation.

Environment

Principle7:Businessshouldsupportaprecautionaryapproachtoenvironmentalchallenges;

Principle8:Undertakeinitiativestopromotegreaterenvironmentalresponsibility;and

Principle9:Encouragethedevelopmentanddiffusionofenvironmentallyfriendlytechnologies.

Anti-corruption

Principle10:Businessshouldworkagainstallformsofcorruption,includingextortionandbribery.

Arcelor’ssustainabledevelopmentstrategyandPrinciplesofResponsibilityarefullyinlinewiththeGlobalCompact’stenprinciples.Arcelor’seightsustainabledevelopmentprinciples,definedbytheGroup,reflectitsdeterminationtoreconcileitseconomic(Profit),social(People)andenvironmental(Planet)strategies,forthegreatergoodofallitsPartners.

AkeyaspectofArcelor’scommitmenttotheGlobalCompactisthepromotionofthetenprinciplesamongtheGroup’ssubcontractorsandsuppliers.In2004,theArcelorPurchasingDivisionintroducedasetofelementaryobligationsforsuppliersconcerninghumanrights,labourstandardsandenvironmentalprotection.TheSustainablePurchasingprogrammenowallowsArcelor’sPurchasingDivisiontoevaluatesuppliersusingascorecardthatcheckscompliancewitheachofArcelor’scommitmentsandvaluesintermsofsustainabledevelopmentandoftheGlobalCompact.

TosupporttheadoptionofthetenthGlobalCompactprinciple,ArceloradoptedaCodeofEthicsin2005.ThisCodedefinesthebehaviourrequiredofeachGroupemployee,inparticularwithregardtocombatingcorruption(alongsideitsPrinciplesofResponsibility),andanearlywarning/whistleblowingprocedure.

Arcelor Sustainable Development Indicators

SustainabledevelopmentisatthecoreofArcelorMittalstrategy,andseveralindicatorsfacilitatethemeasurementofperformanceintermsofsustainablegrowth,healthandsafety,environment,dialoguewithstakeholders,skilldevelopmentandcommonvalues,innovation,corporategovernance,andresponsiblecitizenship.

However,duetotherecentmergerbetweenArcelorandMittalSteel,indicatorsarecurrentlybeingrevised,inordertoachieveanewsystem,commontothenewGroup.Theseindicatorsshouldbereleasedlaterintheyear.

Both the European Union and United Nations aim to ensure a high level of protection for human health and the environment. Arcelor views this globally-shared intention as an opportunity, since it corresponds with its commitment to making safe products.

Arcelor Sustainable Development Strategy


Sustainable development is at the core of Arcelor – and now Arcelor Mittal’s – strategy, and several indicators facilitate the measurement of performance in terms of sustainable growth, health and safety, environment, dialogue with stakeholders, skill development and common values, innovation, corporate governance, and responsible citizenship.


ArcelorMittalemploys1,200researchersin13researchcentresaroundtheworld.In2006,€147millionwerespentonresearch.Two-thirdsofthisamountwasfocusedondevelopingnewproductsandsolutionsforthenewGroup’scustomers.

ThemergerhasaddedanewdimensiontotheR&Deffortbywideningtherangeofpotentialapplicationsforexistingtechnicalknow-howandpermittingthebetteruseofanexpandedR&Dresourceinordertoaccelerateprojectwork.In2006,anumberofcooperationprojectswereinitiatedbetweentheArcelorandMittalSteelR&Dteamstowidentheproductrangethroughouttheworld.

Process research in 2006 focused on:• themodellingoftheGroup’s

processesfromrawmaterialsandenergytofinishedproductstoimproveindustrialperformance;

• improvingrecyclingofby-productssuchassludge,dustandsteelslag,aswellastherecoveryofexpensivezinc;

• theuseofgroundtyresasacarbonadditiveinelectricfurnaces;

• thesecondphaseoftheULCOS(UltraLowCO2Steelmaking)programme.Co-financedbytheEuropeanUnionandthe48partnersengagedintheprogramme,ULCOSisaimedatfindingnewproductionprocessesthatdrasticallyreduceemissionsofCO2andothergreenhousegases.FivetechnologieswereselectedforPhaseIIexperimentation.

Theautomotiveindustryconstantlyseekstoreducecost,improvepassivesafety,reducevehicleweightandincreasedurabilitythroughbettercorrosionresistance.ThecombinedautomotiveR&DeffortsoftheGrouphaveachievedanumberofadvancesin:

• highstrengthandhighdeformabilitysteels,whichhavebeenimprovedandextendedthroughDualPhase,TRIP(TransformationInducedPlasticity)andhotstampingsteels.Majorresearchhasbeencarriedoutonnewmetallurgicalconcepts,carbonsteelsandstainlesssteels,developingmarketingsteelswithveryhighelasticityandplasticity,capableoftheveryhighenergyabsorptionsnecessaryforcrashtestqualification;

• corrosionresistance,wherethefirsttestsofultrahighsurfacequalityzinccoatingbyhotgalvanizingforuseonvisiblepartshavearousedconsiderablecustomerinterest;

• thefieldofmufflers,whereR&DhasbeenworkingwithUgine&ALZtodevelopF18MNb,anewtypeofstainlesssteelprovidingbetterresistancetooxydationathightemperatures,necessaryasaresultofincreasedexhaustgastemperatures.

R&D leadership for Industrial ApplicationsFlat Carbon Steel

• WiththelaunchofHFE(HighFormingEnvironment)Easyfilmforhotrolling.HFEsimplifiesthecustomer’sformingprocessandalmostcompletelyreducestheconsumptionofstampingoil,therebyimprovingsafety;

• Reachingaproductionof1milliontonnesofcoatedgalvanizedsteelusingE-passivation.Thistreatmenteliminatestheuseofchromatesandcontributestoenvironmentalprotection;

• Achievementofgascylinderweightreductionsofabout50%in2006,throughthedesignofsteelsolutionsusingDualPhasesteel.Theseweight-reductionsimprovedthecompetitivenessofsteelasamaterialcomparedtoothercompositesusedforthisapplication.

Electrical steel

Acesitadevelopedanewrangeofmagneticsteels,includingthe0.23mm-thickgrain-orientedgradeGOM3,andnon-grainorientedE100(M230-50),withimprovedmagneticpropertiesatsaturation,improvedthermalconductivityandmagneticpermeability.Theseproductsimprovetheefficiencyoftransformersandelectricmotors,thuscontributingtoenergysaving.

Special Plates

R&DeffortsinthefieldofspecialstainlesssteelplatesconcentratedonthedevelopmentofnewDuplexgradeswithimprovedweldability,aswellastheextensionoftheDuplexrangetowardsgradeswithevenbettercorrosionresistance(hyperduplex)andtowardseconomicgrades(LeanDuplex)thatwillhavetocompetewithstandard304and316typegrades.

Inthefieldofspecialalloyedsteelplates,practicalresultswereachievedinthreedifferentmarketsectors:

• Therefiningandpetrochemicalmarketneedstoinvestheavilyinmorereliableinstallationsinordertomeetstrongdemandforrefinedoilproducts.Steelgradeswith2%ofChromium-Vanadiumwithhigherstrengthpropertiesdevelopedduringrecentyearshavesatisfiednewrequirementsforthickplatesofupto280mm;

• Theenergyandthermalpowerplantsmarketsaredemandingsteelwithimprovedperformanceathightemperaturesforenergyefficiencyreasons.R&Disnowfocusedondeliveringsolutionsusinggradeswith9%Cr–Wwithevenhigherperformancewithinthreetofiveyears;

• Intheplasticinjectionmouldingmarket,whereIndusteelistheworldleader,R&Dhascontinueditseffortstobroadentherangetowardshighgradesteelswithbettermachinabilityandpolishability.

Stainless Steel

Anenlargedproductofferhasbeencarriedoutin2006withthedevelopmentofanewferriticgradewith20%chromiumandcorrosionresistanceequivalenttoAISI304.

Othergradeshavebeendeveloped:

• austeniticwithfewernickelcontent;• ferritic;and• martensiticgrades,with13%chromium

andimprovedmechanicalproperties.

Thislargerproductofferenablesnewapplicationssuchasstructurepartsfortrucks,busesandconstruction,anddeep-drawnparts.

Construction

ForFlatCarbonsteel,significantprogresswasmadein2006inmanufacturingprocessesforcoilswithsolvent-freeorganiccoating.Industrialtestsin2007shouldvalidatethisgreenprocess.

ThefirstcommercialapplicationsofthePhysicalVaporDepositionprojectweremadeusingtheArceoindustrialline.Arangeofreflectingproducts,tosubstitutealuminiuminlighting,andcolouredstainlesssteelforuseinarchitecturalapplications,wasdevelopedin2006.Ongoingdevelopmentssuggestthistechnologyisverypromisingandshouldleadtoinnovativefunctionsofsurfacesandanti-corrosioncoatingswithexceptionalproperties.

Civil Engineering

PositivetestsontheRoxan®sheetpilewatertightnesssystemdevelopedfortheVenicelagoonrehabilitationprojecthaveconfirmedbetterbehaviourthancompetingsolutions.Aidwithdesign(inforecastingthelong-termcorrosionbehaviourofsheetpilewalls)andinstallationsupportconfirmedArcelorMittal’sleadershipinthesheetpilebusiness.

Partnerships

TheGroup’sexpandedsizehashelpedtoincreasethenumberofresearchpartnershipsinwhichitisinvolved.Partnershipswithworld-classscientificandtechnicaluniversitieshavebeenextendedandcontractualrelationshipsstrengthened.CommonresearchworkonprojectsdealingwithautomotivesteelandmanufacturingprocessesthroughtheGlobalStrategicAlliancewithNipponSteelhascontinued.


TheprimaryfocusofHumanResources(HR)istalentmanagement.Harnessinganddevelopingtheskillsofits320,000employeesisanintegralpartoftheArcelorMittalvision.Enablingemployeesatalllevelstocontributetothebestoftheirabilityisadutyofanygoodemployer.

Inthecaseofthesteelindustry,thereisanaddedincentivetoidentifyandencouragetalentfromwithin.Withitsdifficulthistory,theindustryfindsitselfwithashortageofleadersatbothexecutiveandgeneralmanagementlevels.Demographictrendssuggestallindustrieswillfindithardertofindandkeeptopmanagementtalentinthecomingyears.Alongwithmanyinternationalcompanies,thereishugecompetitiontodevelopandattracttalentedpeoplewithmulti-countryexperience.Ensuringthereissufficienttalentforthefutureleadershipneedsofthecompanyisaprimaryfocusoftheexistingseniorexecutives,supportedbyproactiveHRinitiatives.

Arcelor social model – Compliance with main international principlesObservanceoftheUniversalDeclarationofHumanRightsandtheILO(InternationalLabourOrganisation)declarationofprinciplesandfundamentalrightsisattheheartofArcelor’sPrinciplesofResponsibility.Thecompanyintendstopromotethewellbeingofitsemployees,respecttheculturaldiversityofitsteams,andrejectallformsofdiscrimination.ThiscommitmentcanbeseenthroughArcelor’ssigningoftheUnitedNationsGlobalCompact.In2005,ArceloralsosignedaWorldwideAgreementonPrinciplesofCorporateSocialResponsibilitywiththeInternationalMetalworkers’Federation(IMF),EuropeanMetalworkers’Federation(EMF)andtheEuropeanFederationofManagersintheSteelIndustry(FEDEM).

TheseagreementsdemonstrateArcelor’scommitmenttoapplyinghighsocialstandardsinallitsoperations.ItisanofficialstatementofArcelor’scommitmenttofundamentalemployeerights,suchasfreedomofchoiceofwork(noforcedorcompulsorywork),non-discrimination,banningofchildlabour,freedomofassociationandtherighttocollectivebargaining.ThisagreementisapplicabletoallArcelorsubsidiaries.Inaddition,Arcelorencouragesitscommercialpartners(subcontractorsandsuppliers)tocomplywiththeprinciplesofthisagreement.

MulticulturalismisaneverydayfactintheGroup,withnolessthan60nationalitiesrepresented.ThemobilitycellsoperatingatGrouplevelandthejoblistingsontheArcelorintranetpromoteculturalmixingandexperience-sharingwithinthevariousGroupentities.

Skills developmentDevelopingtheskillsofallpersonnelisfundamentaltoArcelor’sindustrialandsalesperformance.Localtrainingpoliciestailoredtospecificneedsandopportunitiesareimplementedeverywhereinthecompany.Needsaredefinedonthebasisofindustrialandcommercialprojects,aswellasonpersonnelexpectationsastheyemerge,forexample,inpersonalinterviews.

Skillsdevelopmentisincreasinglytiedtothedeploymentofbestpracticewithinthecompany.Itisnotonlyaquestionoftraining.Italsodependsonworkorganisation,withtheimplementationofindependentteamsandgreaterresponsibilitiesforeachpersonateverylevel.

Skillsdevelopmentalsoproducesstaffthatarebetterqualifiedandmoreadaptable.TheseattributesareveryvaluableinpreparingthemforcareerprogressionandmobilitywithinaGroupthatisexpandinginternationally.

OneofthekeyprioritiesinthewakeofthemergerwastheestablishmentoftheArcelorMittalUniversity.Buildingonthebestofthetwopredecessorcompanieslearninganddevelopmentprogrammes,theArcelorMittalUniversityconstitutesoneofthemostadvancedskillsdevelopmentresourcesinthecorporateworld.ItsobjectivesaretodevelopthepotentialofeveryoneintheGroupandbringonthenextgenerationofleaders.

Itencouragespeopleto:

• Acquirenewskillsandcompetences;• Meetandexchangeideasand

sharebestpractice;• Allowthemselvestobeintellectually

stretchedandchallenged;• Developa‘bottom-up’flowofideas

–soproposalsforchangesaredrivennotonlyfromthetopdown.

ThenewUniversityhelditsfirsteventattheendofNovember2006.ItcombinestheformerArcelorUniversitytrainingcentreatMaizières-lès-MetzinNorth-EasternFrancewiththeextensivee-learningandlocalisedmodulartrainingcoursescreatedbyMittalSteelinanintegrated,globaloffering.WithblendedprogrammesnowavailablefortheentireArcelorMittalworkforce,theUniversityisadditionallyplayingavaluableroleintheprocessofintegrationandthebuildingofanArcelorMittalculture.

The2007courseprogrammerangesfromthe‘OpenYourSteel’,‘YoungManagers’and‘YoungOperationsManagers’programmestraditionallyrunbytheformerArcelorUniversitytomoreadvancedmodulesonchangemanagementandstrategicmarketing.Thedistancelearningcourseswillbeusedtohelpintroducenewtechnologiesrapidlyandeffectively.

Developing the skills of all personnel is key to Arcelor Mittal’s industrial and sales performance. Local training policies tailored to specific needs and opportunities are implemented everywhere in the Group.

Human Resources and Skills Development


Environment

ForArcelorMittal,continuousimprovementinitsenvironmentalperformanceisakeyelementinitscommitmenttowardsSustainableDevelopment.Inordertoachievethis,thecompanymustmanagetheenvironmentwithamanagementsystem:ensurethatenvironmentalaspectscomplywithlegislation;monitorperformanceanddevelopmoreenvironmentallyfriendlymethodsofproduction.

TheGroupEnvironmentDepartmentworkscloselyincollaborationwiththeregionalproductionfacilitiestoensureaconsistentandcoordinatedapproachtoArcelorMittalenvironmentalperformanceacrossalloperations.

In2006,focusduringtheintegrationphasehasbeenon:

• Coordinatingenvironmentalreportingandanalysis;

• Implementingcommonpoliciesandactionplans;

• Developingandimplementinganenvironmentalframeworkandguidancetoregionalproductionfacilities;

• Supportingenvironmentalcomplianceactivities;and

• Undertakingbenchmarkingandtrendanalysis.

Arcelordevelops,producesandsellssteelinallitsvariousformsandgrades,alongwithprocessedsteelproductsandassociatedproducts,tothesatisfactionofitscustomers,whilerespectingtheenvironment.Itaimstoaddvaluebyharnessingtheintrinsicpropertiesofsteel.

Steelisthematerialofchoiceforenvironmentalprotection.Notonlyisitenvironmentallyfriendly,butalsoitoutperformsothermaterialsintermsofrecyclability.Environmentalexcellenceispromotedbyimplementingkeysustainable,energyefficient,environmentalandsocialresponsibilityprinciples.

Awarenessandcommitmenttotheseprinciplesisapriorityatalllevelsofthecompany,andiscommunicatedinatransparentwaytoallstakeholders.

Groupoperationscomplywithlocalandlegalregulatoryrequirementsandeveryeffortismadetoanticipatenewlegislationbyinvestingaheadofitsimplementation.Anybreachesarerecordeddiligentlyanddealtwithpromptly.ManyoperationsareaccreditedtoISO14001andArcelorMittaliscommittedtoachieving100%certification.Todeliverthiscommitment,theGrouphasissuedmandatoryapplicationofISO14001certificationforallproductionfacilities.TheGroupiscurrentlyreworkingthecomplianceverificationprocedurebuildingonthestrengthsoftheArcelorandMittalSteelapproaches.Goingforward,thiscompliancemethodologywillbeintegratedintotheglobalenvironmentaldatabasethatiscurrentlybeingdevelopedtocaptureGroup-widedataonairemissions,waterquality,CO2andresidues.

TheGroup’sproductionsitesareimplementingagrowingnumberofprojectstoimprovetheprocessforproducingsteelfromironore,inordertoreduceCO2emissions.

ArcelorMittalisinfavourofdecreasinggreenhousegasemissions,incompliancewiththeprinciplesoftheKyotoProtocol.Inthelong-term,onlyaglobalapproachtoreducinggreenhousegasemissionswillallowthereductionsrequestedbythescientificcommunitytobeobtainedwhileensuringthecontinuedexistenceoftheEuropeansteelindustry.

AglobalCO2databaseisbeingestablished,tosetupworldwideArcelorMittalCO2emissionaccounting.Aprocessofidentifyingprojectsandexpertstoboostcleandevelopmentmechanismsandjointimplementationinitiativesthroughout

theGroupisunderway,andcommondevelopmentstrategiesandguidelinesarealsobeingestablished.Tocreateanetworkofexpertsworldwide,theEnvironmentDepartmentorganiseditsfirstKnowledgeManagementProgrammeonenvironmentfromMarch28to30,2007.

Thefutureofthesteelindustrywillhingeonitscapacitytochangeitsprocesses–inparticularthoseforproducingironfromore–toreduceCO2emissionssignificantlyandmeettheexpectationsofsocietyin2030-2050.

Sinceitscreation,Arcelorhassetupathink-tankaspartofanambitiousprojecttodevelopbreakthroughtechnologies.ThisprojectiscoordinatedbytheInternationalIronandSteelInstitute(IISI)andisbasedonregionalinitiatives.InEurope,ArcelorMittalheadstheULCOS(UltraLowCO2Steelmaking)project,whichbringstogetheraround48partners,consistingof:companies,researchcentresanduniversities.ULCOSaimstofindnewproductionprocessesthatdrasticallyreduceemissionsofCO2andothergreenhousegases.Itisevaluatingallfeasibletechniquessuchasgasrecyclinginblastfurnaces,theuseofhydrogenandbiomass,andwaysforseparatingandstoringCO2insuitablegeologicalstructures.ThesecondphaseoftheULCOSprogrammehasstarted,withfivetechnologiesbeingselectedforexperimentation.

Steelisdifferentfromothermaterials:itisnotonlythemostrecycledmaterialintheworld,withcollectionratesofupto90%dependingonusage(forexamplefoodpackagingandbeveragecans),butcanalso,oncecollected,beindefinitelyrecycled.Theuseoflightersteelincarmanufacturingmeansthatfuelconsumptionandpollutingemissionscanbeloweredandalsomeanstherearedryconstructionsites.

2003 2004 2005 2006AirPollution Ducteddust(kg/tonnesteel) 0.27 0.25 0.27 0.25AirPollution SO2Emissions(kg/tonnesteel) 1.05 1.17 1.17 1.18AirPollution NOxEmissions(kg/tonnesteel) 1.16 1.11 1.14 1.08AirPollution CO2Emissions(t/tsteel) 1.50 1.55 1.56 1.59Water Waterdischarge(outflow)(m3/tonnesteel) 4.15 3.74 5.89 5.54WaterQuality ChemicaloxygendemandCOD(g/tonnesteel) 190 190 179 138WaterQuality Suspendedmatter(g/tonnesteel) 118 93 155 150Residues Residueseliminatedthroughdischarge orincineration(kg/tonnesteel) 42.6 31.6 32.0 30.8Residues Storedresidues(kg/tonnesteel) 46.8 33.5 33.5 46.9

Arcelor Sustainable Development: Key Environment Performance Indicators

Steel is the material of choice for environmental protection. Not only is it environmentally friendly, but it also outperforms other materials in terms of recyclability.


The Arcelor Mittal ambition is to become a world class leader in the management of Health and Safety for all its partners.

Health and Safety

HealthandSafety(H&S)isakeypriorityforArcelorMittal.TheH&SdepartmentadvisesandassiststheGroupManagementBoardandthevariousbusinessunitstomaintainasafeandhealthyworkplace.FromthefirstdaysoftheintegrationphasebetweenArcelorandMittalSteel,auniqueH&Smodelhasbeenimplementedacrossthewholeorganisation,whichenablestodefineandfollow-uptargetsandresultsofthevariousbusinessunits.

InordertoraiseawarenessofH&Sissuesamongstthe320,000employees,ArcelorMittaldecidedtoorganiseaworldwideHealthandSafetydayon6March2007,withthehelpofemployeerepresentatives.ArcelorMittalputstheirpeoplebeforethejobandunderstandsthecyclebetweenworkandhome,andhowtheyaffecteachother.TheprincipleistogenerateaworldwidemobilisationdayoftheGroup’sentireworkforce,includingsubcontractors,onthetopicofH&S.ThiseventallowedtofocusonH&Sandtopointoutprioritiesgivenbytheactionplansinplace,bothcorporateandlocal,toproviderenewedfocusforH&S,andtostimulatecollaborationandsharingofknow-howandbestpractices.

A strong commitment to Health and Safety

ArcelorhasdrawnupaSafetyCharterthatappliestoallconsolidatedcompanies.ItcoversthefieldsofHealth,Safety,IndustrialSecurityandProductSafety,andconcernsnotonlyGrouppersonnel,butalsosubcontractorsworkingonsites,personslivingnearfacilities,customerpersonnelworkingwithArcelorproducts,andconsumers.Thestaffrepresentativebodiesthatco-signedthischarterarecloselyinvolvedinitsdistributionandimplementationamongbothArcelorandsubcontractorstaff.

ArcelorMittaliscommittedtothesustainabledevelopmentofsteelinasociallyresponsibleway.Thisglobalconcernincludesallaspectsofhumanlifeandextendsbeyondtheboundariesofthecompany.

Wearing seatbelts

In2005,Arcelormadewearingseatbeltsandharnessesapriority.Thesimpleactoffasteningabeltorputtingonaharnesscansavelives,andmustbecomesecondnature.

Thewearingofseatbeltsisrequiredofallstaff,insideandoutsideplants.Awareness-raisingandpostercampaigns,alongwithseatbeltcheckswithinsitesandatsiteexits,wereintroducedacrossallsitesin2005.

Atthesametime,initiativestoraiseawarenessaboutthewearingofsafetyharnesseswereintroducedinproductionplants,andspecificGroup-widechartersweredrawnupin2005.Theaimwastoreducethenumberoffalls,whichareresponsibleforathirdofallfatalaccidentswithintheGroup.

Safety of production facilities

Thesafetyteamsareextremelyfocusedatallsites.Apreciseinventoryofallpersonsinvolvedincrisismanagementhasbeendrawnup.Thisallowseachpersontobemobilisedandtocoordinatetheiractionsintheeventofaseriousaccident.Precisedirectiveshavebeenpublishedtomanagecrisiscommunication,andtosupportArcelorMittalUniversityinteachingallsitemanagershowtosetupacrisiscentreandbuildamulti-skilledteamtohandleacrisis.

Product safety

Steeldoesnotconstituteahealthhazard.Itdoesnotemithazardous,volatileorallergenicsubstances.Itdoesnothaveitsownelectricormagneticfield,andsometreatmentsevenmakeitfitforfooduse.Unlikeothercompetingmaterials,steel–andmoreparticularlyitsmaincomponentofiron–isofficiallyrecognisedbytheEuropeanCommissionasbeingenvironmentallyfriendly,i.e.notconstitutingaparticularthreattotheenvironmentinanyform(iron,solubleorinsolubleoxidesandsalts).


Financial and Legal Information

Arcelor has entered a new stage of growth and consolidation by merging with Mittal Steel, which created the global leader in the steel industry.The new Group is well-positioned to forge the ultimate phase of consolidation for more sustainability.


Consolidated Financial Statements56 ConsolidatedIncomeStatement57 ConsolidatedBalanceSheet59 ConsolidatedStatementofCashFlows60 ConsolidatedStatementofChangesinShareholders’Equity61 NotestotheConsolidatedFinancialStatements124 Auditor’sReport

Annual Accounts – Arcelor S.A.126 BalanceSheet–ArcelorS.A.128 ProfitandLossAccountfortheyearended31December2006130 Proposedappropriationoftheresultfortheyear131 NotestotheAnnualAccounts138 Auditor’sReport


Consolidated Financial StatementsConsolidated Income Statement(AmountsinEURmillion,unlessotherwisestated)

InEURmillion 2006 2005*

Revenue (Note 28) 40,611 32,611Otheroperatingincome 760 707Ownworkcapitalisedandincreaseanddecreaseinfinishedandunfinishedgoods 81 352Costofrawmaterialsandgoodsforresale -22,692 -15,991Otherexternalexpenses -6,648 -6,761Staffcosts(Note22) -5,418 -4,858Impairment,depreciationandamortisationexpenses -1,460 -1,294Negativegoodwill 11 29Otheroperatingexpenses -791 -378Operating result (Note 28) 4,454 4,417Netfinancingcosts(Note23) -696 -254Shareofprofitincompaniesaccountedforusingtheequitymethod(Note6) 363 317PROFIT BEFORE TAX 4,121 4,480Taxexpense(Note24) -462 -175PROFIT FOR THE YEAR 3,659 4,305Netprofit–Groupshare 3,007 3,873Netprofit–Minorityinterest 652 432EarningspershareinEUR(Note15) –basic 4.71 6.31–diluted 4.71 5.94(*)Tofacilitatemeaningfulyear–on–yearcomparisons,2005figureshavebeenadjustedtoaccountforrevisedaccountingpolicies(seenote1).

Theaccompanyingnotesformanintegralpartoftheseconsolidatedfinancialstatements.


Consolidated Financial StatementsConsolidated Balance Sheet(AmountsinEURmillion,unlessotherwisestated)

AssetsInEURmillion,asat31December 2006 2005*

Non-current assets Intangibleassets(Note4) 1,634 193Property,plantandequipment(Note5) 16,770 13,767Investmentsaccountedforusingtheequitymethod(Note6) 1,793 1,415Otherinvestmentsandfinancialassetsavailableforsale(Note7) 658 653Receivablesandotherfinancialassets(Note8) 1,132 739Deferredtaxassets(Note24) 1,327 1,378TOTAL NON-CURRENT ASSETS 23,314 18,145Current assets Inventories(Note9) 9,084 7,580Tradereceivables(Note10) 4,712 3,716Currenttaxassets 183 268Otherreceivables(Note11) 4,936 1,510Cashandcashequivalents(Note12) 2,345 4,645Assetsclassifiedasheldforsale(Note13) 265 -TOTAL CURRENT ASSETS 21,525 17,719TOTAL ASSETS 44,839 35,864

(*)Tofacilitatemeaningfulyear–on–yearcomparisons,2005figureshavebeenadjustedtoaccountforrevisedaccountingpolicies(seenote1).


Consolidated Financial StatementsConsolidated Balance Sheet continued(AmountsinEURmillion,unlessotherwisestated)

Equity and LiabilitiesInEURmillion,asat31December 2006 2005*

Shareholders’ equity Subscribedcapital 3,349 3,199Sharepremium 5,819 5,397Consolidatedreserves 10,681 6,163Translationreserve -659 149Equity attributable to equity holders of the parent (Note 14) 19,190 14,908Minority interest (Note 16) 2,896 2,522TOTAL EQUITY 22,086 17,430Non-current liabilities Interest-bearingliabilities(Note17) 5,553 4,341Employeebenefits(Note18) 2,438 1,617Provisionsforterminationbenefits(Note19) 762 852Otherlong-termprovisions(Note20) 972 943Deferredtaxliabilities(Note24) 1,124 537Otherliabilities 72 140TOTAL NON-CURRENT LIABILITIES 10,921 8,430Current liabilities Tradepayables 6,128 5,228Interest-bearingliabilities(Note17) 1,757 1,623Taxpayable 195 312Otheramountspayable(Note21) 3,374 2,567Provisionsforterminationbenefits(Note19) 11 30Otherprovisions(Note20) 289 244Liabilitiesclassifiedasheldforsale(Note13) 78 -TOTAL CURRENT LIABILITIES 11,832 10,004TOTAL EQUITY AND LIABILITIES 44,839 35,864

(*)Tofacilitatemeaningfulyear–on–yearcomparisons,2005figureshavebeenadjustedtoaccountforrevisedaccountingpolicies(seenote1).



Consolidated Financial StatementsConsolidated Statement of Cash Flows(AmountsinEURmillion,unlessotherwisestated)


Operating activitiesProfitfortheyearaftertax 3,659 4,305Profitofcompaniesaccountedforusingtheequitymethod,netofdividends -244 -222Amortisation,depreciation,impairmentandnegativegoodwill 1,449 1,265Netmovementinprovisions -25 -148Netprofitondisposalofassets -241 -63Dividendsreceived 70 51Changesinworkingcapital -186 -615Otheritems -202 -109CASH FLOWS FROM OPERATING ACTIVITIES ** 4,280 4,464Investing activities Acquisitionoftangibleandintangibleassets -2,298 -2,070Acquisitionofsubsidiarycompanies,netofcashacquired(Note3) -4,102 57Acquisitionoffinancialfixedassets -330 -331Disposaloftangibleandintangibleassets 348 82Disposalofsubsidiarycompanies,netofcashdisposedof(Note3) 151 331Disposaloffinancialfixedassets 150 120Proceedsandrepaymentofloans -188 205CASH FLOWS FROM INVESTING ACTIVITIES - 6,269 - 1,606Financing activities Othernetcontributionstoshareholders’equity 8 12Dividendspaid -1,473 -560Proceedsfromborrowings 7,158 499Repaymentofborrowings -6,384 -2,086Repaymentofpensionfunds - -254CASH FLOWS FROM FINANCING ACTIVITIES - 691 - 2,389Effectofexchangeratefluctuationsoncashheld 380 133Net increase in cash and cash equivalents - 2,300 602CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 4,645 4,043CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 2,345 4,645

(*) Tofacilitatemeaningfulyear–on–yearcomparisons,2005figureshavebeenadjustedtoaccountforrevisedaccountingpolicies(seenote1).(**) IncludingtaxespaidinanamountofEUR482million(2005:EUR405million)andnetinterestpaidinanamountofEUR195million

(2005:EUR107million).


Subscribed Share Own Revaluation Revaluation Other Foreign Shareholders’ Share- Total capital premium shares reserves reserves consolidated currency equity– holders’ Share- Arcelor Arcelor relatingto relatingto reserves translation Groupshare equity– holders’ derivative securities (Note13) Minority equity instruments available interest (Note25) forsaleInEURmillion (Note7)

31 December 2004 3,199 5,397 - 364 28 - 2,955 - 403 10,812 1,415 12,227PROFIT AND LOSS Profitfortheyear2005 - - - - - 3,846 - 3,846 432 4,278Cashflowhedging - - - 75 - - - 75 - 75Securitiesavailableforsale(Note7) - - - - 24 - - 24 - 24Foreignexchangedifferences - - - - - - 552 552 236 788DISTRIBUTIONS AND TRANSACTIONS WITH SHAREHOLDERS Dividendspaid - - - - - -399 - -399 -161 -560AcquisitionofAcesita - - - - - 42 - 42 - 42Utilisationofandprofitonthesaleofownshares - - 97 - - - - 97 - 97Costofequity-settledshare-basedpayments - - - - - 4 - 4 - 4Acquisitionsandrepurchaseofminorityinterest - - - - - - - - 602 602Otheradjustments - - - - - 56 - 56 - 5631 December 2005 3,199 5,397 - 267 103 24 6,504 149 15,109 2,524 17,633AdoptionIAS19revised - - - - - -201 - -201 -2 -2031 January 2006 3,199 5,397 - 267 103 24 6,303 149 14,908 2,522 17,430PROFIT AND LOSS Profitfortheyear2006 - - - - - 3,007 - 3,007 652 3,659Cashflowhedging(Note23) - - - -119 - - - -119 - -119Securitiesavailableforsale(Note7) - - - - - - - - 4 4ConversionoptionO.C.E.A.N.E.2017(Note17) - - - - - 326 - 326 - 326Foreignexchangedifferences - - - - - - -808 -808 -97 -905DISTRIBUTIONS AND TRANSACTIONS WITH SHAREHOLDERS Dividendspaid - - - - - -1,149 - -1,149 -324 -1,473AcquisitionofMittalSteelGandrange(Note3) - - - - - 155 - 155 - 155DisposalofArcelorGermanyholdinganditssubsidiaries(Note3) - - - - - 1,980 - 1,980 87 2,067Utilisationofandprofitonthesaleofownshares - - 265 - - 41 - 306 - 306Costofequity-settledshare-basedpayments - - - - - 11 - 11 - 11Capitalincrease 150 422 - - - - - 572 - 572Acquisitionsandrepurchaseofminorityinterest - - - - - - - - 52 52Actuarialgains/losses - - - - - -72 - -72 - -72Otheradjustments - - - - - 73 - 73 - 7331 DECEMBER 2006 3,349 5,819 - 2 - 16 24 10,675 - 659 19,190 2,896 22,086


Consolidated Financial StatementsConsolidated Statement of Changes in Shareholders’ Equity(AmountsinEURmillion,unlessotherwisestated)


Note1: GeneralNote2: AccountingpoliciesNote3: ScopeofconsolidationNote4: IntangibleassetsNote5: Property,plantandequipmentNote6: InvestmentsincompaniesaccountedforusingtheequitymethodNote7: OtherinvestmentsandfinancialassetsavailableforsaleNote8: ReceivablesandotherfinancialassetsNote9: InventoriesNote10: TradereceivablesNote11: OtherreceivablesNote12: CashandcashequivalentsNote13: Assetsclassifiedasheldforsaleandliabilitiesdirectlyassociatedwithnon-currentassetsclassifiedasheldforsaleNote14: EquityNote15: EarningspershareNote16: MinorityinterestNote17: Interest-bearingliabilitiesNote18: EmployeebenefitsNote19: ProvisionsforterminationbenefitsNote20: OtherprovisionsNote21: OtheramountspayableNote22: StaffcostsNote23: FinancialincomeandexpenseNote24: TaxationNote25: RelatedpartydisclosureNote26: FinancialinstrumentsandderivativesNote27: CommitmentsgivenandreceivedNote28: SegmentreportingNote29: EventsafterthebalancesheetdateNote30: EmissionrightsNote31: SimplifiedGrouporganisationchartNote32: ListingofGroupcompaniesasat31December2006

Consolidated Financial StatementsNotes to the Consolidated Financial Statements(AmountsinEURmillion,unlessotherwisestated)


PursuanttotheRegulation(EC)No1606/2002of19July2002,theconsolidatedfinancialstatementsoftheArcelorGroupfortheyearended31December2006arepreparedinaccordancewithInternationalFinancialReportingStandards(“IFRS”),asadoptedbytheEuropeanUnionon31December2006.Theexclusionofcertainprovisionsrelatingtohedgeaccounting,pursuanttotheadoptionofIAS39bytheEuropeanUnion,hasnoimpactontheGroup’sconsolidatedfinancialstatements.

NOTE 1 – GENERALArcelorS.A.wasincorporatedunderLuxembourgLawon8June2001inthecontextoftheproposedbusinesscombinationofAceralia,ArbedandUsinor;whichwascompletedon28February2002.MittalSteelCompanyN.V.hascompletedtheacquisitionofArcelorS.A.on1August2006andholds94.24%oftheoutstandingsharesofArcelorS.A.asat31December2006.TheArcelorgroupisincludedintheconsolidatedfinancialstatementsofMittalSteelCompanyN.V.,formingthelargestbodyofundertakingsofwhichtheArcelorgroupformspart.Theregisteredofficeofthecompanyislocated15thfloor,Hofplein20,3032ACRotterdamTheNetherlandsandtheconsolidatedaccountsareavailableatthisaddress.Theconsolidatedfinancialstatementsasat31December2006presentthefinancialpositionoftheCompanyandofitssubsidiaries(hereafter“theGroup”),aswellastheinterestsoftheGroupinassociatedcompaniesandjointlycontrolledentities.TheBoardofDirectorsapprovedtheconsolidatedfinancialstatementsasatandfortheyearended31December2006on21February2007andauthorisedthepublicationofsaidconsolidatedfinancialstatementson23March2006.Thesefinancialstatementswillnotbefinaluntilapprovedattheannualgeneralmeetingofshareholders.TheconsolidatedfinancialstatementshavebeenpreparedinaccordancewithIFRS,asadoptedbytheEuropeanUnion.ThisimpliesthattheGroupmakessomeestimatesandassumptionshavinganimpactonthebalancesheetandontheincomestatementfortheperiod.ChangesinfactsandcircumstancesmayleadtheGrouptochangetheseestimates.Toimprovedisclosureofthegradualexternalisationofitspensioncommitments,theGrouprecognises,startingfrom1January2006,actuarialgainsandlossesimmediatelytoshareholders’equity,inaccordancewithIAS19revised.Therecognitionofnetactuarialgainsandlosseswaspreviouslydoneapplyingthecorridorpolicy.Firsttimeadoptionofthisnewaccountingpolicyhasledtoatransferofnetunrecognisedactuarialgainsandlossesattheendoftheyearended31December2005toshareholders’equity.Impactsonthebalancesheetandincomestatementareasfollows:

Consolidated Financial StatementsNotes to the Consolidated Financial Statements continued(AmountsinEURmillion,unlessotherwisestated)


CONSOLIDATED INCOME STATEMENTInEURmillion 2005aspublished IAS19revised 2005restated

Operatingresult 4,376 41 4,417of which staff costs - 4,899 41 - 4,858PROFIT BEFORE TAX 4,439 41 4,480Taxexpense -161 -14 -175PROFIT FOR THE YEAR 4,278 27 4,305Netprofit–Groupshare 3,846 27 3,873Netprofit–Minorityinterest 432 - 432EarningspershareinEUR –basic 6.26 - 6.31–diluted 5.90 - 5.94

CONSOLIDATED BALANCE SHEETS

AssetsInEURmillion,asat31December 2005aspublished IAS19revised 2005restated

TOTALNON-CURRENTASSETS 18,196 -51 18,145TOTALCURRENTASSETS 17,720 -1 17,719TOTAL ASSETS 35,916 - 52 35,864

Equity And LiabilitiesInEURmillion,asat31December 2005aspublished IAS19revised 2005restated

TOTALSHAREHOLDERS’EQUITY 17,633 -203 17,430TOTALNON-CURRENTLIABILITIES 8,279 151 8,430of which employee benefits 1,431 186 1,617 of which deferred tax 571 - 35 536TOTALCURRENTLIABILITIES 10,004 10,004TOTAL EQUITY AND LIABILITIES 35,916 - 52 35,864



NOTE 2 – ACCOUNTING POLICIES

1) Statement of complianceTheconsolidatedfinancialstatementsarepreparedinaccordancewithinternationalstandardsonfinancialinformationor“InternationalFinancialReportingStandards”(“IFRS”)asadoptedbytheEuropeanUnion.

2) Presentation of the consolidated financial statementsTheconsolidatedfinancialstatementsarepreparedineuro(“EUR”),roundedtothenearestmillion.TheconsolidatedfinancialstatementsoftheGrouparepreparedonthebasisofthehistoricalcostconventionwiththeexceptionofthefollowingassetsandliabilitieswhicharestatedattheirfairvalues:derivativefinancialinstruments,investmentsheldfortradingandinvestmentsavailableforsale.Inqualifyingfairvaluerelationships,hedgedassetsandliabilitiesarestatedattheirfairvaluewithrespecttotheriskshedged.Assetsandliabilitiesheldforsalearecarriedatlowerofcostorfairvalue.AssetsintendedtobedisposedoforconsumedduringtheGroup’snormalcourseofoperations,assetsheldwithaviewtobeingsoldinthetwelvemonthsfollowingtheyear-enddateaswellascashandcashequivalentsareconsideredcurrent.Allotherassetsareconsiderednon-current.LiabilitiesfallingdueduringtheGroup’snormalcourseofoperations,orinthetwelvemonthsfollowingtheyear-enddate,areconsideredcurrent.Allotherliabilitiesareconsiderednon-current.

3) Consolidation principles

SUBSIDIARIESSubsidiariesarecompaniescontrolledbytheGroup.ControlexistswhentheGrouphasdirectorindirectcontroloverthefinancialandoperatingpoliciesofacompanysoastoobtainbenefitsderivedfromitsactivities.ControlgenerallyexistswheretheGroupholdsmorethanhalfofthevotingrights.Thefinancialstatementsofthesignificantsubsidiariesareincludedintheconsolidatedfinancialstatementsfromthedatewheneffectivecontrolstartsuntilthedatewheneffectivecontrolends.Investmentsinnon-significantsubsidiariesarerecordedasnon-currentassets.Theyareclassifiedasbeingavailable-for-saleandarestatedatfairvaluewhenthefairvaluecanbereliablymeasured.Whenthefairvaluecannotbereliablymeasured,theyarecarriedatcostlessimpairmentloss.Gainsandlossesresultingfromthisvaluationprocedurearerecordedinequity.

ASSOCIATEDCOMPANIESAssociatedcompaniesarecompaniesinwhichtheGrouphasasignificantinfluence,butnocontrol,overthefinancialandoperatingpolicies.SignificantinfluenceisgenerallyassumedwheretheGroupholdsatleast20%ormoreofthevotingrights.Thefinancialstatementsofassociatedcompaniesareincludedintheconsolidatedfinancialstatementsusingtheequitymethod,accordingtowhichtheGrouprecordsitsshareinthenetassetsoftheassociatedcompanyinitsbalancesheetfromthedatewhensignificantinfluencestartsuntilthedatewhensignificantinfluenceends.

JOINTLYCONTROLLEDENTITIESJointlycontrolledentitiesarecompaniesinwhichtheGroupholdsjointcontrolovertheiractivitiesunderacontractualagreement.Thefinancialstatementsofjointlycontrolledentitiesareincludedintheconsolidatedfinancialstatementsusingtheequitymethod,accordingtowhichtheGrouprecordsitsshareinthenetassetsofthejointlycontrolledentityinitsbalancesheetfromthedatewhenjointcontrolstartsuntilthedatewhenjointcontrolends.

TRANSACTIONSELIMINATEDTHROUGHCONSOLIDATIONIntra-groupbalancesandtransactions,aswellasunrealisedgainsresultingfromintra-grouptransactions,areeliminatedinthepreparationoftheconsolidatedfinancialstatements.Unrealisedlossesresultingfromintra-grouptransactionsareonlyeliminatedtotheextentthatthereisnoindicationofimpairment.UnrealisedgainsresultingfromtransactionswithassociatedcompaniesandjointlycontrolledentitiesareeliminatedtotheextentoftheGroup’sinterestinsuchcompaniesorentities,againsttheinvestmentamountoftheassociatedcompanyorjointlycontrolledentity.Unrealisedlossesareonlyeliminatedtotheextentthatthereisnoindicationofimpairment.Acompletelistingofthemainsubsidiariesandthecompaniesaccountedforusingtheequitymethod,asat31December2006,isshowninNote32.

4) Business combinations

GOODWILLApositivedifferencebetweenthecostofanacquisitionandtheacquirer’sinterestinthefairvalueoftheidentifiableassets,liabilitiesorcontingentliabilitiesacquired,isaccountedforasgoodwillandisreportedasanasset.Goodwillbalancesareconsideredateachfinancialreportingdateinordertoidentifyapossibleimpairment(seeparagraph8regardingtheimpairmentofassets).Anegativedifferencebetweenthecostofanacquisitionandtheacquirer’sinterestinthefairvalueoftheidentifiableassets,liabilitiesorcontingentliabilities(negativegoodwill)acquired,isrecordeddirectlyintheresultfortheperiod.



STEPPEDACQUISITIONSWhenanacquisitioniscompletedbyaseriesofsuccessivetransactions,eachsignificanttransactionisconsideredindividuallyforthepurposeofthedeterminationofthefairvalueoftheidentifiableassets,liabilitiesandcontingentliabilitiesacquiredandhenceforthegoodwillassociatedwiththeacquisition.Thefairvaluesoftheidentifiableassetsandliabilitiesacquiredcanvaryatthedateofeachtransaction.Whenatransactionresultsintakingcontrolovertheentitytheinterestspreviouslyheldinthatentityarere-valuedonthebasisofthefairvaluesoftheidentifiableassetsandliabilitiesatthatdate.Thecontrapostingforthisrevaluationisrecordeddirectlyinshareholders’equity.Subsequentpurchases,aftertheGrouphasobtainedcontrol,aretreatedastheacquisitionsofsharesfromminorityshareholders:theidentifiableassetsandliabilitiesoftheentityarenotsubjecttoafurtherrevaluationandthepositiveornegativedifferencebetweenthecostofsuchsubsequentacquisitionsandthenetvalueoftheadditionalproportionofthecompanyacquiredisrecordeddirectlyinshareholders’equity.

MINORITYINTERESTTheinterestsofminorityshareholdersarerecordedonthebasisoftheirproportionateinterestinthenetvalueoftheentityacquired.BUSINESSCOMBINATIONSINVOLVINGENTITIESUNDERCOMMONCONTROLTheassetsandliabilitiesacquiredthroughabusinesscombinationarisingfromtransferofinterestsinentitiesthatareunderthecontroloftheshareholderthatcontrolstheGrouparerecognisedatthecarryingamountrecognisedpreviouslyintheGroup’scontrollingshareholder’sconsolidatedfinancialstatements.Anycashpaidfortheacquisitionisrecogniseddirectlyinequity

5) Foreign currency translation

TRANSACTIONSINFOREIGNCURRENCIESTransactionsdenominatedinforeigncurrenciesareconvertedtoEURattheforeignexchangeraterulingatthedateofthetransaction.Monetaryassetsandliabilitiesdenominatedinforeigncurrenciesatthebalancesheetdateareconvertedattheforeignexchangeraterulingatthatdate.Foreignexchangedifferencesarisingonconversionarerecognisedintheincomestatement.Non-monetaryassetsandliabilitiesdenominatedinforeigncurrencies,recordedathistoricalcost,areconvertedattheforeignexchangerateprevailingatthedateofthetransaction.

FINANCIALSTATEMENTSDENOMINATEDINFOREIGNCURRENCIESAssetsandliabilitiesdenominatedinforeigncurrencies,includinggoodwillandfairvalueadjustmentsarisingonconsolidation,areconvertedtoEURattheforeignexchangeraterulingatthebalancesheetdate.TherevenuesandexpensesofforeigncurrencyoperationsareconvertedtoEURattheaverageratecalculatedfortheperiod.Foreignexchangedifferencesarisingonconversionarerecogniseddirectlyinshareholders’equity.Uponthesaleofanentity,anyexchangedifferencesinequityrelatingtothatentity,arerecordedthroughtheincomestatement.

6) Intangible assets

RESEARCHANDDEVELOPMENTExpenditureonresearchactivities,undertakenwithaviewtoacquirenewscientificortechnicalknowledgeandunderstanding,isrecognisedintheincomestatementasincurred.Expenditureondevelopmentactivities,whereresearchfindingsareappliedfortheproductionofneworsubstantiallyimprovedproductsandprocesses,iscapitalisediftheproductortheprocessisconsideredtobetechnicallyandcommerciallyviableandtheGrouphassufficientresourcestocompletethedevelopmentprogramme.Theexpenditurethuscapitalisedincludesthecostofmaterials,directlabourcostsandanappropriateproportionofoverheads.Capitaliseddevelopmentexpenditureisstatedatcostlessaccumulatedamortisationandimpairmentlosses.Otherdevelopmentexpenditureisrecognisedintheincomestatementasincurred.

OTHERINTANGIBLEASSETSOtherintangibleassets,acquiredbytheGroup,arestatedatcostlessaccumulatedamortisationandimpairmentlosses.Expenditureoninternallygeneratedgoodwillisrecognisedintheincomestatementwhenincurred.Intangibleassetsotherthangoodwillprimarilyincludethecostoftechnology,customerrelationshipsandlicencespurchasedfromthirdparties.Theseintangibleassetsareamortisedonastraight-linebasisoveramaximumperiodoftenyears.

SUBSEQUENTEXPENDITURESubsequentexpenditureonintangibleassetsiscapitalisedonlywhenitincreasesthefutureeconomicbenefitsofthespecificassettowhichitrelatesandwhenthiscostcanbemeasuredandattributedtotheassetinareliablemanner.Allotherexpenditureisrecognisedasanexpensewhenincurred.

AMORTISATIONAmortisationisrecognisedasanexpenseonastraight-linebasisovertheestimatedusefullivesofintangibleassets.Theestimatedusefullivesareasfollows:– patentsandtrademarks 5years– capitaliseddevelopmentcosts 5years– customerrelationships 10years



7) Property, plant and equipmentProperty,plantandequipmentarestatedatcostlessaccumulateddepreciationandimpairmentlosses.ThecostofanassetcreatedbytheGroupincludesthecostofmaterials,directlabourcostsandanappropriateproportionofoverheads.Borrowingcostsonloansusedtofinancetheconstructionofproperty,plantandequipmentarecapitalisedaspartofthecostoftheassetuntilsuchtimethattheassetisreadyforitsintendeduse.Property,plantandequipmentaresubsequentlystatedatcostlessaccumulateddepreciationlessanyimpairmentlosses.Whereatangiblefixedassetcomprisesmajorcomponentshavingdifferentusefullives,thesecomponentsareaccountedforasseparateitems.Thecostoftheperiodicreliningofblastfurnacesiscapitalisedanddepreciatedovertheexpectedproductionperiod.Maintenanceandrepaircostsarerecognisedasexpensesintheperiodinwhichtheyareincurred.GovernmentgrantsthatassisttheGroupintheacquisitionofproperty,plantandequipmentaredeductedfromthecarryingamountoftherelatedassetandreleasedtotheincomestatementonastraight-linebasisovertheexpectedusefullifeoftheassociatedasset.

SUBSEQUENTEXPENDITUREExpenditureincurredinreplacingorrenewingcomponentsofsomeitemsofproperty,plantandequipmentisaccountedforastheacquisitionofaseparateassetandthereplacedassetiswrittenoff.Othersubsequentexpenditureonproperty,plantandequipmentisonlyrecognisedasanassetwhentheexpenditureimprovestheconditionoftheassetbeyonditsoriginallyassessedstandardofperformance.Allothersubsequentexpenditureisrecognisedintheincomestatementasanexpenseintheperiodinwhichitisincurred.

DEPRECIATIONDepreciationisaccountedforasanexpenseonastraight-linebasisovertheestimatedusefullivesofproperty,plantandequipment.Landisnotdepreciated.Property,plantandequipmentacquiredbefore1January2001aredepreciatedovertheirusefullives,whichrangefrom12to20yearsforbuildingsandindustrialinstallationsandfrom5to12yearsforotherproperty,plantandequipment.Forotherproperty,plantandequipmenttheestimatedusefullivesareasfollows:AsaconsequenceofthebusinesscombinationbetweenArcelorandMittal,remainingusefullivesoftangibleassetswerehoweverreassessedintheframeworkofthepurchaseaccountingadjustmentsasat1August2006.Depreciationchargewasadjustedaccordinglyfortheperiodbetween1August2006and31December2006.Allproperty,plantandequipmentexcepthardaredepreciatedoverusefullivesvaryingfrom10to50yearsforbuildingsandimprovementsand2to45yearsformachineryandequipment.Thecostofminingproductionassetsisdepreciatedonaunit-of-productionbasis.Therateofdepreciationisdeterminedbasedontherateofdepletionoftheprovendevelopedreservesinthecoaldepositsmined.Provendevelopedreservesaredefinedastheestimatedquantityofproductwhichcanbeexpectedtobeprofitabilityextracted,processedandusedintheproductionofsteelundercurrentandforeseeableeconomicconditions.Depletionofmineralpropertiesisbasedonrateswhichareexpectedtoamortisecostoftheestimatedtonnageofmineralstoberemoved.TheGrouprecognisesthefairvalueofafutureassetretirementobligationasaliabilityintheperiodinwhichitincursalegalobligationassociatedwiththeretirementoftangiblelong-livedassetsthatresultsfromtheacquisition,construction,development,and/ornormaluseoftheassets.TheGroupconcurrentlyrecognisesacorrespondingincreaseinthecarryingamountoftherelatedlong-livedassetthatisdepreciatedoverthelifeoftheasset.Thekeyassumptionsonwhichthefairvalueoftheassetretirementobligationsarebasedincludetheestimatedfuturecashflows,thetimingofthosecashflowsandthecredit-adjustedrisk-freerateorratesonwhichtheestimatedcashflowshavebeendiscounted.Subsequenttotheinitialmeasurementtheliabilityisaccretedovertimethroughperiodicchargestoearnings.Theamountoftheliabilityissubjecttore-measurementateachreportingperiodiftherehasbeenachangetocertainofthekeyassumptions.



LEASES

Where the Group is the lesseeLeaseswithrespecttosignificantassetswheretheGroupassumessubstantiallyalloftherisksandrewardsofownershipareclassifiedasfinanceleases.Property,plantandequipmentacquiredbywayoffinanceleasesarestatedatanamountequaltothelowerofthefairvalueandthepresentvalueoftheminimumleasepaymentsattheinceptionofthelease.Eachleasepaymentisallocatedbetweenthefinancechargesandareductionoftheleaseliability.Theinterestelementofthefinancecostischargedtotheincomestatementovertheleaseperiodsoastoachieveaconstantrateofinterestontheremainingbalanceoftheliability.Thedepreciationpolicyofcapitalisedleasedassetsissimilartothatappliedtoownedproperty,plantandequipment.Ifthereisnoreasonablecertaintythatthelesseewillobtainownershipattheendoftheleaseterm,theassetisdepreciatedovertheshorterofitsestimatedusefullifeortheleaseterm.Whereasignificantportionoftherisksandrewardsofownershipareretainedbythelessor,leasesareclassifiedasoperatingleases.Paymentsmadeunderoperatingleasesarerecognisedasanexpenseintheincomestatementoftheperiod.

Agreements containing a leaseInaccordancewithIFRIC4,thesameaccountingtreatmentappliestoagreementsthatdonottakethelegalformofalease,butconveytherighttouseatangiblefixedassetinreturnforapaymentorseriesofpayments.

8) Impairment of assetsThecarryingamountsoftheGroup’sassets,otherthaninventories,deferredtaxassets,andassetsrelatedtoemployeebenefitplans,arereviewedateachbalancesheetdatetodeterminewhetherthereisanyindicationofimpairment.Goodwillarisingontheacquisitionofcompaniesisallocatedtocashgeneratingunitswhichmaybenefitfromsynergyeffectsrelatedtotheacquisition.Ifanysuchindicationexistsforanasset,orforthecash-generatingunittowhichitbelongs,therecoverableamountisestimated.Forintangibleassetsthatarenotyetavailableforuse,theirrecoverableamountisestimatedateachbalancesheetdate.Animpairmentlossisrecordedimmediatelywherethecarryingamountofanassetoracash-generatingunitexceedsitsrecoverableamount.Impairmentlossesarerecognisedasanexpenseintheincomestatement.

CALCULATIONOFRECOVERABLEAMOUNTTherecoverableamountofanassetisthehigherofitsnetsellingpriceanditsvalueinuse.Inassessingitsvalueinuse,theestimatedfuturecashflowsarediscountedtotheirpresentvalueusingapre-taxdiscountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheasset.Foranassetthatdoesnotgeneratecashinflowslargelyindependentofthosefromotherassets,therecoverableamountisdeterminedforthecash-generatingunittowhichtheassetbelongs.Therecoverableamountofinvestmentsinheld-to-maturitysecuritiesandreceivablesiscalculatedasthepresentvalueoftheexpectedfuturecashflows,discountedattheoriginaleffectiveinterestrateinherentintheasset.Cashflowsonshort-termreceivablesarenotdiscounted.

REVERSALOFANIMPAIRMENTLOSSAnimpairmentlossrecognisedinprioryearsisreversedif,andonlyif,therehasbeenachangeintheestimatesusedtodeterminetheasset’srecoverableamountsincethelastimpairmentlosswasrecognised.However,theincreasedcarryingamountofanassetduetoareversalofanimpairmentlosswillnotexceedthecarryingamountthatwouldhavebeendetermined(netofamortisationordepreciation)hadnoimpairmentlossbeenrecognisedfortheassetinprioryears.Impairmentlossesrecognisedforgoodwillarenotreversed.

9) Investments in debt and equity securitiesInvestmentsheldfortradingareclassifiedascurrentassetsandarestatedatfairvalue,withanyresultinggainorlossbeingrecognisedintheincomestatement.Investmentswithafixedmaturitydateaftermorethanoneyear,thattheGrouphasthepositiveintentandabilitytoholdtomaturity,areincludedinnon-currentassetsandarestatedatamortisedcostusingtheeffectiveyieldmethodlessimpairmentlosses.OtherinvestmentsheldbytheGroupareclassifiedasbeingavailable-for-saleandarestatedatfairvaluewhenitcanbereliablymeasured.InaccordancewithIAS39revisedapplicableasof1January2005,anyresultinggainorlossisrecogniseddirectlyinshareholders’equity.Thefairvalueofinvestmentsheldfortradingandinvestmentsavailable-for-saleistakenasthequotedbidpriceatthebalancesheetdate.Forunquotedsecurities,avaluedeterminedfromdiscountedfuturecashflowsisused.

10) Trade and other receivablesTradeandotherreceivablesarestatedatcostlessvalueadjustmentsforlosses.



11) Inventories

CONSTRUCTIONWORKINPROGRESSConstructionworkinprogressisstatedatcontractcostincreasedbytherelatedprofitrecognisedtodatelessprovisionsforforeseeablelossesandprogressbillings.CostincludesallexpendituredirectlyrelatedtotheprojectsandanallocationoffixedandvariableoverheadsincurredintheGroup’scontractactivities.

OTHERINVENTORIESRawmaterialsandsuppliesarestatedatthelowerofcost(usingeithertheaveragecostmethodorthefirstinfirstoutmethod)ornetrealisablevalue.Finishedgoodsandwork-in-progressarestatedatthelowerofproductioncostornetrealisablevalue.Productioncostincludesdirectrawmaterialandlabourcostsandaportionofoverheadcosts,excludinggeneralandadministrativeexpenses.Themarketvalueofrawmaterialsandotherinventoriesisbasedonthenetrealisablevalue,includingaprovisionforslow-movingitemswhereappropriate.

12) Cash and cash equivalentsCashandcashequivalentsincludecashandshort-terminvestmentswithamaturityoflessthanthreemonthsfromtheacquisitiondate.Short-terminvestmentsarevaluedatmarketvalueattheendofeachperiod.

13) Assets and liabilities held for saleAssetsandliabilitieswhosecarryingamountwillberecoveredprincipallythroughasaletransactionratherthanthroughcontinuinguseareclassifiedasheldforsaleandremeasuredatthelowerofitscarryingvalueandfairvaluelesscoststosell.

14) Equity

REPURCHASEOFSHARECAPITALWhensharecapitalisrepurchased,theamountofconsiderationpaid,includingattributablecosts,isrecognisedasachangeinequity.Repurchased/treasurysharesaredeductedfromtotalshareholders’equityunderthecaption‘Treasuryshares’,untiltheyarecancelled.

DIVIDENDSDividendsarerecordedasaliabilityintheperiodwhentheyareapprovedbyageneralmeetingofshareholders.

15) Convertible debenture loansDebentureloansconvertibleintosharecapitalattheoptionoftheholder,wherethenumberofsharesissueddoesnotchangewithfluctuationsintheirfairvalue,areaccountedforascompoundfinancialinstruments,netofattributabletransactioncosts.Theequitycomponentoftheconvertibledebentureloansiscalculatedastheexcessoftheissueproceedsoverthepresentvalueofthefutureinterestandprincipalpayments,discountedattheprevailingmarketrateforasimilarliabilitythatdoesnothaveanassociatedequitycomponent.Theinterestexpenserecognisedintheincomestatementiscalculatedusingtheeffectiveinterestratemethod.

16) Interest-bearing borrowingsInterest-bearingborrowingsarerecordedatinitialcost,lessdirectattributabletransactioncosts.Theyarethenrecordedatamortisedcostwithanydifferencebetweenamortisedcostandredemptionvaluebeingrecognisedintheincomestatementovertheperiodoftheborrowingsonaneffectiveinterestbasis.

17) Employee benefits

TYPESOFPENSIONPLANS

Defined contribution plansDefinedcontributionplansarethoseplanswheretheGrouppaysfixedcontributionstoanexternallifeinsuranceorpensionfundforcertaincategoriesofemployees.Contributionsarepaidinreturnforservicesrenderedbytheemployeesduringtheperiod.Theyareexpensedastheyareincurredinlinewiththetreatmentofwagesandsalaries.Noprovisionsareestablishedinrespectofdefinedcontributionplans,astheydonotgeneratefuturecommitmentsfortheGroup.WithintheGroup,definedcontributionplansexclusivelyrelatetopensionplans.Theyare,primarily,additionalpensionplansthatservetocomplementlocallegalpensionschemesinrespectofwhichtheGrouppayscontributionstosocialorganisationsandwhichareaccountedforinthesamemanneraswagesandsalaries.

Defined benefit plansDefinedbenefitplansarearrangementsthatprovideguaranteedbenefitstocertaincategoriesofemployees,eitherbywayofcontractualobligationsorthroughacollectiveagreement.ThisguaranteeofbenefitsrepresentsafuturecommitmentoftheGroupand,assuch,aliabilityiscalculated.Theprovisioniscalculatedbyestimatingthebenefitsaccumulatedbyemployeesinreturnforservicesrenderedduringtheperiodandduringpriorperiods.Thecalculationtakesintoaccountdemographicassumptionsrelatingtothefuturecharacteristicsofthepreviousandcurrentpersonnel(mortality,personnelturnoveretc.)aswellasfinancialassumptionsrelatingtofuturesalarylevelsorthediscountrateappliedtoservicesrendered.Benefitsarediscountedinordertodeterminethepresentvalueofthefutureobligationresultingfromthistypeofplan.Theyareshowninthebalancesheetafterthedeductionofthefairvalueoftheassetsthatpossiblyservetocoverthem.



Thediscountrateappliedistheyield,atthebalancesheetdate,onAAcreditratedbondsthathavematuritydatessimilartothetermsoftheGroup’spensionobligations.Aqualifiedactuaryperformstheunderlyingcalculationsannually,usingtheprojectedunitcreditsmethod.Theactuarialassumptions(bothdemographicandfinancial)arereviewedandadaptedatyearend,givingrisetoactuarialgainsorlosses.Asfromthe1stJanuary2006,theGroupreplacedthe“corridorpolicy”bythenewoption,permittedbytheamendmenttoIAS19,ofrecognisingactuarialgainsandlossesintheperiodinwhichtheyoccur.Theseactuarialgainsandlossesarerecognisedinequity.WherethecalculationresultsinabenefittotheGroup,therecognisedassetislimitedtothenettotalofanyunrecognisedactuariallossesandpastservicecostsandthepresentvalueofanyfuturerefundsfromtheplanorreductionsinfuturecontributionstotheplan.Whenadefinedbenefitplanischanged,theincreaseinbenefitsearnedrelatingtopastservicesrenderedisrecognisedasanexpenseonalinearbasisinlinewiththeaverageremainingperiodtobecovereduntilthecorrespondingrightsareacquired.Incasetherightsareimmediatelyacquired,theexpenseisdirectlychargedtotheincomestatement.WithintheGroup,definedbenefitplansrelatetocomplementaryretirementschemes,departureindemnities,workmedalsandhealthinsurancearrangements.

NATUREOFCOMMITMENTSOFDEFINEDBENEFITPLANS

Complementary retirement schemesTheseschemesareprovidedinadditiontothelegalminimalpensioninrespectofwhichGroupcompaniescontributedirectlyintosocialorganisationsandwhichareaccountedforinthesamemanneraswagesandsalaries.

Termination paymentsTerminationpaymentsaregenerallyassociatedwithcollectiveagreementswithemployeesunderwhichindemnitiesarepaiduponnormalretirementaswellasuponvoluntaryorinvoluntaryretirement.

Work medalsWorkmedalprogrammesaresometimesestablishedunderagreementsatindividualcompanylevel.Thesearrangementsrepresentlong-termserviceawardprogrammesmadetoemployeeswithcertainlevelsofsenioritywiththeiremployers.

Health insuranceHealthinsuranceschemesrelateexclusivelytotheNorthAmericansubsidiariesofthegroup(“postretirementmedicalcare”).ForEuropeanentities,healthinsuranceisinplacebywayofobligatorycontributionstostatehealthinsuranceschemes.Thesecontributionsareaccountedforinthesamemanneraswagesandsalaries.

ASSETSCOVERINGCOMMITMENTSRELATINGTODEFINEDBENEFITPLANSThecommitmentsinrespectofcertainretirementplansarewholly,orinpart,coveredbylifeinsurancepoliciesorpensionfunds,dependingontheregulationsinplaceinthecountryinwhichthebenefitsareawarded(theconceptof“fundedobligations”).Externalisedcommitmentsareevaluatedbyindependentspecialists.

REMUNERATIONBYWAYOFSHAREOPTIONSTheGroupgrantsshareoptionplanstocertainmembersofseniormanagement.InaccordancewiththetransitionalprovisionsofIFRS2,applicablesinceJanuary12005,theaccountingtreatmentoftheseshareoptionplansislinkedtothedateofgrant:thosegrantedonorbefore7November2002(oneremainingplanofUsinorS.A.asat31December2005)donotgiverisetoanyrecognitionintheincomestatement.Whentheoptionsareexercised,cashreceivedlesstransactioncostsarecreditedtosubscribedcapitalandsharepremium.Plansgrantedafter7November2002(fourplansasat31December2006)areaccountedforusingthefairvalueoftheoptionatthedateofgrant,theeffectsofwhichwillbeamortisedonastraight-linebasisovertheperiodthroughtotheexercisedategivingrisetoaremunerationcharge.Thecontraentryisrecordeddirectlyinshareholders’equityofArcelorS.A,thecompanygrantingthestockoptions.

18) Provisions for termination benefitsTheGrouprecognisesanobligationforterminationbenefitswhenitisdemonstrablycommittedeithertoterminatinganemployee’scontractbeforethenormalretirementdateortoencouragingvoluntaryredundancy.Suchterminationbenefitsdonotbringfutureeconomicbenefits(servicesrenderedbyemployees)totheGroupandareimmediatelyrecognisedintheincomestatement.WithintheGroup,provisionsforterminationbenefitsfallintotwocategories:

SOCIALPROVISIONSINTHECONTEXTOFRESTRUCTURINGPLANSProvisionsarerecordedwhentheGrouphasannouncedtotheentityandtheaffectedemployeesortotheirrepresentativesasocialplanthatisdetailedandformalisedinaccordancewiththerequirementsofIAS37.Suchsocialplanseithertranslateintoredundancyorearlyretirementmeasures.Benefitsarecalculatedasafunctionoftheapproximatenumberofpeoplewhoseemploymentcontractswillbeterminated.Ifsuchbenefitsareclaimablemorethantwelvemonthsaftertheendoftheperiod,theyarediscountedusinganinterestrate,whichcorrespondstothatofAAcreditratedbondsthathavematuritydatesapproximatingtothetermsoftheGroup’sobligations.



18) Provisions for termination benefits continued

EARLYRETIREMENTPLANSWithintheGroup,earlyretirementplansprimarilycorrespondtothepracticalimplementationofsocialplans.Suchearlyretirementplansareconsideredeffectivewhentheaffectedemployeeshavebeenformallyinformedandwhenliabilitieshavebeendeterminedusinganappropriateactuarialcalculation.Earlyretirementplanscanalsobelinkedtocollectiveagreementssignedwithcertaincategoriesofemployees.Liabilitiesinrespectofbothoftheabovescenariosarecalculatedonthebasisoftheeffectivenumberofemployeeslikelytotakeearlyretirement,inaccordancewithIAS19.Anindependentactuaryperformsthecalculationannually.LiabilitiesarediscountedusinganinterestratewhichcorrespondstothatofAAcreditratedbondsthathavematuritydatesapproximatingtothetermsoftheGroup’sobligations.

19) Other provisionsAprovisionisaccountedforwhentheGrouphasapresentobligation(legalorconstructive)asaresultofapastevent,whoseamountcanbereliablyestimated,anditisprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligation.

TECHNICALWARRANTIESAprovisionfortechnicalwarrantiesisrecognisedwhentheunderlyingproductsorservicesaresold.Theprovisionisbasedonhistoricalwarrantydataandaweightingofallpossibleoutcomesagainsttheirassociatedprobabilities.

RESTRUCTURINGAprovisionforrestructuringisaccountedforwhentheGrouphasapprovedadetailedformalrestructuringplan,andhasraisedavalidexpectationthatitwillcarryouttherestructuringbycommencingtheimplementationoftheplanorannouncingitsmainfeaturestothoseaffectedbyit.

ENVIRONMENTTheGroupgenerallyestimatesprovisionsrelatedtoenvironmentalissuesonacase-by-casebasis,takingintoaccountapplicablelegalrequirements.Abestestimate,basedonavailableinformation,iscalculated,providedthattheavailableinformationindicatesthatthelossisprobableandcanbeestimatedinasufficientlyreliablemanner.

ONEROUSCONTRACTSAprovisionforonerouscontractsisrecognisedwhentheexpectedeconomicbenefitstobereceivedbytheGroupunderacontractarelowerthantheunavoidablecostsofmeetingitsobligationsunderit.

20) Trade and other payablesTradeandotherpayablesarerecordedatcost.

21) Deferred taxesDeferredtaxesarecalculatedforeachtaxableentity,usingthebalancesheetliabilitymethod,ontemporarydifferencesarisingbetweenthetaxbasesofassetsandliabilities,asdeterminedinaccordancewiththetaxrulesinforceinthecountriesinwhichtheGroupconductsitsoperations,andtheircarryingamountsinthefinancialstatements.Deferredtaxassetsandliabilitiesaremeasuredatthetaxratesthatareexpectedtoapplyintheperiodwhentheassetisrealisedortheliabilityissettled,basedontaxratesthathavebeenenactedorsubstantivelyenactedatthebalancesheetdate.Deferredtaxassetsandliabilitiesarenettedwhenauthorisedbylocaltaxauthorities.Deferredtaxassetsarerecognisedtotheextentthatitisprobablethatfuturetaxableprofitswillbeavailableagainstwhichtheycanbeutilised.Therefore,takingintoaccountthecyclicalnatureofthebusiness,deferredtaxassetsmayberecognisedbycompaniesthathaveincurredtaxlossesoverthepreviousperiods.

22) Revenue recognition, interest and dividend income

SALESOFGOODSANDSERVICESRevenuefromthesaleofgoodsisrecognisedintheincomestatementwhenthesignificantrisksandrewardsofownershiphavebeentransferredtothebuyer.Revenuefromservicesrenderedisrecognisedintheincomestatementinproportiontothestageofcompletionoftherelatedtransactionatthebalancesheetdate.Thestageofcompletionisassessedaccordingtotheworkperformed.Norevenueisrecognisediftherearesignificantuncertaintiesregardingrecoveryoftheamountdue,associatedcostsorthepossiblereturnofgoods.

CONSTRUCTIONCONTRACTSAssoonastheoutcomeofaconstructioncontractcanbeestimatedreliably,contractrevenueandexpensesarerecognisedintheincomestatementinproportiontothestageofcompletionofthecontract.Thestageofcompletionisassessedaccordingtotheworkperformed.Anticipatedlossesonacontractarerecognisedimmediatelyintheincomestatement.

INTERESTANDDIVIDENDINCOMEInterestincomeisrecognisedintheincomestatementonapro-ratabasis,takingintoaccounttheeffectiveyieldrate.Dividendincomeisrecognisedintheincomestatementonthedatethegeneralmeetingapprovesthedividendpayment.



23) Financial risk management

DERIVATIVEFINANCIALINSTRUMENTSTheGroupusesderivativefinancialinstruments,interestrateswapsandforwardforeignexchangecontractstohedgeitsexposuretorisksrelatedtoforeignexchangeandinterestratesandarisingfromoperating,financingandinvestmentactivities.Derivativefinancialinstrumentsareinitiallyrecognisedatcostandsubsequentlyrestatedattheirfairvalue.Unrealisedgainsorlossesarerecogniseddependingonthenatureoftheitembeinghedged,forqualifyinghedgerelationships.ThefairvalueofinterestrateswapsistheestimatedamountthattheGroupwouldreceiveorpaytoterminatetheswapatthebalancesheetdate,takingintoaccountcurrentinterestratesandthecurrentcreditworthinessoftheswapcounter-parties.Thefairvalueofforwardforeignexchangecontractsistheirquotedmarketpriceatthebalancesheetdate,beingthepresentvalueofthequotedforwardpriceorforwardrate.

HEDGEOFCASHFLOWSWhenaderivativefinancialinstrumenthedgesthevariationincashflowsofafirmcommitmentoraforecasttransaction,theeffectivepartofanyresultantgainorlossonthederivativefinancialinstrumentisrecogniseddirectlyinshareholders’equity.Whenthefirmcommitmentorforecasttransactionresultsintherecognitionofanassetoraliability,thecumulativegainorlossisremovedfromequityandentersintotheinitialmeasurementoftheacquisitioncostorothercarryingamountoftheassetorliability.Theineffectivepartofanygainorlossisrecognisedintheincomestatement.Anygainorlossarisingfromthetimevalueofthederivativefinancialinstrumentisrecognisedintheincomestatement.Whenahedginginstrumentexpires,issold,terminatedorexercised,thecumulatedunrealisedprofitorlossonthehedginginstrumentismaintainedinequityforaslongastheexpectedtransactiondoesnotoccurandisrecognisedinaccordancewiththeabovepolicywhenthetransactionoccurs.Ifthehedgedtransactionisnolongerprobable,thecumulativenetgainorloss,whichhadbeenrecognisedinequity,isreportedimmediatelyintheincomestatement.

HEDGEOFFAIRVALUEWhereaderivativefinancialinstrumenthedgesthevariabilityinfairvalueofarecognisedreceivableorpayable,anyresultinggainorlossonthehedginginstrumentisrecognisedintheincomestatement.Thehedgeditemisalsostatedatitsfairvalueinrespectoftheriskbeinghedged,withanygainorlossbeingrecognisedintheincomestatement.Thefairvalueofthehedgeditems,inrespectoftheriskbeinghedged,istheircarryingamountatthebalancesheetdatetranslatedtoEURattheforeignexchangeraterulingatthatdate.

HEDGEOFNETINVESTMENTINFOREIGNOPERATIONWhereaforeigncurrencyliabilityhedgesanetinvestmentinaforeignoperation,foreignexchangedifferencesarisingontranslationoftheliabilitytoEURarerecogniseddirectlyinequity.Wherethehedginginstrumentisaderivative,anygainorlossonthehedginginstrumentrelatingtotheeffectiveportionofthehedgeisrecognisedinequity;thegainorlossrelatingtotheineffectiveportionisrecognisedimmediatelyintheincomestatement.Wherethehedginginstrumentisnotrecognised,therelatedprofitorlossisrecognisedintheincomestatement.

24) Emission rightsTheGroup’sindustrialsitesconcernedbytheEuropeanDirectiveonCO2emissionrights,effectiveasof1January2005,arelocatedinGermany,Belgium,Spain,FranceandLuxembourg.TheemissionrightsallottedtotheGrouponanochargebasispursuanttotheannualnationalallocationplan,arerecordedinthebalancesheetatnilvalue.TheGroupcontinuouslymonitorsrightsthathaveexpiredandthatwillhavetobesurrendered.Thenumberofrightstobesurrenderedisequaltothetotalemissionsoveragivenperiod.Theseemissionsaresubmittedtoanannualcertification,donebyacertifiedexternalexpertinaccordancewithapplicablenationalregulation.Anydifferencebetweenavailablerightsandactualemissionstobesurrenderedissubjecttoprovisioningatmarketvalue.Excessallowancessoldontheallowancemarketarerecognisedintheincomestatement.Allowancepurchasesorsalesarerecordedatcost.

25) Segment reportingNewsegmentreportingfollowsMittalSteelsegmentreporting.AsegmentisadistinguishablecomponentoftheGroupthatisengagedeitherinprovidingparticularproductsorservices(businesssegment),orinprovidingproductsorserviceswithinaparticulareconomicenvironment(geographicalsegment),whichissubjecttorisksandrewardsthataredifferentfromthoseofothersegments.TheGroup’sprimarysegmentisdefinedasthe‘businesssegment’,whileitssecondarysegmentisthe‘geographicalsegment’.Segmentassetsareoperationalassetsusedbythesectorinthecontextofitsoperatingactivities.Theyincludeattributablegoodwill,intangibleassetsandproperty,plantandequipment,aswellascurrentassetsusedintheoperatingactivitiesofthesector.Theydonotincludedeferredtaxassets,otherinvestmentsorreceivablesandothernon-currentfinancialassets.Suchassetsareshownunderthecaption‘Unallocatedassets’.Sectorliabilitiesareliabilitiesresultingfromtheactivitiesofasector,whichcaneitherbedirectlyattributedtothissectororcanbeattributedtoitreasonably.Theyincludecurrentandnon-currentliabilities.Theyexcludefinancialdebtanddeferredtaxliabilities.Suchliabilitiesareshownunderthecaption‘Unallocatedliabilities’.



NOTE 3 – SCOPE OF CONSOLIDATION Asat31December2006,thescopeofconsolidationoftheArcelorGroupincludes,inadditiontoArcelorS.A.,352fullyconsolidatedcompanies(31December2005:371fullyconsolidatedcompanies).Furthermore,theGroupaccountsfor184companiesusingtheequitymethod(31December2005:173companiesusingtheequitymethod).Thereductioninthenumberoffullyconsolidatedcompaniesisprimarilyassociatedwithanumberofacquisitionsanddisposals,theprincipaltransactionsbeingasfollows:

3.1. – Acquisitions and disposals

3.1.1. – Acquisitions

Ewald GiebelArcelorfinalisedon1January2006theacquisitionof100%ofE.Giebel(Luxembourg,FlatcarbonEurope).

Laminadora Costarricense and Trefileria ColimaArcelor,throughitsBraziliansubsidiaryBelgoMineira,acquired50%ofthecompaniesLaminadoraCostarricenseandTrefileriaColima(CostaRica,LongCarbon)on31January2006.The2companiesarefullyconsolidatedsincethengiventhatArcelorhasthepowertoappointamajorityofmembersintheBoardofDirectorsofbothcompanies.

DofascoOn21February2006,Arceloracquired88.38%ofDofasco(Canada,FlatCarbonAmericas)atthepriceofCAD71pershare.FollowingtheextensionofArcelor’sofferuntil7March2006,Arcelor’stotalownershipincreasedto98.5%.On5April2006,Arceloracquiredtheremaining1.5%.DofascoisthusfullyintegratedintheconsolidatedGroupaccounts.On3April2006,ArcelortransferredallitssharesinDofascotoanindependentDutchfoundationnamed“StrategicSteelStichting”(S3)andinplaceforatleastfiveyearsunlesstheS3Boarddecidestodissolveit.ArcelorretainsfullcontroloverDofasco,includingalldecision-makingpowerandalleconomicinterestrelatingtoDofasco,withtheexceptionofanydecisiontosellDofasco.

SonasidOn31May2006,severalshareholders,includingArcelor,transferred1,631,167sharesrepresenting41.82%(ofwhich7.5%heldbyArcelor)ofthecapitalandvotingrightsofSonasid(Morocco,AACIS,TubesandMining)totheholdingcompanyNSI(“NouvellesSidérurgiesIndustrielles”).Followingthistransfer,acapitalincrease,entirelysubscribedbyArcelor,whichraiseditsshareholdingto50%inNSI,enabledtheholdingcompanytoacquire898,177additionalsharesinSonasid.ThusNSIacquiredacontrollingstakeof64.86%inSonasid.Asaresultoftheshareholders’agreementsignedon31May2006betweenArcelorandNSI(“NouvellesSidérurgiesIndustrielles”),whichholdstheother50%inNSI,ArceloracquiredthepowertogovernthefinancialandoperatingpoliciesofSonasidviatheholdingNSI.SonasidisthusfullyconsolidatedintheGroupaccountssince1June2006attherateof32.43%.




Thefairvalueandcashflowsfromacquisitionsarethefollowing:InEURmillion Dofasco Sonasid Other 2006 2005

Intangibleassets 383 134 - 517 14Property,plantandequipment 3,560 176 76 3,812 1,065Interestsincompaniesaccountedforusingtheequitymethod 241 - 1 242 7Otherinvestments - 4 - 4 27Debtorsandfinancialassets(commercialandother) 568 104 53 725 379Inventories 1,050 83 44 1,177 280Cashandcashequivalents 120 60 12 192 176Netdeferredtaxliabilities -740 -67 -1 -808 -91Interest-bearingloans -848 - -58 -906 -465Provisionsforpensionsandsimilarbenefits -866 - -1 -867 -2Otherprovisions -119 -9 -2 -130 -58Creditors(suppliersandothers) -315 -94 -51 -460 -243Minorityinterest -32 -253 -15 -300 -589Fairvalueofnetassetsacquired 3,002 138 58 3,198 500Eliminationofthecontributionofcompaniespreviouslyaccountedforusingtheequitymethod(Note6) - -10 -20 -30 -204Netgoodwill 1,124 17 4 1,145 11Revaluationofinterestspreviouslyheld - -18 - -18 -71Totalacquisitioncosts 4,126 127 42 4,295 236Cashandcashequivalentsacquired -120 -60 -12 -192 -176Amountstobepaidinsubsequentperiods - - - - -117OUTFLOW (+) / INFLOW (-) RESULTING FROM ACQUISITIONS 4,006 67 30 4,103 - 57

WithrespecttoDofasco,thedeterminationofthefairvalueoftheidentifiableassetsandliabilitiesacquiredwascompletedatthetimeofthefullintegrationofDofasco(1March2006).However,thefairvalueexerciseisnotcompleteasat31December2006andremainssubjecttopotentialmodificationuntil28February2007.ThefairvalueofthenetassetsacquiredisEUR3,002million.ThisresultedinagoodwillofEUR1,124million.Inordertoreconcilethecashflowsassociatedwiththeacquisition,theconsiderationpaidbytheGroupin2006associatedwithDofascowasEUR4,006million.ThisisdeterminedonthebasisoftheacquisitionpriceofEUR4,126millionandthenetcashacquiredinDofascoofEUR120million.WithrespecttoSonasid,thefairvalueoftheidentifiableassetsandliabilitiesacquiredon1June2006amountstoEUR138millionlesstheacquisitionprice(EUR127million)andtheamountpreviouslyaccountedforundertheequitymethod(EUR10millionattheendofMay2006).ThisresultedinagoodwillofEUR17millionaswellasanequityimpactofEUR18millionduetotherevaluationofthehistoricalparticipation(7.5%).Inordertoreconcilethecashflowsassociatedwiththeacquisition,theconsiderationpaidbytheGroupin2006associatedwithSonasidwasEUR67million.ThisisdeterminedonthebasisoftheacquisitionpriceofEUR127millionandthenetcashacquiredinSonasidofEUR60million.ThetotalnetgoodwillofEUR1,145millionincludesanegativegoodwillofEUR11millionrelatedtotheacquisitionofEwaldGiebel.



3.1.2. – Disposals

TraxysOn11January2006Arcelorsold40%outofits50%stakeinTraxys(ArcelorSteelSolutionsandServices,Luxembourg,)tothemanagementofthecompanytogetherwith2investmentfunds.

UgitechOn27April2006,Arcelorsignedanagreementforthesaleof100%ofthesharesinUgitech(Stainlesssteel,France)toSchmolz+Bickenbach.Thesalewaseffectiveasat30June2006.

Flachform StahlOn14June2006,theGroupcompletedthesaleofitssteelservicecenterFlachformStahlGmbH(Germany,ArcelorSteelSolutionsandServices)toSalzgitter’sHövelmann&LuegGmbH.

Thecarryingamountofthenetassetsdisposedofisthefollowing:InEURmillion 2006 2005

Intangibleassets 7 -Tangibleassets 93 184Interestsincompaniesaccountedforusingtheequitymethod 27 -Otherparticipations 4 1Debtorsandfinancialassets(commercialandother) 131 157Inventories 115 61Cashandcashequivalents 5 76Netdeferredtaxasset(+)/liabilities(-) 12 -13Interest-bearingloans -39 -28Provisionsforpensionsandsimilarbenefits -33 -3Otherprovisions -23 -5Creditors(suppliersandothers) -124 -189Carrying amount of assets disposed of (2) 175 241DISPOSAL PRICE (1) 172 331PROFIT ON DISPOSAL (1)-(2) - 3 90Cash and cash equivalents disposed of - 5 -INFLOW RESULTING FROM DISPOSALS 167 331



3.2. – Acquisitions and disposals of entities under common control

3.2.1. – AcquisitionsArceloracquiredMittalSteelGandrangeon20November2006.TheacquisitionledtotherecognitionofachangeofEUR155millionrecognisedinequity.Thecarryingamountofthenetassetsacquiredispresentedbelow:

InEURmillion 2006

Property,plantandequipment 71Debtorsandfinancialassets(commercialandother) 99Inventories 103Cashandcashequivalents 1Netdeferredtaxassets 72Interest-bearingloans -21Provisionsforpensionsandsimilarbenefits -25Otherprovisions -1Creditors(suppliersandothers) -144Carryingamountofnetassetsacquired 155Increaseinequity(-) -155Totalacquisitioncosts -Cashandcashequivalentsacquired 1INFLOW RESULTING FROM ACQUISITIONS - 1

3.2.2. – DisposalAsat15December2006,ArcelorsoldArcelorGermanyHoldingincluding23GermansubsidiariesandsharesinotherGermansubsidiariestoMittalSteelGermanyHolding,awholly-ownedsubsidiaryofMittalSteelCompanyN.V.foratotalpriceofEUR2,617million(ofwhichareceivableofEUR2,602million)leadingtoanetincreaseinequityofEUR1,980million.Thecarryingamountofthenetassetsdisposedofispresentedbelow:

InEURmillion 2006

Intangibleassets 7Property,plantandequipment 517Otherparticipations 22Debtorsandfinancialassets(commercialandother) 53Inventories 347Cashandcashequivalents 16Netdeferredtaxassets 81Provisionsforpensionsandsimilarbenefits -64Otherprovisions -30Creditors(suppliersandothers) -311Minorityinterests -1Carrying amount of assets disposed of (2) 637DISPOSAL PRICE (1) 2,617NET INCREASE IN EQUITY 1,980




NOTE 4 – INTANGIBLE ASSETS Goodwillonacquisition Concessions,patents, Other TOTALInEURmillion,asat31December2006 licensesandsimilarrights

Grossopeningbalance 290 258 278 826Acquisitions - 20 9 29Acquisitionsthroughbusinesscombinations 1,156 258 259 1,673Disposals - -2 -2 -4Disposalsofsubsidiaries - -7 - -7Changesinscopeofconsolidation -2 -7 - -9Foreignexchangedifferences -138 -26 -12 -176Transfertoassetsheldforsale(Note13) - -3 - -3GROSS CLOSING BALANCE 1,306 491 532 2,329Openingcumulativeamortisation -234 -190 -209 -633Amortisationcharge - -47 -21 -68Foreignexchangedifferences 1 2 1 4Transfertoassetsheldforsale(Note13) - 2 - 2CLOSING CUMULATIVE AMORTISATION - 233 - 233 - 229 - 695OPENING NET BOOK VALUE 56 68 69 193CLOSING NET BOOK VALUE 1,073 258 303 1,634

Goodwillonacquisition Concessions,patents, Other TOTALInEURmillion,asat31December2005 licensesandsimilarrights

Grossopeningbalance 265 227 257 749Acquisitions 33 21 9 63Disposals - -6 -1 -7Changesinconsolidationscope - 14 6 20Foreignexchangedifferences -8 5 1 -2Transfersandothermovements -3 6 3GROSS CLOSING BALANCE 290 258 278 826Openingcumulativeamortisation -242 -168 -182 -592Acquisitionsanddisposals - 6 1 7Changesinconsolidationscope - - -2 -2Amortisationcharge - -29 -11 -40Foreignexchangedifferences 8 1 -1 8Transfersandothermovements - - -14 -14CLOSING CUMULATIVE AMORTISATION - 234 - 190 - 209 - 633OPENING NET BOOK VALUE 23 59 75 157CLOSING NET BOOK VALUE 56 68 69 193


ANALYSIS OF NET POSITIVE GOODWILL ON ACQUISITIONS 2006 Netvalue2005 Changein Foreign Other Netvalue2006 consolidation exchangeInEURmillion scope difference

Usinor/S3P 8 - - - 8ArcelorProfil 3 - - - 3Galtec 3 - - -3 -HaironvillePortugal 2 - - - 2BelgoSiderurgica/Dedini 5 - -1 -4 -ArcelorProjectsSpiralMill 1 - - - 1Acesita 29 - -13 - 16AsturiadePerfiles 3 - - - 3Acindar - - - 1 1LaminadoraCostarricense - 5 - - 5SynergieInteractiveIndustrielle - 5 - - 5DevillersOxycoupage - 4 - - 4Sonasid - 17 - - 17Dofasco - 1,124 -123 - 1,001Guille - - - 4 4IndustriasZarra - 1 - - 1Other 2 - - - 2TOTAL 56 1,156 - 137 - 2 1,073

ANALYSIS OF NET POSITIVE GOODWILL ON ACQUISITIONS 2005InEURmillion Netvalue2004 Acquisitions Netvalue2005

Usinor/S3P 8 - 8ArcelorProfil 3 - 3Galtec 3 - 3HaironvillePortugal 2 - 2BelgoSiderurgia/Dedini 5 - 5ArcelorProjectsSpiralMill - 1 1Acesita - 29 29AsturiadePerfiles - 3 3Other 2 - 2TOTAL 23 33 56



NOTE 5 – PROPERTY, PLANT AND EQUIPMENT Landand Plantsand Prepayments Miningassets Other Total buildings machinery andfixedassetsInEURmillion,asat31December2006 underconstruction

Grossopeningbalance 4,186 16,999 2,086 - 815 24,086Acquisitions 64 165 1,990 6 44 2,269Disposals -137 -397 -7 - -101 -642Acquisitionthroughbusinesscombination(Note3) 869 2,462 80 367 34 3,812Acquisitionanddisposalundercommoncontrol(Note3) -97 -734 -19 - -56 -906Disposalofsubsidiariesoutsidethegroup(Note3) -62 -158 -10 - -9 -239Foreignexchangedifferences -222 -941 -143 -40 -18 -1,364Reclassificationassetsheldforsale(Note13) -51 -218 -4 - -15 -288Transfers 130 1,051 -1,460 - 217 -62GROSS CLOSING BALANCE 4,680 18,229 2,513 333 911 26,666Openingcumulativedepreciationandimpairment -1,310 -8,475 - - -534 -10,319Disposals 96 341 - - 81 518Acquisitionanddisposalundercommoncontrol(Note3) 52 372 - - 36 460Disposalofsubsidiariesoutsidethegroup(Note3) 42 97 - - 7 146Depreciationcharge -101 -1,026 - -20 -84 -1,231Impairment -15 -124 -22 - - -161Foreignexchangedifferences 83 427 - 1 12 523Reclassificationassetsheldforsale(Note13) 9 113 - - 5 127Other 17 103 1 - -80 41CLOSING CUMULATIVE DEPRECIATION AND IMPAIRMENT - 1,127 - 8,172 - 21 - 19 - 557 - 9,896OPENING NET BOOK VALUE 2,876 8,524 2,086 - 281 13,767CLOSING NET BOOK VALUE 3,553 10,057 2,492 314 354 16,770



NOTE 5 – PROPERTY, PLANT AND EQUIPMENT CONTINUED Landand Plantsand Prepayments Other Total buildings machinery andfixedassetsInEURmillion,asat31December2005 underconstruction

Grossopeningbalance 3,510 15,219 1,024 736 20,489Acquisitions 47 139 1,825 29 2,040Disposals -62 -263 -5 -112 -442Changesinconsolidationscope 323 386 9 -18 700Foreignexchangedifferences 205 811 105 36 1,157Transfers 163 707 -872 144 142GROSS CLOSING BALANCE 4,186 16,999 2,086 815 24,086Openingcumulativedepreciationandimpairment -1,123 -7,675 -1 -460 -9,259Disposals 23 224 - 113 360Changesinconsolidationscope 40 124 - 18 182Depreciationcharge -1 96 1 -19 77Impairment -128 -1,063 - -75 -1,266Foreignexchangedifferences -57 -286 - -19 -362Other -64 105 - -92 -51CLOSING CUMULATIVE DEPRECIATION AND IMPAIRMENT - 1,310 - 8,475 - - 534 - 10,319OPENING NET BOOK VALUE 2,387 7,544 1,023 276 11,230CLOSING NET BOOK VALUE 2,876 8,524 2,086 281 13,767

Asat31December2006thegrossvalueofcapitalisedfinanceleasesisEUR213million(2005:EUR178million)andthenetvalueoffinanceleasesamountedtoEUR144million(2005:EUR120million).TangiblefixedassetswithacarryingvalueofEUR212millionhavebeenpledgedasguaranteesoffinancialdebt(2005:EUR279million).Asaconsequenceoftheextensionoftheremainingusefullivesfrom31July2006onwardsfollowingthebusinesscombinationbetweenArcelorandMittalSteel,thedepreciationchargeisreducedbyEUR199millionfortheperiodbetween31July2006and31December2006.TheacquisitionsofEUR2,269millionin2006includeassetswithacostofEUR73millionwiththeexclusiveobjectiveofpreventing,reducingorrepairingdamagetotheenvironment.Theseenvironmentalinvestmentsrelateprimarilytothereductionofemissionstotheatmosphere(dustandgas).



NOTE 5 – PROPERTY, PLANT AND EQUIPMENT CONTINUED

a) Analysis by country and nature of the investment Market Product Cost Replacement Environment Professional Industrial TotalInEURmillion Development Development reduction andrestoration safety safety

Belgium 6 47 57 49 12 8 5 184Spain 33 12 27 141 22 10 12 257France 126 29 72 229 9 16 9 490Luxembourg 5 3 47 59 4 10 6 134Germany 9 3 22 14 1 2 1 52Canada 33 - 52 82 7 5 0 179Argentina 39 - 5 6 1 1 2 54Brazil 641 21 46 87 17 11 7 830Other 17 41 5 25 - - 1 89TOTAL 909 156 333 692 73 63 43 2,269

b) Analysis by country and nature of the environmental investment Protection Noise Effluent Waste Protection Total ofambient andvibration management management andremediationof airandclimate abatement soil,groundwater (excludingthe andsurfacewater working InEURmillion environment)

Spain 14 4 1 3 - 22Brazil 12 1 - - 4 17Belgium 6 2 1 2 1 12France 8 - - 1 - 9Canada 1 1 3 2 - 7Luxembourg 4 - - - - 4Germany 1 - - - - 1Argentina 1 - - - - 1TOTAL 47 8 5 8 5 73

NOTE 6 – INVESTMENTS IN COMPANIES ACCOUNTED FOR USING THE EQUITY METHODInEURmillion Valueaccountedforusingtheequitymethod

BALANCE AT 31 DECEMBER 2005 1,415Acquisitionsthroughbusinesscombinations(Note3) 242Disposalsofequityinvestmentsthroughdisposalofsubsidiaries -54Profitfortheyear 363Dividendspaid -119Changesinthepercentageofinterest -88Foreignexchangedifferences -48Increaseincapital 78Adjustmentthroughequityoffairvalueoffinancialassets 14Reclassificationtoassetsheldforsale(Note13) -10BALANCE AT 31 DECEMBER 2006 1,793

ChangesintheconsolidationpercentageincludethechangeofmethodforDosolGalva,EwaldGiebel,InoxTubos,SonasidandCimafCaboswhicharefullyconsolidatedasat31December2006.


NOTE 6 – INVESTMENTS IN COMPANIES ACCOUNTED FOR USING THE EQUITY METHOD CONTINUEDTheprimaryinvestmentsinassociatedcompaniesandjointlycontrolledentitiesareasfollows: %holding Total Sharein %holding Total Sharein atyearend assetsasat profitasat atyearend assetsasat profitasat 31December 31December 31December 31DecemberInEURmillion 2006 2006 2006 2005 2005 2005

Associated companies FLAT CARBON EUROPE DHSGroup(Germany) 51.3% 688 211 51.3% 500 161Gestamp(Spain) 35.0% 181 19 35.0% 169 18CLN(Italy) 35.0% 115 2 35.0% 84 2Borcelik(Turkey) 40.3% 63 11 40.3% 60 3CiaHispano-BrasileiradePelotização(Brazil) 49.1% 30 12 49.1% 30 22FLAT CARBON AMERICAS DosolGalva(Canada) - - - 20.0% 28 11STAINLESS STEEL Acesita(Brazil) - - - - - 47LONG CARBON AMERICAS AND EUROPE LME(France) 34.0% 32 20 34.0% 12 -10UsinaHidrelectricaGuilmanAmorim(Brazil) 51.0% 14 7 51.0% 14 11SanZenoAcciai–Duferco(Italy) - - - 49.9% 9 -A3S (ARCELOR STEEL SOLUTIONS AND SERVICES) GonvarriIndustrial(Spain) 35.0% 133 27 35.0% 115 22HoldingGonvarriSRL(Spain) 35.0% 77 2 35.0% 79 -ASIA, AFRICA, CIS SociétéNationaledeSidérurgie(Morocco) - - - 7.5% 10 1OTHER ACTIVITIES CFLCargo 33.3% 47 -2 - - -GroupeAtic(France) 42.4% 31 5 42.4% 27 5Soteg(Luxembourg) 20.0% 27 3 20.0% 25 2Variousassociatedcompanies - 49 7 25-45.9% 76 6 Jointly controlled entities FLAT CARBON AMERICAS Gallatin 50.0% 146 30 - - -DJGalv 50.0% 16 3 - - -WabushResources 28.6% 14 -2 - - -Baycoat 50.0% 10 3 - - -LONG CARBON AMERICAS AND EUROPE TrefilARBEDKiswire(Korea) 50.0% 101 4 50.0% 96 5A3S (ARCELOR STEEL SOLUTIONS AND SERVICES) TraxysSA(Luxembourg) - - - 50.0% 34 8Variousjointlycontrolledentities - 19 1 25-50% 47 3TOTAL 1,793 363 1,415 317




NOTE 7 – OTHER INVESTMENTS AND FINANCIAL ASSETS AVAILABLE FOR SALE Sharesin Participating Othersecurities Total affiliatedcompanies interests Gross Imp. Net Gross Imp. Net Gross Imp. Net Gross Imp. NetInEURmillion value value value value value value value value

BALANCE AT 31 DECEMBER 2005 555 - 257 298 100 - 42 58 357 - 60 297 1,012 - 359 653Acquisitions 31 - 31 7 - 7 - - - 38 - 38Disposals -28 23 -5 - - - -11 - -11 -39 23 -16Increase/decreaseincapital 16 - 16 4 - 4 -5 - -5 15 - 15Changesinconsolidationscope -31 -18 -49 20 -3 17 7 3 10 -4 -18 -22Impairment - -19 -19 - 1 1 - -3 -3 - -21 -21Foreignexchangedifferences - - - - - - -2 - -2 -2 - -2Othermovements 28 -8 20 -31 12 -19 4 8 12 1 12 13BALANCE AT 31 DECEMBER 2006 571 - 279 292 100 - 32 68 350 - 52 298 1,021 - 363 658

ThemainacquisitionsoftheyearincludeaEUR9millioninvestmentinGroupAllianceMetalandaEUR6millionstakeinBamesaOtel(Sharesinaffiliatedcompanies).ThemainliquidationoftheyearrelatestoFinancièreMistral(EUR7million,Sharesinaffiliatedcompanies)andSafet(EUR2million,Sharesinaffiliatedcompanies).ThecapitalincreaseoftheyearrelatesmainlytothecompaniesARCELORLogisticsBelgium(EUR9million,sharesinaffiliatedcompanies)andARCELORServicesandSolutionsMaroc(EUR6million,sharesinaffiliatedcompanies).Themostsignificantchangesinthescopeofconsolidationare:– thedisposalofnon-consolidatedsubsidiariesofArcelorGermanyHoldingtoMittalGroup(impactofEUR-24million);– aremaining10%stake(sharesinaffiliatedcompaniesforanamountofEUR7million)afterthedisposalof40%ofTraxyspreviouslyaccounted

forundertheequitymethod;– theentryofLongometalArmatures(EUR4million)followingtheacquisitionandconsolidationofSonasid;Finally,othermovementsincludetherevaluationofotherinvestmentsandfinancialassetsavailableforsaleatfairvalue.ThemainchangeinfairvaluerelatestotheErdemirshares(EUR-20million).Thebreakdownofmovementsbytypeofportfolio(sharesandparticipatinginterestsatcost,sharesandparticipatinginterestsatfairvalue)isasfollows:

Dec.31, Acq. Increase Changes Net Fair Foreign Other Dec.31, 2005 –. in inconsolid. depr. value exchange 2006InEURmillion Disp capital scope adjustments diff.

Shares and participating interests at cost 475 22 15 - 28 - 21 - - 1 8 470Grossvalue 834 -1 15 -10 - -1 -4 833Imp. -359 23 - -18 -21 - - 12 -363Shares and participating interests at fair value 178 - - 6 - 7 - 1 - 2 188AçosVillares 19 - - - - 16 -1 -2 32Erdemir 138 - - - - -20 - - 118Fortis 21 - - - - 7 - - 28Kiswire - - - 1 - - - - 1MittalSteel - - - 5 - 4 - - 9TOTAL 653 22 15 - 22 - 21 7 - 2 6 658

Thechangeintherevaluationreserverelatingtosecuritiesavailableforsaleisnilaftertaxandminorityinterests.



NOTE 8 – RECEIVABLES AND OTHER FINANCIAL ASSETSInEURmillion Grossvalue Impairment Netvalue

BALANCE AT 31 DECEMBER 2005 846 - 107 739Increase 879 - 879Repayments -697 - -697NetImpairment - 7 7Changesinconsolidationscope 525 -3 522Othermovements -301 2 -299Foreignexchangedifferences -21 2 -19BALANCE AT 31 DECEMBER 2006 1,231 - 99 1,132


MittalSteelloans(Note25) 487 -SiderùrgicaAñonloans - 18AlleghenyTechnologiesloans 28 29MendesJuniorcredit 37 37Carsidloans 22 36Sodisidloans 11 15Guaranteedeposits 162 200Revaluationofinterestratehedgeinstruments(Note26) 10 63Revaluationofrawmaterialshedgeinstruments(Note26) 13 38Netassetsrelatedtofundedobligations(Note18) 22 14Others 340 289TOTAL 1,132 739*restated

NOTE 9 – INVENTORIESInEURmillion 2006 2005

Rawmaterialsandconsumables 2,869 3,030Workinprogress 1,983 1,587Finishedgoods 3,492 2,375Contractsinprogress 113 98Spares 585 463Advancesandprepaymentsonorders 42 27TOTAL 9,084 7,580

In2006,rawmaterials,consumables,changesinfinishedgoodsandworkinprogressrecognisedascostofsalesamountedtoEUR 881million(2005:EUR380million).Thecumulatedwrite-downmadeinordertovalueinventoriesattheirfairvaluelesscoststosellamounttoEUR589millionasat31December2006(2005:EUR618million).Thereversalofwrite-downswasEUR18millionfortheyear2006(2005:write-downofEUR61million).ThecarryingamountofinventoriespledgedassecurityforliabilitiesisEUR37million(2005:-).

NOTE 10 – TRADE RECEIVABLESInEURmillion 2006 2005

Grossamount 4,851 3,862Provisionfordoubtfulaccounts -139 -146TOTAL 4,712 3,716



NOTE 11 – OTHER RECEIVABLESInEURmillion 2006 2005*

Otheradvancepaymentstopublicauthorities 806 535Revaluationofforeignexchangeratehedgeinstruments(Note26) 320 172Revaluationofrawmaterialhedgeinstruments(Note26) 53 56MittalSteelloans(Note25) 307 -Otherfinancialloans 566 111Receivablesfromsaleoffinancialassets 2,608 6Prepaidexpenses 100 57Otherreceivables 176 573TOTAL 4,936 1,510*restatedThereceivablesfromsaleoffinancialassetsincludemainlythereceivablerelatedtothedisposalofArcelorGermanyHolding(EUR2,602million).

NOTE 12 – CASH AND CASH EQUIVALENTSInEURmillion 2006 2005

Moneymarketfunds 94 2,654Cashatbankandinhand 1,536 1,481Short-termbankdeposits 715 510TOTAL 2,345 4,645

NOTE 13 – ASSETS CLASSIFIED AS HELD FOR SALE AND LIABILITIES DIRECTLY ASSOCIATED WITH NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALEFollowingMittalSteel’sbidforArcelor,theEuropeancommissionidentifiedcompetitionconcernsincertainsteelproductionsegments.Inresponse,theCompanyannounced,on13December2006,thatithadagreedtosellitswholly-ownedsubsidiaryTravieProfilatidiPallanzenoaswellasits49.9%stakeinSanZenoAcciai–Duferco,toDufercoforanenterprisevalueofEUR 117million.ThetransactionclosedinJanuary2007.At31December2006,thedisposalgroupcomprisesassetsofEUR102millionandliabilitiesofEUR42million.On16March2007,MittalSteelandNoblesignedadefinitiveagreementforthecombinationoftheirlaser-weldedtailoredblanksbusinesses.Underthetermsofthetransaction,MittalSteel,willsellitslaser-weldedblanksbusinessinwesternandeasternEurope,China,IndiaandUnitedStates(“TBA”)foraggregateconsiderationofUSD300million,whichwillconsistofapproximatelyUSD131millioninacombinationofcash,anotereceivable,andassumptionofcertainTBAfinancialobligationsbyNobleand9,375,000sharesofNoblecommonstock(withanagreedvalueofUSD18pershare).Uponcompletion,MittalSteelwillbecomethelargeststockholderofNoble,owningapproximately40%oftheissuedandoutstandingcommonshares.ArcelorwillalsoobtainfourofnineseatsonNoble’sboardofdirectors.CompletionofthetransactionisexpectedtooccurinJune2007,andissubjecttoanumberofconditions,includingNobleshareholderapproval,receiptbyNobleofnotlessthanUSD165millionindebtfinancing,anti-trustclearanceintheUnitedStates,CanadaandEuropeandothercustomaryconditions.Inaddition,ArcelorandNoblewillseektoincludeinthetransactionassoonaspracticablethetailoredblanksbusinessoperatedbyPowerlasers,asubsidiaryofDofasco,Inc.,foradditionalconsiderationtobedeterminedbaseduponthe2006financialperformanceofPowerlasers,estimatedatUSD50million.ThecommonsharesofDofascoareheldinaDutchtrust,thetrusteesofwhichcontrolanydecisiontosellDofascoassets.At31December2006,thedisposalgroupcomprisesassetsofEUR163millionandliabilitiesofEUR36million.

Assets classified as held for saleInEURmillion 2006

Intangibleassets 1Property,plantandequipment(Note5) 161Investmentsaccountedforundertheequitymethod(Note6) 10Otherinvestments 7Receivables 8Deferredtaxassets 3Inventories 51Tradereceivables 16Otherreceivables 8TOTAL 265

Liabilities classified as held for saleInEURmillion 2006

Interest-bearingliabilities 8Employeebenefits 3Deferredtaxliabilities 2Tradepayables 53Otheramountspayable 11Provisions 1TOTAL 78



NOTE 14 – EQUITY

14.1 – Issued capital and share premiumAt31December2006,subscribedcapitalcomprises669,813,408ordinaryshareswithoutfacevalue,issued,fullypaidupandrepresentingEUR3,349,067,040.ThesharepremiumamountstoEUR5,818,878,442.30,039,081ordinaryshareswereissuedand11,954,087ownsharesweredeliveredin2006followingtheconversionof38,961,038convertiblebondsO.C.E.A.N.E.2017.SubscribedcapitalincreasedbyEUR150,195,405andsharepremiumbyEUR422,274,381.Theauthorisedsharecapitalcomprises1,000,000,000sharesandamountstoEUR5,000,000,000.

Evolutionofthenumberofsharesinissue Numberofshares

31 December 2004 639,774,32731 December 2005 639,774,327Capitalincrease 30,039,08131 DECEMBER 2006 669,813,408

14.2 – Foreign currency translation reserveThemovementsinexchangedifferencesofEUR-808million(2005:EUR552million)areprimarilyduetothedepreciationoftheUSDollarandCanadianDollarcomparedtotheEUR.

14.3 – Other consolidated reservesOtherconsolidatedreservesamounttoEUR10,681million(2005:EUR6,163million)andmainlycontaintheprofitattributabletotheequityholdersoftheparentcompanyofEUR3,007million(2005:EUR3,846million).

14.4 – Share option planArcelorhasestablishedfourshareoptionplans,thefeaturesofwhichareasfollows: Firstplan Secondplan Thirdplan Fourthplan establishedon establishedon establishedon establishedon 30June2003 30June2004 30June2005 30June2006

Numberofsharesoutstandingat31December2006 51,396 51,397 10,000 1,335,000Numberofsharesgrantedbytypeofplan 1,320,863 1,202,663 1,135,500 1,335,000Exerciseprice(inEUR) 9.67 13.11 16.17 34.43Maturitydate 30June2010 30June2011 30June2012 30June2013Priceoftheunderlyingatthedateofgrant(inEUR) 9.81 13.35 16.22 37.74Historicalvolatility(in%) 46.2 31.8 35.25 25.26Dividends(inEUR) 0.4 0.4 0.6 0.6Interestrate(in%) 3.5 4.1 2.925 4.145

Theoptionpricingmodelusedforthesefourplansisthebinomialmodel.Furthermore,thebeneficiariesoftheUsinorshareoptionplanestablishedon7March2000andcovering2,380,000shareshavethepossibilityofconvertingtheirUsinorsharesintoArcelorshares.Thematuritydateofthisplanis7April2007.TheexercisepriceisEUR15.24andthenumberofoptionsissuedasat31December2006is37,600.

Themovementsinthenumberofoutstandingshareoptionsduringtheyearwereasfollows:(Numberofshareoptions) 2006 2005

Optionsatthebeginningofyear 4,675,676 4,723,824Optionsgrantedduringyear 1,385,000 1,145,000Optionsforfeitedduringyear -50,000 -10,000Optionsexercisedduringyear -4,495,683 -974,950Optionsexpiredduringyear -29,600 -208,198OPTIONS AT THE END OF YEAR 1,485,393 4,675,676

InaccordancewiththestandardIFRS2Share-basedpayments,plansgrantedafter7November2002aresubjecttospecificvaluationsbytheGroupsince1January2005.Thechargetotheresultin2006associatedwiththefourplansgrantedon30June2003,30June2004,30June2005and30June2006amountstoEUR11.06million.



14.5 – Own shares Numberofshares Value (inEURmillion)

31 December 2004 26,802,407 367Acquisitions 8,189,502 147Disposals -15,220,613 -24731 December 2005 19,771,296 267Acquisitions 38,639 1Disposals -19,652,675 -26631 DECEMBER 2006 157,260 2

14.6 – DividendsTheBoardofDirectorswillproposeagrossdividendofEUR1.00persharewhichwillbepaidupto50%on15June2007,25%inSeptember2007and25%inDecember2007.Thesefinancialstatementsdonotreflectthisdividendwhichissubjecttotheapprovaloftheshareholdersattheannualgeneralmeetingtobeheldon27April2007.

14.7 – Disposal of Arcelor Germany Holding and subsidiariesTheresultondisposalofArcelorGermanyHoldingand23subsidiariestoMittalSteelamountstoEUR1,980millionandwasrecordedinequityasthetransactionrelatestoentitiesundercommoncontrol.MinorityinterestsincreasebyEUR87millionasaresultofthedisposalofsomeminorityinvestmentsheldbyArcelorGermanyHolding.

14.8 – Acquisition of Mittal Steel GandrangeTheequityincreaserelatedtotheacquisitionofMittalSteelGandrangeamountstoEUR155million.

NOTE 15 – EARNINGS PER SHAREThebasicearningspersharearecalculatedbydividingthenetprofit(Groupshare)bytheweightedaveragenumberofsharesinissueduringtheperiod,excludingtheaveragenumberofordinarysharespurchasedandheldbytheGroup. 2006 2005*

Netprofit(GroupshareinEURmillion) 3,007 3,873Numberofordinarysharesinissue 647,377,502 639,774,327Weightedaveragenumberofownshares -9,359,037 -25,707,728Weightedaveragenumberofsharesusedforthecalculationofbasicearningspershare 638,018,465 614,066,599EARNINGS PER SHARE (IN EUR) 4.71 6.31

*restated

ThedilutedearningspersharearecalculatedbytakingthefinancialinstrumentsgivingaccesstothecapitaloftheCompany,whethertheyareissuedbytheCompanyitselforbyoneofitssubsidiaries.Thedilutioniscalculated,instrument-by-instrument,takingintoaccounttheconditionsexistingatthebalancesheetdate,andexcludinganti-dilutinginstruments.Furthermore,thenetprofitisadjustedsoastoeliminatethefinancingchargenetoftaxcorrespondingtothedilutinginstruments.Whenfundsarecollectedinthecontextoftheexerciseofrights(subscriptioncouponsandoptions)theyarefirstappliedtothepurchaseofsharesatmarketpriceifthisisabovetheexercisepriceoftheright.Ineachcase,fundsaretakenintoaccountonapro-ratabasisintheyearofissueofthedilutinginstrumentandonthefirstdayofthefollowingfinancialyear. 2006 2005*

Netprofit(GroupshareinEURmillion) 3,007 3,873Eliminationofinterestexpense,netoftax,ofconvertibledebtinstruments(O.C.E.A.N.E.) 64 19Eliminationofchargeassociatedtostockoptionplans,netoftax 4 3Netprofitusedforthecalculationofdilutedearningspershare(inEURmillion) 3,075 3,895Weightedaveragenumberofsharesoutstanding 638,018,465 614,066,599Adjustmentforassumedconversionofconvertibledebtinstruments(O.C.E.A.N.E.)andforassumedexerciseofstockoptionplans 15,115,301 41,051,425Weightedaveragenumberofsharesinissue,usedforthecalculationofdilutedearningspershare 653,133,766 655,118,024DILUTED EARNINGS PER SHARE (IN EUR) 4.71 5.94

*restated



NOTE 16 – MINORITY INTERESTSIntheyearended31December2006minorityinterestsincreasedbyEUR374million.Theminorityshareofthe2006resultcontributedtoanincreaseintheminorityinterestofEUR652million.DividendspaidtominorityinterestsamountedtoEUR324million.ChangesinthescopeofconsolidationledtoanincreaseofEUR139million.FollowingthepublicoffermadetotheminorityshareholdersinAcesita,minorityinterestsdecreasedbyEUR154millionasArceloracquiredanadditional15.7%stakeinthecompanyasat27April2006.TheacquisitionofSonasidledtoanincreaseofminorityinterestsbyEUR253million.Intheyearended31December2005minorityinterestsincreasedbyEUR1,109million,includingEUR617millionrelatingtochangesintheconsolidationscope,inparticularAcesita(EUR568million).Theminorityshareofthe2005resultcontributedtoanincreaseintheminorityinterestofEUR432million.

NOTE 17 – INTEREST-BEARING LIABILITIESInEURmillion 2006 2005

Convertibledebentureloans 6 709Non-convertibledebentureloans 2,290 2,090Amountsowedtocreditinstitutions 1,220 1,016Amountsowedtopublicinstitutions 183 -Amountsowedonfixedassetsheldunderfinanceleases 140 126Fairvalueofconversionoptionrelatingtoconvertibledebentureloan(Note26) - 168Fairvalueofinterestratehedgeinstruments(Note26) 5 -Borrowingsandotherfinancialdebt 1,709 232of which towards Mittal Steel (Note 25) 1,630 -LONG-TERM BORROWINGS 5,553 4,341Short-termelementofnon-convertibledebentureloans 36 130Amountsowedtocreditinstitutions 136 331Amountsowedtopublicinstitutions 48 -Commercialpaper 99 504Currentbankborrowings 276 92Amountsowedonfixedassetsheldunderfinanceleases 13 15Accruedinterestpayable 74 62Borrowingsandotherfinancialdebt 1,075 489of which towards Mittal Steel (Note 25) 442 -SHORT-TERM BORROWINGS 1,757 1,623



NOTE 17 – INTEREST-BEARING LIABILITIES CONTINUED

17.1 – Convertible debenture loansOn14March2006,ArcelorhasofficiallyirrevocablywaiveditsoptiontoredeemincashtheconvertiblebondO.C.E.A.N.E.2017.Asaconsequence,thefairvalue(EUR463millionorEUR326millionaftertax)oftheoptionhasbeenreclassifiedtoequity,suchthattheconversionrightwillnotbemarked-to-marketanylonger.On6November2006,the19,916,184bondsheldbyMittalSteelN.V.asaresultofitsofferforArcelorsecuritieswereconvertedinto21,469,646sharesofArcelorS.A.Asat31December2006,allO.C.E.A.N.E.2017bondswereconvertedintoArcelorS.A.sharesorrepaid.

17.2 – Breakdown by currency (excluding short-term debt)InEURmillion 2006 % 2005 %

EUR 4,336 78 3,497 81USdollar 511 9 568 13BrazilianReal 384 7 263 6Canadiandollar 321 6 - -Other 1 - 13 -TOTAL 5,553 100 4,341 100

17.3 – Breakdown by maturity (excluding short-term debt)InEURmillion 2006 2005

2007 - 3362008 1,026 8392009 438 2862010 909 7802011 1,859 -Aftermorethan5years 1,321 2,100TOTAL 5,553 4,341

17.4 – Interest ratesVariableinterestratesonborrowingsareprimarilyindexedtoEURIBORandLIBOR.Whenhedginginstrumentsareinplacetoconvertfixedtovariableratestheborrowingsarerecordedasvariablerateloans.

17.5 – Fair value of interest-bearing liabilities 2006 2005 InEURmillion Carryingamount Fairvalue Carryingamount Fairvalue

Convertibledebentureloans 6 6 709 709Non-convertibledebentureloans 2,326 2,354 2,220 2,287Amountsowedtocreditinstitutions 1,356 1,379 1,347 1,433Amountsowedtopublicinstitutions 231 229 - -Amountsowedonfixedassetsheldunderfinanceleases 153 153 141 141Commercialpaper 99 99 504 504Currentbankborrowings 276 276 92 92Borrowingsandotherfinancialdebt 2,784 2,784 721 721Fairvalueofconversionoptionrelatingtoconvertibledebentureloan - - 168 168Fairvalueofinterestratehedgeinstruments 5 5 - -Accruedinterestpayable 74 74 62 62TOTAL 7,310 7,359 5,964 6,117



17.6 – Detail of main individual long-term loansInEURmillion 2006 2005

Arcelor Finance Debentureloan6.385%2003/2015(USD120million) 91 103Debentureloan3.395%2004/2009(EUR100million) 100 100Debentureloan5.125%2003/2010(EUR600million) 596 619Debentureloan6.125%2001/2008(EUR600million) 607 625Debentureloan5.50%2004/2014(EUR100million) 103 108Debentureloan4.625%2004/2014(EUR500million) 495 495Debentureloan2005/2020(USD11million) 8 8EURIBORloan3months2005/2011(EUR97million) 96 97Loan3.94%2005/2009(EUR53million) 51 53EURIBORloan3months2005/2010(EUR30million) 30 30EURIBORloan3months2005/2010(EUR35million) 35 35Loan4.67%2001/2011(EUR47million) 25 31Loan5.36%2002/2012(EUR73million) 49 58Loan5.01%2002/2010(EUR5million) 3 3Loan4.01%2003/2011(EUR5million) 3 4Loan5.56%1995/2009(EUR25million) 6 9Loan5.45%1995/2009(EUR25million) 6 9Loan6.4%2001/2011(EUR58million) 25 32Issueoftransferablesecurities-EURIBOR3months2003/2008(EUR80million) 80 79Loan4.06%2003/2008(EUR35million) 7 14EURIBORloan3months2000/2013(EUR100million) 71 83LIBOR3months2006/2011(EUR2,000million) 1,600 -Debentureloan5.52%2006/2013(USD85million) 55 -EURIBOR3months2006/2015(EUR125million) 125 -LIBOR6months2006/2008(USD20million) 3 -LIBOR6months2006/2012(USD69million) 38 -Otherloans 20 36SUB-TOTAL 4,328 2,631



17.6 – Detail of main individual long-term loans continuedInEURmillion 2006 2005

Arcelor S.A. Convertibledebentureloan3%2002/2017 - 836Arcelor Luxembourg EURIBORloan2000/2007 - 20Belgo Siderurgía TJLPdebentureloan1998/2010(BRL109million)–BMP 13 23TJLPdebentureloan1997/2009(BRL13million) - 5TJLPdebentureloan1997/2009(BRL26million) 2 7IGPMdebentureloan1999/2018(BRL22million) 6 5CST TJLPloan2000/2010(BRL270million) 48 65TJLPloan2003/2012(BRL101million) 24 23LIBORloan2005/2017(USD81million) 62 42LIBORloan2005/2016(USD70million) 50 57LIBORloan2005/2017(USD11million) - 9Debentureloan8%2005/2014(USD19million) 14 15TJLPdebentureloan2006/2018(BRL405million) 144 -TJLPdebentureloan2006/2018(USD21million) 16 -LIBOR6months2006/2017(USD18million) 9 -Debentureloan6%2006/2017(USD10million) 4 -Vega do Sul LIBORloan2002/2014(USD50million) 27 35TJLPloan2002/2011(BRL280million) 54 82Acesita “Pre-Export”loan2003/2010(USD50million) - 36“Pre-Export”loan2003/2011(USD50million) 27 41“Pre-Export”loan2003/2007(USD15million) - 9“Pre-Export”loan2004/2007(USD10million) - 8“Pre-Export”loan2004/2009(USD14million) 12 12“Pre-Export”loan2004/2007(USD10million) - 8TJLPloan2005/2010(BRL32million) 7 9TJLPloan2006/2013(BRL23million) 8 -TJLPloan2006/2013(BRL10million) 3 -TJLPloan2006/2013(BRL89million) 31 -Acindar Convertibledebentureloan2004/2012(USD47million) 6 41Dofasco Debentureloan7.55%2001/2008(CAD125million) 82 -Debentureloan4.961%2005/2017(CAD250million) 164 -Debentureloan9.81%due2009(CAD35million) 23 -Revolvingdebentureloan2006/2009 22 -Arcelor Persebras LoanlinkedtoPut/CalloptiononrepurchaseofminorityinterestsinACB 57 -Other loans 310 322TOTAL 5,553 4,341



NOTE 18 – EMPLOYEE BENEFITS

18.1 – IntroductionThemajorityofthecompaniesincludedintheArcelorconsolidationscopeareEuropean,BrazilianandCanadianentities.Accordingtothelawsandregulationsineffectinthesecountries,additionalbenefitscanbegrantedtostaff.WhencomplementarybenefitsprovidedtoemployeesgiverisetoafuturecommitmentoftheGroup,aprovisioniscalculatedbasedonactuarialvaluationmethodology.TheGroupusesindependentactuariestocalculatetheamountsofthesecommitments.Moreover,anindependentfirmisresponsibleforthecoordinationandsupervisionofalltheseactuarialcalculationsfortheGroup.Inordertoreflecttheevolutionoftheexpectedrateondebentureloanreturnin2006,theGroupdecidedtomaintainitsdiscountratefortheeuroareaat4.5%.Inordertoimprovedisclosureofthegradualexternalisationofitspensioncommitments,theGrouprecognisedactuarialgainsorlossesimmediatelytoshareholders’equitystarting1January2006,inaccordancewithIAS19revised,andthusreplacethecorridorpolicyallowingdeferredrecognitionofnetactuarialgainsorlosses.Thischangeinaccountingpolicyhasaffectedlong-termbenefitsgrantedtostaff(complementarypensionplans,retirementbenefitsandmedicalinsuranceforpensioners),withthesingleexceptionofworkmedals.TheGroupdoesnotapplythecorridorpolicytoworkmedalsandtheirvaluationissubjecttoadifferentlevelofuncertaintycomparedtotheremaininglong-termbenefits.First-timeadoptionofthisnewaccountingpolicyleadtoatransferofnetunrecognisedactuarialgainsorlossesasat1January2006toshareholders’equity.Theimpactonbalancesheetprovisionsisasfollows:

InEURmillion Closingbalance2005 Actuarialgainsorlosses Openingbalance2006

Complementarypensionplans 979 258 1,237Leavingindemnities 374 -77 297Medicalinsurance 25 5 30Workmedals 53 - 53TOTAL EMPLOYEE BENEFITS 1,431 186 1,617

Somesubsidiarieshavedeterminedtocoverpartlyorcompletelytheirretirementobligationsthroughcontractswithexternalinsuranceproviderswheresuchhedgingiscompulsory(fundedobligations).Externalpoliciesareevaluatedbyindependentactuaries.Thedifferencebetweenthecurrentvalueofsuchcommitmentsandthatoftheexternalinsurancepoliciesdesignedtocoversuchcommitments(EUR465millionintotal,includingallbenefits)representsthenetliabilityoftheGroupinrelationtosuchbenefitschemes.Thisdoesnotrepresentanoverallfundingshortfall,butrather,inalmostallcases,financingoptionsenteredintobythesubsidiaries.

18.2 – Financial information

18.2.1 – Detail of the provisions by type of commitmentPre-retirementplanshavebeenreclassifiedtothebalancesheetcaption“Provisionsforterminationbenefits”(Note19).Provisionsforpensionandotherbenefitsareanalysedasfollows:InEURmillion 2006 2005

Complementarypensionplans 1,478 979Leavingcompensation 270 374Privatemedicalinsurance 633 25Workmedals 57 53TOTAL PROVISION FOR PENSION PLANS AND SIMILAR BENEFITS 2,438 1,431

Chargesintheyearassociatedwiththeseadditionalbenefitsgrantedtostaff(excludingtheinterestchargelinkedtothediscountingofcommitmentsandtothediscountedreturnonassets)aredisclosedwithinthecaption“Staffcosts”intheincomestatement,asdetailedatNote22.


18.2.2 – Pensions France Belgium Germany Luxembourg Brazil Canada Others Total

InEURmillion 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005

Financial assets Openingbalance 30 19 306 284 9 7 1 1 411 221 - - 84 69 841 601Actualreturnonplanassets -2 2 11 15 - - - - 58 84 86 - 6 3 159 104Actuarial(gains)/losses -1 1 1 7 - - - - -2 4 - - 3 3 1 15Additionalfunding 6 8 26 27 1 2 - - 14 11 32 - 6 - 85 48Benefitspaidout - - -36 -25 - - - - -17 -13 -50 - -4 -5 -107 -43Acquisitions/disposals/settlements -1 - -9 -2 -10 - - - - -7 1,209 - -16 - 1,173 -9Changesinconsolidationscope - - - - - - - - - 61 - - - 12 - 73Exchangedifferences - - - - - - - - -9 50 -81 - - 2 -90 52Closingbalance 32 30 299 306 - 9 1 1 455 411 1,196 - 79 84 2,062 841 Actuarial value of commitments Openingbalance 555 781 390 375 382 374 209 199 347 208 - - 117 88 2,000 2,025Currentservicecost 16 39 12 10 4 4 6 5 7 6 41 - 2 3 88 67Interestcost 26 42 18 18 16 18 9 10 41 19 63 - 5 6 178 113Actuarial(gains)/losses -4 37 6 14 3 9 -2 8 23 55 62 - - 6 88 129Stafffunding - - - - - - - - 5 4 - - 1 - 6 4Disbursements -41 -278 -38 -28 -26 -25 -18 -22 -17 -13 -50 - -4 -5 -194 -371Acquisitions/disposals/settlements -7 -62 -8 -2 -27 - - - - -6 1,427 - -14 - 1,371 -70Obligationtransfer -2 - - -1 - - - 8 - - - - - - -2 7Changeinpensionplan - - 16 4 - 2 1 - - - - - 1 - 18 6Changesinconsolidationscope 32 -4 - - -23 - 3 1 - 30 - - -3 17 9 44Exchangedifferences - - - - - - - - -8 44 -97 - - 2 -105 46Closingbalance 575 555 396 390 329 382 208 209 398 347 1,446 - 105 117 3,457 2,000 Balance sheet provision Presentvalueoffundedobligations 126 126 369 361 - 12 3 3 398 347 1,446 - 103 114 2,445 963Fairvalueofplanassets -32 -30 -299 -306 - -9 -1 -1 -455 -411-1,196 - -79 -84-2,062 -841Sub-total: Net present value of funded obligation 94 96 70 55 - 3 2 2 - 57 - 64 250 - 24 30 383 122Presentvalueofunfundedobligations 449 429 27 29 329 370 205 206 - - - - 2 3 1,012 1,037Unrecognisedactuarialgains/(losses) - - - - - - - - - - - - - - - -Unrecognisedservicecost - - - - - - - - - - - - - - - -Sub-total: Net commitments 543 525 97 84 329 373 207 208 - 57 - 64 250 - 26 33 1,395 1,159Netassetsrelatedtofundedobligations - - 2 2 - - - - 61 64 14 - 6 - 83 66Balancesheetprovision 543 525 99 86 329 373 207 208 4 - 264 - 32 33 1,478 1,225 Breakdown of charge for the period Currentservicecost 16 39 12 10 4 4 6 5 7 6 41 - 2 3 88 67Interestcost 26 42 18 18 16 18 9 10 41 19 63 - 5 6 178 113Expectedreturnonassets -1 -1 -10 -12 - - - - -52 -27 -72 - -5 -6 -140 -46Amortisationofpastservicecost - - 16 4 - 4 1 2 - - - - 1 - 18 10Curtailmentsandsettlements -4 -62 1 - - - - - - 1 - - 2 - -1 -61Expensesrecognisedintheincomestatement 37 18 37 20 20 26 16 17 -4 -1 32 - 5 3 143 83 Movements in balance sheet provision Openingprovision 525 762 86 93 373 367 208 196 - -1 - - 33 19 1,225 1,436Changesinconsolidationscope 32 -4 - - -23 - 3 1 - - - - -3 5 9 2Exchangedifferences - - - - - - - - 1 -1 -16 - - - -15 -1Variationofnetassetsrelatedtofundedobligations - - - - - - - - -3 - 14 - 6 - 17 -Changeinequity-SORIE - 35 4 4 3 9 -2 8 19 11 48 - -4 6 68 73Acquisition/Divestiture/Obligationtransfer -4 - - -1 -17 -2 - 8 - - 218 - - - 197 5Disbursements -47 -286 -28 -30 -27 -27 -18 -22 -9 -8 -32 - -5 - -166 -373Expensesrecognisedintheincomestatement 37 18 37 20 20 26 16 17 -4 -1 32 - 5 3 143 83Closingprovision 543 525 99 86 329 373 207 208 4 - 264 - 32 33 1,478 1,225 Main actuarial assumptions Discountrate(%) 4.50% 4.50% 4.50% 4.50% 4.50% 4.50% 4.50% 4.50%10.96% 7.12% 5.00% - - - - -Expectedreturnonplanassets(%) 5.00% 5.00% 3.55% 4.06% - 4.00% 4.00% 4.00%12.76% 9.64% 7.16% - - - - -Averagerateofsalaryincrease(%) 2.84% 2.84% 3.37% 3.58% 2.37% 2.49% 4.57% 4.57% 6.66% 2.86% 3.40% - - - - -Inflationrate(%) 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 4.68% 0.96% 2.50% - - - - - Defined contribution plan Contributionsduringtheperiod - - 4 11 - - 1 8 - - - - 1 12 21



18.2.3 – Leaving Indemnities France Others Total

InEURmillion 2006 2005 2006 2005 2006 2005

Financial assets Openingbalance 8 8 - - 8 8Actualreturnonplanassets 1 - - - 1 -Actuarial(gains)/losses - - - - - -Additionalfunding - - - - - -Benefitspaidout - - - - - -Acquisitions/disposals/settlements - - - - - -Changesinconsolidationscope - - - - - -Exchangedifferences - - - - - -Closingbalance 9 8 - - 9 8Actuarial value of commitments Openingbalance 267 274 32 30 299 304Currentservicecost 8 9 1 1 9 10Interestcost 11 13 1 2 12 15Actuarial(gains)/losses -7 -4 -1 2 -8 -2Stafffunding - - - - - -Benefitpaidout -20 -16 -5 -3 -25 -19Acquisitions/disposals/settlements - -3 - - - -3Changesinpensionplan - -5 - - - -5Changesinconsolidationscope -5 -1 -8 - -13 -1Exchangedifferences - - - - - -Closingbalance 254 267 20 32 274 299Balance sheet provision Presentvalueoffundedobligations 12 12 - - 12 12Fairvalueofplanassets -9 -8 - - -9 -8Sub-total: Net present value of funded obligations 3 4 - - 3 4Presentvalueofunfundedobligations 242 255 20 32 262 287Unrecognisedactuarialgains/(losses) - - - - - -Unrecognisedpastservicecosts 5 6 - - 5 6Balancesheetprovision 250 265 20 32 270 297Breakdown of charge for the period Currentservicecost 8 9 1 1 9 10Interestcost 11 13 1 2 12 15Amortisationofpastservicecost -1 -1 - - -1 -1Curtailmentsandsettlements - -3 1 - 1 -3Expensesrecognisedintheincomestatement 18 18 3 3 21 21Movement in balance sheet provision Openingprovision 265 268 32 30 297 298Changesinconsolidationscope -5 -1 -8 - -13 -1Changeinequity-SORIE -8 -4 -2 2 -10 -2Disbursements -20 -16 -5 -3 -25 -19Expensesrecognisedintheincomestatement 18 18 3 3 21 21Closingprovision 250 265 20 32 270 297Main actuarial assumptions Discountrate 4.50% 4.50% - - - -Expectedreturnonplanassets 5.75% 5.75% - - - -Averagerateofsalaryincrease 2.97% 2.97% - - - -Inflationrate 2.00% 2.00% - - - -




18.2.4 – Other benefits (medical insurance, work medals) France Belgium Canada Others Total

InEURmillion 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005

Financial assetsOpeningbalance - - 2 3 - - - - 2 3Actuarial(gains)/losses - - - -1 - - - - - -1Actualreturnonplanassets - - - - - - - - - -Additionalfunding - - 1 2 - - - - 1 2Benefitspaidout - - -1 -2 - - - - -1 -2Acquisitions/disposals/settlements - - - - - - - - - -Changesinconsolidationscope - - - - - - - - - -Exchangedifferences - - - - - - - - - -Closing balance - - 2 2 - - - - 2 2Actuarial value of commitmentsOpeningbalance 36 35 35 34 - - 14 14 85 83Currentservicecost 1 1 - - 10 - 1 1 12 2Interestcost 2 2 1 2 27 - 1 1 31 5Actuarial(gains)/losses 4 4 1 1 27 - - - 32 5Stafffunding - - - - - - - - - -Benefitpaidout -6 -7 -2 -2 -16 - -2 -2 -26 -11Acquisitions/disposals/settlements - - - - 605 - - - 605 -Changesinpensionplan 1 1 -8 - - - - - -7 1Changesinconsolidationscope - - - - - - 2 - 2 -Exchangedifferences - - - - -44 - - - -44 -Closing balance 38 36 27 35 609 - 16 14 690 85Balance sheet provision Presentvalueoffundedobligations - - 20 27 - - - - 20 27Fairvalueofplanassets - - -2 -2 - - - - -2 -2Sub-total: Net present value of funded obligations - - 18 25 - - - - 18 25Presentvalueofunfundedobligations 38 36 7 8 609 - 16 14 670 58Unrecognisedactuarialgains/(losses) - - - - - - - - - -Unrecognisedpastservicecosts - - 2 - - - - - 2 -Balance sheet provision 38 36 27 33 609 - 16 14 690 83Breakdown of charges for the period Currentservicecost 1 1 - - 10 - 1 1 12 2Interestcost 2 2 1 2 27 - 1 1 31 5Expectedreturnonassets - - - - - - - - - -Actuarial(gains)/lossesrecognisedintheperiod 4 4 - - - - - - 4 4Amortisationofpastservicecost 1 1 -6 - - - - - -5 1Curtailmentsandsettlements - - - - - - - - - -Expenses recognised in the income statement 8 8 - 5 2 37 - 2 2 42 12Movement in balance sheet provision Openingprovision 36 35 33 31 - - 14 14 83 80Changesinconsolidationscope - - - - 605 - 2 - 607 -Exchangedifferences - - - - -44 - - - -44 -Disbursements -6 -7 -2 -2 -16 - -2 -2 -26 -11Changeinequity-SORIE - - 1 2 27 - - - 28 2Expensesrecognisedintheincomestatement 8 8 -5 2 37 - 2 2 42 12Closing provision 38 36 27 33 609 - 16 14 690 83Main actuarial assumptions Discountrate 4.50% 4.50% 4.50% 4.50% 5.01% - - - - -Expectedreturnonplanassets - - 5.00% 5.00% - - - - - -Averagerateofsalaryincrease 3.11% 2.86% - - 3.41% - - - - -Healthcarecosttrendrate - - 2.03% 2.50% 7.89% - - - - -Inflationrate 2.00% 2.00% 2.00% 2.00% 2.50% - - - - -

18.3. – Financial assetsPlanassetsconsistofthefollowing:InEURmillion 2006 %

Bonds 1,153 56%Equitysecurities 767 37%RealEstate 1 0%Others 152 7%TOTAL 2,073 100%




18.4 – Other informationsAssumedhealthcarecosttrendrateshaveasignificanteffectontheamountsrecognisedinprofitorloss.Aonepercentagepointchangeinassumedhealthcarecosttrendrateswouldhavethefollowingeffects: Onepercentage OnepercentageInEURmillion pointincrease pointdecrease

Effectontheaggregateserviceandinterestcost 10 (7)Effectondefinedbenefitobligation 114 (96)TheGroupexpectstopay79MEURincontributionstodefinedbenefitplansin2007.

NOTE 19 – PROVISIONS FOR TERMINATION BENEFITSTheprovisionsforterminationbenefitsreflectsocialcommitmentsthattheGrouphasmadeinthecontextofitsrestructuringplansannouncedpriortotheyear-end(whichmaysubsequentlybecomeearlyretirementplans)orearlyretirementplanslinkedtocollectiveagreementssignedwithcertaincategoriesofemployees.

InEURmillion Socialprovisions Earlyretirementplans Total

Opening balance at 1 January 2006 411 471 882Increaseinprovision 60 51 111Utilisationandreversal -58 -105 -163Reclassifications(socialplanstransformedintoearlyretirementplansduringtheyear) -21 21 -Otherreclassifications,changesinconsolidationscopeandforeignexchangevariations -29 -28 -57CLOSING BALANCE AS AT 31 DECEMBER 2006 363 410 773

Chargesfortheperiodrelatingtosocialprovisionsarerecordedin“Otheroperatingcharges”intheincomestatement.Chargesfortheperiodrelatingtoearlyretirementplansarerecordedin“Staffcosts”intheincomestatementasdetailedinNote22.

19.1 – Social provisionsSocialprovisionsattheyear-endincludeestimatedindemnitiesunderthefollowingrestructuringplans(amountsinEURmillion):

• FlatCarbonSteelsector(2006:306;2005:324):primarilythesocialplanrelatedtothereorganisationofthehotphaseinLiège(2006:176;2005:184)andtheincreaseofthesocialprovisionsinSpainwithinthecontextoftheARCOproject(2006:113;2005:109).

• StainlessSteelsector(2006:36;2005:59)• A3Ssector(2006:14;2005:17).

19.2 – Early retirement plansAnactuaryreviewstheearlyretirementplans,whichareeitherpartofrestructuringmeasuresorcollectiveagreements.Themainassumptionsandthemovementsduringtheyeararesummarisedinthefollowingtable. Belgium Germany Luxembourg Others Total

InEURmillion 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005

Balance sheet provision Presentvalueofunfundedobligation 358 378 19 53 2 2 31 38 410 471Unrecognisedactuarialgains/(losses) - - - - - - - - - -Balance sheet provision 358 378 19 53 2 2 31 38 410 471Breakdown of charges for the period Currentservicecost - 31 3 7 - - 1 2 4 40Interestcost 15 17 2 2 - - 1 2 18 21Actuarial(gains)/lossesrecognisedintheperiod 16 19 7 1 - -3 1 -2 24 15Amortisationofpastservicecost 1 5 2 - 2 1 - -1 5 5Expenses recognised in the income statement 32 72 14 10 2 - 2 3 1 51 81Movement in balance sheet provision Openingprovision 378 373 53 63 2 13 38 47 471 496Changesinconsolidationscope - - -1 - - - - - -1 -Exchangedifferences - - - - - - - - - -Acquisition/disposal - - -27 - - - - -1 -27 -1Obligationtransfer 21 4 - - - -8 - - 21 -4Disbursements -73 -71 -20 -20 -2 -1 -10 -9 -105 -101Expensesrecognisedintheincomestatement 32 72 14 10 2 -2 3 1 51 81Closing provision 358 378 19 53 2 2 31 38 410 471Main actuarial assumptions Discountrate 4.11% 4.14% 4.00% 4.03% 4.00% 4.00% - - - -Averagerateofsalaryincrease 2.00% 2.00% 2.50% 2.51% 2.00% 2.00% - - - -Inflationrate 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% - - - -


NOTE 20 – OTHER PROVISIONS Restructuringcosts Commercial Environnemental Otherrisks TOTALInEURmillion risks risks

Opening balance 97 61 228 801 1,187Increaseinprovisions 24 30 58 317 429Utilisationandreversal -37 -22 -35 -294 -388Reclassifications,changesinconsolidationscopeandexchangedifferences -37 7 26 37 33CLOSING BALANCE 47 76 277 861 1,261

InEURmillion 2006 2005

Otherlong-termprovisions 972 943Othershort-termprovisions 289 244TOTAL OTHER PROVISIONS 1,261 1,187

20.1 – Provisions for restructuringProvisionsrecordedunderthisheadingdonotincludesocialcommitmentswhichareseparatelydisclosedunder“Provisionsforterminationbenefits”asdetailedinNote19.Provisionsforrestructuringcompriseprovisionsestablishedinrespectofchargesforthedismantlingandtherestorationofsites.Bysector,restructuringprovisionsareanalysedasfollows:• FlatCarbonEurope:EUR26million(2005:EUR42million)• LongCarbonAmericaandEurope:EUR8million(2005:EUR8million)• Stainless:EUR-million(2005:EUR33million)• A3S:EUR9million(2005:EUR6million)• Other:EUR4million(2005:EUR8million)

20.2 – Commercial risksCommercialrisksprimarilyincludelitigationwithcustomers,baddebts,lossesoncontractsandterminationlossesaswellasguaranteesandotheritems.

20.3 – Environmental risksProvisionsforenvironmentalrisks,analysedbygeographiczones,areasfollows:


Belgium 108 100France 66 68Luxembourg 67 53Canada 31 -Other 5 7TOTAL 277 228

Theprovisionscovertheanticipatedcostsrelatingtobothprotectionandremediationofsoil,groundwaterandsurfacewater(2006:EUR184million;2005:EUR135million),wastemanagement(2006:EUR35million;2005:EUR35million)andotherenvironmentalmeasurements(2006:EUR58million,2005:EUR58million).Theprovisionsarecalculatedinaccordancewithlocalandnationallegalstandardsandregulations.



20.4 – Other risksOtherprovisionscoverthefollowingrisks:


Litigations 329 308Taxrisks 118 235Socialrisks 21 21Otherrisks 393 237TOTAL 861 801

Provisionsfortaxrisksincludeprovisionsbookedwithinthecontextofdisputeswithlocaland/ornationaltaxauthorities.

Provisionsforlitigationscomprisenon-taxrelatedclaims.

Theprovisionsforsocialrisksincludeprovisionsrecordedwhicharenotincludedundertheheadingof“Employeebenefits”.

NOTE 21 – OTHER AMOUNTS PAYABLEInEURmillion 2006 2005

Fixedassetandothersuppliers 422 406Prepaymentsonorders 239 217Revaluationofforeigncurrencyhedgeinstruments(Note26) 318 32Revaluationofrawmaterialshedgeinstruments(Note26) 14 72Remuneration,taxandsocialsecurity 1,629 1,334Dividendspayable 81 5Othercreditors 482 451Deferredincome 189 50TOTAL 3,374 2,567

NOTE 22 – STAFF COSTSInEURmillion 2006 2005*

Wagesandsalaries 3,731 3,352Socialcharges 1,090 1,082Contributionstodefinedcontributionpensionschemes(Note18) 12 21Chargesfortheyearinrespectofadditionalemployeebenefitsgivingrisetoprovisions(notincludinginterestcharges)(Note18) 125 42Chargesfortheyearinrespectofprovisionsforearlyretirement(notincludinginterestcharges)(Note19) 33 60Employeeprofit-sharingscheme 134 103Costofequity-settledshare-basedpayments 10 4Other 283 194TOTAL 5,418 4,858

*restated



NOTE 23 – FINANCIAL INCOME AND EXPENSE

Recognised in profit and lossInEURmillion 2006 2005

Interestincome 236 229Interestcharges -568 -336Discountinginterestcharges -113 -128• ofwhichinterestchargesrelatingtothediscountingofemployeebenefitsprovisions(Note18) -81 -87• ofwhichinterestchargesrelatingtothediscountingofearlyretirementprovisions(Note19) -18 -21Dividendsreceived 70 51Foreignexchangeresult 346 120RestatementtofairvalueoftheequityconversionoptionrelatingtotheO.C.E.A.N.E.2017debentureloan -295 -44Netchangeinfairvalueforderivatives -12 9Impairmentoffinancialassets -17 -3Resultonthedisposaloffinancialassets 6 28Mergercosts -271 -Other -78 -180TOTAL - 696 - 254

InterestchargesincludetheacceleratedamortisationoftheO.C.E.A.N.E.2017debentureloanfollowingtheearlyredemptionoftheloanforEUR64million.TheresultonforeignexchangeincludesagainofEUR354millionrelatedtotherevaluationofaforeignexchangeCAD/EURswap.ThemergercostsincludethebreakfeesrelatedtotheterminationoftheStrategicAllianceAgreementbetweenArcelorandSeverstal(EUR140million).OthernetfinancingcostsincludebankingchargesandcommissionsforEUR64million(2005:EUR48million).

Recognised in equityInEURmillion 2006 2005

Netchangeinfairvalueofavailableforsalefinancialassets - 24Effectiveportionofchangesinfairvalueofcashflowhedge -119 75TransfertoequityofO.C.E.A.N.E.2017liabilitycomponent 326 -Gainonsaleofownshares 41 -DisposalofArcelorGermanyHoldingandsubsidiaries(Note14.7) 1,980 -AcquisitionofMittalSteelGandrange(Note14.8) 155 -Foreigncurrencytranslationdifferencesonforeignoperations -808 552TOTAL 1,575 651

Thechangeincashflowhedgebytypeofderivativeinstrumentisasfollows:InEURmillion 2006 2005

Foreignexchangeratehedgeinstruments -90 115Rawmaterialhedgeinstruments -29 -40TOTAL - 119 75

AsaconsequenceofthecancellationofthecashsettlementoptionrelatedtotheO.C.E.A.N.E.2017convertibledebentureloan,thecumulativevalueoftheequityconversionoptionwastransferredfrominterest-bearingliabilitiestoequity(EUR326millionaftertax).



NOTE 24 – TAXATION

Tax Charge

Tax analysis:InEURmillion 2006 2005*

Currenttax -605 -396Deferredtax 143 221TOTAL TAXATION - 462 - 175

*restated

Reconciliationbetweenthetaxchargeandtheresultbeforetax:InEURmillion 2006 2005

Netprofit 3,007 3,873Minorityinterest 652 432Resultfromcompaniesaccountedforusingtheequitymethod -363 -317Taxcharge 462 175Profit before tax 3,758 4,163Theoreticaltaxcharge(34.39%in2005,33.80%in2005) -1,292 -1,407Reconciliation: Permanentdifferences 117 123Movementsinunrecogniseddeferredtaxassets -21 220Variationintaxrates 80 -4Taxdeduction«Adene»(Brazil) 52 82TaxdeductiononMJSacquisition(Brazil) - 117Variationsindeferredtaxliabilitiesrelatedtoforeignexchangemovementsonnon-monetaryassetsandliabilitiesdenominatedinforeigncurrencies 77 71Deferredtaxassetsrelatedtotaxlossescarriedforward 385 574ForeignexchangelossonCanadiandollarcurrencyswap 75 -ReversalofimpairmentonforestsatCAFSantaBarbara 28 -Taxcredits 37 -Othertaxes - 49EFFECTIVE TAX CHARGE - 462 - 175

Permanentdifferencesareprimarilyduetothefollowing:InEURmillion 2006 2005

Impairment - -8Goodwillandsurplusamortisation 3 9Resultexemptfromtax 95 80Otherchargesandincome,notdeductible/nottaxable 19 42TOTAL 117 123

Deferred TaxMovementsindeferredtaxliabilitiesareanalysedasfollows:InEURmillion 2006 2005

BalanceasatJanuary1 537 605Expense(income)fortheperiod -174 74Deferredtaxassetsrelatedtolossescarriedforward -51 -109Variationsindeferredtaxliabilitiesrelatedtoforeignexchangemovementsonnon-monetaryassetsandliabilitiesdenominatedinforeigncurrencies - -71ReclassificationinLiabilitiesheldforsale -4 -Effectsofthevariationsinexchangerates,consolidationscopeandre-classifications 869 32Deferredtaxbookeddirectlytoshareholders’equity -53 6BALANCE AS AT 31 DECEMBER 1,124 537



NOTE 24 – TAXATION CONTINUEDMovementsindeferredtaxassetsareanalysedasfollows:InEURmillion 2006 2005

Balanceasat1January 1,378 1,300Income(expense)fortheperiod -30 -85Deferredtaxassetsrelatedtolossescarriedforward 351 465Utilisationofdeferredtaxassetsrelatedtolossescarriedforward -463 -226Deferredtaxassetadjustmentsrelatingtopriorperiods -17 -Variationsindeferredtaxassetsrelatedtoforeignexchangemovementsonnon-monetaryassetsandliabilitiesdenominatedinforeigncurrencies 77 -Reclassificationinassetsheldforsale -3 -Effectsofthevariationsinexchangerates,consolidationscopeandre-classifications 8 -60Deferredtaxbookeddirectlytoshareholders’equity 26 -16BALANCE AS AT 31 DECEMBER 1,327 1,378

Originofdeferredtaxassetsandliabilities: Assets Liabilities NetInEURmillion 2006 2005 2006 2005 2006 2005

Intangibleassets 91 9 -131 -3 -40 6Property,plantandequipment 193 261 -1,585 -941 -1,392 -680Inventories 170 120 -41 -27 129 93Financialinstruments 11 36 -31 -117 -20 -81Otherassets 99 267 -70 -151 29 116Provisions: 862 580 -274 -147 588 433of which pensions 513 270 - 16 - 11 497 259of which other social provisions 207 157 - - 1 207 156of which other provisions 142 153 - 257 - 135 - 115 18otherliabilities 120 131 -49 -111 71 20Taxlossescarriedforward 742 934 - - 742 934Taxcredits 123 - - - 123 -Untaxedreserves - - -5 - -5 -OthertaxcreditslinkedtoMendesJunior - - -22 - -22 -Deferred tax assets / (liabilities) 2,411 2,338 - 2,208 - 1,497 203 841Deferredtaxassets 1,327 1,378Deferredtaxliabilities -1,124 -537NET BALANCE 203 841

Asat31December2006,theGroup’scarriedforwardtaxlosseshavethefollowingmaturity:InEURmillion 2006 2005

2006 - 272007 9 412008 - 302009 - 262010 4 -2010andbeyond - 2732011andbeyond 268 -Nomaturitydate 4,490 5,833TOTAL 4,771 6,230Othertaxcredits(long-termdepreciation) 378 1,105



NOTE 24 – TAXATION CONTINUEDDeferredtaxassetsnotrecognisedbytheGroupapplytothefollowingelementsasat31December2006: Grossamount Totaldeferred Recogniseddeferred UnrecogniseddeferredInEURmillion taxassets taxassets taxassets

Taxlossescarriedforward 4,771 1,578 742 836Taxcredits 123 123 123 -Othertaxcredits(long-termdepreciation) 378 57 - 57Property,plantandequipment 1,257 434 193 241Other 4,169 1,429 1,353 76TOTAL 3,621 2,411 1,210

DeferredtaxassetsnotrecognisedbytheGroupapplytothefollowingelementsasat31December2005: Grossamount Totaldeferred Recogniseddeferred UnrecogniseddeferredInEURmillion taxassets taxassets taxassets

Taxlossescarriedforward 6,230 2,106 934 1,172Othertaxcredits(long-termdepreciation) 1,105 166 - 166Property,plantandequipment 1,381 476 261 215Other 3,574 1,207 1,143 64TOTAL 3,955 2,338 1,617

NOTE 25 – RELATED PARTY DISCLOSURETheconsolidatedfinancialstatementsincludetransactionscarriedoutbytheGroupinthenormalcourseofbusinesswithitsnon-consolidatedentitiesandentitiesaccountedforusingtheequitymethod.Transactionsarebookedatmarketprices.At31December2006,thetransactionswithrelatedpartiesalsoincludealltransactionswiththeprincipalshareholderMittalSteelCompanyN.V.andallitssubsidiariesandassociatedcompanies.

25.1 – Transactions with Mittal SteelThesalesandpurchasesofgoodsandservicesbetweentheGroupandMittalSteelGroupamountrespectivelytoEUR114millionandEUR171millionforthefinancialyear.Asat31December2006,thereceivablesandpayablesbetweentheGroupandMittalSteelGroupamountrespectivelytoEUR3,439and2,353million.ThereceivablesincludemainlythereceivablesrelatedtothedisposalofArcelorGermanyHoldinganditssubsidiaries(EUR2,602million)toMittalSteelGermanyHolding.Thisreceivablematureson28February2007anddoesnotincludeanyinterest.Aftermaturitydateanduntilfinalsettlement,thereceivablebearsaninterestratebasedonthelegalratedefinedinGermanyinaccordancewithparagraph247BGBplusaspreadof5%.Theyalsoincludecurrentandnon-currentfinancialloansgrantedbyArcelorFinanceSCAtoMittalSteelCompanyN.V.ThepayablesincludemainlyfinancialloansgrantedbyMittalSteelCompanyN.V.toArcelorFinanceSCA.Theinterestrateonsuchloansisfloating(Euribor+spread)andthematurityiscomprisedbetweenSeptember2007andDecember2009.

InEURmillion 2006

Sales 114Purchases 171Receivables 3,439of which non-current financial loans (Note 8) 487 of which current financial loans (Note 11) 307 of which receivable from sale of Arcelor Germany Holding and subsidiaries (Note 11) 2,602Payables 2,353of which financial loans (Note 17) 2,072

25.2 - Loans and guarantees givenInEURmillion 2006 2005

Loans(includingshort-termloans)tonon-consolidatedcompanies 373 55Guaranteesgrantedtonon-consolidatedcompanies 148 161



NOTE 25 – RELATED PARTY DISCLOSURE CONTINUED

25.3 – Purchases and sales of goods and servicesInEURmillion 2006 2005

Sales 1,917 1,444Purchases 809 758

25.4 – Remuneration of the Board of Directors and General ManagementInEURmillion 2006 2005

BoardofDirectorsandGeneralManagement 6.2 8.9

NOTE 26 – FINANCIAL INSTRUMENTS AND DERIVATIVES TheGroupusesfinancialinstrumentsandderivativestohedgeitsexposuretofluctuationsininterestrates,exchangeratesandthepriceofrawmaterials,energyandemissionrightsquota.TheGroupmanagesthecounter-partyriskassociatedwiththeseinstrumentsbycentralisingitscommitmentsandbyapplyingprocedureswhichspecify,foreachtypeoftransactionandunderlying,risklimitsand/orthecharacteristicsofthecounter-party.TheGroupdoesnotgenerallygranttoorrequirefromitscounter-partiesguaranteesovertherisksincurred.Allowingforexceptions,theGroup’scounter-partiesarepartofitsfinancialpartnersandtherelatedmarkettransactionsaregovernedbyframeworkagreements(mainlyoftheISDAtypeallowingnettingincaseofcounter-partydefault).TheparentcompanycentrallymanagestherisksofalltheGroupentities,withtheexceptionoftheNorthandSouthAmericancompanies.TheseentitiesmanagetheirrisksaccordingtoGrouppolicy,andinagreementwiththeparentcompany.

INTERESTRATERISKTheGroupusesseveraltypesofinstrumentsforthemanagementofinterestrateriskinordertooptimiseitsfinancialexpensesorincome,tohedgeexchangeriskrelatedtoloansandborrowingsinforeigncurrenciesandtomanagethesplitbetweenfixedandvariablerateloans.Interestrateexchangecontracts(‘swaps’)allowtheGrouptoborrowlong-termatvariablerates,andtoswaptherateofthisdebteitherfromthestartorduringtheperiodoftheloan.TheGroupanditscounterpartyexchange,atpredefinedintervals,thedifferencebetweentheagreedfixedrateandthevariablerate,calculatedonthebasisofthenotionalamountoftheswap.Similarly,swapsmaybeusedfortheexchangeofvariableratesagainstothervariablerates.FRAs(‘forwardrateagreements’)andfuturescontractsoninterestratesareprimarilyusedbytheGrouptohedgetheratespaidonloansandvariableratefinancialinstrumentsor,inparticularcases,onexistingorfutureloans.Similarly,futurescontractsareusedbytheGrouptohedgethedifferenceintheratesbetweentwocurrenciesinparticularcasesandwithintheframeworkofexchangeriskmanagement.Thesecontractsareeithercommitmentstobuy(orsell)afinancialinstrumentatafuturedateandatanagreedprice,ortoreceive(orpay)atafuturedatethedifferencebetweentwogivenrates.Certaininstrumentscanbesettledincash,otherscanbesettledthroughdeliveryoftheunderlyingassetorincash.TheGroupwillgenerallyonlycommititselftohighlyliquidtermcontracts,suchasEURIBORorEurodollarfutures.InterestratederivativesusedbytheGrouptocovervariationsinthevalueoffixedrateloansarequalifiedasfairvaluehedgesaccordingtoIAS39.Thesederivativesarere-valuedatthebalancesheetdateandhaveanimpactonthenetprofitorloss.Thisimpactisneutralisedbythehedgedpartoftheassociatedloans.AsatDecember31,2006,theGroupdoesnotowninterestratederivativesthatarenotqualifiedashedginginstrumentsaccordingtoIAS39.

EXCHANGERATERISKTheGroupusesforwardpurchasesandsalesofforeigncurrencyandotherderivativestohedgeforeigncurrencytransactionsofthemajorityofitssubsidiaries.Swapsmightalsobeusedtoexchangeacurrencywithanotherone,withintheframeworkofexchangeriskmanagement.Thegroupismainlyexposedtovariationsinvaluearisingfromexchangeratefluctuationsonrawmaterialsandenergysupplyaswellasonfreight.ThecommonpracticeoftheGroupistoinvoiceclientsintheirowncurrency.TheGroupalsousestheseinstrumentsatconsolidationleveltohedgedebtrecordedinforeigncurrencyorthebalancesheetriskincurredoncertainassets.ThegeneralpolicyoftheGroupistohedgeexchangeriskontransactionscompletely.However,asanexceptiontothisgeneralpolicy,forcertaincurrenciesandforrisksandamountsthatareclearlyidentifiedandauthorisedbymanagement,theGroupmayeitherhedgeinanticipationornothedgetransactionalrisks.Inthiscontext,theGrouphassetupmacro-economicmanagementforapartofitspurchases(mainlyforitsfuturerawmaterialsandassociatedconsumptions[iron,ore,coalandfreight]),enablingittoreprocesspartoralloftherelatedvariationsinvaluetoshareholders’equity.Thisaccountingtreatmentisallowedinordertoaccountforcashflowhedges.



NOTE 26 – FINANCIAL INSTRUMENTS AND DERIVATIVES CONTINUED

RAWMATERIALRISKTheGroupusesfinancialinstruments(forwardpurchases,optionsandswapsoncommodities)inordertoreducethevolatilityriskofcertainrawmaterialsandenergy.TheGroupisexposedtorisksonrawmaterialsandenergybothviathepurchaseofitsownrawmaterialsandviasalescontracts.

EMISSIONRIGHTSPursuanttothecomingintoeffectoftheEuropeanDirective2003/87/ECof13October2003establishingaschemeforemissionallowancetrading,theGroupemploysseveraltypesofderivatives(cashpurchase/sale,forwardtransactions,options)inordertoimplementitsmanagementpolicyforassociatedrisks.

TRADINGRISKIfthereareopenpositions,dulygovernedbylimittrackingprocedures(definedbythenatureoftherisk:autorisednominalamount,maximumlevelofloss/profit,fixedmaturities),theGroupcarriesouttradingoperationsonthebasisoftherisksassociatedwithinterestrates,exchangerates,rawmaterialandenergyprices,aswellaswithgreenhousegasemissionrights.Openpositionsarenotsignificantwithrespecttothevolumeofhedgingoperationsdealtorthegeneralraterisk.

FOLLOWINGUPONRISKSThetypesofinstruments,theproductsandcurrencieswhichmaybeused,aswellasthemaximumriskexposurearedeterminedatmanagementlevel.Eachriskismonitored,onadailybasisandintra-daybasis,byadedicatedandindependentteam,whocanreportdirectlytotheAuditCommitteeoftheGroup,ifnecessary.In2006and2005,thenetprofitorlossontradingoperationswasnotsignificanttotheGroup’sresults.Theportfolioofassetsassociatedwithderivativefinancialinstrumentsasat31December2006isasfollows:

2006 2005InEURmillion Notionalamount Marketvalue Averagerate* Notionalamount Marketvalue Averagerate*

InterestrateinstrumentsINTEREST RATE SWAPS – FIXED RATE BORROWINGS–Foreigncurrency - - - 254 3 2.74%INTEREST RATE SWAPS – FIXED RATE LOANS–EUR 800 9 4.99% 1,353 55 4.59%–USD - - - 356 3 5.51%Interestrateswaps-variable/variable - - - 115 - 2.94%FRAcontracts-purchases - - - 1,050 2 2.24%Cappurchases 100 1 - - - -Floorpurchases - - - 100 - 2.55%Floorsales 100 - 2.70% 200 - 2.70%TOTAL ASSETS (NOTE 8) 10 63 Exchange rate instrumentsForwardpurchaseofforeigncurrency 396 2 - 2,722 65 -Forwardsaleofforeigncurrency 9,265 310 - 111 - -Currencyswap - 1 - - - -Exchangeoptions–Purchases - - - 1,296 73 -Exchangeoptions–sales 450 7 - 1,875 34 -TOTAL ASSETS (NOTE 11) 320 172 Raw MaterialsTermcontracts-sales 24 3 - 26 1 -Termcontracts-purchases 289 59 - 242 61 -Swapsusingrawmaterialspricingindex - - - 1 1 -Options-sales 12 4 - 62 2 -Options-purchases 95 - - 120 29 -TOTAL ASSETS 66 94 of which non-currentt (Note 8) 13 38 of which current (Note 11) 53 56*AveragefixedratesaredeterminedonthebasisoftheEURandforeigncurrencyrates.VariableratesaregenerallybasedonEuribororLibor.



NOTE 26 – FINANCIAL INSTRUMENTS AND DERIVATIVES CONTINUED 2006 2005InEURmillion Notionalamount Marketvalue Averagerate* Notionalamount Marketvalue Averagerate*

InterestrateinstrumentsINTEREST RATE SWAPS – FIXED RATE BORROWINGS–EUR 553 -3 4.59% 50 - 4.24%–Foreigncurrency 93 -1 4.93% - - -FRAcontracts–sales 250 - 3.40% 1,000 - 2.52%Interestrateswaps–variable/variable 97 -1 3.14% - - -Cappurchases 100 - 3.25% 200 - 2.70%O.C.E.A.N.E.2017option - - - 838 -168 4.22%TOTAL LIABILITIES (NOTE 17) - 5 - 168 Exchange rate instrumentsForwardpurchaseofforeigncurrency 5,638 -305 - 18 -2 -Forwardsaleofforeigncurrency 156 -1 - 1,870 -17 -CurrencySwap - -2 - - - -Exchangeoptions–purchases -450 -10 - 275 -2 -Exchangeoptions–sales - - - 750 -11 -TOTAL LIABILITIES (NOTE 21) - 318 - 32 Raw materialsTermcontracts–sales -79 -10 - 129 -26 -Termcontracts–purchases -167 -8 - 57 -2 -Swapsusingrawmaterialspricingindex - -2 - 8 -6 -Options–sales - - - 205 -35 -Options–purchases - - - 86 -3 -TOTAL LIABILITIES - 20 - 72of which current (NOTE 21) - 14 - 72*AveragefixedratesaredeterminedonthebasisoftheEURandforeigncurrencyrates.VariableratesaregenerallybasedonEuribororLibor.

Theassetsandliabilitiesassociatedwithinterestrateinstrumentsaredistributedaccordingtothefollowingmaturitydates:InEURmillion 2006 2005

<1year 1 71–5years 6 55>5years -2 1TOTAL 5 63Assetsassociatedwithinterestrateinstruments 10 63Liabilitiesassociatedwithinterestrateinstruments -5 -TOTAL 5 63

Theexchangerateinstrumentsarereportedinthefollowingcurrencies:InEURmillion Purchasedcurrencies 2006 2005Sold currencies USD CAD EUR JPY PLN

USD 1 12 13 14EUR -37 -278 -315 135CAD 305 305 -9PLN -1 -1 -2006 -37 -277 316 - - 22005 127 8 7 -2 - 140



NOTE 26 – FINANCIAL INSTRUMENTS AND DERIVATIVES CONTINUEDRawmaterialinstrumentsconcernthefollowingunderlyingmaterials:InEURmillion 2006 2005

Basemetals 41 14Gas - -2Oil - 2CO2 - -Electricity 5 8TOTAL 46 22Assetsassociatedwithrawmaterialinstruments 66 94Liabilitiesassociatedwithrawmaterialinstruments -20 -72TOTAL 46 22

Hedginginstrumentsconcerningbasemetals(zinc,nickel,aluminium,pewterandcopper)andoilarenegotiatedinUSD,whereasinstrumentsconcerninggasandelectricityarenegotiatedinGBPandinEUR.

NOTE 27 – COMMITMENTS GIVEN AND RECEIVEDCommitmentsdetailedinthisnotedonotincludethecommitmentsmentionedinNote26.

Commitments givenInEURmillion 2006 2005

Guaranteesonthird-partyfinancialloansandcreditlines 188 133Otherguarantees 704 614Propertypledgedandguarantees 439 684Discountedbills(notyetatmaturity) - 266Commitmentstobuyordisposeoffixedassets 672 896Othercommitmentsgiven 161 184TOTAL COMMITMENTS GIVEN 2,164 2,777

Commitments received:InEURmillion 2006 2005

Endorsementsandguaranteesreceivedfromnon-consolidatedcompanies 343 268Othercommitmentsreceived 221 191TOTAL COMMITMENTS RECEIVED 564 459

Guaranteesonthird-partyloansconsistofguaranteeshedgingfinancialloansandcreditlinesgrantedtonon-consolidatedsubsidiariesandsubsidiariesaccountedforusingtheequitymethod.

Otherguaranteesincludepledges,firstclaimguarantees,documentarycredits,lettersofcreditandothersimilarletters.

PropertyguaranteesmainlyconsistofmortgagesforanamountofEUR296million(2005:EUR212million).

Othercommitmentsgivencomprisecommitmentsincurredforthelong-termuseofgoodsbelongingtoathirdparty,commitmentsincurredunderoperatingleasesandcommitmentsundertakenwithintheframeworkofsecuritisationprogrammes.



NOTE 28 – SEGMENT REPORTING

28.1 Breakdown by Activity

Salesbetweenactivitiesarecalculatedatmarketprice.Theoperatingresultisshownaftereliminations.ThedifferentactivitiesarepresentedinaccordancewiththebreakdownappliedbyArcelorMittal.Thecomparativefiguresfor2005havebeenrestatedaccordingly.

2006 FlatCarbon FlatCarbon LongCarbon Africa, Stainless ArcelorMittal Other Eliminations Total(FiguresinEURmillion, Americas Europe Americas Asia, steel SteelSolutions Activities exceptforthenumberofemployees) andEurope CIS andServices

Incomestatement Revenue 5,291 18,524 7,696 310 5,422 8,437 1,507 -6,576 40,611Inter-sectorsales -273 -3,448 -1,192 - -131 -861 -671 6,576 -TOTAL 5,018 15,076 6,504 310 5,291 7,576 836 - 40,611Grossoperatingprofit 1,137 2,159 1,631 63 745 384 -203 -13 5,903Depreciation -384 -454 -192 -20 -142 -68 -38 - -1,298Impairmentcharges - -240 76 2 - - - - -162Operatingprofit(beforegoodwill) 753 1,465 1,515 45 603 316 -241 -13 4,443Negativegoodwill - 11 - - - - - - 11Operatingprofit 753 1,476 1,515 45 603 316 -241 -13 4,454Shareofresultsincompaniesaccountedforusingtheequitymethod 33 255 34 - 1 32 8 - 363Balancesheet Segmentassets 4,514 9,987 5,467 472 3,011 2,488 23,314 -9,324 39,929Property,plantandequipment 6,461 4,854 2,805 169 1,730 543 208 - 16,770Investmentsincompaniesaccountedforusingtheequitymethod 191 1,089 172 - - 229 112 - 1,793Unallocatedassets - - - - - - - - 3,117TOTAL CONSOLIDATED ASSETS 4,705 11,076 5,639 472 3,011 2,717 23,426 - 9,324 44,839Segmentliabilities 1,708 6,607 2,115 153 1,632 1,917 2,351 -2,242 14,241Unallocatedliabilities - - - - - - - - 8,512TOTAL CONSOLIDATED LIABILITIES 1,708 6,607 2,115 153 1,632 1,917 2,351 - 2,242 22,753ACQUISITIONSOFTANGIBLEANDINTANGIBLEFIXEDASSETS 837 718 445 7 155 99 37 - 2,298Other information Numberofemployees(average) 16,366 39,970 21,148 906 11,790 10,559 3,196 - 103,935



NOTE 28 – SEGMENT REPORTING CONTINUED

28.1 Breakdown by Activity continued2005(Restated) FlatCarbon FlatCarbon LongCarbon Africa, Stainless ArcelorMittal Other Eliminations Total(FiguresinEURmillion, Americas Europe Americas Asia, steel SteelSolutions Activities exceptforthenumberofemployees) andEurope CIS andServices

Incomestatement Revenue 1,928 17,085 6,618 - 4,028 8,656 1,008 -6,712 32,611Inter-sectorsales -88 -3,779 -1,146 - -84 -973 -642 6,712 -TOTAL 1,840 13,306 5,472 - 3,944 7,683 366 - 32,611Grossoperatingprofit 847 2,944 1,371 - 173 328 16 3 5,682Depreciation -177 -678 -277 - -124 -84 -31 - -1,371Impairmentcharges - 34 -1 - 44 - - - 77Operatingprofit(beforegoodwill) 670 2,300 1,093 - 93 244 -15 3 4,388Negativegoodwill - 1 18 - - 10 - - 29Operatingprofit 670 2,301 1,111 - 93 254 -15 3 4,417Shareofresultsincompaniesaccountedforusingtheequitymethod - 218 14 - 47 30 8 - 317BalancesheetSegmentassets 3,923 15,070 5,578 - 4,171 3,707 8,944 -9,713 31,680Property,plantandequipment 3,191 5,310 2,632 - 1,877 542 215 - 13,767Investmentsincompaniesaccountedorusingtheequitymethod - 954 203 - 7 245 6 - 1,415Unallocatedassets - - - - - - - - 2,769TOTAL CONSOLIDATED ASSETS 3,923 16,024 5,781 - 4,178 3,952 8,950 - 9,713 35,864Segmentliabilities 221 6,956 1,720 - 1,476 1,766 2,817 -3,023 11,933Unallocatedliabilities - - - - - - - - 6,501TOTAL CONSOLIDATED LIABILITIES 221 6,956 1,720 - 1,476 1,766 2,817 - 3,023 18,434ACQUISITIONSOFTANGIBLEANDINTANGIBLEFIXEDASSETS 735 694 334 - 183 88 36 - 2,070Other information Numberofemployees(average) 4,790 44,413 20,248 - 13,908 11,207 3,129 - 97,695

28.2 – Geographical Breakdown2006 EuropeanUnion(FiguresinEURmillion,exceptforthenumberofemployees) (EU25) NorthAmerica* SouthAmerica Other Total

Revenue 25,936 5,958 5,111 3,606 40,611Segmentassets 28,890 4,191 6,291 557 39,929Property,plantandequipment 7,707 3,216 5,662 185 16,770Grossoperatingprofit 3,386 440 1,995 82 5,903Operatingprofit 2,448 236 1,709 61 4,454Acquisitionofproperty,plantandequipment,andintangibleassets 1,163 201 897 37 2,298Numberofemployees(average) 69,335 12,346 20,920 1,334 103,935*NorthAmerica,includingMexico

2005(Restated) EuropeanUnion(FiguresinEURmillion,exceptforthenumberofemployees) (EU25) NorthAmerica* SouthAmerica Other Total

Revenue 23,228 2,955 3,530 2,898 32,611Segmentassets 22,684 685 8,178 133 31,680Property,plantandequipment 8,188 67 5,499 13 13,767Grossoperatingprofit 3,936 68 1,659 19 5,682Operatingprofit 3,042 55 1,303 17 4,417Acquisitionofproperty,plantandequipment,andintangibleassets 1,145 15 910 - 2,070Numberofemployees(average) 76,221 1,118 20,018 338 97,695

*NorthAmerica,includingMexico


NOTE 29 – EVENTS AFTER THE BALANCE SHEET DATEOn26January2006,MittalSteelandThyssenKruppAGenteredintoletteragreementwhichprovidedthatifMittalSteelwassuccessfulinitstenderofferforArcelorandwasabletoexertmanagementcontrol“withtheabilitytosellDofasco,”MittalSteelwouldcauseArcelortosellDofascotoThyssenKrupp.DuringMarchandApril2006,Arceloracquired100%ofthesharesofDofasco.On3April2006,Arcelortransferred89%ofthesharesofDofascototheStrategicSteelStichting(“S3”),anindependentfoundationunderDutchlaw,therebyremovingArcelor’sabilitytosellorotherwisedisposeofsuchshareswithoutS3’sconsent.On25June2006,MittalSteelandArceloragreedtothetermsofarecommendedoffer,pursuanttowhichMittalSteelhasacquiredapproximately94%ofthesharecapitalofArcelor.On1August2006,theU.S.DepartmentofJustice(the“DOJ”)announcedthatithadconcludedthattheacquisitionbyMittalSteelofArcelorwaslikelytosubstantiallylessencompetitioninthemarketfortinmillproductsintheEasternUnitedStatesandfiledintheU.S.DistrictCourtinWashington,D.C.aconsentdecreethatMittalSteelhadpreviouslysignedwiththeDOJon11May2006.TheconsentdecreerequiredthedivestitureofDofascoor,ifMittalSteelwereunabletosellDofasco,thedivestitureofeitherMittalSteel’sSparrowsPointFacilityinMarylandorMittalSteel’sWeirtonfacilityinWestVirginia.TheconsentdecreeprovidedthattheDOJinitssolediscretionwouldchoosewhichplantwouldbesold.TheconsentdecreealsoincludedaHoldSeparateStipulationandOrderthatprovidedthatDofascowouldbemaintainedasaseparatebusiness,independentoftheotherbusinessesofMittalSteelandArcelor,untilDofascowasdivestedortheDOJmadeitsselectionofthealternativeplanttobedivested.Aftertheconsentdecreewasfiledincourt,theboardsofbothMittalSteelandArcelorrequestedthedirectorsofS3todissolvethefoundationinordertoallowthesaleofDofasco.On10November2006,however,S3’sdirectorsunanimouslydecidednottodissolvethefoundationandtoretaintheDofascoshares,therebycontinuingtopreventtheirsale.On22December2006,ThyssenKruppinitiatedsummarylegalproceedingsagainstMittalSteelintheDistrictCourtinRotterdamallegingthatMittalSteelhadbreachedtheletteragreementbyfailingtocauseArcelortoinitiatelitigationagainstS3toforceS3totransfertheDofascosharestoArcelorsoastopermittheirsaletoThyssenKrupp.Thesuitsought,amongotherthings,acourtorderdirectingMittalSteeltocauseArcelortocommencesummaryproceedingsintheDutchcourtstoforceS3toreturntheDofascosharestoArcelor.On23January2007,theDistrictCourtinRotterdamdeniedThyssenKrupp’spetitionforanorder.On20February2007,theDOJinformedMittalSteelthattheDOJhasselectedtheSparrowsPointsteelmilllocatednearBaltimore,MarylandfordivestitureundertheconsentdecreefiledbytheDOJinAugust2006.Accordingtothedecree,anysuchdivestituremusttakeplacewithinninetydaysfrom20February2007,subjecttopossibleextensionsbytheDepartmentofJustice.TheselectionofSparrowsPointbytheDOJendedtheperiodduringwhichArcelorMittalmustholdDofascoseparatefromitsoperations.On25September2006,theComissãodeValoresMobiliários(the“CVM”),theBraziliansecuritiesregulator,ruledthat,asaresultofMittalSteel’sacquisitionofArcelor,MittalSteelwasrequiredtocarryoutapublicoffertoacquirealltheoutstandingsharesinArcelorBrasilnotownedbyArcelororanyotheraffiliateofMittalSteel.ArcelorBrasilisamajorityownedsubsidiaryofArcelor.On26October2006,MittalSteelfiledwiththeCVMarequestforregistrationwithrespecttosuchoffer,andfiledanamendedrequeston11January2007.AspertheamendedrequestforregistrationfiledbyMittalSteel,thevaluetobeofferedperArcelorBrasilshareisEUR12.12(whichmaybeacceptedintheformofcashoramixtureofcashandshares,attheoptionoftheholder),foratotalvalueofapproximatelyEUR2.6billionforallArcelorBrasilshares.On12February2007,theCVMissuedaletterstatingthat,accordingtotheCVM’sinterpretationoftheapplicablerules,thevalueMittalSteelshouldofferperArcelorBrasilshareshouldbeEUR4.57incashand0.3942ArcelorMittalcommonshares,subjecttoanumberofadjustments.ThedecisionoftheCVMissubjecttoadministrativeappealandappealbeforetheBraziliancourts.MittalSteelispresentlyevaluatingitsoptionsinrespectofsuchdecision.

NOTE 30 – EMISSION RIGHTSFortheyear2006,thetotalvolumeoftherightsavailabletotheGroupis59milliontonnes.Emissionvolumesroseto53,4milliontonnesasat31December2006.4milliontonnesoutofthe5,6millionsurplusofavailablerightsweresoldonthemarketin2006,foratotalamountofEUR101million.Thissurplusispartiallylinkedtotheclosingofacertainnumberofcontinentalfactorysitesand,onamoregeneralnote,tothevoluntaryreductioninproductionvolumesduringtheyear.




FlatCarbonEurope

Arcelor Atlantique & LorraineFranceIG100.00%(100.00)

Arcelor Méditerranée(exSollacMéditeranée)FranceIG100.00%(100.00)

Arcelor Steel Belgium(exSIDMAR)BelgiumIG100.00%(99.82)

Arcelor Bremen(exSTAHLwerkeBremen)GermanyIG70.00%(67.76)

Cockerill SambreBelgiumIG100.00%(100.00)

Arcelor España(exArceraliaCorp.Siderurgica)SpainIG99.72%(99.72)

Aceria Compacta BizkaiaSpainIG80.00%(79.78)

Arcelor Packaging InternationalFranceIG100.00%(100.00)

Industeel BelgiumBelgiumIG100.00%(100.00)

Industeel FranceFranceIG100.00%(100.00)

DHSGermany EQ51.25%(51.25)

FlatCarbonAmericas

CSTBrazil IG100.00%(67.41)

Vega do SulBrazilIG100.00(67.41)

DofascoCanadaIG100.00%(100.00)

LongCarbonAmericasandEurope

Arcelor Profil Luxembourg(exProfilARBED)LuxembourgIG100.00%(99.82)

Travi e ProfilatiItalyIG100.00%(100.00)

Aceralia Largos PerfilesSpainIG100.00%(99.72)

LME (Lam.March.Europ.)FranceEQ34.00%(27.10)

Arcelor Huta WarszawaPolandIG100.00%(100.00)

Belgo SiderurgiaBrazilIG100.00%(67.41)

AcindarArgentinaIG66.33%(44.38)

Arcelor Bissen(exTrefilARBEDBissen)LuxembourgIG100.00%(99.82)

Arcelor Bettembourg(exTrefilARBEDBettembourg)LuxembourgIG100.00%(99.82)

Arcelor Pine Bluff(exTrefilARBEDArkansas)USAIG100.00%(79.74)

Mittal Steel GandrangeFranceIG100.00%(100.00)

Asia,Africa,CIS

Soc.Nat.Sidérurg.(Sonasid)MoroccoIG64.86%(32.34)

Stainless

Ugine & Alz BelgiumBelgiumIG100.00%(99.82)

Ugine & AlzFranceFranceIG100.00%(100.00)

AcesitaBrazilIG95.00%(57.32)

Imphy AlloysFranceIG100.00%(100.00)

Imphy Ugine PrécisionFranceIG100.00%(100.00)

Meusienne de ConstructionFranceIG100.00%(100.00)

ArcelorSteelSolutionsandServices(A3S)

Arcelor DistributionFranceIG100.00%(100.00)

PUM Service AcierFranceIG100.00%(100.00)

Arcelor InternationalLuxembourgIG100.00%(99.82)

Arcelor Construction FranceIG100.00%(100.00)

Arcelor Projects Spiral MillNetherlandIG100.00%(99.82)

Aceralia TransformadosSpainIG100.00%(99.72)

Laminados VelascoSpainIG100.00%(99.72)

OtherActivities

Arcelor Luxembourg(exARBED)LuxembourgIG99.82%(99.82)

Arcelor France(exUsinor)FranceIG100.00%(100.00)

Arcelor BrasilBrazilIG67.41%(67.41)

Arcelor FinanceLuxembourgIG100.00%(99.82)

Paul WurthLuxembourgIG48.10%(48.01)

Circuit FoilLuxembourgIG89.98%(89.82)

Legend-percentagesofshareholdings

inthe%&interestratesin()-consolidationmethod:IG(Global

integration),EQ(Equitymethod)

NOTE 31 – SIMPLIFIED GROUP ORGANISATION CHART

Arcelor



NOTE 32 – LISTING OF GROUP COMPANIES AS AT 31 DECEMBER 2006

Consolidation scope:352companiesfullyconsolidated(inadditiontoArcelorS.A.)184companiesconsolidatedusingtheequitymethod

Companyname Consolidation Country Percentage method ofcapitalheld control(%)

Flat Carbon Americas Segment CSTsub-groupcomprisingthefollowingentities: – CompanhiaSiderúrgicadeTubarãoSA(CST),Serra Fullconsolidation Brazil 100.000000– CSTComercioExteriorSA,Vitória Fullconsolidation Brazil 100.000000– CSTCorporationBV,Amsterdam Fullconsolidation Netherlands 100.000000– CSTOverseasLtd,GrandCayman Fullconsolidation CaymanIslands 100.000000– SkaddenConsultadoriaeServicosLda,FunchalMadeira Fullconsolidation Portugal 100.000000DofascoInc.,Hamilton,sub-groupcomprising44entities Fullconsolidation Canada 100.000000SolCoqueriaTubarãoSA,Serra Fullconsolidation Brazil 99.000000SolcanFininvestInc.,Burlinton Fullconsolidation Canada 100.000000TailorSteelAmericaLlc,NewYork Fullconsolidation UnitedStates 70.602704VegadoSulSA,SãoFranciscodoSul Fullconsolidation Brazil 99.999996Flat Carbon Europe Segment ACBsub-groupcomprisingthefollowingentities: – AceríaCompactadeBizkaiaSA,Sestao Fullconsolidation Spain 80.004286– Acb,AcrDecapadoAie,Sestao Fullconsolidation Spain 100.000000AcerosURSSA,Viladecans Equitymethod Spain 45.024739ArcelorAmbalajCeligiSanayiveTicaretAS,Levent-Istanbul Fullconsolidation Turkey 74.999931ArcelorAtlantiqueetLorraineSas,SaintDenis Fullconsolidation France 100.000000ArcelorBremenGmbH,Bremen Fullconsolidation Germany 70.000000ArcelorCommercialFCSESA,Luxembourg Fullconsolidation Luxembourg 100.000000ArcelorDudelangeSA,Dudelange Fullconsolidation Luxembourg 100.000000ArcelorEspañaSA,Gozón Fullconsolidation Spain 99.589962ArcelorMéditerranéeSas,SaintDenis Fullconsolidation France 100.000000ArcelorPackagingSA,SaintDenis Fullconsolidation France 99.999801ArcelorPackagingBelgiqueSA,Saint-Nicolas Fullconsolidation Belgium 100.000000ArcelorPackagingEspañaSL,Gozón Fullconsolidation Spain 100.000000ArcelorPackagingItaliaSrl,Canossa Fullconsolidation Italia 100.000000ArcelorPiombinosub-groupcomprisingthefollowingentities: – ArcelorPiombinoSpa,Firenze Fullconsolidation Italia 99.79194– SocietaMezziPortualiPiombinoSpa,Piombino Equitymethod Italia 50.000000ArcelorPlanosSaguntoSL,Valencia Fullconsolidation Spain 99.999998ArcelorResearchSA,SaintDenis Fullconsolidation France 99.779191ArcelorSteelBelgiumNV,Bruxelles Fullconsolidation Belgium 100.000000ArcelorTailoredBlankBremenGmbH,Bremen Fullconsolidation Germany 100.000000ArcelorTailoredBlankGenkNV,Genk Fullconsolidation Belgium 100.000000ArcelorTailoredBlankLiègeSA,Liège Fullconsolidation Belgium 100.000000ArcelorTailoredBlankLorraineSA,Uckange Fullconsolidation France 99.984252ArcelorTailoredBlankZaragozaSA,Pedrola Fullconsolidation Spain 100.000000BorcelikCelikSanyiiTicaretAS,Istanbul Equitymethod Turkey 40.466215Bre.M.AWarmwalzGmbH&CoKG,Bremen Fullconsolidation Germany 88.888889BregalBremerGalvanisierungs-GmbH,Bremen Fullconsolidation Germany 75.050000CiaHispano-BrasileiradePelotizacaoSA,Vitoria Equitymethod Brazil 49.111101CockerillSambreSA,Seraing Fullconsolidation Belgium 100.000000CoilsLamiereNastriSpa,Caselette,sub-groupcomprising20entities Equitymethod Italia 35.000000ComercialdeHojalatayMetalesSA,SanAdrian Equitymethod Spain 22.999561CortesyAplanadosSiderúrgicosSA,Barcelona Fullconsolidation Spain 100.000000DavalSas,SaintDenis Fullconsolidation France 100.000000DermachSA,Madrid Fullconsolidation Spain 100.000000DHS-DillingerHütteSaarstahlAG,Dillingen,sub-groupcomprising15entities Equitymethod Germany 51.250000EwaldGiebel-LuxemburgSA,Dudelange Fullconsolidation Luxembourg 100.000000FerramentaseAccessoriosIndustriaisLda,Agueda Equitymethod Portugal 39.999864GestampAutomocionSL,Abadiano,sub-groupcomprising58entities Equitymethod Spain 34.999996



NOTE 32 – LISTING OF GROUP COMPANIES AS AT 31 DECEMBER 2006 CONTINUED


IndusteelBelgiumsub-groupcomprisingthefollowingentities: – IndusteelBelgiumSA,Charleroi Fullconsolidation Belgium 100.000000– AvalMetalCenterSA,Charleroi Fullconsolidation Belgium 100.000000– CharleroiDéroulageSA,Charleroi Fullconsolidation Belgium 100.000000IndusteelFrancesub-groupcomprisingthefollowingentities: – IndusteelFranceSA,SaintDenis Fullconsolidation France 99.999400– IndusteelCreusotSas,SaintDenis Fullconsolidation France 100.000000– IndusteelLoireSas,SaintDenis Fullconsolidation France 100.000000MetalúrgicaAsturianaSA,Mieres Fullconsolidation Spain 100.000000Ocas-OnderzoekscentrumvoorAanwendingvanStaalNV,Zelzate Fullconsolidation Belgium 100.000000R.BourgeoisSA,Besançon Equitymethod France 29.996667SidstahlNV,Gent Fullconsolidation Belgium 100.000000UsinorAutoSA,SaintDenis Fullconsolidation France 99.969510 Long Carbon Americas and Europe Segment AceraliaRedondosComercialSA,Azpeitia Fullconsolidation Spain 100.000000Acindarsub-groupcomprisingthefollowingentities: – AcindarIndustriaArgentinadeAcerosSA,BuenosAires Fullconsolidation Argentina 66.330000– AcindardoBrasilLtda,SãoPaulo Fullconsolidation Brazil 99.999999– AcindarPymesSA,BuenosAires Equitymethod Argentina 50.000000– AcindarUruguayIndústriaArgentinadeAcerosSA,Montevideo Fullconsolidation Uruguay 100.000000– Agrinsa-AgroIndustrialSA,LaRioja Fullconsolidation Argentina 100.000000– ComercialBagualLtda,Santiago Fullconsolidation Chile 100.000000– EcoOilSA,BuenosAires Equitymethod Argentina 16.666667– ElmecSA,BuenosAires Fullconsolidation Argentina 99.999950– I.P.H.Saicf,BuenosAires Equitymethod Argentina 32.999950– PerformaSA,BuenosAires Fullconsolidation Argentina 100.000000ArcelorBettembourgSA,Bettembourg Fullconsolidation Luxembourg 100.000000ArcelorBissenSA,Bissen Fullconsolidation Luxembourg 100.000000ArcelorComercialBarrasSL,Azpeitia Fullconsolidation Spain 100.000000ArcelorCommercialRPSSàrl,Eschs/Alzette Fullconsolidation Luxembourg 100.000000ArcelorCommercialSectionsSA,Eschs/Alzette Fullconsolidation Luxembourg 100.000000ArcelorDommeldangeSàrl,Luxembourg Fullconsolidation Luxembourg 100.000000ArcelorFürstenfeldAG,Fürstenfeld Fullconsolidation Austria 96.502722ArcelorHutaWarszawaSpzoo,Warszawa Fullconsolidation Poland 99.999487ArcelorLaminadosZaragozaSA,Zaragoza Fullconsolidation Spain 100.000000ArcelorPerfilessub-groupcomprisingthefollowingentities: – ArcelorComercialPerfilesEspañaSL,Madrid Fullconsolidation Spain 100.000000– ArcelorBergaraSA,Bergara Fullconsolidation Spain 100.000000– ArcelorCommercialSectionsRayleighLtd,Rayleigh Fullconsolidation UnitedKingdom 100.000000– ArcelorLongCommercialBordeauxSA,Merignac Fullconsolidation France 98.000000– ArcelorLongCommercialTorinoSrl,Torino Fullconsolidation Italia 100.000000– ArcelorMadridSL,Madrid Fullconsolidation Spain 100.000000– ArcelorOlaberriaSL,Olaberria Fullconsolidation Spain 100.000000– AristrainHispanoTradeGmbH,Düsseldorf Fullconsolidation Germany 100.000000– FercomeTradingSL,Valencia Fullconsolidation Spain 100.000000– Ilsacer2000SL,Zaragoza Equitymethod Spain 50.000000– KramerandSonsTradingCo,Detroit Equitymethod UnitedStates 50.000000– ServiciosComplementariosdelNorteSL,Bilbao Equitymethod Spain 49.000000– SobrinosDeManuelCámaraSA,Renteria Equitymethod Spain 50.000000– TrituradosFérricosSL,Madrid Equitymethod Spain 33.300000ArcelorPineBluffInc,PineBluff Fullconsolidation UnitedStates 62.962963ArcelorProfilLuxembourgSA,Eschs/Alzette Fullconsolidation Luxembourg 100.000000ArcelorRodangeSA,Rodange Fullconsolidation Luxembourg 80.467895ArcelorSheffieldLtd,Sheffield Fullconsolidation UnitedKingdom 100.000000ArcelorZumárragaSA,Zumárraga Fullconsolidation Spain 100.000000AsbmSàrl,Luxembourg Fullconsolidation Luxembourg 100.000000BelgoBekaertAramesLtda,Contagem Fullconsolidation Brazil 55.000000





BelgoBekaertNordesteSA,FeiradeSantana Fullconsolidation Brazil 99.031811BelgoSiderurgiaSA,BeloHorizonte Fullconsolidation Brazil 99.999816Belgo-MineiraParticipacãoIndústriaeComércioSA,BeloHorizonte Fullconsolidation Brazil 100.000000Belgo-MineiraUruguaySA,Montevideo Fullconsolidation Uruguay 100.000000BelgoParLtda,BeloHorizonte Fullconsolidation Brazil 100.000000BemexInternationalLtd,Hamilton Fullconsolidation Bermuda 100.000000BmbBelgo-MineiraBekaertArtefatosdeArameLtda,Vespasiano Fullconsolidation Brazil 55.499970BmfBelgo-MineiraFomentoMercantilLtda,BeloHorizonte Fullconsolidation Brazil 100.000000CafSantaBárbaraLtda,BeloHorizonte Fullconsolidation Brazil 100.000000CimafCabosSA,Osasco Fullconsolidation Brazil 100.000000IndustriasZarraSA,Galdacano Fullconsolidation Spain 100.000000LaminadoraCostarricenseSA,SanJosé Fullconsolidation CostaRica 50.000000LMELaminésMarchandsEuropéensSA,TrithSaintLéger,sub-groupcomprising3entities Equitymethod France 33.999260MittalSteelGandrangeSA,Gandrange Fullconsolidation France 99.999957NewcoSàrl,Luxembourg Fullconsolidation Luxembourg 100.000000NewcoSàrl&CieSecs,Luxembourg Fullconsolidation Luxembourg 100.000000RedalsaSA,Valladolid Equitymethod Spain 26.000000Sanzenoacciai-DufercoSpa,SanZenoNaviglio Equitymethod Italia 49.900001TravieProfilatidiPallanzenoSpa,Pallanzeno Fullconsolidation Italia 100.000000TrefilArbedHungaryKft,Szentgotthárd Fullconsolidation Hungary 100.000000TrefilArbedKiswireLtd,Kyung-Nam Equitymethod Rep.ofSouthKorea 50.000000TrefileríaColimaSA,SanJosé Fullconsolidation CostaRica 50.000000UsinaHidrelétricaGuilman-AmorimSA,BeloHorizonte Equitymethod Brazil 51.000000

Stainless Segment Acesitasub-groupcomprisingthefollowingentities: – AcesitaSA,BeloHorizonte Fullconsolidation Brazil 94.998913– AcesitaArgentinaSA,BuenosAires Fullconsolidation Argentina 98.000000– AcesitaCentrosdeServiçosLtda,Timóteo Fullconsolidation Brazil 100.000000– AcesitaEnergéticaLtda,BeloHorizonte Fullconsolidation Brazil 100.000000– AcesitaExportandTradeLtd,GrandCayman Fullconsolidation CaymanIslands 100.000000– AcesitaInternationalLtd,GrandCayman Fullconsolidation CaymanIslands 100.000000– AcesitaServiçosCom.Ind.ePart.Ltda,Timóteo Fullconsolidation Brazil 100.000000– APParticipacoesSA,BeloHorizonte Fullconsolidation Brazil 100.000000– InoxTubosPart.SA,RibeirãoPires Equitymethod Brazil 43.850000– PreservarMadeiraReflorestadaLtda,Ipatinga Equitymethod Brazil 50.000000– StainlessOverseasLtd,GrandCayman Fullconsolidation CaymanIslands (SPE)AL-FinNV,Genk Fullconsolidation Belgium 99.996377AlinoxSrl,MilanoFullconsolidation Italia 100.000000ArcelorStainlessInternationalSA,SaintDenis Fullconsolidation France 99.997909ArcelorStainlessProcessingLlc,NewYork Fullconsolidation UnitedStates 100.000000ArcelorStainlessUSALlc,NewYork Fullconsolidation UnitedStates 100.000000HavenGenkNV,Genk Fullconsolidation Belgium 50.000000ImphyAlloysSA,SaintDenis Fullconsolidation France 99.999829ImphyMillSas,SaintDenis Fullconsolidation France 100.000000ImphyServiceSnc,SaintDenis Fullconsolidation France 100.000000ImphyUginePrécisionSA,SaintDenis Fullconsolidation France 99.999916LongtainAciersSpéciauxetInoxydablesSA,Strepy-Bracquegnies Fullconsolidation Belgium 100.000000MattheyetCieSA,Apples Fullconsolidation Switzerland 100.000000MattheyFranceSas,Ancerville Fullconsolidation France 100.000000MattheyHoldingSA,Apples Fullconsolidation Switzerland 100.000000MattheySro,UstinadLabem Fullconsolidation CzechRepublic 100.000000MecagisSnc,SaintDenis Fullconsolidation France 100.000000MeusienneItaliaSrl,Milano Fullconsolidation Italia 100.000000RCC&Wehasub-groupcomprisingthefollowingentities: – RCC&WehaGmbH,Erkrath Fullconsolidation Germany 100.000000– Ugine&AlzDeutschlandGmbH,Erkrath Fullconsolidation Germany 100.000000





SociétéMeusiennedeConstructionsMécaniquesSA,Ancerville Fullconsolidation France 99.911328SociétéSavoisiennedeMétauxSas,Annecy Fullconsolidation France 100.000000Ugine&AlzSA,SaintDenis Fullconsolidation France 99.851852Ugine&AlzBelgiumNV,Genk Fullconsolidation Belgium 100.000000Ugine&AlzFranceSA,SaintDenis Fullconsolidation France 99.999978Ugine&AlzFranceServiceSas,Gonesse Fullconsolidation France 100.000000Ugine&AlzIbericaSL,Viladecans Fullconsolidation Spain 99.999480Ugine&AlzItaliaSrl,Milano Fullconsolidation Italia 100.000000Ugine&AlzLuxembourgSA,Rodange Fullconsolidation Luxembourg 100.000000UginoxSanayiveTicaretAS,GebzeKocaeli Fullconsolidation Turkey 65.000000

Arcelor Steel Solutions and Services (A3S) Segment A3SPurchasingSas,Reims Fullconsolidation France 100.000000AceraliaColorAceroSL,MutilvaAlta Fullconsolidation Spain 100.000000AceraliaConstrucciónObrasSL,Pamplona Fullconsolidation Spain 100.000000AMDSud-OuestSas,Langon Fullconsolidation France 100.000000ArcelorAutoProcessingBeneluxSA,Flémalle Fullconsolidation Belgium 100.000000ArcelorAutoProcessingFranceSas,Montataire Fullconsolidation France 100.000000ArcelorAutoProcessingUKLtd,Willenhall Fullconsolidation UnitedKingdom 100.000000ArcelorAvisSSCLtd,Manchester Fullconsolidation UnitedKingdom 100.000000ArcelorCentreLogistiqueEuropéenSA,Pétange Fullconsolidation Luxembourg 100.000000ArcelorConstrucciónEspañaSL,Berrioplano Fullconsolidation Spain 100.000000ArcelorConstructionFranceSA,RueilMalmaison Fullconsolidation France 99.999059ArcelorConstructionUKLtd,StHelens Fullconsolidation UnitedKingdom 100.000000ArcelorDistributionSas,Reims Fullconsolidation France 100.000000ArcelorDistributionLuxembourgSA,Eschs/Alzette Fullconsolidation Luxembourg 100.000000ArcelorInternationalSA,Luxembourg Fullconsolidation Luxembourg 100.000000ArcelorInternationalAmericaLlc,NewYork Fullconsolidation UnitedStates 100.000000ArcelorInternationalAntwerpSA,Antwerpen Fullconsolidation Belgium 100.000000ArcelorInternationalCanadaInc.,Burlington Fullconsolidation Canada 100.000000ArcelorInternationalExportSA,Luxembourg Fullconsolidation Luxembourg 100.000000ArcelorInternationalSingaporesub-groupcomprisingthefollowingentities: – ArcelorInternationalSingaporePlc,Singapore Fullconsolidation Singapore 100.000000– ArcelorInternationalMalaysiaSdn.Bhd.,KualaLumpur Fullconsolidation Malaysia 100.000000ArcelorProfilSas,Yutz Fullconsolidation France 100.000000ArcelorProjectsNV,Overpelt Fullconsolidation Belgium 100.000000ArcelorProjectsBV,Moerdijk Fullconsolidation Netherlands 100.000000ArcelorProjectsInternationalBV,Rotterdam Fullconsolidation Netherlands 100.000000ArcelorProjectsSpiralMillsub-groupcomprisingthefollowingentities: – ArcelorProjectsSpiralMillBV,Heijningen Fullconsolidation Netherlands 100.000000– ByardNetherlandsBV,Heijningen Fullconsolidation Netherlands 100.000000– DeBoerSpiralMillBV,Heijningen Fullconsolidation Netherlands 100.000000– DeBoerSpiralMillVof,Heijningen Fullconsolidation Netherlands 100.000000ArcelorSSCBeneluxNV,Geel Fullconsolidation Belgium 100.000000ArcelorSSCDevelopmentFranceSas,SaintPriest Fullconsolidation France 100.000000ArcelorSSCEspañaSA,MutilvaAlta Fullconsolidation Spain 100.000000ArcelorSSCEspañaSalvatierraSL,Salvatierra Fullconsolidation Spain 100.000000ArcelorSSCFranceSas,Reims Fullconsolidation France 100.000000ArcelorSSCItaliaSrl,Milano Fullconsolidation Italia 100.000000ArcelorSSCPolskaSpzoo,Bytom Fullconsolidation Poland 100.000000ArcelorSSCSverigeAB,Karlstad Fullconsolidation Sweden 100.000000ArcelorSSCUKLtd,Willenhall Fullconsolidation UnitedKingdom 100.000000ArcelorSSCUKBarkingLtd,Barking Fullconsolidation UnitedKingdom 100.000000ArcelorSteelCoatFranceSas,Reims Fullconsolidation France 100.000000ArcelorSteelServiceCentresSas,SaintOuenl’Aumone Fullconsolidation France 100.000000AskMacGowanLtd,Halesowen Fullconsolidation UnitedKingdom 90.000000AsturianadePerfilesSA,Langreo Fullconsolidation Spain 100.000000





BaechlerSas,Thionville Fullconsolidation France 100.000000BertonSicardProduitsMétallurgiquesSas,Avignon Fullconsolidation France 100.000000C.S.T.R.Sas,Reims Fullconsolidation France 100.000000ChaillousSas,Nantes Fullconsolidation France 100.000000CimaSas,Bertrichamps Fullconsolidation France 100.000000CofrastraSA,Fribourg Fullconsolidation Switzerland 100.000000ColorProfilNV,Geel Fullconsolidation Belgium 100.000000DevillersOxycoupageSas,Hericourt Fullconsolidation France 100.000000Dikema&ChabotHoldingBV,Rotterdam Fullconsolidation Netherlands 100.000000DikemaStaalNederlandsub-groupcomprisingthefollowingentities: – DikemaStaalNederlandBV,Rotterdam Fullconsolidation Netherlands 100.000000– DikemaProjectenBV,Born Fullconsolidation Netherlands 100.000000DisteelNV,Machelen Fullconsolidation Belgium 100.000000EtablissementAlfredAndréSas,Harfleur Fullconsolidation France 100.000000EtablissementsJeanLetierceetCieSas,Bolbec Fullconsolidation France 100.000000EtilamSA,SaintDizier Fullconsolidation France 99.989231EucosiderCommercialSA,Pétange Fullconsolidation Luxembourg 100.000000EuroperfilSA,L’hospitalet Equitymethod Spain 50.000000EuropeseStaalPrefabricatieNV,Geel Fullconsolidation Belgium 100.000000Ferrometalli-SafemSpa,Milano Fullconsolidation Italia 98.397895FinancieringsmaatschappijDikemaBV,Rotterdam Fullconsolidation Netherlands 100.000000GalvaServiceSas,Bazeilles Fullconsolidation France 100.000000GonvarriIndustrialSA,Madrid,sub-groupcomprising18entities Equitymethod Spain 29.850431HaironvilleAustriaGmbH,Neuhofen Fullconsolidation Austria 100.000000HaironvilleGuyaneSas,Cayenne Fullconsolidation France 100.000000HaironvilleMetalProfilSA,Herstal Fullconsolidation Belgium 100.000000HaironvillePortugalSA,Cartaxo Fullconsolidation Portugal 99.988462HoldingGonvarriSrl,Bilbao Equitymethod Spain 35.000140JeanGuilleSas,Yutz Fullconsolidation France 100.000000KontiSteelHellasAE,Marousi Fullconsolidation Greece 100.000000LaminadosVelascosub-groupcomprisingthefollowingentities: – LaminadosVelascoSL,Basauri Fullconsolidation Spain 100.000000– AceraliaDistribuciónSL,Basauri Fullconsolidation Spain 100.000000– ArcelorDistribuçaoPortugalSpq,Ribatejo Fullconsolidation Portugal 100.000000– ArcelorDistribuciónLevanteSL,Valencia Fullconsolidation Spain 100.000000– ArcelorDistribuciónMediterraneoSL,ParetsdelValles Fullconsolidation Spain 100.000000– CalibradosPraderaSA,Miravalles Equitymethod Spain 50.000000– GrupoVelascoDesarrolloSL,Basauri Fullconsolidation Spain 100.000000– LaminadosComavesaSA,Basauri Fullconsolidation Spain 100.000000– LaminadosGonvelsaSL,LugodeLlanera Fullconsolidation Spain 100.000000– LaminadosSiderúrgicosDueroSA,Basauri Fullconsolidation Spain 90.000000– LaminadosSiderúrgicosOrenseSA,SanCipriandeViñas Fullconsolidation Spain 90.000000– LaminadosSiderúrgicosSevillaSA,AlcaládeGuadaira Fullconsolidation Spain 100.000000– SAProductosEmpresasMetalúrgicas,Salvatierra Fullconsolidation Spain 100.000000LardieretcompagnieSas,Blois Fullconsolidation France 100.000000LaserflashSA,Eupen Fullconsolidation Belgium 100.000000LilleAciersSas,Lomme Fullconsolidation France 100.000000MegaçoJmaComercioSiderúrgicoSpq,Palmela Equitymethod Portugal 38.666500MontanStaalBV,DenHaag Fullconsolidation Netherlands 100.000000MosacierSA,Liège Fullconsolidation Belgium 100.000000OrientalSheetPilingsub-groupcomprisingthefollowingentities: – OrientalSheetPilingSdnBhd,KualaLumpur Fullconsolidation Malaysia 60.000000– OrientalSheetPilingPteLtd,Singapore Fullconsolidation Singapore 100.000000ParementsMétalliquesd’ArchitectureSas,Cerons Fullconsolidation France 100.000000PlaquesetDécoupesFranceSA,Reims Fullconsolidation France 99.9984Produitsd’UsinesMétallurgiquesPum-StationServiceAcierSA,Reims Fullconsolidation France 99.983629ProduitsMétallurgiquesdesArdennesSas,Donchery Fullconsolidation France 100.000000ProduitsSidérurgiquesdelaMoselleSas,Yutz Fullconsolidation France 100.000000





ProfildufuturSas,HorbourgWihr Fullconsolidation France 100.000000ProfilagedeGuadeloupeSas,BaieMahault Fullconsolidation France 100.000000ProfilagedelaMartiniqueSas,Fort-de-France Fullconsolidation France 100.000000ProfilagedelaRéunionSA,LePort Fullconsolidation France 94.203612ProfilArbedStaalhandelsub-groupcomprisingthefollowingentities: – ProfilArbedStaalhandelBV,Born Fullconsolidation Netherlands 100.000000– AND-SteelNV,Schoten Fullconsolidation Belgium 100.000000– BorotransBornBV,Born Fullconsolidation Netherlands 100.000000– BouwstaalNederlandBV,Born Fullconsolidation Netherlands 100.000000– Demanet-CassartAciersSA,Sombreffe Fullconsolidation Belgium 100.000000– LeducTradingNV,Schoten Fullconsolidation Belgium 100.000000– LimbustaalBV,Meersen Fullconsolidation Netherlands 100.000000– Lommaert/MontanWapeningsstaalBV,Nijmegen Fullconsolidation Netherlands 100.000000– LommaertWalserijproduktenBV,Born Fullconsolidation Netherlands 100.000000– ProfilArbedStaalhandelNederlandBV,Born Fullconsolidation Netherlands 100.000000– SteelexpressNV,Schoten Fullconsolidation Belgium 100.000000ProfilsteelSA,Bouffioulx Fullconsolidation Belgium 100.000000PumParis-NormandieSas,SavignyleTemple Fullconsolidation France 100.000000PumSudEstSas,Lyon Fullconsolidation France 100.000000RobertSmithSteelsLtd,Mersyside Fullconsolidation UnitedKingdom 100.000000SlpmSas,Denain Fullconsolidation France 100.000000S2I(SynergieInteractiveIndustrielle)Sas,Hericourt Fullconsolidation France 68.683329SavoieMétalToitureSas,SaintJorioz Fullconsolidation France 100.000000JHGroupSci,Yutz Fullconsolidation France 100.000000SirusSas,SaintOuenl’Aumone Fullconsolidation France 100.000000SkylineSteelsub-groupcomprisingthefollowingentities: – SkylineSteelLlc,Parsippany Fullconsolidation UnitedStates 100.000000– ArkansasSteelProcessingLlc,Parsippany Fullconsolidation UnitedStates 100.000000– ArkansasSteelProcessingLlc,Bessemer Fullconsolidation UnitedStates 100.000000– AssociatedPileandFittingLlc,Clifton Fullconsolidation UnitedStates 100.000000– CasteelLlc,Belpre Fullconsolidation UnitedStates 100.000000– MidwestSteel&TubeLlc,Chicago Fullconsolidation UnitedStates 100.000000– PAPipeLlc,Cartersville Fullconsolidation UnitedStates 100.000000– SheetingSolutionsLlc,Parsippany Fullconsolidation UnitedStates 100.000000– Skyline(Php)CanadaLtd,StBruno Fullconsolidation Canada 100.000000– SkylineCanadaHoldingInc.,Parsippany Fullconsolidation UnitedStates 100.000000– SkylineSteelPipeLlc,Luka Fullconsolidation UnitedStates 100.000000SlpmAtlantiqueSas,SaintNazaire Fullconsolidation France 100.000000SociétéBelged’OxycoupageSA,Liège Fullconsolidation Belgium 100.000000Sociétédetransportsdeproduitsd’usinesMétallurgiquesSas,Reims Fullconsolidation France 100.000000SociétéIndustrielleMétallurgiqueetd’entrepriseSas,LaChapelleSaintLuc Fullconsolidation France 100.000000SotracierSas,Pontcharra Fullconsolidation France 100.000000StalobrexSpzoo,Poreba Fullconsolidation Poland 89.000000SteelCoatServiceCentresSA,Alleur Fullconsolidation Belgium 100.000000UpacSas,SaintOuenl’Aumone Fullconsolidation France 100.000000

Africa, Asia, CIS Segment NouvellesSidérurgiesIndustriellesSA,Casablanca Fullconsolidation Morocco 50.000000SociétéNationaledeSidérurgieSA,AlAaroui Fullconsolidation Morocco 64.860000

Other Activities Segment ARCELORSA,Luxembourg Luxembourg4313267CanadaInc.,Montréal Fullconsolidation Canada 100.000000ArbedAmericassub-groupcomprisingthefollowingentities: – ArbedAmericasLlc,NewYork Fullconsolidation UnitedStates 100.000000– ArcelorInternacionalMéxicoSA,Tlalnepantla Equitymethod Mexico 100.000000ArcelorAçosEspeciaisdoBrasilLtda,SãoPaulo Fullconsolidation Brazil 99.999976ArcelorBrasilSA,BeloHorizonte Fullconsolidation Brazil 66.72905





ArcelorConstructaliaSL,Berrioplano Fullconsolidation Spain 100.000000ArcelorFinanceandServicesBelgiumSA,Bruxelles Fullconsolidation Belgium 99.999998ArcelorFinanceSca,Luxembourg Fullconsolidation Luxembourg 99.999998ArcelorFinanziaraSrl,Piombino Fullconsolidation Italia 100.000000ArcelorFranceSA,SaintDenis Fullconsolidation France 99.999976ArcelorHoldingSàrl,Luxembourg Fullconsolidation Luxembourg 100.000000ArcelorInvestmentSA,Luxembourg Fullconsolidation Luxembourg 100.000000ArcelorInvestmentServicesSA,Luxembourg Fullconsolidation Luxembourg 100.000000ArcelorItalyHoldingSrl,Piombino Fullconsolidation Italia 100.000000ArcelorLuxembourgSA,Luxembourg Fullconsolidation Luxembourg 99.824701ArcelorMittalBelgiumHoldingSA,Antwerpen Fullconsolidation Belgium 100.000000ArcelorMittalPurchasingSas,SaintDenis Fullconsolidation France 100.000000ArcelorNetherlandsBV,Amsterdam Fullconsolidation Netherlands 100.000000ArcelorPersebrásSL,Azpeitia Fullconsolidation Spain 100.000000ArcelorRealEstateFranceSA,Hayange Fullconsolidation France 99.999703ArcelorRecyclingSas,SaintDenis Fullconsolidation France 100.000000ArcelorSpainHoldingSrl,Madrid Fullconsolidation Spain 100.000000ArcelorSteelTradingNetherlandsBV,Rotterdam Fullconsolidation Netherlands 100.000000ArcelorSystemsBelgiumSA,Flemalle Fullconsolidation Belgium 100.000000ArcelorSystemsFranceSas,SaintDenis Fullconsolidation France 100.000000ArcelorTechnologiesFranceSas,SaintDenis Fullconsolidation France 100.000000ArcelorTreasurySnc,SaintDenis Fullconsolidation France 100.000000ArcelorUSAHoldingInc.,NewYork Fullconsolidation UnitedStates 100.000000AticServicesSA,Paris,sub-groupcomprising21entities Equitymethod France 43.513975CflCanadaInvestmentInc.,Granby Fullconsolidation Canada 100.000000CFLCargoSA,Eschs/Alzette Equitymethod Luxembourg 33.333401CircuitFoilAmericaSecs,Granby Fullconsolidation Canada 100.000000CircuitFoilLuxembourgSàrl,Wiltz Fullconsolidation Luxembourg 89.979841CircuitFoilServiceSA,Weidingen/Wiltz Equitymethod Luxembourg 49.000000CockerillForgesandRingmillSA,Seraing Fullconsolidation Belgium 100.000000CockerillMécaniquePrestationsSA,Seraing Fullconsolidation Belgium 100.000000DafGroupNV,Gent Fullconsolidation Belgium 100.000000EsperbrasSL,Olaberria Fullconsolidation Spain 100.000000FinindusNV,Bruxelles Fullconsolidation Belgium 100.000000FinocasNV,Gent Fullconsolidation Belgium 50.000000GecsSA,SaintDenis Fullconsolidation France 99.940000Groupementdel’IndustrieSidérurgiqueSA,SaintDenis Fullconsolidation France 99.908537GroupementImmobilierScrl,Seraing Fullconsolidation Belgium 100.000000ImmobilièreSchlassgoart(GroupeArbed)Senc,Luxembourg Fullconsolidation Luxembourg 100.000000ImphySA,SaintDenis Fullconsolidation France 99.671593InvestARSàrl,Luxembourg Equitymethod Luxembourg 50.000000JulyProductssub-groupcomprisingthefollowingentities: – JulyProductsLlc,NewYork Fullconsolidation UnitedStates 100.000000– J&LSpecialitySteelInternationalSalesInc.,Christiansted Fullconsolidation UnitedStates 100.000000PaulWurthSA,Luxembourg Fullconsolidation Luxembourg 48.097230SidarfinNV,Gent Fullconsolidation Belgium 99.999979SidarsteelNV,Gent Fullconsolidation Belgium 97.430000SodisidSas,Hayange Fullconsolidation France 100.000000SofinusSA,SaintDenis Fullconsolidation France 99.997244SogepassSA,Hayange Fullconsolidation France 99.800000SotegSociétédeTransportdeGazSA,Luxembourg Equitymethod Luxembourg 20.000000SotelSC,Eschs/Alzette Fullconsolidation Luxembourg 75.000000SotelRéseauetCieSecs,Eschs/Alzette Fullconsolidation Luxembourg 100.000000UsinorBelgiumSA,Seraing Fullconsolidation Belgium 100.000000



NOTE 32 – LISTING OF GROUP COMPANIES AS AT 31 DECEMBER 2006 CONTINUEDEntities not included in the consolidationCompanyname Country Percentageofcapital heldcontrol(%)

1) Non-consolidated subsidiaries (346 entities) A.M.T.Sas,Trévoux France 100.000000A.P.R.Sas,LaBoisse France 100.000000A.S.BuildSA,Liège Belgium 100.000000A’TolSas,LaRavoire France 100.000000AcdoLlc,New-York UnitedStates 100.000000AceraliaConstruccionesSL,Sestao Spain 100.000000AciersSolcanInc.,Burlinton Canada 100.000000Agifep,ArbedGroupInvestorsforElectronicPurchasingSA,Luxembourg Luxembourg 100.000000Agifesa,ArbedGroupInvestorsforElectronicSalesSA,Luxembourg Luxembourg 100.000000AirdixSA,Luxembourg Luxembourg 100.000000AisFinance(GroupeArbed)Snc,Luxembourg Luxembourg 100.000000AlphaProfilSA,Yutz France 99.760000AmsaSteelServiceCentreLtd,Johannesburg SouthAfrica 65.000000ArbedBuildingConceptsSA,inprocessofbusinessdiscontinuance,Eschs/Alzette Luxembourg 100.000000Arc-AirSA,Luxembourg Luxembourg 100.000000ArcDetalSpzoo,Ostrowiec Poland 67.000000ArcelorAcelkereskedelmiKft,Kecskemét Hungary 99.967208ArcelorAsiaManagementServices(Shanghai)Co.Ltd,Shanghai China 100.000000ArcelorAssekuranzVermittlungs-GmbH,inprocessofbusinessdiscontinuance,Bremen Germany 100.000000ArcelorAutoBrasilLtda,SãoPaulo Brazil 99.999882ArcelorChinaholding(Luxembourg)Sàrl,Luxembourg Luxembourg 100.000000ArcelorCommercialBeneluxFCSEBV,Rotterdam Netherlands 100.000000ArcelorCommercialBeneluxFCSENV,Merelbeke Belgium 99.960000ArcelorCommercialFCSEGreeceEpe,Kifissia Greece 99.666667ArcelorCommercialFinlandFCSEOY,Helsinki Finland 100.000000ArcelorCommercialFranceFCSESA,SaintDenis France 99.966666ArcelorCommercialItalyFCSESrl,Milano Italia 100.000000ArcelorCommercialLongFinlandOY,Helsinki Finland 100.000000ArcelorCommercialLongPolskaSpzoo,Katowice Poland 100.000000ArcelorCommercialPolandFCSESpzoo,Poznan Poland 100.000000ArcelorCommercialRebarSA,Rodange Luxembourg 100.000000ArcelorCommercialSectionsBeneluxBV,Rotterdam Netherlands 100.000000ArcelorCommercialSectionsFranceSA,SaintDenis France 99.990000ArcelorCommercialSectionsItaliaSrl,Torino Italia 100.000000ArcelorCommercialSwedenFCSEAK,Stockholm Sweden 100.000000ArcelorCommercialSwitzerlandFCSEAG,Wettingen Switzerland 99.916667ArcelorCommercialUKFCSELtd,Solihull-West UnitedKingdom 100.000000ArcelorCommercialWireDrawingCZSro,JeseniceuChebu CzechRepublic 100.000000ArcelorCommercialWireDrawingUKLtd,Nantwich UnitedKingdom 100.000000ArcelorConstrucciónIberiaSrl,Madrid Spain 100.000000ArcelorConstructionBalticUab,Vilnius Lituania 100.000000ArcelorConstructionNederlandBV,Tiel Netherlands 100.000000ArcelorConstructionNorgeAS,Klofta Norway 100.000000ArcelorConsultantsSA,SaintDenis France 99.840000ArcelorDistribuce-CZSro,Praha CzechRepublic 100.000000ArcelorDistribúciaSlovenskoSro,Kosice Slovakia 100.000000ArcelorDistribucijaDoo,Beograd Serbia 100.000000ArcelorDistribucijaDoo,Cakovec Croatia 100.000000ArcelorDistributieSrl,Pantelimon Romania 100.000000ArcelorDistributionBulgariaEood,Sofia Bulgaria 100.000000ArcelorDistributionFranceSas,Nantes France 100.000000ArcelorDistributionNégoceSas,Reims France 100.000000ArcelorDistributionSteelSolutionsSas,Reims France 100.000000ArcelorDystrybucjaPolskaSpzoo,Katowice Poland 100.000000ArcelorFCSCommercialAustriaGmbH,Steyr Austria 100.000000ArcelorFCSCommercialCZSro,Praha CzechRepublic 100.000000




ArcelorFCSCommercialDenmarkA/S,Kobenhavn Denmark 100.000000ArcelorFCSCommercialHungaryKft,Budapest Hungary 100.000000ArcelorFCSCommercialIbericaSL,Madrid Spain 99.999999ArcelorFCSCommercialLuxembourgSA,Dudelange Luxembourg 100.000000ArcelorFCSCommercialNorwayAS,Oslo Norway 100.000000ArcelorFCSCommercialPortugalSul,Cascais Portugal 100.000000ArcelorFCSECelikTicaretAS,Istanbul Turkey 99.998400ArcelorHoldingMexicoSA,MexicoDF Mexico 100.000000ArcelorInoxidablesdeMexicoSA,MexicoDF Mexico 99.999971ArcelorInsuranceBelgiumNV,Gent Belgium 100.000000ArcelorInsuranceConsultantsSA,Luxembourg Luxembourg 100.000000ArcelorInterestFranceSas,SaintDenis France 100.000000ArcelorInternational(Proprietary)Ltd,Sandton SouthAfrica 100.000000ArcelorInternationalAfricaSA,Casablanca Morocco 99.966102ArcelorInternationalAlgérieEurl,Alger Algeria 100.000000ArcelorInternationalBalticsOÜ,Tallinn Estonia 100.000000ArcelorInternationalCelikDisTicaretAS,Istanbul Turkey 99.999999ArcelorInternationalNordicAS,Oslo Norway 100.000000ArcelorInternationalSteelTradingShanghaiCo.Ltd,Shanghai China 100.000000ArcelorInternationalUkraineTob,Kyiv Ukraine 100.000000ArcelorInvesteelFranceSas,SaintDenis France 100.000000ArcelorIT&ISItaliaSrl,Piombino Italia 100.000000ArcelorItaliaSrl,Piombino Italia 100.000000ArcelorLogisticsBelgiumNV,Antwerpen Belgium 100.000000ArcelorLogisticsBrazilLtda,SãoPaulo Brazil 90.000000ArcelorLogisticsFranceSA,SaintDenis France 99.935135ArcelorLogisticsItaliaSrl,Milano Italia 100.000000ArcelorLogisticsUSALlc,NewYork UnitedStates 100.000000ArcelorLongCommercialAustriaGmbH,Salzburg Austria 100.000000ArcelorLongCommercialDenmarkAS,Kobenhavn Denmark 100.000000ArcelorLongCommercialNorwayAS,Oslo Norway 100.000000ArcelorLongCommercialSwedenAB,Stockholm Sweden 100.000000ArcelorMetalEndüstriVeTicaretAS,Istanbul Turkey 100.000000ArcelorMittalGlobalFinanceSA,Bruxelles Belgium 100.000000ArcelorNégoceDistribution-EuropeEstSA,Luxembourg Luxembourg 100.000000ArcelorNégoceDistributionChinaHoldingLtd,Wanchai China 100.000000ArcelorPackagingImprimerieFlorangeSas,SaintDenis France 100.000000ArcelorPackagingUkrainaTob,Belgorod Ukraine 100.000000ArcelorProjectsPteLtd,Singapore Singapore 90.000000ArcelorProjectsUKLtd,OllKent UnitedKingdom 100.000000ArcelorRealEstateBelgiumSA,Bruxelles Belgium 100.000000ArcelorResearchLiègeScrl,Liège Belgium 99.000000ArcelorRPSItaliaSrl,Torino Italia 100.000000ArcelorRPSUKLtd,Solihull UnitedKingdom 100.000000ArcelorRussiaHolding(Luxembourg)Sàrl,Luxembourg Luxembourg 100.000000ArcelorSectionsCommercialAustriaGmbH,Salzburg Austria 100.000000ArcelorSectionsCommercialSchweizAG,Basel Switzerland 100.000000ArcelorSectionsCommercialUKLtd,Birmingham UnitedKingdom 100.000000ArcelorServicesetSolutionsAciersMarocSAs,Casablanca Morocco 100.000000ArcelorServiciosSA,Queretaro Mexico 99.000000ArcelorSiderailSA,Gozón Spain 100.000000ArcelorSSCDevelopmentItaliaSrl,Avigliana Italia 100.000000ArcelorSSCSlovakiaSro,Senica Slovakia 100.000000ArcelorStainless(China)CompanyLtd,TsimShaTsui China 99.900000ArcelorStainlessAustraliaPtyLtd,Southport Australia 100.000000ArcelorStainlessBalticsOü,Tallinn Estonia 100.000000ArcelorStainlessCanadaInc.,Burlington Canada 100.000000ArcelorStainlessIndiaPrivateLtd,Mumbai India 99.999633ArcelorStainlessInternational-KoreaBranchBO,Seoul Rep.ofSouthKorea 100.000000




ArcelorStainlessSingaporePteLtd,Singapore Singapore 100.000000ArcelorSycówSpzoo,Syców Poland 100.000000ArcelorSystemsEspañaSL,Gozón Spain 100.000000ArcelorTailoredBlankGentNV,Gent Belgium 100.000000ArcelorTailoredBlankSenicaSro,Senica Slovakia 100.000000ArcelorTechnologiesBelgiumSA,Flémalle Belgium 100.000000ArcelorTechnologiesEspañaSL,Gozón Spain 95.655994ArcelorTopSas,Reims France 100.000000ArcelorTurkeyHolding(Luxembourg)Sàrl,Luxembourg Luxembourg 100.000000ArcelorWireDrawingSàrl,Bissen Luxembourg 100.000000ArceoSA,Flémalle Belgium 65.163934ArmarPrestacãodeServicosLtda,SãoPaulo Brazil 99.999996ArmasteelSA,Wavre Belgium 100.000000ArmaturesSA,Pontpierre Luxembourg 100.000000AssociationCoopérativeZélandaisedeCarbonisationBV,inliquidation,Terneuzen Netherlands 100.000000AssuraciersSnc,SaintDenis France 100.000000AuxiliairedeRegroupementFinancierd’ArcelorSas,SaintDenis France 100.000000BeijingArcelorShougangSteelConstructionCo.Ltd,Beijing China 70.000000BelgoTradeSA,Luxembourg Luxembourg 100.000000BemexBelgo-MineiraComercialExportadoraSA,BeloHorizonte Brazil 100.000000BlahoveBV,Amsterdam Netherlands 97.500000BmeBelgo-MineiraEngenhariaLtda,BeloHorizonte Brazil 100.000000BmsBelgo-MineiraSistemasSA,BeloHorizonte Brazil 100.000000BremaWarmwalzGmbH,Bremen Germany 100.000000C3SSàrl,SaintDenis France 100.000000CDSASA,BuenosAires Argentina 100.000000CfaManagementInc.,Granby Canada 100.000000ChangzhouUginoxProductsCompanyLtd,JiangSu China 92.330000CircuitFoilAsiaPacific(Hongkong)Ltd,KwaiChung China 75.000000CircuitFoilAsiaPacific(Zhangjiagang)Ltd,Zhangjiagang China 100.000000CircuitFoilEngineeringSàrl,Weidingen/Wiltz Luxembourg 100.000000CircuitFoilTradingUSAInc.,Glenside UnitedStates 100.000000CofraluxSA,Differdange Luxembourg 100.000000CoinvestSpzoo,Warszawa Poland 100.000000ColorProfilLtd,Moscou RussianFederation 100.000000ConsidarPrivateLtd,Singapore Singapore 100.000000ContisteelLtd,Barking UnitedKingdom 100.000000Contisteel(Holdings)Ltd,Barking UnitedKingdom 100.000000Contisteel(Southern)Ltd,Barking UnitedKingdom 100.000000CordeliaSA,SaintDenis France 99.998000CoreaSA,Senningerberg Luxembourg 100.000000CorporationsEfficencyGrowthThroughInformationSystemsScrl,Ougrée Belgium 88.362069Crois-sensScrl,Ougrée Belgium 99.733333CsnChromeSA,Liège Belgium 100.000000DavalNederlandBV,Amsterdam Netherlands 100.000000DencrestLimitedPlc,Nicosia Cyprus 100.000000e-ArbedDistributionSA,Eschs/Alzette Luxembourg 100.000000EBT–ElectronBeamTechnologyGmbH,Bremen Germany 100.000000EfoamSA,Luxembourg Luxembourg 100.000000EkostoNV,SintGillisWaas Belgium 100.000000ElectroHoldingCompanySA,Luxembourg Luxembourg 100.000000EuroCubageServicesSas,inliquidation,Ennery France 100.000000F.P.C.Sas,Montelier France 100.000000FabestSas,Ludres France 100.000000FerrometalliPlaquesetDécoupesSrl,Calderaradireno Italia 100.000000FersetMaintenanceIndustrielsSàrl,Hayange France 100.000000FersthalSagl,Lugano Switzerland 99.000000Fi2000Sas,Limas France 100.000000FinansiderSA,SaintDenis France 99.999004




FrecoluxSA,Luxembourg Luxembourg 99.999915GalvaServiceRéunionSas,SaintPaul France 100.000000GeoparSA,inliquidation,Couillet Belgium 50.950604GeporSas,Illange France 100.000000GeproluxSA,Luxembourg Luxembourg 100.000000GiePrimus®fonte,Luxembourg Luxembourg 100.000000GroupeAllianceMétalSA,Arnas France 66.018226H&ESA,Rombas France 99.993600H&EWallonieSA,Flémalle Belgium 100.000000HaidonHubinSA,Liège Belgium 100.000000HaironvilleBohemiaSro,CeskeBudejovice CzechRepublic 100.000000HaironvilleDanmarkAS,Rodovre Denmark 100.000000HaironvilledoBrasilIndustriaeComercioLta,SãoPaulo Brazil 100.000000HaironvilleHungariaKft,Budapest Hungary 100.000000HaironvilleNederlandBV,Tiel Netherlands 100.000000HaironvillePolskaSpzoo,Poznan Poland 100.000000HaironvilleSlovenskoSro,Bratislava Slovakia 100.000000HaironvilleSverigeAB,Karlstad Sweden 100.000000HughesandSpencerSteelLtd,Willenhall UnitedKingdom 99.992672HutaSerwisSpzoo,Warszawa Poland 100.000000IcpeImmob.duCentrePolyv.del’EnfanceSàrl,Luxembourg Luxembourg 100.000000ImhuaSpecialMetalCo.Ltd,Foshan China 65.000000ImmobilièreCampusSàrl,Luxembourg Luxembourg 100.000000ImmobilièreCitéJudiciaire2025Sàrl,Luxembourg Luxembourg 100.000000ImmobilièreContourdiffSàrl,Luxembourg Luxembourg 100.000000ImmobilièreDraiEechelenSàrl,Luxembourg Luxembourg 100.000000ImmobilièreJusticia2026Sàrl,Luxembourg Luxembourg 100.000000ImmobilièreTudorSàrl,Luxembourg Luxembourg 100.000000ImpecoSA,SanLuis Argentina 99.999898ImphyAlloysNevadaInc.,NewYork UnitedStates 100.000000ImphyDeutschlandGmbH,Erkrath Germany 100.000000ImphyFarEastCo.Ltd,Kowloon China 99.993103ImphyItalianaSrl,Torino Italia 100.000000ImphyUginePrecisionBV,Amsterdam Netherlands 100.000000ImphyUginePrecisionEspanaSA,Viladecans Spain 100.000000ImphyUginePrecisionSuisseSA,Préverenges Switzerland 94.000000ImphyUginePrecisionUKLtd,Buckinghamshire UnitedKingdom 100.000000IndusteelCanadaInc.,Montréal Canada 100.000000IndusteelDeutschlandGmbH,Grevenbroich Germany 100.000000IndusteelBeneluxNV,Malines Belgium 100.000000IndusteelItaliaSrl,Milano Italia 100.000000IndusteelUKLtd,Worcester UnitedKingdom 100.000000Inspection,ProtectiveSurveyandCertificationBureau–InsurecSA,Bruxelles Belgium 100.000000InstitutoTécnicodelaEstructuradelAceroSL,VillafrancadeOrdizia Spain 69.750000IntersteelBV,Rotterdam Netherlands 100.000000IscHoldingsInc.,NewYork UnitedStates 100.000000ItaúnaSiderúrgicaLtda,Itaúna Brazil 100.000000IUPDeutschlandGmbH,Erkrath Germany 100.000000K.I.V.INV,Genk Belgium 99.998951KontiromTradeSpa,Pantalimon Romania 99.999642KrisperDoo,Kranj Slovenia 100.000000L’équipementparl’acierinoxydableSA,SaintDenis France 99.833000LapandryAcierSàrl,Casablanca Morocco 100.000000LaserWeldedBlanksLtd,London UnitedKingdom 100.000000LasramTechnologyKft,Szentendre Hungary 100.000000LeFeràBétonSas,Yutz France 100.000000LuxembourgSteel(SiChuan)Co.Ltd,Chengdu China 100.000000MattheyIbericaComercialTuboInoxidableSL,Barcelona Spain 100.000000MattheyUKLtd,Dudley UnitedKingdom 100.000000

1�0 ArcelorAnnualReport2006



MattheyUSLlc,NewYork UnitedStates 100.000000MecachimSA,Lusignan France 99.833333MemnousSA,SaintDenis France 99.842932MetaalzetterijdeBetuweBV,Tiel Netherlands 100.000000MetalPresseSàrl,SaintDenis France 99.800000MetalimphyPrecisionAlloysInc.,Collegeville UnitedStates 100.000000MidiAciersProfilsGénieCivilSA,Beauzelle France 99.995872MittalSteelMarketingFranceSA,Amnéville France 99.986882NangoSA,SaintDenis France 99.842932NorsteelCorp.Inc.,NewYork UnitedStates 100.000000OrsaneSA,SaintDenis France 99.837838OsirusSA,SaintDenis France 99.760000P.P.Z.CrapexSpzoo,Krakow Poland 100.000000P.P.Z.SilscrapSpzoo,BielskoBiala Poland 100.000000PalfroidSA,Carignan France 99.993879PaulWurthAS,Ostrava CzechRepublic 100.000000PaulWurthInc.,Canonsburg UnitedStates 100.000000PaulWurthLtd,Burlington Canada 100.000000PaulWurthBelgiumSA,Bruxelles Belgium 100.000000PaulWurthdeChileLtda,Santiago Chile 100.000000PaulWurthdeMexicoSA,Monclova Mexico 99.000000PaulWurthdoBrasilTecnologiaeEquipamentosParaMetalurgiaLtda,BeloHorizonte Brazil 100.000000PaulWurthIbericaSrl,Gijón Spain 100.000000PaulWurthIndiaPlc,NewDelhi India 100.000000PaulWurthInternationalSA,Luxembourg Luxembourg 100.000000PaulWurthItaliaSpa,Genova Italia 100.000000PaulWurthKovrovLtd,Kovrov RussianFederation 55.000000PaulWurthMetalTechnologyCo.Ltd,Beijing China 100.000000PaulWurthRefractory&EngineeringGmbH,Wiesbaden Germany 100.000000PaulWurthUmwelttechnikGmbH,Essen Germany 100.000000PBTransferSpolSro,Bohutin CzechRepublic 100.000000PerfilorSA,SãoPaulo Brazil 50.997505PerryInvestmentsLtd,Willenhall UnitedKingdom 100.000000PhilaeusSA,SaintDenis France 99.842932PlaquesetDécoupesServicesSA,Eupen Belgium 100.000000PliageMidiPyreneesSas,LaMagdeleinesurTarn France 100.000000PlimaSas,Mallemort France 100.000000Pre-FinishedSteelsLtd,Willenhall UnitedKingdom 100.000000PrekonSpzoo,Starachowice Poland 100.000000PrimorecSA,Differdange Luxembourg 100.000000ProfilagedeSaint-MartinSas,SaintMartin France 100.000000ProfilageDominicanaSA,SantoDomingo DominicanRepublic 87.025547RahnsSpecialtyMetalsInc.,Collegeville UnitedStates 100.000000RecaMetalSrl,Bucarest Romania 100.000000RetrimeuseScrl,Seraing Belgium 76.000000RwmRohrwerkeMuldensteinGmbH,inbankruptcy,Muldenstein Germany 100.000000SafemDistribuzioneSrl,Tavagnacco Italia 100.000000Scides1et3delaplaceMaxRousseaux,Reims France 100.000000SciEspaceSaintLéonard,Nantes France 100.000000SciKuntzig,Yutz France 100.000000SciMarly,Yutz France 100.000000SibralParticipaçõesLtda,BeloHorizonte Brazil 100.000000SidleaseNV,Gent Belgium 100.000000SidmarFinance(GroupeArbed)SA,Luxembourg Luxembourg 100.000000SitekSrl,Torino Italia 100.000000SkylineComercialdeMexicoSA,MexicoDF Mexico 100.000000SLP–SociétéLorrainedePlaquesSA,Yutz France 99.760000SobesteelSA,Wavre Belgium 100.000000SociétéCarolorégiennedeCokéfactionSA,inliquidation,Liège Belgium 85.785133

ArcelorAnnualReport2006 1�1



SociétéCivileImmobilièredu3ruedel’industrieàBasse-Yutz,Yutz France 100.000000SociétédeGestionpourlaProtectionSocialeSA,SaintDenis France 99.800000SociétédesMinesd’OttangeIISàrl,inprocessofbusinessdiscontinuance,Yutz France 99.966667SociétédesMinesdeSacilor-LorminesSA,SaintDenis France 100.000000SociétéduTrainUniverseldeLongwySA,Hayange France 99.999994SociétéImmobilièreAudunoiseSA,AudunleTiche France 99.955057SociétéImmobilièreduFortThüngenSàrl,Luxembourg Luxembourg 60.000000SociétéMétallurgiquedeRevignySnc,RevignysurOrnain France 100.000000SociétéNouvelledeParticipationdanslesProduitsPlatsSA,SaintDenis France 99.760000SociétépourlaRéalisationd’EtudesTechn.etEconom.enSidérurgieSàrl,SaintDenis France 76.300000SollacAcosSA,Lisboa Portugal 99.200000SomefSA,Liège Belgium 60.000000SteelFinanceCenterNV,Geel Belgium 100.000000SteelholdPlc,StAlbans UnitedKingdom 99.999997Steelinter(UK)Ltd,StAlbans UnitedKingdom 100.000000SociétéduTrainàFildeSchifflangeSA,Eschs/Alzette Luxembourg 100.000000SylarSA,SaintDenis France 99.837838TailorSteelDeutschlandGmbH,Bremen Germany 100.000000TerrierSas,Arnas France 100.000000TôlerieIndustrielleetAgricoleduCentreSas,Herbault France 100.000000TradeArbedEspañaSA,Madrid Spain 100.000000TradeArbedFranceSA,Paris France 99.900000TransOceanLogisticsBV,Ijssel Netherlands 100.000000TrefilArbedBeneluxBV,s’Hertogenbosch Netherlands 100.000000TrefilArbedCRSro,Cheb CzechRepublic 80.000000TrefilArbedFranceSA,Vincennes France 99.828571TrefilArbedGreenhouseSA,Bissen Luxembourg 80.000000TrefilArbedGrembergenSA,inprocessofbusinessdiscontinuance,Luxembourg Luxembourg 100.000000TrefilArbedItaliaSrl,inliquidation,Milano Italia 100.000000UciSA,Fleurus Belgium 100.000000UfAciers-GroupeIndusteelSas,SaintDenis France 100.000000Ugine&AlzAustriaGmbH,Ansfelden Austria 100.000000Ugine&AlzNordicAB,Eskilstuna Sweden 100.000000Ugine&AlzPolskaSpzoo,Bytom Poland 100.000000Ugine&AlzPrahaSro,Praha CzechRepublic 100.000000Ugine&AlzSuisseSA,Niederhasli Switzerland 100.000000Ugine&AlzUKLtd,Nottingham UnitedKingdom 100.000000UgineNederlandBV,inliquidation,Amsterdam Netherlands 100.000000UginePortugalSpq,Lisboa Portugal 98.000000UginoxVietnamCompanyLtd,HungYenProvince Vietnam 70.000000UnibaSA,SaintDenis France 64.000000UnikontiSteelLlc,Beograd Serbia 100.000000UniondesConsommateursdeFerraillesdeFranceSA,SaintDenis France 99.960000UnitedContinentalSteelsLtd,Hatfield UnitedKingdom 100.000000UsinorIndusteel(Iberica)SA,St.CugatdelValles Spain 100.000000UsinorIndusteel(USA)Inc.,Wilmington UnitedStates 100.000000UsinorIndusteelNordicAB,VastraFrolunda Sweden 100.000000UsinorUKLtd,StAlbans UnitedKingdom 100.000000ValacierSas,Reims France 100.000000VerwaltungsgesellschaftRAG-BeteiligungmbH,Essen Germany 65.000000VikamPrahaAS,Praha CzechRepublic 100.000000VulcainHoldingSA,Seraing Belgium 100.000000YmosBelgiumSA,Seraing Belgium 100.000000ZeelandParticipatieBV,Terneuzen Netherlands 100.0000002) Associated companies not consolidated (63 entities) A.S.C.PrahaSpo.r.o.,Praha CzechRepublic 50.000000ActinvestSc,Arnas France 50.000000AdfadCockerillLtd,Lagos Nigeria 40.000000AlberteumAedesScientiaeSA,inliquidation,Bruxelles Belgium 45.000000

1�� ArcelorAnnualReport2006



ArcelorConstructionMagrebSA,BenArous Tunisia 49.999000ArcelorNeelTailoredBlankPrivateLtd,NewDelhi India 50.000000BamesaCelikServisSanayiiTicaretAS,Orhangazi Turkey 39.990700BamesaOtelSpa,Bucarest Romania 40.000000Cjsc“Severgal”Ltd,Cherepovets RussianFederation 25.010000CompagniedesFersSàrl,ensommeil,Lyon France 50.000000ComptoirBelgedesCokesScrl,inliquidation,Bruxelles Belgium 20.130000ConsidardoBrasilLtda,BeloHorizonte Brazil 20.000000DikemaSteelSdnBhd,KualaLumpur Malaysia 30.000000EnersidSA,Paris France 49.800000EnsilectricSA,Llanera Spain 40.000000ErzkontorRuhrGmbH,Essen Germany 33.333023EspraSas,SaintDenis France 35.000000EuratoolSA,Raismes France 24.901639ForgesProfilAG,Kirchdorf Switzerland 25.000000FtiFaserbetontechnikGmbH,St.Floriana/Inn Austria 33.333333GlobalFacilitiesSA,Luxembourg Luxembourg 33.333333Immobilière2007Sàrl,Luxembourg Luxembourg 50.000000InnovativeGasverwertungs-GmbH,inprocessofbusinessdiscontinuance,Bremen Germany 50.000000IUPJindalMetals&AlloysLtd,NewDelhi India 27.000000KanzenStainlessProcessorsSdnBhd,KualaLumpur Malaysia 30.000000KrWertstoffaufbereitungs-GmbH,Bremen Germany 25.100000LaFilièreBoisScrl,Ougrée Belgium 33.333333LaRevuedeMétallurgieSA,SaintDenis France 43.044000LesHaultesTrixhesScrl,Flémalle Belgium 22.860838LuxcontrolSA,Eschs/Alzette Luxembourg 22.000000Nord-ChromeSnc,GrandeSynthe France 50.000000PbmPicchioniBMDistr.deTít.eVal.Mobil.SA,BeloHorizonte Brazil 48.999991PhenixRousiesSA,Rousies France 25.565161PortalNV,inliquidation,Bruxelles Belgium 39.999988ProfilageOcéanIndienSA,RicheTerre Mauritius 49.000000PromopanelSrl,Piombino Italia 50.000000RetrivalScrlàfinalitésociale,Couillet Belgium 33.311111RolanferRecyclageSA,Yutz France 40.000000ShanghaiBaosteel&ArcelorTailorMetalCo.Ltd,Shanghai China 25.000000SociétédedéveloppementAGORASàrl,Eschs/Alzette Luxembourg 50.000000SociétédedéveloppementAGORASàrletCie,Eschs/Alzette Luxembourg 49.964589SociétédePoseArmaturesTravauxPublicsSàrl,Marignane France 37.500000SociétédesArquebusiersdelaVilledeLuxembourgSA,inliquidation,Luxembourg Luxembourg 33.391710SociétéduCanaldesMinesdeFerdelaMoselleSas,Metz France 25.913497SociétéduPortFluvialdeMertertSA,Mertert Luxembourg 40.000000SociétéLiègeoisedeGestionFoncièreSA,Liège Belgium 50.000000SodieSA,Paris France 44.999333SoreparkSA,Hagondange France 26.295794Steel24-7NV,Drogenbos Belgium 50.000000SteeltrackSA,SaintDenis France 33.296296TelindusSA,Stassen Luxembourg 35.307000TMT-TappingMeasuringTechnologyGmbH,Siegen Germany 50.000000TMT-TappingMeasuringTechnologySàrl,Luxembourg Luxembourg 50.000000TradeArbedMexicoSA,inprocessofbusinessdiscontinuance,MexicoDF Mexico 49.000000TramwaySàrl,inliquidation,SaintJulienlèsMetz France 22.857143Unionpourlapromotiondesindustriesdel’AppertiséSàrl,Paris France 33.333333Unionpourleservicedel’électricitéSA,inliquidation,Briey France 43.300000UnitedSlittingServicesLtd,Halesowen UnitedKingdom 39.000000WanseyLimitedPlc,Limasol Cyprus 50.000000– anditssubsidiaryOooTARusLtd,Orel RussianFederation 19.800000WeserportGmbH,Bremen Germany 49.000000WKSPty.Ltd,Wollongong Australia 33.333333WSA–WarehousesServiceAgencySàrl,Sanem Luxembourg 25.000000

ArcelorAnnualReport2006 1�3

Consolidated Financial StatementsAuditor’s Report

TotheshareholdersofArcelorS.A.Luxembourg

REPORT OF THE RéVISEUR D’ENTREPRISES

Report on the Consolidated Financial StatementsFollowingourappointmentbytheGeneralMeetingoftheShareholdersdated28April2006,wehaveauditedtheaccompanyingconsolidatedfinancialstatementsofArcelorS.A.anditssubsidiaries(“theGroup”),assetoutonpages56to123,whichcomprisetheconsolidatedbalancesheetasat31December2006,andtheconsolidatedincomestatement,consolidatedstatementofchangesinequityandconsolidatedstatementofcashflowsfortheyearthenended,andasummaryofsignificantaccountingpoliciesandotherexplanatorynotes.

Board of Directors’ responsibility for the consolidated Financial StatementsTheboardofdirectorsisresponsibleforthepreparationandfairpresentationoftheseconsolidatedfinancialstatementsinaccordancewithInternationalFinancialReportingStandardsasadoptedbytheEuropeanUnion.Thisresponsibilityincludes:designing,implementingandmaintaininginternalcontrolrelevanttothepreparationandfairpresentationoffinancialstatementsthatarefreefrommaterialmisstatements,whetherduetofraudorerror;selectingandapplyingappropriateaccountingpolicies;andmakingaccountingestimatesthatarereasonableinthecircumstances.

Responsibility of the Réviseur d’EntreprisesOurresponsibilityistoexpressanopinionontheseconsolidatedfinancialstatementsbasedonouraudit.WeconductedourauditinaccordancewithInternationalStandardsonAuditing.Thosestandardsrequirethatwecomplywithrelevantethicalrequirementsandplanandperformtheaudittoobtainreasonableassurancewhetherthefinancialstatementsarefreeofmaterialmisstatement.Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresintheconsolidatedfinancialstatements.Theproceduresselecteddependonourjudgment,includingtheassessmentoftherisksofmaterialmisstatementoftheconsolidatedfinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,weconsiderinternalcontrolrelevanttotheentity’spreparationandfairpresentationoftheconsolidatedfinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalcontrol.AnauditalsoincludesevaluatingtheappropriatenessofaccountingprinciplesusedandthereasonablenessofaccountingestimatesmadebytheBoardofDirectors,aswellasevaluatingtheoverallpresentationoftheconsolidatedfinancialstatements.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.

OpinionInouropinion,theconsolidatedfinancialstatementsgiveatrueandfairviewoftheconsolidatedfinancialpositionoftheGroupasat31December2006,andofitsfinancialperformanceanditsconsolidatedcashflowsfortheyearthenendedinaccordancewithInternationalFinancialReportingStandardsasadoptedbytheEuropeanUnion.

Report on Other Legal and Regulatory RequirementsTheconsolidatedmanagementreport,assetoutonpages22to49,whichistheresponsibilityoftheBoardofDirectors,isinaccordancewiththeconsolidatedfinancialstatements.

Luxembourg,23March2007

KPMGAuditS.àr.l.Réviseursd’Entreprises

EricDamotte


Balancesheetasat31December2006 Profitandlossaccountfortheyearended31December2006 Proposedappropriationoftheresultfortheyear Notestotheannualaccounts Note1: General Note2: Accountingpolicies Note3: Statementofintangiblefixedassets Note4: Statementoftangiblefixedassets Note5: Statementoffinancialfixedassets Note6: Residualtermofdebtors Note7: Prepayments Note8: Capitalandreserves Note9: Provisionsforliabilitiesandcharges Note10: Financialdebt Note11: Residualtermofcreditors Note12: Operatingcharges Note13: Financialresult Note14:Taxonprofit Note15: Off-balancesheetitems Note16: Staff Note17: Directors’remuneration Note18: Stockoptionplans Note19: Otherinformation Auditor’sreport

Annual Accounts Arcelor S.A.

ArcelorAnnualReport2006 1��

Annual Accounts Arcelor S.A.Balance Sheet – Arcelor S.A.(AmountsinEURmillion,unlessotherwisestated)

AssetsInEURmillion 31December2006 31December2005

C. FIXED ASSETS 15,782 11,863

I. Intangible assets (Note 3) 2 - 2.Concessions,patents,licencesandsimilarrights 2 -II. Tangible assets (Note 4) 4 5 1.Landandbuildings 1 1 3.Otherfixtures,fittings,toolsandequipment 3 3 4.Paymentonaccountandtangibleassetsinthecourseofconstruction p.m. 1III. Financial assets (Note 5) 15,776 11,858 1.Sharesinaffiliatedundertakings 15,713 11,822 5.Securitiesheldasfixedassets 36 36 6.Otherloans 27 -

D. CURRENT ASSETS 77 195

II. Debtors (Note 6) 73 172 1.Tradedebtors 1 1 2.Amountsowedbyaffiliatedundertakings 65 168 3.AmountsowedbyundertakingsinwhichtheCompanyhasaparticipatinginterest p.m. p.m. 4.Otherdebtors 7 3

III. Transferable Securities 4 5 2.Ownshares 4 5

IV. Cash at bank, cash in postal cheque accounts, cheques and cash in hand p.m. 18

E. PREPAYMENTS (NOTE 7) 3 6TOTAL ASSETS 15,862 12,064

Theaccompanyingnotesformanintegralpartoftheseparentcompanyannualaccounts.


Annual Accounts Arcelor S.A.Balance Sheet – Arcelor S.A. continued(AmountsinEURmillion,unlessotherwisestated)

LiabilitiesInEURmillion 31December2006 31December2005

A. CAPITAL AND RESERVES (NOTE 8) 14,599 11,248

I. Subscribed capital 3,349 3,199II. Share Premium account 5,819 5,397IV. Reserves 178 79 1.LegalReserve 174 74 2.Reserveforownshares 4 5V. Profit brought forward 1,289 567VI. Profit for the financial year 3,964 2,006

B. PROVISIONS FOR LIABILITIES AND CHARGES (NOTE 9) 16 22

1.Provisionsforpensionsandsimilarobligations 1 1 3.Otherprovisions 15 21

C. CREDITORS (NOTES 10 AND 11) 1,243 794

1a.Convertibledebentureloans - 750 2.Amountsowedtocreditinstitutions - p.m. 4.TradeCreditors 18 19 6.Amountsowedtoaffiliatedundertakings 1,206 15 7.AmountsowedtoundertakingsinwhichtheCompanyhasaparticipatinginterest p.m. p.m. 8.Taxandsocialsecuritydebts 1 1 9.Othercreditors 18 9

D. DEFERRED INCOME 4 -TOTAL CAPITAL AND RESERVES AND LIABILITIES 15,862 12,064



Annual Accounts Arcelor S.A.Profit and Loss Account for the year ended 31 December 2006(AmountsinEURmillion,unlessotherwisestated)

InEURmillion 31December2006 31December2005

A. CHARGES

Operating charges (Note 12) 514 170 3.Staffcosts 66 42 a)Wagesandsalaries 51 35 b)Socialsecuritycostsaccruingbyreferencetowagesandsalaries 4 3 c)Complementarypensions 10 3 d)Othersocialsecuritycosts 1 1 4.a)Valueadjustmentsinrespectofformationexpensesandtangibleandintangiblefixedassets 3 2 5.Otheroperatingcharges 445 126

Financial charges (Note 13) 740 35

6.Valueadjustmentsinrespectoffinancialassetsandoftransferablesecuritiesheldascurrentassets 271 - 7.Interestpayableandsimilarcharges 469 35 a)Concernedaffiliatedundertakings 75 11 b)Otherinterestspayableandcharges 394 24

RESULT FOR THE PERIOD

13. Profit for the financial year 3,964 2,006TOTAL CHARGES 5,218 2,211



Annual Accounts Arcelor S.A.Profit and Loss Account for the year ended 31 December 2006 continued(AmountsinEURmillion,unlessotherwisestated)

InEURmillion 31December2006 31December2005

B. INCOMESALES AND SERVICES 105 120

4.Otheroperatingincome 105 120FINANCIAL INCOME (NOTE 13) 5,113 2,091

5.Incomefromparticipatinginterests 2,739 2,085 a)Derivedfromaffiliatedundertakings 2,739 2,085 6.Incomefromothertransferablesecuritiesandfromloansformingpartofthefixedassets p.m. - b)Otherincome p.m. - 7.Otherinterestreceivableandsimilarincome 2,374 6 a)Derivedfromaffiliatedundertakings 2,331 5 b)Otherinterestreceivableandsimilarincome 43 1TOTAL INCOME 5,218 2,211



Annual Accounts Arcelor S.A.Proposed Appropriation of the result for the year(AmountsinEURmillion,unlessotherwisestated)

2006inEUR 2005inEURmillion

Resultforthefinancialyear 3,964,380,389.42 2,006.0Retainedearnings 1,288,288,528.54 572.8Transferfrom/(to)thereserveforownshares 913,358.90 -5.3Resultavailablefordistribution 5,253,582,276.86 2,573.5Allocationtothelegalreserve 160,979,923.89 100.3Allocationtootherreserves - -BoardofDirectors’remuneration 1,600,000.00 1.6GrossdividendofEUR1.00pershareforthefinancialyear2006paidon669813408shares(*) 669,813,408.00 -GrossdividendofEUR1.85pershareforthefinancialyear2005paidon639774327shares(*) - 1,183.6Resulttobecarriedforward 4,421,188,944.97 1,288.0

(*)Totalnumberofsharesinissueasat31December2006andasat31December2005


NOTE 1: GENERALArcelorS.A.wasincorporatedunderLuxembourgLawon8June2001foranunlimitedperiod.TheregisteredofficeoftheCompanyisinLuxembourgCityandtheCompanyisregisteredattheRegisterofTradeandCommerceofLuxembourgunderthenumberB82.454.Theaccountingperiodstartson1Januaryandendson31Decembereachyear.TheCompanypublishesconsolidatedaccountsinaccordancewiththerequirementsofLuxembourglawsandregulations.TheCompanyisincludedintheconsolidatedaccountsofMittalSteelCompanyN.V.formingthelargestbodyofundertakingsofwhichthecompanyformsapartasasubsidiaryundertaking.TheseconsolidatedaccountsareavailableattheregisteredofficeofMittalSteelCompanyN.V.,Hofplein20,3032ACRotterdam,TheNetherlands.

NOTE 2: ACCOUNTING POLICIESTheannualaccountsarepreparedinEuro(EUR)andinaccordancewithLuxembourglawsandregulationsandgenerallyacceptedaccountingprinciples.

INTANGIBLEANDTANGIBLEFIXEDASSETSIntangibleandtangiblefixedassetsarerecordedinthebalancesheetatcost,includingancillarycosts,oratproductioncost.Depreciationiscalculatedonastraight-linebasis.

FINANCIALFIXEDASSETSInvestmentsarerecordedinthebalancesheetatacquisitioncost,plusassociatedcosts.Attheendofeachaccountingperiod,allinvestmentsaresubjecttoanimpairmentreview.Whereapermanentdiminutioninvalueisrecognised,thisdiminutionisrecordedintheincomestatementasavalueadjustment.Areversalofavalueadjustmentisrecordedtotheextentthatthefactors,whichcausedtheinitialrecordingofthevalueadjustment,haveceasedtoexist.Debtsandotherloansreceivablearerecordedinthebalancesheetattheirnominalvalue.Attheendofeachaccountingperiod,valueadjustmentsarerecordedondebtswhichappeartobepartlyorwhollyirrecoverable.

DEBTORSDebtorsarerecordedinthebalancesheetattheirnominalvalue.Attheendofeachaccountingperiodspecificvalueadjustmentsarerecordedondebtswhichappeartobepartlyorwhollyirrecoverable.

VALUATIONOFTRANSFERABLESECURITIESTransferablesecuritiesarevaluedatthelowerofcostormarket.Avalueadjustmentisrecordedwhenthemarketpriceislowerthantheacquisitionprice.Valueadjustmentsarenotcontinuedifthereasonsforwhichthevalueadjustmentsweremadehaveceasedtoapply.

PROVISIONSFORLIABILITIESANDCHARGESProvisionsaremadeforliabilitiesandchargeswherethecrystallisationofaliabilityconsideredisprobable,basedonpastorcurrentevents,inlinewithlegalrequirements.Provisionsforpensionsandsimilarobligations:TheCompanyparticipatesinthefinancingofanincrementalretirementscheme(definedbenefitscheme)forthebenefitofemployeesmadeavailablebyArcelorLuxembourg(formerlyArbed).Commitmentsarisingfromthisschemearecoveredbyappropriateprovisions.TheCompany’sownemployees,whoarenotmadeavailabletootherArcelorsubsidiaries,arecoveredbyadefinedcontributionscheme.TheCompanypayscontributionsinrespectofthisschemetoanassuranceprovider.Thisschemedoesnotgiverisetoacommitmentandannualcontributionsaretakentotheprofitandlossaccount,followingthesametreatmentadoptedforwagesandsalaries.

CREDITORSCreditorsarerecordedinthebalancesheetattheirnominalvalue.Convertibledebentureloansaredisclosedattheirissuevalue,increasedbytheinteresttobecapitalisedon31Decemberofeachaccountingyear.

TRANSLATIONOFFOREIGNCURRENCYITEMSWhereapplicable,itemsexpressedinforeigncurrencyarevaluedasfollows:• Tangiblefixedassets,creditorsdueaftermorethanoneyearandoff-balancesheetcommitmentsaretranslatedathistoricexchange

rates.Unrealisedlossesincurredasaresultofthispolicyarerecordedintheprofitandlossaccountfortheperiod.• Otherbalancesheetitemsaretranslatedattheyear-endexchangerateandrelatedforeignexchangedifferencesarerecordedintheprofit

andlossaccountfortheperiod.

Annual Accounts Arcelor S.A.Notes to the Annual Accounts(AmountsinEURmillion,unlessotherwisestated)


Annual Accounts Arcelor S.A.Notes to the Annual Accounts continued(AmountsinEURmillion,unlessotherwisestated)

NOTE 3 – STATEMENT OF INTANGIBLE FIXED ASSETS

Acquisition cost Concessions,patents, Total(inEURmillion) licencesandsimilarrights

Openingbalance - -Acquisitionsduringtheperiod 2 2Disposalsandtransfersduringtheperiod - -CLOSING BALANCE 2 2

Value adjustments Concessions,patents, Total(inEURmillion) licencesandsimilarrights

Openingbalance - -Chargefortheperiod p.m. p.m.Closingbalance p.m. p.m.OPENING NET BOOK VALUE - -CLOSING NET BOOK VALUE 2 2

NOTE 4 – STATEMENT OF TANGIBLE FIXED ASSETS

Acquisition cost LandandBuildings Otherfixtures, Paymentsonaccount Total fittings,tools andtangibleassets andequipment inthecourseof (inEURmillion) construction

Openingbalance 3 6 1 10Acquisitionsduringtheperiod 1 1 - 2Disposalsandtransfersduringtheperiod - - -1 -1CLOSING BALANCE 4 7 - 11

Value adjustments LandandBuildings Otherfixtures, Paymentsonaccount Total fittings,tools andtangibleassets andequipment inthecourseof (inEURmillion) construction

Openingbalance -2 -3 - -5Chargefortheperiod -1 -1 - -2Closingbalance -3 -4 - -7OPENING NET BOOK VALUE 1 3 1 5CLOSING NET BOOK VALUE 1 3 - 4



NOTE 5 – STATEMENT OF FINANCIAL FIXED ASSETS

Acquisition cost Sharesin Securitiesheld Otherloans Total(inEURmillion) affiliatedundertakings asfixedassets

Openingbalance 11,822 36 - 11,858Acquisitionsandincreasesduringtheperiod 4,943 - 38 4981Disposalsanddecreasesduringtheperiod -781 - -11 -792CLOSING BALANCE 15,984 36 27 16,047

Value adjustments Sharesin Securitiesheld Otherloans Total(inEURmillion) affiliatedundertakings asfixedassets

Openingbalance - - - -Chargefortheperiod -271 - - -271Closingbalance -271 - - -271OPENING NET BOOK VALUE 11,822 36 - 11,858CLOSING NET BOOK VALUE 15,713 36 27 15,776

The principal holdings at 31 December 2006 are listed below: Percentageofcapitalheld Resultfor2006 Shareholders’equity % EURmillion (includingresult for2006)Nameandregisteredoffice EURmillion

ArcelorLuxembourgSA,Luxembourg(Luxembourg) 99.82 630 2,278ArcelorHoldingSARL,Luxembourg(Luxembourg) 100.00 2 2,310ArcelorMittalBelgiumHoldingSA,Anvers(Belgium) 100.00 (*) (*)ArcelorItalyHoldingSRL,Piombino(Italy) 100.00 12 62ArcelorSpainHoldingSL,Madrid(Spain) 100.00 287 1,603ArcelorFinanceandServicesBelgiumSA,Brussels(Belgium) 33.68 150(**) 7,546(**)ArcelorFranceSA,SaintDenis(France) 99.04 1,082 1,9704313267CanadaInc,Montreal/Quebec(Canada) 10.89 -100 1,32690Depositaryreceipts4313267CanadaInc.,representing89.11%ofthesharesinthecapitalof4313267CanadaInc(*) CompanyestablishedinDecember2006,firstclosingwillbeon31December2007(**)Asperclosingon30June2006

BytheendofArcelor’spubliccashoffertoacquirealltheoutstandingordinarysharesoftheCanadiansteelproducerDofascoInc.,Arcelorhadacquired98.50%ofDofasco’sordinaryshares.Theseshareshavebeenkeptatthecompany4313267CanadaInc.,atthattimeanaffiliatedundertakingattheexclusiveownershipofArcelor.On3April2006Arcelortransferred90sharesofthe101sharesmakingthetotalcapitalof4313267CanadaInc.,toadutchfoundationnamed“StrategicSteelStichting”(3S)againstthereceiptof90depositaryreceipts.OthermovementsonfinancialassetsconsistedmainlyofintragrouptransactionsonthesharesofArcelorSpainHolding,ArcelorFinanceandServicesBelgiumandparticularlythesharesofArcelorGermanyHoldingwhichhavebeentransferredtoArcelorMittalBelgiumHoldingintheframeworkofthecreationoftheArcelorMittalgroup.



NOTE 6 – RESIDUAL TERM OF DEBTORS 31December2006 31December2005(inEURmillion) Upto1year 1to5years Total Upto1year 1to5years Total

Tradedebtors 1 - 1 1 - 1Amountsowedbyaffiliatedundertakings 65 - 65 168 - 168AmountsowedbyundertakingsinwhichtheCompanyhasaparticipatinginterest p.m. - p.m. p.m. - p.m.Otherdebtors 7 - 7 3 - 3TOTAL 73 - 73 172 - 172

ITEMSCOVEREDBYSEVERALHEADINGSAt31December2006amountsowedbyaffiliatedundertakingsaswellasamountsowedbyundertakingsinwhichtheCompanyhasaparticipatinginterestaremadeupoftradereceivablesandreceivablesinrelationwiththetaxintegration.

NOTE 7 – PREPAYMENTSPrepaymentsattheendof2006primarilycomprisethedeferredchargesrelatingtothefinancialcontributiontothreeChinesedevelopmentprogrammes.

NOTE 8 – CAPITAL AND RESERVES

8.1 – Share capital and share premiumAt31December2006,thesubscibedsharecapitalismadeupof669,813,408ordinaryshares,fullypaidupandamountingtoEUR3,349,067,040.TotheknowledgeoftheBoardofDirectorsthefollowingpartiesholdtheCompany’sissuedsharecapital:At31December2006

MittalSteelCompanyN.V. 94.1%Othershareholders(*) 5.9%TOTAL 100.0 %(*)includessharesheldunderself-control.

30,039,081shareswereissuedin2006,withaparvalueofEUR5each,duetotheexerciseoftheconversionoptionintosharesbyholdersofArcelor2017O.C.E.A.N.E.

8.2 – Legal reserveInaccordancewithLuxembourglegalrequirements,theCompanymustappropriateannuallyatleast5%ofitsnetprofitstoalegalreserveuptoaminimumof10%ofthesubscribedcapital.Thelegalreserveisnotavailablefordistribution.

8.3 – Reserve for own sharesInaccordancewithlegalrequirements,theCompanysetupanon-distributablereserveofanamountequaltothebookvalueofownsharesheldbytheCompany.Thisreservewassetupusingretainedprofits.



NOTE 9 – PROVISIONS FOR LIABILITIES AND CHARGES(inEURmillion) Pensionsandsimilarobligations Otherprovisions Total

Openingbalance 1 21 22Allocation 1 - 1Utilisation -1 -6 -7TOTAL 1 15 16

PENSIONOBLIGATIONSByvirtueofanagreementgoverningtheprovisionofstaffbyArcelorLuxembourg(formerlyArbed)toArcelor,theobligationsinrelationtoadditionalretirementsbenefitsavailabletotheArcelorLuxembourg(formerlyArbed)staffhavebeenspecificallyprovidedfor.TheCompany’sshareoftheallocationfortheyearisdeterminedbyapplyingtheactuarialfinancingratetothetotalsalariesofallArcelorLuxembourg(formerlyArbed)staffmadeavailable.Anindependentactuarycalculatesthisrate.FortheCompany’sownemployeesadefinedcontributionplanisinplace.TheCompanymakesannualcontributionstoanassuranceproviderinrespectofthisplan.Theplandoesnotgiverisetocommitmentsandtheannualcontributionsarerecordedintheprofitandlossaccountfollowingthesametreatmentastheoneadoptedforwagesandsalaries.

OTHERPROVISIONSOtherprovisionsarelinkedtoGermantaxconsequencesresultingfromthecreationandorganisationofArcelorGroup.

NOTE 10 – FINANCIAL DEBT

CONVERTIBLEDEBENTURELOANSInJune2002,Arcelorissued38,961,038bondswhichareconvertibleintoand/orexchangeableforneworexistingsharesinArcelor(O.C.E.A.N.E.)foranominalamountofEUR750million.TheseO.C.E.A.N.E.Arcelor2017wereissuedatEUR19.25withanoriginalmaturitydateof27June2017andwithanannualinterestrateof3%.FollowingthenewissueofcapitalofJuly2004,theshareattributionratehadbeenmodifiedfromoneshareforonebondto1.027ArcelorshareperO.C.E.A.N.E.2017.Asaresultofthedividendpaymentforthefinancialyear2005theshareattributionratehasbeenadjustedto1.078Arcelorshareagainstonebondwitheffectforanyconversion/exchangerequestreceivedonorafter29May2006.Intheabsenceofanticipatedconversionoramortisation,thesebondswererepayableatmaturityforaparvalueofEUR19.25.In2006,38,958,576O.C.E.A.N.E.Arcelor2017havebeenconvertedinto41,993,168Arcelorsharesbyusing11,954,087treasurysharesandbyissuing30,039,081newshares.AsthenumberofoutstandingO.C.E.A.N.E.becamelessthan10%ofthetotalO.C.E.A.N.E.issuedattheorigin,thenon-convertedO.C.E.A.N.E.,i.e.2,462bonds,havebeensettledbyananticipatedreimbursementincashon15December2006.

NOTE 11 – RESIDUAL TERM OF CREDITORS

31December2006 31December2005 Upto1year 1to5 5years Total Upto1year 1to5 5years Total(inEURmillion) years ormore years ormore

Convertibledebentureloans - - - - - - 750 750Amountsowedtocreditinstitutions - - - - p.m. - - p.m.Tradecreditors 18 - - 18 19 - - 19Amountsowedtoaffiliatedundertakings 1,206 - - 1,206 15 - - 15AmountsowedtoundertakingsinwhichtheCompanyhasaparticipatinginterest p.m. - - p.m. p.m. - - p.m.Taxandsocialsecuritydebt a)Taxdebt p.m. - - p.m. p.m. - - p.m.b)Socialsecuritydebt 1 - - 1 1 - - 1Othercreditors 18 - - 18 9 - - 9TOTAL 1,243 - - 1,243 44 - 750 794

TheCompanyhasnotgrantedanyformoftangiblesecurityinrespectofthedebtsanalysedabove.

ITEMSCOVEREDBYSEVERALHEADINGSAmountsowedtoaffiliatedundertakingsandamountsowedtoundertakingsinwhichtheCompanyhasaparticipatinginterestincludetradedebtsforanamountofEUR19million.ThebalanceismainlymadeupofthefundingatArcelorTreasurySNC.



NOTE 12 – OPERATING CHARGESIn2006,operatingchargesprimarilycompriseexpensesuptoanamountofEUR271millioninconnectionwithMittalSteel’spublicmixedcashandexchangeoffertotheholdersofArcelorsharesandconvertiblebonds.

NOTE 13 – FINANCIAL RESULT(inEURmillion) 2006 2005

Dividendsreceived 2,739 2,085Netresultonthedisposaloffinancialassets 2,289 -Foreignexchangeresult 41 p.m.Impairmentoffinancialassets -271 -ResultontheconversionO.C.E.A.N.E.2017 -252 -Resultontheexerciseofstockoptions -84 -ResultonthedisposalandattributionoftreasuryshareswithintheArceloremployeeshare-ownershipplan(AESOPE) -42 -Netinterestandother -47 -29TOTAL 4,373 2,056

IncomefrominvestmentsprimarilycomprisesdividendsreceivedfromArcelorLuxembourgSA,ArcelorFranceSA,ArcelorSpainHoldingSL,ArcelorGermanyHoldingGmbH,andArcelorItalyHoldingSRL.CapitalgainsonthedisposaloffinancialassetsaremainlyrelatedtothesaleofthesharesofArcelorGermanyHoldingGmbHtoMittalSteelGermanyHoldingGmbHintheframeworkofthecreationoftheArcelorMittalgroup.ForeignexchangeresultmainlyrelatestothefinancingoftheCanadianinvestmentwhereastheimpairmentoffinancialassetscorrespondstothevalueadjustmentontheArcelorFranceSAsharesduetothesharepremiumreimbursementdonebyArcelorFranceSAintheframeworkofitsdividenddistributionforthefinancialyear2005.

NOTE 14 – TAX ON PROFITArceloristheparentcompanyofafiscalintegrationscopecomprising16companies.Companiesincludedinthefiscalintegrationscopeareputintothesituationinwhichtheywouldhavebeenintheabsenceoffiscalintegration.

NOTE 15 – OFF-BALANCE SHEET ITEMS

Guarantees given(inEURmillion) 2006 2005

Guaranteesissuedondebts - 52Forwardsaleandpurchaseofforeigncurrency 1,427 -Othercommitments 3 3TOTAL 3 55

ForwardsaleandpurchaseofforeigncurrencyarerelatedtothecommitmentsinCADinthecontextofthefinancingoftheacquisitionofDofascoInc.

NOTE 16 – STAFFAveragenumberofstaff 2006 2005

Employees 258 214Workers - -TOTAL 258 214

NOTE 17 – DIRECTORS’ REMUNERATIONMembersoftheBoardofDirectors,theAuditCommitteeandtheNominationsandRemunerationCommitteeareentitledtoatotalofEUR2.5millionfortheyear2006.



NOTE 18 – STOCK OPTIONS PLANSTheinternationalstockoptionplan(2003/2007)confersrightstocertainemployeestoacquireorsubscribeforsharesintheCompany.Theperiodofexerciseisdifferentaccordingtothespecificcountrieswithintheplanandhasamaximumdurationoffouryears.Allocatedshareoptionsat31December2006aredetailedasfollows: Numberofoptions Exerciseprice(inEUR) Maturity

Plan2003 51,396 9.67 30/06/2010Plan2004 51,397 13.11 30/06/2011Plan2005 10,000 16.17 30/06/2012Plan2006 1,335,000 34.43 30/06/2013

Themovementsinthenumberofoutstandingshareoptionsduringtheyearwereasfollows:

Numberofshareoptions 2006 2005

Optionsatthebeginningoftheyear 3,658,526 2,549,224Optionsgrantedduringyear 1,335,000 1,135,000Optionsforfeitedacceptedduringyear -20,000 -25,698Optionsexercisedduringyear -3,525,733 -Optionsexpiredduringyear - -Optionsattheendoftheyear 1,447,793 3,658,526

Thebeginningoftheexerciseperiodfortheoptionsgrantedpriorto25June2006hasbeenadvancedto1July2006.

NOTE 19 – OTHER INFORMATIONThecompanyisjointlyandseverallyliableforthefollowingentities:ArcelorFinanceSCA,Luxembourg(Luxembourg)ArcelorTreasurySNC,SaintDenis(France).


Annual Accounts Arcelor S.A.Auditor’s Report

TotheshareholdersofArcelorS.A.19,avenuedelaLibertéL-2930Luxembourg

REPORT OF THE RéVISEUR D’ENTREPRISES Report on the annual accountsFollowingourappointmentbytheGeneralMeetingoftheShareholdersdated28April2006,wehaveauditedtheaccompanyingannualaccountsofArcelorS.A.,whichcomprisethebalancesheetasat31December2006andtheprofitandlossaccountfortheyearthenendedandasummaryofsignificantaccountingpoliciesandotherexplanatorynotes.

Board of Directors’ responsibility for the annual accountsTheBoardofDirectorsisresponsibleforthepreparationandfairpresentationoftheseannualaccountsinaccordancewithLuxembourglegalandregulatoryrequirementsrelatingtothepreparationoftheannualaccounts.Thisresponsibilityincludes:designing,implementingandmaintaininginternalcontrolrelevanttothepreparationandfairpresentationofannualaccountsthatarefreefrommaterialmisstatement,whetherduetofraudorerror;selectingandapplyingappropriateaccountingpolicies;andmakingaccountingestimatesthatarereasonableinthecircumstances.

Responsibility of the Réviseur d’EntreprisesOurresponsibilityistoexpressanopinionontheseannualaccountsbasedonouraudit.WeconductedourauditinaccordancewithInternationalStandardsonAuditingasadoptedbytheInstitutdesRéviseursd’Entreprises.Thosestandardsrequirethatwecomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassurancewhethertheannualaccountsarefreefrommaterialmisstatement.Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresintheannualaccounts.TheproceduresselecteddependonthejudgementoftheRéviseurd’Entreprises,includingtheassessmentoftherisksofmaterialmisstatementoftheannualaccounts,whetherduetofraudorerror.Inmakingthoseriskassessments,theRéviseurd’Entreprisesconsidersinternalcontrolrelevanttotheentity’spreparationandfairpresentationoftheannualaccountsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalcontrol.AnauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebytheBoardofDirectoraswellasevaluatingtheoverallpresentationoftheannualaccounts.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.

OpinionInouropinion,theannualaccountsgiveatrueandfairviewofthefinancialpositionofArcelorS.A.asof31December2006,andoftheresultsofitsoperationsfortheyearthenendedinaccordancewithLuxembourglegalandregulatoryrequirementsrelatingtothepreparationoftheannualaccounts.

Report on other legal and regulatory requirementsThemanagementreport,whichistheresponsibilityoftheBoardofDirectors,isinaccordancewiththeannualaccounts.

Luxembourg,23March2007

KPMGAuditS.àr.l.Réviseursd’Entreprises

EricDamotte


Annual Accounts Arcelor S.A.Notes


Annual Accounts Arcelor S.A.Notes

1�0 ArcelorAnnualReport2006

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This document is printed on FSC accredited paper.

This document is also available in French and Spanish. It was published in April 2007. To receive a copy of the Annual Report, please contact:Arcelor Mittal19, Avenue de la Liberté L-2930 LuxembourgT: +352 4792 2360www.arcelormittal.com

Copyright 2007 Arcelor Mittal

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Arcelor Annual Report 2006 · 2007. 5. 24. · Sonasid in Morocco, thereby anticipating the strong...

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